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Trump, Western Alliance, FedEx, and Apple · 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
0:06
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. All right, let's get
0:21
Speaker 1: the latest on this Trump indictment, the arraignment yesterday in
0:25
Speaker 1: Lower Manhattan. We're gonna roundtable listening today. Lisa Kamuso Miller,
0:29
Speaker 1: former Republican National Committee communications director and partner with Reset
0:33
Speaker 1: Public Affairs, joins us by phone, as does Bloomberg Washing
0:37
Speaker 1: correspond at Emily Wilkins, to discuss the indictment. Lisa, let's
0:41
Speaker 1: start with you here. What's the feeling in Republican circles
0:45
Speaker 1: about what took place in Lower Manhattan yesterday? Oh? Well,
0:50
Speaker 1: it's really hard to tell. I mean, this is so
0:51
Speaker 1: unprecedented and just so different from anything we've ever seen
0:54
Speaker 1: in the history of this country. I think, you know,
0:57
Speaker 1: there is a different point of view from a lot
0:59
Speaker 1: of different parts of the party, but ultimately the thought
1:03
Speaker 1: is that wherever happened yesterday in front of the world
1:07
Speaker 1: did nothing to bolster any support for Donald Trump from
1:11
Speaker 1: the Republicans that he lost in twenty sixteen. So he
1:14
Speaker 1: has a very core base of about thirty percent of
1:17
Speaker 1: the electorate on the Republican side that are still with him,
1:20
Speaker 1: regardless of how insane all of this really is. But
1:23
Speaker 1: there is just so much more to look at and
1:25
Speaker 1: unpack as this unfolds. But really, yesterday, I mean, the
1:28
Speaker 1: fact that he wants to run for office in twenty
1:31
Speaker 1: four but can go to mar Lago and yell from
1:34
Speaker 1: the microphone about how the fabric of the country is
1:38
Speaker 1: eroded and this is all fake and false is just
1:41
Speaker 1: to me. It's just totally in contrast with what the
1:43
Speaker 1: party at once, at one time stood for. But it
1:47
Speaker 1: seems like everybody in the party has gotten behind him,
1:51
Speaker 1: at least to call this this indictment political move right.
1:58
Speaker 1: I mean, we heard from Mitt Romney, who is no
2:00
Speaker 1: traditional fan of Donald Trump, he voted twice to impeach
2:06
Speaker 1: the former president, that this is overreached by Alvin Bragg
2:10
Speaker 1: and that this will damage the US judicial system. I
2:14
Speaker 1: guess you know, from from the Democrats point of view,
2:17
Speaker 1: Mitt Romney is as close to a voice of reason
2:19
Speaker 1: as a Republican Party has and he's calling out Bragg
2:22
Speaker 1: saying this is not right. Yeah, that's a real change
2:25
Speaker 1: in tone from him, and that was really surprising. But
2:27
Speaker 1: I suspect that part of it, too, is not necessarily political.
2:31
Speaker 1: But I think maybe what Romney is thinking behind the
2:33
Speaker 1: scenes is that it does. It's not necessarily about what
2:36
Speaker 1: Bragg has done, because I cannot believe that someone like um,
2:40
Speaker 1: like Dia Bragg would do anything but bring the strongest
2:43
Speaker 1: possible case in an instance like this. The difference here, though,
2:46
Speaker 1: is your republic Huh. At one point I was now
2:51
Speaker 1: I'm a little bit cot. I was confused. Well, I'm
2:55
Speaker 1: a never Trumper and there's no surprise about that, but
2:57
Speaker 1: I am still part of the Republican Party and I
2:59
Speaker 1: represent the side that's also more just confused by all
3:02
Speaker 1: of this. We're confused by this. But but this trend
3:05
Speaker 1: is not We're not going backwards here. That's the difference
3:07
Speaker 1: is that we're not going back to where we once were.
3:10
Speaker 1: We have to go through this, so we have to
3:12
Speaker 1: figure out as a party, as a country, how it
3:14
Speaker 1: is we're going to manage And because Trump is not
3:17
Speaker 1: going away, So it's more of a how do we
3:20
Speaker 1: figure out what it is that he's done to unlock
3:23
Speaker 1: this core of voters in the Republican side. So back
3:27
Speaker 1: to my point about Trump though, or excuse me about Romney. Romney,
3:30
Speaker 1: to me, if he is trying to unlock and talk
3:33
Speaker 1: about this in a way that he calls this political,
3:36
Speaker 1: he is most likely thinking that not only is the
3:38
Speaker 1: damage going to come from Trump, and the damage is
3:41
Speaker 1: going to be done in a way that will cause
3:44
Speaker 1: harm to the judicial system, it'll also cause a problem
3:48
Speaker 1: for any future case that will come because everything Trump
3:51
Speaker 1: is trying to do is this credit right, These all
3:55
Speaker 1: of these allegations about payments have been confusing to people.
3:59
Speaker 1: No one fundamentally understands why it matters. The truth is
4:02
Speaker 1: that he but everyone sort of agrees that it happened
4:05
Speaker 1: right in terms of the actual payments. Let me bring
4:08
Speaker 1: in Emily Wilkins from Bloomberg Government, Emily the senior statesman
4:14
Speaker 1: from Utah, and I mean, Mitt Romney is the one
4:17
Speaker 1: of the more statesman like people in the entire you know, uh, Senate,
4:22
Speaker 1: I think everyone would agree, he said, quote the prosecutors
4:26
Speaker 1: overreach that's a dangerous precedent for criminalizing political opponents and
4:30
Speaker 1: damages the public's faith in our justice system. Are there
4:34
Speaker 1: any statesman, you know, are then there any like legit,
4:38
Speaker 1: respectable senators Emily who have come out on the other
4:41
Speaker 1: side of this, I mean for Democrats absolutely, you certainly
4:46
Speaker 1: see them, you know, say that that, you know, encouraging
4:49
Speaker 1: what da brag has done here, uh, kind of going
4:53
Speaker 1: after Trump saying like, look, you know, if a potential
4:55
Speaker 1: crime was being committed, that they have the right to
4:57
Speaker 1: look into it. At the same point, I do think
5:00
Speaker 1: there is a sense in DC and on Capitol Hill
5:04
Speaker 1: that this is not the strongest case against Trump. I mean, remember,
5:09
Speaker 1: there are multiple cases that are looking into the former
5:12
Speaker 1: president right There's the one in Georgia that deals with
5:14
Speaker 1: the twenty twenty election and interference. There's the one in
5:18
Speaker 1: DC right now with the Special Special Council that's looking
5:21
Speaker 1: into the classified documents. And there's a sense that some
5:24
Speaker 1: of those are actually bigger concerns than any sort of
5:28
Speaker 1: mismanagement in bookkeeping or hush money payments. And so I
5:32
Speaker 1: think there's kind of and I will be interested to
5:34
Speaker 1: see how Mitt Romney responds when some of those cases
5:37
Speaker 1: are brought forward because if you look at the Republican
5:39
Speaker 1: Party right now on Capitol Hill, they are really done
5:43
Speaker 1: with the twenty twenty election. They're done with calls that
5:45
Speaker 1: it's fraudulent. They want to get past that and move
5:48
Speaker 1: past that. If you see another one of these indictments,
5:51
Speaker 1: they're going to have to confront it again. And I
5:53
Speaker 1: think for a number of them, you aren't going to
5:55
Speaker 1: see maybe as much support for Trump or as much
5:59
Speaker 1: blowback against uh. You know, whoever the DA is who
6:02
Speaker 1: brings the case forward. I mean this particular instance, it's
6:06
Speaker 1: really easy for Republicans, you know, when you ask them
6:08
Speaker 1: about Trump, when you ask them about the indictment, they
6:11
Speaker 1: will immediately change the channel to district District Attorney Alvin Bragg.
6:16
Speaker 1: You saw Kevin McCarthy yesterday, you know, really did not
6:19
Speaker 1: comment about Trump much at all. But when after Alvin
6:22
Speaker 1: Bragg saying he's attempting to interfere with our democratic process,
6:25
Speaker 1: that Congress will hold him accountable. This is really a
6:27
Speaker 1: talking point that everyone's so far been able to get behind. Lisa,
6:31
Speaker 1: you're the former communications director for the Republican National Committee.
6:35
Speaker 1: Has where has the Republican Party go gone in your
6:39
Speaker 1: in your opinion, I mean, is it gone to the
6:41
Speaker 1: Trump's party Trump wing? And is that permanent? I mean,
6:46
Speaker 1: where where did your Republican Party go? That's the million
6:52
Speaker 1: dollar question. Uh. You know the funny thing about all
6:54
Speaker 1: of this, and it's really not very funny that the
6:57
Speaker 1: one thing that now Publicans behind the scenes are trying
7:01
Speaker 1: to figure out is how how do they access how
7:04
Speaker 1: do they unlock the lockbox that Trump has figured out
7:07
Speaker 1: how to hold onto in that thirty percent, that sort
7:09
Speaker 1: of core voter pool that is with him. The difficulty, though,
7:14
Speaker 1: and Emily's point is absolutely right Capitol Hill is not
7:18
Speaker 1: They are not wanting to talk anymore about twenty twenty
7:21
Speaker 1: the leadership. There's a vacuum, right And the only thing
7:25
Speaker 1: that continues to draw attention and continues to hold onto
7:29
Speaker 1: those voters that are really hard the hardest to get
7:32
Speaker 1: to is Trump. So I think that more than ever before,
7:36
Speaker 1: Republicans are brightened to step up and stand up to him,
7:39
Speaker 1: and so they're happier to talk about Alvin Bragg And
7:42
Speaker 1: I mean, he's a He's become a household name over
7:45
Speaker 1: the course of the last couple of months and years,
7:48
Speaker 1: the party itself, though, is going to have to figure
7:50
Speaker 1: out how to carve their own message out and talk
7:55
Speaker 1: to the elector at that portion of the electorate that
7:57
Speaker 1: stepped away from Trump in sixteen or excuse me that
8:00
Speaker 1: we're with Trump in sixteen but stepped away from him
8:03
Speaker 1: in twenty twenty. Those are the voters. Those are like
8:05
Speaker 1: middle class voters that are They're desperate for support, They're
8:09
Speaker 1: desperate for help, they want to access the economy in
8:11
Speaker 1: a way. It's different. So all right, Lisa, thank you
8:13
Speaker 1: so much for joining us. Lisa's Camuso Miller partner, I
8:15
Speaker 1: Reset Public Affairs, and Emily Wilkins from a Bloomberg News
8:19
Speaker 1: joining us talking to us about this Trump in Diamond.
8:24
Speaker 1: You're listening to the Team Cancer Line program, Bloomberg Markets
8:27
Speaker 1: Weekdays and ten Amias Daring on Bloomberg dot Com, the
8:31
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8:33
Speaker 1: listening on demand wherever you get your podcast. We welcome
8:39
Speaker 1: now our Bloomberg TV viewers and radio listeners. The New
8:43
Speaker 1: York International Also show begins on Friday to help us
8:47
Speaker 1: prepare for its Jeremy pappin This On America's chairperson and
8:50
Speaker 1: Bloomberg's Matt Miller join us now, Matt, why don't you
8:54
Speaker 1: kick things off? All right? Thanks? You know what I
8:56
Speaker 1: would love to start with the IRA, Jeremy, And this
8:59
Speaker 1: is the Inflation and Reduction Act that we all struggled
9:02
Speaker 1: for so many months to understand. It's key because if
9:06
Speaker 1: you get it right, consumers automatically get a seventy five
9:10
Speaker 1: hundred dollars tax credit for buying your electric vehicles. But
9:14
Speaker 1: if you get it wrong, they get Bob kiss and
9:16
Speaker 1: you need the lower prices or given centis incentives. So
9:20
Speaker 1: what have you got that I can get seventy five
9:22
Speaker 1: hundred dollars off from Uncle sam on? And what are
9:27
Speaker 1: you planning on putting out that's gonna be IRA compliant?
9:32
Speaker 1: Good the good morning. Well today you've got a Nissan
9:35
Speaker 1: Leaf that fully qualifies for the seventy five hundred dollar
9:39
Speaker 1: tax incentive, and and you've got a Nissan Aria that
9:45
Speaker 1: fully qualifies for the commercial leaves under the forty five
9:50
Speaker 1: provision of the the IRA. So we've got two great
9:53
Speaker 1: offerings in the market today, and we think the IRA
9:58
Speaker 1: IS it's tremendous opportunity. The rules are clear now, the
10:02
Speaker 1: framework is established for several years, and the company is
10:06
Speaker 1: developing plants to be fully compliant with IRA. We will
10:10
Speaker 1: be uh producing a number of EVS from our Campton
10:15
Speaker 1: plant in Mississippi by the end of twenty twenty five
10:18
Speaker 1: and and those and those vehicles would be fully compliant
10:23
Speaker 1: with IRA. So I think we we welcome the IRA,
10:26
Speaker 1: the clarity and the and the and and what it
10:29
Speaker 1: means in terms of developing the EV demand and business
10:32
Speaker 1: in the in the USA. In terms of EVS, I mean,
10:35
Speaker 1: you did have the lead at one point. A lot
10:37
Speaker 1: of people forget that Nissan was a pioneer right with
10:41
Speaker 1: the Leaf and you still got that coming out. What
10:44
Speaker 1: are the higher end vehicles that you can produce here?
10:48
Speaker 1: You know, I've driven the QX sixty from Infinity, I've
10:50
Speaker 1: driven the QX aighty, fantastic vehicles, but they don't have
10:53
Speaker 1: the battery powered um uh sort of forward thinking power
10:59
Speaker 1: plant that that customers are going to need in ten years. Yeah.
11:04
Speaker 1: Look today again, it's it's Leaved that you mentioned. Is
11:07
Speaker 1: Aria area is packed with technology. It's a it's a
11:12
Speaker 1: it's an evy, so you get all the driving pleasure
11:14
Speaker 1: out of it. We've enhanced the E force, which is
11:18
Speaker 1: motion control, which provides you a sense of safety that
11:22
Speaker 1: you know is unprecedented. The connected services in the car
11:27
Speaker 1: is amazing. We've added a poor Pilot two point zero,
11:30
Speaker 1: which is some you know, safety feature, and the autonomous
11:35
Speaker 1: driving capability. So there's a lot of technology in an
11:38
Speaker 1: area today and that's that starts at forty three thousand dollars,
11:41
Speaker 1: so that's very competitive in the marketplace as well. Um
11:45
Speaker 1: and and the future. You know, Nissan is going to
11:48
Speaker 1: be launching about twenty seven new cars in the in
11:51
Speaker 1: the next seven years, nineteen of which will be full
11:54
Speaker 1: battery electric vehicles and most of which will come to
11:57
Speaker 1: the US. We'll have an EV in every market that
12:00
Speaker 1: is significant to the US customer. Jeremy, if I have
12:05
Speaker 1: range anxiety and I want to stick with a traditional
12:09
Speaker 1: combustion engine, what can you offer me? Are we moving
12:13
Speaker 1: away from that too quickly? Now? I think you know
12:17
Speaker 1: today the area is a three hundred miles EV already,
12:20
Speaker 1: and you know it's a it's a it's a very
12:22
Speaker 1: good range for the for the for the daily use
12:26
Speaker 1: and the most commonly used routes in the US. I
12:29
Speaker 1: understand the question and the charging experience. That's why the
12:33
Speaker 1: charging experience is so important, and that's why the efforts
12:37
Speaker 1: that are being put in place by private and public
12:40
Speaker 1: you know, funding to deploy charging infrastructure is so important
12:45
Speaker 1: because that's going to be critical to the to the
12:48
Speaker 1: to the ev experience of the of the customer. So
12:52
Speaker 1: I think it's it's a matter of of of the
12:55
Speaker 1: charging the charging network development. We at Nissan already have
12:59
Speaker 1: a very well established charging network throughout dealer network and
13:04
Speaker 1: thinking about technology of the future of the company is
13:07
Speaker 1: investing into all solid state battery, which will you know,
13:11
Speaker 1: double the power density, lower the charging time, definitely increase
13:16
Speaker 1: further the range. And so that's the future of breaks
13:19
Speaker 1: rain technology. The confidence in terms of the technology we're
13:22
Speaker 1: bringing and the breakthroughs means you know, in twenty thirty,
13:25
Speaker 1: we think ourselves of evs will largely exceed forty percent
13:29
Speaker 1: of ourselves. So there will be an answer for all. Okay,
13:37
Speaker 1: let's let's switch gears a little bit. I know you
13:39
Speaker 1: can't switch gears an electric vehicle, but nevertheless, we'll do it. Um,
13:43
Speaker 1: let's talk a little bit about where we are with
13:45
Speaker 1: the daaler network. Jeremy, a year ago, if I'd gone
13:48
Speaker 1: to the dealer network, The biggest concern would have been
13:50
Speaker 1: the available of availability of inventory, the availability of newcasts
13:54
Speaker 1: to buy. I wonder whether now the biggest concern that
13:57
Speaker 1: the dealer network has is the certain manificant rise in
14:01
Speaker 1: rates interest rates that we've seen over the last year,
14:04
Speaker 1: the fact the ECB everybody is raising rates right now,
14:07
Speaker 1: and I'm wondering what impact you see that having. It's
14:11
Speaker 1: a very good question. I think you're right that availability
14:15
Speaker 1: was an issue. It's less of an issue today, but
14:18
Speaker 1: still delier inventories are very tight at Nissan, so the
14:22
Speaker 1: market is clearly pulling. And today what we see in
14:27
Speaker 1: terms of the market demand is that it's it's exceeding
14:30
Speaker 1: the production that we have. And where we're seeing a
14:35
Speaker 1: change in terms of the interest rates having is people
14:39
Speaker 1: are shopping for entry segments. They're showing interest in the
14:44
Speaker 1: entry segments that perhaps was less there a year ago.
14:48
Speaker 1: For Nissan, it's good news because we've got a Versa,
14:51
Speaker 1: we've got a center, we've got a Kicks. All of
14:53
Speaker 1: those are very strong value for many offerings in entry segments.
14:58
Speaker 1: We have a very well established pres since great products.
15:01
Speaker 1: So the customer shopping shopping a Nissan that is shopping
15:06
Speaker 1: for a price point given where interest rates are as
15:09
Speaker 1: an answer in our product lineup today, you're just the
15:12
Speaker 1: product lineup today. Um, A lot of it is impressive
15:15
Speaker 1: to me. I love the z that's one that you
15:18
Speaker 1: can't make enough of, I'm sure. But Americans in general
15:23
Speaker 1: like bigger things like the q X eight, like the Armada,
15:27
Speaker 1: like the Titan, and that's scheduled um for ending production.
15:31
Speaker 1: What are you gonna do about the big truck big
15:34
Speaker 1: suv segment beyond say twenty twenty five. The Titan, the Armada,
15:41
Speaker 1: the q x X eight that you've mentioned, they're all
15:44
Speaker 1: very good business for us today. The large SUVs are
15:49
Speaker 1: clearly an area where we are meeting customer demand and
15:54
Speaker 1: determined to remain very relevant in the in the marketplace.
15:58
Speaker 1: So these are these are good. These are good the
16:01
Speaker 1: good segments for us in the works. Again, you can
16:05
Speaker 1: find that you can find all of those vehicles as now.
16:08
Speaker 1: But what about in twenty twenty six, I mean, aren't
16:10
Speaker 1: you going to end production of the Titan? Then the
16:15
Speaker 1: Titan again, is it's fully available today We're working on
16:20
Speaker 1: remaining very relevant in the marketplace, working on the solutions
16:25
Speaker 1: around the trucks, that are to world's electrification as well. So, um,
16:31
Speaker 1: the Titan as we know is, you know, is is
16:34
Speaker 1: meeting the customer and and and and we're working on
16:37
Speaker 1: what can come next. Guys, we'll wrap it up there.
16:41
Speaker 1: Really looking forward to the show, Jeremy. I'm sure Matt
16:44
Speaker 1: will be popping down to take a look at what's
16:46
Speaker 1: on offer. Jeremy, happened of Nissan And of course Bloomberg's
16:50
Speaker 1: one and only Matt Miller. You're listening to the tape
16:54
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16:57
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Speaker 1: Alexa play Bloomberg eleven thirty. You want to focus on
17:13
Speaker 1: Europe right now? Tomas and Nets, senior equity analyst. He
17:16
Speaker 1: covers the European banks for bloomerket Intelligence. He's based in London. Toomas,
17:20
Speaker 1: thanks so much for joining us here, framaut for us,
17:23
Speaker 1: what you think the risk could be for European banks?
17:27
Speaker 1: You know, we had Silicon Valley Bank here in the
17:29
Speaker 1: US and that kind of spook people got people focusing
17:31
Speaker 1: on the health of the banks. What's the concern about
17:33
Speaker 1: European banks and real estate? Hi, guys, thank you so
17:37
Speaker 1: much for having me. Yes. Well, first of all, Yes,
17:39
Speaker 1: as you mentioned, everybody is right now looking at commercial
17:42
Speaker 1: real estate. This is the asset which everybody's focusing. After
17:46
Speaker 1: SVB and crazy with drama. Everybody is trying to understand
17:48
Speaker 1: what is the impact of high elevated interest rates on
17:52
Speaker 1: highly leveraged the markets and commercial realistates take all the
17:56
Speaker 1: boxes unfortunately, and when we look at the European banks,
17:59
Speaker 1: we are then in fact that there's nearly one point
18:01
Speaker 1: four trillion of euros of cre loans on the balance
18:04
Speaker 1: street at the moment. It is spread across European markets, UK, France,
18:08
Speaker 1: Germany has the highest volumes. In terms of the exposure
18:12
Speaker 1: as the persentage of total loans, Nordic banks actually are
18:15
Speaker 1: screening the worst. They have more than ten percent of
18:17
Speaker 1: the total loans versus around six to seven for European banks.
18:20
Speaker 1: And in terms of the risk, of course, there is
18:22
Speaker 1: a risk of refinancing, there is a risk of higher rates,
18:25
Speaker 1: there is a risk of not repaying the debt on time,
18:27
Speaker 1: so which for the banks. Means we can create some
18:30
Speaker 1: imperment charges. Maybe there will be a right of even
18:33
Speaker 1: ever happening, but it's not going to happen over one quarter.
18:36
Speaker 1: If there's any stresses in the market, it's gonna take
18:38
Speaker 1: several quarters to play. But investors definitely want to understand
18:42
Speaker 1: who is most exposed, whose portfolio is most vulnerable, and
18:45
Speaker 1: how they will produce portfolio incoming quarters. What do we
18:49
Speaker 1: hear from regulators, what do we hear from the ECB?
18:52
Speaker 1: I mean, the concern here Tamash as you know, is
18:56
Speaker 1: that you know, the FED drop the ball or didn't
19:00
Speaker 1: do anything with the ball. So is it gonna be
19:04
Speaker 1: a different story in Europe? You know, that's very interesting
19:07
Speaker 1: because it SB has been looking into cre market already
19:10
Speaker 1: for a couple of years. I think in two thousand
19:12
Speaker 1: and eighteen they started to collect data from the banks
19:14
Speaker 1: on their explorer to the to the market. Sadly this
19:17
Speaker 1: data is not available for public maybe it will be
19:20
Speaker 1: right now, and it SB has had flagged already. Commercial
19:24
Speaker 1: real estate market is one of the vulnerabilities even before
19:27
Speaker 1: SB and courage with drama right, So definitely it is
19:30
Speaker 1: on the rather for the regulators. They may be looking
19:33
Speaker 1: into introducing some macropodential measures to ease the pressure for
19:36
Speaker 1: the banks, to ease the pressure to to to stop
19:39
Speaker 1: the financing maybe or make financing a little bit more safe.
19:42
Speaker 1: So definitely sb IT has will have to look into
19:45
Speaker 1: this more more carefully. And it's all about what's going
19:48
Speaker 1: to happen the interest racing coming months, right, whether they're
19:50
Speaker 1: gonna be raising or not, and what is the policy
19:53
Speaker 1: over there? And Toomas, I mean unlike here in the
19:56
Speaker 1: US or we have a lot of regional banks that
19:58
Speaker 1: you know, maybe not may not be to take the risk.
20:01
Speaker 1: Here in Europe, the real estate loans are from big,
20:04
Speaker 1: big banks. So does that limit kind of the risk
20:07
Speaker 1: a little bit or do they are you still concerned? Yes,
20:10
Speaker 1: as you mentioned it right right, No, for the biggest
20:13
Speaker 1: banks H S, B, C, BNP and the laws like that,
20:16
Speaker 1: it is around six to seven eight persons. For Nordics
20:19
Speaker 1: banks a little bit more, it's more than ten persons,
20:21
Speaker 1: so they are definitely more exposed. But also we are
20:23
Speaker 1: having we're having four Germans specialized banks which are just
20:26
Speaker 1: doing commercial realized state financing. They are quite small, not
20:30
Speaker 1: all of them are publicly publicly treaded so definitely there
20:33
Speaker 1: would be kind of the Canary mind, you know, there
20:35
Speaker 1: would be there, there would be bad way, Okay, what's
20:37
Speaker 1: happening with the market these banks, these banks are which
20:39
Speaker 1: are very much specializing only in creft financing. What's happening
20:43
Speaker 1: with those loans in the incoming quarter, in the reporting period.
20:47
Speaker 1: That would definitely be a providing as youthful information. What
20:51
Speaker 1: we can expect with other banks, all right, and we
20:53
Speaker 1: can also expect is to get some good news or
20:55
Speaker 1: good intelligence, good data. Bloomer Intelligence is holding an investor
21:00
Speaker 1: event on April twentieth talking about real estate, the Real
21:03
Speaker 1: Estate Summit twenty twenty three. Tell us about this uh
21:06
Speaker 1: conference you guys are having. Is it? Is it in London? Yes,
21:10
Speaker 1: it's based in London. It is organized by my colleagues
21:12
Speaker 1: from the real estate team. So definitely were gathering all
21:15
Speaker 1: the specialists in the market. It is it is second
21:18
Speaker 1: time we are organizing the even so a lots of
21:20
Speaker 1: market participants special will be there talking about actually what
21:23
Speaker 1: we are discussing at the moment, right, So definitely it's
21:25
Speaker 1: gonna be on agenda so very much, you know, inviting
21:27
Speaker 1: everyone who is interested in participating to learn more from
21:30
Speaker 1: the market experts from Bloomberg Intelligence team as well from analysts,
21:33
Speaker 1: from real estate specialists, to get the better understanding of
21:38
Speaker 1: what's happening with the office prices in UK, you know,
21:40
Speaker 1: in France and Germany, across all the capital cities. What
21:43
Speaker 1: are the expectations and how how this situation can play out?
21:47
Speaker 1: All right, really interesting, so that so all our friends
21:50
Speaker 1: in London they can check that out. Got to Bloomberg
21:53
Speaker 1: dot com. They'll have some got the conferences sectionary. He'll
21:56
Speaker 1: see some opportunities there to sign up for that. It's
21:58
Speaker 1: in conjunction with the European Public Real Estate Association, So
22:01
Speaker 1: Bloomberg Intelligence April twentieth in New York, Bloomberg Intelligence and EPRA.
22:06
Speaker 1: It's the real Estate Finance Summit twenty twenty three. So
22:10
Speaker 1: if you're in London, check that out, get the latest
22:12
Speaker 1: on the real estate business and perhaps you know the
22:15
Speaker 1: impact of the risks it means for some of the
22:18
Speaker 1: European banks, and clearly that is a global issue. US
22:22
Speaker 1: banks are being questioned and it's gonna be a real
22:24
Speaker 1: focus for when the bank's report earnings in the next
22:26
Speaker 1: couple of weeks. Is a lot of folks are going
22:28
Speaker 1: to be spending a lot of time focusing on the
22:30
Speaker 1: real estate exposure and maybe how they are reserved against that,
22:34
Speaker 1: and what some of the risks will be for real estate.
22:36
Speaker 1: So when the bank's report, it will be about deposits
22:39
Speaker 1: and in some of their loan portfolio. You're listening to
22:43
Speaker 1: the team cancer a live program Bloomberg Markets weekdays at
22:46
Speaker 1: ten am eastering on Bloomberg dot com, the I Heart
22:49
Speaker 1: Radio app and the Bloomberg Business app, or listening on
22:52
Speaker 1: demand wherever you get your podcast. We've got another guest
22:57
Speaker 1: in studio. It's just like back into the days before
23:00
Speaker 1: the pandemic and people would actually come into work, come
23:03
Speaker 1: into the office, come into the studio, and do this
23:05
Speaker 1: stuff live. We're gonna talk regional banks here. There's a
23:07
Speaker 1: lot to talk about. Obviously, we had the concern over
23:10
Speaker 1: the last several weeks of some of these smaller regional
23:12
Speaker 1: banks failing. That's obviously front and center. That spooked a
23:16
Speaker 1: lot of people about the overall banking industry. Now we've
23:21
Speaker 1: got an additional headwind, which is kind of real estate
23:23
Speaker 1: loans and how that may be an issue for some
23:26
Speaker 1: of the banks. So let's bring in Herman Channy covers
23:28
Speaker 1: the regional banks for Bloomberg Intelligence. He doesn't phone it in,
23:31
Speaker 1: he doesn't mail it, and he comes into the office,
23:33
Speaker 1: and we appreciate that he's in the studio here. Herman
23:36
Speaker 1: talked to us about when you talk to introditional investor
23:38
Speaker 1: clients these days, where are they in kind of the
23:42
Speaker 1: fear factor for the industry. Have we passed that initial
23:47
Speaker 1: panic that we had a few weeks ago and a
23:50
Speaker 1: little bit more rational out there? Maybe? Yeah, I think
23:52
Speaker 1: the panic has receded for the industry. You're right, but
23:57
Speaker 1: there are certain banks that are still in the cares
24:00
Speaker 1: of the market. We can point to Western Alliance today.
24:04
Speaker 1: But in terms of the industry itself, at least from
24:06
Speaker 1: the FED data that we look at, it does seem
24:08
Speaker 1: like the emergency bar rings from banks from the discount
24:12
Speaker 1: window and also the new bank term funding program, those
24:16
Speaker 1: have the client which I think is a positive sign
24:18
Speaker 1: that banks can manage their liquidity issues without needing to
24:21
Speaker 1: tap these emergency measures. All right, you mentioned Western Alliance
24:24
Speaker 1: stocks down fifteen percent today. What's the story there? Yeah,
24:27
Speaker 1: So Western Alliance came out with an updates yesterday after
24:32
Speaker 1: the market close and offered a bunch of interesting metrics
24:36
Speaker 1: in terms of the uninsured deposits. Sixty eight percent of
24:39
Speaker 1: their deposits are now insured versus fifty five percent a
24:43
Speaker 1: couple weeks back, so that's a positive sign. They also
24:46
Speaker 1: mentioned that they didn't tap the discount window at quarter end,
24:50
Speaker 1: so that seems like a positive sign. But interesting enough,
24:53
Speaker 1: they didn't give any disclosures on the amount of deposits
24:57
Speaker 1: on their balance sheet at quarter end, so the markets
25:01
Speaker 1: a bit spooked in terms of why they did disclose
25:03
Speaker 1: these numbers when they were pretty open about disclosing other numbers.
25:08
Speaker 1: So that's that's a number that gets disclosed by these
25:10
Speaker 1: companies in their quarterly filings typically, right, so they would
25:13
Speaker 1: disclose this when they report their earnings, which is in
25:16
Speaker 1: a couple of weeks. But they pre reported a bunch
25:19
Speaker 1: of other metrics, but not probably the most important metrics
25:23
Speaker 1: that investors are focused on now. So that's that's what's
25:26
Speaker 1: spooking the market. Investors are looking for a lot of
25:29
Speaker 1: data from the FED. Right, what do we see in
25:31
Speaker 1: terms of borrowing at the discount window and in this
25:34
Speaker 1: new facility. Yeah, so the discount window peaked two weeks ago.
25:40
Speaker 1: The disclosure went when the direct aftermath of spob um,
25:45
Speaker 1: those discount window borrowings have declined sequentially each week thereafter,
25:52
Speaker 1: and the new bank term program is a bit more
25:57
Speaker 1: generous in the way the borrowings work with the FED.
26:00
Speaker 1: So you're you're seeing those numbers go up, but the overall,
26:04
Speaker 1: if you combine those to the overall borrowings from the
26:07
Speaker 1: FED are coming down, which is a good sign. What
26:10
Speaker 1: are we seeing then, in terms of lending from these banks?
26:14
Speaker 1: You know, even if rates come down or frankly, whether
26:21
Speaker 1: they go up, it doesn't matter if banks aren't giving
26:23
Speaker 1: out loans right right, we can make the inference that
26:28
Speaker 1: if banks are seeing deposits go out the door, that
26:33
Speaker 1: there's probably less interest for banks to really ratchet up
26:38
Speaker 1: their their appetite to lend. I think that's really the
26:42
Speaker 1: issue for the overall economy that banks could probably have
26:47
Speaker 1: less willingness to to to increase their their lending because
26:51
Speaker 1: there there's not a lot of funding available to them
26:54
Speaker 1: at advantageous prices. So you're seeing funding costs rise, so
26:58
Speaker 1: that that inherently means that loan rates and borrowing rates
27:04
Speaker 1: will have to increase as well, and that could affect
27:08
Speaker 1: both the demand for loans and the supply of loans.
27:11
Speaker 1: So let's switch gears a little bit on the regional banks.
27:14
Speaker 1: Another potential headwind for the banks is real estate. And
27:19
Speaker 1: we were just talking to Thomas Nutzel Bloomber Intelligence. He's
27:23
Speaker 1: summarizing the risk for the European banks. How about for
27:25
Speaker 1: the regional banks here in the United States? Is there
27:28
Speaker 1: a concern? If so, what does the concern kind of
27:31
Speaker 1: circle around real estate? Right? So, commercial real estate is
27:36
Speaker 1: something that's become more and more of an issue. It
27:40
Speaker 1: was starting to percolate during the pandemic period when folks
27:45
Speaker 1: weren't going into the office and there was not a
27:48
Speaker 1: lot of travel, so hotel loans were another issue. It
27:52
Speaker 1: seems like now the focus is more on office than
27:54
Speaker 1: anything else because you're seeing these loans reach their maturity
27:59
Speaker 1: this year, next year, and the year after, and the
28:02
Speaker 1: cash flows of these office loans have really been challenged
28:05
Speaker 1: by less occupancy, less folks coming into the office, so
28:11
Speaker 1: the real estate has and square footage has really come down.
28:15
Speaker 1: The needs for those real estate square footage has come down,
28:18
Speaker 1: So all that means that there's less cash flow more
28:22
Speaker 1: in higher vacancies, meaning there's it's going to be a
28:25
Speaker 1: challenge for the folks that own these properties to refinance
28:30
Speaker 1: given that rates are higher and your cash flows are lower,
28:33
Speaker 1: so that something has to give. They either have to
28:35
Speaker 1: inject more equity into these loans or they may have
28:41
Speaker 1: to give the key back to the borrowers. So those
28:44
Speaker 1: are things where we're focused on and tracking, but it's
28:47
Speaker 1: going to be a longer term story that will play
28:49
Speaker 1: out over the next few years. So Herman, let's say
28:52
Speaker 1: a big client calls you up at the end of quarter.
28:54
Speaker 1: He says, listen, I gotta put a lot of money
28:56
Speaker 1: here into action. Which regional banks do I buy? You know, pick,
29:01
Speaker 1: pick your top three? What do you what do I
29:02
Speaker 1: want right now? Sure, you want a bank that has
29:06
Speaker 1: demonstrated the ability to manage interest rate risking. No, I
29:10
Speaker 1: mean I want the names of the banks. I'll give
29:12
Speaker 1: them to you now. So you look at the banks
29:15
Speaker 1: that have the track record. You can look at banks
29:17
Speaker 1: like PNC mnc US bank that have strong management teams,
29:25
Speaker 1: have managed risks pretty definitely over multiple periods, and they've
29:29
Speaker 1: been around the block, and they understand credit risk, they
29:32
Speaker 1: understand interest rate risks. So those are the ones that
29:35
Speaker 1: have been affected by this downturn in banks, then, so
29:38
Speaker 1: prices seem earlier reasons to repeat it slowly for those
29:42
Speaker 1: uh driving along, get out your pencil. PNC, US Bank,
29:47
Speaker 1: M and T and US Bank now full disclosure. Herman
29:51
Speaker 1: used to work at M ANDT in investor Relationshi is
29:53
Speaker 1: that's right? That's right. You own the shares. I do
29:57
Speaker 1: own some residual shares from some Oh thank god you
30:00
Speaker 1: got that out there. What if? What if you so
30:03
Speaker 1: you moved to Buffalo? I did. I moved from New
30:06
Speaker 1: York City to Buffalo for the role. Have you ever
30:08
Speaker 1: jumped on a table? I have broken it. That's what
30:13
Speaker 1: the Buffalo Bills do. Dude, Okay, you not see that?
30:17
Speaker 1: It's yeah, it's a It's something that Bills mafia fans
30:21
Speaker 1: do so but I haven't unfortunately, haven't had the opportunity
30:25
Speaker 1: to do that. But would love to go back and
30:28
Speaker 1: see a Bills game and partake in all those. I mean,
30:33
Speaker 1: they are die hard fans up there, and that's interesting.
30:36
Speaker 1: That's a good bank, quality bank. I usually use that
30:38
Speaker 1: as one of my kind of benchmarks for regional banks.
30:40
Speaker 1: And then P and C H Pittsburgh National Corporation or
30:44
Speaker 1: used to be P and D Pittsburgh National Bank. I
30:47
Speaker 1: think so some good stuff there, US Bank as well.
30:49
Speaker 1: All right, regional banks some issues, but they seem to
30:52
Speaker 1: have weathered at least the initial wave of concern that
30:56
Speaker 1: we saw several weeks ago, and now people are gonna
30:58
Speaker 1: be focusing on the banks when they report their quarterly
31:00
Speaker 1: earnings coming up, Herman Chan, thank you so much for
31:03
Speaker 1: joining us yet again. As we wind our way through
31:05
Speaker 1: this regional banks story, Herman Chann, he covers the regional
31:08
Speaker 1: banks from Bloomberg Intelligence. He joins us here in a
31:10
Speaker 1: Bloomberg Interactive broker studio as he is wanted to do.
31:15
Speaker 1: You're listening to the team cancer a live program Bloomberg
31:18
Speaker 1: Markets weekdays at ten am Eastern, Bloomberg dot Com, the
31:22
Speaker 1: I Heart Radio app, and the Bloomberg Business App. We're
31:25
Speaker 1: listening on demand wherever you get your podcast. Let's get
31:30
Speaker 1: right to our next guest, Dan Ives, Managing Director Senior
31:33
Speaker 1: Echo to analyst. He covers all the tech stuff for
31:35
Speaker 1: web Bush Securities. Dan, thanks so much for joining us again.
31:38
Speaker 1: We appreciate getting some of your time here. I want
31:40
Speaker 1: to start with there's a million ways we can go here.
31:42
Speaker 1: But I want to start with Tesla. It seemed like
31:44
Speaker 1: they had a good delivery number. I know there was
31:46
Speaker 1: a number of the people were looking at, but the
31:48
Speaker 1: stock markets not buying it over the past couple of days.
31:51
Speaker 1: What do you make of it? Yeah, I mean, look,
31:53
Speaker 1: this was obviously a lot of hype that we've seen
31:56
Speaker 1: in terms of what the stocks done this year post
31:58
Speaker 1: of price cuts. I view it as a strong number.
32:01
Speaker 1: I just think some of the bulls were hoping from
32:03
Speaker 1: more in terms of a bigger beat. And now this
32:06
Speaker 1: is sort of the drum roll into earnings April nineteenth
32:09
Speaker 1: to see what margins are doing. I think they're able
32:11
Speaker 1: to hold a line. I think this knee jerk is
32:13
Speaker 1: just sort of a sort of selling the news. We're
32:16
Speaker 1: buyers here on weakness. Yeah, it should be noted that
32:20
Speaker 1: the number was better than the street's estimate, so they
32:24
Speaker 1: beat Not only did they post record deliveries in the quarter,
32:28
Speaker 1: but they beat what the average estimate of analysts had suggested.
32:32
Speaker 1: They would post our analysts just you know, sandbagging them.
32:37
Speaker 1: Here's what's the story. Look, I think it's always hard
32:41
Speaker 1: to peg the number because of the price cuts. Because
32:44
Speaker 1: obviously since the price cuts that they did earlier this quarter.
32:48
Speaker 1: That's been a huge catalyst, specifically in China. So the
32:51
Speaker 1: numbers moved around a lot. And look, I think the
32:54
Speaker 1: big thing here is they are on a trajectory for
32:56
Speaker 1: one point eight million for the year in terms of units,
32:59
Speaker 1: and you look in the neighborhood of autos, it's still
33:03
Speaker 1: Tessa's world. Everyone else's paying rent. And I think that's
33:06
Speaker 1: what continues to stick out here despite this sella. Are
33:09
Speaker 1: the prices, you know, I mean the prices were too
33:12
Speaker 1: high obviously, that's why they cut them. But now that
33:16
Speaker 1: rates continue to climb, is it just unaffordable for too
33:19
Speaker 1: many people to cover that monthly nut? Yeah, Matt, I
33:23
Speaker 1: think here it's really they're trying to find the level
33:27
Speaker 1: where they could cut prices stimulate demand, but also mean
33:31
Speaker 1: team margins. It's a tight rope, especially in China. There's
33:35
Speaker 1: essentially i'll call Mini to monitor a price war breaking
33:38
Speaker 1: out at a time where the macro is still cloudy.
33:41
Speaker 1: And I think that's even though we're still in the
33:43
Speaker 1: second ending of the ev arms race GM others board,
33:47
Speaker 1: you know, for TESTA right now, this is it's a
33:50
Speaker 1: critical three to six months to put an iron fence
33:52
Speaker 1: around their installed these. So, Dan, with the price cuts,
33:57
Speaker 1: what does that do to the test a margin story,
34:00
Speaker 1: the profitability story. Well, they are uniquely positioned because of
34:05
Speaker 1: their scale globally that they're able to cut prices and
34:08
Speaker 1: some still have margins, you know, significantly above the industry,
34:13
Speaker 1: and I think that's going to be the narrative when
34:16
Speaker 1: they are port earnings in a few weeks. But the
34:18
Speaker 1: big question is will they have to cut more to
34:21
Speaker 1: stimulate demand? I think, look, it's mere term pain for
34:24
Speaker 1: long term gain because if they don't and just sit
34:27
Speaker 1: there and keep prices where they are, especially going back
34:30
Speaker 1: a few months ago, that would have been the wrong move.
34:32
Speaker 1: I think it's the right strategic polker move. The stocks
34:35
Speaker 1: obviously had a you know, a huge run from the
34:38
Speaker 1: bottom and now it's really what I've used for the
34:41
Speaker 1: next step in the growth story with China front and center,
34:44
Speaker 1: as just eed, arms race placed out globally, both in
34:47
Speaker 1: China as well as in the US and the three
34:49
Speaker 1: WIN three area code with GM and FOURD aggressively going
34:52
Speaker 1: after evs. So again, how do you think as your
34:57
Speaker 1: view of EV demand changed at all? Dan, I know
35:00
Speaker 1: there's some concerns out there when you see price cuts,
35:03
Speaker 1: that kind of calls into question what the ultimate demand
35:06
Speaker 1: is out there. Well, I think when you think a
35:09
Speaker 1: step back in the US, less than three percent of
35:12
Speaker 1: automobiles or evs, we weave that goes to ten percent
35:16
Speaker 1: in the next three years, So the demand story is
35:19
Speaker 1: going to be there. I think the issue really comes
35:22
Speaker 1: down to prices. Now the tax credit has come through,
35:25
Speaker 1: which is a positive, but that's really going to be
35:28
Speaker 1: the question in terms of competition. And I don't view
35:32
Speaker 1: it as a zero some game. I view this as
35:34
Speaker 1: just a mass of what I'll call green tidal wave
35:37
Speaker 1: that's going to benefit not just Tesla, the likes of
35:40
Speaker 1: GM for short plays like Goose and others, and in China,
35:43
Speaker 1: I think Neo is probably the one or with DYD
35:46
Speaker 1: that sticks out the domestic plays dan if If EV
35:51
Speaker 1: demand is that strong, if sales are as robust as
35:56
Speaker 1: you expect them to be, how on earth are we
36:00
Speaker 1: to power all of those vehicles? I mean, we can
36:03
Speaker 1: already not power the small amount of evs that sit
36:07
Speaker 1: in California today. What will we do if the inventory
36:12
Speaker 1: doubles or triples? You just now then, because that's the
36:16
Speaker 1: big issue in the Beltway because it's the carrot and
36:19
Speaker 1: the stink. You want to move to green, you want
36:21
Speaker 1: to move to evs need the utilities, need charging statitions.
36:25
Speaker 1: Just to give numbers, we have one hundred ten thousand
36:27
Speaker 1: charging statitions in the United States. We need five hundred
36:30
Speaker 1: thousand to get to twenty percent EV penetration. There's going
36:34
Speaker 1: to need to be a lot of government funding around
36:36
Speaker 1: this from a grid perspective and charging stations to ultimately
36:40
Speaker 1: build this out, especially when you have the biggest US
36:42
Speaker 1: automakers going fully ev GM over the next decade. Why
36:47
Speaker 1: do you think we don't see EV charging stations at
36:50
Speaker 1: every gas station? I mean, why don't the big raw
36:53
Speaker 1: duct Shell or BP or you know, Sonoco seventy six.
36:58
Speaker 1: Why don't they get on board. They've had years and
37:01
Speaker 1: years to do it, so it can't be a time issue.
37:04
Speaker 1: Are they fighting against it? Well, look, I think part
37:08
Speaker 1: of it is just the economic decision in terms of
37:11
Speaker 1: especially real estate. For every gas station you know that
37:13
Speaker 1: that are obviously owned by individuals, do they want to
37:16
Speaker 1: give that up? Doesn't make sense mathematically given what it
37:20
Speaker 1: looks like today in terms of EV as a penetration story,
37:23
Speaker 1: you clearly see more of that in China, more of
37:26
Speaker 1: that in Europe, and a lot of this hack contender.
37:29
Speaker 1: I mean, that's really the biggest you're fighting the tide here,
37:33
Speaker 1: but so far it's sort of a game of you know,
37:36
Speaker 1: roll call high stakes poker that they're playing. In so
37:39
Speaker 1: far for them, it's been the right decision because it's
37:42
Speaker 1: Tessa and the Supercharger network that is essentially built out
37:45
Speaker 1: within the US EV demand. Right. All right, Dan, let's
37:49
Speaker 1: switch gears because we can always switch gears with you
37:51
Speaker 1: and you pivot fine. Apple Bloombard BusinessWeek is the great story.
37:56
Speaker 1: Dan Mark German is out saying Apple looks beyond China
38:00
Speaker 1: in Bidjory make Cook's supply chains. In reality, can Apple
38:05
Speaker 1: diversify away from China in terms of its supply chain
38:08
Speaker 1: and if so, how long will that take? Well, German,
38:11
Speaker 1: you know there's Apple as well as anyone out there,
38:14
Speaker 1: look realistically, and it's part of why Cook was in
38:17
Speaker 1: China last week. I mean, that is the hearts and
38:20
Speaker 1: lungs of Apple, and they could talk to Game. But
38:23
Speaker 1: if they aggressively went after it in the next two
38:26
Speaker 1: years max, they can move five to seven percent production
38:29
Speaker 1: app of China now of course India, Vietnam and some
38:32
Speaker 1: other areas. But you know that is right now the
38:35
Speaker 1: tight rope for Apple because that is one of the
38:37
Speaker 1: key ingredients and their success in the geopolitical essentially cold
38:42
Speaker 1: tech board that's playing out. But Coopertina can percent politician,
38:47
Speaker 1: you know, in terms of what Cook's being able to do,
38:49
Speaker 1: and that's how they've been able to navigate this. So
38:54
Speaker 1: thinking about it here, I mean, if I'm an Apple,
38:57
Speaker 1: I'm you know, if I'm Apple, I'm happy. I gotta
39:00
Speaker 1: great story, great tailin But boy, my China risk is
39:03
Speaker 1: almost as large as it's ever been really, and it's
39:06
Speaker 1: not going away, is it. It's not going away? And
39:09
Speaker 1: but look if they if they decide to build production
39:13
Speaker 1: in New Jersey, those are going to be awesome thirty
39:15
Speaker 1: five hundred hour iPhones. And that's the problem is that
39:19
Speaker 1: to keep prices where they are key production. To look
39:22
Speaker 1: at this balance China is a hard and one. It
39:25
Speaker 1: is a geopolitical risk, and it's also why they have
39:28
Speaker 1: to navigate that. But also at peak iPhone, they're the
39:32
Speaker 1: second biggest employer within China. Beijing loves have an Apple
39:35
Speaker 1: and on the trophy Kese Dan what do you like
39:39
Speaker 1: that you know, Tom Keane talks about this bifurcation, the
39:43
Speaker 1: rich getting richer. It's the big profitable tech companies that
39:46
Speaker 1: have done so well in the first quarter, as you know,
39:50
Speaker 1: what are we missing in terms of the smaller companies,
39:53
Speaker 1: those that we haven't heard of, the you know, up
39:56
Speaker 1: and coming We would have once called them maybe unicorns
39:59
Speaker 1: or are possibly a little beyond that. But what do
40:02
Speaker 1: you see out there that you like that's not Apple? Yeah,
40:05
Speaker 1: I think it's Keen summarized so well. The strong will
40:08
Speaker 1: get stronger, and we've seen that in the first quart
40:11
Speaker 1: especially Microsoft Redman terms. I'm from a software perspective. I
40:16
Speaker 1: think it's really going to be it's smidcap and cybersecurity
40:19
Speaker 1: in cloud. I mean, there's your names like I look
40:22
Speaker 1: at names like data Dogs, Snowflake. You look at in
40:25
Speaker 1: cybersecurity names like CrowdStrike and others. I think that's where
40:29
Speaker 1: this first quarter. I view this as really the start
40:33
Speaker 1: putting more gasoline in this tech rally rather than something
40:36
Speaker 1: that I hear. All right, Dan, great stuff. Appreciate it
40:40
Speaker 1: as always. Dan. I'ves managing director and senior equity analysts
40:43
Speaker 1: for Webbush Securities were left checking in with Dan getting
40:46
Speaker 1: the latest on all things at tech. You're listening to
40:49
Speaker 1: the tape cancer our Line program Bloomberg Markets weekdays at
40:53
Speaker 1: ten am Eastern on Bloomberg Radio, the tune in app,
40:56
Speaker 1: Bloomberg dot Com, and the Bloomberg Business App. You can
40:59
Speaker 1: also listen live on Amazon Alexa from our flagship New
41:02
Speaker 1: York station just say Alexa playing Bloomberg eleven thirty. You're
41:08
Speaker 1: here to tell us about FedEx, which, by the way,
41:10
Speaker 1: so Chridy's always pushing the FedEx story. I think it's
41:13
Speaker 1: very important, but a lot of people don't don't want
41:16
Speaker 1: to hear it. Why not, I don't know, because this
41:19
Speaker 1: is riveting stuff. I'll tell you, this is more riveting
41:21
Speaker 1: than the Trump stuff. I gotta say. FedEx is an
41:23
Speaker 1: enormous This is tech. You just don't realize the subtle
41:27
Speaker 1: undercarn of online delivery. Can't imagine that's they're the logistic
41:32
Speaker 1: arms for everybody that's not Amazon. Well, Verry, I'm curious
41:34
Speaker 1: about you think about the FedEx story, because ultimately FedEx
41:37
Speaker 1: is seen as a spell weather naturally except the tropical
41:40
Speaker 1: trade eers. If volumes are going up, if people are
41:42
Speaker 1: spending FedEx stock goes up, except it now feels like
41:45
Speaker 1: there's a little bit of a change here because today
41:47
Speaker 1: I'll give you the news first is that they came
41:49
Speaker 1: out to an investor event at the New York Stock Exchange.
41:52
Speaker 1: They're increasing their dividend by ten percent. But they're merging
41:55
Speaker 1: two of their core businesses, their express business and their
41:57
Speaker 1: ground business. One is there kind of internal network, one
42:02
Speaker 1: is based purely on independent contractors basically for the consumer.
42:05
Speaker 1: One's more expensive postage than the other. Now they're combining
42:08
Speaker 1: them really to avoid some of the margin costs, which
42:11
Speaker 1: was mostly coming from labor, and that's why they're trying
42:13
Speaker 1: to kind of mesh the two. It's going to create
42:15
Speaker 1: four billion dollars in cost efficiency. The stock is rising
42:18
Speaker 1: off it. It's going to help their dividend appease some
42:21
Speaker 1: of their activist investors as well. But at the core
42:23
Speaker 1: of it, to me, it feels like a macro story
42:25
Speaker 1: because this bell weather that is really not about weather.
42:29
Speaker 1: Given the stock has been trading more off margins than
42:31
Speaker 1: volume or economic activity, is now really trading off of labor. Yes,
42:37
Speaker 1: and no, to start with, this is a thirty year
42:39
Speaker 1: trend that's been in the making of the shift in
42:42
Speaker 1: retail from physical stores to online or even just drop
42:49
Speaker 1: shipping and various sorts of app or third party sellers.
42:55
Speaker 1: You know, Instagram is a giant retailer, and FedEx gets
42:58
Speaker 1: to benefit because all the influencers who say I love
43:01
Speaker 1: this lipstick, Suddenly that lipstick sells out. So that's number
43:05
Speaker 1: one and then number two. Sometimes, you know, management looks
43:09
Speaker 1: at the logistics of what they're doing and to them
43:12
Speaker 1: to the end client. I don't care how the hell
43:14
Speaker 1: you ship this package. Send it by air, send it
43:17
Speaker 1: by truck. I don't care. I just want to get
43:19
Speaker 1: it from here to here in the least expensive way.
43:21
Speaker 1: And whether the client is the end consumer or the
43:24
Speaker 1: retailer themselves, hey, whatever you could do to keep our
43:27
Speaker 1: costs down so we can move product from here to there.
43:30
Speaker 1: If you have that as one division or two, who cares.
43:34
Speaker 1: And in fact, I suspect you're gonna pick up my
43:36
Speaker 1: package in a truck, take it to an airport, and
43:39
Speaker 1: then express it to wherever it goes. Whether that's a
43:42
Speaker 1: single division, multiple divisions, it doesn't matter to the retailer
43:46
Speaker 1: or the consumer. All right, good stuff, and Kritty, thank
43:50
Speaker 1: you for bringing the story to us. You've been consistent
43:51
Speaker 1: on this for the last several weeks, and then what
43:53
Speaker 1: we had is a good earnings. The company put out
43:55
Speaker 1: some good earnings, and then they put out some good
43:57
Speaker 1: cost cutting move raising a dividends. So it seems like
44:00
Speaker 1: they're getting themselves positioned. A lot of folks are saying, hey,
44:02
Speaker 1: maybe they're cutting costs because they sense a recession coming.
44:05
Speaker 1: So a couple of ways to look at this. Krittigupta
44:07
Speaker 1: covers all that good stuff. Stocks Force Markets correspondent for
44:11
Speaker 1: Bloomberg TV Radio News. She's pretty much everywhere. You're listening
44:16
Speaker 1: to the Team Cancer Line program, Bloomberg Markets weekdays at
44:20
Speaker 1: ten Amias Daring on Bloomberg dot com, the I Heart
44:23
Speaker 1: Radio app, and the Bloomberg Business app. We're listening on
44:26
Speaker 1: demand wherever you get your podcast. We did get some
44:31
Speaker 1: economic news today. The ism services ism came in weaker
44:35
Speaker 1: than expected, and we got the weaker manufacturing isms earlier
44:39
Speaker 1: in the weeks. And maybe this economy, like a lot
44:41
Speaker 1: of people have been saying for a long time, is
44:44
Speaker 1: in fact weakening and a recession is certainly in play.
44:47
Speaker 1: That could certainly hear those people talking about that a
44:50
Speaker 1: little bit more. But what does that mean for the
44:52
Speaker 1: credit markets. Our next guest has a thought or two
44:54
Speaker 1: on that. Roberta. Goss, Senior Managing director of Pretium Partners,
44:59
Speaker 1: joins us. Roberta. In a credit space, what are you
45:02
Speaker 1: seeing here versus maybe a some other you know, maybe
45:05
Speaker 1: twenty twenty or even you know, during some more challenging times.
45:09
Speaker 1: What are you see in a credit markets these days?
45:12
Speaker 1: Good morning. So we have seen in corporate credit really
45:18
Speaker 1: over the last three years ongoing continued volatility, which we
45:24
Speaker 1: expect to see continue over the next couple of years.
45:30
Speaker 1: By that, I mean, uh, you know, we are expecting
45:34
Speaker 1: an earnings recession, not one that's consumer led, and one
45:40
Speaker 1: that is impacting corporate earnings as a result of ongoing
45:45
Speaker 1: supply chain stabilization and labor costs that are really hard
45:53
Speaker 1: for management teams and companies to address. Still, as a result,
46:00
Speaker 1: we're seeing margin pressure across across corporates. But it's really
46:06
Speaker 1: a rolling set of opportunities and volatility that we expect
46:13
Speaker 1: to be prolonged over the next couple of years. So
46:17
Speaker 1: we're seeing I mean, the fault rates have been so
46:20
Speaker 1: low even during the pandemic. There's so so much liquidity
46:23
Speaker 1: pumped into the marketplace, But in your recession scenario, do
46:26
Speaker 1: you think that is going to increase going forward? Are
46:28
Speaker 1: we're going to see some real stress maybe in some
46:30
Speaker 1: of these credits. Yes. So last year we reached sort
46:35
Speaker 1: of very low levels, historic lows in default rates in
46:39
Speaker 1: the zero point five percent level. Our expectation we've already
46:46
Speaker 1: started to see default rates pick up the trailing numbers
46:50
Speaker 1: in the low two percent range, which is still below
46:53
Speaker 1: the historic average. But our expectation is that in twenty
46:58
Speaker 1: twenty three default rates will will rise to three and
47:02
Speaker 1: a half PERCENTUM, and then in twenty twenty four they
47:06
Speaker 1: will increase increase again to the four and a half
47:09
Speaker 1: percent level. At those rates, that puts us UM, you know,
47:16
Speaker 1: not at certainly not at the levels we experienced during
47:19
Speaker 1: the GFCUM, but close to the five year level that
47:25
Speaker 1: we saw during the oil issues oil and gas issues
47:32
Speaker 1: of twenty twenty or twenty sixteen, leading into uh, sort
47:37
Speaker 1: of some elevated default late rates in twenty twenty as
47:41
Speaker 1: a result of COVID. And does that put us into
47:45
Speaker 1: a credit crunch situation, because we've heard some FED speakers
47:48
Speaker 1: say that's a concern. Yes, we do think, um, that
47:53
Speaker 1: will uh you know, I think a month ago we
47:58
Speaker 1: would have said that this would have been a fairly short,
48:03
Speaker 1: uh you know period of recession. I think the banking
48:07
Speaker 1: volatility we've seen over the last several weeks, although that
48:11
Speaker 1: is stabilized recently, we think will result in tighter credit
48:16
Speaker 1: conditions over the next twelve to twenty four months. And
48:21
Speaker 1: as a result of that, we think that our default
48:25
Speaker 1: assumptions are are you know, base case right now? So
48:31
Speaker 1: if I how about if I want to go out,
48:33
Speaker 1: I mean, you know, I want to do a deal,
48:36
Speaker 1: I need some acquisition capital. I got go to my
48:38
Speaker 1: private equity partners, they pony us some equity. I go
48:41
Speaker 1: to my big banker in New York or LA or somewhere,
48:44
Speaker 1: and I'd look for a leverage loan. What kind of
48:47
Speaker 1: terms am I going to have? And how's that different
48:50
Speaker 1: from maybe a year or two ago. Yeah, So in
48:53
Speaker 1: twenty twenty one, you know, leverage loans and credit capital
48:59
Speaker 1: was freely available. UM. I would say that over the
49:03
Speaker 1: last six months that's certainly tightened in uh dramatically, And
49:10
Speaker 1: the main sort of underwriting banks, the large money center banks,
49:15
Speaker 1: UM are not as free to underwrite large LBOs and
49:22
Speaker 1: at very attractive levels. I'd say today, UM, if you're
49:27
Speaker 1: a PE sponsor coming with a with a new LBOUM,
49:31
Speaker 1: leverage levels are going to be dramatically lower than they
49:36
Speaker 1: were in twenty twenty one. Um. And uh, you know,
49:41
Speaker 1: pricing on leverage loans right now, if you just look
49:45
Speaker 1: at the average yield on the leverage Loan index, that's
49:49
Speaker 1: at nine and a half percent. So the impact of
49:54
Speaker 1: rising rates, in particular with live or now over five
49:58
Speaker 1: percent and spreads on loans over four percent, financing four
50:04
Speaker 1: LBOs and private equity sponsors has gotten quite expensive. I
50:11
Speaker 1: think that also results in you a question of how
50:15
Speaker 1: much PE sponsors are prepared to pay as a result
50:20
Speaker 1: of multiples on new transactions. Hi, Rebert, It thanks so
50:24
Speaker 1: much for joining us. Appreciate get an update there on
50:26
Speaker 1: the credit market. The leverage loan market, like most other markets,
50:30
Speaker 1: being impacted by the rapid raise increase in interest rates
50:34
Speaker 1: from the Federal Reserve over the past twelve to fourteen months.
50:36
Speaker 1: Rebert of Goss, Senior Managing director at Pretium Partners Here,
50:47
Speaker 1: thanks for listening to the Bloomberg Markets podcast. You can
50:50
Speaker 1: subscribe and listen to interviews of Apple Podcasts or whatever
50:54
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
50:58
Speaker 1: at Matt Miller in nineteen seventy three. And I'm fall Sweeney.
51:01
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
51:04
Speaker 1: can always catch us worldwide at Bloomberg Radio