Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.
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Let's check it with.
Alison Williams, Senior Global Banks and Asset Managers analysts for Bloomberg Intelligence.
Allison, you'd been busy.
A lot of the big banks have been reporting, a lot of the European banks starting to report.
What are some of the takeaways here? I mean they were concern in the marketplace.
Just think, you know, a month ago, five weeks ago about some of the regional banks and what does that mean for the banking system. So when you listen to the Brian moynihans of the world, the Jamie Diamonds of the world, how are they characterizing this banking system?
I think in general the clear message is, you know, we had some turmoil, but things have studied. We've heard that across the banks. Of course, of course, you know for a republic, is is the one out there that people keep watching, a situation that has not really resolved itself. But in general, we also have seen you know, sort of you know, companies that gained deposits. We see the
companies that are the safe havens. So in the US that was companies like JP Morgan at the stream, also Bank America, you know, Wells and City to a lesser extent. In Europe we saw ubs as the safe haven crowd. Sweet was the big one that we got this week where we saw i would say, not as bad as feared, so significant outflows, but not as bad as the prior quarter.
Of course, we.
Don't know what the trend was, and the sense is that the day, you know, the daily outflows were significant and that's why regulators had to step in. Deutsche Bank was one that lost deposits. Their stock as you call, came under pressure sort of in the late March turmoil. But they think said things have studied. So things have generally studied. But as we're moving forward, the question is lending. What kind of lending are we going to see? Pullback?
You brought up you know, Jamie Dimond and Brian moynihan who both said, you know, this is not a credit crunch. We are going to see pockets of a pullback, but I think that's really to come in the weeks ahead, and then you know, the cost of those deposits are going to continue to rise. So we're not in a deposit plight, We're not in an extreme environment. But deposits are going to continue to go into higher yielding products
as they should. They're going to go into money market funds as they should, and so it's going to cost. It's going to eat into the bank's interest margins. So still very strong revenue, but at the margin probably have seen the peak.
Do you think that the turmoil we've seen around First Republic and the you know, free fall in the share price for a couple of days this week is going to turn out having led to more deposit outflows? I mean, do do depositors watch the markets as closely as we do and and decide to run again?
I think that, you know, First Republic is something that we're all closely watching, But it's not the days of March where there was a lot of headlines. There were a lot of social media headlines, et cetera, and it was a sort of a broader problem. I think now it's much more an isolated problem where first republic, you know,
it has to figure out a path forward. And now there's a lot more interested parties because you had all these banks that you put those deposits in to try to, you know, send a signal of confidence to the system, and now they're you know, they're sort of tied into the situation a little bit.
So I think that's.
Something we're watching. But it has become a much more bank specific situation. As we know, we had a few banks that were outliers at the extreme. They still caused broad worries, but those broad worries seem to have studied up hears. But I think what it did happen, right is I did think it woke up the conversation. You know why, Oh, suddenly I can make money on my savings, Like that hasn't happened in like, let's say, a decade exactly, And so I think that people realize, suddenly, oh I
can get four or five percent. I might have to pay some fees of money markets or you know, what have you, or shop around a little bit, but there's actually yield out there.
Hey, Alison, our good friends Alizard reported some results a little bit weaker than expected this and they're announcing that they're laying off ten percent of their workforce on weak advisory outlook here, talk to us about that side of the business. What do you what are you seeing when you look across the banks that you cover in terms of kind.
Of capital markets advisory, some.
Of that stuff that's a little bit more volatile, I guess.
So I think, unfortunately, Paul, we're that business remains weak. We're back to actually levels that's sort of the onset of the pandemic to put it into perspective to how weak things are. And the disappointment really is despite this you know, huge rally we've had since you know, granted it's a rally from the bottom, but since the fall,
it hasn't translated into more deals. So that just tells you that the expectations between that, you know, the potential investors or buyers in the market and people that want to come to market, there's still a gap. What we've heard from most of the managements out there is that they expect to pick up in the second half or twenty twenty four. Thozart is a little bit more bearish. I would point to the fact that their M and A business tends to be stronger in Europe, so there
might be a little bit of a regional impact. But we are seeing cuts across these banks. Deutsche Bank, for example, talked about cutting some of their senior executives. Not forward facing, but there will be some cuts there. And you know, we've seen articles here and there about different cuts made.
And so.
To the extent that FED policy does not turn to cuts, because I think that's the outlook that a lot of these more bullish calls are predicated on. You know, we could continue to see some more right sizing through the.
End of the year.
All Right, Alison, thank you very much for joining us. Appreciate the recap there.
Allison Williams senior Global Banks and Asset Managers analysts for Bloomberg Intelligence.
And as if that's not enough, she's also.
Co director of Research for the Americas for Bloomberg Intelligence, so she's got like one hundred and fifty people reporting to her.
I mean, it's crazy.
I'm curious, busy. I'm curious to know, because you had such a long career on Wall Street, what do you make of the term right sizing? How does that strike you?
No, it's just we know it the way we think about it.
It is on Wall Street, we get overpaid, but we have below market job security.
That's just that's the trade off.
They overpay us asymmetrically, but we know our jobs are very tenuous at best.
You're listening to the team Ken's are 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.
We're still a little tech recap here. Why not?
