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Speaker 1: This is Bloomberg Daybreak Asia.

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Speaker 2: For it's Wednesday, April nineteenth in Hong Kong, Tuesday April

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Speaker 2: eighteenth in New York and coming up today.

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Speaker 1: Two Fed officials offer divergent views on future rate hikes.

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Speaker 2: Goldman Sachs traders failed to capitalize on Wall Street's fixed

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Speaker 2: income boom.

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Speaker 1: Netflix reports both subscriber growth and earnings below street expectations.

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Speaker 3: Fox News decides to settle the dominion just before opening arguments.

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Speaker 3: Parking garage collapse in Lower Manhattan. Senate subcommittee doubles down

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Speaker 3: on COVID Wuhan lab leak origin theory. I'm at Baxter

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Speaker 3: with Global News.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Asia, The business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast available on Apples, Spotify, the Bloomberg Business app,

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Speaker 4: and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm deg Krisner and I'm Brian Curtiz.

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Speaker 2: Here are the stories we're following today. Netflix got off

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Speaker 2: to a slow start to the year, adding about one

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Speaker 2: point seventy five million customers in the first quarter. Investors

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Speaker 2: were expecting a figure more like two point four million customers.

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Speaker 2: Netflix also predicted it will generate lower sales and profit

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Speaker 2: in the current quarter than what.

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Speaker 4: Analysts said forecast.

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Speaker 2: We heard from John Erlickman, anchor of BNN Bloomberg's The

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Speaker 2: Open but it.

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Speaker 5: Is really shifting to be a business that in many

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Speaker 5: ways has already told us they are transitioning. There are

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Speaker 5: cost controls right now. Shutting down their DVD by mail

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Speaker 5: business is one example of cost controls. Password sharing crackdowns

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Speaker 5: is another. I mean, arguably that could bring in more subscribers,

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Speaker 5: but even looking at Bloomberg's breakdown in markets like Latin America,

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Speaker 5: maybe that's the kind of development that loses you.

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Speaker 4: A little bit.

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Speaker 2: More on that comment there from mister Erlickman that Netflix

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Speaker 2: will begin cracking down this quarter on US viewers who

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Speaker 2: share someone else's account, and we saw the overall numbers

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Speaker 2: improve actually in Canada after a little bit of a

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Speaker 2: rough start to that. Separately, Netflix added just one hundred

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Speaker 2: thousand customers in the US and Canada after losing about

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Speaker 2: a million customers last year. The Asia Pacific region continues

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Speaker 2: to be Netflix's biggest source of new customers. The service

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Speaker 2: added one point four to six million customers there in

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Speaker 2: the first quarter. And that is thanks to lowering prices

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Speaker 2: in India. We have a very big movement in Netflix

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Speaker 2: shares in after hours. Doug came out around twelve percent

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Speaker 2: down and at the moment trading off just about one

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Speaker 2: percent or so, rather big recovery later in the session.

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Speaker 1: A curious move. Meantime, we have two Fed officials offering

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Speaker 1: divergent views on the future interest rate hikes. On one side,

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Speaker 1: the head of the Atlanta Fed, Rafael Bostik, is favoring

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Speaker 1: just one more twenty five basis point rate hike. Then

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Speaker 1: he wants the Fed to pause and hold the Fed

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Speaker 1: funds rate just above five percent.

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Speaker 6: There's still more work to be done, and I'm ready

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Speaker 6: to do it. I think that after the next move,

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Speaker 6: if the data come in as I expect, we will

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Speaker 6: be able to hold there for quite some time.

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Speaker 1: The Atlanta Fed president Raphael Bostik there speaking with CNBC. Separately,

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Speaker 1: today we heard from the head of the Saint Louis Fed,

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Speaker 1: Jim Bullard. He is arguing for two more rate hikes.

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Speaker 1: Bullard told Reuters he's favoring getting rates. This would be

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Speaker 1: the Fed funds rate to arrange between five and a

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Speaker 1: half percent to five and three quarter percent. He also

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Speaker 1: said fears of recession are simply overblown, which Bostick, by

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Speaker 1: the way, said it wasn't his baseline either. Neither Bostick

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Speaker 1: nor Bullard votes though on monetary policy.

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Speaker 2: This year, Goldman Sachs Trader is failing to capitalize on

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Speaker 2: the fixed income bonanza that we've seen the rest of

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Speaker 2: Wall Street enjoy over the last quarter. Goldman reported fixed

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Speaker 2: income trading revenue that declined seventeen percent in the first quarter. However,

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Speaker 2: it was said to be the third biggest in the

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Speaker 2: past decade. The bank all so offloaded a chunk of

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Speaker 2: its roughly four billion dollars Marcus loanbook, which led to

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Speaker 2: a four hundred and forty million dollar reserve release. Goldman's

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Speaker 2: profit was higher than what analysts had expected, but earnings

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Speaker 2: were still down nineteen percent from a year earlier. Even so,

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Speaker 2: on an earnings call, CEO David Solomon said, it appears

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Speaker 2: the worst of the volatility is behind us.

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Speaker 7: Well, it's impossible for the exact form of market stress

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Speaker 7: will take, and we won't always execute perfectly. Our risk

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Speaker 7: management culture, strong liquidity, and robust capital position have allowed

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Speaker 7: us to navigate a complex environment while also continuing to

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Speaker 7: actively support our clients.

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Speaker 2: Shares of Goldman SAX slumps as much as four percent

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Speaker 2: after the results were announced.

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Speaker 1: Bank of America reported first quarter profit above estimates, primarily

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Speaker 1: driven by revenue from fixed income along with currency and

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Speaker 1: commodities trading. Overall revenue unexpectedly up nearly thirty percent to

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Speaker 1: a total of three point four billion. Meantime, deposits were

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Speaker 1: down much less than expected as customers moved funds to

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Speaker 1: be of a following the collapse of those three smaller

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Speaker 1: regional banks. Here's Bank of america CEO Brian Moynihan's speaking

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Speaker 1: to analyst on the conference call.

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Speaker 8: As you think through all the tightening actions of the FED,

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Speaker 8: the flowsed alternative yielding assets, investments in the destruction of

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Speaker 8: past quarter ore depausites continued to perform well and in

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Speaker 8: the court of one point nine one trillion dollars, if

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Speaker 8: you think about it, that's about the same balance as

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Speaker 8: we had in mid October of twenty twenty two. So

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Speaker 8: we've seen these balances stabilize and remain thirty four percent

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Speaker 8: above they were in prior.

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Speaker 4: To the pandemic.

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Speaker 1: Brian moynihan, there the chief executive of Bank of America

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Speaker 1: b of A, saying the first quarter saw positive returns

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Speaker 1: in credit markets overall and that the bank's business was

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Speaker 1: firing on all cylinders. Today, b OFA shares were up

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Speaker 1: just about six tens to one percent, so.

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Speaker 2: Apples shares straight up about three quarters of a percent

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Speaker 2: in this session to one sixty six forty seven. Apple

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Speaker 2: is doing whatever it can, you'd drum up excitement and

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Speaker 2: sale of its upcoming mixed reality headset. Bloombergs Tom Busby

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Speaker 2: has more on that.

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Speaker 9: Apple now racing the boost interest in its mixed reality headset,

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Speaker 9: which will blend virtual and augmented reality. Forecast to make

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Speaker 9: its debut at Apples Developers Conference in June and go

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Speaker 9: on sale later this year. It's Apple's first all new

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Speaker 9: tech product since the Apple Watch debuted eight years ago.

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Speaker 9: It's expected to retail for upwards of three thousand dollars,

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Speaker 9: so the iPhone maker is now building a whole bunch

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Speaker 9: of software for the unit, including gaming, fitness, wellness and

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Speaker 9: meditation apps, as well as new versions of existing features

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Speaker 9: found on the Apple iPad, and a news service for

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Speaker 9: watching sports. Tom Busby, Bloomberg Daybreak Asia.

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Speaker 2: I'm Brian Curtis along with Doug chris Ner. Rashad Salama

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Speaker 2: will join us in a few moments. So we had

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Speaker 2: the earnings, the bank earnings. We've gotten through quite a

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Speaker 2: few now, and I suppose we can say that the

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Speaker 2: earnings seemed to show that nothing's really broken. But do

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Speaker 2: we need to add the word yet.

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Speaker 1: It's very interesting you should say say that because it

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Speaker 1: was a curious day in the bond market, and we

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Speaker 1: had some mixed economic news here in the US. The

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Speaker 1: New York Bank FED Bank Survey of Business Activity was

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Speaker 1: down in the month of April, but less than the

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Speaker 1: market was expecting. Housing starts, though for single family homes

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Speaker 1: up in the month of March by two point seven percent,

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Speaker 1: so a little bit of cross currents. But then you

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Speaker 1: look at the Atlanta Fed's GDP now index reading, it

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Speaker 1: suggests Brian that GDP growth in Q one may come

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Speaker 1: in at around two point four to eight percent. That's

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Speaker 1: still pretty good, wouldn't you say?

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Speaker 2: Yeah, it's just really interesting that it doesn't seem like

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Speaker 2: we're seeing any signs of recession.

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Speaker 4: Now.

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Speaker 2: However, we have this long running inversion in the yield

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Speaker 2: curve which sort of screams out that there is trouble ahead,

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Speaker 2: so it's it's sort of like, you know, waiting. I

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Speaker 2: don't know if waiting or if we're just you know,

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Speaker 2: kind of hoping that things resolve themselves before we get there.

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Speaker 2: Let's talk a little bit about Netflix, because that was

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Speaker 2: a much awaited earnings. Really the company seems to be

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Speaker 2: struggling a little bit here.

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Speaker 10: It has.

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Speaker 2: We mentioned that it avoided a big collapse, so they

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Speaker 2: apparently liked what they heard on the call, but there's

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Speaker 2: still a number of challenges there. You know, you've got

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Speaker 2: the crackdown on the shared passwords. That's something that may

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Speaker 2: eventually play out in their favor, but it's a difficult

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Speaker 2: road to go down in the initial stages. You've got

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Speaker 2: heavy competition in streaming, and it's still difficult to attract

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Speaker 2: new subscribers.

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Speaker 1: Yeah, and Netflix saying today it's going to ship the

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Speaker 1: last of those red DVD envelopes in September. That's twenty

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Speaker 1: five years of mailing shows through the US Postal service

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Speaker 1: that's going to come to an end in September.

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Speaker 2: I'll probably show you my innocence. I didn't even realize

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Speaker 2: they were still doing that. I've lived abroad for such

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Speaker 2: a long time. I'm amazed that they were still actually

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Speaker 2: doing that anyway, It's time for Global News. There's been

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Speaker 2: a tragic parking garage collapse in Lower Manhattan. Ed Baxter

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Speaker 2: has the story from the San Francisco nine sixty newsroom.

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Speaker 3: In Yeah, Brian, and they're still developing. Rescue crews are

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Speaker 3: working on getting people out from a parking structure that

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Speaker 3: collapsed in Laura, Maha and this on Ann Street near

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Speaker 3: NASA on Ner Pace University. There is at least one

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Speaker 3: person dad, at least five injured, one missing. Authority say

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Speaker 3: at least six parking garage workers have been rescued so far.

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Speaker 3: The upper level of the three story building collapse, sending

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Speaker 3: the cars inside crashing down. I'm just watching a video

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Speaker 3: link on it. They're using robots to actually go in

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Speaker 3: to take a look at the structure itself and to

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Speaker 3: see if it can find anybody who may still be

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Speaker 3: within the structure. Fox News has agreed to settle the

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Speaker 3: Dominion defamation lawsuit. The agreement reached just after the jury

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Speaker 3: was selected and before opening arguments. Dominion has claimed that

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Speaker 3: it was to fame by airing bogus claims that it

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Speaker 3: rigged the twenty twenty election against Donald Trump. Dominion CEO

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Speaker 3: is John Polus.

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Speaker 11: Fox has admitted to telling lies about Dominion that caused

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Speaker 11: enormous damage to my company, our employees, and the customers

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Speaker 11: that we serve.

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Speaker 9: Nothing can ever make up for.

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Speaker 3: That, and do Menion attorney Justin Nelson says, a point

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Speaker 3: coming out.

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Speaker 11: For our democracy to endure for another two hundred and

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Speaker 11: fifty years and hopefully much longer, we must share a

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Speaker 11: commitment to fax.

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Speaker 3: How the settlement for seven hundred and eighty seven million dollars.

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Speaker 3: But Bloomberg's Wendy Benjaminson says, for Fox, that avoids a long,

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Speaker 3: embarrassing trial and for Dominion.

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Speaker 12: And maybe they just didn't want to go through the

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Speaker 12: expense of a long and highly public trial. You're absolutely

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Speaker 12: right that it is totally in Fox's interest to settle

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Speaker 12: rather than get their best known stars on the stand

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Speaker 12: where everyone would be glued to their sets watching everywhere

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Speaker 12: they say.

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Speaker 3: Yeah, so you want see Tucker Carlson, John Hannity or

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Speaker 3: Rupert Murdock on the stand. Says it'll be interesting to

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Speaker 3: see how Fox does address news going forward. Fox has

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Speaker 3: issued a statement saying the settlement reflects it's continued commitment

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Speaker 3: to the highest journalistic standards. New Senate Health Committee report

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Speaker 3: is doubling down on the theory that a China lab

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Speaker 3: leak is the origin of COVID. Republicans very strongly saying

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Speaker 3: there is a total lack of transparency. The chair of

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Speaker 3: the Select Committee on the Pandemic, Senator Brad Wintrip.

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Speaker 2: While the specific origin of COVID nineteen may not be

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Speaker 2: one hundred percent clear, there's mounting evidence suggesting a research

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Speaker 2: or lab related.

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Speaker 3: Incident, Winstrup saying China dodges and ducks every legitimate attempt

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Speaker 3: to investigate the question. Hong Kong has fallen behind rival

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Speaker 3: Singapore in the ranking of the world's wealthiest cities. The

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Speaker 3: number of millionaires in the region dropped twenty seven percent

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Speaker 3: over ten years, while the city state grew forty percent.

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Speaker 3: The US is top China, with ten of the richest

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Speaker 3: cities in the world Top ten New York, Tokyo, San

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Speaker 3: Francisco Bay Area, London, Singapore, Los Angeles, Hong Kong, Beijing, Shanghai,

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Speaker 3: and Sydney. Now this is not on percentage of population,

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Speaker 3: it should be noted, it is just based on raw numbers.

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Speaker 3: Global News powered by more than twenty seven hundred journalists

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Speaker 3: and analysts in over one hundred and twenty countries. In

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Speaker 3: San Francisco, I'm Ed Baxter, and this is Bloomberg.

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Speaker 2: This is Bloomberg Daybreak Asia, Brian Curtis and Richard Salama.

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Speaker 2: Joining us now is Michael Kajino, President and portfolio manager

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Speaker 2: at the Permanent Portfolio family of funds. Michael, we've been

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Speaker 2: kind of treading water here a little bit, waiting on something.

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Speaker 2: What are we waiting on?

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Speaker 10: Good morning, guys. This is a tightrope. I mean, for

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Speaker 10: every bullish scenario, there's a bears scenario, and I think

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Speaker 10: the markets reflecting that. You know, I'm not sure what

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Speaker 10: we're waiting on. More information, I guess would be probably

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Speaker 10: the broad answer that we can then further figure out

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Speaker 10: a directional trend, and I just don't think that's available

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Speaker 10: right now.

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Speaker 13: Well, yeah, so the thing is, you know, we've got

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Speaker 13: to of course, I have a bus Atlanta Fed presidents

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Speaker 13: suggesting that we're going to have well one more rate

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Speaker 13: hike them and I'm going to get into a poolse

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Speaker 13: that I think that's been pricing already. Would you need

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Speaker 13: agree to them? I guess people bulls and bads want

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Speaker 13: something more.

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Speaker 10: I do believe that most of the market believes that

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Speaker 10: we're pretty close, if not already there, in terms of

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Speaker 10: interest rate hikes. I think the momentum and inflation numbers

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Speaker 10: is downward, so they're probably roughly at neutral, whether it's

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Speaker 10: one rate hike or two. At twenty five, they're roughly

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Speaker 10: at neutral right now. Then it becomes a question of

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Speaker 10: how much they want to step on the gas to

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Speaker 10: raise rates and get us down to that two percent,

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Speaker 10: and how quickly. And I think you know there's an

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Speaker 10: issue there. Depending on how aggressive they want to get

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Speaker 10: to two percent, that's where the recession risk probably goes up.

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Speaker 10: I would argue that they're probably close to just sitting

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Speaker 10: pat for the moment, seeing how the economy adjusts to

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Speaker 10: all this. I don't think you can have a real

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Speaker 10: deep recession without employment falling off a cliff, and that

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Speaker 10: hasn't happened yet. Corborate earnings to date have not reflected

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Speaker 10: falling off a cliff either, So the economy is adjusting

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Speaker 10: to this higher cost of capital at some level at

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Speaker 10: the moment. But I would stress at the moment, there

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Speaker 10: are broader factors out there tightening of the Fed's balance sheet,

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Speaker 10: how quickly savings numbers are coming down and people are

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Speaker 10: spending savings, whether growth and employment continues or starts to contract.

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Speaker 10: So those would be things to watch going forward well.

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Speaker 2: And also a reacceleration of inflation, I mean, doesn't seem

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Speaker 2: that likely. It seems like the more likely scenario would

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Speaker 2: be just this slow grind lower that doesn't really please anybody,

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Speaker 2: but it's kind of moving in the right direction. But

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Speaker 2: is there a chance, at least a wildcard chance that

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Speaker 2: inflation could reaccelerate core inflation?

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Speaker 10: Yep. We've been saying for a while we don't know

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Speaker 10: the answer to this, but our concern was that we would.

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Speaker 10: You know, you had a tsunami of money that washed

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Speaker 10: over the economy over the last several years in the trillions,

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Speaker 10: and that wave hit, it flooded everything, and now it's receding,

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Speaker 10: and that would be expected. What we have done, though,

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Speaker 10: is we've increased whether it's spending or the budget bill

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Speaker 10: in December, the Inflation Reduction Act, climate spending, etc. You've

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Speaker 10: created an additional potential wave of stimulative impact that hasn't

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Speaker 10: really hit the economy yet, and so that could basically

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Speaker 10: slow the reduction of inflation. So you have this scenario

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Speaker 10: where all the things being equal, inflation would probably continue

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Speaker 10: to trend down. But because you've got new spending, and

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Speaker 10: I would say that neither the full effect of the

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Speaker 10: interest rate hikes have been felt in the economy, nor

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Speaker 10: any potential stimulus effects of stimulus programs having been felt

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Speaker 10: in the economy. You have this scenario where you're in

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Speaker 10: the middle and you don't really know what direction it's

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Speaker 10: going to go. And I think the market is there.

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Speaker 10: I think trading reflects it. There's not a lot of

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Speaker 10: volatility because I think there's not evidence of a full

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Speaker 10: blown recession, nor is there evidence of a full blown

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Speaker 10: growth track. You know out there and Netflix today was

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Speaker 10: a rather interesting report. It wasn't necessarily it was not

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Speaker 10: a growth story. It wasn't a bad report, but it

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Speaker 10: was not a growth story, and it was not indicative

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Speaker 10: of a company that's trading at a pe of thirty.

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Speaker 10: You would expect better earnings results and revenue results and

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Speaker 10: forecasts for a company trading at that pe in this environment,

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Speaker 10: and that wasn't there. So you know, a lot of

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Speaker 10: uncertainty right now, Michael.

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Speaker 13: You know one thing is credit as well. You know,

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Speaker 13: the thing is this is an emerging story. I mean

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Speaker 13: it's already hit the banks who've seen that already. But

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Speaker 13: it's sort of cool. My I was a Wells Fargo

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Speaker 13: ishing what three and three quarter a billion dollars worth

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Speaker 13: of eleven year bonds earlier. Now it's paying one hundred

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Speaker 13: and eighty bases points over treasuries. Okay, Westwogger's arguably the

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Speaker 13: big the week is the Big four in terms of

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Speaker 13: capital ratios. You know, the question one has to wonder

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Speaker 13: is how much you will smaller banks have to say

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Speaker 13: I have to pay? And what will that tell us

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Speaker 13: about loan spreads ahead?

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Speaker 10: Well, there's a lot packed into that comment. I mean,

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Speaker 10: you know, if it's willing to go out ten years,

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Speaker 10: then they must feel like, you know, the interest rates

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Speaker 10: are reasonable in the circumstances. If you're issuing debt instead

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Speaker 10: of equity, it's not as diluted, so and maybe they

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Speaker 10: feel like it's a good time, it's stable, so that

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Speaker 10: they can raise some additional capital if they need it.

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Speaker 10: I'm not sure what we don't own, well, so I

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Speaker 10: can't specifically speak to their circumstances, but capital raises in general,

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Speaker 10: I think we could see more of them in financial services,

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Speaker 10: just as a precaution. If you have a stable cost

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Speaker 10: of capital, you know, times get good later on, you

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Speaker 10: can always pay it down quicker.

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Speaker 2: And so it sounds like it sounds like from your

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Speaker 2: vision of the world, Michael, that you'd be pretty comfortable

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Speaker 2: being diversified between stocks and bonds here and just allow

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Speaker 2: some time to go buy and collect your four and

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Speaker 2: a half percent coupons.

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Speaker 10: We've been very comfortable doing very little actually, I mean

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Speaker 10: for us, an active decision sometimes is to not do

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Speaker 10: much of anything, and so we haven't been big buyers

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Speaker 10: of equities into strength. We haven't bought a huge amount

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Speaker 10: when they've sold off. We've kind of We're happy with

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Speaker 10: our allocations with nibbled at energy, some financial services on

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Speaker 10: down days. But we you know, we have exposure to equities.

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Speaker 10: We like companies with that can control pricing power and

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Speaker 10: can control their cost structure, and we like macro stories

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Speaker 10: like energy and commodities for the long term because we

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Speaker 10: are we do think out multiple years in our portfolio.

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Speaker 10: We also have a healthy dollop of gold. Given the

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Speaker 10: uncertainty the financial system of the market, of the Fed

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Speaker 10: possibly being done, maybe cutting, maybe not. I think gold

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Speaker 10: is reflecting the move of where we are right now

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Speaker 10: and could go a lot higher. And then on the

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Speaker 10: bond side, we are still relatively short duration in investment

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Speaker 10: grade corporates and treasury, so we're we're about three years

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Speaker 10: and in so we you know, we're we're getting income,

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Speaker 10: but we're not going too far on the duration curve.

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Speaker 2: Sounds about right, Michael Kagino, Thanks very much for joining us.

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Speaker 2: This is Bloomberg Daybreak Asia, your morning brief on the

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