Chief Executive Officer & Chairman of the Board, Morgan Stanley
Wall Street Traders Score Big; Exclusive Ted Pick Interview | Bloomberg Open Interest 4/15/2026
Get a jump start on the US trading day with Matt Miller and Dani Burger on "Bloomberg Open Interest." Stocks surge toward record highs as hopes for peace lift global markets, with the US and Iran agreeing in principle to extend their ceasefire. Earnings season is in full swing, and Wall Street traders at Morgan Stanley and Bank of America cash in on record gains. Plus, Pimco makes a bold $400 million bet on private credit. From the IMF, Bank of England’s Megan Greene joins us live. WeWork’s CEO on the company’s comeback and the future of flexible offices. And Morgan Stanley CEO Ted Pick joins...
About Edward Pick
Ted Pick, chairman and chief executive officer of Morgan Stanley, said on the firm’s first-quarter 2026 earnings call that the company generated a record quarter with revenues of $20.6 billion and earnings per share of $3.43, describing the results as a demonstration of the capabilities of the integrated firm in periods of active markets. He noted that the firm entered 2026 from a position of strength amid increased geopolitical uncertaintyikuha. Pick also stated that the firm’s reported CET1 ratio of 15.1% against a capital requirement of 11.8% provides a capital buffer of over 300 basis points, and said he was encouraged by a period of enhanced regulatory transparency. In interviews with Bloomberg, Pick identified the risk of “imported inflation” through the energy complex, which he said could eventually affect food and living costs and “queer the cost of capital.” He described the private credit market as being in an “adolescent moment,” a learning period for an asset class that has grown rapidly over the past decade. Pick said he expects to see dispersion of returns among asset managers, with those who focused on sector diversification and prudent capital deployment performing better than others. He also said Morgan Stanley does not need to pursue inorganic growth, citing organic potential in its wealth, investment management, and investment banking businesses.
Transcript (170 segments)
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Matt Miller0:02
All right. We are pretty much at record highs on stocks. 30 minutes till the start of the cash trade. I'm Matt Miller.
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Dani Berger0:08
I'm Dani Berger. Bloomberg Open Interest starts right now.
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Matt Miller0:19
You remember this time yesterday, I predicted that we would hit a record high and we were so far away. To be clear, we haven't done it. We're one point away from a closing high.
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Dani Berger0:30
Yes, 1.0. You're one point away from seeing into the future.
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Matt Miller0:33
Well, it'll happen today if we get the right Trump truce. Stocks are at 6967 on the cash trade. Rising hopes for peace. The US and Iran agreed in principle to extend their cease fire. And meanwhile, earnings are in full swing. Morgan Stanley and Bank of America traders join Wall Street's record windfall. And PIMCO bought all $400 million of the bonds sold by Blue Owl investment grade debt. Just a big vote of confidence in a battered private credit market. And I want to be excited to talk about because we spoke with Christian Strauch not that long ago who said everything that's being sold out there does not look good.
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Dani Berger1:14
None of it's good. We'll take it. It's six and a half percent. We'll take you there.
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Matt Miller1:17
Yeah. Meanwhile, Matt, I am looking at the banking stocks after they reported earnings this morning. Bank of America and Morgan Stanley rounding out the big bank earnings. It was the same story, record equity trading revenue for the first quarter. A lot of market volatility that they capitalize on. The consumer is still healthy in spending. Bank of America also announced that they had a $20 billion exposure in private credit. That is the smallest of all the banks that reported that. Big America up 1.7%. Morgan Stanley, 2.7.
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Dani Berger1:44
All right. So big banks are done. We got to talk about banker. No, I mean, we're obviously going to have to write for the week. But yeah, yeah, they're they're all of hours, couple of hours. In tech news, Snapchat is cutting about 1000 jobs as it struggles to reach profitability. That's about 16% of its staff. Meanwhile, Meta and Broadcom expanded their multibillion dollar partnership for custom A.I. chips that will help Meta reduce dependence on suppliers like Nvidia and AMD. You can see that tech stocks are up across the board in Snapchat, which, yes, Snapchat still exists up 7.7%.
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Matt Miller2:20
Matt, it doesn't only exist, but like the kids use it, to be clear, it's popular still.
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Dani Berger2:24
Really?
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Matt Miller2:26
Yes. I mean, I'm not one of them because I'm not a kid, but it is popular. Let's get back to our top story, the bank earnings. Bloomberg finance reporter Paige Smith joins us. So, Paige, we wrapped all of them up. What's been the big takeaway this quarter?
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Paige Smith2:37
Thanks for having me. I think it would be very fair to say that all week we've been monitoring the bank earnings basically since Monday when Goldman kicked off this sort of crazy news of reporting. Equities desks in particular that have been just on a tear. It's been a very, very busy it was a very busy first quarter for the equities desks across the Wall Street banks, I would say, but to zero in specifically on Bank of America and Morgan Stanley that reported today. Both of those firms also reported very strong earnings and equity desks. But just to kind of change tack a bit, since I'm a consumer finance reporter, it was I would like to focus in a bit on the consumer spending trends that Bank of America reported today because they were also quite strong. And that was certainly a question, given all of the volatility and other questions about the geopolitical uncertainties that we are all sort of considering and talking about in any given moment. So I would say that those were sort of the two points to focus on at the moment. Private credit is something that they're giving a lot more transparency on and we're going to talk about in a little bit all the debt that private credit and Goldman Sachs also selling debt to support its private credit fund.
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Matt Miller3:57
Does it look like everything's cool? Nothing to see here. We can move on.
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Paige Smith4:00
I think that we still there is still runway ahead. I think we should certainly still be watching it closely and asking questions about private credit this moment in time. But certainly, I think it would be fair to say that a number of the banks were much more forthcoming and transparent about their exposures to private credit. Bank of America broke out a specific slide in its presentation, sort of explaining, as you said just now, Matt, of, hey, listen, there's nothing really to see here, but certainly a question. And I think it's one that folks will continue to ask about.
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Matt Miller4:35
All right, Paige, thanks very much for joining us. Paige Smith there talking to us about the banks. We are going to continue to talk about banks. Herman Chan coming on from Bloomberg Intelligence and Morgan Stanley's CEO Ted Pick joins us right here on Open Interest. That is at 1030.
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Dani Berger4:50
Is it at 1030? Is it going to be at 1030 for me?
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Matt Miller4:54
Not at 1045. It's at 1030.
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Dani Berger4:57
At 1030. I'm nervous to say 100% because you know what? If he's late, what if that's fair? I just want to make sure it's exactly at that time, because sometimes producers give me times that are not true and I want to make sure that we value our clients' time.
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Matt Miller5:12
Yes. So we think that in 30 is when that is going to happen. Elsewhere in markets, SNAP is laying off around 16% of its workforce to reduce cost and reach profitability. Bloomberg Tech's Caroline Hyde joins us to explain this and other big tech news of the day. Caroline, Beatrice, do you use SNAP?
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Caroline Hyde5:31
No, I'm not one of the almost billion people that use this on a monthly basis. That's a lot of people using this. It's just it's my iPad, not me.
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Matt Miller5:39
Right. So that's the generational divide. It's still not profitable, though. In fact, the people who use in our editorial meeting, we were looking at Snapchat. We were using the model function to look at their profitability or rather lack thereof, because they have never posted a profit. And that is the focus of activist investors that have recently got involved in the stock and why we're seeing the executives realized that they need to sell, need to save almost $1,000,000,000, half of a billion every single year. $500 million is what they're promising to save by. Yes, it comes of people. So once again, we've got this sad, but the fact of the matter that we're going to see enormous about 60% of the workforce, about a thousand people go, but also the 300 people that have been actively looking to hire are also going to be stopped as well. Those open positions are not going to be filled. People are backfilling using AI. That is what I'm hearing time and time again from CEOs. If we're going to see someone depart, try and do it with artificial intelligence before you create yet more headcount. That's kind of what they're hinting at a little bit here. But this is a drive for profitability and a drive for a company that is focused on eyeglasses. All glasses, when they're just up against huge competition, competitive threats, who are deploying massive amounts of money into the future of AI and into the beefing up of that capital expenditure. This is a company that is now worth just $9 billion, easily worth 130 billion. Well, so a company that is much bigger that's moving this morning, as is Broadcom, and they've signed this partnership with Meta. I thought these two were already already had ties together. So what now?
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Caroline Hyde7:09
Meta has already been saying, I want to build my own chips. I want to design them, and I want to have Broadcom help me do that. But remember, they're also deploying some six gigawatts of energy compute coming from AMD. They have an awful lot of chips coming from Nvidia. But most of these large language model makers, providers, labs want to have a little bit more control on their own destiny. They want to have to not have to sacrifice so much margins going out to the use of CPUs so they can design themselves. Look, Hock Tan is actually been on the Meta board for years. He's not going to be stepping down. But the initial deal is for one gigawatt amount. That's like one nuclear reactors worth of energy to deploy and compute. So that's the amount of chips that are gonna come from Broadcom to begin with, but it's going to expand and this is going to be a significant relationship going forward, but it still remains a significant relationship with Meta, with AMD, with Nvidia. Very these companies need more and more, more so the broadening is just going to continue.
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Matt Miller8:00
All right, Caroline, thank you very much. Bloomberg Tech's Caroline Hyde. In other tech news, I feel like I've just got to mention this, Matt, and a news update from Allbirds, the shoe company, which famously has dropped a lot in valuation. I mean, it's literally the worst offender in terms of office fashion in the history of offices. I'm actually interested if you've seen this story. Caroline, let me let me read let me read you some quick headlines. Inexcusable Birds announces expansion into AI compute infrastructure and that they're changing their name to New Bird A.I.. They're not a shoe company they're in today in datacenters. Is this why? What is the infrastructure that they already have that they can easily deploy? Because remember, a lot of crypto miners suddenly became compute providers. But what is it space that they're offering? Do they have manufacturing warehouses that they can suddenly shovel a load of chips into?
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Caroline Hyde8:55
It's going to all those. They're going to have a $50 million convertible financing facility, and that will allow it.
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Matt Miller9:02
50 million?
