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00:00Still looking for a hero. Thirty nine fifty on an S & P 500 unchanged year on the day Romaine Bostick year alongside Katy Greifeld, kicking you off to the clothes here on this Friday afternoon. Interesting moves to seen in the equity space right now. Basically unchanged. It was a lot worse earlier in the day. It's kind of poetic after the week that we get the S & P 500 completely unchanged. Just about on the day, though, we are looking at a second straight week of gains. Somehow the S & P 500 higher by about nine tenths of a percent on the week. Some of the weekly gains that you're going to see on these indices, assuming this holds into their clothes, quite remarkable given all the volatility. It's not just the S & P, the Dow, the Nasdaq, etc. But you're actually now starting to see the KBW bank index poke into the green on a weekly basis. But look at the last line in your screen there. Deutsche Bank down about 4 percent a year on the day the ADR is here in the U.S. and now that is in focus. We should point out that I think almost everyone we've spoken to on this network today has made it clear they think this is overblown, but it shows you everyone still remains on edge about anything having to do with the bank. That's the thing. I mean, when you get into human emotion, this sort of crisis of confidence, things can move very quickly. And we've seen that in Deutsche Bank. Yes. You know, because basically, well, they did a little borrowing, which last time I checked is sort of what they're supposed to be doing. Nevertheless, though, this does get to the whole idea here of regulators and the need for them to sort of gain control, if you will, Katie, maybe even take control here. You know, it's another story floating around out there. You're a big gamer, right? Activision, Blizzard, Microsoft. I think they announced that deal like 20 years ago. It's actually moving closer to being actually a done deal, at least in the UK. Yeah, it was interesting. UK regulators coming out and saying that actually if Microsoft does go ahead and buy Activision, maybe it wouldn't significantly give them such a huge advantage. When it comes to the console market, you can see Activision shares higher by about 6 percent on that news. Yeah, a lot of doubts around that deal. We're gonna dive into that a little bit later. And we were looking to hear from the Fed members now that Jay Powell is out of the way. St. Louis Fed President Jim Bullard never disappoints here, lifting his twenty three rate forecasts. He delivered five point six to five percent fantasies, rate forecasts. It does come with a big asterisk being that that is under the assumption that the financial stress abates in the weeks and months ahead is asked to record asterisk. You know, I was just going to barrel through it and hope that you wouldn't say anything. All right. Well, we got we got three hours to sort it out. We should point out that Bullard actually not alone in that call here, at least based on the dot plot. Couple other folks on that FOMC also in the same realm that Bullard is in. We should point out, though, I think some of the flows that we saw this week, particularly when it came to the flows out of equities and into cash. Bank of America's Michael Hartnett has actually been tracking the surging cash balances over the past month. He wrote an interesting note here. Listen to what he had to say. The biggest picture is the next bubble. Money market fund assets under management surging about 5.1 trillion. That's up more than three hundred billion dollars in the past four weeks. Now, he does point out that the prior to surges that we saw like this in 0 8 and a 20 20 coincided with big Fed rate cuts. Lisa Erikson, head of Public Markets Group over at UBS Bank Wealth Management, joining us right now to talk a little bit about this. And I do want to start there here. Lisa, this is a market still in flux, a market that I don't still think it has its head around what the Fed is doing and what it may continue to do. But there are a lot of folks now looking at the economic conditions, looking at some of the money flows, looking at, I guess, instability in the banking system for lack of a better phrase and saying rate cuts. They've got to be on the table at some point later this year. To your point, the Fed policy is really going to have a big impact on what's going on going forward, and so we are all waiting with bated breath really what the next steps is. The uncertainty level, though, on the direction is pretty high and that's really for a few reasons. So on the one hand, we have economic growth that's been slowing. But on the other hand, we have price pressures that while they've been coming down to some extent, are still at elevated levels. And then we have to your earlier point, the wild card of really what's going on with financial stresses and how that plays out. And so really, given that zone of a trifecta of events, it really is hard to say exactly where policy should evolve and really what the Fed's reaction function is going to be for that. So we really think on the back of that, the best place to be right now is a more modest, cautious stance on risk on assets like U.S. equities. That really reflects the fact that economically we're in a tougher place with respect to both growth and inflation. And yet it reflects that there is some two sided risk around, again, where policy may evolve and whether, again, some of these stresses resolve better or worse when you see the types of flows that have been going into, I guess, relative safe assets, either money market funds, a lot of these cash like instruments even into some of the physical commodities like gold, which is at a pretty good run over the last three or four weeks here. Is that a trade? Is that an investment? Is that a strategy you think is still wise over, I guess, the intermediate term? Overall, we're really recommending that our clients, again, be modestly biased against U.S. equities with more of a neutral tilt on fixed income, and we would actually recommend more of a middle of the road exposure to maturity as opposed to, you know, parking quite a bit of that in cash or the short end. And again, the reason why is really just the factors that we were talking about. While again, you know, there are some stresses and concerns about where we may head. There is also the possibility of pivot. And in addition to that, what we've seen from both companies and consumers is that they've still been relatively resilient even again. You know, some of the flash numbers that came out on manufacturing and services sentiment this morning showed that, you know, services continues to be pretty strong. And so staying more of that middle of the road course in terms of where your bond exposure as opposed to going all short, we think makes sense. We'll talk to me a little bit about why Middle of the Road makes sense here, because when I think about cash, I think about Treasury bills with very, very high yields, with very little duration risk, obviously no credit risk at all. Why wouldn't I just sit in cash? Why do I need to extend out to the middle of the road? Well, really, it's just thinking in terms of, you know, where we might be best positioned to take advantage of future opportunities. And I would agree, Katie, that certainly we we have very attractive yields on the short end. And that's not to say you wouldn't hold some of them. We just wouldn't overemphasize it and be more balanced in the exposure. Hence the middle of the road positioning. And when you think about just how much money is in money market funds right now, five point one trillion dollars in, optimists might look at that and say, OK, that's a lot of dry powder on the sidelines that's going to come back into the equity market at some point. Is that your view? Does that money necessarily belong in the equity market? Well, again, really, right now, our our view is we need to see how, again, the data and the confluence of events plays out. But again, we would be moderately more cautious at this point. And to your point, there are indicators such as the amount into cash, which obviously reflects not only the nice level of yields that you can get in cash like instruments right now, but again, just the general uncertainty and some level of fear. So again, to the extent that some of those things hopefully dissipate over time, again, I think you can't see those coming back into areas like equities and also longer dated bonds. I want to circle back, of course, to the banking sector. The big news today, of course, surrounding the sell off in Deutsche Bank, despite no real issues. I guess, if you will, at least nothing we know publicly. But I think it gets to this idea of investor sentiment. And it also even gets to a broader question here about how much risk these banks are going to be taking with regards to lending, with regards to extending credit. Basically, the Greece of our global economy. That is a worry played certainly about where lending is headed and with the events really of the past few weeks. Certainly there is incentive for more cautiousness on the point of lending both from the lending institutions as well as obviously in terms of consumer and company behavior, because they are also seeing some of the uncertainties and maybe also more cautious about how much they extend themselves. So again, that I think on top of the fact that when we look at our global health indicator of multiple factors across different sectors that show where activity is going and the fact that we're really generally continuing to see those sign trends, that again, really warrants some cautious, more cautious stance right now on both the economy as well as the U.S. stock market, or at least I always love talking to you. Have a wonderful weekend. Lisa Erikson there, head of public markets at U.S. Bank Wealth Management. Coming up here, a lot more coming up here on the show. We'll talk about those durable goods, a big undershoot on the economic data this morning. Well, I'd overshoot on the PMI ISE. John Lee, our chief economist at morning console. And I try to make some sense out of where the economy stands. Plus, is it game on for Microsoft and Activision? UK regulators hinting that they might actually be willing to give this tie up a bit of a break. And a new survey out there finds corporate CEOs. Well, they're going through their own great resignation. It's just not just anecdotal anymore. You know, gut site. John going to be joining us in just a second. Senior managing director over at FTI Consulting. Stick with us. This is Bloomberg. They need to recognize that regulation lost its way over the last year or two. It is inexcusable that the Fed's stress tests did not consider this spring a did not consider last spring an interest rate increase when it was obvious that that was the emerging problem. Given how far the Fed had fallen behind the curve and it is clear that between digital banking and high interest rates, we are living in a very different world. As far as deposits are concerned then we ever have before. And that's going to put great pressure on the franchise value of many banks. It's going to affect their solvency ultimately because it affects their profitability and that needs to be recognized very explicitly in their regulatory approaches. And that is the former Treasury Secretary, Larry Summers, speaking a little bit earlier and really just kind of reiterating gave some of his criticisms about the Fed and maybe the lack of action, at least in his mind, that they've taken so far. He did, of course, reference Janet Yellen and f the Financial Stability Oversight Council of sort of cuts a component of the Treasury Department's scheduled to meet today. We do know that to be true here. Whenever they comes out of that meeting, we don't necessarily know. But we do know this is at least the second time that they've met within the past, you know, 10 to 12 days here to deal presumably with this banking crisis. Of course, the committee that includes Jay Powell as well. And they certainly have a lot to talk about at this moment and what we heard from Larry Summers. I mean, you've heard other people say it as well, that we need some sort of clear message here, some clearer assert Shery Ahn. They need to clarify what exactly is going on and what will happen in the future. But amid all of this, we should point out, though, that there are some people that would make the argument that it always was clear the FDIC guardrails were pretty clear and anything above and beyond 250000 was also clear because we call those systemically important institutions. Well, are we lowering the threshold? That's one of the open questions right now. We'll see if we get any clarity on that. But amid all of what we're seeing in the banking sector, we continue to get economic data for the US. We had U.S. PMI data out this morning showing that the composite index, it rose actually to its highest level in about 10 months. You break that down into services, into manufacturing, you can see that manufacturing, it's still below that 50 threshold. Still, you know, not quite in expansionary territory. And then you look at services, services. Clearly, the bright spot here rising to the highest level, it looks, since about June or so. So definitely a bright spot there. For more, let's bring in John Lear. He is chief economist over at morning console. And John, when you look at this data, what we learned about PMI is this morning you think about what we saw the past few weeks. Is this a bright spot for the economy and is can this continue? Well, I think the first half of the first quarter certainly was a bright spot. And we've seen that in all of morning consoles, daily global consumer confidence data that over the course of January and February, consumers grew extremely more confident in the economic prospects as it so happens. Our data also happens to be a leading indicator of the global PMI data where we've just released that new NBER working paper. And so for me, it wasn't particularly surprising. I do think it's important to note that that data is all up to present. Going forward, the risk in the outlook looks materially different, due in large part to some of the confidence and trust issues that you mentioned at the top of the hour. Well, talk to us a little bit more about what the future could hold, because to your point, they have confidence in the economy and conditions in January and February. It was resilient. Things changed pretty dramatically in March. Yeah, I would say I don't always agree with Secretary Summers, but in this case, it sounds like he may have been reading my newsletter from last week. I mean, the bank supervision and trust in the financial system is absolutely critical for the Fed to be able to implement effectively implement its monetary policy. And when you have folks out there who no longer trust that their banks under 50 thousand dollars, 50 million billion dollars in assets are being effectively regulated, it calls into question many, many issues. And as Secretary Summers noted, you know, given the digitalization that we've seen in fintech, bank runs can happen much faster than they used to. It's not clear to me that regulation has caught up on that front. And so I think there are some pretty, pretty serious reasons to be concerned going forward. Reasons to be concerned going forward. And I do want to link this back to economic activity, particularly looking forward here and sort of where the catalysts are for that economic activity. If it's not going to come from the banks, that the banks either don't have the capacity or the willingness to lend in the way that they did and looking at the economic data. Now, let's focus on some of those numbers out of the durable goods report and what is effectively an anemic level of CapEx spending right now. Where's the growth kind of come from? Yeah, I don't think there's going to be growth. I guess that's sort of consistent with my outlook. The one upside might be additional government spending. I think defense spending is like to be fairly robust given all that's going on in Ukraine and the additional appropriations on that front. But, you know, more broadly, I do think that we are in a spot right now in the U.S. economy in particular, where we've withstood a few very dramatic shocks. That resilience in the economy has been drained. And going forward, I think you'll see this sort of convergence where it won't just be one particular sector. You're going to have multiple sectors fall into recession at the same time, driven by a contraction in credit consumers weekend with limited savings and then employers as well starting to pull back on the jobs front. Do you anticipate a meaningful contraction in the labor market or do you think it can withstand some of what you just laid out? I think so we saw this month that we tracked this every month and normally last month we had eleven percent of workers expect to be laid off in the next month. That jumped up to eighteen point seven percent this month. And so there's real concern out there. While it might take some time for that to materialize, the near-term impact is going to clearly be a diversion away from consumption into savings. That sort of, you know, rainy day fund that puts additional pressure on corporate profits in the near term. And again, I think that that will likely trigger some additional pullback on the hiring front. So it's not to say that's going to happen overnight, but we are clearly seeing a deterioration in economic growth. That's consistent with sort of late cycle activity. John, appreciate your time. That is John Lear. He is chief economist, sovereign morning console. Coming up, good news for Microsoft, 69 billion dollar deal for Activision after U.K. regulators seem to give a thumbs up. More on that next. This is Bloomberg. A flight to cash, a flight to treasuries and, well, a flight to stocks green on the screen here. While we're relatively unchanged on the day, despite all of the rowdiness we saw this week, most of the major indices right now setting up for what's going to be a weekly gain, meaningful weekly gains, to be sure. A big part of the reason where the gains that we saw in some of those big cap tech names, particularly over the previous four days. The bloom has come off the rose here on the day, but most of those gains have stuck. Some of the red on your screen, well, maybe that's a little bit of profit taking. Maybe that's a little bit of repositioning. This has and really quite for some time has been a trader's market. They continue to drive the price action. They continue to drive the volatility. Katie, it'll be interesting to see what, if anything, changes that as we get closer to the closing bell. Well, let's talk about one of the big stories of the day, and that is Microsoft's chances of winning antitrust approval for its 69 billion dollar takeover of Activision Blizzard. It just got a boost from UK regulators. The change comes amid a significant amount of new evidence that Microsoft would be unlikely to profit from restricting access to the franchise. Call of duty on rival consoles. Bloomberg Markets. Molly Schutz joins us now for more insight. Try to quantify this for us. It's good news, but how good is this news? Yes, definitely good news for Microsoft. The U is CMA was one of the first of several major antitrust regulators that is scheduled to rule on this deal in the coming weeks and months. And so to get to have them narrow, their focus of what they're looking at definitely gives a boost to the deal. But Microsoft is still facing significant opposition, especially from the east, from the EU and also in the in the US, which is where it's facing a lawsuit to block the deal. I am curious, Molly, here about sort of the idea that if they did restrict access, that they effectively would not profit. Do we get any insight into what the logic was behind that? Well, basically, what they're saying is that, OK, we realize that because the concern here and one of the biggest, the loudest voices against this deal has been coming from Sony, which operates the PlayStation console, which is the biggest rival to Microsoft's Xbox console. And Sony is concerned that if Microsoft buys Activision, which owns which publishes Call of Duty, which is a mega hit video game, that they would be incentivized to not produce it or put it on the PlayStation console. And that CMA is saying here is that there is no financial incentive for Microsoft to do that. PlayStation sells more terminals, more consoles than Microsoft sells X boxes. So why would they want to not have a call of duty on the PlayStation? That doesn't make any sense. And so, like you said, they've now narrowed the scope of CMA, looking particularly at cloud gaming. What exactly do you think that will be the focus within the cloud gaming component? Right. So cloud gaming. It's a very small part of the video game industry. So far, most people still continue to play games on a console like that's what's on the PlayStation. But Microsoft is placing a big bet that this is all about to change in the future. And they have one of the most popular games subscription passes called Game Pass. It's like a Netflix for video games. And they are way out ahead of Sony in developing this access, which basically allows people to download games and play them on the X box, on a P.C., on a tablet, on a smartphone, anywhere. So this is really the next area of focus that antitrust regulators are going to be concerned about to see whether it gives Microsoft an advantage with all these new games and then being the leader in this cloud service subscription, whether that won't shut off markets for Sony and others. All right. Activision Blizzard shares are having a pretty good day, up five and a half percent. Biggest game we've seen in about six weeks. Molly Schutz covering this story for us. Maybe some light at the end of the tunnel for Microsoft trying to close out this deal. Meanwhile, as we get ready to close out the week, another wild week, stocks relatively unchanged here in the US. We should point out there was a lot of weakness overseas, particularly over in Europe. The stock, 600, down about 1 percent. A lot of that seems to be tied to some of the shakiness surrounding Deutsche Bank and its future. No real news there, but certainly the skittishness remains. And then you look at the bond markets still seeing a bit. Their two year yields down about six basis points, 10 year treasury yields down about six basis points as well, 337. A lot more to cover here on the big show. Stick with us. This is Bloomberg. This is Bloomberg Markets close to 30, let's get you caught up on what's happening in the commodity space, what you sit on there right now on IBEX, crude futures look like they are going to move a little bit lower here on the day, down about 1 percent here. And sentiment looks like it is going to come in just above sixty nine bucks a barrel. We should point out, despite the down drop here on the day, you are actually looking at the first weekly gain in three for WTI crude. Similar story with Brent, but Christian Malika, the head of global head of energy strategy over at J.P. Morgan. He was on Bloomberg a little bit earlier today and actually said he sees further pain in this space, saying that the route could continue, though he does see a rebound into next year. Aluminum futures, as well as a lot of the base metals, got a pretty big bid not only on the day, but also on the week. A lot of optimism out there about China returning to that market. And more importantly, an interesting read of the loss, some of the stockpiles out there, stockpiles for aluminum, copper, iron ore and other key metals that are all significantly depleted. Gold futures down here on the day, Katie Greifeld. Well, let's go from commodities to CFO, because after many employees went through the great resignation during the height of the pandemic, it's now shifting to the C suite. As many CFO ISE are now stepping down. Joining us to discuss is Gina Gut Site. She is senior managing director at FTI Consulting and leads at CFO Solutions Practice, along with Bloomberg work shift reporter Matt Boyle. And Gina, I want to start with you because you recently put out the results to your global CFO survey. And when I look through some of the key takeaways, what stuck out to me is that the tenure seems to be shrinking for the CFO ISE. Absolutely. What we've seen over the years is continues to Shery Ahn. This last year, our surveys showed more than 60 percent of the CFO will have less than five year tenure at one company. That's up I think 16 percent from the prior year. And we've seen a steady decline over the last 10 years. And, you know, I mean, specific to these CFO is, I guess a natural question is why is this happening? Why are we seeing this 10 year time Shorten? I think a lot has to do with their responsibilities. CFO Those have taken on more and more as they have expanded the role, not just as finance numbers taker, but also being part of transformations, being part of decision making process in the C suite, which is great, but also an additional burden. Did Matthew come into this conversation here because when we talk about the initial, I guess, rule that see those traditionally played and how much it's evolved over the last few years, particularly during the pandemic. Is there sort of a direct correlation here between the demands that's being placed on them, not only by the folks above, meaning their boss, the CEO, but on the board, but also the employees underneath them? Yeah, it's funny. You mentioned the folks above them. I mean, you look at CEO tenure during the pandemic, it went up. I mean, you saw CEO tenure rise to over 10, even 11 years, where normally it was about maybe five to eight. And that was because the CEO said, I need to be here to steer the ship throughout this unprecedented period. And if CFO is need to be listening more to their employees. Well, that might not be the greatest skill set. I mean, they're not as much, let's say, right brain people as as CEOs might be. Skills like empathy and listening to employees really came to the forefront during, you know, during the pandemic. Maybe not the things that your normal sort of bean counter is very good at. And we've seen that shift, though, Gina. We've spoken with a lot of CEO. CFO is a new breed of CFO, those that have been hired and more importantly, groomed over the last four years to do exactly what Matt says they really weren't designed to do. And that's not just be a bean counter, but to be much more of a consultant, to be much more operational and to a certain extent to have some degree of a vision. Absolutely. They've taken a literal seat at the table. They're partners with the CEO, the operational and even the board. It's really important they're all on the same page. CFO is also drip, drip and matching the transformation, not just finance, but operational transformations as well. And I think all that responsibility, including new ESG regulations and reporting requirements, adds to that burden. So, I mean, Matt, I'm I'm thinking about your comment on bean counters versus sort of right brain people, and when you think about the trajectory of these CFO, as does CFO, not necessarily translate into the upward mobility up to CEO. Well, it's pretty rare. I mean, there are some examples of CFO who've done really well as CEOs internally at PepsiCo is a good example. But there's been some research on this Spencer sewer. Spencer Stuart took a look at over thirteen hundred CEO transitions and found that when the CFO became the CEO, it was a very low percentage of companies that actually performed the top quartile or something like 8 percent. So you don't see a lot of success there, actually. So, Gina, to that point that it's pretty rare to see a CFO sort of getting the pipeline and become CEOs, the CFO is where we're seeing turnover increase when they're leaving these roles. Where are they going? Most of them are going to other companies. They've been either part of some transformation, some disruption, whether it's a sale or downsizing, and it's not the company or they're not aligned with the senior suite and the board. So they're moving on and they're making names for themselves, establishing themselves as perhaps an innovator or someone to look to for advice, not just as you said. Bean counters. So they continue to take on these new roles or expanded roles and look for other opportunities. Students saying their own personal brand. Well, that gets us to the point, too, of how attractive some of these people can be in this environment. A lot of talk about the CEOs who are quitting, who are stepping down, who are moving on. But for the folks who have the skill set and more importantly, I guess the gut, if you will, Gina, to do this job. I would think that they would now be in high demand, but they would have a lot of bargaining power as well. Absolutely. We constantly see requirements for new and innovative, new and innovative CEOs. Also, as transactions, we're extremely busy the last couple of years, as new buyers, as new ownership patterns. This changes the boards. They often want a new fresh slate. So they're out there looking. But I'd say the CFO was here. Many of them have come up to the challenge and really have changed. Even being part of the people improving our process and part of our survey talked about that being one of their main objection isn't retaining and hiring new talent. And so when you talk about, I guess, the lack of success that some high profile CFO, CEO transitions have had, there are still a lot of quite a few successes out there. And I am curious here about how much effort is being made right now by the boards out there to sort of groom, I guess, the next generation of leaders, the next CEOs. And are they specifically looking at that CFO position or is it still going to be funneled through the operating officers and the division chief that we're that we come to rely on in the past? I mean, a good succession plan leaves no stone unturned. Right. You need to be looking everywhere. And you also need to realize, do we need to be looking internally or externally? Do we need a cultural change here? If the company is struggling or really needs a brand new direction. But if you are looking internally. Yes. The CFO will bring certain things to the table. If your biggest primary, you know, impetus is making sure shareholders are hearing you and you're getting your message out to shareholders, then a CFO is probably the best person. That's the person has the best relationships with your shareholders. Certainly. But if you're looking at more of an operational change or if you're looking to, you know, perhaps go into other markets, they might not be the best. So I think any you know, any board really needs to be looking everywhere in terms of their succession plan and making sure internal and external candidates are considered. Guys, great discussion. Really appreciate both of your time. Gina got site of FTI Consulting in Bloomberg's Matthew Boyle. And be sure to check out this week's edition of the workshop newsletter on your terminal. Still ahead, Ford's TV future. Our conversation with Jim Farley about the automaker's new electric vehicle assembly plant. Coming up next. This is Bloomberg. Let's talk these, because Ford is predicting that losses in its TV business will grow to three billion dollars this year as it spends big on new models and factories, and if you take a look at the money earmarked for even ISE across automakers, you can see Ford comes in right at the top. Seventy three percent of their R and D budget goes to Eby. As you can see, Volkswagen is a close second. We're talking sixty nine percent there. And then you have Nissan, GM, Mercedes Benz. The list goes on. Toyota at the bottom, Romaine just 20 percent earmarked for these, 20 percent earmarked for these. Ford making that push. Ford also making it clear there will be some losses tied to that push. The CEO of Ford, Jim Farley, actually caught up with David Westin a little bit earlier. Here's what he had to say. We're not going to spend all this money and lose money. So this is this is a profitable enterprise. We think we'll be able to make money a couple of years faster than Tesla did. As you said, there's an investment. We've got to build the plants. We've got to engineer the vehicles. That's why we're we're losing a lot of money. So we've got to do a couple of things. First, we've got to scale scaling helps cost. We've got to design the vehicle differently for a smaller battery, more efficient. And we have to get our distribution and manufacturing costs down. This plant for the same size is going to be about 30 percent smaller. And that that plus what happens inside the plant is going to help us make money. All of those things are required to make money because the battery is very expensive. Jim, as you say, scale is important to your plans here. As I understand the projections, you'll have an 8 percent positive margin by the end of 2010 26. What scale assumptions do you have built into that