BofA Stock Traders Post Record

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio, or watch us on YouTube search Bloomberg Global News. Okay, that's it. With Bank of America reporting this morning big bank earnings. They are done for the quarter. Shares hire by about three point nine percent in the wake of that report. The company, joining its Wall Street rivals and capitalizing on market volatility,

will also benefiting from an increase in lending. Joining us now is Sally Bakewell, finance team leader at Bloomberg New She's with us in the Bloomberg Interactive Broker Studio. Sally, great to have you with us. Uh here we are. Your sort of busy season for the quarter is just wrapping up here, Uh, give us the highlights from Bank of America, and then we pulled back and talk about the quarter for big banks in justin MANA. Yeah, I think Bank of America was very much in line with

what we saw from most of the bank's last last week. UM. We saw that it capitalized on the volatility or the volatility that's been exacerbated by the situation in Ukraine. And we saw that investment banking took a bit of a hit UM because we have this sort of spack regulation that has chilled a lot of the deals. UM. And then we also saw some glimpses of how the consumer is doing UM. And much like some of the other banks, we're seeing these trends where consumers are continuing or amping

up a little bit. They're spending UM, and Bank of America gave us a pretty good picture here. UM. We know that consumers, for example, they opened one million credit cards in the first quarter. UM is spending increase. The bank is expecting that its net interest income, which is that key metric for banks, is going to grow by to sifty million in the second quarter. And that's on strong loan and strong deposit growth. So the words from the conference calls and the analysts and the media calls

were very much about the consumers being in robust health. Um, they're sitting on a lot of liquidity UM. Delinquencies and charge offs are all low. So the picture is pretty strong. But I'm sure one of you is going to ask ask me now about what the actual you know, what the risks are and what the outlook might be. So I'll let you do that. Well, go ahead and answer. That was probably a better question than I was gonna actually have for you anyway, Sally. So, yeah, what did

we learn about how things look? Well? I think so MONI hand today this the Bank of America chief executive officer. He did say that consumers are sitting on They're still sitting on a lot of the stimulus that they got, and that's kind of helping them, um keep current on their debt and enabling them to spend a little bit more.

But I guess the questions remain about what happens when that stimulus, that liquidity they do have, starts to drain um and they are left just with high inflation UM gas prices being higher, and then we have, you know, the overall political uncertainty um interest rate hikes. So while the snapshot today looks pretty good, UM, it is not

without some clouds on the horizon. Tell us a little bit about loan growth, because I think when the average perhaps listener, here's the word debt in a non financial market context, it's like that's a bad word, right, But if you hear loans or debt in a Bank of America has long growth, that's actually a really good sign Talk to us a little bit about what that signals. Yeah, and that's exactly the right perspective I think on it. Um, we we see the banks have said for a long

time that they're waiting for loan growth to return. And again it's been stimulus has been cited as the reason that people aren't boring. Again, they've got enough cash in their pockets they don't need to. But loan growth is really important for the banks because that feeds into this net interest income met trick um that is their main source of revenue. So it really matters, UM, and if they aren't seeing that, they have to look for other places where they can get revenue, and it just complicates

everything for banks. So we have started to see it come back. UM. In the first quarter is not completely clear easy picture m JP and and consumer loan growth is key UM of For example, last week we had JP Morgan reporting UM and while they had commercial and I think consumer loans up, I think consumer loans without credit cards were actually down. So it's not completely clear and positive picture. But banks are now finally after sort

of two years, starting to see loan growth picking up again. UM. And that's also really important for them given that we're in a rising rate environment, because they'll obviously benefit from that.

So if we take a step back and we think about what you and your team did last week when it comes to covering all the other companies that reported JP Morgan, Morgan Stanley and well far Agoing more, Uh, what's the takeaway for not just the most recent quarter, but but how the year looks even beyond looking at the consumer what about these companies businesses? UM, I think takeaways are pretty there was a pretty solid picture. I

think there are some nuances to JP Morgan's earnings. UM In particular, UM, we saw that JP Morgan, for example, it's set aside one point nine billion and it's as a kind of reserve PRISIP provision for the bank to cover bad debt, and it's cited both the war in Ukraine and it also cited kind of recessionary headwinds. Now it played that down a lot and said that they

have to do this under a particular accounting standard. But nonetheless it they they it indicates that they see the probability of a recession going from sort of very low to just low. So UM. I think perhaps one of the takeaways from all of the earnings is that there are concerns about future growth. Concerns about future growth go ahead, creaty.

I was going to ask about the training revenue because I know you started off talking about volatility and how a lot of these companies are really taking advantage of it. But what happens when the volatility goes away? Ultimately the selling has to stop, right and we only have about forty got I mean, that's a great question. And we kept thinking that the volatility to volatility would end. UM. We had COVID and then as that receded, we thought it would end. We then had inflation. UM. We now

have the Ukraine situation so that it can't be completely sustainable. UM. But we haven't had the absolute quiet calm period yet where we see them normalize. So you know, big questions remain about what actually normalizing means for these banks um and trading and their trading businesses which just had a bonanza of the quarter. This is why we love having you join us. Sally Bigwhell financed Team Lee for Bloomberg new Shares a Bank America by the way, now higher

by four point two percent. Sally's with us in the Bloomberg Interactive Brooker Studio in New York. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim

Stenovic on Bloomberg Radio. Well, you all might remember last week somebody by the name of Elon Musk, the wealthiest person in the world according to the Bloomberg Billionaires Index, set down for an extended interview with Chris Anderson of TED in Vancouver, and there he talked about a quote unquote plan B if his Plan A for taking Tesla private doesn't work out. This is something that Max Chafkin, features editor at Bloomberg Business Week, writes about. You can

read Max's story now on the Bloomberg Terminal. Also at Bloomberg dot com. Slash A Business Week joining us now is editor Joel Webber as well. He is the editor of Bloomberg business Week, and he joins us on the access line from Brooklyn along with Max. Joel, Uh, before we talk about Plan B, we really need to understand what's plan as. Yeah, that's a great question. So I think we're all still trying to figure that out. But um,

you know, Ellen obviously has made uh this offer. Uh, we'll see if it actually comes to the deal actually comes to fruition. In the meantime, you know, the Twitter board is opted for a poison pill. So all of this very dramatic has played out online, uh since since the news broke on on Thursday morning. Um, and you know, Max in the middle of it, I'm sort of like, Max,

what's your taking all of this? And he raises a good point, which is, you know, this guy's CEO of two publicly traded companies, and you know, like what would it be like to have him on a third company? You know, like we you know, we don't really know, and that that plan A what's it looked like? Max? Yeah, Well, as you say, Joel, I mean the previous uh chief executive of Twitter was constantly getting hammered by investors for having two jobs. Remember Jack Dorsey was the founder of

co founder of Twitter. Also was uh CEO of Square which is now called Block and and and there was this whole drama with it with a bunch of activist investors over the fact that the two jobs that was too many as far as twitters investors are concerned. Elon Musk, you know, has something like, you know so many I've kind of lost count. Right, you have the two the two big ones, plus you have the tunnel thing, you have the you know, you have the AI thinks you

have brain implants. And now he started proposing um to take on another job. And I think anyone who who watched Um that Ted interview that you that you bring up saw, you know, somebody who is very good at, you know, generating media attention and getting people to talk about him. But but there wasn't really there isn't as far as I can tell, any kind of plan um either for how Elon Musk will kind of go through with this proposed acquisition or what he would do with

it once he acquires it. Maxie want us through. And this is just for the benefit of our listeners what a poison pill actually is, because this was referenced multiple time in your story. Uh so, yeah, have poison pill is basically a way for the Border directors to allow other shareholders to acquire shares and essentially dilute, uh, you know, dilute the stake of of whoever the attacker is in

this case, be Elon Musk. And it's it's a way to to basically allow the board to keep control of the situation and and hopefully as far as they're sort of you don't negotiate with Musk and you know, or whoever get them to a higher price. UM. This is something that's commonly used in UM in these kind of situations.

And it's also part of what's driving this is because Musk's offer, while while it's higher than it will than the stock price was when he first you know, started investing in Twitter back in March, it's actually quite a bit lower than than where the stock was, you know, even you know, as as as really as like last fall.

So so from the Border director's point of view, Elon Musk has kind of made a low ball offer, UM, and and they want to negotiate, and Musk um it seems, you know, rather than trying to negotiate is you know, as he does taking this to Twitter and and and um, you know, tweeting about the possibility of a tender offer. All they didn't seem done anything. Um and and you know, suggesting or kind of implying that there might be other

investors who might join him. But it's all extremely sort of theoretical, and it you know, makes for great content, but but it's not clear that any of this goes anywhere. Hey, Max, I know you did a lot of reporting about Elon Musk's early years for your book The con Trary and

Peter Teal and Silicon Valleys Pursuit of Power. What do we know about the way that Elon Musk thinks about quote unquote free speech, the way that he perhaps would think about rules and regulations when it comes to Twitter if he were the person to actually take it over. Musk is um has some libertarian tendencies and um, and he's he's talked, he talked about them at times. You know.

On the other hand, Um, he's also somebody who um, you know who his sort of main political belief in so Fur, you know, has has expressed political beliefs has been around climate change, and in particular, you know, government support for companies like Tesla that are you know, interested in doing something about that, so which is which is not very libertarian. I think it's fair to say his um political beliefs are are are pretty fuzzy or or or you know, this is maybe just not articulated in

in any kind of like clear way. He's been somebody who's been sort of very in favor of helping himself and helping his companies and and and starting innovative businesses. But but hasn't you know, expressed you know, huge you know things on political issues, you know, on free speech. I think some of what's going on here with Musk, you know, I I think he probably agrees with that that general idea. I think he also realizes that there is a huge constituency of people out there for this message.

You know, we're seeing especially on you know, sort of like right wing media, right wing talk radio itself and so on. There. You know, they're getting very very excited about the idea of Elon Musk coming and taking over Twitter and making it a free speech social network because of course, you know, the subtext is they would allow you know, Donald Trump back on the platform, and it becomes this kind of um, you know, almost like a dog whistle to to get um, you know, get enthusiasm

from from conservatives. So I think some of that is Musk is sort of doing some of that, responding to some of that. Remember, he is, you know, an amazing marketer.

He's somebody who did the impossible with Tesla, where where you know, when he started the when he got involved in the company, you know, electric cars were seen as this kind of wimpy thing that they were not capable, and he's you know, created this enormous automaker, you know, one of the best selling um cars in the world at this point and um, and he's done that by

by with his amazing marketing. And I think we're seeing some of that playing out in real time where where Elon must have kind of found a new way to to to generate attention and you know, maybe it ends with him, um, you know, taking over Twitter or something, but it may also just end as another one of these you know, crazy uh episodes in the Elon reality show, which I guess Max, you know it raises I mean, you've you've so elegantly explained sort of master plan and

there has always been this master plan, right like electrified vehicles, ads, solar like it all kind of made sense. How does Twitter fit into that? If at all, it doesn't fit into it. That's what's so strange about this. I mean, Musk has, as you say, Joel, you know, been super articulate on the on sort of the subject of of of SpaceX and Tesla, and he's he's he's he's been he's been very clear that what he's trying to do is, you know, accelerate the development of green technologies. That's with

with Tesla, with SpaceX is rock company. It's um, create these capabilities that will help you know, our our civilization, uh, survive in the event of something something terrible happening. And and those goals you know, are are very lofty and and they've gotten you know, his fans very excited with Twitter. If you're paying attention to that interview at Ted, you know, he tried. He he said that you know, Twitter, if it, if it has free speech, it will be able to

preserve global freedom or something like that. Um And so maybe he'll be able to kind of stitch it all together. But I think the main reason to be skeptical of Musks, ever bail, is that they don't really fit into this mass plan. Oh it is a great read, and check it out. It's online, It's on the Bloomberg terminal. Max Chafkin, Features editor for Bloomberg business Week. He's also the author of The Contrarian Peter Teel and Silicon Valley's Pursuit of Power.

Also Joe Webber, editor at Bloomberg Business Week. You're listening to Bloomberg Radio. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. Well, it's not just tax Day, but it's also Earth Month because Earth Day is coming up, and we think a lot about I think the products that we use, and increasingly consumers are thinking about the products that they use

when it comes to their impact on the environment. And one company that was relatively early to the way the consumers think is Seventh Generation. They make household and personal care products companies. It was it was acquired by Uni Lever back in and we're pleased to have back with us. Allison Wrightner, she's CEO of Seventh Generation. She joins us via zoom from Burlington, Vermont. Alison, how are you hi? How are you. Thank you so much for having me back. Hey,

it's good. Good to have you with us. I do want to just quickly say we did try to have you last week. There were some problems with the telephone. Maybe the cell service in Burlington wasn't so fantastic. So we apologize to our viewers and our listeners, and we are really glad to have you back with us. Um, give us an update on how things are going at seventh generation and what you're seeing, because we talk a

lot about inflation. This is the probably the word that I say the most apart from Bloomberg, every single day. And I got to ask you, You've been at seventh generation for years now, more than a decade, and I'm wondering if you've ever seen the raw materials costs that go into seventh generation products rise like they are right now. Yeah, So if I could have a penny like you for every time I've said inflation over the course of the last year. It's a kind of a running joke these days.

But what I will tell you is that we are not a mute I think like many companies right now, especially in the categories that we operate in, we are seeing a true on cost of materials and commodities that we've never seen before. UM. But I think for our business specifically, UM, we're moving along the same lines as

our category and our counterparts. So I think we're all in this together and for seven times specifically, I think what this conversation around how we show up in market and the cost of doing business these days has really brought to the table an important question around what choices do we need to make in order to protect what

we stand for. We invest significantly in materials like plant based ingredients and post consumer recycled materials, all of which is an on cost for us, especially in today's environment. So we're doing everything we can to make sure that our point of difference remains strong and true during these

really volatile times. Talk to us a little bit about the costs of it, because I think when people think about green products or organic products, or just products that are prepaps mainly the United States and help the environment, a lot of people kind of associate that with Okay, well that's going to cost more. Talk to us about that. Are they wrong to think that? Sure? So I will say the strategy of our company is to make sure that everyday household materials made with better for you ingredients

like plant based ingredients are at an accessible price. So it's our hope to dispel that myth that you know, to buy a natural product means you need to pay more. But well, what I will say is that the ingredients that we put into our products do cost more than the average materials, and the reason why is that they

haven't scaled yet. Right, So, I think there's more virgin plastic available today than post consumer recycled plastic, and so our hope is that as these ingredients scale and more and more companies are using them, actually the cost would go down. Alison, I'm wondering about the equation that you and your team do when it comes to rising costs

and consumer appetite for those rising costs. We talk about inflation hating consumers at the gas pump, at the restaurants they go to, at the grocery store, and certainly on the aisles when they're buying cleaning products. At what point do the does the premium that's put on a product like seventh generation cause a consumer to think twice and go to that one that's not necessarily made with plant

based ingredients. What's the calculation there. Yeah, so it's it's a great question and one that we've spent again a lot of time really wrestling with here at seventh Generation over the year. And what I will say is our number one priority today is the quality of the product itself. Um. So when we look at the value equation about our investments,

I think we look at the full funnel. And so for us to make sure that we are keeping our products at an approachable price point without sacrificing ingredients, it means we might spend a little less on marketing or advertising throughout the course of the year, but we know our product really stands um and works the way consumers expected to. There we go sorry about that else and talk to us a little bit about not just your business,

but businesses broadly. How can they fight against climate change? Is there's something that kind of applies or rule thumb that applies to business broadly? How, yes, I mean, business is going to be what changes our future. I deeply believe in that. It's one of the key reasons that I came to seven Gen a decade ago is that I believe business is the force of good and really can drive that change. You know, I think two key

things that I would that we are looking at right now. One, I think um really the call to action in our industry to drive concentrated products. And so what I mean by that is at home care specifically, there's a ton

of waste. When you walk down the logic detergent aisle, I think you see these big plastic jugs filled with water and ingredients, and so we have a huge opportunity to really change how consumers behave and buy, and collectively, both myself and my competitors make sure that we're driving consumers towards much smaller, yet still performing products. And so that's really what we're focused on from an industry perspective.

The other call to action right now is making sure that we are all doing our part to educate consumers. I think none of this is possible unless consumers are really making different choices at home. And also you think their voice and their vote to make sure that we are making a just transition to clean energy. We we only have like ten seconds for this last question, But how do you start shopping marketing team lead and become CEO in ten years ten seconds? You believe in what

you stand for. I think what brought me here ten years ago with belief that business could be done differently in passion for this space, and that's given me tons of different experiences here over the last ten years. And so just keep believing in what you're doing, um and make sure you're learning along the way. Allison right in, their chief executive officer at Seventh Generation, joining us via zoom from Burlington, Vermont. Really great to have you on

the program. Allison. You're listening to Bloomberg Business Week. This is Bloomberg Radio. Yeah, I'll bet you let me drive. Oh no, no, no no, no, honey, please, I want to drive. It's a good question. This is good Drive to the Clothes music on Bluebird Radio. Well, we've already made it to the Drive to the close just about ten minutes ago. In today's trade volume is still light. We are seeing

some selling into the clothes on this April eighteenth. Let's get into it with Leo Kelly, founder and CEO at Verden's Capital Advisors. Leo joins us once again on the phone from Hunt Valley, Maryland. Leo, we haven't spoken since the end of last year. How are you all right? Well? Thanks, good to be on the show. Guys, it's good to

have you back with us. Uh. The first quarter, as you write, thanks to our notes from our producer Paul Brennan, Well, it was miserable, but you say it shouldn't have been a surprise. You kind of called it to us back in December. Um, what about the second quarter. We're starting to hear from companies right now how they did in the first quarter, their outlook for the year, for the

remainder of the quarter. How should investors be thinking, Well, I think investors need to start to come to grips with the fact that volatility is going to be back, and not the kind of volatility you see once every couple of years when we have a bear market, but sustain volatility, and that we are going to have a secular change in interest rates in front of us, and

that's going to create a more violatle market environment. So it's gonna be this tug and pull between earnings UM and the strength of the consumer versus inflation and higher interest rates and higher energy prices. So I would say get ready for a voltal year. I feel like it's pretty consensus to say that inflation is going to stick around. It's going to be persistent, um at least uh. Even after peaks, it will remain quite elevated for years and years.

I'm curious though, what happens afterwards. Are we looking at a steve drop in consumer prices? Are we looking at deflation? What do you see past the current status quo? Well, yeah, it's it's consensus now. I mean we we've been kind, we've been growing for about a couple of years. That inflation is here and it's not transitory. And I would say that that everyone's jumping on the bandwagon today. That said, again,

we think this is more of a secular change. There is so much capital flooding the system that I think folks got lulled to sleep with this one to two percent inflation that went on for decades, and so with with the low supply and the high demand and the massive capital inflow, I think we could see inflation at higher elevated levels for a for the foreseeable future. Now

that doesn't mean eight percent inflation. That may mean three to four when we're used to one to two, but that it is an insidious tax on the consumer, and that can have an impact over the long over the long haul. Now, all that said, that's not necessarily good or bad inflation if you can, if it's meeting expectations, you can invest in front of inflation and you can still make money. It's just when inflation surprises you, like it has in the last year with the level that

it's reached, that becomes a problem. So what would you say to our audience right now, who is of course looking to make money. What's the recommendation that you have in this inflationary environment? How should they trade it? Well, I think the first thing you have to do if you're an investor today is you have to realize is that which has worked in the past doesn't necessarily work in the future. And if we're going to enter into

a secular change in the market. Remember we've been in a bond bull market since forty year bull market, and so if interest rates start to climb and inflation remains persistent, then things are going to change dramatically over the next period and the next secular cycle. And that means just putting money blindly into growth stocks and they magically go up. Passive investing. Those are things that have worked. Well. We're going into a different time period. We're gonna need active investing.

We're going to have to look for inflation sensitive investments like financials and commodities and energy and industrials, but also small verses, large and international. Over the US um you're gonna have to be very careful with your fixed income portfolios. You can't just you can't just go buy the highest shield anymore. You have to be aware of duration risk. There's a lot happening here as a result of this change, and given the current policy environment and temperature, I don't

think that's going to change anytime soon. One of the pieces of commentary we got this morning was from Jon hat C. S Overck Coleman Sacks. He predicted odds of a recession in the next two years, and in the reasoning for his argument was that or one of the reasoning for his argument was and the last fourteen tightening cycles we've seen since the end of World War two, eleven have seen a recession in the last two years.

What it doesn't take into account is the tightening cycle we saw post financial crisis and oh eight uh, and

a lot of that takes into account. Quie talked to us a little bit about the precedent or we should follow when it comes to predicting what this next tightening cycle is going to look like in terms of risk assets, do we follow the nineteen model where stocks rallied or do we follow the historical trend, which is um a recession in the next two years, and of course markets pricing then in well, I think you hit it on

the head. I don't. I don't think you can look at this in a vacuum and say, if the FED is tightening, then we're going into recession. You have to put it up against several other factors. At the end of the day, when the cost of capital exceeds the return on investment capital, you're gonna head into over session. And so when we look at cost of capital inputs today,

interest rates are climbing quickly, I don't think. I don't think we fully appreciate we just went from the tenure at point five to almost three percent here in a reasonably short period of time. The FED is behind the curve, so they have to catch up to what is very quickly getting out of their hand inflation, and add to that high energy prices, higher interest rates, higher wage inflation. It's all in front of us. So I don't think it's just the one input of the FED. I think

it's the FED catching up to a lot of other inputs. Now, again, you have to offset this against trillions of dollars of capital which was poured into the system, and it is in the consumers hands. The consumer's net worth is higher because their four wing k's are higher and their houses are worth more. So you have some positive news. We have to rebuild inventories, I should say, for so we have to catch up to demand. Right first, we have to get to a point where you're not waiting nine

months for a washing machine or a bicycle. Once we hit there, then we have to rebuild inventories. So there's a demand strength and that wave is crashing against inflation and higher input costs. That's why we think there's volatility. And yes, that's why I think there's a legitimate chance of a recession. I kind of agree with that time frame. I don't. We're not calling for that, but it's something

that we're looking at. So you just mentioned record liquidity, record stimulus pumped into American consumers, pumped into the market. Doesn't that arm the consumer with the ability to weather this inflation? Well, sure arms the arms the consumer, but they're also going into um a market with significantly higher prices and higher input costs. So you're exactly correct. That is the tug on one side, and and and the push on the other is that the consumer has capital.

Now we are seeing consumer credit card debt rise. The consumer savings rate went from its peak in the twenties store and COVID down to about six which is normal, and it is falling. So the consumer is spending that money. And again we can't keep just keep pouring demand. If you think about it logically, we have a problem where we have too much money and too much demand chasing too few good slash too much supply because of the

supply chain disruption and input costs. So so far the current policy, both fiscal and monetary, is to increase demand. You have too much demand and the current policies to increase demand. So we have to get that under control and we have to get our our supply, our supply demand current back into balance. Leo Kelly always great to chat with you. Thank you so much for joining us on Bloomberg Business Week and our countdown to the close.

Leo Kelly's founder and CEO Adverdence Capital Advisors. He joins us on the Access line from Hunt Valley, Maryland. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube. Search to Bloomberg Global News