WEBVTT - Bonds, ETFs, Ukraine, and Crypto (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:24.560 at Bloomberg dot com slash podcast sixty portfolio. Many of 0:00:24.600 --> 0:00:28.920 us grew up with that six stocks, fixed income to 0:00:28.960 --> 0:00:31.680 fixing income to maybe you know kind of you know, 0:00:31.880 --> 0:00:33.800 even out maybe some of the risk here give you 0:00:33.840 --> 0:00:36.360 some return. But man, that did not work this year 0:00:36.440 --> 0:00:40.440 or is not working this year. It's stocks down, the 0:00:40.560 --> 0:00:45.120 US aggregate, the Bloomberg u S aggregate fixed income total 0:00:45.200 --> 0:00:49.880 return unhedged down sixteen point eight percent. It is ugly 0:00:49.920 --> 0:00:51.960 out there, folks. What are you doing the fixed income biz? 0:00:52.240 --> 0:00:54.960 Let's check in with George Borie, chief Investment Strategies for 0:00:55.160 --> 0:00:58.960 fixed income at all Spring Global Investments. George, you guys 0:00:58.960 --> 0:01:01.240 in fixed income? I mean, does anybody want to talk 0:01:01.280 --> 0:01:03.279 to you guys? A cocktail parties or is it just 0:01:03.360 --> 0:01:07.000 stay away? What do you do? Yeah, good morning, Paul, 0:01:07.080 --> 0:01:09.920 Thanks very much. Yeah, I think as you highlight um 0:01:09.920 --> 0:01:13.319 you know, bond investors don't really set up or sign up, 0:01:13.319 --> 0:01:16.760 i should say, for for double digit mark to market 0:01:16.840 --> 0:01:20.399 losses UH in their portfolio. So it's it's been a 0:01:20.520 --> 0:01:23.560 very very challenging year for fixed income. What we tell 0:01:23.680 --> 0:01:27.120 clients is sort of two things. Number one, you know, 0:01:27.160 --> 0:01:30.920 the bonds they bought, they they actually are performing as advertised. 0:01:30.959 --> 0:01:34.320 They're paying the coupons that they were assigned to do. 0:01:34.640 --> 0:01:37.240 But obviously, you know, sort of two things have happened. 0:01:37.280 --> 0:01:40.360 Prices have gone up, and central banks have moved to 0:01:40.440 --> 0:01:43.760 become much more hawkish. As a result, bond prices, at 0:01:43.840 --> 0:01:47.120 least on a mark to market basis, has gone down 0:01:47.200 --> 0:01:49.760 quite a bit. That's the bad news. The good news 0:01:49.920 --> 0:01:52.720 is is that the yield level, the amount at which 0:01:52.760 --> 0:01:57.040 we can invest today is actually very attractive relative to 0:01:57.120 --> 0:02:01.120 history and certainly relative to the current kind of basket 0:02:01.160 --> 0:02:04.160 or risks we're looking at today. So a ten year 0:02:04.240 --> 0:02:08.959 treasury yields about four percent from one percent last year, 0:02:09.360 --> 0:02:13.600 a basket of investment grade bonds yields six, and a 0:02:13.680 --> 0:02:17.520 basket of say high yield bonds yields about ten. And 0:02:17.560 --> 0:02:20.720 it's the power of compounding. If you can reinvest your 0:02:20.720 --> 0:02:24.960 money today. At those yields, your forward looking returns are 0:02:24.960 --> 0:02:29.200 gonna look very compelling and they'll help you clawback some 0:02:29.320 --> 0:02:32.880 of those mark to market losses. They're not realized until 0:02:32.919 --> 0:02:35.359 you sell the bonds. Well, George, to your point that 0:02:35.440 --> 0:02:36.920 you know, if you look at a ten year treasury 0:02:37.000 --> 0:02:39.440 right now yielding about four percent, if you look at 0:02:39.480 --> 0:02:42.720 a three month T bill, uh, it's yielding about the same, 0:02:42.760 --> 0:02:46.400 if not more so. In that environment, you just go 0:02:46.520 --> 0:02:49.840 to the shortest thing possible. If the yield lever levels 0:02:49.840 --> 0:02:54.000 are about the same or are you looking at duration here? Well, 0:02:54.040 --> 0:02:56.600 in the short term, uh, you know, going for that 0:02:56.639 --> 0:02:59.080 sort of one year T bill at at roughly four 0:02:59.240 --> 0:03:01.880 to four and a quarter percent, that's not a bad idea. 0:03:01.960 --> 0:03:05.240 It's a good safe place to park money. It will 0:03:05.400 --> 0:03:08.280 sort of generate that yield for the next year. But 0:03:08.639 --> 0:03:11.600 if you're looking a little bit further out, inflation is 0:03:11.760 --> 0:03:15.000 unlikely to stay at these elevated levels. The central banks 0:03:15.120 --> 0:03:19.160 moving aggressively to get inflation down, and and the important 0:03:19.200 --> 0:03:22.519 thing to remember is the FED as very very powerful tools. 0:03:22.639 --> 0:03:25.080 They will get what they want, but it may take 0:03:25.200 --> 0:03:29.160 some time. So if you're looking say five, ten or 0:03:29.240 --> 0:03:31.880 even thirty years out, and some people do look that 0:03:31.960 --> 0:03:36.440 far out. Then that longer duration trade, locking in, say 0:03:36.560 --> 0:03:40.320 ford to four and a quarter percent yield today may 0:03:40.360 --> 0:03:43.839 look very nice five years out, and so we are 0:03:43.960 --> 0:03:47.160 adding some of that duration. We are looking further out 0:03:47.200 --> 0:03:51.240 the curve to lock in those longer term yields because 0:03:51.280 --> 0:03:54.880 we think inflation will come down and yields will start 0:03:54.920 --> 0:03:58.000 to come down as we sort of move beyond this 0:03:58.000 --> 0:04:02.360 this spike in inflation. George, what's your call there and 0:04:02.440 --> 0:04:05.400 all spring about this Federal reserve? It seems like seventy 0:04:05.440 --> 0:04:07.520 five basis points is baked in for the next meeting 0:04:08.040 --> 0:04:10.760 after that? How do you think the Federal Reserve will 0:04:11.200 --> 0:04:13.640 you know, kind of play Yeah, that's that's that's a 0:04:13.760 --> 0:04:16.520 that's a great, great question, Paul. You know, most people, 0:04:16.600 --> 0:04:19.599 many people expect the Fed to raise rates another seventy 0:04:19.640 --> 0:04:22.560 five basis points. Uh. And the real question is it 0:04:22.640 --> 0:04:24.200 sort of where are we at the end of the year. 0:04:24.240 --> 0:04:26.240 They have two more meetings before now in the end 0:04:26.279 --> 0:04:29.599 of the year, and then importantly, most investors are looking 0:04:29.680 --> 0:04:32.120 into next year. The market sort of wants to get 0:04:32.120 --> 0:04:36.320 a sense of where the terminal rate, where will rates peak? 0:04:36.920 --> 0:04:39.440 Right now, our view is that the Fed has been 0:04:39.560 --> 0:04:42.280 very clear they want to get rates up to about 0:04:42.320 --> 0:04:46.240 four and a half percent. They've recently reinforced that message, 0:04:46.520 --> 0:04:48.720 and so you know, some folks in the market we're 0:04:48.760 --> 0:04:51.279 expecting higher than that. We are not. We think we 0:04:51.400 --> 0:04:53.320 get to sort of four and a half percent by 0:04:53.360 --> 0:04:56.120 the end of the year, that would be another seventy 0:04:55.600 --> 0:04:59.559 five in November, but then start to decelerate that pace. 0:05:00.680 --> 0:05:04.520 That should allow them sometime and perhaps a little bit 0:05:04.520 --> 0:05:07.359 of patients to be able to sort of start to 0:05:07.560 --> 0:05:11.200 slow their rate of pace of of of rate, their 0:05:11.240 --> 0:05:14.120 pace of rate tightening. So four and a half percent 0:05:14.160 --> 0:05:16.160 as our target for the end of the year, we 0:05:16.240 --> 0:05:19.640 think they'll likely sit there for an extended period of time. 0:05:19.720 --> 0:05:23.200 That could be six months, nine months, perhaps even a year. 0:05:23.279 --> 0:05:26.599 It really depends on how inflation behaves and how the 0:05:26.640 --> 0:05:31.120 economy behaves. But the expectation for sort of this ongoing 0:05:31.320 --> 0:05:34.440 rapid fire kind of increase, we think it is getting 0:05:34.480 --> 0:05:37.440 a bit overblown, and we think the Fed actually is 0:05:37.480 --> 0:05:41.400 starting to gain some room to sort of slow that pace, 0:05:41.680 --> 0:05:45.560 but then allow markets and allow the economy to adjust 0:05:45.960 --> 0:05:49.679 as those higher rates take hold. All right, George, great stuff. 