1 00:00:03,279 --> 00:00:07,240 Speaker 1: This is Bloomberg Surveillance. Historically, we have never seen oil 2 00:00:07,280 --> 00:00:10,560 Speaker 1: prices come up this far, this sharply without seeing a 3 00:00:10,720 --> 00:00:14,080 Speaker 1: production response of a significant magnitude. I think banks are 4 00:00:14,080 --> 00:00:15,760 Speaker 1: gonna have a very tough go of it, and the 5 00:00:15,800 --> 00:00:17,520 Speaker 1: only way you're gonna make money over the next twelve 6 00:00:17,560 --> 00:00:20,079 Speaker 1: months is to trade them. You wonder whether there's now 7 00:00:20,120 --> 00:00:22,640 Speaker 1: a case beginning to be built to say we need 8 00:00:22,720 --> 00:00:25,639 Speaker 1: fiscal stimulus around the world, and maybe the IMF should 9 00:00:25,680 --> 00:00:29,280 Speaker 1: begin to help that process. Bloomberg Surveillance your link to 10 00:00:29,320 --> 00:00:33,680 Speaker 1: the world of economics, finance, and investment on Bloomberg Radio. 11 00:00:34,600 --> 00:00:37,320 Speaker 1: Good morning, I'm Michael McKee along with Tom Keane. It's 12 00:00:37,479 --> 00:00:41,360 Speaker 1: seven am on Wall Street. Seven pm in Beijing, where 13 00:00:41,400 --> 00:00:44,520 Speaker 1: today the Chinese government touched off a global stock rally 14 00:00:44,560 --> 00:00:47,280 Speaker 1: by reporting that country's exports jumped by the most in 15 00:00:47,320 --> 00:00:50,400 Speaker 1: a year. During March. The Shanghai composite finished up one 16 00:00:50,400 --> 00:00:54,280 Speaker 1: point four percent, Tokyo's nick two point eight percent, the 17 00:00:54,440 --> 00:00:57,040 Speaker 1: end weaker for a second day one O nine point 18 00:00:57,160 --> 00:01:00,320 Speaker 1: to three. Right now, the good times can new to 19 00:01:00,440 --> 00:01:03,640 Speaker 1: roll in Europe, where miners are leading the stocks six 20 00:01:03,760 --> 00:01:07,600 Speaker 1: hundred higher, and again China gets the credit right now 21 00:01:07,840 --> 00:01:11,560 Speaker 1: the stocks is up seven points two point one percent. 22 00:01:11,880 --> 00:01:14,840 Speaker 1: The docks is up two hundred and nineteen points too, 23 00:01:14,959 --> 00:01:17,800 Speaker 1: and a quarter percent to Catporty in Paris a hundred 24 00:01:17,840 --> 00:01:20,880 Speaker 1: and ten points higher. That's two and a half percent. 25 00:01:21,319 --> 00:01:25,319 Speaker 1: The euro weaker today What Mario wants one thirteen oh 26 00:01:25,440 --> 00:01:29,120 Speaker 1: five on the day. Even so, European bonds are higher. 27 00:01:29,160 --> 00:01:32,120 Speaker 1: The German two year note yield down to negative fifty 28 00:01:32,200 --> 00:01:36,039 Speaker 1: two basis points. Here in the US, features are up, 29 00:01:36,040 --> 00:01:38,800 Speaker 1: pointing to a higher open twelve points for the S 30 00:01:38,880 --> 00:01:41,920 Speaker 1: ANDP evening features six tents of eight percent. Dow evenings 31 00:01:41,920 --> 00:01:44,160 Speaker 1: are up ninety nine points right now six tents, and 32 00:01:44,240 --> 00:01:47,040 Speaker 1: Nasdaq one d e minis up by thirty four points 33 00:01:47,319 --> 00:01:51,640 Speaker 1: three quarters of eight percent. Bonds lower here today as well, 34 00:01:51,840 --> 00:01:54,640 Speaker 1: Yields higher one point seven nine percent for your ten year, 35 00:01:54,720 --> 00:01:57,280 Speaker 1: the five year going for one point to three seventy 36 00:01:57,280 --> 00:02:00,600 Speaker 1: six basis points for the two year note. The dollar 37 00:02:00,680 --> 00:02:05,480 Speaker 1: index is higher at ninety four point five