WEBVTT - Bloomberg Wall Street Week April 21st, 2023 0:00:00.560 --> 0:00:03.720 This is Bloomberg Wall Street Week. We turn our attention 0:00:03.880 --> 0:00:08.320 to the markets this week. USCPI members reinforcing concerns about inflation, 0:00:08.480 --> 0:00:11.600 the financial stories that shape our work a really different 0:00:11.640 --> 0:00:14.560 reaction to Mark. It's more indications of just how hot 0:00:14.600 --> 0:00:17.000 the US economy really is. Through the eyes of the 0:00:17.040 --> 0:00:21.480 most influential voices Larry Summers, the former Treasurer Secretary, Katherine Keating, 0:00:21.600 --> 0:00:24.680 CEO of bny ME, and Sam zel Sharman and founder 0:00:24.720 --> 0:00:28.480 of Aquatic Group Investment. Bloomberg Wall Street Week with David 0:00:28.520 --> 0:00:33.520 Weston from Bloomberg Radio. China gets going, Banks keep going 0:00:33.680 --> 0:00:35.960 and Fox Well Fox gets out of the trap that 0:00:36.040 --> 0:00:39.160 it made for itself. This is Bloomberg Wall Street Week. 0:00:39.240 --> 0:00:43.000 I'm David Weston. This week's special contributor Larry Summers and 0:00:43.040 --> 0:00:45.760 why we aren't more worried about that debt ceiling. 0:00:46.120 --> 0:00:50.159 We do need to have a fundamental conversation about the 0:00:50.200 --> 0:00:53.720 future of government finances in our country. 0:00:54.120 --> 0:00:56.760 Brian Winahan of Bank of America on what the bank 0:00:56.840 --> 0:00:59.760 tremors did to regional and local banks. 0:01:00.080 --> 0:01:02.120 The good news is the basic industry is to report 0:01:02.120 --> 0:01:03.920 of good earnings across the board. 0:01:04.319 --> 0:01:06.640 And Rick Reader of black Rock on whether the FED 0:01:06.840 --> 0:01:08.720 is too focused on inflation. 0:01:09.120 --> 0:01:11.520 FED needs too exhibit a bit more patients. We don't 0:01:11.560 --> 0:01:13.840 have to hit the two percent target next month. 0:01:26.520 --> 0:01:29.920 Global Wall Street waited for direction this week and spent 0:01:30.040 --> 0:01:32.840 its time sorting through the tea leaves to find the 0:01:32.880 --> 0:01:37.080 next big thing. China reported numbers showing its economy and 0:01:37.120 --> 0:01:41.440 particularly its consumers, are starting up again after the COVID shutdown. 0:01:41.880 --> 0:01:46.240 Looks like we are in China eighteen out a lot 0:01:46.640 --> 0:01:49.920 and buying a lot of fancy pants jewelry. As Secretary, 0:01:50.000 --> 0:01:52.760 Yellen tried to draw a line between US policy that 0:01:52.840 --> 0:01:56.280 affects the Chinese economy and having a specific goal of 0:01:56.360 --> 0:01:57.440 slowing its growth. 0:01:57.640 --> 0:02:01.160 The United States will assert ourselves when our vital interests 0:02:01.200 --> 0:02:04.920 are at stake, but we do not seek to decouple 0:02:05.040 --> 0:02:08.760 our economy from China's. A full separation of our economies 0:02:08.800 --> 0:02:11.000 would be disastrous for both countries. 0:02:11.400 --> 0:02:14.240 Bank earnings continued, with Bank of America, Golden Sex, and 0:02:14.280 --> 0:02:17.600 Morgan Stanley all posting some hits and some misses, but 0:02:17.760 --> 0:02:20.160 not a lot of evidence of real trouble. Following the 0:02:20.240 --> 0:02:21.040 tremors of. 0:02:21.040 --> 0:02:23.400 March, we thought this would be the tea leaves we 0:02:23.400 --> 0:02:24.960 were looking for, and then we get guidance. 0:02:25.000 --> 0:02:28.000 It's kind of like, eh, We're not sure. Fox walked 0:02:28.080 --> 0:02:30.200 right up to the brink of a libel trial with 0:02:30.280 --> 0:02:33.280 one point six billion dollars on the line and got 0:02:33.320 --> 0:02:36.640 away with paying Dominion only seven hundred and eighty seven 0:02:36.680 --> 0:02:41.320 million dollars, still one of the largest libel awards in history. Well, 0:02:41.360 --> 0:02:43.800 one thing Dominion earned, as they are now the world's 0:02:43.800 --> 0:02:47.160 most famous voting machines. And the job cuts just kept 0:02:47.240 --> 0:02:50.639 on coming, with Meta and Disney both cutting thousands of 0:02:50.760 --> 0:02:53.440 jobs in a big pivot for both companies. 0:02:53.880 --> 0:02:56.400 In a way, they're a little worse than you anticipated, 0:02:56.480 --> 0:03:00.240 because while Meta is cutting ten thousand jobs now, they 0:03:00.240 --> 0:03:04.160 already cut eleven thousand in November, Disney losing up to 0:03:04.560 --> 0:03:07.000 seven thousand jobs across the board. 0:03:08.600 --> 0:03:10.679 And what about the markets, Well, they pretty much moved 0:03:10.720 --> 0:03:13.160 sideways through the week, with the SMP five hundred down 0:03:13.240 --> 0:03:16.000 one tenth of a percent and just above forty one thirty, 0:03:16.200 --> 0:03:19.000 the NASDA giving up four tenths of a percent, and 0:03:19.040 --> 0:03:21.640 the yield on the tenure moving up about five basis 0:03:21.680 --> 0:03:24.360 points to just under three point five seven percent by 0:03:24.360 --> 0:03:26.160 the end of the week. For their reaction to what 0:03:26.200 --> 0:03:28.880 we've seen welcome back now, Charmin most of our rock money. 0:03:29.080 --> 0:03:32.840 She's Goldman Sachs Wealth Management CIO and head of investment Strategy. 0:03:33.080 --> 0:03:36.720 And David Bianco, DWS Group, Chief Investment Officer. Welcome back 0:03:36.720 --> 0:03:38.640 to both of you here in our studio, New York. 0:03:38.640 --> 0:03:40.600 Great to have you. So let me start with you, David. 0:03:41.000 --> 0:03:43.600 Does the equity market agree with the bond market about 0:03:43.600 --> 0:03:44.440 where we're headed? 0:03:45.560 --> 0:03:46.280 I don't think so. 0:03:46.640 --> 0:03:49.480 And then sometimes there are good reasons for the bond 0:03:49.520 --> 0:03:53.680 market and equity market looking like they're disagreeing when they're 0:03:53.680 --> 0:03:56.320 really agreeing. But this time around, I think the equity 0:03:56.320 --> 0:03:58.920 market is ignoring the recession signals that are flashing. 0:03:59.360 --> 0:04:02.240 Well you think about that, Charmaine. Are there recession flashes 0:04:02.720 --> 0:04:05.480 signals flashing and is the equity market disregarding it? 0:04:06.160 --> 0:04:09.760 The cover of our outlook this year was Caution, heavy Fog, 0:04:10.200 --> 0:04:13.440 and the whole point was that there's a lot of uncertainty, 0:04:13.480 --> 0:04:16.000 there's heavy fog, and to have too much conviction on 0:04:16.040 --> 0:04:19.960 the probability for a recession is not prudent. We actually 0:04:20.000 --> 0:04:22.800 think the probability is forty five to fifty five percent. 0:04:23.160 --> 0:04:25.320 We've never been this high and we've never had a 0:04:25.400 --> 0:04:29.200 ten percentage point range. So our view is a recession 0:04:29.360 --> 0:04:33.440 is not obvious, and clients shouldn't position themselves saying there's 0:04:33.480 --> 0:04:36.599 a recession and let's go underweight equities, or there's no recession, 0:04:36.640 --> 0:04:39.320 we should go overweight equities. And we actually don't think 0:04:39.360 --> 0:04:42.800 the bond market and the equity market are sending mixed signals. 0:04:43.640 --> 0:04:47.200 If you look at where the equity market is, where 0:04:47.200 --> 0:04:50.320 interest rates are, and you compare them to appeared like 0:04:50.360 --> 0:04:53.640 two thousand and three, four or five six that average period, 0:04:54.000 --> 0:04:58.480 the equity risk premium, meaning the incremental earning zield relative 0:04:58.560 --> 0:05:01.440 to treasuries is the same as it was then when 0:05:01.480 --> 0:05:03.760 interest rates were the same level. So we don't think 0:05:03.800 --> 0:05:05.359 it's actually an inconsistent message. 0:05:05.520 --> 0:05:07.360 What about the so called credit crunch, love he was, 0:05:07.480 --> 0:05:08.839 it's not a crunch at all, But at least there's 0:05:08.839 --> 0:05:11.480 credit tightening already agrees with that Charmine. What is that 0:05:11.520 --> 0:05:13.560 going to do? Does that make the likely to recession 0:05:13.640 --> 0:05:14.040 go up? 0:05:14.720 --> 0:05:18.080 There's no doubt that we are seeing tightening of lending. 0:05:18.400 --> 0:05:21.599 So if you look at the loan officer surveys, more 0:05:21.640 --> 0:05:24.520 people are pulling back on lending than not so quite right, 0:05:24.760 --> 0:05:27.640 You see it across the board, all sectors, real estate 0:05:27.720 --> 0:05:31.000 and otherwise. But the fact is is that already priced 0:05:31.000 --> 0:05:33.680 in the market and is a growth rate of around 0:05:34.120 --> 0:05:36.359 one point four or one point six percent. That's the 0:05:36.440 --> 0:05:40.120 range we have actually reflecting that we believe it is. 0:05:40.480 --> 0:05:42.880 Growth will probably be slower by about point four too 0:05:42.880 --> 0:05:46.640 point five percent because of tightening of credit, but not 0:05:46.720 --> 0:05:48.080 so much to cause a recession. 0:05:48.240 --> 0:05:50.760 There were you on this unlikely to recession and particularly 0:05:50.839 --> 0:05:53.240 let me tie in the credit tightening with what the 0:05:53.240 --> 0:05:55.160 Fed's likely to do is just let the FED off 0:05:55.160 --> 0:05:55.960 the hook a little bit. 0:05:56.480 --> 0:05:58.960 Well, it's helping the Fed, but the Fed has more 0:05:59.000 --> 0:06:01.280 work to do. We expect to another hike in May, 0:06:01.360 --> 0:06:03.719 and there might be more hikes perhaps in the autumn 0:06:03.760 --> 0:06:07.920 if inflation doesn't come down faster. I agree with Charman 0:06:08.000 --> 0:06:12.120 that the equity market under the surface there has been 0:06:12.160 --> 0:06:15.320 a defensive rotation, so there is some acknowledgment of the 0:06:15.440 --> 0:06:18.680 risks ahead, and the equity risk premium is also a 0:06:18.680 --> 0:06:21.479 healthy equity risk premu under normal conditions. But we're trying 0:06:21.480 --> 0:06:24.520 to figure out if earnings are sustainable and if these 0:06:24.560 --> 0:06:28.000 interest rates are sustainable. There's risk that interest rates go 0:06:28.120 --> 0:06:30.200 up after this flight to safety that I think the 0:06:30.200 --> 0:06:33.680 bond market is doing right now, and earnings are going downward. 0:06:33.760 --> 0:06:35.880 We're in a profit receession. We'll talk more about it later, 0:06:36.000 --> 0:06:38.000 but there's more risks to the earnings outlook. 0:06:37.720 --> 0:06:37.920 Charm me. 0:06:38.040 --> 0:06:39.800 Let's switch to China just for a moment. We've got 0:06:39.839 --> 0:06:43.520 China data out this week. There were somewhat encouraging about growth. 0:06:44.040 --> 0:06:46.520 You have a big report out actually on China. You 0:06:46.520 --> 0:06:48.520 actually even have a chart in which you compare what 0:06:48.560 --> 0:06:50.520 happens if you take one hundred million dollars at the 0:06:50.560 --> 0:06:53.120 blow point of the Great Financial Crisis and investing in 0:06:53.160 --> 0:06:54.839 different securities. Take us through that chart. 0:06:55.279 --> 0:06:57.280 Yes, if I had to say, over the last twenty 0:06:57.360 --> 0:06:59.680 years of being in private wealth management, it's one of 0:06:59.680 --> 0:07:02.920 my favorite charts because we've had a US pre eminence 0:07:03.000 --> 0:07:06.479 investment view and this chart bears the fact that this 0:07:06.640 --> 0:07:08.680 is actually what is happening, and we think that's going 0:07:08.720 --> 0:07:11.320 to continue, and that is very important in terms of 0:07:11.680 --> 0:07:14.600 flow of funds into the US. What the chart actually 0:07:14.640 --> 0:07:17.160 shows you is if you had put in let's say, 0:07:17.200 --> 0:07:19.600 one hundred dollars in US equities, the S and P 0:07:19.720 --> 0:07:23.320 five hundred versus one hundred dollars in emerging markets or 0:07:23.360 --> 0:07:26.800 in developed non US markets or China, what would the 0:07:26.880 --> 0:07:27.640 return have been. 0:07:27.840 --> 0:07:28.960 You would have earned eight. 0:07:28.840 --> 0:07:32.000 Hundred dollars if it was in US equities, and only 0:07:32.040 --> 0:07:35.000 about two hundred and fifty in Chinese equities. So in 0:07:35.040 --> 0:07:38.720 spite of all this growth and enthusiasm for China, it 0:07:38.720 --> 0:07:41.800 has not been a good place to invest at all. 0:07:42.120 --> 0:07:45.720 In fact, you'd only earn about a third. And going forward, 0:07:45.760 --> 0:07:49.440 we think there's too much euphoria that this recovery from 0:07:49.520 --> 0:07:51.800 the lockdowns would be that meaningful. We can have a 0:07:51.840 --> 0:07:54.400 short term recovery, but generally we think China's going to 0:07:54.440 --> 0:07:59.840 have a substantially sower trend growth and we encapsulated it 0:08:00.280 --> 0:08:03.680 in our report called middle Kingdom middle income. They're not 0:08:03.800 --> 0:08:05.680 going to escape the middle income trap. 0:08:05.800 --> 0:08:08.000 David, too much euphoria over China, do you agree? 0:08:08.160 --> 0:08:10.480 I think there's a bit of too much of your 0:08:11.400 --> 0:08:15.640 euphoria over the reopening in China. And it's good for China, 0:08:15.640 --> 0:08:18.640 it's good for China's service consumption, but I don't think 0:08:18.640 --> 0:08:20.880 it's going to stop the profit recession that we expect 0:08:20.920 --> 0:08:21.200 at the. 0:08:21.200 --> 0:08:21.480 S and P. 0:08:22.160 --> 0:08:24.840 And the interesting thing is America is the greatest and 0:08:25.080 --> 0:08:27.280 US equities over the past ten fifteen years have been 0:08:27.320 --> 0:08:30.480 the place to be large cats, growth stocks, tech stocks, 0:08:30.640 --> 0:08:32.880 and so many investors have said, why should I just 0:08:32.960 --> 0:08:35.400 deviate from what has worked so well over the past 0:08:35.440 --> 0:08:40.480 ten years. The trouble is things are changing, and uncertainty 0:08:40.520 --> 0:08:42.720 on the ability of profits to keep growing at a 0:08:42.720 --> 0:08:45.960 strong pace and intrade straight stay low is the concern. 0:08:46.160 --> 0:08:47.680 So I don't want to be cute about this, but 0:08:47.720 --> 0:08:49.360 this is sort of like past performance is not a 0:08:49.360 --> 0:08:52.880 predictor of future exactly right. As your point about Charmine's chart, 0:08:52.920 --> 0:08:54.679 I mean that is all finding good going back to 0:08:54.720 --> 0:08:57.400 great financhurises. Going forward, it might be quite different. We're 0:08:57.440 --> 0:09:00.160 facing more challenges, Charmie. 0:09:00.360 --> 0:09:02.760 So the gap between the US and the rest of 0:09:02.800 --> 0:09:05.240 the world may not continue to be as big in 0:09:05.320 --> 0:09:08.360 terms of outperformance. But the growth in the US is 0:09:08.440 --> 0:09:11.480 driven by earnings per share growth. It's not driven just 0:09:11.520 --> 0:09:14.520 by price action and multiple action. And if you look 0:09:14.679 --> 0:09:17.760 at the earnings per share growth in the US, the 0:09:17.840 --> 0:09:19.640 other countries don't even come close. 0:09:19.720 --> 0:09:20.400 If you look. 0:09:20.240 --> 0:09:22.720 At China, it has lacked. And it's not looking at 0:09:22.760 --> 0:09:26.200 a particular window where earnings per share growth may have 0:09:26.240 --> 0:09:29.080 been much higher. It's actually looking at long term earnings 0:09:29.080 --> 0:09:32.200 growth in the US and sector bisector, most of them 0:09:32.200 --> 0:09:33.680 have underperformed the US. 0:09:34.040 --> 0:09:34.840 I love what you're saying. 0:09:34.840 --> 0:09:38.760 I'm happy to elaborate on it. There's a difference between 0:09:38.760 --> 0:09:42.080 growth and good return on capital. And the S and 0:09:42.120 --> 0:09:44.840 P five hundred American companies, they know how to get 0:09:45.080 --> 0:09:49.920 strong returns on their incremental investment spending, but a lot 0:09:50.000 --> 0:09:53.880 of that has come through globalization, digitalization, and we have 0:09:53.920 --> 0:09:55.719 to see how much more upside there is on those things. 0:09:55.800 --> 0:09:58.079 Well, let's just end on that globalization question, because I'm 0:09:58.120 --> 0:10:00.640 not saying we're going entirely away from globals, but it's 0:10:00.679 --> 0:10:01.960 not going to be the way it was in the past. 0:10:01.960 --> 0:10:03.840 It looks like it's going to be more divisive than 0:10:03.880 --> 0:10:05.720 it was in the past. Sherman, how does that affect 0:10:05.720 --> 0:10:06.480 your analysis? 0:10:06.760 --> 0:10:09.120 If one has to think of which country in the 0:10:09.160 --> 0:10:13.240 world has benefited the most from globalization, it has been China. 0:10:13.679 --> 0:10:17.440 China's growth rate is completely dependent on globalization. They have 0:10:17.559 --> 0:10:21.440 huge surpluses. They've used that surplus to build a property sector, 0:10:21.480 --> 0:10:25.000 build the infrastructure infrastructure business that they have, and very 0:10:25.040 --> 0:10:29.200 dependent on exports. If globalization at the margin decreases a 0:10:29.200 --> 0:10:33.720 little bit, and globalization peaked in two thousand and eight before, 0:10:33.880 --> 0:10:36.800 just at the peak of the global financial crisis. Then 0:10:36.960 --> 0:10:38.880 they are going to be hurt the most and the 0:10:39.000 --> 0:10:44.080 US hurt the least. So in fact, the slightly globalization 0:10:44.200 --> 0:10:47.440 even would be very beneficial for the US and hurt China. 0:10:47.559 --> 0:10:49.760 Okay, this is a great conversation, so let's continue it. 0:10:49.880 --> 0:10:51.880 Coming up, we're going to continue this marketing conversation with 0:10:51.960 --> 0:10:53.760 David Bianco and Sherman and most of them our cliny, 0:10:53.840 --> 0:10:57.120 and we're going to bring back the iconic elves of 0:10:57.160 --> 0:10:59.560 the original Wall Street Week, updated of course for twenty 0:10:59.600 --> 0:11:01.960 twenty three. That's coming up next on Wall Street Week. 0:11:02.080 --> 0:11:14.360 On Bloomberg, the continuing comeback of the volatile technology sector 0:11:14.720 --> 0:11:18.320 left NASDAK with a gain for the week. Can't scare 0:11:18.360 --> 0:11:21.640 our elves, though their consensus on the Dow's outlook for 0:11:21.679 --> 0:11:23.760 the next three months remains an. 0:11:23.720 --> 0:11:25.360 Ultra bullish plus six. 0:11:25.640 --> 0:11:28.000 So quickly was the mood improving that one of our 0:11:28.040 --> 0:11:32.080 bullish chief elves, Michael Metz, grew cautious and changed his 0:11:32.200 --> 0:11:35.720 boat on the next six months to neutral, bringing urlves 0:11:35.720 --> 0:11:38.960 index down a notch to a still bullish plus three. 0:11:39.520 --> 0:11:43.240 There was no stopping nasdak Amex or Russell, which seemed 0:11:43.240 --> 0:11:47.800 to be operating in an entirely different parallel universe, which, 0:11:47.840 --> 0:11:50.000 come to think of it, may be where good elves 0:11:50.040 --> 0:11:53.920 come from. Our crew are unchanged at are highly bullish 0:11:54.000 --> 0:11:54.720 plus seven. 0:11:55.760 --> 0:11:58.840 That, of course is lews Erguiser talking about hiconic elves 0:11:58.880 --> 0:12:00.880 on the original version of Wall Street Week back in 0:12:00.960 --> 0:12:04.040 January of nineteen ninety eight, and today today we are 0:12:04.080 --> 0:12:07.920 bringing those elves back, modified and updated a bit. Instead 0:12:07.920 --> 0:12:10.480 of ten technical factors crunched by a contributor, which is 0:12:10.480 --> 0:12:13.840 what Lewis had, our elves are real people. They are 0:12:13.880 --> 0:12:16.800 the twenty four equity and analysts Bloomberg has relied on 0:12:16.880 --> 0:12:19.120 four years to come up with a consensus call on 0:12:19.200 --> 0:12:21.600 where the SMP will end up the year, and as 0:12:21.600 --> 0:12:24.520 of this week, the medium of their projections was foury 0:12:24.640 --> 0:12:27.640 twenty five, with Tom Lee of Funstrat the highest at 0:12:27.640 --> 0:12:30.720 four thousand and seven to fifty and Michael Cantowitz of 0:12:30.800 --> 0:12:33.800 Piper Sandler the most conservative, projecting the s and P 0:12:33.960 --> 0:12:36.240 five hundred will end the year at three two hundred 0:12:36.240 --> 0:12:38.360 and twenty five. Every week we're going to check in 0:12:38.400 --> 0:12:40.640 to see how they are doing and whether they have 0:12:40.800 --> 0:12:43.680 moved their projections. Still with us are Charmin, most of 0:12:43.679 --> 0:12:46.440 our rock Commanie of Goldbin Sachs, and David Bianco of 0:12:46.520 --> 0:12:50.920 DWS Group. So it's great to have you here back. Charmin, 0:12:51.320 --> 0:12:53.079 tell me of a David Constant. He's at four thousand, 0:12:53.120 --> 0:12:55.000 right in the middle. Yes he is. 0:12:55.160 --> 0:12:57.640 And we obviously chat to get with each other all 0:12:57.679 --> 0:12:59.720 the time. We go through their earnings views and our 0:13:00.000 --> 0:13:03.840 earnings used and why are they different than what's driving it. 0:13:03.840 --> 0:13:07.120 It's interesting because Jan Hatzis are chief economist at Golobin 0:13:07.200 --> 0:13:09.959 Sachs has a thirty five percent probability of a recession. 0:13:09.960 --> 0:13:12.640 It's one of the lowest in the industry, actually compared 0:13:12.640 --> 0:13:15.679 to somebody like Bill Dudley who's at sixty percent. So 0:13:15.840 --> 0:13:19.120 it's very important what is actually being factored into David's numbers. 0:13:19.360 --> 0:13:22.280 Our view is that there the S and P will 0:13:22.320 --> 0:13:24.320 end up the year at forty two fifty, so a 0:13:24.440 --> 0:13:28.479 thirteen percent total return. We allocate a fifty percent probability 0:13:28.520 --> 0:13:31.520 to that, and then we have a twenty percent probability 0:13:31.559 --> 0:13:34.280 that it actually does much better and you end up 0:13:34.280 --> 0:13:37.000 with something like your return in the twenty plus percent. 0:13:37.320 --> 0:13:40.000 Now there's a small probability to the downside, but nothing 0:13:40.080 --> 0:13:42.440 like the lows you have with the NEU l's we 0:13:42.520 --> 0:13:45.200 are more down like thirty there's a thirty percent probability 0:13:45.240 --> 0:13:49.400 of thirty six hundred. Rview is that in the background 0:13:49.480 --> 0:13:52.600 the backdrop for earnings is generally modestly positive. 0:13:52.760 --> 0:13:55.440 David is actually you were an ELF. Yeah, that's it. 0:13:55.520 --> 0:14:00.760 Was an ELF. Hopefully I haven't graduated control, but yeah, I. 0:14:00.760 --> 0:14:03.120 Was one of those equity strategists for many years. 0:14:03.720 --> 0:14:05.640 So you see a high and a low. What are 0:14:05.640 --> 0:14:07.680 the factors are going to determine whether it's high or low? 0:14:07.960 --> 0:14:09.280 From your point of view, David. 0:14:09.160 --> 0:14:11.440 Whether whether the high turns out to be correct or 0:14:11.440 --> 0:14:15.480 the lows. I think four thousand on the SMP at 0:14:15.520 --> 0:14:17.520 the end of the year, a little bit above four 0:14:17.559 --> 0:14:20.440 thousand for the SMP early twenty twenty four is a 0:14:20.520 --> 0:14:25.120 fair reasonable outlook. But I think there's downside skewed risks 0:14:25.840 --> 0:14:28.320 more than usual. I think it's quite possible the SMP 0:14:28.720 --> 0:14:31.320 re visits thirty six hundred and thirty seven hundred before 0:14:31.360 --> 0:14:33.640 it moves to something well above forty two hundred. 0:14:33.680 --> 0:14:35.960 So Charmin, you have somebody supporting David Coston right at 0:14:36.000 --> 0:14:38.800 four thousand, Thanks so much to David Bianco and Charmen 0:14:38.880 --> 0:14:42.640 most of our RACHMANI. The failure of Silicon Valley Bank 0:14:42.760 --> 0:14:46.080 sent shivers through the entire banking industry, particularly when it 0:14:46.120 --> 0:14:48.880 comes to the trust depositors place in their own banks. 0:14:49.160 --> 0:14:51.600 We spoke with Brian moynihan, Chair and CEO of Bank 0:14:51.680 --> 0:14:54.320 of America about the lasting effects of what we've seen. 0:14:56.080 --> 0:14:58.640 I think, at the end of the day, at crisis 0:14:58.720 --> 0:15:01.720 is too strong a word. Words like that get used 0:15:01.760 --> 0:15:04.880 a lot, but at the end of day, there was 0:15:04.920 --> 0:15:07.840 a fair amount of disruption for a few weeks there. Well, 0:15:08.480 --> 0:15:12.160 certain business models were sorted through. But on the other hand, 0:15:12.200 --> 0:15:14.480 you could see and we could see the stability and 0:15:14.480 --> 0:15:17.120 the other business models which would the way banking is 0:15:17.120 --> 0:15:19.400 down Gray Grand or business and stuff. And so the 0:15:19.440 --> 0:15:22.480 good news is you're seeing the earnings by the broad 0:15:22.480 --> 0:15:26.160 industry come out this week. You're seeing things have sort 0:15:26.200 --> 0:15:28.920 of played out that way, which is very specific business models. 0:15:28.960 --> 0:15:32.280 Because the unique circumstances of the last twenty four months 0:15:32.280 --> 0:15:37.400 of thirty six months of massive amounts of cash putting 0:15:37.440 --> 0:15:40.800 the system and then rates changing caught people and. 0:15:40.920 --> 0:15:42.000 Those had to be sorted out. 0:15:42.160 --> 0:15:44.440 The good news is the basic industry is reported good 0:15:44.440 --> 0:15:48.680 earnings across the board. Deposits have come down, but that's 0:15:48.720 --> 0:15:50.840 intended by the FED taking money out of the system. 0:15:50.880 --> 0:15:53.360 It's got to come out of somewhere. Banking system is 0:15:53.400 --> 0:15:55.960 what they want to do to you, frankly, make credit 0:15:55.960 --> 0:15:58.440 tighter and help slow down the economy. So that's gone on, 0:15:58.560 --> 0:16:01.200 but you look at the cap pub liquidity and the 0:16:01.240 --> 0:16:03.320 earnings power of all these companies have been tremendous, and 0:16:03.400 --> 0:16:06.160 that's that's reassuring to people, and that's good news because 0:16:06.160 --> 0:16:08.000 in the end of the day, the banking system reflects 0:16:08.760 --> 0:16:10.880 economy and American accounties around the world, and. 0:16:12.360 --> 0:16:14.400 You hope it's in good shape, and it is. There's 0:16:14.440 --> 0:16:15.200 no question its good. 0:16:15.200 --> 0:16:18.760 Shap our banks at an inherent disadvantage on their business model. 0:16:18.840 --> 0:16:22.320 In this sense, you're funding by demand deposits that people 0:16:22.400 --> 0:16:25.000 by definition can pull whenever they want. You're putting into 0:16:25.080 --> 0:16:29.040 long term assets you know, that are long term as 0:16:29.040 --> 0:16:31.920 opposed to some of the private credit ufits. You get 0:16:32.040 --> 0:16:34.960 locked up capital for a long period of time that 0:16:35.000 --> 0:16:36.760 they can match with the assets. Do you have an 0:16:36.800 --> 0:16:39.640 inherent mismatch in the deposits versus the assets? 0:16:40.080 --> 0:16:42.880 Well, and we manage that. That's why we have outcome 0:16:42.880 --> 0:16:45.320 management and the team of people, and that's managed to 0:16:45.440 --> 0:16:48.440 maintain the balance and that sensitivity. So up one hundred 0:16:48.560 --> 0:16:51.040 basis points we make three billion dollars more in an 0:16:51.040 --> 0:16:53.720 I and down we make three billion less on a 0:16:53.760 --> 0:16:57.080 base of your fifty five billion dollars a year. 0:16:57.120 --> 0:16:58.240 So it's a little bit of movement of. 0:16:58.160 --> 0:17:00.400 Money, but that's how you balance it, because the entire 0:17:00.400 --> 0:17:02.440 balance sheet moves, and everybody looks at certain parts of 0:17:02.480 --> 0:17:03.120 it in this part. 0:17:04.680 --> 0:17:06.760 So it's it's it's the way you manage money. 0:17:06.800 --> 0:17:10.200 So our consumer customers, I don't know, eighty five percent 0:17:10.200 --> 0:17:12.480 of balance have been here for customers. 0:17:12.040 --> 0:17:12.960 For ten years plus. 0:17:14.320 --> 0:17:16.560 You know, it's it's an even on a commercial side, 0:17:16.600 --> 0:17:18.560 same thing. All the all the balance of people been 0:17:18.720 --> 0:17:20.720 relationships for a long period of time. These customers run 0:17:20.760 --> 0:17:24.320 around for decades, you know, decades and decades in some cases, 0:17:25.359 --> 0:17:28.000 and so they're very stable. It's just a matter of 0:17:28.040 --> 0:17:30.440 the ebbs and flows of the rate environment will change 0:17:30.480 --> 0:17:33.600 the profitability. But you say, is a business model flawed. 0:17:34.160 --> 0:17:36.359 There's only four companies that have made more than fifteen 0:17:36.359 --> 0:17:39.440 billion dollars in America in the last eight years in 0:17:39.480 --> 0:17:41.280 a row. Two of them are banks, and so I 0:17:41.280 --> 0:17:42.639 don't think the business model's flawed. 0:17:42.840 --> 0:17:44.159 As they head of Bank of America, you have a 0:17:44.240 --> 0:17:48.040 almost unique UH insight into the American economy. It's specifically 0:17:48.040 --> 0:17:51.240 the consumer. I know you said that March over March, 0:17:51.560 --> 0:17:55.560 consumer spending is up. Same time you're taking more provisions against. 0:17:55.359 --> 0:17:57.879 Possible some losses. It's the wanting. 0:17:58.400 --> 0:18:00.120 What does that tell you? What's around the corner? Are 0:18:00.160 --> 0:18:03.200 you seeing the end of the the spurt and consumer spending? 0:18:03.840 --> 0:18:04.280 So the. 0:18:05.800 --> 0:18:09.639 Three different topics. One is consumer spending in March was 0:18:09.720 --> 0:18:14.080 up nine percent of the last March across all different forms. 0:18:15.400 --> 0:18:17.600 In April, that's slowed down a little bit. We'll see 0:18:17.640 --> 0:18:19.280 how it ends up, but that's slowed down. It was 0:18:19.320 --> 0:18:22.320 slower in January, ferry picked back up in March. That 0:18:22.720 --> 0:18:26.959 that means the consumers still doing things. They're traveling. It's 0:18:26.960 --> 0:18:30.199 a lot more travel out. The home experience is so 0:18:30.320 --> 0:18:35.440 called theaters, et cetera, concert tickets, any sporting events. Everything's 0:18:35.480 --> 0:18:39.600 going strong there. When you look at April, you're seeing 0:18:39.600 --> 0:18:40.359 it slow down a little bit. 0:18:40.400 --> 0:18:41.200 The debate's going to. 0:18:41.119 --> 0:18:43.040 Be is that due to some at tax timing and stuff, 0:18:43.040 --> 0:18:45.000 because that's changed this year we'll see a play out. 0:18:45.040 --> 0:18:46.960 But the consumers a good shape. 0:18:47.000 --> 0:18:48.600 They have more money in accounts than they did by 0:18:48.600 --> 0:18:50.560 them by multiples, especially. 0:18:50.200 --> 0:18:51.120 The lower STRATEUSY. 0:18:51.119 --> 0:18:53.719 The ones that don't have it are the wealthiest consumers 0:18:53.760 --> 0:18:55.879 are on platform because they put the money into the 0:18:56.040 --> 0:18:58.800 into the first in the market, now into the in 0:18:58.840 --> 0:19:03.119 the money funds. They have money. The credit quality, our 0:19:03.240 --> 0:19:09.199 charge our freight this quarter was a number which is 0:19:09.240 --> 0:19:11.480 about a third under where it was nineteen. To give 0:19:11.480 --> 0:19:15.040 you a centense saying it, but that's a fifty three 0:19:15.080 --> 0:19:21.040 year low in nineteen. So the credit quality is ye, unbelievable, 0:19:21.040 --> 0:19:24.120 and so that's good news. Are we putting up provisions, Yeah, 0:19:24.119 --> 0:19:25.600 because we keep planning on this recession. 0:19:25.640 --> 0:19:26.040 It seems to. 0:19:26.040 --> 0:19:28.160 Always be out there that we haven't gotten to yet. 0:19:29.080 --> 0:19:31.720 And then the third thing is the consumers have capacity 0:19:31.760 --> 0:19:33.960 to borrow. So the usage of our lines are credit 0:19:34.000 --> 0:19:36.520 on the consumer side, home micro loans are down by 0:19:36.840 --> 0:19:39.520