'Bloomberg Surveillance Simulcast' Full Show 7/14/2022
>> EVERY DEVELOPED MARKET IS FACING THE SAME PROBLEMS IN TERMS OF HIGH INFLATION SLOWING GROWTH AND DECLINING REAL WAGES. >> THIS IS GOING TO AMP UP PRESSURE. IT'S GOING TO BE A TOUGH CALL FOR THE FED. >> LET THAT GENIE SURGE OUT OF THE BOTTLE TO QUICKLY, THE SHIFT TOWARD A BACKWARD LOOKING PARADIGM. >> THIS IS "BLOOMBERG SURVEILLANCE."
WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. JONATHAN: GOOD MORNING, THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO, ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ, I'M JONATHAN FERRO. FUTURES DOWN 1.4 PERCENTAGE POINTS. BONDS, FX? TOM: MORGAN STANLEY IS A SIDESHOW TO WHAT'S GOING ON IN THE MARKETS. WHERE MCDONALD WAS A TOUR DE FORCE. EM IS CATCHING UP WITH WHAT WE
SEE IN THE DEVELOPED COUNTRIES. THE IDEA IS THE EGYPT NINE YOUR PIECE IS DOWN 20 SOME PERCENT. SO WHAT? EXCEPT IT IS HAPPENING. IT IS BACK TO CHAIRMAN POWELL. JONATHAN: E.M. LIKE NEWS -- MOVES, WE HAVE THE INVERSION OF THE TREASURY MARKET. GOING BACK TO THE YEAR 2000.
THIS IS BIG STUFF. TOM: THAT IS EXACTLY RIGHT. SUDDENLY IT IS THERE AND WE'VE GOT TO GET THE FORMER DEPUTY GOVERNOR OF THE BANK OF CANADA OVER WHAT CANADA DID YESTERDAY. ARE THEY LEADING THE WAY FOR THE ADULTS IN THE ROOM? JONATHAN: THEY WENT 100, SHE WILL FOLLOW. LISA: THAT IS THE DISCUSSION, MARKET IS A ONE IN TWO CHANCE THAT THE FED WILL GO THAT WAY.
THE FED OFFICIALS WHO SPOKE IN SO FAR ARE NOT DOING ANYTHING TO DAMPEN SPECULATION. WE HEARD YESTERDAY BASICALLY CONFIRMATION FROM THE ATLANTA FED SAYING WE WILL DO WITH EVERETT -- WHATEVER IT TAKES. THAT IS WHAT WE HEARD FROM LAURA OF THE CLEVELAND SET. THEY ARE CONCERNED THIS IS A TERRIBLE CPI REPORT. JONATHAN: WANT TO MAKE SURE WE DON'T GET LOST IN THE 75 BASIS POINTS VERSUS 100 BASIS POINTS STORY.
IT HAS TO BE MUCH BIGGER THAN THAT. I PUT IT ON TWITTER THIS MORNING. IS THERE EVIDENCE FROM THE JUNE CPI REPORT THAT THEY WILL STICK WITH A BROADER AND WAIT LONGER? AND THE RISK FOR THE HIKING CYCLE OF THE YEAR. THERE ARE TWO CAPS IN THIS MARKET.
NUMBER ONE, YOU SAY THEY ARE GOING TO SAY IT THAT IS THE WORST OF IT. NUMBER TWO, SAY THIS IS STICKY, THE FED WILL HAVE TO DO MORE. THAT WILL SHAKE YOU ON THE MARKET AND THE FED IN A BIGGER WAY. TOM:
AND WHAT I WOULD DO AFTER RESEARCH ANALYSIS IS SUGGEST THAT THE PEOPLE FOCUS ON SHELTER, NOT SO MUCH SAYING THE OTHER SIDE IS WRONG BUT WHERE WE ARE MORE DATA-DEPENDENT NOW AND THAT DEPENDENCY, YOU SCARVES -- USED CARS MOVE BUT IT IS ABOUT SHELTER IN THE MARKET. JONATHAN: ON THE NASDAQ, DOWN .9%, THE EURO-DOLLAR A CLEAN BREAK OF PARITY FOR THE FIRST TIME SINCE 2002. HAVE A WEAKER EURO, A STRONGER DOLLAR, A RIPROARING U.S. DOLLAR THROUGH THE YEAR AND ON THE SESSION.
YIELDS UP THREE BASIS POINTS TO 296.16, AND WE MIGHT BE LOOKING AT THE 80'S QUICKLY ON CRUDE. WTI AT $94. LISA: IT IS SURPRISING GIVEN SOME OF THE CALLS FOR THE TIGHTNESS OF THE OIL MARKET, CONSIDERING THIS HAS BEEN A MAIN DRIVER OF INFLATION, HOW QUICKLY CAN IT COME DOWN TO ALLEVIATE SOME OF THESE PRESSURES AND IS IT ENOUGH GIVEN HOW BROAD-BASED THE CPI REPORT SHOWED THE INFLATIONARY WINS ARE TODAY? OR IS SPECIAL FOR YOU. JP MORGAN AND EARNINGS CALLS ARE GOING TO BE KICKING OFF THE Q2 EARNINGS SEASON. I WANT TO UNDERSTAND HOW JIMMY IS FACING A HURRICANE STATEMENT, AT A TIME WHEN THE GDP OF THE ALLEGED FED SHOWS A NEGATIVE READ FOR THE SECOND QUARTER. ARE WE LOOKING AT SOMETHING
SIMILAR ACCORDING TO JP MORGAN AND GRANULAR DATA? 8:30 A.M., WE GET INITIAL JOBLESS CLAIMS AND U.S. JUNE PPI. I AM MORE INTERESTED IN THAT THAN JOBLESS CLAIMS, AND ONGOING CURRENT READ TO GIVE SOME COLOR TO THE REPORT. HOW MUCH DO WE SEE THE
CONTINUING TO INCREASE AND INPUT COSTS, THAT WE WILL FEEL PRESSURE MARGINS AT A TIME WHEN WE ARE SEEING IT BECOME MORE SENSITIVE TO PRICE? 11:30 A.M., MICHAEL MCKEE WILL MODERATE A DISCUSSION WITH THE FED GOVERNOR, CHRIS WELLER. CURIOUS TO HEAR HOW HE TALKS ABOUT WHERE THE MARKET IS PRICING IN INTEREST RATES AT THE END OF THE YEAR. YOUR POINT, IT IS NOT ABOUT 100 BASIS POINTS OR 75, IT IS WHAT HAPPENS AFTER THAT AND AFTER THAT. RIGHT NOW, THE MARKET IS PRICING IN A 3.7% INTEREST RATE AT THE END OF THIS YEAR, BRINGING FORWARD SOME OF THE FORECASTS FROM EARLIER. JONATHAN: THAT IS THE BIG DEBATE ON WALL STREET RIGHT NOW. THANK YOU.
LOOKING FORWARD TO MIKE MCKEE SITTING DOWN WITH THE GOVERNOR LEADER. TURNING US IS THE PORTFOLIO MANAGER AT ALL SPRING GLOBAL INVESTMENTS. IT DOES COME DOWN TO THIS. DO YOU LOOK AT JUNE AS THE WORST OF US -- THIS OR THAT IT IS STICKY, THIS IS GOING TO BE WITH US LONGER AND THE FED HAS TO DO MORE? MARGE: I THINK WE ARE NEAR THE PEAKING OF THE CPI. YESTERDAY MAY NOT HAVE BEEN THE ABSOLUTE PEAK BUT IT SURELY WILL . I'M CONCERNED ABOUT THE FED FOCUSING ON HEADLINE INFLATION AND LOSING TRACK OF THE MOMENTUM AND AROUND THE WORLD, DISTRESS, EUROPE HAS BOTH PROBLEMS. I'M OF FAITH --
AFRAID THEY WILL CONTINUE THE PATH OF TIGHTENING INTEREST ON INFLATION AND THEY WILL DO REAL HARM TO THE ECONOMY. THAT'S WHAT I THINK THE STOCK MARKET IS TELLING US. TOM: YOU SAID AROUND THE WORLD, YOU ARE TOO YOUNG TO REMEMBER 1998. UNFORTUNATELY I REMEMBER IT AND THE CORRELATIONS CLICK IN. HOW FAR BEHIND IS AROUND THE WORLD, HOW FAR BEHIND IS THIS FROM WHAT WE ARE SEEING IN MAJOR THINGS WE'RE FOCUSING ON? MARGARET: I THINK THAT IS A GOOD POINT THAT WHEN BAD THINGS HAPPEN THEY TEND TO GET CLUSTERED AND HAPPENED ALL AT ONCE AND EVERYTHING IS CORRELATED DOWN. IT LOOKS AS IF WE ARE ON THE PRECIPICE WITH THE ASPECT OF WHAT THE FED IS GOING TO DO. I THINK IS HAPPENING MORE OR
LESS SIMULTANEOUSLY, EMERGING MARKETS HAVE HAD BIG PROBLEMS BUILDING FOR YEARS AND IT DID NOT MATTER UNTIL WE HAD A HUGE SPIKE IN BASIC COMMODITIES. EUROPE HAS ITS OWN PROBLEM, BUT GROWTH. THE MARKET IS REFLECTING ECONOMIC REALITY, NOT NECESSARILY WHERE RATES ARE. RATES WILL COME DOWN WITH INFLATION WITH A LOWER ECONOMY. LISA: BASED ON THE CPR REPORTS AND PERHAPS NOT WITH THE FED SHOULD BE FOLLOWING TO WHAT THEY ARE FOLLOWING, HAVE YOU CHANGED YOUR OUTLOOK ON RISK ASSETS? MARGARET: A LITTLE BIT, YES.
IT SEEMS IT'S GOING TO BE UNAVOIDABLE TO NOT HAVE A REAL EARNINGS SLOWDOWN. IT WILL BE INTERESTING THIS QUARTER. I THINK EARNINGS WILL BE SURPRISINGLY GOOD, BUT THE OUTLOOKS FOR THE REST OF THE YEAR MAY BE MUCH MORE GUARDED AND I THINK THE MARKET WON'T LIKE THAT. THE ECONOMY IS LOSING MOMENTUM, THE FED AGGRESSIVELY TIGHTENING AND LOOKING IN THE REARVIEW MIRROR, IT SEEMS LIKE THEY WANT TO REPEAT THE MISTAKE THEY MADE IN OTHER CYCLES. TOM: WHEN IT IS LIKE THIS, WHAT DO CFOS DO? DO THEY USE THIS AS AN OPPORTUNITY? MARGARET: THEY HAVE BEEN DOING THAT OVER THE LAST FEW YEARS, HAVE TAKEN ADVANTAGE OF THE INTEREST RATES. COMPANIES THAT DON'T NEED THE MONEY LIKE APPLE AND YOUNG COMPANIES HAVE AGGRESSIVELY RAISE CASH ON THEIR BOOKS SO THE BALANCE SHEETS ARE STRONG AND THEY WILL BE CUT OFF BY THE BANKS AND THEY CAN RIDE THROUGH A DOWNWARD STRIP -- DOWNWARD CYCLE IN THE ECONOMY. CORPORATE AMERICA LOOKS GOOD
BECAUSE THEY WERE DONE THAT. JONATHAN: MARGARET OF ALL SPRING INVESTMENTS, LET'S LOOK AT THE ITALIAN BOND MARKET. YIELDS UP 24 BASIS POINTS ON THE TWO-YEAR, 10 YEAR, A CONFIDENCE VOTE LATER IN ITALY AND THE PROSPECT OF THE ITALIAN GOVERNMENT COLLAPSING INTO A MASSIVE WEEK WITH THE ECB ON DECK AND NORTH TRIM ONE COMING BACK ONLINE, -- OTHERS COMING BACK ONLINE THURSDAY. TOM: WHAT IS THE RAMIFICATION OF DRAGHI'S -- IF HE IS NOT RENEWED TO ITALY? JONATHAN: THE UNKNOWN. IT TAKES OVER. THE ECB IS IMPORTANT WEEK BECAUSE WE'VE TALKED WITH THIS ANTI-FRAGMENT AND WHAT DOES THAT COME DOWN TO, SUPPORTING THE ITALIAN DEBT MARKET FOR MANY PEOPLE, THAT'S EXACTLY WHAT IT IS. LISA: AND IT'S ONLY THAT MUCH MORE CHALLENGING FOR THE ECB TO ASSESS THAT. WHEN YOU MENTION TO THE NORTH
TRIM REOPENING THAT WE ARE EXPECTING OR SCHEDULED, IT HINGES ON THIS. IT INDICATES HOW MUCH THE ECB WILL BE FORCED TO RAISE RATES, PRESSURING THAT DYNAMIC AND REMOVING SOME SUPPORT FOR THE ITALIAN BOND MARKET. TALK ABOUT THE BUTTERFLY EFFECT. JONATHAN: CAN YOU DEFINE WHAT IS A WARRANTED TIGHTENING OF FINANCIAL CONDITIONS WHEN YOU ARE RAISING INTEREST RATES AND WHAT IS A UNWARRANTED TIGHTENING? THE ECB GETS TO DECIDE. LISA: IF THERE IS -- IF THEIR VIEW IS INFLATION, IT'S WARRANTED. IF IT IS LONGER-TERM ECONOMIC PROSPERITY, THAT IS AN AGREEMENT. THERE'S A CONUNDRUM THE FED IS
STRUGGLING WITH. JONATHAN: I LIKE WHAT THEY HAVE SAID RECENTLY ABOUT THE FEDERAL RESERVE, THERE IS A FREE MARKET, WE CAN ALL TRY TO GET OUR HANDS AROUND THAT. THE CHAIRMAN HAS MADE A MOVE AND THEN PICKED A DATA POINT TO SUPPORT THE MOVE. HE DO THAT WITH THE PIVOT, HE SAID IT WAS DOWN TO THE ECI AND THAT IS THE DIFFERENCE BETWEEN 50 AND 75, IF YOU ARE DEBATING WHETHER WE GET 75 OR 100, IT IS WHATEVER. AT. TOM: I AGREE.
--JONATHAN: IT IS WHATEVER DATA THIS CHAIRMAN WANTS TO LOOK AT. TOM: I AGREE. I CANNOT STRESS ENOUGH HOW ARE THE MARKETS LOOK. THEIR MCDONALD'S ARTICLE IN ZERO HEDGE WAS A TOUR DE FORCE. THE EM ISSUES. JEROME POWELL AND THE CENTRAL
BANKERS OF THE WORLD. JONATHAN: WOULD YOU LIKE TO GET LARRY ON? TOM: I ALWAYS WANT TO TALK TO LARRY, BUT POWELL IS WITH THE OTHER CENTRAL BANKERS OF THE WORLD. THE OTHER THING IS THE BEHAVIOR OF THE JAPANESE YEN'S ORIGINAL, I'VE NEVER SEEN THAT. HOW DOES THIS CONSERVE CONTROL -- THE SEALED CURVE CONTROL MODEL WORK? LISA: FINAL WORD IS THAT EVERYONE HAS BEEN SURPRISED BY INFLATION AND CENTRAL BANKERS HAVE BEEN HUMBLED BY PAST MISTAKES AND UNDERSTANDING. THAT'S WHAT WE HEAR FROM HOW
THEY ARE READING THE INCOMING DATA. TOM: MY FINAL WORD IS ITS 768 MILES FROM FRANKFURT TO ROME. GOVER, DO ECB, GET ON AN ELEPHANT AND GO BACK DOWN.
JONATHAN: I WAS GIVING LISA THE FINAL WORD. TOM: WE TAKE AN ELEPHANT TO ROME. JONATHAN: I DON'T KNOW WHY WE TAKE AN ELEPHANT. DOWN 1% ON THE S&P. THIS IS BLOOMBERG. RITIKA: KEEPING UP-TO-DATE WITH THE FIRST WORD NEWS, THE FED MAY HAVE A HISTORIC 1% RAISE NEXT MONTH, ATLANTA FED CHAIR -- AFTER A RAISE OF 9.1% THROUGH JUNE WITH DEBT. THE FED IS MORE THAN LIKELY GOING TO HIKE BASIS POINTS BY MORE THAN 100 BASIS POINTS NEXT MEETING. A PROCESS THAT WILL DETERMINE
THE NEXT PRIME MINISTER, IT'S DOWN TO SIX FORMER CHANCELLORS, EMERGING AS THE FRONT RUNNERS. AT LEAST MOM -- ONE MEMBER WILL BE KNOCKED OUT AFTER THE VOTE. PRESIDENT BIDEN COMMITTING TO EXTENDING AN AGREEMENT THAT PROVIDES BILLIONS OF DOLLARS FOR THE ISRAELI MILITARY. THE PRESIDENT IS IN ISRAEL AND MET TODAY WITH THE PRIME MINISTER.
HE -- THEY ARE CALLING FOR THE EXTENSION OF THE AGREEMENT THROUGH 2028. A BIG-NAME CASUALTY FROM THE CRYPTOCURRENCY TRASH. A CRYPTOCURRENCY LENDING NETWORK HAS FILED FOR PROTECTION IN NEW YORK. MORE THAN $20 BILLION IN ASSETS, INTEREST RATES AS HIGHS 18%. IT WAS LAST MONTH IN THE MIDST OF A PANIC RUN BY CLIENTS. GLOBAL NEWS 24 HOURS A DAY, ON
AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. >> WE ARE MOVING TOWARD A 29% WITH THE NEUTRAL RATE. MY BELIEF IS WE NEED TO GO BEYOND THAT, WELL BEYOND THAT BECAUSE INFLATION EXPECTATIONS ARE HIGHER THAN 2% NOW. WE ARE GOING TO HAVE TO KEEP MOVING. JONATHAN:
THE CLEVELAND FED PRESIDENT WEIGHING IN AFTER THE CPI REPORT YESTERDAY EVENING. GOOD MORNING, HERE IS YOUR PRICE ACTION. DOWN 39 ON THE S&P, NEGATIVE 1.4% ON THE NASDAQ, 9/10--.9%. YIELDS A BIT HIGHER, CURVE INVERSION THE STORY. THE EURO-DOLLAR BREAKING PARODY YESTERDAY, A BREAK OF 139, MUNSTER MOVES IN FOREIGN EXCHANGE. BIG MOVES IN CRUDE, TOO. 93 HANDLE ON WTI. DOWN 2% ON THE DAY.
WE ARE DOWN MORE THAN 20% ON WTI. QUITE A MOVE. TOM: I'M GLAD YOU MENTIONED IT. WE ARE DOWN ALMOST $30 ON BRENT CRUDE. AN EXTRAORDINARY MOVE. WHAT DO YOU SEE IN EUROPE? GAS, HAS IT REALLY PULLBACK? IT IS STILL A CRISIS OF GERMANY. JONATHAN: IT COMES DOWN TO THE ECB AND ITALIAN POLITICS FOR GOOD MEASURE, IT IS MESSY. IT IS REALLY MESSY. TOM:
WERE GOING TO GO TO EMORY DURING DUTCH ANNMARIE HORDERN -- ANNMARIE HORDERN ABOUT THE TRIP TO THE MIDDLE EAST FOR PRESIDENT. I WANT TO START, THE JETTA IS NOT RIYADH. THE PRESIDENT WILL FLY DOWN THE RED SEA ON THE WESTERN SHORE OF SAUDI ARABIA TO THE COMMERCIAL HUB. WHAT WE OBSERVE WHEN HE LANDS AGENDA? -- LANDS IN JETTA? EMORY-- >> I BELIEVE THE LAST TIME HE WAS THERE WAS WHEN HE WAS PRESIDENT AND HAVING GONE A NUMBER OF TIMES, JETTA, RIYADH OR TORONTO, IT HAS CHANGED DRAMATICALLY. THE LAST TIME I WAS THERE WAS BEFORE LOCKDOWN, AND YOU CAN SEE THE SOCIAL CHANGES ON THE STREET.
I PROBABLY FEEL IT MORE ACUTELY AS A WOMAN. WHEN I WENT TO SAUDI I WORE A TRADITIONAL HEADSCARF AND DRIVES IN PUBLIC AND NOW YOU DON'T HAVE TO. SO THERE ARE MASSIVE SOCIAL CHANGES TAKING PLACE IN THIS IS THE DICHOTOMY OF MOHAMMAD BIN SALMAN AS A LEADER. IT IS VERY YOUNG, WOMEN ARE ENTERING THE WORKFORCE, MANY OF THEM OVER DRIVERS. ALL OF MY UBER DRIVERS WERE WOMEN LESSON I WAS THERE AND IT DOES NOT MEAN SOME THINGS WE WOULD LIKE TO SEE. BUT THEY HAVE HAD A LOT OF
HUMAN RIGHTS ISSUES, THE CRITICS AGAINST THE KINGDOM AND OF COURSE JOE BIDEN WHEN HE WAS CAMPAIGNING SAYING HE WAS GOING TO MAKE THE KINGDOM A PARIAH AND REVEALED INTEL REPORT SAYING THAT HE SIGNED OFF ON THE KILLING OF THE JOURNALIST. TOM: IS THE OIL PROSPERITY FILTERING DOWN TO THE PEOPLE OF SAUDI ARABIA? CAN WE SAY FOR THE PEOPLE IT IS A BOOM ECONOMY? ANNMARIE: WE CAN. CERTAINLY SO. THEY HAVE DONE WELL IN TERMS OF THESE HIGHER GAS OIL PRICES WE HAVE SEEN THEIR EXPORTING AN INCREDIBLE AMOUNT OF FOSSIL FUEL PRODUCTS. WE SHOULD NOTE THAT IT IS A VERY YOUNG ECONOMY AND IT IS WHY MOHAMMAD BIN SALMAN HAS ENVISIONED 2030. HE WANTS TO DIVERSIFY. THIS IS WHAT THE SAUDI'S WANT
TO TALK ABOUT OUTSIDE OF THE TRADITIONAL SECURITIES FOR OIL. THEY WANT TO TALK ABOUT INVESTMENT AND CLEANER TECHNOLOGIES. THEY WANT TO MAKE SURE THEY'RE KINGDOM IS BUILT FOR THE FUTURE. BECAUSE THEY HAVE A GROWING,
YOUNG POPULATION AND THEY DO SEE THE WRITING ON THE WALL THAT AT SOME POINT THE WORLD MAY BE MOVING AWAY TOWARD FOSSIL FUELS EVEN THOUGH WE ARE NOT FEELING THAT NOW. LISA: HOW MUCH IS PRESIDENT BIDEN WORKING IN COORDINATION WITH OLAF SCHOLZ OF GERMANY, AT A TIME WHEN NORSTROM ONE AND THE RESUME CLOSURE, THE QUESTION RATHER REOPENING IS THE DOMINANT STORY AND BECOMING AN INTERNATIONAL SECURITY AND ECONOMIC STORY, NOT ONLY FOR EUROPE BUT THE REST OF THE WORLD? ANNMARIE: DEMONSTRATION HAS BEEN FOCUSED ON THIS FOR MONTHS. THE PRESIDENT ENERGY WAS PRAYER COME THE SECURITY ADVISOR TALK ABOUT THIS LAST FALL. HE SAID EUROPE NEEDS TO GET SERIOUS WHEN IT COMES TO ENERGY SECURITIES OR THEY LIKELY POTENTIALLY HAVE ISSUES IN TERMS OF CONFIRMATION AND POTENTIALLY FREEZING. WE HAVE HEARD FROM EXECUTIVES, THE FRENCH EXECUTIVES TELLING CONSUMERS AND BUSINESSES NEED TO START RATCHETING BACK ON THEIR CONSUMPTION NOW. THE ISSUE IS THEY WANT TO BUILD
THESE STOCKPILES IN THE SUMMER BECAUSE THEY ARE WORRIED ABOUT THE WINTER. A LOT OF THIS AS JONATHAN SAID COMES DOWN TO NEXT WEEK AND NORDSTROM ONE. MUCH OF POLITICS IS PUTIN WILLING TO PLAY WITH ENERGY GIVEN THAT IT IS A LIFEBLOOD OF HIS ECONOMY? JONATHAN: GREAT TO CATCH UP. SHE IS WORKING WITH MY PRODUCER TO GET THE WORD ABOUT THE BANK OF AMERICA, THEY HAVE OBLITERATED THE YEAR-END FORECAST ON THE S&P 500.
3600 DOWN FROM 4500. THIS OFF THE BACK OF THE WORK OF MICHAEL WHO RUNS THE ECONOMIC TEAMS AT B OF A NOW, A RECESSION AT THE SECOND HALF OF THIS YEAR. THEY COME DOWN TO 4500 -- 230 600 FROM 4500, THEY POINT OUT 31% IS THE AVERAGE DECLINE AMID RECESSION. WE ARE LOOKING FOR SOME DOWNGRADES AND THERE IS ONE. TOM: THEY ARE GOING TO BE THERE AND THE PARTITION WHEN TIMES GET TOUGH IS PROFIT. WE WILL SEE THAT WITH JP MORGAN AND MORGAN STANLEY TODAY.
THE QUALITY OF THE PROFIT WILL BE INTERESTING. I'M FASCINATED TO SEE HOW MORGAN STANLEY DOES. THE WEALTH MANAGEMENT MARGIN IS LEGENDARILY WONDERFUL AND IT WILL BE INTERESTING TO SEE IF THEY SUSTAIN THAT. LISA:
MY TAKE IS THAT THE BIG DETERMINANT OF WHAT MAKES ABLE MARKET OR THE BEAR MARKET, GAINS VERSUS LOSSES IS WHAT MARGARET PATEL WAS TALKING ABOUT, THERE WAS A HOPE FOR THE SOFT LANDING TO BE FACILITATED BY A NATURAL ROLE OVER THE INFLATION DATA WHICH IS NOT HAPPENING. HOW MUCH ARE YOU GOING TO SEE THIS BE THE PIVOT POINT FOR THE DOWNGRADE VISIONS AND HOW MUCH OF THE CONCERN OF THE FOREIGN OUTLOOKS FOR COMPANIES THEMSELVES? JONATHAN: I SENT HIM A QUICK MESSAGE HE WILL JOIN US AND -- TOM: HIS PEOPLE SPOKE TO HIM? JONATHAN: I'VE SPOKEN HIS PEOPLE. LISA: MEETING HIM. JONATHAN: YES. TOM: IT IS SHORT, I CAN SEE MCDONALD DOING THAT. JONATHAN: WE WILL SEE. TOM: EVERYONE HERE IS WEARING A PATAGONIA. IN LONDON THERE DRESSING. JONATHAN:
I CAN'T SPEAK FOR LONDON IN THE WEEKEND, EVERYONE IS NAKED BECAUSE THEY HAVE EVER SEEN THE SUN BEFORE. I HATED. TOM: YOU GO FLIP FLOPS THOUGH? JONATHAN: I HATE THAT, TOO. TOM: I CAN SEE SHORTS AND FLIP FLOPS IN THE WINTER. THAT WOULD BE JONATHAN FERRO. I CAN SEE YOU WITH THOSE FLIP-FLOPS. I'M GOING TO GET SOME. JONATHAN: SHORTS AND FOOT FLOPS. THEY SHOP ALONG ANYWHERE ELSE. -- THEY DO NOT ALONG ANYWHERE
ELSE. JONATHAN: HERE COME THE DOWN TRADES IN A BIG WAY, EQUITY FUTURES NEGATIVE, 1.4 PERCENTAGE POINTS ON THE S&P. THE NASDAQ DOWN .8 OR .9%. BANK OF AMERICA FORECASTING A MILD RECESSION IN THE SECOND HALF OF THE YEAR. THE S&P 500 YEAR-END PRICE TARGET, 4500 DOWN TO 36. 3600. THAT IS ONE HELL OF A PRICE TARGET CUT.
THAT IS YOUR EQUITY STORY, HERE'S HER BOND MARKET PICTURE. TWOS INTENDS -- TWOS AND ATTENDS, MOST -20 BASIS POINTS. JUST OFF THOSE LOWS AT THE MOMENT WITH YIELDS HIGHER, THE 10 BY TWO, THE CHARACTER OF THE INVERSION YESTERDAY GOT MY ATTENTION. THIS SIMULTANEOUS POP INTO THE TWO-YEAR LOWER INTO 10 YEAR YIELDS AND IT'S CLEAR WITH THE BOND MARKET PITCH WAS SPEAKING TO. LISA: AND THE 30 YEAR OPTION WE WERE TALKING ABOUT YESTERDAY WAS UNPRECEDENTED IN THE SMALL SHARE BONDS DEALERS TOOK DOWN.
INDIRECT BIDDERS TOOK DOWN A RECORD PROPORTION OF THESE. THE DEMAND IS REAL. PEOPLE HAVE CONFIDENCE WE WILL GET BACK TO INFLATION, LOW GROWTH, BUT HOW WE'RE GOING TO GET THERE IS WHAT HAS CHANGED AND IT IS NEAR TERM, FRONTLOADED RATE HIKES JONATHAN: BY THE FEDERAL RESERVE. JONATHAN:--BY THE FEDERAL RESERVE. JONATHAN:
THE DOLLAR-YEN HAD A LOOK AT 139 EARLIER, 130 894. THAT HAS HAD A ONE PERCENTAGE POINT MOVE TODAY. DOLLAR STRENGTH, THE EURO-DOLLAR HAS NEW PROBLEMS.
NEGATIVE BY ABOUT A THIRD OF 1%, YOU CAN THROW ITALIAN POLITICS INTO THIS. A TOXIC RECIPE FOR EUROPE. TOM: I AGREE, THAT IS THAT THERMOMETER OF WHAT MADAME LAGARDE HAS TO DEAL WITH, BUT WE HAVE MOVED BEYOND JUST FOCUSING ON EUROPE. WHAT IS DIFFERENT WITH YEN WEAKNESSES IS THIS IS GLOBAL. JONATHAN: FOR THE ECB NEXT WEEK, WHAT DO YOU THINK THEY SHOULD DO? PEOPLE EXPECT 25, WE'RE LOOKING AT THE MESS WITH NORDSTROM ONE.
IF YOU ARE IN THE -- IF I WAS IN THE NEWS CONFERENCE NEXT WEEK, I WOULD ASK WHAT DOES THE RATE HIKE TODAY ACHIEVE? TOM: I WOULD SAY TO CHRISTINE LAGARDE, KEEP EVERY BIT OF DEGREES OF FREEDOM OPEN. THE WORD SHE WOULD USE IS OPTIONALITY HAS TO BE TREASURED HERE BECAUSE IT IS VAPORIZING RAPIDLY WITH DIMINISHED DEMAND AND DIMINISHED ECONOMIC GROWTH. JONATHAN: WHAT IS OPTIONALITY AND THE OTHER IS GRANULAR SOME? DO YOU LOSE THE SECOND WORD? TOM: THE POLITICAL CALCULUS IS SO DIFFERENT. OTTAWA IS NOT FRANKFURT. JONATHAN: YOU EVER BEEN TO OTTAWA? TOM: I HAVE NEVER BEEN. I ALMOST WENT ONCE. I WAS POSTED GIVE A SPEECH. IT WAS TOO COLD. JONATHAN: AND LISTENING TODAY. ARE WE DONE-- TOM:
ARE WE DONE? JONATHAN: WE ARE. TOM: JOINING US NOW, GERARD CASSIDY WITH RBC MARKET. WHAT IS THE DISTINCTION AS WE BEGIN WITH JP MORGAN HERE IN 12 MINUTES? GERARD: THE DISTINCTION WILL BE THE FOLLOWING. YOU WILL SEE STRONG REVENUE, THE ENERGY DUE TO THE RISE IN INTEREST RATES WE HAVE SEEN OVER THE LAST THREE TO SIX MONTHS. YOU'RE ALSO GOING TO SEE A BIG FOCUS ON CREDIT QUALITY.
THAT IS THE CONCERN EVERYBODY HAS ABOUT THE BANKS. THAT IS WHAT IS WEIGHING ON BANK STOCKS, THE CONCERN OF CREDIT QUALITY GOING INTO AN ECONOMIC SLOWDOWN OR RECESSION. THIRD, INVESTMENT BANKING RESULTS. YOU HAVE SEEN THE NUMBERS SO FAR. THEY HAVE BEEN WEAK THIS YEAR IN THE INVESTMENT BANKING BUSINESS. JONATHAN: WE GET THE MICROPHONE UP. WHAT WE HAVE HEARD OVER THE LAST FEW WEEKS OF JAMIE DIMON IS THIS HURRICANE WAS COMING. I WONDER IF YOU EXPECT TO SEE
THAT IN UNDERWRITING STANDARDS, THAT IS ALL FOR MANY OF THESE BANKS? GERARD: IT IS GOING TO BE INTERESTING. IT WILL BE INTERESTING TO SEE IF HE MAINTAINS THAT OR UPGRADES IT TO SOMETHING MORE SEVERE LIKE A TSUNAMI, WHICH WOULD NOT BE GOOD FOR BANK STOCKS. HE MAY WALK IT BACK A LITTLE BIT, BUT ON THE UNDERWRITING SPECIFICALLY I WOULD SAY THE BANKING INDUSTRY, AS A RESULT OF THE STRESS TEST THEY GO THROUGH EVERY YEAR AND THE LESSONS THEY HAVE LEARNED IN OA AND 09, IT IS MUCH BETTER THAN WHAT WE SAW IN 2006 AND 2007. I WOULD ALSO SUGGEST -- JONATHAN: WE JUST LOST THAT. DROID CASSIDY OF RBC CAPITAL MARKETS.
-- GERARD CASSIDY OF RBC CAPITAL MARKETS. TOM: LET'S GO TO THE PRESS CONFERENCES. THEY HAVE TWO PRESS CONFERENCES, BOTH EQUALLY IMPORTANT. JONATHAN: EARNINGS CALLS. TOM: EXCUSE ME. BUT THEY ARE GOING TO BE MORE INTERESTING THAN NORMAL IS JONATHAN: HOW I WOULD PUT IT. JONATHAN:--HOW I WOULD PUT IT.
JONATHAN: BUT THAT LAST QUESTION IS WHAT WE WANT TO SEE ANSWERED, IT'S GOOD HAVING THE CHAT ABOUT THE HURRICANE ON THE RISE IN, WE WANT TO KNOW WHAT'S GOING ON WITH THE BUSINESS, LENDING, AND WE HAVE HEARD FROM BANKS REPEATEDLY THAT IS DECENT. LISA: AND HOW TO EXPAND IN LENDING AT A TIME WHEN YOU ARE WORRIED ABOUT CONSUMER CREDIT OR CORPORATE CREDIT IN THE RECESSION? HOW DO YOU EXPAND THE REVENUE BASIS OF THE NUTS AND BOLTS OF WHAT YOU DO IF YOU DO NOT HAVE THAT FAITH THAT THE HURRICANE IS COMING? IF THE INDICATION THAT INVESTMENT BANKING AND DEALMAKING WILL BE SLOWER, TRADING WILL TRY TO PLUG SOME OF THAT GAP, BUT LOAN CREATION IS MY QUESTION. HOW MUCH CAN THEY CAPITALIZE ON HIGHER RATES, IT IS NOT ECONOMIC FOR THEM CONSIDERING THE FLAT YIELD CURVE. JONATHAN: I'VE GOT A MAN TO ASK, GERARD
CASSIDY. I WILL ASK A QUESTION ABOUT UNDERWRITING AND THE AVAILABILITY OF CREDIT AND WHAT THEY ARE GOING TO DO THIS YEAR. CAN YOU PICK UP ON THAT AGAIN? GERARD: SURE, AND WHAT WE SAW ON THE DATA ON CREDIT CREATION, ONE GROWTH FOR THE BANKING INDUSTRY IS AT DOUBLE-DIGIT RATES OF GROWTH IS BEING DRIVEN BY COMMERCIAL LOANS AND CONSUMER LOANS. WE ARE SEEING BANKS TO FIT FROM THIS LOAN GROWTH. ON THE UNDERWRITING, THAT IS A CRITICAL PART IN ANY BANK AND THE UNDERWRITING STANDARDS WE BELIEVE ARE HEALTHY OR STRONG. WE HAVE TO REMEMBER THE COST OF
WHAT WE WENT THROUGH IN 2008 AND 2009 AND WHAT WAS CREATED FOLLOWING THAT. THE FEDERAL RESERVE HAS DE-THE BANKING INDUSTRY BALANCE SHEETS AND HAS PUSHED SOME OF THE HIGHEST RISK LOANS INTO THE BANKING MARKET AND THAT IS WHERE ISSUES COULD PERCOLATE TO THE ECONOMY SLOWDOWN. -- SHOULD IT BE ECONOMY SLOWDOWN IN THE NEXT SIX TO 12 MONTHS. TOM: THERE IS A GREAT BLACK BEAR, A GIANT STATUE RENAMED FOR GERARD CASSIDY. DOES FAR-- VAR MATTER? GERARD: IN THE SECURITIES AREA AND DOES MATTER, TRADING IN PARTICULAR DOES MATTER. THE BANKS HAVE DONE A VERY GOOD JOB FOLLOWING 2008, 2009 IN MANAGING THE BAR FOR THOSE SECURITIES AND WE HAVE NOT SEEN IT GET OUT OF HAND LIKE WE SAW DURING THE FINANCIAL CRISIS. I WOULD SAY BECAUSE OF THE
LESSONS LEARNED IN THE PAST, IT IS MUCH BETTER TODAY, THE SYSTEM IS SAFER. THERE ARE STILL RISK, I DON'T WANT TO DISMISS THAT THERE ARE RISKS. BUT THEY ARE NOT POTENTIALLY AS SEVERE AS 08 AND 09. LISA: IT SEEMS LIKE PEOPLE ARE EXCEPTING THIS, THEY'RE NOT LOOKING FOR INTENSE CREDIT RISK OR SEVERE LOSSES, THEY'RE LOOKING FOR WHERE THE GROWTH IS GOING TO COME FROM IN A SCENARIO WHERE THEY HAVE STRIPPED OUT ENOUGH OF THE RISK THAT THEY ARE NOT EXPOSED TO THE UPSIDE AGAIN ENABLE MARKET COMING OUT OF THE RECESSION. WHAT ARE YOU LOOKING FOR IN TERMS OF AREAS OF GROWTH? GERARD: WE'RE LOOKING FOR AREAS IN TRADITIONAL LENDING.
I THINK WHAT WE ARE GOING TO FIND IS IT IS THE TRADITIONAL BANKS THAT ARE GROWING THEIR LOAN BOOKS. WHAT IS EQUALLY AS IMPORTANT, AND TOM MAY REMEMBER THIS BECAUSE IT'S GOING BACK 15 YEARS NOW, THE RIGHT SIDE OF THE BALANCE SHEET, THE LIABILITY SIDE OF THE BALANCE SHEET FINALLY IS GOING TO COME BACK TO BE THE POSITIVE FOR BANKS. WHAT I MEAN BY THAT IS CORE DEPOSITS ARE GOING TO BE VERY IMPORTANT OVER THE NEXT 12 MONTHS. OVER THE LAST 15 YEARS IT DID NOT MATTER WHERE YOU RECEIVED YOUR FUNDING BECAUSE RATES WERE SO LOW. THAT'S GOING TO CHANGE. WITH INTEREST CLOSE TO 4%, CHIEF CONSUMER CORE DEPOSITS IN BUFFALO, NEW YORK ARE GOING TO BE MORE VALUABLE THAN THE HIGH NET WORTH DEPOSITS. JONATHAN: ARE YOU TELLING US WE ARE NOT GETTING INTEREST ON OUR SAVINGS ANYTIME SOON? GERARD: THAT IS EXACTLY RIGHT. WHAT IS GOING TO HAPPEN IS THAT
THE MOM-AND-POP ACCOUNTS ARE NOT GOING TO GO TO MARKETS FOR 150 BASIS POINTS. THEY'RE GOING TO STAY WHERE THEY ARE. AND THINK OF ALL OF THE PEOPLE THAT HAVE DIRECT DEPOSIT OF THEIR PAYCHECKS. BANK OF AMERICA HAS INCREDIBLE CONSUMER DEPOSIT AND THEY ARE GOING TO BET IN THIS RISING RATE ENVIRONMENT, THAT IS WHY THE MARGIN IS GOING TO BE AMAZING THIS YEAR. WE HAVE NOT SEEN THIS MARGIN GROWTH IN OVER 15 YEARS. TOM:
MR. MINDS ME WHEN CASSIDY, THE UNIVERSITY OF MAINE, HE FOUND JUST THE BLACK BEAR AND THEY WERE PLAYING COLBY COLLEGE IN FOOTBALL AND CASSIDY BROUGHT ALONG THE BABY BEAR. JONATHAN: CAN YOU TRANSLATE THIS? WHAT ARE YOU TALKING ABOUT? TOM: ONE OF THE GREAT SYMBOLS OF NEW ENGLAND, THE BLACK BEAR STATUE IN THE UNIVERSITY OF MAINE, THE SYMBOL THAT IT IS. JONATHAN: GLAD YOU TRANSLATED. -- A FEW MINUTES AWAY FROM THE JP MORGAN NUMBERS, YOU ARE NOT GETTING INTEREST ON YOUR EARNINGS ANYTIME SOON. TOM: I WILL RE-EMPHASIZE THAT WE UNDER REPORT THE SIZE AND SCALE OF THESE ENTERPRISES. YES THERE IS A RECESSION, THESE
BANKS ARE ENORMOUS AND THEY ARE WICKEDLY PROFITABLE COMPARED TO WHAT GERARD CASSIDY MEMBERS IN THE TIME OF LEVERAGE. JONATHAN: WHY IS THE STOCK DOWN 20% -- 30%, JP MORGAN DOWN 29%. THINK ABOUT THE START OF THE YEAR, THE CONSENSUS CALL, RATES COMING DOWN. LISA: WHERE IS THIS COMING FROM, IF YOU ARE NOT EXPANDING, YOU'RE NOT BENEFITING FROM THE YIELD CURVE BECAUSE IT IS CONVERTED AND YOU ARE LOOKING AT A CREDIT ISSUE, TORPEDOING PROFITS, IT IS HARD TO GET EXCITED AND THAT IS THE ISSUE. JONATHAN: SHE IS FIRED UP ABOUT IT. WHERE'S MY INTEREST? LISA:
ABSOLUTELY. JONATHAN: FUTURES DOWN 1% ON THE S&P. WHERE DOWN 38 POINTS. FROM NEW YORK, JP MORGAN EARNINGS COMING UP SHORTLY.
♪ RITIKA: I'M RITIKA GUPTA. DONALD TRUMP IS LOOKING AT ANNOUNCING IN SEPTEMBER HE WILL RUN FOR PRESIDENT AGAIN ACCORDING TO THE WASHINGTON POST. THE NEWSPAPER SAYS ALLIES ARE COUNTING ON HIM ANNOUNCING BEFORE NOVEMBER MIDTERMS TO HELP REPUBLICANS TO COVER CONGRESS. THE SENATE IS GETTING CLOSER TO A DEAL ON THE ECONOMIC AGENDA OF THE PRESIDENT BUT IT COULD SPARK A SHOWDOWN AMONGST DEMOCRATS. SENATOR JOE MANCHIN HAS BEEN
NEGOTIATING WITH SENATE MAJORITY LEADER CHUCK SCHUMER. HE SAYS THE FEDERAL DEDUCTIONS POPULAR IN HIGH TAX STATES HAS NOT BEEN IN THE MIX. AND THERE HAS BEEN A BILL TO HELP STATE AND LOCAL GOVERNMENTS SET UP A WARNING SYSTEM FOR ACTIVE SHOOTER SITUATIONS. IT GAINS NEW URGENCY AFTER SHOOTINGS IN TEXAS, NEW YORK AND ILLINOIS. ANY REPUBLICANS HAVE CALLED IT A ENCROACHMENT ON THE RIGHTS OF GUN OWNERS. IN YOUR FORECAST, AS WE BOUNCE FROM THE PANDEMIC, IT WILL BE WEAKER THAN ANTICIPATED.
2.6% THIS YEAR, 1.4 PERCENT IN 2023, INFLATION AVERAGING 7.6% IN 2022. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG.
♪ JONATHAN: GETTING SOME JP MORGAN NUMBERS COME OUT LET'S START THERE. REVENUE COMING IN A LITTLE LATER THAN EXPECTED, $31.63 BILLION. THE ESTIMATE WAS $31.79 BILLION. I WILL GIVE YOU A BREAKDOWN OF WHERE THIS PERSISTS. EQUITY SALES AND REVENUE IS WHERE THIS WAS, THE MESS WAS INVESTMENT BANKING REVENUE, 6000 TRADING REVENUE, AND HERE IS THE HEADLINE FROM JP MORGAN. TEMPORARILY SUSPENDED SHARE BUYBACKS, STOCK DOWN BY 1.44%
ON THE FREE MARKET, DOWN ON THE YEAR BY ABOUT 30%. SOME REAL MISSES IN THE MIX FOR JP MORGAN. TOM: JAMIE DIMON MENTIONING THEY PERFORMED WELL, HE MENTIONS CREDIT DISCIPLINE AND WHAT A SHOCK.
THERE IS THE FORTRESS BALANCE SHEET FOR MR. DIAMOND. JONATHAN: NOT THE STORY THIS MORNING, THE 3%, MISS MISS MISS MS. SMITH'S IN A LOT OF PLACES. LISA: AND THERE IS WEAKNESS IN INVESTMENT BANKING NOT IN THE TRADING, THE FACT THAT FIXED INCOME TRADING MISSED ESTIMATES WITH REVENUES COMING IN AT 7.4 -- COMING IN AT -- A VOLATILE AREA. WHAT IS GOING TO BE THE MESSAGE
OF TEMPORARILY SUSPENDING SHARE BUYBACKS IF THAT WAS ALSO A BALANCE FROM THE VALUE PEOPLES ON THESE SHARES? JONATHAN: AND INCLUDES A $28 BILLION BILL, SO FIRST WAS, IF YOU ARE LOOKING AT NUMBERS ON THE HORIZON, THESE MIGHT SPEAK TO IT. SONALI BASAK, YOUR TAKE. SONALI: FASCINATING, YOU LOOK AT THE TRADING ON THE DAY AND EVEN IF YOU DID SEE THE BOOST IN INCOME IT IS NOT WHERE WALL STREET WAS EXACTING. JP MORGAN WITH FIXED INCOME VOLATILITY, THEY THE GORILLA IN THE ROOM. HOW DOES THAT STAND FROM MORGAN STANLEY CITIGROUP WHICH WE ARE HOPING FOR TRAINING TO STAY THE DAY? -- TRAINING TO SAY -- STAY THE DAY? A LOT HAPPENING ON WALL STREET, JP MORGAN TAKING SHARES, BUT JP MORGAN HAS BEEN INVESTING IN THAT BUSINESS WHILE THEY ARE CUTTING IN OTHER PLACES. THEY WERE THE FIRST BANK TO
START CUTTING HEADCOUNT IN THE MORTGAGE BUSINESS. THE PROVISIONS FOR LOAN LOSS CAME IN HIGHER THAN WALL STREET WAS EXPECTING. THE CAUTION, ESPECIALLY THOSE SHARE BUYBACKS WILL BE NOTABLE AND SET THE TONE FOR EVERYBODY ELSE, INCLUDING THE REST OF CORPORATE AMERICA. LISA: INCLUDING THE REST OF THE BANKS, I WAS LOOKING AT THE KNEE-JERK REACTION OF BANKAMERICA IN CITIGROUP AND WE ARE SEEING A KNEE-JERK RESPONSE.
THIS IS THE BELLWETHER FOR THE REST OF THE BANKING COMPLEX AND BEYOND, HOW MUCH IS THAT ACCURATE? HOW MUCH HAS THAT BEEN BORNE OUT IN PREVIOUS EARNINGS CYCLES THAT THIS HAS BEEN AN ACCURATE READ ON THE TONE FOR THE REST OF THE SEASON? SONALI: IT IS AND I WOULD POINT OUT THE JP MORGAN AND MORGAN STANLEY ARE THE MOST EXPENSIVE OF THE BIG BANKS, ESPECIALLY IN TERMS OF PRICE-TO-BOOK. THEY ARE TRADING AT 1.3 OR ONE POINT FORWARD BANK OF AMERICA IS TRADING BARELY ADD VALUE. GOLDMAN AND WELLS FARGO ARE BELOW THAT. THERE ARE MAJOR QUESTIONS ON HOW MUCH WORSE IT COULD GET. JONATHAN:
THE SOCKETS DOWN IN THE FREE MARKET BY 5%, YOU WILL PICK UP ON THE STORY FOR THE NEXT HOUR WHEN WE GET MORGAN STANLEY AS WELL. WE WANT TO TOUCH BASE WITH GERARD CASSIDY, STOCKS DOWN 5%, WANT TO GO BACK TO THOSE WORDS OF JAMIE DIMON IN THE LAST FEW MONTHS. HE SAID A HURRICANE MIGHT BE COMING, WE DON'T KNOW HOW BIG IT'S GOING TO BE. DO YOU THINK SOME OF THIS SPEAKS TO THAT? GERARD: -- JONATHAN: WE'VE GOT A TECHNICAL CONNECTION, I WAS TOLD IT WAS GOOD BUT APPARENTLY IT IS NOT.
WHERE DOWN 4.8%, AND THIS IS A MAN WHO STOOD THERE AND SAY THE LAST COUPLE OF MONTHS A HURRICANE MIGHT BE COMING. WHAT WOULD YOU DO IF YOU THOUGHT A HURRICANE WAS ON THE HORIZON AND YOU HAD NO IDEA HOW BIG IT MIGHT BE? DO YOU INCREASE PROVISIONS AND YOU MIGHT SUSPEND A CAPITAL RETURN PROGRAM AND WAIT AND SEE WITH THE SECOND HALF BRINGS. LISA: HE IS PUTTING HIS MONEY WHERE IS ABOUT THIS. AND THE ACTUAL RESULTS WHICH IS OF A DIFFERENT THAN PERHAPS A HURRICANE IS COMING, BUT THAT IS NOT THE CASE. HIS ACTIONS ARE CONFIRMING THEIR PREPARING FOR SOMETHING MORE IN THE ECONOMY.
HOW MUCH DOES HE SEE THAT IN THE UNDERLYING DATA VERSUS JUST A PRECAUTIONARY MANNER? JONATHAN: SOME OF THIS IS SELF FULFILLING AND THANKS FOR STICKING WITH US, SONALI BASAK. UNDERWRITING STANDARDS, ULTIMATELY YOU END UP WITH A SELF FULFILLING SCENARIO WHERE THE BANKS PULLBACK AND THE ECONOMY PULLS LOWER, TOO. SONALI: I WOULD POINT OUT JAMIE DIMON SAID CHARGE-OFFS WILL START TO RISE. THE NET INCOME IS LATER THAN WHAT WALL STREET WAS EXPECTING. JP MORGAN WAS SAYING THEY WOULD GET A LOT MORE WITHOUT RISE IN NET INTEREST INCOME BECAUSE OF HIGHER INTEREST RATES. TODAY IS A HUGE DAY WERE JAMIE DIMON WILL BE ASKED A LOT ABOUT THE FORCE BETWEEN A 1% INTEREST RATE HIKE AND AN INVERTED YIELD CURVE.
IF JAMIE DIMON IS TIGHTENING LENDING STANDARDS, HOW DOES THAT COMPARE TO CONSUMERS BORROWING LESS AND THE HOME LENDING REVENUE PLUMMETED MORE THAN 20% AND CAR AND AUTO WAS WEAKER? WHERE'S THE MONEY GOING TO COME FROM? TOM: LET'S TALK ABOUT WEALTH MANAGEMENT. CREDIT SUISSE IS GOING TO SOLVE THEIR INWARD PROBLEMS BY WEALTH MANAGEMENT, ASSET MANAGEMENT, WAS GO TO ASIA AND TALK TO WHICH PEOPLE. JP MORGAN, ASSETS UNDER MANAGEMENT, $2.7 TRILLION DOWN 8% DRIVEN BY LOWER MARKET LEVELS.
-8% I GUESS IS READY GOOD. HOW DOES WEALTH MANAGEMENT FIT IN FOR BANKS LIKE JP MORGAN OR A MORE FOCUSED EFFORT LIKE FORTRESS GORMAN? SONALI: WE WERE TALKING ABOUT PRICING, MORGAN STANLEY IS MORE EXPENSIVE THAN JP MORGAN BECAUSE THERE'S AN EXPECTATION WEALTHY CUSTOMERS ARE GOING TO -- TOM: EVERYBODY WANTS TO BE A WEALTH MANAGER. SONALI: ANDREW SAUL THOSE CHANGES TO CAPTURE EVEN MORE THE U.S. MARKET. JP MORGAN, GOLDMAN SACHS, MORGAN STANLEY HIGHER ABROAD AS WELL BECAUSE THEY ARE BETTING ON WEAKNESS OF THE EUROPEAN BANK, HOPING THEY CAN TAKE MORE CLIENTS ABROAD AND IN THE UNITED STATES. TO YOUR POINT, THAT'S NOT GOING TO BE A NECESSARILY CHEAP ENDEAVOR TO DO. BUT I WILL SAY MR. DIAMOND ONCE MORE AND SAY -- CITING MR.
JAMIE DIMON CITING MR. BEZOS, SAYING HE HAS BEEN WILLING TO SPEND TO OUTPERFORM IN BUSINESSES LIKE THAT BECAUSE TO YOUR POINT, TOM, WEALTH MANAGEMENT TENDS TO DO BETTER THIS KIND OF ENVIRONMENT BECAUSE CUSTOMERS HOLD UP BETTER. JONATHAN: QUICKLY, IS THERE A BIG RETURN PROGRAM WITH A TARGET ON ITS BACK? SONALI: NO, THEIR CAPITAL RETURN PLANS THAT A BIG GUARDIAN FOR WEEKS AND PEOPLE NEED TO USE THE EXPECTATIONS. IF YOU ARE GOING INTO ECONOMIC
HURRICANE, YOU NEED MONEY ON YOUR BALANCE SHEET. JONATHAN: MORE COVERAGE FROM OUR CHIEF WALL STREET CORRESPONDED THROUGH THE MORNING AS WE GET DETAILS ON THE EARNINGS REPORT. THAT IS JP MORGAN, NEXT IS MORGAN STANLEY, BUT THIS SET THE TONE EARLY ON. LISA: ABSOLUTELY. INTERESTING DETAIL ABOUT THE SHARE BUYBACK PLAN.
THEY TALK ABOUT THE STRESS TEST AND HOW THEY WANT TO GET A CERTAIN GOAL THAT IS SET UP FOR THEM. AND THAT TEMPORARILY SUSPENDING SHARE BUYBACKS WILL ALLOW MAXIMUM FLEXIBILITY TO SERVE OUR CUSTOMERS, BUT IT IS BECAUSE THEY WANT TO GET THOSE TARGETS QUICKER. HOW MUCH IS THIS BEING FORCE ON THEM? JONATHAN: THE TOP LINE FROM JAMIE DIMON, WE ARE PREPARED FOR WHATEVER HAPPENS IN THE ECONOMY. ANOTHER LEG UP IN THIS MARKET, DOWN 1.4% ON THE S&P 500, MORE TO COME, FROM NEW YORK CITY, THIS IS BLOOMBERG. ♪
>> EVERY DEVELOPED MARKET IS FACING THE SAME PROBLEMS IN TERMS OF HIGHER INFLATION SLOWING GROWTH AND DECLINING REAL WAGES. >> IT WILL BE A TOUGH CALL FOR THE FED TO BE HONEST. >> THEY LET THE INFLATION GENIE SURGE OUT OF THE BOTTLE TO QUICKLY WITH THE SHIFT ON A BACKWARD LOOKING PARADIGM. >> THIS IS " BLOOMBERG: SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. JONATHAN: GOOD MORNING, THIS IS BLOOMBERG: SURVEILLANCE WIDE -- LIVE, ONCE I TOM KEENE --ALONGSIDE TOM KEENE AND LISA ABRAMOWITZ, I'M JONATHAN FERRO. TOM: MOBILE CUSTOMERS OF 11%, THE FINANCIALS ARE BURIED IN THE SUPPLEMENTAL REPORT BEGINNING ON THE ATTENTION YOU'RE GOING TO HEAR THAT THE PRESS CONFERENCE EARNINGS CALLS OR WHATEVER YOU WANT TO CALL THEM, RETURN ON ASSETS YEAR-OVER-YEAR FROM A 1.29% DOWN TO 0.89%. TANGIBLE BOOK VALUE, THIS
REALLY SAYS IT ALL ABOUT FORTRESS AND JP MORGAN, TANGIBLE BOOK VALUE IS UP 1%. THIS IS BASICALLY A BIG BANK FLATLINING, THAT IS A LITTLE HARSH BUT FLATLINING GIVEN THE TUMULTUOUS TIMES. JONATHAN: THE HEADLINE IN THE LAST 10 MINUTES, SUSPENDING SHARE BUYBACKS. TOM: ABSOLUTELY. JONATHAN: THE STRESS TEST KICKING INTO THE BIG WAY, WE HAVE SEEN MASSIVE DIRECTIONS. TOM: I WILL LET OUSTING WILLIAMS TELL ME THAT IT DOES MATTER. IT IS CAUTIOUS, RESPONSIBLE,
AND IT HEATS UP OVER WHAT WE ARE GOING TO SEE FROM THE OTHER BANKS. JONATHAN: THE OTHER DISAPPOINTING FACTOR IS WHERE YOU EXPECT THE STRENGTH TO BE TRADING, IT DID NOT SHOW UP. LISA: THAT IS WHERE PEOPLE WERE EXPECTING AN OFFSET ON THE INVESTMENT BANKING SIDE. ON A BIGGER LEVEL, THIS IS A NEGATIVE BELLWETHER, THE BEHEMOTH BANK COMING OUT, HURTING ITSELF FOR THAT HURRICANE AND PUTTING THEIR MONEY WHERE THEIR MOUTH IS IN TERMS OF WHAT JAMIE DIMON SAID. HOW MUCH DO WE SEE THIS
REFLECTED IN THE REST OF EARNINGS AT A TIME WHEN THERE IS SO MUCH UNCERTAINTY AND PEOPLE ARE BUILDING LEVERAGE? THE DEBIT AND CREDIT CARD SPENDING EXPANDING RAPIDLY AS PEOPLE DIVE FURTHER INTO THEIR SAVINGS AND BASICALLY CATCH THE DIFFERENCE AND KEEP SPENDING. JONATHAN: ARE YOU FOR -- SAYING YOU DON'T FIND THAT CONSUMER STORY? LISA: THERE ARE SIGNS OF WEAKNESS, AND WHAT IS THE POTENTIAL CAN'T -- CONSEQUENCE OF BUILDING LEVERAGE INTO A DOWNTURN? ESPECIALLY THE CONSUMER BALANCE SHEET WAS HEALTHY AND STRONG, THIS DEFIES LOGIC. JONATHAN: LOWS DOWN TWO POINT 7% ON JP MORGAN, WE WERE DOWN FIVE. ONE PIECE OF THE BROADER PUZZLE, BECAUSE ASSET YIELDS OVER THE WAS 24 HOURS. THE YIELD CURVE IS INVERTED AND FX A LOT STRONGER. I THOUGHT THAT DOLLAR-YEN WE
CAN THIS MORNING WOULD STRIKE 140, IT CAME BACK DOWN BUT WE ARE SEEING BIG MOVES. TOM: WE ARE LOOKING AT JP MORGAN AND I AGREE WE NEED FURTHER SCRUTINY ON THIS MAJOR BANK. IT SETS UP THE OTHER BANKS. THE HEADCOUNT, 260,000 OUT OF TWO AT 78,000. MR. PINTO AND THE REST OF THEM, THEY WANT TO KNOW GLOBALLY WHAT
IS HAPPENING IN THE MARKETS AND THERE'S A NEW FRAGILITY BACK OVER THERE 9%. JONATHAN: FUTURES ARE -44, WAS PUT 45. -93 ON THE NASDAQ 100, YIELDS HIGHER BY THREE BASIS POINTS ON THE 10 YEAR, 296.60, THE EURO NEGATIVE HALF, WHAT HAPPENED TO 150? 9380. LISA:
IT WOULD INDICATE INFLATION PRESSURE IS CUTTING OFF. RIGHT NOW, DEMAND DESTRUCTION, -- THAT HAS BEEN CONFIRMED BY JP MORGAN EARNINGS COMING UP. THEY ARE DISAPPOINTING ON THE LEVEL, BUT THE SHARE BUYBACK SUSPENSION HIGHLIGHTS CONCERNS AND ALARM BELLS, NOT ONLY ABOUT THE STRESS TEST BUT ABOUT THE CONDITION OF THE ECONOMIC OUTLOOK. MORGAN STANLEY SAID TO REPORT ANY MINUTE, CITIGROUP AND BANK OF AMERICA, THE OTHER BEHEMOTHS YOU'RE ARE SEEING EVEN BIGGER DROPS. WE WILL GET THE LATEST READ ON U.S. DATA INITIAL JOBLESS CLAIMS AND
U.S. JUNE PTI. WE ARE LOOKING AT INFLATION DATA ONLY CAUSING THE FED TO DOUBLE DOWN IN RHETORIC IN TERMS OF AGGRESSIVE RATE HIKES. HOW MUCH ARE WE REACHING A PIVOT POINT WHERE PEOPLE ARE SAYING THE NEGATIVE OUTLOOKS -- OUTCOMES ARE LOOKING MORE LIKELY BECAUSE THE FED WILL BE AGGRESSIVE AND KEEP GOING DESPITE POTENTIAL RECESSION RISK AND THE INCREASING LIKELIHOOD? I 11:30, CHRIS WALLER WITH MICHAEL MCKEE AT THE ROCKING ON ECONOMIC SUMMIT IN IDAHO, TALKING ABOUT WHAT THIS WILL BE FOR HIM A CHANCE AT HOW FAST HE WILL GO THIS MONTH, NOT JUST SEPTEMBER BUT THE REST OF THE YEAR. IF YOU'RE .7% FED FUNDS RATE. WE ARE BRINGING FORWARD THESE
RATE HIKES AND THEY ARE GETTING MORE AGGRESSIVE IN TERMS OF MARKET EXPECTATION. THAT IS CHANGING THROUGH ESTIMATES ON WALL STREET. JONATHAN: I THINK THE BID -- BIG CONVERSATION -- JOINING US NOW IS THE CHIEF INVESTMENT OFFICER FOR WEALTH AND INVESTMENT MANAGEMENT. ALWAYS GOOD TO CATCH UP. LET'S START WITH THE NUMBERS FROM JP. YOUR THOUGHTS. >> I THINK IT IS THE FIRST REAL INDICATION OF CEO CONCESSIONS ASIAN -- CONCESSION SEASON, THE TRUE IMPACT OF THEIR EARNINGS SEASON WE'VE BEEN REFUSING TO A KNOWLEDGE -- ACKNOWLEDGE AND THE REAL IMPACT OF WHAT IS HAPPENING WITH CONSUMERS AT THE PUMP, AT THE GROCERY STORE, THE REAL EFFECTS OF INFLATION AND FINANCIAL CONDITIONING TIGHTENING AT THE WARP SPEED THEY HAVE BEEN TIGHTENING. IT WILL SHOW UP IN EARNINGS, NO PLACE TO HIDE ON THIS. TOM:
THERE IS NO PLACE TO HIDE, DARRELL CRONK, AND THEY WILL BE WINNERS AND LOSERS IN A BEAR MARKET EVEN. WHAT ARE THE DISTINCTION FACTORS SAY WITH BANKS THAT WILL BE A WINNER ANY BEAR MARKET VERSUS A LOSER IN THE BEAR MARKET? DARRELL: FOR THIS EARNINGS SEASON SPECIFICALLY, IT IS A GOOD QUESTION. SALES AND TRADE REVENUE, THAT WILL BE THE CHALLENGE BECAUSE WE KNOW ALL TOO WELL THE FIRST HALF OF THE YEAR AND THE ACUTE NEGATIVE RETURNS FOR EQUITIES AND FIXED INCOME MARKETS IN THE SECOND QUARTER ARE JUST GOING TO MAKE THOSE RETURNS ABYSMAL BY ANY MEANS. THE TRADITIONAL LENDING SIDE, THE CONSUMER SIDE AND SMALL-BUSINESS SIDE HAVE SHOWN IT HAS BEEN MORE RESILIENT, ALTHOUGH WE ARE IN THE EARLY STAGES OF SEEING SOME DETERIORATION THERE. IT PROBABLY IS NOT GOING TO
SHOW UP AS ACUTELY IN Q2. WE NEED TO WATCH THAT. LISA: BASED ON THE REAL-TIME DATA, HOW MUCH IS JP MORGAN ACCENTUATING SOMETHING WE ARE SEEING MORE BROADLY, VERSUS A UNIQUE STORY IN ITSELF, THAT SPECIFIC MISSIVE AND A STRESS TEST WITH EXTREME SCENARIOS AND THAT IS IMPORTANT GIVEN THE CASH WE HAVE RIGHT NOW? DARRELL: IT IS IMPORTANT AND I THINK IT IS A TELLTALE SIGN OF SOUTHERN MORE BROADLY. I DON'T THINK IT IS IDIOSYNCRATIC TO THEM. IF YOU THINK HOW RAPIDLY CONDITIONS HAVE CHANGED IN THE LAST MONTH, A FEW WEEKS AGO WE WERE POSITIVE 14 BASIS POINTS, TODAY WE WERE -23. A FEW WEEKS AGO, A MONTH AGO OIL WAS $123 A BARREL, NOW IT IS DOWN, THAT HELPS THE CONSUMER. CONDITIONS ARE RAPIDLY CHANGING
IN FRONT OF OUR EYES AND I'M NOT SURE PEOPLE HAVE LATCHED ONTO THAT AND WHAT IT MEANS FOR THE SECOND HALF. LISA: I WOULD LOVE YOUR IDEA -- YOUR TAKE ON THE IDEA THAT WE ARE SEEING CREDIT CARD LOANS, THERE IS CREDIT CARD SPENDING AND DEBIT. HOW MUCH DOES THAT INDICATE THE CHALLENGE TO THE STRONG CONSUMER BALANCE SHEET NARRATIVE? DARRELL: YOU HIT IT ON THE HEAD, THE MARKET HAS BEEN SOLD ON HOW STRONG THE CONSUMER IS, BUT THROUGH THE STIMULUS OF THE PANDEMIC, IT HELPS THE CONSUMER, THERE WERE LARGE CAST BALANCES -- CASH BALANCES. THEY HAVE ERODED. THE OVARIES AND EXCELLENT POINT, WHICH IS IF YOU LOOK AT THE FED DATA ON CONSUMER SPENDING AND THAT ACQUIRED OUTSTANDING'S, INCREASES, WE HAVE SEEN SOME OF THE LARGEST INCREASES IN CREDIT CARD OUTSTANDING IN THE LAST COUPLE OF MONTHS THEN WE HAVE EVER SEEN ON RECORD FOR THE DATA. THAT IS OMINOUS HEADING INTO A WORLD WHERE THE ECONOMY IS SLOWING, FINANCIAL CONDITIONS ARE CONTRACTING, DEMAND DESTRUCTION IS HAPPENING AND TO YOUR POINT, THE CONSUMER IS HAVING TO DRAW ON REVOLVING LINES OF CREDIT IN ORDER TO MEET THOSE SPENDING NEEDS AT THE PUMP AND THE GROCERY STORE. JONATHAN:
AWESOME TO GET YOUR VIEWS, DARRELL CRONK OF WELLS FARGO, BANK OF AMERICA MAKING MOVES. FORECASTING A MILD RECESSION THIS YEAR. DOWNGRADING THE OUTLOOK FOR EQUITIES, THE YEAR-END FORECAST GOES FROM 4500 ALL THE WAY DOWN TO 36. THIS COMES IN FROM THE REIT'S, CATCHING UP WITH THE TEAM OF BANK OF AMERICA.
WE FOLLOW THE SHIFT OF A RECESSION CALL, AND A 23 AT 250. HERE'S SOMETHING THAT JUMPED OFF THE PAGE, ONE IMPORTANT SHIFT IN THE REVIEW IS ON QT. THERE WAS GREAT CUTS -- THERE WERE RATE CUTS. TOM: I WILL ALWAYS SEE THE FLOODGATES ARE OPEN BY THINK OF CANADA, LIVING MAKE IT CLEAR, THAT IS SHOCKING, AND ANY CYCLE OR HISTORICAL -- I WILL GO WELL, WE REMEMBER THAT YESTERDAY WE RESEARCHED SEE THOSE CHANGES. LISA: AND HOW MUCH THEY CONFIRM THE VIEW OR FROM JP MORGAN, ESPECIALLY SINCE THEY ARE MORE ON INVESTMENT BANKING AND THE TRADING SIDE, A LOT OF PEOPLE CHANGING THEIR OUTLOOKS. JONATHAN: FUTURES DOWN 1.3 ON THE S&P
500, YIELDS UP A COUPLE OF BASIS POINTS ON THE 10-YEAR AND JP MORGAN THIS MORNING OFF THE BACK OF THIS, WE WERE DOWN ABOUT 5%. I WILL GET THE STOCK ON OF THE BLOOMBERG TERMINAL, THIS WILL BE LOOK LIKE NOW. DOWN BY THREE PERCENTAGE POINTS. THIS IS BLOOMBERG. ♪ RITIKA: KEEPING YOU UP-TO-DATE WITH NEWS AROUND THE WORLD WITH THE FIRST WORD, I'M EQUIPPED UP.
THE FED MAY DEBATE A HISTORIC 1% RATE HIKE THIS MONTH. THE ABOUT A FED PRESIDENT SAID EVERYTHING IS IN PLAY AFTER PRICES ROSE FASTER THAN EXPECTED, 9.1% IN JUNE. THE FED IS MORE THAN LIKELY TO BREAK -- HIKE IT BY HUNDRED BASIS POINTS. ACCORDING TO THE WASHINGTON POST, ALLIES ARE TURNING THE -- TELLING THE FORMER PRESIDENT THAT BEFORE THE MIDTERM ELECTIONS, THEY WILL DRIVE TURNOUT TO HELP REPUBLICANS TAKE OVER CONGRESS. PRESIDENT BIDEN AND THE PRIME MINISTER DISCUSSED REGIONAL SECURITY IN THE MEETING TODAY AFTER THEY SAID THEY WANTED TO MAKE SURE -- ASSESSMENT THE PRESIDENT ECHOES, PRES. BIDEN: HUMID -- PRESIDENT BIDEN SAYS -- A CONSERVATIVE PARTY BALANCING TODAY IN A PROCESS THAT WILL DETERMINE THE NEXT PRIME MINISTER, THE CANDIDATES HAVE BEEN CUT TO SIX.
TRADE MINISTER PENNY MORGAN HAS EMERGED AS A FRONT RUNNER. ANOTHER BIG-NAME CASUALTY FROM THE $2 TRILLION CRYPTOCURRENCY QUEST, THE NETWORK -- IT HAD AMASSED MORE THAN $20 BILLION IN ASSETS BY OFFERING INTEREST RATES AS HIGH AS 18%, THEY WERE WITHDRAWALS LAST MONTH. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. >> INFLATION IS TOO HIGH, BUT WE ARE STARTING TO SEE ESPECIALLY IN COMMODITIES, PRICES COME DOWN.
WE HAVE SEEN THAT IN TERMS OF OIL AND GAS, BUT OTHER COMMODITIES AS WELL. WE'RE GOING TO KEEP TAKING ACTION TO MAKE SURE PRESCRIPTION DRUGS, PEOPLE ARE PAYING LESS GOING FORWARD. JONATHAN: THAT WAS THE U.S. TREASURY DEPUTY SECRETARY, GOOD MORNING. PRICE ACTION LOWER BY 1.25% OF THE S&P, DOWN ABOUT 48.
ON THE NASDAQ 100, ABOUT .9%, 101. YIELDS UP THREE BASIS POINTS, CRUDE LOWER BY 2.9%, 9350. DECIMATE 3.50. SHE CALL IT PARITY, NOT GOING TO ARGUE IT OVER 0.0014 COME OUT WE ARE AT 1.0014 WITHIN HALF OF 1%. LOOKING AT 140 POTENTIALLY, DOLLAR STRENGTH THE BIG STORY AND JP MORGAN COMING OUT A BIT EARLIER, ABOUT 40 MINUTES AGO.
THE STOCK RECOVERING A BIT OF SESSION LOWS, NOW DOWN JUST 2%. A SUSPENDING OF THE SHARE BUYBACK PROGRAM. LISA: THIS IS A BROADER STORY HAS BEEN TREATED IN THE MARKET. DXY GOING BACK MORE THAN A DECADE, WE'RE TAKING A LOOK NOW AT AN ENVIRONMENT THAT IS SHIFTING RAPIDLY.
THE FACT THAT JP MORGAN RESPONDED TO THE STRESS TEST, WE NEED TO BACK DOWN THE HATCHES AND PREPARE FOR THE HURRICANE. TOM: IT IS TIME FOR A SEA CHANGE. I THINK WE WILL HEAR IT FROM JAMES DIMON AND HIS TEAM. A BRITISH GUY WHO INVENTED MODERN BANKING, HE TOOK JP MORGAN FROM THE STARCHY -- ST ODGY BANK. -- YOU ARE SEEING
YEAR-OVER-YEAR, MOVING FROM A 40 STATISTIC DOWN TO 54, I THINK I'M SOMEWHAT CLOSE HERE. THE VALUE AT RISK IS NOT TO BE IGNORED. MR. DIAMOND TACKLES THIS ENORMOUS BANG -- BANK. IT IS LIKE THE SONALI KIM. -- CAM.
SHE'S GOING LIKE THIS ON THE PHONE. JONATHAN: THE QUESTION THIS MORNING, I WONDER IF YOU CAN ANSWER IT THE DECISION TO SUSPEND AN SHARE BUYBACK, HOW MUCH OF THIS IS A BOOST AND THE BANKS SAYING WE'RE GOING TO HAVE SOME PROBLEMS, ARE YOU READY FOR THEM? SONALI: I THINK IT -- THE CONCERN IS THE YOU ARE SEEING ITS ARE TO, BUT TO HIS POINT, YOU DO HAVE A LITTLE STRAINED WHEN YOU'RE LOOKING AT THE INSTITUTIONAL SIDE AND FOR SIDE. THAT IS ALSO CONCERNING. THE BIGGEST JUMP WAS IN FIXED INCOME. THESE WERE SUPPOSED TO BE FIXED MARKETS AND JP MORGAN IS A INTERMEDIARY WHEN LIQUIDITY IS UP. YOU HAVE TO WORRY ABOUT THE CONSUMER SIDE VERY RAPIDLY. LISA:
I WANT TO TALK ABOUT WHAT THE FED IS WORRIED ABOUT, NEAL DONNA SAID ON TWITTER, BEHIND DOOR NUMBER ONE THERE IS ENOUGH TO PUSH THE ECONOMY INTO RECESSION, BEHIND TWO, TRAINING RATES. THE FED SHOWS NUMBER ONE HANDS DOWN AND IT IS A PIVOT TOWARD THE RECESSION. J THE BASE -- JONATHAN: THE BASE CASE IS THE RECESSION, WE CAN ARGUE BUT THE ULTIMATE BASE CASE IS THAT.
YOU SEE AT SEA CHANGE FROM THE OF MORNING. THERE WAS A RECESSION LATER THIS YEAR, SLASHING THE OUTLOOK FOR EQUITIES, NO RECOVERY. 4500 DOWN TO 3600. AND THEN OVER THE RATE SIDE, BASICALLY THE 10 YEAR, YEAR END 275, ASK YOU TO 50. TOM: I THINK YOU'LL SEE MORE OF THIS, IT IS A RESET HERE.
YOU SEE IT WITHIN THE TENSION OF JP MORGAN. WE'VE GOT PHENOLIC -- SENT ALI -- SONALI HERE. THEY'RE GOING TO WORK ON THE HOLIDAYS AND ETC., BUT ISN'T
THAT AGE-OLD SOLUTION TO CUT COST? SONALI: THERE IS -- IT IS THE OLDEST STORY OF THE WORLD. OVER HIGHER AND STARTS HIGHER. YOU'RE STARTING TO SEE THAT AS MOTHER CONSUMER FOCUSED BUSINESS, THE MORTGAGE BUSINESS, WHAT HAPPENS TO THE INVESTMENT BANKING BUSINESSES? IT WAS NOT JUST A LITTLE LATE, IT WAS $100 WORTH OF MIDST. EVEN DEBT UNDERWRITING, $7 MILLION OR SO, THAT WAS MORE THAN $1 BILLION FOR JP MORGAN A COUPLE OF QUARTERS AGO. SO IT CHANGES VERY QUICKLY HERE AND YOU'VE GOT TO WONDER WHAT HAPPENS.
TOM: MORGAN STANLEY SAYS IN 30 MINUTES, 15 MINUTES -- FOR GLOBAL WALL STREET HE'S GOT TO STAY ON THIS. THIS IS A DIFFERENT JP MORGAN REPORT AND I'M FASCINATED, CITIGROUP, MORGAN STANLEY, GOLDMAN SACHS AND THE OTHERS. JONATHAN: IN THE NEXT 30 MINUTES WE SHOULD HEAR FROM MR. GORMAN AND MORGAN STANLEY, WE SHOULD HEAR FROM THE PRESIDENT, TOO. WE'VE BEEN WAITING FOR THE PRESS CONFERENCE WITH THE PREMISE OR THE ISRAEL, IT SHOULD TAKE PLACE ON THE BORDER IN JERUSALEM.
ABOUT 20 MINUTES TO GO, STILL TWO EMPTY PODIUMS SO WE WAIT. TOM: IT'S ALL BEING CHOREOGRAPHED CAREFULLY AND I CAN'T EMPHASIZE ENOUGH THE HISTORY HERE. MY HEAD IS SPINNING, THE PRESIDENT TRAVELING TO JETTA FROM AIR FORCE ONE TO ISRAEL, IN MY YOUTH I CANNOT IMAGINE THAT. JONATHAN: YOU WILL GET NUMBERS SOON FROM MORGAN STANLEY, JOBLESS CLAIMS AS WELL, AND THEN GOVERNOR WALLER LATER WITH MIKE MCKEE. TALK ABOUT BUSY. LISA: ESPECIALLY WITH THE JOBLESS CLAIMS. WE DO NOT TALK AS MUCH
ABOUT THAT BUT THIS IS ALSO THE WILDCARD. COULD WE SEE THIS PICKUP, NOT NOW BUT BUILT UP CAPACITY TO RESPOND TO A SURGE IN DEMAND, HAVING TO CUT BACK BECAUSE HOW MUCH IS THAT GOING TO CREATE SWINGS? JONATHAN: YOU SAW THAT WITH GOOGLE. YOU MIGHT SEE THAT IN JOB OPENINGS OVER THE NEXT SEVERAL MONTHS AND THAT IT IS JOB CUTS AS WELL. THAT CAN HAPPEN QUICKLY. LISA: THAT'S WHY I'M WONDERING IF THERE'S GOING TO BE A TIPPING POINT. WE TALK ABOUT DELTA CANNOT NOT WANTING TO BUILD THE CAPACITY EVEN IN THE FACE OF DEMANDS, BECAUSE THEY'RE WORRIED ABOUT BEING CAUGHT WRONGFOOTED WITH CAPACITY AND THAT WILL BE A CHUBBY MOMENT FOR THE FED TO DEAL WITH. TOM: PEOPLE GET SORTED OUT IN BEAR MARKETS. WHO HAS GOT THE BATHING SUIT ON
KIND OF THING. PEOPLE ARE GOING TO SORT OUT GIVEN WHAT WE ARE DOING AND WHERE WE ARE MOVING TO THE PROFIT MAKERS IN THE NONPROFIT MAKERS. JONATHAN: I WOULD LOVE TO SEE LISA INTERVIEW THEM BECAUSE SHE LOVES TO BRING THAT OUT. LISA: [LAUGHTER] ♪ JONATHAN: LIVE FROM NEW YORK CITY, GOOD MORNING. WAITING FOR NUMBERS FOR MORGAN STANLEY. EQUITIES DOWN 1.3% ON THE S&P, NASDAQ KNOW IT -- LOWER BY .9%,
ONE FULL PERCENTAGE POINT LOWER. MORGAN STANLEY NET REVENUE 1.13 BILLING -- SECOND QUARTER EPS COMES IN AT 1.39. TRADING NUMBERS, TWO POINT NINE 6 BILLION, THE ESTIMATE TWO POINT 94. AN UPSIDE SURPRISE. WEALTH MANAGEMENT, NET REVENUE 5.7 BILLION. I GUESS YOU CAN CALL THAT BASICALLY IN LINE. MORGAN STANLEY LOOKING STARK, DOWN MORE THAN 3%. TOM:
I SEE A DIFFERENT STORY THAN JP MORGAN, MUCH MORE FOCUSED. I WOULD SUGGEST IT IS WEALTH MANAGEMENT TO THE RESCUE. I DON'T SEE THE AGONY I SAW IMMEDIATELY FROM JP MORGAN. IN A POWERPOINT MOMENTS AGO, I GOT TO DIVE IN. JONATHAN:
1.0 7 BILLION. I KEEP GOING THROUGH THE NUMBERS . AN ESTIMATE OF 1.2 7 BILLION. YOUR TAKE? SONALI: YOU DO HAVE THEM BEAT ON EQUITIES AND FIXED INCOME WHICH IS A STRONG SHOWING FROM MORGAN STANLEY'S TRADING DESK. YOU HAD JP MORGAN BRINGING IN $3 MILLION OF TRADING EQUITIES REVENUE SO THAT IS A STUNNING SEAT FOR WHAT IS NORMALLY THE BIGGEST TRADING SHOP ON WALL STREET. WEALTH MANAGEMENT TO THE RESCUE, NET INTEREST REVENUE
COMING IN HIGHER AT MORGAN STANLEY. WE TALKED ABOUT THE FACT THAT THE WEALTHIER CAN SOONER MAY WEATHER RISING INTEREST RATE ENVIRONMENT AS WELL AS THE INFLATIONARY ENVIRONMENT BETTER THAN THOSE WHO ARE NOT EARNING AS MUCH. IT IS KIND OF AS SIMPLE AS THAT. JONATHAN: THIS LINE WILL RESONATE WITH PRETTY MUCH EVERYONE. MORE MARKET UNTIL -- MARKET VOLATILE ENVIRONMENT WE'VE SEEN. ALISON WILLIAMS JOINS US.
YOUR TAKE ON THINGS, COMPARE AND CONTRAST MORGAN STANLEY AGAINST JP MORGAN. ALISON: THE BIG DIFFERENCE THIS QUARTER MIGHT BE CAPITAL. MORGAN STANLEY HAS VERY HEALTHY EXCESS CAPITAL.
FOR JP MORGAN AND SOME OF THE OTHER BIG BANKS, FEELING IT FROM BOTH SIDES. PRESSURED BY BOND VALUATIONS ON THEIR ACTUAL CAPITAL RATIO AND REQUIREMENTS ARE GOING UP. THAT WAS THE BIG NEWS WE GOT A FEW WEEKS AGO, THE JP MORGAN, CITIBANK AMERICA REQUIREMENTS GOING UP. JP MORGAN SUSPENDING BUYBACKS TODAY.
WE THINK THAT'S PRUDENT BUT PERHAPS MIGHT HAVE BEEN SURPRISING FOR SOME. IN TERMS OF THE TRADING AND FEES, ONE THING I WILL POINT OUT ON JP MORGAN, THEY HAD A BIG MISS ON FEES BUT THAT WAS A LEVERAGE LOAN RIGHT DOWN. MORGAN STANLEY MIGHT HAVE THAT BUT IN ANOTHER BUSINESS LINE.
EQUITIES TRADING ABOUT IN LINE FOR MORGAN STANLEY, A BIG SURPRISE. INTERESTING THAT MORGAN STANLEY IS THE BIGGEST IN EQUITIES TRADING AND SOFTER THAN JP MORGAN, AND THE REVERSE IS TRUE ON THE FIXED INCOME TRADING. JONATHAN: MORGAN STANLEY DOWN 2.5%. WE WILL KEEP WORKING THROUGH THESE NUMBERS. THE PRESIDENT OF THE UNITED STATES ALONG WITH THE ISRAELI PRIME MINISTER IN JERUSALEM AT THE WALDORF-ASTORIA, THEY WILL TAKE PART IN A NEWS CONFERENCE. ANY HEADLINES, WE WILL BRING THEM. ON THE BANK STORY ON WALL STREET, EQUITIES DOWN 1.3% ON
THE S&P. MORGAN STANLEY, NOT JP MORGAN, BIG DIFFERENCES IN THE NUMBERS. LISA: YOU SEE MORE STRENGTH IN THE MORGAN STANLEY NUMBERS EVEN THOUGH THEY MISSED IN THE HEADLINE FIGURE.
IT IS NOTABLE THE PROFILE OF THESE BANKS. THIS IS MARV A TRADITIONAL WALL STREET BANK IN LINE WITH GOLDMAN SACHS. HOW MUCH CAN THOSE BANKS DO BETTER THAN THOSE MORE EXPOSED TO THE CONSUMER? I DO WONDER AND I WOULD LOVE YOU TO WEIGH IN, HOW MUCH ARE THE CONSUMERS FACING THE BANKS MUCH MORE EXPOSED TO DOWNSIDE SUIT -- SURPRISE VERSUS THE BREAD-AND-BUTTER OF WALL STREET? ALISON: I THINK THAT'S RIGHT BECAUSE NET INTEREST INCOME IS STRONG FOR THOSE LENDERS THAT HAS BEEN A FACTOR DRIVING THE STOCKS SINCE LAST FALL. THIS YEAR REALLY THE TURN HAS BEEN MORE TOWARDS THE OTHER SIDE OF THINGS, THE CREDIT HIT LOSS PROVISIONS. WE DID SEE A RESERVE BUILD A JP MORGAN THAT WAS MORE THAN PEOPLE THOUGHT THAT WILL BE THE FOCUS FOR TRADITIONAL LENDERS WHEREAS MORGAN STANLEY AND GOLDMAN SACHS THAT ARE MORE FOCUSED ON TRADING IN THE CAPITAL MARKETS UNIT SHOULD BENEFIT MORE FROM THE VOLATILITY. GOLDMAN, WE DO EXPECT TO SEE A BIG INCREASE IN THEIR PROVISION.
ESTIMATES HAVE BEEN RISING. IT IS A PERCENTAGE OF THEIR BUSINESS, LESS EXPOSURE. TOM: ON THE BACK END THEY HAVE SOME DIVIDENDS LISTS AND A GENERAL SHARE OF BUYBACK REDUCE. -- REDO. THOSE THAT ARE FANCY GLOBAL WALL STREET AND THOSE LESS SO, THE ABSOLUTE MIRACLE OF AN UNADJUSTED WEALTH MANAGEMENT PRETEXT MARGIN OF 28.2%.
TO ME, THAT MARGIN IS A NEAR ACTIVE GUIDE. HOW DO THEY DO THAT? HOW DO THEY MAKE THAT SO DAY ON THEN PROFIT UP -- HOW DO THEY MAKE THAT SO DAMN PROFITABLE? ALISON: WEALTH MANAGEMENT. ASSET VALUES ARE GOING DOWN SO THAT MEANS LOWER FEES BUT HIGHER RATES ARE A BOOST TO THE WEALTH MANAGERS AND ESPECIALLY MORGAN STANLEY WITH THEIR ACQUISITION OF E*TRADE, GETTING A LIFT. TOM: I CAN'T SAY ENOUGH ABOUT IT. WHAT I SEE WORLDWIDE AS EVERYBODY IS TRYING TO COPY JAMES GORMAN, AM I RIGHT? ALISON: WEALTH MANAGEMENT, JAMES GORMAN IS SORT OF INACTIVE BUYER BUT I WOULD SAY UBS AND CREDIT SUISSE, CREDIT SUISSE TILTING MORE TOWARDS IT, UBS HAS BEEN SHORING FOR A LONG TIME.
ALL THE BANKS GLOBALLY, TO YOUR POINT, TRYING TO INCREASE THEIR EXPOSURE TO THIS BUSINESS. KEEP IN MIND THIS ISN'T JUST A CYCLICAL HELP FROM HIGHER RATES BUT THE LONG-TERM STORY IN TERMS OF WEALTH CREATION ESPECIALLY IN ASIA AND FINANCIAL SERVICES. JONATHAN: MORGAN STANLEY DOWN A LITTLE MORE THAN 1%, DOWN 2.7 ON JP MORGAN.
WE'VE GOT A DECENT INSIGHT ON THE RANGE OF BUSINESSES AND WALL STREET FROM TWO NAMES. AS WE SET THINGS UP FOR BANK OF AMERICA, GOLDMAN, CITI, WHAT DO YOU SEE? SONALI: BOY, IS THAT TRADING ENVIRONMENT COMPETITIVE WHEN YOU LOOK AT THE SET UP FOR GOLDMAN SACHS. THEY HAVE TO BEAT OUT ON INCOME AND EQUITIES. YOU SEE JP MORGAN BLOW IT OUT OF THE WATERS COMPARED TO MORGAN STANLEY. I DON'T REMEMBER THE LAST TIME THEY BEAT THEM. MORGAN STANLEY GAINING SHARE IN
FIXED INCOME, A FEW YEARS AGO IT WAS UNHEARD OF THEM TO BE MAKING MORE THAN $2 BILLION IN FIXED INCOME TRADING. THAT AND THE PRESSURES, YOU HAVE ASSET MANAGEMENT DOWN MEANINGFULLY IN TERMS OF REVENUE AT MORGAN STANLEY. JP MORGAN AND GOLDMAN SACHS ARE THE BIGGEST ASSET MANAGERS IN THE WORLD. IT IS NOT IMMATERIAL IF YOU SEE DECLINES IN THOSE BUSINESSES EVEN WITH THOSE BLOWOUT FIGURES INVOLVING MANAGEMENT BEATING ON PRETAX MARGINS WHEN YOU EXCLUDE THE INTEGRATED RELATED EXPENSES. GOLDMAN SACHS WANTS TO TAKE SOME OF THAT AND WEALTH MANAGEMENT. LISA: THERE IS THE PARLOR GAME AND HORSERACE OF WHO GETS ONE BUSINESS -- WHAT BUSINESS AND THE DOLLAR HIGHER ON THE HEELS OF THESE REPORTS BECAUSE THERE IS A MACRO WAGER IN A HOLDING FACTURE BUYBACK AND BUILDING THE CREDIT -- I'M WONDERING IF YOU ARE WAITING TO SEE -- WAITING TO HEAR SIMILAR STORIES TO SEE IF THEY ARE POSITION FOR A DIFFICULT NEXT COUPLE OF MONTHS BECAUSE THEY ARE MORE EXPOSED TO RID SENTIENT -- RECESSION BETS. SONALI: THE MACRO GOT EVEN HARDER AND
YOU HEARD THEM MUTE EXPECTATIONS. WELLS FARGO WILL BE INTERESTING GIVEN THEIR TIED TO THE CONSUMER AND MORTGAGE MARKET. BANK OF AMERICA HAS BEEN GUIDING THE CONSUMERS STEADY BUT WILL THEY SHARE THE SAME CONCERN OF CHARGE-OFFS? VALUATION, MORGAN STANLEY IS COMMITTED TO BUYING BACK $20 MILLION WORTH OF STOCK WHILE JP MORGAN IS SUSPENDING BUYBACKS. MORGAN STANLEY IS ALSO MORE EXPENSIVE. ALL OF THESE BUSINESSES ARE
STILL VERY VOLATILE AND SUBJECT TO THE MACRO ENVIRONMENT. TOM: ALISON WILLIAMS, LOOKING AT HEADCOUNT. JP MORGAN $260,000, MORGAN STANLEY 78,000 NOW. WHO ARE THEY HIRING? ALISON: I THINK IN GENERAL THE HIRING WE WILL SEE THIS QUARTER RELATES TO SOME OF THE CAMPUS HIRES COMING ON. FOR MORGAN STANLEY, PROBABLY THE BIGGER STORY WHICH I THINK BLOOMBERG HAS REPORTED ON HIS MORTGAGE BANKING, A BUSINESS WHERE WE EXPECT TO SEE HEADCOUNT COMING DOWN.
IN GENERAL, YOU POINTED TO THE BIG EMPLOYEE BASE OF JP MORGAN VERSUS MORGAN STANLEY. KEEP IN MIND THE BRANCHES THEY HAVE THAT REALLY SORT OF FUEL THAT HIGHER STAFFING, THE LONG-TERM STORY IN TERMS OF RESIZING THOSE BRANCHES AND BECOMING MORE DIGITAL AND THE LIKE. I WOULD SAY THE ONE THING WE ARE FOCUSED ON AS WELL THIS QUARTER WITH GLOBAL INVESTMENT BANKS IS THE COMPENSATION PRESSURE AND WHAT'S HAPPENING WITH THE INVESTMENT BANKING HEADCOUNT BECAUSE THAT'S WHERE WE SAW PRESSURE COMING INTO THIS YEAR, RECORD IPO'S AND MNA LAST YEAR.
OBVIOUSLY THAT IS NOT THE STORY THIS QUARTER AND AS WE LOOK TO THE SECOND HALF AND LISTEN FOR INVESTMENT BANKING PIPELINES AND EXECUTION, WE THINK THERE COULD BE MORE SOFTNESS. JONATHAN: IT'S A VERY DIFFERENT YEAR, ALISON WILLIAMS ALONGSIDE SONALI BASAK. FUTURES DOWN BY 1.4%. WE WILL PUSH THIS FORWARD TO A CONVERSATION ABOUT THE ECONOMIC DATA IN AMERICA. EIGHT: 30 AM, PPI DATA, FACTORY -- JUST WANT TO TAKE YOU TO EUROPE. TAKE A LISTEN TO THIS FROM PRESIDENT MACRON -- WE HAVE TO PREPARE FOR THE POSSIBLE CUT OF RUSSIAN GAS AND THE CITIZENS
2022-07-18 15:23