eight to oil, 38 00:02:05,480 --> 00:02:09,079 Speaker 1: though off a four year high yesterday. West Texas now 39 00:02:09,120 --> 00:02:12,560 Speaker 1: forty one fifty three, one point five percent lower. Brent 40 00:02:12,600 --> 00:02:17,079 Speaker 1: crude one percent lower on the day. Some questions uh 41 00:02:17,120 --> 00:02:20,600 Speaker 1: in people's minds about whether or not that big meetings 42 00:02:20,680 --> 00:02:25,440 Speaker 1: scheduled for Sunday on whether to cap oil production will 43 00:02:25,520 --> 00:02:29,440 Speaker 1: actually produce anything. We also get oil inventories ten thirty 44 00:02:29,639 --> 00:02:33,760 Speaker 1: this morning to company stories making news this morning, some 45 00:02:33,840 --> 00:02:37,680 Speaker 1: thirty nine thousand Verizon workers went on strike an hour ago. 46 00:02:37,840 --> 00:02:40,880 Speaker 1: Verizon shares have not opened for trading yet. Uh. Today 47 00:02:40,880 --> 00:02:44,600 Speaker 1: they finished up six tents of eight percent yesterday. And 48 00:02:45,000 --> 00:02:50,160 Speaker 1: JP Morgan Chase reporting today better than expected earnings per 49 00:02:50,200 --> 00:02:53,000 Speaker 1: share of a dollar thirty five. But that's a net 50 00:02:53,040 --> 00:02:57,880 Speaker 1: income that was six point seven percent lower than it 51 00:02:58,040 --> 00:03:02,160 Speaker 1: was a year ago. Lower trading, lower investment banking revenue. 52 00:03:02,600 --> 00:03:06,440 Speaker 1: JP Morgan shares interestingly enough, up to and a half 53 00:03:06,480 --> 00:03:09,919 Speaker 1: percent even though net income is down. We'll talk about 54 00:03:10,240 --> 00:03:14,519 Speaker 1: how Jamie Diamond did this with Alison Williams from Bloomberg 55 00:03:14,600 --> 00:03:16,839 Speaker 1: Research coming up in just a few moments. But Jim 56 00:03:16,840 --> 00:03:19,680 Speaker 1: Bianco is here right now, the perfect person to talk 57 00:03:19,680 --> 00:03:24,760 Speaker 1: to about this conundrum. From Bianco Research. JP Morgan shares 58 00:03:24,840 --> 00:03:28,280 Speaker 1: are up even though revenue was down. Uh. This whole 59 00:03:28,280 --> 00:03:32,320 Speaker 1: earnings per share thing is really just a giant casino game, 60 00:03:32,400 --> 00:03:35,560 Speaker 1: isn't it. You can be at times, especially with the banks, 61 00:03:35,640 --> 00:03:39,120 Speaker 1: given their complexity. It's really hard to really move through 62 00:03:39,240 --> 00:03:41,720 Speaker 1: is to whether the banks are doing well or not 63 00:03:41,800 --> 00:03:44,560 Speaker 1: doing well. They're so big JP Morgan's largest bank in 64 00:03:44,600 --> 00:03:46,720 Speaker 1: the United States and are well over two trillion dollars 65 00:03:46,760 --> 00:03:49,240 Speaker 1: in assets. On top of it, to add another level 66 00:03:49,280 --> 00:03:53,320 Speaker 1: of complexity as well, you track how earnings per share 67 00:03:53,440 --> 00:03:57,440 Speaker 1: on a SMP five basis are doing throughout the earning season, 68 00:03:57,440 --> 00:03:59,160 Speaker 1: and generally what you find is it's a little bit 69 00:03:59,200 --> 00:04:02,320 Speaker 1: of Lake wobegone. Everybody is better than average. That's right. 70 00:04:02,520 --> 00:04:06,320 Speaker 1: On average, sevent of the companies will beat on their 71 00:04:06,400 --> 00:04:09,000 Speaker 1: Wall Street guts and that has been the case now 72 00:04:09,040 --> 00:04:11,920 Speaker 1: for going on twenty years. So the story as earnings 73 00:04:11,920 --> 00:04:14,000 Speaker 1: will unfold is everybody will tell you, well, the companies 74 00:04:14,040 --> 00:04:16,400 Speaker 1: are doing better than we thought they do every quarter. 