1 00:00:00,240 --> 00:00:04,040 Speaker 1: Runt you by Bank of America Mary Lynch. With virtual reality, 2 00:00:04,320 --> 00:00:09,719 Speaker 1: virtually everything will change. Discover opportunities in a transforming world. 3 00:00:10,119 --> 00:00:14,440 Speaker 1: Be of a, mL dot Com, slash VR, Mary Lynch, 4 00:00:14,520 --> 00:00:29,240 Speaker 1: Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:29,280 --> 00:00:32,760 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:32,840 --> 00:00:37,640 Speaker 1: insight from the best of economics, finance, investment, and international relations. 7 00:00:38,120 --> 00:00:43,640 Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 8 00:00:43,640 --> 00:00:50,960 Speaker 1: and of course on the Bloomberg Hello and welcome to 9 00:00:51,000 --> 00:00:54,680 Speaker 1: Bloomberg Surveillance. I'm Pim Fox in for David Goura. Tom 10 00:00:54,800 --> 00:00:57,440 Speaker 1: Keene will be joining me in just a moment. Of course, 11 00:00:57,480 --> 00:01:00,360 Speaker 1: Bloomberg Surveillance is brought to you by National Realty Managers 12 00:01:00,400 --> 00:01:03,720 Speaker 1: of New York, New Jersey, Philadelphia and Florida cash Flow 13 00:01:04,040 --> 00:01:07,600 Speaker 1: real Estate offering safe, high yield cash flow property units. 14 00:01:07,800 --> 00:01:10,720 Speaker 1: See them at n r I A dot net. Well, 15 00:01:10,760 --> 00:01:13,279 Speaker 1: the news and the interest today has to do with banks, 16 00:01:13,319 --> 00:01:16,600 Speaker 1: and we're looking at JP morgan second quarter results coming 17 00:01:16,640 --> 00:01:18,120 Speaker 1: in and one of the things that I wanted to 18 00:01:18,160 --> 00:01:21,479 Speaker 1: focus on was to understand about their revenues and here 19 00:01:21,520 --> 00:01:24,440 Speaker 1: to help us understand more what's going on is Kate Moore, 20 00:01:24,600 --> 00:01:27,479 Speaker 1: black Rock chief equity strategist. Kate, thank you so much 21 00:01:27,520 --> 00:01:30,080 Speaker 1: for being here, great in Blue. I was watching you 22 00:01:30,120 --> 00:01:33,560 Speaker 1: on Bloomberg Television before you came in. What are your 23 00:01:33,600 --> 00:01:36,320 Speaker 1: thoughts about how the banks are doing? And do you 24 00:01:36,400 --> 00:01:39,440 Speaker 1: feel that this whole conversation about whether they're going to 25 00:01:39,520 --> 00:01:42,759 Speaker 1: release more dividends and and more do more buybacks? Will 26 00:01:43,080 --> 00:01:47,000 Speaker 1: that expand? Yeah? Absolutely, I think the cash return strategy 27 00:01:47,040 --> 00:01:50,720 Speaker 1: for the banks is a huge, huge positive and something 28 00:01:50,760 --> 00:01:53,160 Speaker 1: that I think many investors who have stayed away from 29 00:01:53,160 --> 00:01:56,240 Speaker 1: the sector and who have avoided owning financials maybe perhaps 30 00:01:56,280 --> 00:01:59,840 Speaker 1: in favor of tech stocks, need to re examine their 31 00:02:00,000 --> 00:02:02,600 Speaker 1: positioning at this point because of this um and I 32 00:02:02,640 --> 00:02:04,720 Speaker 1: think you know, JP Morgan is gonna be the first 33 00:02:04,760 --> 00:02:07,400 Speaker 1: to talk about this, but the really positive results of 34 00:02:07,440 --> 00:02:10,440 Speaker 1: all of the stress tests should really underpin you know, 35 00:02:10,480 --> 00:02:14,120 Speaker 1: an income not just a growth strategy for the for 36 00:02:14,160 --> 00:02:17,840 Speaker 1: the sector if they can't make money, and they certainly can, 37 00:02:18,200 --> 00:02:20,840 Speaker 1: right I mean, but that I was listening to the 38 00:02:20,880 --> 00:02:25,960 Speaker 1: hearings Janet yelling uh for Congress, and one of the 39 00:02:26,000 --> 00:02:29,600 Speaker 1: things that came up was, you know, banks earning, making 40 00:02:29,600 --> 00:02:32,280 Speaker 1: a lot of money. And when will the Federal Reserve 41 00:02:32,600 --> 00:02:35,440 Speaker 1: change its disposition towards the banks in order to let 42 00:02:35,480 --> 00:02:38,320 Speaker 1: them give back more money to their shareholders. What did 43 00:02:38,320 --> 00:02:40,600 Speaker 1: you what is your thoughts about that? Remember we had 44 00:02:40,639 --> 00:02:43,200 Speaker 1: this conversation a couple of years ago where everyone started 45 00:02:43,200 --> 00:02:45,920 Speaker 1: to say, the banks are becoming utilities, right, They're going 46 00:02:45,960 --> 00:02:48,160 Speaker 1: to be so overregulated that we're going to be at 47 00:02:48,200 --> 00:02:51,400 Speaker 1: a place where the banks can't actually grow their profits, 48 00:02:51,400 --> 00:02:53,840 Speaker 1: they can't return additional cash. They are just going to 49 00:02:53,919 --> 00:02:58,440 Speaker 1: be very stagnant entities. And that's really not the case anymore. 50 00:02:58,840 --> 00:03:01,000 Speaker 1: You know, while they may not have the same types 51 00:03:01,040 --> 00:03:03,880 Speaker 1: of growth I think we might have seen before the crisis, uh, 52 00:03:03,919 --> 00:03:06,200 Speaker 1: the quality of the growth, we think is much better. 53 00:03:06,560 --> 00:03:09,480 Speaker 1: We think the regulatory pressure is going to be considerably 54 00:03:09,560 --> 00:03:11,200 Speaker 1: less than it has been in the last couple of years. 55 00:03:11,240 --> 00:03:13,240 Speaker 1: But they've gone through a lot of cuts, right, I mean, 56 00:03:13,600 --> 00:03:15,959 Speaker 1: they've brought down the head count all of the big banks, 57 00:03:15,960 --> 00:03:17,640 Speaker 1: and I know we're going to be getting wells fargoing. 58 00:03:18,040 --> 00:03:21,680 Speaker 1: They cut their suspenses, they've really rethought their business lines, 59 00:03:22,040 --> 00:03:23,760 Speaker 1: gotten out of a lot of stuff, and a lot 60 00:03:23,800 --> 00:03:26,120 Speaker 1: of lending goes other places now. And and most of 61 00:03:26,120 --> 00:03:28,760 Speaker 1: these banks are very deposit rich at this point. One 62 00:03:28,800 --> 00:03:31,160 Speaker 1: of the things we're watching too is the deposit batas. 63 00:03:31,400 --> 00:03:35,280 Speaker 1: Every time the FED raises rates, banks are not passing 64 00:03:35,280 --> 00:03:37,800 Speaker 1: that onto deposits. Wait, they don't have to. There's not 65 00:03:37,800 --> 00:03:40,520 Speaker 1: as much competition for deposits. CD rates are not three. 66 00:03:40,920 --> 00:03:43,280 Speaker 1: Oh gosh, we can't get anything. So I guess the 67 00:03:43,320 --> 00:03:45,720 Speaker 1: point is that's really good for bank profits. We think 68 00:03:45,760 --> 00:03:48,000 Speaker 1: the FED is going to continue to normalize at a 69 00:03:48,080 --> 00:03:51,080 Speaker 1: slow pace. Right, And we can go through every different 70 00:03:51,120 --> 00:03:55,119 Speaker 1: piece of language and speech and commentary over I'm exhausted 71 00:03:55,120 --> 00:03:58,200 Speaker 1: by that, right, But but the point being that this 72 00:03:58,280 --> 00:04:01,920 Speaker 1: is a continuous path and should really support bank earnings 73 00:04:01,920 --> 00:04:04,880 Speaker 1: in addition to better macroeconomic growth and in addition to 74 00:04:05,560 --> 00:04:08,040 Speaker 1: what we think is going to be improved appetite for loans. 75 00:04:08,560 --> 00:04:10,800 Speaker 1: You know, we've just we just had an addition here 76 00:04:10,800 --> 00:04:13,640 Speaker 1: in the studio because a gentleman that you know has 77 00:04:13,720 --> 00:04:18,840 Speaker 1: just joined us to Handsome always you know who right 78 00:04:18,880 --> 00:04:22,240 Speaker 1: to the daughter gave me this bow tie. This is 79 00:04:22,279 --> 00:04:24,400 Speaker 1: a red bow tie. Good morning everyone on radio. They 80 00:04:24,440 --> 00:04:27,280 Speaker 1: can see bow ties in our studio. Pim Fox in 81 00:04:27,400 --> 00:04:31,080 Speaker 1: for David David Gura Team coverage in Sun Valley, Idaho. 82 00:04:31,320 --> 00:04:33,479 Speaker 1: Is he on an airplane now, Pim or is he's 83 00:04:33,480 --> 00:04:35,480 Speaker 1: still there? I mean, do they do a Friday thing? 84 00:04:37,920 --> 00:04:40,039 Speaker 1: I don't know. I haven't been. He was not a 85 00:04:40,160 --> 00:04:43,360 Speaker 1: snake yesterday. He told me that they threw him some peanuts. 86 00:04:43,400 --> 00:04:45,760 Speaker 1: Did you know that? Didn't know. The way it works 87 00:04:45,760 --> 00:04:49,480 Speaker 1: in sun apparently is that the reporters and everyone who 88 00:04:49,560 --> 00:04:52,840 Speaker 1: is there that make it this thing, because if it's 89 00:04:52,880 --> 00:04:55,360 Speaker 1: not being covered, you know, if it's not exclusive, then 90 00:04:55,360 --> 00:05:00,440 Speaker 1: why have it. The the reporters are penned in and 91 00:05:00,520 --> 00:05:03,440 Speaker 1: they can't necessarily mix with anybody, so they kind of 92 00:05:03,520 --> 00:05:06,000 Speaker 1: run after them. And I thought, well, they throw you 93 00:05:06,080 --> 00:05:09,200 Speaker 1: some crumbs, they throw the peanuts at the reporters. Yeah, 94 00:05:09,920 --> 00:05:11,960 Speaker 1: that doesn't happen at black He had a good set 95 00:05:12,000 --> 00:05:13,720 Speaker 1: of interviews there, to say the least. Kate Moore with 96 00:05:13,839 --> 00:05:16,120 Speaker 1: us with Black Rock. We say thank you to Pim 97 00:05:16,200 --> 00:05:19,640 Speaker 1: Fox more than anything for coming in early in this morning. 98 00:05:19,720 --> 00:05:22,120 Speaker 1: Kate Moore. One of the high points of my week 99 00:05:22,200 --> 00:05:24,320 Speaker 1: was the Economic Club of New York lunch with Mr 100 00:05:24,360 --> 00:05:28,960 Speaker 1: Coulter of the UH Security Exchange Commission. Mr Clayton excuse 101 00:05:29,040 --> 00:05:32,320 Speaker 1: me at the SEC and I saw their Kurt Check 102 00:05:32,480 --> 00:05:36,040 Speaker 1: of the cf A Institute, the Chart of Financial Analyst Institute. 103 00:05:36,560 --> 00:05:38,520 Speaker 1: Then we were talking about c f A and old 104 00:05:38,520 --> 00:05:42,760 Speaker 1: times and all that. Does that study work now in 105 00:05:42,920 --> 00:05:48,520 Speaker 1: this market? Does traditional security analysis work for Kate Moore 106 00:05:48,680 --> 00:05:52,279 Speaker 1: right now? Well? Absolutely, But it's part, not all of 107 00:05:52,320 --> 00:05:54,640 Speaker 1: the process. I think this is what I often tell 108 00:05:54,800 --> 00:05:57,160 Speaker 1: you know, juniors and young people coming up in the business. 109 00:05:57,600 --> 00:06:00,919 Speaker 1: You have to understand how to do traditional analysis, but 110 00:06:00,960 --> 00:06:03,920 Speaker 1: you also can't be wed to any single investment style. 111 00:06:04,279 --> 00:06:05,760 Speaker 1: I mean in the sense that you have to be 112 00:06:05,800 --> 00:06:09,040 Speaker 1: able to be flexible and taking other parts of uh, 113 00:06:09,160 --> 00:06:12,680 Speaker 1: you know, expand your process to really reflect what's going 114 00:06:12,720 --> 00:06:14,440 Speaker 1: on in the market. And by that I mean, you know, 115 00:06:14,480 --> 00:06:16,320 Speaker 1: Tommy and I were talking a little bit about technical 116 00:06:16,320 --> 00:06:18,800 Speaker 1: analysis and the importance that has. I think you have 117 00:06:18,839 --> 00:06:21,800 Speaker 1: to be very very aware of sentiment, the impact that 118 00:06:21,920 --> 00:06:25,279 Speaker 1: different liquidity regimes might have on your opportunity to realize. 119 00:06:25,279 --> 00:06:27,680 Speaker 1: For thesis, it's it would be great if we could 120 00:06:27,720 --> 00:06:30,039 Speaker 1: just say this is a good company that should earn X, 121 00:06:30,080 --> 00:06:32,159 Speaker 1: and therefore we'll own it. There are lots of other 122 00:06:32,200 --> 00:06:34,640 Speaker 1: things at play here, and so a good analyst has 123 00:06:34,640 --> 00:06:40,760 Speaker 1: a really multifaceted approach. The multifaceted approach is fundamental analysis 124 00:06:40,960 --> 00:06:44,039 Speaker 1: in looking at the religion of the day, which is 125 00:06:44,160 --> 00:06:48,200 Speaker 1: used to cash is the backbone of your optimism that 126 00:06:48,440 --> 00:06:52,240 Speaker 1: it's a new CEO, a new board that will continue 127 00:06:52,279 --> 00:06:56,560 Speaker 1: to distribute cash even as we have higher valuations. I 128 00:06:56,600 --> 00:07:01,120 Speaker 1: think my optimism is about UM, you know, number one positioning. 129 00:07:01,160 --> 00:07:03,039 Speaker 1: And we were saying this before that there's just not 130 00:07:03,160 --> 00:07:05,799 Speaker 1: a lot of love or excitement, not for the broad 131 00:07:05,839 --> 00:07:08,680 Speaker 1: equity market or a lot of people putting additional money 132 00:07:08,680 --> 00:07:11,480 Speaker 1: to work UM, as well as for some key names 133 00:07:11,520 --> 00:07:13,840 Speaker 1: and and sectors that we think are interesting. But I 134 00:07:13,840 --> 00:07:17,440 Speaker 1: would also want to point out something else, which is UM. 135 00:07:17,480 --> 00:07:20,679 Speaker 1: If you don't pay attention to the crowding in certain 136 00:07:20,720 --> 00:07:24,520 Speaker 1: sectors UH and understand why that crowding is happening, it 137 00:07:24,560 --> 00:07:27,160 Speaker 1: makes it really hard for you to reallocate and take 138 00:07:27,160 --> 00:07:29,760 Speaker 1: advantage of the turns. We talked about this last night 139 00:07:29,760 --> 00:07:31,880 Speaker 1: at a dinner. I was at the arbitrary nature of 140 00:07:31,880 --> 00:07:35,240 Speaker 1: the twelve month capture period of the calendar year for 141 00:07:35,320 --> 00:07:38,280 Speaker 1: returns and how frustrating it can be for some of 142 00:07:38,320 --> 00:07:42,120 Speaker 1: the fundamental UM portfolio managers there to have to live 143 00:07:42,160 --> 00:07:46,000 Speaker 1: by that calendar year. It's hiring people that have the 144 00:07:46,040 --> 00:07:50,440 Speaker 1: ability to take that technical and the positioning. Uh. And 145 00:07:50,840 --> 00:07:52,840 Speaker 1: you know, sort of I guess a kind of more 146 00:07:52,920 --> 00:07:57,280 Speaker 1: high frequency approach to investing in a stock or a 147 00:07:57,320 --> 00:08:01,720 Speaker 1: theme into consideration and complimenting that with their traditional That's 148 00:08:01,720 --> 00:08:03,800 Speaker 1: a really good point, Pim Fox. I know you've lived 149 00:08:03,800 --> 00:08:06,640 Speaker 1: this for years with your coverage of equities, this idea 150 00:08:06,640 --> 00:08:09,640 Speaker 1: of people play to the bonus, which doesn't click it now, 151 00:08:09,680 --> 00:08:14,880 Speaker 1: but about four months. Yeah, can I can we just 152 00:08:14,920 --> 00:08:17,960 Speaker 1: do a little WAMO on JP Morgan for just a second. Yeah, Well, 153 00:08:18,000 --> 00:08:20,160 Speaker 1: I just want to mention you know we're leading right now. 154 00:08:20,280 --> 00:08:23,560 Speaker 1: JP Morgan reported f i CC sales and trading revenue 155 00:08:23,600 --> 00:08:28,400 Speaker 1: for the second quarter. No, wait, missed the average annalyst estimate, right, 156 00:08:28,440 --> 00:08:31,480 Speaker 1: and we're looking at trading revenue three point to two billion. 157 00:08:31,560 --> 00:08:35,560 Speaker 1: The estimate was that was expected, right, keep going, sales 158 00:08:35,559 --> 00:08:39,520 Speaker 1: and trading one one point five nine one point six 159 00:08:39,559 --> 00:08:44,800 Speaker 1: to miss there? Uh. Investment banking pretty good, right, one 160 00:08:44,960 --> 00:08:48,880 Speaker 1: seventy versus one. Anyway, the numbers are the numbers. But um, 161 00:08:49,040 --> 00:08:55,240 Speaker 1: the second quarter return on equity twelve per cent pretty 162 00:08:55,280 --> 00:08:58,400 Speaker 1: darn good. And you know, if we get the rest 163 00:08:58,400 --> 00:09:01,199 Speaker 1: of the sector doing the same, think the skeptics will 164 00:09:01,240 --> 00:09:03,920 Speaker 1: really have to rethink the way their positions because they're 165 00:09:03,960 --> 00:09:06,959 Speaker 1: shrinking what that's not good at. Yeah, I'm going to 166 00:09:07,080 --> 00:09:08,880 Speaker 1: just extrapolate out a little bit further and say the 167 00:09:08,920 --> 00:09:12,800 Speaker 1: profitability of US companies is far superior to that of 168 00:09:13,040 --> 00:09:15,360 Speaker 1: many of its developed market piers. And a lot of 169 00:09:15,400 --> 00:09:20,520 Speaker 1: times when we talk about valuation disconnects or the differentials 170 00:09:20,559 --> 00:09:24,880 Speaker 1: between say non US UM stocks and the US, we 171 00:09:24,920 --> 00:09:27,520 Speaker 1: have to look at not just the composition of the market, 172 00:09:27,800 --> 00:09:30,480 Speaker 1: but also the profitability. And I think the fact that 173 00:09:30,520 --> 00:09:34,120 Speaker 1: we have some of our biggest anchor companies achieving twelve 174 00:09:34,120 --> 00:09:37,680 Speaker 1: percent in HIO are o we uh, you know it 175 00:09:37,760 --> 00:09:41,160 Speaker 1: demands that we have in in this environment and one 176 00:09:41,200 --> 00:09:44,840 Speaker 1: and have two percent growth environment? Do you think Tom 177 00:09:44,920 --> 00:09:47,120 Speaker 1: did that that that thesis because we didn't do any 178 00:09:47,160 --> 00:09:50,120 Speaker 1: of the charts for you. We could, I mean, we 179 00:09:50,160 --> 00:09:52,520 Speaker 1: could do the JP Morgan chart and you know, but 180 00:09:52,640 --> 00:09:54,760 Speaker 1: I wanted to add maybe you can Tom, even you 181 00:09:54,880 --> 00:09:57,640 Speaker 1: come into this. You know what an inside day is, right, 182 00:09:57,720 --> 00:10:01,800 Speaker 1: an inside day in trading? Okay, yesterday I think was 183 00:10:02,000 --> 00:10:04,800 Speaker 1: an inside day. I want to come back. Yeah, I 184 00:10:05,800 --> 00:10:08,440 Speaker 1: does that tell you about how people place a value 185 00:10:08,600 --> 00:10:11,440 Speaker 1: on equities? Now? There's there's no premium in equities, or 186 00:10:11,559 --> 00:10:13,840 Speaker 1: is there? You know? I think with the damp and volatility, 187 00:10:13,840 --> 00:10:16,160 Speaker 1: it's an odd market. As Kate wrote up and I 188 00:10:16,240 --> 00:10:19,600 Speaker 1: thank you Business Insider for that smart article. Um is more. 189 00:10:19,640 --> 00:10:21,839 Speaker 1: I believe it was yesterday, Kate. I want to come 190 00:10:21,880 --> 00:10:26,600 Speaker 1: back and talk about how the media and frankly our 191 00:10:26,640 --> 00:10:32,520 Speaker 1: audience really doesn't understand the size of these behemoths. Kate 192 00:10:32,640 --> 00:10:35,079 Speaker 1: More very big on the bank. She's not going to 193 00:10:35,160 --> 00:10:38,240 Speaker 1: give you by hold cell on the individual banks. But 194 00:10:38,320 --> 00:10:40,640 Speaker 1: I really want to walk through the Bloomberg terminal and 195 00:10:40,679 --> 00:10:43,920 Speaker 1: look at the just the sheer mass, almost like an 196 00:10:44,280 --> 00:10:48,800 Speaker 1: aircraft carrier going through the water. And there's two aircraft carriers, 197 00:10:48,800 --> 00:10:53,160 Speaker 1: Michael bar and they hold Megatron up above the ocean 198 00:10:53,559 --> 00:10:57,160 Speaker 1: before they drop Megatron. We don't understand how big those 199 00:10:57,200 --> 00:11:00,880 Speaker 1: aircraft carriers are. I want to say something Megatron, but 200 00:11:00,960 --> 00:11:03,679 Speaker 1: that's another story. Can you tell us the Transformers weekend 201 00:11:03,720 --> 00:11:07,080 Speaker 1: in the Keen household, Pim Fox and for David Gurha, 202 00:11:07,200 --> 00:11:09,959 Speaker 1: Mr Gurrat traveling so as the president. I don't think 203 00:11:10,040 --> 00:11:12,640 Speaker 1: Mr Pim is on Air Force one. The President is 204 00:11:13,040 --> 00:11:16,559 Speaker 1: migrating back from Paris to America. I believe he's heading that. 205 00:11:16,760 --> 00:11:18,800 Speaker 1: Watch the parade. I watched the parade. I love. I 206 00:11:19,120 --> 00:11:22,760 Speaker 1: have witnessed us parade. I have actually been to it 207 00:11:22,840 --> 00:11:26,199 Speaker 1: in my ute. It was a very hot Parisian day, 208 00:11:26,320 --> 00:11:28,880 Speaker 1: and I did see Charles de Golf for a blink 209 00:11:28,960 --> 00:11:31,679 Speaker 1: for a whispered moment. But they really do it right. 210 00:11:31,760 --> 00:11:34,760 Speaker 1: They did then right, and today it was we don't 211 00:11:34,800 --> 00:11:38,360 Speaker 1: have an equivalent. You see the flyby, I missed the 212 00:11:38,360 --> 00:11:41,240 Speaker 1: fly I said, the helicopters come in. That was you 213 00:11:41,240 --> 00:11:45,439 Speaker 1: know the French. Oh no, I did that on television 214 00:11:45,440 --> 00:11:47,600 Speaker 1: and they said, never again. Kate born with us who 215 00:11:47,640 --> 00:11:50,400 Speaker 1: can speak fluent French. With black Rock. As we look 216 00:11:50,400 --> 00:11:52,959 Speaker 1: at equities, Kate, I want to talk about mass in 217 00:11:53,200 --> 00:11:55,640 Speaker 1: size to give you an idea, folks. JP Morgan is 218 00:11:55,679 --> 00:11:59,200 Speaker 1: about black Rock. Rather is about one twelve the size 219 00:11:59,200 --> 00:12:01,920 Speaker 1: of JP Morgan, depending on what metric you look at, 220 00:12:02,360 --> 00:12:08,280 Speaker 1: Katen More, Jamie Diamond's assets are thirteen per cent of 221 00:12:08,320 --> 00:12:14,480 Speaker 1: American GDP. The scale here and the size, the mass 222 00:12:14,559 --> 00:12:17,240 Speaker 1: of these banks, and not just JP Morgan but others 223 00:12:17,760 --> 00:12:24,320 Speaker 1: is extraordinary. Net revenues of eleven um UH eleven billion 224 00:12:24,360 --> 00:12:29,240 Speaker 1: per quarter, UH, net income of three billion, operating income 225 00:12:29,280 --> 00:12:31,959 Speaker 1: of course has come back great over the last ten years. 226 00:12:32,559 --> 00:12:36,280 Speaker 1: What is the advantage of that mass to a long 227 00:12:36,400 --> 00:12:40,439 Speaker 1: term investor? What's interesting when you're giving these incredible numbers, Tom, 228 00:12:40,559 --> 00:12:44,240 Speaker 1: I've started to think about how everyone only talks about 229 00:12:44,240 --> 00:12:48,480 Speaker 1: the gigantic size of the tech sector and how dominant 230 00:12:48,520 --> 00:12:51,480 Speaker 1: that's become in terms of market indices, and fails to 231 00:12:51,520 --> 00:12:55,600 Speaker 1: realize how incredibly important still the banks are, not just 232 00:12:55,679 --> 00:12:58,679 Speaker 1: to the market, but to our overall economy. So I 233 00:12:58,720 --> 00:13:02,120 Speaker 1: think you know. The message I'm taking away from the 234 00:13:02,280 --> 00:13:04,080 Speaker 1: just sort of the headline skimming I've done of the 235 00:13:04,080 --> 00:13:07,319 Speaker 1: earnings thus far has been that when you have the 236 00:13:07,360 --> 00:13:12,400 Speaker 1: big bohemoths in our economy, in our financial system in 237 00:13:12,440 --> 00:13:16,240 Speaker 1: a very healthy place, we should feel confident about the 238 00:13:16,280 --> 00:13:20,880 Speaker 1: sustainability of the market. All right, So we're confident about 239 00:13:20,920 --> 00:13:24,760 Speaker 1: the sustainability of the market. What I like the way 240 00:13:24,840 --> 00:13:26,960 Speaker 1: you couldn't see that. You can't see that though on radio? 241 00:13:27,000 --> 00:13:29,120 Speaker 1: How would you describe the shrug of the shoulders? What 242 00:13:29,160 --> 00:13:31,640 Speaker 1: would it? How would you describe? Okay, Well, so let 243 00:13:31,640 --> 00:13:34,120 Speaker 1: me just give you an example. We always have to 244 00:13:34,160 --> 00:13:37,120 Speaker 1: talk about magnitude here so at black Rock, and it's 245 00:13:37,160 --> 00:13:39,559 Speaker 1: part of black Rock Investments too. We have a proprietary 246 00:13:39,600 --> 00:13:43,360 Speaker 1: indicator of UM, you know, macro economic growth. We call 247 00:13:43,400 --> 00:13:46,760 Speaker 1: it the black Rock Macro GPS. It basically combines, you know, 248 00:13:46,800 --> 00:13:49,559 Speaker 1: the same kind of high frequency macro data, but with 249 00:13:49,600 --> 00:13:51,960 Speaker 1: all of our big data insights stuff that you know, 250 00:13:52,120 --> 00:13:55,720 Speaker 1: the incredible tech teams in UH San Francisco help help us. 251 00:13:56,200 --> 00:13:58,600 Speaker 1: It'll pull out and this gives us, we think, a 252 00:13:58,600 --> 00:14:03,480 Speaker 1: pretty good read on the U, US and developed market economies. Okay, 253 00:14:03,559 --> 00:14:06,839 Speaker 1: so it looks like our estimates are significantly above that 254 00:14:07,000 --> 00:14:09,600 Speaker 1: of consensus, and that's great. But what I always point 255 00:14:09,600 --> 00:14:11,160 Speaker 1: out to clients is we have to pay attention to 256 00:14:11,160 --> 00:14:14,200 Speaker 1: the y access when we're comparing these two lines, because 257 00:14:14,200 --> 00:14:16,080 Speaker 1: when you look at it, we're still talking about two 258 00:14:16,080 --> 00:14:18,360 Speaker 1: percent growth for G seven. So what those of you 259 00:14:18,440 --> 00:14:20,760 Speaker 1: on the radio didn't hearing from the radio didn't see 260 00:14:20,800 --> 00:14:22,280 Speaker 1: was that I sort of shrugged. We're in a kind 261 00:14:22,280 --> 00:14:24,240 Speaker 1: of a sustainable market. I'm not talking about a twel 262 00:14:25,280 --> 00:14:28,520 Speaker 1: annualized return forever and ever type of market. We think 263 00:14:28,520 --> 00:14:31,200 Speaker 1: it's going to be more modest seen as we think 264 00:14:31,640 --> 00:14:36,000 Speaker 1: that the the sustained economic expansion UM you know, can 265 00:14:36,040 --> 00:14:38,680 Speaker 1: go on for some time, but it is also of 266 00:14:38,720 --> 00:14:43,800 Speaker 1: a lower magnitude, so better than expectations, but not shooting 267 00:14:43,800 --> 00:14:46,400 Speaker 1: the lights out compared to history. Well, you can certainly 268 00:14:46,440 --> 00:14:49,760 Speaker 1: connect that with the whole cost savings effort that is 269 00:14:49,800 --> 00:14:53,400 Speaker 1: in the actual industry of delivering these kinds of financial products, 270 00:14:53,440 --> 00:14:56,680 Speaker 1: because if the grosses is going down, then you've got 271 00:14:56,680 --> 00:15:00,640 Speaker 1: to figure out a way to to modify your your 272 00:15:00,680 --> 00:15:04,000 Speaker 1: expanding But I agree with that Pim totally. But Kate More, 273 00:15:04,080 --> 00:15:06,880 Speaker 1: we forget that they're in the loan business. I think 274 00:15:06,880 --> 00:15:10,160 Speaker 1: the number one thing, and they highlighted him. I would 275 00:15:10,160 --> 00:15:13,480 Speaker 1: suggest JP Morgan has the best clarity of earnings release 276 00:15:13,800 --> 00:15:15,760 Speaker 1: and right at the top of the power point that 277 00:15:15,960 --> 00:15:21,000 Speaker 1: got loan growth. Other financial companies aren't doing loans. I 278 00:15:21,040 --> 00:15:23,800 Speaker 1: guess yes, and I would just had I would really 279 00:15:23,840 --> 00:15:27,160 Speaker 1: believe at this point it is not too bizarre to 280 00:15:27,200 --> 00:15:30,400 Speaker 1: say that they are really in the trust business. They 281 00:15:30,440 --> 00:15:32,560 Speaker 1: have to and I don't mean that in legal sense, 282 00:15:32,560 --> 00:15:35,680 Speaker 1: although I mean the trust is trust us. Yes, absolutely, 283 00:15:35,880 --> 00:15:37,840 Speaker 1: and I think that that is right. I mean, and 284 00:15:38,720 --> 00:15:40,960 Speaker 1: go ahead, just last question, Kate More, before we run 285 00:15:41,000 --> 00:15:43,920 Speaker 1: out of time. Large cap, mid cap, small cap, where's 286 00:15:43,960 --> 00:15:46,480 Speaker 1: the value whereas about you know, I have to be 287 00:15:46,520 --> 00:15:49,480 Speaker 1: honest with you. I am a little bit biased towards 288 00:15:49,480 --> 00:15:52,160 Speaker 1: the large cap space at this point. It's it's hard 289 00:15:52,200 --> 00:15:54,920 Speaker 1: because the small cap is kind of internewed. With Larry Fink, 290 00:15:55,000 --> 00:15:58,920 Speaker 1: that's what he demanded, right right, absolutely, j he you know, 291 00:15:58,960 --> 00:16:01,920 Speaker 1: he demanded anything, but not that I have a dominant 292 00:16:01,920 --> 00:16:04,920 Speaker 1: preference for size. I think at this point, you know, 293 00:16:04,960 --> 00:16:07,080 Speaker 1: because we're not talking about three and a half percent 294 00:16:07,120 --> 00:16:09,800 Speaker 1: GDP growth, because we're talking two percent, we need to 295 00:16:09,840 --> 00:16:12,040 Speaker 1: really think about the companies that can sustainably earn in 296 00:16:12,040 --> 00:16:14,920 Speaker 1: that environment richly rewarding. Katemore, thank you so much with 297 00:16:15,040 --> 00:16:18,280 Speaker 1: black rock on too many topics, uh, this morning on 298 00:16:18,320 --> 00:16:22,200 Speaker 1: the equity market, she says, be in this market, Pim 299 00:16:22,280 --> 00:16:38,400 Speaker 1: Fox and Tom King, this is Bloomberg, this is real. Joy. 300 00:16:38,520 --> 00:16:41,960 Speaker 1: Quickly here Megan Murphy, uh, joining us. She is the 301 00:16:42,040 --> 00:16:45,120 Speaker 1: force behind the new Bloomberg business Week, and I really 302 00:16:45,120 --> 00:16:47,920 Speaker 1: want to congratulate you with a celebration and the joy 303 00:16:48,520 --> 00:16:52,880 Speaker 1: of your cover photo and really wonderful article on Mr 304 00:16:52,960 --> 00:16:57,560 Speaker 1: put Fine and Goldman Sachs. It's a celebration I guess 305 00:16:57,560 --> 00:17:00,080 Speaker 1: of his career. What did you learn in putting that 306 00:17:00,240 --> 00:17:02,760 Speaker 1: story together? I think we just continue to learn how 307 00:17:02,880 --> 00:17:06,520 Speaker 1: resilient Lloyd Blank find is as a banker and personally. 308 00:17:06,560 --> 00:17:09,199 Speaker 1: One of the most interesting things he's done recently is 309 00:17:09,640 --> 00:17:12,320 Speaker 1: he's come out on social media. He's taken to Twitter, 310 00:17:12,600 --> 00:17:15,760 Speaker 1: and this is someone who hasn't been known for really 311 00:17:15,800 --> 00:17:18,680 Speaker 1: taking a stance on big social issues. Internally, he is 312 00:17:18,720 --> 00:17:21,000 Speaker 1: a goalman in terms of enforcing things like diversity and 313 00:17:21,000 --> 00:17:24,440 Speaker 1: the importance of women. But publicly now he's come out 314 00:17:24,960 --> 00:17:27,480 Speaker 1: criticizing the President for taking America out of the Paris 315 00:17:27,520 --> 00:17:31,040 Speaker 1: Climate Accord, ribbing him trolling him, we'd say, about Infrastructure 316 00:17:31,080 --> 00:17:33,240 Speaker 1: Week and some other issues. And this is a guy 317 00:17:33,240 --> 00:17:35,560 Speaker 1: who's not fading quietly into the night, that's for sure, 318 00:17:35,720 --> 00:17:37,760 Speaker 1: just because of the time, We've got to switch to Washington. 319 00:17:37,800 --> 00:17:40,119 Speaker 1: When did the bodies start moving at the White House? Megan, 320 00:17:40,440 --> 00:17:42,199 Speaker 1: When do we start see I mean this happens in 321 00:17:42,240 --> 00:17:45,399 Speaker 1: every administration. When do we see new faces? Well, look, 322 00:17:45,440 --> 00:17:47,440 Speaker 1: I think we're gonna be do some sort of change. 323 00:17:47,440 --> 00:17:48,960 Speaker 1: It looks like we're going to go into the summer 324 00:17:48,960 --> 00:17:51,680 Speaker 1: without a big legislative achievement. And I think there's still 325 00:17:51,720 --> 00:17:54,320 Speaker 1: is so much in fighting and discontent about the state. 326 00:17:54,359 --> 00:17:56,080 Speaker 1: They cannot get away from Russia. There's a big new 327 00:17:56,119 --> 00:17:59,320 Speaker 1: story breaking this morning that there was a former counterintelligence 328 00:17:59,359 --> 00:18:01,960 Speaker 1: Russian person companying the lawyer who met with Don Jr. 329 00:18:02,240 --> 00:18:04,880 Speaker 1: About this alleged Hillary Clinton intelligence. That story is only 330 00:18:04,880 --> 00:18:06,880 Speaker 1: gonna get worse today going into the weekend. It's another 331 00:18:06,880 --> 00:18:09,440 Speaker 1: headlines dominated by Russia. The White House needs a change. 332 00:18:09,480 --> 00:18:11,600 Speaker 1: They need to change it by themselves by getting a 333 00:18:11,600 --> 00:18:13,560 Speaker 1: grip on this. But I do think we will see 334 00:18:13,600 --> 00:18:17,160 Speaker 1: new faces sooner rather than later. There's something called a budget, 335 00:18:17,240 --> 00:18:20,840 Speaker 1: right What budget? What healthcare? What tax reform? Look, this 336 00:18:20,920 --> 00:18:23,359 Speaker 1: is a white House. It's a one story, one story 337 00:18:23,440 --> 00:18:25,960 Speaker 1: place right now. You know, every day we go by 338 00:18:26,040 --> 00:18:28,920 Speaker 1: thinking we've heard and they fully disclosed, been transparent, that 339 00:18:28,960 --> 00:18:31,640 Speaker 1: everything's out there, and every day something new breaks. These 340 00:18:31,640 --> 00:18:33,959 Speaker 1: people in the White House are panicked. Some of them 341 00:18:33,960 --> 00:18:35,760 Speaker 1: are going to be looking for the exit themselves. They're 342 00:18:35,760 --> 00:18:37,920 Speaker 1: seeing their entire careers that are going to be tarnished. 343 00:18:37,920 --> 00:18:40,400 Speaker 1: There are serious people in there who wanted serious reforms 344 00:18:40,400 --> 00:18:43,479 Speaker 1: on issues of serious importance to conservatives in this country. 345 00:18:43,480 --> 00:18:45,600 Speaker 1: They are not getting it. You can start to see 346 00:18:45,640 --> 00:18:48,960 Speaker 1: the whites in the eyes. People are panicked. Wow, that's 347 00:18:48,960 --> 00:18:52,760 Speaker 1: a lot to digest. When when will When will individuals? 348 00:18:52,800 --> 00:18:56,680 Speaker 1: When will people? The citizenry begin to feel the effects 349 00:18:57,119 --> 00:19:00,200 Speaker 1: of all of this turmoil. Look, Trump's got a fort base. 350 00:19:00,240 --> 00:19:03,480 Speaker 1: He's keeping that forty percent base base actually likes what 351 00:19:03,520 --> 00:19:05,600 Speaker 1: they're seeing, so they like the sort of middle finger 352 00:19:05,720 --> 00:19:08,920 Speaker 1: up to the establishment. Even on a foreign policy level. 353 00:19:08,960 --> 00:19:12,520 Speaker 1: The issue is, you know, going forward into with people 354 00:19:12,560 --> 00:19:16,320 Speaker 1: really reckoning with the effects of a possible healthcare failure, 355 00:19:16,440 --> 00:19:19,520 Speaker 1: and they want something that's going to affect their pocketbook. 356 00:19:19,600 --> 00:19:21,720 Speaker 1: That's what they want. They want tax reform, they want 357 00:19:21,760 --> 00:19:24,000 Speaker 1: jobs to be lash, they want infrastructure. They are not 358 00:19:24,080 --> 00:19:26,199 Speaker 1: getting that right now, very quickly. Do you agree with 359 00:19:26,240 --> 00:19:28,800 Speaker 1: Greg Valier that the House is at risk that the 360 00:19:28,840 --> 00:19:32,400 Speaker 1: Republicans could lose the House? Mentor I mean it's so hard, 361 00:19:32,440 --> 00:19:34,400 Speaker 1: the math on the House is so hard for them. 362 00:19:34,960 --> 00:19:37,000 Speaker 1: But look, I mean we're getting into an area where 363 00:19:37,000 --> 00:19:39,840 Speaker 1: Republicans are showing themselves to be incapable of getting any 364 00:19:39,920 --> 00:19:42,320 Speaker 1: legislative achievement through. They have the White House, they have 365 00:19:42,440 --> 00:19:44,760 Speaker 1: the Senate, they have the House. They have nothing to 366 00:19:44,760 --> 00:19:47,040 Speaker 1: show for it. Megan, I want to say congratulations. A 367 00:19:47,119 --> 00:19:51,439 Speaker 1: double issue, A smart essay on Brussels and the EU 368 00:19:51,720 --> 00:19:54,960 Speaker 1: and of course their relationship to the United Kingdom, and 369 00:19:55,480 --> 00:19:58,400 Speaker 1: your first read of the weekend. If you're on Global 370 00:19:58,400 --> 00:20:02,480 Speaker 1: Wall Street on Lloyd find in Goldman Sex, this is 371 00:20:02,480 --> 00:20:13,000 Speaker 1: Bloomberg runch you by Bank of America Mary Lynch. With 372 00:20:13,119 --> 00:20:18,520 Speaker 1: virtual reality, virtually everything will change. Discover opportunities in a 373 00:20:18,600 --> 00:20:24,440 Speaker 1: transforming world via a mL dot Com slash VR, Mary Lynch, 374 00:20:24,520 --> 00:20:33,320 Speaker 1: Pierced Fenner and Smith Incorporated. And then of course we 375 00:20:33,359 --> 00:20:36,320 Speaker 1: can look here at the banking Derby City Group out earlier, 376 00:20:36,400 --> 00:20:40,000 Speaker 1: JP Morgan out earlier. We get to excuse me the 377 00:20:40,000 --> 00:20:44,960 Speaker 1: initial of gasping PIM overwheld Wells Fargo. It is Wells 378 00:20:45,000 --> 00:20:47,880 Speaker 1: Fargo numbers. And you know, I mean they're what they are. 379 00:20:47,880 --> 00:20:51,480 Speaker 1: They've got credit losses like everybody else. Efficiency ratio, I 380 00:20:51,520 --> 00:20:55,000 Speaker 1: guess is important. I go to the press release where 381 00:20:55,000 --> 00:20:59,040 Speaker 1: they've got a net income up five diluted earnings up 382 00:20:59,359 --> 00:21:03,200 Speaker 1: six per cent in revenue. This is this is really interesting, 383 00:21:03,240 --> 00:21:06,639 Speaker 1: not interesting, come up six percent because it's more of 384 00:21:06,720 --> 00:21:09,040 Speaker 1: a I would suggest him, and we'll talk to kenderle 385 00:21:09,200 --> 00:21:12,879 Speaker 1: On in a moment. Excuse me, the massages the numbers, 386 00:21:13,440 --> 00:21:16,520 Speaker 1: it's more of a nominal g d P bank. It's 387 00:21:16,560 --> 00:21:21,800 Speaker 1: more like in the American banking growthiness. That's only because 388 00:21:21,840 --> 00:21:25,560 Speaker 1: you come with a lot of historical baggage, right. I 389 00:21:25,600 --> 00:21:28,000 Speaker 1: mean you know that, I mean everybody informs, I mean 390 00:21:28,040 --> 00:21:29,520 Speaker 1: the banks. You know, it goes all the way back 391 00:21:29,560 --> 00:21:32,480 Speaker 1: to First National City Bank and and so on and 392 00:21:32,640 --> 00:21:35,879 Speaker 1: UH City Bank with Walter Riston and so we have 393 00:21:35,960 --> 00:21:37,919 Speaker 1: these images. I just want to point out what the 394 00:21:37,920 --> 00:21:40,840 Speaker 1: stock is doing right now. It's up about four tens 395 00:21:40,840 --> 00:21:43,000 Speaker 1: of a percent compared to JP Morgan, which is down 396 00:21:43,040 --> 00:21:45,080 Speaker 1: to ten I beg your pardon Golden Sex, which is 397 00:21:45,119 --> 00:21:47,160 Speaker 1: down by two tens of a percent. It has been 398 00:21:47,200 --> 00:21:50,040 Speaker 1: management change it Wells Fargo. We talked to Ellison Williams 399 00:21:50,080 --> 00:21:53,080 Speaker 1: about that. We've had good perspective this morning from kend 400 00:21:53,160 --> 00:21:55,679 Speaker 1: Ley on with c f r A about the banks. 401 00:21:55,680 --> 00:21:59,880 Speaker 1: He's got four star outlooks there, the SMP stars being 402 00:21:59,880 --> 00:22:02,720 Speaker 1: a value. Kiley, And what is the Wells Fargo distinction 403 00:22:02,760 --> 00:22:07,960 Speaker 1: besides the yellow stagecoach over in Third Avenue. The sustinction 404 00:22:08,040 --> 00:22:13,200 Speaker 1: really is has historically been stable performance coming from a 405 00:22:13,280 --> 00:22:18,320 Speaker 1: large franchise and traditional consumer and commercial lending. And of 406 00:22:18,359 --> 00:22:21,359 Speaker 1: course you know that kind of tipped over with the 407 00:22:21,400 --> 00:22:26,240 Speaker 1: problems they had with their retail marketing. Um, the capital 408 00:22:26,280 --> 00:22:30,080 Speaker 1: markets business for Wells Fargo just doesn't have the magnitude 409 00:22:30,080 --> 00:22:33,760 Speaker 1: that the other banks that you've mentioned. And also when 410 00:22:33,760 --> 00:22:37,920 Speaker 1: we look at a rising rate environment, Wells Fargo should 411 00:22:37,960 --> 00:22:41,480 Speaker 1: benefit from that, particularly on their assets side with loan 412 00:22:41,520 --> 00:22:46,080 Speaker 1: deposits and other sources. So well Fargo is just it's 413 00:22:46,080 --> 00:22:51,080 Speaker 1: almost like a super regional bank than a diversified global bank. 414 00:22:51,720 --> 00:22:54,360 Speaker 1: I just want to mention shares of Wells Fargo. They're 415 00:22:54,400 --> 00:22:57,280 Speaker 1: down about one percent in pre market trading. Also, JP 416 00:22:57,400 --> 00:23:00,879 Speaker 1: Morgan shares down about one percent right now. The City 417 00:23:00,880 --> 00:23:04,040 Speaker 1: Group getting boosted is up more than half a percent 418 00:23:04,480 --> 00:23:07,040 Speaker 1: in pre market trading. And you know, one of the 419 00:23:07,080 --> 00:23:09,119 Speaker 1: things that you got to ask Lee on is what 420 00:23:10,119 --> 00:23:12,879 Speaker 1: is has everyone already bought the stocks that they you know, 421 00:23:13,240 --> 00:23:16,600 Speaker 1: everyone got told this idea by financials they'll be good, 422 00:23:16,640 --> 00:23:19,320 Speaker 1: they'll expand they'll give some more repurchases and so on 423 00:23:19,440 --> 00:23:23,359 Speaker 1: and uh dividendial increase. Has that already filtered through? Is 424 00:23:23,359 --> 00:23:27,640 Speaker 1: that already a done in, dusted deal. So there's really 425 00:23:27,680 --> 00:23:31,320 Speaker 1: been several stages. After the Trump election, we had an 426 00:23:31,480 --> 00:23:35,480 Speaker 1: enormous run of financials, particularly banks. They eased off in 427 00:23:35,520 --> 00:23:37,800 Speaker 1: the first quarter, and I think since May they're up 428 00:23:37,840 --> 00:23:41,399 Speaker 1: eight percent. Looking ahead, to the second half of this 429 00:23:41,520 --> 00:23:45,160 Speaker 1: year and into next year. UM, I think the outlook 430 00:23:45,240 --> 00:23:48,400 Speaker 1: is still positive because they're going to benefit on an 431 00:23:48,440 --> 00:23:53,480 Speaker 1: improved spread swood rising rights. Also, the capital markets is 432 00:23:53,520 --> 00:23:56,280 Speaker 1: the big question, and at some point in this conversation 433 00:23:56,320 --> 00:23:59,119 Speaker 1: maybe we should talk about Washington. Let's talk about that 434 00:23:59,240 --> 00:24:02,399 Speaker 1: right now. What about Washington? How did they change the 435 00:24:02,440 --> 00:24:06,560 Speaker 1: banking of two thousand twenty. You know, So in terms 436 00:24:06,600 --> 00:24:10,399 Speaker 1: of large visible changes from Congress, the answer is no 437 00:24:10,880 --> 00:24:16,000 Speaker 1: Dot frank legislation. Congresses, as we all know, absorbed with 438 00:24:16,040 --> 00:24:19,680 Speaker 1: healthcare and tax reform. The subtleties I think is more 439 00:24:19,720 --> 00:24:23,560 Speaker 1: positive for the banks, and this really relates to the 440 00:24:23,600 --> 00:24:26,960 Speaker 1: Federal Reserve and the U. S. Treasury. What I would 441 00:24:27,040 --> 00:24:31,000 Speaker 1: be following is not changes in dot frank, but some 442 00:24:31,760 --> 00:24:35,920 Speaker 1: modifications of right rules and regulation like the vocal rule, 443 00:24:36,359 --> 00:24:40,280 Speaker 1: and that will help in terms of higher trading revenue. UH. 444 00:24:40,520 --> 00:24:45,320 Speaker 1: Last week Trump administration appointed a new vice chair for 445 00:24:45,600 --> 00:24:49,640 Speaker 1: Supervisor and this was the seat that Dan tro Ruler had, 446 00:24:49,840 --> 00:24:53,160 Speaker 1: Randy Qualls, and he will bring in a more pragmatic 447 00:24:53,280 --> 00:24:58,440 Speaker 1: view of easing some of the complex and sometimes contradictory 448 00:24:58,640 --> 00:25:01,960 Speaker 1: regulation among the four or five agencies. Well, that sits 449 00:25:02,040 --> 00:25:04,159 Speaker 1: under the Trump administration, but they got to work with 450 00:25:04,200 --> 00:25:07,520 Speaker 1: the Fed. Do you believe that that Janet Yellen will 451 00:25:07,560 --> 00:25:11,520 Speaker 1: be uh saying goodbye soon? Funny I mention that because 452 00:25:11,520 --> 00:25:14,800 Speaker 1: I actually put a note here, so coming up early 453 00:25:14,840 --> 00:25:18,840 Speaker 1: in two thousand eighteen, both the chair Yelling and Awful 454 00:25:18,920 --> 00:25:22,120 Speaker 1: Stanley Fisher, the vice chair, could be up. I think 455 00:25:22,119 --> 00:25:25,880 Speaker 1: the barometer that President Trump watches with Secretary of Minisia 456 00:25:26,000 --> 00:25:28,960 Speaker 1: is really uh, the stock market, and that's his kind 457 00:25:28,960 --> 00:25:33,280 Speaker 1: of scorecard of how well he's doing. And if Chairman 458 00:25:33,640 --> 00:25:38,000 Speaker 1: Yell Yelling is doing fine in terms of managing monetary 459 00:25:38,080 --> 00:25:42,679 Speaker 1: policy and there's confidence in the markets, um, you know, 460 00:25:42,800 --> 00:25:44,880 Speaker 1: I think there might be a good chance that they 461 00:25:45,200 --> 00:25:47,679 Speaker 1: get reappointed. But you know we're gonna be watching that 462 00:25:47,760 --> 00:25:52,080 Speaker 1: as well. Kenley, on a few more questions before you 463 00:25:52,119 --> 00:25:54,400 Speaker 1: write your research note. Within the three banks that we've 464 00:25:54,440 --> 00:25:58,960 Speaker 1: seen today, Pim's already highlighted some of the distinctions. Which 465 00:25:59,000 --> 00:26:00,720 Speaker 1: one is leading the way? Is it? Is it just 466 00:26:00,760 --> 00:26:03,159 Speaker 1: such a jumble you don't know yet or can you 467 00:26:03,240 --> 00:26:07,240 Speaker 1: say city groups outdistancing the others within the tactical battle 468 00:26:07,280 --> 00:26:11,080 Speaker 1: of two thousand seventeen, So it's it's all about the 469 00:26:11,160 --> 00:26:14,720 Speaker 1: rate of change and return to shareholders. And I think 470 00:26:14,840 --> 00:26:18,439 Speaker 1: city of the three that have reported is showing improvement 471 00:26:18,520 --> 00:26:22,439 Speaker 1: and maybe having a better delta of especially after the 472 00:26:22,480 --> 00:26:26,080 Speaker 1: stress tests and the second quarter results, the ability to 473 00:26:26,320 --> 00:26:29,520 Speaker 1: increase dividends buy back and they haven't been able to 474 00:26:29,560 --> 00:26:32,840 Speaker 1: do that. We're allowed to do that. JP Morgan was solid. 475 00:26:33,400 --> 00:26:36,399 Speaker 1: Um they would get an improvement later this year, perhaps 476 00:26:36,480 --> 00:26:40,040 Speaker 1: would improved trading and fixed income. Gentlelyan, thank you so much, 477 00:26:40,040 --> 00:26:44,119 Speaker 1: greatly appreciate with much more. He was great. The hardest 478 00:26:44,119 --> 00:26:47,240 Speaker 1: thing for these analysts is the good spirit of coming 479 00:26:47,240 --> 00:26:50,040 Speaker 1: on with us right when the yearnings come out. It's 480 00:26:50,080 --> 00:26:53,080 Speaker 1: a lot easier an hour later. It's like asking me 481 00:26:53,119 --> 00:26:55,000 Speaker 1: to read and speak at the same time, which I 482 00:26:55,040 --> 00:26:56,959 Speaker 1: can barely. They don't ask me to do that. They 483 00:26:57,000 --> 00:27:00,000 Speaker 1: don't they just make they ask you. They just um, 484 00:27:01,000 --> 00:27:03,520 Speaker 1: you know one of the context for this, just to 485 00:27:04,080 --> 00:27:06,040 Speaker 1: give it to a talking about all the bank earnings 486 00:27:06,400 --> 00:27:09,320 Speaker 1: UM First Republic one of the banks that you know 487 00:27:09,440 --> 00:27:11,960 Speaker 1: who you said in that quote that you don't get 488 00:27:11,960 --> 00:27:15,680 Speaker 1: talked about UM missing estimates in the in the second 489 00:27:15,760 --> 00:27:18,280 Speaker 1: quarter for earnings per share. We're gonna get more details 490 00:27:18,960 --> 00:27:20,439 Speaker 1: with that. And also we'll take a look at them 491 00:27:20,480 --> 00:27:36,320 Speaker 1: v P n C Bank. This is really timely a 492 00:27:36,400 --> 00:27:39,679 Speaker 1: conversation the president of the Dallas Fed, and he's a 493 00:27:39,800 --> 00:27:45,080 Speaker 1: unique president. Robert Stephen Caplan is not the monetary PhD 494 00:27:45,160 --> 00:27:47,560 Speaker 1: you would think about. Dr Caplan of course, with his 495 00:27:47,640 --> 00:27:51,240 Speaker 1: good work at Harvard over the years, and really thinking 496 00:27:51,359 --> 00:27:56,359 Speaker 1: about leadership in the transition of leadership as well. And 497 00:27:56,480 --> 00:27:59,760 Speaker 1: let me begin, Robert Caplan with the idea of why 498 00:27:59,800 --> 00:28:02,480 Speaker 1: you're in Mexico City. You and I know the research 499 00:28:02,600 --> 00:28:06,640 Speaker 1: heritage of your Dallas Fed, of our southern border. Did 500 00:28:06,680 --> 00:28:08,920 Speaker 1: you have to climb a wall to get to Mexico 501 00:28:09,000 --> 00:28:12,600 Speaker 1: City today? No? No, I didn't need to climb the 502 00:28:12,600 --> 00:28:15,480 Speaker 1: wall at all. No. We have a very long standing 503 00:28:15,560 --> 00:28:18,399 Speaker 1: relationship at the Dallas Fed with the Central Bank of 504 00:28:18,440 --> 00:28:22,199 Speaker 1: Mexico and with senior government officials of Mexico. So I 505 00:28:22,240 --> 00:28:25,639 Speaker 1: come here regularly and officials from Mexico come to the 506 00:28:25,680 --> 00:28:29,160 Speaker 1: eleventh District regularly. But this is a very important relationships. 507 00:28:29,840 --> 00:28:32,520 Speaker 1: Texas is the largest exporting state in the country and 508 00:28:32,640 --> 00:28:36,639 Speaker 1: Mexico is our largest largest trading partner. If you're good PhD, 509 00:28:36,680 --> 00:28:41,080 Speaker 1: the legendary Dallas team, the PhDs there have they quantified 510 00:28:41,200 --> 00:28:44,240 Speaker 1: what a Trump wall would mean to the g d 511 00:28:44,480 --> 00:28:48,480 Speaker 1: P of Mexico or to Texas in the eleventh District, 512 00:28:48,840 --> 00:28:52,960 Speaker 1: or for that matter, to America. Well, let me let 513 00:28:52,960 --> 00:28:56,360 Speaker 1: me let me state at more positively what I'd say. 514 00:28:56,360 --> 00:29:00,360 Speaker 1: The two key points are one, the trading RelA ship 515 00:29:00,360 --> 00:29:03,280 Speaker 1: between the United States and Mexico. I think, in our 516 00:29:03,320 --> 00:29:07,040 Speaker 1: research at the Dallas Fed Shows is very critical, uh 517 00:29:07,120 --> 00:29:09,840 Speaker 1: to competitiveness of the United States. And what do I 518 00:29:09,880 --> 00:29:13,880 Speaker 1: mean by that, um, seventy of the goods that are 519 00:29:13,920 --> 00:29:17,560 Speaker 1: imported from Mexico to the United States, or what are 520 00:29:17,600 --> 00:29:20,959 Speaker 1: referred to as intermediate goods, meaning they're goods that go 521 00:29:21,040 --> 00:29:24,360 Speaker 1: back of forth across the border as part of integrated 522 00:29:24,400 --> 00:29:30,000 Speaker 1: supply chains and logistical arrangements. And further, of the content 523 00:29:30,520 --> 00:29:34,160 Speaker 1: of US imports from Mexico is US content. So this 524 00:29:34,240 --> 00:29:37,240 Speaker 1: is a very different trade relationship than say, the relationship 525 00:29:37,280 --> 00:29:41,240 Speaker 1: with China, which is primarily or heavily final goods. This 526 00:29:41,360 --> 00:29:44,760 Speaker 1: relationship has allowed US companies to be more competitive in 527 00:29:44,840 --> 00:29:47,600 Speaker 1: their manufacturing. It's allowed us to grow jobs in the 528 00:29:47,640 --> 00:29:50,600 Speaker 1: United States, and if we didn't have this trading relationship, 529 00:29:50,840 --> 00:29:54,000 Speaker 1: we would likely lose those jobs elsewhere in the world. 530 00:29:54,080 --> 00:29:56,440 Speaker 1: Probably the Asia President Caplin. You know I've got a 531 00:29:56,440 --> 00:29:59,080 Speaker 1: great team here at Bloomberg helping me out, making me smarter. 532 00:29:59,200 --> 00:30:02,440 Speaker 1: On this Friday, let me begin with Michael McKee on NAFTA. 533 00:30:02,760 --> 00:30:08,760 Speaker 1: What does Robert Kaplan need out of new NAFTA negotiations? Well, 534 00:30:09,000 --> 00:30:12,120 Speaker 1: as a central banker, I'm gonna be careful about not 535 00:30:12,320 --> 00:30:16,880 Speaker 1: commenting on a specific trade negotiation further than to say 536 00:30:16,240 --> 00:30:21,000 Speaker 1: I'm I'm optimistic and talking to parties on both sides, 537 00:30:21,200 --> 00:30:24,840 Speaker 1: I'd be optimistic that the importance of this training relationship 538 00:30:24,880 --> 00:30:27,200 Speaker 1: and the fact that it's much more of a strategic 539 00:30:27,960 --> 00:30:33,920 Speaker 1: UH supply chain sophisticated logistical relationship, I think that's being appreciated. 540 00:30:34,000 --> 00:30:38,120 Speaker 1: And I'm actually optimistic, relatively optimistic, and hopeful, and people 541 00:30:38,160 --> 00:30:42,560 Speaker 1: in Mexico are too that this agreement will be renegotiated 542 00:30:42,800 --> 00:30:45,600 Speaker 1: in a successful way. Oh, we just heard testimony from 543 00:30:45,720 --> 00:30:48,840 Speaker 1: your boss, Cherry yelling in Washington. Help me with the 544 00:30:48,880 --> 00:30:52,320 Speaker 1: word transitory. R g Enna Smilac is looking at transitory, 545 00:30:52,840 --> 00:30:56,040 Speaker 1: rob Camplan, I've got a definition back to thirteen seventy 546 00:30:56,080 --> 00:31:00,240 Speaker 1: four in Chaucer. I want to know Caplan's definition of 547 00:31:00,320 --> 00:31:04,600 Speaker 1: transitory inflation, is that a disinflation rather and is that 548 00:31:04,640 --> 00:31:08,120 Speaker 1: going to end at eight thirty this morning. Well, Uh, 549 00:31:08,960 --> 00:31:12,320 Speaker 1: there's two parts of this inflation question. Number one, as 550 00:31:12,520 --> 00:31:15,560 Speaker 1: as your as your viewers know, uh, at at four 551 00:31:15,560 --> 00:31:20,280 Speaker 1: point four percent unemployment and relatively low amount of labor slack. 552 00:31:20,360 --> 00:31:23,800 Speaker 1: And I look, by the way at you six which 553 00:31:23,880 --> 00:31:27,880 Speaker 1: is the unemployed plus discouraged workers plus people working part 554 00:31:27,920 --> 00:31:30,920 Speaker 1: time for economic reasons, and that's still not far away 555 00:31:30,920 --> 00:31:33,680 Speaker 1: from the prerecession low. It's eight point six percent. At 556 00:31:33,720 --> 00:31:37,840 Speaker 1: that low level of unemployment, you would historically have seen 557 00:31:37,840 --> 00:31:42,600 Speaker 1: more inflation pressures were not. Uh so far, March was weak, 558 00:31:43,000 --> 00:31:45,680 Speaker 1: April when they were a little stronger. And I believe 559 00:31:45,760 --> 00:31:50,280 Speaker 1: strongly that some of this is transitory, meaning so there's 560 00:31:50,320 --> 00:31:52,800 Speaker 1: some one time factors in the March numbers. But I 561 00:31:52,840 --> 00:31:57,040 Speaker 1: think some of it is not transitory. Uh. Technology enabled disruption, 562 00:31:57,160 --> 00:32:00,120 Speaker 1: the fact that workers are being replaced by technology, g 563 00:32:00,280 --> 00:32:04,440 Speaker 1: that shoppers can use technology and have much more pricing power. 564 00:32:04,960 --> 00:32:07,640 Speaker 1: I think businesses have far less pricing power right now 565 00:32:07,640 --> 00:32:10,760 Speaker 1: than any time in my lifetime. And I think I 566 00:32:10,800 --> 00:32:15,080 Speaker 1: think because of that phenomena, as well as to some extent, globalization, 567 00:32:15,400 --> 00:32:18,240 Speaker 1: and that goods and services are being to some extent 568 00:32:18,320 --> 00:32:21,640 Speaker 1: competed for globally. I think I think we need to 569 00:32:21,680 --> 00:32:25,200 Speaker 1: accept that some of this muted inflation is the fact 570 00:32:25,200 --> 00:32:27,239 Speaker 1: we're in a different kind of economy than we were 571 00:32:27,240 --> 00:32:29,960 Speaker 1: in five years ago, ten years ago, and fifteen years 572 00:32:30,040 --> 00:32:32,560 Speaker 1: That's brilliant, that's a capital distinction. Let's go right to that. 573 00:32:32,640 --> 00:32:36,120 Speaker 1: The pricing power issue. Is this a different pricing power 574 00:32:36,240 --> 00:32:39,280 Speaker 1: battle than the one that made Jack Welch famous years 575 00:32:39,280 --> 00:32:45,080 Speaker 1: ago in generals Electric? It's dramatically different. And the reason 576 00:32:45,160 --> 00:32:49,840 Speaker 1: for that is, uh, the rate of disruption. And let 577 00:32:49,840 --> 00:32:53,080 Speaker 1: me for let me explain what disruption is. New business 578 00:32:53,080 --> 00:32:57,720 Speaker 1: models being replaced by more efficient models that are technology enabled. 579 00:32:57,960 --> 00:33:01,000 Speaker 1: And you go right down the list to film into street. Uh, 580 00:33:01,040 --> 00:33:05,200 Speaker 1: you know, Kodak and Polaroid being replaced by the digital phone. Uh, 581 00:33:05,360 --> 00:33:10,920 Speaker 1: Retailers being displaced by Amazon, Uber displacing Taxis. It goes 582 00:33:11,000 --> 00:33:15,720 Speaker 1: on and on and on and on. And because of that, businesses, uh, 583 00:33:16,000 --> 00:33:18,520 Speaker 1: even if they have wage pressure, which I think there 584 00:33:18,560 --> 00:33:20,719 Speaker 1: will be more of a wage pressure in the months ahead, 585 00:33:21,040 --> 00:33:23,120 Speaker 1: it is much harder for them to pass that on 586 00:33:23,160 --> 00:33:27,880 Speaker 1: to consumer. Could consumers have far more choices and traditional 587 00:33:27,920 --> 00:33:31,280 Speaker 1: business models are being supplanted at a rate I haven't 588 00:33:31,280 --> 00:33:34,640 Speaker 1: seen in my lifetime by new business models that are 589 00:33:34,800 --> 00:33:37,880 Speaker 1: cheaper and better value for the consumer. And I think 590 00:33:37,920 --> 00:33:40,120 Speaker 1: that's having a real effect on inflation. If you're just 591 00:33:40,200 --> 00:33:43,520 Speaker 1: joining us, Michael, Robert Kaplan joining us rather excuse me, 592 00:33:43,600 --> 00:33:48,320 Speaker 1: Robert Caplin of the Dallas Fed Bloomberg Radio, Bloomberg Television worldwide. Okay, 593 00:33:48,520 --> 00:33:51,040 Speaker 1: I said, Michael, Michael dell is one of your constituents 594 00:33:51,040 --> 00:33:54,120 Speaker 1: in Austin at Texas. You say Michael dell is gonna 595 00:33:54,160 --> 00:33:57,680 Speaker 1: see wage growth. When's he gonna see it? I think 596 00:33:57,720 --> 00:34:00,400 Speaker 1: we're already I gotta tell you, in my conversationations with 597 00:34:00,440 --> 00:34:04,280 Speaker 1: business leaders throughout the eleventh District and and throughout the country, 598 00:34:04,560 --> 00:34:07,400 Speaker 1: and in our surveys, we're already seeing wage pressure for 599 00:34:07,440 --> 00:34:10,000 Speaker 1: skilled workers, but we're now starting to see more wage 600 00:34:10,040 --> 00:34:14,000 Speaker 1: pressure for unskilled workers. Companies I talked to talk about 601 00:34:14,040 --> 00:34:18,560 Speaker 1: the term churn. Workers are leaving. Unskilled workers are leaving 602 00:34:18,760 --> 00:34:21,400 Speaker 1: for higher wages, and they realize they're gonna have to 603 00:34:21,440 --> 00:34:24,680 Speaker 1: pay more to keep those workers. And so I think 604 00:34:25,320 --> 00:34:28,680 Speaker 1: with a lag you're gonna start to see more wage pressure. 605 00:34:28,719 --> 00:34:31,799 Speaker 1: I believe in the months ahead. Uh And and we're 606 00:34:31,800 --> 00:34:36,080 Speaker 1: seeing wage short labor shortages, I should say across industries, 607 00:34:36,320 --> 00:34:39,759 Speaker 1: but now increasingly for unskilled workers. And so that that 608 00:34:39,800 --> 00:34:41,759 Speaker 1: makes me think we're gonna see more wage pressure. Robert 609 00:34:41,800 --> 00:34:43,600 Speaker 1: camp And I think you and John Williams out in 610 00:34:43,640 --> 00:34:48,239 Speaker 1: San Francisco are acutely attuned to currency dynamics. When you 611 00:34:48,280 --> 00:34:51,160 Speaker 1: and I were at the Council on Foreign Relations weeks ago, 612 00:34:51,680 --> 00:34:55,160 Speaker 1: you had beautiful analysis of the timeline of rate movements 613 00:34:55,520 --> 00:34:59,640 Speaker 1: versus balance sheet movements. Are Carle Ricka Donna is focused 614 00:34:59,680 --> 00:35:04,440 Speaker 1: on the dollar dynamics of unloading that balance sheet? Do 615 00:35:04,520 --> 00:35:09,319 Speaker 1: we care about currency movements when we finally taper to 616 00:35:09,400 --> 00:35:15,279 Speaker 1: this and taper to that. Yes, sure we certainly currencies 617 00:35:15,320 --> 00:35:18,520 Speaker 1: and the dollar strength or weakness is something we watch carefully. Listen, 618 00:35:18,640 --> 00:35:21,680 Speaker 1: I'm sitting right now in a country that's had enormous 619 00:35:21,680 --> 00:35:26,160 Speaker 1: currency volatility and that has spurred inflation here, and the 620 00:35:26,239 --> 00:35:29,800 Speaker 1: central Bank in Mexico has had to raise rates literally 621 00:35:29,880 --> 00:35:33,440 Speaker 1: ten times over the last number of months, and so 622 00:35:33,640 --> 00:35:36,480 Speaker 1: a very weak currency or very volatile currency can have 623 00:35:36,520 --> 00:35:39,279 Speaker 1: an effect. My own judgment though, on the balance sheet 624 00:35:39,320 --> 00:35:42,520 Speaker 1: unwined in the United States, I think we've designed it 625 00:35:42,600 --> 00:35:45,319 Speaker 1: to be done gradually. Uh, and in a way that 626 00:35:45,480 --> 00:35:50,520 Speaker 1: is phased in that I believe will I believe and 627 00:35:50,560 --> 00:35:53,480 Speaker 1: I expect it will. It will have a minimal impact 628 00:35:53,840 --> 00:35:57,000 Speaker 1: on the treasury and market back mortgage backed securities markets, 629 00:35:57,160 --> 00:36:00,000 Speaker 1: but we've designed it that way to be very slow, 630 00:36:00,040 --> 00:36:04,040 Speaker 1: over gradual, so it minimizes the disruption to those markets. 631 00:36:04,120 --> 00:36:06,040 Speaker 1: Robert Camp and I've never done this. I'm gonna do 632 00:36:06,080 --> 00:36:07,560 Speaker 1: it now with you. And I know you're gonna say, 633 00:36:07,560 --> 00:36:09,160 Speaker 1: I don't want to answer that, but you've got to. 634 00:36:09,640 --> 00:36:12,880 Speaker 1: You are more qualified than anyone in the history of 635 00:36:12,880 --> 00:36:16,400 Speaker 1: the Federal Reserve system going back to nineteen seventeen to 636 00:36:16,520 --> 00:36:20,279 Speaker 1: talk about leadership and transition. Your classic book What to 637 00:36:20,360 --> 00:36:22,760 Speaker 1: Ask the Person in the Mirror. You had a beautiful 638 00:36:22,800 --> 00:36:27,040 Speaker 1: thing for HBr years ago called the pledge. Advise our 639 00:36:27,200 --> 00:36:30,880 Speaker 1: politicians how they get to June of next year with 640 00:36:30,960 --> 00:36:34,000 Speaker 1: the presumed retirements of chair Yelling, I know you're gonna say, 641 00:36:34,080 --> 00:36:36,520 Speaker 1: we don't know that, or Vice Chairman Fisher. I know 642 00:36:36,560 --> 00:36:39,799 Speaker 1: you're gonna say, we don't know that in empty governor seats. 643 00:36:39,800 --> 00:36:44,200 Speaker 1: What's the best practice for the politicians in Washington to 644 00:36:44,440 --> 00:36:48,560 Speaker 1: get to a good and better fed in two thousand nineteen. 645 00:36:50,680 --> 00:36:53,719 Speaker 1: So you're right, I won't comment on potential candids and 646 00:36:53,760 --> 00:36:55,640 Speaker 1: the prospects of that happened, but I will say that, 647 00:36:55,760 --> 00:36:58,440 Speaker 1: but I will say this, Uh, there are two major 648 00:36:58,520 --> 00:37:02,400 Speaker 1: qualities I would highlight in a FED chair, a FED governor, 649 00:37:02,480 --> 00:37:05,120 Speaker 1: or even a FED president, but certainly in a FED chair. 650 00:37:05,280 --> 00:37:09,279 Speaker 1: Number one, the person he or she must be a 651 00:37:10,000 --> 00:37:14,759 Speaker 1: respected and expert person that can analyze the economy and 652 00:37:14,840 --> 00:37:18,319 Speaker 1: have views on monetary policy that are respected. They have 653 00:37:18,360 --> 00:37:20,280 Speaker 1: to be able to stand on their own two feet 654 00:37:20,280 --> 00:37:23,520 Speaker 1: in that regard and be respected. And the reason that's 655 00:37:23,520 --> 00:37:26,479 Speaker 1: so critical is the second part of the job, which 656 00:37:26,520 --> 00:37:29,960 Speaker 1: is they've got to be able to mobilize a consensus, 657 00:37:30,000 --> 00:37:33,879 Speaker 1: forge a consensus among presidents and governors. And it's much 658 00:37:33,880 --> 00:37:36,680 Speaker 1: easier to do that if you Yes, you have interpersonal 659 00:37:36,719 --> 00:37:39,920 Speaker 1: skills and people skills, but it's much very much easier 660 00:37:40,000 --> 00:37:43,600 Speaker 1: to do that if you're respected, uh in your own views. 661 00:37:43,880 --> 00:37:46,560 Speaker 1: It's much easier to forge a consensus. And I think 662 00:37:46,600 --> 00:37:49,960 Speaker 1: the next chair needs to have those two qualities of 663 00:37:50,040 --> 00:37:52,839 Speaker 1: your Janet Ellen does have those qualities, and if there's 664 00:37:52,840 --> 00:37:55,680 Speaker 1: a replacement, the replacement needs to have those qualities. We 665 00:37:55,880 --> 00:37:59,239 Speaker 1: have eclectic FED. I think of Richard Fisher with his 666 00:37:59,400 --> 00:38:02,640 Speaker 1: unique word at the Dallas Fed before Robert Kaplan. I 667 00:38:02,680 --> 00:38:05,560 Speaker 1: think of others over the years, Mr Walsh in others 668 00:38:05,680 --> 00:38:08,399 Speaker 1: we have Mr Quarrels being appointed, and I know you're 669 00:38:08,440 --> 00:38:11,880 Speaker 1: not going to talk about other names. How crucial is 670 00:38:11,920 --> 00:38:16,839 Speaker 1: it to have a monetary PhD? Olive chair Yelling, Olive, Bill, 671 00:38:17,440 --> 00:38:21,040 Speaker 1: Bill Dudley and certainly all of the giants Stanley Fisher. 672 00:38:21,320 --> 00:38:25,279 Speaker 1: How important is it to have a monetary PhD within 673 00:38:25,320 --> 00:38:32,600 Speaker 1: that triumphant of a chairman and two vice chairman. Uh. 674 00:38:32,640 --> 00:38:37,719 Speaker 1: I think having very strong grounded PhD skills and I'm 675 00:38:37,719 --> 00:38:39,879 Speaker 1: speaking now is someone who's not a PhD. By the way, 676 00:38:39,880 --> 00:38:42,680 Speaker 1: as you know, I'm not even an economist. I'm a 677 00:38:42,719 --> 00:38:45,480 Speaker 1: business person. Some people have suggest that's an advantage of 678 00:38:45,920 --> 00:38:48,919 Speaker 1: somebody would say that's an advantage cap he just he's 679 00:38:48,920 --> 00:38:54,160 Speaker 1: flying at France right now, Okay. So I would say 680 00:38:54,239 --> 00:38:57,640 Speaker 1: you need to have some number of people with PhD 681 00:38:58,160 --> 00:39:03,040 Speaker 1: strong technical, uh fundamental skills. And then I do think 682 00:39:03,080 --> 00:39:05,879 Speaker 1: you need some number of people around the table that 683 00:39:06,000 --> 00:39:09,319 Speaker 1: have a different background business background. And I think the 684 00:39:09,400 --> 00:39:13,279 Speaker 1: combination of those two is very very powerful. And so 685 00:39:13,440 --> 00:39:15,920 Speaker 1: I won't go so far as to say which seats 686 00:39:16,200 --> 00:39:18,759 Speaker 1: which that which need to have which skills. But I 687 00:39:18,800 --> 00:39:21,120 Speaker 1: think as long as you've got a mix, and you've 688 00:39:21,120 --> 00:39:24,839 Speaker 1: got a leader that is good at organizing and orchestrating 689 00:39:24,880 --> 00:39:27,600 Speaker 1: that mix, I think the FED should and does work 690 00:39:27,600 --> 00:39:30,840 Speaker 1: and will work very effectively. The president one final question, 691 00:39:30,880 --> 00:39:36,799 Speaker 1: if I may, is this a fully employed America? Is 692 00:39:36,840 --> 00:39:38,640 Speaker 1: this a what I didn't say employed, Is this a 693 00:39:38,719 --> 00:39:43,920 Speaker 1: fully employed fully employed? I'd say we're it's an America 694 00:39:44,000 --> 00:39:47,120 Speaker 1: that's getting very close to being fully employed. I mentioned 695 00:39:47,200 --> 00:39:50,680 Speaker 1: you six earlier, the pre recession low was eight point 696 00:39:50,760 --> 00:39:55,000 Speaker 1: one percent in unemployment plus discouraged workers plus people working 697 00:39:55,040 --> 00:39:58,200 Speaker 1: part time. For economic reasons, I prefer that measure over 698 00:39:58,280 --> 00:40:02,040 Speaker 1: the headline unemployment rate, as I think it's a measure. Uh, 699 00:40:02,680 --> 00:40:05,040 Speaker 1: eight point one percent was the pre recession low. Where 700 00:40:05,040 --> 00:40:07,920 Speaker 1: at eight point six percent right now, That tells me 701 00:40:08,000 --> 00:40:11,200 Speaker 1: if we're not at full employment, we're moving close to 702 00:40:11,239 --> 00:40:13,440 Speaker 1: getting at full employment. So I think the FED is 703 00:40:13,440 --> 00:40:16,680 Speaker 1: getting very close to meeting its full employment mandate. I'm 704 00:40:16,719 --> 00:40:18,800 Speaker 1: not sure we're there yet, but I think we're moving 705 00:40:18,800 --> 00:40:33,680 Speaker 1: towards getting there. This is the interview of the day, 706 00:40:33,840 --> 00:40:36,480 Speaker 1: with great respect of the President of the Dallas FED. 707 00:40:37,080 --> 00:40:41,160 Speaker 1: We are all transfixed by healthcare. We are transfixed by 708 00:40:41,239 --> 00:40:44,840 Speaker 1: heroin and opioid, and it's nice to have an adult 709 00:40:44,960 --> 00:40:49,000 Speaker 1: in the room. He is from eastern Oklahoma, where there 710 00:40:49,080 --> 00:40:52,759 Speaker 1: is the Montgomery, VA Senator of the St. Francis Hospital 711 00:40:52,800 --> 00:40:55,440 Speaker 1: of Muskegee now and Tulsa. Of course, he is a 712 00:40:55,560 --> 00:40:59,960 Speaker 1: senator from Oklahoma. Dr Coburn. Tom, it is an honored 713 00:41:00,000 --> 00:41:04,040 Speaker 1: to speak to you. Is this nation grapples with healthcare? 714 00:41:04,440 --> 00:41:09,879 Speaker 1: You've delivered four million babies? What does this plan mean 715 00:41:10,120 --> 00:41:14,239 Speaker 1: to the families of Oklahoma? Forget about the suits and 716 00:41:14,320 --> 00:41:18,040 Speaker 1: ties and the lobbyists. What's it mean to those people 717 00:41:18,600 --> 00:41:21,160 Speaker 1: in the every once in a while one where you 718 00:41:21,239 --> 00:41:26,120 Speaker 1: saved their life? Well, I think, Tom, thank you first 719 00:41:26,120 --> 00:41:28,640 Speaker 1: of all for allowing me to speak to you. Listen 720 00:41:28,640 --> 00:41:30,400 Speaker 1: to the show a lot when I drive early in 721 00:41:30,480 --> 00:41:35,080 Speaker 1: the morning. Uh. I don't think the healthcare gets fixed 722 00:41:35,080 --> 00:41:39,360 Speaker 1: in Washington. And let me just digress for a minute. 723 00:41:39,560 --> 00:41:44,720 Speaker 1: There's no price transparency in healthcare, So Washington is about 724 00:41:44,760 --> 00:41:51,360 Speaker 1: fixing the wrong things. M hm. The economy in America, 725 00:41:51,920 --> 00:41:56,440 Speaker 1: markets allocate scarce resources. They don't do that in healthcare. 726 00:41:56,520 --> 00:41:58,440 Speaker 1: They don't do that in education. And those are the 727 00:41:58,440 --> 00:42:01,959 Speaker 1: two areas where we're failing either economically or in terms 728 00:42:01,960 --> 00:42:05,800 Speaker 1: of outcomes. So I don't think they fix it. I 729 00:42:05,840 --> 00:42:08,160 Speaker 1: mean I think they may have a political fix. They 730 00:42:08,200 --> 00:42:10,759 Speaker 1: may pass a billy and may do something, but it 731 00:42:10,840 --> 00:42:13,200 Speaker 1: doesn't fix healthy And there are things, there are things 732 00:42:13,239 --> 00:42:15,920 Speaker 1: occurring right now in the market that are going to 733 00:42:16,000 --> 00:42:19,919 Speaker 1: fix healthcare. If good thinking people, fair thinking people think, 734 00:42:20,000 --> 00:42:23,759 Speaker 1: Republicans and Democrats can find a common ground, it's got 735 00:42:23,760 --> 00:42:28,000 Speaker 1: to be about our medical care system. When a politician 736 00:42:28,200 --> 00:42:31,480 Speaker 1: or lawyer comes to Dr Cockburn and speaks to you, 737 00:42:32,080 --> 00:42:36,239 Speaker 1: what do you tell the lawyers of Washington. I tell 738 00:42:36,280 --> 00:42:38,719 Speaker 1: them to create You know, if you want to do 739 00:42:38,840 --> 00:42:43,520 Speaker 1: something Washington to help lower costs is mandate prost transparency 740 00:42:43,520 --> 00:42:49,560 Speaker 1: and quality transparency because there is none. Uh And you 741 00:42:49,600 --> 00:42:54,320 Speaker 1: know the two models of Kotal government run healthcare, of 742 00:42:54,360 --> 00:42:57,319 Speaker 1: the v A in the Indian Health Service, and you 743 00:42:57,320 --> 00:43:00,920 Speaker 1: wouldn't want your family and any of those. Your acception 744 00:43:00,960 --> 00:43:03,759 Speaker 1: has been by and large, you wouldn't. So if you 745 00:43:03,840 --> 00:43:08,720 Speaker 1: create price transparency where people can see all of a sudden, 746 00:43:08,719 --> 00:43:13,120 Speaker 1: you'll change the insurance market. You'll change the competitive model. 747 00:43:13,120 --> 00:43:16,239 Speaker 1: I'll give you an example. Tom in Tulsa, Oklahoma, you 748 00:43:16,280 --> 00:43:17,960 Speaker 1: can get an M r I done of your spine 749 00:43:18,000 --> 00:43:20,239 Speaker 1: for thirty seven dollars at one of the hospital, so 750 00:43:20,280 --> 00:43:22,960 Speaker 1: you can get it done at now patient uh m 751 00:43:23,080 --> 00:43:25,320 Speaker 1: r I center for seven fifties. Which one are you 752 00:43:25,360 --> 00:43:30,719 Speaker 1: gonna do? Yeah, because you're not spending your money, you 753 00:43:30,760 --> 00:43:33,360 Speaker 1: don't care. But if you're spending your money, you do 754 00:43:33,520 --> 00:43:35,600 Speaker 1: so if in fact that's available. And by the way, 755 00:43:35,640 --> 00:43:39,279 Speaker 1: that seven dollars is lower than what medically pays. Now, 756 00:43:39,360 --> 00:43:46,040 Speaker 1: let me let's just a quick question for you. Given 757 00:43:46,080 --> 00:43:49,120 Speaker 1: political inertia in Washington or whatever is not or going 758 00:43:49,160 --> 00:43:51,800 Speaker 1: to happen, what can people do independent of the government 759 00:43:51,840 --> 00:43:55,960 Speaker 1: to increase the value of what they've got. Well, it's 760 00:43:55,960 --> 00:43:58,919 Speaker 1: get ready to happen. Let me just tell you all 761 00:43:58,960 --> 00:44:01,160 Speaker 1: the things that I said apple around I talk about 762 00:44:01,200 --> 00:44:05,120 Speaker 1: healthcare and investigating. There's something called health egin dot com. 763 00:44:05,120 --> 00:44:08,000 Speaker 1: It cuts the price of an opera outpatient surgery by 764 00:44:08,000 --> 00:44:13,719 Speaker 1: about uh There is something called Metafi, which is an 765 00:44:13,719 --> 00:44:16,640 Speaker 1: app that's sold that gives the best outcome in the 766 00:44:16,680 --> 00:44:21,000 Speaker 1: lowest prices in any market, and employers are buying that 767 00:44:21,080 --> 00:44:24,480 Speaker 1: all the time. There's free standing surgery centers that do 768 00:44:24,640 --> 00:44:27,680 Speaker 1: work for Canada and businesses all across the country. Right 769 00:44:27,719 --> 00:44:31,280 Speaker 1: here in Oklahoma Homa Surgical Hospital. They can't expand because 770 00:44:31,280 --> 00:44:33,320 Speaker 1: the law says you can't expand if you're a physician 771 00:44:33,360 --> 00:44:36,719 Speaker 1: owned hospital. The PC says the position owned hospitals have 772 00:44:36,800 --> 00:44:41,399 Speaker 1: the best outcome in the lowest cost. Me one more 773 00:44:41,440 --> 00:44:43,120 Speaker 1: quick medical question, and I've got to go one of 774 00:44:43,160 --> 00:44:46,120 Speaker 1: the way. Here's a Senator Coburn. Which nation has the 775 00:44:46,160 --> 00:44:49,640 Speaker 1: medical system you're most comfortable with? Is it Canada? Is 776 00:44:49,640 --> 00:44:54,840 Speaker 1: it Switzerland? Sit Switzerland? Please explain? Well, they have to 777 00:44:54,880 --> 00:44:57,360 Speaker 1: buy and they get a subsidy for the people that 778 00:44:57,360 --> 00:45:00,319 Speaker 1: that buy that can't afford it. But but then the 779 00:45:00,400 --> 00:45:04,840 Speaker 1: insurance companies there's no problem with prexisting know us because 780 00:45:04,840 --> 00:45:07,040 Speaker 1: the insurance companies have to share at the end of 781 00:45:07,080 --> 00:45:10,600 Speaker 1: the year, whoever has higher losses, they all share in that. 782 00:45:11,200 --> 00:45:13,800 Speaker 1: So you have true insurance. We don't have real insurance 783 00:45:13,800 --> 00:45:16,800 Speaker 1: in America. There's no true indemnification. What you have is 784 00:45:16,840 --> 00:45:21,320 Speaker 1: prepaid medical expense for which they extract. So we spend 785 00:45:21,360 --> 00:45:25,360 Speaker 1: eight hundred billion dollars here. There's multiple spaces that doesn't 786 00:45:25,360 --> 00:45:27,440 Speaker 1: do anything to help anybody get well and doesn't do 787 00:45:27,480 --> 00:45:30,200 Speaker 1: anything to prevent somebody from getting sick. That's eight hundred 788 00:45:30,200 --> 00:45:33,560 Speaker 1: billion dollars wasted. Market forces will clean that up. But 789 00:45:33,640 --> 00:45:38,560 Speaker 1: we don't have market forces. Well, go ahead, please please please. Well, 790 00:45:38,600 --> 00:45:40,920 Speaker 1: I'm just saying, if you want to fix healthcare in America, 791 00:45:41,080 --> 00:45:45,400 Speaker 1: create a true market or a price discovery and quality 792 00:45:45,400 --> 00:45:48,920 Speaker 1: and price and service matter, and give people the option 793 00:45:49,000 --> 00:45:52,000 Speaker 1: of making choices, then you will see it. Why do 794 00:45:52,040 --> 00:45:54,160 Speaker 1: you think an insurance company doesn't want a hospital to 795 00:45:54,200 --> 00:45:57,439 Speaker 1: disclose what they're paying up for CPP code because they're 796 00:45:57,800 --> 00:46:02,360 Speaker 1: because it's ridiculously low. Well, I'm going to study the 797 00:46:02,360 --> 00:46:04,280 Speaker 1: Swiss system. I've got to get this in here because 798 00:46:04,280 --> 00:46:06,719 Speaker 1: we are Bloomberger eleven Thrio in New York. There are 799 00:46:06,880 --> 00:46:10,600 Speaker 1: very few fathers that can say their daughter Grace Stage 800 00:46:10,600 --> 00:46:13,839 Speaker 1: of the Metropolitan Opera Company. Did you grow up? When 801 00:46:13,840 --> 00:46:16,480 Speaker 1: did you know that your daughter Sarah would be the 802 00:46:16,600 --> 00:46:21,240 Speaker 1: giant and opera that she became. When did you know that? Oh? 803 00:46:21,280 --> 00:46:23,480 Speaker 1: I'm not sure I knew it until it happened. And 804 00:46:23,640 --> 00:46:27,319 Speaker 1: she was talented, she was outgoing, and as she ended 805 00:46:27,400 --> 00:46:31,040 Speaker 1: up falling in love of opera in her master's program. 806 00:46:31,280 --> 00:46:37,680 Speaker 1: And so in uh Eastern Europe right now singing. So 807 00:46:37,960 --> 00:46:41,680 Speaker 1: she's having fun. She loves it. Uh. And we get 808 00:46:41,800 --> 00:46:43,959 Speaker 1: to be grandparents a whole lot more than we would 809 00:46:43,960 --> 00:46:46,880 Speaker 1: otherwise because she travels up. Well, that's very good, Senator, 810 00:46:46,960 --> 00:46:49,239 Speaker 1: thank you so much. He is the father of the 811 00:46:49,280 --> 00:46:53,040 Speaker 1: opera singer Sarah Coburn and he graces us today. Uh, 812 00:46:53,120 --> 00:46:56,000 Speaker 1: the senator from Oklahoma, Mr Tim Pim, is that cool. 813 00:46:56,040 --> 00:46:58,359 Speaker 1: We were just at the Met like like six seven 814 00:46:58,360 --> 00:47:00,279 Speaker 1: weeks ago, you know, the end of the season. Could 815 00:47:00,280 --> 00:47:03,520 Speaker 1: you imagine being at the Met? See, your family is 816 00:47:03,719 --> 00:47:07,759 Speaker 1: huge in the opera. I saw I saw the Bill 817 00:47:08,400 --> 00:47:11,319 Speaker 1: up stocks up come him. You know that I did 818 00:47:11,320 --> 00:47:13,799 Speaker 1: this for you him, you know the Met like nobody 819 00:47:13,840 --> 00:47:16,879 Speaker 1: at Bloomberg. Can you imagine if your daughter walked out 820 00:47:16,920 --> 00:47:20,440 Speaker 1: there on that stage. I'd be nervous and I'd have 821 00:47:20,480 --> 00:47:22,719 Speaker 1: a very big smile. That would be very good. And 822 00:47:22,760 --> 00:47:25,400 Speaker 1: you know, also probably you don't want to sit in 823 00:47:25,400 --> 00:47:29,880 Speaker 1: a better seat than I sat up so high oxygen. Anyways, 824 00:47:29,920 --> 00:47:33,759 Speaker 1: that was wonderful. Tom Coburn, the Senator of Oklahoma. This 825 00:47:33,840 --> 00:47:45,960 Speaker 1: is Bloomberg. Thanks for listening to the Bloomberg Surveillance podcast. 826 00:47:46,440 --> 00:47:51,640 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 827 00:47:51,760 --> 00:47:56,080 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom Keene. 828 00:47:56,160 --> 00:48:00,520 Speaker 1: David Gura is at David Gura. Before the podcast, you 829 00:48:00,520 --> 00:48:15,080 Speaker 1: could always catch us worldwide. I'm Bloomberg Radio runt you 830 00:48:15,160 --> 00:48:19,240 Speaker 1: by Bank of America Mary Lynch. 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