Trump, Jamie Dimon, OPEC, and Markets

at Bloomberg dot com slash podcast. Let's talk. Get some news that's going to take place at downtown Manhattan today really fifteen former President Trump apparently reportedly is going to be indicted. Little team coverage here for bloom We're gonna round table to seeing Bloomberg's pretty Gupta. She is downtown right now as we speak, at Center Street, so we'll get the latest there and plus Boston Bloomberg Washington correspond and Joe Matthew joins us from DC. So Critty, let's

start with you here. What is the scene downtown? Again? The President expected to be arraigned or indicted and arraigned. Two fifteen pm, I believe is the time. What are you seeing downtown? Yeah, so two pm you are going to see a President Trump around two pm. Get a range and basically what that means is he's going to come in to the District Attorney's office, which is where we are right outside, and he's reason going to have his charges told to him. Look, it's reported that his

team doesn't yet know what the charges actually are. There suspicions the rage anywhere from twenty four to thirty different counts in charges, so really waiting to see what that actually means. He's going to go in. There are no cameras allowed for the arranged actual arrangement, but photographs can be taken beforehand. He's going to go in, He's going to submit his plea. The Trump's defense team has said that he's going to plead not guilty, and then it's

going to be a quick, quick exit from there. He's going to get fingerprinted, he might have a mug shot potentially, we don't actually know because of security reasons, he might not, and then he's gonna head very quickly back to Marlago to make his comments out of the state about eight fifteen pm tonight, So a very quick turnaround. But let me just draw you a picture or paint you a

picture if I can. We have this kind of layers of people, who's starting with a District Attorney's office have kind of barricades, a massive police presence, a massive press presence, and then separated from that in the park a right next door, right across the street from the District Attorney's office are protesters. And you're seeing protesters from both sides,

but largely more pro Trumps than anti Trump. So he's got to get back to give his speech from Mara Lago, and I guess Alvin Bragg is going to give a statement afterwards as well. What do you think we're going to hear from these two guys. Well, so Alvin Bragg specifically, we're going to hear more about perhaps some of the

allegations that are being made against him. Remember, he has been at the end of more attacking Congress as well, not just a Trump's defense team as well the Trump defense teams specifically if that have attacked his character is

at attack of legitimacy, is the case. But there are members of Congress who are saying, why is Alvin Bragg taking this on now when this case was presented to him a year ago, So there is a lot of questions about that, how he's actually funding this as the use of federal funds to protecute the form of plesident is really justified. It's likely he may comments on that, but at the end of the day, it might be a very simple question, do we actually start to hear

what the charges actually are. That's what we're expecting at least at three thirty pm. The mar Laudo comments, by the way, at eight fifteen PM, could go in any direction. I'll leave it to Joe to speculate on that one. Yeah, Joe, let's let's bring you in. Here's what's the feeling in DC as to these events today at two o'clock downtown Manhattan, and then what we might hear from the former president

this evening. What's the feeling in DC right now? Look, everyone's looking to New York, and you've even got Marjorie Taylor Green there now. Is apparently not a big fan of your town. I don't know if you've seen some of the tweets, she says. On my way to my hotel in New York City, I've seen many people so drugged up they can't even stand up. They just fall over on the sidewalks from using drugs at mayor Adams Free drug use centers. I'm wondering if she's ever walked

around the district of Columbia. But wait, where are the free drug use centers? I didn't know about this, just reply to her on Twitter. Actually, well, she's got she's got an event that starts very soon here ten thirty, about fifteen minutes, the rally for Trump with the New York Young Republican Club will begin across the street. She's also suggesting that she will be attacked with a sort of audio attack, as the counter protesters are bringing whistles and pots and pans to try to drown her out.

The former President's going to be there early though, eleven am is what is being reported now, to surrender leading up to the indictment at two fifteen, at which time the indictment will be unsealed and will actually have the charges. As far as tonight goes, there actually were questions about whether he would have to navigate a gag order, but it looks like that will not be the case. He's going to return to Marrow Lago and will deliver what

I suspect will be a fairly carefully written speech. Whether he sticks to the script is the big question here. But the idea is, you know, to have this sort of administration in waiting the shadow administration. He's back there. He's going to be in a suit and tie, not looking like a criminal in a jumpsuit, acting and a peer presidential. The big question we have is who's going

to show up. He's invited a lot of lawmakers to go there, and it's a real moment here to choose whether you want to be seen tonight at Marlago as a loyal supporter of Donald Trump or you have other plans. By the way, it does seem like it would be, I mean, beyond ridiculous to take a mug shot of the former president, right. I guess fingerprints maybe aren't on record, but did they really have to do that? Kind of

looks like it's not going to happen. I was really taken by that reporting because supposedly Donald Trump was hoping to use that, you know, as a campaign poster or as a fundraiser. He was mugging in the mirror to try to strike the perfect posture here and expression. I always go back to that Frank Sinatra mug shot. I'm just guessing he was looking at that. But it looks

like there will not be a mug shot. He will be fingerprinted digitally so he will not have ink on his hands, and the Secret Service will be right there with him. The question is what happens between eleven and two fifteen. There's apparently going to be a move following the surrender to the internally connected courthouse. He will not likely go outside, but that could be the closest thing we see to a perp walk based on reporting. Whether

they get pictures of it is another question. Some reporters will be allowed in for some still photos during the arraignment, they'll be ushered right back outside. There will not be any video, so you know, we might get a glimpse of this moment in history, but that's about it. Joe, What kind of response do you think we'll get from perhaps individual members of Congress on both sides of the aisle once the indictment is unsealed and we get a little bit more clarity, because it seems like his allies

are remaining pretty staunch here. Yeah, it's suspect that it'll be pretty predictable, to be honest with you. You know, we've we've heard Democrats, at least on the progressive side of the party celebrating lots of exclamation points. This is about time justice finally being served, and then you've got Republicans calling this a witch hunt. It's the Center that has been awfully quiet, and the White House has been

awfully quiet too. There's been a concerted decision there to not talk about this, to not get bogged down in it, and President, just like everybody else, is going to be watching this unfold today. Critty, let me ask you about what it's like down there right now. I'm sure that there are so many thousands of reporters that you can

barely breathe. But are there any protesters or supporters? I mean, yesterday they were like a couple literally two right are there were there bus loads of people that are showing up now or is it still just all press. It is definitely showing up in full force with protesters, and you're seeing this again for both pro Trump and anti Trump. I did have I wouldn't say two scuffles earlier that we're broken up by the police. It looks like it's

mostly peaceful. You are starting to see more and more people pile in to the parts that are pro Trump. I remember, you're also seeing some lawmakers come onto the scene as well. We had George Santos a spotting George Santos earlier about an hour ago, and it is reported that Representative Marjorie Tayler Green, who is a representative of the fourteenth District of Georgia and a Republicans has says she's point to be right here to protest the arraignment

of the former president. So we are on Wash for more protesters, more politicians who are here too. As Joe said, say are you or are you not with President Trump? And in fact, as we're speaking right now, we are seeing some more police presidence and actually a motorcade. It doesn't look like this is necessarily President or former President Trump's motorcade just yet, but again a very high profile presence coming from Washing NDC. And just quick cretty the

police presidence is it? Is it NYPD primarily and then I guess some secret service when when the president arrives former president define it is definitely NYPD mostly, But you are seeing to Joe's point about kind of that intersection, the internal intersection between the court and the District Attorney's office, it is completely walked off and that's where you are seeing some secret service details, so very mostly dominated by the New York Police Department, but there is again that

presence from the White House as well. All right, great stuff, guys, really appreciate getting the inspectives there. Bloomberg's pretty Gupta. She is downtown live at Center Street with the Manhattan District Attorney's Office, and then down Washington, DC. Bloomberg's Watchington corresponded, Joe Matthew, giving us the perspective from this from Washington, d C. From the Capitol on this historic day. I mean,

that's it is in historic day. Well, it'll be I'm sort some compelling images and we'll see what the indictment reads when we get that later this afternoon, and then we'll get the reactions from presumably members of Congress and then the former president himself at eight pm tonight from Marlago down in Palm Beach, Florida. That's so we'll have

continued reporting on that throughout the day. You're listening to the Team Cancer Line program Bloomberg Markets weekdays at ten am eastering on Bloomberg dot Com, the I Heart Radio app, and the Bloomberg Business App. We're listening on demand wherever you get your podcast. I know it's a big deal because there's been so much pain in terms of of you know, losses and both money and jobs. So much hurt there domestically, there's such rage, outrage, and then we

have UBS tomorrow. But I just don't know what difference the credit sweets agm makes. I was talking to Oliver Crook about this earlier. He's in Zurich, and he says, well, for one thing, they've got to have the team in place to hand off right bank to UBS. But who can we ask who will who has the best overview? I think I got somebody. I think I got somebody. Alison Williams, Bloomberg Intelligence. She does this stuff for a living. So Alison, let's start there where Matt was kind of

talking about this meeting here. I mean, what's going on over in Zurch We've got UBS buying Credit Swiss. But I guess Credit Swiss had to have their annual general meeting today. But it just seems kind of odd timing, doesn't I mean, it does sound odd timing. And again to Matt's point two, I agree, it's it seems almost

sort of pointless, right. But we're in a really unusual situation where, um, you know, the government came in and said they were going to skip shareholder votes and then you know, now we're having this meeting where these shareholders are basically not having a say in terms of this coming deal. So I think it's just perhaps, um, you know, a lot of the statements coming out of it are our people, you know, having their say verbally even though they're not able to sort of exercise the rights that

a typical shareholder would have. So I mean, I guess as we got a little bit of hindsight here, Alison. For UBS, I mean again, is this a deal with hindsight that they wanted to have? It seems like a great opportunity. I think so Stock You're right in the stock won a big time, but they seem to be so wedded to their their their plan of kind of slimming down the bank focusing on wealth management. How do you think the bankers are feeling about it these days?

So I think for UBS, again, you know it to the extent that they have the financial protections based in they do get you know, a fair amount of what they want right, which is, you know, of course there is the cultural issues and the like in terms of bringing these bankers in, but they want more us than the investment bank. They want that m and a business so to the extent that they can hire and keep those bankers and clients, that's a good thing. They want.

Latin America and Southeast Asia, those are big ads and their wealth business and the asset management. Again there's some complementary stuff. And the investment bank had pretty much been gutted from a trading standpoint as it was so. And then finally, of course, I mean the position that they now have in Switzerland, which you know, I don't think would have been allowed if it weren't for the government orchestrating it because it is such a sizeable, concentrated position.

The question remains, and I think people go back to sort of the playbook of the crisis. You know, what else are they inheriting. One of the things is, you know, sort of legal liabilities that obviously turned out to be hugely costly around the deals at the global financial crisis.

But I think this is a little bit different. If you think about the depth and breadth of mortgage and the harm globally and you know, mom and pop consumers there, there's not I don't think the same stakes and I think but I do think that ubs bargain to get what they could and build some protections in and so at the end of the day that that will be you know what what says financially if it was a good deal. I think strategically they are getting sort of what they want and able to you know, sort of

run down what they don't want. All right, let's get to you know, the godfather of big banks, Jamie Diamond, puts out his annual letter. Everybody reads it, and he doesn't even really hold back too much when criticizing regular leaders for the failure of SVB, says kind of, you know, you put these banks in this position and then you shut them down after they use these tools to to to fail. Um. What do you think about Jamie Diamond's

missive here? So I think, you know, Jamie Diamond is always very vocal and you know, certainly he has given their their position and their size and the regulation they face because of those aspects. Um, you know there he's

always very vocal about regulation broadly. UM, And I think that you know he is he is making the point and he doesn't by the way he does say you know, this doesn't excuse management, but I think he is you know, broadening out the picture in terms of the position that uh, you know, the bags are in in turn and and you know, if you look at it, it's a little wonky. But like you know, it comes down to the capital

weights and the way the capital regulations are. And he has consistently consistently talked about, you know the fact that he thinks that a lot of the capital rules it's it's too complex because there's too overlapping, and that there are unintended consequences, and so I think he's using his form to point some of those out. All right, Alison, one of the I think brewing headwinds, if you will, for banks of all shapes and sizes, is commercial real estate.

I'm hearing more and more about that. I suspect that we're gonna hear more about it when the banks start reporting earnings in a couple of weeks. I know you and your team have done some research on this. How big of a risk is commercial real estate to the banking system. So I think the important thing about commercial real estate is that you know, it's not sort of a broad brush. There are there are several different holders,

there are several different properties. And the focus I think has come, you know, the regional because the regional banks had these issues with securities not being marked market, and then people are thinking about how loans are not marked to market and could there be weakness, And the regional banks are the biggest holders of this debt. So in some of the bigger global companies that I cover, it's not as critical or the exposures are not as big, but it is bigger for the regionals. And the one

area that we're watching along with everybody else. I don't think we're unique in this is the office market because of the weaker cash flows, rising vacancy, and again this is sort of another unprecedented time where we have returned to office. We still don't know how that's going to shake out. So we think this is an area of focus for the largest banks. It's a smaller exposure, but this is going to be a long term time to

play out. It's not going to be like how SVB sort of unwound in a couple of days, especially for the larger banks. But I think what investors will focus on is for the smaller banks. You know, could there be certain ones that are overexposed and at risk? Alison, you're running our banks coverage for Bloomberg Intelligence globally? How many humans do you still have on your team? A lot? Because I was thinking you might want to replace some

of them at least with chat GPT. Well you know chat GBT, as you know, I think people are trying to find ways to leverage it. I would say that, Um, I just realized we have a Bloomberg GPT. Did you know that? You know? Yeah, I think we can do Bloomberg intelligence management can be I'm only joking around because Jamie Diamond mentioned that they have a tony you you are, I know you are, but but I guess I would just point to like, that's that's sort of how when

you separate the week from the chaff? Right? Is it? You know? Is the analysis digging in and giving you what you need to know and looking past sort of the headlines or you know something that you could sub diving beneath the surface if you will. All right, so what's when you earnings coming up? About thirty seconds left house and earnings coming up in a couple of weeks.

What's the number one thing we should be focusing on, well, aside from commercial real estate, what's happening was deposits number one thing deposits, What are the flows at for each bank and for the system as a whole, and is that just disclosed by the bank. That's not some data you get somewhere from the government. We do get data weekly from the government. It does come with a lag, and so that's why the last couple of weeks you've seen you have seen those outflows of those really relate.

We're hoping that this week well, or we're expecting this week that we'll see some stabilization. The issue with that data though, is you know, there's a couple of different categories. One category is the top twenty five banks, So you're not going to see in there if some of the large regionals are seating share to sort of the top

six banks. And I think it is going to be banked by bank, not just what's happening was deposits, by the way, but what's happening with the rate that people are paying on deposits, because that's another side effect that we're expecting that that will be going up. All right, all right, Alison, thank you so much for joining us. Really appreciate getting your perspective. There a lot of ground we covered, Alison Williams. She's a senior Banks analyst. She is a human. She is not a bot or a GPT.

She's been doing this for a while, and she's a Bloomberg intelligence. You're listening to the tape. Ken's a our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, 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. Well, yesterday's news in the global

energy space was actually Sunday afternoon. Our time was OPEC plus cutting production by one million barrels, and we had a nice pop five six percent in global crude yesterday, up another half percent here today, Brent crude up sitting here at eighty five bucks. Talk about global energy, the fossil fuel stuff as well as the sustainable energy as well. And we could do that with Jonathan Maxwell. He's a

CEO and co founder of Sustainable Development Capital. He's based in London, Piccadilly, but he's here in our Bloomberg in an actor broker studio in New York City. We appreciate it your offices aren't Piccadilly, So isn't that like having an office in Times Square? It is whipped just around the corner I talpped away, so we can even mind just off Piccadilly. They have some of the best clothing ancestry stores in London, right, I mean that's Hill Ditching

Keys where I get my shirts. There you go Turnabowl and Asser is right up there. They're a number of such companies. So you know what, Jonathan, I'm glad that you're here today because I saw something in the Jamie Diamond letter that I thought you might find interesting. Now, no one's had time to read the whole thing yet because it's forty three pages and it just came out a couple of hours ago, but I did notice he encourages the government to use eminent domain when it comes

to both sustainable energy and fossil fuel policy. I'm not sure exactly how he means it yet, but what do you think of an enlarged government role in you know, the industry that you work in. We've spent years subsidizing energy markets. America has a huge three hundred and sixty nine billion dollar program, the Inflation Reduction Act, But it's designed to onshore production of energy, particularly clean energy, as a core part of it, and to support energy security.

So those are two critical features. America actually is now energy independent, I've right, it's a huge deal, but energy independent because of shale an oil. So we now have the opportunity in the America to really promote clean energy domestic production. And it actually puts America in an amazing position internationally. I'm saying that coming from Europe because Europe is not in an amazing position internationally. Europe is in a very bad position internationally. It's a net energy import

prices in Europe for natural gas. People don't often talk about this, so it's some six to ten times higher depending on when we talk about it every day here and this is a huge issue. So what do you do as Europe as you're facing an import issue? And of course the NEXTUS now after the Russia Ukrane crisis, is that we've now shifted our supply from Russia to America. Well, but we have so energy independence in terms of fossil fuels, right, we have enough oil and gas here in the US

for ourselves. The problem that we have is with the sustainable part. So in California, for example. Sometimes you're not allowed to charge your electric cars because the grids are too weak and frail to support it. And now we're asking people to increase their adaption of evs. I was driving in this morning. I'm test driving this BMWi x Oh. That's the electric suv, which is a mind blowing piece of kit. I mean, it is an incredible vehicle. But as I was passing like six or seven gas stations,

I noticed there's nowhere for me to charge it. Well, I will come back to that. We're actually a big investor in fast charging infrastructure for electric vehicles to solve that problem. We're doing it in the UK and we'll bring it to the US. But here's the issue, right, You're absolutely right. Energy supply and particularly intermittent renewable power is a challenge to adopt onto the grid. I'll tell

you a bigger challenge, and this is my gripe. Do you know how much primary energy in the United States actually ends up getting to the user if you look at the actual amount of energy you mean, in terms of energy that's wasted, right, not only going through pipelines and in ships, but also through generation, expisition, distribution, and extraction. I imagine it's very little that we actually put to use. You know, the Lawrence Livermore National Laboratory produces numbers every year.

They have since the last global energy crisis, really in the seventies. It's seventy percent of primary energy is lost. That means only thirty percent gets to the end. Wait, where's it goal? Right, I'll unpack it. So, first of all, you take a oil and gas out of the ground, you lose about nine to thirteen percent on extraction and conversion into pipelines. Most of up eighty two percent of the world's energy is all gas and coal, so we have to be realistic. Then it goes into an energy machine,

let's call it a natural gas turbine. Firmodynamic states who put a molecule in one end, only half can turn into electricity. What happens to the other physics? Right, it's physics. So the other half. If you're generating miles away from the point of vieuse, which is generally how we do it, that energies to get dumped. So straight before the power gets out of a power station, you've lost about fifty to sixty percent of the energy to start with, depending

on the efficiency. You then lose another roughly ten percent getting to the point of view. So that's how you get to seventy percent of energy loss before it gets there. There is a solution to this, right, and renewables is part of that. But it's a tool in a bigger strategic issue of the US and Europe are going to have to face, which is the decentralized energy. If we just simply rely on these decades old centralized grid connect networks, we are going to have the same problem in ten

twenty thirty years time. What we can do has been much more efficient, cut out many of those extraction, conversion, generation losses, transmission, transmission and distribution losses, decentralized energy, and may make sure that we don't waste most of it before it gets to the user. Before I take a breath. One last thing, do you know how much energy is lost even when it gets to the point of views? No? Another ten twenty percent plus right the wrong I pump

it into my guest tank. I got the little cap there, so yeah, but you still the internal combined Merry engine to use. There's a lot of bleed off there right. In transport transports, about thirty percent of energy use. Seventy percent of it's in buildings industry, and it's on that's where we're just facing enormous losses. So here's the thing. Yes,

we can build renewable power. It will take us ten twenty thirty years to start to By the way, on that note, if the Inflation and Reduction Act is successful, sixty percent of electricity in the America will be green by twenty thirty. Do you know how much energy in America comes from electricity? How much energy comes from electric twenty comes from where Well, we're talking about heat, gas, transport, fuels. So there was just this massive job to do on

the energy transition. My business case is to say, yes, let's build renewable power. Let's make energy as clean as possible on the supply side, but let's look at the demand side. Let's think about attacking that seventy percent last before it gets to the point of views. Then we only got a minute left. Let me hear about the first charging networks that you're building. So how soon will they get here? So we started building them in the UK over the last ten to one or two years.

It's fast charging networks. So if you want to charge your car in five to ten, fifteen, twenty minutes. You can park your car and you can get it completely duced up quickly. We've got a rollout of these sites across the UK. BP Pulse is a big client of ours. We've just announced the breaking ground on the largest one in the UK. It's over maybe two hundred charging points at the n EC in Birmingham in the UK, and we will be bringing this to the United States soon.

How fast is a fast charger for you? We can get to full eighty percent to full charge in anything between fifteen and twenty minutes. That sounds pretty good. It's great, I can tell you it's it's difficult, and I don't know. I've talked. I've talked to all of the last three CEOs of BP about this. Why aren't they already at the gas stations? Why doesn't Shell already have these at every gas station. It's been a decade since Tesla started

rolling out these vehicles. I think they're dragging their feet. They're dragging the feed all right. Jonathan Maxwell, thank you so much for joining us. Great discussion. Jonathan Maxwell as a CEO and co founder Sustainable Development Capital. Next time, Matt and I are are in London Piccadilly. We're stopping by. We're gonna say hi, you're gonna buy us some beverage of our choice by us the shirt, a turn bowl and asser. Oh nice, that's cool. That's even better, a

considerably more expensive than a PIMS cop. Okay, very good, all right, we're gonna have more coming up markets on the red here sp off about three tenths of one percent. You're listening to the Team Cancer Line program, Bloomberg Markets weekdays at ten am, easting on Bloomberg dot com, the I Heart Radio app, and the Bloomberg Business app. We're listening on demand wherever you get your podcast. Let's talk a little M and A here, specifically some tech MNA.

How did the collapse of Silicon Valley Bank impact the tech m and A market out there in Silicon Valley. It's checking with Ted Smith. He's a co founder and president of Union Square Advisors. So, Ted, we had some turmoil, you know, some real unease in the banking space over the last several weeks, with a failure of Silicon Valley Bank and a couple of other regional banks. How did that impact kind of tech m and A the view

towards tech m and A what did you observe? Well, first of all, guys, thanks for having me back on I really appreciate it. I think you're right. A lot of uncertainty around the SEB collapse and related effects, and so everybody picked up the mantle of being cautious and reassessing their situation. Obviously, there's a whole host of companies that were depositors to and lenders, you know, lend these to SVB, and they all had to scramble to try to figure out sort of what the next step was.

So that put a lot of things on hold. Processes that were in flight, processes that were about ready to get kicked off in some cases with which I'm familiar, processes that were almost ready to finish. That the pause button got pushed while everybody kind of figured out whether they were standing on firm ground or quick. I think we're largely through that, or at least the first wave of that. Most people kind of have a plan for

going forward. We're seeing renewed activity. Those processes that I mentioned that we're in flight seemed to be back in flight for the most part, and the ones that I know of that we're almost done, actually completed, So I think I think folks quickly moved past the initial shock and uncertainty and kind of have Plan B in place at this point. I wonder what happens to the banks that are going to now have to compete though with money market funds and you know, short term treasury ETFs

and the like. I mean, are they going to have to start offering four percent five percent on savings accounts? Can they do that? It's a good question, and I think the answer is they are going to have to compete at some level. Obviously there's a broader level of services these banks can provide, and so as a result, they may not have to compete sort of basis point for basis point, but we do see them needing to

be competitive in the market. We also think that, you know, from away from the savings accounts themselves, that back on the lending side, the whole private credit asset class, which has grown to the north of two trillion dollars, is absolutely ready to push forward and be more a part on the lending side rather than just the regional banks and the large banks, particularly in tech, and so we

see that activity picking up as well. So when I think about M and A TED, I think about you know, I guess confidence, confidence on the part of a management team, confidence on the part of a board of directors. You really have to have confidence in the macro environment, the micro part of your business to go out there and spend big money and acquire companies. Is that out there now? It seems like there's anything but confidence out there. I think.

I think it's very situationally dependent, of course, and you're absolutely right, and in fact you're right twice, because you have to have confidence in your own business, and you have to have confidence that you know enough about the business that you may be acquiring that you can double down on that. And certainly in some cases there are we've talked to boards, talk to management teams who are saying, look, we're recasting our own view of the market as we

go forward. Although I would say a lot of that started happening in twenty twenty two. This was not a twenty twenty three event. Yes, the SBB situation was a bit of a shock to the system, but in many cases that didn't really change the plans that it has been put in place from the larger potential acquirers. It was a bit of a It was a side note.

It was an important side note in Silicon Valley, but it was, and so most of the large acquirers and certainly the private equity buyers that have confidence to do deals still have that confidence. I think the secondary piece that I mentioned where you have to have confidence in the target and do they have the right approach to their business? Are they ready to be acquired and contribute

to the new combined organization. That's where all the scrutiny is going right now, and that may mean that bills take long going to get done. Are there lessons learned ted you think in terms of, you know, diversifying your cash you know, or or has the moral hazard proved that? You know, if the FED in the FDIC we're going to back up uninsured depositors last time, they're going to

do it next time too. Yeah. I don't know that we can all count on that ladder point, although it certainly feels that way that the FED is prepared to step in and do what they need to do rather than create an awful tail spin, which is what I think would have happened had they not done that. I do think diversification is more on the minds of every CFO, every CEO, every board member now than it ever has been. So I think we will see more of that spreading

deposits around a little bit. But I also think it's it's it's going to be, as we've seen over the last two or three weeks, it's going to be a flight in some cases to the larger banks who are deemed obviously much safer in this environment, and to other regionals that are deemed to be managing their risk on a more conservative basis. So money is going to move around,

it is going to get more diversified. Um But I also do think to your point that we've learned that the FED is going to step in into a nasty situation and not let even these original banks fail. So ted, when you go ahead and talk to your your private equity clients, uh, their cost a capital just got a lot more expensive on the debt side, um Man. That changes the DCF model a little bit. How are what

are you hearing? Yeah? Well, first of all, absolutely right, but they have an enormous amount of equity capital that they need to put to work. And what we're hearing in some cases is, look, let's just write the equity check and we'll worry about the debt down the road. Now, not every every fund is large enough to do that, except you know, some of the some of the largest, but they will do that in certain cases, and I think some of the midsize funds will do it as well,

obviously for smaller deals. Um. But the reality of it is here is they can adjust their models, given you know, buyout level returns to reduce the amount of debt exposure, and certain cases amp up the equity check a little bit more and still get terrific returns if they might,

if they make the right bets. And because there is so much of this private equity capital on the sidelines right now waiting to be deployed, and a group of LPs standing behind those funds expecting that capital to deployed, they didn't put it, you know, in a safe deposit box and say, you know, wait for another sunny day. They expect these folks to invest, whether it's raining or sunshiny out. And so we think that capital will get deployed.

We just may see the debt equity mix change a little bit, or we may see people wait until the Fed loose you know, loosens a little bit, and we see interest rates come down a little bit before they fully spenanced some of these people. I have to ask, you know, because I've been going to super return for the last few years, and every year there's more and more dry powder. I mean it's it was one trillion, then it was two trillion, then it was two point

seven trillion. I mean, how much cash is there and when is it going to get spent? Yeah, it's a really good question. I don't know what the total number is now, it's obviously well into the multiple trillions. As you point out, I think the log jam eventually breaks, and we think it breaks in the back half of this year. Every private equity firm we're talking about, he's gearing up for a very busy back half of twenty

twenty three and on into twenty twenty four. Obviously, it's not all going to get to spend in one quarter, two quarters, even in the year. But we really do think it loosens up as we go into the back half of this year, because everybody seems to be poised to see a very active second half of the year. All right, Ted, thanks so much for joining us, Ted Smith, He's a co founder and president of Union Square Advisors

based here in Midtown Manhattan. He's been all over the street doing m ANDA, So we're talking a little m and A tech m and A in particular, it's been quiet, like we've seen across the M and A space in general, as a buyers and sellers adjust to a new market, a new higher cost of capital, and some uncertainty out

there in terms of the geopolitical environment as well. You're listening to the tape cancer our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio to tune in a Bloomberg dot Com and the Bloomberg Business alf. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg eleven thirty. Let's stock bonds here. I mean, you think about twenty twenty two, there was just no place to hide. Stocks

down twenty percent, bonds down, you know, mid teens. You know, that's a performance we hadn't really ever seen. I'm looking at the US aggregate index so far this year done a lot better, up three point four percent, So that's helping a little bit offset some of the losses from last year. Let's check in with the professional does this every day, Natalie Trevithick, head of investment grade credit strategy

at paid ind Regal. So, Natalie, after that bruising twenty twenty two, how did you guys approach the beginning here of twenty twenty three? We approached it as optimistic. I would say we thought we were all cowed up. We weren't quite fulls, but we were expecting to get the que ponds, which would be the milk from the cow. So we're looking at probably mid single digit returns and

you want actually turned out way better than expected. As you mentioned, you know, corporate bonds are up three and a half percent, and after that March, you know, when we went through that banking crisis, March was up two point eight percent in corporate bonds. So so far, it's been a good year for us. So where in the investment grade space are you guys, you know, kind of traffick again in the shorter end, the longer end, where you guys kind of playing, we're trafficking in all of it.

I'd say we've been more active in the five and ten year part of the curve, and there's been a lot of the man for long duration credit, but the friend end has become dislocated, so there's definitely opportunities there. Well. Banks of God and beaten up, so have some of the more defensive non financials. Healthcare bonds are doing well. We're looking at some of the other consumer cyclicals, Audios of God and Cheaper, so we're definitely seeing pockets of

opportunity within the credit markets. Are you concerned about a credit crunch Natalie upcoming? We are a little bit concerned because well, more regulations for banks to actually be positive for bondholders, if not equity holders. It also means that that could cool down the economy quicker than expected, and the potential recession maybe more severe, which would be bad

for banks. So all in all, we think spreads may trend a little bit wider from here in the aggregate, particularly within the banking sector, and funding costs may go up for them, But we'd say away from financials, most of them are well positioned with pretty strong balance sheets to weather recession. Yeah. I saw. I mean the world watched as holders of credit Swiss at ones gotten crushed, but there were different covenants for the Swiss at ones than there are for others and everyone you know was

punished on price. So is there the possibility that you know, many babies were thrown out with the bathwater in that case, You're definitely right about that. There is different laws and Swiss that call those at ones to be knocked out fully, but there's also going to be a lot of lawsuits. It will take years to see if there's any recovery there.

There is risk in other bonds and that they could still be you not written down completely in this case, while equities survive, but they still have that potential to be written down in a severe banking environment. So we think some of that punishment is warranted. But there's a lot of places within the banking sector which are still safe for bondholders. So how are you guys thinking about

credit quality these days now? Because we really haven't had too much of an issue even during the lockdowns were so much liquidity pumped into the marketplace. How are you thinking about credit quality in what may be a recessionary environment. Yeah, we think credit quality isn't going to go down terribly. We did see a downgrade from Nissan from investment grade to high yield, but we think most companies can weather

the storm. We're seeing just outside demand for non financial issuance, So there's still a lot of capital sitting on the sideline waiting to buy these corporate bonds that yields greater than five percent. We think companies have already extended their maturity walls pretty successfully, so we don't expect huge amounts of incremental issuance. But we think supply and demand are pretty well balanced at this point. There's more trouble I think within the financial sector, and their cost of funding

could go up. Our new issuers coming to market here, I mean, I'm I've been I'm if I'm a CFO. I'm used to issuing paper, you know, treasures near zero, not where they are here. Yeah, we're still seeing an active calendar. We had general motors in the market today yesterday. Today we have a number more of one off issuers like Mass Mutual. But they're definitely taking opportunities to come to market because they aren't refinancing their entire balance sheets

at these higher levels. Say, if their funding costs used to be three percent, now they you know, refinance about say ten percent. Their total funding costs are only going up marginally, and they want to be active in the in the market. I just think, well, a lot of people are are believing right now that the Fed could cut, that rates could come down. Is that unlikely in your opinion? You know, it's a tough called. Day by day. I think the probability of a fat hike and may has

gone down. Whether they cut by the end of the years yet to be seen. That's not necessarily something we're calling for. But even if rights stay up here, bonds are still poised to you know, clip that keep on and generate decent returns even a spreads wide and a little bit further from here. So we still think we're looking at a nice return, positive returns for corporates in two and twenty three. Now, either you guys looking at particular sectors of the market here that you like better

than some others. Yeah, we do like the healthcare sector. Utilities have actually come out with a lot of issuance that quite keep levels. Those are a rated. A lot of them are first mortgage secured bonds coming with thirty year paper, which we find quite attractive. You know. We like certain pockets of the consumer cyclical sector. Some of the autos were favorable on really though it comes down to bottom up credit selection here, so it's just about

at the individual credits. You've got to do a lot of work in that case. Yes, absolutely, but there's also a lot of name avoidance. There's a lot of insurers out there we can just choose not to own in this market, so we really are focused on the ones which we think are going to be able to weather recession and continue to hold in well. There's a lot of opportunities within technology and communications as well. All Right, Natalie, thanks very much. We really appreciate getting a couple of

minutes of your time. Natalie trevith Ak, head of investment grade credit Strategy at Payden and Regal. You're listening to the tape cancer our 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. Well, if you're a Bloomber terminal user in here looking for some investment ideas, b I go is a good function to know that takes you to Bloomberg Intelligence, which Bloomberg Intelligence is Bloomberg's in house investment research department, four hundred analysts strong all over the world, covering two thousand companies about one hundred and thirty industries. And they got a lot of smart analyst They come up with a lot

of good ideas. Let's get to some of them right now. We can do that with Tim Craighead. He's a research director and European strategists with Bloomberg Intelligence. He joins us

on the phone from London. So Tim, I know, you guys, you've got your focus ideas that are out there for people, and then you look at that focus ideas lists, which are some of the most high high conviction ideas of Bloomberg Intelligence has, and then you whittle it down even more and you guys, guys have some focus ideas to watch here. Talk to us about some of these names and why you guys are highlighting them some pretty interesting

opportunities for investors. Yeah, sure, thank Paul, thanks for thanks for having me on. Look, as you said, the focus ideas are those are those are views that combine three things, a high conviction point of view on fundamentals. Secondly, that high conviction should be differentiated from the market. It's it's anti consensus. And thirdly, they're catalysts or triggers that we

see that can change the market's mindset. And this set of ten, which is as you said, is a subset of the broader list, which, by the way, you can find on bi space focus if you've got a terminal. But this this subgroup all have catalysts that are important coming up in the second quarter. So it is the focus ideas to watch for two Q and there are ten ideas. We kept it. We kept it focused US. It spans the region. There's five US, three European, two Asian.

There's eight that are constructive, there's two that are a bit worrisome. So it's a cool bottom up list on analyst calls. All right, let's start with the US. Give us a couple of names that the analysts put pushed up to you and identified as interesting. Yeah. So I think it all revolves in the US by a large degree, around the consumer. And it's interesting because we have both positive and negative ideas here. The negative idea is a company called Casey's General Stores. If Paul, do you know

this company? I do not yeah, so I didn't either until we started talking about this thing with our coverage. It's a Midwest convenience store, and yeah, we see them as basically being at risk of the general economic outlook and if we see slowing consumers, training down, et cetera, that this is a this is a risk to earnings estimates through this year. The other three that play on the opposite side of the consumer one is Alta Beauty, which is beauty shops across the US. Another is Gap stores.

We all know Gap, and the third is Sketchers those that have very companies exactly company shoes. They all have really company specific element to it. So the Gap is a restructuring story. They've already proved what they can do with Banana Republic, and we think that's a blueprint for the Gap itself. An old Navy is actually half the business and there they had a merchandise in issue last year. It's been corrected, there's a new CEO coming in. There's

a lot of cool stuff happening. Alta Beauty is all about going back to the office and getting back out post pandemic, and people want to look nice and their sales strands, we think are still underestimated, and Sketchers is expanding globally. They've got news distribution centers coming in Canada, in India, they've spent money on technology that's travling a

loyalty program, and again we think there's upside estimates. So Tim, a lot of these names, as you mentioned for the US stock picks, are kind of centered on the consumer. What is really that bi's call on the consumer here? I mean, we've got pretty much full employment, but man, there's a lot of headwinds out there for the consumers

relates to inflation and other things. Yeah, I mean, you're right, there is a there's a I think there's generally a worry that you've got high inflation, negative impact disposable income. If you don't have something special about your story, you are at risk to to discretionary income being impacted over the course of the year. And how much better can it get with employment being as low as it is.

And if housing comes under some stress with higher interest rates, that has you know, another sort of different layer of pressure on what could be consumer spending. So you know, we look for example like these three, but there's others where there's something that's different beyond just simply the economic call. Right, all right, let's let's go over to Europe here for our friends over there. What are some of the names that kind of jump out to you guys there? So,

so a couple here. One You're gonna think I'm crazy at first. I'm going to name him a bank Eba Banko bill val. This is one of the big Spanish banks, but importantly a chunk of their businesses in Mexico where loan growth is actually quite healthy. Another chunk is in Spain. Didn't that interest margins are improving with higher interest rates, basic bank story, and we think all of that is good.

But everybody seems to be focused on Turkey because they do have a Turkish business and there's geopolitical risk there, etc. And with that, it's only now sudden percent of their business. It's smaller and smaller. We don't think it's a worry, and we think it market's too focused on it and not focused enough on the good part, So that we think is underappreciated. Tap Gemini, big global IT service company. It's focused on big strategic transformations. It's not that parculically

exposed to troubles and technology and worries there. So we think that's well positioned. And the other is best thoughts, which if you're in to clean it energy, energy transition. This is one of the leading wind turbine producers globally. And you know, you think about the Inflation Reduction Act, which is really a energy transition bill. And in Europe there's this similar sort of big government initiative and push that's all going to drive business too. We think best

us it's gotten sorry to say, a tailwind. Ye. So all right, all right, thirty seconds, Tim Asia, what do you guys have from there? It's all about China's reopening, think about Hong Kong ex changes, rising, set of IPOs coming. You and I have talked plenty about Laili Baba over time, expliting in the sixth repatriation of tech listenings in the US to Hong Kong and China. That's all the Hong Kong ex changes favor. And AIA is an insurance company.

But you have mainland Chinese that are starting to travel, they go to Hong Kong, they buy new insurance policies as a as a offshore savings mechanism. Good for AI AIA, interesting stuff, all right, Tim, you're based in London. You live in London. How are things on the street of London these days? Packed? Busy crazy? You'd never know that there's any issue. Yeah, it feels good and it's starting

to be spring. All right, that's good stuff because it's here in New York, it's it's we're not quite back, you know. It's a kind of that issue about getting people back in your office. But I understand it's a little bit better in London. Tim Craighead joined us. We appreciate getting a couple of minutes of his time. He is the research director for Bloomberg Intelligence over in London, running that business over there with our good friend Sam Fazzelli.

He's also a macro strategist, kind of given us some good strategies, some good ideas with some catalysts. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three on Falsewhinee. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radient