Wall Street Traders Set for $27.8 Billion Haul

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio, or watch us on YouTube search Bloomberg Global News. Volatility we know has been triving investors crazy. We're seeing it bounce around, certainly on the equity trade today. And yet if you're one of the biggest US banks, get ready for a multibillion dollar windfall. This story Tim Longer most read on the Bloomberg That windfall not coming from M and A like it did

last year. That's seeing a decline. A great piece by Hannah Leavitt and Shabum Sahar and she Bum joins us now in the Bloomberg Interactive at Brokers Studio. Shabum Sahar and finance reporter for Bloomberg News. Okay, so let's talk about this twenty billion dollars. Volatility a pretty good thing if you're trading. Yeah, Tim, exactly as you said. No, I think the one thing that we can say is

that banks really profit during periods of market volatility. And that's exactly what we're gonna see, or we're hoping to see in the upcoming quarter starting on Thursday. You know, massive market swings resulting from you know, recessionary fears. We're seeing inflation on the rise, you know, the Russian invasion of Ukrainians really expected to bolster some of the trading

revenue that we're seeing. And I think what's unique about this quarter that we haven't seen in previous ones is that it's not just one asset class across the board, so we're really seeing it across you know, fixed income, commodities. Equity is also anticipated to be up almost twenty in the upcoming quarter as well. That's interesting. I find that fascin right, Yeah, because it's been really tough on the equity front. I got I do feel like when we

start to get those numbers will just pick it apart. Um. There's a great quote, can I if you can just take us there um the global head of markets at City Group and need Morton. I guess there was an industry conference last month. What did he have to say? Yeah, so we're seeing any more in saying that about volatility being kind of our friend or something, so exactly, volatility is our friend, and that we're seeing it across those asset classes as we as I was talking about before,

it's not just limited to one thing. I love it that they've kind of given us a heads up a little bit about because because you never know, like we talked about this all the time, and this is why we write the big banks report that ultimately and get one that can do really well because they were on

the right side of the trades, another that might not. Okay, So let's talk about the flip side of that coin, though, because if about a year ago we'd be sitting here in the Interactive Broker studio is talking about all the great revenue that these these banks would bring in from making deal after deal after deal I p O after I p O after I pos fact. Yeah, I mean, when was the last time you heard of a spac actually completing a deal? Carroll No, it's been a long

How is that going to be reflected in earnings this quarter? Yeah, so I think the sumth that we saw last quarters

expected to you know, continue on into this one. We saw you know, as you said, like massive amounts of deals in the making last year, and we're really seeing that slow down and all of the you know, sort of economic turbulence that that has bolstered the trading revenue that we're seeing for the upcoming quarter is actually what's going to end up slowing down our investment banking revenue. You know, we have executives analysts predicting almost decrease year

over year in the revenue that we're expected to see. Yeah, it's really kind of come to a start after you know, a couple of record years. Talk to us about interest interest income, because I do think about this in the banks, right, I want to know, you know, they're certainly making money, is right, it's go upwards. It's a much more positive environment for them when it comes to interest income. How

big of a kick might that be? Yeah, you know, Carol, I'm so glad that you brought that up, because we're expected to see almost you know, fifty billion in over a fifty billion actually in interest income for the big five names, um, and that's about increase from last year. So you know, we're really seeing those higher rates benefit banks. They're able to you know, pass those down onto their loan products. You know, we've seen credit card used to

go up. We're seeing those also reflected in credit card rates. So it's expected to be a big you know, um, you know, a theme across the board this quarter and honestly moving on from this quarter as well. Okay, lots of macro stuff to talk about. And again we love hearing from banks because we get an idea of what consumers are doing with their money, how they're spending. From Jamie Dimon the weather man. The weather man. Yeah, it's like there's like a Bob Dylan song in here somewhere, right,

there's totally but right, the commentary is going to be crucial. Um. So I think that you know, the one word on everyone's mind right now is recession. You're gonna say hurricane, well, hurricane to tsunami, you know, thunderstorms, whatever he was mentioning before. But you know, again, one word on every everyone's mind is recession. And I think the way that we're really going to start seeing that is um, how banks are going to start shoring up whether or not they're anticipating

a recession is really going to be reflected in their reserves. Yeah, so interesting, Well, what we'll go ahead, Carol, No, I was thinking about that too, right, you know, we look at like low lost for visions, right and things like that that given indication of maybe what the banks are

worried about are just preparing for maybe in the second half. Well, one thing that I think about are the headlines that we saw in the quarter about companies laying off people in the mortgage division or reassigning them in the mortgage division, and how perhaps that foretold some of the challenges that we might hear about when it comes to home loans

as interest rates have gone up. Yeah, so I mean, as you said, you know, markets rates are surging, which means that there has really been that cool down in UM in the in the housing market overall, we've seen JP Morgan whilst Fargo start either laying off or reassigning their UM reassigning some of their stuff there. So that's definitely something that we're going to keep a lookout for in the earnings calls. And then the reports and how

that's going to continue on. Well, I noticed it even just like you know, getting bombarded by my own bank, you know, in terms of my mortgage company, and like rEFInd its refined so long ago, like it's the lowest rates, and then you can just see it's just come to halt. And I have a relative um that works in the industry, and I'm like, how you're doing because they she was frenetic through the pandemic, additional assistance and processing mortgages and refinancing,

and she's like, it's been really quiet. I'm sure it has. With six rates. Well, Uh, this is going to be really important in terms of the sentiment. We talked so much A part a part, so much how important the investor sentiment is. Uh, and I think the banks are going to go a long way to shaping it. So thank you so much. Good preview, good set up for the week. Sabam Sahara, And she is Bloomberg News Finance reporter joining us in our Bloomberg Interactive Broker studio. We

get what JP Morgan Thursday morning? Who else do we get Thursday morning Morgan Stanley? So there's a big one, and then I think we get Alban Sacks. We've got well spargo for next week. It's not all happening in one week. This year quarter. We spread out the wealth. Excuse me, we spread out the wealth. When it said I don't know, I didn't know what he said. We have fun here. It's a wacky Tuesday, guys. All right, you're listening to Bloomberg Business with Carol Masther, Jim Stanivic

and this is Bloomberg Radio. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick takes Tim Stinovic on Bloomberg Radio. In the upcoming issue of Bloomberg Business Week, a story that looks into the U s rivalry with China over advanced technologies. And what's interesting about that, Tim, is the role of Israel and all of that. Yeah, it kind of finds itself in the middle of this global conflict. Joshua Brewstein is Technology editor for Bloomberg Business Week.

He joins us on the phone from New York City. He's gonna talk all about this story by Sarah Zang and Coco Lou. It is in feed thee upcoming issue of Bloomberg Business Week magazine. But you can read it now on the Bloomberg in at Bloomberg dot com Slash business Week. Also with us right now is Joel Weber, editor of Bloomberg Business Week. He's with us in the Bloomberg Interactive Brokers studio. So, Joel, how how does Israel find itself right now when it comes to tech? You know,

it's a really interesting question. Israel long been fascinating to me just as a tech obsessed country, and like within the last ten to twenty years the country is actually trans formed its economy and gone all in on tech. So just to set this table, there's it's a very interesting, uh environment. Also, keep in mind there's this larger east West tension between China and the US and Israel right

smack dad in the middle of it. What's interesting and what caught my attention with this story is the US has been really trying to move Israel into its sphere of influence on the tech front. Um. China has long been uh, you know present there. But but Josh, how how has the US managed to sort of ice China

out in regards to Israel? Yeah, thanks, Joel. The interesting thing is, as you said, Israel really punches above its way when it comes to tech, especially in cybersecurity, and the US has been over the last several years, UM really focus on his global effort to try to keep China from getting Western technologies and being able to kind of build up its own capacity. And it's it's really been aggressive on doing at UM with US companies and

companies in Europe. And you know, China was trying to get into UM into Israeli companies that it was making an increasing amount of investments there, and the US through UM, through pressure, through pressure on the government hasn't really done anything formal, but Israeli companies are kind of getting the message and and just steering away from taking Chinese investment UM not because they have to, but just because they kind of see the winds shifting. Well, Josh, so what

does this look like in practice? Right? Like you you obviously have this is like a meta meta level kind of like influence play, But how does it actually work in practice? Because China's you know, poured a lot of money into play here and maybe it's just not as much now or is it? Is it bigger than that? Yeah? I think there's two things. The main thing is that China had been increasing Chinese investors had been increasing the

amount of money they were putting into Israeli startups. It wasn't there weren't the main source of capital, but there was a growing source and that changed UM kind of in the late Trump administration, you saw Israeli startups and they went to look for funding UM, shying away from Chinese sources. The amount of money that Israeli companies were

taking from Chinese investors has just been steadily declining. UM. And you saw, like for instance, in an electric vehicle UM company that UH said, you know, it didn't want to take money from you know, from from from China that was being offered UM. And just kind of a general chilling of the mood. But you know, Joshua, it's it's not black and white here, right, It's not totally binary. I noticed in the reporting from our colleagues, the piece

that that you edited that you know, US investors. For example, in in an Israeli chip company, they would allow this company to sell products in China, but only if it promised not to conduct research there. This according to a person familiar with the company plans, and just discussing it, not saying their name because it's a sensitive matter. In

the reporting. UM. I'm wondering though, like where the gray areas are here, because it's not like they're going to completely cut themselves off from from doing business right right, Absolutely, And obviously the U S and China UM, despite the rivalry, are are very interwoven themselves. What the US doesn't want China to get ahold of our the types of technologies that would allow it to be able to make the most advanced semiconductors completely on their own. So that is

really the focus of US policy. UM. For technologies that aren't as sensitive, there's kind of as you move further down UM down the scale, there's less and less concern and less and less pressure to kind of ice China out there. And it does sound like increasingly we're seeing when it comes to and Israeli startup, that they're going to lean more towards the West, whether it's US or

their versus over a Chinese investor. Is that fair to say, Yeah, I think that that is really the dynamic we're seeing now. One thing the US has done is pushed for a more for the Israeli government to adopt a more formal review process for technologies that might have national security implication.

I think that was That's a really interesting part of the story, Josh, because it speaks to like, you know, Sippius became such a you know, just that thing during especially during the Trump administration, and I'm just curious, like, what what kind of uh pressure has the US really tried to put on Israel on that front? Yeah, exactly, So, the Trump administration was pushing, uh for for the Israeli

government to implement a similar review process to Sippius. The Biden administration continues to advocate for that Israel hasn't done it, um in the way that the US would like. But even without that formal review um. You know, companies are making their own decisions, uh, you know and steering away from you know, steering away from doing deals that you know,

even that that don't have a formal review process. Um. It's you know, even even without the formal even without the formal success, they're having, you know, the informal sway. So do we anticipate with President Biden making that first presidential visit to Israel that's tomorrow, should we anticipating kind of headlines on this front or I'm just thinking about our investment audience. Should they be looking out for something or this is going to be stepp probably under the radar,

but watch for more stories to come. Yeah, I think I could go either way. I mean, Israel and the United States. Uh, you know, it's one of the most important relationships that the Biden administration has, and there's a lot to discuss, um, things that they are closer on and things that they're further away from. So this might not be up on the same level as say the Russian war in Ukraine or you're any nuclear deal, but and they're certainly going to discuss it in some context.

