WEBVTT - Saudi Pricing Power To Trigger Shale Patch Carnage 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Wicks. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.200 at Bloomberg dot com. Looking at crude oil today, w 0:00:21.400 --> 0:00:24.360 t I up six point two percent. That's to thirty 0:00:24.360 --> 0:00:27.840 three dollars and about three cents UH barrel. That's after 0:00:28.000 --> 0:00:33.240 yesterday's twenty four point five decline. Just extraordinary, the biggest 0:00:33.240 --> 0:00:36.120 decline since one the golf. For to get a sense 0:00:36.120 --> 0:00:38.240 of what's going on in the world of global crew, 0:00:38.320 --> 0:00:41.640 we welcome John Kilduff, founding partner for Again Capital. John's 0:00:41.680 --> 0:00:43.879 based in New York City. So John, I want to 0:00:43.880 --> 0:00:45.680 go back just a couple of days ago and ask 0:00:45.760 --> 0:00:50.280 my fundamental question about global oil. What were the saluities 0:00:50.440 --> 0:00:55.040 thinking the Saudi's uh, you know, I knows that out 0:00:55.040 --> 0:00:57.040 of joint or however you want to put this. I 0:00:57.040 --> 0:01:02.680 mean they were quite exercised about the Russian position at 0:01:02.680 --> 0:01:06.160 the OPEC meeting, uh, and when the Russians sort of 0:01:06.319 --> 0:01:08.680 stuck it to them and said, you know what, everybody 0:01:08.680 --> 0:01:11.120 can pump whatever they want come April first, because that's 0:01:11.120 --> 0:01:15.480 when the steel ends. The Sattie's quickly came together and 0:01:15.600 --> 0:01:20.080 decided to show the world what the price landscape looks 0:01:20.120 --> 0:01:23.760 like if Saudi Arabia can pump whatever it wants. And 0:01:23.800 --> 0:01:28.800 they unleashed a thermonuclear bomb on the on the oil 0:01:28.880 --> 0:01:35.840 market with several uh positions, provisions, uh, slashing mightily their uh, 0:01:36.040 --> 0:01:39.319 their their pricing scheme. They they cut their uh cost 0:01:39.400 --> 0:01:42.160 of cruder offered price to their customers by over ten 0:01:42.240 --> 0:01:46.840 dollars a barrel. You've heard how they are ramping up mightily. Uh. 0:01:46.920 --> 0:01:48.560 The latest this morning is that they're gonna go to 0:01:48.600 --> 0:01:50.840 tve point three million barrels a day next month. So 0:01:50.880 --> 0:01:52.800 that means they're gonna be taking oil out of storage. 0:01:53.040 --> 0:01:55.560 I mean, it is just they throw down by them 0:01:55.600 --> 0:02:00.080 of the first order. We're in a thermonuclear fish and 0:02:01.000 --> 0:02:06.080 throw down the explosion of I know, I love it. Uh. 0:02:06.120 --> 0:02:09.079 You know, given what we're dealing with in terms of 0:02:09.120 --> 0:02:12.800 both the knockdown in demand as well as the increase 0:02:12.800 --> 0:02:15.239 in supply, why have we seemed to have found a 0:02:15.320 --> 0:02:20.520 bottom if you view yesterday today's action as anything. Well, 0:02:20.720 --> 0:02:24.440 you know, first, I think, first of all, um, there's 0:02:24.440 --> 0:02:26.400 still some hope in the market that cooler heads will 0:02:26.440 --> 0:02:29.560 in fact prevail. UH. There's some talk that the Russians 0:02:29.560 --> 0:02:32.400 are regrouping themselves to maybe do a reproach mont with 0:02:32.440 --> 0:02:35.359 Saudi Arabia and try to maybe get cobbled back together 0:02:35.480 --> 0:02:37.840 some kind of deal. Also, too, there was a pretty 0:02:37.840 --> 0:02:42.040 swift reaction from several of the US oil producers, ranging 0:02:42.080 --> 0:02:46.160 from Diamondback Energy to Exxon Mobile and UH. As a 0:02:46.160 --> 0:02:48.359 result of that, you know, we we should be seeing 0:02:48.480 --> 0:02:52.320 some demand or production response here in the US RIGG cuts, 0:02:52.560 --> 0:02:58.720 production cuts, UH, pull back on investment going forward. So, um, 0:02:58.760 --> 0:03:01.799 the market you found a bottom down around twenty seven 0:03:01.880 --> 0:03:05.040 dollars UH and bounced off that. And I think that 0:03:05.040 --> 0:03:09.240 that's sort of the skirched scorched Earth number for now. So, John, 0:03:09.240 --> 0:03:13.200 in this throwdown between Saudi Arabia and Russia, who's got 0:03:13.200 --> 0:03:17.240 the stronger hand? Do you think Saudi Arabia by far? 0:03:17.800 --> 0:03:19.920 First of all, that they have the low lowest cost 0:03:19.960 --> 0:03:23.520 of production of any country by far, uh, single digits, low, 0:03:23.600 --> 0:03:28.040 single digits that was in their RAMCO I p O disclosures. Um, 0:03:28.160 --> 0:03:31.000 as you've been seeing from some of the UH palace 0:03:31.760 --> 0:03:35.240 intrigued to over the weekend. Uh, there's a consolidation of 0:03:35.280 --> 0:03:38.760 power there. Uh. The king and Mohammed and Salmon are 0:03:38.960 --> 0:03:42.680 firmly in charge with an iron grip. UH. I'm not 0:03:42.760 --> 0:03:44.640 so sure you can say that about Russia. If there's 0:03:44.640 --> 0:03:48.480 an extended low price environment for oil, it's but not 0:03:48.600 --> 0:03:51.120 the Soviet Union off. It's blocked back in the day. 0:03:51.440 --> 0:03:54.720 And UM, you know, Vladimir Putin and his government will 0:03:54.720 --> 0:03:58.000 start to feel pressure if the price stays low for long. 0:03:58.360 --> 0:04:00.920 So logically it doesn't seem like a benefits anyone, and 0:04:00.960 --> 0:04:03.440 it would seem to behoove everyone to come to the table, 0:04:03.600 --> 0:04:06.160 shake hands, pull that flag back up that was tipped 0:04:06.160 --> 0:04:08.680 over in the OPEC meeting on Friday, and call it 0:04:08.720 --> 0:04:12.360 a day and get back to negotiating. That said, this 0:04:12.440 --> 0:04:14.560 is not that, and it doesn't seem like that's going 0:04:14.600 --> 0:04:17.000 to happen, at least in the next few days. What 0:04:17.080 --> 0:04:19.400 do you think it's going to take. What's the tipping 0:04:19.480 --> 0:04:21.599 point when it comes to either the price of oil 0:04:21.720 --> 0:04:24.800 or the magnitude the length of time before they come 0:04:24.839 --> 0:04:30.160 to the table, it will probably seven several months. Uh. 0:04:30.200 --> 0:04:33.440 You know, this was the ultimate lever for Saudi Arabia 0:04:33.520 --> 0:04:35.159 to pull. I mean, I've talked about this in the 0:04:35.200 --> 0:04:39.159 past or over the years. This trimming output only served 0:04:39.200 --> 0:04:43.279 to support really the US producers and another higher cost 0:04:43.360 --> 0:04:46.919 producers they needed to get shaken out. The corollary for 0:04:47.000 --> 0:04:51.640 this is back in uh when pre Hugo Chavez Venezuela 0:04:51.720 --> 0:04:55.000 tried to compete for US oil market share, and the 0:04:55.040 --> 0:04:57.680 Staudis taught them and the market a lesson back then 0:04:57.720 --> 0:04:59.880 and created oil prices down to eight bucks of our 0:05:00.720 --> 0:05:03.880 The US oil industry in particular was hammered, and there 0:05:03.960 --> 0:05:07.160 was a lost decade or so or more of US 0:05:07.240 --> 0:05:12.000 production that was really moribund, and what helped to ultimately 0:05:12.080 --> 0:05:14.520 generate the ninety and a hundred dollar barrel oil that 0:05:14.560 --> 0:05:16.719 we had lived through there for a while, which then 0:05:16.760 --> 0:05:20.360 finally encouraged the frackers to to roll the bones again 0:05:20.360 --> 0:05:23.039 and get back in there. So, you know, this is 0:05:23.040 --> 0:05:25.640 gonna take some time and it's gonna wait for a response, 0:05:26.080 --> 0:05:29.360 but it's certainly what the Russians wanted to have happened, 0:05:29.400 --> 0:05:32.760 because they have their eye on the US producers. Uh, 0:05:33.000 --> 0:05:36.000 keep pointing to this weekly inventory report from last week 0:05:36.000 --> 0:05:38.400 that the government puts that it's ten thirty every Wednesday, 0:05:38.440 --> 0:05:41.400 and then you guys cover it. Um that last week's 0:05:41.440 --> 0:05:45.120 report record US production their teen point one million barrels 0:05:45.120 --> 0:05:48.559 a day and record US crude oil exports of over 0:05:48.640 --> 0:05:52.000 four million barrels a day. The numbers were astounding right 0:05:52.040 --> 0:05:54.080 as they were heading into the OPEC meeting. I really 0:05:54.279 --> 0:05:57.640 still feel that was the trigger point for the Russian position. 0:05:58.040 --> 0:06:01.039 So John, just roll cookie thirty seconds. Um, how bad 0:06:01.120 --> 0:06:02.360 you think this is going to get for the U 0:06:02.360 --> 0:06:08.200 s show patch. It's gonna get. It's gonna get rather bad. Uh. 0:06:08.279 --> 0:06:11.640 You know there's going to be a host of bankruptcies 0:06:11.680 --> 0:06:15.240 and consolidations. Uh. And we'll even have to keep our 0:06:15.279 --> 0:06:17.479 eye on on some of the majors in terms of 0:06:17.480 --> 0:06:20.840 their ability to continue with the stock buybacks. It looks 0:06:20.880 --> 0:06:24.960 like capital investments is going to go by the boars first, 0:06:25.400 --> 0:06:28.880 and that's gonna end up lowering US output and achieving 0:06:28.920 --> 0:06:31.480 the ultimate goal here Up Saudi Arabia and even Russia 0:06:31.520 --> 0:06:33.919 for that matter, deal with some short term pain for 0:06:34.000 --> 0:06:37.480 some longer term gain. John killed off, Thank you so much. 0:06:37.520 --> 0:06:39.440 For being with us. We really appreciate it. John Killed, 0:06:39.440 --> 0:06:43.240 a founding partner of Again Capital, joining us as Oil 0:06:43.320 --> 0:06:47.240 tries to stage somewhat of a rebound, although off earlier highs, 0:06:47.400 --> 0:06:51.960 and after a absolutely an epic day for oil, absolutely 0:06:52.040 --> 0:06:55.240 terrible day, a record day when you saw the sell off, 0:06:55.279 --> 0:07:08.440 particularly when it comes to energy stocks. We've been talking 0:07:08.680 --> 0:07:11.680 a lot about the coronavirus, the effect on markets, the 0:07:11.720 --> 0:07:14.440 effect on businesses. What about the effect on the health 0:07:14.480 --> 0:07:16.960 care system? And this is an important topic and we're 0:07:17.000 --> 0:07:19.880 lucky to have Susan Duvore, chief executive officer of Premiere 0:07:20.240 --> 0:07:24.200 UH Incorporated, joining us on the phone. Susan, you are 0:07:24.440 --> 0:07:27.880 in a Premiere place to actually see the issues here. 0:07:27.880 --> 0:07:31.360 You're discussing with the government the potential vulnerabilities in the 0:07:31.400 --> 0:07:35.400 health care system. What are you finding. Yeah, we just 0:07:35.520 --> 0:07:38.720 briefed and Administrative task Force and Premiere. You know, we're 0:07:38.720 --> 0:07:42.560 working seven We've got four thousand hospitals and seventy five 0:07:42.560 --> 0:07:46.000 thousand non acute care providers. And what we're seeing is 0:07:46.920 --> 0:07:50.440 everybody is worrying about the current supply. The demand is 0:07:50.480 --> 0:07:54.160 three or four times what normal demand would be, and 0:07:54.240 --> 0:07:58.720 because we have a fragmented system. What we're hearing is federal, 0:07:58.800 --> 0:08:03.240 state governments and private health care systems really trying to 0:08:03.280 --> 0:08:06.120 figure out how to work together so as not to 0:08:06.240 --> 0:08:09.200 hoard supplies and to be able to get the supplies 0:08:09.280 --> 0:08:13.240 where they're needed. So, at this early stage here in 0:08:13.280 --> 0:08:16.360 the US, where are the bottlenecks, Where are the problems? 