Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanabek. We're here every day bringing
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Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on
Speaker 1: YouTube search Bloomberg Global News. Just to rehash, JP Morgan
Speaker 1: really one of the ones we've obviously been in the
Speaker 1: front and center today down two point six percent, so
Speaker 1: it's hovering near it's loads of the session, and this
Speaker 1: is after the I think it's safe to say Tim
Speaker 1: the most closely watched bank and certainly the most closely
Speaker 1: watched CEO of a bank on Wall Street. They did
Speaker 1: come out and they said it was a record in
Speaker 1: terms of making deals, a record M and a quarter.
Speaker 1: And that's and that's happening in the industry more broadly,
Speaker 1: kind of record M and a activity but that's certainly
Speaker 1: offset some of maybe the downside of what we saw
Speaker 1: for jpmore, but not enough for investors today. Loan growth
Speaker 1: still lacking. The bank does see some green shoots. The
Speaker 1: company's CFO emphasized that excess deposits are stabling analysts, though
Speaker 1: on the call they were quite curious how the bank
Speaker 1: intends to deploy its capital. What's the acquisition strategy with
Speaker 1: all these fintech players that are out there right now?
Speaker 1: So she has been so busy, you said, just coming
Speaker 1: into the studio, because she has been nonstopping, probably up
Speaker 1: since the wee hours. Allison Williams, our senior Global Banks analyst,
Speaker 1: a Bloomberg Intelligence here in our interactive broker studio. Thanks
Speaker 1: because I know it is a crazy day for you
Speaker 1: and am yes, I did, but this is just the
Speaker 1: warm up tomorrow. We have four all right, so's today's
Speaker 1: sort of relaxed and we have had so we actually
Speaker 1: have had time to go through the numbers and such,
Speaker 1: and I think you touched on a couple of key points,
Speaker 1: and really our cheek away is, you know, green joots
Speaker 1: need to blossoms, right, will they blossom? They So there's
Speaker 1: a couple of positive signs. So the consumers are working
Speaker 1: down the access deposits. And one of the reasons why
Speaker 1: we don't have card loan growth is because people are
Speaker 1: paying off their cards with their savings so there, so
Speaker 1: they're spending, but they're not borrowing. So that's why those
Speaker 1: excess deposits coming down are sort of a sign of
Speaker 1: or a green shoot for the future. How important is
Speaker 1: that on the as a revenue line for these companies,
Speaker 1: So for JP Morgan and City, it's it's relatively important
Speaker 1: because they have more exposure to the card business. If
Speaker 1: you think about the yields on a card loan, the
Speaker 1: spreads are much better than some of the other businesses.
Speaker 1: And then the other area, um, the other area. Sorry,
Speaker 1: I'm just going to move my challenge. Just get headphones.
Speaker 1: It's not easy, so the following following the rules. So
Speaker 1: um So the other positive is that they're seeing an
Speaker 1: uptick in commercial line utilization. So that's an important reader
Speaker 1: cross for Wells Fargoing, Bank of the Artist r OW.
Speaker 1: So what that means is, you know, banks extend credit lines.
Speaker 1: During the crisis, we saw people borrowing on those lines, right,
Speaker 1: so think of it. People have like a whole equity
Speaker 1: line of credit or any kind of credit. This is
Speaker 1: available to you, and so banks or companies pulled down,
Speaker 1: they borrowed, then they paid it all back, and so
Speaker 1: you use of those lines is very low because again
Speaker 1: the companies, like consumers, have a lot of cash and
Speaker 1: so they're not borrowing. And so to the extent that
Speaker 1: you're starting to see companies use those lines, right, So
Speaker 1: they're starting to borrow against them, perhaps too finance inventory
Speaker 1: needs or or other. Wait a second, I thought the
Speaker 1: housing market was on fire, and everybody's getting new mortgages
Speaker 1: at low rates, and they're going out and buying really
Speaker 1: expensive homes because the monthly costs are low. That is,
Speaker 1: and that's all good for origination volumes, but it doesn't
Speaker 1: necessarily transfer to long growth because a lot of the
Speaker 1: banks are sell off those loans. So it's good for volumes,
Speaker 1: it's good for fees um but by the way, we're
Speaker 1: starting to get up some against some tough comparisons in
Speaker 1: those businesses. So it is interesting on the commercial side though,
Speaker 1: that if they are drawing on the lines finally, right,
Speaker 1: because we've seen such a such a huge cap raig
Speaker 1: certainly during the pandemic, right everybody was able to act
Speaker 1: because money was so cheap. Correct. So we've seen you know,
Speaker 1: massive raising of money by corporations. UM. And what's interesting
Speaker 1: that we saw on the quarter was actually still some
Speaker 1: good debt feed growth because now with all this M
Speaker 1: and A right going on, people are borrowing UM with
Speaker 1: those transactions, so there has there was actually some some
Speaker 1: debt feed growth advisory. UM. I think as you pointed
Speaker 1: out earlier, that's really the highlight record fees triple a
Speaker 1: year ago for JP Morgan, you know, up like uh
Speaker 1: a hot big percent. I think it's from the prior quarter.
Speaker 1: Hey listen. Also, what's always a highlight I feel like
Speaker 1: is yep, the results. And let's point out JP Morgan
Speaker 1: has been on a tear up about this year, so
Speaker 1: it's been a big bump to the upside. We've seen
Speaker 1: that with some of the big banks. UM. What Jamie
Speaker 1: Diamond has to say about the world at large. I
Speaker 1: have to say, we're getting ready to go to milk
Speaker 1: in and I was taking notes for some of the
Speaker 1: interviews and some of the panels we're going to be
Speaker 1: doing because he's like, I'm going to spend whatever I
Speaker 1: can have to on fintech, and I was thinking it
Speaker 1: was really the big I think that's a really big line.