Until something that you said earlier in our conversation really stuck out to me was the over the last decade. And I think for me what I remember as a as a pivotal point was when Google bought Ways years ago. And what's remarkable, I think is the way that cybersecurity in particular just dominates. And one thing that I found pretty striking is that of global investment in cybersecurity that's happening in the tiny country of Israel. Yeah, and I mean he does speak to like I mean Josh said

said it. You know, it is a country that hits above its weight. Um and what's even interesting to me is that you know, the US doesn't maybe you know, as you heard Josh, it's like Israel is the way of like kind of also rebuffing the US and not giving the U s everything that I want, so so they can throw their away around for sure. Well, and I think about the Cold War right when it comes to technology and how we're starting to see, you know, potentially things being divated up even more and more, or

the role of Israel and all of it. And look like I just think from from again from an investment standpoint, this is a hot better place, and like from an investors standpoint, like we will see more and more interest there. And if this sphere influenced thing really does play out, you know that that bodes well for American investors especially. I think about the number of startups that we often feature on air that are coming from Israel. Our guys

we got around Joshua Breustin. He's Technology editor of Bloomberg business Week, along with Jill Weber, the editor of Bloomberg Business Week magazine. Check out this story in the upcoming issue. This is Bloomberg Radio. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. Tim Stenovic on Bloomberg Radio. I gotta say we are obsessed with this story. I am. I don't know about Tim, but I think we both Oh,

I am too. I'm ready to get adopt what Europe is doing when it comes to passengers bill of rights. Let's get into it with Brook Southerland Carol, because she's deals in industrials. Columness from Bloomberg Opinion. She joined this this afternoon on the phone from New York City. Well, and it's interesting because you know, we're coming off this story about Heathrow UM that's imposing a two month camp

on daily passenger traffic. There's just so much going on in this industry at the same time, Brooke, I don't know. First of all, great to have you here with us on the phone in New York City. Um. Tim and I've done some flying and some of the experiences have been okay, some so okay, like the last one we had. And I feel like, who's speaking up for me, the traveler who's paying for these tell us a little bit

about what's going on here? Sure, And I think, I mean the unfortunate reality is that you two are not alone in having a very difficult travel experience. Uh, this is you know some of it. I do think, you know, we collectively have a little bit of amnesia about how annoying it was to travel pre pandemic because you know, we just haven't done it very often. But the data does suggest that delays, cancelations, all of that is becoming

more frequent. Um, so there is, you know, some some data to back up those anecdotes that you yourself have experienced. And you know that we hear all too much about there's a couple of different factors that play. I think it's really hard to point the finger in any one direction. You did have the U. S. Taxpayer step in and provide more than fifty billion of you mean, like you, me and Tim and everybody else. Yeah, comolutely, I mean, you know this is this is what we did during

the pandemic. In terms of stimulus. The airline industry was the only one to receive special dispensation among those hard hit pandemic sectors. Certainly, they were not the only ones that asked for it. There was lots of calls to have special protections for restaurants, bus operators, you name it, but airlines were the ones that got the special protection.

Now that did not necessarily stop them from shrinking their workforces. Um, you know, they were bleeding cash pretty significantly, and so they leaned heavily on things like voluntary leave, uh in early retirement offers. So they are now trying to ramp their staffing back up. Um, we're seeing, you know, especially domestically, demand above and beyond what we saw pre pandemic, and so they're playing catch up with that. And now you also have some of these third party operators to do

things like baggage handling, catering. They're all facing staffing shortages. Air traffic control plays a role. We also have weather that all popular, Um, you know issue for delays. Yes, sometimes I look sometimes I get that delay or cancelation and I see zero weather anywhere in the country. So I'm just gonna say, you know, whether in quotation mark

meaning we could find a pilot, Yeah, exactly. Yes. I want to get an understanding of of what this bill of rights could look like for US travelers here because right now as you write that, you know, passengers, if their flight is canceled or or then they get they're entitled to a full cash refund. It goes further in Europe. Um, what happens in Europe if a plane is delayed, for example, it does And so I think this is really interesting.

First emphasize, you know, I I'm not suggesting that Europe is a sort of panacea for fight travel right now, because they certainly have issues of their own in terms of delays and cancelations. But there is more of a safeguard, There are more consumer protections for when these travel experiences go awry. So in the US you are entitled to a refund if the carrier cancels your flight, and that is a cash refund um. And then you can theronically

get a refund if your flight is significantly delayed. But there's no definition for what is a significant delay, and the Department of Transportation decides this on a case by case basis. Just from a practical standpoint, that's a pain. Uh, you are not, I mean as long as you ultimately

get to your destination. The number of people who are going to go through this process of sort of figuring this out with the Department of Transportation are are few and far between, um, And so that contrasts with Europe, which does have provisions in place to say that, you know, passengers who face significant delays should get not only refunds, but also compensation up to six hundred euros that is sort of variable depending on the length of the flight.

They also have all kinds of rules around requiring the airlines to provide refreshments and meals in the event of significant delays UH and to also provide overnight accommodation if that rerouting forces passengers to have to take a flight the following And I will say my recent one where I had some flight delays, they were offering me up a meal cupon and asking me if I needed a hotel. So I was pretty impressed with that, and I gotta say,

get that and I had the same issue. I don't want to tell you, buddy, I will say, I remember. Think that's the problem is that, you know, like sometimes airlines will step in and do something sort of of their own free will, because you know they are customer facing industry. They will try to help you out. But it's not standardized, and so people can have wildly different experiences depending on the airlines, the circumstances of your fight, what airport you get stranded at. Yeah, and I think

that can be really frustrating for people. Absolutely absolutely, all right, brooks So good to catch up with you, brook Sutherland. She's deals in Industrials, communist at Bloomberg Opinion on the phone in New York City. I mean, I remember days of like circling for a long time waiting to land or kicking off from the gate and just sitting for hours on a runway. I do feel like something. We're driving from Cincinnati next month. You've just given up the

journal now, but you let me drive? Oh no, no, no, no, all right, please, I want to drive. It's good question. Drive. This is the drive to the clothes on Bluebirg radio. All right, just about ten minutes left in today's trading session, and we had seen take it back about I don't know, forty minutes or so. We really saw some selling uh deepening and hitting our loads of the session. We bounced off those levels, but we're still down across the board.

The NASTAC though tim taking the biggest hit on a percentage basis down about one percent. But we've talked about to some extent some white volume in all of this. But nonetheless, this is ahead of that important CPI print tomorrow. Yeah, let's get to Sandy Villeri, portfolio manager at Villary and Co. Just Sandy joining us this afternoon on the phone from New Orleans. Sandy, good to have you back with us. How are you? Yeah, thanks, Tim, doing well, appreciate it.

I love the way that you start out your notes here to our producer Paul Brennan, who then passed them along to us. Uh, you said that you're forty seven years old and that we're going to finish the first half of two with the worst six month returns since you've been alive. So what's an investor to do seeing declines? Yeah, no, it's it's been an unbelievable start to start to the year.

But I do think people can take advantage of of some of this weakness, especially when you look at you know, the Vanguard Growth index is off about you know, year

to date, Vanguard values off just ten percent. So we would actually begin to chase some of those growth names that have really been left for dead and been beaten up, as opposed to uh, you know, going after the most crowded trade there is, which is buying the value names, the staples, the health care of the utility in the telecoms So are you saying, I mean, are you saying that the worst is behind us and that it's now is the time to get And are you saying, you know,

if you have a three to five year time horizon, even if we see more declines in the second half of the year, you're still in a good place putting your money to work right now. Yeah, I think people don't really want to buy stocks quite yet, not until you know, we'll see the inflation number tomorrow. And then two things are kind of happening at once. You're gonna have all these companies reporting second quarter earnings, which you are coming out you know now through the next you know,

let's call it the end of July. Well, we'll see the bulk of them. And I think I think companies in general gonna report good numbers, but they're going to use that as an opportunity to probably guide down, um, you know, just kind of moderate expectations. And I think that's one thing that people may want to just wait for.

And and um, you know, really the the um the second is really just where um you know, um, you know what what the FED does at the end of their meeting July when they go ahead and raise that you know, it's all but a foregone conclusion. They're gonna raise seventy five basis points. So if you can you know, own them, you know, right after that, I think that's going to set the loads for the market as things get reset. Alright, Sandy, your Portfolido manager, you know you've

got money to put to work. You've got to figure it out for your investors. Let's get to some names that you brought to our attention on semiconductor. Is one UM that you like tickers? Oh and tell me why the stocks off about year to day. It's a semi device maker. Why this particular name? Yeah, I like it UM for a couple of reasons. You know, one UM, I love the CEO, Hassan el Cory. We we owned a Cyper Semiconductor before it was sold and he um, he did a great job running that company and really

transforming it. So he is uh currently you know, basically getting rid of a lot of the lower margin commodity or in in parts of their business and getting into the more you know, higher growth, higher margin business. In fact, you get a goal of reaching gross margins in three years. And he's basically they're already uh he's getting into you know, silicon carbide, which is really the fastest growing segment of

their of their business. It's growing at thirty percent and it's just totally it's of the revenue, So I think it's going to uh, you know, do quite well. And it's cheap, but it's it's eleven times earning, So I like on a lot how much of it is. Also, it's gonna be part of the S and P five hundred. Does that make a little bit more attractive to That means those index managers gotta gotta include this one. Yes,

that that definitely helps will take all the all the buying. Uh, you know, power that we can we can throw that we can find for them. Um but uh no great great end markets and when you're looking at it versus you know, some of the other semiconductor names, as the sector has kind of been left for dead. Uh certainly like the way that uh these guys have you know, end markets that aren't totally you know, tied up to

cell phones and PCs and the consumer um. But uh, you know, but areas that you know, electric vehicles and um, industrial automation and alternative energy and and and and things like that. Solether end markets as well. All Right, it's a nice sunny day here in the summer in New York City. Perfect day to talk about the lack of pools that me and all my friends have, but a good day to talk about Pool Corporation another one of your picks. It's got about a fourteen billion dollar market cap. Um,

why are you bullish on Pool and you've liked it before? Correct? Yeah, I mean we we have. You know, we're a very long term holder. Um. Five years is almost young for us, and we've been involved with Pool since nine six when it went public. And what I think people don't quite get about pools that of their revenue is really from repair and maintenance of your swimming pools. So if you think about your cell phone bill and your electric bill and things you tend to continue to pay in any

sort of recession, etcetera. Most people continue to, you know, buy chlorine and don't let the pool turn green or black or something like that, and they rarely fill them in. So once you have this hole in your ground and in your backyard, you tend to continue to maintain it. So only of the revenue really comes from new pool construction, which you know, it will be a little bit choppy as as housing slows down with higher interest rates, but I don't think enough to warrant a thirty five you

know pull back in the stock. And it really sets up as a nice opportunity for for people that have you know, two to three year time horizon alright, pool and on semi conductor. There's are bigger market caps. You've got a smaller market cap about one point six billion. We're talking about Palmar Technologies. I think this is another name that you've talked to us before preas in the

insurance market. Seconds, why this name and why now? Yeah? Yeah, so, um, this is also pulled back pretty sharply, and it's it's awfully cheap trades that less than you know, fifteen times you know, two thousand twenty three earnings and the peers around seventeen times. Um. But these guys are pretty getting into some pretty um, you know, great markets with you

know hurricanes and Hawaii and you know earthquakes in California. Um, it's just a very nice business that's only a two percent market share of basically an eighteen billion dollar you know, total addressable market. So we think these guys um have incredible technology. It allows them to get really granular UH in their underwriting and and really get into some UH inefficient markets to help, you know, drive drive their return.

So we like it a lot. And and mc armstrong is also a very solid CEO that we're looking forward to the next you know, several years with him at the Helm. All right, I'm gonna leave it there. I really appreciate it. And it's interesting to how you note the leaders, and that obviously is something that's on your radar when you pick and choose some of the names to invest in. Sandy Villery, he's portfolio manager at Villery and Company, on the phone in New Orleans, joining us

on the phone on this Tuesday. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News