I am Katie Greifeld and welcome to bloomberg markets. You take a look at the markets and there is some red on the screen. The s p 500 off by about point read percent, a far cry from this time 24 hours ago. You look at the nasdaq 100 and the big tech names and it gets worse. The nasdaq 100 off by. 8 , not too big of a move but to the downside. This as we count down to the fed decision. That line is what you want to watch, the 10year treasury yield lower by one basis point. We are sitting at 4. 3 or so. Of course that meeting kicked off at 9 00 a. M. Let us dive deeper into the markets with catherine, the stone next financial chief market strategist. Let us talk about the fed but let us start about the bank of japan, the big news out overnight, the negative Interest Rate and the zero Interest Rate era is over. What could that mean for Global Markets . It could mean a bit of an impetus for more growth in japan, i think the negative Interest Rate policy was controversial in its effectiveness which is why you continue to see this move higher in Japanese Equities which have done remarkably well. If we are looking from a global perspective, getting off of negative Interest Rate policy increases the attractiveness of the jgp which comes at a difficult time when you have the fed unwinding its balancing sheet and high financing needs. It increases the chances of a higher risk premium for u. S. Treasuries. Katie you bring up something ive been wondering about. You think of the concerns of the past summer, all of this treasury supply and they are not necessarily being enough buyers to absorb that. Is it possible that those japanese buyers will stay home and not bother with the u. S. Treasury market . Kathryn or move out and repatriate back into jgb makes sense. There is a sponsorship that is fundamental in nature from these currentaccount surplus countries such as china, japan and saudi arabia and russia. The truth is when you look at the holdings of treasuries, they are declining. There is a diversification from treasuries into something such as gold especially for china. That came after the sanctions on russia. There was this impression that you are not the friend zone of the u. S. Then you are at risk. We saw the big currentaccount circle countries start to diversify. This also comes at a bad time. The risk premium is higher over the long term. The question is on the short term. The two year and shortterm treasuries are attractive at current yields. We saw a move higher and that makes sense for 2024. Katie shortterm treasuries are attractive so let us get your idea on equities. The bank of america fund manager survey came out and it was a bullish read across the board just to redo some of the highlights. Global growth expectations at a two year high and Risk Appetite at the highest since 2021. How do you stand versus consensus. You talk about your own Risk Appetite how does that compare to the past couple of years . Kathryn i am more cautious. When you look at the euphoria and optimism it hinges on pce services and housing. That take tick up being a oneoff thing. If it is not i think you will get a repricing of risk which is to be determined. The market is taking it as a fact, which is of course that inflation will meaningfully will maintain its trend in 2023. At the same time the u. S. Economy grows above potential and that is not commensurate with trend. Either the said chooses implicitly higher 3 target or something has to give. I think the euphoria is or the optimism is probably well placed. My position is what i am telling stonex clients, let us hedge our bets. Quotes are cheap and volatility is low. The vix index is relatively low. Take out that protection in the form of high yield in cash which will stay highyielding because the fed is not likely to cut that dramatically. There is a chance they do not cut at all. Two year treasury notes gold look good equity space. I would not be chasing these high flyers that were the leaders over the past months. Katie let us talk about that more because in the survey magnificent seven, long magnificent seven, that was a most crowded trade at 58 . It sounds like you would not necessarily be chasing the big tech names. Kathryn if we are repricing in the market will reprice a fed not as dovish or likely to cut as previously imagined, that is not good for attack. That is not god. And it is not positive for any rate sensitive sectors especially if the fayette if the fed maintains nominal rates for a prolonged period of time that increases the rate of recession. At the risk of chasing these top performers that is not the place to be. I would be looking if the market continues to move higher, which is a possibility, i would be looking for equally weighted s p 500. We have seen a bit of a broadening in the s p which is a good and positive thing. To get there we would have to see deceleration and really we had one poor retail sales data. I am concerned about the strength of the labor market implementing this Course Services and housing inflation which i think is a risk to markets. Really enjoyed this conversation and a great preview as we count down to the fed meeting in 24 hours time. Thank you to the Stonex Financial chief Financial Market strategist. We want to talk about motorcycle because ducati announced that the companys revenue came in at over one billion euros, the second Consecutive Year thanks to strong sales. I am thrilled to melt to welcome the ducati ceo joining us from the companys headquarters in italy. It is great to have you with me. You hit the one billion euro mark and you had your best ever. What is fueling some of your numbers . Yes. It is kind of of course really reassuring. It shows that our products are liked. We are generating what is needed to continue our development plan. We have a lot to do for keeping the momentum, there is a lot of investment that we are doing for Product Development for the future. There is a lot of technology to be developed in order to remain competitive. It is reassuring that we are generating that and financially strong in order to make that plan viable. Katie i want to talk about input costs because i spoke the ceo of Daimler Trucks and it sounds like it is a wash for them. Some costs are going down and some have risen. What does it look like when it comes to the cost of Raw Materials . Claudio that is a bit better anyway. In a way. Energy price was high in the past and raw material increase. Actually it is a bit of a relief now. It is not yet in europe, the energy price going to what it was, but actually it is better. And so that is helping in order to keep a proper balance within prices and margin, and actually we are in a strategy caused called raise the bar and we are targeting much more profitability than volume and it is very important to keep that between prices and costs. Katie a bit of relief when it comes to input cost. Let us talk about financing because they are quite high and starting to come down, but from this high level how does this affect the high end brands . Claudio of course, financing is important. So in many countries, even high end motorcycles have financing to make it more difficult anyway. A very high risk value for our product, so once you make the difference, that is for sure an advantage. So we are not suffering too much on that point. And actually when it comes to the company we have the luxury of it being cash positive so that is not impacting the p l because if anything we get an advantage. Katie i appreciate the context and im interested in your relationship with your parent company. You have been owned by volkswagen since 2012. How has working as a Volkswagen Company changed over that times , over that time period, those 14 years old or so. Claudio sometimes it is complicated because i have mentioned how different we are. We are a 2000 People Company different from a 680,000 group. And sometimes processes are more complicated. On the others there is a strong solidity and actually we are managing directly with audi, and actually now we have people that understand pretty much how to manage a brand like ducati, how much product is important for us and we are keeping innovative and being italian, so this means that actually we have been helped to develop the cut the Property Company which is in the best shape ever. We are coming into the year 2026 with a long heritage we have a fantastic president. We like to see that we are building our future. Also, a lot of that has to be thanks to the current shareholder that has allowed the brand to develop and work on many aspects like we have made a lot of investments in order to make sure that that this is completely out of discussion. Katie a complicated relationship but ducati can keep being italian. How much does how much is ducati able to collaborate with other brands under volkswagen . Claudio that is a very positive part. We are in what we call a Progressive Brand Group which is under the umbrella of audi, ducati, lamborghini, and bentley. We have very Close Relationships with lamborghini and we are from the same region and then we are very Close Friends with bentley which was made possible in the last couple of years to make a special version. We made our streetfighter in lamborghini trim which was a fantastic success. 630 units plus 63 specials only for lamborghini customers. And then we replicated one year later with bentley making a ducati for bentley. This is a very special version, very high price but collectors love it because typically the resale value is higher. And so it is not only a fantastic deal but also a good investment. Katie we have to talk about moto gp because ducati won its fourth straight world title in 2023. What has that meant for sales. Are you able to get close to quantifying the impact . Claudio that is a particular question. I have been asset many times. To be completely honest it is difficult with the result with our racing. For sure, there is a lot of prestige. Everything we do and measure and we keep monitoring brand strength around the world, it has been skyrocketing in the last five years, and for sure when we consider that we are the only brand in the history of motorcycling that actually won this two years in a row. That was never happening before in history. So when you do something so big, all the passionate bikers really understand and think that the Technology Comes from the brand is so high. And so the reputation is very high. Katie best of luck and really great to speak with you. Thank you to ducati. Coming up the deal. We will speak with the cofounder of reverence capital. A key investor in the 1 billion Capital Infusion in new York Community bank. This is bloomberg. Hey you, with the small business. Whoa. Youve got all kinds of bright ideas, that your customers need to know about. Constant contact makes it easy. With everything from managing your social posts, and events, to email and sms marketing. Constant contact delivers all the tools you need to help your business grow. Get started today at constantcontact. Com Constant Contact. Helping the small stand tall. Katie last week new York Community bank closed a deal to raise 1 billion from capital from a group of investors led by Steven Mnuchin. One was reverence capital which committed one 200 billion. Joining us is milton berlinski, the cofounder of reverence capital and sonali basak. Let us set the scene and start to talk and talked about how the deal came together. Did stephen call you or what was the initials first steps . Milton so, we were approached by the banker helping arrange this. We knew that stephen and i had a long relationship going back to Goldman Sachs to see if we would have an interest. We obviously did, for several reasons. One is that we recently merged into us a Real Estate Group called pembroke road by run by larry combe who had a deep relationship with part of the bank, and knew a lot of the assets. So, we felt comfortable that we could assess the risk very quickly. And secondly we had been having a dialogue on the asset side with institution and so that was very helpful. And so we got the call from the bank and of course we were very happy to do that. Katie this deal was immediately in the money, quickly and almost doubled. Since then the stock has been volatile. Investors are looking for a reason. What is new York Community bank a year from now . How do you and your Investor Group plan to make it profitable . Milton first, obviously joe coming in, he has a very experienced ceo, having done this at onewest. I think he is going to work very closely first with the existing Management Team to assess the existing businesses and then we will step back and say longerterm what do we want this franchise to look like . This is a very significant regional bank, more than new york city even though the name says new York City Community bank. We are going to try and diversify and reposition the institution. And i think it is a longterm project so this is not something you can snap your fingers and it will happen overnight. I have high confidence that joseph will get this right in the short term. Sonali this only closed a week ago and investors are asking is 1 billion enough . At what point where it might need more capital . Will 1 billion do the job . Milton i cannot predict tobacco the macro and where it goes but based on the work that we have done and liberty did this independent of us and then we came together to look at the results and we were spot on top of each other. I think we feel very comfortable today based upon the current view that 1 billion is sufficient. If that changes in the future will, we will put more capital. Katie i want to talk about the role of private capital. Is there a plan to sell assets to private credit firms and do they even want them . Milton we run a private credit firm, opportunistic. So reverence has rebusinesses, private equity which is focused on financial services, the second is an opportunistic credit business and the third is an opportunistic real estate business. Some funds would like the multifamily side of the business, some will like office at what they think is the reset value for those assets. And i think what the bank ultimately decides to do will be a function of how we want to reshape the bank. A bunch of this will run off and mature and refinance elsewhere. Part of it will sell into other pockets to take it off the balance sheet. And some part of it will sell. Sonali how much Due Diligence were you able to conduct before the deal . And now that you have a look under the hood, how bad is it . How much work is there to be done on the real estate portfolio especially the red regulated part . Milton we did a lot of work. We substantially went through the bulk, 75 of the office portfolio. We went through about 25 of the multi family, which is quite extensive when you think about a sampling. We also then took and by the way management and the bank was extremely helpful in providing us the information needed. We stratified the business, each one of the multi family by percentage of rent control versus nonrent control. Bou euros where they were located where they were located. We did a sale assessment of how much capital we would need and how the bank would be an Regulatory Compliance and we concluded that we could do that and still be in Regulatory Compliance. We were happy with that as part of the commitment of the 1 billion. I would say the thing that is misunderstood is that the multifamily portfolio is performing well. And as we have gone in and done more work on the inside with the bank, we feel better about it even then we did a week ago. Sonali really interesting color that the multifamily part of the business is a bright spot. I am curious to broaden out and talk about regional banks as a whole. In your view did you think that nyc be was a standalone do you think there are more shoes to drop . Milton if you go back and look over the last five years, a lot of the growth came in the real estate area. And so people will have to adjust their portfolios, take reserves. I think that rates starting to peak and coming down over time will be helpful for that. Most banks will be able to work through their issues including new York Community bank. The Smaller Banks will need to raise capital and there are a lot of bankers out there who want to help them do that. Sonali you were mentioning how commercial real estate as part of the problem. You will only get two rate hikes this year, and in that scenario where Interest Rates are still higher than expected, how much more damage in there in the property sector that could impact these banks . Milton i assume you meant rate cuts as opposed to ready kite rate hikes. I think the rate cuts are helpful. I think most people understand what the occupancy looks like in these buildings. People are coming back to work not as fast as and some geographies as they would like. And so i would think people have a good handle on what the operating expenses are for these businesses and what the ny is on the buildings. And so i think you will see banks slowly but surely start to take incremental reserves if they need them. And, frankly, start to interact with borrowers on how to refinance the existing portfolio. Some of them will require more reserves than others. Today, i do not see any catastrophic events in the banking system, given the amount of capital that sits in the system today. Katie you have 30 seconds, you think there is another 1 billion deal out there . Milton i am sure there is. Katie i think that was three seconds. We reall