WEBVTT - Amazon, Oil Earnings, First Republic, and Activision (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.080 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.720 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.640 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.360 --> 0:00:20.480 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.280 --> 0:00:21.840 Let's check it with. 0:00:21.840 --> 0:00:25.439 Alison Williams, Senior Global Banks and Asset Managers analysts for 0:00:25.440 --> 0:00:26.480 Bloomberg Intelligence. 0:00:26.680 --> 0:00:27.760 Allison, you'd been busy. 0:00:27.840 --> 0:00:30.120 A lot of the big banks have been reporting, a 0:00:30.120 --> 0:00:31.880 lot of the European banks starting to report. 0:00:32.280 --> 0:00:34.120 What are some of the takeaways here? I mean they 0:00:34.120 --> 0:00:35.480 were concern in the marketplace. 0:00:36.080 --> 0:00:37.760 Just think, you know, a month ago, five weeks ago 0:00:37.800 --> 0:00:39.479 about some of the regional banks and what does that 0:00:39.520 --> 0:00:42.720 mean for the banking system. So when you listen to 0:00:42.760 --> 0:00:44.800 the Brian moynihans of the world, the Jamie Diamonds of 0:00:44.840 --> 0:00:48.239 the world, how are they characterizing this banking system? 0:00:48.680 --> 0:00:51.640 I think in general the clear message is, you know, 0:00:51.680 --> 0:00:55.840 we had some turmoil, but things have studied. We've heard 0:00:55.880 --> 0:00:58.760 that across the banks. Of course, of course, you know 0:00:58.840 --> 0:01:01.200 for a republic, is is the one out there that 0:01:01.280 --> 0:01:06.160 people keep watching, a situation that has not really resolved itself. 0:01:06.240 --> 0:01:11.199 But in general, we also have seen you know, sort 0:01:11.200 --> 0:01:14.880 of you know, companies that gained deposits. We see the 0:01:14.959 --> 0:01:18.639 companies that are the safe havens. So in the US 0:01:18.680 --> 0:01:22.080 that was companies like JP Morgan at the stream, also 0:01:22.120 --> 0:01:25.920 Bank America, you know, Wells and City to a lesser extent. 0:01:26.080 --> 0:01:30.039 In Europe we saw ubs as the safe haven crowd. 0:01:30.120 --> 0:01:32.520 Sweet was the big one that we got this week 0:01:32.560 --> 0:01:35.679 where we saw i would say, not as bad as feared, 0:01:35.920 --> 0:01:39.080 so significant outflows, but not as bad as the prior quarter. 0:01:39.200 --> 0:01:39.759 Of course, we. 0:01:39.720 --> 0:01:43.240 Don't know what the trend was, and the sense is 0:01:43.280 --> 0:01:46.640 that the day, you know, the daily outflows were significant 0:01:46.680 --> 0:01:50.240 and that's why regulators had to step in. Deutsche Bank 0:01:50.400 --> 0:01:54.080 was one that lost deposits. Their stock as you call, 0:01:54.640 --> 0:01:57.080 came under pressure sort of in the late March turmoil. 0:01:57.560 --> 0:02:00.600 But they think said things have studied. So things have 0:02:00.800 --> 0:02:06.640 generally studied. But as we're moving forward, the question is lending. 0:02:06.880 --> 0:02:09.840 What kind of lending are we going to see? Pullback? 0:02:10.560 --> 0:02:13.920 You brought up you know, Jamie Dimond and Brian moynihan 0:02:14.000 --> 0:02:17.440 who both said, you know, this is not a credit crunch. 0:02:17.960 --> 0:02:21.520 We are going to see pockets of a pullback, but 0:02:21.600 --> 0:02:25.280 I think that's really to come in the weeks ahead, 0:02:25.880 --> 0:02:28.480 and then you know, the cost of those deposits are 0:02:28.480 --> 0:02:30.680 going to continue to rise. So we're not in a 0:02:30.800 --> 0:02:36.040 deposit plight, We're not in an extreme environment. But deposits 0:02:36.080 --> 0:02:39.920 are going to continue to go into higher yielding products 0:02:39.960 --> 0:02:42.920 as they should. They're going to go into money market 0:02:42.960 --> 0:02:46.400 funds as they should, and so it's going to cost. 0:02:46.760 --> 0:02:49.040 It's going to eat into the bank's interest margins. So 0:02:49.240 --> 0:02:53.880 still very strong revenue, but at the margin probably have 0:02:53.960 --> 0:02:54.560 seen the peak. 0:02:55.080 --> 0:02:58.720 Do you think that the turmoil we've seen around First 0:02:58.720 --> 0:03:02.200 Republic and the you know, free fall in the share 0:03:02.240 --> 0:03:06.000 price for a couple of days this week is going 0:03:06.040 --> 0:03:10.919 to turn out having led to more deposit outflows? I mean, 0:03:11.880 --> 0:03:14.880 do do depositors watch the markets as closely as we 0:03:14.919 --> 0:03:17.280 do and and decide to run again? 0:03:18.400 --> 0:03:20.720 I think that, you know, First Republic is something that 0:03:20.800 --> 0:03:25.240 we're all closely watching, But it's not the days of 0:03:25.280 --> 0:03:27.400 March where there was a lot of headlines. There were 0:03:27.400 --> 0:03:30.240 a lot of social media headlines, et cetera, and it 0:03:30.360 --> 0:03:32.480 was a sort of a broader problem. I think now 0:03:32.960 --> 0:03:37.480 it's much more an isolated problem where first republic, you know, 0:03:37.520 --> 0:03:42.320 it has to figure out a path forward. And now 0:03:42.320 --> 0:03:45.040 there's a lot more interested parties because you had all 0:03:45.040 --> 0:03:48.960 these banks that you put those deposits in to try to, 0:03:49.440 --> 0:03:51.960 you know, send a signal of confidence to the system, 0:03:52.960 --> 0:03:55.400 and now they're you know, they're sort of tied into 0:03:55.440 --> 0:03:56.560 the situation a little bit. 0:03:56.640 --> 0:03:57.800 So I think that's. 0:03:57.680 --> 0:04:01.280 Something we're watching. But it has become a much more 0:04:01.800 --> 0:04:05.880 bank specific situation. As we know, we had a few 0:04:05.880 --> 0:04:09.000 banks that were outliers at the extreme. They still caused 0:04:09.080 --> 0:04:12.680 broad worries, but those broad worries seem to have studied 0:04:12.760 --> 0:04:16.520 up hears. But I think what it did happen, right 0:04:16.640 --> 0:04:19.039 is I did think it woke up the conversation. You 0:04:19.040 --> 0:04:22.320 know why, Oh, suddenly I can make money on my savings, 0:04:22.360 --> 0:04:25.560 Like that hasn't happened in like, let's say, a decade exactly, 0:04:25.800 --> 0:04:28.760 And so I think that people realize, suddenly, oh I 0:04:28.760 --> 0:04:32.080 can get four or five percent. I might have to 0:04:32.120 --> 0:04:35.640 pay some fees of money markets or you know, what 0:04:35.760 --> 0:04:38.120 have you, or shop around a little bit, but there's 0:04:38.200 --> 0:04:39.839 actually yield out there. 0:04:40.440 --> 0:04:44.920 Hey, Alison, our good friends Alizard reported some results a 0:04:44.960 --> 0:04:47.240 little bit weaker than expected this and they're announcing that 0:04:47.240 --> 0:04:49.960 they're laying off ten percent of their workforce on weak 0:04:50.360 --> 0:04:54.240 advisory outlook here, talk to us about that side of 0:04:54.279 --> 0:04:55.600 the business. What do you what are you seeing when 0:04:55.640 --> 0:04:57.560 you look across the banks that you cover in terms 0:04:57.600 --> 0:04:58.000 of kind. 0:04:57.920 --> 0:05:00.360 Of capital markets advisory, some. 0:05:00.320 --> 0:05:02.960 Of that stuff that's a little bit more volatile, I guess. 0:05:03.320 --> 0:05:09.000 So I think, unfortunately, Paul, we're that business remains weak. 0:05:10.080 --> 0:05:13.719 We're back to actually levels that's sort of the onset 0:05:13.760 --> 0:05:16.279 of the pandemic to put it into perspective to how 0:05:16.440 --> 0:05:20.440 weak things are. And the disappointment really is despite this 0:05:21.000 --> 0:05:23.560 you know, huge rally we've had since you know, granted 0:05:23.600 --> 0:05:25.600 it's a rally from the bottom, but since the fall, 0:05:26.000 --> 0:05:28.479 it hasn't translated into more deals. So that just tells 0:05:28.520 --> 0:05:33.360 you that the expectations between that, you know, the potential 0:05:33.480 --> 0:05:36.320 investors or buyers in the market and people that want 0:05:36.320 --> 0:05:39.719 to come to market, there's still a gap. What we've 0:05:39.760 --> 0:05:42.200 heard from most of the managements out there is that 0:05:42.279 --> 0:05:44.719 they expect to pick up in the second half or 0:05:44.800 --> 0:05:48.040 twenty twenty four. Thozart is a little bit more bearish. 0:05:48.279 --> 0:05:49.880 I would point to the fact that their M and 0:05:49.920 --> 0:05:53.720 A business tends to be stronger in Europe, so there 0:05:53.800 --> 0:05:55.599 might be a little bit of a regional impact. But 0:05:55.680 --> 0:05:59.920 we are seeing cuts across these banks. Deutsche Bank, for example, 0:06:00.520 --> 0:06:04.880 talked about cutting some of their senior executives. Not forward facing, 0:06:04.960 --> 0:06:08.359 but there will be some cuts there. And you know, 0:06:08.400 --> 0:06:12.600 we've seen articles here and there about different cuts made. 0:06:12.600 --> 0:06:12.920 And so. 0:06:15.320 --> 0:06:19.680 To the extent that FED policy does not turn to cuts, 0:06:19.720 --> 0:06:22.200 because I think that's the outlook that a lot of 0:06:22.200 --> 0:06:25.880 these more bullish calls are predicated on. You know, we 0:06:26.200 --> 0:06:29.240 could continue to see some more right sizing through the. 0:06:29.240 --> 0:06:29.720 End of the year. 0:06:30.160 --> 0:06:32.400 All Right, Alison, thank you very much for joining us. 0:06:32.720 --> 0:06:34.280 Appreciate the recap there. 0:06:34.320 --> 0:06:37.920 Allison Williams senior Global Banks and Asset Managers analysts for 0:06:37.960 --> 0:06:38.960 Bloomberg Intelligence. 0:06:39.000 --> 0:06:41.760 And as if that's not enough, she's also. 0:06:41.640 --> 0:06:44.719 Co director of Research for the Americas for Bloomberg Intelligence, 0:06:45.040 --> 0:06:46.960 so she's got like one hundred and fifty people reporting 0:06:47.000 --> 0:06:47.159 to her. 0:06:47.160 --> 0:06:47.839 I mean, it's crazy. 0:06:47.960 --> 0:06:52.160 I'm curious, busy. I'm curious to know, because you had 0:06:52.200 --> 0:06:54.240 such a long career on Wall Street, what do you 0:06:54.240 --> 0:06:57.080 make of the term right sizing? How does that strike you? 0:06:57.120 --> 0:06:59.680 No, it's just we know it the way we think 0:06:59.680 --> 0:07:00.000 about it. 0:07:00.000 --> 0:07:02.279 It is on Wall Street, we get overpaid, but we 0:07:02.320 --> 0:07:03.880 have below market job security. 0:07:03.960 --> 0:07:05.240 That's just that's the trade off. 0:07:05.279 --> 0:07:09.280 They overpay us asymmetrically, but we know our jobs are 0:07:09.440 --> 0:07:11.520 very tenuous at best. 0:07:12.840 --> 0:07:16.240 You're listening to the team Ken's are Live program Bloomberg 0:07:16.280 --> 0:07:19.720 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:07:19.760 --> 0:07:22.880 the iHeartRadio app and the Bloomberg Business App, or listen 0:07:22.960 --> 0:07:25.240 on demand wherever you get your podcasts. 0:07:27.160 --> 0:07:29.240 We're still a little tech recap here. Why not? 0:07:29.960 --> 0:07:32.480 There's always lots of talk about Dan Ives, senior equity 0:07:32.480 --> 0:07:34.320 analyst at web Bush Securities, joins us live here in 0:07:34.360 --> 0:07:37.720 our Bloomberg Interactive Broker studio with yet again a questionable 0:07:37.720 --> 0:07:40.480 outfit on a rag ran a senior tech anaists and 0:07:40.480 --> 0:07:42.680 Bloomberg Intelligence. We get him one week a month, so 0:07:42.720 --> 0:07:44.800 we get him here as often as we can. Otherwise 0:07:44.800 --> 0:07:47.400 he's in Chicago doing god knows what. All Right, Dan, 0:07:47.480 --> 0:07:48.320 let's start with you here. 0:07:48.560 --> 0:07:50.920 Well, I don't think you can call out anybody's outfit today. 0:07:51.600 --> 0:07:52.560 You don't like the flannel? 0:07:52.680 --> 0:07:55.520 I love it, but I'm not a great I mean, 0:07:55.760 --> 0:07:59.119 Paul is wearing for our listeners a red and black 0:07:59.200 --> 0:08:02.240 check lumberjack flannel. Yes, I've got a flannel on. 0:08:02.880 --> 0:08:04.320 Character for me, so yes, I get. 0:08:04.480 --> 0:08:07.360 But at least at least Dan is wearing a blazer, Yes, 0:08:07.880 --> 0:08:11.160 albeit lilac checked blazer to go. 0:08:11.160 --> 0:08:15.240 With the powder blue pants. Yes, so Dan, Amazon, what's 0:08:15.280 --> 0:08:16.600 your take on kind of what we heard out of 0:08:16.640 --> 0:08:17.480 those guys last night. 0:08:17.640 --> 0:08:19.880 I think it's tailed two cities. I mean, on one hand, 0:08:20.120 --> 0:08:22.120 better than feared in terms of what we saw in 0:08:22.240 --> 0:08:25.400 cloud in the quarter and e commerce really starting to 0:08:25.400 --> 0:08:28.520 now recover bit and the cost cuttings there, but with 0:08:28.600 --> 0:08:30.880 the guidance for next quarter was soft, and I think 0:08:30.960 --> 0:08:34.079 ultimately just speaks to that company Crosstown the two or 0:08:34.160 --> 0:08:38.320 six area, coulde they're gaining share. Microsoft is gaining share 0:08:38.480 --> 0:08:41.440 from Amazon in the AWS, and I think that's a 0:08:41.520 --> 0:08:44.320 narrative that continues to play out. But overall, this is 0:08:44.400 --> 0:08:47.480 better than feared tech earnings. I think investors came in 0:08:48.120 --> 0:08:51.679 white knuckles into the week, they go in drinking cappuccino. 0:08:52.240 --> 0:08:55.040 Yeah, I will point out, as I said earlier, Yes, 0:08:55.160 --> 0:09:00.600 Amazon shares are down today, they're off two point eight percent, 0:09:00.800 --> 0:09:03.120 but they were up four point six percent yesterday and 0:09:03.120 --> 0:09:05.200 they're up twenty six percent year to date. I mean, 0:09:05.240 --> 0:09:08.680 they're doing very well. In fact, they're supporting this market. 0:09:08.760 --> 0:09:12.040 Right They're one of the companies on Ragrana that's really 0:09:12.679 --> 0:09:15.680 boosted this market, one of a handful that's boosted this 0:09:15.760 --> 0:09:18.400 market this year. So they're still doing pretty well, and 0:09:18.520 --> 0:09:20.960 I feel like they might be underpromising so that they 0:09:20.960 --> 0:09:23.520 can over deliver on the one hand. On the other hand, 0:09:24.240 --> 0:09:28.080 they're gonna cut margins to fight Microsoft across town. 0:09:28.920 --> 0:09:31.160 See from our side, the other thing you want to 0:09:31.160 --> 0:09:33.520 think about today the growth rate is going down, then 0:09:33.559 --> 0:09:35.880 margin expectations at least in the near term have to 0:09:35.880 --> 0:09:39.040 go down as well, because AWS supports majority of the 0:09:39.080 --> 0:09:42.200 margins of Amazon. But think about it this way, and again, 0:09:42.240 --> 0:09:44.280 this is where I argue with you know, most of 0:09:44.280 --> 0:09:46.960 the bears is I agree, the next six months are 0:09:46.960 --> 0:09:50.240 going to be tough for everybody, But think about the 0:09:50.280 --> 0:09:52.400 revival when it comes back. It comes back with the 0:09:52.400 --> 0:09:55.560 margin structure that's far superior than when we entered the 0:09:56.000 --> 0:09:58.560 you know, the boom. I would say, imagine what's going 0:09:58.640 --> 0:10:00.440 to happen to the margins at that point, and the 0:10:00.480 --> 0:10:03.440 margins of the overall company, which is Amazon is just 0:10:03.480 --> 0:10:05.880 going to be phenomenal once we get the recovery. 0:10:06.559 --> 0:10:11.760 So Dan, you know Andy Jase uh is the you 0:10:11.800 --> 0:10:14.160 know now the new president and see it EO. Is 0:10:14.200 --> 0:10:17.000 he as committed to Jeff Bezos's plan to like, I'll 0:10:17.040 --> 0:10:19.120 spend whatever I need to spend to get market share 0:10:19.160 --> 0:10:21.400 and grow a business that I think is in line. 0:10:21.480 --> 0:10:23.720 Is that still the mantra for Amazon or no? No? 0:10:23.840 --> 0:10:26.480 I mean, look, Bezos was basically spending money like in 0:10:26.559 --> 0:10:30.240 nineteen eighty is rock star right? And Jase basically inherited 0:10:30.280 --> 0:10:32.960 that has had a cut costs, ripped a band aid 0:10:33.040 --> 0:10:35.560 off and that's why he inherited a lot of this. 0:10:36.280 --> 0:10:40.880 But look, ultimately they need to aggressively spend AI need 0:10:40.920 --> 0:10:43.760 to focus on next gen, especially in this arms where 0:10:43.760 --> 0:10:45.360 it's going on in tech. But at the same time 0:10:45.480 --> 0:10:48.360 cut costs you're starting to see it play out. But 0:10:48.440 --> 0:10:51.040 overall in tech, I mean, I'll call it him as 0:10:51.080 --> 0:10:55.199 a Goldilocks week when you combine Microsoft, Meta Alphabet and Amazon. 0:10:55.880 --> 0:10:58.120 I actually heard a story about Plexico Burus buying a 0:10:58.200 --> 0:11:02.600 Lamborghini today and without having ever test driven one, and 0:11:02.600 --> 0:11:06.080 then realizing after he got into the four hundred thousand 0:11:06.080 --> 0:11:09.480 dollars car that he doesn't really fit. And this came 0:11:09.480 --> 0:11:13.160 from where I can't reveal my sources. Okay, friend of 0:11:13.240 --> 0:11:15.840 Plexico's who now works for Bloomberg Radio. 0:11:15.880 --> 0:11:17.760 I was wondering why we were talking to our tech 0:11:17.760 --> 0:11:19.079 annals about Plexico errors. 0:11:19.080 --> 0:11:21.440 No, because he said spending money like a nineteen eighty star. 0:11:21.640 --> 0:11:24.040 I got ya, and with it reminded me and the 0:11:24.160 --> 0:11:30.199 NFL draft and so it all. So AI is relatively 0:11:30.240 --> 0:11:31.040 new term for me. 0:11:32.000 --> 0:11:35.880 Tell me what it means for the tech industry, you know, 0:11:36.320 --> 0:11:36.960 and who. 0:11:37.000 --> 0:11:39.120 The players are? How do I think about it? 0:11:39.240 --> 0:11:41.360 So, at least in my view right now, it's a 0:11:41.440 --> 0:11:45.400 lot of software development or software that's there for people 0:11:45.440 --> 0:11:48.640 to build applications on. To me, the two biggest things 0:11:48.640 --> 0:11:50.800 and I'm not talking about hardware world because the video 0:11:50.880 --> 0:11:53.080 is a huge you know, winner in that case, But 0:11:53.120 --> 0:11:55.440 the two real big areas we're going to see a 0:11:55.440 --> 0:11:58.760 lot more money go into is cloud services we're on 0:11:59.040 --> 0:12:01.960 which you will develop these applications. And the second is 0:12:02.000 --> 0:12:05.320 this army off software developers that are you know, part 0:12:05.360 --> 0:12:09.120 of IBM Global Services or Accenture or Tata and all 0:12:09.160 --> 0:12:11.840 those companies that are going to be deployed by companies 0:12:11.840 --> 0:12:13.840 to create these enterprise applications. 0:12:14.800 --> 0:12:16.800 All right, So maybe is it too late for me, 0:12:16.880 --> 0:12:19.080 Matt to retrain as a software engineer if you think. 0:12:18.960 --> 0:12:20.920 It is too late, because I've considered it myself a 0:12:20.960 --> 0:12:23.120 number of different times. Have you seen the salaries that 0:12:23.160 --> 0:12:25.000 we're paying programmers at this company? 0:12:25.120 --> 0:12:27.320 And they don't even and they dress like they're you know, 0:12:27.679 --> 0:12:28.400 paupers over there. 0:12:28.400 --> 0:12:30.880 They don't have to, I don't. They don't please anybody. 0:12:30.920 --> 0:12:34.400 No, theo those and make money. Yes, I know, and 0:12:34.440 --> 0:12:36.840 they're the best in the business. Dan, what's some of 0:12:36.840 --> 0:12:38.200 your top what's your top pick right here? 0:12:38.240 --> 0:12:39.800 What are you talking to investors as we come out 0:12:39.800 --> 0:12:41.199 of this little earnings period here? 0:12:41.320 --> 0:12:43.679 Yeah, I look, Apple continues to be a top pic 0:12:43.720 --> 0:12:45.520 and I think Thursday night that will be the drum 0:12:45.600 --> 0:12:48.000 roll with Cooper Tino coming out with what I believe 0:12:48.080 --> 0:12:51.000 strong iPhone numbers next week Thursday. 0:12:51.000 --> 0:12:52.720 Next week we have Apple numbers. 0:12:52.400 --> 0:12:55.200 Thursday, and that's the drummo because look is we saw 0:12:55.200 --> 0:12:57.960 it from Microsoft and Alphabet that's one half in terms 0:12:57.960 --> 0:13:01.560 of what we see on cloud, Microsoft best cloud Play. 0:13:01.800 --> 0:13:04.079 Apple can just be overall our top pick. But then 0:13:04.120 --> 0:13:07.640 I look like names like Power out doing cybersecurity that 0:13:07.679 --> 0:13:09.920 can turn short of what I view is almost to try, 0:13:10.640 --> 0:13:13.480 you know, triangulate way to play some of the key 0:13:13.640 --> 0:13:16.199 tech trends right here. But it all starts in Cooper, 0:13:16.320 --> 0:13:17.120 Tino and Redmond. 0:13:17.160 --> 0:13:19.800 When you when you travel around talking to institution investors today, 0:13:20.080 --> 0:13:22.800 I mean, you had it. I'm gonna call it easy job. 0:13:22.840 --> 0:13:24.719 You an on an easy job. I could have done 0:13:24.720 --> 0:13:27.120 your job over the last decade fifteen years. Now you've 0:13:27.080 --> 0:13:28.720 got a little bit of headwind out there for the 0:13:28.720 --> 0:13:32.240 tech story. What's the pushback you get from investors on 0:13:32.280 --> 0:13:32.839 tech these days? 0:13:32.880 --> 0:13:35.280 But it's almost more enjoyable because now the New York 0:13:35.360 --> 0:13:38.160 City cab drivers still barish on tech. A lot of 0:13:38.200 --> 0:13:42.000 institutional investors hate the rally, But ultimately it's a stock 0:13:42.040 --> 0:13:45.440 pickers market. Is on our talking about it is identifying 0:13:45.520 --> 0:13:48.560 the winners, doing the work and trying to figure out 0:13:48.559 --> 0:13:51.680 the hype from the actual you know where the spending is. 0:13:51.720 --> 0:13:54.600 And that's why I think that's been the best this 0:13:54.760 --> 0:13:57.640 last three to four month. It's a stock pickers market, 0:13:57.840 --> 0:14:00.880 and I think that's the key here. No longer fed 0:14:01.000 --> 0:14:04.920 driven Ppi y Noko every Friday, that's the key. 0:14:05.520 --> 0:14:05.960 Interesting. 0:14:06.400 --> 0:14:10.680 I mean, Anaak how much further can these companies run? 0:14:10.720 --> 0:14:13.640 I mean they're already they've done so well. When you 0:14:13.679 --> 0:14:16.520 look at the gains we've seen year to date, they're 0:14:16.559 --> 0:14:20.920 all basically Apple, Microsoft, and Video Meta and Amazon. 0:14:21.240 --> 0:14:23.960 I thought they would all cut down massively last year. 0:14:24.640 --> 0:14:27.160 Okay, I was. I was not. I was ignoring twenty 0:14:27.200 --> 0:14:28.600 twenty two off the bottoms. 0:14:29.360 --> 0:14:31.680 I would not ignore that, because you know what, come 0:14:31.760 --> 0:14:33.680 next year, we're going to see a very different story. 0:14:33.760 --> 0:14:38.120 Quarterly sales for web services. Amazon kicked off twenty twenty 0:14:38.160 --> 0:14:41.120 two with a gain of forty percent year over year. 0:14:41.200 --> 0:14:43.160 Now we're looking at sixteen percent and they're saying it's 0:14:43.160 --> 0:14:43.800 going to fall the same. 0:14:43.840 --> 0:14:45.520 I would say, go back and see what happened in 0:14:45.520 --> 0:14:48.560 twenty twenty three. Quarters of four quarters in a row, 0:14:48.600 --> 0:14:53.120 Amazon's growth trade declined massively awsh The year after that, 0:14:53.360 --> 0:14:56.200 it improved by ten percentage points in some quarters more 0:14:56.240 --> 0:14:59.280 than that. So it's it's a matter of usage. It's 0:14:59.280 --> 0:15:02.560 not as if things cried up. It's a paper use model. 0:15:02.840 --> 0:15:06.240 People using more, it's gonna go up. Economic activity goes up. 0:15:06.280 --> 0:15:06.880 It goes up. 0:15:07.040 --> 0:15:10.200 People want to save more money, then move more workloads. 0:15:09.920 --> 0:15:10.960 It adds up. 0:15:11.000 --> 0:15:12.240 It's a compounding business. 0:15:12.400 --> 0:15:15.120 You know, it's also cool. Dan hon Rog was telling 0:15:15.160 --> 0:15:18.920 us yesterday, but there's a green component to businesses switching 0:15:18.920 --> 0:15:20.640 to the cloud, right, because if you have all your 0:15:20.680 --> 0:15:23.280 servers on site wherever you are, energy could cost a 0:15:23.320 --> 0:15:26.480 lot and it could be very pollutive. However, a lot 0:15:26.520 --> 0:15:28.800 of these businesses, like on Rog was telling us, Amazon 0:15:28.880 --> 0:15:32.040 or maybe Microsoft, have put their server farms in places 0:15:32.080 --> 0:15:35.200 where energy is cleaner and cheaper, so it really makes 0:15:35.240 --> 0:15:37.200 a difference to their big carbon footprint. 0:15:37.280 --> 0:15:39.760 Well, it's a big part of what you see that 0:15:39.880 --> 0:15:43.040 Microsoft's talked about where Apple talks about. And then at 0:15:43.080 --> 0:15:45.400 the same time, like when you look at AI, what's 0:15:45.440 --> 0:15:49.440 really happening now from processing power perspective, It's going to 0:15:49.520 --> 0:15:51.840 be a golden age in terms of AI. This is 0:15:51.920 --> 0:15:54.360 not a hype trend and I've viewed as the next 0:15:54.440 --> 0:15:55.960 leg to what I've view is just going to be 0:15:55.960 --> 0:15:57.520 probably one of the biggest trends between in the last 0:15:57.520 --> 0:15:58.480 twenty five years. 0:15:58.600 --> 0:16:00.640 Hey, Dan, can't let you leave here without and the 0:16:00.720 --> 0:16:03.880 update of Tesla call what are you seeing out of 0:16:03.920 --> 0:16:04.480 our good friends? 0:16:04.640 --> 0:16:07.920 The cyber truck coming, Yeah, so cyber Truck's coming for you. 0:16:08.080 --> 0:16:10.520 And around Halloween Look, I think the biggest thing is 0:16:10.600 --> 0:16:14.240 just the price cuts continue sort of weigh on the 0:16:14.280 --> 0:16:17.040 stock in terms of margins. You see now a lot 0:16:17.040 --> 0:16:19.400 of you know, throwing in the towel. I view this 0:16:19.480 --> 0:16:21.600 is sort of over sold in my opinion, because I 0:16:21.640 --> 0:16:24.320 think the demand will start to tick up, specifically in China, 0:16:24.600 --> 0:16:27.920 price cuts will start to stabilize. And then again going 0:16:28.000 --> 0:16:30.200 the second half with cyber truck, I think that's where 0:16:30.200 --> 0:16:32.760 I must puts the red cape back on and you 0:16:32.840 --> 0:16:34.600 start to see sentiment improve. 0:16:35.080 --> 0:16:35.880 The cyber truck. 0:16:36.120 --> 0:16:38.720 I'm excited for the cyber truck. It looks terrible. It 0:16:38.760 --> 0:16:41.480 looks awesome. Did you not like mad Max? 0:16:41.920 --> 0:16:43.000 No, it looks like. 0:16:43.000 --> 0:16:45.320 A giant DeLorean. I love it. 0:16:45.440 --> 0:16:47.040 I like the Ford f one fifty. 0:16:47.040 --> 0:16:50.800 Look all right, that's our tech roundtable for the day again. 0:16:50.880 --> 0:16:53.720 I've seen your equity antis, what Bush Securities and on 0:16:53.760 --> 0:16:57.120 Ourgrana he's a senior technists with Bloomberg Intelligence. Kind of 0:16:57.200 --> 0:16:59.960 round table here, kind of get the latest on tech 0:17:00.080 --> 0:17:02.640 space again. Amazon reporting numbers, keep it a little bit. 0:17:03.240 --> 0:17:06.000 The numbers were good, big big operating profit. 0:17:06.040 --> 0:17:08.120 But this market has been dominated by tech. 0:17:08.240 --> 0:17:10.440 I know totally, yep, absolutely. 0:17:10.280 --> 0:17:13.399 You're listening to the tape. Cat's are live program Bloomberg 0:17:13.480 --> 0:17:17.040 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:17:17.119 --> 0:17:20.359 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:17:20.359 --> 0:17:23.200 You can also listen live on Amazon Alexa from our 0:17:23.200 --> 0:17:27.600 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:17:29.400 --> 0:17:31.400 Let's get a kind of a wider view of what's 0:17:31.440 --> 0:17:33.320 going on here. We're going to bring in the. 0:17:33.040 --> 0:17:35.960 Sylvia Drablonski, chief investment officer and co founder of Defiance 0:17:36.000 --> 0:17:38.919 ATFS and Herman Chan. He is the regional bank analyst 0:17:38.960 --> 0:17:40.800 for Bloomberg Intelligence, kind of put this a little bit 0:17:40.840 --> 0:17:43.199 into context. So, Sylviet, it's not every day that we 0:17:43.240 --> 0:17:46.760 see this type of struggle for a financial institution. Yes, 0:17:46.800 --> 0:17:48.880 it's not a big money center bank like we saw 0:17:48.960 --> 0:17:51.399 back in two thousand and eight, but still, what's your 0:17:51.480 --> 0:17:53.440 view when you start seeing some of these regional banks 0:17:53.440 --> 0:17:54.640 really face some stress here? 0:17:56.240 --> 0:17:59.639 Yeah, iked morning. Well, interestingly enough, it actually feels like 0:17:59.800 --> 0:18:02.400 it is a little more common. It's not every day, 0:18:02.400 --> 0:18:04.840 but it's happened a couple of days this year. So 0:18:05.320 --> 0:18:07.280 I think what it does is it puts some strain 0:18:07.520 --> 0:18:10.639 on you know, the confidence of investors essentially about the 0:18:10.720 --> 0:18:14.720 regional banking system. And you know, there's that becomes problematic, 0:18:14.840 --> 0:18:17.399 right because if all of the funds are pulled from 0:18:17.640 --> 0:18:20.200 regional banks, you know, we can assume that they go elsewhere, 0:18:20.240 --> 0:18:22.040 so you know, find the money stays in the system. 0:18:22.080 --> 0:18:25.200 But you do have this, you know, major part of 0:18:25.600 --> 0:18:28.560 the financial sector on shaky ground, and I think if 0:18:28.560 --> 0:18:30.760 that happens, you know, these are banks that classically lead 0:18:30.800 --> 0:18:33.000 to to main street and that's the major part of 0:18:33.040 --> 0:18:35.800 our RGVP and our economy. So there is some fear 0:18:35.880 --> 0:18:38.760 that these things that they keep piling up, you know, 0:18:38.880 --> 0:18:41.679 would be inherently pretty bad for the for the banking 0:18:42.200 --> 0:18:44.800 banking system, and it would make investors worry about this 0:18:44.920 --> 0:18:46.400 ability of larger banks eventually. 0:18:47.040 --> 0:18:50.320 Uh yeah, all we see those fears spreading across the market, 0:18:50.680 --> 0:18:53.840 until now it looks like it's only you know, it's 0:18:53.880 --> 0:19:00.240 isolated to so far. SVB, Signature Bank and First Public 0:19:00.280 --> 0:19:02.840 is still going concern But Herman chan, how much longer? 0:19:02.840 --> 0:19:06.000 I mean, what do they have in terms of deposits 0:19:06.080 --> 0:19:08.000 and what do they have in terms of assets? Can 0:19:09.160 --> 0:19:11.959 customers get all their money out today? 0:19:12.680 --> 0:19:14.919 The First Republic's to open for business right now today. 0:19:15.040 --> 0:19:17.600 So if you're a depositor, you can easily just go 0:19:17.720 --> 0:19:20.800 to the ATM or head up your business banker or 0:19:20.840 --> 0:19:24.800 personal banker and exit the balance. 0:19:24.880 --> 0:19:28.760 Che ATMs have limits. You can't pull out more than 0:19:28.760 --> 0:19:31.040 like a thousand dollars. So if you have forty sending 0:19:31.080 --> 0:19:32.400 at First Republic you're gonna need. 0:19:32.440 --> 0:19:35.320 You can go visit one of their beautiful offices and 0:19:35.520 --> 0:19:37.800 eat some of their chocolate chip cookies and talk to 0:19:37.840 --> 0:19:42.800 a personal banker and exit your withdrawal funds as you see. 0:19:42.800 --> 0:19:46.240 Please, Sylvia, you know, how concerned are you about in 0:19:46.280 --> 0:19:49.080 the broader economy if there is some more stress to 0:19:49.119 --> 0:19:53.359 this banking system that maybe not a credit crunch, but certainly, 0:19:53.400 --> 0:19:56.240 you know, maybe tightening of credit out there such that 0:19:56.600 --> 0:19:57.920 it might impact the economy. 0:19:57.960 --> 0:19:59.439 Are you factoring that into your outlook? 0:20:01.119 --> 0:20:03.080 You know, I think it sort of depends to tough 0:20:03.200 --> 0:20:05.440 question to answer, because I think it depends a lot 0:20:05.440 --> 0:20:07.600 on what the Fed plans to do. I think, so 0:20:08.160 --> 0:20:10.920 if you know, we'll certainly have credit tightening, and we'll 0:20:10.920 --> 0:20:12.919 certainly have less liquidity in the system, and then on 0:20:13.000 --> 0:20:14.800 top of that, you'll have you know, sort of even 0:20:14.880 --> 0:20:17.880 less liquidity in the system because investors will will kind 0:20:17.880 --> 0:20:19.639 of pull out in the market, and you know, it 0:20:19.720 --> 0:20:22.560 gets worse. Thinks that, okay, perhaps there's some systemic risk. 0:20:22.840 --> 0:20:25.040 I don't think there is a you know, broad based 0:20:25.119 --> 0:20:27.399 risk to the entire banking system. As you said, these 0:20:27.400 --> 0:20:29.919 are a handful of players. But nevertheless, you know, these 0:20:30.000 --> 0:20:32.439 things happen haven't happened in the US since two thousand 0:20:32.440 --> 0:20:34.960 and eight, and you know, they do instill some fear. 0:20:35.080 --> 0:20:38.320 So I think it's the FED. You know, maybe we 0:20:38.440 --> 0:20:40.600 get maybe that's twenty five BIPs is just a given, 0:20:41.520 --> 0:20:44.600 particularly with shase inflation data and whatnot. But I think, 0:20:44.840 --> 0:20:46.560 you know, if the side kind of keeps going after that, 0:20:46.640 --> 0:20:49.359 and you have this liquidity and this credit tightening the system, 0:20:49.800 --> 0:20:53.560 then the market is directionally at risk for perhaps a 0:20:53.600 --> 0:20:56.240 recession or a harder landing. I think if that doesn't 0:20:56.240 --> 0:20:58.119 happen in the sense sort of pauses after this and 0:20:58.280 --> 0:21:00.400 lets all of this kind of feed in and and 0:21:00.440 --> 0:21:02.800 you know, bring inflation down and and kind of let 0:21:02.840 --> 0:21:04.400 the market reset a little bit for a few months. 0:21:04.440 --> 0:21:06.080 But then I think, well, we'll kind of be okay. 0:21:06.160 --> 0:21:09.719 And whether this you know, corporators are certainly holding up, 0:21:09.760 --> 0:21:12.119 and if if things don't sort of get worse. I 0:21:12.119 --> 0:21:15.520 think that can can change the other way. But again 0:21:15.560 --> 0:21:17.600 a tin side could could pull back. 0:21:17.400 --> 0:21:18.240 Any kind of right. 0:21:18.800 --> 0:21:22.520 Hermann just explained to us how this mechanically might work 0:21:22.640 --> 0:21:25.480 if the FDI is it the FDI see that comes 0:21:25.560 --> 0:21:27.880 in and intervenes here, and how does that work? 0:21:28.000 --> 0:21:31.000 So the f I see what would typically likes to 0:21:31.119 --> 0:21:36.480 close any failed bank on a Friday after business hours 0:21:36.480 --> 0:21:41.479 to come in too, and then hopefully line up a 0:21:41.760 --> 0:21:45.160 buyer by the weekend, and so the buyer would would 0:21:45.160 --> 0:21:49.760 then operate First Republic or any other failed bank uh 0:21:49.880 --> 0:21:54.000 as as their own entities, so there's no disruption in service, 0:21:54.359 --> 0:21:58.119 and then any any customers of that bank could just 0:21:59.000 --> 0:22:03.439 transact as normal, so there's no disruption. So that's typically 0:22:03.480 --> 0:22:05.960 how things work, and that's why the FDIC likes to 0:22:05.960 --> 0:22:07.639 do things on a Friday afternoon. 0:22:07.840 --> 0:22:11.240 Yeah, exactly, that's a good point. We get these announcements 0:22:11.240 --> 0:22:14.040 often on the weekend or after the market closes on Friday. 0:22:14.800 --> 0:22:19.600 In terms of deposits above and beyond the two hundred 0:22:19.600 --> 0:22:23.359 and fifty thousand dollars that's insured, do they break that 0:22:23.480 --> 0:22:25.800 out at First Republic? Have they said, okay, everybody who 0:22:25.840 --> 0:22:27.959 had more than two hundred and fifty. They've reduced that 0:22:28.000 --> 0:22:29.240 to two fifty. 0:22:29.080 --> 0:22:32.320 Right, So they said that in the fourth quarter it 0:22:32.400 --> 0:22:34.800 was like sixty seven percent, and a lot of that 0:22:34.840 --> 0:22:37.920 has now gone. And really there's only a few billion 0:22:38.000 --> 0:22:41.920 dollars outside of the thirty billion from the collectively from 0:22:41.960 --> 0:22:46.000 the largest US banking institutions that tried to prop up 0:22:46.440 --> 0:22:50.960 First Republic. So most of the uninsured deposits have already eccided, 0:22:51.200 --> 0:22:56.320 and any left probably and after this turmoil over the 0:22:56.320 --> 0:23:00.199 past week, probably have thought twice about keeping their their 0:23:00.240 --> 0:23:01.560 money at First Republic as one. 0:23:01.680 --> 0:23:04.359 All right, Herman Chan is our Bloomberg intelligence analyst for 0:23:04.400 --> 0:23:06.400 regional banks. I'm sure you're one it on television right 0:23:06.400 --> 0:23:10.040 now or some other meeting. You should wear a cape 0:23:10.760 --> 0:23:12.879 when you walk around this building. Sylvia. I'm sorry that 0:23:12.920 --> 0:23:15.479 we didn't get to talk about more about quantum because 0:23:16.600 --> 0:23:19.720 this ETF that you run qt u M it's got 0:23:19.800 --> 0:23:21.679 to be so hot right now with all the interests 0:23:21.680 --> 0:23:24.879 in AI and tech and banking has distracted us. But 0:23:25.040 --> 0:23:28.159 just tell us briefly about you know, the flows and 0:23:28.160 --> 0:23:31.400 the interest in qt um. 0:23:31.680 --> 0:23:34.919 Yeah, so quantum is just sort of taking off, as 0:23:34.920 --> 0:23:38.159 you can imagine and the tech earnings have particularly propelled that. 0:23:38.240 --> 0:23:39.639 You know, we hold all of these needs in our 0:23:39.680 --> 0:23:43.120 baskets that are benefiting from you know, cut and cost, 0:23:43.200 --> 0:23:46.240 but also their future investments in AI for the Microsoft, Googles, 0:23:47.000 --> 0:23:48.880 Amazons and whatnot. But yeah, I mean AI is going 0:23:48.920 --> 0:23:50.399 to change the way we live. We've talked about it 0:23:50.400 --> 0:23:53.520 a lot. You have AI applications in healthcare, you know, 0:23:53.920 --> 0:23:56.080 reta out thinking about Amazon, you know, if they lose 0:23:56.119 --> 0:23:58.399 on cloud, well maybe that you may also like this 0:23:58.600 --> 0:24:02.120 thing when you're shopping comes from AI in to blues 0:24:02.119 --> 0:24:06.639 speature revenues, you know, manufacturing AI solutions, forecast demand and 0:24:06.680 --> 0:24:08.119 things like that. So it's just going to change the 0:24:08.160 --> 0:24:10.080 way we live and work. And I think that a 0:24:10.080 --> 0:24:12.280 lot of the companies at the forefront of this are 0:24:12.359 --> 0:24:15.400 really you know, performing this year and I was performing 0:24:15.400 --> 0:24:17.400 both and howzat on smt Hie. 0:24:17.440 --> 0:24:19.040 Soyllia, thank you so much for joining us, and thank 0:24:19.080 --> 0:24:21.480 you for being flexible here as we talk about the 0:24:21.800 --> 0:24:25.080 First Republic News as well as so Vijablonski, chief investment 0:24:25.200 --> 0:24:27.440 officer with Defiance E TFS. 0:24:29.160 --> 0:24:32.560 You're listening to the team Ken's are Live program Bloomberg 0:24:32.600 --> 0:24:35.960 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:24:36.040 --> 0:24:39.200 the iHeartRadio app, and the Bloomberg Business app, or listen 0:24:39.280 --> 0:24:42.000 on demand wherever you get your podcast. 0:24:43.680 --> 0:24:44.960 Lose it just across the tape here. 0:24:45.320 --> 0:24:47.640 At the top of the hour, the Federal Reserve Bank 0:24:47.680 --> 0:24:51.360 Supervision chief called for a sweeping re evaluation of how 0:24:51.359 --> 0:24:54.600 the institution oversees US financial firms following the failure of 0:24:54.680 --> 0:24:57.560 Silicon Value Bank Gas some detailed reporting on that. Steve Matthews, 0:24:57.680 --> 0:25:00.959 us economy reporter with Bloomberg News, and Jenny Sirring, she's 0:25:01.000 --> 0:25:03.359 a financi reporter with the Bloomberg News who joins us 0:25:03.400 --> 0:25:05.320 here in our Bloomberg Interactive Broker studio. 0:25:06.000 --> 0:25:07.600 Jenny, what did What's your takeaway here? 0:25:07.640 --> 0:25:09.920 I mean, it looks like they're trying to spread the 0:25:10.440 --> 0:25:12.960 blame around a little bit on the bank itself and that, 0:25:13.080 --> 0:25:16.119 but also on regulatory officials themselves and maybe been I 0:25:16.119 --> 0:25:17.359 think the term is foot dragging. 0:25:17.960 --> 0:25:20.040 Yeah, No, I think this is a little bit more 0:25:20.040 --> 0:25:22.320 of the finger pointing that we've been seeing for a 0:25:22.320 --> 0:25:25.240 lot of the last few weeks. So this is I 0:25:25.320 --> 0:25:27.359 think you're right, the Fed is kind of putting a 0:25:27.359 --> 0:25:30.159 lot of the bit blame squarely on these managers. I 0:25:30.160 --> 0:25:33.760 do think they've acknowledged a little bit of their their laxness. 0:25:33.800 --> 0:25:35.880 But yeah, I mean, I think one of the more 0:25:35.880 --> 0:25:39.080 interesting takeaways that I saw was that they were calling 0:25:39.160 --> 0:25:43.119 their interest rate risk modeling, you know, deficient, and that 0:25:43.280 --> 0:25:45.399 was as far back as November at least, and so 0:25:45.840 --> 0:25:48.240 obviously this was something that was on the radar of regulators. 0:25:48.280 --> 0:25:51.760 But did they move quickly enough and act you know, anticipation. 0:25:51.960 --> 0:25:55.280 Yeah, I mean, Steve Matthews, isn't this a case of 0:25:55.560 --> 0:25:59.399 toothlessness at the regulator? What became really clear to me 0:25:59.520 --> 0:26:02.199 watching the congressional testimony over a couple of days was 0:26:02.240 --> 0:26:05.320 that the FED knew this was coming. You know, the 0:26:05.480 --> 0:26:10.080 regulators knew this was happening for a year and did 0:26:10.320 --> 0:26:14.359 essentially nothing about it. As John Tester said, nobody dropped 0:26:14.400 --> 0:26:14.800 the hammer. 0:26:15.600 --> 0:26:16.560 That is correct. 0:26:16.600 --> 0:26:19.040 And you know, if you read the details of the report, 0:26:19.359 --> 0:26:22.960 and if you're interested in financial regulation, it's definitely worth reading. 0:26:22.960 --> 0:26:24.240 It's one hundred page report. 0:26:25.200 --> 0:26:26.119 But the. 0:26:27.720 --> 0:26:31.000 When there's a problem with the bank, the regulators write 0:26:31.080 --> 0:26:35.640 up what an MR or MR I a matter requiring 0:26:35.680 --> 0:26:39.960 attention and matter requiring immediate attention and send it to 0:26:40.000 --> 0:26:44.600 the bank, and there were thirty one areas thirty one 0:26:44.840 --> 0:26:50.439 of these corrections where there were problems with the bank, 0:26:50.680 --> 0:26:54.600 and they you know, obviously they left them open and 0:26:55.359 --> 0:27:00.600 you know, as in their annual exam in and uh, 0:27:01.119 --> 0:27:04.600 you know, in the middle of last year, they found 0:27:04.800 --> 0:27:09.159 management and controls were deficient and they were considering, you know, 0:27:09.200 --> 0:27:13.080 putting together an enforcement action that would require the bank 0:27:13.160 --> 0:27:16.439 to do more, and they were the regulators were mulling it. 0:27:17.160 --> 0:27:19.679 But you know, the bank failed in the in the 0:27:19.760 --> 0:27:22.080 year in which they were considering it. So it's like 0:27:22.119 --> 0:27:26.160 they clearly there was a whole problem with the culture 0:27:26.560 --> 0:27:30.080 of supervision. And the report kind of lays that out 0:27:30.160 --> 0:27:34.720 and says that under the former vice chairman, uh, you know, 0:27:34.840 --> 0:27:39.720 they pushed efficiency, they pushed you know, a light regulatory 0:27:39.960 --> 0:27:44.000 approach and and uh and that kind of you know, 0:27:44.119 --> 0:27:48.040 created a culture of what of supervisors backing off. 0:27:48.400 --> 0:27:53.080 You know, Jenny, What's interesting is that Dodd Frank had 0:27:53.600 --> 0:27:59.640 created some really tough supervisory regulations that then later were 0:28:00.160 --> 0:28:03.360 loosened a little bit by Congress I think twenty eighteen, right, 0:28:03.760 --> 0:28:07.439 and a lot of people, Elizabeth Warren and others have 0:28:07.720 --> 0:28:10.760 grafted onto this as maybe the big problem. Right, it 0:28:10.800 --> 0:28:14.080 was during the Trump era, so certainly it must have 0:28:14.119 --> 0:28:17.160 been problematic. We talked to Barney Frank on this show, 0:28:17.359 --> 0:28:19.639 we did, and he said, that has nothing to do 0:28:19.720 --> 0:28:22.359 with it, So what's the truth? 0:28:23.280 --> 0:28:25.560 I mean, yeah, I think he wrote. 0:28:25.359 --> 0:28:27.760 That regulation right, He wasn't worried about it, So why 0:28:27.800 --> 0:28:28.520 is anyone else? 0:28:28.640 --> 0:28:31.000 Yeah, I mean, I think we're always going to see that. 0:28:31.480 --> 0:28:33.800 The same fingerpointing that we've seen between you know, the 0:28:33.840 --> 0:28:36.480 banks and the regulators, we'll probably see that between Democrats 0:28:36.480 --> 0:28:39.440 and Republicans. And I mean, certainly there was a lot 0:28:39.480 --> 0:28:41.720 of rolling back of regulation under Trump. But then I 0:28:41.720 --> 0:28:45.080 think even just days before this all happened, you had 0:28:45.120 --> 0:28:46.880 Michael Barr out there saying that, you know, you could 0:28:46.880 --> 0:28:49.840 take a light touch approach to regional banking regulation. So 0:28:50.480 --> 0:28:54.479 I don't think either side is completely blameless. And you know, 0:28:54.520 --> 0:28:56.600 probably we could point to a lot of different examples 0:28:56.600 --> 0:28:59.480 that you know, ultimately led to what happened in that 0:28:59.520 --> 0:29:00.000 faithful day. 0:29:00.040 --> 0:29:03.960 In mind, Steve, this just feels like a process that's 0:29:04.040 --> 0:29:07.280 just going to take a long time to implement. Meanwhile, 0:29:07.880 --> 0:29:10.040 you know, we still it's become clear that some of 0:29:10.040 --> 0:29:12.640 these small regional banks they can do a lot of 0:29:12.720 --> 0:29:16.320 damage to just market confidence. Here, what's the sense of 0:29:17.040 --> 0:29:19.880 how any increased regulation may play out in terms of timing, 0:29:20.840 --> 0:29:21.360 It could. 0:29:21.240 --> 0:29:25.080 Take several years, just because the regulatory process is really 0:29:25.200 --> 0:29:28.400 slow in terms of like creating the rules and then 0:29:28.440 --> 0:29:31.360 having you know, a comment period and then you know, 0:29:31.840 --> 0:29:35.600 Congress can can weigh in, and it's going to take 0:29:35.840 --> 0:29:37.920 you know, a couple of years before you get actually 0:29:38.400 --> 0:29:41.280 new rules in place. I think I think the important 0:29:41.280 --> 0:29:46.520 thing is that Michael Barr is recognizing that there's a 0:29:46.600 --> 0:29:50.880 problem with the culture of supervisors that they are you know, 0:29:50.960 --> 0:29:54.800 not empowered to take action, that they feel like they're constrained, 0:29:54.840 --> 0:29:57.360 and the report kind of lays that out. Before they 0:29:57.400 --> 0:30:00.840 could even like you know, issue any kind of order 0:30:00.880 --> 0:30:02.840 at all or any kind of memo, they had to 0:30:02.960 --> 0:30:06.280 like consult at the San Francisco Fed with with the 0:30:06.640 --> 0:30:09.720 FED staff in Washington. It's just kind of a slow 0:30:09.800 --> 0:30:13.520 bureaucratic process. And they can definitely do a better job 0:30:13.560 --> 0:30:18.960 with supervision just by you know, changing the culture without 0:30:19.040 --> 0:30:21.720 changing any laws or rules at all. 0:30:22.680 --> 0:30:25.400 Was there any criticism of the San Francisco Fed of 0:30:25.880 --> 0:30:29.480 Mary Daily. I mean, during the testimony, Republicans you know, 0:30:30.200 --> 0:30:33.680 made comments about how she may have been too worried, 0:30:34.600 --> 0:30:39.440 too concerned with, you know, the vibe in San Francisco, 0:30:39.520 --> 0:30:43.360 the mood of employees, although that's part of her job 0:30:43.400 --> 0:30:45.400 as well. But did she get a mention in the 0:30:45.400 --> 0:30:47.960 one hundred and two pages here, Jenny. 0:30:48.760 --> 0:30:50.720 Not that I've seen yet, although I am still making 0:30:50.720 --> 0:30:52.480 my way through all one hundred and two pages. 0:30:52.560 --> 0:30:53.560 That's fair, that's fair. 0:30:53.600 --> 0:30:56.880 It's a long report, you know. I wonder if any 0:30:56.920 --> 0:31:00.200 of this will have fallout on First Republic. You know, 0:31:00.240 --> 0:31:02.240 even if it takes years Steve, as you said, to 0:31:02.640 --> 0:31:07.959 work through regulatory changes in legislation, do they feel the 0:31:08.000 --> 0:31:11.800 need to be more hands on, to be more proactive 0:31:12.720 --> 0:31:16.120 in a bank that could also see some real deposit 0:31:16.240 --> 0:31:19.400 flight and has also had some serious interest rate risk. 0:31:20.080 --> 0:31:22.880 Well, they definitely feel the need to be more proactive. 0:31:22.920 --> 0:31:25.480 I mean, exactly how it will play out with First 0:31:25.560 --> 0:31:28.880 Republic is an interesting question because, on the one hand, 0:31:28.920 --> 0:31:32.520 if you're going to have a get tough approach, then 0:31:32.760 --> 0:31:35.720 you know that would not necessarily be good news for 0:31:35.800 --> 0:31:40.400 First Republics shareholders or depositors. On the other hand, if 0:31:40.440 --> 0:31:45.200 you're worried about it's you know, systemic importance, you would 0:31:45.200 --> 0:31:49.000 want to make sure that it doesn't cause additional harm 0:31:49.080 --> 0:31:52.400 to the entire banking system. So you know, they're there 0:31:52.840 --> 0:31:55.760 are definitely kind of cross currents there. 0:31:56.000 --> 0:31:58.120 Hey, Jenny, what what are we hearing from the regional 0:31:58.160 --> 0:32:02.440 banks themselves? Are they are they prepared heard for increased regulation? 0:32:02.680 --> 0:32:05.440 Are they fighting back? What are we hearing from them? 0:32:05.960 --> 0:32:08.800 I think we've honestly probably heard more from the biggest 0:32:08.800 --> 0:32:11.680 banks wanting to draw that distinction that you know, we 0:32:11.680 --> 0:32:13.640 were fine, we were able to step in and help 0:32:13.640 --> 0:32:17.200 First Republic, for example. We haven't heard as much of 0:32:17.240 --> 0:32:19.400 the regional banks saying like, no, no, you know, still 0:32:19.480 --> 0:32:22.479 leave us alone. I think, you know, I think everybody 0:32:22.560 --> 0:32:24.400 kind of realizes the state that things are in and 0:32:24.680 --> 0:32:26.840 how fragile things are still, even though you know, we 0:32:26.960 --> 0:32:29.480 just got through earning season and things felt a little 0:32:29.520 --> 0:32:32.280 bit better. But I think mostly we've just heard from 0:32:32.280 --> 0:32:34.720 the biggest US banks saying we've already been subject to 0:32:35.000 --> 0:32:37.320 all number of things that prevented us from being in 0:32:37.360 --> 0:32:40.000 this situation and allowed us actually to you know, step 0:32:40.000 --> 0:32:43.040 in and save the day in some cases. So I 0:32:43.040 --> 0:32:45.280 think that's that's mostly what we've been hearing so far. 0:32:45.280 --> 0:32:48.800 Was there any mention of the you know, rapid rise 0:32:49.000 --> 0:32:53.720 in rates by Jerome Powell and co. I mean, I 0:32:53.720 --> 0:32:58.000 I guess we know that there are reasons for that, right, 0:32:58.040 --> 0:32:59.840 they had to slow inflation, and a lot of people 0:32:59.840 --> 0:33:02.239 think they were late to the party even there. But 0:33:02.640 --> 0:33:05.000 you know, still five hundred basis points in a year, 0:33:06.520 --> 0:33:10.680 Steve Matthews, is a lot for the economy to handle. 0:33:10.920 --> 0:33:13.200 You know, you can see why it would have put 0:33:13.240 --> 0:33:15.560 people in a difficult position. Do they talk about it, 0:33:15.560 --> 0:33:16.280 do they touch on it? 0:33:16.600 --> 0:33:19.880 That is not really touched on in that context. I 0:33:19.880 --> 0:33:23.240 mean a lot of people outside the Fed say, well, 0:33:23.240 --> 0:33:26.160 if you raise rates, you know, the most aggressively you 0:33:26.280 --> 0:33:28.600 have in forty years, there's a good chance you're going 0:33:28.600 --> 0:33:29.920 to end up with some accidents. 0:33:30.440 --> 0:33:31.800 But you know, what the. 0:33:31.760 --> 0:33:36.960 Report says is basically that these banks were not really 0:33:37.040 --> 0:33:41.080 prepared for This bank in particular is not prepared for 0:33:41.680 --> 0:33:45.280 the interest rate rises, and that the supervisors were not 0:33:45.520 --> 0:33:51.160 really forcing this bank or banks more generally, to model 0:33:51.320 --> 0:33:54.680 for this kind of thing. So you know, there was 0:33:54.840 --> 0:33:58.719 there was, you know, an absence of risk management, and 0:33:58.920 --> 0:34:02.560 you know that this wasn't the base case, this was 0:34:02.920 --> 0:34:06.120 what people were expecting, but they should have been prepared for, 0:34:06.560 --> 0:34:09.399 you know, a worst case scenario without you know, going 0:34:09.400 --> 0:34:10.359 out of business. 0:34:10.760 --> 0:34:11.240 Ay, Jenny. 0:34:11.239 --> 0:34:14.680 Another troubled regional bank, New York Community Bank CRUP, bought 0:34:14.760 --> 0:34:17.880 Signature Bank, So I should rephrase that New York Community 0:34:17.880 --> 0:34:21.680 Bank bought a challenge Signature Bank. How's that working out? 0:34:22.440 --> 0:34:24.439 You know, it's actually working out pretty well for them today. 0:34:24.480 --> 0:34:27.360 I think they're up quite a bit. They reported earnings 0:34:27.400 --> 0:34:29.920 this morning. It was sort of interesting because, you know, 0:34:29.960 --> 0:34:32.600 when they bought this bank and combined to the two companies, 0:34:32.680 --> 0:34:35.480 they had about ninety three billion in deposits, and they've 0:34:35.520 --> 0:34:38.000 seen that slip down to about eighty two billion or 0:34:38.040 --> 0:34:41.200 so as of last week, and they actually said a 0:34:41.239 --> 0:34:43.640 lot of that was expected and that going forward it 0:34:43.719 --> 0:34:46.840 should stabilize pretty nicely. And so, you know, it seems 0:34:46.960 --> 0:34:48.840 like even the ones that were hit the hardest, and 0:34:48.880 --> 0:34:50.960 even the ones that had the worst headlines where customers 0:34:51.000 --> 0:34:53.479 would be the most booked, things are sort of getting 0:34:53.560 --> 0:34:56.080 okay and things are sort of stabilizing. So you know, 0:34:56.080 --> 0:34:58.680 they forecasted that their profits will go up and that 0:34:58.719 --> 0:35:01.440 things look really nice. So I think that was definitely 0:35:01.440 --> 0:35:02.719 a little bit of a sigh of relief. For a 0:35:02.719 --> 0:35:04.239 lot of regional bank investors out there. 0:35:04.680 --> 0:35:07.640 How are the other regional banks doing? Pac West was 0:35:07.680 --> 0:35:12.759 one that we were all following very closely, even a 0:35:12.840 --> 0:35:16.799 giant like Schwab was a company whose shares had been 0:35:16.960 --> 0:35:21.719 hit pretty hard. Are are those others that had kind 0:35:21.760 --> 0:35:26.120 of indirect contact with SVB and First Republic? Have they 0:35:26.160 --> 0:35:26.799 bounced back? 0:35:27.719 --> 0:35:30.520 Yeah? So I think, you know, if bounce back is 0:35:30.680 --> 0:35:32.960 probably a little bit too strong. Stabilized, I think is 0:35:32.960 --> 0:35:34.200 the word that a lot of them like to use. 0:35:34.280 --> 0:35:37.000 So they're, you know, they've they admit that they saw 0:35:37.040 --> 0:35:39.560 heavy outflows. Maybe it hasn't completely stopped, but it's a 0:35:39.640 --> 0:35:40.640 leaf's gone down quite a bit. 0:35:40.719 --> 0:35:42.920 Hiight, Jennie, thanks so much. We appreciate that. Jenny Starraine. 0:35:42.960 --> 0:35:45.920 She's a financial reporter Steve Matthews covering the economy, weighing 0:35:45.920 --> 0:35:47.040 in on this bank. 0:35:47.560 --> 0:35:50.640 You're listening to the tape catch are live program Bloomberg 0:35:50.719 --> 0:35:54.319 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:35:54.360 --> 0:35:57.600 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:35:57.640 --> 0:36:00.480 You can also listen live on Amazon Alexi from our 0:36:00.480 --> 0:36:04.840 flagship New York station, Just Say Alexa playing Bloomberg eleven thirty. 0:36:06.960 --> 0:36:11.200 Big Oil reporting big numbers today. Chevron and Exxon Mobile. 0:36:11.280 --> 0:36:13.600 You put it together, they have like eighteen billion dollars 0:36:13.600 --> 0:36:16.280 in net profit just in the quarter. Both Stoctor trading 0:36:16.360 --> 0:36:19.680 higher today. My question to Fernando Valley, who covers all 0:36:19.680 --> 0:36:22.640 this stuff for Bloomberg Intelligence, is is this as good 0:36:22.680 --> 0:36:25.320 as it gets for Big Oil? Are we peak oil 0:36:25.360 --> 0:36:27.280 here in terms of profitability and stuff? 0:36:27.840 --> 0:36:29.959 I don't think we're quite as good as it gets. 0:36:29.960 --> 0:36:33.520 But it's pretty darn good, okay, And it could be better, 0:36:34.480 --> 0:36:37.240 and I think it may be in the next within 0:36:37.280 --> 0:36:40.640 the next decade, but it's pretty close to that. 0:36:41.880 --> 0:36:47.120 So how does the market look in terms of supply? 0:36:47.560 --> 0:36:51.759 I keep seeing, you know, draw downs in stocks, and 0:36:52.520 --> 0:36:55.720 I don't know about the demand side, but it seems 0:36:55.760 --> 0:36:57.719 to me from the draw downs, I see that the 0:36:57.760 --> 0:37:02.160 market's very tight, and I keep expecting to see the 0:37:02.200 --> 0:37:04.680 price rise more than it has. Right where seventy five 0:37:04.719 --> 0:37:07.839 dollars for right now, we're at about seventy five dollars 0:37:07.840 --> 0:37:12.239 only pull up GLCO go seventy six, forty four for 0:37:12.400 --> 0:37:15.200 WTI seventy nine to fifty one, so basically eighty bucks 0:37:15.200 --> 0:37:15.560 for Brent. 0:37:15.960 --> 0:37:18.440 Yeah, I think That's why it could get better, right 0:37:18.480 --> 0:37:21.960 because the supply side, we see the underinvestment that's happened 0:37:22.000 --> 0:37:26.000 over the past five to six, maybe even eight years globally, 0:37:26.040 --> 0:37:27.719 not just in the US. And then we see the 0:37:27.760 --> 0:37:30.719 limitations in US shale that we've talked about before, how 0:37:30.719 --> 0:37:34.160 they're running out of the good quality inventory to get 0:37:34.200 --> 0:37:37.080 to that supply. The issue, as you mentioned, is demand. 0:37:37.840 --> 0:37:41.560 We were talking about earlier ups saying volumes are down. 0:37:41.680 --> 0:37:45.680 You see FED hiking rates, all the tech layoffs, bank implosions, 0:37:46.200 --> 0:37:48.960 all of that will have a repercussion in oil demand. Ultimately, 0:37:49.239 --> 0:37:51.759 so far it hasn't really happened. We just saw the 0:37:51.840 --> 0:37:54.880 EIA send revised numbers for diesel around four million barrels 0:37:54.920 --> 0:37:57.919 a day. That's good. It's not great, but it's good, 0:37:58.239 --> 0:38:01.160 and so we're not seeing the cracks yet. As we 0:38:01.239 --> 0:38:05.360 see further pressure on consumer demand, be the Disney's, the 0:38:05.400 --> 0:38:10.040 Amazon layoffs, that could lead to lower oil demand itself. 0:38:10.480 --> 0:38:14.680 I see your AEI and raise you one i EA. 0:38:14.960 --> 0:38:17.879 I spoke with fatib Roll a couple of days ago, 0:38:18.480 --> 0:38:22.080 who runs the International Energy Agency, and he came out 0:38:22.120 --> 0:38:25.399 with a report that EV sales are going to make 0:38:25.520 --> 0:38:29.000 up almost a fifth of total car sales this year. 0:38:29.120 --> 0:38:32.759 That's huge, right, I mean that's up from what four 0:38:32.840 --> 0:38:36.120 percent a couple of years ago. I think eighteen percent 0:38:36.160 --> 0:38:39.200 was the exact number. Okay, it's still a tiny part 0:38:39.360 --> 0:38:44.040 of the global automotive fleet. But is that having any 0:38:44.120 --> 0:38:45.200 impact on demand? 0:38:46.200 --> 0:38:50.880 Very limited because two main things. First is, how do 0:38:50.920 --> 0:38:53.680 you mind for all those minerals that are going to 0:38:53.719 --> 0:38:56.560 an EV battery and go into producing an EV. You 0:38:56.600 --> 0:38:59.279 actually mind ten times as many minerals to produce an 0:38:59.280 --> 0:39:01.640 EV as you do an internal combustion engine. 0:39:01.400 --> 0:39:03.840 Vehicle with diesel powered machines exactly. 0:39:04.840 --> 0:39:07.560 And then the second part is I come from Brazil 0:39:08.520 --> 0:39:14.240 and the biggest growth engine of oil is developing markets. 0:39:14.360 --> 0:39:17.359 Five billion people over fifty percent of demand. We can't 0:39:17.400 --> 0:39:20.400 afford a forty thousand dollars Model three. We barely have 0:39:20.480 --> 0:39:23.279 the power to feed them as it is. And when 0:39:23.320 --> 0:39:25.520 you look at Europe, you look at California, they're struggling 0:39:25.560 --> 0:39:27.960 with the power to feed their current EV fleet, let 0:39:28.080 --> 0:39:30.200 alone if all of us were driving on evs. 0:39:30.960 --> 0:39:32.960 All right, so what is your demand model? 0:39:33.440 --> 0:39:35.799 I manage these guys for years, and they are a 0:39:36.400 --> 0:39:38.879 These energy guys are a ruly bunch to manage. I mean, 0:39:40.160 --> 0:39:42.440 I'm unbelievable. But one thing I did learn is you 0:39:42.440 --> 0:39:45.879 guys have demand models. You've got supply models. What what's 0:39:45.920 --> 0:39:47.680 your demand model kind of telling you over the next 0:39:47.840 --> 0:39:48.480 couple of years. 0:39:48.960 --> 0:39:52.359 Well, the biggest variable there is exactly what we get 0:39:52.400 --> 0:39:56.480 on fuel efficiency and electric vehicles. Our view is that 0:39:56.520 --> 0:39:58.359 we're going to continue to be at the one point 0:39:58.360 --> 0:40:01.600 three to one point four per sent long term average 0:40:01.640 --> 0:40:05.120 growth for oil demand, and the biggest change there is 0:40:05.160 --> 0:40:08.719 just yes, you're going to get some ev penetration, but 0:40:09.200 --> 0:40:12.880 more abundant energy actually leads to higher consumption as opposed 0:40:12.920 --> 0:40:16.520 to fewer consumption. If you have more of it and 0:40:16.640 --> 0:40:20.200 a cheaper price, you typically consume higher volumes and again 0:40:20.280 --> 0:40:24.080 develop markets. We consume thirty seven times more than the 0:40:24.160 --> 0:40:28.680 average African today, we owed American thirty seven times. 0:40:28.760 --> 0:40:32.640 Is match driving around this Chevy Silverado thing, I mean, 0:40:32.760 --> 0:40:33.799 like you need in west Chester. 0:40:33.920 --> 0:40:38.040 I occasionally drive also electric vehicles, and I enjoy never 0:40:38.080 --> 0:40:41.000 having to go to the pump. That reminds me to 0:40:41.040 --> 0:40:44.719 bring John Tucker into this discussion, because JT I think 0:40:44.760 --> 0:40:47.439 you have a question. Every day I come in here 0:40:47.480 --> 0:40:50.160 and you're complaining to Paul about what you pay. I 0:40:50.200 --> 0:40:51.680 whant to ask Fernando, what's up with that? 0:40:52.360 --> 0:40:56.240 Yeah? Well, also it's first off, what are the best margins? 0:40:56.400 --> 0:40:58.800 Is a diesel gasoline? What do you make the most 0:40:58.880 --> 0:40:59.719 as a refinery? 0:41:00.080 --> 0:41:03.399 Today it's gasoline, but refiners really benefit the most. Woe 0:41:03.520 --> 0:41:06.800 diesel is that its highest because a barrel of oil 0:41:06.840 --> 0:41:09.919 produces around fifty to fifty five percent gasoline and only 0:41:09.960 --> 0:41:12.680 thirty percent diesel, so it's harder to make diesel. So 0:41:12.719 --> 0:41:15.719 when those margins are high, you're really benefiting. And that's 0:41:15.760 --> 0:41:19.600 what happened last year. Today gasoline is almost twice as 0:41:19.680 --> 0:41:21.000 high on a margin as diesel. 0:41:21.080 --> 0:41:23.040 What we were paying this morning three point fifty at 0:41:23.080 --> 0:41:24.759 the wah wah, I think it was. Is it a 0:41:24.920 --> 0:41:29.279 seasonal thing also where we're seeing a change in refinery 0:41:29.320 --> 0:41:32.399 maintenance and some are blends starting to come in at 0:41:32.400 --> 0:41:32.840 some point. 0:41:33.080 --> 0:41:36.000 Yeah, the summer blend is just the switch off is 0:41:36.120 --> 0:41:38.480 just getting into high gear and we're going to go 0:41:38.520 --> 0:41:41.440 into high seasonal demand in the summer. The other issue 0:41:41.480 --> 0:41:46.120 is Europe struggling to replace Russian crude and also high 0:41:46.239 --> 0:41:48.440 energy costs in the East Coast. We import a lot 0:41:48.520 --> 0:41:52.600 of gasoline from Europe Now some of it from India, 0:41:52.640 --> 0:41:56.239 which is Russian crude. Don't tell them. 0:41:56.520 --> 0:41:58.920 I mean, there's a chance that I'm filling up my 0:41:59.160 --> 0:42:02.719 crush with gasoline that was a crude oil that was 0:42:02.719 --> 0:42:04.800 refined in the gasoline in Europe. 0:42:04.880 --> 0:42:08.160 There's a chance that you were funding Vladimir Putin's for Ukraine. 0:42:08.320 --> 0:42:11.200 Yeah, it might be a Russian crew that was refined 0:42:11.239 --> 0:42:13.000 in India and then came all the way here. 0:42:13.480 --> 0:42:16.479 Okay, as I passed the bay Way refinery or what's 0:42:16.520 --> 0:42:19.160 the one on the turnpike this Phillip sixty six. 0:42:19.040 --> 0:42:20.560 Yeah, exactly, we're doing it right there. 0:42:20.640 --> 0:42:22.520 So let's say I want to go down to Corpus Christi, 0:42:22.640 --> 0:42:24.600 Texas and build a refinery. 0:42:24.840 --> 0:42:25.400 Can I do that? 0:42:26.040 --> 0:42:27.920 Well, you'd be better off just taking one of the 0:42:27.960 --> 0:42:29.440 idle ones and restarting it. 0:42:29.480 --> 0:42:31.040 Oh so, where are some idled ones? 0:42:31.480 --> 0:42:32.840 You have some in Louisiana? You have? 0:42:32.880 --> 0:42:35.319 Why do we have idle refineries? Don't we need not to. 0:42:35.200 --> 0:42:39.000 Close some more? And one most refining it is that. 0:42:39.160 --> 0:42:42.600 But it's also just it's very expensive to make all 0:42:42.600 --> 0:42:46.640 the investments to bring them up to spec, not just 0:42:46.719 --> 0:42:50.080 on green but also the emissions regulations and all the 0:42:50.160 --> 0:42:53.760 other limitations that have been put on refiners and crewde 0:42:54.200 --> 0:42:57.919 processing itself. And then the bigger challenge is we've talked 0:42:57.920 --> 0:42:59.920 about it. You love it. The Jones Act. You can 0:43:00.080 --> 0:43:01.279 up that's transported. 0:43:01.400 --> 0:43:04.200 When I'm president, the first thing I'm doing is get ready, 0:43:04.239 --> 0:43:04.560 what's that? 0:43:05.480 --> 0:43:09.520 The Jones Act. You can't transport anything in the US 0:43:09.640 --> 0:43:12.799 unless it's in a vessel that was built, crewed, and 0:43:13.200 --> 0:43:17.200 registered in the US. And we only build naval ships, 0:43:17.680 --> 0:43:20.680 uh for for defense reasons, so there are none of those. 0:43:20.719 --> 0:43:23.120 And you can't really bring a lot of products from 0:43:23.120 --> 0:43:25.080 the Gulf Coast to East coast, which is why we're 0:43:25.120 --> 0:43:26.320 importing it from India. 0:43:26.440 --> 0:43:28.920 So they can't. They can't put them a bunch of 0:43:29.800 --> 0:43:35.880 petroleum products into a ship in Louisiana and bring it 0:43:36.080 --> 0:43:37.760 back around here to New Jersey. 0:43:37.840 --> 0:43:38.520 You can't do it. 0:43:38.560 --> 0:43:39.040 We send them. 0:43:39.239 --> 0:43:41.279 Let's so let's put a pipeline in and pipe it 0:43:41.320 --> 0:43:43.360 in from the Pennsylvania shale area. 0:43:43.520 --> 0:43:45.759 Well, yeah, if you can't do them, if you can 0:43:45.800 --> 0:43:48.759 convince New York State to build a pipeline, I'll give 0:43:48.800 --> 0:43:52.799 you all of my uh all my all of my 0:43:52.800 --> 0:43:54.160 free snacks from upstairs. 0:43:54.840 --> 0:43:56.400 I mean that. That's the frustrating thing. 0:43:56.400 --> 0:43:59.200 When you see you know, you can't get fuel to 0:43:59.280 --> 0:44:02.680 the northeast it states, so we have to import it 0:44:02.719 --> 0:44:03.839 from other parts of the world. 0:44:04.000 --> 0:44:07.560 Absolutely nuts. You got to fix that. Go down to DC. 0:44:08.160 --> 0:44:10.520 I can't run for president. I wasn't born in the US. 0:44:10.680 --> 0:44:17.120 Yeah, Fernando Valley Brazilian. You speak obviously English and Portuguese, 0:44:17.200 --> 0:44:19.799 but also German and Spanish. And I hear that you 0:44:20.040 --> 0:44:22.480 ran a restaurant. What's the story with that. 0:44:22.920 --> 0:44:24.480 It was a long time ago in Brazili. 0:44:25.120 --> 0:44:25.719 It's not US. 0:44:25.920 --> 0:44:28.960 No, it was bar food. It didn't go out, didn't 0:44:29.080 --> 0:44:31.239 It didn't go so well. But you know, you live 0:44:31.280 --> 0:44:33.120 and you learn, and so. 0:44:33.040 --> 0:44:35.800 It fell back on being a global oil analyst. 0:44:35.920 --> 0:44:38.160 Yeah, that's a pretty good fallback. I think you know, 0:44:38.239 --> 0:44:40.600 yours is Walmart Greeter. I'm gonna be a truck driver, 0:44:40.680 --> 0:44:42.520 and Fernando is like, I think I'll be a global 0:44:42.520 --> 0:44:43.480 oil analystic. 0:44:44.120 --> 0:44:46.520 One more thing before you go, and this is cool. 0:44:46.680 --> 0:44:50.400 You go to boil, go on the terminal. How many 0:44:50.440 --> 0:44:54.760 different types of crude oil are they? And real quick, 0:44:54.880 --> 0:44:58.360 just what's the defining difference between them? The sulfur content 0:44:58.480 --> 0:44:59.120 or something like that. 0:44:59.400 --> 0:45:03.760 Yeah, So, I mean there are hundreds of crude grades globally. 0:45:03.800 --> 0:45:06.799 I mean even in the US, there are two things. 0:45:06.840 --> 0:45:09.200 You can be sour sweet, which is the sulfur content, 0:45:09.520 --> 0:45:13.160 but then the gravity, so it's gravity relative to water. 0:45:13.840 --> 0:45:16.920 You can go from the heavy bitumen in Canada which 0:45:16.960 --> 0:45:21.520 is eight API gravity measure to a very light EGO 0:45:21.600 --> 0:45:24.640 forward condensate which is sixty five, which. 0:45:24.480 --> 0:45:28.440 Is the defining differences. Some are easier to refine than others. 0:45:28.600 --> 0:45:30.000 That's the difference in price. 0:45:30.320 --> 0:45:33.520 I think currently the defining difference is the higher it is, 0:45:33.560 --> 0:45:36.960 the more gasoline it produces, it has fewer carbon atoms 0:45:37.360 --> 0:45:40.160 and so it makes more gasoline less diesel. We actually 0:45:40.200 --> 0:45:42.080 want the heavy stuff now we do. 0:45:42.160 --> 0:45:43.360 That's that's science. 0:45:43.640 --> 0:45:47.040 That's cool. Boil go on the Bloomberg terminal. 0:45:47.040 --> 0:45:50.919 Fernanda Valley, senior analyst, former restauranteur at Bloomberg Intelligence. 0:45:51.000 --> 0:45:54.600 You're listening to the tape Catcher live program Bloomberg Markets 0:45:54.640 --> 0:45:58.399 weekdays at ten am Eastern on Bloomberg Radio, tune in app, 0:45:58.440 --> 0:46:01.600 Bloomberg dot Com, and the Business app. You can also 0:46:01.640 --> 0:46:05.160 listen live on Amazon Alexa from our flagship New York station, 0:46:05.520 --> 0:46:09.840 Just say Alexa play Bloomberg eleven thirty. 0:46:10.840 --> 0:46:12.000 Here on Bloomberg Markets. 0:46:12.120 --> 0:46:15.880 We'd like to talk to C suite folks at interesting companies. 0:46:15.960 --> 0:46:17.960 We think we've got one for you today, Kevin Sayer. 0:46:18.480 --> 0:46:21.080 He's the CEO of dex coom Now, Dexcom, I wasn't 0:46:21.080 --> 0:46:22.680 I'm not that familiar with it. But it's a medical 0:46:22.719 --> 0:46:26.520 device company focused on the design and development of continuous 0:46:26.560 --> 0:46:29.400 glucose monitoring systems for people with diabetes. 0:46:29.400 --> 0:46:31.200 So certainly something. 0:46:30.880 --> 0:46:33.000 That is needed out guessing I'm guessing it's even a 0:46:33.040 --> 0:46:35.799 broader market. I mean, let's bring him in right now. 0:46:35.800 --> 0:46:43.000 The ticker is d x CM NASDAK listed Dexcom. Kevin Sayer, CEO, Kevin, 0:46:43.080 --> 0:46:46.279 is this really just for people with diabetes? Because I 0:46:46.520 --> 0:46:48.600 feel like this market is really broadening out. 0:46:50.120 --> 0:46:52.080 You know, that is a great question, and thanks for 0:46:52.120 --> 0:46:55.520 having me on the show today. Right now, this technology 0:46:55.560 --> 0:46:58.640 is used primary for people with diabetes and primarily for 0:46:58.719 --> 0:47:02.279 people using insulin, but all time as a health indicator, 0:47:02.800 --> 0:47:05.560 as a biosensor. I believe glucose can become a very 0:47:05.600 --> 0:47:10.160 vital marker in healthcare for people, for example, weight loss, wellness. 0:47:10.360 --> 0:47:13.680 Glucose is a sign of many things. Our primary indication 0:47:13.800 --> 0:47:16.759 today is for diabetes, and our primary use case has 0:47:16.760 --> 0:47:18.319 been for people on insulince so far. 0:47:18.560 --> 0:47:20.839 I mean the reason I ask, and as my wife 0:47:20.880 --> 0:47:23.920 will tell you, I'm a sucker for good marketing. I 0:47:24.000 --> 0:47:28.000 see all over Okay, I see all over Instagram these 0:47:28.040 --> 0:47:32.800 glucose monitors, and the idea is it can tell you, you 0:47:32.440 --> 0:47:36.000 know what kind of sugar spike you get for eating 0:47:36.080 --> 0:47:40.880 different kinds of food, and different people react in different ways. 0:47:41.120 --> 0:47:44.239 So example is if I eat a bagel, I might 0:47:44.320 --> 0:47:47.640 have a big sugar spike and maybe Paul doesn't. The 0:47:47.719 --> 0:47:49.600 other thing is on the weight loss side. You know 0:47:49.600 --> 0:47:54.080 I'm consistently ten to twenty pounds overweight. I love cake 0:47:54.560 --> 0:47:57.120 and cookies, and that's a real problem for me. I 0:47:57.120 --> 0:47:59.640 feel like if I had a glucose monitor, it would 0:47:59.640 --> 0:48:01.719 be an easy your way for me to watch what 0:48:01.760 --> 0:48:04.440 I eat, monitor what I eat, and maybe help control 0:48:04.440 --> 0:48:05.239 myself a little bit. 0:48:06.719 --> 0:48:10.000 There are numerous things you learned from wearing, one being 0:48:10.000 --> 0:48:12.600 the COO at X common. Having been here quite a while, 0:48:12.680 --> 0:48:15.200 I wear these things all the time. I don't have diabetes, 0:48:15.600 --> 0:48:18.600 So a couple of personal insights. For example, I was 0:48:18.640 --> 0:48:20.960 an investor conference one time and wanted to see how 0:48:21.040 --> 0:48:23.880 high I could spike my glucose. So I ate a 0:48:23.880 --> 0:48:27.400 great big cup of chocolate covered raisins and drank a 0:48:27.400 --> 0:48:30.360 glass of orange juice, and I got my glucose so 0:48:30.520 --> 0:48:32.320 high it almost looked like I had diabetes. And it 0:48:32.400 --> 0:48:34.840 went very quickly. But I've learned what foods, for example, 0:48:34.920 --> 0:48:38.200 I eat because my glucose to go up rapidly. Ice 0:48:38.200 --> 0:48:40.280 cream does not cause you to go up as rapidly 0:48:40.320 --> 0:48:43.160 as cake. You still go up, but not as not 0:48:43.200 --> 0:48:46.680 as rapidly as weres cake as straight sugar, candies, jelly 0:48:46.680 --> 0:48:51.160 beans and licorice guys super high spike very quickly. Chocolate 0:48:51.200 --> 0:48:54.080 takes more time. At the end of the day, you 0:48:54.200 --> 0:48:56.880 learn what those things do and how your body reacts 0:48:56.920 --> 0:48:58.920 over the course of the day. But you also learn 0:48:58.960 --> 0:49:02.320 about things like extra So if I have a workout 0:49:02.360 --> 0:49:05.560 in the morning, what does mike glucos do during the 0:49:05.600 --> 0:49:09.560 course of the day. And again my physiology personally, if 0:49:09.600 --> 0:49:11.560 I have a nice workout on the morning, mike glucose 0:49:11.600 --> 0:49:15.720 is ten percent lower all day long. And those things 0:49:15.840 --> 0:49:18.399 are really good learnings as far as your overall health 0:49:18.440 --> 0:49:21.520 over time. We look forward to being that market over time. 0:49:21.520 --> 0:49:23.919 We're not labeled for that now, but you're right. People 0:49:23.960 --> 0:49:27.239 are using them on a regular basis off label because 0:49:27.239 --> 0:49:29.239 they can learn so much. And these devices go to 0:49:29.320 --> 0:49:32.160 your phone, so you've got it right on your phone. 0:49:32.200 --> 0:49:34.240 You can look at the data at the same time 0:49:34.640 --> 0:49:37.279 you're looking at your text messages and your emails. And 0:49:37.320 --> 0:49:41.080 for our diabetes users, particularly those on insulin, that phone 0:49:41.080 --> 0:49:44.600 connection was one of the key advances we led, so 0:49:44.680 --> 0:49:47.640 rather than look at a medical device or something else, 0:49:48.160 --> 0:49:50.200 you can look at your phone. And if you're a 0:49:50.239 --> 0:49:53.360 young person, particularly if you're a kid in school, we 0:49:53.480 --> 0:49:56.279 have the opportunity for your parents to see that data too, 0:49:56.400 --> 0:49:59.760 so caregivers can know that those in their family are safe. 0:50:00.160 --> 0:50:03.080 It's just been an amazing journey. Well here at the company, 0:50:03.160 --> 0:50:04.680 this technology is game changing. 0:50:04.800 --> 0:50:07.880 Well and what kind of discomfort are we talking about? 0:50:07.920 --> 0:50:11.920 This isn't like installing a pacemaker. No, no, no, I'm assuming 0:50:12.520 --> 0:50:15.880 at least equal to or better than a fingerprick on 0:50:15.920 --> 0:50:16.840 a regular basis. 0:50:17.000 --> 0:50:18.399 It's it's much less. 0:50:18.400 --> 0:50:21.600 Describe describe Kevin the device for us and how it 0:50:22.080 --> 0:50:23.400 has somebody. 0:50:24.560 --> 0:50:26.880 There is a small sensor that's about the width of 0:50:26.880 --> 0:50:29.759 a human hair in less than a less than a 0:50:29.840 --> 0:50:31.839 half inch of length, about three eights of an inch 0:50:31.880 --> 0:50:35.320 and length. It is inserted very rapidly with a needle. 0:50:35.440 --> 0:50:39.000 The needle is inside your body for that milliseconds, not 0:50:39.200 --> 0:50:42.560 even seconds. You don't feel it when you put it 0:50:42.600 --> 0:50:45.480 in our new product, The G seven's inserted on somebody's arm, 0:50:46.080 --> 0:50:48.319 attached to that small sensor in your arm as an 0:50:48.320 --> 0:50:52.480 electronic transmitter, and that sits outside your arm, uh and 0:50:52.600 --> 0:50:56.040 is attached with tape. You really don't feel that it's there. 0:50:56.280 --> 0:50:59.400 The G seven is a little bit bigger than a nickel. 0:51:00.040 --> 0:51:02.600 That's also you really don't feel it. You don't know 0:51:02.640 --> 0:51:05.160 that it's there. You wear it for ten days. People 0:51:05.160 --> 0:51:08.239 put them on themselves. There's no doctor or physician or 0:51:08.280 --> 0:51:11.719 anybody involved, and pair it with your phone and within 0:51:11.760 --> 0:51:13.680 a half hour you have glucose readings. 0:51:14.000 --> 0:51:16.200 Hey, Kevin Linten, that's yeah. 0:51:16.080 --> 0:51:16.960 That looks simple. 0:51:17.120 --> 0:51:20.000 Let's pivoty to your company and your stock. I mean, 0:51:20.320 --> 0:51:22.480 I need to pay more attention. This is a big company, 0:51:22.520 --> 0:51:26.000 forty six billion market cap. The stock you guys reported 0:51:26.480 --> 0:51:29.120 numbers after the close last night came in a little 0:51:29.120 --> 0:51:31.560 bit better and expected stocks trading off about three percent 0:51:31.560 --> 0:51:34.160 today but up about six percent year to date, up 0:51:34.160 --> 0:51:37.200 seventeen percent on trailing twelve year basis. Talk to us 0:51:37.200 --> 0:51:39.319 about the earnings last night reported what was a key 0:51:39.400 --> 0:51:42.120 message you wanted to get across to your investors in 0:51:42.120 --> 0:51:43.920 the anals, you know. 0:51:44.040 --> 0:51:47.600 Key message was continued growth. Nineteen percent organic revenue growth 0:51:47.960 --> 0:51:51.040 over last year. We launched our new product platform, mar 0:51:51.160 --> 0:51:53.239 G seven in this quarter and we just barely got 0:51:53.239 --> 0:51:56.239 started with that, and we believe that product's going to 0:51:56.239 --> 0:51:58.280 be an important growth driver for us in the future. 0:51:58.880 --> 0:52:02.480 We raise our guidance for the year. You talk about 0:52:02.480 --> 0:52:05.520 our stock story, and I listened to those revenue numbers. 0:52:05.560 --> 0:52:08.719 I've been with the company for twelve years. We were 0:52:09.000 --> 0:52:12.000 forty million dollars in revenue the year before I got here. 0:52:12.040 --> 0:52:14.719 In our guidance this year is in the three and 0:52:14.760 --> 0:52:18.000 a half billion dollar range. So this company is a 0:52:18.000 --> 0:52:20.200 big story. It's come a very, very long ways. We're 0:52:20.239 --> 0:52:22.040 in the s and P five hundred now as well, 0:52:22.400 --> 0:52:23.880 and our message rewarded you. 0:52:24.040 --> 0:52:26.440 I always look at comp charts right to compare a 0:52:26.440 --> 0:52:31.040 company stock over just a five year period, and your 0:52:31.080 --> 0:52:34.120 total return is five hundred and forty six percent. The 0:52:34.160 --> 0:52:38.600 stock has a sex tuppled in five years? Is that 0:52:38.680 --> 0:52:43.560 because you know this this market is growing Is it 0:52:43.600 --> 0:52:46.439 because there are more diabetics or is it because you've 0:52:46.440 --> 0:52:49.239 made innovations. You know it's much easier for them to 0:52:49.320 --> 0:52:51.680 use the product. What's the what's the main driver? 0:52:52.960 --> 0:52:55.359 I think the main driver has become awareness of how 0:52:55.400 --> 0:52:59.560 important a technology like this is in managing diabetes in general. 0:53:00.360 --> 0:53:04.600 We have expanded dramatically access to this product on the 0:53:04.640 --> 0:53:07.560 reimbursement front. One of our other key messages was expanded 0:53:07.600 --> 0:53:11.960 Medicare coverage. That's going to give us another three possibly 0:53:12.000 --> 0:53:14.960 three million people to access here in the US. So 0:53:15.239 --> 0:53:17.680 as people look at this technology and guys compare it. 0:53:18.040 --> 0:53:20.080 If you stick your finger, you have one number and 0:53:20.120 --> 0:53:23.400 that's all you have. We give people a new glucose 0:53:23.440 --> 0:53:27.560 reading every five minutes and with that, diabuts management is 0:53:27.600 --> 0:53:30.879 so much better. Every time somebody wears this or there's 0:53:30.880 --> 0:53:36.080 a study, we see people get healthier. Their average glucos 0:53:36.120 --> 0:53:39.239 comes down there when SE's come down, and it even 0:53:39.280 --> 0:53:42.760 goes beyond that into other health factors like cardiovascular conditions 0:53:42.800 --> 0:53:46.520 get better. People have realized how important this is. So 0:53:46.680 --> 0:53:49.800 the technology in our innovations, going to the phone, connecting 0:53:49.800 --> 0:53:53.040 with things, that has driven it. But because of those innovations, 0:53:53.800 --> 0:53:56.920 access is driven. It's just one after another after another, 0:53:56.960 --> 0:53:59.080 and we've been at the forefront of everything. 0:53:58.719 --> 0:54:01.040 All right, Kevin, thank you so much for joining Uskevin Sayer, 0:54:01.160 --> 0:54:03.680 CEO of dex Com, been a real success story for 0:54:03.719 --> 0:54:04.040 this dot. 0:54:05.960 --> 0:54:09.040 Thanks for listening to the Bloomberg Markets podcast. You can 0:54:09.080 --> 0:54:12.840 subscribe and listen to interviews at Apple Podcasts or whatever 0:54:12.960 --> 0:54:16.680 podcast platform you prefer. I'm Matt Miller. I'm on Twitter 0:54:16.880 --> 0:54:18.920 at Matt Miller nineteen seventy three. 0:54:19.239 --> 0:54:21.640 And I'm Faul Sweeney. I'm on Twitter at pt Sweeney. 0:54:21.760 --> 0:54:24.440 Before the podcast, you can always catch us worldwide at 0:54:24.440 --> 0:54:26.160 Bloomberg Radio.