BofA Dashes Hopes For Hefty Trader Bonuses This Year

today that really hit close to home for me. It's a story where a Bank of America is floating an idea to its traders to keep bonuses flat relative to last year despite a huge profit year UH in the trading environment. To get some more details here, we welcome Lenon new in Financial reporter for Bloomberg News. Lennan, I've sat across the desk from my manager many many times around this time of year, arguing for a higher bonus. Hey, look how well I did. Look how profitable our desk

was that. I think, what's can I borrow you? For a humanus like manager? And I need to me exactly right. So, Lenan, it doesn't sound like there's gonna be some open ears for that kind of discussion this year. That's right, Paul, I think these sources we spoke to across the street obviously, I think that this is not enough. You know, it's been a manner year for trading desks. The reality is that they have jumped, you know, huge amounts, and Bank of America I think is on the lower end of

the desks that have done extremely well throughout this year. Um. So it comes as a kind of bitter pill at your end to see that their bonuses are probably being going to be flat and that you know, managers are managing expectations about a more gloomy environment. So I mean, given that a lot of people are experiencing reductions and pay will it be something that traders will just have to eat or will they look to other banks to

see what they're doing. How does this go down? Well, vunny right now, it's going down like a red bull, as you can imagine. But BA is a consumer bank, you know, right now, less than a fifth of its net income comes from trading. And on top of that, you know, there is this legacy of a financial crisis and rank of the optics of paying big bonuses when the rest of the economy is doing so poorly. It's something I think the banks leadership is acutely aware of.

So I don't think there are a lot of options here. Of course, as Paul says, you know, managers will advocate for their staff. They will point to those strong pm L numbers and say, hey, look, we made a big contribution to the banks making money this year. Um, so we need to be properly compensated for it. But I'm not sure that that's going to be particularly convincing given this terrible environment that the rest of the U. S.

Economy is in. So Lennon, when I worked on Wall Street, you know, bonuses would make up, particularly for senior people, maybe of their total compensation. I believe that's changed really since the financial crisis, is that they've gone to more of a fixed salary model. But still, uh, the bonuses have a big, big impact for a lot of folks.

That's right, Pearl, And well, we're not talking about the outsized bonuses that you know you might have been discussing in the nineties, but we're looking bonuses are still a huge deal for everyone on Wall Street. So this comes as a very disappointing signal. You know, the managers are managing expectations, and as Bonnie said, other banks are watching this closely as well to see how they'll compensate their

staff and to kind of see what the herd is doing. Right, this might be cover for other banks to say, hey, listen, Via is not paying as much, and um, you know, the environment is bad for everyone. On top of which, we have other banks that are actually planning to cut staff. So right now, Beve has said they're going to keep everyone's jobs fast this year, but then again they're managing expectations that that might mean that everyone doesn't get paid

as well. So what options do dissatisfied traders have? I mean, can they just walk across the street anymore? It sounds like that's not really an option, and I think everyone is fully aware of that. Right It's still early days, and it's possible that managers can go back to executives and say, look, my team deserves more and lobby really hard for more. But still, you know, the jobs are are hard to come by these days on Wall Street,

and I think everyone is pretty aware of that. So right now, I think a lot of traders are happy to still have their jobs. Um, and so you know, they don't really have a lot of options, particularly if we think that next year there may be some more cuts to come across the industry. So have we heard anything leland from some of the other big players the Goldman Sachs is the Morgan Stanley's of the world, or a kind of upfront floating this idea. I think the

ave is early floating this idea. And again I have to stress that these are very early conversations, Paul. You know that you know there are some expectations being managed early on, but that obviously this will raise the level of the discussion and you know, cause a lot of debate I think, to go on internally about how much trader should be paid. UM. We are watching the other banks very closely as well to see what indications are

coming out of them. UM, and the survey consultants that we talked to, you know, the recruitment consultants and the pay consultants have guided higher on trading. And so this comes as a real disappointment because the expectations are already set high for this trading bonanza and now we're already starting to see early signs that that's really being tamped down across the street. And I think that that may be a trend that we see with other banks coming in the in the next couple of weeks. I mean,

what can you do. It's not exactly like you can call in the union what happens in cases like this, and surely we've seen it before. Yeah, it's interesting because I think on the street, Um, you know, people talk about everything being very merit and performance based, right, and so a lot of people in the street, if they if their division that their desk brought in you know, bumping revenues, then they expect to get you know, not not exactly that amount, but at least directionally a good

bump in their compensation, right. And so I think this kind of flies in the face of what people on the street, um, you know, really think they deserve. And um, it's it's going to be a bit of a cultural shock, I believe, because you know, it's just a very strange year. In a normal year, if the trading test made a lot of money, you'd expect to get a decent bonus.

And this year, I think, just because of the broader context we're in the banks simply are aware that you know, paying big banker bonuses is not going to be a good look. Let's also just point out that they're still getting bonuses, just not more than last year, but they're the sales and trading pool is at last year's level, even though revenue obviously has done this year. And we have to leave it there. But thank you for your story from lannan noon, and you can see on your

Bloomberg about Bank of America and traders getting jewelhood. There a slew of data to pass through today. We had a whole bunch of jobs data earlier this morning, durable goods orders, We have the fo m C minutes later this afternoon, and then of course the non nation of Janet Yellen to be Secretary of the Treasury. When you have days like that, you just have to speak to Danielle di Martino, Booth CEO and director of Intelligence at Quill Intelligence. She's a former advisor at the Dallas Federal

Reserve and a Bloomberg opinion columnist. Danielle, thanks so much for joining us on a very busy Thanksgiving Eve. First off, I list love to get your thoughts on the nomination of Janet Yellen for Secretary of the Treasury. Well, I think that this was a very convenient political move on president like Biden's part, I'm I'm no big fan of it, and in fact, I wrote a long book about it

about and I detailed Janet Yellen's philosophy in it. And we have to remember that she is a trained labor economists. So you think back to her days at the San Francisco Fete and companies that we haven't talked about in years, like New Century and Countrywide Mortgage. These were in her backyard. And at the root of being unaware of the subprime crisis building on the West Coast was Janney Ellen's unappreciation and lack of knowledge and experience with the financial markets.

If you think back to a year ago when we were in the not QE era and overnight repo funding strains and reserves not being kind of. These are very technical type of issues that as Secretary of the Treasury you would need to be highly familiar with. So again, I think markets are applauding the fact that she has said that that that you could reopen the Fed Reserve Act and allow the Federal reserves by stocks, that negative interest rates could be imposed under the under certain circumstances.

I think she would certainly spearhead a digital currency in order to deliver money directly to individuals, helicopter money, so to speak. But again, um, these are these are the types of policies that have tended to UH to help out the top one percent looking back in history, and and end up being a backlash, if you will, against

those who need it the most. Yes, do you think that just for the moment, she will work a sort of hand in hand with the FED and try and do something in terms of retrievings some of those emergency funds that Stephen manutition is as buddhiside. Well, I certainly think that that will be priority number one. Of course, it's not as easy as look. I think of the months and months we've been watching Minutian go back and forth between McConnell and Pelosi. These are these You need

an extremely savvy politician UH to make these deals. And it's not just a matter of flipping a switch. You have to get congressional approval UH to have these funds reallocated. And we don't know for sure what Manutions motivations are, but this could be such that McConnell could, in the Continuing Resolution December the eleventh, have his skinny stimulus bill of a half trillion. You tack on what has been taken away from the Fed and you get to a trillion.

But politically, the optics from McConnell would be very favorable because there would only be a new half a trillion stimulus package attached. So again, we don't know where Minutan is coming from, but we do know that Congress would have to would have to sign into law reopening these lines, these credit uh facilities at the Reserve. All right, Daniel, let's go to the ECO page on the Bloomberg terminal here. What are some of your key takeaways here from some

of the economic data we saw this morning. So, you know, besides the you know, as we were listening um coming into the segment, the back to back increases in regular state initial jobless claims. Yet we're trying at GROL Intelligence right now to kind of back into what the survey week looks like for non farm payrolds. Next week is when we finally get the we call it the bathtub where you get every source of a mayor are consclaiming

unemployment insurance in some form. We saw that tick up this week for the weekend in November seventh to the first time since August, and we know that the last two weeks have come up, so we're anticipating that when we get that final print for the survey week, which always includes the twelfth of the month, we get that next Thursday morning, right before the payroll report, we're anticipating

that that number goes up again. So you're seeing economists across the street scrambled to take down their their November unemployment payrolls forecast. And if you look inside the weeds of the University of Mission Consumer Confidence report, you also saw that employment expectations came in at the lowest levels in April. So we're definitely starting to see some backtracking in the labor data, which is of course key to

a consumer driven economy. So what are you anticipating, Danielle, Does this economy show more scarring zone we're seeing forecast of I don't think. I think we're about six weeks behind Europe in terms of the coronavirus UH and by

the way, not imposing restrictions. So I do see economists across the pond taking down their Q four estimates, and I would foresee that the United States could easily slip back into contractions into recession at the end of the fourth quarter going into the first quarter of given purely what we're seeing in terms of of of of people choosing to be less mobile in states where there are not even restrictions, and what we're seeing in terms of

small business revenues and small businesses that are open. These are declining figures. Leisure and hospitality, job openings have come down appreciately. There's their lowest August. These are all signs that the economy is going into a retrenchment because the coronavirus is becoming so severe in the United States that it cannot be ignored. Danielle, we appears that we have a new president here. Um it appears that it might be a split government once again in terms of UH.

It appears that the Republicans may continue to control the center. Off to see what happens in Georgia. How did you view what was your key takeaway from this political season and kind of where we find ourselves now? Well, I think I think more than anything else, the American voters have spoken that they're not divided at all, They're in the middle. When you look at the least appreciative appreciated

story of this last election. It is the change of of the change of the guard in the House of Representatives. And you know, Nancy Pelosi is going to have the slimmest margin of majority in two decades, and that I think is less appreciated because you will have more of a bifurcation between the administration, assuming these two Georgia's seats go to the GOP, which is a big assumption. Assuming that that is the case, you really will have an

administration in one party in a Congress largely in the other. Danielle, really quickly, because we're out of time. Do we get a fourth round of to meet us fiscal Oh? Oh, absolutely. I think that this will be priority number one. You're not going to see mass addictions and the Cares Act unemployment benefits expire when upwards of thirteen million Americans are collecting these emergency forms of unemployment insurance. Danielle, thank you

so much for joining us once again today. Danielle Di Martineo Booth is CEO and director of Quill Intelligence, former advisor of Course after Dallas FED also Bloomberg Opinion Columns, and she's based in Dallas typically and we thank her again. That raft of economic data today will pitch forward to the f O m C meeting and all of that later on, So do tune in from two pm onwards for all that emerges from there. For the longest time during this pandemic, oil has been just really hovering around

that forty level. We've actually had a lift here over the past a week or so. We're up another one percent today oil w t I oil trading at forty five dollars thirty five cents per gown again, a lift off of that forty range it had been hovering out for a long time. To get a sense of kind of what this means, what's driving it, we welcome John Kilduff. He joins us. He's a founder of Again Capital. John,

thanks so much for joining us here. You know, it's it appears that investors across various asset classes here are willing to look towards the other side of this pandemic and start to really discount uh pick up an economic activity UH next year. What do you see in the supply demand of the oil markets globally, I mean, for oil, there's no doubt that that is a key factor here. Oil has really been the covid trade or pandemic trade

or now vaccine trade across all the markets. Um. I mean, we had a significant dip and things were looking rather bleak, just as several weeks ago when we saw those renewed lockdowns in Europe, and of course the raising Caselow is here, but now with the successive VEX positive vaccine news, that's

exactly it. And the sort of connecting the dots here is that you can see the pent up demand, um, you know, for for transportation, for travel, um, just what we saw over the weekend where there was you know, the highest number of airport visitors since early March, and so jet fuel has been crushed consistently down Paul, versus that you know year on year measures um, and it's really been weighing. That factor has really been weighing on this market. And the pent up demand is obvious and

it's kind of come roaring back. And I really see a big pick up next year for gasoline and for for jet fuel and diesel fuels. John, why are you convinced that this is longer than just a Thanksgiving blip? Well, I think there's the hopefulness out there and and and you know, I hate to say it, but the apparently almost even disregard uh for for folks that they are going to uh, they're going to travel. I mean they're

they're they're going to travel after this Thanksgiving. I think that there's the setup is gonna be that you're gonna go travel for Christmas as well, um, and get in their cars this time even more so and and continue to travel. The other thing too, is I think people are starting to realize that it appears that air travel is safe, that the the that the the planes air systems are not engendering or in inculcating uh COVID nineteen cases. And I think that word is getting out there and

that is helping as well. So we're sitting we're seeing the beginning of the rebound. But the thing about it is that, as Paul mentioned, we're looking ahead here and there's a ton of pent up demand that's going to hit the petroleum market. All right, So, John, so that's

kind of the demand side of the equation. Talk to us about the supply side globally here, How is OPEC behaving, how's RUSH behaving and meeting the US, Well, they're they're they're OPEC plus, which includes Russia, UM have been rather disciplined. I mean, there they are itching to put more oil on the market, which is going to I think hold

back any kind of potentially substantial UH price rise. But I think the discipline should prove sufficient to get UH, certainly brent over fifty dollars a barrel with relative ease come the beginning of the new year, UH and push w T I prices similarly up towards that level. Right now, if if things were to snap back meaningfully, UH, we find ourselves in a very tightly supplied situation and and

see a draw down pretty quickly of global inventories. So I mean, to the extent that these vaccines work out, and again this thesis of mine that the pent up demand is there, UM, it's gonna get real interesting in in terms of prices in the US. Two now haven't been you know, just raked over by this low price environment. Um we UH, the US is going to be a diminished factor and certainly won't get the encouragement in terms of drilling uh an exploration activity under the Biden administration

that they had under the Trump administration. So that's also a factor. So what do companies do at a time like this, when their stock prices are just all over the place, John, You know, every time oil goes up, they see a nice gain and then a law something. Do they just ignore their daily stock market fluctuations. Well, they have to and I and actually what they've been doing, uh is well suffering under it, suffering under the environment,

and and really retrenching. I mean there's been considerable capital expenditure cutbacks, considerable you know, even self examination of what their future holes in terms, especially with the climate uh pushback movement. So um, but yeah, I mean so you know, but you've seen the companies that have really done a Holman's work on this, like Chevron get making themselves almost a bulletproof Now. I think going forward and the prices pick up, they'll only benefit. I think it's on Mobile

to a to a lesser degree. But um and the other players that the companies that are left standing in the aftermath of this are going to do well. It's like almost a free call option on oil prices going up from here. I think it's a very attractive sector, uh, for for the upcoming year. John. And we can see some more pain in the oil patch here. Maybe it's more consolidation of some of the weaker balance heated players.

There's no doubt the pain. It's not over yet, and I think to the extent that the prospects start to look brighter price wise and industry wide. Uh, you'll see another round of the stronger, you know, like the Chevrons getting back out there on the acquisition trail and and

consolidating uh, their position even more so. So you're gonna have a smaller group of stronger players with the bigger portfolios of production, but also of discipline that they won't just drill for drilling sake or to cover cash flow requirements for their for their loans and inventures. They're gonna they're gonna be moderate, and that would that should also help to sort of set us up for a more

consistent higher price than what we just went through. All right, John, Always a pleasure of speaking with you and getting an update. That is, John killed off their founding partner again Capital and of course crude oil today above forty five dollars of barrel once again forty five thirty three of one percent or forty two cents for a barrel of w T I and Brent crude is above forty eight dollars

of arrel. Of course, there's always that spread there between Brent and w T I. So a couple of little items to take note all of the f o MC meeting a little later on today, some more certainty as to who we might be seeing populating the Treasury as well as of course the Federal Reserve over the next couple of years, and the possibility that those people might actually cooperate. So let's bring in Laird Landman to see

what all this means for markets. Starred Landman is co director for Fixed Income at tc W, which is two thirty five billion dollars under management firm wide. So, Laard, how different does the landscape look today versus just last week. I think it's got We've gotten a lot of clarification because of these political appointments that things are probably not going to be quite as radical as uh people might

have initially feared in terms of policy changes. Obviously there is some chance of increased cooperation as you pointed out, between the FAT and the Treasury. I wouldn't be convinced for bond markets that that's a great thing. We could continue to see a trend of yield yields going higher in the face of that in the long end of the curve. So Lard, we had just this morning a batch of economic data and I guess we could call it mixed at best, derbal good orders. Uh, maybe better

than expect it. But boy, the the labor market remains very challenging with the stubbornly high jobless claims. What's your view of kind of where this economy is now and and you know how it what may continue to progress? Well, we've come through a recession like no recession we've ever had. You know, wealth is up four personal incomes were up six percent over the course of this. But obviously you

point out the weak spot is is unemployment. And when you dig into that number and you realize that we still have close unemployment for the lowest third of of earners in the economy, there are people who have been extremely damaged in this and that's sort of covered up by this flood of money into the financial markets and the bowl markets we've seen in stocks, uh, in corporate bonds and high yield. But underneath all this, I would

say the underlying economic trends are not all that healthy. Uh. And clearly the stimulus got into the economy, But I'm not convinced it it went to the right people. If if you dine out as much as I did, once the restrictions were lifted, you saw plenty of people at fancy restaurants using those their their their unemployment cards to play tay for dinner. So I'm not sure that the money necessarily it got into the economy, but I'm not sure it went to that lowest third it got where

it needed to get to really cure the problem. I think we still have to face the problem long term. For sure. They'll obviously that that would in itself have supported some jobs and so on as well. Laard Um, you said that yields might go up at the long end. Why would that necessarily be bad for markets? I mean, I understand just in terms of looking for return or what have you. But would it be such a bad thing if fields did go up with it. Well, I

don't think it's it's it's it's not unhealthy for the economy. Obviously, if you own ten your treasuries, um, you're not going to be cheering as you see the prices go down as the yields go up. UM. So I do think, uh, it's indicative of I think a skepticism when the Fed and the Treasury of historically worked together that has long term resulted in increased inflation and inflation expectations. UM. Clearly there's a lot of hugely in the market regarding inflation.

You know, tips are suggesting something a little bit above one and a half. When you look at some of the numbers that are actually coming in, UM, they're consistent with that. When you take out some of the really inflating sectors of the economy like housing, shelter and autos, you know, you get back down to about point four point five on the core. UM. So there's again and in course in Europe you have some countries beginning to deflate. Actually, so I think there's a lot of confusion out there

about that. UM. We don't think the underlying economy is healthy enough to support true economic inflation, but you could get monetary inflation if you get too much cooperation between the the Essential Bank and the Treasury. So lared having spoken to you when your TCW colleagues you know in the past, UH, definitely sense that you folks have a cautious view on the marketplace, maybe more so uh than some of your peers. Where given that backdrop, where do

you see some opportunities here to deploy capital. Well, I think you can look uh in a couple of places. One, it's very possible that the bowl market in corporate bonds continues because UH, we are going to continue to see a flot of money coming in from Japan and Europe as are hedged yields into corporate bonds is very attractive versus what they can engineer. UM. At the same time, you have to be cautious. This will probably be one

of the most Styrian periods that will ever see. There's dramatic changes going on in the economy that will result in winners and losers i e. More defaults in the bond market, so you have to really do your credit work in here and picking these companies. UH. The second place is obviously, UH some of the legacy non agency bonds in the mortgage market will continue to look attractive

in our opinion. Obviously, there's been a huge move of of money into residential real estate, particularly in the suburbs, so even where you're seeing increased delinquencies, you're not seeing losses on those types of security, so they still represent

value for the fixed income investor c MBS. We think will be an area that will be challenged over the next couple of years as they deal with the long term effects all those Styrian effects of work from home et cetera that will have, you know, pretty devastating effects on demand for commercial real estate. Right. Hey, Lart, thanks so much for joining us. We really appreciate getting your

thoughts here on the fixed income markets. Landman, co director for Fixed Income at tc W, a little shop out on the West Coast and they have about two thirty five billion dollars under management and datat When you go to l a two big meetings you have to have. Number one is Capital Group and the other one is TCW. Just huge shops that they're all over the marketplace. Thanks

for listening to Boomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio