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Banks, Powell, Crypto, and Jamie Dimon (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
0:04
Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEO's, market pros and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. I want to check
0:21
Speaker 1: in with Alison Williams of Bloomberg Intelligence Season senior analysts
0:24
Speaker 1: covers all the big global banks, the investment banks, the
0:28
Speaker 1: asset managers. I don't want to start, Alison. I don't
0:31
Speaker 1: want to start with Credit Swiss because it's too depressing
0:33
Speaker 1: from my former employer, and that thing is just a
0:36
Speaker 1: disaster city. Great article in the Bloomberg Terminal City adding
0:40
Speaker 1: maybe doubling staff in Paris, and in this article they
0:44
Speaker 1: talk about more and more investment banks any more and
0:46
Speaker 1: more staff to Paris. Now it's a great city, one
0:50
Speaker 1: of the world's all time great cities. I get it.
0:52
Speaker 1: But is this just another movement of people post Brexit
0:56
Speaker 1: from London to the continent. I believe that is um
1:01
Speaker 1: the case. And we did hear this, you know, from
1:04
Speaker 1: from a lot of bank managements in recent years about
1:07
Speaker 1: some of the changes that we've we've been they'd be making.
1:10
Speaker 1: Um and I think that this is just sort of
1:12
Speaker 1: a continuation of moving some headcount out of London. So
1:19
Speaker 1: what is it when when you think about these big
1:21
Speaker 1: global investment banks, Allison, you know, the JP Morgans is
1:24
Speaker 1: the cities of the world. Where is London in the
1:28
Speaker 1: global picture? I mean there was a time back and
1:30
Speaker 1: I'll tell you where London is. It's in a lower
1:32
Speaker 1: tax regime than Paris. Yes, I mean, are the most
1:35
Speaker 1: important players really going to move to a place that
1:38
Speaker 1: you know threatens like ninety percent income tax? It just
1:42
Speaker 1: seems like too much of a problem for me. Paris
1:45
Speaker 1: is a great city to visit. I adore the French,
1:49
Speaker 1: but um, you know, they're just too unpredictable in terms
1:53
Speaker 1: of how much money they're going to take from you
1:55
Speaker 1: if you live there. Well, I guess that's that's perhaps
2:00
Speaker 1: viewpoint of the employees, right, But I think from the
2:03
Speaker 1: bank's perspective, you have to go where the clients are
2:06
Speaker 1: and if the clients want their trades to be done
2:10
Speaker 1: in Paris, Um, you know, that's that's that's really the
2:15
Speaker 1: movement that's happening. I mean, I remember five years ago
2:17
Speaker 1: when the clients wanted their trades to be done in Frankfort,
2:19
Speaker 1: and bankers said, like, we'd rather work at a gas
2:22
Speaker 1: station in London then go to Frankfort. I remember when
2:26
Speaker 1: Goldman Saxe was pushing people to move there, go to Munich,
2:29
Speaker 1: and I think like Hugh pill went there and then
2:33
Speaker 1: his administrative assistant refused to come with him, Like nobody
2:37
Speaker 1: wanted to go to Frankfort exactly. So I mean, I
2:40
Speaker 1: guess Paris has a bigger draw with the louver and stuff. Um.
2:43
Speaker 1: I think Paris has some baguettes, yes, exactly, No, but
2:46
Speaker 1: I just can't imagine that the big money really goes there. London, Alison,
2:50
Speaker 1: London is still the financial hub of Europe, isn't it correct? Yes, yeah,
2:56
Speaker 1: So it's not to say that, it's just it's you know,
3:00
Speaker 1: it's all sort of I guess degrees or it's all
3:02
Speaker 1: relative um and just you know, with Brexit, you just
3:05
Speaker 1: have to have a presence in more than one place, um.
3:09
Speaker 1: And so you know, some might have picked Frankfurt, and
3:12
Speaker 1: so I might pick Paris. If if you're Bloomberg, you
3:15
Speaker 1: doubled down on London and built the most amazing office
3:19
Speaker 1: building in the city of London, which is smoking on true.
3:22
Speaker 1: But that was before Brexit. Ye still headcount there. We
3:26
Speaker 1: doubled down fingers crossed and then hoops um. Let me
3:30
Speaker 1: ask about Credit Sweee because I was pretty amazed that
3:35
Speaker 1: David Harrow sold the rest of his stake. I mean this,
3:39
Speaker 1: if if anybody had a solid long term backer, it
3:43
Speaker 1: was Credit Sweee and and David Harrow. And now they're gone.
3:47
Speaker 1: Does that mean it's over? I mean, obviously it's it's
3:52
Speaker 1: not a good thing to lose, you know, your biggest
3:55
Speaker 1: backer for a long time. And in some to some extent,
3:59
Speaker 1: it may explain, you know, some of the weakness in
4:03
Speaker 1: the stock over the past couple of months. Obviously there's
4:06
Speaker 1: there was a lot of reasons kind of going into
4:08
Speaker 1: the capital raise. But I think that this just goes
4:13
Speaker 1: to again, I think that the key concern is that
4:15
Speaker 1: there has to be some type of studying, you know,
4:20
Speaker 1: And I saw that Harrow had made comments I believe
4:23
Speaker 1: in in the ft at the end of last year
4:25
Speaker 1: when he had cut sort of his stake in half,
4:28
Speaker 1: just talking about the fact that you know, other banks
4:31
Speaker 1: were generating capital. You know, kartz Sweet is still in
4:36
Speaker 1: a lost position. It needs to show sign of setting
4:39
Speaker 1: and it just it just one could argue, you know,
4:43
Speaker 1: with some investors that the sort of lack of catalysts
4:48
Speaker 1: the upside or stopping them from getting in. But for
4:51
Speaker 1: a very big investor to get out, I think that
4:53
Speaker 1: really does you know, sort of sort of cast out
4:57
Speaker 1: on what's next for this bank. So, Alison, I look
5:01
Speaker 1: at the holders section here on the Bloomberg terminal hd AS.
5:05
Speaker 1: It gives you the stockholders, the Saudi National Committee, you know,
5:08
Speaker 1: the Cutter Investment Authority are the two big shareholders. Is
5:12
Speaker 1: there a point where the Swiss government needs to get
5:17
Speaker 1: involved in terms of ownership? Yeah, Their their capital ratio
5:22
Speaker 1: is one of their strengths at the moment. They are
5:25
Speaker 1: going to obviously eat into that with some of the
5:27
Speaker 1: losses that are expected in one queue and for this year.
5:32
Speaker 1: So I think that that does give them some breathing room.
5:36
Speaker 1: I think, you know, you know, it's the fact that
5:39
Speaker 1: there are other the two anchor investors now are you
5:43
Speaker 1: know the sovereign sovereign wealth funds which have you know,
5:47
Speaker 1: generally can have a much longer investment horizon just maybe
5:54
Speaker 1: speak to the fact that this is sort of a
5:56
Speaker 1: longer term story. And I guess to the point I
6:00
Speaker 1: said before that there are sort of no near term catalysts,
6:03
Speaker 1: and I think that investors do want to see some
6:06
Speaker 1: sign of stability, especially in terms especially in terms of
6:10
Speaker 1: the wealth flows. I think that's that's the most important.
6:13
Speaker 1: We management talked about some green shoots. You know, they
6:17
Speaker 1: said that they've been talking to a lot of clients,
6:19
Speaker 1: et cetera, et cetera. But you really need to see
6:21
Speaker 1: that turn. You need to see that the client confidence
6:24
Speaker 1: has studied. All right, Alison, thank you so much. We
6:26
Speaker 1: really appreciate it. Alison Williams, she covers the global investment banks,
6:30
Speaker 1: all the big banks for Bloomberg Intelligence. Anna, thanks so
6:36
Speaker 1: much for joining us here. Well, you are out front.
6:39
Speaker 1: We really appreciate being the beneficiaries of that called hang on.
6:42
Speaker 1: She also said there was one hundred percent chance of
6:43
Speaker 1: a recession. Really well, I might think I think this year,
6:48
Speaker 1: because it's not fair Anna to say there's a one
6:49
Speaker 1: hundred percent chance of a recession at any time in
6:52
Speaker 1: the future. Yeah, you've got you've got a time stamped
6:56
Speaker 1: and in fact, just to be clear. It's the model
7:00
Speaker 1: model that's as this one hundred percent recession. So our
7:03
Speaker 1: holistic judgment has been in between seventy to eighty percent
7:08
Speaker 1: chance of recession, and we were talking about twelve months ahead.
7:11
Speaker 1: So we built this model that we wanted to tell
7:15
Speaker 1: to tell us be able to send a signal whenever
7:19
Speaker 1: recession probability spike for each of this month for this year,
7:23
Speaker 1: and the model says that recession is with spiked to
7:27
Speaker 1: one hundred percent probability starting in September of this year.
7:30
Speaker 1: It's been sending a pretty steady signal for most guilt,
7:35
Speaker 1: so it's still saying that. It's still saying that. In fact,
7:38
Speaker 1: when we updated it using January's data, it is even
7:43
Speaker 1: even We also rely on a lot of other models
7:46
Speaker 1: to yield curves. We looked at various yield curves, including
7:49
Speaker 1: the one that Chair Powell likes to use, which is
7:52
Speaker 1: the four spreads between three months and eighteen months, that
7:56
Speaker 1: actually saw an increase in recession probability in January because
8:00
Speaker 1: all the yield curves in further in January. So so
8:04
Speaker 1: but our you know, overall judgment is that there's of
8:07
Speaker 1: course twenty to thirty percent chance at least of no
8:10
Speaker 1: recession this year, but as you said, it's just a
8:13
Speaker 1: matter of time. If there's not one this year, then
8:16
Speaker 1: it's just been pushed back to next year. Well, when
8:18
Speaker 1: you say your model, are you talking about chat GPT. No.
8:23
Speaker 1: In fact, if you asked chat GPT to predict anything,
8:27
Speaker 1: they like to take they like to not answer directly
8:30
Speaker 1: to say they're not a prediction model. On the one hand,
8:33
Speaker 1: and then on the other hand, Right, it's learning, you know,
8:35
Speaker 1: how to speak like an economist, and so you know,
8:38
Speaker 1: when we think about a recession scenario, you know, it's
8:42
Speaker 1: it's awful hard to do. If you take a look
8:44
Speaker 1: at the labor market there, how do you and we're
8:46
Speaker 1: going to get some more jobs data this week, how
8:50
Speaker 1: do you square up kind of this strong, really strong
8:53
Speaker 1: labor market and again concerns about the economy going forward. Yeah,
8:57
Speaker 1: so we looked deeply into this. First of all, the
9:00
Speaker 1: very strong January port. You have to remember that it's
9:04
Speaker 1: actually it's a story not about firms busily hiring left
9:08
Speaker 1: and right. It's more of a story of firms retaining workers.
9:11
Speaker 1: Because if you look at the non seasonally adjusted figures,
9:14
Speaker 1: it's all like decrease in hirings. It's just that the
9:17
Speaker 1: decrease in January is less than the decrease decrease in
9:21
Speaker 1: the typical January. And so a second we were looking
9:25
Speaker 1: at these war notices, which is that you know, the
9:29
Speaker 1: Labor Department in this country require employers to file these
9:34
Speaker 1: layoff warnings if they are going to layoff workers. And
9:37
Speaker 1: a lot of these high profile layoffs that we read
9:40
Speaker 1: is ADUs back in January, you know, Amazon, Google, Microsoft, Goldman.
9:44
Speaker 1: We know that tech Sectors has already laid off one
9:46
Speaker 1: hundred k at least of workers. How come it doesn't
9:49
Speaker 1: show up in the initial claims? While the answer is
9:52
Speaker 1: because most of these layoffs have not even become effective yet.
9:57
Speaker 1: By laws, employers have to give at least sixty day notice,
10:01
Speaker 1: and in New York, in fact, employers have to give
10:03
Speaker 1: ninety date notice. So many of these announced layoffs will
10:06
Speaker 1: only be translated to actual layouts where people will go
10:10
Speaker 1: file unemployment claims in March. So we're expecting that there
10:16
Speaker 1: will be some picked up in initial unemployment insurance claims.
10:20
Speaker 1: So how many if you get one hundred thousand layoffs,
10:24
Speaker 1: how much does that translate into in terms of claims
10:27
Speaker 1: for unemployment insurance because we've heard that only anecdotally, I
10:32
Speaker 1: should point out, but we've heard that people who get fired,
10:35
Speaker 1: especially from tech, have like two or three job choices
10:40
Speaker 1: where they can go instantly. Yeah, I've heard that too anecdotally,
10:45
Speaker 1: but I think data wise, so I think that an
10:48
Speaker 1: answer it will be less than the one hundred k
10:51
Speaker 1: that's an announced layoff. And furthermore, anecdotally, I've heard that
10:55
Speaker 1: tech workers might not be eligible for a claims because
11:00
Speaker 1: they are foreign or they haven't worked for more than
11:03
Speaker 1: six months. But I think the point is that the
11:07
Speaker 1: data we have been receiving just do not reflect the
11:10
Speaker 1: softening that had indeed happened in December and January, and
11:14
Speaker 1: we just have to wait for a couple of months
11:16
Speaker 1: to see and I think the FED is aware of this.
11:19
Speaker 1: And furthermore, there's the weather effect, and you know, we
11:24
Speaker 1: try to quantify it, and you know, there's also a
11:26
Speaker 1: fat paper that try to quantify it, and it turns
11:29
Speaker 1: out that weather tends to warm. Weather tends to boost
11:34
Speaker 1: employment in the months that the weather is warmer, and
11:37
Speaker 1: this effect is especially pronounced in spring. So if we
11:40
Speaker 1: have a very warm spring, then we're likely going to
11:44
Speaker 1: see a stronger employment too, but this effect is going
11:48
Speaker 1: to wash out throughout the year. So with seasonal adjustment
11:51
Speaker 1: the way that it works, we have stronger employment now
11:55
Speaker 1: seasonally adjusted if weather it's warmer, but later in the
11:58
Speaker 1: year it will be more negative than usual because of that.
12:01
Speaker 1: You know, many of the hiring was posed ford. So
12:04
Speaker 1: I also don't affect. I don't expect the strong employment
12:09
Speaker 1: to last. Furthermore, I don't want to, you know, go
12:12
Speaker 1: into weather forecasting, but you know, forecasting economics is part
12:17
Speaker 1: of my job and it is related to weather. And
12:20
Speaker 1: you know, the weather people are now saying that El
12:23
Speaker 1: Nino is likely going to start this summer. And so
12:27
Speaker 1: you know, we had a warm winter here in the
12:30
Speaker 1: in the East coast because of La Nina. But El
12:34
Speaker 1: Nino what it brings a lot of precipitation to the
12:37
Speaker 1: south and flooding of this, so we are we're probably
12:40
Speaker 1: looking at a second half of this year with a
12:42
Speaker 1: lot of you know, weather precipitation that could campen economic activity.
12:47
Speaker 1: So ANA given that backdrop, you know, now we have
12:51
Speaker 1: in the marketplace people looking at you know, the Fed
12:54
Speaker 1: walks saying fifty basis points might be back on the
12:57
Speaker 1: table at perhaps the next meeting. Is that something you
13:01
Speaker 1: guys are looking for, that's not our baseline, And I
13:05
Speaker 1: expect that Powell will say that everything was on the table.
13:08
Speaker 1: They certainly don't want to roll it out if we
13:11
Speaker 1: do have a very very strong HEBI report and a
13:14
Speaker 1: jobs report, say, I mean, of course, if a jobs
13:17
Speaker 1: report of four hundred k was Friday, or a CPI
13:21
Speaker 1: print of core of point six percent, would I think
13:26
Speaker 1: that would put fifty basis point on the tables as
13:29
Speaker 1: a baseline. But right now twenty five basis is still
13:32
Speaker 1: our baseline. But I think Powell will just leave the
13:35
Speaker 1: door open for anything in his testimony this week. What
13:39
Speaker 1: do you think about long and variable lags? You know,
13:42
Speaker 1: how long are we talking about? I know Danny Blanchflower
13:46
Speaker 1: I think, in commentary to the Bank of England said
13:49
Speaker 1: he works typically on eighteen to twenty four months. Is
13:54
Speaker 1: that still accepted as how long and variable? How long
13:59
Speaker 1: the long and variables are? Yeah, this is definitely the
14:02
Speaker 1: debate happening within the central length circle. If you believe
14:05
Speaker 1: that the lags are short, and I think there are
14:08
Speaker 1: evidence to show that the financial conditions are now the
14:11
Speaker 1: lacks of financial conditions very short as a three months
14:14
Speaker 1: only three to six months. Then it means that the
14:17
Speaker 1: tightening from the past FED hikes has already peaked, and
14:22
Speaker 1: that would be a case for further more longer path,
14:26
Speaker 1: steeper path of FED rate heights going forward. But I
14:29
Speaker 1: also think that there's evidence that there's some part of
14:32
Speaker 1: monetary policy that has very long legs, and that has
14:35
Speaker 1: to do with like equities and dollars, those have twelve
14:40
Speaker 1: months legs still, but certainly the financial conditions part have
14:43
Speaker 1: a very short leg. All right, And I thank you
14:46
Speaker 1: so much for joining us. Always appreciate getting your thoughts
14:52
Speaker 1: I want to talk about to me, this China story
14:55
Speaker 1: has really captured my has really fascinated me my attention
15:01
Speaker 1: this morning and last night as I was reading it.
15:03
Speaker 1: The disappointment with economists about their five percent growth target
15:08
Speaker 1: I find interesting, not only because you know we would
15:12
Speaker 1: be jealous of a five percent growth target, but also
15:15
Speaker 1: I think it means more than just a slowdown in
15:19
Speaker 1: your global growth expectations. It means also a slow down
15:22
Speaker 1: your inflation expectations. We haven't seen the reopening provide US
15:25
Speaker 1: with boosted prices for commodities, metals, oils, etc. Yet I
15:33
Speaker 1: want to bring in Everett Millman. He's the chief market
15:35
Speaker 1: analyst at Gainesville Coins. We talked to him about obviously
15:40
Speaker 1: silver and gold coins and virtual digital coins as well.
15:44
Speaker 1: But Everett, just in terms of the of the commodities
15:48
Speaker 1: impact of the reopening of China, in terms of you know,
15:53
Speaker 1: demand from the Chinese after the end of the COVID
15:56
Speaker 1: zero policy, have you seen a big move in prices
15:59
Speaker 1: across the metal that you watch, Not yet actually, And
16:04
Speaker 1: I think that you've kind of hit the nail on
16:06
Speaker 1: the head with the uncertainty surrounding China's reopening. We've also
16:11
Speaker 1: seen some pretty big intra day volatility for crude oil
16:14
Speaker 1: prices and the US dollar. So all of that does
16:17
Speaker 1: weigh on the commodity space and it simply makes the
16:21
Speaker 1: landscape more uncertain and more difficult for producers to kind
16:24
Speaker 1: of plan ahead. So I think all of that is
16:26
Speaker 1: that play here. How important is that part of the
16:29
Speaker 1: world when it comes to gold? For example, I know
16:31
Speaker 1: India is huge, right, what about the Chinese? Did they
16:35
Speaker 1: contribute to price moves in gold, both for industrial purposes
16:41
Speaker 1: or for you know, consumer purposes? Certainly, so China not
16:47
Speaker 1: only has a major over the counter gold market that
16:51
Speaker 1: mainly is dealing in gold jewelry, but it also with
16:54
Speaker 1: the Shanghai Gold Exchange, does exert more pricing pressure over
16:58
Speaker 1: the gold market than it has in the past, and
17:02
Speaker 1: we do often see kind of seasonal flows that when
17:06
Speaker 1: prices are falling in the gold market, China steps in
17:09
Speaker 1: as a major buyer, not just official purchases, not just
17:12
Speaker 1: the government or the People's Bank of China, but also
17:15
Speaker 1: just the general public. So as time has gone on,
17:19
Speaker 1: we've seen that China has more and more of an
17:21
Speaker 1: influence over the price of gold, and I do suspect
17:24
Speaker 1: that's one of the reasons we've seen the gold price
17:26
Speaker 1: hold up even though broader markets have offered better opportunities
17:30
Speaker 1: as gold has kind of trended sideways in twenty twenty three.
17:34
Speaker 1: So Everard, I'm looking at global commodity prices here on
17:36
Speaker 1: the Bloomberg terminal GLCO. I look at silver really gets
17:41
Speaker 1: my attension off eleven and a half percent year today.
17:44
Speaker 1: What's going on in the silver market, m yea. And
17:47
Speaker 1: not only is silver down, but in terms of like
17:50
Speaker 1: the broader precious metals complex, it's usually a somewhat bearish
17:54
Speaker 1: sign if the silver price is lagging gold, and that's
17:57
Speaker 1: essentially what we've been seeing lately. As far as the
18:01
Speaker 1: weakness we've seen in silver, there's usually a strong floor
18:05
Speaker 1: beneath the silver price based on the all in sustaining
18:08
Speaker 1: costs kind of the cost of production from silver miners.
18:12
Speaker 1: Right now, that's around twenty dollars and ounts, just below
18:16
Speaker 1: where we've been trading. But I think an interesting thing
18:18
Speaker 1: to keep in mind is that most silver that is
18:21
Speaker 1: produced each year doesn't come strictly from silver mines. It
18:25
Speaker 1: is produced as a byproduct of other mining operations, mainly nickel.
18:29
Speaker 1: So in those cases, the all in sustaining cost for
18:32
Speaker 1: those miners is actually it's far lower. It's closer to
18:34
Speaker 1: about fourteen dollars announced. So I would not be shocked
18:37
Speaker 1: to see if there is another sell off in silver,
18:41
Speaker 1: that we could see prices fall back near that cost
18:44
Speaker 1: of production, which I think is below what most market
18:47
Speaker 1: participants are actually expecting. Is there still a concern that
18:51
Speaker 1: some of these markets are manipulated? I don't need to.
18:55
Speaker 1: I don't mean to drag up some kind of zero
18:57
Speaker 1: hedgestyle conspiracy theories, but in silver, I mean it was true, right,
19:03
Speaker 1: The Hunt Brothers got busted, and there are major Wall
19:08
Speaker 1: Street banks that have settled on these kind of manipulation probes.
19:15
Speaker 1: Is there concern among traders that there's still a problem
19:18
Speaker 1: with the silver market or others? I would have to
19:22
Speaker 1: say that, you know, where there's smoke, there's fire in
19:25
Speaker 1: these kinds of cases. And although you know, the credibility
19:28
Speaker 1: of such claims as obviously dubious, as you pointed out,
19:32
Speaker 1: in the same way that foreign exchange markets like forex
19:35
Speaker 1: trading of currencies has some of those problems, I think
19:39
Speaker 1: the same is true of silver and gold that because
19:43
Speaker 1: it functions sort of like money, you do see manipulative
19:46
Speaker 1: trading behavior that although on ethical it certainly it doesn't
19:52
Speaker 1: rise for the level of criminality. All of those cases
19:55
Speaker 1: you mentioned have been settled out of court, so it's
19:58
Speaker 1: it's at least a narrative that concerned some investors and
20:02
Speaker 1: kind of pushed them away from getting involved in the
20:05
Speaker 1: golden silver markets. But um, I think the best way
20:08
Speaker 1: to think about it is that it would be very
20:10
Speaker 1: similar with really any any currency trading. Um you can
20:14
Speaker 1: manipulate currencies up and down relative to the trading volumes
20:18
Speaker 1: and similar things happen in golden sils, even bitcoin. Even bitcoin,
20:23
Speaker 1: I think perhaps of the highest probability that that kind
20:27
Speaker 1: of thing happens. And we need to keep in mind
20:31
Speaker 1: with the fallout from the STX scandal, traders on those
20:34
Speaker 1: on those crypto exchanges were entering into contracts for for
20:38
Speaker 1: bitcoin trades when there was no bitcoin being custodied. Um,
20:42
Speaker 1: so you can call that really supply manipulation of bitcoin
20:45
Speaker 1: as well. What if we step back, Everett, what's kind
20:49
Speaker 1: of the big global commodities call of the moment right now? Well,
20:55
Speaker 1: I think it's the call right now is probably sideways
20:59
Speaker 1: until the end to the year because it's going to
21:01
Speaker 1: be very dependent on the reaction function from the Fed
21:05
Speaker 1: and central banks. Higher interest rates they're usually not great
21:09
Speaker 1: for gold, but they do tend to drive copper and
21:12
Speaker 1: industrial commodities higher. So I think everything is going to
21:16
Speaker 1: depend on central bank policy. Do we get higher interest
21:20
Speaker 1: rates for longer or is that you know, once expected
21:23
Speaker 1: pivot going to come sometime in the second half of
21:26
Speaker 1: this year or perhaps next year. It's all about interest
21:29
Speaker 1: rates right now, and the gold call, I mean, as
21:33
Speaker 1: we head into what some expect to be a recession,
21:37
Speaker 1: do you want to buy gold into that? I would
21:41
Speaker 1: say so, but perhaps the gold bowls shouldn't get too excited.
21:45
Speaker 1: Gold will be kind of caught between those two forces.
21:49
Speaker 1: Of it yields nothing, and we want to protect ourselves
21:52
Speaker 1: in case the world collapses, correct, correct, and preserve preserve
21:57
Speaker 1: purchasing power and in the event that, you know, a
22:00
Speaker 1: local currency collapse. So just thirty seconds bitcoin, Yeah, you're
22:05
Speaker 1: nay at this point. Right now, I think Bitcoin is
22:09
Speaker 1: at least looking better than the other cryptos, but of
22:12
Speaker 1: course regulation and the amount of bad press that the
22:16
Speaker 1: crypto space gets generally, I think it kind of ironically
22:21
Speaker 1: it boosts bitcoins appeal, if only because it is the
22:25
Speaker 1: one kind of most noteworthier and most trusted crypto. But
22:28
Speaker 1: the rest of the space I think is obviously in
22:31
Speaker 1: pretty bad shape right now. All right, good stuff. Everett Milman,
22:34
Speaker 1: chief market analyst for Gainesville Coins. Want to get to
22:40
Speaker 1: our next guest, Dan sam And. He's a partner and
22:42
Speaker 1: analyst at New Street Research. He covers the USC He
22:45
Speaker 1: leads to the US Internet team there. He recently joined
22:48
Speaker 1: New Street. Before they had a long career at what
22:50
Speaker 1: I know is Bank of Montreal. The market now knows
22:53
Speaker 1: is BEMO Capital Markets. And Dan's been covering the Internet
22:56
Speaker 1: space since really the inception of the Internet. And Dan,
22:59
Speaker 1: thanks so much for taken a time to join us. UM.
23:02
Speaker 1: I know you've recently ramped up coverage once again here
23:04
Speaker 1: in New Streets. What's your thirty thousand foot call for
23:07
Speaker 1: these Internet names here? They had such a great run,
23:10
Speaker 1: you know, over the last decade, but now there's definitely
23:13
Speaker 1: some some headwinds for the sector and for some individual names.
23:16
Speaker 1: They love to get your perspective. Yeah, no, thanks for
23:20
Speaker 1: having me on, guys. I'd say thirty thousand for view.
23:22
Speaker 1: So we launched our coverage New Street right here at
23:25
Speaker 1: the beginning of the year. The January third was published date.
23:29
Speaker 1: And you know, look at our title of our original
23:32
Speaker 1: industry report was borrowing from the famous Wren Buffet line, right,
23:37
Speaker 1: be greedy when others are fearful, because you know, what
23:40
Speaker 1: we saw was the sector trading essentially at decade lows,
23:45
Speaker 1: right that we hadn't seen it trading this this this
23:49
Speaker 1: cheaply relative to the SMP five hundred for for over
23:52
Speaker 1: ten years. And look, as you said, lots of good
23:56
Speaker 1: reasons for that post COVID hangovers, having more regulatory and
24:03
Speaker 1: policy pressures than we've seen in the past, and probably
24:07
Speaker 1: this this big idea of increasingly you know, amongst the
24:10
Speaker 1: big players, uh, you know, and this crosses more into
24:14
Speaker 1: to some of the other stuff that that I don't cover,
24:16
Speaker 1: like Apple and Microsoft, but you know, these megacap tech
24:19
Speaker 1: stocks starting to swim in each other's lanes a little
24:23
Speaker 1: bit more and compete with each other. So, you know,
24:25
Speaker 1: we definitely sort of frame you know, us Internet as
24:29
Speaker 1: it's it's not a pure growth sector anymore. It's more
24:32
Speaker 1: of a garp sector now. And we can talk a
24:33
Speaker 1: little bit more about the shift to focus on profitability
24:36
Speaker 1: in various groups. But but it's but we thought it
24:40
Speaker 1: was still very attractive to look at these names over
24:43
Speaker 1: a longer term basis, notwithstanding that lots of fear around
24:47
Speaker 1: macro and recession that could impact them as well, But
24:50
Speaker 1: we just found the valuation too attractive. It worked really
24:53
Speaker 1: well out of the year. They pulled back a little
24:54
Speaker 1: bit out of earnings, but still find the group attractive
24:58
Speaker 1: for long term positions. What what is web three, Dan?
25:02
Speaker 1: Do you is it more than just like marketing or
25:07
Speaker 1: a whole bunch of gen z kids push to pretend
25:10
Speaker 1: they have a career. Is it really something that we're
25:13
Speaker 1: going to finally understand at some point and be able
25:15
Speaker 1: to sync our teeth into. So it's a good question.
25:20
Speaker 1: I mean, I think it's a series of things that
25:24
Speaker 1: whether you go from cryptocurrencies to virtual reality and augmented
25:31
Speaker 1: reality and we can you know, talk about metaverse. You know,
25:37
Speaker 1: there's even some elements of you know, just just businesses
25:41
Speaker 1: like like Twitch at Amazon for example, you know, video
25:45
Speaker 1: gaming and gaining sort of the next level of you know,
25:49
Speaker 1: watching streamers and things like that, sort of creating this
25:52
Speaker 1: sort of digital environment much more significantly than versus what
25:56
Speaker 1: we think of as Web two point zero, which was
26:00
Speaker 1: you know, not something as immersive, still something on screens.
26:03
Speaker 1: Right If Web two point zero is probably mostly the
26:05
Speaker 1: web on a mobile screen, you know Web one pointzo
26:07
Speaker 1: is it on a desktop screen. Originally, Like I said,
26:10
Speaker 1: these are more virtual faces and things like virtual currencies.
26:15
Speaker 1: I still think it's pretty tough to pin it down
26:17
Speaker 1: to sort of one specific thing right now, but I
26:22
Speaker 1: think a few of those things are floating around. And look,
26:25
Speaker 1: I think notwithstanding that cryptos come back a lot and
26:28
Speaker 1: had its own challenges. I mean, I do believe over
26:31
Speaker 1: the long term that you know, things like virtual reality
26:33
Speaker 1: and augmented reality will be more significant. But yeah, probably
26:38
Speaker 1: not the great big title wave of impact in the
26:41
Speaker 1: near term just yet. Hey, Dan, I see that you
26:43
Speaker 1: have buy ratings on the two big digital advertising plays
26:47
Speaker 1: Meta Platforms and Halpha bit Facebook and Google for US
26:50
Speaker 1: old timers, definitely some macroeconomic headwinds there. There might be
26:55
Speaker 1: some regulatory overhang. What's your call on those two names?
27:00
Speaker 1: So you know, this goes back to, like I said,
27:02
Speaker 1: what our positioning was for the sector to start was
27:05
Speaker 1: we wanted to be more aggressive, and you know what
27:08
Speaker 1: that means in our space. You know, even though Internet
27:11
Speaker 1: is a consumer space overall, it's relatively cylical in general.
27:15
Speaker 1: You know, when you want to be greedier, you want
27:17
Speaker 1: to get along more than digital advertising names where they
27:20
Speaker 1: are a little bit more cyclical. And so you know, Facebook,
27:24
Speaker 1: I'm an old timer, I still mostly got to you know.
27:26
Speaker 1: But Meta was one name that we had function upgraded
27:29
Speaker 1: as we came over to the new shop and set
27:32
Speaker 1: up here at Dustry and you know, and and office.
27:35
Speaker 1: It's worked worked really well to start the year. Um,
27:40
Speaker 1: you know, basically that was our view as we started
27:43
Speaker 1: was that, you know, especially still the fourth quarter. We
27:47
Speaker 1: saw this with fourth quarter results quite choppy. My expectations
27:51
Speaker 1: are still really for the first and second quarter to
27:53
Speaker 1: still be pretty choppy. U in the in the digital
27:56
Speaker 1: at economy. But that, oh it sounds like the telecommunications
28:02
Speaker 1: for this Internet analysts or not up the snuff. Yeah,
28:05
Speaker 1: telecoms are still as bad as they were in the nineties. Yeah.
28:09
Speaker 1: Pros once told me, Um, you know, cell phones are
28:12
Speaker 1: like the bane of talk radio. Yeah, you know, the
28:16
Speaker 1: old landline. I don't have a landline, and it's no bueno. Yeah.
28:19
Speaker 1: I don't have a landline either. Actually, Um, but I
28:22
Speaker 1: my cell phone has I think never dropped a call.
28:26
Speaker 1: But the cell phones of people who call in for
28:28
Speaker 1: radio or television drop every three or four tries. So
28:32
Speaker 1: I don't know what the problem is. In any case,
28:35
Speaker 1: I was hoping to ask Dan about, Um, what happens
28:38
Speaker 1: when you put AI in your name? Does that automatically
28:41
Speaker 1: get a buy rating? Yeah, doubles your multiple I guess, um,
28:45
Speaker 1: Dan Salman, he is a partner an analyst at New
28:48
Speaker 1: Street Research. Hopefully he can get him back on get
28:50
Speaker 1: him back some point. Maybe we can get him in
28:52
Speaker 1: the studio. Where's he from, Eric, where's he calling it? Yeah?
28:55
Speaker 1: All right, oh wait, we got him back. Yeah we
28:57
Speaker 1: got Dan, We got you back. Okay, Hey, Danny there,
29:01
Speaker 1: bud Well. Eric keeps saying he's there, hey there there.
29:06
Speaker 1: We can hear you. You're cutting out intermittently, but you
29:09
Speaker 1: should come up to the studio seven thirty one Lexington Avenue.
29:12
Speaker 1: You can take the five of the six. We'll do that.
29:16
Speaker 1: I'll do that properly next time. Um. I think also
29:19
Speaker 1: the magic or lack there of a Wi Fi calling
29:22
Speaker 1: is letting us here. But but but lonter short on
29:25
Speaker 1: the big you know, ad driven names is I think
29:29
Speaker 1: the risk to those names is there is a deep,
29:31
Speaker 1: extend consumer recession and where you look where employment levels
29:36
Speaker 1: are right now, unemployment is still relatively low. I know
29:39
Speaker 1: we're seeing tons about layoffs from these companies and other
29:42
Speaker 1: tech companies, but across the economy unemployment is still pretty low.
29:46
Speaker 1: So we think the risk of an extended consumer recession
29:49
Speaker 1: is still you know, manageable, and that you know, we
29:52
Speaker 1: want to have exposure online advertising. If that's the case,
29:55
Speaker 1: all right, Dan, thanks so much. Next time, we will
29:57
Speaker 1: get you in the studio here we'll feed you some snacks.
29:59
Speaker 1: It's all. It's a trip worth making. Dan Simmon, partner
30:03
Speaker 1: and analysts at New Street Research, longtime media analysts on
30:06
Speaker 1: the street at Bemo Capital Markets, talking about his new
30:09
Speaker 1: coverage on the internet. Still pretty tell you. He's got
30:12
Speaker 1: seven stocks under coverage right now. He's got five buys
30:14
Speaker 1: buys on Amazon, Meta Alphabet, Snap and Match, and he's
30:19
Speaker 1: got neutral on Trade Desk and Netflix. He's got a
30:23
Speaker 1: neutral on Netflix. So interesting. So we'll get Dan back,
30:28
Speaker 1: all right. I still think, you know we have. We
30:29
Speaker 1: just got through earnings. Earnings matter, I know that, but
30:32
Speaker 1: it just seems like this market continues to be held
30:35
Speaker 1: hostage by the feeder reserve and and what it will do.
30:38
Speaker 1: I wonder what they really smart people are doing these days,
30:41
Speaker 1: like the quant people. The people do like math and stuff. Yeah,
30:45
Speaker 1: I like to stay away from that as much as
30:46
Speaker 1: I can. My Moon Nurani joins us here. He's co
30:49
Speaker 1: founder of quant Insight. He joins us in our Bloomberg
30:51
Speaker 1: Interactor Broker studio. He's based in London, but he's in
30:55
Speaker 1: New York getting into trouble this week's We appreciate him
30:57
Speaker 1: taking a few minutes so mama, would I wonder how
30:59
Speaker 1: you got at a quant shot up? How you guys,
31:04
Speaker 1: how did you do last year in twenty twenty two
31:05
Speaker 1: and to sixty forty? Portfolio got crushed? And then how
31:08
Speaker 1: do you look at twenty twenty three and going forward?
31:11
Speaker 1: So last year it became so what we do is
31:14
Speaker 1: there are lots of conflicting stories and narratives in markets,
31:17
Speaker 1: and it can get quite confusing. What we do is
31:19
Speaker 1: we ask the data what's going on. We have algorithms
31:21
Speaker 1: that interrogate all the data about the economic data, what
31:25
Speaker 1: the Fed's priced to do, stress in China, the dollar
31:28
Speaker 1: or energy prices, and it finds the pattern and the
31:32
Speaker 1: pattern last year February March was very clear, and that
31:35
Speaker 1: was real rates was the driver. The daily moves we
31:40
Speaker 1: were seeing in equity markets were all explained by shifts
31:43
Speaker 1: in real interest rates in the US. Real interest rates
31:46
Speaker 1: went up, the market went down. As we got towards
31:49
Speaker 1: the end of twenty twenty two, the relationships started to
31:51
Speaker 1: shift and the algorithms were telling us, actually, rates aren't
31:55
Speaker 1: that important anymore. What matters now is the real economy.
31:58
Speaker 1: So twenty twenty two was all about the FED. Twenty
32:01
Speaker 1: twenty three going in was okay, what impact is the
32:04
Speaker 1: FED going to have? We had. Of course, everyone's screaming
32:07
Speaker 1: about the inverted yield curve recession is imminent. We haven't
32:10
Speaker 1: seen that recession yet. And one of the reasons the
32:13
Speaker 1: stock market is doing okay is because it's keying off
32:15
Speaker 1: the real economy data now and the credit data. And actually,
32:18
Speaker 1: if you look at the credit cycle and you look
32:20
Speaker 1: at credit spreads, they're not screaming distress yet. So the
32:23
Speaker 1: equity markets okay. What's really interesting is in the last
32:27
Speaker 1: three weeks, the machine is telling us that actually rates
32:30
Speaker 1: are starting to matter again. But there's another complicating factor
32:34
Speaker 1: that's entered the equation in the last two months, and
32:36
Speaker 1: that's China. And what the machine is saying is that
32:39
Speaker 1: we've got two forces pulling in different directions. On the one,
32:43
Speaker 1: FED terminal rates continue to rise, bad for equities. Number two,
32:47
Speaker 1: a lot of the price action in equities is keying
32:51
Speaker 1: off indicators of China, GDP growth, copper prices, basically China indicators,
32:57
Speaker 1: and that's driving markets higher, particularly in Europe. That's why
33:01
Speaker 1: we're seeing Europe out performed the US. Are you concerned
33:03
Speaker 1: about the China news we had over the weekend that
33:06
Speaker 1: they only and I'm using air quotes here, expect growth
33:10
Speaker 1: of five percent. I guess that's relative to what they
33:13
Speaker 1: would normally forecast low for a post pandemic economy. On
33:19
Speaker 1: the other hand, it doesn't seem like such horrible news
33:21
Speaker 1: to me, considering they won't be driving inflation at much either. Yeah,
33:24
Speaker 1: I think you know what you have to look at
33:26
Speaker 1: with China is the swing They went from around analyzing
33:30
Speaker 1: two percent real GDP growth to now five percent real
33:32
Speaker 1: GDP growth. And the way China is impacting is not
33:36
Speaker 1: only the demand that's coming out of China, which is
33:39
Speaker 1: hitting Europe a bit more. Europe is a bit more
33:41
Speaker 1: leverage to China growth, but the impact that China is
33:43
Speaker 1: having on commodity prices. And the big problem for the
33:46
Speaker 1: FED is that China growth is creating another massive problem
33:49
Speaker 1: for them because the more China stimulates, the higher commodity
33:53
Speaker 1: prices go. That's not good for headline inflation. It'll feed
33:57
Speaker 1: through to wage growth and core inflation, and it's forcing
34:00
Speaker 1: the FED higher and higher and higher all the time.
34:03
Speaker 1: Personal view, I think we headed above six percent terminal rates. Okay,
34:07
Speaker 1: all right, that's it's two six percent or above six percent.
34:11
Speaker 1: I think if China continues to grow above six percent. Wow,
34:15
Speaker 1: all right, so that's all. That's a call rate there
34:17
Speaker 1: with a capital C And what do you do with
34:20
Speaker 1: a backstop of that type of interest rate call? What
34:23
Speaker 1: are you guys doing with your capital these days? Well?
34:26
Speaker 1: Step one is poke it in short term cash. Step two,
34:33
Speaker 1: don't be along the bond market for the time being.
34:36
Speaker 1: Step three weight for the buying opportunity that will come.
34:41
Speaker 1: Because we know that six percent plus rates is going
34:44
Speaker 1: to drive a recession in the ECB four percent plus
34:48
Speaker 1: rates is going to drive a recession in Europe. Equity
34:51
Speaker 1: markets are very focused on earnings recession, so equity markets
34:54
Speaker 1: will head south. But I think it's second half of
34:56
Speaker 1: the year. And what's caused the huge delay is China.
34:58
Speaker 1: By the way, just to capital BOE is five because
35:01
Speaker 1: I like four or five six That works for me. Yeah,
35:03
Speaker 1: that sounds about wrong. Yeah. So in the city of
35:06
Speaker 1: London with all the financial people, the ones that haven't
35:09
Speaker 1: left to go to Paris, which we have a story
35:10
Speaker 1: about that because our brekfit. You're not consensus, are you?
35:14
Speaker 1: You you sound more bearished than consensus. We don't. We
35:19
Speaker 1: don't key off consensus. We asked the data. We're quants, remember, right, right?
35:24
Speaker 1: And so I mean do you really have money? Like,
35:27
Speaker 1: what's your cash position today relative to maybe where you
35:31
Speaker 1: normally like to be. I'm, you know, around eighty percent cash. Wow, dude,
35:37
Speaker 1: it's pretty defensive. Yeah, it's been good. Well, look, when
35:39
Speaker 1: are you gonna know when to put that cash work?
35:43
Speaker 1: What's what are some of the signs that you or
35:45
Speaker 1: your model um is gonna you know, suck off the
35:49
Speaker 1: Bloomberg term a along? Go? Oh, now it's time to
35:51
Speaker 1: buy credit sprints rs high yield credit sprints. So we
35:56
Speaker 1: have the default data for January US bankruptcies. It was
36:00
Speaker 1: significantly higher than Q four last year. A couple of
36:03
Speaker 1: days ago we got the data for February it was higher. Again.
36:08
Speaker 1: Credit spreads are still reasonably unworried. When credit spreads start
36:13
Speaker 1: to turn higher, and that will be implying higher default
36:16
Speaker 1: rates in the US, that is going to be the
36:18
Speaker 1: catalyst for equity markets to turn south. And when implied
36:23
Speaker 1: default rates getting towards the six seven eight percent, which
36:26
Speaker 1: is pretty high and a lot higher than the three
36:28
Speaker 1: percent now, that will be somewhat close to the bottom
36:32
Speaker 1: of the equity market, and so that's I mean, you're
36:34
Speaker 1: keying really off of it a material recession? Is that
36:38
Speaker 1: how you guys think about it? Well, given the current regime? Yes, okay? Interesting,
36:44
Speaker 1: So any sense like do you have a sense of timing?
36:46
Speaker 1: Assist is a twenty three event? I think it's late
36:48
Speaker 1: twenty three. And what's delaying it? Because let's face it,
36:52
Speaker 1: if you asked everyone a year ago, fens are going
36:54
Speaker 1: to go to four and a half or five? Yes? Right,
36:56
Speaker 1: what do you think is going to happen to the
36:58
Speaker 1: US economy? Everyone would have said to desire pasta well
37:01
Speaker 1: Q one real GDP now casting in the US is
37:03
Speaker 1: around one and a half percent positive real GDP growth.
37:06
Speaker 1: We haven't had that disaster. Bonmarket's been, you know, sitting
37:09
Speaker 1: so well a six percent or six and a quarter percent.
37:13
Speaker 1: I think I think it will once the China impulse
37:16
Speaker 1: has faded. Okay, but you know they China data today again,
37:20
Speaker 1: growth a little bit slower than expected. Okay, not good
37:23
Speaker 1: for the global economy. But the silver lining is perhaps
37:26
Speaker 1: less inflationary pleasure pressure globally. Is that enough of an
37:30
Speaker 1: offset or I don't think it is because There's a
37:32
Speaker 1: really interesting piece of research from the San Francisco FED
37:35
Speaker 1: recently that split out the current core inflation into the
37:38
Speaker 1: US into its demand driven or cyclical component, and it's
37:43
Speaker 1: a structural component, and they found that forty percent of
37:47
Speaker 1: current core inflation in the US is actually structural. So
37:51
Speaker 1: what this means is makes life. It makes life much
37:54
Speaker 1: tougher for the FED because it means they're gonna have
37:56
Speaker 1: to squeeze the demand side even more to compensate for
37:59
Speaker 1: the fact that there's this structural and that's driven by demographics,
38:03
Speaker 1: baby boomer retirement. You know, offshoring has become on shoring,
38:07
Speaker 1: more expensive labor at home. Geopolitics, free trade is sort
38:11
Speaker 1: of dying. We've moved to secure trade, managed trade, fair trade.
38:14
Speaker 1: There are a lot of structural factors that is driving
38:17
Speaker 1: core inflation in the US, and that makes the FED
38:20
Speaker 1: job even hardest. It's well, the good news, Mark Mood,
38:22
Speaker 1: is that Jerome Powell is going to testify in front
38:25
Speaker 1: of the smart, well informed, capable people of the US
38:29
Speaker 1: Congress over the next two days. So I'm sure they're
38:32
Speaker 1: going to do everything they can to help solve the situation.
38:35
Speaker 1: What is the fiscal answer, Well, I don't think the
38:39
Speaker 1: US can really embark on any kind of fiscal expansion.
38:43
Speaker 1: And one you know, one question, and particularly kind of
38:46
Speaker 1: in the retail in can they clamp down? Are they
38:48
Speaker 1: partially to blame? I mean, is there they overdid the
38:52
Speaker 1: fiscal stimulus. We know this and that that took the
38:55
Speaker 1: inflation genie out of the bottle, and the FED is
39:00
Speaker 1: left dealing with the issue. And the issue is particularly
39:03
Speaker 1: acute because if you look at the amount of government debt,
39:06
Speaker 1: not just in the US but all developed economies over
39:10
Speaker 1: this whole COVID crisis, it has increased dramatically. So the
39:14
Speaker 1: problem for the FED is they cannot afford to lose
39:17
Speaker 1: their inflation fighting credibility because if they lose the credibility,
39:21
Speaker 1: then the bond market is you know, global bond investors
39:24
Speaker 1: are going to demand much higher yields. We saw what
39:27
Speaker 1: happened to the guilt market when there was a credibility
39:29
Speaker 1: issue with the lizt Trust government, and the US just
39:32
Speaker 1: cannot and the Eurozone just cannot afford long term government
39:36
Speaker 1: bond deals to rise, which means that FED has to
39:38
Speaker 1: be one hundred percent clear to the market that their
39:41
Speaker 1: inflation fighting credibility is strong. This is a good car.
39:44
Speaker 1: I'm glad he made a trip over from London. Yeah,
39:46
Speaker 1: please come over more after we'll go there and you
39:48
Speaker 1: take us to your favorite pub. Mahoudnarrani, co founder quant Insight,
39:52
Speaker 1: given us his thoughts. All right, right now, let's bring
39:57
Speaker 1: you our interview with JP Morgan, c EO Jamie Diamond.
40:02
Speaker 1: He sits down with Bloomberg's Ed Hammond. Let's go to
40:05
Speaker 1: that conversation right now, Jamie Diamond, Ed Hammond, right now,
40:11
Speaker 1: thank you so much. Obviously, we would like to welcome
40:14
Speaker 1: now also our listeners on Bloomberg Radio as well as
40:16
Speaker 1: our viewers on Bloomberg TV. And I should say we're
40:18
Speaker 1: not sitting down, we're standing up. We're here in Miami, Jamie.
40:21
Speaker 1: Great to be back, Great to be with you, Great
40:22
Speaker 1: to be standing What are you worried about? Great? Great
40:25
Speaker 1: to be here, by the way, so thank you. But
40:27
Speaker 1: they are't worry the most about if you go, it's Ukraine,
40:30
Speaker 1: it's oil gas. So the leadership of the world, and
40:34
Speaker 1: you know our related with China. I mean that that
40:36
Speaker 1: is much more serious, like the economic vibrations we all
40:40
Speaker 1: have to deal with on a day to day basis
40:43
Speaker 1: on the Ukraine question that we talked about it a lot.
40:45
Speaker 1: Obviously a year ago, very shortly after the war had started.
40:48
Speaker 1: Do you think now a year in that the West
40:51
Speaker 1: has become sort of somewhat neured to the idea of
40:53
Speaker 1: a conflict of discale on its borders And if so,
40:56
Speaker 1: does that worry it? No? No, it looks a little
40:58
Speaker 1: bit like people are neured to it. But I think
41:00
Speaker 1: that's a little bit of mistake. I read a report
41:02
Speaker 1: the other day that there when the war goes to
41:04
Speaker 1: one year, it lasts normally last ten. But this is
41:07
Speaker 1: a major land war in Europe and a freedom democratic nation.
41:11
Speaker 1: You know, the hundreds of thousands of casualties are ready
41:14
Speaker 1: on both sides, and so I think we we don't
41:17
Speaker 1: know how this is going to end. We know what
41:18
Speaker 1: direction it is going to take, and it's affecting global relationships,
41:22
Speaker 1: so Ukraine Russia then as oil gas, food of how
41:27
Speaker 1: it's hurting poorer countries, and it's royally trade relationships between America,
41:32
Speaker 1: China and the rest of the world. So this is
41:34
Speaker 1: a probably the most serious geopolitical thing we've had to
41:37
Speaker 1: deal with since World War Two? Would you We'll see
41:39
Speaker 1: a future way people going to could potentially re enter
41:42
Speaker 1: the Russia MAKA as a business. I mean a very
41:45
Speaker 1: premature to say, you know, I think if there is
41:48
Speaker 1: a one day maybe, but it's very possible that woman
41:51
Speaker 1: happened in our lifetime. And you mentioned US China relations
41:55
Speaker 1: obviously not at that best right now, particulity posts the balloons.
41:59
Speaker 1: I want what role you see business playing in trying
42:02
Speaker 1: to sort of moderate those relations and try and keep
42:05
Speaker 1: them as good as possible. Well, you know, it's really
42:09
Speaker 1: the government. The government has to set the rules and
42:12
Speaker 1: fear what they want to do. But I think it's
42:13
Speaker 1: a fair complaint about government and business that we probably
42:16
Speaker 1: should have started resetting this ten years ago and we didn't.
42:20
Speaker 1: I don't like a choir was billed milk and all that.
42:22
Speaker 1: But going forward, the government and I think they're doing
42:25
Speaker 1: a good job thinking through what is national security? So
42:28
Speaker 1: I think it's semiconductors, earth, penicillin, certain drugs, What is
42:33
Speaker 1: unfair trade? And then you know, at one point you
42:36
Speaker 1: sit down and have a very serious conversation the Chinese government.
42:39
Speaker 1: You know, we remember Secretary Blincoln was on his way
42:41
Speaker 1: over there to do that. And then the balloon, but
42:44
Speaker 1: at one point they'll do that, and business is a
42:46
Speaker 1: peripheral player in that. So I think I think business
42:48
Speaker 1: will help give advice on how to do things. If
42:51
Speaker 1: you're gonna have an outbound investment controls how you said
42:54
Speaker 1: that way, that works a huge bureaucracy. And so so
42:57
Speaker 1: far all the conversation had been quite rational about it.
43:01
Speaker 1: I mean, JP Morgan obviously has a significant business in China.
43:04
Speaker 1: I'm sure that the government that would listen to you.
43:07
Speaker 1: What are the conversations you have just about sort of
43:09
Speaker 1: trying to, as I say, trying to maintain as cordial
43:12
Speaker 1: relations as possible between the two nations. I mean, you know,
43:16
Speaker 1: for us, we're there and like I said, you know,
43:19
Speaker 1: we're we're basically taking a backseat or American government in
43:22
Speaker 1: this one, and we're gonna we're obviously have to do
43:25
Speaker 1: whatever the American government asked us to do, and we're
43:28
Speaker 1: trying to engage in their courage of their own government
43:30
Speaker 1: and with the Chinese government and what those things should be.
43:32
Speaker 1: You know, I'm hoping cooler has prevailed here. But this
43:35
Speaker 1: is why Ukraine is so important. This can cause it
43:38
Speaker 1: to go in a bad direction rather quickly. So uh,
43:42
Speaker 1: you know, everyone's got to be some little cautions you
43:44
Speaker 1: talk about our government. Let's talk about the FED for
43:46
Speaker 1: a moment, obviously, I just want to talk about the
43:49
Speaker 1: FED for a moment. I have half a dozen posaic
43:52
Speaker 1: questions I can ask you about the FED. I think
43:54
Speaker 1: I know the answer to many of them. Start trying
43:55
Speaker 1: to find one fairly easy one is, you know, when
43:59
Speaker 1: do we get to say we're landing, be that hard
44:01
Speaker 1: landing or a soft landing sort of when does that
44:03
Speaker 1: begin to a cup? You know, forecasting the future is,
44:06
Speaker 1: as you know, very complicated. The consumer still has a
44:10
Speaker 1: lot more money in their checking accounts than before COVID.
44:13
Speaker 1: They're spending ten percent more than last year, forty percent
44:16
Speaker 1: more than pre COVID, and it looks like they'll have
44:18
Speaker 1: excess point to spend roughly until the end of the year.
44:22
Speaker 1: And at that point or you can say, is it
44:24
Speaker 1: a little bit of a cliff? Is a soft landing?
44:26
Speaker 1: And also QT has nar start to bite That also
44:29
Speaker 1: is gonna happen at one point, probably later this year,
44:31
Speaker 1: and you know that's when you're gonna know what these
44:33
Speaker 1: things do. But you weaken still have a soft landing
44:37
Speaker 1: and the other thing about all this economic forecasting is
44:40
Speaker 1: Russia Ukraine. I mean that can change it dramatically and
44:44
Speaker 1: very very quickly. Do you think absent Russia Ukraine we
44:47
Speaker 1: will have a soft landing. I think it's still possible,
44:50
Speaker 1: but I would I look at possibilities all possible possible.
44:54
Speaker 1: I think mild recessions possible, harder recessions possible. Is a
45:00
Speaker 1: good chance that inflation will come down, but not enough
45:03
Speaker 1: by the fourth quarter that may actually have to do more.
45:06
Speaker 1: And I think a lot of things that happened in
45:08
Speaker 1: the world, think of the bigger trends are inflationary. You know,
45:12
Speaker 1: infrastructure spending, the IRA Act less, any trade with you
45:16
Speaker 1: know certain parts of the world, we bringing trade back
45:19
Speaker 1: into America. Those things are all the green transition is
45:23
Speaker 1: going to take a lot of capital to all those
45:25
Speaker 1: things kind of have inflationary attributes that are very different
45:28
Speaker 1: than we've been through the last twenty years. I'm gonna
45:30
Speaker 1: come back to the consumer point in a second. But
45:32
Speaker 1: last year you talked about and your letter this sort
45:35
Speaker 1: of confluence of three major effects. It's qt the America
45:38
Speaker 1: rebounding from a sort of post COVID economy, fedly, strongly
45:41
Speaker 1: and then oversee the wall as well. You talked about
45:44
Speaker 1: them sort of leading us into an unprecedented period. How
45:47
Speaker 1: do we get out of that period? You know, it's
45:50
Speaker 1: it's diplomacy. I mean, that's why this is not you know,
45:53
Speaker 1: we always talk about uncertainty in the economy and the incertainty,
45:56
Speaker 1: but I call it normal uncertainty. The weather is, you know,
45:59
Speaker 1: we know what the west, there's life. That's why these
46:01
Speaker 1: things are different. Qt coming out of COVID, the war
46:05
Speaker 1: in Ukraine. I think it's been pushed out a little
46:07
Speaker 1: bit further. I would have thought we'd be dealing with
46:09
Speaker 1: this a little bit sooner, but it does look like
46:11
Speaker 1: some of that stuff it's coming to fruition at the
46:14
Speaker 1: end of this year. Russia, Ukraine, we sussif we don't know,
46:16
Speaker 1: I think it's wrong. It's didn't predict because if you
46:19
Speaker 1: look at the history of wars, they've been pretty much
46:22
Speaker 1: unpredictable and how they play out, and which ones affect
46:26
Speaker 1: the global economy, and how they took a lot of
46:28
Speaker 1: wars they didn't affect the global economy, but they were
46:31
Speaker 1: literally in very small parts of the economy. This is
46:33
Speaker 1: not in a small part of the economy, and this
46:36
Speaker 1: is a European nation, it's Russia, and it's oil and
46:40
Speaker 1: you know, major oil and gas supply and food supply
46:43
Speaker 1: around the world. So this is a whole different attribute
46:47
Speaker 1: to it. But then why does the consumer, particularly here
46:49
Speaker 1: in the US, remain, as you say, fairly bullish there
46:54
Speaker 1: Over a period of time, their home pride has been
46:56
Speaker 1: going up, jobs a plentiful ways of going up to
46:58
Speaker 1: the lower end, which I think it's a good thing.
47:01
Speaker 1: They've got a lot of money to checking account. You know, Uh,
47:04
Speaker 1: stocks generally been had gone up for ten or fifteen years.
47:07
Speaker 1: The consumers, if you look at today, in great shape.
47:11
Speaker 1: But I'm telling you that's going to end at one point.
47:14
Speaker 1: But even if we go to recession, then the consumer
47:16
Speaker 1: is entering a recession better shape, far better shape than
47:19
Speaker 1: they didn't know eight you know, no way when we
47:21
Speaker 1: went to that recession knowing did own employment go through
47:23
Speaker 1: the roof. But their home prices are dropping dramatically, jobs
47:27
Speaker 1: are disappearing, the stock market is way down. So this
47:30
Speaker 1: one is a little bit better than that. One of
47:33
Speaker 1: the sort of narratives that it's fairly popular at the moment.
47:36
Speaker 1: It's the consumer doesn't like uncertainty. I would even though
47:39
Speaker 1: as far as saying it's it's sort of one of
47:40
Speaker 1: these false axioms, that's you know, that's payble the thought
47:43
Speaker 1: now that you know, when it's times are uncertain it
47:45
Speaker 1: consumer freaks out. They stopped spending, They stopped doing the
47:48
Speaker 1: things that the consumer needs to do to keep the
47:49
Speaker 1: economy going. That doesn't seem to be the case here.
47:52
Speaker 1: The consumer's done pretty well through uncertainty, through COVID, through
47:55
Speaker 1: the wall, through everything else. So I wonder what when
47:57
Speaker 1: we get to this point of you know, the wallet
48:00
Speaker 1: being hit and the consumers saying we're gonna stop spending.
48:03
Speaker 1: Is it just reality catching up with them? Is this
48:05
Speaker 1: some kind of deflection point? Where is it just that
48:07
Speaker 1: they run out of money? I early is destroyed by COVID,
48:09
Speaker 1: including quote uncertainty. So you have, you're obviously correct confidence
48:13
Speaker 1: consumer covers is dropping it. But I think your pocketbook
48:17
Speaker 1: trump's confidence. But they have a lot of money, they
48:20
Speaker 1: tend to spend it. And you see here like look
48:22
Speaker 1: at the travel in Miami and the building and the
48:25
Speaker 1: optimism around. But if you ask me how they're doing,
48:27
Speaker 1: it's very good. And then they tell them they're not
48:29
Speaker 1: comed by the economy. So jobs are plentiful, wages are
48:34
Speaker 1: going up. I mean, what, that's what's really affecting them.
48:37
Speaker 1: You know, when they wake up the morning, they feel
48:38
Speaker 1: pretty good about that, and then they read the paper
48:40
Speaker 1: and of course you can get a little depressed and
48:43
Speaker 1: views at the end of this year. What's towards the
48:45
Speaker 1: end of this year that sort of begins to tell
48:47
Speaker 1: it looks but it looks like the excess cashle be disappearing.
48:51
Speaker 1: And then but the jobs are still there, so you
48:53
Speaker 1: could That's why he said you could have a soft landing.
48:55
Speaker 1: So now Jeffrey Epstein, obviously hey specter continues to haunt
49:01
Speaker 1: the global elite and most recently JP Morgan have been
49:05
Speaker 1: sort of caught up in it. How has that made
49:07
Speaker 1: you feel? I can't talk about litigation, but you should
49:11
Speaker 1: you should know that a JP Moore, we got top experts,
49:13
Speaker 1: including some of the best people that come out of
49:15
Speaker 1: the DOJ, etc. Who review and make judgment decisions like this,
49:20
Speaker 1: and we've they've generally do a very good job. But
49:24
Speaker 1: how does it make you feel? As the CEO of
49:25
Speaker 1: JP Morgan as a figureheads for the bank. It's unfortunate,
49:28
Speaker 1: but it's life. And look, we're here in Florida. We
49:32
Speaker 1: have to talk about politics because we always talk about politics.