Speaker 1: And I think that's the other thing that you've seen
Speaker 1: in JP Morgan's numbers. I mean, they raised their cost
Speaker 1: guidence something like five times five billion like over the
Speaker 1: past year. And we think that that spending is going
Speaker 1: to go up next year. But I think just him,
Speaker 1: you know, sort of making that statement, we have all
Speaker 1: kinds of competition, We're going to spend what it takes
Speaker 1: um so sort of a mic drop, as my peer
Speaker 1: put it, spend what it takes to compete, or spend
Speaker 1: what it takes to acquire. Well, you can buy acquiring, right.
Speaker 1: So one of the things that the banks have done,
Speaker 1: or I guess two of the things that that they've done,
Speaker 1: right is that they, um you know, they partners with
Speaker 1: fin techs, they buy the FinTechs, they have you know,
Speaker 1: these venture funds where they do different things. Um So
Speaker 1: I think they kind of look at it from all angles.
Speaker 1: And you know what we've talked about is this this
Speaker 1: go around, right, So in the nineties when there was
Speaker 1: the Internet and they all kind of dismissed it, you know,
Speaker 1: this time around the banks from the beginning even with
Speaker 1: technologies like blockchain or you know, we're gonna make sure
Speaker 1: that we're involved. We're except for bitcoin. We know how
Speaker 1: he feels about more controversial on bitcoin. Real quickly. I'm
Speaker 1: going to squeeze you twenty five seconds. What we've got
Speaker 1: city wells um Morgan Stanley tomorrow? What am I leaving out?
Speaker 1: Sacks tomorrow? Bank America. I think Morgan Stanley is on
Speaker 1: Friday by forgive me yeah, Strong Equities trading M and
Speaker 1: A fee strong still looking for some more signs of
Speaker 1: green shoots on the loan growth side. All right, sorry,
Speaker 1: you'll get sleep on the weekend or somewhere. Alison Williams,
Speaker 1: we love her, knows this industry like no other. She's
Speaker 1: senior global banks analyst here at Bloomberg Intelligence. We are
Speaker 1: lucky she's part of our team. You are listening to
Speaker 1: Bloomberg Business Week. So he writes today on the Bloomberg
Speaker 1: that quote, perhaps the most important outcome today is that
Speaker 1: there remains little sign that inflation is turning around. Let's
Speaker 1: get a market perspective on today's hotter than forecast CPI
Speaker 1: report with us Cameron Chries. Cameron's back Crow strategist and
Speaker 1: a contributor to the market's live blog at Bloomberg News.
Speaker 1: He joins us on the throne from Westford, Connecticut. Macroman
Speaker 1: literally Macroman Cameron take us into the reading of today's numbers.
Speaker 1: It came in a little hotter than expected, but but
Speaker 1: only a little hotter. Well, I guess it depends on
Speaker 1: how you wanted to find that. Yeah, I mean that
Speaker 1: the headline number was came in at zero point four
Speaker 1: percent on the month. Margaret had expected zero point three.
Speaker 1: The core reading, which is thought to get a better
Speaker 1: um sent some underlying inflation, was zero point two. And
Speaker 1: that seems very well behaved. But there are a number
Speaker 1: of things under the surface, uh that that van flow
Speaker 1: based on what's going on with the pandemic saying UM.
Speaker 1: But there are some alternative measures, such as those that
Speaker 1: sort of strip out the very lowest and the very
Speaker 1: highest readings, the so called shouldn't mean or median c
Speaker 1: p i UM. The Cleveland said has a series on that,
Speaker 1: and that actually rose by zero point four or five,
Speaker 1: which is the highest in more than thirty years, uh,
Speaker 1: and one of the highest readings in the last forty years.
Speaker 1: So from that perspective, what that implies is actually that
Speaker 1: the scope of price rises is broadening out, and it's
Speaker 1: not just a narrow set of of components that are
Speaker 1: impacted by the pandemic understate in price rise. This is
Speaker 1: exactly what you would expect if inflation is not, in
Speaker 1: the fact a transitory phenomenon. But it is starting to
Speaker 1: build on itself as the public gets used to this
Speaker 1: idea that the price of everything is going up. Well,
Speaker 1: and you know what's interesting, Cameron, and prepping for this segment,
Speaker 1: I wrote to myself a little note. Um, when I'm
Speaker 1: not speaking to myself, I write to myself. But um,
Speaker 1: what are we allowed to say that inflation isn't transitory anymore? Like?
Speaker 1: What is it technically that happens where say, um, no, folks,
Speaker 1: this is the environment and it's going to stay with us.
Speaker 1: Well between you and me. You can say it now.
Speaker 1: You go home, lock yourself in the bathroom, look yourself
Speaker 1: in the mirror, and say it loud, to say it proud, um.
Speaker 1: You know it's it's it's one of these things. You know.
Speaker 1: It seems like the only people that that that's not there.
Speaker 1: But among the the central bankers, the people in charge
Speaker 1: of policy for the most prominent advocates of this notion
Speaker 1: that that it's transitory because they kind of they kind
Speaker 1: of need an excuse to do nothing. Um. You could
Speaker 1: argue that given what the stock markets done, given what
Speaker 1: spending has done, that we haven't needed emergency settings for
Speaker 1: montary policy for quite some time. But yet we've been
Speaker 1: full bor QUEI. And one of the excuses is that, well,
Speaker 1: all this inflation stuff that everyone's worried about, it's just transitory.
Speaker 1: It'll it'll go away. And you know, in practice life
Speaker 1: is transitory. You know, in the long run, we're all that.
Speaker 1: Uh and in between now everybody, uh, we're this is
Speaker 1: the Sunshine report. Uh you know, uh so at some level,
Speaker 1: geolove and you know, geologic time, they're all human existence
Speaker 1: is so Um, it's an arbitrary construct. Um that that
Speaker 1: basically I think the central banks are using to mean,
Speaker 1: you know, until we're proven correct. But you are seeing
Speaker 1: some uh you know, some fractures in the committee. Uh.
Speaker 1: Some of the regional Fed presidents in particular has been
Speaker 1: pretty dismissive of this notion that you can just wave
Speaker 1: away price rises. And I would say that these are
Speaker 1: the people that are more in touch with sort of
Speaker 1: main street and in the real world because they have
Speaker 1: business contact they speak to on a regular basis. Well,
Speaker 1: does it seem like from a policy perspective, the FED
Speaker 1: is letting the foods footing stuff run too hot? I
Speaker 1: think so, um And I think one of the reasons
Speaker 1: is that over the last sort of thirty almost forty
Speaker 1: years inflation uh. And policy has been thought of from
Speaker 1: the demand side. Uh. You know, we need to manage
Speaker 1: demands to get the outcomes we want on inflation. The
Speaker 1: problem is is that this inflation shock, it is driven
Speaker 1: not just by demand but also prominently supply. The supply side,
Speaker 1: You've had these supply constraints because because of the pandemic
Speaker 1: that aren't going away. Um. And when you matched that
Speaker 1: sort of reduction in the supply with outsized demand last
Speaker 1: sort of eighteen months or so, that's where you get
Speaker 1: this sort of dynamic and that the problem with the
Speaker 1: risk is it becomes sufficiently entrenched, then that permanently changes
Speaker 1: or or maybe not permanently, but substantively changes expectations and behavior.
Speaker 1: And this is exactly the phenomena that we had in
Speaker 1: the nineteen seventies where there was an energy supply shock
Speaker 1: that was met with policy that said well, we're not
Speaker 1: going to we're not going to address to sort of
Speaker 1: head on because it's it's going to be ephemeral. But
Speaker 1: it influenced people's expectations the wage demands. And the next
Speaker 1: thing we know, you had this sort of wage price
Speaker 1: spiral where people got paid more and they were willing
Speaker 1: to pay more for good services. Price that those went up,
Speaker 1: the people demanded more wages, and that just kind of
Speaker 1: fed on itself. And there's there's a risk that we're
Speaker 1: going to see the same sort of thing that you
Speaker 1: realized this tumeral. Hey, when it comes to wages, and
Speaker 1: I was just looking at your work. I mean you
Speaker 1: point out real wage growth is negative using both hourly
Speaker 1: and weekly earning series, and funny enough, there's a prominent
Speaker 1: shortage of lab or perhaps the public is sharper than
Speaker 1: we've been led to believe because one of the things
Speaker 1: I thought about, I don't know if the feed is watching,
Speaker 1: because they talk about inequities and equalities. Certainly the lower
Speaker 1: end of the income strata, you know, has not seen
Speaker 1: the benefits at the higher end has seen, especially when
Speaker 1: it comes to wealth gains and wage gains. Um and
Speaker 1: so in a funny way, this shortage of labor has
Speaker 1: you know, drove companies to increase what they pay, certainly
Speaker 1: hourly workers. And in some way is that a benefit?
Speaker 1: But help me out here is the real wage inflation?
Speaker 1: We keep hearing about it? How do you see it? Well,
Speaker 1: this is the issue, right. Uh. Yes, wage growth has
Speaker 1: been has been stronger than it has been historically. But
Speaker 1: if you get a four percent pay rise, but the
Speaker 1: call us the living goes up by five, are you
Speaker 1: better off? No? You can buy one percent less stuff. Um.
Speaker 1: There's a phenomena known as money illusion, which means that
Speaker 1: there is has historically been intensity tendency to say, well,
Speaker 1: I've bet a wage drives a four percent This is fantastic. Um.
Speaker 1: But if the public is now aware, because of this
Speaker 1: narrative of watch tran inflation, that that four percent wage
Speaker 1: growth isn't going to cover the cost of living, there
Speaker 1: there's a problem. And um, you know, there's an argument
Speaker 1: that if if people aren't compensated adequately, and you would
Speaker 1: say that negative real wages wage growth is not a
Speaker 1: particularly remunerative compensation, then the the largeal propensity to actually work. Uh,
Speaker 1: and say safe exposure to COVID or what have you
Speaker 1: is least and if you have positive wage so cavin
Speaker 1: here we are earning season has kicked off officially. We
Speaker 1: heard from Delta, We heard from Fast and Hour earlier
Speaker 1: this week, and we heard of course from jpmore in
Speaker 1: Chase earlier today. UH Delta saying that fuel prices have
Speaker 1: risen six this year. The company is saying that could
Speaker 1: really hurt. What happens this quarter. What should we be
Speaker 1: on the lookout for when it comes to other companies
Speaker 1: that are reporting over the next few weeks when thinking
Speaker 1: about these pressures on the supply side and on the
Speaker 1: demand side. Yeah, one word margins um uh if uh
Speaker 1: you know, the good question is uh, input costs are
Speaker 1: gone up in terms of raw materials, weren't terms of labor? Uh?
Speaker 1: You know, companies have two choices. They can either raise
Speaker 1: prices uh and passed pass those costs onto somebody else,
Speaker 1: whether it's their business customers or their their their their
Speaker 1: ouphold customers, or they can absorb hit too margins and
Speaker 1: essentially make less per dollar of good service as their assault.
Speaker 1: In probability some combination of the two. So I think
Speaker 1: the thing to focus on is to what degree or
Speaker 1: a company seeing a squeeze a squeeze on margins, because
Speaker 1: that is obviously not a positive or uh for the
Speaker 1: equity market. Right, and that's when you know, if certainly,
Speaker 1: if you're a publicly held market, you gotta care because
Speaker 1: you know, if those margins start to um, diminish, go down, decline, uh,
Speaker 1: you're gonna get punished probably when it comes to your
Speaker 1: reporting season, and certainly a to the stock price. Hey, Cameron,
Speaker 1: thank you so much. Really some great insight into terms
Speaker 1: of some of that inflation data that we got today.
Speaker 1: Cameron cries. He's macro strategist, He's the macroman here at Bloomberg.
Speaker 1: He is a contribute to Markets Live blog at Bloomberg
Speaker 1: News on the phone from Westport, Connecticut. Well here in
Speaker 1: our interactive broker studio two days in a row. I'm
Speaker 1: gonna just say that Tim and I are super, super
Speaker 1: lucky because Jenny Seraine, she's our finance reporter here at
Speaker 1: Bloomberg News. She's got the cover story of Bloomberg Business
Speaker 1: Week this week. It's all about the relatively new CEO
Speaker 1: on Wall Street, not new to the company she now runs,
Speaker 1: but she certainly is making some changes. When it comes
Speaker 1: to City Group, we're talking about CEO Jane Fraser, Jenny
Speaker 1: here in our studio. Congratulations, thank you great cover story.
Speaker 1: First of all, Um, tell us about writing this and
Speaker 1: kind of what you set out to do. Yes, well,
Speaker 1: we set out to really tell the story of City
Speaker 1: right now, Um, and we were fortunate enough to get
Speaker 1: an interview with Jane and have her kind of walk
Speaker 1: us through some of the big changes that she's got planned. Um.
Speaker 1: They're just an interesting company, you know, They've had a
Speaker 1: really off go of it recently, and I think they
Speaker 1: needed this fresh air and fresh blood and they've got that,
Speaker 1: and so it will be interesting to kind of see
Speaker 1: where she takes it from here. Well, speaking of fresh air,
Speaker 1: I mean, the piece literally opens with fresh air talking
Speaker 1: about an outdoor space that that city has for employees
Speaker 1: and also the way that that city is different than
Speaker 1: the other majors in thinking about a return to work.
Speaker 1: Take us through what Jane Fraser was doing and why
Speaker 1: this is this is kind of crazy for for what's
Speaker 1: happening in Wall Street. Yeah, I think that's exactly right.
Speaker 1: So a lot of where this started was just we
Speaker 1: were hearing grumblings over and over again, that people were
Speaker 1: leaving other banks and joining cities simply because they really
Speaker 1: liked the way she talked about the future of work
Speaker 1: and and what that looks like. And so you know,
Speaker 1: she's doing the thing where they are allowed to work
Speaker 1: from home at least two days a week on a
Speaker 1: permanent basis. That's one thing. But I think the more
Speaker 1: interesting thing that she said is, um, it's not just
Speaker 1: about this hybrid half in, half out situation. They're also
Speaker 1: being really flexible. So you know, if it's three o'clock
Speaker 1: and you want to knock off and go pick up
Speaker 1: your kids from school or or take them to a
Speaker 1: soccer game, that's fine. You know, log on later and
Speaker 1: finish your work up whenever you can. Um, it's this
Speaker 1: whole idea of flexibility that people seem to really appreciate.
Speaker 1: You know, she's acknowledging that people are not just robots
Speaker 1: at a desk, that they're real people with real lives
Speaker 1: and really embracing that. All right, So don't penalize me
Speaker 1: because I really hate this. Is like it's because she's
Speaker 1: a woman that she looks at it differently, because that
Speaker 1: kind of makes me crazy. But there is that, But
Speaker 1: is it also a leader who's understanding that the world
Speaker 1: has changed because of the pandemic and we have shown,
Speaker 1: certainly the big banks how much they could get downe home.
Speaker 1: Is it also third um kind of her sticky to
Speaker 1: the other banks and saying, you know, it's a fight
Speaker 1: for competition, uh, and so if this is what we
Speaker 1: have to do to kind of draw on talent, this
Speaker 1: makes sense. Yeah. I think she's she's definitely unique, and
Speaker 1: that she seems more willing to listen to her employees
Speaker 1: and has kind of let that guide a lot of
Speaker 1: her decisions, you know, since becoming CEO, And also she
Speaker 1: was president before that, So I think she's very unique. Um.
Speaker 1: A lot of the other CEO is kind of get
Speaker 1: an idea in their head and and stick to it
Speaker 1: and and don't really let a lot of um advice
Speaker 1: um come their way. But I think she's she's very
Speaker 1: unique in that sense. UM. And I do think, you know,
Speaker 1: it's a war for talent right now. These banks are
Speaker 1: it's a very cutthroat environment for for bankers, for traders,
Speaker 1: for engineers, for all sorts of different folks, and she's
Speaker 1: acknowledging that and I think really kind of setting them
Speaker 1: apart I thought of the other cover story that was
Speaker 1: on Business Week. I don't know, is it over the
Speaker 1: summer where it's like, basically, I don't get out of
Speaker 1: bed for thousand dollars just to steal you know, the
Speaker 1: supermodel line. But it was basically because we just continue
Speaker 1: to see, right tim that Wall Street, the big banks,
Speaker 1: the big firms are upping kind of salaries for some
Speaker 1: of their you know, starting junior bankers whatever, you know,
Speaker 1: we just see that happening. Well, well, when Jenny, will
Speaker 1: we start to see this payoff? If there is this
Speaker 1: talent war, and we know this talent war is happening,
Speaker 1: when will we start to see the moves that Jane
Speaker 1: Fraser's making, uh, in terms of poaching talent and perhaps
Speaker 1: just as important retaining talent. Yeah, so that's the big,
Speaker 1: big question, I think facing all of the efforts that
Speaker 1: they're making. They've already started to have some successes. There's
Speaker 1: been some big names that have left Goldman, Sachs, JP, Morgan,
Speaker 1: Google and joined Jane Um and her big journey UM.
Speaker 1: And I think it's not just talent, you know, it's
Speaker 1: also this whole energy that she's trying to bring to
Speaker 1: the turnaround. There um and really just trying to set
Speaker 1: them apart and set them on this path towards um.
Speaker 1: Excellence is the word that they like to use, um,
Speaker 1: which is all, you know, to be fair there, she
Speaker 1: did work for Mackenzie. She did work for Mackenzie. She's sorry,
Speaker 1: I love you Mackenzie. But you know, she's definitely I mean,
Speaker 1: she has that consultant brain and and the kind of
Speaker 1: see a lot of that Mackenzie touch um and the
Speaker 1: strategy rematch that she's partake or that she's kind of
Speaker 1: venturing out on. So she's you know, focused on wealth.
Speaker 1: She talks a lot about prioritizing high return businesses de
Speaker 1: prioritizing the low return businesses. That's McKenzie. Well, let's talk
Speaker 1: about it. I remember very early on my career when
Speaker 1: uh Sandy Wild was at City right and he bought
Speaker 1: Smith Barney. He was making this financial supermarket company, and
Speaker 1: I remember under the red umbrella and like doing the
Speaker 1: whole thing, doing a stand up. But what's interesting is
Speaker 1: wealth management, right, they lost Smith Barney eventually are sold
Speaker 1: it off. Is that an area they've got to be
Speaker 1: a bigger player. And so Jane certainly thinks so, and
Speaker 1: I think, um, you know, if you look at some
Speaker 1: of the big success stories on Wall Street of the
Speaker 1: last decade, it was wealth management shops. Morgan Stanley bought
Speaker 1: Smith Barney and has since turned it into this powerhouse
Speaker 1: UM and so I think, you know, it's definitely a
Speaker 1: higher returning business. City has long um you know, punched
Speaker 1: under their weight there, and so it's kind of an
Speaker 1: easy one where they already have a little bit of scale.
Speaker 1: They just got to invest in and get it a
Speaker 1: little bit bigger UM internally or do they have to
Speaker 1: acquire or can they acquires anything out there? They're a
Speaker 1: little bit hamstrung right now. They've you know, last year
Speaker 1: they had the O c C and the FED ding
Speaker 1: them for some long standing issues with their internal controls,
Speaker 1: and so they're really limited in the amount of M
Speaker 1: and A activity that they can do because of that.
Speaker 1: UM everything has to be run by their regulators. So
Speaker 1: I think they're you know, really focused on an organic
Speaker 1: growth strategy with this UM and yeah, wealth management. Everybody
Speaker 1: is making lots of money there. So Okay, no, we
Speaker 1: already talked about work life balance, but I I'm stuck
Speaker 1: on this one quote that you include do work life
Speaker 1: and do the different parts of business, because I was
Speaker 1: pretty surprised to to to read this. When I was
Speaker 1: reading it this morning, she told you quote the number
Speaker 1: of dads that came up and said, it's so neat
Speaker 1: because I can work from home and therefore I can
Speaker 1: get to the kids school play. First, first of all,
Speaker 1: she called out the dad's right, which was I think
Speaker 1: huge as a dad. And and too, this is not
Speaker 1: Wall Street, right, this is not the Wall Street that's
Speaker 1: portrayed by the media, and certainly not the one that's
Speaker 1: been portrayed over the last couple of years as we've
Speaker 1: seen so much burnout. Yeah, that's absolutely right. I mean,
Speaker 1: I think that's what is so fascinating, Um, you know,
Speaker 1: to cover with city right now, and that just totally
Speaker 1: different tone we get from them than a lot of
Speaker 1: their competitors. And so, um, I think she really embraces
Speaker 1: she's a mom herself. She embraces that side of her
Speaker 1: and talks about it openly and talks about, you know,
Speaker 1: going part time when she first had her kids as
Speaker 1: a partner at Mackenzie, and I think she definitely brings
Speaker 1: all of herself to that role and encourages other people
Speaker 1: to do the same and um that what that's really
Speaker 1: what makes her kind of stand apart and a lot
Speaker 1: of these discussions, I feel like she brings a much
Speaker 1: more authentic and kind of genuine um tone to it all. Um.
Speaker 1: But you know, at the same time, she's got a
Speaker 1: really tough job. So I think a lot of it is,
Speaker 1: you know, the communications and the approach. But then there's execution,
Speaker 1: and that's where we really have to see kind of
Speaker 1: going forward. Well, execution is such a big thing. And
Speaker 1: again going back to the pandemic, I think we were
Speaker 1: all shoved at how well things worked, and certainly the
Speaker 1: big banks, right, I mean, they did really really well.
Speaker 1: Productivity returns uh as she continues to be really flexible.
Speaker 1: What is she seeing? What are they seeing in terms
Speaker 1: of city and we'll get we'll get a read right
Speaker 1: in terms of earnings this week. Yes, so we have
Speaker 1: earnings tomorrow, So it'll be very interesting to kind of
Speaker 1: see how it all plays out. I mean, she said
Speaker 1: that they watch productivity very carefully, and none of what
Speaker 1: they've done so far has let anyone to slack off,
Speaker 1: and no one seems to be using the like extra
Speaker 1: flexibility to um not work. Um. At the same time,
Speaker 1: their returns are much lower than a lot of their rivals,
Speaker 1: and she is that. Um. I mean, I think a
Speaker 1: lot of it is just that they had more catching
Speaker 1: up to do. You know, they took the biggest bail out.
Speaker 1: They set aside nearly one trillion dollars worth of bad,
Speaker 1: unwanted toxic assets that they had to sell off from
Speaker 1: the crisis, from the financial exactly, and so that's you know,
Speaker 1: that's a big pile of stuff to work through, and
Speaker 1: they've done that now and that it's kind of the
Speaker 1: next step is here and Jane is the one to
Speaker 1: lead them out of it. But um, but it's definitely
Speaker 1: there behind and they have to catch up. She knows that.
Speaker 1: She's pretty public about wanting to do that. Um, and
Speaker 1: crush the competition along the way. What do we always
Speaker 1: say is the right way to crush the competition to
Speaker 1: get to a point where they're actually valued like one
Speaker 1: of their peers. And by that he means Mike Mayo. No,
Speaker 1: I'm just kidding. We talked about Mike Mayo yesterday. Yeah,
Speaker 1: everyone everyone wants to see them do better. I think
Speaker 1: the big thing that a lot of folks really want
Speaker 1: to focus on actually is their payments business. It's um
Speaker 1: a little bit of a sleepier business, but it actually
Speaker 1: handles payments for most of the world's largest companies. So
Speaker 1: you know, if you're a major company like a coke
Speaker 1: or something like that, and you need to pay a
Speaker 1: supplier and Kenya or wherever, you lean on City Group
Speaker 1: they're basically the only bank that can really help you
Speaker 1: do that because so their international footprint. That's exactly right. Yeah,
Speaker 1: and so analysts want to just see them talk about
Speaker 1: that more and kind of give that size and scope
Speaker 1: a little bit better. Um, you know, payments companies are
Speaker 1: super hot right now. They're getting all these fun valuations.
Speaker 1: City Group is sitting on this enormous payments business. Analysts
Speaker 1: just want to hear them talk about that more. The
Speaker 1: international part. Is it good that they're everywhere? I mean,
Speaker 1: because that's one of the things you get into in
Speaker 1: your story. They certainly put it out there that it
Speaker 1: is right, I think. I mean, they're torn on it.
Speaker 1: Jane is in the midst of selling off about a
Speaker 1: dozen room consumer operations in Asia and Europe, so they
Speaker 1: seem to be de emphasizing that aspect, but they are
Speaker 1: very much emphasizing that they are staying in those countries. Um.
Speaker 1: From an institutional side, and I think, you know, it
Speaker 1: is something that makes them unique, the fact that they
Speaker 1: have these operations and can do payments and can you know,
Speaker 1: sell to customers and be there for folks anywhere in
Speaker 1: the world. Um. But it means that anytime something you
Speaker 1: know goes wrong and in some far flung place, City
Speaker 1: likely is there and has a view on it. And
Speaker 1: I think that sometimes gives invest There's a little bit
Speaker 1: of Jenners dare I ask about bank earnings? Darre I
Speaker 1: even go there, Jenny, sir. So you know the card
Speaker 1: business we talked with Alison Williams would be out. We
Speaker 1: know the card business is an important one, right, yeah.
Speaker 1: And what do you keep an eye on for later
Speaker 1: this week, especially when it comes to city. I definitely.
Speaker 1: I mean cards. We had JP Morgan this morning. They
Speaker 1: are also huge in cards and they were seeing really
Speaker 1: big upticks and spending on cards and it just didn't
Speaker 1: materialize into loan growth. So I think the big question
Speaker 1: folks have is when does this turn into borrowing. Are
Speaker 1: people continuing to pay down their their their debts and
Speaker 1: and what does that mean for the way these businesses
Speaker 1: are structured and how these banks bank money. Is there
Speaker 1: something that it sounds like you guys got to cover
Speaker 1: a lot of ground. Is there something that you would
Speaker 1: like more particulars on or as you continue to cover
Speaker 1: UM City Bank and continue to report that that you
Speaker 1: will be watching really closely and think these are going
Speaker 1: to be future stories that that I expect to come.
Speaker 1: I definitely think the wealth management that is an interesting one,
Speaker 1: and I love that she's going about it in such
Speaker 1: a different way because I think that will be really
Speaker 1: fun to watch and kind of see who ends up
Speaker 1: being right. You know, Morgan Stanley, they like this big
Speaker 1: asset manager. They've married it to their wealth management business.
Speaker 1: UM so their asset managers turning out products and this
Speaker 1: fleet of brokers will sell that for them. She's going
Speaker 1: on a very different path, and so I think that's,
Speaker 1: you know, a fun storyline to keep on track of
Speaker 1: and see who's right. You know, who ends up making
Speaker 1: more sense as we all go more digital and and
Speaker 1: also just the insane explosion and wealth that we're expected
Speaker 1: to see around the world. What's gonna be interesting what
Speaker 1: she like? And the reason I asked is I think
Speaker 1: about the recent meeting that Biden just had President Biden
Speaker 1: with the big bank ceo s and they were talking
Speaker 1: about uh, they're talking about the dead ceiling, and she
Speaker 1: was the one who spoke first. Um and so I
Speaker 1: thought that was pretty impressive. But what is she like
Speaker 1: as a person in terms of the field that you
Speaker 1: got from her and the time you spent with her? Yeah,
Speaker 1: I think, I mean, I think she's a really genuine,
Speaker 1: authentic person. I think Mike Mayo and his note this week,
Speaker 1: he said he's word change agent. And I definitely I
Speaker 1: think a lot of folks get that vibe that she's
Speaker 1: there and it's ready to put her own stamp, and
Speaker 1: she's very much willing to kind of go her own
Speaker 1: path to do that. Um. And so I think people
Speaker 1: respond to that. And you know, it's working on the
Speaker 1: recruiting side. We'll see how it goes on the retention side. UM.
Speaker 1: But I definitely think she's she's the fresh air that
Speaker 1: everyone talks about. What do other big bank final question,
Speaker 1: Big banks ceo? What do you hear like? Kind of
Speaker 1: back channels? I think, you know, I mean, I think
Speaker 1: everybody has their own flavor. I mean, Jamie Diamond is
Speaker 1: Jamie Diamond. He's very out there and very outspoken, and
Speaker 1: I mean he's been in the seat for so long
Speaker 1: and so he's kind of like father time on Wall Street. Um,
Speaker 1: so she's new and she's different. She's definitely not you
Speaker 1: know Jamie. So I think that's the big difference here
Speaker 1: and what we were trying to capture with the piece
Speaker 1: this week, and to show like there's someone new. There's
Speaker 1: a new sheriff in charge of city and and they've
Speaker 1: got a lot going on. Definitely different feel. Do we
Speaker 1: see Goldman, Sachs and other banks adjust their hours and
Speaker 1: adjust their schedules for their bankers as a results. I don't.
Speaker 1: I don't think. I mean, they just seem so adamant.
Speaker 1: All right, we gotta run. Sorry forgive us great cover story.
Speaker 1: Jenny Seraine, we love it, City Bank and Jane Frasier.
Speaker 1: I'm broc journal now. But you let me drive. No,
Speaker 1: no, no no, no home honey, please, I'll do the right
Speaker 1: drivel Let me I want to drive, Just drive the question.
Speaker 1: Try this is the drive to the Globe Commune. Thanks,
Speaker 1: we'll try us down on Bloomberg Radio. All right, So
Speaker 1: we've got about tennants left in the Wednesday trading session.
Speaker 1: Lucky for us. Back with us is J. J. Kinahan,
Speaker 1: chief market strategus over at t D A Merry Trade,
Speaker 1: joining us on the phone from Chicago. We do this
Speaker 1: as we see stocks definitely off their loads of the
Speaker 1: session and really the momentum coming out of the tech
Speaker 1: sector as we've seen certainly yields come down, particularly that
Speaker 1: tenure bond coming down. Hey j J. Nice to have
Speaker 1: you back with Tim and myself. What are you guys
Speaker 1: talking about at t D Merriagory today. Uh, you know,
Speaker 1: I think everybody was very interested in the start of
Speaker 1: earning season primarily, and I would say that although the
Speaker 1: stocks maybe haven't responded, we were off to a good
Speaker 1: start overall in terms of what the uh financials kind
Speaker 1: of laid out for us this morning. And you know, uh, Delta,
Speaker 1: maybe it start down a little bit. I know, as
Speaker 1: I said, the stocks are down, but I think that
Speaker 1: the overall tone of the earnings was still pretty good.
Speaker 1: There's no question about that. JP Morgan, black Rock down
Speaker 1: a little bit, no doubt about it. But uh, you know,
Speaker 1: I think there were some worries going in that what
Speaker 1: if the financials have issues? Also because I think most
Speaker 1: of us are expecting that as the earning season goes on,
Speaker 1: particularly as we get towards the tail end, when we
Speaker 1: start to get more retailers, it's going to be very
Speaker 1: difficult because of you know, you talk about supply chain
Speaker 1: issues on the show a lot, and that's something that's
Speaker 1: gonna come into bear, and I think it's gonna be
Speaker 1: very difficult for some of those CEOs to put a
Speaker 1: real positive picture around that, particularly as we had the
Speaker 1: holiday season. So I think the fact that the financials
Speaker 1: came in, Yes, the stocks are down, we know there
Speaker 1: were a lot of expectations around the financials. I think
Speaker 1: we're going to continue to see that pattern over the
Speaker 1: next few days. A lot of expectations. Tough to meet
Speaker 1: those expectations, but the tone of the earnings calls pretty
Speaker 1: positive overall, and the growth continues, but at a slower pace. Okay,
Speaker 1: even Delta Airlines, I mean shares down more than yeah,
Speaker 1: the airlines as I'm sorry, uh, you know, the financials
Speaker 1: I thought were good the airlines. This one's a little
Speaker 1: bit tougher overall, right, And I think we may see
Speaker 1: a similar pattern for some of the transportation companies. Let's
Speaker 1: face it, the biggest, their biggest input in most cases
Speaker 1: is gasoline, and we know what happened with gasoline, and
Speaker 1: we also have you know, the Southwest story seems to
Speaker 1: be a little bit more stock specific rather than an
Speaker 1: overall airline story. However, the uh, you know, maybe a
Speaker 1: little bit of a slowness of people taking up domestic travel.
Speaker 1: And I think the other thing that's really may hurt
Speaker 1: the airlines is, you know, anecdotally, I traveled a lot
Speaker 1: for business. I just think business travel is continuing to
Speaker 1: be taking a little bit longer to get back on
Speaker 1: track than the airline's expected. And now you're at this
Speaker 1: time of year where a lot of family holiday travel
Speaker 1: is over because the kids are back in school. Business
Speaker 1: travel hasn't picked up necessarily to the level that I
Speaker 1: think many of the airlines would have expected. So it's
Speaker 1: a tough time for them. Yeah, I'm wondering, you know, Caroline,
Speaker 1: are actually jumping on a plane tomorrow for the first
Speaker 1: time travel. Well, I traveled for work once over the summer,
Speaker 1: but you haven't traveled for working months. February Super Bowl
Speaker 1: we were doing some stuff down in Miami, a big broadcast,
Speaker 1: live event. That's it. I have not been on a plane.
Speaker 1: It's almost two years. I mean I had to you
Speaker 1: and we were talking about T S A. I had
Speaker 1: to like re up my thing because it expires. I
Speaker 1: know you're not j J just getting out. Yeah, we'll
Speaker 1: see the supply chain problems, inflation problems transitory. If these
Speaker 1: things are a bigger dislocation, that's just not a temporary
Speaker 1: thing that this becomes part of the new norm. What
Speaker 1: does that mean for our environment? Is it a case
Speaker 1: of an uncomfortable adjustment for a few more quarters and
Speaker 1: then it just becomes part of the way things happen,
Speaker 1: or um, I don't know, or yeah, how do you
Speaker 1: see it? Well, so inflation, you know, is in my experience,
Speaker 1: is something that kind of goes slowly, slowly, slowly, and
Speaker 1: then all of a sudden and so you know, you
Speaker 1: see the reaction in the bond market today in terms
Speaker 1: of maybe, uh, not as frightened I guess about it,
Speaker 1: because bonds being higher, yields being a little bit lower.
Speaker 1: That would tell me that people learn is frightened about it.
Speaker 1: But again, this is a this is one day where
Speaker 1: we are having this big move. I certainly don't think
Speaker 1: you can say inflation is over by any strutch of
Speaker 1: the imagination. Um, but it's a it's just such a
Speaker 1: strange time the supply chain, you know, l A ports
Speaker 1: going seven. Hopefully that helps. I really don't think we
Speaker 1: start to see the true effects of that until for
Speaker 1: another problem, in about a month to a month and
Speaker 1: a half, I think we'll have a real clear picture
Speaker 1: why because at that point, holiday shopping season should be
Speaker 1: in full uh you know, full level, so to speak.
Speaker 1: And if there isn't things that people can get delivered
Speaker 1: quickly or probably more importantly for many of these stores
Speaker 1: right now, this is why you have a brick and
Speaker 1: mortar stories usually the holiday season and a there's not
Speaker 1: the things on the shelves that people want. That unfortunately
Speaker 1: could be other death knell for many of the brick
Speaker 1: and mortar stores. Hey, speaking to the holiday shopping season.
Speaker 1: Apple shares taking a hit today, Not that big, just
Speaker 1: down close to half a percentage point right now. This
Speaker 1: on our colleagues report that will likely slash it's projected
Speaker 1: iPhone thirteen production targets by as much as ten million units.
Speaker 1: We hit that hard yesterday. How did you read into
Speaker 1: that news and Apple's ability and other company's ability to
Speaker 1: successfully navigate the supply chain issues in the fourth quarter. Well,
Speaker 1: you know, um, Apple obviously superior. But one thing I
Speaker 1: will say, tim in terms of just how our clients
Speaker 1: trade that stock, the Apple and Microsoft are in a
Speaker 1: little bit of a category under themselves. And the reason
Speaker 1: I say that is they get a they get a
Speaker 1: unique benefit many people you know, seeing them as blue
Speaker 1: chip mature companies, which they are. So when we headed
Speaker 1: a downside, a lot of retail traders will go to
Speaker 1: those two stocks for you know, air quote safety. However,
Speaker 1: when things get better and we start to see in
Speaker 1: tech stock start to go up, they also go to
Speaker 1: them for growth stocks. So you know, it doesn't surprise
Speaker 1: me actually that the bad news there isn't met with
Speaker 1: some you know, a bigger reaction than it is. Because
Speaker 1: again this is one when we talked about that by
Speaker 1: the dip has has worked for many people over the
Speaker 1: last you know, eight ten years take your time frame.
Speaker 1: This is one of the stocks that usually from a
Speaker 1: retail perspective, is one of the first leaders in terms
Speaker 1: of by the dip. So people are looking for opportunities.
Speaker 1: If Apple this isn't one where Apple goes down, people say,
Speaker 1: oh my god, God, I get rid of it. When
Speaker 1: Apple goes down, people say I gotta get more. Alright,
Speaker 1: Hey be well. J J. Kinahan, Chief Market Strategies at
Speaker 1: t D Marriage Right. Thanks for listening to Bloomberg Business Week.
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