>> all those negatives of last year turned around from headwinds into tailwinds. >> we think earnings are going to go down, between 7% to 10%. >> we have a good chance for the fed being on hold for some time. announcer: this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowitz. jonathan: from new york city, for our audience worldwide, good morning, good morning. this is bloomberg surveillance on tv and radio.

equity futures positive .3%. decent data out of china. later this hour, earning from bank of america. then we turn to regionals. tom: what if we got bank of america and goldman sacs making it to 2000? the headline of the china news and jp morgan into the banks is we are on the cusp of 4200 on the spx. went to the bears capitulate? jonathan: we have talked about the tightly defined range, 3800 at the low end and 4200 at the high end and we are about to break through that. equity features just below that. china and tk could only talk about china growth, upgrades this morning, six handles for

gdp in china. for. 2023 tom: i wish -- 42023 -- for 2023. tom: there is a gradual decline in gdp from seven-ish down to five. 4.5 isn't 6% gdp but the vector is phenomenal. it shows they could get a sequential of un-consumer spending in china. jonathan: we have to talk about china data and fundamentals in the earnings. what do the traditional bank earners, morgan stanley, names we have to discuss, that is a key focus of earnings season. lisa: the theme has been consolidation of power in the biggest banks crushing it and seeing good profits and consolidation of deposits. not such a clear story from

small banks and those stocks selling off the mid-positive results from the big banks. bank of america will be interesting from the show lending and mortgage related assets. if we get the team these, the bleed over could be important. -- the tea leaves, the bleed over could be important. people are talking about cannibalizing for markets. goldman sachs and apple teaming up. tom: when does washington say tim cook, you are not a bank? they are doing it through contacts. jonathan: it is lisa's point, you can get more through apple backed by goldman then you can through goldman via the markets. lisa: the incentive to open an account. i don't know how this is going

to read through. maybe goldman sachs will talk about it. tom: i am doing what i was doing 15 years ago, the libor of a tick. jonathan: you have to compete with that. i don't think jp morgan and bank of america are some of those names regardless of what they are offering. lisa: can they offer a haircut when it comes to their tickets and -- their certificates of deposit? people would rather pay a premium to get the safety. tom: -- jonathan: the s&p 500 positive .3%. a rally of a better data overnight from china. yields come in on a 10 year, 3.5851. we have gone from 3.50 back to 4.20.

yields this morning down three basis points on a two-year. lisa: it has been a difficult market to game out. fonts all over the place. we get the bank earnings around 6:45 and goldman sachs around 7:30 a.m. eastern. western alliance after the bell people will focus on because those shares are what pummeled over the last two months or so as people try to gain out which regional banks were the most vulnerable. we get a slew of housing data, the link permits and fed services business activity for april. -- building permits and fed services business activity for april. we have a deficit of housing in the united states. this has been a push-pull for homebuilders who don't see a great picture for where mortgages are. 1:00 p.m. we get the fed

governor at a georgetown university event, shall bowman. -- michelle bowman. at this point, do they have any more visibility than we do or will this just be a game and saying hey, we are going to raise rates and stop with the cuts and we are plugging forward. tom: it is a calendar item in that we are at the end of the first quarter with a lot of data and a complete mystery about q2. as they speak, they are flying blind. jonathan: without a doubt. tom: lisa, sorry to interrupt. jonathan: you always interrupt, what are you sorry about? tom: i don't know. marvin loh joins us now at state street.

it was said yesterday, even a mild recession would warrant 15% plus downside and went on to say we view the recent rally as irrational and we continue to believe a recession is likely this year. do you believe the recent rally is irrational? marvin: it has been a very thin rally. certain parts are doing well and others continuing to struggle. i think there is some rationality into certain sectors that appear a bit better positioned for a recession. valuations, after the bank stress earlier this year, session as increase -- recession odds increase. i see some asset allocation trends that have some sense. tom: from a global strategist standpoint, or we enable market?

do you -- are we enable market -- are we in a bull market? marvin: i think investors are being attracted to cash. one of the things we are seeing our cash levels owing of any money market type of discussion showing a hesitancy in terms of committing to this bull rally. also showing cash as being a viable alternative in this volatility. lisa: is this enough to get bullish? i ask because i looked at a michael hartnett note showing investor allocation to bonds is the highest relative to stocks going back to 2009. is this a contradictory or potential contrarian indicator,

signaling perhaps you have to be more bullish? marvin: the fixed income allocation is certainly fascinating. i think there is a lot of ultimate protection with the sovereign part of that market. this is the discussion we have on whether or not we have seen high yields in the 10 year and is a sign there is protection being bought from a duration part of the discussion. i wouldn't read into it that way. certainly issuance in the corporate space is not as robust as last year and certainly hasn't fallen off but having said that, it is the solid protection people are looking at. jonathan: what i am struggling with is i see a lot of people seeing signs of the all clear on the financial side of things, the stress of the last months starting to fade, indicated by information from the fed and willing to bet on equities because of that. when you asked them about the

bond market and rate cuts priced in, they are not willing to push back. i don't know if you can have both at the same time. do we have to go back to march 8 if you truly believe we are going to avoid the banking stress. march 8, the day before svb starts blowing up, after chairman powell opens up to potentially 50 basis points, the two-year dropped to 3.55 on march 24 and has since come back to 4.20 in the last few hours. where does the two-year belong if you believe the financial stress will have limited impact on this economy? marvin: we have seen some data in the right direction. it is not as if the world has been unchanged. some were frightening to a certain degree. on the employment front, you don't have enough clarity to say we are going to get a soft landing which is ultimately what i think a lot of asset

valuations are priced at. if you are willing to write off any bank stress, which includes tightening and the impact of tightening on the economy, you need to see a two-year get back above 4.50. if you are going down that route, you can't have your cake and eat it too. jonathan: thank you. marvin loh of state street. i spoke to brian levitt yesterday. he said maybe october was the low and that was the market pricing in the recession. so i said we are pricing in the recession in october and now we are pricing in the recovery of the recession we haven't seen. lisa: some say we are in the recession and it is after soft

recession and we will see that in the data. i feel like we are waiting to get confirmation and instead we are getting a drip feed of data points that don't get the clear picture. tom: i don't agree with this. lisa abramowicz has a great chart, not on the edge of 2007, 2008, 2009, people aren't in this market. they have the bramo doubt. jonathan: i have one of the millions who follow bramo on twitter. this hour, bank of america earnings. and then we will catch up with james zelter . this is bloomberg.

lisa: i'm lisa mateo. japan's rapid support marrow terry group -- paramilitary group fighting has agreed to a 24 hour humanitarian truce as fighting continues in that capital with the most intense violence around the airport headquarters. the envoy said at least 185 people have been killed. china's economy grew by 4.5% in the first quarter from a year, the fastest pace in a year. a rebound in consumer spending after covid zero and a ramp up in infrastructure investment helped gdp come investor than the forecast by economists. the latest caters for march show a mixed picture with industrial activity being subdued. $4.4 billion from credit suisse's european and u.s. funds after the ubs take over. the data for morningstar only

includes funds that include daily numbers and doesn't include all of credit suisse's asset manage. spacex is aiming to launch its next generation starship rocket on april 20, the second attempt from the groundbreaking flight. they delayed the launch blaming a pressurization issue that took place in the minutes before the scheduled lift off. the unaccrued mission -- mission is their plan to send humans into space. i'm lisa mateo. this is bloomberg.

>> dual politics leads to a fragmentation. this calls for greater policy

cohesion. not compromising independence but recognizing the interdependence between policies and best achieving objectives if aligned with the strategy goal. jonathan: from christine lagarde on the geopolitical issues dominating the conversation worldwide. bank of america earnings later this hour. then earnings from goldman. equity futures solid, positive by .3% on the s&p. a 10 year, up 3.60, 3.5794. the story has been on euro-dollar, right now positive

.4%, 1.0974. first quarter growth up 4.5% in china from a year ago. retail sales a 10.6% surge, the biggest month since june 2021. soft spots, fixed asset and retail sales but strong stuff. they upgraded the gdp forecast for the year. tom: need to get depth. carl weinberg joins us from high-frequency economics. what is fascinating is you say there is a lot of noise at a 4.5 percent gdp data. you end by saying this is a trajectory to 6% growth. do you buy that right now that they can get to 6% gdp growth?

carl: they could be asleep at the switch and gdp could not grow at all from where it was at the end of the fourth quarter in they would get the year-over-year change in gdp at 6% target. there is a basis effect. growing from a low base is not a great accomplishment. look at the 4.5% gdp number. pre-covid we have never seen a gdp number as low as 4.5% since the data began in 1995. let's not be teenagers and talk about relative to expectations or the last three quarters which were four for china. this is a better than expected number sure but an awful number. tom: they are going to do what they've always done, clear of the property market and get it going as an incentive for the public and straighten out the sops. what is your forward running rate?

carl: two to 3%. china's economy has been driven by economy and that in previous decades is had a huge rate of return on investment but in recent years, using public money not to invest in infrastructure but real estate and investing public money in owner occupied housing is a zero rate of return for gdp investment. we are subtracting all of the investment out of gdp growth we saw in the past that is a strategy that leads to subpar economic growth and very low 2% to 3% range. lisa: this is the reason why it has been enthusiastic -- less than enthusiastic. we are seeing oil actually lower on the day. is this the correct read that anything china prints might have a high number but longer-term is going back to a lower number

this isn't necessarily screaming recovery? carl: if only gdp would print a high number we would have a positive reaction. but for .5% year-over-year is an abysmal result. it is better than some people forecasted and the only thing you can say good is that it is better than the three quarters before. to repeat -- this is the worst quarter for gdp growth we have seen in the pre-covid period. nor are back to normal on china. lisa: you also point out that trade with china -- russia with china got your increase. what is your take away from a 130% -- 136% increase in trade with russia by china? carl: nearly fell off my chair when i saw that result. if you dig into the trade numbers, china's exports to russia exploded 136% in the days

after putin and xi meet. the only other time we have seen your arrear growth that big is when putin came to china for the olympics -- we haven't seen it year-over-year growth that big is when putin came to china for the olympics. china is selling something to russia. i don't know what it is but it could be problematic materials. tom: i was sitting on the stage at the imf and said i can't wait to talk to carl weinberg about the unspeakable's at the imf meetings and that is will china join restructuring methods and processes? you are the expert on this. do you believe china can restructure donna's -- ghana's debt? carl: they don't want to restructure it within the western framework. this is an opportunity for china

to channel refinancing through its own institutions rather than through the existing western institutions. so restructured loans in the emerging world should be restructured through new loans out of china and they become more dominant on the world stage then it was before. i think that is what is going on in the restructuring business. tom: what does global gdp look like? you know the imf view of a subpar five-year view. i can't see you going all imf gdp growth. carl: they call it a rocky recovery, but where is the recovery? gdp rolls along at a 3% rate, not much of a recovery. your take away is that they are flat as a board and straight as a line for five years and that has never happened for. if you read -- happened before.

if you read there is summers on that, they said this is not happened before -- if you read larry summers' review on that, he said this is not happened before. we want to look at the variance that the imf doesn't forecast and there are risks ahead of us. i heard you talking to marvin loh about the risks and their are risks out there and we have to keep in eye on the risks. jonathan: that is a really interesting last point to wrap it up. carl weinberg of high-frequency economics. we talked about the earnings we expect, bank of america and then goldman sachs. right now j&j big in the race. looking out from here, a range from 10.60 210.70, up from 10.60

5 -- 10./60 to and .78, up from 10.65. lisa: johnson & johnson is up year-over-year. all of these highly positive at a time when people are expecting low results. i wonder how much we can talk about a behemoth with j&j with specific issues. tom: 6.9 million is up to yours. i will read this, j&j first covid-19 vaccine revenue sales $747 million, the estimate was $204 million. i have no idea what that means. it is just an oddity. lisa: the talcum powder and

legal bills lawsuits has been a big issue as they try to fight some of that. even with that cloud hanging over, they can sell it. jonathan: i had no idea they were making covid-19 vaccine revenue at j&j. lisa: i have gotten my booster and still got covid. tom: 9.2% return in the last 10 years. jonathan: the stock is up by 2%. later this hour earnings from bank of america. earnings on the s&p up. ♪

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jonathan: week begins with earnings from bank of america and goldman later this morning in morgan stanley tomorrow. equity futures assertive of better data. the nasdaq of .6%. in the bond market, quiet repricing the two year yield. a couple weeks ago, 3.60 on the two-year, yesterday, four point

28. right now 4.16 -- 4.20. right now, 4.16. the fx market, euro strength, euro-dollar south of one point 1.07. bank of america today alongside goldman. morgan stanley tomorrow. after the close a little later on this afternoon, united community banks, western alliance. a big focus. tom: western alliance is a big deal, outlier. jonathan: is a west coast bank. tom: there are different west

coast banks. zions has always been a struggle and there are certain banks where riveting knows when you hear the name, what is going on now and i would suggest western alliance is one of those. ritika: many of -- jonathan: many of these names we would never talk about. we would just look of the global economy and move on. tom: spx breaking out to new heights, 41.92%. for global wall street and for american wall street, now is the time to stop and lean forward. david konrad have done -- has done two tours of duty at keefe bruyette and woods. road to have you on today. 48 thousand people at goldman sachs, a quarter million bodies.

i know when there is stress, bodies go out the door. will there be layoff announcements today? david: probably not today. we have seen a few and that will be the trend throughout the year. we are seeing much better trading than we thought coming into this quarter which will help. there are long-term pressures that will weigh on returns. tom: what does it mean to see apple, goldman generate a 4.15% savings account? what does that? ? mean for david: mr. solomon david: goldman has an -- what does that mean for mr. solomon? david: the fact that they are borrowing on the savings account is created for goldman. the interesting thing is the pressure it puts on the rest of the industry. the savings account at north of 4% is a staggering premium. lisa: are we learning anything

from the big banks earnings? we get guidance and we are not sure about setting aside more loan losses and doing well and don't want to celebrate. ari learning anything more substantial? david: -- are we learning anything more substantial? david: it was a very positive result in will be an outlier throughout the earnings season. the other names have been somewhat more in line with expectations. the key is declining overall deposits. more important a negative deposit shift and i mean checking account non-interest-bearing deposits are down mid to high single digit quarter over quarter. that is putting pressure on the cost of funds. lisa: when will we know what their burdens -- verdict is? you are using the data point to

fit their narrative. when will you be able to sate decisively, shows there is a lack of credit availability under the top tier of companies and banks? david: a couple points here. one, bank of america will be interesting today. we saw jp morgan had relatively lower costs to the group. how much of the benefit from the flight of the stress regional banks this quarter. we haven't seen any bond growth. we have seen credit cards and growth there but be careful what you wish for. i think the trend that won't be showing up is the increased the quiddity requirements -- liquidity requirements will dampen growth. tom: i think of kbw, sandler o'neill where you were doing

banking 24/7. do you just assume a new round of consolidation and combination in the kbw world over the next three to five years? is there a new acceleration to go from 1000 banks down to x thousand ? david: it is tough to get deals approved. balance sheets are limiting new mergers. three to five years out, the regulations and environment is getting more difficult and we expect a lot of consolidation. tom: what is the average blended markdown right now? on par, 100, trading, markdown? david: i think it is more in the 10% markdown. we are really focused on the bond books right now.

it is not really markdown per se but liquidity associated with it. you have to work the two in concert. we are seeing much better rebound in those this quarter, about 30% better than what i thought in terms of the rebound of the negative we saw last quarter. jonathan: just got mellon crossing the bloomberg and it is deposits. 281 billion, the estimate was 277 billion, a touch better. a bit of commentary from leadership, saying we need to remain vigilant. we are pushing forward with the strategic agenda. lisa: the deposits came in better than expected but net loans came in lower than expectation and this speaks to how banks are managing the bottom line. it is speaking to the

restriction in credit extension and that perhaps could be the leading tea leaf. tom: david konrad with us. i look at bny mellon and what is the expectation of the total return from a bank? david: it is interesting. we have said that a lot about the universal since the great financial crisis. utilities, increase regulation, i don't think that is the case. jp morgan put up 14% capital. it puts more stress on your strategy and management team. what we are seeing is the bigger banks diversified revenues and delivering better expectations moving forward. lisa: what is more interesting

the deposit growth are lack thereof loan growth? david: i think the loan growth is more of the economic side less impactful for the economic models but does concern about gdp growth. the deposits is the uncertainty that creates deltas in near-term earnings expectations. we have gone through a period of qe and government stimulus and people working from home, and we have a lot of deposits at the bank that are going to be normalized here. i think this normalizing trend, we have been here before. checking account balances are 35% total balances. that trend has happened before but was happens -- hasn't happened before is that trend reversing we are having liquidity regulations. those things working together do limit the credit extension.

jonathan: wonderful to hear from you. david konrad of keefe bruyette and woods. we haven't had a shocker yet. we haven't had a shocker in this earnings season. lisa: do we have enough time to get a shocker? some people trying to find an aha moment to cling onto. do we get it or do we need more time for credit tightening and fissures from silicon valley bank to play through markets? tom: posits walk out the door, and wiped with those headlines. -- deposits walk out the door and bmy lead with those --bny lead with those. is it a big deal if they catch

up? jonathan: it will certainly be a big deal for the regional banks relative to some of the major clients. tom: i agree that some banks come and mentee has held up as a trophy bank. like buffett says, the water runs out and you find out how dressed the emperor is. lisa: a bank making loose loans to a lot of people for low interest rates, it can't do that if they have to pay up for those deposits and the cash they are using. they have to either hike up the interest they are going to charge or underwrite fewer loans. tom: i am watching the loan demand. i agree, where has the loan demand been? that is the question in america at least. his loan demand there? i am not sure it -- is the loan

demand there? jonathan: not sure. jonathan:-- i am not sure. jonathan: in the next hour, we will catch up with apollo's james zelter. these guys have raised so much money. how easy was it to put that money to work? tom: you have to measure the distress and act when the fear is the greatest. jonathan: coming up shortly, bank of america earnings. lisa: with the first word, i'm lisa mateo. video released from the kremlin shows russian president vladimir putin eating officers in

occupied regions in ukraine, the second time in a month putin has toured the territories. ukrainian forces preparing a counteroffensive that kyiv hopes will have a decisive. ubs says it will use shares it repurchased over the last year to finance the acquisition of credit suisse. zurich backed lender bought back 299 million shares. the largest bank in switzerland said it is using repurchased stocks because it didn't want to use new stocks without consulting shareholders. blackrock said to start sales and looking to offload $114 billion of assets from failed unders, signature bank and svb.

ceo tim cook opened the first store in india betting it will help accelerate sales growth. the sales in india it a new high of $6 billion through march, highlighting the market's increased importance and they are exploring ways to reduce reliance on china. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo, and this is bloomberg. ♪

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>> can we stop calling it a baking crisis? jonathan: tell me why it wasn't

a banking crisis. >> this was a banking tremor. a few banks were badly supervised went down. the big banks are just fine. the big banks are benefiting from this. not only are they viewed as safe but they have diversified business models. jonathan: the big banks are benefiting from this, this was mohamed el-erian at the imf meeting last week. sonali basak, the numbers look good. she and ali -- sonali: coming in line with expectations and a little above expectations are the net charge-offs. this is a time where analysts are watching for how consumer credit is doing. so long as they are lending a little more, wall street is accepting they will lose a little money on loans, not more than expected.

through the roof on fixed income trading. let's see how long that boost lasts for. jp morgan, citigroup, bank of america through the roof. non-interest expectations above interest as they tried to gain share. jonathan: how do these numbers compare to what we heard from j.p. morgan last week? sonali: when brian moynihan waits to tell you what they expect for the year in interest income. when jp morgan raised fixations by billions of dollars, pressure on bank of america to keep up. you have average deposits declined by 3%, an interesting number to keep an eye on. deposit flight is at bay. a record number of digital logins, exceeding $3 billion --

3 billion logins, 100 30,000 new consumer checking accounts. -- 130,000 new consumer checking accounts. tom: apples to apples of the bloomberg, deposits, 1.55 per jp morgan and people like us compare and contrast the banks. you say bank of america keeps up or catches up, is revenue up 13%? what is the quality of that revenue up 13%? sonali: the return of 17% is through the roof but below jp morgan and the difference is not just the consumer of the type of consumer. you have a huge asset and wealth at jp morgan. tom: bank of america doesn't have that?

sonali: they do they have lots of american households. if you look at it, bank of america has shown the average pico score per consumer -- fico score per consumer has gone up over the last few quarters. who of the customers they are banking is an important question. lisa: another way to say it is there is a drag on the highest quality borrowers by the biggest banks, taking them up in the smaller regional banks are left to extend loans to the less creditworthy borrowers, which puts them in a more vulnerable position. is that your take away from earnings that surprised the upside on the behemoths as we wait to hear from western alliance later? sonali: there are hundreds of thousands of clients flocking to bank of america that are quality

. when we think about the weakness of the regional banking system and the flock to quality, can the big banks take on how many clients are leaving other firms behind, especially when you have firms operating in lending and deposit areas that some of the banks were not in. lisa: want to hear from brian moynihan who is talking about the incredible profitability for this bank and the fortification of its balance sheet. he also made talk about commercial real estate and the mortgage presence which is significant. what do you expect? cinelli: if rate -- sonali: they are not as exposed to some of the areas as you saw the regional banks exposed to. what many people don't realize about science is not only does it have commercial real estate exposure, it has more total loan bulk than others tied to

commercial real estate, particularly office is not the same bank of america, which is stronger securitization function. tom: you and i said on the deck with mr. moynihan and a banking nerd fest. there pdf presentation in this is the single best of all the banks and that is because of the nerd fest that is brian moynihan banking. it is a joy to read a 39 page pdf that actually touch what they are doing. what is the fed going to do? i don't care. average loans and leases increased 7%. total nerd fest pdf presentation. sonali: i just want to put more color into it.

credit card balances, partly offset by improved acro outlook. brian moynihan -- macro outlook. brian moynihan has been saying this as others have been gloomy. tom: they have a charts of checks written versus zelle transitions. the checks are going down back to 2020 and the zelle is going up. jonathan: it indicates the time we have going -- we have been going through. lisa: and what else can i get for how much income? can i just go point out one other issue. expectations above expectations come $1.9 trillion -- 9.9

between dollars versus the estimate of -- 9.8 billion crushing it. sonali: the competition never went away. we saw boiling back of talent at bank of america. remember how long brian went hand tried to hang on -- brian moynihan try to hang on and move bankers around. i wouldn't call it a full-scale comeback but you see activity coming back. the fixed income numbers are nothing to cry about. by side competition is stiff. every major hedge fund thinks the bond traders, when they used to trade equities. that means competition for talent. jonathan: goldman in the next hour. what have we learned about trading? sonali: the bar is so high, you

have banks beating. you want to see goldman win in a court business. equities, a few quarters they beat morgan stanley, which is pretty remarkable. the consumer business after the apple announcement yesterday, a lot of questions about what david solomon's ambitions are, especially when they said they are scaling so much back. jonathan: coverage from sonali basak will continue. a decent couple of days of gains or bank of america, following jp morgan and citibank. we look forward to goldman sachs in the next hour and goldman sachs -- tomorrow. tom: 4.1 percent is a legitimate deposit rate, the real deal. jonathan: decent enough. lisa: better than some market

money funds. tom: triple leverage, a gross of 12% and you take out the fees and it is good. sonali: jonathan: -- jonathan: i will take five if we can get it. lisa: is hard to find unless you are investing in more speculative assets. you look at the prospectuses and you see what people's desire for safety exceeding the desire for 5%. tom: check writing is down. jonathan: why are we still writing checks? i know people in their -- pay the rent in manhattan i checked. -- pay their rent in manhattan by check. tom: are we going to the coronation? jonathan: we are not going to

the coronation? goldman sachs earnings in the next hour. ♪ ♪ ♪ the vehicles are all-electric. the feeling is all mercedes. the choice is all yours. see your dealer for exceptional offers today.

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>> baking data massively improves. >> i'm not sure regional banks finding stability is enough to help the market. >> we further tightening due to bank lending standards. >> a soft landing is possible but not easy to do. >> inflation is high and sticky and not going to get back to target anytime soon. jonathan: so far, so good this

earnings season. live from new york city, for our audience worldwide, good morning, good morning. this is "bloomberg surveillance." equity features on the s&p 500, positive .4%. the premarket up by 2.6%. tom: a lift from china, 4.5%. secondary lift moments ago, up to the 4200 level. what percent of the street is that? jonathan: five minutes away potentially. tom: 60% of the street is looking for something. jonathan: we talked about the range from 3800 4200 all year and if we break it, it looks like we will break it to the

upside. china gdp retail sales better than expected. citi in for six handles on growth for gdp. trading numbers from bank of america decent is that decent for goldman? lisa: does it take to set up the short squeeze? if you look at the short positions in the s&p, highest levels going back to 2011. the catalysts are not enough because they don't say the economy is all clear. they are saying wall street is minting profits and the millions at the expense of smaller firms. tom: the banks of -- the bank of america sales of the quarter were impressive. the short squeeze is important. there are different kinds of short squeeze.

the traders spend time in the hedge funds. are they getting squeezed out or panicking, but there is also an american public short squeeze coming out of covid, the pandemic. when do they throw in the towel and become optimistic? certainly we tweeted an hour ago, bank of america research, nowhere near that pending short squeeze. jonathan: goldman sachs numbers 20 minutes away. tomorrow, morgan stanley. western alliance also leading an effort. equity futures on the s&p 500, a lift up .4% year yields pushing higher on the back of better than expected manufacturing data. a ton of fed speak later this week. the tenure up 3.5870. lisa: shareholders are caring

because you are seeing a pop not the broader reaction in the other areas of the equity markets. we have bank of america earnings . and then goldman sachs is coming out. western alliance after the bell and first horizon and other regional banks for the rest of the week to be a big earnings season. i don't know whether we have enough information to be conclusive to get the short squeeze so many are talking about. we will get housing permits and housing starts later and how much are people actually beginning to build houses again because there is demand and lack of housing people keep talking about. the fed governor michelle bowman will be speaking at georgetown university. very curious to see whether she takes the same tone of what we heard on friday, that basically we have a lot more to do in the baking crisis was not a crisis,

full steam ahead with rate hikes. jonathan: going into this weekend, the quiet period ends and number fed speak. with us is dan greenhaus, chief strategist at management. -- at sofus alternative asset management. is it 8:00 it -- idiosyncratic or too early? dan: there was a debate from the begin this was not idiosyncratic. there were signatures that i never really found were systemwide. that is not to say the unrealized losses is not a real thing. to give you the best that i could give you, silicon valley bank had 17 ranches and 150,000 checking accounts -- 17 branches

and 150,000 checking accounts. we were never particularly concerned about there being a banking crisis. certainly there is an issue that has to be dealt with. i don't know that hearing from j.p. morgan and wells fargo and what western will tell me as much more consequential. jonathan: we are trying to see if we will see a tightening in lending. have you done any conclusions? dan: a few basis points of gdp. i don't have any new news on this paired we note lending standards have been tightening and we assume they will tighten further coming out and on balance the level of tightening we have seen is traditionally associated with worse economic outcomes than better economic outcomes. i don't think that narrative is likely to be changed from the large banks that loans will

expand. there is a lag and i think it will slow gdp. tom: do we overweight what we think other bets of hedge funds if we are trying to establish a strategy longer than three hours, a nine month or three year strategy? is there value in measuring the long and short that's of the world? dan: we are not active traders, if you will paired we have owned positions for 10 -- if you will. we have owned positions for 10 years. actively trading hedge funds that flip incisions. -- flip positions. momentum strategies are going to be derived from trading activity and be related to that activity. we are a long-term focused investor and take a position to control the company and we are

the second or third-largest owner. we are not actively participating in the market. is there value in those strategies? sure, but values for a specific type of investor, not our client. lisa: which is against the bearishness out there has been the credit markets that you focus on has been the longer-term bets. people are looking more for opportunity than losses and you see that under the hood across the board. do you make that people still have confidence this is going to be a shallow recession and that we will emerge on the other side at higher rates? dan: i know everyone says it will be a shallow recession and i find that statement to be more a function of comfort than analysis. it is very easy to say this is going to be a shallow recession because there is career risk.

the likelihood you are wrong and saying it is more than that is quite high. that said, and i don't want to speak for you guys, but how many times do we follow up and say what do we mean by a soft recession? basis points moves in the unemployment rates. if you think unemployment is going up by 1%, that is somewhat of a shallow recession. as we all know, there is really no instance to the unappointed rate goes up by 1% and stops. lisa: it feels like we have been in this purgatory that we are on the one hand or the other hand and lack of clarity. when you get clarity of what we are heading into? dan: you and everyone else is the top question of the day. i would've told you at the start of 2022 that by the middle of 2023 we will be in something close to resembling a recession. here we are in the middle-ish of 2023 and i don't think we are anywhere close to a recession.

i have been in public bearish on risk assets over the course of that time and i more or less remain so. it is remarkable the way the economy has performed in the face of rapid increases, which brings up something you were talking about in the imf report and the discussion of the rate of interest. i think there is a lot we don't know about the current environment. with the national rate of interest, it is fair to say whatever we thought the national rate of interest or what balances supply and demand, is higher than we previously thought. what we thought the economic damage would be from 500 basis points of rate hikes is not what we thought. it might take 600 or 700 to do the same amount of damage without 500. tom: the bloomberg index, out to a positive .19, not doing what

jay powell wants. jonathan: i am tying everything together. march 8, two year yield north of 5%. is that what we are going back to given what you have told us? dan: if you look at the three-month and six-month bill yields, i was surprised at the level of decline in the two-year . a drop of that move and you see it in the fed fund futures. the level of pricing adjustments seen excessive to me based on my imaginal -- my original comment. tom: doug kass is listening and has a yankees question but he says dividend spx 1.7%, this is talking about 5% money. how does the stock market elevate of the 5% yield? dan: it is a tremendous

headwind. it is not sufficient to look back historically and say the market rally in 1983, interest rates were much higher. there are challenges to the equity market right now from the fixed income space. in the credit market, the high-yield market is yielding 8.5%, which isn't particularly high-yield. even triple c is yielding less than 1000 basis points. if you had anything resembling port economic expectations priced in, they simply wouldn't be there. jonathan: credit spreads would be 4.4. lisa: if credit is a leading indicator, it is not indicating much stress. jonathan: great to catch up. dan greenhaus of sofus

alternative asset management. earnings from goldman 15 minutes away. lisa: with news from around the world, i'm lisa mateo. the group of seven nations vowed to support ukraine for as long as it takes in the fight against russian forces. g-7 diplomats met in japan and condemned russia's war against ukraine. they called for greater engagement with china to stabilize relations with the world's second-biggest economy, including a peaceful resolution with tyrone -- taiwan related issues. taiwan will buy missiles intended to repel a potential chinese invasion. congress approved the deal in 2020. taiwan had previously purchased ship launched missiles. the united nations making a renewed appeal for international aid for afghanistan.

afghanistan remains cutoff from the global financial system since the taliban took over in 2021. foreign aid is needed in fort food and -- import food and art the economy. afghanistan is one of the world's poorest countries in the world. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> our national debt is too high. far too high, and the problem is getting worse not better.

american debt is a ticking time bomb that will detonate unless we take serious, responsible action. unfortunately, i have not heard from the white house since our very first meeting. in the coming weeks the house will vote on a bill to lift the debt ceiling into the next year. jonathan: that is the plan and goal, house speaker kevin mccarthy addressing the new york stock exchange in the last four hours. on -- last 24 hours. unclear if his party is on board with that plan. bank of america numbers better than expected off the back of better-than-expected numbers from j.p. morgan, looking for morgan stanley tomorrow. equity futures on the s&p 500 up .4%, a lift in the equity market. the smallest of rallies in the treasury, yields down a sickle basis point, a 10 year, 3.5870.

tom: we are watching the equity market and nudging toward 4200. and you heard what dan greenhaus said. it is an important day if we get a break on this stuff. jonathan: i think what dan greenhaus was getting back to the conversation we were having earlier saying he does not see a recession on the horizon and making the argument that maybe the fed needs to do more to slow down growth. that was the conversation of a month ago. lisa: he said potentially rates have to go to 600 or 700 basis points to achieve what 5% would have achieved in the minds of many before. this is what we were talking about before march 8. why is the market not coming to that same conclusion because people are seeing lower rates and inflation. jonathan: i was going to the

march 8 number, march 8 is basically the day before svb lou up, wednesday -- blew up. day after chairman powell opened the door to a potential 50 basis point hike. the two-year it was close to 5.1% that day. in the weeks it dropped to 3.55%, and now we have come back to 4.20%. that move is something worth paying attention to, off the bank -- back of several indicators, suggesting maybe we have seen stability in the banking system. the question from last month is the same, to what extent of the stress influences rate hikes, leaning the direction over the next couple of weeks. tom: you can watch the rates on the bloomberg terminal.

i will say who is that guy on the debt ceiling. i look at kevin mccarthy as a complete amateur and i am saying, is he getting the traction of boehner or ryan? he is out of bakersfield, california and a firefighter in years ago, when he came out of cal state, he has been in politics with bill thomas from day one. do we know who he is and how is he doing on this big event and with republicans? lisa: you wanted to make the debt ceiling -- annmarie: he once to basically put the blame at biden's feet saying it is the president refusing to negotiate with me. he spoke at the new york stock exchange and said he has not sat down with the president in 75 days and said the republicans will have their plan.

the white house said we are willing to negotiate about fiscal spending but it is a separate discussion and you have to raise the debt ceiling in a clean way. the republicans have yet to suggest a budget. they will put a bill through congress and put the debt ceiling fight into next year and raise it for a year and would come with spending cuts. tom: we call it kicking the can down the road in case that is a new concept for you. they are so individualistic and they don't speak to an institutional republican belief, a foundational republican belief. does that belief exist? annmarie: this will be part of his problem. he has to get 218 republicans to vote for it. not a single democrat will vote for it. no one expects this bill to go anywhere, dead on arrival.

he has to communicate effectively to the white house and to america that he is able to get this bill through, so then he has a little bit of go shooting power with the white house. white house is saying and it was put well yesterday, you have seen this administration go after the republicans using their own leader's words. they quote president trump in memos saying i can't imagine anyone using the debt ceiling for negotiation. they are using the past president's words against mccarthy. lisa: we deal with this every year with the debt ceiling debacle or debate. when do we have to start caring more? when do we find out how much time we have until we potentially run out of cash? annmarie: the treasury is talking about june 5 when they

would like to see action move. for the actual real hard and fast date, no one knows and i believe today is the day you have to get your tax money in with the irs. that could change the date. anywhere from early summer into the early fall is where the x date will lie. the issue that congress has is they are here for two weeks and then on recess. lisa: what is the calculus pushing it to a couple months before the election? annmarie: it would push it before the election but congress can use extraordinary measures but it would only be after the election they would have to be concerned about the x date. if they push into next year, the debt ceiling and fiscal spending becomes a republican talking point for the election, especially when they want to talk about things like the debt ceiling because they are getting

questions about other topics that don't poll well like abortion and guns. this way they can talk about the economy year when it is a massive election. jonathan: great to catch up. tax returns, you paid the irs in the last couple of days? tom: i did and i wrote a check. jonathan: of course you did. you can use a debit card. tom: they have a pay thing. they have gotten digital and can take your money at lightning speed. we were talking about this on the break. i looked at the deviousness of the tax season. with nelson rockefeller you paid a marginal rate.

now there is the fed, the state, and the new york city tax, fica and added up and you are back to a nelson rockefeller merger. what is it like in england? jonathan: not everyone has to do a tax return. if you earn up to a certain amount of money you don't have to file. i don't understand why in this country you have to guess what the irs -- what you all the irs. it doesn't make sense. tom: a posh person like you, how thick is your 1040 in the united kingdom? jonathan: i never did one. tom: you never did one? jonathan: i didn't earn enough

money to do one. tom: you should see mr. solomon's tax return. jonathan: the equity market, positive .4%. goldman sachs numbers crossing the wire. sonali: net revenue missing analysts estimates, not very clean read because there is this they are selling revenue from that business declining and they beat on earnings-per-share. we are watching the fixed income revenue come in below expectations. fixed income sales and trading at $3.9 billion, the estimate was more than $4 billion. we watched bank of america, citigroup and jp morgan and saw the number come in above expectations. goldman sachs core business, why has it come in below when the

others are up is a question. the loss they are reporting on the partial sale of market loans is $470 million according to goldman sachs. as a physician the consumer bank, there are a lot -- as they position the consumer bank, there are a lot of questions. you can expect the call to answer how quickly they would sell off the loan portfolio. the benefit that comes from selling the loan portfolio is a reduction in reserves, which means where other banks are taking larger provisions for loan losses, you are seeing that be a benefit to goldman sachs as well. this is watching goldman sachs change in front of your eyes as they boost away from consumer bank further into the asset and wealth manager under a new leadership structure. jonathan: is not a shocker but a disappointment.

the stock is down by 1.4%. some other big banks came out with tremendous trading numbers, better than expected. goldman does not follow suit on certain indicators. lisa: they missed income trading. they are supposed to be the trading house and supposed to win on this, particularly given that morgan stanley pulled back so dramatically number of years ago and they did not. the fact that they didn't raises the questions about the bread-and-butter business that made them goldman sachs. jonathan: bowman softer and the premarket. tom: a beautiful note was sent out by my favorite -- one of my favorite people. i got consumer platforms at $490 million, divided by a number at the top of the sheet and it is amazing how people are focusing on this consumer bank experience and it is such a teensy-w

eensy part. jonathan: didn't get more, even though goldman backed the apple product. that doesn't make sense. lisa: does markets have to lift it up or do they want to shrink it naturally and divert it perhaps to something more lucrative? i can't think of any other logic behind this. 3.9% and you get 4.1% on the newfangled apple goldman sachs kind of partnership. tom: consumer is a 4%. it is a joke. that is what everybody is focusing on. jonathan: goldman down by 1.4%. for the broader story, equity futures up .4%, a lift this morning. the nasdaq up by .6%. the two-year march 8 north of

5%. svb gets into trouble, it drops into the 3.5% and i would bounce back to about 4.20%. i wonder if that changes the conversation in the fx arc it's. euro-dollar, 1.0970. in the immediate instability in the last month and get indications in the last week that we are seeing more stability, this conversation is slowly that maybe the fed needs to go further. i think it is tremendously early days but that's where the conversation has shifted. tom: can you see an apollo credit card? can you see apollo getting into

this? jonathan: i am not sure that's what they want to do. tom: jamie shelter is with us. he joins us now with decades of experience. let's bring in a gentleman with this overview of this crisis or noncrisis were in right now? jonathan: can we start after the days of svb? this is your moment to make things happen? how difficult was it to deploy it? jim: you have to differentiate between a crisis and you were talking to a lot of borrowers and institutions that needed help. that week we did a large transaction and helped out pack west but i think what you're talking about this morning is a deposit crisis evolving into a

business model question and that is where the overall evolution of the markets are. we have been very busy, busy on all sides of our business and there is no doubt that this withdrawal of capital, is not a credit crunch but there is a transition with the higher cost of capital in debt financing across markets. jonathan: can you describe the spaces where you expect traditional banks to retrench from and where there are opportunities for you to step in more? jim: we've had conversations about private credit over the past decade it has been focused on sponsor finance which is not investment grade. the real opportunity is a variety of acid-base class strategies whether it's commercial mortgage or resident

mortgage, finance, aircraft finance. regional banks, those were interesting businesses. the businesses that we bought out of credit suisse. those businesses, the underlying risk is the investment rate and for the most part, because of solvency in europe or other rules, those have become much more capital-intensive and capital consuming for the banks. those asset classes that i mentioned, that is 40 trillion versus a 10 trillion private credit opportunity in the u.s.. lisa: what i did not hear you mention is the unsecured revolving line of credit which is what a lot of these regional banks delivered to smaller companies? is that a no go area at this point? jim: those are smaller,

corporate loans and someone needs to fill the gap on that. the cost of financing has gone up 200-400 basis points in the past month. those businesses are getting financing but that's where we believe the tighter financial conditions, that company that you're talking about is having a more challenging time right now in terms of financing. lisa: how does that change the equation when you think of investing in that size of company will have an even better profile than the worst one for those smaller ones? jim: at apollo,, if the capitalist coming from our balance sheet we are talking with companies that are less than 50 million. we have a portfolio of 16 portfolio companies. they will range in the companies

that they finance from 3000 employees to 80 billion of assets. those companies will lend to companies 10 million, 15 million in revenue. lisa: are they as attractive? jim: let's talk about commercial real estate. commercial real estate finance for the most part, a single a piece of paper, that was 350 when i came out here six months ago and at six 75 today. spreads have widened from 175 to 350. tom: i noticed that they gave back to properties. i want to look at the level of distress out there right now and i look at it as an economy standard. how blind are people like you,

you can't mark the market debt out there? was the opacity in the system? jim: if you look at the leveraging dollar market you have to look at the 4.5% in the forward calendar. if you look at commercial real estate, you have a trillion and a quarter that means financing in the next month. you are not seeing brought distress yet. you are in the transition period , we have 14 years of low interest rates in the real impact on evaluation takes a while to filter through. in the pe sector market, those names are trading between the high 70's and low 80's. credit secondaries are in the high 80's, low 90's. you are seeing it in some markets but this idea of tighter financial conditions, this takes

3, 6, 12 months to evolve and as you talk later on today with big banks reporting today, it will be interesting to see on the regional banks, they went from a deposit crisis to a question of their economic business model. how do they make money long-term? we feel that our business model has only been and hands. we have 10 year liability models, it allows us to be a robust, stable lender. tom: the heart of the matter to me, the brookfield article is definitive, year-over-year the monthly payments on blended pieces of properties went from 330 gazillion to 180. somebody has to put up cash to put up restructuring. this is a whole new world for a lot of people.

jim: for a decade plus, equity was a beneficiary of debt that subsidize the equity. the consumers of rate beneficiary. back to our model, we have gone through a really tough quarter but 4% of the population, we have the indeed financial markets of the world and we are evolving right now with a higher cost of capital.

jim: if you take the last 25, 30 years in the evolving road -- role the ability to operate to bring the proper liabilities to the equation. our investors, sovereign institutions, they can make the 5, 10 year commitments. we just have a lot more tools in our toolbox. we are able to provide a lot more capital. the pack west solution happened in three days. 3.4 billion facility for them.

it was a high quality asset that were investment grade. lisa: how much cash do you have in anticipation of the doorbell ringing? jim: in powder, in excess of 4 billion. there are a lot of conversations about what is happening in japan with the yield curve control. i think that's a really interesting story for the latter half of the year. the reality is, we are in an evolving market with the deposit liquidity crisis and an evolution of the business model and it will be a time of tougher

conditions. jonathan: i want to build on the question, when do you expect the doorbell to be nonstop ringing because it seems us what you are looking for. jim: at the time that happens all the activity has occurred. you need to be in the markets every single day. the reality is that private credit took a step back. the reality is that the m&a market is quiet right now and lmp firms went a do something. tom: i'm looking for some news here this morning. jonathan: this was fine, thanks for coming in. james charles zelter apollo global management llc from. lisa: we can take on some of

that business at some of these regionals. tom: can i suggest the good news of j.p. morgan versus of what we're seeing in goldman sachs, i have never seen it. jonathan: look at the spread on what j.p. morgan delivered on friday, goldman sachs is done by -- down by 3.4%. vishwanath tirupattur from morgan stanley i'm next. equity futures are up .4%. this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word i'm lisa matteo. the united nations says that

fires in sudan's capital were targeted at diplomats and emergency staff. they targeted homes of those working for the u.n. in downtown areas of the capital. that's according to an internal u.n. document. the gunmen sexually assaulted women and looted belongings including cars and personal belongings. forces close to them have clashed for the past four days leading 180 people died. china's economy grew by 4.5% in the first quarter from a year earlier. the fastest pace in the year. a rebound in consumer spending and a ramping up in government infrastructure spending helped gdp growth come in faster. there is a more mixed picture with industrial activity somewhat subdued.

the data from morningstar puts funds a daily numbers and just not include all of their data management. the challenge the firm faces to retain clients after the government back to cover. spacex is looking to launch its rocket. it's the second attempt for the flight. a delayed the rocket system, the uncured mission is a critical step in spacex plan into sending humans into deep space. powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa matteo and this is bloomberg. ♪

>> i think somewhere between here and 2.75 is a good reentry

level. i think it's difficult to imagine us getting us back to 4%. looking for that move lower in real yields. let us show you what the 10 year looks like right now. the tenure is 3.5718. futures are so positive by .41% bank of america is up one point 48%. bank of america is allied -- is a mind from what we saw in wells fargo. it came out this morning and crushed trading figures. some disappointment and extent,

goldman sachs. lisa: this is what we keep talking about, how much was a distraction was a consumer banking side of things. tom: i look back at the moment where j.p. morgan announced their earnings and i compared it to goldman sachs at the same point in time. j.p. morgan is up 8.4% over the recent days. goldman sachs over those recent days is down 1.4%. that is a 900 basis point delta between j.p. morgan and goldman sachs. i have never seen it. jonathan: that raise for j.p. morgan was a unique moment that drove those skins on friday.

tom: and to be fair it is not apples to apples. from a sheer performance standpoint, you have to look at the goldman sachs board and say where are we going three years from now? jonathan: for a long time, i know you have said this pretty explicitly or implied it many times, you were waiting for the headline where they exit the business? tom: there is a way to exit a business and save face. it is a ballet among courageous people and involves a lot of employees. these are painful things. you wonder what you were doing with the 12.2 billion? jonathan: hsbc under pressure from one of its top shareholders

to consolidate the business in asia? tom: does goldman sachs want to be associated and compared to the hong kong exchange? jonathan: there are a lot of financial institutions that are under pressure to become something else? lisa: looking at the market cap of morgan stanley and goldman sachs. right now, morgan stanley is 149 .3 billion goldman sachs is 100 18 billion. that delta is widening as we talk about who won this game. tom: we have the banner, price-to-book. this is the real apples to apples. morgan stanley with a substantial premium price. it is a j.p. morgan like price-to-book. jonathan: morgan stanley's turn tomorrow. tom: we will get said this with

the guest here. right now, let's get with vishwanath tirupattur a chief income strategist at morgan stanley. economist in strategist do not comment. we have heard guests parler a 10 year yield to 3% are between 3% and other with fear in their voice price down, yield up. 12 months of -- 12 months out where's morgan stanley? vishwanath: i think we are closer to 4% will be a huge stretch. lisa: you can see the data keeps coming in persistently strong

enough to keep things on track. it seems the banking crisis was not a crisis in the way people were worried about. when do you talk about referring back to pre-march 8, this idea that this economy has enough heat to sustain higher yields for longer? vishwanath: a few things to keep in mind. even though we have not had any new bank failures in the past two weeks. the fact remains the banking system, the dependence on the bed facilities, the bank funding program. it is still pretty high. 140 billion and to assess suggest there is still a lot of residual tension related to liquidity within the banking system. it does not indicate to us the banking challenges that we are facing are behind us.

keep in mind the effect on hyping of financial conditions -- tightening of financial conditions that comes from a crowd of supply that has yet to be played out and we will not be so confident that the challenges from march are behind us. lisa: are these credit tensions being reflected in u.s. credit markets? vishwanath: they are reflected differently. they reflected in the sectors commercial real estate, most directly front and center because of the exposure that the regional banks have and the crux of the challenge is the smaller regional banks, it's not with the big banks. the smaller regional banks have disproportionate exposure to real estate debt.

tom: define your world with ellen sutton errors world, does yield and inflation follow nominal gdp and if we see damp and nominal gdp over the next 1, 2, 3 years, do you assume a lower rate regime? vishwanath: as the economy slows we should expect to see inflation coming down. that is our base case forecast and we will expect to see that gradually come through. as we go through the rest of the year, the expectation for future rates get priced in. that is our rationale for the lower 10 year number as the economy slows, expectation of future yield cuts comes in and that meets the level of the

10-year treasury yield loan. jonathan: can i finish on this, is there any scenario in which you could envision whereby we go back to march 8, pre svb? vishwanath: not really, we have had a major, significant turmoil in the banking sector that came with a substantial intervention on the part of authorities and that will have to come with the regulatory change in all of that does not take us to where we were. jonathan: this march 8 number is interesting. north of 5%, chairman powell talking about 50 basis points. if you think this is isolated, this limited macroeconomic spill

over, why would we not go back to the conversation? lisa: that's what you're hearing from some people and others are saying there is credit tightening on top of what the fed has already done resulting from the recent turmoil that we haven't seen yet. that is the purgatory we are in. jonathan: it is still super early days. we have the regionals later and we will get a flavor for what that looks like for medium and small lenders for the next week and lisa has talked about this date in early may, the single loan officer survey. that will be keenly watched in the next few weeks. stress is one thing. but lending standards, that is something that will feature in the conversation. tom: what to follow in the banking reports is more important than it's ever been. jonathan: on the equity market,

sam stovall of see fra is coming up shortly. ♪

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>> the baking data has massively improved. i'm not sure that regional banks

finding stability is enough to help the market. we already see further tightening. it is not easy to do given where inflation is. inflation is high and sticky and it will not get back to target anytime soon. this is bloomberg surveillance with tom kean, jonathan parra and lisa abramowitz. tom: we welcome you all, on television radio. every saturday morning you look through barons together, 41 92 here. which bankers are on the cover of barons coming up on the saturday? is it jamie die vendor just mr. solomon do a solo turn? jonathan: the big banks are doing a tremendous, and then

goldman underperforming here on the specific side of the trading business down by 3.3%. tomorrow, onto a morgan stanley after the close. typically on the front cover of a financial publication would be a major bank and ceo. the regionals, some things we wouldn't typically talk about, that is the focal point. tom: we have a select few were focusing on? a handful 25? jonathan: i don't think any of us know. we will get some clarity on that

name in the week or so. looking at the broader story outside of the financials, they want to understand how much lending standards, credit standards will tighten in the coming weeks, months. i think the federal reserve the answer to that because they need to work out how they need to coordinate. lisa: what we are seeing are fewer loans getting underwritten. tom: social media is focused on deposits.

jonathan: the question about u.s. resiliency. you can see that backed up with two year back up again so for 20 in the journey of the last month, march 8 the day before svb blows out, then dropping back into the three 50's. lisa: are we seeing the tipping

point at which there could be some surprises, blowups and just the fed lean into that? tom: i looked at the six standard deviation move off the six in march, it's a huge move forward. jonathan: at the close 4150 one yesterday. the s&p 500 is a tight trading range. there was a feeling we went break to the upside. tom: to all the fancy people it is about emotion and buying straw hats and winter. long ago and far away a guy named stovall said falling out of a basement window isn't too painful. joining us is sam stovall

are we in a bull market? sam: the low was set last year and we will have to see if it was challenged or eclipsed. i think there is so much negative emotion that the only surprise will be to the upside. the clients in the first quarter . there are many behavioral short squeezes along the continuum. have we had any indication had a

short squeeze from the public that says we don't own enough equities? sam: there is a lot of cash waiting to be put to work. the commitment of traders does indicate that there so you get some number i think this will trigger a lot of short covering and give us a nice move in the near term. i worry about valuations at this point we are trading at a 12% premium on forward basis compared to the past 20 years. lisa: i want to talk about cash on the sidelines.

what will incentivize them to go into the equity market when there is so much concern when money isn't just on the sidelines anymore? sam: it's an issue of fomo, if we see equities move higher because of the short squeeze we see the markets move against the majority of the sentiment. as jonathan said earlier, with volatility of the yields, they will be looking towards equities

once again. if you go back to 1990 which is fars they have sector level data and look at the nine month. technology was one of the outperformer's. tom: the reits would blow up every couple of years how do you know when to buy when they go from a one star to a five star? sam: the reits have done quite poorly. they are keeping their head above water but that compares with a person gains for the s&p 500.

there are some out there that are worth owning out there. it is wonderful to hear from you sir. with sub select names in the mix. bank of america has concluded its first quarter earnings call. some headlines from that call. the cfo saying the bank is seeing less demand for mortgages. unsurprising for many of you. the pressure to raise rates in a competitive market and this one was interesting, consumer spending not seeing cracks in the consumer portfolio. thus the latest from the bank of america and cfo. lisa: we have seen that from citigroup, maybe this economy that surprised with this resilient has more steam behind

it and will necessarily end up with a higher rate simply because of the amount of cash in the market. jonathan: bank of america up .5, how did these big players read the consumer? tom: i think is far more idiosyncratic bank to bank. the super regionals have a lot of big bank characteristics but beneath, but beneath that are regionals it is completely different stock the stock. lisa: big banks have increase their fight goes gorgeous. who is left with the less credit ones? does that change in terms of the have and have-nots? jonathan: do you keep track of

your credit score? lisa: not anymore. jonathan: i went to a monthly. tom: do they have that silliness of the u.k.? jonathan: credit scores? yeah. getting credit here is very hard. lisa: do you evaluate what could have been the driver lower? jonathan: yeah, they tell you. lisa: do you get angry? jonathan: i don't get angry, i fix it. you can drown in resentment with these things. lisa: you've never drowned in resentment? jonathan: never. tom: you are so sensitive. jonathan: i got into a car with

tom ndc at 4:00 a.m.. he goes straight to the front seat and he pulls the seat forward and starts complaining about the car. he gets in the back, slams the door as hard as he can. that is a 320 score right there. s&p positive .4%. lisa: keeping you up-to-date with news from around the world. video released today by the kremlin shows russian president putin meeting officers. this is the second time he has visited the territories. the ukrainians are hoping to mount a counter offensive. russia has some plans for an offensive of its own after failing to gain ground. bloomberg has learned that

blackrock will begin selling failed bank assets kicking off with mortgage-backed securities. it looks to offload 114 billion of assets picked up from failed lenders, signature bank and svb. tim cook opened the first apple company store in indiana. the company's sales in india hit a new high of $6 billion in march highlighting the markets importance. it is exploring ways to reduce its reliance on china as tensions between washington and beijing sqa. powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa matteo, and this is bloomberg. ♪ we dissect the market from every angle. helping to build portfolios that redefine what's possible.

because investing isn't one size fits all. allspring. purposefully divergent.

>> the bond market is saying we have to be much more vigilant

about where earnings will go down and where they will go up. companies that have moats around them, technology company and other industries where you can see margin growth and revenue growth should be rewarded. jonathan: the latest in the equity market, a lip for equity futures. .4%. goldman is looking lonely on the trading side of things. the stock is down by 3.3% premarket. tom: is it a split or is it loneliness? it will be interesting to see how the sell side adapts to what they hear from mr. solomon on the conference call. jonathan: we will hear from

morgan stanley tomorrow and then the regionals through the rest of the week. if you want first republic, it was due to report last week. lisa: a lot of people will be looking at how idiosyncratic they are. looking at the story and wall street journal about a study showing few banks are really hedging risks. about a quarter of publicly traded banks reduce their hedges. at what point does that cramp their potential earning? tom: brookfield giving back to properties in and outside of washington dc. the bottom paragraph is some sort of year-to-year interest calculation going from three brazilian to 80 gazillion.

every single company has more cash in. when they say financial conditions will tighten that is bs first you need to put up more money. jonathan: that's balance sheet talk. have you seen chat gpt? it can accurately read fed speak and tell you if it's good or bad for the market. they can do it on a single name basis as well. lisa: they say that it's better than some experts. in the future we could have a chat gpt sitting here. tom: i'm on the phone with my brother is a fancy computer guy. there was a point where when you did code and you had to go to books to look at the next step, big and intimidating books and

they were lined up on the code. chat gpt is as big a move as that. it's seismically changing the computer business. let's get to brian w wieser from madison on wall principal. i won't ask you about chat gpt. what's so important here is the basic idea, when does everyone decide we have to be fewer players? brian: basically the potential discovery, amc will probably become part of some bigger company.

tom: is netflix on the top of the pile right now? are they the one that will acquire? brian: they will be in a good position to do so. they are only going to continue to grow on that front. their importance will only continue to grow as they continue to invest in content on a scale this on match. there is only about 30 billion being spent on streaming services. there is a lot of money to be pulled out of paid tv into streaming. lisa: netflix will be a fascinating story because they used to be the poster child for borrowing money to build up who they were. does this make them a

potentially problematic position because they have already acquired the content and raise the entry that much higher. brian: you have a conservative player on warner discovery. they scaled back their investment and that just creates opportunities for others. the discipline across hollywood is only applicable to hollywood not to apple and amazon when it comes to spending on video services. the competition may not be as intense as it was. lisa: how much do you think they will crack down on sharing passwords? some people share passwords with relatives and friends and that's one stream of revenue they might be losing. brian: they were encouraging sharing for so many years. there is a lot of new -- the ad

supported tear is meant to help to sustain that. tom: there is a lot of gossip in the industry. you read variety and all that. you've been brilliant on the ability of sports to maintain. is there a mood to put more capital into video entertainment or is it broken? brian: the only appetite for investment into content is in the streaming services. there isn't any appetite to invest into the linear ecosystem. sports will continue to benefit and grow in terms of what's getting spent for linear services but that will come at

the cost of having nonsupport content. total content spending will be at a low single-digit rate going forward but it will be skewed toward streaming services. jonathan: basically will have live sports and news and entertainment is a page streaming service? brian: that is absolutely the direction being traveled. so much of the streaming content will not be ad supported and that's critical. what does this do to a system that's been dependent on advertising when you can't reach everyone on television like you used to? jonathan: where do you think that money goes? brian: from an advertising perspective, i think every advertiser will have a different solution. they will redefine television to youtube and tiktok in those who do don't have much of a problem.

the second solution is to look for other marketing channels and that means spending more money on things that are idiosyncratic. it won't be uniform. tom: are you suggesting bloomberg surveillance should be on tiktok? brian: you did have a show on bloomberg called tiktok at one point. tom: go away brian. it is wide open. jonathan: is he allowed back? tom: his claim to fame is for all sorts of things in this medium landscape we been living in for 15 years more than anyone he got right the call for facebook.

at the same time, he is grounded and follow the money. jonathan: live sports, news and then everything else. throwing money at content for a decade. they have to be a lot more discipline than they used to. jonathan: back in the day is zero rates you could throw money at the wall and see what sticks. coming up, the open. thanks for that tom. ♪

tom: we are looking at is 7% mortgages and that folds into a wall of housing data. we get the new york fed services activity michael mckie has are complete and total report. michael: certainly worse than

last month housing is down 1,000,400 thousand rate. the housing number falls down to 1,000,400 that -- number. a step back in the construction industry. the one thing that is hard to know on a month-to-month basis, housing completions were down .6%. that is one to watch because that is what they have got in trade. once that starts to fall, do we see it back off?

tom: how does it fold into gdp? are these pr numbers for the building industry or did they fold into those numbers we focus on? mike: they fold into business spending and residential investment. they folded into the gdp but it's not a clear-cut line. it is a measure of the influence of the federal reserve with mortgage rates. we have seen a decline in construction workers last month. that might just fit nicely with the data were getting now. lisa: we are looking at building permits dropping. tom talked about the new york fed services being tertiary or but what we saw from umpire manufacturing was stronger than expected which is an early read there. this coming in less negative than the month before, it that

important? mike: what comes after tertiary? tom: four-ciery? brian: we have a small sample set and you can't really extrapolate a lot from the whole nation but it shows the influence of the fed and tightening on the service industries. tom: michael mckee one of our fed speakers. lisa: we will look to see if it means this is a softening of the u.s. economy. kathy bostjancic saying there will be a moderate recession but she wrote that inflation will not allow the fed to pause and may cut rates as it simply -- as it typically does

during the recession. this is not being priced into the market, what you see in the market are rate cuts through the remainder of this year. tom: kathy bostjancic joins us from nationwide. the stock market is going up, is that an indicator to you? kathy: it's part of the leading economic indicators. think of the conference board's overall index. that one seems to stand out from other leading economic indicators. it's been more resilient than even the labor market. we have to see how their earnings announcements and guidance play out to see if the equity market continues to hold in their. you alluded to the bond market

that's been pricing in recession for a long time now. tom: what's the framework of the consumer right now? frame the consumer mood now and into the next 30 days? as a boy isn't? is it lethargic? kathy: what we have seen is consumer still feel the weight of high inflation even though the headline numbers have been slowing a bit as we know the course service number has been very sticky and the fact that interest rates remain very high also weighs on consumer sentiment. the key is the labor market. if you look at the conference board's where i used to work three of the five questions is focused on the labor market. the michigan is more influenced

by gasoline prices. overall, the consumer is feeling very consumer of -- conservative at this point. they've been able to splurge on the service side of things but now have to recalibrate especially as cracks start to develop in the labor market. lisa: there are number of things that you've said that are controversial. that inflation will be to sticky in the market disagrees. the market thinks the fed will go back down with rate cuts. how do you argue against people who say if you look at the just inflationary forces they are stronger than the figures may account for including u.s. rent posting its first drop since

march 2020. kathy: the rent prices, that inflation should decelerate pretty meaningfully as captured by the cpi price indices. real-time rent increases have slowed quite a bit. home prices have fallen. those both suggest that the rental inflation will slow. even when you do that as chairman powell has suggested, you look at those service members, it is very sticky. things like transportation services and car repairs are still running double digits year on year. inflation and insurance premiums, we know from what we do capture the higher car repair costs. it's even broader than that. service prices still remain

sticky and you need to see the labor market slow before we start to see that correction because with car repairs, it's not that you can't get the parts is that the labor is still so expensive. lisa: if you have sticky inflation and the fed is holding rates of 5%, what kind of shallow recession is this going to be? one are the contours of that? kathy: typically the federal reserve is slow in raising rates and fasting cutting rates. we are seeing the opposite dynamic in this business cycle. the consumer balance sheet is in good shape. the business balance sheet is in good shape. there are pockets of stress but overall in better shape and we think keeping the fed funds rates should allow the decrease

to be slow assuming that inflation gradually slows. tom: do you have a run rate of american gdp over 2% or do you model it below? kathy: the first quarter is running around 2% but as we go into the second quarter it looks slowed us. it indicates that these housing numbers, people are getting joyful that housing may be on an upswing. keep in mind that interest rates matter and supply matters but employment and income is the best indicator. tom: we will have more housing

data. in general, and premarket chart and i can take it back to 1 a.m. this morning looking at the futures chart, it is the series of higher lows all the way up. there is a bid to this market. lisa: is flat on the smp about .5% we are seeing that grind higher. goldman sacs notwithstanding. if all things being equal and there is no banking crisis is this in all clear signal for stock buyers?

tom: that implies some nominal gdp? is it 4.5, five .2? i don't think anyone knows. you have to calculate in a better gdp into the reports. lisa: if we have sticky or inflation that means sticky revenues and that means also people have money to go out and spend. how do you understand the fed's function and what kind of downturn there will be if people keep spending and if the fed keeps rates where they are? tom: someone emailed in and said they -- they said there is no

fouthiary after tertiary. may 3 approaches and we are into the point where the data lines up and fresher as they go into the fed meeting. lisa: and may be as an insight into the may 8 meeting and give us a sense of how quickly the credit conditions are tightening. tom: spx 4190 6.50. stay with us on radio and television, this is bloomberg, good morning. lisa: keeping you up-to-date with news from around the world with the first word i'm lisa matteo. the united nations said riders in sudan targeted buildings occupied by diplomats.

thus according to an internal u.n. document seen by bloomberg. the gunman sexually assaulted women and looted people's belongings including cars and personal items. forces loyal to the military have been clashing for the past four days leaving 100 80 people dead. the group of seven nation vowed to support ukraine for as long as it takes in its fight against russian forces. g-7 met in japan and they called for greater engagement with china to stabilize relations with the second biggest economy in a peaceful resolution with taiwan issues. taiwan will buy harpoon missiles intended to repel a chinese invasion. they had previously purchased

shipped locked missiles. it was issued on taiwan's behalf by the u.s. command. afghanistan remains cut off from the global financial system since the taliban took over in 2021. the u.n. says 4.6 billion in foreign aid is needed to import food and jumpstart the economy. without a per capital income could fall to 306 dollars next year making afghanistan one of the poorest countries in the world. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa matteo and this is bloomberg.

(♪♪)

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we had 14 years of low interest rates in the real valuation takes a while to filter through. was it the positive liquidity crisis? is that the evolution of a business model and it will be a time of tougher financial conditions. tom: he said he has 42 trillion in the kitty? lisa: drive powder ready to go when there is a knock on the door and possible -- good possibility. tom: what was the message you got from tim salter? lisa: it will take 12-14 months to understand credit tightening.

whether it's credits we use -- there should be people ready to use it on the others. tom: alison williams is with us, she is truly esteemed and she joins us today. what i thought the oddest division. revenue is up, and there is this one bank challenge. let me cut to the chase, why is fletcher solomon challenged? allison: the investment bank came in line, other people had positive surprises. tom: will they have to lay off

people? allison: the headcount does come back and lower than they are making those cuts. lisa: apollo isn't the only one looking for opportunities, how much in the numbers is the big banks taking business from credits we and potential firms that may be in a weaker position? how do you parse this out in these results? allison: i think that's why we saw this huge quarter fixed income, huge and the fact that they had sizable growth it was up almost 30%. if you think of the businesses that credit suites excelled then, those businesses are coming up big at bank of america. there are some shared games

going on there. lisa: do we have a sense of who the winners will be with credit tightening, will it be jp morgan, citigroup and bank of america? alison: in terms of deposits, we saw bank of america, wells fargo and j.p. morgan benefit from flight to quality. only j.p. morgan saw that increase over the quarter but we saw details and bank of america where they are gaining share and that goes to the long-term story . the u.s. banks have gained share in retail deposits and in trading. lisa: this is the issue i was grappling with. 15 years ago people were talking about too big to fail in banks getting too big and now were in a situation where regulations are allowing the biggest banks to get even bigger and consolidation among smaller banks. alison: i think that's a great

point and i would add to it, two things i think about. one is credit suites. if this was a more narrowly focused business and it was a business that did not succeed. if we look at the last crisis, it was the more narrow businesses like lehman and barrett that failed where j.p. morgan survived. granted, we had capital -- government help. the mix really helped out. what is coming out of this is that we need more regulation on some of the smaller banks. some regional banks that are sizable enough that they can have some of the protections put in place for the bigger banks. tom: bank of america hasn't operating income of 30 billion, some regionals have 2, 4

billion. are they under a pressure and stress to acquire? is this a time that regionals grow sub? alison: they can, keep in mind that bank of america can apply because they already have so much time to grow organically. tom: this is what we been waiting for? alison: truest was one of the banks that was created for this respect. they wanted a bigger attack budget. the jury is still out and whether this is been successful. tom: do you believe they can compete with the big guys? i saw brian moynihan had checks going up and down like a moonshot. alison: i think it is about having cutting edge technology. just because you spend more

doesn't mean you're the best. it has proven to be an advantage if you are spending more. you have a more -- you have a little more of an edge. we have had competitors in other parts of the business become hugely successful but in the bread and butter banking business which is highly regulated it's a lot tougher for an upstart to come in there. tom: if you don't get the technology right we call it doing in ef hutton. lisa: duly noted. there is an issue as we look towards earnings going forward about whether the business model makes sense. you talked about more regulation and the potential for consolidation, when will we know what the real fallout is stucco alison: it's going to be interesting to see if the

regulators come out and put something in place. what will make sense is having some kind of liquidity ratio that is punitive to uninsured deposits. there has been talk about raising the insurance deposit limit. i think that's something that has to be coordinated globally or you will risk deposits moving one way or the other. the three big bags of made a point to say this is something temporary and it's over. i think however if you have businesses with imbalances you need to figure out a way to write those imbalances or you can become vulnerable and that is why you are also seeing bank of america going through so much detail to show, look at our deposit base, look how diverse it is. here's the story of how we built up the security portfolios. tom: with returns on equities

and balance sheet ratios you use, is a simple to say we will see a price-to-book expansion among these banks? alison: in the near term, we don't do buy sell hold but we talk about things that drive the stocks. the returns are impressive but it's hard for banks to outperform going into a recession. the positive thing is as we come out of it, the fact that we can look at j.p. morgan with 23% on return, that will be their target this year and next year. tom: alison williams from bloomberg intelligence. just terrific taking experience. this is a great banking day. lisa: agreed, as this pleads

forward the banking system will change dramatically in 2023. that is the take away, you will see greater consolidation and bigger existential around regional banks and their role in the community and what they have to do in terms of regulation and survival of the fittest and looking at them making the biggest space profits. tom: and that goes away from the fed strategies. a lot of people have to figure out a new business strategy given where rates are right now. lisa: at what point do we see a number of companies left behind when it comes to financing unable to get financing in the new rate regime? tom: what about investors left behind? 4197 on s&p futures.

stay with us on television and radio, it is bloomberg surveillance. ♪ i screwed up. mhm. i got us t-mobile home internet.

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jonathan: we are wrapping up a bank earnings. good morning, good morning. equity futures are up 0.5%. the countdown to the open begins now. announcer: everything you need to get started with u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york, bank of america topping earnings estimates as goldman looks lonely with the trading miss.