Jump that that 49 increase is the biggest jump. On top of that, one point 4 billion worth of gains. That is more than double what you saw one year ago. On top of that, equity underwritings, huge gains. We will see how this keeps going on. They are seeing saying there priceline is strong. A different story than what we are seeing at the Consumer Banks that have seen many declines. Big in terms of ipo trading at goldman. How sustainable is that . Sonali as long as the markets are healthy, this can keep going on. Our sources are telling us the election can create a bit of a pause. The pipeline is huge for next year as well. You dont know when airbnb is going to go and there are a lot of unicorns looking to break into the public markets. When the ipos fail, you know that there is sachs waiting on the sidelines. Guy we are going to leave it there but we will continue the conversation. She will continue to brief us. Thank you very much indeed. Joining us now for more on those , baird is david george ceo. Targets, mutual rating on jp morgan. Let me kick off this conversation in the same way we kicked off the last one. What is your take away . David a lot of information this morning to process. If i had to summarize it of what we have seen so far, credit related costs have come down significantly. That has been the biggest positive. Obviously market activity throughout all kind of Capital Markets activity, equities have been strong across the board. That is being offset for a lot of the traditional Interest Rate sensitive banks by very significant Net Interest Margin compression as well as declines in loans. That has negative impact on revenues broadly. Alix lets put this on goldman. Look likethe pipeline and what kind of visibility . It seems all ceos are seeing yes, we need stimulus. What is the pipeline visibility . David we do not cover goldman sachs. I cannot give you any details as it relates to that. And Capital Markets pipeline i think is very strong across the board. I think a call for stimulus is more of a function of helping the consumer and Small Business that we have seen an improvement in Credit Trends there and i think a lot of these Bank Management feeds are sensitive to continuing the stimulus in an effort to help the Small Business and the consumer rather than more ipos. David, when are we going to start to see real concrete action in terms of what he is delivering . How much longer will the market give him . David that is a good question. Charlie has been there one year. It has gone by relatively quickly. The heat is being turned up as we speak. Obviously this is a very difficult environment to engineer a bank turnaround and being in this incredibly low rate environment, not to mention a global pandemic. Charlie, we think is under a greater deal of pressure to improve returns and growth over time. We think Market Expectations are relatively low given the evaluation. Clearly the heat is being turned up. Isx i guess the question how can they turn it around when they have the fed regulatory cap which limits the amount of deposits they can take in which is automatically going to limit their Interest Income ability because they cannot take in the money . When is that going to be reversed. . Other than that, they have this rock they are dragging with them uphill. David that is an excellent point and i think that is very much the case. I think the cap, it has had a negative impact on wealth this year in part because of the significant surge in loan demand that occurred during the pandemic and because of that growth, wealth had to be very creative in finding ways to live under the cap whereas other banks were able to more aggressively accommodate their customer needs. Is living that, wells comfortably under that cap and it is key for things to improve. We are of the view that in the should beor so, wells in a position to lift the cap. This is a company that should consider finding other ways around the cap like selling some of their businesses like their brokerdeal or finding ways to create shareholder value in a time where they have a limited ability to grow. Guy lets talk about shareholder value. When are they going to see money coming back . This time next year, how different will the picture be . Orid as it relates to wells the banks broadly . Guy the banks broadly. David it is a function of couple of things. Interest rates are probably the biggest challenge to the case for banks. From our perspective, the evaluation of banks are very attractive and credit quality should continue to get better which we think should result in a fairly notable earnings lift in 2021. In order to get that meaningful next leg higher, i am of the view that you need rates to pick up particularly on the long end. The fed has said they are not going to do much in the near term but they cannot control the long end and i think that is really the key for these stocks theo get the belly on longer end of the yield curve to be higher. Alix we really appreciate it, david george. We will bring updates in a second. Joining us, cole smead, Smead Capital Management president. Jp morgan, bank of america are his number nine and 10 holdings. He also owns wells fargo. He joins us from phoenix. What do you like about the reports and what did you not like about the reports . Cole the more on