Speaker 1: Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keane
Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Jeffrey
Speaker 1: Curry has given us such good perspective with Goldman says,
Speaker 1: of course, Uh, he's a guy John who gives us
Speaker 1: a huge micro economic foundation with his work at the
Speaker 1: University of Chicago over the years. And John, it's not
Speaker 1: just about oil, but it's about the commodity complex in general.
Speaker 1: Do they get out front of a pandemic and try
Speaker 1: to expect the recovery. Well, the thing that Jeff I
Speaker 1: think was on top of was what would happen if
Speaker 1: we started to break you'll getting near to breaching storage capacity.
Speaker 1: And once we got to that point, how quickly this
Speaker 1: market would have to adjust, Tom and everything else, which
Speaker 1: is fully to place on a really small amount of time.
Speaker 1: And that's basically what you saw a month ago. The
Speaker 1: real threat of breaching storage capacity prices plunge aggressively lower
Speaker 1: than everything. House has to correct and correct fast, must listen,
Speaker 1: must watch for Global Wall Street. Jeffrey Curry of Golden
Speaker 1: Sex Jeffrey, good morning. I know that Lisa and John
Speaker 1: I have a lot of oil questions. Let me ask
Speaker 1: you a general question. Do commodities expect out like equities?
Speaker 1: If equities are reaching out six months, two years, etcetera.
Speaker 1: Do commodity participants do the same thing at most? Maybe
Speaker 1: in like oil thirty days? Um? I mean there is
Speaker 1: some expectations in but very small. And you know I
Speaker 1: can find out. Commodities are spot assets, UM. You know,
Speaker 1: financial markets their anticipatory assets. They look out to the future.
Speaker 1: So today's spot price for oil has to clear today's
Speaker 1: supply and demand. So, jeff how much optimism is being
Speaker 1: priced into that thirty day outlook for oil right now?
Speaker 1: Far too much? You know. We argue that the prices
Speaker 1: above thirty dollars a barrel, particularly on w T I UM,
Speaker 1: incentivised producers to bring supply back online that was shut off.
Speaker 1: The only way this market rebalances and creates that optimism
Speaker 1: that the market's trying to price in is that that
Speaker 1: production stays up. That's the point that Tom's make it.
Speaker 1: Commodities are spot assets, UM, and so the investors go
Speaker 1: in bit it up. They try to anticipate it. And
Speaker 1: by the way, every time a commodity market price anticipates
Speaker 1: something ins and tears for the investors. Jeff. Given the
Speaker 1: fact that we are already seeing shale drills come back
Speaker 1: online exactly to your point, could we see negative spot
Speaker 1: prices once again, at least in the futures market in
Speaker 1: the near term contracts in the US. Probably not. And
Speaker 1: the reason I say that is that the magnitude of
Speaker 1: the surpluses going back last day or this April when
Speaker 1: we saw the negative prices were unpressed globally, they were
Speaker 1: running twenty million barrels per day. That is an absolute
Speaker 1: massive number UM. Having a four or five hundred thousand
Speaker 1: barrels per day of additional supply comeback online not going
Speaker 1: to create that same type of risk um. So it's
Speaker 1: so I think the only thing they could recreate that
Speaker 1: environment again would be a second wave where demand losses
Speaker 1: are as big or even worse than what we saw
Speaker 1: the first time around, which I'd argue pretty unlikely because
Speaker 1: we know how to cope with it now. Jeff. I
Speaker 1: think the story of the last couple of days has
Speaker 1: been about demand demand normal I think, and how quick
Speaker 1: they can normalize. We've had some reports out of China
Speaker 1: that we're back to pre COVID levels. If you're looking
Speaker 1: at demand in China in the moment, you have any
Speaker 1: visibility on how quickly demand is coming back online, yeah,
Speaker 1: I'd be a little cautious, you know that. I mean
Speaker 1: they argue with you know, thirty million barrels per day
Speaker 1: right now versus at December, at the end of last year,
Speaker 1: it is running thirteen point seven. So that's still down.
Speaker 1: You know, it's still down like three or four percent um.
Speaker 1: The most recent data headed down five percent, So it's
Speaker 1: you know, I'm not going to go as far as
Speaker 1: to say that, uh, you know, it's a full recovery.
Speaker 1: I think the parts there's two things you take out
Speaker 1: of it. Commuting demand is up because people are too
Speaker 1: afraid to take public transport, and the jet demand is
Speaker 1: still down. Seriously, Jeff Curry, tell us about your world
Speaker 1: commodities folded into some of these glide paths of the
Speaker 1: pandemic in Brazil. I noticed the other day Indonesia is
Speaker 1: not not doing well at all. I mean some of
Speaker 1: these commodity and almost commodity importing company countries are really struggling.
Speaker 1: How will the pandemic affect your world? I mean, the
Speaker 1: the biggest and most direct impact, it's a sharp drop
Speaker 1: off in capex, which starts to create supply problems. UM.
Speaker 1: Further down the road. You know we see it in
Speaker 1: oil UM. You know you look at even like exon
Speaker 1: Flash their CAPEX budgets. UM decline rates began to set in.
Speaker 1: And in the energy markets, UM, you're not making investments
Speaker 1: in all sorts of different commodities, whether if it's mining UM,
Speaker 1: which starts to create supply constraints as we look further out.
Speaker 1: So UM, I would argue that, yeah, it hurts demand
Speaker 1: right now. I mean India's gold demand was very weak. UM.
Speaker 1: But I think the longer term UM impact really is
Speaker 1: on investment. So link that framework into Brazilian reality. Mean
Speaker 1: I gotta make some money here? Am I going to
Speaker 1: go weaker reality? Going through six? I mean, link your
Speaker 1: commodity world into the f X world of Golden Sex.
Speaker 1: How do you play it well? When you when the
Speaker 1: dollar strengthens, commodity prices typically could go down. And the
Speaker 1: reason for that is you take like the as a
Speaker 1: you get a weaker Chile and pay so you can pay.
Speaker 1: Labor becomes lower cost and as a result in dollars,
Speaker 1: the price of the commodity goes down. Um In the
Speaker 1: current environment, I mean to continue to argue for further
Speaker 1: strength in the dollar when you're sitting near you know,
Speaker 1: all time highs um I think it's kind of difficult.
Speaker 1: But in no way am I going to go out
Speaker 1: and argue that we're going to get a snap back
Speaker 1: and I want to be short the dollar, but I
Speaker 1: think you know it's I would. I'm not focused on
Speaker 1: the dollar right now just because it's not it's not
Speaker 1: a good story one direction or the other. We're speaking
Speaker 1: with Jeff Curry Goldman Sachs Global head of Commodities Research,
Speaker 1: and we've been focusing a lot on the price of oil.
Speaker 1: The other area that's been a hotspot has been the
Speaker 1: price of gold reach and climbing toward all time highs.
Speaker 1: When it comes to euro denominations and the dollar, it's
Speaker 1: the highest in more than seven years. I'm trying to
Speaker 1: figure out what the upside here is. What the main
Speaker 1: argument that you buy into here for an ongoing strength
Speaker 1: in the precious metal is um our. Our near term
Speaker 1: target is eight ounce, So it's got a male modest upside.
Speaker 1: From here. I want to first talk about what we know.
Speaker 1: Above eighteen hundred, we're going into the world of the unknown. UM.
Speaker 1: What we do know is the two main drivers of
Speaker 1: gold demand. Investment demand, primarily in the developed markets is
Speaker 1: very strong, driven by the stimulus. Low real rates in
Speaker 1: gold is just another defensive asset. UM. You see it
Speaker 1: in the et F holdings have gone up sharply. UM.
Speaker 1: The other big main driver of gold is the consumersumption
Speaker 1: or consumer demand in emerging markets like Indian China. Let
Speaker 1: for let's say jewelry. UM. India's numbers were atrocious that
Speaker 1: came out recently. UM. The Chinese numbers still have yet
Speaker 1: to start to pick up. UM. And so the one
Speaker 1: leg that's missing and we think you're going to get
Speaker 1: it back in China and first India's a question mark
Speaker 1: is that consumer demand. That's what probably gets you to
Speaker 1: eighteen hundred. Now the question is how do you go
Speaker 1: above eighteen hundreds of two thousand's. That's the world of
Speaker 1: the unknown. You have to start making assumptions on inflation
Speaker 1: expectations off the back of the large stimulus. UM. The
Speaker 1: reason why it's difficult to model. Monitor to model is
Speaker 1: you're running into the zero bound on nominal rates um
Speaker 1: So to make the argument you know that you know
Speaker 1: gold is gonna go much higher, you need real rates
Speaker 1: to go much more negative while the nominal rates stays
Speaker 1: fixed at zero. That means you have to make an
Speaker 1: assumption on inflation. Jeffredy small stuff as always, Jeff carry
Speaker 1: in London. Jeff, what's London like at the moment? If
Speaker 1: you made it into the square mile over the last months?
Speaker 1: For your answer, is this work from home? A government?
Speaker 1: It's work work from home? I have I haven't seen
Speaker 1: the square mile in a long time. But the weather
Speaker 1: is great here, and you know it's it's not as
Speaker 1: up and running as as New York in the US.
Speaker 1: Jeffreys the city. Don't you missed the city? Town? I do?
Speaker 1: I do? I miss? I miss I missed the square mile.
Speaker 1: You come out of bank station, see the Bank of English.
Speaker 1: It said they said bunk. You call it bunk, bunk,
Speaker 1: bunk in London? Bunk? Who call is it bunk? The
Speaker 1: British they call it be given it a toll by Frenchman.
Speaker 1: There's something like that. I do I miss the city
Speaker 1: We're gonna get over there, folks at some point here
Speaker 1: is said and don Jeffrey Curry thank you as always.
Speaker 1: Jimmy Sullivan joins us some TV securities. Jim, we'll give
Speaker 1: us an update and give us Chairman Paul and Secretary
Speaker 1: Manution an update on your call. In the unemployment rate,
Speaker 1: how high can it go? I Tom and all this morning. Well,
Speaker 1: I mean a lot of it to do with measurement
Speaker 1: as well. I mean, you're sight plus numbers, and arguably
Speaker 1: it is there if if you you count everybody's who's
Speaker 1: suddenly become unemployed. Obviously, the number for last month was
Speaker 1: fourteen points seven percent. But I mean if you had
Speaker 1: just for the drop of the participation rate and b
Speaker 1: less suggest that some people are miss class deified and
Speaker 1: as employed but just not on their job, and they
Speaker 1: probably should have been unemployed. If you include those, the
Speaker 1: number would have been probably around So those sort of
Speaker 1: statistical issues could continue for the next couple of months.
Speaker 1: So I don't think we will necessarily see a number,
Speaker 1: but we probably will see a higher number in April
Speaker 1: than we saw in May. But the hope is that
Speaker 1: after that, from June on, the numbers will start coming
Speaker 1: down again. So yes, I mean, measured maybe properly, it's
Speaker 1: plus number, but we may not actually see numbers that
Speaker 1: high in any event. And I mean this is not
Speaker 1: the great depression in the sense that we shouldn't be
Speaker 1: extrapolating these numbers that there will be improvement in the
Speaker 1: second half of the year. We hope there will be improvement,
Speaker 1: significant improvement in the months to come. Jim, let's talk
Speaker 1: about the Chairman before the Senate a little bit late
Speaker 1: this morning. We've heard so much from Chairman Power over
Speaker 1: the last several weeks. I'm sure some people welcome that.
Speaker 1: I'm sure many others don't. What's left from Chairman Power
Speaker 1: that you haven't heard? And well, Jonathan, you were just
Speaker 1: touching on issues from our perspective, I would not expect
Speaker 1: to get already on those today. In terms of forward guidance,
Speaker 1: I don't think that's the focus of today's testimony, which
Speaker 1: is more about the Cares Act than the four and
Speaker 1: fifty four billion it was allocated as capital backstop for
Speaker 1: the very thirteen three programs. And so yes, absolutely we're
Speaker 1: very interested in terms of forward guidance on the funds
Speaker 1: rates as well as QWI. What are the conditions for
Speaker 1: ultimate tightening, which is way down the road arguably, but
Speaker 1: that's I don't think that's the focus today. It's more
Speaker 1: about the CARES Act. So, given the fact that there
Speaker 1: is this focus right now on future stimulus in Washington,
Speaker 1: while the markets are basically pricing in additional fiscal stimulus,
Speaker 1: they're also pricing in a near term vaccine at least
Speaker 1: later this year early next year, is it time to
Speaker 1: sell in May and go away? And well, I guess
Speaker 1: I would be cautious for sure. I mean exactly what
Speaker 1: that means, I'm gonna try in terms of equities, et cetera,
Speaker 1: and equities of obviously had a had a good run here,
Speaker 1: and arguably there's a lot of optimism in there. I mean, obviously,
Speaker 1: even if we do get a vaccine, it'll it'll take
Speaker 1: a while to be to be fully up and running,
Speaker 1: and there are some promising results out there, and I
Speaker 1: think the net of it all is that, yeah, I mean,
Speaker 1: it's going to be a struggle to come back, but
Speaker 1: we will. We will see positive numbers. So I mean,
Speaker 1: I don't think optimism is completely crazy in the sense
Speaker 1: that we shouldn't be extrapolating what we're seeing in April
Speaker 1: and into May. But that said, I mean this is
Speaker 1: a big hole to climb out of. It's it's going
Speaker 1: to be a long time for the economy to recover.
Speaker 1: Jimal Sullivan, what is your question for Secretary Monution? You know,
Speaker 1: we have a parlor game here with the Chairman of
Speaker 1: the Fed, the vice chairman of the rest, and we've
Speaker 1: got all these smart questions we asked them. Folks are
Speaker 1: Michael McKee will speak with Eric rosen Gren of Boston
Speaker 1: later today as well. Nobody ever talks about the questions
Speaker 1: the Secretary monution? What would you ask him, Jim And Well,
Speaker 1: I mean, of course the markets are hurricane on seeing
Speaker 1: what what more in terms of fiscal stimulus. I mean,
Speaker 1: that's that's obviously an issue, and I think there is
Speaker 1: the senses that there is going to be another round.
Speaker 1: It's just a question of how much help is in there.
Speaker 1: And I think everybody agrees that the states and cities
Speaker 1: will will need more aids. So again we'll let question
Speaker 1: be answered today. I suspect not, but that that's obviously
Speaker 1: an issue for markets over the next month. I think
Speaker 1: a lot of people are upset as well, Tom about
Speaker 1: how much is being done to lose some financial conditions,
Speaker 1: and it hasn't been contingent upon the companies that have
Speaker 1: received the benefits of that maintaining the payroll. The small
Speaker 1: business program quite clearly small business lending has done that.
Speaker 1: But when it comes to the FED, the amount have
Speaker 1: built up the bandaged sheet, the amount they have loosened
Speaker 1: up financial conditions so that people can still come into
Speaker 1: the capital markets and raise money. I think there's been
Speaker 1: a huge disappointment these companies are able to tap it
Speaker 1: to really loose credit markets largely because of what the
Speaker 1: FED has done, and not have to follow up by saying,
Speaker 1: you know what, we pledge to keep the payroll exactly
Speaker 1: where it was before COVID hit and John, what's so
Speaker 1: important about your important comment is it's a comment for
Speaker 1: June and July. Their reporting will be done on that
Speaker 1: and that will drop. You know, there'll be some adventurous reporters,
Speaker 1: hopefully at Bloomberg News, where that will drop like a
Speaker 1: bombshell into June and July and frankly into the election season.
Speaker 1: That's the problem, isn't it, Jim, That we haven't really
Speaker 1: seen the large multinational payroll cuts yet. When we reopen
Speaker 1: and these big multinational companies take a look around at
Speaker 1: the demands backdrop, at the outlook for improvement. Are we're
Speaker 1: going to see some big job cuts outweigh as some
Speaker 1: of these big multinationals. Isn't that just inevitable at this point, Jim,
Speaker 1: And Well, I mean it's it's it's not. I mean,
Speaker 1: certainly big companies have contributed. It's not I think just
Speaker 1: the small companies that accounted for the twenty million plus.
Speaker 1: And certainly there are a lot of furloughs out there.
Speaker 1: I mean, even companies like the auto companies obviously are
Speaker 1: starting to come back. I mean they're they're they're big companies.
Speaker 1: So I think disproportionately it's smaller businesses. But I think
Speaker 1: across the board, when you got the twenty million decline
Speaker 1: in April and and again to the extent econ of
Speaker 1: he does start to open up again, then I think
Speaker 1: there are reasons to think that the big job losses
Speaker 1: are behind us once we get through. May thank you
Speaker 1: so much for being with us. Jim Osullivan, TV Security's
Speaker 1: chief US macro strategist. Never sleepy at the Bank of America.
Speaker 1: Always important to catch up and certainly during UH this
Speaker 1: pandemic as well with Brian moynhan. Here is David Weston.
Speaker 1: We're welcome now our Bloomberg TV and radio and it
Speaker 1: is worldwide as we welcome also the Chairman and CEO
Speaker 1: of Bank of America, Brian moynihan. Brian, thank you so
Speaker 1: much for joining us. Last time we spoke about six
Speaker 1: weeks ago, and you said you expected a rough second
Speaker 1: quarter down, maybe some rebound in the third and fourth quarter,
Speaker 1: and then the economy really getting back to full steam
Speaker 1: sometime in a lot's happened in that six weeks. Has
Speaker 1: your view changed, but David, our view hasn't changed. But
Speaker 1: it comes back to what I said before. This is
Speaker 1: a healthcare crisis. And as you're starting to see the
Speaker 1: healthcare crisis be mittig not solved yet, you're starting to
Speaker 1: see the economy start to recover. And we can talk
Speaker 1: about that. But the approach to winning UH, the war
Speaker 1: against the crisis UH for us, has been a customer centric,
Speaker 1: community centric, employee centric move and so you know, we've
Speaker 1: been out there driving, we've been supporting our clients and
Speaker 1: trying to make sure they have the credit and capital
Speaker 1: to UH to do what they need to do and
Speaker 1: help them through this trough of activity in the second quarter,
Speaker 1: and you can see that in the loan balances extended,
Speaker 1: the p P P loans and how the things we've done.
Speaker 1: We've helped our consumer clients through waivers so they have
Speaker 1: the ability to have better cash flow in the house.
Speaker 1: We helped our teammates by saying no layoffs so they
Speaker 1: know their job is secure, and then getting them safe
Speaker 1: and working from home. And then we've helped our communities
Speaker 1: by contributions and a hundred million dollars and c d
Speaker 1: f I investments which are community belot and financial institutions
Speaker 1: at two fifty million dollars of which about undred seventy
Speaker 1: million is already out. So all that is offsetting the
Speaker 1: impacts of the current second quarter down draft that you've
Speaker 1: seen with the unemployment numbers, and we don't see much differently,
Speaker 1: it's just that we're starting to see us come out
Speaker 1: the other side of this. Frankly. So, we have heard
Speaker 1: from the Federal Reserve and they've expressed some concern at
Speaker 1: least that as this pandemic continues, there may be some
Speaker 1: threat to the overall system and specifically talks for example
Speaker 1: about commercial real estate. Are you seeing some parts of
Speaker 1: the market that are particularly vulnerable on the credit side.
Speaker 1: Remember that the US economy is going to be depended
Speaker 1: on the activity the consumer base, and and so you
Speaker 1: always have to start there when you talk about the US.
Speaker 1: So even though we have this year from the Bank
Speaker 1: American research team, which is the best in the world,
Speaker 1: you know, being minus five percent five and a half
Speaker 1: percent this year and plus five percent next year, the
Speaker 1: real question will be how to consumers behave And in
Speaker 1: what we've seen since the low point in the second
Speaker 1: couple first couple weeks of April, in terms of everything
Speaker 1: in terms of their spending because of the stay at
Speaker 1: home edicts, in terms of their borrowing activity, in terms
Speaker 1: of the transfer of money. Um, you saw all that
Speaker 1: all to a lowest level, and obviously things like travel
Speaker 1: and hotels and things are most affected. But as you've
Speaker 1: seen steadily as you went through the third week April
Speaker 1: then on into the first part of May, you're seeing
Speaker 1: their activities pick up even in the states that are
Speaker 1: still understay from home, and you're seeing the activity pick
Speaker 1: up much quicker in the places they're going back to work.
Speaker 1: And so for the month of May, we're seeing it
Speaker 1: down about you know, two or three four percent versus
Speaker 1: last year. UH for the year today it's down a
Speaker 1: couple of percent. And that's the question. The length of
Speaker 1: this is going to be how the consumers behave given
Speaker 1: the high levels unemployment that you've seen published, when people
Speaker 1: get back to work, jobs coming back in the stimulus
Speaker 1: payments which are all hitting the street of the last
Speaker 1: few weeks, and how all works together to see if
Speaker 1: the consumer's behavior changed. And when I hear when you
Speaker 1: hear Governor, chair Pal and others, the concern I have
Speaker 1: is have we changed consumer behavior as we look out
Speaker 1: across the next four or five quarters. Well, that is
Speaker 1: a key question, maybe the key question, Brian, clearly when
Speaker 1: it comes to consumer I know you've already taken about
Speaker 1: four point eight billion dollar reserve against credit possible losses
Speaker 1: given the level unemployment, which is really quite stunning. Do
Speaker 1: you think that's gonna be enough? Well, what you've seen
Speaker 1: so far is with the consumer help, we've we've granted
Speaker 1: about a million a half payment deferrals. But if you
Speaker 1: look at the actual interesting statistics about thirty five or
Speaker 1: the people ask for credit card payment deferral one ahead
Speaker 1: and made the payment. And if you go and a
Speaker 1: look at those consumers, what you see is because of
Speaker 1: the UH leave aside the issue of where the money
Speaker 1: is coming from, you're seeing higher balance in our account
Speaker 1: and that's because the stimulus between you know, the I
Speaker 1: P payments, between the enhanced unemployment, these measures taken by
Speaker 1: Congress and by the administration by the FED have worked
Speaker 1: as offset the unfortunate aspects of very high unemployment. And
Speaker 1: so so far you're not seeing the delinquent seas and
Speaker 1: things rise vs. You've seen payment deferrals UH increase, but
Speaker 1: you're seeing them start to level off and come down
Speaker 1: in our book, and so we expect to see you
Speaker 1: charge offs coming later on as as as this thing
Speaker 1: goes on. But the reality is right now you're not
Speaker 1: seeing the kind of credit damage that you'd expect to
Speaker 1: see with this amount of down draft and activity. The
Speaker 1: question is what happens next, and that's we're all watching.
Speaker 1: And to that very point you said in the past,
Speaker 1: China to some extent may give us some indication. We've
Speaker 1: seen numbers coming out of China, Brian that indicate the
Speaker 1: industrial production has come back pretty quickly. All consumption is
Speaker 1: coming back as well. But on the other hand, consumer
Speaker 1: maybe not so much with retail sales. Does that give
Speaker 1: you cause for concern back here in the United States, Well,
Speaker 1: it does because the question is how did you change behavior?
Speaker 1: So when you saw Chinese, uh, you know, they went
Speaker 1: into this earlier, they locked down earlier, they came out earlier,
Speaker 1: and you know, we're back in our offices in China
Speaker 1: moving from people back towards so you're starting to see
Speaker 1: normalization of activity and in the questions what's the underlying
Speaker 1: activity and restaurants and and shopping and things like that.
Speaker 1: And so you saw an immediate burst of activity as
Speaker 1: they opened back up and see it fall back down.
Speaker 1: And that we have to watch in the States is
Speaker 1: there'll be a burst of activity in some of these
Speaker 1: places as people who have been you know, in their
Speaker 1: homes for six, five, six, seven, eight weeks go back
Speaker 1: out and do things and will let sustain. And that's
Speaker 1: where you need to look more fundamentally on things like
Speaker 1: car purchases and things like house purchases and see where
Speaker 1: they start to end up over time. But remember the
Speaker 1: baseline projection for most people is the economy doesn't get
Speaker 1: back to its current size until you get to sort
Speaker 1: of the end of next year. That's the definition of recovery.
Speaker 1: So but each quarter from this quarter forward is increased
Speaker 1: economic activity. And what we have to make sure and
Speaker 1: all the policies and stimulus have been put in place
Speaker 1: or making sure, is that despite the very highnemployment, despite
Speaker 1: the issues of who's unemployed, despite the issues getting that
Speaker 1: we need to get people back to work from the
Speaker 1: human toll of all that these stimulus is offsetting. It
Speaker 1: is an attempt off set that. And you have to
Speaker 1: see that play out of our time, Brian, you have
Speaker 1: something like a hundred eighty thousand I think people working
Speaker 1: from home right now. You talked about what you're doing
Speaker 1: over in Asia. When do you expect him to come
Speaker 1: back and how and by the way, how many will
Speaker 1: they all come back? Well, that the ideas we have
Speaker 1: We've always had people who worked outside the standard office setting,
Speaker 1: and that's something we do. Um, there's a great debate
Speaker 1: you know, with this change forever the workforce in America
Speaker 1: and where they want to work. We'll see that play out.
Speaker 1: But that is that is further out there in your term.
Speaker 1: We have we have been open every day, we have
Speaker 1: not shut down except for the branches we closed out
Speaker 1: of concerns to keep our teammates safe in those in
Speaker 1: those branches. Um we which is about branches. Everything else
Speaker 1: has been open. We've been functioning every day and we're
Speaker 1: beginning to open those branches, especially in the States, are
Speaker 1: reopening slowly but surely. So we have the ability to
Speaker 1: operate very well, very much under control. Our technops team
Speaker 1: under Kathy Bisson's leadership, did a fabulished job of putting
Speaker 1: us in position to have a hundred eighty thousand people
Speaker 1: work from home, so we can operate this way. So
Speaker 1: we have the luxury to go back slowly and with
Speaker 1: social distancing requirements, with temperature taking while all the policies
Speaker 1: that all employers want to put in place, you know,
Speaker 1: the the ability of the luxury putting people back in
Speaker 1: place carefully also takes a burden off of the communities
Speaker 1: we operate in, not to have high level of cases
Speaker 1: are perfections and having people move around and creating pressure
Speaker 1: on the community. So we will go back slowly. We
Speaker 1: haven't said any plans yet. We have a top talent
Speaker 1: team working on the reentry back to the office. It's
Speaker 1: not back to work. We'll work and every day it's
Speaker 1: back to the office. Yes, sure, no, I understand, Brian. Finally,
Speaker 1: we're going to hear from Federal Reserve Chair J Pow
Speaker 1: today as part of the cares Actor report on that
Speaker 1: he's been doing a fair amount taking already. What would
Speaker 1: you like to hear from Chair Pile today? I think
Speaker 1: if you're going to hear from both second reminution Schair Pole.
Speaker 1: But and I think people have to stack. You know,
Speaker 1: there's a the p p P program is now. You know,
Speaker 1: it still has money left. The applications are still coming in.
Speaker 1: That dollar volume of loans is going up, but the
Speaker 1: number loans is going up faster. So the loans are
Speaker 1: smaller and small. In our case, we've done three thousand
Speaker 1: of them as of this morning, eighty thousand average balance. Uh.
Speaker 1: It's the employers are under a hundred or under ted employees. Uh.
Speaker 1: And so there's a small business that are getting the
Speaker 1: help they need. And so I think what you want
Speaker 1: to hear is where's the next rounds of their ideas
Speaker 1: to continue to put money into the economy to help
Speaker 1: because it's not an unlimited resource, so we need to
Speaker 1: keep adding carefully in the areas I think that need
Speaker 1: the most help in the near term of the States
Speaker 1: because of the incredible budget pressure they've been put under,
Speaker 1: and if we don't help them, we'll see them have
Speaker 1: to make budget justments which will add to the unemployment
Speaker 1: burden to the hospitals and things. Is similar issue in
Speaker 1: terms of having to shut down and lose revenue and
Speaker 1: they need to get that whole plug so they can
Speaker 1: get back to it. And in some respect some of
Speaker 1: the nonprofits in the performance nonprofits, especially the same issue university.
Speaker 1: So that the idea is the stimulus has to continue
Speaker 1: help Americans through the unemployment, assis benefits, uh uh and
Speaker 1: things like that, but also has to it can be
Speaker 1: targeted in X rounds towards these places that just have
Speaker 1: operating holes that we have to decide as a society
Speaker 1: we're going to replace so that they can get back
Speaker 1: and provide a great services they provide. And so that's
Speaker 1: what you like to hear in terms of the work.
Speaker 1: And there's a lot of discussion about facilities and usage
Speaker 1: and other up and operating. A lot of these facilities
Speaker 1: were put in place to stabilize and you see massive
Speaker 1: stabilization in the market so that you know high grade
Speaker 1: issues will have another record month, probably this month. Uh
Speaker 1: uh uh. You know, high yield will have a strong
Speaker 1: month if you're starting to see converts and some equity
Speaker 1: deals get done. The stabilization and the fact those facilities
Speaker 1: aren't all used, it's actually good news. That means the
Speaker 1: markets are doing what they're doing and providing capital. So
Speaker 1: what I think people get focused on is how much
Speaker 1: money's outstanding on facility X or something. The reality is
Speaker 1: having it there provides a comfort that the private sector
Speaker 1: can drive it in the banking system can drive it.
Speaker 1: So whether it's main street, whether some of these other facilities,
Speaker 1: you know, the debate ought to be not about whether
Speaker 1: it being used about the news. If they're not being used,
Speaker 1: that means you've seen stability the funding structures. Fascinating. Thank
Speaker 1: you so much. Brian really appreciated spending time with us.
Speaker 1: As Brian moynihan, he is the chairman and CEO of
Speaker 1: Bank of America. We want to thank all our radio
Speaker 1: listeners for joining us and this is Bloomberg. One of
Speaker 1: the great joys of doing this, folks, has been over
Speaker 1: the last number of weeks learning and speaking to the
Speaker 1: consistent excellence of the Johns Hopkins University medical team. We've
Speaker 1: talked to people at the Bloomberg School of Public Health.
Speaker 1: Of course Michael Bloomberg, the founder of Bloomberg LP, is
Speaker 1: the philanthropist there, but also to their medical school and
Speaker 1: their nursing school. This morning a conversation where NASA ernest
Speaker 1: we have the adrenaline rush of the ambulances in in
Speaker 1: the days have diminished, but what hasn't really changed is
Speaker 1: the demand for i c U. Bit well, the you know,
Speaker 1: the demand for the i CU beds and the ability
Speaker 1: to go into intensive care. Right now, what does that
Speaker 1: signal to you? Is it still a large body of
Speaker 1: older people most vulnerable, or is it across all age groups.
Speaker 1: It's interesting it is the majority of the age group
Speaker 1: that we're seeing here at Hopkins that's impacted is actually
Speaker 1: in the thirty to fifty year old range. It is
Speaker 1: spread across all ranges. But that was very surprising to
Speaker 1: us to see that it wasn't just the elderly population.
Speaker 1: But now you make a point right in saying, look,
Speaker 1: reopening isn't relaxing. But how do you change perception because
Speaker 1: a lot of people will say, well, look, you know,
Speaker 1: we're over the worst, so actually I can get back
Speaker 1: to a normal life. That's a very good question. One
Speaker 1: of the things that you have to do is you
Speaker 1: have to have a good message about the balance between
Speaker 1: science and economics and not have it as simply political
Speaker 1: all the time. And if you notice, you see it.
Speaker 1: That what we see quite frequently. But really the things
Speaker 1: that have worked are the masking the social distancing. That
Speaker 1: part needs to stay. But are people understanding is it
Speaker 1: not clear from the authorities or are people refusing to
Speaker 1: do that? So I don't know, you know what your
Speaker 1: perception is in what could be done better? Sure, so
Speaker 1: people are, they're relaxing. I was out the other day
Speaker 1: and I noticed many people without a face mask and
Speaker 1: that wasn't the way it was a few weeks ago.
Speaker 1: So while I don't want this to be an acceleration
Speaker 1: of doom and gloom, I do want people to really
Speaker 1: understand that in order for us to stay ahead of
Speaker 1: this curve that we've been working so hard on, we
Speaker 1: need to keep the mask on. I saw your segment
Speaker 1: about Uganda where they're giving mass to all of the children.
Speaker 1: That's an important message. We need to keep those messages going. Masking,
Speaker 1: social distancing, washing your hand are all very important things.
Speaker 1: We are at a different place, but we are not
Speaker 1: completely out of the woods yet. News earnest with us
Speaker 1: with Johns Hopkins University School of Nursing, and we look
Speaker 1: for those updates tomorrow and here in the coming weeks
Speaker 1: as well. Cam Harvey, Professor Finance at the FUCAL School
Speaker 1: of Business at the University, former professor of mine. Actually, uh, professor,
Speaker 1: thanks so much for joining us here. I tell you,
Speaker 1: as I think back to my FUKAL at years, Professor,
Speaker 1: I don't recall you or any other professors telling teaching
Speaker 1: us anything about a pandemic and what that means for economies.
Speaker 1: Give us your sense of kind of how you're seeing
Speaker 1: the Federal Reserve, central banks around the world, Congress, how
Speaker 1: everybody's trying to react to this pandemic. What do you what?
Speaker 1: What what are you seeing right now? Yeah, that's the
Speaker 1: first thing, all Tom, great to be on the show. Um.
Speaker 1: My first lecture in risk management is on something called
Speaker 1: systemic risk, and systemic risk is really hard to hedge,
Speaker 1: really hard to mitigate, and we kind of brainstorm different
Speaker 1: systemic risks and you could think of, let's say, a
Speaker 1: nuclear war between the US and Russia. UM. There's no
Speaker 1: place to hide nowhere on Earth. UM. And one of
Speaker 1: the four systemic risks that we talk about is pandemic.
Speaker 1: And it's interesting discussion because pandemic's nothing new. It's no
Speaker 1: black swan. We've had plenty of pandemics. UM, it is
Speaker 1: unusual this time around given the response, UH that the
Speaker 1: economies have effectively been stopped. Uh So if there's any
Speaker 1: black swan, it's the policy response that's completely unexpected and
Speaker 1: you get numbers that are just off the chart. I
Speaker 1: don't UM look forward to dealing with the macroeconomic day
Speaker 1: in the future when you've got such extreme observations. So
Speaker 1: the response is the black swan. So the FED, you know,
Speaker 1: I think a lot of market participants, Professor would say
Speaker 1: the FED has done a relatively admiral job here. They
Speaker 1: were early, they were aggressive, appears, they were I think
Speaker 1: they clearly message kind of what they were looking to do.
Speaker 1: We heard from Chairman Pale on Sunday on sixty minutes
Speaker 1: saying there's still more tools in his toolbox. How do
Speaker 1: you kind of view the FETs performance to date? So
Speaker 1: early on I was very nervous UM and certain actions
Speaker 1: that they took at the beginning I was critical of
Speaker 1: and still am. For example, they cut the interest rate
Speaker 1: from one point five percent to one percent really early on.
Speaker 1: That's what you're talking about being kind of early. UM, Well,
Speaker 1: one point five percent is already a low interest rate.
Speaker 1: And in the global financial crisis when they cut fifty
Speaker 1: basis points in two thousand and seven, the rate of
Speaker 1: interest they started from was five point to five So
Speaker 1: then they cut again from one percent to zero percent,
Speaker 1: and soon usually start doing that, you run the risk
Speaker 1: of a liquidity trap that and we saw this effectively
Speaker 1: UM play out where the third year bond at some
Speaker 1: point was less than one percent. Who wants to buy
Speaker 1: the thirty year bond had less than one percent? When
Speaker 1: just like a moderate increase in rates like one UM,
Speaker 1: you get hammered. You lose on that bond. So given
Speaker 1: given the amount of QUEI going on, giving the amount
Speaker 1: of money creation, UH, the risk shifts and the bonds
Speaker 1: are no longer safe haven. Kim. One final question, if
Speaker 1: we could cam and I want to go back to
Speaker 1: Madigliana Miller, any idea of on and equities and we
Speaker 1: all learn this and it's all theory and and all
Speaker 1: that as well. Most of what we're doing now, Professor
Speaker 1: is not in those textbooks. They're not in the textbooks
Speaker 1: we used when we try to keep up with Fama.
Speaker 1: They were in the textbooks Fama used when he tried
Speaker 1: to keep up with Frank Night, etcetera, etcetera, etcetera. What
Speaker 1: textbook are we using right now? Yeah, So it's really
Speaker 1: hard to have a model of all possible situations, and
Speaker 1: you have to kind of step back and and figure,
Speaker 1: you know, the basics, what what we really know about this?
Speaker 1: And one thing that we do know is that we're
Speaker 1: borrowing a huge amount of money from the future um
Speaker 1: to kind of get through this, and we need to
Speaker 1: realize that we need to pay that back, and we
Speaker 1: pay it back either through taxes or inflation. And also
Speaker 1: we are creating a lot of money. The Fed's balance
Speaker 1: sheet has exploded and s in the global financial crisis,
Speaker 1: something similar to happen and there was no inflation. Beware
Speaker 1: of extrapolating from one observation. So this combination of increasing
Speaker 1: deadedness UH and the exploding balance sheet, to me, the
Speaker 1: major risk for investors is unexpected inflation in the future. Hey, Cam,
Speaker 1: thanks so much for joining us. We really appreciate a
Speaker 1: camp Harvey, Professor of Finance at the Fuqual School of
Speaker 1: Business at Duke University. Thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio