Surveillance: Inflation Is A Concern, Moynihan Says

more or less. We need to pay attention to inflation and not clear exactly what we're doing, but we need to pay attention to it. And they didn't move anything except some dots on some plots. But where they did they get it right? Are they reacting in the right way at the right time or is it too much? Well? I think that first, David, good to see you again. Let me uh. I think there's three key points. The first point is about the virus, the vaccines and the variants.

The second points about the dot plots, but what is the underlying FED predictions of economy, And the third points about thinking about this FED and where they we're nineteen. So first point, if you have the three VS virus variants and vaccines, you really have to listen that they need to see the whole that they were trying to fill between physical, physical stimulus and accommodation was to put the economy back to where it was and with the

same growth characteristics are frankly even better growth characteristics. And if you look around the world, central banks are gonna struggles to win. This virus is behind him because at the end of the day, is that is the determined here. So if you think about India, think about what they went through over the last several weeks, think about in the UK delaying uh the full of reopening because of

the variants. That's the variant question. You think about the US vaccines through half the population you can see and it's pretty open and the questions with the variance effect us to pay attention to the vaccine path. The second question was the dots, as you said, dot plots, and there's great debate whether he's add value at this point when they're put in there, it put in for a different purpose. But leaving that debate aside, the question is

the FEDS economic projections. This year seven. Next year in the mid threes, the street actually is seven percent. Matches have fed this year, but next year Bank America security is and our team there and it's a great team is at five in the streets at high fours. If you believe the street in Bank of America are more

right as you move through the year. The reality is the economy is growing much fashion it was, with much more fiscal stimus still to be spent in the customers accounts, much more opportunity for the economy around out and grow. And that's something people should pay attention to because last year this time this year's rate of growth was half of what it's turned out to be predicted to be.

So if those economic growth predictions move, those dot plots will become uninteresting because I'll have to move because things will be moving faster. And the third things, think about two thousand nineteen, same fed, same chairs, different somewhat different people, the same research department. They were sitting there mid two thousand to two percent plus FED funds rate two percent, plush ten tenure Treasury rate. Economic projective forward growth was

two percent. Unemployment in the threes. Think about that. Where we are now, We've got three times the growth rate projected next year, even two times the growth rate projected a FED unemployment rate projection in the low threes by the end of twenty three, high threes by next year, in low force bid force. This year there was a full employment and what was the only thing concerning them and nine team was wage growth. And you're seeing wage growth,

so that'll be interesting. Tug A wars that seeing normalized. So Brian absolutely right. We're have a remarkable story and the bounce back of the economy and the growth. But what about inflation, because they also have taken way up the FED the projection on the PCU deflate or three point four percent core is three point o percent. What are you seeing? You have your tentacles in to so many consumers as well as small businesses more than anybody else.

Are your customers seeing feeling real pressure from from price increases? Well, ye know. The great debate is yea, what is temporary? What is transitory? As at SFP, as toom Mus talk about this morning, these terms are used to try to signal what they think right now. The firm belief I think by the FET is most of this is transitory. We'll see But the question is what about the stickier things.

Wage growth becomes sticky, and you're seeing that come back, and as unemployment rates come down and you're seeing you know, the pick up employement. We'll see what the new claims are this morning, but you're seeing unemploy the employment market titan. If you ask our small business customers last fall, their number one issue pandemic, pandemic, pandemic. This spring, number one issue getting people to work and supply chains, that's a

whole different place. And that means inflation and characteristics are out there to be filled. But is it temporary? Is it transitory? Um? And there'll be a great debate about that, But I think it still comes down to what you think next year's projection for for economic growth is and what you see in wage growth leading into that, as to whether the stickier parts of this will happen. Now. The route is in our customers accounts. They still have

sixty five sevent stiments dollars in those accounts. The average balance for people two to five thousand dollars of average balunc accounts are up three times and sitting there ready to be spent. You're seeing their spending growth year to date through the last through the fourteenth of June versus nineteen, not eighteen, but not twenty nineteen, meaning the no normal year growth that's very strong. So it's all set up that inflation could happen. That would be the great debate.

But I think we have to get further into the question of what is transitory. So, Brian, the one thing that seems clear after the FETE has spoken is that we are changing sort of the dynamic. We were on a loosening phase. We're not going to start tightening. It's not clear when or how how fast we're gonna start tightening. What does that due to Bank of America's business at its core? And let's start if we could with trading. I mean, we've heard from a couple of your rivals

here the trading is down the second quarter. Were you in the second quarter? But could this cause volatility of the tightening that could help your trading? Well, let's go back to the You know, our economics for economist projections are that the economy this quarter will be about the same size that was heading into the pandemic, which means that you're sort of restored differently constituted with shortages and supply, labor,

unemployment not where we want. Spending that's migrated from panic to sort of do it yourself and now to go out and eat and things, restaurants spending up dramatically. Travel back to what is all that means economy continues to grow In terms of trading, you know, there's always a seasonality between the first quarter and the second quarter, and

we're no different than other people. But the reality, if you really think about it, is vaulatility helps a trading group, but frankly, from a bank American perspective, you'd rather have the economy growing at a solid rate, unemployment down because any day that means great for the core business. That means great for the UH capital, for markets formation activity,

less emergency and more normalized. And also it means great for loan demand and loan demand were stings start to pick up slowly as we moved through the months of April, April, May and June, which is better than it was obviously last fall or coming into their early spring. So so Brian, if ironers that you correctly sounded like you're sort of along with your rivals. They are on trading the Siddon quarter,

which should come down am I understanding that correctly? If the market moves, you know, we all maintain our market share kind of moves together. So there's nuances that will know, we'll get into but when we get to the earnings and figure out what happens the last few weeks here, but you know, we're not gonna be a heck of

a lot different from other people. So that I raised the question of Okay, what does it due to the rest of your business, particularly if we're into a tightening phase, as I say, it doesn't know, don't know how long it will take tightening phase. What does that do to things like net interest margin? Well, that interest margin, the deposit bounces are huge, and that's due to the amount of physical stimulus that went in the system and amount

of monetary accommodation, so that deposit bounces are high. The loans. The good thing about the business is half our money comes from spread deposits and loans, and you're starting to see those loans stabilize as we came to the first quarter and start to grow this quarter at a modest pace. But our credit card balances, you know, fell from ninety billion dollars and seventy billion dollars, and that's those are the kinds of things indicate the cut are still getting

back in the game. Our middle market draw rate onlines went from the forties to the low thirties. That's lower than we've ever seen it. It's stabilized there and starting to move out, you know. So I think we're in the what I call the twist of both rates and economy that you're seeing economy normalized in rates move up. Rates moving up helps our business, but if they're moving

up the wrong reason, it doesn't help our business. So the good good thing for Bank America is when the US economy and the world economies are growing on a fundamental basis. As we look forward, richeld moving up. But let's be frank, it's pretty modest still as a practical matter. And and let's also be honest, the Fed continues to buy those bonds, which means there's more stimulus coming to

the marketplace. Is there demand for the loans, because the problem doesn't seem to be the interest rates, it's more whether's demand. Are you seeing demand from your customers? We are, We're seeing as we came to this quarter. Uh so, our small business originations in two thousand, twenty one May. We're about our small business originations in two thousand, nineteen May, and that's it's finally crossed over in various areas and that's good. Now again, it's still not where it was.

We we fell from nine hundred eighty billion dollars loans down to nine hundred billion dollars loans and it's moving up from there. But but the reality is that loan growth is actually the core business. That means the core in the line economy is going well and we expect that to continue. And if you think from the first quarter to the fourth quarter, you'll see that growth and deposits continue. You'll see that growth and loans continue, and

that's good for banking generally and US in particular. But at the end of the day, we are in the part of the process where you're seeing companies need to hire, need to get goods to sell, need to get goods to manufacturer. And that's because a seven percent growth rate on an economy that is the size of American economy is unprecedented and we haven't seen that in our lifetime. So think about that online activity that will be good for Bank of americaud be good for America and that's

what we gotta get focused on. Brian, give us a sense of how the pandemic want to change your business where it comes to digital. As I understand, you picked up a lot more digital users. Where is Bank of America right now? Well, the three things that happened in terms of digital in the pandemic. Number one, consumer adoption continued to go and by necessity it rounded out. What

do you mean by that? We continue to grow consumer digital customers to forty point four million active digital customers today. But what happened is the amount of sales went from moving up to and now it's settling in in a high fifties six. That is very good because that means there's efficiency and effective as a reach of the market. But the important the second important thing was what it happened happened internally our ability to interact with customers, Our

ability to relate to customers. Think about it, four or five quarters of record investment banking fees and customers couldn't We couldn't go see the customers do the to the pandemic restrictions, So that ability to operate differently, UH is really important. And the third thing is it went to various businesses. So our wealth management business adoption rates went

through the roof. In our commercial businesses, the cash pro mobile, the numbers of users went up dramatically, an amount of activity went up dramatically, and so you're seeing it round out through all the businesses that the adoption of digital et cetera. It usage of digital is important and that gives us more flexibility to continue to manage expense as while we're not company, we'll talk about those expenses. Does that mean, as a practical matter, you could see your

number of retail establishments go down. I think here's something like, Yeah, it's been coming down for years based on customer behavior, so it will continue to will continue to shape it. So yesterday, the day before, we open to Kentucky for the first time in our history. So think about that. So we're opening new markets. We Columbus, Cleveland, Cincinnati, Indianapolis, Minneapolis, UH, Denver, Salt Lake City UH, and then now Kentucky. I'm trying

to think where else we've gone. All have been open of the last three or four years while we're shaping the distribution franchise and more markets have been in for two hundred years due to the fact that you know, the customer behavior changes, so we watched that carefully. In long term, we've had six thousand branches the high point and now we're forties. During that time, the customer satisfaction has gone up, which means the digital and other means

of operating have replaced that activity. And that's a relentless trend which we're continue to work up. Brian, you've talked about the bounce back and consumer spending that you're seeing, and goodness knows, you have contacted a lot of consumers. You've got some of your rivals like City changing their credit standards on credit cards. We have JP Morgan really beefing up on marketing. Tell me what the competition of our credit cards and what Bank of America is doing well.

We've always taken a position to our credit card business it's about our core customers and getting a customer in the wallet and getting it used by those customers through the rewards systems that have so we have the only all company rewards. If you have a performed rewards, you get rewarded for your cards and your accounts of all types, and you get lower rates on your auto loans and stuff that so preferred rewards, the holistic rewards programs we

focus on. The number one thing is the Great Bank of America capabilities delivered to you, and the car is part of that. And so you're seeing that card origination picked back up. It fell probably by seventy percent. It's back now at about lower than it was, and that's good for good news. Now they've got a bar on them and then they got to pay us for bar

and on them, which which takes some time. But the roality is it's a it's a great business and we like it, but it's part of our core consumer business checking accounts, sorry of cards, auto loans, homeowns, be straightforward about it, serve those customers well on The team under de Nathan Asia does a great job with it. Finally, Brian, I know you said that you're hoping to get most of your people back into the offices by I think at mid September you've talked about are you going to

require them to be vaccinated? Have you decided? Right now we're moving people back who are vaccinated, which we our team under Sherry Bronstein's leadership, our HR team has done a fabulous job for us in terms of managing through this, uh, not not with any playbook, but doing it because before nobody had this happened. They've done a great job. So we build a vaccine tool three or four months ago

and capture voluntary capture. We have seventy plus thousand people and it's worth concentrating getting them back to work because that allows people to move about under the CDC guidelines with out masks and things like that. As more people get vaccinated, we keep bringing more back. We've got a

lot of work to get those back. But the view is after labor Day, our view is all the vaccinate teammates were back and we'll be able to operate Fairlure normally and we'll then start to make provisions for the other teammates as we moved through the fall. Okay, Brian, thank you so very much for your time. That's Brian moynan. He is the chairman and CEO of Bank of America. David Rosenberg joining us from Rosenberg Research. Thrill that you

could join us. David Rosenberg slices and dices inflation dynamics. Truly like no one I know. David. We had Goldman Saxon, He and you are so much on the same page of a slide of GDP back to something normal. At some point, if we get a hot seest sub three g d P, what does that do to Rosenberg inflation? Well, look, I think that if the economy slows down, especially with the fiscal withdrawal, we're going to be sing in the second half of the year. I think what happens in

traditional economic terms is the output gap starts to widen again. Uh, it's going to bring this in platient run up. We've seen reverse course and should ultimately be very good news for a long duration assets. So that's really what the story there is. But let's say Tom, it was really I think less about the dots. The dots have no predicted powers. Historically, there was the fat taking this year's GDP growth from six and a half to seven percent.

As you know, when you look at what's baked in already for the first half of the year, the Feds telling you that they're expecting fourth quarter growth to be close to five which is up materially from what they're in plicit before. What do you have into two thousand twenty two, though, they've got to get to two rate increases the year on and so much of it depends on that level of GDP. Do we get back to a potential GDP two percent? Do we go under three percent?

What's your guestamate, Well, you know, look the FEDS over three percent. Uh. A lot of it depends on the fiscal backdrop. Um. But I think the fiscal drawal is so enormous um that you're gonna have to have. I mean, the FED is I implicitly assuming that private sector demand is going to be over six percent next year. I am nowhere close to that. I think the economy is gonna slow back below trend um starting probably in the third or fourth quarter of this year. UM. So I'm

back the low potential growth for next year. Uh and uh And as a result of me, that reinforces my view that inflation is going to come back down more. The people thinking, David, do you think that the FED is committing an error here? Uh? Well, it's too early to say that. UM. You know, it's situational and everything is really about you know, now moving from moving from three um. And so it's still a few years down the road to say that Fed's going to make a mistake.

Right now, they haven't really done anything. I mean, they're talking about talking about tapering, which is maybe happening earlier. The people pot but they haven't done anything, and they just you know, laid say. I guess that will it be Will it be a mistake? Should they follow through on the median dot plot projection there of hiking rates twice? Well, I think it probably will be. But you know that's

based on that's based on my assumptions. Uh, And even on the fom s take a look, there's still a wide range of opinions. People look at the median dot plot. Not everybody has centered on the media. So I say that they haven't made a mistake yet. I thought that it was surprisingly either less stubbish um than uh. You know that I was certainly thinking about. But they haven't. They haven't done anything yet. I mean, look when you

look at the dots. When they were first introduced by Bernankei in early two thousand and twelve, the funds rate was pressing against zero. For the next two years, the dot plot showed, you know, point seven five they were gonna hike rate three times. So we know with hindsight they never did that, and I guess that they race rates three times. It would have been a mistake, but

they never carried through the dots. So to say that they made a mistake way too premature to say that right now, did you so don't see the inflation right in your notes you talk about uh cp I gets all the attention, and that's up, but the index is not accelerating. And if the Fed is even thinking about raising rates, why would you like gold here? Well, look,

I haven't been banging my fist on gold for for months. Um, you know I've got dramatically over sold at the lows several months ago, it's backed up and now it's rolling over again. I mean a lot of the gold analysts are saying we can correct all the way down in the context of what could still be a secular bowlt market and gold nothing moves on the straight line. But you know, you folks are talking earlier about the backup

or less negative results in real rates. Well, golds caught a time warm relationship with real rates, and the real rates back up here and the dollar continues to strengthen, then it's such as gold enditing price in US dollars is going to take it on the chin, including most commodity prices. Uh So, for the time being. As long as real rates back up here are the dollars that's broke above the Twitter day moving average, BOLD is going

to remain under some near turned downward pressure. So to say that I'm bullets on gold right now because they've been affected, or bullog gold right now, I'd be saying, you know that the near term rests similar to the downside. David Rosenberg, thank you so much, greatly appreciate it. This morning he's with Rosenberg Research. A little much more for Mr Rosenberg in the coming days as he writes on inflation.

Alan Ruskin with the Standard Deutsche Banker Chief international Strategist, Alan I, I look at where we are right now. That what an interesting press conference yesterday, and I've really got to ask you about this phrase substantial further progress. We're making a joke about it, but on a theoretical basis, out of the textbooks you've used, what is substantial fur

their progress? How do you define that? Well, Tom, I think what you saw yesterday was that the dual mandate is so important and at it's both uh, the progress you make on the inflation side, but also you know, of course the progress you make on the employment labor market side, and the market up until now has been emphasizing the labor market and the lack of progress there. But I think what you finally saw was recognition from the FED on the importance of the other side of

the dual mandate, the inflation side. So um, you know, it really depends on what you're looking at on the labor market side. I think even there, Chairman Power was very optimistic when he starts to speak about the longer term view on the labor market, and when you look at the Fed's forecasts on the labor market, including an unemployment rate of three point eight percent at the end of two around four and a half percent at the end of this year, those are very you know, consistent

