WEBVTT - Housing Starts Fall to 3-Month Low: BofA Earnings Recap 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast. I'm Paul Swinge. You, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.560 at Bloomberg dot com. Well, the market appears to be 0:00:23.640 --> 0:00:27.280 pricing in three rate cuts for the remainder of twenty nineteen. 0:00:27.280 --> 0:00:29.480 I guess the only real question is at the next 0:00:29.560 --> 0:00:32.519 meeting will it be twenty five basis points or fifty. 0:00:33.000 --> 0:00:34.920 To get a sense of what to look for when 0:00:34.960 --> 0:00:38.760 the Fed does meet, we welcome Neil Data from Renaissance 0:00:38.880 --> 0:00:41.440 macro Research. He is ahead of economics there. Neil, thanks 0:00:41.479 --> 0:00:44.640 so much for joining us. So what is your sense 0:00:44.720 --> 0:00:46.800 that when we when the FED does meet on the 0:00:46.840 --> 0:00:49.440 thirty feet will they cut by twenty five or fifty? 0:00:49.440 --> 0:00:53.599 What is your sense, Neal? My sense is that they 0:00:53.600 --> 0:00:58.440 cut by um? I think first, um, you know historically 0:00:58.440 --> 0:01:00.760 if you look at it, you took sickly get fifty 0:01:00.840 --> 0:01:04.720 basis point cuts going into recession or we have some 0:01:04.840 --> 0:01:08.920 sort of um, you know, crisis on our hands. Um, 0:01:09.080 --> 0:01:12.400 we don't have either of those things at the moment um, 0:01:12.440 --> 0:01:16.280 so this looks like a basis point cut. It is probably, um, 0:01:16.360 --> 0:01:19.280 what's more likely. At the same time, I mean, if 0:01:19.280 --> 0:01:22.040 you just sort of read the FED speak that we've seen, 0:01:22.160 --> 0:01:24.160 I mean, you have the most devish members calling for 0:01:24.319 --> 0:01:26.720 twenty five basis point cuts. So if you can't convince 0:01:26.800 --> 0:01:30.760 them of a fifty basis point move, um, you know, 0:01:30.800 --> 0:01:33.720 I think it's it's it's pretty unlikely. So I think 0:01:33.720 --> 0:01:35.880 the first go is probably a twenty five basis point 0:01:35.880 --> 0:01:38.000 cut at the end of the month. So, Neil, I'm 0:01:38.040 --> 0:01:40.760 curious what your impression is just generally of where we 0:01:40.800 --> 0:01:43.120 are in the economic cycle, because we are getting these 0:01:43.120 --> 0:01:46.280 bank earnings and they show a very strong consumer yet 0:01:46.600 --> 0:01:51.480 relatively muted capital markets activity. Is there some kind of 0:01:51.560 --> 0:01:55.360 leading indicator that you see in there of businesses perhaps 0:01:55.400 --> 0:01:58.840 slowing some of their big moves while the consumers stays 0:01:58.840 --> 0:02:02.720 strong right now? Yeah, maybe, I mean I don't I 0:02:02.760 --> 0:02:06.800 can't speak Lisa specifically to two bank earnings, but uh, 0:02:06.880 --> 0:02:10.160 I mean that my my sense is basically that, um, 0:02:10.240 --> 0:02:12.520 you know, these issues that we've been talking about a 0:02:12.560 --> 0:02:17.320 lot in the macro space. You know, trade tensions, um, 0:02:17.360 --> 0:02:22.120 you know week overseas activity. UM. You know. My sense 0:02:22.160 --> 0:02:26.840 is that probably impacts um, you know, medium and large 0:02:26.840 --> 0:02:31.760 sized firms more than it does domestic consumers and so um. 0:02:31.800 --> 0:02:35.840 And you're seeing that largely reflected in the data. Business 0:02:35.880 --> 0:02:39.480 fixed investment has been quite sluggish, but consumer spending has 0:02:39.520 --> 0:02:43.280 been quite good. Now of course, UM, you know, at 0:02:43.360 --> 0:02:46.519 some point something's going to have to give. A final 0:02:46.560 --> 0:02:50.639 demand is holding up reasonably well, um, you know, then 0:02:50.680 --> 0:02:53.520 businesses are going to have to play catch up and um. 0:02:53.560 --> 0:02:55.240 And that means that you know, you you may see 0:02:55.280 --> 0:02:59.040 sort of a pickup in in investment activity as as 0:02:59.120 --> 0:03:02.639 firm sort of real one well but with final demand good. 0:03:02.680 --> 0:03:05.079 But but Neil, I mean