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00:00I AM JOHN HOLLAND, THIS IS BLOOMBERG. > > WELCOME TO BLOOMBERG MARKETS. > > LET'S GET A QUICK CHECK ON THE MARKETS, A VERY CONFUSING DAY. IT FELT LIKE WE ARE IN A SEVERE RISK OFF SESSION AS WE STARTED TRADING EARLIER THIS MORNING AND NOW WE ARE IN DEPOSIT TERRITORIES. YOU HAVE THE PMI BETTER THAN EXPECTED -- ESTIMATED. THEN YOU HAVE HIM TALKING ABOUT THE HAWKISH HIKE. YOU ARC THAT INFLATION COMING IN THE 4 HANDLE, WELL BELOW WHAT WE SAW IN JANUARY. THAT HELPED REVERSE SOME OF THE LOSSES WE SAW IN STOCKS. NEVER THE LESS WE SEE BID INTO SAFETY. THE DOLLAR INDEX UP BY .4%, YOU STILL SEE MONEY MOVE IN THERE AND THE RISK OFF WHEN IT COMES TO COMMODITIES. GOLD STABILIZING THE OIL CONTINUES TO ROLLOVER. JON: THAT IS HELPFUL CONTEXT. THE BANK STOCKS SPECIFICALLY IS WHERE I WANT TO KEY IN. WE SAW SOME OF THE REGIONAL NAMES COME UP THE WORST LEVELS OF THE SESSION IS ONE OF THE BROADER CONSIDERATIONS FOR WHERE THE EQUITY MARKETS ARE RIGHT NOW. WE ARE LOOKING AT A DECLINE OF 1% OR FIRST REPUBLIC -- FOR FIRST REPUBLIC. AT THE END OF THE DAY WE WILL SEE THE THIRD WEEK OF DOUBLE-DIGIT PERCENTAGE DECLINES WITH THAT NAME, THAT HAS LOST ABOUT $20 BILLION IN ITS VALUE. WE ARE WATCHING THE REALITY OF HIGHER INTEREST RATES, BLOOMBERG REPORTING JOB CUTS, AND A VARIETY OF AREAS OF DNA AND WEALTH MANAGEMENT, RIGHT NOW THAT STOCK IN THE GREEN -- B OF A, WEALTH MANAGEMENT AND RIGHT NOW THE STOCK IS IN THE GREEN. DEUTSCHE BANK DOWN 3% AT THIS HOUR. > > BX K LOOKING AT THE LOWEST LEVEL SINCE MARCH OF 2020. WE HAVE RENEWED BANK JITTERS. WE HAVE ALLISON OF BLOOMBERG INTELLIGENCE. I'M TRYING TO UNDERSTAND IF THIS IS STILL LIQUIDITY, SOLVENCY, CONFIDENCE, PROFIT ABILITY? WHERE ARE WE IN THAT LIST WHEN IT COMES TO BANKS? GUEST: I THINK WE ARE STILL IN THE CONFIDENCE ZONE. IT IS MORE ABOUT SENTIMENT THAN ANYTHING ELSE. INVESTORS ARE INCREASINGLY MOVING ONTO THE NEXT STAGE. WE HAVE EVERY LIQUIDITY FRONT, IF YOU WILL, THE LIQUIDITY CONCERNS THE NEXT STEP IS CREDIT CONCERNS IN THE CREDIT CRUNCH. INCREASINGLY INVESTORS ARE FOCUSING ON COMMERCIAL REAL ESTATE. THIS IS SOMETHING THAT IS NOT A NEW CONCERN. SOMETHING WE HAVE BEEN WATCHING SINCE THE PANDEMIC ESPECIALLY IN OFFICE PROPERTIES. I WOULD POINT TO SOMEONE LIKE WELLS FARGO AMONG THE BIG BANKS THAT I COVER. THEY HAVE SIZABLE EXPOSURE. IN 2021 WHEN BANKS WERE TAKING RESERVES DOWN WELLS FARGO KEPT THE RESERVES CONSERVATIVE KNOWING IT WOULD TAKE A SIGNIFICANT TIME TO PLAY OUT AND THERE IS A LOT OF UNCERTAINTY. WE SEE WEAKNESS IN CERTAIN INDICES. THIS IS TRANSLATING TO THE STOCKS, AND THAT IS WHAT WE ARE HEARING FROM INVESTORS WHERE THE CONCERNS ARE FOCUSED. JON: 20 BACK ON THE IDEA, IT -- TO ZERO BACK ON THE IDEA, IS A MARKET ACTING IRRATIONALLY? ARE THERE OPPORTUNITIES WHERE BANKING VALUATIONS HAVE BEEN DEPRESSED? YOU ARE SAYING YOU HAVE TO LOOK AT THE OTHER LEGS OF THE STOOL, ONE POTENTIALLY THE COMMERCIAL WILL STATE IT -- REAL ESTATE MARKET. GUEST: THE CONVENTION IN FINANCIALS, IS YOU HAVE TO BUY INTO THE FEAR AND SELL INTO THE GREED. I GUESS THAT IS TRUE IN ALL STOCKS. HOWEVER WITHIN FINANCIALS, DEFINITELY ONCE RISK IS OVERPRICED IN THAT IS WHEN INVESTORS GET INTERESTED. I AM WALKING YOU THREE THE PROCESS, WHICH -- THROUGH A THOUGHT PROCESS. YOU BROUGHT UP DEUTSCHE BANK SPECIFICALLY, THERE IS NOTHING SPECIFIC TO THE STORY THERE. I THINK FOLLOWING THE CONCERNS OVER CREDIT SUISSE PEOPLE ARE LOOKING FOR THE NEXT ONE. THAT FOR EXAMPLE IS A BANK THAT STARTED RESTRUCTURING A LOT SOONER. LIKELY HAS MANAGED TO DOWN SOME OF THE RISK. CIRCLING BACK BROADLY TO THE BROAD COMMENT, IN GENERAL, PEOPLE ARE FEARFUL. IT IS A GOOD TIME TO BUY FINANCIALS BUT I WOULD ALSO CAUTION THAT FINANCIALS ANOTHER SECTOR THAT RESPONDS WELL INTO A RECESSION. INVESTORS WHIMSY LIGHT AT THE END OF THE TUNNEL. ONE LAST -- WANT TO SEE THE LIGHT AT THE END OF THE TUNNEL. ONE LAST, EVEN THOUGH LIQUIDITY CONCERNS ARE FOCUSED ON A FEW BANKS, WE ARE NOT SURE HOW BROAD-BASED THEY ARE. THERE IS AN EARNINGS HEADWIND. FROM INTEREST RATES, FROM BANKS HOLDING EXTRA LIQUIDITY, WITH INTEREST MARGINS AND BACK TO THE CREDIT COSTS AND WHAT WE GET WITH COMMERCIAL REAL ESTATE. JON: ALLISON WILLIAMS OF BLOOMBERG INTELLIGENCE, LET'S STAY ON THEIR EARNINGS REALITY. OUR NEXT GUEST IS WATCHING THAT CLOSELY WITHIN THE FINANCIALS. SENIOR U.S. EQUITY STRATEGIST AT UBS WEALTH MANAGEMENT. ONE OF THE REASONS YOU HAVE BEEN CAUTIOUS ON THIS AREA IS WE HAVE TO BE WATCHING WHAT THE EARNINGS PICTURE LOOKS LIKE EVENTUALLY WITH THE INITIALS. GUEST: ABSOLUTELY, WE HAVE BEEN PREFERRED ON FINANCIALS SINCE DECEMBER. WHILE THERE MIGHT BE SOME LONGER-TERM OPPORTUNITIES IN THE HIGHER QUALITY LARGE-CAP MONEY SECTORS, THAT HAVE MORE STICKY DEPOSIT BASED THIS WE ARE -- WE ARE CAUTIOUS FOR THE BROADER SECTOR IN THINK EARNINGS WILL BE AT RISK. WE HAVE POINTED OUT THAT LENDING STANDARDS WERE TIGHTENING, AND IT IS IN LINE WITH LEVELS YOU SEE IN A RECESSION. THEY WILL TIGHTEN FURTHER AND THAT HAS IMPLICATIONS FOR LONG TERM GROWTH. WE EXPECT REGULATIONS ARE LIKELY TO TIGHTEN. THAT WILL HAVE AN IMPACT ON CAPITAL RETURNS. WHAT THIS REMINDS US TO, HIGHER LENDING COST, HIGHER COST OF CAPITAL, TIRE LENDING STANDARDS AND -- TIGHTER LENDING STANDARDS AND A CONSTRAINT TO SHAREHOLDERS. > > THE REVERSE OF THAT IS LOWER YIELDS IN THE BOND MARKET AND THEN A RESURGENCE OF TECH. I APPRECIATE TODAY MY ABOUT -- MAY NOT BE THE BEST EXAMPLE. DO YOU BY THE THROUGH LINE? GUEST: WE DO NOT. WE HAVE BEEN CAUTIOUS ON TECH. AS YOU POINTED OUT TECH RECENTLY HAS BEEN BENEFITING FROM THE FALLING YIELD AND THE FLIGHT TO QUALITY, HIGH QUALITY COMPANIES. WHAT THAT HAS DONE, IS EVALUATION FOR THE SECTOR COME AS A SECTOR THAT IS TRADING AT A PREMIUM OF OVER 35%. MUCH HIGHER THAN THE HISTORICAL 10% PREMIUM. ONE THE REASONS WE BE CAUTIOUS ON THE SECTOR IS THE CONCERN ABOUT WEAKNESS IN I.T. AND OVERALL FUNDAMENTAL RISK. WE HAVE SEEN A ROLLING CORRECTION IN SEMIS FOR QUITE SOME TIME NOW. INCLUDING ANALOG, WE'VE ALSO SEEN IN SMARTPHONE, AND IN CLOUD SOFTENING. IT IS INTERESTING TO SEE SEMIS HAVE LED THIS RALLY, THIS IS A MORE CYCLICAL AREA OF TECH. THAT GIVES US SOME PAUSE. WITHIN TECH YOU WANT TO CONTINUE TO AVOID THOSE UNPROFITABLE TECH COMPANIES AND FOCUS ON HIGH-QUALITY COMPANIES THAT HAVE EXPOSURE TO ENTERPRISE SPENDING, THAT HAVE KEY TECHNOLOGIES I'M TALKING ABOUT, AI, CLOUT, CYBERSECURITY AND DIGITAL DATA. > > THAT IS THE VIEW ON TECH COMING TALK ABOUT WATCHING THE MONEY FLOWS IN THE BANK AS MARK WAS SAYING TO ALEX TODAY. THE LIKELIHOOD OF MORE MONEY SHIFTING TOWARDS THE MONEY CENTER BANKS. IN TERMS OF AREAS THAT ARE ATTRACTIVE TO YOU RIGHT NOW, IT WOULD SEEM YOU ARE PLAYING SOME DEFENSE. GUEST: WE ARE PLAYING DEFENSE. WE DO THINK THAT PERIOD OF SUB TREND ECONOMIC GROWTH, THE PROBABILITY OF IT HAPPENING HAS INCREASED IN RECENT WEEKS. WE DIFFER -- REFER TO SENSITIVE -- DEFENSIVE SECTORS LIKE CONSUMER STABILITY. WE DO NOT WANT TO BE TOO DEFENSIVE. WE RECOGNIZE THERE IS STILL STRENGTHEN THE ECONOMY. WE COUPLE THAT WITH A MORE CYCLICAL TILTS TOWARDS A SECTOR WITH SECULAR GROWTH AS WELL. INDUSTRIALS THAT WILL BENEFIT FROM A PICKUP IN INFRASTRUCTURE SPENDING. OVERALL AT THE END THE DAY THIS IS A MARKET OF STOCKS YOU WANT TO FOCUS ON THE HIGH-QUALITY STOCKS WITH A STRONG BALANCE SHEETS THAT DO NOT HAVE FUNDING NEEDS. SELF-FUNDED WITH GOOD FREE CASH FLOW GENERATION. > > GREAT TO SEE YOU, HAPPY WEEKEND, NADIA OF UBS GLOBAL WEALTH MANAGEMENT. COMING UP BLOOMBERG'S DAVID WESTIN, -- THIS IS BLOOMBERG. > > THIS IS "BLOOMBERG MARKETS." TIME FOR THE STOCK OF THE HOUR, THE COMPANY WILL LOOK AT IS FORD, THEY SAY THE ELECTRIC AVENUE SERIES PICKUP FACTORY WILL PRODUCE HALF A MILLION TRUCKS PER YEAR. HE SPOKE WITH WESTON EARLIER TODAY. > > WE ARE NOT COME TO SPEND ALL OF THIS MONEY TO LOSE MONEY. THIS IS A PROFITABLE ENTERPRISE. WE THINK WILL BE ABLE TO MAKE MONEY A COUPLE YEARS. FASTER THAN TESLA DID. THERE IS AN INVESTMENT WE HAVE TO BUILD THE PLANS, ENGINEER THE VEHICLES THAT IS WHY WE ARE USING A LOT OF MONEY. WE HAVE TO DO A COUPLE OF THINGS. . . WE HAVE TO SCALE IT HELPS COSTS. WE HAVE TO HELP -- DESIGN A VEHICLE FOR A SMALLEY -- SMALLER BATTERY DISSIPATION. THIS PLANT FOR THE SAME SIZE IS 30% SMALLER. THAT AND WHAT HAPPENS INSIDE THE PLANT WILL HELP US MAKE MONEY. ALL OF THOSE THINGS ARE REQUIRED TO MAKE MONEY BECAUSE THE BATTERY IS VERY EXPENSIVE. DAVID: YOU SAID SCALE. -- YOUR SCALE IS IMPORTANT TO YOUR PLANS. YOU HAVE AND A PERCENT POSITIVE -- 8% POSITIVE I-20 26. > > -- BY 2026. > > THE COMPANY IS GOING TO GROW BY MORE THAN 30%, THAT SCALING IS REALLY IMPORTANT. 2 MILLION UNITS, NO ONE IS EVER DONE THAT IN NORTH AMERICA, ESPECIALLY. WE ARE ALREADY NUMBER TWO, THE VEHICLES ARE BEST SELLERS IN THEIR SEGMENT. TRUCK AND VAN, THE TRANSIT, WE ARE VERY OPTIMISTIC WE CAN GET THAT PROFITABILITY AND SCALE. THE BIGGEST THING ON SCALING IS BATTERIES. DAVID: YOU MENTIONED TESLA. AND THE TRACK RECORD OF TESLA. BY ALL ACCOUNTS, THEY HAVE AN OPERATING MARGIN OF 17%. IF YOU GET TO 8%, THERE IS A GAP BETWEEN THAT AND 17. > > WE THINK WE CAN DO BETTER THAN A PERCENT ON A --8% ON A PICKUP TRUCK. THE REALITY IS TESLA HAS NOT HAD MUCH COMPETITION. THE PRICE WILL COME DOWN. YEAR-OVER-YEAR TESLA PRICE HAS COME DOWN $7,000, THEY WILL NOT. KEEP THAT PRICING FOREVER. NOW THEY HAVE COMPETITION FROM FORD. WE ARE COUNTING ON A VERY COMPETITIVE PRICING ENVIRONMENT. WE HAVE BEEN IN THIS BUSINESS FOR 120 YEARS. WHEN A NEW MARKET THESE HAPPENS THE PRICING COMES DOWN. EVEN WITH THAT PRICING WE EXPECT TO MAKE THAT 8% + MARGIN. JON: FORD CEO JIM, SPEAKING WITH BLOOMBERG'S DAVID WESTIN. COMING UP PRESIDENT BIDEN PREPARING TO ADDRESS THE CANADIAN PARLIAMENT AFTER A MEETING WITH JUSTIN TRUDEAU. WE WILL FIND OUT WHAT THE TWO LEADERS AIM TO ACCOMPLISH. JON: THIS IS "BLOOMBERG MARKETS ." I AM JOHN WITH ALIX STEEL, AS IN BIDEN IS EXCITED TO ADDRESS THE CANADIAN PARLIAMENT AT THE TOP OF THE HOUR. HE MET WITH CANADIAN PRIME MINISTER JUSTIN TRUDEAU ON A VARIETY OF TOPICS. THE TWO LEADERS WILL HOLD A JOINT NEWS CONFERENCE LATER TODAY. JOINING US NOW IS CHRIS OR SANS, DIRECTOR OF THE CANADA INSTITUTE AT THE WILSON CENTER. WE SHOULD POINT OUT THAT THE PRESIDENT BROUGHT A LOT OF HIS TEAM TO OTTAWA. MEMBERS FROM HIS CANDIDATE -- CABINET, WITH A TO DO LIST. GUEST: YOU CAN SEE THAT THIS WAS AN ACKNOWLEDGMENT THAT SO MUCH OF THE RELATIONSHIP IS DOMESTIC, DOMESTIC AGENCIES LIKE ENERGY, TRANSPORTATION, THEY NEED TO BE PART OF THE MANAGEMENT OF THIS RELATIONSHIP. THERE WAS VERY SMARTER PRESIDENT BIDEN TO BRING THEM. IT SUGGEST A MUCH BROADER AGENDA THAN THE ONE AT THE TOP THAT WAS FIRST FOREIGN, TRADITIONALLY WHEN YOU SEE AN AMERICAN PRESIDENT GO ABROAD. THE DOMESTIC ISSUES ARE RISING IN IMPORTANCE. NOT JUST TO THE U.S. BUT ALSO TO THE CANADIANS. JON: A LOT OF PEOPLE ARE CURIOUS HOW THE REST OF THE DAY WILL UNFOLD WHEN THERE ARE MORE QUESTIONS FROM THE MEDIA. PARTICULARLY ON CHINA. PART OF THAT CHINA FILED WHERE BOTH CANADA AND THE U.S. HAVE BEEN WORKING CLOSELY. AS SOME MAY KNOW, THERE ARE CONSTANT CONCERNS AROUND POSSIBLE ELECTION MEDDLING IN THIS COUNTRY AND JUSTIN TRUDEAU HAS BEEN DEALING WITH THAT AS WELL. I DID NOTICE THAT THE PRESIDENT TRIED TO PUSH AWAY, DEFLECT QUESTIONS ABOUT THAT, BECAUSE IT IS A DOMESTIC ISSUE. GUEST: I THINK IT IS A TRICKY ISSUE FOR BOTH LEADERS. AFTER THE LAST ELECTIONS, BETWEEN BETWEEN UNITED STATES AND 2021 IN CANADA, THERE WERE SERIOUS CONCERNS ABOUT ELECTION APPEARANCE RAISED BY OTHER POLICY -- INTERFERENCE RAISED BY MANY. BOTH SAID YOU CANNOT CHALLENGE THE INTEGRITY OF THE ELECTIONS, THEY SAW IT THE CRITICISM OF THE ELECTIONS. FOR SIX OF THE -- FOR THE SAKE OF LEGITIMACY OF ELECTION DATE DISMISSED IT. WE HAVE CONCERNS IN CANADA GOING BACK TO THE FREEDOM TRUCKER CONVOY THAT WAS NOT THAT LONG AGO. BOTH LEADERS WERE DEFENSIVE, NOW IT MAKES A HARDER AS WE HAVE MORE INFORMATION ABOUT WHAT CHINA AND POSSIBLY RUSSIA WERE DOING. TRYING TO INTERFERE WITH OUR INSTITUTIONS AND ACTUALLY TRYING TO LOWER OUR CONFIDENCE IN OUR DEMOCRACIES. WE ARE GETTING MORE INFORMATION, IS TRICKY FOR THE LEADERS TO TALK ABOUT THAT PUBLICLY. > > WE ARE LOOKING AT A LIVE SHOT AT PARLIAMENT, I WANT TO GO BACK TO ENERGY AND TRANSPORTATION. THOSE THINGS ARE KEY WHEN IT COMES TO CLIMATE AND ENERGY TRANSITION. ARE CANADA AND THE U.S. FRIEND OR FOE WHEN IT COMES ABOUT? WHERE ARE THEY POSE? -- FRIENDS AND WHERE ARE THEY FOES > > > IT WAS NOT THAT LONG GONE THE 1980'S WE WERE DOING THE SAME THING, TRYING TO ADJUST TO THE OIL SHOCKS AND CREATE MORE EFFICIENT CARS. IF YOU DO NOT THINK DENIES NICER INDUSTRIAL POLICIES YOU CAN END UP OVER SUBSIDIZING AND PUTTING TOO MUCH PUBLIC MONEY IN AND GRADING CONVERSATION -- COMPETITIONS WHERE -- CREATING COMPETITIONS WHERE GOVERNMENTS POUR MONEY WHERE INDUSTRY IS MOVING FORWARD. IT CREATES WASTEFUL SPENDING, AND THE ONLY ANTIDOTE TO THAT IS BETTER CORONATION. CONGRESS IS NOT ALWAYS THINK OF INTERNATIONAL CORONATION, IT PUTS THE BURDEN ON THE BIDEN ADMINISTRATION AND HIS CABINET ALWAYS WE CAN AVOID INDEED CONFLICT THE INDUSTRIAL POLICIES BOTH CANADA AND THE UNITED STATES ARE ENGAGING IN. JON: THE OTHER THING WE ARE WATCHING A BLOOMBERG IS THE BANKING REALITIES, THE COMPLICATED STORY THAT IS PIECING TOGETHER DIFFERENT PARTS OF THE GLOBE. WHAT CAN THE LEADERS DISCUSS ON THAT FRONT TO SEND A MESSAGE OF CONFIDENCE TO THE GLOBAL MARKETS? > > THEY SHOULD BE VERY PROUD OF THE FACT THAT THE BANK OF CANADA AND FEDERAL RESERVE AND OTHER LIKE-MINDED CENTRAL BANKS HAVE BEEN WELL COURTED IN THE ATTEMPT TO REASSURE PEOPLE THAT THE BANKING SYSTEM IS SOUND. CANADA'S BANKS STEP FORWARD TRYING TO ADDRESS SOME OF THE WEAKNESSES THAT THE SILICON VALLEY BANK COLLAPSE SUGGESTED. RESPONDING TO THE CREDIT SUISSE AND UBS MERGER, IT IS A COMPLICATED WEB. BECAUSE OF EGO -- DEEP ECONOMIC INTEGRATION THEY ARE AFFECTED BY THESE INSTABILITIES. I'M SURE IT WILL BE UNDER CONSIDERATION. ALIX: WHEN IT COMES TO MONETARY POLICY THIS IS A SIMILAR THING TO CLIMATE. ARE THERE CENTRAL BANKS ON THE SAME PAGE WITH EACH OTHER? THAT WILL FEED INTO THE BACKDROP AS WELL. GUEST: ALTHOUGH THEY WILL SOMETIMES TAKE DIFFERENT DECISIONS ON INFLATION AND INTEREST RATES BECAUSE OF THE LOCAL CONDITIONS THE REMARKABLE THING ABOUT THE CANADA AND THE U.S., THE FEDERAL RESERVE AND THE CANADA -- ARE SITUATED IN THE SAME TIME ZONE. A LOT OF CALLS BETWEEN THE TWO AGENCIES, THAT SAME TIME ZONE ALSO SHARE'S WALL STREET TIME ZONE. THERE IS A LOT OF CORONATION IN REAL-TIME, LIVE DATA SHARED, OF THE NICE THINGS ABOUT THE NATURE OF THIS RELATIONSHIP IS THE BANK OF CARE THAT -- BANK OF CANADA'S LIKE A PURE REVIEW OFFERING THEIR TAKE ON IF THE FED'S VIEW OF HOW CANADIANS CAN VIEW THE SAME DATA, THAT STRENGTHENS IT RATHER THAN MAKING IT MORE DIFFICULT. THIS MAY GIVE US -- ALIX: WE HAVE TO LEAVE IT THERE, CHRIS SANZ, DIRECTOR OF THE CANADA INSTITUTE. HAVE A GOOD WEEKEND EVERYONE. THIS IS BLOOMBERG.

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