Surveillance: Earnings Amid Inflation Worries

their chief strategies. Seema, you are decidedly half full. What do they half empty? People that the gloom crew, what do they get wrong? I think I'm really concerned about the fly shortages. Of course, I think the market is really prev and now it's quite looking for the companies which are we're looking away from the company which are particularly vulnerable. And I think there's a lot of concerns

about growth. You know, growth is stoning, but it's still pretty solid um and that should be enough to carry us through. And certainly for risk assets, it's still a supportive environment. When I look at the supportive environment here and we saw the supportive environment from JP Morgan, what will you look at for us forward tone that will lead to supportive What do you want to hear on

those animals conference calls? Yeah? So I think for the banks, um, it's going to be a little bit different, right because they are going to be less vulnerable to some of the supply bottle necks that we that we've been worried about. They're less vulnerable to the energy prices. So what we want to see from them is how do they see the consumer panning out? Now the good thing for the consumer is a little bit of a negative for banks,

So that's the thing that we need to watch. But generally from earning seasons, we want to know what their guidance is on profit margins. So how are they dealing with that? Are they starting to be concerned about wage pressures or is it something that they can write through or in additionally, do they feel like they've got enough pricing power to pass us onto consumers? So those are

the new since that we can be watching for. What I have to say, I think we're expecting a pretty solid earning season um and going into one it's just about maybe slightly more challenging environments, but still pretty solid. So the idea that Apple are reportedly by Bloomberg yesterday it was going to cut productions significantly because of the chip shortage, that it has not rippled through markets more.

Does that indicate to you that we've already priced in all potential supply chain disruptions and that from here you only have upside in terms of those pressures facing certain companies. I think that there's definitely element of that. I think the market has knows so much about the supply chain issue then know that it's going to last until two

They've made that adjustment in terms of expectations. And on top of that, you know, we all hate the word transitory, but maybe some of these these problems for Apple are likely to be transitory. This is just for so you know, we should see them picking up some of those games again once the supply shortages are finished. So is SEMA.

Are you against a big tech at this point, because you do you see the pressure upwards and yields and this idea that you're going to continue to see a further correction there or do you think that it's time to go back because they have suffered the most over the past month and a half. Yeah, we are definitely still supportive for big cap tech, make cap tech, and the reason is that, yes, it's been a slightly challenging environment with deals, but we do think that that's near

the top, right. We don't see that much additional movement here from here on which is going to be particularly steep or disruptive. And then just generally for big cap tech, yes, there are supply change shortages which will impact them, but the overall longer term demand is still really strong and you know, as we said, the environment is getting slightly

more challenging. This is a time when you want balance sheet You want the big profit margins, the companies that have the power to deal with some of those maybe margin pressures which can be facing the economy in the next year or so. Sema, thank you. We have to leave in their fantastic to catch up with you out of London. As always Semi Shada, A principal Global Investors, Yeah, this time is always different. As bank earnings, you bring

in Allison Williams, little big Intelligence senior bank analysts. Alison, I want you to explain what Fortress JP Morgan looks like. These are ratios you and I never studied. We never framed tangible equity. The profitability seems overwhelming. Can it endure? Well, some of it can. I would say that the two big surprises that we got this quarter are are similar to the drivers of positive surprises in recent quarters, and

that's the investment bank and the reserve releases. So the reserve releases are something that really helps the bottom line this year, hurt the bottom line last year, and so obviously that's that's something that's not sustainable. The Global Investment Bank continues to surprise to the upside this quarter. It's really equities UM. Trading revenue growth very strong UM, advi issory fees a new record UM. So so those are key positives. I really set the bar ahead of Goldman

and Morgan Stanley tomorrow, but not interest income. That's the key UM metric that investors are focusing on this quarter. So for JP, Morgan came in banging line UM, which is a bit neutral. But what investors are going to be digging into our what are the prospects for loan growth UM that can give us a little lift going forward. And so I would say there's enough there to sort of feed the optimism, but UM, but you know, nothing over the top. So signs of green shoots is what

we're hearing from JP Morgan. We've heard that from Wells Fargo, UM and and so some positives there, but I think needs to get a little bit better Ellison. Broadly, this is being taken as a positive for the economic story as well as for other banks. And yet the advisory fees, I want to really hone in on that the idea

that they hit a record. Could this be taking some of the business of the market share away from the likes of Morgan Stanley or is the market right to shrug this off and says it's just basically a green light for advisory businesses all across the street. I think for M and A it is definitely the ladder. I mean, I think it's going to be a great quarter for all the banks. You know, the equity trading side of things, I think is where you might be seeing a little

bit more market shift, but equity advisory fees. And we saw this from Jeffrey's earlier this month. You know, last quarter was was a record for Jeffreys. They this quarter a new record. UM JP Morgan, you know, triple what we were a year ago. That's not that impressive given it was a week year ago, but sizeable growth from

last quarter. And we do think that the fundamentals are there for JP Morgan and for the bank's broadly UM to continue this sort of record setting M and A piece and listen for people in the audience right now who aren't familiar with the way these earnings to deliver it. On the front page, the first page, you get Jamie Timonds comments down the right side of that page at the bottom, there is this common here. This quarter, we became the first bank to have branches in all of

the lower forty eight states. Now that's not news, Allison, but we know there's been a big push here to expand from the likes of JP Morgan and others. What's the effort here, what's behind it and how important is it? It is important, and this is a multi year plan that's taking place at JP Morgan, similar at Bank of America. They're already significant across the country, but you know, rounding

out their footprint, if you will. And so while there's a lot of focus for banks on technology and the digital side of things, that's that's really been sort of a boon to the bottom line UM and increasingly focusing on the top line UM. They are building branches in new markets, and you know the banks are the global banks, the biggest banks back American JP Morgan winning share where they want and we think this sort of comes back

to UM. You know the level of technology investments that that sort of helps them be more efficient broadly UM, as well as you know, seeking out these new markets. Annison, thank you as always Annison Williams JP moking up by six tenths of one percent. A whole host of banks are pulling agnis tomorrow and that's a government on Friday. This is an important conversation. One of the great moments

of Bloomberg surveillance. John Farrell was there as well with for Instant Laqua was Kenneth Rogoff and Joseph Stiglets on set with us in Davos. It was a trenchant moment in World Bank I m F history. We are honored today to have Laureate Stiglets with us from Columbia University

to sketch out the uproar in Washington over data integrity. Joe, I thought you covered so much ground in your project Syndicate s A in your defense of the managing director of the I m F The question seems to be, if we're gonna do data, try to to data that's not politically tinged. Have these meetings in these institutions that you worked at, have they become too political? Well, there's

always going to be a political element. Uh. The report that was the subject of all this controversy was the Doing Business Report, and that was a report that was always problematic. In fact, just a decade ago I testified to Congress about why that was a bad report and ought to be uh a scrapped. Uh. They said that doing business meant doing well, and that meant not treating your workers well, weakening labor market protections, lowering corporate income tax.

My view was progressive taxation, finances infrastructure, and that makes anyfication makes for his funder economy. So you're absolutely right. If you're going to have data, make sure that, by its very nature it's not a political database. Joe Stiglers, do you believe that Dr Georgieva wherever follows on from David mal Pass at the World Bank? Will they be tinged by this? Is she does she have too much baggage now to do her job for the remaining three years?

Absolutely not. In fact, if you look closely at what she did. She stood up for data integrity. What she said is, we're not going to monkey with the methodology. She instructed her staff to make sure the data is right, do exactly what I would have done if I were in a position. Uh. And it turned out that when they looked at the data, there were some rounding errors

they suggested of things, and the difference. This whole controversy is about whether China was an eighty third or seventy five in the ranking, and that difference is not statistically significant. It's basically a tie. So and what they said was our data confirmed what we said before we the literal adjustment. What they should have done is explained the lack of statistical significance to this difference between seventy five and Professor Stiglett's.

There's a broader story here of increasing politicization of central bankers in general, of some of the financial authorities around the world. And I speak about this with the Federal Reserve in particular, Randy Quarrel stepping down as the vice chair of supervision. How much does this weaken the role of the likes of the Federal Reserve going forward? At a time when they are more pivotal than ever to markets. You cannot remove our regulatory authorities from the political context.

You know, we had a crisis in two thousand eights. Some people seem to have forgotten that, and one side of our political spectrum says it didn't occur, uh and we ought to uh deregulate. The other side says, two thousand eight actually occurred. It occurred because we did not have adequate regulation, and we need to maintain a strong regulatory framework. That has become political, but it's also the essence of economics, and the same thing goes for climate change.

Climate risk is a financial risk. Countries all over the world have recognized it, but in the United States we seem not to have fully taken this on board. And I'm very concerned that the Chairman of the Federal Reserve has not taken on board the real risks associated with climate change to our financial system, to our banking system. Professor, what do you say to the accusation that your own thoughts might be shaped by around politics. I'm reading the

project Syndicate Pace. You defend the Mountains director of the IMF, but you raised the issues with the World Bank President David Malpass, which of course was supported by the former administration. You're now going after the chairman of the Federal Reserve, which of course was nominated by Republicans. What would you say, bank to people that set your own views, Shank, buy your own personal politics. Well, I mean, obviously I'm uh.

The issues we we're talking about regulation, uh, climate change are issues I feel very deeply about. But they're also economic issues. Uh. In the case of David Malpass, Bloomberg itself exposed the attempt of David Malpas to interfere with the methodology that was used in the Doing Business Report, a far graver concern than telling your staff to make

sure the numbers are right. And yet it is so strange that there has been no discussion about that intervention in the methodology of fire rap concern than uh, what she did when she was trying to maintain integrity of the data given the methodology. Professor, we appreciate your time, We always do. Thank you your contribution this morning. Judge Stiglitz there, the Columbia University professor and of course the novad laureate in Economic We had some technical difficulties with

Fatty bro a little bit earlier this hour. I understand we can catch up with him right now. The International Energy Agency executive director, fancy forgive me, we gotta cut this shot because we had some technical difficulties with you. But let's start right here. The energy transition is increasingly difficult right now worldwide because consumers are starting to see higher prices of fossil fuels. How compromises that transition at

the moment, sir, thank you. I think that might be misunderstanding or some people are trying to portrayed in a way as if the current market classes is the first classis of the clean energy transitions, and the current station with natural gas or oil or coal, it is not into the clean energy transitions. There are different fundamental drivers for that, and in my view, clean energy is not the cause, but the solution to this problem we have.

So therefore it is important to put this in a perspective. And the press of oil you were just talking about a few minutes ago. Today it is above eighty dollars. But today we the world consumes about ninety six million bullars per day, and only two thousand nineteen the world was consuming much higher hundred million bars per day of oil and the press was sixty dollars. So we cannot talk about the lack of investment to oil or other things.

There is enough oil in the in the world, but the high oil process must be a result of other things rather than the lack of capacity or lack of investments. As a representative both of the energy industry as well as a proponent of trying the transition to a cleaner energy future, do you think the price of oil should stay high, should go even higher to expedite the transition period.

I think the clrent pricess oil gas coal process are a serious challenge for the global economic recovery through higher inflation, and it's such a those process I would like to see as lower than they are now. But regardless of the process, a clean energy is coming very strongly. It is the electric cars, it is the the solar, it is the bed. Just today I just saw the electric cars. Says in China the largest car manufacturers, it is more than twenty percent of all the cars sold in China

are electric cars. Same in Europe. It is going to grow and it will end up I expect a big impact on the will demand. We shouldn't be fixated what is happening today in the markets as a result of the unsustainable economic recovery around the world. Just to get a bit beyond beyond this, and I expected the current climate policies of many governments from China to the United States, United States to Europe and others, we have significant implications

for the global energy markets. Fancy, we have to leave it there. We had to kind of show off some technical difficulties. Funny, please come back soon. We'll have a longer conversation on an important topic. Funny people that the II executive director. This is the Bloomberg Surveillance Podcast. Thanks for listening to and us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from

the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course on the terminal. I'm Tom Keane, and this is Bloomberg