WEBVTT - Rates, SocGen, Markets, and COP27 (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.360 at Bloomberg dot com slash podcast. The narrative here as 0:00:22.400 --> 0:00:24.919 it relates to rates here in the US is pretty clear. 0:00:24.960 --> 0:00:27.760 The Federal Reserve is job number one is fighting inflation, 0:00:27.840 --> 0:00:31.159 aben raising rates to do that. The question is, you know, 0:00:31.200 --> 0:00:33.200 kind of when will they stop? Where will they stop? 0:00:33.479 --> 0:00:35.200 And a lot of folks are saying, let's talk about 0:00:35.200 --> 0:00:38.960 the European markets, in the UK markets, what's going on there? 0:00:38.720 --> 0:00:41.400 We touch base with Hugh Worthington. He's a European rate 0:00:41.440 --> 0:00:44.920 strategist for Bloomberg Intelligence based in in London. Hugh, thanks 0:00:44.960 --> 0:00:48.280 so much for joining us here. Give us your sense 0:00:48.320 --> 0:00:50.200 of kind of what you're seeing there in the UK 0:00:50.320 --> 0:00:54.440 and Europe in terms of the rate environment. What are 0:00:54.440 --> 0:00:57.080 you seeing over there? Well, I think I think the 0:00:57.600 --> 0:00:59.920 situation in the UK he's putty more and not like 0:01:00.080 --> 0:01:03.040 sports going on in the US. The UK has been 0:01:03.280 --> 0:01:05.440 hiking rates for some time. It's been you know, it's 0:01:05.480 --> 0:01:09.040 it's got its self fairly well down the curve in 0:01:09.120 --> 0:01:12.880 terms of of of kind of negative of exiting the 0:01:12.880 --> 0:01:15.520 negative interestrate policy. But the ECB does seem to be 0:01:15.720 --> 0:01:18.400 lagging still a little bit, and I think there's there's 0:01:18.400 --> 0:01:21.679 concerns that you know, they they they're they're still behind 0:01:21.680 --> 0:01:25.440 the curve and their their focus is a primary focus 0:01:25.440 --> 0:01:27.000 on inflation. They don't have a dual man they like 0:01:27.040 --> 0:01:29.200 the said just for example, and I think that there's 0:01:29.240 --> 0:01:32.280 there's a definite sign of the changing attitude there. There's, 0:01:32.400 --> 0:01:33.880 if you like, the Germans seems to be much more 0:01:33.920 --> 0:01:37.360 in control of the ECB and the focus very much 0:01:37.360 --> 0:01:39.800 remains on fighting inflation and it's going to continue that way, 0:01:39.840 --> 0:01:41.880 I think, and I think they're they're basically the latest 0:01:41.880 --> 0:01:43.280 things they've been saying is that they are going to 0:01:43.319 --> 0:01:45.319 be hiking in December and they're going to keep going 0:01:45.600 --> 0:01:47.640 and they're going to keep hiking into restrictive policy. And 0:01:47.680 --> 0:01:49.400 it may well be that they're they're still doing that 0:01:50.040 --> 0:01:52.480 whilst people like the FED in the Bank of England 0:01:52.480 --> 0:01:55.200 may well be starting to ease off a little bit Well, 0:01:55.320 --> 0:01:58.360 that's interesting to me because on the one hand, you 0:01:58.440 --> 0:02:01.320 have these odds of recession, the US specifically going to 0:02:02.120 --> 0:02:06.200 three really ramping up, but those arts have been quite strong, 0:02:06.280 --> 0:02:07.680 I want to say, for at least a year now 0:02:07.720 --> 0:02:11.040 in Europe. Why would they keep hiking. Isn't just to 0:02:11.120 --> 0:02:15.760 perhaps close the divergence between the ECB and the FED 0:02:15.800 --> 0:02:18.600 and other central banks, or is there a real fundamental 0:02:18.720 --> 0:02:21.160 reason behind it? Well, I think I think they're they're 0:02:21.240 --> 0:02:23.839 very concerned that they know they forget the e CV 0:02:24.000 --> 0:02:27.400 is still printing cash to buy bonds back in as 0:02:27.400 --> 0:02:30.440 early as as late as June, so they were still 0:02:30.880 --> 0:02:34.640 being very accommodatated when things were being being much more 0:02:34.680 --> 0:02:38.320 strictive elsewhere. Also, you've definitely got some things that are 0:02:38.320 --> 0:02:40.959 happening in Europe which happened happened for many, many years. 0:02:41.760 --> 0:02:44.320 There's later stage on wages out from the funny enough 0:02:44.320 --> 0:02:46.680 in Central Bank of Ireland, on wage growth in places 0:02:46.720 --> 0:02:49.640 like Germany, wage's running at something like seven percent, and 0:02:49.639 --> 0:02:51.960 those sort of thing as you haven't seen for fifty years. 0:02:52.080 --> 0:02:54.079 And it's very hard to know that they think that 0:02:54.240 --> 0:02:56.200 the ECB is going to get their inflasi and target 0:02:56.200 --> 0:02:58.840 back down to two percent when German wages are running 0:02:58.840 --> 0:03:00.720 a nomenal wage worth's running at that sort of level. 0:03:00.760 --> 0:03:03.280 So they are basically saying that they are going to 0:03:03.320 --> 0:03:06.520 be having to be hiking into a restrict into restrictive territory. 0:03:06.560 --> 0:03:08.959 And obviously they look sort of worryingly behind the curve 0:03:09.000 --> 0:03:11.800 and a rate bill look low in Europe compared to 0:03:12.919 --> 0:03:16.600 what they are in the English tax and sphere. Also, 0:03:16.639 --> 0:03:18.440 I think, you know, definitely QT is definitely going to 0:03:18.480 --> 0:03:20.200 be on the agenda there as well, and that's going 0:03:20.240 --> 0:03:23.880 to be something which is gonna be probably restrictive for 0:03:23.880 --> 0:03:26.359 the yields and maybe something which means it can keep 0:03:26.440 --> 0:03:29.160 yields curves pretty steep. In the UK and Europe. There's 0:03:29.160 --> 0:03:30.960 a lot of issues that needs to be done to 0:03:31.040 --> 0:03:34.400 meet in particular things like the energy subsidies that are 0:03:34.680 --> 0:03:37.080 being put in place to help the economies in the 0:03:37.080 --> 0:03:40.880 wake of you know, Cuton's illegal actions in Ukraine. Yeah, 0:03:40.880 --> 0:03:42.280 that's kind of where I want to go here. I mean, 0:03:42.600 --> 0:03:45.960 you know, the US are our recession discussion is generally 0:03:46.680 --> 0:03:50.000 if it happens in twenty three, you know, how short 0:03:50.040 --> 0:03:51.920 will it be, how shallow will it be? That tends 0:03:51.920 --> 0:03:54.840 to be the discussion narrative talk to us about kind 0:03:54.840 --> 0:03:58.760 of as European banks continue to tighten, what's the recession 0:03:59.000 --> 0:04:02.600 discussion over there? Well, I think I think the UK 0:04:02.680 --> 0:04:05.960 probably is already in recession um and we're expecting a 0:04:06.000 --> 0:04:09.320 pretty long, if if relatively shallow procession, not to not 0:04:09.560 --> 0:04:11.880 such a hard recession like I was in two thousd 0:04:11.880 --> 0:04:14.360 and eight. But it looks the Bank of England and 0:04:14.400 --> 0:04:17.840 the and and the Office of the Responsibility in the 0:04:17.920 --> 0:04:21.240 last week's statement in in in the UK Parliament was 0:04:21.279 --> 0:04:23.760 expecting pretty much a recession to last all next year 0:04:23.800 --> 0:04:25.599 as well. So it's going to be pretty long and 0:04:25.600 --> 0:04:28.480 pretty painful, but it maybe not as as as sharp 0:04:28.520 --> 0:04:30.280 as it was in two thousand and eight. And it's 0:04:30.279 --> 0:04:32.080 a very much going to be a similar situation. I 0:04:32.120 --> 0:04:35.599 suspect um in in Europe and in particular in Europe 0:04:35.600 --> 0:04:37.919 this time around Germany is going to be leading their 0:04:37.960 --> 0:04:40.720 work the way down and obviously in the past prices 0:04:40.760 --> 0:04:42.800 in Europe it hasn't been Germany's. It's been hits it hard. 0:04:42.800 --> 0:04:44.080 But it looks like Germany is going to be the 0:04:44.560 --> 0:04:48.599 you know, the main the main impact will be in 0:04:48.600 --> 0:04:53.520 Germany probably next year. I suspect we have about literally 0:04:53.560 --> 0:04:56.200 thirty seconds here. When does QT start for the e 0:04:56.279 --> 0:04:58.800 c B. I think they're lands it in in December. 0:04:59.080 --> 0:05:01.799 I'm not sure they'll they'll and in terms of active sales, 0:05:01.839 --> 0:05:05.160 but it'll just be basically not letting, not reinvesting bonds 0:05:05.160 --> 0:05:07.159 as they roll off, and that's obviously gonna matter. An 0:05:07.200 --> 0:05:10.880 aflot was already very very high issuance needs and that's 0:05:10.880 --> 0:05:12.720 going to be keeping pressure on nels and spreads high 0:05:12.760 --> 0:05:17.320 in Europe. All right, you great stuff, As always, always 0:05:17.320 --> 0:05:22.000 appreciate getting your perspective the UK European rates outlook. Uh 0:05:22.000 --> 0:05:25.360 there Hugh Worthington European rates strategies for Bloomberg Intelligence. He's 0:05:25.400 --> 0:05:29.880 based in our London office, Queen Victoria Street, extraordinary building 0:05:30.480 --> 0:05:33.000 in the city of London, just spectacular. Our brand new 0:05:33.040 --> 0:05:36.080 headquarters over there opened up a few years ago. Good stuff. 0:05:36.240 --> 0:05:40.040 Looking at the markets here, uh the pound one spot 0:05:40.120 --> 0:05:43.960 one eight on your sterling and Europe above parody here. 0:05:44.440 --> 0:05:46.920 Remember we were below parody several weeks ago. One spot 0:05:47.000 --> 0:05:51.280 zero two seven eight on US euro ten year treasuries. 0:05:51.320 --> 0:05:54.520 Talking about rates ten years up thirteen thirty seconds, pushing 0:05:54.560 --> 0:05:57.520 that yield down to three point seven seven percent on 0:05:57.600 --> 0:06:03.160 your ten year treasury. It's not a little education now 0:06:03.200 --> 0:06:05.880 shout we Stephen Kramer, he's the CEO of Bright Horizons. 0:06:05.880 --> 0:06:08.640 That's a New York Stock Exchange traded company the symbols 0:06:08.720 --> 0:06:11.200 b F, A M. You put that into your Bloomberg 0:06:11.279 --> 0:06:15.000 terminal Education services company. The company also offers a child 0:06:15.040 --> 0:06:18.640 and other dependent care solutions as part of their employee benefits. 0:06:18.760 --> 0:06:22.200 We work with them, you do, Bloomberg Bloomberg works, We do. 0:06:22.240 --> 0:06:24.680 That's what I mean. Yeah, if you, you know, have 0:06:24.720 --> 0:06:28.320 an emergency and you need childcare, an unexpected emergency, or 0:06:28.360 --> 0:06:31.120 if you just um, you know, have if you're sick 0:06:31.160 --> 0:06:35.320 and you need childcare, fail step into help. Oh cool, excellent? Uh, Stephen, 0:06:35.360 --> 0:06:36.880 thanks so much for joining us here. Talk to us 0:06:36.880 --> 0:06:39.400 about Bright Horizons. What are you guys up to these days. 0:06:39.400 --> 0:06:43.240 What's your strategy over the next several years to drive 0:06:43.279 --> 0:06:46.480 your growth. It's a pleasure to be here. Thank you 0:06:46.520 --> 0:06:49.680 for including me, and thank you obviously to Bloomberg for 0:06:49.720 --> 0:06:53.640 being a great client over many years. Our strategy remains 0:06:53.680 --> 0:06:56.719 the same as it always has been. We are very 0:06:56.760 --> 0:07:00.839 focused on working with our employer clients to support UH 0:07:00.880 --> 0:07:04.520 their employees. UH to integrate their work in their life. 0:07:05.040 --> 0:07:07.719 We do that through the provision of on site chold 0:07:07.760 --> 0:07:11.040 care centers. We provide backup child care as you just outlined, 0:07:11.400 --> 0:07:14.080 and elder care, and then in addition to that, we 0:07:14.160 --> 0:07:18.840 support organizations and their employees with workforce education. And so 0:07:19.200 --> 0:07:23.040 certainly we continue to see great demand across our services 0:07:23.080 --> 0:07:27.200 and continue to focus on being across those services and 0:07:27.240 --> 0:07:30.800 also continuing to operate in multiple geographies across the globe. 0:07:31.400 --> 0:07:32.920 So what kind of growth are you looking at? I 0:07:32.960 --> 0:07:35.960 can imagine that employers now as they do things like 0:07:36.120 --> 0:07:42.880 expand um UH parental leave policies and look to offer 0:07:43.240 --> 0:07:46.800 more solutions for for daycare and elder care, UM, they 0:07:46.800 --> 0:07:51.360 can attract better candidates UM if they have you know, 0:07:51.440 --> 0:07:53.800 bright horizons working with them. So what kind of growth 0:07:53.800 --> 0:07:57.240 are you looking at? Yeah, so we we continue to 0:07:57.280 --> 0:07:59.920 focus our growth with our employer clients, and you're right, 0:08:00.440 --> 0:08:04.160 as they continue to recognize all the challenges that their 0:08:04.160 --> 0:08:08.200 employees are facing with childcare and other dependent care needs 0:08:08.240 --> 0:08:12.640 as well as in workforce education. UM, we continue to 0:08:12.640 --> 0:08:16.080 expand our client base, we continue to expand the utilization 0:08:16.120 --> 0:08:20.680 of our services, and ultimately that propels our growth forward. UH. 0:08:20.880 --> 0:08:25.320 Each and every year. Is it quantifiable? Yeah, So in 0:08:25.640 --> 0:08:28.800 typical times we were growing at sort of call it 0:08:28.880 --> 0:08:32.960 eight to ten per um. We had a major dislocation 0:08:33.000 --> 0:08:36.280 obviously in COVID UH. And so back in March and 0:08:36.320 --> 0:08:40.160 April we closed eight percent of our centers. Obviously saw 0:08:40.240 --> 0:08:44.440 a significant degradation UM in UH, in our revenue as 0:08:44.480 --> 0:08:47.080 well as the services that we deliver UM. We are 0:08:47.520 --> 0:08:50.640 at this point continuing to grow at a much faster 0:08:50.760 --> 0:08:54.320 clip against the comps of the prior two years. But 0:08:54.400 --> 0:08:56.640 we expect in the long term that our growth algorithm 0:08:56.720 --> 0:09:00.640 will come back into UH that more normalized place UH 0:09:00.640 --> 0:09:03.520 and continue on on that starting in the next year 0:09:03.600 --> 0:09:06.680 or two. So, Steve and I gotta imagine, like many 0:09:06.760 --> 0:09:10.000 many many businesses and industries, you were dramatically impacted by 0:09:10.440 --> 0:09:14.760 the pandemic. How have you your discussions with your clients 0:09:15.160 --> 0:09:17.920 kind of evolved over the last several years as we 0:09:18.000 --> 0:09:19.680 come out on the other send, the other end of 0:09:19.679 --> 0:09:23.880 this pandemic. Yeah, So there has been a great awakening 0:09:24.400 --> 0:09:27.400 among employers. I call it a great renaissance among employers 0:09:27.960 --> 0:09:30.679 recognizing that they need to lean in more heavily than 0:09:30.720 --> 0:09:34.960 they ever have. And so in the current situation where 0:09:35.000 --> 0:09:37.960 there's a war for talent, or even in a scenario 0:09:38.120 --> 0:09:42.560 where employers are just simply looking for UM, you know, 0:09:42.679 --> 0:09:46.280 supports that allow for productivity of their employees. UM. There 0:09:46.320 --> 0:09:50.200 has been great receptivity towards the services we offer. UM. 0:09:50.240 --> 0:09:53.080 I think it's well understood that through the pandemic UM 0:09:53.240 --> 0:09:57.080 you know, somewhere between ten and of child care centers 0:09:57.240 --> 0:10:00.880 across the US permanently closed, and so there is an 0:10:00.920 --> 0:10:04.280 expectation among employers that there will continue to be a 0:10:04.400 --> 0:10:08.920 great imbalance between supply and demand, and so employers are 0:10:08.960 --> 0:10:12.080 looking to lean in and support their employees to provide 0:10:12.080 --> 0:10:15.600 better access, higher quality, and more affordable care. UH. And 0:10:15.640 --> 0:10:18.640 then on the backup side, we've seen really significant growth 0:10:19.240 --> 0:10:24.959 because again, UH, employees have really needed those extra supports 0:10:25.120 --> 0:10:28.400 as some of the supports that were generally available to 0:10:28.440 --> 0:10:31.880 them in their community have really dried up. Well. What 0:10:32.200 --> 0:10:34.600 are the kind of challenges that you face in terms 0:10:34.600 --> 0:10:38.920 of childcare and elder care? I imagine it's a business 0:10:39.040 --> 0:10:45.080 that is rife with regulation. UM. Compliance must be difficult, 0:10:45.400 --> 0:10:48.680 and UM, you know, you've got to have a certain 0:10:48.720 --> 0:10:51.720 amount of sensitivity as well for both of those UM, 0:10:51.800 --> 0:10:56.360 but for both both those demographics. Yeah, so I certainly think, um, 0:10:56.520 --> 0:10:59.440 you know that there is a strong regulation. I think 0:10:59.440 --> 0:11:02.640 there are um you know, a maniacal focused on health 0:11:02.679 --> 0:11:05.679 and safety and other things that we do, and over 0:11:05.760 --> 0:11:09.440 thirty five years have really perfected in terms of making 0:11:09.440 --> 0:11:12.160 sure that what we're delivering every day is high quality 0:11:12.200 --> 0:11:15.719 and meeting the needs of those who we serve. I 0:11:15.720 --> 0:11:19.640 would say the biggest challenge is around workforce. So there 0:11:19.760 --> 0:11:23.840 is a significant shortage of teachers, and we see that 0:11:23.920 --> 0:11:26.920 across all the geographies in which we operate, but specifically 0:11:26.920 --> 0:11:30.079 acute here in the US, where their pre COVID was 0:11:30.280 --> 0:11:34.480 a shrinking pool of talented people going into early childhood 0:11:34.559 --> 0:11:39.240 education that was exacerbated in the pandemic. And so I 0:11:39.240 --> 0:11:41.920 would say our biggest challenge is really on the workforce 0:11:41.920 --> 0:11:46.240 side in terms of attracting um, you know, talent into 0:11:46.280 --> 0:11:49.240 the field and then ultimately to bright horizons. So how 0:11:49.240 --> 0:11:51.920 difficult is it then to uphold margins because I can imagine, 0:11:52.480 --> 0:11:55.760 you know, um, teachers are going to be wanting substantial 0:11:55.840 --> 0:12:02.439 hourly salaries and parents are going to want to pay 0:12:02.559 --> 0:12:06.520 less than what dollars a month, But that that puts 0:12:06.520 --> 0:12:09.800 you in a tight spot. Yeah, no, for sure, I 0:12:09.800 --> 0:12:12.680 mean certainly. We have always looked to be at the 0:12:12.679 --> 0:12:15.040 top of the market in terms of the pay that 0:12:15.080 --> 0:12:19.319 we provide to the heroes in our classrooms are teachers, uh, 0:12:19.360 --> 0:12:22.559 and so over the last several years, we have accelerated 0:12:22.559 --> 0:12:26.760 wage increases pretty significantly. Um to quantify it, it's been 0:12:26.800 --> 0:12:30.800 more than to our teachers over the last several years 0:12:30.920 --> 0:12:35.960 and so um. Obviously, working families struggle to afford the 0:12:36.040 --> 0:12:39.720 investment in early childhood education, but the reality is is 0:12:39.800 --> 0:12:43.839 expensive to deliver, and so we have always relied upon 0:12:44.160 --> 0:12:48.920 our employer clients to help their employees to offset some 0:12:49.000 --> 0:12:52.120 of the costs of childcare. And that's really what makes 0:12:52.120 --> 0:12:55.439 our model unique, right, which is our employer clients lean 0:12:55.520 --> 0:12:59.840 in and provide subsidy so that their employees are not 0:13:00.120 --> 0:13:03.680 responsible for the full cost of childcare and the full 0:13:03.679 --> 0:13:07.200 cost of delivering that childcare, and ultimately that becomes an 0:13:07.240 --> 0:13:11.040 important benefit to them for working at companies like Bloomberg. 0:13:11.559 --> 0:13:14.040 All right, good stuff, I really appreciate you taking a time. 0:13:14.240 --> 0:13:16.640 Stephen Kramer, CEO of Bright Horizons again in New York 0:13:16.640 --> 0:13:19.560 stock has changed listed company b f A M is 0:13:19.559 --> 0:13:22.920 a symbol to type into your Bloomberg terminal there. So, uh, 0:13:23.360 --> 0:13:26.800 you're a user, Yeah, well we can. It's a great 0:13:27.040 --> 0:13:31.199 service that Bloomberg um offers. You know, the interesting thing 0:13:31.559 --> 0:13:33.840 the comparison I make is between what the system in 0:13:33.880 --> 0:13:36.400 Germany and here, right, because I just moved back. I 0:13:36.440 --> 0:13:39.800 pay more in taxes here than I did in Germany, really, 0:13:39.920 --> 0:13:44.960 but childcare was free there, so they had doublic daycarees 0:13:45.240 --> 0:13:49.839 with organic food and musicians and farm field trips over there, 0:13:50.280 --> 0:13:52.559 and here it's like two or three grand a month 0:13:53.559 --> 0:13:58.480 for the basics, right, parent contrast, not saying which one 0:13:58.520 --> 0:14:01.559 is better, but just comparing tressed all right, sp of 0:14:01.679 --> 0:14:03.720 eight tens of one percent. We'll take that on a 0:14:03.760 --> 0:14:12.520 holiday Tuesday. This this bood bern get a little bit 0:14:12.559 --> 0:14:14.560 of a deal here, and it really got my attention. 0:14:14.920 --> 0:14:18.640 So chen Or Society General is doing a deal with 0:14:18.679 --> 0:14:21.440 Alliance Bernstein. Alliance Bernstein is one of the combination of 0:14:21.480 --> 0:14:23.880 two of the best names I think in the US 0:14:24.000 --> 0:14:28.280 global finance. Jonathan Tyson's his senior analyst European banks for 0:14:28.400 --> 0:14:31.880 Bloomberg Intelligence. He's based in London. He joins us, Hey, John, 0:14:31.920 --> 0:14:34.160 you know the story that we've heard over and over 0:14:34.200 --> 0:14:36.080 and over again over the years is kind of the 0:14:36.160 --> 0:14:41.320 European banks retrenching, pulling back. I'm thinking credits Swiss Deutsche Bank. 0:14:41.400 --> 0:14:44.960 But what does suck Gen doing well? I mean, you're 0:14:44.960 --> 0:14:48.680 completely right, and sockd In has only just finished about 0:14:48.720 --> 0:14:50.880 three years of a lot of disposals there in mind, 0:14:50.920 --> 0:14:55.080 they sold their stake in the Monday to UM Credittal, 0:14:55.160 --> 0:14:59.200 they sold lix Source creditcal next to the number of businesses, 0:14:59.480 --> 0:15:03.840 but um they are pretty strong in equities and prime services, 0:15:04.000 --> 0:15:06.880 of which castext is probably not the strongest part of it. 0:15:07.240 --> 0:15:09.520 So I think they're trying to do what BMP did 0:15:09.520 --> 0:15:12.120 with x mat UM and they've picked a very good franchise. 0:15:12.120 --> 0:15:15.240 I agree with you at Alliance UM and Bernstein Research. 0:15:16.680 --> 0:15:19.240 So what does this mean? Are they going to be 0:15:19.240 --> 0:15:23.400 moving pushing to move market share higher? UM is chen 0:15:23.640 --> 0:15:26.960 making a play here? Are they an aggressive dealmaker? Now? 0:15:28.480 --> 0:15:32.800 Oh no. But basically the outgoing CEO who who leaves 0:15:32.920 --> 0:15:34.680 may have next. He has been there for fifteen years, 0:15:34.840 --> 0:15:37.160 a lot of ups and downs. The new guy coming 0:15:37.200 --> 0:15:41.480 in is ex corporate investment banking and clearly a lot 0:15:41.560 --> 0:15:44.840 of the restruction has been done. But if you look 0:15:44.840 --> 0:15:47.240 at say their equities division, they've beaten for the last 0:15:47.240 --> 0:15:48.960 six quarters and I don't think any bank's done that, 0:15:49.360 --> 0:15:51.840 so they would have pretty good franchise there. He's making 0:15:51.840 --> 0:15:54.680 his mark. He's confirming that sock Jan as the European 0:15:54.920 --> 0:15:58.400 player and a global equities player wants to play. And 0:15:58.440 --> 0:16:00.720 as I say, I think they've looked at BEMP did 0:16:00.760 --> 0:16:03.320 with nex Han over a few years, eventually buying in 0:16:04.080 --> 0:16:05.960 a year or so ago, and the strength of their 0:16:06.000 --> 0:16:07.960 franchise there, and they're trying to do the same thing. 0:16:08.320 --> 0:16:10.200 They have said. We don't think there'll be that many 0:16:10.840 --> 0:16:13.000 job cuts. There's not that much of an overlap, probably 0:16:13.040 --> 0:16:16.640 nine hundred staff in total across the two businesses. Um 0:16:16.680 --> 0:16:19.160 it's suspensible move. And in terms of how they're paying 0:16:19.160 --> 0:16:22.160 for it, I mean banks are actually profitable again, so 0:16:22.200 --> 0:16:23.920 that they're paying for it by using up some of 0:16:23.960 --> 0:16:26.320 the capital they're generating. You know what I thought was interesting. 0:16:26.640 --> 0:16:31.840 Um So soft Gen takes fift Alliance Bernstein gets the 0:16:31.880 --> 0:16:36.520 CEO position, um and they're going to be headquartered in London. 0:16:37.120 --> 0:16:40.480 Why headquartered in London? Five years ago we thought maybe 0:16:40.480 --> 0:16:44.040 that was going to shift as a as a financial hub, 0:16:44.440 --> 0:16:46.760 you know, to the continent, or maybe more business would 0:16:46.800 --> 0:16:48.760 come back here to New York. But is it still 0:16:48.800 --> 0:16:51.640 just so attractive that when you're there you can get 0:16:51.680 --> 0:16:55.560 the best talent. Well, I think it's time zones. Um. 0:16:55.600 --> 0:16:59.840 It is also language, as you say, the Bernstein research 0:17:00.520 --> 0:17:04.359 quite US heavy, very English speaking, and also the uk 0:17:04.520 --> 0:17:06.959 IS is doing everything you can with the kind of 0:17:06.960 --> 0:17:10.600 watering down post Brexit, etcetera, to make this as a 0:17:10.720 --> 0:17:13.560 nicer place to be a bank as possible. We were 0:17:13.640 --> 0:17:16.080 even looking at things like tweaking Bank Aponus as we've 0:17:16.080 --> 0:17:20.399 removed the cap so there's no reason to rush anything. 0:17:20.440 --> 0:17:22.119 And I mean this is they've got five years to 0:17:22.160 --> 0:17:24.919 buy the remaining four nine. This is a a thing that 0:17:24.920 --> 0:17:26.399 we've done in a hurry. But I think at a 0:17:26.480 --> 0:17:28.520 starting point it makes sense to me in London given 0:17:28.560 --> 0:17:36.000 the the US An American English speaking component of Burnstein. So, Jonathan, 0:17:36.000 --> 0:17:38.440 you've covered all the European banks here, this seems a 0:17:38.520 --> 0:17:40.760 little bit of, you know, out of step with some 0:17:40.840 --> 0:17:43.280 of the other ones. Does this suggest that maybe some 0:17:43.400 --> 0:17:47.720 others European banks may be looking to maybe increase through 0:17:47.760 --> 0:17:51.440 your U S exposure. Um, maybe thinking that twenty three 0:17:51.480 --> 0:17:54.840 will be a better year for the financial markets. Not 0:17:54.960 --> 0:17:56.720 at all. No, I think well, this is though, this 0:17:56.800 --> 0:17:57.960 is a bank that's come to the end of a 0:17:58.000 --> 0:18:01.240 very long and painful restructuring okay, torture bank, and it's 0:18:01.240 --> 0:18:04.040 looking at the businesses is doing well in it is profitable, 0:18:04.040 --> 0:18:06.439 it's generating capital, it's got more capital than it needs. 0:18:06.760 --> 0:18:10.080 So it's sort of building out in the franchises. Another 0:18:10.080 --> 0:18:12.320 franchise has got a l d S. You've probably never 0:18:12.359 --> 0:18:14.240 heard of it, but it's pretty much the biggest leasing 0:18:14.280 --> 0:18:16.880 company in Europe um and it's going great guns. That's 0:18:16.880 --> 0:18:20.040 another business that they are building out via acquisition. The 0:18:20.080 --> 0:18:23.080 ext franchise. They used to be very very strong and derivatives, 0:18:23.440 --> 0:18:26.440 remember the French blew up massively in one Q twenty. 0:18:26.600 --> 0:18:29.359 They've got through that. They've got revenues right back again. 0:18:29.400 --> 0:18:31.680 This unit is supposed to make about three billion next year, 0:18:31.760 --> 0:18:34.679 so that they're just sort of moving on to the 0:18:34.720 --> 0:18:38.640 next CEO and consolidating in the businesses that they're good at. 0:18:39.640 --> 0:18:42.280 When when you talk to your institutional investor clients these days, 0:18:43.040 --> 0:18:46.960 what is there kind of outlook for kind of European 0:18:47.119 --> 0:18:51.520 and UK banks? Well, I mean the thing is we've 0:18:51.520 --> 0:18:53.959 been waiting for ten years for revenue to start going up. 0:18:53.960 --> 0:18:56.560 They started going up. Rates went up that interesting and 0:18:56.640 --> 0:19:01.199 went up. Then Ukraine invason happened. It's has begun to 0:19:01.200 --> 0:19:02.600 look through it. But the fact is we can see 0:19:02.640 --> 0:19:04.760 the peak of the rate cycle now. So they're now 0:19:04.800 --> 0:19:08.080 worrying about the downturn and quite how badly bad debt 0:19:08.480 --> 0:19:10.399 is going to impact the banks. And we have an 0:19:10.440 --> 0:19:14.240 accounting standard that's reasonably new and pretty untried and untested. 0:19:14.280 --> 0:19:17.120 So they're a little bit skeptical, world more bullish, were 0:19:17.119 --> 0:19:19.600 comfortable that the banks will weather this and actually report 0:19:19.680 --> 0:19:22.200 double digit r o e s, which if you've looked 0:19:22.200 --> 0:19:24.120 at European banks for the last ten of fifteen years, 0:19:24.119 --> 0:19:26.280 you can't even remember the last time you saw that 0:19:27.480 --> 0:19:31.520 and did thirty seconds Jonathan. Brexit Did it kill the 0:19:31.560 --> 0:19:33.439 city of London? Do you think? Or it's just a 0:19:33.520 --> 0:19:38.040 minor blip. It hasn't helped um And hopefully the new 0:19:38.080 --> 0:19:41.160 government is going to stop kind of the UK and 0:19:41.600 --> 0:19:46.760 the ECB being at war about things like euroclearing and derivatives, 0:19:47.000 --> 0:19:50.520 so hopefully the hospitalities will cease or the least softened. 0:19:50.600 --> 0:19:53.680 But no, it didn't, it didn't help all right, good stuff, 0:19:53.720 --> 0:19:56.520 Jonathan Tyce. He covers all the European and UK banks 0:19:56.520 --> 0:19:58.800 for Bloomberg Intelligence. He's been doing it for decades. One 0:19:58.800 --> 0:20:02.000 of the best in the city of London, so he's 0:20:02.000 --> 0:20:04.400 seen it all. But I mean he gets some masters 0:20:04.520 --> 0:20:09.320 in classics, literature and linguistics from I don't Oxford Cambridge 0:20:09.320 --> 0:20:13.200 one of those super duper banker major and then you 0:20:13.280 --> 0:20:16.399 got classics and then you go to financial services. I 0:20:16.440 --> 0:20:18.960 just don't get it. But he is a really really 0:20:19.000 --> 0:20:21.639 good banks I would get some massive I would guess 0:20:21.640 --> 0:20:25.960 a double digit percentage of successful bankers majored in classics classics. 0:20:25.960 --> 0:20:27.280 All right, I'll take your word for they love it. 0:20:27.320 --> 0:20:29.960 That's why I always hedge funds have like Greek god names. 0:20:33.080 --> 0:20:36.000 Let's talk energy here. Yesterday, as John was just mentioning 0:20:36.040 --> 0:20:38.760 today we got w t I crude oil eight cents. 0:20:38.760 --> 0:20:41.920 We had a seven handle yesterday which got my attention. 0:20:42.560 --> 0:20:49.399 Got gasoline prices unleaded regular. Yeah that I'm going to 0:20:49.520 --> 0:20:52.359 tell you that's not good for your engine. Yeah that's 0:20:52.760 --> 0:20:55.640 your car was engineered to tank ninety one octane. Alright, 0:20:55.680 --> 0:21:00.760 so it's cheaper. Yeah, I know the long run, it's 0:21:00.800 --> 0:21:03.560 not Do you love your car question? Yes you do? 0:21:04.119 --> 0:21:06.800 And will you be able to replace it. No, MW 0:21:07.040 --> 0:21:08.960 does not make those anymore. Right, I'll take better care 0:21:08.960 --> 0:21:11.639 of it. But diesel is the issue here, and I 0:21:11.640 --> 0:21:14.080 want to talk to much more important fuel for the 0:21:14.080 --> 0:21:17.200 global economy. Exactly right, Scott Levin, senior Energy and industrial 0:21:17.200 --> 0:21:20.439 analysts for Bloomberg Intelligence Joints us Hey. Scott talked to 0:21:20.480 --> 0:21:22.919 us about diesel. I mean, I don't put it in 0:21:23.000 --> 0:21:26.200 my car. I don't like the sound diesel engines make. 0:21:26.800 --> 0:21:29.520 But it's big, it's great, it's a great sound. Talk 0:21:29.560 --> 0:21:32.440 to us about diesel UH fuel Scott House concerns should 0:21:32.440 --> 0:21:36.240 we be Yeah, you have kind of a unique phenomenon 0:21:36.320 --> 0:21:39.520 going on with right now. And if you look at 0:21:39.560 --> 0:21:44.040 your local gas station, you'll see a gap of close 0:21:44.119 --> 0:21:48.639 to two dollars gallon in some places between diesel and gasoline. 0:21:48.680 --> 0:21:52.959 And that's abnormally large, obviously, and the primary reason for that, 0:21:53.000 --> 0:21:58.800 I think is unusually low inventories of diesel weren't less 0:21:58.800 --> 0:22:01.960 than half of or we typically are this time of year. 0:22:02.960 --> 0:22:05.360 UH for diesel fuel, and diesel fuel is much more 0:22:05.359 --> 0:22:09.879