1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,240 Speaker 1: on Apple car Play or Android Auto with the Bloomberg 4 00:00:21,320 --> 00:00:24,840 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:25,280 --> 00:00:26,960 Speaker 1: or watch us live on YouTube. 6 00:00:27,080 --> 00:00:31,880 Speaker 2: Joining us right now from Standard Charter Bank. Just an 7 00:00:31,960 --> 00:00:34,599 Speaker 2: open question to begin Mike Mayo coming up as well 8 00:00:34,600 --> 00:00:37,920 Speaker 2: in free of Beamish to get you prepared for Global 9 00:00:37,920 --> 00:00:41,160 Speaker 2: Wall Street this morning. What is a single thing you're 10 00:00:41,320 --> 00:00:45,040 Speaker 2: focused on now in the cophany of newsflow. 11 00:00:46,320 --> 00:00:50,040 Speaker 3: Well, first, let me say that Barry Achengen, i Can Green, 12 00:00:50,040 --> 00:00:52,600 Speaker 3: and I were classmates at Yale in the PhD program 13 00:00:52,600 --> 00:00:54,960 Speaker 3: in the seventies. I doubt I'm in the book, but 14 00:00:55,360 --> 00:00:59,200 Speaker 3: we do have a connection there. In terms of what 15 00:00:59,280 --> 00:01:02,240 Speaker 3: I'm focused on, I mean, longer term, I think it's 16 00:01:02,280 --> 00:01:06,080 Speaker 3: all productivity growth. That's the biggest factor driving the economy. 17 00:01:06,120 --> 00:01:10,880 Speaker 3: It makes everything possible. If you know Powell is correct, 18 00:01:10,920 --> 00:01:14,600 Speaker 3: if Worsh is correct, if we are correct that it's surging, 19 00:01:15,200 --> 00:01:17,480 Speaker 3: you know, we're kind of back to the late nineties, 20 00:01:17,520 --> 00:01:19,560 Speaker 3: which was a very good period for us. 21 00:01:20,240 --> 00:01:21,959 Speaker 4: But that's in the medium and long term. 22 00:01:22,440 --> 00:01:23,120 Speaker 2: Shorter term. 23 00:01:23,280 --> 00:01:27,000 Speaker 3: I think we're going to see US policy become more cautious. 24 00:01:27,160 --> 00:01:30,720 Speaker 3: I mean, focus being the midterm elections. You know, doing 25 00:01:30,720 --> 00:01:32,920 Speaker 3: a trade deal with India as a positive, sort of 26 00:01:32,920 --> 00:01:36,040 Speaker 3: threatening to invade Greenland as a negative. So I expect 27 00:01:36,360 --> 00:01:39,639 Speaker 3: the temperature to really calm down and you know, dollar 28 00:01:40,120 --> 00:01:42,440 Speaker 3: to appreciate very gradually, get rid of some of the 29 00:01:42,520 --> 00:01:45,080 Speaker 3: risk premium that accumulated in January. 30 00:01:45,760 --> 00:01:49,440 Speaker 4: So I guess that January was a tough time for 31 00:01:49,480 --> 00:01:51,880 Speaker 4: the dollar, the dollar weakening. We haven't seen the dollar 32 00:01:51,920 --> 00:01:55,560 Speaker 4: bounce back from that April of last year. Is this 33 00:01:55,880 --> 00:01:58,320 Speaker 4: is this the new normal for the US dollar? Do 34 00:01:58,360 --> 00:01:58,680 Speaker 4: you think? 35 00:01:58,920 --> 00:02:04,640 Speaker 3: Well, you know, based on our equations, what we what 36 00:02:04,680 --> 00:02:07,480 Speaker 3: we saw was that the risk premium zoomed at one 37 00:02:07,480 --> 00:02:12,080 Speaker 3: point about eight percent right in April, but then it 38 00:02:12,240 --> 00:02:16,360 Speaker 3: converged back to you know, normal levels, and then it 39 00:02:16,720 --> 00:02:19,920 Speaker 3: reopened again, went up to five six percent, you know, 40 00:02:20,080 --> 00:02:24,400 Speaker 3: during during January, and like it goes up really fast 41 00:02:24,440 --> 00:02:27,000 Speaker 3: when something dramatic happens, and it comes down really slowly 42 00:02:27,160 --> 00:02:28,600 Speaker 3: when things get normal. 43 00:02:29,040 --> 00:02:32,560 Speaker 4: So we think that you're expecting a recovery in the 44 00:02:32,680 --> 00:02:34,399 Speaker 4: dollar gradually going forward. 45 00:02:34,440 --> 00:02:37,520 Speaker 5: Here in down twenty six largely, I mean there are risks. 46 00:02:37,560 --> 00:02:40,040 Speaker 3: I mean, if they if the Supreme Court bounces the 47 00:02:40,080 --> 00:02:44,040 Speaker 3: ie PA tariffs in a big way, compromising not just 48 00:02:44,560 --> 00:02:48,640 Speaker 3: the revenues that they've already collected, but future revenues. That's 49 00:02:48,680 --> 00:02:51,400 Speaker 3: going to really hit the dollar. And we'll probably see 50 00:02:51,880 --> 00:02:54,600 Speaker 3: bond yields go to the moon off that because the 51 00:02:54,600 --> 00:02:57,519 Speaker 3: fiscal path will be even worse than it looks right now. 52 00:02:58,160 --> 00:03:01,440 Speaker 2: I look Steve at the dollar, and the basic idea 53 00:03:01,480 --> 00:03:06,400 Speaker 2: here is the dollar is over valued. For example, on yen. 54 00:03:06,720 --> 00:03:08,440 Speaker 2: We're going to see a big move for this, that 55 00:03:08,600 --> 00:03:12,200 Speaker 2: or the other reason. Explain why we want a week dollar. 56 00:03:12,440 --> 00:03:15,640 Speaker 2: The president wants a week dollar. Do we want a 57 00:03:15,639 --> 00:03:16,280 Speaker 2: week dollar? 58 00:03:17,000 --> 00:03:21,040 Speaker 3: I don't think so. There are paths by which a 59 00:03:21,040 --> 00:03:25,480 Speaker 3: week a week dollar represents represents a positive outcome for 60 00:03:25,560 --> 00:03:28,000 Speaker 3: the US. For example, say the rest of the world 61 00:03:28,240 --> 00:03:32,400 Speaker 3: decides on fiscal expansion and so their interest rates go 62 00:03:32,520 --> 00:03:36,200 Speaker 3: up relative to hours. Uh, you know, our currency depreciates, 63 00:03:36,240 --> 00:03:40,000 Speaker 3: but there's more demand every everything. It's fine. But most 64 00:03:40,080 --> 00:03:42,040 Speaker 3: of the other paths, and I'd say the majority of 65 00:03:42,080 --> 00:03:44,760 Speaker 3: paths are actually negative for the US. They represent the 66 00:03:44,800 --> 00:03:50,880 Speaker 3: loss of confidence either in fiscal policy, geopolitical policy, the 67 00:03:51,080 --> 00:03:54,840 Speaker 3: you know, US marketative. 68 00:03:53,920 --> 00:03:57,960 Speaker 2: Green is an a seismic shift across the history of 69 00:03:58,000 --> 00:04:00,000 Speaker 2: where your colleague get Yelle as expert. 70 00:04:01,640 --> 00:04:03,760 Speaker 3: You know, I haven't read the book, but I'd say 71 00:04:03,800 --> 00:04:06,360 Speaker 3: that most of the market there is two you know, 72 00:04:06,400 --> 00:04:09,720 Speaker 3: predict seismic shifts every three months, every six months. It 73 00:04:09,800 --> 00:04:12,200 Speaker 3: takes a lot to get a seismic shift. I don't 74 00:04:12,240 --> 00:04:14,440 Speaker 3: think we're there yet. I think there's still a lot 75 00:04:14,440 --> 00:04:16,480 Speaker 3: of positives for the US dollar out there. 76 00:04:17,080 --> 00:04:19,640 Speaker 4: Where's value out there in the currency markets today. 77 00:04:21,839 --> 00:04:25,640 Speaker 3: You know, we we like Ousie and Kiwi, we like 78 00:04:27,120 --> 00:04:31,159 Speaker 3: and we like high yielders, you know, Brazil. You know, 79 00:04:31,200 --> 00:04:34,080 Speaker 3: we're you know, we're We're still sort of concerned about Europe. 80 00:04:34,560 --> 00:04:36,560 Speaker 3: Sterling's having a good week. Well, we don't think it's 81 00:04:36,600 --> 00:04:40,040 Speaker 3: gonna you know, carry on for an extended period. Canada 82 00:04:40,920 --> 00:04:43,800 Speaker 3: is vulnerable because of you know, the poor relations that 83 00:04:43,880 --> 00:04:45,680 Speaker 3: Carneye has with Trump at this point. 84 00:04:45,960 --> 00:04:51,800 Speaker 4: So to us about the euro here, we saw in 85 00:04:51,839 --> 00:04:54,480 Speaker 4: the beginning of the tariff discussion, Europe really step up 86 00:04:54,960 --> 00:04:59,080 Speaker 4: some of their spending, whether it's for military spending, infrastructure. 87 00:05:00,160 --> 00:05:02,479 Speaker 4: Kind of felt a little bit more positive about Europe. 88 00:05:02,560 --> 00:05:04,919 Speaker 4: Is that something that's sustainable or was that kind of 89 00:05:04,920 --> 00:05:06,400 Speaker 4: a one off there. 90 00:05:06,920 --> 00:05:09,599 Speaker 3: I hate being a poor guest and correct, you know, 91 00:05:09,640 --> 00:05:13,080 Speaker 3: correcting you. We saw Europe step up talk, yes, more 92 00:05:13,520 --> 00:05:17,279 Speaker 3: fiscal spending. It's yet to be seen how much room 93 00:05:17,360 --> 00:05:20,960 Speaker 3: there is. Germany clearly has room, but that's disappearing because 94 00:05:21,000 --> 00:05:24,040 Speaker 3: their entitlement spending is going way up, So in two 95 00:05:24,160 --> 00:05:27,279 Speaker 3: years that room may disappear. Most of the rest of 96 00:05:27,320 --> 00:05:29,280 Speaker 3: Europe doesn't have room, and it's not clear where it's 97 00:05:29,279 --> 00:05:30,960 Speaker 3: going to come from, so we'll have to see what 98 00:05:31,000 --> 00:05:31,520 Speaker 3: they deliver. 99 00:05:32,320 --> 00:05:35,200 Speaker 4: Yeah, the Era one eighteen, so they're going I look. 100 00:05:35,080 --> 00:05:36,840 Speaker 2: At these moves and I guess my question is that 101 00:05:36,839 --> 00:05:38,560 Speaker 2: we're going to go back to Japan in terms of 102 00:05:38,560 --> 00:05:41,080 Speaker 2: your excitement of big figure moves. Are you and a 103 00:05:41,120 --> 00:05:44,080 Speaker 2: Steve england Er big figure moment here or is it 104 00:05:44,120 --> 00:05:46,320 Speaker 2: a grind through twenty twenty six? 105 00:05:47,200 --> 00:05:49,240 Speaker 3: You know, I think if we're right on the dollar, 106 00:05:49,320 --> 00:05:51,159 Speaker 3: it's going to be a grind because it takes a 107 00:05:51,160 --> 00:05:52,760 Speaker 3: while for the market to buy. 108 00:05:52,680 --> 00:05:54,800 Speaker 4: Into long term thesies. 109 00:05:55,040 --> 00:05:57,200 Speaker 3: If it's really the case that the US economy is 110 00:05:57,279 --> 00:06:01,719 Speaker 3: more robust, productivity growth is picking up capital flows, both 111 00:06:02,600 --> 00:06:06,440 Speaker 3: equity flows, you know, private equity flows, direct investment and 112 00:06:07,040 --> 00:06:10,280 Speaker 3: as we think real interest rates pick up, fixed income 113 00:06:10,320 --> 00:06:13,080 Speaker 3: flows pick up, but that's a very gradual process. The 114 00:06:13,560 --> 00:06:16,479 Speaker 3: bad stuff is higher frequency and that's. 115 00:06:16,400 --> 00:06:17,200 Speaker 5: More short term. 116 00:06:17,400 --> 00:06:19,560 Speaker 2: Steven ended her with us, Michael Mayo scheduled to be 117 00:06:19,640 --> 00:06:21,159 Speaker 2: with us here just in a bed and then free 118 00:06:21,160 --> 00:06:24,800 Speaker 2: a beamish, very strong moment for global Wall Street tie. 119 00:06:25,080 --> 00:06:29,320 Speaker 2: Your currencies is litmus paper for everything else in the markets, 120 00:06:29,400 --> 00:06:32,520 Speaker 2: including commodities. I mean, Standard Charter has such a good 121 00:06:32,560 --> 00:06:36,719 Speaker 2: perspective on that. What are currencies tell you now about 122 00:06:36,720 --> 00:06:39,440 Speaker 2: a potential commodity boom? Or what China is going to 123 00:06:39,520 --> 00:06:42,880 Speaker 2: do with commodities or the equity markets in the Western 124 00:06:43,120 --> 00:06:44,760 Speaker 2: you know, the Atlantic sphere. 125 00:06:45,160 --> 00:06:47,800 Speaker 3: Well, my colleague whom you know, Sukie Cooper, had been 126 00:06:47,800 --> 00:06:51,800 Speaker 3: shaming lights out for fantastic and she'd been saying last 127 00:06:51,839 --> 00:06:54,000 Speaker 3: week that it looked like some of the commodities were overbought. 128 00:06:55,200 --> 00:06:57,840 Speaker 3: Now we've corrected, and I think, you know, so far 129 00:06:57,880 --> 00:06:59,640 Speaker 3: you're beginning to see people come in. It could end 130 00:06:59,720 --> 00:07:02,680 Speaker 3: up being a healthy correction rather than a bad one. 131 00:07:02,720 --> 00:07:07,040 Speaker 3: In terms of currency impact, right, you know, you look 132 00:07:07,040 --> 00:07:10,480 Speaker 3: at say silver or gold against Pickett currency euro, right 133 00:07:10,520 --> 00:07:13,320 Speaker 3: that's appreciated against the dollar. The chart looks almost exactly 134 00:07:13,360 --> 00:07:17,000 Speaker 3: the same. I think what you're seeing is the world 135 00:07:17,040 --> 00:07:20,760 Speaker 3: has concerns about fiat currencies in general, maybe from time 136 00:07:20,800 --> 00:07:23,120 Speaker 3: to time a little bit more about the dollar, but 137 00:07:23,160 --> 00:07:25,840 Speaker 3: it's not like the European physical situation is gold and 138 00:07:25,920 --> 00:07:28,800 Speaker 3: the Japanese fiscal situation is gold, and any of the 139 00:07:28,840 --> 00:07:33,680 Speaker 3: major currencies have strong economies that you can really count 140 00:07:33,720 --> 00:07:36,520 Speaker 3: on as on a sustainable basis. So I think we're 141 00:07:36,560 --> 00:07:39,440 Speaker 3: looking for the world is looking for store, you know, 142 00:07:39,600 --> 00:07:41,760 Speaker 3: stories of value that's not a fiat currency. 143 00:07:41,840 --> 00:07:44,680 Speaker 2: What was class like with you and Keen Greens sent 144 00:07:44,840 --> 00:07:49,000 Speaker 2: and shares dumb PhD students like name it were you? 145 00:07:49,040 --> 00:07:54,120 Speaker 2: There were shillerous. 146 00:07:52,320 --> 00:07:55,280 Speaker 3: Not not medically anemy, but Schiller was there for part 147 00:07:55,280 --> 00:07:59,560 Speaker 3: of my time. I'd say Kon Green was never done. 148 00:08:00,120 --> 00:08:03,120 Speaker 2: Oh no, Now he's been a huge support. But between 149 00:08:03,160 --> 00:08:05,640 Speaker 2: the two of you, that's some intellectual firepower. 150 00:08:05,920 --> 00:08:09,120 Speaker 3: Wells he and one of the things he was very capable. 151 00:08:09,160 --> 00:08:10,320 Speaker 3: I think he was one of the first in the 152 00:08:10,360 --> 00:08:13,400 Speaker 3: class to finish the PhD, So you know, he really 153 00:08:13,480 --> 00:08:14,120 Speaker 3: was focused. 154 00:08:14,160 --> 00:08:17,240 Speaker 2: Yeah, as you point out that his thesis was golden fetters, 155 00:08:17,240 --> 00:08:21,080 Speaker 2: which became this absolute mustard if you didn't read Golden fetters. 156 00:08:21,080 --> 00:08:23,560 Speaker 2: You didn't get to play the game. We'll get Professor 157 00:08:23,640 --> 00:08:27,040 Speaker 2: Eichen Greenan on his new book, which is hugely anticipated. 158 00:08:27,120 --> 00:08:30,280 Speaker 2: It's like Rogue Off, a sprawling history of foreign exchange, 159 00:08:30,280 --> 00:08:32,240 Speaker 2: and no doubt Englander will read it cover to cover. 160 00:08:32,480 --> 00:08:34,920 Speaker 2: Thank you for coming in today is a standard Angler's 161 00:08:34,960 --> 00:08:39,800 Speaker 2: standard charter. A bank there with some real movement. Stay 162 00:08:39,840 --> 00:08:43,719 Speaker 2: with us. More from Bloomberg Surveillance coming up after this. 163 00:08:50,960 --> 00:08:54,560 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 164 00:08:54,640 --> 00:08:57,760 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 165 00:08:57,880 --> 00:09:01,280 Speaker 1: Apple Karplay and Android Otto with the Bloomberg is ess Up, 166 00:09:01,440 --> 00:09:03,920 Speaker 1: or watch us live on YouTube. 167 00:09:03,640 --> 00:09:07,800 Speaker 2: Tree a Beamish for this right now with ts Lombard 168 00:09:07,920 --> 00:09:11,280 Speaker 2: just with brilliant work and particularly on Asia Paul, this 169 00:09:11,320 --> 00:09:13,439 Speaker 2: could be like an hour at Chat totally, so we 170 00:09:13,480 --> 00:09:14,360 Speaker 2: get black outs. 171 00:09:14,120 --> 00:09:16,920 Speaker 4: Into their offices. Ts Lombard literally across the street from 172 00:09:16,920 --> 00:09:17,840 Speaker 4: Bloomberg at London. 173 00:09:18,080 --> 00:09:19,680 Speaker 2: Yeah, yeah, it's also do there. 174 00:09:19,760 --> 00:09:20,840 Speaker 4: I mean we're neighbors. 175 00:09:20,960 --> 00:09:23,000 Speaker 2: They go over to the Royal Exchange, I know, I know, 176 00:09:23,920 --> 00:09:27,560 Speaker 2: go to Boodles. I've seen free and Bootles buying something before. 177 00:09:27,840 --> 00:09:31,439 Speaker 2: Wonderful to have you in our studios. Let's go American 178 00:09:31,760 --> 00:09:35,880 Speaker 2: right now. You are quite the student of a labor dynamic, 179 00:09:35,960 --> 00:09:40,600 Speaker 2: a capital dynamic, a total factor productivity dynamic. Do you 180 00:09:40,679 --> 00:09:43,760 Speaker 2: really believe, as Steven Englander does, that we have a 181 00:09:43,840 --> 00:09:45,559 Speaker 2: new productivity. 182 00:09:46,360 --> 00:09:50,560 Speaker 6: I believe in there being strong, stronger structural productivity growth 183 00:09:51,040 --> 00:09:54,320 Speaker 6: visa v like the twenty tens when you had austerity 184 00:09:54,400 --> 00:09:57,400 Speaker 6: and monetary policy was the answer to everything and so 185 00:09:57,559 --> 00:09:59,400 Speaker 6: and cheap labor was the answer to everything as well. 186 00:09:59,440 --> 00:10:02,000 Speaker 6: So productive growth at that moment in time was very weak. 187 00:10:02,679 --> 00:10:04,240 Speaker 6: And now we have the sort of the reverse of 188 00:10:04,280 --> 00:10:07,199 Speaker 6: that policy as things stand, and we have a new 189 00:10:07,240 --> 00:10:09,760 Speaker 6: technology in the economies being run hotter and so that 190 00:10:09,960 --> 00:10:12,920 Speaker 6: it's likely for that to be adopted. It's probably also 191 00:10:13,080 --> 00:10:16,160 Speaker 6: likely that that will diffuse out into the macroeconomic statistics 192 00:10:16,160 --> 00:10:19,000 Speaker 6: more so than being just captured by a select group 193 00:10:19,080 --> 00:10:22,000 Speaker 6: of sort of big US farms in the in a 194 00:10:22,000 --> 00:10:23,880 Speaker 6: profit sense as well. And so that's all sort of 195 00:10:23,880 --> 00:10:25,840 Speaker 6: good for the structure, and we see that already in 196 00:10:25,880 --> 00:10:27,760 Speaker 6: the data. But I think a lot of that is 197 00:10:27,800 --> 00:10:30,199 Speaker 6: already in the price for the US where it's still untested. 198 00:10:30,240 --> 00:10:32,280 Speaker 6: And I believe in it for the rest of the world, 199 00:10:32,640 --> 00:10:35,360 Speaker 6: and then for last year in particular, I think there's 200 00:10:35,360 --> 00:10:37,880 Speaker 6: a lot of sort of weird statistical stuff going on 201 00:10:37,920 --> 00:10:40,680 Speaker 6: that perhaps flatters the productivity outturn for the US. If 202 00:10:40,720 --> 00:10:43,960 Speaker 6: you think about sort of how does AI show up 203 00:10:44,000 --> 00:10:47,000 Speaker 6: in the productivity statistics last year, It's like AI capex 204 00:10:47,080 --> 00:10:49,839 Speaker 6: is in the numerator, and all of the uncertainty over 205 00:10:49,920 --> 00:10:53,120 Speaker 6: tariffs is in the is in the denominator. So because 206 00:10:53,160 --> 00:10:56,000 Speaker 6: nobody's because nobody's hiring, so of course productivity is going 207 00:10:56,040 --> 00:10:58,240 Speaker 6: to be temporarily higher in that environment. 208 00:10:58,559 --> 00:11:01,720 Speaker 4: Well, that's certainly what I think are the FED nominee, 209 00:11:01,800 --> 00:11:05,640 Speaker 4: the FED chair nominee, is banking upon AI improving productivity, 210 00:11:05,880 --> 00:11:10,920 Speaker 4: which would offset perhaps any inflationary issues coming from lower rates. 211 00:11:11,559 --> 00:11:13,320 Speaker 4: I don't know, you're an economist, Does that make sense 212 00:11:13,360 --> 00:11:13,560 Speaker 4: to you? 213 00:11:13,840 --> 00:11:17,200 Speaker 6: That's why they're going to be late in realizing that 214 00:11:17,400 --> 00:11:20,040 Speaker 6: if we still have one more cut penciled in for 215 00:11:20,640 --> 00:11:23,040 Speaker 6: this year, precisely for the dynamics that you're that you're 216 00:11:23,080 --> 00:11:26,200 Speaker 6: sort of highlighting. But I think at some stage we're 217 00:11:26,240 --> 00:11:29,480 Speaker 6: going to see a bottoming out in wage growth in 218 00:11:29,559 --> 00:11:32,600 Speaker 6: the context of dropping a lot of fiscal demand into 219 00:11:32,640 --> 00:11:35,400 Speaker 6: this economy. So zero point six percent of GDP coming 220 00:11:35,440 --> 00:11:38,400 Speaker 6: into the middle income section of the distribution through refunds. 221 00:11:38,679 --> 00:11:41,160 Speaker 6: Probably there'll be like stimulation of the bottom part of 222 00:11:41,200 --> 00:11:43,840 Speaker 6: the k that was a bit unhappy in the gubernatorial elections, 223 00:11:44,720 --> 00:11:47,880 Speaker 6: and so so that that demand coming into a very 224 00:11:47,920 --> 00:11:50,920 Speaker 6: dislocated labor market where the NFL break and break even 225 00:11:51,040 --> 00:11:52,520 Speaker 6: is probably about thirty at most. 226 00:11:52,679 --> 00:11:55,839 Speaker 2: So this is a core theme of ourpose and pure 227 00:11:55,960 --> 00:11:58,040 Speaker 2: orzeg in their essay of a couple of weeks ago, 228 00:11:58,440 --> 00:12:02,480 Speaker 2: looking for a persistent, resilient inflation and dare I say 229 00:12:02,480 --> 00:12:05,600 Speaker 2: a higher inflation. Are you in that camp where the 230 00:12:05,640 --> 00:12:10,160 Speaker 2: wage dynamic, the labor dynamic gives us a higher yield structure. 231 00:12:10,480 --> 00:12:12,240 Speaker 6: Yeah, I think so. I mean, over the course of 232 00:12:12,240 --> 00:12:14,960 Speaker 6: this year, we're not actually that far above consensus on 233 00:12:14,960 --> 00:12:18,199 Speaker 6: on our CPI number, just because shelters there and energy 234 00:12:18,240 --> 00:12:20,280 Speaker 6: is all kind of dragging that down a bit. But 235 00:12:20,400 --> 00:12:22,959 Speaker 6: in terms of like the leading indicators for twenty twenty 236 00:12:23,000 --> 00:12:25,160 Speaker 6: seven and how the narrative could shift over the course 237 00:12:25,200 --> 00:12:27,720 Speaker 6: of this year, how that could get played out in 238 00:12:27,760 --> 00:12:30,800 Speaker 6: the in the longer end of the curve in the 239 00:12:30,840 --> 00:12:33,600 Speaker 6: bond market, that seems to be the shift that is 240 00:12:33,640 --> 00:12:36,439 Speaker 6: going to happen over the course of maybe not immediately, 241 00:12:36,480 --> 00:12:38,920 Speaker 6: because there's so much of a tail rind behind this 242 00:12:39,000 --> 00:12:41,880 Speaker 6: kind of productivity story. That's the sort of the new 243 00:12:41,920 --> 00:12:45,440 Speaker 6: fed chair. That's his sort of that's his boosterism, that 244 00:12:45,480 --> 00:12:47,640 Speaker 6: he's sort of that's he's pushing, and that gives them 245 00:12:47,679 --> 00:12:49,439 Speaker 6: a little bit of time. I wouldn't want to run 246 00:12:49,440 --> 00:12:52,079 Speaker 6: against the equity market when you've got all this fiscal 247 00:12:52,080 --> 00:12:55,040 Speaker 6: policy coming into the into the pipeline. But over the 248 00:12:55,040 --> 00:12:56,800 Speaker 6: course of this year, I think the narrative is going 249 00:12:56,840 --> 00:12:58,679 Speaker 6: to shift to actually, what does this mean for the 250 00:12:58,760 --> 00:13:00,600 Speaker 6: labor market and what does this mean for the underlying 251 00:13:00,600 --> 00:13:02,600 Speaker 6: trends in inflation, which are probably going to be higher, 252 00:13:02,600 --> 00:13:04,559 Speaker 6: particularly in the context of the globalization. 253 00:13:05,120 --> 00:13:07,800 Speaker 4: In your talking points, you highlight Japan, which is great 254 00:13:07,840 --> 00:13:10,040 Speaker 4: because this is a crazy story to me. When I 255 00:13:10,040 --> 00:13:11,960 Speaker 4: started my career in the eighties on Wall Street, you 256 00:13:12,240 --> 00:13:14,240 Speaker 4: had to be in Tokyo because that's where all the 257 00:13:14,360 --> 00:13:17,000 Speaker 4: action was, and we were there and we were doing deals. 258 00:13:17,080 --> 00:13:20,640 Speaker 4: Then it died for like a generation plus. Now people 259 00:13:20,640 --> 00:13:24,240 Speaker 4: are talking about more what's the call your call on Japan? Here? 260 00:13:24,320 --> 00:13:26,840 Speaker 4: Is this a flash in Japan or is this a renaissance? 261 00:13:27,120 --> 00:13:29,200 Speaker 6: I don't think it's a flash in the pan, But 262 00:13:29,240 --> 00:13:33,840 Speaker 6: I think both the renaissance and the crisis calls are 263 00:13:34,040 --> 00:13:36,960 Speaker 6: overblown at this moment in time. On the renaissance side, 264 00:13:37,000 --> 00:13:40,400 Speaker 6: I think yields are rising because of that renaissance, right, 265 00:13:40,800 --> 00:13:44,400 Speaker 6: I've gone back to European pronunciation. Now they're rising because 266 00:13:44,400 --> 00:13:47,480 Speaker 6: of that. Because of that renaissance, nominal GDP growth is 267 00:13:47,559 --> 00:13:49,920 Speaker 6: higher and therefore yields a higher as a result of that. 268 00:13:50,040 --> 00:13:52,880 Speaker 6: Does that doesn't immediately mean fiscal crisis when you have 269 00:13:52,920 --> 00:13:55,960 Speaker 6: an eight point five year average maturity on the debt, 270 00:13:56,000 --> 00:13:58,520 Speaker 6: because it's the effective interest rate that they're paying, So 271 00:13:58,559 --> 00:14:01,080 Speaker 6: it takes a huge blowout in term premium, not just 272 00:14:01,080 --> 00:14:03,200 Speaker 6: the sort of a normalization based on the fact that 273 00:14:03,240 --> 00:14:08,080 Speaker 6: we're moving from a savings led deflationary regime to a 274 00:14:08,080 --> 00:14:11,120 Speaker 6: regime where there's actually some degree of competition for fun. 275 00:14:11,280 --> 00:14:13,600 Speaker 6: So I don't think we're in a fiscal crisis. But 276 00:14:13,679 --> 00:14:17,320 Speaker 6: I also think in terms of inflation downside surprises, which 277 00:14:17,360 --> 00:14:19,640 Speaker 6: is a key trigger for the yen that could start 278 00:14:19,680 --> 00:14:22,040 Speaker 6: to come through. If you think of nominal GDP growth, 279 00:14:22,080 --> 00:14:24,040 Speaker 6: where that would be and where inflation is probably going 280 00:14:24,120 --> 00:14:26,000 Speaker 6: to pan out at one point five In. 281 00:14:25,880 --> 00:14:29,480 Speaker 2: Her studios with fabulous work at Ts Lombard, London, her 282 00:14:29,560 --> 00:14:32,360 Speaker 2: work at the London School of Economics and the University 283 00:14:32,360 --> 00:14:36,120 Speaker 2: of Edinburgh, Free of Beamish with us today adp out 284 00:14:36,160 --> 00:14:39,120 Speaker 2: at eight point fifteen. I guess more important because I 285 00:14:39,120 --> 00:14:43,240 Speaker 2: don't have a Friday jobs report right now. Maybe I 286 00:14:43,240 --> 00:14:46,280 Speaker 2: don't think that'll change my kiss now. The revision cut 287 00:14:46,320 --> 00:14:49,640 Speaker 2: a little lower. The survey was forty five thousand. It 288 00:14:49,680 --> 00:14:53,760 Speaker 2: came in at a paltry twenty two thousand mortgage applications 289 00:14:53,760 --> 00:14:57,000 Speaker 2: with the negative statistic. Okay, that's true, Shary pass when 290 00:14:57,040 --> 00:15:00,640 Speaker 2: you have the ISM Services Index for you ten o'clock 291 00:15:01,720 --> 00:15:05,000 Speaker 2: is as well. I guess I just got to ask 292 00:15:05,040 --> 00:15:08,440 Speaker 2: you about China, Frere with your fabulous work over the decade, 293 00:15:09,000 --> 00:15:13,280 Speaker 2: and China is there five percent? You talk about nominal GDP? 294 00:15:13,800 --> 00:15:16,800 Speaker 2: Do they have a legitimate seven percent nominal GDP? 295 00:15:17,840 --> 00:15:20,360 Speaker 6: Maybe not seven percent, certainly not sort of a trend. 296 00:15:20,360 --> 00:15:23,520 Speaker 6: But we are above consensus on real growth this year, 297 00:15:23,600 --> 00:15:27,120 Speaker 6: so sort of four point eight percent, and probably inflation 298 00:15:27,240 --> 00:15:30,680 Speaker 6: a little bit less, less low and less deflationary than 299 00:15:30,680 --> 00:15:32,080 Speaker 6: it was last year. That's more of a sort of 300 00:15:32,120 --> 00:15:35,440 Speaker 6: a tactical call, probably just because there's like a lot 301 00:15:35,480 --> 00:15:37,560 Speaker 6: of stimulus coming into the system in the first half. 302 00:15:37,720 --> 00:15:41,640 Speaker 2: Can you see them moving everything over to Malaysia, everything 303 00:15:41,720 --> 00:15:44,560 Speaker 2: over to Vietnam, and you know, basically just saying to 304 00:15:44,600 --> 00:15:47,040 Speaker 2: President Trump, I'm sorry, we're going to do an end around. 305 00:15:48,160 --> 00:15:50,040 Speaker 6: I think I think that's a sort of a trend. 306 00:15:50,120 --> 00:15:53,360 Speaker 6: I think the American authorities are sort of onto that 307 00:15:53,400 --> 00:15:55,480 Speaker 6: to some degree. Certainly when we look at who they're 308 00:15:55,520 --> 00:15:57,800 Speaker 6: tariffing and who they're sort of like sort of lashing 309 00:15:57,800 --> 00:16:00,880 Speaker 6: out against. There's those those are the countries are sort 310 00:16:00,920 --> 00:16:03,760 Speaker 6: of there. But I think there is also a concerted 311 00:16:03,800 --> 00:16:06,840 Speaker 6: shift and a realization that the consumption is now a 312 00:16:06,920 --> 00:16:10,720 Speaker 6: question of national security. Reorganizing the economy towards consumption as 313 00:16:10,760 --> 00:16:13,400 Speaker 6: a question of national security. Whether they'll be successful in 314 00:16:13,440 --> 00:16:16,400 Speaker 6: that in any kind of you know, positive senses is 315 00:16:16,800 --> 00:16:22,200 Speaker 6: more of a question, But that reordering towards private consumption 316 00:16:22,320 --> 00:16:25,160 Speaker 6: is certainly enough to sustain the tactical rally for the moment. 317 00:16:25,240 --> 00:16:27,120 Speaker 6: There might be a little bit of a by the 318 00:16:27,200 --> 00:16:29,440 Speaker 6: rumor sell the fact, and March is the point when 319 00:16:29,440 --> 00:16:31,000 Speaker 6: the fact comes in, So I'll be a bit more 320 00:16:31,040 --> 00:16:33,040 Speaker 6: worried about the equity market at that point in time. 321 00:16:33,320 --> 00:16:36,080 Speaker 4: Free when you talk to your UK and European clients. 322 00:16:36,400 --> 00:16:39,520 Speaker 4: Do they feel like the UK Europe They're really on 323 00:16:39,560 --> 00:16:43,600 Speaker 4: their own now they can't. There's the globalization, the relationship, 324 00:16:44,080 --> 00:16:47,080 Speaker 4: trade relationship with the US. It's fundamentally changed, is that 325 00:16:47,080 --> 00:16:47,480 Speaker 4: the belief? 326 00:16:47,560 --> 00:16:50,480 Speaker 6: Yeah, it has fundamentally changed, But partly as a result 327 00:16:50,520 --> 00:16:53,560 Speaker 6: of that, and partly because of the political instability that 328 00:16:53,680 --> 00:16:59,000 Speaker 6: is rising within Europe as well as across most major economies. 329 00:16:59,360 --> 00:17:02,840 Speaker 6: There is atic response and reordering towards domestic demand, and 330 00:17:03,240 --> 00:17:05,520 Speaker 6: the German fiscal policy that's coming through, I think is 331 00:17:06,920 --> 00:17:09,280 Speaker 6: also potentially a good thing for equities. We were never 332 00:17:09,280 --> 00:17:13,080 Speaker 6: big believers in the export led growth model as a 333 00:17:13,400 --> 00:17:16,600 Speaker 6: driver of equities for EMS or for Europe, so we 334 00:17:16,640 --> 00:17:19,680 Speaker 6: can't now start crying about how the export led growth 335 00:17:19,680 --> 00:17:22,800 Speaker 6: model is dying when there's something there that does appear 336 00:17:22,840 --> 00:17:25,040 Speaker 6: to be replacing it, partly as a result of all this, 337 00:17:25,200 --> 00:17:25,919 Speaker 6: in this chaos. 338 00:17:26,640 --> 00:17:28,480 Speaker 2: Thank you so much for coming in. Just wonderful to 339 00:17:28,560 --> 00:17:31,680 Speaker 2: have you here today. But Ts Lombard London freea Beamishwell's 340 00:17:31,720 --> 00:17:37,399 Speaker 2: chief economists. Stay with us. More from Bloomberg Surveillance coming 341 00:17:37,480 --> 00:17:38,440 Speaker 2: up after this. 342 00:17:45,720 --> 00:17:49,280 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 343 00:17:49,359 --> 00:17:52,320 Speaker 1: weekday afternoons from seven to ten am. He's durn listen 344 00:17:52,440 --> 00:17:56,000 Speaker 1: on Applecarplay and Android Otto with the Bloomberg Business app, 345 00:17:56,160 --> 00:17:57,920 Speaker 1: or watch us live on YouTube. 346 00:17:58,080 --> 00:18:00,240 Speaker 2: You know it's Paul's bit brilliant on this. I mean 347 00:18:00,320 --> 00:18:05,320 Speaker 2: dxy like a rock dxy, the blended major trading currency 348 00:18:05,400 --> 00:18:11,000 Speaker 2: like Bloomberg Dollar index a ninety excuse me, a ninety seven. 349 00:18:11,119 --> 00:18:13,520 Speaker 2: It just won't give way. I mean, everybody's going weaker 350 00:18:13,600 --> 00:18:18,120 Speaker 2: dollar weeker dollar. In that long agoing far away, there 351 00:18:18,200 --> 00:18:19,800 Speaker 2: was a bank roll up and I don't have the 352 00:18:19,880 --> 00:18:21,960 Speaker 2: numbers in front of me, but there was like sixteen 353 00:18:22,040 --> 00:18:27,560 Speaker 2: thousand American banks, and now there's under five thousand American banks. 354 00:18:27,560 --> 00:18:29,800 Speaker 2: And someday we're going to be like Canada and I 355 00:18:29,880 --> 00:18:33,520 Speaker 2: have five banks. Someone that's been just absolutely legendary and 356 00:18:33,560 --> 00:18:36,720 Speaker 2: following saying yes, we'll get the Mic Mayo on City 357 00:18:36,720 --> 00:18:39,760 Speaker 2: Group as well. What a moonshot that is. Mayo finally 358 00:18:39,760 --> 00:18:43,040 Speaker 2: gets Jane Fraser to behave yourself and get something done here. 359 00:18:43,280 --> 00:18:49,160 Speaker 2: But today with Webster Financial of Waterbury, Connecticut, forys they're 360 00:18:49,160 --> 00:18:51,639 Speaker 2: going to be taken out by Tender Bank. It's like 361 00:18:51,680 --> 00:18:54,920 Speaker 2: a new era. You say, good to see you look, 362 00:18:55,000 --> 00:18:57,959 Speaker 2: you look great. I mean, you know, I look at 363 00:18:58,000 --> 00:18:59,760 Speaker 2: this and you're giving me. This is a new ear 364 00:18:59,800 --> 00:19:03,000 Speaker 2: for bank mergers. We've said that like five times. What's 365 00:19:03,040 --> 00:19:03,920 Speaker 2: different now. 366 00:19:04,480 --> 00:19:09,440 Speaker 5: Well, you have night and day difference in bank regulation. 367 00:19:09,640 --> 00:19:14,040 Speaker 5: This is once in a generation deregulation. Since the Financial Crisis, 368 00:19:14,480 --> 00:19:17,879 Speaker 5: regulators didn't want banks to merge so much. And now 369 00:19:18,000 --> 00:19:20,119 Speaker 5: it's back to the future. It's when I worked at 370 00:19:20,160 --> 00:19:22,919 Speaker 5: the FED thirty five years ago, we approved bank deals 371 00:19:22,960 --> 00:19:25,399 Speaker 5: in ninety days. And guess what they're back to doing. 372 00:19:25,560 --> 00:19:26,800 Speaker 5: They're back to approving deals. 373 00:19:26,920 --> 00:19:29,120 Speaker 2: Is that a one off with Trump? And after President 374 00:19:29,200 --> 00:19:31,080 Speaker 2: Trump we see something different. No. 375 00:19:31,400 --> 00:19:34,159 Speaker 5: I think there's a realization that the lack of bank 376 00:19:34,280 --> 00:19:37,119 Speaker 5: deals was a gift to Jamie Diamond. I mean you 377 00:19:37,200 --> 00:19:38,320 Speaker 5: just prevented a lot. 378 00:19:38,400 --> 00:19:40,280 Speaker 2: I happen to agree with this, but continue. 379 00:19:40,400 --> 00:19:44,240 Speaker 5: Yeah, like bank mergers are needed instead of just having 380 00:19:44,320 --> 00:19:47,360 Speaker 5: you know, Goliath is winning. JP Morgan is the Goliath 381 00:19:47,400 --> 00:19:50,080 Speaker 5: of Goliath. And to put this in perspective, the bank 382 00:19:50,080 --> 00:19:53,639 Speaker 5: that just sold to Bank of Santander JP Morgan is 383 00:19:53,680 --> 00:19:56,960 Speaker 5: going to spend about twenty billion dollars on tech expenses 384 00:19:57,000 --> 00:20:00,600 Speaker 5: this year. That would equal fifteen years the bank that 385 00:20:00,720 --> 00:20:04,520 Speaker 5: just solds total expenses? So how do you compete if 386 00:20:04,560 --> 00:20:07,520 Speaker 5: you're a small bank. Scale is more important than ever 387 00:20:07,560 --> 00:20:09,879 Speaker 5: before in banking. So you have the need, you have 388 00:20:09,920 --> 00:20:13,280 Speaker 5: the ability with the regulation, and it's happening, it's just 389 00:20:13,320 --> 00:20:16,000 Speaker 5: getting started. This is a new error for bank mergers 390 00:20:16,080 --> 00:20:19,560 Speaker 5: once again, Thomas, you may recall in the nineteen nineties 391 00:20:19,600 --> 00:20:21,920 Speaker 5: that's what I made a name for myself with our 392 00:20:21,960 --> 00:20:26,000 Speaker 5: bank franchise value model, and this morning I reintroduced that 393 00:20:26,080 --> 00:20:30,520 Speaker 5: bank franchise value model to highlight hidden values at banks. 394 00:20:30,480 --> 00:20:34,000 Speaker 2: Do you have to pay a royalty to credit squeeze? Paul? 395 00:20:34,080 --> 00:20:35,480 Speaker 2: So you jump into my bank? 396 00:20:35,600 --> 00:20:39,720 Speaker 4: So, Mike, how is this merger wave going to look 397 00:20:39,800 --> 00:20:42,919 Speaker 4: like in the bank space? Is it the regional banks? 398 00:20:42,960 --> 00:20:45,840 Speaker 4: Is you know, regional banks merging? Are we going to 399 00:20:45,840 --> 00:20:48,639 Speaker 4: see creation of more super regionals? What are we going? 400 00:20:48,760 --> 00:20:49,840 Speaker 4: How's that going to look for us? 401 00:20:50,119 --> 00:20:52,320 Speaker 5: I think it's going to be banks that rank, you know, 402 00:20:52,400 --> 00:20:55,840 Speaker 5: twentieth to one hundredth in size, and I think you'll see, 403 00:20:56,040 --> 00:21:00,360 Speaker 5: you know, deals where you have undervalued banks. Remember twenty 404 00:21:00,400 --> 00:21:03,000 Speaker 5: three wasn't that long ago when you had some regional 405 00:21:03,000 --> 00:21:06,280 Speaker 5: bank failures and several banks were looking at the abyss 406 00:21:07,080 --> 00:21:11,400 Speaker 5: and their long term value is debatable, but their short 407 00:21:11,480 --> 00:21:14,240 Speaker 5: term value is still very much there. So I think 408 00:21:14,280 --> 00:21:19,000 Speaker 5: these kind of mid sized banks, you know, have their 409 00:21:19,040 --> 00:21:21,720 Speaker 5: moment reckoning and I think this is and this is 410 00:21:21,760 --> 00:21:26,199 Speaker 5: a window to where I think murders are you know, tolerated, encouraged, 411 00:21:27,000 --> 00:21:30,439 Speaker 5: and that might not last forever like after the Trump presidency, 412 00:21:30,520 --> 00:21:31,320 Speaker 5: but it should. 413 00:21:31,480 --> 00:21:34,080 Speaker 2: How many banks will there be in five years? I mean, 414 00:21:34,280 --> 00:21:37,800 Speaker 2: am I right? We went from sixteen thousand It's Thomas 415 00:21:37,800 --> 00:21:40,439 Speaker 2: showed that Keith buryet would know this six down to 416 00:21:40,480 --> 00:21:41,960 Speaker 2: four thousand banks now right. 417 00:21:42,440 --> 00:21:45,399 Speaker 5: From fifteen thousand or forty six hundred, and I'd expect 418 00:21:45,400 --> 00:21:47,280 Speaker 5: the number of banks be cut in half over the 419 00:21:47,359 --> 00:21:50,720 Speaker 5: next next next ten years, ten years. 420 00:21:50,840 --> 00:21:51,000 Speaker 2: Yeah. 421 00:21:51,000 --> 00:21:54,000 Speaker 4: I got a neighbor mind I commute with. He postponed 422 00:21:54,040 --> 00:21:56,760 Speaker 4: his retirement. He's a banker on financial services. He says, 423 00:21:56,800 --> 00:21:57,959 Speaker 4: I'm going to make a lot of money in M 424 00:21:57,960 --> 00:22:00,560 Speaker 4: and A the next few years. I'm not retiring. So 425 00:22:01,240 --> 00:22:05,280 Speaker 4: what's driving the consolidation here? Is it that technology investment 426 00:22:05,320 --> 00:22:07,639 Speaker 4: that's required You mentioned JP Morgan versus some of these 427 00:22:07,640 --> 00:22:10,240 Speaker 4: smaller banks. Is that what's driving some of this consolidation. 428 00:22:10,800 --> 00:22:13,480 Speaker 5: Yeah, I think the need for scale has never been 429 00:22:13,480 --> 00:22:16,159 Speaker 5: more important. But you know what's happening right now. The 430 00:22:16,320 --> 00:22:20,280 Speaker 5: level of competition in US banking is the greatest it's 431 00:22:20,320 --> 00:22:24,439 Speaker 5: been since before the global financial crisis. Banks are adding 432 00:22:24,600 --> 00:22:32,960 Speaker 5: more branches, bankers, marketing, credit card mailings, technology AI and 433 00:22:33,040 --> 00:22:35,520 Speaker 5: so it's competitive out there. And so if you can 434 00:22:35,600 --> 00:22:38,960 Speaker 5: leverage those calls over a larger customer base, that tends 435 00:22:39,000 --> 00:22:42,520 Speaker 5: to benefit. So there's an economic reason for this happening. 436 00:22:42,160 --> 00:22:44,960 Speaker 2: For Global Wall Street. Stephen Englander with US now, Michael 437 00:22:45,040 --> 00:22:47,960 Speaker 2: Mayo with US, A Wells Fargo, friabeamish coming up here 438 00:22:48,200 --> 00:22:51,840 Speaker 2: in a bit across America. Everyone listening to mister Mayo 439 00:22:51,920 --> 00:22:55,400 Speaker 2: as they do within the banking business. This Smead family, 440 00:22:55,640 --> 00:23:02,560 Speaker 2: fabulous value investors, wonderful, wonderful, contrarian record, serious serious stuff 441 00:23:02,960 --> 00:23:04,920 Speaker 2: and calls to meat emails. And he says, you got 442 00:23:04,960 --> 00:23:07,920 Speaker 2: to ask Mike Mayo about a bank bigger than Webster. 443 00:23:07,960 --> 00:23:11,639 Speaker 2: And this gets into almost regional and super regional, something 444 00:23:11,720 --> 00:23:16,360 Speaker 2: like fifth third of Cincinnati. They don't have four thousand employees, 445 00:23:16,400 --> 00:23:19,520 Speaker 2: they got nineteen thousand employees. What is a bank like 446 00:23:19,600 --> 00:23:20,720 Speaker 2: that doing right now? 447 00:23:20,960 --> 00:23:26,160 Speaker 5: Well, there's a few idiosyncratic situations where you have exceptional management. 448 00:23:26,680 --> 00:23:30,280 Speaker 5: And Third is one of those banks. The CEO fifth 449 00:23:30,280 --> 00:23:34,480 Speaker 5: Third Tim Spence. He's kind of the next generation Jamie Diamond, 450 00:23:34,760 --> 00:23:38,400 Speaker 5: repackaged in a different form. And so so far. They 451 00:23:38,400 --> 00:23:41,680 Speaker 5: started off with their acquisition of this bank called Kamerica, 452 00:23:42,080 --> 00:23:45,040 Speaker 5: I was headquartered in Data. It just closed this past 453 00:23:45,080 --> 00:23:49,360 Speaker 5: weekend and amazing. They they are targets that they were 454 00:23:49,400 --> 00:23:51,600 Speaker 5: looking for next year and now they expect to achieve 455 00:23:51,600 --> 00:23:54,800 Speaker 5: in the fourth quarter of this year, and they think 456 00:23:54,840 --> 00:23:58,320 Speaker 5: out of the box. They've had good technology. This merger 457 00:23:58,359 --> 00:24:00,640 Speaker 5: is off to a great start. So I'd say they're 458 00:24:00,680 --> 00:24:02,560 Speaker 5: the acception to the role in terms of a bank 459 00:24:02,720 --> 00:24:03,440 Speaker 5: that size. 460 00:24:04,440 --> 00:24:06,680 Speaker 4: I want to start a business, I want to build 461 00:24:06,720 --> 00:24:09,120 Speaker 4: a multi family residential thing. 462 00:24:09,240 --> 00:24:09,520 Speaker 5: Majig. 463 00:24:09,960 --> 00:24:11,960 Speaker 4: Is my local bank going to make a loan to me? 464 00:24:12,040 --> 00:24:13,639 Speaker 4: Are they going to bank me? Or do I have 465 00:24:13,680 --> 00:24:14,400 Speaker 4: to go somewhere else? 466 00:24:14,680 --> 00:24:17,240 Speaker 5: No, you can get loans, I mean for a bank, 467 00:24:17,280 --> 00:24:19,679 Speaker 5: it doesn't matter what size yard. It's easy to make loans. 468 00:24:19,720 --> 00:24:22,960 Speaker 5: The hard part is getting paid back. Okay, in fact, 469 00:24:23,040 --> 00:24:25,199 Speaker 5: a lot of good credit. If you're a customer, you 470 00:24:25,240 --> 00:24:27,080 Speaker 5: go around. You can shop around to a lot of 471 00:24:27,080 --> 00:24:30,080 Speaker 5: different banks, and sometimes these smaller banks are the ones 472 00:24:30,080 --> 00:24:33,840 Speaker 5: that we'll give you the better terms, looser credit. I frankly, 473 00:24:34,160 --> 00:24:36,359 Speaker 5: I think there could be more risk with these smaller banks. 474 00:24:36,359 --> 00:24:40,120 Speaker 5: The reason you had national banking starting thirty years ago 475 00:24:40,359 --> 00:24:43,800 Speaker 5: was for greater diversification. Remember the rolling recessions it was, 476 00:24:44,080 --> 00:24:46,720 Speaker 5: you know, it was New England and in Texas and California. 477 00:24:46,880 --> 00:24:49,600 Speaker 5: And guess what if you had a diversified geographic footprint, 478 00:24:49,920 --> 00:24:52,240 Speaker 5: less chance of failing. Whereas a lot of these smaller banks, 479 00:24:52,520 --> 00:24:55,800 Speaker 5: once again, who looked at the abyss in twenty twenty 480 00:24:55,800 --> 00:24:57,280 Speaker 5: three are not as diverse. 481 00:24:57,320 --> 00:25:00,439 Speaker 2: Bied Okay Sitting Group finally with the Moonshot twenty six 482 00:25:00,520 --> 00:25:04,119 Speaker 2: thousand employees trading it one times book. JP Mortgan is 483 00:25:04,119 --> 00:25:06,200 Speaker 2: a two and a half times book. Is City Group 484 00:25:06,280 --> 00:25:08,400 Speaker 2: with a story you finally got it, You finally got 485 00:25:08,440 --> 00:25:10,760 Speaker 2: your big pop in City Group. Does it keep on 486 00:25:10,840 --> 00:25:12,560 Speaker 2: going and improve that book value? 487 00:25:12,760 --> 00:25:14,639 Speaker 5: You say, finally got the pop. Yeah, it was the 488 00:25:14,640 --> 00:25:17,960 Speaker 5: best performing big bank last year. It's doing my dominant 489 00:25:18,040 --> 00:25:20,479 Speaker 5: number one pick. So I have a barbell strategy with 490 00:25:20,480 --> 00:25:24,359 Speaker 5: my weightlifting theme too. We have the takeover target picks 491 00:25:24,480 --> 00:25:28,040 Speaker 5: banks like Bank United and Bank of California and Associated. 492 00:25:28,119 --> 00:25:29,920 Speaker 5: But I also have City Group on the other side, 493 00:25:30,280 --> 00:25:32,800 Speaker 5: and Jane Fraser is turning this company around. And if 494 00:25:32,800 --> 00:25:36,040 Speaker 5: there's one point for those who cover all industries, how 495 00:25:36,080 --> 00:25:40,040 Speaker 5: many restructuring stories out there are there that get seven 496 00:25:40,040 --> 00:25:42,560 Speaker 5: percent revenue growth? That's what they got last year even 497 00:25:42,560 --> 00:25:46,199 Speaker 5: while they're restructuring. This is a generational restructuring at a 498 00:25:46,280 --> 00:25:50,160 Speaker 5: time of generational deregulation. City Group is the beneficial. 499 00:25:49,720 --> 00:25:52,600 Speaker 2: For their distinction. B there'll be international more than the 500 00:25:52,680 --> 00:25:56,160 Speaker 2: other great American banks. What's what's the Pixie does that's 501 00:25:56,200 --> 00:25:57,280 Speaker 2: going to drive her forward? 502 00:25:57,359 --> 00:25:59,679 Speaker 5: See you're asking that question the way you would have 503 00:25:59,720 --> 00:26:00,920 Speaker 5: for the last fifty years. 504 00:26:01,119 --> 00:26:03,400 Speaker 2: Why you could be like a fossil. I mean, let's 505 00:26:03,440 --> 00:26:06,119 Speaker 2: just wouldn't have asked it that way, I understand. So 506 00:26:06,160 --> 00:26:06,960 Speaker 2: what's a new new? 507 00:26:07,600 --> 00:26:10,399 Speaker 5: The new new is they've only had eight quarters of 508 00:26:10,440 --> 00:26:13,719 Speaker 5: this new structure for half a century. They're organized as 509 00:26:13,760 --> 00:26:18,919 Speaker 5: this global matrix Mishmash structure mishmash and now they have 510 00:26:19,200 --> 00:26:24,080 Speaker 5: five lines of business, which I say simply payments, banking, markets, cards, 511 00:26:24,080 --> 00:26:26,480 Speaker 5: and wealth, with the CEO in charge of each of 512 00:26:26,520 --> 00:26:30,000 Speaker 5: those five, each with a line of business target each 513 00:26:30,000 --> 00:26:31,919 Speaker 5: with and they are responsible. They all report to the 514 00:26:31,920 --> 00:26:33,720 Speaker 5: CEO of that's simple but powerful. 515 00:26:33,800 --> 00:26:36,280 Speaker 2: Twenty second single best buy right now. 516 00:26:36,320 --> 00:26:39,680 Speaker 5: Michael Mayo City Group, I think in three years will 517 00:26:39,720 --> 00:26:41,720 Speaker 5: be a two hundred dollars stock That's not quite a 518 00:26:41,760 --> 00:26:43,400 Speaker 5: double debt to a long way. And by the way, 519 00:26:43,440 --> 00:26:47,200 Speaker 5: there's no analytical gymnastics to get that valuation. They just 520 00:26:47,240 --> 00:26:49,000 Speaker 5: go to one and a half times to handle a 521 00:26:49,040 --> 00:26:49,639 Speaker 5: book value. 522 00:26:49,800 --> 00:26:54,080 Speaker 2: Michael Maniel, thank you so much. Stay with us. More 523 00:26:54,200 --> 00:26:57,080 Speaker 2: from Bloomberg Surveillance coming up after this. 524 00:27:04,320 --> 00:27:07,920 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 525 00:27:08,000 --> 00:27:11,159 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 526 00:27:11,240 --> 00:27:14,879 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 527 00:27:15,040 --> 00:27:16,679 Speaker 1: watch us live on YouTube. 528 00:27:16,960 --> 00:27:21,480 Speaker 2: Newspapers hugely anticipated. Here's Alexis Christophis. 529 00:27:21,000 --> 00:27:23,680 Speaker 7: All right, I've got another Super Bowl article for you guys. 530 00:27:23,680 --> 00:27:25,800 Speaker 7: I know you loved it so much yesterday. Tom So, 531 00:27:25,920 --> 00:27:28,560 Speaker 7: this is from the Wall Street Journal Sunday. Super Bowl, 532 00:27:28,640 --> 00:27:30,520 Speaker 7: you know, going to be played at Levi Stadium in 533 00:27:30,600 --> 00:27:33,280 Speaker 7: Santa Clara, But it doesn't seem to be reaping all 534 00:27:33,280 --> 00:27:35,840 Speaker 7: the benefits you think would go along with hosting the game. 535 00:27:36,240 --> 00:27:40,159 Speaker 7: Why Well, because it's more famous cousin San Francisco is 536 00:27:40,280 --> 00:27:42,760 Speaker 7: ending up with the lion's share of official Super Bowl 537 00:27:42,800 --> 00:27:46,399 Speaker 7: week activities. And that's despite being forty miles north of 538 00:27:46,840 --> 00:27:50,359 Speaker 7: Levi Stadium. So San Francisco, look, it's hard to beat it. 539 00:27:50,359 --> 00:27:52,600 Speaker 7: You got the Golden gate Bridge, you got cable cars 540 00:27:52,640 --> 00:27:56,760 Speaker 7: and Fisherman's Wharf. The mayor of San Jose, which is 541 00:27:56,760 --> 00:27:58,360 Speaker 7: sort of in the back of Santa Clara, is sort 542 00:27:58,359 --> 00:28:01,200 Speaker 7: of the backyard of San Jose trying to come back 543 00:28:01,200 --> 00:28:02,480 Speaker 7: with the roster of events of his own. 544 00:28:02,520 --> 00:28:03,240 Speaker 8: But it's gonna be top. 545 00:28:03,400 --> 00:28:05,760 Speaker 7: I saw this stat during the twenty sixteen Super Bowl, 546 00:28:06,000 --> 00:28:08,440 Speaker 7: which was also played at Levi's. San fran reaped more 547 00:28:08,480 --> 00:28:11,720 Speaker 7: than half of the two hundred and forty million dollar windfall. 548 00:28:11,760 --> 00:28:15,600 Speaker 4: And it's funny because the weather in San Francisco usually clatten, 549 00:28:15,760 --> 00:28:19,840 Speaker 4: you know, foggy, cold, Santa Claara. Perfect. My son goes 550 00:28:19,880 --> 00:28:22,680 Speaker 4: to college at Santa Clara. Yeah, perfect every day. I mean, 551 00:28:22,760 --> 00:28:25,040 Speaker 4: and you know why people don't want to hang out 552 00:28:25,040 --> 00:28:26,480 Speaker 4: down there versus San Francisco. 553 00:28:26,640 --> 00:28:28,080 Speaker 8: That allure of sandfrid it is. 554 00:28:28,119 --> 00:28:29,040 Speaker 4: I guess all right. 555 00:28:29,280 --> 00:28:31,760 Speaker 7: I got another one for you from the Washington Post today. 556 00:28:32,080 --> 00:28:34,200 Speaker 7: This is about the boy Scouts and It sort of 557 00:28:34,280 --> 00:28:36,560 Speaker 7: caught my attention because I have two Eagle Scouts, so. 558 00:28:36,640 --> 00:28:39,760 Speaker 4: We do I do. Wow, that is awesome, great, thank 559 00:28:39,800 --> 00:28:41,840 Speaker 4: you very much. I mean that is I did it. 560 00:28:41,880 --> 00:28:43,040 Speaker 8: But yeah, I was very proud of me. 561 00:28:43,080 --> 00:28:45,360 Speaker 4: I think I when I interview people that are guys 562 00:28:45,400 --> 00:28:48,240 Speaker 4: are like fifty six years old, they put they still 563 00:28:48,240 --> 00:28:49,720 Speaker 4: put Eagle Scout on their resume. 564 00:28:49,840 --> 00:28:52,040 Speaker 8: Oh you bet, Oh yeah, it's right there on their LinkedIn. 565 00:28:52,280 --> 00:28:52,680 Speaker 4: Yep. 566 00:28:52,840 --> 00:28:56,160 Speaker 7: So now the Pentagon is warning Scouts of America to 567 00:28:56,280 --> 00:29:00,160 Speaker 7: make quote core value reforms or lose military support. So 568 00:29:00,160 --> 00:29:02,560 Speaker 7: I didn't realize this, but the relationship between the Pentagon 569 00:29:02,800 --> 00:29:05,600 Speaker 7: and the Scout dates back decades, and now the Defense 570 00:29:05,600 --> 00:29:09,720 Speaker 7: Secretary criticizing the organization for its DEI policies. They allowed 571 00:29:09,760 --> 00:29:13,000 Speaker 7: girls to join the Boy Scouts two years ago, which 572 00:29:13,040 --> 00:29:15,120 Speaker 7: is why we have the name change of Boy Scouts 573 00:29:15,160 --> 00:29:17,800 Speaker 7: of America. So you know, they've got their big national 574 00:29:17,880 --> 00:29:21,600 Speaker 7: jamboree coming up. I think it's just a few months. 575 00:29:21,680 --> 00:29:24,720 Speaker 7: So not having the military spending could be a big 576 00:29:24,760 --> 00:29:25,800 Speaker 7: deal for the organization. 577 00:29:25,880 --> 00:29:26,360 Speaker 5: So we'll see. 578 00:29:26,360 --> 00:29:27,760 Speaker 7: I don't know if they're going to make any changes. 579 00:29:27,760 --> 00:29:29,560 Speaker 7: Are they going to stop allowing girls in? 580 00:29:29,680 --> 00:29:30,240 Speaker 8: We'll see. 581 00:29:30,320 --> 00:29:33,160 Speaker 4: I was a scout that for so many years. I 582 00:29:33,200 --> 00:29:36,320 Speaker 4: hate to camp out, and I camped that every year 583 00:29:36,440 --> 00:29:38,240 Speaker 4: for like twelve years, safe three. 584 00:29:38,280 --> 00:29:43,520 Speaker 2: So it's a mess, to say the least. I mean, 585 00:29:43,560 --> 00:29:45,200 Speaker 2: whatever anybody's opinion is, it's. 586 00:29:45,040 --> 00:29:46,800 Speaker 7: A mess and it's a shame, I think for the 587 00:29:46,880 --> 00:29:48,760 Speaker 7: kids at the end of the day. Yes, but I 588 00:29:48,840 --> 00:29:49,400 Speaker 7: see what happened. 589 00:29:49,440 --> 00:29:51,200 Speaker 2: I wasn't scout. 590 00:29:51,720 --> 00:29:52,040 Speaker 4: You were. 591 00:29:52,960 --> 00:29:54,240 Speaker 8: Wow, well you still are once. 592 00:29:54,280 --> 00:29:55,560 Speaker 4: You were. 593 00:29:57,160 --> 00:30:00,760 Speaker 2: A really really interesting troop in Rochester tatoes, oh, which 594 00:30:00,840 --> 00:30:03,000 Speaker 2: was a bit of the old school back you know, 595 00:30:03,120 --> 00:30:05,400 Speaker 2: like way way back old school. 596 00:30:05,720 --> 00:30:07,560 Speaker 8: You know how to tie all your knots and. 597 00:30:07,520 --> 00:30:10,600 Speaker 2: Oh yeah, last place of notts. Let me tell you, 598 00:30:11,400 --> 00:30:14,560 Speaker 2: And this is true. We're camping out, Paul, And they said, 599 00:30:14,640 --> 00:30:16,440 Speaker 2: you know, clean the dish. So I cleaned the dish 600 00:30:16,480 --> 00:30:21,480 Speaker 2: with soap. Everybody got sick, right, yeah? Next, what do 601 00:30:21,560 --> 00:30:22,240 Speaker 2: we have? All? Right? 602 00:30:22,440 --> 00:30:23,520 Speaker 8: What have I got for you? 603 00:30:23,600 --> 00:30:23,760 Speaker 2: Oh? 604 00:30:23,800 --> 00:30:25,960 Speaker 8: I like this one. This is from Business Insider. 605 00:30:26,480 --> 00:30:30,320 Speaker 7: Disney's next CEO often dresses like Bob Iger. Is it 606 00:30:30,360 --> 00:30:34,360 Speaker 7: a good idea to copy your boss's style? So apparently 607 00:30:34,520 --> 00:30:36,600 Speaker 7: Josh Tomorrow, who's we're not going to take over for 608 00:30:36,640 --> 00:30:40,440 Speaker 7: Bob Iger, has a fondness for sweaters and white button downs, 609 00:30:40,640 --> 00:30:44,120 Speaker 7: and apparently they each like dressed almost identically at disney 610 00:30:44,160 --> 00:30:45,520 Speaker 7: seventieth anniversary case. 611 00:30:45,600 --> 00:30:49,800 Speaker 4: I saw the interview, that long interview ABC Network News 612 00:30:49,880 --> 00:30:53,560 Speaker 4: last night, okay, and boy, this guy was fawning over 613 00:30:53,640 --> 00:30:55,800 Speaker 4: Bob Iger like overboard. 614 00:30:55,800 --> 00:30:57,720 Speaker 8: It was uncomfortable, a little syrupy. 615 00:30:57,800 --> 00:31:00,479 Speaker 4: Huh yeah, uncomfortable. I was like, dude, I don't know, 616 00:31:01,200 --> 00:31:01,760 Speaker 4: what do you think? 617 00:31:01,880 --> 00:31:02,600 Speaker 2: Is this going to work? 618 00:31:02,680 --> 00:31:04,680 Speaker 4: Yeah, I've heard. I've talked to a bunch of shareholders 619 00:31:04,680 --> 00:31:06,160 Speaker 4: at Disney. They're happy with this guy, and I think 620 00:31:06,160 --> 00:31:07,120 Speaker 4: it's all going to work here. 621 00:31:07,200 --> 00:31:10,040 Speaker 8: Sonny, get your veteran so he's definitely yes, cap. 622 00:31:10,200 --> 00:31:12,440 Speaker 2: I don't know how they do creative even with Dana 623 00:31:12,440 --> 00:31:13,040 Speaker 2: Walden there. 624 00:31:13,280 --> 00:31:16,240 Speaker 4: Yeah. Well, I mean you've pointed out yesterday and over 625 00:31:16,240 --> 00:31:18,320 Speaker 4: the day's time that that stock has done nothing for 626 00:31:18,400 --> 00:31:19,040 Speaker 4: a decade. 627 00:31:18,960 --> 00:31:21,360 Speaker 2: Yeah, eighty percent per your single digit return. I had 628 00:31:21,360 --> 00:31:23,920 Speaker 2: a spike up and then came back. And you know, 629 00:31:23,960 --> 00:31:27,080 Speaker 2: I don't have any acts in the Disney story, but 630 00:31:27,680 --> 00:31:31,840 Speaker 2: it's fascinating. Great covers are yesterday, particularly Gathrag and I 631 00:31:32,120 --> 00:31:34,800 Speaker 2: thank you so much for that. Thank you, alexis greatly 632 00:31:34,960 --> 00:31:36,360 Speaker 2: your questorship. 633 00:31:35,960 --> 00:31:40,760 Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, 634 00:31:40,880 --> 00:31:45,160 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 635 00:31:45,320 --> 00:31:48,560 Speaker 1: seven to ten am Easter and on bloomberg dot Com, 636 00:31:48,680 --> 00:31:52,480 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 637 00:31:52,800 --> 00:31:55,880 Speaker 1: You can also watch us live every weekday on YouTube 638 00:31:56,200 --> 00:31:58,200 Speaker 1: and always on the Bloomberg terminal