1 00:00:09,880 --> 00:00:12,960 Speaker 1: Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keane 2 00:00:13,480 --> 00:00:17,560 Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,600 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Jeffrey 5 00:00:27,600 --> 00:00:30,639 Speaker 1: Curry has given us such good perspective with Goldman says, 6 00:00:30,720 --> 00:00:33,760 Speaker 1: of course, Uh, he's a guy John who gives us 7 00:00:33,760 --> 00:00:36,960 Speaker 1: a huge micro economic foundation with his work at the 8 00:00:37,040 --> 00:00:40,519 Speaker 1: University of Chicago over the years. And John, it's not 9 00:00:40,680 --> 00:00:44,199 Speaker 1: just about oil, but it's about the commodity complex in general. 10 00:00:44,600 --> 00:00:48,000 Speaker 1: Do they get out front of a pandemic and try 11 00:00:48,080 --> 00:00:50,559 Speaker 1: to expect the recovery. Well, the thing that Jeff I 12 00:00:50,560 --> 00:00:52,199 Speaker 1: think was on top of was what would happen if 13 00:00:52,200 --> 00:00:55,040 Speaker 1: we started to break you'll getting near to breaching storage capacity. 14 00:00:55,280 --> 00:00:57,360 Speaker 1: And once we got to that point, how quickly this 15 00:00:57,400 --> 00:00:59,600 Speaker 1: market would have to adjust, Tom and everything else, which 16 00:00:59,640 --> 00:01:02,040 Speaker 1: is fully to place on a really small amount of time. 17 00:01:02,080 --> 00:01:03,760 Speaker 1: And that's basically what you saw a month ago. The 18 00:01:03,800 --> 00:01:07,559 Speaker 1: real threat of breaching storage capacity prices plunge aggressively lower 19 00:01:07,760 --> 00:01:11,839 Speaker 1: than everything. House has to correct and correct fast, must listen, 20 00:01:11,920 --> 00:01:14,600 Speaker 1: must watch for Global Wall Street. Jeffrey Curry of Golden 21 00:01:14,600 --> 00:01:16,640 Speaker 1: Sex Jeffrey, good morning. I know that Lisa and John 22 00:01:16,640 --> 00:01:19,039 Speaker 1: I have a lot of oil questions. Let me ask 23 00:01:19,080 --> 00:01:24,480 Speaker 1: you a general question. Do commodities expect out like equities? 24 00:01:24,720 --> 00:01:28,720 Speaker 1: If equities are reaching out six months, two years, etcetera. 25 00:01:29,040 --> 00:01:34,720 Speaker 1: Do commodity participants do the same thing at most? Maybe 26 00:01:34,720 --> 00:01:37,520 Speaker 1: in like oil thirty days? Um? I mean there is 27 00:01:37,560 --> 00:01:40,640 Speaker 1: some expectations in but very small. And you know I 28 00:01:40,680 --> 00:01:43,920 Speaker 1: can find out. Commodities are spot assets, UM. You know, 29 00:01:44,200 --> 00:01:47,600 Speaker 1: financial markets their anticipatory assets. They look out to the future. 30 00:01:47,640 --> 00:01:51,000 Speaker 1: So today's spot price for oil has to clear today's 31 00:01:51,040 --> 00:01:54,400 Speaker 1: supply and demand. So, jeff how much optimism is being 32 00:01:54,440 --> 00:01:57,160 Speaker 1: priced into that thirty day outlook for oil right now? 33 00:01:58,760 --> 00:02:03,040 Speaker 1: Far too much? You know. We argue that the prices 34 00:02:03,040 --> 00:02:07,200 Speaker 1: above thirty dollars a barrel, particularly on w T I UM, 35 00:02:07,280 --> 00:02:11,280 Speaker 1: incentivised producers to bring supply back online that was shut off. 36 00:02:11,360 --> 00:02:16,040 Speaker 1: The only way this market rebalances and creates that optimism 37 00:02:16,080 --> 00:02:18,000 Speaker 1: that the market's trying to price in is that that 38 00:02:18,080 --> 00:02:20,880 Speaker 1: production stays up. That's the point that Tom's make it. 39 00:02:21,160 --> 00:02:24,480 Speaker 1: Commodities are spot assets, UM, and so the investors go 40 00:02:24,600 --> 00:02:27,600 Speaker 1: in bit it up. They try to anticipate it. And 41 00:02:27,600 --> 00:02:30,760 Speaker 1: by the way, every time a commodity market price anticipates 42 00:02:30,840 --> 00:02:34,480 Speaker 1: something ins and tears for the investors. Jeff. Given the 43 00:02:34,520 --> 00:02:37,360 Speaker 1: fact that we are already seeing shale drills come back 44 00:02:37,400 --> 00:02:42,200 Speaker 1: online exactly to your point, could we see negative spot 45 00:02:42,280 --> 00:02:45,440 Speaker 1: prices once again, at least in the futures market in 46 00:02:45,480 --> 00:02:50,680 Speaker 1: the near term contracts in the US. Probably not. And 47 00:02:50,919 --> 00:02:53,800 Speaker 1: the reason I say that is that the magnitude of 48 00:02:53,800 --> 00:02:57,440 Speaker 1: the surpluses going back last day or this April when 49 00:02:57,480 --> 00:03:00,960 Speaker 1: we saw the negative prices were unpressed globally, they were 50 00:03:01,040 --> 00:03:05,440 Speaker 1: running twenty million barrels per day. That is an absolute 51 00:03:05,560 --> 00:03:10,000 Speaker 1: massive number UM. Having a four or five hundred thousand 52 00:03:10,040 --> 00:03:13,560 Speaker 1: barrels per day of additional supply comeback online not going 53 00:03:13,560 --> 00:03:16,000 Speaker 1: to create that same type of risk um. So it's 54 00:03:16,360 --> 00:03:18,919 Speaker 1: so I think the only thing they could recreate that 55 00:03:19,040 --> 00:03:23,320 Speaker 1: environment again would be a second wave where demand losses 56 00:03:23,320 --> 00:03:25,440 Speaker 1: are as big or even worse than what we saw 57 00:03:25,480 --> 00:03:28,720 Speaker 1: the first time around, which I'd argue pretty unlikely because 58 00:03:28,919 --> 00:03:31,200 Speaker 1: we know how to cope with it now. Jeff. I 59 00:03:31,240 --> 00:03:32,680 Speaker 1: think the story of the last couple of days has 60 00:03:32,680 --> 00:03:35,360 Speaker 1: been about demand demand normal I think, and how quick 61 00:03:35,400 --> 00:03:37,480 Speaker 1: they can normalize. We've had some reports out of China 62 00:03:37,560 --> 00:03:39,920 Speaker 1: that we're back to pre COVID levels. If you're looking 63 00:03:39,960 --> 00:03:41,400 Speaker 1: at demand in China in the moment, you have any 64 00:03:41,480 --> 00:03:45,800 Speaker 1: visibility on how quickly demand is coming back online, yeah, 65 00:03:46,400 --> 00:03:48,400 Speaker 1: I'd be a little cautious, you know that. I mean 66 00:03:48,440 --> 00:03:52,480 Speaker 1: they argue with you know, thirty million barrels per day 67 00:03:52,560 --> 00:03:55,480 Speaker 1: right now versus at December, at the end of last year, 68 00:03:55,520 --> 00:03:59,080 Speaker 1: it is running thirteen point seven. So that's still down. 69 00:03:59,680 --> 00:04:02,880 Speaker 1: You know, it's still down like three or four percent um. 70 00:04:03,080 --> 00:04:05,960 Speaker 1: The most recent data headed down five percent, So it's 71 00:04:06,200 --> 00:04:07,800 Speaker 1: you know, I'm not going to go as far as 72 00:04:07,800 --> 00:04:12,280 Speaker 1: to say that, uh, you know, it's a full recovery. 73 00:04:12,480 --> 00:04:14,360 Speaker 1: I think the parts there's two things you take out 74 00:04:14,400 --> 00:04:17,240 Speaker 1: of it. Commuting demand is up because people are too 75 00:04:17,240 --> 00:04:20,919 Speaker 1: afraid to take public transport, and the jet demand is 76 00:04:20,960 --> 00:04:25,880 Speaker 1: still down. Seriously, Jeff Curry, tell us about your world 77 00:04:25,960 --> 00:04:29,680 Speaker 1: commodities folded into some of these glide paths of the 78 00:04:29,680 --> 00:04:33,479 Speaker 1: pandemic in Brazil. I noticed the other day Indonesia is 79 00:04:33,520 --> 00:04:36,000 Speaker 1: not not doing well at all. I mean some of 80 00:04:36,000 --> 00:04:42,240 Speaker 1: these commodity and almost commodity importing company countries are really struggling. 81 00:04:42,560 --> 00:04:47,960 Speaker 1: How will the pandemic affect your world? I mean, the 82 00:04:48,360 --> 00:04:51,320 Speaker 1: the biggest and most direct impact, it's a sharp drop 83 00:04:51,320 --> 00:04:55,480 Speaker 1: off in capex, which starts to create supply problems. UM. 84 00:04:55,560 --> 00:04:57,400 Speaker 1: Further down the road. You know we see it in 85 00:04:57,480 --> 00:04:59,840 Speaker 1: oil UM. You know you look at even like exon 86 00:05:00,040 --> 00:05:04,000 Speaker 1: Flash their CAPEX budgets. UM decline rates began to set in. 87 00:05:03,760 --> 00:05:07,160 Speaker 1: And in the energy markets, UM, you're not making investments 88 00:05:07,160 --> 00:05:10,560 Speaker 1: in all sorts of different commodities, whether if it's mining UM, 89 00:05:10,600 --> 00:05:14,200 Speaker 1: which starts to create supply constraints as we look further out. 90 00:05:14,240 --> 00:05:17,440 Speaker 1: So UM, I would argue that, yeah, it hurts demand 91 00:05:17,560 --> 00:05:22,000 Speaker 1: right now. I mean India's gold demand was very weak. UM. 92 00:05:22,080 --> 00:05:25,400 Speaker 1: But I think the longer term UM impact really is 93 00:05:25,640 --> 00:05:29,840 Speaker 1: on investment. So link that framework into Brazilian reality. Mean 94 00:05:29,839 --> 00:05:31,280 Speaker 1: I gotta make some money here? Am I going to 95 00:05:31,320 --> 00:05:34,840 Speaker 1: go weaker reality? Going through six? I mean, link your 96 00:05:34,960 --> 00:05:37,839 Speaker 1: commodity world into the f X world of Golden Sex. 97 00:05:38,279 --> 00:05:42,080 Speaker 1: How do you play it well? When you when the 98 00:05:42,160 --> 00:05:46,480 Speaker 1: dollar strengthens, commodity prices typically could go down. And the 99 00:05:46,520 --> 00:05:49,200 Speaker 1: reason for that is you take like the as a 100 00:05:49,720 --> 00:05:53,600 Speaker 1: you get a weaker Chile and pay so you can pay. 101 00:05:53,800 --> 00:05:57,200 Speaker 1: Labor becomes lower cost and as a result in dollars, 102 00:05:57,440 --> 00:06:01,520 Speaker 1: the price of the commodity goes down. Um In the 103 00:06:01,600 --> 00:06:05,839 Speaker 1: current environment, I mean to continue to argue for further 104 00:06:05,960 --> 00:06:08,200 Speaker 1: strength in the dollar when you're sitting near you know, 105 00:06:08,279 --> 00:06:11,240 Speaker 1: all time highs um I think it's kind of difficult. 106 00:06:11,680 --> 00:06:13,400 Speaker 1: But in no way am I going to go out 107 00:06:13,520 --> 00:06:15,560 Speaker 1: and argue that we're going to get a snap back 108 00:06:15,600 --> 00:06:17,760 Speaker 1: and I want to be short the dollar, but I 109 00:06:17,800 --> 00:06:20,120 Speaker 1: think you know it's I would. I'm not focused on 110 00:06:20,160 --> 00:06:23,080 Speaker 1: the dollar right now just because it's not it's not 111 00:06:23,200 --> 00:06:25,839 Speaker 1: a good story one direction or the other. We're speaking 112 00:06:25,880 --> 00:06:28,800 Speaker 1: with Jeff Curry Goldman Sachs Global head of Commodities Research, 113 00:06:28,839 --> 00:06:31,039 Speaker 1: and we've been focusing a lot on the price of oil. 114 00:06:31,160 --> 00:06:33,520 Speaker 1: The other area that's been a hotspot has been the 115 00:06:33,560 --> 00:06:37,120 Speaker 1: price of gold reach and climbing toward all time highs. 116 00:06:37,320 --> 00:06:40,320 Speaker 1: When it comes to euro denominations and the dollar, it's 117 00:06:40,320 --> 00:06:42,919 Speaker 1: the highest in more than seven years. I'm trying to 118 00:06:42,960 --> 00:06:45,640 Speaker 1: figure out what the upside here is. What the main 119 00:06:45,839 --> 00:06:50,040 Speaker 1: argument that you buy into here for an ongoing strength 120 00:06:50,240 --> 00:06:55,200 Speaker 1: in the precious metal is um our. Our near term 121 00:06:55,240 --> 00:06:58,799 Speaker 1: target is eight ounce, So it's got a male modest upside. 122 00:06:58,800 --> 00:07:01,200 Speaker 1: From here. I want to first talk about what we know. 123 00:07:01,760 --> 00:07:05,960 Speaker 1: Above eighteen hundred, we're going into the world of the unknown. UM. 124 00:07:06,000 --> 00:07:09,560 Speaker 1: What we do know is the two main drivers of 125 00:07:10,080 --> 00:07:14,760 Speaker 1: gold demand. Investment demand, primarily in the developed markets is 126 00:07:14,880 --> 00:07:18,880 Speaker 1: very strong, driven by the stimulus. Low real rates in 127 00:07:19,000 --> 00:07:23,280 Speaker 1: gold is just another defensive asset. UM. You see it 128 00:07:23,280 --> 00:07:26,240 Speaker 1: in the et F holdings have gone up sharply. UM. 129 00:07:26,280 --> 00:07:31,960 Speaker 1: The other big main driver of gold is the consumersumption 130 00:07:32,080 --> 00:07:35,320 Speaker 1: or consumer demand in emerging markets like Indian China. Let 131 00:07:35,320 --> 00:07:39,440 Speaker 1: for let's say jewelry. UM. India's numbers were atrocious that 132 00:07:39,520 --> 00:07:44,640 Speaker 1: came out recently. UM. The Chinese numbers still have yet 133 00:07:44,680 --> 00:07:47,560 Speaker 1: to start to pick up. UM. And so the one 134 00:07:47,680 --> 00:07:49,520 Speaker 1: leg that's missing and we think you're going to get 135 00:07:49,520 --> 00:07:51,720 Speaker 1: it back in China and first India's a question mark 136 00:07:52,240 --> 00:07:55,400 Speaker 1: is that consumer demand. That's what probably gets you to 137 00:07:55,520 --> 00:07:57,920 Speaker 1: eighteen hundred. Now the question is how do you go 138 00:07:58,000 --> 00:08:01,000 Speaker 1: above eighteen hundreds of two thousand's. That's the world of 139 00:08:01,040 --> 00:08:04,920 Speaker 1: the unknown. You have to start making assumptions on inflation 140 00:08:05,000 --> 00:08:08,440 Speaker 1: expectations off the back of the large stimulus. UM. The 141 00:08:08,480 --> 00:08:12,160 Speaker 1: reason why it's difficult to model. Monitor to model is 142 00:08:12,200 --> 00:08:15,440 Speaker 1: you're running into the zero bound on nominal rates um 143 00:08:15,520 --> 00:08:18,520 Speaker 1: So to make the argument you know that you know 144 00:08:19,040 --> 00:08:21,240 Speaker 1: gold is gonna go much higher, you need real rates 145 00:08:21,280 --> 00:08:24,560 Speaker 1: to go much more negative while the nominal rates stays 146 00:08:24,600 --> 00:08:27,000 Speaker 1: fixed at zero. That means you have to make an 147 00:08:27,000 --> 00:08:31,440 Speaker 1: assumption on inflation. Jeffredy small stuff as always, Jeff carry 148 00:08:31,440 --> 00:08:33,720 Speaker 1: in London. Jeff, what's London like at the moment? If 149 00:08:33,760 --> 00:08:36,079 Speaker 1: you made it into the square mile over the last months? 150 00:08:36,200 --> 00:08:38,480 Speaker 1: For your answer, is this work from home? A government? 151 00:08:38,800 --> 00:08:41,640 Speaker 1: It's work work from home? I have I haven't seen 152 00:08:41,679 --> 00:08:44,120 Speaker 1: the square mile in a long time. But the weather 153 00:08:44,240 --> 00:08:46,679 Speaker 1: is great here, and you know it's it's not as 154 00:08:46,760 --> 00:08:48,920 Speaker 1: up and running as as New York in the US. 155 00:08:50,080 --> 00:08:53,120 Speaker 1: Jeffreys the city. Don't you missed the city? Town? I do? 156 00:08:53,400 --> 00:08:55,840 Speaker 1: I do? I miss? I miss I missed the square mile. 157 00:08:56,120 --> 00:08:58,800 Speaker 1: You come out of bank station, see the Bank of English. 158 00:09:00,040 --> 00:09:03,360 Speaker 1: It said they said bunk. You call it bunk, bunk, 159 00:09:05,240 --> 00:09:10,079 Speaker 1: bunk in London? Bunk? Who call is it bunk? The 160 00:09:10,120 --> 00:09:13,040 Speaker 1: British they call it be given it a toll by Frenchman. 161 00:09:13,880 --> 00:09:16,920 Speaker 1: There's something like that. I do I miss the city 162 00:09:16,920 --> 00:09:18,800 Speaker 1: We're gonna get over there, folks at some point here 163 00:09:19,679 --> 00:09:23,480 Speaker 1: is said and don Jeffrey Curry thank you as always. 164 00:09:27,080 --> 00:09:30,800 Speaker 1: Jimmy Sullivan joins us some TV securities. Jim, we'll give 165 00:09:30,840 --> 00:09:33,560 Speaker 1: us an update and give us Chairman Paul and Secretary 166 00:09:33,640 --> 00:09:36,600 Speaker 1: Manution an update on your call. In the unemployment rate, 167 00:09:36,679 --> 00:09:41,720 Speaker 1: how high can it go? I Tom and all this morning. Well, 168 00:09:41,800 --> 00:09:43,480 Speaker 1: I mean a lot of it to do with measurement 169 00:09:43,640 --> 00:09:47,280 Speaker 1: as well. I mean, you're sight plus numbers, and arguably 170 00:09:47,320 --> 00:09:50,000 Speaker 1: it is there if if you you count everybody's who's 171 00:09:50,120 --> 00:09:53,520 Speaker 1: suddenly become unemployed. Obviously, the number for last month was 172 00:09:53,600 --> 00:09:55,840 Speaker 1: fourteen points seven percent. But I mean if you had 173 00:09:56,000 --> 00:09:58,400 Speaker 1: just for the drop of the participation rate and b 174 00:09:58,559 --> 00:10:01,000 Speaker 1: less suggest that some people are miss class deified and 175 00:10:01,360 --> 00:10:03,560 Speaker 1: as employed but just not on their job, and they 176 00:10:03,600 --> 00:10:05,760 Speaker 1: probably should have been unemployed. If you include those, the 177 00:10:05,840 --> 00:10:09,520 Speaker 1: number would have been probably around So those sort of 178 00:10:09,559 --> 00:10:12,080 Speaker 1: statistical issues could continue for the next couple of months. 179 00:10:12,120 --> 00:10:15,200 Speaker 1: So I don't think we will necessarily see a number, 180 00:10:15,800 --> 00:10:17,880 Speaker 1: but we probably will see a higher number in April 181 00:10:17,880 --> 00:10:19,839 Speaker 1: than we saw in May. But the hope is that 182 00:10:19,960 --> 00:10:22,440 Speaker 1: after that, from June on, the numbers will start coming 183 00:10:22,480 --> 00:10:27,199 Speaker 1: down again. So yes, I mean, measured maybe properly, it's 184 00:10:27,880 --> 00:10:30,079 Speaker 1: plus number, but we may not actually see numbers that 185 00:10:30,200 --> 00:10:32,679 Speaker 1: high in any event. And I mean this is not 186 00:10:32,880 --> 00:10:34,880 Speaker 1: the great depression in the sense that we shouldn't be 187 00:10:34,920 --> 00:10:37,800 Speaker 1: extrapolating these numbers that there will be improvement in the 188 00:10:37,840 --> 00:10:40,680 Speaker 1: second half of the year. We hope there will be improvement, 189 00:10:40,720 --> 00:10:43,240 Speaker 1: significant improvement in the months to come. Jim, let's talk 190 00:10:43,280 --> 00:10:45,520 Speaker 1: about the Chairman before the Senate a little bit late 191 00:10:45,679 --> 00:10:47,840 Speaker 1: this morning. We've heard so much from Chairman Power over 192 00:10:47,840 --> 00:10:49,959 Speaker 1: the last several weeks. I'm sure some people welcome that. 193 00:10:50,000 --> 00:10:53,400 Speaker 1: I'm sure many others don't. What's left from Chairman Power 194 00:10:53,440 --> 00:10:57,000 Speaker 1: that you haven't heard? And well, Jonathan, you were just 195 00:10:57,080 --> 00:10:59,640 Speaker 1: touching on issues from our perspective, I would not expect 196 00:10:59,679 --> 00:11:02,200 Speaker 1: to get already on those today. In terms of forward guidance, 197 00:11:02,200 --> 00:11:04,520 Speaker 1: I don't think that's the focus of today's testimony, which 198 00:11:04,559 --> 00:11:06,480 Speaker 1: is more about the Cares Act than the four and 199 00:11:06,559 --> 00:11:09,719 Speaker 1: fifty four billion it was allocated as capital backstop for 200 00:11:09,760 --> 00:11:13,319 Speaker 1: the very thirteen three programs. And so yes, absolutely we're 201 00:11:13,400 --> 00:11:16,679 Speaker 1: very interested in terms of forward guidance on the funds 202 00:11:16,760 --> 00:11:18,880 Speaker 1: rates as well as QWI. What are the conditions for 203 00:11:19,160 --> 00:11:22,000 Speaker 1: ultimate tightening, which is way down the road arguably, but 204 00:11:22,559 --> 00:11:24,520 Speaker 1: that's I don't think that's the focus today. It's more 205 00:11:24,520 --> 00:11:27,720 Speaker 1: about the CARES Act. So, given the fact that there 206 00:11:27,840 --> 00:11:31,160 Speaker 1: is this focus right now on future stimulus in Washington, 207 00:11:31,520 --> 00:11:35,240 Speaker 1: while the markets are basically pricing in additional fiscal stimulus, 208 00:11:35,400 --> 00:11:38,040 Speaker 1: they're also pricing in a near term vaccine at least 209 00:11:38,520 --> 00:11:41,559 Speaker 1: later this year early next year, is it time to 210 00:11:42,520 --> 00:11:47,360 Speaker 1: sell in May and go away? And well, I guess 211 00:11:48,600 --> 00:11:50,599 Speaker 1: I would be cautious for sure. I mean exactly what 212 00:11:50,679 --> 00:11:52,480 Speaker 1: that means, I'm gonna try in terms of equities, et cetera, 213 00:11:52,559 --> 00:11:55,000 Speaker 1: and equities of obviously had a had a good run here, 214 00:11:55,040 --> 00:11:59,120 Speaker 1: and arguably there's a lot of optimism in there. I mean, obviously, 215 00:11:59,160 --> 00:12:01,480 Speaker 1: even if we do get a vaccine, it'll it'll take 216 00:12:01,520 --> 00:12:03,760 Speaker 1: a while to be to be fully up and running, 217 00:12:04,240 --> 00:12:07,360 Speaker 1: and there are some promising results out there, and I 218 00:12:07,679 --> 00:12:09,440 Speaker 1: think the net of it all is that, yeah, I mean, 219 00:12:09,480 --> 00:12:10,839 Speaker 1: it's going to be a struggle to come back, but 220 00:12:10,960 --> 00:12:14,360 Speaker 1: we will. We will see positive numbers. So I mean, 221 00:12:14,400 --> 00:12:16,960 Speaker 1: I don't think optimism is completely crazy in the sense 222 00:12:17,040 --> 00:12:19,560 Speaker 1: that we shouldn't be extrapolating what we're seeing in April 223 00:12:19,640 --> 00:12:22,480 Speaker 1: and into May. But that said, I mean this is 224 00:12:22,640 --> 00:12:24,440 Speaker 1: a big hole to climb out of. It's it's going 225 00:12:24,480 --> 00:12:26,439 Speaker 1: to be a long time for the economy to recover. 226 00:12:27,200 --> 00:12:31,559 Speaker 1: Jimal Sullivan, what is your question for Secretary Monution? You know, 227 00:12:31,640 --> 00:12:33,839 Speaker 1: we have a parlor game here with the Chairman of 228 00:12:33,880 --> 00:12:36,240 Speaker 1: the Fed, the vice chairman of the rest, and we've 229 00:12:36,280 --> 00:12:38,560 Speaker 1: got all these smart questions we asked them. Folks are 230 00:12:38,640 --> 00:12:41,520 Speaker 1: Michael McKee will speak with Eric rosen Gren of Boston 231 00:12:42,080 --> 00:12:45,720 Speaker 1: later today as well. Nobody ever talks about the questions 232 00:12:45,800 --> 00:12:50,520 Speaker 1: the Secretary monution? What would you ask him, Jim And Well, 233 00:12:50,559 --> 00:12:52,760 Speaker 1: I mean, of course the markets are hurricane on seeing 234 00:12:52,800 --> 00:12:56,760 Speaker 1: what what more in terms of fiscal stimulus. I mean, 235 00:12:56,840 --> 00:12:59,559 Speaker 1: that's that's obviously an issue, and I think there is 236 00:12:59,840 --> 00:13:02,080 Speaker 1: the senses that there is going to be another round. 237 00:13:02,120 --> 00:13:04,360 Speaker 1: It's just a question of how much help is in there. 238 00:13:04,840 --> 00:13:08,240 Speaker 1: And I think everybody agrees that the states and cities 239 00:13:08,280 --> 00:13:10,880 Speaker 1: will will need more aids. So again we'll let question 240 00:13:10,960 --> 00:13:13,480 Speaker 1: be answered today. I suspect not, but that that's obviously 241 00:13:13,679 --> 00:13:15,760 Speaker 1: an issue for markets over the next month. I think 242 00:13:15,760 --> 00:13:17,839 Speaker 1: a lot of people are upset as well, Tom about 243 00:13:17,880 --> 00:13:21,000 Speaker 1: how much is being done to lose some financial conditions, 244 00:13:21,520 --> 00:13:23,800 Speaker 1: and it hasn't been contingent upon the companies that have 245 00:13:23,920 --> 00:13:27,520 Speaker 1: received the benefits of that maintaining the payroll. The small 246 00:13:27,600 --> 00:13:31,160 Speaker 1: business program quite clearly small business lending has done that. 247 00:13:31,280 --> 00:13:33,199 Speaker 1: But when it comes to the FED, the amount have 248 00:13:33,280 --> 00:13:35,600 Speaker 1: built up the bandaged sheet, the amount they have loosened 249 00:13:35,640 --> 00:13:38,360 Speaker 1: up financial conditions so that people can still come into 250 00:13:38,360 --> 00:13:40,760 Speaker 1: the capital markets and raise money. I think there's been 251 00:13:40,760 --> 00:13:43,400 Speaker 1: a huge disappointment these companies are able to tap it 252 00:13:43,800 --> 00:13:46,959 Speaker 1: to really loose credit markets largely because of what the 253 00:13:47,040 --> 00:13:49,840 Speaker 1: FED has done, and not have to follow up by saying, 254 00:13:49,920 --> 00:13:53,000 Speaker 1: you know what, we pledge to keep the payroll exactly 255 00:13:53,040 --> 00:13:56,040 Speaker 1: where it was before COVID hit and John, what's so 256 00:13:56,160 --> 00:13:59,719 Speaker 1: important about your important comment is it's a comment for 257 00:14:00,080 --> 00:14:03,000 Speaker 1: June and July. Their reporting will be done on that 258 00:14:03,800 --> 00:14:06,760 Speaker 1: and that will drop. You know, there'll be some adventurous reporters, 259 00:14:06,800 --> 00:14:10,040 Speaker 1: hopefully at Bloomberg News, where that will drop like a 260 00:14:10,240 --> 00:14:14,280 Speaker 1: bombshell into June and July and frankly into the election season. 261 00:14:14,600 --> 00:14:16,480 Speaker 1: That's the problem, isn't it, Jim, That we haven't really 262 00:14:16,559 --> 00:14:20,600 Speaker 1: seen the large multinational payroll cuts yet. When we reopen 263 00:14:21,120 --> 00:14:24,640 Speaker 1: and these big multinational companies take a look around at 264 00:14:24,680 --> 00:14:28,520 Speaker 1: the demands backdrop, at the outlook for improvement. Are we're 265 00:14:28,560 --> 00:14:30,720 Speaker 1: going to see some big job cuts outweigh as some 266 00:14:30,800 --> 00:14:33,720 Speaker 1: of these big multinationals. Isn't that just inevitable at this point, Jim, 267 00:14:34,480 --> 00:14:37,200 Speaker 1: And Well, I mean it's it's it's not. I mean, 268 00:14:37,240 --> 00:14:40,040 Speaker 1: certainly big companies have contributed. It's not I think just 269 00:14:40,160 --> 00:14:42,400 Speaker 1: the small companies that accounted for the twenty million plus. 270 00:14:43,000 --> 00:14:44,920 Speaker 1: And certainly there are a lot of furloughs out there. 271 00:14:45,320 --> 00:14:47,800 Speaker 1: I mean, even companies like the auto companies obviously are 272 00:14:47,840 --> 00:14:50,120 Speaker 1: starting to come back. I mean they're they're they're big companies. 273 00:14:50,760 --> 00:14:54,320 Speaker 1: So I think disproportionately it's smaller businesses. But I think 274 00:14:54,360 --> 00:14:56,440 Speaker 1: across the board, when you got the twenty million decline 275 00:14:56,840 --> 00:15:00,040 Speaker 1: in April and and again to the extent econ of 276 00:15:00,120 --> 00:15:03,400 Speaker 1: he does start to open up again, then I think 277 00:15:03,440 --> 00:15:05,480 Speaker 1: there are reasons to think that the big job losses 278 00:15:05,520 --> 00:15:07,840 Speaker 1: are behind us once we get through. May thank you 279 00:15:07,920 --> 00:15:10,200 Speaker 1: so much for being with us. Jim Osullivan, TV Security's 280 00:15:10,280 --> 00:15:18,080 Speaker 1: chief US macro strategist. Never sleepy at the Bank of America. 281 00:15:18,320 --> 00:15:21,520 Speaker 1: Always important to catch up and certainly during UH this 282 00:15:21,680 --> 00:15:25,440 Speaker 1: pandemic as well with Brian moynhan. Here is David Weston. 283 00:15:25,880 --> 00:15:28,120 Speaker 1: We're welcome now our Bloomberg TV and radio and it 284 00:15:28,200 --> 00:15:31,200 Speaker 1: is worldwide as we welcome also the Chairman and CEO 285 00:15:31,320 --> 00:15:33,480 Speaker 1: of Bank of America, Brian moynihan. Brian, thank you so 286 00:15:33,600 --> 00:15:35,600 Speaker 1: much for joining us. Last time we spoke about six 287 00:15:35,680 --> 00:15:38,520 Speaker 1: weeks ago, and you said you expected a rough second 288 00:15:38,600 --> 00:15:42,200 Speaker 1: quarter down, maybe some rebound in the third and fourth quarter, 289 00:15:42,360 --> 00:15:44,840 Speaker 1: and then the economy really getting back to full steam 290 00:15:45,040 --> 00:15:48,160 Speaker 1: sometime in a lot's happened in that six weeks. Has 291 00:15:48,240 --> 00:15:52,800 Speaker 1: your view changed, but David, our view hasn't changed. But 292 00:15:52,960 --> 00:15:55,200 Speaker 1: it comes back to what I said before. This is 293 00:15:55,240 --> 00:15:58,400 Speaker 1: a healthcare crisis. And as you're starting to see the 294 00:15:58,440 --> 00:16:01,880 Speaker 1: healthcare crisis be mittig not solved yet, you're starting to 295 00:16:01,920 --> 00:16:04,520 Speaker 1: see the economy start to recover. And we can talk 296 00:16:04,560 --> 00:16:07,640 Speaker 1: about that. But the approach to winning UH, the war 297 00:16:07,720 --> 00:16:11,080 Speaker 1: against the crisis UH for us, has been a customer centric, 298 00:16:11,080 --> 00:16:14,160 Speaker 1: community centric, employee centric move and so you know, we've 299 00:16:14,200 --> 00:16:16,400 Speaker 1: been out there driving, we've been supporting our clients and 300 00:16:16,440 --> 00:16:18,120 Speaker 1: trying to make sure they have the credit and capital 301 00:16:18,360 --> 00:16:21,680 Speaker 1: to UH to do what they need to do and 302 00:16:22,000 --> 00:16:24,440 Speaker 1: help them through this trough of activity in the second quarter, 303 00:16:24,520 --> 00:16:26,360 Speaker 1: and you can see that in the loan balances extended, 304 00:16:26,400 --> 00:16:29,040 Speaker 1: the p P P loans and how the things we've done. 305 00:16:29,120 --> 00:16:31,440 Speaker 1: We've helped our consumer clients through waivers so they have 306 00:16:31,840 --> 00:16:33,840 Speaker 1: the ability to have better cash flow in the house. 307 00:16:33,960 --> 00:16:36,440 Speaker 1: We helped our teammates by saying no layoffs so they 308 00:16:36,480 --> 00:16:39,000 Speaker 1: know their job is secure, and then getting them safe 309 00:16:39,040 --> 00:16:41,320 Speaker 1: and working from home. And then we've helped our communities 310 00:16:41,400 --> 00:16:44,960 Speaker 1: by contributions and a hundred million dollars and c d 311 00:16:45,120 --> 00:16:48,680 Speaker 1: f I investments which are community belot and financial institutions 312 00:16:48,680 --> 00:16:51,240 Speaker 1: at two fifty million dollars of which about undred seventy 313 00:16:51,280 --> 00:16:54,080 Speaker 1: million is already out. So all that is offsetting the 314 00:16:54,160 --> 00:16:57,800 Speaker 1: impacts of the current second quarter down draft that you've 315 00:16:57,800 --> 00:17:00,680 Speaker 1: seen with the unemployment numbers, and we don't see much differently, 316 00:17:00,760 --> 00:17:02,280 Speaker 1: it's just that we're starting to see us come out 317 00:17:02,320 --> 00:17:06,080 Speaker 1: the other side of this. Frankly. So, we have heard 318 00:17:06,119 --> 00:17:08,639 Speaker 1: from the Federal Reserve and they've expressed some concern at 319 00:17:08,720 --> 00:17:11,600 Speaker 1: least that as this pandemic continues, there may be some 320 00:17:11,840 --> 00:17:14,800 Speaker 1: threat to the overall system and specifically talks for example 321 00:17:14,840 --> 00:17:17,960 Speaker 1: about commercial real estate. Are you seeing some parts of 322 00:17:18,000 --> 00:17:20,640 Speaker 1: the market that are particularly vulnerable on the credit side. 323 00:17:22,040 --> 00:17:25,199 Speaker 1: Remember that the US economy is going to be depended 324 00:17:25,240 --> 00:17:28,800 Speaker 1: on the activity the consumer base, and and so you 325 00:17:29,000 --> 00:17:31,160 Speaker 1: always have to start there when you talk about the US. 326 00:17:31,240 --> 00:17:33,720 Speaker 1: So even though we have this year from the Bank 327 00:17:33,760 --> 00:17:36,000 Speaker 1: American research team, which is the best in the world, 328 00:17:36,119 --> 00:17:39,200 Speaker 1: you know, being minus five percent five and a half 329 00:17:39,280 --> 00:17:42,080 Speaker 1: percent this year and plus five percent next year, the 330 00:17:42,160 --> 00:17:44,639 Speaker 1: real question will be how to consumers behave And in 331 00:17:44,760 --> 00:17:47,879 Speaker 1: what we've seen since the low point in the second 332 00:17:48,119 --> 00:17:50,879 Speaker 1: couple first couple weeks of April, in terms of everything 333 00:17:50,920 --> 00:17:53,240 Speaker 1: in terms of their spending because of the stay at 334 00:17:53,280 --> 00:17:57,240 Speaker 1: home edicts, in terms of their borrowing activity, in terms 335 00:17:57,320 --> 00:17:59,720 Speaker 1: of the transfer of money. Um, you saw all that 336 00:18:00,040 --> 00:18:02,879 Speaker 1: all to a lowest level, and obviously things like travel 337 00:18:03,000 --> 00:18:05,800 Speaker 1: and hotels and things are most affected. But as you've 338 00:18:05,800 --> 00:18:08,280 Speaker 1: seen steadily as you went through the third week April 339 00:18:08,400 --> 00:18:10,560 Speaker 1: then on into the first part of May, you're seeing 340 00:18:11,040 --> 00:18:13,320 Speaker 1: their activities pick up even in the states that are 341 00:18:13,359 --> 00:18:15,919 Speaker 1: still understay from home, and you're seeing the activity pick 342 00:18:16,000 --> 00:18:18,600 Speaker 1: up much quicker in the places they're going back to work. 343 00:18:19,480 --> 00:18:21,399 Speaker 1: And so for the month of May, we're seeing it 344 00:18:21,480 --> 00:18:23,920 Speaker 1: down about you know, two or three four percent versus 345 00:18:24,040 --> 00:18:26,560 Speaker 1: last year. UH for the year today it's down a 346 00:18:26,600 --> 00:18:28,639 Speaker 1: couple of percent. And that's the question. The length of 347 00:18:28,680 --> 00:18:31,160 Speaker 1: this is going to be how the consumers behave given 348 00:18:31,440 --> 00:18:35,160 Speaker 1: the high levels unemployment that you've seen published, when people 349 00:18:35,200 --> 00:18:38,200 Speaker 1: get back to work, jobs coming back in the stimulus 350 00:18:38,240 --> 00:18:40,200 Speaker 1: payments which are all hitting the street of the last 351 00:18:40,200 --> 00:18:42,359 Speaker 1: few weeks, and how all works together to see if 352 00:18:42,400 --> 00:18:44,399 Speaker 1: the consumer's behavior changed. And when I hear when you 353 00:18:44,440 --> 00:18:47,320 Speaker 1: hear Governor, chair Pal and others, the concern I have 354 00:18:47,520 --> 00:18:49,679 Speaker 1: is have we changed consumer behavior as we look out 355 00:18:49,720 --> 00:18:53,720 Speaker 1: across the next four or five quarters. Well, that is 356 00:18:54,359 --> 00:18:57,240 Speaker 1: a key question, maybe the key question, Brian, clearly when 357 00:18:57,280 --> 00:18:59,120 Speaker 1: it comes to consumer I know you've already taken about 358 00:18:59,119 --> 00:19:02,439 Speaker 1: four point eight billion dollar reserve against credit possible losses 359 00:19:02,680 --> 00:19:05,399 Speaker 1: given the level unemployment, which is really quite stunning. Do 360 00:19:05,440 --> 00:19:08,520 Speaker 1: you think that's gonna be enough? Well, what you've seen 361 00:19:08,600 --> 00:19:12,840 Speaker 1: so far is with the consumer help, we've we've granted 362 00:19:12,840 --> 00:19:15,440 Speaker 1: about a million a half payment deferrals. But if you 363 00:19:15,480 --> 00:19:18,760 Speaker 1: look at the actual interesting statistics about thirty five or 364 00:19:19,440 --> 00:19:21,640 Speaker 1: the people ask for credit card payment deferral one ahead 365 00:19:21,640 --> 00:19:23,000 Speaker 1: and made the payment. And if you go and a 366 00:19:23,080 --> 00:19:25,879 Speaker 1: look at those consumers, what you see is because of 367 00:19:25,920 --> 00:19:30,560 Speaker 1: the UH leave aside the issue of where the money 368 00:19:30,640 --> 00:19:32,679 Speaker 1: is coming from, you're seeing higher balance in our account 369 00:19:33,080 --> 00:19:35,840 Speaker 1: and that's because the stimulus between you know, the I 370 00:19:35,960 --> 00:19:40,119 Speaker 1: P payments, between the enhanced unemployment, these measures taken by 371 00:19:40,160 --> 00:19:43,560 Speaker 1: Congress and by the administration by the FED have worked 372 00:19:43,600 --> 00:19:47,320 Speaker 1: as offset the unfortunate aspects of very high unemployment. And 373 00:19:47,480 --> 00:19:50,720 Speaker 1: so so far you're not seeing the delinquent seas and 374 00:19:50,760 --> 00:19:55,520 Speaker 1: things rise vs. You've seen payment deferrals UH increase, but 375 00:19:55,560 --> 00:19:57,360 Speaker 1: you're seeing them start to level off and come down 376 00:19:57,440 --> 00:20:00,359 Speaker 1: in our book, and so we expect to see you 377 00:20:00,600 --> 00:20:03,720 Speaker 1: charge offs coming later on as as as this thing 378 00:20:03,800 --> 00:20:05,960 Speaker 1: goes on. But the reality is right now you're not 379 00:20:06,480 --> 00:20:08,639 Speaker 1: seeing the kind of credit damage that you'd expect to 380 00:20:08,680 --> 00:20:11,000 Speaker 1: see with this amount of down draft and activity. The 381 00:20:11,080 --> 00:20:13,200 Speaker 1: question is what happens next, and that's we're all watching. 382 00:20:15,000 --> 00:20:16,840 Speaker 1: And to that very point you said in the past, 383 00:20:16,920 --> 00:20:19,120 Speaker 1: China to some extent may give us some indication. We've 384 00:20:19,160 --> 00:20:21,680 Speaker 1: seen numbers coming out of China, Brian that indicate the 385 00:20:21,760 --> 00:20:24,359 Speaker 1: industrial production has come back pretty quickly. All consumption is 386 00:20:24,440 --> 00:20:26,560 Speaker 1: coming back as well. But on the other hand, consumer 387 00:20:26,600 --> 00:20:29,120 Speaker 1: maybe not so much with retail sales. Does that give 388 00:20:29,160 --> 00:20:32,720 Speaker 1: you cause for concern back here in the United States, Well, 389 00:20:32,720 --> 00:20:35,480 Speaker 1: it does because the question is how did you change behavior? 390 00:20:35,640 --> 00:20:38,439 Speaker 1: So when you saw Chinese, uh, you know, they went 391 00:20:38,520 --> 00:20:41,160 Speaker 1: into this earlier, they locked down earlier, they came out earlier, 392 00:20:41,680 --> 00:20:44,160 Speaker 1: and you know, we're back in our offices in China 393 00:20:44,200 --> 00:20:47,760 Speaker 1: moving from people back towards so you're starting to see 394 00:20:48,680 --> 00:20:51,199 Speaker 1: normalization of activity and in the questions what's the underlying 395 00:20:51,240 --> 00:20:54,280 Speaker 1: activity and restaurants and and shopping and things like that. 396 00:20:54,560 --> 00:20:57,399 Speaker 1: And so you saw an immediate burst of activity as 397 00:20:57,440 --> 00:20:59,680 Speaker 1: they opened back up and see it fall back down. 398 00:20:59,720 --> 00:21:01,560 Speaker 1: And that we have to watch in the States is 399 00:21:01,760 --> 00:21:03,320 Speaker 1: there'll be a burst of activity in some of these 400 00:21:03,359 --> 00:21:05,879 Speaker 1: places as people who have been you know, in their 401 00:21:05,920 --> 00:21:08,320 Speaker 1: homes for six, five, six, seven, eight weeks go back 402 00:21:08,359 --> 00:21:10,720 Speaker 1: out and do things and will let sustain. And that's 403 00:21:10,720 --> 00:21:13,000 Speaker 1: where you need to look more fundamentally on things like 404 00:21:13,119 --> 00:21:16,440 Speaker 1: car purchases and things like house purchases and see where 405 00:21:16,440 --> 00:21:18,680 Speaker 1: they start to end up over time. But remember the 406 00:21:18,760 --> 00:21:22,560 Speaker 1: baseline projection for most people is the economy doesn't get 407 00:21:22,600 --> 00:21:25,320 Speaker 1: back to its current size until you get to sort 408 00:21:25,320 --> 00:21:28,080 Speaker 1: of the end of next year. That's the definition of recovery. 409 00:21:28,240 --> 00:21:31,800 Speaker 1: So but each quarter from this quarter forward is increased 410 00:21:31,840 --> 00:21:34,680 Speaker 1: economic activity. And what we have to make sure and 411 00:21:34,760 --> 00:21:36,920 Speaker 1: all the policies and stimulus have been put in place 412 00:21:37,040 --> 00:21:39,960 Speaker 1: or making sure, is that despite the very highnemployment, despite 413 00:21:39,960 --> 00:21:42,560 Speaker 1: the issues of who's unemployed, despite the issues getting that 414 00:21:42,640 --> 00:21:44,080 Speaker 1: we need to get people back to work from the 415 00:21:44,160 --> 00:21:47,159 Speaker 1: human toll of all that these stimulus is offsetting. It 416 00:21:47,720 --> 00:21:49,440 Speaker 1: is an attempt off set that. And you have to 417 00:21:49,480 --> 00:21:53,440 Speaker 1: see that play out of our time, Brian, you have 418 00:21:53,560 --> 00:21:55,560 Speaker 1: something like a hundred eighty thousand I think people working 419 00:21:55,600 --> 00:21:57,360 Speaker 1: from home right now. You talked about what you're doing 420 00:21:57,480 --> 00:21:59,719 Speaker 1: over in Asia. When do you expect him to come 421 00:21:59,720 --> 00:22:01,800 Speaker 1: back and how and by the way, how many will 422 00:22:01,840 --> 00:22:05,720 Speaker 1: they all come back? Well, that the ideas we have 423 00:22:05,880 --> 00:22:09,200 Speaker 1: We've always had people who worked outside the standard office setting, 424 00:22:09,280 --> 00:22:12,159 Speaker 1: and that's something we do. Um, there's a great debate 425 00:22:12,520 --> 00:22:15,960 Speaker 1: you know, with this change forever the workforce in America 426 00:22:16,000 --> 00:22:18,200 Speaker 1: and where they want to work. We'll see that play out. 427 00:22:18,240 --> 00:22:20,399 Speaker 1: But that is that is further out there in your term. 428 00:22:20,880 --> 00:22:22,879 Speaker 1: We have we have been open every day, we have 429 00:22:23,000 --> 00:22:25,560 Speaker 1: not shut down except for the branches we closed out 430 00:22:25,560 --> 00:22:28,520 Speaker 1: of concerns to keep our teammates safe in those in 431 00:22:28,600 --> 00:22:34,600 Speaker 1: those branches. Um we which is about branches. Everything else 432 00:22:34,640 --> 00:22:36,560 Speaker 1: has been open. We've been functioning every day and we're 433 00:22:36,560 --> 00:22:38,680 Speaker 1: beginning to open those branches, especially in the States, are 434 00:22:38,680 --> 00:22:42,080 Speaker 1: reopening slowly but surely. So we have the ability to 435 00:22:42,119 --> 00:22:45,400 Speaker 1: operate very well, very much under control. Our technops team 436 00:22:45,480 --> 00:22:47,920 Speaker 1: under Kathy Bisson's leadership, did a fabulished job of putting 437 00:22:48,000 --> 00:22:49,920 Speaker 1: us in position to have a hundred eighty thousand people 438 00:22:49,960 --> 00:22:52,359 Speaker 1: work from home, so we can operate this way. So 439 00:22:52,480 --> 00:22:55,280 Speaker 1: we have the luxury to go back slowly and with 440 00:22:55,440 --> 00:22:59,359 Speaker 1: social distancing requirements, with temperature taking while all the policies 441 00:22:59,440 --> 00:23:01,879 Speaker 1: that all employers want to put in place, you know, 442 00:23:02,040 --> 00:23:04,280 Speaker 1: the the ability of the luxury putting people back in 443 00:23:04,359 --> 00:23:07,280 Speaker 1: place carefully also takes a burden off of the communities 444 00:23:07,320 --> 00:23:10,560 Speaker 1: we operate in, not to have high level of cases 445 00:23:10,600 --> 00:23:14,439 Speaker 1: are perfections and having people move around and creating pressure 446 00:23:14,480 --> 00:23:17,399 Speaker 1: on the community. So we will go back slowly. We 447 00:23:17,520 --> 00:23:19,920 Speaker 1: haven't said any plans yet. We have a top talent 448 00:23:20,000 --> 00:23:23,360 Speaker 1: team working on the reentry back to the office. It's 449 00:23:23,400 --> 00:23:24,960 Speaker 1: not back to work. We'll work and every day it's 450 00:23:24,960 --> 00:23:29,040 Speaker 1: back to the office. Yes, sure, no, I understand, Brian. Finally, 451 00:23:29,359 --> 00:23:33,160 Speaker 1: we're going to hear from Federal Reserve Chair J Pow 452 00:23:33,280 --> 00:23:35,560 Speaker 1: today as part of the cares Actor report on that 453 00:23:35,800 --> 00:23:37,760 Speaker 1: he's been doing a fair amount taking already. What would 454 00:23:37,800 --> 00:23:41,800 Speaker 1: you like to hear from Chair Pile today? I think 455 00:23:41,880 --> 00:23:45,040 Speaker 1: if you're going to hear from both second reminution Schair Pole. 456 00:23:45,160 --> 00:23:47,200 Speaker 1: But and I think people have to stack. You know, 457 00:23:47,400 --> 00:23:50,800 Speaker 1: there's a the p p P program is now. You know, 458 00:23:51,280 --> 00:23:54,480 Speaker 1: it still has money left. The applications are still coming in. 459 00:23:55,160 --> 00:23:57,960 Speaker 1: That dollar volume of loans is going up, but the 460 00:23:58,040 --> 00:23:59,960 Speaker 1: number loans is going up faster. So the loans are 461 00:24:00,000 --> 00:24:02,520 Speaker 1: smaller and small. In our case, we've done three thousand 462 00:24:02,600 --> 00:24:06,040 Speaker 1: of them as of this morning, eighty thousand average balance. Uh. 463 00:24:06,480 --> 00:24:12,040 Speaker 1: It's the employers are under a hundred or under ted employees. Uh. 464 00:24:12,359 --> 00:24:14,240 Speaker 1: And so there's a small business that are getting the 465 00:24:14,280 --> 00:24:16,480 Speaker 1: help they need. And so I think what you want 466 00:24:16,520 --> 00:24:19,960 Speaker 1: to hear is where's the next rounds of their ideas 467 00:24:20,000 --> 00:24:22,960 Speaker 1: to continue to put money into the economy to help 468 00:24:22,960 --> 00:24:25,720 Speaker 1: because it's not an unlimited resource, so we need to 469 00:24:25,800 --> 00:24:27,840 Speaker 1: keep adding carefully in the areas I think that need 470 00:24:27,920 --> 00:24:29,919 Speaker 1: the most help in the near term of the States 471 00:24:30,040 --> 00:24:32,760 Speaker 1: because of the incredible budget pressure they've been put under, 472 00:24:32,800 --> 00:24:34,320 Speaker 1: and if we don't help them, we'll see them have 473 00:24:34,440 --> 00:24:36,880 Speaker 1: to make budget justments which will add to the unemployment 474 00:24:36,960 --> 00:24:40,000 Speaker 1: burden to the hospitals and things. Is similar issue in 475 00:24:40,160 --> 00:24:42,800 Speaker 1: terms of having to shut down and lose revenue and 476 00:24:42,800 --> 00:24:44,639 Speaker 1: they need to get that whole plug so they can 477 00:24:44,680 --> 00:24:46,720 Speaker 1: get back to it. And in some respect some of 478 00:24:46,720 --> 00:24:51,280 Speaker 1: the nonprofits in the performance nonprofits, especially the same issue university. 479 00:24:51,400 --> 00:24:53,719 Speaker 1: So that the idea is the stimulus has to continue 480 00:24:53,800 --> 00:24:58,440 Speaker 1: help Americans through the unemployment, assis benefits, uh uh and 481 00:24:58,600 --> 00:25:00,320 Speaker 1: things like that, but also has to it can be 482 00:25:00,400 --> 00:25:03,159 Speaker 1: targeted in X rounds towards these places that just have 483 00:25:03,320 --> 00:25:05,680 Speaker 1: operating holes that we have to decide as a society 484 00:25:05,680 --> 00:25:07,960 Speaker 1: we're going to replace so that they can get back 485 00:25:08,040 --> 00:25:10,840 Speaker 1: and provide a great services they provide. And so that's 486 00:25:10,880 --> 00:25:12,720 Speaker 1: what you like to hear in terms of the work. 487 00:25:12,840 --> 00:25:17,760 Speaker 1: And there's a lot of discussion about facilities and usage 488 00:25:17,760 --> 00:25:20,359 Speaker 1: and other up and operating. A lot of these facilities 489 00:25:20,480 --> 00:25:22,959 Speaker 1: were put in place to stabilize and you see massive 490 00:25:23,000 --> 00:25:25,640 Speaker 1: stabilization in the market so that you know high grade 491 00:25:25,640 --> 00:25:28,080 Speaker 1: issues will have another record month, probably this month. Uh 492 00:25:28,680 --> 00:25:33,240 Speaker 1: uh uh. You know, high yield will have a strong 493 00:25:33,359 --> 00:25:36,000 Speaker 1: month if you're starting to see converts and some equity 494 00:25:36,040 --> 00:25:39,200 Speaker 1: deals get done. The stabilization and the fact those facilities 495 00:25:39,200 --> 00:25:41,159 Speaker 1: aren't all used, it's actually good news. That means the 496 00:25:41,200 --> 00:25:43,480 Speaker 1: markets are doing what they're doing and providing capital. So 497 00:25:44,080 --> 00:25:46,000 Speaker 1: what I think people get focused on is how much 498 00:25:46,040 --> 00:25:48,720 Speaker 1: money's outstanding on facility X or something. The reality is 499 00:25:48,800 --> 00:25:51,399 Speaker 1: having it there provides a comfort that the private sector 500 00:25:51,440 --> 00:25:53,320 Speaker 1: can drive it in the banking system can drive it. 501 00:25:53,440 --> 00:25:56,320 Speaker 1: So whether it's main street, whether some of these other facilities, 502 00:25:56,480 --> 00:25:58,920 Speaker 1: you know, the debate ought to be not about whether 503 00:25:58,920 --> 00:26:01,080 Speaker 1: it being used about the news. If they're not being used, 504 00:26:01,119 --> 00:26:05,920 Speaker 1: that means you've seen stability the funding structures. Fascinating. Thank 505 00:26:05,960 --> 00:26:07,919 Speaker 1: you so much. Brian really appreciated spending time with us. 506 00:26:08,080 --> 00:26:10,520 Speaker 1: As Brian moynihan, he is the chairman and CEO of 507 00:26:10,600 --> 00:26:12,280 Speaker 1: Bank of America. We want to thank all our radio 508 00:26:12,320 --> 00:26:18,960 Speaker 1: listeners for joining us and this is Bloomberg. One of 509 00:26:19,000 --> 00:26:20,800 Speaker 1: the great joys of doing this, folks, has been over 510 00:26:20,840 --> 00:26:23,840 Speaker 1: the last number of weeks learning and speaking to the 511 00:26:23,960 --> 00:26:28,880 Speaker 1: consistent excellence of the Johns Hopkins University medical team. We've 512 00:26:28,880 --> 00:26:31,080 Speaker 1: talked to people at the Bloomberg School of Public Health. 513 00:26:31,520 --> 00:26:35,399 Speaker 1: Of course Michael Bloomberg, the founder of Bloomberg LP, is 514 00:26:35,520 --> 00:26:39,159 Speaker 1: the philanthropist there, but also to their medical school and 515 00:26:39,240 --> 00:26:43,480 Speaker 1: their nursing school. This morning a conversation where NASA ernest 516 00:26:43,800 --> 00:26:47,840 Speaker 1: we have the adrenaline rush of the ambulances in in 517 00:26:47,960 --> 00:26:52,399 Speaker 1: the days have diminished, but what hasn't really changed is 518 00:26:52,440 --> 00:26:56,399 Speaker 1: the demand for i c U. Bit well, the you know, 519 00:26:56,520 --> 00:26:58,800 Speaker 1: the demand for the i CU beds and the ability 520 00:26:58,840 --> 00:27:00,760 Speaker 1: to go into intensive care. Right now, what does that 521 00:27:00,920 --> 00:27:03,800 Speaker 1: signal to you? Is it still a large body of 522 00:27:03,960 --> 00:27:07,919 Speaker 1: older people most vulnerable, or is it across all age groups. 523 00:27:08,640 --> 00:27:12,360 Speaker 1: It's interesting it is the majority of the age group 524 00:27:12,440 --> 00:27:16,040 Speaker 1: that we're seeing here at Hopkins that's impacted is actually 525 00:27:16,160 --> 00:27:19,639 Speaker 1: in the thirty to fifty year old range. It is 526 00:27:19,880 --> 00:27:23,560 Speaker 1: spread across all ranges. But that was very surprising to 527 00:27:23,760 --> 00:27:28,320 Speaker 1: us to see that it wasn't just the elderly population. 528 00:27:29,400 --> 00:27:32,200 Speaker 1: But now you make a point right in saying, look, 529 00:27:32,280 --> 00:27:36,160 Speaker 1: reopening isn't relaxing. But how do you change perception because 530 00:27:36,160 --> 00:27:38,399 Speaker 1: a lot of people will say, well, look, you know, 531 00:27:38,480 --> 00:27:41,200 Speaker 1: we're over the worst, so actually I can get back 532 00:27:41,240 --> 00:27:44,560 Speaker 1: to a normal life. That's a very good question. One 533 00:27:44,640 --> 00:27:47,280 Speaker 1: of the things that you have to do is you 534 00:27:47,400 --> 00:27:50,280 Speaker 1: have to have a good message about the balance between 535 00:27:50,440 --> 00:27:56,639 Speaker 1: science and economics and not have it as simply political 536 00:27:57,320 --> 00:27:59,119 Speaker 1: all the time. And if you notice, you see it. 537 00:27:59,760 --> 00:28:03,680 Speaker 1: That what we see quite frequently. But really the things 538 00:28:03,760 --> 00:28:07,920 Speaker 1: that have worked are the masking the social distancing. That 539 00:28:08,160 --> 00:28:13,720 Speaker 1: part needs to stay. But are people understanding is it 540 00:28:13,880 --> 00:28:16,840 Speaker 1: not clear from the authorities or are people refusing to 541 00:28:17,040 --> 00:28:18,719 Speaker 1: do that? So I don't know, you know what your 542 00:28:18,840 --> 00:28:22,840 Speaker 1: perception is in what could be done better? Sure, so 543 00:28:23,080 --> 00:28:26,439 Speaker 1: people are, they're relaxing. I was out the other day 544 00:28:26,480 --> 00:28:28,960 Speaker 1: and I noticed many people without a face mask and 545 00:28:29,080 --> 00:28:31,320 Speaker 1: that wasn't the way it was a few weeks ago. 546 00:28:32,040 --> 00:28:36,280 Speaker 1: So while I don't want this to be an acceleration 547 00:28:36,680 --> 00:28:40,640 Speaker 1: of doom and gloom, I do want people to really 548 00:28:40,800 --> 00:28:44,320 Speaker 1: understand that in order for us to stay ahead of 549 00:28:44,480 --> 00:28:47,920 Speaker 1: this curve that we've been working so hard on, we 550 00:28:48,200 --> 00:28:51,479 Speaker 1: need to keep the mask on. I saw your segment 551 00:28:51,520 --> 00:28:54,440 Speaker 1: about Uganda where they're giving mass to all of the children. 552 00:28:55,520 --> 00:29:00,560 Speaker 1: That's an important message. We need to keep those messages going. Masking, 553 00:29:00,760 --> 00:29:04,640 Speaker 1: social distancing, washing your hand are all very important things. 554 00:29:05,160 --> 00:29:07,560 Speaker 1: We are at a different place, but we are not 555 00:29:07,920 --> 00:29:12,280 Speaker 1: completely out of the woods yet. News earnest with us 556 00:29:12,320 --> 00:29:15,160 Speaker 1: with Johns Hopkins University School of Nursing, and we look 557 00:29:15,240 --> 00:29:18,280 Speaker 1: for those updates tomorrow and here in the coming weeks 558 00:29:18,920 --> 00:29:25,560 Speaker 1: as well. Cam Harvey, Professor Finance at the FUCAL School 559 00:29:25,600 --> 00:29:30,520 Speaker 1: of Business at the University, former professor of mine. Actually, uh, professor, 560 00:29:30,600 --> 00:29:33,280 Speaker 1: thanks so much for joining us here. I tell you, 561 00:29:33,400 --> 00:29:36,600 Speaker 1: as I think back to my FUKAL at years, Professor, 562 00:29:36,680 --> 00:29:39,640 Speaker 1: I don't recall you or any other professors telling teaching 563 00:29:39,720 --> 00:29:44,280 Speaker 1: us anything about a pandemic and what that means for economies. 564 00:29:44,760 --> 00:29:47,760 Speaker 1: Give us your sense of kind of how you're seeing 565 00:29:48,360 --> 00:29:53,200 Speaker 1: the Federal Reserve, central banks around the world, Congress, how 566 00:29:53,280 --> 00:29:56,280 Speaker 1: everybody's trying to react to this pandemic. What do you what? 567 00:29:56,440 --> 00:29:59,360 Speaker 1: What what are you seeing right now? Yeah, that's the 568 00:29:59,480 --> 00:30:02,920 Speaker 1: first thing, all Tom, great to be on the show. Um. 569 00:30:03,520 --> 00:30:08,520 Speaker 1: My first lecture in risk management is on something called 570 00:30:08,560 --> 00:30:13,800 Speaker 1: systemic risk, and systemic risk is really hard to hedge, 571 00:30:14,280 --> 00:30:17,920 Speaker 1: really hard to mitigate, and we kind of brainstorm different 572 00:30:18,040 --> 00:30:20,840 Speaker 1: systemic risks and you could think of, let's say, a 573 00:30:20,960 --> 00:30:24,400 Speaker 1: nuclear war between the US and Russia. UM. There's no 574 00:30:24,520 --> 00:30:28,200 Speaker 1: place to hide nowhere on Earth. UM. And one of 575 00:30:28,240 --> 00:30:30,760 Speaker 1: the four systemic risks that we talk about is pandemic. 576 00:30:31,200 --> 00:30:35,160 Speaker 1: And it's interesting discussion because pandemic's nothing new. It's no 577 00:30:35,360 --> 00:30:39,240 Speaker 1: black swan. We've had plenty of pandemics. UM, it is 578 00:30:40,240 --> 00:30:44,840 Speaker 1: unusual this time around given the response, UH that the 579 00:30:44,920 --> 00:30:48,640 Speaker 1: economies have effectively been stopped. Uh So if there's any 580 00:30:48,680 --> 00:30:53,080 Speaker 1: black swan, it's the policy response that's completely unexpected and 581 00:30:53,160 --> 00:30:56,520 Speaker 1: you get numbers that are just off the chart. I 582 00:30:56,640 --> 00:31:00,000 Speaker 1: don't UM look forward to dealing with the macroeconomic day 583 00:31:00,160 --> 00:31:04,600 Speaker 1: in the future when you've got such extreme observations. So 584 00:31:04,800 --> 00:31:10,080 Speaker 1: the response is the black swan. So the FED, you know, 585 00:31:10,160 --> 00:31:12,320 Speaker 1: I think a lot of market participants, Professor would say 586 00:31:12,320 --> 00:31:16,000 Speaker 1: the FED has done a relatively admiral job here. They 587 00:31:16,080 --> 00:31:20,440 Speaker 1: were early, they were aggressive, appears, they were I think 588 00:31:20,480 --> 00:31:23,760 Speaker 1: they clearly message kind of what they were looking to do. 589 00:31:24,320 --> 00:31:26,520 Speaker 1: We heard from Chairman Pale on Sunday on sixty minutes 590 00:31:26,520 --> 00:31:29,280 Speaker 1: saying there's still more tools in his toolbox. How do 591 00:31:29,320 --> 00:31:34,040 Speaker 1: you kind of view the FETs performance to date? So 592 00:31:34,560 --> 00:31:39,120 Speaker 1: early on I was very nervous UM and certain actions 593 00:31:39,200 --> 00:31:41,960 Speaker 1: that they took at the beginning I was critical of 594 00:31:42,120 --> 00:31:45,920 Speaker 1: and still am. For example, they cut the interest rate 595 00:31:46,120 --> 00:31:49,320 Speaker 1: from one point five percent to one percent really early on. 596 00:31:49,520 --> 00:31:53,480 Speaker 1: That's what you're talking about being kind of early. UM, Well, 597 00:31:54,000 --> 00:31:56,320 Speaker 1: one point five percent is already a low interest rate. 598 00:31:57,160 --> 00:32:01,200 Speaker 1: And in the global financial crisis when they cut fifty 599 00:32:01,240 --> 00:32:04,360 Speaker 1: basis points in two thousand and seven, the rate of 600 00:32:04,440 --> 00:32:08,960 Speaker 1: interest they started from was five point to five So 601 00:32:09,720 --> 00:32:13,320 Speaker 1: then they cut again from one percent to zero percent, 602 00:32:13,640 --> 00:32:16,640 Speaker 1: and soon usually start doing that, you run the risk 603 00:32:16,960 --> 00:32:22,120 Speaker 1: of a liquidity trap that and we saw this effectively 604 00:32:22,560 --> 00:32:26,040 Speaker 1: UM play out where the third year bond at some 605 00:32:26,200 --> 00:32:29,560 Speaker 1: point was less than one percent. Who wants to buy 606 00:32:29,680 --> 00:32:33,240 Speaker 1: the thirty year bond had less than one percent? When 607 00:32:33,760 --> 00:32:38,720 Speaker 1: just like a moderate increase in rates like one UM, 608 00:32:39,560 --> 00:32:44,320 Speaker 1: you get hammered. You lose on that bond. So given 609 00:32:45,560 --> 00:32:47,960 Speaker 1: given the amount of QUEI going on, giving the amount 610 00:32:48,000 --> 00:32:52,320 Speaker 1: of money creation, UH, the risk shifts and the bonds 611 00:32:52,360 --> 00:32:56,000 Speaker 1: are no longer safe haven. Kim. One final question, if 612 00:32:56,040 --> 00:32:58,160 Speaker 1: we could cam and I want to go back to 613 00:32:58,240 --> 00:33:01,040 Speaker 1: Madigliana Miller, any idea of on and equities and we 614 00:33:01,120 --> 00:33:03,360 Speaker 1: all learn this and it's all theory and and all 615 00:33:03,440 --> 00:33:07,000 Speaker 1: that as well. Most of what we're doing now, Professor 616 00:33:07,320 --> 00:33:10,880 Speaker 1: is not in those textbooks. They're not in the textbooks 617 00:33:10,920 --> 00:33:12,960 Speaker 1: we used when we try to keep up with Fama. 618 00:33:13,320 --> 00:33:15,720 Speaker 1: They were in the textbooks Fama used when he tried 619 00:33:15,760 --> 00:33:19,520 Speaker 1: to keep up with Frank Night, etcetera, etcetera, etcetera. What 620 00:33:19,760 --> 00:33:24,120 Speaker 1: textbook are we using right now? Yeah, So it's really 621 00:33:24,200 --> 00:33:29,320 Speaker 1: hard to have a model of all possible situations, and 622 00:33:29,720 --> 00:33:32,280 Speaker 1: you have to kind of step back and and figure, 623 00:33:32,640 --> 00:33:35,880 Speaker 1: you know, the basics, what what we really know about this? 624 00:33:36,520 --> 00:33:39,040 Speaker 1: And one thing that we do know is that we're 625 00:33:39,120 --> 00:33:43,080 Speaker 1: borrowing a huge amount of money from the future um 626 00:33:43,280 --> 00:33:45,840 Speaker 1: to kind of get through this, and we need to 627 00:33:45,920 --> 00:33:48,600 Speaker 1: realize that we need to pay that back, and we 628 00:33:48,720 --> 00:33:54,000 Speaker 1: pay it back either through taxes or inflation. And also 629 00:33:54,720 --> 00:33:58,560 Speaker 1: we are creating a lot of money. The Fed's balance 630 00:33:58,640 --> 00:34:01,880 Speaker 1: sheet has exploded and s in the global financial crisis, 631 00:34:01,960 --> 00:34:05,960 Speaker 1: something similar to happen and there was no inflation. Beware 632 00:34:06,360 --> 00:34:12,400 Speaker 1: of extrapolating from one observation. So this combination of increasing 633 00:34:12,480 --> 00:34:16,800 Speaker 1: deadedness UH and the exploding balance sheet, to me, the 634 00:34:17,080 --> 00:34:23,480 Speaker 1: major risk for investors is unexpected inflation in the future. Hey, Cam, 635 00:34:23,560 --> 00:34:25,680 Speaker 1: thanks so much for joining us. We really appreciate a 636 00:34:25,719 --> 00:34:28,480 Speaker 1: camp Harvey, Professor of Finance at the Fuqual School of 637 00:34:28,520 --> 00:34:32,040 Speaker 1: Business at Duke University. Thanks for listening to the Bloomberg 638 00:34:32,080 --> 00:34:38,000 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 639 00:34:38,400 --> 00:34:42,600 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 640 00:34:42,680 --> 00:34:46,880 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 641 00:34:47,400 --> 00:34:48,440 Speaker 1: I'm Bloomberg Radio