49:35
Speaker 1: Obviously we're into census. It's back yard. What do you
49:39
Speaker 1: make of his if you like hands on approach to
49:42
Speaker 1: business and is that something you would like to see
49:44
Speaker 1: more of in even higher office? Solution an approach the sentence. Look,
49:48
Speaker 1: I know, like I've learned and listen and read and
49:52
Speaker 1: stuff like that. You know, it's it has got a
49:54
Speaker 1: little complicated between business and government and stuff like that.
49:56
Speaker 1: But but you know, anyone here knows that I'm a
50:00
Speaker 1: full throated, red blooded American patriot supporter free enterprise. So
50:05
Speaker 1: you know, I hear the complains on both sides, but
50:08
Speaker 1: you know you listened to learn from them. I don't
50:09
Speaker 1: worry that much about it. And we've been We've loved Florida.
50:13
Speaker 1: We're growing in Florida left and right. You know, small businesses,
50:17
Speaker 1: large companies. We've got. I've got how many total employees
50:20
Speaker 1: we have for you. I'm on my way to Tampa.
50:21
Speaker 1: We've got you know, major operations there Orlando, major operations
50:25
Speaker 1: were opening branches and so the mayor just joined us
50:28
Speaker 1: in a small business event we did here we're very
50:31
Speaker 1: pro pro Florida. And this is long dates at Florida.
50:34
Speaker 1: This isn't part of the sort of recent influx of
50:36
Speaker 1: capital in Florida or financial wild and Florida packs. I
50:40
Speaker 1: think they've been great. I mean, you know, if you
50:42
Speaker 1: were running the state, you know you should be thinking,
50:44
Speaker 1: how can I make this date off good? Well off
50:46
Speaker 1: my people. So Florida likes business. They want you to come.
50:51
Speaker 1: You know, you come to Florida, you see the opting
50:52
Speaker 1: Texas is the same way. You know if I was
50:56
Speaker 1: some other states. If you think about why do people
50:58
Speaker 1: like going to these dates, it's their tax is is
51:00
Speaker 1: their pro business. They want better life for the people.
51:03
Speaker 1: It's not necessary some of the parts we've talked about.
51:05
Speaker 1: So you know, we now have more employees in Texas
51:08
Speaker 1: than the New York's day. You know it should have
51:10
Speaker 1: been the way, but Texas loves to be there. I mean,
51:13
Speaker 1: you go through there optimistic. They're optimistic here pro American
51:16
Speaker 1: optimistic business. No. Unfortunately, No. Every year there's a sort
51:23
Speaker 1: of tech topic to jur that we talk about last
51:25
Speaker 1: year as a metaverse, and I think we talked briefly
51:27
Speaker 1: about you appearing in a non physical form in the
51:30
Speaker 1: lobby of the METS verse. This here, it's uh, it's AI.
51:34
Speaker 1: I asked chat GPT what I should ask Jamie Diamond.
51:37
Speaker 1: I was hoping he would come up with a really
51:38
Speaker 1: smart answer. I wouldn't need to write any of my questions.
51:40
Speaker 1: I could get it to do the whole interview for me.
51:42
Speaker 1: So so it didn't. Unfortunately, it asked what would I
51:46
Speaker 1: asked Jamie Diamond about AI and what it meant for
51:49
Speaker 1: the future of investment. Let so AI is real. This
51:54
Speaker 1: is not great total, that's not cryptn't this is a
51:57
Speaker 1: technology which is staggering. Already lose three hundred AI. We
52:02
Speaker 1: have thousands of people of thousand involved data, machine learning,
52:05
Speaker 1: natural language process saying, we have two hundred people in
52:08
Speaker 1: AI research labs. But we're already used to do risk fraud, marketing, prospecting,
52:14
Speaker 1: and it's the tip of the iceberg. So you know,
52:17
Speaker 1: to me, this is this is extraordinary. And the other
52:19
Speaker 1: thing to keep in mind there's good use, but bad
52:22
Speaker 1: guys are going to use it too, So it's a
52:24
Speaker 1: little bit of arms race and how you have to
52:27
Speaker 1: use it to protect your company and protect your clients,
52:29
Speaker 1: protect data, etc. And we're fully engaged and the other
52:32
Speaker 1: thing you have to keep about AI. You need to
52:34
Speaker 1: be in the cloud to use the compute power fundamentally
52:37
Speaker 1: that you need for AI. And so that's why the cloud,
52:40
Speaker 1: digital AI, they're all kind of related that way. What
52:42
Speaker 1: was behind the decision to ban chet chpt on the
52:46
Speaker 1: on the trading float on company owned devices. That's why
52:51
Speaker 1: you could do it in your own device, but we
52:53
Speaker 1: also lab people use it within our own firewalls, so
52:57
Speaker 1: we didn't take it away just you have to go
52:59
Speaker 1: within our firewall to use it, and it was just
53:01
Speaker 1: for control purposes and riskpers There's no wasn't a statement
53:05
Speaker 1: of any time before we end up. I want to
53:07
Speaker 1: get on celebriage finance obviously that's in large part why way, Hey,
53:10
Speaker 1: it's still about the conference. One of the things Stavid
53:11
Speaker 1: Morgan still at the moment it's very interesting is lending
53:14
Speaker 1: from its own balanced sheet and direct lending. If you're like,
53:17
Speaker 1: at the moment, I think it's ten billion dollars is
53:19
Speaker 1: what's been allocated? How big can that business get? So,
53:23
Speaker 1: you know, I mean, it's amazing. And this is when
53:25
Speaker 1: you look at something like this for reviewers American capitalism,
53:29
Speaker 1: there are two thousand investors here from around the world.
53:32
Speaker 1: Hundreds of companies still inventing ideas and growing and expanding,
53:36
Speaker 1: both in the US and overseas. It is, it is extraordinary.
53:40
Speaker 1: So direct lending, you know, obviously one of the biggest
53:42
Speaker 1: lenders out there, but a lot of people here are
53:44
Speaker 1: also huge lenders. So you know, I meet with them all,
53:46
Speaker 1: and you know, direct lending away from banks to become
53:49
Speaker 1: equally in size and something. Think of those heals as
53:51
Speaker 1: competitives there and there. You know that's a lot, but
53:53
Speaker 1: we deal with competitors and collaborators all the time. So
53:57
Speaker 1: we do direct lending and all. It is fundamental if
53:59
Speaker 1: you're viewers, you know, unitron quicker, more flexibility, and certain
54:04
Speaker 1: type of covenants not necessarily cheaper for the borrower, by
54:07
Speaker 1: the way, so you gotta look at it all things.
54:09
Speaker 1: So we've done I think ten million forty deals. We
54:11
Speaker 1: could do a lot more, and you know we can
54:13
Speaker 1: work with partners or some of the deals, etc. But
54:15
Speaker 1: we'll do what we need to do to compete. Feel
54:18
Speaker 1: someone pass to ask you about succession. You get asked
54:20
Speaker 1: about it all the time. I'm not going to do that,
54:22
Speaker 1: but I am interested. You talk a lot about the
54:25
Speaker 1: need for sort of unified responses to global conflict. You
54:28
Speaker 1: talk a lot about things that are needed domestically, whether
54:30
Speaker 1: it's better health, better education, raising wage inequality or reducing
54:35
Speaker 1: i should say wage in equality. It seems very obvious
54:38
Speaker 1: that you could go into public office if you chose
54:41
Speaker 1: to when you leave, Jake Mulgan, it's that's something we
54:43
Speaker 1: can expect. I'm not going to go into public service.
54:46
Speaker 1: I love what I do here. You know you mentioned succession.
54:49
Speaker 1: I enjoy it. I think you should practice it a
54:53
Speaker 1: little bit before you go into it, and I mean
54:55
Speaker 1: I feel that I do here's a huge contribution to
54:58
Speaker 1: my country, My clients are around the world, etc. And
55:01
Speaker 1: the other thing about succession, you got you guys already
55:04
Speaker 1: know who that we have a lot of potential successors,
55:07
Speaker 1: so you can add right about it frequented exactly, so
55:09
Speaker 1: you know, I couldn't answer that you already know, all right, Bil,
55:12
Speaker 1: Jamie Diamond, great conversation. Thank you so much for having us,
55:15
Speaker 1: and with that guy, I'll tide it back to you
55:17
Speaker 1: in New York. Thanks for listening to the Bloomberg Markets podcast.
55:21
Speaker 1: You can subscribe and listen to interviews with Apple podcasts,
55:25
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
55:29
Speaker 1: on Twitter at Matt Miller nineteen seventy three. And I'm
55:32
Speaker 1: fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast,
55:35
Speaker 1: you can always catch us worldwide at Bloomberg Radio