1
00:00:02,920 --> 00:00:05,880
Speaker 1: This is Bloomberg Daybreak Asia for this Tuesday in March

2
00:00:05,920 --> 00:00:08,920
Speaker 1: twenty first in Hong Kong, Monday March twentieth in New

3
00:00:09,000 --> 00:00:12,560
Speaker 1: York and coming up today, JP Morgan and Morgan Stanley

4
00:00:12,680 --> 00:00:16,000
Speaker 1: maybe buying the risky dead of Credit Suisse. Former New

5
00:00:16,040 --> 00:00:19,720
Speaker 1: York Fed President William Dudley sees the Fed continuing quantitative

6
00:00:19,720 --> 00:00:23,120
Speaker 1: tightening and what's the new plan for the struggling First Republic.

7
00:00:23,160 --> 00:00:26,759
Speaker 1: Bank Putin says he'll look at China's peace proposal. She

8
00:00:27,040 --> 00:00:30,920
Speaker 1: Putin meet in Moscow. UN report says industrialized nations must

9
00:00:30,960 --> 00:00:34,680
Speaker 1: stop mining coal and gas products. New York prepares for

10
00:00:34,760 --> 00:00:40,760
Speaker 1: potential Trump arrest. I'm at Baxter with Global News. That's

11
00:00:40,800 --> 00:00:44,520
Speaker 1: all straight ahead on Bloomberg Daybreak Asia, the business news

12
00:00:44,560 --> 00:00:47,280
Speaker 1: you need to start your day in just one fifteen

13
00:00:47,280 --> 00:00:51,720
Speaker 1: minute podcast available on Apples, Spotify, the Bloomberg Business app

14
00:00:51,760 --> 00:00:57,440
Speaker 1: and everywhere you get your podcasts. Good morning, I'm Deck

15
00:00:57,480 --> 00:01:00,280
Speaker 1: Prisoner and I'm Bryan Curtis. Here are the story we're

16
00:01:00,320 --> 00:01:04,679
Speaker 1: following today. Risky bonds in Credit Suis last quoted at

17
00:01:04,720 --> 00:01:07,399
Speaker 1: prices at just a few cents on the dollar. The

18
00:01:07,440 --> 00:01:10,559
Speaker 1: debt is known as additional Tier one bonds or at ones.

19
00:01:10,959 --> 00:01:13,279
Speaker 1: These bonds are set to be written down to zero

20
00:01:13,400 --> 00:01:17,000
Speaker 1: by Swiss regulators as a condition of the UBS rescue

21
00:01:17,000 --> 00:01:20,240
Speaker 1: of Credit Suis. The bonds have a value about seventeen

22
00:01:20,360 --> 00:01:23,400
Speaker 1: point three billion dollars, but of course will be written

23
00:01:23,440 --> 00:01:26,920
Speaker 1: down to zero at some point. Here's Bloomberg's PAULA. Silligson.

24
00:01:27,319 --> 00:01:30,160
Speaker 1: I think the AT one situation is very unique because

25
00:01:30,240 --> 00:01:32,520
Speaker 1: of its role essentially being meant to be written down

26
00:01:32,640 --> 00:01:34,800
Speaker 1: in a moment of crisis. But in general, I think

27
00:01:34,800 --> 00:01:37,240
Speaker 1: there's a lot of just unknowns and uncertainties, and people

28
00:01:37,280 --> 00:01:39,600
Speaker 1: aren't sure what's going to happen next and what might

29
00:01:39,680 --> 00:01:41,280
Speaker 1: be the next thing to be wiped out to zero.

30
00:01:41,520 --> 00:01:43,959
Speaker 1: If anything, it will increase the borrowing costs for banks

31
00:01:44,000 --> 00:01:46,600
Speaker 1: that are trying to issue this type of debt, which

32
00:01:46,680 --> 00:01:48,680
Speaker 1: is not a great thing to have happened when there's

33
00:01:48,680 --> 00:01:52,920
Speaker 1: already a banking crisis. PAULA Seligson, Well US based holders

34
00:01:52,960 --> 00:01:56,120
Speaker 1: of these at ones include Pimco and Invesco. In the

35
00:01:56,160 --> 00:01:58,680
Speaker 1: case of Pimco, the firm held about eight hundred and

36
00:01:58,720 --> 00:02:02,720
Speaker 1: seven million dollars in these securities were told dealers including JP,

37
00:02:02,840 --> 00:02:05,960
Speaker 1: Morgan Chase and Morgan Stanley are willing to buy these

38
00:02:06,040 --> 00:02:08,920
Speaker 1: at ones for somewhere around two cents on the dollar.

39
00:02:09,240 --> 00:02:12,160
Speaker 1: The buyers of these securities are betting on successful legal

40
00:02:12,240 --> 00:02:16,080
Speaker 1: challenges to the move by Swiss regulators. Well, we are

41
00:02:16,080 --> 00:02:18,160
Speaker 1: being told that there is a new plan to further

42
00:02:18,240 --> 00:02:22,560
Speaker 1: help the still struggling San Francisco based lender, First Republic Bank.

43
00:02:22,680 --> 00:02:25,600
Speaker 1: We have that story from Bloomberg's Tom Busby. Days after

44
00:02:25,680 --> 00:02:28,240
Speaker 1: eleven of the largest healthiest banks in the US agreed

45
00:02:28,280 --> 00:02:31,960
Speaker 1: to backfield deposits following a run on First Republic Bank,

46
00:02:32,400 --> 00:02:35,640
Speaker 1: JP Morgan Chase CEO Jamie Diamond now spearheading a new

47
00:02:35,680 --> 00:02:38,720
Speaker 1: plan to help the troubled lender. Although details are hard

48
00:02:38,760 --> 00:02:41,560
Speaker 1: to pin down, the latest plan would convert some or

49
00:02:41,760 --> 00:02:45,760
Speaker 1: all of that thirty billion dollars in deposits into some

50
00:02:45,880 --> 00:02:48,680
Speaker 1: form of a capital infusion for First Republic to be

51
00:02:48,760 --> 00:02:52,120
Speaker 1: used to bolster its finances. Both JP Morgan Chase and

52
00:02:52,200 --> 00:02:55,040
Speaker 1: First Republic, though declined to comment to Bloomberg on the

53
00:02:55,040 --> 00:02:58,480
Speaker 1: exact nature of the proposed initiative. Shares the First Republic

54
00:02:58,600 --> 00:03:02,919
Speaker 1: tumbling another forty seven percent on Monday, Tom Busby, Bloomberg

55
00:03:03,040 --> 00:03:07,080
Speaker 1: Daybreak Asia. Well, the Feds today meeting kicks off tomorrow.

56
00:03:07,280 --> 00:03:10,440
Speaker 1: The swamps market is pricing in a seventy five percent

57
00:03:10,560 --> 00:03:13,760
Speaker 1: chance of a quarter point hike. Aside from raising rates,

58
00:03:13,800 --> 00:03:16,760
Speaker 1: the FED has been tightening financial conditions by winding down

59
00:03:16,800 --> 00:03:19,519
Speaker 1: its balance sheet the former FED in the New York

60
00:03:19,520 --> 00:03:23,680
Speaker 1: President Bill Dudley says that he expects that process to continue.

61
00:03:24,040 --> 00:03:27,280
Speaker 1: I think this is about exceptional liquid lender of last

62
00:03:27,320 --> 00:03:31,160
Speaker 1: resort provision to support the banking system. I think quantitative tightening,

63
00:03:31,400 --> 00:03:34,840
Speaker 1: the runoff of the Treasury portfolio and the Agency mortgage

64
00:03:34,840 --> 00:03:39,080
Speaker 1: backed securious PORTFOILO is going to continue unabated. I see

65
00:03:39,120 --> 00:03:42,080
Speaker 1: these tools is very separate and different, so I expect

66
00:03:42,200 --> 00:03:46,160
Speaker 1: that the quantitative tightening will continue. Dudley also said that

67
00:03:46,200 --> 00:03:48,680
Speaker 1: the current problems in the banking system are not the

68
00:03:48,720 --> 00:03:52,760
Speaker 1: global financial crisis all over again. Well, the European Central

69
00:03:52,800 --> 00:03:56,360
Speaker 1: Bank doesn't see any conflict between on one hand it's

70
00:03:56,440 --> 00:04:00,400
Speaker 1: inflation targeting mission and on the other it's response ability

71
00:04:00,480 --> 00:04:03,720
Speaker 1: to stave off threats to the financial system. ECB president

72
00:04:03,800 --> 00:04:07,480
Speaker 1: Christine Lagarde said financial stability has an impact on how

73
00:04:07,760 --> 00:04:11,800
Speaker 1: the ECB sees the situation from a macroeconomic point of view,

74
00:04:11,920 --> 00:04:17,520
Speaker 1: but there are two different stabilities addressing addressed by different tools.

75
00:04:18,040 --> 00:04:22,479
Speaker 1: Here's Madame Legard. Price stability is the primary objective of

76
00:04:22,760 --> 00:04:26,719
Speaker 1: the European Central Bank. But we all know that price

77
00:04:26,760 --> 00:04:34,080
Speaker 1: stability goes with financial stability, and they are both important

78
00:04:34,279 --> 00:04:37,599
Speaker 1: and come together, but there is no trade off between

79
00:04:37,600 --> 00:04:41,080
Speaker 1: the two. Now, Legard's comments kind of expand on those

80
00:04:41,120 --> 00:04:44,120
Speaker 1: she made last week when the ECB raised rates by

81
00:04:44,120 --> 00:04:46,919
Speaker 1: a half point, although the ECB did not provide a

82
00:04:46,960 --> 00:04:51,680
Speaker 1: signal on further moves. Separately, Legard repeated remarks made on

83
00:04:51,720 --> 00:04:56,040
Speaker 1: Sunday to welcome the swift actions and the decisions made

84
00:04:56,600 --> 00:05:02,359
Speaker 1: by the Swiss regulators over the crisis at Credit Suice Doug.

85
00:05:02,400 --> 00:05:06,640
Speaker 1: Amazon is laying off some nine thousand employees. Let's get

86
00:05:06,640 --> 00:05:10,360
Speaker 1: the story from Bloomberg's Charlie Pellet. The job cuts are

87
00:05:10,400 --> 00:05:14,240
Speaker 1: on top of the eighteen thousand announced in January, which

88
00:05:14,400 --> 00:05:18,200
Speaker 1: was its largest layoff ever. CEO Andy Jase said the

89
00:05:18,200 --> 00:05:23,520
Speaker 1: actions would mainly affect Amazon Web Services, HR advertising, and

90
00:05:23,640 --> 00:05:27,520
Speaker 1: the Twitch live streaming group. Jasse said the latest cuts

91
00:05:27,600 --> 00:05:31,480
Speaker 1: came after teams completed another phase of the company's annual

92
00:05:31,560 --> 00:05:35,880
Speaker 1: planning process. Amazon has been laying off mostly corporate workers

93
00:05:36,120 --> 00:05:40,120
Speaker 1: after a hiring spree during the pandemic. It has periodically

94
00:05:40,160 --> 00:05:43,440
Speaker 1: worked a rekindled growth in its retail division, but the

95
00:05:43,480 --> 00:05:47,360
Speaker 1: current slowdown is also hitting aws, the source of most

96
00:05:47,400 --> 00:05:51,599
Speaker 1: of Amazon's profit in recent years. In New York, Charlie

97
00:05:51,640 --> 00:05:55,440
Speaker 1: Pellet Bloomberg Daybreak Asia, I'm Brian Curtis, along with Doug

98
00:05:55,520 --> 00:05:58,440
Speaker 1: Chrisner and Doug as Tom mentioned their first Republic was

99
00:05:58,520 --> 00:06:03,039
Speaker 1: down forty seven percent. Today it's down ninety one in

100
00:06:03,120 --> 00:06:05,719
Speaker 1: a month, and most of that is just in the

101
00:06:05,760 --> 00:06:10,640
Speaker 1: past week. Yet banks rallied today, and the thinking appears

102
00:06:10,720 --> 00:06:14,039
Speaker 1: to still be that we don't have a banking crisis.

103
00:06:14,120 --> 00:06:17,760
Speaker 1: We have bad management among a few, but that's it.

104
00:06:18,240 --> 00:06:22,520
Speaker 1: And one wonders why investors would take the risk. These

105
00:06:22,560 --> 00:06:25,640
Speaker 1: institutions are showing you they can go to zero in

106
00:06:25,680 --> 00:06:28,840
Speaker 1: a week. Industrials don't do that, Utilities don't do that,

107
00:06:29,120 --> 00:06:33,560
Speaker 1: Widget makers don't do that. It's amazing. Yeah, I don't

108
00:06:33,560 --> 00:06:36,279
Speaker 1: know if you saw the comments said today from Morgan

109
00:06:36,320 --> 00:06:38,760
Speaker 1: Stanley's Mike Wilson. He was saying the stress that we

110
00:06:38,800 --> 00:06:41,640
Speaker 1: have seen in the banking system marks what is likely

111
00:06:41,720 --> 00:06:44,640
Speaker 1: to be the beginning of a painful and vicious end

112
00:06:45,200 --> 00:06:48,320
Speaker 1: to the bear market. In US equity. So maybe we're

113
00:06:48,320 --> 00:06:51,560
Speaker 1: in the process of putting in some kind of bottom

114
00:06:51,600 --> 00:06:54,800
Speaker 1: in terms of stock market price action, particularly if you

115
00:06:54,880 --> 00:06:57,560
Speaker 1: begin to accept this idea that, Okay, so the Fed

116
00:06:57,640 --> 00:07:00,560
Speaker 1: does raise rates twenty five basis points this week, but

117
00:07:00,720 --> 00:07:04,160
Speaker 1: what is the probability that they pause at that point

118
00:07:04,240 --> 00:07:07,520
Speaker 1: in time and that the new terminal rate is five

119
00:07:07,640 --> 00:07:12,720
Speaker 1: percent and not six percent. It almost feels like everybody

120
00:07:12,720 --> 00:07:16,480
Speaker 1: who wants them to raise twenty five basis points has

121
00:07:16,600 --> 00:07:20,480
Speaker 1: kind of a bearish position and interest, and that they

122
00:07:20,520 --> 00:07:23,320
Speaker 1: may be talking their book the whether or not we

123
00:07:23,360 --> 00:07:27,080
Speaker 1: have a crisis. We've had a number of banks go bust,

124
00:07:27,760 --> 00:07:30,240
Speaker 1: and if that isn't a time for caution, I don't

125
00:07:30,280 --> 00:07:34,440
Speaker 1: know when it would be. It really does seem that,

126
00:07:35,240 --> 00:07:37,680
Speaker 1: you know, that policymakers may just hold their nose and

127
00:07:37,800 --> 00:07:40,640
Speaker 1: raise because they want to be able to put a big,

128
00:07:40,760 --> 00:07:44,280
Speaker 1: pretty bow on this thing after a very long process,

129
00:07:44,320 --> 00:07:46,120
Speaker 1: and they want it to seem as though it's all

130
00:07:46,160 --> 00:07:49,200
Speaker 1: gone according to plan. But you know, if you listen

131
00:07:49,240 --> 00:07:50,760
Speaker 1: to the guests that we have on the program, We've

132
00:07:50,760 --> 00:07:53,680
Speaker 1: got Nancy Dawoud coming up in a few moments. Private

133
00:07:53,680 --> 00:07:57,040
Speaker 1: wealth advisor at Emery Prize Financial a lot of guests

134
00:07:57,080 --> 00:08:00,280
Speaker 1: are are against the Fed moving, but then there are

135
00:08:00,280 --> 00:08:02,679
Speaker 1: many that are for it. In the near term, balance

136
00:08:02,760 --> 00:08:08,480
Speaker 1: sheet reparation tightener, tighter financial conditions, and perhaps perhaps a

137
00:08:08,560 --> 00:08:12,080
Speaker 1: lower rate of inflation going forward. It's time for global news.

138
00:08:13,640 --> 00:08:17,360
Speaker 1: Russian President Vladimir Putin has told China's President Shi Jinping

139
00:08:17,720 --> 00:08:21,160
Speaker 1: and Russia is ready to look at China's peace initiative

140
00:08:21,320 --> 00:08:24,400
Speaker 1: regarding Ukraine. At Baxter is back with us and he's

141
00:08:24,440 --> 00:08:27,840
Speaker 1: got global news. In the nine sixty, newsman San Francisco ed, Yeah,

142
00:08:27,880 --> 00:08:30,040
Speaker 1: thank you, Brian, good to be back. This is President.

143
00:08:30,160 --> 00:08:32,520
Speaker 1: She is in Moscow as part of his three day visit.

144
00:08:32,840 --> 00:08:35,920
Speaker 1: President she's saying China wants to play a constructive role there.

145
00:08:35,920 --> 00:08:38,640
Speaker 1: At Putin and in televised comments, referred to the two

146
00:08:38,720 --> 00:08:42,000
Speaker 1: as dear friends and said he would look at the proposal.

147
00:08:42,040 --> 00:08:44,200
Speaker 1: We know thought you are basing this on principle of

148
00:08:44,280 --> 00:08:48,000
Speaker 1: furnace and upholding the principle of the international law. And

149
00:08:48,200 --> 00:08:52,400
Speaker 1: President She's saying the relationship is important because of historical ties,

150
00:08:52,520 --> 00:08:56,200
Speaker 1: neighbors and two big countries. We're also strategic partners. Such

151
00:08:56,200 --> 00:08:59,280
Speaker 1: a position determines that we have a very close relationship

152
00:08:59,679 --> 00:09:02,840
Speaker 1: now the West is watching at US Secretary of State

153
00:09:02,880 --> 00:09:05,840
Speaker 1: and today b. Lincoln. The fundamental element of any plan

154
00:09:06,160 --> 00:09:08,920
Speaker 1: for any war in Ukraine and producing a justin durable

155
00:09:08,960 --> 00:09:11,880
Speaker 1: piece must be upholding the sovereignty, in chargeable integrity of

156
00:09:12,000 --> 00:09:15,239
Speaker 1: Ukraine in accordance with the United Nations starter and Bloomberg's

157
00:09:15,360 --> 00:09:19,360
Speaker 1: Jinny Schanzano on Bloomberg Sound on Radio says, this represents

158
00:09:19,400 --> 00:09:22,400
Speaker 1: a new day. We see now a new China. China

159
00:09:22,559 --> 00:09:25,520
Speaker 1: is no longer just an economic threat. It is now

160
00:09:25,559 --> 00:09:29,600
Speaker 1: a political threat. It is making itself a negotiator in

161
00:09:29,640 --> 00:09:35,600
Speaker 1: world politics. Let's look at the axis with Iran, Saudi Arabia, Russia, China. Now.

162
00:09:35,640 --> 00:09:39,000
Speaker 1: The timing also illustrates how little regard she holds for

163
00:09:39,160 --> 00:09:43,440
Speaker 1: the ICC arrest warrant for Vladimir Putin. One other thing

164
00:09:43,440 --> 00:09:46,199
Speaker 1: that the West will be watching very closely is whether

165
00:09:46,200 --> 00:09:49,120
Speaker 1: there's any kind of agreement for China to provide weapons

166
00:09:49,160 --> 00:09:53,280
Speaker 1: of lethal force. New York City police officers have erected

167
00:09:53,280 --> 00:09:56,600
Speaker 1: security barricades around the Criminal Court and District Attorney Office

168
00:09:56,720 --> 00:10:01,480
Speaker 1: Marvin Marvin Alvin Bragg's office today. This with Donald Trump

169
00:10:01,600 --> 00:10:04,160
Speaker 1: saying over the weekend that he expects to be arrested

170
00:10:04,160 --> 00:10:07,640
Speaker 1: on Tuesday. He hasn't been indicted yet. An associated press

171
00:10:07,640 --> 00:10:10,880
Speaker 1: says a call for protests have shown well, little signs

172
00:10:10,880 --> 00:10:14,720
Speaker 1: of organization, but there is reaction. Rhonda Santis has been

173
00:10:14,760 --> 00:10:17,680
Speaker 1: asked about it. I don't know what goes into paying

174
00:10:17,800 --> 00:10:22,200
Speaker 1: hist money to a porn star. Yeah, And Lindsey Graham

175
00:10:22,280 --> 00:10:25,959
Speaker 1: says he will help Trump. The Secretary General of the

176
00:10:26,040 --> 00:10:29,040
Speaker 1: United Nations, Antonio gu Terrists is sounding the alarm on

177
00:10:29,120 --> 00:10:32,440
Speaker 1: climate change again. The impetus today is a new report

178
00:10:32,480 --> 00:10:35,679
Speaker 1: from the Governmental panelt on climate change. The rate of

179
00:10:35,720 --> 00:10:38,600
Speaker 1: temperature rise in the last half century is the highest

180
00:10:38,679 --> 00:10:43,199
Speaker 1: in two thousand years. Concentrations of carbon dioxides are at

181
00:10:43,240 --> 00:10:47,040
Speaker 1: their highest at least two million years, and says coal

182
00:10:47,080 --> 00:10:50,880
Speaker 1: mining has to cease, stopping any expansion of existing oil

183
00:10:50,920 --> 00:10:54,080
Speaker 1: and gas reserves, and says the globe is in trouble

184
00:10:54,120 --> 00:10:57,199
Speaker 1: if the major industrial powers do not step up. China's

185
00:10:57,240 --> 00:11:00,560
Speaker 1: aviation regulator is saying investigators are still looking into the

186
00:11:00,559 --> 00:11:03,600
Speaker 1: cause of the crash of the Eastern Airlines flight almost

187
00:11:03,600 --> 00:11:06,200
Speaker 1: a year ago. They say they have over one hundred

188
00:11:06,200 --> 00:11:09,280
Speaker 1: pieces that they are of wreckage that they are looking at.

189
00:11:09,800 --> 00:11:12,600
Speaker 1: Global News powered by more than twenty seven hundred journalists

190
00:11:12,600 --> 00:11:15,960
Speaker 1: and listen over one hundred and twenty countries. In San Francisco,

191
00:11:16,000 --> 00:11:19,160
Speaker 1: I'm at Baxter and this is Bloomberg. I'm Bran Curtis

192
00:11:19,200 --> 00:11:22,160
Speaker 1: along with Rishad Salamat here in Hong Kong. Our guest

193
00:11:22,320 --> 00:11:27,040
Speaker 1: is Nancy Daoud, who is private wealth advisor at Amerprize Financial. Nancy,

194
00:11:27,040 --> 00:11:28,600
Speaker 1: It's a question I've been putting to a lot of

195
00:11:28,600 --> 00:11:31,680
Speaker 1: our guests that investors have been looking at these banking

196
00:11:31,720 --> 00:11:35,040
Speaker 1: issues as kind of a duration liquidity story in a

197
00:11:35,080 --> 00:11:38,760
Speaker 1: management story, not so much a credit story. But as

198
00:11:38,800 --> 00:11:43,000
Speaker 1: time goes on, does it turn into a credit crisis story?

199
00:11:43,240 --> 00:11:49,359
Speaker 1: Your thoughts, well, you know, it's not unreasonable to realize

200
00:11:49,360 --> 00:11:52,160
Speaker 1: that these rate hikes for the past year, the consistent

201
00:11:52,240 --> 00:11:55,240
Speaker 1: rate hikes monthly, would bound to have an adverse effect

202
00:11:55,240 --> 00:12:01,679
Speaker 1: eventually in some unintended consequences perhaps, and we even the

203
00:12:01,720 --> 00:12:05,720
Speaker 1: market has been pricing in an eventual recession all along.

204
00:12:06,679 --> 00:12:09,160
Speaker 1: What's interesting is that the fallout is coming through the

205
00:12:09,280 --> 00:12:13,160
Speaker 1: US banking sector, which is an area that we would

206
00:12:13,160 --> 00:12:17,360
Speaker 1: all assume would benefit the most from the rate hikes.

207
00:12:17,679 --> 00:12:22,079
Speaker 1: But clearly last week's events, you know, for SVB and Signature,

208
00:12:23,520 --> 00:12:26,960
Speaker 1: it was essentially a classic case of borrowing short and

209
00:12:27,160 --> 00:12:31,120
Speaker 1: lending long. What that means is that they took in

210
00:12:31,320 --> 00:12:36,080
Speaker 1: tons of deposits during the pandemic for the short term

211
00:12:36,280 --> 00:12:39,560
Speaker 1: and invested the money in longer term treasuries, and with

212
00:12:39,640 --> 00:12:43,560
Speaker 1: the FED rate hikes that caused a decline in the

213
00:12:43,640 --> 00:12:48,000
Speaker 1: value of those treasuries, and when these investors wanted to

214
00:12:48,040 --> 00:12:51,400
Speaker 1: take their money out to perhaps make more money, there

215
00:12:51,440 --> 00:12:55,920
Speaker 1: was a liquidity problem. So this is really just kind

216
00:12:55,920 --> 00:13:00,400
Speaker 1: of a classic case. And the whole thing was very

217
00:13:00,480 --> 00:13:02,960
Speaker 1: much spurred on by a social It was a social

218
00:13:03,000 --> 00:13:06,400
Speaker 1: media driven bank run. It didn't have to happen so

219
00:13:06,520 --> 00:13:10,320
Speaker 1: quickly and so drastically. It felt like kind of throwing

220
00:13:10,360 --> 00:13:14,600
Speaker 1: the baby out with the bathwater almost at the end

221
00:13:14,640 --> 00:13:17,360
Speaker 1: of the day. Here though, a Nancy, that's you know,

222
00:13:17,440 --> 00:13:19,600
Speaker 1: this is the eternal question, isn't it for banking? How

223
00:13:19,600 --> 00:13:21,880
Speaker 1: can banks ever be safe when they have short term

224
00:13:21,880 --> 00:13:25,360
Speaker 1: liabilities and long dated assets? Right? And you know the

225
00:13:25,760 --> 00:13:28,400
Speaker 1: corollary of that is, you know, if it is engendered

226
00:13:28,440 --> 00:13:31,560
Speaker 1: a banking crisis, when does that as what we have?

227
00:13:31,679 --> 00:13:34,360
Speaker 1: Of course, Brian, they're alluding to a credit crisis, but

228
00:13:34,480 --> 00:13:38,640
Speaker 1: more than that, an economic one. Well, if I mean,

229
00:13:39,280 --> 00:13:41,800
Speaker 1: if every single bank depositor went to the bank and

230
00:13:43,200 --> 00:13:45,840
Speaker 1: withdrew all their money, all of the banks would fail.

231
00:13:45,960 --> 00:13:48,520
Speaker 1: I don't care how big they are, so you know,

232
00:13:49,000 --> 00:13:53,240
Speaker 1: it's it's all a question of taking this a little

233
00:13:53,280 --> 00:13:57,120
Speaker 1: bit more methodically. And yes, it's not a credit issue

234
00:13:57,200 --> 00:13:59,560
Speaker 1: like it was in the two thousand a date recession.

235
00:13:59,640 --> 00:14:03,640
Speaker 1: It's much more of an liquidity issue now. Having said that,

236
00:14:03,800 --> 00:14:09,440
Speaker 1: if this continues, if this panic continues, then yes we

237
00:14:09,480 --> 00:14:12,439
Speaker 1: will have an economic crisis. It will. It will cause

238
00:14:12,520 --> 00:14:16,960
Speaker 1: a great deal more number of banks to fail. But

239
00:14:17,080 --> 00:14:20,880
Speaker 1: I mean, ultimately, these treasuries mature and all we got

240
00:14:20,880 --> 00:14:25,000
Speaker 1: to do is wait. That's true. But if you need

241
00:14:25,000 --> 00:14:28,880
Speaker 1: that money now, you know, you're kind of stuffed because

242
00:14:28,960 --> 00:14:30,720
Speaker 1: you can't sell it, because you have to sell and

243
00:14:30,760 --> 00:14:33,240
Speaker 1: take a huge loss. And that's what happened with Silicon

244
00:14:33,360 --> 00:14:37,080
Speaker 1: Valley Bank. And no strong hands are going to come

245
00:14:37,120 --> 00:14:41,400
Speaker 1: in and buy ten year treasures yielding one percent, you know,

246
00:14:41,480 --> 00:14:43,840
Speaker 1: just to be a nice guy, right, So they would

247
00:14:43,840 --> 00:14:45,760
Speaker 1: have to be marked down otherwise, you know, because you

248
00:14:45,760 --> 00:14:47,600
Speaker 1: can go out and get treasuries now and get you know,

249
00:14:47,720 --> 00:14:52,160
Speaker 1: four percent. So the only entity that could buy those

250
00:14:52,280 --> 00:14:55,280
Speaker 1: or take those securities off of these banks would be

251
00:14:55,720 --> 00:14:59,000
Speaker 1: the FEDS, not the Federal you know, not the government,

252
00:14:59,040 --> 00:15:02,080
Speaker 1: but the Federal Reserve perhaps, And you know, does that

253
00:15:02,160 --> 00:15:04,200
Speaker 1: look like a bailout and there is a sort of

254
00:15:04,200 --> 00:15:09,480
Speaker 1: a stigma against it. Well, I think the FEDS do

255
00:15:09,880 --> 00:15:11,800
Speaker 1: have to do a certain amount of that in order

256
00:15:11,800 --> 00:15:15,920
Speaker 1: to just restore confidence and trust, because the entire banking

257
00:15:15,960 --> 00:15:20,560
Speaker 1: industry could disappear and fail just based on pure panic

258
00:15:20,800 --> 00:15:23,840
Speaker 1: and lack of trust. And we've certainly watched that happen

259
00:15:24,000 --> 00:15:29,239
Speaker 1: very quickly, mainly because of the speed in which information

260
00:15:29,320 --> 00:15:32,480
Speaker 1: gets around, and by the time the third or fourth

261
00:15:32,880 --> 00:15:36,800
Speaker 1: piece of information comes out, it's completely totally a different story.

262
00:15:37,520 --> 00:15:42,120
Speaker 1: So now there are two separate things going on here.

263
00:15:42,160 --> 00:15:44,920
Speaker 1: We've seen the Federal Reserve, you know, they've been raising

264
00:15:45,000 --> 00:15:48,520
Speaker 1: raids to combat inflation, and we think that they will

265
00:15:48,560 --> 00:15:51,520
Speaker 1: continue to do that, and in fact, it's actually a

266
00:15:51,600 --> 00:15:57,400
Speaker 1: welcome We welcome that because the whole idea of zero

267
00:15:57,840 --> 00:16:02,800
Speaker 1: borrowing is just gone. It's over. The FED has to

268
00:16:02,800 --> 00:16:05,680
Speaker 1: win the fight against inflation. That's their number one job,

269
00:16:06,400 --> 00:16:10,720
Speaker 1: so they're the continuation of the FED rate hikes will

270
00:16:10,800 --> 00:16:14,240
Speaker 1: just continue to tighten the money supply and the liquidity,

271
00:16:14,560 --> 00:16:16,960
Speaker 1: so banks have to readjust to that, they have to

272
00:16:17,000 --> 00:16:21,680
Speaker 1: make sure that they have enough deposits on enough liquidity

273
00:16:21,680 --> 00:16:26,040
Speaker 1: on hand to meet the depositor the deposits that Nancy,

274
00:16:26,120 --> 00:16:28,360
Speaker 1: I mean, okay, that brings us nicely to talk about

275
00:16:28,360 --> 00:16:30,480
Speaker 1: the Federal Reserve. Of course, it's in a bit more detail.

276
00:16:30,880 --> 00:16:35,520
Speaker 1: And you know what happens if they pause. That's perhaps

277
00:16:35,560 --> 00:16:37,720
Speaker 1: seen as the line of lease resistance. Right now, if

278
00:16:37,720 --> 00:16:40,840
Speaker 1: they high rates, even twenty five basis points, they're looking

279
00:16:40,840 --> 00:16:44,400
Speaker 1: like they're sort of deaf to the mood music out there,

280
00:16:44,400 --> 00:16:47,480
Speaker 1: given what's happening with the banks. And see if they cut,

281
00:16:47,600 --> 00:16:50,480
Speaker 1: that would be panic. Okay, so that's one part of it.

282
00:16:50,520 --> 00:16:54,440
Speaker 1: And surely pausing would be great because then we're talking

283
00:16:54,480 --> 00:16:58,800
Speaker 1: about credit et cetera. And the tightening perhaps of loan

284
00:16:58,880 --> 00:17:01,080
Speaker 1: restrictions and things like that are going to do the

285
00:17:01,400 --> 00:17:06,480
Speaker 1: offense job for itself. No, I don't think that's I mean,

286
00:17:07,560 --> 00:17:10,120
Speaker 1: that could be true, but I doubt it. I think

287
00:17:10,160 --> 00:17:13,520
Speaker 1: that the Feds need to continue the course that they're

288
00:17:13,560 --> 00:17:18,720
Speaker 1: on in order to combat inflation. And I think there's

289
00:17:18,760 --> 00:17:21,680
Speaker 1: all those are just two set completely separate issues. The

290
00:17:22,480 --> 00:17:27,760
Speaker 1: banking institutions have to rearrange how they keep their deposits

291
00:17:27,800 --> 00:17:32,719
Speaker 1: on hand. Lots of investments, you know, look attract I mean,

292
00:17:32,760 --> 00:17:36,520
Speaker 1: and as the rates go up, the cost of borrowing

293
00:17:36,600 --> 00:17:40,040
Speaker 1: is going to keep going up, and that's they have

294
00:17:40,119 --> 00:17:44,160
Speaker 1: to readjust to that. Other investments will look attractive when

295
00:17:44,200 --> 00:17:47,680
Speaker 1: the cost of money zero, but now that's no longer

296
00:17:47,720 --> 00:17:52,080
Speaker 1: the case. So the Federal Reserve will keep raising the

297
00:17:52,160 --> 00:17:55,119
Speaker 1: rates to tame the inflation. And as rates go higher,

298
00:17:55,160 --> 00:18:01,080
Speaker 1: these unintended consequences will continue to arise. Yeah, these are

299
00:18:01,119 --> 00:18:04,960
Speaker 1: pretty massive unintended consequences. I want to do a mea

300
00:18:05,040 --> 00:18:08,080
Speaker 1: culpa and sort of apologize for getting too far out

301
00:18:08,119 --> 00:18:10,120
Speaker 1: over my skis by saying that a lot of people

302
00:18:10,160 --> 00:18:15,239
Speaker 1: who want the Fed to raise are short markets. I

303
00:18:15,240 --> 00:18:17,400
Speaker 1: think that was probably a step, a step too far,

304
00:18:17,480 --> 00:18:19,600
Speaker 1: because you've made the case. But I think a lot

305
00:18:19,600 --> 00:18:21,639
Speaker 1: of people would disagree with you. There's nothing wrong with

306
00:18:21,720 --> 00:18:28,720
Speaker 1: pausing to see the impact that this possible crisis might have.

307
00:18:29,320 --> 00:18:32,840
Speaker 1: Do you think that pausing would admit defeat in in

308
00:18:32,960 --> 00:18:38,720
Speaker 1: addressing inflation? You know, not necessarily. I just think that

309
00:18:39,040 --> 00:18:42,120
Speaker 1: in my opinion, and we're telling all of our clients

310
00:18:42,160 --> 00:18:43,960
Speaker 1: the same thing, is that this is not a reason

311
00:18:44,040 --> 00:18:47,920
Speaker 1: to panic. This doesn't mean the entire banking system is

312
00:18:47,960 --> 00:18:50,199
Speaker 1: going down. I mean the Feds are stepping in, the

313
00:18:50,240 --> 00:18:53,320
Speaker 1: regulators are doing what they're supposed to be doing, and

314
00:18:53,359 --> 00:18:56,639
Speaker 1: it's part of the business cycle. And why you know,

315
00:18:57,240 --> 00:19:01,960
Speaker 1: having a long term diversion in investment, diversified portfolio matters.

316
00:19:02,800 --> 00:19:05,320
Speaker 1: We're going to get to the other side of this eventually,

317
00:19:05,720 --> 00:19:08,240
Speaker 1: but we have to go through the pain of the

318
00:19:08,280 --> 00:19:13,199
Speaker 1: whole pandemic era where there was money printed and a

319
00:19:13,240 --> 00:19:16,879
Speaker 1: lot of zero cost of borrowing, and now we have

320
00:19:16,920 --> 00:19:20,840
Speaker 1: to get to the pain of fixing all of that

321
00:19:20,960 --> 00:19:24,600
Speaker 1: to get to the other side. And we're getting very

322
00:19:24,640 --> 00:19:27,240
Speaker 1: close to that. So why stop now, I mean, why

323
00:19:27,320 --> 00:19:31,440
Speaker 1: take a pause? Now we're getting close to it. This

324
00:19:31,720 --> 00:19:34,440
Speaker 1: is Bloomberg Daybreak Asia, your morning brief on this story

325
00:19:34,520 --> 00:19:37,840
Speaker 1: is making news from Hong Kong to Singapore and Wall Street.

326
00:19:38,000 --> 00:19:41,199
Speaker 1: Look for us on your podcast feed every day on Apple,

327
00:19:41,400 --> 00:19:44,719
Speaker 1: Spotify and anywhere else you get your podcasts. You can

328
00:19:44,760 --> 00:19:47,520
Speaker 1: also listen live each day on Bloomberg eleven three zero

329
00:19:47,640 --> 00:19:51,240
Speaker 1: in New York, Bloomberg ninety nine one in Washington, Bloomberg

330
00:19:51,240 --> 00:19:54,439
Speaker 1: one oh sixty one in Boston, and Bloomberg nine sixty

331
00:19:54,600 --> 00:19:57,800
Speaker 1: in San Francisco. Our flagship New York station, is also

332
00:19:57,920 --> 00:20:02,400
Speaker 1: available on your Amazon Alexa devices. Just say Alexa play

333
00:20:02,440 --> 00:20:05,600
Speaker 1: Bloomberg eleven thirty plus listen coast to coast on the

334
00:20:05,640 --> 00:20:10,840
Speaker 1: Bloomberg Business app, Sirius XM Channel one nineteen, the iHeartRadio app,

335
00:20:10,960 --> 00:20:14,440
Speaker 1: and on Bloomberg dot Com. I'm Brian Curtis and I'm

336
00:20:14,520 --> 00:20:16,960
Speaker 1: Doug Prisoner. Join us again tomorrow for all the news

337
00:20:16,960 --> 00:20:19,760
Speaker 1: you need to start your day right here on Bloomberg

338
00:20:19,840 --> 00:20:20,560
Speaker 1: day Break Asia