FidelityConnects: Measuring the strength of U.S. financials

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<b>Subtitles are AI Generated</b>

 

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Hello, happy Friday. Welcome to Fidelity Connects.

 

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I'm Pamela Ritchie. Financials are back in focus as AI,

 

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regulation and capital markets reshape the investment landscape.

 

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While early AI fears sparked disruption concerns across financial services

 

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the winners are increasingly emerging and many banks and insurers appear

 

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to be on that list.

 

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Our next guest says the market is moving beyond the AI scare of earlier this

 

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year with investors rewarding balance sheet strength.

 

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Can banks turn AI into a competitive advantage, and how

 

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could they do that? Also, could deregulation prove a meaningful tailwind

 

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for regional lenders across the US?

 

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Joining us here today to examine the health and key drivers of the US financial

 

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sector is Lee Sotos.

 

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He is senior analyst and portfolio manager of the Fidelity Global Financial

 

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Services Fund. Happy Friday.

 

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Warm welcome to you, Lee. Nice to see you again.

 

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Nice to see you, Pamela.

 

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Next week is a huge week. We've got earnings up and

 

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second quarter earnings are gonna do a lot of things.

 

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They're gonna tell us how much oil prices affected everything.

 

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For the banks in particular, just give us a little bit of a preview of

 

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where the AI story is going to fit into the narrative.

 

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I think when we look at first,

 

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second quarter earnings we have seen quite an acceleration both

 

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in deposit growth, I mean it's a pretty positive background when

 

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you look at the US, and even on a global basis.

 

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For the US in particular you've got deposits growing 5%,

 

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6%, loans growing 7%, 8%, that's

 

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pretty solid. Net interest margins have held up quite

 

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well with, you know, a slight shift higher

 

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in the yield curve.

 

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I think most of the banks are

 

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going to have relatively positive things to

 

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say about the outlook.

 

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I think the big questions are how sustainable is

 

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the loan growth. If loans are outgrowing deposits how

 

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does competition kind of leak into...

 

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To feed the loans.

 

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Yeah. The other areas showing strength, capital markets in particular

 

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are quite strong right now.

 

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They've got to be. I mean, look at the trading going on.

 

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They've gotta be.

 

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Yes. What's interesting is you're seeing a lot of two-way trading so

 

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the market hasn't necessarily moved all that much

 

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but the underlying volatility is high enough such that you're

 

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definitely seeing a lot two-way which is beneficial to the brokers as

 

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well as the large-cap banks that have big trading platforms.

 

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Also, investment banking is back.

 

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I think the trial has

 

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been SpaceX on the equity capital market side.

 

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I think as long as that kind of holds in you'll

 

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see a little more enthusiasm going into the back half of the year for

 

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some of these other kind of elephants that might be coming out, whether

 

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it's OpenAI or Anthropic.

 

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That may actually be really helpful for

 

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private equity, if they see a solid uptake [crosstalk]...

 

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Because they could find a moment to exit if they need to and it's healthy

 

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enough.

 

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Yes, they can maybe accelerate some of their own

 

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exits. Overall, it's a pretty solid background.

 

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If you look on a global basis, when we look at the global fund we're seeing

 

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strong growth in Asia as far as deposits and

 

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wealth management is doing quite well in Asia.

 

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Loans are growing.

 

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I think Japan is even growing loans 4 or 5% which we haven't seen

 

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in decades.

 

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Overall, Asia's seeing fairly strong growth.

 

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Europe is a little bit behind but still showing better

 

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growth than it had. A lot of the scares that took place

 

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as far as tariffs last year and

 

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this year, the issues with Iran,

 

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the banks and insurance companies seem to be plowing forward.

 

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The scares that you mentioned there, when we spoke to you last it was actually

 

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a little bit of a containment managing a crisis from

 

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a disbelief in all kinds of different companies that could

 

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be disrupted by AI.

 

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The concern was across many, many companies,

 

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across sectors but financials definitely caught it.

 

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What did you do at that time? Bring us up to date from sort of since February,

 

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essentially.

 

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Being highly diversified ...

 

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a lot of our peers are kind of bank funds or insurance funds or a little of

 

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both but we are very diversified across sub-sectors.

 

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We had some exposure to the alts which

 

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traded off because of concerns about private credit and

 

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software exposure.

 

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We had some exposures to business services like an S&P or

 

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Moody's and...

 

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Which also can be disruptive for ..

 

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.I mean, it feels that was the market reaction.

 

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Exactly. Insurance brokers were viewed as being disrupted.

 

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There were sort of all these

 

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little sub-sectors that there were concerns about.

 

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Exchanges was another one.

 

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What we did back then was sort of

 

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trim our exposures to the sort of more

 

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forceful AI losers or the ones that people really put in the penalty

 

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box.

 

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We did not exit a lot of positions but just sort

 

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of moved exposures. Then we took our exposures and moved more

 

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into kind of the balance sheet heavy which we've talked about are

 

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viewed more as kind of AI winners.

 

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What's balance sheet heavy mean with banks?

 

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I mean, in other industries  it means stuff you can hold with your hands,

 

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right, dig out of the ground. That's heavy stuff.

 

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Yeah, it's heavily regulated.

 

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There's heavy regulation.

 

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Also, it's fairly difficult to

 

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supplement just, okay, taking deposits and making loans.

 

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They are viewed...

 

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So more basic banking, okay.

 

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And basic insurance, and they're viewed more as

 

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at least beneficiaries.

 

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It's hard to say if they're winners, not winners, but beneficiaries in that

 

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in the early stages I think what we'll see, and

 

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what we have been seeing, is a lot of these companies

 

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utilizing AI to make

 

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back offices and middle offices more efficient.

 

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We're also starting to see areas maybe that are more

 

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customer facing.

 

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Wealth management was viewed as

 

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an AI loser but you're seeing a number of firms who are actually

 

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utilizing AI in very productive ways.

 

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And places where you still need to see an investment manager

 

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or even a teller.

 

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I mean, physically.

 

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Yes, exactly.

 

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If you think of the financial advisory, some of the

 

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wealth managers, what they're coming up with is best ideas,

 

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types of prompts, things to make their financial advisors

 

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more on top of their portfolios as well as

 

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making them ...

 

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giving them a reason to call clients like, hey, I have this idea.

 

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You're also seeing it fall into portfolio construction

 

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and making portfolios better and more kind of

 

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risk tolerant.

 

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There have really been quite a few

 

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wealth management types of applications

 

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that we've been seeing which I think is probably pretty interesting.

 

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The repositioning, would you call it .... you had to reposition the portfolio

 

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in February, is that going too far?

 

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I would say it was not a wholesale repositioning

 

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but it was sort of subtracting from some of these AI

 

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loser categories and mostly through

 

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trimming names. We still have some exposures because

 

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it's hard to say how this will all play itself out and it's going to

 

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play itself over years.

 

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But at the same token we kind of move capital from those areas

 

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to areas that we thought were more

 

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beneficiaries. Now we're starting to kind of dip our

 

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toe back into the water where people aren't quite sure.

 

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And you can see the balance of risks more clearly.

 

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Yes, and where we think maybe they've overreacted.

 

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Okay, that's really interesting.

 

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Let's go ... you often have said that the way you manage the portfolio is

 

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actually somewhat rate agnostic.

 

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For financials that just seems hard to sort of

 

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square that somehow but in this moment take us through how that

 

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has either helped or in the discussions of will they, won't they at the

 

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moment, this leaves you positioned.

 

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I think we have discussed this.

 

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Myself and my co-manager have always said we

 

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cannot predict what's going to happen with the US 10-year or whatever

 

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so a financials

 

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portfolio will always be somewhat asset sensitive

 

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or sensitive to higher rates.

 

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What we try to do is sprinkle in more

 

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names that will also benefit or will benefit from

 

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lower rates. That gives us

 

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... when we do our risk reports we actually have a very low

 

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sort of rate component on our risk group reports.

 

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I think right now we see rates, are

 

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they in a higher for longer, are they sort of set right here, could

 

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they go higher?

 

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We try not to care that much. What

 

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we'll do is ... usually when rates are high like this

 

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the beneficiaries of lower rates are looking rather cheap.

 

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So we're starting to see opportunities with

 

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those types of names where people are kind of

 

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getting into the higher for longer type of mindset.

 

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That gives us opportunities where some areas that are being

 

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shunned.

 

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It's interesting because it does sound like with the new head

 

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of the Fed, Kevin Warsh, that there's going to be less guidance and less

 

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expectation and less ability to predict where interest rates are going for

 

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the average consumer. Now, that might be quite different for you.

 

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However, again, we'll talk more about Kevin

 

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Warsh but first of all, with the less guidance it tends to force

 

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everyone to look more at fundamentals. I wonder how would you expand that

 

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comment, the less communication that we're expecting.

 

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I think there's proponents of it as well as people that believe

 

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that guidance actually worked pretty well.

 

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I think there's two important points.

 

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One, with less guidance, which Warsh is

 

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currently exploring through his task force,

 

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you tend to have better two-way markets.

 

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With too much guidance, essentially, the market gets

 

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fairly one-sided if they feel like they can predict exactly

 

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where rates are going to go.

 

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There's also some questions about the Fed dot plot.

 

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Ultimately inflation is kind

 

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of a moving thing and the dot plot gives people maybe

 

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a false sense of direction, or

 

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certainty as to where things are going to go.

 

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I think he's a believer, and I kind of agree, that

 

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a healthier market is one that isn't centred on one

 

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point but is more focusing back

 

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on the fundamentals.

 

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We'll see how that plays out. All these task forces are

 

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in the early stages.

 

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So let's talk about that. Actually, it's a new ...

 

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we've got some minutes which said, yeah, they were hawkish

 

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which kind of we knew. Anyway, that confirmed that.

 

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Then there's the announcement of who's going to join. There's a former Bank of

 

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England, I think Mervyn King, is going to be on one of the task force ...

 

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there's five task force, one are going to look at, well, where inflation should

 

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be and what it should mean, data overall.

 

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How do some of the others fit in?

 

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Mark Andreessen, as well, is going be on this?

 

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What do you think?

 

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The five task force are data, communications,

 

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Fed balance sheet and...

 

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Don't worry, it's not a test, there's five of them.

 

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There's five that are going to overhaul how they're looking at things.

 

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Fed balance sheet we want to ask you about but what do you think of these new

 

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... are they the heads of the task force? I guess that's what they are.

 

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His team, his team.

 

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I think this is a big win for Kevin Warsh, actually.

 

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People were kind of looking as to, okay, who's going to be on this task

 

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force, are they going to come in with a lot

 

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of preconceived biases?

 

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People have been worried about how tied Kevin Warsh has been to

 

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the administration.

 

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He really kind of hit a home run with it.

 

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He brought in a lot of very distinguished

 

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and respected academics.

 

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He brought in balance between monetarists and Keynesians.

 

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He brought in very good practitioners

 

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from corporates as well as investors.

 

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You mentioned Andreessen.

 

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I think ultimately people were positively

 

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surprised. The market was positively surprised as to,

 

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okay, these are really heavy hitters who are well respected.

 

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Now, there's also heavy hitter at the Fed so the question

 

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is how does it come together.

 

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They will come up with their recommendations and

 

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ultimately it is a Fed board and we'll

 

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see actually what gets adopted or kind of

 

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where the direction actually goes on a number of these areas.

 

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You mentioned a bit about communications, guidance, some thoughts there.

 

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Let's talk about the balance sheet because this has been a very interesting

 

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discussion that I think probably began with Scott Bessent and some

 

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comment of should the Treasury have more of the

 

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Fed balance sheet, should there be a transfer, literally, of assets

 

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from one to the other to help the Fed trim its balance sheet.

 

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I mean, that starts with sort of a philosophical

 

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view that the Fed balance sheet is too big.

 

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Where do you fall in that discussion?

 

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I would tend to agree.

 

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I think that with the Fed balance sheet ...

 

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now, the large Fed balance sheet at this point is instrumental

 

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to how monetary policy is carried out.

 

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From a technical standpoint you actually really

 

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have to change how monetary policy will be carried out.

 

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Okay, what do you mean by that?

 

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You've basically gone to what's a floor system.

 

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The floor system is sort of

 

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... it starts with the interest that you pay the

 

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banks for holding reserves at the Fed.

 

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All interest rates are sort of based off of that.

 

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Well, what that does is that encourages banks

 

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to leave more money at the Fed, right?

 

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Where that comes in conflict is that's money that's

 

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not necessarily making it out into the economy.

 

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It's also supporting a very large asset which is the

 

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Fed securities.

 

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The idea of shrinking

 

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the Fed balance sheet becomes very technically difficult in

 

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that you need to first change liquidity rules and...

 

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Of how much banks need to or are required to keep...

 

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How much they need to keep at the Federal Reserve.

 

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There's proponents of a large balance sheet.

 

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They feel like it's sort of banks are self-insuring themselves

 

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and leaving a lot of liquidity at the Fed.

 

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There's others that feel like it's a lot of wasted capital

 

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or wasted cash that could go into the economy in

 

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different ways.

 

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Let me ask you this, even if they kind of split the difference or came in

 

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somewhere relatively in the middle there, what would that represent

 

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for opening up money for growth?

 

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It could be fairly sizable over time.

 

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It's going to be a slow process because the Fed assets

 

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and securities are essentially rolling off.

 

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They're just not necessarily buying more

 

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securities.

 

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Unless the Fed went out and actively--

 

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Started shopping.

 

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--start selling securities the roll down will take a number of years.

 

18:34.113 --> 18:38.117

But I think that's probably a healthier way to go at it

 

18:38.117 --> 18:41.987

anyways. I think that would certainly spook the market if the Fed actually was

 

18:41.987 --> 18:45.390

going to start selling securities and went into sort of a quantitative

 

18:45.390 --> 18:49.962

tightening which hits money supply and everything else.

 

18:49.962 --> 18:54.099

Ultimately, I think what they're trying to figure out is how

 

18:54.099 --> 18:57.536

big does the Fed balance sheet really need to be.

 

18:57.536 --> 19:01.673

How far can it shrink from here and what's the duration that it's

 

19:01.673 --> 19:03.475

gonna take to get there?

 

19:03.475 --> 19:05.911

Task force has a task to do on that part.

 

19:05.911 --> 19:09.214

It'll be really interesting to hear how they come out of that.

 

19:09.214 --> 19:13.285

Tying it back to kind of the regulatory environment, some of

 

19:13.285 --> 19:17.256

the discussions there, Basel III, something I'm sure you watch closer than

 

19:17.256 --> 19:21.126

most people, it really digs into actually liquidity and making sure capital

 

19:21.126 --> 19:23.395

levels are at the right level.

 

19:23.395 --> 19:27.533

At one point, Basel III seemed overly cumbersome

 

19:27.533 --> 19:30.235

to the Trump administration. Is that fair?

 

19:30.235 --> 19:30.469

Yes.

 

19:30.469 --> 19:33.238

Where are we with that? Which parts actually have gotten through?

 

19:33.238 --> 19:35.841

It kind of has gone through now.

 

19:35.841 --> 19:42.581

Rght now we have a proposal that is out for comment.

 

19:42.581 --> 19:47.052

You had the first Trump administration who was

 

19:47.052 --> 19:47.920

generally sort of--

 

19:47.920 --> 19:50.355

They panned it, really.

 

19:50.355 --> 19:53.425

--[crosstalk] Basel so it didn't really go anywhere.

 

19:53.425 --> 19:57.396

Then the Biden administration, the head of supervision put out

 

19:57.396 --> 20:02.167

a proposal that would have fairly significantly increased capital

 

20:02.167 --> 20:05.370

requirements for US banks.

 

20:05.370 --> 20:09.374

That meant, or was met with

 

20:09.374 --> 20:13.712

quite a bit of pushback from the industry as well as others.

 

20:13.712 --> 20:16.281

And arguably led to some of the growth in private credit.

 

20:16.281 --> 20:19.451

I mean, that's another story but that arguably is part of the story.

 

20:19.451 --> 20:24.323

Yes, I think that's part of it as well as

 

20:24.323 --> 20:29.228

just the fact that holding more capital also leads

 

20:29.228 --> 20:34.833

to less lending so can be economically constrictive.

 

20:34.833 --> 20:39.137

Now, the new Trump administration has brought in Michelle Bowman

 

20:39.137 --> 20:43.308

as Director of Supervision and her

 

20:43.308 --> 20:47.312

proposal actually doesn't

 

20:47.312 --> 20:51.717

really decrease capital necessarily all that much but it decreases

 

20:51.717 --> 20:55.420

the risk-weighted assets.

 

20:55.420 --> 21:00.158

It's more a numerator of that. What

 

21:00.158 --> 21:04.162

I thought was quite surprising was the view

 

21:04.162 --> 21:08.100

that myself and many market participants had that this was

 

21:08.100 --> 21:12.404

going to be great for the large banks and

 

21:12.404 --> 21:16.341

that we were going to change a lot and it would actually work best for the

 

21:16.341 --> 21:16.808

larger banks.

 

21:16.808 --> 21:22.781

Because they're not competing with private credit, for instance.

 

21:22.781 --> 21:26.485

Right. The interesting thing is the capital levels or risk-weighted asset

 

21:26.485 --> 21:30.822

levels actually went down more for the regional banks which

 

21:30.822 --> 21:33.759

was...

I'm so glad you're going to talk about this because I've been promo-ing this

 

21:33.759 --> 21:36.228

particular point every time we've had a show.

 

21:36.228 --> 21:39.498

The regional banks actually could be the beneficiaries.

 

21:39.498 --> 21:41.633

Yes.

 

21:41.633 --> 21:46.204

But now, of course, because capital requirements

 

21:46.204 --> 21:50.208

go down the interesting thing will be where do the rating agencies

 

21:50.208 --> 21:54.613

come in and how much will they actually allow capital to come down at

 

21:54.613 --> 21:56.548

the regional banks.

 

21:56.548 --> 21:59.918

The rating agencies and also just cost of capital.

 

21:59.918 --> 22:03.855

Investors will judge whether

 

22:03.855 --> 22:08.760

a regional bank has too much or too little capital and will look

 

22:08.760 --> 22:14.199

at investing based off of that.

 

22:14.199 --> 22:18.337

Overall, I would say there are some

 

22:18.337 --> 22:22.574

tweaks probably that need to happen for Basel III endgame

 

22:22.574 --> 22:26.011

but overall we're probably pretty close.

 

22:26.011 --> 22:30.148

I would believe fourth quarter, first quarter

 

22:30.148 --> 22:34.219

of '27 we should have final capital rules.

 

22:34.219 --> 22:38.757

Does it strengthen the banks, strengthen the picture for investing,

 

22:38.757 --> 22:42.594

take out some risk? I mean, that's what it's meant to do without overly

 

22:42.594 --> 22:47.632

constraining. I don't know, is it okay?

 

22:47.632 --> 22:51.169

Yeah. Banks have built capital ... since the great financial crisis they've

 

22:51.169 --> 22:55.273

doubled their capital levels.

 

22:55.273 --> 22:59.344

Taking that down 10% is not that

 

22:59.344 --> 23:02.681

big of a deal, really, in the grand scheme of things.

 

23:02.681 --> 23:06.818

You could certainly argue US banks are more well

 

23:06.818 --> 23:10.255

capitalized than a lot of their foreign peers.

 

23:10.255 --> 23:14.426

They're almost like Canadian banks, which you are not invested

 

23:14.426 --> 23:17.629

in because you're looking at a global view and particularly US banks.

 

23:17.629 --> 23:21.700

Couple of questions, this circles back a bit to the Treasury balance sheet

 

23:21.700 --> 23:25.937

discussion, liquidity. Do you expect TIPS, the

 

23:25.937 --> 23:29.975

inflation-protected side of things, to be affected by any change in the

 

23:29.975 --> 23:32.844

Treasury balance sheet/liquidity?

 

23:32.844 --> 23:37.249

I mean, I think there's definitely concerns

 

23:37.249 --> 23:41.987

as to

 

23:41.987 --> 23:46.491

if the balance sheet goes too low

 

23:46.491 --> 23:50.929

is that enough liquidity...

 

23:50.929 --> 23:52.798

To fight a fire if you need to.

 

23:52.798 --> 23:56.968

Yeah. But you can always go back and start buying securities again.

 

23:56.968 --> 24:01.706

I think overall it's probably not going

 

24:01.706 --> 24:07.045

to change the inflation outlook that much but ultimately

 

24:07.045 --> 24:11.049

it's just going to

 

24:11.049 --> 24:14.119

work its way into the economy fairly slowly.

 

24:14.119 --> 24:18.256

Your fund, as you mentioned earlier, is somewhat agnostic

 

24:18.256 --> 24:22.260

to rates. That said, a rate or two

 

24:22.260 --> 24:26.164

hike or even down will be okay.

 

24:26.164 --> 24:29.868

I mean, the sense is there's sort of a direction that you're happy with here.

 

24:29.868 --> 24:35.407

Yeah, I think right now higher rates are

 

24:35.407 --> 24:36.942

fine, they're helping the portfolio.

 

24:36.942 --> 24:42.981

As in where we are.

 

24:42.981 --> 24:44.950

Yes, because, you know, the US, we have a lot of holdings in the US, at the

 

24:44.950 --> 24:48.887

same token we also have a lot of holdings that are fee

 

24:48.887 --> 24:55.760

income oriented and it's not just about rates.

 

24:55.760 --> 25:00.065

As inflation stays relatively

 

25:00.065 --> 25:04.469

high it does benefit some of our holdings in Europe which

 

25:04.469 --> 25:09.140

tend to be more balance sheet intensive types of banks.

 

25:09.140 --> 25:13.445

It also helps our Asian exposure,

 

25:13.445 --> 25:17.382

as rates tend to follow

 

25:17.382 --> 25:21.620

the US over time holdings like Japan which is

 

25:21.620 --> 25:25.557

seeing more inflation than they've been used

 

25:25.557 --> 25:30.195

to. I mean, part of it is the weaker currency, etc., etc., but,

 

25:30.195 --> 25:33.498

ultimately, they're also fairly balance sheet intensive.

 

25:33.498 --> 25:35.066

And you're overweight Asian banks.

 

25:35.066 --> 25:36.167

Yes.

 

25:36.167 --> 25:38.803

And you're underweight European banks.

 

25:38.803 --> 25:42.807

Yes, although we have used some of the volatility

 

25:42.807 --> 25:46.978

over the past six months to close some of that--

 

25:46.978 --> 25:48.446

Underweight.

 

25:48.446 --> 25:52.684

--underweight, exactly. Part of the idea is

 

25:52.684 --> 25:56.721

as we've kind of worked our way through we've

 

25:56.721 --> 26:00.759

gotten some opportunities. They stopped outperforming the US banks to the

 

26:00.759 --> 26:05.697

same degree. When the Iran war started

 

26:05.697 --> 26:10.201

the European banks also traded off a little more significantly

 

26:10.201 --> 26:14.339

than the US banks so we saw some opportunities

 

26:14.339 --> 26:18.443

to maybe pick up some names, or add to

 

26:18.443 --> 26:22.414

some names that looked particularly cheap at the time.

 

26:22.414 --> 26:26.551

Lee, as a final thought, the discussion of some repositioning

 

26:26.551 --> 26:30.522

that happened due to the AI disruptive trade, you might want to

 

26:30.522 --> 26:33.091

call it in February, there was a bit of a panic there.

 

26:33.091 --> 26:35.360

You've made some adjustments.

 

26:35.360 --> 26:39.564

What you're invested in now is less exposed to

 

26:39.564 --> 26:41.066

that, essentially, is that fair to say?

 

26:41.066 --> 26:47.839

Yeah. I would say we're really happy with the way the fund's been performing.

 

26:47.839 --> 26:51.276

It has good days when rates are backing up.

 

26:51.276 --> 26:55.013

It has good days when the rates are coming down.

 

26:55.013 --> 26:56.881

It's definitely showing ...

 

26:56.881 --> 27:02.420

I mean, really the biggest impact

 

27:02.420 --> 27:04.656

was the AI scare.

 

27:04.656 --> 27:08.827

As we've kind of evened that out a little bit and evened out some of

 

27:08.827 --> 27:12.797

our holdings it's performing exactly like we

 

27:12.797 --> 27:15.734

would think it would.

 

27:15.734 --> 27:20.472

Not every day is a good day but at the same token it's

 

27:20.472 --> 27:24.509

looking very rate agnostic, it's having good days and bad days,

 

27:24.509 --> 27:27.579

a lot more good days recently.

 

27:27.579 --> 27:31.616

It's definitely much more

 

27:31.616 --> 27:33.585

where we want it to be.

 

27:33.585 --> 27:37.422

What's the most interesting thing that you're watching for to come out of the

 

27:37.422 --> 27:40.625

tasks force at the Fed?

 

27:40.625 --> 27:44.562

This is what you do every day. I think you mentioned the Chicago Booth School

 

27:44.562 --> 27:48.566

of Business is where you went originally, you said there's some people on task

 

27:48.566 --> 27:50.635

force from that side and the other side.

 

27:50.635 --> 27:53.605

This will be kind of exciting to watch this come together.

 

27:53.605 --> 27:56.241

What interests you the most?

 

27:56.241 --> 28:00.645

I think given the

 

28:00.645 --> 28:04.683

broad spectrum of topics that they are

 

28:04.683 --> 28:09.120

going through I think that the entire package really

 

28:09.120 --> 28:11.222

sort of matters.

 

28:11.222 --> 28:15.360

How they use data, there's

 

28:15.360 --> 28:18.897

different views on how to use data.

 

28:18.897 --> 28:25.203

The Fed balance sheet certainly has direct repercussions.

 

28:25.203 --> 28:29.340

AI and the recommendations they come out with as far

 

28:29.340 --> 28:33.445

as how resistant or how

 

28:33.445 --> 28:39.150

AI can benefit or hurt the economy I think could be very interesting.

 

28:39.150 --> 28:44.656

I think you go across the spectrum and it's

 

28:44.656 --> 28:48.993

really a full package of interesting

 

28:48.993 --> 28:49.994

things that come out of it.

 

28:49.994 --> 28:52.630

You can't say everything. You have to pick one.

 

28:52.630 --> 28:56.668

Give us like what sort of, you know, just a spectator ...

 

28:56.668 --> 29:02.373

they are all interesting. It's just a fascinating moment, actually.

 

29:02.373 --> 29:06.444

When I think about it as an analyst as well as a portfolio

 

29:06.444 --> 29:13.518

manager, the Fed balance sheet question is probably the most interesting, not

 

29:13.518 --> 29:17.689

only sort of sizing of the balance sheet but how do they get to

 

29:17.689 --> 29:21.793

where they want to be and what they're going to do

 

29:21.793 --> 29:25.029

from a technical standpoint.

 

29:25.029 --> 29:29.834

I'm gonna put that into AI and see what it comes up with.

 

29:29.834 --> 29:32.303

Lee Sotos, thank you for joining us. Great way to end the week.

 

29:32.303 --> 29:34.539

We look forward to the bank earnings. We know you'll be looking at them

 

29:34.539 --> 29:35.874

carefully for all your investors.

 

29:35.874 --> 29:36.941

Great. Thank you.

 

29:38.610 --> 29:40.311

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29:40.345 --> 29:42.547

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29:42.547 --> 29:44.382

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