Bloomberg Surveillance 7/14/2026

[00:00:01] Speaker 1: EARNINGS ARE EXPLODING TO THE UPSIDE. [00:00:07] Speaker 2: THE MARKET IS VERY EXCITED FOR THIS WEEK. WE ARE ALL EXPECTING GREAT THINGS. WE DON'T WANT TO [00:00:15] Speaker 3: OVERTHINK THE SECULAR TRADE. WE ARE STILL IN A STRONG EARNINGS ENVIRONMENT FOR U.S. STOCKS. [00:00:21] Speaker 4: THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA [00:00:26] Speaker 5: PARTICULAR. GOOD MORNING FOR OUR AUDIENCE WORLDWIDE. COMING INTO TUESDAY, GEARING UP FOR A BIG ONE. FIVE BIG BANKS ON WALL STREET KICKING OFF QUARTERLY EARNINGS [00:00:43] Speaker 6: HEADING INTO THE LAST CPI PRINT BEFORE THE FED'S NEXT MEETING AS A REBOUND IN OIL IS PIMING THE PRESSURE ON A DIVIDED COMMITTEE. THE FED CHAIR IS HEADING TO CAPITOL HILL. IT IS THE WORLD CUP TODAY OF FINANCE. WE ARE SEEING THE FINALS OF THE FEDERAL RESERVE. WE ARE SEEING THE FEDERAL RESERVE. NUMBER ONE, IS THE WINDOW STARTING TO CLOSE IN AI FINANCING? HOW MUCH MOMENTUM IS THERE BEHIND SOME OF WHAT WE ARE SEEING WITH INFLATION? HOW MUCH ARE YOU TRULY SEEING A HAWKISH FEDERAL RESERVE? [00:01:11] Speaker 5: WILL WE GET SEALING THE DEAL? KEVIN WARSH SAYING SOMETHING. WE'RE SEEING THE FEDERAL RESERVE. GOVERNOR WALLER, IF WE GET ANOTHER HOT READING ON CORE INFLATION THIS WEEK, THE FOMC WILL NEED TO CONSIDER TIGHTENING MONETARY POLICY IN THE NEAR TERM. HE GOT OUT FRONT OF KEVIN WARSH, THE FED SHARE, OVER TWO DAYS OF [00:01:37] Speaker 6: TESTIMONY COMING UP. HE PUSHED BACK AGAINST LOOKING AT A DIFFERENT METRIC, THE MEAN-ADJUSTED INFLATION METRIC THAT WE HAVE HEARD SOME DISCUSSION AROUND. SOMEHOW AMELIORATING THE INFLATIONARY PRESSURE UNDERPINNING THIS ECONOMY, SAYING NO MATTER HOW YOU CUT IT OR WHAT MEASURE YOU WANT TO USE, INFLATION IS UP THIS YEAR, WITH INCREASES RECENTLY QUITE BROAD. HOW MUCH ARE WE GOING TO SEE THAT [00:02:01] Speaker 5: REITERATED BY KEVIN WARSH? THIS MOVING CRUDE WON'T HELP. BRING IT UP, A TWO-DAY RALLY AND WE ADD SOME WEIGHT TO IT THIS MORNING, UP BY MORE THAN 3% ON WTI, $80 A BARREL. BRENT CRUDE BREAKING 85, BREAKING 86, 86, 88 THIS MORNING, [00:02:15] Speaker 7: UP BY MORE THAN 4%. THE STRIKES CONTINUE IN THE REGION. THE PRESIDENT OF THE UNITED STATES IS COMPENSATED 20% FOR ALLOWING THE PASSAGE. HE'S ALSO SAYING, INTERESTING, IRAN IS NOT ABLE TO CHARGE A FEE, HE'S SAYING NOW THE UNITED STATES WILL BE COMPENSATED SOME 20% FOR ALLOWING THE PASSAGE. REMEMBER THE HOUTHIS, THEY'VE BEEN QUIET FOR A WHILE. THEY'RE GETTING SOMEWHAT INVOLVED BY STRIKING A SAUDI AIRPORT. THINGS ARE GETTING A LITTLE BIT MORE VOLATILE, A LITTLE BIT MORE HOSTILE IN THE [00:02:39] Speaker 5: REGION, AND YOU SEE THAT IN THE PRICE PREMIUM IN CRUDE. WHO WANTS TO TRANSLATE THIS ONE? THINGS ARE PAYING INTO THE UNITED STATES. IF YOU WANT TO GO THROUGH A CERTAIN PATH, YOU PAY A 20% [00:02:55] Speaker 6: TOLL TO THE UNITED STATES. HOW DOES THAT EVEN WORK? WE'RE LOOKING AT THE UNITED STATES IN THE UNITED STATES. THE UNITED STATES PUTTING ON DIFFERENT SHIPS IS ABOUT $2 MILLION PER OIL TANKER. A 20% CHARGE BY THE UNITED STATES WILL BE ABOUT $30 MILLION PER OIL TANKER. IF WE ACTUALLY LOOK AT THE FINANCES BEHIND THAT, THAT IS UNTENABLE FOR PRETTY MUCH ANY KIND OF INVESTOR OR COMPANY THAT WANTS TO TRANSPORT SOME OF THESE GOODS. THAT SAID, THERE IS THIS QUESTION OF IF IRAN IS NOT WILLING THE UNITED STATES FOR THE UNITED STATES. WE WILL TAKE IT OVER AND PUSH YOU OUT OF THE EQUATION. WILL THAT WORK? WILL THERE BE THE POLITICAL AND FINANCIAL BEHIND THAT? WILL THERE BE THE ALLIED [00:03:36] Speaker 5: SUPPORT FOR 30% OR 20% TAX? PROBABLY NOT. NONETHELESS, THIS IS THE PATH OF TRAVEL RIGHT NOW. THIS COULD BE THE MUDDLED NEW NORMAL. THIS COULD BE A VOLATILE NEGOTIATION FILLED WITH [00:03:48] Speaker 7: UNWORKABLE SOLUTIONS LIKE THE ONE IN THE LAST 24 HOURS OF THE UNITED STATES AND THE UNITED STATES AND THE STANDSTILL WE ARE IN AND POTENTIALLY THE HIGHER OIL PRICE MIGHT PUSH THEM BACK TO THE NEGOTIATING TABLE ONLY FOR TALKS TO FALL THROUGH ONCE AGAIN AND THEN WE ARE ONCE AGAIN BACK AT THIS CYCLE. THE MARKET IS GOING TO HAVE [00:04:06] Speaker 5: TO GET USED TO THE TIT-FOR-TAT, START AND STOP OF THE NEGOTIATIONS AND THE CONFLICT. JONATHAN: LATER THIS HOUR, THE EARNINGS SEASON STORY BEGINS ON WALL STREET. WE WILL HEAR FROM J.P. MORGAN AND BANK OF AMERICA OVER THE NEXT 60 MINUTES OR SO. CHRIS BARRON OF BAD STRATEGISTS FACING DOWN A MORNING PACKED WITH EVENT RISK. WE WILL SPEAK TO THE FORMER DEPUTY NATIONAL SECURITY ADVISOR VICTORIA COATES AS OIL BREAKS BACK THROUGH 80 AND GERALD CASSIDY OF RBC AS FIVE BIG BANKS REPORT QUARTERLY EARNINGS THROUGH THIS MORNING. WE BEGIN THIS HOUR WITH STOCKS LITTLE CHANGE HEADING INTO THIS MORNING'S DATA AND A TON OF BANK EARNINGS. CHRIS BARRON OF BAD STRATEGISTS WRITING THE FOLLOWING WITH 99% OF BANKS ABOVE THE 200 DAY AVERAGE THE GROUP KICKS OFF THE 2Q EARNINGS SEASON ON SOLID TECHNICAL FOOTING. CHRIS JOINS US NOW FOR MORE. CHRIS GOOD MORNING. GOOD TO SEE YOU. GREAT TO BE HERE. IS THAT WHAT YOUR FOCUS IS ON THIS MORNING BECAUSE WE'VE GOT CPI. WE'VE GOT FED SHARE WASH. IS IT EARNINGS FRONT AND CENTER? [00:04:55] Speaker 8: YEAH I THINK THIS IS GOING TO START TO TAKE SOME OF THE ATTENTION AWAY BOTH FROM THE CENTRAL BANK AND FROM IRAN HERE AND YOU KNOW OUR KIND OF MAIN POINT HERE IS WHEN YOU LOOK AT KIND OF THE SETUP OF THE BANK STOCKS INTO EARNINGS SEASON THEY ARE ON VERY SOUND FOOTING. ARE THEY OVERBOUGHT IN THE NEAR TERM. YEAH THEY PROBABLY ARE. I DON'T PARTICULARLY CARE BECAUSE THE UNDERLYING TRENDS ARE SO FIRM. THESE ARE STILL THE RELATIVE LEADERS. AFTER FRANKLY WHAT WAS A PRETTY FUNKY YOU KNOW MARCH APRIL PERIOD THE BANKS HAVE REALLY SINCE ABOUT MID MAY COME BACK AND RECLAIM THE BAR OF LEADERSHIP AND YOU SEE IT NOT JUST DOMESTICALLY IT'S TRUE IN EUROPE IT'S TRUE IN JAPAN EVEN WITH JGB YIELDS UP IT'S TRUE IN JAPAN THAT THESE GLOBAL BANKS CONTINUE TO ACT REALLY REALLY WELL. SO I THINK IT'S DIFFICULT TO GET KIND OF TOO WORKED UP ABOUT FINANCIAL CONDITIONS HERE WHEN FINANCIAL STOCKS ARE STILL IN PRETTY GOOD SHAPE. LET'S TALK ABOUT THE U.S. [00:05:40] Speaker 5: BANKS AND THE KIND OF EXPOSURE YOU WANT RIGHT NOW. SO LET'S SAY ON THE FAR SIDE YOU'VE GOT A PURE PLAN CAPITAL MARKETS AND ON THIS SIDE IS A PURE PLAY ON MAIN STREET THE CLOSER YOU ARE TO THIS SIDE AS A GENERAL RULE OF THUMB SO FAR THIS YEAR THE BEST YOU'VE DONE IN TERMS OF MORGAN STANLEY GOLDMAN SACHS THE STOCKS HAVE BEEN FLYING. WHERE IS THE SWEET SPOT NOW? [00:05:58] Speaker 8: THAT'S NOT GENERALLY BEEN TRUE FOR ABOUT TWO YEARS. YOU LOOK AT LIKE WHEN MORGAN STANLEY AND GOLDMAN BROKE OUT IT WAS PROBABLY BACK IN LATE 24 EARLY 25. SO THEY REALLY HAVE CARRIED THE FLAG OF LEADERSHIP THE ENTIRE TIME. I THINK WHAT MAY BE A LITTLE UNAPPRECIATED THOUGH PARTICULARLY WHEN YOU GO DOWN THE CAP SCALE THERE ARE SO MANY REGIONAL AND SMALL BANKS THAT ARE ACTING GREAT HERE THAT ARE IN GOOD LONG-TERM UPTRENDS THAT HAVE JUST FINALLY BROKEN OUT TO NEW MULTI-YEAR HIGHS. SO IT'S MORE THAN JUST THE CAPITAL MARKET STOCKS BUT CLEARLY THERE'S BEEN A STORY THERE WITH THE IPO BOOM BUT IT'S WHEN YOU START TO MIGRATE DOWN THE CAP SCALE YOU DO GET SOME EXPOSURE AND SOME VERY GOOD CHARTS IN THESE SMALL AND MED CAP BANKS. [00:06:32] Speaker 6: JUST TO BUILD ON WHAT JOHN'S TALKING ABOUT IT'S ALMOST MAIN SWEET VERSUS WALL STREET. YOU'VE GOT WELLS FARGO ON ONE SIDE OF THE EXTREME. YOU'VE GOT GOLDMAN SACKS AND MORGAN STANLEY ON THIS SIDE OF THE EXTREME. AND IT SEEMS LIKE WE'VE SEEN THE FEES THAT POTENTIALLY ARE COMING FROM SOME OF THESE IPOs, SOME OF THESE ISSUANCES. IS IT GOING TO BROADEN OUT WHERE WE START TO SEE TRUE ROBUST BORROWING AND LENDING FROM CONSUMERS AND THE BROADER ECONOMY? [00:06:53] Speaker 8: TO THE DEGREE IT EXTENS TO CONSUMERS I'M UNSURE, I WOULD SAY THIS. WHEN YOU LOOK AT THE CREDIT LANDSCAPE AND PUT ASIDE THE PRIVATE CREDIT NAMES FOR A MINUTE, WE CAN TALK ABOUT THAT. BUT PUBLIC CREDIT CONDITIONS ARE STILL EXTREMELY BENIGN HERE. I MEAN, DOUBLE-BEE SPREADS YESTERDAY MADE NEW CYCLE TIGHTS. THAT'S TRUE HERE. IT'S TRUE IN EUROPE AS WELL. SO I THINK, AGAIN, WITH BANK STOCKS GENERALLY STILL IN UP TREND ACROSS THE WORLD, CREDIT CONDITION IS PRETTY BENIGN. I THINK IT'S PREMATURE TO GET TOO WORKED UP OR TOO BEARISH. I RECOGNIZE WHERE WE ARE SEASONALLY. YOU CAN GET A CORRECTION HERE FOR ANY REASON INTO AUGUST, INTO SEPTEMBER. WE'VE SEEN THAT HISTORICALLY. BUT I THINK THE UNDERPINNINGS OF THIS MARKET ARE STILL IN DECENT CONDITION. [00:07:31] Speaker 6: ONE BIG ANXIETY RIGHT NOW IN MARKETS IS HOW LONG CAN THIS LAST? THIS INCREDIBLE ISSUANCE BOOM, THIS INCREDIBLE FINANCING CONDITION FOR ANYTHING RELATED TO AI. AND WE'VE GOTTEN THE SENSE THAT MAYBE THE MARGINS ARE STARTING TO COME BACK A LITTLE BIT. DO YOU EXPECT TO GET A SENSE OF THAT, THE SORT OF FORWARD PIPELINE OR JUST WHETHER IT'S STARTING TO CLOSE? [00:07:49] Speaker 8: SO, LISA, OUR KIND OF BIG VIEW THIS YEAR IS THAT THERE IS SOME INTEREST RATE OUT THERE WHERE BONDS SIMPLY BECOME MORE COMPETITIVE TO STOCKS. AND I JUST DON'T THINK WE HAVE FOUND THAT INTEREST RATE YET. SO TO ANSWER YOUR QUESTION, WHEN DOES KIND OF THE CAPITAL MARKETS BOOM IN, I THINK IT'S WHEN WE FIND A BOND YIELD THAT IS MEANINGFULLY HIGHER THAN WHERE YIELDS ARE TODAY. WE LEARNED A COUPLE WEEKS AGO, I THINK THE HIGHS WERE 467 ON 10s. THAT'S NOT THE LEVEL. IT'S SOME LEVEL MEANINGFULLY HIGHER. PEOPLE FORGET, GO BACK TO 1999 WHEN YOU WERE IN THAT NASDAQ MELT UP. YOU KNOW BOND YIELDS THAT YEAR WENT FROM 4 TO 7 IN THE U.S.? SO IT TYPICALLY TAKES A YIELD SO MUCH HIGHER THAN THE CONSENSUS BELIEVES TO TRULY BE COMPETITIVE. SO I THINK WE'RE IN THIS ENVIRONMENT WHERE MONEY IS JUST SLOSHING AROUND FROM GROUP TO GROUP TO GROUP BUT IT'S VERY RELUCTANT TO LEAVE THE ASSET CLASS OF EQUITY. [00:08:38] Speaker 6: ARE YOU CALLING FOR 7%? [00:08:39] Speaker 8: NO, I'M JUST SAYING THAT IT TAKES A YIELD MUCH HIGHER THAN WHAT THE CONSENSUS BELIEVES IS RIGHT IN FRONT OF THEM. I DON'T THINK 461 THIS MORNING IS THAT YIELD THAT ENDS THIS KIND OF 17-YEAR BULL MARKET THAT WE'VE BEEN IN. [00:08:53] Speaker 7: IS JULY 29 THE FIRST RATE HIKE? [00:08:56] Speaker 8: I THINK NOT. I DON'T THINK WE GET A RATE HIKE IN CALENDAR YEAR 2026. I'LL GIVE YOU THREE THINGS TO THINK ABOUT. NUMBER ONE I THINK IS THE ONE WE ALL KNOW LOOK AT FORWARD INFLATION EXPECTATIONS. THEY'RE RELATIVELY ANCHORED BY ANY METRIC WHETHER FIVE-YEAR FIVE-YEAR FORWARDS OR EVEN JUST FIVE-YEAR FORWARDS. IS THAT BECAUSE THE MARKET'S PRICE FOR HIKES? WELL PLAYED. LISTEN I THINK THE SHIFT IN NARRATIVE THIS YEAR HAS BEEN SO DRAMATIC WE'VE GOT TO GET BACK TO CENTER HERE A LITTLE BIT. LET'S THINK ABOUT SOME OF THE DATA. NUMBER ONE PMI RIGHT NOW IS 53 AND A HALF. FED DOESN'T Hike FROM THERE. JUST LOOK HISTORICALLY THAT'S NOT WHERE YOUR MAJORITY OF HIKES COME FROM. THE THREE-MONTH AVERAGE ON PAYROLLS RIGHT NOW IS ABOUT 125 K. IF YOU LOOK AT A DISTRIBUTION OF FED ACTION WHEN THE THREE-MONTH AVERAGE OF PAYROLLS IS IN THAT 100-150 RANGE, THE LIKELIHOOD OF A HIKE ANY POINT OVER THE NEXT SIX MONTHS IS LESS THAN 20%. SO WHETHER IT'S THE PAYROLL DATA, WHETHER IT'S THE PMI DATA, I THINK THE LIKELIHOOD THAT WE GET THIS FED IN PARTICULAR MOVING TO HIKES IN 26 IS LOW. RESERVE THE RIGHT TO CHANGE THE OPINION, SHOULD THE FACTS ON THE GROUND CHANGE, AS ALWAYS, BUT THAT'S THE JOB OF WHAT WE DO. I'D BE BETTING NO HIKE HERE. [00:10:14] Speaker 7: EVEN THOUGH GOVERNOR WALLERG YESTERDAY MADE IT VERY CLEAR HE'S VERY CONCERNED ABOUT INFLATION AND ALSO TALKED ABOUT HE DOESN'T WANT TO REPEAT THE MISTAKES OF THE PAST? WALLERG IS NOT THE CHAIR. [00:10:25] Speaker 8: AND I THINK WE ALL NEED TO COME TO THIS REALIZATION THE CHAIR IS THE CHAIR. LET'S GET BACK TO THAT MENTALITY. THE CHAIR IS THE CHAIR. I THINK AS WE'VE SEEN WITH THESE TASK REPORTS, WE'RE GOING TO GET LESS AND LESS COMMUNICATION FROM REGIONAL FED PRESIDENTS, FED GOVERNORS. SO I'M MORE INCLIENT TO KIND OF DISCOUNT WHAT WALLER SAID YESTERDAY. I THINK AT THE END OF THE DAY, THE LIKELIHOOD THIS FED GOES IN 26 IS STILL LOW. THAT'S HOW WE'RE POSITIONED. THAT'S HOW WE'RE THINKING ABOUT THAT. [00:10:51] Speaker 5: IT'S INTERESTING YOU DON'T THINK THE CENTER OF POWER AT THE FEDERAL RESERVE HAS SHIFTED SOMEWHAT BECAUSE I'VE WITNESSED THE COMMITTEE VOTE DOWN OF A CHAIR BEFORE. IN THAT CASE, IT WAS THE BANK OF ENGLAND GOVERNOR OF A QE COMING OUT OF THE FINANCIAL CRISIS. HE WANTED MORE. THE COMMITTEE VOTED AGAINST HIM A COUPLE OF TIMES, I BELIEVE, IF MY MEMORY SERVES ME WELL. THE SITUATION OF THE FED, YOU DON'T THINK IT'S SHIFTED. JUST GIVE US THE WHY. [00:11:10] Speaker 8: I THINK AT A MINIMUM, THESE TASK FORCES OVER THE NEXT SIX MONTHS DO BY THE NEW WORST FED TIME TO GET AN UNDERSTANDING OF THE NEW LAY OF THE LAND, I ALSO THINK THE DATA IS JUST NOT THERE. AT THE END OF THE DAY, IF THIS IS A DATA-SENSITIVE FED, THE DATA IS NOT THERE, WHETHER IT'S PAYROLLS, WHETHER IT'S MANUFACTURING. I ALSO THINK WHEN YOU LOOK AT TENURE YIELDS, ARE THEY ESCAPE VELOCITY HERE? I WOULD HARDLY SAY THAT. TWO'S, YOU CAN MAKE A CASE, HEY, TWO'S ARE, YOU KNOW, 425 THIS MORNING, THEY'RE 50 BIPs ABOVE FED FUNDS. THAT'S PROBABLY THE ONE SIGNAL THAT I WOULD SAY MAYBE PUSHES BACK IN MY VIEW HERE A LITTLE BIT. I WOULDN'T SAY IT'S AS EXTREME AS WHAT WE SAW IN LATE '21, EARLY '22. I THINK BY THE TIME THE FED GOT AROUND TO HIKING IN EARLY '22, THE TWO-YEAR YIELD WAS SOMETHING LIKE 200 BIPs ABOVE WHERE FED FUNDS WERE. SO WE'RE NOT YET IN THAT CATEGORY. BUT, YOU KNOW, WATCH THE TWO-YEAR YIELD HERE. THAT WOULD PROBABLY BE THE ONE THING THAT WOULD START TO [00:12:00] Speaker 5: SHIFT MY MIND. CHRIS, IT'S GOOD TO SEE YOU. LOOKING AHEAD TO THE DATA LATER THIS MORNING, 8:30 EASTERN TIME, WE GET CPI. TO CHRIS'S POINT, AND HE'S ABSOLUTELY RIGHT, WE'VE BROKEN DOWN TO TWO'S AT 4:30-ISH, TEN'S AROUND 4:60 AGAIN, AND THIS EQUIPITY MARKET HASN'T REALLY BROKEN DOWN IN A MATERIAL WAY IN THE FACE OF WHAT [00:12:20] Speaker 6: WE'VE SEEN IN YIELDS. I WOULD LOVE TO PLAY YIELD ROULETTE WHERE YOU START TO FIGURE OUT WHAT THAT LEVEL COULD BE, THAT COULD START TO CRIMP CAPITAL MARKETS. AND IF YOU DO HAVE EASY FINANCING CONDITIONS, YOU HAVE TO START ASKING, SHOULD WE? AND HOW MANY PEOPLE ARE GOING TO SAY THAT? ARE WE APPROPRIATELY BORROWING AND LENDING AT A TIME WHERE THERE SEEM TO BE PARABOLIC MOVES? AND I THINK INCREASINGLY PEOPLE HAVE BEEN ASKING THAT QUESTION. [00:12:43] Speaker 5: I THINK THAT'S PART OF THE CONVERSATION OF THE FEDERAL RESERVE RIGHT NOW. THAT'S FOR SURE. MORE BANK EURNICS LATER ON THIS MORNING. WE GET J.P. MORGAN AND BANK OF AMERICA THIS HOUR. EQUITY FUTURES RIGHT NOW JUST ABOUT UNCHANGED WITH AN [00:12:56] Speaker 9: UPDATE ON NEWS WORLDWIDE WITH YOUR BLOOMBERG BRIEF. BONNIE QUINN HAS MORE. GOOD MORNING. PRESIDENT DONALD TRUMP REINSTATING THE WEEKEND. FED GOVERNOR CHRIS WALLER SAYS THE CENTRAL BANK MAY NEED TO RAISE RATES SOON. [00:13:21] Speaker 10: UNLESS I SEE EVIDENCE OF A SIGNIFICANTLY WEAKENING LABOR MARKET, MY FOCUS FROM HERE ON OUT WILL BE ON INFLATION. NO MATTER HOW YOU CUT IT OR WHAT MEASURE YOU WANT TO USE, INFLATION IS UP THIS YEAR. EVEN ACCOUNTING FOR THE LIKELY TEMPORARY DIRECT EFFECTS OF THE OIL PRICE SHOCK, IT IS RUNNING AT LEVELS INCONSISTENT WITH THE FOMC'S 2% OBJECTIVE. [00:13:46] Speaker 9: OF COURSE CPI DATA OUT AT 8:30 THIS MORNING. PPI OUT TOMORROW. SAMSUNG MAY BE EXPLORING A POTENTIAL OFFERING OF ADR. SOURCES HAD BEEN TELLING US HERE AT BLOOMBERG. THE COMPANY HELD PRELIMINARY DISCUSSIONS WITH BANKERS. BANKERS ARE TALKING TO OUR REPORTING SAYING VIA TEXT MESSAGE IT IS NOT REVIEWING THE POSSIBILITY OF ISSUING ADRs. [00:14:11] Speaker 5: THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: THE AMOUNT OF EQUITY SUPPLY ALREADY. SK HYNIX TAPPING THE EQUITY MARKET STATESIDE FOR 26.5 BILLION. THE AMOUNT OF EQUITY MARKET STATESIDE FOR RUSSIA. WE HAD A RECORD IPO. IT IS DIFFICULT TO KEEP UP. WE WILL TALK ABOUT THE BANKS LATER THIS HOUR. THEY WILL MAKE A TON OF MONEY FROM ALL OF THAT SUPPLY. [00:14:31] Speaker 6: BUT AT SOME POINT THAT SUPPLY BECOMES A PROBLEM FOR THE MARKET. NOT NOW BUT AT SOME POINT. IT IS SOME POINT. WE ARE TALKING ABOUT THE NUMBERS OF RECORD. WE ARE TALKING ABOUT IT. WE HAVE TO WONDER GIVEN HOW SUCCESSFUL THESE IPOs HAVE BEEN. [00:14:46] Speaker 5: WHY WOULDN'T SAMSUNG ISSUE ADRs GIVEN THE VALUATION IN THE UNITED STATES. WE WILL HAVE THAT [00:14:49] Speaker 11: CONVERSATION LATER THIS HOUR. UP NEXT ON THE PROGRAM, CONTROLLING THE STREETER FORMERS. WE ARE TAKING OUT ALL OF THE CAPABILITY FOR ANYTHING HAVING TO DO WITH THE STRAIGHT AND I THINK IN THE END WE [00:15:03] Speaker 5: WILL END UP DISCONTROLLING THE WHOLE THING. I THINK WE ARE TALKING ABOUT THIS. WE WILL TALK ABOUT THE SECURITY ADVISER, VICTORIA COATES IN JUST A MOMENT. LIVE FROM NEW YORK CITY THIS [00:15:15] Speaker ?: MORNING. GOOD MORNING. [00:15:34] Speaker 5: WHAT A MORNING COMING UP. LATER ON THIS MORNING, THIS HOUR, WE START WITH TWO OF THE FIVE BANKS REPORTING EARNINGS. LATER ON, CPI DATA AT 8:30 EASTERN TIME. AFTER THAT, WE WILL HEAR FROM THE FED CHAIR, KEVIN WASH ON CAPITOL HILL. LOOK OUT FOR THAT LATER THIS MORNING. EQUITY FUTURES INTO ALL OF THAT. THE FED FUTURES ON THE FED FUTURES MARKET. A BOUNCE BACK ON TECH, THE NASDAQ 100 UP BY 4.10. YES, WE HAVE A BOUNCE BACK IN CRUDE. THAT IS DRIVING THIS MOVE IN THE BOND MARKET. IN ADDITION TO THAT, IT IS GOVERNOR CHRIS WALLER. THANKS FOR JOINING US ON THE FED FUTURES MARKET. [00:16:22] Speaker 6: HOW LIVE IS THE MEETING IN JULY IN A FEW WEEKS TIME? TURNS OUT IT COULD BE QUITE LIVE AFTER THE STATE LATER THIS MORNING. AFTER HIS SPEECH, IT RAN TO ALMOST A 50/50 CHANCE IN THE FED FUNDS FUTURES MARKET BECAUSE PEOPLE ARE LOOKING AT SLECED THAT HE SAID INFLATION IS BROADENING OUT. WHAT IS THE THRESHOLD? DOES THIS MEAN THAT A HOT PRINT TODAY COULD REALLY PUT HIM IN A HIKING POSITION? AND THEN WHAT WILL KEVIN MORSE SAY TO THAT LATER TODAY? [00:16:45] Speaker 5: THIS WON'T HELP. WTI 80, BREN CRUDE AROUND 87, UNDER SURVEYING THIS MORNING CONTROLLING THE STRAIGHT OF HUMMERS. [00:16:53] Speaker 11: WE ARE TAKING OUT ALL OF THE CAPABILITY FOR ANYTHING HAVING TO DO WITH THE STRAIGHT, WITH THE HUMMERS STRAIGHT. AND I THINK IN THE END WE WILL END UP DISCONTROLLING THE WHOLE THING. WE ARE CONTROLLING THE STRAIGHTS. WE ARE PUTTING THE BLOCKADE BACK. I WANT TO BE REIMBURSED BECAUSE WE ARE PROTECTING A VERY RICH PORTION OF THE WORLD. [00:17:13] Speaker 5: SO HERE IS THE LATEST THIS MORNING. CRUDE CLIMBING AS THE U.S. REINSTATES THE BLOCKADE OF THE STRAIGHT OF HUMMERS WITH PRESIDENT DONALD TRUMP DEMANDING A 20% FEE ON CARGO SHIPPED THROUGH THE WATERWAY. BLOOMBERG'S TYLER KENDALL HAS THE LATEST. HEY TYLER. [00:17:26] Speaker 12: HEY JOHN GOOD MORNING. WELL THE U.S. IS SET TO REINSTATE THE NAVAL BLOCKADE AT 4:00 P.M. EASTERN TODAY. AS THE U.S. IS LOOKING TO GAIN ANY SORT OF LEVERAGE WHEN IT COMES TO THE STRAIGHT OF HUMMUZE. WE HAVEN'T GOTTEN ADDITIONAL DETAILS FROM THE WHITE HOUSE WHEN IT COMES TO THE PRESIDENT'S PROPOSAL FOR THAT 20% REIMBURSEMENT. THOUGH IT COULD WORK OUT TO SOME OF THE LARGEST CRUDE TANKERS PAYING MORE THAN $30 MILLION PER TRIP. NOW PRESIDENT TRUMP HAS PREVIOUSLY FLOATED THAT HE WOULD LIKE TO SEE THE U.S. COMPENSATED FOR HELPING TO SECURE THE STRAIGHT. BUT THIS MOVE WOULD MARK WEEKS -- WOULD MARK A REVERSAL FROM WHAT HAS BEEN WEEKS OF THE TRUMP ADMINISTRATION SAYING THAT FREEDOM OF NAVIGATION MEANS THAT THERE SHOULD NOT BE A PRICE TAG INVOLVED BUT IT'S VERY CLEAR HERE THAT THE U.S. IS TRYING TO GAIN SOME SORT OF LEVERAGE WHEN IT COMES TO THE STRAIGHT CONSIDERING THAT WE SAW THE U.S. MILITARY LAST NIGHT CONDUCT ANOTHER WAVE OF STRIKES SEEKING TO DEGRADE IRAN'S CAPABILITIES WHEN IT COMES TO STRIKING COMMERCIAL SHIPPING. BUT EVEN WITH THE ESCALATION, THE UAE'S DEFENSE MINISTRY DID CONFIRM THAT TWO OF ITS TANKERS WERE HIT AND DATA IS SHOWING US THAT TRAFFIC IN THE STRAIGHT HAS REACHED ITS LOWEST LEVEL ON SUNDAY ACCORDING TO WHAT WAS ANALYZED BY BLOOMBERG NEWS. NOW THE REGION, JOHN, IS BRACING FOR THE NEXT STEPS AND I WILL POINT OUT THAT PRESIDENT TRUMP TODAY IS SET TO MEET WITH IRAQ'S NEW PRIME MINISTER AS THE WHITE HOUSE IS PRESSURING THAT LEADER TO DISARM PROXY GROUPS THAT ARE OPERATING IN THE COUNTRY AS WE KEEP CLOSE EYES ON SOME OTHER IRANIAN PROXY GROUPS INCLUDING THE HOUTHIS IN YEMEN AND SOME RECENT ATTACKS THAT WE SAW FROM THEM OVERNIGHT. [00:19:00] Speaker 5: TO BUILD ON THIS CONVERSATION WE CAN SPEAK TO THE FORMER DEPUTY NATIONAL SECURITY ADVISER VICTORIA COASE. WELCOME BACK. I'M STRUGGLING WITH THIS ONE AND I NEED YOUR HELP. IS THIS A SERIOUS POLICY PROPOSAL FROM THE WHITE HOUSE? WELL, GOOD MORNING, JONATHAN. [00:19:18] Speaker 13: IF YOU'RE TALKING ABOUT THE MOVE THROUGH THE STRAIGHT IN TERMS OF THE POLICY PROPOSAL. [00:19:27] Speaker 5: THAT'S PRECISELY WHAT I'M TALKING ABOUT. BECOMING THE GUARDING OF THE STRAIGHT AND CHARGING A 20% TOLL. [00:19:32] Speaker 13: WELL, BUT I DON'T SEE THIS AS A TOLL. I SEE THIS AS THE UNITED STATES SHARING THE COSTS OF SECURING THE STRAIGHT. AND SO THAT'S WHAT'S DIFFERENT. IF YOU'RE PAYING A TOLL TO THE IRANIANS, YOU'RE PAYING THEM TO NOT SHOOT YOU. IF YOU ARE SHARING A COST WITH THE UNITED STATES, THE UNITED STATES TAXPAYER IS BEARING A BURDEN TO TRY TO KEEP THAT WATERWAY OPEN. AND SO THIS IS SOMETHING VERY DIFFERENT. YOU'RE JUST SIMPLY SHARING A COST. SO I THINK THAT'S PERFECTLY LOGICAL IF THAT'S HOW THE PRESIDENT WANTS TO ARRANGE IT. BUT THE WHOLE POINT IS WE NEED TO KEEP THAT ENERGY FLOWING. AND WHAT WE'VE SEEN RECENTLY ARE PRICES COMING DOWN AROUND $75 A BARREL. THAT'S RIGHT AROUND THE SWEET SPOT FOR THE UNITED STATES. THEY'RE COMING UP TODAY CLOSER TO $80 A BARREL. WE'D PREFER TO HAVE THAT LOWER. SO, NO, I THINK THIS IS A GOOD SECURITY ARRANGEMENT. I DO THINK THE GULF IS PERFECTLY CAPABLE OF PAYING FOR ITS OWN SECURITY. SO I DON'T SEE THIS AS A TOTAL. [00:20:28] Speaker 5: THE GULF HAS GOT THE MEANS. I'M TOTALLY WITH YOU. THEY'VE GOT THE MONEY. THAT'S NOT IN DISPUTE THIS MORNING. VICTORIA, MY STRUGGLE IS THE U.S. HAS FAILED TO DEMONSTRATE THEY HAVE THE ABILITY TO OPEN THE STRAIGHT AND GET TRAFFIC THROUGH THE STRAIGHT BACK TO PRE-WAR LEVELS. REGARDLESS OF WHETHER SOMEONE'S GOT THE MEANS OR NOT, DOES THE U.S. HAVE THE CAPABILITY TO ACHIEVE WHAT THEY'RE [00:20:48] Speaker 13: TALKING ABOUT ACHIEVING? NO, I THINK WE DO. AND WE ALSO -- I MEAN, THERE IS A PLAN IN PLACE THAT CENTCOM HAS THAT WILL CLEAR THE STREET. IT WOULD BE FAIRLY DESTRUCTIVE TO DO. SO I THINK THE PRESIDENT WOULD PREFER NOT TO DO THAT. AND I THINK THE PRESIDENT HAS TO DO THAT, BUT IF HE HAS TO DO IT, HE DOES ABSOLUTELY HAVE THE MEANS AT HAND TO DO THAT. AND I LOOK AT ALSO WHERE WE STRUCK LAST NIGHT. I WAS INTERESTED IN THE STRIKES ON BASHEAR, WHICH IS ONE OF THE PORT CITIES ALONG THIS SIDE, ALSO WITH AN IMPORTANT NUCLEAR PROGRAM ELEMENT TO IT. SO THEY'RE STARTING TO GO AFTER THOSE TARGETS, WHICH DEGRADE IRAN'S INFRASTRUCTURE, ALSO GOING AFTER THEIR NUCLEAR PROGRAM. I THINK YOU'RE GOING TO SEE THOSE STRIKES CONTINUE OVER THE NEXT WEEK OR SO. [00:21:32] Speaker 7: VICTORIA, WHAT DO YOU MAKE OF THE FACT THAT THE INDUSTRY HAS BEEN SOMEWHAT CAUGHT OFF GUARD, THE OIL AND GAS INDUSTRY, THE SHIPPING INDUSTRY? THEY'RE CAUGHT OFF GUARD WITH THE FACT THAT THIS IS AN INTERNATIONAL WATERWAY. NOW THE PRESIDENT WANTS TO MAKE A NEW PRECEDENT WHERE BASICALLY THEY HAVE TO GIVE BACK TO THE UNITED STATES, SOME 20% TO PAY THIS FEE TO GO TOWARDS THE SECURITY OF IT. [00:21:53] Speaker 13: WELL, I THINK THAT'S PRECISELY IT. THAT'S GOING TOWARD THE SECURITY OF THAT WATERWAY. WE'RE NOT THE ONES WHO HAVE CLOGGED IT UP. IT'S THE IRANIANS WHO STARTED MAKING THIS AN ISSUE OF YOU'RE GOING TO GET SHELLED IF YOU GO THROUGH. AND I THINK TWO UAE SHIPS WERE -- OR VESSELS, RATHER, WERE HIT OVERNIGHT. THERE WAS ANOTHER ONE. I MEAN, THEY'RE JUST TAKING POT SHOTS AT THESE TANKERS AS THEY'RE GOING THROUGH. THIS IS ON THE IRANIANS, NOT ON THE UNITED STATES. AND IF WE'RE GOING TO EXPEND THE TREASURE AND PUT OUR PEOPLE IN HARM'S WAY TO CLEAR THE STRAIGHT, TO MAKE SURE THAT THESE VESSELS CAN GO THROUGH, I DON'T THINK IT'S UNREASONABLE TO EXPECT OTHERS TO SHARE IN THAT COST. [00:22:36] Speaker 7: HASN'T THE FIFTH FLEET ALWAYS BEEN THE, QUOTE, GUARDIAN OF THE STRAIGHT? HASN'T OUR NAVY ALWAYS BEEN THERE? [00:22:42] Speaker 13: WELL, I MEAN, NOT ALWAYS. SINCE 1979, WHEN PRESIDENT CARTER -- OR 1980, RATHER, DECLARED THE CARTER DOCTRINE, THAT WE WERE DEPENDENT ON THE FLOW OF ENERGY OUT OF THE GULF AND WE WOULD ENSURE THAT IT WOULD BE COMING OUT. BUT NOW WE'RE IN A VERY DIFFERENT POSITION. AND I THINK THAT'S A REALLY IMPORTANT POINT, THAT WHEN CARTER MADE THAT DECLARATION OF THE CARTER DOCTRINE, WE WERE DEPENDENT ON THAT ENERGY. WE NOW AREN'T. AND I THINK WE JUST HIT A RECENT HIGH OF ABOUT 13.6 MILLION BARRELS A DAY THAT WE'RE PRODUCING IN TERMS OF OIL. I MEAN, THE NEXT CLOSEST TO ARE SAUDI AND RUSSIA, NINE AND CHANGE. SO WE ARE NOW THE WORLD'S LARGEST ENERGY PRODUCER. WE'RE IN A VERY DIFFERENT POSITION VIS-A-VIS THE GULF. WE DON'T FOR OUR DOMESTIC PURPOSES HAVE TO HAVE THAT ENERGY. NOW WE ARE A PART OF A GLOBAL ENERGY MARKET. WE DON'T WANT THERE TO BE HUGE PRICE SPIKES BASED ON WHAT'S COMING OUT OF THE GULF. BUT THAT'S LESS OF AN EXISTENTIAL THREAT TO US. SO, YES, THAT'S WHY THE FIFTH FLEET IS IN Bahrain. BUT I'M CURIOUS TO SEE GOING FORWARD IF THAT'S SOMETHING THAT WE NEED TO HAVE THERE. [00:23:55] Speaker 5: LET'S HOPE THAT WE CAN AVOID ANOTHER SPIKE. VICTORIA, IT'S GOOD TO CATCH UP WITH YOU. VICTORIA COATES THERE, THE FORMER DEPUTY NATIONAL SECURITY ADVISOR. WE'VE GOT ANOTHER ONE THIS MORNING UP BY CLOSE TO 5%. $87 A BARREL. IT IS AN INTERNATIONAL SHIPPING WATERWAY. SHOULDN'T HAVE TO PAY ANYONE. DOES THE MIDDLE EAST HAVE THE MEANS? ABSOLUTELY. THE WILLINGNESS, I'VE GOT NO IDEA. BUT DO WE HAVE THE CAPABILITY, THE MILITARY MIGHT, TO ACTUALLY KEEP THAT STRAIGHT OPEN? WHAT I'VE SEEN SO FAR IS THAT THAT IS DIFFICULT, MUCH HARDER THAN IT IS TO SAY YOU CAN. COMING UP ON THE PROGRAM, JOE CASSIDY OF RBC, BIG BANK EARNINGS, SET TO REPORT. J.P. MORGAN, BANK OF AMERICA, UP NEXT. GOOD MORNING, COMING UP, EARNINGS FROM BANK OF AMERICA AND J.P. MORGAN DROPPING RIGHT NOW, NUMBERS FROM WELLS FARGO, LOOKING AT AN UPSIDE SURPRISE ON INVESTMENT BANKING FEES. EXPECTING TO SEE A WHOLE LOT MORE LIKE THAT THROUGHOUT THIS MORNING AND INTO TOMORROW. FEES COMING IN AT 9:39, THE ESTIMATE WAS 8:30.2. THIS, OF COURSE, NOT A PURE PLAY ON CAPITAL MARKETS AND INVESTMENT BANKING, ANYTHING BUT OVER AT WELLS FARGO. A BIT OF AN OUTLIER COMPARED TO WHAT WE'LL BE TALKING ABOUT LATER ON THIS HOUR. [00:25:04] Speaker 6: THEY DON'T HAVE THE SAME CAPITAL MARKETS, GOLDMAN SAX OR MORGAN STANLEY OR J.P. MORGAN. THEY ALSO HAVE BEEN LAGGING BEHIND, AS YOU POINTED TO EARLIER THIS MORNING, THIS IDEA THAT THEY HAVE BEEN THE WORST PERFORMING BANK OUT THERE. THAT SAID, THE FACT THAT EVEN WELLS FARGO COULD COME IN WITH INVESTMENT BANKING FEES ABOVE EXPECTATIONS AT $939 MILLION VERSUS THE ESTIMATE AT 830, EVEN AS THEY CAN REAFFIRM THEIR FULL-YEAR NET INTEREST INCOME FORECAST. THIS GIVES A SENSE OF JUST WHAT WE CAN EXPECT FROM SOME OF THE OTHERS. [00:25:36] Speaker 5: NET INTEREST INCOME, THE BIG NUMBER FOR WELLS FARGO, THE SECOND QUARTER COMING IN AT 12.32 BILLION. THE STOCK THIS MORNING POSITIVE BY ABOUT 1%. EQUITY FUTURES MORE BROADLY. SCORES LOOKED LIKE THIS THIS MORNING ON THE S&P 500. EQUITY IS JUST ABOUT UNCHANGED. SOME OF THE OIL NUMBERS COME OUT A LITTLE BIT EARLIER THAN EXPECTED. THE OIL NUMBERS ARE A LITTLE BIT EARLIER THAN EXPECTED BY 0.4% IN THE BOND MARKET. NEW LEVELS TO TALK ABOUT. THANK YOU, GOVERNOR WALLER. 430 CLOSE TO THAT LEVEL ON TWOS, 10s THROUGH 460, 30s THROUGH 5.1%. IN ADDITION TO SOME HAWKISH COMMENTS FROM THE FED GOVERNOR, THIS MOVE IN CRUDE AS WELL. WTI PUSHING HIGHER ONCE AGAIN. BREAKING 80 ON WTI, BREAKING 87 ON BRENT CRUDE. S&P 500 IS COMING OUT A LITTLE BIT EARLIER THAN EXPECTED. J.P. MORGAN DROPPING NOW. BANKFOR AMERICA WILL COME IN JUST A MOMENT. WE HAVE ADJUSTED REVENUE COMING IN AT 58.02 BILLION. THE ESTIMATE WAS 51.39 BILLION. I THINK IT IS FAIR TO SAY THAT IS AN UPSIDE SURPRISE. INVESTMENT BANKING REVENUE COMING IN AT 3.9. THE ESTIMATE WAS 3.06. FIXED SALES AND TRADING REVENUE AT 6.05. I THINK THAT IS WHAT YOU CALL A MEGA, MEGA UPSIDE SURPRISE. I DON'T EVEN KNOW WHAT YOU CALL A $2 BILLION AT THIS POINT, GIVEN THE FACT THAT IT IS AN UPSIDE SURPRISE. IT ALMOST DOUBLES WHERE THE ESTIMATES WERE. ULTIMATELY THIS HAS BEEN A QUARTER THAT WAS DEFINED BY [00:27:07] Speaker 6: THOSE SHARE SALES THAT WE'VE BEEN TALKING ABOUT, BY THE IPOs, BY SOME OF THE VOLATILITY, THE SINGLE NAME AND SECTOR RELATED VOLATILITY THAT EVIDENTLY IS THE GOOD TYPE OF VOLATILITY. JUST LOOKING THROUGH THIS, NOT EVERYTHING WAS EXACTLY A BEAT. YOU COULD SEE JUST MANAGED NET INTEREST INCOME CAME IN JUST A TOUCH LIGHT. NONETHELESS, ALL AROUND A REALLY BIG QUARTER TIED TO EXACTLY WHAT WE'VE BEEN TALKING ABOUT, THE IPOs, THE SHARE SALES, THE VOLATILITY THAT HAS BEEN BOUNCING AROUND THE BALL OF MONEY THAT IS MOVING, BUT NOT NECESSARILY MOVING DOWN. THAT EQUITY SALES AND TRADING [00:27:46] Speaker 5: REVENUE NUMBER IS A MONSTER. THE STOCK IS DOWN BY ABOUT 3/4% THIS MORNING. THE BAR WAS ALREADY HIGH COMING INTO THOSE NUMBERS. WE'VE HAD WELS FARGO AND J.P. MORGAN WE'LL SPEND SOME TIME ON THAT IN JUST A MOMENT. A FEW MINUTES AWAY, SHOULD BE IN THE NEXT 10 MINUTES. BEFORE WE GET THERE, THREE HOURS AWAY FROM THE CASH OPEN, LET'S GET YOU SOME MORNING MOVERS. [00:28:08] Speaker 14: THANK YOU SO MUCH. WE ARE SEEING SK HYNIX ADR BOUNCING BACK UP 6.6% IN THE PREMARKET AFTER FALLING MORE THAN 9% YESTERDAY. THE REBOUND FOLLOWS A RECOVERY IN SOUTH KOREA OVERNIGHT, REINFORCING KOREA'S GROWING ROLE AS A KEY BAROMETER FOR THE AI TRADE AND ALSO SHOWING HOW THIS COMPANY, SK HYNIX'S U.S. LISTING IS INCREASINGLY LINKING TRADE BETWEEN THE U.S. LISTING IS IN THE U.S. LISTING IS IN THE U.S. A LISTING IS IN THE U.S. CALL MEMORY AND CHIP STOCKS ARE ALSO BOUNCING BACK THIS MORNING WITH NAMES LIKE MICRON UP 3% IN THE PREMARKET. AFTER YESTERDAY'S SELLOFF AND AFTER A VOLATIAL STRETCH FOR THESE STOCKS, AS INVESTORS CONTINUE TO GRAPPLE WITH THIS CONCERN THAT THE WAVE OF SPENDING BY MEMORY COMPANIES COULD FLOOD THE MARKET WITH CHIPS, PUTTING PRESSURE ON PRICES AND OF COURSE, ERODING ALL THIS PRICING POWER THAT THEY HAVE ENJOYED DURING THIS AI BOOM. AND WE END ON APPLE SEEING SOME PRESSURE AFTER SOME SOUTHSIDE ACTION DOWN 1.1% AFTER KEYBANK DOWNGRADED THE STOCK TO UNDERWEIGHT, SAYING EXPECTATIONS FOR IPHONE DEMAND MAY HAVE GOTTEN A BIT TOO OPTIMISTIC. THE FIRM THINKS THAT U.S. CARRIERS ARE GOING TO PULL BACK ON SUBSIDIES AND THAT MEANS FEWER PEOPLE UPGRADING THEIR PHONES AND LESS REVENUE FOR APPLE SERVICES AND WITH ITS HIGH VALUATION, KEYBANK THINKS THAT THIS DYNAMIC MAKES THE STOCK LOOK UNFAVORABLE. THE STOCK IS UP 17% YEAR-TO-DATE [00:29:36] Speaker 5: OUTPERFORMING THE MAG-7. JONATHAN: J.P. MORGAN, THE CEO AND CHAIR. REVENUE IN EACH LINE OF BUSINESS HIT A NEW RECORD. [00:29:51] Speaker 6: THAT IS QUITE A LINE COMING OUT OF THAT BANK AFTER 2Q. ESPECIALLY GIVEN SOME OF THE MONSTER EARNINGS THAT YOU HAVE ALREADY SEEN IN REVENUES COMING FROM THIS BANK. TALKING ABOUT HOW THERE HAS BEEN INCREDIBLE STRENGTH PARTICULARLY IN CAPITAL MARKETS. THE U.S. ECONOMY HAS DEMONSTRATED NOTABLE RESILIENCE THIS YEAR WITH STRONGER BUSINESS INVESTMENT AND HIRING, THE STRENGTH BEING SUPPORTED BY AI-DRIVEN CAPITAL INVESTMENT. WE'VE BEEN HOPING INVESTMENT. WE'VE GOT TO TALK ABOUT THAT INVESTMENT. WE'VE GOT TO TALK ABOUT THAT SORT OF DEREGULATORY PUSH. GOING ON TO HIGHLIGHT THE RISKS AS MR. DIAMOND IS WANTED TO DO, INCLUDING POTENTIALLY STICKY INFLATION AND SOME OTHER GEOPOLITICAL RISKS THAT WE [00:30:26] Speaker 5: HAVE CONTINUED TO TALK ABOUT, PARTICULARLY IN THE MIDDLE EAST. WE'VE GOT FIVE OF THE BIGGEST BANKS ON WALL STREET REPORTING SECOND QUARTER RESULTS THIS MORNING. WHILE FARGO AND J.P. MORGAN FIRST OUT OF THE GATE, BANK OF AMERICA EXPECTED ANY MINUTE NOW. WE'VE GOT TO TALK ABOUT WHAT WE'VE GOT TO TALK ABOUT. WE'VE GOT TO TALK ABOUT THE BANKS OVER THE NEXT 12 MONTHS. WE EXPECT TO SEE CONTINUED STRONGER LOAN GROWTH, A POSITIVE YIELD CURVE AND THE RETURN OF EXCESS CAPITAL. JARRAD JOINS US NOW FOR MORE. JARRAD, WELCOME. THIS LINE FROM JAMIE. JAMIE DIAMOND SAYING THE FOLLOWING, RESULTS ARE THE PRODUCT OF A PARTICULARLY FAVORABLE ENVIRONMENT. I THINK THAT'S AN IMPORTANT ISSUE RIGHT NOW, JARRAD. [00:31:00] Speaker 15: THE WEATHER WAS GOOD. IS THE WEATHER GOING TO BE GOOD IN THE QUARTERS TO COME? JARRAD JOINS US NOW. THERE IS AN ENVIRONMENT THAT IS VERY POSITIVE FOR THE BANKING INDUSTRY, AS JAMIE DIAMOND HAS POINTED OUT. THE ECONOMY REMAINS VERY RESILIENT. LOAN DEMAND IS PICKING UP. THE CAPITAL MARKET NUMBERS THAT YOU GUYS HAVE JUST DISCUSSED ARE INCREDIBLY STRONG. NOW THE REAL QUESTION IS WHAT DOES THE NEXT COUPLE OF QUARTERS LOOK LIKE? I THINK IT'S GOING TO REMAIN ROBUST. WE'LL SEE, OBVIOUSLY, THE THIRD QUARTER IS A SLOWER QUARTER FOR CAPITAL RECORD HIGH. WE'LL SEE THE BANKS. WE'LL SEE THE BANKS. WE'LL SEE THE BANKS. WE'LL SEE THE BANKS. WE'LL SEE THE BANKS. WE'LL SEE THE BANKS. I THINK JAMIE POINTED OUT THE [00:31:46] Speaker 5: REGULATORY ENVIRONMENT IS AS GOOD AS IT'S GOING TO GET. THAT'S A REAL BIG TAILWIND FOR THE BANKS. JONATHAN: I WANT TO TALK ABOUT THE BANKS YOU WANT EXPOSURE TO RIGHT NOW. I'VE BEEN TALKING ABOUT THE BANKS AS A GROUP ON THE S&P TRADING AT RECORD HIGHS. WITHIN THAT GROUP, YOU'VE GOT SOME REAL PERFORMANCE DISPERSION, SO TO SPEAK. WE'LL SEE THE BANKS THAT YOU ARE RIGHT NOW. THE CLOSER YOU ARE TO MAIN STREET, THE MORE OF A STRUGGLE. [00:32:08] Speaker 15: WHERE IS THE SWEET SPOT FOR YOU FOR THE YEAR AHEAD? THE SWEET SPOT IS ON MAIN STREET. WE'VE BEEN CONSTRUCTIVE ON THE VALUATIONS ARE VERY FULL. AND YOU ARE GOING TO NEED A CONTINUED RECORD PACE, I THINK, FOR THOSE STOCKS THAT CONTINUE TO WORK, WHICH WE MAY GET. BUT WHAT'S INTERESTING TO US IS THAT THE STEEPING -- THE LOAN GROWTH, ANTICIPATED IMPROVED LOAN GROWTH, A POTENTIAL HEALTHY YIELD CURVE FOR THE BANKS, MAKES MAIN STREET MAY BE MORE ATTRACTIVE THAN IT COMES TO THE WALL STREET BANKS OR INVESTMENT BANKS. THE YEAR-OVER-YEAR COMPARISON HAS BECOME MORE DIFFICULT ON THE INVESTMENT BANKING NUMBERS IN THE SECOND HALF OF THIS YEAR AND CERTAINLY THE FIRST HALF OF 27 WHEN YOU COMPARE THEM TO THE FIRST HALF OF 26. [00:32:56] Speaker 6: I'M STRUCK WHAT YOU ARE TALKING ABOUT, GERRARD, WHICH IS THAT MAIN STREET IS GOING TO HAVE ITS REVENGERS COME UP WITH RESPECT TO WALL STREET. I'M NOTING THAT AT J.P. MORGAN, THE CHARGE-OFFS WERE BELOW EXPECTED AT 2.37 BILLION VERSUS THE ESTIMATE OF 2.6 BILLION. WALLS-FARGO ALSO SEEING A MUCH LOWER CHARGE-OFF NUMBER THAN PREVIOUSLY EXPECTED. WHAT DOES THIS TELL YOU ABOUT THE ACCELERATION OF THE U.S. ECONOMY DESPITE SOME OF THE CONCERNS THAT JAMIE DAMMEN FLAGGED, IN PARTICULAR STICKIER INFLATION? [00:33:25] Speaker 15: IT'S INTERESTING BECAUSE CREDIT HAS BEEN VERY RESILIENT. I THINK INVESTORS ARE FINALLY RECOGNIZING THAT THE BANKING INDUSTRY POST FINANCIAL CRISIS HAS BEEN DE-RISKED. THEN YOU HAD THE 2023 MARCH MADNESS WHEN OF COURSE SILICON VALLEY SIGNATURE BANK AND REPUBLIC BANK FAILED. AT THAT TIME, THE VICE CHAIR BAR OF THE FEDERAL RESERVE BROUGHT OUT THAT SUMMER THE FIRST BASEL III PROPOSAL, WHICH WAS VERY ONEROUS. AND BANKS HAD TO GO ON AT THE TIME WHAT THEY REFERRED TO AS RISK-WEIGHTED ACID DIETS, SHRINKING THEIR LOAN BOATS. AND SO THE BANKS, I THINK, HAVE UNDERWRITTEN THEIR LOANS VERY WELL. BUT THIS RESILIENT ECONOMY IS A MAIN REASON WHY THE CREDIT PICTURE IS AS STRONG AS IT IS. [00:34:11] Speaker 5: THERE IS A ROUTINE THAT J.P. MORGAN GOES THROUGH EVERY SINGLE QUARTER THAT ALWAYS MAKES ME SMILE. YOU GET A HEADLINE FROM JAMIE DIAMOND AND HE TALKS ABOUT RISKS SHIFTING BELOW THE SURFACE LIKE TECHTONIC PLATES. AND THEN A FEW MINUTES LATER, THEY RAISED THE OUTLOOK. [00:34:27] Speaker 6: AND, BRAMO, THAT'S JUST WHAT J.P. MORGAN DID AGAIN. SO AFTER RAISING IT, THEN LOWERING IT EARLIER THIS YEAR, NOW THEY SEE FULL-YEAR NET INTEREST INCOME OF ABOUT $105.5 BILLION VERSUS THE $103 BILLION. SO SUPERCEDING THE PREVIOUS REVISION THAT THEY HAD CREATED EARLIER THIS YEAR THAT CAUSED A SELL-OFF IN THE SHARES, NOW COMING OUT AND RAISING IT ONCE AGAIN ABOVE WHERE IT INITIALLY HAD BEEN. [00:34:47] Speaker 5: I'M NOT TRYING TO GET IN TROUBLE, BUT ON EARNINGS DAY, IS IT WORTH LISTENING TO JAMIE DIAMOND? [00:34:52] Speaker 15: OF COURSE IT IS. GOSH, HE IS OBVIOUSLY ICONIC, AND HE IS THE REAL LEADER OF THE INDUSTRY. AND YOU ARE GOING TO PARSE TO HIS WORDS, NO DOUBT ABOUT IT. BUT, OH, MY GOD, YES. HE IS DEFINITELY SOMEONE TO LISTEN TO. [00:35:04] Speaker 5: YOU KNOW WHY I SAY THAT? HE IS TALKING ABOUT THIS, AND HE IS TALKING ABOUT RISKS EVERY QUARTER, AND THEY JUST KEEP RAISING THE OUTLOOK AND RAISING THE OUTLOOK, AND THEY DID THAT AGAIN THIS MORNING. ALSO, THIS LINE AS WELL, LET'S TALK ABOUT THIS. FULL-YEAR EXPENSE GUIDANCE BOOST DUE TO HIGHER VOLUMES. WHAT IS GOING TO HAPPEN WITH EXPENSES IN THE YEAR TO COME, WHICH IS THE HIGHER EXPENSES IN THE YEAR TO COME. [00:35:25] Speaker 15: WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHAT IS GOING TO HIGHER EXPENSES IN THE YEAR? WHEN IT COMES TO AI, WE ARE NOT EXPECTING IT TO BE A COST REDUCTION MEASURE JUST YET. [00:35:58] Speaker 5: IT IS MORE OF A PRODUCTIVITY ENHANCEMENT TOOL THAN IT IS REDUCED COSTS. GERALD, IT IS GOOD TO SEE YOU. YOU ARE GOING TO STICK WITH US. GERALD CASSIDY, BREAKING DOWN THE NUMBERS FROM J.P. MORGAN, WE WILL HEAR FROM BANK OF AMERICA IN A FEW MINUTES. [00:36:11] Speaker 6: THE HEADLINE, RECORD REVENUE ACROSS EACH BUSINESS LINE. WE ARE GOING TO TALK ABOUT THAT. WE ARE GOING TO TALK ABOUT EVERY SINGLE FRONT. YOU ASKED THE QUESTION, WHAT KIND OF FORWARD VISIBILITY DO WE HAVE ABOUT HOW LONG THIS LAST? ULTIMATELY, THAT IS THE KEY QUESTION FOR A LOT OF THESE BANKS. IT IS CLEAR THAT JAMIE DIMON IS WORRIED ABOUT SOME OF THOSE RISKS THAT ARE PERCOLATING, THE TECTONIC SHIFTS THAT ARE OCCURRING UNDER THE SURFACE. THINGS ARE GOING VERY STRONGLY AND YOU ARE GETTING THIS NOT ONLY FROM THE CAPITAL MARKETS BUT ALSO ON THE MAIN STREET SIDE. [00:36:40] Speaker 5: HE OFTEN LIKES TALKING ABOUT THE WEATHER, STORMS ON THE HORIZON, HURRICANES, ALL THAT STUFF. THIS WAS A HEATWAVE IN 2Q FOR INVESTMENT BANKING, RIGHT? [00:36:48] Speaker 6: I THINK THAT IS FAIR TO SAY. IT IS A HEATWAVE. QUESTION IS, IS IT GOING TO BE A HEATWAVE AKIN TO THE ONE WE HAVE SEEN OVER THE PAST COUPLE OF MONTHS, PARTICULARLY OVER IN EUROPE, WHICH WE HEAR A LOT ABOUT OR IS THERE GOING TO BE A HEATWAVE LIKE THE ONE THAT WE ARE GOING TO GET THIS WEEK AND THEN IT IS GOING TO FADE BY THE WEEKEND? [00:37:01] Speaker 5: THE STOCK IS DOWN BY 1%. DON'T GET BURNT, FORGIVE ME. LET'S GET BACK FOR AMERICA IN JUST A MOMENT. [00:37:09] Speaker 9: BEFORE WE GET THERE, LET'S GET TO THE BLOOMBERG BRIEF. VONNIE QUINN HAS MORE. VONNIE. THANK YOU. U.S. CENTRAL COMMAND SAYING IT COMPLETED THE LATEST WAVE OF STRIKES ON MILITARY TARGETS ACROSS IRAN. PRESIDENT DONALD TRUMP SAYING THE U.S. WILL HIT IRAN HARD AGAIN TODAY. THANK YOU FOR JOINING US. THANK YOU FOR JOINING US. THANK YOU FOR JOINING US. SOUTH CAROLINA'S GOVERNOR APPOINTING THE SISTER OF THE LATE U.S. SENATOR LINDSEY GRAHAM TO SERVE OUT THE REMAINDER OF HIS TERM THROUGH JANUARY. HER APPOINTMENT COMES AS REPUBLICANS PREPARE FOR AN AUGUST PRIMARY TO CHOOSE THE PARTY'S CANDIDATE FOR A FULL SIX-YEAR TERM. J.P. MORGAN REPORTING SECOND QUARTER SALES AND TRADING REVENUE THAT BEAT WALL STREET ESTIMATES. IT'S A HIGH BAR FOR THE BIG BANKS. [00:37:57] Speaker 5: WE ARE ALL EXPECTING GREAT THINGS. CAN THE MEGA CAP BANKS EXCEED THE MEGA EXPECTATIONS THAT HAVE [00:38:02] Speaker 16: BEEN PUT ON? THERE IS SORT OF A POTENTIAL FOR EARNINGS DOWNGRADES BECAUSE OF HIGHER DEPOSIT COSTS VERSUS THE FANTASY OF THE CAPITAL MARKET REVISIONS CONTINUING TO GO UP AND UP AND UP. [00:38:17] Speaker 5: THE BANK OF AMERICA IS DROPPING RIGHT NOW. 2Q TRADING REVENUE, 7.16 BILLION, THE ESTIMATE 6.21. [00:38:29] Speaker ?: IT'S A HIGH BAR FOR THE BIG BANKS. YOU CAN SEE THAT WITH J.P. MORGAN, THE STOCK IS DOWN BY 2.25% [00:38:52] Speaker 5: IN THE PRE-MARKET FOLLOWING RECORD REVENUE ACROSS EACH BUSINESS LINE. THAT'S J.P., BANK OF AMERICA OUT OF THE GATE JUST MOMENTS AGO. THE STOCK IS HIGH BY A THIRD OF 1%. ANOTHER BIG NUMBER FOR EQUITY TRADING, THE NUMBER IS 3.62 BILLION. THE ESTIMATE WAS 2.69, A RECORD FOR SALES AND TRADING REVENUE OUT OF BANK OF AMERICA, UP SOME 33%. A RECORD FOR EQUITIES AS WELL. INVESTMENT BANKING FEES AT BANK OF AMERICA UP BY 50%. THE NUMBER IS JUST PHENOMENAL. [00:39:33] Speaker 6: BRIAN MOINAHAN CALLING IN AN EXCEPTIONAL QUARTER FOR OUR MARKERS-FACING BUSINESS. ULTIMATELY, RIDING THE SAME TAILWINDS THAT WE'VE SEEN FROM ALL THE OTHER BANKS, TALKING ABOUT HOW TRADING REVENUE, EXA DEVA, WAS AT $7.16 BILLION VERSUS A $6.2 BILLION NUMBER. REALLY BEATING ACROSS THE BOARD, NOT JUST IN THE EQUITIES BUSINESS, BUT ALSO FICK, WHICH WE SAW WAS A LITTLE BIT DIFFERENT OVER J.P. MORGAN. THANKS FOR JOINING US. WHAT IS GOING TO BE GOING FORWARD? IS THIS AS GOOD AS IT GETS OR IS THERE SOME MORE UNDER THE HOOD? ALSO, ARE PEOPLE GOING TO START COMPARING WHICH BANK EXECUTED BEST? WHO IS GRABBING SHARE UNDER [00:40:10] Speaker 5: THE SURFACE? AND THAT, I THINK, IS WHAT IS GOING TO BE SCRUTINIZED AFTER THIS. JONATHAN: AMERICA UP BY 0.8%, J.P. MORGAN DOWN BY CLOSE TO 2%. [00:40:24] Speaker 16: UNDER SURVEILLANCE THIS MORNING, IT IS A HIGH BAR FOR THE BIG BANKS. WE ARE ALL EXPECTING GREAT THINGS, RIGHT? BUT CAN THE MEGA CAP BANKS REALLY EXCEED THE MEGA EXPECTATIONS THAT HAVE BEEN PUT ON? IT IS GOING TO BE DIFFICULT TO STAND OUT. THERE IS A POTENTIAL FOR EARNINGS DOWNGRADES BECAUSE OF HIGHER DEPOSIT COSTS, VERSUS THE FANTASY OF THE CAPITAL MARKET PROVISIONS CONTINUING TO GO UP AND UP AND UP. [00:40:43] Speaker 5: HERE IS THE LATEST THIS MORNING. WELLS FARGO, J.P. MORGAN, BANK OF AMERICA KICKING OFF A BLOCKBUSTER DAY FOR EARNINGS, RESULTS FROM GOLDMAN AND CITY DURING THE NEXT HOUR OR SO. GERALD CASSIDY OF RBC HAS BEEN STANDING BY WORKING THROUGH THE NUMBERS. GERALD, WELCOME TO THE NUMBERS FROM BANK OF AMERICA JUST MOMENTS AGO, REALLY GOOD NUMBERS. RECORDS IN SOME PLACES, THE NAME IS UP BY SOME 1%. LISA HAS ASKED THE QUESTION, WE HEARD FROM AMERICAN ADJOURN OF UPS JUST YESTERDAY. THE BIAS BAR IS SO HIGH, GERALD. IS THIS AS GOOD AS IT GETS FOR SOME OF THESE BANK STOCKS? [00:41:18] Speaker 15: THAT IS THE $64,000 QUESTION, JONATHAN, IS HOW MUCH HAS BEEN PRICED INTO THESE STOCKS? AND WHEN YOU'RE TRADING AT THREE TIMES TANGIBLE OR OVER THREE TIMES TANGIBLE BOOK VALUE IN THE CASE OF JP MORGAN, THERE'S QUITE A BIT OF OPTIMISM PRICED IN THERE AS WELL FOR GOLDMAN SACHS AND MORGAN STANLEY. BANK AMERICA, ON THE OTHER HAND, DOESN'T TRADE AS HIGH AS THOSE MULTIPLES. OBVIOUSLY, IT DOESN'T HAVE THE PROFITABILITY YET OF THOSE COMPANIES. SO THERE MIGHT BE MORE UPSIDE THERE IN THE BANK AMERICA NUMBER. IT'S A HARD DETERMINATION OF WHAT'S PRICED IN AND THAT'S THE VALUATION CALL THAT INVESTORS HAVE TO MAKE. JUST LIKE ART, IT'S IN THE EYE OF THE BEHOLDER WHETHER THE STOCKS LOOK CHEAP OR NOT WHEN YOU COMPARE THEM TO THE NON-BANKS IN THE MAG-7 OR ANY OF THE SEMICONDUCTOR STOCKS. [00:42:03] Speaker 6: HOW DO YOU DETERMINE, GERARD, WHAT IS EXECUTION VERSUS RIDING THE TAILWINDS OF THE OVERALL ECONOMY? [00:42:13] Speaker 15: RIDING THE TAILWINDS OF THE OVERALL ECONOMY AND IN PARTICULAR THE CAPITAL MARKETS IS A HUGE IMPACT ON EVERYBODY'S NUMBERS THIS MORNING. YOU SAW IT IN 2021 WHEN YOU TAKE A LOOK AT THE NUMBERS THAT BANKS PUT UP BACK THEN, WHEN YOU REMEMBER THE SPAC IPOS WERE VERY STRONG AND THEN WHEN THAT FELL OFF IN 2022, REVENUES FELL IN SOME CASES IN INVESTMENT BANKING BY 50%. SO A GOOD PORTION OF WHAT WE SEE TODAY, OF COURSE, IS MARKET DEPENDENT. BUT EXECUTION IS ALSO IMPORTANT AND THE BIG PLAYERS HAVE THE ECONOMY TO SCALE AND THEY ARE GAINING MARKET SHARE AS EVIDENCED BY SOME OF THESE [00:42:50] Speaker 6: NUMBERS. LOOKING RIGHT NOW, JP MORGAN SHARES ARE FALLING AFTER LOOKING AT THE -- AT LEAST SOME PEOPLE ARE ATTRIBUTING IT TO THE FULL YEAR ADJUSTED EXPENSES OF ABOUT $107.5 BILLION VERSUS THE EXPECTATION OF $105 BILLION. BANK OF AMERICA SECOND QUARTER COMPENSATION CAME OUT A LITTLE BIT BELOW EXPECTATIONS. I'M JUST WONDERING HOW YOU VIEW COMPENSATION EXPENSES IN THE SCHEME OF OVERALL PERFORMANCE. DOES IT MATTER TO YOU OR IS THIS JUST AN EXCUSE TO SELL REALLY HIGHLY PRICED SHARES? [00:43:24] Speaker 15: IT MAY BE MORE THE LATTERLY, BECAUSE WE'RE MORE FOCUSED ON POSITIVE OPERATING LEVERAGE THAN THE ACTUAL EXPENSE NUMBER. AND WHAT I MEAN BY THAT IS, IF REVENUE GROWTH, THE RATE OF GROWTH EXCEEDS THE RATE OF GROWTH OF EXPENSES, THAT'S WHAT YOU WANT TO SEE BECAUSE THAT LEVERAGE DRIVES BETTER EARNINGS PER SHARE GROWTH. AND AS A RESULT, YES, YOU'D LIKE TO SEE EXPENSES KEPT IN CHECK. BUT IF YOU'RE GROWING REVENUES IN INCENTIVE COMP TYPE BUSINESSES WHERE THE FOLKS THAT DRIVE THOSE REVENUES WILL BE INCENTIVIZED WITH HIGHER COMPENSATION, THEN OF COURSE YOU WANT TO SEE THOSE EXPENSES RISE BECAUSE THAT MEANS REVENUE IS RISING. BUT POSITIVE OPERATING LEVERAGE TAKES INCENTIVE COMPANIES. WE'VE BEEN CONSISTENTLY [00:44:09] Speaker 5: DELIVERING ON THAT. THAT IS THE CASE PRECEDENT TRUMP'S, IF YOU WILL, THE ACTUAL LEVEL OF EXPENSE GROWTH IN OUR VIEW AT LEAST. JONATHAN: THAT'S THE STORY AT BANK OF AMERICA THIS MORNING. 15% REVENUE GROWTH, 8% EXPENSE GROWTH. [00:44:25] Speaker 15: OPERATING LEVERAGE IS IMPROVING AND HAS BEEN OVER THE PAST FEW QUARTERS. THAT'S A KEY GOAL I THINK FOR BRIAN MOINAHAN AND THE TEAM. ARE YOU EXPECTING TO SEE MORE OF THE SAME? WE'VE BEEN AVAILABLE ON THAT. WE'VE BEEN CONSISTENTLY DELIVERING ON THAT AND THEIR FOCUS GOING FORWARD WILL BE TO CONTINUE TO DO THAT AS WITH MANY OTHER BANKS. WE ANTICIPATE TO SEE POSITIVE OPERATING LEVERAGE THROUGHOUT THIS QUARTER AND CERTAINLY [00:44:48] Speaker 5: BANK AMERICA DELIVERED ON THAT TODAY. JONATHAN: WE'LL BE INVOLVED. WE'LL BE INVOLVED. WE'LL BE INVOLVED. WE'LL BE INVOLVED. WE'LL BE INVOLVED. TOMORROW, ANOTHER PURE PLAY. THE LIKES OF MORGAN STANLEY. EXECUTION, THIS IS SOMETHING THAT LISA WAS TALKING ABOUT. ENVIRONMENT IS GREAT. [00:45:07] Speaker 15: LET'S TALK ABOUT EXECUTION. WHAT IS THE DIFFERENCE BETWEEN A MORGAN STANLEY AND A GOLDMAN SAX? GERARD, IT'S EARLY DAYS. WE'LL BE INVOLVED. WE'LL BE INVOLVED. IT MAY GIVE IT MORE STABILITY AND REVENUE GROWTH THROUGH THE FULL CYCLE. GOLDMAN SAX IS NOT THERE YET. THAT'S ONE OF THEIR PRIORITIES IS TO BUILD OUT THEIR WEALTH MANAGEMENT REVENUES AND THEY ARE WORKING ON THAT NOW. THAT'S THE PRIMARY DIFFERENCE BETWEEN THE TWO. THEY ARE BOTH PREMIER INVESTMENT BANKS [00:45:42] Speaker 6: AND THE FULL CYCLE. WE HAVE NOT GOTTEN GOLDMAN SAX. WE HAVE NOT GOTTEN GOLDMAN SAX. WE HAVE NOT GOTTEN GOLDMAN STANLEY. [00:45:49] Speaker 15: SO FAR, WHO IS WINNING EARNINGS? I WOULD SAY TODAY, WHEN YOU LOOK AT THE NUMBERS ACROSS THE BOARD, THEY WERE ALL VERY GOOD. THE J.P. MORGAN NUMBERS WERE QUITE EXTREDINARY. IF YOU HAD TO RANK THEM, PROBABLY J.P. MORGAN, BANK, AMERICA, WELLS. THEY ARE ALL GOOD. I DON'T KNOW IF YOU CAN GET THREE [00:46:08] Speaker 5: GOLD MEDALS. SO FAR, THEY ARE ALL GOOD. WE HAVE NOT GOTTEN GOLDMAN SAX. WE HAVE NOT GOTTEN GOLDMAN SAX. LOOK AT THE PRE-MARKET PRICE ACTION RIGHT NOW. THE LIKES OF J.P. MORGAN TRADING A BIT SOFTER FOLLOWING THE NUMBERS. YOU SAW A DECENT POP FOR BANK OF AMERICA. THAT NAME IS UP BY CLOSE TO 2%. [00:46:30] Speaker 6: THAT WOULDN'T GET PAID. THAT'S YOUR COMPENSATION INCREASE. THAT WAS CRUBS FROM THOSE EQUITY TRADIERS. THAT ABSOLUTELY KNOCKED IT OUT OF THE PARK. [00:46:36] Speaker 5: THOSE NUMBERS ARE WILD. THEY ARE BUNKERS. [00:46:38] Speaker ?: THEY ARE CRAZY, RIGHT? [00:46:38] Speaker 6: IT GIVES YOU A SENSE OF HOW WELL WALL STREET IS DOING AND HOW MUCH YOU ARE SEEING SOME OF THESE IPO SHARES, PRICES, AND SOME OF THE VOLATILITY REALLY UNDERPINNING SOME OF THESE RESULTS. ON THE MAIN STREET SIDE, I KNOW WE ARE GLOSSING OVER WELLS FARGO, WHICH AS ERIKA WAS SAYING IS SORT OF BEEN LEFT FOR DEAD. THE COMMENTARY FROM THE CEO IS REALLY INTERESTING. CONSUMER SPENDING IS HIGHER, CHARGE-OFFS AND DELINQUENCIES ARE LOWER, SAVINGS AND INVESTMENTS ARE GROWING. GOING ON TO SAY CONCERNS AROUND AFFORDABILITY AND INFLATION EXISTS, BUT THE LABOR MARKET AND WAGE GROWTH REMAIN STRONG. WE ARE GETTING THE READ ON WALL STREET FROM A LOT OF THESE BANKS. HEADING TO CPI AND THEN KEVIN WORSH. WHAT IS GOING ON ON MAIN STREET? THE READ THERE IS PRETTY POSITIVE AS WELL. THAT, I THINK, WILL HAVE A LONGER STORY LINE THROUGHOUT THE [00:47:18] Speaker 5: DAY. THIS IS PART OF THE CONVERSATION. THE NEXT PHASE OF THE BANKS TRADE HAS BEEN ABOUT THE PURE CAPITAL MARKETS PLAY AMONGST THE BIG PLAYERS ON WALL STREET. DO YOU GET SOMETHING THAT SHIFTS BACK TOWARDS MAIN STREET IN THE MONTHS TO COME? BANKFOR AMERICA UP BY 3/4 OF 1% THIS MORNING. J.P. MORGAN TRADING SOFTER. IT IS DOWN BY 2%. COMING UP NEXT, WE WILL CATCH UP WITH VINNUKRISHNER OF BARCLAYS. WE WILL SPEAK TO HENRY ATTREZ OF VEDA PARTNERS. CHRIS MARANAK OF BRING CAPITAL INFLATION. WE WILL TALK ABOUT THE LATEST NUMBERS FROM THE BIG BANKS. WE WILL CATCH UP WITH THE FORMER NEW YORK FED PRESIDENT BILL DUDLEY. LOOKING FORWARD TO CATCHING UP WITH BILL. FOLLOWING SOME VERY, VERY PUNCHY COMMENTS FROM GOVERNOR WALLER AHEAD OF THE FED'S NEXT MEETING, PUTTING A LOT OF WEIGHT ON THE IMPORTANCE OF THE NEXT READ ON INFLATION. CPI DROPPING AT 8:30 EASTERN INFLATION. WE WILL TALK ABOUT IT. [00:48:17] Speaker ?: WE WILL TALK ABOUT THE SECOND HOUR OF BLOOMBERG SURVEILLANCE. [00:48:21] Speaker 10: WE WILL TALK ABOUT IT. [00:48:31] Speaker 17: I REALLY DON'T SEE A CASE FOR HIKES ANYWHERE. I DON'T THINK THERE IS A STRONG ARGUMENT RIGHT NOW AMONG [00:48:36] Speaker 18: FED OFFICIALS FOR CUTTING RATES. NOW, FRANKLY, THE U.S. HAS TOO MUCH INFLATION AND EVERYBODY CAN SEE IT. FROM AN INFLATION PERSPECTIVE, [00:48:43] Speaker 3: IT'S A LITTLE BIT OF A LITTLE BIT OF THE BIT OF THEM. [00:48:50] Speaker 5: THE CPI NUMBER IS HOT. THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA ABRAMOWITZ AND ANNE MARIE HORDERN. LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING FOR OUR AUDIENCE WORLDWIDE. THE SECOND HOUR OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW. YOUR PRICE SECTION OF SCORES LOOK LIKE THIS. THE BANK STORY SO FAR SO GOOD. EQUITIES NEGATIVE BY A TENTH OF 1% ON THE NASDAQ. LAST WEEK, 430, 10s THROUGH 460, 30s OF 5.1%. GOING INTO CPI LATER THIS MORNING. IN FOCUS FOLLOWING THIS MOVE, IN CRUDE. WTI AND BRENT THIS MORNING, HIGHER ACROSS THE BOARD, HIGHER BY CLOSE TO 5% ON BRENT AND CLOSING BACK IN ON 90. 87.30 SO FAR THIS MORNING. CPI, 90 MINUTES AWAY. BEFORE WE GET THERE, NUMBERS FROM GOLDMAN SAX, ROUNDING OUT QUITE A QUARTER WITH GOLDMAN SAX AND CITY ON DECK IN THE NEXT 60 MINUTES OR SO. THIS IS WHAT WE HAVE SEEN SO FAR. JP MORGAN, ACCORDING TO JAMIE DIAMOND, THE CEO, A RECORD IN EVERY SINGLE BUSINESS LINE. A RECORD FOR REVENUE. WE SAW MORE RECORDS OVER THE BANK OF AMERICA. AND THE TRADE, THE STOCKS ARE A LITTLE SOFTER OFF THE BACK OF THIS. THEY MET A VERY, VERY HIGH BAR. [00:49:58] Speaker 6: AND THIS IS A QUESTION OF WHO IS EXPENSIVE HEADING INTO THIS AND WHERE ARE THE OPPORTUNITIES. YOU CAN SEE THAT IN THE PRICE SECTION. WELLS FARGO HAD BEEN BEATEN UP AND YOU'VE SEEN J.P. MORGAN LAGGED BEHIND JUST BECAUSE THE PRICE TO BOOK HAD BEEN SO HIGH. BANK OF AMERICA WITH A SIMILAR TYPE OF TREND. WHEN YOU TAKE A LOOK AT THE ACTUAL EARNINGS AND THE RHETORIC, THIS IS WALL STREET GOING GANG BUSTERS WITH RESPECT TO THE I.P.O.S. WITH RESPECT TO EQUITY TRADING AND SALES AND REVENUES. THIS IS ALSO MAIN STREET DOING INCREDIBLY WELL WITH CHARGE-OFFS DIMINISHING. I KEEP GOING BACK TO THIS WEALTH FARGO COMMENTARY. CONSUMER SPENDING IS HIGHER, CHARGE-OFFS AND DELINQUENCIES ARE LOWER AND SAVINGS AND INVESTMENT ARE GROWING. EVEN IN THE FACE OF HEADWINDS, THE CONSUMER CONTINUES TO COME UP FROM BEHIND ALONGSIDE AN [00:50:41] Speaker 5: STOCK CAPITAL MARKETS. HOW WELL PRICED ARE WE FOR THIS STORY? THAT IS THE EARNINGS RISK COMING INTO QUARTERLY EARNINGS SEASON. THE BAR WAS HIGH. HOW MUCH DO YOU NEED TO BEAT IT BY TO SQUEEZE OUT A LITTLE BIT MORE OF A RALLY IN THE STOCK? BRING UP THE BOARD AGAIN AND LOOK AT J.P. MORGAN OF BANKFOR AMERICA. BIG UPSIDE SURPRISES ACROSS SEVERAL BUSINESS LINES THERE, INCLUDING OVER AT J.P. MORGAN WITH THIS ON THE EQUITY SALES AND TRADING REVENUE SIDE OF THINGS. $6 BILLION AGAINST AN ESTIMATE OF JUST BELOW FOUR. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. IT IS GOING TO BEAT IT. [00:51:27] Speaker 6: WE ARE NOT GOING TO BEAT IT. WE ARE NOT GOING TO BEAT IT. THAT WILL BE A KEY TEST FOR THE NEXT FEW MONTHS. IF THIS MARKET WAS PERFECTLY PRICED, THESE EARNINGS WERE EVEN MORE PERFECTLY DELIVERED AND THAT STILL WASN'T ENOUGH. DOES THAT GIVE YOU A SENSE OF HOW PERFECTLY PRICED EVERYTHING ELSE IS OR IS THIS A SPECIFIC STORY WHERE PEOPLE ARE UNPACKING EXPENSES OR ANY KIND OF EXCUSE TO SELL? YOU ARE LOOKING FOR A REASON TO BUY ON THE RUMOR AND SELL ON THE NEWS. IS THIS PERHAPS THE FORESHIGHT [00:51:51] Speaker 5: AWAY FOR THE REST OF BURNING SEASON? THIS IS THE EARLY MOVE. J.P. MORGAN IS TRYING TO BUY MORE THAN 2% THIS MORNING. WE WILL TURN BACK TO CRUDE. A BIG MOVE ON BRENT UP CLOSE TO 5%. $87 A BARREL ON BRENT CRUDE. WTI THROUGH $80 A BARREL A LITTLE EARLIER ON THIS MORNING AND WE WILL TURN MORE THAN 2% OF THE EARLY AMERICANS. [00:52:16] Speaker 7: THIS IS A LITTLE BARREL A LITTLE BARREL. ANOTHER UNWORKABLE SUGGESTION COMING FROM THE WHITE HOUSE. NOT JUST UNRESOLVED BUT YOU SEE MORE ESCALATION OVERNIGHT. YOU SEE THE IRANIANS GO AFTER UAE VESSELS. YOU SEE THE HOUTHIS STRIKE A SAUDI AIRPORT. THE PRESIDENT OF THE UNITED STATES SAYING THE BLOCKADE IS COMING BACK ON. THAT WILL GO INTO EFFECT TODAY. AT THE SAME TIME EVEN THOUGH THEY TOOK ISSUE CLEARLY WITH THE IRANIANS TRYING TO CHARGE A TOLL TO GO THROUGH THE VESSELS. IF YOU GO THROUGH THE U.S. PROTECTED ROUTE, YOU ARE A TARGET OF THE IRGC. THE IRGC IS DEMANDING A 20% REIMBURSEMENT FOR WHAT THEY SAY IS PROTECTING THE CARGO. YOU BRING UP THE GREAT POINT. THEY HAVEN'T BEEN ABLE TO DEMONSTRATE THEY CAN PROTECT EVERY VESSEL BECAUSE WE ARE AT THIS POINT. THEY CAN PROTECT EVERYBODY. IF YOU ARE A TARGET OF THE IRGC [00:53:00] Speaker 5: ROUTE THAT HUGS THE OMANI COAST, YOU ARE A TARGET OF THE IRGC. THAT IS THE LATEST DOWN THE MIDDLE EAST. THAT IS A WRINKLE FOR THIS MARKET STORY. HERE IS ANOTHER ONE. WE WERE LOOKING AT THE BANKS EARLIER AND WE WERE TALKING ABOUT BEATING BUT NOT BEATING ENOUGH TO GENERATE A RALLY. THIS IS NOT THE QUARTER WHERE YOU WANT TO MISS. SECOND QUARTER REVENUE, 17.2 BILLION, THE STOCK IS PLUNGING. LISA, CLOSE TO 15%. [00:53:22] Speaker 6: THE CEO SAYING THIS WAS AN EXECUTION PROBLEM. IN THE LAST FEW WEEKS OF JUNE, WE SAW CLIENTS SHIFT THEIR QUARTERLY CAPEX SPEND TOWARD SERVERS, STORAGE AND MEMORY PURCHASES TO SECURE SUPPLY CONSTRAINED INFRASTRUCTURE AHEAD OF EXPECTED PRICE INCREASES. THIS IS THE HOARDING WE WERE TALKING ABOUT. THIS DYNAMIC IMPACTED CLIENT BUYING POWERS. WHILE WE ANTICIPATED SOME SUPPLY CHAIN-RELATED IMPACT IN OUR EXPECTATIONS, WE DID NOT ANTICIPATE THE MAGNITUDE OF WHAT ACTUALLY HAPPENED. THIS ULTIMATELY IS WHAT HAPPENED, THAT CAPEX DIFFERENTIAL OF WHERE PEOPLE WERE SPENDING. AGAIN, IT JUST HIGHLIGHTS HOW QUICKLY MOVING THIS IS AND HOW MUCH PEOPLE ARE UNDERAPPRECIATING THE SPEED IN WHICH THE TECH STORY REALLY IS SHIFTING. [00:54:09] Speaker 5: NUMEROUS LARGE DEALS FAILED TO CLOSE ON TIME. THE STOCK IS DOWN BY CLOSE TO 15%. COMING UP THIS HOUR, WE WILL CATCH UP WITH VENUKRISHNER OF BARKLEY'S HEADING INTO AN ACTION-PACKED DAY ON WALL STREET. WE WILL CATCH UP WITH THE FORMER NEW YORK FED PRESIDENT, BILL DUDLEY, WITH KEVIN WASH HEADING TO CAPITOL HILL. WE BEGIN THIS OUT WITH STOCK SIGURE REBOUND AS THE BIG BANKS MEET THE HIGH REVENUE BAR SET BY WALL STREET. VENUKRISHNER OF BARKLEY'S WRITING, WE REMAIN CONSTRUCTIVE ON EQUITIES AND WOULD VIEW ANY NEAR-TERM POSITIONING UNWIND AS A BUYING OPPORTUNITY. VENUKRISHNER JOINS US NOW FOR MORE. VENUKRISHNER, GOOD MORNING. IT'S GOOD TO SEE YOU. LET'S TALK ABOUT HOW HIGH THAT BAR IS FOR THIS EARNING SEASON BASED ON THE EVIDENCE SO FAR THIS MORNING. [00:54:49] Speaker 19: EVEN IF YOU SAW OUR RECENT UPGRADE FOR PRICE TARGET, YOU KNOW, WE THINK THERE'S UPSIDE BUT THE UPSIDE IS LIMITED BECAUSE WE'VE HAD A BUNCH OF THE UPSIDE ALREADY REALIZED. AND UNFORTUNATELY NOW WE'VE ENTERED A NEW REGIME WHERE THE MACRO RISKS HAVE ESCALATED. IT'S OIL IS UP. INTERESTRATE UNCERTAINTY IS ALREADY THERE. SO THAT IS ALSO GOING THE WRONG DIRECTION. INFLATION IS STICKY. THAT'S A PROBLEM. AND WITHIN THE AI NARRATIVE, THERE'S BEEN A SHIFT. THE MOST CROWDED TRADE WAS OUT