Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.

Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.

Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven news.

Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven news.

Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com. Slash podcast looks good to Allison Williams. She's a senior banks analyst at Bloomberg Intelligence. You worked at Morgan Stanley, Allison, you've covered this doc forever. Just put into perspective mister Gorman's reign here, How does the street pursue his his performance at CEO.

Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com. Slash podcast looks good to Allison Williams. She's a senior banks analyst at Bloomberg Intelligence. You worked at Morgan Stanley, Allison, you've covered this doc forever. Just put into perspective mister Gorman's reign here, How does the street pursue his his performance at CEO.

So obviously the biggest thing that Gorman did when he was at Morgan Stanley is to transform the business to wealth and asset management. So twenty six percent and twenty ten, that went to fifty to two percent in twenty twenty two. That's of pre text income. And I would say that, you know, for me personally, when I was at Morgan Stanley, the first time I met James Gorman was at Merrilynch and he did a tremendous job there, came into Morgan Stanley to run their wealth business, you know, was elevated to CEO. Really has transformed that business. At this that does sort of perhaps give an edge to Andy Sapperstein. He's the one who's running wealth management now he's an heir apparent along with Ted Pick who runs the institutional business. But Ted Pick also has done a tremendous job with their trading business, turning things around first in fixed income and then the broader business and gaining share in both fixed income and equities under over the long term.

So obviously the biggest thing that Gorman did when he was at Morgan Stanley is to transform the business to wealth and asset management. So twenty six percent and twenty ten, that went to fifty to two percent in twenty twenty two. That's of pre text income. And I would say that, you know, for me personally, when I was at Morgan Stanley, the first time I met James Gorman was at Merrilynch and he did a tremendous job there, came into Morgan Stanley to run their wealth business, you know, was elevated to CEO. Really has transformed that business. At this that does sort of perhaps give an edge to Andy Sapperstein. He's the one who's running wealth management now he's an heir apparent along with Ted Pick who runs the institutional business. But Ted Pick also has done a tremendous job with their trading business, turning things around first in fixed income and then the broader business and gaining share in both fixed income and equities under over the long term.

So he said within twelve months, Allison, and that's a relatively short time frame. Do you have a sense or of when this may occurs or natural time?

So he said within twelve months, Allison, and that's a relatively short time frame. Do you have a sense or of when this may occurs or natural time?

Do you think so?

Do you think so?

I think that this is a natural time. If we think back to when Lloyd Blankfein retired, you know, he made the point at the time that he wanted to step away in a commer time for markets and turnover leadership before we had before we had more turmoil, and I think that did successfully put David Solomon in place with time to have looked at the business. If you recall they had their first investor day and within weeks we had the global pandemic take hold, and so I think the reason why this is timely for Morgan Stanley is, you know, we're just past the pandemic. There's still a lot of economic and monetary policy and certainly for sure, but as you know, Paul, there there always is, there's always going to be, but we're past the pandemic where we've digested the company has digested two major acquisitions that they did. He traded eaton Vance, and so it does seem a commer time and perhaps the right time to pass the baton.

I think that this is a natural time. If we think back to when Lloyd Blankfein retired, you know, he made the point at the time that he wanted to step away in a commer time for markets and turnover leadership before we had before we had more turmoil, and I think that did successfully put David Solomon in place with time to have looked at the business. If you recall they had their first investor day and within weeks we had the global pandemic take hold, and so I think the reason why this is timely for Morgan Stanley is, you know, we're just past the pandemic. There's still a lot of economic and monetary policy and certainly for sure, but as you know, Paul, there there always is, there's always going to be, but we're past the pandemic where we've digested the company has digested two major acquisitions that they did. He traded eaton Vance, and so it does seem a commer time and perhaps the right time to pass the baton.

Any is this gonna be a typical succession where you've got too clear and maybe even a third person in the running for the job that whoever does not get the job then leaves the firm?

Any is this gonna be a typical succession where you've got too clear and maybe even a third person in the running for the job that whoever does not get the job then leaves the firm?

Is that kind of the expectation here?

Is that kind of the expectation here?

I mean that that is what does tend to happen. These are Ted and Andy are both very strong leaders and as I said, have have in their own right their own success stories that have contributed to the overall firm. Certainly, I think that each does have bigger aspirations. So you know, that's that's the kind of thing I think we'll have to say.

I mean that that is what does tend to happen. These are Ted and Andy are both very strong leaders and as I said, have have in their own right their own success stories that have contributed to the overall firm. Certainly, I think that each does have bigger aspirations. So you know, that's that's the kind of thing I think we'll have to say.

Do we have any idea what James Gorman is thinking to do here? Is this a true retirement or expect him to show up some other place in a meaningful way.

Do we have any idea what James Gorman is thinking to do here? Is this a true retirement or expect him to show up some other place in a meaningful way.

I think that I think it is a true retirement. He's sort of going out on top right, and he is going to He has that that he will stay with the firm, as you know, is sort of typical, you know, just just as Kenjacob said the other day with Blizzard. You know he will he will stay on the firm. It will ensure some continuity with the clients and with the management. But again you never say never.

I think that I think it is a true retirement. He's sort of going out on top right, and he is going to He has that that he will stay with the firm, as you know, is sort of typical, you know, just just as Kenjacob said the other day with Blizzard. You know he will he will stay on the firm. It will ensure some continuity with the clients and with the management. But again you never say never.

Yep, you know what.

Yep, you know what.

This kind of my second thought after seeing this news first left being you know, good for mister Gorman because he's had a heck of a run. The second thought was this has to shine the light once again on Jamie Diamond and JP Morgan. No one wants Jamie Diamond to leave. I can't imagine any of the shareholders, any of the board members. But if I were a board member, I'd be just making sure we have our ducks in a row. As it relates to any type of succession, what's the feeling at Morgan Stanley these days? I'm sorry at JP Morgan these days.

This kind of my second thought after seeing this news first left being you know, good for mister Gorman because he's had a heck of a run. The second thought was this has to shine the light once again on Jamie Diamond and JP Morgan. No one wants Jamie Diamond to leave. I can't imagine any of the shareholders, any of the board members. But if I were a board member, I'd be just making sure we have our ducks in a row. As it relates to any type of succession, what's the feeling at Morgan Stanley these days? I'm sorry at JP Morgan these days.

So I think, as you know, Jamie Diamond is consistently asked the question because that is one of the biggest concerns for investors. You know, we look at James Gorman, who is at the helm for a long period of time, but Jamie Diamond is really the one who led JP Morgan even bef for the global financial crisis and has had continuity even through the most recent crisis, and he has consistently said that you know, there are plans in place. I'm sure it's something that he and the board talk with all the time, and they always have a huge slate of contenders at any point in time at JP Morgan in terms of who could be next to run the bank. To your point earlier, we have seen some of those contenders leave in previous shakeups or potentially just getting a little bit antsy in terms of wanting to go on to do other things, and they sort of prooferate some of the other banks across Wall Street in terms of their leadership. But also extremely timely since we do have the JP Morgan Investor Day on Monday.

So I think, as you know, Jamie Diamond is consistently asked the question because that is one of the biggest concerns for investors. You know, we look at James Gorman, who is at the helm for a long period of time, but Jamie Diamond is really the one who led JP Morgan even bef for the global financial crisis and has had continuity even through the most recent crisis, and he has consistently said that you know, there are plans in place. I'm sure it's something that he and the board talk with all the time, and they always have a huge slate of contenders at any point in time at JP Morgan in terms of who could be next to run the bank. To your point earlier, we have seen some of those contenders leave in previous shakeups or potentially just getting a little bit antsy in terms of wanting to go on to do other things, and they sort of prooferate some of the other banks across Wall Street in terms of their leadership. But also extremely timely since we do have the JP Morgan Investor Day on Monday.

Oh, what's the number one thing you are going to be looking for? What could make news for us on Monday?

Oh, what's the number one thing you are going to be looking for? What could make news for us on Monday?

The number one thing I'm looking looking for and that could make news is anything that they would say on the expense front. Right, So we have a look into a lot of the macro variables, but expenses are really something that are truly up to management discretion, to the investment opportunities that they see, and so we think that that's where we could potentially get the biggest surprise. We have already already gotten a big lift to the net interest income outlook with their most recent earnings. Could we get further upside there? I would say yes, potentially. We think that they were being conserva still a little bit conservative when we look at sort of the underlying variables, keeping in mind that monetary policy is uncertain, so could get a little bit there. We will get an update on trading and banking fees. Again, we can see in the environment banking fees studying at a lower level. Trading is still good, but probably softer than a year ago. Credit will also be a big focus. Are there any incremental Is there any incremental insight we could get, especially with regard to commercial real estate, office lounge, etca. We expect maybe they'll provide some more granularity, but again looking for these expenses great.

The number one thing I'm looking looking for and that could make news is anything that they would say on the expense front. Right, So we have a look into a lot of the macro variables, but expenses are really something that are truly up to management discretion, to the investment opportunities that they see, and so we think that that's where we could potentially get the biggest surprise. We have already already gotten a big lift to the net interest income outlook with their most recent earnings. Could we get further upside there? I would say yes, potentially. We think that they were being conserva still a little bit conservative when we look at sort of the underlying variables, keeping in mind that monetary policy is uncertain, so could get a little bit there. We will get an update on trading and banking fees. Again, we can see in the environment banking fees studying at a lower level. Trading is still good, but probably softer than a year ago. Credit will also be a big focus. Are there any incremental Is there any incremental insight we could get, especially with regard to commercial real estate, office lounge, etca. We expect maybe they'll provide some more granularity, but again looking for these expenses great.

Steff I'm sure we'll be chatting with you next week on that. Allison Williams, Senior Global Banks analyst at Bloomberg Intelligence, is also the co director of Research for the Americas for Bloomberg Contelligency.

Steff I'm sure we'll be chatting with you next week on that. Allison Williams, Senior Global Banks analyst at Bloomberg Intelligence, is also the co director of Research for the Americas for Bloomberg Contelligency.

You're listening to the team.

You're listening to the team.

Ken's a live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, or listen on demand wherever you get your podcasts.

Ken's a live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, or listen on demand wherever you get your podcasts.

Big News Adam Morgan Stanley, I think the right move. It just shows what a nice succession plan can look like. You know, we'll see how it plays out. But they've got a bench and they've got some good choices, so hopefully it'll work out.

Big News Adam Morgan Stanley, I think the right move. It just shows what a nice succession plan can look like. You know, we'll see how it plays out. But they've got a bench and they've got some good choices, so hopefully it'll work out.

The race is not over.

The race is not over.

Yep, the race is not over. Let's continue our discussion. The banks will focus on some of the regional banks. We'll focus on some of the credit side of the equation because we can do that here. We have Bloomberg Intelligence four hundred analysts covering two thousand companies one hundred and thirty industries. B I go on the terminals a function you need to get access to the best research on Wall Street. Check it out Herman Chan and Arnold Kakuda. They are two of the analys we have a Bloomberg intelligence. Arnold focuses on the regional banks and I'm sorry Herman focuses on the regional banks are Arnold Kakuda focuses on the credit side of the equation for all the banks here. So Herman, let's start with you here. Any I haven't sensed any you know, kind of big potholes blowing up over the last couple of weeks. It seems to have been pretty calm. What's your read of what's happening in the regional banks based these days?

Yep, the race is not over. Let's continue our discussion. The banks will focus on some of the regional banks. We'll focus on some of the credit side of the equation because we can do that here. We have Bloomberg Intelligence four hundred analysts covering two thousand companies one hundred and thirty industries. B I go on the terminals a function you need to get access to the best research on Wall Street. Check it out Herman Chan and Arnold Kakuda. They are two of the analys we have a Bloomberg intelligence. Arnold focuses on the regional banks and I'm sorry Herman focuses on the regional banks are Arnold Kakuda focuses on the credit side of the equation for all the banks here. So Herman, let's start with you here. Any I haven't sensed any you know, kind of big potholes blowing up over the last couple of weeks. It seems to have been pretty calm. What's your read of what's happening in the regional banks based these days?

It definitely has calmed down a lot. I think it's interesting that Western Alliance of all the banks is the bell weather these days, with them announcing two billion dollars of deposits in the second quarter coming back to the bank, and that's really calm the waters for the rest of the industry, which is really interesting to see.

It definitely has calmed down a lot. I think it's interesting that Western Alliance of all the banks is the bell weather these days, with them announcing two billion dollars of deposits in the second quarter coming back to the bank, and that's really calm the waters for the rest of the industry, which is really interesting to see.

And from an industry.

And from an industry.

Perspective, we've seen deposits really stabilize over the past couple of months after the big spike down in March, and consequently there hasn't been a lot of emergency fed barns from the discount window.

Perspective, we've seen deposits really stabilize over the past couple of months after the big spike down in March, and consequently there hasn't been a lot of emergency fed barns from the discount window.

Now I'm curious also because what does this mean in terms of changes Herman, there's a sense that it's going to get more expensive for banks, banks of many different sizes, now that we've seen some fail. How soon our investors turning the page to look at the next phase for these banks.

Now I'm curious also because what does this mean in terms of changes Herman, there's a sense that it's going to get more expensive for banks, banks of many different sizes, now that we've seen some fail. How soon our investors turning the page to look at the next phase for these banks.

Yeah.

Yeah.

I think if you look at the valuations where they're trading, the low tangible book value on average, a lot of the negativity is really priced in. So you've got tougher regulatory regime coming with tougher liquidity requirements, higher capital requirements. Arnold can talk about increasing the debt issue once. For the larger regionals, you've got higher expenses from the FDIC assessment, you have weaker margins, you have lower lending, you've got higher costs for deposits. So it's still a tough on the middle of view.

I think if you look at the valuations where they're trading, the low tangible book value on average, a lot of the negativity is really priced in. So you've got tougher regulatory regime coming with tougher liquidity requirements, higher capital requirements. Arnold can talk about increasing the debt issue once. For the larger regionals, you've got higher expenses from the FDIC assessment, you have weaker margins, you have lower lending, you've got higher costs for deposits. So it's still a tough on the middle of view.

I want to bring an Arnold here for a second here because the stock price story of PacWest this week makes it seem like we're all on the clear, But when you look at how their bonds are trading, it's still thirty one cents on the dollar. They've barely moved. Actually, they've kind of gotten worse throughout the month. Western Alliance has done a little better, but it's still at sixty four cents on the dollar. This is well below par. What are the bonds telling you about how investors feel about the stories?

I want to bring an Arnold here for a second here because the stock price story of PacWest this week makes it seem like we're all on the clear, But when you look at how their bonds are trading, it's still thirty one cents on the dollar. They've barely moved. Actually, they've kind of gotten worse throughout the month. Western Alliance has done a little better, but it's still at sixty four cents on the dollar. This is well below par. What are the bonds telling you about how investors feel about the stories?

Well, I guess you know, we live in this world of you know, it's like a factory eighteen days since the Lens Bank failure, right so, you know recently.

Well, I guess you know, we live in this world of you know, it's like a factory eighteen days since the Lens Bank failure, right so, you know recently.

They're not even counting.

They're not even counting.

I've been counting, so so yeah, it's you know, these these two banks have suffered multiple rating downgrades and definitely lots of concern. But I think, you know, and as Sermon said, these kind of are.

I've been counting, so so yeah, it's you know, these these two banks have suffered multiple rating downgrades and definitely lots of concern. But I think, you know, and as Sermon said, these kind of are.

The bell weathers right now.

The bell weathers right now.

But really, you know, we've had a sea change in regional bank bond space. Where it used to be before twenty twenty three, these were they didn't issue a lot of debt. They traded very tight. You couldn't get enough of it. Right now it's oh my gosh, you know, these things are really dangerous. You might get zero and with upcoming regulation, these guys might need to issue a lot more debt. So so I think the way to play this is, you know, we had charge swap coming to market. I think a day or two ago, you know, and you know, we know there's gonna be more and more bank dead issues from this space, and it's gonna come really wide.

But really, you know, we've had a sea change in regional bank bond space. Where it used to be before twenty twenty three, these were they didn't issue a lot of debt. They traded very tight. You couldn't get enough of it. Right now it's oh my gosh, you know, these things are really dangerous. You might get zero and with upcoming regulation, these guys might need to issue a lot more debt. So so I think the way to play this is, you know, we had charge swap coming to market. I think a day or two ago, you know, and you know, we know there's gonna be more and more bank dead issues from this space, and it's gonna come really wide.

So I think that's.

So I think that's.

An opportunity for you know, portfolio managers to come step in little by little if if they want to get in.

An opportunity for you know, portfolio managers to come step in little by little if if they want to get in.

All right, So just probably define if I look at the bond market for the banks, the big banks, what's.

All right, So just probably define if I look at the bond market for the banks, the big banks, what's.

It telling you here? I mean, is it telling you that they're concerned.

It telling you here? I mean, is it telling you that they're concerned.

About there's any unusual concerns in this system? Or are they kind of trading as they should trade?

About there's any unusual concerns in this system? Or are they kind of trading as they should trade?

Yeah? No, absolutely, the regionals have definitely underperformed, you know, definitely the you know, just just as we've seen the deposits kind of gravit towards JP Morgan. That's been kind of the safety in the space and and kind of you know, even within the big six banks, really the banks with more of a kind of regional footprint, like like the Bank of America and Wells Fargo with a lot of kind of long dated mortgages, those have underperformed a bit. But but you know, the preference definitely has been with these the biggest banks.

Yeah? No, absolutely, the regionals have definitely underperformed, you know, definitely the you know, just just as we've seen the deposits kind of gravit towards JP Morgan. That's been kind of the safety in the space and and kind of you know, even within the big six banks, really the banks with more of a kind of regional footprint, like like the Bank of America and Wells Fargo with a lot of kind of long dated mortgages, those have underperformed a bit. But but you know, the preference definitely has been with these the biggest banks.

Okay, toss up for the star panel here because you saw a shop come to market issue debt. Does that mean that the capital markets are open for the banking system and does that mean that we're kind of more close or to the all clear? You'd think back to Silicon Valley Bank trying to tap equity markets and that's set off a run on the bank.

Okay, toss up for the star panel here because you saw a shop come to market issue debt. Does that mean that the capital markets are open for the banking system and does that mean that we're kind of more close or to the all clear? You'd think back to Silicon Valley Bank trying to tap equity markets and that's set off a run on the bank.

Yeah, I think you know, nobody wants to really issue equity in this market, given how much the valuations have come down, right, And I think you know it was it Western Alliance or a prafic pac Quest. Oh, you know, they looked we're looking for a solution or equity ways and then you know the opportunity wasn't right, right, So I think that that's a that's a you know, no for now. But you know the way these guys, You know that these regional banks have less regulation that they are viewed as under equitized, right, less capital because they've been able to exclude these unreal as losses and they're available for sale securities from their radiatory capital right so on on an adjusted basis compared to what the bigger banks like the JP Morgans have to do, right, they look under capitalized. So you know, we think regulation will increase from that standpoint as well.

Yeah, I think you know, nobody wants to really issue equity in this market, given how much the valuations have come down, right, And I think you know it was it Western Alliance or a prafic pac Quest. Oh, you know, they looked we're looking for a solution or equity ways and then you know the opportunity wasn't right, right, So I think that that's a that's a you know, no for now. But you know the way these guys, You know that these regional banks have less regulation that they are viewed as under equitized, right, less capital because they've been able to exclude these unreal as losses and they're available for sale securities from their radiatory capital right so on on an adjusted basis compared to what the bigger banks like the JP Morgans have to do, right, they look under capitalized. So you know, we think regulation will increase from that standpoint as well.

But right now they look under equitized.

But right now they look under equitized.

Right now.

Right now.

So when the banks report earnings, the big investment banks, oftentimes they come to the market and raised debt.

So when the banks report earnings, the big investment banks, oftentimes they come to the market and raised debt.

What's that all about, Oh, they need to it's basically, you know, over the past three the actually, so let me step back, the past three years have been extremely active for these big jesips. And that's because global systemically important banks.

What's that all about, Oh, they need to it's basically, you know, over the past three the actually, so let me step back, the past three years have been extremely active for these big jesips. And that's because global systemically important banks.

Say, we have lives. We don't we're not into that stuff. Okay, that's not just an audience too. We have we have social lives. We don't know what jesips are. Okay, so go ahead.

Say, we have lives. We don't we're not into that stuff. Okay, that's not just an audience too. We have we have social lives. We don't know what jesips are. Okay, so go ahead.

I So it's it's these systemically important banks that that if they cannot fail, right, and so part of that process, you know, we saw in two thousand and eight, the you know, when these guys got into trouble, the government had to step been with equity investments. Well, in the US and Europe, we can't have that anymore. So what we have instead is these big banks need to have a big liability stack debt really that that in a case of a crisis, that can be used as the new equity. Right, and so that's what this TI LAK regulation is total less observant capacity, and so that's where we've seen a lot of volatility with these regional banks. So maybe they're not global systemic important, but you know, maybe if these guys had a big debt stack, then they can reequitize in a case of of an issue, right, And so that's where we're headed.

