Bank Earnings, Why Consumers Are 'Roughed Up' & Real…

PodcastBloomberg SurveillanceTom PorcelliOct 17

The discussion examines pressure on consumers from inflation, gas prices, and real wages, alongside bank profitability and Morgan Stanley's asset inflows. Housing themes include affordability, mortgage rates, regional supply, private listings, and diverging conditions between luxury and lower-priced markets. It also touches on AI-simulated business-school cases, growing women's sports merchandise, and an analyst's severe downside view on CoreWeave.

Banking Consumer Spending Inflation Real Estate Interest Rates Technology Stocks

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Key Takeaways

Inflation at 3.7% and gas prices up 34% year over year are adding to pressure on consumers: Tom Porcelli says real earnings are trailing inflation, while Beige Book accounts describe customers buying less and reacting to prices. A wealth effect from 401(k), housing, and investment balances is helping sustain spending despite that strain, and Social Security’s roughly 3.6% COLA will nearly—but not fully—keep pace with inflation.

Housing affordability is constrained by several factors: mortgage rates above 7% have pushed pending sales near a 12-year low, young people’s wages are not keeping up with home costs, and required parking minimums add construction costs. The discussion also cites a 5 million-home U.S. housing deficit and argues that private listing networks can restrict access and obscure days-on-market information.

The housing market is sharply segmented: Jonathan Miller says equity drawdowns are supporting luxury demand, while lower-priced buyers are more exposed to mortgage rates; Freedman also links New York City’s stronger high-end market to expected Wall Street earnings and bonuses, noting that 65% of deals there last year were cash purchases. Miller says supply is tightest in the Northeast and Midwest, greatest in the Sunbelt, and intermediate in the West, making inventory a key metric.

GEO-POLITICS

Private Listings — Bess Freedman argues that private listing networks hide days-on-market information and can restrict access to homes, harming fair housing and affordability. She says the networks should not be allowed to exist.

“And that's why we've been raising alarm bells and saying, look, this is not helpful…”—

TECHNOLOGY

AI Case Studies — A Bloomberg Businessweek survey found that half of the 56 responding global business schools had implemented, were developing, or were piloting interactive AI-simulated cases. The report says the cases let students practice negotiation, team direction, and crisis management.

“According to a Bloomberg Businessweek survey of global business schools, half of the 56 that responded have either implemented more interactive AI simulated cases or are developing or piloting them…”—

ECONOMY

Inflation And Gas — The segment reports inflation of 3.7% across the economy and a 34% year-over-year increase in gas prices, a sharper rise than the overall inflation figure cited.

“Yes. So obviously, we got inflation numbers, inflation up 3.7% across the economy. But in a lot of places, much higher gas prices up 34% over year.”—

Social Security COLA — Social Security payments are set to rise about 3.6% starting December 31, an average increase of $75 per month. The speaker says the increase will nearly, but not fully, keep pace with inflation.

“Now Social Security payments did get a bump. So starting on December 31, payments will be up by about 3.6%. So almost keeping up with inflation, but just not quite…”—

Consumer Pullback — Beige Book accounts from shop owners described the same number of customers buying less and flinching at prices. The speaker warned that a broader consumer pullback could become a problem.

“But there were just a lot of shop owners reporting that people... They had the same number of customers, but people were buying less. They were cutting back…”—

MARKETS

Morgan Stanley Inflows — Morgan Stanley reported $232 billion in net new assets, more than twice analysts’ $111 billion estimate; the discussion says IPO-related flows drove much of the inflow. The segment also cites $500 million in fees for banks leading the SpaceX IPO in June.

“You know, you look at the numbers…”—

Wealth Management Margin — Morgan Stanley's wealth-management business has a 30% pretax margin and steady revenue, according to the discussion.

“At Morgan Stanley, the pretax margin is 30%. That's Three zero. Three zero. On wealth management. On wealth management. We're in the wrong business. And it's steady revenue too…”—

Yield Drivers — Porcelli argues that a new floor has formed under yields and that rising yields are not inherently bad. In his view, the reason for the rise matters, and increases for good reasons may be acceptable.

“Yeah, you know, we've been talking about this for quite some time now. Think I think the rise in yields is real. I think there's a new floor underneath yields…”—

FORECASTS

CoreWeave Downside — One analyst says CoreWeave's stock could go to zero; the transcript presents this as an analyst's view, not a settled outcome. The discussion also notes that CoreWeave has 550 employees.

“I was... Understood Core Weave is 550 employees. The way we're talking about it, I would've thought it was 20,000 employees. One analyst says the stock could go to zero.”—

Bloomberg Money Launch

Tom Keene and Scarlet Fu introduce the show and preview its coverage of wealth management, bank earnings, wages, Social Security, and housing.

Morgan Stanley Wealth Inflows

Morgan Stanley's $232 billion in net new assets greatly exceeded estimates, highlighting wealth management's steady revenue and its importance to the bank's transformation.

Inflation Squeezes Consumers

Inflation and sharply higher gas prices are eroding Social Security gains, while businesses report shoppers keeping customer visits steady but buying less.

Big Bank Profit Growth

The largest U.S. banks have nearly doubled combined profitability over a decade, reflecting strength in consumer and corporate health and market activity.

CoreWeave Downside Debate

The hosts note the sharp technology selloff and an analyst's extreme view that CoreWeave shares could fall to zero before turning to consumer wages.

Real Wages Fall Behind

Wells Fargo's Tom Porcelli says real earnings are struggling, with wage growth especially weak, even as rising investment and home values help sustain consumer spending.

Retirement Income Risks

Porcelli says more households rely on investment income, leaving retirees exposed to market swings, while he favors a hands-off approach and sees a higher floor under yields.

Mortgage Rates And Housing Supply

Jonathan Miller says affluent buyers and equity gains support luxury housing, but rate uncertainty, regional supply differences, and affordability pressures shape the broader market.

New York Housing Affordability

Bess Freedman describes strong luxury demand alongside an affordability crisis and argues that zoning reform and more housing supply are essential for younger buyers.

Women's Sports Merchandise

Lisa Mateo discusses the growing market for women's sports fans, including licensed apparel designed specifically for women and premium team merchandise.