There's always lots of talk about Dan Ives, senior equity analyst at web Bush Securities, joins us live here in our Bloomberg Interactive Broker studio with yet again a questionable outfit on a rag ran a senior tech anaists and Bloomberg Intelligence. We get him one week a month, so we get him here as often as we can. Otherwise he's in Chicago doing god knows what. All Right, Dan, let's start with you here.
Well, I don't think you can call out anybody's outfit today.
You don't like the flannel?
I love it, but I'm not a great I mean, Paul is wearing for our listeners a red and black check lumberjack flannel. Yes, I've got a flannel on.
Character for me, so yes, I get.
But at least at least Dan is wearing a blazer, Yes, albeit lilac checked blazer to go.
With the powder blue pants. Yes, so Dan, Amazon, what's your take on kind of what we heard out of those guys last night.
I think it's tailed two cities. I mean, on one hand, better than feared in terms of what we saw in cloud in the quarter and e commerce really starting to now recover bit and the cost cuttings there, but with the guidance for next quarter was soft, and I think ultimately just speaks to that company Crosstown the two or six area, coulde they're gaining share. Microsoft is gaining share from Amazon in the AWS, and I think that's a narrative that continues to play out. But overall, this is
better than feared tech earnings. I think investors came in white knuckles into the week, they go in drinking cappuccino.
Yeah, I will point out, as I said earlier, Yes, Amazon shares are down today, they're off two point eight percent, but they were up four point six percent yesterday and they're up twenty six percent year to date. I mean, they're doing very well. In fact, they're supporting this market. Right They're one of the companies on Ragrana that's really boosted this market, one of a handful that's boosted this
market this year. So they're still doing pretty well, and I feel like they might be underpromising so that they can over deliver on the one hand. On the other hand, they're gonna cut margins to fight Microsoft across town.
See from our side, the other thing you want to think about today the growth rate is going down, then margin expectations at least in the near term have to go down as well, because AWS supports majority of the margins of Amazon. But think about it this way, and again, this is where I argue with you know, most of the bears is I agree, the next six months are going to be tough for everybody, But think about the
revival when it comes back. It comes back with the margin structure that's far superior than when we entered the you know, the boom. I would say, imagine what's going to happen to the margins at that point, and the margins of the overall company, which is Amazon is just going to be phenomenal once we get the recovery.
So Dan, you know Andy Jase uh is the you know now the new president and see it EO. Is he as committed to Jeff Bezos's plan to like, I'll spend whatever I need to spend to get market share and grow a business that I think is in line.
Is that still the mantra for Amazon or no? No?
I mean, look, Bezos was basically spending money like in nineteen eighty is rock star right? And Jase basically inherited that has had a cut costs, ripped a band aid off and that's why he inherited a lot of this. But look, ultimately they need to aggressively spend AI need to focus on next gen, especially in this arms where it's going on in tech. But at the same time
cut costs you're starting to see it play out. But overall in tech, I mean, I'll call it him as a Goldilocks week when you combine Microsoft, Meta Alphabet and Amazon.
I actually heard a story about Plexico Burus buying a Lamborghini today and without having ever test driven one, and then realizing after he got into the four hundred thousand dollars car that he doesn't really fit. And this came from where I can't reveal my sources. Okay, friend of Plexico's who now works for Bloomberg Radio.
I was wondering why we were talking to our tech annals about Plexico errors.
No, because he said spending money like a nineteen eighty star.
I got ya, and with it reminded me and the NFL draft and so it all. So AI is relatively new term for me.
Tell me what it means for the tech industry, you know, and who.
The players are? How do I think about it?
So, at least in my view right now, it's a lot of software development or software that's there for people to build applications on. To me, the two biggest things and I'm not talking about hardware world because the video is a huge you know, winner in that case, But the two real big areas we're going to see a lot more money go into is cloud services we're on
which you will develop these applications. And the second is this army off software developers that are you know, part of IBM Global Services or Accenture or Tata and all those companies that are going to be deployed by companies to create these enterprise applications.
All right, So maybe is it too late for me, Matt to retrain as a software engineer if you think.
It is too late, because I've considered it myself a number of different times. Have you seen the salaries that we're paying programmers at this company?
And they don't even and they dress like they're you know, paupers over there.
They don't have to, I don't. They don't please anybody.
No, theo those and make money. Yes, I know, and they're the best in the business. Dan, what's some of your top what's your top pick right here?
What are you talking to investors as we come out of this little earnings period here?
Yeah, I look, Apple continues to be a top pic and I think Thursday night that will be the drum roll with Cooper Tino coming out with what I believe strong iPhone numbers next week Thursday.
Next week we have Apple numbers.
Thursday, and that's the drummo because look is we saw it from Microsoft and Alphabet that's one half in terms of what we see on cloud, Microsoft best cloud Play. Apple can just be overall our top pick. But then I look like names like Power out doing cybersecurity that can turn short of what I view is almost to try, you know, triangulate way to play some of the key tech trends right here. But it all starts in Cooper, Tino and Redmond.
When you when you travel around talking to institution investors today, I mean, you had it. I'm gonna call it easy job. You an on an easy job. I could have done your job over the last decade fifteen years. Now you've got a little bit of headwind out there for the tech story. What's the pushback you get from investors on tech these days?
But it's almost more enjoyable because now the New York City cab drivers still barish on tech. A lot of institutional investors hate the rally, But ultimately it's a stock pickers market. Is on our talking about it is identifying the winners, doing the work and trying to figure out the hype from the actual you know where the spending is. And that's why I think that's been the best this last three to four month. It's a stock pickers market,
and I think that's the key here. No longer fed driven Ppi y Noko every Friday, that's the key.
Interesting.
I mean, Anaak how much further can these companies run? I mean they're already they've done so well. When you look at the gains we've seen year to date, they're all basically Apple, Microsoft, and Video Meta and Amazon.
I thought they would all cut down massively last year.
Okay, I was. I was not. I was ignoring twenty twenty two off the bottoms.
I would not ignore that, because you know what, come next year, we're going to see a very different story.
Quarterly sales for web services. Amazon kicked off twenty twenty two with a gain of forty percent year over year. Now we're looking at sixteen percent and they're saying it's going to fall the same.
I would say, go back and see what happened in twenty twenty three. Quarters of four quarters in a row, Amazon's growth trade declined massively awsh The year after that, it improved by ten percentage points in some quarters more than that. So it's it's a matter of usage. It's not as if things cried up. It's a paper use model. People using more, it's gonna go up. Economic activity goes up.
It goes up.
People want to save more money, then move more workloads.
It adds up.
It's a compounding business.
You know, it's also cool. Dan hon Rog was telling us yesterday, but there's a green component to businesses switching to the cloud, right, because if you have all your servers on site wherever you are, energy could cost a lot and it could be very pollutive. However, a lot of these businesses, like on Rog was telling us, Amazon or maybe Microsoft, have put their server farms in places where energy is cleaner and cheaper, so it really makes a difference to their big carbon footprint.
Well, it's a big part of what you see that Microsoft's talked about where Apple talks about. And then at the same time, like when you look at AI, what's really happening now from processing power perspective, It's going to be a golden age in terms of AI. This is not a hype trend and I've viewed as the next leg to what I've view is just going to be probably one of the biggest trends between in the last twenty five years.
Hey, Dan, can't let you leave here without and the update of Tesla call what are you seeing out of our good friends?
The cyber truck coming, Yeah, so cyber Truck's coming for you. And around Halloween Look, I think the biggest thing is just the price cuts continue sort of weigh on the stock in terms of margins. You see now a lot of you know, throwing in the towel. I view this is sort of over sold in my opinion, because I think the demand will start to tick up, specifically in China,
price cuts will start to stabilize. And then again going the second half with cyber truck, I think that's where I must puts the red cape back on and you start to see sentiment improve.
The cyber truck.
I'm excited for the cyber truck. It looks terrible. It looks awesome. Did you not like mad Max?
No, it looks like.
A giant DeLorean. I love it.
I like the Ford f one fifty.
Look all right, that's our tech roundtable for the day again. I've seen your equity antis, what Bush Securities and on Ourgrana he's a senior technists with Bloomberg Intelligence. Kind of round table here, kind of get the latest on tech space again. Amazon reporting numbers, keep it a little bit. The numbers were good, big big operating profit.
But this market has been dominated by tech.
I know totally, yep, absolutely.
You're listening to the tape. Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Let's get a kind of a wider view of what's going on here. We're going to bring in the.
Sylvia Drablonski, chief investment officer and co founder of Defiance ATFS and Herman Chan. He is the regional bank analyst for Bloomberg Intelligence, kind of put this a little bit into context. So, Sylviet, it's not every day that we see this type of struggle for a financial institution. Yes, it's not a big money center bank like we saw back in two thousand and eight, but still, what's your view when you start seeing some of these regional banks really face some stress here?
Yeah, iked morning. Well, interestingly enough, it actually feels like it is a little more common. It's not every day, but it's happened a couple of days this year. So I think what it does is it puts some strain on you know, the confidence of investors essentially about the
regional banking system. And you know, there's that becomes problematic, right because if all of the funds are pulled from regional banks, you know, we can assume that they go elsewhere, so you know, find the money stays in the system. But you do have this, you know, major part of the financial sector on shaky ground, and I think if that happens, you know, these are banks that classically lead to to main street and that's the major part of
our RGVP and our economy. So there is some fear that these things that they keep piling up, you know, would be inherently pretty bad for the for the banking banking system, and it would make investors worry about this ability of larger banks eventually.
Uh yeah, all we see those fears spreading across the market, until now it looks like it's only you know, it's isolated to so far. SVB, Signature Bank and First Public is still going concern But Herman chan, how much longer? I mean, what do they have in terms of deposits and what do they have in terms of assets? Can customers get all their money out today?
The First Republic's to open for business right now today. So if you're a depositor, you can easily just go to the ATM or head up your business banker or personal banker and exit the balance.
Che ATMs have limits. You can't pull out more than like a thousand dollars. So if you have forty sending at First Republic you're gonna need.
You can go visit one of their beautiful offices and eat some of their chocolate chip cookies and talk to a personal banker and exit your withdrawal funds as you see.
Please, Sylvia, you know, how concerned are you about in the broader economy if there is some more stress to this banking system that maybe not a credit crunch, but certainly, you know, maybe tightening of credit out there such that it might impact the economy.
Are you factoring that into your outlook?
You know, I think it sort of depends to tough question to answer, because I think it depends a lot on what the Fed plans to do. I think, so if you know, we'll certainly have credit tightening, and we'll certainly have less liquidity in the system, and then on top of that, you'll have you know, sort of even less liquidity in the system because investors will will kind of pull out in the market, and you know, it gets worse. Thinks that, okay, perhaps there's some systemic risk.
I don't think there is a you know, broad based risk to the entire banking system. As you said, these are a handful of players. But nevertheless, you know, these things happen haven't happened in the US since two thousand and eight, and you know, they do instill some fear. So I think it's the FED. You know, maybe we get maybe that's twenty five BIPs is just a given,
particularly with shase inflation data and whatnot. But I think, you know, if the side kind of keeps going after that, and you have this liquidity and this credit tightening the system, then the market is directionally at risk for perhaps a recession or a harder landing. I think if that doesn't happen in the sense sort of pauses after this and lets all of this kind of feed in and and you know, bring inflation down and and kind of let the market reset a little bit for a few months.
But then I think, well, we'll kind of be okay. And whether this you know, corporators are certainly holding up, and if if things don't sort of get worse. I think that can can change the other way. But again a tin side could could pull back.
Any kind of right.
Hermann just explained to us how this mechanically might work if the FDI is it the FDI see that comes in and intervenes here, and how does that work?
So the f I see what would typically likes to close any failed bank on a Friday after business hours to come in too, and then hopefully line up a buyer by the weekend, and so the buyer would would then operate First Republic or any other failed bank uh as as their own entities, so there's no disruption in service, and then any any customers of that bank could just
transact as normal, so there's no disruption. So that's typically how things work, and that's why the FDIC likes to do things on a Friday afternoon.
Yeah, exactly, that's a good point. We get these announcements often on the weekend or after the market closes on Friday. In terms of deposits above and beyond the two hundred and fifty thousand dollars that's insured, do they break that out at First Republic? Have they said, okay, everybody who had more than two hundred and fifty. They've reduced that to two fifty.
Right, So they said that in the fourth quarter it was like sixty seven percent, and a lot of that has now gone. And really there's only a few billion dollars outside of the thirty billion from the collectively from the largest US banking institutions that tried to prop up First Republic. So most of the uninsured deposits have already eccided, and any left probably and after this turmoil over the past week, probably have thought twice about keeping their their money at First Republic as one.
All right, Herman Chan is our Bloomberg intelligence analyst for regional banks. I'm sure you're one it on television right now or some other meeting. You should wear a cape when you walk around this building. Sylvia. I'm sorry that we didn't get to talk about more about quantum because this ETF that you run qt u M it's got to be so hot right now with all the interests in AI and tech and banking has distracted us. But just tell us briefly about you know, the flows and the interest in qt um.
Yeah, so quantum is just sort of taking off, as you can imagine and the tech earnings have particularly propelled that. You know, we hold all of these needs in our baskets that are benefiting from you know, cut and cost, but also their future investments in AI for the Microsoft, Googles, Amazons and whatnot. But yeah, I mean AI is going to change the way we live. We've talked about it
a lot. You have AI applications in healthcare, you know, reta out thinking about Amazon, you know, if they lose on cloud, well maybe that you may also like this thing when you're shopping comes from AI in to blues speature revenues, you know, manufacturing AI solutions, forecast demand and things like that. So it's just going to change the
way we live and work. And I think that a lot of the companies at the forefront of this are really you know, performing this year and I was performing both and howzat on smt Hie.
Soyllia, thank you so much for joining us, and thank you for being flexible here as we talk about the First Republic News as well as so Vijablonski, chief investment officer with Defiance E TFS.
You're listening to the team Ken's are 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 podcast.
Lose it just across the tape here.
At the top of the hour, the Federal Reserve Bank Supervision chief called for a sweeping re evaluation of how the institution oversees US financial firms following the failure of Silicon Value Bank Gas some detailed reporting on that. Steve Matthews, us economy reporter with Bloomberg News, and Jenny Sirring, she's a financi reporter with the Bloomberg News who joins us here in our Bloomberg Interactive Broker studio.
Jenny, what did What's your takeaway here?
I mean, it looks like they're trying to spread the blame around a little bit on the bank itself and that, but also on regulatory officials themselves and maybe been I think the term is foot dragging.
Yeah, No, I think this is a little bit more of the finger pointing that we've been seeing for a lot of the last few weeks. So this is I think you're right, the Fed is kind of putting a lot of the bit blame squarely on these managers. I do think they've acknowledged a little bit of their their laxness.
But yeah, I mean, I think one of the more interesting takeaways that I saw was that they were calling their interest rate risk modeling, you know, deficient, and that was as far back as November at least, and so obviously this was something that was on the radar of regulators. But did they move quickly enough and act you know, anticipation.
Yeah, I mean, Steve Matthews, isn't this a case of toothlessness at the regulator? What became really clear to me watching the congressional testimony over a couple of days was that the FED knew this was coming. You know, the regulators knew this was happening for a year and did essentially nothing about it. As John Tester said, nobody dropped the hammer.
That is correct.
And you know, if you read the details of the report, and if you're interested in financial regulation, it's definitely worth reading. It's one hundred page report.
But the.
When there's a problem with the bank, the regulators write up what an MR or MR I a matter requiring attention and matter requiring immediate attention and send it to the bank, and there were thirty one areas thirty one of these corrections where there were problems with the bank, and they you know, obviously they left them open and you know, as in their annual exam in and uh, you know, in the middle of last year, they found
management and controls were deficient and they were considering, you know, putting together an enforcement action that would require the bank to do more, and they were the regulators were mulling it. But you know, the bank failed in the in the year in which they were considering it. So it's like they clearly there was a whole problem with the culture
of supervision. And the report kind of lays that out and says that under the former vice chairman, uh, you know, they pushed efficiency, they pushed you know, a light regulatory approach and and uh and that kind of you know, created a culture of what of supervisors backing off.
You know, Jenny, What's interesting is that Dodd Frank had created some really tough supervisory regulations that then later were loosened a little bit by Congress I think twenty eighteen, right, and a lot of people, Elizabeth Warren and others have grafted onto this as maybe the big problem. Right, it was during the Trump era, so certainly it must have been problematic. We talked to Barney Frank on this show, we did, and he said, that has nothing to do with it, So what's the truth?
I mean, yeah, I think he wrote.
That regulation right, He wasn't worried about it, So why is anyone else?
Yeah, I mean, I think we're always going to see that. The same fingerpointing that we've seen between you know, the banks and the regulators, we'll probably see that between Democrats and Republicans. And I mean, certainly there was a lot of rolling back of regulation under Trump. But then I think even just days before this all happened, you had Michael Barr out there saying that, you know, you could take a light touch approach to regional banking regulation. So
I don't think either side is completely blameless. And you know, probably we could point to a lot of different examples that you know, ultimately led to what happened in that faithful day.
In mind, Steve, this just feels like a process that's just going to take a long time to implement. Meanwhile, you know, we still it's become clear that some of these small regional banks they can do a lot of damage to just market confidence. Here, what's the sense of how any increased regulation may play out in terms of timing, It could.
Take several years, just because the regulatory process is really slow in terms of like creating the rules and then having you know, a comment period and then you know, Congress can can weigh in, and it's going to take you know, a couple of years before you get actually
new rules in place. I think I think the important thing is that Michael Barr is recognizing that there's a problem with the culture of supervisors that they are you know, not empowered to take action, that they feel like they're constrained, and the report kind of lays that out. Before they could even like you know, issue any kind of order at all or any kind of memo, they had to like consult at the San Francisco Fed with with the FED staff in Washington. It's just kind of a slow
bureaucratic process. And they can definitely do a better job with supervision just by you know, changing the culture without changing any laws or rules at all.
Was there any criticism of the San Francisco Fed of Mary Daily. I mean, during the testimony, Republicans you know, made comments about how she may have been too worried, too concerned with, you know, the vibe in San Francisco, the mood of employees, although that's part of her job as well. But did she get a mention in the one hundred and two pages here, Jenny.
Not that I've seen yet, although I am still making my way through all one hundred and two pages.
That's fair, that's fair.
It's a long report, you know. I wonder if any of this will have fallout on First Republic. You know, even if it takes years Steve, as you said, to work through regulatory changes in legislation, do they feel the need to be more hands on, to be more proactive in a bank that could also see some real deposit flight and has also had some serious interest rate risk.
Well, they definitely feel the need to be more proactive. I mean, exactly how it will play out with First Republic is an interesting question because, on the one hand, if you're going to have a get tough approach, then you know that would not necessarily be good news for First Republics shareholders or depositors. On the other hand, if you're worried about it's you know, systemic importance, you would want to make sure that it doesn't cause additional harm
to the entire banking system. So you know, they're there are definitely kind of cross currents there.
Hey, Jenny, what what are we hearing from the regional banks themselves? Are they are they prepared heard for increased regulation? Are they fighting back? What are we hearing from them?
I think we've honestly probably heard more from the biggest banks wanting to draw that distinction that you know, we were fine, we were able to step in and help First Republic, for example. We haven't heard as much of the regional banks saying like, no, no, you know, still leave us alone. I think, you know, I think everybody kind of realizes the state that things are in and how fragile things are still, even though you know, we just got through earning season and things felt a little
bit better. But I think mostly we've just heard from the biggest US banks saying we've already been subject to all number of things that prevented us from being in this situation and allowed us actually to you know, step in and save the day in some cases. So I think that's that's mostly what we've been hearing so far.
Was there any mention of the you know, rapid rise in rates by Jerome Powell and co. I mean, I I guess we know that there are reasons for that, right, they had to slow inflation, and a lot of people think they were late to the party even there. But you know, still five hundred basis points in a year, Steve Matthews, is a lot for the economy to handle. You know, you can see why it would have put people in a difficult position. Do they talk about it, do they touch on it?
That is not really touched on in that context. I mean a lot of people outside the Fed say, well, if you raise rates, you know, the most aggressively you have in forty years, there's a good chance you're going to end up with some accidents.
But you know, what the.
Report says is basically that these banks were not really prepared for This bank in particular is not prepared for the interest rate rises, and that the supervisors were not really forcing this bank or banks more generally, to model
for this kind of thing. So you know, there was there was, you know, an absence of risk management, and you know that this wasn't the base case, this was what people were expecting, but they should have been prepared for, you know, a worst case scenario without you know, going out of business.
Ay, Jenny.
Another troubled regional bank, New York Community Bank CRUP, bought Signature Bank, So I should rephrase that New York Community Bank bought a challenge Signature Bank. How's that working out?
You know, it's actually working out pretty well for them today. I think they're up quite a bit. They reported earnings this morning. It was sort of interesting because, you know, when they bought this bank and combined to the two companies, they had about ninety three billion in deposits, and they've seen that slip down to about eighty two billion or so as of last week, and they actually said a lot of that was expected and that going forward it
should stabilize pretty nicely. And so, you know, it seems like even the ones that were hit the hardest, and even the ones that had the worst headlines where customers would be the most booked, things are sort of getting okay and things are sort of stabilizing. So you know, they forecasted that their profits will go up and that things look really nice. So I think that was definitely a little bit of a sigh of relief. For a lot of regional bank investors out there.
How are the other regional banks doing? Pac West was one that we were all following very closely, even a giant like Schwab was a company whose shares had been hit pretty hard. Are are those others that had kind of indirect contact with SVB and First Republic? Have they bounced back?
Yeah? So I think, you know, if bounce back is probably a little bit too strong. Stabilized, I think is the word that a lot of them like to use. So they're, you know, they've they admit that they saw heavy outflows. Maybe it hasn't completely stopped, but it's a leaf's gone down quite a bit.
Hiight, Jennie, thanks so much. We appreciate that. Jenny Starraine.
She's a financial reporter Steve Matthews covering the economy, weighing in on this bank.
You're listening to the tape catch are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexi from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Big Oil reporting big numbers today. Chevron and Exxon Mobile. You put it together, they have like eighteen billion dollars in net profit just in the quarter. Both Stoctor trading higher today. My question to Fernando Valley, who covers all this stuff for Bloomberg Intelligence, is is this as good as it gets for Big Oil? Are we peak oil here in terms of profitability and stuff?
I don't think we're quite as good as it gets. But it's pretty darn good, okay, And it could be better, and I think it may be in the next within the next decade, but it's pretty close to that.
So how does the market look in terms of supply? I keep seeing, you know, draw downs in stocks, and I don't know about the demand side, but it seems to me from the draw downs, I see that the market's very tight, and I keep expecting to see the price rise more than it has. Right where seventy five dollars for right now, we're at about seventy five dollars only pull up GLCO go seventy six, forty four for WTI seventy nine to fifty one, so basically eighty bucks for Brent.
Yeah, I think That's why it could get better, right because the supply side, we see the underinvestment that's happened over the past five to six, maybe even eight years globally, not just in the US. And then we see the limitations in US shale that we've talked about before, how they're running out of the good quality inventory to get to that supply. The issue, as you mentioned, is demand. We were talking about earlier ups saying volumes are down.
You see FED hiking rates, all the tech layoffs, bank implosions, all of that will have a repercussion in oil demand. Ultimately, so far it hasn't really happened. We just saw the EIA send revised numbers for diesel around four million barrels a day. That's good. It's not great, but it's good, and so we're not seeing the cracks yet. As we see further pressure on consumer demand, be the Disney's, the Amazon layoffs, that could lead to lower oil demand itself.
I see your AEI and raise you one i EA. I spoke with fatib Roll a couple of days ago, who runs the International Energy Agency, and he came out with a report that EV sales are going to make up almost a fifth of total car sales this year. That's huge, right, I mean that's up from what four percent a couple of years ago. I think eighteen percent was the exact number. Okay, it's still a tiny part of the global automotive fleet. But is that having any impact on demand?
Very limited because two main things. First is, how do you mind for all those minerals that are going to an EV battery and go into producing an EV. You actually mind ten times as many minerals to produce an EV as you do an internal combustion engine.
Vehicle with diesel powered machines exactly.
And then the second part is I come from Brazil and the biggest growth engine of oil is developing markets. Five billion people over fifty percent of demand. We can't afford a forty thousand dollars Model three. We barely have the power to feed them as it is. And when you look at Europe, you look at California, they're struggling with the power to feed their current EV fleet, let alone if all of us were driving on evs.
All right, so what is your demand model?
I manage these guys for years, and they are a These energy guys are a ruly bunch to manage. I mean, I'm unbelievable. But one thing I did learn is you guys have demand models. You've got supply models. What what's your demand model kind of telling you over the next couple of years.
Well, the biggest variable there is exactly what we get on fuel efficiency and electric vehicles. Our view is that we're going to continue to be at the one point three to one point four per sent long term average growth for oil demand, and the biggest change there is just yes, you're going to get some ev penetration, but more abundant energy actually leads to higher consumption as opposed
to fewer consumption. If you have more of it and a cheaper price, you typically consume higher volumes and again develop markets. We consume thirty seven times more than the average African today, we owed American thirty seven times.
Is match driving around this Chevy Silverado thing, I mean, like you need in west Chester.
I occasionally drive also electric vehicles, and I enjoy never having to go to the pump. That reminds me to bring John Tucker into this discussion, because JT I think you have a question. Every day I come in here and you're complaining to Paul about what you pay. I whant to ask Fernando, what's up with that?
Yeah? Well, also it's first off, what are the best margins? Is a diesel gasoline? What do you make the most as a refinery?
Today it's gasoline, but refiners really benefit the most. Woe diesel is that its highest because a barrel of oil produces around fifty to fifty five percent gasoline and only thirty percent diesel, so it's harder to make diesel. So when those margins are high, you're really benefiting. And that's what happened last year. Today gasoline is almost twice as high on a margin as diesel.
What we were paying this morning three point fifty at the wah wah, I think it was. Is it a seasonal thing also where we're seeing a change in refinery maintenance and some are blends starting to come in at some point.
Yeah, the summer blend is just the switch off is just getting into high gear and we're going to go into high seasonal demand in the summer. The other issue is Europe struggling to replace Russian crude and also high energy costs in the East Coast. We import a lot of gasoline from Europe Now some of it from India, which is Russian crude. Don't tell them.
I mean, there's a chance that I'm filling up my crush with gasoline that was a crude oil that was refined in the gasoline in Europe.
There's a chance that you were funding Vladimir Putin's for Ukraine.
Yeah, it might be a Russian crew that was refined in India and then came all the way here.
Okay, as I passed the bay Way refinery or what's the one on the turnpike this Phillip sixty six.
Yeah, exactly, we're doing it right there.
So let's say I want to go down to Corpus Christi, Texas and build a refinery.
Can I do that?
Well, you'd be better off just taking one of the idle ones and restarting it.
Oh so, where are some idled ones?
You have some in Louisiana? You have?
Why do we have idle refineries? Don't we need not to.
Close some more? And one most refining it is that. But it's also just it's very expensive to make all the investments to bring them up to spec, not just on green but also the emissions regulations and all the other limitations that have been put on refiners and crewde processing itself. And then the bigger challenge is we've talked about it. You love it. The Jones Act. You can up that's transported.
When I'm president, the first thing I'm doing is get ready, what's that?
The Jones Act. You can't transport anything in the US unless it's in a vessel that was built, crewed, and registered in the US. And we only build naval ships, uh for for defense reasons, so there are none of those. And you can't really bring a lot of products from the Gulf Coast to East coast, which is why we're importing it from India.
So they can't. They can't put them a bunch of petroleum products into a ship in Louisiana and bring it back around here to New Jersey.
You can't do it.
We send them.
Let's so let's put a pipeline in and pipe it in from the Pennsylvania shale area.
Well, yeah, if you can't do them, if you can convince New York State to build a pipeline, I'll give you all of my uh all my all of my free snacks from upstairs.
I mean that. That's the frustrating thing.
When you see you know, you can't get fuel to the northeast it states, so we have to import it from other parts of the world.
Absolutely nuts. You got to fix that. Go down to DC.
I can't run for president. I wasn't born in the US.
Yeah, Fernando Valley Brazilian. You speak obviously English and Portuguese, but also German and Spanish. And I hear that you ran a restaurant. What's the story with that.
It was a long time ago in Brazili.
It's not US.
No, it was bar food. It didn't go out, didn't It didn't go so well. But you know, you live and you learn, and so.
It fell back on being a global oil analyst.
Yeah, that's a pretty good fallback. I think you know, yours is Walmart Greeter. I'm gonna be a truck driver, and Fernando is like, I think I'll be a global oil analystic.
One more thing before you go, and this is cool. You go to boil, go on the terminal. How many different types of crude oil are they? And real quick, just what's the defining difference between them? The sulfur content or something like that.
Yeah, So, I mean there are hundreds of crude grades globally. I mean even in the US, there are two things. You can be sour sweet, which is the sulfur content, but then the gravity, so it's gravity relative to water. You can go from the heavy bitumen in Canada which is eight API gravity measure to a very light EGO forward condensate which is sixty five, which.
Is the defining differences. Some are easier to refine than others. That's the difference in price.
I think currently the defining difference is the higher it is, the more gasoline it produces, it has fewer carbon atoms and so it makes more gasoline less diesel. We actually want the heavy stuff now we do.
That's that's science.
That's cool. Boil go on the Bloomberg terminal.
Fernanda Valley, senior analyst, former restauranteur at Bloomberg Intelligence.
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Here on Bloomberg Markets.
We'd like to talk to C suite folks at interesting companies.
We think we've got one for you today, Kevin Sayer.
He's the CEO of dex coom Now, Dexcom, I wasn't I'm not that familiar with it. But it's a medical device company focused on the design and development of continuous glucose monitoring systems for people with diabetes.
So certainly something.
That is needed out guessing I'm guessing it's even a broader market. I mean, let's bring him in right now. The ticker is d x CM NASDAK listed Dexcom. Kevin Sayer, CEO, Kevin, is this really just for people with diabetes? Because I feel like this market is really broadening out.
You know, that is a great question, and thanks for having me on the show today. Right now, this technology is used primary for people with diabetes and primarily for people using insulin, but all time as a health indicator, as a biosensor. I believe glucose can become a very vital marker in healthcare for people, for example, weight loss, wellness. Glucose is a sign of many things. Our primary indication today is for diabetes, and our primary use case has been for people on insulince so far.
I mean the reason I ask, and as my wife will tell you, I'm a sucker for good marketing. I see all over Okay, I see all over Instagram these glucose monitors, and the idea is it can tell you, you know what kind of sugar spike you get for eating different kinds of food, and different people react in different ways. So example is if I eat a bagel, I might have a big sugar spike and maybe Paul doesn't. The other thing is on the weight loss side. You know
I'm consistently ten to twenty pounds overweight. I love cake and cookies, and that's a real problem for me. I feel like if I had a glucose monitor, it would be an easy your way for me to watch what I eat, monitor what I eat, and maybe help control myself a little bit.
There are numerous things you learned from wearing, one being the COO at X common. Having been here quite a while, I wear these things all the time. I don't have diabetes, So a couple of personal insights. For example, I was an investor conference one time and wanted to see how high I could spike my glucose. So I ate a great big cup of chocolate covered raisins and drank a glass of orange juice, and I got my glucose so high it almost looked like I had diabetes. And it
went very quickly. But I've learned what foods, for example, I eat because my glucose to go up rapidly. Ice cream does not cause you to go up as rapidly as cake. You still go up, but not as not as rapidly as weres cake as straight sugar, candies, jelly beans and licorice guys super high spike very quickly. Chocolate takes more time. At the end of the day, you learn what those things do and how your body reacts
over the course of the day. But you also learn about things like extra So if I have a workout in the morning, what does mike glucos do during the course of the day. And again my physiology personally, if I have a nice workout on the morning, mike glucose is ten percent lower all day long. And those things are really good learnings as far as your overall health over time. We look forward to being that market over time.
We're not labeled for that now, but you're right. People are using them on a regular basis off label because they can learn so much. And these devices go to your phone, so you've got it right on your phone. You can look at the data at the same time you're looking at your text messages and your emails. And for our diabetes users, particularly those on insulin, that phone connection was one of the key advances we led, so rather than look at a medical device or something else,
you can look at your phone. And if you're a young person, particularly if you're a kid in school, we have the opportunity for your parents to see that data too, so caregivers can know that those in their family are safe. It's just been an amazing journey. Well here at the company, this technology is game changing.
Well and what kind of discomfort are we talking about? This isn't like installing a pacemaker. No, no, no, I'm assuming at least equal to or better than a fingerprick on a regular basis.
It's it's much less.
Describe describe Kevin the device for us and how it has somebody.
There is a small sensor that's about the width of a human hair in less than a less than a half inch of length, about three eights of an inch and length. It is inserted very rapidly with a needle. The needle is inside your body for that milliseconds, not even seconds. You don't feel it when you put it in our new product, The G seven's inserted on somebody's arm, attached to that small sensor in your arm as an electronic transmitter, and that sits outside your arm, uh and
is attached with tape. You really don't feel that it's there. The G seven is a little bit bigger than a nickel. That's also you really don't feel it. You don't know that it's there. You wear it for ten days. People put them on themselves. There's no doctor or physician or anybody involved, and pair it with your phone and within a half hour you have glucose readings.
Hey, Kevin Linten, that's yeah.
That looks simple.
Let's pivoty to your company and your stock. I mean, I need to pay more attention. This is a big company, forty six billion market cap. The stock you guys reported numbers after the close last night came in a little bit better and expected stocks trading off about three percent today but up about six percent year to date, up
seventeen percent on trailing twelve year basis. Talk to us about the earnings last night reported what was a key message you wanted to get across to your investors in the anals, you know.
Key message was continued growth. Nineteen percent organic revenue growth over last year. We launched our new product platform, mar G seven in this quarter and we just barely got started with that, and we believe that product's going to be an important growth driver for us in the future. We raise our guidance for the year. You talk about our stock story, and I listened to those revenue numbers.
I've been with the company for twelve years. We were forty million dollars in revenue the year before I got here. In our guidance this year is in the three and a half billion dollar range. So this company is a big story. It's come a very, very long ways. We're in the s and P five hundred now as well, and our message rewarded you.
I always look at comp charts right to compare a company stock over just a five year period, and your total return is five hundred and forty six percent. The stock has a sex tuppled in five years? Is that because you know this this market is growing Is it because there are more diabetics or is it because you've made innovations. You know it's much easier for them to use the product. What's the what's the main driver?
I think the main driver has become awareness of how important a technology like this is in managing diabetes in general. We have expanded dramatically access to this product on the reimbursement front. One of our other key messages was expanded Medicare coverage. That's going to give us another three possibly three million people to access here in the US. So as people look at this technology and guys compare it. If you stick your finger, you have one number and
that's all you have. We give people a new glucose reading every five minutes and with that, diabuts management is so much better. Every time somebody wears this or there's a study, we see people get healthier. Their average glucos comes down there when SE's come down, and it even goes beyond that into other health factors like cardiovascular conditions get better. People have realized how important this is. So the technology in our innovations, going to the phone, connecting
with things, that has driven it. But because of those innovations, access is driven. It's just one after another after another, and we've been at the forefront of everything.
All right, Kevin, thank you so much for joining Uskevin Sayer, CEO of dex Com, been a real success story for this dot.
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