WEBVTT - The Ramifications of Credit Suisse and SVB 0:00:01.520 --> 0:00:05.200 From Mark hard of We're Innovation Money Empower Collie in 0:00:05.320 --> 0:00:10.280 Silicon Valley, NBR. This is Bloomberg Technology with Caroline Hide 0:00:10.280 --> 0:00:27.080 and Ed Ludlow. I'm Caroline Hide of Bloomberg's World headquarters 0:00:27.080 --> 0:00:29.720 in New York, and I'med Lovelow in San Francisco. This 0:00:29.800 --> 0:00:32.960 is a special edition of Bloomberg Technology because Ed throughout 0:00:33.000 --> 0:00:35.559 the show will cover all the market chaos that's spreading 0:00:35.760 --> 0:00:38.120 from Europe to the US and beyond. Elaine stokes some 0:00:38.200 --> 0:00:41.120 lumas sales hits fixed income. John Roe of el JIM 0:00:41.560 --> 0:00:44.560 covers the macro picture and how it affects your tech exposure, 0:00:45.360 --> 0:00:48.720 plus how the SVB collapse and bank crisis contagion could 0:00:48.800 --> 0:00:52.600 lead to the unraveling of fintech liquidity. We'll discuss with 0:00:53.200 --> 0:00:56.320 Jojau of Millennia Capital and we'll get the outlook on 0:00:56.440 --> 0:00:58.960 risk sentiment. Broadly, We're going to dive into the state 0:00:58.960 --> 0:01:01.959 e venture capital investor as clouds loom over the industry, 0:01:02.160 --> 0:01:06.000 so a constan CLEO Capital Managing directs there. So let's 0:01:06.040 --> 0:01:09.160 turn back to credit Swiss shares record drop hitting a 0:01:09.240 --> 0:01:12.559 record low credit default swaps or insurance against the fault 0:01:12.640 --> 0:01:16.600 also trading above financial crisis levels. Let's bring in Bloomberg's 0:01:16.640 --> 0:01:19.039 Marry and Half Tameya from Zerich for more on this. 0:01:19.120 --> 0:01:21.720 What are the latest moves when it comes to Credit 0:01:21.760 --> 0:01:23.160 Swiss and what do we know about the health of 0:01:23.200 --> 0:01:27.319 this bank. So we've got about half an hour until 0:01:27.319 --> 0:01:29.600 the market closes, so we'll see where the stock ends 0:01:29.640 --> 0:01:32.360 up then. But it has been plummeting today and that's 0:01:32.400 --> 0:01:34.319 off the back of some comments from one of their 0:01:34.360 --> 0:01:37.720 anchor investors in the Saudi National Bank earlier today talking 0:01:37.760 --> 0:01:40.360 about their stake in the bank and their ability their 0:01:40.440 --> 0:01:43.480 non ability to increase it more than ten percent. But 0:01:43.600 --> 0:01:46.840 in reality, what we're seeing is is a broad reaction 0:01:46.880 --> 0:01:50.520 across the European banking sector, with all stocks down off 0:01:50.560 --> 0:01:53.120 the back of someone certainty with what happened with Silicon 0:01:53.200 --> 0:01:56.080 Valley Bank in the US and someone certainty around what 0:01:56.240 --> 0:01:58.720 you know, how stable European banks are, And of course 0:01:58.760 --> 0:02:00.800 with Credit Suiss, you always have to add a layer 0:02:00.840 --> 0:02:02.440 to that with the fact that it's going through a 0:02:02.520 --> 0:02:04.920 very difficult restructuring right now and has lost a lot 0:02:04.960 --> 0:02:09.399 of confidence of its investors and clients. Marion Great Reporting 0:02:09.480 --> 0:02:13.280 matt a course US felled in bringing that exclusive which 0:02:13.400 --> 0:02:17.120 sparked the whole concern over Credit sus Marian half Toman, 0:02:17.200 --> 0:02:19.079 We thank you very much. Indeed, let's warn it out. 0:02:19.120 --> 0:02:23.040 Let's bring in EMOTIONALI Bassak who well, maybe yesterday we 0:02:23.160 --> 0:02:26.960 thought had maybe the past was worse behind us when 0:02:26.960 --> 0:02:29.040 it came to Silicon Valley Bank, and now we into 0:02:29.240 --> 0:02:31.440 yet a further bit of contagion when it comes to 0:02:31.520 --> 0:02:34.520 europeying financial it certainly does. And the thing it's important 0:02:34.560 --> 0:02:36.400 here is this is not a bank far far away. 0:02:36.440 --> 0:02:39.800 This is a globally systemic financial institution with big presence 0:02:39.800 --> 0:02:42.360 in the United States, with counterparties across the world and 0:02:42.520 --> 0:02:45.480 clients across the world. So seriously, this is a very 0:02:45.480 --> 0:02:48.079 serious situation to see a bank under this kind of stress, 0:02:48.120 --> 0:02:50.000 because anyway you cut the pie here, you have the 0:02:50.040 --> 0:02:53.200 shares trading out record lows, you have the bonds really 0:02:53.280 --> 0:02:58.640 trading very low for again, a globally systemic institution, and 0:02:58.720 --> 0:03:01.280 the credit default to ops so widening out to levels 0:03:01.280 --> 0:03:04.800 on scene before. So a lot of records being faced 0:03:04.800 --> 0:03:08.040 by Credit Suez and therefore causing concerns in the market 0:03:08.080 --> 0:03:10.919 about it. There are sources of mind that say that 0:03:11.040 --> 0:03:13.360 this feels worse than Silicon Valley Bank in a lot 0:03:13.400 --> 0:03:16.200 of ways. Remember, for a globally systemic financial institution, there 0:03:16.240 --> 0:03:19.919 are backstops here. But there's some really interesting color that's 0:03:19.919 --> 0:03:23.240 worth noting, Caroline, And it's this my sources say, for 0:03:23.360 --> 0:03:26.480 Silicon Valley Bank, for example, if things kind of moved 0:03:26.520 --> 0:03:30.160 quickly in the pursuit of a sale before the deposit 0:03:30.240 --> 0:03:32.239 or flight, it would have been easier to get the 0:03:32.320 --> 0:03:34.680 job done. But you know, you have to wonder about 0:03:34.680 --> 0:03:37.240 what that looks like for credit, Sueeze. At what point 0:03:37.320 --> 0:03:39.400 do you reach a point where things get so bad 0:03:39.440 --> 0:03:43.160 that they're so hard to turn around? Right now, they 0:03:43.160 --> 0:03:48.040 are still obviously fine when it comes to their own liquidity, 0:03:48.240 --> 0:03:50.560 So we have to keep an eye on what the 0:03:50.600 --> 0:03:53.040 depositors do at the end of the day, given their 0:03:53.200 --> 0:03:56.800 capital sources here look very strained. And I mean when 0:03:56.800 --> 0:03:59.040 the readacross is for the tech community US well, and 0:03:59.120 --> 0:04:02.360 that the idea that everyone was sort of too concentrated 0:04:02.400 --> 0:04:04.360 a risk. What's the read across when it comes to 0:04:04.360 --> 0:04:08.120 credit sweets And indeed for our own technology community, well, 0:04:08.120 --> 0:04:10.240 we know that venture firms large and small, and the 0:04:10.360 --> 0:04:13.360 number of tech companies are still trying to finalize their banking. 0:04:13.480 --> 0:04:16.400 The read through from what's happened with SPB to Credit 0:04:16.400 --> 0:04:19.880 Suite now is deposit outflow risk, right, Shinali. That is 0:04:19.920 --> 0:04:22.760 still where we're looking, whether it's Europe or First Republic 0:04:22.760 --> 0:04:25.320 here in the States. You want to hear something crazy too, 0:04:25.400 --> 0:04:27.599 But people forget this. Credit sweet was one of the 0:04:27.640 --> 0:04:30.520 biggest members of the market when it came to financing, 0:04:30.560 --> 0:04:32.919 so to the extent people were worried about Silicon Valley 0:04:32.920 --> 0:04:34.960 Bank and the exit for the market, Credit Swiez was 0:04:35.000 --> 0:04:37.920 one of the biggest underwriters of spacks in a hot market. 0:04:38.040 --> 0:04:40.240 They were a banker to a lot of the world's 0:04:40.240 --> 0:04:45.600 wealthy technology firms. They helped disseminate those pre IPO shares 0:04:45.640 --> 0:04:49.240 that pre IPO equity two founders across the world to 0:04:49.360 --> 0:04:51.400 billionaires across the world that we're able to get in 0:04:51.480 --> 0:04:53.960 early on a lot of these trades. It has a 0:04:54.040 --> 0:04:57.599 huge ramification to financing markets with an exit of a 0:04:57.600 --> 0:05:00.800 bank like this and ed I mean also, we just 0:05:00.839 --> 0:05:03.080 had the CEO of Credit Smison yesterday saying that they 0:05:03.120 --> 0:05:05.599 did well from some of the deposits coming from Silicon 0:05:05.720 --> 0:05:08.800 Valley Bank to their own lender. Right. But what you 0:05:08.839 --> 0:05:10.240 need to realize on credit sweet and we'll get to 0:05:10.279 --> 0:05:12.120 this later in the show. All of this started happening 0:05:12.160 --> 0:05:14.440 back in the fourth quarter or sooner when it came 0:05:14.480 --> 0:05:17.840 to client assets and liquidity concerns. It's just the last 0:05:17.839 --> 0:05:21.040 five days have been astonishing. Bloomberg Scenali Bassack, you are 0:05:21.040 --> 0:05:23.000 coming back later in the hour. I want to bring 0:05:23.000 --> 0:05:25.320 in John row Though, head of multi asset funds at 0:05:25.520 --> 0:05:28.720 Legal and General Investment Management LGYM, multi asset fund with 0:05:28.880 --> 0:05:32.440 eighty five billion dollars in AUM. John, let's start here. 0:05:32.960 --> 0:05:36.359 Are we seeing a de facto tightening in this market? 0:05:36.480 --> 0:05:43.640 Is that what the concern is? Yeah, we're definitely seeing Kara, 0:05:43.760 --> 0:05:45.360 I think we lost John. So I'm going to jump 0:05:45.400 --> 0:05:48.040 in here and just say, you know, John, I think 0:05:48.040 --> 0:05:52.480 you're back. Please carry on. Sorry. Oh yeah, and so yeah, 0:05:52.520 --> 0:05:54.360 I think we are seeing a tightening and little feat 0:05:54.360 --> 0:05:57.280 three for several quarters. So we're seeing not just in 0:05:57.320 --> 0:05:58.960 the American market, but we're going to see it in 0:05:59.000 --> 0:06:01.479 Europe as well. I mean that there are less kind 0:06:01.480 --> 0:06:03.719 of US and European rate hikes because more of the 0:06:03.760 --> 0:06:06.680 tightening can be done through a tighter financial conditions and 0:06:06.800 --> 0:06:10.320 learning standards. The issue the handwringing is that the Federal 0:06:10.360 --> 0:06:12.160 Reserve is having to hike rates and it's going to 0:06:12.200 --> 0:06:16.080 break things. Ultimately, How bad would a credit squeeze breakage? 0:06:16.080 --> 0:06:21.440 B Yeah, I think on the inflation side, that's actually 0:06:21.480 --> 0:06:23.160 been starting to look a bit better. We've had improved 0:06:23.160 --> 0:06:25.800 participation in the US, so the US labor market datas 0:06:25.839 --> 0:06:28.359 look quite good, and there's been some softening in some 0:06:28.440 --> 0:06:30.960 of the inflation data before today, which was clear in this. 0:06:31.120 --> 0:06:36.159 On the upside, I think though that oh, we're having 0:06:36.160 --> 0:06:38.599 some technical difficulties with John at the moment. We'll go 0:06:38.720 --> 0:06:40.920 get back to him in a moment. I think one 0:06:40.960 --> 0:06:43.640 of the key issues for me ED is thinking about 0:06:43.680 --> 0:06:47.039 the broader impact across asset is the bond market move. 0:06:47.080 --> 0:06:49.440 We know that John has exposure not only to now 0:06:49.480 --> 0:06:52.400 stack futures but also within his multi asset funds. He 0:06:52.440 --> 0:06:54.880 looks particularly at the bond market when we're seeing yules 0:06:54.920 --> 0:06:57.440 move so much. Yes, this is about contagiu risk when 0:06:57.480 --> 0:06:59.320 it comes to banks, but it's also been in a 0:06:59.360 --> 0:07:01.200 large part about some of the PPI reading that we 0:07:01.320 --> 0:07:04.880 got today. The macro data points we still get and 0:07:04.960 --> 0:07:06.719 it all goes back to the FED. That's why the 0:07:06.760 --> 0:07:11.160 reset on expectations was so important. Yes, it's a really 0:07:11.880 --> 0:07:15.800 basic idea, higher rates discount pres eventually of cash flows. 0:07:15.840 --> 0:07:18.400 But actually I think we're really focused on the short 0:07:18.480 --> 0:07:21.440 end when it comes to policy sensaive stocks. Sharlie Bassek, 0:07:21.480 --> 0:07:23.240 I think you're still with us out in New York. 0:07:23.560 --> 0:07:26.760 What are you watching right now? Broadly in the sexes 0:07:26.800 --> 0:07:29.400 you covered? Forget credit Swiss is an isolated incident. But 0:07:29.440 --> 0:07:32.440 what are we hearing from the US banking sector in particular? 0:07:32.480 --> 0:07:34.280 I'm glad you asked this because I asked, what are 0:07:34.280 --> 0:07:36.080 the pain trades right now? Is there anything that you 0:07:36.080 --> 0:07:38.360 could buy in this market? And I'm hearing things like 0:07:38.480 --> 0:07:41.119 gold ed You know, this is how tough this market 0:07:41.240 --> 0:07:44.200 is that even safe doesn't feel that safe right now. 0:07:45.160 --> 0:07:49.680 Credit trades, investment grade trades, are these under pressure in 0:07:49.720 --> 0:07:53.080 a market like this, Even some of the big regional 0:07:53.200 --> 0:07:56.400 banks here. Remember we face that downgrade for a First Republic. 0:07:56.440 --> 0:07:58.440 We've been talking about this a lot. First Republic was 0:07:58.480 --> 0:08:00.840 also a bank that many people move money to in 0:08:00.840 --> 0:08:02.880 the wake of Silicon Valley Bank. But the pressure on 0:08:02.960 --> 0:08:05.880 deposits here is what caused that downgrade. So the bonds 0:08:05.880 --> 0:08:08.000 had been trading lower. The stock had been trading lower 0:08:08.040 --> 0:08:11.240 after those rebounds we saw yesterday, So again, what is 0:08:11.280 --> 0:08:14.160 safe is a huge question in this market. I think 0:08:14.200 --> 0:08:16.840 one other thing I'm very curious about is the pain 0:08:16.880 --> 0:08:19.000 that might be felt. They call it the carry trade, 0:08:19.200 --> 0:08:21.320 and that is remember at the end of last year, 0:08:21.960 --> 0:08:24.240 we saw all the tech community feel a lot of 0:08:24.280 --> 0:08:27.440 pain in the hedge fund world, but the macro traders 0:08:27.600 --> 0:08:31.280 had come roaring bath because of the volatility and interest 0:08:31.360 --> 0:08:36.600 rates and commodities in asset classes around the macro world. However, 0:08:36.760 --> 0:08:39.480 now it looks like some of those trades are unwinding, 0:08:39.520 --> 0:08:41.959 and by the way, they're levered trades, which means they're 0:08:42.200 --> 0:08:45.440 used often on borrowed funds. So we are expecting a 0:08:45.480 --> 0:08:49.240 little bit more pain among investors and a broader set 0:08:49.280 --> 0:08:52.679 of investors, even the ones that had one out last year. 0:08:53.280 --> 0:08:55.720 To what extent that pain could be is a huge 0:08:55.800 --> 0:08:59.760 question mark. And Shannani hindsight's a beautiful thing. What we've 0:08:59.800 --> 0:09:01.760 had some of the biggest names in finance way, and 0:09:01.760 --> 0:09:03.839 you've heard from Larry Fink today talking about some of 0:09:03.840 --> 0:09:06.560 the domino effects, the worries about financial crisis. More broadly, 0:09:06.720 --> 0:09:10.360 you've heard of course, from the likes of Bridgewater Associates 0:09:10.440 --> 0:09:13.880 founder as well Ray Dalio talking about how maybe indeed 0:09:14.000 --> 0:09:16.120 SVB was some sort of canary in a coal mine. 0:09:16.240 --> 0:09:19.440 Interesting me. Kathy Wood weighing in on Twitter, of course yesterday, 0:09:19.960 --> 0:09:22.720 of course, she says, now it is obviously glaringly clear 0:09:22.800 --> 0:09:24.719 that some sort of bank crisis was coming our way. 0:09:24.760 --> 0:09:28.559 But ultimately, did you feel that it was so hard 0:09:28.640 --> 0:09:31.559 to tell because people got so complacent with the market. 0:09:31.600 --> 0:09:34.040 If you took a look at how many banks had 0:09:34.080 --> 0:09:37.160 taken advances, for example, from the federal home loan banks, 0:09:37.400 --> 0:09:40.120 which is not you know, standard behavior to see in 0:09:40.160 --> 0:09:42.600 the billions as done in the last year or so, 0:09:43.000 --> 0:09:44.960 there was a lot of it, and it's really hard 0:09:45.000 --> 0:09:47.720 to calculate. You would have to go through the regulatorial 0:09:47.800 --> 0:09:50.000 filings of each of those banks separately to really get 0:09:50.040 --> 0:09:52.800 a sense of how much was borrowed at the end 0:09:52.840 --> 0:09:55.360 of the day and which banks were really borrowing to 0:09:55.400 --> 0:09:58.520 that extent to make sure that they had liquidity on 0:09:58.559 --> 0:10:02.200 hand here in the case of a dire moment. These 0:10:02.240 --> 0:10:05.480 are dire moments. Again, I think what's hard for me 0:10:05.480 --> 0:10:07.600 and I got a little criticism for this, this idea 0:10:07.679 --> 0:10:09.760 here that this is not two thousand and eight. Well, 0:10:10.000 --> 0:10:13.720 because there have been so many micro crashes leading up 0:10:13.720 --> 0:10:16.520 to this moment, and there has already been federal intervention. 0:10:16.559 --> 0:10:19.520 Remind you in the United States what that looks like 0:10:19.600 --> 0:10:22.960 in Europe as well, and how much half global leaders 0:10:23.040 --> 0:10:24.880 have to kind of step up and stem some of 0:10:24.920 --> 0:10:28.800 these concerns. That creates a rock and a hard place 0:10:28.840 --> 0:10:30.680 when the market is still worried about the FED and 0:10:30.760 --> 0:10:33.640 in the inflation and the trajectory of interest rates. So 0:10:33.960 --> 0:10:36.600 everywhere you look there are kind of issues to go around. Wow. 0:10:36.800 --> 0:10:39.600 We heard, of course from Cliff Fastness, who was saying, 0:10:39.679 --> 0:10:42.520 if you look at the ball market, that's showing GFC 0:10:42.960 --> 0:10:45.280 two thousand and eight warriors, Maybe the equity market not 0:10:45.320 --> 0:10:47.520 so much. Shinale. We are so thankful for your expertise 0:10:47.600 --> 0:10:49.640 day and day out. Welcome back to a special edition 0:10:49.640 --> 0:10:52.360 of Bloomberg Technology. I'm at Ludlow in San Francisco, and 0:10:52.400 --> 0:10:54.719 I'm Karine Hyde in New York. We are markets through 0:10:54.760 --> 0:10:57.520 and through. Just before the market opened, we had that knock, 0:10:57.760 --> 0:11:01.120 that repercussion of a debt cut from SMP over to 0:11:01.160 --> 0:11:03.679 the likes of First Republic Bank. We want to get 0:11:03.679 --> 0:11:05.760 into that with cutting gook to joining us for more 0:11:05.920 --> 0:11:08.920 on well that has implied for the equity market too. Yeah, 0:11:08.960 --> 0:11:11.040 a lot of pain at Caroline, and you're seeing this 0:11:11.080 --> 0:11:13.200 across the board for regional banks. I should mention in 0:11:13.240 --> 0:11:16.000 the pre market, all of these names were higher by 0:11:16.400 --> 0:11:19.280 eight to ten percent, and now you've completely seen the 0:11:19.280 --> 0:11:21.440 credit sweet story turn it around. First Republic is, of 0:11:21.440 --> 0:11:23.360 course our poster child for some of the pain in 0:11:23.360 --> 0:11:25.960 the regional banks, just given how similar of a profile 0:11:26.040 --> 0:11:28.720 it has to the signature bank story, and that really 0:11:28.760 --> 0:11:30.680 puts it in the focus when it comes to where 0:11:30.679 --> 0:11:33.840 the regulatory concern might line next. Nevertheless, you are seeing 0:11:33.840 --> 0:11:36.440 a move about eighteen percent lower on that stock, really 0:11:36.559 --> 0:11:38.880 leading the charge lower. The one stock you want to 0:11:38.920 --> 0:11:41.000 keep in mind that's in the green is Western Alliance. 0:11:41.040 --> 0:11:43.280 That's really coming off of a stake, a five point 0:11:43.360 --> 0:11:46.000 three percent stake coming from Ken Griffin over at Citadel. 0:11:46.040 --> 0:11:48.200 It's the only reason that stock is in the green 0:11:48.240 --> 0:11:50.000 and not following the trend. But again, I want to 0:11:50.000 --> 0:11:52.240 go back to our poster child of First Republic, because 0:11:52.280 --> 0:11:54.199 take a look at just what it's done in the 0:11:54.280 --> 0:11:57.280 last year or so. The dramatic drop of down about 0:11:57.320 --> 0:11:59.560 eighty percent a lot of that loss is really just 0:11:59.600 --> 0:12:02.040 coming in the last week or so, once again really 0:12:02.040 --> 0:12:04.760 showing just how much it's fallen from grace, and especially 0:12:04.800 --> 0:12:06.959 when it comes to their price to book ratios, even 0:12:07.000 --> 0:12:10.040 with that cheapness, still not catching a bid for that reason. Now, 0:12:10.160 --> 0:12:13.280 to add a little bit of salt to the wound, 0:12:13.320 --> 0:12:15.120 you are starting to see that down grade now cut 0:12:15.160 --> 0:12:17.520 to junk over at S ANDP. I had an A 0:12:18.400 --> 0:12:21.360 rating now to a double B plus and is still 0:12:21.360 --> 0:12:24.160 on credit watch negative. The reasoning here is they're worried 0:12:24.160 --> 0:12:27.640 about outflows, kind of this mass bank run First Republic 0:12:27.640 --> 0:12:29.720 getting hit next after some of the chaos you've seen 0:12:29.920 --> 0:12:33.320 in SVP and signature. They're also pointing out that there's 0:12:33.320 --> 0:12:35.720 a little bit more dependency in terms of their structure 0:12:36.000 --> 0:12:39.040 on net interest income in instead of their fee income 0:12:39.080 --> 0:12:41.680 from their wealth management business. That is something that sets 0:12:41.720 --> 0:12:44.280 First Republic apart from some of its peers and perhaps 0:12:44.320 --> 0:12:46.960 why it's getting hurt just a little extra when it 0:12:46.960 --> 0:12:49.640 comes to the scrutiny from regulators and of course from 0:12:49.640 --> 0:12:52.640 these credit agencies. Yeah, outflow risk at the core of 0:12:52.679 --> 0:12:55.000 that story. Numbers will continue to track this out. Bloom 0:12:55.000 --> 0:12:57.520 Bows pretty good to thank you so much. Let's keep 0:12:57.520 --> 0:13:00.320 it going and bring in Elaine Stokes, executive VP and 0:13:00.400 --> 0:13:03.000 portfolio manager at Loo Miss Sales and Company in LA 0:13:03.040 --> 0:13:05.440 and I'll ask you the question we tried to pose earlier. 0:13:06.160 --> 0:13:09.400 Is this just broadly a de facto tightening that we're 0:13:09.440 --> 0:13:13.439 seeing play out in front of us? Yeah, I mean, 0:13:13.440 --> 0:13:16.560 I think that's exactly what we're seeing it where we 0:13:16.640 --> 0:13:19.880 are finally getting proof, right, the FED is finally getting 0:13:19.960 --> 0:13:25.800 proof that they are affecting more than just the housing market. 0:13:25.960 --> 0:13:30.960 They are affecting the lending markets across the board. You know, 0:13:31.040 --> 0:13:34.600 Credit Swiss we still have to deal with over the 0:13:34.679 --> 0:13:38.160 next couple of days to find out just how far 0:13:38.280 --> 0:13:42.480 that contagion goes. But what has happened within the US 0:13:42.520 --> 0:13:45.559 away from Credit Swiss had already proved that point that 0:13:46.160 --> 0:13:50.920 lending has changed. People are not as willing to be 0:13:51.080 --> 0:13:57.480 in private equity, venture capital in lend to they don't 0:13:57.559 --> 0:14:00.520 need to yields and hit a point that they don't 0:14:00.520 --> 0:14:04.240 need to. So therefore, Lane, what have you been doing 0:14:04.400 --> 0:14:08.480 when you've seen the enormous volatility not just incorporate debt, 0:14:08.760 --> 0:14:11.440 but my goodness, in US treasuries when we have on 0:14:11.520 --> 0:14:14.520 one day a more than twenty five basis point move 0:14:14.600 --> 0:14:16.880 that has then become a four day straight from the 0:14:16.960 --> 0:14:20.320 upside to the downside in terms of boring costs. Yeah, 0:14:20.360 --> 0:14:24.200 you know, it's it's funny. In times like this, we 0:14:24.280 --> 0:14:28.920 expect to be really, really active, and it's been a 0:14:28.960 --> 0:14:33.800 little bit disappointing within the treasury market. We were running 0:14:33.840 --> 0:14:38.400 neutral in our funds and now it hit a point 0:14:38.440 --> 0:14:42.840 where we went from we went to an overdone place 0:14:42.960 --> 0:14:46.680 so quickly that I don't I don't necessarily think that 0:14:46.720 --> 0:14:49.360 what the market, the treasuring market is pricing into the 0:14:49.440 --> 0:14:52.240 market is reality. Do we really think that there are 0:14:52.240 --> 0:14:54.800 going to be one hundred and twenty five basis points 0:14:54.800 --> 0:14:59.360 of cuts by January? That seems a little overdone, But 0:14:59.520 --> 0:15:02.080 then that's a exactly what our technology viewer is trying 0:15:02.120 --> 0:15:05.800 to get to grips with. For our viewing, the context is, 0:15:05.960 --> 0:15:09.840 you know, Loomis Sales has a storied history in bond management, 0:15:09.840 --> 0:15:13.040 You've got hundreds of billions in assets under management, and 0:15:13.040 --> 0:15:15.040 you're trying to read the tea leaves of ultimately, what 0:15:15.080 --> 0:15:17.560 the Fed does in this scenario. Does the Federal Reserve 0:15:17.640 --> 0:15:22.160 focus more of financial issues contagion bank risk, or does 0:15:22.200 --> 0:15:25.120 it focus more on inflation and some of the concerns 0:15:25.120 --> 0:15:29.160 there that ultimately means they have to hike rates. Yeah, 0:15:29.360 --> 0:15:32.480 I do think that the Fed probably hasn't made a decision, 0:15:33.120 --> 0:15:35.080 and the Fed is going to watch what happens over 0:15:35.160 --> 0:15:37.920 the next couple of days and does credit Swiss and 0:15:38.000 --> 0:15:44.400 what's happening there take us to right. They know more 0:15:44.440 --> 0:15:47.560 than we do, but they don't know what the markets 0:15:47.560 --> 0:15:51.240 are going to do here. I think if they were 0:15:51.280 --> 0:15:54.640 to be making a decision today with what they know, 0:15:55.160 --> 0:15:59.520 economic numbers that they don't lie but are definitely distorted 0:15:59.600 --> 0:16:06.360 by weather, distorted by some other exogenous factors, and the 0:16:06.440 --> 0:16:09.560 amount of fear that's in the market right now, I 0:16:09.640 --> 0:16:12.440 think that they would hold off. But we could see 0:16:12.520 --> 0:16:15.640 something happen in the next couple of days that settles 0:16:15.680 --> 0:16:18.640 the markets down and allows them to do that twenty 0:16:18.680 --> 0:16:21.320 five basis points. I mean, the market right now is 0:16:21.320 --> 0:16:24.280 saying it's a fifty fifty chance, at least that's what 0:16:24.320 --> 0:16:26.560 the treasury market is saying, it's a fifty fifty chance. 0:16:26.600 --> 0:16:29.840 Reply that the Fed is going to cut twenty five 0:16:29.840 --> 0:16:34.640 business points. I do think something that's pretty oh, go ahead, 0:16:35.480 --> 0:16:37.360 Well no, no, I want to tie this together. I 0:16:37.360 --> 0:16:39.600 want to understand why this is happening right now. Let's 0:16:39.600 --> 0:16:43.040 go to the Bloomberg terminal. I look at Credit Swiss CDs, 0:16:43.120 --> 0:16:47.520 credit default swaps trading at financial crisis above financial crisis 0:16:47.640 --> 0:16:52.160 levels to ensure against the fault. This was happening at 0:16:52.200 --> 0:16:54.520 Credit Swiss in the fourth quarter in terms of client 0:16:54.560 --> 0:16:59.560 asset outflows, liquidity metrics dropping, SVB happened, and it seems 0:16:59.600 --> 0:17:04.159 as if everyone suddenly realize again that bank liquidity is important. 0:17:05.359 --> 0:17:07.479 Why are we sort of happening Why is this happening 0:17:07.520 --> 0:17:13.160 Wednesday right now? What's the catalyst for you? Well, clearly, 0:17:13.160 --> 0:17:15.879 when the largest shareholder comes out and says there's no 0:17:15.920 --> 0:17:20.560 way I'll put another sentence, and you fear that they 0:17:20.640 --> 0:17:25.400 know something you don't know, right, That's that, I think 0:17:25.520 --> 0:17:28.200 is the fear that's going through the market. Everything we 0:17:28.280 --> 0:17:31.960 know is that, you know, Credit Swiss is a bank 0:17:32.160 --> 0:17:35.000 that had a different type of regulation than what we 0:17:35.160 --> 0:17:40.040 then SVP it. It seems to me to be a 0:17:40.160 --> 0:17:44.400 very different situation, and it was really all about that 0:17:44.480 --> 0:17:48.360 Lacke's confidence. It was all about a lack of confidence 0:17:49.359 --> 0:17:53.040 for the banking system and if that reverberates We're going 0:17:53.080 --> 0:17:57.960 to see more credit Swiss, more First Republics. Now, the 0:17:58.040 --> 0:18:04.000 credit markets don't seem to be saying deep dark recession 0:18:04.480 --> 0:18:10.480 in its app and right away. Yeah, very different signals 0:18:10.480 --> 0:18:13.240 coming from very different asset classes. And Lane Stokes, you're 0:18:13.240 --> 0:18:15.480 a cross of course, the corporate credit world and the 0:18:15.560 --> 0:18:17.520 government bond world. And we want to thank you so much. 0:18:17.560 --> 0:18:19.960 We're spending some time with us exactly p portfolio manager 0:18:19.960 --> 0:18:23.280 over at Looma Sales. We thank you. Stay well, let's 0:18:23.320 --> 0:18:26.600 take a quick look at the macro picture, the repercussions 0:18:26.720 --> 0:18:29.320 of well, an investor that won't put an extra cent 0:18:29.400 --> 0:18:33.960 into credit suite. The context to the SVB crisis and 0:18:34.000 --> 0:18:36.920 the market contagion means Europe the stock six hundred having 0:18:36.920 --> 0:18:39.800 its worst day in a year, but the euro having 0:18:39.800 --> 0:18:41.800 its worst day in two years. We're off by almost 0:18:41.840 --> 0:18:44.280 two percent overall that we're lowest levels in two months. 0:18:44.400 --> 0:18:46.720 The flight to quality, the Bloomberg dollext sows up a 0:18:46.760 --> 0:18:51.240 percentage point. Sovereign bonds they outperform d Yeah, in the 0:18:51.280 --> 0:18:53.960 tech sector and equity market, it's really interesting, like risk off, 0:18:53.960 --> 0:18:57.600 but no obvious move to safety. Gorman Sachs profitless tech 0:18:57.840 --> 0:19:00.520 only down nine tenths of a percent outperform really what 0:19:00.560 --> 0:19:02.720 we see in the equity space, in the tech sector, 0:19:02.760 --> 0:19:06.160 the underperformance really in your semiconductors, the socks down more 0:19:06.160 --> 0:19:08.439 than three percent at this point. Caroline, Yeah, and I 0:19:08.480 --> 0:19:10.719 think the repercussions are far and wide. It's interesting that 0:19:10.720 --> 0:19:14.800 actually the NASDAC the technology sector somewhat outperforms the flight 0:19:14.840 --> 0:19:17.040 to the bond market. I think the volatility there is 0:19:17.040 --> 0:19:18.679 one that you have to keep an eye on. And 0:19:18.760 --> 0:19:21.280 this is a context in which this affects every risk 0:19:21.320 --> 0:19:23.560 taker out there. What does this mean for future deal 0:19:23.560 --> 0:19:26.360 flu What does this mean for investing in technology? More broadly, 0:19:26.520 --> 0:19:28.399 It's notable that some of the key tech stocks do 0:19:28.760 --> 0:19:31.960 outperformed to a semi excent a Bitcoin actually remarkable amid 0:19:31.960 --> 0:19:35.480 the dollar strength and tight of financial conditions. They don't 0:19:35.560 --> 0:19:38.840 hit megacats, they hit small or keep tracking. That's all. Next. 0:19:38.880 --> 0:19:45.800 This is Bloomberg. Welcome back to a special markets edition 0:19:45.800 --> 0:19:49.040 of Bloomberg Technology. I'm Caroline Hyde in New York in 0:19:49.080 --> 0:19:51.560 his fourth thirty PM in London. And of course we've 0:19:51.560 --> 0:19:53.879 got to keep a keen eye on the European ripple effects, 0:19:53.920 --> 0:19:56.320 the credit swee concerns it has been in a remarkable 0:19:56.400 --> 0:20:00.840 day of trading in European assets. Ed, you've got the latest. Yeah, look, 0:20:00.880 --> 0:20:03.719 banks the main driver the eurostocks Banks index down eight 0:20:03.760 --> 0:20:06.480 point five percent, biggest drop for the banks collectively since 0:20:06.520 --> 0:20:09.960 March of twenty twenty when the pandemic hit. But Credit suis, 0:20:10.080 --> 0:20:12.560 of course not traded within that index. It is swift, 0:20:12.600 --> 0:20:15.320 but down twenty one percent, biggest drop on record. Stock 0:20:15.359 --> 0:20:18.040 trading at its lowest level on record. Also movement in 0:20:18.040 --> 0:20:20.440 currency markets euro dollar one oh five, but we're off 0:20:20.480 --> 0:20:23.639 by two cents or two percentage points. Almost what a 0:20:23.720 --> 0:20:26.080 volatile week it's actually been in eurodollar if you think 0:20:26.119 --> 0:20:28.280 about it, and then we're debating on the show whether 0:20:28.280 --> 0:20:30.080 there's this flight to safety or not. But you look 0:20:30.119 --> 0:20:32.280 at the short end on the German two year burned, 0:20:32.280 --> 0:20:35.480 we're off by five basis points two point three eight 0:20:35.520 --> 0:20:39.159 percent banks, banks and more banks Caroline. What's remarkable is 0:20:39.200 --> 0:20:42.280 also the relative strength of technology. Off by the least 0:20:42.280 --> 0:20:44.160 in terms of benchmarks. We're off only by one point 0:20:44.200 --> 0:20:46.240 one percent on the NASDAK. But let's broaden it out 0:20:46.280 --> 0:20:49.480 to the movement in European assets. The read across to 0:20:49.600 --> 0:20:52.520