1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:17,560 Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,120 Speaker 1: Bloomberg dot com, and of course, on the Bloomberg Sinali 5 00:00:28,160 --> 00:00:32,000 Speaker 1: Bassett dropping by the studio Bloomberg News. Investment banking report 6 00:00:32,000 --> 00:00:37,400 Speaker 1: a shinale record net income of nine point seven billion dollars. 7 00:00:37,440 --> 00:00:39,280 Speaker 1: But it's never about that, is it. It's never about 8 00:00:39,280 --> 00:00:41,960 Speaker 1: the record profits. It's always about the outlook, and what's 9 00:00:42,000 --> 00:00:45,280 Speaker 1: the outlook. The outlook so far isn't great. Net interest 10 00:00:45,320 --> 00:00:47,680 Speaker 1: income coming down just a bit to five point the 11 00:00:47,800 --> 00:00:51,360 Speaker 1: fifty seven point five billion, that's only five million less. 12 00:00:51,400 --> 00:00:54,640 Speaker 1: But it's never good when you see a decline in 13 00:00:54,640 --> 00:00:58,840 Speaker 1: the core business. I see book value of seven percent. 14 00:00:59,240 --> 00:01:02,200 Speaker 1: I see in or Ganic revenue number of four point 15 00:01:02,280 --> 00:01:05,440 Speaker 1: one percent year over year. I mean it is best 16 00:01:05,480 --> 00:01:09,120 Speaker 1: in class, isn't it? And the ratios are jaw dropping 17 00:01:09,160 --> 00:01:12,000 Speaker 1: compared to the competition. City Group is trying so hard 18 00:01:12,080 --> 00:01:14,959 Speaker 1: to hit the return on capital number of twelve percent 19 00:01:16,200 --> 00:01:20,400 Speaker 1: is blowing through there. There's really that's that's important to stop. 20 00:01:20,400 --> 00:01:22,800 Speaker 1: Their city group is a hurdle rate of a given 21 00:01:22,880 --> 00:01:26,560 Speaker 1: ratio of twelve percent? And Mr Diamonds, did you just 22 00:01:26,600 --> 00:01:30,080 Speaker 1: say at But let's be clear, we can't get too 23 00:01:30,120 --> 00:01:32,440 Speaker 1: excited about the numbers. And we're seeing now when it's 24 00:01:32,480 --> 00:01:34,920 Speaker 1: probably already baked into the stock. The fact that the 25 00:01:35,040 --> 00:01:37,400 Speaker 1: net interesting comme is going down a bit and loans 26 00:01:37,440 --> 00:01:41,600 Speaker 1: are growing slower is a concern. And you know Jamie 27 00:01:41,640 --> 00:01:45,120 Speaker 1: diamond the first thing he said was he's competent in 28 00:01:45,120 --> 00:01:47,240 Speaker 1: the consumer. I mean, I see price to book. Just 29 00:01:47,319 --> 00:01:50,400 Speaker 1: one ratio we used on the Bloomberg John's city group 30 00:01:50,480 --> 00:01:54,000 Speaker 1: is at point nine in JP Morgan is at one 31 00:01:54,080 --> 00:01:57,120 Speaker 1: point six. What a valuation difference. So that's what's biked 32 00:01:57,120 --> 00:01:59,400 Speaker 1: into the valuation of these K companies right now. So 33 00:01:59,560 --> 00:02:01,880 Speaker 1: all it's about now is the outlook versus each other. 34 00:02:01,880 --> 00:02:04,480 Speaker 1: On the outlook, it's interesting and you pick up on it. 35 00:02:04,760 --> 00:02:08,320 Speaker 1: The cut to the interesting income. Shinale didn't see it 36 00:02:08,360 --> 00:02:14,040 Speaker 1: in city Why not? That's a question. Not sure? Maybe. 37 00:02:14,120 --> 00:02:16,280 Speaker 1: I mean the thing is some people already started to 38 00:02:16,280 --> 00:02:19,519 Speaker 1: revise estimates lower. I believe JP Morgan, we didn't see 39 00:02:19,560 --> 00:02:22,120 Speaker 1: them yet. Remember Wells Fargo made a big cut a 40 00:02:22,160 --> 00:02:24,919 Speaker 1: couple of months ago, and so some of these expectations 41 00:02:24,919 --> 00:02:27,160 Speaker 1: were already baked in. But JP Morgan kind of help 42 00:02:27,200 --> 00:02:29,840 Speaker 1: steady wellgo coming in a round about an hour. What 43 00:02:29,880 --> 00:02:33,959 Speaker 1: are you looking for? Shnali? Also consumer results, we already 44 00:02:33,960 --> 00:02:37,639 Speaker 1: know about their interest rate expectations. But you know trading 45 00:02:37,840 --> 00:02:39,720 Speaker 1: by the way, we have Goldman Sacks in lesson. Now 46 00:02:39,760 --> 00:02:41,839 Speaker 1: we have Goldman Sacks in a half an hour, and 47 00:02:42,080 --> 00:02:45,399 Speaker 1: we only do one bank a day. That's all we're doing. Surveillance. 48 00:03:00,160 --> 00:03:03,079 Speaker 1: Thomas showed with us with stephle Kbw, the chief executive 49 00:03:03,120 --> 00:03:05,959 Speaker 1: officer of Keith bri Hunton Woods, and of course their 50 00:03:06,000 --> 00:03:10,080 Speaker 1: combination was stephile he's given us great perspective this morning 51 00:03:10,520 --> 00:03:13,920 Speaker 1: on these banks. What is the distance of these major banks? 52 00:03:14,040 --> 00:03:17,239 Speaker 1: Mr mhowed from the regionals? I mean they're too big 53 00:03:17,240 --> 00:03:20,920 Speaker 1: to fail and there's a super regionals. Are they like 54 00:03:21,080 --> 00:03:24,040 Speaker 1: five times bigger than the regionals? Are they two times bigger? 55 00:03:24,080 --> 00:03:27,840 Speaker 1: What's that? The Big four are enormous, there two trillion 56 00:03:27,919 --> 00:03:31,400 Speaker 1: dollars in assets, and then you get very quickly down 57 00:03:31,480 --> 00:03:33,640 Speaker 1: to banks that are just a couple hundred billions. So 58 00:03:33,680 --> 00:03:36,840 Speaker 1: these banks can be ten times bigger the big four 59 00:03:36,880 --> 00:03:40,240 Speaker 1: banks have about of the deposits in America, which is 60 00:03:40,320 --> 00:03:45,240 Speaker 1: up from about exactly for the crisis. Is there legislation 61 00:03:45,320 --> 00:03:48,560 Speaker 1: to preclude that or are we comfortable with almost a 62 00:03:49,480 --> 00:03:53,680 Speaker 1: neo Canadian model of four dominant big banks? I mean, 63 00:03:53,680 --> 00:03:57,040 Speaker 1: do we want that? Well, so the they have picked 64 00:03:57,080 --> 00:03:59,640 Speaker 1: up market share since the crisis, there are laws that 65 00:03:59,720 --> 00:04:02,400 Speaker 1: say that you can't acquire another bank when you're over 66 00:04:02,440 --> 00:04:08,600 Speaker 1: ten percent. What's different? You had asked earlier, what's different? 67 00:04:08,600 --> 00:04:11,240 Speaker 1: Which is a great question. We we have been watching 68 00:04:11,280 --> 00:04:14,240 Speaker 1: the sweet spot of banking for a long time, and 69 00:04:14,280 --> 00:04:17,440 Speaker 1: for most of my career, the smaller banks were more profitable. 70 00:04:18,000 --> 00:04:21,440 Speaker 1: That dynamic is now shifting and now you're seeing some 71 00:04:21,480 --> 00:04:24,000 Speaker 1: of the So now when we look at the strata 72 00:04:24,080 --> 00:04:27,640 Speaker 1: in the industry, the over fifty billion dollar banks are 73 00:04:27,680 --> 00:04:31,159 Speaker 1: becoming the more profitable ones, and so you're starting to 74 00:04:31,160 --> 00:04:34,599 Speaker 1: see scale and diversification start to work. Even though we 75 00:04:34,720 --> 00:04:38,159 Speaker 1: talked about it forever, it hadn't worked. Now it's starting 76 00:04:38,160 --> 00:04:40,280 Speaker 1: to work. That doesn't mean the smaller banks that aren't 77 00:04:40,320 --> 00:04:43,640 Speaker 1: high performing ones. It doesn't mean in all cases, for example, 78 00:04:43,880 --> 00:04:47,160 Speaker 1: cities a little bit behind JP Morgan and profitability. It 79 00:04:47,200 --> 00:04:50,080 Speaker 1: doesn't mean there aren't examples of differences. But when you 80 00:04:50,080 --> 00:04:52,520 Speaker 1: look at the aggregate data, that's what we're seeing. Looking 81 00:04:52,560 --> 00:04:55,240 Speaker 1: at the net interest income out look for jap Morgan 82 00:04:55,400 --> 00:04:57,200 Speaker 1: cutting that seems to be waning on the stock at 83 00:04:57,240 --> 00:04:59,320 Speaker 1: least in the early part of this morning. What is 84 00:04:59,360 --> 00:05:01,400 Speaker 1: it about Jake more go into the business model that 85 00:05:01,440 --> 00:05:04,120 Speaker 1: would lead them to cut that outlook and for city 86 00:05:04,480 --> 00:05:07,200 Speaker 1: that keep it unchanged, you know, it's it's a lot 87 00:05:07,200 --> 00:05:08,839 Speaker 1: of it is the work that they've done up to 88 00:05:08,880 --> 00:05:11,920 Speaker 1: this point and how they've gone about collecting to I 89 00:05:11,960 --> 00:05:14,960 Speaker 1: think that this net interest margin drive is going to 90 00:05:15,040 --> 00:05:17,760 Speaker 1: be what's happening on the funding side as much as 91 00:05:17,760 --> 00:05:20,719 Speaker 1: it is on the asset side. So it's a makeup 92 00:05:20,760 --> 00:05:24,359 Speaker 1: of your deposits and where the competitive pressure is on 93 00:05:24,400 --> 00:05:27,480 Speaker 1: that because even though interest rates now are going to 94 00:05:27,560 --> 00:05:31,599 Speaker 1: be going down, there still is a speedboat effect where 95 00:05:31,640 --> 00:05:34,760 Speaker 1: there's a deposit mixed change that's happening that's affecting the 96 00:05:34,800 --> 00:05:37,359 Speaker 1: deposit cost. So actually, if I was doing more work, 97 00:05:37,560 --> 00:05:40,200 Speaker 1: I would dig into the deposit cost of the franchise. 98 00:05:40,440 --> 00:05:43,160 Speaker 1: And that's really where you see the separation. What does 99 00:05:43,200 --> 00:05:45,640 Speaker 1: that mean for a Bank of America tomorrow um and 100 00:05:45,680 --> 00:05:52,800 Speaker 1: what are you doing using stories. Yeah, we think that 101 00:05:52,839 --> 00:05:55,400 Speaker 1: Bank America, like the rest of the industry, is going 102 00:05:55,440 --> 00:05:59,160 Speaker 1: to be talking about tighter margins because I don't think 103 00:05:59,320 --> 00:06:02,640 Speaker 1: much of the history a year ago was looking for 104 00:06:02,720 --> 00:06:07,200 Speaker 1: interest rates to start going down. It's almost talking about valuations. 105 00:06:07,200 --> 00:06:11,120 Speaker 1: A couple of minutes ago, record net income of nine 106 00:06:11,120 --> 00:06:13,919 Speaker 1: point seven billion dollars for JP Morgan. We saw record 107 00:06:13,960 --> 00:06:16,360 Speaker 1: profits from all of these banks last year as well, 108 00:06:16,440 --> 00:06:19,160 Speaker 1: Tom Yet they don't seem to be attracting the valuation. 109 00:06:19,200 --> 00:06:22,120 Speaker 1: Investors thing to be shrugging the shoulders whenever they see 110 00:06:22,120 --> 00:06:24,040 Speaker 1: records like this, Why is that the count? So I'm 111 00:06:24,040 --> 00:06:25,919 Speaker 1: going to give you the big pieces for what I 112 00:06:25,960 --> 00:06:28,080 Speaker 1: think is the balance and to give you the perspective 113 00:06:28,440 --> 00:06:31,839 Speaker 1: the banking industry, especially, many of these banks, and JP 114 00:06:31,960 --> 00:06:36,320 Speaker 1: Morgan in particular, are very profitable. They've more than recovered 115 00:06:36,320 --> 00:06:39,839 Speaker 1: their profitability from the crisis. What we're talking about now 116 00:06:40,000 --> 00:06:42,799 Speaker 1: is just growth. So it's not as if the bottom 117 00:06:42,880 --> 00:06:44,960 Speaker 1: is falling out. It's just that revenues are going to 118 00:06:45,000 --> 00:06:47,920 Speaker 1: be growing slower because we've had I think a sudden 119 00:06:48,040 --> 00:06:51,880 Speaker 1: unexpected change and where interest rates are going so so 120 00:06:52,240 --> 00:06:55,960 Speaker 1: and investors are very concerned, and so now they're trading 121 00:06:56,000 --> 00:06:58,520 Speaker 1: at a tw we think at a twenty plus percent 122 00:06:58,640 --> 00:07:02,600 Speaker 1: discount where historically they would for the performance they have now. 123 00:07:02,640 --> 00:07:05,960 Speaker 1: And it's all about expectations. The other, uh, the other 124 00:07:05,960 --> 00:07:08,760 Speaker 1: item that we haven't talked about is that we're not 125 00:07:08,839 --> 00:07:12,000 Speaker 1: talking about credit. We we've just talked about JP Morgan's 126 00:07:12,000 --> 00:07:13,760 Speaker 1: earnings and I haven't had a you know, I've been 127 00:07:13,800 --> 00:07:15,720 Speaker 1: on the set, so I haven't had chance to credit 128 00:07:15,720 --> 00:07:19,040 Speaker 1: provisions and Shanty can confirm that actually came down. So 129 00:07:19,240 --> 00:07:22,240 Speaker 1: credit is pristine to the point where it can't get 130 00:07:22,280 --> 00:07:25,520 Speaker 1: any better. So I think what investors are worried about 131 00:07:25,560 --> 00:07:28,640 Speaker 1: when they see all this uncertainty around trade and macro 132 00:07:28,840 --> 00:07:32,760 Speaker 1: growth is they keep discounting a credit cycle that hasn't come. 133 00:07:33,000 --> 00:07:37,560 Speaker 1: Everybody wants to be a wealth manager. Wealth management permeates 134 00:07:37,600 --> 00:07:41,520 Speaker 1: every deck, every you know, spreadsheet and all that come on. 135 00:07:41,720 --> 00:07:44,160 Speaker 1: Everybody wants to jump into the same business. Is your 136 00:07:44,240 --> 00:07:47,400 Speaker 1: radar up on that Thomas show and that that there's 137 00:07:47,440 --> 00:07:53,400 Speaker 1: just too many people chasing after too few asset gathering fees. Well, 138 00:07:53,600 --> 00:07:56,800 Speaker 1: there there's a tremendous amount of competition, even though it's 139 00:07:56,840 --> 00:07:59,560 Speaker 1: shaking out, you know, And I think what's notable is 140 00:07:59,720 --> 00:08:03,120 Speaker 1: det she bank shrinking their equity business, and so you're 141 00:08:03,160 --> 00:08:06,600 Speaker 1: seeing some retreating going on, which you would, but I 142 00:08:06,640 --> 00:08:09,800 Speaker 1: don't think it will come to a point where you'll see, uh, 143 00:08:09,960 --> 00:08:12,000 Speaker 1: folks feel like there aren't too many competitors. These are 144 00:08:12,120 --> 00:08:15,240 Speaker 1: very competitive businesses. But when I talk to my colleagues 145 00:08:15,240 --> 00:08:18,200 Speaker 1: in the office that they have always been competitive and 146 00:08:18,240 --> 00:08:20,960 Speaker 1: we should expect nothing different. Thomas Cha can be w 147 00:08:21,160 --> 00:08:39,360 Speaker 1: Chief Executive John what sticks out so far besides terrific ratios? 148 00:08:40,120 --> 00:08:42,640 Speaker 1: Use of cash? You know, I get their churning and 149 00:08:42,720 --> 00:08:45,400 Speaker 1: all the challenges, but we didn't think we'd be here 150 00:08:45,440 --> 00:08:47,480 Speaker 1: ten years ago. Well used to cash, I think is 151 00:08:47,559 --> 00:08:50,719 Speaker 1: the story for the banks. The capital return programs are 152 00:08:50,720 --> 00:08:54,800 Speaker 1: just ginormous, enormous, that's a correct And so many investors 153 00:08:54,840 --> 00:08:56,160 Speaker 1: have lined up to tell me they want to be 154 00:08:56,200 --> 00:08:58,920 Speaker 1: along the financials. They think the share accounts just gonna 155 00:08:58,920 --> 00:09:01,680 Speaker 1: get eaten up. It's gonna do CPS, and that's something 156 00:09:01,760 --> 00:09:03,319 Speaker 1: they want to be a part of. I just wonder 157 00:09:03,400 --> 00:09:07,360 Speaker 1: Tom whether this story can repeat itself next year the 158 00:09:07,440 --> 00:09:11,040 Speaker 1: year after. Maybe John Stelfus can help us with the 159 00:09:11,040 --> 00:09:15,640 Speaker 1: Alpenheimer's coaching investment strategist. John has been a huge optimist 160 00:09:15,679 --> 00:09:19,040 Speaker 1: and writes a lovely detailed note. What is detailed on banking? 161 00:09:19,120 --> 00:09:23,720 Speaker 1: John Within your note, now, could you be along the banks? Well, 162 00:09:23,760 --> 00:09:26,679 Speaker 1: we are along the banks, and we've we've been overweight 163 00:09:26,760 --> 00:09:32,080 Speaker 1: financials for the last year. Required some patience, perseverance, But 164 00:09:32,120 --> 00:09:35,119 Speaker 1: we've got to say that the banks have certainly performed 165 00:09:35,160 --> 00:09:39,000 Speaker 1: better this year than last. By the end of the 166 00:09:39,040 --> 00:09:43,160 Speaker 1: most recent quarter they were still under performing. With my recollections, 167 00:09:43,240 --> 00:09:47,800 Speaker 1: they were up about fourteen uh, up about fourteen percent 168 00:09:47,920 --> 00:09:50,120 Speaker 1: by the end of the of the second quarter. And 169 00:09:50,200 --> 00:09:52,640 Speaker 1: that's you got to say, that's pretty that's that's a 170 00:09:52,640 --> 00:09:55,800 Speaker 1: pretty good return. And we think what it is is 171 00:09:55,840 --> 00:09:58,959 Speaker 1: the banks are not as dependent as they once were 172 00:09:59,520 --> 00:10:04,199 Speaker 1: on the ms UH for their for their for their profitability. 173 00:10:04,600 --> 00:10:07,080 Speaker 1: There's an awful lot of fees involved. There's all of 174 00:10:07,200 --> 00:10:11,520 Speaker 1: us who are our clients of commercial banks. If you 175 00:10:11,559 --> 00:10:13,840 Speaker 1: have a deposit account, you know, you don't get paid 176 00:10:13,880 --> 00:10:18,600 Speaker 1: anything on it, and they give very little and take 177 00:10:18,679 --> 00:10:21,240 Speaker 1: as much as they can. So we've got to think 178 00:10:21,320 --> 00:10:24,040 Speaker 1: that the financials are a good place to be as 179 00:10:24,040 --> 00:10:26,599 Speaker 1: a shareholder. Johnny, it's a really really important point that 180 00:10:26,640 --> 00:10:29,480 Speaker 1: you make about the recurring feed based revenue of these banks. 181 00:10:29,480 --> 00:10:31,640 Speaker 1: And how the business models have shifted over the last 182 00:10:31,640 --> 00:10:35,680 Speaker 1: ten years, but have invested perceptions shifted on what low 183 00:10:35,800 --> 00:10:38,800 Speaker 1: rates ultimately do and don't mean for some of these businesses. 184 00:10:39,800 --> 00:10:42,960 Speaker 1: I don't think yet, Jonathan. I think at this point 185 00:10:43,000 --> 00:10:46,000 Speaker 1: what we're looking at very much as investors are just 186 00:10:46,400 --> 00:10:49,600 Speaker 1: I don't want to sound arrogant, but I think are 187 00:10:49,720 --> 00:10:53,000 Speaker 1: just beginning to wake up to that fact. And as 188 00:10:53,120 --> 00:10:55,880 Speaker 1: a result of that, we think these have a lot 189 00:10:55,920 --> 00:10:58,040 Speaker 1: more to go. I'm looking here on my bloom birth 190 00:10:58,760 --> 00:11:03,479 Speaker 1: a year today, finance was up eight percent, still underperforming 191 00:11:03,520 --> 00:11:06,240 Speaker 1: the S and P five hundred years to day through yesterday, 192 00:11:06,760 --> 00:11:09,520 Speaker 1: you know, but that's I would I'm pleased with that 193 00:11:09,679 --> 00:11:12,520 Speaker 1: return on that index right now. And considering they take 194 00:11:12,720 --> 00:11:16,079 Speaker 1: they pay better dividends if they've paid in years, this 195 00:11:16,200 --> 00:11:19,640 Speaker 1: is beginning to look like an attractive space. Essecially, when 196 00:11:19,720 --> 00:11:22,400 Speaker 1: considering the run ups that we've seen in technology and 197 00:11:22,440 --> 00:11:29,040 Speaker 1: consumer discretionary communications services, uh, you know, and and and 198 00:11:28,679 --> 00:11:31,319 Speaker 1: then in some of the defenses like real estate and 199 00:11:31,400 --> 00:11:35,120 Speaker 1: you that's financiers look like they're saying, hey, good time 200 00:11:35,160 --> 00:11:38,079 Speaker 1: to to buy us now, Whichohn, just in terms of 201 00:11:38,120 --> 00:11:40,800 Speaker 1: the psychology, I think it's important you said, market perception 202 00:11:40,880 --> 00:11:43,640 Speaker 1: maybe shifting somewhat. What gives you the confidence because there's 203 00:11:43,679 --> 00:11:46,440 Speaker 1: an old line, isn't there. Don't fight the market. And 204 00:11:46,480 --> 00:11:48,079 Speaker 1: if you think it should be valued one way, but 205 00:11:48,120 --> 00:11:50,240 Speaker 1: everyone else thinks it should be valued another, everyone else 206 00:11:50,320 --> 00:11:54,040 Speaker 1: is going to win that fight, aren't they? Jonathan? When 207 00:11:54,040 --> 00:11:56,000 Speaker 1: I when I just looked at those returns, I've got 208 00:11:56,000 --> 00:12:00,760 Speaker 1: to say double digit and almost uh not being on 209 00:12:00,760 --> 00:12:04,680 Speaker 1: on the on the market of eighteen point eight percent 210 00:12:04,800 --> 00:12:08,640 Speaker 1: year today does show a change of perception actually taking place. 211 00:12:08,720 --> 00:12:12,480 Speaker 1: If not convinced yet, John, how do you stay in 212 00:12:12,520 --> 00:12:16,040 Speaker 1: the market? One of the great stuff is hallmarks. I 213 00:12:16,040 --> 00:12:18,840 Speaker 1: think of Gina Martin Adams of Bloomberg Intelligence as well. 214 00:12:19,400 --> 00:12:23,439 Speaker 1: It's so thicken thing you were writing notes begging Appenheimer 215 00:12:24,040 --> 00:12:27,040 Speaker 1: accounts to have the courage to stay in the market. 216 00:12:27,559 --> 00:12:29,480 Speaker 1: How do you do that on the edge of twenty 217 00:12:29,480 --> 00:12:33,560 Speaker 1: eight thousand? Now, well, I think you've got to look 218 00:12:33,960 --> 00:12:38,960 Speaker 1: at the both cyclical and secular trends, uh Tom. What 219 00:12:39,040 --> 00:12:44,040 Speaker 1: we feel is that when it comes to technology today 220 00:12:44,800 --> 00:12:48,680 Speaker 1: is parallel on on a historical timeline. We believe to 221 00:12:48,720 --> 00:12:52,079 Speaker 1: the automobile when it began to replace the horse, and 222 00:12:52,160 --> 00:12:54,920 Speaker 1: we don't mean the tech today is replacing people, but 223 00:12:55,040 --> 00:12:59,679 Speaker 1: it is changing everything that both corporates do as well 224 00:12:59,720 --> 00:13:04,440 Speaker 1: as consumers do and people in their individual lives. When 225 00:13:04,520 --> 00:13:06,960 Speaker 1: was the last time you got into a car and 226 00:13:07,040 --> 00:13:09,880 Speaker 1: you were driving to some new plight, new destination and 227 00:13:09,920 --> 00:13:12,840 Speaker 1: you had a yellow legal path with directions scrawled on 228 00:13:12,920 --> 00:13:15,440 Speaker 1: it and expectations that you can find a gas station 229 00:13:15,840 --> 00:13:18,480 Speaker 1: where somebody to give you directions. You just you just 230 00:13:18,559 --> 00:13:22,040 Speaker 1: either plug in your iPhone or connect wirelessly and you 231 00:13:22,160 --> 00:13:25,920 Speaker 1: running on GPS. And that permeates our lifestyles and it's 232 00:13:25,960 --> 00:13:33,079 Speaker 1: almost UH constant upgrade cycles, both for businesses and consumers 233 00:13:33,480 --> 00:13:36,360 Speaker 1: to the heart of your skill sets. If I need 234 00:13:36,400 --> 00:13:40,360 Speaker 1: to catch up now, do I buy high beta performers 235 00:13:40,480 --> 00:13:43,920 Speaker 1: or do I go with low beta performers for solid 236 00:13:44,200 --> 00:13:49,480 Speaker 1: return given any kind of optimism, well in portfolios that 237 00:13:49,480 --> 00:13:53,040 Speaker 1: that we manage, that that that we've enjoyed, we actually 238 00:13:53,080 --> 00:13:58,319 Speaker 1: select UH lower beta portfolios that that are that are 239 00:13:58,400 --> 00:14:01,079 Speaker 1: close to matching the v s keep five hundreds just 240 00:14:01,200 --> 00:14:04,080 Speaker 1: a little bit below it, and we find that we 241 00:14:04,120 --> 00:14:08,679 Speaker 1: can find many growthier value stocks as well as as 242 00:14:08,920 --> 00:14:12,360 Speaker 1: as good growth in in UH in big names and 243 00:14:12,520 --> 00:14:18,320 Speaker 1: technology that are very much linked to facilitating technological advancements 244 00:14:18,360 --> 00:14:21,480 Speaker 1: and upgrades in all factoris. John, Just as a final 245 00:14:21,560 --> 00:14:24,320 Speaker 1: question for you, the Bank of America Fund Manager survey 246 00:14:24,440 --> 00:14:27,600 Speaker 1: came out earlier this morning. Always really interesting to see 247 00:14:27,600 --> 00:14:30,400 Speaker 1: where the biases the most crowded trade at the moment, 248 00:14:30,520 --> 00:14:34,520 Speaker 1: long treasuries, long US tech, long investment grade corporate bonds. 249 00:14:34,720 --> 00:14:37,720 Speaker 1: There is a very much a long America theme to 250 00:14:37,800 --> 00:14:39,840 Speaker 1: some of the most crowded trades at the moment. John, 251 00:14:39,880 --> 00:14:41,800 Speaker 1: and I just wonder, out of all of them, which 252 00:14:41,800 --> 00:14:45,200 Speaker 1: one would you be fading right now? It is the 253 00:14:45,960 --> 00:14:49,680 Speaker 1: one uh A long uh US bonds. I think. I 254 00:14:49,720 --> 00:14:52,720 Speaker 1: think treasuries right now are are very much over bought. 255 00:14:52,800 --> 00:14:55,720 Speaker 1: Considering we could get a trade deal with China and 256 00:14:55,880 --> 00:14:59,480 Speaker 1: lift that, you'll see expectations for growth ramped up, both 257 00:14:59,480 --> 00:15:02,480 Speaker 1: in terms of a global JDP as well as corporate 258 00:15:02,560 --> 00:15:05,640 Speaker 1: revenuence and earnings prospects. John, Thank you so much. JOHNS 259 00:15:05,640 --> 00:15:09,360 Speaker 1: told us with Appenheimer and Company, just thrilled it he 260 00:15:09,360 --> 00:15:24,400 Speaker 1: could join his tea. Do we have Wells Fargo, Yeah, 261 00:15:24,440 --> 00:15:27,280 Speaker 1: we do. Dropping across the blampeg, we do. So I'm 262 00:15:27,280 --> 00:15:29,280 Speaker 1: taking a look here. No big surprise and list for 263 00:15:29,360 --> 00:15:32,480 Speaker 1: expecting this lowered net interesting come Wells Fargo of course 264 00:15:32,560 --> 00:15:35,080 Speaker 1: missing the lowest essmate. And this is after we've seen 265 00:15:35,120 --> 00:15:38,720 Speaker 1: similar cuts from companies like JP Morgan. Example, in the 266 00:15:38,760 --> 00:15:41,320 Speaker 1: first quarter, when they were all tooking taking a look 267 00:15:41,360 --> 00:15:44,080 Speaker 1: at their full year guidance net interest income, they were 268 00:15:44,120 --> 00:15:46,400 Speaker 1: looking at a fed hikes. So that now has shifted. 269 00:15:46,440 --> 00:15:49,080 Speaker 1: Those are coming down as we're now shifting to two cuts. 270 00:15:49,280 --> 00:15:53,440 Speaker 1: Return on equity, it's a troubled bank and it's that's 271 00:15:53,440 --> 00:15:56,360 Speaker 1: not a bad number. John still without a CEO looking 272 00:15:56,400 --> 00:15:58,480 Speaker 1: for a leader. I think when north of a hundred 273 00:15:58,560 --> 00:16:03,400 Speaker 1: days looking for ce is that Wells Farco it is, Yeah, 274 00:16:03,440 --> 00:16:06,000 Speaker 1: and the return on equity is a good number thirteen percent. 275 00:16:06,080 --> 00:16:09,080 Speaker 1: You've had companies like JP Morgan reaffirmed their return on 276 00:16:09,160 --> 00:16:12,000 Speaker 1: tangible equity at twelve percent, So those are sort of 277 00:16:12,040 --> 00:16:15,280 Speaker 1: reaffirming their guidance for the era, just keeping the costs 278 00:16:15,280 --> 00:16:18,720 Speaker 1: in line and turning out the profit of the second 279 00:16:18,760 --> 00:16:21,560 Speaker 1: quarter total average loans dropping across the Blomberg What do 280 00:16:21,640 --> 00:16:23,080 Speaker 1: you make of that side up? Yeah, you know, there's 281 00:16:23,120 --> 00:16:25,280 Speaker 1: been a lot of focus on the consumer and we 282 00:16:25,320 --> 00:16:27,320 Speaker 1: know that Wells Fargo of course has been a little 283 00:16:27,320 --> 00:16:30,120 Speaker 1: bit troubled and so you're seeing perhaps people not want 284 00:16:30,160 --> 00:16:32,760 Speaker 1: to take out loans with them. I would say though, 285 00:16:32,760 --> 00:16:35,520 Speaker 1: that City and JP Morgan continue to highlight strength in 286 00:16:35,560 --> 00:16:38,200 Speaker 1: the consumer. So I'm curious to see when Wells Foco 287 00:16:38,720 --> 00:16:42,120 Speaker 1: Wells Fargo looks at you know, credit cards and the 288 00:16:42,160 --> 00:16:45,040 Speaker 1: consumer and and the big consumer business that they have, 289 00:16:45,600 --> 00:16:47,840 Speaker 1: what they see in terms of the strength of they're 290 00:16:47,960 --> 00:16:51,760 Speaker 1: within within mortgage loans and auto loans. Is are they 291 00:16:51,760 --> 00:16:54,040 Speaker 1: a bank taylor within all your reporting that it has 292 00:16:54,080 --> 00:16:56,920 Speaker 1: to do a lot of triage or they just managing 293 00:16:56,960 --> 00:17:01,240 Speaker 1: themselves out of the real estates of the years. Yeah. 294 00:17:01,360 --> 00:17:04,080 Speaker 1: I think Wells fargoes in a very different bucket than 295 00:17:04,119 --> 00:17:06,080 Speaker 1: all the other banks that we're looking at. They have, 296 00:17:06,240 --> 00:17:09,640 Speaker 1: of course one off video syncratic issues that they're dealing with, 297 00:17:10,000 --> 00:17:13,000 Speaker 1: and so I think it's it's very difficult to sort 298 00:17:13,000 --> 00:17:14,919 Speaker 1: of put them in another and johnn it took me 299 00:17:14,920 --> 00:17:17,680 Speaker 1: a while to find it because their their statement is bologny. 300 00:17:17,720 --> 00:17:19,480 Speaker 1: To be honest, it's not as clear as i'd like. 301 00:17:19,840 --> 00:17:23,280 Speaker 1: Their revenue is flat year over year. I love quotity 302 00:17:23,320 --> 00:17:26,720 Speaker 1: results with you, it's just a really stop now, this 303 00:17:26,800 --> 00:17:29,320 Speaker 1: is the way it works. JP Morgan was okay, it 304 00:17:29,440 --> 00:17:32,959 Speaker 1: was really nicely done with a lot of people tuning in. 305 00:17:33,000 --> 00:17:36,480 Speaker 1: You're not talking about it being an okay, the presentation 306 00:17:36,520 --> 00:17:39,399 Speaker 1: of the presentation. We're sitting here in the trenches with 307 00:17:39,480 --> 00:17:45,760 Speaker 1: the bloomer. JP Morgan killed it with great percents. Yes, 308 00:17:46,280 --> 00:17:49,840 Speaker 1: Goldman Sachs did not have really good percentage analysis and 309 00:17:49,880 --> 00:17:52,640 Speaker 1: I had to hunt for two minutes Taylor to find 310 00:17:52,680 --> 00:17:56,760 Speaker 1: that revenues were flat year over year versus JP Morgan. Right, well, 311 00:17:56,800 --> 00:17:59,240 Speaker 1: and you saw this with City We're the only reason 312 00:17:59,280 --> 00:18:01,240 Speaker 1: they beat on the autom line is they had flat 313 00:18:01,280 --> 00:18:03,760 Speaker 1: top line revenue. But their cost cutting is John had 314 00:18:03,800 --> 00:18:07,720 Speaker 1: pointed out, had beat expectations. I was asking Alison Williams, 315 00:18:07,760 --> 00:18:10,159 Speaker 1: how is the cost cutting of a City Group or 316 00:18:10,200 --> 00:18:12,960 Speaker 1: a Wells Fargo with flat top line revenue growth better 317 00:18:13,000 --> 00:18:15,120 Speaker 1: than a cost cutting of a Doutsche Bank which tries 318 00:18:15,160 --> 00:18:16,639 Speaker 1: to cut their way of growth, which is, you know, 319 00:18:16,760 --> 00:18:19,399 Speaker 1: long term you can't do. She says that this is 320 00:18:19,440 --> 00:18:22,280 Speaker 1: good cost cutting. Dorshe Bank was decades of bad cost 321 00:18:22,280 --> 00:18:27,399 Speaker 1: cutting side the rigs. I don't know how you managed 322 00:18:27,440 --> 00:18:29,760 Speaker 1: to stay so professional. As Tom runs around a studio 323 00:18:30,119 --> 00:18:34,280 Speaker 1: with a spotted blood and a spotted blood on a finger, Honestly, 324 00:18:34,400 --> 00:18:37,960 Speaker 1: this is ridiculous. You had my meant to work like this? 325 00:18:38,920 --> 00:18:42,040 Speaker 1: What's wrong with your hand? I cut myself. It's not 326 00:18:42,080 --> 00:18:46,359 Speaker 1: even a interns didn't use the expensive staples, so you 327 00:18:46,400 --> 00:18:50,320 Speaker 1: know you're blaming the interns fault. Okay? Can I bring 328 00:18:50,359 --> 00:18:53,639 Speaker 1: in mart Mcca Taylor? Thank you? Well? Can't you with 329 00:18:53,680 --> 00:18:59,040 Speaker 1: Taylor Riggs over a couple of days, Bank Stanley. I'm 330 00:18:59,040 --> 00:19:01,760 Speaker 1: going to go jump on the Morgan media call right now, 331 00:19:03,200 --> 00:19:07,200 Speaker 1: Bank of America tomorrow and that Okay, Taylor Riggs, thank 332 00:19:07,200 --> 00:19:23,399 Speaker 1: you so much, really really appreciated. Can we do some 333 00:19:23,440 --> 00:19:30,080 Speaker 1: foreign exchange Sterling? Mark McCormick joining now from TV Securities. Mark, 334 00:19:30,280 --> 00:19:35,800 Speaker 1: is Sterling tradeable? Um? It is, It's just at this 335 00:19:35,880 --> 00:19:39,560 Speaker 1: moment it's particularly tricky. Um Again, we're dealing with an 336 00:19:39,640 --> 00:19:42,359 Speaker 1: environment that has probably i would say binary risks, which 337 00:19:42,400 --> 00:19:45,960 Speaker 1: makes it very challenging to trade on an investment team. Um, 338 00:19:45,960 --> 00:19:49,000 Speaker 1: it's tradeable maybe from a tactical perspective where things look 339 00:19:49,040 --> 00:19:51,480 Speaker 1: a little bit overstretched, or our positioning looks a little 340 00:19:51,520 --> 00:19:53,959 Speaker 1: bit disjointed when you have too much of a discount 341 00:19:54,000 --> 00:19:55,679 Speaker 1: in the currency, which right now we see about a 342 00:19:55,680 --> 00:19:58,280 Speaker 1: three percent one relative to our short term frameworks, but 343 00:19:58,720 --> 00:20:01,520 Speaker 1: in terms of kind of investing in new K assets, 344 00:20:01,560 --> 00:20:03,600 Speaker 1: I think it becomes a little bit trickier over the 345 00:20:03,640 --> 00:20:06,480 Speaker 1: medium term. So Mark, I'm lucky to be funded in dollars. 346 00:20:06,520 --> 00:20:08,160 Speaker 1: I've got a co anchor that I'd like to send 347 00:20:08,160 --> 00:20:10,320 Speaker 1: a wife for six months. I'm happy to cover his 348 00:20:10,400 --> 00:20:13,679 Speaker 1: expenses month after month after month, and always want to 349 00:20:13,680 --> 00:20:17,480 Speaker 1: make sure that I'm pretty hedged with a US dollar 350 00:20:17,520 --> 00:20:20,120 Speaker 1: that could stay stable or stronger against that currency. Where 351 00:20:20,119 --> 00:20:24,119 Speaker 1: should I send him? Um? So, yeah, I think you 352 00:20:24,160 --> 00:20:25,960 Speaker 1: might probably want to send him to the London office 353 00:20:26,000 --> 00:20:28,240 Speaker 1: a little bit. Um. That's probably one of your best 354 00:20:28,320 --> 00:20:33,520 Speaker 1: environments here where there's the risks here around we've changed 355 00:20:34,080 --> 00:20:36,240 Speaker 1: the probabilities of where we can go in a post 356 00:20:36,320 --> 00:20:39,000 Speaker 1: made government. So if worse Johnson takes over and we 357 00:20:39,080 --> 00:20:41,880 Speaker 1: have these new brexit scenarios, we have one where again 358 00:20:41,920 --> 00:20:45,040 Speaker 1: we could have a snap election, which markets were not 359 00:20:45,320 --> 00:20:47,840 Speaker 1: anticipating three months ago, and we could also have one 360 00:20:47,840 --> 00:20:50,919 Speaker 1: where we have a hard brexit, which again most markets 361 00:20:50,960 --> 00:20:52,560 Speaker 1: weren't really priced for that. If you look at the 362 00:20:52,560 --> 00:20:55,320 Speaker 1: tail risks around Sterling, if you look at options pricing 363 00:20:55,320 --> 00:20:57,600 Speaker 1: all those kind of things, a lot of those tail 364 00:20:57,680 --> 00:20:59,320 Speaker 1: risks were priced out a couple of months ago, so 365 00:20:59,359 --> 00:21:03,480 Speaker 1: now no deal Brexit or heart Brexit is shot back 366 00:21:03,560 --> 00:21:07,359 Speaker 1: up to which makes it very challenging. So if you're 367 00:21:07,359 --> 00:21:10,160 Speaker 1: gonna send Tom away, Blenden is probably a good deal. 368 00:21:10,240 --> 00:21:16,240 Speaker 1: Especially it's just great well with your different properties, it 369 00:21:16,280 --> 00:21:19,560 Speaker 1: gets confusing, but you know what's important there is is 370 00:21:19,800 --> 00:21:22,639 Speaker 1: just pumped on the Texas. You know, coming into this season, 371 00:21:22,680 --> 00:21:25,280 Speaker 1: we're not talking about football yet. Okay, carry on. Mark. 372 00:21:25,400 --> 00:21:27,800 Speaker 1: If I look at dollar index, so many of our 373 00:21:27,840 --> 00:21:33,400 Speaker 1: listeners are touched by dollars strength or weakness. What index 374 00:21:33,480 --> 00:21:36,840 Speaker 1: do you look at? What parameters or pairs? I should say, 375 00:21:36,960 --> 00:21:40,119 Speaker 1: do you look at to gauge your call on dollar? 376 00:21:40,920 --> 00:21:43,560 Speaker 1: That's a great question. We look at UM. We build 377 00:21:43,560 --> 00:21:45,560 Speaker 1: our own baskets, but I would say we have three 378 00:21:45,600 --> 00:21:48,320 Speaker 1: different baskets that provide three different ways of looking at 379 00:21:48,320 --> 00:21:51,680 Speaker 1: the dollar, especially in this world that's dealing with your 380 00:21:51,680 --> 00:21:55,680 Speaker 1: political issues, dealing with global growth issues, dealing with trade tensions, 381 00:21:55,720 --> 00:21:59,000 Speaker 1: and so UM a dollar emerging market basket, I think 382 00:21:59,119 --> 00:22:00,720 Speaker 1: is one of the ways in want to think about it. 383 00:22:00,800 --> 00:22:02,919 Speaker 1: You know, kind of lumping e M is one asset 384 00:22:02,960 --> 00:22:05,280 Speaker 1: classes is one way to kind of think about how 385 00:22:05,320 --> 00:22:07,760 Speaker 1: it trades against the dollar. The dollar block, which I 386 00:22:07,760 --> 00:22:11,119 Speaker 1: would call almost e M light ausi qwe CAD kind 387 00:22:11,160 --> 00:22:14,080 Speaker 1: of falls into that category. Um, they're no longer high 388 00:22:14,119 --> 00:22:16,600 Speaker 1: yielders like they were back in the heyday of the 389 00:22:16,600 --> 00:22:19,879 Speaker 1: global carry trade ten fifteen years ago, but those are 390 00:22:19,920 --> 00:22:22,600 Speaker 1: important commodity currencies in the G ten. And then also 391 00:22:22,680 --> 00:22:27,560 Speaker 1: the reserve currencies Euro, Yen, Swiss sterling and also Norway 392 00:22:27,600 --> 00:22:31,000 Speaker 1: Sweden I think fall into that group. So for our 393 00:22:31,040 --> 00:22:35,399 Speaker 1: global investors, whether they be corporations or real money, or 394 00:22:35,440 --> 00:22:38,840 Speaker 1: global hedge funds or global pension funds, you know, they 395 00:22:39,359 --> 00:22:41,879 Speaker 1: think about the dollar and all these different risk categories. 396 00:22:41,880 --> 00:22:44,200 Speaker 1: So I think that's one of the emerging ways. I 397 00:22:44,200 --> 00:22:45,680 Speaker 1: think one of the ways you can do it. On Bloombergs. 398 00:22:45,680 --> 00:22:47,320 Speaker 1: You look at the b d x Y, the Bloomberg 399 00:22:47,400 --> 00:22:50,240 Speaker 1: d x Y that captures some of the weights that 400 00:22:50,320 --> 00:22:52,119 Speaker 1: come through on some of the emerging market currencies a 401 00:22:52,119 --> 00:22:54,080 Speaker 1: little bit better than the z x Y mounk just 402 00:22:54,160 --> 00:22:56,320 Speaker 1: for J ten specifically, and just to wrap things up, 403 00:22:56,800 --> 00:22:58,480 Speaker 1: a lot of people make in a week at dollar 404 00:22:58,560 --> 00:23:01,359 Speaker 1: coal on the lying that is just a view on 405 00:23:01,480 --> 00:23:04,960 Speaker 1: right differentials, where the right differentials rank for you in 406 00:23:05,000 --> 00:23:08,120 Speaker 1: this effex right, Jane, I would say they are very low, 407 00:23:08,560 --> 00:23:10,880 Speaker 1: much lower than where I think people wook at them 408 00:23:10,880 --> 00:23:13,040 Speaker 1: and give them credence for it, because one of the 409 00:23:13,040 --> 00:23:16,720 Speaker 1: correlation is not there. Uh two. F FX markets are 410 00:23:16,840 --> 00:23:19,440 Speaker 1: very forward looking. So if you kind of think about 411 00:23:19,480 --> 00:23:23,359 Speaker 1: when rate regimes really matter for FX, it's anticipation head 412 00:23:23,359 --> 00:23:25,400 Speaker 1: of a FED tightening cycle or FED of a chance 413 00:23:25,800 --> 00:23:28,400 Speaker 1: or change. It could be up to two years. And 414 00:23:28,440 --> 00:23:30,840 Speaker 1: what I think is most important is when we flush 415 00:23:30,880 --> 00:23:33,639 Speaker 1: out factors that we think are driving effects, whether it 416 00:23:33,680 --> 00:23:36,280 Speaker 1: be trading baskets that we run, or models that we run, 417 00:23:36,400 --> 00:23:41,159 Speaker 1: or even just basic correlations. Rate differentials are not positively 418 00:23:41,240 --> 00:23:44,000 Speaker 1: correlated with the dollar. They're actually moving in the opposite 419 00:23:44,000 --> 00:23:47,600 Speaker 1: direction um, and the correlations just not statistically significant. The 420 00:23:47,600 --> 00:23:49,960 Speaker 1: thing that matters the most for g T f X 421 00:23:50,640 --> 00:23:54,719 Speaker 1: is growth differentials in equities, and I think that is 422 00:23:54,840 --> 00:23:57,560 Speaker 1: intuitive to the world that we live in, which is 423 00:23:57,840 --> 00:24:03,200 Speaker 1: trade tensions, geopolitical tension, UM, growth divergence, or the perceptions 424 00:24:03,240 --> 00:24:05,679 Speaker 1: of who's kind of winning the trade wars has been 425 00:24:05,800 --> 00:24:10,000 Speaker 1: driving the dollar those major currencies since February of last year. 426 00:24:10,000 --> 00:24:11,880 Speaker 1: I gotta leave there. Mike McCormick, thank you so much. 427 00:24:11,880 --> 00:24:28,960 Speaker 1: He's a td obsecurity, a churn to the market with 428 00:24:29,040 --> 00:24:31,400 Speaker 1: dollar strengths. Right now yen gives it back to one 429 00:24:31,600 --> 00:24:36,120 Speaker 1: eight fifteen euro a weakness one twelve. We only can 430 00:24:36,160 --> 00:24:39,520 Speaker 1: speak then to someone who has not one but two 431 00:24:40,440 --> 00:24:46,760 Speaker 1: Clairvoyant essays Swank consumer activities stronger than it appears. Swank 432 00:24:47,040 --> 00:24:50,160 Speaker 1: retail sales bloom for spring. What did you see others 433 00:24:50,240 --> 00:24:53,400 Speaker 1: did not see, Diane Swank? Well, I think we knew 434 00:24:53,440 --> 00:24:55,920 Speaker 1: that retail sales would come back after the polar war, 435 00:24:56,040 --> 00:24:58,840 Speaker 1: tax government shutdown and all the malaise that we really 436 00:24:58,840 --> 00:25:01,320 Speaker 1: saw in the way ache of the December sort of 437 00:25:01,400 --> 00:25:04,560 Speaker 1: chaos in financial markets. So the good news is we've 438 00:25:04,560 --> 00:25:07,159 Speaker 1: had solid employment games. We haven't had much of an 439 00:25:07,160 --> 00:25:09,560 Speaker 1: acceleration in wages, but they're still there. But looking at 440 00:25:09,560 --> 00:25:12,120 Speaker 1: the detail and retail sales is really interesting as well, 441 00:25:12,200 --> 00:25:15,440 Speaker 1: because you've got strong gains and online sales, but help 442 00:25:15,440 --> 00:25:18,680 Speaker 1: department stores still contracting a little bit of a game 443 00:25:18,720 --> 00:25:21,800 Speaker 1: in big box discounters off setting that, but you know 444 00:25:21,880 --> 00:25:25,080 Speaker 1: that the really big trade offs going on also contraction 445 00:25:25,080 --> 00:25:27,800 Speaker 1: and gasoline store sales because gasoline prices fell a bit, 446 00:25:27,840 --> 00:25:30,359 Speaker 1: so that helped free up some discretionaries, thanking for people 447 00:25:30,400 --> 00:25:32,720 Speaker 1: to kick up their heels and got to restaurants and 448 00:25:32,760 --> 00:25:38,200 Speaker 1: barrows over during the July holiday season are doing during June. 449 00:25:38,200 --> 00:25:39,720 Speaker 1: That's right where I wanted to go. And I know 450 00:25:39,800 --> 00:25:42,280 Speaker 1: you do this at Grant Thornton with the entire team there, 451 00:25:42,640 --> 00:25:45,800 Speaker 1: which is the shock of the online To be clear, 452 00:25:46,040 --> 00:25:50,320 Speaker 1: Amazon is in these statistics this morning. Oh yeah, absolutely, 453 00:25:50,320 --> 00:25:52,600 Speaker 1: Online retailers are in here, and in fact they're up 454 00:25:52,960 --> 00:25:55,840 Speaker 1: the non store retailers, which doesn't have the complete breakdown 455 00:25:55,880 --> 00:25:59,320 Speaker 1: of online versus other stuff. We get that later that's 456 00:25:59,359 --> 00:26:02,560 Speaker 1: not seasonally ad justed, but the overall category that includes 457 00:26:02,640 --> 00:26:05,160 Speaker 1: online is up thirteen point four percent from a year ago. 458 00:26:05,320 --> 00:26:09,640 Speaker 1: That is pretty stunning numbers. People also forget that much 459 00:26:09,720 --> 00:26:14,080 Speaker 1: of the online retail hiring um, which is actually in 460 00:26:14,320 --> 00:26:16,960 Speaker 1: even in warehouses, is in the retail category. Out we're 461 00:26:17,000 --> 00:26:20,440 Speaker 1: housing transportation and John Amazon Prime Day that's going on 462 00:26:20,600 --> 00:26:22,840 Speaker 1: right now. You were buying cricket equipment, I was buying 463 00:26:23,080 --> 00:26:26,040 Speaker 1: tied pods and I was buying nineties something tied pods 464 00:26:26,080 --> 00:26:29,359 Speaker 1: for twenty dollars. You should. It's a fantastic deal. We 465 00:26:29,440 --> 00:26:31,240 Speaker 1: are not going to talk about that right now though, Diane, 466 00:26:31,440 --> 00:26:33,520 Speaker 1: because on July thirty one, there's a FED mating of 467 00:26:33,600 --> 00:26:36,560 Speaker 1: FED decision, and there's a belief that no data, nothing 468 00:26:36,680 --> 00:26:39,040 Speaker 1: between now and then will change the path of the 469 00:26:39,080 --> 00:26:41,320 Speaker 1: Federal Reserve, at least in terms of their next move 470 00:26:41,600 --> 00:26:43,960 Speaker 1: at the end of this month, even though we've had 471 00:26:44,320 --> 00:26:47,240 Speaker 1: a better CPI print, even though we've had retail sales 472 00:26:47,280 --> 00:26:52,000 Speaker 1: and nothing really to suggest this economy is weakening materially. Diane, 473 00:26:52,040 --> 00:26:55,040 Speaker 1: what is your response to that argument? Well, I think 474 00:26:55,080 --> 00:26:57,520 Speaker 1: actually the CPI is interesting because if you look at 475 00:26:57,600 --> 00:27:01,719 Speaker 1: the depart the apparel store of sales were actually were affected. Um, 476 00:27:01,840 --> 00:27:04,639 Speaker 1: the apparel was up dramatically in the CPI. That was 477 00:27:04,680 --> 00:27:06,800 Speaker 1: one of those transitory factors. It looks like they actually 478 00:27:06,840 --> 00:27:09,600 Speaker 1: contracted in June. So you start getting into the detail, 479 00:27:09,640 --> 00:27:11,560 Speaker 1: and the dirt is always in the detail. But I 480 00:27:11,640 --> 00:27:13,960 Speaker 1: do think, um, the majority of the FED is now 481 00:27:14,000 --> 00:27:17,160 Speaker 1: in the position where they've seen persistently weak inflation numbers 482 00:27:17,200 --> 00:27:19,440 Speaker 1: of p p I numbers were not as great and 483 00:27:19,600 --> 00:27:23,360 Speaker 1: they are concerned that they overshot because of that persistent 484 00:27:23,480 --> 00:27:27,320 Speaker 1: weakness in the inflation numbers in December. There's also a 485 00:27:27,400 --> 00:27:31,560 Speaker 1: concern that, um, they these headwinds that we see coming 486 00:27:31,640 --> 00:27:33,520 Speaker 1: from abroad, which I just was in the middle of 487 00:27:33,680 --> 00:27:35,480 Speaker 1: for a week, one of the most intense weeks I 488 00:27:35,520 --> 00:27:39,400 Speaker 1: can say in UM recent times, and that those headwinds 489 00:27:39,800 --> 00:27:42,600 Speaker 1: are accumulating and taking a toll on growth and need 490 00:27:42,680 --> 00:27:45,200 Speaker 1: to be offset. And I think that's where the majority 491 00:27:45,240 --> 00:27:47,560 Speaker 1: of the FED is. There is a minority it is 492 00:27:47,640 --> 00:27:49,440 Speaker 1: out there saying listen, we don't want to look like 493 00:27:49,560 --> 00:27:52,879 Speaker 1: we're being bullied by the UM President of the United 494 00:27:52,960 --> 00:27:56,000 Speaker 1: States into doing a rate cut, and we want to 495 00:27:56,040 --> 00:27:57,680 Speaker 1: stand pat and so I think we will see a 496 00:27:57,800 --> 00:27:59,280 Speaker 1: rate cut at the end of the month with a 497 00:27:59,359 --> 00:28:05,320 Speaker 1: descent to illustrate. Interesting, that's independence there is that there's 498 00:28:05,320 --> 00:28:07,280 Speaker 1: a little bit of tension though still between a feeder 499 00:28:07,359 --> 00:28:10,800 Speaker 1: reserve that on the whole is tacking up an adjustment 500 00:28:10,880 --> 00:28:13,600 Speaker 1: of rights and a market don on aggregate just looking 501 00:28:13,640 --> 00:28:16,680 Speaker 1: at the pricing of where rights are right now is 502 00:28:16,720 --> 00:28:19,200 Speaker 1: looking for a right cutting cycle. Don How do we 503 00:28:19,280 --> 00:28:21,040 Speaker 1: resolve that tension? If we do it's all in the 504 00:28:21,080 --> 00:28:24,040 Speaker 1: coming month. Well, I think that's that's gonna be really hard, 505 00:28:24,200 --> 00:28:25,800 Speaker 1: and that is that the FED is ready to do 506 00:28:25,880 --> 00:28:28,719 Speaker 1: a preemptive cut. It's not ready to promise a series 507 00:28:28,760 --> 00:28:30,840 Speaker 1: of rate cuts and this is where the dissonance has 508 00:28:30,880 --> 00:28:33,199 Speaker 1: been in equity markets and in the bond market as well. 509 00:28:33,240 --> 00:28:37,200 Speaker 1: The bond market almost expecting recession today, where equity markets 510 00:28:37,280 --> 00:28:40,920 Speaker 1: have been on the run, and that dissonance it's never resolved, 511 00:28:41,000 --> 00:28:44,880 Speaker 1: very pretty, and I have a feeling for a rocky summer. Grant. 512 00:28:45,040 --> 00:28:50,360 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 513 00:28:50,560 --> 00:28:55,840 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 514 00:28:55,920 --> 00:28:59,800 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane, but 515 00:29:00,040 --> 00:29:03,480 Speaker 1: for the podcast, you can always catch us worldwide. I'm 516 00:29:03,520 --> 00:29:04,400 Speaker 1: Bloomberg Radio.