WEBVTT - Surveillance: Coronavirus Response With Rajan 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.319 Bloomberg dot Com, and of course on the Bloomberg John 0:00:27.360 --> 0:00:29.240 gets on the phone on place to say, is Mike Wilson, 0:00:29.280 --> 0:00:32.839 Multin Stanley, chief US equity strategist, might always fantastic to 0:00:32.880 --> 0:00:35.040 catch up with you. Let's just start with that first question, 0:00:35.520 --> 0:00:39.120 how should invest this process? The agreement overnight in Washington, 0:00:39.200 --> 0:00:42.760 d C. Well, good morning to all of you. I 0:00:42.760 --> 0:00:45.920 hope you're doing well in this lockdown. But you know, look, 0:00:45.920 --> 0:00:47.960 I think this is uh, you know, this has been 0:00:47.960 --> 0:00:50.280 expected obviously for the last couple of weeks. We didn't 0:00:50.280 --> 0:00:53.239 know the exact timing over to the size, but I 0:00:53.320 --> 0:00:56.480 think given in the state of Washington over the last 0:00:56.520 --> 0:00:58.880 few years, they got this done pretty quickly. And to 0:00:59.040 --> 0:01:01.920 try and as a series number at least I mentioned 0:01:01.960 --> 0:01:04.600 you know which you've include QUI we've got a six 0:01:04.680 --> 0:01:07.720 trillion dollar stimulus of some you know, some form. You know, 0:01:07.800 --> 0:01:10.240 our estimates are like everybody else, we think the second 0:01:10.319 --> 0:01:11.440 quarter is going to be a bit of a black 0:01:11.480 --> 0:01:14.640 hole on the economy. It's about a trillion dollar hit, 0:01:14.760 --> 0:01:16.880 maybe a trillion two trillion three when all of a 0:01:16.880 --> 0:01:19.160 sudden done, assuming there's a recovery in the back half. 0:01:19.680 --> 0:01:21.560 So you've got about a trillion trillion two hit to 0:01:21.640 --> 0:01:24.080 the economy and you've got a six trillion dollar stimulus. 0:01:24.200 --> 0:01:26.760 I mean, it seems it seems like that's appropriate, and 0:01:26.840 --> 0:01:30.240 it seems like that's gonna be good enough to uh 0:01:30.400 --> 0:01:31.800 kind of put in a low here, which is what 0:01:31.880 --> 0:01:33.400 we've been sort of calling for. It doesn't mean it's 0:01:33.400 --> 0:01:35.080 gonna not be volatile, doesn't mean we're not going to 0:01:35.160 --> 0:01:38.000 read test some of these levels. But stocks have discounted 0:01:38.240 --> 0:01:41.200 a lot of bad news, and we think, you know, 0:01:41.400 --> 0:01:42.800 as we've been saying for the last few weeks, you 0:01:42.800 --> 0:01:45.360 should be you know, averaging in over this period where 0:01:45.400 --> 0:01:48.000 the news is going to be really scary. You know. 0:01:48.080 --> 0:01:50.360 I look, Mike Wilson, and good morning to you and 0:01:51.080 --> 0:01:54.279 to all of Morgan Stanley on lockdown nationwide and indeed 0:01:54.360 --> 0:01:58.280 worldwide as well. Mike Wilson. So much of this is 0:01:58.320 --> 0:02:03.960 about the elasticities of malieabilities of corporations. Can they adjust 0:02:04.560 --> 0:02:08.480 on the income statement to that one trillion dollar hole 0:02:08.639 --> 0:02:11.480 this quarter. Yeah, that's the right question time. I mean, 0:02:11.639 --> 0:02:13.839 here's the way I think about it, which is maybe 0:02:13.880 --> 0:02:17.880 a little bit different than the consensus, which is the government, 0:02:18.120 --> 0:02:20.880 you know, because this is a such a shock. I mean, 0:02:20.880 --> 0:02:23.679 we've never seen anything like this. Okay, let's and John 0:02:23.760 --> 0:02:25.799 you said it right, there's a there's a human toll here. 0:02:25.840 --> 0:02:28.639 It's not just a statistic. Okay. People are going to 0:02:28.680 --> 0:02:30.280 be losing their jobs and some of those jobs are 0:02:30.360 --> 0:02:32.560 gonna be coming back for a while. That is whatever 0:02:32.680 --> 0:02:35.160 sssion is. And so there is a human cost, there's 0:02:35.200 --> 0:02:39.120 an economic cost, and that's typically you know, what happens 0:02:39.200 --> 0:02:40.480 is when you have a when you have a situation, 0:02:40.520 --> 0:02:44.000 as government does step in with easier monetary policy and stimulus. 0:02:44.040 --> 0:02:46.160 And I think in that case, the government is on 0:02:46.280 --> 0:02:49.040 the ball. Now, when we think about it as equity 0:02:49.120 --> 0:02:51.600 strategist and investors, you know, we try to and we 0:02:51.680 --> 0:02:53.480 try to be objective about what's actually going on. And 0:02:53.560 --> 0:02:56.200 here's the way I think about it. So companies are 0:02:56.400 --> 0:02:58.720 basically we're going to go through a full employment cycle 0:02:59.200 --> 0:03:02.240 in a month, meaning typically it takes about two years 0:03:02.840 --> 0:03:05.320 for us to see an unemployment rate go up three 0:03:05.400 --> 0:03:07.359 or four basis points, which is likely what's going to 0:03:07.440 --> 0:03:10.480 happen over the next thirty days. Okay, now that's really 0:03:10.720 --> 0:03:12.480 scary and bad, But at the same time, what it 0:03:12.520 --> 0:03:15.440 really means is that, you know, costs, costs are gonna 0:03:15.440 --> 0:03:17.079 be coming down. I mean, companies are going to be 0:03:17.080 --> 0:03:19.840 getting their house in order, so to speak. And that's 0:03:19.880 --> 0:03:22.560 the bad news. The good news is is that protects margins, 0:03:22.880 --> 0:03:25.840 it protects the cash flow, and the government is really 0:03:25.919 --> 0:03:28.320 stepping in here in a way where you could argue 0:03:28.919 --> 0:03:31.760 they are allowing companies to take those costs off their 0:03:31.800 --> 0:03:34.280 income statement and put it onto the government's balance sheet. 0:03:34.720 --> 0:03:37.800 So it's not gonna be seamless. It's not only there's 0:03:37.840 --> 0:03:40.440 not going to be damaged in that transition, but in 0:03:40.560 --> 0:03:44.480 many ways you're transferring the risk of shareholders to the 0:03:44.560 --> 0:03:48.520 federal government. Mike, this sort of supports the sense that 0:03:48.760 --> 0:03:51.680 you're giving out there a couple of weeks ago that 0:03:51.760 --> 0:03:53.800 we're starting to get to a place where you feel 0:03:53.800 --> 0:03:56.640 comfortable buying, and in fact, uh, you're more bullish and 0:03:56.720 --> 0:03:59.040 you have been in a while on stocks. At the 0:03:59.080 --> 0:04:01.480 same time, if you look at Targets, Chief executive officer, 0:04:01.960 --> 0:04:04.520 he said this today, it's difficult to provide guidance with 0:04:04.600 --> 0:04:08.000 any precision in this environment. America is largely out of business. 0:04:08.200 --> 0:04:10.920 There's no playbook, and we are writing the script each 0:04:11.080 --> 0:04:14.600 and every day. How bullish can you be? How much 0:04:14.720 --> 0:04:18.120 upside can there be at a time of incredible uncertainty 0:04:18.480 --> 0:04:21.760 and companies laying off workers, the psychological impact of that 0:04:21.880 --> 0:04:26.200 demand and supply destruction destruction, Well, I mean, it's always 0:04:26.240 --> 0:04:29.640 a continuum of risk reward, right. So the way we 0:04:29.720 --> 0:04:32.280 think about it is, you know, it's it's hard to 0:04:32.320 --> 0:04:34.960 get bullish, you know when when all these bad things 0:04:35.000 --> 0:04:37.840 are happening around you at the same time. You know, 0:04:38.080 --> 0:04:41.200 if we're thinking about an investment horizon of twelve months 0:04:41.320 --> 0:04:44.040 or longer, which is the way we think about our process, 0:04:44.600 --> 0:04:47.040 then you know, this is the best risk reward we've 0:04:47.080 --> 0:04:50.200 seen in quite a while. You know, it's ironic. I mean, 0:04:50.520 --> 0:04:52.760 market like, markets top on good news and they bottom 0:04:52.839 --> 0:04:54.440 on bad news. And that's where we are. We're at 0:04:54.440 --> 0:04:56.960 a period of you really really bad news that the 0:04:57.000 --> 0:04:59.800 stock markets crashed. It's crashed in a way like we've 0:05:00.000 --> 0:05:04.640 early seen maybe twice in history nine okay, and it's 0:05:04.680 --> 0:05:07.680 crashing because the economy is crashing, so you know, you 0:05:07.760 --> 0:05:09.400 have to put that all into context. And when we 0:05:09.520 --> 0:05:11.680 step back and we say, okay, we don't think we're 0:05:11.720 --> 0:05:13.360 going to go into a depression. We don't know that, 0:05:13.480 --> 0:05:15.160 but we have to have a view. We think this 0:05:15.240 --> 0:05:17.160 is gonna be a really steep procession. There's gonna be 0:05:17.200 --> 0:05:19.960 tremendous policy response on the other side, and then by 0:05:20.040 --> 0:05:22.719 next year we'll be recovering to some degree. And that's 0:05:22.760 --> 0:05:24.720 what goes into our models and our thought process when 0:05:24.760 --> 0:05:27.200 we think about the twelve month view. So you know, 0:05:27.360 --> 0:05:30.320 that's that's the thought process, that's the math, and you 0:05:30.360 --> 0:05:33.160 know we've done the work. We've pretty presented for people 0:05:33.200 --> 0:05:34.680 to look at, and we think it you know, this 0:05:34.800 --> 0:05:36.560 is this is where it makes sense. You know. One 0:05:36.640 --> 0:05:38.280 last comment on this, which I think is important. You know, 0:05:38.360 --> 0:05:40.920 people don't think about risk reward much when they invest. 0:05:41.560 --> 0:05:43.880 I mean when I say people, I mean the average person. 0:05:43.960 --> 0:05:46.920 I think a lot of you know, strategic strategic as 0:05:47.040 --> 0:05:49.840 allocators do for sure, and when we do that, that's 0:05:49.880 --> 0:05:51.960 one of our jobs here. And if you think about 0:05:52.000 --> 0:05:55.080 the risk reward today, people in December felt like the 0:05:55.200 --> 0:05:58.280 risk reward was more attractive than it is today, and 0:05:58.360 --> 0:06:00.720 that just doesn't mean that the math doesn't compute on that. 0:06:01.279 --> 0:06:03.840 And this is just a remainder that price matters, right, 0:06:03.920 --> 0:06:07.680 Price matters and the upside and price matters on the downside. 0:06:07.760 --> 0:06:10.080 That is the final arbiter of when you should be 0:06:10.120 --> 0:06:13.479 committing capital or removing capital from investments. It's strangely count 0:06:13.480 --> 0:06:15.160 of intuitive, but it's something we keep going back to 0:06:15.200 --> 0:06:17.240 on this program, Mike, that risk appetite seems to be 0:06:17.279 --> 0:06:20.680 positively correlated with the direction of price. Risk cappitite goes 0:06:20.760 --> 0:06:24.400 up as prices arising, goes down as prices are going lower. 0:06:24.960 --> 0:06:28.600 The drawdown we have seen has gone through several phases 0:06:28.839 --> 0:06:31.159 over the last one month alone. The more recent phase 0:06:31.200 --> 0:06:33.560 has been a really ugly one, the liquidation phase, the 0:06:33.600 --> 0:06:37.120 sell everything face. Can you identify some points Mike, which 0:06:37.400 --> 0:06:39.000 kind of signal to you at the moment that we're 0:06:39.040 --> 0:06:40.920 working our way through that we're working our way out 0:06:41.000 --> 0:06:45.600 of that ugly face. Yeah. I was saying credit is 0:06:45.680 --> 0:06:49.160 one area where I mean that's to me that you know, 0:06:49.160 --> 0:06:51.800 the bigger issue over the last three months for markets, 0:06:52.480 --> 0:06:54.520 Uh this you know, I want to sell the wrong way. 0:06:54.600 --> 0:06:56.919 But the bigger issue for markets was the oil price collapse. 0:06:57.440 --> 0:06:59.280 Then it was the virus because that's when the credit 0:06:59.320 --> 0:07:01.920 markets really came include. And the credit markets, you know, 0:07:02.000 --> 0:07:05.520 are incredit critically important for the economy and how kind 0:07:05.560 --> 0:07:09.400 of markets function overall. So they became completely dislocated over 0:07:09.400 --> 0:07:11.120 the last month, and that's when the FED really got 0:07:11.160 --> 0:07:13.760 active as they should and they now have you know, 0:07:14.080 --> 0:07:17.160 intervene and the funding markets in particular. Uh, they've got 0:07:17.240 --> 0:07:20.040 that under control. And then of course they injected capital 0:07:20.120 --> 0:07:22.360 directly into the credit market the Monday, and that you know, 0:07:22.480 --> 0:07:26.000 allowed investment grade credit to start to heal. So the 0:07:26.080 --> 0:07:28.680 credit you know, liquidation looks like you know that that 0:07:28.800 --> 0:07:31.640 could continue in the lowest quality credits, but that's really important. 0:07:31.680 --> 0:07:34.040 So I think we've seen you know, people basically selling 0:07:34.080 --> 0:07:35.600 what they can sell. The other thing, I would argue, 0:07:35.840 --> 0:07:37.360 you know, there was a period of about a week 0:07:37.440 --> 0:07:39.320 or two where it didn't matter what it was. Everything 0:07:39.400 --> 0:07:42.800 was for sale gold right, Uh, you know, high quality bonds, 0:07:43.360 --> 0:07:45.440 low quality styles. I mean, everything was being sold to 0:07:45.600 --> 0:07:49.000 raise money into that liquidation phase was quite clear. What 0:07:49.080 --> 0:07:51.160 I would remind listeners of is that we had the 0:07:51.280 --> 0:07:55.000 reverse situation last Paul. So when everybody, you know, when 0:07:55.040 --> 0:07:57.440 the fed came back in and did que four right. 0:07:57.480 --> 0:08:01.840 We had basically systematic strategies and risk seekers basically putting 0:08:01.880 --> 0:08:04.600 on too much leverage. So these things work both directions, 0:08:04.640 --> 0:08:06.280 and I would I would continue to go back and 0:08:06.360 --> 0:08:09.000 argue at the fourth quarter rally really should not have 0:08:09.120 --> 0:08:11.040 happened to the magnitude that it does, and so it 0:08:11.120 --> 0:08:13.280 cuts both ways, like where he can work both ways, 0:08:13.720 --> 0:08:17.120 and in many respects, this you know, liquidation phase we're 0:08:17.160 --> 0:08:21.000 having is happening because people got two levered and the 0:08:21.080 --> 0:08:23.440 fourth we're on the premise that you know, nothing bad 0:08:23.560 --> 0:08:26.440 was ever going to happen again, Mike, always send my 0:08:26.480 --> 0:08:27.840 best of the team, won't you? And my best of 0:08:27.880 --> 0:08:30.520 you and yours as well, Mike Wilson, that of Morgan Stanley, 0:08:30.520 --> 0:08:35.920 the chief US equity strategy. Now let's do this right now, 0:08:36.040 --> 0:08:38.199 let us bring in our esteem guests. He of course 0:08:38.400 --> 0:08:42.319 uh served his India is their central bank governor, and 0:08:42.440 --> 0:08:44.520 of course is at the Universe of Chicago. But that 0:08:44.679 --> 0:08:48.520 barely describes the social contribution of Rob and Roger and 0:08:48.679 --> 0:08:52.439 his book fault Lines was definitive twelve years ago in 0:08:52.520 --> 0:08:55.920 a financial crisis. And now the third pillar was my 0:08:56.080 --> 0:08:59.000 book of the year last year. The third pillar is 0:08:59.080 --> 0:09:04.400 a primal scream for a return of community. Professor, thank 0:09:04.440 --> 0:09:07.200 you so much at this historic moment for being with us. 0:09:07.640 --> 0:09:14.240 Where is the community known as America. It's it's struggling, 0:09:14.440 --> 0:09:17.000 I mean, like every other country in the world, to 0:09:17.440 --> 0:09:23.599 find the resources to deal with this totally unexpected and 0:09:23.800 --> 0:09:29.720 unanticipated disease uh pandemic. Um. I think we will emerge 0:09:29.800 --> 0:09:33.800 from this stronger. I think you know, people are talking 0:09:33.840 --> 0:09:38.360 about the isolation that this uh pandemic creates, but it 0:09:38.440 --> 0:09:42.920 also creates a sense of togetherness. The package that was 0:09:43.000 --> 0:09:45.679 put together, I guess the word cares is in it. 0:09:46.280 --> 0:09:48.760 It's a way of telling people everywhere in the country 0:09:48.840 --> 0:09:53.280 that you belong in one big hole and that that 0:09:53.480 --> 0:09:56.800 big community the nation cares about you. And of course, 0:09:58.160 --> 0:10:00.360 what would be nice is if that when down to 0:10:00.480 --> 0:10:03.200 the local level and we've got far more local action 0:10:03.440 --> 0:10:08.480 once this pandemic is defeated, Professor. In an audial world, 0:10:08.520 --> 0:10:10.719 we'd have the fiscal support package before we get the 0:10:10.720 --> 0:10:12.520 shut down, to make sure that some of these companies 0:10:12.600 --> 0:10:15.679 don't start folding, don't start laying off people before they 0:10:15.720 --> 0:10:17.120 have a chance to get the money. And that's the 0:10:17.160 --> 0:10:19.800 story in the United States, the sequencing, it's just a 0:10:19.880 --> 0:10:23.360 little bit messy in your India. With one point three 0:10:23.520 --> 0:10:26.840 billion people lockdown for three weeks, what are they doing 0:10:26.880 --> 0:10:28.959 on the fiscal side, on the monty policy side to 0:10:29.000 --> 0:10:30.959 try and cushion what will be a massive blow to 0:10:31.000 --> 0:10:37.199 the economy. It's worse. I mean, governments simply happened to 0:10:37.360 --> 0:10:39.400 come to terms with what is happening. I think in 0:10:39.480 --> 0:10:42.640 India we've got the lockdown first and now they're contemplating 0:10:42.720 --> 0:10:45.240 what they will do on the fiscal side. It's also harder. 0:10:45.320 --> 0:10:48.280 How do you get money to a worker who has 0:10:48.360 --> 0:10:52.839 no formal bank account? Uh And what we're seeing right 0:10:52.960 --> 0:10:56.280 now is the first phase where people are trying to 0:10:56.360 --> 0:10:58.800 come to terms with not going to work. There are 0:10:58.880 --> 0:11:01.880 lots of poor house holes that have absolutely no income, 0:11:01.960 --> 0:11:07.000 no savings, and they also aren't necessarily better off by 0:11:07.040 --> 0:11:09.240 being locked down at home because home is a slum 0:11:09.360 --> 0:11:12.120 where everybody sort of really lives on top of each other. 0:11:12.840 --> 0:11:16.199 So I think India will have to see over the 0:11:16.320 --> 0:11:19.120 next few days whether this is sensible. It can't go 0:11:19.280 --> 0:11:21.760 the same way as the West, but will also have 0:11:21.880 --> 0:11:25.880 to work very quickly in getting money directly to households, 0:11:26.320 --> 0:11:31.400 especially in the urban areas where you know the lockdown 0:11:31.520 --> 0:11:35.360 is going to be far more problematic, and also on 0:11:35.480 --> 0:11:38.480 small and medium sized firms which are already hurting because 0:11:38.840 --> 0:11:43.800 of previous the previous demonetization which reduced informality, as well 0:11:43.880 --> 0:11:46.120 as the rollout of a goods and service tax which 0:11:46.160 --> 0:11:49.599 put great streams on small businesses. But now we have 0:11:49.720 --> 0:11:52.760 the third blow, which is coronavirus, and I don't think 0:11:52.960 --> 0:11:55.880 many small and medium enterprises are prepared to handle it. 0:11:56.280 --> 0:11:58.760 Professor Rice, a really excellent point and something I'd like 0:11:58.840 --> 0:12:00.720 to dig a little bit data on. Hind, every single 0:12:00.800 --> 0:12:02.640 data point we receive in the next month will be 0:12:02.720 --> 0:12:06.360 real economic pain and real psychological pain as well. You've 0:12:06.440 --> 0:12:09.000 brought up the issue of the unbanked, the individuals in 0:12:09.080 --> 0:12:11.199 society that don't have a bank account that one be 0:12:11.240 --> 0:12:13.480 able to cash that check in the same way as well, 0:12:13.640 --> 0:12:15.679 especially in the developed world, what can you do in 0:12:15.720 --> 0:12:18.000 a country like India, in an emerging market where so 0:12:18.080 --> 0:12:22.160 many of societies still do not have bank accounts, Well, 0:12:22.640 --> 0:12:24.960 you you will have to find some way to get 0:12:25.080 --> 0:12:28.160 money to them, and this is where you might have 0:12:28.320 --> 0:12:31.800 to use community resources. Of course, bearing in mind that 0:12:31.960 --> 0:12:35.560 getting a bunch of people together as dangerous at these times. 0:12:36.200 --> 0:12:40.360 But perhaps funnel money through the post office. You will 0:12:40.480 --> 0:12:43.120 have to accept a fair amount of leakage money going 0:12:43.200 --> 0:12:46.520 to people who don't actually deserve to get that money 0:12:46.559 --> 0:12:49.840 because they've manipulated the system. But that is the price 0:12:49.960 --> 0:12:53.040 you have to pay to keep people from starvation at 0:12:53.120 --> 0:12:56.840 this point. So, I mean, India has many people banked, 0:12:57.880 --> 0:13:00.320 that was one of the achievements over the last few years, 0:13:00.600 --> 0:13:03.280 but there are still some unbanked people, and the way 0:13:03.360 --> 0:13:07.640 to do that might be through community institutions. Professor, India 0:13:07.840 --> 0:13:10.199 and a lot of the developing world have really relied 0:13:10.400 --> 0:13:14.079 on fast growth for their entire ecosystem. I'm just looking 0:13:14.200 --> 0:13:17.680 right now at the growth in the GDP of India 0:13:17.800 --> 0:13:20.440 over the past few years eight percent, eight point three percent, 0:13:20.559 --> 0:13:23.160 seven percent now coming out of i n G saying 0:13:23.280 --> 0:13:26.480 that India's economy is plaised to shrink next quarter and 0:13:26.520 --> 0:13:29.800 the full year expansion is supposed to be perhaps uh 0:13:30.480 --> 0:13:32.679 significantly lower than it has been in a long time. 0:13:32.760 --> 0:13:35.760 How much does that challenge the financial structure right now 0:13:35.840 --> 0:13:39.280 of India and it's just an incredible economic engine in 0:13:39.360 --> 0:13:42.559 the longer term, Well, I think it's a challenge for 0:13:42.760 --> 0:13:46.760 all developing countries which don't have the kind of resources 0:13:46.920 --> 0:13:51.959 than industrial countries. Have remembered that industrial countries are putting 0:13:52.240 --> 0:13:56.360 enormous amounts of wealth to work in questioning the blows 0:13:56.440 --> 0:14:00.559 from this this crisis. Emerging markets and developed in countries 0:14:00.679 --> 0:14:05.280 don't have that spare cushion, and especially when you're running 0:14:05.320 --> 0:14:08.480 already a large fiscal deficit, your debt to GDPs at 0:14:08.559 --> 0:14:13.440 levels which markets already start worrying about, and your inflation 0:14:13.559 --> 0:14:16.800 is not zero, so the printing press can't start up 0:14:17.000 --> 0:14:20.600 as we see with the central banks and industrial countries. 0:14:21.160 --> 0:14:23.920 So e ms and developing countries have to keep in 0:14:24.040 --> 0:14:27.400 mind that they have to maintain some sense of fiscal 0:14:27.960 --> 0:14:33.360 and monetary responsibility even while dealing with this unprecedented crisis. 0:14:34.000 --> 0:14:37.760 And that means that you know they many of them 0:14:37.800 --> 0:14:40.800 are at this point facing capital outflows. So you have 0:14:41.040 --> 0:14:44.080 you can't cut interest rates to zero. You have to 0:14:44.160 --> 0:14:47.320 main interest rates and maintain interest rates at the reasonable level. 0:14:47.880 --> 0:14:50.200 You can't blow out your fiscal depths. That you have 0:14:50.280 --> 0:14:54.240 to be very careful about where you apply resources. And 0:14:54.320 --> 0:14:57.640 of course you really hope that you have the medical 0:14:57.720 --> 0:15:00.920 resources to cope because your medical resolve, also the refraction 0:15:01.000 --> 0:15:04.480 of the ones in industrial countries, and everybody at this 0:15:04.600 --> 0:15:07.720 point is looking for those resources ventilators that are premium 0:15:07.760 --> 0:15:11.120 across the world. So what I think at this point 0:15:11.160 --> 0:15:14.160 emerging markets and developing countries they're looking for is certainly 0:15:14.280 --> 0:15:16.960 trying to make the best of their own situation, but 0:15:17.080 --> 0:15:20.640 also more global cooperation and Professor, I mean, this is 0:15:20.680 --> 0:15:23.200 such an important issue for the entire world because the 0:15:23.240 --> 0:15:27.040 developing nations have been the engine of growth for years 0:15:27.280 --> 0:15:30.640 and I'm wondering what this means extrapolate out into what 0:15:30.840 --> 0:15:34.840 the scenario is given India's precarious situation and frankly that 0:15:35.120 --> 0:15:38.360 of all developing nations right now. Yeah, no, I I 0:15:39.080 --> 0:15:43.240 think for for the next month and a half, countries 0:15:43.280 --> 0:15:45.320 will have to try and get ahead of the of 0:15:45.400 --> 0:15:48.400 the virus. And this is where India's lockdown comes in, 0:15:48.560 --> 0:15:51.240 and it's an attempt to prevent the surge that's happening 0:15:51.280 --> 0:15:55.120 in an variety of other countries and to prepare their 0:15:55.200 --> 0:16:00.480 medical resources for the eventual rise in cases. So this 0:16:00.680 --> 0:16:04.600 is something that every developing country now understands it has 0:16:04.680 --> 0:16:08.320 to do. But of course it would help if there 0:16:08.400 --> 0:16:12.280 were more resources available, especially for the poorest countries in Africa. 0:16:13.720 --> 0:16:16.240 What we know from this virus is there's no point 0:16:16.840 --> 0:16:21.160 eliminating it in the West or in East Asia. If 0:16:21.200 --> 0:16:23.320 it comes back from some other part of the world 0:16:23.400 --> 0:16:26.200 where it's not controlled to some extent. We can't have 0:16:26.280 --> 0:16:31.960 an open world again until we will eliminate this virus everywhere. Professor, 0:16:32.400 --> 0:16:33.920 which we shake its hand this morning, I'm gonna have 0:16:33.960 --> 0:16:39.320 to leave it there. The secret sauce for Lisa Bramo, 0:16:39.360 --> 0:16:43.000 it's John Farrell and I Paul Sweeney Francine liquid is 0:16:43.040 --> 0:16:47.080 we lean over the desk and we actually read the research. 0:16:47.280 --> 0:16:51.720 This is always problematic with Karl Weinberg of high frequency Economics, 0:16:52.040 --> 0:16:54.080 because he has the audacity. At least it tore right 0:16:54.120 --> 0:16:58.920 an international peace, a United States peace, and a China piece. 0:16:59.040 --> 0:17:03.479 I read every word of them on Sunday, and Karl Weinberg, 0:17:03.720 --> 0:17:07.840 what stunned me was, after a mere thirty two years 0:17:07.920 --> 0:17:11.720 of doing this, you decided you couldn't make a forecast. 0:17:12.359 --> 0:17:16.920 What does that feel like? It feels like sailing on 0:17:17.119 --> 0:17:20.359 the ocean without a sale or a rudder. You know, 0:17:20.560 --> 0:17:23.720 we are in unschowed territory as far as the economy 0:17:23.840 --> 0:17:27.240 is concerned. Great example of that is tomorrow's number on 0:17:27.359 --> 0:17:31.600 initial claims for unemployment. Absolutely no idea how that number 0:17:31.640 --> 0:17:33.920 is going to print. It's going to be big, it's 0:17:34.000 --> 0:17:36.440 probably going to be a record. But more than that, 0:17:36.640 --> 0:17:39.560 more detailed than that, no precedent to move on. And 0:17:39.680 --> 0:17:42.440 that's a really important number because we're coming up on 0:17:42.520 --> 0:17:45.280 the employment report in another ten days or so, and 0:17:45.640 --> 0:17:47.800 and that's another number we don't know anything about. We 0:17:48.240 --> 0:17:51.240 really do not know the true state of any major 0:17:51.280 --> 0:17:54.359 economy in the world right now. The shock of this 0:17:55.080 --> 0:17:57.760 is the shock, as Alan Ruskin of Deutsche Bank says, 0:17:57.960 --> 0:18:02.840 of depth and to ration. Is Karl Weinberg more concerned 0:18:02.880 --> 0:18:08.360 about the depth or the duration of what we're living. Yes, 0:18:08.760 --> 0:18:12.320 I'm concerned about both the depth and the duration. And 0:18:12.359 --> 0:18:15.160 it's not a lessing matter. I apologize for lessing at 0:18:15.200 --> 0:18:19.240 it all right. The shock itself, the lockdown is unprecedented. 0:18:19.600 --> 0:18:22.840 The complications of it, you know, no historical precedents to 0:18:22.880 --> 0:18:25.240 agd against them that I can think of making. You know, 0:18:25.760 --> 0:18:27.760 maybe you spoken to someone who has a precedent, but 0:18:27.880 --> 0:18:31.120 I don't. And of course the driving factory, the driver 0:18:31.600 --> 0:18:34.440 is the disease, the virus and nobody really has a 0:18:34.560 --> 0:18:37.159 handle on the medicine or the science of that to 0:18:37.320 --> 0:18:40.159 tell us how long this is gonna last. So we 0:18:40.280 --> 0:18:42.360 are very much a wrong for the ride right now 0:18:42.640 --> 0:18:45.200 and um trying our best just to keep up with 0:18:45.280 --> 0:18:48.320 the news. We're looking forward to some we we're looking 0:18:48.359 --> 0:18:51.240 forward to the survey data for March, but the surveys 0:18:51.320 --> 0:18:53.960 we're seeing seemed to have been taken too early in 0:18:54.040 --> 0:18:56.320 the months to be able to give us a good 0:18:56.440 --> 0:19:00.919 bead on what's happening. So, for instance, markets MR yesterday, 0:19:00.960 --> 0:19:04.040 which are flawed indicators anyhow, but if you just say 0:19:04.119 --> 0:19:06.200 that even they couldn't use a big moves like this. 0:19:06.720 --> 0:19:09.920 They showed that the climb manufacturing activities for the month 0:19:10.000 --> 0:19:13.320 of March, said that you expect that, but February had 0:19:13.359 --> 0:19:16.080 blipped up the levels of the industries. Tell us that 0:19:16.240 --> 0:19:20.239 manufacturing in Europe and Japan and the United States as 0:19:20.280 --> 0:19:23.320 we were was down and marched from federately, but no 0:19:23.480 --> 0:19:26.560 worse than it was less small and last summer level. 0:19:26.880 --> 0:19:31.240 And that's just ridiculous. Well, Carl, No, I mean I 0:19:31.320 --> 0:19:33.320 want to break in and get a sense from you. 0:19:33.480 --> 0:19:36.199 You know, we're talking about how it's unprecedented and how 0:19:36.240 --> 0:19:38.840 We just don't have a sense of of how long, 0:19:39.000 --> 0:19:41.400 how deep. But it's it's it seems like it's really bad. 0:19:41.520 --> 0:19:44.800 We know the virus will eventually be stopped, whether it's 0:19:44.840 --> 0:19:47.240 by a vaccine or whether it's just by herd immunity 0:19:47.320 --> 0:19:50.520 after everybody gets it. This does have an end point, 0:19:50.600 --> 0:19:52.960 we don't know when it is. And the question is 0:19:53.040 --> 0:19:56.200 how quickly can people get their jobs back? Can the 0:19:56.280 --> 0:19:59.840 economy get back up to steam? Is there a precedent 0:20:00.280 --> 0:20:03.600 with the job market destruction and then recreation? And how 0:20:03.720 --> 0:20:07.840 long are short of a time that could take? Well, 0:20:08.560 --> 0:20:11.320 I can't really think of a good one to tell 0:20:11.320 --> 0:20:13.440 you the truth. I need to tend to elevance. You 0:20:13.520 --> 0:20:17.480 want to think about the Japanese uh tsunami in twenty eleven, 0:20:17.520 --> 0:20:19.359 and there are all kinds of things out there that 0:20:19.440 --> 0:20:22.320 are similar, but nothing on such a global scale. The 0:20:22.480 --> 0:20:25.800 really big anomies say, it's not only the duration. If 0:20:25.840 --> 0:20:27.479 you told me the date when this was all going 0:20:27.520 --> 0:20:29.720 to stop, I'd be happy to know it. But what 0:20:29.840 --> 0:20:33.080 I don't know is what's going to break in between. Okay, 0:20:33.080 --> 0:20:35.520 if you shut the economy down for a month or 0:20:35.600 --> 0:20:37.760 a week or three months, and it definitely turns out 0:20:37.800 --> 0:20:40.439 to be some firms are going to sell, and are 0:20:40.520 --> 0:20:42.880 they going to be big or small firms? Are they're 0:20:42.880 --> 0:20:45.399 going to be systemically important? Are they're going to be 0:20:45.520 --> 0:20:49.760 financial system and regularities that they're going to banks that fell? 0:20:50.359 --> 0:20:53.040 Uh is they're going to markets that fail, But we 0:20:53.080 --> 0:20:54.960 don't know what breaks. And that's what I'm going to 0:20:55.040 --> 0:20:57.480 determine the question of whether they're the jobs for people 0:20:57.520 --> 0:21:00.440 when this all ends. Tom, You know, I been thinking 0:21:00.480 --> 0:21:02.360 and talking a lot about this with people. How will 0:21:02.359 --> 0:21:04.640 the world look after this is over? Are you still 0:21:04.680 --> 0:21:06.639 going to go to the Irish pub downstairs from you? 0:21:06.840 --> 0:21:08.639 Of course you will. Will you still come to the 0:21:08.680 --> 0:21:11.280