Bloomberg Surveillance 07/18/2022 Big Bank Earnings
>> THE SELLOFF IS ROOM AS IT SEEMS HAS BEEN ORDERLY. >> MAINSTREAM SEEMS TO BE DOING BETTER. >> REAL WAGES ARE DECLINING. REAL HOUSEHOLD INCOME IS GOING
DOWN. >> THE CONSUMER IS VERY STRESSED RIGHT NOW >> -- NOW. >> RETAIL SALES PLUS CORPORATE EARNINGS EQUALS THE U.S. CONTINUES TO OUTPERFORM. JONATHAN: LIVE FROM NEW YORK CITY, FOR OUR AUDIENCE WORLDWIDE, GOOD MORNING, GOOD MORNING. THIS IS "BLOOMBERG SURVEILLANCE, LIVE ON TV AND RADIO."
FUTURES POSITIVE .9% ON THE S&P. THE NASDAQ 100 UP. COUNTING DOWN TO A BIG CENTRAL BANK DECISION. JONATHAN: YOU HAVE THE -- TOM: YOU HAVE THE ECB AND THEN WE HAVE THE FEDERAL RESERVE WITH 75 OR 100 BASIS POINTS. I SAW AN ARTICLE ON LUXURY SALES AND EARNINGS THE DOW UP 254 POINT THIS MORNING.
JONATHAN: GOOD NEWS FOR WALL STREET. NO MORE FED SPEAK. IT LOOKS LIKE 75 BURNED MORE -- A WALL STREET JOURNAL -- IT LOOKS LIKE 75 POINTS BARRING A WALL STREET JOURNAL ARTICLE. TOM:
OIL MAYBE WITH A LITTLE ELEVATION SHOWS SOME OF THE BETTER FEELING ABOUT EARNINGS. JONATHAN: GOLDMAN AND BANK OF AMERICA ON DECK. KAILEY: COMING OFF OF A MONSTER RALLY FOR THE BANK. CITI WAS UP SOME 13%. THE LOSS -- THE QUESTION WILL BE ON THE LOAN LOSSES. AND FOR GOLDMAN, WHAT DO THE INVESTMENT BANKING FEES MEAN AND DOES THE OUTLOOK IMPROVE IN THE BACK HALF OF THE YEAR? JONATHAN: RATE HIKES WE HAVE LEARNED ARE GOOD FOR PROFITS BUT NOT GOOD FOR BANK STOCKS SO FAR THIS YEAR. KAILEY:
IT HAS BEEN A CATCH 22 FOR THE BANKS. BANKS ARE GOING HIGHER AND YOU ALSO HAVE A DEEPLY INVERTED CURVE AND CONCERN ABOUND -- ABOUT RECESSION. JONATHAN: RECESSION ON, RECESSION OFF SEEMS TO BE THE TRADE.
DOES THAT GET YOU EXCITED FOR THE WEEKEND? TOM: IT DOESN'T, AND I HAD THE PRIVILEGE OF SPEAKING WITH LAWRENCE SUMMERS ON WALL STREET WEEK ON FRIDAY. I THOUGHT LARRY WAS BRILLIANT ABOUT THE FOOLISHNESS OF GAMING ALL OF THIS. THE WORD RECESSION AS A FORECASTER GUESSTIMATE OF A NUMBER OF MOVING PARTS. YOU JUST HAVE TO GET ONE OF THEM WRONG TO BE WRONG. JONATHAN: THE LABOR MARKET AT THE EPICENTER. FUTURES UP .9% ON THE S&P. THE NASDAQ 100 UP. STRONG AND TO THE WEEK WITH A
STRONG TILT INTO THE FINANCIALS. THE BANKS FINISHING REALLY STRONGLY ON FRIDAY'S SESSION. YIELDS UP BY FIVE BASIS POINTS ON A 10 YEAR. EURO-DOLLAR, WHAT A WEEK AHEAD FOR EUROPE. KAILEY: IT IS GOING TO BE INTERESTING AND EXACERBATED BY THE TURMOIL IN ITALY. HOW DOES THE ECB KEEP CONTROL
OF THE PERIPHERY IF YOU HAVE THAT KIND OF CRISIS? THAT IS LATER THIS WEEK. THERE ARE A NUMBER OF THINGS WE ARE LOOKING AT. BANK EARNINGS, BANK EARNINGS. CAN MAKE CONTINUE THE MOMENTUM WE SAW? WHAT ARE THE CREDIT PROVISIONS LOOKING LIKE AND BAKING REVENUE FOR GOLDMAN? AT 10:00 I'M AT THE NATIONAL ASSOCIATION OF HOMEBUILDERS HOUSING INDEX -- AT 10:00, THE NATIONAL ASSOCIATION OVAL WAY TO LOSE -- THE NATIONAL ASSOCIATION OF HOMEBUILDERS HOUSING INDEX. CONSUMERS WARY ABOUT HIGH PRIZING PUTTING A DAMPER ON SALES. AT 4:00 P.M. EASTERN, FLOWS FOR THE MONTH OF MAY. THERE IS A LAG TO THE CAPITAL DATA, SIX-WEEK LAG, BUT IT COULD HELP EXPLAIN THE MOVEMENT OF DOLLAR AND THE TREASURY OF BUYING FROM CHINA COULD BE INTERESTING.
WE EXPECT THE CHINA HOLDING OF U.S. DEBT COULD FALL BELOW $1 TRILLION FOR THE FIRST TIME SINCE 2010. JONATHAN: THE U.S. NATIONAL AVERAGE GASOLINE PRICE HAS BEEN DOWN EVERY SINGLE DAY SINCE JUNE 13. ASKED WEEK, COMMODITIES CONTINUE TO GET HAMMERED. -- AND LAST WEEK, COMMODITIES CONTINUED TO GET HAMMERED. TOM: WE STILL HAVE INFLATION AND IT APPEARS TO BE PERSISTENT AND DRIVES THE HIGH NOMINAL GDP. TO ME, THE ULTIMATE MYSTERY TO
GET TO PELFREY, IS WHAT IS THE REVENUE LINE GOING TO BE? WE DON'T HAVE A CLUE. JONATHAN: PATRICK PELFREY JOINS US NOW. PATRICK, LET'S START HERE. THE HOUSE VIEW IS MUCH MORE CONSTRUCTIVE ON EARNINGS ON WALL STREET AND BEYOND THAN THE REST. CAN YOU JUST GO THROUGH IT? WHY IS THAT YOUR VIEW?
PATRICK: THE QUESTION IS, WHAT HAPPENS WITH NOMINAL GDP AND WE MEASURE CORPORATE PROFITS ON A YEAR-TO-YEAR BASIS. THIS YEAR NOMINAL GDP EXPECTED TO BE AROUND 8% FOR 2022. THAT IS A BIG NUMBER. THAT IS SUPPORTING THE REVENUE TRENDS. RIGHT NOW, REVENUE EXPECTATIONS .2 GROWTH AT 10% AND THAT WILL SUPPORT REVENUE GROWTH WITH THE REMAINDER OF THE YEAR.
IT ULTIMATELY HELPS PROPEL THE BOTTOM LINE. THAT IS HOW WE GET TO STRONG REVENUE. THE QUESTION IS WHAT HAPPENS TO MARGINS.
ANY COMPANIES BENEFIT FROM MARGINS AS THEY LEVERAGE. ACROSS THE BENCHMARK IN GENERAL, WE SEE GOOD MARGIN LEVERAGE. TOM: WHAT IS THE SURPRISE OF SIX WEEKS, EIGHT WEEKS IN EARNINGS? WHAT IS THE GUESSTIMATE YOU HAVE ON HOW WE WILL ALL BE SURPRISED AUGUST 15? PATRICK: AS WE LOOK TOWARD THE END OF EARNINGS SEASON, WE ARE SEEING GROWTH AROUND 5%.
WE EXPECT IT TO COME IN AT A HEALTHY LEVEL. WHAT IS IMPORTANT IS THERE ARE GROUPS THAT ARE PROBLEMATIC, FINANCIALS IS AN AREA WHERE LAST YEAR'S RESERVE RELEASES WERE CYCLING. IT IS DIFFICULT FOR THE GROUP AND IF YOU TOOK OUT FINANCIALS, YOU COULD SEE A BACKUP AROUND 13% 14% THESE ARE NUMBERS MOST INVESTORS SALIVATE OVER IN NORMAL TIMES. KAILEY: YOU ARE TALKING ABOUT EARNINGS
AND PRICES HAVE COME DOWN. OUR VALUATIONS AT A POINT WHERE THEY ARE ATTRACTIVE ENOUGH WHERE WE WILL SEE REENTRY AND WHERE WOULD THAT BE? PATRICK: WE STARTED THE YEAR AROUND 21.5. AS INFLATION CAME IN AND THE EXPECTATION OF FED INCREASES, WE EXPECTED TO BE REMOVED HERE RIGHT NOW WE HAVE A PE INCREMENTALLY ABOVE AVERAGES. THERE IS PLENTY OF OPPORTUNITY AND THOSE OTHER ONES SEEING GROWTH. ETF'S ARE GROWING FASTER THAN WHAT YOU SEE WITH THE DEPRECIATION. A LOT OF THE VALUATION STORY HAS BEEN CORRECTED.
THE QUESTION IS WHETHER WE WILL HEAD INTO A RECESSION. JONATHAN: WHEN YOU LOOK AROUND AND SAY, WE ARE WRONG? PATRICK: WE ARE WRONG IN TERMS OF THE FORECAST FOR EPS. WE TOOK OUR CALL DOWN. I THINK THE REFLECTION OF OUR
CALL COMING IN WAS THE WIDENING CREDIT SPREAD, THE NATURAL VOLATILITY PRICED IN AND THE VALUATION RATING. THE QUESTION BECOMES, AS WE MOVE THAT THE BACK HALF OF THE YEAR, WHAT DO WE GET BACK? WE THINK CREDITS WILL COME IN AND THE MACRO UNCERTAINTY WILL FADE AND THAT WILL DRY US -- DRIVE US HIGHER. TOM: IS THERE A DISTINGUISHING BETWEEN PROFIT AND WILL THAT BE INTO 2023? PATRICK: WHAT WE SEE WHEN WE TAKE A LOOK AT THE REGROUPING OF STOCKS I PROFIT MAKING OR MARGINS, YOU ARE SEEING COMPANIES WITH BETTER MARGINS SWINGING INTO FAVOR OVER THE PAST SIX TO EIGHT WEEKS THAT STORY WAS VALUE LEAD FOR THE FIRST SIX MONTHS OF THE YEAR. CHEAPER COMPANIES DID BETTER. THE FOCUS NOW IS ON MARGINS OF QUALITY, INCREMENTALLY ON GROWTH AND THAT IS WHERE WE ENCOURAGE INVESTORS TO LOOK.
A LOT OF THAT IS TAKING PLACE IN CYCLICAL. IT CAN BE STAPLES, HEALTH CARE. AT THE QUALITY COMPANIES. JONATHAN: PATRICK AND THE TEAM LOOKING FOR 4300 YEAR AND. WONDERFUL FOR YOU TO CATCH UP.
PATRICK PALFREY OF CREDIT SUISSE. AT 730 EASTERN TIME -- 7:30 EASTERN TIME, WE SHOULD HEAR FROM GOLDMAN. THE BOJ IS THE STORY THIS WEEK. TOM: IT IS OUT THERE AND OVER THE WEEKEND IT IS IN THE RESEARCH. THE WONDERFUL SETH CARTER AT MORGAN STANLEY WITH THE JAPANESE TEAM MAKES A VERY SUBTLE SHIFT. THEY WILL CONTINUE YIELD CURVE
CONTROL OUT INTO NEXT YEAR, INTO Q2 OF NEXT YEAR. THAT IS A HUGE DEAL FROM AN INCREDIBLY INFORMED HOUSE. JONATHAN: WHAT I ENJOYED IS HIGHLIGHTING THE DIFFERENCES BETWEEN RATE POLICY OVER THE NEXT 12 MONTHS. THE BOJ OWNS 2% OF THE GTP MARKET AND SINK UPSIDE RISK TO THAT. TOM: THE POLITICAL ECONOMICS, WE DON'T EMPHASIZE ENOUGH THE POLITICS AND OFF OF THE A TERRIBLE ASSASSINATION OF ABE AND LACK OF OPTIONALITY AND DEGREES OF FREEDOM WITH DRIVE YOU -- WITH DRAGHI. JONATHAN:
I DID NOT CATCH UP WITH MR. DRAGHI. TOM: I THOUGHT YOU WERE HAVING A COCKTAIL. JONATHAN: I WOULD LOVE TO CATCH UP ON THE ITALIAN MARKET AND THE ECB AS WELL. WE WILL SEE HOW MUCH OF A MARKET WE WILL HAVE IN ITALY. TOM: YOU SHOULD HAVE SEEN THE PHOTOS THAT KAYLEE HAD -- KAILEY HAD. JONATHAN:
IS THERE SOMETHING I DON'T KNOW? TOM: SHE DID A REMOTE THEIR. LIKE CATHERINE HAVE -- REMOTE THERE. LIKE KATHERINE HEPBURN DID. JONATHAN: GOOD MORNING TO YOU.
THIS IS BLOOMBERG. ♪ >> KEEPING YOU UP-TO-DATE. A U.S. ENERGY ENVOY OPTIMISTIC. OIL OUTPUT INCREASES AFTER BIDEN'S VISIT.
IT IS SAID THERE WILL BE A FEW MORE STEPS IN THE COMING WEEKS SAUDI OFFICIAL SAY ANY DECISION TO PUMP MORE WOULD BE MADE WITHIN OPEC-PLUS. THE INTERNATIONAL MONETARY FUND SAID IT WILL CUT ITS GLOBAL ECONOMIC OUTLOOK SUBSTANTIALLY IN THE NEXT UPDATE. THAT CAME AFTER G20 FINANCE MINISTERS AND CENTRAL BANK GOVERNORS ENDED THE MEETING WITHOUT AGREEING.
THE IMF DOWNGRADED OUTLOOK FOR GROWTH AFTER RUSSIA INVADED UKRAINE. IN THE U.K., A CANCELLATION OF THE FINAL DEBATE OF THE PARTY CANDIDATES. TWO OF THE FIVE CAME OUT OF THE DEBATE AFTER IT TURNED PERSONAL AND ACCUSING OF SOCIALISM. A VOTE TODAY TO A LIMITED ONE OF THE CANDIDATES. A NEW REPORT BLAST THE POLICE
RESPONSE TO THE ELEMENTARY SCHOOL SHOOTING IN UVALDE, TEXAS. IT SET ALMOST 400 LAW ENFORCEMENT OFFICIALS RUSHED TO THE SCENE BUT POOR DECISION-MAKING RESULTED IN AN HOUR OF CHAOS BEFORE THE GUNMAN WAS KILLED. 19 STUDENTS AND TWO TEACHERS WERE KILLED AND THE ATTACK. GLOBAL NEWS 24 HOURS A DAY, ONLINE AND AT QUICKTAKE ON BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. ♪ >> I'M DOING ALL I CAN TO INCREASE THE SUPPLY FOR THE UNITED STATES OF AMERICA.
>> THERE IS A POTENTIAL SHORTAGE. LET'S WORK ON INCREASING CRUDE OIL PRODUCTION WITH OUR OPEC PARTNERS AND OPEC-PLUS PARTNERS. >> WE WANT TO SEE MORE SUPPLY. THAT HELPS TO DEPRESSURIZED AND KEEP COSTS DOWN. JONATHAN: GOOD MORNING. COUNTING DOWN TO THE CENTRAL BANK DECISION WITH FEATURES POSITIVE ONE FULL PERCENTAGE POINT. ON THE NASDAQ, UP 1.2.
CRUDE IN FOCUS, THE BPI -- W TI UP. FURTHER STEPS EXPECTED IN THE COMING WEEKS ON CRUDE OUTPUT FROM OPEC LATER IN AUGUST. TOM: WE WILL HAVE TO SEE FROM HERE. THE FIST BUMPING REALLY TOOK FRONT AND CENTER. WHAT WE NEED TO DO IS UNDERSTAND THAT IN LIEU OF SCARLET FU TO UNDERSTAND WHAT IS REALLY GOING ON WITH BEN AFFLECK AND J. LO, WE HAVE TO GO TO ANNMARIE HORDERN. SHE JOINS US EXHAUSTED FROM THE TRIP THIS MORNING.
I KNOW YOU HAVE TO HAVE A SUBSCRIPTION TO THE CLUB TO GET THE SCOOP OF WHAT IS GOING ON WITH THE WEDDING. BUT THE WEDDING IS ABOUT JOE MANCHIN. WHO IS GIVING HIM LOVE IN WASHINGTON AND THE REAL J LOVERS CLUB? ANNMARIE: HE IS NOT GETTING MUCH LOVE. THE FACT THAT HE IS SAYING NO AT LEAST AHEAD OF AUGUST FOR A BIGGER PACKAGE THAT WOULD MEAN TAX HIKES AND PROVISIONS TO FIGHT CLIMATE CHANGE DOES MEAN THAT SENATOR MITCH MCCONNELL IS LIKELY GOING TO HAVE THE REPUBLICANS SIGN UP WHICH WOULD BE A BIG DEAL. THAT IS A BILL THAT EVERYONE IN
WASHINGTON IS COALESCING AROUND BECAUSE IT MEANS YOU CAN COME BACK CHINA AND HAS 52 BILLION DOLLARS FOR THE SEMICONDUCTOR INDUSTRY. WHEN IT COMES TO HIS OWN PARTY, WHAT A WELCOME HOME FROM HIS PARTY FROM HIS TOUGH TRIP TO THE MIDDLE EAST. HE IS NOW SEEING HIS ECONOMIC POLICY PUSHBACK. JONATHAN: WALK ME THROUGH WHAT WE CAN EXPECT IN THE COMING WEEKS AND MONTHS. ANNMARIE:
THERE WAS NO AGREEMENT, ESPECIALLY FROM OIL ON A MEETING. YOU DO HERE U.S. OFFICIAL SAYING IN THE COMING WEEKS. THAT POINTS YOU TO AUGUST 3 WHEN THE NEXT PASS -- THE NEXT OPEC-PLUS MEETING WILL BE. WHEN I TALKED TO A TOP SAUDI DIPLOMAT, THEY SAY THEY NEED TO SEE THE SUPPLY AND DEMAND DYNAMIC.
FOR SAUDI ARABIA, THIS IS A DELICATE MOMENT. IF THEY ARE GOING TO POP -- PUMP MORE OIL, THEY HAVE TO GET WORK GROUPS ON BOARD. THIS DOES SET A DIFFICULT STAGE THEY WANT PRICES TO COME DOWN AS SOON AS POSSIBLE, AND WE ARE UNDER PERFORMANCE AWAY FROM THE MIDTERM ELECTIONS. IF THERE IS AN AGREEMENT IN AUGUST, YOU WILL SEE THAT CLOSE TO NOVEMBER IF IT WILL HAVE ANY IMPACT ON PRICES. KAILEY: WHAT HAS THE RECEPTION BEEN LIKE AT HOME TO BIDEN'S TRIP AND THE FIST BUMP TOM ALLUDED TO? ANNMARIE: THE OPTICS HAD TAKEN OVER THE ENTIRE TRIP, AND IT HAS NOT BEEN GOOD YOU HAD SANITY -- SENATOR BERNIE SANDERS SAYING NO U.S. PRESIDENT SHOULD BE GOING TO SAUDI ARABIA FOR THIS TYPE OF GOVERNMENT.
PRESIDENT BIDEN TRIED TO OSTRACIZE THIS INDIVIDUAL AND THEN YOU HAVE HIM GIVING A FIST BUMP AND HAVING A DIRECT MEETING WITH HIM. PRESIDENT BIDEN SAT ACROSS FROM THE CROWN PRINCE WHICH LEGITIMIZED HIM AS THE LEADER OF COUNTRY, SOMETHING THE ADMINISTRATION DIDN'T WANT TO DO. THE HUGE COUP FOR THE SAUDI'S IN GEOPOLITICS AND WHETHER OR NOT THE PRESIDENT GETS WHAT HE WANTS DONE, WE WON'T KNOW FOR A FEW WEEKS. TOM: IS A COUP FOR THE GOP? WOULD THEY HAVE DONE ANYTHING DIFFERENT? ANNMARIE: PRESIDENT TRUMP WENT TO SAUDI ARABIA ON HIS FIRST TRIP AND GOT THE FULL FANFARE.
HE DID THE SWORN DANCE WHICH IS TYPICAL -- SWARD DANCE WHICH IS TYPICAL. IT WAS TONED DOWN AT THE REQUEST OF U.S. OFFICIALS THEY DID NOT WANT THIS, AND CIRCUMSTANCE AND THEY TRY TO TONE IT DOWN AND MAKE IT LOOK LIKE A WORKING MEETING. YOUR OPTIMISM AND GOALS WHEN YOU ARE CAMPAIGNING DOES NOT MEET THE MOMENT WHEN YOU ARE IN THE WHITE HOUSE. JONATHAN: AMH BACK AND MANAGES START ABOUT J. LO AND BEEN ATHLETIC. WE APPRECIATE IT -- AND BEN AFFLECK. WE APPRECIATE IT.
IT WASN'T PRESIDENT TRUMP WITH THAT HE WOULD MAKE THIS PRESIDENT PROMISED TO DEAL WITH THE KING AND CROWN PRINCE. THE PRESS SECRETARY AT THE TIME SAID THE PRESIDENT WOULD BE DEALING WITH THE COUNTERPART AND IT IS SOMETHING THAT SECRETARY BLINKEN SHOULD BE DEALING WITH. A LOT HAVE CHANGED. TOM: A LOT HAS CHANGED WITH THE OIL PRICES. WHAT IS IMPORTANT WITH THE OIL FAMILY IS HOW FAR WE ARE FROM THE ROBERT LACEY BOOKS I READ 30 YEARS AGO.
WE JUST REMOVED, NOT A SPECIAL RELATIONSHIP WITH SAUDI ARABIA BUT THE HISTORY OUT OF WORLD WAR I AND WORLD WAR II. JONATHAN: THE GOOD NEWS FOR THIS ADMINISTRATION AND THE AMERICAN PEOPLE IS THAT GAS PRICES HAVE BEEN COMING DOWN. WE HAVE TALKED ABOUT IT COMING DOWN EVERY DAY SINCE THE MIDDLE OF JUNE. WE SAW THAT FACTOR INTO EXPECTATIONS AS WELL. THAT CAME DOWN IN WHAT HAS BEEN HAPPENING WITH GAS PRICES. AND WE COULD GET A 75 BASIS POINT HIKE FROM THE FED. RECESSION RISK CLIMES AND INFLATION COMES DOWN AND WE HAVE A DIFFERENT STORY. TOM: THIS IS LIKE GETTING THE KIDS
STARTED ON THEIR SUMMER READING. IT PROVES DIFFICULT. YOU MENTIONED LAST WEEK THAT IT IS PASSED DOWN FROM 9% TO WHAT AND THEN WHAT AND THE THAN WHAT AND WHEN IS THE THEN WHAT IS THE BIG MYSTERY. JONATHAN: FOR ME, IT WAS NEVER ABOUT 75 OR 100 BASIS POINTS AT THE JULY MEETING IT WAS WHETHER YOU LOOK AT THAT LAST WEEK AND THOUGHT THERE WERE REASONS TO BELIEVE THIS IS STICKY AND UPSIDE RISK TO FED FUNDS IN THE SECOND HALF OF THE YEAR OR YOU JUST LOOKED AT IT AND SAID, THIS IS THE WORST OF IT. ENERGY AND COMMODITY PRICES ARE COMING IN. ANNMARIE: -- KAILEY: THAT IS WHAT WE SAW AT THE RALLY AT THE END OF THE WEEK. IT IS NOT THEY DO ABOUT WHAT THEY DO IN JULY BUT HAS OUR ASSESSMENT OF WHAT THE TERMINAL RATE IS LIKELY TO CHANGE AND HOW QUICKLY THEREAFTER DO WE SEE CUTS COMING IN? YOU HAVE SEVERAL FORECASTING LARGER HIKES THIS WEEK LOOKING AT CUTS OUT IN 2023. JONATHAN:
CITIGROUP THINKS WE NEED TO GET TO 4% BY YEAR END. FUTURES UP MORE THAN 1% ON THE S&P 500. YIELD HIGHER BY FOUR BASIS POINTS. JONATHAN: GOOD MORNING. MOMENT AWAY FROM BANK OF AMERICA EARNINGS. AN HOUR FROM NOW YOU WILL HEAR
FROM GOLDMAN. FUTURES UP BY 1%. ON THE NASDAQ, UP 1.2%. BRAMO WOULD WANT TO TELL YOU WHERE THE BOND MARKET IS. THE FED DECISION NEXT WEEK, YIELDS HIGHER BY FOUR BASIS POINTS. ON A TWO-YEAR COME UP BY A COUPLE OF BASIS POINTS. JUST WRAP THINGS UP, A PEAK WEEK AHEAD FOR THE ECB, BETWEEN A ROCK AND A HARD PLACE.
DOLLAR-YEN FACING WEAKNESS, DOWN BY .3%. EURO-DOLLAR DOWN BY .8%. THIS DECISION FOR THE ECB THIS WEEK, I DO NOT ENVY THEM. I AM NOT SURE THERE IS A POLICYMAKING -- POLICYMAKER THAT ENVIES THE CURRENT POSITION. TOM: HOW DOES MADAME LAGARDE SAVE FACE FOR ALL? IS IT CALLED THE FRAGMENTATION? JONATHAN: THE ANTI-FRAGMENTATION. TOM: YOU ARE GONE.
YOU HAD A FOUR-DAY TRIP. THE DRAGHI THING IS IMPORTANT. HOW DOES HIS TURMOIL AFFECT LAGARDE? JONATHAN: IF YOU GET A CHANGE IN THE ITALIAN GOVERNMENT AND IT SHIFTS ONE SIDE TO THE OTHER, WHATEVER IT IS, AS SPREADS WIDEN IS IT FOR UNWARRANTED REASONS AND THE ECB CONSIDERS THAT THERE WORLD TO COME BACK IN. I DON'T KNOW ABOUT THAT AND THEY ARE IN A TOUGH PLACE. TOM: WE ARE GOING TO DIVE INTO A HALF-HOUR OF MYSTERY. USUALLY COMES OUT WITHIN A MINUTE WITH EACH OTHER EVEN THE EARNINGS.
BANK OF AMERICA, SOMEWHERE BETWEEN NOW AND THEN THEY WILL COME OUT WITH EARNINGS. KAILEY LEINZ WILL DIVE INTO THE ANALYSIS. SOMEONE WHO KNOWS KEN LEWIS IS KEN LEON FROM CFRA. THE FOUR MAJOR BANKS AND THE GREAT FINANCIAL CRISIS.
IT IS ABSOLUTELY STUNNING THE DEGREE BRIAN MOYNIHAN HAD TO PICK UP. IT IS 2.1% PER YEAR FOR BANK OF AMERICA. THAT WAS THE DEBRIS HE PICKED UP AND PICKED IT UP AND CUT COSTS. IS HE AT A POINT OR HE WILL CUT COSTS AGAIN? CAN: FIRST -- KEN: YOU ARE RIGHT. IF WE DO SEE FURTHER WEAKNESS IN THE CAPITAL MARKETS, I THINK BY DECEMBER, THE BANK WILL HAVE TO LOOK AT WHETHER THEY HAVE TOO MANY PEOPLE IN TERMS OF INVESTMENT BANKING.
I DON'T THINK WE WILL HEAR THAT TODAY BUT FOR THE BACK PART OF THE YEAR. TOM: WE KNOW THE CALENDAR ON THIS AND YOU FRAME UP FEBRUARY BONUSES IN THE DISTANT DARK OF THE FOURTH WEEK OF SEPTEMBER. IT IS ALL OF THAT GOING TO BE MOVED FORWARD THIS WEEKEND -- THIS YEAR? KENNETH: I THINK ABLE DO THE WORK IN AUGUST TO SEE IF WE CONTINUE TO SEE INVESTMENT BANKING FEES DOWN 60% FOR THE YEAR AS WE SAW FOR THE FIRST HALF OF THE YEAR, THEN OBVIOUSLY YOU DON'T NEED A LARGE MACHINE IN TERMS OF EQUITY UNDERWRITING IN PARTICULAR IPO'S. JONATHAN: WE KNOW RATE HARKS ARE GOOD FOR NOT INCOME. AT THIS STAGE OF THE CYCLE, WHAT ABOUT BANK STOCKS? KENNETH: THEY ARE STILL GOOD. WIDENING SPREADS AND HIGHER NET
INCOME. BUT THE BEST CASE FOR BANKS IS NOT ONLY THE HIGHER RATES BUT HIGHER VOLUMES. WHAT WE SAW FROM LAST WEEK AND TODAY FOR BANK OF AMERICA IS EASING CONSUMER LOAN ACTIVITY. WE ARE NOT IN THE DARK DAYS YET, AND THAT WOULD BE WHERE THERE IS A SIGNIFICANT RISE IN PROVISION FOR LOAN LOSSES. THE BANK CREDIT RISK COMMITTEES
CAN ONLY BOOK THEY SEE TODAY. IT IS A REAL INDICATOR BUT NOT FORWARD INDICATOR. IS THAT -- JONATHAN: IS THAT ENOUGH? KENNETH: CITIGROUP UP 13% LAST FRIDAY AND ANY GLIMPSE OF POSITIVE NEWS, EVEN IF THE TREND SEEMS TO BE STILL UNCERTAIN OR NEGATIVE WILL MOVE STOCKS BECAUSE THEY ARE TRADING AT RIDICULOUSLY LOW, 52-WEEK LOWS. ESPECIALLY BANK OF AMERICA. TODAY'S STORY WITH BANK OF AMERICA IS THAT THIS IS A PREMIER BANK AND CERTAINLY SHOULD SHOW BETTER METRICS THAN CITIGROUP OR WELLS FARGO. KAILEY: DO YOU EXPECT BANK OF AMERICA WILL FOLLOW CITIGROUP? KENNETH: THEY ARE GOING TO HAVE TO. WE DIDN'T GET ENOUGH PRESS WITH THE FED.
THE CAPITAL BUFFER HAS TO BE WIDENED FOR BANK OF AMERICA. I SUSPECT THEY WILL SOFTLY TALK ABOUT HOLDING OFF BUYBACKS FOR NOW AND MAYBE LOOK AT IT IN THREE MONTHS. THEY ARE GOING TO HAVE TO DO THAT.
THERE WASN'T A BLOCKBUSTER YEAR FOR THE FED STRESS TEST. THE BUSINESS FOR MANY IS GROWING HIGHER AND THE YIELDS FOR THE STOCKS ARE 3.5%, 4%. KAILEY: IF THEY NEED HIGHER CAPITAL BUFFERS, BASED ON THE RESULTS WE HAVE ALREADY SEEN COME WHAT IS YOUR THOUGHTS ON THE HEALTH OF THE ECONOMY AND CONSUMER, BECAUSE EXECUTIVES THINK IT IS STILL SUNNY FOR NOW BUT THE HURRICANE WINDS ARE OUT THERE SOMEWHERE FOR JAMIE DIMON. KENNETH: ON THE STRESS TEST, IT IS ALICE IN WONDERLAND. WE ARE TALKING ABOUT 10% TO 14% UNEMPLOYMENT RATE. IT IS A DANCE THE FED DOES WITH THE BANKS BECAUSE OF THE FINANCIAL CRISIS.
SO REALITY TODAY, THE BANKING INDUSTRY IS GOING TO HAVE LOWER LOAN ACTIVITY IN THE SECOND HALF OF THE YEAR VERSUS THE FIRST HALF AND THEN WE HAVE TO PLAY THE RECESSION SCENARIO FOR 2023. BUT IF THEY START BUILDING RESERVES IN THE SECOND HALF OF THIS YEAR, THAT COULD BE GOOD FODDER FOR PUSH-UPS IN 2023. THAT'S EXACTLY WHAT HAPPENED IN 2021 VERSUS 2020. TOM: KENNETH LEON IS WITH US AS WE AWAIT THE EARNINGS FROM BANK OF AMERICA. SOMETIMES A MYSTERY. I WILL GUESS EIGHT MINUTES AND GOLDMAN SACHS WILL BE LATER TODAY.
MR. LEON WILL JOIN US. WELCOME TO ALL OF YOU ON BLOOMBERG RADIO AND TELEVISION, AND ESPECIALLY GLOBAL WALL STREET. THERE ARE TWO STUNNING WAYS TO COMPARE JP MORGAN AND BANK OF AMERICA. ONE IS ON BOOK VALUE, WHERE THERE IS A PREMIUM TO JP MORGAN. I DON'T THINK MOYNIHAN HAS HAD ENOUGH CREDIT FOR PULLING BANK OF AMERICA UP ABOVE TO 1.09.
THE OTHER RATE OF RETURN OVER 20 YEARS, BANK OF AMERICA HAS BEEN AT 2% PER YEAR VERSUS JP MORGAN'S RELATIVE EXCELLENCE AT 11% PER YEAR. WHAT IS THE DIFFERENTIATOR FOR THE SENIOR MANAGEMENT OF BANK OF AMERICA AS THEY COMPETE? KENNETH: IT IS REALLY INVESTMENT AND DIGITAL BANKING AND MAKING THE RIGHT CALLS IN TERMS OF EXPANDING YOUR CONSUMER BUSINESS. I DON'T THINK IT IS THE CAPITAL MARKETS AND I THINK IT IS MORE HISTORY AND EMOTIONAL BUYING THAT TICKLY MORGAN IS A BETTER BANK. -- THAT PARTICULARLY MORGAN IS A BETTER BANK. WHEN YOU LOOK AT BANK OF
AMERICA, ESPECIALLY THE LAST THREE OR FOUR YEARS, I HAVE UPGRADED THEIR PLATFORM. THEY ARE WELL AHEAD OF THE WELLS FARGOS, BUT I DON'T SEE A REASON FOR SUCH A WIDE DIFFERENCE BETWEEN OF AMERICA AND JP MORGAN, WHICH IS WHY WE HAVE A BUY ON BANK OF AMERICA AND A HOLD ON JP MORGAN. IT IS HARD TO CONTINUE TO EXCEED EXPECTATIONS WHEN YOU ARE SO OPTIMIZED AS JP MORGAN HAS BEEN. JONATHAN: KEN LEON THERE OF CFRA. HAVE A LOOK AT CREDIT SUISSE AND DO THE SAME WITH --. IT IS NOT GOOD IN EUROPE. TOM: THEY ARE NOT APPLES AND ORANGES
BUT THEY ARE NOT APPLES AND APPLES. THEY MAY BE MCINTOSH AND THE ONES I HATE, MAYBE THE RED DELICIOUS ONES, I HATE THOSE APPLES. ON CREDIT SUISSE, THIS IS IT STORED NARY -- EXTRAORDINARY, I SPOKE WITH GREG FLEMING WITH THE ROCKEFELLER FOUNDATION AND WALL STREET WEEK, AND HE WAS SCATHING ABOUT THE BANKS STUMBLED AND HAVE BECOME ZOMBIE BANKS.
IS CREDIT SUISSE A ZOMBIE BANK? MOYNIHAN AND HIS TEAM AND WHAT THEY INHERITED, IT IS AMAZING HOW BANK OF AMERICA HAS GOTTEN BACK TO BOOK. JONATHAN: ON THE MAINLAND, THEY WAITED 11 YEARS FOR A RATE HIKE, EIGHT YEARS TO GET AWAY FROM NEGATIVE INTEREST RATES. TOM: TO ME IT IS ALL CULTURAL. JONATHAN:
WE ARE GETTING THAT BUT DOING IT INTO WEAKENING. TOM: WHAT IS THE DIFFERENTIATOR AT BARCLAYS? WHAT IS DIFFERENTIATOR OF THE MESS THAT AB AND AMARAL BECAME. WITH DIGITAL BANKING, JP MORGAN OF 11% ON MOBILE CUSTOMERS. JONATHAN: THEY HAVE TO SPEND TO MAKE THAT TRANSITION. TOM: SPENDING IS EVERYTHING.
THEY WILL GO BY WAY OF PUTNAM IF THEY DON'T GET IT DONE. WHEN I WAS A KID, THE EXCHANGE WAS OPEN SATURDAY AND GRANDPA WOULD TAKE ME DOWN AND THEY HAD THE PAPER TAPE AND THE OLD GEEZER WITH THE TAPE GOING THROUGH HIS HAND AND THE SPITTOONS AND THE WHOLE THING. THE DOW JONES INDUSTRIAL AVERAGE WAS THE ONLY THING THEY QUOTED. JONATHAN: THAT MAKES SENSE. I HUNDRED YEARS LATER, WE CALL IT THE S&P.
-- 100 YEARS LATER, WE CALL IT THE S&P. TOM: AND THEY STILL CALL IT THE DOW. JONATHAN: THIS IS BLOOMBERG. >> RUSSIA'S DEFENSE MINISTER HAS ORDERED PART OF FORCES TO FOCUS ON DESTROYING UKRAINE'S LONG RAGE MISSILE AND ARTILLERY SYSTEMS -- LONG-RANGE MISSILE AND ARTILLERY SYSTEMS. RUSSIAN TROOPS HAVE IN TRYING TO DESTROY WEAPONS. THE U.S. AND ALLIES HAVE SET SHIMS TO UKRAINE. WINDING DOWN OPERATIONS IN RUSSIA.
A COMPANY HALTED BUSINESS AFTER RUSSIA INVADED UKRAINE P THEY EXPECT COSTS AT $190 -- $190 MILLION. ELECTIONS AFTER PRIME MINISTER MARIO DROWNED THE -- MARIO DRAGHI CALLED OUT THE POSSIBILITY OF REMAINING IN THE GOVERNING COALITION. DRAGHI SAID HE WOULD RESIGN. IN CHINA, THE NUMBER OF DAILY
NEW CORONAVIRUS CASES IS STAYING ABOVE 500. FEWER CASES REPORTED ON SUNDAY AS IT ROLLED OUT MASS TESTING IN NINE DISTRICTS. THE U.K. IS BRACING FOR A HEAT WAVE THIS WEEK. LONDON MAY HIT A RECORD. THAT IS HOTTER THAN ALL OF THE U.K..
GLOBAL NEWS 24 HOURS A DAY, ONLINE AND AT QUICKTAKE ON BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. ♪ JONATHAN: BANK OF AMERICA NUMBERS IN LINE. INVESTMENT REVENUE COMING IN AT $1.13 BILLION.
IN LINE EVERYWHERE ELSE INCLUDING ON TRADING REVENUE. >> THE QUESTION IS, IS IN LINE ENOUGH IN A QUARTER LIKE THIS? YOU ARE SEEING THE PROFESSION FOR LOAN LOSSES BETTER THAN EXPECTED, WHICH IS A FEATURE SIGN OF THE HEALTH OF THE CONSUMER. YOU HAVE EFFICIENCY A LITTLE HIGHER THAN EXPECTED AND WE ARE EXPECTING BANK OF AMERICA BUT 67% EFFICIENCY REVENUE COMPARES TO 59% AT JP MORGAN. WHEN YOU ASK HIM ABOUT WHAT THE DIFFERENCE IS, IS BANK OF AMERICA IS A LITTLE LESS EFFICIENT THAN JP MORGAN. BANK OF AMERICA BEFORE THE EARNINGS WITH THE BIG RUN-UP, SEEING STOCKS REACT NEGATIVELY TODAY FOR RESULTS THAT ARE PRETTY MUCH IN LINE WITH EXPECTATIONS EVERYWHERE ELSE. TOM: I GIVE THEM THE HIGHEST MARKS FOR A BEAUTIFUL POWERPOINT. I GIVE THEM GREAT CREDIT FOR
THE COURAGE TO GO BACK TO THE GREAT FINANCIAL CRISIS. THIS IS NOT THE BANK FROM BEFORE WHERE CONSUMER LOANS GO FROM 67% DOWN TO 44%. THIS IS NOT THE BANK WE PERCEIVE, IS IT? SONALI: IT IS NOT THE BANK OF 2008.
THE QUESTION IS, HOW DO THEY BECOME THE BANK OF THE NEXT FIVE OR SIX YEARS. WHAT INVESTORS ARE CONCERNED ABOUT IS THE NEXT 24 MONTHS. THE QUESTION OF INVESTMENT IS SO IMPORTANT. YOU HAVE BANK OF AMERICA INKING 21% OF THE SHARE OF M&A VOLUME AT A TIME WHEN M&A IS DOWN.
THAT MAKES THEM A CONTENDER. THE QUESTION OF WHETHER THEY WILL PULL BACK ON INVESTORS IN A TOUGH MARKET IS A TOUGH QUESTION. I ANTICIPATE YOU WILL SEE BRIAN MOYNIHAN TALK ABOUT THE NEED TO INVEST THROUGH TOUGH CYCLES, BECAUSE INVESTORS ARE GOING TO WANT THEM TO HAVE SOME PRUDENCE. TOM: WE DIDN'T DO ANY OF THE MACRO BLATHER ON WHAT THE FED WILL DO WE TALKED ABOUT THE INSIDE STUFF SHOWN IN THE CHARTS.
WE HAD MOYNIHAN AS A TOTAL BANK NERD. JONATHAN: DID YOU CALL HIM THAT? HOW MANY TIMES HAVE WE SEEN RESILIENT IN A BANK STATEMENT FROM THESE GUYS? KAILEY: BRIAN MOYNIHAN IS NO EXCEPTION IN A STATEMENT SAYING THE U.S. CONSUMER CLIENTS REMAIN RESILIENT AND CONTINUED STRONG BALANCES AND SPENDING LEVELS. DIDN'T LOOK AT THE CREDIT LOSS PROVISIONS, LIGHTER THAN EXPECTED.
THE ESTIMATE WAS CLOSE TO 605 MILLION. SONALI: NOT ONLY ARE THE PROVISIONS LESS, SO ARE THE CHARGE-OFFS ARE YOU ARE NOT SEEING LOANS GO BAD. YOU ARE SEEING A BEAT IN THE INTEREST INCOME. THAT IS THE MOST IMPORTANT LINE FOR BANK OF AMERICA.
NOT JUST HIGHER IN THE INCOME BUT THE NET INTEREST YIELD TAKING HIGHER IN A WAY YOU WOULD WANT TO SEE IT IN THE FACE OF HIGHER INTEREST RATES AND ALSO AN INVERTED CURVE. IS IT ENOUGH FOR INVESTORS AT A TIME WHEN THEY ARE STILL WORRIED ABOUT A RECESSION AND SOME OTHER DECLINING BUSINESSES WHEN THE OTHER HALF THE CORPORATE SIDE ALSO UNDER PRESSURE. JONATHAN: STAY WE WILL CATCH UP. WE WILL GET OTHER NUMBERS LATER. DOWN 1.7 PERCENT IN THE AFTERMATH OF THOSE RESULTS. TOM: WHAT IS INTERESTING IS WHAT THE EXPENSE PATH FORWARD. DON'T YOU AGREE, LARRY FINK WAS
OUT ABOUT NOT HIRING FREEZE BUT TIGHTENING. JONATHAN: THAT IS WHERE IT STARTS, HIRING INTENTIONS. HOW QUICKLY IT MOVES REMAINS TO BE SEEN. TOM: CAN LEON IS WITH US. WHAT ARE YOU SEEING? IS THERE A STORY WE ARE MISSING? KENNETH: THE STORY IS THEY CAN'T REALLY SEE INTO THE SECOND HALF OF THE YEAR. THE BANKS ARE CONSERVATIVE ON
PROVISIONS. IT IS A STRONG STATEMENT WE WILL HAVE A SOFT LANDING OR A VALLOW -- VERY SHALLOW RECESSION OR WE WILL SEE MORE SIGNIFICANT INCREASE. I LOOKED AT PROVISIONS FOR LOAN LOSSES OVER THE LAST SIX QUARTERS AND IT HAS COME DOWN STARTING IN THE FIRST QUARTER OF THIS YEAR OFF OF THE SUGAR HIGH THEY HAD OFF OF THE LOAN REVERSALS. I DON'T THINK WE ARE GETTING THE STORY FOR THE BANKS FOR THE SECOND QUARTER IN WHAT LIES AHEAD IN THE SECOND HALF OF THIS YEAR AND CERTAINLY SESSION IN 2023 HERE WE ARE NOT GETTING THAT STORY. KAILEY: MAYBE A MURKIER FORWARD OUTLOOK. IS THAT WHY WE ARE SEEING
SHARES DOWN 2%? KENNETH: IT IS, BECAUSE IF YOU CALL ALL OF THE BANK ANALYSTS, BANK OF AMERICA WOULD BE YOUR FAVORITE WITH RISING RATES AND LOWER LOAN ACTIVITY. AS WE HEARD, IT IS MORE MODEST VOLUMES. IT IS NOT ONE WHERE WE ARE GOING TO SEE IT MOVE THE NEEDLE ONE WAY OR THE OTHER. MANY TIMES, AS TOM MENTIONED, WE GET BRIAN MOYNIHAN ON THE CALL ON BEAUTIFUL EXECUTION ON LARGE BUSINESSES AND CONSUMER AND COMMERCIAL BANKING.
I THINK WE MIGHT SEE SOME PICKUP. BUT THE SECOND QUARTER IS NOT LOOKING INTO THE CRYSTAL BALL OF WHAT LIE AHEAD FOR THE NEXT SIX TO 12 MONTHS BECAUSE CREDIT RISK COMMITTEES ARE LOOKING AT THE REAL ENVIRONMENT OR WHAT HAPPENED IN THE LAST THREE MONTHS. JONATHAN: AWESOME TO GET YOUR REACTION IN REAL TIME. HE WILL BE BACK WITH US LATER THIS MORNING FOLLOWING GOLDMAN NUMBERS. EVEN SOLOMON -- DAVID SOLOMON OF GOLDMAN UP NEXT. TOM: EACH STORY IS DIFFERENT AND HAS
A DIFFERENT CLARITY AS WE IMMEDIATELY LOOK AT THE DATA. WITH GOLDMAN SACHS, WONDERFUL EFFORT, 10 DAYS, MAYBE TWO WEEKS AGO. I AM ABSOLUTELY FASCINATED HOW GOLDMAN SACHS POSITIONS THE RETAIL BANK EXPERIMENT. JONATHAN: ARE YOU NOT IN MARKETS? I WONDER IF THE CASH POSITION WOULD HAVE COME OVER. TOM: I WONDER IF IT IS, THIS IS WHAT WE ARE GOING TO DO. JONATHAN: YOU EXPECT THAT THIS MORNING? TOM: I DON'T KNOW IF IT IS THIS MORNING OR A YEAR AND THING BUT I AM FASCINATED ABOUT A WELL-INTENTIONED EFFORT TO GO INTO RETAIL AND THAT WE ARE PATIENT. JONATHAN: YOU ARE VERY DIPLOMATIC THIS
MORNING. TOM: I FEEL DIPLOMATIC. JONATHAN: YOU DON'T SOUND THAT PATIENT MOST OF THE TIME. FUTURES UP .9% ON THE S&P. A DECENT AND TO THE WEEK -- END TO THE WEEK LAST WEEK. CONSUMER INFLATION EXPECTATIONS AND THE UNIVERSITY OF MICHIGAN SENTIMENT SURVEY CAME IN OFF THE BACK OF WHAT IS HAPPENING WITH GASOLINE PRICES AND THAT SET UP OR A 75 BASIS POINT HIKE AND NOT 100 BASIS POINTS. TOM: AND THE CURVE IN GETS MY ATTENTION. THEIR REAL YIELD ON FRIDAY,
THEY DID NOTE HOW IT HAS COME IN FROM A .62 A POSITIVE. JONATHAN: DID YOU DO THE SHOW ON FRIDAY? TOM: I WAS DOING MY FRANKFORD ECB PRACTICE LUNCH. JONATHAN: HOW DID THAT WORK OUT? >> THIS SELLOFF, BRUTAL AS IT SEEMS, HAS BEEN THE ORDERLY.
>> MAIN STREET NEEDS TO BE DOING A LITTLE BIT BETTER, THOUGH I HAVE SEEN SOME SIGNS OF STRESS. >> REAL HOUSEHOLD INCOME IS GOING DOWN. >> WE FEEL LIKE THE CONSUMER IS VERY STRESSED RIGHT NOW. >> RETAIL SALES PLUS CORPORATE EARNINGS EQUAL U.S. CONTINUING TO OUTPERFORM. >> THIS IS "BLOOMBERG SURVEILLANCE." JONATHAN:
GOOD MORNING, GOOD MORNING, THIS IS "BLOOMBERG SURVEILLANCE, I'M JONATHAN FERRO ALONG WITH KAILEY LEINZ. ON THE NASDAQ 100, WE ARE UP BY 1.12%. EARLIER, BANK OF AMERICA EARNINGS, COMING UP NEXT, GOLDMAN. TOM: GOLDMAN SACHS TELLING US MAYBE IT BE EIGHT BETTER QUARTER AND WE WILL HEAR FROM J.P.
MORGAN IN A MOMENT. GREEN ON THE SCREEN, IT'S A VERY NICE LIVE THROUGH THE MARKET, 22,000. JONATHAN: NEXT WEEK THE FEDERAL RESERVE CONCLUSION AFTER THE CONSUMER SENTIMENT SURVEY OF DATA ON FRIDAY WITH A RATE HIKE THAT IS 75 AND NOT ON HUNDRED.
>> I DON'T KNOW WHAT TO MAKE OF THE ECB MEETING. I THINK IT'S HUGELY ANTICIPATED BY ECONOMIC WANTS. -- WONKS. WHAT IS SHE GOING TO SAY THAT'S GOING TO CHANGE THE DIALOGUE AROUND A BRUTAL WAR IN UKRAINE AND HORRIFIC WEATHER. JONATHAN: WHAT'S THE MOST IMPORTANT ASPECT OF THURSDAY? THE UCP WORK NORD STREAM ONE COMING ONLINE AND HOW MUCH GAS WILL DO IT. JONATHAN: I WILL -- TOM: I WILL GO WITH THAT. WE ARE SEEING IT IN THE PRICE OF GOLD -- GOLD -- THE PRICE OF COAL AND GAS.
THE DISTINCTION BETWEEN THE CONFIDENCE AND TONE IN EUROPE VERSUS AMERICA, IT'S REALLY STARK. JONATHAN: LET'S JUST SAY THAT WHAT YOU ARE HEARING FROM THE BANK EXECUTIVES ABOUT THE STRENGTH AND THE RESILIENCE OF THE U.S. ECONOMY IS PERHAPS NOT SHARED BY THE YOU. COUNTERPART. KAILEY: IT'S A SERIOUS COST-OF-LIVING CRISIS AND THAT IS THE DIFFERENCE BETWEEN THE EUROPE IN THE U.S.. IN THE U.S. INFLATION HAS MOSTLY BEEN
DRIVEN BY HIGH DEMAND. IN EUROPE IT'S A LOT OF ENERGY. THE ECB ISN'T NECESSARILY READY TO DO ANYTHING ABOUT IT. THEY ARE HIKING INTO MATERIAL ECONOMIC WEAKNESS.
HOW MUCH WILL THEY BE ABLE TO DELIVER? JONATHAN: NEW YORK CITY, POURING RAIN. IN LONDON THEY HAVE A HEAT WAVE. TYPICALLY I WOULD JOKE ABOUT LONDON AND THEIR SO-CALLED HEAT WAVES BUT ULTIMATELY THIS IS A HOT, HOT ONE IN THE CITY OF LONDON TODAY. JONATHAN: YEAH IN EUROPE AND AS MATT MILLER MENTIONED EARLIER IN TEXAS, I THINK GRAHAM IS THE RIGHT WORD AS WELL AND IT GOES TO CLIMATE CHANGE. WHAT I WOULD EMPHASIZE CERTAINLY WHAT WE ARE SEEING IS CLIMATE CHANGE FLAT-OUT BEING PUSHED ASIDE. YOU SEE IT IN AUSTRALIA AND
WITH NEWCASTLE AND EUROPE. JONATHAN: THE HOUSING ACROSS THE CITY WILL BE PROBLEMATIC OVER THE LAST COUPLE OF DAYS. JONATHAN: WE HAVE AIR CONDITIONING AT QUEEN VICTORIA STREET. -- TOM: WE HAVE AIR CONDITIONING AT QUEEN VICTORIA STREET. JONATHAN: THAT'S RIGHT. ON THE NASDAQ 100 WE LOOK SOMETHING LIKE THIS, 1.4%. BOND MARKET, YIELDS HIGHER.
THIS IS WHAT RISK ON LOOKS LIKE, ISN'T IT? POSITIVE 7/10 OF 1%. A EURO THAT IS STRONGER TODAY. CRUDE, 9930 FOUR, UP 1.8%. KAILEY: GAINS IN OIL PRICES IS NOT WHAT THE BIDEN ADMINISTRATION WANTS TO SEE AFTER AUGUST 3. THAT IS STILL A FEW WEEKS AWAY. LET'S GET THROUGH WHAT'S
HAPPENING ON THIS MONDAY WHERE WE GOT BANK OF AMERICA RESULT 15 TO 20 MINUTES AGO. GOLDMAN SACHS WAS ON DECK. WE HAVE HEARD BANK AFTER BANK TALKING ABOUT THE STRENGTH OF THE CONSUMER AND THE ECONOMY. WHAT IS IT LOOKING LIKE WHEN IT COMES TO TRADING REVENUE AND INVESTMENT IN GETTING? 10:00 A.M., THE NATIONAL ASSOCIATION OF HOMEBUILDERS HOUSING INDEX, EXPECTING IT TO ALL FURTHER WITH A COOLING IN THE HOUSING MARKET AND THE IMPACT OF HIGHER RATES STARTING TO BITE. THEN AT 4 P.M. WE WILL GET TREASURY CAPITAL FLOW DATA THAT BE REALLY INTERESTING TO HELP US UNDERSTAND THE BEHAVIOR OF THE DOLLAR IN RECENT MONTHS AND JUST DEMAND IN GENERAL FOR DOLLAR-DENOMINATED ASSETS WITH A LAG FROM THE STATE THAT IS SIX MONTHS OLD AND STILL CHINA COULD BE INTERESTING, CHINESE TREASURIES ARE HOLDING AT $1 TRILLION FOR THE FIRST TIME IN 12 YEARS. JONATHAN:
GOLDMAN EARNINGS SHOULD BE 25 MINUTES AWAY. JOINING US NOW IS THE PORTFOLIO MANAGER AT J.P. MORGAN. I HATE THIS QUESTION BUT WE HAVE TO ASK IT, BAD NEWS, IS A GOOD NEWS IN THIS MARKET? PHIL: LOOKING AT THE ECONOMIC DATA WE GOT SO FAR, JOHN, WITH RETAIL SALES FROM FRIDAY OR THE JUNE PAYROLL NUMBER, YOU WOULD THINK THIS IS JUST AN ALL-TIME ENVIRONMENT TO TAKE RISK. THE PROBLEM IS WE HAVE A NINE PLUS INFLATION GUIDE NUMBER AND THAT STRONG GAME THAT I JUST MENTIONED, WHICH HAD BEEN GOOD NEWS FOR THE ECONOMY, IS BAD NEWS IF YOU THINK ABOUT WHAT IT MEANS FOR THE RESERVE. IT OPENS THEIR WINDOW TO CONTINUE TO BE VERY AGGRESSIVE. ON THE FLIPSIDE THIS IS A WORSE YEAR, THE WORSE WE HAVE EVER SEEN FOR FIXED INCOME.
THAT'S NOT HYPERBOLE. THE WORST EVER FOR THE AGGREGATE INDEX WAS 2.9% IN 94 AND IF YOU TALK TO OLD BOND PEOPLE ABOUT 1994 THEY GO CROSS EYED. THE AGGREGATE IS DOWN 10% RIGHT NOW.
THIS IS LESS UNCERTAINTY ABOUT HOW AGGRESSIVE THE FED IS GOING TO BE. REALLY, NO END IN SIGHT IN INFLATION ROLLING OVER. THAT'S SOMETHING THAT HAS CAUSED INTEREST RATE VOLATILITY TO JUMP 70% FROM LAST YEAR, OF COURSE LEADING EQUITY VOLUME. I MADE TOM CRAZY BECAUSE I
COMPARED THE 10 YEAR TREASURY TO REGGIE JACKSON AND ALL THAT STUFF. BUT THAT STUFF HAS TO SLOW IN ORDER FOR FOLKS TO BE MORE COMFORTABLE ABOUT EQUITIES AND THAT IS THE REASON WE ARE A LITTLE UNDERWEIGHT RIGHT NOW. TOM: THE MOST PRESTIGIOUS DEGREES IN AMERICA FROM FORDHAM LED BY SALVATORE A FEW YEARS AGO, THE GIANT, WE ALL STUDIED DOMINIC SALVADOR. I WANT YOU TO ACCOUNT FOR THE INFLATED REVENUE STREAM.
AS YOU ASSET ALLOCATED, HOW DO YOU TREAT REVENUE GROWTH THAT IS NOT FOR PERCENT TO 5% BUT IS A GOOFY THING OF REAL GROWTH LESS CHANG OR MISS INFLATION ON TOP OF IT? PHIL: THAT IS WHAT MAKES IT LOOK MISLEADING, TOM, THE NOMINAL RATE OF REVENUE STREAMS, HE WOULD POINT TO SOMETHING VERY RISK ON. BUT AS HE SAID IT'S INFLATED HERE. THE INFLATION STORY FOR US, MAYBE IT PEAKED IN JUNE. MAYBE. BUT THE END OF THE DAY THE FACT
THAT THE FEDERAL RESERVE, TOM, IS GOING RAPIDLY THROUGH NEUTRAL. THAT WAS THE HOPE EARLIER. MOVING RAPIDLY THROUGH NEUTRAL INTO RESTRICTIVE, AS YOU MENTIONED, THE YIELD CURVE INVERTING, PRETTY SIGNIFICANTLY PUTTING THE CROSSHAIRS ON GROWTH. LEADING US TO BE MORE UNDERWEIGHT ON RISK. HOWEVER WE ARE POUNDING OUR FISTS ON DIVERSIFICATION RIGHT NOW. DO YOU REALIZE THAT THE 60/40, EVERYDAY I WAKE UP I TRY TO DO IT AS AN ASSET ALLOCATOR. THIS YEAR IT'S DOWN 10%.
VERY RARE. HERE'S THE PUNCHLINE, EVERY OTHER TIME THE 60/40 WAS DOWN 10%, THE FOLLOWING 12 MONTH RETURN WAS AVERAGE POSITIVE 18. THAT'S REALLY IMPORTANT FOR US RIGHT NOW.
KAILEY: YOU ARE SAYING ESSENTIALLY IT IS TIME TO BUY BONDS IF YOU DON'T WANT TO BUY RISK ASSETS? PHIL: WE BELIEVE THAT WHAT OCCURRED THIS YEAR, NOWHERE TO HIDE, THE BARCLAYS BLOOMBERG AGGREGATE DOWN 10%, THOSE DAYS WE THINK ARE BEHIND US. FROM THE ASSET ALLOCATION PORTFOLIO CONSTRUCTION DECISION, EVEN THOUGH WE ARE NOT AS BULLISH ON EQUITIES JUST YET, FUTURE INTEREST RATE HIKES, BONDS WILL PROVIDE DIVERSIFICATION AND THAT IS SOMETHING THAT WILL REALLY, WE ARE REALLY CLEAR ON THAT WITH CLIENTS DESPITE WHAT HAS HAPPENED IN THE FIRST SEVEN MONTHS OF THIS YEAR. JONATHAN: COMMENTING ON RED SOX YANKEES, PHIL? FINAL WORD ON THAT? PHIL: NO CONTEST, I WILL LEAVE IT AT THAT. [LAUGHTER] JONATHAN:
TK, YOU HAVE TO HAVE IT. TOM: IT HAPPENS EVERY SUMMER. CAN YOU COMMENT ON THE FACT IN THIS WORLD, RADIO AND TELEVISION, WE ARE IN THE MIDDLE OF A MASSIVE THUNDERSTORM. THUNDER AND LIGHTNING GENERATED THIS MORNING FROM 270 PARK AVENUE. JONATHAN: IS THAT RIGHT? ARE THEY BUILDING A NEW BUILDING? WE HAVE SEEN THAT STRUCTURE GOING UP. HOW BIG THAT IS. ABSOLUTELY MASSIVE. PHIL: I HOPE I MAKE IT THAT LONG.
[LAUGHTER] TOM: YOU ARE IN GOOD COMPANY. JONATHAN: PHIL, JP MORGAN, ASSET MANAGEMENT. YOU CAN FEEL IT SHAKE THIS MORNING, THE BUILDING. THE FUTURE IS UP BY 1.2. COUNTING IT DOWN TO GOLDMAN EARNINGS ABOUT 20 MINUTES AWAY. JONATHAN: VERY DIFFERENT FROM BANK OF AMERICA AND WHAT WE SAW FROM FORTRESS DIAMOND HERE A FEW DAYS AGO.
IT'S GOING TO GO THROUGH IT AND STOP BY AS WELL, ALWAYS AN ORIGINAL STORY. TOM: WHAT I FIND FASCINATING IS WHERE GORMAN HAS GONE TO WEALTH MANAGEMENT, WHAT IS JP MORGAN GOING TO? MAYBE THEY ARE THE BANK LEAST CHANGE? JONATHAN: THE DAY AFTER THE FED NEXT WEEK IT IS APPLE'S TURN. DOWN PICKING UP? TOM: I HAVEN'T READ, SUBA DOES A GREAT JOB HERE, DAN EYES AND THE REST OF THEM. I HAVEN'T REALLY READ IT OTHER THAN WHAT ARE THEY GOING TO DO, STOP GENERATING CASH? I DON'T THINK SO. JONATHAN: THE BANKS ARE TALKING TO US ABOUT THE CONSUMER RESILIENCE AND HOW MUCH SAVINGS THERE ARE, LEVERAGE BEING LOWER THAN IT USED TO BE ON CONSUMER BALANCE SHEETS. WE KNOW ALL THAT STUFF. I WANT A REAL INSIGHT INTO WHAT'S HAPPENING WITH SPENDING RIGHT NOW AND WE ARE LOOKING TO TECH FOR THAT. TOM: I GOT MANGO TODAY, I JUST DON'T
LIKE IT. JONATHAN: MANGO TANGO? TOM: UN-AMERICAN. JONATHAN: I WANT TO COMMENT FROM KAYLEE ABOUT CAPEX, SOUTHWEST SPENDING, ALL THAT GOOD STUFF, TOM. TOM: WE DON'T KNOW THE ANSWERS, DO WE? KAILEY: WE'LL FIND OUT. JONATHAN: THERE WE GO. SHE'S ON THIS BEFORE, HASN'T SHE? SHE KNOWS. I'M SORRY, KAILEY. [LAUGHTER] FROM NEW YORK, THIS IS BLOOMBERG.
♪ >> KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD, I'M RITIKA GUPTA. GULF PRODUCERS, OPTIMISTIC ON INCREASED OUTPUT AFTER THE VISIT TO SAUDI ARABIA BY PRESIDENT BIDEN. CONFIDENT THAT THERE WILL BE A FEW MORE STEPS IN THE COMING WEEK AND THAT ANY DECISIONS TO PUMP MORE WOULD BE MADE WITHIN OPEC. IN THE U.K., SKY NEWS CANCELED THE FINAL DEBATE IN CONSERVATIVE PARTY CANDIDATE, SAYING THAT TWO OF THE FIVE PULLED OUT OF THE EVENT AFTER LAST NIGHT'S DEBATE TURNED PERSONAL WHERE SOON ACT -- RISHI SUNAK ACCUSED OTHERS OF BORROWING AND CONSERVATIVE MPS ARE ILLUMINATING ONE CANDIDATE TODAY. THE INTERNATIONAL MONETARY FUND THAT THEY WOULD OTHER GLOBAL OUT SUBSTANTIALLY IN THE NEXT UPDATE AFTER THE G20 FINANCE MINISTERS ENDED THEIR MEETING IN BALI WITHOUT AGREEING ON A COMMUNIQUE AND THE IMF DOWNGRADING THEIR OUTLOOKS BY 3.6 PERCENT AFTER RUSSIA IN
GRADED UKRAINE -- INVADED UKRAINE. INTERNATIONAL AIRSHOW OUTSIDE LONDON, DELTA AIRLINES PURCHASING 100 OTHER 737 MAX 10 JETLINERS WITH A VALUE OF $7.6 BILLION OVERALL, USUALLY THERE ARE BIG DISCOUNTS ON BIG ORDERS IN AUGUST. THE BOND RATE IS THE FIRST LARGE-SCALE GATHERING OF AVIATION INDUSTRY LEADERS IN THREE YEARS. GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON QUICKTAKE BY BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES.
>> THEY MADE A MAJOR SHIFT IN THEIR POLICIES, RECOGNIZING SINCE THEY STARTED AMASSING FORCES THAT THE MARKETS HAVE BEEN AFFECTED AND THERE IS A SUB WHY DEMAND ISSUE WITH ANNOUNCED INCREASES FOR JULY AND AUGUST. BASICALLY WHAT WE HEARD ON THE TRIP, I'M VERY CONFIDENT WE WILL SEE A FEW MORE STEPS IN THE COMING WEEKS. JONATHAN: ONE OF THE SHOP AT -- SHARPEST MINDS IN THE STATE DEPARTMENT, A SENIOR DESIGNER ON ENERGY SECURITY FROM CVS. GOOD MORNING IN 12 MINUTES WE WILL HAVE 12 MINUTES FROM GOLDMAN, HOPEFULLY. GOING INTO THAT, FUTURES ARE
OFF. THE PATH CONTINUING FOR NOW BY 1.2 PERCENT. YIELD TIME BY A AT THREE BASIS POINTS.
A DOLLAR WEAKNESS OUT THERE AT THE ECB AND DOJ ON THURSDAY THIS WEDNESDAY WITH TOM CRUDE UP BY 99.5%. JONATHAN: I REALLY WANT TO POINT OUT CURVE INVERSION. JOHN, -20 BASIS POINTS, THE DIFFERENCE IN YIELD BETWEEN THE 10 YEAR AND THE TWO-YEAR GETTING OUT TO ONE QUARTER OF ONE BASIS POINT WITH ANY BREAKDOWN THEY. JONATHAN: A LOT OF THAT, A LOT OF THAT CAME FROM THE RALLY YIELD TO LOWER. TOM: REMEMBER, FOR OUTCOMES INTO YIELDS, IT GETS COMPLICATED. ALWAYS COMPLICATED IN AMERICAN POLITICS IS THE GREAT THING THAT I GET WRONG, YOU GET WRONG, EVERY QUARTER GETS WRONG. ARIZONA, A QUAINT PLACE OF TWO
LITTLE CONGRESSIONAL DISTRICTS AND WITH PHOENIX IT HAS EXPLODED. ANNE-MARIE, ON FASCINATED BY THE WORK IN THE WASHINGTON POST THIS MORNING OF PENCE AND TRUMP OUT IN ARIZONA TRYING TO FIND THE NEXT REPUBLICAN PARTY. PHOENIX IS NOT THE PHOENIX WE GREW UP WITH. ANNE-MARIE: NO, CERTAINLY NOT. ARIZONA IS PURPLE, RIGHT?
A TON OF COMPANIES COMING IN BRINGING ON THE SOCIAL ECONOMIC LEVEL A LOT OF HIGHER EDUCATED INDIVIDUALS AND IT IS STARTING MOVE LEFT. WE HAVE SEEN THAT OVER THE COURSE OF THE LAST EIGHT OR 10 YEARS OR SO AND IT IS WHY THE REPUBLICAN PARTY IS OUT THERE TRYING TO MAKE SURE THEY CAN SHORE UP THE RIGHT WING BASE HAD OF NOVEMBER AND 2024, THAT IS WHERE TRUMP AND PENCE ARE LOOKING. TOM: THE GREAT UNKNOWN HERE, I KNOW SO MANY PEOPLE UPSET BY THE EIGHT FLAVORS OF LATINO, LATINA, THIS AND THAT. HOW ARE THE TWO PARTIES GOING TO DEAL WITH A CRITICAL PART OF THE ARIZONA PUBLIC? ANNMARIE: IT'S A GREAT QUESTION. A LOT OF MEMBERS OF THE
COMMUNITY DON'T LIKE THIS LABEL. A RECENT EPISODE FROM JILL BIDEN, TALKING TO A GROUP OF LATINOS TALKING ABOUT HOW THEY ARE AS DIVERSE AS A BREAKFAST BURRITO, GETTING A TON OF PUSHBACK. YOU CAN SEE EACH SIDE TRYING TO MAKE SURE THEY ARE SHORING UP THIS MASSIVE VOTING BASE AND DEPENDING ON WHO YOU ARE TALKING TO IS IT REALLY BREAKING THROUGH? NOT SO SURE. KAILEY: JONATHAN: OBVIOUSLY -- KAILEY: OBVIOUSLY IT'S ALL IN THE RUN-UP TO THE MIDTERMS IN NOVEMBER IN THE BIGGEST PROBLEM DOGGING THE DEMOCRATS IS INFLATION, HENCE HIM BEING SO VISIBLE ABOUT TRYING TO REIN IN GAS AND OIL PRICES. HOW SUCCESSFUL WAS HIS TRIP TO SAUDI ARABIA IN TERMS OF ECHOING AND RESONATING WITH HIS OWN PARTY OR EVEN THE U.S. PUBLIC. KAILEY: COMING HOME TO THE WHITE HOUSE,
MANY WOULD SAY HE'S COMING HOME EMPTY-HANDED. A FEW WINS IN TERMS OF OVERFLIGHTS, THE SAUDI'S WILL NOW BE ABLE TO DEVELOP. THEN YOU HAD U.S. OFFICIALS THERE SAYING THAT THEY DO BELIEVE THAT THERE WILL BE CERTAIN STEPS TAKEN IN THE NEXT FEW WEEKS LIKE WHAT HAPPENED AT THE OPEC PLUS MEETING. BUT IMMEDIATELY AFTER THE PRESIDENT IN U.S.
OFFICIALS SAID THIS, SAUDI OFFICIAL SAID THAT IT DEPENDS ON SUPPLY AND DEMAND AND THAT THERE WAS NO CLEAR-CUT FIRM DECISION THAT THEY WOULD COME TO THE PRESIDENT'S RESCUE. WHEN IT COMES TO OIL IT WILL BE A YOU WEEKS UNTIL YOU SEE WHETHER OR NOT THE TRIP WAS A CLEAR WIN FOR THE PRESIDENT IN TERMS OF BRINGING DOWN OIL AND GAS PRICES. KAILEY: CONVERSATION ABOUT CONTRADICTIONS, TALKING ABOUT HER ARIUS THAT IS ON THE CAMPAIGN TRAIL, BUT ALSO AT THE SAME TIME PUSHING MORE FOSSIL FUELS. HE WANTED TO BE A CLIMATE PRESIDENT AND IT LOOKS LIKE THAT AGENDA IN TERMS OF THE LEGISLATURE ISN'T SOMETHING JOE MANCHIN WILL LET THROUGH.
ANNMARIE: AMBITION OF THE CAMPAIGN TRAIL VERSUS THE REALITY OF ENTERING THE WHITE HOUSE. THIS IS THE REAL POLITICS HE'S FACING ON SO MANY FRONTS. FOREIGN POLICY CHANGING BECAUSE OF DOMESTIC ISSUES AT HOME. WHETHER IT IS GOING TO THE KINGDOM AND ASKING FOR A LIFT ON THE TERRACE OR ASKING U.S. PRODUCERS, ASKING GLOBAL PRODUCERS TO PUMP MORE OIL AT THE SAME TIME, THEY ARE TRYING TO BRING DOWN THE USE OF FOSSIL FUEL.
RIGHT NOW WHAT YOU ARE BRINGING UP IS THEY WILL NOT BE ABLE TO GET THROUGH THOSE PROVISIONS ABOUT FIGHTING CLIMATE CHANGE AND A BILL BECAUSE THEIR OWN SENATOR IN THEIR OWN PARTY WILL NOT GO FORWARD WITH IT. SENATOR MANCHIN HOLDS SO MUCH POWER. THEY NEED HIM TO GET THIS DONE AND IT DOESN'T LOOK LIKE IT'S GOING TO HAPPEN. JONATHAN: REALITY AND WE SAY IT AGAIN, IT'S AT THE WHITE HOUSE THIS TIME. ANNE-MARIE HOLDEN DOES NOT STOP. IT WAS WONDERFUL THERE, TOM. JUST A FOLLOW THE PRESIDENT THROUGH THE MIDDLE EAST, A REAL HISTORICAL ELEMENT AS WELL, HISTORICAL ELEMENT FROM THIS PRESIDENT. TOM:
THIS GUY HAS BEEN ON THE ROAD. BAVARIA, MADRID, SAUDI. WHERE TO NEXT, THAT'S THE BIG QUESTION. JONATHAN: GOLDMAN SACHS COMING IN AT $2.7 BILLION ON THE EQUITY SIDE OF THINGS, 2.86 WITH FIXED TRADING REVENUE AT 3.11. GOING THROUGH THESE NUMBERS, INVESTMENT BANKING REVENUE COMING IN AT 1.7 9 BILLION WITH AN ESTIMATE OF 1.88.
GOLDMAN COMING IN A LITTLE BIT LIGHTER THAN EXPECTED THERE. KAILEY: -- TOM: THERE ARE A NUMBER OF WAYS TO DO THIS, BOOK IS UP WITH NOTHING SHABBY, RESILIENT, THAT'S THE IMPORTANT WORD NOW. NOW IF YOU DON'T SAY RESILIENT, YOU PLAY. RESILIENT FIRST-HAND PERFORMANCE. JONATHAN: STOCK UP BY 1.73%. TOM: CRITICAL INCREASED DIVIDEND ON THE COMMON SHARE THIS YEAR, THIS IS THAT USE OF CASH DEVELOPMENT AND AGAIN THE REAFFIRMATION OF CONFIDENCE IN HAVING A BUSINESS LOOKING FORWARD UNDER ANY UNCERTAINTY. JONATHAN: INVESTMENT BANKING, WE WILL GUIDE YOU THROUGH THE NEXT FEW MINUTES IN ABOUT FIVE MINUTES WITH REACTION TO THESE BANK NUMBERS FROM KEN LEON AT CFRA WITH GOLDMAN DROPPING THE NUMBERS AROUND THE STOCK PART A LITTLE BIT FUTURES POSITIVE BY MORE THAN 1% ON THE S&P 500.
YIELD IS HIGHER BY 3% TO 4% WITH 22. AS SEEN ON TV, THIS IS BLOOMBERG. JONATHAN: LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, HERE IS PRICE ACTION YOU. EQUITIES ARE HIGHER BY 1.5%. NASDAQ 101 POINT 26%.
GOLDMAN CLIMBING HIGHER, FIVE MINUTES AGO THE NUMBERS THEM UP. A BIG WE RUN TRADING REVENUE THEY DIVE ON THESE NUMBERS. HEY, SONALI BASAK. ONLY: -- SONALI: WITH THE RATIO AND EXPECTED BENEFITS, IT'S A LOW WORK AND LIGHTER, A BIG BEAT OVER THE FIXED INCOME TRADING DESKS, 34% JUMP YEAR-OVER-YEAR ON FIXED INCOME TRADING HELPING GOLDMAN SACHS THIS QUARTER JUMPED MORE THAN ANYONE ELSE, MORE THAN JP MORGAN OR CITIGROUP BY A PERCENTAGE JUMP. EQUITIES TRADING BEATING EXPECTATIONS.
WHERE DID WE FALL SHORT OF LITTLE BIT? YOU SAID INVESTMENT BANKING OVERALL BUT THE ART OF THE BUSINESS THAT STILL ONE OUT IS ADVISORY. THAT IS WHERE GOLDMAN SACHS IS THE RAINMAKER. THE KING OF WALL STREET. THAT BUSINESS, $1.2 BILLION, BRINGING IN ADVISORY REVENUE AND A QUARTER LIKE THIS IS STUNNING BUT YOU WERE TALKING ABOUT INVESTMENT BANKING AND WHERE THEY FALL, THAT'S UNDERWRITING FEES AND WHEN THEY PROJECT AHEAD YOU ARE LOOKING AT THEM PROJECT A TIGHTER PIPELINE, A DECREASED PIPELINE HERE WHEN IT COMES TO BOTH NET AND EQUITIES UNDERWRITING MOVING FORWARD WITH RAMIFICATIONS FOR THESE LOWER ASSET VALUES. YOU ARE SEEING THE QUIET -- DECLINES IN THE VALUE OF THEIR EQUITY PORTFOLIO. JONATHAN: CONSUMER BANKING, MR. SOLOMON HAS SOME FORM OF REAFFIRMATION
AND VICTORY LAP. I KNOW YOU HAVEN'T REALLY HAD TIME TO LOOK AT IT, BUT CERTAINLY IT IS NOT GLOOMY. IT'S CONSUMER BANKING, BUSINESS STARTING, GIVING UP POSTERS? SONALI: IT'S A PART OF -- GIVING OUT TOASTERS? SONALI: THEY ARE TRYING TO START PARTNERSHIPS ALL OVER. TOM: HOW IS THE APPLE GOING? YOU KNOW THE GOSSIP. SONALI: YOU HAVE TO MOVE OVER TO GM WITH PARTNERSHIPS OF LONG-TERM CLIENTS WITH WHAT IT MEANS FOR LENDING BOOKS. A LOT OF THE RATIONALE EARLY ON, CAN THEY CONTINUE TO GROW THE BUSINESS ENOUGH? MAKING IT A STABLE AND LESS RELIANT SHIP? JONATHAN: JONATHAN CAN PURCHASE THE HUMMER EV? SONALI: PERHAPS ONE DAY WITH BUY NOW PAY LATER. WHO KNOWS. [LAUGHTER] JONATHAN:
YOU ARE GOING TO BUY NOW PAY LATER SOMETHING THAT BIG, SONALI? TOM: WELCOME TO AMERICA. [LAUGHTER] SONALI: THE IDEA IS TO SERVE DIFFERENT CLIENTS IN DIFFERENT WAYS IN THAT IS WHAT THEY ARE TRYING TO DO, SMALL COMPARED TO THE REST OF GOLDMAN SACHS. BUT THEY ARE BEATING ON EXPECTATIONS IN TERMS OF REVENUE FOR THE QUARTER AND HAVING TO PLUG AWAY AND ANSWER QUESTIONS ABOUT STRATEGIC DIRECTION, TRADING BARELY UP ON VALUE TODAY WITH MORGAN STANLEY AT 1.4 TIMES THE VALUE WITH
JAMES GORMAN GETTING A LOT OF CREDIT HERE FOR PIVOTING THE BANK TO BIG INVESTMENTS BUT CAN DAVID SOLOMON COMMAND OF SAME PREMIUM IN STOCK MARKETS WHILE THEY ARE HEADING INTO A TOUGHER ECONOMIC ENVIRONMENT? JONATHAN: REALLY BUSY COUPLE OF DAYS, WHAT TIME IS THE CALL? SONALI: 9:30 I BELIEVE. JONATHAN: WE WILL CATCH UP WITH YOU AGAIN, NOBEL. TOM? IT'S UP? TOM: THE CONSUMER BANKING THING IS DOING BETTER. LET'S FRAME OUT A TWO DECADE THICK AND THIN RETURN FOR BANK OF AMERICA AND GOLDMAN SACHS. JP MORGAN, I COULD HAVE PICKED OTHER BANKS AS WELL BUT THIS SPEAKS VOLUMES. BANK OF AMERICA IS UP 2% PER
YEAR, JP MORGAN, STELLAR PERFORMANCE, UP 11%. GOLDMAN SACHS IS SORT OF IN BETWEEN, THE 8% PER YEAR, BRINGING US TO KEN LEON. WHO DOES GOLDMAN SACHS WANT TO BE? DO THEY WANT TO BE A RESPONSIBLE BANK LIKE BANK OF AMERICA? DO THEY WANT TO BE WEALTH MANAGEMENT, LIKE MORGAN STANLEY? OR AS WILLIAM COHAN WROTE, DO THEY JUST WANT TO BE GOLDMAN SACHS? KEN: GOLDMAN WILL BE GOLDMAN, IT'S A GREAT FRANCHISE BUT THE SECOND ORDER SPEAKS TO YOUR QUESTION ABOUT THE SEPARATION ON THOSE EXPOSED TO CREDIT CARD, CONSUMER LOAN AND COMMERCIAL, THEY WERE DINGED AND HAD TO BUILD THEIR NUMBERS BACK UP. BANK OF AMERICA IS ONE OF THEM WITH MORGAN STANLEY HAVING A HUGE INCREASE LIKE WE SAW WITH GOLDMAN SACHS TODAY. GOLDMAN WANTS TO BE MORE LIKE MORGAN STANLEY. THOSE BUSINESSES ARE BIGGER CONSUMER WEALTH MANAGEMENT OFFSETS IN DECLINE ASSET MANAGEMENT.
THAT IS A PART OF THEIR STRATEGY, TO EXPAND TO GET THE MILLENNIALS EARLY IN THE INVESTMENT STAGE AND THEN THEY MOVE INTO THE PRIVATE BANKS. THE ASSET MANAGEMENT BUSINESS WAS DOWN SIGNIFICANTLY WITH THE EARNINGS OF BEAT ON A LOWER MARK TO MARKET PRICING, LIKELY TO COME BACK IN THE SECOND HALF OF THE YEAR. I LIKE THE GOLDMAN ROOF WORK TODAY, I THINK IT'S A GOOD ONE. THEY DO WANT TO BE MORE LIKE MORGAN STANLEY TO CLOSE THE GAP FROM 11 TO 14 TIMES PE MULTIPLE. RESPONDING FOR THE TRADING IN THE ROUTINE YOU HAVE TO HAVE RECURRENT REPEATABLE SUCCESS WITH STABLE INCOME THAT COMES REALLY FROM WEALTH ASSET MANAGEMENT. KAILEY: YOU LIKE THE REPORT, CLEARLY THE MARKET DOES, TOO, BUT LET'S TALK ABOUT WHERE THEY MISSED IN THE DEBT AND EQUITY WHERE IT REFLECTED A DECLINE IN INDUSTRYWIDE VOLUME WITH A TALK ON MERGERS AND ACQUISITION TRANSACTIONS. HOW DO YOU EXPECT THAT
ENVIRONMENT TO CHANGE IN THE SECOND HALF IN THE RATE OF THESE INVESTMENT BANKS CHANGING WITH IT. KEN: I'M NOT SURE IT'S GOING TO CHANGE IN THE FULL YEAR FOR THE FIRST HALF OF THE INDUSTRY BUT IT BE 15% AND WE GO INTO THAT SLOW THIRD-QUARTER, REALLY THE HOLIDAY SEASON WITH AN UNCERTAIN MARKET IN EUROPE THAT IS 25% OF THE RANK REVENUE IN INVESTMENT BANKING. HARD DECISIONS HAVE TO BE MADE LOOKING OUT TO 2023 AS IT RELATES TO STAFF AND CURRENT INVESTMENT BANKING. THOSE NUMBERS ARE NOT GOING TO
COME BACK. WE CAME OFF THE SUGAR HIGH OF THE LAST TWO YEARS OF EASY MONEY AND I THINK POSSIBLY YOU GET SOME IMPROVEMENT BUT THEY ARE GOING TO HAVE TO LOOK AT STAFFING DECISIONS AND EXTEND. KAILEY: WE HAVE SEEN SOME BIG BEATS FROM TRADING AND GOLDMAN IS NOT ALONE IN THAT. DO YOU HAVE TO CONTINUE TO SEE MARKETS BE SO VOLATILE FOR A BALLAST ON THESE THINGS CONSIDERING WHAT YOU ARE SAYING ABOUT THE MAKING ENVIRONMENT NOT GETTING BETTER? KEN: YOU NEVER GET REWARDED FROM TRADING AND YOU CAN'T PREDICT, BUT VOLATILITY SERVES WELL IN FIXED INCOME, CURRENCIES, AND COMMODITIES DERIVATIVES. EQUITIES, IT'S KIND OF LIGHTENS UP A BIT BECAUSE WE HAVE MOVED FROM A RISK ONTO RISK OFF ENVIRONMENT FOR INVESTORS AND INSTITUTIONS AND RETAIL. VOLATILITY IS YOUR FRIEND.
ESPECIALLY IF YOU ARE A SMART TRADER LIKE GOLDMAN SACHS. JONATHAN: NO ONE IN AMERICA IS PLANNING TO GO TO EUROPE. THESE BANKS, ARE THEY GOING TO SURPRISE US WITH ACQUISITIONS IN EUROPE? KEN: THERE WAS A COMMENT EARLIER ABOUT CREDIT SUISSE AND PHANTOM BANKS.
I THINK THERE -- I THINK THEY HAVE BEEN SUCCESSFUL IN GAINING WALLET SHARES IN FULL AREAS OF INVESTMENT BANKING AND FOR THESE BANKS, GOLDMAN EVEN TODAY, INVESTING 20% OF THEIR INCOME FROM EUROPE, YOU DON'T WANT TO PURCHASE ETF, EUROPE WILL BE A FRIGHTFUL CASE GOING INTO THESE HISTORIC WINTER MONTHS. I WOULD SAY THAT THEY HAVE BEEN PLEASANTLY GROWING ORGANICALLY IN EUROPE AS THE EUROPEAN INDEX KIND OF WITHERS. KEN: MORGAN STANLEY. JONATHAN: HOW MANY TIMES HAVE WE SAID THAT? TOM: AGAIN, I'VE SAID THIS, I SET IT AT DAVOS. THE DECADE HAD A MAJOR HAT TIP TO JAMIE DIMON. IT THERE WERE REAL CHALLENGES INHERITED ON THE TRADING SIDE WITH THE BLOWUP OF MORGAN STANLEY BEFORE MAYBE, MR. DIAMOND MIGHT ARGUE WITH ME ON
THAT, BUT I DON'T THINK THERE WAS THAT CHALLENGE THEIR. I'M SORRY, IN THE LAST FIVE YEARS THE REAL VICTORY LAP IS BRIAN MOYNIHAN. PEOPLE HAVE NO UNDERSTANDING OF THE TRAIN WRECK THAT WAS THE COBBLING TOGETHER OF THE MODERN BANK OF AMERICA.
JONATHAN: INCREASED VOLATILITY AND UNCERTAINTY, I REMAIN CONFIDENT IN OUR ABILITY TO NAVIGATE THIS ENVIRONMENT. YOU WOULDN'T EXPECT TO HEAR ANYTHING ELSE, WOULD YOU? TOM: YOU WOULDN'T END THE FIRST THING I'M GOING TO ASK YOU ABOUT -- HIM ABOUT HIS CONSUMER BANKING WITH CONSUMER BANKING HAVING A VERY CONSTRUCTIVE POP. JONATHAN: THAT YOUR PITCH FOR AN INTERVIEW? TOM: NO MY PITCHES I REALLY WANT ANOTHER CHARACTER OF THESE PEOPLE. I'VE GOT TO ADMIT IT'S A BLENDED RUSSIAN. I'M FASCINATED HOW THEY MOVE JULY, AUGUST. I'M GOING TO
ASSUME THE LAST WEEK OF AUGUST IS THE NEW OCTOBER AS THEY RIGHT SIZE INTO NEXT YEAR AMID ALL OF THIS UNCERTAINTY, THEY DON'T KNOW WHAT IT'S GOING TO BE LIKE. JONATHAN: YOU WON'T ASK HIM HOW MANY RATE HIKES? TOM: NOT A FAN, YOU ARE BUSTING MY CHOPS. LOOK, THE DOW IS UP. [LAUGHTER] JONATHAN: TOM LOVES THE INTERVIEWS WITH BANK EXECUTIVES. NASDAQ UP BY 1.2. QUICK LOOK AT THE BOND MARKET WITH YIELDS HIGHER THIS MORNING CENTRAL BANK DECISIONS OVER THE NEXT WEEK, THE ECB AND THE DOJ ON THURSDAY, NEXT WEDNESDAY, WEEK TO 10 DAYS FROM NOW. TOM:
I DIDN'T SEE THIS, AND I LOOKED, IS THERE A PUBLISHED FRAGMENTATION THEORY OR PROCESS? JONATHAN: WE HAVE A NAME BUT NO DESCRIPTION ON HOW IT WILL WORK. THURSDAY FOR EUROPE. TOM: THERE WAS A FLOWCHART, YOU KNOW, WITH A POINTER? JONATHAN: RATE HIKE, MORE THAN 10 YEARS. THEY HAVE TO TRY TO TELL US WHAT THE ANTI-FRAGMENTATION IS GOING TO DO, HOW IT WILL WORK WITH NORD STREAM ONE COMING BACK ON LINE WITH NO IDEA HOW MUCH GAS WILL COME THROUGH IT. TOUGH TIMES FOR EUROPE.
HOW MANY TIMES HAVE I SAID THAT? GOLDMAN, STOCK UP IN THE PREMARKET. THIS IS BLOOMBERG. ♪ RITIKA: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD, I'M RITIKA GUPTA. BANK OF AMERICA EXPECTED TO PAY A 200 MILLION DOLLAR FINE RELATED TO A U.S. INVESTIGATION INTO THE USE OF UNAPPROVED PERSONAL DEVICES IN LINE WITH PENALTIES IMPOSED ON OTHER WALLS BANKS. FINANCE FIRMS ARE REQUIRED TO SCRUPULOUSLY MONITOR COMMUNICATIONS INVOLVING THEIR BUSINESS, THESE FINES RANK AMONG THE LARGEST EVER. THE RUSSIAN DEFENSE MINISTER ORDERING PART OF THEIR FORCES TO DESTROY UKRAINIAN LONG-RANGE MISSILE ARTILLERY SYSTEMS AND IT'S NOT CLEAR HOW MUCH OF A CHANGE THIS REPRESENTS.
TROOPS HAVE BEEN TRYING FOR MONTHS TO DESTROY UKRAINIAN WEAPONS WITH ALLIES STEPPING UP ARMS SHIPMENTS TO UKRAINE. H&M DECIDING TO WIND DOWN THEIR OPERATIONS IN RUSSIA. HALTING ALL SALES THERE IN MARCH AFTER THE RUSSIAN ATTACK ON UKRAINE. THEY WILL REOPEN THE RUSSIAN STORES IN ORDER TO SELL REMAINING INVENTORY AT $190 MILLION. THE U.K. BRACING FOR A HEAT THIS WEEK. TEMPERATURES MIGHT HIT A RECORD-SETTING 14 DEGREES SO -- 40 DEGREES CELSIUS, 104 FAHRENHEIT, HOTTER THAN THE FORECAST IN MADRID FOR IN ALL OF THEIR WARMEST YEARS, HAVING OCCURRED SINCE 2002. ANNUAL REPORT BLASTS OF FOR LEASE -- BLAS . POOR DECISION-MAKING RESULTED
IN MORE THAN ONE HOUR OF CHAOS BEFORE THE GUNMEN WAS KILLED. 19 STUDENTS AND TWO TEACHERS WERE KILLED IN THE ATTACK. THIS IS BLOOMBERG. ♪ >> I THINK INVESTORS ARE BETTER OFF FOR NOW IN SHORT DURATION BONDS, TREASURY BILLS, THE BOND MARKET IS NOT PRICED FOR THE FED GETTING TO AS HIGH AS 4%. NEITHER IS THE EQUITY MARKET. JONATHAN: THAT WAS WALL STREET WEEK OVER THE WEEKEND HOSTED BY TOM AND LISA. I TUNED IN FOR THAT ONE
EPISODE. TOM: IT WAS GREAT, IT WAS FINE. I WORE A SUIT WITH WIDER LAPELS. LOOKED NICE. IT WORKED OUT. THEY ALMOST DIDN'T LET ME ON SET. JONATHAN: NICE EVENT TO GIVE YOU THE KEYS FOR THE WEEKEND. KAILEY: REALLY GOOD OH -- TOM: REALLY GOOD OBOE PLAYER, BY THE WAY. JONATHAN: I KNOW. TOM: GIFTED. FESTIVAL, SOMEWHERE.
JONATHAN: IS THAT JUST FOR A LONG WEEKEND? TOM: I'M TALKING TO YOU AND YOU AND WESTON ARE ALL ON THE SAME PAGE. KAILEY: I HAD NO IDEA. JONATHAN: OK -- JONATHAN: I HAD NO IDEA. TOM: SERIOUSLY, NASDAQ LEADS THE WAY. JONATHAN:
I BELIEVE THAT RITIKA IS GOING TO TALK ABOUT IT. KRITI: IT SEEMS TO BE THE TRADE THAT'S GOING AWAY. LAST WEEK IT WAS ALL 100 BASIS POINTS, IT WAS THE BASE CASE FOR NOMURA AND IT DROPS A LITTLE BIT WHERE THE CHART OF THE DAY IS THE ODDS OF A 100 BASIS POINT HIKE TO LOOK AT THAT DECISION IN THE LAST FIVE DAYS WHERE YOU HAD THE ODDS GOING 80% AND THE REASONING IS TWOFOLD. ON THE ONE HAND THERE IS AN END RATION STORY THAT'S TOUGH TO GO. 9% CPI, 11% CPI NUMBERS WITH STRONG ECONOMIC DATA ON FRIDAY. DOES IT CHANGE THAT SCENARIO THROUGH THE FACT YOU HAVE WRONG RETAIL SALES WITH LOWER INFLATION OCCASIONS WITH 75 SEEMING MORE LIKELY? JONATHAN: IT WAS A MORNING NOTE THIS MORNING, THANK YOU SO MUCH.
THE READING ON THE WEEKEND, WHEREVER YOU LIVE, IT'S SIMPLE, THEY NAILED IT AT FOS. YOU WROTE ABOUT WHERE I WENT, THE STICKING POINT AROUND RENT. A HUGE UPROAR IN NEW YORK CITY ABOUT IT. EAST OF MANHATTAN, AN APARTMENT LISTED FOR A CHEAP $3500 IN A FRENZY OF 4050. HOW DO WE BRING DOWN RENT IN AMERICA? >> THIS DISINCENTIVIZES HOMEBUILDERS IN AN ENVIRONMENT WHERE WE HAVE AN ASSORTED AMOUNT OF HOUSING SUPPLY.
VERY LIKELY OVER THE NEXT YEAR WE CONTINUE TO SEE RENT PUTTING UPW
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