Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moving news.
Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
Speaker 3: Let's check it with.
Speaker 1: Alison Williams, Senior Global Banks and Asset Managers analysts for
Speaker 1: Bloomberg Intelligence.
Speaker 3: Allison, you'd been busy.
Speaker 1: A lot of the big banks have been reporting, a
Speaker 1: lot of the European banks starting to report.
Speaker 3: What are some of the takeaways here? I mean they
Speaker 3: were concern in the marketplace.
Speaker 1: Just think, you know, a month ago, five weeks ago
Speaker 1: about some of the regional banks and what does that
Speaker 1: mean for the banking system. So when you listen to
Speaker 1: the Brian moynihans of the world, the Jamie Diamonds of
Speaker 1: the world, how are they characterizing this banking system?
Speaker 4: I think in general the clear message is, you know,
Speaker 4: we had some turmoil, but things have studied. We've heard
Speaker 4: that across the banks. Of course, of course, you know
Speaker 4: for a republic, is is the one out there that
Speaker 4: people keep watching, a situation that has not really resolved itself.
Speaker 4: But in general, we also have seen you know, sort
Speaker 4: of you know, companies that gained deposits. We see the
Speaker 4: companies that are the safe havens. So in the US
Speaker 4: that was companies like JP Morgan at the stream, also
Speaker 4: Bank America, you know, Wells and City to a lesser extent.
Speaker 4: In Europe we saw ubs as the safe haven crowd.
Speaker 4: Sweet was the big one that we got this week
Speaker 4: where we saw i would say, not as bad as feared,
Speaker 4: so significant outflows, but not as bad as the prior quarter.
Speaker 5: Of course, we.
Speaker 4: Don't know what the trend was, and the sense is
Speaker 4: that the day, you know, the daily outflows were significant
Speaker 4: and that's why regulators had to step in. Deutsche Bank
Speaker 4: was one that lost deposits. Their stock as you call,
Speaker 4: came under pressure sort of in the late March turmoil.
Speaker 4: But they think said things have studied. So things have
Speaker 4: generally studied. But as we're moving forward, the question is lending.
Speaker 4: What kind of lending are we going to see? Pullback?
Speaker 4: You brought up you know, Jamie Dimond and Brian moynihan
Speaker 4: who both said, you know, this is not a credit crunch.
Speaker 4: We are going to see pockets of a pullback, but
Speaker 4: I think that's really to come in the weeks ahead,
Speaker 4: and then you know, the cost of those deposits are
Speaker 4: going to continue to rise. So we're not in a
Speaker 4: deposit plight, We're not in an extreme environment. But deposits
Speaker 4: are going to continue to go into higher yielding products
Speaker 4: as they should. They're going to go into money market
Speaker 4: funds as they should, and so it's going to cost.
Speaker 4: It's going to eat into the bank's interest margins. So
Speaker 4: still very strong revenue, but at the margin probably have
Speaker 4: seen the peak.
Speaker 2: Do you think that the turmoil we've seen around First
Speaker 2: Republic and the you know, free fall in the share
Speaker 2: price for a couple of days this week is going
Speaker 2: to turn out having led to more deposit outflows? I mean,
Speaker 2: do do depositors watch the markets as closely as we
Speaker 2: do and and decide to run again?
Speaker 4: I think that, you know, First Republic is something that
Speaker 4: we're all closely watching, But it's not the days of
Speaker 4: March where there was a lot of headlines. There were
Speaker 4: a lot of social media headlines, et cetera, and it
Speaker 4: was a sort of a broader problem. I think now
Speaker 4: it's much more an isolated problem where first republic, you know,
Speaker 4: it has to figure out a path forward. And now
Speaker 4: there's a lot more interested parties because you had all
Speaker 4: these banks that you put those deposits in to try to,
Speaker 4: you know, send a signal of confidence to the system,
Speaker 4: and now they're you know, they're sort of tied into
Speaker 4: the situation a little bit.
Speaker 3: So I think that's.
Speaker 4: Something we're watching. But it has become a much more
Speaker 4: bank specific situation. As we know, we had a few
Speaker 4: banks that were outliers at the extreme. They still caused
Speaker 4: broad worries, but those broad worries seem to have studied
Speaker 4: up hears. But I think what it did happen, right
Speaker 4: is I did think it woke up the conversation. You
Speaker 4: know why, Oh, suddenly I can make money on my savings,
Speaker 4: Like that hasn't happened in like, let's say, a decade exactly,
Speaker 4: And so I think that people realize, suddenly, oh I
Speaker 4: can get four or five percent. I might have to
Speaker 4: pay some fees of money markets or you know, what
Speaker 4: have you, or shop around a little bit, but there's
Speaker 4: actually yield out there.
Speaker 1: Hey, Alison, our good friends Alizard reported some results a
Speaker 1: little bit weaker than expected this and they're announcing that
Speaker 1: they're laying off ten percent of their workforce on weak
Speaker 1: advisory outlook here, talk to us about that side of
Speaker 1: the business. What do you what are you seeing when
Speaker 1: you look across the banks that you cover in terms
Speaker 1: of kind.
Speaker 3: Of capital markets advisory, some.
Speaker 1: Of that stuff that's a little bit more volatile, I guess.
Speaker 4: So I think, unfortunately, Paul, we're that business remains weak.
Speaker 4: We're back to actually levels that's sort of the onset
Speaker 4: of the pandemic to put it into perspective to how
Speaker 4: weak things are. And the disappointment really is despite this
Speaker 4: you know, huge rally we've had since you know, granted
Speaker 4: it's a rally from the bottom, but since the fall,
Speaker 4: it hasn't translated into more deals. So that just tells
Speaker 4: you that the expectations between that, you know, the potential
Speaker 4: investors or buyers in the market and people that want
Speaker 4: to come to market, there's still a gap. What we've
Speaker 4: heard from most of the managements out there is that
Speaker 4: they expect to pick up in the second half or
Speaker 4: twenty twenty four. Thozart is a little bit more bearish.
Speaker 4: I would point to the fact that their M and
Speaker 4: A business tends to be stronger in Europe, so there
Speaker 4: might be a little bit of a regional impact. But
Speaker 4: we are seeing cuts across these banks. Deutsche Bank, for example,
Speaker 4: talked about cutting some of their senior executives. Not forward facing,
Speaker 4: but there will be some cuts there. And you know,
Speaker 4: we've seen articles here and there about different cuts made.
Speaker 5: And so.
Speaker 4: To the extent that FED policy does not turn to cuts,
Speaker 4: because I think that's the outlook that a lot of
Speaker 4: these more bullish calls are predicated on. You know, we
Speaker 4: could continue to see some more right sizing through the.
Speaker 1: End of the year.
Speaker 3: All Right, Alison, thank you very much for joining us.
Speaker 3: Appreciate the recap there.
Speaker 1: Allison Williams senior Global Banks and Asset Managers analysts for
Speaker 1: Bloomberg Intelligence.
Speaker 3: And as if that's not enough, she's also.
Speaker 1: Co director of Research for the Americas for Bloomberg Intelligence,
Speaker 1: so she's got like one hundred and fifty people reporting
Speaker 1: to her.
Speaker 3: I mean, it's crazy.
Speaker 2: I'm curious, busy. I'm curious to know, because you had
Speaker 2: such a long career on Wall Street, what do you
Speaker 2: make of the term right sizing? How does that strike you?
Speaker 3: No, it's just we know it the way we think
Speaker 3: about it.
Speaker 1: It is on Wall Street, we get overpaid, but we
Speaker 1: have below market job security.
Speaker 3: That's just that's the trade off.
Speaker 1: They overpay us asymmetrically, but we know our jobs are
Speaker 1: very tenuous at best.
Speaker 5: You're listening to the team Ken's are Live program Bloomberg
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com,
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Speaker 3: We're still a little tech recap here. Why not?
Speaker 1: There's always lots of talk about Dan Ives, senior equity
Speaker 1: analyst at web Bush Securities, joins us live here in
Speaker 1: our Bloomberg Interactive Broker studio with yet again a questionable
Speaker 1: outfit on a rag ran a senior tech anaists and
Speaker 1: Bloomberg Intelligence. We get him one week a month, so
Speaker 1: we get him here as often as we can. Otherwise
Speaker 1: he's in Chicago doing god knows what. All Right, Dan,
Speaker 1: let's start with you here.
Speaker 2: Well, I don't think you can call out anybody's outfit today.
Speaker 3: You don't like the flannel?
Speaker 2: I love it, but I'm not a great I mean,
Speaker 2: Paul is wearing for our listeners a red and black
Speaker 2: check lumberjack flannel. Yes, I've got a flannel on.
Speaker 3: Character for me, so yes, I get.
Speaker 2: But at least at least Dan is wearing a blazer, Yes,
Speaker 2: albeit lilac checked blazer to go.
Speaker 1: With the powder blue pants. Yes, so Dan, Amazon, what's
Speaker 1: your take on kind of what we heard out of
Speaker 1: those guys last night.
Speaker 6: I think it's tailed two cities. I mean, on one hand,
Speaker 6: better than feared in terms of what we saw in
Speaker 6: cloud in the quarter and e commerce really starting to
Speaker 6: now recover bit and the cost cuttings there, but with
Speaker 6: the guidance for next quarter was soft, and I think
Speaker 6: ultimately just speaks to that company Crosstown the two or
Speaker 6: six area, coulde they're gaining share. Microsoft is gaining share
Speaker 6: from Amazon in the AWS, and I think that's a
Speaker 6: narrative that continues to play out. But overall, this is
Speaker 6: better than feared tech earnings. I think investors came in
Speaker 6: white knuckles into the week, they go in drinking cappuccino.
Speaker 2: Yeah, I will point out, as I said earlier, Yes,
Speaker 2: Amazon shares are down today, they're off two point eight percent,
Speaker 2: but they were up four point six percent yesterday and
Speaker 2: they're up twenty six percent year to date. I mean,
Speaker 2: they're doing very well. In fact, they're supporting this market.
Speaker 2: Right They're one of the companies on Ragrana that's really
Speaker 2: boosted this market, one of a handful that's boosted this
Speaker 2: market this year. So they're still doing pretty well, and
Speaker 2: I feel like they might be underpromising so that they
Speaker 2: can over deliver on the one hand. On the other hand,
Speaker 2: they're gonna cut margins to fight Microsoft across town.
Speaker 7: See from our side, the other thing you want to
Speaker 7: think about today the growth rate is going down, then
Speaker 7: margin expectations at least in the near term have to
Speaker 7: go down as well, because AWS supports majority of the
Speaker 7: margins of Amazon. But think about it this way, and again,
Speaker 7: this is where I argue with you know, most of
Speaker 7: the bears is I agree, the next six months are
Speaker 7: going to be tough for everybody, But think about the
Speaker 7: revival when it comes back. It comes back with the
Speaker 7: margin structure that's far superior than when we entered the
Speaker 7: you know, the boom. I would say, imagine what's going
Speaker 7: to happen to the margins at that point, and the
Speaker 7: margins of the overall company, which is Amazon is just
Speaker 7: going to be phenomenal once we get the recovery.
Speaker 1: So Dan, you know Andy Jase uh is the you
Speaker 1: know now the new president and see it EO. Is
Speaker 1: he as committed to Jeff Bezos's plan to like, I'll
Speaker 1: spend whatever I need to spend to get market share
Speaker 1: and grow a business that I think is in line.
Speaker 3: Is that still the mantra for Amazon or no? No?
Speaker 6: I mean, look, Bezos was basically spending money like in
Speaker 6: nineteen eighty is rock star right? And Jase basically inherited
Speaker 6: that has had a cut costs, ripped a band aid
Speaker 6: off and that's why he inherited a lot of this.
Speaker 6: But look, ultimately they need to aggressively spend AI need
Speaker 6: to focus on next gen, especially in this arms where
Speaker 6: it's going on in tech. But at the same time
Speaker 6: cut costs you're starting to see it play out. But
Speaker 6: overall in tech, I mean, I'll call it him as
Speaker 6: a Goldilocks week when you combine Microsoft, Meta Alphabet and Amazon.
Speaker 2: I actually heard a story about Plexico Burus buying a
Speaker 2: Lamborghini today and without having ever test driven one, and
Speaker 2: then realizing after he got into the four hundred thousand
Speaker 2: dollars car that he doesn't really fit. And this came
Speaker 2: from where I can't reveal my sources. Okay, friend of
Speaker 2: Plexico's who now works for Bloomberg Radio.
Speaker 1: I was wondering why we were talking to our tech
Speaker 1: annals about Plexico errors.
Speaker 2: No, because he said spending money like a nineteen eighty star.
Speaker 3: I got ya, and with it reminded me and the
Speaker 3: NFL draft and so it all. So AI is relatively
Speaker 3: new term for me.
Speaker 1: Tell me what it means for the tech industry, you know,
Speaker 1: and who.
Speaker 3: The players are? How do I think about it?
Speaker 7: So, at least in my view right now, it's a
Speaker 7: lot of software development or software that's there for people
Speaker 7: to build applications on. To me, the two biggest things
Speaker 7: and I'm not talking about hardware world because the video
Speaker 7: is a huge you know, winner in that case, But
Speaker 7: the two real big areas we're going to see a
Speaker 7: lot more money go into is cloud services we're on
Speaker 7: which you will develop these applications. And the second is
Speaker 7: this army off software developers that are you know, part
Speaker 7: of IBM Global Services or Accenture or Tata and all
Speaker 7: those companies that are going to be deployed by companies
Speaker 7: to create these enterprise applications.
Speaker 1: All right, So maybe is it too late for me,
Speaker 1: Matt to retrain as a software engineer if you think.
Speaker 2: It is too late, because I've considered it myself a
Speaker 2: number of different times. Have you seen the salaries that
Speaker 2: we're paying programmers at this company?
Speaker 3: And they don't even and they dress like they're you know,
Speaker 3: paupers over there.
Speaker 2: They don't have to, I don't. They don't please anybody.
Speaker 3: No, theo those and make money. Yes, I know, and
Speaker 3: they're the best in the business. Dan, what's some of
Speaker 3: your top what's your top pick right here?
Speaker 1: What are you talking to investors as we come out
Speaker 1: of this little earnings period here?
Speaker 6: Yeah, I look, Apple continues to be a top pic
Speaker 6: and I think Thursday night that will be the drum
Speaker 6: roll with Cooper Tino coming out with what I believe
Speaker 6: strong iPhone numbers next week Thursday.
Speaker 3: Next week we have Apple numbers.
Speaker 6: Thursday, and that's the drummo because look is we saw
Speaker 6: it from Microsoft and Alphabet that's one half in terms
Speaker 6: of what we see on cloud, Microsoft best cloud Play.
Speaker 6: Apple can just be overall our top pick. But then
Speaker 6: I look like names like Power out doing cybersecurity that
Speaker 6: can turn short of what I view is almost to try,
Speaker 6: you know, triangulate way to play some of the key
Speaker 6: tech trends right here. But it all starts in Cooper,
Speaker 6: Tino and Redmond.
Speaker 1: When you when you travel around talking to institution investors today,
Speaker 1: I mean, you had it. I'm gonna call it easy job.
Speaker 1: You an on an easy job. I could have done
Speaker 1: your job over the last decade fifteen years. Now you've
Speaker 1: got a little bit of headwind out there for the
Speaker 1: tech story. What's the pushback you get from investors on
Speaker 1: tech these days?
Speaker 6: But it's almost more enjoyable because now the New York
Speaker 6: City cab drivers still barish on tech. A lot of
Speaker 6: institutional investors hate the rally, But ultimately it's a stock
Speaker 6: pickers market. Is on our talking about it is identifying
Speaker 6: the winners, doing the work and trying to figure out
Speaker 6: the hype from the actual you know where the spending is.
Speaker 6: And that's why I think that's been the best this
Speaker 6: last three to four month. It's a stock pickers market,
Speaker 6: and I think that's the key here. No longer fed
Speaker 6: driven Ppi y Noko every Friday, that's the key.
Speaker 3: Interesting.
Speaker 2: I mean, Anaak how much further can these companies run?
Speaker 2: I mean they're already they've done so well. When you
Speaker 2: look at the gains we've seen year to date, they're
Speaker 2: all basically Apple, Microsoft, and Video Meta and Amazon.
Speaker 7: I thought they would all cut down massively last year.
Speaker 2: Okay, I was. I was not. I was ignoring twenty
Speaker 2: twenty two off the bottoms.
Speaker 7: I would not ignore that, because you know what, come
Speaker 7: next year, we're going to see a very different story.
Speaker 2: Quarterly sales for web services. Amazon kicked off twenty twenty
Speaker 2: two with a gain of forty percent year over year.
Speaker 2: Now we're looking at sixteen percent and they're saying it's
Speaker 2: going to fall the same.
Speaker 7: I would say, go back and see what happened in
Speaker 7: twenty twenty three. Quarters of four quarters in a row,
Speaker 7: Amazon's growth trade declined massively awsh The year after that,
Speaker 7: it improved by ten percentage points in some quarters more
Speaker 7: than that. So it's it's a matter of usage. It's
Speaker 7: not as if things cried up. It's a paper use model.
Speaker 7: People using more, it's gonna go up. Economic activity goes up.
Speaker 2: It goes up.
Speaker 7: People want to save more money, then move more workloads.
Speaker 3: It adds up.
Speaker 7: It's a compounding business.
Speaker 2: You know, it's also cool. Dan hon Rog was telling
Speaker 2: us yesterday, but there's a green component to businesses switching
Speaker 2: to the cloud, right, because if you have all your
Speaker 2: servers on site wherever you are, energy could cost a
Speaker 2: lot and it could be very pollutive. However, a lot
Speaker 2: of these businesses, like on Rog was telling us, Amazon
Speaker 2: or maybe Microsoft, have put their server farms in places
Speaker 2: where energy is cleaner and cheaper, so it really makes
Speaker 2: a difference to their big carbon footprint.
Speaker 6: Well, it's a big part of what you see that
Speaker 6: Microsoft's talked about where Apple talks about. And then at
Speaker 6: the same time, like when you look at AI, what's
Speaker 6: really happening now from processing power perspective, It's going to
Speaker 6: be a golden age in terms of AI. This is
Speaker 6: not a hype trend and I've viewed as the next
Speaker 6: leg to what I've view is just going to be
Speaker 6: probably one of the biggest trends between in the last
Speaker 6: twenty five years.
Speaker 1: Hey, Dan, can't let you leave here without and the
Speaker 1: update of Tesla call what are you seeing out of
Speaker 1: our good friends?
Speaker 6: The cyber truck coming, Yeah, so cyber Truck's coming for you.
Speaker 6: And around Halloween Look, I think the biggest thing is
Speaker 6: just the price cuts continue sort of weigh on the
Speaker 6: stock in terms of margins. You see now a lot
Speaker 6: of you know, throwing in the towel. I view this
Speaker 6: is sort of over sold in my opinion, because I
Speaker 6: think the demand will start to tick up, specifically in China,
Speaker 6: price cuts will start to stabilize. And then again going
Speaker 6: the second half with cyber truck, I think that's where
Speaker 6: I must puts the red cape back on and you
Speaker 6: start to see sentiment improve.
Speaker 3: The cyber truck.
Speaker 2: I'm excited for the cyber truck. It looks terrible. It
Speaker 2: looks awesome. Did you not like mad Max?
Speaker 3: No, it looks like.
Speaker 2: A giant DeLorean. I love it.
Speaker 3: I like the Ford f one fifty.
Speaker 1: Look all right, that's our tech roundtable for the day again.
Speaker 1: I've seen your equity antis, what Bush Securities and on
Speaker 1: Ourgrana he's a senior technists with Bloomberg Intelligence. Kind of
Speaker 1: round table here, kind of get the latest on tech
Speaker 1: space again. Amazon reporting numbers, keep it a little bit.
Speaker 1: The numbers were good, big big operating profit.
Speaker 2: But this market has been dominated by tech.
Speaker 3: I know totally, yep, absolutely.
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Speaker 3: Let's get a kind of a wider view of what's
Speaker 3: going on here. We're going to bring in the.
Speaker 1: Sylvia Drablonski, chief investment officer and co founder of Defiance
Speaker 1: ATFS and Herman Chan. He is the regional bank analyst
Speaker 1: for Bloomberg Intelligence, kind of put this a little bit
Speaker 1: into context. So, Sylviet, it's not every day that we
Speaker 1: see this type of struggle for a financial institution. Yes,
Speaker 1: it's not a big money center bank like we saw
Speaker 1: back in two thousand and eight, but still, what's your
Speaker 1: view when you start seeing some of these regional banks
Speaker 1: really face some stress here?
Speaker 8: Yeah, iked morning. Well, interestingly enough, it actually feels like
Speaker 8: it is a little more common. It's not every day,
Speaker 8: but it's happened a couple of days this year. So
Speaker 8: I think what it does is it puts some strain
Speaker 8: on you know, the confidence of investors essentially about the
Speaker 8: regional banking system. And you know, there's that becomes problematic,
Speaker 8: right because if all of the funds are pulled from
Speaker 8: regional banks, you know, we can assume that they go elsewhere,
Speaker 8: so you know, find the money stays in the system.
Speaker 8: But you do have this, you know, major part of
Speaker 8: the financial sector on shaky ground, and I think if
Speaker 8: that happens, you know, these are banks that classically lead
Speaker 8: to to main street and that's the major part of
Speaker 8: our RGVP and our economy. So there is some fear
Speaker 8: that these things that they keep piling up, you know,
Speaker 8: would be inherently pretty bad for the for the banking
Speaker 8: banking system, and it would make investors worry about this
Speaker 8: ability of larger banks eventually.
Speaker 2: Uh yeah, all we see those fears spreading across the market,
Speaker 2: until now it looks like it's only you know, it's
Speaker 2: isolated to so far. SVB, Signature Bank and First Public
Speaker 2: is still going concern But Herman chan, how much longer?
Speaker 2: I mean, what do they have in terms of deposits
Speaker 2: and what do they have in terms of assets? Can
Speaker 2: customers get all their money out today?
Speaker 9: The First Republic's to open for business right now today.
Speaker 9: So if you're a depositor, you can easily just go
Speaker 9: to the ATM or head up your business banker or
Speaker 9: personal banker and exit the balance.
Speaker 2: Che ATMs have limits. You can't pull out more than
Speaker 2: like a thousand dollars. So if you have forty sending
Speaker 2: at First Republic you're gonna need.
Speaker 9: You can go visit one of their beautiful offices and
Speaker 9: eat some of their chocolate chip cookies and talk to
Speaker 9: a personal banker and exit your withdrawal funds as you see.
Speaker 1: Please, Sylvia, you know, how concerned are you about in
Speaker 1: the broader economy if there is some more stress to
Speaker 1: this banking system that maybe not a credit crunch, but certainly,
Speaker 1: you know, maybe tightening of credit out there such that
Speaker 1: it might impact the economy.
Speaker 3: Are you factoring that into your outlook?
Speaker 8: You know, I think it sort of depends to tough
Speaker 8: question to answer, because I think it depends a lot
Speaker 8: on what the Fed plans to do. I think, so
Speaker 8: if you know, we'll certainly have credit tightening, and we'll
Speaker 8: certainly have less liquidity in the system, and then on
Speaker 8: top of that, you'll have you know, sort of even
Speaker 8: less liquidity in the system because investors will will kind
Speaker 8: of pull out in the market, and you know, it
Speaker 8: gets worse. Thinks that, okay, perhaps there's some systemic risk.
Speaker 8: I don't think there is a you know, broad based
Speaker 8: risk to the entire banking system. As you said, these
Speaker 8: are a handful of players. But nevertheless, you know, these
Speaker 8: things happen haven't happened in the US since two thousand
Speaker 8: and eight, and you know, they do instill some fear.
Speaker 8: So I think it's the FED. You know, maybe we
Speaker 8: get maybe that's twenty five BIPs is just a given,
Speaker 8: particularly with shase inflation data and whatnot. But I think,
Speaker 8: you know, if the side kind of keeps going after that,
Speaker 8: and you have this liquidity and this credit tightening the system,
Speaker 8: then the market is directionally at risk for perhaps a
Speaker 8: recession or a harder landing. I think if that doesn't
Speaker 8: happen in the sense sort of pauses after this and
Speaker 8: lets all of this kind of feed in and and
Speaker 8: you know, bring inflation down and and kind of let
Speaker 8: the market reset a little bit for a few months.
Speaker 8: But then I think, well, we'll kind of be okay.
Speaker 8: And whether this you know, corporators are certainly holding up,
Speaker 8: and if if things don't sort of get worse. I
Speaker 8: think that can can change the other way. But again
Speaker 8: a tin side could could pull back.
Speaker 2: Any kind of right.
Speaker 1: Hermann just explained to us how this mechanically might work
Speaker 1: if the FDI is it the FDI see that comes
Speaker 1: in and intervenes here, and how does that work?
Speaker 9: So the f I see what would typically likes to
Speaker 9: close any failed bank on a Friday after business hours
Speaker 9: to come in too, and then hopefully line up a
Speaker 9: buyer by the weekend, and so the buyer would would
Speaker 9: then operate First Republic or any other failed bank uh
Speaker 9: as as their own entities, so there's no disruption in service,
Speaker 9: and then any any customers of that bank could just
Speaker 9: transact as normal, so there's no disruption. So that's typically
Speaker 9: how things work, and that's why the FDIC likes to
Speaker 9: do things on a Friday afternoon.
Speaker 2: Yeah, exactly, that's a good point. We get these announcements
Speaker 2: often on the weekend or after the market closes on Friday.
Speaker 2: In terms of deposits above and beyond the two hundred
Speaker 2: and fifty thousand dollars that's insured, do they break that
Speaker 2: out at First Republic? Have they said, okay, everybody who
Speaker 2: had more than two hundred and fifty. They've reduced that
Speaker 2: to two fifty.
Speaker 9: Right, So they said that in the fourth quarter it
Speaker 9: was like sixty seven percent, and a lot of that
Speaker 9: has now gone. And really there's only a few billion
Speaker 9: dollars outside of the thirty billion from the collectively from
Speaker 9: the largest US banking institutions that tried to prop up
Speaker 9: First Republic. So most of the uninsured deposits have already eccided,
Speaker 9: and any left probably and after this turmoil over the
Speaker 9: past week, probably have thought twice about keeping their their
Speaker 9: money at First Republic as one.
Speaker 2: All right, Herman Chan is our Bloomberg intelligence analyst for
Speaker 2: regional banks. I'm sure you're one it on television right
Speaker 2: now or some other meeting. You should wear a cape
Speaker 2: when you walk around this building. Sylvia. I'm sorry that
Speaker 2: we didn't get to talk about more about quantum because
Speaker 2: this ETF that you run qt u M it's got
Speaker 2: to be so hot right now with all the interests
Speaker 2: in AI and tech and banking has distracted us. But
Speaker 2: just tell us briefly about you know, the flows and
Speaker 2: the interest in qt um.
Speaker 8: Yeah, so quantum is just sort of taking off, as
Speaker 8: you can imagine and the tech earnings have particularly propelled that.
Speaker 8: You know, we hold all of these needs in our
Speaker 8: baskets that are benefiting from you know, cut and cost,
Speaker 8: but also their future investments in AI for the Microsoft, Googles,
Speaker 8: Amazons and whatnot. But yeah, I mean AI is going
Speaker 8: to change the way we live. We've talked about it
Speaker 8: a lot. You have AI applications in healthcare, you know,
Speaker 8: reta out thinking about Amazon, you know, if they lose
Speaker 8: on cloud, well maybe that you may also like this
Speaker 8: thing when you're shopping comes from AI in to blues
Speaker 8: speature revenues, you know, manufacturing AI solutions, forecast demand and
Speaker 8: things like that. So it's just going to change the
Speaker 8: way we live and work. And I think that a
Speaker 8: lot of the companies at the forefront of this are
Speaker 8: really you know, performing this year and I was performing
Speaker 8: both and howzat on smt Hie.
Speaker 1: Soyllia, thank you so much for joining us, and thank
Speaker 1: you for being flexible here as we talk about the
Speaker 1: First Republic News as well as so Vijablonski, chief investment
Speaker 1: officer with Defiance E TFS.
Speaker 5: You're listening to the team Ken's are Live program Bloomberg
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com,
Speaker 5: the iHeartRadio app, and the Bloomberg Business app, or listen
Speaker 5: on demand wherever you get your podcast.
Speaker 3: Lose it just across the tape here.
Speaker 1: At the top of the hour, the Federal Reserve Bank
Speaker 1: Supervision chief called for a sweeping re evaluation of how
Speaker 1: the institution oversees US financial firms following the failure of
Speaker 1: Silicon Value Bank Gas some detailed reporting on that. Steve Matthews,
Speaker 1: us economy reporter with Bloomberg News, and Jenny Sirring, she's
Speaker 1: a financi reporter with the Bloomberg News who joins us
Speaker 1: here in our Bloomberg Interactive Broker studio.
Speaker 3: Jenny, what did What's your takeaway here?
Speaker 1: I mean, it looks like they're trying to spread the
Speaker 1: blame around a little bit on the bank itself and that,
Speaker 1: but also on regulatory officials themselves and maybe been I
Speaker 1: think the term is foot dragging.
Speaker 10: Yeah, No, I think this is a little bit more
Speaker 10: of the finger pointing that we've been seeing for a
Speaker 10: lot of the last few weeks. So this is I
Speaker 10: think you're right, the Fed is kind of putting a
Speaker 10: lot of the bit blame squarely on these managers. I
Speaker 10: do think they've acknowledged a little bit of their their laxness.
Speaker 10: But yeah, I mean, I think one of the more
Speaker 10: interesting takeaways that I saw was that they were calling
Speaker 10: their interest rate risk modeling, you know, deficient, and that
Speaker 10: was as far back as November at least, and so
Speaker 10: obviously this was something that was on the radar of regulators.
Speaker 10: But did they move quickly enough and act you know, anticipation.
Speaker 2: Yeah, I mean, Steve Matthews, isn't this a case of
Speaker 2: toothlessness at the regulator? What became really clear to me
Speaker 2: watching the congressional testimony over a couple of days was
Speaker 2: that the FED knew this was coming. You know, the
Speaker 2: regulators knew this was happening for a year and did
Speaker 2: essentially nothing about it. As John Tester said, nobody dropped
Speaker 2: the hammer.
Speaker 11: That is correct.
Speaker 12: And you know, if you read the details of the report,
Speaker 12: and if you're interested in financial regulation, it's definitely worth reading.
Speaker 12: It's one hundred page report.
Speaker 5: But the.
Speaker 12: When there's a problem with the bank, the regulators write
Speaker 12: up what an MR or MR I a matter requiring
Speaker 12: attention and matter requiring immediate attention and send it to
Speaker 12: the bank, and there were thirty one areas thirty one
Speaker 12: of these corrections where there were problems with the bank,
Speaker 12: and they you know, obviously they left them open and
Speaker 12: you know, as in their annual exam in and uh,
Speaker 12: you know, in the middle of last year, they found
Speaker 12: management and controls were deficient and they were considering, you know,
Speaker 12: putting together an enforcement action that would require the bank
Speaker 12: to do more, and they were the regulators were mulling it.
Speaker 12: But you know, the bank failed in the in the
Speaker 12: year in which they were considering it. So it's like
Speaker 12: they clearly there was a whole problem with the culture
Speaker 12: of supervision. And the report kind of lays that out
Speaker 12: and says that under the former vice chairman, uh, you know,
Speaker 12: they pushed efficiency, they pushed you know, a light regulatory
Speaker 12: approach and and uh and that kind of you know,
Speaker 12: created a culture of what of supervisors backing off.
Speaker 2: You know, Jenny, What's interesting is that Dodd Frank had
Speaker 2: created some really tough supervisory regulations that then later were
Speaker 2: loosened a little bit by Congress I think twenty eighteen, right,
Speaker 2: and a lot of people, Elizabeth Warren and others have
Speaker 2: grafted onto this as maybe the big problem. Right, it
Speaker 2: was during the Trump era, so certainly it must have
Speaker 2: been problematic. We talked to Barney Frank on this show,
Speaker 2: we did, and he said, that has nothing to do
Speaker 2: with it, So what's the truth?
Speaker 10: I mean, yeah, I think he wrote.
Speaker 2: That regulation right, He wasn't worried about it, So why
Speaker 2: is anyone else?
Speaker 10: Yeah, I mean, I think we're always going to see that.
Speaker 10: The same fingerpointing that we've seen between you know, the
Speaker 10: banks and the regulators, we'll probably see that between Democrats
Speaker 10: and Republicans. And I mean, certainly there was a lot
Speaker 10: of rolling back of regulation under Trump. But then I
Speaker 10: think even just days before this all happened, you had
Speaker 10: Michael Barr out there saying that, you know, you could
Speaker 10: take a light touch approach to regional banking regulation. So
Speaker 10: I don't think either side is completely blameless. And you know,
Speaker 10: probably we could point to a lot of different examples
Speaker 10: that you know, ultimately led to what happened in that
Speaker 10: faithful day.
Speaker 1: In mind, Steve, this just feels like a process that's
Speaker 1: just going to take a long time to implement. Meanwhile,
Speaker 1: you know, we still it's become clear that some of
Speaker 1: these small regional banks they can do a lot of
Speaker 1: damage to just market confidence. Here, what's the sense of
Speaker 1: how any increased regulation may play out in terms of timing,
Speaker 1: It could.
Speaker 12: Take several years, just because the regulatory process is really
Speaker 12: slow in terms of like creating the rules and then
Speaker 12: having you know, a comment period and then you know,
Speaker 12: Congress can can weigh in, and it's going to take
Speaker 12: you know, a couple of years before you get actually
Speaker 12: new rules in place. I think I think the important
Speaker 12: thing is that Michael Barr is recognizing that there's a
Speaker 12: problem with the culture of supervisors that they are you know,
Speaker 12: not empowered to take action, that they feel like they're constrained,
Speaker 12: and the report kind of lays that out. Before they
Speaker 12: could even like you know, issue any kind of order
Speaker 12: at all or any kind of memo, they had to
Speaker 12: like consult at the San Francisco Fed with with the
Speaker 12: FED staff in Washington. It's just kind of a slow
Speaker 12: bureaucratic process. And they can definitely do a better job
Speaker 12: with supervision just by you know, changing the culture without
Speaker 12: changing any laws or rules at all.
Speaker 2: Was there any criticism of the San Francisco Fed of
Speaker 2: Mary Daily. I mean, during the testimony, Republicans you know,
Speaker 2: made comments about how she may have been too worried,
Speaker 2: too concerned with, you know, the vibe in San Francisco,
Speaker 2: the mood of employees, although that's part of her job
Speaker 2: as well. But did she get a mention in the
Speaker 2: one hundred and two pages here, Jenny.
Speaker 10: Not that I've seen yet, although I am still making
Speaker 10: my way through all one hundred and two pages.
Speaker 3: That's fair, that's fair.
Speaker 2: It's a long report, you know. I wonder if any
Speaker 2: of this will have fallout on First Republic. You know,
Speaker 2: even if it takes years Steve, as you said, to
Speaker 2: work through regulatory changes in legislation, do they feel the
Speaker 2: need to be more hands on, to be more proactive
Speaker 2: in a bank that could also see some real deposit
Speaker 2: flight and has also had some serious interest rate risk.
Speaker 12: Well, they definitely feel the need to be more proactive.
Speaker 12: I mean, exactly how it will play out with First
Speaker 12: Republic is an interesting question because, on the one hand,
Speaker 12: if you're going to have a get tough approach, then
Speaker 12: you know that would not necessarily be good news for
Speaker 12: First Republics shareholders or depositors. On the other hand, if
Speaker 12: you're worried about it's you know, systemic importance, you would
Speaker 12: want to make sure that it doesn't cause additional harm
Speaker 12: to the entire banking system. So you know, they're there
Speaker 12: are definitely kind of cross currents there.
Speaker 1: Hey, Jenny, what what are we hearing from the regional
Speaker 1: banks themselves? Are they are they prepared heard for increased regulation?
Speaker 1: Are they fighting back? What are we hearing from them?
Speaker 10: I think we've honestly probably heard more from the biggest
Speaker 10: banks wanting to draw that distinction that you know, we
Speaker 10: were fine, we were able to step in and help
Speaker 10: First Republic, for example. We haven't heard as much of
Speaker 10: the regional banks saying like, no, no, you know, still
Speaker 10: leave us alone. I think, you know, I think everybody
Speaker 10: kind of realizes the state that things are in and
Speaker 10: how fragile things are still, even though you know, we
Speaker 10: just got through earning season and things felt a little
Speaker 10: bit better. But I think mostly we've just heard from
Speaker 10: the biggest US banks saying we've already been subject to
Speaker 10: all number of things that prevented us from being in
Speaker 10: this situation and allowed us actually to you know, step
Speaker 10: in and save the day in some cases. So I
Speaker 10: think that's that's mostly what we've been hearing so far.
Speaker 2: Was there any mention of the you know, rapid rise
Speaker 2: in rates by Jerome Powell and co. I mean, I
Speaker 2: I guess we know that there are reasons for that, right,
Speaker 2: they had to slow inflation, and a lot of people
Speaker 2: think they were late to the party even there. But
Speaker 2: you know, still five hundred basis points in a year,
Speaker 2: Steve Matthews, is a lot for the economy to handle.
Speaker 2: You know, you can see why it would have put
Speaker 2: people in a difficult position. Do they talk about it,
Speaker 2: do they touch on it?
Speaker 12: That is not really touched on in that context. I
Speaker 12: mean a lot of people outside the Fed say, well,
Speaker 12: if you raise rates, you know, the most aggressively you
Speaker 12: have in forty years, there's a good chance you're going
Speaker 12: to end up with some accidents.
Speaker 11: But you know, what the.
Speaker 12: Report says is basically that these banks were not really
Speaker 12: prepared for This bank in particular is not prepared for
Speaker 12: the interest rate rises, and that the supervisors were not
Speaker 12: really forcing this bank or banks more generally, to model
Speaker 12: for this kind of thing. So you know, there was
Speaker 12: there was, you know, an absence of risk management, and
Speaker 12: you know that this wasn't the base case, this was
Speaker 12: what people were expecting, but they should have been prepared for,
Speaker 12: you know, a worst case scenario without you know, going
Speaker 12: out of business.
Speaker 3: Ay, Jenny.
Speaker 1: Another troubled regional bank, New York Community Bank CRUP, bought
Speaker 1: Signature Bank, So I should rephrase that New York Community
Speaker 1: Bank bought a challenge Signature Bank. How's that working out?
Speaker 10: You know, it's actually working out pretty well for them today.
Speaker 10: I think they're up quite a bit. They reported earnings
Speaker 10: this morning. It was sort of interesting because, you know,
Speaker 10: when they bought this bank and combined to the two companies,
Speaker 10: they had about ninety three billion in deposits, and they've
Speaker 10: seen that slip down to about eighty two billion or
Speaker 10: so as of last week, and they actually said a
Speaker 10: lot of that was expected and that going forward it
Speaker 10: should stabilize pretty nicely. And so, you know, it seems
Speaker 10: like even the ones that were hit the hardest, and
Speaker 10: even the ones that had the worst headlines where customers
Speaker 10: would be the most booked, things are sort of getting
Speaker 10: okay and things are sort of stabilizing. So you know,
Speaker 10: they forecasted that their profits will go up and that
Speaker 10: things look really nice. So I think that was definitely
Speaker 10: a little bit of a sigh of relief. For a
Speaker 10: lot of regional bank investors out there.
Speaker 2: How are the other regional banks doing? Pac West was
Speaker 2: one that we were all following very closely, even a
Speaker 2: giant like Schwab was a company whose shares had been
Speaker 2: hit pretty hard. Are are those others that had kind
Speaker 2: of indirect contact with SVB and First Republic? Have they
Speaker 2: bounced back?
Speaker 10: Yeah? So I think, you know, if bounce back is
Speaker 10: probably a little bit too strong. Stabilized, I think is
Speaker 10: the word that a lot of them like to use.
Speaker 10: So they're, you know, they've they admit that they saw
Speaker 10: heavy outflows. Maybe it hasn't completely stopped, but it's a
Speaker 10: leaf's gone down quite a bit.
Speaker 3: Hiight, Jennie, thanks so much. We appreciate that. Jenny Starraine.
Speaker 1: She's a financial reporter Steve Matthews covering the economy, weighing
Speaker 1: in on this bank.
Speaker 5: You're listening to the tape catch are live program Bloomberg
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 5: flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Speaker 1: Big Oil reporting big numbers today. Chevron and Exxon Mobile.
Speaker 1: You put it together, they have like eighteen billion dollars
Speaker 1: in net profit just in the quarter. Both Stoctor trading
Speaker 1: higher today. My question to Fernando Valley, who covers all
Speaker 1: this stuff for Bloomberg Intelligence, is is this as good
Speaker 1: as it gets for Big Oil? Are we peak oil
Speaker 1: here in terms of profitability and stuff?
Speaker 11: I don't think we're quite as good as it gets.
Speaker 11: But it's pretty darn good, okay, And it could be better,
Speaker 11: and I think it may be in the next within
Speaker 11: the next decade, but it's pretty close to that.
Speaker 2: So how does the market look in terms of supply?
Speaker 2: I keep seeing, you know, draw downs in stocks, and
Speaker 2: I don't know about the demand side, but it seems
Speaker 2: to me from the draw downs, I see that the
Speaker 2: market's very tight, and I keep expecting to see the
Speaker 2: price rise more than it has. Right where seventy five
Speaker 2: dollars for right now, we're at about seventy five dollars
Speaker 2: only pull up GLCO go seventy six, forty four for
Speaker 2: WTI seventy nine to fifty one, so basically eighty bucks
Speaker 2: for Brent.
Speaker 11: Yeah, I think That's why it could get better, right
Speaker 11: because the supply side, we see the underinvestment that's happened
Speaker 11: over the past five to six, maybe even eight years globally,
Speaker 11: not just in the US. And then we see the
Speaker 11: limitations in US shale that we've talked about before, how
Speaker 11: they're running out of the good quality inventory to get
Speaker 11: to that supply. The issue, as you mentioned, is demand.
Speaker 11: We were talking about earlier ups saying volumes are down.
Speaker 11: You see FED hiking rates, all the tech layoffs, bank implosions,
Speaker 11: all of that will have a repercussion in oil demand. Ultimately,
Speaker 11: so far it hasn't really happened. We just saw the
Speaker 11: EIA send revised numbers for diesel around four million barrels
Speaker 11: a day. That's good. It's not great, but it's good,
Speaker 11: and so we're not seeing the cracks yet. As we
Speaker 11: see further pressure on consumer demand, be the Disney's, the
Speaker 11: Amazon layoffs, that could lead to lower oil demand itself.
Speaker 2: I see your AEI and raise you one i EA.
Speaker 2: I spoke with fatib Roll a couple of days ago,
Speaker 2: who runs the International Energy Agency, and he came out
Speaker 2: with a report that EV sales are going to make
Speaker 2: up almost a fifth of total car sales this year.
Speaker 2: That's huge, right, I mean that's up from what four
Speaker 2: percent a couple of years ago. I think eighteen percent
Speaker 2: was the exact number. Okay, it's still a tiny part
Speaker 2: of the global automotive fleet. But is that having any
Speaker 2: impact on demand?
Speaker 11: Very limited because two main things. First is, how do
Speaker 11: you mind for all those minerals that are going to
Speaker 11: an EV battery and go into producing an EV. You
Speaker 11: actually mind ten times as many minerals to produce an
Speaker 11: EV as you do an internal combustion engine.
Speaker 2: Vehicle with diesel powered machines exactly.
Speaker 11: And then the second part is I come from Brazil
Speaker 11: and the biggest growth engine of oil is developing markets.
Speaker 11: Five billion people over fifty percent of demand. We can't
Speaker 11: afford a forty thousand dollars Model three. We barely have
Speaker 11: the power to feed them as it is. And when
Speaker 11: you look at Europe, you look at California, they're struggling
Speaker 11: with the power to feed their current EV fleet, let
Speaker 11: alone if all of us were driving on evs.
Speaker 3: All right, so what is your demand model?
Speaker 1: I manage these guys for years, and they are a
Speaker 1: These energy guys are a ruly bunch to manage. I mean,
Speaker 1: I'm unbelievable. But one thing I did learn is you
Speaker 1: guys have demand models. You've got supply models. What what's
Speaker 1: your demand model kind of telling you over the next
Speaker 1: couple of years.
Speaker 11: Well, the biggest variable there is exactly what we get
Speaker 11: on fuel efficiency and electric vehicles. Our view is that
Speaker 11: we're going to continue to be at the one point
Speaker 11: three to one point four per sent long term average
Speaker 11: growth for oil demand, and the biggest change there is
Speaker 11: just yes, you're going to get some ev penetration, but
Speaker 11: more abundant energy actually leads to higher consumption as opposed
Speaker 11: to fewer consumption. If you have more of it and
Speaker 11: a cheaper price, you typically consume higher volumes and again
Speaker 11: develop markets. We consume thirty seven times more than the
Speaker 11: average African today, we owed American thirty seven times.
Speaker 1: Is match driving around this Chevy Silverado thing, I mean,
Speaker 1: like you need in west Chester.
Speaker 2: I occasionally drive also electric vehicles, and I enjoy never
Speaker 2: having to go to the pump. That reminds me to
Speaker 2: bring John Tucker into this discussion, because JT I think
Speaker 2: you have a question. Every day I come in here
Speaker 2: and you're complaining to Paul about what you pay. I
Speaker 2: whant to ask Fernando, what's up with that?
Speaker 13: Yeah? Well, also it's first off, what are the best margins?
Speaker 13: Is a diesel gasoline? What do you make the most
Speaker 13: as a refinery?
Speaker 11: Today it's gasoline, but refiners really benefit the most. Woe
Speaker 11: diesel is that its highest because a barrel of oil
Speaker 11: produces around fifty to fifty five percent gasoline and only
Speaker 11: thirty percent diesel, so it's harder to make diesel. So
Speaker 11: when those margins are high, you're really benefiting. And that's
Speaker 11: what happened last year. Today gasoline is almost twice as
Speaker 11: high on a margin as diesel.
Speaker 13: What we were paying this morning three point fifty at
Speaker 13: the wah wah, I think it was. Is it a
Speaker 13: seasonal thing also where we're seeing a change in refinery
Speaker 13: maintenance and some are blends starting to come in at
Speaker 13: some point.
Speaker 11: Yeah, the summer blend is just the switch off is
Speaker 11: just getting into high gear and we're going to go
Speaker 11: into high seasonal demand in the summer. The other issue
Speaker 11: is Europe struggling to replace Russian crude and also high
Speaker 11: energy costs in the East Coast. We import a lot
Speaker 11: of gasoline from Europe Now some of it from India,
Speaker 11: which is Russian crude. Don't tell them.
Speaker 13: I mean, there's a chance that I'm filling up my
Speaker 13: crush with gasoline that was a crude oil that was
Speaker 13: refined in the gasoline in Europe.
Speaker 2: There's a chance that you were funding Vladimir Putin's for Ukraine.
Speaker 11: Yeah, it might be a Russian crew that was refined
Speaker 11: in India and then came all the way here.
Speaker 13: Okay, as I passed the bay Way refinery or what's
Speaker 13: the one on the turnpike this Phillip sixty six.
Speaker 3: Yeah, exactly, we're doing it right there.
Speaker 1: So let's say I want to go down to Corpus Christi,
Speaker 1: Texas and build a refinery.
Speaker 3: Can I do that?
Speaker 11: Well, you'd be better off just taking one of the
Speaker 11: idle ones and restarting it.
Speaker 3: Oh so, where are some idled ones?
Speaker 11: You have some in Louisiana? You have?
Speaker 3: Why do we have idle refineries? Don't we need not to.
Speaker 11: Close some more? And one most refining it is that.
Speaker 11: But it's also just it's very expensive to make all
Speaker 11: the investments to bring them up to spec, not just
Speaker 11: on green but also the emissions regulations and all the
Speaker 11: other limitations that have been put on refiners and crewde
Speaker 11: processing itself. And then the bigger challenge is we've talked
Speaker 11: about it. You love it. The Jones Act. You can
Speaker 11: up that's transported.
Speaker 1: When I'm president, the first thing I'm doing is get ready,
Speaker 1: what's that?
Speaker 11: The Jones Act. You can't transport anything in the US
Speaker 11: unless it's in a vessel that was built, crewed, and
Speaker 11: registered in the US. And we only build naval ships,
Speaker 11: uh for for defense reasons, so there are none of those.
Speaker 11: And you can't really bring a lot of products from
Speaker 11: the Gulf Coast to East coast, which is why we're
Speaker 11: importing it from India.
Speaker 2: So they can't. They can't put them a bunch of
Speaker 2: petroleum products into a ship in Louisiana and bring it
Speaker 2: back around here to New Jersey.
Speaker 3: You can't do it.
Speaker 11: We send them.
Speaker 1: Let's so let's put a pipeline in and pipe it
Speaker 1: in from the Pennsylvania shale area.
Speaker 11: Well, yeah, if you can't do them, if you can
Speaker 11: convince New York State to build a pipeline, I'll give
Speaker 11: you all of my uh all my all of my
Speaker 11: free snacks from upstairs.
Speaker 3: I mean that. That's the frustrating thing.
Speaker 1: When you see you know, you can't get fuel to
Speaker 1: the northeast it states, so we have to import it
Speaker 1: from other parts of the world.
Speaker 3: Absolutely nuts. You got to fix that. Go down to DC.
Speaker 11: I can't run for president. I wasn't born in the US.
Speaker 2: Yeah, Fernando Valley Brazilian. You speak obviously English and Portuguese,
Speaker 2: but also German and Spanish. And I hear that you
Speaker 2: ran a restaurant. What's the story with that.
Speaker 11: It was a long time ago in Brazili.
Speaker 2: It's not US.
Speaker 11: No, it was bar food. It didn't go out, didn't
Speaker 11: It didn't go so well. But you know, you live
Speaker 11: and you learn, and so.
Speaker 1: It fell back on being a global oil analyst.
Speaker 2: Yeah, that's a pretty good fallback. I think you know,
Speaker 2: yours is Walmart Greeter. I'm gonna be a truck driver,
Speaker 2: and Fernando is like, I think I'll be a global
Speaker 2: oil analystic.
Speaker 13: One more thing before you go, and this is cool.
Speaker 13: You go to boil, go on the terminal. How many
Speaker 13: different types of crude oil are they? And real quick,
Speaker 13: just what's the defining difference between them? The sulfur content
Speaker 13: or something like that.
Speaker 11: Yeah, So, I mean there are hundreds of crude grades globally.
Speaker 11: I mean even in the US, there are two things.
Speaker 11: You can be sour sweet, which is the sulfur content,
Speaker 11: but then the gravity, so it's gravity relative to water.
Speaker 11: You can go from the heavy bitumen in Canada which
Speaker 11: is eight API gravity measure to a very light EGO
Speaker 11: forward condensate which is sixty five, which.
Speaker 13: Is the defining differences. Some are easier to refine than others.
Speaker 13: That's the difference in price.
Speaker 11: I think currently the defining difference is the higher it is,
Speaker 11: the more gasoline it produces, it has fewer carbon atoms
Speaker 11: and so it makes more gasoline less diesel. We actually
Speaker 11: want the heavy stuff now we do.
Speaker 3: That's that's science.
Speaker 2: That's cool. Boil go on the Bloomberg terminal.
Speaker 1: Fernanda Valley, senior analyst, former restauranteur at Bloomberg Intelligence.
Speaker 5: You're listening to the tape Catcher live program Bloomberg Markets
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Speaker 5: listen live on Amazon Alexa from our flagship New York station,
Speaker 5: Just say Alexa play Bloomberg eleven thirty.
Speaker 3: Here on Bloomberg Markets.
Speaker 1: We'd like to talk to C suite folks at interesting companies.
Speaker 3: We think we've got one for you today, Kevin Sayer.
Speaker 1: He's the CEO of dex coom Now, Dexcom, I wasn't
Speaker 1: I'm not that familiar with it. But it's a medical
Speaker 1: device company focused on the design and development of continuous
Speaker 1: glucose monitoring systems for people with diabetes.
Speaker 3: So certainly something.
Speaker 2: That is needed out guessing I'm guessing it's even a
Speaker 2: broader market. I mean, let's bring him in right now.
Speaker 2: The ticker is d x CM NASDAK listed Dexcom. Kevin Sayer, CEO, Kevin,
Speaker 2: is this really just for people with diabetes? Because I
Speaker 2: feel like this market is really broadening out.
Speaker 14: You know, that is a great question, and thanks for
Speaker 14: having me on the show today. Right now, this technology
Speaker 14: is used primary for people with diabetes and primarily for
Speaker 14: people using insulin, but all time as a health indicator,
Speaker 14: as a biosensor. I believe glucose can become a very
Speaker 14: vital marker in healthcare for people, for example, weight loss, wellness.
Speaker 14: Glucose is a sign of many things. Our primary indication
Speaker 14: today is for diabetes, and our primary use case has
Speaker 14: been for people on insulince so far.
Speaker 2: I mean the reason I ask, and as my wife
Speaker 2: will tell you, I'm a sucker for good marketing. I
Speaker 2: see all over Okay, I see all over Instagram these
Speaker 2: glucose monitors, and the idea is it can tell you, you
Speaker 2: know what kind of sugar spike you get for eating
Speaker 2: different kinds of food, and different people react in different ways.
Speaker 2: So example is if I eat a bagel, I might
Speaker 2: have a big sugar spike and maybe Paul doesn't. The
Speaker 2: other thing is on the weight loss side. You know
Speaker 2: I'm consistently ten to twenty pounds overweight. I love cake
Speaker 2: and cookies, and that's a real problem for me. I
Speaker 2: feel like if I had a glucose monitor, it would
Speaker 2: be an easy your way for me to watch what
Speaker 2: I eat, monitor what I eat, and maybe help control
Speaker 2: myself a little bit.
Speaker 14: There are numerous things you learned from wearing, one being
Speaker 14: the COO at X common. Having been here quite a while,
Speaker 14: I wear these things all the time. I don't have diabetes,
Speaker 14: So a couple of personal insights. For example, I was
Speaker 14: an investor conference one time and wanted to see how
Speaker 14: high I could spike my glucose. So I ate a
Speaker 14: great big cup of chocolate covered raisins and drank a
Speaker 14: glass of orange juice, and I got my glucose so
Speaker 14: high it almost looked like I had diabetes. And it
Speaker 14: went very quickly. But I've learned what foods, for example,
Speaker 14: I eat because my glucose to go up rapidly. Ice
Speaker 14: cream does not cause you to go up as rapidly
Speaker 14: as cake. You still go up, but not as not
Speaker 14: as rapidly as weres cake as straight sugar, candies, jelly
Speaker 14: beans and licorice guys super high spike very quickly. Chocolate
Speaker 14: takes more time. At the end of the day, you
Speaker 14: learn what those things do and how your body reacts
Speaker 14: over the course of the day. But you also learn
Speaker 14: about things like extra So if I have a workout
Speaker 14: in the morning, what does mike glucos do during the
Speaker 14: course of the day. And again my physiology personally, if
Speaker 14: I have a nice workout on the morning, mike glucose
Speaker 14: is ten percent lower all day long. And those things
Speaker 14: are really good learnings as far as your overall health
Speaker 14: over time. We look forward to being that market over time.
Speaker 14: We're not labeled for that now, but you're right. People
Speaker 14: are using them on a regular basis off label because
Speaker 14: they can learn so much. And these devices go to
Speaker 14: your phone, so you've got it right on your phone.
Speaker 14: You can look at the data at the same time
Speaker 14: you're looking at your text messages and your emails. And
Speaker 14: for our diabetes users, particularly those on insulin, that phone
Speaker 14: connection was one of the key advances we led, so
Speaker 14: rather than look at a medical device or something else,
Speaker 14: you can look at your phone. And if you're a
Speaker 14: young person, particularly if you're a kid in school, we
Speaker 14: have the opportunity for your parents to see that data too,
Speaker 14: so caregivers can know that those in their family are safe.
Speaker 14: It's just been an amazing journey. Well here at the company,
Speaker 14: this technology is game changing.
Speaker 2: Well and what kind of discomfort are we talking about?
Speaker 2: This isn't like installing a pacemaker. No, no, no, I'm assuming
Speaker 2: at least equal to or better than a fingerprick on
Speaker 2: a regular basis.
Speaker 11: It's it's much less.
Speaker 2: Describe describe Kevin the device for us and how it
Speaker 2: has somebody.
Speaker 14: There is a small sensor that's about the width of
Speaker 14: a human hair in less than a less than a
Speaker 14: half inch of length, about three eights of an inch
Speaker 14: and length. It is inserted very rapidly with a needle.
Speaker 14: The needle is inside your body for that milliseconds, not
Speaker 14: even seconds. You don't feel it when you put it
Speaker 14: in our new product, The G seven's inserted on somebody's arm,
Speaker 14: attached to that small sensor in your arm as an
Speaker 14: electronic transmitter, and that sits outside your arm, uh and
Speaker 14: is attached with tape. You really don't feel that it's there.
Speaker 14: The G seven is a little bit bigger than a nickel.
Speaker 14: That's also you really don't feel it. You don't know
Speaker 14: that it's there. You wear it for ten days. People
Speaker 14: put them on themselves. There's no doctor or physician or
Speaker 14: anybody involved, and pair it with your phone and within
Speaker 14: a half hour you have glucose readings.
Speaker 11: Hey, Kevin Linten, that's yeah.
Speaker 14: That looks simple.
Speaker 1: Let's pivoty to your company and your stock. I mean,
Speaker 1: I need to pay more attention. This is a big company,
Speaker 1: forty six billion market cap. The stock you guys reported
Speaker 1: numbers after the close last night came in a little
Speaker 1: bit better and expected stocks trading off about three percent
Speaker 1: today but up about six percent year to date, up
Speaker 1: seventeen percent on trailing twelve year basis. Talk to us
Speaker 1: about the earnings last night reported what was a key
Speaker 1: message you wanted to get across to your investors in
Speaker 1: the anals, you know.
Speaker 14: Key message was continued growth. Nineteen percent organic revenue growth
Speaker 14: over last year. We launched our new product platform, mar
Speaker 14: G seven in this quarter and we just barely got
Speaker 14: started with that, and we believe that product's going to
Speaker 14: be an important growth driver for us in the future.
Speaker 14: We raise our guidance for the year. You talk about
Speaker 14: our stock story, and I listened to those revenue numbers.
Speaker 14: I've been with the company for twelve years. We were
Speaker 14: forty million dollars in revenue the year before I got here.
Speaker 14: In our guidance this year is in the three and
Speaker 14: a half billion dollar range. So this company is a
Speaker 14: big story. It's come a very, very long ways. We're
Speaker 14: in the s and P five hundred now as well,
Speaker 14: and our message rewarded you.
Speaker 2: I always look at comp charts right to compare a
Speaker 2: company stock over just a five year period, and your
Speaker 2: total return is five hundred and forty six percent. The
Speaker 2: stock has a sex tuppled in five years? Is that
Speaker 2: because you know this this market is growing Is it
Speaker 2: because there are more diabetics or is it because you've
Speaker 2: made innovations. You know it's much easier for them to
Speaker 2: use the product. What's the what's the main driver?
Speaker 14: I think the main driver has become awareness of how
Speaker 14: important a technology like this is in managing diabetes in general.
Speaker 14: We have expanded dramatically access to this product on the
Speaker 14: reimbursement front. One of our other key messages was expanded
Speaker 14: Medicare coverage. That's going to give us another three possibly
Speaker 14: three million people to access here in the US. So
Speaker 14: as people look at this technology and guys compare it.
Speaker 14: If you stick your finger, you have one number and
Speaker 14: that's all you have. We give people a new glucose
Speaker 14: reading every five minutes and with that, diabuts management is
Speaker 14: so much better. Every time somebody wears this or there's
Speaker 14: a study, we see people get healthier. Their average glucos
Speaker 14: comes down there when SE's come down, and it even
Speaker 14: goes beyond that into other health factors like cardiovascular conditions
Speaker 14: get better. People have realized how important this is. So
Speaker 14: the technology in our innovations, going to the phone, connecting
Speaker 14: with things, that has driven it. But because of those innovations,
Speaker 14: access is driven. It's just one after another after another,
Speaker 14: and we've been at the forefront of everything.
Speaker 1: All right, Kevin, thank you so much for joining Uskevin Sayer,
Speaker 1: CEO of dex Com, been a real success story for
Speaker 1: this dot.
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three.
Speaker 3: And I'm Faul Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio.