WEBVTT - September Rate Cut Prospects 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.320 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:26.920 us live on YouTube. 0:00:26.920 --> 0:00:30.320 Bloomberg Surveillance is about conversation. That's the way we do it. 0:00:30.480 --> 0:00:33.880 Right now, joining us without question or interview of the day. 0:00:33.920 --> 0:00:38.160 Steven Englander with earn credit, the standard charter at Bank, 0:00:38.240 --> 0:00:41.360 definitive at City Group for years on cross rates, absolutely 0:00:41.400 --> 0:00:45.320 known globally for the relationships and currency show. I want 0:00:45.320 --> 0:00:47.680 to cut to the chase and go back to Yale. Okay, 0:00:47.760 --> 0:00:52.360 you had Bob Evanson is your faculty advisor at Yale. 0:00:52.400 --> 0:00:55.080 Did you ever go to the Yale Harvard tailgate games 0:00:55.120 --> 0:00:56.800 that were legendary with Evanson? 0:00:57.520 --> 0:01:00.200 No, but he did send me the Pesol Fundau in 0:01:00.440 --> 0:01:04.240 Brazil to look at their agricultural experiment stations and see 0:01:04.480 --> 0:01:05.199 what they were doing. 0:01:05.319 --> 0:01:09.920 His was granular data, which is the way Steve Englander rolls. 0:01:10.280 --> 0:01:13.840 What take the Yale granular study that Colls commissioned. Shill 0:01:13.880 --> 0:01:16.560 learn all that and bring it over to how you 0:01:16.600 --> 0:01:19.880 make a call of fifty basis points in September. 0:01:21.880 --> 0:01:24.679 I think the trick is to try and understand everything 0:01:24.680 --> 0:01:27.480 that's in the market and ask you why does the 0:01:27.480 --> 0:01:31.160 market think what it's thinking? What is the market logic? 0:01:31.840 --> 0:01:33.680 And then say do I have a right to disagree 0:01:33.760 --> 0:01:35.640 with it? Do I think that there's something I know 0:01:35.720 --> 0:01:38.360 that the market doesn't know? And how comfortable am I 0:01:38.480 --> 0:01:40.840 with it? Let's start on the dual mandate of inflation. 0:01:40.959 --> 0:01:44.319 Let's go back to Evanson, giant of Minnesota and teaching 0:01:44.360 --> 0:01:48.080 it Yale iconic and that's the American farmer. The images 0:01:48.120 --> 0:01:52.520 this weekend of farmers in Arkansas flat on their back, 0:01:52.800 --> 0:01:57.120 how pernicious, Stephen Englander. Is the inflation now in America? 0:01:58.520 --> 0:02:01.880 I think the perception is quite strong, and there is 0:02:01.960 --> 0:02:04.960 a justification. I'd say this that the if you look 0:02:04.960 --> 0:02:09.239 at some of the adjustments for technological progress, our computers 0:02:09.280 --> 0:02:11.160 are much better, but we don't use that much of 0:02:11.200 --> 0:02:14.920 their capacity. So you know, some of the softness that 0:02:14.960 --> 0:02:18.120 we sometimes see in inflation is sort of added on 0:02:18.480 --> 0:02:22.240 by the BLS. It's completely legitimate, but it's not what 0:02:22.280 --> 0:02:25.280 the price of coffee is, what the you know, farmers 0:02:26.120 --> 0:02:29.280 or inputs from market saft farmers, Stephen Englander, where there's 0:02:29.320 --> 0:02:31.880 the standard charter bank, we are commercial trees through the 0:02:31.880 --> 0:02:34.760 market opening and well into this nine o'clock hour. 0:02:34.919 --> 0:02:36.480 David Gerray in for Paul Sweeney. 0:02:36.560 --> 0:02:38.520 David, you mentioned that you're sort of looking at all 0:02:38.560 --> 0:02:42.120 of these market factors as you come up with that forecaster. 0:02:42.400 --> 0:02:45.160 What was it that led you to make this call? 0:02:45.240 --> 0:02:46.960 Was it the simple variable of just the jobs numbers 0:02:47.000 --> 0:02:48.320 that we got, or were there was there some other 0:02:48.440 --> 0:02:51.240 mechanism or variable that made you feel confident in that. 0:02:52.160 --> 0:02:54.600 Well, you also have to try and read the mind 0:02:54.639 --> 0:02:56.679 of the FED and the incentives in the market and 0:02:57.000 --> 0:03:01.160 so on, and they think, you know, yes, you know, 0:03:01.360 --> 0:03:02.880 I actually think it's the right thing to do. And 0:03:03.280 --> 0:03:06.240 one question I ask myself is say they had known 0:03:06.360 --> 0:03:08.520 the data for the last four months, non FORIGM pay 0:03:08.600 --> 0:03:12.040 rolls last four months has averaged twenty seven thousand, and 0:03:12.360 --> 0:03:14.160 because of the bias that you get from the birth 0:03:14.200 --> 0:03:17.800 death adjustment, we think even that's overstated. Would they have 0:03:17.840 --> 0:03:21.519 cut And you know the answer is yeah, entire mind 0:03:21.520 --> 0:03:23.360 that they would have cut. And so we think that 0:03:23.400 --> 0:03:25.880 they they're not going to commit themselves to making a 0:03:25.919 --> 0:03:27.880 series of cuts, but they're going to say, look, you know, 0:03:27.919 --> 0:03:30.919 the numbers are softer than we expected. We're reading the 0:03:31.000 --> 0:03:34.679 numbers and they justify cutting, but also a bit of 0:03:34.760 --> 0:03:35.160 catch up. 0:03:35.400 --> 0:03:38.720 We're in this moment where the integrity of government data 0:03:38.760 --> 0:03:41.000 is being cast into question more than it has been, 0:03:41.920 --> 0:03:44.360 certainly by personnel movements, but also as you listen to 0:03:44.400 --> 0:03:47.200 the president's economic advisor suggesting that they're not capturing the 0:03:48.360 --> 0:03:51.480 labor economy in a holistic sense, how does that complicate 0:03:51.560 --> 0:03:54.160 your job as a private sector economist who's looking at 0:03:54.160 --> 0:03:57.040 the economy. Does it raised doubts in your mind? How 0:03:57.120 --> 0:03:58.640 how does it sort of change the work that you're 0:03:58.680 --> 0:03:59.920 doing if that's coming about. 0:04:00.080 --> 0:04:02.840 Well, we actually spend a lot of time looking at 0:04:02.840 --> 0:04:05.760 the data and trying to understand if they're legitimate or not. 0:04:05.920 --> 0:04:08.240 Like last year, one of our big papers, and I 0:04:08.240 --> 0:04:10.720 think we were one of the first, was served integrating 0:04:11.480 --> 0:04:14.200 undocumented immigrants and kind of saying, there's a reason the 0:04:14.280 --> 0:04:17.839 payrolls are so strong because they're getting work permits and 0:04:17.880 --> 0:04:23.040 getting picked up by NFP. So I actually spend an 0:04:23.120 --> 0:04:27.080 inordinate amount of time worrying about the quality of data. 0:04:27.640 --> 0:04:30.480 And I say this that the riskiest thing you can 0:04:30.520 --> 0:04:32.880 do is believe people when they say you'res a gold 0:04:32.880 --> 0:04:36.400 standard because he's self criticism goes out the door. 0:04:36.600 --> 0:04:38.800 Stephen Englander with this here and a fed call of 0:04:38.920 --> 0:04:41.440 fifty basis points, I want to take a little bit 0:04:41.480 --> 0:04:43.800 of theory here. The Yale a Budget Lab at Yale 0:04:44.160 --> 0:04:47.520 has been absolutely brilliant in teaching us about this legislation 0:04:48.000 --> 0:04:51.000 and about tariffs as well. I personally saw terroriffs this 0:04:51.040 --> 0:04:54.839 weekend and cannot paint when I'm fifteen percent out of 0:04:54.839 --> 0:04:58.240 the blue. Steve Englander, I'm in the camp. David Kelly, 0:04:59.360 --> 0:05:01.280 I want to say it hutting them at JP Morgan 0:05:01.560 --> 0:05:04.960 David Kelly writing about the income effect as well. We're 0:05:05.000 --> 0:05:08.400 all focused on substituting. Lisa's going to go to Costco. 0:05:08.480 --> 0:05:11.560 She's not gonna buy coffee, She's gonna buy Sanca Blogny. 0:05:11.960 --> 0:05:14.520 To me right now, what's going on as a major 0:05:15.120 --> 0:05:19.320 income effect affected by purchasing power? This goes back to 0:05:19.360 --> 0:05:22.279 a guy named Hicks, Folks, a guy named Slutsky. But 0:05:22.400 --> 0:05:25.479 the answer is we're being a hit with a new 0:05:25.520 --> 0:05:27.560 purchasing power that's evaporating. 0:05:28.440 --> 0:05:30.479 I think that's correct, and you know a lot of 0:05:30.480 --> 0:05:33.279 people understand it. You know, in terms of oil prices, right, 0:05:33.360 --> 0:05:36.200 you know you were paying forty to fill up your tank. 0:05:36.279 --> 0:05:39.200 Now you pay eighty. It means one less trip with 0:05:39.200 --> 0:05:44.280 the kids to McDonald's in the week. With tariffs and 0:05:44.320 --> 0:05:47.680 import prices, it's more spread out and less dramatic, but 0:05:47.680 --> 0:05:49.560 it's the same kind of impact. All of a sudden, 0:05:49.640 --> 0:05:52.400 everything you see is a little bit more expensive, and 0:05:52.440 --> 0:05:55.080 you have to make decisions and prioritize your spending. 0:05:55.320 --> 0:05:58.440 Feel the dreams will fifty basis points ease our pain? 0:05:59.760 --> 0:06:04.240 I think yes, And let me be clear, because we 0:06:04.480 --> 0:06:06.960 think that they do fifty and then they pause because 0:06:07.320 --> 0:06:11.640 GDP numbers aren't bad. Productivity looks like it's actually pretty good. 0:06:11.680 --> 0:06:14.960 You sure, Scharmer said that in the Ft today and the. 0:06:16.400 --> 0:06:18.800 You know, you look at the labor numbers, as you know, 0:06:19.240 --> 0:06:23.320 they're really mediocre. Its sluggage softish. But you know, as 0:06:23.360 --> 0:06:25.159 you know, I was at Lehman's in two thousand and eight. 0:06:25.200 --> 0:06:27.599 This is not a two thousand and eight type of 0:06:27.680 --> 0:06:31.080 labor market. That's not a twenty April twenty twenty labor market. 0:06:31.440 --> 0:06:36.960 It's a mediocre, sluggish, poor labor market where you know 0:06:37.000 --> 0:06:39.479 you probably should get closer to neutral, but nothing is 0:06:39.520 --> 0:06:40.440 falling off a cliff. 0:06:41.480 --> 0:06:44.880 The Chairman has talked about the oddness of that and 0:06:44.920 --> 0:06:48.200 the challenge of having a market like you describe. How 0:06:48.279 --> 0:06:51.719 much closer are we to figuring out why it is 0:06:51.720 --> 0:06:53.120 that way and why he continues to be Is it's 0:06:53.160 --> 0:06:57.279 just the simple sense of ambiguity about policies and their effects, 0:06:57.360 --> 0:07:00.600 is it? As you hear from Scott Bessant or An Hasset, 0:07:00.600 --> 0:07:02.839 you know, things will take time to equilibrate or work 0:07:02.880 --> 0:07:05.680 themselves out. What do you make of the labor market 0:07:05.720 --> 0:07:06.880 the state of which it's in right now? 0:07:07.120 --> 0:07:10.120 Well, look, if I want to criticize the fad, I'd 0:07:10.160 --> 0:07:13.320 say that they spend ninety percent of their time worrying 0:07:13.360 --> 0:07:16.280 about the man shocks. And here we are talking about 0:07:16.320 --> 0:07:20.800 productivity shocks, talking about labor market shocks. And there's a 0:07:20.840 --> 0:07:24.200 lot of ambiguity in terms of how you interpret numbers 0:07:24.400 --> 0:07:27.080 when they come in because you don't know if they're moving, 0:07:27.440 --> 0:07:32.320 you know what shock is moving them. So I think 0:07:32.320 --> 0:07:38.240 that that's the big issue that leaves things uncertain, and 0:07:38.480 --> 0:07:41.280 you know, uncertain about how bad things are. So I 0:07:41.320 --> 0:07:43.560 think that you know in some ways that argues that 0:07:43.640 --> 0:07:45.360 you know, you kind of know the direction so you 0:07:45.400 --> 0:07:48.400 make a move, but you'd be very cautious. I mean, 0:07:48.560 --> 0:07:50.119 what if we're in nineteen ninety seven. 0:07:50.640 --> 0:07:54.000 Is stagflation a word that is bandied about in the 0:07:54.040 --> 0:07:56.720 standard charted offices? Is it something that you were thinking 0:07:56.760 --> 0:07:58.480 about or worried about at this moment. 0:07:59.560 --> 0:08:00.640 It's always a worry. 0:08:00.760 --> 0:08:03.920 But you know, with labor markets so soft, you know, 0:08:04.000 --> 0:08:07.960 and spending going to be soft, I don't think labor 0:08:08.040 --> 0:08:10.360 is going to be about to push wages up, you know. 0:08:10.400 --> 0:08:13.400 So I think that you know, he respect in sixties, 0:08:13.520 --> 0:08:19.440 he's so yale, irrespectful, irrespected of the productivity story. I 0:08:19.480 --> 0:08:22.800 think that the you know, uh yeah, Darter. 0:08:22.720 --> 0:08:25.120 With a brilliant essay this weekend and he goes back 0:08:25.120 --> 0:08:28.360 to nominal GDP, and I get it. It's a conundrum. 0:08:28.360 --> 0:08:31.520 Do we have terrible economic growth but still buying inflation? 0:08:31.600 --> 0:08:36.480 Stagflation is doctor Ger talks about here, Stephen Englander. Is 0:08:36.520 --> 0:08:38.800 the real risk here that we get this wrong and 0:08:38.840 --> 0:08:43.880 we have dampen growth and quiescent inflation where nominal GDP 0:08:44.600 --> 0:08:48.760 dips below five percent, ginormous number dips below Dare I 0:08:48.840 --> 0:08:52.400 say four percent or worse? Or is that in one 0:08:52.400 --> 0:08:54.599 of your probabilities. 0:08:54.559 --> 0:08:56.839 You know, I think that you know, we all talk 0:08:56.880 --> 0:09:00.760 about AI all day long, and I think that that's 0:09:00.760 --> 0:09:04.760 going to be the real decisive for how the economy 0:09:04.800 --> 0:09:07.520 breaks that if it turns out that we're, you know, 0:09:07.559 --> 0:09:10.319 partly because of AI or other factors, that productivity growth 0:09:10.360 --> 0:09:12.520 is strong, right, everything's going to be fun. 0:09:12.559 --> 0:09:14.600 But the FED doesn't have that luxury. We can talk 0:09:14.640 --> 0:09:17.160 about it, we can go yeah, yeah, bring in Simon 0:09:17.240 --> 0:09:20.240 Johnson up at MIT. Rogueoff was on the other day. 0:09:20.280 --> 0:09:22.760 It's a bunch of bow type stuff. The FED doesn't 0:09:22.800 --> 0:09:26.240 have that luxury. Do they to ponder AI and productivity? 0:09:27.040 --> 0:09:31.080 Well, a, they should, I know, the more time on. 0:09:31.120 --> 0:09:36.320 Stoomberg prescriptive of should. I like, Crewman was on once 0:09:36.360 --> 0:09:38.160 and I couldn't get him to say the dreaded s 0:09:38.240 --> 0:09:42.560 word should. Englander's doing it? What should got to do 0:09:42.640 --> 0:09:43.000 with it? 0:09:43.520 --> 0:09:46.720 But I think, you know, in practice, given the absence 0:09:46.720 --> 0:09:49.520 of knowledge, it just means that you you sort of 0:09:49.520 --> 0:09:51.680 go slowly in the direction that you think that data 0:09:52.160 --> 0:09:56.040 are telling you. I mean, there's no straw here with 0:09:56.080 --> 0:09:59.240 which to make bricks, and you know, you can critique 0:09:59.240 --> 0:10:02.720 the productivity data very easily as well. So I think 0:10:02.720 --> 0:10:05.760 that they sort of you know, you take a step, 0:10:05.800 --> 0:10:08.640 you see what happens. Right, take another step, see what happens. 0:10:08.679 --> 0:10:11.280 If something bad happens, you stop, or you step back 0:10:11.320 --> 0:10:13.520 a little bit. If it looks good, you keep going. 0:10:15.200 --> 0:10:17.680 Yeah, I want you to jump in here and finish 0:10:17.679 --> 0:10:20.400 out the interview. We're having so much funnier folks with 0:10:20.480 --> 0:10:24.080 the academics of doctor England or I really want to 0:10:24.160 --> 0:10:29.520 emphasize some of this stuff is incredible dynamics moving parts. 0:10:29.760 --> 0:10:34.000 David off of that is this dreaded word ambiguity, which 0:10:34.080 --> 0:10:38.959 is we really don't know where we are or what's 0:10:39.000 --> 0:10:39.559 going to happen. 0:10:39.640 --> 0:10:42.320 Continue will, I will ask you to indulge me and 0:10:42.360 --> 0:10:43.719 do a little work for us here as we look 0:10:43.720 --> 0:10:45.959 ahead to this week of data. So we have these revisions, 0:10:46.000 --> 0:10:48.840 I'm curious how you're thinking about them. But also we 0:10:48.880 --> 0:10:52.000 had President Cools beyond Friday saying he wants to see 0:10:51.800 --> 0:10:54.440 the inflation data this week that matters to him. We've 0:10:54.440 --> 0:10:56.520 got to look at the inflation side too, He says, 0:10:57.000 --> 0:10:58.760 how important is that to you? So how should be 0:10:58.760 --> 0:11:00.880 thinking or framing the day releases that we're going to 0:11:00.920 --> 0:11:01.440 get this week? 0:11:01.559 --> 0:11:04.600 Okay, I think the important thing about the benchmark revisions 0:11:05.200 --> 0:11:08.400 is we think they're going to be significant, maybe seven 0:11:08.480 --> 0:11:12.360 hundred and fifty to one million down and important things 0:11:12.400 --> 0:11:14.040 there is there's no reason to think that things have 0:11:14.120 --> 0:11:19.360 gotten better since the March of twenty twenty five. As 0:11:19.400 --> 0:11:23.800 far as inflation goes, I think the real issue. You know, yeah, 0:11:23.960 --> 0:11:26.040 so you know my shirt price went up because there's 0:11:26.040 --> 0:11:28.800 a tariff on shirts. I mean, you don't know how 0:11:28.840 --> 0:11:31.800 to engauge it. If it turns out that, you know, 0:11:31.880 --> 0:11:34.640 say services inflation is heating up and stuff that you 0:11:34.720 --> 0:11:37.839 know is not related to tariffs is heating up, then 0:11:37.880 --> 0:11:38.920 there's a problem. 0:11:39.280 --> 0:11:42.400 What happens to the animal spirit? You mentioned seven fifty 0:11:42.640 --> 0:11:45.360 to one million, Most people are below that, it's say 0:11:45.360 --> 0:11:47.920 four hundred and five. I mean, Steve Angler's out in 0:11:47.960 --> 0:11:50.280 a linear folks, with what we're going to see tomorrow. 0:11:50.280 --> 0:11:54.520 We'll have complete coverage of this. And Steven Angler, what 0:11:54.559 --> 0:11:59.880 does it mean for people's retirement plans? Slash the stock market? 0:12:00.160 --> 0:12:03.680 If we get Anglander rate cuts? Is that good or 0:12:03.760 --> 0:12:05.160 bad for equities? 0:12:06.200 --> 0:12:09.120 You know, a little bit of bad news is probably 0:12:09.160 --> 0:12:11.880 pretty good for equities because it calms the market down 0:12:12.000 --> 0:12:14.120 and it sort of says, look, if you get your 0:12:14.120 --> 0:12:17.320 company right, cost the capital isn't going to be an 0:12:17.360 --> 0:12:20.480 issue for you. I think if things are really falling apart, 0:12:20.600 --> 0:12:23.080 like you know, twenty twenty or two thousand and eight, 0:12:23.880 --> 0:12:26.520 then you know, bad news is really bad news. But 0:12:27.040 --> 0:12:29.439 in many circumstances, a little bit of bad news is 0:12:29.480 --> 0:12:34.199 actually good news for equities. And I'd say things that 0:12:34.240 --> 0:12:36.240 the equity. You know, you sort of say why your 0:12:36.280 --> 0:12:39.160 equity is so strong when when everybody thinks things are 0:12:39.160 --> 0:12:41.520 a mush. It sort of makes you look at the 0:12:41.520 --> 0:12:45.400 productivity element again, kind of saying, well, wages aren't going up, 0:12:45.400 --> 0:12:47.520 but it looks like GDP is fairly strong. 0:12:48.200 --> 0:12:48.760 What's left. 0:12:48.840 --> 0:12:52.040 It's not going into taxes, right, there's only profits. 0:12:52.360 --> 0:12:55.600 Bill from London emails in he's with a standard Charter 0:12:55.679 --> 0:12:58.520 bank and says, ask Steven what it means for the 0:12:58.559 --> 0:13:02.280 rest of the world. How about standards charter question this 0:13:02.360 --> 0:13:05.680 morning for Bill Winters, what does all this Englander talk 0:13:05.880 --> 0:13:09.440 mean for Singapore, for London and the rest of the 0:13:09.640 --> 0:13:10.960 standard charter world? 0:13:11.160 --> 0:13:14.360 In some ways it's actually okay. I mean there are 0:13:14.360 --> 0:13:16.680 two elements. One is that if you look at the 0:13:16.720 --> 0:13:19.680 AI game, if that's the game, you sort of say, okay, 0:13:19.880 --> 0:13:22.680 us seems to be on the game. China might be 0:13:22.760 --> 0:13:25.680 in the game. A bunch of other countries trying to 0:13:25.679 --> 0:13:27.440 get in Europe, you know. 0:13:27.760 --> 0:13:29.760 Right not there having some conferences. 0:13:29.880 --> 0:13:34.360 On the other hand, you know, the say US GDP 0:13:35.480 --> 0:13:39.000 or say the FED cuts by the fifty basis points. 0:13:39.360 --> 0:13:42.679 That's everybody else's interest rates go down by thirty to 0:13:42.679 --> 0:13:46.680 fifty basis points. And that's far more important to them 0:13:46.920 --> 0:13:50.160 than sort of saying, well, oh, you know if England 0:13:50.160 --> 0:13:52.800 there's right, you know they're forty your jobs that they're 0:13:52.840 --> 0:13:55.560 not going to buy a Singapore exports. The fact that 0:13:55.600 --> 0:13:57.679 they can get their cost of capital and the risk 0:13:57.720 --> 0:13:59.640 premium is down, they think is more important to the 0:13:59.640 --> 0:14:00.200 rest of us. 0:14:00.280 --> 0:14:03.240 Bill Winters know that Standard Charter Bank is up eighty 0:14:03.320 --> 0:14:06.600 nine point sixty seven percent in the past twelve months 0:14:06.640 --> 0:14:07.840 because of Steve Englander. 0:14:08.880 --> 0:14:11.240 Well, I think he can add like four or five 0:14:11.280 --> 0:14:18.000 decimal points. I'm not from your mouth to his ears, honored. 0:14:18.040 --> 0:14:19.800 We'd love to get a phone call with you tomorrow 0:14:19.800 --> 0:14:22.800 on your busy day, Steve Englander. When we get this data. 0:14:23.120 --> 0:14:26.800 Doctor Englander is with a Standard Charter Bank and they're 0:14:26.880 --> 0:14:30.040 just thrilled to give you extended conversations. There that's what 0:14:30.080 --> 0:14:34.120 Bloomberg likes to do for Global at Wall Street. Stay 0:14:34.160 --> 0:14:38.040 with us. More from Bloomberg Surveillance coming up after this. 0:14:45.280 --> 0:14:48.840 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:14:48.920 --> 0:14:52.080 weekday afternoons from seven to ten am Eastern Listen on 0:14:52.160 --> 0:14:55.840 Applecarplay and Android Auto with the Bloomberg Business app, or 0:14:55.960 --> 0:14:57.320 watch us live on YouTube. 0:14:57.440 --> 0:14:59.880 The good news from Mark Geller is he's Aisconsin London. 0:15:00.160 --> 0:15:02.920 He probably avoided the hit of the summer here for 0:15:03.000 --> 0:15:05.800 Global Wall Street. Mister Geller's global head of Bank Debt 0:15:05.840 --> 0:15:08.720 capital Markets at Berkley's. And this is a chat for 0:15:08.800 --> 0:15:12.080 Global at Wall Street. The big song this summer, I know, 0:15:12.280 --> 0:15:15.320 are you in the Hamptons this summer? Unfortunately not more 0:15:15.320 --> 0:15:19.200 than Hamptons. Are these trench at lyrics because this is 0:15:19.240 --> 0:15:22.120 where we are in September. I'm looking for a man 0:15:22.160 --> 0:15:27.880 in finance Trust fun six' five blue, Eyes Finance trust 0:15:27.960 --> 0:15:31.640 fun six' five. Blue eyes that's the deep lyrics of. 0:15:31.680 --> 0:15:34.360 This song are we in an m and? A frenzy 0:15:34.480 --> 0:15:38.440 are we Going With? President trump? A deregulation just with 0:15:38.480 --> 0:15:41.960 the way the? Stars align is your day to day activity? 0:15:42.040 --> 0:15:43.560 Right now nuts. 0:15:44.200 --> 0:15:46.240 It certainly picked up over the course of, this YEAR 0:15:46.280 --> 0:15:49.320 and i think the first quarter was particularly busy when 0:15:49.320 --> 0:15:52.360 we think about the post election momentum that we had at. That, 0:15:52.440 --> 0:15:55.160 time obviously as we've drifted through, the air there have 0:15:55.160 --> 0:15:57.720 been a few, risk events not least obviously the tariff 0:15:57.760 --> 0:16:01.120 discussions that we all had during the Course. Of april 0:16:01.480 --> 0:16:03.640 there's been a lot of geopolitical risk which have brought 0:16:03.640 --> 0:16:07.440 some headlines, as well whether it's On the, European Side, Middle, East. 0:16:07.640 --> 0:16:10.000 India PAKISTAN so i think through the course of the 0:16:10.080 --> 0:16:13.320 year there have been a few elements where issuers AND 0:16:13.400 --> 0:16:17.160 also M and a prospective participants have had to think 0:16:17.240 --> 0:16:20.120 very very carefully about. The year, but overall the risk 0:16:20.160 --> 0:16:22.280 appetite that we've witnessed has been very. Very STRONG so 0:16:22.560 --> 0:16:24.040 i think FROM an M and a point, of view 0:16:24.040 --> 0:16:26.720 we are certainly very constructive as we think about the 0:16:26.800 --> 0:16:27.720 progress over the. 0:16:27.720 --> 0:16:30.960 Coming months are the clients coming to the Banks like 0:16:31.040 --> 0:16:35.320 barclays or are you going out across the Hinterlands of 0:16:35.360 --> 0:16:38.200 america Of continental europe and saying now is? The time 0:16:38.280 --> 0:16:39.600 which Dynamic. 0:16:39.240 --> 0:16:40.040 Is it's a little bit. 0:16:40.080 --> 0:16:40.480 Of both to. 0:16:40.480 --> 0:16:42.000 Be honest if you take a step back and you 0:16:42.000 --> 0:16:44.200 look at the financing conditions that we've had at, the 0:16:44.200 --> 0:16:47.760 moment the strength of the equity markets obviously many measures 0:16:48.040 --> 0:16:50.680 across the globe at all. Time highs that's been very 0:16:50.680 --> 0:16:54.040 favorable in terms of using that currency for opportunities ON 0:16:54.040 --> 0:16:55.600 the M and. A SIDE and i think if you 0:16:55.640 --> 0:16:58.560 look in terms of the cost of capital, right now 0:16:58.560 --> 0:17:01.080 we've had rates. Relatively HIGH but i think as we've 0:17:01.120 --> 0:17:03.880 been discussing since the job Numbers, on friday and we've 0:17:03.880 --> 0:17:06.679 seen a reaction in terms, of rates the prospect of 0:17:06.680 --> 0:17:09.000 seeing rate cuts over the coming months should support some 0:17:09.080 --> 0:17:11.159 of that activity, as well in the same way that 0:17:11.200 --> 0:17:13.080 we had three or four. Years AGO so i think 0:17:13.080 --> 0:17:16.040 it's looking very very strong as we prospectively look ahead 0:17:16.040 --> 0:17:16.760 over the next three to. 0:17:16.800 --> 0:17:19.000 Six months you've enumerated a lot of the risks with 0:17:19.040 --> 0:17:21.199 which you've had. To deal how much of, those have 0:17:21.880 --> 0:17:24.960 if not, resolved themselves got to a place where they're 0:17:25.000 --> 0:17:27.920 more satisfactory to those who are looking TO pursue M. 0:17:27.960 --> 0:17:30.800 And A so i guess is there more of a 0:17:30.880 --> 0:17:33.439 kind of comprehension or sense of the, regulatory landscape? For, 0:17:33.440 --> 0:17:35.680 instance now is there a feeling that things have calmed 0:17:35.760 --> 0:17:37.600 down in effect more than they were a few. 0:17:37.600 --> 0:17:39.640 Months, back yes if you look at the, regulatory LANDSCAPE 0:17:39.640 --> 0:17:41.960 and i think certainly coming out of the global financial 0:17:42.000 --> 0:17:44.239 crisis for banks over the last, fifteen years it's been 0:17:44.240 --> 0:17:47.520 about building up capital thinking about where the rest. May 0:17:47.560 --> 0:17:50.080 be but if you look at the global bank space, 0:17:50.160 --> 0:17:53.600 right now capital strength is very, very high liquidity is, 0:17:53.640 --> 0:17:57.800 extremely strong vigilance around asset quality. Very HIGH so i 0:17:57.800 --> 0:17:59.320 think you could argue that the banks are in the 0:17:59.359 --> 0:18:01.199 best position been for twenty twenty. 0:18:01.240 --> 0:18:02.520 Five years so that's very. 0:18:02.600 --> 0:18:05.199 Very strong the opportunity to lend and to support some 0:18:05.280 --> 0:18:07.359 of the m and a activity that we're likely to 0:18:07.400 --> 0:18:09.320 witness and have seen over the course of. THIS year 0:18:09.800 --> 0:18:12.520 i think as you consider some of those, risk events whether, 0:18:12.560 --> 0:18:17.360 it's taris, geopolitical risk, or otherwise certainly at those moments 0:18:17.359 --> 0:18:19.399 there's a little bit of, a pause but when you 0:18:19.440 --> 0:18:22.040 look at the speed with which the markets recovered over, 0:18:22.040 --> 0:18:22.920 THAT period i think it's. 0:18:23.000 --> 0:18:24.760 Very, conducive indeed how. 0:18:24.680 --> 0:18:27.399 About the appetite for cross, border transactions so or at 0:18:27.400 --> 0:18:29.040 a moment here where there is a lot of ambiguity 0:18:29.080 --> 0:18:31.439 about tariffs and, TRADE policy i think a lot of 0:18:32.000 --> 0:18:34.240 business executives are kind of wondering what the future looks 0:18:34.280 --> 0:18:35.960 like in terms of them putting a footprint or a 0:18:35.960 --> 0:18:36.800 plant here IN. 0:18:36.840 --> 0:18:38.000 The us is. 0:18:37.960 --> 0:18:39.600 That dampening sentiment? 0:18:39.640 --> 0:18:42.760 At all just the kind of confusion, OR again i 0:18:42.760 --> 0:18:45.080 guess the sense of not knowing the way that this 0:18:45.119 --> 0:18:45.680 is all likely to. 0:18:45.720 --> 0:18:47.880 Play out it's certainly an element in terms of. The, 0:18:48.040 --> 0:18:50.080 debate ABSOLUTELY and i think that's something that we have 0:18:50.119 --> 0:18:52.040 to look at over the next. Six MONTHS but i 0:18:52.080 --> 0:18:54.960 think the confidence around where asset valuations are, right now 0:18:55.160 --> 0:18:57.720 it's a great opportunity to think about what your business 0:18:57.720 --> 0:18:59.080 needs and could achieve over the next. 0:18:59.119 --> 0:19:00.920 Few years it remains a very very. 0:19:00.920 --> 0:19:04.399 GOOD opportunity i want you to define strategic. 0:19:04.520 --> 0:19:06.159 FOR banks i don't know if you've, seen it but 0:19:06.240 --> 0:19:09.159 a bank merger. Just warning maybe you can't come Out 0:19:09.200 --> 0:19:13.320 because barclays, is INVOLVED but Pnc of pittsburgh is buying 0:19:13.359 --> 0:19:16.800 Into the denver retail Market With. First, bank okay one 0:19:16.840 --> 0:19:21.880 small four billion. Dollar transaction to find the word strategic 0:19:21.960 --> 0:19:26.119 and conversations, right now not finance stuff like six or 0:19:26.119 --> 0:19:30.280 five guys with, trust funds but the strategic mandate that's. 0:19:30.280 --> 0:19:33.680 Out there coming back to my comments around where the 0:19:33.720 --> 0:19:36.400 banks are globally right now in terms, of, capital liquidity 0:19:36.440 --> 0:19:40.000 the confidence, looking forward especially outside OF the us where 0:19:40.040 --> 0:19:42.560 there have been issues in. The past over the last, ten, 0:19:42.640 --> 0:19:44.879 years yeah most of that seems to, have gone and 0:19:44.920 --> 0:19:47.880 so a LOT of ceo CFOs the boards can look 0:19:47.920 --> 0:19:50.760 forward with confidence and think about what where they want 0:19:50.760 --> 0:19:52.560 to be over the next five to, ten years what 0:19:52.600 --> 0:19:55.480 footprint might be missing from. Their BUSINESSES and i think 0:19:55.520 --> 0:19:58.600 for so many banks looking through the rear view mirror 0:19:58.960 --> 0:20:01.760 having to manage, your business whether it's because you're building 0:20:01.840 --> 0:20:03.960 up the strength that you didn't have at, one stage 0:20:04.359 --> 0:20:07.480 or strategically thinking about what, you need or managing conduct 0:20:07.520 --> 0:20:09.600 issues that it. MAY be i think a lot of 0:20:09.640 --> 0:20:11.159