Surveillance: Citi Picks Fraser To Be Next CEO

were you surprised by this announcement? Uh, there's always a surprise when you have a change of leadership of this magnitude. And it is historic because we have a world class executive, a woman taking over one of the largest banks in the world. Uh, this is exciting. She's got a stellar resume. Um what Jane Fraser, She's a known entity. So you know,

City internally is not a troubled bank. But Tom and all our conversations, of course, with the impact of COVID nineteen, you know, banks are just fighting their way up in terms of the troubled consumer market. Before Paul jumps in here in the short time, was Mr Corbett forced out. I don't have insight into that. Um. You know, clearly we've seen difficulty in terms of cities performance, especially in the consumer area, which is one of the strengths of

Jane Fraser. Additionally, you know, for investors looking at share price movement, City has come back from its more slows, but it's really been about around fifty dos UM. You know, we think that's an opportunity. Really it's not Michael Corbett's fault. But there's two factors that drive City's outlook and why we have a by recommendation. The US economy going back to a normal market gained City for credit cards, and City, unlike any other large US bank, is a global play

on strength in Southeast Asia or Latin America. Those markets come back, cities going to outperform. What Jane Fraser brings to the table was CEO in both Southeast Asia and Latin America. So I think the board is thinking about we've got a tough road over the next six months, trying to get back to a new normal, and Jane Fraser has skill sets to bring on a new generation of leadership. Ken, what do you think the top of

Jane Fraser's to do list here. I think it's bringing greater integration of the businesses, particularly on the consumer side, which should be easy for her. We just haven't seen um strength across the board, and consumer for example, appears like JP Morrigan, Bank of America, Morgan Stanley very strong in wealth management. City really hasn't put a strategy and a business together to compete with that, and that's a big growth opportunity for City. Secondly, obviously there's a sensitivity

to regulation, but risk taking. Where do you want to take risk is at the capital markets, it's looking at specific areas of commercial loans or possibly do you want to make an acquisition in the US? Do you know as large as City is only in like four states New York, Florida, California, and they're in South Dakota because that's where they do all their credit card processing. So ken one. Obviously, the key issues with this announcement is it's a the first woman to the top of a

major globe investment bank. This is your sense of how Wall Street or financial services, of these sectors that you cover, how are they doing on diversity? From your perspective, they'd be getting a lot of pushback for many, many years I think it's top of lists for the whole industry, and um, we have certainly seen examples of it, but there's more that can be done. And when you think of the C suite where the major decisions are made for an entire enterprise or bank, UM, this is a

great step. I think we're going to see more of this again. Look at we're talking to. Jane Fraser was the Mackenzie partner. She was at Goldman Sachs, m and A. She's covered the globe for city with the experiences I've mentioned, and she's a senior leader today. What a terrific opportunity for city to have her leads to Bank and Trump. I don't want to interrupt you. We're gonna rune out of time here again, Lean and thank you so much for coming out in short notice. Did they make this

change because they were rate a losen er? I mean, is this no different than the starting pitcher for the New York mets. Well, given the current environment and what needs to be done for city, that reminds me of an interview of this founder of Netflix, which is who is right for the times we have and where we're going to lead? So I think after eight years Mike Corbit, you know he was basically City was a punching bag six eight years ago, not able to make the bank

stress US. Bottom line is I think there's a smart move by the board and Michael Corbett's and gentleman and did a great job. Ken Leon, thank you so much. On short notice. Just a beautiful overlay, folks. Is that we love to do on Bloomberg surveillance. We get perspective from Carston. Rescue were thrilled that he could join us. UH this morning, Carston, good morning, Good morning, Tom good

wonderful to have you with us. I guess it's as expected, but there was the money question right away on euro and this goes down to the need for continental and global trade for Europe to hold up the economy. Can world trade save the day for Europe? I think this is this time around, it's not going to be global trying saying the European economy when I have to come from from domestic demand, and that there are still so many problems out there outside of the yuro y'ar, look

at the US, look at the U k UM. So this is I think why we also heard luck Guard only talking about the impact on inflation. She didn't mention the euro as a concern for the e CP. S Glow tut, look, look, excuse me. Of course it is the growth outlook. But to me, as I mentioned Paul Sweeney, it's sort of a euro that wants to have it both ways or guarding against weak tempered economic growth. And yet they're trying to set the template for higher inflation.

Did that surprise you that they were so specific about an inflation to come in two thousand one? Um, No, because we have so many say, distortions in two thousand twenty one, don't don't forget. We have the reversal of the German v A reduction this year, so that's going to be reversed Enuary next year. So we should push up the inflation forecast. We we we had the so we have to the all pure and price development. Myself,

I was not too concerned. What struck me was more the fact that the two thousand two inflation forecasts remained unchanged at one point um there. If you just would apply the technical assumption like the ECP does with with the stronger Europe, it should have normally pushed out the inflation production and then this is well what is it did the odd thing here? So the the you're not mentioned as a downside risk for growth, only mentioned as

a dampening factor for inflation. So the ECB is indeed still try treating carefully and probably asked to keep some vocal or verbal iman via left. Well you taking notes on what you just said because I got lost about it halfway through. We're about to a one nineteen on euro Paul, absolutely, so Carson, just give us a sense of what you think the ECB is likely to do over the next six to twelve months. What do you

think is going to be their strategy here? Strategy here is that having another one or two months in the verbal intervention right that guard is trying to currently and then towards the end of the year, I would still see an increase in the indecuity program b be it an increase of the PEPT program so the pandemic quity, or it could actually eas be reverting back to the old Q program which is currently this twenty billion per months um so, but there will be so in order

to ensure that the ECB will be actively purchasing bonds at least until the two one and not as currently unvisited on until it's two Carston, thank you so much. Carston Braski with his chief economist, with Iron G. Ken Hartman runs Wells Fargo Asset Management, their chief investment officer. And within that he writes notes and they're, you know, they're sort of short. They're like the way a C. I over you know, writes ball, you know, like short's not like a forty two page themistic ring. And he

absolutely nails in paragraph too. What all of us have to focus on, which is the G and the R and the bottom line is with this fiscal ginormity that we're doing kennon Good Morning, is we've got to get the growth rate to sustain above some form of interest rate. Discussed that, well, it's very important that the growth rate is above the real rate of interest. UM. It's the way we can grow out of our debt problem. So the feed is very um focused on keeping the real

rate very low so we can grow our way out. UM. The problem will be whether that in fact will happen. And then the other thing that I'm very interested in is if it does happen, do we then get inflation? This is really important and Paul I have to apologize. I was out front on Kennerley and will join us in a bit with Michael Corbett. So I sent apologies to Kirk, and you know, Kirk, as Paul knows, I'm not focused because the Red Sox have the worst record

in the American League. Paul, save me, I will save your tom so Kirk. It's interesting here we're hearing Madame Legard this morning again UM mentioning kind of the need to keep liquidity into the market place. What do you think the read through will be, uh for the US Federal Reserve is a parse kind of what they're hearing out of the our European friends today. Well, I think the Federal reservedly very pleased to see that. Um. They're following in ing with the Federal Reserve, and just the

amount of stimulus is enormous. The money supply in the U S. Euro over year is up or more. And UM, I think that they will be very pleased to see that. Pleased enough uh that Again, I think the Fed has done each job. I think most market participants would say they were early, they were firm, They message very clearly their intent. Now I are turning back to Washington, d d C. And there's much less clarity coming out of

Washington as it relates to stimulus. How do you think, Uh, those in Congress that are pointing to more stimulus may think about it given what we're seeing out of Europe and out of the US, Well, we clearly need more fiscal stimulus. The central banks are so to speak, pretty much out of AMMO. So I think the things that we're all watching is, you know, can that continue? Um. The other thing I think that we're all focused on, obviously is whether there's going to be a second way,

so to speak, of the virus. And you know, I'm very concerned, as is everyone about the winner. So you know, we'll have to see how this plays out. But this goal stimulus is very important. This is really important. Kirk Folks I mentioned this earlier on television, very icon Green

writing for Project Syndicate. I put it on Twitter. This is, of course the economic historian of the University of Berkeley and used to California at Berkeley, and Kirk he absolutely agrees with you that we're going into a period that maybe will not be is medically traumatic, but will be economically traumatic than what we've seen in the past six months. How is Wells Fargo stealed for that. In investment management, Well,

I think you have to be cautious here. Clearly, Uh, the markets are are betting on a very strong recovery in and um I think it's prew them to head your better bit. The thing that's very interesting me is the disparity between growth and value. I've never seen uh, this disparity before. You have a growth it's ahead of value. Value, you know, is down nine on the large caps and growth is up something like so on a lot of these mega techniques. So I think that gap has to close.

So my view would be I'd be cautious about the mega text. I think they've had their run. They obviously will do well in a low rate environment because they've got good earning streams. But to really see these markets sustain and continue to move, you've got to see the value sectors come back. So, Kirk, again we talk about the big tech names driving this market, and you know, some market participants, namely myself among them, are concerned about

the lack of breath within the equity market. How concerned are you about that? Or can we just shrug it off given where we are in terms of low interest rates, Well, I don't think you can shrug it off. And what we're looking at is other areas of growth. So I think there's a little bit of a misunderstanding that it's

only the mega tech names. There are a lot of other good growth names and uh, you know many of your guests that come on the program, So there are many other um uh companies that have good growth and they aren't necessarily the mega growth And that's where we're really looking at all. Right, So, Kirk, if someone's in the triple all leverage cash funds and and they're looking to kind of wedge themselves into the market, here, where should they be looking. Well, I looked internationally. I think

what's very interesting is the dollar. And my view is the dollar and it already has a starting to weaken. So I think there are a lot of opportunities internationally. Uh. Anytime you see a mess, you want to look at that. So I think Europe right now is a bit of a mess. And I think that uh, Europe has value. UM, I think that Asia has value. You've seen China rebound, so um, you know we will get through this, and um, I think you want to look internationally. That's fascinating to me.

Let's let's let's let's call it this. I mean, Nestley is first of all out of Switzerland, so it's in some ways not Europe, and it's amazing the discount. Kirk Hartman of the Pe of Nestley called up twenty five ish versus so many of its equivalences here at thirty ish. I mean that it's tangible, isn't it? Well, very much so. And if you look at the PE ratios of Europe or Asia versus the US, it's a lot less. So um. Again,

that gets to I look at two things. I think the growth of value gap is going to close, and I think that with a weaker dollar, Europe and Asia have value. Interesting Kirk, I mean, would you go so far as to consider emerging markets? I know there's a lot of discussion around when people should really start taking a look there. Well, emerging markets, UH are very much dependent on China, and I think China got the message that they can't depend for a lot of reasons on

the US supply chain. So um, what's interesting to media is China is really diversifying. You look at the companies in Korea and Japan and Taiwan. And it's very clear that China is going to build its own semi conductor industry and chips, and that's why I would look to value is the extended UH periphery outside of UH Japan. Excuse me, China, Okay. Kirk Hartman with US Folks. We gotta let him go or that market will go down. Kirk Hartman with Wells Fargo, thank you. Right now, we

want to get to this important interview. The Johnson family runs Fidelity and they've always done inspired hiring around the street to bring in the troops with the Boston Bread. They did that two years ago with Vadim Zlotnikov, who was definitive in Alliance Bernstein. If you were on the street, you had to read the quantitative and market UH letters and research pieces from Mrs Slatnikov. He joins US now with Fidelity, their institutional asset management president, voting. The rules

have changed. Fidelities lived at, Schwab's lived at. Everybody I'll has lived it. I want you to first discuss the overtrading disease we are we have right now. Are you in Fidelity facilitating and overtrading disease that will lead to

losses and ill return. Look, Fidelity has always been about long term and and you know as well as I do, of the investment outcomes comes from the underlying product design, not from the trading, and the emphasis has always been on making sure you have the appropriate product design to achieve the particular investment goals. Very importantly in your heritage, and this goes back to the great Paul Handros as well.

Fidelity is at a mandate to be on perspectus what is working right now in terms of total return, narrow on perspective investment or are more broader tone. The last ten years have been very much about a very narrow market ut product that emphasized US at the expense of international equities has delivered very very strong results. The key

issue is is this going to change? And we believe that it will, and that there are a number of drivers that are conspiring to argue for significantly greater degree of diversification as we move forward. That is going to be we believe, a critical decision. And just to be absolutely clear, I'm not speaking on behalf of Fidelity, but rather on the on behalf of my group and the

economic research team that developed the paper. But they built on that a little bit and move away from the sixty forty because it's the forty that it's got a ton of attention in the last month or so. Can you speak to that, Dame, Absolutely. So. Look, one of the basic premises we have is that you want to invest in the basis of something that is at least

noble or at least very likely about the future. And the one thing that is very likely is that the levels of death in the economy relative to GDP are going to continue to escalate. Demographics, policy, everything is inspiring to make it happen. The issue is, and this is where really the big question is, is that going to drive inflation? And we believe it will. That is a

huge departure from where we've been in the past. Not only will it drive inflation, it will also alter the type of assets that are likely to under outperform in that environment. Okay, so what's likely to outperform? So there

are a number of things. So, first of all, one of the interesting things, if you look back at before even two thousand three, luxury goods had the same essential inflation as the CPI following two thousand three, and if you remember the aspirational consumer using your house is getting account. All of those cliches that we've had drove massive inflation

and luxury goods. We likewise we've seen asset inflation. The future inflation is going to be somewhat driven by the policy, for example, to the extent we start to see policies aimed at wealth redistribution, narrowing the income inequality gap. Many of the areas that have high elasticity to the lower and consumer spending are likely to see inflation. They've been left for dead their undervalue, and we do think some of those could I'll perform over a long term. This

is not a one year forecast about him. This will be a question for you an alliance. Burnstand certainly with you a serious money at fidelity. When we read about the gamma, well, when we read about the nastack, well, when we read about fancy derivative strategies, it it destroys trust on the street. How do we regain the trust on the street if everybody's trying to outdo Soft Bank

of Japan. Yeah, look, there there will always be investors that are interested in shorter horizon trading that believe they might have a point of view on things like gamma or delta. Honestly that that is a relatively small minority. I do see, you know it is happening. It is I think a function of significant liquidity if we've seen in the mark it as well as well as low interest rates, so there is a propensive Just try to seek out incremental investments. I really want to keep coming

back to the point. If you really believe the statement that eighteent of your outcome is about product design, that's where people should spend eight of their time. I just got an email in All anybody wants to know is how does will dan Off do it? What's the dan Off message that has made Contra Fund do that for all these years? Hard work and natural talents, those those are generally pretty good recipe for our success. He's done

a remarkable job. It's truly truly aspiring. I believe it's his thirty a year of fidelity this year, so it's it's it's been a remarkable run. It's been a remarkable run. I want you to take us back to George Vanderheid and Jeff Finnick and the rest of them, who from time to time would make bets in the bond markets. Are your equity guys using zero coupon bonds and such to make big bets now on fixed income or is that from the past. I think it's mostly from the past.

I think, look there there are so many products of fidelity. There may be somebody doing uh investing in some pot but no, that's within the group that I run, which is really what I'm most familiar with. We we don't do that now, which it's mostly multi asset products, balanced products that aimed at satisfying a particular investment outcome, particular regulatory requirement, particular tax requirement, with a fantastic to catch up, going to see you again, but names at a cuff

that vitality, institutional asset management. President. We move on to the depression of Washington. We can always do that with Henrietta treys Veda, Partners Director of Economic Policy Research. I guess the battle over the stimulus, Henriette is sort of like the Boston Red Sox. It's not going well. My major question is there's a huge perception among our guests of the urgency for Washington to act. Does Wash you didn't have any of that urgency? No, they really don't.

Um you can see that as far back is July thirty one, when the unemployment insurance benefits expired, and nothing has changed since we passed the August eighth date with the p p P And here we are over a month after that event even and we don't have a bill that can pass the Senate, even with just the Republican conference. So today there's a vote scheduled and we'll see if it actually happens, but it will fail, and we'll see what happens after that. Not much is my expectation.

What are the consequences of no stimulus bill? Unfortunately, the consequences for the Republican Party and the Democratic Party are good for the political side, bad obviously for the state of further stimulus and the potential for more unemployment checks and other fiscal stimulus for the investors or markets um. But for both parties, I see benefits on the political side.

For Republicans, they get to get back to their roots buck Speaker Pelosi, which is always a good time UM and appease their conservative base who's deficit conscious and doesn't want to stimulate the economy with another two trillion dollar package, which is what this eventually would have to kind of be on the Democrats side. They can say Republicans aren't

understating the severity of the crisis. President Trump's off, you know, talking to Bob Woodward instead of actually engaging on the coronavirus. It suits their narrative going into the election, and then they can pass a massive stimulus under Biden if he wins the administration in the first quarter. Um. That's what we've heard from them for a while now, and that's what I expect will ultimately come to pass. Henrietta, why are there so many, you know, citizens of the U

s A undecided who they'll will for in November? Is this because they have questions on policies or something else? Um? I think that's interesting. There's a lot of late deciders. We definitely see that every cycle. What I would focus on right now is the fact that this cycle is different from that. Instead of the independence who make up those undecided voters but going for Trump at the end of the day three to one, they're now going for

Joe Biden. So the undecided sliver has shrunk to about six percent of the population of the overall piece of the pie that is independent voters. Three to one, they're going to president to Vice President Biden, so that really votes poorly for President Trump. That's where elections are made, whether you're in a swing state, UM or nationwide. And that's I think why you're seeing the Biden polls nation nationally come in at plus seven plus eight, plus nine

plus ten. It's because he's already captured those independent voters. So even if President Trump were able to win fifty of the remaining undecided, he would still lose the race, including the battlegrounds. UM. So the Biden team feels pretty

good about that. I think the Republicans are reading that and saying, we really need to dig in, make sure we don't pass another two trillion dollar stimulus package and look like tax and spend Democrats, and we can go into the selection at least with our base galvanized, which was not what they had in late March after they passed the Cares Act. So this is full you know, cover your butt mode and campaign cycles. UM. And does the undecided voter than I mean, are they easier to

get their minds to be changed from now until November? UM? The undecided voter is probably not particularly politically engaged. So all of this news cycle stuff you're seeing about wood Word or Dr Fauci or UM, what's going on with President Trump and his Nobel Peace Prize yesterday. All that stuff is really going to play in UM. I would say,

like the second and third week of October. Oftentimes, that last remaining eighth of the population decides how they're going to break in the last seven days of the election. So we'll really see. I imagine there will be a couple more news cycles before then, maybe like fifty more news cycles between now and then UM, and they're going to really make their decision at the very last minute. You would assume that the economy was going to make

their decision for them UM. So the administration will try to play up the next month's unemployment data UM. Democrats will try to focus on the coronavirus and try to really hammer members home, those voters home with UM, just pounding them with ads. And that's where you look at how much cash on hand does the Biden campaign have versus Trump. Obviously, Joe Biden had a record breaking hall last month. We'll see if you can keep that up.

And he's UM in a very good place to essentially convince those last minute voters at the last minute in those battlegrounds, Henry had a quickly here, what ads work? Do TV ads work? Or we finally be on that where it's all digital all the time. Digital ads are definitely where the Trump administration is. You've seen them focus on that. They almost exclusively go to Facebook now and they ignore all the polling data and aggressively saying that's

not even what you should be watching. Just go straight to Facebook. See what the enthusiasm is. That's where we're going to get our base. That's where we're going to turn out. There are more um, non voting white individuals in the United States that didn't even turn out. Facebook is telling us that, So we're just going to focus on advertising and Facebook. On the Democrats side, you see a much more um even hyperlocalized type of ad where

they are working through individual text messages. They have a robust grassroots game dealing with that. The Act Blue app obviously helps with that, but they're also doing the generic TV ads, specially pounding Trump in those um swing STAPs. Hand it's been right, great brief. Thank you so much handing in the trays with us with Veda Partners. Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio