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Now, let's get to today's.
Second drop of some big bank earnings another round along with business updates from the Wall Street banks. We got today Morgan Stanley and Bank of America BAA shares we've seen them trade slightly lowered despite fourth quarter profit beat due to high investment banking fees and strong net interest income. And then Tim Morgan Stanley shares, we've seen them take off rallying, following in the steps of what we saw in terms of share moves by Goldwyn, JP, Morgan and City.
They reported yesterday Morgan Stanley fourth quarter profit more than doubling, driven by strong trading revenue due to US election volatility.
Here with the details on today's big bank results, we got Bloomberg Intelligence Senior Global Banks analyst Alison Williams here in the Bloomberg BusinessWeek Studio. Alison, Bank of America A little preview for the clothes right now is going to be one of my decliners today. Why are shares lower?
I mean, you know that yesterday I think was when there was a readjustment in terms of, you know, we got the we got the results yesterday, we had strong numbers, and I think Bank of America did deliver, right, they delivered on that an interest income upside. The outlook is good, the outlook for costs is good. They're going to have operating leverage. But potentially wasn't the same magnitude.
Is it because they were already up three percent yesterday?
Yeah, I mean I think yeah. So I think yesterday was kind of baking in, you know, an adjustment for expectations like, okay, so we've seen this across the banks, We're probably going to get it from Bank of America. And as I said, they did deliver on it, but
not necessarily. I mean, the huge upside that we're seeing at the capital markets focused Morgan Stanley and Golden Sachs for example, and so Bank of America good growth in their wealth management business, but we knew that they had already talked about that, so that was kind of in line. And then you know, trading and revenue, yes, up, but not of forty five percent, which is what we saw at you know, forty five percent trading growth in Morgan Stanley.
Yeah, I mean it's the traders, right that seem to have really done super super well. I mean, even if investment banking fees are up, I mean they're coming from I mean, there's still not where they were when they were hitting record levels, right, and it's it was pretty anemic, like the reference point.
But to your point, what people are really focused on is this investment banking fee recovery. Investors and managements and bankers have been looking for it, you know, ever since the downturn, and so now we're starting to see things pick up. We saw i mean IPOs in the fourth quarter. It's really was like a hockey stick. And so, you know, the highest level in a few years M and A backlog Morgan Stanley saying today it's like the highest and
you know, ten to fifteen years. Keep in mind that M and A feeds into all these other underwriting businesses. So so that's something to be excited about.
Right, you do a deal for a company, you do like other businesses.
I mean, we just had at the start of our broadcast, Rio Tinto and Glencore said to discuss a potential combination, you.
Know, right, and that is, you know, after Trump, we saw a sentiment really drive all these banks higher. Part of that is less scrutiny and anti trust and so that's meaningful, not not for banks merging with each other, but for banks advising.
On more deals.
And you know, we actually INBI we have a we did a deep study led by you know, my my colleague Neil Sipes, looking at M and A in the cycle. You know, it's a cyclical business, and you know it's you can make a really solid argument that we could. You know, M and I is a percent of market cap reached new lows last year, and you can make a caste for that improving just as we said, scrutiny, more sentiment as people feel a little bit more confident in the economy, you know, the pro growth economy as
Jamie calls it. And really if you get that improved sentiment, you can start to see more and more deals get done.
What do we learn in them about in the last thirty six hours about the way consumers are feeling about the economy specifically, you know, Bank of America. We often look too, because they have such a good view on consumers in the US.
What did we hear, I mean, we heard good things. It's a little hard to tell because the fourth quarter is really bolstered by all that holiday spend.
Yeah, I know, my credit card, I'm confirmed.
That is confirmed, confirmed.
And that's why in the first half tends to be the weaker part on the credit side, right because people are ringing up the bills. There's spending is very strong, but then the bills start coming in and so you know, the credit trends in that business are not great for the first half, but you know, in general, the credit picture is good. You know, we haven't talked about credit. You didn't see a lot of headlines. That means that the stories, good provisions actually coming on a little bit
better than expected. When we look at reserves, so keep in mind, reserves are thinking about the losses ahead, they're over the life, but they're also based on you know, economic scenarios, capabilities of those economic scenarios, and they're all telling us that, you know, next year looks stable and solid.
What does the you know, kind of financial community, investor analyst community, you guys think when it comes to those capital ratios. I know there's expectations under Trump that even that eases, right, or it doesn't even it doesn't get amped up more.
And so that's why we saw that Trump bump with a lot.
Of these banking names in the last quarter of twenty twenty four. What's the view on that in terms of oversight and keeping them in check?
So the viewposts Trump to your point, right, banks shares rally, they're very excited, and it's not necessarily regulation.
Roll back, but let's rules.
So the rule you're referring to is a new rule and it's more punitive for the biggest, biggest banks. So again, these capital markets focus banks, so less regulation, more revenue. We saw a twenty billion dollar buy back announced by City Group, fourteen percent of their market cap. Right, you
saw you saw those shares rally. But that is another thing that investors are focused on because the banks happen hoarding capital, if you will, right, because they these when the rules were introduced, they were extremely I don't know if you want to say strict or punitive, but you know there we're going to need a lot of capital. As people started to feel that, okay, these are going to get watered down. There was you know, comment by Power that they're going to get watered down. So people
felt a little bit better. But really that you know, post Trump, people became very excited. And now with Bars stepping down, you know, Bar was really one of the people that was looking for these banks to hold more capital. And so I think all of that positive momentum. Investors are more positive. But managements are also feeling better about Okay, you know, we may have we may feel better about the capital situation.
That said a headline coming in you mentioned City City eliminating more jobs. This week, the bank games to reduce jobs by twenty thousand by the end of twenty twenty six, headcount currently two hundred and twenty nine thousand. How should we read into this? The story just breaking about ten.
Minutes, So, I mean City Group and Walls Fargo are a little bit unique because they are dealing with some regulatory issues, right, So there's a couple of and there's a couple of things at City First they called the transformation, right.
So just kind of about twenty seconds getting that in control.
But then they are also refining their business and honing their business, right, and so focusing on the parts that are more profitable.
We saw the severance charges at Wells.
It's not surprising that we were kind of seeing continued honing the business at the City Group.
All right, Yeah, they continue in terms of that transformation, all right, and City shares a little change in today's session. Alison Williams, thank you so much. Luck going on when it comes to the big banks. Senior at Global Bank Salist Here at Bloomberg Intelligence.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five these during that listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
Well.
The data are clear that the nation's current housing crisis stems from a lack of home building in the wake of the Great Recession more than a decade ago. Earlier this month, Bloomberg Opinion highlighting in a column how home construction never caught back up to the demand of a growing population. As a result, the United States has a shortage of about four and a half million homes. This
is from Zillo data. Surveys published last year. Tim showed that more than half of all prospective home buyers were unable to make a move.
Larry Connor is founder and managing partner of the Connor Group. It's a real estate investment firm that owns and operates luxury apartments and high growth markets throughout the South and the Midwest. The firm has more than five billion dollars dollars in assets under management. Larry joins us from Dayton, Ohio. Larry, good to have you with us. Just give us an idea of your footprint and when we say luxury, what sort of the demographic that your firm caters to.
Sure? First off, thanks for having me.
Yeah, we operated eighteen cities around the country. We go as far west as Phoenix, Denver, Texas, Florida, North Carolina, and obviously here.
In the Midwest.
And so generally it's going to be the renner by choice. But I would tell you the affordable housing crisis is real. Two, it's just not for example, on the coast, I think it's in every city across to America. But I believe the new administration absolutely has an opportunity to address this well.
And I'm curious, well, how do you think that they should address it? Because I think some might say and I'm not being sassy here, so forgive me, but I know I'm going to get emails. You know, they would say, hey, Larry, you know what can a luxury real estate investor kind of really tell us about what needs to be done when it comes to affordable housing? So let's start there now.
I think that's a fair question, Carol. So I would have three thoughts. And by the way, the backdrop is the new administration has the opportunity to unleash the power of America's free enterprise. The problem is the economics.
Don't work for these developers.
And I know a lot of developers who work with even though we don't develop properties, and say, okay, how so three ways. Number one, common sense regulations. Let me give you just one example. In California.
There was a.
Recent research paper approximately thirty percent of the total cost of a new home in California is based upon permitting and red tape.
That's not good, Okay.
Yeah, that's an issue that has been talked a lot about too in the wake of the fires, and even the governor suspending some of that red tape to try to get this stuff rebuilt faster. Go ahead, Sorry, I just want to jump in.
Yeah, Jim, You're absolutely right, and in California the same research it takes up to four years. Seven three pronged attack. Number One, common sense regulations. I think the Trump and administrations.
Will equipped to do that.
Second, create low interest costs moans, Third tax credits. But in return, put real teeth in the requirements that these developers. One build a quality product and two, over the long term, maintain it to high standards.
So there, I hear what you're saying, and I think a lot of people watching and listening would agree that regulations are a huge issue. The challenge, though, is the federal government doesn't really have much control on the regulatory front when it comes to zoning rules, when it comes to environmental policy rules, environmental review rules in individual states. How do you make it work at a federal level if these are local issues?
Yeah, fair statement, Tim.
The reality is it's a federal problem, it's a state problem, and it's a local problem. But somebody has to start in the federal government, and the new administration, in my opinion, are.
Uniquely positioned to do so.
For example, let's go to the low interest rate instead of borrowing costs for these developers at seven or eight percent create an environment where they can do it at three or four percent. Now suddenly the economics work and developers will develop tax credits. Every deal project you do, you need a down payment, tax credits can help fund them.
If you do that, developers will do it.
But again, you've got to build a safety and out of regulations.
Larry, why do developers always need tax breaks? I mean, you're not going to build an areas where you're not going to be able to sell properties, right, You're not going to do that because it would be a bad business decision. So I'm not sure I ever completely get this. I mean I think, why don't we give tax breaks to the homeowners that actually buy it and send them to do it even more and to kind of make
it even possible. We know that when you know a homeowner buys a home, you know they're going to buy a lot of other things. There's a lot of economic activity that is rest that is created as a result.
Good question, Carol.
Two part answer or number one is I agree, give the home owner some tax breaks.
Here's why tax credits.
So you're going to build a project in wherever in Ohio and Cincinnati, Ohio.
Well, if you get a loan.
Let's say through Fannie Mae freddie Man that loan is only under cover let's call it seventy five percent of your cost.
Well, you have to come up with.
A twenty five percent down payment. A lot of developers can't come up with that. Tax credits you can actually monetize.
You can go out and sell.
Those to investors who will buy those net net you can pay for maybe not all, but maybe half to two thirds.
Of your down payment.
That's why, again, you come back to the realities. You got to make the economics work. If you do, you're going to unleash the power of all these developers.
So only got about a minute and a half for so left thirty seconds. I want to ask you, though, if you could change one thing that you think would really create affordable housing, and it's not just affordable housing, but affordable housing in major cities like New York and LA where it's expensive and they're needed in those locations, not just anywhere where people who maybe don't make a lot of money, but they work in New York City
and they need a place to live. One change, thirty seconds, what would it.
Be, reduce the cost and create the economics for it to work.
Larry, I like that answer because it was short and it gives me time to ask about your mission to space back in twenty twenty two. With the one minute we do have left. Well, give us your outlook on NASA under the next administration and the role of private investors, and the role of private companies such as SpaceX Axiom, the company you went with to space to the ISS. What's your view over the next four years when it comes to the US role in the Cosmos.
Well, if you ask my opinion, the future is space and it's important that the United States lead in control space. Second, I think again, you partner the private sector with the public sector, and the power of being.
Able to do that can be unbelievable.
Me personally, I was fortunate seventeen days in space extraordinary. Well, what's not known is that ten months of full trying training behind the scenes.
We are not space tours.
We were private astronauts who had to meet or exceed most of them NASA astronaut requirements.
All Right, we got to leave it on that note, Lard. Great to get some time with you. Larry Connor, founder imaging partner of the Connor Group.
This is The Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Applecarplay and Android Otto with the Bloomberg Business You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa Play Bloomberg eleven thirty Well.
Treasury Secretary nominee Scott Bessen warned that the US space is an economic crisis that will hammer middle in working class people if the twenty seventeen Republican tax cuts are not extended when a swath of them expire at the end of this year. Bessent making these comments answering questions at his Senate Finance Committee confirmation hearing today. He also touched on the independence of the FED during that hearing.
I'm asking you, but let me just say, but you don't deviate from our conversation that you think that there should be independence.
I think on monetary policy decisions, the FOMC should be independent.
Thank you.
I appreciate that.
Indeed, here at Bloomberg, we've been talking a lot about Scott Besson in recent months, Yet for many people he wasn't a familiar name, especially those in Republican political circles before Donald Trump nominated him to be Treasury Secretary. Still is Bloomberg Business Wee columnist Josh Green, Right, it's the macro hedge fund executive beat out several rival contenders to get the nod for one of the most powerful jobs
in global economics and finance. He managed to convince both Maga populist and Wall Street that he was on their side. Josh Green is a Bloomberg BusinessWeek national correspondent. He's also the author of several books, including the number one New York Times bestseller Devil's Bargain, Steve bann and Donald Trump and the Storming of the Presidency, as well as The Rebels Elizabeth Warren, Bernie Sanders, AOC and The Rise of
the New Left. Josh joins us from Washington, d C. Josh, I had no idea Steve Bannon was such an integral part of Scott Besson's sort of rise in Republican Circles. Explain the relationship there and what Besson did during the first Trump presidency and then over the last four years.
Yeah, Steve Besson is. Sorry, Steve Bannon is. He's kind of like a Maga Forrest Gump. He just sort of shows up and everywhere and everybody. But as I wrote in Bloomberg News this week, with my colleague Soleia Mosen, we did a big profile of Scott Bessont, the likely next next Treasury secretary, basically trying to answer the question like who is this guy and where did he come from? I was watching an event at mar a Lago earlier this month, and Trump on stage kind of just stood up.
There was like musing to the crowd like, Hey, there's Scott Besson Who's ever heard of this guy? And it sort of struck me as like that that really is a question to answer about Besstt, And of course this is what senators are trying to find out. We're trying to find out the hearings this morning, Bannon came into the picture because Bessentt, for most of his career had been a low profile but very well regarded hedge fund manager for George Soros's fund. In twenty fifteen twenty sixteen,
he launched out on his own. A Key Square Group was his hedge fund, and shortly after Trump's inauguration in
twenty seventeen. Bessen is a macroad bester, which is very curious to learn about these new forces of populism that are obviously royaling governments and markets across the world, and wound up paying to attend to Credit Lionee conference in Hong Kong, where he sat next to Steve Bannon, who had recently left the White House, and from what Bannon describes, they basically had a two day debrief on all things
Trump and have been in touch ever since. And when Besson made up his mind that he wanted to have a position in the Trump administration, Bannon was one of the people in his ear helping advise him how to land the Treasury secretary role.
You know, I think about this, Josh.
There are a lot of politicians out there, individuals who kind of start to align themselves or start to play to Donald Trump. But what was it what's so unique about what Besson did that really made him such a standout to ultimately get one of the top jobs, or at least nominated for one of the top jobs in this administration upcoming administration.
You know what stood out to me about him, and I think Sileia, my co author, also was that what you've tended to see across two Trump administrations is that, uh, the key figures tend to either come from the traditional world of Wall Street or GOP politics, or they come from the kind of hard right Steve Bannon Maga Breitbart
News world. And what was so interesting about Bessett is that he he emerged out of the Wall Street world, but over the last seven or eight years, he's really become a sort of a prominent and well thought of person in the MAGA world. Also, Bannon was one of his most vocal and outs outspoken supporters during the long race to become Treasury Treasury Secretary.
And I think it was the.
Fact that Bessant has went managed to win over kind of the two key components of Trump era Republican Party that explain how a guy like this, who doesn't have the profile of like, you know, a Gary Cohne or some you know, some of the more famous Treasury secretaries of the past, wound up up getting this role.
I love this part at the top of the piece where you quote Steve benn who says he went to Ivy League and has an elite Wall Street pet pedigree, but he's a true populist. He's MAGA to his core. And then you also quote just after that Stanley Druckenmiller, who says Scott has very conservative views, but they are not necessarily orthodox or populist.
So what is it to me?
I just said, there's a great way of framing the kind of chameleon nature of Scott Bessont's political appeal, the fact that he has, you know, the talents and I think the credibility to appeal to a guy like Bannon, while at the same time, you know, having loyalists like like Stan Druckenmiller, who's about is credential the Wall Street
figure is you're liable to find now. I think the challenge for besst is going to be that, you know, once he's confirmed, I think the expectation is he'll be confirmed fairly easily and becomes Treasury secretary.
You can't be a friend to all people.
You have to sort of choose sides, and ultimately you have to do the president's bidding. And so he is going to have some I think, very difficult situations in the coming years and months where, uh, you know, one group is going to want one thing and another group's going to want another. You know, if Trump wants to slap on global tariffs, that's going to make a lot
of Wall Street folks very nervous. You know, if if Besson wants to focus on tax cuts and not do any of the tariff or the MAGA stuff, that's going to make people like Steve Bannon upset and so as I you know, as we write in the piece, Besson has a very narrow, tight rope to walk, and it's going to be interesting to see, you know, if he is able, he is a newcomer to high level politics, is able to pull this off well.
And you know, I think about in moments of crisis, whether it's the Great Financial Crisis or you know, even the pandemic, you know, you need a Treasury secretary who really figures out what really needs to be done to kind of get us out of a financial crisis. Is this someone who would stand up to Donald Trump? Should he need to be in terms of policy initiatives.
You know, it's a good it's a good question, and it is the question that everybody wants to know in Washington on Wall Street. In my like lame cop out answer to you, we don't know yet. That's one of the big questions around Scott and frankly everybody in Trump's inner circle standing up to Trump is difficult. As a senior Administration official was telling me when I asked him this question for the piece, he said, you don't stand up to Trump.
You don't engineer a confrontation.
What you have to do is manage his impulses and help translate what he wants to do into into policies and language that isn't going to spook global capital markets. And I do think that because Scott Bessett has such deep market experience. This isn't a guy who's been holed up in the academy thinking about theory. He's been out there running a fairly successful hedge fund. I do think
that that is a skill set that he possesses. Now, whether whether or not he can convince Trump to walk a straight and narrow path, well.
I would I would say I don't think.
I don't think anybody is able to kind of quite do that all the time. But I do know that there's a great deal of relief on Wall Street and Republican circles and even quietly in Democratic circles that Besent is the is the man going to habit this role rather than some of the other choices who I don't think had that level of experience and that degree of trust that they know what they're doing when it comes to managing the levers of the economy.
Can he be a servant to two different sides? Can he be a servant to Wall Street and to Maga as well? Can he pull that off?
I don't think you can, because on a lot of issues, including issues that are going to be central to what a Treasury secretary does, the two campser shrip diametrically opposed.
Right, Wall Street doesn't want.
Tariffs, the Maga Crow does, and so you know, we've gotten a preview of how he might try and manage that best, and actually showed up at a Bloomberg's DC office last summer and sat down for a long and interesting editorial talk with me and some of my colleagues. You know, one of the proposals he'd mentioned about how you kind of split the baby was, well, maybe you could have a friends and family plan for tariffs. Our allies would get lower rates and adversaries would get higher rates.
So you could already see kind of the gears turning in his mind of how can I carry out Trump's policies in a way that reflect what he wants without upsetting markets to a degree that it causes a recession, a return of inflation, and so on. And so that's why I think he's going to be one of the most interesting.
Figures to watch in the upcoming Trump administration.
Well, it's a fascinating story to read. Josh Green, Thank you so much, Bloomberg BusinessWeek National correspondent.
This is Business Week.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five these during listen on app Karplay and Android Otto with the Bloomberg Business app, or watch US Live on YouTube.
The numbers out of LA just absolutely astounding. The flames have killed at least twenty five people does and still remain unaccounted for. They've upended life in America's second largest city, carol with more than three hundred thousand Los Angeles County homes and businesses still without power, many schools either destroyed or badly damaged.
All right for more, we turn out in one of the nation's most respected voices on climate change, the environment in public health. Jim McCarthy is former USPA administrator and first White House National Climate Advisor. She's also managing co Chair of America is All in Coalition. It's a group of leaders from all over the United States that supports
climate action. She's also operating advisor at Pegasus Capital Advisors and a senior advisor at tpg Rise Climate Fund, and a senior advisor at Bloomberg Philanthropy is the philanthropic arm of Bloomberg LP, which is of course the parent company of Bloomberg TV and Bloomberg Radio. She is a busy individual, but it's her expertise in terms of climate that everybody is drawing upon.
She joins us from Boston and we do as well. Gina, Nice to be talking with you.
The last time was at our Bloomberg Green event last year last fall. We do want to start with the La fires. We are still waiting to see what the cause was, but yet many would argue that climate change exacerbated the situation no rain for eight or nine months. How are you thinking about La and what has happened there?
Well, first of all, it's great to be back on the show, and my heart does go out to everybody in this area. It's really feels like I'm watching climate change a crisis in action. When I'm looking at what's happening in the devastation. Look, twenty twenty four was the warmest year on record globally, and what we saw in California was extreme heat and the lack of rain. We saw one hundred mile per hour wins and that just led to a recipe for disaster. And I think we
have to be prepared. We have to understand how we can be more resilient, how we can adapt and look at some opportunities. We have to really begin to tackle these issues and stop the climate denial that keeps holding people back. You know, these extreme weather events cost American families more than one hundred and fifty billion dollars every year. Isn't it time for us to really recognize this and take action?
Administrator, you said we have to be prepared. Was Los Angeles not sufficiently prepared for this latest round of wildfires?
No, that wasn't what I was suggesting. I mean, it was a confluence of the issues that actually led to this challenge. But my point is that we have to moving forward, understand that with the advent of climate change and with the challenges that we are facing, we have to understand that a shift to clean energy is essential. Reduction in our need for fossil fuels is essential because we cannot allow this to continue to exacerbate. This is
just the start of this problem. This is not yet answered, and it's time for us to develop a strategy in the United States to work with other countries to really start focusing on this clean energy zoom that we need to advance.
Well, you know, the incoming president, Donald Trump, of course, being sworn in on Monday, has talked about more drilling in terms of fossil fuels and certainly seems to be a much more sympathetic sympathetic ear in terms of the fossil fuel industry. Having said that time will tell in terms of whatever policies we see. But any increase in reliance on fossil fuels, that's a problem in your view, I'm asking with a question mark.
It's inconsistent with what we know we need to do to address climate change and keep people healthy. That's the major challenge here. And so the good news is that we have the answers here. You know, clean energy is literally booming. We now have federal investments that are really changing the game here. We have the BIPOD it's an
infrastructure of the inflation Reduction Act. All that means that we now have more than four hundred thousand new clean energy jobs that have already grown just in the past two years. We have seven hundred and fifty one new clean energy projects out there. We're talking about money and jobs and rural communities, we're talking about the low income communities,
and this is our opportunity. This is how we're going to prevent the continued devastation that we're seeing and begin to realize that clean energy is our answer and it is cheaper for families. I mean, we are talking about great news here on clean energy investments because it is lowering costs, but it's also opening the door a whole lot more energy choices like solar, which is thirty three percent cheaper than gas power that translates into a ninety
five percent reduction in utility costs. This is a big deal and it is an opportunity.
But we still not But Gina, you know, we rely still so much on fossil fuels at this point, right And many would argue, even green energy folks will say, you know, we still kind of need a hybrid approach in terms of energy because everything on the alt side, whether it's increasingly people are pointing to things like nuclear or geothermal, but even solar and wind it can't meet the demand that is out there today, and that we still need to rely on fossil fuels.
Unfortunately, some might say for a few.
More years, how to the challenge that we saw. You're absolutely right. I am not suggesting that we reduce our energy demand our energy in a way that's going to impact families. We need to address our energy challenges, but we don't. We can do that over time by increasing clean energy and watching fossil fuels be higher price, which they already are now and phase out. So this is not in all enoughing, nor is this an opportunity to threaten people's lives. We have to keep energy out there
and moving and strong. But we can do that in a way that saves families money. We can do that in a way that lowers our air pollution challenges. We can do it in a collaborative way internationally so that we meet our responsibility to other countries as well. And so I'm excited about the opportunities now. I am not looking to shut the spick it off of fossil fuel tomorrow. I am looking at this as an opportunity to ensure that clean energy can progress because it is the winner.
It's the winner for our families, it's the winner for our pocketbooks, and it is certainly a winner in terms of the health and safety of our country and how to move forward. Do you think it so we just have to continue to be leaders on this.
Do you think we can continue to be leaders on it during the next Trump administration given the way that the President elect has been outspoken about his disdain for renewable energy and his support of the fossil fuel industry.
You know, I think it's going to be very challenging. It was very challenging during the Trump administration. But one of the reasons I've been working with Bloomberg Philanthropies, as you indicated, is that we're working on a program called America Is All In. It's an unbelievable opportunity for governors and mayors, local community leaders to work together to fill in the blanks when the new administration might want to waiver. Look, most of the money and the IRA the Inflation Reduction
Act is actually going to Republican districts. You can see it. That's when most of the projects are being built.
So they would have to.
Be sort of challenged to not realize that we have to move this forward. And it's just as important in Republican districts, if not more so than ENDEMA.
So, you know, one thing I want to ask you. You're a senior advisor at tpg Rise Climate Fund, operating advisor at Pegas's Capital Advisors. You know, we have spent so much time I feel like over the last decade even talking about the intersection of you know, money from you know, financial markets, capital markets, the private sector, working
with the public sector. What are you hearing from you know, your experiences and working with those folks who manage a ton of money and can put it to work and make things move in the green space. We understand there are commitments and then there are really strong initiatives that move the needle. And especially under Trump administration, where I think many would argue too that they don't necessarily want to make the incoming president look at them negatively and get negative attention.
So I don't know what's your.
Hope for the next couple of years and that intersection I think of money that moves things.
Yeah, I think you're going to see continued investment in the private sector. No, they may not be standing up and saying, you know, I'm doing this or that, but there's no question about it that we are not seeing private sector investment or public sector money waning. It is actually an opportunity of our lifetime. And I think that, you know, even if President Trump doesn't want to admit it, we are highly dependent now on clean energy. We have to be. We can not go back. We don't have
that as a choice. And the exciting thing is we don't have to, you know. So right now, we know that Republican districts are heavily invested in this, as are the Democrats. We know, we have governors, We know we have leaders in cities and communities that are going to keep pushing forward. So this is all about the entire United States of America recognizing that we're facing a world's challenge that we not only helped to instigate, but can
actually become leaders and moving forward. And the companies that I'm working with are all in on making that shift to clean energy and recognizing that that's we We're going to actually make the most benefit for our communities today and build a stronger America tomorrow.
Administrator thirty seconds left President act Donald Trump's pick to lead the EPA, Lee Zelden. He did tell a Center panel that he believes that climate change is real. What are your thoughts on him as the pick? Thirty seconds?
Well, that was better than the answers I've seen from the people. Look, Lee Leezelden is a bit of an unknown. I know that he has made some decisions in New York that seem to be very good ones from both an environmental and climate perspective. But I've also seen him do work that seemed very negative around around climate change and making progress. So we'll have to wait and see. You know, it's very easy to go in front of a committee and answer questions on now it apparently avoids
most of them. But we have to work together. We have to understand about people, not politics.
Well, we so appreciate getting time with you again. Jeana McCarthy, former US EPA administrator, first White House National also White Climate Advisor, I sh'd say, and she's also an advisor senior advisor Eplenbergh Philanthropy.
Now about you let me drive them.
Oh no, no, no, no, this is not a toy.
He's going to drive any Please gravels. Let's wait, I want to drive. It's a good question. This is the drive to the clothes.
Now plunks to music, Well, Briar Jona.
Don on Bloomberg Radio.
All right, everybody, we are just about eighteen minutes, nineteen minutes away from the closing bell on this Thursday, January sixteenth, Carol Master, Tim Stanovik liven Or Bloomberg Interactive Broker Studio. You're Bill Maloney and Charlie breaking down the trade here. We are definitely off our highs of this session. I'm looking at the S and P five hundred, still about almost four hundred names. Tim to the upside, but again it's kind of I feel like an anemic trade a little bit here.
Okay, you mentioned earlier what's going on with yields. Earlier this week, Carroll, the yield on the tenure had to high a four point eight percent. It's the highest going back to November of twenty twenty three. It's backed off a bit. Our next guest, though, says, not so fast, and we're going to see five percent this year.
All right, So let's see what Max Wasserman has to say. He is, of course, founder and senior portfolio manager at Miramar Capital, registered investment advisor, independent, I should say he joins us from Northbrook, Illinois. Max, Good to have you here with us. We kind of, you know, just like the FED, seem to be data dependent in terms of the sentiment and the moves in the market environment.
How do you see this trade?
Are there any clear trends that are emerging in your view? Or it's going to be a bit of a weight and see mode because of what we get from the new administration, what we get from economic data, and what that will mean in terms of FED policy.
Well, thank you for having me on. And I think it's a combination of both. But I think what we've seen is a FED that is recognizing that inflation's a little bit stickier than they thought, and that you have growth roughly around GDP roughly around three percent yet core CPI roughly about three percent. And it really is hard to justify in our opinion, why they cut so aggressively last year at fifty bases points and then followed up
by another two twenty five. If you have nominal GDP around five and a half six percent, we don't think it warned to cut. So what you're going to see now is we think pressure pressure from the new administration. New administration's talking about tariffs, talking about a potential embargoes and restrictions, so we think that's going to be a
little inflationary. Also, if you think about immigration policies, so we think that a ten year treasury around four fifty four sixty, that's great, but we see more pressure pushing it upward as deficits start to rise. Also, the current administration that's coming in, they're talking about cutting taxes even more. I mean, let's not forget they were trying to get
rid of Social Security tax, taxes on tips. So we see a lot of spending taking place and you may not see the tax cuts or their spending cuts that they're being promised. I mean, already I think Elon musk is saying two trillion was a little aggressive, maybe more towards a trillion. And we thing as time goes on, there's more risk to the upside and interest rates than there is downside.
In our opinion, what brings rates down ultimately or is this the new normal at least based on what happens fiscally over the next few years.
I think a slow down in the economy I think if you see the demand significantly slow down, but keep in mind, there's going to be pressure to refinance. There's a lot of debt that's coming to do. You're dealing with about one point two trillion annually and debt service costs, so and a lot of paper is going to be rolling over. So that's going to eat up on some
of the federal budget and spending. But I think the only way you really see interest rates coming down is if you see the economy substantially coming down, right and unemployment ticking up. But again, if you're talking about immigration right reform, you're talking about shutting the borders and deporting a lot. That's a lot of labor that's going to be leaving the economy, and that means inflation, we think,
to wages. So we think right now you could actually see the ten year go up to five to five and a quarter. And we don't think this market is really pricing in that scenario, and we're not saying that it's going to definitely go there. We think there's a high probability if the current president's coming in gets what he wants. We just don't see how that brings interest rates down in the next six to twelve months.
Right, but higher rates in terms of certainly some of those hier are big tech names that have had quite a run up, you know, or their valuations. Right, You've got to do somewhat of a reset. Having said that, you do still like Microsoft. Do you like Qualcom at current prices? Is it just a price thing or is it a fundamental thing. Let's start with Microsoft.
Sure, I think it's a fundamental thing basically. I mean they're monetizing with the check BTC. They're monetizing their business, and the prices come down, right, And even though it's a software company, right, they tend to get higher multiples let's say a hardware company. So I like where they're positioned. They're spending a lot of money. I mean, we want it's one of our largest positions. We wouldn't be jumping in full boat at this point. We look for any
further pullbacks. But you could start in our pinion, you can start a position here. But realizing these are not cheap Qualcomm, you know, we think is a little bit different story train at fifteen times earnings, and we think as they expand into the Internet of things, as they start expanding into the PC market that could be a
new growth potential for them. They're only trading at fifteen multiples, and you know, it's been more of a depressed multiple in that stock, and the stock was trained at a much higher rate. So we think here, along with even Google and all three of these companies, we have investments
that we think they have a better upside potential. But the nasdick in general, chading it thirty seven times right after two big years, is not and it's really become an interest rate sensitive play if you think about it. Every time interest rates take up, they come down. So at this point, I think everybody recognizes the growth and they're paying for it. So we think there's very limited upside in the Nasdaq this year, but we think there's a lot of upside in the other parts of the market.
Well, let's talk about another part at Jacks, actually a part that we talked about, the defense part. We talked earlier about Aerial Industries selecting Ohio. They're going to create this sprawling new manufacturing facility that's going to make a lot of autonomous systems and weapons, and they're going to be doing that on an annual basis. But you like some of the kind of old line defense guys, and.
Those are the ones that Androl wants to disrupt exactly.
So well, lackeyed Martin or General Dynamics, why those two versus someone else.
Well, again, we're divoting investors, so we like dividing growth. And both of them have dividends roughly around two and two and a half percent percent respectively. If you look at General Dynamics, twenty percent of their business is a golf string and they're bringing on more onlines with the G seven hundreds, and we see that side of the business really going up. Also, we think the demand for
the products. I mean, you're going to need the submarines, you're going to need the strikers, you're going to need.
On the tank.
So we think the demand is not going away. As we do not see global disruption calming down that much. Right, we see it in the Middle East calming down, but you still have to do with the Ukraine, you still have to do with Asia and Europe. So we think demand and we think Lockey, who's building the planes. I mean, we have to look at the fighters, and if you
look at it, there's going to be disruptors. But we like safety and these two are behemoths, right, and so if you have that dividend growth and we have the budgets that are put in there, we feel very comfortable. Especially they've come down about ten percent, so we like them.
Here, Okay, we got thirty seconds left for you to talk about energy infrastructure Williams Companies thirty seconds.
Why are you optimistic?
We I'm optimistic on the pipelines. They're not cheap right now. Both that and one hope we have an investment. They've gone up like fifty percent last year, but they service the natural gas like thirty percent of the US so and there hasn't been any buildouts in the pipelines. And if you're going to become more energy independent and more production, you've got to move that gas throughout the country and
they have that market. So we like them a lot, paying a nice dividend about three and a half percent. One Oak is closer to four percent, and they've just had an acquisition of Magiality. So we like the pipeline because you have to move energy throughout the country and there's no new pipelines in this country.
All right, Max, thanks so much, love talking stocks with you.
Max Wasserman founder and senior portfolio manager at Nearmark Capital. Joining us from Northbrook, Illinois.
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