the risk side the business is and the more Capital Markets related, you are seeing more diversification, extra income showing up by those places. I think that is a blessing today. The problem is i think in two or three years that could be looked at a different eye. You mentioned how robust the outlook of what is going on in the Capital Markets activity. If you could read between the lines what is being said is, it really gets better rarely gets better. The Consumer Bank site is doing poorly because it has to do with rates and people are scared about the economy and the consumer. His help the Household DebtService Ratio is the lowest in 40 years in the entire time they have recorded the data. I think the Consumer Banking world is going to be more attractive to investors in two or three years because Capital Markets will rarely ever get better. You have everything from Warren Buffett lulling Berkshire Hathaway to go into an ipo. Allowing Berkshire Hathaway. That is all you need to know about banking and Capital Markets activity right now. Is it positive to see them doing so well in Global Asset Management and is that the place you want to be right now . Cole to your point about the Wealth Management, it is a very consistent business. Going back to the wells fargo conversation. That does limit wealth. It is a consistent business. At the same time, you can fetch a nice price for a Wealth Management business today. Lets say we wake up in a world in two years where equity markets have done poorly and bonds have done poorly. Those businesses will not fetch the same price. Wealth historically has not been as strong as it pertains to operations. It has been a traditional Residential Lending bank. They are the best at real estate in the u. S. Historically speaking. That could be a lever that they could pull. If you are jp morgan, if you are goldman sachs, that is not the same. Any of these banks are buying assets because they want to get diversified because it blends out the stream of the income. In wells, they are best at the Consumer Banking level. Alix you have to look at goldman markets to see that. One year ago all we will talk about is how the big angst wanted to become retail banks big banks. Now we are talking about illegal disease and losses showing up at 180 days after the fact that is going to hurt these guys in six months time. What you think is most exposed as stimulus runs on . Cole i think the stimulus is overhyped. Lets call a spade a spade. The person who needs a stimulus is not the person buying a home. It is not a person buying a 50,000 car. Just to give you a sense, we own a Company Called credit acceptance corp. s. We see what the customer look like looks like. They are looking to middle and upperclass america to do business with them. We are having a classical economic recovery in every sense of the world every sense of the word. If you look at the data 1 terday, new cars had a uptick monthtomonth. Pricears were up 6. 7 in monthtomonth. Which means if you are a bank with auto loans, congratulations, if you have to repost something, it is going up in value quicker than the payments are being missed. I think the circumstances a great on the Consumer Banking side. But people are afraid of the economy. People are afraid of where we will end up. Theumer banking is really redheaded stepchild of banking. As you pointed out, Wealth Management, Capital Markets activity, trading, all of these other things seem more glamorous where they brag about today in industries, they will usually mock tomorrow. Guy stick around. We will carry on this conversation and talk about the pharma sector. Pharma, we need to talk about what is happening. We need to talk about the political angle as well. That is all coming up. This is bloomberg. 20 minutes past the hour. Welcome back. This is bloomberg markets. Complications mounting in the rush to put out treatments and vaccines against covid19. It isday lily said pausing its antibody trial due to safety concerns. That is after j j halted its vaccine trial your astrazeneca has halted it and continued elsewhere. We talked with bloomberg reporter. How should we view this . Should we view this as normal and in some ways positive because it means the process is working or should we worry about the fact that this is going to delay the vaccine to the World Economy . Michelle the case of development of all of these vaccines and therapeutics has been unprecedented. One of the things that is most remarkable is that there have been no hiccups which always happens in pharmaceutical development. The fact that we are seeing some complications, these are things that we normally would not even hear about in the course of development until something more significant happened. So the idea that we are hearing about it means they are taking it seriously. There are many things in development. Hopefully we are whittling out the ones that are less effective and we will end up with something that is really going to be helpful, perhaps later that we otherwise would have. Alix do we know anything yet about certain types of vaccines causing certain problems or becoming more problematic . The same with antibody treatments . Michelle we are learning a lot more about lilys antibody treatment and that is similar to the one President Trump not from regeneron. Got from regeneron. We are seeing what is being used in a high dose. They were also getting remdesivir so it is the combination that might be an issue or perhaps the high dose. Other trials have not been halted so that suggests that perhaps is not just this drug they are concerned about. This is important because these are for people who are already sick, who already have coronavirus, in some cases are hospitalized or fighting it at home. They really need something. On the vaccine, it is still early days. With Johnson Johnson, we dont even know yet if the person who got sick actually got the vaccine. I was talking to a doctor last night who told me he has gotten calls when someone died and it turned out they had been shot. Obviously not related to the vaccine at all. With astrazeneca, still on hold in the u. S. Michelle, we are desperate to see this candidate make it over the line. Somebody has to get over the line at some point. Talking to people in the logistics business, they talk about the incredible complications of getting this distributed. You have to refrigerate most of the chainsnes and are long and complicated. What are you hearing about that . Once we get the candidates, how quickly is it going to get out there and how difficult is that process going to be . Absolutely ais huge challenge to get these vaccines out to people. Many of them not just refrigerated, they have to be frozen at unbelievably cold temperatures and this is an infrastructure that is not really wellestablished throughout the entire world, certainly not even throughout countries like the u. S. And places like across europe. So we are seeing some of those infrastructure buildings literally buildings and freezers being built right now. That is one of the concerns with Johnson Johnson trial being halted. That should be an easier vaccine to give. The flipside is Companies Making the vaccines, whether or not they get across the line, if they are successful, we should have many vaccines to give to people and there are efforts being put in place to open up those supply chains. It is just going to take some time. Alix really good to catch up with you, bloombergs michelle cortez. Stay with us still with us, cole smead the one part of the reflation trade on the vaccine guide. Where you land . What we are showing to the entire world is that they are one of the most important sectors in the industry that you can see in any Capital Market arena. If you look at one of our larger facilities, you look at them today, they dont trade much more than 13 times 14 times earnings. We are marveling at what going on what google on at a much quicker rate. We are not beating up the stocks around that. Niche probesore have gotten some of that. We are not marveling at science which is odd because a lot of people talk about science. If you look at people that produce the science, you are not paying anything of excitement for those companies. We think all of this will come out as showing that these businesses do produce wonderful economics as it pertains to politics. If you want to go into that, i actually think biden would be better for these companies than trump because i think the global conversation would be a more frustrating sunset to have to deal with versus status quo as we have seen at the last five or 10 years during an obamacare error. U. S. Farmer or european farmer, which looks best . Cole we were looking over the last two years, amgen is a very large company. There has only been 80 million of insider sales over the last two years. Many interested parties that would have to file in the united states, it is incredible that that little stock selling is going on. Have that because, they the biggest pipeline left that we currently own. I think the other interesting thing is the Pfizer Upjohn spinoff. It is going into the hands of shareholders. It will become the largest shareholder. Tivo used to be in the generic drug space. Produce one of the Largest Companies in generics. I think that is the other interesting thing that we are looking at right now is that Pfizer Upjohn spinoff that settles out. It is something we are interested in. We think investors should be paying attention to that. Alix you are saying that the stimulus, we did not need it for stocks to go one way or the other. How are you playing the election when it feels like the markets in a blue wave whether or not you believe that and on the flipside it might come with higher taxes. What you do with the investors . Cole the significantly higher taxes is a moot point for stocks. The less profitable, the less it affects you. It is not the companies you want to go out and find. On the upside, it is a moot point. That to when we lowered the Corporate Tax rate, if anything where we are in stocks, that was a sugar high to get investors more interested and more excited about stocks. Nothing had happened with cash flows and revenues for those businesses. Incentivized investors into the market. It was going to go to the investors rather than the government. , the idea companies of high taxes on a corporate basis, yes, that would affect most investors view of that. I think the personal income tax rates are more important for the economy just because so much of the economics are done on the highend of income and so much of the government is funded at that level. Side isthe personal more touching on the economy. President trump is the most critical of the drug Company Prices than you will ever find. I say critical, not he makes so paying a lotou are less for your drugs in the u. K. That has never happened. In my lifetime at least. Thank you very much indeed. Cole smead of Smead Capital Management. Thank you. This is bloomberg. Alix wells fargo stocks getting hit down over 3 . The call is underway. A couple of things going on. The company is lowering its 2020 net Interest Income guide by the billion dollars. It was 40. 5 billion. Lowering that down. Not only Interest Rates, also the deposits of the asset cap. Handcuffs, bad handcuffs around wells fargo in terms of their ability to make money. Guy lead handcuffs. A difficult position. He needs to start showing concrete evidence of what he is going to do about these kinds of problems. The market has been tolerant because far in terms of the timing. The timing will get more difficult going forward. The other thing as well is David George David george, we heard it from we heard it from david george earlier on. I think we will see a significant lease deeper yield curve and that is at large across the banks. Wells is highlighting it. Alix at least a lot more regulatory relief. Coming up, imf managing director speaking live. We will bring you the headlines. This is bloomberg. Alix . Urging government to keep spending. Normally a champion of budget restraint. Too earlyagrees it is to end that report. The u. K. Says it will not walk away from trade talks with the European Union immediately. Boris johnson said tomorrow is the deadline for an agreement. Negotiators are expected to keep talking pass then. They will discuss the impact later today on his video call. It is looking less and less likely like there will be a new stimulus relief plan before the election. Nancy pelosi and Mitch Mcconnell have dug in on their opposing stances. Stephen mnuchin heads to the wille east next week that further delay negotiations between democrats and the white house. That is your first word news update. What i think is interesting is if you have the theory that the market is pricing in a blue wave because you are getting a lot of Infrastructure Spending and big stimulus, ive been reading a lot of articles now that the gop will be concentrated on the senate to try to fight against presumably president biden. That would delay any kind of stimulus. Guy take a look at the polls. Paul seemed to indicate biden is likely to win the presidency. The polls should always come with caveats, they have been wrong. The focus is on what is happening with the senate. There isly to be a whole series of key battles involving highprofile republicans. It is fascinating what is happening with the stimulus story. Ofp your antenna up in terms more headlines coming through. It was fascinating listening to nancy pelosi on wolf blitzer last night. Ding abused being accused of maybe stonewalling. She pushed back on that idea. Some in the Democratic Party said they just want to get a deal but pelosi is playing politics ahead of the election. Alix how do you calculate Different Senate races with Lindsey Graham being competitive , four years ago that wouldve been unthinkable. This in caps is what i was thinking about this. Fiscal expansion and fiscal gridlock could challenge some of our more bullish view. I read a note out of jp morgan that said if you take a look at whos registering, what voters are registering, you could see it more to the republicans or swing states. There is still that granular data that causes a lot of uncertainty. Have beenn stanley particularly super bullish in terms of a strong recovery going through. You could see the divergence emerging there. We are talking about what is talk what is happening with those competitive races and how close they want to get. About what is happening with the stimulus debate as well. Whether there is not anything north of a trillion that will be accessible. The disagreements seem to be great within the Republican Party as they are between the democrats at the moment. We talk about a two horse debate. You have Mitch Mcconnell, you have nancy pelosi, and you have the president. They all have very different pages. Pelosi and the president are closer together than Mitch Mcconnell. Alix mnuchin is somewhere in between. Lets break it down with genies and no jeanie zano. The narrative turned to the senate more and how the gop senators who are up for between aligning with President Trump and keeping their seat. How do you see that playing out . I was listening to what you were talking about and i could not agree more. You have republicans particularly in the senate and across the country very nervous about these polls. Do they want the president to win, absolutely. They show the path to victory is increasingly narrow. They are considering what does it mean not just for their seat in november, which is critically important but also for the gop going forward. Be led bying to donald trump by next year or a more fiscally conservative gop in which they would have to depend defend agreeing with the white house or the democrats on a larger stimulus bill that maybe some of their more hawkish supporters may want in six months or a year. This is something i think we