Fed's only mistake would be easing too quickly: Atlas Merchant Capital CEO

Former Barclays CEO Bob Diamonds here, founding partner, CEO of Atlas Merchant Capital joins us for a discussion. Bob, welcome back. Good to have you. So I mean, Sarah’s right. It is lumpy. But if you go 30,000 feet, can you make broad calls about where the economy is and where it’s going right now? The economy feels very good right now in the USI think it’s much to the surprise of everyone around the world looking at the US that, you know, it was a year ago that SVB hit, You know, deposits were guaranteed, special bank lending facilities were put in. People were worried about the economy, you know, a very, very high percentage. And what happened? the Fed raised another 75 basis points and people were calling for recession and easing. And as I was here in January with you and we said then, they’re going to be higher longer, not because the Fed should ease, but because it would be almost irresponsible with the economy still strong, inflation not quite where they wanted to be. That our feeling is, and it continues to be that the only mistake the Fed could make here is to act too quickly on easing. And so let’s see how this economy plays out. But we felt in January it was unlikely that we get a rate cut in the first half. It could be one in the toward the end of this year. I think we’ll see how the numbers come. It could be none, but I think that you know, Carl, if I go back in history like since 2008, before these rate increases, then Fed funds were averaging below 1%, right. We all got used to that. It was kind of free money prior to 2008, for decades and decades and decades Fed funds averaged what above 4%. So where we are today is not abnormal in many ways. It’s probably a more normal interest rate structure and interest rate environment for risk taking than what we saw when when rates were below 1%. What about the fact that the company first of all, if you listen to earnings, it’s not like everything is peachy. You know it’s obviously it varies by sector, by demographic. If you’re in services you’re doing a lot better than if you’re in in goods. But the the commentary is so far from earnings and we saw this last quarter as well, hasn’t exactly been a 3% or 2.9% GDP economy. So the inputs are are pretty mixed. I I just wonder if you said the risk is them cutting too early, you don’t think there’s a risk of them cutting too late. I think they’ll see the data, Sarah. But I think in addition to it’s been sticky getting down to the 2% target. Well, what’s happened recently, China’s growing faster than we thought. Christine Lagarde, you did a great interview with her yesterday, is ready to ease the Bank of England is ready to ease. Both the UK and Europe look like they’re going to get a little bit more growth. So actually there’s some more things out there in the macro environment that you know are kind of positive. Positive is the wrong word, but you know, more in favor of inflation is going to stay a bit sticky. So you know the the slower economy in China was certainly beneficial to a lower rate of inflation and I think this surprise is going to go the other way a little bit. So data dependent is important, Sarah. And if we do see a weakening U.S. economy, then I can see the reason for easing. But boy, I we haven’t seen any sign of weaker U.S. economy. Bob, given your your history of course is having run a large financial institution. I’d just love to get your take on on earnings season that you’ve been through, particularly with the bigger banks in which you competed against the Goldmans, the Morgans been a very mixed picture this earnings season. We’ve talked about it. JP Morgan obviously stock went down dramatically after earnings Bank of America yesterday, not great, but then Goldman and Morgan fight strong quarters. What do you think? So I would say underlying all of it is counterintuitively and we’ve talked about this, higher rates are good for financial institutions. If you look at B of A, it’s a deposit machine. B of A and JP Morgan have hoovered deposits for years since 2008, but even more post SVB. And if you’re at 5 1/2% versus 1%, look at the the net interest margin of B of A and the amount of deposits out there. And keep in mind that a year ago, right in the first quarter there was 100 billion loss in the treasury portfolio. That doesn’t go through the mark to market, right. That’s much better now. And so the banks have adjusted to that rate increase they’re used to in in you know, interest rates at these levels and they’re very, very beneficial for the deposit taking institutions.