WEBVTT - Square Working With Government to Speed Up Small Business Payments 0:00:02.680 --> 0:00:05.320 Welcome to the Bloomberg Penl podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.720 Along with my co host Lisa Brahma Waits. Each day 0:00:07.760 --> 0:00:10.280 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.560 you and your money, whether at the grocery store or 0:00:12.600 --> 0:00:15.520 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.560 --> 0:00:18.000 podcast or wherever you listen to podcasts, as well as 0:00:18.000 --> 0:00:22.119 that Bloomberg dot com. There's a huge focus right now 0:00:22.280 --> 0:00:25.439 on the fate of small businesses. Is their hard hit 0:00:26.000 --> 0:00:30.160 by the shutdowns from the coronavirus pandemic. Someone who's very 0:00:30.240 --> 0:00:34.120 clean clued in to exactly how these businesses operate and 0:00:34.159 --> 0:00:36.839 how they can survive and thrive going forward. As Jim mccalvey, 0:00:36.920 --> 0:00:41.560 co founder of Square, that incredibly popular payment system electronic 0:00:41.560 --> 0:00:45.360 payment system used by many small businesses, also the author 0:00:45.800 --> 0:00:49.479 of a new book, The Innovation Stack, Building an unbeatable business, 0:00:49.600 --> 0:00:52.360 one crazy idea at a time. He has a former 0:00:52.440 --> 0:00:56.000 glass blower who ended up founding one of the pre 0:00:56.080 --> 0:01:00.240 eminent mobile online payment systems. Jim, thank you so much 0:01:00.280 --> 0:01:02.600 for being with us today. I wanted to start with 0:01:03.040 --> 0:01:07.080 just anecdotally, given your conversations with small businesses, how hard 0:01:07.160 --> 0:01:11.120 hit have they been from this whole episode? Oh my god, Lisa, 0:01:11.240 --> 0:01:14.119 They've been tremendously hard hit. UM, and everybody knows it 0:01:14.120 --> 0:01:17.920 it's uh, but nobody knows the extent of it. We 0:01:18.000 --> 0:01:23.959 are watching, uh, some businesses closed, We're watching employees and panics. UM, 0:01:24.080 --> 0:01:27.520 It's it's bad. And I'm actually still in the art 0:01:27.520 --> 0:01:29.920 world and I still run a small studio and my 0:01:30.000 --> 0:01:33.080 staff was terrified, UM, because we had to shut down. 0:01:34.240 --> 0:01:36.520 So why is this time different than other times when 0:01:36.520 --> 0:01:40.360 you talk about financial downturns? So this is the first 0:01:40.400 --> 0:01:43.319 time there's been a voluntary shutdown of a healthy economy. 0:01:43.319 --> 0:01:45.479 So I'm also a director of the St. Louis Federal Reserve, 0:01:45.640 --> 0:01:48.320 and so I get to see the economic data almost 0:01:48.320 --> 0:01:50.840 in real time. And we had a very healthy economy 0:01:50.880 --> 0:01:56.600 going in UM, and we elected to voluntarily closed down, uh, 0:01:56.640 --> 0:02:00.800 the economy to solve a medical problem. Uh. This is 0:02:00.840 --> 0:02:04.120 different than most recessions. Most recessions just happened because there's 0:02:04.120 --> 0:02:06.720 some structural problem in the economy. There was none in 0:02:06.720 --> 0:02:10.040 this case. What happened was we had this medical emergency 0:02:10.400 --> 0:02:13.240 and to fight the disease, we had to close the economy. 0:02:13.440 --> 0:02:16.520 But it's different. So yes, you you do run an 0:02:16.600 --> 0:02:19.880 art studio and you are a glassblower, I believe based 0:02:19.880 --> 0:02:23.680 on your bio. Yet you did also found co found Square, 0:02:23.880 --> 0:02:26.680 which is one of the key technological advances for a 0:02:26.680 --> 0:02:29.519 lot of small businesses. And I'm just wondering the role 0:02:29.560 --> 0:02:32.920 of tech at this moment when so much business is 0:02:32.960 --> 0:02:37.040 going online. How are you seeing this sort of transformative 0:02:37.160 --> 0:02:42.399 moment for small businesses in the relationship with their tech infrastructure. Well, 0:02:42.440 --> 0:02:44.880 they're super defended on the tech infrastructure. As a matter 0:02:44.880 --> 0:02:48.000 of fact. Square has been rolling out new products almost 0:02:48.000 --> 0:02:51.720 every day to help small businesses adapt, and we're putting 0:02:51.760 --> 0:02:55.800 new products in their hands. Uh, you know, probably one 0:02:55.800 --> 0:02:59.600 a week now, allowing restaurants to turn to a delivery 0:02:59.600 --> 0:03:03.680 and pick up, uh, making our software free for companies 0:03:03.680 --> 0:03:07.120 that need it, and basically look um, this in some 0:03:07.200 --> 0:03:11.639 ways helps companies that have modernized their processes to use 0:03:11.880 --> 0:03:15.480 electronic payments, to use electronic record keeping, to use electronic meetings, 0:03:15.480 --> 0:03:17.960 to use distributed workforces, and it's forcing a lot of 0:03:18.000 --> 0:03:22.680 other companies to get with the program going forward. I'm 0:03:22.720 --> 0:03:25.360 just wondering, do you expect a lot of these smaller 0:03:25.400 --> 0:03:27.560 businesses to go out of business completely or do you 0:03:27.600 --> 0:03:30.239 think that they'll just be a sort of transformation as 0:03:30.280 --> 0:03:35.400 far as weeding out the most successful successful ones. Well, 0:03:35.440 --> 0:03:37.160 I mean, there's certainly going to be a winnowing down 0:03:37.320 --> 0:03:40.160 of companies that were not well prepared for this, But 0:03:40.200 --> 0:03:41.920 the real tragedy is that there were a lot of 0:03:41.920 --> 0:03:44.560 healthy businesses that are getting caught in it. The government's 0:03:44.600 --> 0:03:46.640 trying to step in. One of my great concerns is 0:03:46.680 --> 0:03:49.000 that the government is doing a lot of their aid 0:03:49.080 --> 0:03:52.640 through uh sort of antiquated paper based systems, and it's 0:03:52.680 --> 0:03:54.720 not going to get the money to the people that 0:03:54.840 --> 0:03:57.040 need it and the businesses need it fast enough. So 0:03:57.480 --> 0:03:59.800 at Square we're working diligently to try to give them 0:03:59.800 --> 0:04:03.960 the tools for instantaneous or near real time um action 0:04:04.120 --> 0:04:06.400 if the government chooses to do that. Wait. So, in 0:04:06.440 --> 0:04:08.520 other words, you're working with the government right now to 0:04:08.760 --> 0:04:13.720 try to make these payments electronic. Yes, so, I'm Jack 0:04:13.720 --> 0:04:15.440 said a tweet about this a couple of weeks ago. 0:04:15.480 --> 0:04:18.360 But basically, our whole company stands ready to give whatever 0:04:18.400 --> 0:04:21.680 aid we can because we've had the electronic rails working 0:04:21.760 --> 0:04:24.240 for several years, and they work with millions of businesses 0:04:24.680 --> 0:04:27.120 and scaling for millions to tens of millions or hundreds 0:04:27.160 --> 0:04:30.840 of millions is not as difficult as scaling from nothing 0:04:31.400 --> 0:04:35.520 to you know, project number one. Jim McKelvey, thank you 0:04:35.560 --> 0:04:37.919 so much for being with us and for sharing your insights. 0:04:37.960 --> 0:04:41.039 Jim McKelvey as co founder of Square based in St. 0:04:41.080 --> 0:04:45.279 Louis author of The Innovation Stack, Building an Unbeatable Business, 0:04:45.320 --> 0:04:48.680 One Crazy Idea at a Time, a new book that's out. 0:04:48.760 --> 0:04:52.160 He also is a glassblower, which I really love as 0:04:52.160 --> 0:04:54.920 somebody who used to do sculpture a long time ago. 0:04:57.920 --> 0:05:00.880 One of the key questions for markets going forward is 0:05:00.920 --> 0:05:04.960 whether inflation will actually start to pick up this time. Typically, 0:05:05.040 --> 0:05:08.400 in the past, the idea has been theoretically, when governments 0:05:08.440 --> 0:05:11.240 print money that leads to inflation. It didn't happen in 0:05:11.279 --> 0:05:14.839 two thousand nine. People are expecting it not to happen again. 0:05:15.480 --> 0:05:18.159 But are they wrong. Maria Murphy joining us now vice 0:05:18.200 --> 0:05:21.719 president and portfolio manager at Lomas Sales, which oversees nearly 0:05:21.760 --> 0:05:25.280 three hundred billion dollars and is based in Boston. Mara 0:05:25.960 --> 0:05:28.799 Maura there This to me is one of the most 0:05:28.839 --> 0:05:32.480 important debates at a time when people are basically shrugging 0:05:32.480 --> 0:05:36.000 off the concept of inflation. Going forward, even as governments 0:05:36.279 --> 0:05:39.799 and central banks unleash some of the biggest financial packages 0:05:39.920 --> 0:05:42.800 ever to hit markets. Do you think this time is 0:05:42.839 --> 0:05:47.200 different the two nine financial crisis and that this actually 0:05:47.360 --> 0:05:52.600 will spurf inflation? Hi, Lisa, thanks for having me. Um. 0:05:52.640 --> 0:05:55.320 You know, it's certainly different this time, and that the 0:05:55.360 --> 0:06:00.240 pace and the size that the FED is is going 0:06:00.240 --> 0:06:02.680 and buying right now is drastically different than any of 0:06:02.720 --> 0:06:05.640 the other quei's we've ever seen. They're really doing this 0:06:05.760 --> 0:06:08.880 at what I'd call a sprint pace, and we need 0:06:08.920 --> 0:06:11.960 to get ourselves into this marathon mindset rather than the 0:06:12.040 --> 0:06:14.960 frint we've been in, because they need As you see 0:06:15.080 --> 0:06:17.840 this week, they're already starting to taper the pace of 0:06:17.880 --> 0:06:20.760 their purchases and we'll see how the market responds to that. 0:06:21.440 --> 0:06:24.320 So far, as you mentioned that break evens are off 0:06:24.320 --> 0:06:27.520 their lows um which suggests that the market is no 0:06:27.640 --> 0:06:32.840 longer pricing that real fear of deflation or disinflationary risk, 0:06:32.920 --> 0:06:36.799 but we're still well off the levels of being afraid 0:06:36.839 --> 0:06:39.599 of inflation to come. I think the thing to watch 0:06:39.680 --> 0:06:41.680 that will be key to see if we do good 0:06:41.720 --> 0:06:44.640 inflation this time with all the easing, is what happens 0:06:44.640 --> 0:06:47.320 with the dollar. We need to watch for that excess 0:06:47.360 --> 0:06:51.039 dollar liquidity in the market, and given the amount that 0:06:51.600 --> 0:06:54.719 we've seen with increased swap lines from the FED, a 0:06:54.760 --> 0:06:58.800 weaker dollar would finally perhaps give us that impotence for 0:06:58.960 --> 0:07:01.640 inflation pressure. But I think that's a lot further down 0:07:01.680 --> 0:07:04.200 the line, and right now we need to be focused 0:07:04.279 --> 0:07:06.599 on the pace of the seed byon Alright. So, I 0:07:06.600 --> 0:07:09.160 guess inflation is sort of a hard concept to to 0:07:09.240 --> 0:07:10.520 get your mind around because there are a lot of 0:07:10.520 --> 0:07:12.200 different components to it, and there are a lot of 0:07:12.240 --> 0:07:16.600 potential scenarios in terms of whether the financial package from 0:07:16.600 --> 0:07:20.080 the FED continues to accelerate or if it does slow down. 0:07:20.280 --> 0:07:23.520 As you talked about, there is a much more concrete 0:07:23.520 --> 0:07:25.640 issue of bond yields, and we're looking right now at 0:07:25.640 --> 0:07:28.600 tenure yields at at three quarters of a percent, and 0:07:28.640 --> 0:07:32.120 you're seeing people expect that rate to actually go down 0:07:32.240 --> 0:07:36.640 over time, even as the US prints unprecedented amount amounts 0:07:36.680 --> 0:07:39.920 of these securities. At what point will that increase in 0:07:40.120 --> 0:07:46.560 supply lead to higher yields. That's the ultimate question here, 0:07:46.640 --> 0:07:49.000 right is timing on all of this, And I think 0:07:49.080 --> 0:07:52.000 unfortunately we still have too many unknown to really have 0:07:52.040 --> 0:07:55.360 a good sense of when that actually might occur. The 0:07:55.440 --> 0:08:00.600 Fed is talking about issuing T bills right now for 0:08:00.960 --> 0:08:04.480 um supply to pay for this stimulus, but eventually they 0:08:04.480 --> 0:08:06.440 may need to issue on the back end of the curve, 0:08:06.960 --> 0:08:08.920 which I don't think we have a lot of natural 0:08:08.960 --> 0:08:11.760 demand there right now with levels as low as you mentioned, 0:08:12.800 --> 0:08:15.000 because people are starting to step into some of the 0:08:15.040 --> 0:08:17.720 new I G issuants rather than to day in the 0:08:17.760 --> 0:08:22.480 safe case incursory assets, but volatility remains really high in 0:08:22.560 --> 0:08:26.120 this asset class. The set has improved liquidity, but ball 0:08:26.240 --> 0:08:29.280 is still there. And so I think, you know, given 0:08:29.280 --> 0:08:32.360 that we're likely to see bigger move in per day, 0:08:32.440 --> 0:08:34.600 and the range of yields that we're going to be 0:08:34.679 --> 0:08:37.360 in will likely be wider than we've been used to. 0:08:37.520 --> 0:08:39.520 So when we used to trade in a range of 0:08:39.960 --> 0:08:43.440 twenty to thirty basis points on ten or thirty year yields, 0:08:43.440 --> 0:08:45.280 now I think that range could be a lot wider 0:08:45.600 --> 0:08:48.360 while we try to figure out where the right level 0:08:48.520 --> 0:08:51.600 is based on the supply that's coming and based on 0:08:51.640 --> 0:08:55.959 the buying that's happening. The volatility has pretty significant consequences, 0:08:56.040 --> 0:08:58.640 not only for the Treasury, market, but also for credit. 0:08:58.720 --> 0:09:02.960 And I'm wondering what this does for investment grade bonds 0:09:02.960 --> 0:09:06.120 even as they're back stopped by the Federal Reserve, given 0:09:06.160 --> 0:09:08.439 the fact that they're more sensitive than ever to the 0:09:08.480 --> 0:09:12.800 fluctuations in the volatility and treasury yields. Yeah, one of 0:09:12.840 --> 0:09:15.040 the patterns we've seen over the last week is that 0:09:15.400 --> 0:09:18.439 all of this new ig issuance that's come to market, Um, 0:09:18.520 --> 0:09:22.760 you have deals that are highly oversubscribed. Um. I'd liken 0:09:22.840 --> 0:09:25.360 it to all of us right now, rushing to get 0:09:25.400 --> 0:09:27.920 that online order. We all wake up early and we're 0:09:27.920 --> 0:09:30.760 trying to, you know, secture that online delivery for our 0:09:30.800 --> 0:09:34.600 groceries every day. And are you are you actually succeeding, 0:09:34.640 --> 0:09:36.679 by the way, are you? Are you? It's so hard, 0:09:36.760 --> 0:09:40.000 isn't this? I have I've failed every single day. I 0:09:40.000 --> 0:09:42.080 actually have to go out, get get geared up in 0:09:42.080 --> 0:09:43.880 my hasmat suit and go to the grocery store. But 0:09:44.000 --> 0:09:46.720 carry out please. So you know, if we think of 0:09:46.720 --> 0:09:49.360 it like that, we have this rush for everyone going 0:09:49.400 --> 0:09:52.040 to the same space right now because that's where the 0:09:52.080 --> 0:09:54.760 FED is supporting. So you know that old adage of 0:09:54.840 --> 0:09:57.760 don't fight the bed persist here. So you want to 0:09:57.760 --> 0:10:01.559 be in i G and that UM demand for these 0:10:01.640 --> 0:10:06.080 high quality, large deals is really persisting and I think 0:10:06.600 --> 0:10:10.200 that will continue UM and we've only probably just seen 0:10:10.240 --> 0:10:12.720 the start of that, and I think to strengthen the 0:10:12.720 --> 0:10:15.960 secondary will be the next order of operations after all 0:10:16.000 --> 0:10:18.600 of this new issue. So it sounds like you're overweight 0:10:18.800 --> 0:10:22.320 investment grade? Is that right? Yeah, We're We're constructive on 0:10:22.360 --> 0:10:24.920 the new issuants here, and we like the level of 0:10:25.000 --> 0:10:28.080 yields after the backup, and I think given the natural 0:10:28.080 --> 0:10:31.160 buyer and the stead it's a place we definitely like 0:10:31.400 --> 0:10:35.559 and we'll be adding to What about high yield UM, 0:10:35.600 --> 0:10:38.360 it's a little bit harder to source high heeled paper 0:10:38.520 --> 0:10:43.360 right now. Uh, We're we're having we're seeing that UM 0:10:43.360 --> 0:10:45.960 i G with that excess supply is a little bit 0:10:45.960 --> 0:10:48.480 easier for us to be buying right now UM in 0:10:48.520 --> 0:10:51.320 a high yield. I'm just not sure we have a 0:10:51.360 --> 0:10:55.079 good sense yet, UM. Given the unknowns with the recovery 0:10:55.120 --> 0:10:58.600 of you know, how how long will this last? We 0:10:58.640 --> 0:11:02.240 how fast can company is really resume normal operations and 0:11:02.520 --> 0:11:05.280 how big and how you know, what's the magnitude of 0:11:05.280 --> 0:11:08.400 this recession and not knowing those unknowns, it's hard to 0:11:08.440 --> 0:11:13.280 really assess recovery values and highlo companies, and so I 0:11:13.320 --> 0:11:16.320 guess we're just not ready to say that the uh, 0:11:16.360 --> 0:11:19.040 the bounce is real here yet, so we're not adding 0:11:19.160 --> 0:11:23.000 to their respectors at the mall. That's really compelling to me. 0:11:23.040 --> 0:11:25.320 You said it's difficult to source paper. In other words, 0:11:25.640 --> 0:11:30.439 has a dramatic move that we've seen been largely on paper, 0:11:30.480 --> 0:11:33.440 and nobody really wants to solidify their losses by actually 0:11:33.920 --> 0:11:36.920 selling the underlying bonds. Is that is that what you're saying. 0:11:37.840 --> 0:11:42.400 Liquidity is definitely improving across the board across most markets, 0:11:42.440 --> 0:11:46.720 but I think it's it's perhaps not necessarily people stepping 0:11:46.720 --> 0:11:50.560 in to buy yet in large size. UM, this this 0:11:50.720 --> 0:11:54.160 sell off has happened very quickly. I think, you know, 0:11:54.600 --> 0:11:56.400 less than a month, or just about a month is 0:11:56.440 --> 0:11:58.800 how long it took for us to hit the bottom 0:11:58.880 --> 0:12:01.040 here if we did hit the ball them, And that's, 0:12:01.200 --> 0:12:04.160 you know, the fastest pace we've seen in a long time. UM. 0:12:04.200 --> 0:12:07.319 Back in eight seven, it took about seventy five days 0:12:07.400 --> 0:12:09.720 for the peak to trough to occur, and this time 0:12:09.760 --> 0:12:13.400 it took less than thirty. So given that it just 0:12:13.480 --> 0:12:17.000 happened so quickly, I'd be shocked if there isn't more 0:12:17.040 --> 0:12:20.640 downside to come, and I think in light of that, 0:12:21.679 --> 0:12:26.000 it's it's unwise to be stepping into risk here. Maura Murphy, 0:12:26.000 --> 0:12:27.960 thank you so much for being with us. Mor Murphy, 0:12:28.040 --> 0:12:32.640 vice president and portfolio manager at Loomis Sales with almost 0:12:32.679 --> 0:12:37.760 three billion dollars under management, based in Boston. I'm Lisa Abramoy. 0:12:37.840 --> 0:12:40.880 It's by co host and colleague Paul Sweeney Off today 0:12:41.679 --> 0:12:49.360 from New York. This is Bloomberg Markets. There's a keig 0:12:49.440 --> 0:12:53.600 question in the transformation of the US economy right now 0:12:53.640 --> 0:12:56.240 that's going on in the heels of the coronavirus, and 0:12:56.240 --> 0:12:59.240 that is what is the state of the consumer? Will 0:12:59.280 --> 0:13:02.680 they be able to maintain the recovery that we saw 0:13:03.280 --> 0:13:05.360 that will have to happen yet again and may not 0:13:05.400 --> 0:13:08.840 happen yet again for another couple of years. Joining us 0:13:08.840 --> 0:13:12.000 now is David Coudla, chief executive officer and chief investment 0:13:12.000 --> 0:13:15.439 strategist at Mainstay Capital Management. David, this has been a 0:13:15.480 --> 0:13:18.520 sort of key talking point for years that the American 0:13:18.600 --> 0:13:22.080 consumer is very strong. Right now we are seeing an 0:13:22.120 --> 0:13:27.719 absolute demolition in confidence among American consumers. How pivotal are 0:13:27.800 --> 0:13:30.400 they in the recovery from this period of time that 0:13:30.440 --> 0:13:34.199 we're looking at, it will be very pivotal highly. So 0:13:34.679 --> 0:13:37.560 the you know, the consumer is two thirds of the 0:13:37.640 --> 0:13:43.560 U S economy. And how the consumer uh comes out 0:13:43.559 --> 0:13:47.040 of this in terms of their UH, purchasing habits, the 0:13:47.080 --> 0:13:52.440 consumer sediment, consumer confidence, how soon consumers are willing to 0:13:52.840 --> 0:13:57.000 re engage the economy, how unemployment affects their behavior coming 0:13:57.000 --> 0:13:59.880 out of this, how pay cuts because some of the 0:14:00.400 --> 0:14:03.480 you know, there are different impacts on different parts of 0:14:03.920 --> 0:14:08.240 different demographics across the US. We have some that are 0:14:08.240 --> 0:14:10.440 going to be unemployed for a certain period of time, 0:14:10.480 --> 0:14:13.880 and the fiscal stimulus packages addressing some of that, uh 0:14:13.960 --> 0:14:16.959 in a meaningful way. UH. There are others that are 0:14:17.040 --> 0:14:20.360 going to just have haircuts in their pay A lot 0:14:20.400 --> 0:14:25.560 of the automotive industry here in Michigan have pay deferrals 0:14:25.840 --> 0:14:29.040 um that or pay cuts just straight pay cuts that 0:14:29.080 --> 0:14:31.560 will go on for months, and so that's going to 0:14:31.680 --> 0:14:37.160 be affecting, you know, consumer discretionary activity. So UH, it's 0:14:37.200 --> 0:14:39.120 yet to be seen, you know, so much of this 0:14:39.200 --> 0:14:42.320 is unknown, but it will be key and how the 0:14:42.360 --> 0:14:46.480 consumer behaves coming out of or on the other side 0:14:46.480 --> 0:14:50.280 of the coronavirus restarted the economy. Yeah, I was looking 0:14:50.680 --> 0:14:53.000 at a story out of the Financial Times, the survey 0:14:53.040 --> 0:14:56.280 that they conducted this. It came out today that nearly 0:14:56.320 --> 0:14:59.880 three quarters of Americans say that coronavirus pandemic has reduced 0:14:59.880 --> 0:15:03.800 the family's income nearly a quarter. So their household income 0:15:03.840 --> 0:15:07.120 had been cut very significantly, according to this poll. And 0:15:07.160 --> 0:15:08.960 you're very much at the epicenter of that when you 0:15:09.000 --> 0:15:11.480 look at the auto industry in Detroit and how much 0:15:11.520 --> 0:15:15.160 has just come to a complete halt. How much long 0:15:15.280 --> 0:15:17.240 term damage will that do? I mean, that's sort of 0:15:17.360 --> 0:15:21.160 a key question. I'm wondering how quickly can people revive, 0:15:21.320 --> 0:15:25.920 not just from a balancee perspective, but from a confidence perspective. 0:15:25.960 --> 0:15:30.000 Is there any kind of historical precedent. I don't know 0:15:30.040 --> 0:15:32.320 that there is. You know, this is the first recession 0:15:32.400 --> 0:15:36.600 that's been brought on by um, a pandemic that's been 0:15:36.600 --> 0:15:39.560 brought on by any kind of disease or virus. So 0:15:39.960 --> 0:15:43.320 it's unknown in that regard um. You know, we have 0:15:43.680 --> 0:15:46.520 some predictability and that you know, we came into this 0:15:46.840 --> 0:15:50.760 with a really an economy on pretty good footing in 0:15:50.840 --> 0:15:55.200 terms of being at fifty year unemployment, we had rising wages, 0:15:55.720 --> 0:15:59.320 we had a strong relatively strong consumer coming into this, 0:16:00.000 --> 0:16:03.680 and then the economy didn't shut down or slow down 0:16:03.760 --> 0:16:07.120 under normal business conditions are a normal business cycle. It 0:16:07.240 --> 0:16:10.800 was an artificial restraint. We the government actually shut down 0:16:10.880 --> 0:16:14.040 the economy and we're then we're going to fire back up. 0:16:14.080 --> 0:16:17.800 But there's some natural things or natural or human factors 0:16:17.800 --> 0:16:21.400 that have to happen for that to reoccur. So there 0:16:21.440 --> 0:16:24.800 are a lot of unknowns in that. As an investor, 0:16:25.360 --> 0:16:28.720 how do you trade around this? Well? I think for now, 0:16:28.920 --> 0:16:31.320 I think that you know, these last two days, there 0:16:31.440 --> 0:16:34.640 is a lot of optimism about you know, what we 0:16:34.680 --> 0:16:37.520 saw over the weekend in New York City, the improvement 0:16:37.560 --> 0:16:41.320 of the last several days in Europe, specifically in in 0:16:41.440 --> 0:16:46.080 France and Spain, in Italy, um, and so there's confidence 0:16:46.120 --> 0:16:51.320 about the number of new cases slowing. But uh, you know, 0:16:51.360 --> 0:16:53.040 we know that there we have a long way to 0:16:53.080 --> 0:16:56.760 go here and the economic impacts are still to be realized. 0:16:57.280 --> 0:17:00.720 So I think that investors need to be careful about 0:17:01.200 --> 0:17:03.880 thinking that this is this is behind us, and we 0:17:03.920 --> 0:17:06.639 think that it's still important to have, you know, some 0:17:06.720 --> 0:17:09.960 defensive posturing in play, some hedges, in place in your portfolio, 0:17:10.720 --> 0:17:13.720 because there's there's still volatility ahead. We still got some 0:17:13.720 --> 0:17:17.080 some pretty bad ecademic numbers to come out, and uh 0:17:17.160 --> 0:17:20.359 first quarter earnings and even second quarter earnings that are 0:17:20.400 --> 0:17:23.240 gonna be pretty abysmal. So do you think that you'd 0:17:23.240 --> 0:17:26.639 be uh selling this rally and that you expect the 0:17:26.720 --> 0:17:30.040 US equity markets to test new lows. I don't know 0:17:30.040 --> 0:17:32.480 I full test new lows, but I think we've certainly 0:17:32.520 --> 0:17:35.040 got a down draft, uh more of a down draft 0:17:35.119 --> 0:17:38.680 from from some point here. I don't know how much 0:17:38.720 --> 0:17:41.000 further this rally can go. We're seeing it fade a 0:17:41.040 --> 0:17:42.920 little bit as we get into trading today. You know, 0:17:43.080 --> 0:17:46.600 very strong rally yesterday, Futures were strong again this morning, 0:17:46.960 --> 0:17:49.680 started to fade a little bit. It's it's it's uh, 0:17:49.840 --> 0:17:52.800 you know, come and go today through trading this morning. 0:17:53.240 --> 0:17:56.320 But um, you know, we we see, you know, we're 0:17:56.359 --> 0:17:58.560 in a what we're calling right now an event driven 0:17:58.760 --> 0:18:02.040 bear market, not a not a secular bear market, not 0:18:02.160 --> 0:18:04.400 a you know, we don't think that this is a 0:18:05.400 --> 0:18:07.760 more than too an O eight O nine top type 0:18:07.760 --> 0:18:10.200 of bear market, that this is still just an event 0:18:10.280 --> 0:18:13.639 driven beer market that will just last a few short 0:18:13.720 --> 0:18:17.320 months and not a couple of years or or or 0:18:17.520 --> 0:18:21.440 uh a year or longer. We think that we're coming 0:18:21.480 --> 0:18:23.360 out of this and by the end of the year 0:18:23.960 --> 0:18:26.000 the economy and stock market will be on pretty good 0:18:26.000 --> 0:18:29.000 footing again. Um, that's yet to be seen, but that's 0:18:29.119 --> 0:18:32.480 that's our forecast right now. The economy and the stock 0:18:32.520 --> 0:18:34.760 market are two very different things. And there's a feeling 0:18:34.800 --> 0:18:37.280 that the stock market might recovery, but the economy the 0:18:37.320 --> 0:18:40.560 economic hit. Very few people at this point are are 0:18:40.640 --> 0:18:44.000 putting conviction behind a V shaped recovery in the economy. 0:18:44.400 --> 0:18:46.679 What gives you confidence that this will just be a 0:18:46.680 --> 0:18:48.960 couple of months and then all those jobs will come back. 0:18:51.200 --> 0:18:53.600 I guess it's it's it really comes down to, and 0:18:53.640 --> 0:18:55.960 we don't know right it. It comes down to how 0:18:55.960 --> 0:18:59.440 long the social distancing needs to go on, um, how 0:18:59.480 --> 0:19:02.800 the data coming in relative to the number of new cases. 0:19:03.280 --> 0:19:07.640 And then what we talked about earlier on how uh 0:19:07.760 --> 0:19:11.080 the consumers re engage the economy, how people get back 0:19:11.080 --> 0:19:17.680 to work. Um, the the uh you know, continuation of 0:19:18.280 --> 0:19:21.880 or the continuation of unemployment for a period of time. 0:19:21.880 --> 0:19:25.080 The longer goes, the more businesses to go out of business, 0:19:25.240 --> 0:19:28.520 the more people that are suffering that much longer makes 0:19:28.520 --> 0:19:31.080 it that much harder to restart the economy and and 0:19:31.240 --> 0:19:34.760 starts to manifest into longer term effects. That's the that's 0:19:34.800 --> 0:19:38.240 the risk. So the sooner we restart the economy, and 0:19:38.280 --> 0:19:40.119 I'm not suggesting we do that, it's got to be 0:19:40.240 --> 0:19:43.440 health and safety first. But the sooner we restart the economy, 0:19:43.560 --> 0:19:45.199 the less the effects will be. If you look at 0:19:45.280 --> 0:19:48.760 China as a model, um and as much as we 0:19:48.800 --> 0:19:51.239 believe the data and the recovery, but there's you know, 0:19:51.280 --> 0:19:54.520 there's measurements that we're taking that are being taken to 0:19:54.520 --> 0:19:56.760 to see that what the real recovery rate is there 0:19:56.760 --> 0:19:59.160 and how much factories are actually running and so forth. 0:19:59.200 --> 0:20:01.639 But they really did have somewhat of a V shaped 0:20:01.680 --> 0:20:04.520 recovery in a matter of a few months from the 0:20:04.520 --> 0:20:06.919 time they went down to come back up. They're not 0:20:07.000 --> 0:20:10.080 running it full production now. It's questionable as to what 0:20:10.119 --> 0:20:12.359 market sign ship too, but you know there's a model 0:20:12.359 --> 0:20:15.879 where it all happened literally in a few months. Yeah, 0:20:16.119 --> 0:20:17.959 David Couldla, thank you so much for being with us. 0:20:18.040 --> 0:20:21.159 David Couldla, chief executive officer and chief investment strategist at 0:20:21.240 --> 0:20:25.360 Mainstay Capital Management with nearly three billion dollars joining us 0:20:25.640 --> 0:20:32.000 from Michigan. There's a question right now about the progress 0:20:32.160 --> 0:20:34.919 of the coronavirus and some of the measures put in 0:20:34.960 --> 0:20:38.480 place to limit a limited spread in Europe. They appear 0:20:38.600 --> 0:20:41.200 to be working. However, we did see an increase in 0:20:41.240 --> 0:20:43.200 the number of deaths in Spain, and there is a 0:20:43.280 --> 0:20:47.400 question right now around the leadership of the United Kingdom. 0:20:47.520 --> 0:20:50.760 Is Boris Johnson, the Prime Minister is still in the 0:20:50.800 --> 0:20:55.000 hospital and in an intensive care unit being treated for 0:20:55.160 --> 0:20:58.160 the coronavirus. For some insight on what we should take 0:20:58.200 --> 0:21:01.680 away from this episode, let's bring in to raise Raphael Bloomberg, 0:21:01.680 --> 0:21:06.840 opinion editor covering European politics and economics. Trace, of course, 0:21:06.880 --> 0:21:09.480 our thoughts are with Boris Johnson, hoping that he does 0:21:09.560 --> 0:21:13.520 recover from the virus. On a bigger level, though, is 0:21:13.520 --> 0:21:16.199 there anything that we can take away in terms of 0:21:16.240 --> 0:21:20.240 the leadership of the United Kingdom throughout this epidemic as 0:21:20.240 --> 0:21:23.760 well as beyond and what the future brings in terms 0:21:23.760 --> 0:21:27.679 of Boris Johnson's government, Well, the UK does not, like 0:21:27.800 --> 0:21:32.240 the US, have a vice president or vice prime minister role. 0:21:32.320 --> 0:21:37.840 There's no constitutionally designated number two at present. Foreign Secretary 0:21:37.880 --> 0:21:42.280 Dominique rob a cabinet member and one time rival to 0:21:42.520 --> 0:21:46.679 Boris Johnson, has been designated as his stand in for 0:21:46.960 --> 0:21:51.080 day to day policy meetings, and the cabinet is says 0:21:51.119 --> 0:21:54.520 it's taking decisions by consensus now that can continue for 0:21:54.560 --> 0:21:59.800 a while. Should Johnson become UH seriously incapacitated, should he 0:22:00.080 --> 0:22:03.280 sign UH, then it's a different process. The Cabinet would 0:22:03.280 --> 0:22:07.359 then choose a member to recommend to the Queen to 0:22:07.440 --> 0:22:10.879 become prime minister. There's no acting prime ministerial role in 0:22:10.880 --> 0:22:14.040 the UK constitution. They would simply become prime minister. But 0:22:14.280 --> 0:22:17.200 I think that's sort of getting ahead of ourselves. Johnson, 0:22:17.480 --> 0:22:22.160 the news out this afternoon is in good spirits and stable. 0:22:22.240 --> 0:22:24.679 He's not on a ventilator, as you said in your introduction, 0:22:25.080 --> 0:22:27.919 so the hope is that he will be able to 0:22:27.960 --> 0:22:31.479 return to full work. Um whether that will happen in 0:22:31.640 --> 0:22:34.240 a few days or much further into the future isn't clear. 0:22:35.040 --> 0:22:38.119 And Soris forgive me for being I don't want to 0:22:38.160 --> 0:22:42.439