0:05:49.720 --> 0:05:55.040 Really appreciate getting your informed perspective on all things fixed income. Again, 0:05:55.080 --> 0:06:00.200 a brutal, brutal start to the year two returns like 0:06:00.440 --> 0:06:03.120 the fixed and gum world has never seen, is what 0:06:03.200 --> 0:06:06.839 I have been told. George Borie, chief investment strategist for 0:06:06.880 --> 0:06:13.640 fixed income at Offspring Global Investments. I want to get 0:06:13.720 --> 0:06:16.719 right to our next guest, the Conversation of the Morning. 0:06:16.800 --> 0:06:20.120 James Travitis, retired Admiral U S. Navy is in the 0:06:20.200 --> 0:06:22.839 Navy for like thirty seven years, fifteenth commander of the 0:06:22.880 --> 0:06:27.400 US European Command and NATO's sixteenth Supreme Allied Commander in Europe. 0:06:27.440 --> 0:06:29.880 But I know the highlight of his career is that 0:06:29.920 --> 0:06:33.040 he is a Bloomberg opinion columnist, which means he has 0:06:33.120 --> 0:06:36.560 to speak with us here at Bloomberg Radio. Admiral, thank 0:06:36.600 --> 0:06:37.960 you so much for taking the time out of your 0:06:38.000 --> 0:06:41.800 busy schedule so many places ago. But let's start with Ukraine. 0:06:41.960 --> 0:06:45.040 If I were to war game this out from this point, 0:06:46.000 --> 0:06:48.120 how would it go? I just don't know how the 0:06:48.160 --> 0:06:51.200 same places out there's spent so many mistakes by Mr Poutin, 0:06:51.279 --> 0:06:54.240 I just don't know where he goes from here. Well, 0:06:54.279 --> 0:06:58.000 I'll start with three little words, which are I don't know. 0:06:58.360 --> 0:07:03.160 Nobody does. UM. War is unpredictable, but I'll give you 0:07:03.240 --> 0:07:07.120 my estimate, having watched it closely, having been the NATO commander, 0:07:07.240 --> 0:07:11.000 having visited Ukraine many many times. UM, these are very 0:07:11.080 --> 0:07:13.840 tough people on both sides of that firing line. By 0:07:13.880 --> 0:07:17.400 the way, both Russians and Ukrainians, UM, So don't look 0:07:17.440 --> 0:07:22.240 for any sudden give out of either party here. So 0:07:22.360 --> 0:07:26.320 here's what I think will happen over the coming weeks. 0:07:27.280 --> 0:07:30.600 There is going to be a significant attack on the 0:07:30.640 --> 0:07:35.520 city of Harsan, which is a major uh Ukrainian city. 0:07:35.560 --> 0:07:40.120 It's the gateway to Crimea, and that will be where 0:07:40.200 --> 0:07:45.080 I would focus investors, analysts watch what happens in here soon. 0:07:45.600 --> 0:07:50.240 If the Ukrainians really run the table, push the Russians out, 0:07:50.240 --> 0:07:53.600 they're gonna have strong momentum. On the other hand, if 0:07:53.600 --> 0:07:57.200 the Russians can bob down the Ukrainian advance, that will 0:07:57.240 --> 0:08:00.360 also tell us something. So all of that all will 0:08:00.400 --> 0:08:03.640 play itself out over the next month or so. Then 0:08:03.640 --> 0:08:05.559 we're going to be deep in the guts of winter, 0:08:06.120 --> 0:08:09.760 and hopefully as we come out of winter, both sides 0:08:09.800 --> 0:08:13.120 will have been exhausted and be prepared to at least 0:08:13.200 --> 0:08:15.840 begin a negotiations so we can start to find a 0:08:15.840 --> 0:08:19.320 way out of this situation. Well, in the guts of winter, 0:08:19.400 --> 0:08:22.360 I want to talk about the dollar and sense of 0:08:22.560 --> 0:08:24.960 what war actually costs, because you know, there's a story 0:08:25.000 --> 0:08:28.280 on the terminal today, uh the Ukrainian president saying that 0:08:28.320 --> 0:08:33.360 his government needs seventeen billion dollars in immediate financing. That's immediate, 0:08:33.920 --> 0:08:35.960 Whereas you have the EU on the other side saying 0:08:35.960 --> 0:08:38.960 that the EU is going to develop funding around eighteen 0:08:39.000 --> 0:08:44.640 billion euros just under eighteen billion dollars for next years. 0:08:44.679 --> 0:08:47.760 So there's a real mismatch here. And I'd love to 0:08:47.800 --> 0:08:49.640 hear your thoughts on whether or not you're worried that 0:08:49.679 --> 0:08:53.120 the political will to fund Ukraine might fade as we 0:08:53.240 --> 0:08:57.400 got into those winter months. I think the political will 0:08:57.679 --> 0:09:02.040 will remain, but it's going to be more of a negotiation, 0:09:02.400 --> 0:09:06.400 not a simple Ukraine says we need X, and we 0:09:06.559 --> 0:09:09.960 hand them x. Um. I think it's gonna be more 0:09:10.040 --> 0:09:13.640 a situation of Ukraine says we need X and we're 0:09:13.640 --> 0:09:17.880 gonna say X. Sounds like a lot. How about why 0:09:18.280 --> 0:09:23.000 plus some longer term Z and maybe some additional A, 0:09:23.240 --> 0:09:26.280 B and C in terms of weapons. So you know, 0:09:26.480 --> 0:09:29.160 we talk a lot in private equity. I'm the vice 0:09:29.240 --> 0:09:31.280 chairman of the Carlisle Group. We talk a lot about 0:09:31.360 --> 0:09:34.959 burn rates and on putin side, the burn rate is 0:09:35.000 --> 0:09:39.120 pretty clear. It's the killed in action, the equipment destroyed. 0:09:39.559 --> 0:09:42.040 He is a very high burn rate. The burn rate 0:09:42.080 --> 0:09:45.040 on the Ukrainians is what you just put your finger on, Katie. 0:09:45.120 --> 0:09:49.200 It's the patients, the resources, the dollars, the Euros, the 0:09:49.200 --> 0:09:52.240 weapons of the West. I think that tap is not 0:09:52.280 --> 0:09:54.640 going to be suddenly shut off, but I think it's 0:09:54.679 --> 0:09:57.760 going to be more of a negotiation between the Ukrainians 0:09:57.800 --> 0:10:00.520 and the West. Point forward, add I want to take 0:10:00.520 --> 0:10:03.040 you to the other side of the globe to China. 0:10:04.280 --> 0:10:07.319 They just finish up their party congress and the strengthened 0:10:07.559 --> 0:10:12.439 g and potentially presenting much more risk to the global 0:10:13.200 --> 0:10:16.400 environment here. How do you What are your takeaways from 0:10:16.520 --> 0:10:20.160 what we've learned about China over the last couple of weeks. Well, 0:10:20.240 --> 0:10:24.760 first and foremost, we've seen, as you point out correctly, Paul, 0:10:24.920 --> 0:10:29.599 we've seen the emergence of g as a as a 0:10:30.400 --> 0:10:34.240 pantheon leader in China. He's now up there with Mao 0:10:34.320 --> 0:10:37.280 and Dan, and he is someone who is going to 0:10:37.320 --> 0:10:39.040 be with us for a while. He appears to be 0:10:39.160 --> 0:10:44.280 very healthy's late sixties, early seventies. He is in complete control. 0:10:44.320 --> 0:10:46.800 And if you doubt me at all, go back and 0:10:46.840 --> 0:10:51.600 review the video of the previous leader who Jentao, being 0:10:51.800 --> 0:10:55.079 dragged out. It looks like a scene from George Orwell. 0:10:55.640 --> 0:11:00.280 So clearly she is in full charge of I know. 0:11:00.559 --> 0:11:03.480 I'll give you two things to focus on as investors. 0:11:04.000 --> 0:11:07.559 One is he has remained adamant that he will continue 0:11:07.640 --> 0:11:12.080 this zero COVID policy that has real implications for the 0:11:12.160 --> 0:11:15.800 Chinese economy obviously, which then has a knock on effect globally. 0:11:16.240 --> 0:11:19.680 Watched to see if now that he's installed and is 0:11:19.720 --> 0:11:23.000 in full control, might he be willing to crack open 0:11:23.040 --> 0:11:27.280 that COVID policy a little bit. And secondly, Taiwan. In 0:11:27.400 --> 0:11:31.160 his speeches as part of this twentieth Party Congress where 0:11:31.160 --> 0:11:35.440 he was just appointed, he talked quite aggressively about the 0:11:35.600 --> 0:11:40.400 long term play on Taiwan. But my takeaway is don't 0:11:40.440 --> 0:11:43.079 look for a military move there for the next three 0:11:43.120 --> 0:11:45.920 to five years. He's not ready to go there. He's 0:11:45.960 --> 0:11:50.520 watching the debacle in the Ukraine. He has uncertainties and 0:11:50.640 --> 0:11:54.280 doubts about his own military about the Taiwanese. So I 0:11:54.320 --> 0:11:57.400 think that those two are going to be indicators to 0:11:57.440 --> 0:12:00.280 watch over the next few weeks. I've I want to 0:12:00.280 --> 0:12:03.280 talk about a Bloomberg opinion column you wrote last week, 0:12:03.320 --> 0:12:06.320 the headline of which is NATO's nuclear drills are a 0:12:06.480 --> 0:12:09.560 risk worth taking. Of course, you're talking about the round 0:12:09.559 --> 0:12:13.880 of exercises that started from NATO and Western Europe last week. 0:12:14.559 --> 0:12:17.880 As you point out, it's a pretty fraught time in 0:12:18.080 --> 0:12:22.200 Russian relations, to say the least. But talk me through 0:12:22.240 --> 0:12:26.520 that argument and whether we should expect more of these drills. Sure, 0:12:27.000 --> 0:12:31.480 let's start with the predicate that Russia has been rattling 0:12:31.559 --> 0:12:36.440 the nuclear saber almost continuously since this war began. So 0:12:37.240 --> 0:12:40.400 NATO every year, Katie and I commanded these drills. As 0:12:40.440 --> 0:12:46.400 Supreme Allied Commander, NATO every year exercises its nuclear capabilities. 0:12:46.440 --> 0:12:52.079 It's very routine. Um, it involves half of the NATO nations, 0:12:53.000 --> 0:12:56.640 it's confined hundreds and hundreds of miles from the Russian 0:12:56.640 --> 0:13:01.120 border out in Western Europe. Um. And it's it's a routine, 0:13:01.240 --> 0:13:05.560 business as usual exercise. I fear that if NATO were 0:13:05.600 --> 0:13:09.960 to say, oh, we're really concerned about Russian nuclear threats, 0:13:09.960 --> 0:13:14.280 so we just won't exercise our capability. I think that 0:13:14.320 --> 0:13:17.600 sends exactly the wrong signal to putin. It shows that 0:13:17.640 --> 0:13:20.079 we're going to back down in the face of his threats, 0:13:20.400 --> 0:13:22.840 and he'll begin to think, well, maybe they don't really 0:13:22.920 --> 0:13:27.040 have that kind of capability to counter. So, yes, you're right, 0:13:27.200 --> 0:13:30.199 it's a fraud. Time you've got to think it through. 0:13:30.240 --> 0:13:32.880 But on this one, I come down on this side 0:13:32.880 --> 0:13:36.000 of conducting those exercises, which are in fact in progress 0:13:36.080 --> 0:13:38.439 right now. All right, Ada, Well, thank you so much 0:13:38.480 --> 0:13:40.600 for joining us. We really appreciate your time and your 0:13:40.720 --> 0:13:46.640 informed perspective on these global geopolitical issues facing the world, 0:13:46.640 --> 0:13:50.880 facing markets, facing investors. James Travita's Admiral, United States Navy. 0:13:51.440 --> 0:13:53.600 He was with the Navy for thirty seven years, fifteenth 0:13:53.600 --> 0:13:57.400 Commander of the US European Command and NATO's sixteen Supreme 0:13:57.440 --> 0:14:00.800 Allied Commander. He is a Vice chairman Global Affairs at 0:14:00.800 --> 0:14:04.720 Carlisle Group and he is a Bloomberg opinion columnists, So 0:14:04.760 --> 0:14:08.040 he is a a busy individual. We appreciate getting perspective 0:14:08.080 --> 0:14:11.720 on some of these bigger issues here. On terms of geopolitics, 0:14:11.720 --> 0:14:14.520 We've got Ukraine, we've got China, lots of areas of 0:14:14.640 --> 0:14:20.120 concern out there, still the thick of earning season for 0:14:20.240 --> 0:14:22.280 the global banks. Last week we had a lot of 0:14:22.280 --> 0:14:24.680 the US names. Now we're starting to get some of 0:14:24.720 --> 0:14:28.560 the European names. UBS, for example, which is one of 0:14:28.600 --> 0:14:31.200 the many firms I can say I once worked at 0:14:31.280 --> 0:14:33.240 because they were I used to work at painting weeb 0:14:33.320 --> 0:14:36.000 which is now part of UBS. There's probably not many 0:14:36.040 --> 0:14:38.880 financial institutions that aren't part of where I used to work, 0:14:38.920 --> 0:14:42.320 for whatever that's worth. But UBS beat some some numbers today. Uh, 0:14:42.320 --> 0:14:44.640 stock up a little bit. Alison Williams, she's been covering 0:14:44.920 --> 0:14:48.360 bank stocks for decades on Wall Street. She's actually one 0:14:48.360 --> 0:14:51.480 of the leading voices out there. So Allison, um, what 0:14:51.520 --> 0:14:53.600 are you seeing from some of the European banks? Because 0:14:53.760 --> 0:14:56.320 I guess my theme has just been I'm not sure 0:14:56.320 --> 0:14:59.400 how they compete in the global banking business. But what 0:14:59.440 --> 0:15:03.560 are you seeing with quartally numbers? So for UBS, I 0:15:03.560 --> 0:15:05.920 mean there are a few key positives. I think you know, 0:15:06.120 --> 0:15:10.600 the stock is really reacting to trends in the wealth business. Um, 0:15:10.640 --> 0:15:13.440 so they're more focused on that business. They had nineteen 0:15:13.600 --> 0:15:17.080 excuse me, seventeen billion of wealth inflows a couple of 0:15:17.120 --> 0:15:21.440 billion as well in asset management, and so given UM 0:15:21.480 --> 0:15:24.320 sort of the tough environment in Asia, we think that's 0:15:24.360 --> 0:15:27.880 impressive and we think that is an indicator that their 0:15:28.000 --> 0:15:31.120 their business health is strong going forward despite the fact 0:15:31.160 --> 0:15:34.520 that we have some cyclical pressure in Asia on the 0:15:34.600 --> 0:15:38.880 capital front, capital ratio much bigger than expected UM, so 0:15:39.000 --> 0:15:42.680 investors I think are looking for UM that capital to 0:15:42.720 --> 0:15:45.960 be returned, so that's exciting. They did up upside their 0:15:46.000 --> 0:15:48.160 buy back to five point five billion, but that was 0:15:48.640 --> 0:15:51.760 had been sort of signaled. And then over to UM 0:15:51.800 --> 0:15:54.560 the investment bank that we always like to talk about 0:15:54.680 --> 0:15:58.640 fixed income treading up over sixty so that's a small 0:15:58.680 --> 0:16:01.880 business for them. UM but did very well. They had 0:16:01.880 --> 0:16:06.400 a record quarter and sort of derivatives on UH currencies 0:16:06.440 --> 0:16:08.920 and rates, which is where we're seeing all the strength. 0:16:09.640 --> 0:16:13.200 On the negative side of things, equity trading worse than expected, 0:16:13.320 --> 0:16:15.440 so that's more negative for them because that's a bigger 0:16:15.480 --> 0:16:19.080 part of their business and those fees UM, like we've 0:16:19.120 --> 0:16:22.800 seen at the bank's All quarter week. The one thing 0:16:22.880 --> 0:16:25.960 that the one place where UBS is benefiting and they 0:16:26.000 --> 0:16:29.040 are competing Asia Asia. I p o s have been 0:16:29.240 --> 0:16:31.960 sort of the soul UM Bright spot in the I 0:16:32.080 --> 0:16:35.040 p O market and ubs getting some benefit from that. 0:16:35.080 --> 0:16:36.800 Their fees were stilled down, but they did get some 0:16:36.880 --> 0:16:39.760 benefit there. And so also I want to go back 0:16:39.800 --> 0:16:43.600 to last week and to US bank earnings because this 0:16:43.640 --> 0:16:45.880 isn't a space I follow too closely, but I do 0:16:45.960 --> 0:16:48.680 at least four times a year, and what stuck out 0:16:48.720 --> 0:16:53.400 to me was the fact that net interest income absolutely 0:16:53.840 --> 0:16:56.960 on fire. Bloomberg's Lisa for Home It's had a great 0:16:56.960 --> 0:16:59.920 tweet which really have been thinking about since that if 0:17:00.000 --> 0:17:03.640 you think about the pressure on the big banks to 0:17:03.960 --> 0:17:08.119 pass on the higher interest rates to consumers hasn't really 0:17:08.200 --> 0:17:10.560 amounted it much last week. I know that the big 0:17:10.560 --> 0:17:13.119 banks CEO is one in front of Congress in the 0:17:13.160 --> 0:17:15.760 past month or so and said that they would do that. 0:17:15.920 --> 0:17:18.520 Hasn't seemed to happen yet. When would you expect to 0:17:18.520 --> 0:17:23.400 see that? So they're passing it on in specific products 0:17:23.400 --> 0:17:27.960 and businesses. So, for example, UM, the wealth business is 0:17:28.000 --> 0:17:32.080 an area where they are passing on those increases. UM. 0:17:32.119 --> 0:17:37.000 Other areas include the commercial banking business. So you are 0:17:37.040 --> 0:17:40.600 seeing it UM in some areas. But you know, keep 0:17:40.640 --> 0:17:44.360 in mind there's been a lot of changes, including overdraft 0:17:44.440 --> 0:17:48.200 in the for the US banks UM, where UM they've 0:17:48.280 --> 0:17:51.439 largely eliminated those fees. So in a way that's giving 0:17:51.480 --> 0:17:57.640 the customers some some economics, though not necessarily interest rates. UM. 0:17:57.720 --> 0:18:01.119 But I would say that in general, all the costs 0:18:01.119 --> 0:18:05.040 on those sort of smaller accounts continue to be low. 0:18:05.160 --> 0:18:08.000 Keep in mind, we're coming from like an incredibly low 0:18:08.080 --> 0:18:11.520 interest rate environment UM. And so I think, as you know, 0:18:11.560 --> 0:18:15.320 things are normalizing a bit there. UBS did see some 0:18:15.400 --> 0:18:18.240 benefit from the net interest income line, similar to the 0:18:18.280 --> 0:18:22.080 US banks, where the fourth quarter is going up and 0:18:23.200 --> 0:18:27.239 UM looks to be higher. So also we're gonna hear 0:18:27.240 --> 0:18:30.800 from Deutsche Bank, I guess tomorrow. I mean this is 0:18:31.160 --> 0:18:33.719 way back in a decades ago I wrote a paper saying, 0:18:33.760 --> 0:18:36.000 you know, predicting some of the big big who are 0:18:36.000 --> 0:18:38.000 going to be the leaders and financial services. You know, 0:18:38.359 --> 0:18:40.439 in the twenty one century. Deutsch Bank was one of 0:18:40.480 --> 0:18:43.360 my names, but it hasn't worked out that way. What 0:18:43.400 --> 0:18:46.919 do we do with Deutsche Bank? What does Germany do 0:18:47.200 --> 0:18:50.000 with Deutsche Bank. You have to have a strong Deutsche Bank, 0:18:50.040 --> 0:18:54.480 don't you. They are um executing on their strategy and 0:18:54.520 --> 0:18:58.159 they do have strength in those German markets and in Europe, 0:18:58.280 --> 0:19:02.000 and you know, they're big restructuring which took place, or 0:19:02.040 --> 0:19:04.760 I guess their last restructuring took place, because there were many, 0:19:04.800 --> 0:19:08.000 many years of restructuring. But you know, in nineteen they 0:19:08.000 --> 0:19:10.280 made the tough decision to get out of equities for 0:19:10.320 --> 0:19:14.119 the most part focused on fixed income trading. UM. It 0:19:14.160 --> 0:19:17.200 took a couple of quarters, a couple of years maybe 0:19:17.200 --> 0:19:20.480 even for that business to stabilize, but that business is 0:19:20.520 --> 0:19:24.720 really um what's doing well this year. They also have 0:19:24.800 --> 0:19:28.000 been hurt by the lower interest rates. Um. You know, 0:19:28.119 --> 0:19:31.080 we we've had low interest rates in the US, but UM, 0:19:31.160 --> 0:19:33.960 Europe I think has it's been even tougher. And so 0:19:34.119 --> 0:19:36.480 Deutsche Bank. What you know, the read across are joint 0:19:36.600 --> 0:19:39.159 bank is very positive from the fixed income trading that 0:19:39.200 --> 0:19:41.840 we've seen at these banks. So we're going to expect 0:19:41.880 --> 0:19:43.920 them to get the benefit from that as well as 0:19:43.960 --> 0:19:48.359 from higher rates when they report tomorrow. And Allison, we're 0:19:48.880 --> 0:19:50.720 we've said good bye to the US banks in terms 0:19:50.760 --> 0:19:53.879 of reporting, we're getting through the European banks. What has 0:19:53.920 --> 0:19:58.080 been the biggest stand out to you thus far? I mean, 0:19:58.080 --> 0:20:01.120 the biggest driver has been the net interest income. I mean, 0:20:01.280 --> 0:20:05.840 the growth is just super strong upside to the fourth quarter. 0:20:06.480 --> 0:20:08.280 You know, banks are sort of varied in terms of 0:20:08.280 --> 0:20:13.960 their caution or their optimism with regard to and then 0:20:14.000 --> 0:20:17.119 I also thought that the most interesting data point on 0:20:17.160 --> 0:20:20.440 the credit front because that's I think an area where 0:20:20.480 --> 0:20:23.719 most investors are very uncertain about next year. But Jamie 0:20:23.760 --> 0:20:27.919 diamond saying that five to six unemployment is about you know, 0:20:27.960 --> 0:20:30.600 a couple of quarters of building reserves a six billion, 0:20:31.040 --> 0:20:35.080 So giving that context, because the last cycle we had 0:20:35.119 --> 0:20:38.440 was the pandemic, where it was over twenty billion UM, 0:20:38.560 --> 0:20:40.760 next year's estimate is one billion, so I think kind 0:20:40.760 --> 0:20:44.920 of level setting um the risk there and comparing that 0:20:44.960 --> 0:20:49.679 to the very strong pretexts, pre profit, pre provision profit 0:20:49.760 --> 0:20:52.239 that we're getting at these banks, I think sort of 0:20:52.280 --> 0:20:56.600 help frames a debate that that is a manageable scenario. Alright, 0:20:56.720 --> 0:21:00.200 great stuff. As always the Alison Williams Senior Global Banks 0:21:00.240 --> 0:21:03.800 Analysts for Bloomberg Intelligence. She covers everything around the world 0:21:03.840 --> 0:21:06.439 on the banks, and that's not enough. She's also the 0:21:06.600 --> 0:21:09.879 co director of research for the America's for Bloomberg Intelligence, 0:21:09.920 --> 0:21:11.639 so she does it all. We appreciate getting some of 0:21:11.640 --> 0:21:17.400 her time. Katie. You know, one of the biggest growth 0:21:17.480 --> 0:21:20.159 stories of recent time for me on Wall Street, and 0:21:20.160 --> 0:21:21.920 I've been doing this for thirty five years. Is E 0:21:22.080 --> 0:21:24.160 t S right? You know a thing or two about 0:21:24.160 --> 0:21:27.640 et F? Don't yet? They're the future. And I say 0:21:27.640 --> 0:21:29.879 that as someone who covers E t F for Print 0:21:29.920 --> 0:21:34.560 News and also uh anchor show Me and Matt. He's 0:21:34.680 --> 0:21:36.280 a little bit m I I for the next couple 0:21:36.320 --> 0:21:39.720 of weeks, but the show will go on tomorrow. Unbelievable 0:21:39.880 --> 0:21:42.040 growth story, folks, funds flows. If you want to know 0:21:42.040 --> 0:21:44.119 where the money is going, boy, take a look at 0:21:44.119 --> 0:21:45.800 the E t F. So let's take a couple of 0:21:45.840 --> 0:21:48.040 segments here. Let's do two segments, Katie, We'll do a 0:21:48.040 --> 0:21:50.280 little round table talk et F. See where the money 0:21:50.359 --> 0:21:52.520 is going, where the smart money is going or leaving 0:21:52.720 --> 0:21:57.240 Sylvia Jablonski, she joins in the Bloomberg Interactive Broker Studio. 0:21:57.320 --> 0:21:59.600 She's the c i O at Defiance. They do nothing 0:22:00.200 --> 0:22:01.679 but E t F s. And then when you think 0:22:01.720 --> 0:22:04.119 of E t F S, I think of Eric Baltunus. 0:22:04.160 --> 0:22:06.600 He is the senior et F and also Bloomberg Intelligence. 0:22:06.600 --> 0:22:10.159 He is literally phoning it in from Philadelphia. God forbid. 0:22:10.240 --> 0:22:14.800 He hasn't bedged in since last week. I mean all right, Eric, 0:22:14.800 --> 0:22:16.840 we'll get to you in a second. Sylvia, I asked 0:22:16.840 --> 0:22:19.160 you earlier. All fair, but I love to just get 0:22:19.160 --> 0:22:21.879 your thoughts here. This has been a great growth story 0:22:21.920 --> 0:22:24.359 e t F funds. It just seems like they're just 0:22:24.400 --> 0:22:26.359 coming right out of mutual funds right into e t 0:22:26.480 --> 0:22:29.320 F s. Is there a bare case for the e 0:22:29.440 --> 0:22:32.520 t F industry that this tremendous funds flows you guys 0:22:32.560 --> 0:22:36.120 have have in the industry have experienced. Yeah, great question. 0:22:36.160 --> 0:22:39.080 Great to see you, Paul in person. So what's really 0:22:39.119 --> 0:22:41.280 interesting about e t F flows this year is that 0:22:41.560 --> 0:22:44.800 the flow and pace of people coming into e t 0:22:44.960 --> 0:22:47.080 F s and coming into the market has only increased. 0:22:47.080 --> 0:22:49.320 So we've seen outflows and things like the maddox and 0:22:49.359 --> 0:22:51.600 some of the riskier types of products, just as investors 0:22:51.600 --> 0:22:53.959 have gone risk off. But the good news is that 0:22:54.040 --> 0:22:56.440