Bloomberg Markets Full Show (02/22/2022)

Bloomberg Markets Full Show (02/22/2022)

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From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. Just 30 minutes into the U.S. trading day Tuesday February 22nd. Here are the top stories we're following for you at this hour. Russia risk. The U.K. is imposing sanctions on five Russian banks as tensions heighten in Ukraine with the EU not far behind with their own. Even German Chancellor Orloff shouldn't think he would halt

certification of Nord Stream to pipeline. And that means volatility. Well it's top of mind financial markets around the world. Choppy action as investors digest the read through ongoing inflationary pressures and mixed earnings. Commodities surging with nickel now climbing to the highest since 2011. And now we're up to nine. That's the number of consecutive rate hikes.

JP Morgan economists are forecasting for the Federal Reserve as the central bank aims to tackle inflation. We'll speak to chief economist Bruce Castleman on his team's call from New York with Creative Gupta in New York. I'm joined with Tom Mackenzie in London. Alix Steel and Guy Johnson are off today. Welcome to Bloomberg Markets Tom. It is a wild wild day in the markets perhaps unchanged on the surface level. But there's so much to digest. Even my head is boggling. Yeah. Chrissy we came out at the start of play here in Europe down around 2 percent and the markets just pared back some of

that risk off mood on the back. It seems of confidence that maybe these sanctions we're getting from the UK the EU even the US are not going to be as tough as they had expected. We're getting lines now when it comes to consumer confidence because we also have to forget or mustn't forget that of course the build up to what's happening in terms of that Fed decision mid-March continues even if the moment is being overshadowed by the geopolitics. Of course one key question is to what extent that geopolitics changes the pricing mechanism and the right height mechanism for the Federal Reserve and for banks. So the numbers coming in the consumer the conference board consumer confidence for the month of February coming in just above the estimate one hundred ten point five again for the month of February. That is slightly below what we saw in the pre at

month. The prior month January hundred thirteen point eight is what you got in January. It's gone down two hundred ten point five. But again it's above just slightly above the estimates. So again the questions around the health of the US consumer where we know that household balance sheets on aggregate remain relatively strong. But of course prices at four decade highs and of course real wages are in negative territory. But it seems that consumer confidence is holding up for now at least building on that strong set of retail data that we got out stateside as well. OK. Let's get back to the main story of the day then. The

European Union and the UK have responded to Russia's latest move in the Ukraine crisis. They've set out initial packages of sanctions targeting Moscow and the US is expected to follow with its own penalties. Joining us from Washington Bloomberg's Anne-Marie or Dan Amery. Get us up to speed then on where things stand in terms of the US thinking and to what extent they're going to follow the lead from the U.K. and the proposals from the Europeans. Well first of all last night we did have that executive order from the president which would prohibit any sort of financing or trading that goes on in these self-proclaimed regions of done. Yes. And the horns that President Vladimir Putin and the Kremlin

yesterday recognized as separatist regions recognizing them and what the United States says ripping up the territorial integrity of Ukraine. And then they said that there will be more severe measures tomorrow. And really what would likely going to happen given the fact that they've been in constant communication with their European partners. I would say they'll be pretty much in line from what we are hearing out of the European Union as well as in the United Kingdom. Now I spoke to an official this morning that said a lot of what will happen will match the event. So it looks like this will not be these swift severe

hardships and has the breath that they could go in terms of the scope of the sanctions at this moment. Boris Johnson is calling it tranche one. I imagine we'll hear the similar kind of language from the White House. Well Emery I'm glad you brought up language in particular because there certain language that's being used about whether or not this is being classified as an invasion. What are you hearing about that. So I think some military officials and the deputy national

security adviser is that a number of networks that they are they do consider this an invasion. When President Putin signed that to create decree yesterday recognizing these two separatist entities that also called for Russian troops what they called peacekeeping troops. But that is Russian troops going into this region now. It got a little bit more complicated last night. We were briefed by a senior administrative official because they had noted that for the past eight years. And we should always be noting that for the past eight years there has been fighting in this Donbass region in eastern Ukraine. And they said they noted

that the past eight years there have already been Russian troops in these separatist territories. Bloomberg's Annmarie Horden thank you so much for your time actually brings us to our Question of the day. Is there contagion risk from Russian and Ukraine tensions. We're joined by Bloomberg sustainably and Vincent Signal relative really explore that question. Vince I'll start with you here. How does this what's happening in Europe. Yes we know nat gas is kind of being influenced in Europe. We know that there are consequences when it comes to the currency space. How does that read through show up here in the United States. I think you mentioned it earlier. You were you were referencing

the John where oil prices were coming in crude prices were going. I think that's the the canary in the coal mine if you will for how this is going to impact the economies globally not just in the energy space but in the what it's going to mean for inflation and what it's going to mean for yields. You mentioned a moment ago J.P. Morgan raising their estimate for nine interest rate hikes. I'm waiting for someone to get to twelve. It is the Fed. It puts the Fed in a very precarious position. And this is reminiscent of the late 70s where if you see crude prices really surge and inflation really surge and they are put in a situation where they have to raise rates to curtail that. Will it be the aggressive pace that as you said JP Morgan's going for which could easily undermine economic growth and that's going to be the same situation for Europe.

Just now let's bring you in at this point for the equity market reaction and here it's been pretty pronounced in Europe. Futures stateside currently range bound. But European stocks gaining two tenths of a percent. Assessing the potential impacts of these sanctions that we've had proposals at least from the U.K. and the Europeans. What do you make of the way that the markets the equity markets are weighing up these geopolitical risks at this stage.

Yeah I think today there might be a bit of a buy the rumor sell the news a fact. I mean we had a JP Morgan story Morgan Stanley's Mike Wilson saying we could even get a bounce back maybe 5 percent and the S&P 500. If there are any signs of de-escalation because it does feel like you know when it comes to European U.S. stocks some of this has been priced in already.

But I think at the same time you know the market remains very jittery and it's kind of watching what's going to come next in terms of sanctions and how the West responds to the Russian moves. Just you know I would stick with you here because I'm really curious about that exact idea. A few quarters ago a few months ago I should say a lot of strategists economists were saying well this first quarter was going to be pretty volatile anyway.

They were attributing it to simply a hawkish Fed that very strong pivot. No one really saw these kind of geopolitical tensions creeping up. How much of the price action is actually those Russian tensions as opposed to perhaps volatility that investors on the street were anticipating for months yet. Yeah I think it's like really a combination of all of that because on one hand you have like this big policy shift from the Fed and obviously this geopolitical risk kind of came unexpected. And at the same time there's also been some signs of decelerating earnings revisions. And so I think you know people are also worried about kind of slower profit growth at the same time. And of course it's kind of hard to disentangle everything because the Russian news also at the same time affects inflation expectations through the channel of commodity prices. And that

in turn kind of affects what people are expecting the Fed to do as well. Vincent when it comes to the central banks the market pricing around the ECB they had been looking for possibly two hikes by the end of the year by December of this year. Now it looks like the markets are looking at one partly as a result what we're seeing on the Ukraine border. Does the Fed. Can the Fed continue to look through this. I don't think so and again it's it's gonna be that commodity price issue. If if commodity prices continue to rise and we

continue to see energy prices WTI pass one hundred just for argument's sake I mean that's going to be I think impossible for central banks to to avoid. And I honestly think the pricing for the ECB is a mess when they you know scaling it back from 2 to 1. I realize the geopolitical tensions may cause a little bit of a slowdown in economics for Europe but the potential for inflation for Europe is probably greater than here in the US. So where last week I would have thought the ECB was maybe one of the last central banks to move on interest rates or at least the scale of their move. I think it's put them all bright in the mix

now right in the race of how quickly they must look. Pretty chaps raising rates to cut back on what could be some really nasty inflation. Then let's talk about the measure or I should say the margin of the rate hikes that we're looking at. I think consensus says that we're going to see one in March. Do we see a 50 basis point hike perhaps not on the back of inflation but perhaps on the back of these Russian tensions. I think that probably lowers the expectations for 50 basis points because of the geopolitical risk. The Fed has a lot more factors now to weigh. One of them would be potentially a slower economic growth cycle because of this geopolitics. I think one

thing that's very interesting and no one's really talking about is to wait to see what China's response to all of this is. Initially of course they were supportive of what Russia had done but in the long run they cannot afford a global economy that stagnates or turns south. They and they cannot import inflation to extreme levels at all. So one even though you have the Taiwan situation and this plays into that and saying perhaps people think this is a positive for China I would honestly expect them to come in and weigh on the side of the west to some extent to try to cool tensions and to keep this as close to where it is right now and not escalating it. Interesting cool evidence and particularly when you know and expect that the policy makers in Beijing they like to have stability domestically they certainly don't have to like to have stability internationally as well. Certainly with their largest trading partner partner the EU. And if you're looking at oil closing in to what ninety seven dollars a barrel. Now Brent that is going to be painful for China as well. So it is something to watch. Vincent Signorile thank you. And of course Justine Atlee as well walking us through the market reaction to these

geopolitical events. And coming up the Wall Street economist who's forecasting the Fed will actually go further than almost anyone else thinks when it comes to fighting inflation. We're going to talk to Bruce Kinsman chief economist at JP Morgan Securities about his latest call. That is next. This is Bloomberg. With news from around the world here's the first word. I'm John Hyland in Hong Kong.

There will be mandatory coronavirus testing for all city residents within three months. Authorities are trying to tame a growing outbreak that has pushed resources to the brink. Chief executive Carrie Lam says most social distancing restrictions will be in place until mid or late April. In Canada Prime Minister Justin Trudeau will retain emergency powers for at least a few more days.

Police have cleared all blockades across the country but Trudeau said there's concern that demonstrators opposed to vaccine mandates are prepared to resume protests. The Shanghai branch of China's central bank is urging commercial banks to accelerate real estate lending. It's a sign that efforts to end the housing market slowdown are spreading to some of the country's biggest cities. Real estate accounts for about one fourth of China's economic output. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm John Hyland. This is Bloomberg Daybreak. John thank you so much. Wall Street is ramping up. That's for faster policy tightening by the Federal Reserve. But no one on the street has gone farther than J.P. Morgan. The bank's economist forecasting nine straight interest rate increases starting next month.

Joining us now with more is Bruce CAC chief economist at J.P. Morgan. Thank you so much for joining us. Let's just start with your call here because I think what we're really interested in me is not just the nine rate hikes that you're seeing but the fact that you're saying it's happening at 25 basis point increments. Talk to us about why you're ruling out the 50 basis points in March. Well I think from the perspective of the March meeting I think the Fed wants to make sure that it is clear that it hasn't made a decision on having to go beyond neutral at this point. I think it's also clear that with the geopolitical backdrop and with a lot of other things driving uncertainty that they have a little bit of a time here to consider whether they have to move more aggressively. I think they're going to come in and basically say to us we're going to move at every meeting unless something goes

wrong for a while and something could go wrong that both slows them down which is growth could get weaker or something could go wrong in terms of the inflation pressures speeding them up and they could do a 50 later on. But I think the chances of a March 50 still are quite a bit below 50 percent. Bruce we're still waiting for the details of these U.S. sanctions in fact the details as well from the European sanctions. But there's a view that if you hit the banking sector if you hit the energy sector and we don't know if that's going to happen you get a serious inflation impact and a serious impact on growth. How does the Fed weigh up those two dual impacts and which ones are priority. Well I think the short answer is it's not easy. I think the last 30 40 years we've been schooled in a world in which energy price shocks have been negative for growth. And the Fed has basically refrained from moving in the face of them. But we have a

somewhat different environment given the momentum on inflation given that a price wage setting dynamic could be influenced by it. I think the bottom line in the near-term is they continue to use the playbook that they don't want to threaten the expansion. And this move on energy prices probably leads them towards a 25 at the start. But you know there's time here. We're going to have to watch and see how this plays out. And if we're sitting here with the energy prices feeding inflation and not hurting growth as we move through the middle part of the year the Fed will respond by moving more aggressively. First if I can I'd like to go very very macro very very long term. I wonder if this kind of playbook the idea that if the Fed is able to successfully carry out these rate hikes at whatever pace it works and they don't actually basically create a policy mistake which I think the market is also pricing for does is essentially create a new playbook for the Federal Reserve in terms of how they're going to tackle future recessions. I think we're going to get a new playbook out of this because

there are going to be lots of lessons. The question I think that really faces us now is the Fed is behind the curve. It clearly understands that the economy is healthy but has tight labor market conditions. The global economy has tight labor market conditions. Can we do enough to both contain inflation pressure but keep this expansion on solid footing. That's going to be a tough effort. I think where the market is wrong is not recognizing how much the Fed is going to have to do to give that

a reasonably good chance of being successful. When it when it comes when it comes to the picture on the balance sheet and the unwind of the balance sheet because we're looking at clarity or lack of clarity when it comes to that question and financial conditions which have held up pretty solidly do we have any sense now. Do you have a clearer stare on one on one to the balance sheet will mean for financial conditions. Not really. And I think there is a question mark that the balance sheet policy could end up tightening financial

conditions further which could slow the Fed down or it could have less effect which would would be basically in line with our baseline forecast. But I would just say this. I think what the Fed is doing on the balance sheet will have an impact on financial conditions but most likely it's going to be a modest impact. And importantly the Fed is telling us that it's going to be using interest rate policy to calibrate whether it needs to do more or less not balance sheet policy. Bruce you brought up an interesting point earlier about the labor market. I'm curious where you start to see perhaps the labor market up. Were the issues in the labor market lie for lack of a better phrasing there. How. What do we need to kind of improve the situation on that point the idea that job openings are still

extremely high. The quit rate is extremely high. Where do we start to find that balance when it comes to the jobs market. Well there's some hope that you're going to get a better environment on supply if we can just get beyond Covid. And I think that's a reasonable thing to anticipate. The problem is if we're right and the economy's carrying 3 percent or more growth

that improvement isn't going to be enough to stop a labor market that still has a lot of demand openings by by companies and is simply going to be growing rapidly enough. And by the way I want to emphasize also that I don't think we have the cushion that we've had in the past if immigration and just general mobility of labor across the world to help cushion the blow here. So we think the labor market is going to tighten supply conditions are going to improve. And the concern here would be that we start to shift the dynamics in terms of wage and price setting because of this overshoot in inflation which is lasting far longer than we or the Fed would have anticipated. Are you seeing any evidence of that now that wage price spiral is. I wouldn't call the wage price spiral. I want to make sure

everybody understands that the debate I see right now is not whether we're going to return to 70s 80s inflation but whether we're going to break out of the level of inflation which I'd say is somewhere in the mid 2s that the Fed is tolerant of. To me the the issue now is we are starting to see broader wage pressures. It's pretty early in the game. We are starting to see new decisions being made on wages come in higher. I think it's way too early to draw any strong conclusions on it but I think there are some hints that we might be starting to see that that dynamic begin to take hold. Not in the way it happened in the

1970s but far different than what we saw over the last 25 years. OK. Great insights. Bruce Gasman J.P. Morgan Securities chief economist on that call for nine hikes consecutive 25 basis points and the importance of continue to look at the stickiness of wage inflation. Stay with us. This is Bloomberg. It's time for the Bloomberg Business Flash a look at some of the biggest business stories in the news right now. I'm John Highland. Macy's posted fourth quarter sales and profit that beat estimates. Comfortable sales soared 28 percent. The

department store chain. Also forecasts earnings for the full year that were better than expected. Home Depot is forecasting a deceleration in profit growth this year after a bumper end to 2021. That's a sign that pandemic fueled spending on home improvement is starting to fade. Home Depot's fourth quarter profit and comparable sales beat estimates and the cargo ship carrying about 4000 Volkswagen vehicles that caught fire last week could cost the automaker at least one hundred fifty five million dollars. That's according to a risk modeling company's estimate. The Russell Group's estimate assumes all the cars were lost in the fire off the ISE Islands. Among the cars on board a number of Lamborghinis Bentleys and Porsches. And that's your Bloomberg Businessweek cash credit Tom.

Yeah I'll pick it up from there. Luxury car lovers. That is an upsetting story. We can say that because we know the crew is safe. But one hundred fifty five million dollars of luxury cars sinking to the bottom of the ocean. Porsches Lamborghinis Bentleys. That is a painful picture Kristie. Yeah it really is. I think Matt Miller is over here somewhere just bawling his eyes

out at the losses of those luxury cars. What's interesting to me is that's coming at a horrible time really when there's a real lack of cars broadly when people are trying to go by. There's just no availability. And then you add on this this loss it's not looking good. Yeah you saw people on Switzer taking to Twitter to say look I place my order for a poor spider and now it's in the bottom the ocean. So you had people feeling the impacts of that by the way. PAUSCH VW is up almost 10 percent in European sessions today because they're gonna be IPO ing. The most profitable part of that business. Will get more on that in the next hour Chris. Well if you can't seem to get an actual car you might as well

get a stake in the IPO. We got throughout this throughout our show coming up from Wall Street to Main Street. Goldman Sachs is ramping up its consumer business. A new credit card partnership and checking accounts are just part of the strategy. We'll have an exclusive with the global co head of consumer and wealth management Stephanie Cohen. This is. Well it's about an hour into the U.S. trading session a little bit of green on the screen when it comes to the S&P 500. You can see it's up about just three tenths of a percent after a pretty downside opening you should say. But take a look at this. Some of the traditional geopolitical risk kind of movers that you have seen in the last couple of weeks the kind of turning around start. We'll start with the S&P 500 which is actually green on the screen for the first time in a couple of days here. But

you're also seeing the Russian ETF. This of course is a vehicle that a lot of people have used not only to get exposure to the Russian stock market but also to short it potentially. You're actually seeing that under some pressure down 9 percent earlier in the session. It was down as much as 13 percent. We're seeing a little bit of those losses getting paired there. But Alcoa is one that really caught my eye here. I love to look at Alcoa because Russia is the second largest producer of aluminum in the world. So when you did see these geopolitical tensions Alcoa stock actually served as a little bit of a hedge for that. Now you're seeing a little bit of a reversal in that spike. And it's a similar story when you look at the ruble the ruble actually

higher on the day against the dollar just shy of that key 80 level. Important to keep in mind that this is as much a story about technicals as it might as it is excuse me that geopolitical risk. But we can't forget to talk about oil when it comes to simply the geopolitical tensions that are actually being baked into the market here. Check this out Brent. The backwardation essentially showing you just how strong the underlying demand is. Well that's what this panel is showing. It

is going at a record here the spread between that first and third month contract. Just look at the spot price here. We are nearing that one hundred dollars per barrel. So as you kind of digest what the market is thinking about this geopolitical tensions some mixed messages when it comes to what the narrative is actually today really reflecting the uncertainty you're seeing around the situation but not the only story that's driving markets. Don't forget we do have earnings rolling in

Home Depot for example down on the day after despite calm pretty strong comp sales numbers while they forecasted a deceleration in their profit going into 2020 to a miss on their gross margins essentially that pandemic play perhaps losing a little bit of its luster. On the other hand you see a little bit of a consumer rebound. Macy's actually saying that they're expecting bigger and better profits in the years to come. At least that's what you're seeing through the earnings story when it comes to the stock market. Let's talk about the underlying economy here. For more on that let's go to Bloomberg's Michael McKee. Well we're

talking about consumer confidence that came out top of the hour here. You have to take it apart to really get an idea of where we are. The headline number does fall to the lowest since September of 2021. But if you take a look underneath the white line here is present situation. People think things are pretty much OK. It's the future they're worried about. And this may be the dichotomy between jobs Covid and I guess it's a try economy jobs Covid and oil prices because right now jobs are pretty good. And this index is usually related very well to jobs. But the future isn't so good according to people because oil prices are going up. They expect inflation by the end of the year to be at 7 percent. That's where we are right now. So they don't think Americans that the Fed is going to accomplish anything. But does it really mean anything for the economy. Well that's the thing

here. So far we've seen consumer confidence fall with Covid and his Covid cases rose. It came back down again but it's still not coming up even though the Covid outbreak is starting to ease. We'll have to see if that happens when we get the February numbers. But the February numbers are IBEX. The March numbers. This is February.

The March numbers are going to be influenced by what happens in Ukraine and what happens with oil. So the good news is it so far hasn't really affected spending. Let's see if that continues. We get this personal spending numbers on Friday. OK. Bloomberg's Michael McKee breaking down those consumer confidence numbers out of the conference board thank you. Joining us now for an exclusive interview is Stephanie Cohen co head of consumer and wealth management at Goldman Sachs will stay with the consumer story that Bloomberg's Sonali Basak is also with us Sonali. Thank you Tom. And thank you Stephanie for joining us. It's a nice little window you have into the consumer world here with an additional new 3 million customers just today

alone with the conversion of the GM card. What are your consumers really saying to you. With this elevated period of volatility and all that uncertainty that's on the horizon. It's great to be here and it's great to be in the studio. And certainly we're in really complicated times. You talked about the geopolitical risk you've talked about inflation you've talked about the pandemic. But actually what we're seeing in our consumer business is that our consumer is really strong is performing really well. But Goldman Sachs been managing risk for 150 years and we know that things can change really rapidly. So we're going to look at it. We're going to focus on it and we're gonna learn from what's going on in the environment. For now our

customers really performing. But are you seeing that they are taking advantage of the volatility in any way or are they shying away from it. Ready to save more rather than spend what we're seeing across our wealth business and you're actually seeing in the market generally is that people are using these periods of volatility as a buying opportunity. That's really interesting. If they're taking it as a buying opportunity then are you seeing that it's competitive to actually get them to spend on a credit card like you are doing with GM rather than invest. Actually if you look across our consumer business we're seeing a very strong consumer. You mentioned that we have just recently launched the GM credit card and we converted three million customers today. And we're seeing across both of our credit cards the consumers really strong on all levers. But we're gonna continue to watch

the market environment. It's a rapidly changing market environment for sure. Stephanie told here in London. How do you see a higher rate environment impacting that part of the business. Yeah it's super interesting. You know what we're still seeing right now as people go into equities from fixed income and that's really because they've seen this market volatility and it's an opportunity for them to invest in equities. But certainly as you

see rates go up things like savings and the fixed income market become more attractive to our clients across consumer and wealth management. Well Stephanie we've talked about inflation. We've talked about the Fed. We've talked about geopolitical risk. I think the only thing left here is we got to talk about that fiscal stimulus because that of course is a key part of the consumer. So many people saying it was going to fade by the summer of 2021. And yet you're still seeing some of that impact when it comes to the consumer mentality. He spoke to us a little bit about that dynamic. Yeah we're certainly saying you talked

about a little bit earlier in the in the program where you talked about the fact that there continues to be while confidence is down it's certainly in a reasonably good place. On top of that savings is still in a reasonably good place and the job market is in a good place. So for now we see that the consumer is strong and we're seeing optimism across our consumer wealth management business. But of course people there's uncertainty in the world that it's really hard to look back in

history and see period of time with more uncertainty. So we're monitoring that. And so our clients and customers. Stephanie you have a house now outside of our near Dallas. You are moving. You have a business that is hiring rapidly in Dallas and growing in Atlanta. What can you tell us about how Goldman Sachs is shifting to areas outside of New York and the hiring plans you may have in cities like Dallas and in Atlanta. Our clients and customers are everywhere. And that's really the important point.

We want to be as close to our clients and customers as we possibly can be. We're approaching almost 4000 people in a Dallas metro area and we plan to continue to grow in that area. As you mentioned we're hopefully soon going to bring on the green sky employees to our family and grow in Atlanta. But we'll be over a thousand people in Atlanta. But the most important place is that we want to be close to our clients customers and we want to give our employees an opportunity to live where they want to live. Is Dallas changing the culture at all of Goldman Sachs and the types of people that you bring on board. We've been in a lot of places for a really long time. And I think what's happening is if you look at Goldman Sachs engineering has

always been an important part of our employee population. But as we grow businesses like consumer and transaction banking they're becoming an even more important part of what we're doing inside of Goldman Sachs. Stephanie emotionally actually I love you guys Brown of Dallas cause that is a very near and dear place. I grew up in Dallas.

Talk to us a little bit about the cost of living situation how perhaps that is helping more and more consumers get involved with say the financial markets. Well one I need to come and get some advice from you. We just recently moved to Dallas in August and I'll take all the advice that I can get you know. The reality is that I think we're seeing people move from places across the country one because they want a different type of lifestyle. But you raise the point on cost of living. And that really gets back to how we think about where our employees live but also where our clients and customers live. They want to live the lifestyle that they want to live in a place where their paycheck goes as far as it can go. Stephanie you talked about green sky and the onboarding of that business with all the areas of retail finance. Are you hoping to

push into it or really excited that this year. We're going to launch checking and once we launch check and we can be someone's primary bank on their phone. If you think about our consumer business it's really these two self reinforcing strategies. We're trying to help tens of millions of clients and customers achieve their financial goals and we're doing that through Goldman Sachs. Marcus which today has savings lending investing and insights. But once we have checking we can become someone's primary bank. We can take their direct deposit and we can do that bill pay. So now that we have the General Motors card out there with our 3 million customers we're focused on getting checking out. I have to put on my Tom Keene hat for a little bit

because he's grown up in that area where Goldman Sachs was a trading house and investment bank. And he asks me every quarter where does the consumer business play into the broader picture. GOLDMAN At what point does a consumer even get bigger than the traditional businesses. How do you answer these questions to investors that I know have a lot of those questions on their mind as well. What is a larger total addressable market than the rest of Goldman Sachs. But the way that we think about the consumer business is there are actually a ton of synergies with that corporate and institutional business. If you think about

the second part of our strategy there's the first part which is that markets by Goldman Sachs strategy and then there's a strategy we're bringing in bed or capabilities in the ecosystems of our partners. So if you think about Apple in General Motors those are companies that we have had relationships within the investment bank for a really long period time. So we think we have a lot of competitive advantages in that business including our technology. But one of the best competitive advantages is that we've had these longstanding corporate relationships and you former investment banker yourself as you move over and cover this consumer business. Are you learning new things about how the consumer behaves especially as you say the day trader which is investing more in this market dip that you're surprised about. It's a really interesting business to watch. It's an operationally intensive business. And we certainly have lots of businesses like Goldman Sachs that are operationally intensive

but we don't have any other business inside of Goldman Sachs. That's more than 13 million customers. And so you learn that when you have 13 million customers it's really important that you provide them with amazing experience. And you do that by having great service but also by having a fantastic technology. Stephanie that brings me to my next question was it as you look across the retail part of the business the consumer part of the business the well thought of the business where do you see the vulnerabilities where the gaps when you look at those fintech competitors. Yeah. The way that we think about our business is that we are bringing the best of those two strategies together. We have the trillion dollar balance sheet at Goldman Sachs more than 150 years of history. But then we have that clean sheet of paper technology. And the most important thing for us to do is

make sure that we're building that technology platform in a way where it can be used across those two businesses. So like every business we have to weigh going quickly and make sure we having the right platform and every day we work to make that tradeoff. But that's one of the things that we're quite focused on. You know I'm curious about this expansion across the U.S. as you capture more consumers. Do you think that there will ever be a proper Wall Street's south. And is there an idea of getting more

space down there at any point a proper Wall Street south. So Florida. There you go. We think we have a proper Wall Street now. We have over fourth we have almost 4000 people in Dallas. And as you know we have a lot of people in in Florida. Now we're have a lot of people in Atlanta. I think what you're seeing across all

industries is that it's people are all over the place. And so while we believe that we're better together meaning being together and working together and solving problems for customers is when we're at our best we all don't have to be sitting in the same city. Well Stephanie Cohen thank you so much. She joins us from Goldman Sachs along with Bloomberg Sonali Basak. Thank you so much for bringing us that interview. Coming up we actually seize

may have some breaking news I should say. President Biden is looking to give remarks about Ukraine and Russia at 2:00 p.m. Eastern. So we will of course wait to hear that the update when it comes to those GOP politics. And speaking of geopolitics let's combine that with travel. What sort of impact will the crisis in Ukraine have on the hotel industry. Well. We'll talk

with the Hyatt Hotels president and CEO Mark Hypomania next. This is Bloomberg. This is Bloomberg Markets. I'm John Hyland live in the principle room. Coming up on Bloomberg balance of power an exclusive interview with Amtrak CEO Stephen Gardiner. That's at 12:00 p.m. in New York 5:00 p.m. in London. This is Bloomberg. The travel industry is rebounding from the corona virus pandemic. Well now it faces a new crisis. The one in Ukraine.

Joining us now is the president and CEO of one of the world's largest hospitality companies Marc Couple Mazin of Hyatt Hotels. Marc thank you so much for joining us. Let's just start there. Speak to us a little bit about how these geopolitical tensions in Russia and Ukraine are affecting your business. What measures are you taking. What are you looking for. How are you thinking about it. Well critic thank you for having me today. First and foremost we

operate in more than 70 countries around the world have a 65 year history. So we've lived through many disruptions over a long period of time and it has led us to really have robust plans in place for potential disruptions. And and the safety and security of our colleagues first and foremost and our guests of course is is really what those plans are built around. So we are we feel very well prepared to be able to adapt to the circumstances I can tell you that. As of this morning with a

report in from less than an hour ago things are calm in our hotel and there are general managers there and overseeing operations. And so I'm not I have nothing to report that is of current concern. And it's really impossible to say at this point how this might evolve. What I will say is that the world has learned to adapt and to pivot based on many different types of disruptions of course mostly a pandemic in the last two years. But are I think the muscles of being resilient and being able to be adaptable are really well strengthened over the last couple of years. So I actually have great confidence that we'll be able to sort out and be able to persevere through this disruption. Mark just to follow up on this and we're still waiting. Of course this is a key question. The aggressiveness of any

sanctions that come down the pipe from the US and its allies and we don't have the details yet but in terms of your contingencies that you have in place for the Russia part of the business. Are you confident that you can shield that part of the business from any set of sanctions that might be coming. You know I can't speak to the macro economic impacts but I can say is that if you look at what transpired over the course of the pandemic is there were there were countries most notably China that really self-contained and ran a zero Covid policy which really led to a complete decline in inbound international travel one outbound international travel. And the response of our teams was really to look internally and we were running prior to the more recent lockdowns associated with the Olympics. We were running at occupancies and total revenue per available room that were comparable to pre Covid times with a one hundred to be 100 percent domestic travelers. So I think that in terms of how we actually manage our on the ground business including in Russia I

I suspect that we'll end up doing is really pivoting who we're actually focusing on how we actually continue to operate at sustainable levels. Mark I'm really glad you brought up China in particular and the zero Covid policy there because I'm curious about the kind of uneven recovery that you see around the world when it comes to Covid-19 pandemic. But I think that also yields an uneven recovery when it comes to the travel rebound specifically the hotel recovery. Can you speak to us a little bit about how you're navigating that. Are you perhaps building or creating more business in one part of the world than the other to kind of navigate or get ahead of those challenges. Well on a multi year basis we've been pursuing a strategy which has really been to focus on the high end traveler and to be able to serve more of their travel occasions. And twenty twenty one was a very transformative year. We did our biggest acquisition in the history of the company two point seven billion dollar acquisition of Apple Leisure Group and that that allowed us to double our resort representation over the course of this past year. We closed on that acquisition in

November at the beginning of November. But over the last four years we've doubled the number of luxury hotels that we've got. We've tripled the number of resorts and we've tripled the number of lifestyle hotels. So I would say that by psychographic and by types of destinations and types of hotel experiences that people are looking for. We've expanded into the markets that have been the highest growth and really the most resilient and durable because leisure has leisure. Trouble has led the way in this recovery. But we're also seeing really strong signs of business coming back. You had a guest from Goldman Sachs one of our key customers on the phone. I saw him on the television a few minutes ago talking

about the need for them to reconvene. And we're seeing that among all of our top customers who are primarily their primary asset bases their people and getting people back to the office but also back to meetings has been tremendous. So we're optimistic that we're going to see a very balanced recovery. I think leisure will still lead the way in 2022 but I think it will be we'll see growth and recovery of price. Each group business and business transition as well. A balanced recovery on the cards for higher. Then Mark Optimizing CEO of that hotel's business. I thank you for those insights and updating us post earnings some lines crossing the terminal right now when it comes to the geopolitics just to update you. Vladimir Putin the president of course of Russia saying he has asked the Russian Senate to authorize sending

troops to Don Bass which of course is part of the territories that Russia has now officially recognized. So just to update you the Russian president asking the Russian Senate to authorize sending troops to Donbas. When we get more on this we will of course bring it to you. We know that the U.S. president Joe Biden will be speaking 2:00 p.m. Eastern time. We'll be bringing you that of course live. Stay with us. This is Bloomberg.

It's time for the Bloomberg Businessweek a look at some of the biggest business stories in the news right now. I'm John Hyland. Volkswagens in advanced talks for a potential IPO of his horse sports car brand. The move would help fund record investments and unlock value for shareholders.

Bloomberg intelligence estimates that Porsche could be up to ninety six billion dollars for its valuation when West Coast tech firms are hiring. They're increasingly pushing jobs in Texas Virginia and Georgia. More than four in 10 listings for higher educated white collar jobs in tech companies based in California Oregon and Washington are outside of that region. That's according to the Conference Board. Texas is by far the top state destination and U.S. regulators are investigating HSBC over bankers misuse

of services such as WhatsApp. The London based bank says it's cooperating with the Commodities Futures Trading Commission probe. HSBC CEO tells Bloomberg it's part of a broader investigation across all financial institutions. In December J.P. Morgan was fined two hundred million dollars for sending work related messages outside of bank platforms. And that's your Bloomberg business flash Tom. John thank you very much indeed. We have some more lines crossing from the Russian president. We know he's going to be asking the Senate. This line crossed a couple of minutes ago to approve the deployment of troops in dumbass. And another line crossing

saying you're gonna set the timing and the size of that. So we're getting a few more details. But of course we are still waiting for clarity on what exactly this means after that huge move that hugely significant move by the Russian president. Yesterday at least yesterday U.K. time to sign off on recognizing those two territories. And of course we've had the

Europeans and the Brits coming out with additional sanctions and proposals for sanctions. And we're looking ahead to what Joe Biden the U.S. presence can be saying at 2:00 p.m. Eastern Time in reaction to that. The markets have turned around here in Europe as we head towards the close in just over 30 minutes time. You're seeing gains of just a tenth of a percent. But the open you are down almost 2 percent. So a bit of re risking or at least repricing of just where we stand in terms of the

geopolitics a little bit more benign when it comes to what I've been hearing on the geopolitics that this of course could change. Expect more volatility. The ruble is actually gaining in the session Blakes and some cent and Brent crude. Ninety six dollars a barrel off from its earlier highs. Coming up on the European close Brian Toll on all things sanctions. This is Bluebird.

2022-02-24 08:57

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