75 00:04:16,960 --> 00:04:20,479 Speaker 1: Uh So, if you factor that in as a fudge factor, 76 00:04:20,520 --> 00:04:23,680 Speaker 1: when you look at the numbers SMP companies UH in 77 00:04:23,720 --> 00:04:26,160 Speaker 1: total are expected to have earnings down ten percent from 78 00:04:26,200 --> 00:04:28,640 Speaker 1: a year ago, it will probably end up down seven 79 00:04:28,720 --> 00:04:31,400 Speaker 1: or down six. The big thing there is it's down 80 00:04:31,480 --> 00:04:33,760 Speaker 1: seven or down six. It's a negative on a year 81 00:04:33,760 --> 00:04:35,880 Speaker 1: over year basis, So it's not good when you look 82 00:04:35,880 --> 00:04:39,520 Speaker 1: out over the coming quarters. Is this likely to be 83 00:04:39,720 --> 00:04:42,200 Speaker 1: the worst well so far. If you look at the 84 00:04:42,200 --> 00:04:46,279 Speaker 1: analysts estimates and they're always too high. They expect more 85 00:04:46,360 --> 00:04:49,719 Speaker 1: losses in the in the second quarter. They are looking 86 00:04:49,760 --> 00:04:52,160 Speaker 1: for the year end right now to be somewhere about 87 00:04:52,240 --> 00:04:55,800 Speaker 1: positive three. But they've still got nine more months to 88 00:04:56,160 --> 00:04:58,680 Speaker 1: mark those numbers down, which is what they usually do. 89 00:04:59,160 --> 00:05:03,520 Speaker 1: So unless something dramatic happens, you're looking at another subpar 90 00:05:03,720 --> 00:05:06,440 Speaker 1: year in earnings, like last year and like the year before. 91 00:05:06,800 --> 00:05:09,560 Speaker 1: I know Tom once again in here. I think a 92 00:05:09,680 --> 00:05:12,880 Speaker 1: question just occurred to me when when you were talking 93 00:05:12,920 --> 00:05:17,920 Speaker 1: about seventy companies beating estimates. Uh. Banks and others pay 94 00:05:18,000 --> 00:05:20,360 Speaker 1: analysts a lot of money to try to figure out 95 00:05:20,440 --> 00:05:22,440 Speaker 1: what company earnings are going to be, and you're telling 96 00:05:22,480 --> 00:05:25,159 Speaker 1: me that three quarters of the time they're wrong. Yeah, 97 00:05:25,200 --> 00:05:27,400 Speaker 1: you know, and they're not usually on the on the 98 00:05:27,440 --> 00:05:29,800 Speaker 1: revenue side, they're a lot closer. I think there's a 99 00:05:29,800 --> 00:05:32,400 Speaker 1: little bit of gaming that goes on there. Uh Uh. 100 00:05:32,560 --> 00:05:35,440 Speaker 1: Analysts want to access companies want to beat because that 101 00:05:35,600 --> 00:05:38,280 Speaker 1: is the metric on Wall Street to say that you're 102 00:05:38,320 --> 00:05:42,440 Speaker 1: doing a good job is whatever Wall Street estimates you 103 00:05:42,560 --> 00:05:46,040 Speaker 1: do better. And that's everybody guides and all the analysts 104 00:05:46,120 --> 00:05:48,560 Speaker 1: know the game, and that's why you wind up always 105 00:05:48,560 --> 00:05:52,240 Speaker 1: having about Yeah, the magic I've seen in this is 106 00:05:52,320 --> 00:05:56,320 Speaker 1: everyone understands the game that you correctly described, and we 107 00:05:56,440 --> 00:06:01,440 Speaker 1: all adjust for it within companies that we perceive as competent. 108 00:06:01,520 --> 00:06:06,800 Speaker 1: What's interesting is at the margin outside the average and 109 00:06:07,120 --> 00:06:09,760 Speaker 1: SMP five hundred, you've got x the number of companies 110 00:06:10,080 --> 00:06:13,039 Speaker 1: where you know you've got to adjust a lot more 111 00:06:13,839 --> 00:06:16,240 Speaker 1: with a grain of salt. And again with that said, 112 00:06:16,279 --> 00:06:19,640 Speaker 1: I would say earnings within banking and particularly non banking 113 00:06:19,680 --> 00:06:23,400 Speaker 1: Wall Street always have a greater volatility. That Brad hints 114 00:06:23,480 --> 00:06:27,080 Speaker 1: lived with us for years at Sanford Bernstein. That's true 115 00:06:27,279 --> 00:06:29,800 Speaker 1: that the earnings should have a volatility. In fact, there's 116 00:06:29,800 --> 00:06:33,240 Speaker 1: a kind of a running joke that companies that you 117 00:06:33,279 --> 00:06:37,000 Speaker 1: know report better than expected earnings for ten consecutive quarters 118 00:06:37,040 --> 00:06:39,800 Speaker 1: are most are the ones most likely to wind up 119 00:06:39,839 --> 00:06:43,760 Speaker 1: getting SEC violations for accounting than the ones that aren't. 120 00:06:43,839 --> 00:06:46,920 Speaker 1: So the more that they consistently beat because the world 121 00:06:46,920 --> 00:06:49,599 Speaker 1: doesn't work that way, you don't consistently beat every quarter. 122 00:06:49,680 --> 00:06:51,880 Speaker 1: But one of the distinctions here, folks, not to get 123 00:06:51,920 --> 00:06:56,000 Speaker 1: too inside cef A baseball is it's widely understood there's 124 00:06:56,080 --> 00:06:58,719 Speaker 1: less massaging here than there isn't a lot of Europe. 125 00:06:58,760 --> 00:07:03,480 Speaker 1: I mean, you look at German UH processes for revenue recognition, 126 00:07:04,000 --> 00:07:06,040 Speaker 1: and if you did that in the United States, it's 127 00:07:06,080 --> 00:07:08,280 Speaker 1: not that you'd go to jail, but you'd you'd you'd 128 00:07:08,320 --> 00:07:11,000 Speaker 1: be under scrutiny. You'd be under fast be scrutiny. To 129 00:07:11,000 --> 00:07:13,840 Speaker 1: say the least. Absolutely reminds you of the the old 130 00:07:13,840 --> 00:07:17,360 Speaker 1: Winston Churchill line about democracy. It's the worst system we've 131 00:07:17,360 --> 00:07:20,000 Speaker 1: ever seen developed except for every other system. Well, that's 132 00:07:20,080 --> 00:07:21,760 Speaker 1: kind of the way that gap and fasts in the 133 00:07:21,840 --> 00:07:24,160 Speaker 1: United States. That's level for c f A. For those 134 00:07:24,200 --> 00:07:25,840 Speaker 1: of you that are keeping up in the global Wall 135 00:07:25,840 --> 00:07:29,400 Speaker 1: Street discussion Bloomberg surveillance. We say good morning on JP 136 00:07:29,560 --> 00:07:32,880 Speaker 1: Morgan Ernies Day, James Bianco with us, we say good 137 00:07:32,880 --> 00:07:34,440 Speaker 1: morning and let you know that we're brought to you 138 00:07:34,480 --> 00:07:39,640 Speaker 1: by Investco explore what high conviction investing means. Two investcos 139 00:07:39,720 --> 00:07:43,560 Speaker 1: value equity managers. Watch the conversation at investco dot com 140 00:07:43,680 --> 00:07:47,320 Speaker 1: slash interactive and I was thrilled to be there UH 141 00:07:47,320 --> 00:07:50,160 Speaker 1: and do an interactive thing with Investco UH with their 142 00:07:50,240 --> 00:07:53,280 Speaker 1: value people. They have one their dividend track record on 143 00:07:53,360 --> 00:07:56,640 Speaker 1: value is jaw dropping it right now in Jim Bianco. 144 00:07:56,760 --> 00:08:01,160 Speaker 1: That brings up the point uh is dividend growing stocks, 145 00:08:01,240 --> 00:08:04,880 Speaker 1: blue chip nifty fifty stocks. We all know their price 146 00:08:04,960 --> 00:08:08,720 Speaker 1: to perfection. Can you own perfection now? Can you own 147 00:08:08,720 --> 00:08:12,400 Speaker 1: a twenty two? Or you know it's gonna be a 148 00:08:12,440 --> 00:08:15,160 Speaker 1: real tough game to own that. Right now, You've got 149 00:08:15,880 --> 00:08:19,440 Speaker 1: GDP that's coming in below average, you've got negative earnings. 150 00:08:19,840 --> 00:08:23,239 Speaker 1: The big positive you have right now in the world 151 00:08:23,520 --> 00:08:26,160 Speaker 1: is easy central banks or at least in the case 152 00:08:26,200 --> 00:08:28,840 Speaker 1: of the Fed, no rate hikes. It's or rate hikes 153 00:08:28,840 --> 00:08:32,480 Speaker 1: as quickly as we thought. So in that environment, if 154 00:08:32,480 --> 00:08:35,000 Speaker 1: you want to own some kind of a you know, 155 00:08:35,360 --> 00:08:39,040 Speaker 1: a very high pe company, you're really betting on an 156 00:08:39,040 --> 00:08:41,920 Speaker 1: inside straight. And usually people that bet on inside straights 157 00:08:41,960 --> 00:08:44,000 Speaker 1: don't get Are you going to give a victory lap 158 00:08:44,120 --> 00:08:46,360 Speaker 1: to Mr Diamond? I mean when you look at his 159 00:08:46,760 --> 00:08:50,640 Speaker 1: performance obviously relative to the poster child Deutsche Bank, but 160 00:08:50,679 --> 00:08:53,400 Speaker 1: frankly others. He was out in New Chicago with Bank one. 161 00:08:53,720 --> 00:08:59,000 Speaker 1: Was he banished there? Michael? They took away his Yankee 162 00:08:59,040 --> 00:09:01,200 Speaker 1: tickets or whatever. I mean, he goes out there, he 163 00:09:01,240 --> 00:09:05,040 Speaker 1: has forced to watch the Chicago Cubs, forced I say, 164 00:09:05,200 --> 00:09:07,800 Speaker 1: to go to Wrigley Field. He comes back here, he's 165 00:09:07,800 --> 00:09:12,120 Speaker 1: pilloried by Washington. But I mean he's employing only two people. 166 00:09:12,559 --> 00:09:14,760 Speaker 1: That's not the worst thing, is it. No? I mean 167 00:09:14,960 --> 00:09:18,680 Speaker 1: it is an extraordinarily difficult job to manage a large 168 00:09:18,800 --> 00:09:21,760 Speaker 1: complex bank see City Bank, if you know, if you 169 00:09:21,800 --> 00:09:23,480 Speaker 1: want an example of how hard it can be to 170 00:09:23,520 --> 00:09:26,160 Speaker 1: find somebody. And when you get somebody like Jamie Dimon 171 00:09:26,240 --> 00:09:29,200 Speaker 1: that is well suited and is doing the job that 172 00:09:29,280 --> 00:09:32,199 Speaker 1: he's doing, they're you know, worth their weight in gold. 173 00:09:32,280 --> 00:09:34,600 Speaker 1: He has done a very good job in a very 174 00:09:34,640 --> 00:09:39,040 Speaker 1: difficult place to do it. Morning, I gotta ask one last, 175 00:09:39,200 --> 00:09:42,360 Speaker 1: very clear question. If analysts are wrong most of the 176 00:09:42,400 --> 00:09:45,080 Speaker 1: time analysts say that Chicago Cubs are gonna win the 177 00:09:45,080 --> 00:09:47,920 Speaker 1: World Series this year, what does Jim biangle say, Well, 178 00:09:47,920 --> 00:09:49,559 Speaker 1: that's the one place where they're going to be right, 179 00:09:50,760 --> 00:09:54,000 Speaker 1: all right, they have a forecast. Right. The last time 180 00:09:54,040 --> 00:09:56,720 Speaker 1: that the Chicago Cubs won the World Series, the Federal 181 00:09:56,760 --> 00:10:02,480 Speaker 1: Reserve did not exist. So there is your economic analysis. 182 00:10:04,200 --> 00:10:08,960 Speaker 1: Mike AND's April thirteen, Well, Boston three and four, you 183 00:10:09,080 --> 00:10:12,600 Speaker 1: do the math. How about those Baltimore Orioles seven and 184 00:10:12,640 --> 00:10:18,520 Speaker 1: oh now back very impressive of St. Louis Browns and 185 00:10:18,720 --> 00:10:21,480 Speaker 1: all that. So there's your baseball report for today. We'll 186 00:10:21,520 --> 00:10:24,120 Speaker 1: get the Stanley Cup started well, the hockey report in 187 00:10:24,200 --> 00:10:27,040 Speaker 1: the next hour. James Bianco, thank you so much. Just 188 00:10:27,200 --> 00:10:30,520 Speaker 1: terrific research. When he's on, folks, we get a million emails. 189 00:10:30,600 --> 00:10:33,199 Speaker 1: Can you send me his research? No, we protect the 190 00:10:33,320 --> 00:10:36,679 Speaker 1: copyright of all of our guests. We even protect the 191 00:10:36,840 --> 00:10:40,640 Speaker 1: copyright of Michael Barr's newscasts here in New York. And 192 00:10:40,640 --> 00:10:45,280 Speaker 1: we'll get there. I mean their treasured Michael right, absolutely treasured. 193 00:10:45,360 --> 00:10:48,679 Speaker 1: Futures up twelve down, futures up ninety six yield one 194 00:10:48,720 --> 00:10:53,319 Speaker 1: point seven nine. This hour of surveillance brought to you 195 00:10:53,360 --> 00:10:56,800 Speaker 1: by Monkiscov. Also visit monks vlo dot com. Here's Michael 196 00:10:56,800 --> 00:10:59,760 Speaker 1: Barre with those news headlines. Mike, Tom, thank you very much. 197 00:10:59,760 --> 00:11:02,880 Speaker 1: It's access teenager who received a probated sentence after a 198 00:11:03,000 --> 00:11:05,760 Speaker 1: twenty thirteen drunken driving wreck that killed four people and 199 00:11:05,920 --> 00:11:09,320 Speaker 1: left two others severely injured, is due in court today. 200 00:11:09,720 --> 00:11:13,959 Speaker 1: Ethan Coucher, turned nineteen on Monday, could face more jail 201 00:11:14,080 --> 00:11:17,040 Speaker 1: time as part of the conditions of his adult probation. 202 00:11:17,480 --> 00:11:19,720 Speaker 1: He and his mother fled to Mexico in December after 203 00:11:19,760 --> 00:11:22,680 Speaker 1: a video surfaced online appearing to show couch at a 204 00:11:22,720 --> 00:11:26,640 Speaker 1: party where alcohol was being served. An Ohio police officer 205 00:11:26,720 --> 00:11:29,439 Speaker 1: has died two days after he was critically wounded when 206 00:11:29,440 --> 00:11:32,079 Speaker 1: police say a man opened fire on a SWAT team 207 00:11:32,120 --> 00:11:35,360 Speaker 1: trying to arrest him. Polling stations are open and government 208 00:11:35,400 --> 00:11:37,760 Speaker 1: held parts of Syria for the election of a new 209 00:11:37,760 --> 00:11:41,360 Speaker 1: two hundred fifty member parliament. Global News twenty four hours 210 00:11:41,400 --> 00:11:44,719 Speaker 1: a day, powered by our twenty four hundred journalists and 211 00:11:44,800 --> 00:11:46,960 Speaker 1: more than a hundred fifty news bureaus from around the world. 212 00:11:47,120 --> 00:11:49,880 Speaker 1: Un Like Laubar Nighttime Mecha, thanks so much again. Futures 213 00:11:49,920 --> 00:11:52,280 Speaker 1: of twelve down, futures of nine j PO Morgan up 214 00:11:52,280 --> 00:11:55,520 Speaker 1: as well off earnings the ten years the two year 215 00:11:55,600 --> 00:11:58,680 Speaker 1: yelled two year in Germany is a negative point five 216 00:11:59,000 --> 00:12:03,120 Speaker 1: to zero. That gets my attention this morning. Later, Brad 217 00:12:03,200 --> 00:12:07,679 Speaker 1: hints on banks. Bloomberg surveillance brought to you by your 218 00:12:07,679 --> 00:12:10,040 Speaker 1: try State BMW centers. Visit the online at try State 219 00:12:10,080 --> 00:12:12,480 Speaker 1: BMW dot com. At BMW they make only one thing, 220 00:12:12,559 --> 00:12:19,319 Speaker 1: the ultimate driving machine.