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Caroline Hyde9:03
Yes. And apparently that's enough to pivot into infrastructure. And that's the world we live in. It's shocking. Yeah, but not so company. I don't know about you guys. I can only hope I can become one.
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Matt Miller9:15
Thank you so much, Caroline Hyde. Of course. Check out Bloomberg Tech every day at 11 a.m.. Elsewhere on the war, the AP reporting that the US and Iran agreed in principle on extending the cease fire to allow for more time for President Trump for diplomacy. President Trump spoke on Fox Business.
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Donald Trump9:33
I think it's close to home. I mean, I view it as very close to over. You know what? If I pulled up stakes right now, it would take them 20 years to rebuild that country. And we're not finished. We'll see what happens. I think they want to make a deal very badly.
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Matt Miller9:50
Joining us now is Tyler Kendall, Bloomberg, Washington correspondent. The president also saying to the New York Post yesterday, Tyler, that talks could be happening over the next two days in Pakistan. Where do we understand about where these negotiations stand?
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Tyler Kendall10:03
Hey, Danny. Well, at this point, our main reporting remains the same, which is that it appears that both the US and Iran are working towards another round of in-person talks. Now, as you mentioned, this headline from the Associated Press that the sides have agreed in principle to an extension of the cease fire. I will point out we got another headline from Axios earlier today saying that the US has not agreed to that yet, but that progress is moving in the right direction because at this point it does appear that diplomacy is still a viable option. Though it is an understatement to say there is still so much to tackle. As President Trump yesterday, for example, indicated in an interview that he was not happy with reports that the US had floated to Iran a 20 year moratorium on uranium enrichment, instead saying that he does prefer a permanent ban. Plus pair that with other headlines from this morning, which do remind us that escalation is still on the table, including from Iranian state media, saying that if the US blockade continues, that would be considered, in their view, a violation of the cease fire, as Iran's military is now threatening to halt any shipments in the Persian Gulf, the Gulf of Oman and the Red Sea. But Matt and Danny, we got this statement overnight from CENTCOM confirming that they have stopped all commercial traffic when it comes to those waterways. A senior U.S. official has outlined to Bloomberg News that they are dispersing vessels in the Gulf of Oman instead of directly near the Strait of Hormuz in a bid to give the U.S. some more flexibility.
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Matt Miller11:31
Yeah, it's interesting because President Trump just last night told ABC News he did not see any reason to extend the cease fire. So we're getting conflicting messages here from the president and AP, but that's not really a surprise. Tyler Kendall, thanks very much, reporting out of Washington. A quick check on what's going on in markets. We're looking at S&P futures and Nasdaq futures that are really little changed. But we closed again yesterday on the cash trade at 69, 67. So one point away from an all time closing high on stocks and much higher than we were or let's just say higher than we were on February 27th before we invaded Iran together with Israel. Let's get a look at some of the other movers on our radar this morning. Quantum stocks are surging after Nvidia unveiled new models meant for quantum computing. So these tiny meme stocks are running out of stocks. I feel like every day there's an IPO of some some quantum stocks. I feel like Dan Curtis, our London producer, is obsessed with quantum dots. Is that why we're talking about.
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Dani Berger12:37
That's why. Well, they're rallying.
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Matt Miller12:39
Yeah, they're anywhere up. Unfortunately, this is the one I have to discuss. American Eagle, they're climbing after announcing a new campaign with me. A hater.
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Dani Berger12:49
Now, I don't know. I don't know. I'm a hater. To be fair, it's worked out very well for American Eagle. So good for them. This time it's promoting shorts. It's called Sit for Short, and clearly it's very successful for them. Some people wear jorts.
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Matt Miller13:01
I know shorts. I am not a giant hater, but I hope you don't wear Allbirds. The shoe company is making a huge pivot to compute infrastructure. That is correct. The shoemaker Allbirds that did business casual something dirty is now transforming itself into a neo cloud computing company called What's it called again? It's called New Bird.
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Dani Berger13:28
Yes. New Bird. A new bird. And to be clear, Allbirds, they did just get sold to a company that owns a bunch of other apparel companies. I'm a little I'm I'm all all around confused by this. It is massively rallying almost 200% to seven reasons crazy. Coming up on the show, PIMCO buying all $400 million of bonds sold by a blue owl private credit fund. We'll have the details for you next right here on Open Interest.
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Matt Miller14:10
Let's getting out of high interest liquids making headlines around the world. Starbucks is turning chat GPT into your personal barista. The coffee giant is testing a chat powered feature that will let customers personalize their drinks inside the agent. Several major retail brands, including Walmart, Target and Target, I should say, have partnered with open AI to integrate chat CBT into their shopping experience. I don't understand what it could do to coffee, but we'll see. And I am old. S&P Global is warning that a small group of big banks funding hedge funds could pose a growing risk to financial stability revenues from this kind of financing. Major investment banks, including Goldman Sachs and Morgan Stanley, jumped 25% to $24 billion with trillions in lending and echoes of Archegos, regulators are watching for cracks as risk is concentrated in fewer banks and private credit may maybe turning a corner. PIMCO bought the entire $400 million Blue Owl bond deal at six and a half percent, while Goldman Sachs raised $750 million in a second offering at two and a half percent. It's the latest sign that demand is back after months of redemption pressure. It's marked a shift from just a few weeks ago when PIMCO CEO Christian Stracke joined Open Interest, expressing his caution about those private credit assets.
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Christian Stracke15:38
A lot of the loans that are out for sale right now are pretty bad loans. So, you know, we've we've seen some blocks of those and they're not clearing at a price where yet where we would be interested in buying them.
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Matt Miller15:52
Let's get more on PIMCO and with Bloomberg credit editor Bruce Douglas. Bruce, I just wonder, listening there to Christian saying they're not at a price yet where we jump in. Is that a sign that there was a steep discount on some of these assets that made it attractive for PIMCO to jump in and buy all $400 million worth of them?
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Bruce Douglas16:06
Well, essentially, they're buying an investment grade rated product for a yield of about six and a half percent. So that's pretty pretty attractive pricing for something that is ultimately, even if it's at the bottom of the investment grade scale, is is quite highly rated. So, yeah, I mean, PIMCO has been a longstanding critic of private credit. So the fact that it's now buying in in this big way is suggesting that maybe the private credit winter is starting to thaw.
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Matt Miller16:37
So contrast that with the Goldman Sachs bond deal. It's larger, $750 million, but I see two and a half percent figure there rather than six and a half percent.
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Bruce Douglas16:48
Yeah. I mean, I think that it's is two and a half percent over over treasuries there. So that's still kind of decent, a decent spread. And I think that, you know, the Goldman Sachs deal, again, that's a that's a non traded business development corporation. That's obviously the kind of thing that we've seen a lot of these redemption requests from in in recent months. But what this really shows is both the the the PIMCO buying the the the Goldman Sachs sale is that institutional capital is kind of back in in a significant way in private credit. The just as we've seen in recent months have come from retail investors keen to get their their money back and finding it's not quite that easy when you have invested in illiquid assets. But now institutional capital appears to to see value in private credit. We've had BlackRock the other day talking about strong demand from institutions and that's really what these two big debt sales in the last few days have shown us.
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Matt Miller17:52
By the way, two and a half percent over Treasuries is then I mean, it depends on obviously the duration, but ten year treasuries are four and a quarter. So that's more than six and a half. Yeah. So is it five year? Ten year?
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Bruce Douglas18:05
I think so. Yeah. It's it's it's a decent spread.
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Dani Berger18:06
Bruce, just quickly, in terms of institutions, I mean, were there ever any concerns about them? Did they ever back out? That feels like a pillar that's held up well, but don't they need retail? Some of these giants, if they really want to achieve the growth that they're targeting?
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Bruce Douglas18:24
Well, it is obviously a very interesting point in private credit's development. It's coming at a time when the Trump administration is pushing for opening up 41 KS to retail investors. And yes, clearly, retail is seen as a potential source of growth. But there are other sources of potential growth, particularly from the insurance industry, that private credit may be looking to tap for the next stage of its development. So obviously, the jitters in retail, we don't know whether that be passing or whether they're here to stay. But private credit does have other potential sources of growth as well.
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Matt Miller18:57
All right, Bruce, thanks so much for joining us. Bruce Douglas there. Appreciate your reporting and clarification there on the spreads. Really interesting story. We'll continue to follow this coming up. Imran Khan says markets are under appreciating risks from the war as earnings kick off. He'll join us next. This is Bloomberg Open Interest.
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Ken Griffin19:28
We have a classic energy price shock unfolding across the world as we speak. That, of course, will create demand destruction. It will cause economies across the world to decelerate. The risk of recession has increased and central banks are making some really difficult decisions. This really is a very, very treacherous moment for the world economy.
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Matt Miller19:48
Citadel CEO Ken Griffin speaking at the Centre for World Economic Forum, the 2026 summit. Joining us now is Northstar Asset Management, chief investment Officer and Nimrod Kagan. Great to see you. And. Is this a treacherous moment for the global economy? And if so, why are stocks less than 2/10 of a percent away from all time highs?
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Nimrod Kagan20:10
Danny does feel like a treacherous moment, but we've been here so many times before. But this is a market that just wants to keep going up. You know, we've been conditioned over the last 18 day, 18 years to buy the dip, and that's what the market is really responding to. But you're right. I mean, under the under the hood, there's a lot of violent rotation going on. It again points to we just want this market. This is a market that wants to keep going up, but not really sure how. So we keep bouncing from a sector to sector, hoping that something's going to actually work out.
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Dani Berger20:45
So what has been working out? What does the rotation look like to you throughout this six weeks of war?
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Nimrod Kagan20:50
Yeah, I mean, you look at it, you just take an example of consumer staples. You know, earlier first two months of the year, we had a big defensive rotation, also small cap value. Those were the sectors outperforming. Then we go into the war, everything sells off pretty much evenly. Stagflation, fears and then bouncing out of the war are bouncing. We're still in it, but bouncing in. In April, we've seen where, you know, consumer staples is kind of flat and we've seen a resurgence again of your growth sectors. Some of the other areas that were lagging behind. So this complete rotation going on.
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Matt Miller21:33
All right. We're going to keep you with us through the opening bell. In terms of futures, we are seeing just a very slight gain. We'll be back with the NYSE and the Nasdaq. This is Bloomberg.
We are moments away from the start of trading. This is Bloomberg Open Interest. I'm Matt Miller. We're not seeing a lot of action in futures, although green arrows and they're moving higher to the upside right now. Over 7000 and S&P futures over 26,000 on Nasdaq futures. You hear the opening bell we see down at the New York Stock Exchange. A few people ringing the bell for Vikings. Not a very big showing for exploring the world in comfort. Maybe an office on a cruise and without kids.
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Dani Berger22:27
Yeah, what a shame. There's no kids on a Viking cruise.
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Matt Miller22:30
I have bad news for you When you look over to the. Oh, no. There's one small tribe. No, no children at the NASDAQ. No children here. We have some brothers that are stoked at the Metals Royalty company ringing the bell there at the Nasdaq. Yeah, there's the Viking ad, it sounds like. I don't know, They. They hate children. Nobody's supposed to be like luxury cruises. They're more expensive. They have less people. I think they're not. They're like the anti Disney cruise. They're more like river cruises.
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Dani Berger22:56
Yeah, exactly. So you don't want children on that? You know, it's adults. No one running around. You spent a lot of money. You want calm, you want peace. So, yeah, they don't. Is it just adults or is it like old people? I have no idea. Can't say I've ever been on one, but I know that I'm guessing. I know that they're very expensive cruises and they're doing well.
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Matt Miller23:11
I'm looking at Bank of America. Morgan Stanley shares here at the Open, both of them posting record equity trading revenue for the first quarter. And if not, if I'm not mistaken, every single bank posted record equity trading. It's all about market volatility, Also had a healthy consumer. They've also all been breaking out their private credit exposure. Bank of America has one of the smallest $20 billion in private credit. Just as a comparison, Jp morgan, they're bigger. This makes sense. Has $50 billion. Shares of Bank of America, UPS 3.7%, Morgan Stanley, three and a half percent. Not. All right. In tech news, Snapchat is cutting about 1000 jobs as it struggles to reach profitability because Snapchat is only for kids, 16% of the staff has to go. Meanwhile, Meta and Broadcom back to again the old people expanding their multibillion dollar partnership for custom A.I. chips that will help Meta reduce dependence on suppliers like Nvidia. And Andy should really have Allbirds in the in the tech board. Now that they're a tech infrastructure. Should I do we stereotype the people that wear allbirds what that they're all tech?
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Dani Berger24:15
Rose I think you can stereotype them. Yeah.
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Matt Miller24:17
No, I know. I was just wanting to group them. You know, we need to put everything in a box. Yes, I think that is probably still with us is Northstar Asset Management Chief Investment Officer Nimrod Kagan. Nimrod, The I mean, this story with Allbirds is pretty hilarious, but the story just has legs. I mean, we every day we have multibillion dollar deal headlines. By the way, today is Deals day. It's Wednesday, so Danny's show kicks off at noon. Do you continue to invest in this? Because a lot of these companies have really lost some steam. I mean, Microsoft is still down like a fifth year to date.
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Nimrod Kagan24:54
Yeah. I think the I story is to two different parts, right? So the market is pricing in the semiconductor stocks. That's where still the momentum is. That's where the price action has been and the market is pricing those on the near term cash flows. We have a pretty strong security that these companies are going to see revenue, profits, earnings, cash flows. Great. And that's what we're seeing on one side. The other side we are seeing is the, you know, taking out of the companies on the software as a service spectrum, the SAS of clips that we've been talking about. And that's prime you know, you have companies like Microsoft but also CRM into all of those companies lagging significantly because the market is saying we're not going to, you know, we're not going to price their short term cash flows, We're going to look out further 20 year horizon. And maybe these companies don't exist in the same way that they do today. So two different bifurcation going on at the same time. We think that, yes, the AI is here, it's real, but now it's time for the rest of the economy to start to seeing the diffusion and the benefits from the AI penetration company. After company we're seeing is implementing AI, you know, and that's where we see the real momentum coming to bear for the AI nimrods.
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Dani Berger26:16
Also, when it comes to AI, our team reporting this morning that Anthropic had another fundraising round at valuing it at 800 billion openai's latest fundraising round, valuing it at even more than that. It could be an IPO of something that's like $1.2 trillion when these things list. Considering that they're listing at already punchy valuations, is that something you'd buy into?
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Nimrod Kagan26:40
Well, you know, one of the things is that private markets have become the valuations. Usually you used to have to wait to come to the public markets to really get that uplift in valuations. I think the story has been turned upside down. There's been so much demand, so much liquidity, money chasing in the private markets that those valuations have already reflected a lot of good. The other part of the whole story, Danny, is that let's not forget the Microsofts of the world, the Alphabet's all these companies own significant stakes in these private companies, right? So if you do it the other way around, the public market is not fully valuing the valuation that's being reflected on the private market. So my answer would be we wait for the public markets to give you the true valuation range for these companies.
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Dani Berger27:26
What what do you see as an opportunity in terms of things that have lost value during the war, during the first half of the year? I mean, with the kind of rotation that we saw. You know, we've been talking about the fact that in the midst of this war rally, only 200 of S&P 500 companies have been up. The breadth, you know, is to the downside. So is there anything that you like? Are there any bargains out there?
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Nimrod Kagan27:55
Yeah, well, I think I'll start with the software stocks have become the value stocks. Right. And that's very attractive. And here's why not primarily. I'm sorry. Not private credit? No. Well, private credit. I think there's time to go. There's you know, we're going to let that play out for a little bit. But on the software side, you know, these have become real value stocks. And yes, there is a major reconfiguration that's required of business models, but the business processes are same, Matt. I mean, take a look at CRM. You know, every every business still needs to capture their customer information before back in the day. It used to happen in file cabinets. Then we came with those different types of softwares, like a CRM, to capture that information. Now we have so different tools in the toolbox, but the business process is exactly the same. And some of these companies are going to be able to introduce more tools to capture that. I mean, doing a plug here for Bloomberg and be ask, you know, I used to have to do these queries using BQ l BDP. Now I just do ask B Right. And that gives me all that information right there. So that's your way that some of these companies are going to adapt to this challenge posed by.
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Dani Berger29:13
It is pretty incredible to see some of these changes. But just taking a step back on this overall economy, I was having a conversation with someone yesterday who works for one of the biggest real estate asset managers who said that there actually is this level where the k-shaped doesn't capture everything, this middle level, that it's not just air, but it's the lack of visas for highly skilled workers coming into the United States that's being challenged. You're also getting less visitors coming into the US because if they know they have to spend hours speaking to a Border Patrol agent before they're finally allowed in, maybe they're not going to travel as much in the US. We talked a lot about consumer stocks being challenged by lower income consumers, now adding energy on top of that. I just wonder if there's something else happening underneath the surface, if it's the really, really high part of the economy, those really high net worth individuals that are supporting us. But like everything else below it is challenge and what that means for your investment outlook.
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Nimrod Kagan30:13
Absolutely. Danny and I can vouch for that. I was at the national parks a couple of weeks back and, you know, just it's $100 fee for if you're not a US resident. So again, all these different pieces coming into play and maybe a family of four traveling from outside of the US is not going to be inclined to come and visit our national parks. But anyway, leaving that aside, I think there's a real thing. There is the high end that supporting, you know, the lower end that's struggling. We have seen a lot of data points around that. But what's happening also is that there's, you know, on the on the on the whole aggregate level, people are holding onto their jobs. It's a low hire, low fire environment and they're barely making it, but they're still holding onto their jobs and they are getting you know, Ed Yardeni talks a lot about this, how we have this huge inflow from baby boomers who are using their wealth and their resources to support the next generation who might be just barely making it with their expenses and income. So there there are all these places to be for investment. That does mean that we want to be diversified overall because you just don't know what's happening on a day to day basis, but also looking for those companies that are going to continue to offer value to the consumer. That's going to remain a paramount framework for us as we navigate this very difficult market.
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Matt Miller31:42
All right. We're going to have to end things there. Thank you so much for joining us. And Nimrod Kagan, Northstar Asset Management, Chief investment Officer. Let's get a check on your equity market right now, because at the price we are currently trading at 6986, if we close at this level, it will be an all time high, the previous high being 6978. What is leading us, they're not huge gains, but again, it's enough. After ten days of a rally, that would be the best ten day rally since 2020. So we bounce back even better than we did in Liberation Day, Microsoft, Broadcom, those both leading the pack. Broadcom signing a deal with Meta to use their chips, Meta also in the top of the pile, Oracle. So a lot of the A.I. names having a very good day. On the downside, Amazon's a little bit weaker. Chips are not doing well today for whatever reason. Lam Research Micron. Those are in the bottom of the pile, as is Caterpillar. SanDisk again, another chip name. Looking at the individual sectors, you do have Infotech being one of the best performing, but financials doing well. We heard from Bank of America, Morgan Stanley rounding out the big bank earnings with a very strong trading revenue coming in, materials, utilities, consumer staples, those are at the bottom of the pile. But again, at 69, 87, well on our way right now to another all time high, 69, 87. Okay, that's 69. 87. That's the number 69. Our rate. Well, 78 was was the prior record anywhere at 69. 87 right now. You got it. We just need to get to around 7000. Coming up, banks are reporting a stellar quarter as market volatility leads to trading revenue records. Just massive records knocking the cover off the ball at Goldman Sachs, Jp morgan and others. Herman Chan of Bloomberg Intelligence breaks down the earnings for us next. This is open interest.
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Dani Berger33:32
15 minutes into your trading day. Let's get some top calls while the analysts are upgrading and downgrade. First, we have an upgrade from Piper Sandler. This for Cloudflare, calling it an eye winner to own and pointing to the recent pullback as a rare entry opportunity. Shares up 3.4%. Next up, Jefferies cuts PPI said IG, saying that a data center deal for its nuclear plant looks unlikely as ratepayer rules could discourage hyperscalers. The firm sees weaker rate growth from New Jersey regulations and warns that new rules could add more pressure, though shares down 9/10. Finally, Wall Street is weighing on Bank of America's solid quarter. Evercore calls the results probably better, while noting that investors may be underweight and concerned about cost. Barrett is highlighting steady buybacks and execution. Matt.
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Matt Miller34:19
All right. Market volatility has created a massive windfall for Wall Street banks with Bank of America, Morgan Stanley, Goldman Sachs and J.P. Morgan all reporting record trading revenue. Joining us now is Bloomberg Intelligence senior banks analyst Herman Chan. And it has been Herman, amazing to watch. The banks have made so much money. The energy companies have made so much money. This war has been very profitable for also the defense industry, I imagine. But what about the massive mess we saw at Goldman Sachs? I can't get over on FICC trading, right? It was $800 million less than analysts had anticipated. I think a 10% drop compared to the same quarter last year. Right. That not show up at other banks? It didn't show up.
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Herman Chan35:03
It seemed like that issue was more specific to Goldman. So having Goldman to kick off the earnings season for the banks this time around, it sort of introduced some questions on FICC trading across the group. But I think resoundingly with the results from Morgan Stanley today, from the results of Jp morgan yesterday and Citi yesterday, that FICC trading was solid. Bank of America did that post about a flattish FICC trading. So I would point to them as on the big side as well. Most mostly, sure.
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Matt Miller35:31
I mean, Morgan Stanley shares higher by four and a half percent. Why wasn't this priced in? I mean, there's a lot of volatility. We assume trading would be strong. Right. And it's not exactly a thing that they can I mean, they can repeat it as volatility is strong, but it's so markets dependent. Right. So what wasn't wasn't priced in to these banking shares coming into this earnings season, I would say there was a lot of optimism coming into the the quarter. I mean, the industry what and the analysts give me two words expecting about mid-teen earnings growth year over year. So really, you know, enthusiastic expectations coming in and the banks have met that and there's been some puts and takes right for the banks that I cover some issues on net interest margin from Wells Fargo and some reduce expectations on NII from Jp morgan. But then on the other hand, Bank of America really offered some solid guidance on net interest income for for the full year as well. What are they told us about private credit? I mean, we've heard, what, 36 billion in exposure from Wells Fargo and 20 from Bank of America, only two from Citi, smaller number. But what about the money that they make from lending private credit and private equity companies money to do these deals? I mean, what are the fees like for these big banks?
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Herman Chan36:47
Yeah, the fees are great. You've seen it in the investment banking numbers that those were still fairly solid quarter over quarter and year over year as well. So there are some really strong results on the on the fee side of the investment banking, particularly on equities and fixed income. M&A has been might be a bit more choppier heading into the rest of the year, but the deal backlogs seem fairly stable. So we're enthusiastic despite all the volatility that we're seeing in the macro side of things, that things can be sustainable going forward.
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Matt Miller37:20
That's not that some of the regional banks, PNC first horizon among them, I know it's it's a sector you also closely watch. Hermann what did we learn anything.
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Herman Chan37:25
Yeah PNC is numbers were great. They talked about some higher loan growth for the rest of the year. That's been working out really well for them. They just closed the first bank deal that adds to their presence in Denver, which is expected to work well. MNC also reported today a bit mixed trends there in terms of some softer guidance for net interest income for 2026, really related to some deposit growth and some softer consumer lending.
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Matt Miller37:54
All right, Herman, thank you very much for joining us. Herman Chan at Bloomberg Intelligence. A very busy week for him. And in the next hour, we're going to hear from Morgan Stanley's CEO, Ted Pick, right here on Open Interest at 1030. I believe it's actually at 1040. Yeah. I don't know why we keep saying that. I'm pretty sure. Yes. At 1030 we interview the CEO of We work, so it can't be 1030 point well in the 10 a.m. hour. Watch the whole thing because this interview will happen. Coming up, Stellantis gets a boost from the US with North American shipments jumping, is the turnaround taking hold? That's next. This is bloomberg open interest.
This is Bloomberg open interest on Matt Miller. A quick check on stocks right now. We do see the s&p 500 up only 1/10 of 1%, but 6974 the level here. Nasdaq up 2/10. If you take a look at oil, it continues to well, it's only down 5/100 on Brent, but 9472 is the level there. WTI also bouncing back and forth. We'll find it. We'll show you. And video right now. Up 1% almost. That's helpful. Broadcom gaining 3.7% on its deal with Facebook. Snap doing well. Also, Allbirds. This is an astounding story. Well, it was. I know it still is behind you. If you look me up. I'm happy about this, though. Okay. Who knows what's going on? Ted Pick is joining us at 1040. The CEO of Morgan Stanley is coming on this network at 1040. So mark your calendars. We don't want to waste your time. Yes, 1040 okay, So you have Stellantis there. Matt, Should we talk about Stellantis?
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Dani Berger39:42
Yes. Stellantis shipments are rebounding up 12% globally in the first quarter, led by a 17% jump in North American sales. Joining us now is Bloomberg autos reporter Gabby Coppola. And Gabby, I want to say this is because of the Hemi, right? It's because they brought the vapes back that they're selling more vehicles.
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Gabby Coppola40:01
Matt, I'm so happy to tell you that. I think you're right. I think that is part of what's driving this. That was a kind of a strategic blunder that they ever took it away in terms of, you know, pleasing the customer. And the fact that RAM has basically they they had some manufacturing problems, some some issues. They got those worked out. So they're coming off a low base. But yes, and they've brought back the Hemi, put it in the RAM 1500, and that is what consumers wanted. And if you just look at the RAM light duty pickup truck deliveries in the U.S. in the first quarter, they were up 27%. So that helped a lot. Also, they have the new Jeep Cherokee hybrid that just started delivery. So they finally getting that new product out the door and that's helping them, you know, recover shipments a bit.
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Matt Miller40:48
Is it enough? I mean, they only just earlier this year, Gabby took a $26 billion write down and charges. I mean, that that's pretty massive to deal with.
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Gabby Coppola40:57
Yes, it is. And, you know, they certainly weren't alone with that. A lot of automakers, a lot of that was, you know, they ordered all these tooling and equipment and parts to make electric vehicles and then they scrapped the plan so they had to pay the suppliers for that. So is it enough to be profitable? I think CEO Antonio Phil also has said that North America business will be profitable this year. That's what they're hoping for the rest of the entire company, TBD. And I think they're looking for solutions for other regions. But they really, you know, put all their most of their eggs in the basket of a rebound in North America and particularly the U.S.. You know, they were one of the first companies. Jeep was one of the first companies to pull its factories out of China. As you know, things got a little bit heated. And now I read that they're thinking about going back to a partnership with Dongfeng to make vehicles there, to make vehicles for China, to make vehicles for Europe.
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Matt Miller41:53
What's the story with that?
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Gabby Coppola41:56
It's very interesting. So you're right back under the previous CEO, Carlos Tavares. I think to his credit, he sense that there was going to be sort of just a China the China car market was going to be a bloodbath in terms of profits. And so he got he got out of there and they broke up with Dongfeng. But now, you know, they want to get back. And the bigger issue is that Stellantis has a lot of excess capacity in Europe. And even though they had some rebounds, you know, in shipments like with the new hybrid Fiat 500 made in Italy and things like that, Maserati, Alfa, they need new markets and they need someone that, you know, help absorb some of that capacity. So the talks that my colleagues in Europe reported today is that they are talking about getting back together with their Chinese partner, Dongfeng, where they would Dongfeng could possibly maybe use some of the production or build in, you know, use up some of the capacity in the European plants. And in return, they could make some of the Stellantis's models in China and help them access the Chinese market again.
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Matt Miller42:52
All right, hot story. Gaby, really appreciate you joining us. Gaby Coppola out there talking to us about Stellantis. I will say if you listen to my podcast, Hot Pursuit with Hannah Elliott, you'll know that I love the V8. It's like every other American I like. I own a 392 Hemi in my challenger, but I will say the hurricane inline six. The high output motor with 510 horsepower is still a fantastic motor even for the truck. I drove it in the RAM 1500. So yeah. All right. Coming up in the next hour, Goldman Sachs Katherine Borel May joins us. Plus, Bank of England policymaker Megan Green and an exclusive interview with Morgan Stanley CEO Ted Pick at 1040. This is open interest.
We are 30 minutes into the trading day. Welcome to bloomberg open interest. I'm matt Miller.
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Dani Berger43:52
And I'm Danny Berger. Markets hanging on to all time highs. If we close at these levels and the game show no signs of letting up after ten straight days of rallying now in 11th Friday's the Nasdaq. Coming up, stocks near record highs on rising hopes for peace. Don't we already have it? The US and Iran agree in principle to extend their cease fire. Earnings in full swing. Morgan Stanley, Bank of America. Those traders join Wall Street's record windfall. And PIMCO bought all $400 million of bonds sold by Blue Owl, a big vote of confidence in a battered private credit market. Now, US and Iran have agreed in principle to extend the ceasefire, buying more time for diplomacy. This according to the AP. President Trump speaking on Fox Business about a potential deal in the Middle East.
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Donald Trump44:42
I think it's close to over. Yeah, I mean, I view it as very close to over. You know, what? If I pulled up stakes right now, it would take them 20 years to rebuild that country. And we're not finished. We'll see what happens. I think they want to make a deal very badly.
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Dani Berger45:01
So it's close to over, but we're not finished. Joining us now to talk more about this is Tyler Kendall, Bloomberg's Washington correspondent. Have you kept track, Tyler, of how many times President Trump has told us it's close to over? It'll be over soon. It's just one or two more days.
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Tyler Kendall45:16
That is a good point, Matt, considering that President Trump has telegraphed before that the war could be nearing an end, though we can say that our own reporting does indicate that at least both sides at the moment are still vying to have another round of in-person face to face negotiations. As you mentioned, the Associated Press reported earlier today that the sides have agreed in principle to an extension. But we can also couch that with comments from President Trump earlier this week who said that the timetable in Iran for a deal has not changed. And just yesterday, in an interview with ABC News suggested that he would not agree to an extension. At this point, though, it does appear that diplomacy is still a viable option at this point. But we also have to keep in mind that there are just so many points that ultimately need to be discussed and find a solution to. Just yesterday, President Trump indicating, for example, that he was unhappy with reports that at the last talks in Pakistan this past weekend, the U.S. had offered to Iran a 20 year moratorium on uranium enrichment, instead maintaining that he would still prefer prefer a permanent ban. So, yes, to your point, there are so many headlines coming out. Still the option for escalation. Iran saying, for example, if this blockade continues, they would take that as a violation of the cease fire. But the indications from this White House right now is that they are still pushing for that diplomatic solution.
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Dani Berger46:37
We're just listening to the president's interview there on Fox and in it, speaking to Maria Bartiromo. He also talked about the Fed's Jay Powell. Let's just listen. Listen to his comments there.
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Donald Trump46:47
Whether it's incompetence, corruption or both, I think you have to find out. I really do. I think you have to find it. So you're not going to drop the probe? I'm not. I have to find out. And he said he's not leaving. If you know, then I'll have to fire him. Okay. If he's not leaving on time. I've held back, firing him. I've wanted to fire him. But I hate to be controversial.
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Dani Berger47:09
Tyler one, I mean, I don't. I guess the president can't really just fire Jay Powell, but. But to where does Senator Tom Tillis stand in all of this? We're expecting a confirmation hearings to begin next week.
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Tyler Kendall47:23
How is that possible if the senator said that he will not vote on this as long as these investigations are pending? Wait and three. Yes. Is it true that President Trump hates to be controversial? Well, I will leave that one to you all to decide. But on Danny's first point, you are right. There is a very high legal bar here when it comes to removing a state official. It's section ten of the Federal Reserve Act. You have to prove what's known as sufficient cause, not legally defined, but typically meant to mean malfeasance or an illegal act of duties related to the job. We are expecting a Supreme Court case potentially as soon as this Friday. That could help give a little bit more of a clarification around that. Related to the Lisa Cook court case that is currently making its way through the legal system. To the second question on where this meat goes for Kevin Walsh's nomination, including that we did hear Jerome Powell say that if his successor isn't confirmed by mid-May, then he would stay on in at least an interim basis. At this point, Senator Tom Tillis really does have the potential to delay this. And the president's pressure campaign isn't going to help ease the senator's concerns. There is a 1311 majority, very slim. He is a key vote on that Senate Banking Committee, which can prevent the nomination from ultimately moving to the floor. I heard some murmurs this morning that maybe we could see an off ramp, that we could have a discharge petition put forward. I have to say, I called up a few congressional sources this morning on both sides of the aisle. Nobody thinks that that's a viable option at the point this maybe could change, but without getting into the wonkiness, you would still need two thirds of the Senate to vote to approve it. And at this point, that's not going to happen. So, Matt and Danny, a lot to watch here. It doesn't seem like it's viable for the president to fire Jerome Powell. But of course, we have questions as Kevin Walsh's nomination hearing is expected to kick off next week.
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Matt Miller49:12
Tyler, thank you very much for joining us. Bloomberg's Tyler Kendall there outside the White House, joining us here in New York City. Catherine Burton, Goldman Sachs, co-head of Equity Client Portfolio Management. Catherine, thanks so much for joining us. How are you? How are you feeling here at all time highs? Are you comfortable with this huge rebound that the equity index has done?
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Catherine Burton49:29
Yeah, we'll look equities drifted into earnings upward revisions. So that's a good setup. That's why we're here and we're going to continue to deliver. But this theme of divergence will undoubtedly continue. So I think first the good news I investment spend is really the underpin of this. It's durable, it's accelerating, it's largely independent to the Iran war and we're going to spend $1 trillion in the next 3 to 4 years, and that's structurally lifting earnings for us and emerging market companies. So that's the good news. The bad news is inflation and the pull through and the consumer, we don't know yet exactly what that's going to look like today. Things look, okay, we're all getting our tax refunds. Tax refunds are now offsetting the higher price at the pump. But if you have a scenario of price of the pump going from, let's say, 4 to $5, this will cause a more dramatic shift in consumer behavior. So putting those two things together, what I would say is uncertainty is here to stay. But uncertainty is also actually very good for prospective equity returns. And we're very aggressively leaning into our deep corporate relationships, our extensive access to data and technology to exploit those entry points.
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Dani Berger50:31
Yeah, Bank of America said its customers are spending 16% more on gas, and that's pretty much in line with the Tax Foundation said how The Tax Foundation said that our that our tax refunds would would rise. Let me ask about what we've seen in terms of the movement under the hood, because I like the RG function on the Bloomberg terminal. It shows its relative rotation graph and you can see what's done poorly over the last 12 weeks at least or going gone into the lagging sector of the matrix is tech software and services as well as financials. Why are financials down there?
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Catherine Burton51:11
Yeah, so if you look at the S&P financials, worst performing sector year to date, so you've had the headwinds of obviously private credit. Generally the Iran war earlier this year we had kind of the noise around credit cards where generally neutral within the financial sector. But what we do like, we like big banks, loan growth is the highest we've seen in four years. The yield curve is the steepest we've seen in four years. And we're at the precipice of a capital market supercycle that might get delayed with the war. But ultimately that's going to come through and that's going to be a big benefit. But on the other side of that, obviously banks are higher beta. If we get bad news like that, can weigh it down. So there is there's a little more balance there. And then I'd also say stock exchanges are really exciting. This whole concept of high volatility, they profit off of that and then selectively within wealth management. That's another area we've been leaning into within the US. And then just quickly on European banks, which by the way, were up 100% last year over the last three and five years, actually European banks outperform the M&G seven. We made a lot of money for our clients over the last few years. Year to date, we continue to express very selective position in that sector.
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Dani Berger52:14
Are your clients talking about these big IPOs that are coming down open a I anthropic? Are they like, Please, Catherine, we need to get in these things once they list? How is appetite looking for these things that are already commanding punchy valuations in private market?
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Catherine Burton52:31
Yes. Clients are so excited. They want to talk about it. And it's interesting. For so long there's been this big narrative of staying private for longer. And I think things are changing now. We talked about this massive cap ex deployment. You're going to need public markets to help fund this massive transition that we're seeing. I'm also kind of interested to see what will happen in terms of the composition of our index. We're very concentrated. This isn't going to solve our problems with that, but that should be interesting.
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Dani Berger52:56
I want to just ask about the price of oil. We hear a lot that the US is insulated, but, you know, as there's as shortages persist, they come over and buy our oil driving WTI price up as well. Is that not going to hurt earnings? Does that not come through in the corporate earnings maybe next quarter, the quarter after that, if we stay here?
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Catherine Burton53:17
Yeah. So the price of oil going up, what we're looking at that's looking at what's happening right now and we're thinking about earnings, the stock market, we're kind of looking towards the future in the market is telling us that we're getting a resolution, not today, but in the future. So that's kind of where we are, which is futures are it Futures are over $90. Right. The price of oil is like 140. Having company is not fully felt. It like the barrels of oil that are priced at that level are finally just making their way over. So we've not seen the at the company level and we're not going to see it in Q1. We would likely start seeing that in the second, third, fourth quarter this year. So if we continue to have elevated oil, yes, that is going to start to feel through. And that's coming back to my earlier comment where we started about this divergence. It's going to hit different companies better. This is why you want to take advantage of those entry points and identify what are the companies that actually might uniquely benefit from this scenario, maybe leaning into LNG or leaning into things that just kind of sold off irrationally or even kind of fun facts, thinking about something like Korea shipping, which is really dominates the floating LNG sector, they really benefit from both energy and just the security defense theme in general. So things like that are giving us good entry points. So embrace that the positive long term conviction views.
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Matt Miller54:27
All right. Super smart analysis. Really appreciate you joining us. Catherine Borglum there of Goldman Sachs Asset Management. Coming up, a vote of confidence for the private credit industry. We'll talk about PIMCO buying all $400 million of bonds sold by Blue Owl's Private Credit Fund. Next, This is open interest.
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Christian Stracke54:55
A lot of the loans that are out for sale right now are pretty bad loans. So, you know, we've we've seen some blocks of those and they're not clearing at a price where yet where we would be interested in buying them.
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Matt Miller55:09
That was PIMCO president Christian Stracke speaking here on open interest last month. And what a difference a month makes. Bloomberg now learning that PIMCO bought all $400 million of bonds issued Monday by a blue Owl private credit fund. Let's get more with David Bach. Boucher, Bloomberg corporate finance reporter. I mean, how much of this because, I mean, he said everything we see out there are bad loans. So what does it tell us that they've gone in and snatched these up?
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David Boucher55:37
I think it tell us it tells us that there's been a repricing in the market generally across bond markets with yields higher, but partly because of geopolitics and specifically in the case of BDCs, whose spreads have been trading higher. So it's become an attractive opportunity for investors looking to buy in the space. You know, we're seeing roughly the same pricing. Bruce Douglas clarified my mistake earlier. I thought Goldman Sachs was just selling debt for two and a half percent. Turns out that's over Treasuries. So it's about six and a half percent in line with what Blue Owl sold to PIMCO. So, yeah, that really tells you that, you know, it's it's a repricing across markets. And for BDC in particular, they're offering a new concession which is higher than what we're seeing so far as of now since the beginning of the year for four other issuers. So clearly there is, you know, they're offering more and investors are attracted to that.
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Dani Berger56:34
Is there not a degree though, to which, you know, everything has kind of repriced and that just allows a reset in this industry? Or how far away are we from from that moment?
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David Boucher56:44
Well, is this the question is like, is this a reopening of the market or a repricing of the market for BDC? Right. And I think, you know, it's a repricing, but it's also leading to essentially more demand. So we're in that space and I mean they plenty of money to spend, I guess. Institutional investors are still in these, so a lot of money on the sidelines waiting to get put to work.
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Matt Miller57:04
David, thank you so much for joining us. That is Bloomberg's Davide but Brucia and catch by the way, Bloomberg deals will air today as it does every Wednesday 12 p.m.. New York time ahead all tech focus. Today we're going to have a partner of Tom of Bravo joining us, the founder of Khosla Ventures. So it's going to be one to watch. Coming up next, Bank of England policymaker Megan Green is going to join us from the IMF spring meetings in Washington, DC. You're watching Bloomberg Open Interest.
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Christine Lagarde57:46
You have to look at, you know, the price of the barrel, the price of the various categories of fuel, the price of futures and all of that applied to gas as well to determine where we are exactly relative to these two. But we are somewhere, I think, in between the baseline and the and the adverse scenario.
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Matt Miller58:06
That was ECB president Christine Lagarde speaking with Bloomberg Francine Lacqua at the spring meetings in Washington, D.C. yesterday. Francine is back and joins us now today with a bank of england policymaker back in green. Francine, take it away.
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Francine Lacqua58:25
Yeah. Thank you so much, Matt. I couldn't be more happy to speak to AM PC policy member Megan Green, and thank you for joining us. I'm going to go straight to the point because we know the issues at hand. We know it's inflation. Are you considering voting for a hike at the meeting at the end of the month?
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Megan Green58:37
So we're about to start our round on Monday and we'll have weeks of discussions and be shown a ton of research and analysis. I can't say what I'm considering voting for at this stage. I will say that, you know, there are reasons to really worry about the upside inflation risks from the war in Iran, and there are reasons to not be so worried. I mean, the world looks very different and the UK economy looks very different now than it did back in 2022 when we last had this kind of negative supply shock driven by energy. The labour market is weaker, there's weaker demand, interest rates are higher as well. For me, the really important question is whether we'll get second round effects or not, and all these factors I've just mentioned suggest we might not get the same kind of second round effects that we've had before. That said, I wasn't totally convinced that, you know, the second round effects from the last shock and totally worn off from the economy before as well.
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Francine Lacqua59:26
How does how is this different from 2022? Because inflation expectations seem to be moving quicker, I guess, as households think about 2022.
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Megan Green59:36
Yeah. So this is different from 2022, in part because the labour market is weaker. Now we have slack that's opened up, demand is much weaker. And so even if workers go to their employers and say we want to get paid more, employers might say, well, I'll just hire the next guy, right? So it might not feed through. And also for firms, it's not clear that they have pricing power. So even if they pay workers more, they might not be able to pass it through in the form of higher prices. That said, firms constantly tell me they don't feel they have pricing power. It might mean that they don't feel they do because if they raise their prices, they'll lose market share. But if everybody is facing an energy shock, then they might all be able to pass it through. So that's a big unknown and an important question for me. Another important difference is we've had 2022. So to your point, inflation expectations for households have jumped much more at the beginning of this war than they did at the beginning of the invasion of Ukraine in 2022. So it does suggest that households are more sensitive to inflation. We've done a lot of work showing that the threshold at which households notice it has has gotten lower, and I think we'll probably see inflation in that threshold. So that's a worry. So, you know, that's a necessary condition for second round effects, but it's not sufficient. Make it so.
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Francine Lacqua1:00:48
So what kind of data do you need to see to say, look, I want to vote for a hike.
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Megan Green1:00:52
So unfortunately we won't have definitive data on whether there a second round effects are not for months. And if we wait until we see it, then it will be too late. So for me, I'm looking at inflation expectations. Certainly I'm also looking at the settlements as they actually come in, but I'm looking at some forward looking indicators as well. So we run a survey of businesses. We asked them all kinds of questions, but they talk about their year ahead, price expectations in the year ahead, wage expectations. And so that will be important, too. And actually, we've gotten data points from that survey that cover the period of the war. And so they give a bit of a mixed mixed picture. So household inflation expectations have jumped a lot, but you're had own price expectations for firms haven't moved that much. You're had wage expectations for firms haven't moved that much. So we really do from the very few data points that we have. PMI data suggests input costs have risen much more for manufacturing than they did in 2022. We really have a mixed picture from the data that we have so far.
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Francine Lacqua1:01:47
What about unemployment? How does the war actually affect what we're expecting on employment, which is already a little bit soft?
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Megan Green1:01:53
That's right. So the labour market has been weakening and, you know, a negative supply shock will push down on activity. And so we are looking for a further weakening in the labour market. We're particularly looking to see if there are any indications of a non-linear adjustment in the labour market. Now that was already the case before this war actually that we were concerned about that. Going into this, I will say that the labour market's been weakening. It hasn't been weakening more than we really expected, I don't think. And also there are signs that the labour market was stabilising. So our own indicator for underlying employment growth has been stable, vacancies has kind of moved sideways for the past nine months or so. And so these things indicate that maybe a non-linear adjustment in the labour market wasn't coming. This might change that if you have a hit to activity. So that's something that we're looking at too, and it gets to this trade off that we're facing between higher inflation and weaker activity, which is something that we're going to have to manage.
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Francine Lacqua1:02:48
But is there a worry that because we've had multiple shocks to inflation, that actually there's a time where that, you know, inflation expectations get anchored?
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Megan Green1:02:57
Yeah, I think there is. So I'm not worried that inflation expectations will get anchored and we are committed to hitting our 2% target, which is our mandate. But I think if you have successive negative supply shocks, you need to think about the interaction of them. And so I think that the latest inflation expectations print for households is is showing because it did jump much more than in 2022, even though the shock is actually smaller. And for households, they're somewhat protected for now. From the energy shock because of the Ofgem price cap. So they'll really feel it much more from July onwards. But the fact that inflation expectations have risen so much more really does show that households are maybe more sensitive to upside surprises in inflation, which is what a lot of our research shows.
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Francine Lacqua1:03:42
I mean, the difficulties, of course, we don't know how much this conflict continues, Right. The length of it. So how long does this need to last to actually warrant an interest rate hike?
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Megan Green1:03:51
So it's it's unclear. And it's not just the length. It's also kind of the infrastructure damage, how long it takes for oil and gas to come back on the market. I mean, these things are all factors as well. As things stand now, as the war ended already, there would be pretty significant lags, particularly with gas markets. And the UK is particularly exposed to gas markets. You know, given the pricing electricity in the UK. So, you know, I think that this could last a while. It's also worth considering kind of the succession in shock. So businesses are really feeling it immediately. Households are a bit protected for a little while because of the price cap. We also have fertilizer that comes through this, the Strait of Hormuz. And so that can affect your growing seasons that might actually feed through into price inflation in six months time. So you might have sort of mini waves of inflationary bouts throughout this. And that's even if the war ends today.
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Francine Lacqua1:04:43
I mean, out of all the countries that have downgraded the UK the most, does that worry you?
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Megan Green1:04:50
It worries me. But, you know, I think growth is already fairly weak in the UK. That said, the supply side I think is really constrained in the UK as well. So that means that, you know, we can only have so much growth without it being inflationary. It's no surprise that the UK and other countries were downgraded in terms of their growth forecasts and upgraded in terms of their inflation forecast is exactly what you expect to see.
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Francine Lacqua1:05:11
I mean, you've seen, you know, market expectations for rate hikes move around a bit. Yeah. Or they fair now so I haven't looked at the latest I have to be honest I would say they've done so they've moved around a lot to you know I can't say because we don't know exactly how long this war will last. But I will say they have moved around a lot. And some of that reflects kind of market participants and market dynamics. There were massive consensus trades in the gilt market. The gilt market is a pretty niche, small market, less liquid than some others. There were a lot of stop outs. I think that actually explains a lot of the moves when you read sell side research or talk to people in finance. And virtually no one has said to me, We expect you to hike four times, which is what was priced at the very peak. It's come off of that which I think is about right.
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Megan Green1:05:59
I ask you about duty because is it something that, you know, Bowie has or should think about to basically change duty to ease market conditions? So, I mean, Q2 is very much running in the background and our main tool is the policy tool and it is tricky in a negative supply shock. You know, interest rates are actually at the very heart of demand management tools. So for this reason, there's this kind of conventional thinking that central banks should always look through negative supply shocks. And because we've had a few in a row, I think we should probably rethink some of that thinking. But, you know, the main tool is the policy rate.
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Francine Lacqua1:06:32
I mean, there's also, of course, is aid that can change how we look at employment. And so how much does that complicate what your, you know, policy setting for the next couple of quarters?
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Megan Green1:06:41
So for the next couple of quarters, probably not a whole lot. And we're looking at I and the implications of quite a lot both on employment, as you point out, but also on productivity growth. So I've talked a lot about negative supply shocks. This is the one positive supply shock that's coming down the pike. I think it will be transformative. The question is over what time period? And there's some nascent signs that it is affecting the labour market. You know, in industries that are more exposed, I have fewer vacancies in others, for example, and that's in the US, but also in the UK, you know, So it is affecting it potentially, but it's really just the beginning. So over the next couple of quarters, I don't think this should have a huge impact over the next couple of years. It's also a question actually how much of an impact it should have.
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Matt Miller1:07:25
Making our our most read story on the Bloomberg terminal is without a surprise. President Trump threatening to fire Jay Powell if he stays on to the Fed once his term ends as Fed chair. Do you worry or how do you think about that? And do you worry about central bank independence?
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Megan Green1:07:38
Yeah. So, I mean, as a central banker, I always worry about central bank independence. You know, to our discussion about inflation expectations, if there isn't any central bank independence, and then those could become the anchor. And so really the currency of a central bank is its credibility. And I think you need central bank independence to ensure that and to ensure that inflation expectations will remain anchored. And so I think it is absolutely paramount that we have central bank independence. So any kind of threat to it is a worry.
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Francine Lacqua1:08:06
But are you surprised the market is looking through any threat?
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Megan Green1:08:10
So, I mean, I think the markets have seen these threats before and have maybe been a bit desensitized to it. So we'll see how that unfolds.
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Francine Lacqua1:08:18
Megan Green, thank you so much for joining us as always. Thank you for the interview. We'll send it back to you in New York, Matt, And and we'll have fun. More throughout the day here from the IMF.
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Matt Miller1:08:25
Francine another fantastic conversation down there in washington, d.c.. Francine Lacqua in the blue is megan green. Thank you both so much. And stay with bloomberg for more conversations from the IMF, including imf managing director kristalina georgieva. That's at 11 a.m. New York time. Now elsewhere, we work is making a comeback. After emerging from bankruptcy. The company has restructured, downsized and is now focusing on profitability under new leadership as hybrid work reshapes office demand. The question is whether flexible workspace can deliver consistent returns. Joining us now is we Work CEO John Santora. John, thank you so much for joining us. And you took over. We were coming out of bankruptcy June 20, 24, so we're nearing your two year anniversary. What is actually different about this company today?
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John Santora1:09:12
Well, good morning, Danny, and good morning, Matt. Where are we today? So we're financially stable. We're structurally and operationally sound. We've had five consecutive quarters of EBIDTA profitability and we continue to grow. If I give you a little bit more. So we have 47, the Fortune 500, Fortune 100 in our spaces around the world we have. Yeah, we have 47 Fortune 100 in our spaces around the world. We have 45 million square feet and we're in 30 countries. 30 plus countries.
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Matt Miller1:09:51
Are those square footage numbers only spaces that you own? Because I know you made kind of a strategic shift previously. You know, you owned the real estate and then you took in tenants. Now you'll manage real estate portfolios for landlords and essentially you do the admin for them.
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John Santora1:10:16
Yes. So let me correct you a little bit there, Matt. Those are the spaces that we leased. We have a number of them where we are managing those spaces, but the majority of it is leased by. We work directly. Sorry, leased. Exactly.
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Matt Miller1:10:32
So but isn't that part of the shift that you're now essentially doing, you know, managing properties more than just leasing them yourselves and then getting tenants for other landlords?
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John Santora1:10:47
No, that is a small piece of our business today. It's an opportunity to grow. But today the biggest part of our business is our properties that we lease. And then we have our members occupy them, and that occupancy today is in the low 80% across the world and in key markets like New York, where above 90%. Toronto as well, we're above 90% and San Francisco's getting there very quickly, I guess.
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Dani Berger1:11:14
So the message I got, John, was that you were aiming towards a more asset light business structure. Is that is that not part of the plan?
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John Santora1:11:23
So so some people have talked about that and we've looked at it and it's a balance, right? The asset light, the pure management play is not nearly as profitable as it is when you take some risk and you do and you take down the leases. Now there's a there's a bit of a hybrid where where our lease structure is, we we have a low lease price and then we share the upside with our landlords. So that's a that's kind of a hybrid model. But the pure manage the space is not nearly as profitable as the other two models.
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Dani Berger1:12:03
John Then how do we solve what has been pointing at pointed out as sort of the core issue, this idea of you have long term lease liabilities against short term tenants, How do you solve that fundamental mismatch?
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John Santora1:12:16
So the problem is, is a balance. So first of all, our portfolio is now taken down to the places we want to be, the key buildings around the world, the key city, the key cities, the key markets that we've invested in that portfolio. And then we have a balance of some of our tenants are in our spaces. They've committed to three years. Some have committed to five years, some are six months to one year. So that balances out our portfolio. And there's been a structural shift in how people occupy real estate from where it used to be. If we roll back and I've spent 47 years with Cushman Wakefield prior to this, so I'm grounded in real estate. So if we roll back ten years ago, 15 years ago, companies owned their headquarters, right? They committed huge capital dollars into owning their headquarters and everything else they had was a ten year lease with a lot of capital. Today, smart companies are balancing out that risk so they may own or likely lease their headquarters with a big long term commitment. They'll do some mid-term leases and then 20 to 25% of their portfolio will begin, is beginning to move into flex so they can adjust to the downturns and the business cycles. I mean, if you look at a ten or 15 year lease, think about just, you know, the last 15 years, the cycles we hit, the business cycles we had and the downturns that happened. So you have the 2001 technology crash. You had the financial crisis in 2008, and then you have Covid in each of those times. If you're stuck in long term leases, you're taking the write down the financial hits to your books. You've got to try to sublease those spaces. Now, if you have a piece of your portfolio in Flex, you can flex out of that in those downtimes. Now that's a little more difficult for us, but we will manage through it.
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Matt Miller1:14:15
John, we've been talking a lot about this Allbirds announcement today. I'm not sure if you've seen it, but that's the shoe maker. They they do like business casual shoes and have decided to not do that business anymore. They're selling their shoe making assets and they're going to do like air data centers. Sounds insane. The stock is up like 300%. I was thinking about that when I was looking at your company. And obviously you've got a lot of space around the world. There's a case to be made that, you know, we need more edge data centers, metro edge data centers, you know, micro edge data centers. And I imagine you already housed some kind of servers for a lot of your tenants. Like, have you thought about how you could pivot a little bit more towards I.
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John Santora1:15:02
No, actually, we have not. So from an AI perspective, we have 220, 238 companies in our spaces around the world. We have the largest companies. The companies you talk about each and every day are in our spaces as well. So from the from the one person to the the largest in the world, the data center aspect, you know, you know, they say stick to your knitting, We're sticking to real estate. We're sticking it a flexible real estate model. We're looking at some new innovations, different ways of creating space. Our spaces is is being upgraded around the world. And yesterday we launched Office Pod, So, so low pod little office pods or high end phone booth type things that will be in convention centers and and airports around the world. We all travel. We know you look at people sitting on the floor trying to find a plug, trying to find an outlet, trying to find a quiet place to have a call. So we're rolling them out throughout airports and convention centers and down a block at Semaphore, there's a line of people waiting to get into them.
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Matt Miller1:16:07
I would pitch nap pods. I was pitching literally just about to say that you could sleep in, but maybe maybe you don't want people spending so long in this. John, I know you're also expanding where Matt and I are here in New York City. What's underpinning that? What type of customer are you getting? That means that you have enough demand to expand in New York.
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John Santora1:16:26
So our space in New York is over 90% occupied. So when you hit that point, we don't have the flexibility. Today, we're opening up some new office to be able to meet it. But if a client comes to us and says, I need 10,000 square feet, I need a full floor, we don't have that availability. So that come that's where the discipline came in over the last year and a half, almost two years, is to not get out ahead of yourself where you have all this vacant space. So now we're taking space down directly. We're taking some additional space where we needed in great locations.
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Matt Miller1:17:02
John, thanks so much for joining us. Fascinating business. Great to hear from you. Hope you can get you back. John Santora there, the CEO of We Work. Let's get a check now on the markets in terms of the S&P 500 right now trading about 12 points. You get a double check. My math, they're about 12 points above this, -69, 78. There you go. Okay. So if we closed at this level when Romain and Katie come on, if indeed Romain and Katie are both here at the close, that would be a record high. The Nasdaq up half a percent, 25,009 or 77, so almost to the 26 handle. And that with oil rising, although it looks a lot better than it has, you know, a week and a half a day ago, we were at 117 as the intraday high on nine max crude, and now we're back down to 91, 66, Brent at 9502. Should we look at some singles? Let's do it. God, I hope all Allbirds is in here. And you know what? It's the first one. Allbirds. Forget everything you know about them. They're now an air company. They're going to do a pivot to compute air compute infrastructure. And of course, you can't stay allbirds You got to keep the bird Newburg new bird. You know what? There there is alpha everywhere you look in this market, if you can just find it and pivot. I got to wonder if Jon is going to go back now and read that story and say, like maybe we should understand about this is they just got bought by a company, I believe they're called American Exchange, and they just do apparel like all the companies they own are consumer goods and now they own in a compute firm. Are they the ones to do this? I don't like that. I mean, the other thing is it's not a penny stock. No, it's it's now it's over $11 a share. This is like Wall Street vets in action, you know, And you're got to have a couple of copycats if they can do that with just 50 million bucks. Snapchat is cutting about 1000 jobs as it struggles to reach profitability. It's always struggled to reach profitability, but it still struggles. So it's reducing its staff by 16%. Meanwhile, Amita and Broadcom expanded their multibillion dollar partnership for chips. And of course, Bank of America and Morgan Stanley had earnings. So we see those shares moving as well. Coming up, Lisa Abramowitz, by the way, sits down with Morgan Stanley CEO Ted Pick.
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Lisa Abramowitz1:19:37
Market volatility has created a huge windfall for Wall Street banks. Bank of America, Morgan Stanley, Goldman Sachs and J.P. Morgan all reporting record trading revenue for equities. Joining us now is Bloomberg finance reporter Catherine Doherty. I mean, Catherine, a huge quarter for these banks, but between that between their investment bank, do we get any signals whether the good times can keep rolling? It seems like they are.
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Catherine Doherty1:20:00
I'm looking at some commentary from Morgan Stanley this morning. They're saying that the sentiment has shifted. So they're noting that there's this cautionary, unknown environment. But as there is more clarity that should be positive for the future, this is quite an obvious statement. It's this note that I think is what people are hoping for, which is backlogs themselves, has not changed materially. If anything, there's a steadiness around that, and that's from the CFO of Morgan Stanley speaking, giving a little bit more context on the numbers that they are seeing. And you've heard that Bank of America, their investment bank, outperforming expectations as well across the board for advisory debt, equity underwriting all out, beat the analyst expectations. So it was a pretty good positive morning in terms of B of A and Morgan Stanley today. And it really continues what Goldman kicked off the week really on a on a high note with trading no bank has surpassed their trading record that they set. But a lot of the banks when they are compared to their own records B of A today, they're stock traders once again set a new quarterly record. And that's not just a for first quarter record, but an overall quarter record.
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Matt Miller1:21:17
I'm always I always love the intel we get from these because these guys know our finances. Right. And Bank America's Brian Moynihan. Talk us through a slide that includes a 16% year over year spike in gas spending in March, but they don't think it's going to hit the consumer too hard.
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Catherine Doherty1:21:33
No, they're once again repeating the strength of the consumer spending is up overall. So, yes, they are noting that 16% spike for spending on gas specifically, but they are giving that context in saying that they believe based on the strength of the consumer and their account balances, that those consumers can handle the increased spend that they are seeing. And that's really just in the last few weeks. So I think that we're in early days as it relates to the increased spending, not just on gas, but on other consumer goods that will start to come through next quarter.
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Dani Berger1:22:14
And Jamie Dimon himself was basically like, there's no level of gas that hurts the consumer as long as the jobs market remains plentiful, which it has been fine. What about private credit? A lot of these banks, some of them for the first time, are going into very granular detail about exactly what their exposure is. Is this a topic that we can now put to bed for the big banks?
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Catherine Doherty1:22:33
I think for now we have much more disclosure as you note today. Bank of America put out a 20 billion private credit exposure. They also noted many protections in a whole slide, and it was reiterated on both the media and analysts call today in terms of here's are the number, but here is actually how we feel we are protected against any downside and noted that they haven't taken any losses yet.
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Matt Miller1:23:01
Catherine Dougherty, really appreciate your reporting. Catherine covers the financials for us. Let's get now speaking of to Bloomberg's Lisa Abramowitz, she is standing by with the CEO of Morgan Stanley, Ted Pick. Let's get you straight over to that interview, Lisa.
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Lisa Abramowitz1:23:18
Thank you so much. I am sitting here at Morgan Stanley's headquarters in New York with Ted Peck, the one and only the chair and the CEO of Morgan Stanley. After an earnings result that you led off with by just saying. Morgan Stanley had a record quarter. Mike drop what led that kind of strength?
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Edward Pick1:23:35
We have a team that I'm so proud of and we've been building our firm for all these years and we have the strategy set now over the last couple of years, raise margin, allocate capital for clients. We've got a wealth and investment manager alongside investment bank and the integrated firm of those divisions working together. So it begins and ends with the team. It's one quarter, we're on to next quarter, but I'm really proud of Morgan Stanley Blue today.
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Lisa Abramowitz1:24:02
There's a question about the trading and sales volumes and how they absolutely blew expectations out of the water, particularly at Morgan Stanley for both FICC and equities. How much does this stem for good volatility versus bad volatility? Because sometimes when things are kind of moving around, it hasn't led to those kinds of results. But this quarter seem to have been a real boon for Wall Street.
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Edward Pick1:24:21
I think you're right about that. The the crisis in the Middle East began to bubble up and folks were thinking going into 2026, this would be a year of investment banking tailwinds, large cap, corporate health, momentum, upside, trade. And then this exogenous event was creeping up, but it wasn't sort of like a bang Covid that became pretty quickly on investable correlation of assets. And the only thing you can do is put your pencil down. This is one where folks thought, well, we'll see how the conflict evolves, but I'd like to express a view. Perhaps I want to hedge some of my portfolio, perhaps I want to diversify. So you start seeing dispersion activity. And our job at Morgan Stanley is to bring content like you and then to get folks to act. And if they're in a mood to act, we're effectively moving inventory, market making our best ideas. And then there are buyers and sellers for hedging insurance and the like. And so in that sense, some volatility is a good thing because you can sort of measure where where it becomes bad as if it's risk off and people say, well, I can't do anything to put their pencils down. So, yes, this was a good vol environment because we were close to clients and those clients were listening to our content and evolving and trying to measure through scenarios. And that worked both in equities and in fixed income.
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Lisa Abramowitz1:25:43
It was fascinating as it also worked in the banking side. Usually when you have that kind of volatility, it isn't good for capital markets on the primary side because people are concerned. They sit on their hands, they don't do some of the deals that were expected. That was not the case in the first quarter. How much do you see that pipeline which you talked about on the earnings call, being resilient and solid coming to fruition given the fact that there has been an easing in some of the tensions in the Middle East?
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Edward Pick1:26:10
Well, that's an interesting point you're making, that typically when you effectively have market making to sort of protect, you're not going to have the risk spirits of the new issue market or the M&A market functioning at the same time. And I think the M&A market in the new issue market worked in part because there was so much tailwind from the beginning of the year. And in certain sectors, the air ecosystem, even with geopolitics, they were able to keep going. So the question that hopefully will become a hypothetical would have been if the conflict had gone on for a number of quarters and we started to see energy costs get effectively imported from Asia through Europe to the U.S., what would that do to the calendar, both the M&A calendar, the IPO calendar? And I, I hope that question will be for another day or maybe no day. Today's question is if the conflict can be boxed at some level, would we expect the coming to the market of these great companies, but also smaller, very high quality sponsor companies to either come via IPO or to engage in the M&A trade? That has been sort of the logjam over the last couple of years. And I think we're seeing in pipelines that both corporates and sponsors want to come. So I think what you could have is a period now we still have some volatility, maybe not the very high levels of charged activity at the beginning of the year. That was, generally speaking, good for trading desks. Maybe you'll see more of a normalization in those types of activities. Remember now the volatility measures already elevated, so the price of buying incremental insurance is high. But then importantly, the core corporate finance life cycle that we've been looking at over the last couple of years hopefully can resume against S&P 7,015% earnings growth. And we can we can keep going. But the only caveat I'd make here, leases there are going to be some companies that are just not they're still not ready. They're they're in their locked in sponsor portfolios and they're going need even more time. Five years, not enough. They need six, seven years because of the higher rate of interest and that to sort of carry the debt. But they're going to be other. And he's clearly that want to come. And we're beginning to see the lead sponsors and lead companies, not necessarily these mega caps. Those are coming in any case. But the next tier of companies we see in bake offs, sort of like M&A versus IPO type of bake off, we're seeing those. We're seeing those happening. And I think that that augurs well.
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Lisa Abramowitz1:28:35
What needs to happen for those deals to all come to market? Does it depend on rates coming in or volatility staying relatively muted or where it is? I mean, what what are some of the sponsors and some of the CEOs talking about here?
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Edward Pick1:28:49
I think the biggest risk continues to be that inflation gets imported around the world again through the energy complex, and eventually it works its way through the food and general living ecosystem. And that becomes that becomes challenging that that that clears the cost of capital. And effectively, then you start talking about the R word. The good news, we're not talking about the R word. And so that, you know, that that that translates into, I think, you know, sort of continued momentum and high quality companies. And the wealth piece of the spectrum is continuing to deploy, continuing to want to engage. So I think if there is some sort of and again, I don't want to use the phrase it's a serious and complex issue, but sort of a better understanding, maybe a narrowing of the cone of uncertainty around what is happening in the Middle East that I think is going to be enough for folks to say, okay, you know what, I can sort of manage through the imputed energy costs in the back end of 2026. And we're going to continue with sort of the game plan. The game plan is to get bigger, to diffuse the cost of I remember the the regulatory backdrop very favorable and then the need to diffuse the cost of I real you put those two together. I'm not saying bigger is better for everyone, but bigger is better might be hip again.
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Lisa Abramowitz1:30:06
Well and we heard about that from united speculating or is some speculation that you might United might buy American Airlines if that gets through, What's next? Morgan Stanley buying Goldman Sachs. I mean, how big could it get? Should there be some sort of regulatory green light potentially to even some of the big players? Right.
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Edward Pick1:30:24
Well, on on on on mergers inside of our space. I'll make you give me an opening to make a comment on that. I think one of the interesting phenomena of the last couple of years and one of the things I've learned in this job is that the quality of the management teams and the quality of the business models of our closest competitors is very high quality. This is so important for us to have vibrant competitors now in a period when the economy is hopefully going to really have another leg and where we are able to conduct some of the businesses that we've been wishing to conduct and have been curtailed from conducting during this tough regulatory patch that we went through for the better part of 20 years. Now that we're able to compete in our traditional businesses, a lot of these firms have internal growth prospects, different models from each of the firms. You know very well where we'll be competing, but we don't actually need to go inorganic. I mean, there may be ways where you want to bolt on, for example, an incremental business, but in our case we have the wealth and investment manager, we have the investment bank on a global basis and the organic growth potential for those businesses. The tailwinds are enormous. And I think with some of our competitors, not that I want to make the pitch for our competitors, I think they have similar types of dynamics. So the reason that's so important is for investors. They want to know that there's embedded durable growth inside of this group that still trades at a low teens multiple.
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Lisa Abramowitz1:31:55
One big question and frankly, the most read story on the Bloomberg terminal today is about Fed chair independence. President Trump threatening to fire Fed Chair Jay Powell. How much does that register in any of what you talk about with people? Or do a lot of people view this kind of as noise and the backdrop being really stable with respect to inflation expectations and even the institutional landscape?
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Edward Pick1:32:17
Yeah, I think I think sort of the politics of the moment tend not to get too much into the focus of how you want to express the position because the question becomes sort of the bigger landscape items. Do we have interest rate policy that feels like it's on a path? Well, I think the answer to that question is more so than it was 18 months ago, but for the war. So with the resolution of the war, do we feel again like we're on a path where there's sort of a equilibrium between price stability and employment and if it's friendly enough or predictable enough that the CFO that she can model what the next five years look like, well, then she's going to be more comfortable taking to her board the idea of buying Company X, Y, Z. And likewise, if there is a reasonable view of what the economy looks like because there isn't going to be an inflation shock, the asset manager can then go about investing in a particular sector and trying to generate alpha.
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Lisa Abramowitz1:33:16
On the call. You call it private credit in its adolescence. And you talked about how your exposure is relatively small. Where is the fact and where are the where is the fiction when it comes to private credit and some of the concerns?
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Edward Pick1:33:28
Well, I think when I say adolescence, I mean a learning it's a learning period. You know, it's growing like a weed. And that, as you know, is a function of an asset class that didn't exist ten or 15 years ago, where effectively the street was replaced on that. It's around 1,000,000,000,007 high yields at about 1,000,000,000,007 levered lending is at about trillion 527. So it's relevant. But the AIG stack, as you know, is the investment grade stack is 10 to 15 trillion. It's all credit. It's all credit. So all things being equal, if the economy is growing, credit is fine. It is fine when there's a recession, credit struggles. And then the question is then which of the borrowers were really doing the work around what's in underlying portfolios? How quickly was the capital put to work? And I think what we're going to see is we're going to see dispersion of returns among great asset managers who really stuck to their knitting, thought about sector diversification, thought about how long it takes to put those investments to work and manages to do less well. And over time, I think the arts will find their place as a growing asset class for all kinds of institutional investors.
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Lisa Abramowitz1:34:45
Ted Peck, we're out of time, which is such a shame. I could talk to you for an hour. Ted Peck, CEO and chair of Morgan Stanley, I'm going to send it back to you as we look to an incredible earnings season for Wall Street, Morgan Stanley with a record of trading and sales looking to optimism ahead if there is some resolution in the Middle East. From New York, this is Bloomberg.