1
00:00:02,440 --> 00:00:05,280
Speaker 1: This is Bloomberg day Break Asia for this Thursday, May

2
00:00:05,320 --> 00:00:08,680
Speaker 1: eleventh in Hong Kong, Wednesday May tenth in New York

3
00:00:08,760 --> 00:00:09,720
Speaker 1: and coming up today.

4
00:00:09,880 --> 00:00:13,560
Speaker 2: US retail inflation moderates in April, giving the Fed room

5
00:00:13,600 --> 00:00:15,560
Speaker 2: to pause in its rate hiking cycle.

6
00:00:15,720 --> 00:00:19,080
Speaker 1: Walt Disney loses streaming subscribers in the latest quarter.

7
00:00:19,280 --> 00:00:24,079
Speaker 2: China names little known government official Liunza as top financial regulator.

8
00:00:24,280 --> 00:00:27,479
Speaker 3: Santos pleads not guilty to thirteen federal counts freed on

9
00:00:27,560 --> 00:00:30,479
Speaker 3: half a million dollars bond debt. Ceiling Side is not

10
00:00:30,560 --> 00:00:34,480
Speaker 3: talking publicly of any progress today. Hong Kong legislators pass

11
00:00:34,560 --> 00:00:38,159
Speaker 3: another step in Beijing's quest for judicial control. I'm at

12
00:00:38,159 --> 00:00:39,360
Speaker 3: Baxter with Global News.

13
00:00:44,120 --> 00:00:47,800
Speaker 4: That's all straight ahead on Bloomberg Daybreak Asia, The business

14
00:00:47,840 --> 00:00:50,279
Speaker 4: news you need to start your day in just one

15
00:00:50,400 --> 00:00:55,320
Speaker 4: fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App,

16
00:00:55,360 --> 00:00:57,320
Speaker 4: and everywhere you get your podcasts.

17
00:01:00,120 --> 00:01:03,240
Speaker 1: Good morning, I'm Doug Chrisner and I'm Brian Curtiz. Here

18
00:01:03,280 --> 00:01:06,840
Speaker 1: are the stories we're following today. Walt Disney reported second

19
00:01:06,880 --> 00:01:10,360
Speaker 1: quarter's sales in profit, in line with Wall Street expectations.

20
00:01:10,680 --> 00:01:14,440
Speaker 1: Disney's direct to consumer segment, which includes its Disney Plus

21
00:01:14,480 --> 00:01:17,479
Speaker 1: streaming service, posted a loss of six hundred and fifty

22
00:01:17,560 --> 00:01:20,520
Speaker 1: nine million dollars, but that was significantly lower than the

23
00:01:20,560 --> 00:01:23,760
Speaker 1: eight hundred and fifty million that analysts had projected. We

24
00:01:23,880 --> 00:01:27,680
Speaker 1: get reaction from Jimmy Lumley, senior analyst at Third Bridge Group.

25
00:01:27,920 --> 00:01:30,440
Speaker 5: Trimming those losses is definitely one of those things which

26
00:01:30,440 --> 00:01:32,840
Speaker 5: Bob Iger is putting at the top of this to

27
00:01:32,880 --> 00:01:35,840
Speaker 5: do list, and certainly I think there is some encouragement

28
00:01:35,880 --> 00:01:37,880
Speaker 5: to be found and that those losses are being trimmed.

29
00:01:37,920 --> 00:01:40,440
Speaker 5: But again, it is a large amount of money which

30
00:01:40,440 --> 00:01:43,640
Speaker 5: is losing, and also coming off the backs of Brothers

31
00:01:43,720 --> 00:01:46,640
Speaker 5: Discovery last week reporting that their streaming business is starting

32
00:01:46,640 --> 00:01:48,960
Speaker 5: to turn around a profit. I think there is ongoing

33
00:01:48,960 --> 00:01:52,440
Speaker 5: pressure to see some slightly more positive results in that segment.

34
00:01:52,480 --> 00:01:55,200
Speaker 1: And just taking a closer look at these earnings, paid

35
00:01:55,240 --> 00:01:58,120
Speaker 1: subscriptions to Disney Plus also filled at one hundred and

36
00:01:58,120 --> 00:02:01,400
Speaker 1: fifty eight point or one hundred fifty seven point eight million.

37
00:02:01,640 --> 00:02:05,360
Speaker 1: Analysts had expected one hundred and sixty three point one million.

38
00:02:05,600 --> 00:02:08,720
Speaker 1: Disney hiked the price of its ad free streaming service

39
00:02:08,800 --> 00:02:12,520
Speaker 1: by thirty eight percent in December, and that may have

40
00:02:12,639 --> 00:02:18,800
Speaker 1: impacted subscriber numbers, and profit at Disney's traditional TV business

41
00:02:18,840 --> 00:02:22,119
Speaker 1: also fell thirty five percent to one point eight three

42
00:02:22,200 --> 00:02:26,040
Speaker 1: billion dollars. It's the result of higher sports programming costs

43
00:02:26,080 --> 00:02:29,320
Speaker 1: and lower advertising and at the moment, Disney shares are

44
00:02:29,400 --> 00:02:32,320
Speaker 1: trading down four point three percent in late trading.

45
00:02:32,480 --> 00:02:35,519
Speaker 2: Well, let's talk a little bit more about US retail inflation.

46
00:02:35,600 --> 00:02:38,639
Speaker 2: We had evidence of moderation in the month of April,

47
00:02:38,680 --> 00:02:41,360
Speaker 2: the government saying that the consumer price index was up

48
00:02:41,400 --> 00:02:44,440
Speaker 2: at a rate of four point nine percent from last year.

49
00:02:44,720 --> 00:02:48,280
Speaker 2: This is the first sub five percent reading in two years.

50
00:02:48,760 --> 00:02:52,720
Speaker 2: Services prices excluding housing and energy also posted the smallest

51
00:02:52,760 --> 00:02:57,120
Speaker 2: advance since last summer. Here's Vincent Reinhardt, chief economist at

52
00:02:57,160 --> 00:02:58,120
Speaker 2: dreyfusen Mellon.

53
00:02:58,520 --> 00:03:03,200
Speaker 6: Inflation is projected to continue to soften. That will be

54
00:03:03,280 --> 00:03:06,679
Speaker 6: good news, but it doesn't change the core problem. There's

55
00:03:06,720 --> 00:03:11,760
Speaker 6: some momentum there. Core question they ask is was today's

56
00:03:11,880 --> 00:03:16,960
Speaker 6: print disqualifying for FED action in June. Make the answers know.

57
00:03:17,320 --> 00:03:20,200
Speaker 2: That is Vince Reinhardt from Dreyfus Melon. By the way,

58
00:03:20,240 --> 00:03:23,880
Speaker 2: today's CPI report will be one of several factors that

59
00:03:23,919 --> 00:03:27,560
Speaker 2: the FED can use in its policymaking decision next month.

60
00:03:27,840 --> 00:03:31,560
Speaker 2: The FED will also receive CPI from May. We'll also

61
00:03:31,680 --> 00:03:34,640
Speaker 2: have the reports on the employment market and the Fed's

62
00:03:34,680 --> 00:03:39,520
Speaker 2: preferred measure for inflation, the Personal Consumption Expenditures Index.

63
00:03:39,920 --> 00:03:42,720
Speaker 1: Well, the rescuer of Silicon Valley Bank has seen a

64
00:03:42,760 --> 00:03:46,960
Speaker 1: big jump in deposits and announced also a very large

65
00:03:47,000 --> 00:03:51,200
Speaker 1: profit on the Silicon Valley Bank acquisition. Let's get this story.

66
00:03:51,360 --> 00:03:53,720
Speaker 1: And by the way, the stock was up seven point

67
00:03:53,840 --> 00:03:56,880
Speaker 1: five percent. Let's get the story from Bloomberg's and Kate's.

68
00:03:57,120 --> 00:03:59,960
Speaker 7: First Citizen says deposits top one hundred and forty billion

69
00:04:00,160 --> 00:04:04,040
Speaker 7: dollars in the first quarter, beating estimates. The SVB acquisition

70
00:04:04,120 --> 00:04:06,720
Speaker 7: added a preliminary gain of almost ten billion dollars to

71
00:04:06,760 --> 00:04:10,280
Speaker 7: First Citizens net income and contributed sixty five million dollars

72
00:04:10,280 --> 00:04:12,640
Speaker 7: in interest income for the first three months of the year.

73
00:04:13,040 --> 00:04:16,000
Speaker 7: The SVB deal, following its collapse in March, vaulted First

74
00:04:16,040 --> 00:04:19,040
Speaker 7: Citizens into the top fifteen US banks. It has brought

75
00:04:19,120 --> 00:04:22,040
Speaker 7: up more than twenty FDIC assisted banks since two thousand

76
00:04:22,080 --> 00:04:25,520
Speaker 7: and nine in Washington and Kates Bloomberg Daybreak Asia and.

77
00:04:25,480 --> 00:04:29,560
Speaker 2: Now to US accounting firms doing business in China. KPMG's

78
00:04:29,560 --> 00:04:33,960
Speaker 2: affiliate in China, as well as PWC's Hong Kong member firm,

79
00:04:34,520 --> 00:04:39,400
Speaker 2: both fell short in vetting their client's accounting or internal controls.

80
00:04:40,080 --> 00:04:43,120
Speaker 2: This was in seven of eight audits from twenty twenty

81
00:04:43,240 --> 00:04:47,520
Speaker 2: reviewed by the US Public Company Accounting Oversight Board. We

82
00:04:47,560 --> 00:04:51,039
Speaker 2: heard from PCAOB chair Erica Williams.

83
00:04:51,440 --> 00:04:54,960
Speaker 8: We did uncover a number of deficiencies and it is

84
00:04:55,000 --> 00:04:57,960
Speaker 8: an opportunity now for US to hoole firms accountable to

85
00:04:58,040 --> 00:05:03,240
Speaker 8: fix those problems. These firms that we inspected covered forty

86
00:05:03,279 --> 00:05:08,279
Speaker 8: percent of the US market share of companies that were

87
00:05:08,480 --> 00:05:11,240
Speaker 8: audited by China and Hong Kong firms.

88
00:05:11,320 --> 00:05:15,400
Speaker 2: That is PCAOB chair Erica Williams. Now the publication of

89
00:05:15,440 --> 00:05:21,960
Speaker 2: the KPMG and CPWC assessments markam milestone for the CAOB.

