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00:04In the month of July, we just got the final sort of payments report, the consumers of Bank of America
00:12put 5% more in the economy.
00:14And what you've been seeing in June and July is that if you do a third of third, third of
00:19high income, medium income, low income, the lower income people's wages are growing a little faster.
00:22So that's great.
00:23And they're spending a little bit more. And so you're starting to see more convergence in the spending patterns. That's
00:27very good.
00:27But if you look at what they're spending on, it's interesting. Cruises are up strong.
00:33Travel, instant numbers of travels is flat. The cost is up a little bit. Gas is up. Food's down a
00:39little bit.
00:39So if you look around, they just move money around. They're pretty resilient.
00:42But 5% is consistent with a 2.5% growing economy.
00:47That's the good news because if consumer stays in the game, the U.S. economy kind of rolls along.
00:51They have great debt capacity. They're not as borrowed up as people think because they see like credit cards pass
00:56where they were in 19.
00:57But it's been six years now. So seven years.
00:59Does that change your view of the, you know, we have, you know, you look at a lot of polls.
01:03People talk about affordability and an affordability crisis.
01:06Do you think we have an affordability crisis based on these numbers?
01:08I think we have an affordability crisis because people believe there's an affordability crisis
01:12which will shape their behavior if it doesn't come in the line.
01:14That's largely around housing and rent costs, which are still rising, but rising at a less fast rate.
01:20It's around insurance costs, which actually came back in line.
01:22It's around food costs and gas costs.
01:25And so if a deal gets worked out and the gas prices come back down, that takes away one of
01:30the concerns.
01:30But it's a real issue.
01:32It's just the say-do paradox is about as high as I've ever seen it.
01:37So that's what the polls say.
01:39And it's how people feel.
01:41What you watch them do is different because they're spending on, they're spending absolutely consistent
01:45what they spend in the past and probably a little bit more on entertainment, a little bit more on travel
01:49than they did last year this time.
01:51Not, you know, other parts of the year, but the last year.
01:53By the way, you talked about oil and the straight.
01:56When corporate leaders call you for advice, we have maybe a deal in the next day.
02:02The markets think there's a deal.
02:03Yeah.
02:04Do you say to them, we think there's a deal too?
02:08We think we should be skeptical?
02:09What's the right reaction?
02:11Well, I think there's been ups and downs on this and you see a range of oil prices probably
02:16from 60, 60, 70 to 100.
02:19And while that seems like a huge range, the actual impact of that has been felt by the
02:23economy before.
02:24The question is, if people believe it's temporary, they change their behavior, think it's going
02:29to come back down.
02:29So that uncertainty is still in people's minds until they see a deal get struck and hold.
02:34And look, this is hard diplomatic work that's going on.
02:37I think we all think, well, you can just sit there and work it out.
02:40It's been going on a while.
02:42But I think, believe me, the small business community, the medium-sized business community,
02:45the large business community would be very happy if this got cleaned up and they knew
02:49that oil prices were more predictable in the long-term future.
02:52One of the big debates here, of course, given we have so many members of the FOMC here,
02:57sometimes they call this the pre-show for Jackson Hole, is whether interest rates need
03:03to, you know, whether they need to be hiked, right?
03:06Like, that's the big question.
03:08We're going to have Neil Kashkari on in just a little bit.
03:10You're calling for three hikes, I think, by the end of this year, which is not, I think,
03:16where everybody else is.
03:17It's a little bit, it's higher than the market, but you've got to back up on why.
03:21So if you look at the issues of inflation continuing to roll through the economy, it was mitigating
03:27that pop back up because of the impact on prices from terrorists, impact on prices from
03:31the war.
03:31And that's coming back down.
03:32Our team thinks inflation reaches the mid-twos by the end of next year, 27, and then gets into
03:38the target range that you've heard them talk about.
03:40They think the federal raise rates three times in September, October, December meeting this
03:44year.
03:45That's a little bit more than the thing.
03:46And they're a smart research team.
03:48They think this through.
03:48But they really are saying that the labor market's in very good condition.
03:51And so you have to work on the inflation side and make sure that it keeps going down.
03:55If it goes down better than, like last month, it went down a little better than people thought,
03:58I'm sure that they would change that.
04:00But right now they think that that three gets the Fed in a place that they can have the inflation
04:06get tamed.
04:07What's important, though, is the travel across the last 12 months of the view of the second
04:13half of this year.
04:14So Liberation Day, last year's second quarter, instantaneously people took 100 basis points
04:20out.
04:20As you move through, they raised it back by more than 100 basis points.
04:23that it came back down, and now they're sitting at 2.4 for the year and 2.5 for the
04:28second
04:28half.
04:29So they're accelerating, and they're accelerating.
04:31And so raising rates and accelerating economy to help the inflation is actually a rational
04:36economic strategy because the economy can grow through the higher rate structure.
04:40Becky's got a question for you back in New York.
04:41Becky?
04:43Thanks, Andrew.
04:44Brian, it's good to see you.
04:45If that's the case, if we actually do raise rates three times to try and get inflation back
04:49down like you suspect by the middle part of next year, what impact do you think that will
04:54have on lending, particularly for, I'm thinking of the AI data space?
05:01There's a lot of money that's needed for that.
05:03There's a lot of financing that's going through.
05:05If you see rates up 75 basis points, do you think that has an impact and slows any of that
05:11down or not?
05:12Well, I think the impacts to that financing you've already seen.
05:15You've seen the spreads move out on the bonds.
05:17There's generally term facilities.
05:19Yes, they do some short-term construction financing, but the long-term impact of that
05:23financing on that build-out is going to be in the term bond structure.
05:26You've seen those move out.
05:28And my guess is short-term rate moves won't have a big move in that area of the curve.
05:32So it should continue because, frankly, what we're hearing here and what you hear from your
05:37colleagues that you bring on the show all the time is the returns on building a data
05:40center are so high, that'll be fine.
05:42When you get further down the build-out, this may be a more interesting gate than you have
05:47not.
05:48But I think right now they're building through it because the economics still support it.
05:51Their usage is going up dramatically, and they've got to get these things built.
05:55Hey, Brian.
05:56So that, thanks, Andrew.
05:58The three rate hikes, so that's what you think is going to happen.
06:02That's not in any way something that you think is a problem.
06:05You're not making value judgment.
06:07I guess your team isn't either.
06:08So you have a team that just looks at the facts on the ground.
06:11How about your team that's looking at stock prices?
06:14I think we're almost at 7,800.
06:17And I think Bank of America is like the lowest on the street at 7,100 at this point for
06:23the
06:24S&P.
06:24Do you think, do you get involved with that?
06:27Or you just, you have other people that handle that and they can do what they're going to
06:31do.
06:32And you're not going to say, hey, what's happening here?
06:34We're, you know, the market's moving out from under us.
06:38So our research team is one of the best in the world.
06:40It's a half billion dollars a year of brain power.
06:43I let them make those decisions, Joe, because between, you know, Chris Heisey, who you often
06:47talk to, or Savita, you often talk to, you know, they've got a view of that.
06:50Look, these things catch up to each other.
06:52When you've seen the movement up to levels now, they'll probably adjust.
06:56But importantly, think about the year, Joe.
06:58We've seen that a lot.
06:59They keep, you know, the market runs away from them and then they raise their target.
07:03But that doesn't really help investors very much.
07:06Yeah.
07:06So I think when you think about what's been interesting as they talk about the market in
07:10the last several months is the rounding out, that the dominance of a few companies have
07:15become wider, yet those companies continue to go.
07:18So I think we'll see what happens here.
07:20But it's all going to be about earnings, Joe.
07:21And you saw the second quarter earnings almost across the board in our industry, very strong.
07:24earnings were up 30%.
07:26You look at other people, that's going to drive this.
07:29We could be back at six.
07:31We could be back at six.
07:32Tom Lee said that before the end, another strategist said before the end of the year, we're going
07:36to visit the sixes again.
07:38So you never know.
07:39We could end at 8,000 and hit 6,900 on the way there with all the time we have
07:44left.
07:44I'm not saying that.
07:45In my next life, I'm going to come back as an analyst that gets to predict the market
07:49because you get to change it.
07:50I don't get to change what we do at the company.
07:51You don't get to do that.
07:52I know.
07:53It's a luxury belief.
07:54I know.
07:55That's the sell side, I think.
07:56Right.
07:57Yeah.
07:58Let me ask you a question on the other side of that, which is situational awareness.
08:02They were a client of your firm.
08:03You had lent to them.
08:05I think we're all still trying to grapple with the aftermath of that, what happened.
08:10Has anything changed in terms of your lending standards to hedge funds and other firms in
08:15the aftermath of this?
08:16One, two things.
08:18One, I think things changed as people saw this move, and there's a natural adjustment
08:22period.
08:23I think any time one of these happens and we're fine, et cetera, et cetera, you always look
08:28and say, okay, what happened?
08:29Should we learn from it?
08:30Should we change?
08:31And so the tendency is to tighten the underwriting standards just to hair, to adjust, especially
08:36with big run-ups in stocks.
08:37So we'll see what happens next.
08:38But these are all warning shots of, as Joe was talking about, valuations get out, leverage
08:43in the system gets there.
08:44You have to be careful.
08:45And we run a great shop.
08:47And so, you know, that works for me.
08:48Had Ken Griffin not come in, though, I mean, how damaging would have that been?
08:53I think we'd have been fine, based on the standards that we land on.
08:58And that's, but the reality is, is that you have to go learn from every lesson of the
09:03past.
09:04And so the natural instinct of everybody that participates is, wait a second, let's go back
09:08and look.
09:08And that has a tendency to push down a little bit.
09:10But before we go, we were having a conversation at the end of that fascinating interview that
09:16Becky and Joe were doing with Dave Ricks at Eli Lilly about GLP-1s.
09:21And you were telling me about how much Bank of America is spending on GLP-1s now for its
09:26employees and how you're thinking about that.
09:29Yeah.
09:29So if you think about our company, we're self-insured.
09:32We spend $2 billion plus on health care a year.
09:34We spend about $250 million or more on GLPs.
09:38And that's up from zero.
09:39Think about it four or five years ago.
09:40$250 million, you spend it.
09:41Yeah, because it's self-insured.
09:43So it's when, when the teammate pays the quote premium or the co-pay, you know, that helps.
09:48But everything else we pay for.
09:49What we see in it is we see a great impact on the employees.
09:52We've always been about mental wellness, physical wellness.
09:55We've had a lot of programs.
09:56We have a, you know, steps campaign, you know, 10, 40, 50,000 people are doing as we speak.
10:01So we build these programs.
10:02What's interesting is, as you talk to this, and I've been on a group of CEOs in American Heart
10:06Association and David's, others on them.
10:09And as they watch this drug progress, you know, how it impacts is really interesting because
10:14it's lowering near-term incidence of heart issues for people to take it, even if they
10:19don't have all the attributes.
10:21That's the payback.
10:22And so our belief is, believe me, we're pounding everybody on price and trying to get as cheap
10:26and the pills make it more available.
10:28But our view is that the long-term health benefits, plus there may be more short-term health benefits,
10:32and that's what we're trying to say.
10:33So here's the thing.
10:34So your company's doing that.
10:35There's a lot, there's a whole number of towns, you've probably read about these, towns that
10:38are spending extraordinary amounts of money, firefighters, people, and it's bankrupting the towns
10:43because they're not seeing on the other side.
10:46It's really a long-term bet on the health of your employee base and how you have to think
10:51about that.
10:51That's an interesting question.
10:52It clearly is, if we have somebody 40 taking this and their life improves at 70, they may
10:57not be working for a company.
10:58Matter of fact, they may not be working for a company in five years because they take a
11:01job somewhere else.
11:02So you just have to say it's the right thing to do for your teammates so they can get access
11:05to these benefits.
11:05And we have gates and they have to qualify and be prescribed and all that stuff.
11:09But the interesting question that's arriving is, does it help other types of things?
11:14And the docs talk about it, I just listen.
11:16And that's kind of an interesting question because it does help other types of things.
11:19The payback's nearer.
11:20Now, here's the problem with cities and towns is that we have about $3 billion in monthly
11:25salaries and wages and about $200 million, make it easy, in monthly health care benefits.
11:30If our teammates are happy, that's more important.
11:32If I'm in a city and town, it's a little different dynamic.
11:35So we can afford this.
11:36We do it because we want to be the great place to work.
11:38But it's been fascinating to watch our teammates' behavior on these adjustments, the loss of weight.
11:44We monitor that.
11:44We give them coaches and everything.
11:45And so it's a good investment bias.
11:47Brian Moynihan, always appreciate you and appreciate seeing you.
11:50Thank you for waking up early here in Aspen.
11:52The sun's coming up.
11:53The sun is coming up.
11:54The sun's coming up.
11:57The sun's coming up.
11:58The sun's coming up.
11:59The sun's coming up.
11:59The sun's coming up.
11:59The sun's coming up.
11:59The sun's coming up.
11:59Grazie a tutti.
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