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Speaker 2: All Right, Fed decision Day, the eighth and final FOMC
Speaker 2: meeting of twenty twenty five. It is done, and widely
Speaker 2: as expected, the Fed cutting rates for a third consecutive time.
Speaker 3: The Fed also maintaining its outlook for just one cut
Speaker 3: in twenty twenty six. Okay, so two descents last time, yep,
Speaker 3: this time three descents correct, but in different ways correct,
Speaker 3: kind of spanning everything. That's Stephen Meyer into want a
Speaker 3: more aggressive interest rate cut right at fifty basis points.
Speaker 3: But maybe what people didn't expect were two dissenters who
Speaker 3: wanted to hold rate study.
Speaker 2: Mister Goolsby of the Chicago Fed and mister Schmidt of
Speaker 2: Kansas City.
Speaker 4: Yeah, exactly, saying we didn't need to do anything.
Speaker 3: Okay, Yeah, so not a lot of consensus, but.
Speaker 2: Must have been a healthy debate around the FED table
Speaker 2: on the wall. Yeah, exactly. So now we're done for
Speaker 2: the year and now we think about what's going to
Speaker 2: happen next year.
Speaker 4: We got a lot of commentary on that from fedho J. Powell.
Speaker 2: In fact, one of the things he really emphasized repeatedly
Speaker 2: in his comments in his opening statement that the committee
Speaker 2: is in.
Speaker 4: A wait and see mode.
Speaker 2: Also noting, by our account, thank you Talia, our producer,
Speaker 2: for actually pulling this out to our attention, noting by
Speaker 2: our account for the third FOMC meeting in a row,
Speaker 2: saying there is no risk free path forward.
Speaker 4: It's a challenging situation.
Speaker 5: In the near term. Risks to inflation are tilted to
Speaker 5: the upside, and risks risks to employment to the downside.
Speaker 5: A challenging situation. There is no risk free path for policy.
Speaker 5: You're going to get a great deal of data between
Speaker 5: now and the January meeting. Everyone around the table at
Speaker 5: the fom SE agrees that inflation is too high and
Speaker 5: that we want it to come down, and agrees that
Speaker 5: the labor market has softened in that there's further risk.
Speaker 5: Everyone agrees on that where the difference is how do
Speaker 5: you wait those risks and what does your forecast look like?
Speaker 5: And where do you ultimately weal Where do you think
Speaker 5: the bigger risk is? And you know, it's very unusual
Speaker 5: to have persistent tension between the two parts of the mandate.
Speaker 5: We're well positioned to wait to see how the economy evolves.
Speaker 6: We'll just have to see.
Speaker 5: It's a very challenging situation. I think we're in a
Speaker 5: good place too, as I mentioned, to wait and see
Speaker 5: how the economy evolves.
Speaker 4: All right, very challenging situation.
Speaker 7: Fit your J.
Speaker 4: Powell.
Speaker 2: At the press conference, you also did say gradual labor
Speaker 2: market cooling justified that rate cut today. So talking about
Speaker 2: some weakness that we've got in the labor market.
Speaker 4: Next f MC decision, folks, Not.
Speaker 2: That we like to kind of look ahead, but we do.
Speaker 2: January twenty eight, twenty twenty sixth.
Speaker 3: Mark your calendars, I am, are you?
Speaker 2: Oh yeah, it'll be the first of twenty twenty six. J.
Speaker 2: Powell still will be FED chair, So it'll be interesting.
Speaker 4: We should point out.
Speaker 2: After the decision, President Trump at the White House made
Speaker 2: some comments tim on today's FED move.
Speaker 4: He said that could have been doubled at least doubled.
Speaker 4: Not a surprise.
Speaker 2: We have heard criticism from the President when it comes
Speaker 2: to FED Chair J Powell.
Speaker 3: Well, interestingly enough, that's where Stephen Myron exactly, Stephen Myron voted,
Speaker 3: who's widely seen as somebody who has the most connection
Speaker 3: to the White House, who's on the FOMC.
Speaker 4: Yeah, exactly right.
Speaker 2: All right, So let's do a little bit more in
Speaker 2: terms of the commentary around this decision. We've had a lot,
Speaker 2: certainly come across the Bloomberg, including our live blog. Let's
Speaker 2: see what our Bloomberg Intelligence chief US Interest rates strategist
Speaker 2: Iri Jersey has to say about this. All right, Ira,
Speaker 2: We have heard from Fedchair J. Powell for at least
Speaker 2: the last three meetings where they cut that both sides
Speaker 2: of the Fed's mandate is challenged at the FED decision today.
Speaker 4: Does it make sense to you?
Speaker 6: I think it does.
Speaker 8: I mean it was fully priced. And you know clearly
Speaker 8: when they pivoted to worrying more about employment than inflation,
Speaker 8: they were going to go more than fifty basis points
Speaker 8: as kind of these risk management cuts, and you know
Speaker 8: now that they've cut seventy five basis points. Another key
Speaker 8: phrase that Jay Powell said was that that they're now
Speaker 8: in the range of neutral. So basically, with all the
Speaker 8: committee members, what is this mystical r star or real
Speaker 8: neutral rate?
Speaker 3: And are we there yet?
Speaker 8: And he conceded that he thinks that they're now in
Speaker 8: the range of being at neutral. So therefore this could
Speaker 8: be the end of cuts, or maybe they're going to
Speaker 8: cut again unless the economic data changes enough for them
Speaker 8: to be comfortable cutting again, because like you mentioned, you know,
Speaker 8: he did say that there's still this balance of risk
Speaker 8: between inflation and employment.
Speaker 3: Yeah, exactly, And look he did say we're even between
Speaker 3: now and January, not to mention between now and the
Speaker 3: end of next year, when some people think that another
Speaker 3: twenty five point rate will happen. He said, we're going
Speaker 3: to get a great deal of data between now and
Speaker 3: the January meeting, so a lot can change or a
Speaker 3: lot can be confirmed in the meantime ira before that happens. Though,
Speaker 3: I want to go back to this tension between the
Speaker 3: different parts of the dual mandate. Which part do you
Speaker 3: believe the FED needs to focus on more? Is it
Speaker 3: inflation or is it maximum employment?
Speaker 8: Well, I actually think that at the moment there's very
Speaker 8: little that they can do about inflation because you know
Speaker 8: that the interest rates still are relatively high compared for
Speaker 8: like the housing market, and there's not much that the
Speaker 8: Federal Reserve can actually do to help the housing market
Speaker 8: right now in terms of, you know, bringing house prices down,
Speaker 8: Like what are they going to do there? You know,
Speaker 8: if they lower interest rates a lot more, that's just
Speaker 8: going to increase the value of some people's houses because
Speaker 8: you know, maybe mortgage rates come down a little bit,
Speaker 8: that increases affordability, and suddenly house prices actually go up,
Speaker 8: which is actually against their mandate. And for other goods
Speaker 8: and services, they don't seem to be particularly elastic, like
Speaker 8: the elasticity to interest rate and a lot of these
Speaker 8: other goods, whether it's even automobiles or any other large purchases,
Speaker 8: there just doesn't seem to be a significant correlation between
Speaker 8: the two at the moment. I think part of that
Speaker 8: is quite frankly, because a large portion of the population
Speaker 8: does have very low interest rate mortgages, so they're not
Speaker 8: going to refi, it's not going to Lowering interest rates
Speaker 8: isn't going to be as stimulative as it has been
Speaker 8: in previous cycles. And at the same time, lowering interest
Speaker 8: rates again, isn't going to necessarily bring inflation, make inflation
Speaker 8: go significantly higher, if you know, if you don't get
Speaker 8: a big lending boom. And I'm not sure that that
Speaker 8: lending has you know, increased the whole heck of a
Speaker 8: lot anyway. So anyway, the fact that they were close
Speaker 8: to neutral, and we you know, we've always thought that
Speaker 8: they'd probably cut a little bit beyond three percent because personally,
Speaker 8: I'm a little bit more concerned about the job market.
Speaker 8: I think the job market shows some cracks beneath the
Speaker 8: surface that some people are either ignoring or you know,
Speaker 8: everyone's making excuse for why we're at fifty k ish
Speaker 8: payrolls the last couple of reports that we've gotten. But
Speaker 8: the fact is is that companies are still reluctant to hire.
Speaker 6: You have seen in some of the survey data.
Speaker 8: Maybe that leveling out a little bit. Yeah, but I'm
Speaker 8: still concerned about the job market, and I think that
Speaker 8: the FED is and the people who voted for the
Speaker 8: cut certainly are worried about the job market more than inflation.
Speaker 2: And we get to read on that next week. Hey,
Speaker 2: one thing I want to do before we go. We
Speaker 2: got about a minute and a half or so left
Speaker 2: here Just quickly, Ira, the FED move to expand its
Speaker 2: balance sheet again fresh purchases of short term treasury securities
Speaker 2: to maintain what they said an ample supply of bank reserves.
Speaker 4: Just got about thirty seconds. What do we need to
Speaker 4: know here?
Speaker 8: Yeah, well, that's actually probably the bigger story, even than
Speaker 8: everything else that we just talked about, because it's much
Speaker 8: larger than most of us thought it would be. They're
Speaker 8: adding somewhere around one hundred and sixty billion dollars of
Speaker 8: tea bills over the next couple of months.
Speaker 3: Through the April tax day.
Speaker 8: Risk assets seem to like that quite a lot, and
Speaker 8: it made the whole meeting a lot more doubvish to
Speaker 8: I think a lot of people's sensibilities and just looking
Speaker 8: at the whole cut plus the Qiwi light, if you
Speaker 8: want to call it that.
Speaker 2: All right, good stuff, Ira, Thank you so much. We'll
Speaker 2: be looking out for your research. Also later on today
Speaker 2: and into tomorrow, our Jersey chief US interest rates strategist
Speaker 2: at Bloomberg Intelligence from BI headquarters in New Jersey.
Speaker 3: Stay with us more from Bloomberg Business Week Daily coming
Speaker 3: up after this.
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Speaker 3: We're staying on the FED decision today. We're also thinking
Speaker 3: about FED leadership come twenty twenty six, We've got a
Speaker 3: great roundtable. Steve Moore's with us. He's co founder and
Speaker 3: chair of the nonprofit Unleash Prosperity. He's a former economic
Speaker 3: and senior policy advisor to Donald Trump in twenty sixteen
Speaker 3: and twenty twenty four, and served as Chief Economist and
Speaker 3: Distinguished Visiting Fellow at Heritage Foundation for twelve years. Yeah.
Speaker 2: He's also written a bunch of books, including trump Anomics,
Speaker 2: Inside the America First Plan to Revive Our Economy. Also
Speaker 2: another one, The Trump Economic Miracle. And you might remember
Speaker 2: back in twenty nineteen, President Trump selected Steve Moore for
Speaker 2: the Federal Reserve Board of Governors, which more ultimately withdrew from.
Speaker 2: So we have a lot to unpack and talk about.
Speaker 2: Steve joins us from Palm Beach, Florida. Great to have
Speaker 2: him here. Also with us is Bloomberg Economics US and
Speaker 2: Canada economist Stuart Paul. He's right here in our Bloomberg
Speaker 2: Interactive Broker studio.
Speaker 4: Steve, I want to kick it off with you. Welcome.
Speaker 2: Nice to have you here on Bloomberg. Your key takeaways
Speaker 2: from today's FED decision.
Speaker 7: Well, it was certainly Wall Street was happy with what
Speaker 7: happened today. It was very expected that the Fed did
Speaker 7: exactly what they announced today. Trump of course wants more
Speaker 7: rate cuts. You know, Look, inflation has come down, and
Speaker 7: it's still not where we wanted to be. We wanted
Speaker 7: to be at the two percent at target, and so
Speaker 7: we're running about two point seven two point eight, So
Speaker 7: there's still work to be done to bring inflation down.
Speaker 7: Of course, if you bring inflation down, affordability goes up.
Speaker 7: But look, this is a booming economy right now. It
Speaker 7: is so hot. Trump is right about that. In twenty
Speaker 7: twenty six is going to be a monster year for
Speaker 7: growth and for incomes and I believe for equities.
Speaker 3: If you were on the FOMC in a voting member,
Speaker 3: how would you have voted today? What would you have
Speaker 3: wanted to see?
Speaker 7: I would have done exactly what they did.
Speaker 3: You wouldn't have gone fifty basis points like Stephen Myron.
Speaker 7: No, I'm a little bit more of an inflation hot
Speaker 7: than Steve and Steven. I know Stephen, he's a smart economist.
Speaker 7: I lean towards making sure. I think the top priority
Speaker 7: of the Fed should be to make sure that we
Speaker 7: bring that inflation rate down to the target level. We're
Speaker 7: not there yet, and you know, look at the as
Speaker 7: a political matter, Trump really needs to continue to bring
Speaker 7: that inflation rate down because people are still angry about prices.
Speaker 9: Mister Moore, is really difficult to square the circle between
Speaker 9: being an inflation hawk and voting for or advocating for
Speaker 9: additional rate cuts. When you see somebody like President Trump
Speaker 9: focusing so much on affordability, but at the same time
Speaker 9: calling for the FED to cut rates even more, how
Speaker 9: do you really square the circle?
Speaker 6: How would you.
Speaker 9: Rationalize voting for a cut while also being an inflation hawk.
Speaker 7: Well, I think I believe that Wall Street puts way, way,
Speaker 7: way too much influence and interest in FED rate cuts.
Speaker 7: I mean, nobody the short term interest rate has become
Speaker 7: almost irrelevant, So I really don't believe that it's all
Speaker 7: that important. Frankly, whether it was a quarter point or
Speaker 7: fifty percent, fifty points or doing nothing. I don't think
Speaker 7: that it makes all that much difference. We should have
Speaker 7: learned the lesson. By the way, what look, what we mean,
Speaker 7: what we'd all like to see is for those mortgage
Speaker 7: rates to come down, in the ten year treasury interest
Speaker 7: rate to come down. The FED doesn't control that. I
Speaker 7: know that may surprise people watching with the FED has
Speaker 7: no impact on the ten year treasury or the thirty
Speaker 7: year mortgage. And we know that, by the way, And
Speaker 7: what happened in twenty twenty four when the FED cut
Speaker 7: the discount rate and what happened to the I mean
Speaker 7: the FED funds rate, and what happened to the mortgage
Speaker 7: rate and the ten year treasury went up. So I
Speaker 7: don't overly obsess about FED rate cuts. I think we're
Speaker 7: in a pretty good look. The most important thing is
Speaker 7: this incredibly healthy economy. We've got hundreds of billions of
Speaker 7: dollars coming into the US economy of foreign investment. We've
Speaker 7: got the highest s and P five hundred, the highest Dow,
Speaker 7: and the highest Nazza in the history of the country.
Speaker 7: People are making huge amounts of money. And this is
Speaker 7: a bet when the markets go up, this is a
Speaker 7: bet that policy will be well guided and that American
Speaker 7: companies are going to make money. So I have a
Speaker 7: hard time really having many much problem with the direction
Speaker 7: that we're going in with respect to this economy. And
Speaker 7: don't forget the sorry. In January, people will start to
Speaker 7: see the middle income people will start to feel the
Speaker 7: impact of those big, beautiful task cuts that passed and
Speaker 7: in terms of less money deducted from their paychecks and taxes,
Speaker 7: and the no tax on tips, the no tax on overtime.
Speaker 7: Those are all positive features that will help middle class Americans.
Speaker 9: That's a really an interesting point that fiscal policy is
Speaker 9: going to be especially accommodative in twenty twenty six. And
Speaker 9: I think that one thing that's interesting is whether we're
Speaker 9: going to see monetary policy that's equally accommodative or even
Speaker 9: more so, And that's going to really depends on who
Speaker 9: we get as the next Chairman of the Federal Reserve
Speaker 9: and chairman.
Speaker 6: Of the FOMC.
Speaker 9: What do you make of the White House's floating of
Speaker 9: a trial balloon with Kevin Hassett about three weeks ago
Speaker 9: and then seeming to reconsider you know, if there's anybody
Speaker 9: in the world who recognizes how difficult a process it
Speaker 9: can be to make it through the Senate. It's you,
Speaker 9: and so I'm really interested to hear what your thoughts
Speaker 9: on what your thoughts are about what's going on in
Speaker 9: the White House and on Capitol Hill in terms of
Speaker 9: whipping up the votes to support someone perhaps like Hassett
Speaker 9: or wash I like them both.
Speaker 7: I mean, I think the two Kevens, I've been saying
Speaker 7: this for two years now that you know, it should
Speaker 7: be one of those two as the FED chairman. I
Speaker 7: also like Larry Kudlow, but I don't think Larry probably
Speaker 7: is in the runnings to do it, but he'd be
Speaker 7: an excellent FED share as well. But look, the two
Speaker 7: Covens are monetary experts. They're extraordinary economists. I really truly
Speaker 7: either one of them I think would be fantastic picks.
Speaker 7: And I think they would also keep their eye on
Speaker 7: the most important thing that the FED needs to do,
Speaker 7: which is defend the dollar. Defend the dollar, make sure
Speaker 7: that it's strong and stable. That's all the FED needs
Speaker 7: to do. It doesn't have to worry about jobs, it
Speaker 7: doesn't have to worry about climate change or any of
Speaker 7: these other things. The most important thing is to keep
Speaker 7: prices stable and the dollars strong. I think both would
Speaker 7: do that.
Speaker 2: Steve, you have some great insight into President Trump behind
Speaker 2: closed doors. You know, he did nominate you for a
Speaker 2: FED governor position. You ultimately backed out of it. But
Speaker 2: I'm just curious what were your conversations with President Trump
Speaker 2: or what insight can you give to our audience, an
Speaker 2: investing audience trying to understand read the tea leaves, because
Speaker 2: we do have a president that most would agree that
Speaker 2: he's transactional, and so I think we're trying to understand
Speaker 2: that in terms of any appointments. Is that seen as
Speaker 2: an expectation that you're going to do the President Trump's
Speaker 2: bidding and listen to him if you are at the
Speaker 2: FED in terms of what needs to be done in
Speaker 2: cutting rates, if that's what he wants.
Speaker 7: Well, look, my opinion is that it is valuable to
Speaker 7: have an independent FED, but I also believe that the
Speaker 7: FED needs to be accountable and in my opinion, and
Speaker 7: it hasn't been accountable in the last few years. That's
Speaker 7: why we got, you know, a nine percent inflation under
Speaker 7: the current Joan Powell and so.
Speaker 2: Well, when you say that that nine percent was the
Speaker 2: result of the pandemic and incredible demand. I mean, there
Speaker 2: were some you know, unexpected events. That's crazcal policy too,
Speaker 2: fiscal policy. There was a lot of money slashing around.
Speaker 2: When you can see that that nine percent inflation, any
Speaker 2: president or any fed shair would have had to deal
Speaker 2: with that.
Speaker 7: Well, listen. I mean, I do think that Trump made
Speaker 7: a big mistake in that he passed a big, massive
Speaker 7: spending bill right before he left office. So you could
Speaker 7: you make a good point, but it was catastrophic everything
Speaker 7: that happened under COVID. We made the biggest mistake in
Speaker 7: the history of the United States and shutting down our economy,
Speaker 7: shutting down our schools, shutting down our hospital It was outrageous,
Speaker 7: and I think we've hopefully learned that level of lesson
Speaker 7: that will never never do it again. But you are
Speaker 7: quite correct that what caused the inflation, and I hope
Speaker 7: we remember this lesson for many, many decades to come,
Speaker 7: is that when you massively spend four trillion dollars, guess
Speaker 7: what you're going to have inflation. And it didn't stimulate
Speaker 7: the economy, it caused huge, huge reductions and real incomes
Speaker 7: for middle class people. It destroyed middle class incomes. They
Speaker 7: lost massive amounts of money because we very stupidly printed
Speaker 7: all this money and spent it, dropped it out of helicopters.
Speaker 7: And that's a policy that's never worked.
Speaker 3: So I want to go look. I think I think
Speaker 3: it's an important You bring up a lot of important
Speaker 3: points about what happened during the pandemic and the causes
Speaker 3: of inflation. But to Carol's point, you do have this
Speaker 3: direct line to the White House and to the President.
Speaker 3: You advised him back in twenty sixteen, you advised him
Speaker 3: in twenty twenty four. How would you characterize the relationship
Speaker 3: with him right now and to what extent are you
Speaker 3: and how often are you speaking to him about economic
Speaker 3: matters that hit the United States.
Speaker 7: By the way, I hope there isn't still a debate
Speaker 7: about what we did of COVID, because it really really
Speaker 7: is important that we learn how incredibly enupt almost everything
Speaker 7: that we did. And by the way, I'm in Florida
Speaker 7: right now, in Palm Beach, and one of the few
Speaker 7: politicians who got it right was Ron DeSantis, the governor here,
Speaker 7: who did not shut down the Florida economy. And then
Speaker 7: you have these blue blue states like New York and
Speaker 7: California and my home state of Illinois that shut down
Speaker 7: their economy, and that's one of the reasons, by way
Speaker 7: the way, these blue states have never really made a
Speaker 7: recovery from their tragic mistakes.
