WEBVTT - GameStop Is Rage Against the Financial Machine: John Authers 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.400 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.440 --> 0:00:13.600 along with essential market moving news. Trying the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:20.800 and on Bloomberg dot com. Looking at games doot, Bonnie, 0:00:20.960 --> 0:00:22.960 I know you wanted an update. It's up a hundred 0:00:23.079 --> 0:00:29.600 seventeen percent today, up sixtcent year to date, up seventy 0:00:29.640 --> 0:00:33.120 four hundred percent. As for the Bloomberg terminal on a 0:00:33.159 --> 0:00:36.040 trailing twelve month basis, let's trying to put some of 0:00:36.040 --> 0:00:38.960 that into context. We can do that with John Authors. 0:00:38.960 --> 0:00:41.320 He's a senior editor for Bloomberg Markets. He's seen a 0:00:41.440 --> 0:00:44.680 thing or two. John, thanks so much for joining us here. 0:00:45.120 --> 0:00:47.560 What do you make of the game stops? So the 0:00:47.600 --> 0:00:49.559 world and there's a lot more besides game stop and 0:00:49.600 --> 0:00:50.840 you take a look at some of the other names 0:00:50.840 --> 0:00:55.440 like tuts, your role in AMC entertainment and others. Well, 0:00:56.640 --> 0:01:00.960 I guess my best take on this, which has provoked 0:01:00.960 --> 0:01:03.680 a lot of reaction, but that this is h This 0:01:03.760 --> 0:01:07.600 is obviously bubblished behavior, not necessarily a bubble for the 0:01:07.760 --> 0:01:12.920 entire market, but extremely frosty behavior at the margins and 0:01:12.959 --> 0:01:17.360 the very least, which is concerning. And what's really concerning 0:01:17.520 --> 0:01:22.200 is that it's not a classic bubble driven by greed. 0:01:23.400 --> 0:01:27.639 It seems to me to be driven by anger. People 0:01:27.760 --> 0:01:34.280 feel that the current situation is unfair and with all 0:01:34.280 --> 0:01:37.480 of those have got plenty of reasons to think that, 0:01:38.600 --> 0:01:43.920 and things like the attack on the shorts, the short 0:01:44.000 --> 0:01:48.160 squeezing GameStop are seen as a way. I've had feedback 0:01:48.200 --> 0:01:50.600 saying this is a way of earning back the money 0:01:50.640 --> 0:01:54.560 we paid for the top bailout twelve years ago. That 0:01:54.760 --> 0:01:58.000 this this is seen as writing a historical wrong, which 0:01:58.040 --> 0:02:04.120 is something that angle fueled by righteous anger rather than greed. Yeah, 0:02:04.160 --> 0:02:08.080 I mean, I find this a phenomenally interesting take, because 0:02:08.280 --> 0:02:09.720 you know, there are a lot of takes out there 0:02:09.720 --> 0:02:12.400 from the people who were shut themselves, to people like 0:02:12.400 --> 0:02:15.000 Anthony Scaramucci saying that this is positive for bitcoin if 0:02:15.000 --> 0:02:18.079 there's a lot of people just making hay from this phenomenon. 0:02:18.120 --> 0:02:20.080 But John, I think you've hit on something very interesting, 0:02:20.120 --> 0:02:24.400 which is, you know, are there now different strata of 0:02:24.520 --> 0:02:28.400 capitalists and are they partaking of the whole populism phenomenon 0:02:28.480 --> 0:02:33.959 only is sort of in a different world. Yes, that's 0:02:34.919 --> 0:02:40.480 the the kind of similarity to um what we saw 0:02:40.680 --> 0:02:46.320 at the Capital is quite concerning. Again, you're talking about 0:02:46.880 --> 0:02:52.240 social media coordinating angry people into making an attack on 0:02:52.320 --> 0:02:56.440 what they see as the establishments, and plainly the Capitol 0:02:56.600 --> 0:03:00.440 is the establishment with with a tradition and lead. The 0:03:00.440 --> 0:03:04.079 short sellers who have been attacking Game Stop are unpopular 0:03:04.160 --> 0:03:07.160 on Wall Street. They're seen as the good guys or 0:03:07.200 --> 0:03:10.760 the little guys trying to to keep all streets honest. 0:03:10.960 --> 0:03:13.760 But at this point they wear suits, and that means 0:03:13.800 --> 0:03:18.280 they're they're among the enemies. Now that there's obviously great 0:03:18.760 --> 0:03:25.880 differences in methods, but the motivations behind this are very 0:03:25.919 --> 0:03:31.440 similar to the motivations behind the various populist movements we 0:03:31.520 --> 0:03:36.840 know around the world. The the reasons for anger are 0:03:36.920 --> 0:03:41.880 very genuine. Again, as you might also say about, for example, Brexit. 0:03:41.960 --> 0:03:45.840 The question is whether this is a sensible way to 0:03:46.000 --> 0:03:48.920 channel that anger, whether this is a sensible response to 0:03:49.800 --> 0:03:53.400 the real unfairness that is out there. John, Is there 0:03:53.400 --> 0:03:56.240 a political element to this? I mean, is this occupy 0:03:56.360 --> 0:03:59.120 the stock market or is it something more akin to 0:03:59.240 --> 0:04:03.720 what we saw last week. As he said, I do 0:04:03.800 --> 0:04:08.800 think there's a political element to this, yes, um, whether 0:04:09.000 --> 0:04:16.640 it is um uh, I mean, it's not solely a 0:04:16.720 --> 0:04:20.719 political element. But in terms of when you're worried about 0:04:21.560 --> 0:04:24.159 a bubble, whether you're worried, when you're worried about the 0:04:24.200 --> 0:04:31.000 possibility of excess um, what matters then is sentiments, how 0:04:31.240 --> 0:04:34.400 what the psychology is that's driving people. Now. The problem 0:04:34.440 --> 0:04:38.120 with greed is that people will do a lot for 0:04:38.240 --> 0:04:41.719 greed naturally, and it needs to be balanced against fear. 0:04:43.440 --> 0:04:47.560 In this case, it is righteous anger. And if there 0:04:47.680 --> 0:04:52.839 is any emotion that will make us throw caution to 0:04:52.960 --> 0:04:57.240 the winds even more than greed will, I would say, 0:04:57.240 --> 0:05:03.240 it's anger. Um. And it's very hard. Since I wrote 0:05:03.240 --> 0:05:05.320 my column last night, I've had some people suggesting that 0:05:05.360 --> 0:05:08.960 the Mississippi bubble, the French current of the South Sea 0:05:08.960 --> 0:05:12.080 bubble might have had some elements of this, that that 0:05:12.240 --> 0:05:16.559 people were angry with with life in France and sort 0:05:16.600 --> 0:05:21.400 of investing in in rather illusory prospects in the New 0:05:21.440 --> 0:05:23.880 World as as a way of getting back at them. 0:05:23.920 --> 0:05:27.480 But that's the best that's the only example anybody has 0:05:27.520 --> 0:05:30.560 come up with. Something like this, where there is this 0:05:30.800 --> 0:05:36.600 kind of speculative action and it's driven by anger, not greed. 0:05:37.279 --> 0:05:39.880 So so it's whenever we have a lack of precedent 0:05:40.120 --> 0:05:44.040 that's concerning you don't know what's coming. John. If this 0:05:44.120 --> 0:05:46.719 is indeed a bubble, does this bubble? Is there any 0:05:46.720 --> 0:05:48.560 reason to believe that this bubble doesn't end like other 0:05:48.600 --> 0:05:51.360 bubbles do and people get hurt and it just kind 0:05:51.360 --> 0:05:56.120 of pops. No, there's no reason to believe that. There's 0:05:56.160 --> 0:05:58.520 certainly a reason to believe that that this bubble could 0:05:58.520 --> 0:06:02.280 be far far bigger than it currently is. And there's 0:06:02.720 --> 0:06:06.240 um we can we can go back over the there 0:06:06.279 --> 0:06:07.960 are two sides to the argument of Both of them 0:06:08.000 --> 0:06:10.479 are completely valid as far as they go. Stop stocks 0:06:10.520 --> 0:06:14.320 are very expensive judged against their own history, but they're 0:06:14.320 --> 0:06:19.000 not expensive compared to two bond yields. And then it 0:06:19.040 --> 0:06:21.760 becomes an argument about where the bond yields stayed this 0:06:21.880 --> 0:06:25.919 low um. But in terms of is there any reason 0:06:25.960 --> 0:06:29.280 to believe this kind of a bubble wouldn't burst compared 0:06:29.279 --> 0:06:31.080 to other bubbles, there's there's no reason to believe that. 0:06:31.120 --> 0:06:33.880 I assume that it would, and I assume that the 0:06:33.960 --> 0:06:37.000 last people in who will be the little guys just 0:06:37.040 --> 0:06:39.960 as they are now, will, as in previous bubbles, be 0:06:40.000 --> 0:06:42.120 the ones who get hurt the most. I mean, is 0:06:42.120 --> 0:06:45.160 this one area we're seeing actual unity? John? Are these 0:06:45.200 --> 0:06:47.200 people on the right and on the left with the 0:06:47.240 --> 0:06:50.360 same argument. There's a great argument out there about how 0:06:50.960 --> 0:06:56.760 we don't fully recognize that cultural expressions of politics, like 0:06:56.880 --> 0:06:59.320 protest songs, for example, are just as popular on the 0:06:59.400 --> 0:07:01.160 right as they are on the left, and that just 0:07:01.240 --> 0:07:06.599 haven't given enough, you know, attention to both sides of 0:07:06.640 --> 0:07:08.680 that coin. It just seems to be something associated with 0:07:08.680 --> 0:07:10.560 the left. But is that what you know? We're seeing 0:07:10.600 --> 0:07:13.520 that here? Yes, I think that's a very good point. 0:07:13.760 --> 0:07:15.720 I think that it's it's one of the points we've 0:07:15.880 --> 0:07:19.040 seen in politics for some years now and again, if 0:07:19.040 --> 0:07:21.920 you want to go back to Brexit and and Trump 0:07:22.000 --> 0:07:25.440 or order of protectionism, that the in Britain it was 0:07:25.560 --> 0:07:28.920 very much the traditional right, but a lot of people 0:07:28.960 --> 0:07:33.640 on the traditional left wanted to Brexit, and it was 0:07:33.720 --> 0:07:37.680 a a an elite from the center left to the 0:07:37.680 --> 0:07:39.800 center right that wanted to stay with Europe. That there 0:07:39.840 --> 0:07:43.240 was this unholy alliance in many ways. If we go 0:07:43.320 --> 0:07:46.200 back to the financial crisis, of twelve years ago. There 0:07:46.200 --> 0:07:51.000 there was a very strange alliance in the in the 0:07:51.400 --> 0:07:55.240 the the people who really shared an analysis of what 0:07:55.480 --> 0:08:00.240 has gone wrong and who really disliked moral hazard way 0:08:00.240 --> 0:08:04.960 the FED behaved were either libertarians on the rights you 0:08:05.040 --> 0:08:09.760 think of libtic on meses, or outright socialists on the 0:08:09.880 --> 0:08:15.240 left like Hyman Minsky, and they had very different ideas 0:08:15.360 --> 0:08:19.760 for how to solve the problem, but they actually had 0:08:19.880 --> 0:08:24.960 almost exactly the same prescription, the same definition of what 0:08:25.120 --> 0:08:29.440 has gone wrong. And similarly, if you're a libertarian or 0:08:29.760 --> 0:08:34.199 an equal egalitarian socialist, you have equally strong good reasons 0:08:34.240 --> 0:08:36.800 to be angry at the moment, and you get this 0:08:36.960 --> 0:08:41.840 strange alliance. John author is fabulous conversation and the latest 0:08:42.320 --> 0:08:45.599 Bloomer opinion article from John on this particular subject is 0:08:45.720 --> 0:08:49.720 game stop is rage against the machine? Anger is an energy. 0:08:50.240 --> 0:08:52.320 Do have a read of it. It's a take that 0:08:52.360 --> 0:08:55.320 we haven't heard enough about, to be honest, out there 0:08:55.480 --> 0:08:59.000 and just really fascinating. Do stay tuned. We're going to 0:08:59.040 --> 0:09:02.480 get a COVID nine teen White House Task Force briefing 0:09:02.520 --> 0:09:04.280 at eleven am. We're going to dip into that and 0:09:04.320 --> 0:09:06.880 see what exactly is going on. This is New York 0:09:06.920 --> 0:09:10.320 City is to get seventeen thousand more doses next week. 0:09:13.160 --> 0:09:16.000 Another treat for us. Now we get to talk FED 0:09:16.040 --> 0:09:19.880 with Alan Blinder, Princeton University professor and of course, former 0:09:20.000 --> 0:09:23.679 Federal Reserve Vice chair. He served with Janet Yellen on 0:09:23.720 --> 0:09:28.720 the Fed's board in you know, recent decades, and is 0:09:28.800 --> 0:09:31.679 also a co author of a book with Janet Yellen 0:09:31.800 --> 0:09:35.679 called The Fabulous Decade Macroeconomic Lessons from the nineteen Nineties 0:09:35.720 --> 0:09:38.160 that was published in two thousand one. Alan, thank you 0:09:38.240 --> 0:09:42.040 so much for joining First your reaction to Joannet Yellen 0:09:42.160 --> 0:09:45.319 as now Treasury Secretary, the first woman Treasury Secretary of 0:09:45.320 --> 0:09:48.120 the United States of America, Well, I'm pleased as punch 0:09:48.160 --> 0:09:52.920 as you can, well regarded, well understand. It is a 0:09:53.040 --> 0:09:57.640 landmark to have the first woman sitting in the Secretary 0:09:58.080 --> 0:10:02.319 of the Treasuries off us. She comes very well prepared. 0:10:03.080 --> 0:10:06.720 Not all Secretaries of the Treasury do, you may recall 0:10:06.840 --> 0:10:10.640 without naming names. Uh, some do, some don't. She comes 0:10:10.760 --> 0:10:16.320 very well prepared, both understanding markets and understanding Washington, and 0:10:16.480 --> 0:10:22.480 understanding the Treasuries business, and especially obviously understanding the Federal Reserve. 0:10:23.679 --> 0:10:26.640 When you're in a crisis, situation such as we've been 0:10:26.640 --> 0:10:30.320 in for a while. The Treasury and the Fed, regardless 0:10:30.360 --> 0:10:33.120 of who's sitting in those two chairs, have got to 0:10:33.240 --> 0:10:36.960 be in close collaboration early and often. And this is 0:10:37.000 --> 0:10:40.079 just going to be so easy with a Janet Yellen 0:10:40.160 --> 0:10:44.120 and J Powell. So, professor, how do you expect or 0:10:44.160 --> 0:10:47.360 what would you like to see in terms of fiscal 0:10:47.400 --> 0:10:50.360 policy and monetary policy? Here? Just where we are right now? 0:10:50.520 --> 0:10:52.920 It seems like we're gonna we can look to the 0:10:52.920 --> 0:10:54.800 other side of this pandemic, but there's still a long 0:10:54.880 --> 0:10:57.120 road ahead. What would you like to see? Yeah, I 0:10:57.120 --> 0:11:00.599 think monetary policy should be sitting right where it is, 0:11:00.640 --> 0:11:02.960 and that's of course what the Federal Reserve thinks. This 0:11:03.120 --> 0:11:06.200 is no news. And then but I just might say 0:11:06.280 --> 0:11:11.000 that's in a hyper expansionary stance. So it's not like 0:11:11.040 --> 0:11:13.520 they're sitting in neutral or something like that. Fig got 0:11:13.520 --> 0:11:18.520 the interest rate to the floor. They're buying securities may 0:11:18.760 --> 0:11:22.360 uh to increase the side of the balance sheet and 0:11:22.440 --> 0:11:25.720 so on. They should stay that way for a while. Uh. 0:11:26.679 --> 0:11:29.800 It's regretful and I'm not sure the legal status of 0:11:29.920 --> 0:11:35.080 some of these. Uh that Secretary minution saw fit in 0:11:35.080 --> 0:11:38.880 its closing days to cut cut them out the Fed's 0:11:38.960 --> 0:11:44.600 emergency UH lending facilities. I'd like to see Janet Yellen 0:11:44.679 --> 0:11:47.080 put them back to the extent that she can. Some 0:11:47.280 --> 0:11:51.360 that may need Congressional action, which is harder. Whatever can 0:11:51.400 --> 0:11:54.440 be done by Treasury action, I think should be done 0:11:54.480 --> 0:11:57.360 just because you want them. There is a backstop. The 0:11:57.480 --> 0:12:00.480 argument that minution made the row and not using let's 0:12:00.480 --> 0:12:04.520 throw them away is exactly the same as saying I 0:12:04.559 --> 0:12:07.600 haven't made a claim of my fire insurance policy from 0:12:07.600 --> 0:12:11.679 my home, so let me just cancel it. Yeah, for sure, 0:12:11.840 --> 0:12:14.000 if and when it does come up again, I imagine 0:12:14.000 --> 0:12:17.320 there'll be a different type of approach from the Treasury. 0:12:17.440 --> 0:12:21.120 So curious, Allen. You know, Jerome Powell has been a 0:12:21.200 --> 0:12:24.719 FED board member since two thousand twelve. He became the 0:12:24.800 --> 0:12:29.360 chair of the FMC in two eighteen. What happens next 0:12:29.520 --> 0:12:33.400 with the FED chair position? Presumably Chair Powell stays as 0:12:33.440 --> 0:12:36.760 long as he's welcome to stay, which presumably is the 0:12:36.800 --> 0:12:39.680 rest of his term. And then does President Biden appoint 0:12:39.760 --> 0:12:43.400 somebody else who might it be? Well, I think it's 0:12:43.480 --> 0:12:46.080 very early to speculate on that, But look, I don't 0:12:46.120 --> 0:12:51.240 think you should eliminate Jerome Powell. Prior to Donald Trump, 0:12:52.280 --> 0:12:57.040 there were many instances of a new president coming in 0:12:57.120 --> 0:13:01.480 with a FED chair appointed by president of the other 0:13:01.600 --> 0:13:07.240 party and then um giving that person another term because 0:13:07.280 --> 0:13:09.720 they were all he's then one of them was Janet Yellen. 0:13:10.200 --> 0:13:13.160 She was the exception. Trump did not do that, but 0:13:13.320 --> 0:13:16.360 many previous presidents looked at the FED chair said well, 0:13:16.400 --> 0:13:20.280 he did a very good job. Let's keep him in position. 0:13:20.440 --> 0:13:23.360 So you'd be fine with Ron Paul having a second 0:13:23.559 --> 0:13:25.840 term as FED chair. I would be. Now, of course, 0:13:25.880 --> 0:13:28.080 it's up to Joe Biden, not to me. All I'm 0:13:28.120 --> 0:13:32.679 saying is that I wouldn't write him out. There's definitely 0:13:32.679 --> 0:13:38.400 a live possibility that he could become get a second term. 0:13:38.440 --> 0:13:41.600 Now if if that's not the case, an obvious kennidate 0:13:41.760 --> 0:13:46.440 is Lele Brainerd, who's the Democrat sitting on the board 0:13:47.480 --> 0:13:53.040 right now. And there may be other uh Biden appointments 0:13:53.720 --> 0:13:57.880 before Powell's term ends to the board and those will 0:13:57.960 --> 0:14:01.280 be live. Candidate said, then there are plenty of people 0:14:01.440 --> 0:14:04.480 I don't want to thought speculating on names in the 0:14:04.480 --> 0:14:10.800 financial world, UH, who are Democrats who could be attractive 0:14:10.920 --> 0:14:15.880 to Biden as a replacement for power But the logic 0:14:15.960 --> 0:14:19.400 here is going to be question A is for Biden 0:14:19.520 --> 0:14:23.520 is do I keep power or replace him? That's question one. 0:14:23.640 --> 0:14:26.040 Then if you answer that in the negative, then a 0:14:26.080 --> 0:14:30.360 whole host of names UH start should start coming to 0:14:30.440 --> 0:14:35.200 your desk, Professor. Given what we know about fiscal policy, 0:14:35.280 --> 0:14:40.440 given what we know about UH fiscal stimulus and monetary policy, 0:14:40.480 --> 0:14:43.280 what is your economic outlook here? I mean, I think 0:14:43.280 --> 0:14:47.800 there's concern here that the improvement in the economy, the 0:14:47.880 --> 0:14:49.800 opening up of the economy, if you will, maybe take 0:14:49.800 --> 0:14:52.640 a little bit longer than people had initially thought. Yeah, Well, 0:14:52.720 --> 0:14:56.040 it depends on many things, in which two are completely obvious. 0:14:56.520 --> 0:15:02.000 One is the speed or or lack of speed with 0:15:02.040 --> 0:15:06.600 which we get this wave of the virus under control. 0:15:07.080 --> 0:15:11.200 That depends a lot on the vaccination rollout, which, as 0:15:11.240 --> 0:15:15.720 you know, has been disappointingly slow, in which President Biden 0:15:15.760 --> 0:15:21.240 has promised to accelerate, its taping steps to accelerate. And 0:15:21.280 --> 0:15:25.360 the other is the passage or non passage of another 0:15:25.480 --> 0:15:29.760 COVID relief package. So we did one in December. That 0:15:29.880 --> 0:15:33.520 was good. It's now to January. It is soon going 0:15:33.520 --> 0:15:38.360 to be February. In March, for example, things start running 0:15:38.360 --> 0:15:45.280 out such as the extra unemployment benefits. I be pleased 0:15:45.800 --> 0:15:52.080 but surprised if the economy is looking really healthy in March, 0:15:52.880 --> 0:15:57.960 that is to say, not no longer needing extra emergency support. 0:15:58.720 --> 0:16:00.880 So I hope the kind this is going to pass 0:16:00.880 --> 0:16:04.880 a bill. We don't need it this week, but we 0:16:04.920 --> 0:16:11.280 do need it, and the health of the economy in March, April, May, June, 0:16:11.320 --> 0:16:16.640 etcetera depends, among other things on that. Alan, what do 0:16:16.680 --> 0:16:19.920 you make of the data that actually shows improvement these days? 0:16:20.240 --> 0:16:22.640 I mean, yesterday we got the confidence data would showed 0:16:22.640 --> 0:16:24.760 that perhaps know in the future, but right now people 0:16:24.800 --> 0:16:27.880 are a little more confident. What's giving them that confidence 0:16:27.920 --> 0:16:29.560 if many of them have been out of work for 0:16:29.960 --> 0:16:32.840 nearly that's great. I'm glad you asked that. I was 0:16:32.880 --> 0:16:36.680 surprised at that, and I noted that the sentiment about 0:16:36.680 --> 0:16:41.240 the current economy had not improved, had deteriorated a little bit. 0:16:41.640 --> 0:16:44.080 But people are looking forward, and I think the answer 0:16:44.240 --> 0:16:45.840 is the light at the end of the tunnel. The 0:16:45.920 --> 0:16:51.120 vaccine um. It's not like this secret. Everybody in the 0:16:51.160 --> 0:16:53.920 country knows that vaccines. To hear people are starting to 0:16:54.000 --> 0:16:58.440 get vaccinated, and there's a lot of talk now, especially 0:16:58.480 --> 0:17:04.639 now about have everybody who wants a vaccine vaccinated by summer. 0:17:05.720 --> 0:17:08.480 That's a big change from the way the world looked 0:17:08.520 --> 0:17:11.879 three six months ago. So when we think about that, 0:17:11.920 --> 0:17:13.760 to let at the end of the tunnel, professor, the 0:17:14.240 --> 0:17:16.880 number of folks that are out of work and out 0:17:16.880 --> 0:17:20.720 of work for a long period of time is increasingly troubling. 0:17:20.720 --> 0:17:23.359 I think to a lot of folks here, how do 0:17:23.440 --> 0:17:26.680 you think the the labor economy is going to recover? 0:17:26.920 --> 0:17:29.440 You know again at the other side of this, well, 0:17:29.520 --> 0:17:31.800 I'm gonna sound like a broken record, but it depends 0:17:31.800 --> 0:17:35.520 on those two things as we get rid of the 0:17:35.560 --> 0:17:40.240 scourge of the coronavirus. Let me back up a step. 0:17:40.400 --> 0:17:42.480 A lot of those jobs you're talking about are in 0:17:42.520 --> 0:17:49.439 the service industries, restaurants, theaters, entertainment venues of all uh sorts. 0:17:49.480 --> 0:17:52.680 It's not people like me and people like you who 0:17:52.760 --> 0:17:57.439 are working electronically. And those jobs will come back, at 0:17:57.520 --> 0:17:59.880 least most of them, I think will come back as 0:18:00.040 --> 0:18:05.720 and when the virus fades into insignificance. You know, I 0:18:06.040 --> 0:18:10.439 should emphasize we have seasonal flu every year. It kills 0:18:10.520 --> 0:18:14.680 ten thirty thou people every year. But that's a long 0:18:14.760 --> 0:18:19.159 way from four hundred, five hundred thousand. You know, the 0:18:19.520 --> 0:18:23.119 thought we should have is to get the coronavirus down 0:18:23.160 --> 0:18:27.160 to the level of the flu or something like that, 0:18:27.320 --> 0:18:31.640 and then the country can go back to normal. So 0:18:31.680 --> 0:18:35.479 there's that, and then the second thing is the COVID 0:18:35.480 --> 0:18:39.280 relief package, which has benefits for unemployed. So if you 0:18:39.480 --> 0:18:41.680 if you don't have your job back, you can continue 0:18:42.400 --> 0:18:46.840 on on unemployment benefit. It will probably have relief checks 0:18:47.320 --> 0:18:51.439 which I hope are better targeted than they've been uh 0:18:51.960 --> 0:18:54.959 in the past, and those things will help the labor market. 0:18:56.560 --> 0:18:59.000 Alan Blinder, thank you so much for joining us. We 0:18:59.040 --> 0:19:02.320 always appreciate get your thoughts on the economy here. Alan Blinder, 0:19:02.359 --> 0:19:06.200 he's professor of economics at Princeton University and former FED 0:19:06.520 --> 0:19:10.640 vice chairman. We appreciate his thoughts and now we want 0:19:10.640 --> 0:19:12.560 to get to our next guest, Brian Whyle and his 0:19:12.640 --> 0:19:16.520 group Managing director for ctc w's fixed income group. Brian, 0:19:16.560 --> 0:19:19.520 the obvious question, were below one percent once again on 0:19:19.560 --> 0:19:21.840 the ten year. We waited a long time to get 0:19:21.880 --> 0:19:24.920 back above the one percent, and actually in the in 0:19:24.960 --> 0:19:26.720 the immediate moment we're back above it, but we did 0:19:26.720 --> 0:19:29.439 get below it. What took us there and what happens 0:19:29.480 --> 0:19:34.600 post f O mc sure, um Funnie, thanks for having me. Um. 0:19:34.640 --> 0:19:36.480 You know, I think the run from the ten year 0:19:36.560 --> 0:19:39.040 up about basis points on the year when it got 0:19:39.080 --> 0:19:42.120 up as close to about one was a lot about 0:19:42.160 --> 0:19:44.920 the blue wave and um, the you know, the hope 0:19:44.920 --> 0:19:46.520 that there would be, you know, a tremendous amount of 0:19:46.520 --> 0:19:48.560 fiscal stimulus. And I think that you know, the run 0:19:48.600 --> 0:19:50.919 back towards one percent or maybe dipping right below it 0:19:50.960 --> 0:19:54.040 is is kind of maybe a recognition that you know, 0:19:54.160 --> 0:19:57.040 the the administration, while they may have these these goals 0:19:57.040 --> 0:19:59.159 and they'll put out these stimulus packages, it may not 0:19:59.200 --> 0:20:02.400 be as easy to implement uh as originally thought. Uh 0:20:02.440 --> 0:20:04.239 and it certainly might take a little bit longer than 0:20:04.240 --> 0:20:07.640 originally thought. So, Brian, where do you think just we'll 0:20:07.640 --> 0:20:09.960 focus on the tenure here? How do you what's your 0:20:09.960 --> 0:20:12.680 outlook here for rates? Because you know, we had been 0:20:12.680 --> 0:20:15.240 in that trading range stream we're still in there obviously 0:20:15.359 --> 0:20:16.840 kind of rates smack in the middle of some type 0:20:16.840 --> 0:20:20.159 of training range here. But what's your outlook? Yeah, you 0:20:20.200 --> 0:20:22.760 know it's um. First, I think we talk about out look, 0:20:22.760 --> 0:20:24.800 you gotta kind of forget, you know, what you'll what 0:20:24.880 --> 0:20:27.160 you learned back in school, and you know how the 0:20:27.200 --> 0:20:30.000 nominal rates should move relative to growth, because you know, 0:20:30.000 --> 0:20:32.359 we're in this world where you know, rates are clearly 0:20:32.359 --> 0:20:34.320 controlled by by the Fed, you know, and what they 0:20:34.320 --> 0:20:36.160 do with their balance sheet. Uh. And so I think 0:20:36.160 --> 0:20:38.040 you just gotta you gotta take them out their word, 0:20:38.160 --> 0:20:39.399 you know, which is that you know they're going to 0:20:39.480 --> 0:20:41.959 continue with this policy. You know they're not gonna you know, 0:20:42.560 --> 0:20:44.600 lift off the zero bounds not going to happen until 0:20:44.680 --> 0:20:48.240 at least three um. You know, a reduction in the 0:20:48.240 --> 0:20:50.000 pace of the growth of the balance sheet that's not 0:20:50.000 --> 0:20:53.160 going to happen until next year. UM. So it's hard 0:20:53.200 --> 0:20:56.480 to see rates going much, you know, significantly higher from 0:20:56.480 --> 0:20:59.360 where they are now because you know, also in addition, 0:21:00.119 --> 0:21:02.159 not only the economy fragile, but I think you know, 0:21:02.240 --> 0:21:05.280 the markets would react negatively to to attend your rates 0:21:05.280 --> 0:21:08.320 significantly higher. So you know, we hate to put you know, 0:21:08.520 --> 0:21:10.800 numbers and bands on rates because you know, you never know. 0:21:10.920 --> 0:21:12.359 But you know, it's kind of hard to see the 0:21:12.440 --> 0:21:14.639 ten year certainly not getting to a you know, a 0:21:14.680 --> 0:21:18.920 two point something yield this year. And personally, I think 0:21:18.920 --> 0:21:20.920 we'd be surprised if you know, we've got much above 0:21:20.960 --> 0:21:24.439 a one point five. So what do you do? Because 0:21:24.680 --> 0:21:26.840 we were just talking yesterday about the record amount of 0:21:26.920 --> 0:21:31.359 junk issuance, there's also huge you know, investment grade issuance. 0:21:31.840 --> 0:21:34.720 There's there's lots to buy out there. But none of 0:21:34.720 --> 0:21:37.800 it is all that attractive, is it. It's a it's 0:21:37.800 --> 0:21:40.119 a bond party. Um. You know, I think that the 0:21:40.240 --> 0:21:45.080 Fed has uh successfully repressed everyone. Um. And you know 0:21:45.119 --> 0:21:47.280 we're I mean just you know, for for your for 0:21:47.359 --> 0:21:49.800 your your listeners. I mean, you know, we are while 0:21:49.800 --> 0:21:53.000 we're much lower in interest rates you know, um today 0:21:53.040 --> 0:21:55.399 than we were a year ago, when you look at 0:21:55.400 --> 0:21:57.960 other things like credit spreads and where high old bonds 0:21:57.960 --> 0:22:01.320 are trading, and leverage loans and of the securitized market, 0:22:01.320 --> 0:22:04.200 the mortgage backed securities, when you talk about like the 0:22:05.000 --> 0:22:07.880 spread of how they trade relative to the treasuries, we're 0:22:08.000 --> 0:22:09.919 right back where we were last year. So, you know, 0:22:09.960 --> 0:22:13.000 from just from a kind of the narrow world of 0:22:13.000 --> 0:22:15.119 the bond world, at least on on the credit side, 0:22:15.119 --> 0:22:18.760 everything non treasury related, you know, it looks exactly like 0:22:18.840 --> 0:22:22.560 it did before the pandemic. So we've unwound, um, you know, 0:22:22.600 --> 0:22:26.360 the entire pandemic period, even though you know, we're clearly 0:22:26.359 --> 0:22:28.560 not out of the pandemic. So so the markets that 0:22:28.600 --> 0:22:30.240 I've heard some of, you know, Alan Blinder said, you know, 0:22:30.240 --> 0:22:32.960 the markets are definitely forward looking, um, and I think 0:22:33.000 --> 0:22:35.760 they're they're priced not necessarily for even like the middle 0:22:35.760 --> 0:22:40.000 of markets, particularly on the credit side, are priced for 0:22:40.160 --> 0:22:45.080 you know, the end of one, if not two. Alright, 0:22:45.119 --> 0:22:48.400 So Brian, let's talk about credit quality. How are you 0:22:49.080 --> 0:22:51.000 viewing it? What are you seeing in your portfolio in 0:22:51.080 --> 0:22:53.480 terms of credit quality? Here we're, you know, almost twelve 0:22:53.480 --> 0:22:56.720 months into this pandemic and economic disruption. Yeah, I think 0:22:56.880 --> 0:22:59.159 I think that the theme we you know, we're running 0:22:59.160 --> 0:23:03.000 with here is that let's just let's try to justify 0:23:03.080 --> 0:23:06.280 today's prices and today spreads from a credit perspective, like, uh, 0:23:06.920 --> 0:23:09.119 clearly the market is looking towards, like I said, the 0:23:09.200 --> 0:23:11.520 end of the year, and let's just say and this 0:23:11.640 --> 0:23:13.800 kind of consensus that by the end of this year, 0:23:14.520 --> 0:23:17.439 the economy is the same size as it was, you know, 0:23:17.600 --> 0:23:20.840 in let's say February, so before the pandemic. So so 0:23:20.880 --> 0:23:23.160 we've kind of we've kind of gone we've gone through 0:23:23.200 --> 0:23:26.240 the dark ravine of the the economic contraction and we've 0:23:26.240 --> 0:23:28.760 got the same size economy. The point we like to 0:23:28.760 --> 0:23:31.080 emphasize is that while the size of the economy may 0:23:31.080 --> 0:23:32.640 be the same, by the end of the year, it's 0:23:32.640 --> 0:23:35.320 going to have a different shape. And when an economy 0:23:35.359 --> 0:23:38.200 has a different shape, and that may be a good 0:23:38.400 --> 0:23:41.000 thing long term, but when an economy has a different shape, 0:23:41.240 --> 0:23:43.520 there's gonna be winners and losers. So we're gonna kind 0:23:43.520 --> 0:23:46.119 of fall outside of of of of the economy and 0:23:46.160 --> 0:23:50.240 maybe not relevant anymore. So our thoughts, particularly when when 0:23:50.320 --> 0:23:52.399 spreads are tight and there's not a lot of value. 0:23:52.600 --> 0:23:55.919 Is Vanni indicated, You're gonna have have and have nots, 0:23:56.359 --> 0:23:58.840 And so as an investor, you want to think. You 0:23:58.880 --> 0:24:01.600