OF HYPERSCALERS, OUT OF BIG TECH INTO SEMIS. NOW THAT'S ALSO BEING TESTED. SO I THINK OVERALL, THOUGH, IF I THINK ABOUT WHY WE ARE OPTIMISTIC ABOUT EQUITIES, IT IS SIMPLY THE POWER OF EARNINGS IS TOO STRONG FOR THE NEXT, CALL IT 18 MONTHS. BECAUSE WE DO HAVE VISIBILITY ON THAT CAPITAL SPENDING. BECAUSE THE FOLKS ARE SPENDING HAVE THE EARNINGS, THE EARNINGS, THE OPERATING CASH FLOWS AND ACCESS TO LIQUIDITY BETWEEN CREDIT, EQUITY AND CONVOTIBLE BOND MARKETS. AND THAT IS SUSTAINING A BROADER ECOSYSTEM OF EARNINGS. [00:55:51] Speaker 5: THREE MONTHS AGO, THAT STORY WASN'T WELL UNDERSTOOD. CLEAR EVIDENCE FOR THAT. WE HAD TO PRICE A POSITIVE EARNINGS SHOCK IN THIS MARKET REALLY QUICKLY. EARNINGS EXPECTATIONS KEPT CLIMBING GOING INTO THIS EARNINGS SEASON. IS THAT STORY WELL UNDERSTOOD AND WELL PRICED NOW? [00:56:03] Speaker 19: I THINK IT IS REASONABLY WELL PRICED. IF YOU ARE SEEING WHAT IS HAPPENING TO MULTIPLES, THEY HAVE BEEN STODILY DECLINING. AND NOW ON TOP OF THAT, TO ADD A LITTLE BIT MORE FUEL TO THE FIRE ON MULTIPLES, TEN YEAR RATES ARE BACK OVER 4.6%. AND WE JUST ABOUT CALL IT A FEW WEEKS AGO, WE WERE IN THE 435-440 HANDLE. BUT WHAT I WOULD SAY IS IN THIS EARNINGS SEASON, WHAT YOU ARE LIKELY TO SEE IS A REPEAT OF WHAT YOU SAW LAST QUARTER, WHICH IS, IF COMPANIES ARE BEATING THEIR NUMBERS, THE REACTION IS MUTED. BUT IF YOU MISS, IT IS A PUNCH ON THE DOWNSIDE. AND I THINK IT JUST TELLS YOU THAT THE AMOUNT OF EDIOSYNCRATIC RISK IN THE MARKET IS TREMENDOUS. WE HAVE NOTED IN THE DERIVATIVE SIDE THAT MOST OF THE VOLATILITY NOW IS SQUEEZED INTO EARNINGS SEASON. SO THE CONCEPT OF EARNINGS DRIFT WHERE THE MARKET ABSORBS INFORMS INFORMATION AND STOCKS EVENTUALLY REACT TO THE EARNINGS INFORMATION IS PRETTY MUCH GONE. IT'S ALL PACKED INTO THAT ONE PARTICULAR DAY AND THAT ONE PARTICULAR EVENT. SO THIS IS A HIGHLY, HIGHLY SORT OF DISPERSION DRIVEN SORT OF MARKET WHERE CORRELATIONS ARE AT HISTORIC LOWS. RETURN DISPERSIONS ARE AT HISTORIC HIGHS, WHICH MEANS THAT THIS IS AN IDIOSYNCRATIC MARKET. [00:57:13] Speaker 6: THIS IS A FORWARD PRICING MARKET. THEY'RE TRYING TO LOOK INTO THE FUTURE AND GAGE EXACTLY HOW MUCH THESE EARNINGS CAN CONTINUE. WE'VE BEEN TALKING ABOUT ALL MORNING HOW IT IS. IT'S VERY DIFFICULT TO GET A READ OF HOW HOT THE CAPITAL MARKETS WILL REMAIN FOR THE REST OF THE YEAR. THE IBM STORY REALLY HIGHLIGHTS HOW QUICKLY THIS IS SHIFTING. IT SEEMS LIKE UNDERPINNING THIS ARE THE HINTS OF MYTHOS AND SOME OF THE CONCERNS THAT CAME OUT WITH FABLE AND SOME OF THE OTHER INNOVATIONS THAT CONCERNED CYBERSECURITY EXPERTS IN A DRAMATIC FASHION. HOW MUCH CAN YOU GET FORWARD VISIBILITY FROM ANY OF THESE COMPANIES WHEN THE C-SUITE TELLS YOU THEY HAVE NO IDEA WHERE IT'S GOING, HOW FAST IT'S MOVING AND HOW QUICKLY THEIR BUSINESSES ARE SHIFTING. [00:57:49] Speaker 19: I THINK YOUR POINT IS WELL TAKEN AND THAT IS CONSISTENT WITH THE FACT THAT WE'VE ENTERED THIS WHOLE DISRUPTION PHASE OF THE AI STORY WHERE THE WINNERS AND LOSERS AND WE DON'T KNOW WHICH BUSINESS MODELS ARE ADOPTING WELL AND WHICH ARE THE NEW AI NATIVE BUSINESSES. IF YOU LOOK AT THE IBM NUMBER FROM WHAT I UNDERSTOOD BASED ON WHAT YOU JUST REPORTED, THE MISS WAS MARGINAL, RIGHT? BUT IT'S JUST THAT THE EXPECTATIONS ARE SO HIGH AND THE MARKET IS JUST PUNISHING EVEN MARGINAL MISSES. THAT'S WHAT WE HAVE SEEN. BUT GOING BACK TO YOUR QUESTION OF HOW MUCH -- WE DO HAVE VISIBILITY. AND THAT VISIBILITY IS BEING DRIVEN BY THE DOLLAR AMOUNT OF CAPITAL SPENDING. AND THAT CAPITAL SPENDING IS FUNDED, WHICH MEANS ALL THE BENEFICIRIES OF THE DOLLARS ARE DOING WELL. SO WHAT YOU NEED TO CARE ABOUT IS ARE YOU OVERPAYING ON THE BENEFICIARY SIDE AND ARE YOU UNDERPAYING FOR THE STRENGTH OF EARNING STABILITY FOR THE GUYS WHO ARE SPENDING, WHO ARE STILL POSTING WELL OVER 30% EARNINGS GROWTH. SO THAT IS A SETUP. AND THAT'S WHY WE ARE STILL BROADLY CONSTRUCTIVE IN TECHNOLOGY. BUT YOU HAVE TO RECOGNIZE, LIKE I SAID, THAT THIS IS A VERY, VERY INDUCING MARKET. SO THIS IS NOT ABOUT MAKING A TECH CALL, BUT ABOUT MINI AND MICRO THEMS AND INDIVIDUAL STOCKS. MAKING, YOU KNOW, IS THE WAY TO GO. [00:59:05] Speaker 6: PUTTING ASIDE IBM FOR A SECOND AND JUST LOOKING AT THE BANK EARNINGS, WHAT'S THE ARGUMENT JUST LOOKING AT THOSE FOR FEDERAL RESERVE NOT TO HIGH INTEREST RATES? [00:59:15] Speaker 19: IT'S A TOUGH ONE. THE BIGGEST ARGUMENT IS THAT THIS INFLATION WE ARE SEEING IS GOING TO EVENTUALLY START TAPERING OFF, YOU KNOW, BY EARLY PART OF NEXT YEAR. IT SEEMS TO BE AT LEAST CERTAINLY EVEN OUR HOUSE CALL. BUT THE PROBLEM IS THAT IF INFLATION REMAINS STICKY AND IF THIS MIDDLE EASTERN CRISIS AGAIN COPS UP AND GOES THE WRONG DIRECTION, AND BY THE WAY, IF IT DOES, THAT IS BREAKING THE TRADITION OF THE LAST THREE DECADES OF GEOPOLITICAL RISK. WE ARE GENERALLY SPEAKING, IT'S BEING GEOGRAPHICALLY CONTAINED AND/OR IT'S BEEN RESOLVED IN A REASONABLE PERIOD OF TIME. NOT SO IT APPEARS IN THIS SITUATION. SO I THINK RATES MARKET IS SHOWING THAT UNCERTAINTY. LIKE I SAID, 10 YEARS ARE UP ALMOST 25 BASIS POINTS. JUST IN THE LAST FEW WEEKS AND THE HIGHER THE HEAD, AND I'VE SAID IN THE PAST, 5% IS A CRITICAL THRESHOLD FOR EQUITIES. THERE'S A VERY CLEAR NEGATIVE CORRELATION EMPIRICALLY OVER A LONG PERIOD OF TIME BETWEEN 10 YEAR RATES GOING UP AND EQUITIES GOING DOWN. AND I THINK WE'RE SEEING THAT IN MULTIPLE'S MODERATING. SO IT'S NOT JUST RATES AND INCREASED MACRO RISK, BUT IT'S ALSO THE FACT THAT THE AI NARRATIVE HAS MADE PEOPLE UNCOMFORTABLE BECAUSE THE SHEAR AMOUNT OF DOLLARS SPENT IS ENORMOUS, IS ENORMOUS. AND SO THE MARKET IS SORT OF WAITING TO, THAT'S WHY, AND SAYING THAT THE FOLKS ARE SPENDING, EVEN THEIR EARNINGS, WE DON'T KNOW WHAT THE RETURNS ARE GOING TO BE, WE DON'T KNOW IF THIS IS GOING TO BE A PERMANENTLY CAPITAL INTENSIVE BUSINESS OR HOW LONG THIS CONTINUES. THERE'S NO LINE OF SIGHT ON THAT. BUT WE MIGHT AS WELL BENEFIT THE PLAYERS WHO ARE GETTING THOSE DOLLARS. BUT THAT IS ALSO BEING TESTED NOW. [01:00:47] Speaker 5: VINU, IT'S GOOD TO SEE YOU. IT ALWAYS IS. IT'S A REAL TEST FOR THIS MARKET THIS MORNING. WE'VE BEEN LOOKING AT THE TEST FOR THE MARKETS. WE'VE BEEN LOOKING AT THE TEST OF THE MARKETS. WE'VE BEEN LOOKING AT THE MARKETS. WE'VE BEEN LOOKING AT THE QUARTER WHERE YOU WANT TO MISS. CAPTURED BY IBM THIS MORNING, TRADING LOWER BY MORE THAN 17% IN THE PRE-MARKET. LET'S BRING UP THE STOCK. AND THEN LOOK AT HOW THIS BLEEDS ACROSS THE SECTOR. WE'VE BEEN LOOKING AT WHAT WE'VE BEEN LOOKING AT. WE'VE BEEN LOOKING AT THE MARKETS. [01:01:13] Speaker 6: SAP OVER IN EUROPE, SERVICE NOW HERE IN THE UNITED STATES. THOSE NAMES ALL STRUGGLING, PRAMO, OFF THE BACK OF THIS. BECAUSE IT WASN'T JUST A QUESTION OF IBM NOT EXACTLY EXECUTING IN CERTAIN WAYS. THIS WAS AN OVERALL READ ON A DISTRACTED BUSINESS SECTOR THAT WAS TRYING TO PLUG ANY DEMANDS FROM CYBERSECURITY. AGAIN, WE TALKED ABOUT MYTHOS. WE TALKED ABOUT CONCERNS AS THAT WAS SHUT DOWN BY THE U.S. GOVERNMENT ON BEHALF OF A LOT OF COMPANIES THAT WE'RE FINDING, AND WE COULD BE REALLY VULNERABLE. ALSO, A QUESTION OF HOARDING. HOW MUCH ARE PEOPLE TRYING TO GET AHEAD OF THE PRICE INCREASES FROM THE CHIP SECTOR AND AVOIDING THE SOFTWARE SIDE OF THINGS? AGAIN, IS THIS A READ ON THE SASCOPOLYPSE, OR IS THIS A READ ON THE PRIORITIZATION OF HARDWARE AHEAD OF WHATEVER IS TO COME? [01:01:53] Speaker 5: IBM, A MISS ON REVENUE. THE STOCK IS GETTING HAMMERED IN THE PREMARKET. LET'S GET YOU AN UPDATE ON NEWS WORLDWIDE THIS MORNING. WITH YOUR BLOOMBERG BRIEF, VONNIE QUINN HAS MORE. HEY, VONNIE. [01:02:01] Speaker 9: THANK YOU. EVEN BEATING DOESN'T GUARANTEE YOU A BUMP THESE DAYS. BANK OF AMERICA AND J.P. MORGAN BOTH LOWER IN THE PREMARKET BUT BOTH REPORTED SECOND QUARTER RESULTS THAT BEAT WALL STREET ESTIMATES. THE COMPANY REPORTED THE STREET ESTIMATES. THE COMPANY REPORTED PRELIMINARY SECOND QUARTER RESULTS THAT MISSED STREET ESTIMATES. THE COMPANY REPORTED THE STREET ESTIMATES. THE COMPANY REPORTED THE STREET ESTIMATES. THE CEO SAYING CLIENTS WERE DISTRACTED BY CYBERSECURITY CONCERNS AND NUMEROUS LARGE DEALS FAILED TO CLOSE ON TIME. IN SPORTS, FRANCE AND SPAIN FACE OFF IN THE FIRST OF TWO WORLD CUP SEMIFINALS AT 3:00 P.M. EASTERN IN IRLINGTON, TEXAS. TOMORROW, ARGENTINA PLAYS ENGLAND IN ATLANTA. [01:03:02] Speaker 5: THAT IS YOUR BLOOMBERG BRIEF. [01:03:09] Speaker 11: MORE FROM VONNIE LATER THIS MORNING. UP NEXT ON THE PROGRAM, REINSTATING THE BLOCKADE. WE ARE PUTTING THE BLOCKADE BACK. WE ARE TAKING OUT ALL OF THE CAPABILITY FOR ANYTHING HAVING TO DO WITH THE STREET, WITH THE HARMONY STREET. [01:03:21] Speaker 5: IN THE END, WE WILL END UP DISCONTROLLING THE WHOLE THING. EQUITIES, FUTURES, DOING NOT MUCH AT ALL. IT LOOKS LIKE A SNOOZE. EQUITY FUTURES DOWN BY ABOUT A TENTH ON THE S&P ON THE NASDAQ, UP BY 0.5 AWAY FROM THE INDEX. THIS IS ANYTHING BUT A SNOOZE THIS MORNING. CHECK OUT THE BANKS FIRST. RECORD NUMBERS ACROSS EVERY BUSINESS LINE, ACCORDING TO JAMIE DIAMOND, ON REVENUE, THE STOCK IS DOWN 2.5%. BANK FOR AMERICA, A RECORD FOR SALES AND TRADING REVENUE. THE STOCK IS UP BY NOT EVEN A TENTH OF 1%. BEATS THIS MORNING ARE NOT BEING REWARDED. MISSES ARE BEING ABSOLUTELY PUNISHED AND SOME. CHECK OUT IBM. IBM WITH A MISS. THE STOCK IS DOWN BY CLOSE TO 18%. THAT MISS ON IBM SPARKING THIS MOVE ON OTHER SOFTWARE NAMES. HAPPENING OUT. [01:04:39] Speaker 6: THE LAST TIME I LOOKED, PRETTY UGLY STUFF. A REAL QUESTION AROUND WHAT SOFTWARE NAMES ARE GOING TO DO GIVEN THE SHIFTING PRIORITIES, THE RAPIDLY SHIFTING PRIORITIES AWAY FROM SOFTWARE UNLESS IT IS RELATED TO SECURITY AND POTENTIALLY TOWARD THE HARDWARE BECAUSE THAT IS WHERE THE FOCUS WAS. IBM CEO TALKING ABOUT THE INABILITY TO CLOSE LARGE DEALS IN PART BECAUSE PEOPLE WERE FRONT LOADING PURCHASES OF MEMORY CHIPS AND OTHER SOFTWARE. AGAIN, YOU KEEP WONDERING HOW DISRUPTIVE IS THE LIKES OF MYTHOS, A FABLE, TO REALLY REIGNITE A RACE INTO CYBERSECURITY. [01:05:09] Speaker 5: WE ARE JUST FIVE MINUTES INTO THIS, SO I DON'T WANT TO MAKE TOO MUCH OF IT. THINGS CAN CHANGE AS THE EARNINGS SEASON GROWS A LITTLE BIT OLDER, BUT THE EARLY TAKE AWAY, AND WE WILL SEE IF IT IS PREMATURE, BUT THE EARLY TAKE AWAY IS THIS BAR WAS VERY HIGH, BEATING IT IS NOT ENOUGH. YOU HAVE TO ABSOLUTELY SMASH EXPECTATIONS AND SOME TO GENERATE A STOCK MOVE. BASED ON WHAT WE HAVE SEEN SO FAR THIS MORNING, THAT CAN CHANGE. I'M OPEN TO THAT CHANGING. SO FAR WHAT WE HAVE SEEN THIS MORNING, YOU MISS, YOU GET BATTERED, YOU BEAT, YOU DON'T GET REWARDED. [01:05:36] Speaker 6: IF PEOPLE GET A SENSE THERE IS ANY WEAKNESS, THERE IS AN EXISTENTIAL FEAR HOVERING OVER A LOT OF THESE EARNINGS AT A TIME OF RAPID SHIFT. I JUST WONDER HOW MUCH FORWARD GUIDANCE WE ARE GOING TO GET FROM ANY OF THESE BANKS, LET ALONE OTHER COMPANIES, GIVEN THE LACK OF VISIBILITY INTO THE PACE OF CHANGE. [01:05:52] Speaker 5: THE NEXT BANK SET TO REPORT IN THE NEXT 10 MINUTES OR SO, WE WILL GET TO THAT. I NEED TO TALK ABOUT THIS AS WELL. CRUDE AT 4% ON BRENT, $87 A BARREL THIS MORNING. UNDER SURVEILLANCE THIS MORNING, [01:06:03] Speaker 11: THIS MORNING, THE PRESIDENT DECLARING THE U.S. THE U.S. THE GUARDIAN OF THE STRAIGHT INFORMERS. WE ARE TAKING OUT ALL OF THE CAPABILITY FOR ANYTHING HAVING TO DO WITH THE STRAIGHT, WITH THE HARMONE STRAIGHT, AND I THINK IN THE END WE WILL END UP DISCONTROLLING THE WHOLE THING. WE ARE CONTROLLING THE STRAIGHTS, WE ARE PUTTING THE BLOCKADE BACK. [01:06:23] Speaker 5: SO, HERE IS THE LATEST THIS MORNING. THE PRESIDENT DECLARING THE U.S. THE GUARDIAN OF THE STRAIGHT INFORMERS, RE-IMPOSING A NAVAL BLOCKADE ON IRANIAN SHIPS, AND PROPOSING A 20% FEE FOR ALL OTHER CARGO SHIPPED THROUGH THE PASSAGEWAY. BLOOMBERG'S TYLER KENDALL HAS THE LATEST FROM WASHINGTON. HEY, TYLER. [01:06:37] Speaker 12: HEY, JOHN, GOOD MORNING. WELL, THESE MOVES THREATEN TO ESCALATE TENSIONS FURTHER AND, OF COURSE, CHANGE THE ECONOMICS OF SHIPPING ENERGY THROUGH THE STRAIGHT. WE HAVEN'T GOTTEN FURTHER DETAILS FROM THE WHITE HOUSE ON THE PRESIDENT'S PROPOSAL FOR THIS 20% REIMBURSEMENT, THOUGH IT COULD MEAN THAT SOME OF THE LARGEST OIL TANKERS WOULD BE ON THE HOOK FOR PAYING MORE THAN $30 MILLION PER TRIP. THE ADMINISTRATION ISN'T CALLING THIS A TOLL. THEY'RE CALLING IT A REIMBURSEMENT, THOUGH I WILL POINT OUT THAT BACK IN APRIL WHEN IRAN WAS REALLY PUSHING THE IDEA OF A TOLL, THE WALL STREET JOURNAL DID AN ANALYSIS THAT FOUND THAT GULF STATES WOULD BE ON THE HOOK FOR PAYING NEARLY 80 TO 95% OF THE TOTAL COSTS. IT'S UNCLEAR AT THIS POINT IF THE TRUMP ADMINISTRATION HAS BEEN IN TOUCH WITH REGIONAL ALLIES ABOUT THE IDEA AS THEY ARE TAKING THE BRUNT OF IRAN'S RETALIATION. OVERNIGHT, THE UAE'S DEFENSE MINISTRY CONFIRMED THAT TWO OF THE COUNTRY'S TANKERS WERE HIT BY IRANIAN CRUISE MISSILES AMID THE LATEST WAVE OF ATTACKS BY THE U.S. DESIGNED TO DEGRADE IRAN'S ABILITY TO ATTACK COMMERCIAL SHIPPING. AND, JOHN, WE'RE NOT JUST WATCHING FOR REACTION IN THE REGION. NEW THIS MORNING, WE'RE HEARING FROM CHINA URGING A REOPENING OF THE STRAIGHT OF HIRMUZ. CHINA'S FOREIGN MINISTRY SAYING THAT THEY ARE QUOTE DEEPLY CONCERNED AHEAD OF THE U.S. MOVING FORWARD WITH THIS BLOCKADE [01:07:51] Speaker 5: TODAY AT 4:00 P.M. EASTERN. THE PRESIDENT'S NEWLY PROPOSED 20% REIMBURSEMENT FEE HE INTENDS TO CHARGE AND THE RENEWAL OF THE BLOCKADE OF THE STRAIGHT OF HIRMUZ CREATES FAR MORE QUESTIONS THAN THE WHITE HOUSE HAS ANSWERS FOR. WHAT IS YOUR NUMBER ONE QUESTION THIS MORNING? WELL, I THINK THE REIMBURSEMENT [01:08:14] Speaker 20: FEE IS MORE OF A DISTRACTION. SO MY REAL QUESTION IS HOW EXACTLY DO YOU PLAN TO GET FLOW THROUGH THE STRAIGHTS AGAIN? WE NEED THE EU AND THE U.K. INVOLVED IN ANTI-MINING EFFORTS. WE OBVIOUSLY HAVE A RENEWED ESCALATION ON THE MILITARY FRONT. WHAT IS THE OBJECTIVE AND THE GOAL HERE? YOU AND I HAVE TALKED FOR MONTHS NOW ABOUT HOW THE IATOL, IN MY OPINION, IS THE MOST IMPORTANT DYNAMIC IN THIS ENTIRE WAR. WE KNOW WHAT THE NUCLEAR FILE IS GOING TO LOOK LIKE. THE PRESIDENT GAVE AWAY THE BALLISTIC MISSILE COMPONENT. WHAT WE REALLY NEED TO RESOLVE IS THIS IDEA OF TAXATION OF THE STRAIGHT. TAX POLICY IS EXTRAORDINARILY COMPLICATED. IT IMPACTS EVERY SINGLE WESTERN CORPORATION AND COUNTRY, WHETHER YOU'RE AN INSURER OR A BANK OR A TANKER. YOU'RE GOING TO HAVE TO DEAL WITH THE IRGC AND THAT IS JUST UNSUSTAINABLE. SO I DON'T REALLY CARE WHAT THE PRESIDENT IS TALKING ABOUT ON THE REIMBURSEMENT FEE SIDE HERE IN THE UNITED STATES. I DON'T THINK THAT WILL HOLD. THE MARGINS ARE TOO HIGH IN TERMS OF WHAT HE'S ASKING FOR. I THINK IT REALLY NEEDS TO BE RESOLVED HOW IRAN IS GOING TO BE KEPT OFF OF ITS IDEA OF A PORT AUTHORITY. [01:09:17] Speaker 7: WHEN IT COMES THOUGH TO THE STRAIGHT OF HER MOVES, AND YOU THINK POTENTIALLY THIS 20% REIMBURSEMENT IS A DISTRACTION, IS IT MAYBE A CARROT AND STICK TO TRY TO GET THE EUROPEANS AND NATO TO ACTUALLY GO SUPPORT THE UNITED STATES IN THE STRAIGHT OF HER MOVES AND DEFEND IT? [01:09:30] Speaker 20: YEAH, ABSOLUTELY. THAT'S WHAT THEY WERE TALKING ABOUT AT NATO, IN TURKEY. THE IDEA THAT SPECIFICALLY FRANCE AND THE U.K. NEED TO GET IN THERE AND HELP WITH THE ANTI-MINING COMPONENTS IS SOMETHING THAT I'VE HEARD FROM MILITARY BRASS SINCE THE WAR STARTED AND THEIR ABILITIES, THEIR CAPABILITIES, AND THEIR DESIRE TO GET A LARGER CONGLOMERATE OF NATO ALLIES IN THERE WITH THEM. SO NOT JUST THE TWO NATIONS BUT MAYBE 20, 30 DIFFERENT NATIONS TO HAVE A REAL SIZABLE COMPONENT. WHAT THEY HAVE SAID IN THE PAST IS WE NEED SOME SORT OF PERMANENT CEASE-FIRE THAT WE CAN REALLY TRUST BEFORE WE'LL SEND HUGE SWASTS OF OUR MILITARY IN TO HELP THE UNITED STATES WITH THIS REGION AND TO SECURE PEACE. WE'RE NOT THERE. WE DO NOT HAVE PEACE TIME. WE DO NOT HAVE A CEASE-FIRE, EVEN A TENUOUS ONE. IT IS FULL-SCALE MILITARY ENGAGEMENT NOW AS THE LAST THREE DAYS OR SO OF BOMBINGS INDICATE. [01:10:22] Speaker 7: WILL REPUBLICANS IN CONGRESS SUPPORT THIS? [01:10:25] Speaker 20: I WOULD SAY THE BETTER WAY TO SAY THAT IS THAT THEY WON'T OPPOSE IT. SO THERE WILL BE RENEWED FIGHTS ABOUT HOW TO GIVE THE PRESIDENT WAR POWERS AND WHETHER OR NOT WE SHOULD STRIP THEM BACK. THAT'S WHAT DEMOCRATS AND REPUBLICANS IN THE SENATE HAVE VOTED ON SEVERAL TIMES AND IT'S PASSED. AND YOU'VE SEEN THAT THE PRESIDENT HAS A REAL PROBLEM WITH THE REPUBLICANS WHO CROSS THE AISLE AND VOTE TO REIGN IN HIS WAR POWERS. THAT WAS WITH SENATOR TILLIS -- EXCUSE ME SENATOR CASSIDY AND SENATOR RAND PAUL JUST A FEW WEEKS AGO. THE PRESIDENT WANTS THEM NOT TO GET IN THE WAY. AND SO FAR THE SENATORS HAVE BEEN ACCOMMODATING. THEY'RE GOING TO BE DISTRACTED WITH THE THIRD RECONCILIATION EFFORT. AND I THINK THAT WILL KEEP THEM OFF OF MAJOR OPPOSITION TO THE PRESIDENT'S WAR. [01:11:09] Speaker 7: JUST VERY QUICKLY, WHO FILLS THE LINDSEY GRAHAM VOID THAT DID A LOT OF THIS FIXING? [01:11:13] Speaker 20: WHAT DO YOU THINK THAT IS GOING TO BE? IT'S GOING TO NEED TO BE A LOT OF PEOPLE. HIS REACH IS ACROSS THE BUDGET COMMITTEE, ACROSS THE STATE AND FOREIGN OPERATIONS, APPROPRIATIONS COMMITTEE, JUDICIARY, SHOULD WE GET ANY KIND OF NEW NOMINATIONS TO THE SUPREME COURT, YOU'LL HAVE A LOT OF PEOPLE STEP IN TO FILL HIS [01:11:28] Speaker 5: SHOES. IT'S GOOD TO SEE YOU AS ALWAYS. HENRY LATER IS THEIR AVAILABLE PARTNERS ON THE LATEST. AS WE WRAP UP THAT CONVERSATION, GOLDMAN DROPS. FIX SALES AND TRADING REVENUE, 4.59 BILLION, THE ESTIMATE 3.76. SECOND QUARTER, EQUITY SALES AND TRADING REVENUE CAME AT 7.42 BILLION, THE ESTIMATE WAS $5 BILLION. I'LL GO THROUGH THAT NUMBER AGAIN. $7.42 BILLION FOR EQUITY SALES AND TRADING REVENUE, THE ESTIMATE WAS JUST NORTH OF FIVE. THAT'S ANOTHER MONSTER UPSIDE SURPRISE. [01:12:03] Speaker 6: THEY KNOCKED IT OUT OF THE PARK IN PRETTY MUCH EVERY CAPACITY THAT YOU COULD POSSIBLY IMAGINE. THE IDEA THAT YOU COULD SEE EQUITY'S REVENUE COMING IN MORE THAN $2 BILLION, $2.4 BILLION BEAT. I THINK IT'S INTERESTING, WHEN YOU TAKE A LOOK AT SOME OF THE COMMENTARY COMING FROM GOLDMAN SACK, THE CEO, THAT YOU CAN SEE, HE SEES THIS CONTINUING. WE EXPECT THIS FLYWHEEL OF ACTIVITY TO CONTINUE. LOOK FOR THE FORWARD LOOK BECAUSE THAT ULTIMATELY WILL GIVE YOU [01:12:27] Speaker 5: THE EQUITY'S REVENUE GUIDE. YOU NEED TO SMASH IT THIS MORNING. THE STOCK IS UP BY 2.4%. THE STOCK IS UP BY JUST 0.9% AFTER ABSOLUTELY SMASHING ESTIMATES, WHICH SEEMS TO BE THE STORY SO FAR THIS MORNING. THE BEATS ARE NOT BEING REWARDED AND MISSES ARE BEING PUNISHED. WE WILL GET INTO THAT IN A MOMENT. LET'S START WITH GOLDMAN. SECOND QUARTER EQUITY SALES AND TRADING REVENUE, $7.42 BILLION. THE ESTIMATE WAS $5.02 BILLION. WHEREVER YOU LOOK, YOU ARE SEEING SOME MAJOR UPSIDE SURPRISES. THE FIRM'S SECOND QUARTER RESULTS ARE THE THIRD CONSECUTIVE QUARTER IN WHICH THE FIRM'S EQUITIES UNIT HAS [01:13:29] Speaker 6: HAD AN ALL-TIME RECORD FOR ANYTHING. THIS HAS BEEN A BONANZA FOR NOW THREE CONSECUTIVE QUARTERS. THE MAGNITUDE OF THE BEATS IS PRETTY NOTABLE WHICH IS THE REASON WHY EVEN IN THE FACE OF A SKEPTICAL MARKET THAT IS PUNISHING OTHER NAMES FOR BEATING, THEY ARE REWARDING THIS NAME. THAT IS HOW BIG OF A SURPRISE THIS ACTUALLY IS. [01:13:53] Speaker 5: THAT IS A REWARD, 2%. ISN'T THAT THE STORY? YOU GET 2%. FOR SMASHING ESTIMATES YOU GET A 2% RALLY. IF YOU'RE A TECH STOCK RIGHT NOW, YOU ARE A TECH STOCK RIGHT NOW, THAT IS A MASSIVE PROBLEM. [01:14:11] Speaker 6: THIS IS A MARKET THAT HAS SUCH HIGH EXPECTATIONS AND IS SO SKEPTICAL OF GETTING BEAT THAT EVEN INCREDIBLE EARNINGS FROM GOLDMAN SACKS BUT ALSO THE PROMISE OF MORE TO COME. AGAIN, YOU ARE ASKING THE QUESTION, WE HAVE BEEN ASKING THE QUESTION ALL MORNING, WHAT ABOUT THE FORWARD LOOK? HOW LONG CAN THIS LAST? IS THIS AS GOOD AS IT GETS? WHAT WE ARE SEEING FROM GOLDMAN SACKS, THE CHIEF EXECUTIVE OFFICER, DAVID SULLIMON, GIVEN WHAT WE SEE IN OUR PIPELINES, WE EXPECT THIS FLYWHEEL OF ACTIVITY TO CONTINUE. IN OTHER WORDS, SAYING THAT THERE IS MORE RUNWAY HERE. NONETHELESS, YOU STILL SEE THAT [01:14:39] Speaker 5: SKEPTICISM PERCOLATING OTHER PLACES. THANK YOU FORWARD, THANK YOU FORWARD. THE BUSINESS HAS BEEN DOING TREMENDOUSLY WELL. THAT IS THE LATEST ON THE BANKS THIS MORNING. LET'S GET TO THE OTHERS, INCLUDING IBM. [01:14:59] Speaker 14: THAT STOCK IS DOWN BY 19%. WITH MORE WITH YOUR MORNING MOVIES, YAHIRA HAS THAT. WE START WITH THE BIG BANKS DELIVERING BLOCKBUSTER RESULTS, BUT THAT IS NOT ENOUGH AFTER A RALLY THAT HAS BEEN PART OF THE BANKS DELIVERING BLOCKBUSTER. WE JUST WENT THROUGH GOLDMAN'S NUMBERS WHICH WERE ASTONISHING, RECORD-BREAKING. J.P. MORGAN ALSO POSTED A RECORD $6 BILLION IN EQUITIES TRADING. BANK OF AMERICA AND WELLS FARGO ALSO BENEFITED FROM STRONGER TRADING AND INVESTMENT BANKING, UNDERSCORING HOW BUSY IT HAS BEEN FOR WALL STREET WITH DEALMAKING AND EQUITY ISSUANCE ON PACE FOR THE STRONGEST PERFORMANCE IN RECENT YEARS. TURNING TO BANK EARNINGS, ALSO HIGHLIGHTING, AS I HIGHLIGHTING, A LITTLE BANKING IN THE COUNTRY, WHICH IS HIGHLIGHTING, WHICH IS HOW STRONG CAPITAL MARKETS HAVE BEEN. THAT IS SEEN THROUGH SK HYNIX. IT HAD THE LARGEST EQUITY SALE BY A FOREIGN COMPANY IN U.S. HISTORY. IT SHARES BOUNCING BACK THIS MORNING UP NEARLY 7% AFTER FALLING 9% YESTERDAY. THE COMPANY SAYS CUSTOMERS SHIFTED SPENDING LATE IN THE QUARTER, PULLING MONEY AWAY FROM SOFTWARE AS THEY PRIORITIZED THE AI BUILDOUT, SPENDING MORE ON THOSE PRICE SERVERS AND MEMORY NEEDED TO POWER IT. THAT ADDS TO CONCERNS IN THE SOFTWARE SECTOR, WHICH HAD ALREADY BEEN STRUGGLING OVER CONCERNS ABOUT RELEVANCE IN THE AI AGE AND NOW THIS JUST ADDS TO ANOTHER WORRY FOR SOFTWARE. JONATHAN: [01:16:28] Speaker 5: THANK YOU. THANKS FOR THE UPDATE. THAT STOCK, THAT IS A BIG WARNING TO THE TECH STORY FOR THE NEXT MONTH OR SO. DO NOT MISS THIS QUARTER. [01:16:36] Speaker 6: IT WASN'T A HUGE MISS. WE ARE TALKING ABOUT LESS THAN $1 BILLION AND $17 BILLION OF REVENUE. THAT WAS STILL ENOUGH TO TORPEDO THE NAME AT LEAST IN PRE-MARKET TRADING AND THE ENTIRE SECTOR BECAUSE OF THE EXISTENTIAL FEAR OF HOW QUICKLY THIS MARKET IS MOVING. I THINK THAT IS THE UNDERPINNING HERE. THE IDEA THAT ALL THE SPEND COULD GO AWAY FROM SOFTWARE TO HARDWARE IN ONE QUARTER AND AVOID REALLY CONSOLIDATING DEALS, AGAIN, IT JUST SHOWS WHAT POTENTIALLY COULD BE THE [01:17:00] Speaker 5: RISK. I THINK BY SOME MEASURE, THE GOVERNMENT'S BEAT ON EQUITY SELVES AND TRADING REVENUE WAS LARGER THAN THE MISS OVER AT IBM. [01:17:07] Speaker 6: SIGNIFICANTLY MORE. IT WAS LESS THAN $1 BILLION IN TERMS OF THE MISS AT IBM AND THE BEAT OVER AT SIX MONTHS ON JUST THE EQUITIES TRADING WAS ALMOST $2.5 [01:17:19] Speaker 5: BILLION. IT GIVES YOU A SENSE OF WHAT WE ARE TALKING ABOUT HERE. LET'S TURN BACK TO THE BIG BANKS, FIVE OF THEM REPORTING SECOND QUARTER RESULTS THIS MORNING. GOLDMAN, THE LATEST CROSS IN THE WIRE. CHRIS MARANAK OF BREEEN CAPITAL JOINS US NOW FOR MORE. CHRIS, YOU'VE HAD A FEW MOMENTS TO GATHER YOUR THOUGHTS ON THIS ONE. WHAT IS YOUR REACTION TO THE RECORD [01:17:37] Speaker 21: NUMBERS OUT OF GOLDMAN'S SACKS? WE HAVE ANOTHER REALLY GOOD QUARTER IN Q3. I THINK AS THE POINT WAS MADE IN THE RELEASE, THE RUNWAY IS STILL VERY GOOD FOR ADDITIONAL EARNINGS. [01:17:48] Speaker 5: I THINK THAT APPLIES TO OTHER BANKS BESIDES GOLDMAN. HOW WELL PRICED DO YOU THINK WE ARE FOR THAT STORY BASED ON THE REACTION WE'VE SEEN TO THE NUMBERS SO FAR THIS MORNING? [01:17:55] Speaker 21: I THINK THE MARKETPLACE MAY TEMPORARILY SELL THE NEWS. BUT I STILL THINK PEOPLE WILL COME BACK TO THESE STOCKS. THEY'RE NOT EXPENSIVE ON 27 EARNINGS. AND I THINK THE ATTITUDE TOWARDS 27 SHOULD BE MORE BULLISH. AND I THINK ESTIMATES CAN RISE FOR NEXT YEAR. PLUS I THINK THE SECOND HALF OF THIS YEAR WILL STILL BE QUITE GOOD. SO I THINK ESTIMATE INCREASES ARE GOING TO DRAG STOCKS HIGHER. [01:18:14] Speaker 6: AT A CERTAIN POINT, CHRIS, DO YOU THINK THAT EXPENSES ARE GOING TO SORT OF BE THE WEIGHT ON THESE NAMES? WE SEE THAT AS THE EXCUSE BEING USED FOR THE JP MORGAN SHARE DECLINE SO FAR THIS MORNING. [01:18:25] Speaker 21: I THINK CREDIT COSTS ARE A PIECE OF THE EXPENSE PUZZLE. SO IF YOU LOOK AT OVERHEAD, YOU'RE CORRECT. BUT I ALSO THINK IF YOU THINK ABOUT CREDIT COSTS, THEY ACTUALLY BEAT ON PROVISION EXPENSE AND CHARGE-OFFS. AND I THINK THAT CREDIT THEME BEING POSITIVE IS A HUGE FACTOR IN FAVOR OF THESE COMPANIES. [01:18:40] Speaker 6: IF YOU THINK THAT THERE'S MORE TO COME, AND THAT CERTAINLY SEEMS TO BE WHAT DAVID SOLOMON IS INDICATING IN HIS COMMENTARY IN THE LETTER AHEAD OF EARNINGS, WHAT IS THE ARGUMENT HERE FOR THE ECONOMY SLOWING DOWN AND, FRANKLY, FOR THE FED NOT TO HIKE RATES? [01:18:55] Speaker 21: WELL, I THINK THE BANKS ARE TAKING SHARE, NUMBER ONE. I ALSO THINK THE WAY THE CURVE IS ACTING FAVORS THE WAY BANKS ARE POSITIONED. THERE STILL IS A REFINANCING OF LOANS FOR MANY MIDSIZED COMPANIES FROM 2022 AND 21 THAT IS GOING TO BENEFIT THE INTEREST INCOME AND MARGIN THE SECOND HALF OF THE YEAR. I STILL THINK OVERALL VOLUMES ARE GOING TO BE CONSISTENTLY GOOD, AND THEN YOU LAYER IN THE OPERATING LEVERAGE IN THE SPACE PLUS LOW CREDIT COSTS, THAT CONTINUES TO FACTOR INTO VERY GOOD EARNINGS. LET'S NOT FORGET THE CAPITAL BUILD THAT IS IN THE SPACE, AND ULTIMATELY THAT WILL LEAD TO MORE BUYBACKS AND GREATER INVESTOR CONFIDENCE, WHICH GETS BACK TO THE PE EXPANDING. [01:19:33] Speaker 5: THANK YOU VERY MUCH. THIS IS THE KIND OF ECONOMIC ACTIVITY THAT THESE BANKS CAN LEVERAGE. THIS IS THE KIND OF CAPITAL MARKETS ACTIVITY THAT THESE BANKS LOVE, AND, CHRIS, WE HAVE SEEN THAT THROUGH THE PURE PLACE, THE LIKES OF MORGAN STANLEY, THE LIKES OF GOLDMAN SAX, THOSE STOCKS HAVE BEEN ABSOLUTELY FLYING. CHRIS, LESS TALKED ABOUT IS AN AREA OF THIS MARKET THAT YOU KNOW WELL, IT IS THE REGIONALS. THE REGIONALS ARE UP BY CLOSE TO 18% SO FAR YEAR-TO-DATE. WITH THE EXCEPTION OF MORGAN STANLEY AND GOLDMAN SAX. CHRIS, WHAT IS PROVIDING THE REGIONALS WITH THIS KIND OF TAILWIND RIGHT NOW, AND AWAY FROM CAPITAL MARKETS AND THAT BUSINESS, IS THAT SET TO CONTINUE? [01:20:07] Speaker 21: I THINK IT IS BECAUSE THERE IS REGULATORY RELIEF, JOHN. I THINK ULTIMATELY THE WAY THE FED AND OCC HAS TEED UP THE INDUSTRY, THERE IS A WINDOW FOR EXPANSION IN THE SPACE. I THINK YOU WILL SEE MORE M&A. I ALSO THINK THE COMPANIES THEMSELVES ARE GETTING THIS CAPITAL RELIEF AND I THINK A BETTER REGULATORY ATTITUDE THAT ULTIMATELY LEADS TO BETTER EARNINGS, A LITTLE BIT LESS REGULATORY SPEND THAN WHAT THEY WERE SPENDING A FEW YEARS AGO, AND ULTIMATELY WEAVES BACK INTO HIGHER CONFIDENCE ABOUT THE EARNINGS. [01:20:34] Speaker 5: WHEN WE SEE THESE CONSUMER CENTIMENT NUMBERS AND THEY ARE ROCK-BOTTOM, THEY ARE ABSOLUTELY AWFUL. I UNDERSTAND WHY I RESPECT IT, THE ACCUMULATION OF PROBLEMS WHEN IT COMES TO PRICES AND INFLATION. WE WILL SEE CPI AGAIN IN THE NEXT HOUR OR SO. ARE YOU SAYING THAT YOU ARE SEEING ACTIVITY THAT CORRESPONDS WITH A PICKUP IN LOAN DEMAND ACROSS SMALL AND MEDIUM SIZED BUSINESSES, CONSUMER DEMAND AS WELL, THAT WILL PROVIDE GAINS FOR THESE GUYS? [01:20:57] Speaker 21: YES, AND I THINK HISTORICALLY, IF YOU GO BACK TO THE 80s, JOHN, WHEN WE HAD EARLY 80s INFLATION, THE BANKING SYSTEM HAD MORE CREDIT AND AN EXPANSION OF CREDIT WAS DEFINITELY A THING. GO BACK TO THE OLD ANNUAL REPORTS TO CONFIRM THAT. I DO THINK YOU ARE GOING TO SEE BETTER CREDIT DEMAND. THE FED H8 DATA HAS BEEN RISING IN RECENT WEEKS. SO I THINK THIS QUARTER IS A TRIGGER POINT TOWARDS A HIGHER SECOND HALF ON LOANS. [01:21:20] Speaker 6: CHRIS, YOU KEEP SAYING THAT THIS IS A GOOD REGULATORY ENVIRONMENT, A REALLY GOOD ONE. AND I WONDER, WHEN YOU SAY GAINING SHARE, IF THE BANKING SECTOR IS WINNING BACK BUSINESS FROM PRIVATE ASSET MANAGEMENT FIRMS THAT HAD BEEN EATING THEIR LUNCH? [01:21:36] Speaker 21: YES, I THINK THAT'S TRUE AND I THINK WE SEE A LITTLE BIT THIS QUARTER AND I THINK WE'LL SEE A LOT MORE OF IT THE NEXT THREE OR FOUR QUARTERS. [01:21:43] Speaker 6: WHICH BANK DO YOU THINK IS POISED TO BENEFIT THE MOST FROM THAT SHARE CONSOLIDATION? [01:21:48] Speaker 21: CERTAINLY THE REGIONAL BANKS WHO HAVE LOST A LITTLE BIT OF BUSINESS AND HAVE BEEN TRYING TO FIGHT BACK. SO THAT GOES BACK TO FIFTH THIRD. IT ALSO GOES BACK TO PNC AND TRUIST, THOSE WHO ARE STILL REPORTING AS THE WEEK GOES ON. BUT I THINK TO SOME EXTENT THE NATIONAL PLAYERS AT B OF A AND JPM SHOULD BENEFIT AND WELLS AS WELL. SO I DON'T THINK IT'S JUST RELATED TO THE REGIONALS. I THINK IT IS A LARGE-CAP BANK SYSTEMIC BENEFIT. [01:22:13] Speaker 6: IS THE RATE HERE THAT ULTIMATELY THE ECONOMY ISN'T JUST SOLID, BUT THAT IT SEEMS TO BE RE-ACCELERATING? I SAY THIS BASED ON THE FACT THAT LOAN LOSS PROVISIONS HAVE COME DOWN, THAT THERE IS THE EXPECTATION FOR THIS TO CONTINUE EVEN IN THE FACE OF INFLATION AND RATES THAT POTENTIALLY ARE GOING TO STAY WHERE THEY ARE OR GO HIGHER? [01:22:31] Speaker 21: I THINK THAT'S TRUE AND I THINK THERE'S A LOT OF REGULAR WAY ACTIVITY THAT THE BANKS SEE. SO WE'VE TALKED SO MUCH ABOUT AI IN RECENT QUARTERS THAT THE NON-AI SPEND IS STILL THERE. IT MAY NOT BE AS BIG, BUT IT IS STILL POSITIVE. I THINK THE BANKS ARE PICKING UP MORE OF THAT. I ALSO THINK THERE'S BEEN LESS DISTRACTIONS THIS YEAR BECAUSE YOU HAVEN'T HAD ANY PROBLEMS IN THE BANKING SYSTEM TO KIND OF DISTRACT INVESTORS. THAT'S PART OF MY THESIS THAT YOU CAN SEE EARNINGS GET BETTER, DEMAND BETTER, AND ALSO MULTIPLES EXPAND ON THE 27 ESTIMATES. [01:23:00] Speaker 5: CHRIS, IT'S GOOD TO SEE YOU. I KNOW YOU'RE GOING TO STICK AROUND. STAY CLOSE BECAUSE WE'LL GET CITY IN THE NEXT 20 MINUTES OR SO. CHRIS MARANAC THERE OF BRING CAPITAL. CHECK OUT GOLDMAN. LET'S BRING IT UP. LOOK AT THE STOCK MOVE. SO THEY'VE JUST SMASHED ESTIMATES THIS MORNING. KNOCKED IT OUT OF THE PARK WHEN IT COMES TO EQUITY SALES AND TRADING REVENUE. AND THAT STOCK IS UP BY JUST 1.4%. CALL IT 2% HIGHER SO FAR THIS MORNING. IF YOU'RE LOOKING AT GOLDMAN ON THE YEAR AT THE MOMENT, HIGHED BY 20% YEAR TODAY. MORGAN STANLEY UP BY 24, CALL IT 25% HIGHER. THE MARKET WAS ANTICIPATING A LOT OF THIS. WHERE THERE'S PUSHBACK RIGHT NOW, THE BAR IS HIGH. AND IF YOU BEAT, YOU DON'T GET A MASSIVE REWARD. BUT IF YOU MISS, YOU GET OBLITERATED. THAT'S THE STORY OF THE LAST 60 MINUTES. [01:23:43] Speaker 6: PARTICULARLY WHEN IT COMES TO TECH. ULTIMATELY, THE BANKING STORY IS ONE OF AN ENTIRE MARKET THAT IS REALLY PERFORMING WELL. ON THE FLIP SIDE, THERE ARE SOME REAL FUNDAMENTAL QUESTIONS ABOUT SHIFTS UNDER THE TECH SECTOR, WHICH WE KEEP TALKING ABOUT WITH IBM. BUT WITH GOLDMAN SAX, WATCH THIS SPACE, ESPECIALLY FOR THE COMMENTARY. HOW MUCH DO OTHER BANKS REFLECT THAT COMMENTARY? ALSO, WHAT CHRIS WAS JUST SAYING THERE, THESE BANKS ARE ALL WINNING BACK MARKET SHARE FROM THE ASSET MANAGERS LIKE APOLLO AND KKR AND OTHERS THAT HAVE EATEN THEIR LUNCH OVER THE PAST FEW YEARS BECAUSE THE REGULATORY ENVIRONMENT HAS GOTTEN MORE FAVORABLE TO THEM. HOW MUCH WILL THAT BE, THEIR GAIN AT SOMEONE ELSE'S PAIN VERSUS AN ENTIRE MARKET THAT IS JUST HEADING IN ONE DIRECTION? [01:24:24] Speaker 5: REGIONALS HAVE HAD A NICE RUN. UP CLOSE TO 20% SO FAR YEAR TODAY. LET'S GET YOU A WRAPP-UP OF ALL THE NEWS RIGHT NOW. LET'S GET TO YOUR BLOOMBERG BRIEF WITH VONNIE QUINN. [01:24:33] Speaker 9: THANK YOU. THE WHITE HOUSE SAYING PRESIDENT DONALD TRUMP WILL SUPPORT ONE OF SENATOR LINDSEY GRAHAM'S LAST MAJOR LEGISLATIVE EFFORTS BEFORE HE DIED, A NEW SANCTIONS BILL ON RUSSIA. THE BILL WOULD IMPOSE SO-CALLED SECONDARY TARIFFS AS HIGH AS 500% ON COUNTRIES THAT BOUGHT RUSSIAN OIL OR NATURAL GAS. CHINESE AI START-UP DEEP SEEK IS CONSIDERING A FRESH ROUND OF FUNDRAISING. THE FINANCIAL TIMES REPORTING THE COMPANY IS IN TALKS WITH 1 BILLION DOLLARS. DEEP SEEK COMPLETED ITS FIRST FUNDING ROUND AT THE END OF MAY. RECAPPING THIS MORNING'S BIG BANK EARNINGS, GULMAN TAX BEATING ITS OWN STOCK TRADING RECORD, POSTING A 7.4 BILLION DOLLAR HALL FOR THE SECOND QUARTER. BANK EARNINGS. THE BANK EARNINGS WILL BE CONSIDERING THE BANK EARNINGS WEEKEND OF AMERICA. [01:25:27] Speaker 5: THE BANK EARNINGS ARE SEEING A SURGE IN EQUITIES TRADING AND A MAJOR PICKUP IN DEALMAKING. THAT IS YOUR BLOOMBERG REEF. JONATHAN: PHENOMENAL NUMBERS. WHEN IT COMES TO EQUITY SALES AND TRADING NUMBERS, WE ARE LOOKING AT A BANK EARNINGS WITH A BANK EARNINGS. [01:25:42] Speaker 6: THE BANK EARNINGS WILL BE ABLE TO SEE A TREMENDOUS SPIKE. I BELIEVE IT IS MORE THAN 80% OVER J.P. MORGAN IN TERMS OF THE GAIN QUARTER OVER QUARTER. IT JUST GIVES YOU A SENSE OF THE MOMENTUM. [01:25:52] Speaker 5: THE FACT THAT YOU CAN GET RECORD AFTER RECORD AFTER RECORD AGAIN, HOW LONG CAN THIS LAST? IT SEEMS LIKE JUST A LITTLE BIT LONGER. [01:25:56] Speaker 10: JANE FRASER AND CITY, OVER TO YOU, 20 MINUTES AWAY. UP NEXT ON THE PROGRAM, THE CASE FOR HIKING RATES. IF WE GET ANOTHER HOT READING ON CORE INFLATION [01:26:03] Speaker 5: POLICY, IT WILL BE ABLE TO PUT THEM IN THE NEAR TERM. GOVERNOR WALLER GETTING PEOPLE TALKING ABOUT A LIVE MEETING IN A FEW WEEKS TIME. [01:26:13] Speaker ?: WE WILL CATCH UP WITH THE FORMER NEW YORK FED PRESIDENT, BILL DUDLEY. HE JOINS US NEXT. [01:26:33] Speaker 5: GO BACK TO BED. SWITCH OFF THE ALARM. NOTHING IS HAPPENING HERE. EQUITY FUTURES DOWN BY 0.1% ON THE S&P. NASDAQ UP BY 0.5%. THAT IS NOT THE STORY. THE SINGLE NAME AND SECTOR LEVEL STORY IS QUITE REMARKABLE SO FAR TODAY. IT IS AN EARLY TEST FOR EARNING S&P. THE BANKS IS KNOCKING IT OUT OF THE PARK THIS MORNING. GOLDMAN CRUSHING ESTIMATES. GOLDMAN IS UP BY 1%. J.P. DOWN BY 2%. J.P. MORGAN, AS THEY POINTED OUT THIS MORNING, RECORD REVENUE ACROSS EVERY SINGLE UNIT BUSINESS LINE ACCORDING TO THE J.P. MORGAN BOSS, JAMIE DIAMOND. [01:27:24] Speaker 6: GOLDMAN, THE SHARES ARE ONLY UP BY 1.3%. THIS IS REDEFINING THE IDEA OF PRICE TO PERFECTION AS SOMETHING THAT IS SO PERFECT THAT WE CAN HARDLY IMAGINE IT BECAUSE THE EXPECTATIONS OUT THERE TRULY WERE SHATTERED, PARTICULARLY BY GOLDMAN SACKS AND THE SHARES NOT MOVING THAT SIGNIFICANTLY. HOW MUCH DOES THIS SPEAK TO A GENERAL MOOD RIGHT NOW WHERE PEOPLE ARE GENERALLY SKEPTICAL VERSUS SOMETHING THAT WILL ACTUALLY LAST? ULTIMATELY, WE HAVE TO CHECK AT THE END OF THE DAY TO THE EARLY READ. THE EARLY READ GIVES YOU A SENSE THAT MAYBE PEOPLE WERE [01:27:55] Speaker 5: WAITING FOR THE EARNINGS SEASON TO SELL THE NEWS. IT IS THE FIRST FEW PAGES OF THE FIRST CHAPTER OF EARNINGS SEASON, BUT THIS IS THE HEADLINE SO FAR. THIS IS THE STORY. IF YOU BEAT, YOU DON'T GET REWARDED. IF YOU MISS, YOU GET HAMMERED. IF YOU MISS, YOU CAN LOSE A QUARTER OF YOUR VALUE IN THE PRE-MARKET, JUST LIKE THAT. IBM DOWN 24, IT BLEEDS THROUGH [01:28:21] Speaker 6: SOFTWARE. MICROSOFT DOWN BY THREE. THE POTENTIAL HERE FOR A BROADER MARKET IMPACT GIVEN THE FACT THAT SOFTWARE REALLY WAS NOT THE AREA THAT PEOPLE WERE SPENDING ON. THAT WAS WHAT IBM HIGHLIGHTED. IT REALLY WAS HARDWARE. IN OTHER WORDS, SEMI'S GAIN HAS BEEN IN THE TECH STACK, AND THAT SEEMS TO BE THE STORY FROM IBM. HOW MUCH THIS REALLY SPEAKS TO YOU AGAIN, WHAT COULD BE AHEAD FOR ANY OTHER TECH COMPANIES THAT MISS EARNINGS EVEN BY $600 MILLION, GIVES YOU A SENSE OF [01:28:48] Speaker 5: WHAT IS AT STAKE HERE. IBM DOWN BY 24% SO FAR THIS MORNING. THAT IS THE EQUITY PICTURE. THE BOND MARKET STORY, YIELDS COME AGAIN. THE EQUITY PICTURE HAS BEEN RETIRED IN THE LAST 24 HOURS FOLLOWING A VERY HAWKISH SPEECH FROM GOVERNOR WALLER. [01:29:08] Speaker 10: THE CASE FOR HIKING RATES. IF WE GET ANOTHER HOT READING ON CORE INFLATION THIS WEEK, THEN THE FOMC WILL NEED TO CONSIDER TIGHTENING MONETARY POLICY IN THE NEAR TERM. AS ALWAYS, WE NEED TO AVOID MAKING THE MISTAKE OF FIGHTING THE LAST WAR AND REACTING TOO SOON TO TIGHTEN INFLATION. [01:29:27] Speaker 5: WE ARE TALKING ABOUT WHAT IS HAPPENING. THE FED PICTURE IS INVOLVED. TRADERS BOOSTING BETS. THE FEDERAL RESERVE WILL RAISE RATES LATER THIS MONTH. INVESTORS ARE WAITING FRESH INFLATION DATA AND FED SHARE KEVIN WASH'S TESTIMONY ON CAPITOL HILL A LITTLE BIT LATER THIS MORNING. THE FORMER NEW YORK FED PRESIDENT BILL DUDLEY JOINS US NOW FOR MORE. BILL, WHAT WAS YOUR REACTION TO THAT? THIS MEETING THIS MONTH IS INDEED LIVE. [01:29:51] Speaker 22: I THINK IT IS LIVE BECAUSE INFLATION HAS BEEN ABOVE THE FED'S TARGET FOR OVER FIVE YEARS AND CORE INFLATION HAS STAYED QUITE STICKY OVER THE LAST FEW MONTHS. WALLER BASICALLY IS PROVIDING THE GUIDANCE TO THE MARKET ABOUT HOW THE FED IS LIKELY TO REACT IF THE INFLATION NEWS IS BAD THAT KEVIN WASH HAS BEEN UNWILLING TO PROVIDE. THIS IS ONE OF THE PROBLEMS THAT KEVIN WASH I THINK HAS. IF HE CONTINUES TO BE AS SILENT AS HE HAS BEEN ABOUT HOW THE FED IS LIKELY TO REACT, HIS VOICE IS JUST GOING TO BE REPLACED BY OTHER PEOPLE THAT ARE GOING TO PROVIDE MORE INSIGHT IN TERMS OF HOW THE FED IS LIKELY TO REACT. I THINK THERE IS A STRONG CASE FOR TIGHTENING MONETARY POLICY. I DON'T SEE MUCH EVIDENCE THAT MONETARY POLICY IS ACTUALLY RESTRICTIVE RIGHT NOW. FINANCIAL CONDITIONS ARE EXTREMELY ACCOMMODATIVE AND THAT IS PROVIDING QUITE A STRONG IMPULS TO THE ECONOMY. THEN YOU HAVE THE AI INVESTMENT SPENDING BOOM WHICH IS LIKELY TO CONTINUE FOR A WHILE LONGER. BOTH THOSE THINGS, TO ME, ARGUE FOR THE FED TO RAISE RATES. THE FED ISN'T THERE YET. I DON'T THINK KEVIN WASH IS THERE YET. IF YOU LOOK AT WHAT HE SAID IN HIS PUBLIC REMARKS, PRETTY OPTIMISTIC ABOUT AI HELPING YOU ON PROACTIVITY, HOLDING DOWN INFLATION. BUT WALLER HAS PUT A MARKER DOWN. I THINK THERE IS A LOT OF OTHER PEOPLE IN THE FED THAT FEEL THE SAME WAY. [01:31:03] Speaker 5: BILL, DO YOU THINK THAT IS WHERE WE CAN FIND SOME COMMON GROUND? THERE ARE SOME PEOPLE THAT DO THINK WE ARE SLIGHTLY RESTRICTIVE. MANY ON THE FOMC DO NOT SHARE THAT VIEW. BUT CAN WE FIND CONSENSUS AROUND THE FOLLOWING IDEA THAT WE AREN'T SUFFICIENTLY RESTRICTIVE TO GET INFLATION BACK TO TARGET? IS THAT WHERE WE CAN FIND SOME CONSENSUS ON THE COMMITTEE? [01:31:21] Speaker 22: I DON'T THINK THERE IS MUCH EVIDENCE OF THAT. WE HAVE BEEN IN THIS RESTRICTIVE SETTING FOR SEVERAL YEARS NOW AND INFLATION HASN'T COME DOWN AND THE ECONOMY AND UNEMPLOYMENT RATE HASN'T GONE UP. IT SEEMS TO ME THAT THE EVIDENCE THAT MONETARY POLICY IS EXERTING RESTRAINT IS QUITE WEAK IN THE CURRENT VENUE. [01:31:36] Speaker 6: WE HAVE BEEN JUST GETTING ON BANK EARNINGS AND FRANKLY IT SEEMS LIKE ALL CYLINDERS ARE FIRING AS QUICKLY AS THEY POSSIBLY CAN RECORD AFTER RECORD AFTER RECTOR IN CAPITAL MARKETS AS WELL AS MAIN STREET ACTIVITY THAT SEEMS TO BE RE-ACCELERATING. BY NOT HIKING INTEREST RATES, DO YOU THINK THAT THIS FED IS ALLOWING SOME SORT OF CAPITAL MARKETS BUBBLE, EFFERVESCENCE, WHATEVER YOU WANT TO CALL IT, TO BUILD? [01:31:59] Speaker 22: WELL, WE MIGHT CHESSEY MARTINING USED TO SAY THAT THE FED'S JOBS TO TAKE AWAY THE PUNCH BOWL WHEN THE PARTY JUST STARTS GETTING GOOD. I WOULD SAY THE PARTY IS GETTING REALLY GOOD RIGHT NOW. SO THIS IS, YOU KNOW, THE FLIP SIDE OF FINANCIAL CONDITIONS BEING VERY ACCOMMODATIVE. AND SO I THINK THAT ARGUES FOR THE FED RAISING RATES A LITTLE BIT. YOU KNOW, THE CPI WILL GET A GOOD HEADLINE CPI THIS MONTH, BUT THAT'S NOT GOING TO HAVE AS MUCH WAIT NOW THAT THE WAR IN IRAN HAS STARTED BACK UP AND ENERGY PRICES ARE HEADED BACK UP. SO IT'S REALLY WHAT'S HAPPENING TO INFLATION BEYOND ENERGY PRICES THAT'S REALLY GOING TO MATTER. AND I THINK THAT'S WHAT WALLER FLAGGED THIS PAST WEEK. [01:32:40] Speaker 6: THERE'S A QUESTION ABOUT THE IDEA OF OUTSOURCING SOME OF THE COMMENTARY TO OTHER FED OFFICIALS ON THE PART OF KEVIN WARSH WITH CHRIS WALLER REALLY SUCKING UP THE OXYGEN IN THE ROOM. DO YOU THINK THAT THIS IS ACTUALLY A DESIRABLE OUTCOME OR DO YOU EXPECT GOVERNOR, FED PRESIDENT, FED CHAIR WARSH TO CLIP THE WINGS, SAY, OF A CHRIS WALLER? [01:33:01] Speaker 22: I DON'T THINK THAT THE FED CHAIR HAS A LOT OF POWER TO LIMIT THE ABILITY OF PEOPLE TO TALK ABOUT THEIR OUTLOOK FOR MONETARY POLICY. THAT'S WHAT FED OFFICIALS DO. THAT'S THEIR JOB, CONDUCT MONETARY POLICY. SO I THINK THE PROBLEM THAT KEVIN WARSH MIGHT HAVE IS THAT AS PEOPLE LIKE CHRIS WALLER SPEAK UP, AND WARSH DOES NOT PROVIDE SIMILAR KIND OF GUIDANCE ABOUT WHAT HIS MONETARY POLICY REACTION FUNCTION IS, IT BASICALLY MAKES HIM LESS IMPORTANT AND MAKES PEOPLE LIKE CHRIS WALLER MORE IMPORTANT IN TERMS OF GUIDING MARKETS. SO, BILL, WHAT DOES HE SAY TODAY? [01:33:34] Speaker 7: HIS FIRST TESTIMONY AS THE FED CHAIR BEFORE CONGRESS ON THE HEELS OF NOT JUST WHAT GOVERNOR WALLER SAID BUT ALSO CPI? DOES HE JUST STICK TO THE SCRIPT OF HIS TASK FORCE AND I'M NOT GOING TO PROVIDE GUIDANCE? [01:33:45] Speaker 22: I THINK IT'S GOING TO BE MORE OF THE SAME. I THINK HE'S NOT GOING TO PROVIDE MUCH GUIDANCE ABOUT WHERE HE'S GOING FORWARD. I THINK WHERE HE'S DONE HIMSELF A GOOD JOB, DONE HIMSELF A GOOD SERVICE, IS BASICALLY UNDERSCORING THE FACT THAT HE'S COMMITTED TO THE INDEPENDENCE OF THE FED. SO, COMPARED TO WHERE HE WAS WHEN HE WAS TESTIFYING BEFORE THE SENATE BANKING COMMITTEE FOR HIS CONFIRMATION, HE'S GOT A LOT MORE DISTANCE FROM PRESIDENT TRUMP AND I THINK HE'S REALLY REINFORCED THE IDEA THAT HE'S NOT GOING TO CHANGE THE FED'S COMMITMENT TO PRICE STABILITY. [01:34:13] Speaker 7: BILL, PICKING UP YOUR POINT ABOUT FINANCIAL CONDITIONS, THEY'RE EASY IN SOME SECTORS BUT DO YOU EXPECT KEVIN MORSE TO DOUBLE DOWN THAT THEY'RE RESTRICTIVE WHEN IT COMES TO THE HOUSING MARKET? [01:34:22] Speaker 22: I THINK THE HOUSING SECTOR IS THE WEAKEST PART OF THE ECONOMY. BUT THE QUESTION IS WHY IS HOUSING WEAK? IS IT WEAK BECAUSE INTEREST RATES ARE TOO HIGH OR IS IT WEAK BECAUSE WE'RE NOT HAVING ANY MORE IMMIGRATION INTO THE UNITED STATES AND SO THE GROWTH RATE OF THE HOUSEHOLD FORMATION HAS COLLAPSED AND SO WITH THAT THE DEMAND FOR HOUSING IS MUCH WEAKER THAN IT WAS IN THE PAST. WHEN YOU'RE CREATING 2 MILLION JOBS A YEAR, THAT CREATED A LOT OF DEMAND FOR HOUSING. WHEN YOU'RE NOT CREATING MUCH IN THE WAY OF JOB CREATION, THE HOUSING DEMAND IS GOING TO BE A LOT WEAKER. I DON'T THINK THE HOUSING SECTOR IS WEAK SO MUCH BECAUSE RATES ARE TOO HIGH. I THINK IT'S WEAK BECAUSE WE'RE NOT SEEING A LOT OF GROWTH IN THE LABOR FORCE. [01:35:01] Speaker 5: BILL, WELL FRAMED. AS ALWAYS, IT'S GOOD TO HEAR FROM YOU. THE FORMER NEW YORK FED PRESIDENT, BILL DADLEY, GOING INTO THIS SEMIANNUAL TESTIMONY FROM THE FED CHAIR KEVIN WALSH LATER ON THIS MORNING. TO BILL'S POINT, THE PARTY GETTING STARTED? THEY'VE BEEN SPIKING A PUNCH BOWL, HAVEN'T THEY? DAVID GUETTA TURNED UP, PLAYED A FULL SET. [01:35:20] Speaker 6: THERE'S FLAIRS IN THE BOTTLES OF CHAMPANY. I WAS LISTENING TO DAVID GUETTA THIS MORNING. JUNE, WHAT A MONTH. NEVER MIND. THAT GIVES YOU A SENSE OF WHAT WE EXPECT FROM BANK EARNINGS. I THINK HIS POINT HERE IS TO TAKE THE PUNCH BOWL AWAY TO RAISE RATES A LITTLE BIT. THEY'VE GOT TO BE EASING BY US SINCE THE LAST MEETING. THIS IS NOT EXACTLY ONE THAT'S READY TO WHOLESALE CALL THE COPS. [01:35:42] Speaker 5: I SAID IT IN THE QUESTION TO BILL, WHERE CAN YOU FIND SOME COMMON GROUND? WE'VE GOT TO BE ABLE TO FIND SOME COMMON GROUND AROUND THE IDEA THAT WE ARE NOT SUFFICIENTLY RESTRICTED AT THIS COMMITTEE. EVEN IF YOU THINK WE'RE SOMEWHAT RESTRICTIVE, CAN YOU REALLY MAKE THE ARGUMENT THAT WE ARE SUFFICIENTLY RESTRICTIVE TO GET INFLATION BACK TO TARGET WHEN YOU'VE BEEN ABOVE TARGET FOR THIS LONG? [01:35:58] Speaker 6: I THINK THAT SHIP HAS SAILED GIVEN THE FACT THAT INFLATION HASN'T COME DOWN. IF YOU WERE SUFFICIENTLY RESTRICTIVE, INFLATION WOULD NOT BE RUNNING AS HOT AS IT WAS. EVEN IF WE ARE TALKING ABOUT DOWNSIDE SURPRISE OF 3.8% VERSUS THE 4.2% ON CPI, IT STILL HAS A THREE HANDLE. REALLY IN THE WRONG DIRECTION. [01:36:16] Speaker 5: THIS IS A MONTH ROLL INTO A MORNING. FIVE BANK EARNINGS, CPI, TESTIMONY FROM THE FED SHARE. CITY, EARNINGS FROM JANE FRASER IN ABOUT FIVE MINUTES TIME. [01:36:31] Speaker 1: THE NEXT HOUR OF BLOOMBERG SURVEILLANCE, UP NEXT. EARNINGS ARE EXPLODING TO THE UPSIDE. [01:36:41] Speaker 2: THE MARKET IS VERY EXCITED FOR THIS WEEK. WE ARE ALL EXPECTING GREAT THINGS. I THINK THE SECULAR TRADE. WE ARE STILL IN A REALLY STRONG EARNINGS ENVIRONMENT FOR [01:36:50] Speaker 3: U.S. STOCKS. [01:36:52] Speaker 4: THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA ABRAHMOWITZ AND ANNE MARIE HORDERN. LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, GOOD [01:36:59] Speaker 5: MORNING FOR OUR AUDIENCE WORLDWIDE. THE THIRD HOUR OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW. YOUR PRICE ACTION TO SCORES LOOK LIKE THIS. EQUITY FUTURES ON THE S&P DOWN BY ABOUT A TENTH OF 1%. ON THE S&P 500, ON THE NASDAQ UP BY 0.5. THE SECTOR LEVEL STORY, NOT THE STORY THIS MORNING. THE HEADLINE IS AN EARNINGS SEASON AT THE STOCK AND SECTOR LEVEL. BANK OF AMERICA THIS MORNING DOWN BY 1.3. J.P. MORGAN DOWN BY 2.7. THEY WERE DELIVERING RECORD NUMBERS ACROSS EQUITY SELLS AND TRAINING REVENUE. GOLDMAN SAX KNOCKED IT OUT OF THE PARK AND WE ONLY SEE A BUNCE OF 2%. THE HEADLINE SO FAR THIS MORNING, IF YOU BEAT, THERE AIN'T MUCH OF A REWARD. IF YOU MISS, WELL, YOU GET ABSOLUTELY OBLITERATED. IBM THIS MORNING WITH A MISS. THE STOCK IS DOWN BY 23%. BRAMO, THAT BLEEDS RIGHT THROUGH SOFTWARE WORLDWIDE. PERHAPS GIVES A SENSE OF WHAT IS TO COME GIVEN THE SHIFT IN [01:37:51] Speaker 6: SPENDING AWAY FROM SOFTWARE, TOWARD HARDWARE, TOWARD CYBERSECURITY. THE BIG BANKS CLEARLY SEEING EVEN SMALL GAINS, SMALL BEATS, NOT ENOUGH TO GET THE JOB DONE. GET ANOTHER BEAT, BUT THIS IS A SMALL ONE FROM CITIGROOP. [01:38:07] Speaker 5: SECOND QUARTER EQUITY SALES AND TRADING REVENUE, 2.3 BILLION, 1.9 MIGHT SOUND LARGE. COMPARED TO WHAT WE HAVE SEEN ELSEWHERE, THAT IS A SMALL BEAT. IF YOU LOOK AT FIX SALES AND TRADING REVENUE OUT OF CITY THIS MORNING, THAT WON'T GET IT DONE THIS MORNING. [01:38:24] Speaker 6: CITY IN THE PREMARKET DOWN 1%. THE BAR HAS BEEN RESET FOR BANKING STOCKS. IF YOU DON'T REPORT SOME SORT OF NOT ONLY A REVENUE BEAT, BUT SOME SORT OF 80%, 70% INCREASE YEAR-OVER-YEAR IN QUARTERLY EQUITY TRADING SALES OR SOME SORT OF ASTRONOMICAL SUPERLATIVE TYPE OF QUARTER, YOU ARE NOT GOING TO INCREASE. THIS IS WHAT WE HAVE SEEN ALL MORNING, WHICH IS ESSENTIALLY YOU HAVE TO BE SO ASTRONOMICALLY HIGH TO EVEN HAVE YOUR SHARES GO UP IN ANY KIND OF WAY. AGAIN, REALLY SPEAKING TO THAT, BECAUSE ULTIMATELY THEY BEAT ACROSS THE BOARD. MARKETS REVENUE, $7 BILLION VERSUS 6.45. [01:39:04] Speaker 5: WEALTH REVENUE, 3.2 VERSUS 3.07. ALL OF THESE, BEAT, BEAT, BEAT, JUST NOT ENOUGH. WE ARE LOOKING AT THE EXECUTION OF THE MANAGEMENT TEAM AND EVERYONE WORKING AT THE LIKES OF CITY. THESE ARE GREAT NUMBERS. THIS IS ABOUT HOW THE MARKET IS CHOOSING TO REWARD OR PUNISH THOSE NUMBERS SO FAR THIS MORNING. YOU MENTIONED A BUNCH OF NUMBERS THERE. WE ARE LOOKING AT EARNINGS SEASON. [01:39:26] Speaker 6: THAT'S A REALLY NICE BEAT FROM CITY. I DON'T SEE ANY MISSES HERE. WHAT IS THE EXCUSE FOR THE SHARES BEING LOWER? SOME 1.5% RIGHT NOW. I'M NOT SURE. MAYBE PEOPLE WILL POINT TO EXPENSES LIKE JP MORGAN WILL HAVE TO GO THROUGH THIS. NONETHELESS, IT DOES FOLLOW THE TREND OF THE MORNING, WHICH IS ULTIMATELY PEOPLE WERE WAITING FOR THE EARNINGS [01:39:44] Speaker 5: TO COME OUT TO SELL. JUST A LITTLE BIT AROUND THE EDGES. THAT'S THE BROADER STORY FOR EARNINGS SEASON SO FAR. THIS BAR IS SUPER HIGH. SO FAR THE CITY IS DOWN BY 1.5%. THAT'S THE EARNINGS STORY FOR THE BIG BANKS. FIVE OF THEM ALREADY REPORTING SO FAR THIS MORNING. NOW THE STORY SHIFTS TOWARDS INFLATION AND THE FEDERAL RESERVE. COMING UP VERY SHORTLY, 27 MINUTES AWAY, CPI IN AMERICA. AND THEN A FEW HOURS AFTER THAT, WE HEAR FROM THE FED [01:40:13] Speaker 7: SHARE AT 10:00 A.M. EASTERN TIME IN FRONT OF THE HOUSE FINANCIAL SERVICES COMMITTEE. WE'LL TAKE A LOOK AT THAT. WE'LL TAKE A LOOK AT THAT. THAT'S WHAT I SAID YESTERDAY FROM GOVERNOR WALLER. GOVERNOR WALLER SAID IF WE GET ANOTHER HOT READING ON CORE INFLATION THIS WEEK, THEN THE FOMC WILL NEED TO CONSIDER TIGHTENING MONETARY POLICY IN THE NEAR TERM. WHAT IS KEVIN WASH GOING TO SAY WHEN HE GETS HIS FIRST TESTIMONY TODAY IN FRONT OF THE HOUSE, TOMORROW IN FRONT OF THE SENATE, BASICALLY RESPONDING TO THIS. BECAUSE TO BILL DUDLEY'S POINT, IF HE DOESN'T, THEN HIS VOICE JUST BECOMES LESS IMPORTANT. [01:40:40] Speaker 5: OTHERS WILL FILL THAT GAP. WITHOUT A DOUBT, IF YOU'RE NOT GOING TO PROVIDE GUIDANCE RIGHT NOW, ALL YOU'RE DOING IS OUTSOURCING GUIDANCE TO SOMEONE ELSE ON THE COMMITTEE. [01:40:52] Speaker 6: I THINK WE SAW THAT YESTERDAY, TO YOUR POINT. YOU'RE NOT GOING TO SAY THAT. IF YOU'RE NOT GOING TO SAY ANYTHING, WILL HE LEAN INTO WHAT CHRIS WALLER SAID, OR WILL HE PUSH BACK? [01:41:04] Speaker 5: IF HE DOESN'T SAY ANYTHING, THAT'S AKIN TO ALMOST BACKING IT GIVEN WHERE THE MARKET HAS MOVED TO. YIELD ABOVE 425 AT THE FRONT END OF THE CURVE ON TUESDAY MORNING, 460-ISH ON 10s AND NORTH OF 5% ON 30s. COMING UP THIS HOUR, WE'LL CATCH UP WITH SETH CARPETER OF MORGAN STANLEY. WE HAVE A LITTLE BIT OF 2% ON CITY THIS MORNING. WE'VE BEEN LOOKING AT THE BANKS BLEW PAST WALL STREET ESTIMATES AND DAVID KELLY OF J.P. MORGAN ASSET MANAGEMENT REACTING TO THE LATEST READ ON INFLATION. RESULTS FROM CITY CROSSING JUST MOMENTS AGO, THEY WERE OK. RESULTS FROM GOLDMAN, J.P. MORGAN, WELLS FARGO, ALL DOING ABSOLUTELY FINE. BANKFOR AMERICA AS WELL. BUT THE REACTION TO THE STORY SO FAR IS THAT THE NAMES HAVE DROPPED. WE'RE DOWN BY 2% ON CITY THIS MORNING. THE BEATS AREN'T BEING REWARDED. WE'VE BEEN LOOKING FOR A CORE CPI TO BE 20, 22 BASIS POINTS, SO A SOFTENING UP. I THINK THERE'S A CLEAR MESSAGE THAT WE'RE TAKING FROM THE DATA THAT CORE GOODS INFLATION BOOSTED BY TARIFFS, THAT'S GOT TO BE COMING OFF. THAT'S GOT TO BE COMING OFF ON THE BASIS POINTS. [01:42:03] Speaker 23: WE'RE LOOKING FOR CORE CPI TO BE 20, 22 BASIS POINTS. SO A SOFTENING UP. I THINK THERE'S A CLEAR MESSAGE THAT WE'RE TAKING FROM THE DATA THAT CORE GOODS INFLATION BOOSTED BY TARIFFS, THAT'S GOT TO BE COMING OFF OVER TIME. I THINK THERE'S SOME SOFTNESS IN SHELTER INFLATION. BILL DUDLEY WAS ON EARLIER AND HE TALKED ABOUT SORT OF THE RESTRICTION IN IMMIGRATION LEADING TO LESS DEMAND FOR HOUSING. WE THINK WE'RE SEEING A SIGNAL THERE WHERE YOU'RE GOING TO SEE SOME MODERATION CONTINUE IN THE SHELTER INFLATION. WE THINK INFLATION ACTUALLY IS COMING DOWN. IS IT GOING BACK TO TARGET RIGHT AWAY? NO. BUT IS IT COMING DOWN ENOUGH TO THE POINT WHERE THE FOMC IS GOING TO BE ABLE TO SAY NO NEED TO HURRY, NO NEED TO HIKE NOW IN JULY. LET'S WAIT A COUPLE MORE MONTHS AND SEE WHAT HAPPENS. THAT'S WHAT WE THINK IS THE RIGHT OUTCOME. THAT'S YOUR FORECAST. [01:42:51] Speaker 5: HOW OFF SIGHT DO YOU FEEL RIGHT NOW RELATIVE TO WHAT YOU'RE [01:42:53] Speaker 23: HEARING FROM THE COMMITTEE? I THINK CHRIS WALLER IS A GREAT EXAMPLE THERE. ONE OF THE POINTS -- I WAS AT [01:43:03] Speaker 5: THE ECB'S CONFERENCE IN SENTRA. I GET THIS GREAT OPPORTUNITY TO TALK TO POLICYMAKERS. EVERYONE WAS -- FANTASTIC [01:43:08] Speaker 23: OPPORTUNITY, SETH. I'M RIGHT THERE WITH YOU. IT WAS GREAT AND BEAUTIFUL SETTING. EVERYONE WAS TALKING ABOUT KEVIN WARSH'S SORT OF NON-FORWARD GUIDANCE AND WHAT YOU CAN SAY AND WHAT YOU CAN'T SAY. I THINK THE ARGUMENT IN FAVOR OF KEVIN'S POINT IS THAT MARKETS OFTEN JUST LISTEN TO ONE PART OF WHAT POLICYMAKERS SAID. WHAT DID CHRIS WALLER SAY? HE SAID IF WE GET ANOTHER HOT INFLATION READ, THEN THE COMMITTEE WILL HAVE TO CONSIDER RAISING INTEREST RATES SOON. WHAT DID THE MARKET DO? THE MARKET SOLD OFF SAYING CHRIS WALLER JUST SAID THEY ARE LIKELY TO RAISE RATES IN JULY. THAT'S NOT WHAT HE SAID. HE SAID IF WE GET ANOTHER HOT READING, THEN THEY WILL HAVE TO CONSIDER RAISING RATES IN THE NEAR FUTURE. I THINK THAT IS THE TRICKY PART WITH ANY CENTRAL BANKS COMMUNICATION. WHAT I WOULD LIKE TO SAY TO POLICYMAKERS IS BE AS CLEAR AS YOU CAN BE BUT UNDER NO [01:43:55] Speaker 6: CIRCUMSTANCES BE MORE CLEAR THAN THAT. DO YOU DISAGREE WITH BILL DODDLEY THAT ESSENTIALLY THE FED'S JOB IS TO TAKE AWAY THE PUNCH BOWL WHEN THE PARTY IS REALLY GETTING STARTED AND HEATING UP? AND RIGHT NOW THE PARTY IS PRETTY HOT AND IT SEEMS LIKE IT MIGHT BE AN OPPORTUNE TIME TO START REMOVING SOME OF THE ALCOHOL. DO YOU DISAGREE WITH THAT? [01:44:14] Speaker 23: I'M NOT SURE I FULLY DISAGREE AND I THINK IF WE KEEP THAT METAPHOR AND THEN PUT IT IN THE CONTEXT OF CHRIS WALLER'S SPEECH YESTERDAY, THEY WANT TO TAKE THE PUNCH BOWL AWAY BEFORE THINGS GET CRAZY BUT THEY ARE NOT THERE TO TRY TO SMASH ALL THE CRYSTAL AND DESTROY THINGS. CHRIS SAID THEY DON'T WANT TO BE BEHIND THE CURVE, THEY WANT TO RAISE INTEREST RATES IF NECESSARY TO CONTROL INFLATION BUT THEY DON'T WANT TO RAISE INTEREST RATES AGGRESSIVELY AND RISK CAUSING A RECESSION AND THAT IS THE INHERENT CHALLENGE FOR MONETARY POLICY SINCE TIME [01:44:43] Speaker 6: INMEMORIAL. BASED ON THE EARNINGS THAT WE JUST GOT, BASED ON THE COMMENTARY, BASED IN THE SENSE THAT IT'S NOT JUST WALL STREET THAT'S GOING GANG BUSTERS BUT YOU'RE ALSO SEEING MAIN STREET DO REALLY WELL WITH THE DELINQUENCIES COMING DOWN. WHAT'S THE ARGUMENT AGAINST [01:44:55] Speaker 23: HIKING RATES JUST ONCE? I THINK AGAINST HIKING RATES JUST ONCE IS I DON'T KNOW WHAT HIKING RATES ONCE IS GOING TO DO. HIKING RATES ONCE FEELS A LITTLE BIT OF SPURRIOUS PRECISION. I THINK THE ARGUMENT TO STAY PAT IS INFLATION WAS BOOSTED TEMPORARILY BY TARRIFFS, TEMPORARILY BY THE ENERGY PRICE SHOCK. IF IT'S GOING TO SETTLE DOWN ON ITS OWN, THEN LET'S SEE WHAT THE ECONOMY CAN DO. WE DON'T KNOW WHERE THE UNEMPLOYMENT RATE CAN ULTIMATELY SETTLE. I THINK IT IS A LITTLE BIT OF A LITTLE BIT OF THE ECONOMY. IT IS A LITTLE BIT OF [01:45:31] Speaker 6: SIDEWAYS BUT WITH MUCH LESS JOB CREATION. HAVE YOU SLOWED THE ECONOMY ENOUGH TO SETTLE INTO THE [01:45:36] Speaker 23: SLOWER GROWTH RATE? HOW LONG DO YOU WAIT? FIVE YEARS? SIX YEARS? FIVE YEARS? I THINK IT IS A LITTLE BIT OF A LITTLE BIT OF THE ECONOMY ENOUGH. I THINK IT IS A LITTLE BIT OF THE ECONOMY ENOUGH. NOW I HAVE TO ARGUE OVER WHAT THEY ARE LIKELY TO DO. IF YOU THINK ABOUT THE MEDIAN, THOUGH, FROM THE LAST FOMC MEETING, THERE WAS A MEDIAN OF ONE HIKE THIS YEAR AND THEN A MEDIAN OF A CUT FOR NEXT YEAR. [01:45:57] Speaker 7: IF YOU THINK LAST YEAR WAS ABOUT INSURANCE CUTS, EVEN IF IT IS JUST ONE HIKE, IT IS TAKING AWAY THAT INSURANCE. [01:46:06] Speaker 23: I THINK THAT IS A REASONABLE ARGUMENT. WERE THE 75 BASIS POINTS WORTH OF INSURANCE CUTS NECESSARY GIVEN THAT THE LABOR MARKET DID NOT COLLAPSE? I COULD SEE THAT AS AN ARGUMENT. MAYBE YOU PULL BACK ON THE INSURANCE CUTS. I THINK THAT IS A LEGITIMATE ARGUMENT THAT SOMEONE COULD MAKE IN THE FUTURE. AGAIN, I CAN SEE THAT AS A PERFECTLY VALID ARGUMENT. IT IS NOT WHAT OUR BASELINE FORECAST IS FOR WHAT THE FOMC WILL ULTIMATELY DELIVER. [01:46:35] Speaker 5: HOW BIG IS THE SPREAD BETWEEN WHAT YOU THINK THE FED SHOULD DO AND WHAT THEY WILL DO? IF WE GO BACK OVER ENOUGH YEARS, THERE HAS BEEN AT [01:46:43] Speaker 23: TIMES A HUGE GAP. HOW BIG IS THE GAP FOR YOU PERSONALLY? THE HARDEST PART TO ANSWER THAT QUESTION IS THAT WE CAN'T UNDO HISTORY. OUR FORECAST WAS WRONG WHEN THEY DID THE INSURANCE CUTS. THEY DID THE INSURANCE CUTS. I WAS NOT CONVINCED AT ALL THAT THE LABOR MARKET WAS WEAK ENOUGH THAT IT WAS GOING TO BE A SYSTEMIC COLLAPSE IN THE ECONOMY. OUR FORECAST WAS WRONG AND THEY ENDED UP CUTTING 75 BASIS POINTS. IT'S A DIFFERENT QUESTION TO SAY IF I COULD GO BACK IN TIME, I WOULDN'T DO THOSE. NOW THAT WE ARE WHERE WE ARE, SHOULD WE HIKE 75 BASIS POINTS AND UNDO IT? [01:47:23] Speaker 5: THAT'S A VERY DIFFERENT PROPOSITION. YOU HAVE LEARNED FROM THAT EXPERIENCE. I JUST WONDER IF THAT WAS A DIFFERENT FEDERAL RESERVE. I WONDERFUL. I WONDERFUL INSURANCE THE COMMITTEE IS UNCHANGED. YOU CAN FEEL THE INSTITUTIONS SORT OF FLEXING, PUSHING BACK A LITTLE BIT. [01:47:46] Speaker 23: SOME OF THE SPEECHES I HAVE READ MORE RECENTLY. IS THIS A DIFFERENT FED? WE HAVE SEEN SPECIFICALLY WHERE KEVIN WASHES PREFERENCE ARE FOR POLICY. THE REST OF THE COMMITTEE IS UNCHANGED. YOU ARE RIGHT, THEY HAVE LIVED THROUGH THIS EXPERIENCE. IT WAS AN INSURANCE SET OF CUTS, SO TO SPEAK. THEY ARE A LITTLE BIT PAST THE POLITICAL PRESSURE, SO MAYBE THEY WANT TO GO IN THE OPPOSITE DIRECTION. BUT THEN I WOULD JUST ARGUE BACK TO WHERE THE SUMMARY OF ECONOMIC PROJECTIONS IS. THEY ONLY HAD A MEDIAN OF ONE RATE HIKE FOR THIS YEAR. AND THEIR FORECAST FOR INFLATION IS AT 3.3% FOR CORE AT THE END OF THIS YEAR. WE THINK IT'S BELOW THAT AT 3, AND THAT'S BEFORE YOU FACTOR IN THIS POTENTIAL REVISION TO METHODOLOGY FROM THE BEA THAT COULD LOWER INFLATION EVEN MORE. SO IS IT CHANGED? I MEAN, POSSIBLY. IS IT A DRAMATICALLY DIFFERENT INSTITUTION THAT FUNDAMENTALLY WANTS A DIFFERENT OUTCOME? I DON'T THINK THERE'S EVIDENCE OF THAT. SETH, IT'S GOOD TO SEE YOU. [01:48:36] Speaker 5: IT ALWAYS IS. THANK YOU. SETH CARPENTER OF MORGAN STANLEY BREAKING DOWN HIS EXPERIENCE COVERING THIS FEDERAL RESERVE. CPI DROPS IN 28 MINUTES TIME. ABOUT 90 MINUTES AFTER THAT, WE'LL HEAR FROM THE FED CHAIR. [01:48:50] Speaker 6: KEVIN WASH ON CAPITOL HILL. RIGHT NOW, AT LEAST THE EARNINGS SEEM TO BE SUPPORTING THE IDEA OF AN INSUFFICIENTLY RESTRICTIVE FED, AT LEAST NOT RESTRICTIVE POLICY. NOW THE QUESTION IS, WILL CPI GIVE US THE INSIGHT TO NEED FORWARD-LOOKING GIVEN THE FACT THAT OIL PRICES HAD GONE DOWN THROUGH THE INSTITUTIONS AND THE INSTITUTIONS ARE NOW INFLECTING UPWARD. YOU'LL HAVE TO STRIP THOSE OUT AND STRIP OUT THE SECONDARY EFFECTS THAT POTENTIALLY COULD HAVE COME THROUGH. [01:49:12] Speaker 5: IT'S GOING TO BE A MESSY PRACTICE. THESE GUYS ARE HUMAN BEINGS. THIS INSTITUTION IS NOT A MACHINE OR A ROBOT. I CAN SENSE THE PERSONAL ANXIETY ABOUT BEING ABOVE TARGET FOR FIVE YEARS. THE ENERGY STORY HAS EXACERBATED THAT ANXIETY MORE RECENTLY. YOU CAN SEE AI COME UP REPEATEDLY IN THE MINUTES WHEN IT CONCERNS PRICE PRESSURE. DOES IT SIGNAL RIGHT NOW THAT THEY ARE LOOKING TO ANCHOR INFLATION EXPECTATIONS BY SIGNALING A WILLINGNESS TO TIGHTEN MONETARY POLICY IN THE NEAR TERM OR WHETHER IT REFLECTS A REAL ITCH THEY NEED TO DO SOMETHING AND DO SOMETHING SOON? [01:49:41] Speaker 6: THAT I THINK IS THE KEY QUESTION. DO THEY HAVE TO ACT TO CONTINUE MARKET JAWBONING THE WAY THAT THEY HAVE OR CAN THEY SAY WELL NEXT MEETING MIGHT BE LIFE. WE STILL COULD POTENTIALLY HIKE AND PUSH THEM BACK MONTH AFTER MONTH AFTER MONTH MEETING AFTER MEETING AND STILL GET THE PRICE REACTION THAT THEY ARE HOPING FOR. [01:49:58] Speaker 5: WHAT IS THE CIRCULAR NATURE OF THE CONVERSATION RIGHT NOW? CHRIS ROME IS ON THE PROGRAM EARLY ON THIS MORNING AND HE SAID LOOK INFLATION EXPECTATIONS ARE WELL ANCHORED. AND WE RESPONDED VERY CLEARLY ARE THEY WELL ANCHORED BECAUSE WE ARE PRICED FOR RATE HIKES? ISN'T THAT THE STORY RIGHT NOW? [01:50:10] Speaker 6: WHAT YOU SAW WAS YIELD CURVE FLATTENING AS SOON AS YOU SAW KEVIN WASH REALLY REASSERT THE INDEPENDENCE OF THE FEDERAL RESERVE, THIS IDEA THAT THERE WAS CONFIDENCE THAT THEY WOULD INFLICT THE NECESSARY PAIN TO BRING DOWN INFLATION SHOULD THEY HAVE TO. IF THAT ISN'T NECESSARILY AS A PRESENT IN MARKET UNDERSTANDING, DOES THAT SHIFT INFLATION EXPECTATIONS IN A MORE MATERIAL WAY? [01:50:29] Speaker 5: 50 BASIS POINTS ABOVE THE POLICY RATE AT THE FEDERAL RESERVE ON TWOS. AND I REMEMBER THE ARGUMENT THAT CAME OUT OF THE TREASURY NOT SO LONG AGO. WHEN TWO-YEAR YIELDS WERE BELOW THE POLICY RATE, THE TREASURY SECRETARY WAS MAKING THE ARGUMENT THAT THE MONEY SHOW POLICY WAS TIGHT. AND THAT WAS EVIDENCE FOR IT. NOW YOU HAVE A TWO-YEAR TRADING 50 BASIS POINTS ABOVE FED FUNDS AT THE UPPER BAND OF THE POLICY RATE. IT'S AN ARGUMENT RIGHT NOW THIS MARKET IS MAKING THAT WE ARE ABOUT TO SEE HIGH RATES. [01:50:52] Speaker 6: AND THAT IS A LITTLE BASIS POINTS. AND ARGUE THAT THAT'S ACTUALLY NECESSARY BECAUSE EVERY SINGLE BANKER THAT WE TALK TO SAY THAT 25, 50 BASIS POINTS OF A RATE HIKE ISN'T GOING TO MAKE A DIFFERENCE FOR THE [01:51:03] Speaker 5: FINANCING FLYWHEEL THAT WE ARE HEARING ABOUT FROM ALL THE BIG BANKS. AND THIS WHOLE CONVERSATION CAN CHANGE IN 15 MINUTES TIME. TWO-YEAR YIELDS ARE DOWN BY TWO BASIS POINTS. SPORT, RIGHT? 426 ON TWOS. [01:51:13] Speaker 9: LET'S GET YOU AN UPDATE ON STORIES WORLDWIDE WITH YOUR BLOOMBERG BRIEF. VONNIE QUINN HAS MORE. VONNIE QUINN HAS MORE. EVEN AFTER THE COMPANY REPORTED BEATS ACROSS THE BOARD. REVENUE FROM EQUITIES TRADING SURGING TO A NEW RECORD THERE AS WELL. 45% HIGHER THAN LAST YEAR. IBM SHARES THOSE SINKING IN THE PRE-MARKET. THE COMPANY REPORTING PRELIMINARY SECOND QUARTER SALES THAT MISSED ANALYST ESTIMATES. CEO ARVAN KRISHNA SAYING THAT CLIENTS ARE SHIFTING CAPITAL AWAY FROM SOFTWARE AND INTO SERVERS, STORAGE, MEMORY, TO HEAD OFF INDUSTRY-WIDE SUPPLY SHORTAGES. COUTLEY IS HEADED TO MEXICO. THE AMERICAN COMPANY IS HOPING IT CAN SELL ITS MEXICAN INSPIRED FOOD SOUTH OF THE BORDER. ITS INAURGURAL STORE WILL OPEN NEAR MONTEREIT ON THURSDAY [01:52:01] Speaker 5: WITH A COUPLE OTHER LOCATIONS PLANNED THROUGH 2027. THANK YOU FOR JOINING US. [01:52:16] Speaker ?: THANK YOU FOR JOINING US. THANK YOU FOR JOINING US. [01:52:37] Speaker 15: THANK YOU FOR JOINING US. WHEN YOU LOOK AT THE NUMBERS ACROSS THE BOARD, THEY WERE INVESTORS IN THE ECONOMY AND IN PARTICULAR THE CAPITAL MARKETS IS A HUGE IMPACT ON EVERYBODY'S NUMBERS. INVESTORS ARE FINALLY RECOGNIZING THAT THE BANKING INDUSTRY POST FINANCIAL CRISIS HAS BEEN DE-RISKED. [01:52:59] Speaker 5: THANK YOU FOR JOINING US. THAT WAS JARED CASSIDY OF RBC JOINING THE PROGRAM A LITTLE BIT EARLIER FOLLOWING NUMBERS FROM J.P. MORGAN FROM BANK OF AMERICA, FROM CITY, FROM WELLS FARGO, FROM GOLMORSACKS, KNOCKING IT OUT OF THE PARK. FUTURES THIS MORNING ON THE S&P DOWN BY JUST 2/10 OF 1%. ON THE NASDAQ UP BY 0.4. AT THE SINGLE NAME LEVEL, LOOKING AT THE BANK SECTOR THIS MORNING, YOU WOULDN'T REALLY KNOW THAT ANYTHING COULD DOESN'T UNDERSTAND THE BANK STOCKS ARE LOWER ON THE DAY. [01:53:32] Speaker 6: THE ONE THAT IS THE EXCEPTION IS GOLDMAN SACKS BUT THEY ARE JUST POSITIVE AFTER BLOWING IT OUT OF THE WATER. THE IDEA THAT 3% GAIN COMES AFTER A $7.4 BILLION EQUITIES TRADING REVENUE, THAT IS 23% LARGER THAN J.P. MORGAN'S AT $6 BILLION. IT IS MORE THAN DOUBLE BANK OF AMERICA'S AT $3.6 BILLION. IT IS 70% HIGHER THAN IT WAS AT THE SAME TIME LAST YEAR. SHOCKING NUMBERS. MAYBE WE WILL GIVE YOU 3%. IT IS PROBABLY GOING TO FADE. THIS IS SORT OF HOW THE MORNING HAS BEEN GOING. WE WILL SEE IF IT HOLDS. [01:54:07] Speaker 5: I KNOW I SOUND LIKE A BROKEN RECORD BUT THIS IS THE HEADLINE SO FAR THIS MORNING. BEATS ARE NOT BEING REWARDED BUT MISSES ARE BEING PUNISHED. AND MISSES ARE BEING REALLY PUNISHED, OBLITERATED. IBM IS LOSING ABOUT A QUARTER OF ITS VALUE. IBM IS DOWN BY 23% IN THE PRE-MARKET. THAT IS PICKING UP ACROSS SOFTWARE NAMES IN THE UNITED STATES AND IT IS PICKING UP ACROSS SOFTWARE NAMES AROUND THE WORLD AS WELL. SAP OVER IN EUROPE BEING ONE EXAMPLE OF THAT. [01:54:40] Speaker 6: WITH EXISTENTIAL RISK BEING AT THE FOREFRONT OF A LOT OF PEOPLE'S MINDS, THE IDEA THAT IF SOFTWARE NAMES CANNOT LOCK IN BIG DEALS AT A TIME OF A LOT OF UNCERTAINTY AND INSTEAD A LOT OF CORPORATE CLIENTS ARE GOING TO THE HARDWARE OR GOING TO CYBERSECURITY OR PUTTING PRIORITIES ELSEWHERE, DOES THIS REPRESENT THE SASCOPOLYPSE THAT PEOPLE WERE [01:54:58] Speaker 5: TALKING ABOUT EARLIER AND PERHAPS A TASTE OF WHAT IS TALKING ABOUT IT. SOFTWARE NAMES, SOFTWARE NAMES DOING A WHOLE LOT OF SOMETHING, SOFTWARE NOT SO GOOD THIS MORNING. MICROSOFT, IBM, ACCENTURE TRADING LOWER IN THE PRE-MARKET. FIRST UP, KEYBANK DOWNGROUNDING APPLE TO UNDERWAY, EXPECTING SLOWER U.S. DEMAND AND WEAK SERVICE REVENUE GROWTH. THE STOCK IS DOWN BY 3/4%. A CALL FROM EVERCORE INITIATING COVERAGE ON SPACEX WITH AN OUTPERFORMED RATING SAYING HIS UPSIDE POTENTIAL IS TOO COMPALING TO IGNORE. LET'S TURN BACK TO ONE OF OUR TOP STORIES, J.P. MORGAN, BANK OF AMERICA, GOLDMAN CITY, ALL REPORTING EARNINGS THAT BEAT WALL STREET ESTIMATES. JOINING US NOW IS HERMAN CHAN OF BLOOMBERG INTELLIGENCE. LET'S PARK THE PRICE ACTION FOR A MOMENT. [01:55:58] Speaker 18: LET'S GO THROUGH THE NUMBERS. HOW PHENOMENAL WAS THAT QUARTER FOR THESE BANKS? THERE WAS A LOT OF THESE BANKS THAT HAD HIGH EXPECTATIONS HEADING INTO THE QUARTER. THE BANKS EASILY CLEARED THAT, HIGHLIGHTED BY J.P. MORGAN'S EQUITY TRADING REVENUE UP 86% YEAR-OVER-YEAR. THUS FAR HAD VERY SIMILAR RESULTS. CATTLE MARKETS WERE STRONG AS WELL, ACROSS EQUITIES ISSUANCE, FIXED DECOMBED ISSUANCE AND M&A AND THEN YOUR TRADITIONAL BANKING SIDE, DECENT LOAN GROWTH, MARGINS WERE FAIRLY STABLE. ALL IN ALL, THE REVENUE PICTURE LOOKS REALLY STRONG. [01:56:33] Speaker 5: THE ENVIRONMENT WAS FANTASTIC, THE WEATHER WAS TREMENDOUS. IS THE NEXT QUARTER AFTER THAT GOING TO BRING MORE OF THE SAME? [01:56:39] Speaker 18: YEAH, I THINK THAT'S WHAT A LOT OF THE ANALYSTS WILL BE ASKING FOR. HOW SUSTAINABLE ARE THESE RESULTS? YEAH, I THINK THAT'S PRETTY MUCH. I DON'T THINK THAT'S PRETTY MUCH. I RECALL THAT IN THE JP MORGAN PRESS RELEASE TODAY. JAMIE DIMON WAS A BIT MEASURED IN HIS COMMENTS TALKING ABOUT SHIFTING TECHTONIC PLATES AND RISK THAT'S REALLY BUBBLING BOLOW THE SURFACE. HOW THAT CHANGES REMAINS TO BE SEEN. BUT ALL IN ALL, I THINK YOU CAN EXPECT THE OVERALL TRADING REVENUE [01:57:08] Speaker 5: ENVIRONMENT TO BE REALLY CONSTRUCTIVE, AT LEAST IN THE NEAR TERM. IT'S GOOD TO SEE YOU. WHAT DO YOU THINK ABOUT THIS? [01:57:19] Speaker 21: THE TAILWINS THROUGH Q2, ARE THEY DURABLE THROUGH INTO YEAR-END? I THINK THEY ARE, JOHN. I THINK YOU HAVE OPERATING LEVERAGE FROM THE EXPENSE SIDE THIS QUARTER WAS GOOD. AS WE TALKED EARLIER, I THINK THE LOWER CREDIT COSTS REALLY DO MATTER. I THINK THERE IS A LANG BETWEEN ANY SHIFT OF HIGHER RATES ON FUNDING COSTS AND THE BANKS WILL RESET LOANS AND EARNING ASSETS FASTER. I THINK THERE IS A VERY GOOD CASE HERE FOR THE WIDENING OF NET INTEREST INCOME, NET INTEREST MARGIN THE SECOND HALF OF THE YEAR. LAYER OVER, THE RATE OF GROWTH ON EXPENSES SHOULD BE LIMITED. THAT IS GOING TO HELP PROFITABILITY CONTINUE. PLUS WE STILL HAVE BUYBACKS AND WE STILL HAVE OVERALL THE OPPORTUNITY FOR MORE BUSINESS TO BE ONE AS SHARE SHIFTS BACK TO THE BANKING UNDUSTRY. [01:58:05] Speaker 6: RIGHT NOW, THE JP MORGAN EARNINGS CALL WITH MEDIA IS ONGOING. WE ARE HEARING FROM THE CFO SAYING THE U.S. CONSUMER IS A LITTLE BIT STRONGER THIS QUARTER. REALLY SPEAKING TO WHAT WE HAVE HEARD ACROSS THE BANKING SECTOR ABOUT THE MAIN STREET SIDE OF THE BOOK. AND THEN JAMIE DIMON SAYING THAT MARKETS ARE BOOMING RIGHT NOW AND IT'S PRETTY BROAD BASED. OF COURSE, WE ALSO HAVE THE CAVEAT OF THERE IS A TIPPING POINT THAT CAN COME EVEN WITH SUCH STRENGTH. WHAT ARE YOU LOOKING FOR, FOR A POTENTIAL TURN IN THE CYCLE, FOR SOME SORT OF END TO WHAT WE'RE SEEING? [01:58:36] Speaker 21: WELL, I THINK IF YOU HAVE STOCK PRICES GO DOWN NOT JUST IN THE FINANCIAL WORLD BUT REALLY ACROSS THE BOARD, THAT'S GOING TO LIMIT THE OPPORTUNITY TO PLACE NEW EQUITY AND DEBT. I THINK IF YOU HAD A DROP OF M&A ACTIVITY, BECAUSE, AGAIN, PRICES WEREN'T COOPERATIVE, THAT WOULD ALSO BE AN END. BUT RIGHT NOW WE'RE SEEING THE OPPOSITES. THAT'S KIND OF WHY I THINK THE ATTITUDE AND THE BULLISHNESS INTO THIRD QUARTER AND FOURTH IS STILL QUITE GOOD. [01:58:59] Speaker 5: CHRIS, ALWAYS GOOD TO CATCH UP. THANKS FOR STANDING BY. CHRIS MARANAC THERE OF RING CAPITAL ON THE BANK SECTOR SO FAR THIS MORNING. THE NUMBERS SO IMPRESSIVE THAT WE'VE NOT TALKED ABOUT SUCCESSION PLANNING AT JP MORGAN ONCE. IMAGINE THE CALL MIGHT BE DIFFERENT. THERE WILL BE LOTS OF QUESTIONS ABOUT THAT OVER AT JP MORGAN. [01:59:16] Speaker 6: BUT THE ATTENTION FIRMLY, I SWEAR. JUST TO ANSWER THE QUESTION OF HOW LONG IT CAN CONTINUE AND TALKING ABOUT HOW, IF ANYTHING, IT SEEMS TO BE ACCELERATING WHEN IT COMES TO THE ECONOMIC STRENGTH OF THE CONSUMER, EVEN IF JUST A LITTLE BIT. YOU'RE HEARING THAT ACROSS ALL THE DIFFERENT COMPANIES. I MEAN, WHO HAS REPORTED EARNINGS SO FAR? WE'VE GOTTEN DELTA AND WE'VE GOTTEN THE BIG BANKS. AND THEY ALL HAVE COME OUT AND SAID THAT THE CONSUMER IS INCREDIBLY STRONG. WHERE THERE IS SOME SKEPTICISM IS ON THE AI SIDE OF THINGS IN TERMS OF WHERE THE MONEY IS FLOWING, AND THAT'S WHAT WE SAW FROM IBM IN TERMS OF THE INVESTMENTS. THAT'S MAYBE WHERE THE FIREWORKS COME INTO PLAY. [01:59:45] Speaker 5: I OFTEN CALL EARNINGS SEASON CHERRY-PICKING SEASON BECAUSE WE CAN ALSO TALK ABOUT PEPSI AND STORY ON THE CONSUMER NOT SO GREAT OVER AT PEPSICO. [01:59:51] Speaker 6: ALTHOUGH SOME PEOPLE ARE SAYING THAT MIGHT BE MORE OF THE EXECUTION THING, BUT YOU ARE RIGHT. [01:59:58] Speaker 5: CHERRY-PICKING OR APPLE-PICKING. [01:59:59] Speaker 6: IS IT CHERRY-PICKING SEASON? THEY ACTUALLY HAVE BEEN REALLY GOOD THIS SEASON. [02:00:06] Speaker 5: THE FRUIT HAS BEEN VERY GOOD THIS SEASON. AN ENDORSEMENT ON FRUIT FROM BRAMO. GOOD STUFF, ALL RIGHT. HOW MUCH ARE THOSE CHERRIES? CPI UP NEXT. WE'LL BREAK IT DOWN WITH TIFFANY IN JUST A MOMENT. [02:00:19] Speaker 11: WE'LL BREAK IT DOWN WITH THE BEST. [02:00:26] Speaker ?: WE'LL BREAK IT DOWN WITH THE BEST. WE'LL BREAK IT DOWN WITH THE BEST. [02:00:34] Speaker 5: WE'LL BREAK IT DOWN WITH THE BEST. INFLATION DATA IN AMERICA, CPI 20 SECONDS AWAY. YOUR SCORES INTO IT LOOKED LIKE THIS. EQUITY FUTURES ON THE S&P JUST ABOUT UNCHANGED. DOWN BY CLOSE TO 1/10 OF 1%. ON THE NASDAQ, UP BY 0.6. ROUND IT UP, 0.7. IN THE BOND MARKET, 2s, 10s AND 30s. YIELDS PUSHING HIGHER THROUGH YESTERDAY'S SESSION. WE'LL BREAK IT DOWN WITH THE BEST. [02:01:06] Speaker 24: SOME BREAKING NEWS, MIKE MCKEE. GOOD MORNING. KEVIN WARSCHE MAKES NO NEWS IN HIS PREPARED TESTIMONY. THERE IS NO GUIDANCE ON INTEREST RATES, ALTHOUGH HE DOES REITERATE THAT INFLATION IS STILL THE FOCUS FOR THE FED. GOOD NEWS FOR CHAIRMAN WARSCHE THIS MORNING AS CPI COMES IN DOWN 4/10 ON THE MONTH. THIS IS THE FIRST NEGATIVE PRINT SINCE 2026 YEARS. CORE CPI IS FLAT FOR THE MONTH. THAT PUTS THE YEAR OVER YEAR AT 3.5% DOWN FROM 4.2% FOR THE HEADLINE AND FOR THE CORE, 2.6% DOWN FROM 2.9%. NOW, ONE MONTH DOES NOT MAKE A TREND AND OBVIOUSLY THE FED AND THE WHITE HOUSE WILL TAKE CREDIT FOR SOME OF THIS, BUT THEY ARE GOING TO HAVE TO WAIT AND SEE HOW THINGS BREAK OUT GOING FORWARD. MOST OF THIS IS AS FAR AS WE CAN DETERMINE FROM ENERGY, OF COURSE. NOW, WARSCHE, IT'S A KIND OF A DRAMATIC OPENING HE MAKES IN HIS STATEMENT THIS MORNING, BUT AGAIN, NO GUIDANCE. HE SAYS THE U.S. IS AT A HINGE POINT IN HISTORY AND THEIR TASK IS TO ENSURE THAT THE ECONOMY EXCELS INTO THE FUTURE. IN THE TEXT OF THE TESTIMONY, WARSCHE SAYS THE KEY TO THAT IS BRINGING INFLATION DOWN. QUOTE, WHILE MONTHLY PRICE FLUCTUATIONS ARE INEVITABLE, ESPECIALLY IN AN UNSETTLED WORLD, UNDERLYING INFLATION OVER LONG TIME HORIZONS IS DETERMINED LARGELY BY MONETARY POLICY. THE MEMBERS OF OUR COMMITTEE HAVE NO TOLERANCE FOR PERSISTENTLY ELEVATED INFLATION, AND WE SHARE A RESOLUTE COMMITMENT TO RESTORING PRICE STABILITY. NOW, WHAT'S MISSING FROM THAT STATEMENT IS ANY MENTION OF HOW THEY PLAN TO DO THAT. WHETHER THEY PLAN TO RAISE OR LOWER INTEREST RATES OR HOLD THEM, NOTHING ON THAT IN THE TEXT. THE ECONOMY, HE DOES SAY, IS SOLID. CONSUMER SPENDING IS MODERATE, MANUFACTURING MOVING UP STEADLY, AND THE LABOR MARKET BROADLY STABLE IN HIS ECONOMIC OUTLOOK. THE ONLY LAGGERD IS HOUSING, WHICH IS A VICTIM OF INTEREST RATES, BUT AGAIN, NO MENTION OF WHERE RATES ARE GOING. HE DOES MENTION AI, WHICH CAME UP AS A CONCERN IN THE MINUTES OF THEIR LAST MEETING. WE DON'T KNOW THE EXTENT TO WHICH THE ECONOMY WILL BENEFIT FROM THE AI BUILDOUT WAR, SAYS. EVEN SO, NEW OPPORTUNITIES FOR THE ECONOMY INTRODUCED NEW CHALLENGES FOR POLICYMAKERS. WE AT THE FED ARE MONITORING THE IMPLICATIONS FOR INFLATION AND THE LABOR MARKET. IN THE REST OF HIS SIX PAGES, WHICH ARE, BY THE WAY, ABOUT TWO PAGES LONGER THAN JAY POWELL HAS HAD IN RECENT YEARS, HE OUTLINES THE FIVE TASK FORCES THAT HE HAS APPOINTED, AND HE OFFERS PRAISE FOR THE LATE ALAN GREENSPAN. AGAIN, NO POLICY POSSIBILITIES. THAT WILL HAVE TO WAIT UNTIL MEMBERS GET A CHANCE TO QUESTION HIM. MIKE MCKEE, THANK YOU, BUDDY. LET'S GET TO THE BOND MARKET BOARD. [02:03:51] Speaker 5: THAT IS A DOWNSIDE SURPRISE ON CPI, AND THIS IS THE SOUND OF THE DOOR CLOSING ON A JULY RATE HIKE. TWO IS DOWN BY TEN BASIS POINTS, 418. REMOVING THE URGENCY TO HIKE ANYTIME SOON IN THE MINDS OF MANY, I'M SURE, IN THIS MARKET, THAT CAN CHANGE. TEN'S RIGHT NOW DOWN BY ABOUT EIGHT BASIS POINTS TO 4.55. TEN'S RIGHT NOW DOWN BY ABOUT EIGHT BASIS POINTS TO 4.55. TEN'S RIGHT NOW DOWN BY ABOUT EIGHT BASIS POINTS TO 4.55. TEN'S RIGHT NOW DOWN BY ABOUT EIGHT BASIS POINTS TO 4.55. TEN'S RIGHT NOW DOWN BY ABOUT EIGHT BASIS POINTS TO 4.55. TEN'S RIGHT NOW DOWN BY ABOUT EIGHT BASIS POINTS TO 4.55. TEN'S RIGHT NOW DOWN BY ABOUT EIGHT BASIS POINTS TO 4.55. TEN'S RIGHT NOW DOWN BY ABOUT EIGHT BASIS POINTS TO 4.55. TEN'S RIGHT NOW DOWN BY ABOUT EIGHT BASIS POINTS TO 4.55. TEN'S RIGHT NOW FROM GOVERNOR WALLER. IF WE GET ANOTHER HOT READING ON CORE INFLATION THIS WEEK, THEN THE FOMC WILL NEED TO CONSIDER TIGHTENING MONETARY POLICY IN THE NEAR TERM. BRAMO, WE'VE GOT A COOL READING ON CORE CPI JUST MOMENTS AGO. [02:04:41] Speaker 6: THAT CORE READING CAME IN SIGNIFICANTLY BELOW EXPECTATIONS, WHICH IS THE REASON WHY YOU'RE SEEING ESSENTIALLY WHAT WAS ONE OF THE BIGGEST MOVES THAT WE SEE IN THE TWO-YEAR GOING BACK TO SEPTEMBER OF LAST YEAR. THAT'S RETRACED SOME OF IT BUT DOWN MORE THAN 10 BASIS POINTS AT ONE POINT. PEOPLE POINTING TO THIS, AS YOU SAID, CLOSING THE DOOR TO A JULY MEETING AND POTENTIALLY IN GENERAL. WHAT I FIND INTERESTING IS THAT THE EQUITY MOVE IS AS SIGNIFICANT. I'M LOOKING FOR EXAMPLE AT THE SHARES OF GOLDMAN SACKS TAKING ANOTHER LIKE HIGHER ON THE HEELS OF THAT. HOW MUCH DOES THIS JUST ADD FUEL TO THE ENTHUSIASM THAT WE'RE SEEING IN SOME OF THESE EARNINGS THAT WE'VE GOTTEN THIS MORNING? [02:05:12] Speaker 5: LET'S START ON THE RAY DEBATE. IN THE NEAR TERM, THE URGENCY TO HIKE. WE HAD A SOFT PAY ROSS REPORT. I THINK IN THE NEAR TERM YOU REMOVE SOME OF THE URGENCY. BUT DOES IT SETTLE THE DEBATE? I DON'T THINK SO. NOT WITH CORE INFLATION STILL CLOSER TO THREE THAN IT IS TO TWO. ANXIETY THAT WE'VE BEEN ABOVE TARGET FOR FIVE YEARS. UNEMPLOYMENT CLOSE TO 4%. AND STICKY INFLATION AROUND THEMES LIKE AI IS GOING TO KEEP THESE GUYS ON THE BACK FOOT FOR THE TIME BEING. NOW WHEN THE CHAIRMAN IS GOING TO COME OUT AND SAY WE'VE GOT NO TOLERANCE FOR ABOVE TARGET INFLATION, LET'S WORK WITH THAT. WHAT DOES THAT MEAN IN PRACTICE? THAT'S WHAT WE NEED TO GET INTO TODAY. YOU'VE SAID THIS A FEW TIMES NOW AND I HEAR THIS FROM VARIOUS GUESTS AND I HEARD IT FROM MIKE MCKEY JUST MOMENTS AGO. WE'VE HEARD THIS REPEATEDLY FROM YOU. WHAT DO YOU INTEND TO DO ABOUT IT? WE UNDERSTAND NOW. WE'VE GOT THE PICTURE. I'VE HEARD THE MESSAGE LOUD AND CLEAR. WHAT ARE YOU GOING TO LEAD THE COMMITTEE TO DO TO COUNTER IT? [02:05:59] Speaker 6: IS IT GOING TO BE SOMETHING THAT CAN BE EXECUTED WITH RATES? IS IT GOING TO BE BALANCE SHEET? IS IT SOMETHING ELSE? AND DO YOU THINK THAT YOU CAN AFFORD TO WAIT FOR THE TASK FORCES TO BE DONE BEFORE YOU MAKE ANY OF THOSE DECISIONS? DO YOU THINK THAT THE FED CAN BE PUT ON HOLD WHILE DELIBERATIONS CONTINUE? AND IF NOT, DO YOU THINK THAT YOU ARE SUPPORTIVE OF YOUR POTENTIAL COLLEAGUES WHO ARE GIVING GUIDANCE AND ARE AFFECTING MARKET PRICING? AGAIN, THERE ARE SOME REALLY IMPORTANT QUESTIONS. AND IF HE DOESN'T ANSWER THEM, THAT WILL SPEAK AS LOUDLY AS IF HE DOES. [02:06:29] Speaker 5: BECAUSE REMOVING THE URGENCY TO HIKE AND SETTLING THE DEBATE TO HIKE ARE TWO DIFFERENT THINGS THIS MORNING. AND WITH TWO STILL AROUND 4:18, YES, WE'RE SEEING A 10 BASIS POINT MOVE LOWER. WE'RE TAKING BACK THE WALL OF SELLOFF IN SOME WAYS. YOU'RE REMOVING THE URGENCY. DO YOU SETTLE THE DEBATE THIS FAR, THIS HIGH, ABOVE THE POLICY RATE? FED FUNDS RIGHT NOW, 50 BASIS POINTS LOWER THAN WHERE TWO'S ARE. I DON'T THINK YOU'VE SETTLED THE DEBATE JUST YET. [02:06:49] Speaker 6: AND JUST TO BUILD ON THAT, OIL PRICES DID COME IN, WHICH WAS A BIG PART OF THE HEADLINE NUMBER DECLINING FOR THE FIRST DECLINE GOING BACK SIX YEARS. ON THE FLIP SIDE, OIL PRICES ARE INFLICTING HIGHER AGAIN. HOW DO YOU FACTOR THAT IN GIVEN THE FACT THAT THE PASS THROUGH IS SIGNIFICANT AND IT'S NOT JUST COMING IN THE FORM OF GASOLINE PRICES BUT ALSO DIOSEL PRICES, FOOD PRICES, PRETTY MUCH THE INPUTS FOR EVERYTHING THAT PEOPLE BUY. [02:07:11] Speaker 5: WE'VE TURNED DOWN THE HEAT ON THE STOVE, BUT THIS DEBATE IS STILL SIMMERING. MIKE MCKEE HAS A SECOND LOOK AT THIS INFLATION DATA. MIKE, WHAT DO YOU SEE? [02:07:17] Speaker 24: WELL, FOOD PRICES DID RISE 2/10 OF A PERCENT, BUT GASOLINE WIPED OUT ALL OF THOSE GAINS. GASOLINE DOWN 9.7%, MORE THAN ACCOUNTING FOR ALL OF THE DECLINE IN THE CPI THIS MONTH. NEW CARS WERE FLAT. APPAREL PRICES WERE DOWN 6/10 OF THE MONTH AND USED CAR PRICES WERE DOWN 2/10 OF A PERCENT. OWNER'S EQUIVALENT RENT UP JUST 2/10 OF A PERCENT AFTER A STRING OF READINGS ABOVE THAT LEVEL. AND AIRLINE FAIRS WERE UP ONLY 2/10 OF A PERCENT. REMEMBER, WE WERE WATCHING THEM RISE BECAUSE OF THE PRICE OF JET FUEL. SO A LOT OF THINGS DOWN IN PRICE THIS MONTH. BUT AS LISA JUST POINTED OUT, THE WAR BACK ON, SOME OF THOSE THINGS ARE GOING TO GO BACK UP AGAIN IN THE JULY READING. SO WHILE IT DOES PROBABLY ELIMINATE THE IDEA OF A JULY RATE INCREASE, IT DOESN'T TAKE IT OUT OF THE ROOM FOR THEM TO DISCUSS. [02:08:10] Speaker 5: MIKE, LOOKING FORWARD TO YOUR COVERAGE OF THE TESTIMONY LATER THIS MORNING. MIKE MCKEE BREAKING DOWN THE INFLATION DATA AND THE PREPARED TESTIMONY FROM THE FED CHAIR KEVIN WALSH. HE CONFRONTS THE HOUSE FINANCIAL SERVICES COMMITTEE AT 10:00 A.M. EASTERN TIME. I'M SURE IT WON'T BE THAT COMBATITIVE WITH THE CHAIRMAN FRENCH HILL A LITTLE BIT LATER THIS MORNING. AND THEN TOMORROW, IN FRONT OF THE SENATE BANKING COMMITTEE. TWO DAYS ON CAPITOL HILL. I DON'T ENVY THAT. CAN YOU IMAGINE THAT? TWO DAYS ON CAPITOL HILL, FRONT OF THE HOUSE, THEN THE SENATE TO TALK MONITORY POLICY AND ALL THESE CRAZY QUESTIONS ABOUT FINANCE IN THE BACKDROP RIGHT NOW. [02:08:40] Speaker 6: WHAT IS THE PRE-HEARING BREAKFAST? SERIOUSLY, BECAUSE YOU HAVE TO REALLY HAVE ENOUGH ENERGY TO GET THROUGH IT. GOT A CARB LOAD. DO TRAINING, YOU KNOW, SING "EYE OF THE STORM" IN THE BATHROOM WHILE BEATING YOUR CHEST. IS THAT WHAT YOU DO? NO COMMENT. "EYE OF THE STORM" IN THE SHOWER. [02:09:00] Speaker 5: THAT'S WHAT YOU DO IN THE MORNING. STRETCHES TO HYPE SOCKS, ROCKY. TIFFANY, NOT MORE OF THAT, WE TALK ABOUT THE DATA. WHAT IS YOUR REACTION TO CPI DROPPING JUST MOMENTS AGO? [02:09:15] Speaker 17: I THOUGHT YOU GUYS LAID OUT A VERY KEY LIST OF QUESTIONS THERE THAT CHAIRMAN WARSH AND THE FOMC COMMITTEE WILL HAVE TO ANSWER OVER THE COMING MONTHS AND QUARTERS. I THINK IN ADDITION TO THOSE QUESTIONS THAT YOU LAID OUT, YOU KNOW, ONE OF THE KEY ONES HAS BEEN THIS YEAR, WHAT IS REALLY DRIVING INFLATION? IS IT A, YOU KNOW, KIND OF A SEQUENCE OF SUPPLY SHOCKS AND ONE-TIME PRICE LEVEL ADJUSTMENTS, OR ARE WE GENUINELY SEEING SOME RESILIENT DEMAND THAT IS LIFTING INFLATION? AND I LAY OUT THAT QUESTION BECAUSE, YOU KNOW, IT'S REALLY KEY TO HOW MONETARY POLICYMAKERS SHOULD REACT TO WHAT WE'RE SEEING. IF IT IS INDEED JUST A SERIES OF SUPPLY SHOCKS, YOU KNOW, THEN THEY CAN AFFORD TO BE PATIENT. BUT IF IT'S NOT AND IT'S UNDERLYING DEMAND, YOU KNOW, THEN THAT'S WHEN YOU REALLY NEED TO OFFSET THAT WITH HIGHER INTEREST RATES. AND I THINK, YOU KNOW, THERE'S CERTAINLY EVIDENCE THAT SUPPLY RELATED FACTORS ARE CONTRIBUTING HERE. BUT THERE'S SOME AMBIGUOUSNESS AS WELL. AND I THINK WALLER SORT OF LAID OUT THE CASE YESTERDAY TO BASICALLY SAY THE LONGER THAT WE GET, YOU KNOW, A CONTINUED SEQUENCE OF ELEVATED INFLATION PRINTS, YOU KNOW, THE MORE THE CASE BUILDS THAT THIS IS REALLY DEMAND THAT'S KEEPING INFLATION ELEVATED AS WELL. YOU KNOW, SO I THINK THIS THIS DATA TODAY WILL BE A SIGH OF RELIEF FOR MANY FOMC MEMBERS. AS YOU GUYS SUGGESTED, IT WON'T CLOSE THE DOOR TO INTEREST RATE HIKES IN GENERAL. BUT IT BASICALLY IS NOW A NOT IN THE DIRECTION THAT, YOU KNOW, YES, WE DID GET SOME ONE-OFF TARIFF ADJUSTMENTS. CERTAINLY ENERGY PRICES ARE NOT BACK TO THE WAR-RELATED LEVELS YET. AND WE'RE GETTING THIS SORT OF AI-RELATED PRICE INCREASES AND INTECH COMPONENTS AND STUFF LIKE THAT. SO, YOU KNOW, I THINK THIS PRINT DOES SUGGEST THAT, YOU KNOW, THERE'S REASON TO BELIEVE THAT THAT COOLS DOWN IN THE SECOND HALF OF THE YEAR. YOU KNOW, BUT CLEARLY THE ONUS IS ON THE DATA. IT NEEDS TO COOL DOWN FOR THEM TO HOLD. YOU KNOW, AND THEY, YOU KNOW, I THINK WALLER AGAIN REALLY LAID OUT THE CASE THAT WE COULD NEED SOME MODEST ADJUSTMENTS HIGHER, YOU KNOW, IF INFLATION CONTINUES TO RISE. [02:11:16] Speaker 5: IT GIVES THEM THE TIME, IF THEY WANT IT, THE MUCH NEEDED TIME TO HAVE A LONGER CONVERSATION THROUGH THE SUMMER. TIFFANY, IT TAKES ME TO THIS QUOTE FROM KEVIN WALSH, THE FED SHARE, PREPARED TESTIMONY, AND HE SAYS THIS, THE MEMBERS OF OUR COMMITTEE HAVE NO TOLERANCE FOR PERSISTENTLY ELEVATED INFLATION AND WE SHARE A RESOLUTE COMMITMENT TO RESTORING PRICE STABILITY. SO, TIFFANY, WE HAVE SEEN PERSISTENTLY ABOVE TARGET INFLATION AND THEY HAVE TOLERATED IT FOR FIVE YEARS. WHEN HE SAYS WE SHARE A RESOLUTE COMMITMENT TO RESTORING PRICE STABILITY, WHAT IS YOUR BEST GUESS AS TO WHAT HE MEANS AND WHAT THEY INTEND TO DO ABOUT IT? [02:11:53] Speaker 17: I THINK HE IS CLEARLY SAYING THAT HE WANTS TO MAINTAIN THE FEDERAL RESERVE THAT THE MARKETS VIEW AS CREDIBLE. HE SAYS, YOU KNOW, IN THE LONGER RUN, IF YOU HAVE PRICE STABILITY, YOU KNOW, THAT'S GOOD FOR THE ECONOMY. HE WANTS TO MANAGE INFLATION EXPECTATIONS. HE WANTS TO MAKE SURE THAT THEY'RE ANCHORED BECAUSE ULTIMATELY THAT RESULTS IN AN EASIER JOB FOR THE FEDERAL RESERVE IF INFLATION EXPECTATIONS ARE ANCHORED, YOU KNOW, IN ORDER TO GET THAT PRICE STABILITY. SO HE IS CLEARLY SAYING THE RIGHT THINGS HERE IN TERMS OF KEEPING THOSE INFLATION EXPECTATIONS ANCHORED. YOU KNOW, I THINK THAT'S TRUE. YEAH, BUT AT SOME POINT, IF INFLATION DOES TURN OUT TO BE MORE OF A DEMAND-DRIVEN PHENOMENON, ABOVE TARGET INFLATION, IF YOU HAVE, YOU KNOW, SEVERAL MORE YEARS OF THAT, YOU KNOW, AGAIN, THE RISK IS THAT YOU HAVE INFLATION EXPECTATIONS THAT ARE STARTING TO DRFT HIGHER AND THE FED DOES INFLATION. I THINK THEY ARE -- AND I THINK CHAIRMAN WARSH IS BASICALLY SAYING WE'RE PREPARED TO ACT IF WE NEED TO, YOU KNOW, BUT AS OF RIGHT NOW, AT LEAST WITH TODAY'S PRINT, IT DOES BUY THEM A LITTLE BIT MORE TIME TO SEE A LITTLE BIT MORE DATA AND TO MAYBE CLEAR UP SOME OF THAT AMBIGUITY THAT WE'RE SEEING IN TERMS OF DEMAND OR SUPPLY RELATED FACTORS DRIVING INFLATION. [02:13:07] Speaker 6: TIFFANY, HOW LONG CAN JAWBONING WORK WITHOUT ACTION? IN OTHER WORDS, HOW LONG CAN THEY SIGNAL THAT THEY ARE WILLING TO ACT WITHOUT ACTING WITH INFLATION SQUARELY ABOVE THAT 2% TARGET? [02:13:19] Speaker 17: YEAH, WELL, I MEAN, I CERTAINLY THINK THAT, YOU KNOW, AT SOME POINT, IF THE DATA IS NOT -- IF INFLATION IS NOT GOING IN THEIR DIRECTION, ABSOLUTELY, THEY WILL NEED TO ACT. BUT AS OF RIGHT NOW, AT LEAST, YOU KNOW, IF YOU HAVE A SEQUENCE OF INFLATION PRINTS THAT ARE -- YOU KNOW, THAT ARE GIVING YOU MORE EVIDENCE THAT INFLATION IS HEADED BACK TO TARGET, YOU KNOW, THEN I THINK, AGAIN, THAT KIND OF BUYS YOU A LITTLE BIT MORE TIME. I MEAN, WE HAVE HAD JUST AN UNFORTUNATE SET OF, YOU KNOW, SORT OF EVENTS WITH THE INCREASE IN ENERGY PRICES, OF COURSE, TERRIF-RELATED INFLATION, YOU KNOW, INFLATION THAT WAS COMING ON THE BACK OF THE PANDEMIC, YOU KNOW, WHICH WAS BOTH SUPPLY AND DEMAND-RELATED FACTORS. YOU KNOW, ALL OF THAT HAS JUST KEPT INFLATION ABOVE TARGET. WE THINK THE FEDERAL RESERVE HAS DONE A VERY GOOD JOB, YOU KNOW, AT CERTAINLY AT BRINGING IT BACK DOWN. YOU KNOW, AND, OF COURSE, AS WE LOOK FORWARD, WE EXPECT THEM TO CONTINUE TO DO THAT AND WORK TO MODERATE INFLATION. [02:14:17] Speaker 5: TIFFANY, IT'S GOOD TO SEE YOU. ALWAYS IS. TIFFANY WILDING, GETTING UP EARLY ON THE WEST COAST TO LOOK AT THIS DATA. [02:14:25] Speaker 6: I DON'T KNOW HOW THEY DO IT OVER AT PIMCO. I MEAN, WAKING UP AT WHAT, 4? [02:14:27] Speaker 5: OVER IN NEWPORT. [02:14:28] Speaker 6: CAN YOU IMAGINE WAKING UP AT 4? [02:14:29] Speaker 5: I DO THAT EVERY MORNING. I'M KIDDING AT 3. BUT THEY'VE GOT TO BE IN THE OFFICE AT LIKE 3. CRAZY. LET'S GET BACK TO THAT DATA. CPI, MONTH OVER MONTH COMING IN AT ZERO. THE ESTIMATE IN OUR SURVEY WAS POSITIVE 0.2. YEAR OVER YEAR, WE GO TO 2.6, DOWN FROM 2.9. THE ESTIMATE WAS 2.8. THAT'S A MATERIAL IMPROVEMENT THERE. OF COURSE, WHEN YOU LOOK AT HEADLINE IN AT NEGATIVE 0.4, THE ESTIMATE EXPECTATION WAS NEGATIVE 0.1. MONTH OVER MONTH, I'M TALKING ABOUT HERE. YEAR OVER YEAR, HEADLINE INFLATION COMES IN AT 3.5. AGAINST THEN SOMEBODY AT 3.8. CERTAINLY, IT'S BETTER THAN 4.2. AND FAR BETTER THAN 3.8. THERE'S SOME ENERGY NOISE IN THIS. AND ENERGY, OF COURSE, THIS MORNING IS BOUNCING BACK. SO THIS CAN BE NOISY AGAIN IN THE NEXT MONTH OR SO. THE CONCLUSION, THOUGH, THE EARLY CONCLUSION ON WALL STREET, IS THIS WILL REMOVE AGAINST SOME URGENCY TO HIGH INTEREST RATES, BUT IT WON'T COMPLETELY SETTLE THE DEBATE WITH INFLATION STILL ABOVE TARGET, WHERE IT HAS BEEN FOR MUCH OF THE LAST FIVE YEARS OR SO. WHAT DO YOU SEE IN THE MARKET? FRONT END OF THE CURVE, A RALLY. TWO IS DOWN 10. DOWN 10 BASIS POINTS AT THE FRONT END OF THE CURVE. GOT THAT. ONCE YOU SEE THAT IN THE BOND MARKET, YOU CAN GUESS THE EQUITY MARKET REACTION. EQUITY FUTURES UP ACROSS THE BOARD. THE S&P UP BY A THIRD. OUTPERFORMANCE ON RUSSELL. NASDAQ FUTURES DOING NICELY. THE RUSSELL THIS MORNING UP BY ONE PERCENTAGE POINT. CHAIRMAN WALSH IS THE NEXT RISK EVENT ON THE HORIZON. HE IS SAYING THE COMMITTEE WON'T TOLERATE PERSISTENTLY ABOVE TARGET INFLATION. BUT INFLATION HAS BEEN ABOVE TARGET PERSISTENTLY NOW FOR FIVE YEARS. WHEN THEY TALK ABOUT DOING SOMETHING ABOUT IT, HOW CREDIBLE IS THAT OR IS THAT JUST A COMMUNICATION EXERCISE? WHAT I JUST HEARD FROM TIFFANY WAS ESSENTIALLY THE LATTER. THAT IT IS JUST A COMMUNICATION EXERCISE AT THIS POINT. [02:16:07] Speaker 6: THAT IS THE SPECULATION ON WALL STREET RIGHT NOW. AND THAT IS THE REASON WHY YOU ARE SEEING THE REACTION IN MARKETS. THIS WILL BE A GOOD EXCUSE FOR THEM TO HOLD OFF. THE BIAS IS STILL TO NOT HIKE RATES IF THEY CAN. NOT NECESSARILY TO USE ANY DATA POINT AS AN EXCUSE TO HIKE. THAT IS A DIFFERENCE BETWEEN AN EASING BIAS OR A HIKING BIAS. AND IT IS STILL UNDERNEATH THIS FEDERAL RESERVE THERE IS ULTIMATELY MORE OF AN EASING BIAS THAN A HIKING BIAS. I DON'T KNOW IF THAT IS THE CASE. I DON'T KNOW IF WE ARE GOING TO HEAR ANYTHING FROM CHAIR WARSCH. ULTIMATELY, IF HE DOESN'T SAY ANYTHING, IS THAT GOING TO FEED THE CREDIBILITY ARGUMENT OR NOT? ULTIMATELY, WE WILL BE PLAYING THE TEST OF WHO IS KEVIN ORCH. [02:16:44] Speaker 5: SOMEONE ELSE WILL DO THE COMMUNICATION FOR HIM. THE FED SHARE IS ONE HOUR AND 15 MINUTES AWAY. LET'S GET YOU AN UPDATE ON NEWS WORLDWIDE WITH YOUR BLOOMBERG [02:16:57] Speaker 9: BRIEF. VONNIE QUINN HAS MORE. LET'S RECAP THE INFLATION DATA WE JUST GOT MOMENTS AGO. JUNE CPI FALLING 0.4% FROM A MONTH AGO. IT IS THE FIRST NEGATIVE FRONT SINCE 2020 AND LIKELY TAKES SOME PRESSURE OFF THE FED TO RAISE INTEREST RATES IN JULY. IN HIS OPENING STATEMENT PUBLISHED MOMENTS AGO, THE FOMC HAS NO TOLERANCE FOR PERSISTENTLY ELEVATED INFLATION AND REMAINS COMMITTED TO RESTORING PRICE STABILITY. SOUTH CARLINAS GOVERNOR APPOINTING THE SISTER OF THE LATE U.S. SENATOR, LINDSEY GRAHAM, TO SERVE OUT THE REMAINDER OF HIS TERM THROUGH JANUARY. HER APPOINTMENT COMES AS REPUBLICANS PREPARE FOR AN AUGUST PRIMARY TO CHOOSE THE PARTY'S CANDIDATE FOR A FULL SIX-YEAR TERM. [02:17:43] Speaker 5: THAT IS YOUR BLOOMBERG BRIEF. GOOD MORNING. UP NEXT ON THE PROGRAM, WE'LL SET YOU UP FOR THE DAY AHEAD. [02:17:54] Speaker ?: WE'LL CATCH UP WITH DAVID KELLY OF J.P. [02:17:57] Speaker 17: NEXT ON THE PROGRAM. IT'S REALLY KEY TO HOW MONETARY POLICYMAKERS SHOULD REACT TO WHAT WE'RE SEEING. IF IT IS INDEED JUST A SERIES OF SUPPLY SHOCKS, THEN THEY CAN AFFORD TO BE PATIENT. IF IT'S NOT AND IT'S UNDERLYING DEMAND, THEN THAT'S WHEN YOU REALLY NEED TO OFFSET THAT WITH HIGHER INTEREST RATES. [02:18:19] Speaker 5: CAN WE JUST SAY THANKS TO ROBIN VINCE OVER AT BNY TO TED PICK OVER AT MORGAN STANLEY FOR CHOOSING TOMORROW TO REPORT EARNINGS AND NOT TODAY WITH EVERYBODY ELSE. [02:18:29] Speaker 6: WE CAN TAKE A BREATH, DRINK OUR COFFEE, LOOK AT THEIR EARNINGS. [02:18:33] Speaker 5: THANK YOU. WHAT A MORNING. WE'VE HAD FIVE BANKS REPORTING EARNINGS ALREADY THIS MORNING. WE'VE HAD CPI. ON THE BANK SIDE OF THINGS, THE TEST, SUPER SKY HIGH EXPECTATIONS, SOME BEATS HERE AND THERE, INSUFFICIENT TO GENERATE A BIG RALLY. THEN WE'VE GOT SOME BETTER NEWS. CPI JUST BELOW EXPECTATIONS, SIGNIFICANTLY BELOW BY SOME MEASURE, UNLOCKING THESE GAINS. INVESTORS ARE HIGHER BY A QUARTER OF ONE PERCENT ON THE S&P. THE NASDAQ UP BY ONE FULL PERCENTAGE POINT. [02:19:03] Speaker 6: THE BOND MARKET YIELDS DROPPING AT THE FRONT END OF THE CURVE. WE'RE DOWN 10 ON TWOS. TAKING A JULY RATE HIKE OFF THE TABLE, THE QUESTION IS HOW MUCH ARE WE GOING TO SEE KEVIN WORSH TAKE A RATE HIKE OFF THE TABLE FOR THE REST OF THE YEAR? ULTIMATELY, IT'S GOING TO BE REALLY HOW DO YOU EXECUTE PRICE [02:19:18] Speaker 5: STABILITY AT A TIME WHERE WE HAVEN'T GOTTEN THAT FOR MORE THAN FIVE YEARS. INVESTORS LOOKING AHEAD TO FED SHARE. DAVID KELLY OF J.P.MORGAN ASSET MANAGEMENT JOINS US NOW FOR MORE. DAVID, WELCOME, SIR. ALWAYS GOOD TO HEAR FROM YOU. YOUR REFLECTIONS ON WHAT WE SAW IN THE DATA MOMENTS AGO AND WHAT YOU ANTICIPATE TO HEAR FROM THE FED SHARE LATER THIS MORNING, PLEASE. [02:19:36] Speaker 25: FIRST OF ALL, THE NEWS IN INFLATION IS GOOD. IT WAS BETTER THAN EXPECTED. USUALLY IF THAT HAPPENS, IT'S BECAUSE OF SOME SPECIAL FACTORS. IF YOU DIG INTO THE DATA, WE SAW A DECLINE IN AIRLINE FAIRS. WE SAW A 1% DECLINE IN ELECTRICITY PRICES. THAT BOUNCES AROUND A LOT MONTH TO MONTH. WE SAW A 2% DECLINE IN AUTO INSURANCE. REMEMBER, THAT ONE WAS CAUSING A HUGE PROBLEM A FEW YEARS AGO. WE SAW A BIG DECLINE IN TOBACCO PRICES. THESE ARE SPECIAL FACTORS, WHICH IS CAUSING THE DECLINE IN INFLATION THAT WE'VE EXPECTED ALL ALONG TO OCCUR A LITTLE FASTER THAN WE THOUGHT. BUT OVERALL, WE DON'T HAVE AN UNDERLYING INFLATION PROBLEM, AT LEAST NOT ONE THAT MONETARY POLICY CAN SOLVE. THIS IS THE INFLATION CAUSED BY THE TARIFFS, BY THE OIL SHOCK, BY THE FACT THAT SHELTER COSTS JUST DON'T KEEP UP WITH THE REAL WORLD. AND IT IS GRADUALLY FIXING ITSELF. SO, I THINK INFLATION IS ON THE RIGHT TRACK HERE. IT'S COMING DOWN. I THINK IT WILL BE JUST A LITTLE OVER 3% BY DECEMBER. I THINK IT WILL BE DOWN 2% YEAR-OVER-YEAR BY NEXT MAY. I DON'T THINK THE FED SHOULD DO ANYTHING. WE'LL HAVE TO SEE WHAT CHAIRMAN WARSH SAYS. I THINK HE'LL TALK TOUGH. BUT, ULTIMATELY, I DON'T THINK THE FED DOES ANYTHING THIS YEAR. [02:20:44] Speaker 6: DAVID, A LOT OF PEOPLE HAVE COME ON THE SHOW, INCLUDING BILL DUDLEY, FORMALLY OF THE NEW YORK FED, AND TALKED ABOUT HOW HE SEES A LOT OF PLACES WHERE INFLATION SEEMS TO BE PICKING UP, BUT NOT ONLY TIED TO AI SPENDING AND ALL OF THE ISSUES YOU MENTIONED, LIKE TARIFFS AND OIL PRICES, BUT CONSUMERS ARE SPENDING IN THE UPPER END OF THE K IS DOING VERY WELL. DELTA IS SAYING THEY'RE GOING TO RAISE PRICES MORE IF OIL PRICES GO BACK UP. WHERE DO YOU SEE THE PROGRESS BEING MADE SO SIGNIFICANTLY? [02:21:08] Speaker 25: WELL, I THINK WHAT WE'RE NOT SEEING IS A LIFTOFF IN THE SPENDING OF LOWER AND MIDDLE INCOME CONSUMERS. YES, THE UPPER END OF THE K IS DOING WELL. I SUPPOSE THAT'S GOING TO PUSH UP THE COST OF EXPENSIVE RESTAURANTS AND SO FORTH. BUT WE'RE NOT REALLY SEEING THAT MUCH IN AIRLINE FAIRS, BECAUSE IT IS A VERY COMPETITIVE INDUSTRY. AND MORE THAN THAT, I THINK THE BIG THING THAT WE'RE NOT TALKING ABOUT IS THE DEMOGRAPHIC DRAG HERE. A POPULATION GROWTH IN THE UNITED STATES, AT LEAST A POPULATION OF ADULTS, HAS ESSENTIALLY SLOWED TO A HALT BECAUSE OF WHAT'S HAPPENED WITH IMMIGRATION. NOW, THE RESULT OF THAT IS WE'RE NOW AT AN EIGHT-YEAR HIGH ON RENTAL VACANCY RATES. WE'VE GOT AN EXTREMELY HIGH NUMBER ON UNSOLD NEW HOMES. THAT IS DAMPENING DOWN THE COST OF HOUSING. IT'S DAMPENING DOWN DEMOGRAPHIC DEMAND FOR A LOT OF BASIC GOODS AND SERVICES. SO I THINK A LOT OF THE BASICS ARE NOT SEEING A LOT OF INFLATION. I UNDERSTAND PEOPLE THINK THE PRICES ARE HIGH. OF COURSE THEY'RE HIGH. BUT THE RATE OF INCREASE IN PRICES IS LOW BECAUSE, FRANKLY, YOU'RE NOT SEEING LOWER MIDDLE-INCOME HOUSHOLDS HAVE GAINS IN REAL INCOME THAT WOULD ALLOW THEM TO SPEND MORE IN THESE AREAS. SO I'M NOT SEEING IT BROADLY. I'M SEEING IT TO THE UPPER END, BUT NOT BROADLY. [02:22:12] Speaker 7: DAVID, WHAT DO YOU MAKE, THEN, OF GOVERNOR WALLER SAYING NO MATTER HOW YOU CUT IT OR WHAT MEASURE YOU WANT TO USE, INFLATION IS UP THIS YEAR. AT SOME POINT, THOUGH, THEY NEED TO ADDRESS THAT, THE FACT THAT IT IS UP AND IT HAS BEEN UP FOR FIVE, SIX YEARS. [02:22:23] Speaker 25: I THINK THAT CENTRAL BANKERS THINK THAT MONETARY POLICY HAS GOT MUCH MORE TO DO THAN IT ACTUALLY DOES. LOOK, WE GOT INFLATION IN 2022 BECAUSE OF THE PANDEMIC, THE POLICY RESPONSE IN UKRAINE. WE GOT INFLATION IN 2026 BECAUSE OF TARIFFS, THE IRAN WAR, AND, YOU KNOW, SOME LEGACY OF THESE HIGH SHELTER COSTS. BUT IT'S NOT CAUSED BY AN INCREASE IN THE QUANTITY OF MONEY. IT'S NOT REALLY BEING CAUSED BY INTEREST RATES BEING TOO HIGH OR TOO LOW. THAT'S NOT WHAT'S CAUSING IT. AND, YOU KNOW, THE ECONOMY WILL HEAL ITSELF. INFLATION WILL HEAL ITSELF AT A MEASURED PACE IF THE REST OF WASHINGTON JUST LEAVES IT ALONE. AND, YOU KNOW, FOR MY MIND, INTEREST RATES ARE ABOUT A REASONABLE PLACE. THE FEDERAL RESERVE SHOULD NOT MESS AROUND WITH THEM AND DON'T PRETEND THEY'RE THE ONES THAT ARE GOVERNING THE INFLATION RATE BECAUSE THEY'RE NOT. [02:23:07] Speaker 5: DAVID, IT'S GOOD TO SEE YOU. AS ALWAYS, IT'S BEEN YOUR MESSAGE FOR QUITE SOME TIME. THEY NEED TO STAY OUT THE WAY. DAVID KELLY OF J.P. MORGAN ASSET MANAGEMENT. STAY OUT THE WAY ACROSS SEVERAL DIMENSIONS, INCLUDING MAYBE THE MIDDLE EAST, BECAUSE RIGHT NOW, CRUDE IS BOUNCING BACK. AND THESE NUMBERS WE'RE COMFORTABLE WITH THIS MORNING COULD CHANGE IN A MONTH'S TIME. [02:23:24] Speaker 6: YEAH, BECAUSE A LOT OF THESE INPUTS REALLY ARE DIRECTLY CONNECTED TO THE PRICE OF OIL. NOT JUST OIL BUT ALSO THE DISTELLATES BECAUSE THAT IS THE REFINERIES THAT HAVEN'T NECESSARILY COME BACK ONLINE. THIS IS GOING TO BE THE KEY QUESTION. DO YOU SEE THIS NATURAL PROCESS THAT CAN BRING US DOWN TO 2% STILL IN EFFECT OR HAVE THERE BEEN ENOUGH ONE-OFFS TO SHAKE THE CONFIDENCE NOT ONLY OF THE FEDERAL RESERVE BUT ALSO OF MARKETS THAT MAYBE ARE ADJUSTING THEIR INFLATION EXPECTATIONS TO THE EXPECTATION FOR RATE HIKES, NOT FOR REMAINING ON HOLD. [02:23:52] Speaker 5: THIS IS GOING TO BE HAPPENING. ONE MORE RISK EVENT TO GO, TWO DOWN. BANK EARNINGS BEHIND US FOR THIS MORNING AT LEAST. CPI BETTER THAN EXPECTED. KEVIN WALSH, FED SHARE, AN HOUR AWAY. COMING UP TOMORROW, STEVE CHEVRON, ED YARDENY OF YARDENY RESEARCH, THE BNY CFO, DERMOT MCDONNAH AND THE FORMER U.S. COMMERCE SECRETARY GINA RAMONDO FROM NEW YORK CITY THIS MORNING. GOOD MORNING, WHAT A MORNING. THANKS FOR JOINING US.