model to be able to deliver those results? We hope and we plan on building capacity like this plant a 2 million incremental units a year. We make about five now. So to millions like the company is going to grow by more than 30 percent. So that scaling is really important. I mean, two million units. No one has ever done that in North America especially. But, you know, we're already number two, our vehicles are best, best sellers in their segment, like Truck and van, the E Transit. So we're we're very optimistic that we can get that profitability and we can scale the biggest thing and scaling as batteries. The CEO of Ford, Jim Farley, talking about that company's evey ambitions. Ambitions. Katie, they'd have actually so far come to fruition, at least in terms of production. But the big question is how do you get those costs down? And of course, it is all about getting the cost of the batteries down, something even Elon Musk has struggled with. I know it's an industry wide issue. And I mean, to Ford specifically, we know that they have big plans here, clearly planned to back that up with a lot of spending, because when you have such an established industry leader in Tesla, they had like a 10 year head start. You have a 10 year head start. But I think one thing Ford does have is they actually have a very profitable gasoline combustion business. They can actually offset some of the losses in the interim should they want to see this out. I also thought it was interesting, too. I mean, the focus on batteries is really becoming big thing. And I was actually going through the Bloomberg Billionaires Index. OK. And you're starting to see people come up. I check this every morning. To see to sit right here in my name just magically popped up there. It's still happening, Mike. Anyway, so but what I think is interesting, you're starting to see the CEOs of these battery companies are these mining and minerals companies that are supplying the materials needed to make these batteries really starting to move up the list. These are going to be the big players here. I mean, no disrespect to the Farley's and the musk of the world, but it's those people who really control the materials that go into this. And I think they're really kind of rise up your release, have the ability to profit. I mean, it makes perfect sense. And you think about how companies are focusing so much on their supply chains to get a hold of those batteries, to get a hold of those components. I have to imagine that's making some people rich. All right. OK. I know you're really into I also know you're really into basketball. March Madness. That's what we call basketball here every march where all of the big teams get about 64 teams. CAC Greifeld. Right. And they put you like my mansplaining Emily Chang. Then they put it to the hoop. Oh, yeah. Go swish. And then at some point you get a winner and everyone celebrates close to. We're getting close there. Chad, violence in your gaming, lodging at theater analyst over at Macquarie Securities going to be stopping by not to talk about who will win, but more importantly, to talk about a lot of the money being made behind the scenes, particularly when it comes to sports betting. Stick with us. This is Bloomberg. All right, let's get a view from the sell side with our top calls, the big movers on the back of analysts recommendations. And we start with block shares sliding a second day, Atlantic equities cutting to neutral. The analyst saying Block's initial response to that Hindenburg research report lacks specific rebuttals and a significant proportion of Block's profits could actually be hurt if it chooses to improve risk controls. Shares a block off the lows of the day, but still lower by 1 percent. Next up, far fetched Citi cutting its price target on the online retailer to four dollars a share, down from six. And keeping a sell rating. The analysts citing the risk to profits of increased price promotion as discretionary spending by consumers remains under pressure. Far fetch under pressure, down 5 percent on the day. And finally, let's take a look at regional bank first horizon, getting an upgrade today to overweight over at Wells Fargo with the analysts saying that the company's 13 billion dollars sale to Toronto Dominion Bank, that's still on track at the original twenty five dollar offer. Price shares a first horizon, up almost 6 percent on the day. And those are some of our top calls. We want to pivot that to the from that over to gaming stocks. With March Madness expected to generate about four and a half billion dollars in legal sports betting in North America. All eyes are on some of the companies that could benefit. Chad Bynum joining us right now. He's a senior gaming, lodging and theaters analyst over at Macquarie Securities. And Chad, let's start off with who you think actually could benefit the most. Sure. Thanks, Roman. So a little different than what we're seeing in the NCAA tournament. Sports betting and kind of the market share, it is pretty hot top heavy right now. So the big companies you have Draft Kings and Faneuil, they're the number one and two players. And then right behind them, you have companies like MGM and Caesars. Behind them, you have rostered interactive Bally's and Penn National and in kind of, you know, a longer list there, but kind of focusing again on the top heavy players. We really like draft kings here. We have a twenty seven dollars stock. We think they did a really nice job in the fourth quarter. The playbook is working. They have been losing money. Right. I mean, that's obviously been a theme that people have been talking about. They're expected to make money in the fourth quarter of this year, along with a lot of their competitors. But most importantly, there's really good fan engagement and that has continued during March Madness. I mean, Draft Kings obviously has a brand. And like you said, they positioned themselves for this moment. Who among the competitive landscape hasn't positioned them for self? Well, who is going to potentially miss this short? Well, it's you know, it's it's an interesting business study because you've had a number of companies that were willing to lose half a billion to a billion dollars in 2022, more even in a little bit less in the year prior to that. And those are the companies that are getting scale because they vertically integrated. They have their own technology. They make their own bets and they really control the whole technology stack. So those are the companies that will really see the big improvement in terms of margin. There's been some other companies that have taken a different approach where they've said we're only willing to lose seven hundred million dollars in 2022. So those companies aren't able to get a bump. Let's call it the 5 percent market share, Mark. They're kind of in the low to mid singles and I think they'll continue to be in that low to mid singles unless they come up with a better customer acquisition tool or a better retention tool. So companies like FADEL and Draft Kings have been willing to spend the money, invest in the customer, and they believe they have really good retention tools. That's what we're seeing in March Madness. There's a menu of products. If you're able to check out tonight some of the games, you'll be able to see different player prompts, different types of things. And we think those two companies are the leaders. All right. Well, let's get right to it and get to the fun part of this and the gambling, because I am curious. I mean, I think a lot of us had our brackets busted. It wasn't by Fairleigh Dickinson or Florida Atlantic or, you know, it was a firm. And I forgot our. Allan, are they still around anyway? But let's get to this idea here of if you were taking the over under. Right. If you took the under, I might from what I'm seeing in the data, you basically would have come out ahead overall. Right. Is that what you're saying? Yes. So during March Madness, so far, the under has overwhelmingly won. Up to this point, I don't think there's any rhyme or reason. Generally, people like to take the over, but this is disproportionate to what we would expect if we kind of look at the NFL season. Generally, the public will take the favorites, right. We'll take money line bets on the teams that are expected to win from three to seven points on the point spread for March Madness. People like taking deferments. The Princeton's the FAA used. So there were some big upsets that has hurt the sports books a little bit. So far we've looked at the data and tonight you've got a big game on Princeton. The public's going to be playing that hard. Yeah. So the books probably want to see the favorite win. I'm curious, do you do that? Do you think betting actually increases or decreases when you start to have these smaller these lower seats basically start to move up? Because basically everyone who picks, you know, Alabama and Tennessee go all the way. They get flushed out and then they lose interest. Yeah, that's a good question. You know what we saw on the World Cup? You wanted some early upsets, but you won and the big teams, the big countries to make it to the end just because then it's a little bit more of a, you know, a well-known product, right. So you do want some of the big teams making it into the final four, and that would increase just overall viewership engagement. What we've seen in sports betting right now is somewhere between five and 10 percent of adult populations in states that are legal, which is about 36 in the U.S. are engaging in sports betting. We think that'll get a little bit higher as we continue to see program improvements. Yeah, but yeah, I think certainly having the big teams could kind of push that to the hard higher end of that five to 10 percent. All right, Chad. Got to leave it there. Chad Beynon over at Macquarie Securities here. A look at March Madness. And we should point out for the eighth year in a row, we've actually assembled a group of big Wall Street titans and people in finance here to sort of fill out their brackets. And this is all for a call. It's brackets for a cause where they each pledge at least twenty thousand dollars to various charities at the way for us here, and more importantly, our chairman, Peter Grier, to help really raise some money for some good causes. John Wick, orate over at TPC, the CEO there. He's actually number one on this list right now as it stands today for the men's tournament. For the women's tournament, Brian doubles over at Synchrony Financial Elite. That PAC, Katie Greifeld, where do you stand? I did not make a bracket, but I am having a lot of fun hearing about it. Not to brag, but I'm actually 332 out of 12000 people. I'll take it. Yeah. I'm number three, 132, 332. Go down to the first comprehensive. Storm coverage ahead of the US market starts right now. This is the countdown to the close. About 60 minutes left to go here in the trading session. Romaine Bostick alongside Katie Greifeld, joined right now by our colleague Carol Massar and just met and welcome to our audiences across all of our Bloomberg platforms, TV, radio, originals and those folks streaming on YouTube. Carol Massar markets have been all over the place today. We're kind of poking into the green for most of the major indices. But we should point out, amid all this turmoil this week, we're actually looking at green across the screen on a weekly basis, even including potential here for the bank stocks. Isn't that amazing? Just that I were just talking about that with our Joe Matthew. Having said that, so we've got that going on. Generally speaking, if you take a look at some of the things stocks, I mean, that's what's really caught my attention. You know, despite the nervousness and the concerns, these guys have been on a tear. You've got Netflix up of that two and a half percent that it's up about 7 to 8 percent up for the week overall. Metta is up about six tenths of a percent. It's up around 5 percent this week. Apple is up about two and a half percent, just a kick higher in today's session, up about half a percent. And shares of Alphabet, parent of Google, they're actually slightly down. But again, up a couple of percentage points, percentage points this week suggests it's interesting amid the nervousness. This is where investors have been going. Definitely. I tell you something, too, because I don't know if you you brought it up a few maybe last week that we had dusted off the thing as we talked about things in a long time. Yeah. That was actually. I mean, aside from the fact that, you know, the F and the G. Really aren't technically there anything. But I thought it was interesting that Snowflake was added to this. I didn't know for some reason that quite some time ago. But anyway, that's it. That's just useless trivia for you to at all. So is it is it mang? Don't even try to print. Okay. Okay. To be continued. Yeah. So many different ways you can say that, right? Well I wanted to point out once again we've been talking about the two years so much, but had you pointed out again on this Friday, if you look at it, we're trading around three point seventy seven and it's been astounding. If you just think back to where it was trading with just a few weeks ago, it was a little over 5 percent. Now around three point seven percent. So even heading into today, over the last 11 trading sessions, it saw the largest 11 day decline in yields, around 130 basis points since October 16th to noon. Its members second in 1987. And that's a stat from analysts at Creative Planning Investor. And I thought that was pretty astounding when you put it into perspective. But obviously, two very different scenarios when you think back in the late 80s versus obviously what's happening right now with a look at the continued volatility that we see in the yield space. Continued volatility in the equity space as well. But you put it all together, we're relatively on change on a daily basis, up about two tenths of a percent on the S & P and the Dow. The Nasdaq basically unchanged by the Russell, higher by about four tenths of a percent. But as I just said, with maybe the exception of the Russell, I believe all of the major indices here are sitting on a weekly gain, at least where prices stand right now. And you take a look at the sector level. You have seven sectors in the green, four in the red. What's leading gains right now is utilities up two and a half percent. Also, real estate and consumer staples higher. Look at utilities and staples. I say that's pretty defensive. Then you take a look over. It was leading losses. Right now it's consumer discretionary. It's financials. That's been true all week. Interesting, though, I'll just note energy managing to squeak out again today, up three tenths of a percent. We know that energy really has been under pressure. Energy has been under pressure. But, of course, big tech has been leading the charge. Netflix having a great day, up about two and a half percent, having a great week, up about 8 percent. In fact, that well, if that holds, that's going to be the strongest weekly gain we've seen for this stock going back towards the end of November, beginning of December. Activision Blizzard shares higher by about 6 percent here. Some indication here that regulators over there in the UK are maybe potentially warming up to the idea of allowing Microsoft to go through with the third tier, with the big purchase of that company and keep an eye on shore. Plastic Corp, of course, is the big education and textbook maker down 30, almost twenty three percent excuse me right now here on the back of a full year revenue forecast that came in well below what the street was looking for. And of course, we continue our focus on bank stocks, particularly here in the U.S. First Republic, relatively unchanged on the day, but down 12, up down to twelve dollars a share and down about 50 percent just on the week. And then you go back over to Europe. It's not about Credit Suisse. It's not about UBS, Deutsche Bank. Now on the clock here, you're taking a look at a chart right now of their five year credit default swaps and the big spike that we've seen and what folks have to pay to protect against a potential default there. No one is saying that there is a potential default afoot here, but still some concerns here about contagion going on in the European banking sector. Yeah. And just it just adds to the nervousness has been around for the now, what, two weeks and counting at this point. All right. So all of us here at Bloomberg, we've been talking to investors about what's going on in the banking community. And earlier on TV, our team caught up with Avenue Capital Group CEO Marc Lasry. He is a distressed investor. He says the Fed is trying to shore up confidence now for investors as such an investor. He. He's actually finding some opportunities within what's going on as a result of the banking turmoil. Here's what he had to say. The opportunities for what we do right now is immense, and I think it's for anybody who does private credit and the simple reason for it is it's going to be more difficult. It's harder for banks now going forward to lend capital or even if they lend money, they're going to require different covenants. It's just going to be harder. All right. Avenue Capital Group CEO Marc Lasry earlier on Bloomberg TV. I think that's really interesting because as we see either consolidation within the cent set sector excuse me or have covenants are higher, difficult, more difficult for some banks versus others. You do wonder about the slowdown in lending and then what does that mean essentially for economic growth? And there's also a lot of concern here about the shift in money from one bank to another. And he also talked about this in his interview. The idea that he expects to continue to see the shift away from smaller banks is permanent, pretty much referring to commercial depositors here. And the idea that I mean, we've already seen a show up in the data, but the idea that that could actually worsen and it does raise the question of sort of what that leaves us with. I mean, small banks serve a very important function because they do things. They lend in a way. They have relationships in a way with certain businesses that are just, frankly, a Bank of America. JP Morgan just isn't going happen. Well, that tells us nicely up for what's going to happen at 415 p.m. We're going to get an update on that H. 8 data series. I believe it's called usually not something we pay attention to, but when we're trying to piece together that deposit flight, that's one of the pieces of the puzzle. And contrary to that, everyone everywhere. 415. Yeah, yeah, absolutely. It isn't it on my calendar. Who believes that? Raise your hand. And what I'm keeping a close eye on, obviously, as we head into the close, a lot of my sources have been telling me not necessarily all of them want to be long heading into the weekend after some of the headlines obviously coming out from the bank. So keeping a close eye on that, especially when you rate looks like heading into foreclosure, you don't see that in the trade right now. So what are you saying? For example, I really think that rightly explains a lot of it, that after what we saw last week and maybe if you're in Deutsche Bank, maybe you just offload that now. I guess we'll see what happens. You know, in the next 45 minutes, if we continue to stay at these levels, I will be floored that that will have that. Certainly on the equity side of things, I had always optimistic. Somebody has to be in this environment. All right. We're gonna be back in less than an hour's time. Radio, TV. YouTube has a pony in there somewhere. Bloomberg Originals. I hope. I hope. Beyond the belt. Join us at 4:00 p.m. Wall Street time. All right. Let's continue our markets coverage right here on Bloomberg Television, a little more than 50 minutes to go until we get to the closing bell. Joanne Feeney joining us right now, partner and portfolio manager at Advisors Capital Management. Joanne actually sees an opportunity and some tech names like IBM, Cisco and Broadcom. Joanne, great to have you here on the program. I do want to get your thoughts here on what we're seeing in the tech sector. But before we get there, I am curious here about just the general shift and these are quickly shifting sands here and investor sentiment surrounding whatever the latest sort of development is in this banking crisis. If we can call it that. Yeah. Ramon, good to see you again. And it's certainly shifting sands is the right characterization. There is just new information coming in all the time. And investors are struggling to keep up with that and reassessing the expectations for banks. You know, the failures we saw do not appear to be systemic. We've seen a lot of details about that yet. We see other one off concerns like with Deutsche Bank. But I think going forward, the banking crisis seems to be contained. And I don't think we need to worry about that. But I wouldn't expect things to settle down anytime soon. I think it's important at this point for investors to look beyond the banking crisis and recognize that the year ahead of us and that we're in the middle of, we'll still have plenty of other sources of volatility. And it's really important for folks to position for that depending on what their needs are, whether it's cash flow right now, whether they're waiting a lot, whether they have the time horizon to get into tech names. We've seen some excitement in some of the growth here names. So there's opportunities there. Well, let's talk about that, because we were talking about this in the NEWSROOM a little bit earlier. The big outperformance that we've seen in growth stocks relative to value specifically in that tech space. The big al performer on the week. Yeah, I think there's a couple things going on. One is folks are finally realizing that we are far closer to the end of rate hikes than we were last year. In fact, we've seen rates come down because of concerns, though, about a more likely economic slowdown. With those issues you guys we're talking about before more constrained bank lending. On the other hand, if you're an investor and you want to find some companies that are likely to deliver sales and profit growth even through a recession, some of those tech names are likely to deliver because we're still seeing expansion of data centers. We're seeing the demand driven by A.I. We're seeing the demand driven by not just 5G cellular, but now companies moving to get ready for sixth generation cellular. So there's there's structural growth out there. And I think that's what investors are now looking to make sure is in their portfolios. Also in name some names. What names do you specifically like here? I know I see IBM in your list as well. What's the bull case for IBM in this environment? IBM is going through a transformation, you know, with Red Hat, with more software. They've offloaded some of their legacy products that were really slow growth. And so it's still a bit of a turnaround story. They also have a pretty decent size, you know, consulting business, which is pretty resilient, even though we've seen other consultants pare back on their labor. So I think you have some unique drivers in IBM that enabled it to outperform last year and we think it's good to hold on to plus they have a very attractive dividend in this kind of environment. A lot of our clients are saying get me some dividends because the stock prices are likely to remain volatile. At least I know I'll have that building up in my portfolio. Well, Joanne, we don't have much time left, but when it comes to dividends, is it sort of a blanket recommendation there when you're going through some of those high dividend names? What are you looking at beyond just the dividend level? Yeah, no, we're looking at the whole total return opportunity and what we're looking for a quality companies that have the free cash flow that really can sustain and enable them to raise the dividend, because in this high inflation environment, great clients and investors need to see the real value of those dividends rise over time. But again, you also want to make sure you build that appreciation potential. That's where we see a company like Broadcom fitting in really well. It has a yield well above the S & P average, but it's exposed to that cloud and data center area that I mentioned before. That's likely to see multiple years of growth well above the average for the S & P 500. All right. Joanne, always great to catch up with you. Joanne Feeney, advisors capital management partner and portfolio manager, helping us counter down to these closing bells with a little less than 50 minutes to go. Linda, this is going to be joining us to give us her insights. Senior equity strategist over at Federated Armies. Plus the discussion up ahead here about the drop that we're seeing in share. The Deutsche Bank falling the most in about three years after announcing a plan to repurchase debt. The jitters in the banking sector continue. And we're going to get some insights here out of Dan Rouleau, formerly of the Fed. Larry Summers, formerly of the Treasury David Westin sat down with them, as well as our very own Stephanie Flanders, about how to stabilize the financial sector. Highlights from that exclusive conversation coming up in just a bit. Stick with us. This is Bloomberg. All right, time now for our Wall Street week daily segment, the host of Wall Street Week David Westin joining us right now. And David, we were speaking yesterday, as we do almost every day now, pretty much. And you had a great interview with the former head of IBM, Sam Palmisano. And as we were concluding that interview, you had to scurry off because you had another exclusive interview with all three folks here. We did a roundtable with Larry Summers, the former treasury secretary, as well as DAX, a former governor, Federal Reserve. And, of course, our very own Stephanie Flanders of Bloomberg Economics. And we sat down to talk about what happened with the banks. Where did it go wrong? And one of the things we talked about with them was that the Federal Reserve's decision this week and what Jihye Lee says, news coverage and whether he said the right things to calm the situation down. This is part of what we've heard. Arguably the most difficult decision since he's been there, although I actually think market expectations helped him. They had sort of converged around 25 basis points and then it became a communication issue. I mean, when I was struck by David in on the monetary policy side of what he said yesterday was that he he said quite explicitly, it's too soon to tell how monetary policy should respond to the anticipated credit tightening. But I actually think their actions yesterday were a fairly significant response. I mean, everybody is three or four weeks ago, people were anticipating a 50 basis point increase. We get 25, three or four weeks ago, we thought we might see the SEP suggest a ceiling of 5, 7, 5 or 6 percent interest. And now we're back to exactly where they were in December, last December when they did the last step. And of course, they changed the language on the what what the forward guidance type language instead of ongoing increases were back to may have some firming. And of course, some people are reading that as the end or close to the end of the tightening cycle. So I actually thought that they were conveying more than an assessment of the impact then Chair Paul Allen suggested in his remarks yesterday. So, Larry, what about you? In the past, you've suggested perhaps they might have to have a trauma rate as high as 6 percent. Do you agree with Dan that what we saw from Jay Powell and the Fed Reserve this week was a monetary policy reaction, what we've seen already? And if so, was it appropriate? I think what they did was broadly appropriate. It was a time for temporizing because there's a lot of uncertainty and a lot of cards are going to be turned over in the next several months. And the question then was just temporizing, mean stopping all rate increases. And I think if they had done that, it would have sent actually a signal that they were very highly alarmed and would have been a mistake whether to continue precisely on the path that they were on before these banking concerns arose. I think that would have seemed almost oblivious to what was potentially gathering storm. And so I think, as Dan suggests, that a middle ground path was right and it was particularly right. If the policy is going to be signaling in a clear way that even if your bank fails, you're going to be a depositor as well. And so nobody in America needs to have the kind of sweaty palms weekend that a large number of people had worrying about whether they were going to meet their payroll because of Silicon Valley Bank. And I think in the context of providing those kinds of assurances that the monetary policy path they set was appropriate and appropriate, it doesn't mean that it will turn out to be right. Appropriate means that the errors are kind of two sided, that there's a chance that they'll need to tighten more than they're currently projecting. And there's also a chance that not all the tightening they're currently projecting will be necessary. I think if authorities are sufficiently aggressive about adding confidence to the system, my guess, best guess is that the Fed's judgment in the SGP will turn out to be considerably more accurate than the market's assessment that the Fed is going to be pushed into rate cuts very soon. But that's a judgment that one can't have any great amount of confidence in. But yes, I think what they did was broadly appropriate, particularly if we can be sending reasonably strong signals of confidence in the system. So, Stephanie. Let me ask you about what we saw from the Fed Reserve this week and in a larger context, what it indicates, if anything, about central banks in general and how they're reacting to this situation. Look, I think it showed, you know, we've had a lot of debate about whether there's a conflict between trying to bring down inflation as effectively as possible and how to us in responding to this situation in the banking system. And Larry, is Larry's said it well, but I think also we've had sort of central banks explicitly say, the ECB saying we have a different set of. Tools available. We had a bit of that from the Fed this week, but I think, you know, propping up confidence in the stock market is in conflict with bringing down inflation in an orderly and as effective way as possible. But trying to resolve these questions of confidence, especially if we do see the kind of policies that Larry and Diane have been discussing down the road, I think is perfectly consistent. What I would worry about is that uncertainty is going to continue. The uncertainty about how these higher interest rates feed through into bank balance sheets and the broader economy is going to still be there in six months time. And you are going to have those potentially those discontinuities that Larry was talking about earlier, which the Fed is not necessarily going to be able to gauge. So, yes, it was the right decision. And it makes the point that it doesn't have to be a conflict between these two things, but it probably still narrows the path. Yes, again, to an effective approach. That was Larry Summers. He's a former U.S. Treasury secretary, former Fed Governor Dani Burger and Stephanie Flanders of Bloomberg Economics. And really, you heard them now say they appreciate the Fed trying to both fight inflation and settle down the banks at the same time. It's not an easy job. We'll have more from them tonight on Wall Street week at six o'clock Eastern Time, where they'll talk about what went wrong. The regulations lead us so badly astray. Well, that's the question. I mean, you can't really talk about the solutions unless you have a real understanding of why we ended up in this situation in the first place. And one of things I found really fast, because Dan really created stress test. And Larry asked him. He said what would have happened, in fact, if you'd put Silicon Valley back through this stress, as he said? Denton I don't think we'd made a difference because they were not testing for interest rate risk. Interesting. All right. Well, your show less than three hours away here at 6:00 p.m. New York time. Be sure to check out David Westin on Wall Street week. Still ahead here on the big show, we are counting down to the closing bells here a little more than 30 minutes ago. Stick with us. Markets are relatively unchanged on the day, but despite the wild week, despite all the volatility, most risk assets actually holding on to gains on a weekly basis. Stick with us from New York. This is Bloomberg. Romain, big news. The pet economy. It's expected to grow more than 50 percent in the coming years due to animal lovers spending big on sophisticated drugs and treatments for their furry friends like recreational marijuana. Oh, I think so. Yeah, I'm just checking on her now. You know, we have a little Web cams set up, you know? Yeah. She's done our turn up hours or anything, so that's good. What's her name? No drugs. Yancey, Yancey, Enzi. The percent G. Yeah, I get it. I mean, look at the end of the day. There is sort of no cause. I mean, you know, I mean, I hate to make this comparison, but, you know, it's almost like children. Right. Your children get sick. You're not going to like you like quibble about the costs. Right. You're just gonna go there. I'm so thrilled that you did, because you feel the same way. You are animal lover, but you have bigger animals, right? I have. You have a horse. I have a horse. And then I have a really tiny cat. So I NIKKEI. I'm on both ends of the spectrum. And I really don't know how you manage to keep them both in the same New York City apartment, but difficult, I would assume that they have to be relatively costly. Hey, isn't cheap. Oh, my God says I mean, I don't even want to talk about it, but cats in particular, they're, you know, expensive, too. We actually recently had a health scare with CAC trick. That's his name. And I was of the same attitude. I was like, I don't really care how much this costs right now. Find out what's wrong with this animal. And also is that when you look at this, that this story and there's been a lot of other data that's come out over the last few years about why we're spending so much more. Right. It's the idea that I mean, I guess for lack of a better word, we've kind of humanized the animals in a way that maybe didn't exist a few years ago if you dedicate decades ago. And that means that we have a deeper connection to them. And so we feel more of responsibility not just to fix them when they're sick, but even when they're well, we've got to buy them an expensive chew toy or something else. I know you're generalizing, but I can just say I bought you into all these nice chew toys. I know she chews on your shoes, dryer balls. Delicious. This is Bloomberg. This is the countdown to the close, about 30 minutes left to go here in the day. And believe it or not, Katie Greifeld, it is Friday, but it is Friday. We have the S & P 500 adding to gains right now. And pretty low liquidity, though. And you look at what's happening on the sector level. You have more green than red. You look up top there, it's utilities leading the charge, extending gains up two point eight percent. Real estate, consumer staples also getting a bid as well. You go down to the bottom, what's not doing so well. Financials, of course, have been under pressure all week. And then you look at consumer discretionary bringing up the rear down two tenths of a percent. Yeah. Take a look at some of the other individual movers. Metro platforms up about a percent on the day. A lot of the big cap tech names really doing their best here to keep this market afloat. Keep an eye on match group. Remember, it was just I don't know, what, six, seven sessions ago. It actually hit a record low, but it's been on a tear ever since then, up for about six straight days, including one percent here on the day. Coinbase trying to recoup some of the losses from the last couple of days, up about 3 percent here on the day pack was relatively unchanged. But again, we talk about the risk going into the weekend, the idea that there are a lot of issues with the banking sector that have still yet to be fully resolved. So something to keep an eye on not only today, but really for the days beyond. Also keep an eye here on, well, the cost of capital, the cost of lending and more importantly, the idea here that, well, there are a lot of companies out there, they have no choice but to come back to the market to refinance. And that has a lot of people making bets, making bets to the downside that some of those companies could struggle. What you're looking at behind me is the main ISE shares are ETF that tracks the real estate sector, has three partners crunched the data about 40 percent and a little more than 40 percent right now of the float out there on this ETF. I why are is now short? This is an interesting move here because a lot of people are looking at the real estate companies, particularly in the commercial space, and saying that those long term structural trends that have made those such good bets over the last few years has now completely flipped and there's not going to change anytime soon. Well, I remain going back to the banks, Deutsche Bank. It's the latest focus of the banking turmoil in Europe as concerns about the broader sector sent the lenders shares tumbling by the most in three years. German Chancellor Olof Scholz weighed in earlier at a news conference in Brussels. Let's take a listen to Deutsche Bank cutting shifts. Deutsche Bank has fundamentally modernized and reorganized its business model, Majorca, and is a very profitable bank. If you're top bunk, there is no reason for concern. For more, let's bring in Alison Williams, of course, she is our senior global investment banks analyst for Bloomberg Intelligent and Alison Deutsche Bank. It seems like this cropped up overnight when you think about what we saw in the five year CBS in particular. I mean, we just heard from the German chancellor. We've heard from others saying that this is overblown. What's your view? So I think, you know, after the events of Credit Suisse last weekend, investors are obviously skittish and sort of looking around and I think for years Deutsche Bank was the weaker bag. But I would point to the fact that, you know, since mid 20, 19, when they announced their plan, it was a long haul of executing that plan and restructuring, making cuts. Do you risk risking? So they really have made a lot of progress. But the issue, I think, for all the banks is that it's really about sentiment right now. And there needs to be something to help know, to help steady things broadly. Well, that could be something with the same kind of change to write letters for gage deposits. Or it could be just some sign that the deposit outflows are slowing down. Well, I'm curious. I mean, as an analyst, as somebody who tries to model this and usually sort of I guess traffic's lessened sentiment and more on the actual data itself, I mean, how do you model this at this point or do you not do you just gonna sit and wait? Well, that's exactly the question, because it's hard to bottle sentiment and it's hard to judge what is going to be the thing that finally study sentiment, because we are at this point and what we've seen over the last couple weeks at a point where market sentiment can drive reality, and I think that's why regulators are coming out and trying to reassure. But that tends not to be the thing that makes investors feel better. I don't think that. Well, we've already heard that U.S. regulators don't have an appetite to insure the entire deposit market, although earlier in the week we did hear talk of looking at different things. So we'll see if that can happen. But as an analyst, you know, the capital of all of these banks, especially compared to the global financial crisis, is leaps and bounds ahead of that. You know, the question is all about liquidity. That was the that was the shift that we saw most recently at the banks. And I think now there's also investors are really starting to assess, you know, sort of the next steps. So, yeah, and whenever we get a liquidity crunch, the next step tends to be a credit crunch. And that's why there seems to be an evolving focus on commercial real estate. Well, Alison, at about 415 p.m., we're going to get the latest weekly data of H. 8, which should show us what deposits looks like, whether we're seeing a movement from those smaller banks to the larger banks. What are you expecting to see? So I think that the reason why this data is so anticipated is keep in mind it comes out with a lag. So this will really be sort of the first look at what happened with top on an industry basis. Since then, Silicon Valley Bank shares and concerns really arose a couple weeks ago and then eventually the bank was seized. But I guess I'd point to two things. You know, we'll be able to see the overall data. We'll be able to see the smaller banks versus the larger banks. But the larger bank data for the top 25 banks, you're not going to be able to see sort of the flows in to the biggest three banks, which people expect are the ones that deposits are flowing into. So you're not going to be able to see any switch there, but you are likely to see some outflows. This is something that I think was happening at a much slower pace. But, you know, all I think in general, we were expecting deposits to go into higher yielding sources and banks would have to increase those deposit rate. So we expected some pressure on net interest margins. But certainly the last couple of weeks have accelerated those outflows. And so we're going to want to see what the magnitude here it is. The other positive data point that we've gotten is that a lot of these banks are tapping the facility that was put in place. The sun was it was only a week ago, two weeks ago, that debt ceiling that was put in place, that the banks aren't tapping that. So hopefully that's been helpful. Alison, I'm sure we're going to be checking in with you very soon. That is Allison Williams. She is senior global investment banks analyst for Bloomberg Intelligence. Now keeping you up to date with news from around the world, here's the first word with John Hyland. Hi, John. Katie, Russia is dialing back plans for a further offensive in Ukraine this spring after failing to gain much ground. The Kremlin says it will instead focus on blunting a new push by Key's forces expected to begin soon. Bloomberg has learned Moscow is digging up in a long fight. Can sign up as many as 400000 contract soldiers this year to replenish its ranks. The US has carried out airstrikes in Syria following a deadly attack there that killed one American contractor and wounded five service members. U.S. officials say a drone of Iranian origin crashed into a coalition base. According to the Pentagon, the U.S. airstrikes hit facilities linked to Iran's Islamic Revolutionary Guards. Here in New York City, police are investigating a suspicious envelope filled with an unidentified white powder delivered to the building that houses the Manhattan district attorney's office. That's where the grand jury is hearing evidence in the investigation of Donald Trump over a payment to adult film star Stormy Daniels. The grand jury isn't in the building today and it is expected return early next week. Police say there are no reports of injury or sickness. Many schools across country are seeing increased problems, getting kids to learn and behave in the classroom. Officials and doctors say it could be linked to an ongoing shortage of Adderall and other medications for ADHD. Doctors say kids who've gone off their medications can have trouble concentrating or completing their schoolwork. And they say behavioral changes can be severe. Michigan Democratic Senator Gary Peters said this week he'll introduce legislation to help ease that shortage. Global news 24 hours a day on air and on Bloomberg Originals, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm John Hyland. This is Bloomberg. Time now for our Stock of the Hour, a look at Coinbase Coinbase shares is actually rebounding a bit after falling almost 20 percent over the previous couple of days. A wells notice from the S.E.C., something you don't sneeze at. Maybe investors are adjusting to what they know or maybe importantly, what they don't know. Let's get right to it and bring in Bloomberg reporter. Usually Django covers the crypto market for us. And let's talk about exactly the context of this. Wells notice they didn't really go into specifics, but we do know some of this does relate to their sticking brands. Seeking operations as well as some other unspecified ways that they've been, I guess, conducting. Right. So Coinbase this week disclosed that they have received a wells notice from, as you see, informing them that the agency is preparing to take legal actions. And Coinbase said they couldn't get a lot of information from the S.E.C. despite trying to engage with the regulator and having multiple meetings. And therefore, they said it's not exactly clear to them what the wells note is will be related to in terms of specific lines of business. And as a result, when it's actually listed quite a wide range of products that they think could be potentially affected. And that includes taking, as you said, but also asset leasing, the spot market, the Coinbase prime service, as well as Coinbase wallet service. So this has become quite a significant overhang on the stock. Well, I want to talk about what this means for the business, because I imagine this is going to take some time to resolve. In the meantime, though, what happens if Coinbase so when they said always immediate term, they don't expect to make any changes to their products or services. These all of the products are still operating as usual, and then they're ready to prepare for litigation. And the co-invest chief legal officer said they're confident in the legality of their services and they will welcome even a legal process which they think will provide clarity on some of the rules when it comes to ask. I am curious about this strategy, the legal strategy, because they're not the first company that seems that basically just said they're fed up with regulation or rather what they are saying. There's ambiguity and regulation and they feel like they want a judge to come in and just basically say, OK, here is the lay of the land here. What gives them the sense, though, that they would actually win? So as we know, there's this long running dispute between Coinbase and other crypto companies with the S.E.C., which has been coming out with a series of enforcement actions, bitcoin. This really is the biggest target that the S.E.C. can take within the United States. Coinbase is the biggest crypto exchange. And therefore, Coinbase believes that they have the legal resources to take on whatever process that will come next. But then Coinbase is also really rallying on social media and telling people to tell their congressional representatives, for example, and let them know how important crypto is, how important crypto is. It'll be interesting to see how this fight plays out. He's Yang over a Bloomberg News covering all this for us in the crypto space. We turn back to the broader markets here, counting you down to the closing bell. Linda, we're going to be joining us, senior equity strategist over at Federated Army. Stocks now back in the green on a daily basis. And we should point out, Katie, they're solidly in the green on a weekly basis as well, solidly in the green. Then you have bitcoin down almost 2 percent. We'll be back in a moment. About 40 minutes until these closing bell. Stick with us. This is Bloomberg. Beyond the Bell Bloomberg's Comprehensive Cross. Coverage of the US market closed starts right now. And right now, we are two minutes away from the end of the trading day. Romaine Bostick alongside Katie Greifeld. We're counting down to the closing bell. Here to help take us beyond the Bell, Carol Massar and just met and joining our global final cast. Welcome to our audiences across Bloomberg Television, Bloomberg Radio, Bloomberg Originals and those folks streaming on YouTube as we get closer to the closing bell. Seeing some buying here. GREENE Across the screen. Carol Massar. Yeah, look at it. Taking another look up here in the last few minutes, which is pretty remarkable. And you guys, we've talked about it earlier. You know, you look at the regional banks. I mean, they're actually rallying today. They're up about 2.8 percent in today's trade. Yes. And that has to make investors feel good when you are seeing those regional banks, as well as some of the more larger lenders holding up. Well, especially if you're looking just on a weekly basis as far as stocks holding up not just last week, but this week as well with those weekly gains remain. I will note that this rally is coming on some pretty light volume. You look at the S & P 500 volumes, about 3 percent lower than the 20 day average, but that's normal for a Friday. Maybe that's comforting that we don't have very high volume right now. Yeah, absolutely. The volume has definitely tapered off a little bit here. It will be interesting to see how much exposure people want going on into the weekend. And we should point out we are up against what is effectively the end of the quarter here at the end of next week. So a lot of people are going to have to reposition. They're going to be forced to reposition based on their mandates. So there could be some interesting price action going into next week. And then, of course, after that, we have to start talking about once again, Katie Greifeld earnings season. Oh, yeah. Let's go. Yeah. Earnings season never ends. And well, here we go. We get the closing bell. If you're in New York, the clapping begins and the cheering begins here. And, well, they actually have some reason to clap and cheer here on this day. Dow Jones Industrial Average higher by more than 100 points or about four tenths of a percent here on the day. That's not going to be good enough. Well, I take that back. It's gonna be good enough to give it a weekly gain of about nine tenths of a percent. The S & P 500 higher by 22 points or about six tenths of a percent. It's holding on to a weekly gain right now of about 1 percent. The Nasdaq composite up about 3 percent, a three tenths of a percent on the day and about one and a half percent almost on the week here. The Russell 2000, though, is going to squeak out a gain for the day, up about nine tenths of a percent. And it's going to end relatively unchanged for the week. Yes. Speaking of volatility, get the volatility index, the VIX. I mean, man, at a time today was up about two point six at twenty five above 25 at its lows, down more than two points at twenty two and change but actually about 21 and change, forgive me. And finishing the day just just down about a point here. So I find the complacency in this market amid kind of the news flow this week is startling. And I mean it's been interesting. We've been talking about this weekly rally. You can see that on the industry group as well for the day's action. Utilities, though, up at the top kind of defensive. Their utility is higher by about 3 percent. Then you have real estate and household products and there's more greens and red. But if you go down to where the red is, you can see semi's at the bottom. Remember, they've been on a tear and they were the leader yesterday, not so much today, off by a percent and a half. And then you have autos down as well, Carol, off by eight tenths of a percent. Yeah, the stock's still up about 23 percent so far this year. All right. Let's get to some individual gainers. This one, number one in the S & P 500. Number one in the NASDAQ 100. We're talking about Activision. You know the story. We've been talking about it throughout the day here. It's up about 6 percent at the close. UK Competition and Markets Authority updated its provisional findings in Microsoft's acquisition of Activision after some new evidence showed the transaction will not result in a substantial lessening of competition in console gaming the UK basically. God bless you. I think I don't know. Basically UK feeling OK about maybe this deal going forward. So Activision certainly a standout here. Number three, the S & P 500. Number two in the Nasdaq 100 is intuitive surgical maker of the DaVinci surgical systems. You know this name, William Blair, initiating coverage with an outperform rating and is bullish about durable growth at the company. So a pop there and I had to mention Renew Energy Global up 22 percent here at the close. It's a two point one dollars billion market cap renewable energy company. It's based in India. Bloomberg reported, citing those in the know that the Canada Pension Plan Investment Board exploring buying the shares of the power producer that it doesn't already own and taking the NASDAQ listed firm private. Then that explains totally the rally. Big time in that name. Yes, and I'll grab the decliners. So have to start off with what we're seeing with the U.S. listed ADR for Deutsche Bank. It did finish down a little more than 3 percent. But again, that did pare a lot of the losses, especially premarket, when it happened down more than 10 percent. Obviously, we did see that steep rise in the cost of to insure those bondholders against the bank defaulting on its debts and obviously the concerns about those credit default swaps, but still seeing a big paring of losses there. And I have to point out, J.P. Morgan, obviously big bank in the U.S., but still down. Nearly 2 percent, but not a lot. So just want to point that out for perspective as far as how U.S. banks are holding up. And then, of course, I want to point out what's happening with in fees energy. Now it's posting its worst decline in about a week. It was amongst if you're looking at the S & P 500 NASDAQ one hundred one of the worst decliners in that group. But also, I wanted to point out one that's not on there. So Scholastic. That's down twenty two percent worst percentage drop since 2003. And that did post a drop, unfortunately, when it came to its revenue in the latest quarter and it did cut its guidance for the full year. So really seeing that share pressured as well. Let's take a look at yields here, because this has really been driving the story. We talk about coming off what happened six straight weeks where we've seen yields rise. Now we are officially down for a third straight week. We've basically gone from almost 5 percent down to three point seven and change on a two year yield that includes about a six basis point drop here on the day the 10 year yield down about 5 basis points or 20 year yield making similar moves here on the day. And I would like to point out that most of the indexes that track the debt market, including sovereign debt as well as corporate debt, actually saw pretty substantial gains on a price basis this week. That even includes high yield as well as some of the sovereign debt and the safer stuff out there here. And that really raises the question here is what crisis in a crisis I forget. Well, I mean, high yield is its own story. But you think about the the bid coming into the long end of the Treasury curve, you think about all the rate cuts that are being priced into the front end. What is going to happen? What do bond traders see happening in this economy where that trade would make sense? It doesn't seem too pretty. You know, we talked to Chris Whelan, who we talked to him so much. Sure. In the great financial crisis, understands the banking sector. I mean, he basically says the Fed's going to cut rates now. He also says the Fed needs to let inflation run high at this point. I mean, the concern is at this point, who else has the Treasury exposure? Right. And if you think about it, that's kind of his take at what needs to happen. I'm curious about what happens when Janet Yellen maybe comes out shortly from now and what she says or does maybe when it comes to the bank sector. Y'all, if we look ahead toward the end of next week, we are going to get the P.C. indicator. Obviously, the Fed's preferred measure to gauge inflation. We talk about CPI so much in the gap a bit there still between the Fed's terminal rate and CPI. But if you look at where P.C. is, words projected not too far off now. So it doesn't make you wonder is when it comes to what the Fed's watching is. Indeed, when we look at P.S., will that be right there where they're looking for it to be at this point? They still got a long way to go here. And we talk about the impact and the work that has to be done. Is that going to be done through the main measures? Are the policy levers, if you will, or is it going to be done by kind of what we saw over the last couple of weeks when the market sort of did some of the work for them? I'm not sure they necessarily want that, because, of course, maybe that means it's a little bit more out of their control. But you have a lot of forces now, a lot of deflationary forces, I should say, now working not necessarily in tandem, but certainly working out there in some capacity to the point that what we're seeing in the banking sector, what behaviors could change what that means for the tightening of financial conditions? Hard to quantify. It just introduces another element of uncertainty and trying to map the Fed's path forward. I mean, Jerome Palin, so self said it's really impossible to quantify what the impact is. It's at least one 25 basis point hike. But who knows? Definitely. And remain. I know you like to do those weekly pop pop quizzes when it comes to the biggest gainers of decliners. But you do, which the biggest gainer was this week. It wasn't like in the S & P. I mean, wasn't like match or something like that. So it was regenerated vertical. So it was up close to 10 percent. It was its best week since September. The former general. Yeah, right. A bright spots, Carol. How are you? You kind of you look good today, by the way. Thank you. Every once in a while. We get it. We get it right. That's your compliment. I really appreciate it. Thank you. I like the bow tie as well. What's interesting is I hope we're focusing on the right thing. And this is in terms of what do you mean the right thing that going back to. I'm thinking about this conversation we had with Chris Whalen that maybe we need to stop worrying about inflation at this point. Maybe the Fed does need to stop raising rates. Maybe it needs to cut rates to maybe ease some of this potential exposure. We still don't know really. Right. All these bank balance sheets are potentially on what's supposed to be a safe trade treasury. I know we have to wrap it. I'm sure the regulators are on top of it. You really think so? No. Yes, exactly. That's my point. So I'm a little worried that data, inflation data, maybe that's not what we need to be worried about at this point. All right. I'm getting yelled at and I look so good faith. I can stay here. I mean, keep me feeling herself now. All. All right, guys. Have a great weekend. One of the wine segments today. We had a banker. You know, we have a bank crisis or so we can't do wine. All right. Have a good weekend, guys. That'll do it. Beyond the Bell. We'll catch. Same time. Same place on Monday. All right. Stick with us, a lot more coming up here, a look at what's going on in the banking sector, particularly when it comes to the smaller banks, the community banks and those minority deposit companies out there. Rohit Matt Miller are gonna be joining us, who leads Citi Group's new initiative with Wal-Mart. You got to hear what he has to say. That's coming up after the break. This is Bloomberg. Amid all the turmoil in markets right now, it's really hard to understate the importance of small banks here in the U.S., there's roughly 48 hundred community banks in the US making up about 60 percent of all small business loans are holding about 5 trillion in deposits. And that brings us to the big number of the day, five point five trillion. That's the precise amount of deposits that small domestically chartered banks here in the U.S.. And it's been falling for seven straight weeks now. That's the longest contraction we've had since data began being collected back in the 1970s. Now, a deposit flight as well, a concern for a lot of folks and tighter loan controls even more of a concern because it would cut off a vital source for small businesses. Small businesses that employ about half of the Americans out there. Marc Lasry, the billionaire co-founder, Avenue Capital, he was on Bloomberg earlier. He said there's little benefit for small businesses and other depositors to keep their money with regional banks unless, of course, well, the Fed steps in. Goldman Sachs economist quantify the impact, saying that if community banks get more conservative about lending to preserve liquidity, it would shave a quarter of a percentage point off GDP this year. JP Morgan economist said it could even be worse. A slowdown in credit growth could take up to 1 percent off GDP in the coming quarters Kitty. Another reminder here of just how important these small banks are to the U.S. economy. Well, that brings us to a new initiative between Citi and Wal-Mart, introducing, of course, the bridge built by Citi platform to Wal-Mart's 10000 small and medium sized businesses in their U.S. based supplier network. Now, Bridge will connect SMB with a diverse group of more than 70 lenders that provide qualifying businesses with loans of up to 10 million dollars. For more, I'm pleased to say we have had a fridge built by Citi on set with us. Rohit Mathur and Rohit Talk does us through how this came to be. Why now and why with Wal-Mart in particular? Yeah, that's a great question. So Citi has been working on this initiative for the past couple of years to really help the SMB ecosystem. Now that starts with the borrower, right? That starts with the small business owner that that needs access to capital. Like you said, that is the lifeblood of many businesses. And often the number one challenge that they have is finding access to that capital. It involves lenders. So we've got seventy five plus lenders in the platform part of the 40, 48 hundred community banks that you talked about. Very important to provide that capital. But then it also includes large corporates like Wal-Mart, which we've recently partnered with, which has access to these 10000 plus small and medium sized businesses that sell to them. That means that they've got data from these businesses that can support decision making, but it also means they've got these businesses that have a need once they get a purchase order from Wal-Mart. And I'm going to show you a very basic question, because I think it's important for our viewers to understand why would a Wal-Mart do this? And more importantly, why would a global behemoth like Citigroup do this? Explain the important. Sure. So from a Wal-Mart perspective, you know, there's a lot of programs that they have to support their suppliers on a full shipment perspective. So once they give you an order, you have to go build that order. Maybe you have to hire some employees. Maybe you can buy some commercial real estate to fulfill that order. How do you finance that? Right. That is the question that that Wal-Mart wanted to answer in partnership with Citi. And that's how we've created this bridge built by Citi partnership. Finding that capital to support from a purchase order all the way to an invoice post invoice. There are programs that banks have and other corporates have that can support that invoice being paid sooner. But really, the pre shipment part was a big question that we've tried to solve using bridge. And I mean, talk to us a little bit more about the process. If I'm a Wal-Mart supplier, for example, how would I get involved in this? Sure. So if you're a Wal-Mart supplier, you have access to the bridge both by city website that's special by city dot com slash Wal-Mart. You go to the platform, you can submit your request. You can put in your Wal-Mart supplier, I.D. That then verifies that you are a Wal-Mart supplier. You can go through the process. What we've done is take, you know, questions that would take a small or medium sized business owner days to answer with a bank. It now takes 20 to 30 minutes to submit that request to our platform. Right. And on the other end of this, you've got seventy five plus lenders that can request and that can respond to those questions. Right. On the platform. So as a small business owner, you can spend 30 to 45 minutes and then get these options and compare your choices and pick the right one. By the way, that's exactly what a large corporate do. So what we've done for small and medium sized business owners is what large corporates already have available to them. I'm going to interrupt you right now right in conversation with Robert over at City Bridge by City. We do have some breaking news. This is a read out here by the Financial Stability Council. This is basically a Department of the Treasury that includes the heads basically of all the main financial regulatory agencies. Janet Yellen convened this meeting, the second one that we've seen over the last couple of weeks here. The statement is out there basically saying that they did discuss efforts to monitor financial developments. They did say, in their words, that the banking system here in the United States remains sound and resilient. This is a statement coming out of the Treasury. There are no further details here about any actions that they take, any actions that they would discuss. Or anything going forward. It is basically a discussion about ongoing efforts with the member agencies to monitor financial developments, and in the words of Janet Yellen, the banking system in the US remains resilient and a sound. The Financial Stability Oversight Council will convene putting out this statement. Katie Greifeld, that's all we know for right now. And, of course, Roe. That's the context in which we're having this conversation. A lot of questions right now about small and mid-sized banks, really the future of these regional lenders. And given that concept texts the past few weeks that we've seen. How would you expect that to affect this initiative, if at all? Sure. So, you know, all of the lenders that we're talking about, these are Main Street lenders, right. I think everyone talks about the large banks, but there are 43, 48 hundred banks in the U.S. Many of these are lenders that lend to small businesses. That is the bank's bread and butter. And for small businesses, that is how they access capital. Well, I do want to go back here to the issue of deposit tumor, getting more headlines, crossing the Bloomberg terminal. This on the level of bank deposits in the United States system, dropping by about ninety eight billion dollars in the week ended March 15th. So backward looking data that doesn't capture some of the turmoil really that we've had over the last few days. But this is the big concern, right? It's not so much just the money coming out of the banking system altogether, but also the rotation. Right. The idea that some of the banks, that group that the city is working with, a bridge by city or Wal-Mart is working with that they're going to suffer from this, as everybody says. Well, we don't trust the smaller banks, but we trust a city, a JP Morgan of the Bank of America that does not maybe result, at least not here in the US in a functioning financial system. Exactly. Right foot for a functioning financial system. It is the envy of the world that we have 40, 40, 100 banks. And that is why the system is so strong. What bridge does is give you access to those banks. So at times when you're looking for a bank, you can now use the platform, whether you're a Wal-Mart supplier or not, and you can use the platform to find those institutions. And as our CEO recently said, largely all of these banks are very stable. Right. We've had it. We are well capitalized, but in the large and mid-sized banks. And so these banks will continue to be that lifeblood for small and medium sized businesses. All right. You're going to have to leave it there. Appreciate you taking time for us here on a day with a lot of news crossing the wire. Rohit Mathur is the head of Bridge built by Citi, an interesting partnership with Wal-Mart, and really a lot of efforts only by Citi, but a lot of the big banks here to stabilize their smaller brethren. The importance to our financial system. Stick with us. A lot more coverage of what's going on out there. This is Bloomberg. Despite all the turmoil this week, if you bought songs, stocks in aggregate, if you bought treasuries in aggregate, if you bought investment grade bonds in aggregate, if you bought commodities in aggregate, well, guess what? You're actually higher here on the week. In fact, one of the weakest things that we saw this week was the dollar which continued that downtrend that it's seen over the last few weeks versus the yen and versus the euro. We saw a big rebound in some of the banking stocks, even though some were left out here on the party. First Republic still remains down about forty six percent on a weekly basis. Yeah, that to the 70 percent drop that you had a week or so ago here. And you get a sense here that there are still some unresolved issues. But as a group, believe it or not, bank stocks actually held up this week. It wasn't massive gains here, but I think any green on the screen, a lot of investors will take. Meanwhile, we were talking a little bit earlier about the pet sector, Petco, which had its worst day on record just two days ago, down 21 percent this week on the back of some tepid guidance. GameStop shares finishing out the week very strong, up about 44 percent. And Netflix phenomenal, up 8 percent here on the day. And the weak excuse me. And it gets back to the broader issue here about the rotation that we've seen in this market. Remember, we spent so much time in January and part of February talking about that rotation into value really over the last few weeks when things really started to look shaky. You know, where people gravitated to growth stocks, they found safety. And they're not just because these stocks are growing in theory, but, well, it's because they have profitability, they have cash flow. And more importantly, Katie, they have familiarity. Well, let's go back to the bank sector from growth stocks, because we got two breaking pieces of news, both on deposits and the read out of that Federal Reserve meeting that Janet Yellen called for, the Financial Stability Oversight Council. That happens on Friday morning. We just got the read out. And it seems that while some banks are overseas under stress, the system as a whole is sound for more. Let's go to Michael McKee. He is Bloomberg International Economics and policy correspondent in Washington and Bloomberg's Kelly Lines. They both join us from D.C. right now. Kelly, I'll start with you. When you look at this read out. It's a little anticlimactic. Yeah, I mean, Romaine was just talking about familiarity. The phrase sound and resilient is becoming very familiar because that is the line that these regulators and the administration continually goes back to when talking about the banking system. And once again, it was included in this exact statement, which really, frankly, provided no real news. Other than that, these regulators, which include the Treasury, the Fed, the FDIC, the S.E.C. chair, CFTC, a bunch of other regulatory agencies convened today, talked about what is happening in the banking sector, decided that largely it is still sound and resilient and they are discussing ongoing efforts to monitor financial developments. So did we learn anything really new from this statement? Probably not, which raises a lot of questions about what exactly the regulators are thinking of doing going forward after these bank failures. Was stress still present in some of those names like First Republic, which remain was just discussed? Well, I guess it's good that at least we know they're talking. I guess the fact that they haven't actually told us anything, a little cause for concern. And of course, might I mean, at the same time that came out, we got some of the deposit data a year in the US still continuing to see deposits come out of the system and particularly coming out of a lot of those small banks. And I guess there is a question here whether these regulators do something to stem that or whether they even need to. Well, that's the open question, and it's certainly not answered by the Treasury Department's press release a few moments ago, which may have been put out after the markets because it didn't say so much. And a lot of people were watching for FTSE news, and if they had been disappointed by it, maybe they would have sold off. If you were buying, you probably buying large bank stocks. The problem we have this time, guys, is that the report has been benchmarked to the December 20 to call reports. Basically, the data that the banks have to provide to the Fed and one thrift was transformed into a bank and that added five point four billion dollars to the system, which basically means that the numbers from the previous weeks were unreliable. So let me give you just the headline numbers here. Ten trillion. Seven hundred and ninety six billion in large bank deposits. That's up one hundred and twenty billion from the prior week, 10 trillion 676. And the small banks lost one hundred and eight billion dollars in deposits, five trillion for sixty eight point eight to front down from five trillion five seventy six point seven. So we did see a shift. Not all of that money from the small banks necessarily ended up in the big banks because we know on Wednesday that money market funds reported a gain of one hundred and seventeen billion dollars in their deposit. So we have money moving around, but it's hard to say specifically that it's a result of this crisis. And Kelly, I mean, it's again, very interesting to get this statement at the same time that we're getting the deposit data. And when you think about really the state of mid-sized banks, of some of those smaller banks, some of those regional banks that we've been talking all week, even though, again, the official read out is sound and resilient. We know that there's a lot of questions still. Yeah, I mean, First Republic definitely exhibit A in that front, we're still waiting to see if any kind of additional aid or intervention is required for that bank, which has been under continued market pressure, which, as we well know, can result in pressures of a different kind. And it does. It raises the question, as we are having ongoing conversations around whether and in what cases the Treasury would provide assurance that all deposits will be covered should a bank fail. Janet Yellen has really struggled to clarify some of the remarks this week, as we have seen. Larry Summers, the former treasury secretary, was speaking with Bloomberg's David Westin earlier, saying regulators need to provide more clarity. Just say for a fact that any failed bank is going to have all depositors made whole. But there has been a certain lack of clarity as to what exactly that would look like, what authority the Treasury actually has in exceptional cases. And, of course, whether Congress is going to do anything, which right now looks like a lot of talk and not a lot of potential action. So this is just something that's going to continue to leave us all on tenterhooks as we look for any headlines around the banks. All right, guys. Gonna have to leave it there. I mean, look, folks, if you don't get better coverage than this Michael McKee down in Washington, Kelly lines down in Washington. A look at this dramatic soccer statement. We'll catch up with them next week. And we're going to continue, of course, with our Covid here on this day digesting the Treasury Department statement. Jake Shery Ahn are going to be joining us. Portfolio manager within the Multi Ethic Solutions Team over at Harper Capital. Stick with us. This is Bloomberg. I'm Katie Greifeld. Let's take a look at how markets performed on the day, and it was a bit across the board. Let's start with the bond market. You could see that yields continued to fall and it was in the two year yield that you saw a six basis point drop that yield now at three seventy seven, that yield was above 5 percent earlier this month. Feels like a long time ago. Same story if you look across the curve as well. And you saw stocks hanging onto gains. The S & P 500, it did get back to negative territory at one point today, but we managed to close about six tenths of a percent higher on the day. Second straight week of gains for that index. Big tech to getting in on the action. That index up about three tenths of a percent. And small caps, relative out performer today. The Russell 2000 up nine tenths of a percent, all as volatility continued to come out of the market. You look at the VIX back below twenty two and then you look at crude oil, romaine back below seventy dollars a barrel. That falling by about 1 percent on this Friday. The volatility and of course, the oscillations continue in the market just a little while ago. We did learn that the Financial Stability Oversight Council, that includes Treasury Secretary Janet Yellen and the heads of all the major financial regulators here in the US did meet. They did put out a statement. It is about a 250 word statement. And, well, they spent about 200 words at that just telling you who was at the meeting. The statement itself was short and sweet. During the meeting, the council heard a presentation from staff on market developments and they discussed current conditions in the banking system system and noted that while some institutions are under stress, the banking system remains sound and resilient. That's pretty much it, folks. Kathleen Hays joining us right now, Bloomberg finance reporter in there. I mean, I guess it's good that they give you that statement of a word. We're resilient, we're sound. But a lot of people really want to know about all these loose ends that are still out there and whether these regulators, which includes not just the but also Jay Powell himself, whether they're actually going to do something more. Right. Sound and resilient. We're hearing that again and again. But it's the words that matter. And you've seen the market react depending on how far they will go to give direction about the the type of security that they in terms of government support will provide to this industry. When Yellen earlier said that the government is not prepared to give a unified unilateral blanket support for all uninsured deposits. You saw the market react the next day she came back. She pulled some of those words, reversed a lot of what she had earlier stated. And you saw the market react in a completely different way. So I believe that this very specific 200 or so statement is deliberately giving a lack of answers to to the market. So we're not going to be ending this Friday really with a lot of clear answers. As much as we would like to wrap up the week. Talk to us about some of the questions that still are out there that we would have liked to maybe get some answers on. I'm thinking First Republic, I'm thinking pack w what are some of the biggest questions heading into this weekend? So while they're unlikely to go into specific names, they could have given some indication about treatment based on the various sizes of the bank and and also the health of specific names either that are in receivership or are clearly still looking for some sort of support. So with actually SBB right now, we expect that some sort of buyer or some sort of deal could be announced as soon as this weekend. There are some deadlines I believe is good. ISE today. Today is the deadline. We might not see an announcement by that deadline, but hopefully by the end of the weekend we'll be getting some of those names out. And in terms of First Republic, from from what we're hearing from sources, the timeline seems to be further out. And it's not as much of an urgent scenario by any means. But that is also the next question after the 30 billion dollars that they saw from the banks in terms of deposits. The other week, there still seems to be another shoe that could drop or another progression. Something else that needs to really keep this bank going. That's really the fear here. Bloomberg finance reporter Catherine Daughtry giving us a nice little roundup there. Let's keep the conversation going. And Jake Shaw Myer joining us, portfolio manager within the Multi Asset Solutions Team over at Harbor Capital. Prior to joining Harbor, Jake spent about six years with the Federal Reserve Bank of New York, where he was head of the Treasury market analysis in the Banks Markets Group. Jake, we joke a lot here about, you know, how this statement says nothing. And everyone's waiting for them to do something more. We should point out they have done a lot, of course, are the implicit guarantee of all deposits. The bank term funding program and of course, corralling the big banks here to provide a 30 billion dollar deposit lifeline, at least for one of the banks here. What more do you want to see, if anything, out of the regulators? Yeah. The reason why that statement was so sparse was really that this is now a political question. And so sure, Yellen went through the kind of various fork foibles this week. You know, the difficulty for her position is she doesn't have the legal authority to provide a blanket guarantee for deposits. And so what markets are really focused on is what are the politicians and the FDIC prepared to do to address kind of the structural deficiencies facing regional banks as they see deposit outflows. And so I think that's what the F SOC, you know, why they can't provide much more information until we see some movement on the political side to whether it's raising the deposit cap, whether it's thinking about a temporary guarantee of all and insured deposits, something that is required legally in order to do these actions. We also know that the power of words, at least for markets, can also sort of be almost as impactful as the money itself here. I know they can't come out and promise something that they don't have the authority to give, but is there a communication that they can give to the markets and basically say that? Yeah. One way or another, we're going to make sure that we don't end up in some sort of catastrophe. Yeah, I think, you know, obviously the messaging hasn't been clear and consistent on that front. You had your poll on Wednesday. You continue to reiterate that deposits are going to be safe. Chair Yellen walked back her her statement yesterday as well, talking about safety and security of deposits in the financial system. And so I think they're going to continue playing to that line. And the data we've received this week from the Fed take for one from the recently released deposit data kind of points to some stabilization. We still know with problem children all within the banking system, but it doesn't seem to have spread it spread more widely among other banks, particularly regional banks, based on the kind of limited available data that we have. And Jake, it seems that so far the consensus is that what we're seeing in the banking sector right now, the problems that there are there, liquidity problems there, not solvency problems necessarily, but does that do to feed into each other? Is it a liquidity problem? Can then actually turn into a solvency problem? Yeah, absolutely. Unlike 2008, kind of the genesis of this was really kind of an asset liability mismatch and then followed by deposit runs in some of these kind of banks with large uninsured deposit bases. But, you know, it's it doesn't take that long. For once you kind of in a fire sale environment, you know, a lot of these regional banks have mostly real estate and particularly a high commercial real estate exposure. So in a world where they're all rushing for the same exit, you know, you can see liquidity start to falter in that market. You can see knock on effects to other large holders of those securities and you can see kind of a wider dash for cash. Something that we saw, you know, in the most liquid market in treasuries, as well as agent CMBS during Covid, where despite these being the risk free assets for the world, if everyone's rushing for the same exit, it can really complicate liquidity for the market as a whole and eventually impair the value of things like commercial real estate that do have some credit exposure with a very difficult secular tailwinds. Because if remote working after Covid, we'll see from where you're sitting right now. I mean, how likely does it seem that a dynamic, a situation like that could actually play out? You know, we're hopeful that it's a pretty low likelihood. You know, we do think this episode is really just going to increase the firmness of our view that we're going to be going into a recession at some point this year. You know, lending standards are going to tighten. Banks willingness to extend new loans is going to contract. And it's unclear if the larger banks are absorbing a lot of these deposits. I'm going to we're going to be able to and willing to step in for these smaller and regional banks, especially outside of their core coastal coastal markets. So we think all that adds up to a slowdown in growth this year and in that state of the world. It's hard to predict what will happen for specific assets because because, again, you know, if you have to raise liquidity and everyone's raising liquidity and similar assets, that can have real implications for market dysfunction. I am sure it's just from an investor's perspective here. And about the attractiveness or whatever we want to call it right now with some of these banking stocks, given the big sell off, given the idea that there are a lot of people, Jake, really betting on the idea that we're going to avoid the worst case scenario here. Is this now the time to look at this or do you need them? Do you need more reassurance, more clarity out of the regulators? Yes. So I think, you know, the positives are clear. Like on a tangible book basis, banks are quite attractive. U.S. banks in particular are relative to their historical norms. But the problem is the thing you have to be able to handicap is unknowable. And that is what are regulators willingness to do for uninsured deposits? What is the likelihood of similar bank runs in other banking institutions? Because, again, the banking system is built on confidence. And what we've seen is that confidence can erode quite quickly. You know, three weeks ago, you would have said that Silicon Valley Bank had one of the best and loyal franchises in the business, and it took two days for that to unwind and sell again. You know, what is unknowable is how confidence in individual institutions is going to evolve. How much confidence should investors have, though, in the regulatory process as it stands right now? Because, I mean, you bring up Silicon Valley Bank and everyone is sort of wondering, you know, where the San Francisco Fed was, where California state regulators were, particularly when it came to this idea of some of the duration risk that they clearly had that, you know, may have fallen outside the purview of traditional stress tests and some of the other sort of metrics. But as we now know, with the benefit of hindsight was quite material. Yeah, you know, you have to trust in the integrity of these institutions, particularly the Fed, who is talked about how they're going to be doing a full scale review. You're going to submit that to the public by the start of May. And so I think there is going to be, some know, inward looking from a lot of these institutions about what went wrong. And I think more broadly from our rules and regulations standpoint, I think they're going to revisit some of the Taylor Riggs rules we saw in 2018, 2019, which increase the asset threshold for things like the LCR annual stress test and some of the other comprehensive income effects on capital. And so I think you are going to see the Fed probably move down that asset gap and kind of unwind some of the regulations we saw after 2018. And Jake, of course, one of the ripple effects of everything we've been discussing has been in the markets and in particular in the Treasury market. I mean, just the moves that we're seeing at the very front end of the curve, but all the way out on the long end to begs the question, I mean, what is liquidity like right now in the Treasury market? What's supposed to be the balance of your portfolio moving like a penny stock? How do you think about that as a portfolio manager? Yeah, I mean, it's really difficult. And so if you look at Treasury market liquidity relative to the kind of the realized volatility we're seeing, it's held up reasonably well. But of course, why are we seeing that volatility? Because it's such an uncertain rate path going forward and kind of the worst possible world we could find ourselves in. It's similar kind of March 2020, when the Treasury market, by and large ceased functioning, particularly for longer duration securities for less liquid treasury varieties. And that would be the worst case outcome because unlike 2012, much 20 20, you still have an inflation problem here. And so the Fed may be a little more hesitant to act to backstop market functioning in so far as it starts doing QE again because it has its inflation problem. I think events over the last two weeks show that the Fed is willing to change that and still believe that inflation, you know, counter cyclically will come down in a world that we start to see a more material slowdown. But I think market dysfunction associated with very high and high inflation regime is going to be the concerning thing for the market. Jake, great conversation. Really appreciate the time. That is Jake Shaw Meyer. He is portfolio manager within the Multi Asset Solutions seem over at Harbor Capital. Coming up, we're gonna get more and we're gonna do that with Steve Sosnik over at Interactive Brokers. That conversation up next. This is Bloomberg. What is the benefit of keeping your money in sort of a smaller bank, even if that bank is doing extremely well? It's not one of the banks that in essence, the Fed worries about systemic risk. So even if there is a 1 percent probability, why wouldn't you move your money in to sort of JP Morgan and or B of A into the banks where you know that if there's a problem, the Fed has to step in, too. Ultimately, all of this is a question of trust and sort of confidence. And, you know, the Fed is trying to give everybody back that confidence. But if you're a business and you've got 100 million or 200 million in a small bank, should you move it? And I think ultimately people will end up doing that unless the Fed gives people guarantees that they've got nothing to worry about. Was Marc Lasry over at Avenue Capital speaking a little bit earlier on Bloomberg Television about at least in his mind, what he sees as a little benefit for small businesses and other depositors to keep their money in regional banks? LASRY His comments came this morning ahead of an unscheduled meeting that Treasury Secretary Janet Yellen called the Financial Stability Oversight Council. They did put out a statement just a little while ago reiterating their stance that the banking system here in the U.S. is sound and resilient. We do want to get some insights. RTS NIKKEI. Joining us right now is the chief market strategist over at Interactive Brokers. And Steve. I want to sort of pull back here and talk about kind of how we got to where we are today, because there's all this talk about how, you know, Jay Powell finally broke something and all this and always kind of just point to this and maybe I'm wrong, but there's nothing about this that should have been a surprise. I mean, this has been that slow moving train of rate hikes. And there's been a lot of time, I think, for investors and for that matter, banks to sort of pass the potential effects of that. Have investors been doing that? Or are they just now sort of waking up and realizing that, oh, we've got a 5 percent Fed funds rate high, Ramon? No, you're not wrong. I mean, when you think about the banks that that that have been the worst so far. You know, you had Silver Gate, which was, you know, rumored to be a problem because of its crypto holdings, U.S. signature bank, which had, you know, was also crypto adjacent and also sort of had a knack for being in all the weirdest corners of the New York banking world. And yet, Credit Suisse, that was you know, that that has been more or less considered problematic since the cargoes problems. Now, SVP is a bit different. And, you know, one of the bank regulators, I heard a comment that that they really wouldn't have caught this because they don't they don't look at duration risk. So that is problematic. But again, they didn't have a chief risk officer for eight months. So what this is it's a weird culling of the herd right now. Yeah, it's tough to fight in inverted yield curve is really very difficult for bankers to deal with. But they've they've had to come to grips with this for some time. What do you make of the market reaction so far, particularly this week? Because we were kind of joking earlier that, you know, I mean, if you were on vacation and you just sort of checked the market today, you would never have known all the turmoil that took place over the last few days. I mean, stocks ended up at least on a weekly basis in the green and even the main banking indexes were basically unchanged. Yeah, I mean, I think this this shows the resilience of a lot of investors mindsets to a certain extent. I do think it's it's generational. The conversations I have with, you know, shall we say that the more seasoned crowd, you know, the people who you know, who's been through 2008 or maybe 2001 or worse or longer. You know, they're their word during the that, you know, where's the other shoe to drop? Because these things do unravel somewhat slowly before they unravel very quickly. I think. But there's been a whole generation of investors, you know, who really haven't seen anything but an accommodative fed and have been come and have come to realize that the Fed always seems to come in when things get troubled and troublesome. And when and when they have tried to raise rates, they backed off quickly. Well, this is the first real crisis of that sort that the Fed has had to deal with. And as your previous guest mentioned, they didn't have to deal with it with inflation as a problem right now. So I think for the short term, I think it shows the resilience of equity investors and whether and we'll find out over the next few weeks whether that's, you know, warranted or misguided. And Steve, I think that generational gap that you talk about is real, but does that playbook of just buying the debt still work here? Because you mentioned that, you know, we've gotten used to the Fed stepping in pretty much any sign of crisis. I mean, when you hear arguments that have been made about moral hazard that's been created over the past few weeks, some of them are pretty convincing. Yeah. I mean, you know, that that that's really the issue that you have you seen this movie before? Have you know or have you not? My generational idea came from a conversation I had with a very bright young reporter who called me basically because I was old to find out what happened in 2008, and I realized that that's the difference. The Fed does want to come to the rescue. But remember something the Fed is not about stocks. If you think that the Fed is worried about the stock market there, it's among the least of their concerns. They're worried about they have the dual mandate of full employment and stable prices. And really they're their main mandate. The reason they were created, which is strangely not their dual mandate, is the safety and soundness of the banking system. You've noticed I've said nothing about equity prices and they're now to the extent that they do come in and add liquidity. That's been a really good thing for it for equity markets. But what if people ever say, you know, the Fed put is gonna get exercised because because the stock market's down? No, the Fed more the Fed put would get exercised if there is some other reason why stocks are down or if stocks actually threaten the system, as they did in 1987, which sadly, I'm also old enough to remember that one. Well, Steve, the reporter sounds really sharp, whoever she was. But really quickly, we're running up against the clock here. You've seen this big divergence in bond volatility as measured by the move index versus the VIX. How do those two lines come back together? To me, to me, one of them has to resolve themselves. And usually, again, I tend to take the lead from fixed income rather than from stocks. Martin, my one of the things I've been working with for my thesis is that it's almost impossible to price riskier assets like stocks if you can't price risk relatively risk free assets like T bills to your notes, et cetera. You know, I did some work over the week with with with Tony Kushner. You pinch PIMCO and they have this concentric circle model of, you know, risk appetite and basically risk free rates are at the core of every financial model. You can't price stocks, you can't price options. You can't price anything without using the risk free rate. And how else you going to do it if you can't get some stability there? Steve, great stuff. Enjoy your weekend. That is Steve Sosnik. He is chief market strategist for Interactive Brokers. This is Bloomberg. As we wrap up a wild week, here's a look at what markets going gonna have their eye on in the week ahead. Well, let's start off overseas here. Well, actually will start off here with the banking fallout because there's still a lot of unresolved issues here, Kitty. We know some bids are coming in, supposed to come in today for SVP, but a lot of loose ends. Obviously, something to watch and to keep an eye on Europe as well. Whatever is happening over there. Yeah. Still skittishness off for the banking sector worldwide. Let's go over to China. China Development Forum undergoing to be under way starting tomorrow. The first in-person meeting that they've had since the pandemic. And you can see it comes at a time when you've seen shipments to the U.S. They've been slumping. But this summit, it's all about showing that China is back in business. And notable that some key players are going to be there, including Tim Cook said to be there as well. March Madness continues a little bit later tonight. Who you got, Creighton? A Princeton. I don't know what we're talking about. I think Princeton. All right. Well, I guess you can't go wrong. Go picking the backyard team here. And of course, there are two big hearings on Capitol Hill. Congress gets to have their say in the fallout from SBB. Two big hearings, Kitty. Which one you got? Oh, my gosh. I mean, I have to imagine the sound bites out of bowls will be fantastic. All right. Thank you for joining us this week on Bloomberg Markets Clothes. Stick around. Here in the U.S., balance of power. Coming up next. This is Bloomberg.

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