WEBVTT - Surveillance: BOFA's Moynihan on Economic Recovery 0:00:09.880 --> 0:00:12.960 Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.600 Bloomberg dot Com, and of course on the Bloomberg. Jeffrey 0:00:27.600 --> 0:00:30.639 Curry has given us such good perspective with Goldman says, 0:00:30.720 --> 0:00:33.760 of course, Uh, he's a guy John who gives us 0:00:33.760 --> 0:00:36.960 a huge micro economic foundation with his work at the 0:00:37.040 --> 0:00:40.519 University of Chicago over the years. And John, it's not 0:00:40.680 --> 0:00:44.199 just about oil, but it's about the commodity complex in general. 0:00:44.600 --> 0:00:48.000 Do they get out front of a pandemic and try 0:00:48.080 --> 0:00:50.559 to expect the recovery. Well, the thing that Jeff I 0:00:50.560 --> 0:00:52.199 think was on top of was what would happen if 0:00:52.200 --> 0:00:55.040 we started to break you'll getting near to breaching storage capacity. 0:00:55.280 --> 0:00:57.360 And once we got to that point, how quickly this 0:00:57.400 --> 0:00:59.600 market would have to adjust, Tom and everything else, which 0:00:59.640 --> 0:01:02.040 is fully to place on a really small amount of time. 0:01:02.080 --> 0:01:03.760 And that's basically what you saw a month ago. The 0:01:03.800 --> 0:01:07.559 real threat of breaching storage capacity prices plunge aggressively lower 0:01:07.760 --> 0:01:11.839 than everything. House has to correct and correct fast, must listen, 0:01:11.920 --> 0:01:14.600 must watch for Global Wall Street. Jeffrey Curry of Golden 0:01:14.600 --> 0:01:16.640 Sex Jeffrey, good morning. I know that Lisa and John 0:01:16.640 --> 0:01:19.039 I have a lot of oil questions. Let me ask 0:01:19.080 --> 0:01:24.480 you a general question. Do commodities expect out like equities? 0:01:24.720 --> 0:01:28.720 If equities are reaching out six months, two years, etcetera. 0:01:29.040 --> 0:01:34.720 Do commodity participants do the same thing at most? Maybe 0:01:34.720 --> 0:01:37.520 in like oil thirty days? Um? I mean there is 0:01:37.560 --> 0:01:40.640 some expectations in but very small. And you know I 0:01:40.680 --> 0:01:43.920 can find out. Commodities are spot assets, UM. You know, 0:01:44.200 --> 0:01:47.600 financial markets their anticipatory assets. They look out to the future. 0:01:47.640 --> 0:01:51.000 So today's spot price for oil has to clear today's 0:01:51.040 --> 0:01:54.400 supply and demand. So, jeff how much optimism is being 0:01:54.440 --> 0:01:57.160 priced into that thirty day outlook for oil right now? 0:01:58.760 --> 0:02:03.040 Far too much? You know. We argue that the prices 0:02:03.040 --> 0:02:07.200 above thirty dollars a barrel, particularly on w T I UM, 0:02:07.280 --> 0:02:11.280 incentivised producers to bring supply back online that was shut off. 0:02:11.360 --> 0:02:16.040 The only way this market rebalances and creates that optimism 0:02:16.080 --> 0:02:18.000 that the market's trying to price in is that that 0:02:18.080 --> 0:02:20.880 production stays up. That's the point that Tom's make it. 0:02:21.160 --> 0:02:24.480 Commodities are spot assets, UM, and so the investors go 0:02:24.600 --> 0:02:27.600 in bit it up. They try to anticipate it. And 0:02:27.600 --> 0:02:30.760 by the way, every time a commodity market price anticipates 0:02:30.840 --> 0:02:34.480 something ins and tears for the investors. Jeff. Given the 0:02:34.520 --> 0:02:37.360 fact that we are already seeing shale drills come back 0:02:37.400 --> 0:02:42.200 online exactly to your point, could we see negative spot 0:02:42.280 --> 0:02:45.440 prices once again, at least in the futures market in 0:02:45.480 --> 0:02:50.680 the near term contracts in the US. Probably not. And 0:02:50.919 --> 0:02:53.800 the reason I say that is that the magnitude of 0:02:53.800 --> 0:02:57.440 the surpluses going back last day or this April when 0:02:57.480 --> 0:03:00.960 we saw the negative prices were unpressed globally, they were 0:03:01.040 --> 0:03:05.440 running twenty million barrels per day. That is an absolute 0:03:05.560 --> 0:03:10.000 massive number UM. Having a four or five hundred thousand 0:03:10.040 --> 0:03:13.560 barrels per day of additional supply comeback online not going 0:03:13.560 --> 0:03:16.000 to create that same type of risk um. So it's 0:03:16.360 --> 0:03:18.919 so I think the only thing they could recreate that 0:03:19.040 --> 0:03:23.320 environment again would be a second wave where demand losses 0:03:23.320 --> 0:03:25.440 are as big or even worse than what we saw 0:03:25.480 --> 0:03:28.720 the first time around, which I'd argue pretty unlikely because 0:03:28.919 --> 0:03:31.200 we know how to cope with it now. Jeff. I 0:03:31.240 --> 0:03:32.680 think the story of the last couple of days has 0:03:32.680 --> 0:03:35.360 been about demand demand normal I think, and how quick 0:03:35.400 --> 0:03:37.480 they can normalize. We've had some reports out of China 0:03:37.560 --> 0:03:39.920 that we're back to pre COVID levels. If you're looking 0:03:39.960 --> 0:03:41.400 at demand in China in the moment, you have any 0:03:41.480 --> 0:03:45.800 visibility on how quickly demand is coming back online, yeah, 0:03:46.400 --> 0:03:48.400 I'd be a little cautious, you know that. I mean 0:03:48.440 --> 0:03:52.480 they argue with you know, thirty million barrels per day 0:03:52.560 --> 0:03:55.480 right now versus at December, at the end of last year, 0:03:55.520 --> 0:03:59.080 it is running thirteen point seven. So that's still down. 0:03:59.680 --> 0:04:02.880 You know, it's still down like three or four percent um. 0:04:03.080 --> 0:04:05.960 The most recent data headed down five percent, So it's 0:04:06.200 --> 0:04:07.800 you know, I'm not going to go as far as 0:04:07.800 --> 0:04:12.280 to say that, uh, you know, it's a full recovery. 0:04:12.480 --> 0:04:14.360 I think the parts there's two things you take out 0:04:14.400 --> 0:04:17.240 of it. Commuting demand is up because people are too 0:04:17.240 --> 0:04:20.919 afraid to take public transport, and the jet demand is 0:04:20.960 --> 0:04:25.880 still down. Seriously, Jeff Curry, tell us about your world 0:04:25.960 --> 0:04:29.680 commodities folded into some of these glide paths of the 0:04:29.680 --> 0:04:33.479 pandemic in Brazil. I noticed the other day Indonesia is 0:04:33.520 --> 0:04:36.000 not not doing well at all. I mean some of 0:04:36.000 --> 0:04:42.240 these commodity and almost commodity importing company countries are really struggling. 0:04:42.560 --> 0:04:47.960 How will the pandemic affect your world? I mean, the 0:04:48.360 --> 0:04:51.320 the biggest and most direct impact, it's a sharp drop 0:04:51.320 --> 0:04:55.480 off in capex, which starts to create supply problems. UM. 0:04:55.560 --> 0:04:57.400 Further down the road. You know we see it in 0:04:57.480 --> 0:04:59.840 oil UM. You know you look at even like exon 0:05:00.040 --> 0:05:04.000 Flash their CAPEX budgets. UM decline rates began to set in. 0:05:03.760 --> 0:05:07.160 And in the energy markets, UM, you're not making investments 0:05:07.160 --> 0:05:10.560 in all sorts of different commodities, whether if it's mining UM, 0:05:10.600 --> 0:05:14.200 which starts to create supply constraints as we look further out. 0:05:14.240 --> 0:05:17.440 So UM, I would argue that, yeah, it hurts demand 0:05:17.560 --> 0:05:22.000 right now. I mean India's gold demand was very weak. UM. 0:05:22.080 --> 0:05:25.400 But I think the longer term UM impact really is 0:05:25.640 --> 0:05:29.840 on investment. So link that framework into Brazilian reality. Mean 0:05:29.839 --> 0:05:31.280 I gotta make some money here? Am I going to 0:05:31.320 --> 0:05:34.840 go weaker reality? Going through six? I mean, link your 0:05:34.960 --> 0:05:37.839 commodity world into the f X world of Golden Sex. 0:05:38.279 --> 0:05:42.080 How do you play it well? When you when the 0:05:42.160 --> 0:05:46.480 dollar strengthens, commodity prices typically could go down. And the 0:05:46.520 --> 0:05:49.200 reason for that is you take like the as a 0:05:49.720 --> 0:05:53.600 you get a weaker Chile and pay so you can pay. 0:05:53.800 --> 0:05:57.200 Labor becomes lower cost and as a result in dollars, 0:05:57.440 --> 0:06:01.520 the price of the commodity goes down. Um In the 0:06:01.600 --> 0:06:05.839 current environment, I mean to continue to argue for further 0:06:05.960 --> 0:06:08.200 strength in the dollar when you're sitting near you know, 0:06:08.279 --> 0:06:11.240 all time highs um I think it's kind of difficult. 0:06:11.680 --> 0:06:13.400 But in no way am I going to go out 0:06:13.520 --> 0:06:15.560 and argue that we're going to get a snap back 0:06:15.600 --> 0:06:17.760 and I want to be short the dollar, but I 0:06:17.800 --> 0:06:20.120 think you know it's I would. I'm not focused on 0:06:20.160 --> 0:06:23.080 the dollar right now just because it's not it's not 0:06:23.200 --> 0:06:25.839 a good story one direction or the other. We're speaking 0:06:25.880 --> 0:06:28.800 with Jeff Curry Goldman Sachs Global head of Commodities Research, 0:06:28.839 --> 0:06:31.039 and we've been focusing a lot on the price of oil. 0:06:31.160 --> 0:06:33.520 The other area that's been a hotspot has been the 0:06:33.560 --> 0:06:37.120 price of gold reach and climbing toward all time highs. 0:06:37.320 --> 0:06:40.320 When it comes to euro denominations and the dollar, it's 0:06:40.320 --> 0:06:42.919 the highest in more than seven years. I'm trying to 0:06:42.960 --> 0:06:45.640 figure out what the upside here is. What the main 0:06:45.839 --> 0:06:50.040 argument that you buy into here for an ongoing strength 0:06:50.240 --> 0:06:55.200 in the precious metal is um our. Our near term 0:06:55.240 --> 0:06:58.799 target is eight ounce, So it's got a male modest upside. 0:06:58.800 --> 0:07:01.200 From here. I want to first talk about what we know. 0:07:01.760 --> 0:07:05.960 Above eighteen hundred, we're going into the world of the unknown. UM. 0:07:06.000 --> 0:07:09.560 What we do know is the two main drivers of 0:07:10.080 --> 0:07:14.760 gold demand. Investment demand, primarily in the developed markets is 0:07:14.880 --> 0:07:18.880 very strong, driven by the stimulus. Low real rates in 0:07:19.000 --> 0:07:23.280 gold is just another defensive asset. UM. You see it 0:07:23.280 --> 0:07:26.240 in the et F holdings have gone up sharply. UM. 0:07:26.280 --> 0:07:31.960 The other big main driver of gold is the consumersumption 0:07:32.080 --> 0:07:35.320 or consumer demand in emerging markets like Indian China. Let 0:07:35.320 --> 0:07:39.440 for let's say jewelry. UM. India's numbers were atrocious that 0:07:39.520 --> 0:07:44.640 came out recently. UM. The Chinese numbers still have yet 0:07:44.680 --> 0:07:47.560 to start to pick up. UM. And so the one 0:07:47.680 --> 0:07:49.520 leg that's missing and we think you're going to get 0:07:49.520 --> 0:07:51.720 it back in China and first India's a question mark 0:07:52.240 --> 0:07:55.400 is that consumer demand. That's what probably gets you to 0:07:55.520 --> 0:07:57.920 eighteen hundred. Now the question is how do you go 0:07:58.000 --> 0:08:01.000 above eighteen hundreds of two thousand's. That's the world of 0:08:01.040 --> 0:08:04.920 the unknown. You have to start making assumptions on inflation 0:08:05.000 --> 0:08:08.440 expectations off the back of the large stimulus. UM. The 0:08:08.480 --> 0:08:12.160 reason why it's difficult to model. Monitor to model is 0:08:12.200 --> 0:08:15.440 you're running into the zero bound on nominal rates um 0:08:15.520 --> 0:08:18.520 So to make the argument you know that you know 0:08:19.040 --> 0:08:21.240 gold is gonna go much higher, you need real rates 0:08:21.280 --> 0:08:24.560 to go much more negative while the nominal rates stays 0:08:24.600 --> 0:08:27.000 fixed at zero. That means you have to make an 0:08:27.000 --> 0:08:31.440 assumption on inflation. Jeffredy small stuff as always, Jeff carry 0:08:31.440 --> 0:08:33.720 in London. Jeff, what's London like at the moment? If 0:08:33.760 --> 0:08:36.079 you made it into the square mile over the last months? 0:08:36.200 --> 0:08:38.480 For your answer, is this work from home? A government? 