WEBVTT - First Republic Sinks and Disney Cuts 0:00:02.400 --> 0:00:06.040 This is Bloomberg Daybreak Asia for this Tuesday, April twenty 0:00:06.040 --> 0:00:09.160 fifth in Hong Kong, Monday April twenty fourth in New 0:00:09.240 --> 0:00:10.560 York and coming up today. 0:00:10.680 --> 0:00:15.040 First Republic Bank is pursuing strategic options as it reports 0:00:15.040 --> 0:00:17.000 a slump in first quarter deposits. 0:00:17.239 --> 0:00:20.800 Credit Suie saw sixty nine billion dollars of outflows last 0:00:20.920 --> 0:00:23.279 quarter as it near to collapse. 0:00:22.920 --> 0:00:26.080 And China's Poloit Bureau is likely to shift its focus 0:00:26.120 --> 0:00:27.960 from stimulus to reforms. 0:00:28.320 --> 0:00:32.040 China distances itself from its French ambassador and supports former 0:00:32.120 --> 0:00:36.599 Soviet Bloc country sovereignty. Australia Defense Ministry says the military 0:00:36.680 --> 0:00:39.880 must make adjustments to be fit for purpose. McCarthy looks 0:00:39.880 --> 0:00:42.320 to be going ahead with debt vote. I'm Ed Baxter 0:00:42.400 --> 0:00:43.160 with Global News. 0:00:47.640 --> 0:00:50.839 That's all straight ahead on Bloomberg day Break Asia, The 0:00:50.880 --> 0:00:53.519 business news you need to start your day in just 0:00:53.640 --> 0:00:58.120 one fifteen minute podcast available on Apples, Spotify, the Bloomberg 0:00:58.160 --> 0:01:00.800 Business app and everywhere you get podcasts. 0:01:03.640 --> 0:01:07.040 Good morning, I'm Doug Chrisner and I'm Brian Curtiz. Here 0:01:07.080 --> 0:01:10.280 are the stories we're following today. First Republic saying it's 0:01:10.319 --> 0:01:15.000 pursuing strategic options. Now and seeking to shrink its balance sheet. 0:01:15.160 --> 0:01:17.800 That's after it reported deposits that fell to one hundred 0:01:17.840 --> 0:01:20.680 four point five billion in the first quarter. Deposits are 0:01:20.720 --> 0:01:23.640 down forty one percent from the end of last year. 0:01:24.040 --> 0:01:27.280 The California Lendo was engulfed in the regional banking turmoil 0:01:27.319 --> 0:01:29.959 that led to the collapse of three of its peers. 0:01:30.520 --> 0:01:31.200 First Republic. 0:01:31.319 --> 0:01:35.560 Slump also comes despite the largest US lenders injecting some 0:01:35.760 --> 0:01:38.440 thirty billion dollars of their own cash into the bank 0:01:38.720 --> 0:01:42.280 to try to help shore up the finances in response 0:01:42.319 --> 0:01:45.880 to the unprecedented outflows of deposits. The company says now 0:01:45.920 --> 0:01:49.080 that it plans to cut its workforce as much as 0:01:49.160 --> 0:01:52.560 twenty five percent. We heard earlier from Bloomberg's Herman Chen. 0:01:52.960 --> 0:01:57.800 They talked about some expense reductions with some employee cuts. 0:01:57.960 --> 0:02:01.760 That helps on the margin, but really instill confidence is 0:02:01.960 --> 0:02:05.160 more focused on stabilizing the balance sheet and getting those 0:02:05.160 --> 0:02:08.440 deposits back that left in the first quarter. 0:02:09.120 --> 0:02:11.080 And the bank's shares are down a little more than 0:02:11.120 --> 0:02:12.560 twenty one percent now. 0:02:12.639 --> 0:02:16.760 In late trading, well clients had credit Sueeze pulled sixty 0:02:16.880 --> 0:02:19.239 nine billion dollars from the bank during the first quarter. 0:02:19.400 --> 0:02:23.440 As the bank neared collapse, and now UBS will have 0:02:23.480 --> 0:02:29.160 big challenges ahead following that emergency takeover of its biggest rival. 0:02:29.200 --> 0:02:31.320 We have more from Bloomberg's Manis Kranny. 0:02:31.520 --> 0:02:34.040 Over the past six months, one hundred and seventy billion 0:02:34.040 --> 0:02:39.040 Swiss ranks of assets that yield for the bank have exited. 0:02:39.320 --> 0:02:42.799 The question now is what can UBS do to stop 0:02:42.840 --> 0:02:46.359 that rot when the deal closes? What can they offer clients? 0:02:46.560 --> 0:02:48.280 How can they make them stay? How can they make 0:02:48.320 --> 0:02:51.760 the rain makers within the institution of Credit Suite remain. 0:02:52.200 --> 0:02:55.000 The message was clear, we will make more substantial losses 0:02:55.000 --> 0:02:57.880 in wealth management from Credit Suie. We had to tap 0:02:58.080 --> 0:03:00.360 the Swiss National Bank for one hundred billion and more 0:03:00.680 --> 0:03:04.680 of liquidity. This is far from done. The challenges are 0:03:04.720 --> 0:03:08.760 significant for Colin kalaher Ikbal Khan and Sergio Motty, the 0:03:08.840 --> 0:03:12.680 CEO of UBS, on getting this flow show to stay 0:03:13.000 --> 0:03:15.960 and generate income in Zurich. On Manistrane. 0:03:16.440 --> 0:03:18.440 All right, let's take a closer look here at Tesla, 0:03:18.480 --> 0:03:22.840 because it's increasing its forecast for capex again and looks 0:03:22.880 --> 0:03:26.360 to be targeting nine billion dollars in twenty twenty three, 0:03:26.800 --> 0:03:30.920 according to a regulatory filing as of January Tesla provided 0:03:30.960 --> 0:03:33.960 a forecast range that was a billion less. 0:03:33.800 --> 0:03:35.520 At both the low and the high end. 0:03:35.960 --> 0:03:40.360 Tesla's capex boost comes while executives have been emphasizing cost 0:03:40.400 --> 0:03:43.640 cutting efforts. Bloombergs Ed Ludlow says it's being done with 0:03:43.680 --> 0:03:45.640 an emphasis on sustaining growth. 0:03:45.760 --> 0:03:48.480 They're cutting prices on evs here in North America, they 0:03:48.520 --> 0:03:51.480 did recently just re raise prices on Mode less and 0:03:51.520 --> 0:03:55.240 Model X, and internally a view on cutting costs is 0:03:55.280 --> 0:03:59.680 a big focus. But reminder of Elon musk commitment to 0:04:00.160 --> 0:04:04.280 sustaining growth at the expense of margin and profit. That's 0:04:04.320 --> 0:04:06.040 something that he's been relatively clear on. 0:04:06.120 --> 0:04:08.040 And while the cell side at least are. 0:04:07.920 --> 0:04:10.240 A little concern about the impact of price cuts to 0:04:10.320 --> 0:04:14.000 products on that bottom line, at least Tesla is consistent 0:04:14.040 --> 0:04:16.279 on the view of investing through periods like this to 0:04:16.360 --> 0:04:17.400 maintain that growth rate. 0:04:17.600 --> 0:04:19.720 Tesla shows are down one and a half percent in 0:04:19.760 --> 0:04:22.600 the regular sash and drifting just a little bit lower 0:04:22.640 --> 0:04:25.279 here in after hours. Not much about an extra four 0:04:25.360 --> 0:04:28.440 tenths of one percent overall, though the stock has risen 0:04:28.560 --> 0:04:30.520 some thirty four percent this year. 0:04:30.720 --> 0:04:33.760 A second round of job cuts underway at Walt Disney 0:04:33.920 --> 0:04:35.400 We have more from Bloomberg's and. 0:04:35.400 --> 0:04:38.440 Kate's play also take place in all Disney divisions, from 0:04:38.440 --> 0:04:42.159 corporate headquarters to ESPN, although hourly workers at its theme 0:04:42.200 --> 0:04:44.880 parks will not be affected. It's part of Disney's push 0:04:44.880 --> 0:04:47.680 to eliminate seven thousand positions in an effort to save 0:04:47.720 --> 0:04:49.960 five and a half billion dollars a year in costs. 0:04:50.200 --> 0:04:52.640 The entertainment giant is also racing to curb losses at 0:04:52.640 --> 0:04:55.480 its Disney Plus streaming service, as Wall Street shifts as 0:04:55.520 --> 0:04:58.680 focused from subscriber growth to the expense of operating online 0:04:58.760 --> 0:05:03.839 video platforms. In Washington and Kates Bloomberg day Break Asia. 0:05:03.279 --> 0:05:05.880 China's top leaders may convene a meeting of the party's 0:05:05.920 --> 0:05:08.719 politbureau this week to tweak economic policy. 0:05:09.000 --> 0:05:11.040 We get the story from Bloomberg's Joan Wong. 0:05:11.520 --> 0:05:15.160 Officials are looking to boost business confidence, increase jobs, and 0:05:15.200 --> 0:05:19.680 strengthen the property market without adding new stimulus. Economists say 0:05:19.680 --> 0:05:23.159 they're closely watching monetary and fiscal support now that growth 0:05:23.240 --> 0:05:26.039 is rebounding. Several banks have raised as there are China 0:05:26.040 --> 0:05:30.120 growth forecasts to six percent or higher for twenty twenty three. 0:05:30.320 --> 0:05:33.840 That's well above Beijing's target of around five percent, and 0:05:33.880 --> 0:05:36.839 that level of growth would reduce the need for more stimulus. 0:05:37.040 --> 0:05:39.640 Some economists say it could be too soon, as though 0:05:39.800 --> 0:05:43.320 as opposed, COVID recovery has been fairly uneven. But the 0:05:43.320 --> 0:05:47.520 PBOC has already signaled it will begin dialing back pandemic stimulus, 0:05:47.600 --> 0:05:50.919 and the thinking is officials may pull back further. In 0:05:50.960 --> 0:05:53.279 Hong Kong, I'm joined Wong Bloomberg day Brigeisia. 0:05:54.000 --> 0:05:57.599 I'm Brian Curtis along with Doug Krisner and Rashad Salamat 0:05:57.680 --> 0:06:02.280 and Doug. Nothing's really rattling page right now in markets. 0:06:03.320 --> 0:06:07.360 It's still the banking turmoil that didn't quite become a crisis, 0:06:08.080 --> 0:06:10.240 and yet the stocks haven't recovered. 0:06:10.240 --> 0:06:11.920 The regional banking stocks haven't recovered. 0:06:11.960 --> 0:06:14.080 And I don't think the earnings from First Republic today 0:06:14.320 --> 0:06:15.880 changed that at all. 0:06:16.160 --> 0:06:18.919 Well, you're right about that, and then there's the FED 0:06:18.960 --> 0:06:21.039 story on top of that. Right now, it's kind of 0:06:21.080 --> 0:06:23.800 interesting to see the divergence. On one hand, we have the 0:06:23.839 --> 0:06:27.440 swaps market continuing to see rates peaking in the coming 0:06:27.480 --> 0:06:30.960 weeks and then a series of cuts later in the year, 0:06:31.080 --> 0:06:33.520 So that seems to be the view of money market traders, 0:06:33.600 --> 0:06:36.400 right and then you look at the other story data 0:06:36.400 --> 0:06:40.560 from the CFTCS showing that net short positions on the 0:06:40.640 --> 0:06:44.840 ten year rose to the highest level on record this month. 0:06:44.920 --> 0:06:47.120 So the hedge fund community seems to be betting that 0:06:47.160 --> 0:06:50.200 the Fed will continue to raise rates. And look at 0:06:50.200 --> 0:06:53.719 today's data from the Dallas Fed Manufacturing week, but it's 0:06:53.800 --> 0:06:57.880 clear that inflationary pressures remain very elevated. So it's this 0:06:58.040 --> 0:06:59.280 tension in markets right now. 0:06:59.320 --> 0:07:02.400 Brian, Yeah, but the hedge fund position also indicates that 0:07:02.440 --> 0:07:05.880 they're not expecting recession, and I think that story is 0:07:05.920 --> 0:07:06.800 still to be written. 0:07:06.960 --> 0:07:09.920 That's another way of looking at it. But maybe it's 0:07:09.960 --> 0:07:13.240 a period of stagflation. That's what Bloomberg Economics is saying, Right, 0:07:13.280 --> 0:07:17.240 you get slow growth, but yet inflation remains persistent. Going 0:07:17.280 --> 0:07:20.480 back to that Dallas Fed stuff, the wages and benefits 0:07:20.520 --> 0:07:23.600 component of the manufacturing report now at the highest level 0:07:23.640 --> 0:07:26.840 since August. Ninety nine percent of the firm surveyed by 0:07:26.840 --> 0:07:31.680 the Dallas Fed reported higher or similar wages and benefit 0:07:31.760 --> 0:07:35.320 cost in the month. So this it remains sticky. Let 0:07:35.360 --> 0:07:36.160 me just say that. 0:07:36.440 --> 0:07:38.000 I think for most of the people we talked to, 0:07:38.640 --> 0:07:40.840 they acknowledge that this is one of the most difficult 0:07:40.840 --> 0:07:45.240 times to really understand and or predict whether we're heading 0:07:45.240 --> 0:07:47.960 toward recession or whether or not you escape this with 0:07:48.040 --> 0:07:50.320 a soft landing. It makes it great for us to 0:07:50.360 --> 0:07:52.760 put these questions to our guests. And we'll have Carol 0:07:52.760 --> 0:07:56.720 Pepper coming up shortly, founder and CEO of Pepper International. 0:07:56.920 --> 0:08:01.240 But now it's time for Global news. China has sought 0:08:01.240 --> 0:08:05.840 to distance itself from the firestorm caused by its ambassador 0:08:05.880 --> 0:08:09.200 to France and those comments from yesterday and back to 0:08:09.320 --> 0:08:11.560 with Global News from the nine to sixty newsroom in 0:08:11.680 --> 0:08:12.360 San Francisco. 0:08:12.560 --> 0:08:15.360 Ed, Yeah, exactly right, Brian. China says the comments by 0:08:15.360 --> 0:08:19.040 Ambassador at Lui Chu that former Soviet Bloc states are 0:08:19.120 --> 0:08:23.440 not sovereign nations was an expression of his personal point 0:08:23.520 --> 0:08:26.480 of view at a Beijing breast briefing. Spokes One mal 0:08:26.560 --> 0:08:28.880 And ning through a translator. 0:08:28.600 --> 0:08:32.640 Ye, China respects the status of the former Soviet republics 0:08:32.679 --> 0:08:35.160 and sovereign countries after the Soviet Unis dissolution. 0:08:35.400 --> 0:08:37.280 Now I'm ao saying the media has blown it out 0:08:37.320 --> 0:08:40.480 of proportion, and former Ambassador to China Paul Volker on 0:08:40.480 --> 0:08:44.079 Bloomberg sound On earlier said they don't like to contradict themselves, 0:08:44.400 --> 0:08:46.920 but the fact that they took down a transcript of 0:08:47.040 --> 0:08:49.520 loose comments shows they don't approve if you. 0:08:49.480 --> 0:08:52.880 Start playing through the implications, like you're now saying that 0:08:53.040 --> 0:08:56.400 Kazakhspan a neighbor of China and a vast one in 0:08:56.440 --> 0:08:59.480 which China has huge interests, that that should actually be 0:08:59.520 --> 0:09:01.959 part of right. I don't think the Chinese mean that. 0:09:02.280 --> 0:09:06.480 Meanwhile, France President Maniu mccron also distancing himself, saying it's 0:09:06.520 --> 0:09:09.719 not a diplomat's place to use this sort of language. 0:09:10.120 --> 0:09:13.760 Major Australian Defense Minister report has recommended sweeping changes to 0:09:13.840 --> 0:09:17.480 the country's defense forces as it readjusts to a changing 0:09:17.520 --> 0:09:22.040 into Pacific region. The Defense Strategic Reviews says Australia's military 0:09:22.120 --> 0:09:25.480 is not fit for purpose. Defense Minister Richard Marle says 0:09:25.760 --> 0:09:29.520 this will provide for an Australian defense force befitting a 0:09:29.600 --> 0:09:33.760 much more confident and self reliant nation. Meanwhile, US President 0:09:33.840 --> 0:09:36.000 Joe Biden will use this week's state visit by South 0:09:36.080 --> 0:09:40.360 Korean President Unsukiol to undersco support there, including being ready 0:09:40.400 --> 0:09:43.360 to step up its efforts to tour North Korean attack 0:09:43.440 --> 0:09:46.440 on the South. US House speaker Kevin McCarthy looks to 0:09:46.440 --> 0:09:48.800 be going ahead with a vote without the possibility of 0:09:48.800 --> 0:09:52.680 amendments for his debt sealing bill, even though Bloomberg Reporting 0:09:52.760 --> 0:09:54.880 says he may come up short on votes from the 0:09:54.960 --> 0:09:58.760 ultra conservative part of of his party now. Bloomberg's Windy 0:09:58.760 --> 0:10:01.640 Benjamin sent on Bloomberg's balance of power, says, it is 0:10:01.679 --> 0:10:04.160 hard to figure out what he is really thinking. 0:10:04.360 --> 0:10:06.360 And he thinks they're just going to go along with 0:10:06.400 --> 0:10:08.880 the plan. I guess that's what he thinks. 0:10:08.920 --> 0:10:11.679 But if he were a speaker who had a lot 0:10:11.720 --> 0:10:13.840 of power behind him, who had a lot of support 0:10:13.880 --> 0:10:18.520 behind him, who wasn't elected on the fifteenth ballot, that 0:10:18.840 --> 0:10:22.120 could be a good play. But it's clear his caucus 0:10:22.440 --> 0:10:23.640 doesn't believe him. 0:10:23.800 --> 0:10:25.800 It is dead in the Senate anyway, and the White 0:10:25.840 --> 0:10:27.960 House says we'll only talk about the Deat ceiling as 0:10:27.960 --> 0:10:31.680 a separate piece of legislation. Florida Governor Ron de Santis 0:10:31.679 --> 0:10:34.360 has met with Japan's Prime Minister Fumio Kishi to today 0:10:34.679 --> 0:10:35.760 in Tokyo. 0:10:35.800 --> 0:10:38.080 You see a lot of opportunities to build on our 0:10:38.160 --> 0:10:40.160 business and economic. 0:10:39.760 --> 0:10:43.320 Ties that Desanta says good for Japan. What is good 0:10:43.320 --> 0:10:46.920 for Japan? Is good for America. Cable TV is jettison 0:10:46.920 --> 0:10:50.719 two of their more inflammatory and controversial hosts, Fox News 0:10:50.760 --> 0:10:54.520 announcing that Tucker Carlson's last show was last Friday. Bloomberg's 0:10:54.520 --> 0:10:58.280 Felix Gillette says Dominion settlement was a takeoff point for 0:10:58.320 --> 0:11:02.960 this and that Rupert Murdoch treats people like Carlson as replaceable. 0:11:03.280 --> 0:11:06.360 Murdoch has always felt confident that he can replace the talent, 0:11:06.480 --> 0:11:09.320 even if it's someone like Tucker Carlson, who's currently the 0:11:09.360 --> 0:11:10.920 top rated primetime. 0:11:10.480 --> 0:11:11.560 Host for Fox News. 0:11:11.880 --> 0:11:14.000 You think back of when Fox News got rid of 0:11:14.040 --> 0:11:18.240 Glenn Beck, Red Events, Sustron, Meg and Kelly. They're always 0:11:18.240 --> 0:11:20.520 this question, Oh, how are they going to recover? And 0:11:20.600 --> 0:11:23.560 yet whoever they plug into those time slots always seem 0:11:23.640 --> 0:11:24.160 to do it. 0:11:24.360 --> 0:11:26.520 Carlson was due to testify at the trial, but the 0:11:26.520 --> 0:11:29.280 emails it would have been presented we have shown Fox 0:11:29.360 --> 0:11:32.840 is knowingly reported lying on the other side of the spectrum. 0:11:32.920 --> 0:11:36.840 Almost at the same time, CNN Don Lemon Boom. 0:11:36.760 --> 0:11:40.040 Don Lemon has been, you know, going from one controversy 0:11:40.040 --> 0:11:41.760 to the next for the last couple of months. They 0:11:41.800 --> 0:11:44.840 brought him back after he made these comments about Nikki Haley. 0:11:44.880 --> 0:11:48.440 That upset people. You know, the problem with Don Lemon 0:11:48.559 --> 0:11:51.400 is not only is the generating negative headlines for CNN, 0:11:51.480 --> 0:11:53.880 but also the ratings have been lousy. 0:11:54.000 --> 0:11:55.079 Well, I will do it. 0:11:55.280 --> 0:11:58.679 Carlson's departure from Fox estimated will cost six hundred and 0:11:58.720 --> 0:12:01.200 ninety million dollars in worth, shares falling as much as 0:12:01.280 --> 0:12:04.240 five point four percent. Today, Global News powered by more 0:12:04.280 --> 0:12:06.720 than twenty seven hundred journalists and analysts and over one 0:12:06.800 --> 0:12:09.959 hundred twenty countries. In San Francisco, I'm at Baxter and 0:12:10.040 --> 0:12:10.960 this is Bloomberg. 0:12:11.880 --> 0:12:14.680 I'm Brian Curtis along with Rushad Selama, and we have 0:12:14.760 --> 0:12:17.680 it Backstraw News as we just heard there, and also 0:12:17.800 --> 0:12:21.199 Doug Crisner looking at markets. And our guest, a live guest, 0:12:21.280 --> 0:12:25.160 Carol Pepper, a founder and CEO of Pepper International. Carol, 0:12:25.200 --> 0:12:28.240 there was a lot of anticipation about First Republic's earnings, 0:12:28.280 --> 0:12:30.920 so let's take a moment and just have a quick look. 0:12:31.280 --> 0:12:33.400 I mentioned that this is sort of the banking turmoil 0:12:33.440 --> 0:12:36.160 that didn't really develop into a crisis. 0:12:36.600 --> 0:12:38.120 Lots of reasons for. 0:12:37.960 --> 0:12:41.080 That, but one thing appears clear that it's going to 0:12:41.080 --> 0:12:43.040 be very hard for the regional. 0:12:42.640 --> 0:12:46.040 Banks to earn their way out of the position that 0:12:46.040 --> 0:12:47.400 they find themselves in. 0:12:48.000 --> 0:12:51.760 Can you see the regional banks coming back from this, well, 0:12:51.880 --> 0:12:52.360 I mean. 0:12:52.200 --> 0:12:55.040 I think there'll always be a place for regional banks, 0:12:55.400 --> 0:12:57.920 but I agree with you, the headwinds are definitely there. 0:12:58.600 --> 0:13:01.440 I think it's going to take a long time. I mean, 0:13:02.120 --> 0:13:04.839 there has to be some change hopefully coming in terms 0:13:04.840 --> 0:13:08.199 of how they measure the belt and suspenders for the 0:13:08.240 --> 0:13:10.200 regional banks, and I think they will do that, and 0:13:10.240 --> 0:13:10.600 I think that. 0:13:11.240 --> 0:13:13.719 I mean, if nothing else, they just need a lot 0:13:13.760 --> 0:13:17.840 of time, right because all those unrealized losses, they don't 0:13:17.880 --> 0:13:20.160 want to have them realized, and so you've got to 0:13:20.400 --> 0:13:22.640 you've got to wait till maturity. 0:13:22.679 --> 0:13:24.720 So that could be years and years and years. 0:13:24.480 --> 0:13:26.400 Down the road. No, I don't think they're going to 0:13:26.400 --> 0:13:28.760 have to wait to maturity. But I do think if 0:13:28.800 --> 0:13:32.880 we get some rolling back of those regulatory cuts, in 0:13:32.920 --> 0:13:34.839 other words, to put the regulations back in place, that 0:13:34.920 --> 0:13:39.760 will that will increase security for the banks and people's 0:13:39.920 --> 0:13:41.960 ability to be confident. And I think the second thing 0:13:41.960 --> 0:13:43.720 will be if rates start to go back down again 0:13:43.760 --> 0:13:45.640 and give them a little bit of a breather so 0:13:45.679 --> 0:13:47.640 the losses aren't so large. So those are the two 0:13:47.679 --> 0:13:49.079 things that we have to look for. 0:13:50.160 --> 0:13:50.760 Carol, though. 0:13:50.800 --> 0:13:53.319 I mean, the thing is they're going to be very judicious. 0:13:53.320 --> 0:13:55.000 In fact, that is the word that was used by 0:13:55.000 --> 0:13:57.920 the Huntington Banks Shares a CFO to Bloomberg the other 0:13:58.040 --> 0:14:01.560 day when it comes to lending. Judicious means they're going 0:14:01.600 --> 0:14:03.680 to have to raise their standards, which is going to 0:14:03.679 --> 0:14:05.720 be probably the case with most of these regional banks, 0:14:05.720 --> 0:14:09.000 which ten of course, means that we have a problem 0:14:09.040 --> 0:14:14.680 with the with the companies and smemes in particular getting money, 0:14:14.840 --> 0:14:17.920 and that is another form of perhaps. 0:14:17.640 --> 0:14:21.520 Tightening correct I think, well remember too, First Republic also, 0:14:21.840 --> 0:14:24.400 most of their loans were mortgages to ultra high net 0:14:24.440 --> 0:14:27.720 worth individuals. This was not a credit issue on them 0:14:27.760 --> 0:14:31.400 at all. They were doing ten years no interest loans. 0:14:31.480 --> 0:14:34.600 So they got stuck with this huge geno bullet at 0:14:34.600 --> 0:14:37.920 the end, which of course flaps around quite a bit 0:14:37.960 --> 0:14:39.640 in terms of value, and the rates went up, that 0:14:39.720 --> 0:14:43.440 went down significantly, So it wasn't really a credit issue. 0:14:43.480 --> 0:14:46.240 It was it was how they structured these bonds, which 0:14:46.280 --> 0:14:49.480 seemed frankly a little bit surprising that they couldn't have 0:14:49.480 --> 0:14:53.040 anticipated that some point in ten years the rates would 0:14:53.040 --> 0:14:56.320 have gotten up. So in this case from First Republic, 0:14:56.360 --> 0:14:58.760 their credit was stellar. This was not a problem for them. 0:14:59.240 --> 0:15:02.160 It was this interest only lending thing for ten years 0:15:02.200 --> 0:15:03.360 that they've got to stop doing. 0:15:03.560 --> 0:15:05.200 In the broader markets, who haven't had a lot of 0:15:05.280 --> 0:15:09.160 movement of lad although we have had in individual companies, 0:15:09.200 --> 0:15:12.000 but not so much in the broader picture. Are you 0:15:12.040 --> 0:15:14.400 waiting on a catalyst? Is there a catalyst coming for 0:15:14.480 --> 0:15:16.480 more direction in markets than what might it be? 0:15:16.760 --> 0:15:19.320 Well, I think even this week will be interesting for 0:15:19.720 --> 0:15:21.920 the tech names. You know, I'm a big tech bull, 0:15:22.040 --> 0:15:26.040 so I'm anticipating Amazon will give us a good story. 0:15:26.120 --> 0:15:29.600 And you know, again, once we get a clear picture 0:15:29.600 --> 0:15:31.480 of when these rate hikes are going to stop, you're 0:15:31.480 --> 0:15:33.000 going to see the rest of the markets start to 0:15:33.040 --> 0:15:36.520 run again. Because generally the economy is doing fine. This 0:15:36.680 --> 0:15:40.120 was a FED induced slowdown. This is not because the 0:15:40.160 --> 0:15:43.120 fundamentals of the companies were bad and they were slowing 0:15:43.160 --> 0:15:48.040 down organically, but because interest rate and cost barring costs 0:15:48.080 --> 0:15:50.120 have gone up. It has given all of the companies 0:15:50.160 --> 0:15:53.480 also frankly, an excuse to lay off a lot of employees. 0:15:53.520 --> 0:15:56.040 So guess what happens they do the layoffs those costs 0:15:56.080 --> 0:15:59.200 aren't coming back, and now if the boring costs go down, 0:15:59.320 --> 0:16:02.160 suddenly there a much better position. They have more cash 0:16:02.400 --> 0:16:04.560 and they could start moving forward. So I think that 0:16:04.600 --> 0:16:07.320 the catalyst will be, you know, when we see the 0:16:09.120 --> 0:16:11.120 I mean, I just don't think they can keep hiking 0:16:11.160 --> 0:16:14.480 for too much longer because the big ticking time bomb 0:16:14.640 --> 0:16:17.000 is the real estate loans. Honestly, I mean, the real 0:16:17.080 --> 0:16:19.440 estate developers are all hanging on here, but at a 0:16:19.480 --> 0:16:21.160 certain point they're going to run out. You're going to 0:16:21.160 --> 0:16:23.640 see a lot more bank problems if you don't lower 0:16:23.680 --> 0:16:24.320 those rates. 0:16:24.560 --> 0:16:27.440 Absolutely, So in that environment, who does well. You're a 0:16:27.480 --> 0:16:29.880 fan of tech, You're also find of medicare. 0:16:30.760 --> 0:16:34.880 Medical yes, drug companies for example, there's some really exciting 0:16:35.000 --> 0:16:38.560 blockbuster type of drugs that are coming along, the weight 0:16:38.560 --> 0:16:42.640 loss drugs Eli Lilly for example, with Goovy. The minute 0:16:42.640 --> 0:16:46.360 that that gets approved to use for weight loss, that 0:16:46.440 --> 0:16:49.520 thing is going to be excuse me, Monjarno for Eli 0:16:49.560 --> 0:16:53.480 Lilly and then Wagovy for Nova Nordisk. They're actually just 0:16:53.520 --> 0:16:55.680 announced today that they're going to do a head to 0:16:55.720 --> 0:16:58.160 head competition and study which one is going to be better. 0:16:58.880 --> 0:17:01.520 But the general thought is probably Munjaro is going to win, 0:17:01.960 --> 0:17:04.680 and that's a multi billion dollar opportunity. There are also 0:17:04.840 --> 0:17:09.000 wonderful new cancer drugs coming along. There's genetic medicine happening. 0:17:09.080 --> 0:17:12.600 So I do think there are certain categories like technology 0:17:13.320 --> 0:17:17.600 and drug development that will go do well regardless of 0:17:17.680 --> 0:17:19.960 where the interest rates are, because these are things people 0:17:20.000 --> 0:17:20.560 have to use. 0:17:21.640 --> 0:17:25.400 It is a difficult environment where you have basically half 0:17:25.480 --> 0:17:28.119 the people think we are heading toward recession, and that 0:17:28.280 --> 0:17:31.320 changes a lot of calculations for sure. I mean it 0:17:31.359 --> 0:17:34.240 would mean that you know, the twenty five percent draw 0:17:34.320 --> 0:17:37.440 down last year isn't enough probably if. 0:17:37.320 --> 0:17:39.080 You actually hit a full blown recession. 0:17:39.160 --> 0:17:42.480 Right, So it doesn't sound like you're too expecting of that. 0:17:42.520 --> 0:17:46.239 But can you outline or you know, give us your 0:17:46.280 --> 0:17:49.240 thoughts on where we're heading in say the middle term 0:17:49.280 --> 0:17:51.160 here on the economy, Well, when you. 0:17:51.119 --> 0:17:53.399 Say middletar, I would say the rest of that. Let's 0:17:53.480 --> 0:17:55.560 just look at where you know, let's say we're beginning 0:17:56.000 --> 0:17:58.800 the next quarter here, if we look at by the summer, 0:17:58.840 --> 0:18:01.200 if we look at by this summer, if the Fed 0:18:01.280 --> 0:18:03.840 stops raising, which I believe they will at some point 0:18:03.920 --> 0:18:08.040 June or July, the outside outside because things are slowing 0:18:08.080 --> 0:18:10.520 down on their own from what they've already done. And 0:18:10.560 --> 0:18:13.080 it also always happens this way that it takes a 0:18:13.119 --> 0:18:16.440 few months for the raises to actually start to slow 0:18:16.440 --> 0:18:20.280 the economy. Let's say it starts to go through then 0:18:20.320 --> 0:18:24.000 I think, you know, the will be sort of sideways 0:18:24.040 --> 0:18:25.840 through the summer and then maybe take off again in 0:18:25.880 --> 0:18:30.040 the fall. Okay, that's one possible scenario. I personally don't 0:18:30.080 --> 0:18:33.439 see the recession. I don't see enough science to convince 0:18:33.440 --> 0:18:36.119 me that a major recession is happening. However, if you're 0:18:36.160 --> 0:18:39.040 afraid of that, my advice would be throw your money 0:18:39.040 --> 0:18:40.639 into the money market funds and earn four and a 0:18:40.680 --> 0:18:43.560 half percent right now, and just stay out as long 0:18:43.600 --> 0:18:46.280 as you're that frightened. Just stay in the money market 0:18:46.320 --> 0:18:48.399 funds and wait to see what the Fed does. You 0:18:48.440 --> 0:18:50.240 don't have to, you know, the day after the Fed 0:18:50.280 --> 0:18:53.000 moves is still plenty of time for the average investor 0:18:53.040 --> 0:18:55.440 to get into the market. Just sit in those nice, 0:18:55.720 --> 0:18:57.919 you know, Treasury backed money market funds and earn your 0:18:57.920 --> 0:18:59.639 four and a half percent right now, and it will 0:18:59.720 --> 0:19:01.560 only go up if you're right. You learn five or 0:19:01.600 --> 0:19:04.840 six percent. Then you can wait so when you feel 0:19:04.880 --> 0:19:08.000 that the pain is over, and then look for some 0:19:08.119 --> 0:19:10.320 period around the month or two when the term is coming, 0:19:10.600 --> 0:19:13.680 and then go back in. So for those listeners who 0:19:13.680 --> 0:19:16.639 are very frightened the money markets, there's no shame in 0:19:16.680 --> 0:19:18.800 the money market. Sit over there and wait for those 0:19:18.840 --> 0:19:21.280 who think, eh, I really want to get in now, 0:19:21.320 --> 0:19:23.440 I'm afraid it's going to go higher. Then look at 0:19:23.480 --> 0:19:27.080 big tech names. Look at big you know, blue chip names. 0:19:27.200 --> 0:19:29.720 Those always do well regardless. So if you want to 0:19:29.760 --> 0:19:31.240 be a little ahead of the curb and you want 0:19:31.280 --> 0:19:34.200 to take the risk, go into bloo chips. If you don't, don't, 0:19:34.440 --> 0:19:34.880 All right. 0:19:34.840 --> 0:19:37.479 Carol, thanks very much for joining us. Carol Pepper, founder 0:19:37.480 --> 0:19:42.720 and CEO of Pepper International. This is Bloomberg Daybreak Asia, 0:19:42.760 --> 0:19:45.320 your morning brief on the stories making news from Hong 0:19:45.400 --> 0:19:47.359 Kong to Singapore and Wall Street. 0:19:47.440 --> 0:19:51.400 Look for us on your podcast feed every day on Apple, Spotify, 0:19:51.680 --> 0:19:53.639 and anywhere else you get your podcasts. 0:19:53.640 --> 0:19:56.240 You can also listen live each day on Bloomberg eleven 0:19:56.280 --> 0:19:58.639 three to zero in New York, Bloomberg ninety nine to 0:19:58.680 --> 0:20:02.280 one in Washingtonloomberg one oh sixty one in Boston, and 0:20:02.280 --> 0:20:04.679 Bloomberg nine sixty in San Francisco. 0:20:04.760 --> 0:20:07.600