are seeing play itself out in the Republican Party. The Republican Party is skittish. What that means for the party going forward. In what are the republicans these tight races saying about the focus Mitch Mcconnell has developed on making sure we look at the Supreme Court rather than stimulus . That issomething universally accepted across the Republican Party . The republicans are acrosstheboard the board supportive of this nominee. They see this as a win that they could point to on the ground that is important to their supporters. They dont want to discuss stimulus. What it has done to the economy and what it has done to peoples lives and livelihoods. They do support moving forward on this nomination. We have to remember this is in the context of a 60 year battle for the Supreme Court. Issues like abortion and gun control that they care an awful lot about. They are widely supportive of her. They want this to move forward. They also want to address the issue of stimulus. The question is how do you do that . That is where the debate is coming out. Alix what is your best prediction for what happens to this bennett of the senate . I would not have said this last year. The map looked pretty good for republicans. It is looking increasingly likely that democrats have a fairly strong chance of taking the senate. Something that the market will want to take into account as we go forward. Will it happen . We dont know yet. If we see that happen we will see a Chain Reaction when it comes to things like spending, taxes, all of those things. Even if you look at things like packing the court, which joe biden has refused to talk about publicly. Impact how the market responds. If we wake up november 4 or later in november with an all democratic washington, d. C. , it is extremely likely. Tested code contested election off the table . If polls are as big and democrats favor right now, do you think we will have a result by the end of the day . Im not counting on the rig im not counting on the result by the end of the day. It has made it that many more people are voting early. We have seen the struggles of voting early. Many people voting by mail they cannot count those ballots until election day. Maybe even not the presidency but in the senate and other down ballot races, these things may not be decided in a day, two, or maybe even a week. I think we will have more than one contested election that could have real consequences in washington dc and across the country. I think that is very much on the table, still. Guy thank you for your time. Have some great guests lined up for you. Ofyou want to switch out u. S. Big tech, look at asia and europe. We will be joined shortly by our guest, this is bloomberg. Alix you are looking at the principal room. Imf managing director will be coming up in a few minutes. This is bloomberg. Guy this is bloomberg markets. Investors apparently should diversify away from u. S. Big tech and look for affordable growth in both asia and europe. That is according to socgen. Socgens Cross Asset Research head. U. S. Big tech looks very expensive. You had a great run. Why is that run over . It is not on the evaluation base. Valuation has risen a lot. Expansion of corporate earnings. What we focus on is the volatility. We learned in a research that 64 of the total volatility of the s p 500 index in the u. S. Is made out of the bigger tech. Two thirds of the u. S. Equity. Arket this is how much risk it takes the risk is bigger and the expectation is lower. Less that itcantly has been for a long while. Find growth in asia, and in some parts of europe. Does that mean you are looking at tech stocks in asia . What is the distinction . When you look at how much you pay for growth, the nasdaq is about 2. 1 to the expected longterm growth. For asia it is 1. 4. China it is 1. 2. All of these growth have higher values based on the quality and high numbers you get in asia. Particularly like asia. You have 115 billion in investments. That is a growth we like very much. The other one is the china infrastructure. Position, they have the policy level to accelerate the condition to make a cleaner china for the next 30 years. Onre are a lot of stocks which the private sector is going to add. Components wetwo like in asia. One is the suppliers in asia. The other is the new infrastructure in china. Guy where is growth in europe . We do not capture growth in europe. This is not our goal. What we are watching is the new governments. Macron comingdent together saying this is the new government. You have a billion euro in what we call the Recovery Fund from 2021 onwards. Tos is investments in order embed it in the Recovery Fund, one third of total spending is in green matters. They are in energy and cleaner works. That is the growth we very much like in europe. The green deal as we named it in suppliers all of the who will be backed by public investment. Greenville is definitely growth for the european economy and the european stock market. Alix when we talk to anyone who likes europe, they always go to that and the Recovery Fund. What happens if we dont get it . It does not seem like it is a done deal. It is not a done deal. Talks and a lot of little execution of this plan. Your question is not only rational but when you deal with , we have the new leader of the european commission. Had anopean Central Bank President macron and president macron work very well together. They have changed the way of operating the governments of europe to the better. They are aligned, the four of them not only to make announcements but to execute what they announced a few months ago. That is quite impressive. Phase in the discussion on the details of the recovery. Especially inside the Recovery Fund. Will, by thel it First Quarter of next year. Execution should come by q1 of next year. It is a good time to take position. Our guest we will talk to shortly things the euro will be 120 or 130. How big of a headwind will that be for european stocks . Areo the kind of stocks you talking about not really take a hit from this because most of it will come out of europe itself . We are reasonably optimistic for the euro. The fair value of the eurodollar is around 140. 130 whichecting 125, what we are expecting. Stage, if we stay at fair value of the euro against the fundamental should take over and the growth of the economy is the one we wish to recommend. Alix thank you very much. Really appreciate your time today. A look atl take futures and focus. We are dealing down on oil. The macro fund is looking at russia and saudi arabia trying with other countries on an oil deal. Looking at a super Bloomberg News where conoco could be making a build for concho resources. That could really post them in the caribbean basin here. Concho is one of the top players in that sphere. Looking at potentially some kind isbuyout because everyone struggling. The rationale is a currently holds about 170,000 net acres in the caribbean. Concho has 550,000 net acres. That would quintuple what they have. You will be anywhere you want to be in the permian. Withu want to do deals this attached to them . I would not have thought so. There will be no premium for investors. Your pointl see to is cash getting bigger. It doesnt mean it will be an easier market to operate. So youl have to scale could actually do something here at a time when everyone else is not. Im glad you brought up the premium. They would think the company would want a 20 plus premium. Few hundredd by a million dollars. Will conoco want to pay up for that 20 premium . This clearly has to be in play. Not short of opportunities right now. Looking at the imf managing director, she will be joining us. This is bloomberg. Of our top stories today, Big Bank Earnings is a mixed bag. Joining us now for more is allison williams. By all intents and purposes, goldman crushed it. Wells fargo hurt on expenses. Bank of america rolling over by about 4 . What has been your biggest take away today . Biggest take away across the firms is really huge help from Capital Markets. We saw that in trading, asset management, to be fair the banks generally also getting some good flows. We saw blackrock throw out those numbers yesterday. Ood markets helping the banks provisions also helping the banks this quarter. That has been the big story the last couple of quarters. Thiss are building up cushion. Benefitrter there was a from the fact that the economic assumptions have improved. We found lower loan balances. The charge for the actual content we are receiving came in a little bit better than expected. If you look at reserve ratios for banks it reflects a stable bu view. For these factors, investors are not overly excited about it. They are tough to repeat. The markets keep to the upside but it is difficult to bet on that to continue. When you have the underwriting calendars, that sort of continues. That will depend on asset prices. Towards the provision, i think steadying the ship is positive. Think the outlook is stable. The overhang for the companies is from the fact that we have so far to go to see what the actual losses are. T will depend on the economy they said yesterday they expect losses not to pick up in the second half. Specific factors, wells fargo has a lot of changes going on. Bank of america could execute, they have great pressures. Citibank has the regulatory risk. Jp morgan again shine with some growth gaining more share. I read that cross into Morgan Stanley for tomorrow . Can. N i think you the readthrough for Morgan Stanley, everything we have seen is very positive. The big story across the banks sort of fits the beginning of the crisis. There has been a recognition that this time is not like the Global Financial crisis. The lending banks have the provision and Capital Markets have the lighter area. Guy perfect. We have to leave it there. Next, we have the imf. Guy from london, i am guy johnson. Alix steel is a new york. We are counting you down to the european close on bloomberg markets. What you need to know from europe this hour . No brexit breakthrough. Leyen, andn der michelle will speak tonight. The u. K. Looks poised to continue the talks after johnsons october 15 deadline. Emmanuel mack ron is considering a curfew. The french president will speak tonight. Boris johnson also refusing to rule out a threeweek lockdown. In a moment well hear from the imf managing director, kristalina georgieva, on the Global Economic outlook. Lets go to that conversation. Francine lacqua is standing by. Toncine we are delighted speak to the managing director of the imap, kristalina georgieva, a woman who has not slept in days because of the