WEBVTT - Surveillance: "Wait And See" Mode After Draghi, Coronado Says 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.000 Bloomberg dot Com, and of course, on the Bloomberg ye 0:00:31.960 --> 0:00:35.520 Out Wire. Bt i G, Chief Equity and Derivative Strategist. 0:00:35.560 --> 0:00:37.600 I'm not going to bury the lead here, Julian. Try 0:00:37.640 --> 0:00:39.120 not to do that on a daily basis, but I'm 0:00:39.120 --> 0:00:42.120 definitely not going to do it today to rate cuts 0:00:43.320 --> 0:00:45.960 guys up to a bt i G. Yeah. No, Well, look, 0:00:46.560 --> 0:00:51.159 first of all, we're historians, and the FED cuts rates 0:00:51.479 --> 0:00:56.040 after hiking cycles. Generally they start within five to six 0:00:56.080 --> 0:00:59.840 months after the last hike UM and so so the 0:01:00.040 --> 0:01:02.600 one time they didn't was two thousand and seven. But 0:01:02.720 --> 0:01:07.040 it's more than that. The FED is very cognizant of 0:01:07.120 --> 0:01:10.360 the message of the yield curve. We're not believers in 0:01:10.360 --> 0:01:13.800 in in the yield curve in version. We we strictly 0:01:13.800 --> 0:01:16.600 adhere to twos tends, but the rest of the market 0:01:16.600 --> 0:01:20.520 does look at it. Uh So, the psychology of recession 0:01:21.000 --> 0:01:24.000 has started to form. We saw that in the plunging yield. 0:01:24.560 --> 0:01:28.319 But more importantly, the FED wants inflation. The Fed is 0:01:28.319 --> 0:01:32.720 is very focused on stoking I want inflation to come on. 0:01:32.880 --> 0:01:37.160 There's technological change starting with Uber John's I said on 0:01:37.200 --> 0:01:39.640 TV today, John, did you really try to get thirty 0:01:39.640 --> 0:01:44.880 thousand shares of Uber popped on Uber? Can I just 0:01:45.040 --> 0:01:48.440 editorialize your folks, it's like worldwide. After doing this show 0:01:48.520 --> 0:01:51.840 for forty years, John, you've been a saint about this. 0:01:52.080 --> 0:01:56.360 The I p O giddiness, it's just ridiculous. While the 0:01:56.520 --> 0:01:59.160 reporting from Bloomberg suggesting that we could get a filing 0:01:59.160 --> 0:02:01.640 for that ip as soon as tomorrow like a RAM, 0:02:03.360 --> 0:02:06.000 and maybe a listing as soon as May for Ruber. 0:02:06.480 --> 0:02:08.360 So the IPOs are snacking up. You know what some 0:02:08.360 --> 0:02:11.160 people will be saying, Julian, this is it the C suite, 0:02:11.200 --> 0:02:13.040 as some of these private companies see, this is the 0:02:13.080 --> 0:02:16.520 final opportunity. The window is closing, Let's go public. What 0:02:16.560 --> 0:02:19.720 do you say back to that, Well, there's no question 0:02:19.800 --> 0:02:22.720 that you know, when you think about the activity the 0:02:22.800 --> 0:02:26.240 last several weeks, there's been some major, major deals, major 0:02:26.280 --> 0:02:29.600 ones coming and you could say that our point of 0:02:29.680 --> 0:02:32.440 view is that what you've really seen is a lot 0:02:32.520 --> 0:02:37.079 of that risk has occurred through the private investment markets 0:02:37.200 --> 0:02:40.840 over the last call a dozen years or so UM 0:02:40.960 --> 0:02:45.079 and in actuality when you think about evaluations, we're not 0:02:45.200 --> 0:02:47.239 to that froth point yet. So let's dig into the 0:02:47.320 --> 0:02:49.880 rate cut call and why you still think stocks can 0:02:49.919 --> 0:02:52.320 go higher. That's hard to reckon sile for so many people. 0:02:52.600 --> 0:02:55.840 If you have the environment that's fertile for a rate 0:02:55.880 --> 0:02:58.880 cut that is tipping, not the environment that risk assets 0:02:58.880 --> 0:03:01.960 perform well in Why do you, at the same time 0:03:02.040 --> 0:03:06.320 as predicting forecasting two rate cuts this year simultaneously forecast 0:03:06.520 --> 0:03:10.920 a higher equity market because it doesn't necessarily have to 0:03:10.960 --> 0:03:14.120 be that sort of seeing recession in the whites of 0:03:14.120 --> 0:03:16.919 the market's eyes if you look at it UH in 0:03:17.240 --> 0:03:22.919 a time where we think there are similarities. The Fed 0:03:23.080 --> 0:03:27.040 cut five months after the last hike in in early 0:03:28.280 --> 0:03:33.040 just because inflation UH and growth dipped briefly. We are 0:03:33.080 --> 0:03:35.760 in the midst of the soft patch. We're not necessarily 0:03:35.800 --> 0:03:38.600 in the midst of a recession of any sort. But 0:03:38.720 --> 0:03:42.440 the Fed wants to also give the rest of central 0:03:42.440 --> 0:03:47.240 banks UH flexibility and that means rate cutting. Julian, The 0:03:47.320 --> 0:03:49.520 charm of your research notes is the first two pages 0:03:49.560 --> 0:03:51.240 are in English, and then the rest of it is 0:03:51.280 --> 0:03:55.160 all this derivative mumbo jumbo which basically centers around what's 0:03:55.200 --> 0:03:57.640 the bet of the market, what's the bet of the 0:03:57.680 --> 0:04:00.840 market right now? Like what actually are hedge funds doing, 0:04:01.080 --> 0:04:03.560 what's the long only buy side doing? What are we 0:04:03.640 --> 0:04:07.720 doing actually doing and not talking about? Well, the bet 0:04:07.720 --> 0:04:10.480 in the market is that equities are going higher, But 0:04:10.680 --> 0:04:15.480 interestingly enough, that has been a very grudging bet over 0:04:15.520 --> 0:04:19.040 the last several months, and and in fact, without without Gamma, 0:04:19.120 --> 0:04:22.599 there's no pop to it, exactly exactly, And and our 0:04:22.640 --> 0:04:25.440 our concern in the very near term is that this 0:04:25.600 --> 0:04:29.000 vaal selling has gotten a bit too carried away, well, 0:04:29.000 --> 0:04:32.440 like February of year ago carried away well. So there 0:04:32.440 --> 0:04:35.920 are actually two examples. There was late two thousand and 0:04:36.000 --> 0:04:39.920 seventeen when val sellers were so extreme that they actually 0:04:40.040 --> 0:04:43.640 ran to the outside. But also like the same as 0:04:44.000 --> 0:04:47.440 last year where you had on the downside move is 0:04:47.480 --> 0:04:51.159 comment John Gamma, g A M m am in the Greeks. 0:04:51.360 --> 0:04:53.680 We're doing the Greeks today. It's Greek onesday. Looking for 0:04:53.720 --> 0:04:56.840 a short term pop involva. Over the long term risk 0:04:56.839 --> 0:04:59.200 assets performed well. Just walk me through the thinking care 0:04:59.279 --> 0:05:03.040 of but what time. That's exactly right, so so and 0:05:03.080 --> 0:05:07.800 again this short term pop involved, particularly if you get 0:05:08.040 --> 0:05:13.080 good news, um, you know, market satisfaction with the breggsit extension, 0:05:14.000 --> 0:05:19.200 the potential for some sort of Chinese deal to materialize, um, 0:05:19.520 --> 0:05:23.719 you know, that is where volatility could actually pop on 0:05:23.800 --> 0:05:25.440 the other Okay, we need to talk about that. That's 0:05:25.440 --> 0:05:29.320 a catalyst good news as a catalyst for higher volatility. 0:05:29.480 --> 0:05:32.200 Walk me through it. So if you go back, the 0:05:32.440 --> 0:05:34.840 way to think about this is sort of the end 0:05:34.880 --> 0:05:38.840 of ten, beginning of eighteen, and Tom alluded to it 0:05:39.480 --> 0:05:43.240 with February. Essentially you got into a performance chase and 0:05:43.240 --> 0:05:46.160 there are a lot of people that are behind their benchmarks, 0:05:46.640 --> 0:05:51.000 came into the year under invested, remains somewhat underinvested, and 0:05:51.080 --> 0:05:55.599 that kind of psychology that chase, particularly if the Fed 0:05:55.760 --> 0:05:59.840 continues to indicate that it's got the markets back, uh, 0:06:00.040 --> 0:06:02.920 causes volatility to expand down the opposite. Do you know, Julian, 0:06:02.960 --> 0:06:05.280 it's it's amazing on your channels. That's what John and 0:06:05.279 --> 0:06:09.320 I do every day. We do a performance. Cheez Can 0:06:09.320 --> 0:06:11.160 we talk about a performance just briefly that's going to 0:06:11.200 --> 0:06:13.679 take place on Capitol Hill a little bit later, speaking 0:06:13.680 --> 0:06:17.720 of volatility the House versus Wall Street. That's what it 0:06:17.760 --> 0:06:20.720 feels like, That's what it's teed up for. With Jamie Diamond, 0:06:20.800 --> 0:06:24.880 David Solomon, Brian moynihan, Michael Corbett, James Coleman all going 0:06:25.000 --> 0:06:28.520 up against the House Financial Services Committee? What does that 0:06:28.600 --> 0:06:30.880 bring a little bit later other than theater, what are 0:06:30.880 --> 0:06:36.560 you looking for from that? Julian well being overweight financials? 0:06:36.600 --> 0:06:40.000 It always concerns us when you've got executives testifying on 0:06:40.120 --> 0:06:42.240 Capitol Hill, and it's one of the reasons that were 0:06:42.279 --> 0:06:45.719 neutral rated on technology because we continue to see technic 0:06:46.000 --> 0:06:50.160 technology executives in front of Capitol Hill. Essentially, what they're 0:06:50.200 --> 0:06:54.839 gonna do is try and convince legislators that the system 0:06:54.880 --> 0:06:57.680 is far better off and that they are really, you know, 0:06:57.839 --> 0:07:01.359 socially conscious. In this new age, there's important phrases that 0:07:01.400 --> 0:07:04.360 you see, say the late nineties into two thousand one, 0:07:04.720 --> 0:07:08.039 two thousand six over to two thousand seven. Julian yesterday, 0:07:08.160 --> 0:07:11.320 I'm Blueberg surveillance. We heard one of those phrases of 0:07:11.360 --> 0:07:15.520 the era, the debt hamster wheel? Are we on the 0:07:15.560 --> 0:07:18.240 debt hamster wheel now? Where we're gonna be like two 0:07:18.280 --> 0:07:22.560 thousand six worrying about every ten basis points. UH with 0:07:22.680 --> 0:07:25.840 a yield below two fifty in the ten year, we 0:07:25.920 --> 0:07:28.520 are going to worry about it every ten basis points, 0:07:28.640 --> 0:07:31.240 which goes back to our fall for rate cuts because 0:07:31.240 --> 0:07:34.320 we actually think that if you cut rates, you can 0:07:34.400 --> 0:07:39.640 potentially stimulate inflation expectations increasing the yield at the long 0:07:40.120 --> 0:07:42.280 This is just you know, the guy goes to work 0:07:42.280 --> 0:07:47.600 for Rich Greenfield and he becomes radical, radical, got to 0:07:47.680 --> 0:07:50.080 keep up with Rich. I feel like once she leaves 0:07:50.080 --> 0:07:52.960 the Swiss Bank she becomes unleashed a little bit true. 0:07:54.320 --> 0:07:58.400 There's a lot going on, Thank you getting a manueout BT. 0:07:58.480 --> 0:08:15.680 I g chief E put into rivatives rategy shop glens 0:08:15.760 --> 0:08:17.640 with us with credit Sweete, and I guess shop where 0:08:17.640 --> 0:08:19.600 I want to go is Mr drag. He's going to 0:08:19.680 --> 0:08:22.320 do everything not to move the Euro. And yet you've 0:08:22.320 --> 0:08:25.160 got to decide if there's alpha or pop or gain 0:08:25.400 --> 0:08:29.200 either way in the Euro. Is the Euro movable over 0:08:29.240 --> 0:08:34.560 the next six months? Well, the market has sold implied 0:08:34.640 --> 0:08:37.560 volatility in the Euro in massive size for the market 0:08:37.960 --> 0:08:40.840 certainly thinks that there aren't many reasons for a large 0:08:40.840 --> 0:08:44.480 euro move. I think in terms of today, the biggest 0:08:44.480 --> 0:08:48.120 surprise would be if, as part of the Q and 0:08:48.160 --> 0:08:51.959 a um ECB Chief Drug decides to address head on 0:08:52.040 --> 0:08:55.000 this issue or the stories in the markets around the 0:08:55.040 --> 0:08:58.160 possibility of tiered rates in the future. I think if 0:08:58.200 --> 0:09:02.000 there's a substantial discuss and around that topic, then I 0:09:02.040 --> 0:09:03.640 think the Euro could move, and it would probably be 0:09:03.640 --> 0:09:05.719 to the downside. Let's talk about the move to the 0:09:05.800 --> 0:09:07.800 dance on and how difficult that would be. Euro dollar 0:09:07.840 --> 0:09:10.320 has really struggled to break one two a half and 0:09:10.360 --> 0:09:12.720 we've thrown a lot at it. What is it going 0:09:12.760 --> 0:09:15.079 to take to get the euro to break that level? 0:09:16.280 --> 0:09:20.520 I think it's going to have to be something like 0:09:20.520 --> 0:09:22.840 like what I just described, some something along the lines 0:09:22.880 --> 0:09:28.200 of a conversation that raises the possibility of new innovations 0:09:28.440 --> 0:09:32.360 in monetary policy designed to address more specifically what we 0:09:32.400 --> 0:09:37.959 can see, which is very low inflation, very falling inflation expectations, 0:09:38.559 --> 0:09:41.360 and a high likelihood of the e CV missing its 0:09:41.360 --> 0:09:44.880 targets for inflation in the future. Until now, Drug has 0:09:45.040 --> 0:09:48.760 maintained that ultimately the economy will cover and the inflation 0:09:48.800 --> 0:09:52.320 expectations and inflation itself will move up against So anything 0:09:52.360 --> 0:09:55.160 that suggests that there's a greater risk that that won't happen. 0:09:55.640 --> 0:09:57.840 We would need to see that before the europe can 0:09:57.960 --> 0:10:00.840 conclusively break down through those levels. In John Field, this 0:10:00.880 --> 0:10:05.079 is critical because Shabs and the trenches and this this massive, 0:10:05.200 --> 0:10:09.320 as you call it, binary call. John does coming up 0:10:09.360 --> 0:10:11.640 on what central banks do? What is the e c 0:10:11.760 --> 0:10:14.559 BAS next move. I mean, President drag tease the prospect 0:10:14.640 --> 0:10:16.480 that we could have a tier deposit rate of the 0:10:16.480 --> 0:10:19.040 e c B or they would do something to offset 0:10:19.040 --> 0:10:22.200 the pain of negative interest rates for financial and the 0:10:22.240 --> 0:10:24.840 financial sector. Shahab, It doesn't seem to me that that's 0:10:24.840 --> 0:10:28.439 on the horizon in terms of happening anytime soon. No, 0:10:28.600 --> 0:10:31.199 that's right, and I think that's the reason why, as 0:10:31.200 --> 0:10:34.080 we discussed volatility in the urine imply, volatility is so 0:10:34.160 --> 0:10:37.480 low and one markets are basically betting on the current 0:10:37.559 --> 0:10:41.400 ranges holding um. It would be a surprise if Frankly, 0:10:41.440 --> 0:10:44.720 if today he decides to make a big issue of 0:10:44.760 --> 0:10:47.400 these of these themes. But the thing is, it's still 0:10:48.000 --> 0:10:51.840 difficult to completely give a zero probility to this because 0:10:52.120 --> 0:10:55.240 ultimately it's still the case that the economy is shaky 0:10:55.800 --> 0:10:58.640 and certainly inflation data a very week so that you 0:10:58.679 --> 0:11:01.680 can't really hide from that, and that's why we stair 0:11:01.679 --> 0:11:04.839 alive to this risk dumb question of the day which 0:11:04.840 --> 0:11:06.679 we just take for granted, but I think for a 0:11:06.679 --> 0:11:10.719 lot of our audience, it's not a dumb question. Can 0:11:10.760 --> 0:11:16.000 the ECB cut rates? It's still technically possible. Um, there 0:11:16.000 --> 0:11:19.000 are central banks, for example the Swiss National Bank that 0:11:19.080 --> 0:11:22.880 have even lower rates than the u CBS current rates. 0:11:23.240 --> 0:11:26.520 There's a debate about how useful that would be, particularly 0:11:26.920 --> 0:11:31.800 for bank profitability and therefore credit creation which comes from 0:11:31.800 --> 0:11:35.160 banks ultimately in your area. So but it's but it's 0:11:35.160 --> 0:11:38.000 technically possible. And again that the issue is what does 0:11:38.000 --> 0:11:41.840 the CD do if we go into another major slow 0:11:41.880 --> 0:11:45.760 down with another big fall in inflation expectations when it's 0:11:45.840 --> 0:11:48.079 tool set is as limited as it is, As long 0:11:48.120 --> 0:11:50.960 as the market doesn't perceive there to be a wide 0:11:51.080 --> 0:11:54.760 range of other options, it will still keep open, keeping 0:11:54.840 --> 0:11:57.760 up in mind around the possibility of more negative rates, 0:11:57.800 --> 0:12:00.880 which again, you know, I think hells us that maybe 0:12:00.920 --> 0:12:04.120 the problem lies elsewhere in all of you that if 0:12:04.120 --> 0:12:06.040 they don't go into be a solution, it probably will 0:12:06.080 --> 0:12:09.600 need a fiscal component. UM probably need the countries that 0:12:09.760 --> 0:12:12.520 have room for fiscal expansion, like Germany, to the player 0:12:12.600 --> 0:12:15.040 role in that. But that doesn't seem to be on 0:12:15.080 --> 0:12:17.400 the menu. And Joan, wasn't it ten days ago that 0:12:17.559 --> 0:12:20.840 Cherry Yellen in Asia said exactly what you heard Mr 0:12:20.920 --> 0:12:23.160 Jones say. I think so many people have made this 0:12:23.240 --> 0:12:25.400 point and for whatever reason, Europe just doesn't want to 0:12:25.440 --> 0:12:27.760 explore the policy options Jha. But I just don't know 0:12:27.800 --> 0:12:30.760 when that changes. When does the penny finally drop that 0:12:30.840 --> 0:12:35.600 you need a counter cyclical fiscal policy in Europe. I 0:12:35.640 --> 0:12:39.120 think the difficulty there is it's not so much in 0:12:39.160 --> 0:12:42.400 the fact that it's not been discussed efficiently clearly it has. 0:12:42.559 --> 0:12:47.320 It's just that philosophically, obviously the German has been disinclined 0:12:47.360 --> 0:12:49.680 to go that way, but also maybe they want to 0:12:49.679 --> 0:12:54.520 see more signs of reforms that they approve of in 0:12:54.559 --> 0:12:58.160 the other countries, big countries like France for example. Um 0:12:58.320 --> 0:13:01.120 so there's a quick pro crow thoughts playing out here. 0:13:01.120 --> 0:13:04.480 The question is whether the European economy can sustain itself 0:13:04.640 --> 0:13:07.440 long enough for this to really work itself out. Again. 0:13:07.520 --> 0:13:09.720 This this plays into the view of some who believe 0:13:09.760 --> 0:13:12.960 you need crises to force the issue, and in the 0:13:13.000 --> 0:13:17.040 absence of those nothing much happens, which is why so 0:13:17.160 --> 0:13:21.200 many investors tend to have a structural bearers your review. Well, 0:13:21.280 --> 0:13:23.439 let's talk about that structural bearers your review and talk 0:13:23.480 --> 0:13:26.560 about the cycle as well. At the moment, your view 0:13:26.880 --> 0:13:30.400 is a different degree of bad. It's weak. Will agree 0:13:30.440 --> 0:13:32.559 that it's weak in Europe, but to what degrees you have, 0:13:32.800 --> 0:13:37.120 because manufacturing is very much weak in a recession pretty much, 0:13:37.160 --> 0:13:42.000 services is okay, the hard data is still coming out. Okay, 0:13:42.040 --> 0:13:45.160 the soft data looks terrible. How do you think DR 0:13:45.600 --> 0:13:48.240 actually analyzes the Eurozone economy today with all of those 0:13:48.280 --> 0:13:51.920 different things going on. It's not that clear. It's really 0:13:51.920 --> 0:13:56.120 not clear because there are other problems too. For example, 0:13:56.640 --> 0:14:00.720 we don't know whether the US and President Trump will 0:14:00.920 --> 0:14:06.200 push on and force the issue around auto tariffs, which obviously, 0:14:06.679 --> 0:14:08.920 if the US were to impose auto tarmas in Europe 0:14:09.080 --> 0:14:11.960 would be a new economic shock. Uh and something that 0:14:12.080 --> 0:14:14.120 isn't currently has been talked about, but I wouldn't say 0:14:14.160 --> 0:14:16.880 it's necessarily in the price at this point in time 0:14:16.920 --> 0:14:20.000 for the euro or maybe even drug his assessments of 0:14:20.040 --> 0:14:23.040 the future. So I think it's very difficult because of 0:14:23.080 --> 0:14:28.000 the changing nature of global trade relationships um and especially 0:14:28.000 --> 0:14:32.240 for the Your area being a net exporting region largely 0:14:32.320 --> 0:14:34.800 used to Germany. This is a key factor I think 0:14:34.800 --> 0:14:37.480 in terms the current data, as you suggest, you do 0:14:37.560 --> 0:14:41.720 have the split between the services sector and reasonable employment 0:14:42.120 --> 0:14:46.040 outlooked by European standards on the one hand, and yet 0:14:46.080 --> 0:14:49.040 obviously this terrible manufacturing story and the other. But I 0:14:49.080 --> 0:14:51.440 think ultimately you know what I'm looking at there to 0:14:51.440 --> 0:14:54.560 to solve that dylemma is inflation expectations. And if you 0:14:54.600 --> 0:14:57.200 look at some of the e CVS own favored measures, 0:14:57.200 --> 0:15:01.800 example the five year five year inflation swell for it, uh, 0:15:02.000 --> 0:15:04.200 they'd been falling. These are in session. Expectations are going 0:15:04.280 --> 0:15:07.880 lower and I haven't bounced too much yet either, even 0:15:07.880 --> 0:15:12.240 with positive news like China's upside p M I surprises 0:15:12.320 --> 0:15:14.600 so much. So I think that as long as that's 0:15:14.640 --> 0:15:17.800 the case, we should lean on the side of VCV 0:15:18.320 --> 0:15:20.520 having to be remaining under pressure to come up with 0:15:20.560 --> 0:15:23.400 new ideas. Sham Johns with us with credit sweet, thank 0:15:23.440 --> 0:15:39.480 you so much. Right now. Julia Cornado on a weaker Euro, 0:15:40.160 --> 0:15:42.080 I mean the Euro Julia is just to be direct, 0:15:42.120 --> 0:15:45.280 really floats off of every word that Mr Droggy says. 0:15:45.840 --> 0:15:48.680 What is the significance right now of this weaker euro. 0:15:50.120 --> 0:15:53.680 I mean, nobody really expected the market wasn't really looking 0:15:53.720 --> 0:15:57.760 for dragging to deliver a lot today, and he didn't. 0:15:58.480 --> 0:16:01.600 And he's sort of dancing between the raindrops in his comments, 0:16:01.640 --> 0:16:04.520 sort of indicating that they're studying what they can do 0:16:04.600 --> 0:16:07.520 and that they're willing to do more, but also trying 0:16:07.560 --> 0:16:11.400 to stick to that optimistic baseline. But uh so there's 0:16:11.400 --> 0:16:14.840 a little bit maybe of disappointment that he didn't deliver anything, 0:16:14.960 --> 0:16:18.560 or maybe that he sounds still a little too um 0:16:18.840 --> 0:16:22.920 sanguine and about the outlook and less willing to do 0:16:23.000 --> 0:16:26.320 what needs to be done. But you know, it's it's 0:16:26.360 --> 0:16:28.800 really not a big reaction. I think we're still going 0:16:28.840 --> 0:16:31.040 to be in wait and the mode after this meeting. 0:16:31.800 --> 0:16:34.440 Uh the one what the data do and what the 0:16:34.440 --> 0:16:36.800 ECB comes up with. One question went to what we 0:16:36.840 --> 0:16:41.800 spoke about earlier on Bloomberg's surveillance, this idea of looking 0:16:41.800 --> 0:16:46.880 out five years and then five years forward from there. 0:16:46.920 --> 0:16:49.760 So when when the pros talk about a five year 0:16:49.840 --> 0:16:52.560 five year forward, Am I right, Julia, that that's a 0:16:52.600 --> 0:16:57.040 ten year guestimate of inflation. Yes, that's basically what the 0:16:57.080 --> 0:17:00.800 market is thinking is trend inflation and they're we've seen 0:17:00.840 --> 0:17:06.200 a real deterioration in market expectations for European inflation, and 0:17:06.240 --> 0:17:09.159 I guess that's where probably some of the disappointment comes, 0:17:09.200 --> 0:17:13.240 because Draggy is downplaying that deterioration, saying it's it's just 0:17:13.400 --> 0:17:16.240 risk premium, which is what central bankers say when they 0:17:16.280 --> 0:17:18.760 want to sort of dismiss it and put it okay. 0:17:19.600 --> 0:17:21.919 Does the market have a good track record of getting 0:17:22.040 --> 0:17:28.720 tenure out anything right, let alone inflation. We can't even 0:17:28.840 --> 0:17:31.800 in forecast inflation in the next six months, let alone 0:17:31.800 --> 0:17:34.120 the next five or ten years. So I don't think 0:17:34.119 --> 0:17:37.320 anybody's got a good Julie. We'd go an hour long 0:17:37.359 --> 0:17:39.840 with you, but we've got festivities in Washington. We're gonna 0:17:39.880 --> 0:17:41.480 run to Paul Sweene and I are going to begin 0:17:41.520 --> 0:17:44.840 to frame out a bank conference. We thank Dr Coronado 0:17:44.880 --> 0:17:47.640 for a really good perspective at this morning, across all 0:17:47.720 --> 0:18:06.640 of Bloomberg surveillance on television and radio. We are beyond honored, 0:18:06.640 --> 0:18:09.439 Paul Sweeney and myself to have a gentleman who is 0:18:09.480 --> 0:18:11.679 the only gentleman I would like to talk to on 0:18:11.800 --> 0:18:15.000 this bridge from two thousand eight o nine to where 0:18:15.080 --> 0:18:19.159 we are now, with bankers defending City Group at ugliest 0:18:19.560 --> 0:18:24.560 negative eight billion operating income than positive fourteen billion bailout 0:18:24.640 --> 0:18:28.840 operating income up now, Mike Mayo to twenty three billion 0:18:28.920 --> 0:18:32.760 of operating income. Do these bankers come before Maxine Waters 0:18:32.800 --> 0:18:36.840 minting money look at night and day versus before the 0:18:36.880 --> 0:18:39.280 financial crisis or during the financial crisis, and what you've 0:18:39.280 --> 0:18:42.680 seen so far. So far, we've had four CEOs testify, 0:18:42.840 --> 0:18:45.840 and there's a contrast between three of those and one other. 0:18:46.200 --> 0:18:50.080 And so Bank America they said they recognized the damage 0:18:50.160 --> 0:18:53.560 caused by the company. Morgan Stanley, the CEO, said, if 0:18:53.560 --> 0:18:56.080 not for the support attack payers for a Right Night 0:18:56.160 --> 0:18:58.959 survived and City Group CEO said it was a searing 0:18:59.640 --> 0:19:03.480 x And moynihan went right after ken Lewis secondarily here 0:19:03.600 --> 0:19:05.879 talking about country Wise that it's not my faults, my 0:19:05.960 --> 0:19:07.720 predecessor that fought this from that was one of the 0:19:07.760 --> 0:19:11.120 worst acquisitions. There's a strivancy to tone that the three 0:19:11.160 --> 0:19:13.639 of us, we've all the combined three of us folks 0:19:13.640 --> 0:19:16.240 in the studio have been in forty two thousand three 0:19:16.440 --> 0:19:20.160 D twelve conference calls. This isn't a normal conference call, 0:19:20.320 --> 0:19:22.879 is it. This is pretty unique? But in terms of 0:19:22.880 --> 0:19:25.320 being night and day. There's one statistic that really sums 0:19:25.400 --> 0:19:28.280 up the strength of the banking industry the fixed income market. 0:19:28.440 --> 0:19:31.040 There's a trillion dollars of bank bonds out there and 0:19:31.040 --> 0:19:33.080 the spread of those bank bonds in the last decade 0:19:33.080 --> 0:19:35.639 of decline from seven hundred basis points down to a 0:19:35.680 --> 0:19:38.280 hundred basis points. So if somebody says the banking industry 0:19:38.359 --> 0:19:40.520 is at big risk today, what we would say back 0:19:40.520 --> 0:19:42.800 to them is we have one trillion dollars of bank 0:19:42.840 --> 0:19:45.720 bonds that disagree. That's right. So, Mike, what would be 0:19:45.760 --> 0:19:48.399 a success for these bankers coming in front of the 0:19:48.400 --> 0:19:50.840 Democratic House. They haven't had to do it since the 0:19:50.840 --> 0:19:54.159 financial crisis. This could get ugly. It's starting out pretty 0:19:54.160 --> 0:19:56.480 calm here. What would you define a successful day for 0:19:56.520 --> 0:19:59.639 these banks CEOs? A successful day for the seven banks 0:19:59.640 --> 0:20:03.000 eato us that are testifying is that there's no headlines, 0:20:03.320 --> 0:20:05.639 there's not many articles. By the time we get to 0:20:05.640 --> 0:20:07.960 the weekend, there certainly will be a lot of press 0:20:08.000 --> 0:20:11.600 on this today and tomorrow. But make no mistakes. So 0:20:11.640 --> 0:20:16.320 it's one misspoken word or one dad answer that could 0:20:16.320 --> 0:20:19.080 be really damaging the reputation. Where do you think they 0:20:19.160 --> 0:20:22.240 might be most exposed. Is it diversity and hiring, is 0:20:22.240 --> 0:20:24.600 it lending? Is it compensation? Where do you think they're 0:20:24.600 --> 0:20:27.800 most exposed? Well, I think compensation is an issue not 0:20:27.880 --> 0:20:30.680 when banks perform well, but when they don't perform well, 0:20:30.720 --> 0:20:33.840 because that gives a perception of a system that's not fair. 0:20:33.840 --> 0:20:36.639 And so we published a report about the Estate Street 0:20:36.720 --> 0:20:40.160 CEO over the last nine years made a hundred fifteen 0:20:40.160 --> 0:20:44.600 million dollars even when their primary target got worse, not better. 0:20:46.600 --> 0:20:50.600 Its predecessor. It's predecessor, So you know this, But this 0:20:50.680 --> 0:20:53.080 is the realm. This should be the realm of shareholders. 0:20:53.119 --> 0:20:57.000 So you know nature abhors a vacuum wash and DC 0:20:57.160 --> 0:21:01.080 loves one. So if shareholders don't step in and control compensation, 0:21:01.400 --> 0:21:04.160 then it's an invitation for Congress to say something about it. Okay, 0:21:04.200 --> 0:21:05.800 we got in a couple of gun number of minutes 0:21:05.840 --> 0:21:07.600 before this. We're gonna go back to David Solomon of 0:21:07.680 --> 0:21:09.680 goldn Sex here when he steps in. But Michael Mayo, 0:21:09.960 --> 0:21:12.639 this is critical and this goes back to you for 0:21:13.080 --> 0:21:15.240 you know you you were Jackson, it was a bank 0:21:15.280 --> 0:21:18.600 of the United States. When you begin securities analysis, right, 0:21:19.040 --> 0:21:22.320 I mean, it's always a tension of Washington in the 0:21:22.440 --> 0:21:25.400 mean capitalist New York City banks that this goes back 0:21:25.400 --> 0:21:28.639 to Jape Moore, goes back to Jefferson. I would suggest 0:21:28.680 --> 0:21:32.159 as well, that's never going to change. So what is 0:21:32.280 --> 0:21:37.040 Mr Corbett through Mr Solomon alphabetically, what's their best outcome 0:21:37.480 --> 0:21:40.760 today knowing it's never gonna change. Well, you know, I 0:21:40.800 --> 0:21:44.720 think Jamie Diamonds, uh, you know, ceol in the Any 0:21:44.800 --> 0:21:47.520 report just came out last week, sums it up. He goes, 0:21:47.760 --> 0:21:50.560 Sometimes the job of a banker is to not be 0:21:50.680 --> 0:21:53.639 liked because you need to say no sometimes. And you 0:21:53.640 --> 0:21:58.520 know what when Congress people say, you know, make more loans, well, 0:21:58.720 --> 0:22:02.679 lending is an output, an outcome, not a decision. You 0:22:02.680 --> 0:22:04.080 can make as many loans as you want, and that 0:22:04.240 --> 0:22:06.840 got us into the subprime crisis for sure. So I 0:22:06.880 --> 0:22:10.560 think it's just a matter of it's a natural sometimes 0:22:10.560 --> 0:22:12.920 a healthy tension. You don't want banks learning too much 0:22:12.960 --> 0:22:15.359 because then you do, indeed have a financial crisis. I 0:22:15.440 --> 0:22:18.280 was surprised Paula didn't mention the number of construction workers 0:22:18.280 --> 0:22:20.680 that are going to tear down and rebuild the Palace. 0:22:22.480 --> 0:22:24.600 I mean I looked it up. The Ocean Bay apartments 0:22:24.680 --> 0:22:26.840 or whatever in Rockaway Beach and there it is on 0:22:27.000 --> 0:22:30.119 Google is is is. One of the bankers mentioned that 0:22:30.160 --> 0:22:31.840 as well, Paul, So, Michael, do you think that, I 0:22:31.880 --> 0:22:36.800 mean again, post financial crisis, a big layer of regulatory 0:22:36.840 --> 0:22:39.320 oversight came up to the global banking industry, the US 0:22:39.400 --> 0:22:41.520 banking industry. Do you feel like we're at a point 0:22:41.520 --> 0:22:44.160 now where they can start pushing back and saying, listen, 0:22:44.160 --> 0:22:46.040 we the system is much safer now, we can pull 0:22:46.080 --> 0:22:48.359 back some of those regulations off of the cities and 0:22:48.359 --> 0:22:50.960 the JP Morgan's or do you think the CEOs don't 0:22:50.960 --> 0:22:52.520 even want to go there? Well, I don't. I think 0:22:52.640 --> 0:22:55.040 you're the way you phrased it, pushing back. I don't 0:22:55.080 --> 0:22:59.119 like that phrase. I think preserve the safety and soundness 0:22:59.160 --> 0:23:01.040 of the banking into stree. It's stronger than it's been 0:23:01.080 --> 0:23:05.040 in decades. Having said that, you know, improve the efficiency 0:23:05.080 --> 0:23:08.679 of regulation, improve the transparency of regulations, improve the effectiveness 0:23:08.720 --> 0:23:11.560 of regulations. Regulators did a great job. Regulators should take 0:23:11.560 --> 0:23:13.600 a victory laugh. But now it's time for a look 0:23:13.640 --> 0:23:16.480 back and say, hey, can we have this effectiveness of 0:23:16.520 --> 0:23:19.480