Speaker 3: So yeah, look, I don't think it's I don't I
Speaker 3: don't want to. We don't have a ton of time,
Speaker 3: so I don't want to rehash the pass. And I think,
Speaker 3: you know, we could do an entire segment about that,
Speaker 3: and that's.
Speaker 7: For people, right because it was you know, we don't
Speaker 7: want to ever make that mistake again, right, we don't.
Speaker 3: Hopefully, hopefully we don't face another pandemic. And I don't
Speaker 3: think any any of us we're countering your what you're
Speaker 3: saying there. What I'm interested in is what you're you're
Speaker 3: talking to the president about right now? What is the
Speaker 3: line that you have to President Trump on economic policy?
Speaker 7: What I tell him is that I think the tax
Speaker 7: cuts have been enormously beneficial and it's not a commen
Speaker 7: date of fiscal policy on the tax side. What it is.
Speaker 7: I mean, like, one of the most important things we
Speaker 7: did in the Big Beautiful Bill was we are allowing
Speaker 7: businesses to you know, instantly capitalize their expenditures and write
Speaker 7: them off instantly. And I believe that's one of the
Speaker 7: reasons we're seeing this capital boom in the United States.
Speaker 7: I mean, if you look at the last nine months,
Speaker 7: capital investment has been really strong as a result of
Speaker 7: this tax cut. So it wasn't really meant to just
Speaker 7: pump money into the economy. It was meant to incentivize
Speaker 7: through lower tax rates, lower lowering the corporate rate, giving expensing,
Speaker 7: lowering the individual income tax rate. Those are pro growth,
Speaker 7: pro supply side policies that actually help bring inflation down.
Speaker 7: I mean, it's very simple. If the economy produces more,
Speaker 7: prices go down.
Speaker 2: Hey, one of the things I do to go back
Speaker 2: to this idea of transactional and again I'm going to
Speaker 2: go back to the insight that you have and having
Speaker 2: conversations with President Trump before he you know, made a
Speaker 2: nomination for you to join the FED and be a governor.
Speaker 2: Because we've heard Jay, the President come out and say j.
Speaker 2: Powell has been very bad for our country. He's terrible.
Speaker 2: He's a terrible FED chair. I'd love for him to
Speaker 2: lower interest rates. I call him too late. I'd love
Speaker 2: to fire him. Tell us about would there be pressure
Speaker 2: by President Trump with who he appoints for the next
Speaker 2: FED share and would there be an assumption by the
Speaker 2: person who takes that position to kind of do the
Speaker 2: president's bidding.
Speaker 4: Give us some insight, if you could.
Speaker 7: I put it a little differently, it's a good question.
Speaker 7: First of all, When I was nominated to be on
Speaker 7: the FED, Trump never really you know, asked me about, well,
Speaker 7: would you cut rates or would you raise rates or
Speaker 7: so on. He just he had trusted in me as
Speaker 7: an economist that I would get it right. So there
Speaker 7: was no pressure, sure to sort of do his bidding.
Speaker 7: Now with respect to Kevin Hassett or Kevin Walsh, which
Speaker 7: I think is a good chance it's gonna be one
Speaker 7: of those two. What he is doing is picking someone,
Speaker 7: you say, do his bidding. He's picking someone who agrees
Speaker 7: with his overall economic philosophy, and that's exactly what a
Speaker 7: president should do. I don't think that means undue influence
Speaker 7: on the independence of the FED, but I think it's basically,
Speaker 7: you know, presidents deserve the monetary policy they want, frankly,
Speaker 7: and so you know, I think they will they will
Speaker 7: do they agree with Trump on monetary policy. And that's
Speaker 7: one of the reasons one of the two of them
Speaker 7: will be chosen. But I can't think of two economists
Speaker 7: I admire more than Kevin Hassett and Kevin worsh.
Speaker 9: It's interesting that you bring up President Trump's economic philosophy
Speaker 9: because I think that if you were to press him
Speaker 9: to describe his economic philosophy with regards to monetary policy,
Speaker 9: he would just say he's a low interest rate guy.
Speaker 9: So is the expectation going to be from you know,
Speaker 9: Kevin Hassarter, Kevin warsh that they will just deliver low
Speaker 9: interest rates.
Speaker 7: You know, you make a good point. The one thing
Speaker 7: that Trump has often sent to me is that he
Speaker 7: likes low interest rates. And and I've always said, well,
Speaker 7: mister President, low interest rates are good, but we also
Speaker 7: want to make sure we don't cause inflation. And so
Speaker 7: that is the kind of dual competing interests here. But
Speaker 7: I think he gets it that, you know, what destroys
Speaker 7: a presidency is inflation for one of whatever. You know,
Speaker 7: we saw Jimmy Carter, Jimmy Carter lose because of inflation.
Speaker 7: We saw Jerry Ford lose because of inflation. We saw this.
Speaker 7: I think the major factor in this last of presidential
Speaker 7: election was inflation. Americans hate, hate, hate, higher prices. It's
Speaker 7: one of the reasons they're still in a foul mood
Speaker 7: on the economy. So I believe that Kevin Hassett and
Speaker 7: and Kevin worsh either one of them will be an
Speaker 7: inflation hawk, and they will I predict we will bring
Speaker 7: that inflation rate down to two percent.
Speaker 2: But one does wonder, since he's not running again, assuming
Speaker 2: no third term, that maybe he doesn't care if there's inflation.
Speaker 4: I'm just going to put that out there. Why do
Speaker 4: you want to go see?
Speaker 3: I mean, the Republicans certainly care, and affordability is going
Speaker 3: to be a key message for them in the mid
Speaker 3: for everybody in the midter. Hey, we only have thirty
Speaker 3: seconds left, Steve. I just want to take a sharp
Speaker 3: turn here, because, yeah, because you are an economist and
Speaker 3: you watch what's happening closely, the US taking a stake
Speaker 3: in publicly traded companies such as Intel, MP Materials and others.
Speaker 7: I don't like it. Hey, wow, no, no, no, never.
Speaker 7: You know, I've spent most of my career trying to privatize,
Speaker 7: not nationalize, So it's one of those issues I disagree
Speaker 7: with the president, and I don't want I believe in
Speaker 7: separation of business and state, and the less you know,
Speaker 7: the government does to you know, to influence business decisions.
Speaker 3: I think the better your old school that way.
Speaker 7: Yeah, I am.
Speaker 3: It's a different It's definitely a different republic party.
Speaker 4: Thank you.
Speaker 3: From a business perspective today.
Speaker 2: I think there's a lot of investors out there too
Speaker 2: who certainly would agree with you.
Speaker 4: Steve, Thank you so much. Really enjoyed this.
Speaker 2: Steve Moore, co founder and share of the nonprofit Unleashed
Speaker 2: Prosperity and of course, as we said, a former economic
Speaker 2: and senior advisor to President Trump in both of his terms,
Speaker 2: and of course are great thanks to our own Bloomberg
Speaker 2: Economics US and Canada economist Stewart Haul.
Speaker 3: Stay with us more from Bloomberg Business Week Daily coming
Speaker 3: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five ees during
Speaker 1: Listen on Applecarplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 2: Oracle shares they are down about five and a half
Speaker 2: percent here in the aftermarket meantime. Adobe shares there right
Speaker 2: now little change, but they've been bouncing around a little bit.
Speaker 3: I want to bring in Bloomberg Intelligence senior technology analyst
Speaker 3: Donna rug Rana to break down these earnings. I want
Speaker 3: to start with what's going on with Oracle down close
Speaker 3: to five percent in the after hours. The company reported
Speaker 3: adjusted revenue for the second quarter that met the average
Speaker 3: analyst estimate. Revenue, adjusted revenue coming in it's sixteen point
Speaker 3: zh six billion, cloud revenue coming in eight billion dollars.
Speaker 3: What's your initial reaction here and why are we seeing
Speaker 3: the stock lower?
Speaker 10: So when you look at Oracle results as expected, the
Speaker 10: backlog or the booking stumbers was very strong. That's been
Speaker 10: over five hundred billion right now, but the realization of
Speaker 10: some of that into revenue owned to cloud revenue was
Speaker 10: slightly lower than what street was expecting. And one reason
Speaker 10: for that good piece of supply constraint. They may not
Speaker 10: have the necessary chips or equipment to fulfill that demand.
Speaker 10: So I think there is going to be a lot
Speaker 10: more discussion on the call about it. On the other side,
Speaker 10: there was a little bit higher capex as well. So
Speaker 10: for Oracle right now, I think the backlog or the
Speaker 10: order book does not matter What really matters is how
Speaker 10: can they convert that backlog into sales over the next
Speaker 10: few years.
Speaker 2: All right, So you're talking about the RPO growth, right,
Speaker 2: and we are getting another headline that says it's aided
Speaker 2: by commitments from Meta and n Video. I mean, in
Speaker 2: terms of where this commitments or these you know, order
Speaker 2: flow continues to come from, does it matter that it
Speaker 2: still is so concentrated in the hyperscalers?
Speaker 10: Well, as far as you know, the concentration is concerned
Speaker 10: really depends on who's you know, who's committing those promises.
Speaker 10: If the promises are for somebody like a Microsoft or
Speaker 10: an Amazon or somebody else like Meta, it does make
Speaker 10: sense because they actually have the cash flow to support it.
Speaker 10: But the big question for everybody is it's out of
Speaker 10: that three hundred plus billion commitments are from OPENINGI Where
Speaker 10: does open A I have the money to fund a
Speaker 10: lot of this expansion now Opening I think so over
Speaker 10: the next few years they can get to that point
Speaker 10: where they can then spend that money. But in terms
Speaker 10: of certainty for an investor, I think you're better off
Speaker 10: when the commitment is coming from a Meta or a Microsoft.
Speaker 2: Hey, ANAA, can we assume that those folks that continue
Speaker 2: to invest in open ai, they have looked at the books.
Speaker 2: They understand the financials of open ai because it is
Speaker 2: not a publicly held company, and we know there are
Speaker 2: some big time investors, including Microsoft in that company and others.
Speaker 2: But can we assume that there's a real business there,
Speaker 2: even though there's a lot that we don't know about it?
Speaker 10: Oh? Yes, absolutely, there's a real business. I mean nine
Speaker 10: hundred million users and mean for chart GPT, I mean
Speaker 10: this is the biggest consumer up out there when it
Speaker 10: comes to AI tools. So this's definitely a real business there.
Speaker 10: But the big question is do they need to spend
Speaker 10: you know, three hundred five hundred seven hundred billion down
Speaker 10: the road to in order to train their models. That's
Speaker 10: an area where we are not sure how that translates
Speaker 10: into future revenue.
Speaker 3: I'm looking, I'm looking for the word debt in the
Speaker 3: press release coming from Oracle. I don't see it anywhere, Carol,
Speaker 3: but not too surprising.
Speaker 4: I think that schell will come up on the call.
Speaker 3: It'll definitely come up on the call. But how should
Speaker 3: investors be thinking about Oracle's debt position? Because that was
Speaker 3: a concern a few weeks ago and you know, we
Speaker 3: saw CDs evaluation as a result.
Speaker 6: Yeah.
Speaker 10: See, when you look at the size of their order book,
Speaker 10: they just cannot fund it themselves. It's just not possible
Speaker 10: given the free cash flow that they generate. So they
Speaker 10: have to do something called a special but was vehicle
Speaker 10: where you'll have a private equity player, you will have
Speaker 10: private debt, and then you will have investments from maybe
Speaker 10: SoftBank around the others to create as create an entity
Speaker 10: that can fund a lot of the stargate you orders
Speaker 10: that are flowing in. So it is going to be
Speaker 10: a little more complicated than straight out going to the
Speaker 10: debt market and raising capital.
Speaker 2: I know, because at some point I always wonder, you know,
Speaker 2: when there's a lot of debtbek cred and there's a
Speaker 2: lot of investors involved, how much are willing to throw
Speaker 2: more money at it to make sure that it all
Speaker 2: plays out right because the nervousness of it not happening
Speaker 2: maybe because just of a shortage of capital.
Speaker 10: Yeah, but Carol, if you look at it when they
Speaker 10: last came out in the market, I mean the news
Speaker 10: that we heard was it was oversubscribed. I mean, these
Speaker 10: companies are not having at this point any trouble raising
Speaker 10: capital for the for data center expansion.
Speaker 4: All right, let's go to Adobe.
Speaker 3: Yeah, I'm just looking at what's going on with Adobe
Speaker 3: right now. The company gave a strong sales growth outlook.
Speaker 3: It's eased concerns about AI. The company giving an outlook
Speaker 3: for revenue in the coming year. The top Dannal assessmates.
Speaker 3: It suggested that AI features are helping fuel growth of
Speaker 3: its creative software business. Just looking at shares of Adobe
Speaker 3: in the after hours, they are kind of unchanged. They
Speaker 3: bats around a little bit, but right now down about
Speaker 3: three tenths of one percent. What do we need to
Speaker 3: know about Adobe's report?
Speaker 10: Adobe's management needs to just come out and say we
Speaker 10: are executing properly. They are, you know, I always say,
Speaker 10: not worried about AI cannibalizing their business. Their margins were
Speaker 10: very strong this time. What they promised a year ago,
Speaker 10: they actually fulfilled it. For the next quarter. They are
Speaker 10: talking about ten percent growth in the overall company annual
Speaker 10: recurring revenue. So I think, overall, good results. But this
Speaker 10: is a company where honestly, the sentiment is so negative.
Speaker 10: No matter what they do, they just can't get a break.
Speaker 4: Hey, listen, the story today too.
Speaker 2: Anorog is that chatgypt users can now use Photoshop and
Speaker 2: other creativity software from Adobe directly within the chatbot. So
Speaker 2: we're looking at Open Eye continuing to bring kind of
Speaker 2: third party apps into its product. Sounds like a plus
Speaker 2: for Adobe, is it, you know? And where is Adobe's
Speaker 2: role in the AI world? Where does it exactly fit in?
Speaker 2: Is it like an add on or what?
Speaker 10: Yeah, So when you look at I think the biggest threat,
Speaker 10: the reason why Adobe stock has not been able to
Speaker 10: recover over the past two years is the biggest threat
Speaker 10: is a lot of their main products their cash cows.
Speaker 10: Whether it's Photoshop or some of the other video editing tools.
Speaker 10: People are saying, you know, I can go to an
Speaker 10: open source model and create a lot of that myself.
Speaker 10: Now we don't think that is you know, there is
Speaker 10: a reason forul to have Adobe down the road because
Speaker 10: of workflow issues and how you edit those things and
Speaker 10: how you manage that. But that is the threat, and
Speaker 10: I think the only thing that can help them is
Speaker 10: if they consistently execute like this for next several years
Speaker 10: and showcase that their own AI products are gaining momentum
Speaker 10: and they're working closely with people like open the Eye
Speaker 10: and people like Google. I think they're both integrating those
Speaker 10: models into their workflow. Also.
Speaker 3: Yeah, that's hard though, because I mean in Adobe, what
Speaker 3: they want to do is they always want to come
Speaker 3: out and say, you know, are our images and what
Speaker 3: we creator are commercially safe? So what ess actually that means?
Speaker 3: The translation is that if you're creative and you're working
Speaker 3: on an ad campaign for a company, you're going to
Speaker 3: know that whatever Firefly or whatever Adobe product you're using,
Speaker 3: whatever it spits out, is something that you're not going
Speaker 3: to get sued over. And that's not necessarily the case
Speaker 3: with the other gene High models.
Speaker 10: No, I agree, But if you think about it, there
Speaker 10: is a case that if there is a pyramid of
Speaker 10: customers on the top, you have the enterprise customers who
Speaker 10: are very concerned about it, but it's possible at the
Speaker 10: base layer they may be customers either their individual users
Speaker 10: or you know, very smart to come.
Speaker 3: That's a good point.
Speaker 7: They don't they don't really care about some sort.
Speaker 3: Of like person posting on Instagram isn't really going to
Speaker 3: care if what they created it's like, you know, by copyright. Okay,
Speaker 3: I get it, that makes sense.
Speaker 2: All right, what do you want to go, Carol, Well,
Speaker 2: you know, I'm just thinking, you guys have a massive
Speaker 2: AI report that is out there so timely as we
Speaker 2: get ready for a new year, and.
Speaker 4: It gets into cross industry disruption of AI.
Speaker 3: And this is what vecher J. Powell was asked about today.
Speaker 2: Yes, exactly, he talked about it, and you know, so
Speaker 2: I'm just curious talk to us about this report. Who
Speaker 2: you guys all talked to and what were some of
Speaker 2: the key findings.
Speaker 9: Yeah.
Speaker 10: You know, we embarked on this several months ago, and
Speaker 10: our entire take was, we have all this CAPEX spending
Speaker 10: on the tech side, what are the users saying, whether
Speaker 10: they are financial services firms, consumer firms, you know, hospitals,
Speaker 10: pharmaceutical companies. So we went out and looked at nine
Speaker 10: industries and over six hundred C suite executives that were
Speaker 10: surveyed for this report. And I think the biggest thing
Speaker 10: the crime takeaway for US is every sector is extremely
Speaker 10: worried about being disruptive disrupted. Now for US, we thought
Speaker 10: only the software companies would be worried about it, but
Speaker 10: you know, we saw industrial firms, auto firms, hospitals, they
Speaker 10: were all saying that okay, you know, this is going
Speaker 10: this could shake up our business, so we need to
Speaker 10: invest and invest mode. The second thing we saw was
Speaker 10: even in these sectors that you could considered laggards of
Speaker 10: technology adoption, the people who are you know, part of
Speaker 10: the employee base, they're very, very apt at using these
Speaker 10: AI tools that we talk about, whether that's Shack, Gipt
Speaker 10: and the others. So the level of awareness is there,
Speaker 10: the understanding is there. Now it's going to take some
Speaker 10: time for them to flow a lot of those technologies
Speaker 10: into their code business so that they don't get eaten away.
Speaker 3: Hey, one more on this and it has to do
Speaker 3: again we're thinking about We're just coming off of a
Speaker 3: press conference with Peto J. Powell where I personally thought
Speaker 3: and I told you this, you know, as the discussions
Speaker 3: going on. One of my biggest takeaways was his answer
Speaker 3: about AI and productivity and the idea that productivity growth
Speaker 3: in the US, like he didn't think that he would
Speaker 3: see a period of time with such an extended plus
Speaker 3: two percent in terms of GDP growth. And you know,
Speaker 3: we don't know what we can attribute to AI, but
Speaker 3: there are also so many questions about Okay, what is
Speaker 3: when to be the effect on employees, what's going to
Speaker 3: be effect on different sectors of workers. Did you guys
Speaker 3: hit on that at all in this report?
Speaker 10: Yeah, yeah, yeah, absolutely, And you know, productivity was the
Speaker 10: number one factor. Everybody is going throwards. Other thing that
Speaker 10: we have seen, and this is more predominant in the
Speaker 10: software companies that we cover, is the level of revenue
Speaker 10: growth and the level of headcount growth hasn't widened. I mean,
Speaker 10: what I'm saying is the relationship that was very tight
Speaker 10: before has moved on. So when you have a company
Speaker 10: growing revenue at a particular rate, headcount is not growing
Speaker 10: at that rate. We're not saying there are cuts out there,
Speaker 10: but that delta is where the productivity is coming in,
Speaker 10: which will eventually lead to and it's already we have
Speaker 10: already seen that in certain cases is higher revenue per employee,
Speaker 10: and that I think is the benchmark everybody needs to
Speaker 10: focus on.
Speaker 2: Right, But he still had to say notching up in
Speaker 2: layoffs yet, So I mean TBD right to see how
Speaker 2: this kind of ultimately plays out. Hey, before you go,
Speaker 2: there's one other question we wanted to ask you. Meta
Speaker 2: platforms an open source money or tilting from an open
Speaker 2: source to a closed source AI model. What is this
Speaker 2: all about? I think it's called avocado. It's a new
Speaker 2: model expected to take you.
Speaker 4: I know, I was like, what is that? I was
Speaker 4: trying to like understand. Totally califul.
Speaker 10: Yeah, I'll take you back to many years ago when
Speaker 10: there was Linux and Windows. Linux is open source. Windows
Speaker 10: you gotta pay for it. You make money when you
Speaker 10: have Windows, and very few companies out there have made
Speaker 10: money when they have an open source product. Meta started
Speaker 10: with this open source model really because the thing is
Speaker 10: you and I can go and perfect this model and
Speaker 10: then we can use it without paying Meta any money.
Speaker 10: But if you have a closed end model, you have
Speaker 10: to pay Meta that royalty. And you know, at the
Speaker 10: end of the day, they're spending all these billions of dollars?
Speaker 10: How are they going to monetize it? And I think
Speaker 10: that's kind of one of the reasons for that pivot.
Speaker 2: It's like they were listening to everybody saying, well, how
Speaker 2: are we going to monetize this? All this spend, how
Speaker 2: are we going to monetize it? And Rock, thank you
Speaker 2: so much man, and that report. I'm sure we're going
Speaker 2: to lean on that a lot, especially in the new year,
Speaker 2: on our Grana. He's senior technology analyst at Bloomberg Intelligence
Speaker 2: out there at the Bloomberg News Bureau in Chicago.
Speaker 3: Stay with us more from Bloomberg Business Week Daily coming
Speaker 3: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five eas during
Speaker 1: Listen on Applecarplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 2: FED cutting rates for three descents, projecting one cut in
Speaker 2: twenty twenty six. So we also want to get into
Speaker 2: kind of how it may impact bank lending as well.
Speaker 2: We did see banks as a whole the KBW Bank
Speaker 2: index rally in today's session off of the FED. With
Speaker 2: a little bit more perspective, let's get to Zach Wasserman.
Speaker 2: He's chief financial officer at the Columbus, Ohio based Huntington Bank.
Speaker 2: Shares back with us. The company has a market cap
Speaker 2: of nearly twenty seven billion shares her up five percent
Speaker 2: year to date, and just today Tim Piper Sandler raising
Speaker 2: the price target on the stock from fifteen to sixteen,
Speaker 2: maintaining though it's underweight rating.
Speaker 3: Zach joining us here in the Bloomberg Interactive Broker's Studio. Zach,
Speaker 3: great to talk with you again, especially appreciate you coming
Speaker 3: into the studio. Did the FED get it right today?
Speaker 6: I think they did. You know, the analysis they did
Speaker 6: that showed the labor markets still of course softening to
Speaker 6: some degree, but inflation pressures continuing to be present and
Speaker 6: with a potential for some higher price pressures as we
Speaker 6: go into the early part of next year. I think
Speaker 6: they got it right, and I think the outlook for
Speaker 6: they've signaled probably one additional cut into twenty twenty six.
Speaker 6: The market, by the way, is making in two cuts
Speaker 6: for twenty twenty six. Somewhere in that range seems very
Speaker 6: likely and I think helpful for the economy at this point.
Speaker 2: All right, Zach, So if you were sitting down with J. Powell,
Speaker 2: what would you want to ask him right now?
Speaker 6: That's a good question. What is he going to do
Speaker 6: after he leave his job?
Speaker 3: Do you think he will leave his job in the spring?
Speaker 6: I would think so, that's mine, that's myself.
Speaker 2: But do you think then, also Kevin has it is
Speaker 2: a given? Like we're seeing that the President's meeting with
Speaker 2: Kevin Warsh like, so it feels like things are.
Speaker 6: Still fluid well I'm not a party to those discussions.
Speaker 6: I have no clue, but I certainly think that you know,
Speaker 6: as the uh uh, you know, as they as they
Speaker 6: think about how that how they're gonna chart their course
Speaker 6: on interrul st rate policy, I think the path that
Speaker 6: they've chosen at this point appears to be the right one,
Speaker 6: very data reliant, uh appears to be you know, we're
Speaker 6: landing the economy in a sweet spot.
Speaker 3: Okay, So can can Carol? Are you done with FED stuff?
Speaker 3: Can I talk?
Speaker 2: Yes?
Speaker 3: Okay to you? Guys have been so acquisitive. I mean,
Speaker 3: there's been a lot of M and A in your space.
Speaker 3: You've been much more aggressive than others in your peer group.
Speaker 3: Why now in terms of the aggressive aggressive posture, Well,
Speaker 3: I wouldn't.
Speaker 6: Characterize our posture as aggressive. It's really, you know, for.
Speaker 4: Us, expansive, that's for sure.
Speaker 6: Well, certainly it's expansive. It's been it's been a dynamic
Speaker 6: year for us, but primarily from an organic growth perspective.
Speaker 6: You know, Huntington has been growing way faster than almost
Speaker 6: any other bank in the industry at this point from
Speaker 6: an organic perspective. And so when we think about these
Speaker 6: partnership that we've announced we're a pleasure to announce two
Speaker 6: partnerships this year. It's really all in service of sustainable,
Speaker 6: long term organic growth.
Speaker 3: All them partnerships, not acquisition.
Speaker 6: We really do and that's intentional. The partnerships we've created
Speaker 6: with Veritexs Bank and then Cadence Bank really are in
Speaker 6: fact bringing these organizations together, making one plus one equals
Speaker 6: three and for us will be a powerhouse in Texas,
Speaker 6: will be present in a lot of terrific markets across
Speaker 6: the South, and really together we're going to be a
Speaker 6: much stronger organization. So they really are partnerships and ultimately
Speaker 6: all in service of long term, sustainable organic growth.
Speaker 2: So you know, I've got family in South Carolina. They've
Speaker 2: noticed some economic softness, and certainly the Vertex's deal was
Speaker 2: about North Carolina and South Carolina. They've seen softness in
Speaker 2: real estate which had been on fire. I'm just curious
Speaker 2: your expansion plans there, your organic growth that you want
Speaker 2: to do there. I think you guys were looking to
Speaker 2: open more than fifty branches in those states. So is
Speaker 2: that impacting any of the growth or you're on target
Speaker 2: for that.
Speaker 6: We're on target for that. In fact, next year we
Speaker 6: expect to open one branch every two weeks in the Carolina.
Speaker 6: So we've got some products for your family, and we'd
Speaker 6: love to take you on this customer. But we're really
Speaker 6: excited about that, and in fact, the market reception we've
Speaker 6: had so far has been tremendous. We've opened a several
Speaker 6: new branch locations just in the last few months, and
Speaker 6: each of them have beat their full year first year
Speaker 6: deposit plan before they've even opened, to give you a sense,
Speaker 6: because the market reception has been so strong.
Speaker 3: So with the look, I know, you know, I can
Speaker 3: ask the question, but in terms of what you have
Speaker 3: planned any more acquisitions, you know, look, how are you
Speaker 3: thinking about it?
Speaker 6: The way we're thinking about it is if something comes.
Speaker 3: Up keepsakes to you.
Speaker 2: Just said they expect more, They expect more acquisitions to happen.
Speaker 7: Do you know.
Speaker 6: I think the industry has been consolidating for twenty years.
Speaker 6: It will continue to consolidate for us. If something comes
Speaker 6: up that's a creative to organic growth, that's a great
Speaker 6: fit for us, we'll consider it. But otherwise it's all
Speaker 6: about organic growth for us.
Speaker 3: Geographically, what's area of the country that's of interest to you,
Speaker 3: Where you're where you don't have a presence.
Speaker 6: We love the markets that we're in right now. Yeah,
Speaker 6: our markets. We're going to be twenty one states covering
Speaker 6: more than fifty percent of the population of the country,
Speaker 6: and in markets collectively that are growing thirty percent faster.
Speaker 3: Than the national a lot of states you're not in.
Speaker 6: True, you know, I think our view is we're not
Speaker 6: trying to be a national bank. We're trying to you're
Speaker 6: not trying to be a national stake explicitly, Okay, we
Speaker 6: want to be deeply present in the states that we're in.
Speaker 3: So would that mean that if there were more expansion
Speaker 3: it would be within the states that you're already in,
Speaker 3: so you can become bigger in those places rather than
Speaker 3: expanding the geographic foot printed places for something fit.
Speaker 6: I think that that's the right characterization. Okay, yes, but
Speaker 6: I think again that's not our Our objective is not
Speaker 6: m and a per se. Our objective is organic growth.
Speaker 2: The Goldman Financials Conference, and I think that's part of
Speaker 2: also why the KBW Bank Index really rallied in a
Speaker 2: big way out performance about two and a half percent higher.
Speaker 2: They many said, and you guys presented there too, that
Speaker 2: they're seeing a stable consumer despite worries of an economic
Speaker 2: slow down.
Speaker 4: What are you guys seeing?
Speaker 6: We're seeing the same. I think we just were up
Speaker 6: on stage this morning ourselves. That's a consumer stable consumer,
Speaker 6: pipelines continue to be strong. From a lending perspective on
Speaker 6: both consumer and commercial profitability is very strong. Credit is
Speaker 6: very stable. It really looks like a solid economy from
Speaker 6: our perspective. If all you did was read our internal reports,
Speaker 6: it would belie what you're hearing in terms of the headlines,
Speaker 6: which is very encouraging as we go into the end
Speaker 6: of this year and into next year.
Speaker 3: Why do you think you're seeing in that distinction, like
Speaker 3: you're seeing something The anecdotes and indeed some data are
Speaker 3: showing softness in places. Why are you seeing strength?
Speaker 7: Look?
Speaker 6: I think in total, you're seeing consumer spending continues to grow. Corporations,
Speaker 6: I think are more confident today than they would have
Speaker 6: been at the middle of this year when there was
Speaker 6: more uncertainties in the environment. We've had a tax bill pass,
Speaker 6: We've had more teriff certainty come into the environment. The
Speaker 6: government is now functioning again. I think as companies are
Speaker 6: looking forward to twenty six, they're seeing this is another
Speaker 6: year of growth. I just came out today saying that
Speaker 6: the outlook for economic growth next year was more than
Speaker 6: two percent GDP, and so that looks like an environment
Speaker 6: where we should continue to be investing, continue to be expanding,
Speaker 6: continue to be expanding. You know, in from a commercial
Speaker 6: and consumer perspective, there is of course a bit of
Speaker 6: a so called K shaped shaped economy happening. And yeah,
Speaker 6: I think certain segments of the consumer environment have faced pressures,
Speaker 6: particularly from inflation and higher interest rates. Our bank does
Speaker 6: not have much exposure to that, and I think in
Speaker 6: many cases the net of growth is continued to be positive.
Speaker 4: Who is your typical consumer?
Speaker 6: You know, from us, we're focused on the mass affluent
Speaker 6: consumer base.
Speaker 2: And that's specifically target we do. Okay, sorry forgiving.
Speaker 6: We target the mass affluent, and we've got a very
Speaker 6: strong base of consumers that are that are in that segment.
Speaker 6: And then of course we're also one of the large
Speaker 6: largest small business banks and commercial banks in the country
Speaker 6: as well.
Speaker 3: What does mass affluent mean in your markets?
Speaker 6: You know, typically we're looking at customers who have a
Speaker 6: net worth of or income of more than one hundred
Speaker 6: thousand dollars net worths that are that are high and
Speaker 6: of course we bank everyone, and we really our tagline
Speaker 6: is welcome to all, and we mean that. But for
Speaker 6: the most part our business is concentrated in that mass
Speaker 6: out of one segment.
Speaker 2: From it, so loan origination activity. Tell us about what
Speaker 2: you're kind of seeing since do you last reported?
Speaker 6: Yeah, In fact, we just this morning showed a quarter
Speaker 6: to date loan growth of two point eight billion dollars
Speaker 6: sequentially from last quarter. We're growing at about eight to
Speaker 6: nine percent a year on year right now and actually
Speaker 6: exceeding our own forecast that we set just a month ago.
Speaker 3: In the Bread press conference today, I found what jap
Speaker 3: Powis said about AI really fascinating. This idea of productivity,
Speaker 3: and it's going to get me to ask every single
Speaker 3: person I talked to about not just how they're using AI,
Speaker 3: but like productivity increases at your bank, Like what are
Speaker 3: you seeing? How are they using it?
Speaker 6: We're doing a lot in AI. Actually it's increasing. Point
Speaker 6: it sure is. I mean to give you a sense.
Speaker 6: Last year in the fourth quarter we had two Jenai
Speaker 6: projects going through our risk evaluation and implementation. Today we thirty.
Speaker 6: There's about a dozen per month that are coming into
Speaker 6: the pipeline. Software engineering is being made much more more productive.
Speaker 6: We're seeing all manner of internal process improvement and now
Speaker 6: customer facing applications as well, things that make the loan
Speaker 6: approval process seamless and more effective, more personalized service.
Speaker 3: Is that going to increase earnings for you?
Speaker 10: Look?
Speaker 6: I think it will certainly create capacity for us to
Speaker 6: then invest more. You know, our modus operandi is to
Speaker 6: harvest and try to drive efficiencies in the baseline costs
Speaker 6: so that we can deploy those expenses into investments.
Speaker 2: A few years ago, I used to actually drive up
Speaker 2: to make a deposit. I used to talk to a teller.
Speaker 2: I mean I was a kid at the time, you know,
Speaker 2: and on my little book. But having said that, I
Speaker 2: don't talk to a teller for the most part anymore.
Speaker 4: So will AI? In your estimation?
Speaker 2: We are talking to CEOs, our team, our tech team
Speaker 2: just did a big AI report and they're talking to
Speaker 2: executives across industries. Everybody seems to be in on AI.
Speaker 2: But in terms of fat your j powsing hasn't really
Speaker 2: impacted the labor market yet, will it?
Speaker 4: Does it? It has to right?
Speaker 6: Look, I think in the end, AI will touch almost
Speaker 6: every element of human life and commercial activity, and ultimately
Speaker 6: will supplant many of the more rote processes that we
Speaker 6: use people to do. But it'll mean people could do
Speaker 6: other things. You know, this will be a change in
Speaker 6: the in the labor force in terms of what people
Speaker 6: are are doing. And there's things that people can uniquely do,
Speaker 6: make judgments, be creative, interact with other people, lead organizations.
Speaker 6: I think, you know what's incumbent upon all employees and
Speaker 6: I think about this myself, is you know where can
Speaker 6: I shift my activities to where I uniquely add value?
Speaker 4: People matter? You matter?
Speaker 3: Thank you, Thank you, You matter.
Speaker 4: Zach Wasserman, thank you so much.
Speaker 6: With you.
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