with substantial progress. The substantial progress could be a green light for other central banks given your international preview. Did he green light other central banks yesterday to begin to nudge read so up as they choose. I don't think other central banks are using this flexible average inflation targeting regime, certainly not in a religious way that the FED seemed to be up until yesterday, So I think there's no

sort of green lighting per se. I think the FED was standing out is really looking like the ultra Dvish central bank within the G ten group. UM, I don't think it really changes things materially. What you are, however, seeing is that some of the central banks that were leaning to be more on the hawkish side, like the Norgious Bank on our signaling that they will raise rates, not not just a taper, but actually raise rates in September. So you do have, you know, some central banks that

are well ahead of the Federal Reserve. There were before yesterday and they are after After yesterday, we have seen more central banks start to raise rates than cut rates. I think there have been eighty four central bank actions globally this year. At the beginning of the year, Um, there were more cuts and now we're seeing that skewed towards hikes. Um. When are we going to see though the big ones follow or or is that the way it's going to be? Is the easy be really gonna

wait until after the Fed? Look, I think the big ones are, you know, holding back for the most part. I think the e c B is also you know, obviously said they're not going to taper through Q three. There also on this you know, this attempt to look at things and see how things are going to change. The Bank of Japan is not looking at things for you know, the next three or four years really in a way, so they're very much on hold. The Bank of England maybe is a little bit more hawkish than

the other central banks. But I think when you look at global markets, it's a federal reserve. I mean, we just saw it yesterday that, um, you know, it's what the federal Reserve does that's going to dictate I think going all asset prices. Lisa a great piece out yesterday on Bloomberg Opinion about the financial risk that we're seeing rate risk intertwined uh with credit risk, And today I

saw a story on private equity. They've been pumping more leverage loans onto the books of their companies than they have in the last fourteen years because of these low rates. Is this a dangerous situation certainly for someone like myself intends to emphasize the assets cycle is ultimately driving the

business cycle. Um, there's plenty of signs of a bullians really, and I think the Fed has been very restrained, just to put it charitably, in terms of the way they've spoken about, you know, the ideas of bubbles of bubble letts, etcetera. So I think you know the the example you cite

on the leverage loan side. I think one could just look in terms of just some of the more orthodox measures, the most obvious being, you know, just equity p ratios, just say that, yes, there are dangerous signs there, and you know it's not obviously just as surprises, but now where we've seen it in consumer prices, I mean the danger is upon us really in a sense. So, um, you know that the whose action and I think the FED did the minimum yesterday, So I want to talk

a little bit about the market reaction. We did get an immediate knee jerk increase in rates as the FED took a more hawkish till makes sense today you're getting some buying people coming in and seeing some opportunity. At what point does the international aspect of the bond market, the fact that if the US does tighten, they look better on a relative basis, their yields are higher, the dollar strengthens, people go into these bonds and yields go lower.

How much without the rest of the world moving, does the balance of motion and go to the lower when it comes to bond yields even with a more hawkish FED.

Well these I mean, you know, we just have to think back to Q one, where the bond market was very much in the frame and the bears were, you know, very much taking up the running and quarter two has been very very different, and the dynamic there's different because on the supply side, the Federal Reserve, you know, it's obviously been holding huge treasury balances that the Treasury has now been running down, so the net issuance, particularly the

last couple of months is going to be negative. So that supply side has been very helpful for the bond market. And then on the demand side, obviously got the Federal Reserve dominance sort of taking down, you know, it's close to say, sixty percent of issuance quarter by quarter, but on top of that over the last few months, but you know, we really have got good data for March

and April. Foreigners stepped up their game as well. So our foreigners do seem to be interested in US bonds and Treasury bonds in particular when you see heels above one point five percent. So previously I thought, look here the ten you can easily get to two and a half percent. You know two's tens to fifty basis points is not unusual, but I think what you're seeing in this low yield environment is that and this will restrain the bond market. But Corter two has been a special

because of the issuance science. I think there's definitely a danger that when we get past this rundown of treasury cash balances, bond heels are going to start backing up in a more material way. That's really interesting basically waiting for the taper to actually begin. Just to sort of wrap this all together, Did anything change about your investing

thesis after yesterday's FED meeting? Yeah, I think things did change because the FED has really been you know, ultra ultra dovish, really and you know, I still think they're dovish. I still think, you know, there's an argument that there should be finishing tapering at the time when they're starting to talk about tapering, so you know, we're still you know, dealing with an ultra dovish FED. But I think they're

catching up with the market. And the key element is is the FED behind the curve or not or certainly behind the market, because you know, if they lag behind the market, then for example, in the FX arena, the dollar will tend to be weak if they catch up, and certainly if they're ahead of them pocket then the doll is strong. So you know, we're at that cusps really when we're making up on mind just exactly where

the fit fits in relation to the marketplace. Ellen Russ can thank you so much, greatly, greatly appreciated this morning with Deutsche Bank there John Gollob writes two and three page notes that are massively sector dependent and data dependent, and we're thrilled that he joins us this morning in his optimism. John Gollob, I like what you say about high sales growth companies. It's a struggle. It's a it's a yin yang kind of thing there. Tell me about

the substantial further progress of high sales growth companies. Well, you know, what we've seen is that the market has been a value driven market and growth is lagged. But if you look at kind of growth on steroids, these are companies with higher sales growth, not just higher earnings growth. They're really doing quite poorly and they remain expense of So think about some of these more speculative companies. We think that they're going to going to lag in the

current environment. And we continue to believe that even with the FEDS saying what they did yesterday that the value cyclical trade is gonna work in the market's gonna be strong. And what's great here in radio you can't see it but galu But you know, forget about having the fancy bookcase behind you. Lisa Gollub's got Henry Kissingers Magisterial World Order behind him. That was my book of the Years million years ago, with two really pressian chapters on America.

Still true today. So what's the world order going forward? If you're gonna have that tone behind your head when it comes to a potential hawk ish FED doesn't kill off some of the transformation that we've seen in equity markets, like increase in meme trading, like the increase in spac issuance. Well, let's let's put this in perspective. We know there's inflation everywhere.

We had a five percent inflation prints on CPI, a six post persition of inflation prints on PPI, and the FIT was acknowledging it, and they said, okay, we may have to raise rates in two years from now. At the end of twenty three, expectations of sixty basis points and and and in a market that or economy that is on fire, if they didn't acknowledge, um, what we're all seeing, I think they would have lost credibility. So yeah, they you know, they took a little bit of our

candy away. We were incrementally unhappy. We're one percent of all off of all time eyes. But I don't think that that we're really changing this. This is still zero money. And and unfortunately, I think that some of the specular trades are going to continue to work because it is

still a very combinative environment. All Right, we'll go from the speculative to I guess the more stable companies here, John, When we talk about evaluations in this market, there was an argument being made last year and into this year here that a lot of the highest valuations were actually assigned to some of the highest growth companies, at least on a revenue basis. Here. Is that still the case

going forward? It is? And that was actually the point of that note that that Tom was mentioning, is that the market's expensive, but it's not the average company that's that's out of whack. It's really the stuff at the very top from evaluation perspective, and a lot of these

things are very speculative in nature. Um those stocks we think are going to be vulnerable, and which is probably a good thing for investors who do the fundamental work and focus on the underlying earnings and cashitlows and all that boring stuff. John John from Coventry emails and he says, did you guys stop talking and ask him what SPX is gonna do? What's your standard reports target? Out one year? We have you know, we have the highest UM target

according to Bloomberg Survey at fort hundred. That's a little bit less than ten percent. That's pretty bullish. We think that earnings are gonna be about two hundred UM, which you know that that's a that's a big you know that that's a big number. But companies are beating really really strongly. Hopping at this is great. John sending more questions Lucy Jonathan. There's a question of how far we

can project this into the future. Are we still bringing the returns of the future to the present or is this something that's sustainable with ten percent returns foreseeable for a number of years out for the SMP you know, I think that was one of the challenges with the FED report that you were seeing a more of a dispersion of what the FED governors were seeing because there's just so many unknowns on how this reopening is going

to do. The real question is when do we get to normal, because then you would expect, you know, your typical eight percent return. I don't think we're gonna get to normal from an equity perspective until the early to mid part of three. At that point in time, the Fed's probably already moved. At that point in time, GDP is already growing at two percent, back in line with normal history. Between now and then, I think stocks continue to be on fire and value continues to win. You

have been killing it. Look at twelve trailing market returns. Folks to know that John got all the credit. Sweez has just absolutely nailed it there with a bold call out to SPX. I'll triangulate and find out what that means for the dal Jones industrial average. Eric Adams joins us semoral candidate in the June primary. And this has a national I should point out really a national view as well as what we see. I was thunderstruck, Eric, and I don't know where you came in on this.

But in the debate transcript, I looked at once again the fancy suit and Ties have a middle class definition of a hundred and thirty seven thousand income per year, and one of the candidates said, wait a minute, it's more like fifty four thousand a year. Explain to me if you are mayor where your middle class is define middle class in your New York City. Well, and that's a that's a moving target. As I stated during the debate, when you looked at the United Ways report of New

Yorkers have a sufficiency deficit. So if you have a family of four and you're making a hundred and fifty thousand dollars a year and you're living in Park Slope, you are challenging to actually make ends meet. And there are many parts of the city where based on your income, your family, your rent, and dealing with everything from student loans to tuition. You know, it's a very difficult time

for middle class New Yorkers. And we have decimated the middle class in the city and if not throughout the entire country. Part of the decimation of the middle class is their fear of crime. Certainly, we've learned at Bloomberg in the last number of weeks, crime is front and center. Uh, there's a lot of people talking. Eric Adams, I would suggest war the blue was a police officer. I want you to provide the distinction of your approach to NYPD

versus the candidates who don't have your public service. And that's a great question because many of the candidates refused to talk about this real issue of crime. They wanted to look at public safety through the eyes of a bumper sticker or slogan. Unless we clear the prerequisite to prosperity is public safety and justice. We're not going to recover as a city or country if we don't get

this crime under control. No one is going to come here as a tourist, a multi billion dollar industry if you have three year children shot in Times Square, no one wants to ride out subways to get back into the office spaces if you're slash or shove to the subway system on the subway tracks. And so my goal

is number one, get gun violence under control. We want to put in place a plain closed anti gun unit there zero and or gun and gang violence, use out gun suppression unit to really collaborate together with our other agencies to identify who's using the guns, stopping guns from coming into our city, and then we must deal with our street homeless problem, really dealing with the mental health illnesses that we're facing. We're losing the quality of life.

No one is going to stay in the city or building the city if we're viewed as a city that's not seen. Uh. Certainly so, uh, Mr Adams. Obviously a prerequisite to that prosperity is public safety. So is education here. A lot of folks want to know how what's your approach gonna be with regards to the public school systems here, with regards to staffing, and more importantly, with reguards to

the prosperity of our children. Well said? Well said? Listen, let me tell you the biggest embarrassment in this city, uh is how we treat our children in education. Education is not K through twelve. That's wrong. The neurologists and pediatricians would tell you. Education is pregnancy through profession. We must make sure that every area of a vacation is handled right, everything from nutrition on when mothers are pregnant to the time that we give them the right too

they need and brain development. But also are the real embarrassment. Sixty five of black and brown children never reach proficiency in the department education in the city. So one, we must return the joy of learning in our schools. We must look into internships. Externships, leaning too, vocational trainings allowed the business community, our tech and other industries to be part of the curriculum that we develop in our school systems. And then we must get technology in our schools, access

to WiFi and all the twos our children need. And finally, our fundation not be based solely on what happens in a school building. We need to look at the issues around the schools as well. Is your vision centered around the public school system? Mr Adams? My business is surrounding lifted up excellence. If that needs charter schools, public school private schools, let's duplicate successful schools in our city and go across the country to do so. I got forty

five seconds, Eric, How are you gonna cut costs? How are you going to manage costs in a city where costs are unmanageable? I'll city is dysfunctional as cities across America's Americas, they are number one. We're going to reign in a three to five percent of cutting all of our agencies. There's a lot of fat. We have a twenty billion dollar increase in our budget. Uh, there's just

too much waste and mismanagement. And we're not going to hurt those communities that were hardest hit during COVID and even pre COVID. UH. This city is manageable. Taxpayers are doing their dollars of doing the right things by paying their taxes. It's time for us to do the right thing with government by using those dollars correctly. We're too expensive, too bureaucratic, and too difficult to do business in this city. And that's going to change day one. He is from Brooklyn.

Eric Adams, thank you so much for joining us twenty seven at the mayoral effort here with that very unique voting. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten a m Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment,

and international relations. And subscribe to the Surveillance Podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom keene In. This is Bloomberg