Big Banks' Announced Job Cuts Don't Match The Reality

Wall Street and the city in London. But there's indications that there might be pockets of growth actually and job growth in the financial services industry. To help us put it on perspective, we welcome a good Fred yeaman on iran senior finance writer for Bloomberg News, joining us here in our Bloomberg Interactor Brooker Studio. So yeah, m give us a sense of Again, we've seen a ton of reporting about job cuts. Morgan Stanley News out this week,

we heard city maybe doing some things. What's your reporting showing? So you know, I I try to look at their actual numbers at the end of every quarter. And I've been tracked in this for about twelve years now, since the crisis. I started the first job spreadsheets during the crisis, because you know, during the crisis it was big. And a few years after our crisis, Europe went to the crisis, and then they were big. But then it kind of

started slowing down into the fourteen fifteen. UM started reversing in sixteen um And and I still look at the actual numbers of employees the banks higher and the last time I took was what looked was the middle of the year. And and actually several banks they're up from where they were during the crisis. So in other words,

they cut a big chunk, then they started adding. JP Morgan is pretty much even uh bamp Party, but pretty much even UM And and many banks, after many years of cutting, have stopped and started adding slowly, not not too much. But there are still those that need to keep cutting, like doa Bank. And if you look at today's story, the top bank cutting is dotche Bank. It's it wants to cut eighteen thou it also has a terrible record of job cuts, has announced ten thousand job

cuts three years ago. How many cut three in three years so so, and they kept talking about that ten thousand and they managed to cut three. Now they say eighteen, so with that same rate, maybe they'll cut five if they can. They're they're really bad. Uning Credit, which is the biggest Italian bank, is also on the list. They said eight. They have a better record. They actually have

cut a lot since the crisis. A lot of it is not necessarily Italy, but they un Credit has also gotten out of countries where where they just don't think they're core it's their core business anymore. So Italian and French banks have done that, um, getting out of markets that they don't think they really need to be in. UH and that reduces the headcount when you're no longer don't have a subsidiary there, but really has a terrible,

terrible It's hard. I mean, I understand it's harder for European banks to cut people than it is for US banks. Some of the laws over there is that a challenge. It is anyway to get it. I know, like in Germany when they're talking about maybe merging with the Torch back with Commerce Bank, the big issue was how many employees of the merged bank would be cut, and that was one of the reasons I think that that, I mean they have they have labor laws that are much tougher.

H France and Germany and Italy, they all have a tougher labor laws. Politically, it's very challenging. Um. I mean, Germany is the strongest economy in the world. How can you then go say I'm cutting thousands of jobs when you should be hiring thousands of people. Yet Germany is overbanked. It has too many banks. Um of them should be shut down. And I've been saying this, you know, for

about ten years now. The whole chapter in my book that came out in two thousands eleven was about this, and and German um advisors, analysts, professors have been saying the same thing for twenty years, that they have too many banks, they need to cut them down, and they can't do it because politically it's a rich, economically doing great country. So they can't do it. So they there's always pressure not to. So Germany, not just labor laws,

but politics also works against it. How about some of the big US investment banks, the JP Morgan's of the world, the banks of America. You know, as you walk on those trading floors, I grew up on a trading floor from a generation ago, where they're just packed massive floors, packed with people, people yelling, buying, selling all kinds of stuff. You go on a trading floor, it's a lot different way.

Way fewer people, I guess, replaced with technology. So if these US investment banks and you're reporting our adding jobs, where are they? So they they are, You're right, trading floors are very quiet. For one thing, even if there are people, they're using instant chat programs instead of yelling at each other. Right that there's a big difference. I remember the days when you could go and people were yelling. But it's it's not it's been gone for a while.

