Latest / Bloomberg Intelligence / Bank Earnings, Student Loans, Metals, Genpact, and James Bullard (Podcast)

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Bank Earnings, Student Loans, Metals, Genpact, and James Bullard (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 CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news.
0:14
Speaker 2: I'm the Bloomberg Markets podcast called Apple Podcasts or wherever
0:17
Speaker 2: you listen to podcasts, and at Bloomberg dot com slash podcast.
0:21
Speaker 3: I want to.
0:21
Speaker 4: Quickly move over to our next guest. Whoever better than
0:24
Speaker 4: to talk about the economy. We have Steve Matthews' economy
0:27
Speaker 4: reporter at Bloomberg News, who's going to join us to
0:29
Speaker 4: talk about the latest when it comes to the Federal Reserve.
0:31
Speaker 4: Also James Bullard set to leave the Central Bank. But
0:35
Speaker 4: first I want to get your thoughts just overall on
0:37
Speaker 4: the economy, Steve, because we did just get these big banks,
0:41
Speaker 4: especially when you're thinking about JP Morgan Wills Fargo City
0:44
Speaker 4: reporting about not just of course they're earnings more backward looking.
0:47
Speaker 4: This came over a tumultuous time when you think about
0:50
Speaker 4: the regional banks and the stresses that the banking industry
0:53
Speaker 4: went over, especially in the spring. What do you think
0:56
Speaker 4: this tells us about the direction and trajectory of thecon mean,
1:00
Speaker 4: when you see these results.
1:01
Speaker 2: Yeah, I think that's exactly right. I mean, the FED
1:05
Speaker 2: has been looking at the economic data, but they've also
1:08
Speaker 2: been watching very carefully what's happening with the banking sector.
1:12
Speaker 2: And the reports we've gotten so far are kind of
1:14
Speaker 2: a green light for more interest rate hikes. I mean,
1:17
Speaker 2: the banks seem to be doing fine. You know, there
1:21
Speaker 2: was a worry when we had three moderately big failures
1:25
Speaker 2: in March that okay, this could kind of lead to
1:28
Speaker 2: you know, another series of bank failures and there could
1:32
Speaker 2: be some volatility and who knows where it would end up.
1:37
Speaker 2: And basically, right now, things seem pretty calm and the
1:42
Speaker 2: big banks are doing, you know, better than expected them.
1:45
Speaker 2: And look at JP Morgan and some of the others.
1:50
Speaker 2: You know, the one caveat there is the FED is
1:54
Speaker 2: really probably more focused on the regional banks and a
1:57
Speaker 2: lot of the regional banks and to see how how
2:00
Speaker 2: they are doing, and a lot of those won't report
2:03
Speaker 2: until you know, next week or even the week after.
2:06
Speaker 5: Did we get any indicators so far from some of
2:09
Speaker 5: these major banks about how the regional banks might perform,
2:14
Speaker 5: because remember, you know, at that moment of crisis, we
2:16
Speaker 5: saw a lot of deposits flood to these major folks,
2:20
Speaker 5: whereas some of the more regional players were left on
2:23
Speaker 5: the sidelines. Or are we really waiting until next week
2:26
Speaker 5: for the kit for the verdict on this?
2:29
Speaker 2: Yeah, I mean I think in the reality is we're
2:31
Speaker 2: probably waiting for next week. But these banks have done well.
2:36
Speaker 2: You know, their interest margins are doing well, you know,
2:41
Speaker 2: their credit worthiness is fine. You know, there's been a
2:44
Speaker 2: lot of worry about commercial real estate. That doesn't seem
2:48
Speaker 2: to be a huge issue. I mean, it's a huge
2:52
Speaker 2: issue going ahead because you have all of these office
2:55
Speaker 2: buildings that are damaged by work from home, but in
3:00
Speaker 2: this quarter it's not a particular issue. So the caveat
3:06
Speaker 2: again is that the regional banks have a lot more
3:10
Speaker 2: exposure to commercial real estate than you know, for example,
3:14
Speaker 2: JP Morgan, Hey.
3:16
Speaker 4: Steve something that struck me looking at cities results. So
3:19
Speaker 4: it did get a boost when it comes to credit cards,
3:22
Speaker 4: but part of that was actually due to borrowers that
3:25
Speaker 4: were starting to struggle. You cover the economy so closely.
3:28
Speaker 4: What do you think this tells us about consumer spending
3:30
Speaker 4: right now?
3:31
Speaker 2: Well, that's interesting and we, as you pointed out, earlier.
3:35
Speaker 2: We also just got the Michigan Consumer Index Cinnament index
3:40
Speaker 2: and cinema of consumers has been fairly dire the last
3:46
Speaker 2: couple of years, and we saw a huge pickup in
3:51
Speaker 2: cineament both for you know, how consumers are looking at
3:54
Speaker 2: current conditions, how they're looking for expectations much higher than
3:59
Speaker 2: anyone epected, and you know that kind of suggests that
4:05
Speaker 2: consumer attitudes are are getting a little bit better. I mean,
4:09
Speaker 2: if this, if this sticks, you know, the thing that's
4:15
Speaker 2: driving this to a certain extent is inflation is coming down,
4:21
Speaker 2: so you're having disinflation. We have three percent inflation. At
4:25
Speaker 2: the same time, people's pay has been boosted recently because
4:31
Speaker 2: of the inflation. If you look at the average wages
4:34
Speaker 2: in the Atlanta Fed's wage tracker are running five point
4:39
Speaker 2: six percent year over year, So people are getting real
4:42
Speaker 2: wage s gains. And to the extent that people are
4:44
Speaker 2: getting real wage gains, they have the ability to spend.
4:48
Speaker 2: So you know, it's also a story of as you
4:53
Speaker 2: point out of different segments, it's like, you know, the
4:57
Speaker 2: rich are getting or getting richer to to a certain extent,
5:01
Speaker 2: I mean, a lot of the spending comes from the
5:04
Speaker 2: top half of the demographic segment.
5:08
Speaker 6: You know.
5:08
Speaker 5: To that end, you mentioned the consumer prices. We got
5:14
Speaker 5: those numbers in earlier this week. We also got producer prices.
5:17
Speaker 5: I mean, we see to seem to have two different narratives.
5:20
Speaker 5: There are one that consumer prices and producer prices are
5:24
Speaker 5: starting to disinflate at the same time as we have
5:28
Speaker 5: all this optimism, which really goes against the FED the
5:32
Speaker 5: traditional economic theory that you know, the FED really needs
5:35
Speaker 5: to cause some kind of slow down in the economy,
5:39
Speaker 5: which numbers is the central bank watching most closely?
5:44
Speaker 2: Well, if you listen to FED Shair Pale, he's very
5:49
Speaker 2: focused on the labor market. I mean there are, as
5:51
Speaker 2: you point out, two schools the thoughts. There's the Phillips
5:55
Speaker 2: curve thought that unemployment has to you know, go up
6:00
Speaker 2: for inflation to come down, and there's this big relationship
6:03
Speaker 2: between the two. And you know a lot of the
6:06
Speaker 2: older FED leaders basically buy into that kind of labor
6:10
Speaker 2: market view of inflation. But there's also some people who
6:14
Speaker 2: are pushing back on it, like Austin Goules the Chicago FED,
6:19
Speaker 2: you know, and even Jim Bullard, who is retiring, you know,
6:24
Speaker 2: say that the relationship isn't all that clear. And we
6:27
Speaker 2: have had disinflation so far without any labor market pain.
6:33
Speaker 2: And you know, now there's a big debate at the FEDS.
6:36
Speaker 2: Can this continue or do we need to see some
6:39
Speaker 2: pain to get back to two percent inflation? And that's
6:45
Speaker 2: going to be the big debate when the FED starts
6:48
Speaker 2: meeting today, among other things, today is the last day
6:51
Speaker 2: we get FED speak before the before the July meeting,
6:56
Speaker 2: and then we go into a self imposed blackout. You know, right,
7:02
Speaker 2: it'll be an interesting debate.
7:04
Speaker 4: And Steve, we only have about thirty seconds left, but
7:06
Speaker 4: we have to you brought up James Bullard, who set
7:09
Speaker 4: to leave the Central Bank. How tricky is this for
7:11
Speaker 4: the Fed's trajectory moving forward when you have a hawk
7:13
Speaker 4: like that who's about to leave.
7:15
Speaker 2: Yeah, I mean, I think in the short term Bullard
7:19
Speaker 2: is highly influential. He definitely carried more than his single
7:25
Speaker 2: vote because everybody paid attention to them, including the markets.
7:29
Speaker 2: But Powell has firm control on the committee. So if
7:33
Speaker 2: he wants to hike, he clearly wants to hike in July.
7:37
Speaker 2: You know, whether we get a second hike or not
7:39
Speaker 2: will be basically up up to Powell. He can continue
7:42
Speaker 2: to do it if he wants.
7:44
Speaker 4: All right, Steve Matthew's economy reporter at Bloomberg News. Always
7:48
Speaker 4: a pleasure getting your take on all things when it
7:50
Speaker 4: comes to the trajectory of economic growth.
7:53
Speaker 1: Work.
7:54
Speaker 7: You're listening to the teenth Ken's a line program Bloomberg
7:58
Speaker 7: Markets weekdays at ten am. He's there on Bloomberg dot Com,
8:01
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8:04
Speaker 7: on demand wherever you get your podcast.
8:08
Speaker 4: Jessman and Smoon Foxman here in the Bloomberg Interactive Brokers studio.
8:13
Speaker 4: And on a day when you're looking at these bank
8:15
Speaker 4: earnings JP Morgan, Wells Fargo City Group all reporting this morning,
8:18
Speaker 4: especially if you're looking at GP Morgan revenue soaring to
8:21
Speaker 4: a record, really boosted by Fed interest rate hikes, and
8:24
Speaker 4: also looking over at Wells Fargo those earning more net
8:27
Speaker 4: interest income than analysts did expect it really helping giving
8:30
Speaker 4: a boost to the broader equity market this Friday. But
8:34
Speaker 4: who better to come in and speak with us and
8:36
Speaker 4: break down these latest earnings results from the big banks
8:39
Speaker 4: than Allison Williams, Senior Global Banks and Asset Manager Analysts
8:42
Speaker 4: with Bloomberg Intelligence. Thanks so much for joining us in studio. Allison.
8:47
Speaker 4: What's your takeaway once we got these first batch of
8:50
Speaker 4: big banks this morning?
8:51
Speaker 8: So I would say, obviously the net interest income upside
8:55
Speaker 8: at all the banks and the higher guidance, especially with
8:58
Speaker 8: respect to net interest income is positive, but I think
9:01
Speaker 8: it was sort of expected by investors. We when you
9:06
Speaker 8: looked at the run rate for these banks, you could
9:08
Speaker 8: tell that their previous guidance was a little bit conservative.
9:12
Speaker 8: I think the most impressive thing that we saw this
9:14
Speaker 8: morning with the twenty five percent return on tangible equity
9:16
Speaker 8: at JP Morgan. So that is helped by the interest income,
9:20
Speaker 8: also helped by the better capital markets. Business costs in
9:24
Speaker 8: line and provisions rising as we would expect with normalizing credit,
9:29
Speaker 8: and so across the banks we're seeing, you know, trading
9:32
Speaker 8: down a little bit but still normalizing within historically higher levels.
9:38
Speaker 8: Fees M and A is really the big head when
9:40
Speaker 8: they're as expected. Equity fees up a bit. We're seeing
9:45
Speaker 8: some green shoots there, but we still expect that fees
9:48
Speaker 8: are setting at a lower level, expenses basically in line
9:53
Speaker 8: where you know there is some higher severance adding to
9:56
Speaker 8: those costs, especially flagged by Wells Fargo. And then the
10:00
Speaker 8: provision side, we are seeing reserve building again Wells Fargo,
10:04
Speaker 8: which is the biggest commercial real estate lender adding related
10:08
Speaker 8: to office profit properties. That's not a surprise, it's an
10:10
Speaker 8: area that everyone's watching. And then that card growth really
10:15
Speaker 8: that we're seeing in the loans also means that banks
10:18
Speaker 8: are adding reserves.
10:20
Speaker 5: Well, we'll dig into some of the details there. But
10:23
Speaker 5: as as someone who is not as enmeshed in the
10:27
Speaker 5: banking nitty gritty, no, I think it's not something that's
10:34
Speaker 5: protectarly fantastic. As a finance reporter, however, I would I
10:38
Speaker 5: want you to rank a differentiate for me between JP Morgan,
10:43
Speaker 5: who shares up percent today, City Group down over one percent,
10:49
Speaker 5: and Wells Fargo somewhere in between. I mean, is that
10:52
Speaker 5: the ranking that we're seeing in terms of who's best
10:56
Speaker 5: who's worst in our earnings report out today.
10:59
Speaker 8: Yeah, so I would say JP Morgan again having the
11:02
Speaker 8: strongest quarter and they're they're in their best position for
11:07
Speaker 8: the long term, right, So they've been in this virtual
11:09
Speaker 8: virtuous cycle of spending on technology, that technology benefiting them
11:14
Speaker 8: with a competitive advantage, especially in business like deposit gathering
11:18
Speaker 8: and the global investment banking business. With regard to City Group,
11:23
Speaker 8: Jane Frasier really I think making all the right decisions there,
11:27
Speaker 8: but that's really a longer term story. I mean that
11:31
Speaker 8: that bank has been, you know, trying to sort of
11:35
Speaker 8: revitalize itself and fix some things for a significant period
11:39
Speaker 8: of time. One thing that they have in Commonwealth Fargo
11:43
Speaker 8: is that they're spending a lot of money on the
11:46
Speaker 8: regulatory and compliance side just to get things in order,
11:49
Speaker 8: and so City Group probably has the most opportunity for improvement.
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Speaker 8: I think they're delivering on everything that Jane has said.
11:57
Speaker 8: It's just a longer path with Fargo. So again I
12:02
Speaker 8: talked about the regulatory side of things in those claus,
12:05
Speaker 8: but they're I think, hope hopefully for Wells Fargo getting
12:09
Speaker 8: to the end of that journey. It's it's been certainly
12:12
Speaker 8: much longer than people have thought, but again, better net
12:16
Speaker 8: interest income. You know, card is a much smaller business
12:20
Speaker 8: for them, but they're you know, that's been in business
12:22
Speaker 8: that they're investing in and that's been paying off commercial
12:26
Speaker 8: real estate. As I said is they're the biggest lender there,
12:29
Speaker 8: so I think it's prudent that they're taking provisions related
12:32
Speaker 8: to the office, even though that's going to be a
12:34
Speaker 8: long story.
12:35
Speaker 4: Allison, I want to get your thoughts when it comes
12:37
Speaker 4: to banking regulation because we did hear from Fedvice Chair
12:41
Speaker 4: Michael Barr as you know, earlier this week talking about
12:43
Speaker 4: how there could be these potential regulatory changes in on
12:47
Speaker 4: GP Morgan's call this morning, Jeremy Barnum, the CFO at
12:50
Speaker 4: the bank, did receive a question about Basel three, asking
12:53
Speaker 4: about what kind of market consequences and CEO Jamie Diamond
12:57
Speaker 4: was actually warning about in his intro when he's did
13:00
Speaker 4: that these upcoming finalized rules, and Barnum actually did call
13:04
Speaker 4: some of the proposals quote excessive. So I mean, do
13:07
Speaker 4: you think regulators are listening and what is your kind
13:09
Speaker 4: of view of how the banks are thinking about these
13:12
Speaker 4: potential proposals.
13:13
Speaker 8: So I would say two things. So, first of all,
13:17
Speaker 8: I mean the proposals are a long time and coming.
13:19
Speaker 8: I think investors, managements, we all want to know what
13:22
Speaker 8: the rules are so we can sort of, you know,
13:26
Speaker 8: get on with with understanding what the final endgame will be.
13:30
Speaker 8: And that's sort of what they're called the Basil three
13:32
Speaker 8: endgame rules. That being said, we still have sort of
13:35
Speaker 8: this volatility of the ongoing stress tests, So that creates
13:38
Speaker 8: a lot of noise. But the second thing again you'll
13:42
Speaker 8: hear from bank managements and I think bank investors, is
13:45
Speaker 8: you know, the rules are designed to make banks safe,
13:48
Speaker 8: but what are the unintended consequences? How much lending is
13:51
Speaker 8: being pushed out of the system. It's no secret that
13:55
Speaker 8: private credit is really one of the fastest growing areas
13:59
Speaker 8: of asset management, and alternative managers are focusing on this
14:03
Speaker 8: area of the business. Traditional managers are buying into the business.
14:07
Speaker 8: And to the extent that this credit lending is being
14:10
Speaker 8: pushed outside of the banking system, you know that the
14:13
Speaker 8: risks don't go away. It just I guess it's where
14:16
Speaker 8: those risks are.
14:18
Speaker 5: Speaking of risks, one of them earlier this year was
14:21
Speaker 5: from that regional banking crisis, perhaps though it does seem
14:25
Speaker 5: to have dissipated to some degree. JP Morgan seeing a
14:29
Speaker 5: two point seven billion dollar gain in its first Republic purchase.
14:35
Speaker 5: What signals is some of the commentary that we've heard
14:39
Speaker 5: from these executives this morning, sending about you know, other banks,
14:43
Speaker 5: regional banks that are looking to report next week. You know,
14:46
Speaker 5: are there still concerns alive and well in that space,
14:51
Speaker 5: or have we gotten past that.
14:53
Speaker 8: I would say, if anything, perhaps the fears might be
14:58
Speaker 8: quelled a bit. There is, you know, certainly a differential
15:01
Speaker 8: between some of these big banks and some of the
15:03
Speaker 8: regional banks. But I think in general, what we saw
15:07
Speaker 8: even as early as April and with the first quarter
15:11
Speaker 8: reporting season, we did hear most bank management saying things
15:14
Speaker 8: had stabilized, and so we have seen that this quarter
15:19
Speaker 8: as the turmoil sort of subsided and deposits subsided. Investors
15:22
Speaker 8: obviously have focused on the cost of deposits. Those are rising,
15:26
Speaker 8: but again I think a little bit better than feared
15:31
Speaker 8: that we've seen at the big banks. I think one
15:33
Speaker 8: differentiator that we might see a key one for these
15:37
Speaker 8: big banks versus the regional banks is more on the
15:39
Speaker 8: loan side of things, because credit card is really a
15:43
Speaker 8: bunch bigger exposure for City Group, JP, Morgan Wellsbargo to
15:48
Speaker 8: a lesser extent, but still more than some of these
15:51
Speaker 8: regional banks. And what we are seeing is weakness and
15:53
Speaker 8: commercial and industrial balances, loan balances. We saw that in
15:58
Speaker 8: the FED industry data. We're seeing it at the banks,
16:01
Speaker 8: and that may weigh a little bit more on the regionals,
16:04
Speaker 8: and I think, you know, from a broader perspective, back
16:07
Speaker 8: to your point about the bank turmoil is we will
16:11
Speaker 8: be watching deposits. Are these bigger banks continuing to benefit
16:16
Speaker 8: or you know, have things pretty much stabilized for everyone.
16:19
Speaker 8: My guess is it's probably more of.
16:21
Speaker 4: The latter, and for the bigger banks. Next week we
16:23
Speaker 4: have Goldman and obviously Morgan Stanley Bank of America only
16:26
Speaker 4: about thirty seconds left. But what's the big thing you
16:29
Speaker 4: want to watch when it comes to those particular banks For.
16:33
Speaker 8: You know, for a Bank of America, pretty much the
16:35
Speaker 8: highlights I've hit, how is an interest income holding up
16:38
Speaker 8: their cost of deposits and C and I balances, But
16:43
Speaker 8: they might get some benefit from card Goldman and Morgan Stanley.
16:46
Speaker 8: We're really going to see the M and A weakness
16:49
Speaker 8: feed into those results in a negative way. We'll be
16:52
Speaker 8: looking for the equity green shoots. We'll be looking to
16:55
Speaker 8: see what happened with headcount and severance costs that sort
17:01
Speaker 8: of looks to the second half. And then you know,
17:04
Speaker 8: Goldvin Zachs has a few specific things that are going
17:06
Speaker 8: to damp their results, but we'll be looking at their
17:09
Speaker 8: trading to see how that share holds up. And then
17:11
Speaker 8: Morgan Stanley will be looking at the wealth business how
17:14
Speaker 8: the flows look. There's some seasonal issues, but hopefully better
17:18
Speaker 8: than improved from there.
17:19
Speaker 4: Great well. Alison Williams, Senior Global Banks and Asset Manager
17:23
Speaker 4: Analysts with Bloomberg Intelligence. Is always a pleasure having you
17:26
Speaker 4: join us there.
17:27
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17:30
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17:33
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17:45
Speaker 4: Just been in Simoon Foxman here in the Bloomberg Interactive
17:48
Speaker 4: Broker Studio. We're going to change things up next and
17:51
Speaker 4: talk about student loan forgiveness, and we're gonna have Janet Lauren,
17:55
Speaker 4: higher education finance reporter here with Bloomberg News joining us
17:59
Speaker 4: on zoom to talk talk about this and especially looking
18:01
Speaker 4: at the Biden administration set to forgive thirty nine billion
18:05
Speaker 4: dollars in student debt. This does come after the Supreme
18:08
Speaker 4: Court did strike down that broader debt forgiveness plan. So
18:12
Speaker 4: talk to us Janet about this and kind of break
18:15
Speaker 4: it down. What's the latest on this news here?
18:18
Speaker 9: Great, Hi, thanks for having me.
18:20
Speaker 10: So this is a little bit different than the what
18:23
Speaker 10: was being proposed that the Supreme Court shut down. This
18:27
Speaker 10: was sort of administrative changes to a longstanding program called
18:31
Speaker 10: income These are all income based repayment programs, and it
18:35
Speaker 10: targets borrowers who are having trouble paying off their loans.
18:38
Speaker 9: And the issue here is, you know, if you look
18:40
Speaker 9: and look at these income based repayment programs are kind
18:43
Speaker 9: of confusing that there's a lot of red tape you
18:46
Speaker 9: have to show you've made payments. And this was in
18:49
Speaker 9: some ways a little bit of a surgical strike updating,
18:52
Speaker 9: more of a technical requirement. And it's quite an effects
18:55
Speaker 9: quite a number of bar quite a higher number of borrowers,
18:59
Speaker 9: more than eight hundred thousand, and you know, it forgives
19:03
Speaker 9: thirty nine billion in student loans. But this isn't, you know,
19:06
Speaker 9: an automatic forgiveness. These borrowers have been making payments for
19:09
Speaker 9: quite a long time.
19:11
Speaker 5: Tell me about the impact of this in comparison to
19:15
Speaker 5: the broader plan that the Biden administration had tried to
19:18
Speaker 5: push through. Give me a sense of scale.
19:23
Speaker 9: So the whole federal student loan program we're talking about
19:27
Speaker 9: roughly one point seven trillion dollars, and that impacts everybody
19:32
Speaker 9: for decades who've been borrowing student loans. It also includes
19:35
Speaker 9: parents who've taken out parent plus loans. And that forgiveness
19:39
Speaker 9: would have given ten thousand dollars to borrowers twenty thousand
19:44
Speaker 9: if you had a PEL grant, which is aimed at
19:46
Speaker 9: low income students during college, and that was a one
19:49
Speaker 9: time forgiveness, and critics you know, said, you know, perhaps
19:53
Speaker 9: it's unfair to people who've already paid back their loans,
19:56
Speaker 9: but it also doesn't really fix the overall problem of
20:00
Speaker 9: college costs continuing to grow up, to go up and
20:03
Speaker 9: up and up. And this sort of a surgical strike
20:06
Speaker 9: really addresses a program that barrowars have been making payments
20:11
Speaker 9: for and income there's a bunch of income driven repayment programs.
20:16
Speaker 9: I think there may be as many as a half
20:18
Speaker 9: a dozen, and they're confusing, and you know, and this
20:22
Speaker 9: allows payments that people have made to count towards these forgiveness,
20:28
Speaker 9: which is twenty or twenty five years and these income
20:31
Speaker 9: driven payments are calculated based on your income. You have
20:36
Speaker 9: to reapply every year. You may not be paying anything.
20:40
Speaker 9: And as students start to think about repayment, which begins
20:45
Speaker 9: October first, they may want to learn more about these
20:48
Speaker 9: programs to see if they're eligible that they may not
20:50
Speaker 9: have to make any payment at all when the repayment
20:52
Speaker 9: plan starts in October.
20:54
Speaker 4: All right, Janet, So myself along with millions of others
20:57
Speaker 4: who have a student debt here if we want to
20:59
Speaker 4: figure out how we qualify, especially when it comes to
21:02
Speaker 4: a lot of these income driven repayment plans that you're
21:04
Speaker 4: walking us through. What's the best way to figure it out?
21:06
Speaker 4: Just call up your servicer?
21:08
Speaker 9: Well, good, great question. So the services are the ones
21:12
Speaker 9: that are going to be getting information about repayment. However,
21:16
Speaker 9: you could actually go right now to f S a
21:19
Speaker 9: Federal student aid and log on and go through the
21:24
Speaker 9: whole website and figure out what you might qualify for.
21:27
Speaker 9: There's a lot of information you could do now before
21:30
Speaker 9: you even hear from your servicer. So that's what I
21:34
Speaker 9: would recommend because the plans are kind of complicated they are,
21:38
Speaker 9: and bar wars just make it a big headache. Trying
21:40
Speaker 9: to understand it, but at least go through there. You know,
21:43
Speaker 9: look at the website, look at the plans and if
21:46
Speaker 9: you've never you know, there's something like seven or eight
21:49
Speaker 9: million people who've actually never made a payment because they've
21:52
Speaker 9: graduated from college in the last three three and a
21:54
Speaker 9: half years. Go into the student loan site register, get
21:59
Speaker 9: more information so you know exactly what you have. It's
22:02
Speaker 9: you know, if you if you're taking out a loan
22:04
Speaker 9: every year in college, you have chances are eight loans.
22:07
Speaker 9: They may all have different interest rates, and it's quite
22:09
Speaker 9: confusing to keep track of everything.
22:11
Speaker 4: Who do you think gets left out of this?
22:15
Speaker 9: Well, this particular program is for people who have already left,
22:19
Speaker 9: who've been already in these income driven payment programs, So
22:23
Speaker 9: they're aimed at struggling borrowers, people who maybe are underpaid,
22:27
Speaker 9: they haven't had jobs and h and that's who these
22:31
Speaker 9: are are aimed towards. You know, it's all going to
22:34
Speaker 9: depend again on your income. And if you sign up
22:37
Speaker 9: and just look at the at the department pages, you'll
22:40
Speaker 9: get a better sense of who who these are targeted for.
22:43
Speaker 5: Jennet, talk to me about how this fits into the
22:46
Speaker 5: overall bid administration plan looking forward about trying to forgive
22:53
Speaker 5: student debt. Are we going to see more piecemeal sort
22:56
Speaker 5: of developments at this after that unfavorable Supreme Court ruling
23:02
Speaker 5: or will we see is this just preparing us for
23:05
Speaker 5: a bigger push?
23:07
Speaker 9: Well, yes, you absolutely are going to see more of
23:09
Speaker 9: these because there are ways to sort of look at
23:12
Speaker 9: these these programs. In particular, in the press release that
23:17
Speaker 9: the Biden administration said out earlier today, they talked about
23:20
Speaker 9: forgiveness that borrowers have already received, such as forty five
23:25
Speaker 9: billion through people who've worked through the Public Service Loan
23:29
Speaker 9: Forgiveness program. That's a program where you make payments for
23:33
Speaker 9: ten years and you work in public service or nonprofit
23:37
Speaker 9: and you get forgiveness after ten years. But again, this
23:41
Speaker 9: has been a really complicated program. They've made a lot
23:44
Speaker 9: of changes to make it easier. I think before these changes,
23:49
Speaker 9: something like the number of people who got forgiveness were
23:51
Speaker 9: extremely low because it's again the keyword is it becomes
23:55
Speaker 9: very confusing. You know, if you switch jobs and you
23:58
Speaker 9: haven't signed up and you haven't and you know made
24:00
Speaker 9: all the changes, or your employer has it you made
24:03
Speaker 9: up qualified and then they also forgiven twenty two billion
24:06
Speaker 9: dollars for more than a million barrowers. Who were you
24:10
Speaker 9: cheated by schools or their schools? Right? And these are
24:13
Speaker 9: typically for profit colleges. And then you owed these thirty
24:16
Speaker 9: nine billion and you know it's not a small mound
24:19
Speaker 9: of money for loan forgiveness.
24:22
Speaker 8: Yeah, I think.
24:22
Speaker 4: Well, thanks so much for joining us. Janet Lauren, higher
24:26
Speaker 4: education finance reporter with Bloomberg News, joining us to talk
24:30
Speaker 4: about President Biden today announcing this another move when it
24:33
Speaker 4: comes to forgive student loan forgiveness.
24:36
Speaker 7: You're listening to the teenth Cancer Live program Bloomberg Markets
24:40
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24:43
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24:50
Speaker 4: Jessminton here with Simone Foxman in the Bloomberg Interactive Broker Studio,
24:55
Speaker 4: and I want to get straight to our next guest.
24:57
Speaker 4: Ifan Davitt, CIO at Monique joins us to talk about
25:02
Speaker 4: this week's inflation data. When we're looking at consumer CPI
25:06
Speaker 4: as well as producer prices along with the latest on
25:09
Speaker 4: the outlook when it comes to all things with markets
25:12
Speaker 4: and Investing. Thank you so much for joining us. I
25:15
Speaker 4: wanted to start off and just kind of get your
25:17
Speaker 4: view and your take of the latest market action today
25:20
Speaker 4: in the equity market on the back of these bank
25:22
Speaker 4: results and the earnings from JK. P. Morgan and others,
25:25
Speaker 4: when it comes to city that's dragging a little things
25:27
Speaker 4: a little bit lower. In the financial sector.
25:30
Speaker 11: Well, the financial sector has really probably not had the
25:33
Speaker 11: attention it deserves given what a hotbed of chaos it
25:37
Speaker 11: was in the first quarter, and towards the end of
25:39
Speaker 11: that it did seem that that regional bank crisis got
25:42
Speaker 11: swept under the carpet a little and it wasn't fully
25:45
Speaker 11: understood how that was going to ripple through the economy.
25:48
Speaker 11: So I think it's appropriate we saw in the last
25:50
Speaker 11: few weeks the significant write downs by the likes of
25:53
Speaker 11: Bank of America and just this bond market has taken
25:56
Speaker 11: its toll on bank stocks, and what we can see
25:59
Speaker 11: from the REAIS banking sector, it's just how exposed they
26:02
Speaker 11: are to quite a fickle consumer and depositor essentially when
26:05
Speaker 11: trouble starts to brew. So we've always suggested that it
26:08
Speaker 11: would take some time to really fully understand what kind
26:12
Speaker 11: of problems the banking sector was facing. And when we
26:15
Speaker 11: see these kind of very mixed picture coming out of banks,
26:18
Speaker 11: you know, certainly some we're seeing a bit of a
26:19
Speaker 11: pickup and some trading and assets are asset pools are
26:23
Speaker 11: growing thanks to equity markets. It's only natural that investors
26:26
Speaker 11: will start to try to dissect that pick and choose
26:30
Speaker 11: where the opportunities are. So I'd say, we're not seen
26:33
Speaker 11: the end of this banking crisis yet. So that's why
26:36
Speaker 11: it didn't surprise me that there's a little bit of
26:40
Speaker 11: I suppose, just a little bit of just a delay
26:42
Speaker 11: in terms of processing that's less exuberant than we might expect.
26:46
Speaker 5: Even so you're saying, not the end of the banking
26:49
Speaker 5: crisis yet, How do you expect to see this play
26:51
Speaker 5: out when we get some of the regional banks, some
26:54
Speaker 5: of the other banks come report their results next week.
26:58
Speaker 11: Well, certainly there is a lagging effect always in these
27:01
Speaker 11: bank results. We only know at the end of the
27:03
Speaker 11: quarter how deposits had moved, and we only know then,
27:06
Speaker 11: of course when what write downs if any, are being
27:09
Speaker 11: taken on a fixed income book. So with the FEDS
27:11
Speaker 11: looking set to continue its increase in rates, that's going
27:14
Speaker 11: to still put pressure on some of these securities holdings.
27:17
Speaker 11: This was perhaps an unintended consequence of the steepest rate
27:21
Speaker 11: rise trajectory we've seen in recent history, but it was
27:25
Speaker 11: not unanticipated. It should have been anticipated that this would
27:28
Speaker 11: take its toll somewhere after the bear market we had
27:31
Speaker 11: in bonds last year. So what I expect is and
27:33
Speaker 11: we can see that regional banks have seen no pickup.
27:36
Speaker 11: We've seen no bottom fishing almost whatsoever within those banks
27:40
Speaker 11: since the trouble started brewing back in February March. So
27:43
Speaker 11: I say that indicates that investors are very happy to
27:45
Speaker 11: send us sidelines when it comes to financials today and
27:48
Speaker 11: will remain on those sidelines. Is more than enough to
27:50
Speaker 11: attract them elsewhere in the equity sectors that are looking
27:55
Speaker 11: more promising out of more upside today. So I expect
27:59
Speaker 11: a very low level of enthusiasm around financials. And as
28:03
Speaker 11: far as what the regional banks are likely to come
28:05
Speaker 11: out with, I think it's going to be challenging. I
28:07
Speaker 11: think they may spin it in different ways, but it
28:09
Speaker 11: will be challenging.
28:10
Speaker 4: So then, how are you advising clients to position at
28:13
Speaker 4: this point? Where do you think they should put their money.
28:17
Speaker 11: We have always had a very it's almost like our
28:20
Speaker 11: message doesn't change. We talk about core exposures. We like
28:23
Speaker 11: to have exposures across growth and value segments. We like
28:26
Speaker 11: exposures that are international in flavor, that include emerging markets,
28:29
Speaker 11: develop markets X US, and of course a very strong
28:33
Speaker 11: core allocation to the US. None of that changes, so
28:36
Speaker 11: we're still quite keen on that, and I'd say what
28:38
Speaker 11: we're advising is to look at the underlove sectors. Everyone's
28:42
Speaker 11: talking about the top seven stocks today, those stocks that
28:45
Speaker 11: are really showing and lifting the market almost single handedly,
28:49
Speaker 11: those seven. Everything else is lagging and is very lack
28:51
Speaker 11: lust to year today. Since the numbers are better than expected,
28:55
Speaker 11: the consumer, the economy, everything's stronger than expected, we think
28:59
Speaker 11: that that good will should trickle down across sectors. So
29:02
Speaker 11: we'd expect that other sectors will start to participate more
29:05
Speaker 11: and more now. And they're therefore for our clients were saying,
29:09
Speaker 11: stay invested in core, stay balanced, don't neglect value. Look
29:14
Speaker 11: at the less perhaps exciting sectors today, less momentum, but
29:17
Speaker 11: around healthcare industrials, consumer staples, that's where we think the
29:21
Speaker 11: next leg of this rally will happen now.
29:23
Speaker 5: Even you mentioned healthcare there in addition to the fact
29:28
Speaker 5: that you are quite healthy. Have run a fun fact
29:31
Speaker 5: here our producer pointing out fifty one marathons.
29:34
Speaker 3: Amazing.
29:35
Speaker 4: Wow.
29:36
Speaker 6: So hopefully you.
29:37
Speaker 5: Do not have to rest on the services of the
29:41
Speaker 5: likes of United Health. The health insurer reporting today had
29:46
Speaker 5: talked up these these rising costs in it the potential
29:52
Speaker 5: for rising costs people going back and getting all the
29:56
Speaker 5: elective procedures that they had put off during the pandemic.
30:00
Speaker 5: What's your thesis there if healthcare is something that's among
30:03
Speaker 5: your winners sector wise.
30:06
Speaker 11: It's interesting there are certainly healthcare has undergoing transformation, just
30:10
Speaker 11: like many other industries, and certainly there may be this
30:12
Speaker 11: imbalanced post COVID of as you mentioned elective surgeries. I
30:16
Speaker 11: thankfully haven't needed anything were to be replaced yet, thank you,
30:18
Speaker 11: But I couldn't traveline if I continue beating the bidding
30:21
Speaker 11: the sidewalk. But so that that one is one thing
30:24
Speaker 11: that perhaps an anomaly that will work its way through.
30:27
Speaker 11: But with the advent of digital health, with more telemedicine
30:30
Speaker 11: and particularly AI, and nobody's really paying a huge amount
30:33
Speaker 11: of attention to just how much AI is going to
30:36
Speaker 11: transform the healthcare industry, transform the insurance industry. I've spoken
30:40
Speaker 11: about financials before. We focused on banks, but when you
30:42
Speaker 11: look at more broad financials, insurers are overall winners here
30:47
Speaker 11: in the current transsition to use of AI and bigger
30:51
Speaker 11: data because they can calculate with much more precision the
30:55
Speaker 11: risk involved in their insurance, and they can take this
30:58
Speaker 11: data and use it to do better underwriting. They do
31:00
Speaker 11: also have a certain amount of pricing power. As we
31:03
Speaker 11: all know, we're not exactly when it comes to negotiating
31:06
Speaker 11: our car insurance, our house insurance. We're not always in
31:09
Speaker 11: a position of strength. It's usually the insurers that have
31:11
Speaker 11: that pricing power. So they're saying really strong margins being protected.
31:16
Speaker 11: Digital health, of course, will ultimately drive costs down. If
31:19
Speaker 11: we can use our telemedicine, if we can have more
31:23
Speaker 11: control in the holder, in the patient of their health care,
31:27
Speaker 11: less reliance and expensive services, that trajectory is deflationary, we
31:32
Speaker 11: believe for healthcare. However, yes, in the short term there
31:35
Speaker 11: probably will be the spike, which is the post COVID
31:38
Speaker 11: reckoning that we're seeing in other sectors.
31:39
Speaker 4: To you brought up industrials, which I think is interesting
31:43
Speaker 4: because when you look at that particular group in the
31:45
Speaker 4: S and P. Five hundred, it's actually trading at records,
31:48
Speaker 4: and that's a particular group that, as you know, cyclically oriented,
31:52
Speaker 4: very tied to the health of the economy. What do
31:55
Speaker 4: you think this tells us about the trajectory of the
31:57
Speaker 4: equity mortgage as well as how that tie in to
32:01
Speaker 4: economic growth.
32:03
Speaker 11: Well, this is the economy that is proving to be
32:05
Speaker 11: surprisingly resilient, and I think it's really bucking many commentators
32:09
Speaker 11: expectations as to just when this recession, if whatever comes,
32:12
Speaker 11: will come. And in a way, it's almost an unbreakable economy.
32:16
Speaker 11: I wrote a piece today about how it is almost
32:18
Speaker 11: anti fragile to borrow Nasim Teleb's phrase in the sense
32:22
Speaker 11: that no matter what monetary policy or physical policy throws
32:25
Speaker 11: at it, the economy continues to be resilient. And I'd
32:29
Speaker 11: say that I've also been hearing that there is an
32:31
Speaker 11: unprecedented amount of capital on the sidelines on company balance
32:35
Speaker 11: sheets to be spent on capex. Ways in some ways
32:39
Speaker 11: it's compared to post war spending. Not only do we
32:42
Speaker 11: have this pent up demand for spending because there hasn't
32:45
Speaker 11: been much during COVID, but also things like the Inflation
32:48
Speaker 11: Reduction Act and the stimulus packages which are providing incentives
32:52
Speaker 11: to invest in those technologies that are tied to the
32:56
Speaker 11: transition economy. All of this bodes very well for ustrials.
33:00
Speaker 11: AI is going to require tremendous investment in facilities, in
33:06
Speaker 11: chemicals and stuff and batteries, et cetera, and that's all
33:09
Speaker 11: going to bode well. So this is the trickle down effect.
33:12
Speaker 11: The first layer has been in tech stocks, where you
33:15
Speaker 11: could naturally expect that we'd have more in terms of
33:18
Speaker 11: the in terms of the AI height cycle. But now
33:21
Speaker 11: it's going to actually be implemented and the investments are
33:24
Speaker 11: going to happen. And just like cybersecurity is a non
33:26
Speaker 11: negotiable part of a corporate spending trajectory, right now, we're
33:31
Speaker 11: going to see investments in technology non negotiable and that
33:34
Speaker 11: all bodes well for the component makers.
33:37
Speaker 5: Yeah, so looking beyond the semiconductors, the hot names, the NVIDIAs,
33:41
Speaker 5: you know, even we only have about thirty seconds here,
33:44
Speaker 5: but talk to me. We've seen some contradictory indicators, one
33:47
Speaker 5: of them being housing about where the future of the
33:50
Speaker 5: economy goes. Your quick thoughts, because we get some big
33:54
Speaker 5: numbers next week, what do you expect to see?
33:57
Speaker 11: Yeah, housing is it, as you said, a mixed indicator.
33:59
Speaker 11: We have the some of the highest mortgage rates we've
34:01
Speaker 11: seen in decades back to their peaks, but that doesn't
34:04
Speaker 11: seem to be biting the consumer. Many locked in their
34:06
Speaker 11: rates at lower levels. And we can also see this
34:08
Speaker 11: quite a mixed picture. We've seen the average price falling,
34:11
Speaker 11: but yet demand and housing starts rising, and that of
34:14
Speaker 11: course indicates how just how checkered this market is in
34:18
Speaker 11: that some of the hot segments say that the Nashville's
34:20
Speaker 11: of Florida that will actually be be quite strong. I'm
34:23
Speaker 11: here in the Midwest in Chicago, we might see some
34:26
Speaker 11: of our pricing a little softer. So it's going to
34:28
Speaker 11: be mixed, definitely. With the post COVID economy, we're still
34:32
Speaker 11: seeing a strong demand for people to live in those
34:35
Speaker 11: houses with those home offices. And I think within the
34:38
Speaker 11: real estate segment office is the sick six sector right now,
34:43
Speaker 11: residential is quite robust.
34:46
Speaker 5: Ethan, thank you for giving us such a broad outlook
34:49
Speaker 5: on so many sectors where we head with the US economy.
34:54
Speaker 5: We really appreciate it. That's Ethan deviit Cio at Moneta
34:58
Speaker 5: with AUM seven billion dollars, managing the money, looking at
35:03
Speaker 5: the markets, and some interesting thoughts there on housing, particularly
35:07
Speaker 5: as we head into a big week of data.
35:10
Speaker 7: You're listening to the tape can to our live program
35:12
Speaker 7: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,
35:16
Speaker 7: the tune in app, Bloomberg dot Com, and the Bloomberg
35:19
Speaker 7: Business app. You can also listen live on Amazon Alexa
35:22
Speaker 7: from our flagship New York station Just Say Alexa playing
35:26
Speaker 7: Bloomberg eleven thirty and our.
35:29
Speaker 4: Next guest, doctor Lisa Breno, who is the president of
35:31
Speaker 4: Defense Metals, who's discussing the significance of China banning rare
35:35
Speaker 4: earth exports and how it affects the US and production
35:39
Speaker 4: around the world. Joining us on zoom and please can
35:42
Speaker 4: you set the scene for us and explain why is
35:45
Speaker 4: China banning rare earth metal exports at this point?
35:50
Speaker 6: Thank you, Thank you very much for having me so.
35:55
Speaker 6: China has essentially said they are planning to pose export
36:02
Speaker 6: restrictions on some rare metals, specifically gallium and germanium, which
36:08
Speaker 6: are critical for semiconductor applications. To make chips effectively. So
36:14
Speaker 6: they have not yet imposed export restrictions on other rare
36:19
Speaker 6: metals such as earth elements, which we Defense Metals are
36:25
Speaker 6: planning to produce. Those are critical for applications for green
36:29
Speaker 6: applications like electric vehicles and wind turbines. But it seems
36:35
Speaker 6: that the fact that China is imposing some restrictions now
36:40
Speaker 6: on semiconductors, it is highly likely that they would have
36:46
Speaker 6: the power certainly and potentially they might also impose restrictions
36:52
Speaker 6: on rare earth.
36:53
Speaker 5: You know what's interesting here, as we've seen in the
36:55
Speaker 5: last couple of days according to a Shanghai metals market
37:00
Speaker 5: to report their researcher in the space, that there was
37:03
Speaker 5: sort of a rush for overseas buyers to buy up
37:06
Speaker 5: as much Chinese gallium as they could, and then that
37:10
Speaker 5: sort of dissipated. What's your take, what have you heard
37:14
Speaker 5: from folks that are looking to buy these sorts of metals.
37:20
Speaker 6: So usually these minor metals, they they are applied in
37:26
Speaker 6: small quantities. You know, the volumes of sales are also
37:30
Speaker 6: significantly lower compared for instance, with iron ore, which is
37:33
Speaker 6: in the billions of times, and and so they they
37:37
Speaker 6: tend to buy them and keep them in advance for
37:43
Speaker 6: for threes to six months or more sometimes and so
37:47
Speaker 6: probably that's what we saw. So they went in they
37:50
Speaker 6: with the news. They they some some some traders and
37:54
Speaker 6: some end users might have a stockpiled a little bit
37:57
Speaker 6: more to extend whatever, you know, stock else they already have,
38:01
Speaker 6: which led to an increase in the price of gallium,
38:04
Speaker 6: and now they might just perhaps sit back and see
38:08
Speaker 6: how this I guess right now a threat from China
38:13
Speaker 6: will play out, and how US and the rest of
38:16
Speaker 6: the world will respond to that.
38:18
Speaker 4: And when you're talking about these potential chip curbs, my
38:21
Speaker 4: ears perked up because as an equities reporter here at Bloomberg, obviously,
38:25
Speaker 4: if you look at the Nasdaq one hundred up more
38:27
Speaker 4: than forty percent, a lot of this was used to
38:30
Speaker 4: buy AI in recent months. Not just that, but also
38:32
Speaker 4: some margin when it comes to cost cutting pressures that
38:35
Speaker 4: have helped some of those companies. But when you think
38:37
Speaker 4: about AI in the companies you brought up ev makers
38:40
Speaker 4: and then these semiconductor type companies that obviously have a
38:43
Speaker 4: broad exposure overseas, what do you think this means for them?
38:47
Speaker 4: After this massive rally that we've seen, especially in the
38:50
Speaker 4: chip space.
38:52
Speaker 6: Well, it seems that there has been some issues with
38:57
Speaker 6: the supply of chips in the last couple of years,
39:00
Speaker 6: especially since since COVID so this export ban. Considering that
39:05
Speaker 6: China produces most of the galum in the world, I
39:08
Speaker 6: believe more than ninety percent. If if they will impose
39:12
Speaker 6: export restrictions, that means that many of these companies are
39:15
Speaker 6: not going to have access to the basic material that
39:20
Speaker 6: they need to make to make those chips. So that
39:22
Speaker 6: will lead to potentially an increase in prices for these
39:28
Speaker 6: chips and supply issues, and so it just will mean that,
39:33
Speaker 6: you know, the same problems we saw before. Automakers are
39:37
Speaker 6: not going to be able to make certain models, and
39:39
Speaker 6: and uh, you know, and folks and the tele communications
39:43
Speaker 6: smartphone smartphone producers and others might have a hard time
39:48
Speaker 6: producing their products.
39:50
Speaker 5: You know, we have some reporting out suggesting that these
39:54
Speaker 5: export controls could potentially backfire. Your take on that.
40:01
Speaker 6: Backfire for for China?
40:03
Speaker 5: For China, yes, that I suppose other countries will ramp
40:08
Speaker 5: up their production to the extent that they can that
40:10
Speaker 5: it may hurt trade overall. What's your take?
40:15
Speaker 6: I think China is more concerned about having access to
40:19
Speaker 6: advanced chips right now and and equipment that they need
40:22
Speaker 6: to make them as well than the supply of gallium.
40:27
Speaker 6: So I think they they understand that it will take
40:31
Speaker 6: time for the rest of the world to be able
40:35
Speaker 6: to produce the gallium and the gallium product products like
40:40
Speaker 6: gallium arsenide that we need for for for to make
40:45
Speaker 6: these advanced chips. So it is it will take time
40:48
Speaker 6: for the rest of the world to be able to
40:51
Speaker 6: ramp up production of gallium and then build the supply
40:55
Speaker 6: chain to be able to produce these finished products that
40:58
Speaker 6: are critical for semi conductors. So the situation for China
41:04
Speaker 6: is already critical for them as far as having access
41:06
Speaker 6: to this equipment to make chips, advanced chips, and the
41:13
Speaker 6: chips you know as well that there are produced in
41:15
Speaker 6: the Netherlands in the United States.
41:18
Speaker 5: Lisa, thanks so much for breaking this down for us.
41:22
Speaker 5: That's doctor Lisa Moreno, President of Defense Medals Corp, discussing
41:26
Speaker 5: the significance of some of these China moves, and interestingly,
41:30
Speaker 5: the OECD has warned that these expert restrictions may actually
41:33
Speaker 5: threaten the green transition. Very interesting stuff, as these China
41:39
Speaker 5: tensions with the US seem to ramp up.
41:42
Speaker 7: You're listening to the tape. Can's our live program Bloomberg
41:45
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41:48
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41:52
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42:00
Speaker 4: Jessminton and Simone Foxman here once again in the Bloomberg
42:04
Speaker 4: Interactive Brokers Studio. And I always love this segment, the
42:07
Speaker 4: c Suite Conversations, that really gets into the notes and
42:10
Speaker 4: bolts of especially when you think about what's going on
42:13
Speaker 4: with the Fortune five hundred. So, who want to get
42:14
Speaker 4: straight to our next guest, Tiger Tia Garajen, CEO of
42:18
Speaker 4: gin Pack, that's ticker Simple G for our terminal users,
42:21
Speaker 4: who's joining us in studio on this Friday, which is
42:24
Speaker 4: very exciting. Always great to have someone in the studio
42:26
Speaker 4: to discuss his company as well as AI's emergence. And
42:30
Speaker 4: I want to take a step back first to sort
42:33
Speaker 4: of show us the landscape of what your company does
42:35
Speaker 4: in who you work with, because I know you are
42:37
Speaker 4: working with a number of big Fortune five hundred companies.
42:41
Speaker 3: Great, thank you for having me here.
42:42
Speaker 12: And the way we would describe our company is a
42:45
Speaker 12: professional services firm that works with about three quarters of
42:48
Speaker 12: the Fortune five hundred companies. So think about a consumer
42:51
Speaker 12: goods company, a retailer, large banks, large insurance companies, and
42:54
Speaker 12: what we do for them is basically processing their finance,
43:00
Speaker 12: their precurement, their supply chain, the flow of information to
43:04
Speaker 12: make orders get delivered, to make inventory come down, to
43:09
Speaker 12: reduce cash flow requirements, to improve working capital, to reduce fraud,
43:14
Speaker 12: and insurance claims. We process insurance claims, we process insurance applications.
43:19
Speaker 12: That's the work that we do, and we do it
43:20
Speaker 12: in a very consolidated way. What then allows us to
43:23
Speaker 12: bring technology to improve the way it gets done and
43:25
Speaker 12: deliver better outcomes.
43:26
Speaker 5: So essentially the grunt work of doing a lot of well,
43:29
Speaker 5: well you know, I mean, it means that somebody does
43:33
Speaker 5: not have to sit there and open their email or
43:36
Speaker 5: we hear we've heard over the last earnings season, every
43:41
Speaker 5: time a CEO would say AI on an earnings call,
43:44
Speaker 5: it felt like, you know, suddenly the shares had popped.
43:46
Speaker 4: Or even Kroger mentioned it eight times, So not even
43:51
Speaker 4: just tech companies anywhere, and talk to.
43:53
Speaker 5: Me about what you've been hearing. When you've heard, you know,
43:56
Speaker 5: these executives talk about AI. Are they talking about stuff
44:00
Speaker 5: that is going to meaningfully impact and change their business today,
44:05
Speaker 5: tomorrow or perhaps the next year.
44:08
Speaker 3: So it's a great question, Simon.
44:09
Speaker 12: So the good news that for us is that not
44:12
Speaker 12: only do we listen to them when they come on
44:14
Speaker 12: to Bloomberg Radio and talk, but we actually meet them
44:19
Speaker 12: a lot.
44:19
Speaker 3: Because we serve them.
44:21
Speaker 12: And I would say, clearly, there is hype, so let's
44:24
Speaker 12: be clear, this is a hype. However it's real. And
44:28
Speaker 12: you know, the way I would think about it is
44:30
Speaker 12: that if you think about the cell phone and iPhone,
44:33
Speaker 12: if you think about the Internet, those were hypes but
44:36
Speaker 12: it did end up being real. So, like any hype,
44:39
Speaker 12: in the short term, I think we are overestimating its impact.
44:43
Speaker 12: But in the medium term, and the medium term could
44:44
Speaker 12: not be more than a couple of years, we have
44:47
Speaker 12: maybe underestimating the impact.
44:48
Speaker 3: And that's what every conversation with the CEOs say.
44:51
Speaker 4: Well, we're talking about overestimating the impact from what perspective
44:54
Speaker 4: as far as what about from a stock market perspective?
44:57
Speaker 4: When you've seen how much particular chip makers have moved
45:00
Speaker 4: move on a lot of this hype. Is that something
45:02
Speaker 4: that you think has been overdone or do you think
45:04
Speaker 4: it's more not from that perspective, but from maybe even
45:07
Speaker 4: more fundamental perspective.
45:09
Speaker 12: Yeah, I'm assuming that the stock market moves less on
45:11
Speaker 12: short term and more on long term. So therefore it
45:15
Speaker 12: might actually be the right move because computing needs, you know,
45:19
Speaker 12: therefore semi connective needs. Therefore power of all of that
45:22
Speaker 12: is going to the demand for that is certainly going
45:25
Speaker 12: to go up a lot. For our clients, it typically
45:28
Speaker 12: boils down to where's the biggest impact I can deliver
45:31
Speaker 12: and what do I need to make that happen. Clearly,
45:33
Speaker 12: large language models and AI models are very important, but
45:37
Speaker 12: guess what you need data, And if you talk to
45:40
Speaker 12: typical large enterprises, that data is distributed, it's fragmented, it's corrupted,
45:45
Speaker 12: it's not clean. So there's a lot of effort that
45:48
Speaker 12: needs to bring that together to then be able to
45:51
Speaker 12: build and feed the algorithms that then deliver great value.
45:55
Speaker 12: And I think most CEOs understand that. However, they also
45:59
Speaker 12: know that once they get that together, then it's real value.
46:02
Speaker 12: It's improving their revenue, it's improving their customer satisfaction, it's
46:07
Speaker 12: improving their ability to serve their customers on time and full.
46:10
Speaker 5: Is most of the work that you're doing on the
46:12
Speaker 5: back end from the company perspective, or is any of
46:16
Speaker 5: this as much of this and how much are you
46:18
Speaker 5: seeing this increase on the consumer facing end?
46:22
Speaker 12: So someone actually, interestingly, you know, our business about half
46:26
Speaker 12: of it faces the.
46:27
Speaker 3: Front of our client's businesses.
46:29
Speaker 12: So if you think about a retailer, large retailers placing
46:34
Speaker 12: an order for cheese or for chocolate, then how quickly
46:39
Speaker 12: can that order get delivered? Can there ort to be
46:43
Speaker 12: delivered not only quickly, but exactly the way it was ordered?
46:46
Speaker 12: And can you make sure that it gets delivered with
46:50
Speaker 12: a high degree of efficiency of delivery in terms of
46:52
Speaker 12: transportation cost logistics or by the way, these days, can
46:55
Speaker 12: you actually make sure that you don't burn up too
46:58
Speaker 12: much carbon when you're moving trucks across and how do
47:01
Speaker 12: you optimize all of that? How do you build algorithms
47:03
Speaker 12: and models that actually deliver that. Once you do that,
47:06
Speaker 12: the consumer goods company expects to be paid on time.
47:10
Speaker 12: So if you think about that whole cycle, that's all
47:13
Speaker 12: in the front end. When done well, everyone is thrilled.
47:17
Speaker 12: So this is about driving growth and customer satisfaction because
47:19
Speaker 12: then that cheese is available when the consumer walks into
47:22
Speaker 12: the retailer.
47:24
Speaker 4: I wanted to actually switch it up because I wanted
47:26
Speaker 4: to get your perspective on a key emerging market when
47:28
Speaker 4: it comes to India. That's something that we've discussed a
47:30
Speaker 4: lot on this program. What are your thoughts as for
47:33
Speaker 4: as just how big of a player that has been
47:36
Speaker 4: for a lot of especially big companies.
47:38
Speaker 12: It's huge for us from a talent perspective. Let's start
47:43
Speaker 12: with that more than forty percent of our talent, close
47:47
Speaker 12: to fifty percent of our talent is based on India.
47:52
Speaker 12: And that goes back to the history of the company
47:54
Speaker 12: when we were part of g when we set up
47:56
Speaker 12: this operation as an extension of GE to serve global
47:59
Speaker 12: g from India. Now we deliver those services from thirty
48:03
Speaker 12: five countries across the globe. So India is incredibly important,
48:05
Speaker 12: but so are many other countries. The talent pool is
48:08
Speaker 12: India is incredibly important as we go into the future.
48:12
Speaker 12: The fact that you have a younger demographic and when
48:15
Speaker 12: they come out, they are hungry to learn, and we
48:18
Speaker 12: are in a world where learning and reskilling is going
48:22
Speaker 12: to be the ticket to everyone's party. So we use
48:25
Speaker 12: that and leverage that for our clients, and our clients
48:27
Speaker 12: understand that there is a different perspective about India being
48:30
Speaker 12: a market itself and that demographic population creates a real opportunity.
48:34
Speaker 12: And the third one is how much can India becoming
48:37
Speaker 12: a manufacturer base to diversify out of just being focused
48:40
Speaker 12: on China.
48:42
Speaker 5: We have about a minute here. We've seen this dramatic
48:44
Speaker 5: one up and shares and things like Nvidia, the demand
48:49
Speaker 5: for semiconductors right now, it feels like an exuberance, but
48:53
Speaker 5: how significant do you think this will be having more
48:58
Speaker 5: semiconductors these put parts? Is the is the dramatic rally
49:04
Speaker 5: we've seen warranted.
49:05
Speaker 12: So again, I'll give you a longer term perspective some
49:07
Speaker 12: on because you know, I'm not here to predict and crystal.
49:09
Speaker 3: Ball, but your best sense, this is real, This is real.
49:14
Speaker 3: AI is real.
49:15
Speaker 12: AI will need computing power, AI will need data, a
49:18
Speaker 12: I will need change in organizations, a I will need
49:20
Speaker 12: reskilling of people. Anyone who's engaged in any of these
49:23
Speaker 12: topics is really going to create value for themselves, for
49:26
Speaker 12: their shareholders, for their customers, and actually to improve society.
49:30
Speaker 12: The fact that you can have people leverage education and
49:32
Speaker 12: healthcare at almost zero costs, which is going to become
49:35
Speaker 12: real overtime, is something to really look forward to.
49:38
Speaker 4: Well, thank you so much for joining us. It's such
49:40
Speaker 4: a great perspective to get things on not just emerging markets,
49:43
Speaker 4: but then also about whether AI is just hyper if
49:46
Speaker 4: there's more to it here. So really great to get
49:48
Speaker 4: your perspective as well as the Fortune five hundred companies
49:50
Speaker 4: that you work with.
49:53
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
49:56
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50:00
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
50:04
Speaker 1: at Matt Miller nineteen seventy three. And I'm fall Sweeney.
50:08
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50:09
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50:12
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