tv Bloomberg Markets Bloomberg January 19, 2022 1:00pm-2:00pm EST
country's leaders in key have. the biden administration is trying to head off a russian invasion. it says that it could happen at any moment. secretary blinken said that diplomacy is still the best option. he believes that leading with russian foreign minister's and helping to determine whether moscow is willing to negotiate over concerns nds clay. the british government is lifting the restriction imposed in england in december. the omicron variant of coronavirus has caused a record spike in infections that now show no signs of easing. some signs of easing. boris johnson spoke with the house of commons today. this morning. the cabinet concluded that because of the exporter campaign, with the way the public has reacted to the measures, we can return to plan a in england and a lifetime plan b regulation to expire.
>> prime mr. johnson says that guidance to work from home will be ending, as will and -- mandatory covid certification. the u.k. government will no longer require here the wearing of the mass. israel is seeing a spike. they rose for a record 71,000 on tuesday. more than six times the previous high. officials say that many infections are unconfirmed. that is leading to thought that the actual figure is two or three times the amount. israel, a leader in vaccination, has already given a fourth dose of the vaccine. that is to more than 500,000 people. united states supreme court is signaling interest in rolling back finance. a number of justices voiced skepticism today about a proposal for provisions regulating the repayment of candidate loans. it involved the clash of ted
cruz and the reelection campaign. the provision says that campaigns can use money, donated after the election, to repay cap it loans, only up to $250,000. the biden administration says that the cap helps prevent corruption. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i mark crumpton. this is bloomberg. ♪ >> it is 1 p.m. in new york. 7:00 p.m. in berlin. two eam in hong kong paid i'm matt miller. welcome to bloomberg markets. here are the top stories we are following. it's a raft. the big banks finish off reporting, and morgan stanley and bank of america are on sale.
their earnings will result. we break down the numbers with oppenheimer. plus, divisional infrastructure. a digital bridge ceo mark yancey will be here is the firm closes at $8.3 billion. flagship funds on the sector. and we stick with digital infrastructure. the 5g rollout is air travel in the states and around the world. we will discuss with a jefferies analyst later this hour. we will focus on airlines. first off, let's take a look at the markets. a big selloff yesterday. we saw a rebound. today, the s&p 500 is up about one third of 1%. the u.s. 10 year yield is coming back down. investors are strained to buy the debt, and that is happening across the curve. today, the bloomberg dollar index is also down. 1170 right now, and still not at the level we saw last week with the 1160. it is far off the 1194 that we saw in november as a high.
crude continues to hide -- climb. $87 and six cents a barrel for intermediate. received the brent getting ever closer to 90. but let's get to the latest on bank earnings. right now, morgan's reporting is surprise increase in trading's in the fourth quarter, and boosting profit targets. bank of america's getting a boost from loans. clients are strained to borrow again. for the company's traders and analysts and expectations. we are joined now by managing director who is banks at oppenheimer. it is been a bit of a mixed bag. the trading picture is one that a lot of people are interested in. in terms of equity trading. the boom is over. >> it is normalizing. that is fine. i think overall, for the quarter earnings, earnings are little bit light. that is on trading normalizing. expenses are flipping open. but stanback.
consider that the estimate for going into earnings, the estimate of 2021 for goldman, for example, it was $60 a share. for 22, it was $40 a share. for jefferies it was six dollars a share. and for jp morgan it was $15 for 21, and 12 for 22. it is not as though it should be a surprise to anyone anywhere. the environment is normalizing a little bit. people are building in a huge degree of normalization, and it is a forward number. it is normalizing, and in terms of cost and pay, it is going the other direction. is this increased pay that has to happen across the sector. >> there two things. i think it is a real phenomenon.
all the lower levels. on the other hand. the big dollar chunks, especially for the debit banks, is from senior people. that will be very revenue dependent. the other thing to keep in mind is that 2021 was an extraordinarily good year. nobody was going to pay for next dollar of earnings-per-share for goldman in 2021. there is quite honestly a natural incentive for ceos to sort of push as much incremental spending as you can into this year. i'm not saying that there isn't any cost inflation, but there is also a feeling of having a great year, you know, and let's give ourselves some room next year. just to put that into perspective, my numbers are early, but it is nothing like a 15 half percent rate.
in the last couple years it was mostly in the 12 to 14% range. >> as far as i can see, and jp morgan, i can see market perform ratings. you don't have an outperformer on any of the big bank shares. >> no. we are constructed. we have bank of america, and jp morgan. and u.s. bank, gold bank, jeffrey. there are quite a few that we like. city. it is kind of a special case. but i would say that i am generally positive about the outcome, and if you look at the key underlying narrative, which drove the stocks hired. early in the year. it is basically that rising rates are not going to help bank earnings, and same time, we are
probably going to take air out of the gross stock multiples. on a larger basis, the banks will have it. on top of that, you have something that is interesting. in the fourth quarter, after declining in covid, and most of last year, we had about 1.8% loath -- low growth this quarter cover in about 2.8% net interest income growth. there are these blips on expenses, and on trading income, but if you look at the key revenue line of the banks, this was really the first kind of meaningful uptick since covid had. >> that is what will continue. >> in terms of loan growth, and this rate environment, what is your outlook? >> it doesn't pay to be a hero difference. figure three or four hike this year and a share. the bottom line is what it means is if you have a 5% loan growth,
and a rising rate environment, that will probably turn into eight to 10% that ink come growth. it will be disproportionately raise the. i think the ford outlook is pretty good. quite honestly, i wouldn't get too bent out of shape by a bit of a blip in expenses. or trading coming down sooner than you are looking. >> the concern, of course, is that rates rise too quickly. tighten financial conditions considerably. i could go either way in terms of patting the net interest margin, or also hurting loan demand. >> i think you're such a long way from that, quite honestly. i will start worrying about that when the fed funds rate is
between 200 40 basis points -- 200 and 400 basis points. we will start to have a meaningful impact it the first hundred basis points in particular i think are all gravy from the banks. matt: thanks. great to get your insight. he covers banks for oppenheimer. i will give our viewers a programming. tomorrow, we will interview the ceo of bank of america. brian moynihan. that is at 10 a.m. new york time. three p.m. in london. 11:00 p.m. in hong kong. on bloomberg television. an interview you don't want to miss. coming up next, investing in digital infrastructure. this is an interview you don't want to missed either. the ceo says his firm closes at $8.3 billion. they are focused on that sector. the big move is next. this is bloomberg.
>> this is bloomberg markets. i am matt miller. investors are betting big on the global push into digital infrastructure. the digital grid is proposing a second flagship fund with over $8 billion. all of this admits rising concerns. all of a sudden, surrounding the blood of the 5g network. mark joins us, because we are
have a reporter who is a star and here with us on this program. mark, let's start with the 5g. the hubbub over the past couple of. i didn't even realize this was a problem. all the sudden, a couple minutes ago, my mother says i wonder if we are going to start canceling lights. there is a 50 up. is this really that big of a problem? >> i don't believe it is that big of a problem. the faa is saying they have not known about this for a couple years, and that is ignorant. remember the spectrum which is what 5g operates on. it is operating in 40 countries around the world. today, they land a plane and those countries with zero disruption and no problems. this is really a bit of a red herring for mike -- from my perspective. there is always been discussion about the telemetry of aircraft, and we always navigate through it. the industry has great credit -- with great credit, has done a great job. this really isn't a story, to be
honest. this is in the faa's court, they have to get it right. they've been working with the faa, working well with the airlines that come to the table, they provide concessions. we have to get on with innovating, with to get on with building these networks. >> i am curious. on one hand, you have these grand plans from the biden administration about building digital infrastructure. i am wondering if you at all could outline some of the hurdles as this gets done. >> the biggest hurdle is 42 people being handed to the states. that immediately sort of raises a red flag, which is where is the money going mark my question is prime really, we need to make sure we are doing a couple of things. first and foremost, we have to provide all types of communication solutions. not just rural committees in urban areas. we have to use our entire arsenal. that is wireless technology wire technology, and it can't just go
to the states where we are basically putting more fiber in the ground. certainly, in these situations, we are overbuilding for it we need to avoid that. the second big thing is that, from my perspective, it is really a great opportunity to retrain her workforce. i've been a big advocate for putting americans back to work. it is a highways with digital jobs. we need to dig ditches, we need to have powers, and we need data centers. the resignation is a great opportunity to reignite the economy and train people. put people back to work. we need to continue centers, and their organizations train people, and most portly, we need to work with military veterans put them in a job. they're the best workers we have a digital input structure. >> are also outlining a huge gap. i one hand you have a great
resignation, and on the other hand, he of all this capital that is not leaving those jobs yet. will it take to find those workers and really push for the digital economy? >> training. it is simple. it starts in the universities. we have been putting a lot of our own capital to work in historical black and universities. we are working with them to create and build data centers and places like -- in places like morehouse college. digital mentorships with rate high school like the cap organization new york city. other organizations where we are mentally -- mentoring people, and creating education grid if we don't at people educated and we don't train them, we have no chance to retool our records print we have to start early. we have to start earlier in the process. >> it seems like your goals are pretty closely aligned with the goals of the ministration. and we had a big infrastructure bill pass. it seems that washington dc was able to do that. last year. how is that money being spent?
is it working out? the way it was supposed to? are you betting on anymore? >> we are not. we are betting on ourselves. that is the best thing we can do here far investors. for customers. as i said, 42 billion dollars are allocated down to the states. that is where the money will flow. it will start in the fourth quarter, but that money really will not get into the hands of our customers and ourselves until early next year. we have a year to figure this out. we have to get it right. in the meantime, the show goes on. we have to build the next generation networks. we have to continue to invest in cloud applications and cloud infrastructure, which we are doing here. we have to put people to work. these are easy things that people can get behind. matt: i guess it may be easier for you to transition from -- colleague capital goal was focused on real estate, and i are focused on this. i can see that the connection
it's easy to make, but what was it like moving your firm in that direction from real estate to infrastructure? >> the things we are investing in are really the map of real estate. digital river structure is real estate. it was quite similar, but on another hand, it was hard print we rotated $75 billion of assets. now we are managing $42 billion of digital infrastructure of cross five digital -- across five comments. we have a $6.5 billion retail cap budget for this year. we continue to invest in the keitha maddox. we are investing cloud computing and network spread we are investing in the future. our eyes are squarely focused on the future. we have an incredibly successful fundraiser, and now we have to put the capital to work for our shareholders. >> i am curious if you are focused on world wide areas, worldwide industries. more traditional areas. they will take place -- where
you have, and it will become also-ran. if they don't start to transition to a new economy. >> there is plenty of room for s allocators to invest in traditional real estate. we have made the decision that we want to invest in digital real estate. it was a pretty simple. for us. his management team took over two years ago, it has been doing this for three decades. it is what we know best. on the key perspective, for our perspective on digital bridges,, we are investing in cell towers of fiber-optic networks. these are the things that we believe will have the best secular growth trends. if you figure out were capital expenditures are being put to work in 2022 and beyond, look at the cloud. $1.1 billion in cloud cap will be spent over the next eight years. another $900 billion will be spent over the next seven years. also in 5g network spread all of that will require mission-critical real estate.
it will require the next generation of real estate, and that is where we are going. i think real estate investors have a lot of friends that run real estate bonds, they run public rates. they will be successful. they will continue to invest, they will create good returns for investors, but this is where we have taken the future of this company? matt: it is quite cold. i just saw weather warning. we have a threat of ice on the sidewalks. we a great story about investors in south florida buying football clubs all over the world. of course, we watched on wall street. the migration of the last couple of years pretty what selecting business in the south? is a change in the pandemic? >> i don't think it has. the governor has done a great job of keeping stay open. he is made a very friendly business environment for people to move your. this is the third company of run from south florida, so we had a lot of success.
shortly after 9/11, we were here for 20 years. and it is a great place to do business, and for us, it is really a launchpad for running a global business. we have offices in singapore, london, new york, and all parts around the world. we are a global organization, but we like south florida. it is our workforce that is motivated. people want to move here and they want to be here. largely, we have a great business, and a great investable the medic, and art was there is pretty good. the taxes aren't so bad either. we have been here for a while, and we will continue stay here. matt: we see so many businesses and industries putting hubs down there when it comes to crypto. you mentioned launchpad for decades, but now, you see wall street south. great to get some time with you. thank you for joining us. the ceo of digital bridge. he is talking to us about infrastructure after closing up a flagship eight point $4 billion fund. thanks you is always as well.
matt: this is bloomberg markets. i am matt miller. let's get to something that caught my eye. that is wall street. jp morgan is raising compensation for the second time in seven months. salaries are up for the first year investment banking analyst. it is said that they are starting now at a hundred $10,000 -- $110,000. the second year pay will be 125. third year will be 135. the market is expected to see similar chumps. this comes a few days after bloomberg learned that citigroup is also increasing its pay for junior investment bankers. that is after its division posted its best performance on record last year. we continue to see a ratcheting
up of pay on the lower end, again, in terms of investment banks. we also broke a story about partners that top 1% at goldman sachs. they get multimillion dollar five-year payouts on top of million-dollar bonuses on top of million dollar salaries. it has been a million-dollar -- if investing time to read the pandemic. you can see that typing ma go on the terminal. coming up, we'll get back to the market story of the day, but a senior per folio manager will stop by. this is bloomberg.
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the one-year anniversary of taking office. he is spending the first year with setbacks and low approval ratings. the news conference is scheduled for 4:00 p.m. washington time. you can see that live here on bloomberg television. on capitol hill, house democrats are promising to sink the president economic agenda if a scaled-back version -- soft is a key issue for many democrats -- salt is a key issue for many democrats. new york's attorney general has asked a judge to order donald trump and two of his adult children to testify under oath as part of the ongoing civil probe into the family real estate business.
she says investigators have discovered the former president likely used fraudulent valuations to restate the value of his assets. the trumps say the investigation is politically motivated. the judge has rejected that argument at least twice. booster shots with mrna vaccines failed to block omicron in a study of the first rank through cases. -- rick through cases. all of the cases studied were mild or moderate providing support for the extra shots ability to prevent disease, death, and hospitalizations. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg.
>> welcome to bloomberg markets. matt: u.s. stocks erased declines and a choppy session as volatility returns. turbulence in the airlines, a 5g rollout by at&t and verizon airports could interfere with safety systems leading to disruptions and cancellations. so far, we have a slight reprieve and we have not seen many disruptions or cancellations. a new study shows that booster shots with mrna failed to block omicron and early documented breakthrough cases.
all that and more coming up. >> i thought you will characterized it talking about the choppy session we have seen. a little bit of green on the screen when it comes to north american markets, but there are some different flavors. you could make the argument there is a little buying the dip mentality from investors in the tech sector. it seems like there is a cautious thing with investors moving into safer areas like utilities or communication because we keep going back to the same story of the inflation realities, rate expectations and broader rotation in the stock market so far in 2022. this is not just a u.s. story. for what it's worth, it is our segment today because cpa -- cpi
accelerated at the fastest level. this is going to add pressure to the bank of canada to start increasing interest rates. going back to 1991 inflation levels in this country, that's like c&c music factory or brian adams topping the charts. matt: 1991 was the year of pearl jam, nirvana, soundgarden, jane's addiction. that all happened in 1991. i don't know that i would've picked c&c music factory. ethic it's interesting we are seeing the unexpected rise especially in the u.k. were the bank of england moved earlier. the blackrock vice chair said in an interview with us that it is
not just a problem that can be solved by central banks. >> monetary policy is not the only game in town. that's very important. you can raise rates more aggressively, but that's not going to ease supply constraints that are the underlying cause of the higher inflation. >> not just central banks. other people have to reach in and help out when it comes to fighting inflation. that's what we think about the governments of the u.k., canada, the u.s. in a position to do that. jon: we have looked at this through the lens of stocks, but let's talk deeper about the bond market. matt brill is the perfect person to have this conversation today. we have been having this conversation around the selloff in technology stocks. walk us through corporate debt
and the reaction we have seen to the rising rate expectations. matt: it has been really challenging year for corporate credit thus far because you have investment grade credit down 3%. high-yield credit is down to 1%. it is mainly driven by interest rates. there are two components to bond returns. treasury yield moves and credit spread moves. the majority or treasury yield moves. the returns are pretty ugly. the fundamentals are still good, but the returns have been tough as the view that the fed is going to be tightening has been weighing on rates. matt: it's interesting because there are a couple of generations of investors sitting at their desks and home offices. they are dealing with the situation we have never seen before. rising rate environment. what is different about
investing as we expect the fed to increase rates up to five times in one year? matt: the magnitude and the speed is different. if we see three to five hikes this year, we could even see 50 basis points right out of the gate in march. it's not likely, but it is on the table. it's not just the magnitude, it's the fact that you are going to be getting rate hikes the same time you get a balance sheet runoff off maybe even a balance sheet sale. we have never had the federal reserve selling assets. have let them runoff come up they have never actively sold assets. this kind of one to punch is different. the fed still needs to be agile. if the fed is overly committed to one path in one direction and one magnitude, meaning very fast
speed, they could overdo this. the fed has to be careful because they have never seen this before. let alone anyone under the age of 40. jon: it feels like the word transitory has been locked away in a box with pearl jam cds. it if we look at what the picture might end up being in the second half, i know what the bond market is indicating, but you were clear you expected to see easing on the inflation front. has your own opinion changed drastically over the past few weeks? >> without it was going to be the second half of the year went inflation would start to slow. going to take a while. i think what we didn't expect was the fed, the pressure was going to mount a lot quicker. both politically than from academics as well. the fed has a lot of pressure to start moving now.
that wasn't the case in the third quarter of last year and barely in the fourth quarter. the speed of the inflation was always expected it was going to start to ease round april or may of 2022. it still probably going to be there. it might be june or july, it will start to slow down. you're not going to print 7% or 8% handles for too much longer. if the fed keeps seeing these prints, they're going to keep pushing the break and that's going to be this -- the story of 2022. matt: i gathered some information today from someone who sees the supply chain constraints lasting for another year or two. rivian is seeing supply chain construction -- congestion.
another advisor says we could be looking at an industrial recession already. how difficult is going to be for the fed to fight inflation without tightening financial conditions so much that it hurts the economy? matt: they're trying to thread the needle and it's going to be a tough time for them. it's a case-by-case basis in terms of when inflation or pricing pressures or supply pressures are going to start to recede. the reality is, if the fed is going to be the only one doing it, that's probably not enough. if the economy starts to slow on its own, that will help inflation go lower. you do have a situation where you had so much stimulus, that has all worn off. the lower end consumer is out of money. they are in a worse position than a year and a half ago
because inflation is so rampant and now they have lost stimulus. the lower end consumer is in a lot of trouble right now. if that starts to spill over to other areas of the economy, we could be talking about a slower economy by 2022. if they can thread the needle, then we will have a soft landing. i am optimistic that the fed will speak more harshly than the actions they're going to go through with because i think they will realize the back half of 22 that the economy and inflation is slowing and they need to take their foot off the brake a little bit. matt: thank you so much for joining us. talking about investing in a rising rate environment. coming up, the first day of a new 5g service. so far, only modest flight disruptions.
airlines from emirates, japan airlines, air india all warning they may have to use different airplanes because boeing 777 is affected. maybe the 747 400 doesn't work well. i don't want to say it's much ado about nothing, but it feels like this problem has a solution. >> i'm glad you brought out the boeings. i thought about how you had only seen the canadian government agreed to a few things like a buffer zone around airports which the u.s. players have been arguing for. also the speed of 5g, with some of the wireless auctions we have had in canada, they are approving lesser speeds. it becomes this situation of new technology on the front lines of
where the airlines are using their technology and trying to figure it out in real time. matt: i was there for the 3g auctions 20 years ago alongside the ceo of a telecom company and it was supposed to be the most amazing new technology and now it's a nightmare if your phone gets stuck in 3g. i love the wide-body planes. i want to talk more about that situation. let's bring in our next guest for more. how much of a disruption is the 5g rollout going to be? we heard trade groups say it could be catastrophic. sheila: think of our phones on airplane mode. that's why you're asked to turn your phone off on flights. the impact would be fairly limited, impacting two aircraft
models. we will see some rollout pullback given the potential disruptions, but the airlines have had a slew of issues from omicron cancellations, they don't need another headwind to face them. jon: i think that gives us the opportunity to talk about what you are expecting from earnings given there is a long list of things they have been navigating . how would you characterize what's going on now? sheila: tomorrow american airlines and united are reporting. what's interesting is although revenues give us a snapshot of what they're doing right now, revenues are ending 2020 120% below 2019 level. -- they are ending 2021 20%
below 2019. i think we look forward to see how united and american are going to navigate their costs. united came of their analyst day last year saying costs are going to be 8% less. we will see what they have to say on costs and of course booking trends, what delta told us is the next 30 days to 60 days are tough, but they are looking forward for the reopening starting after president's day. of course, pricing. one of the only reasons why delta -- we think it's the premium carrier that could warrant better pricing especially with a lot of capacity coming into the market. capacity is granted increased
25% due to these low-cost carriers coming in. matt: low-cost carriers don't help. his business travel going to come back? that's where they make their money. sheila: that's what we are waiting to see. we are waiting for to recoveries to happen. corporate and international. on the corporate side, one of our data pieces tracks going into offices -- people going into offices through their id cards. we track 40 million users across the u.s., but that was 33% below 2019 levels. pre-thanksgiving, that was 30% below 2019 levels. that took me by surprise because i thought in a big return to office, i only saw three point improvement. corporate is the recovery we are waiting for. delta because the corporate exposure is 50% small medium
businesses and we think those will come back faster than that large institutions. then, the international traffic coming back which will be driven by transatlantic opening up. jon: thank you for joining us. time now for our stock of the hour. ford is sitting -- we have a look at what has been going on. >> let's start off with ford shares down. the biggest intraday drop in eight months when it comes to ford. today not only are they dealing with inflations in cost pressures, but consumer discretionary is under pressure. you see that was shares of gm. at the same time, ford is dealing with a supply chain and labor issue. at the heart of the announcement today was $8.2 billion
disclosure about fourth-quarter revenue from the rivian investment. let's get the rivian ipo. it went public at $78. it got to $100 billion then reversed down to $66 billion. ford made a big investment and they lost part of it. they also have a 12% stake in rivian. compared to amazon that has a 18% stake. jon: thank you for the breakdown. this is bloomberg. ♪
regulations to expire. jon: that was boris johnson with rollback of restrictions. this comes as his own leadership position is in question. that is been the reality for a lot of political leaders during the pandemic if there are restrictions in place, then are you following suit and we covered this one in great detail. matt: i think he's got a lot of people in his own party angry. some have reported switching to the other party. it looks like the pressure continues to increase. i heard jon ferro say get ready because get ready there might be
a change at the top. who would replace boris johnson? who is there that could take his spot from either party? as you said earlier, inflation is picking up big time. they need some stability at the helm. jon: does the omicron situation allowing for these restrictions play into his favor? we will watch that closely. matt: how fantastic wednesday afternoon. this is bloomberg. ♪
-- imposed in england when the omicron variant caused a record spike in infections that now shows signs of easing. boris johnson spoke in the house of commons today. >> this morning, the cabinet concluded that because of the extraordinary booster campaign together with the way the public responded, we can return to plan a in england and allow plan b regulations to expire. mark: the prime minister added that means guidance to work from home will be ended as will mandatory covert status certification. u.k. government will no longer require wearing masks. two u.s. supreme court justices issued a statement today over what is for many americans a common refrain. whether their coworkers should wear a mask. justice sotomayor or says she did not ask justice gorsuch to where a
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