But they add they've been in many areas well. For one thing, banks need to invest in in programmers, technology people that's we can actually do the I mean. And and technology has become so important to every industry, including finance um and to compete with all these new fintech companies that could be a threat to them, big banks have been buying those some of those companies, really increasing the number of people who do technology for them so

they can stay on top of the technology spectrum. And compliance has been a big boon for employment at Wall Street firms around the world, but especially as firms on the pressure from the FED to comply with new regulations which were even harsher than the rest of the world, added thousands and thousands of people to make sure compliance was really tip top. And now it is. But and and maybe Dave's stopped hiring more, but that really compensated for a lot of people who were leaving the trading

rooms and and other sale positions other things. So those areas have have really made the difference interesting. Uh, yeaman on An thank you so much for your reporting here. Yamen is a senior finance writer for Bloomberg News. Joinings here in our Bloomberg Interact. Their broker studio continues to be a big story on Wall Street. The head count issues when there's pressure on lower interest rates and on fees um one of the areas, uh, you know, obviously

that banks can look at is their head count. That is one of their biggest costs, and it walks in and out of the door every day their biggest assets. So when there is fee pressure, we certainly see time and time again the big investment banks and big financial institutions look to the head count none, you know, more so than in Europe, as you Yeaman was just reporting

Deutsche Bank. You know, clearly it's been reported that they have a lot of cost cutting to do there and again they have to take a very hard look at headcount and we'll see how that plays out in Well, what a difference a year makes. You think back to a year ago, almost to the day markets were in a free fall, setting many setting lows on Christmas Eve. Compared that to this year where most asset classes, certainly on the risky side, have put up some stellar, stellar performance.

Let's get a sense trying to put all of that in perspective. We welcome my next guest, Jim Vogel. He's an interest rate strategist for FT and Financial based in Memphis, Tennessee. Joining us on the phone. Jim, thanks so much for joining us, help us, you know, put into perspective what really the last twelve months have meant to the markets, starting with that free fall we saw back in you know, almost a little more than a year ago, to where

we are today. How do you put that in perspective? Well, that was an enormous wake up call, not only for investors but also for the Federal Reserve, and so they responded almost immediately, and it really set the tone for all of two thousand and nineteen where the FED no longer was wed to a particular forecast, was prepared to react throughout the year. It's interesting, so as we think about it here today, how would your characterize kind of where we are in terms of the economy, in terms

of the interest rate environment. How constructive are you kind of on the markets here? Given kind of this performance we've seen, we're looking for more of the same. In particular, um the um increases that we've seen in stocks should start moving to emerging market classes as well as the FED and the other sent large central banks stay on hold.

That's very important. Meantime, we've got the possibility that that long term interest rates also stay within a band and that we don't get the kind of increase you would typically see as other risk assets begin to recover and continue to set new highs. It's interesting you think you talk about emerging markets as you know it's still I would say, kind of an a sector and asset class that a lot of folks are kind of split on.

What makes you think about going that far out on the risk parameter, the risk curve, if you will, and think about emerging markets. The reason to consider is that UM investors are too focused on difficulties and individual markets and individual regions when they should be thinking about a five to six year horizon that allows a look for those to begin to catch up, become less commodity dependent, become more uh in terms of putting into work their workforce.

That's going to be prized as developed markets continue to see a particular tight labor pool. How about it. It's interesting we think about the bond market again, another asset class had just a fantastic year. When we think about the credit markets, how do you think about allocation between perhaps investment grade, high yield, maybe even going out that you know, kind of the leverage loans side of the business.

We've got an awful lot of forecasts by people on Wall Street that the leverage loan market is going to get a little thinner in terms of performance this year as they again focus on specific assets. But overall, there's an awful lot of money still waiting to go into that market and find bargains as they can, and we think that provides support both for leverage loans and for high yield debt as well. Then investment grade is all going to be a question of supply, and right now

our forecasts are for modest growth and supply. But if we see large um corporations tapping the market consistently, you'll see investment grade begin to widen. How about the menus of a bond market, just to take it one step further, that there's a market where we've seen tremendous inflows of capital. We've seen you know, you know, all in returns of you know, proximately seven percent this year, which for the mini bond markets fantastic. Here is that a healthy move

for this market? You think that market may have got

in a little bit ahead of itself. It's a little bit of head but it's also it benefits an awful lot from uh tax policy, tax policy uncertainty in an election year, and we'll see that, of course continue in And also you've got an awful lot of domestic savings that wants to stay in fixed income because they realize that there's a after the last couple of years, there's a possibility that some of their big equity gains could pull back a little bit, and they want that core

holding and fixed income as something of an anchor on the portfolio and that just hasn't changed for municipals at all, and nor should it next year. So, Jim, you've been in the markets a long time. You've seen these cycles, whether they're economic cycles and also political cycles. As you mentioned,

this is a presidential election year we're coming into. How are you kind of factoring that into kind of your view about how much risk you may you want to take or what sectors you may want to have exposure to where you just kind of play that out and

really don't pay too much attention to the uh clitical aspect. Well, the political aspect is important because right now the market's not focused on it, and if you look at two thousand and nineteen, it was a year when things sort of did not things did definitely did not go to plan, but then we recovered with moves by the Fed, by

the ECB, and then investors sort of recalibrated. One of the things that's difficult to recalibrate for our political surprises and could bring that and if it ends up where you have a Democrat in the White House and a democrat Um controlled Senate, then you've got the possibility for a surprise that the markets simply not thinking about. And although policies may move slowly, investor fears can develop quite quickly. Absolutely, Jim, Jim, thanks so much for sharing us, sharing with us your

thoughts here. Jim is an interestrate strategist for f TN Financial based in Memphis, Tennessee, joining us on the phone today giving us his thoughts kind of us asset classes. That sounds like Jim Vogel continues to be pretty constructive on the markets here, uh, in terms of taking uh you know, kind of being out there on the risk curve, not pulling back, trying to get a sense across uh, you know, strategist, fund managers, economist kind of their view.

For time to check in with Bloomberg Opinion, we're joined by opinion columnist Tera La Chapelle. She covers entertainment and telecommunication. She joins us here on a Bloomberg Interactive broker's studio, and she is out with a stellar column today. It's really awesome. If you want to get a sense and really get a primer for the streaming business and what it's done to Hollywood, I highly recommend you read Terrorist Calm on the terminal end on Bloomberg dot com. So

Tera again. I followed the media industry for about thirty years, and by far the biggest disruption that I've seen has been Netflix and the whole streaming concept, because it really changed the way people consume media, and Hollywood is trying in the media industries trying to react. Tell us what

comes some of the key findings in your column. So I think what you know consumers see is how it's changed their own habits, how it's changed us some of our entertainment, the way we watch TV, the way creative decisions are made. But in the business world, what's been really interesting is it's driven multi billions of dollars worth of mergers. So you saw Disney and twenty one century

Fox combined. So now Disney owns those studios. A T and T bought Time Warner and HBO via Common CBS have gotten together Charter the cable company about Time Warner Cable. So it just goes on and on and on, and you know, little by little, when you see one of those deals piece by piece, it doesn't really seem like

that much of a transformation. But I think when you look at the long list of what's happened in the last decade, you start to see how drastically it really has changed, and how it's really because of kind of

like one company, Netflix causing all of this. Yeah, there's a great graphic that you have in your column that it's called Disappearing Act, and basically it just compares the kind of the big media companies that were in the marketplace in two verses today and the list is almost half of what it was, you know, back in the day. So is there any sense of whether any of these

media companies can really compete against Netflix? Well, it's funny because I was looking at the market caps for I think it was the ten biggest media giants right now, and all of those combined are still smaller than Apple. For example, Apple has got an over a trillion dollar market cap. So I think that tells you right there that the scale. It kind of puts it into perspective that even Disney, after doing all these deals, is still

small compared to the tech giants. On the other hand, I think Disney is one of the sort of the best equipped to weather this, and maybe you feel the same. You know, they have the Disney Plus app, which had a really good launch. A lot of people seem to like it. They're really investing in content for streaming, more so than I would have expected for a company that

has its profits so tied to traditional television. So I think some of these companies they do have a lot to prove, But when it comes to content, you know, HBO, Disney, they know great content and it's going to come down to that. So I think we'll see, you know, what happens over the next year. Maybe Netflix starts to feel

some pressure of that. You mentioned a big tech and UM interested in what your sources are telling you, because we we've seen big technology comanies, whether it's Amazon or Apple or you know, Google with Facebook kind of I would car, you know, argues just kind of dipping their toe in the content business, in the video business. Is there any sense that maybe will see them really jump

into the deep end of the pools relates to video programming. Yeah, I'm really curious to see what Apple does specifically, because I think right now it's been really vague. You know, It's like they have the Apple TV Plus app. The content didn't really get rave reviews, but they're spending a lot of money, but on the other hand, there's not really enough on there, you know, to replace television. For instance.

You know, when you go onto Netflix, there's just a load of an endless scroll of things you and watch, whether you like all the content or not. Apple had like a handful of shows you could watch. So I think it'll be interesting to see, you know, if if this is successful for them and getting more people to buy Apple devices, maybe they go out and buy a studio.

I know some other people disagree and think this is just sort of a loss leader for them, is a way to get more iPhones and iPads into people's homes. So I guess we'll see. But I always tend to air on the side of these companies like to do deals and it seems really important to them, and I think we're going to see more of those, any idea. One of the pet peeves that Tom Keene has is he thinks he's subscribing to like ten or eleven different

streaming services. How many streaming services do you think the market can bear? Maybe? Yeah, I think that's going to have to change. I mean, most people can't afford to subscribe to multiple apps, you know, more than a handful. They get very expensive and especially with the cost of Internet, and I think what we'll see happen as companies like Comcast and Charter, for example, we'll try to bundle some

of these services. I think they see that this is a big consumer pain point, and when there is something like that, there's opportunity of business opportunities. So I think some of these companies, including Amazon and Apple, will look to try to bundle these you know, not just put them all in one place where you can subscribe to them, but also pay in one spot and maybe pay one bill every month and not have to subscribe to them individually to get all the content you need. That kind

of sounds like a cable company exactly. We're bringing that cable, but we're still seeing court cutting. We had Craig moffatt on from off at Nathanson on a couple of weeks ago when he was out with his research showing the court cutting is not only continuing, exection actually accelerating. So kind of it goes to your point, Tara, the move towards streaming it is in full force and probably accelerating. In Tara La Chapelle Entertainment and Telecommunications columns for Bloomberg Opinion,

joining us here on a Bloomberg Interactive broker studio. You can read more on this and other stories from Bloomberg Opinion. They have great stuff every day. Really makes you think you can go to Bloomberg dot com slash opinion, or you can go to the terminal by typing in O, P, I N GO. And I think the real issue is Tara pointed out in her column, is streaming wars are heating up. They really kind of art in earnest arguably in twenty nineteen. But they're really going to accelerate here. Uh,

We're gonna see how Disney plays it out. We're gonna see Time Warner, A T and T time Warner come to the marketplace with a more robust product, Comcast with their peacocks. So it's only going to get more aggressive out there. So get ready. Take a look at the housing market here is a really been fairly strong over the years, and you would expect that with interest rates so low. Get a sense of kind of how things are playing out across the country in the housing market.

We welcome a good friend. Logan Mohatshami, senior loan officer for AMC Lending Group based in Irvine, California. So Logan, just give us a kind of a snapshot of kind of what you're seeing in the housing market right here as we end, well, lower mortgage rates did the or thing. Um you know, last year, you know, we had a monthly supply spike in new home UH, in new homesale sector.

People were thinking housing might have peaked. But as soon as the tenure yield started going down, really by May of this year, the housing market just got back to its normal traditional cycle trend, very slow and steady. The existing home sales market, even though it's going to be slightly negative year to day, has been keeping sales above

five million for some time now. But really the most important factor for twenty nineteen going into twenty is that the monthly supply for new home sales have come back down. New home sales are up. That's good for the economy. That's good for housing. That means housing starts construction job. That right there was really the story for twenty nine and it should continue into as long as the ten

year yield doesn't get near two point six or higher. UH, the new home sales sector and the and the existing home sales sector should have legs for slow and steady growth, look and give us a sense of new home struction. And we've heard there's some some reports that it's just not that much supply, uh, kind of at the lower end of the market. Is that something that you're seeing. Here's what I disagree with everybody in America. What is

an affordable house that a builder can build? Right? If an affordable house is either a rental, multi family construction or a condo. Because if you're asking for the builders to build affordable housing, they'll never do it right because they're a bigger, more expensive home. So I'm not a big fan of this wall they have to build for the lower end. Anything they build on the single family

sign is going to be more expensive. So the builders have long term issues in terms of are they going to be able to provide a product that the home buyer can afford or is willing to pay for? And I think that's a multi decade issue for them out here. So I'm not a big fan of using the wall. They're just don't build enough lower end. Anything they build on an apple to apples basis is going to be more expensive than this massive existing homesale market that just

has more. So why cheaper homes and more spread out geographically. But as long as new home sales can grow because housing starts are low, and new home sales so you can get that slow and steady growth and that's good for the economy because it just means more construction jobs, means more domestic spending out here. But it all revolves around can new home sales grow from this level on?

So give us a sense, logan, any regional changes are areas that we should be concerned about because we think about, you know, going back to the financial crisis and the kind of the O seven period, O six oh seven period, and we really saw some real estate markets that you know, even you know obviously with hindsight, you know, whether it's Miami or you know, Las Vegas really kind of feeling seriously overheated. Do we have any of those issues in

the marketplace here? Here's the thing. Price doesn't necessarily mean it overheated housing sector. I mean, you can look at California. California is always considered a hot housing market. Sales have gone nowhere for ten years. Really if you look at the data when interest rates rise, those areas, the coastal areas, the high cost metros, those are the areas that only

get hit. We saw this in We saw this in nineteen except every single time the ten year old has gone lower, lower mortgage rates bring those demand back up to par. So you always want to be careful of hot coastal priced areas out here. But if you look at the housing bubble, existing home sales was at five point seven two million, or excuse me, seven point two six million, and then new home sales were over a million back then. So we have no overheated demand markets

out there in America right now. Purchase application data is only a levels here. But we're always gonna have an issue that when mortgage rates get the four point seven, five or five percent, the high cost areas do get hit, supply increases and the market slows down a little bit. It's just not enough velocity to be a crash. Nothing, nothing like that should happen in so Loogan. Give us a sense of what's going on in the residential mortgage

market in terms of quality. Are we seeing, you know, still a focus on quality, because again, another concern coming out of the financial crisis was, you know, the lenders had a role to play in kind of the overheating housing market. Where are we in kind of underwriting standards right now? In credit quality? Would you say the best home loan profile ever in US history? You know, that's that's that's the one benefit that we got from the financial crisis that we just lend to the capacity for

people to own the debt. It's not a tight people think a lending is tight. Americans, absolutely not. It's still very liberal. But the people that get homes actually make money, they can handle the debt payments. All it is is late cycle lending will happen at some point. Just means that, you know, people that buy homes late in the year for a very low down payment, when they go into a recession and they lose their jobs, those are the

only at risk homeowners when the next recession happens. But everything else looks excellent, fixed flow debt payments, a lot of nested equity, and there's no exotic debt structures left in the system, not once they all kind of went away in So we have a decade as absolute decade of quality homeowners. And now we're going into the biggest and most prominent demographic patch ever recorded in US history.

Ages thirty two are the biggest right now in America, first time median home buyer age at thirty three, So you have replacement buyers in this decade where we were just working through that level from two thousand to two thousand nineteen. So the fundamentals of housing look solid. It's just not going to be a record breaking booming hot cycle that some people might forecast. But you've got the demographics and you've got the quality homeowners this time, two

things that weren't with us in two thousand. Hey, Logan, thanks so much for journeys. We appreciate it. Logan Logan Multi Shami, Senior loan Officer for AMC Lennon Group based in Irvine, California, giving us a a very constructive view of the US housing market. Thanks for listening to the Bloomberg pl podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform them you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm

Lisa Abram Wohits. I'm on Twitter at Lisa abram Woits. One Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio