Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. All right, we got
Speaker 1: some p p I data tomorrow. That's the producer prices
Speaker 1: in next, and then cp I Thursday. Wow, this is
Speaker 1: disturbing image. Matt Miller just walked in with a huge
Speaker 1: thing of peanut butter. Yes, well, I'll tell you what.
Speaker 1: We have these machines upstairs and they grind the peanuts.
Speaker 1: They make it fresh for you, so it doesn't take
Speaker 1: anything like peanut butter, the worst thing in the word.
Speaker 1: I'm telling you. It is so good and it's much
Speaker 1: better for you than Jiff, which is my previous fat
Speaker 1: Matt loved eating Jeff peanut butter or skippy, but skinny
Speaker 1: Matt likes fresh ground peanuts. It's so much healthier. Alright, folks.
Speaker 1: For those of that don't know, Matt's been on a
Speaker 1: diet for the last couple of months and has lost
Speaker 1: a meaningful amount thirty three pound the end of July.
Speaker 1: So there you go. Good for him. Ira save us
Speaker 1: here Ira Jersey, chief US interest rate strategist for Bloomberg Intelligence.
Speaker 1: I've got inflation data over the next couple of days.
Speaker 1: People like you tell me I need to pay attention.
Speaker 1: What's the FED looking for when I get some of
Speaker 1: these data points over the next couple of days. Well,
Speaker 1: they're really hoping for them to be lower. Um. You know,
Speaker 1: of course, Bloomberg Economics actually has a relatively high print
Speaker 1: for or or things that it will be relatively high
Speaker 1: print month on month. But if if the expectation is
Speaker 1: met here on CPI, particularly core CPI being up only
Speaker 1: zero point four uh instead of the zero point six
Speaker 1: it was up last month, I think the FED will
Speaker 1: kind of applaud that a little bit. And you know,
Speaker 1: don't look at the headline number being up or down
Speaker 1: a little bit, because there's you know, it's probably gonna
Speaker 1: be up a little because gas prices are up a
Speaker 1: little bit. But it's really the core inflation number that
Speaker 1: is going to be the focus. I think that the
Speaker 1: next month or two for for the FED and certainly
Speaker 1: for market participants. What about retail sales. I've heard a
Speaker 1: couple of people say that, you know, retail sales is
Speaker 1: going to be a big number to pay attention to
Speaker 1: this week. Yeah, so retail sales is always is always
Speaker 1: a big number. In fact, I would say in this world,
Speaker 1: it's really um the top three, you know, it kind
Speaker 1: of has been eclipsed a little bit by CPI recently
Speaker 1: in terms of market reaction and market function. But retail sales,
Speaker 1: if it continues to slip, you know, X automobiles for example,
Speaker 1: like it did last month, UM, then that certainly is
Speaker 1: a sign that these higher prices are leading to demand destruction.
Speaker 1: And I think that that's the real um, you know,
Speaker 1: real concern for UM for the economy in general and
Speaker 1: things like corporate earnings. Will those keep up because if
Speaker 1: obviously its top line revenues start to fall significantly, it's
Speaker 1: not going to be good for risk assets. UM. You know.
Speaker 1: But but then again, like one of the reasons why
Speaker 1: falling headline CPI is important and certainly headline UM core
Speaker 1: inflation is that that real wage is might wind up
Speaker 1: being higher. Right, the wage numbers that we got last
Speaker 1: week weren't that bad, you know, so so bad in
Speaker 1: what sense bad for the FED or bad for the economy. Well,
Speaker 1: I when I say weren't that bad, I mean that
Speaker 1: they were high enough that it looks like real growth
Speaker 1: is still going to be positive. And that's where, um,
Speaker 1: I think the the issue is right, nominal nominal growth
Speaker 1: rates have just skyrocketed in part because of prices, but
Speaker 1: but demand has kept up right, So so that's why
Speaker 1: those retail sales numbers that we're going to get on
Speaker 1: Friday are going to be, you know, pretty important facts.
Speaker 1: So I just saw pretty good walking by the Bloomberg
Speaker 1: Interactive Broker studio and I brought her in here, um
Speaker 1: put her in front of a mike because Cretty, you're
Speaker 1: the one from whom I heard this. I think you
Speaker 1: were talking yesterday with Carol masser Um on Bloomberg Business
Speaker 1: Week and saying that maybe the retail sales number is
Speaker 1: as important or more important than, um the CPI number. Yeah,
Speaker 1: the logic there was that, uh, if the CPI number
Speaker 1: and the PPN number, basically it's becoming a question of
Speaker 1: the margin of of deceleration when it comes to the
Speaker 1: inflation figures. But the retail number is different because it's
Speaker 1: speaking more to the demand side rather than the supply side,
Speaker 1: whereas the CP and PPI is more supply side driven.
Speaker 1: The retail numbers that we're going to say, are people
Speaker 1: still spending and it's coming out of time when a
Speaker 1: lot of people are kind of expecting inventory levels that
Speaker 1: are extremely high and therefore these massive sales and discounted
Speaker 1: prices for the retail sector. So the question here is
Speaker 1: if net net the GDP is going to kind of
Speaker 1: um or I should say that the net sales are
Speaker 1: going to drop in the fourth quarter going into holiday season.
Speaker 1: What you want to make up for the lower prices
Speaker 1: or the lower sales is higher demand UM And that's
Speaker 1: why the retail sales number could couldn't make or break
Speaker 1: that theory that people are still spending into the holiday
Speaker 1: season rather than cutting back because of UM inflation or
Speaker 1: higher prices or disposal when you do your Christmas shopping.
Speaker 1: And Matt I don't completely disagree with that. So so
Speaker 1: the number within the retail sales number on Friday you
Speaker 1: really want to be focused on is that retail sales
Speaker 1: control group because it that is all the what inputs
Speaker 1: into GDP that looks at at overall prices. Remember this
Speaker 1: is a September number, so obviously going into like like
Speaker 1: you know, it's it's accurate to say, hey, are we
Speaker 1: going to have a decent holiday sales numbers? Um, and
Speaker 1: September is a little bit early for that. But but
Speaker 1: still if we have a zero point three as the
Speaker 1: consensus is expecting for that control group, that will be
Speaker 1: a pretty decent number. And actually that would mean that
Speaker 1: real control group sales was basically flat. And and you know,
Speaker 1: if demand continues to keep up with these price increases
Speaker 1: and things are good. And by the way, Matt, I
Speaker 1: just looked while we were talking, um, good things to
Speaker 1: go to that that fresh peanut butter, because peanut butter
Speaker 1: in the CPI report is up you know so far
Speaker 1: this year. So you are free in the Bloomberg pantry.
Speaker 1: But is a poultry and like eggs like up or something.
Speaker 1: Some some sectors in the food are are are quite
Speaker 1: significantly um. But keep in mind like like things like
Speaker 1: like the the actual commodities that are in CPI, UM,
Speaker 1: you know that that's for the consumer, so so a
Speaker 1: lot of that is still shipping costs. So things like
Speaker 1: gasoline prices being much higher means that it's, you know,
Speaker 1: just cost more to get the good stores. All right,
Speaker 1: Skippy superchunk is the way to go. And I would
Speaker 1: die on that hill. Iro Jersey, chief US interest rate
Speaker 1: strategist for Bloomberg Intelligence, Thank you so much. We didn't
Speaker 1: even get to talk soccer. That's a wasted opportunity. Tomorrow,
Speaker 1: all right, we'll do it tomorrow. Let's bring our next
Speaker 1: guest professional big time. Cole Speed, President portfolio manager of
Speaker 1: Smeet Capital Managements. Some really really good performance there. Well,
Speaker 1: I'm looking at this market. It's just been a blood
Speaker 1: bath all year. I mean, I've got cash in my pocket.
Speaker 1: Should I just leave it there? What should I be doing? Well?
Speaker 1: To your point, what we're witnessing this year is what
Speaker 1: we call stock market failure, okay, and this is the
Speaker 1: seeds of this were sowned by the spectator of euphoria
Speaker 1: that we saw um in twenty one, whether it be
Speaker 1: Spacts or the Robin Hood Yolo traders, as Spencer Jacob
Speaker 1: from the Wall Street Journalist book lays out um. And
Speaker 1: so we're just we're bearing what we have to do
Speaker 1: with based on this, and by the way, we might
Speaker 1: not be done with this bear market until Matt has
Speaker 1: his next neat whiskey just okay. So so I just
Speaker 1: say that because to your point, I think the topest
Speaker 1: thing for investors right now is some investors want to
Speaker 1: go right back to what was just popular okay. In
Speaker 1: other words, there is a large population of the professional
Speaker 1: stock pickers out there that are hiding out in big
Speaker 1: cap tech because they think they'll pass through price pricing
Speaker 1: better than anyone else. The question is will the valuation
Speaker 1: protect them even if they can pass on pricing On
Speaker 1: the flip side, where you'd have to go, in our
Speaker 1: opinion to make you know, wonderful money looking forward is
Speaker 1: you need to go into economically sensitive places that have
Speaker 1: been bombed out based on the circumstances, based on the
Speaker 1: fear of macroeconomics, based on the FED I think to break, etcetera.
Speaker 1: And that's where it looks like the best prospects are
Speaker 1: for making money in stocks. You know, I uh, there
Speaker 1: were a lot of hot stocks meme stocks during the
Speaker 1: pandemic that I've gotten crushed and most of them didn't
Speaker 1: make any money. But I, in in my health pivot,
Speaker 1: have founded another way of taking the edge off. When
Speaker 1: I get home, it doesn't involve alcohol, and I'm wondering
Speaker 1: if you have taken a look at weed stocks. I mean,
Speaker 1: talk about cheap valuations. Some of these stocks are trading
Speaker 1: at two times earnings and they're trading at three times sorry,
Speaker 1: two times sales and three times earnings. I mean they're
Speaker 1: they're trading for very low valuations and they make money,
Speaker 1: and the outlook has to be right, right. Uh yeah,
Speaker 1: I just don't know how society is better off if
Speaker 1: we're all high to be. But you should be worried
Speaker 1: about making money. You're not making value judgments, you're not
Speaker 1: making ethical calls, right You you want to make money,
Speaker 1: you want to maximize profitability, and you want to buy
Speaker 1: stuff that's cheap. I can take all the ethical questions
Speaker 1: and the ideological questions on by owning energy stocks and
Speaker 1: get way wealth here. Okay, that's the difference in orders.
Speaker 1: There's an ideology going on out there about how bad
Speaker 1: that industry is. And by the way, it's effectively portfolio
Speaker 1: managers being shamed so that they don't touch it. Okay.
Speaker 1: I mean when we can look across the value por
Speaker 1: folios and find no energy holdings, Um, you know that
Speaker 1: the shaming has been tough because even the value people
Speaker 1: have given up on this, So we don't have to
Speaker 1: make that judgment call. We don't have to wonder how
Speaker 1: big they'll be, we don't have to wonder how profitable
Speaker 1: they could be. We can buy all those economics right
Speaker 1: now in the energy business and use it. People ask
Speaker 1: us often, you know, what does day to day trading
Speaker 1: look like to you? I mean, Friday was a big
Speaker 1: up day in the oil and the stocks rolled down.
Speaker 1: Today's a down day and oil and the stocks are down.
Speaker 1: So what goes on day to day in these stocks,
Speaker 1: whether you know, tied to the oil price, it really
Speaker 1: hasn't correlated much. Any day over ninety is a drain.
Speaker 1: We're just getting fat and happy and everyone else is frustrating.
Speaker 1: So well on that, What is your kind of your
Speaker 1: central energy call here? Is it tied to the price
Speaker 1: of oil per se or is it something else? Macro? Well,
Speaker 1: I mean the lack of supply. It's massive. And when
Speaker 1: I say massive, you know, let's just say in the interim,
Speaker 1: you know, parts of say Western Europe have slowed down
Speaker 1: because their energy crisis. That's that's probably likely, right, which
Speaker 1: means there's just subtle demand that's taken off, but again,
Speaker 1: supply can't grow. UM supply is continued to disappear when
Speaker 1: the Saudis are out there making the case that we
Speaker 1: cannot sustain at these levels. You know, there's real problems
Speaker 1: that The big myth to so we're all aware, is
Speaker 1: that out of nowhere OPEC can snap their finger, ten
Speaker 1: million barrels can just show up. And that's false, right
Speaker 1: that that's western myth is what it is. And the
Speaker 1: reality is if we're going to be we're gonna be
Speaker 1: producing a lot more oil the United States and can it.
Speaker 1: I've got to be a primary driver that. Just so
Speaker 1: we're all aware, all right, good stuff, Cold, really love
Speaker 1: getting your perspective there, coll Smeat President folio manager Smeat
Speaker 1: Capitol UH Management with a you know, a bullish call,
Speaker 1: which it's really been surprising how well, well, I guess
Speaker 1: it's not surprising, but it's just interesting to see how
Speaker 1: well UH Energy has done over the last several years.
Speaker 1: It was so out of favor for so long, Peak
Speaker 1: oil and all that, but boys and how and how
Speaker 1: well they've done Bill and it's I mean, they they
Speaker 1: have UM produced incredible performance at a time when other
Speaker 1: funds just long stocks. Are getting crushed. Absolutely good stuff.
Speaker 1: G l c O the Global Commodity Price Dashboard on
Speaker 1: the Bloomberg Terminal, that's where you find all the commodity stuff,
Speaker 1: energy metals, aggs, all that kind of good stuff. And
Speaker 1: that's typically where you're find you know, people like Mike mcglowan,
Speaker 1: Senior Commodity Strategies for Bloomberg Intelligence. But nope, he's not
Speaker 1: on the farm checking out the corn, you know, or
Speaker 1: the cotton and soybeans or any of that kind of stuff.
Speaker 1: He's in Vegas and he's at something called the web
Speaker 1: Crypto Conference. Mike, what are you doing in Vegas? And
Speaker 1: what is the Web three Crypto Conference? Hey boy, I
Speaker 1: was invited to attend by a group called the Wolf
Speaker 1: of All Streets and I've been presenting on the macro
Speaker 1: and um talking to you, um and but yeah, I
Speaker 1: was out in the cornbell a couple about of months ago,
Speaker 1: bus the family and it was shocking how good the
Speaker 1: corn crop was this year and the parts I went
Speaker 1: to Illinois. UM. But in terms of the rest of
Speaker 1: the space that you know, I look at, commodities is
Speaker 1: kind of like a futruty nail as the global macroeconomic
Speaker 1: tide recedes and that's what you're seen in in crude
Speaker 1: oil and things like that. It had its bounced, but
Speaker 1: I think it's just resuming and during bear market as
Speaker 1: we see stocks headlower. Two So what is where are
Speaker 1: the opportunities in the global commodity space? And and and folks,
Speaker 1: Mike mcgloan has been covered doing this for four decades.
Speaker 1: He covers everything in the commodities, which is now included
Speaker 1: over the last decade U cryptocurrencies as as well, and
Speaker 1: he understands that as well, are better than anybody on
Speaker 1: Wall Street. So, Mike, when you talk to your institutional
Speaker 1: investor clients out there in the commodity space, where are
Speaker 1: they putting their money? Where they spending their time? Yeah,
Speaker 1: that's the key thing. Everybody's looking for a place to hide.
Speaker 1: And I the sense I get here and keep I
Speaker 1: keep saying. And when I'm getting since I'm getting for
Speaker 1: a lot of the money managers I speak to is
Speaker 1: their selling equities on rallies and they're buying two you
Speaker 1: notes on dips and are buying on dips. And I
Speaker 1: think that's going to continue. At some point They're gonna
Speaker 1: make some good money. Even so from Jamie Timing yesterday.
Speaker 1: Now cryptos and that space, I'm sensing a decent amount
Speaker 1: of institutions are coming into the bigcoin space and looking
Speaker 1: to buying the bitcoin space. And that's really showed because
Speaker 1: it's been the same price since June. But again, it's
Speaker 1: it's also been the fastest horse in the race, and
Speaker 1: it's going down. But that's my sense, and the key
Speaker 1: question is where it stops. The key thing I like
Speaker 1: to point out is there's been a lot of people
Speaker 1: calling for very bullish calls and crude all this year,
Speaker 1: and I think they're missing the macroeconomics and being tied.
Speaker 1: And now I'm afraid that this is just going to
Speaker 1: excel rate, and particularly because we have the sledge hammer
Speaker 1: from the FED out there, and sledge hammer is just
Speaker 1: pounding harder and harder every day. When when do we
Speaker 1: see bitcoin move out of this range? I mean, it
Speaker 1: hasn't really since June. Um. Okay, it's been up a
Speaker 1: little to like twenty four thousand in August, and it's
Speaker 1: been down a bit too, you know, eighteen, occasionally dipping
Speaker 1: under that, but really it's been hovering around nineteen or
Speaker 1: twenty thousand for months now. Why yeah, exactly, well and
Speaker 1: more Sollars just like in obvious what my sensence, what's
Speaker 1: happening with bitcoin. It's in that transition to becoming global
Speaker 1: digital collateral and trading more like gold and long bonds,
Speaker 1: and they're both down to so far this year. But
Speaker 1: it's showing that stabilization. The key thing I've been really
Speaker 1: watching as you saw what happened in theerium. It bought
Speaker 1: him at a thousand, it had the merge and went
Speaker 1: to two thousand. Now it's back towards and I think
Speaker 1: that those are two things where we see what's looked
Speaker 1: five ten years for that's the rapidly advancing technology. It's
Speaker 1: much likely to more likely to appreciate, and I think
Speaker 1: people get that. And then you see the old like
Speaker 1: you like proof of steak, Well, I like it, Matt,
Speaker 1: But it has the income. Now you can get involved.
Speaker 1: Institutions are getting involved, and they can measure discounted cash
Speaker 1: flows and that's what's a really unique space for its
Speaker 1: hearing though that didn't exist before. So it's getting the attention.
Speaker 1: But right now we are in a macroeconomic beer market.
Speaker 1: Cryptos are part of it. And this is the fact
Speaker 1: that bitcoin has been able to stabilize as we see
Speaker 1: a new low in the NASA today is showing that
Speaker 1: it's moving forward, looking to a better future. It's just
Speaker 1: right now, it's October. We all know the Feds tightening
Speaker 1: and markets haven't gone down enough yet. Unfortunately, by the way,
Speaker 1: in crypto circles, Paul, this month is typically referred to
Speaker 1: as October October yeah, because average average returns to two
Speaker 1: thousand twenty one for bitcoin has been I'm sorry, two
Speaker 1: thousand fourteen has been about usually it's a game. Usually
Speaker 1: it's a game, all right. My important question where you're
Speaker 1: staying in Vegas at the win this is a resource. Yeah,
Speaker 1: it's it's rough, Diggs here, Yeah, you've got to play
Speaker 1: to go. Is the wind the place to get the place?
Speaker 1: Now I'm a Blagio guy, but the wind is the
Speaker 1: setting the bar like like he always does. I mean
Speaker 1: you guys, I mean Mr Wynn is just the just
Speaker 1: the visionary in which is crazy term use since he's
Speaker 1: partially blind. But I thought that was secret or you're
Speaker 1: not supposed to admit or tell him that he's blinds
Speaker 1: Oh yeah, yeah, yeah, it's no big Oh. I thought
Speaker 1: it was a thing that he didn't like I've I've
Speaker 1: always I've always talked him about it. But anyway, Uh so, Mike,
Speaker 1: you're at this crypto conference in in the midst of
Speaker 1: a bare global bear market. What is the conversation from
Speaker 1: crypto folks in Vegas this week? They're One key person
Speaker 1: I spoke to yesterday was a minor and adventure capital
Speaker 1: investor and he've got much more capitalist to the point,
Speaker 1: and his quote was, I really prefer bearer markets because
Speaker 1: you get rid of the silly speculation. And he's just
Speaker 1: looking at to play more capital. Um so there's a
Speaker 1: lot of positive there from people like him. Partney says, Hey,
Speaker 1: I've got good investor returns and I've got a lot
Speaker 1: of good discounts here. But that's the main sense. It
Speaker 1: was the first day in a semi Holley associate. What
Speaker 1: really kicks it today? But it's an investor conference. It's
Speaker 1: certainly be enthusiasm from a few months ago was gone,
Speaker 1: which most people here for the institutions think, thank you.
Speaker 1: It's good to get rid of that. Oh I haven't
Speaker 1: been there in years. You gotta go. I mean, so, Mike,
Speaker 1: how is Vegas? Is it? Is it hopping? Is it
Speaker 1: kind of like the old days. What's going on? Give
Speaker 1: us a read? It's my first time here, is really what?
Speaker 1: It's your first time ever in Las Vegas. I have
Speaker 1: to admit that, yes, my wife and I walked on
Speaker 1: the strip yesterday and we found a nice place to eat.
Speaker 1: But I'm not much of a gamble. I can lose
Speaker 1: a lot enough, a lot of much money in markets,
Speaker 1: even with an edge. So but it's it seems to
Speaker 1: be hopping. It's happening. But the key thing is there's
Speaker 1: so much construction and building and so much going on here.
Speaker 1: It's just quite an amazing place. So it's cool, cool
Speaker 1: to be here for the first time from and the
Speaker 1: key thing there for you know, people who invest in,
Speaker 1: you know, these gaming companies, is the conference business. That
Speaker 1: is the kind of Yeah, I thought that that's what
Speaker 1: we're talking about, and I've I haven't been there in years,
Speaker 1: but it's great to go for that purpose. You know,
Speaker 1: I don't gamble much either because I just end up
Speaker 1: losing money, but I do like to go to conferences
Speaker 1: or um, you know, I've been down there to a
Speaker 1: few track schools. Lamborghini has tracks schools down there, super fun,
Speaker 1: good stuff all right, Mike, Well, we'll let you get
Speaker 1: back to it. Let you get back to the tables.
Speaker 1: Mike McLoone senior commodity strategist for Bloomberg Intelligent out of
Speaker 1: Vegas at Crypto conference. But again, you think about they
Speaker 1: have so much conference space out there. I mean, the
Speaker 1: Consumer Electronics Show in January, it's just a monster. You know,
Speaker 1: a couple hundred thousand people descend on the city. Win
Speaker 1: looks like the biggest. I mean I'm looking at the
Speaker 1: RV function, which shows you relative value of one company
Speaker 1: to others. So I put up Win Resorts um it's
Speaker 1: the biggest by market cap six and six point six
Speaker 1: billion of any of the American ones. Of course, they
Speaker 1: have Win Macau, which is another three point three billion.
Speaker 1: And now that I hear, it's the place to say
Speaker 1: they're setting the bar. I want to go down there
Speaker 1: and get a get a suite, go out there. Yes,
Speaker 1: go out there, out to Vegas. But when you talk
Speaker 1: about the gaming companies, it's all about Asia Macau. I mean,
Speaker 1: that's McCaw's such. It dwarfs the strip on Vegas. So
Speaker 1: you think about what moves the needle for these gaming companies,
Speaker 1: it's for the majority of them, Las Vegas Sands wins
Speaker 1: those big ones. It's been Macau because that is a
Speaker 1: huge gaming market for these companies and they put monstrous
Speaker 1: investments in there. So it's kind of fun to get
Speaker 1: some feedback from Mike mcgloan in Vegas. We have to
Speaker 1: get to Allison Williams. We've got Allison coming up and
Speaker 1: we'll talk to We always talked. We talked to pretty
Speaker 1: a lot on linked to talk to her, but we'll
Speaker 1: get more coming up. But I need to talk to
Speaker 1: Alice Williams because starting Friday, we'll get the big banks
Speaker 1: reporting numbers. And that's big for a lot of reasons.
Speaker 1: A for the for the banks themselves and for their sheralders,
Speaker 1: but also for their their read on the overall economy.
Speaker 1: Alison Williams joints the senior Global Banks and Asset Manager
Speaker 1: analyst for Bloomberg Intelligence. So Alison, I wanted to start
Speaker 1: first with Credit Swiss that I guess the latest twist
Speaker 1: in this story is if they want to survive, if
Speaker 1: they want to implement their restructuring, they may need more capital.
Speaker 1: Is that kind of the read? That is the read?
Speaker 1: And that's actually you know that is been the concern
Speaker 1: with the stock. I think every other day we get
Speaker 1: a we get another number that's being thrown out there. Um,
Speaker 1: you know, I think there was numbers to the multi billions.
Speaker 1: But but but the bottom line is that the amount
Speaker 1: of capital they need depends on you know, a what business,
Speaker 1: what businesses in their portfolio are they going to keep
Speaker 1: um and seek to fund um If they're selling businesses,
Speaker 1: obviously that they can get capital without raising stock. They
Speaker 1: can get it from from other investors um. But then
Speaker 1: you know, what are the steps ahead and you know
Speaker 1: what money do they need to pay for those taps
Speaker 1: steps in terms of restructuring. And so that's why when
Speaker 1: you see sort of various numbers out there, any of
Speaker 1: these numbers could be correct. It really just depends on
Speaker 1: what we're going to hear from them on the So, Alison,
Speaker 1: is are the so over? Like when I was a
Speaker 1: Credit Swiss we felt we could pitch any deal anywhere
Speaker 1: around the world and be really competitive. Are those days
Speaker 1: kind of over for this new Credit Swiss? So? I think,
Speaker 1: And that's not really where the challenge lies. I think
Speaker 1: in general, um, you know, across the firm they have
Speaker 1: to be feeling Um, you know some pressure as you know,
Speaker 1: clients as well as investors are looking at them with
Speaker 1: some uncertainty, but they really do you know, they have
Speaker 1: a good m and a franchise. UM, equity underwriting and
Speaker 1: leverage lending. These are all areas that the bank is
Speaker 1: wrong on. But as we know that there's not that
Speaker 1: none of those deals are being done right now, aren't
Speaker 1: being done. Leverage lending is a book where we're is
Speaker 1: a business where we're seeing write downs. Um, just given
Speaker 1: the markets this year, so there's structural issues with credit
Speaker 1: Swiss and then the cyclical pressures I think are just
Speaker 1: you know, really um bringing those issues to bear. So
Speaker 1: we're going to hear from the big banks JP Morgan
Speaker 1: on the fourteenth. What day is today? Today is the
Speaker 1: eleventh Friday? Okay, so we're gonna hear from JP Morgan
Speaker 1: on Friday, Wells Fargo as well, City Group as well,
Speaker 1: and then the following week Bank America, UM State some
Speaker 1: other states treat as some mother's truest you always think
Speaker 1: is not a great name. Um, what do we expect
Speaker 1: to hear? Yeah? And so yeah, so Friday, as you said,
Speaker 1: we'll get JP Morgan, City Wells and Morgan Stanley. UM,
Speaker 1: you know, the big thing that we're watching is what
Speaker 1: happens with UM credit provisions. We think that credit is
Speaker 1: good right now, but the question is how are banks
Speaker 1: looking out into the future and factoring that into UM
Speaker 1: their lost provision. So it's more a view towards what
Speaker 1: the risks are head We saw UM headlines yesterday UM
Speaker 1: from JP Morgan's comments talking about our recession next year.
Speaker 1: When the banks set these reserves, they look over the
Speaker 1: loan life so if they see increasing odds of a recession,
Speaker 1: if they see a recession looking tougher, we'll see it
Speaker 1: in those reserves, and so we're watching that number more
Speaker 1: for three risk UM. From a revenue perspective, the negative
Speaker 1: is investment banking fees, as we talked about wealth inesset
Speaker 1: management fees, mortgage fees, lots of fees going down. Fixed
Speaker 1: income trading will be the highlight in the investment bank.
Speaker 1: But the revenue story is really not interest income that's
Speaker 1: going to come in very strong for the banks UM.
Speaker 1: There's potential upside relating to rates UM, but the question
Speaker 1: for the outlook what is how our loans growing. Again,
Speaker 1: that comes back to the economic risks and then what's
Speaker 1: happening with their cost of deposits? And on the cost side, Allison,
Speaker 1: when we talk costs, we usually talk people, Uh, you
Speaker 1: know better than anybody. Are we going to get some
Speaker 1: big announcements from some of these banks. Is this an
Speaker 1: opportunity for them to really pair back their head count?
Speaker 1: I think that I think what we're going to see
Speaker 1: in the quarter is more on the compensation side of things. So, UM,
Speaker 1: when we look across banks, are our expectation is that
Speaker 1: they'll bring down comp um at a similar amount to
Speaker 1: the related revenue. So keep in mind that many of
Speaker 1: these banks are diversified UM. Morgan Stanley and Golbin Sachs
Speaker 1: are are sort of more focused on the capital market.
Speaker 1: So we'll see it. UM. They're the most revenue down
Speaker 1: CALMP down UM. The issue is that some of the
Speaker 1: non compense station costs are going up. We have inflation broadly, UM.
Speaker 1: We have wages and businesses that are not related to
Speaker 1: capital markets that are impacted by inflation. UM. So net
Speaker 1: net investors are not going to like, uh some of
Speaker 1: the negative operating leverage that we're going to see at
Speaker 1: the banks. UM. So we think that there will be
Speaker 1: pressing questions in terms of what's coming in the final quarter.
Speaker 1: Will compensation appruals be depressed further to help UM offset
Speaker 1: some of the lower revenues that we've just discussed, And
Speaker 1: how are they looking at investments and discretionaries spending? Will
Speaker 1: there be some pullback there as well? So, I mean
Speaker 1: in the in the deals, in the fees space, I
Speaker 1: can't remember the last time we had a juicy m
Speaker 1: N a trade other than Elon and Twitter. I can't
Speaker 1: remember the last time we had a really big juicy
Speaker 1: at all, the opposite of juicy, ye, So I mean, no,
Speaker 1: it's definitely gone from feast to famine. Keeping keep in
Speaker 1: mind that, you know, to your point, you can't remember
Speaker 1: when we've seen some interesting transactions, you know, I p
Speaker 1: O s are are very scarce. Last year was a
Speaker 1: phenomenal year, record m and a record equity fees, and
Speaker 1: we came into the year UM. You know, sort of
Speaker 1: we were talking about compensation when we came into this year.
Speaker 1: UM the pressure was extreme because not just it's not
Speaker 1: just investment banks right like hedge funds, other people are
Speaker 1: looking to hire UM the staff, so and the competition
Speaker 1: from technology also raising UM sort of the cost to compete.
Speaker 1: Now we've had the markets are sort of uh pulled back,
Speaker 1: So that's going to pull back some of the pay pressure.
Speaker 1: Also on the tech side of things, UM, as their
Speaker 1: cost of capital goes up with these tupper markets, they
Speaker 1: have less access to capital. That also UM has a
Speaker 1: little bit of a relief aspect to their cost base.
Speaker 1: All right, good stuff, Allison, thank you so much as
Speaker 1: always for joining us. We know you're gonna have a busy,
Speaker 1: busy Friday coming up, Alison Williams. She covers all the
Speaker 1: banks on a global basis for Bloomberg Intelligence. Alright. One
Speaker 1: of the many many tickers Met Miller has taught me
Speaker 1: over the years is one is m O V movers.
Speaker 1: It gives you the big movers. You type in SMP
Speaker 1: next and it gives you, you know, what are the
Speaker 1: big gainers? What are the big losers of today? The
Speaker 1: losers today number one, number two casino stocks win Las
Speaker 1: Vegas stands. What's going on? And we just talked to
Speaker 1: Mike mc loan. He's at Vegas. He said this strip
Speaker 1: was hopping. Conferences are back, So we said, let's get
Speaker 1: Brian egger On here. He does all this kind of
Speaker 1: stuff ran Nigger, senior gaming and lodging analyst. Also the
Speaker 1: cruise lines and all the fun stuff. Guy hasn't worked
Speaker 1: a day in his life. Let me tell you he's
Speaker 1: a Bloomberg intelligence Brian, what's going on with the casino sucks?
Speaker 1: I thought like China's letting people go gamble away their livelihoods.
Speaker 1: Vegas has hopping. What's going on? Yeah, you're right, Paul,
Speaker 1: I mean China really is the issue now. On the
Speaker 1: one hand, to your point, we do have some good
Speaker 1: news on the travel from We've gotten resumption of China
Speaker 1: tour groups coming up, as well as the issuance of
Speaker 1: online or e visas, which had helped travel volumes going
Speaker 1: to next year. But at least a totally the feedback
Speaker 1: is the Golden Week holiday was weaker than expected from
Speaker 1: a gaming volume perspective, So we've still got a MACCAU
Speaker 1: market with a lot of pressures after v I P
Speaker 1: Junk of credit was basically banned West December. I think
Speaker 1: those travel openings which I mentioned are good news going forward,
Speaker 1: but you know, I sim it's going to take time
Speaker 1: for those to pan out. The market is still quite
Speaker 1: weak compared to pre pandemic levels. Who do you want
Speaker 1: to own? I mean I was looking at when before
Speaker 1: just because um, we were talking about how great it
Speaker 1: would be to stay at one of their suites, and
Speaker 1: then I ran the RV function relative value to see
Speaker 1: who's bigger. Um, I look at competition like Las Vegas,
Speaker 1: Sands like Boyd, like Pen like Caesar's, which is the
Speaker 1: most desirable of the group. So the way I think
Speaker 1: about this is if you if you want to avoid
Speaker 1: fundamental exposure to Macao because you know that market likely
Speaker 1: to be down at least this year versus pre pandemic levels,
Speaker 1: then you know, really of the companies in North America, UM,
Speaker 1: you know, Sands and Win arguably the most exposed. You know,
Speaker 1: falled by MGM. Um. You know right now it is
Speaker 1: true that domestic but doesn't Win have their Macau business
Speaker 1: broken out to Win Macau. It's still part of the
Speaker 1: consolidated company, right, So you know when as a when
Speaker 1: resorts as a company still has through its Macau subsidiaries,
Speaker 1: substantial exposure to Macau, and now it's Sands out of Vegas,
Speaker 1: it's really all the cow in Singapore. So if you
Speaker 1: want it to be more domestically exposed among the bigger destinations.
Speaker 1: You know, companies like MGM and Caesar's don't have that
Speaker 1: McCaw exposure. And then of course all the regional companies
Speaker 1: right now in North American gaming at least compared to
Speaker 1: pre prodemic levels is by most standards back, which is
Speaker 1: good news. But MACAU has the lingering effects of not
Speaker 1: only the pandemic, but you know, clamp down on junk
Speaker 1: at credit and other pressures. Yeah. If I look at
Speaker 1: I always look at the comp screen, as you know, right,
Speaker 1: and um total return over the last five years for
Speaker 1: Las Vegas sands down thirty for when down fifty five.
Speaker 1: But if you look at you know, BOYD is up
Speaker 1: eighty seven, Caesar's up thirty five, Pen up four mg
Speaker 1: of five, so everybody else is killing it. Ye. Hey, Brian,
Speaker 1: you know the only time I've I've been to Vegas
Speaker 1: a lot. I love Vegas, but basically every time I
Speaker 1: go to Vegas it's because of a conference, you know,
Speaker 1: the c E S conference, the n a B, the
Speaker 1: National Association Broadcasters, or any other conference I can glom
Speaker 1: onto for for that matter, what is the concert business
Speaker 1: in Vegas? Now? It was such a driver is such
Speaker 1: a driver is it back the pre pandemic. It's un
Speaker 1: back to where it was, which would be total room
Speaker 1: nights for a company like MGM, but it's it's coming back,
Speaker 1: and the bookings have been there. Of course, the question
Speaker 1: is if you have meeting planners and trade associations and
Speaker 1: businesses begin to experience some waiting confidence because of a
Speaker 1: shaker economy, that could certainly effect the tone of bookings.
Speaker 1: But based on the lag to seat back we have
Speaker 1: and we're due for an update discerning season, the bookings
Speaker 1: are winding up fairly well. I mean, ce yes, they're
Speaker 1: gonna have a couple hundred thousand people there in January,
Speaker 1: so I don't know. But all right, let's switch over
Speaker 1: to cruises because I think Matt's thinking about his next
Speaker 1: vacation and I think he should do a cruise. Take
Speaker 1: the whole family, go down to you know, the Caribbean,
Speaker 1: and you know, see see that part of the world.
Speaker 1: How's the cruise business, Brian? So the Chris business from
Speaker 1: the perspective of bookings, I mean, the good news is
Speaker 1: the fleets are back in operation, um after that long
Speaker 1: pandemic pause, and uh, you know right now they're not
Speaker 1: only the fleets back, but after a lot of the
Speaker 1: pandemic protocols are lifted, bookings have improved. The question of
Speaker 1: course is whether or not profitability returns at a fast
Speaker 1: enough pace. So the company is to continue to manage
Speaker 1: liquidity and to manage their debt obligations, which which they have.
Speaker 1: You know, we we were just at an investor media
Speaker 1: a couple of days ago for Norwegian cruise Lines and
Speaker 1: they expect to see record revenue yields and ibadad next year.
Speaker 1: You know, so there's some good news in the out there.
Speaker 1: You know, the recent feedback from Carnival was a little
Speaker 1: bit more mixed, I thought in terms of the booking space,
Speaker 1: but you know, there's you know, there's obviously concern what
Speaker 1: happens in a slowing on To me, I think the
Speaker 1: good news at least is that the chips are back
Speaker 1: in operation and is pandemic protocols get lifted, bookings have revived,
Speaker 1: so discretion or income, which is kind of how your
Speaker 1: companies make their bread and butter bride, whether it's a
Speaker 1: casino or a cruise line or a hotel. In a recession,
Speaker 1: how sticky is that spending or is that one of
Speaker 1: the first things that go I pull back on my vacations.
Speaker 1: My cruise is my vagus, you know kind of trip. So,
Speaker 1: I mean, historically, the cruise industry across the multiple decades
Speaker 1: has performed well in economic downturns. This one is more
Speaker 1: complex because you've got potentially rising inflation, You've got the
Speaker 1: lingering effects of how consumers behave after the pandemic. But
Speaker 1: you know, it depends, I think really on the severity
Speaker 1: in the hell effects overall consumer discretionary income, I mean gaming.
Speaker 1: I think it really depends on the part of gaming
Speaker 1: that we're talking about. Those regional markets have to date
Speaker 1: held up really well despite higher gas prices and inflation,
Speaker 1: so you know, it's some of the businesses are more
Speaker 1: cyclical than others, the hotels, but I think a lot
Speaker 1: of it depends on whether or not the consumer holds
Speaker 1: up as well as it has so far. And you're
Speaker 1: also just on the cruise ships. They stopped by the
Speaker 1: gas tank there. It's a lot to fill up a
Speaker 1: cruise ship, isn't it getting less and less? Right? Yeah,
Speaker 1: I guess he would have beens been to help, and
Speaker 1: obviously any any back off in bunker fuel prices would
Speaker 1: be bunker helpful as much as they help the bunker
Speaker 1: fuel so as much as they do hedge. You know,
Speaker 1: it's a it's another cost pressure that has certainly you know,
Speaker 1: weight on the companies. Can't put bunker fuel on my truck, No,
Speaker 1: I don't think so it's got to be at least
Speaker 1: octane doesn't Okay, which is the best. It's running about
Speaker 1: four dollars and fifty cents. That's the credit price near me.
Speaker 1: Just wait, but you gotta go electric. Maybe we'll get
Speaker 1: electric cruise ships at some point. Brian Edgar, Senior Gaming
Speaker 1: and Lodging ANALYSTEE covers the you know the cruises. I
Speaker 1: mean again, the guy has not worked a day in
Speaker 1: his life. You should see the trips he goes on.
Speaker 1: Supposedly for research intelligence reasons, but it's a scam. But
Speaker 1: he does that. He's been doing it for decades on
Speaker 1: Wall Street. One of the time I know he's he's
Speaker 1: gamed it. He's not a dumb guy. He went to
Speaker 1: Wharton undergrad. You never Chicago for an NBA, so he
Speaker 1: knows what he's up. And he's been doing this on
Speaker 1: Wall Street four decades at DLJ Credit, Swiss, all great
Speaker 1: shops before from him to Bloomberg Intelligence. Thanks for listening
Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
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Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three.
Speaker 1: Pet On Ball Sweeney I'm on Twitter at pt Sweeney.
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