WEBVTT - Bloomberg Surveillance: NYCB Rebound and Disney Preview 0:00:05.040 --> 0:00:08.639 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:08.680 --> 0:00:12.040 with Paul Sweeney. Join us each day for insight from 0:00:12.039 --> 0:00:16.200 the best in economics, finance, investment, and international relations. You 0:00:16.239 --> 0:00:19.599 can also watch the show live on YouTube. Visit the 0:00:19.600 --> 0:00:24.360 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:24.360 --> 0:00:27.400 mornings from seven to ten am Eastern from our global 0:00:27.440 --> 0:00:32.080 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:32.440 --> 0:00:36.000 or anywhere else you listen, and always on Bloomberg Radio, 0:00:36.159 --> 0:00:39.360 the Bloomberg Terminal, and the Bloomberg Business App. 0:00:39.479 --> 0:00:44.040 NYCB cut to junk by Moodies as stock hits lois 0:00:44.040 --> 0:00:47.040 since nineteen ninety seven. The real question for investors, just 0:00:47.080 --> 0:00:48.560 like it was a year ago some of the West 0:00:48.600 --> 0:00:51.159 Coast banks, is is this specific to one or two 0:00:51.520 --> 0:00:54.760 individual banks? This indicative and maybe some risk in the 0:00:54.840 --> 0:00:56.920 US banking system. For that, we turn to Herman Chant. 0:00:57.000 --> 0:00:59.840 He covers the regional banks for Bloomberg Intelligence. He joins 0:00:59.840 --> 0:01:02.320 his us here in our Bloomberg Interactive Broker Studio. So 0:01:02.400 --> 0:01:04.880 Hermann tell us, just summarize for us what happened at 0:01:05.000 --> 0:01:07.960 NYCB and what do you think is going to happen 0:01:07.959 --> 0:01:08.600 going forward? 0:01:08.840 --> 0:01:09.559 Right for this bank. 0:01:09.720 --> 0:01:13.800 So there's two things. One is our idios and credit factors, 0:01:13.840 --> 0:01:16.560 and one that's the overall risk and commercial real estate. 0:01:16.920 --> 0:01:21.279 The and credit factor is your community cleared one hundred 0:01:21.280 --> 0:01:24.880 billion dollar asset threashold with the acquisition of signature banks 0:01:25.400 --> 0:01:29.200 that was facilitated by the FDIC last year. That ushers 0:01:29.200 --> 0:01:32.600 in higher capital and liquidity requirements and they're trying to 0:01:32.640 --> 0:01:35.880 digest that. The second is that they cut their dividend 0:01:35.959 --> 0:01:39.600 to be able to increase their capital and increase their 0:01:39.640 --> 0:01:43.399 reserves because of some issues on the credit quality side, 0:01:44.000 --> 0:01:47.880 some losses in multi family, commercial real estate and in office. 0:01:48.280 --> 0:01:49.600 All right, So for. 0:01:49.520 --> 0:01:53.400 Our listeners and viewers out there nationwide worldwide, does the 0:01:53.560 --> 0:01:55.880 US have a regional bank problem. 0:01:56.760 --> 0:02:00.480 The United States does not have a regional bankrob It 0:02:00.600 --> 0:02:06.440 has a burgeoning potential problem in losses and commercial real estate, 0:02:06.520 --> 0:02:09.840 specifically office and if you want to throw in multifamily 0:02:10.200 --> 0:02:13.160 regulated multifamily, it's a niche business in New York City. 0:02:13.680 --> 0:02:17.320 That's not going to be a issue across the industry. 0:02:18.600 --> 0:02:22.400 We'll see losses percolate in twenty twenty four and throughout 0:02:22.440 --> 0:02:25.000 the next few years, but it's going to be a 0:02:25.040 --> 0:02:26.120 longer term issue. 0:02:26.160 --> 0:02:29.760 How many more nycbs are. There's a general number, there's 0:02:29.760 --> 0:02:32.120 four thousand banks. I don't need a number, most of 0:02:32.200 --> 0:02:35.040 minus ten. But do you feel in very William Isaac 0:02:35.200 --> 0:02:39.120 SNL crisis Robert McTeer of the eighties or the complete 0:02:39.160 --> 0:02:42.160 disaster of the reats in the seventies, or is this 0:02:42.320 --> 0:02:43.560 really hyper selective. 0:02:43.720 --> 0:02:46.280 It's going to be selective going forward and it has 0:02:46.360 --> 0:02:51.440 been right so the banks that FAED, we're very focused 0:02:51.440 --> 0:02:55.040 on certain businesses that really didn't pan out when rates 0:02:55.040 --> 0:02:59.520 went higher, and now we're facing the similar issues with 0:02:59.680 --> 0:03:03.600 rates where they are elevated. It's tougher for these commercial 0:03:03.639 --> 0:03:07.520 real estate lenders to in their bars to refinance, and 0:03:07.560 --> 0:03:10.639 it's creating asset quality issues. And it's going to be 0:03:10.720 --> 0:03:13.639 banks that have an intense focus on commercial real estate 0:03:13.680 --> 0:03:15.840 and that's going to be a small subset of the 0:03:15.880 --> 0:03:16.960 overall banking system. 0:03:17.040 --> 0:03:18.639 And you know, because Tom and I were talking about this, 0:03:18.680 --> 0:03:21.760 and we follow the news flow in this very carefully, 0:03:21.760 --> 0:03:24.720 which is when we see some of these big pieces 0:03:24.720 --> 0:03:27.640 of real estate change hands. Now it's fifty cents on 0:03:27.680 --> 0:03:30.760 the dollar, right, and it's all over the country. It's 0:03:30.800 --> 0:03:35.400 not just San Francisco or New York. It's everywhere. So 0:03:35.480 --> 0:03:38.280 but I guess what I'm asking you is what percentage 0:03:38.320 --> 0:03:41.400 of that type of real estate is part of the 0:03:41.480 --> 0:03:43.600 portfolio of the regional banks out there in the US. 0:03:43.640 --> 0:03:45.240 Is it a big piece, small piece? 0:03:45.440 --> 0:03:48.680 It's a fairly small we're talking about when we say 0:03:48.720 --> 0:03:51.160 fifty cents on a dollar. It's like those B and 0:03:51.200 --> 0:03:54.520 C class properties in central business districts that aren't getting 0:03:54.560 --> 0:03:58.280 a lot of occupancy. And that's not like typically where 0:03:58.280 --> 0:04:02.320 the regional banks play there, like medical offices where the 0:04:02.360 --> 0:04:03.360 operators also. 0:04:03.360 --> 0:04:06.560 Okay, so there's this headline story here when I hear 0:04:06.640 --> 0:04:09.360 bankers tell me things will be fine, or even someone 0:04:09.400 --> 0:04:12.880 as cynical as you. The heart of the matter is 0:04:12.880 --> 0:04:15.000 is we're looking at them like they own every office 0:04:15.040 --> 0:04:17.440 hour out there, right, and they don't. They don't. 0:04:17.839 --> 0:04:20.400 And even if they do, you can go back to 0:04:20.440 --> 0:04:24.920 their underwriting right where their loan to value is about 0:04:25.040 --> 0:04:26.400 fifty five to sixty years. 0:04:26.600 --> 0:04:28.800 So who takes a loss cut to the chase. There's 0:04:28.800 --> 0:04:31.320 a building out there, it's down fort it's going to 0:04:31.360 --> 0:04:34.840 be the headlining cranes two days from now. Who takes 0:04:34.880 --> 0:04:35.720 that laws. 0:04:35.520 --> 0:04:37.920 Ermage in the loss is going to be on the 0:04:37.960 --> 0:04:41.160 owner of the building predominantly, and the banks will take, 0:04:41.240 --> 0:04:44.479 you know, maybe some sliver, but it's going to be 0:04:45.520 --> 0:04:49.920 the losses will be prevailing in areas like commercial banks, 0:04:49.960 --> 0:04:53.520 It's going to be in commercial real estates, the NBS, reads, 0:04:53.600 --> 0:04:57.760 insurance companies, the entire financial system will face some sort 0:04:57.800 --> 0:04:58.040 of way. 0:04:58.520 --> 0:05:00.920 Tom. It just feels like one of the markets where 0:05:01.680 --> 0:05:03.520 this smart money is gonna come in soon, and I 0:05:03.520 --> 0:05:06.159 don't know who that is. Is it private equity, is 0:05:06.160 --> 0:05:08.919 it just some smart real estate money? Is it the 0:05:09.000 --> 0:05:12.120 rooting found start buying the stuff at fifty cents on 0:05:12.160 --> 0:05:14.920 the dollar, and we're gonna have the story five or 0:05:15.120 --> 0:05:17.600 ten years from now. Wow, at a time, I. 0:05:17.520 --> 0:05:20.080 Get I do agree with that, But then here's the 0:05:20.120 --> 0:05:22.279 next question. Herman Chan what I see And I'm reading 0:05:22.320 --> 0:05:25.760 cranes voraciously just to get the gossip and all that. 0:05:26.000 --> 0:05:29.800 You know, I don't know anything about this. The foreign 0:05:29.920 --> 0:05:32.599 money is like a drug. I mean, they just show 0:05:32.720 --> 0:05:34.800 up in New York. Are they going to show up 0:05:34.800 --> 0:05:35.880 in Topeka? 0:05:36.680 --> 0:05:38.320 I don't think they're going to show up and say 0:05:38.720 --> 0:05:42.400 the foreign money has to be in large metro city, 0:05:42.600 --> 0:05:44.240 So it's gonna be in New York Miami. 0:05:44.440 --> 0:05:46.240 Are they buying LA with a train wreck in the 0:05:46.320 --> 0:05:48.080 central district LA. 0:05:48.160 --> 0:05:51.480 That remains the BC? Maybe if if valuations have become 0:05:51.600 --> 0:05:53.720 really really attractive, but we haven't really seen them. 0:05:55.920 --> 0:05:58.880 Told the Jepanese there was a there was a time 0:05:58.880 --> 0:06:01.000 when I first started playing Public thirty years ago that 0:06:01.640 --> 0:06:03.520 every time I went out and played, which is probably 0:06:03.520 --> 0:06:05.960 two or three times a year, it was my foursome 0:06:06.080 --> 0:06:09.320 was all Japanese players. Because the japan economy is so strong, 0:06:09.360 --> 0:06:11.880 the yen was so strong, it was close by they 0:06:11.920 --> 0:06:14.520 owned it. You know, you don't see that anymore. But again, 0:06:14.560 --> 0:06:17.520 the foreign buyers have been in the big metro markets. 0:06:17.600 --> 0:06:22.360 What are the banks saying about will they underwrite commercial 0:06:22.360 --> 0:06:24.840 real estate today? Are they? Are they making loans? Are 0:06:24.839 --> 0:06:28.080 they trying to say? Are they refinancing? Are they how's 0:06:28.080 --> 0:06:30.160 it typically happening? Because if I have to go refinance 0:06:30.200 --> 0:06:32.839 a real estate loan in Topeka, I gotta pay a 0:06:32.839 --> 0:06:33.680 lot more interest rate. 0:06:33.760 --> 0:06:35.520 Yeah, You're gonna have to pay a lot more interest rate. 0:06:35.560 --> 0:06:37.279 What they're what the banks are doing is trying to 0:06:37.320 --> 0:06:41.479 make sure that the existing bioer can repay and maybe 0:06:41.480 --> 0:06:43.640 in Jeck some equity into it. Because the value of 0:06:43.640 --> 0:06:45.719 that real estate is not what it was two, three, four, 0:06:45.760 --> 0:06:46.360 five years ago. 0:06:46.480 --> 0:06:49.080 Thomas showed question over. Keith Brey added, woods, are we 0:06:49.120 --> 0:06:50.720 going to see m and A? What are we gonna 0:06:50.720 --> 0:06:52.680 do here? Come on, Herman, I mean, it's got to 0:06:52.720 --> 0:06:53.880 be mating season. 0:06:53.680 --> 0:06:57.159 Right, it's got to be at this point. You see 0:06:57.240 --> 0:07:00.960 all these banks, and especially the banks that are wobbling, 0:07:01.160 --> 0:07:05.160 and then any other management team is going to be 0:07:05.600 --> 0:07:08.240 is going to be a bit shaken what happened. So 0:07:08.320 --> 0:07:12.360 I think bigger, bigger is better and need for scale 0:07:12.600 --> 0:07:16.080 is something that I think the industry needs a consolidate 0:07:16.120 --> 0:07:17.000 and create the value. 0:07:17.000 --> 0:07:19.640 Add go to the Bloomberg terminal, look at Bloomberg Intelligence. 0:07:19.720 --> 0:07:22.480 Herman Chan c ch A and Herman Chan is just 0:07:22.760 --> 0:07:28.720 absolutely encyclopedic on the regional banks, not so much the 0:07:28.760 --> 0:07:31.320 hot air the emotion of it, but the actual matthewness 0:07:31.920 --> 0:07:32.800 of where we're. 0:07:32.640 --> 0:07:33.160 Going to be in. 0:07:43.440 --> 0:07:45.360 Pall Swunian time, keen, and we're going to do now 0:07:45.400 --> 0:07:48.600 for Global Wall Street. We're going to get wonky. We're 0:07:48.600 --> 0:07:51.239 going to edge on the edge of Imperial College in London, 0:07:51.480 --> 0:07:54.480 n Yu Currant in a small shop and the rivers 0:07:54.880 --> 0:07:57.880 of Boston the Charles River of Boston. That would be 0:07:57.920 --> 0:08:02.200 the Massachusetts Institute of Technology. That can only mean Katie Kimsky, 0:08:02.760 --> 0:08:06.480 Katie Kaminski joins us with Andre Loo's Elpha. Simplex, folks. 0:08:06.480 --> 0:08:08.640 This is going to be a little bit of jargon laced, 0:08:08.960 --> 0:08:11.800 but it's going to give you a window into how 0:08:11.840 --> 0:08:15.240 the animals in the derivative space think. Katie, I have 0:08:15.400 --> 0:08:18.440 up in front of me the Magnificent Seven, and I've 0:08:18.480 --> 0:08:24.240 got a five trend quant log chart up. I have 0:08:24.360 --> 0:08:30.040 the Magnificent seven on trend with log convexity. I've got 0:08:30.120 --> 0:08:33.839 room to run. I'm up only at two standard deviations 0:08:33.920 --> 0:08:36.920 up among those seven stocks. And maybe there's an argument 0:08:36.920 --> 0:08:39.680 about is Tesla in it or though can you do 0:08:39.880 --> 0:08:44.880 trend analysis on this historic moment, this Magnificent seven? 0:08:45.960 --> 0:08:48.280 Well, I mean, I think if you look at the 0:08:48.280 --> 0:08:52.120 Magnificent seven, they have been the ballast for US markets 0:08:52.320 --> 0:08:56.760 and they have driven a divergence trade for the US. 0:08:56.840 --> 0:08:59.000 It's put the US in a much better position. 0:08:59.120 --> 0:09:02.000 But as we know, the trend can keep going longer 0:09:02.040 --> 0:09:05.200 than you think it can. And that's what we continue 0:09:05.240 --> 0:09:08.440 to see is that there's still continued strength in that 0:09:08.559 --> 0:09:11.199 trend despite some critics. 0:09:11.120 --> 0:09:12.800 Is that trend LinkedIn I'm going to go over to 0:09:12.800 --> 0:09:16.280 the fundamental world away from alpha simplex, which is this 0:09:16.440 --> 0:09:20.440 new belief in an annuitization. And frankly, folks, I'm talking 0:09:20.480 --> 0:09:22.640 the Bloomberg book here. This is what we do with 0:09:22.720 --> 0:09:25.240 the Bloomberg terminal. It's been a real gift to us 0:09:25.559 --> 0:09:30.360 over thirty years plus. But the annuitization of free cash flow, 0:09:30.640 --> 0:09:35.000 the annuitization of that hunk of money at the EBITDA line, 0:09:35.280 --> 0:09:39.400 does that fold over into your technical analysis as a 0:09:39.480 --> 0:09:44.040 force and an inertial force to a higher priced Magnificent seven. 0:09:45.240 --> 0:09:47.440 Well, I mean, I think as you said, I mean, 0:09:47.480 --> 0:09:51.080 we're much more of a technical trader, and at the 0:09:51.200 --> 0:09:53.520 end the fundamentals become clear. 0:09:53.679 --> 0:09:56.240 But what you've really seen is resilience. 0:09:56.360 --> 0:10:01.800 They're in prices for those technical and there doesn't seem 0:10:01.840 --> 0:10:06.040 to be any indication that that's abating. And the other 0:10:06.080 --> 0:10:08.840 thing that's interesting to me is that, you know, if 0:10:08.880 --> 0:10:11.640 you look at where we are, even with higher rates, 0:10:11.679 --> 0:10:15.520 those type of companies should be more duration sensitive, and 0:10:15.679 --> 0:10:16.120 they've been. 0:10:16.400 --> 0:10:17.560 They've wavered the storm. 0:10:17.760 --> 0:10:20.400 So perhaps it's perhaps it's you know, sort of the 0:10:20.440 --> 0:10:23.319 future is the value in the future is more technology 0:10:24.280 --> 0:10:27.199 than what we're used to thinking about for value companies. 