WEBVTT - Powell Says Recent Data Raise Confidence Inflation on Path to 2% 0:00:02.920 --> 0:00:07.240 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.520 --> 0:00:12.880 This is Bloomberg Business Wait inside from the reporters and 0:00:13.080 --> 0:00:16.640 editors who bring you America's most trusted business magazine, plus 0:00:16.720 --> 0:00:20.800 global business, finance and tech news. The Bloomberg Business Week 0:00:20.880 --> 0:00:25.759 podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:27.200 --> 0:00:29.920 Let's get to our key interview this hour with Carlisle's 0:00:29.960 --> 0:00:32.760 David Rubinstein, David, of course, host of Peer to Peer 0:00:32.840 --> 0:00:36.200 Conversations on Bloomberg Television and radio. You can catch David's 0:00:36.200 --> 0:00:38.760 interview with FED chair j Powell on The David Rubinstein 0:00:38.800 --> 0:00:41.440 Show Peer to Peer, airing July twenty fourth at nine 0:00:41.440 --> 0:00:43.600 pm Wall Street Time on Bloomberg TV. Let's go to 0:00:43.640 --> 0:00:46.640 the source. David patiently waiting for us in our Washington 0:00:46.680 --> 0:00:50.040 DC bureau. David, great to have you here. We've been 0:00:50.080 --> 0:00:54.640 counting down to your conversation with Ja Powell. We watched. 0:00:54.800 --> 0:00:56.840 How did this come about? Was it planned for a 0:00:56.840 --> 0:00:57.360 long time? 0:00:57.440 --> 0:01:02.360 I'm just curious, Okay, Well, I am the chairman of 0:01:02.400 --> 0:01:06.520 the Economic Club of Washington, and in that capacity I 0:01:06.560 --> 0:01:10.920 often interview government leaders and business leaders and Jay Powell 0:01:10.959 --> 0:01:14.119 and had been somebody i'd interviewed before. He had worked 0:01:14.120 --> 0:01:16.800 at my firm a number of years ago, well before 0:01:16.800 --> 0:01:19.560 he was at the FED, and so we worked out 0:01:19.560 --> 0:01:21.679 a date that I would do this interview today, and 0:01:22.040 --> 0:01:24.280 we had about seven hundred people there and obviously a 0:01:24.319 --> 0:01:25.480 live TV audience. 0:01:26.280 --> 0:01:29.160 David, we were chuckling the whole time. I mean, this 0:01:29.319 --> 0:01:32.480 was like a really a powel that you don't see 0:01:32.480 --> 0:01:34.600 at press conference, as a powel that you don't see 0:01:34.600 --> 0:01:36.520 every day. It's clear that you too are familiar with 0:01:36.560 --> 0:01:38.800 one another. What did you want to get out of 0:01:38.800 --> 0:01:40.840 the interview? Because we know that he's not going to 0:01:40.840 --> 0:01:47.400 give us any indication about a rate path. He established 0:01:47.400 --> 0:01:48.760 that at the top of the interview, What did you 0:01:48.760 --> 0:01:49.480 want to get out of it? 0:01:50.560 --> 0:01:53.880 Well, I think it's always good to humanize well known people, 0:01:54.320 --> 0:01:56.640 and people can understand them better and the way they 0:01:56.640 --> 0:01:59.840 make decisions and the way they kind of handle their 0:02:00.600 --> 0:02:03.240 and I thought humanizing him would be always good. Clearly, 0:02:03.360 --> 0:02:04.880 when you're a chairman of the FED, you talk in 0:02:04.960 --> 0:02:07.120 what I've often called Fed speak, which is to say, 0:02:07.160 --> 0:02:09.360 it's very difficult for the average person to understand it. 0:02:09.760 --> 0:02:11.760 But Jay does a better job than some of his 0:02:11.840 --> 0:02:14.600 predecessors and speaking in common English because he's not a 0:02:14.919 --> 0:02:18.120 trained economist, and I just thought giving people an update 0:02:18.320 --> 0:02:21.840 on his perspectives on the economy would be a good thing. 0:02:21.880 --> 0:02:23.760 I mean, obviously, as you point out, he's not going 0:02:23.800 --> 0:02:26.720 to announce at an interview with me that he's lowering 0:02:26.720 --> 0:02:27.280 interest rates. 0:02:27.280 --> 0:02:28.080 You can't expect that. 0:02:28.440 --> 0:02:30.480 But I think he gave a pretty good description of 0:02:30.520 --> 0:02:33.520 how they decide to lower interest rates or increase interest rates, 0:02:33.600 --> 0:02:36.119 and I thought it was informative. And therefore I thought, 0:02:36.480 --> 0:02:38.280 you know, he accomplishes goal, which is the kind of 0:02:38.520 --> 0:02:40.120 you know, show people how he makes decisions, and I 0:02:40.160 --> 0:02:42.880 accomplish my goal, which is kind of humanize the chairman 0:02:42.919 --> 0:02:44.200 of the FED a little bit more than maybe he 0:02:44.240 --> 0:02:45.000 otherwise would be. 0:02:45.280 --> 0:02:47.600 Well, David, help us understand your relationship. You mentioned that 0:02:47.760 --> 0:02:49.480 you guys do go back years. Of course, he was 0:02:49.480 --> 0:02:51.280 a partner at the Carlisle Group before he went into 0:02:51.280 --> 0:02:54.799 public service. I'm wondering if you're in touch with him 0:02:54.800 --> 0:02:57.560 regularly now, if you consider him a friend, just give 0:02:57.600 --> 0:02:59.000 us an idea of your relationship with him. 0:02:59.520 --> 0:03:01.480 I wouldn't say I'm in touch with them regularly when 0:03:01.480 --> 0:03:04.560 you're a chairman of the FED, you know, I think 0:03:04.560 --> 0:03:06.520 it's somebody like me doesn't want to be calling them 0:03:06.600 --> 0:03:09.320 up all the time, and you know, I don't want 0:03:09.360 --> 0:03:11.880 to look like I'm trying to get information from him. 0:03:11.880 --> 0:03:14.240 And he worked at Karloff for years, but I wouldn't 0:03:14.280 --> 0:03:17.040 say I was his closest friend or vice versa. So 0:03:17.080 --> 0:03:21.200 I know him reasonably well. I've interviewed him, I think 0:03:21.280 --> 0:03:23.920 three times or four times at the Economic Club in Washington, 0:03:24.280 --> 0:03:26.560 and I have a good relationship with him, but I 0:03:26.560 --> 0:03:29.200 wouldn't say we're, you know, close as a friends. But 0:03:29.440 --> 0:03:32.320 I certainly like him and admire what he's done for 0:03:32.360 --> 0:03:33.680 the country and the job that he's had. 0:03:33.960 --> 0:03:35.840 You know what's interesting too, and something we've talked a 0:03:35.840 --> 0:03:38.400 lot about David is, you know, the neutral rate and 0:03:38.480 --> 0:03:43.120 what he thinks about that two percent goal that the 0:03:43.160 --> 0:03:46.240 Federal Reserve has. He said, the neutral rate is probably 0:03:46.320 --> 0:03:49.880 hired today. Monetary policy is restrictive, but not severely restrictive. 0:03:50.040 --> 0:03:52.000 I am curious how you see things. Do you think 0:03:52.040 --> 0:03:54.200 the neutral rate doesn't make sense anymore, that it does 0:03:54.280 --> 0:03:57.080 need to be higher? And what is your expectation or 0:03:57.120 --> 0:03:58.640 what you think the Fed should be doing when it 0:03:58.640 --> 0:04:00.920 comes to interest rates right now? 0:04:01.120 --> 0:04:03.520 Well, I think the country will do much better off 0:04:03.560 --> 0:04:06.160 listening to Jay Pal's vieues on where the interest rate 0:04:06.200 --> 0:04:09.000 should go than probably my views on interest rates. But 0:04:09.160 --> 0:04:11.480 I think it's a general sense that the market is 0:04:11.520 --> 0:04:15.880 believing that there will be a cut, and I think 0:04:16.040 --> 0:04:18.080 Jay made it clear that he doesn't listen to the 0:04:18.120 --> 0:04:21.479 political situation. So I have said in speeches that I 0:04:21.480 --> 0:04:23.920 thought it would be unlikely that the FED would want 0:04:23.920 --> 0:04:27.120 to cut during a presidential election period of time, but 0:04:27.200 --> 0:04:28.920 I think he's made it clear that that's not his 0:04:29.000 --> 0:04:31.400 view or the view of the FOMC, that if they 0:04:31.400 --> 0:04:33.960 think the data warrants a cut, they will have a cut. 0:04:34.240 --> 0:04:36.440 And therefore, the FED could do something at the end 0:04:36.440 --> 0:04:38.200 of July when they meet, or they could do something 0:04:38.240 --> 0:04:41.599 again when they meet in September. And my guess is 0:04:41.640 --> 0:04:48.000 that sometime before the FED meets after the election, they 0:04:48.000 --> 0:04:50.520 will do something. That'd be my current thinking. The economy 0:04:50.520 --> 0:04:53.560 could change, and obviously data is everything, but right now 0:04:53.600 --> 0:04:56.560 the markets are anticipating, and I think the FED is 0:04:56.600 --> 0:05:00.680 not shutting down the idea that something could happen before 0:05:00.920 --> 0:05:01.360 the election. 0:05:01.640 --> 0:05:04.080 Before the election, okay, do you think that the election 0:05:04.200 --> 0:05:06.640 in any way sways? I mean, we're all human, right, 0:05:06.680 --> 0:05:09.239 and we can say we're very objective, but we're human 0:05:09.279 --> 0:05:11.159 and impacted by lots of things that are going on 0:05:11.200 --> 0:05:13.680 in this world. Do you think that j Powell and 0:05:13.880 --> 0:05:16.600 policymakers at the FED might be swayed a little bit 0:05:16.640 --> 0:05:18.880 of small influence when it comes to the November election 0:05:18.960 --> 0:05:19.760 presidential election? 0:05:21.040 --> 0:05:24.880 I think the Fed, everything Jay says, is that they 0:05:24.880 --> 0:05:28.320 don't really pay attention to the election dates, and I 0:05:28.400 --> 0:05:31.080 think right now, since so many people pay attention to 0:05:31.160 --> 0:05:34.000 the markets and the interest rates where they are that 0:05:34.200 --> 0:05:36.800 I think that the FED will do what the data 0:05:36.880 --> 0:05:39.359 suggests is appropriate. And when the data gets to the 0:05:39.360 --> 0:05:41.800 point where they see inflation more or less getting the 0:05:41.839 --> 0:05:45.279 two percent and the economy softening a bit, I suspect 0:05:45.279 --> 0:05:48.040 they will not wait until after the election because they 0:05:48.040 --> 0:05:50.400 don't want to be seen as political. And therefore, while 0:05:50.400 --> 0:05:52.960 they might be criticized by some for lowering interest rates 0:05:53.200 --> 0:05:56.520 before the end of the before the election's over, I 0:05:56.560 --> 0:05:59.960 just think the FED has given enough signals, including today, 0:05:59.839 --> 0:06:01.640 that they're not going to worry about the election. They'll 0:06:01.640 --> 0:06:03.279 do what the data suggests is appropriate. 0:06:03.560 --> 0:06:05.200 I do wonder, David, as you said, you've talked with 0:06:05.320 --> 0:06:08.160 Jay Powell several times certainly in this format. So you 0:06:08.360 --> 0:06:11.760 monetary policy obviously in the economy first and foremost, and 0:06:11.800 --> 0:06:13.640 there are certain things that Jay Powell will go you 0:06:13.640 --> 0:06:16.080 guys laugh about some of the things he will obviously 0:06:16.120 --> 0:06:18.440 not reveal. But having said that, at the end of 0:06:18.480 --> 0:06:20.640 the conversation, when it comes to the things the Bloomberg 0:06:20.680 --> 0:06:23.520 audience cares so much about in terms of monetary policy 0:06:23.560 --> 0:06:26.520 and the economy, what was your key takeaway from j Powell? 0:06:27.640 --> 0:06:30.520 My key takeaway from the interview and with my discussion 0:06:30.560 --> 0:06:32.279 with him is that he's a man who's very much 0:06:32.320 --> 0:06:35.240 on top of the data. He enjoys the job, not 0:06:35.360 --> 0:06:38.159 worn out by it. Doesn't say well is to me, 0:06:38.440 --> 0:06:40.839 I have got all this pressure on my shoulders. I 0:06:40.839 --> 0:06:42.480 think he can deal with it quite well. He's used 0:06:42.520 --> 0:06:44.120 to it. He's been in the chair for quite some time. 0:06:44.480 --> 0:06:48.000 I think he's reasonably happy now with where the economy is. Remember, 0:06:48.360 --> 0:06:51.080 we didn't go into the hard landing that everybody was predicting. 0:06:51.640 --> 0:06:53.560 People thought there would be a recession that last year 0:06:53.600 --> 0:06:56.080 or this year. That didn't happen. So whoever gets credit 0:06:56.120 --> 0:06:58.520 for it, The Fed deserves some share of that credit 0:06:58.680 --> 0:07:01.400 because they manage the economy. Me into a really nice 0:07:01.400 --> 0:07:04.480 soft landing, so called, and so right now, while unemployment 0:07:04.520 --> 0:07:06.280 is going up, I don't think it's going up by 0:07:06.279 --> 0:07:09.400 such on a level that's scaring people. And I think 0:07:09.400 --> 0:07:11.440 the markets are in pretty good shape and the economy 0:07:11.480 --> 0:07:12.480 is in pretty good shape. 0:07:13.000 --> 0:07:15.520 He didn't want to comment on the market, the idea 0:07:15.520 --> 0:07:19.120 of the so called Trump trade returning after this weekend's 0:07:19.600 --> 0:07:23.200 horrific Yes, he was clear about that up on top, 0:07:23.240 --> 0:07:24.840 and I'm at the top of the interview. But I'm 0:07:24.880 --> 0:07:27.320 curious about your view and what you think is being 0:07:27.360 --> 0:07:30.280 priced into markets right now, David, the Fed chair not 0:07:30.320 --> 0:07:33.160 weighing in, but politically, what is being priced in right now? 0:07:34.000 --> 0:07:37.480 Well, clearly, the events of the weekend, no doubt scared 0:07:37.480 --> 0:07:39.880 a lot of people about the violence that is still 0:07:40.320 --> 0:07:44.480 prevalent in this country in many areas. Unfortunately, and so fortunately, 0:07:45.560 --> 0:07:49.920 we did not have an assassination, though one person did 0:07:50.000 --> 0:07:53.920 die tragically and another person still in the hospital for 0:07:54.080 --> 0:07:59.239 the wounds that that person suffered as well. Sad situation. Obviously, 0:07:59.280 --> 0:08:02.400 the investigation we'll figure out what the Secret Service could 0:08:02.440 --> 0:08:04.760 have done differently or better. I'm not an expert in 0:08:04.760 --> 0:08:06.880 that area, so I just can't say what they will find, 0:08:06.920 --> 0:08:11.560 but clearly we have an eliminated violence from our political situation. 0:08:11.680 --> 0:08:15.320 Unfortunately, David, you've served in the federal government. You were 0:08:15.400 --> 0:08:18.080 chief counsel to the US Senate Judiciaries Committee sub Committee 0:08:18.080 --> 0:08:21.240 back in the seventies, Deputy Assistant to the President for 0:08:21.320 --> 0:08:25.080 Domestic Policy during the Carter administration. The democracy has faced 0:08:25.160 --> 0:08:27.960 other heavy periods before. It feels rather heavy today. Is 0:08:28.000 --> 0:08:29.800 there something different this time around? 0:08:30.160 --> 0:08:31.160 You are, I. 0:08:31.040 --> 0:08:32.880 Feel like it's safe to say a student of history. 0:08:32.880 --> 0:08:36.040 You respect past leaders and what they've done. How do 0:08:36.120 --> 0:08:39.360 you make sense of this particular political and historical period. 0:08:40.679 --> 0:08:43.800 Well, it's difficult to really put it in context right 0:08:43.840 --> 0:08:46.560 now because you can't really tell what the historical impact 0:08:46.600 --> 0:08:49.400 it is till many years afterwards. But right now the 0:08:49.400 --> 0:08:53.160 country seems to be fairly bitterly divided between the Democrats 0:08:53.160 --> 0:08:56.839 and Republicans. And it wasn't the case fifty years ago 0:08:56.960 --> 0:08:59.160 or so. When John Kenny ran for president against Richard 0:08:59.200 --> 0:09:02.760 Nixon teen sixty, they campaigned in most of the states 0:09:02.920 --> 0:09:05.040 because they didn't know how the states would go. Now 0:09:05.120 --> 0:09:07.679 the country's fairly divided, so we know how almost all 0:09:07.720 --> 0:09:09.800 the states are going to go. They're only five or six, 0:09:09.880 --> 0:09:13.000 maybe seven states where it's a kind of a swing state. 0:09:13.320 --> 0:09:15.240 So it's much different than it used to be. The 0:09:15.280 --> 0:09:18.120 tensions between both sides seem to be much greater than 0:09:18.160 --> 0:09:21.360 they used to be. Bipartisanship is something that is not 0:09:21.440 --> 0:09:24.040 as common as it used to be in Washington, d C. 0:09:24.600 --> 0:09:26.880 So I don't know whether the events of this weekend 0:09:26.920 --> 0:09:30.120 will scare people into saying we should try to, you know, 0:09:30.240 --> 0:09:35.000 be less i'd say violent in our rhetoric and less 0:09:35.320 --> 0:09:39.559 condemning of other sides. But clearly President Trump has suggested 0:09:39.600 --> 0:09:42.240 that he would make them more unifying speech than otherwise 0:09:42.720 --> 0:09:45.199 was going to make. And I think President Biden's speech 0:09:45.280 --> 0:09:48.000 last night was designed to also have a unifying impact. 0:09:48.120 --> 0:09:51.240 Whether you can unify our country in a way like this, 0:09:51.920 --> 0:09:53.720 I think we should, I don't know, but it will 0:09:53.720 --> 0:09:56.800 probably have some beneficial impact, though obviously the events were tragic. 0:09:57.200 --> 0:10:01.520 David, are you optimistic given the heated political environment right now? 0:10:02.960 --> 0:10:08.160 I'm optimistic that the country is in reasonable shape economically, politically, 0:10:08.480 --> 0:10:11.040 we can do more than than we have been doing 0:10:11.080 --> 0:10:13.400 to kind of bring the country together, and that part 0:10:13.760 --> 0:10:16.280 the jury is still out, but I'm hopeful that while 0:10:16.320 --> 0:10:18.320 the events were tragic over the weekend that there will 0:10:18.360 --> 0:10:21.599 have some beneficial impact in getting both sides, Democrats and 0:10:21.640 --> 0:10:24.160 Republicans to try to work together more cooperatively. 0:10:24.559 --> 0:10:27.280 Jay Powell said to you, predictions are very difficult, especially 0:10:27.320 --> 0:10:30.200 about the future. When you think about the future for 0:10:30.280 --> 0:10:33.360 the United States politically, economically, what's top of mind and 0:10:33.840 --> 0:10:36.120 curious if you have any plans to maybe want to 0:10:36.120 --> 0:10:38.240 be at the Federal Reserve. You guys talked about if 0:10:38.240 --> 0:10:39.000 it's a good job. 0:10:40.720 --> 0:10:43.600 Well, I think it's really hard to kind of say 0:10:43.600 --> 0:10:46.080 that all of a sudden, we're going to eliminate all 0:10:46.080 --> 0:10:48.520 the schisms that we've had in the last couple of years. 0:10:48.760 --> 0:10:50.680 Clearly there are a lot of tensions between the two 0:10:51.160 --> 0:10:55.080 side political sides. Jay Powell has been appointed by a 0:10:55.120 --> 0:10:58.319 Republican president and reappointed by Democratic president, and he's done 0:10:58.320 --> 0:10:59.960 a really good job of kind of walking a fine 0:11:00.080 --> 0:11:02.079 line of not trying to be seen as political or 0:11:02.120 --> 0:11:04.160 democratic or Republican. I think he deserves a lot of 0:11:04.160 --> 0:11:06.120 credit for that. I think he's an excellent job as 0:11:06.200 --> 0:11:06.880 Chairman of the FED. 0:11:07.600 --> 0:11:09.280 All right, I'm not going to ask you that about 0:11:09.320 --> 0:11:09.880 Chairman of the. 0:11:09.800 --> 0:11:16.000 Fed any thoughts, but you can answer if you want well. 0:11:16.080 --> 0:11:17.680 I think he's done a good job. I remember, this 0:11:17.760 --> 0:11:21.079 is not a job that anybody really thinks it is 0:11:21.120 --> 0:11:23.880 an easy job. Many people who have emerged from the job, 0:11:24.920 --> 0:11:28.559 you know, are generally applauded after they've served, but when 0:11:28.559 --> 0:11:31.800 they're serving, very often they get criticized by both sides. 0:11:31.840 --> 0:11:34.000 And it's hard to be chairman of the Fed. And 0:11:34.040 --> 0:11:36.680 in fact, as one chairman of the FED once said, 0:11:36.720 --> 0:11:39.760 William mc chesney Martin, my job is to take away 0:11:40.000 --> 0:11:42.200 the punch bowl at the party, which is to say, 0:11:42.360 --> 0:11:45.080 take away all the fun that you would you would 0:11:45.200 --> 0:11:46.959 want to get. And so that's the job of the 0:11:47.040 --> 0:11:48.720 chairman of the Fed, is to take away the punch bowl. 0:11:48.760 --> 0:11:50.959 And people don't like that absolutely. 0:11:51.040 --> 0:11:53.160 David Rubinstein, thank you so much. Busy day for you 0:11:53.320 --> 0:11:55.559 and so appreciate checking in with you. Bloomberg host and 0:11:55.600 --> 0:11:58.679 Carlile co founder and co chair David Rubinstein. You can 0:11:58.720 --> 0:12:01.320 catch his show and come Station with j Powell July 0:12:01.400 --> 0:12:03.840 twenty fourth at nine pm Wall Street Time on Bloomberg TV. 0:12:04.080 --> 0:12:04.880 This is Bloomberg. 0:12:05.920 --> 0:12:09.439 You're listening to the Bloomberg Business Week podcast. Catch us 0:12:09.480 --> 0:12:12.720 live weekday afternoons from two to five pm Eastern listen 0:12:12.760 --> 0:12:14.920 on Apple car Play and then Brout Auto with a 0:12:14.920 --> 0:12:19.080 Bloomberg Business app or watch us live on YouTube. 0:12:19.679 --> 0:12:21.520 Let's not forget we are in the midst of the 0:12:21.520 --> 0:12:22.920 beginning of earning. 0:12:23.080 --> 0:12:25.120 It's just getting started, you know that, because the big 0:12:25.120 --> 0:12:27.679 banks are reporting. This is just the beginning, Carol. 0:12:27.440 --> 0:12:30.400 The official, unofficial start. Yeah, they did continue this morning 0:12:30.440 --> 0:12:33.120 Goldman Sachs reporting results. Stock is off its highs of 0:12:33.160 --> 0:12:35.600 its set of the session, but we did see some 0:12:35.679 --> 0:12:39.440 move to the upside. Goldman. Among the headlines the trading 0:12:39.520 --> 0:12:41.600 unit powering a surgeon earnings in the second quarter. It 0:12:41.600 --> 0:12:44.520 also plans to cut down on stock repurchases. After the 0:12:44.520 --> 0:12:47.120 fed's annual stress tests required to set aside more capital, 0:12:47.200 --> 0:12:50.360 the bank again pushing back against those results. 0:12:50.559 --> 0:12:53.280 For more, we turned to David Conrad, managing director over 0:12:53.320 --> 0:12:56.320 at KBW right here in New York City. David, I'm 0:12:56.320 --> 0:12:59.640 first up politics front center after what happened over the weekend, 0:12:59.640 --> 0:13:03.000 and certainly the economy always front and center. We just 0:13:03.040 --> 0:13:05.400 talked with David Rubinstein, you interviewed FED SHO J. Powell 0:13:05.440 --> 0:13:09.320 at the Economic Club of Washington. Let's start with politics. 0:13:09.480 --> 0:13:12.599 I'm just curious how it might impact the sector that 0:13:12.640 --> 0:13:14.440 you cover and follow so closely banking. 0:13:16.360 --> 0:13:18.360 Yeah, first of all, thanks for having me on. You know, 0:13:19.040 --> 0:13:22.439 it's a big question mark for investors. Certainly, we saw, 0:13:23.400 --> 0:13:26.880 you know, when Trump was elected president the first time, 0:13:27.360 --> 0:13:30.480 a big bump of financials. Part of that was because 0:13:30.520 --> 0:13:33.320 they paid the highest tax rates and so the big 0:13:33.360 --> 0:13:35.920 tax cut really led that. But there was also a 0:13:35.960 --> 0:13:40.000 hope for deregulation and consolidation in the industry, and I 0:13:40.040 --> 0:13:44.360 think that latter point would probably hold true if he 0:13:44.440 --> 0:13:46.080 were to be re elected. I think there's a lot 0:13:46.120 --> 0:13:50.440 of pinned up demand for consolidation, which I think would 0:13:50.480 --> 0:13:53.360 open the doors for that. I think there's also another 0:13:53.400 --> 0:13:57.480 school thought of what may happen to inflation and the 0:13:57.480 --> 0:14:00.320 long end of the curve as well under that scene area, 0:14:00.400 --> 0:14:02.599 which which may put a little bit of pressure on financials. 0:14:02.600 --> 0:14:05.320 But I think overall, I think the conclusion would be 0:14:06.559 --> 0:14:08.800 if Trump were to win, it would be you know, 0:14:08.880 --> 0:14:11.760 less regulations and maybe opening the door for more inm andang. 0:14:11.960 --> 0:14:14.160 So maybe good for some of the big banks and 0:14:14.200 --> 0:14:17.000 some of the financial companies, maybe not necessarily for consumers. 0:14:19.080 --> 0:14:23.120 Well, I think maybe longer term, if if that one 0:14:23.160 --> 0:14:25.400 scenario were to be the case, where it turned out 0:14:25.400 --> 0:14:28.160 to be inflationaring a long end backed up, that would 0:14:28.200 --> 0:14:30.440 be the case. But I think you know that that's 0:14:30.480 --> 0:14:34.120 just one school of thought. But certainly, you know, we 0:14:34.120 --> 0:14:37.120 would we would expect, you know a little bit for 0:14:37.200 --> 0:14:39.320 the bigger banks and the and the broader m and 0:14:39.360 --> 0:14:42.400 a perspective, but also for you know, the regional banks 0:14:42.400 --> 0:14:45.680 for further consolidation would be you know, also an attractive 0:14:45.680 --> 0:14:46.680 place to be, all right. 0:14:46.720 --> 0:14:50.160 Having said that, we also as to mention David Rubinstein 0:14:50.360 --> 0:14:52.640 obviously of Carlisle but also hosts the show here at 0:14:52.640 --> 0:14:55.640 Bloomberg did interview fed jo J Palm. They talked about 0:14:55.640 --> 0:14:58.160 the economic environment. What color have you gotten from the 0:14:58.200 --> 0:15:01.600 big banks? Obviously Goldman this morning, but we had JP 0:15:01.680 --> 0:15:05.080 Morgan City Wells Fargo last week. What are you getting 0:15:05.480 --> 0:15:08.280 from those banks and their results and what it says 0:15:08.320 --> 0:15:11.080 to you about first of all, the security and health 0:15:11.080 --> 0:15:14.000 of our financial banking system and then also what it's 0:15:14.040 --> 0:15:15.320 telling us about the environment. 0:15:16.800 --> 0:15:20.000 Well, there's there's really two. It's really kind of split 0:15:20.120 --> 0:15:23.000 with what we've seen. First of all, capital markets we 0:15:23.120 --> 0:15:25.960 be waiting for this for a long time. Investment banking 0:15:26.120 --> 0:15:28.840 is up, you know, well over twenty percent fifty percent 0:15:28.880 --> 0:15:31.400 for JP Morgan year over year. So we saw a 0:15:31.480 --> 0:15:35.720 lot of underwriting and trading as well, and so we 0:15:35.800 --> 0:15:39.720 did see a pretty strong environment for capital markets. The 0:15:39.800 --> 0:15:42.200 flip side of it is those we didn't see really 0:15:42.520 --> 0:15:45.880 any loan demand outside of credit card borrowings, and so 0:15:45.960 --> 0:15:49.360 the loan demand is continues to be weak. And as 0:15:49.360 --> 0:15:51.920 we're at this peak and rates before maybe the FED 0:15:52.000 --> 0:15:57.200 starts to drop rates, we're getting the tailwind of deposit 0:15:57.280 --> 0:16:01.400 costs still, so consumers are still kind of adding higher 0:16:01.480 --> 0:16:03.800 rates on their deposits and that that's hurting the net. 0:16:03.840 --> 0:16:06.800 Interesting come, what's any other aspect too, is we're still 0:16:06.800 --> 0:16:09.720 seeing higher charge offs and credit cards. So I think 0:16:09.760 --> 0:16:12.560 that's right now more of the normalization state, but we 0:16:12.600 --> 0:16:14.080 are seeing higher charge offs there. 0:16:14.120 --> 0:16:15.560 How much higher do those charge offs go? 0:16:17.640 --> 0:16:20.600 Yeah, I think I think we're about at the normalized state. 0:16:21.640 --> 0:16:24.560 But the borrowing has increased materially, you know, over the 0:16:24.600 --> 0:16:27.800 past years, So I think for the most part, we're 0:16:27.840 --> 0:16:30.240 probably going to go up, you know, probably another fifty 0:16:30.240 --> 0:16:34.000 basis points. But you know, we've come from a one 0:16:34.040 --> 0:16:36.440 and a half percent rate to now pushing three and 0:16:36.440 --> 0:16:39.040 a half four percent, So I think we're near the 0:16:39.080 --> 0:16:42.520 top four the prime bowers in terms of the marginal 0:16:42.560 --> 0:16:43.960 increasing credit card boss. 0:16:44.040 --> 0:16:46.320 Hey, let's go through some of the banks. Obviously, Goldman 0:16:46.400 --> 0:16:49.640 reporting in today's session. I'm looking at Goldman shares. They're 0:16:49.800 --> 0:16:51.920 just off their highs. They're up about two percent. Go 0:16:52.040 --> 0:16:54.320 back to Friday. JP Morgan was down more than one 0:16:54.360 --> 0:16:58.120 percent on their results. You had City down almost two 0:16:58.160 --> 0:17:01.360 percent on its result, and if I pull up Wells Fargo, 0:17:01.920 --> 0:17:04.399 it was also we saw really taking a hit in 0:17:04.440 --> 0:17:06.760 the Friday trade. It was down about six percent. So 0:17:06.800 --> 0:17:10.480 walk us through those in particular, which names you might 0:17:10.480 --> 0:17:12.439 be a little bit more worried about, which ones you like? 0:17:13.680 --> 0:17:16.199 Yeah, I would say, first of all, JP Morgan was 0:17:16.280 --> 0:17:20.400 down on Friday, really more for positioning and its valuation. 0:17:22.119 --> 0:17:26.359 It's pe is near the high watermark for its historical range, 0:17:26.840 --> 0:17:29.000 you know, pushing twelve and a half thirteen times twenty 0:17:29.080 --> 0:17:31.760 twenty five numbers. So it's an over owned name. It's 0:17:31.760 --> 0:17:35.359 a very popular name. I think fundamentally was very strong. 0:17:35.400 --> 0:17:38.640 But that's just technicals on ownership on why you kind 0:17:38.640 --> 0:17:41.679 of pulled back. They didn't change their guidance materially, and 0:17:41.720 --> 0:17:44.880 so that was maybe modestly disappointing, but I think that's 0:17:44.920 --> 0:17:48.960 more on valuation Goldman, you know, I think it's really 0:17:48.960 --> 0:17:50.640 the place you want to be right now. You want 0:17:50.640 --> 0:17:53.400 to be a market sensitive revenues. You want to kind 0:17:53.400 --> 0:17:56.720 of be in the place where investment banking still probably 0:17:57.200 --> 0:18:00.800 operating twenty percent below normalized levels, so there's a lot 0:18:00.800 --> 0:18:04.760 of momentum with revenues there. I also think what's interesting 0:18:04.760 --> 0:18:08.000 about Goldman is their restructure and the balance sheet both 0:18:08.080 --> 0:18:12.639 you know, limiting consumer exposure, but also you know, unwinding 0:18:12.720 --> 0:18:16.880 some heavy capital components of their their on balance sheet 0:18:16.880 --> 0:18:19.440 equity investments, and so that's going to free up a 0:18:19.480 --> 0:18:22.040 lot of capital. I think buybacks may be a little 0:18:22.080 --> 0:18:24.640 bit lower from this current quarter, as you mentioned earlier, 0:18:24.880 --> 0:18:27.680 but still very strong. You know, City is a long 0:18:27.760 --> 0:18:31.720 term turnaround story, you know. I think actually the quarter 0:18:31.760 --> 0:18:34.879 though itself was a little bit disappointing. They had you know, 0:18:35.240 --> 0:18:38.760 they had a headline beat, but in reality they missed 0:18:38.760 --> 0:18:42.639 on revenues. They had strong wealth of performance, which was 0:18:42.760 --> 0:18:45.679 which was needed there that that has been struggling had 0:18:45.680 --> 0:18:49.040 a really strong performance there, but they had declining service 0:18:49.600 --> 0:18:53.560 services revenue and they didn't perform as well on trading 0:18:53.600 --> 0:18:57.320 as Goldman or JP Morgan did. And then lastly, you know, 0:18:57.400 --> 0:18:59.720 Wells got beat up a little bit. That's also a 0:18:59.720 --> 0:19:05.239 long turnaround story. They disappointed on their NII guide as 0:19:05.280 --> 0:19:07.480 well as their expense guide, and so that was a 0:19:07.480 --> 0:19:09.680 bit of a setback in the long term story there. 0:19:09.840 --> 0:19:13.239 Hey, David, help us move this forward to tomorrow when 0:19:13.280 --> 0:19:15.320 we hear from Morgan Stanley and we hear from Bank 0:19:15.320 --> 0:19:17.240 of America. Starting with Bank of America, such a great 0:19:17.280 --> 0:19:19.679 read on the consumer. What should we be looking for? 0:19:19.720 --> 0:19:21.400 What should our investing audience be looking for? 0:19:22.800 --> 0:19:25.440 I think with Bank of America it's two components which 0:19:25.440 --> 0:19:28.000 are really the same. I think originally, you know, initially 0:19:28.000 --> 0:19:30.200 on the print you want to look at the deposit 0:19:30.280 --> 0:19:34.040 costs and see was Wells Fargo's higher deposit costs a 0:19:34.920 --> 0:19:37.040