>> "bloomberg surveillance." jonathan: good morning, i'm jonathan ferro lowell seida tom keene. u.s. -- tom: it was interesting to see this story in bloomberg and also in london under the telegraph. it was the shock of an outlet effort. -- in allied effort. jonathan: the u.s. and -- are now did in the targets. we were to dissent a clear message that the united states and our allies will not tolerate targets on our personnel. you wonder if this is a one-off or if there is more to come. tom: i hear more to come.

we will have norman roule with us in a moment. to have him with us with the cia experience, i think the brief will be timely about it. jonathan: let's go to the price action and look at the scores. in the equity market on the s&p, you would not have a clue anything is happening. we are down 1%. yields are going nowhere. crude is going somewhere. almost 75 on wti come up by 4%. brent crude, back into the 80's. tom: it is a jump here. on the terminal, look at the standard deviation distribution. you are getting there, i will say two or 83 on brent is much more of a strain to the present system. jonathan: is a busy finish to the week. starting with bank earnings, jp morgan, bank of america do at

6:45 a.m.. citi at 8:00. tom: marcus drummond at the new york yankees, that alone will get you going. have you ever seen three or four banks in space of 15 minutes? i don't recall that. they used to spread them out. jonathan: it often feels that way. tom: there is going to be a lot coming at you. what i find interesting are the partition between these big banks removed from the property market commercial real estate versus all of the other banks which in a week or two will just be -- will be just as important. jonathan: earnings season underway, 6:30 eastern you are going to hear from delta. cpi hotter than expected yesterday. this morning, ppi. we will break down those numbers with michael mckee and mohamed

el-erian. tom: the bottom line is if you take shelter out of the inflation report, you are -- that was the shelter to that lived there. it is really not all that bad. jonathan: you cannot something about the data and how the market responds to it. we often say look how bonds responded. what happened at the close? yields down, bonds rallied. tom: 1.80 is now a 1.72. to dip there, 1.69 would be a shock into the weekend. jonathan: thanks in the market pretty stable, things in the middle east, anything but. joining us now is norman roule, a senior u.s. official.

overnight and through this morning, was that a strike on pres. biden: rebels -- a strike on houthi rebels pressure on iran. norman: it was a strike against houthi rebels. it was part of a plan to have a slight escalatory approach in the region. it is unclear to the extent capabilities will be degraded. the houthis will likely calibrate attacks in discussion with iran to prevent a regime declining response. tom: the telegraph has a terse essay on the actual missiles the bloomberg -- the houthis have. i see a stereotype that this is a bunch of terrorists on a desert island. this is not the case. they have sophisticated

missiles. they have some missiles here of real capability, including asb ms. to be under mr. rate -- do we underestimated their sophistication? norman: no. it is a well-known fact that the houthis have acquired powerful missiles and they train from iran and in iran on those missiles to make them a people threats to the region. tom: what is the difference for our ships at sea in the red sea and outside the red sea? now that this attack has occurred, what is the new risk to our sailors? norman: the houthi are going to see what they have left, how many missiles. they still have a best drone fleet, drone boats, and enable

-- and naval mines. that does not mean we have taken out all of this capabilities. they can use those as long as the keep the nature of the attacks people the level that would cause a significant counterstrike. jonathan: this effort has been led by the u.s. and the view k -- and of the u.k.. what can we learn from the countries that were involved and the countries that weren't? norman: the united states and united kingdom are close partners and their intelligence authorities would have coordinated closely. we have involvement by bahrain and the european union. that does not meet these other countries were play different roles, but for their own political reasons, they cannot evolve themselves in the attack. the u.s. and u.k. had more than enough ordinance to undertake these activities. jonathan: can you take us into

riyadh and give us a deeper understanding of how saudi arabia will be understanding this moment? norman: saudi arabia has issued a muted response: for restraint from all parties. the saudis will probably be pushing a dramatic initiative -- a diplomatic initiative. the saudis have to recognize if the conflict were to escalate, it would impact their security issues and the international community has not shown much appetite for working against yemen. they have to be careful. if you are going to involve yourself in yemen, you have to be careful. the united states and europe have not -- that interest. tom: bahrain sandwich between kuwait and uva -- and uae and dubai, what is their relationship to the other arab states?

are they alone or are they acting with the support of the other arab nations? norman: there is no oppositions to all rent's activities -- to bahrain's activities. it shows leadership on abraham accords, to opposing what, stated on october 7 and its work with naval committee's. the naval command center is located in the region and the bahrain leadership is a reliable partner. tom: what is the level of our intelligence? you have been good at outlining how we know what we know, that is always the worry. do we have good intelligence after these attacks? norman: the nature of the attacks demonstrates a clear and good understanding of the locations from which attacks have taken place. we have infrared satellite

capability that according to reports allows us to understand from whence attacks develop -- attacks originate. i'm confident subsequent attacks will be good and assisted with the pass. jonathan: i wonder what you think about this, when you hear the houthi that all u.k. and u.s. interests are legitimate targets, what does that mean? norman: houthi rhetoric will remain defiant and strong but we are likely to see houthis attacks within their neighborhood. their reach is not far beyond that. they are going to want to calibrate this for their own domestic audience and the region as they move forward. getting another major missile response, particularly one aimed at their leadership. this response was technical. it was -- strategic.

it was not aimed at all houthi assets. the administration is doing this carefully. jonathan: the administration and london will have to -- this comes from rishi sunak describing the hits as necessary and proportionate after weeks of attacks. the electorate and domestically within the u.s. and the u.k. are going to be worried about their countries being drawn into this tension in the middle east. would you describe what we saw overnight this morning as a one-off or are we setting the stage for a repeat of this through the next few weeks? norman: the british prime minister's statement is accurate and crisply said. we hope it is a one-off but that is up to the houthis. we have to look if a cap strike will be some alok kumar mehta to show defiance or indicates they have not gotten the message. if the latter is the case, there

will be a broader strict by the u.s. it will be carefully calibrated. neither washington or london are interested in any all-out conflict. jonathan: you are comfortable that there is some distinction between iran and houthi rebels? a lot of people struggle with that. norman: in the u.s. statement, iran is not mentioned. any expedition of the attack and the problems, iran is always described as being behind the activity. iran will attempt to deliver new weapons to the houthis, but the naval capacity will likely prevent that. they provide counsel to the houthis as they move forward but that is the relationship between iran and the houthis. jonathan: norman roule there.

prude up by 4%, i would not call this a major move but we are back in the 80's on brent crude. tom: standard deviations, 82, 83 gets my attention. people say oil is searching. that is not the right word. jonathan: we are seeing business have to respond to this. the disruption in the red sea, first recite affect shipping -- first we saw it affect shipping. then we saw business on the ground. this from reuters tesla, partially holding work at a utility plant near berlin because suppliers have to shift transport channels off the back of this tension in red sea. tom: bloomberg intelligence had a lot of perspective yesterday. there is a big number on the disruption of the billions and billions of dollars. it is 10 to 11 days around the cape of good hope. it is longer. jonathan: we have a lot to get

through. we have to talk about bank earnings. ken leon reacting to bank earnings later. jp morgan, bank of america, wells fargo all do within the next half-hour. we have to talk about citibank, pvi -- ppi. tom: each of these stories are different and unique. leon and our team will slice that up. jonathan: here are this course on the s&p 500, equities pulling that a touch, yields higher by a single basis point. 3.98 on the 10 year end crude rallies, 4% on wti. $75 per barrel on brent. -- $75 per barrel and back in the 80's on brent. good morning. ♪

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>> i think march is probably too early in my estimation for a rich decline because i think we need to see more evidence. if the cpr report shows the job is not done yet and the fomc is committed to finishing the job of getting inflation back to our 2% target. the important thing to realize is that this inflation has been happening while the labor market conditions remain healthy. jonathan: that was cleveland fed president speaking with michael

mckee signaling a later fed cut that some of the markets may be anticipating. citi echoing some of is today. -- some of that today. the state of financial markets looks like this on s&p 500, heading toward a week of gains, just a touch lower. negative on the s&p 500. the bond market, yields higher bicycle basis point. prude on the move following airstrikes by the united states and the u.k., very close to 75 on wti. brent crude back in the 80's. $80 -- $80.40. tom: thank you to norman roule they with us. his expertise is valuable. i look at what michael mckee encompassed with the remaster -- beretta mr..

some initial expense to me how the fed can act before they see shelter come in. they have to wait to see the show directors turnaround. that is borderline religious. jonathan: march feels too early for you? tom: i want them to cut in january, but that is not the issue. they are after the fact and they have to wait to see shelter crack. jonathan: i think some people agree with you. whether they should be worried about the labor market, overall headline payroll growths look pretty decent. people would point to >> elsewhere but the overall number looks good. tom: we need more data to keep us going. this is an important interview now, we get out in front of bank earnings but also good markets with that experience. katrina dudley joins us. i love how you push against the

earnings going to be better than people expect idea. help us with that. our earnings going to be tepid and wide? katrina: if we look at expectations before the year, they are at 11% growth. that is either high rate of growth given the headwinds. we are talking about the full effect of interest rates coming through. you have talked about the strength in the labor market and that strength still is not reflected in corporate earnings because you are not releasing those wage increases come through. there are some of the pressures that we think mean the earnings growth is good to come in than the market expects. tom: we are modeled on a mid-single digit and there are also it's of people including gina martin adams making it clear we could see a nice surprise beginning with this morning's bank earnings. you are flat out pushing against that. katrina: we are. we think expectations are closer

to the double digits on my next growth. we think single digits would be one of those things where a ceo can get the proverbial tap on the back. we have a lot of headwinds to deal with. we think the markets are tepid. we don't think the ability to get pricing power is as strong in 2024 as you saw in 2022 and 2020 three when we had supply chain issues, shortages of product. the price mechanism is the way you offset these costs which we are not sure they can do that. jonathan: you have five surprises to start the year, i wonder if what is happening in the middle east is one of them. katrina: it isn't. we look at two to 23 and we already see escalation around the world in various pockets. this is just a continuation. one of our five surprises are not more tomorrow in the world. i hope for more less rush i hope

for less turmoil in the world because we are going to a cycle. one thing we did talk about is the election cycle. people are not focusing. here in the u.s., we know what is happening in november but people around the world are going to the ares -- are going to the polls. that is going to cause some turmoil. jonathan: are these idiosyncratic or is there a broad theme to these elections? katrina: in the u.s., there is a lot of reactionary policy. that is what we saw in 2023. we saw the u.s. come out with green policy and then europe updates its green policy. countries are realizing they are like miniature companies, they need to be competitive. they need policies that are competitive. as we go through an election cycle, we will have new policies coming out and that will change the world order. tom: i digress put it is in the ether.

that is not the death of esg but the readjustment of esg. speak for franklin templeton and all heritage mutual series, is esg forming into something new and different? katrina: esg is integral into the investment process. when i started my career 20 years ago, we were heavy on the g, holding companies accountable, looking at pay packages, making sure there is a linkage between corporate earnings. now we are focusing on environment. what do their products say, how well are they positioned on an infertile basis. we are looking at social, how it relates to their workforce. it is part of the analysis. it is no longer a separate category. tom: i am fascinated in what you and annmarie hordern see in an adjusted esg offer the enthusiasms of -- jonathan: most would agree on

the ultimate destination set by governments. we have some disagreements on how we get there. do you see companies moving too quickly than others? we saw -- dumping ev simply because the demand wasn't there. are there companies that are going too fast? katrina: when you think about when you're ready a car, you don't know the area you are going to. we need a technology that can help people map out charging stations. it is showing a gap in the market where we need to have the technology solution to support the kind of hard solution which is the ev reducing emissions. in terms of companies getting faster, you have to. you cannot be the last person firing down the coal-fired plant. jonathan: the conversations we are having in america are different than your petrochina, the ev reality checks we are getting.

do you hear any of this in europe? katrina: in europe in terms of esg, they are much more developed in terms of the narrative. you look at company reporting and the infrastructure, it is further along and a much more developed narrative. i think that is what is provided in the conversations. over in davos, you are going to be in the center of things. hearing what ceos are saying and what they're talking about as it relates to esg. that is where you are going to get a barometer. tom: i agree with katrina. when we were in london, i was unprepared with how green london is versus the american dialogue. that doesn't even speak to the continent of europe. katrina: london is much smaller obesity. that is one of the drivers of ev adoption because you know that there is not many kilometers.

tom: i have a tesla for sale. jonathan: the anxiety israel -- is real. tom: i am going to give credit to business insider. you rent a tesla from hert and you havez never driven any ev before? a lot of people were doing that. jonathan: katrina, good to see you. a busy 30 minutes coming up. thank earnings from jp morgan. gerard cassidy joining us in a few moments. we look ahead to more data this morning. ppi at 8:30 eastern time. from new york city, this is bloomberg. ♪ think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options.

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jonathan: earnings just around the corner, jp morgan and bank of america on deck. this course look like this on s&p 500, future slower, negative by 0.1%. heading toward a week of gains of the s&p, high by something like 1.8%. in bond market, 30 year, tension in the middle east. yields are higher by single basis point. 3.98 in 10 year. to see some of it in crude, back in the 80's on brent.

brent, $80.55, up by more than 4%. wti reclaiming 75. tom: is up there by standard deviations. it is a nice lift in price after the allied effort against the houthi. 82 to 83 gets my attention as far as more robust language. jonathan: let's get the latest under surveillance, escalating tensions in the middle east. the u.s. and u.k. watching more than 60 airstrikes on the houthi s in yemen. the president to saying the attack sent a clear message. the houthi has yet to respond. tom: we are learning. it is about the lead response but as well as bahrain representing the persian gulf. the prime minister earlier this morning, britain clearly alongside the u.s. we are not alone. jonathan: let's get to the quote from rishi sunak describing the

attacks as "limited, necessary, and percussion it." -- precautionate." tom: is the next one limited? norman roule making clear this was a tactical exercise and nonstrategic. you wonder of the risk of further technical attacks or responses and does a shift to becoming a more strategic effort against them? jonathan: i talked about how stec the calendar is just for this morning. the next 30 minutes, earnings from jp morgan, bank of america, wells fargo. citi later this morning. thanks stocks enjoying a bumping third quarter. almost 25% since october. tom: they are all going to come out within 20 minutes of each other and ache the worst 20 minutes in surveillance history.

jp morgan is going to undersell the profit machine it has done, even if it does layoffs or cost reductions. it is like we did not mean to make those tens of minutes of dollars. jonathan: and then raise the outlook. we have no idea if that happens anytime soon but we are about to get numbers from them together. the latest on blackrock, we have a deal buying obliterate structure partners for $12.5 billion. the infrastructure -- the acquisition is one of the biggest for blackrock. coming up later at 9:45, david westin sitting down with the ceos of blackrock and gid. tom: what is interesting here is infrastructure here, a big topic at davos. what is interesting here is the acquisition today of laurence

fink of get week airport. can we talk about the drive from the city at 4:00 p.m. to the airport? would you explain the la guardia of london? jonathan: if you europe in london -- if you grew up in london go to gatwick airport, it was like jfk on steroids. jonathan: you wonder how many people are bidding for -- tom: you wonder how many people are bidding for this. the sewers operation, you wonder if that is around the suez canal. we are going to try to get this in here at 6:33, gerard cassidy joins us. he is a large cap make analyst with decades of experience. what will the cost reductions be? i get their to come out and

manage that but 2024 beginning with this. to report a year of cost reductions for these major banks? gerard: i think there will be a focus on reducing costs. the banks are striving for positive operating beverage. the net interest revenue numbers will start the year on the weak side because of the margin pressure the banks are experiencing. we expect that to inflect in the second quarter. we do expect to see further announcements of downsizing of personnel. we have already has some announcements. pnc is an example. citigroup has a big restructuring going on. we expect to see more about reducing costs. tom: how is the digital banking battle? who is winning the digital bank worse? -- wars?

gerard: all of the digital banks have incredibly good products. when he think about the introduction of the iphone, it has transformed banking. especially on the consumer banking side. as we know, you can buy a very strong product offer the shelf which allows the smaller community banks to compete against the likes of gp america and jp morgan with the digital product. as you probably know, only a handful of transactions we do on a phone. you don't need to go through all the bells and whistles. it is like the old eob machines, we only used them to play with tapes and record even though they had all of those other bells and whistles. tom: that is such a fossil. he busted my chops. he knows you have no idea what we were talking about. jonathan: i was around for vhs.

jp morgan and bank of america around the corner. let's talk about how to navigate his numbers from bfa. the one-time items you are anticipating, the strength of the underlying business. what will you look for? gerard: we will exclude the one-time items. everybody is going to have the big ftse charge as -- fbi see as you might recall from last spring. it will come down to the core numbers and that will focus on two areas. within the fee revenue growth, with the big universal banks, we will be focused on the capital markets numbers, specially read through's for next week when morgan stanley and goldman report. jonathan: i am wondering why the pie has not been getting bigger, which bank has been getting a bigger slice of that pie? where are they relative to other banks? who is winning?

gerard: it appears bank of america issuing improvement of taking a better -- a bigger piece of the pie. it is difficult to get a handle on who has the better market shares. the numbers help us on the investment banking side because this will publicly report numbers -- because those are publicly reported numbers. the dominant players are goldman sachs, jpmorgan chase. we will see if bank of america or citi can creep up in their market share in that area. tom: you going to undersell their success? it is not a joke, i am serious when i say they almost have to apologize for their concentration and success down the income statement. is it the same or similar around this time with reporting -- same old same old around this time with reporting? gerard: they are going to be straightforward about what they're doing, the success they are having.

also putting out there not only making money for their shareholders but they are investing in their communities. the baking industry never receives credit for the amount of volunteer hours and money invested that they donate to communities around this country. it is a win for everybody when these banks produce strong numbers and they have been producing strong numbers. i expected today we will see some impressive numbers. tom: i said this from the day i walked in the door, we don't understand how big these people are. i added up an approximation of how many people added up, these four banks. 989,000 plus invoice -- plus employees. where is that statistic in five years? gerard: i think that number depending on how well they can grow will probably be flattened down because of the expectation

over the next five years of increased use of artificial intelligence to make the banks more efficient and profitable. nobody should expect those numbers to be down 20% or 30% because of technology. these companies are a people business. financial services is a high touch business. there is opportunity for digital banking. it is not a total elimination of the human touch which is an important part of breaking. jonathan: we have some numbers on just a moment from bank of america and wells fargo and citi. equity futures on the s&p 500 slightly negative, down by 0.2 percent. the tension in the middle east continues to build. crude is up 4%. $75 on wti. on brent crude, in the 80's. with us to pretend his numbers is sonali basak.

four big banks, four different stories. what are you looking for? sonali: can you imagine that capital one bustier was up 42% and bank of america up only 2%? tom: white? -- why? sonali: people are borrowing on their credit cards. tom: morning and has to, today. to he have to address concerns over -- not concerns or fears but a study of bank of america's liquidity and solvency position? brooke: -- sonali: he does not because bank of america has taken care of that problem over the last decade. you could argue that investors want bank of america to take on more risk. they have piled their balance sheet into bonds when yields were next to nothing. they have them in tied up, the

balance sheet history to rolloff and you are seeing maturity losses start to shrink as well as rates rise -- rates come down, rather. they want them to put that money to work. their average fungal score is higher than these riskier borrowers. does that mean they want them to let harder? i think this is a balance question of the banks, specially as to rise. how much risk are you willing to take on? tom: what happens in february? do we see announcements or is it drips and drive through the winter? sonali: we have seen stricter callings. jonathan:. brutal. sonali: it is absolutely brutal. we saw job because last year at the hope this year is the internet surround and keep more people on staff. you did see bank of america gain share in investment banking. they also make in the middle

market where a lot of banks don't have that white american footprint and deals have been faster. jonathan: we have been talking about banks the last 15 minutes and not mentioned last spring. have a love that all behind, the bank failures? sonali: yes. no in the sense that you will see the fdic charges, but the crisis people felt in march, they don't feel better now. we feel pain still and you see that in places like commercial real estate. do you see it in places like auto and credit cards that could get messy in coming quarters as we see that the link wednesday's are rising. tom: they all come out with different power points. what are the first things you look for? what is the first thing sonali basak goes to? sonali: we go to the returns. to comes down to the returns on equity. it is the best clean way to gauge the banks. tom: except for citigroup, big

double digit. sonali: for jp morgan. everybody else is wavering against the double digit number and it comes down to the costs. those returns cannot be gauged if you cannot keep costs under control. bank of america made that great move to increase their minimum-wage to $25 per person in the next year or so. they have a cost base, a big employee base they have to content to while managing bringing in more net income. tom: is 6:44 and we are waiting for four separate button pushes. sonali: who's fault is it? remember when bank of america came out at 5:45? tom: gerard cassidy remembers when there were carrier pigeons. the bird would fly from new york to boston with a big net. jonathan: we will be running

these numbers in the next five to 10 numbers -- 10 minutes. what you may go black rock? sonali: blackrock has been struggling to grow its alternatives business and to do it and infrastructure makes sense. their competition is brookfield. you wonder if they will day deeper into those other alternatives like private credit. tom: we had to careful here with the time. next we have to be careful here with the time. we will give you the banks when they come out. i've fascinated this is a bidding war -- i am fascinated that this has been a bidding war. everybody else must have been bidding as well. sonali: these alternative asset managers when i talk to folks in the market, they are all up for sale. tom: is that because money costs something? sonali: and scale matters. if you are not big enough, you're not invited to the party. jonathan: the push into the

private markets has been phenomenal. i want to bring back in gerard cassidy from rbc capital markets. private markets, qamar these guysdebank started to eat the lunching of the big guys on wall street? gerard: they have increase their competitive positions. many of the big banks that are regulated by the federal reserve, they have been deepest following -- derisked following the financial crisis. shadow banking industry has been around 40 years. it has taken over every large position of providing financing for companies in this country. it has intensified more recently. the banks are competitive but the private side has taken a leg up more recently. jonathan: let's get to those

numbers. the couple of one-time items in here you need to strip out. sonali basak getting a picture of what is dropping. we are down by 5%. sonali: they missed a lot on acquittal -- on a lot of critical figures. in trading were you've seen them punch above their weight, they did come in below estimates. importantly, they came below estimates on net interest income. this is what we have been talking about. their ability to bring in lending money at a time when you see consumer still borrowing. are people going to slow down borrowing activity if they feel overextended? the outlook for that is really important as we wait for further communication. provision for credit losses, while that came in below estimates, you did see charge-offs below estimates. blondes are starting this hour just a little bit more than what you'd expect. tom: as a generalization here,

return on average tangible common equity goes from a 15 to a 13 for bank of america. there is a key ratio. jonathan: let's sit on the tree numbers out of bank of america -- the trading numbers out of bankamerica. $3.75 billion. fic trading coming in at $2.1 billion. equities at $1.55 billion. what would you read into that? sonali: zero days of trading losses, that is great for a bank. prime services, the ability to service asset managers and funds is super competitive. goldman has been trying to eat away at everyone's share. watching how trading falls across the back will be important. how much risk are you willing to take on in this global market?

tom: bank of america, zero trading loss days in 2023. is that good or bad? i guess they are bragging about that, but does that mean they took no risk? sonali: you don't want to see these banks losing much money. to your point, at this point can you afford to lose a little bit of money? that is a big question here. it is a tough balance. we are living in a time when non-bank market members are getting a lot of share. citadel securities, we don't know what they look like full year. trading activity bounced back at the end of last year. bank of america's competitive positioning, we have to wait for everybody else's numbers. but you want to see if they are holding their ground. jonathan: wells fargo, a promise to those briefly. $24.8 billion. that stock is down by 2.6%.

jp morgan is up next. we will go through this piece by piece. we told you about trading revenue over it bankamerica, let's do that. equity sales and trading revenue, $1.78 billion. this comes in at $1.03 billion. there is a time to get through with jp morgan, just the early stock reaction, down 4%. what do you see? sonali: investment banking is not jumping back as quickly as anyone expects. even if dealmaking came back at the end of last year, you not seeing the bank clipped those fees yet from this activity. it takes a while for those fees to come in. equities also below estimates. this is another low place on wall street. that is a place where investors are expecting a prospect. data came in below -- above estimates, is it enough to offset elsewhere?

jp morgan at first glance are coming in above estimates for provisions. do they expect to be -- expect the environment to be weakening faster than investors expect? tom: this is not cfa institute work. book value up 16%, tangible book value up 18% at fortress diamond. jonathan: a bit of commentary from jamie dimon, the jp morgan ceo, raising higher than the markets expect. we have had this kind of warnings from jamie dimon over the last year. gerard cassidy has had time to go to these numbers. tons of numbers, wells fargo, bank of america, j.p. morgan, put it together for us. gerard: it is complicated because of all of the one-time charges. what caught my attention already is that the credit quality picture for the banks was strong

in the quarter. bank of america, the provision for loan losses was less than expected and the in our estimate were better than what we were anticipating. i think that is one of the messages for investors. everybody is very concerned about the outlook for credit quality from the banks. it looks like it is shaping up toward the end of the year to be strong. the investment banking results are coming in e than expected. tom: it is not the fine print but on the edge, this is jp morgan. average deposits flat are down 3%, excluding their first republic soiree. how do x react if yields come down and the money market fund wall -- how do money markets react if yields come down and the money market fund wall reacts to them? gerard: as you pointed out, the money market mutual funds are

tight tightly -- tied tightly to the fed rate. the banks are slower to bring their yields down. you could see that. jp morgan at the other big banks are confronting quantitative tightening. under quantitative easing in the pandemic, we estimate that the photo reserved pumped for trillion dollars of deposits into the banking system and now they're taking them out. that is why you see these depositors. tom: sonali basak with that person to conversation. jp morgan wealth management r.o.e., 31%. that is the jewel of each of these banks. they all want to be james gorman. sonali: it is incredible what they are bringing in terms of margins from these assets and with managers. if they cannot make money at his

other businesses, it does dampen the story even for the profitable parts of the business. we will have citigroup, they are making tons of money in services business but markets and investment banking are lacking and credit quality they are below are gerard's estimates and they are below all bloomberg estimates on average. on cost, jp morgan which is among the best on cost control for such a large bank, really able to keep a handle on their numbers, they are above estimates on noninterest expenses. keeping these costs under control for the top four consumer banks is going to be a very interesting balance. jonathan: we are down across the board on a little more than 2%. slightly unfair for me to ask this question given you have only had 24 minutes to look at his numbers. based on what you have seen, who won the quarter? gerard: it is hard to say.

jp morgan's numbers look pretty darn good. i am interested to dive into the wells fargo numbers because they have been making inroads into capital market areas that has been very beneficial to the fee revenue area. overall, the important part as we go through these numbers is what the outlook will be for 2024. i know we are going to focus on the earnings calls to see what the guidance is for 2024 and if we are in for a soft landing and if the federal reserve is finished raising interest rates, all four of these banks are going to be winners in 2024. jonathan: thank you for the anticipation of these numbers and the reaction to them. gerard cassidy of rbc capital markets. finally, the guidance. what do you expect it to look like. sonali: net interest income will be interesting, it is expected to rise. the drop you are saying is

fairly dramatic. jp morgan was already rich, they were trading at 1.7 times book value. bank of america was barely at book value heading into today. these are pretty significant drops you are saying premarket. also the outlooks are not so far so rosy. are we going to hear the make executive -- the bank executive structure july caution around and throw some optimism? where are they going to keep investors on hold? jonathan: bank of america down 3%. jp morgan up by 2.7%. tom: we will have to parse this and alison williams will do it at bloomberg intelligence. this is one idea of the modern bank, jp morgan active mobile customers up 8%. what happens to all of those bridges after 2026? cashless branches after 2026? jonathan: we will stand up with these numbers. kenneth leon.

sonali basak. from around the table, good morning. ♪ the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado.

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it is clear that the fed has policy in a restricted place. the policy is restrictive in its eating into the economy. the economy slows a lot, the fed willful comfortable coming into interest rates. there are a lot of rate cuts priced in that may not come to fruition. this is bloomberg surveillance

with tom keene jonathan ferro and lisa abramowicz. jonathan: here comes earnings season. good morning worldwide. this is bloomberg surveillance. your equity market on the s&p 500 slightly negative. it's all about bank stocks. jp morgan, bank of america out with earnings. a little lighted jp morgan. we are up by 1.75, 1.03% on jp morgan. tom: we are doing it right, right now. critically, julian emanuel well will join us and he has a pretty cautious view of the 2024 on these banks.

jonathan: here are the scores this morning, s&p 500 touch software, yields a touch higher at 3.9937 and curtis up by 4%, 74.87. the u.s. a new k launching 60 airstrikes on the houthi in yemen. tom: that's where you get to see a measurement of tension on the market. jonathan: is this a one-off or is there more to come? from the u.s., the u.k. suggesting they may not have to do this again. rishi sunak describing the hits as a limited, necessary and proportionate. tom: in the psychiatrist, --z t

itgeist it's just another tactical strike. jonathan: and mary herded to break it down with us in just a short time. canada, and the next hour we will hear from citigroup after you have heard from bank of america, and wells fargo. mohamed el-erian will be reacting to these numbers immediately after they drop and then more fed speak at 10:00 a.m. eastern time. tom: the blackrock transaction at 9:30. but your point with mohamed el-erian, there is so much justice together.

it feels like it's already june. jonathan: it's just january 12. director of equity research at cfra. what stands out for you this morning? >> stock prices are consolidating after the fourth quarter and looking out to 2024, it will not be a v-shaped strong recovery in any area. but what we are seeing is stability and it will lead to growth. loan growth, net interest doesn't just fall off a cliff when is cut. overall, it's the inflection point in investment bacon -- making. there is significant backlog

from private equity firms to monetize those investments which would benefit the bank for underwriting and m&a. banks are going to be conservative in their message with analyst today mostly because we expect to see tighter regulation by the end this year. in the near term from banks and analyst about capital bill. tom: we have jane fraser on with 200,000 employees, i came up with over 900,000 employees between the four. you have covered this for decades, where is their employee count of five years? is this a shrinking business? or do they keep on going? ken: they are doing a great job on transformation but investors it is of multi-your story.

as for what will be the headline for a streamlined citigroup, 10-15% lower. there is a whole list of businesses announced as sold his consumer outside the u.s.. what jane fraser is looking for is execution and by pre-announcing the onetime chargers they want to show that runway of that transformation. tom: what will we learn in the hour? ken: she will articulate the citi has durable businesses that have reliable revenue from corporate or treasury services and when they look at other businesses where they may have had only one eye on the business they will reinvest in wealth

management along with other areas of investment banking. this will be a streamlined bank. i would say there will be bumps along the way. we had that same narrative for wells fargo and they are in a better position today than a few years ago. for jane fraser it's showing that strategy, it's beginning to work it won't be a turnaround. jonathan: citi is in the next hour and ken will help us break that down. julian emanuel well strategist at evercore, good morning. numbers, tons of them. let's go to the outlook. the outlook from jp morgan, 90 billion with the estimated 86. >> that is consistent with his

rates could be higher for longer. i think when you step back and think about where things are in general whether it is the banks of the markets overall is there is a lot of positivity priced in. if you look at the last 24 hours we had cpi hotter than expected, military action last night that is underpinned the price of oil. when you look at that it makes the fence job more difficult. jonathan: are these durable trends? julian: when you go back and think about rising oil prior to october there is an element of uncertainty around all of this. when you step away from it, it is the question of whether there is a greater degree of uncertainty priced in whether the trends are or are not

durable. you have one the fine line of keeping inflation underpinned, ahead of trajectory. tom: i want to get to june and then try to get to december. your notice blistering when you go sub 4000 spx, that is down 16 , 17%. that is buying the dip. that is a hell of it did. are you modeling a bear market economy? ken: ed is calling for a mild recession at midyear consistent with the cumulative tightening we have seen over the years and mindful of the fact that when you go into modern financial history there has only been one soft landing and part of our concern is that unlike this time last year when everyone thought recession was imminent, no one

thinks it is a minute. when you think of that draw down the average non-recession year draw is 13%. what we are calling for is something not out of the ordinary but consistent with volatility in an average year. we like defensive names, there is a well-known history of consumer staples, health care, communication services working during the time between the last fed hike in the first cut which comes in the spring. jonathan: what you are getting into is in your note. i enjoyed your note. the nothing can go wrong optimism. what is going to shake it? what is the one thing that you can point to that shake set up? julian: there really isn't an number one but what i would say in the immediate term is the

earnings trajectory. there is an expectation for year on year growth of 11.5%. normally that would be fined in an expectation that would come down as it typically does. the over optimism is to the point where there is a believably factor that is the same. tom: ed hyman is calling for a mild recession and you're giving me a sub 14 spx. what do i do? if interest rates come down those magnificent seven growth companies are more valuable do i have that right? julian: the other part of the call in and has been on this for a year is that inflation has been and will continue to fall

faster despite this open the road that we have. but the last mile towards 2% will require a growth slowed down and in that environment you don't so winners. tom: i am having is cj lawrence. moment. he said you take shelter and we have disinflation right now. julian: it comes down to perception and expectation and if we had had this conversation six weeks ago prior to the pivot we would say ok we understand but expectations got ahead of the data. jonathan: what hasn't head that you think will hit after they raise rates?

