Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.
Every business day, we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news.
Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. June fourteenth, which for me is Flag Day, but for some other people it is FED Day. We're gonna hear from the Fed June fourteenth to get their latest thinking on interest rates. I want to bring in Ira Jersey because he actually does this stuff for a living. We actually pay him for this. Ira Jersey, chief US indust
rate strategist for Bloomberg Intelligence. So, Ira, I guess you know kind of the new term that I heard here is is skip. Are they going to skip a rate increase here? Then maybe kind of re evaluate?
Maybe?
Yeah, Yeah, I think I think they will skip. I wouldn't be surprised if the skip turned into a proper pause. But there certainly are a number of people who are thinking that perhaps the Federal Reserve, if they do skip, could potentially hike again in July and that's not out of the question, but I think that the hurdle just gets a little bit higher and it gets more difficult to get over that hump, particularly if we wind up seeing economic data, right, real economic data start to slip
as much as it is. And in fact, if you look at things like the ISM data that we've recently received, you know that's already in and near recessionary territories, if not actually in it.
Iira, I have to get your thoughts on this debate over the Treasury's flood of bill issueings is basically being the latest test for banks kind of break it down for us as far as what the issues are there and what that could potentially mean for any sort of volatility that we could see in the bomb market.
Yeah, so I don't think it's a debate. There will be, and we'll get an announcement actually just in about forty five minutes for what the Treasury Department is going to be issuing in terms of four to eight and four months bills that they're going to auction on Thursday. They have to increase the sizes to rebuild the cash balance in the Treasury General Account, which is the checking account that the Fed keeps for on behalf of the government.
And what happens is when when the Treasury General account goes up, then other liabilities at the FED need to go down, and that's either bank reserves, so deposits come out of the system, and that means that bank reserves go down, or money market mutual funds, if they purchase the T bills, might instead not use the reverse repo facility that's been used quite frequently to the tune of two point two trillion dollars by money market mutual funds might move those So if money market mutual funds at
the primary buyer of these tea bills, it's really not an issue. But I suspect that upwards of seventy percent of the T bills are going to be are going to be purchased for cash, and that means that bank reserves are going to go down. It means bank deposits go down, and it could see some depositively. Now the question is there's a distributional issue here where most of the depositive outflow is probably not going to be in the medium and smaller banks that were the problem back
in March. I think it comes out of more of the bulge bracket firms that already have a lot of reserves, so probably won't be as systemically of a problem at least not initially. Now by year end that might change quite a lot. We're working on that now. We'll have a no doubt tomorrow morning looking at the reserve requirements and how low they can get in how quickly. But I don't think it's a June July issue. Could be something for later in the third quarter or before year end for sure.
So all right, this is really get into the plumbing. But in terms of buying US security share, when they come to auction, international buyers, are they there, how big are they and who are they?
So foreigners typically don't buy a whole lot of tea bills. Actually the central banks buy a few, but the primary buyer are domestic investment funds that means money market mutual funds. So you know it used to be when and where this comes from is I don't want to say it's old, but prior to the global financial crisis, when the US had twin deficits, there was a lot of buying of US treasury securities, both at auction and outside of auction
by foreign central banks in particular, that's actually stopped. Most people still think that, you know, foreigners or massive buyers. Foreigners have not increased their holdings of US treasury securities significantly central banks over the last six seven years. Who has been buying there are private investors. And private investors
typically don't buy tea bills. They buy longer term treasury securities, you know, thirty years for pension funds and investment and insurance companies, or they just buy for their portfolio because interest rates in the US are still higher than they are in a lot of other jurisdictions.
And IIRA.
We have a story on the terminal from Liz McCormick, Michael McKinsey, and Craig trur Is talking about how bond bulls are betting that the FED is right in anticipating low rates to return. In Fed official's long run neutral median forecast looking at that is around two and a half percent. Do you think that's accurate?
So I actually think that ultimately the floor that when the Federal Reserve starts to cut will actually be below two and a half percent. I think that they'll wind up cutting probably closer to two. Of course, you're talking about twenty twenty five or twenty twenty six, it was
still a long ways off from that. You know, where I think the market is probably a little bit a little bit wrong is that the market seems to think that the Federal Reserve, there's a good chance that the Federal Reserve is going to start cutting interest rates this
year and January of next year. I suspect that the Federal Reserve will wind up raining on hold a bit longer, so regardless of what they do kind of this month and next month, that once they get to the peak, that they'll be on hold for the better part of the year, maybe more than a year. But once they start to cut, they're going to cut aggressively. They're not going to cut in twenty five base point increments once
a quarter like some people are thinking. I think that they cut fifty basis points, you know, every meeting for four or five meterets, and then they wind up cutting interest rates down towards two percent. So two and a
half is not outside the range of possibility. But I do think that there's a floor probably two is percent, and hopefully we don't go below that, because if we go below that, that means we have disinflation again, and it seems like that's not likely given the demographic and economic dynamics that have developed since the COVID pandemic.
All right, Ira, thank you so much. We appreciate that.
Ira Jersey, Chief US Interest rate Strategist for Bloomberg Intelligence.
You're listening to the team. Can'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.
All swinging down here in Orlando, Florida the b and Y Insight Purshing Insight twenty twenty three conference where they got about two thousand and their financial clients down here. I'm talking about all things on financial services. So some good stuff down here, Jess. You can spend thirty five hundred bucks for I don't know vr Apple thing Mejig, I.
Don't think so. I think I'm gonna have to pass on that one since it's a more than my rent.
Exactly.
I know, I don't know what they're doing, but let's let's roundtable this with a couple of smart people who know the text base. No Apple know this whole metaverse thing. Anurag Rana and Mandeep Sing their senior tech analysts for Bloomberg Intelligence.
Let's go on. Let's start with you. You cover Apple.
And as does Mandi. But what are they thinking with this thirty four and ninety nine dollars price point.
See Paul from our site. They're going to try to create an ecosystem of a new applications, new way of computing. This is a completely different ecosystem that they're currently the one that they have with the you know, the iPad, the iPhone, the air pods. So it is a first step in it. They really need develop us to build applications on it. We need new content and frankly speaking,
that's really the game here. This is not It is going to take years to really build out, so we don't expect any near time action, but we are fairly optimistic in the long run.
Man deep, how do we square this away with Meta's headset?
So, actually, what Apple has done is really made it hard for Meta to go anywhere with their hardware ambitions. At least, I think what their demo showed was Apple can build this much better than what Meta has done, and just take aside the price point for a moment, but clearly what they showed was something that I think
consumers may want, not at that price point. And for Meta having invested billions of dollars in developing their own headset, I mean it leaves them with very little room to be the scale player, even though they have that eighty percent share and they have a five hundred dollars headset. I would be surprised if they continue to pour more money because now that Apple has entered, they will lower
the price over time. And I think when it comes to hardware, there's no other company that can build better hardware than Apple.
So Mandy, what's you know, mister Zuckerberg to do here? Is he content not to be in a hardware business? Again, I don't think of hardware when I think of Meta. But how would they play here just by sybody with their applications with the metaverse?
Yes, And what Meta has done in the background is they have invested heavily in AI and large language models, and they could still you know, build applications for the metaverse. I think they're better off trying to build it for you know, all the devices out there. And I think, going by what Apple has shown us they will be one of the kind of the leaders when it comes to the adoption for VR AR mixed reality headset. So what Meta probably will eventually end up doing is they
will develop applications. They'll use whatever they have built on the A side to be compatible with Apple, and that may be a better approach than trying to develop their own ecosystem entirely.
Hey on Rock, I wanted to jump in and get your take as far as what could be the potential next catalyst for Apple stock. It's interesting because Morgan Stanley is thinking they're actually looking to October for the next catalyst when they expect to learn more about the headset volumes. Do you think we'll have to wait that long?
I mean it could be even longer than that. If the consumer spending starts to slow down, then iPhone fifteen may not do exactly what all of us are hoping, which is jumpstart the top line growth rate. You know, and Paul and I have talked about this a lot, that this is a company that's not going to go top line above ten percent anytime soon. And that's because
the scale, the size, the penetration rate of iPhones. So I think it's going to be a while before if people are thinking this is going to grow double digits again, you know, they may have to wait quite a bit of time.
So, Man, Dave, what do we know now?
It's been I don't know, maybe a year since you know, Meta kind of you know, more than a year when they changed their name and they said we're going all in on this metaverse and then they've kind of paired back their investment ambitions maybe in that business. What's the understanding on the street as to Meta's kind of next one to two to three years in terms of investment, in terms of how they'll evolve.
I mean, clearly they have you know, made a one to ady degree turn this year compared to where they were last year, and that has increased, you know, at least expectations that they'll focus more on profitability. They will not lose as much money as they were doing before on reality labs.
Still.
I think they are investing on building data center capacity, adding more applications that are metaverse oriented, and I think the street is okay with that. It's just the hardware side, which I think where they're losing money on every headset that they're selling. That may not be a good strategy because the more you scale, you know, it's a bigger hole when it comes to your operating income.
An a rog have to get.
Your thoughts also when it comes to this fifteen inch MacBook Air that's starting around thirteen hundred dollars.
Yeah, I'm actually looking forward to it. I'm a cheap guy, but I think I'm going to go by that. I love my MacBook Air. I've had it for I mean, I think fifteen years, two different models in that tankgame, and it's just a beautiful machine. I'm very optimistic in that. But having said that, once again, mathematically as as a company for Apple, it's not going to have a material impact over the next twelve months, and that has to do with very tough comparison the PC market in the slump.
But personally I'm very keen on that machine.
All right on rag Rana men deep seeing our senior technology analyst from Bloomberg Intelligence helping us break down. You know, it was a pretty big event yesterday for Apple with this new virtual reality augmented reality device.
You're listening to the tape Kensur 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.
So the big, big news coming out of Marshton and DC.
Secretary of State Anthony Blincoln plans to visit China in the coming weeks for talks with top officials, possibly including President Jijimping. People familiar with the matter said, as the US looks to resume high level communication despite continued at tensions, want to get the latest on that. We bring in Justin Sinky covers the White House and DC for Bloomberg News.
Justin Big News. Give us your some sense of context here.
Yeah, well, you know, the relationship between the US and China has been strained sort of multiple points over the last you know, well lots of years, last decade, however far back you want to go. But there had seemed to be a sort of warming between President Biden and President Juhn Ping of China at the sum in Bali
last fall. All of that was sort of thrown off track when right ahead of the Secretary of Blncoln's planned trip earlier this year to Beijing, the Chinese Bible balloon flew over the US, so that led the State Department to scrap the plans, and since then there's been a real breakdown in sort of conversations between China and the US.
There's been a number of military drills recently where US or Chinese aircraft and ships have buzzed in front of US aircraft or ships, and so it seems like there was a real tension and Secretary B. Lincoln headed back to Beijing a signal that things may be warming and getting back on track.
Justin, do we have a sense of the exact timing of when his trip to Beijing could happen.
We expect in the next few weeks. The specific dates, I'm not sure if they're locked in yet or they're just not being shared yet. The State Department has said that they don't have anything to announce officially yet. But my colleagues Jenny Leonard and Marie Horton, who reported this piece out, till fairly confidence this trip is not only happening, but happening in the relatively near future.
And justin, I'm not sure how these things work here when it comes to the diplomacy is typically a high level visit by a Secretary of State, perhaps a precursor for getting Present Biden president G together at some point.
Yeah, or at the very least, even President Biden has said that he expects and hopes to talk to G on the phone sometime soon. So there are a number of you know, diplomatic forum again this fall or the G twenty, it could again be an opportunity for them
to meet. But I would expect, you know, if this meeting goes well, to two possible things to accomplish setting up that phone call between Biden and G. And secondly, the US is really pushed for real opening military to military communication, which the Chinese cut off after former Speaker Pelosi went to Taiwan late last year, and so I think that was the goal of the original Blinking trip. Then the spy balloon happened, and so there's a hope that that can kind of kickstart if things go well.
When Secretary Blanking Ghostavision.
Justin talk to us about what this visit would essentially mean. When we're putting this in context to Presidents Biden's efforts to really try to restore some normalcy to the relationship here.
Yeah, I mean there Not only did Speaker Pelosi's trip really kind of strain re license, but there have been a number of pressure points over the last few years. Obviously China's reaction to Russia's invasion of Ukraine, the Biden administration has been mostly happy with, but has wanted to push for kind of a stronger breaking of ties between Russia and China, the situation in Taiwan, the situation and sort of the South Pacific in general, where China has
been increasingly assertive. And so you put all that into the context, especially of trade, when you think about the economy and efforts to sort of counter Chinese manufacturing influence and post COVID, I think all of these are sort of sore spots that there's a real hope than the Biden administration that improved dialogue can help get past.
Hey justin you know, it's interesting we seem to sort of past several weeks a lot of high profile US executives heading over to China. Jamie Diamond was there for big a Jpmorton conference. Elon Musk was there, Tim Cook from Apple. It feels like maybe the government officials are kind of behind a little bit of the private sector. What's the feeling with in DC about what we should be doing in China?
Yeah, I think that there is. There are sort of countervailing winds. Right on the one hand, I think there is a sense among many that they are trying to repair this relationship to at least make it more functional than it's been, particularly because you're seeing these military maneuvers or communication breakdowns, that there's a real concern that it
could bleed inadvertently to something bad happening. At the same time, we're about to have a presidential election in twenty twenty four where the issue of China is certain to be central. Former President Donald Trump obviously made that a sort of signature campaign issue and has talked a lot about being tough on China as part of his push back into the Republican primary. It's something that the Biden administration has tried to counter by big government programs to return manufacturing
back to the United States. And so it's one of those tricky things where I think if you talk to people about is it good for business to improve those ties, they'll say yes, Is it good for politics to improve those ties? Maybe no.
I just think thank thank you so much for joining us.
Really appreciated getting the latest air Secretary of State Blincoln announcing that he intends to travel to China in the near future, so presumably that is good news.
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.
Let's get a breakdown what's happening with the markets. Billy Lipschaltzy covers the Markets force. He joins us in a Bloomberg Inactive broker studio, as does Scarlet Food TV anchor for Bloomberg Television business sports host as well. So Bailly gave us kind of the movements in the golf stocks. Let's go to Scarlett right away here. I mean, this news shocked me.
Scarlett. I'm a golfer, I follow the business, I follow the sport of it. I was shocked at this happened.
Totally shocked. Given that the two had really dug in the two sides live golf and the PGA Tour, there was a lot of charges flung against each other, suits between the two. The DOJ got involved because it was also looking into the PGA for monopolistic antitrust type of behavior. And then all of a sudden, you have them declaring a truce in what really was a civil war in golf.
So who caved It's not clear, but I guess if the PGA Tour has admitted, basically conceded that live has a role to play, my guess is PGA Tour did.
Yeah, that's exactically.
Well.
You know, it's interesting if you look at the Bloomberg news story, the headline is PGA bows and so I immediately emailed the editor, which you can do because all the contact information to the bottom of every Bloomberg story helpful. And I said, I said, really, because I didn't. I don't think that, not knowing anything about this deal, but I thought pg had by far the upper hand here. Nobody cared about Live Golf, nobody watched it, nobody went
to the events relative to a PGA event. Yes, they had the money, and that's I guess the big issue.
Yes, they had an investor with bottomless pockets, which was basically the Sovereign Wealth Fund of Saudi Arabia, and my understanding is the reporting shows that they've already made a two billion dollar investment in Live, and they were prepared to spend more on it in the years to come.
The problem with Live was that they didn't have a US broadcast partnership, right, They didn't have media rights, So the only way you could watch live golf is to go in person, and it was hosted at two Donald Trump owned golf courses here in the US, along with other places overseas, or you could watch it on YouTube, streamed on YouTube, or on Live goolf website itself. Unlike PGA Tour tournaments, which are available on what, NBC, CBS, ESPN, and Living else.
Live does have a TV deal with the CW Network, which is a bunch of independently own you know, broadcast stations that are carried on cable.
Right, that's a good point.
Yes, so they do have some distribution there, but it's just not nearly and they don't have near the sponsorship or near any of the prestige. So I'm just shocked at this announcement, and I can't wait to really get the full reporting here, because this is the last thing I know.
I can't wait to get the TikTok on this, and of course this split the world of golf players too, right because Live Golf was really led by the former golf star Greg Norman, and they poached a lot of the best players, whether it's Phil Mickelson or Dustin Johnson, Cameron Spait.
Past their prime, all past their prime.
All past their prime, but big names nonetheless, And the difference was that they got paid these multi year contracts, large upfront payments. So one big question is what does this mean in terms of their splashy contracts. Will they continue to get paid out for this year their second year?
I don't know. Well, what does it mean for all the people who were not supporting the Live Tour because of its involvement with Saudi Arabia. Now Saudi Arabia's would be even more involved of what is left of professional golf. I wonder how that's going to play with large parts of them.
I don't know, my guess as money speaks, so in the end it will work itself out. I mean, there are a lot of uncomfortable press conferences with the players that did sign on with Live Golf, or asking golf players in general whether they would ever sign on would live golf. They just didn't want to go there and answer the difficult questions about sports washing and how Saudi Arabia was using it its heft to get into sports as a way to really accumulate soft power.
Bailey, you were walking us through some of the stock moves here. What are some other beneficiaries like Top Golf that are moving this morning?
It's really Top Golf, Callaway and a Kushna again, the company that is the home of titleist Scottie Cameron Putters and Footjoy that are rallying, both again up more than five percent. But Scarlett, this is coming reading from a note from Jeffrey saying that this unexpected agreement holds immense potential to elevate the sport of golf to new heights.
Is that your expectation. Is this really a deal that is going to be like the AFL and NFL merging and all of a sudden everyone wants to grab their golf.
I guess it depends on whether the PGA is going to change up its format or not. Because lif Golf was very different from the PGA in that they didn't have a thirty six hole cut, meaning no one goes home after two rounds. They had team play, they had shorter events, they had DJ's like the Chainsmokers performing at their tournament. I mean, it was just a different feel
in general. It was a little hip or a little so maybe with this merger, the PGA will change its stripes a little bit and make it, I don't know, make it more up to date. Because PJ was kind of the home of you know, this is golf. We're very traditional and this is how you follow the rules, and this is what the way we've always done it. And it wasn't exactly appealing to younger viewers except the pandemic came along and really helped people rediscover golf. Does this change it for you?
I mean, will you.
Watch the livie Well no, I mean here's the thing.
I mean, I consume this stuff big time, watch all the golf all the you know, all the time. I haven't watched any live For my personal reasons, I don't support that tour. I have nothing against the players who went there, because it's a great opportunity for them to make way more money than they could on the PGA Tour, So good for them. But you felt at some point
that for the game of golf. Yet they had to have to get back together at some force in some way, but I thought it would have been and I still think it needs to be with the PGA Tour kind of leading the way. So we'll have to get a lot more reporting, and I guess you know, I love that. I can't wait to see the prescott on this.
I know the kinds of questions that they'll be asking. By the way, we're going to be speaking with Mike One, who is the CEO of the US Golf Association, which is kind of the umbrella body that oversees amateur golf, so lots and lots of questions for him. I don't know what this means in terms of the DOJ also looking into the PGA and whether they would approve this kind of murder as well.
Yep, okay, great stuff, you know, Scarlet Fu, thank you so much. We appreciate that. Scarlet Fool Supper Television and Belly Lipscholtz covering all the market stuff and the movers on this golf news. Belly Lipschultz from Bloomberg News covering the market.
You're listening to the tape Ken'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 playing Bloomberg eleven thirty.
Just checking in here.
I'm seeing on Alson Williams has got one of these notes that you just have to read because if you think about you investing in the big band, recently it's been about, hey, when are they going to start returning cash.
To shareholders and maybe even more cash to shareholders. Yeah, we had to.
Pay our we were in the penalty box after the Great Financial Crisis. But time to start paying back some money.
And they were.
But now Allison's suggesting maybe maybe putting the brakes on it. Alison Williams jorians that she's a senior banks analyst for Bloomberg Intelligence. I know, Alison, you've got a research note out today kind of talking about that issue.
So are their banks pulling back on their buybacks?
So I think the banks are taking applause. Hopefully the strength that we saw in the first quarter is not a one hit wonder. But what we had seen was last year. At the June stress tests, we were sort of surprised. Back in America, JP Morgan and City Group were also surprised in terms of the results of that test and pushing up their higher capital requirements. They pulled back for a few quarters, shrunk their balance sheet, got their capital ratios, return to buybacks. Wells Fargo also on
pause return to buybacks. Keep in mind they had some huge legal expenses last year, still relating to some of their historical issues. So first quarter we had better buybacks than expected, sort of sort of almost across the board. But now banks are taking a pause and there's a few good reasons for that. One is higher capital is coming requirements, so it's coming for the industry. Part of
that is due to the March turmoil. Part of that is something we refer to as Basil three endgame, which the banks have been waiting for for a long time. So we have that. Nathan Dean thinks that, who's our
regulatory analyst, thinks that could be coming next week. And then we had the stress tests again, and you know, the issue is the stress tests set a buffer for these banks based on the losses that they see and the extent of the losses and the extent of the decline, and we have a higher starting point for a home price is we have a higher starting point for employment, which means the decline is greater, and we could see increases related to that test. So we think banks are
going to be conservative. And by the way, we have an economy that we're very uncertain about.
So if we're more conservative when it comes to the bank side of things, when it does come to buybacks, does the broader stock market begin to lose a bit of a pillar support there to prop it up.
So I think it probably depends across companies. You know, the one but the one bank that we think really has the potential toinuous, continuous strong bank. Well, I guess there's two banks. There's Morgan Stanley, who really is more of an asset and wealth manager at this point, but
then there's also Wells Fargo. And the reason why but Wells Fargo is likely to continue buybacks is they don't have a lot of other options because their bound cheat growth is restricted, and they also maybe passed the worst of those legal issues, So we have a special case there. So you know, looking I think more broadly, and Gina mar and Adams and her team does a lot of work on this, but looking more broadly, if the environment is weaker, does that open up the opportunity for buybacks broadly?
So, Allison, I mean, it seems like the banks are finding themselves back in the doghouse a little bit from a regulatory perspective. They it's been almost more than a decade trying to you know, get themselves out of that are for the Great Financial Crisis? Is it just because a couple of regional banks couldn't manage interest rate risk?
So I think, yeah, I think there's a few things going on there. I think for the for the biggest banks that I cover, you know, we had sort of gotten to this really strong period. Then the pandemic hit that changed some things, and you know, I think that the one thing that is really difficult to manage is this process so that we have we've had stress tests since the Financial crisis, but the process now is every year we have a test and so every year your
requirement can change. So you're basically having to manage a business for the long term to a target that moves every year. And so I think that that is sort of difficult, and it is set up so that you know, the higher the starting point, right, the better things you are, the more conservative you'll be with capital. And so that was a little bit what I alluded to. That was
a little bit that we saw last year. But I think that is definitely noise that it's introduced for And Basil three endgame is another thing that has been coming for a long time. I mean, you know, Paul that the Basil three rules came out, I mean how long ago, and we're still looking to finalize those from the crisis. And for the regional banks, it is a few banks that mismanaged risk. But the regulator's job is to say, you know, could there have been something in place that
would have helped these these banks keep things online? Right, So you know, sometimes rules are meant to protect someone like the like the seatbelt law, and you know, the largest banks have a lot of different regulations banks and you know, in recent years some of those got rolled back for sort of the next tier of banks. And now I think regulators are looking at you know, maybe that wasn't such a great.
Idea, Allison. As you know, whenever we talk about buybacks, we also talk about dividends. What are you expecting and could we see an increase in dividends this year.
So I do think that we will see for select banks, so Wells Fargo again is one who during the crisis cut their dividend. They were perhaps more a little too aggressive before the crisis, just in terms of you know, part of it is of provisions, which there was a new accounting that makes that more volatile, legal issues more volatile. But the bottom line is they're walking back that ratio, moving that up a little bit, and so we think
that they could be a standout. For JP Morgan and City Group, it was a real negative last year that we saw flat dividends that we did not see an increase again. I think we're going to have to see what happens over the next month or so. But especially in the case of JP Morgan generating significant capital, they're going to beat their profitability targets this year. They did do the first Republic acquisition that used up some of it. Whereas for a City Group, I think, you know, they
still have a lot of balls in the air. They have this IPO that's going to be pushed out now versus the sale of the Bandamax unit, so they could keep more on the conservative side.
So Alison, I feel like if I were a bank investor, a banks investor, I think what I have to do is just buy the best balance sheet. I can't take any risk really because I just it just feels like the pendulum is starting to swing back again against the banks.
I think in general, for banks, you want to buy the biggest risk manager, right because there are you know, there's a lot of things you don't know, and it's you want to be with the team that is sort of looking at their portfolio of businesses and their portfolio of risk and managing those risks effectively. Because in general, financial stocks, you know that all stocks, we know that the saying goes to, you know, buy into the fear
financial stocks certainly you know fit that. Again, I'm not making that recommendation since we don't do that at Boomberg. I'm just saying, like, you know, there's a saying out there, and certainly financial stocks, you know, when there's fear, people become very uncertain, right, They become uncertain about the unknowns, the no nonnwns, unknown nonnwns, and so you really just want to have someone at the helm and you want to invest in the bank at the helm who can manage those risks.
Accordingly, we only have about a minute left. I know you focus more when it comes to the big banks instead of the regionals, But where are you looking right now for any sort of red flags. Obviously have gotten a couple months out of those bank stresses that we saw in March.
I think you know that.
So we had some of the surprises, and granted there were idiosyncratic risks, but these are broad issues. So the cost of deposits, you know, the funding is going up, and commercial real estate I think is something that's well
known in the market. So I think we have sort of a lot of the red flags out there, and especially with regional banks, you know, with the pricing that they're they're at, they're they're pricing in a lot of risso, you know, and maybe another way of looking at it is, you know, what could be the opportunities Fixed income trading I think is one area that will continue to benefit and it's when you look across these banks. You know,
granted markets were very difficult last year. Banking fees, as we know, our down all up, but trading is a big source of revenue and some of these capital markets banks could still continue to benefit from that area.
All right, Alison, thank you very much.
As always, love getting your thoughts there on the big banks, Allison Williams. She's a senior analyst covering all the banks for Bloomberg Intelligence. He's also the director of Research for the US for Bloomberg Intelligence.
Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
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