0:08:38.800 --> 0:08:41.640 It's work work from home? I have I haven't seen 0:08:41.679 --> 0:08:44.120 the square mile in a long time. But the weather 0:08:44.240 --> 0:08:46.679 is great here, and you know it's it's not as 0:08:46.760 --> 0:08:48.920 up and running as as New York in the US. 0:08:50.080 --> 0:08:53.120 Jeffreys the city. Don't you missed the city? Town? I do? 0:08:53.400 --> 0:08:55.840 I do? I miss? I miss I missed the square mile. 0:08:56.120 --> 0:08:58.800 You come out of bank station, see the Bank of English. 0:09:00.040 --> 0:09:03.360 It said they said bunk. You call it bunk, bunk, 0:09:05.240 --> 0:09:10.079 bunk in London? Bunk? Who call is it bunk? The 0:09:10.120 --> 0:09:13.040 British they call it be given it a toll by Frenchman. 0:09:13.880 --> 0:09:16.920 There's something like that. I do I miss the city 0:09:16.920 --> 0:09:18.800 We're gonna get over there, folks at some point here 0:09:19.679 --> 0:09:23.480 is said and don Jeffrey Curry thank you as always. 0:09:27.080 --> 0:09:30.800 Jimmy Sullivan joins us some TV securities. Jim, we'll give 0:09:30.840 --> 0:09:33.560 us an update and give us Chairman Paul and Secretary 0:09:33.640 --> 0:09:36.600 Manution an update on your call. In the unemployment rate, 0:09:36.679 --> 0:09:41.720 how high can it go? I Tom and all this morning. Well, 0:09:41.800 --> 0:09:43.480 I mean a lot of it to do with measurement 0:09:43.640 --> 0:09:47.280 as well. I mean, you're sight plus numbers, and arguably 0:09:47.320 --> 0:09:50.000 it is there if if you you count everybody's who's 0:09:50.120 --> 0:09:53.520 suddenly become unemployed. Obviously, the number for last month was 0:09:53.600 --> 0:09:55.840 fourteen points seven percent. But I mean if you had 0:09:56.000 --> 0:09:58.400 just for the drop of the participation rate and b 0:09:58.559 --> 0:10:01.000 less suggest that some people are miss class deified and 0:10:01.360 --> 0:10:03.560 as employed but just not on their job, and they 0:10:03.600 --> 0:10:05.760 probably should have been unemployed. If you include those, the 0:10:05.840 --> 0:10:09.520 number would have been probably around So those sort of 0:10:09.559 --> 0:10:12.080 statistical issues could continue for the next couple of months. 0:10:12.120 --> 0:10:15.200 So I don't think we will necessarily see a number, 0:10:15.800 --> 0:10:17.880 but we probably will see a higher number in April 0:10:17.880 --> 0:10:19.839 than we saw in May. But the hope is that 0:10:19.960 --> 0:10:22.440 after that, from June on, the numbers will start coming 0:10:22.480 --> 0:10:27.199 down again. So yes, I mean, measured maybe properly, it's 0:10:27.880 --> 0:10:30.079 plus number, but we may not actually see numbers that 0:10:30.200 --> 0:10:32.679 high in any event. And I mean this is not 0:10:32.880 --> 0:10:34.880 the great depression in the sense that we shouldn't be 0:10:34.920 --> 0:10:37.800 extrapolating these numbers that there will be improvement in the 0:10:37.840 --> 0:10:40.680 second half of the year. We hope there will be improvement, 0:10:40.720 --> 0:10:43.240 significant improvement in the months to come. Jim, let's talk 0:10:43.280 --> 0:10:45.520 about the Chairman before the Senate a little bit late 0:10:45.679 --> 0:10:47.840 this morning. We've heard so much from Chairman Power over 0:10:47.840 --> 0:10:49.959 the last several weeks. I'm sure some people welcome that. 0:10:50.000 --> 0:10:53.400 I'm sure many others don't. What's left from Chairman Power 0:10:53.440 --> 0:10:57.000 that you haven't heard? And well, Jonathan, you were just 0:10:57.080 --> 0:10:59.640 touching on issues from our perspective, I would not expect 0:10:59.679 --> 0:11:02.200 to get already on those today. In terms of forward guidance, 0:11:02.200 --> 0:11:04.520 I don't think that's the focus of today's testimony, which 0:11:04.559 --> 0:11:06.480 is more about the Cares Act than the four and 0:11:06.559 --> 0:11:09.719 fifty four billion it was allocated as capital backstop for 0:11:09.760 --> 0:11:13.319 the very thirteen three programs. And so yes, absolutely we're 0:11:13.400 --> 0:11:16.679 very interested in terms of forward guidance on the funds 0:11:16.760 --> 0:11:18.880 rates as well as QWI. What are the conditions for 0:11:19.160 --> 0:11:22.000 ultimate tightening, which is way down the road arguably, but 0:11:22.559 --> 0:11:24.520 that's I don't think that's the focus today. It's more 0:11:24.520 --> 0:11:27.720 about the CARES Act. So, given the fact that there 0:11:27.840 --> 0:11:31.160 is this focus right now on future stimulus in Washington, 0:11:31.520 --> 0:11:35.240 while the markets are basically pricing in additional fiscal stimulus, 0:11:35.400 --> 0:11:38.040 they're also pricing in a near term vaccine at least 0:11:38.520 --> 0:11:41.559 later this year early next year, is it time to 0:11:42.520 --> 0:11:47.360 sell in May and go away? And well, I guess 0:11:48.600 --> 0:11:50.599 I would be cautious for sure. I mean exactly what 0:11:50.679 --> 0:11:52.480 that means, I'm gonna try in terms of equities, et cetera, 0:11:52.559 --> 0:11:55.000 and equities of obviously had a had a good run here, 0:11:55.040 --> 0:11:59.120 and arguably there's a lot of optimism in there. I mean, obviously, 0:11:59.160 --> 0:12:01.480 even if we do get a vaccine, it'll it'll take 0:12:01.520 --> 0:12:03.760 a while to be to be fully up and running, 0:12:04.240 --> 0:12:07.360 and there are some promising results out there, and I 0:12:07.679 --> 0:12:09.440 think the net of it all is that, yeah, I mean, 0:12:09.480 --> 0:12:10.839 it's going to be a struggle to come back, but 0:12:10.960 --> 0:12:14.360 we will. We will see positive numbers. So I mean, 0:12:14.400 --> 0:12:16.960 I don't think optimism is completely crazy in the sense 0:12:17.040 --> 0:12:19.560 that we shouldn't be extrapolating what we're seeing in April 0:12:19.640 --> 0:12:22.480 and into May. But that said, I mean this is 0:12:22.640 --> 0:12:24.440 a big hole to climb out of. It's it's going 0:12:24.480 --> 0:12:26.439 to be a long time for the economy to recover. 0:12:27.200 --> 0:12:31.559 Jimal Sullivan, what is your question for Secretary Monution? You know, 0:12:31.640 --> 0:12:33.839 we have a parlor game here with the Chairman of 0:12:33.880 --> 0:12:36.240 the Fed, the vice chairman of the rest, and we've 0:12:36.280 --> 0:12:38.560 got all these smart questions we asked them. Folks are 0:12:38.640 --> 0:12:41.520 Michael McKee will speak with Eric rosen Gren of Boston 0:12:42.080 --> 0:12:45.720 later today as well. Nobody ever talks about the questions 0:12:45.800 --> 0:12:50.520 the Secretary monution? What would you ask him, Jim And Well, 0:12:50.559 --> 0:12:52.760 I mean, of course the markets are hurricane on seeing 0:12:52.800 --> 0:12:56.760 what what more in terms of fiscal stimulus. I mean, 0:12:56.840 --> 0:12:59.559 that's that's obviously an issue, and I think there is 0:12:59.840 --> 0:13:02.080 the senses that there is going to be another round. 0:13:02.120 --> 0:13:04.360 It's just a question of how much help is in there. 0:13:04.840 --> 0:13:08.240 And I think everybody agrees that the states and cities 0:13:08.280 --> 0:13:10.880 will will need more aids. So again we'll let question 0:13:10.960 --> 0:13:13.480 be answered today. I suspect not, but that that's obviously 0:13:13.679 --> 0:13:15.760 an issue for markets over the next month. I think 0:13:15.760 --> 0:13:17.839 a lot of people are upset as well, Tom about 0:13:17.880 --> 0:13:21.000 how much is being done to lose some financial conditions, 0:13:21.520 --> 0:13:23.800 and it hasn't been contingent upon the companies that have 0:13:23.920 --> 0:13:27.520 received the benefits of that maintaining the payroll. The small 0:13:27.600 --> 0:13:31.160 business program quite clearly small business lending has done that. 0:13:31.280 --> 0:13:33.199 But when it comes to the FED, the amount have 0:13:33.280 --> 0:13:35.600 built up the bandaged sheet, the amount they have loosened 0:13:35.640 --> 0:13:38.360 up financial conditions so that people can still come into 0:13:38.360 --> 0:13:40.760 the capital markets and raise money. I think there's been 0:13:40.760 --> 0:13:43.400 a huge disappointment these companies are able to tap it 0:13:43.800 --> 0:13:46.959 to really loose credit markets largely because of what the 0:13:47.040 --> 0:13:49.840 FED has done, and not have to follow up by saying, 0:13:49.920 --> 0:13:53.000 you know what, we pledge to keep the payroll exactly 0:13:53.040 --> 0:13:56.040 where it was before COVID hit and John, what's so 0:13:56.160 --> 0:13:59.719 important about your important comment is it's a comment for 0:14:00.080 --> 0:14:03.000 June and July. Their reporting will be done on that 0:14:03.800 --> 0:14:06.760 and that will drop. You know, there'll be some adventurous reporters, 0:14:06.800 --> 0:14:10.040 hopefully at Bloomberg News, where that will drop like a 0:14:10.240 --> 0:14:14.280 bombshell into June and July and frankly into the election season. 0:14:14.600 --> 0:14:16.480 That's the problem, isn't it, Jim, That we haven't really 0:14:16.559 --> 0:14:20.600 seen the large multinational payroll cuts yet. When we reopen 0:14:21.120 --> 0:14:24.640 and these big multinational companies take a look around at 0:14:24.680 --> 0:14:28.520 the demands backdrop, at the outlook for improvement. Are we're 0:14:28.560 --> 0:14:30.720 going to see some big job cuts outweigh as some 0:14:30.800 --> 0:14:33.720 of these big multinationals. Isn't that just inevitable at this point, Jim, 0:14:34.480 --> 0:14:37.200 And Well, I mean it's it's it's not. I mean, 0:14:37.240 --> 0:14:40.040 certainly big companies have contributed. It's not I think just 0:14:40.160 --> 0:14:42.400 the small companies that accounted for the twenty million plus. 0:14:43.000 --> 0:14:44.920 And certainly there are a lot of furloughs out there. 0:14:45.320 --> 0:14:47.800 I mean, even companies like the auto companies obviously are 0:14:47.840 --> 0:14:50.120 starting to come back. I mean they're they're they're big companies. 0:14:50.760 --> 0:14:54.320 So I think disproportionately it's smaller businesses. But I think 0:14:54.360 --> 0:14:56.440 across the board, when you got the twenty million decline 0:14:56.840 --> 0:15:00.040 in April and and again to the extent econ of 0:15:00.120 --> 0:15:03.400 he does start to open up again, then I think 0:15:03.440 --> 0:15:05.480 there are reasons to think that the big job losses 0:15:05.520 --> 0:15:07.840 are behind us once we get through. May thank you 0:15:07.920 --> 0:15:10.200 so much for being with us. Jim Osullivan, TV Security's 0:15:10.280 --> 0:15:18.080 chief US macro strategist. Never sleepy at the Bank of America. 0:15:18.320 --> 0:15:21.520 Always important to catch up and certainly during UH this 0:15:21.680 --> 0:15:25.440 pandemic as well with Brian moynhan. Here is David Weston. 0:15:25.880 --> 0:15:28.120 We're welcome now our Bloomberg TV and radio and it 0:15:28.200 --> 0:15:31.200 is worldwide as we welcome also the Chairman and CEO 0:15:31.320 --> 0:15:33.480 of Bank of America, Brian moynihan. Brian, thank you so 0:15:33.600 --> 0:15:35.600 much for joining us. Last time we spoke about six 0:15:35.680 --> 0:15:38.520 weeks ago, and you said you expected a rough second 0:15:38.600 --> 0:15:42.200 quarter down, maybe some rebound in the third and fourth quarter, 0:15:42.360 --> 0:15:44.840 and then the economy really getting back to full steam 0:15:45.040 --> 0:15:48.160 sometime in a lot's happened in that six weeks. Has 0:15:48.240 --> 0:15:52.800 your view changed, but David, our view hasn't changed. But 0:15:52.960 --> 0:15:55.200 it comes back to what I said before. This is 0:15:55.240 --> 0:15:58.400 a healthcare crisis. And as you're starting to see the 0:15:58.440 --> 0:16:01.880 healthcare crisis be mittig not solved yet, you're starting to 0:16:01.920 --> 0:16:04.520 see the economy start to recover. And we can talk 0:16:04.560 --> 0:16:07.640 about that. But the approach to winning UH, the war 0:16:07.720 --> 0:16:11.080 against the crisis UH for us, has been a customer centric, 0:16:11.080 --> 0:16:14.160 community centric, employee centric move and so you know, we've 0:16:14.200 --> 0:16:16.400 been out there driving, we've been supporting our clients and 0:16:16.440 --> 0:16:18.120 trying to make sure they have the credit and capital 0:16:18.360 --> 0:16:21.680 to UH to do what they need to do and 0:16:22.000 --> 0:16:24.440 help them through this trough of activity in the second quarter, 0:16:24.520 --> 0:16:26.360 and you can see that in the loan balances extended, 0:16:26.400 --> 0:16:29.040 the p P P loans and how the things we've done. 0:16:29.120 --> 0:16:31.440 We've helped our consumer clients through waivers so they have 0:16:31.840 --> 0:16:33.840 the ability to have better cash flow in the house. 0:16:33.960 --> 0:16:36.440 We helped our teammates by saying no layoffs so they 0:16:36.480 --> 0:16:39.000 know their job is secure, and then getting them safe 0:16:39.040 --> 0:16:41.320 and working from home. And then we've helped our communities 0:16:41.400 --> 0:16:44.960 by contributions and a hundred million dollars and c d 0:16:45.120 --> 0:16:48.680 f I investments which are community belot and financial institutions 0:16:48.680 --> 0:16:51.240 at two fifty million dollars of which about undred seventy 0:16:51.280 --> 0:16:54.080 million is already out. So all that is offsetting the 0:16:54.160 --> 0:16:57.800 impacts of the current second quarter down draft that you've 0:16:57.800 --> 0:17:00.680 seen with the unemployment numbers, and we don't see much differently, 0:17:00.760 --> 0:17:02.280 it's just that we're starting to see us come out 0:17:02.320 --> 0:17:06.080 the other side of this. Frankly. So, we have heard 0:17:06.119 --> 0:17:08.639 from the Federal Reserve and they've expressed some concern at 0:17:08.720 --> 0:17:11.600 least that as this pandemic continues, there may be some 0:17:11.840 --> 0:17:14.800 threat to the overall system and specifically talks for example 0:17:14.840 --> 0:17:17.960 about commercial real estate. Are you seeing some parts of 0:17:18.000 --> 0:17:20.640 the market that are particularly vulnerable on the credit side. 0:17:22.040 --> 0:17:25.199 Remember that the US economy is going to be depended 0:17:25.240 --> 0:17:28.800 on the activity the consumer base, and and so you 0:17:29.000 --> 0:17:31.160 always have to start there when you talk about the US. 0:17:31.240 --> 0:17:33.720 So even though we have this year from the Bank 0:17:33.760 --> 0:17:36.000 American research team, which is the best in the world, 0:17:36.119 --> 0:17:39.200 you know, being minus five percent five and a half 0:17:39.280 --> 0:17:42.080 percent this year and plus five percent next year, the 0:17:42.160 --> 0:17:44.639 real question will be how to consumers behave And in 0:17:44.760 --> 0:17:47.879 what we've seen since the low point in the second 0:17:48.119 --> 0:17:50.879 couple first couple weeks of April, in terms of everything 0:17:50.920 --> 0:17:53.240 in terms of their spending because of the stay at 0:17:53.280 --> 0:17:57.240 home edicts, in terms of their borrowing activity, in terms 0:17:57.320 --> 0:17:59.720 of the transfer of money. Um, you saw all that 0:18:00.040 --> 0:18:02.879 all to a lowest level, and obviously things like travel 0:18:03.000 --> 0:18:05.800 and hotels and things are most affected. But as you've 0:18:05.800 --> 0:18:08.280 seen steadily as you went through the third week April 0:18:08.400 --> 0:18:10.560 then on into the first part of May, you're seeing 0:18:11.040 --> 0:18:13.320 their activities pick up even in the states that are 0:18:13.359 --> 0:18:15.919 still understay from home, and you're seeing the activity pick 0:18:16.000 --> 0:18:18.600 up much quicker in the places they're going back to work. 0:18:19.480 --> 0:18:21.399 And so for the month of May, we're seeing it 0:18:21.480 --> 0:18:23.920 down about you know, two or three four percent versus 0:18:24.040 --> 0:18:26.560 last year. UH for the year today it's down a 0:18:26.600 --> 0:18:28.639 couple of percent. And that's the question. The length of 0:18:28.680 --> 0:18:31.160 this is going to be how the consumers behave given 0:18:31.440 --> 0:18:35.160 the high levels unemployment that you've seen published, when people 0:18:35.200 --> 0:18:38.200 get back to work, jobs coming back in the stimulus 0:18:38.240 --> 0:18:40.200 payments which are all hitting the street of the last 0:18:40.200 --> 0:18:42.359 few weeks, and how all works together to see if 0:18:42.400 --> 0:18:44.399 the consumer's behavior changed. And when I hear when you 0:18:44.440 --> 0:18:47.320 hear Governor, chair Pal and others, the concern I have 0:18:47.520 --> 0:18:49.679 is have we changed consumer behavior as we look out 0:18:49.720 --> 0:18:53.720 across the next four or five quarters. Well, that is 0:18:54.359 --> 0:18:57.240 a key question, maybe the key question, Brian, clearly when 0:18:57.280 --> 0:18:59.120 it comes to consumer I know you've already taken about 0:18:59.119 --> 0:19:02.439 four point eight billion dollar reserve against credit possible losses 0:19:02.680 --> 0:19:05.399 given the level unemployment, which is really quite stunning. Do 0:19:05.440 --> 0:19:08.520 you think that's gonna be enough? Well, what you've seen 0:19:08.600 --> 0:19:12.840 so far is with the consumer help, we've we've granted 0:19:12.840 --> 0:19:15.440 about a million a half payment deferrals. But if you 0:19:15.480 --> 0:19:18.760 look at the actual interesting statistics about thirty five or 0:19:19.440 --> 0:19:21.640 the people ask for credit card payment deferral one ahead 0:19:21.640 --> 0:19:23.000 and made the payment. And if you go and a 0:19:23.080 --> 0:19:25.879 look at those consumers, what you see is because of 0:19:25.920 --> 0:19:30.560 the UH leave aside the issue of where the money 0:19:30.640 --> 0:19:32.679 is coming from, you're seeing higher balance in our account 0:19:33.080 --> 0:19:35.840 and that's because the stimulus between you know, the I 0:19:35.960 --> 0:19:40.119 P payments, between the enhanced unemployment, these measures taken by 0:19:40.160 --> 0:19:43.560 Congress and by the administration by the FED have worked 0:19:43.600 --> 0:19:47.320 as offset the unfortunate aspects of very high unemployment. And 0:19:47.480 --> 0:19:50.720 so so far you're not seeing the delinquent seas and 0:19:50.760 --> 0:19:55.520 things rise vs. You've seen payment deferrals UH increase, but 0:19:55.560 --> 0:19:57.360 you're seeing them start to level off and come down 0:19:57.440 --> 0:20:00.359 in our book, and so we expect to see you 0:20:00.600 --> 0:20:03.720 charge offs coming later on as as as this thing 0:20:03.800 --> 0:20:05.960 goes on. But the reality is right now you're not 0:20:06.480 --> 0:20:08.639 seeing the kind of credit damage that you'd expect to 0:20:08.680 --> 0:20:11.000 see with this amount of down draft and activity. The 0:20:11.080 --> 0:20:13.200 question is what happens next, and that's we're all watching. 0:20:15.000 --> 0:20:16.840 And to that very point you said in the past, 0:20:16.920 --> 0:20:19.120 China to some extent may give us some indication. We've 0:20:19.160 --> 0:20:21.680 seen numbers coming out of China, Brian that indicate the 0:20:21.760 --> 0:20:24.359 industrial production has come back pretty quickly. All consumption is 0:20:24.440 --> 0:20:26.560 coming back as well. But on the other hand, consumer 0:20:26.600 --> 0:20:29.120 maybe not so much with retail sales. Does that give 0:20:29.160 --> 0:20:32.720 you cause for concern back here in the United States, Well, 0:20:32.720 --> 0:20:35.480 it does because the question is how did you change behavior? 0:20:35.640 --> 0:20:38.439 So when you saw Chinese, uh, you know, they went 0:20:38.520 --> 0:20:41.160 into this earlier, they locked down earlier, they came out earlier, 0:20:41.680 --> 0:20:44.160 and you know, we're back in our offices in China 0:20:44.200 --> 0:20:47.760 moving from people back towards so you're starting to see 0:20:48.680 --> 0:20:51.199 normalization of activity and in the questions what's the underlying 0:20:51.240 --> 0:20:54.280 activity and restaurants and and shopping and things like that. 0:20:54.560 --> 0:20:57.399 And so you saw an immediate burst of activity as 0:20:57.440 --> 0:20:59.680 they opened back up and see it fall back down. 0:20:59.720 --> 0:21:01.560 And that we have to watch in the States is 0:21:01.760 --> 0:21:03.320 there'll be a burst of activity in some of these 0:21:03.359 --> 0:21:05.879 places as people who have been you know, in their 0:21:05.920 --> 0:21:08.320