90
00:05:22,720 --> 00:05:26,479
Speaker 2: These are the first inspection reports the regulator has released

91
00:05:26,480 --> 00:05:29,960
Speaker 2: four China based audit firms in its twenty year history. Now,

92
00:05:30,000 --> 00:05:34,119
Speaker 2: these results do reflect an historic agreement the US audit

93
00:05:34,160 --> 00:05:38,159
Speaker 2: regulator made last year with authorities in Beijing. In the past,

94
00:05:38,560 --> 00:05:42,840
Speaker 2: Beijing has blocked the board from inspecting and investigating Chinese auditors,

95
00:05:42,880 --> 00:05:45,159
Speaker 2: citing national security concerns.

96
00:05:45,440 --> 00:05:48,839
Speaker 1: Right meantime, China has named a little known local government

97
00:05:48,880 --> 00:05:52,159
Speaker 1: official as the nation's top financial regulator. We get the

98
00:05:52,160 --> 00:05:54,840
Speaker 1: story from Bloomberg's Joanne Wong in Hong Kong.

99
00:05:55,160 --> 00:05:58,279
Speaker 9: Former banker Li Junze is being elevated from his latest

100
00:05:58,360 --> 00:06:01,080
Speaker 9: job as a vice governor of sich Profs. He's now

101
00:06:01,120 --> 00:06:04,719
Speaker 9: Party secretary of the newly formed National Financial Supervision and

102
00:06:04,760 --> 00:06:08,359
Speaker 9: Management Bureau. Is considered a surprise move, as a person

103
00:06:08,440 --> 00:06:11,760
Speaker 9: with more experienced was expected. The appointment also stands in

104
00:06:11,800 --> 00:06:15,080
Speaker 9: contrast to leadership changes made in March. At that time,

105
00:06:15,320 --> 00:06:19,720
Speaker 9: Beijing reappointed several top economic officials to provide continuity. Lee's

106
00:06:19,800 --> 00:06:23,760
Speaker 9: role was involved regulating thousands of banks, insurers, and trust firms.

107
00:06:23,920 --> 00:06:26,240
Speaker 9: The appointment comes as an anti graft campaign and the

108
00:06:26,240 --> 00:06:29,000
Speaker 9: Finance in the Street Gathers team in Hong Kong joined

109
00:06:29,040 --> 00:06:30,480
Speaker 9: Wong Bloomberg Day Brigaisia.

110
00:06:31,080 --> 00:06:33,760
Speaker 1: I'm Brian Curtis, along with Doug Chris. Doug, you said

111
00:06:33,760 --> 00:06:36,279
Speaker 1: something in the data check that really got my attention.

112
00:06:36,760 --> 00:06:39,880
Speaker 1: You probably don't know exactly what that is, but I'll

113
00:06:39,920 --> 00:06:41,800
Speaker 1: tell you. It's when you said that the swaps market

114
00:06:42,040 --> 00:06:45,680
Speaker 1: is pricing in more cuts now from the FED as

115
00:06:45,720 --> 00:06:49,080
Speaker 1: a result of the slightly software inflation reading.

116
00:06:49,279 --> 00:06:50,279
Speaker 10: So what does that tell us?

117
00:06:50,400 --> 00:06:53,360
Speaker 1: I think many of us were thinking that the market

118
00:06:53,640 --> 00:06:55,839
Speaker 1: was thinking that the FED would be forced to cut

119
00:06:55,920 --> 00:06:59,200
Speaker 1: rates because of recession, because of bad news. But here

120
00:06:59,279 --> 00:07:03,599
Speaker 1: you get it sign that they're increasing their action on

121
00:07:03,720 --> 00:07:05,840
Speaker 1: cuts or their prediction on cuts.

122
00:07:05,880 --> 00:07:08,680
Speaker 10: Due to inflation falling. I think that's quite interesting.

123
00:07:09,000 --> 00:07:11,240
Speaker 2: Yeah, I think there's some people who are looking for

124
00:07:11,280 --> 00:07:14,520
Speaker 2: a pretty aggressive decline in the radio inflation, and I

125
00:07:14,520 --> 00:07:17,160
Speaker 2: would put on that list the head former head of

126
00:07:17,200 --> 00:07:19,600
Speaker 2: the New York Fed, Bill Dudley. He is saying that

127
00:07:19,600 --> 00:07:22,240
Speaker 2: a pullback in the rise of housing cost will push

128
00:07:22,480 --> 00:07:26,720
Speaker 2: headline US inflation below below three percent by the end

129
00:07:26,800 --> 00:07:30,600
Speaker 2: of this year. He also told us that housing inflation

130
00:07:30,800 --> 00:07:34,280
Speaker 2: is going to come down, obviously pretty dramatically. That's his opinion.

131
00:07:34,320 --> 00:07:36,480
Speaker 2: He is also a Bloomberg opinion columnist.

132
00:07:36,840 --> 00:07:39,160
Speaker 10: Yeah, it's certainly not the opinion of the Fed, end

133
00:07:39,200 --> 00:07:40,120
Speaker 10: of J. Powell.

134
00:07:40,280 --> 00:07:43,120
Speaker 1: But here's one thing I think with this report. The

135
00:07:43,200 --> 00:07:46,760
Speaker 1: narrative may and I stress the word may. The narrative

136
00:07:46,800 --> 00:07:50,120
Speaker 1: may switch to how long the FED stays at these

137
00:07:50,200 --> 00:07:53,280
Speaker 1: levels rather than will it hike in June. And there's

138
00:07:53,360 --> 00:07:56,760
Speaker 1: one other interesting point here about whether or not you

139
00:07:56,800 --> 00:07:59,440
Speaker 1: think the market has done its job. The S and

140
00:07:59,480 --> 00:08:04,080
Speaker 1: P five hundred fell more last year than during Vulgar's.

141
00:08:03,680 --> 00:08:05,440
Speaker 10: Reign when he was crushing inflation.

142
00:08:05,800 --> 00:08:08,320
Speaker 1: So it may be that that twenty seven percent sell

143
00:08:08,320 --> 00:08:11,360
Speaker 1: off we saw last year was enough to discount whatever

144
00:08:11,480 --> 00:08:12,400
Speaker 1: is happening this year.

145
00:08:12,720 --> 00:08:15,200
Speaker 2: And away from the Fed, let's remember there is still

146
00:08:15,240 --> 00:08:18,920
Speaker 2: the likelihood of a great deal additional contraction in credit

147
00:08:19,000 --> 00:08:20,560
Speaker 2: as a result of a lot of the stress that

148
00:08:20,600 --> 00:08:22,560
Speaker 2: we have seen in the regional banking system.

149
00:08:23,040 --> 00:08:24,080
Speaker 10: We probably have to run.

150
00:08:24,080 --> 00:08:26,560
Speaker 1: But I wanted to make one quick point about Lee

151
00:08:26,640 --> 00:08:30,800
Speaker 1: Yun Zup, the new financial regulator. State Media went and

152
00:08:30,840 --> 00:08:33,560
Speaker 1: looked at his old speeches and he was very much

153
00:08:33,559 --> 00:08:37,160
Speaker 1: in the camp that banks need to support economic development

154
00:08:37,800 --> 00:08:40,840
Speaker 1: and prevent financial risks. So that very much fits with

155
00:08:40,960 --> 00:08:45,840
Speaker 1: President She's pushed for common prosperity and China's version of

156
00:08:46,240 --> 00:08:49,920
Speaker 1: socialized capitalism. That's something we'll be taking a closer look

157
00:08:49,960 --> 00:08:51,520
Speaker 1: at later this morning.

158
00:08:51,840 --> 00:08:53,280
Speaker 10: Now it's time for global news.

159
00:08:55,360 --> 00:08:59,160
Speaker 1: US Congressman George Santos has been freed on five hundred

160
00:08:59,240 --> 00:09:02,600
Speaker 1: thousand dollars of bail after pleading not guilty to a

161
00:09:02,679 --> 00:09:06,080
Speaker 1: variety of alleged federal crimes and back to with Global

162
00:09:06,080 --> 00:09:08,280
Speaker 1: News in the nine to sixty News from at San Francisco.

163
00:09:08,920 --> 00:09:12,320
Speaker 3: Yeah, exactly right, Brian thirteen counts, including election fraud, stealing

164
00:09:12,320 --> 00:09:15,840
Speaker 3: from his election campaign, money laundering, wire fraud, making false

165
00:09:15,880 --> 00:09:18,760
Speaker 3: statements to Congress. He has surrendered his passport. It's a

166
00:09:18,760 --> 00:09:22,760
Speaker 3: witch hunt because it makes no sense that in.

167
00:09:22,720 --> 00:09:27,040
Speaker 11: Four months, four months, five months, I'm indicted.

168
00:09:26,800 --> 00:09:28,600
Speaker 3: And he says emotionally he's doing well.

169
00:09:28,640 --> 00:09:30,000
Speaker 8: I'm going to fight my battle.

170
00:09:30,120 --> 00:09:32,480
Speaker 6: I'm going to deliver, I'm going to fight the witch

171
00:09:32,760 --> 00:09:34,680
Speaker 6: I'm going to take care of clearing my name and

172
00:09:34,679 --> 00:09:35,840
Speaker 6: I look forward to doing that.

173
00:09:35,960 --> 00:09:38,240
Speaker 3: As for Congress, there's nothing. Says he has to resign.

174
00:09:38,360 --> 00:09:40,319
Speaker 2: Elections are very tricky and it's up to the people.

175
00:09:40,320 --> 00:09:41,720
Speaker 2: I trust them to decide what's better.

176
00:09:41,920 --> 00:09:44,120
Speaker 3: Yeah, which is what got us here in the first place. Now,

177
00:09:44,120 --> 00:09:47,440
Speaker 3: Bloomberg's Megan Scully says, House Speaker Kevin McCarthy says, if

178
00:09:47,440 --> 00:09:51,360
Speaker 3: Santos is convicted, well, he could ask him to resign.

179
00:09:51,400 --> 00:09:54,800
Speaker 11: But McCarthy needs every vote he can get. Remember, he

180
00:09:54,880 --> 00:09:58,600
Speaker 11: got his budget deal through. He squeaked it through with

181
00:09:58,720 --> 00:10:03,280
Speaker 11: just two additional votes two seventeen to two fifteen. He

182
00:10:03,400 --> 00:10:07,040
Speaker 11: loses Santos and he loses a vote, and that's how

183
00:10:07,040 --> 00:10:08,960
Speaker 11: he sees it right now, McCarthy.

184
00:10:09,120 --> 00:10:11,480
Speaker 10: In America, we'll just fall at the same pattern we

185
00:10:11,520 --> 00:10:11,920
Speaker 10: always have.

186
00:10:12,120 --> 00:10:15,280
Speaker 3: Right if a person is indicted, they're not on committees,

187
00:10:15,320 --> 00:10:15,920
Speaker 3: they have the right.

188
00:10:15,840 --> 00:10:17,840
Speaker 10: To vote, but they have to go to trial.

189
00:10:18,000 --> 00:10:21,000
Speaker 3: And votes are really important. With that ceiling morass that

190
00:10:21,120 --> 00:10:23,679
Speaker 3: is going on right now. As for that, a lot

191
00:10:23,720 --> 00:10:26,959
Speaker 3: of noise around it and how spending cut proposals of

192
00:10:27,040 --> 00:10:30,679
Speaker 3: course floating ahead of friday second meeting, Bloomberg's Jack Fitzpatrick

193
00:10:30,760 --> 00:10:32,600
Speaker 3: says it is hard to know how much work now

194
00:10:32,640 --> 00:10:34,040
Speaker 3: is being done behind the scenes.

195
00:10:34,280 --> 00:10:38,080
Speaker 12: Nobody seems to agree fully on whether those staff level

196
00:10:38,120 --> 00:10:41,240
Speaker 12: conversations are actually about the debt limit. The Republicans came

197
00:10:41,240 --> 00:10:43,040
Speaker 12: out and said we're going to have staff level conversations,

198
00:10:43,080 --> 00:10:45,800
Speaker 12: are going to meet again Friday on the debt limit. Democrats,

199
00:10:45,800 --> 00:10:48,880
Speaker 12: including Senator Schumer, said, well, we're going to talk about

200
00:10:49,000 --> 00:10:52,120
Speaker 12: the budget process and appropriations bills, but we're not going

201
00:10:52,160 --> 00:10:54,760
Speaker 12: to let the Republicans tie those two together.

202
00:10:55,200 --> 00:10:57,800
Speaker 3: Jack says a possible middle road could be for them

203
00:10:57,800 --> 00:10:59,800
Speaker 3: to find an agreement on a path for without making

204
00:10:59,840 --> 00:11:03,040
Speaker 3: it into a debt ceiling bill or possibly folding it

205
00:11:03,080 --> 00:11:05,880
Speaker 3: into another, but whether or not that'll fly at this

206
00:11:06,000 --> 00:11:09,240
Speaker 3: point is not known, and President Biden out of New

207
00:11:09,320 --> 00:11:11,040
Speaker 3: York State with his pitch today.

208
00:11:11,120 --> 00:11:15,000
Speaker 13: According to estimates, the Republican bill would put twenty one

209
00:11:15,160 --> 00:11:20,280
Speaker 13: million people at risk of losing Medicaid, including two point

210
00:11:20,320 --> 00:11:23,200
Speaker 13: three million people here in New York State and seventy

211
00:11:23,200 --> 00:11:25,520
Speaker 13: eight thousand people right here in Westchester County.

212
00:11:25,720 --> 00:11:28,680
Speaker 3: Biden says he's standing firm on not allowing that to happen.

213
00:11:29,080 --> 00:11:32,200
Speaker 3: Hong Kong legislators now have passed the legislation has been

214
00:11:32,480 --> 00:11:35,000
Speaker 3: in the works for a while. To vido foreign lawyers

215
00:11:35,040 --> 00:11:39,319
Speaker 3: from national security cases. It gives the government more control

216
00:11:39,400 --> 00:11:42,560
Speaker 3: over the legal system and puts the Beijing demand into

217
00:11:42,800 --> 00:11:46,880
Speaker 3: Hong Kong's books. And India's election season picks up, Prime

218
00:11:46,920 --> 00:11:50,360
Speaker 3: Minister Narendra Modi has turned his attention to Karnataka, one

219
00:11:50,400 --> 00:11:54,120
Speaker 3: of the India's wealthiest states. Global News powered by more

220
00:11:54,160 --> 00:11:56,920
Speaker 3: than twenty seven hundred journalists and analysts over one hundred

221
00:11:56,960 --> 00:12:01,079
Speaker 3: twenty countries. In San Francisco, Iamed Baxter and this is Bloomberg.

222
00:12:01,640 --> 00:12:04,640
Speaker 1: I'm Brian Curtis, along with Rashad Salamat and we are

223
00:12:04,679 --> 00:12:07,600
Speaker 1: here in our Hong Kong studios welcoming to the show,

224
00:12:07,720 --> 00:12:12,480
Speaker 1: Eric Sterner, CIO of a Pollen Wealth Management. So, Eric,

225
00:12:12,640 --> 00:12:16,040
Speaker 1: does a soft landing work for you given all that

226
00:12:16,080 --> 00:12:17,320
Speaker 1: we learned over the past week.

227
00:12:17,880 --> 00:12:20,160
Speaker 14: Well, first of all, thanks for having me on the show.

228
00:12:20,480 --> 00:12:24,920
Speaker 14: And I would love to say I believe a soft

229
00:12:25,000 --> 00:12:28,080
Speaker 14: landing was in the cards, But I do think we

230
00:12:28,120 --> 00:12:31,800
Speaker 14: are heading towards a recession. I think we have a

231
00:12:31,840 --> 00:12:35,960
Speaker 14: lot of evidence pointing towards that. And just we've seen

232
00:12:36,040 --> 00:12:40,520
Speaker 14: twelve months of the leading economic indicators in negative territory

233
00:12:41,160 --> 00:12:43,480
Speaker 14: and the longest going back to last thirty years, the

234
00:12:43,520 --> 00:12:49,280
Speaker 14: longest stretch we've seen being economic indicators negative without our

235
00:12:49,280 --> 00:12:51,640
Speaker 14: recession has been three months. So here we are twelve

236
00:12:51,640 --> 00:12:55,000
Speaker 14: months into it, and obvioustely plenty of other signs. So

237
00:12:55,000 --> 00:12:57,440
Speaker 14: I do think we are heading towards our recession, probably

238
00:12:57,480 --> 00:12:59,480
Speaker 14: a mile one towards the end of this year.

239
00:13:00,600 --> 00:13:02,600
Speaker 15: Eric, That's something that we're seeing really at the moment

240
00:13:02,600 --> 00:13:04,440
Speaker 15: in the belly of the yield curve?

241
00:13:04,480 --> 00:13:04,960
Speaker 10: Are we not?

242
00:13:05,120 --> 00:13:05,760
Speaker 3: In some senses?

243
00:13:05,800 --> 00:13:07,400
Speaker 15: And you know the short end that we've had a

244
00:13:07,440 --> 00:13:10,080
Speaker 15: lot of a lot of ructions, if you will, with

245
00:13:10,520 --> 00:13:13,160
Speaker 15: not just the debate over the debt seeting, the concerns

246
00:13:13,160 --> 00:13:15,800
Speaker 15: of inflation, that some of those now may abate a

247
00:13:15,840 --> 00:13:18,640
Speaker 15: little bit at least, and not least the prospect of

248
00:13:18,840 --> 00:13:22,120
Speaker 15: the financial termoil and so a shorter end. It's a

249
00:13:22,120 --> 00:13:22,840
Speaker 15: lot of confusion.

250
00:13:23,360 --> 00:13:27,040
Speaker 14: Oh absolutely. I think there's there's a lot of disconnect

251
00:13:27,120 --> 00:13:30,160
Speaker 14: between the Fed, the bomb market, and even the stock market.

252
00:13:30,600 --> 00:13:34,640
Speaker 14: You know, the Fed, you know, whether they hike again

253
00:13:34,720 --> 00:13:38,280
Speaker 14: in June. I only think that's really irrelevant, is what's

254
00:13:38,280 --> 00:13:41,880
Speaker 14: another twenty five basis points. The disconnect is really just

255
00:13:42,080 --> 00:13:44,760
Speaker 14: the FED telling us that they're going to maintain restrictive

256
00:13:44,840 --> 00:13:46,920
Speaker 14: rate levels for the rest of this year, while the

257
00:13:46,920 --> 00:13:50,800
Speaker 14: market's pricing in three cuts. And I love the opinion

258
00:13:50,920 --> 00:13:54,280
Speaker 14: that the Fed is telling us the truth. And you

259
00:13:54,320 --> 00:13:58,400
Speaker 14: know that inflation, while yes, it was welcome news today

260
00:13:58,440 --> 00:14:02,959
Speaker 14: that we saw continued downward trend, it's very slow and

261
00:14:03,280 --> 00:14:06,800
Speaker 14: inflation's remaining sticky and stubborn. I think it's going to

262
00:14:06,880 --> 00:14:10,440
Speaker 14: take all of this year and potentially some of twenty

263
00:14:10,520 --> 00:14:12,880
Speaker 14: twenty four to get it back down to its target level.

264
00:14:13,800 --> 00:14:18,079
Speaker 1: Eric, the inflation scare was caused by probably three extraordinary

265
00:14:18,120 --> 00:14:21,640
Speaker 1: events the Ukraine War, the pandemic, and then the huge

266
00:14:21,680 --> 00:14:26,120
Speaker 1: response to both by monetary and fiscal authorities. This was

267
00:14:26,160 --> 00:14:30,800
Speaker 1: not an organic bout of inflation. Yeah, we saw a

268
00:14:30,800 --> 00:14:33,800
Speaker 1: twenty seven percent sell off in US stocks last year

269
00:14:33,800 --> 00:14:36,760
Speaker 1: and we've had a slow down in growth. Is it

270
00:14:37,000 --> 00:14:39,000
Speaker 1: that far of a stretch to think that you might

271
00:14:39,120 --> 00:14:43,360
Speaker 1: avoid recession because this was not something that took a

272
00:14:43,400 --> 00:14:44,400
Speaker 1: long time in developing.

273
00:14:44,520 --> 00:14:46,360
Speaker 10: It came on fast and it might leave fast.

274
00:14:47,520 --> 00:14:51,280
Speaker 14: Well, yeah, but we still have, you know, plenty of

275
00:14:51,520 --> 00:14:54,760
Speaker 14: cleanup and you know, I'm calling the COVID hangover that

276
00:14:54,800 --> 00:14:57,840
Speaker 14: we're dealing with because you know, we still have imbounds

277
00:14:57,960 --> 00:15:01,680
Speaker 14: new labor markets where the labor participation rate is still

278
00:15:01,760 --> 00:15:05,200
Speaker 14: zero point seven below where it was pre pandemic, and say,

279
00:15:05,200 --> 00:15:08,960
Speaker 14: well what's point seven. That's nearly two million workers in

280
00:15:09,320 --> 00:15:12,960
Speaker 14: the US. And that's what's keeping the labor market tight.

281
00:15:13,160 --> 00:15:15,560
Speaker 14: One of the reasons is keeping it tight and also

282
00:15:16,040 --> 00:15:21,680
Speaker 14: applying pressure to wage growth, and that's feeding into inflation too.

283
00:15:21,840 --> 00:15:24,120
Speaker 14: So I think, you know, we need to get more

284
00:15:24,160 --> 00:15:26,960
Speaker 14: people in our labor force. You know, we saw about

285
00:15:27,000 --> 00:15:32,480
Speaker 14: five hundred thousand re enter the market back in February

286
00:15:32,760 --> 00:15:35,760
Speaker 14: or March. I should say, but in this last rating April,

287
00:15:35,800 --> 00:15:39,480
Speaker 14: we saw it Actually that's stall out. So we're starting

288
00:15:39,480 --> 00:15:41,800
Speaker 14: to see a slow increase. But I think we do

289
00:15:41,880 --> 00:15:45,960
Speaker 14: have some other structural issues that we're dealing with. They're

290
00:15:46,000 --> 00:15:50,320
Speaker 14: continuing to put some upward pressure on inflation in addition

291
00:15:50,440 --> 00:15:54,440
Speaker 14: to all the causes that you mentioned there with the

292
00:15:54,480 --> 00:15:58,400
Speaker 14: pandemic and of course the Ukraine conflict.

293
00:15:58,680 --> 00:16:03,040
Speaker 15: Is this something here, Eric, that would be not that

294
00:16:03,320 --> 00:16:05,400
Speaker 15: different to the Minski moment here, because I mean, what

295
00:16:05,440 --> 00:16:08,960
Speaker 15: we do have is years of free money building up

296
00:16:09,000 --> 00:16:12,040
Speaker 15: asset bubbles, and you know that's never good. And you know,

297
00:16:12,120 --> 00:16:14,800
Speaker 15: got commercial real estate and indeed also you know, just

298
00:16:14,800 --> 00:16:17,360
Speaker 15: real estate generally and looking at markets too, and then

299
00:16:17,760 --> 00:16:21,800
Speaker 15: suddenly you get this shock of prices rising and then

300
00:16:21,880 --> 00:16:26,000
Speaker 15: suddenly also of course the debt servicing costing that much more.

301
00:16:26,120 --> 00:16:28,800
Speaker 10: Oh, you're scaring me, you're scaring Eric.

302
00:16:29,920 --> 00:16:32,080
Speaker 14: Well, well, I've been scared for a while.

303
00:16:32,160 --> 00:16:32,360
Speaker 3: Yeah.

304
00:16:32,440 --> 00:16:35,920
Speaker 14: I think there's a lot to be concerned. There's always

305
00:16:36,000 --> 00:16:38,680
Speaker 14: risks in the market that we have to navigate, but

306
00:16:38,720 --> 00:16:41,960
Speaker 14: I think those risks are mounting now and between what

307
00:16:41,960 --> 00:16:45,840
Speaker 14: we're seeing with the stress and the regional banks, and

308
00:16:47,520 --> 00:16:50,440
Speaker 14: I think, you know, being under these restrictive rate levels.

309
00:16:51,760 --> 00:16:54,760
Speaker 14: I do think we see more downside risk in the markets,

310
00:16:55,440 --> 00:16:58,920
Speaker 14: and I mean, looking right now, we're about to officially

311
00:16:59,040 --> 00:17:02,080
Speaker 14: go into earnings for ession. While the earnings this quarter

312
00:17:02,160 --> 00:17:04,439
Speaker 14: have not nearly been as bad as some as Beard,

313
00:17:04,720 --> 00:17:06,880
Speaker 14: they're still negative for a second quarter in a row,

314
00:17:06,960 --> 00:17:10,359
Speaker 14: and expectations are for negative for earnings in the second

315
00:17:10,440 --> 00:17:14,960
Speaker 14: quarter nearly six percent. And while some annals are predicting

316
00:17:15,600 --> 00:17:17,560
Speaker 14: the seed growth in the third and fourth quarter, I

317
00:17:17,600 --> 00:17:20,160
Speaker 14: think they're also pricing in those rate cuts, which obviously,

318
00:17:20,520 --> 00:17:23,560
Speaker 14: as I mentioned before, I don't believe it's going to happen. Okay,

319
00:17:23,600 --> 00:17:25,520
Speaker 14: I think we are going to see some more earning

320
00:17:25,680 --> 00:17:29,240
Speaker 14: de seriation going into this year until let me let.

321
00:17:29,119 --> 00:17:33,440
Speaker 1: Me out bear you then that because there is another

322
00:17:33,440 --> 00:17:34,800
Speaker 1: way of looking at I think this is a point

323
00:17:34,880 --> 00:17:38,040
Speaker 1: that was made quite cogently thereby Rish, which is that

324
00:17:38,560 --> 00:17:40,960
Speaker 1: you built up a lot of excesses during this long

325
00:17:41,000 --> 00:17:44,159
Speaker 1: period of super low interest rates, and you're going to

326
00:17:44,240 --> 00:17:47,040
Speaker 1: have to rationalize that everybody who borrowed money, you know,

327
00:17:47,080 --> 00:17:50,040
Speaker 1: at zero percent and invested in things, and now they've

328
00:17:50,160 --> 00:17:52,560
Speaker 1: you know, they're kind of the issues are coming home

329
00:17:52,600 --> 00:17:55,040
Speaker 1: to roost. So that that might take three to five

330
00:17:55,119 --> 00:17:59,080
Speaker 1: years to work through the system. You may not have

331
00:17:59,119 --> 00:18:02,520
Speaker 1: an implosion, but a long period of recovering. Are you

332
00:18:03,280 --> 00:18:05,960
Speaker 1: that bearish, I'm not that bearish.

333
00:18:06,480 --> 00:18:11,600
Speaker 14: I think once we get past, you know, get inflation

334
00:18:11,800 --> 00:18:15,679
Speaker 14: back under control. I do think we'll be set up

335
00:18:15,720 --> 00:18:19,000
Speaker 14: for recovery in twenty twenty four that will allow the

336
00:18:19,040 --> 00:18:22,920
Speaker 14: FED to start cutting rates. But no, I'm not bearish

337
00:18:23,119 --> 00:18:25,920
Speaker 14: enough to say this is going to last multiple years.

338
00:18:25,920 --> 00:18:28,159
Speaker 14: I think we'll be set up for recovery at some

339
00:18:28,200 --> 00:18:29,600
Speaker 14: point in twenty twenty four.

340
00:18:31,320 --> 00:18:33,200
Speaker 15: Just very very It's not a nice thing to say

341
00:18:33,200 --> 00:18:36,040
Speaker 15: because it does affect a lot of people. And do

342
00:18:36,119 --> 00:18:39,240
Speaker 15: we need a recession to cleanse the economy?

343
00:18:39,840 --> 00:18:43,800
Speaker 14: Yes, I believe so. I think there's just still a

344
00:18:43,800 --> 00:18:47,600
Speaker 14: lot of excessive demand out there. And again with all

345
00:18:47,600 --> 00:18:51,240
Speaker 14: the stimulus that was paid, it really helped improve consumers

346
00:18:51,640 --> 00:18:54,360
Speaker 14: bound sheets. And that's why we're seeing, you know, the

347
00:18:54,720 --> 00:18:57,720
Speaker 14: excessive demands as people have a lot of money spend

348
00:18:57,720 --> 00:18:59,760
Speaker 14: and they have jobs and I don't keep on spending,

349
00:18:59,800 --> 00:19:02,119
Speaker 14: but I think we're going to need to see your

350
00:19:02,119 --> 00:19:05,600
Speaker 14: recession happen and for that unemployment rate to go up

351
00:19:05,720 --> 00:19:08,800
Speaker 14: in order to dampen that demand and bring more people

352
00:19:08,840 --> 00:19:11,760
Speaker 14: back into the labor morse, and then once all that happens,

353
00:19:11,760 --> 00:19:14,520
Speaker 14: hopefully we'll be set up for a strong, healthier recovery

354
00:19:14,760 --> 00:19:15,160
Speaker 14: next year.

355
00:19:15,240 --> 00:19:15,480
Speaker 13: Yeah.

356
00:19:15,920 --> 00:19:18,720
Speaker 1: Yeah, you're sort of scaring the kids there, Eric. In fact,

357
00:19:18,800 --> 00:19:22,480
Speaker 1: I'm having breakfast here with two scary guys, you and Risch,

358
00:19:22,680 --> 00:19:24,680
Speaker 1: And there's dug Over on the side as well, and

359
00:19:25,359 --> 00:19:27,680
Speaker 1: he generally tends to be verished. Eric, thanks very much

360
00:19:27,680 --> 00:19:30,760
Speaker 1: for joining us, so we appreciated. Eric Sterner, CIO of

361
00:19:30,800 --> 00:19:35,560
Speaker 1: a Pollen Wealth Management. This is Bloomberg Daybreak Asia, your

362
00:19:35,640 --> 00:19:38,400
Speaker 1: morning brief on the story's making news from Hong Kong

363
00:19:38,480 --> 00:19:40,080
Speaker 1: to Singapore and Wall Street.

364
00:19:40,119 --> 00:19:44,119
Speaker 2: Look for us on your podcast feed every day, on Apple, Spotify,

365
00:19:44,400 --> 00:19:46,320
Speaker 2: and anywhere else you get your podcasts.

366
00:19:46,400 --> 00:19:48,960
Speaker 1: You can also listen live each day on Bloomberg eleven

367
00:19:49,000 --> 00:19:51,399
Speaker 1: three to zero in New York, Bloomberg ninety nine to

368
00:19:51,400 --> 00:19:55,000
Speaker 1: one in Washington, Bloomberg one sixty one in Boston, and

369
00:19:55,000 --> 00:19:57,359
Speaker 1: Bloomberg nine sixty in San Francisco.

370
00:19:57,480 --> 00:20:00,320
Speaker 2: Our flagship New York station is also available on your

371
00:20:00,359 --> 00:20:04,960
Speaker 2: Amazon Alexa devices. Just say Alexa play Bloomberg eleven.

372
00:20:04,800 --> 00:20:08,440
Speaker 1: Thirty plus listen coast to coast on the Bloomberg business app,

373
00:20:08,720 --> 00:20:12,919
Speaker 1: Sirius XM Channel one nineteen, the iHeartRadio app, and on

374
00:20:13,000 --> 00:20:14,320
Speaker 1: Bloomberg dot Com.

375
00:20:14,560 --> 00:20:17,680
Speaker 2: I'm Brian Curtis and I'm Doug Krisner. Join us again

376
00:20:17,680 --> 00:20:19,719
Speaker 2: tomorrow for all the news you need to start your

377
00:20:19,800 --> 00:20:22,399
Speaker 2: day right here on Bloomberg Daybreak Asia