you could go either way here, right, 0:03:05.080 --> 0:03:06.880 So businesses may have to play catch up with the 0:03:06.919 --> 0:03:09.799 consumer and invest more, or you could say the other 0:03:09.800 --> 0:03:12.120 way around. The consumers will have to catch up with 0:03:12.120 --> 0:03:15.280 the businesses if the businesses aren't investing and aren't necessarily 0:03:15.360 --> 0:03:17.760 hiring more people, are even cutting in the face of 0:03:17.760 --> 0:03:19.359 some of these trade tensions, right, I mean you could 0:03:19.360 --> 0:03:23.440 go either way. Lisa had that work in you want 0:03:23.440 --> 0:03:25.840 to make that mistake again. I mean, I think consumers 0:03:26.880 --> 0:03:31.400 ultimately are the sort of main driver, the primary driver 0:03:31.600 --> 0:03:35.440 of dynamics, you know, I mean, consumer spending tends to 0:03:35.520 --> 0:03:37.880 lead investment. UM, even when you look at you know, 0:03:37.920 --> 0:03:42.680 sort of just changes in growth dynamics. So UM. And 0:03:42.960 --> 0:03:44.800 you know, even when you look at investments spending in 0:03:44.840 --> 0:03:48.320 the U S it's it's um. I mean compared now 0:03:48.840 --> 0:03:50.840 to to how it was that when we actually did 0:03:50.840 --> 0:03:54.600 have a Capex procession, which was in Capex is holding 0:03:54.640 --> 0:03:57.000 up reasonably well all things considered. I mean, we were 0:03:57.000 --> 0:04:00.520 here talking about, um, you know how terrible things are 0:04:00.880 --> 0:04:02.960 in the global economy with the stock market at all 0:04:03.000 --> 0:04:05.640 time highs and you know, all this trade to trade uncertainty, 0:04:05.640 --> 0:04:09.400 and even then, UM, you know, investment spending is still 0:04:09.600 --> 0:04:11.920 holding up reasonably well. So you know the fact that 0:04:12.040 --> 0:04:15.520 US investment spending is doing so much better than many 0:04:15.520 --> 0:04:17.920 other places in the world tells you that there's already 0:04:17.920 --> 0:04:20.520 something going on with respect to those companies respond but 0:04:20.800 --> 0:04:24.719 with respective firms responding to final demands. So um, you know, 0:04:24.760 --> 0:04:27.960 you're not seeing big declines and employment. Uh, you're seeing 0:04:28.200 --> 0:04:32.000 plum plumbing continue to expand your consumers um, continuing to 0:04:32.080 --> 0:04:34.719 spend money, and it's that final demand that firms ultimately 0:04:34.720 --> 0:04:36.760 have to respond to. So you're one of the things 0:04:36.760 --> 0:04:40.159 that the FED is looking at is inflation. Where we 0:04:40.320 --> 0:04:46.440 right now with the inflation outlooking the US UM, you know, 0:04:46.520 --> 0:04:49.279 I mean, I think inflation is running persistently below the 0:04:49.279 --> 0:04:51.800 FEDS target. You know, I think if you have like 0:04:51.839 --> 0:04:54.159 if you look at it, you know, very very near term. 0:04:54.279 --> 0:04:57.239 I mean, it's pretty clear that, you know, the FEDS 0:04:57.279 --> 0:04:59.760 transitory story that they had been sort of pitching for 0:04:59.800 --> 0:05:01.839 a two months there, I mean, that's actually kind of 0:05:01.960 --> 0:05:04.520 worked out. I mean, inflation has you know, co inflation 0:05:04.520 --> 0:05:06.960 has popped up a bit, but it's not enough to 0:05:07.080 --> 0:05:11.560 kind of, you know, change the underlying story about inflation. UM. 0:05:11.600 --> 0:05:14.440 Inflation is persistently below two percent, and that means that, 0:05:14.760 --> 0:05:17.080 you know, in my view, at least you know, the 0:05:17.120 --> 0:05:19.400 benefits of the FED doing something here in terms of 0:05:19.760 --> 0:05:23.680 you know, accommodating UM you know, outweighs the cost. So 0:05:24.000 --> 0:05:26.240 you're bullish. You're very bullish, it sounds like, and I'm 0:05:26.279 --> 0:05:29.440 curious when you think that things. Yeah, I mean you're welcome, right, 0:05:29.480 --> 0:05:32.760 I mean, you know, yes, you know, I love it, 0:05:32.880 --> 0:05:37.479 absolutely love it. UM it's a happy Wednesday, Neale. I 0:05:37.520 --> 0:05:39.600 do want to look at it though, and wonder, you know, 0:05:39.720 --> 0:05:43.000 when you see these credit cycle perhaps aging, because people 0:05:43.000 --> 0:05:44.960 have been saying we're the ninth Inning for the past 0:05:45.000 --> 0:05:48.040 six years, and I'm just wondering, from your perspective, what 0:05:48.080 --> 0:05:50.360 will it'll what it will actually take to get there? 0:05:52.960 --> 0:05:56.400 What in terms of credit I mean for the business cycle, 0:05:56.440 --> 0:05:57.840 I mean, when are we actually see a downturn? What 0:05:58.000 --> 0:05:59.240 is what do I think it's going to be looking 0:05:59.320 --> 0:06:03.599 less rosy? Um? Well, I mean I think when you 0:06:03.680 --> 0:06:07.560 have a sharp upturn in real interest rates, uh, you know, 0:06:07.640 --> 0:06:09.599 then I think that would be something that would that 0:06:09.640 --> 0:06:12.560 would concern me. Um. But at the moment, I mean, 0:06:12.600 --> 0:06:16.719 you still have you know, nominal growth running well above 0:06:16.839 --> 0:06:20.400 the level of overnight interest rates. I mean that's that's 0:06:20.560 --> 0:06:23.320 that's as reasonable and indication as any of the business 0:06:23.320 --> 0:06:26.360 cycle still has room to run. Um. You know, you 0:06:26.720 --> 0:06:28.520 have you know, when you take a look at sort 0:06:28.520 --> 0:06:31.240 of the kind of classic sort of check boxes that 0:06:31.279 --> 0:06:33.200 people have when they want to make a recession call 0:06:33.839 --> 0:06:39.040 um there, no, they're not and um and so it's 0:06:39.040 --> 0:06:41.400 gonna be a while. Yeah. And I just think that 0:06:41.440 --> 0:06:43.279 the housing market in the U s is arecovering and 0:06:43.279 --> 0:06:45.640 it's really unusual to see, you know, some kind of 0:06:45.680 --> 0:06:48.839 a big downturn in the economy with residential with residential 0:06:48.839 --> 0:06:52.200 investment accelerating. Neil Data, thank you so much, love having 0:06:52.200 --> 0:06:56.440 you on. Neil Data, head of economics for Renaissance Macro Research, 0:06:56.839 --> 0:07:15.800 joining us. Seeing positive signs ahead. Well, it has been 0:07:15.920 --> 0:07:19.000 obvious for sometime the President Trump is not a fan 0:07:19.080 --> 0:07:22.120 of the US Federal Reserve and its chairman j Pal. 0:07:22.520 --> 0:07:26.120 The question is whether the President's tweets and other commentary 0:07:26.200 --> 0:07:30.280 influences the FED to get some analysis. So this we 0:07:30.280 --> 0:07:33.640 welcome our next guest, Christopher Condon. Christopher is a reporter 0:07:33.680 --> 0:07:36.680 for Bloomberg News covering the Federal Reserve. Chris, thanks so 0:07:36.760 --> 0:07:40.160 much for joining us from Washington. So let's go to 0:07:40.160 --> 0:07:42.600 that big question. To what extent, if any, do you 0:07:42.680 --> 0:07:47.320 think President's Trump's commentary and tweets about j Pal about 0:07:47.320 --> 0:07:50.960 the Federal Reserve influences the FED at all? I really 0:07:50.960 --> 0:07:54.080 don't think it has that much influence. The Fed has 0:07:54.120 --> 0:07:57.560 a pretty clear process. It goes through a very rigorous 0:07:58.080 --> 0:08:01.720 an intense process UH to prepare for each of the 0:08:01.760 --> 0:08:04.000 f O m C meetings. They happen eight times a year, 0:08:04.640 --> 0:08:07.960 and it's a it's a big deal, and the participants 0:08:08.000 --> 0:08:11.480 have to really have their act together, um when they 0:08:11.520 --> 0:08:14.840 come and make arguments at that table about what they 0:08:14.840 --> 0:08:20.880 should do with policy. And by all accounts, current members, 0:08:21.000 --> 0:08:26.160 former members, people who understand this process, staff people, politics 0:08:26.240 --> 0:08:29.800 just doesn't have a place in there now. At the 0:08:29.840 --> 0:08:31.600 same time, we have to grant that, you know, these 0:08:31.640 --> 0:08:35.520 are human beings. They don't sit there talking about the 0:08:35.559 --> 0:08:39.240 president's pressure, but they must feel it. They really see 0:08:39.280 --> 0:08:42.080 the tweets, they see the news about it. Uh and 0:08:42.120 --> 0:08:47.080 if anything, you know, um, former senior staff have told me, 0:08:47.920 --> 0:08:51.840 it may actually make it harder for the president to 0:08:52.040 --> 0:08:55.720 get what he wants when a decision is a real 0:08:55.800 --> 0:08:58.720 close call. So let's hold hold one, okay, But before 0:08:58.720 --> 0:09:00.760 we get into, you know, the idea that they might 0:09:00.760 --> 0:09:03.800 try to rebel against him and show that their independence 0:09:04.000 --> 0:09:06.760 by not doing what he wants. In on the margins, 0:09:07.160 --> 0:09:09.280 I want to talk about moves that President Trump could 0:09:09.320 --> 0:09:13.640 actually make that economically would create a better picture for 0:09:13.720 --> 0:09:15.679 a rate cut or further rate cuts. And I'm talking 0:09:15.679 --> 0:09:18.360 about tariffs because President Trump is cutting out now, coming 0:09:18.360 --> 0:09:20.880 out now and threatening additional tariffs in China saying he 0:09:20.920 --> 0:09:23.720 can levy them whenever he wants, and a lot of 0:09:23.720 --> 0:09:27.040 people are saying, you know, is this perhaps an effort 0:09:27.120 --> 0:09:30.600 to push the FED into cutting rates even more ahead 0:09:30.600 --> 0:09:33.040 of the election, In other words, that the FED would 0:09:33.040 --> 0:09:36.600 be compelled to do so from an economic perspective, even 0:09:36.600 --> 0:09:40.720 though it's a politically driven economic perspective. Yeah, that it 0:09:40.760 --> 0:09:42.800 does seem like a bit of a circular. I'm not 0:09:42.840 --> 0:09:46.960 sure how strategically he thinks about what the he wants 0:09:47.000 --> 0:09:50.280 the FED to do when he considers imposing tariffs and China. 0:09:50.320 --> 0:09:53.760 There's a whole other agenda there, obviously, with respect to 0:09:53.760 --> 0:09:55.920 our trade relations with China, and what's he what he 0:09:55.960 --> 0:09:59.640 wants to achieve there. Um, that may be putting too 0:09:59.640 --> 0:10:03.280 many uses in play at once. It certainly is true 0:10:03.840 --> 0:10:06.040 that the FED has to deal with the reality of 0:10:06.080 --> 0:10:10.199 those terrorists and the extent to which they hurt the economy. 0:10:10.240 --> 0:10:15.400 They certainly are hurting business sentiment and the way companies 0:10:15.480 --> 0:10:19.040 think about investing and hiring. That seems to be showing up. 0:10:19.400 --> 0:10:23.160 So it is factoring in to their analysis of whether 0:10:23.400 --> 0:10:25.960 the economy may need a rate cut or not, that's 0:10:26.000 --> 0:10:29.280 for sure. So Chris one of the issues. I think 0:10:29.400 --> 0:10:32.720 is probably maybe even more potentially impactful on the Fed 0:10:33.000 --> 0:10:36.600 um than tweets is you know, kind of an effort 0:10:36.679 --> 0:10:38.840 on part of the president too, you know, arguably quote 0:10:38.880 --> 0:10:43.600 unquote pack the Fed with uh not with people that 0:10:43.679 --> 0:10:48.720 are more amenable to his uh easing of FED policy. 0:10:48.840 --> 0:10:50.520 So it gives a sense of kind of where that 0:10:50.559 --> 0:10:53.160 stands within the Fed, how how are they? That is 0:10:53.240 --> 0:10:57.520 that it represents a big turn of events that happened gradually, 0:10:58.040 --> 0:11:01.520 and I'm told that has set folks inside the FED 0:11:01.880 --> 0:11:05.320 much more than the barrage of tweets and comments attacking 0:11:05.320 --> 0:11:09.400 the Fed over monetary policy. It represents a serious potential 0:11:09.480 --> 0:11:12.680 threat in a couple of ways. First of all, it 0:11:12.800 --> 0:11:16.920 could be a direct a way to get political partisans 0:11:17.000 --> 0:11:20.360 inside uh the f O m C. You know of 0:11:20.400 --> 0:11:23.439 course that he Trump made a number of nominations some 0:11:23.520 --> 0:11:25.920 of which they cut through that were entirely conventional and 0:11:25.960 --> 0:11:30.800 have support helped the Fed. But this year the nominations 0:11:30.800 --> 0:11:35.280 where the people considered for nominations has changed. Currently we 0:11:35.320 --> 0:11:38.000 have a couple of people, uh and one and one 0:11:38.160 --> 0:11:40.880 person in particular represents this kind of change. Her name 0:11:40.920 --> 0:11:44.319 is Judy Shelton. She has been an economic advisor to 0:11:44.400 --> 0:11:48.199 Trump during the campaign. Um, she's a she is, uh, 0:11:48.280 --> 0:11:53.280 I would say, a classic libertarian thinker and author, has 0:11:53.360 --> 0:11:57.440 been a long standing UM advocate of the gold standard. 0:11:57.960 --> 0:12:01.440 Now she's been talking despite that at around strangely has 0:12:01.440 --> 0:12:03.920 been talking about wanting to lower interest rates. So that 0:12:04.000 --> 0:12:07.840 makes people think she represents just a sort of partisan 0:12:07.920 --> 0:12:11.640 loyalty to the president, and if confirmed, that puts that 0:12:11.760 --> 0:12:16.680 partisan political agenda potentially right inside the rate setting meetings. 0:12:16.760 --> 0:12:21.480 And second, UM, she also uh just really does not 0:12:21.800 --> 0:12:26.520 seem to agree with the fundamental mission of the Central 0:12:26.520 --> 0:12:28.679 Bank of the United States. She does not think they 0:12:28.679 --> 0:12:33.600 should be setting a benchmark interest rate to guide the market. 0:12:34.480 --> 0:12:37.760 But in fairness, right now, a lot of people in 0:12:37.760 --> 0:12:41.040 the market are very unclear of what the Fed's mandate 0:12:41.120 --> 0:12:43.720 actually is because it was on one at one point, 0:12:44.040 --> 0:12:47.680 inflation at one point, it was employment at one point. 0:12:48.040 --> 0:12:52.000 People are speculating it's just keep the markets propped up. Well, 0:12:52.040 --> 0:12:54.680 the law is pretty clear they have a dual mandate 0:12:54.760 --> 0:12:58.560 to keep prices stable through their inflation target and to 0:12:58.679 --> 0:13:04.280 maximize employment in a sustainable way. UM. It can't be 0:13:04.440 --> 0:13:07.719 much clearer than it is in the law. UM, and 0:13:08.040 --> 0:13:13.959 of course, as as economic and financial conditions change, um, 0:13:14.440 --> 0:13:17.199 the FED focuses on one area another. If they're meeting 0:13:17.240 --> 0:13:19.480 one mandate, then they they look at the other and 0:13:19.520 --> 0:13:22.720 how they can try to guide the the economy back 0:13:22.800 --> 0:13:27.040 to a point where they're meeting both of those targets. Um. 0:13:27.120 --> 0:13:29.720 And of course, when it comes to you know, Judy's 0:13:29.800 --> 0:13:33.400 argument about the market should be setting rights, I don't 0:13:33.400 --> 0:13:35.959 think it can be reasonably said that the Fed just 0:13:36.240 --> 0:13:39.640 sets a rate and expects everyone to fall in line. 0:13:39.960 --> 0:13:43.600 Actual borrowing costs are kind of a result of a 0:13:43.679 --> 0:13:46.480 dance between the Fed and the markets. They're very much 0:13:46.559 --> 0:13:50.640 listening to each other. Um. So her her thinking is 0:13:50.640 --> 0:13:53.680 a bit more fundamentalist. I think and and and does 0:13:53.840 --> 0:13:57.000 what Whether it's right or wrong, The bottom line is 0:13:57.120 --> 0:14:01.160 it really disturbs folks at the FED. Christopher Conton, thank 0:14:01.200 --> 0:14:03.960 you so much as always for joining us, as well 0:14:04.000 --> 0:14:07.360 as for your Bloomberg Business Week piece about just the 0:14:07.520 --> 0:14:10.040 political pressure on the Federal Reserve and whether it will 0:14:10.080 --> 0:14:12.920 actually have any impact on their decision making. It looks 0:14:12.960 --> 0:14:16.800 like it may not, despite the fact that the pressure 0:14:16.920 --> 0:14:40.240 is rising from President Trump. Chris Condon of Bloomberg News, Well, 0:14:40.360 --> 0:14:42.720 we have read on the screen. As Greg reported, let's 0:14:42.720 --> 0:14:45.560 see where the action is in small caps with Bloomberg 0:14:45.560 --> 0:14:47.160 stocks that or Dave Wilson, Dave, what are you looking at? 0:14:47.280 --> 0:14:50.000 I'm looking at more red than I'm seeing with the 0:14:50.160 --> 0:14:53.000 larger companies, that's for sure. The RUST of two thousand 0:14:53.040 --> 0:14:56.520 index down seven tenths of a percent, of the SMP 0:14:56.640 --> 0:14:59.360 five hundreds lower by just three tenths of a percent. 0:15:00.000 --> 0:15:03.160 One of the Russell's deepest declines belongs to Beyond Spring, 0:15:03.280 --> 0:15:07.000 who's ticker is b y s I, the cancer drug 0:15:07.040 --> 0:15:11.080 developer has fallen more than fifteen percent after raising thirty 0:15:11.080 --> 0:15:14.520 five million dollars in a share sale, representing more than 0:15:14.560 --> 0:15:18.560 an eight percent steak, and Obio Pharmaceuticals ticker i n 0:15:18.600 --> 0:15:22.440 O was dropped fourteen percent. The drug developer ended research 0:15:22.520 --> 0:15:25.960 on a bladder cancer treatment and said its workforce would 0:15:25.960 --> 0:15:29.040 be reduced by twenty eight percent as part of an 0:15:29.040 --> 0:15:32.720 effort to cut costs. Malan Krott ticker m n K 0:15:33.000 --> 0:15:35.680 has lost about nine and a half percent. The drug 0:15:35.720 --> 0:15:38.440 maker end of the study of its biggest selling product, 0:15:38.720 --> 0:15:43.080 hp acthar gel as a treatment for Luke Garrig's disease. 0:15:43.560 --> 0:15:46.800 Now the Russell's biggest game belongs to avro Bio ticker 0:15:46.960 --> 0:15:50.760 a v r O, the stem cell therapy developer has 0:15:50.880 --> 0:15:55.560 risen more than sixteen percent. Avro Bio raised twenty million 0:15:55.560 --> 0:15:58.520 dollars by selling the equivalent of a twenty one percent 0:15:58.600 --> 0:16:01.920 steak and may Come Technology Solutions to m t s 0:16:02.000 --> 0:16:05.040 I has added more than eight percent. The chip maker 0:16:05.120 --> 0:16:09.360 was raised equivalent buy from Neutral and Piper Jeffrey David Wilson, 0:16:09.400 --> 0:16:11.080 thank you so much for being with us, Steve Wilson, 0:16:11.760 --> 0:16:14.720 always with those great updates. Bank of America shares up 0:16:14.760 --> 0:16:17.600 a little bit about four tens of a percent after 0:16:17.600 --> 0:16:21.520 reporting earnings. UH that had good had bad. You basically 0:16:21.560 --> 0:16:23.640 could plug in the name of a number of different 0:16:23.680 --> 0:16:27.040 banks this earning season and have the same story. Told 0:16:27.240 --> 0:16:29.720 Alison Williams joining us here, she is the hardest working 0:16:29.720 --> 0:16:34.560 woman at Bloomberg these days of Bloomberg Intelligence senior financial analysts. So, Alison, 0:16:34.600 --> 0:16:37.520 what's the deal with b of A? So UH net 0:16:37.520 --> 0:16:41.160 interest margin MS guidance coming down. That's similar to what 0:16:41.200 --> 0:16:44.960 we saw across the big four banks that that I cover, UM, 0:16:45.000 --> 0:16:48.680 but the differentiator has been costs and so for Bank 0:16:48.680 --> 0:16:52.400 of America. Basically they had said Um, they expected cost 0:16:52.480 --> 0:16:54.680 to be flat this year. Now they're saying there may 0:16:54.720 --> 0:16:57.960 be some opportunity for those to come down, so offsetting 0:16:58.360 --> 0:17:02.560 the net interest margin. Pain, Let's back up for a second. 0:17:02.640 --> 0:17:05.760 When they have opportunity to reduce those costs, is that 0:17:05.840 --> 0:17:09.399 another way of saying we can cut jobs. Well, it 0:17:10.040 --> 0:17:12.679 depends where the costs are coming from, right, So to 0:17:12.760 --> 0:17:16.200 some extent, um, they don't want to be cutting jobs 0:17:16.200 --> 0:17:18.720 in certain areas, right because there there's a pickup in 0:17:19.119 --> 0:17:22.840 UM opportunity. So mortgage banking is an area actually where 0:17:23.080 --> 0:17:26.399 you might be see some additions across uh, some of 0:17:26.400 --> 0:17:28.639 the companies well as far Ago yesterday also saying that 0:17:28.720 --> 0:17:31.760 was an area for for higher costs. They're also saying 0:17:31.760 --> 0:17:34.399 they're not going to cut tech spending. So that's, um, 0:17:34.440 --> 0:17:37.080 you know, something that you don't want to see banks doing, 0:17:37.160 --> 0:17:39.840 especially given sort of the battleground in some of the 0:17:39.880 --> 0:17:43.320 U S companies winning on that front. UM. But you know, 0:17:43.800 --> 0:17:47.399 in terms of other areas cutting back, you know, uh, Paul, 0:17:47.480 --> 0:17:50.480 you can remember the days when um, you go through 0:17:50.520 --> 0:17:53.119 the department and everybody gets a little bit more focused 0:17:53.240 --> 0:17:56.520 on where no certain expenses are coming from, and everybody 0:17:56.560 --> 0:18:00.040 just sort of keeps and keeps a closer eye in 0:18:00.119 --> 0:18:03.880 terms of what you're spending, what travel, you're technical, lunch necessary, 0:18:04.000 --> 0:18:07.240 where you guys are going out for lunch, the number 0:18:07.240 --> 0:18:10.040 of black cars that are lined up outside um the 0:18:10.080 --> 0:18:12.359 investment banks. So you guys have lived a different life 0:18:12.400 --> 0:18:14.040 than I had. That's like it was a different time. 0:18:14.720 --> 0:18:17.800 So yeah, So there are some expenses that very very 0:18:17.840 --> 0:18:20.760 with revenue, and then there are some where you can 0:18:20.760 --> 0:18:23.520 be a little bit more efficient, and so technologies, uh, 0:18:23.640 --> 0:18:26.200 you know, we were we've been talking more recently about 0:18:26.240 --> 0:18:29.439 technology helping on the revenue front, but that's also helping 0:18:29.600 --> 0:18:34.040 helping on the efficiency front. Right, So mobile deposits are 0:18:34.040 --> 0:18:36.479 a great experience for the customer, but they're also like 0:18:36.600 --> 0:18:39.760 three cents on the dollar for some of these. So 0:18:40.080 --> 0:18:42.280 also when I worked on the street, the big trading 0:18:42.359 --> 0:18:45.760 desk were really drivers of profitability, whether it's the you know, 0:18:45.920 --> 0:18:49.480 fixed income trading desk, the equities, the commodities. Are we 0:18:49.520 --> 0:18:51.000 ever going to get back to a time on the 0:18:51.000 --> 0:18:53.720 wall street where they can be consistently profitable and really 0:18:53.800 --> 0:18:56.439 drive some of the returns for these big global banks. 0:18:56.840 --> 0:18:59.040 I think that, you know, one of the big changes 0:18:59.200 --> 0:19:02.639 is really the electronification UM and again, and you know, 0:19:03.080 --> 0:19:05.880 Paul and I have been tortured by this throughout our 0:19:05.920 --> 0:19:08.880 careers in terms of seeing what's happened on the equities front. Right, 0:19:08.920 --> 0:19:12.320 So UM a business UM that has really shifted over 0:19:12.359 --> 0:19:15.560 time to be more UH to be traded a lot 0:19:15.600 --> 0:19:18.520 more through the electronic venue, and we're seeing a lot 0:19:18.600 --> 0:19:21.760 more UM progress on that front on the fixed income side. 0:19:21.760 --> 0:19:25.040 So I think as volumes continue to go electronic, that 0:19:25.080 --> 0:19:28.080 does UM you know obviously has it has an impact 0:19:28.160 --> 0:19:32.320 of thing go low touch versus high touch UM. And 0:19:32.640 --> 0:19:35.639 in general, you know, the volatility there there are some 0:19:35.680 --> 0:19:38.240 cyclical factors that that may get better in terms of 0:19:38.320 --> 0:19:41.600 volatility and quantitative easing. But the other big pressure is 0:19:41.600 --> 0:19:45.480 the pressure on customers, right, so passive versus active. You think, 0:19:45.600 --> 0:19:48.680 you know, an active customer is doing trades, they're providing 0:19:48.720 --> 0:19:53.160 flow for desks. A passive customer UM is generally not 0:19:53.320 --> 0:19:55.680 And so I think that's you know, hedge hedge funds 0:19:55.680 --> 0:19:57.880 are another area where we've seen a lot of fee pressure. 0:19:58.359 --> 0:20:01.560 Less fees, broadly for the end stry is less revenue. 0:20:02.080 --> 0:20:06.040 If your customers have less revenue to pay, you know, 0:20:06.160 --> 0:20:09.879 that's less opportunity for you. Just real quick here. We 0:20:09.960 --> 0:20:13.680 talked earlier, perhaps year or two ago, that the banks 0:20:13.720 --> 0:20:16.320 would have to pass along some of the increase in 0:20:16.320 --> 0:20:20.399 interest rates to their depositors. Was there any talk about 0:20:20.400 --> 0:20:24.480 that this time around? The increases that you've seen, so 0:20:24.520 --> 0:20:29.480 you've seen increases in two businesses, the wealth business and 0:20:29.840 --> 0:20:33.480 the commercial small business side of things, right, So that's 0:20:33.840 --> 0:20:37.480 where you get people where sort of the shopping around 0:20:38.240 --> 0:20:41.199 is going to pay off. So when you have you know, 0:20:41.320 --> 0:20:44.080 ten customer let's let's say you know, ten customers with 0:20:44.119 --> 0:20:47.119 a hundred dollars versus one customer a thousand, you know, 0:20:47.240 --> 0:20:49.560 multiply that, right, So someone with a million dollars is 0:20:49.600 --> 0:20:52.200 going to shop around, whereas someone with like a thousand 0:20:52.200 --> 0:20:55.800 dollars isn't likely. So when you look at UM the 0:20:55.840 --> 0:21:00.119 core franchises, you're still seeing, you know, things pretty sticky there, 0:21:00.119 --> 0:21:03.720 but you are seeing a pick up in terms of UM. 0:21:03.760 --> 0:21:06.080 As I said, the wild small business, you know, City 0:21:06.080 --> 0:21:08.760 Group also had sort of a notable pick up. They're 0:21:08.800 --> 0:21:11.560 building digital, So when you're gonna go digital again, you're 0:21:11.600 --> 0:21:14.840 probably paying up for those deposits. Alison William, thank you 0:21:14.920 --> 0:21:18.640 so much. Allison Covers all Things Banks for Bloomberg Intelligence, 0:21:18.680 --> 0:21:37.240 joining us on a Bloomberg Interact the Broker Studio. Funds 0:21:37.280 --> 0:21:40.920 are having a very good year by historical standards, although 0:21:40.960 --> 0:21:43.359 I will note that equity funds are still lagging the 0:21:43.520 --> 0:21:46.040 SMP five hundred the broader market. Here to get a 0:21:46.040 --> 0:21:49.800 sense of which strategies are performing better, we welcome UH 0:21:49.880 --> 0:21:54.720 Don Steinbruger. Don is the chairman UH and founder and 0:21:54.800 --> 0:21:58.159 CEO of Agecroft Partners. John Don joins us here in 0:21:58.160 --> 0:22:00.600 the Bloomberg Interactor Broker Studio. Don, thanks so much for 0:22:00.680 --> 0:22:03.720 joining us again, just give us a sense, just kind 0:22:03.720 --> 0:22:06.120 of We're six months into the books for the year. 0:22:06.440 --> 0:22:10.120 How are the hedge funds, broadly defined doing so? From 0:22:10.200 --> 0:22:13.639 an absolute standpoint, they're doing the best they've done in 0:22:13.680 --> 0:22:16.240 ten years. The average hedge fund for the first six 0:22:16.240 --> 0:22:18.720 months of the year was up seven point five percent 0:22:19.680 --> 0:22:22.680 based on the h f R I index, and that's 0:22:22.720 --> 0:22:26.240 significantly better than the acid weighted index. It is dominated 0:22:26.240 --> 0:22:30.520 by large hedge funds. Smaller hedge funds outperform large hedge 0:22:30.520 --> 0:22:34.080 funds for the first six months of this year. So 0:22:34.600 --> 0:22:36.520 here's my question, and this is going to be the 0:22:36.640 --> 0:22:40.520 question that everyone's wondering which is it's two and twenty 0:22:40.520 --> 0:22:41.960 worth it. I mean, it's not really two and twenty 0:22:42.000 --> 0:22:44.439 anymore of the fee structure because it's come down dramatically. 0:22:44.960 --> 0:22:47.560 But if these hedge funds are performing the best at 0:22:47.560 --> 0:22:50.919 an absolute level and still under performing the broader market, 0:22:52.000 --> 0:22:56.320 is it worth it? So when you think of first 0:22:56.359 --> 0:22:59.040 of all, relative defease, I don't think anyone should pay 0:22:59.080 --> 0:23:02.320 two in twenty less they find just an absolutely fabulous 0:23:02.320 --> 0:23:04.440 hedge fund manager, there's no reason to do it. There's 0:23:04.440 --> 0:23:07.200 a lot of hedge funds that are offering founders share 0:23:07.280 --> 0:23:10.240