0:10:27.640 --> 0:10:29.640 Hey, Katie, I know you guys at Alpha Simplex or 0:10:30.000 --> 0:10:35.480 as you mentioned, technical uh focused, you're also global. Where's 0:10:35.559 --> 0:10:39.199 the global relative value? I actually, for the first time 0:10:39.240 --> 0:10:41.680 in twenty or twenty five years, I hear people talking 0:10:41.679 --> 0:10:44.600 about Japan here, So I'm wondering, where's the relative value 0:10:44.600 --> 0:10:45.000 out there? 0:10:45.800 --> 0:10:48.720 So the interesting thing that we have seen, and this 0:10:48.880 --> 0:10:50.559 is something that we can talk about this in a 0:10:50.559 --> 0:10:54.120 minute because I'm a little I'm always nervous. You've seen 0:10:54.320 --> 0:10:58.520 very strong signals in the US and Japan, and you've 0:10:58.520 --> 0:11:00.920 seen very weak signals in China. 0:11:01.040 --> 0:11:02.800 In fact, China's been down. 0:11:02.640 --> 0:11:06.160 For two years and almost fifty percent if you look 0:11:06.160 --> 0:11:08.800 at the A fifty. So that to me is something 0:11:09.000 --> 0:11:14.640 very interesting that this huge divergence across performance. Albeit that 0:11:14.720 --> 0:11:16.720 you know, we just talked about the tech names really 0:11:16.760 --> 0:11:19.640 being a leader for the US. But the question for 0:11:19.720 --> 0:11:22.560 that that all comes back to inflation too, is if 0:11:22.679 --> 0:11:25.600 China has been down so much, they're a huge driver 0:11:25.760 --> 0:11:29.640 of demand for raw commodities and the commodity sector, is 0:11:29.720 --> 0:11:33.080 that the missing sort of key component that has driven 0:11:33.120 --> 0:11:37.040 inflation down in the short term is that China is 0:11:37.080 --> 0:11:39.080 a big player and they've definitely been in the bunker. 0:11:39.600 --> 0:11:42.319 They have been and I'm not sure if it's technical 0:11:42.440 --> 0:11:46.920 or just the fundamentals of is China even investible here? 0:11:46.960 --> 0:11:50.040 So I'm guessing your technical signals are flashing pretty green 0:11:50.920 --> 0:11:54.360 for China. But then how do you overlay I guess 0:11:54.440 --> 0:11:57.240 the fundamental just kind of country risk factor. 0:11:58.200 --> 0:12:00.000 Oh well, I think that's definitely an issue. 0:12:00.120 --> 0:12:03.640 I think what we're more concerned about is is there 0:12:03.720 --> 0:12:07.280 a stimulus package? Is there a way out of that 0:12:07.400 --> 0:12:12.000 trend which causes increased demand for commodities because we've kind 0:12:12.000 --> 0:12:13.560 of like forgotten about China. 0:12:13.960 --> 0:12:16.680 If they get back in the game, things change. 0:12:16.800 --> 0:12:20.360 I mean, if they increase their demand for commodities, you'll 0:12:20.360 --> 0:12:21.080 see that change. 0:12:21.120 --> 0:12:23.880 But the heart of the matter here, Katie, is the 0:12:23.960 --> 0:12:26.440 stochastic view of catching the knife in the dark, and 0:12:26.520 --> 0:12:28.959 right now China is a knife coming down, down, down. 0:12:29.520 --> 0:12:31.800 What you're saying, and Andrew Lows saying, is you've got 0:12:31.840 --> 0:12:35.720 to find trend when China turns, and let's be optimistic 0:12:35.760 --> 0:12:40.040 and believe a society has to when China turns. How 0:12:40.040 --> 0:12:43.800 do you know when to get on board a nascent 0:12:44.040 --> 0:12:45.040 China bull market? 0:12:46.120 --> 0:12:48.320 So we're not seeing I mean, we're starting to see 0:12:48.320 --> 0:12:50.920 some indications this week. I mean people have been looking 0:12:51.000 --> 0:12:53.960 for a bottom in that market for some time now, 0:12:54.360 --> 0:12:56.679 but we need to see confirmation in the data, and 0:12:56.720 --> 0:12:58.079 we haven't seen that yet. 0:12:58.559 --> 0:13:00.839 I think people are nervous right now because. 0:13:00.600 --> 0:13:03.520 It is the holiday season and you know how far 0:13:03.600 --> 0:13:05.520 that trend has really gone a long way. 0:13:05.720 --> 0:13:09.440 You know, you got some parchment from MIT. I mean, 0:13:09.480 --> 0:13:11.360 you know she does like doublele and you know a 0:13:11.440 --> 0:13:15.080 bunch of other fancy degrees thought about it's off furymed Katie. 0:13:15.080 --> 0:13:17.640 But I want to go all eric Rinjelsnania. Can we 0:13:17.679 --> 0:13:20.679 do that? Is it okay? If I go rieln On 0:13:20.760 --> 0:13:23.640 you what is this AI stuff? I mean I get 0:13:23.679 --> 0:13:28.160 the idea Chat, gpt works, Microsoft co Pilot, Azure, blah 0:13:28.200 --> 0:13:31.960 blah blah, But you how about what portion, Katie Kaminsky 0:13:32.080 --> 0:13:34.640 of AI is hot air. 0:13:36.040 --> 0:13:40.320 So AI is great for solving some simple problems and 0:13:40.480 --> 0:13:45.119 to deal with data and to analyze lots of information 0:13:45.280 --> 0:13:48.560 in an efficient way. We see it in our space 0:13:48.679 --> 0:13:52.640 more for things like execution, just dealing with very complex, 0:13:52.840 --> 0:13:56.280 complicated data sets and distilling that down into information. 0:13:57.000 --> 0:14:00.280 I think the idea that you're going to let AI trade. 0:14:00.080 --> 0:14:03.360 Your money is still very far away, at least for 0:14:03.520 --> 0:14:04.960 my personal view as well. 0:14:05.040 --> 0:14:07.120 But it is a tool. 0:14:06.760 --> 0:14:10.520 To help us to analyze more things in less time 0:14:10.640 --> 0:14:13.600 and automate a lot of things that you know, could 0:14:13.600 --> 0:14:15.559 make our focus onto something else. 0:14:15.600 --> 0:14:17.280 So that's kind of how I see it. 0:14:17.280 --> 0:14:19.760 It is the future, but it has to be taken 0:14:19.880 --> 0:14:22.920 with trust and with understandability. 0:14:23.480 --> 0:14:25.960 Yeah, it seems like I'm one of the questions I 0:14:26.000 --> 0:14:28.240 asked the tech analyst Katie when we have them on 0:14:28.400 --> 0:14:32.120 is how much of you know, is AI capital spending 0:14:32.240 --> 0:14:34.680 or just development of AI? How much is that just 0:14:35.360 --> 0:14:37.720 taking is it new money? Is it new spending on 0:14:37.760 --> 0:14:40.320 AI or is it just just moving it from some 0:14:40.400 --> 0:14:43.520 other it budgets and things like that. So from your perspective, 0:14:43.800 --> 0:14:47.760 just from the you know, the academics, is AI really 0:14:47.920 --> 0:14:50.000 new or is it just taking the next step in 0:14:50.600 --> 0:14:51.800 making everything more techy. 0:14:53.400 --> 0:14:54.800 A is definitely not new. 0:14:55.160 --> 0:14:58.240 It's just about can we find new applications for it 0:14:58.640 --> 0:15:01.400 and are there ways see this In the financial sector, 0:15:01.400 --> 0:15:04.640 It's interesting all the large firms have really invested in 0:15:04.840 --> 0:15:08.160 AI because they know they need to be there, and 0:15:08.200 --> 0:15:10.360 they're still trying to sort out Okay, how do we 0:15:10.440 --> 0:15:12.960 use it and what are the applications? So I think 0:15:13.000 --> 0:15:17.320 it's it's the next phase and there's the adoption, but 0:15:17.480 --> 0:15:18.760 the application is still unclear. 0:15:18.800 --> 0:15:21.600 He Katie one found a questionnaire. My quota of the 0:15:21.640 --> 0:15:23.680 year last year was a guy named Ta Leb. He's 0:15:23.680 --> 0:15:27.000 pretty good and derivatives and that seeing Taleb said, the 0:15:27.080 --> 0:15:29.720 gravity's returned, And that's really what's going on here. We 0:15:29.800 --> 0:15:31.760 finally have interest rates up, We've got a risk for 0:15:31.840 --> 0:15:35.920 you rate, We've got a legitimate, calculable sharp ratio. You know, 0:15:36.000 --> 0:15:39.200 all the mumbo jumbo as well. Can there be too 0:15:39.320 --> 0:15:42.480 much gravity? Can there be too much like a higher 0:15:42.520 --> 0:15:45.880 real rate that gums up our investment horizon? 0:15:47.200 --> 0:15:48.960 So I think that's a great point. 0:15:49.000 --> 0:15:52.320 I mean, I think for us, everybody's sitting around hoping 0:15:52.840 --> 0:15:55.600 for lower rates because who doesn't like that? But the 0:15:55.680 --> 0:15:59.400 truth is that's not the normal equilibrium. And I think 0:15:59.680 --> 0:16:01.840 what you're seeing as well as I mean, do you 0:16:01.880 --> 0:16:03.359 think policy is restrictive? 0:16:03.440 --> 0:16:03.600 Now? 0:16:04.320 --> 0:16:04.880 I don't think so. 0:16:06.960 --> 0:16:10.080 Lisa Minteo, did you see how Kaminsky did that? Who's 0:16:10.160 --> 0:16:13.560 running this program? Do I think things are restrictive? There's 0:16:13.600 --> 0:16:15.120 a lot of people out there going to come on, 0:16:15.200 --> 0:16:19.920 Tom answer, Oh look Mike from rebuta to see be 0:16:19.960 --> 0:16:24.640 able to say. Don't answer, Katie Kaminski, go away. You're 0:16:24.720 --> 0:16:29.200 restrictive but also accommodative as well, Katrin Kaminsky. Folks with 0:16:29.400 --> 0:16:36.800 Alpha Simplex can't say enough about their work. We're gonna 0:16:36.800 --> 0:16:39.520 stop the show right now and take a broader view 0:16:39.680 --> 0:16:43.000 kind of Leon So c if RA a research usually 0:16:43.040 --> 0:16:45.360 joins us in the big bank days. He does not 0:16:45.720 --> 0:16:48.880 cover the regional banks, and there's also of legal issues. 0:16:48.920 --> 0:16:51.200 You don't talk about what you don't cover. But his 0:16:51.320 --> 0:16:54.840 research director for CFRA, We're going to take a broader 0:16:54.960 --> 0:16:58.080 view of the nyc B tobacco and not speak to 0:16:58.160 --> 0:17:01.760 him about the individual's securities. Ken, What are the government 0:17:01.920 --> 0:17:06.280 doing right now? I mean, this is a dibaccle commercial 0:17:06.320 --> 0:17:09.439 real estate, a tobacco, this singular bank. Maybe there'll be 0:17:09.520 --> 0:17:13.399 others like them. What are government institutions like the FED 0:17:14.119 --> 0:17:17.560 institutions in Washington in this case Albany, what are they 0:17:17.600 --> 0:17:18.359 doing right now? 0:17:19.520 --> 0:17:22.359 Great to be with you, Tom, And what's going on 0:17:22.400 --> 0:17:27.399 in Washington is we had comments this week from the 0:17:27.440 --> 0:17:30.959 head of the OCC that m and A for the 0:17:31.000 --> 0:17:35.719 banks is going to be tougher, and also there's going 0:17:35.760 --> 0:17:39.720 to be significant capital built for most of the banks. 0:17:40.760 --> 0:17:44.040 And what this means, I think for investors is that 0:17:44.520 --> 0:17:48.960 we're not going to see systemic bank failure of the industry, 0:17:49.760 --> 0:17:53.639 but we're going to see kind of situations as we 0:17:53.680 --> 0:17:58.000 did with New York community banks. So I think it 0:17:58.160 --> 0:18:01.639 just has to be put in the right placement that 0:18:01.680 --> 0:18:05.600 this is not going back to March twenty twenty three, 0:18:06.400 --> 0:18:09.040 but it's something that gets the attention of the market. 0:18:09.240 --> 0:18:12.399 If the industry struggles with this gets the attention of 0:18:12.440 --> 0:18:17.280 the market and there's smaller institutions, does that lead to 0:18:17.480 --> 0:18:20.919 more consolidation of the industry. 0:18:21.640 --> 0:18:24.600 There is, and there are still four thousand banks in 0:18:24.640 --> 0:18:28.720 the United States. Regularly, Tom we speak about the big 0:18:28.880 --> 0:18:33.800 six that dominate and are gaining market share and expanding 0:18:34.280 --> 0:18:39.720 across the US. So again, it's what's happening with really 0:18:39.800 --> 0:18:43.240 small banks that might have founders that want to sell 0:18:43.320 --> 0:18:48.399 because there's no succession. In some instances, you're going to 0:18:48.440 --> 0:18:52.359 see these elevated risks for real estate for those that 0:18:52.480 --> 0:18:55.719 have a high percentage of their loan book related to 0:18:55.760 --> 0:18:57.040 some troubled real estate. 0:18:58.040 --> 0:19:00.240 And can I guess what a lot of investors trying 0:19:00.280 --> 0:19:01.960 to get a handle of And it was literally a 0:19:02.080 --> 0:19:04.520 year ago that we had some problems with some of 0:19:04.520 --> 0:19:07.800 the regional banks on the West Coast, and now we've 0:19:07.800 --> 0:19:10.520 got the New York Community Bank. So what are the 0:19:10.520 --> 0:19:13.520 good folks at CFOA. Are you concerned about the status 0:19:13.560 --> 0:19:16.720 of just kind of the regional banking system in general, 0:19:16.880 --> 0:19:19.240 or again, can we chalk this up to some more 0:19:19.480 --> 0:19:21.840 just specific idiosyncratic issues. 0:19:22.680 --> 0:19:24.879 It's a good question. If you go back in time 0:19:25.000 --> 0:19:28.840 over decades, you know, a bank analyst would say by region, 0:19:28.920 --> 0:19:31.919 you might have more exposure to Texas banks if the 0:19:32.080 --> 0:19:37.000 energy industry was failing in this situation. Today we go 0:19:37.080 --> 0:19:40.600 through really rigorous bank metrics and to see who is 0:19:40.720 --> 0:19:45.520 under reserve, who has not really not had a good 0:19:45.560 --> 0:19:50.760 balance in terms of diversifying their loans and in situations 0:19:50.800 --> 0:19:55.040 of in this case commercial real estate, it's going to 0:19:55.119 --> 0:20:00.240 be those banks with assets perhaps of fifty bill million 0:20:00.480 --> 0:20:01.480 to one hundred billion. 0:20:01.560 --> 0:20:03.679 It could be at rest Kin Leon was his director 0:20:03.760 --> 0:20:08.920 research at CFIRA. Previously scheduled to be on Disney. Oh 0:20:09.080 --> 0:20:11.440 they report airnings after the club joining us. Now ken 0:20:11.520 --> 0:20:16.399 Leon bank expert on the don't bank on Disney. I 0:20:16.440 --> 0:20:18.479 guess is it or the other media stax Paul, why 0:20:18.480 --> 0:20:21.520 don't you talk to Kenn Lean about absolutely dibaccle known 0:20:21.520 --> 0:20:22.600 as Disney Ken. 0:20:22.600 --> 0:20:24.560 So we've got Disney after the close, and there's a 0:20:24.800 --> 0:20:28.000 million issues to discuss. But I guess the latest one 0:20:28.080 --> 0:20:29.879 is just kind of what we heard the announcement today 0:20:29.920 --> 0:20:33.639 that you know, Disney's gonna hook up with you know, 0:20:33.720 --> 0:20:39.080 Warner Brothers, Discovery and Fox to create a standing sports 0:20:39.080 --> 0:20:41.800 streaming offering. I didn't see that coming, do you. What 0:20:41.800 --> 0:20:42.760 do you think is going on there? 0:20:43.520 --> 0:20:44.080 Good for that? 0:20:44.480 --> 0:20:46.960 So, you know, I think when you look at Disney, 0:20:47.200 --> 0:20:52.560 Warner Brothers, Discovery and also Fox, they basically were victims 0:20:52.760 --> 0:20:56.160 to the NFL and other major sports leagues of spending 0:20:56.200 --> 0:21:00.080 billions of dollars. It still continues. But putting them all 0:21:00.119 --> 0:21:04.040 together and putting them in a package for streaming, this 0:21:04.080 --> 0:21:06.040 gives them an opportunity to have a little bit more 0:21:06.119 --> 0:21:10.440 pricing power to defend. And also it puts at risk 0:21:10.520 --> 0:21:14.000 those that are not in this droika, which would be 0:21:14.480 --> 0:21:19.080 comcast with Peacock. We saw what happened with viewers infumed 0:21:19.480 --> 0:21:25.120 when the Miami game was not on NBC but on Peacock. 0:21:25.720 --> 0:21:28.240 So you know, I think there's a lot of moving 0:21:28.320 --> 0:21:33.240