WEBVTT - Bloomberg Wall Street Week: Moynihan, Davis, Landmann 0:00:00.160 --> 0:00:03.360 This is Bloomberg Wall Street Week. What's the state of 0:00:03.400 --> 0:00:06.360 corporate governance? The deficit is a real issue. The US 0:00:06.400 --> 0:00:09.880 economy continues to send mixed signals. The financial stories that 0:00:10.039 --> 0:00:13.000 cheap our world fed action to con concerns over dollar 0:00:13.039 --> 0:00:16.520 liquidity and encouraging China data. The five hundred wealthiest people 0:00:16.520 --> 0:00:19.560 in the world. Through the eyes of the most influential voices, 0:00:19.880 --> 0:00:22.880 Larry Summers, the former Treasury Secretary, star Ward CEO, Kevin 0:00:22.960 --> 0:00:26.600 Johnson sec Chairman J Clayton. Bloomberg wool Street Week with 0:00:26.760 --> 0:00:31.240 David Weston from Bloomberg Radio. Don't bring me no bad news. 0:00:31.520 --> 0:00:35.160 Market shrug off, higher consumer prices and even a vaccination 0:00:35.200 --> 0:00:38.480 program put on hold as they see a glass more 0:00:38.680 --> 0:00:41.879 than half full. This is Bloomberg Wall Street Week. I'm 0:00:41.960 --> 0:00:44.960 David Weston. The markets took it all in stride, with 0:00:45.040 --> 0:00:47.879 the banks posting earnings no one could have dreamed of 0:00:48.040 --> 0:00:50.199 just a year ago, and the S and P and 0:00:50.360 --> 0:00:54.400 Dow and NASDAC one all reaching new record highs. Even 0:00:54.440 --> 0:00:57.440 the US Treasury tenure barely blinked on the J and 0:00:57.520 --> 0:01:00.160 J news, with the yield ticking up only for a 0:01:00.160 --> 0:01:03.920 moment and then turning around and dropping the most since February. 0:01:04.440 --> 0:01:07.319 Heelp us understand the market reaction or maybe lack of reaction. 0:01:07.520 --> 0:01:09.759 We're going down by our Wall Street Week round table 0:01:09.840 --> 0:01:12.960 of Nancy Davis, chief investment officer at Quadratic Capital, and 0:01:13.000 --> 0:01:15.680 also Laird Landman. He is a portfolio manager for a 0:01:15.720 --> 0:01:19.160 fixed income at TCW. So welcome both of you. Lead. 0:01:19.200 --> 0:01:22.280 Let me start with you. You are a fixed income guy. 0:01:22.560 --> 0:01:24.679 One of the big questions I think on investor's minds 0:01:24.760 --> 0:01:28.360 right now is inflation. Is it transitory? Is J? Powell 0:01:28.400 --> 0:01:30.600 tells us? Or it could have been more troubling than that. 0:01:30.959 --> 0:01:32.640 If as you look at the fixed income market, what 0:01:32.680 --> 0:01:35.360 do you look at to answer that question? Well, I 0:01:35.360 --> 0:01:37.119 think it's very hard to know what to look at. 0:01:37.200 --> 0:01:39.480 In the sixties, people looked at the Philips curve. In 0:01:39.560 --> 0:01:42.720 the seventies, the theory of monet of inflation was that 0:01:42.760 --> 0:01:45.000 it was monetary in all places you looked at him 0:01:45.080 --> 0:01:48.640 and to growth. UM. In the in the nineties it 0:01:48.720 --> 0:01:51.040 was pce Star. There's been all different models and none 0:01:51.040 --> 0:01:54.840 of them have really worked. UM. Today we're in a 0:01:55.040 --> 0:01:58.840 we're clearly moved into a direction of uh. This this 0:01:58.920 --> 0:02:01.720 modern monetary One of my favorite charts you can pull 0:02:01.800 --> 0:02:05.480 up on your terminal. Is just just chart the budget 0:02:05.480 --> 0:02:09.079 deficit versus the growth in the Fed balance sheet. It's 0:02:09.120 --> 0:02:11.560 a one for one sort of item. So if anyone 0:02:11.600 --> 0:02:15.200 thinks we're not in modern monetary policy world, take a 0:02:15.280 --> 0:02:17.960 hard look at that um and I think that given 0:02:17.960 --> 0:02:20.160 that it's it's going to be very difficult to know 0:02:20.600 --> 0:02:23.880 whether inflation is going to be real or transitory. But 0:02:23.919 --> 0:02:26.320 as we increase the amount of government spending going on, 0:02:26.440 --> 0:02:29.240 and as we move from the government transferring money to 0:02:29.280 --> 0:02:33.520 individuals to actually spending the money themselves, I believe the 0:02:33.560 --> 0:02:37.040 price elasticities will become will change, and you'll actually see 0:02:37.080 --> 0:02:40.440 more persistent inflation. So that's something we're focused on, is 0:02:40.480 --> 0:02:44.440 the idan that government spending does tend to be subject 0:02:44.480 --> 0:02:47.840 to more inflationary pressures, and they will also crowd out 0:02:47.880 --> 0:02:50.960 as they do infrastructure, they're going to crowd out traditional 0:02:51.120 --> 0:02:56.760 commodities like copper, lumber, steel. So Nancy, you actually try 0:02:56.800 --> 0:03:00.639 to hedge against inflation with your eyeball. Yeah, Uh, give 0:03:00.720 --> 0:03:02.799 us as what you look at an inflation because in 0:03:02.800 --> 0:03:05.320 additional one Lard said, for example, you cook money supply. 0:03:05.960 --> 0:03:07.600 I mean, like M two I think is increased by 0:03:07.600 --> 0:03:10.080 more than year every year. I mean, if you if 0:03:10.120 --> 0:03:12.760 you look at the data and you look at what's 0:03:12.800 --> 0:03:17.520 happening in reality, between the FED having an average inflation target, 0:03:17.919 --> 0:03:22.280 between having fiscal spending, between having the FED not even 0:03:22.360 --> 0:03:26.280 thinking about thinking about raising rates UM and UH a 0:03:26.360 --> 0:03:29.239 blue wave right now, and relative to the rest of 0:03:29.280 --> 0:03:33.960 the world really exporting inflation now from emerging market companies 0:03:33.960 --> 0:03:39.800 and countries. I don't know why people wouldn't have inflation 0:03:39.960 --> 0:03:42.119 in their portfolio. To me, it's sort of like why 0:03:42.120 --> 0:03:44.640 would you why would you take a risk and take 0:03:44.680 --> 0:03:48.160 a bet? To me, UM, inflation is actually a bigger 0:03:48.280 --> 0:03:52.080 risk to investors and a recession because if you think 0:03:52.120 --> 0:03:55.400 about what you know, not not healthy normal inflation, but 0:03:55.440 --> 0:04:00.400 if we had runaway inflation, that would decrease our purchasing 0:04:00.480 --> 0:04:04.440 power right UM, the cost of drugs, the cost of housing, 0:04:04.520 --> 0:04:08.960 the cost of travel, especially if we have a weaker dollar. UM. 0:04:09.000 --> 0:04:12.680 To me, I don't see why people are thinking or 0:04:12.760 --> 0:04:16.200 overthinking it. I think you should just have a diversified portfolio. 0:04:16.320 --> 0:04:19.800 And just because we haven't had runaway inflation for many 0:04:19.880 --> 0:04:22.440 years doesn't mean we're not going to have it in 0:04:22.440 --> 0:04:25.680 the future, So learn pick up on what Nancy just said, 0:04:26.000 --> 0:04:27.839 What about the symmetry of the risk? I mean, we 0:04:27.880 --> 0:04:31.279 don't know what's going to happen, obviously, but what about 0:04:31.279 --> 0:04:33.839 the symmetry. Do you think that's a greater risk of 0:04:34.240 --> 0:04:38.520 out of control they'd say, unmoored inflation, or of disinflation 0:04:38.560 --> 0:04:40.920 or even recession. Well, I was trying to be subtle 0:04:40.960 --> 0:04:42.880 in my first answer, so I'll be direct in this 0:04:42.920 --> 0:04:45.800 one and just say I don't think anybody has a 0:04:45.839 --> 0:04:48.919 good model of inflation, and I certainly don't think the 0:04:48.960 --> 0:04:51.640 FED has it. So the notion that the FED targets 0:04:51.640 --> 0:04:54.919 a variable that they don't really have a model to 0:04:55.080 --> 0:04:58.159 understand seems a little absurd on the surface. So I 0:04:58.200 --> 0:05:00.839 do think it leads to a symmetry. And again, just 0:05:00.960 --> 0:05:04.839 look at that chart that I mentioned before, federal federal 0:05:05.720 --> 0:05:09.320 deficits versus the size of the balance sheets? Do it 0:05:09.360 --> 0:05:13.880 across countries? And we're clearly in a new monetary environment, um, 0:05:13.920 --> 0:05:16.040 And so I do think the risk is asymmetric at 0:05:16.040 --> 0:05:19.200 the end of the day, that this new type of 0:05:19.240 --> 0:05:24.360 economic approach may result in inflation that we previously wouldn't 0:05:24.360 --> 0:05:26.840 have understood from our models. And Nancy, one of the 0:05:26.880 --> 0:05:29.719 things that I wonder about is the length of time 0:05:29.839 --> 0:05:32.400 over which we will not know the answer. We had 0:05:32.440 --> 0:05:34.640 an interview with Jim Bullard in the St. Louis FED 0:05:34.680 --> 0:05:36.799 this week, and he said, basically, we're not even gonna 0:05:36.880 --> 0:05:39.320 have numbers. We're gonna rely on inflation until the end 0:05:39.320 --> 0:05:41.279 of the year. As we get these cp A numbers 0:05:41.279 --> 0:05:43.800 and even PC numbers, CORPS PC numbers. We can't trust 0:05:43.880 --> 0:05:45.480 him right now because the base effects and all those 0:05:45.480 --> 0:05:48.160 sort of things. Does that actually increase the risk because 0:05:48.200 --> 0:05:51.679 we're running blind for some period of time, assuming maybe 0:05:51.680 --> 0:05:55.240 contrary to what Larry says, we have a model at all. Well, 0:05:55.279 --> 0:05:57.279 I do think we have to keep in mind that 0:05:57.400 --> 0:06:00.680 all of these whether it's CPI or PC, these are 0:06:00.680 --> 0:06:03.880 all in disease right there. Their baskets of goods and 0:06:03.920 --> 0:06:08.240 services that you know, the FED officials of your labor statistics, 0:06:08.279 --> 0:06:10.880 they're trying to do the best they can with the 0:06:10.880 --> 0:06:13.640 baskets that they've created. But it's almost like if you 0:06:14.040 --> 0:06:16.520 if you own the US equity market, but you have 0:06:16.720 --> 0:06:19.640 the Dala Jones Index and you just say, oh, I'm good, 0:06:19.680 --> 0:06:21.960 I've got it, but you don't have the NASTAC or 0:06:22.000 --> 0:06:24.120 you don't have the Russell. I think there are lots 0:06:24.120 --> 0:06:27.600 of different ways to measure inflation, and and David, that's 0:06:27.600 --> 0:06:29.440 one of the things you know, we tried to do 0:06:29.520 --> 0:06:33.240 with the IBOLL e t F is give another measure 0:06:33.440 --> 0:06:38.320 of inflation expectations. It's not linked to a government entity 0:06:38.440 --> 0:06:40.919 creating an index for it. Thank you so much for 0:06:40.920 --> 0:06:44.359 our Wall Street Week roundtable. Lard Lamon from TCW and 0:06:44.440 --> 0:06:48.320 Nancy Davis from Quadratic Capital. Coming up dealing with high 0:06:48.360 --> 0:06:51.120 tech one problem with the United States and China have 0:06:51.160 --> 0:06:54.880 in common, and former IBM CEO Sam Paulmisano sees the 0:06:54.920 --> 0:06:58.760 differences and the similarities. That's next on Wall Street Week 0:06:58.960 --> 0:07:08.040 on Gloomberg. This is Bloomberg Wall Street Week with David 0:07:08.080 --> 0:07:12.240 Weston from Bloomberg Radio. Big Brother is going after jack 0:07:12.280 --> 0:07:15.520 Mas Tech Empire. As part of a string of crackdowns. 0:07:15.560 --> 0:07:18.280 Beijing and post a record two point eight billion dollar 0:07:18.360 --> 0:07:21.800 fine on ali Baba for abusing its market dominance and 0:07:22.000 --> 0:07:25.160 ordered it to stop making merchants choose between Ali Baba 0:07:25.480 --> 0:07:29.080 and competing platforms. Here's company vice chair and co founder 0:07:29.200 --> 0:07:34.320 Joe Tsi with this uh a penalty decision. Uh we've 0:07:35.160 --> 0:07:39.840 uh you know, received a good guidance on some of 0:07:39.880 --> 0:07:43.960 the specific issues under the anti monopoly law. China also 0:07:44.080 --> 0:07:48.280 ordered an overhaul of ANT Group, which has expanded into payments, banking, 0:07:48.400 --> 0:07:51.680 wealth management and insurance over the years. I didn't think 0:07:51.760 --> 0:07:55.480 the government wants this story to dominate through one and 0:07:55.520 --> 0:07:59.040 specifically they've been guiding media to report on how um 0:07:59.160 --> 0:08:01.760 they the government is pro what they called platform economy. 0:08:01.800 --> 0:08:05.000 There pro the innovation, that's Duncan Clark, chairman of b 0:08:05.160 --> 0:08:08.800 DA China. The revamp leaves Aunt's main businesses in tact, 0:08:09.120 --> 0:08:11.480 but the new directive makes it harder for the firm 0:08:11.520 --> 0:08:14.720 to direct traffic from its payment service Alipay, which has 0:08:14.720 --> 0:08:18.880 a billion users, to other AUNT financial services, including wealth management, 0:08:19.000 --> 0:08:23.560 consumer lending, and even on demand neighborhood services and delivery. 0:08:23.680 --> 0:08:27.480 Here's Rabbi Menon from the Monetary Authority of Singapore and 0:08:27.520 --> 0:08:30.800 our philosophy is simple. If you carry out similar activities, 0:08:31.240 --> 0:08:34.920 similar risks as a bank, then you subject to similar 0:08:35.000 --> 0:08:39.079 rules and similar requirements. This week, Chinese regulators also summoned 0:08:39.160 --> 0:08:42.360 thirty four of the country's largest tech companies, from ten 0:08:42.480 --> 0:08:46.319 Cent to TikTok owner Byte Dance, warning them to curb 0:08:46.360 --> 0:08:50.040 their excesses joining a global rush by governments to regulate 0:08:50.080 --> 0:08:54.240 big tech once again Ali Baba's Joe Tsig. Globally, the 0:08:54.320 --> 0:08:59.160 trend is that regulators will be more keen to look 0:08:59.200 --> 0:09:03.400 at some of the areas where you could have unfair competition. 0:09:03.559 --> 0:09:06.240 Sam Paulmisano knows what it is to run a tech 0:09:06.280 --> 0:09:09.280 giant the government wants to regulate from his time as 0:09:09.360 --> 0:09:11.800 CEO of IBM, when the U. S Government and the 0:09:11.840 --> 0:09:15.800 European Commission we're both pursuing IBM. We asked him to 0:09:15.920 --> 0:09:19.240 evaluate the Chinese moves to restrict big tech and how 0:09:19.280 --> 0:09:22.400 they compare with US efforts. If you go back, I'll 0:09:22.400 --> 0:09:24.560 start with China first and they'll get to the United States. 0:09:25.000 --> 0:09:27.359 But if go back in the early stages of technology 0:09:27.520 --> 0:09:31.200 or in emerging economic opportunities, to view it broadly, government's 0:09:31.240 --> 0:09:34.160 always trying to provide in sentence or clear a path 0:09:34.240 --> 0:09:37.920 for companies, and that started really in fintech in China, 0:09:38.400 --> 0:09:40.520 and basically, you know, I was over there a lot 0:09:40.559 --> 0:09:43.080 when I was working, and it was clear from the 0:09:43.120 --> 0:09:45.560 central banking system that they wanted to be able to 0:09:45.600 --> 0:09:48.600 get more liquidly going to small businesses and the Stono 0:09:48.720 --> 0:09:51.520 state on enterprise banks are really focused on midsize to 0:09:51.640 --> 0:09:55.200 large companies, so they gave a lot of flexibility in 0:09:55.200 --> 0:09:58.360 the regulations. So let these guys get going, and they 0:09:58.360 --> 0:10:00.679 did a phenomenal job. They get really big. Unless they 0:10:00.679 --> 0:10:03.120 get really big, the government decides that we need to 0:10:03.120 --> 0:10:05.720 bring them back into the banking system and therefore create 0:10:05.760 --> 0:10:08.840 the holding company and subject them to more regulation. At 0:10:08.840 --> 0:10:10.720 the time, that really struck me that after there was 0:10:10.760 --> 0:10:15.400 that record fine imposed against Ali Baba, Ali Baba thanked 0:10:15.440 --> 0:10:18.080 the regulators for the fine. I don't remember IBM back 0:10:18.080 --> 0:10:22.240 in your day thanking the federal government for pursuing them. Well, 0:10:22.280 --> 0:10:24.880 you know, we we uh, as I used to say. 0:10:24.960 --> 0:10:27.640 And when I was the CEO, I'm elected every year 0:10:27.679 --> 0:10:31.200 by the shareholders. Uh So it's a different system, you 0:10:31.240 --> 0:10:34.400 know here versus there. Uh But I really mean, I 0:10:34.400 --> 0:10:37.160 mean I could see that. Why if you are operated 0:10:37.200 --> 0:10:40.200 in China, you need to maintain a close relationship and 0:10:40.240 --> 0:10:43.080 partnership with the government because they can impact your business 0:10:43.120 --> 0:10:46.560 either positively negatively, in a very direct way, in a 0:10:46.640 --> 0:10:49.040 very quick and direct way. Does that suggest that China 0:10:49.120 --> 0:10:51.559 may have an easier time, if you can call it easy, 0:10:52.240 --> 0:10:55.480 really getting their control over the big tech companies in 0:10:55.559 --> 0:10:58.800 China because of that different relationship than for example, Washington 0:10:58.840 --> 0:11:01.080 would have with the big tech here in the United States. 0:11:01.240 --> 0:11:03.280 When you think about it, you know, it's not it's 0:11:03.320 --> 0:11:05.400 not it's not a the split government of any way. 0:11:05.400 --> 0:11:08.559 It's a centralized government and complete control. So if she 0:11:08.640 --> 0:11:10.640 usually main decides he does he wants to stop the 0:11:10.720 --> 0:11:12.839 ipl of it. He just stops the I P O 0:11:12.880 --> 0:11:14.760 of a you know, right, they don't have to go 0:11:14.800 --> 0:11:17.440 through the process. There's not checks and balances and those 0:11:17.440 --> 0:11:19.880 sorts of things. So therefore the government does have a 0:11:19.920 --> 0:11:22.319 lot of control and in a lot of a lot 0:11:22.320 --> 0:11:25.559 of the early stage government companies, I should say governments 0:11:25.559 --> 0:11:29.400 are actually active shareholders in those companies UH and over 0:11:29.440 --> 0:11:32.160 time they divest and sometimes they don't. An example be 0:11:32.240 --> 0:11:35.280 Lenovo what we did with UH selling the PC business 0:11:35.320 --> 0:11:37.720 and Lenovo, but at the early stage of that relationship, 0:11:37.960 --> 0:11:41.360 the Chinese government had about share of Lenovo. Now they've 0:11:41.360 --> 0:11:44.680 divested over time, but nonetheless that they come in and 0:11:44.720 --> 0:11:47.800 out of companies. At the same time, President has made 0:11:47.800 --> 0:11:49.760 it very clear he wants to compete in the world 0:11:49.800 --> 0:11:51.840 stage when it comes to tech. He's made that a 0:11:51.880 --> 0:11:54.640 priority of his. Does he have to be somewhat concerned 0:11:54.760 --> 0:11:58.800 about going too far and really curtailing big tech in 0:11:58.880 --> 0:12:01.439 China because it will be as competitive with for example, 0:12:01.480 --> 0:12:04.440 the United States. The kicks needs innovation, right, and there's 0:12:04.440 --> 0:12:06.160 a lot of the areas that they don't have the 0:12:06.160 --> 0:12:10.240 same expertise and experience and take entrepreneurship. I mean, there 0:12:10.240 --> 0:12:13.120 are a lot of great entrepreneurs in China, but not 0:12:13.200 --> 0:12:16.640 necessarily in tech in China. So therefore there's going to 0:12:16.760 --> 0:12:20.520 be a encouragement But I believe by the Chinese government 0:12:20.720 --> 0:12:24.200 for foreign investment in entrepreneurial endeavors, even though in other 0:12:24.240 --> 0:12:27.720 places they're trying to control foreign investment. UM. So you'll 0:12:27.760 --> 0:12:32.160 see this sort of almost like it's uh split perspective 0:12:32.240 --> 0:12:35.719 or split uh interactions. Some areas are gonna say they 0:12:35.720 --> 0:12:40.120 want to uh indigenous innovation, but they need foreign help, uh, 0:12:40.160 --> 0:12:42.679 and that's how they'll pursue it. In my opinion, look 0:12:42.720 --> 0:12:45.920 at Hong Kong, for example, they're getting more controlled Hong Kong, 0:12:45.960 --> 0:12:47.880 but they're putting tax in set ups to attract hedge 0:12:47.880 --> 0:12:50.679 funds and wealthy people to Hong Kong. So you see 0:12:50.720 --> 0:12:53.679 this isn't that aren't they counter counter interests of each other? 0:12:53.760 --> 0:12:56.880 The communist system of socialism, or as attracting hedge funds 0:12:56.880 --> 0:12:59.880 and large wealthy people. Well, they're very pragmatic, you know, 0:13:00.080 --> 0:13:02.480 and depending upon their goals they will adjust. Well, it 0:13:02.520 --> 0:13:05.160 seems thus partly perhaps we're working in Hong Kong because 0:13:05.160 --> 0:13:08.720 you see a lot of new money managers being created 0:13:08.720 --> 0:13:11.000 in Hong Kong and a lot of big banks, including 0:13:11.040 --> 0:13:14.040 US banks, increasing their personnel in Hong Kong despite all 0:13:14.040 --> 0:13:16.600 the civil unrest. There's a during sytums to do that. 0:13:16.720 --> 0:13:19.199 And like you know, companies learn like we learn. You 0:13:19.280 --> 0:13:23.320 operate with any system that you operate within um you know, 0:13:23.360 --> 0:13:26.160 in some ways, and I know this sounds crazy, but 0:13:26.200 --> 0:13:30.440 there's more stability and essentially controls governments than there isn't 0:13:30.440 --> 0:13:32.839 our system because every four years you get a whole 0:13:32.880 --> 0:13:35.760 new set of priorities. So you could argue that once 0:13:35.800 --> 0:13:39.240 you adjust to their systems and you work within their systems, 0:13:39.240 --> 0:13:42.840 there's much more stability over time and from a business perspective, 0:13:42.880 --> 0:13:45.000 give you more certainty of investment. If you go back 0:13:45.000 --> 0:13:47.640 in history, the federal government in the United States has 0:13:47.679 --> 0:13:50.680 tried to regulate technology. IBM certainly they went after they 0:13:50.720 --> 0:13:53.040 went after Microsoft. Do you think looking back and it 0:13:53.160 --> 0:13:56.040 did curtail innovation. You talked about China having to be careful. 0:13:56.080 --> 0:13:58.839 It didn't curtail innovation. There's no doubt about it. If 0:13:58.840 --> 0:14:01.120 you look at all of us went through it. What 0:14:01.240 --> 0:14:03.800 happens is that as you're going through the process, as 0:14:03.800 --> 0:14:06.400 they're trying to split you up or any trust, you 0:14:06.440 --> 0:14:09.800 are so focused on those cases of the government involvement 0:14:10.240 --> 0:14:12.839 you spend you tend to miss shifts in the technology. 0:14:13.040 --> 0:14:15.160 And that happened to have you have the IPM, Microsoft, 0:14:15.480 --> 0:14:16.839 A T and T all of us. I mean you 0:14:16.920 --> 0:14:19.200 just want could hissue of these things and that could 0:14:19.200 --> 0:14:22.560 happen here that the more government involvement that there happens 0:14:22.640 --> 0:14:26.600 to be, you will curtail innovation. Uh, and that's a tradeoff. 0:14:26.960 --> 0:14:29.000 I don't know that governments look at it that way, 0:14:29.120 --> 0:14:31.480 and I really don't think they worry about that because 0:14:31.560 --> 0:14:34.720 their view will be that, look, we created more competitives. 0:14:34.720 --> 0:14:37.200 So yes, your company is not as innovative as it 0:14:37.320 --> 0:14:39.360 was before. We look at all these other companies that 0:14:39.400 --> 0:14:42.200 we're created because we the baby bells in the A 0:14:42.280 --> 0:14:45.720 T example, you know alternatives that IBM, Microsoft in the 0:14:45.800 --> 0:14:49.520 PC into etcetera, etcetera. That was Wall Street. We contributed 0:14:49.720 --> 0:14:52.800 Sam paulms out out coming up how the economy looks 0:14:52.800 --> 0:14:55.320 from the top of one of America's with leading banks. 0:14:55.680 --> 0:14:58.720 We talked with Brian moynihan, a Bank of America. That's 0:14:58.760 --> 0:15:06.720 next on Wall Street Week on Bloomberg. This is Bloomberg 0:15:06.760 --> 0:15:11.080 Wall Street Week with David Weston from Bloomberg Radio. The 0:15:11.160 --> 0:15:14.720 Federal Reserve can putting money into this system by increasing 0:15:14.720 --> 0:15:16.800 the money supply. That if banks are unwilling to lend 0:15:16.840 --> 0:15:20.160 it to corporations because they are afraid of bad loans 0:15:20.200 --> 0:15:23.200 and rescue loans and write offs, then the private economy 0:15:23.240 --> 0:15:26.160 will suffer. That was Pimco's Bill Gross on Wall Street Week. 0:15:26.200 --> 0:15:30.040 Back in this week, bank lending was back in the 0:15:30.080 --> 0:15:34.120 news again as the banks posted eye popping numbers despite 0:15:34.360 --> 0:15:38.440 sluggish loan growth. As in the Federal Reserve has done 0:15:38.520 --> 0:15:41.360 its part in putting money into the system, but this 0:15:41.520 --> 0:15:44.440 time it's not because the banks are reluctant to lend. No, 0:15:45.040 --> 0:15:47.280 this time is that the government has given a lot 0:15:47.320 --> 0:15:49.880 of money to households that have used it to pay 0:15:49.880 --> 0:15:53.480 off debt, leaving less reason to borrow. We talked with 0:15:53.520 --> 0:15:55.640 the head of one of the biggest lenders of the country. 0:15:55.640 --> 0:15:58.640 He's Brian moynihan, a backup America, and we asked him 0:15:58.880 --> 0:16:01.520 what this says about the economy going forward. Yeah, this 0:16:01.560 --> 0:16:03.640 is a healthcare crisis, and the very good news is 0:16:03.680 --> 0:16:06.560 you're seeing the vaccine numbers go up. You're seeing the 0:16:06.560 --> 0:16:09.440 ability then to reopen without the risk that the governments 0:16:09.480 --> 0:16:11.880 can do in the states and cities and towns, and 0:16:11.880 --> 0:16:14.800 you're seeing people move around. So are spending levels for 0:16:14.880 --> 0:16:18.120 our Bank of American consumer customer base or record in 0:16:18.120 --> 0:16:21.080 the first quarter March is the biggest month ever. If 0:16:21.120 --> 0:16:24.600 you go back and compared to nineteen, they're up and 0:16:24.640 --> 0:16:26.880 so divide that by two, it's up ten percent a year, 0:16:26.920 --> 0:16:29.080 which is much faster than they were growing in fifteen 0:16:29.080 --> 0:16:32.200 and sixteen seventeen. So there's a bigger number growing at 0:16:32.200 --> 0:16:34.680 a faster rate. And yet people still have a lot 0:16:34.720 --> 0:16:36.640 of the stimulus in their accounts and haven't spent it. 0:16:36.760 --> 0:16:39.120 So the world still has a group. We have a 0:16:39.160 --> 0:16:40.880 group of Americans and a group of people around the 0:16:40.920 --> 0:16:43.040 world who you know aren't back to work yet, and 0:16:43.120 --> 0:16:45.600 we need to get that done. Whose businesses can't open 0:16:45.680 --> 0:16:47.800 yet because the nature of them. We've got to get 0:16:47.840 --> 0:16:50.400 those done, but a big part of the economy, and 0:16:50.440 --> 0:16:53.480 I think our predictions for economy across over the next 0:16:53.480 --> 0:16:55.200 couple of quarters to be bigger than it was before 0:16:55.240 --> 0:16:58.440 the pandemic is is open and operating, and the consumers 0:16:58.480 --> 0:17:00.960 are spending money, and that's a good news. And then 0:17:00.960 --> 0:17:03.560 when you translate the Bank of America, what you're seeing 0:17:03.680 --> 0:17:05.439 is our depositor way up because that money went into 0:17:05.440 --> 0:17:08.560 people's accounts and it's sitting there. But our loans are 0:17:08.640 --> 0:17:11.359 not as you fell, because largely because people are paying 0:17:11.400 --> 0:17:13.720 us off because they have so much cash sitting around. 0:17:13.760 --> 0:17:16.400 So now the commercial side, we expect that to change. 0:17:16.440 --> 0:17:18.879 The economy growing at seven percent, which is what we predict, 0:17:18.880 --> 0:17:21.760 it would require companies to borrow to service at economy. 0:17:22.000 --> 0:17:24.400 It's just that company has had a lot of cash too. 0:17:24.480 --> 0:17:26.640 So we look for more long growth as year progresses. 0:17:26.960 --> 0:17:30.560 But the good news is the customer consumers in good shape. 0:17:30.840 --> 0:17:32.639 There's an unemployment issue. We've got to get that the 0:17:32.640 --> 0:17:34.040 rest of the way down to where it should be. 0:17:34.400 --> 0:17:36.240 The business has got to get open. That couldn't be. 0:17:36.400 --> 0:17:38.959 But by and large, a big portion economy is up 0:17:38.960 --> 0:17:41.239 and operating very well. Back over here is a very 0:17:41.240 --> 0:17:43.880 special viewpoint into the America coutomy because you have such 0:17:43.920 --> 0:17:46.520 a consumer, such a retail presence, and also the middle 0:17:46.560 --> 0:17:49.080 market you really deal with small and medium sized enterprise 0:17:49.080 --> 0:17:51.439 across the country. Are you see any pickup in the 0:17:51.480 --> 0:17:54.720 borrowing from your medium sized companies yet? If we've sent 0:17:54.800 --> 0:17:58.080 it bump along the bottom usage of our business banking segment, 0:17:58.080 --> 0:18:00.400 which is fifty million under revenue companies in our metal 0:18:00.440 --> 0:18:02.520 market which is to an half billion, we're seeing the 0:18:02.560 --> 0:18:05.440 line US it's really pretty flat. But the goodness is 0:18:05.440 --> 0:18:07.560 a quick going down. We saw in the months during 0:18:07.560 --> 0:18:09.400 the quarter January fe Everry March, it got a little 0:18:09.400 --> 0:18:13.760 stronger origination activity meaning uh, you know, new clients and 0:18:13.840 --> 0:18:16.200 new deals done. Is still is strong. Bodes well for 0:18:16.280 --> 0:18:18.280 the for the year. But but we've got to see 0:18:18.280 --> 0:18:20.640 it comes through um. And that goes back to those 0:18:20.680 --> 0:18:22.560 companies having a lot of cash and had to run 0:18:22.680 --> 0:18:24.720 very efficiently during the crisis because you didn't know what 0:18:24.800 --> 0:18:28.520 happened next and and and now they're gonna be you 0:18:28.560 --> 0:18:30.879 need to start spending money on supplies and things to 0:18:31.119 --> 0:18:33.960 redo their inventory. Now. The one thing I think we 0:18:33.960 --> 0:18:35.280 all have to be mindful is we've got to get 0:18:35.320 --> 0:18:38.199 the trade. The trade is growing fast out you know, 0:18:38.280 --> 0:18:40.280 into the country, but the ports and things still need 0:18:40.320 --> 0:18:42.840 to get straightened out because of just the dynamics of 0:18:42.880 --> 0:18:44.920 the virus and the supply chains are still iron out. 0:18:44.920 --> 0:18:46.560 So I think one of the things I worry about 0:18:46.560 --> 0:18:48.840 from mid sized companies king that they get the supplies 0:18:48.920 --> 0:18:50.960 to do do what they do. So you've heard about 0:18:51.000 --> 0:18:53.440 lumber prices or residant things like that. I think it 0:18:53.440 --> 0:18:55.600 little straight out. We hope it will straight now. But 0:18:55.720 --> 0:18:57.800 that's the next sort of channel outside the healthcare. The 0:18:57.840 --> 0:18:59.680 next challenge to get the supply chains really up in 0:18:59.720 --> 0:19:01.920 oil and greased and running through to serve that fast 0:19:01.920 --> 0:19:04.479 growing economy. So when you're talking about settling down, one 0:19:04.480 --> 0:19:07.000 thing that doesn't seem to be settling down yet the spacks, 0:19:07.040 --> 0:19:10.240 those special purpose acquisition companies. How much of your equity business, 0:19:10.240 --> 0:19:12.439 because you had a pretty robust quarter and equities, how 0:19:12.520 --> 0:19:15.320 much of other SPACs? And do you expect that to continue? Yeah, 0:19:15.320 --> 0:19:17.879 whether it continues not going to do some of the dynamics, 0:19:17.880 --> 0:19:20.479 and we do we do selective ones were not as 0:19:20.480 --> 0:19:23.240 big in the business as other people and and that's fine, 0:19:23.280 --> 0:19:26.800 and in different times we're stronger and investment grade issuance 0:19:26.840 --> 0:19:29.400 and other people are stronger and and spacts, and that's 0:19:29.440 --> 0:19:31.520 fine with us, and we go forward. But you know, 0:19:31.560 --> 0:19:34.480 it seems to be holding on right now. Let's talk 0:19:34.480 --> 0:19:38.000 about yields. The yields have been pushing up on fixed 0:19:38.000 --> 0:19:40.360 income despite the fact that this week actually we had 0:19:40.359 --> 0:19:42.919 a downturn that maybe a flip flip or not. But 0:19:43.160 --> 0:19:45.359 it's really important to Bank of America given the way 0:19:45.400 --> 0:19:47.920 your business works, what the ten year yield on this 0:19:48.040 --> 0:19:50.359 treasury is, and what the yield curve is, the spread 0:19:50.359 --> 0:19:53.080 between the twos and the tens. What are you projecting 0:19:53.080 --> 0:19:54.760 for the rest of the year. Many people think that 0:19:54.840 --> 0:19:57.080 yields are just going to keep marching up. We're all 0:19:57.080 --> 0:19:59.760 projecting that, and so we're up over the ten year, 0:19:59.800 --> 0:20:03.040 got up to one seventy plus. And the reality is 0:20:03.080 --> 0:20:06.520 if the economic activities picking up and and prices are 0:20:06.560 --> 0:20:09.560 picking up what you've seen unemployments going down, you know, 0:20:10.200 --> 0:20:12.280 the yield curve will start to normalize. And you saw 0:20:12.320 --> 0:20:14.040 that start to happen as we came in out of 0:20:14.160 --> 0:20:16.920 last year fourth quarter in the first quarter. That helps 0:20:17.000 --> 0:20:19.880 us because as a curve gets higher, that we can 0:20:19.920 --> 0:20:22.240