julian: you saw a softer ism, the labor market at some point in our view is going to have a more normalized progression given this concept of global slowdown which we think ultimately results in a slower. recovery. jonathan: away to counteract the nothing can go wrong optimism. tom: is disinflation good for markets are not in that comes to the growth call. we talk about nominal gdp. jonathan: where's the

unemployment rate at the end of the year? julian: it could nudge closer to 5%. tom: this is a really important dialogue. it would be great to get ed hyman and julian together. jonathan: later on the software earnings from city. we will get ppi in reaction from this guy right here, mohammed mohamed el-erian. this is bloomberg. ♪ ♪

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the islamic republic of iran sees the marshall islands tanker the saint nicholas in the gulf of oman. this is another example of iran activity and we call on them to release the tinker and. jonathan: addressing the latest iranian attempts at disruption in the middle east as the u.s. and allies release attacks.

good morning, a busy one already. it is a busy friday. let's get straight to bank earnings from jp morgan, the stock higher by 2.23%. a little bit lighter on the investment banking side but the outlook predicting more of the same this year. tom: they're going to apologize for the profits and hide how successful they are. the screen is green on jp morgan everyone else's red and bank of america is 410 spread between jp morgan and bank of america. jonathan: net interest income 19 billion, -- 90 billion against the 86 billion estimate. equity futures are little bit softer down by 0.3. crude is a little higher at

74.52. a lift to crude. tom: we should remember that in an hour and 15 minutes we get more inflation in america. jonathan: cpi and ppi. tom: let's address the persian gulf, will there be another attack, that seems to be the mystery and the press. this allied tactical effort. annmarie: the president said they wanted clear message that the u.s. and its partners will not tolerate attacks on personnel in one of the world's most critical commercial roots. if the houthis failed to respond

we could potentially see escalation. what the u.s. went after last night's degrading capability. will there be a potential back channel? tom: the relationship between tehran and the houthis? annmarie: they cannot be undeterred. you see what the saudi's tried

to dislodge them from yemen for years. this is why this is so delicate. there is a tentative peace agreement that no one wanted to of been that this is the first time that the u.s. is taking a strike in yemen because they are striking vessels that are having to go around africa and upending the economy. this is an attack on houthi and not iran. is this enough? jonathan: when the member of the iranian military was tak en out they were worried it would cause a backlash but it did not. annmarie: they felt they had to

respond after going after one of their generals but i have sources that iranians through the swiss have of frenetic situation they want to get the message that we are done because we don't want to see an escalation. jonathan: you look at the language from houthi robles that u.s. and u.k. targets are still an issue. annmarie: the forces its 16 sites no leadership was taken out here but this is consistent with policy.

tom: you said iran has a message with thinness reporting that they are done. they are not done on the lebanese border or in gaza and now not in yemen. they don't look done. annmarie: the message they sent to trump was that we were done. there were retaliatory strikes in iraq. but we are in a whole new world with a different administration and regime in iran. jonathan: there is a country we haven't spoken about saudi arabia. how did they feel? annmarie: they said they are taking a close eye and monitoring the situation in the region. they would have told the saudi's

this would happen because they have a border with yemen. they have been trying to dislodge the houthis for years. it's easy for them politically to sit back and let the u.s. handle this. tom: is there any reporting on how we affected this tactical exercise with the perryville secretary of defense? annmarie: this overcame all of the doubt. there are so lots of questions about this but secretary boyd austin is set up to work walter reed. there is clearly no doubt that he got the go-ahead for the strike. before he went into the hospital he gave the ok on a previous

strike in the middle east but there will be lots of questions because the u.s. is becoming embroiled in the middle east which this administration has been quiet. but that's no longer true. jonathan: this is an example of the united states working along with the u.k. in europe and others. here is what they said on the prospect of donald trump. we should learn the lessons of history, insufficient to look the fight against climate change, nato, u.s. interests were not aligned with your. how is standing it was to hear from a central banker to weigh in on politics. what do you make of that? tom: all of this is time and i urge you if you see her on the

promenade. tom asked me to ask you. jonathan: it was interesting to see those comments from christine lagarde. annmarie: i'm sure people don't go to central bankers to be political. can you imagine jay powell weighing in on macron or rishi sunak. jonathan: stunning to see those comments. equity futures slightly positive. we will have numbers from citi this is bloomberg. ♪

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jonathan: live from new york city, 60 minutes away from ppi data. this just around the corner. and earnings from citigroup. on the nasdaq we are down by .75. jp morgan is better in the premarket off the back of this.

two year yield is higher by a basis point or two. crude is back in the 80's briefly on brent crude and where back again. 3.87 percent. tom: as we get more news out of washington and london but i need to see 82 on brent crude until it has my full attention. with all the data we have god i would say there is a turning in the yield space. jonathan: and turning to the data later this morning let's get to the top story houthis continue to target vessels.

president biden saying i will not hesitate to direct further measures to protect our people in the free flow of international commerce is necessary. tom: there was an attack. i am in the camp that if there are 18 drones in the air and you do a victory shot but that is an attack because there is a humbling reality that one of 18 could have got through. your second story, bank earnings. so busy in that last hour. jp morgan up 1.81%. let's talk about the outlook. tom: you see it with the red

and green green with jp morgan read with everyone else. the jane fraser restructuring i want to know the outlook in restructuring out 12, 24 months. i think there was an allusion there that they are going to cut and added back in places they need to outback. but 900 89,000 employees will come down a little bit. jonathan: we saw that with blackrock. and then an acquisition. tom: blackrock is not only a 5% cut now and another one earlier in the year. that's a lot of people. jonathan: i can't get you through the next year, numbers from citi and then mike and

stanley. i want your thoughts on this, christine lagarde with her most vocal comments on u.s. politics. another trump presidential return with trade tariffs, climate change and nato. tom: she would say this was taken out of context, this is a central banker talking about politics. a former trade minister from france she can weigh in on politics but she has a new job as a central banker and i think every one would think this was an appropriate. what is more important to me is

what could come out of the united states. jonathan: you have the comments of the person delivering them. highly unusual. on the content she is absolutely right, it's a statement of fact but this works both ways. how aligned have european interest in with america? was a questionable stance on china in america's interest? was under resourcing the continent following short of what was promised to nato in america's interest? you have seen real cracks in that given what has happened in

ukraine. tom: the energy dynamic and challenge for the guard. --legaurde. what is important is that this tension is here amongst disinflation and that expansion and it is taken completely different within our fractions ecb than it is in america. do you hear anybody in the congress talking about the expansion of debt? in europe, is a third rail. jonathan: congress talking aboue expansion of debt? in europe, is a third rail. jonathan: basically germany. just starting to see those comments overnight. tom: we will keep you entertained with good conversation with michael schumacher. head of global strategy at wells fargo. if you areif you are part of m'n

you have your dose of the wonderful robert solow and growth economics. what doeswhat does the trajectof america look like this year? michael: not all that great. will the u.s. have a recession? it's not binary and if you listen to jay bryson i think a recession is slight. but the idea of is slight. but the idea of getting to the 2% is very low. tom: how do you asset allocated in your microstrategy? mike: right now is study. a wise man told me that the markets are in choppy mode. jonathan ferro, he has plenty of company.

when you think of the data flow is pretty light. why take a big swing right now? i think people are looking to the fed and central banks waiting until the end of the month and will reassess at that point. jonathan: listening to jamie dimon with the earnings, you could see stickier inflation with rates higher for longer and on government spending as well. the economy has been fueled by government deficit spending. are you expecting thatare you eo continue for much longer? mike: we are not expecting fiscal -- there is at least a

chance that core inflation in the u.s., do we have to come in and hike again but we can. can. people have to think about it. tom: how do you study the cash conundrum? a lot of good work being done on this. but what is a summary of what our listeners and viewers should think about trillions exiting money market funds? mike: it's a question of how much can move. money market funds can earn a

lot of money and is been an attractive spot for a lot of people. we do think some of that cash is going to exit but it will be a fairly methodical process. i think people tend to chase return but when you look at the s&p performance and use that as a template most people are wondering about that. and use that as a template most people are wondering about that. we think the process will be fairly slow. and use that as a template most people are wondering about that. we think the process will be fairly slow. tom: i was making a joke about a january rate cut but but is te an institution that they are behind right now? mike: i don't think the fed is behind but you can't just tell if you're a central banker you've never seen this

environment before. it's been so crazy with covid c, incredible inflation. it is foolish to think that exit will be smooth. we expect a lot of bumps. jonathan: the market is priced at five because in the federal reserve is saying three. how likely is it that you go one way or the the federal reserve is saying three. how likely is it that you go one way or the other when you start cutting interest rates? mike: we've done a lot of work on the effects side and when you look at the fed or the ecb when a big central bank because it cuts a lot so 200 points in the first bank because it cuts a lot so 200 points in the first year that's very common

and now we have a fairly high rate environment. if they do it by the middle of the year they should price in 130, 140 which is to light. we are modestly bullish. as far as year-end 10 year treasury fallout will be 375 over the next quarter, a fairly modest drop but like the fed and policymakers you have to be handle and there is a lot to factor into that forecast. lot to factor into that forecast. we are modestly bullish. jonathan: with a big caveat. we appreciate the update.

375 is a call from wells fargo. tom: i love that he says that we are still in the thrall of the pandemic and i feel like that has been underplayed. what i hear is that this is not a single digit conversation. there is all this simply monetary discussion but we believe. michael schumacher saying steady as she goes as she goes and we need to garner single digit returns. that's what i heard from him. jonathan: equity futures are -.2%. yields higher by three basis points at 3.99 and crude 74.53. you asked this question we got some comments defense secretary

boyd austin acting over the actions conducted in the red sea. tom wanted to know if he was coordinating this and we have information that he is. tom: the more the -- the moment annmarie hordern is off the side she is right under funds keeping up with this news. jonathan: coming up later this morning ppi data drops and mohamed el-erian will be here to report. coming up the next hour. this is bloomberg. ♪ ♪

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ticket is a big move for us. making that game day experience on sundays. you should expect a lot more innovation with product and integration. all of our fans especially younger fans you should see more of that from us. jonathan: the fans are turning in from youtube. it's best rating since 2010. 93 of the top 100 broadcast were nfl games. peacock getting involved this weekend set to air that first game. when the history of tv will be written one chapter will be dedicated that there was a model

that wasn't good fone. let's talk about the sport itself, the dominance of football in this country. >> it is a perfect sport for tv. you have a set of games that is very predictable, every game matters and sports gambling is growing very quickly. it's easy to watch, you can bet on it. and they are nationally followed. tom: i was reading about the total dominance on youtube and you have been so far out in front will anybody compete with

two consolidated giants, youtube and netflix? >> amazon. people of always said content is king. but what we see coming out of the platforms is king amazon, netflix and youtube are the future leaders in this industry. the challenge is how do you plan the world where you have these choices? this will be the challenge next decade. tom: we need to make sense of news the idea of espn, an expense that they have to pay for all of this. as mr. iger setting up espn for sale to amazon? > he has the idea of finding

minority partners. i don't think he wants to give it up. partners from the league or other parties. disney just wants to find funding to get through. we have wondered for a while now , costs are rising. they did not have a good streaming run they need to focus on streaming and less on the s ian. espn. tom: he said we don't really want to when we just want to compete. i am not hearing that from

nathanson or iger. jonathan: how do you break it? with every playoff game on streaming platform so people don't have. i asked him how do you watch the football on? any could not answer the question with the direct answer. that's a problem for all these sports. the great example is boxing. this used to be something everyone watched together. it's always on the streaming platform. i don't pay to watch it. are they about to break it? you talk about the watching experience. they have had massive success and their about to break it. >> i totally agree with you.

it makes me angry is a consumer analyst. the playoff game is a top game of the weekend. i saw the schedule and they are putting it on peacock? we have to pay $60 a month just to watch it? i think it is greedy. i know why comcast is doing it but i think they are overreaching i think you are right, there is a feedback loop that says these guys don't care about the fans there in it for the money. and that's just loud and clear putting this game on peacock. jonathan: the problem was sports as you build out the asset but you never run it, you

lease it. i wonder if the numbers really work anymore. i just wonder the future of that given how much the output costs? >> when you're in 90 million homes, the cost of sport keeps going out in the cost of revenues keep going down. for five months out of the year, it maintains the pay-tv bundle. i think those two models for baseball and hockey, they hold. tom: you are predicting that we

cut the cord, i want to talk about the new cord cutting the model of 60% , over 36 months of a business plan. >> the turn this 60% a month or some of the services. you could churn your entire base. crag's been on this from day one, there was nothing better than 20 years ago because you don't have to compete for customers.

in this world with the constant his psycho it's impossible to do. netflix has surprised me but it has just worked in their favor so well. the number two position is not pretty. if you look at disney in their economics. you need to cut churns. tom: in the stock market what's your single best buy now? >> there is a short call on roku. we've been impressed with the alphabet but it is getting harder and harder. immediate we have been buying disney but the pressure is on them to prove the case for

streaming. our best call is shorting roku which is a call on the state of streaming. every six months we allocate our call and now it is roku. jonathan: martin nathanson, thank you buddy. when you have conversations with the consumer the people are increasingly frustrated with streaming. tom: one popular gifs is jonathan ferro calling me hey stupid. and now, you've said to follow the tots. the chiefs thing this

weekend is absurd. jonathan: if you want to kill a sport hide it on a streaming platform. ♪

>> we feel pretty good about the year ahead. we are looking more broadly. >> we don't need to run the risk

of tipping the economy over. it's hard to say the market reflects that anxiety. the economy is actually doing great. the soft landing is happening. this is bloomberg surveillance with tom keene and lisa abramowicz. tom: good morning everyone bloomberg surveillance from new york. this is the day for big bank earnings. jp morgan at 1.72 is their book value, citigroup's last in line up .52. jane fraser has a wall to climb. jonathan: they have a new strategy. we are higher since october but the stock lower by 2%. sonali: we are looking at fourth-quarter revenue and the meson expectation.

they expected to bring in 18 billion but they brought in 17.4 billion. returns on equity in the fourth quarter come in above expectation -- sorry below expectation in the fourth quarter. they were expected to be positive. this was a kitchen sink quarter. what we will see in the next hour the cost hedges for structuring. we know their cost and extraneous parts of the world. this is jane fraser's year. this is the year she has to bring the turnaround story to wall street. we have to see what that is in investment banking business. jonathan: a fourth quarter that

is disappointing. jane fraser said is very disappointing. as you know, investors will not pay as much attention to those. what changes have been made and how quickly will be see the results? sonali: projectra-bor that is coming management. jane fraser inherited a bank that was bloated and that she has taken then asked to. it will take a minute to get through all those layers of management. that is the fixing story but where does she get competitive and wall street businesses? i am looking at cost of credit as well. tom: in to her credit she puts

ugly ratios of top. a single digit 5% versus 13, 14%. is citigroup still a big bank? sonali: even this morning i was looking at j.p. morgan breaking away from the pack. are these big banks as competitive with each other when you see one breaking the way? the most profitable and exciting business they have makes their money from global internationals but the loss they have taken from argentina's currency fluctuation. businesses that they have largely exited. it's hard to be a global bank. jonathan: more to come from sonali basak with jane fraser as

city is not dressing it up saying the fourth quarter was very disappointing. that's the tone from the city ceo. tom: it absolutely fascinating. ken leon, let's cut to the chase , is jane fraser going to slowly? ken: she has no choice. she has a monolithic bank she has to streamline into a different bank for the future and the story that hasn't been told is talent is looking over their shoulder for whether they

have a job or not. the strategy is going to work but it will take several years into the prior discussion, this will no longer be a leading global bank akin to a custody bank like bank of new york mellon. tom: that's right where i wanted to go it comes down to culture and care there. when you said manufactured and that meant something. what is citigroup look like in five years? bny mellon or something else? ken: i think they will have durable businesses with recurrent income and treasury services. it will be well and asset management. they will also try to play a role with asset management and wealth.

it's an enormous competition for jane fraser and again, as we go through 2024 every quarter is not going to be in a linear fashion of improvement. there will be issues that come up. the analysts are generally positive about spending. i look back at wells fargo and it took him five years to get back to where they are today. it is the right strategy but there is a bit of optimism on how well this will work quarter to quarter in 2024. jonathan: how big will the big bang be? the number 20,000, is that what you were expected?

sonali: we knew it would be tens of thousands. it's nice to give a headcount because they have been holding out. it's in line with what we were expecting. how much will it cost them? it is the kitchen sink quarter. they had a lot of charges that they will have to announce and work through. they had among the biggest headcount even more than bank of america. they had a lot of room to cut. jonathan: let's talk about what this could mean for capital returns. can you take us across the industry right now given everything we've been discussing? what a capital returns look like? ken: as a relates to the operating side of the business, it's good. and we will see an overall 12%

return at jpmorgan chase about that. the risk of capital build with tighter bank regulation. that means that the banks generating strong returns will be mindful in terms of a higher capital requirement in the restraint it will have for buybacks. it will be a delicate dance for the large banks to not oversell. regulators in the europe and u.s. are concerned. higher return areas and derivatives training, the banks will take less risk and hold onto capital. tom: is citigroup so challenged

that what we are looking at over 12-24 is the merger of super regionals with big big citigroup that's not a big bank anymore. they wake up the next day and it's like swiss bank in ubs, the next day they are a big bank again? a software jane fraser is heading? -- is that where jane fraser is heading? ken: the services really matter to them. that is why a mention bank of new york as an example where they have durable businesses but they don't get higher multiples. you are moving away from higher growth areas but they know they have to get away from cyclicality of being a bank

because you don't get rewarded. jonathan: can you take anything from this morning to apply plight of banks next week? ken: 2024 will look good for investment banking. i can assure you there will be plenty of activity in underwriting and m&a. there is an enormous backlog to monetize and goldman sachs and morgan stanley will execute on that. the other story is lightening up the balance sheet and moving over the private credit. all the attention is on the large banks but when you look at blackstone and apollo, they are in a pretty good condition.

jonathan: tom: if you are just joining us thank you. jp morgan is positive by a little more than 2%. their outcome coming in better-than-expected. tom: 41 up to 53 on citigroup. what i would emphasize their and all of the tumult and turmoil is jane fraser, the execution of this on lexington avenue. i am fascinated by the immense pressure to get going and then ken leon saying your name iteris not that easy. -- saying it is not that easy.

jonathan: we have so much more to come, ppi data but 8:30 a.m. with mohammed al arian. a must watch conversation. what is the big take away from this morning? sonali: citigroup wants to shave off tens of thousands and medium-term she's thinking 180,000. this will be a much smaller bank to tom's point and if you look throughout the begich system, the margin at which jp morgan is remarkable. they brought in 10 billion the bank of america alone. tom: the shift from what ken leon said but bny mellon, i

can't frame that culturally in new york. sonali: this will be a smaller bank with more defined business lines of more accountability for everyone. jonathan: an excellent take away. we will have more from sonali through the day. in your equity market futures are negative in crude is 74.35. global investment is up next. this is bloomberg. ♪

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early as two months from now, that may not come to fruition. the fed is good at waiting and watching and liking. they are probably going to keep rates too high for too long before they cut and then they will have to cut more aggressively. jonathan: there is a big shift yesterday from michael collins. he has been constructive on credit but now he is reducing risk. is it about price or fundamentals? he thinks the spread is getting too tight. tom: they picked up tom purcell he again this year and i thought that interview was great with michael collins about just grab the coupon and don't overthink. that was a real clarion call of

grab the coupon and don't overthink about jerome powell. jonathan: that was cpi thursday and today ppi with mohamed el-erian. tom: if we can dovetail with victoria fernandez from cross mark global investment. i was speaking with sandy wiles and i wanted you to deal now with the magnificent seven with so many out there so say we should buy and hold and it didn't work out. victoria: i'm not sure i have the perfect playbook but there are names that they are going to

have the volatility around them. apple, microsoft perfect examples that we do see as buy and hold. it doesn't mean you can't be tactical. you can trend names on other days but overall you want to hold those positions for a longer period of time. they have proven themselves over and over. i think you're going to have some of that. tom: what are you learning from your cross mark accounts about cash? they must still be in cash of 5% but are they ready to move with the lower yield? victoria: we have seen movement from cash. when you look at globally it is moving into equity etf's. we have seen our clients moving into our balanced portfolios.

they want to have that fixed income exposure. you guys talk about clipping coupons and not worry about what jay powell says. there are positive moves you can do for your portfolio by doing that. and are covered call writing strategy and option strategies. people are looking at ways to generate income. tom: cover call writing, are you ready for that? you get a premium, the yield. it worked out great last year but come on? does covered call writing work? victoria: depending on how you are writing them. if you keep them short, 30, 1690

days --60, 90 days. tom: what you heard there was gospel. don't be a pig. you think i can pop out 12 months are going to be a genius and they take apple away from you. jonathan: victoria, who has pricing power at the moment? victoria: that is tough but when you look at corporations as a whole they are losing pricing power as you have disinflation come in and wages continue to stay high these companies are using pricing power. one of the reese's we think the market is going to have a pullback than what we have seen so far.

when you talk about apple, we know that ecosystem. i can probably call 3, 4 apple items right now in my home. i pay for the services. once you are locked in that pricing power is locked in. when it comes to apple, you are better off in that category then a lot of other global companies. tom: a thing that is out there is health care stocks. everyone said health care united are going to go. what is the catalyst to make health care away in? victoria: it's far more common in election years because of the volatility. signet we own in our portfolios is one of our favorite names this year. they were beaten down over the past 12 months but their ballots sheets are looking pretty good.

i think you could dip your toe into health care names, you will have volatility around elections into regulation. we think you can have upside opportunities with signet being one of our favorites. tom: with everything said and done about this year, the shock of how everyone was running last year. we just heard from schumacher at wells fargo, it's not going to be easy this year. what is the strategy month by month for retail, they own whatever they own. where are you with your accounts? victoria: patience is the key word but also diversification.

we don't mean general diversification go in and do your homework and where do we see opportunity there are names that will be a little risk off. we bought financials and we think there is upside there with jp morgan being our favorite. we know the consumer is going to get squeezed a little bit. we think yields might move a little bit higher as the market prices out multiple cuts in there right now. we don't think the fed is going to move us much as they are and we would also like to put a little bit of our equity neutral for our clients, even out there portfolios. jonathan: victoria fernandez from cross mark global. something from boeing or on

boeing, check out boeing it's down one point 8%. the faa says it is conducting an audit to evaluate their procedures. results will determine whether additional audits are necessary. tom: it unravels support from october this year, we are 218 so we have room to move. get back to where they were before the bull market boom. jonathan: you wanted to know how quickly the 737 would go back into service? safety not speed will determine the timeline for returning the 737s back to service. some people were talking a week

but based on what we hear, maybe more. tom: the faa is stepping in with the new leader who has to prove himself. i'm gonna leave it up to a probe like george ferguson and steve tried to tell me, you will an airplane into new work in check every rivet? how does that work? jonathan: bowing down 2% premarket. coming up premarket data with ppi and mohamed el-erian is with us to close out this hour in the show. from new york city, this is bloomberg. ♪

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we had cpi and we have ppi this morning. that data is about 20 seconds away. the futures on the s&p 500 look like this, at .27%. let's say good morning to michael mckee. mike: good news on inflation after higher cpi

lower-than-expected ppi. down .1% with the forecast for a 10th gain and last month it was completely flat. the core is flat which was expected to be a 2%. energy and trade which is the important core of this number of .2%. that's on expectation with a little bit of a higher yield. for the year-over-year number, ppi goes up 1% and core 1.8% and energy and trade stays unchanged at 2.5%. people asking if this is good news for the future, we shall see. the important thing to note is there are a number of categories

that are used by economies to figure out what pce is going to be. used by the government as well. if we are in line here. it means ppe will come in a little lower. it's we will start with equities and then bond in foreign exchange. we are still down to touch on the s&p by 0.4%. the two-year is 4.22 in the euro against the dollar was negative but now 1.068. march is too early. is that the fed's view.

mike: we could see big change in the data but the data we have been getting tells the same story. let me just note vital demand services unchanged. in the one thing that went up in the thing that has been going up for some time is the securities brokerage stealing an investment that increased 3.3%. it is kind of an interesting point to make on a day where bank earnings are coming out. tom: there is no shelter and ppi.

basically there is disinflation in place. mike: is suggest that we will see continued improvement and inflation but how fast is the question. before we go to mohamed el-erian i wanted to congratulate him because we've been talking about this for a long time. if you are an nfl fan, the new york jets is the team that mohammed follows. his last game as a loss to the new york jets. jonathan: that does speak to where the new york jets are. mike: i would imagine mohammed

is sitting there with a glass of champagne. tom: we will turn to mohamed el-erian at queens college cambridge. after the attacks we saw overnight against houthi revels in their relationship to iran. would you suggest that the arab nations are in support of the solid attack on the rebels? mohamed: they are warning against escalation of the concern is that other proxies in the middle east will see this as a reason to escalate what is

going on in that region. that is why you hear concern from arab countries. the last thing anyone wants is an escalation. tom: which institution can create a dialogue between iran and the western world? mohamed: i think you need to see a cessation of hostilities in gaza. there will not be the ability to get people talking in a broader sense with those hostilities in gaza. once you get that, the relationship with saudi arabia and iran has improved. the uae plays a critical role among countries in the region. there are parties that can help. jonathan: not to extrapolate

out the faithful trends last year. is there something developing in the middle east. my major concern is that if you look at the regions within the world. all three are having issues growing and robust manner. even the u.s. is facing lower household savings. china needs to change its models and without a healthy germany europe will struggle. if you look at locomotive growth. it will be hard for america to maintain growth rates.

beyond that, very real geopolitical concerns. you are tracking the disinflationary trends. mohamed: we are seeing cost push pressure in the pipeline. what's happening in the red sea indirectly by causing shortages that -- we have the labor market

so you have cost push pressures coming in and i suspect we will see inflation get stuck at 3%. either tolerated for longer and i was encouraged by john williams term. this notion that disinflation is going to discontinue is something i find it hard to reconcile with this data. you push back against that. do you really believe something

really has changed? what are the issues you can point to that has fundamentally changed the submitted debate. mohamed: coming out of the crisis we had major balance sheet damage there simply wasn't enough demand you have. also prices and have some growth response but nothing exciting. that was a story before the pandemic. coming out of the pandemic what

are those factors? not just commercial reasons. we have company is looking for a more resilient biology and more resilient timelines after the pandemic. we have the labor market also where the labor participation has not gone up as much as we have ways. tom: if i was in davos, what has fundamentally changed is all

of a sudden, money cost something. every single business and family out there has a new cost of money. how is the world going to change with this new, new after the free lunch of the last decade? mohamed: on a flow basis we can deal with the higher cost of money. but the problem is the stock. we know three major areas that have to be refinanced and it will have to get the volume back. one is the u.s. housing market which is stopping people from moving and is hard to get onto the ladder because you don't have the flow you need. second is commercial real estate. some of it cannot be refinanced

in terms of value. the third area, a wall of maturities coming up in 2025 were companies try to get ahead of it. if we can deal with the stock issue and legacy of the borrowing when rates were low. we can deal with the flow aspect. jonathan: we will continue this conversation. jonathan: relegation zone. tom: can the jets be relegated? jonathan: they can go down the leak. this is not looking good for qpr. if they get relegated, can we get a consortium together.

you can coach a team or something. to round out this week, ppi coming in better than expected. equities unchanged in the bond market, yields out. we are down five basis points. from new york city this morning, good morning. good morning. ♪ (upbeat music) ♪

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♪ >> you go back in modern financial history, there's only been one "soft landing."

part of our concern right now is that unlike this time last year when everyone thought recession was imminent, no one thinks recession is imminent. when you think about that kind of drawdown, the average non-recession year drawdown is 13%. >> that was julianemanuel of evercore looking for a rocky path in 2024. the team looking for recession in the middle of this year. equity futures unchanged on the s&p 500 going into the opening bell about 40 performance of. at the front end of the curve on a two year we are down five basis points. ppi a little softer than anticipated, going against the grain a bit with cpi coming in harder than expected yesterday but encouraging the view that the federal reserve can raise interest rates anytime soon. jp morgan, but it's all about the outlook from that bank. the outlook is better than

expected and the stock turned higher afte -- off the back of the information in the premarket right now. . jp morgan up by 2%. tom: i would suggest even at davo's they are going to have to manage the excellence. they've got to underplay profitability, underplay dominance. >> imagine trying to forecast this year, tom, the next 12 months. all the elections around the world, the tensions in the middle east the expectation the fed is going to reduce interest rates, may well start in march. tom: we are going to have to see. will continue with mohamed el-erian. this is just wonderful after the accolade he has received from dubai, and an award given to him for all of his commitments of the arab world and economics as well. his father, the former egyptian

investor to france a few years ago. i know what dubai was like the first time i was there and the growth just since i've been there is extraordinary. what was dubai like the first time you were there? >> so, that's going to expose my age but i was there the first time in the 80's and there was nothing there. there is absolutely nothing there. to see what there is in dubai right now and it's a combination, as you know, of vision, leadership, and agility, and those three things have delivered something. i was really surprised to learn that more people go to the dubai mall, more tourists go to the dubai mall than they do to new york. that's an incredible statistic. i still cannot get over it. tom: how do they sustain the persian gulf, i have use a phrase from a year ago, a tribal

structure? how do they get a generation or two beyond where they are now? >> they've done it. dubai has done it. the uae has done it. they have done it through very consistent, wise leadership. that has allowed them to position themselves as a,, a major hub. a lot of people transferred to dubai on the local airlines. and three, a hub for finance. it's this longtime vision. it reminds me of singapore. is the same approach that they have had and the same agility always looking into what's happening outside them and recognizing that they are small. and they just have to keep agile. the uae really has shown incredible progress. >> congratulations to being

named the great arab mind winner for your exceptional contributions to the field of economics and your prospective analysis of changes in economic and financial systems, perceptive analysis let's talk about some of that perceptive analysis right now. i want to go back to last year briefly, i remember the banks were failing, i referred to it as a crisis and you would say this is not a crisis. just how resilient is this system? and how well do you think it is standing up to this aggressive rate hiking cycle that has started? >> i think if you look at it as a system, it is highly resilient. if you look at jp morgan's results today, it will show you how resilient they have been. really impressive what that bank keeps on delivering quarter after quarter. the system as a whole is very resilient. there are some banks that are fragile. they make mistakes.

if it wasn't for the fact that the de facto change in insurance last year, we would have a few more of the midsize banks. . come under pressure to change has made it possible to contain the price. the system as a whole is strong. i don't worry about the banks, i worry about the nonbanks. the banks i think are strong. tom: i look at the core economic course at the university of cambridge, you've got to go in and give central-bank theory. i can see dr. al arian with chuck in hand, we are going to rip up the phillips curve and move forward. do we have an operative central-bank theory right now or post-pandemic, is a completely ad hoc? >> we have a theory of central banks. i think reaction functions have become ad hoc. the phrase you hear most often is data dependent, data

dependent, which is quite curious, because everybody acknowledges that the measures act with legs. so the fact that you are operating with measures with lags based on historical data is a little strange. what you see lacking which is very different from the bernanke fed, the yellen fed, certainty from the greenspan fed is a vision of where this whole thing is going. the fed today's very short-term and just keeps on repeating data dependent, data dependent. tom: this is really important. el-erian demands at queens college a university approved scientific accolade, estimated costs $25 to $35. >> let's finish on fed policy. expectations, they go in much. what your gauge of what the threshold is to be able to reduce interest rates?

>> there's no reason we should go in march. i think the market is overoptimistic, both in terms of timing and in terms of the amount of cuts we are going to get. i think the market should listen to the fed when it says signals around three 25 basis point cuts and starting later than march. i think it will be the summer when they start. >> appreciate the update and congratulations on the award. thank you. it's good to hear from you. mohamed el-erian of queens bridge college, -- of queens college cambridge. tom: i go back to the phrase i was saying. the facts have changed. the single sentence today that shows you how things have changes from sonali basak, who summarizes a power point from jane fraser. they are pumping from 240,000 employees down to 180,000. that is 60,000 bodies out the

door over the next number of medium-term years. onlybasak knows what medium-term means. what are you looking for >> see next week from morgan stanley? tom: it will be interesting to see how morgan stanley develops past james gorman. they are not traditional banks. mr. solomon has learned this the hard way having to pick up the pieces there of their banking experiment. what i would look for them next week is a different story than what we heard today. today is maybe what we predicted, jp morgan just continues to move forward and the others each have their own challenges, to say the least. >> do you want to start the weekend early? tom: we are off monday. >> we are. long weekend. tom: i didn't know until yesterday that we are off monday. we are off monday. we are going to digest it all and see what goes on here. i think the one thing we have

not mentioned today because jon and i don't believe in it is bitcoin. the answer is it popped up,, moonshot, 49,000, i loaded the boat at $49,000, looking for that 50k print, oops, right back down. jonathan: let's turn to stocks. don't put me on the list with you. equities going absolutely nowhere, yields unchanged on the 10 year or so. at the front end of the curve, i got a move, down another five basis point, it's a break of 4.20., it is 4.19 as ppi comes in. tom: you look at the real yield, 1.71%, really, really extraordinary to see that. a break of 1.70, that's a huge deal. i would suggest a real yield is technically very elegant right now. that's is the number one thing i would watch into next week. good morning.

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>> from new york city, i'm manus cranny. the stock market simply does not take the bait from the lower ppi. we are caught in the vortex between bid up and count down from jane fraser. >> everything you need to get started for u.s. trading, this is bloomberg "the open," with jonathan ferro. manus: coming up