I So it's it's these systemically important banks that that if they cannot fail, right, and so part of that process, you know, we saw in two thousand and eight, the you know, when these guys got into trouble, the government had to step been with equity investments. Well, in the US and Europe, we can't have that anymore. So what we have instead is these big banks need to have a big liability stack debt really that that in a case of a crisis, that can be used as the new equity. Right, and so that's what this TI LAK regulation is total less observant capacity, and so that's where we've seen a lot of volatility with these regional banks. So maybe they're not global systemic important, but you know, maybe if these guys had a big debt stack, then they can reequitize in a case of of an issue, right, And so that's where we're headed.

You know, I'm interested, Herman, do you think part of the reason shrob was able to raise money in bond markets and from what I understand at slightly more favorable terms than they initially set out for. Is there a huge difference between how investors view like a Schwab versus.

You know, I'm interested, Herman, do you think part of the reason shrob was able to raise money in bond markets and from what I understand at slightly more favorable terms than they initially set out for. Is there a huge difference between how investors view like a Schwab versus.

A pack list.

A pack list.

Is Schwab viewed as much safer?

Is Schwab viewed as much safer?

Oh?

Oh?

I think definitely, just given the stable a deposit base and they Schwab hasn't had to restructure there their entire balance sheet, like like a Western Alliance has, where Western Alliance is looking to sell assets and seeing deposits down somewhat like twenty percent enter quarter in the first quarter.

I think definitely, just given the stable a deposit base and they Schwab hasn't had to restructure there their entire balance sheet, like like a Western Alliance has, where Western Alliance is looking to sell assets and seeing deposits down somewhat like twenty percent enter quarter in the first quarter.

So you can just.

So you can just.

See from the equity valuations where PacWest is trading well south of Tantoba book value. And what investors are thinking about now is that how much can the bank return back to a normal situation versus the straw is still operating in a normal fashion.

See from the equity valuations where PacWest is trading well south of Tantoba book value. And what investors are thinking about now is that how much can the bank return back to a normal situation versus the straw is still operating in a normal fashion.

So I happen to think, I guess what I learned during this whole crisis from I guess your stuff and others is there's the US has roughly more than four thousand regional banks. I happen to think that's a strength of our banking system visa visa Europe, where they have less.

So I happen to think, I guess what I learned during this whole crisis from I guess your stuff and others is there's the US has roughly more than four thousand regional banks. I happen to think that's a strength of our banking system visa visa Europe, where they have less.

Banks, they have more national banks. A Is that true?

Banks, they have more national banks. A Is that true?

Do you think that's the strength of our banking system? And B maybe if not, is there gonna be some consolidation going forward?

Do you think that's the strength of our banking system? And B maybe if not, is there gonna be some consolidation going forward?

It is?

It is?

It is a strength because I think of it as shopping for for a suitor or a jacket. If you go to Brooks Brothers, you can buy something off the rack, and that's it's going to be too regular for me what you too are so you know what you're getting. But the region banks offer a bit more of a bespoke typ experience where where they will work with the barrow or you know, it's not going to be a cookie cutter type loan that you would get at a JP Morgan or a b of A. And these these regional banks know their community a bit better, so I can can structure a deal that's more favorable for that potential borrower. So that's that's something that that is helpful for the US economy where where you have credit more credit availability versus other regions and geographies like in Europe.

It is a strength because I think of it as shopping for for a suitor or a jacket. If you go to Brooks Brothers, you can buy something off the rack, and that's it's going to be too regular for me what you too are so you know what you're getting. But the region banks offer a bit more of a bespoke typ experience where where they will work with the barrow or you know, it's not going to be a cookie cutter type loan that you would get at a JP Morgan or a b of A. And these these regional banks know their community a bit better, so I can can structure a deal that's more favorable for that potential borrower. So that's that's something that that is helpful for the US economy where where you have credit more credit availability versus other regions and geographies like in Europe.

All right, guys, thanks so much for joining us. Really appreciated two experts folks. I can't tell you how fortunate we are to have these folks available to us, Hermit chan and Arnold Kakuda. They cover the bank's equities, fixed income, credit side, the whole thing that got the banks covered, along with Allison Williams on some of the bigger banks. There so great great research coming out of Bloomberg Intelligence.

All right, guys, thanks so much for joining us. Really appreciated two experts folks. I can't tell you how fortunate we are to have these folks available to us, Hermit chan and Arnold Kakuda. They cover the bank's equities, fixed income, credit side, the whole thing that got the banks covered, along with Allison Williams on some of the bigger banks. There so great great research coming out of Bloomberg Intelligence.

They're both joining us here in our Bloomberg Interactive Broker Studio.

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You know, we talk a lot, Schanali about inflation, but where one of the areas I see it most is in food prices, whether it's you know, at a restaurant or in the supermarket. And here's an article just from a week or so ago from Bloomberg News. US price is a baby formula and baby food jump by the most on record to an all time high last month, that would be April. Data from the Bureau of Labor Statistics showed Wednesday prices in the category rose by four point three percent in April from the prior month and from a year ago throughout eight point eight percent. So I said, we need to figureut what's going on there, and fortunately we have a great guest who can help us out there.

You know, we talk a lot, Schanali about inflation, but where one of the areas I see it most is in food prices, whether it's you know, at a restaurant or in the supermarket. And here's an article just from a week or so ago from Bloomberg News. US price is a baby formula and baby food jump by the most on record to an all time high last month, that would be April. Data from the Bureau of Labor Statistics showed Wednesday prices in the category rose by four point three percent in April from the prior month and from a year ago throughout eight point eight percent. So I said, we need to figureut what's going on there, and fortunately we have a great guest who can help us out there.

Laura Mody.

Laura Mody.

She's this It's THEEO and co founder of Bobby and Bobby is a baby formula delivery startup that sells direct to consumer and offers a subscription service to parents across the US.

She's this It's THEEO and co founder of Bobby and Bobby is a baby formula delivery startup that sells direct to consumer and offers a subscription service to parents across the US.

So a pretty cool business.

So a pretty cool business.

We've been talking to Lara a lot over the last several years during a pandemic when there really was a you know, a concern about the availability of baby formula. So Lara give us a sense of where the baby formula is, where, where the market is for baby formula now. I mean, the pricing is just and the price inflation is just really dramatic, isn't it.

We've been talking to Lara a lot over the last several years during a pandemic when there really was a you know, a concern about the availability of baby formula. So Lara give us a sense of where the baby formula is, where, where the market is for baby formula now. I mean, the pricing is just and the price inflation is just really dramatic, isn't it.

It is.

It is.

Good morning, Paul, great to stat with you again. It is, And you know, I think it's also disheartening on the back of what parents have just gone through, which is a very tough year for formula and just not being able to find it. Now we're finally seeing shells get stopped and they are seeing prices go up. I mean, look where this is coming from. Is it really is because of the shortage. A few things happened off the back of last year, and the first is I believe in March, the FDA came out with new regulations they're really supported off leveling safety and that's forced ultimately a change in production and infrastructure with the hopes of improving safety getting more formula to market, and the consequences of that was seeing an increase in price.

Good morning, Paul, great to stat with you again. It is, And you know, I think it's also disheartening on the back of what parents have just gone through, which is a very tough year for formula and just not being able to find it. Now we're finally seeing shells get stopped and they are seeing prices go up. I mean, look where this is coming from. Is it really is because of the shortage. A few things happened off the back of last year, and the first is I believe in March, the FDA came out with new regulations they're really supported off leveling safety and that's forced ultimately a change in production and infrastructure with the hopes of improving safety getting more formula to market, and the consequences of that was seeing an increase in price.

I'm kind of curious here about how you got the job done, Laura. I think you have such an interesting background. You've been written about as a wartime CEO for your work during this infant formula crisis. You've worked with some really interesting names including Gwyneth Paltrow to raise some of the money to get this done. How do you bring people on board?

I'm kind of curious here about how you got the job done, Laura. I think you have such an interesting background. You've been written about as a wartime CEO for your work during this infant formula crisis. You've worked with some really interesting names including Gwyneth Paltrow to raise some of the money to get this done. How do you bring people on board?

Great question. Honestly, it's approaching this in the complete opposite way that the industry has for the last few decades. It's representing your customers who they are. I'm the only female CEO of an infant formula company, and it starts there. And we have been able to relate to parents throughout this shortage by making one of the toughest decisions when the shortage hit, which was we became the only formula company to reliably continue to serve our subscribers, and I have to make a really tough call at the time to stop growing the business while we kept product in stock for our current subscribers.

Great question. Honestly, it's approaching this in the complete opposite way that the industry has for the last few decades. It's representing your customers who they are. I'm the only female CEO of an infant formula company, and it starts there. And we have been able to relate to parents throughout this shortage by making one of the toughest decisions when the shortage hit, which was we became the only formula company to reliably continue to serve our subscribers, and I have to make a really tough call at the time to stop growing the business while we kept product in stock for our current subscribers.

So where are you in terms of your company, Bobby? Just give us a sense of how, you know, the last couple of years have been for you during the pandemic, and maybe you know how are things right now.

So where are you in terms of your company, Bobby? Just give us a sense of how, you know, the last couple of years have been for you during the pandemic, and maybe you know how are things right now.

They've been a long few years and they've definitely been accelerated obviously throughout the pandemic and then the shortage. We're in a position right now where we're serving about three to four percent of baby born in the US continuing to grow, but growth also comes with having to invest in infrastructure and supply. So our sites are an outset on what are we doing to be able to grow our supply and continue to serve more of the population, And that in itself just takes further investment, which I'm setting my eyes.

They've been a long few years and they've definitely been accelerated obviously throughout the pandemic and then the shortage. We're in a position right now where we're serving about three to four percent of baby born in the US continuing to grow, but growth also comes with having to invest in infrastructure and supply. So our sites are an outset on what are we doing to be able to grow our supply and continue to serve more of the population, And that in itself just takes further investment, which I'm setting my eyes.

On setting your eyes on. The other thing you've done, too, beyond expanding a business here, is that you've taken to Congress as well to make changes to kind of solve some of the crisis that had been seen in the shortages. Talk to us about that process.

On setting your eyes on. The other thing you've done, too, beyond expanding a business here, is that you've taken to Congress as well to make changes to kind of solve some of the crisis that had been seen in the shortages. Talk to us about that process.

Well, look, Bobby's entire existence is to reform the industry. It's not just to get out there and sell infant formula. When you look at the ingredients, the way the product is made of, even how it's sold, and the narrative that surrounds it, it is fundamentally broken. So when the shortage hit, we put out a hotline to allow customers to call in with their fire and fury, basically to tell Congress what needs to change. We created Bobby for Change dot org, which allowed us to go out and really fight for policy changes to support parents, to support mothers where they're at and one of those policy changes that we're looking to change is to put out a bill to be able to support more product and more manufacturing domestically in the US so that we don't experience a shortage again. I'm very fortunately happen to be here in DC beside it all and to see the action and momentum from this has been wonderful.

Well, look, Bobby's entire existence is to reform the industry. It's not just to get out there and sell infant formula. When you look at the ingredients, the way the product is made of, even how it's sold, and the narrative that surrounds it, it is fundamentally broken. So when the shortage hit, we put out a hotline to allow customers to call in with their fire and fury, basically to tell Congress what needs to change. We created Bobby for Change dot org, which allowed us to go out and really fight for policy changes to support parents, to support mothers where they're at and one of those policy changes that we're looking to change is to put out a bill to be able to support more product and more manufacturing domestically in the US so that we don't experience a shortage again. I'm very fortunately happen to be here in DC beside it all and to see the action and momentum from this has been wonderful.

So lar why isn't the marketplace taking care of this itself? Why do we need regulation?

So lar why isn't the marketplace taking care of this itself? Why do we need regulation?

Aren't the manufacturers themselves saying we need the diversify our manufacturing, We need to diversify our suppliers. Isn't this what are the big players in this baby food business saying?

Aren't the manufacturers themselves saying we need the diversify our manufacturing, We need to diversify our suppliers. Isn't this what are the big players in this baby food business saying?

I think in a regulated industry there's really three legs to the stool on this. There is the private sector, of course, and companies themselves are looking for ways to diversify. But because it is regulated, it's also having the support of both government and the FDA as well. And if those three agencies can come together and figure out how within the next seven to ten years, we can look back at a truly reformed industry and I mean reformed domestically using domestic suppliers, local farmers, and be proud of our instant formula. Then I think those three bodies will have done the right job, but it will take the three of them coming together.

I think in a regulated industry there's really three legs to the stool on this. There is the private sector, of course, and companies themselves are looking for ways to diversify. But because it is regulated, it's also having the support of both government and the FDA as well. And if those three agencies can come together and figure out how within the next seven to ten years, we can look back at a truly reformed industry and I mean reformed domestically using domestic suppliers, local farmers, and be proud of our instant formula. Then I think those three bodies will have done the right job, but it will take the three of them coming together.

Three of them coming together. I think it's the past question on as suppliers here are interesting, but equally, you know, I'd like to double down on this idea here that you worked at Airbnb, you worked at Google finance. What role is Internet playing and helping you get the job done?

Three of them coming together. I think it's the past question on as suppliers here are interesting, but equally, you know, I'd like to double down on this idea here that you worked at Airbnb, you worked at Google finance. What role is Internet playing and helping you get the job done?

I think I think it starts with just the mindset of being able to look at a traditional industry and say that we can do differently. Airbnb was born on the back of seeing travel being different and disrupting really the travel industry. So we come at this with the mindset which is it can be different and the status quo isn't good enough. But I also do believe that technology, whether it's tracking supply and the data surrounding in stock rates, which frankly, if they were all in place to begin with, we would be staring at the shortage today. So I think using data and you know, even dare I say this's movement towards AI as well, I do believe can get us into a position where we're not going to be dealing with another crisis in the future, and we've just gotten ahead of this.

I think I think it starts with just the mindset of being able to look at a traditional industry and say that we can do differently. Airbnb was born on the back of seeing travel being different and disrupting really the travel industry. So we come at this with the mindset which is it can be different and the status quo isn't good enough. But I also do believe that technology, whether it's tracking supply and the data surrounding in stock rates, which frankly, if they were all in place to begin with, we would be staring at the shortage today. So I think using data and you know, even dare I say this's movement towards AI as well, I do believe can get us into a position where we're not going to be dealing with another crisis in the future, and we've just gotten ahead of this.

Lauria, we just got about thirty seconds left over the next year or two. What's the biggest challenge opportunity for your company?

Lauria, we just got about thirty seconds left over the next year or two. What's the biggest challenge opportunity for your company?

Bobby and I think.

Bobby and I think.

It really is production. We need to be in a position where we are not waiting on the edge of our seats and questioning if another shortage happens, we'll be able to serve the market. We need to break up concentration and competition and introduce more players to the market.

It really is production. We need to be in a position where we are not waiting on the edge of our seats and questioning if another shortage happens, we'll be able to serve the market. We need to break up concentration and competition and introduce more players to the market.

Laura Modi, thank you so much for joining us. Lara Moti, she's a CEO and co founder of Bobby and Bobby is a baby formula delivery startup that sells direct to consumer and offers a subscription service to parents across the US. When we first got introduced to Laura, you know, a few years ago during the pandemic, when we really had that shortage in that if you think back in how serious that was at the time, and we needed a smart voice to kind of explain it all to us, explain the challenges, and Laura was that person. So like checking in with larav every once in a while to see how that business and the you know, the greater food business and distribution business, how that's playing out.

Laura Modi, thank you so much for joining us. Lara Moti, she's a CEO and co founder of Bobby and Bobby is a baby formula delivery startup that sells direct to consumer and offers a subscription service to parents across the US. When we first got introduced to Laura, you know, a few years ago during the pandemic, when we really had that shortage in that if you think back in how serious that was at the time, and we needed a smart voice to kind of explain it all to us, explain the challenges, and Laura was that person. So like checking in with larav every once in a while to see how that business and the you know, the greater food business and distribution business, how that's playing out.

You're listening to the team Ken's our line program, Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business app, or listening on demand wherever you get your podcasts.

You're listening to the team Ken's our line program, Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business app, or listening on demand wherever you get your podcasts.

Right now, we're bringing Ira Jersey.

Right now, we're bringing Ira Jersey.

He's the chief US interest rate strategist for Bloomberg Intelligence. So, Ira, we've got current FED Chairman Jpal, former FED chair Ben Bernanke making some comments today.

He's the chief US interest rate strategist for Bloomberg Intelligence. So, Ira, we've got current FED Chairman Jpal, former FED chair Ben Bernanke making some comments today.

What are you taking away here?

What are you taking away here?

Well, first, I'm taking away that there's multiple headlines going on at the same time and it's hard to pay attention. That's number one. Number two, you know, I think Chair Powell's comments about forward guidance and about the market not pricing what the dot plot says, and that it seems like the market has a different forecast than the FED, and you know, hinting that we think that we'll be right based on the incoming data that we've seen recently. I think it is interesting it's not going to be enough to job own the market as significantly, maybe as the hopes it would. You know, I think the fact that we're pricing in significant chance of rake cuts later this year is easing financial conditions and actually might be making their job a little bit harder than it would be if we were pricing for the FED to be on hold a bit longer than we currently are.

Well, first, I'm taking away that there's multiple headlines going on at the same time and it's hard to pay attention. That's number one. Number two, you know, I think Chair Powell's comments about forward guidance and about the market not pricing what the dot plot says, and that it seems like the market has a different forecast than the FED, and you know, hinting that we think that we'll be right based on the incoming data that we've seen recently. I think it is interesting it's not going to be enough to job own the market as significantly, maybe as the hopes it would. You know, I think the fact that we're pricing in significant chance of rake cuts later this year is easing financial conditions and actually might be making their job a little bit harder than it would be if we were pricing for the FED to be on hold a bit longer than we currently are.

To the point on competing headlines, you had this idea here that the banking stress is taking hold from Powell, but then you have the debt ceiling talks. At the same time, you had a big drop off and yields from the Powell comments or not big, but you know, meaningful time to day, and then you know you're seeing a slight rise once again, if you think about it, we're just getting all these headlines. We're still getting Powell headlines, the most recent being that FED was expecting further tightening until recently, which is significant, which force wins out the fiscal strains or the or the monetary ones.

To the point on competing headlines, you had this idea here that the banking stress is taking hold from Powell, but then you have the debt ceiling talks. At the same time, you had a big drop off and yields from the Powell comments or not big, but you know, meaningful time to day, and then you know you're seeing a slight rise once again, if you think about it, we're just getting all these headlines. We're still getting Powell headlines, the most recent being that FED was expecting further tightening until recently, which is significant, which force wins out the fiscal strains or the or the monetary ones.

Well, I think near term, the market's going to probably react to the debt ceialing angst quite significantly. So our model still shows that the government runs out of money on June fifth, if someone doesn't get paid on that day, and then the June sixth tea bills are significantly at risk of maybe missing a payment. And so I think that the markets and and risk assets and in particular are going to wind up moving, you know, quite dramatically, probably on some of these debt ceiling headlines. You know, it's not obvious what the Republicans are trying to get out of these negotiations. You know, it's like, you know, obviously the Democrats want something clean, that the Republicans want to use this as a bargaining chip to try to reduce government spending uh and and reduce deficits. But at the same time, you know that there's there's a time to do that, and there's a time not to. And you know, I'm sympathetic to the idea that deficits are too high, that the stock of that outstanding right now is making liquidity in some markets, and even in the treasury market itself a challenge just because of the of the quantum of of treasury securities available. So but at the same time, you know, you play this game when when the right you're working on a budget, not when you're working on whether or not you're going to pay your bill.

Well, I think near term, the market's going to probably react to the debt ceialing angst quite significantly. So our model still shows that the government runs out of money on June fifth, if someone doesn't get paid on that day, and then the June sixth tea bills are significantly at risk of maybe missing a payment. And so I think that the markets and and risk assets and in particular are going to wind up moving, you know, quite dramatically, probably on some of these debt ceiling headlines. You know, it's not obvious what the Republicans are trying to get out of these negotiations. You know, it's like, you know, obviously the Democrats want something clean, that the Republicans want to use this as a bargaining chip to try to reduce government spending uh and and reduce deficits. But at the same time, you know that there's there's a time to do that, and there's a time not to. And you know, I'm sympathetic to the idea that deficits are too high, that the stock of that outstanding right now is making liquidity in some markets, and even in the treasury market itself a challenge just because of the of the quantum of of treasury securities available. So but at the same time, you know, you play this game when when the right you're working on a budget, not when you're working on whether or not you're going to pay your bill.

Right.

Right.

But here we are again, And the thing is that to most of the country and to most of the world, what they see as a bunch of sparring in Washington for something that usually works itself out at the very end, but for more hom sitting covering markets, banks, market makers, investment firms that are levered towards treasury and repo markets. There are more worries and this gentle sense of panic under the market right that things will be very volatile and potentially throw things off course. You know, how drastic are we going to have to see? I mean, do you think we'll have to get to the point that the Fed would have to step in? I mean, at what point are some of these sharp moves is going to be troubling for the market.

But here we are again, And the thing is that to most of the country and to most of the world, what they see as a bunch of sparring in Washington for something that usually works itself out at the very end, but for more hom sitting covering markets, banks, market makers, investment firms that are levered towards treasury and repo markets. There are more worries and this gentle sense of panic under the market right that things will be very volatile and potentially throw things off course. You know, how drastic are we going to have to see? I mean, do you think we'll have to get to the point that the Fed would have to step in? I mean, at what point are some of these sharp moves is going to be troubling for the market.

Well, I don't think that the Fed will step in, because you know, their their job is financial stability, and if Congress doesn't want financial stability, then you know that the Fed Reserve is going to be the uh a financial stabilizer of less resort.

Well, I don't think that the Fed will step in, because you know, their their job is financial stability, and if Congress doesn't want financial stability, then you know that the Fed Reserve is going to be the uh a financial stabilizer of less resort.

But but that.

But but that.

Probably doesn't come unless the unless the government actually defaults on the debt.

Probably doesn't come unless the unless the government actually defaults on the debt.

I would suspect we're downgraded.

I would suspect we're downgraded.

Right, Well, yeah, down but downgraded doesn't necessarily mean a whole heck of a lot. Mandates don't change. So most mandates for fixed income investors globally is that you can buy, you know, a sovereign government debt of OECD countries, you know agency debt. So in the United States, most most mandates say treasuries agencies, and then you know investment grade or or triple A corporates, right so so so so treasuries are still a completely separate asset class from that that are that are devoid of ratings, at least for now. You know that might that could change in the future potentially, But you look at somewhere like Japan. Japan hasn't had a triple A credit rating in ages and ages, and yet their interest rates don't have a particular problem. So, you know, sovereign ratings for investment grade, for for very high rated company countries that issue debt primarily in their own currency, really don't mean a whole act of a lot, because it really has more to do with investor sentiment and with not with the ability to pay, but the willingness to pay, which is exactly what we're dealing with right now with the dead limit IRA.

Right, Well, yeah, down but downgraded doesn't necessarily mean a whole heck of a lot. Mandates don't change. So most mandates for fixed income investors globally is that you can buy, you know, a sovereign government debt of OECD countries, you know agency debt. So in the United States, most most mandates say treasuries agencies, and then you know investment grade or or triple A corporates, right so so so so treasuries are still a completely separate asset class from that that are that are devoid of ratings, at least for now. You know that might that could change in the future potentially, But you look at somewhere like Japan. Japan hasn't had a triple A credit rating in ages and ages, and yet their interest rates don't have a particular problem. So, you know, sovereign ratings for investment grade, for for very high rated company countries that issue debt primarily in their own currency, really don't mean a whole act of a lot, because it really has more to do with investor sentiment and with not with the ability to pay, but the willingness to pay, which is exactly what we're dealing with right now with the dead limit IRA.

What do you think are the the upcoming key data points that we need to we need to be focusing on. Maybe the FED is focusing on what should we be looking for.

What do you think are the the upcoming key data points that we need to we need to be focusing on. Maybe the FED is focusing on what should we be looking for.

Yeah, so we have the PC data coming up next week. You know, that's probably the biggest one that that we have. You know, we get a revision and GDP that's you know, not probably not going to be significantly market moving, but the PC data that we get because that's for April, so that's going to be important for uh, you know, where GDP and where consumer spending and what the inflationary impulse is. Remember that the PC deflator uses similar data to the CPI, but but the weightings are different. So the weightings are weighted more toward what actually was purchased in the month of April. So that's one reason why the Fed Reserve concentrates on that particular measure, and so there will be some modest differences between that data and what we got in CPI. But but regardless, you're still likely to see the inflation continuing to move lower, but just at a you know, but still wind up you know, well above four percent for example, on a year on year basis for the headline PC.

Yeah, so we have the PC data coming up next week. You know, that's probably the biggest one that that we have. You know, we get a revision and GDP that's you know, not probably not going to be significantly market moving, but the PC data that we get because that's for April, so that's going to be important for uh, you know, where GDP and where consumer spending and what the inflationary impulse is. Remember that the PC deflator uses similar data to the CPI, but but the weightings are different. So the weightings are weighted more toward what actually was purchased in the month of April. So that's one reason why the Fed Reserve concentrates on that particular measure, and so there will be some modest differences between that data and what we got in CPI. But but regardless, you're still likely to see the inflation continuing to move lower, but just at a you know, but still wind up you know, well above four percent for example, on a year on year basis for the headline PC.

And in that scenario, IRA does a FED just kind of sit on the sidelines and wait, and that it really.

And in that scenario, IRA does a FED just kind of sit on the sidelines and wait, and that it really.

Is a pause.

Is a pause.

Yeah, that's what I think the Fed's most likely to do. And Powell did hint at that during his remarks today, And and I think that the FED would it would behove the Fed at this point just to take a weight and see action. They can talk about, you know, the long and variable legs of how monetary policy works. They can still say, like the banking sector is, you know, still tightening financial conditions. You look at the senior loan, the survey and some other measures of credit conditions, and they can say that, you know, credit conditions are modestly tightening, and we're just going to take away and see approach. And of course so they'll say that symmetric you know that in the future, if inflation does in fact, you know, rebound, we can hike more. I think if he couches it in those kind of language, then maybe the market will wake up and we'll start to price out some of the cuts that are currently in the market, kind of as a risk management measure.

Yeah, that's what I think the Fed's most likely to do. And Powell did hint at that during his remarks today, And and I think that the FED would it would behove the Fed at this point just to take a weight and see action. They can talk about, you know, the long and variable legs of how monetary policy works. They can still say, like the banking sector is, you know, still tightening financial conditions. You look at the senior loan, the survey and some other measures of credit conditions, and they can say that, you know, credit conditions are modestly tightening, and we're just going to take away and see approach. And of course so they'll say that symmetric you know that in the future, if inflation does in fact, you know, rebound, we can hike more. I think if he couches it in those kind of language, then maybe the market will wake up and we'll start to price out some of the cuts that are currently in the market, kind of as a risk management measure.

All right, Ira, thanks so much for joining us. I really appreciate getting your insights.

All right, Ira, thanks so much for joining us. I really appreciate getting your insights.

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We need the roundtable list in a big way. We've got some smart people that are joining us. So we've got Abigail Doolittle, she covers all the markets for Bloomberg Television. She joins us here in our studio, Billy House. He's down in Washington, DC Congress for Bloomberg News. He's going to join us, give us the latest on what's happening with these debt talks, and then we have a real treat here. Monica Defend, chief strategist at Amundi. A Mundi is an extraordinarily large global investor. Will get a great global view of kind of how the markets are viewing what's happening here in the States and abroad.

We need the roundtable list in a big way. We've got some smart people that are joining us. So we've got Abigail Doolittle, she covers all the markets for Bloomberg Television. She joins us here in our studio, Billy House. He's down in Washington, DC Congress for Bloomberg News. He's going to join us, give us the latest on what's happening with these debt talks, and then we have a real treat here. Monica Defend, chief strategist at Amundi. A Mundi is an extraordinarily large global investor. Will get a great global view of kind of how the markets are viewing what's happening here in the States and abroad.

Abigail, let's start with you. What have we seen in these markets?

Abigail, let's start with you. What have we seen in these markets?

A little bit of inter day volatility, if not a lot, and it's cross asset and of course has to do with all these different headlines that we've seen. Now, I'll start off with feed shair J.

A little bit of inter day volatility, if not a lot, and it's cross asset and of course has to do with all these different headlines that we've seen. Now, I'll start off with feed shair J.

Powell.

Powell.

Every now and then he drops, I don't want to say a bomb, but a surprise, and I would I would characterize his thought that rates may not need to rise as high given credit stress as a possible, not pivot, but a nuance worth watching going forward, because he's been pretty consistent in his message to my memory over basically the last year, saying that the Fed is hike rates are going higher. The hikes may get smaller, but they're going to go higher higher. And now all of a sudden he's saying, whoa credit stress, bank turmoil, bank crisis. So maybe not as high now on that we saw stocks take a little bit of a dip, But I'll stress the word little because right now we have that S and P five hundred down two tens of one percent, although on on interday basis it has been a turnaround of almost less than a percent, but close to Chanale not so long ago, was talking about the huge move we've seen in yields. Yields had been hired than they were lower by a considerable amount. They gave up fourteen basis points on that headline now about flat on the day, the dollar down a little bit, and then following Powell having this, I'm going to call it the Powell nuance. I know it doesn't sound as good as a Powell pivot, but just to be accurate, the debt limit talks hit a roadblock, and on that we saw stocks drop a little bit too.

Every now and then he drops, I don't want to say a bomb, but a surprise, and I would I would characterize his thought that rates may not need to rise as high given credit stress as a possible, not pivot, but a nuance worth watching going forward, because he's been pretty consistent in his message to my memory over basically the last year, saying that the Fed is hike rates are going higher. The hikes may get smaller, but they're going to go higher higher. And now all of a sudden he's saying, whoa credit stress, bank turmoil, bank crisis. So maybe not as high now on that we saw stocks take a little bit of a dip, But I'll stress the word little because right now we have that S and P five hundred down two tens of one percent, although on on interday basis it has been a turnaround of almost less than a percent, but close to Chanale not so long ago, was talking about the huge move we've seen in yields. Yields had been hired than they were lower by a considerable amount. They gave up fourteen basis points on that headline now about flat on the day, the dollar down a little bit, and then following Powell having this, I'm going to call it the Powell nuance. I know it doesn't sound as good as a Powell pivot, but just to be accurate, the debt limit talks hit a roadblock, and on that we saw stocks drop a little bit too.

Right, all right, let's just bring up Billy House because I need to figure out what's going on down in Washington, DC.

Right, all right, let's just bring up Billy House because I need to figure out what's going on down in Washington, DC.

Job, this is in the driver's seat. I think we could safely.

Job, this is in the driver's seat. I think we could safely.

Say yeah, yeah, I don't know.

Say yeah, yeah, I don't know.

All right, Bill, You're done in DC here. Now, when the GOOP negotiators walked out, did they angrily walk out? Did they did they hop skin walk out? Like what's going on down there?

All right, Bill, You're done in DC here. Now, when the GOOP negotiators walked out, did they angrily walk out? Did they did they hop skin walk out? Like what's going on down there?

Well? I wouldn't say they stormed out, but they certainly walked out abruptly after the meeting. Shortly after them again and the lead negotiator for Kevin McCarthy, the speaker, Garrett Grays of Louisiana, said that they were being unreasonable, meaning the White House team, and that things were being put on pause. He didn't know if they were going to meet again today or even this weekend. He didn't get provided any specifics, but we believe it has something to do with the discussions over work requirements and the hesitance of the White House to embrace anything that the House Republicans want in that regard.

Well? I wouldn't say they stormed out, but they certainly walked out abruptly after the meeting. Shortly after them again and the lead negotiator for Kevin McCarthy, the speaker, Garrett Grays of Louisiana, said that they were being unreasonable, meaning the White House team, and that things were being put on pause. He didn't know if they were going to meet again today or even this weekend. He didn't get provided any specifics, but we believe it has something to do with the discussions over work requirements and the hesitance of the White House to embrace anything that the House Republicans want in that regard.

Where's the speaker?

Where's the speaker?

The speaker and I'm standing right here in front of a door in which he's supposed to arrive at the Capitol and walk through at any second. He touched down apparently at the airport around eleven thirty and makes his way over here. We hope to get details from him, and details that are a lot broader. He's been giving us last two days of over pessimism, I mean over optimism apparently, but who knows these things? People play roles, and again we're on pause. We don't know if it's a breakdown really, but they're calling it a pause.

The speaker and I'm standing right here in front of a door in which he's supposed to arrive at the Capitol and walk through at any second. He touched down apparently at the airport around eleven thirty and makes his way over here. We hope to get details from him, and details that are a lot broader. He's been giving us last two days of over pessimism, I mean over optimism apparently, but who knows these things? People play roles, and again we're on pause. We don't know if it's a breakdown really, but they're calling it a pause.

Monica, I want to bring you in here, Monica defend chief strategist at a Mundi Monica, How do how do investors view what's happening in Washington, this this long, tortuous path of just trying to get to a point where the United States government can at least pay its bills.

Monica, I want to bring you in here, Monica defend chief strategist at a Mundi Monica, How do how do investors view what's happening in Washington, this this long, tortuous path of just trying to get to a point where the United States government can at least pay its bills.

How do you think the markets are viewing it? All over the world?

How do you think the markets are viewing it? All over the world?

Yeah, thank you. Well, you know, I'm so lucky because I am based in Europe, and I have to say, guys that how we see things in Europe it might be a little bit different from how are you ask, colleague, So where it seems to us that there is and they will be definitely a lot of noise may be entering in June on the market. So still we are not that concerning that a technical the force the war happens in our opinion, but we might be more worried on the people. So these things might play out with people not getting there the salaries or spending cuts to kick in, and this might be painful for the US economy.

Yeah, thank you. Well, you know, I'm so lucky because I am based in Europe, and I have to say, guys that how we see things in Europe it might be a little bit different from how are you ask, colleague, So where it seems to us that there is and they will be definitely a lot of noise may be entering in June on the market. So still we are not that concerning that a technical the force the war happens in our opinion, but we might be more worried on the people. So these things might play out with people not getting there the salaries or spending cuts to kick in, and this might be painful for the US economy.

Well, it's to date we've been climbing a wall of worry. Can we climb more with this added worry?

Well, it's to date we've been climbing a wall of worry. Can we climb more with this added worry?

Well, I think that this might be, but it really depends what kind of worries you are looking for, whether it is or not market and monectivity. Yes, this will materialize, it is it is likely so as we've seen so far. But then when it goes down to more entrenched consequences on the economic cycle, while we expect this to be less likely.

Well, I think that this might be, but it really depends what kind of worries you are looking for, whether it is or not market and monectivity. Yes, this will materialize, it is it is likely so as we've seen so far. But then when it goes down to more entrenched consequences on the economic cycle, while we expect this to be less likely.

So the market, sorry.

So the market, sorry.

That blue button thing, so abigail these markets here, What do you think the market is kind of factoring in here? It relates to this debt, silly negotiations. The things have been kind of the optics has been kind of building for the last twenty four to thirty six hours.