0:08:16.400 --> 0:08:19.400 Where the areas that you're focusing on in other folks 0:08:19.400 --> 0:08:23.320 in the industry are focusing on. Yeah, so premier to 0:08:23.400 --> 0:08:25.560 the survey of all of our health care systems to 0:08:25.560 --> 0:08:29.160 to ask that very question. And and what we're hearing 0:08:29.200 --> 0:08:32.640 and seeing in the data, uh, and in the responses 0:08:32.760 --> 0:08:36.400 is that people are most worried about the protective attire 0:08:36.440 --> 0:08:40.079 the mass the gowns. There is essentially a two week 0:08:40.360 --> 0:08:46.199 supply of that. There are um longer term supplies of 0:08:46.360 --> 0:08:50.319 some of the other stuff. But the protective attire um 0:08:50.440 --> 0:08:54.400 that really protects the healthcare workers, protects the people who 0:08:54.520 --> 0:09:00.240 don't have the coronavirus um, that is where very significant 0:09:00.000 --> 0:09:05.160 a short term challenges exist. I think longer term, UH, 0:09:05.200 --> 0:09:08.360 there are real challenges for nursing homes and non acute 0:09:08.400 --> 0:09:12.160 care providers, and there are real challenges in the pharmacy 0:09:12.200 --> 0:09:15.640 supply chain, But in the short term, it's it's centered 0:09:15.679 --> 0:09:20.520 around right now a lot of the protective equipment and attire. Susan, 0:09:20.640 --> 0:09:24.080 what's the historical precedent for this period for the health 0:09:24.080 --> 0:09:26.720 care system and the potential stress we may see there. 0:09:28.600 --> 0:09:31.200 You know, we have seen as a health care system 0:09:31.320 --> 0:09:34.839 a variety of you know, H one, N one viruses 0:09:34.920 --> 0:09:39.080 and other kinds of of challenges. The spread of this 0:09:39.120 --> 0:09:42.600 one is creating, um what many people think will be 0:09:43.200 --> 0:09:46.559 a significant demand. And when you couple that with our 0:09:46.679 --> 0:09:51.400 dependence on China and Southeast Asia for a lot of 0:09:51.440 --> 0:09:55.800 these products, we have sort of, um, the perfect storm, 0:09:55.960 --> 0:10:00.480 will have very increased demand for these products and will 0:10:00.520 --> 0:10:04.680 have limited supply of the products because they're coming from 0:10:04.679 --> 0:10:08.400 places that you know, have shut down that exportation. So 0:10:08.520 --> 0:10:12.880 we as a US healthcare industry have to figure out 0:10:12.960 --> 0:10:16.040 how to optimize the use of the supplies we have. 0:10:16.240 --> 0:10:19.760 We've got to follow the CDC guidelines to conserve it, 0:10:20.200 --> 0:10:22.480 and we've got to figure out how we're gonna get 0:10:22.600 --> 0:10:27.280 from what is a normal million masks used a year 0:10:27.840 --> 0:10:31.040 to a supply of five hundred million. So that is 0:10:31.080 --> 0:10:35.400 the magnitude of the challenge that we have. This is 0:10:35.480 --> 0:10:38.400 one of the problems for investors certainly, but probably consumers 0:10:38.400 --> 0:10:40.240 in generals. Again, you kind of a mixed message out 0:10:40.240 --> 0:10:44.520 of Washington, out of the administration and other entities about 0:10:44.600 --> 0:10:46.600 kind of the extent of this, the severity of this, 0:10:46.720 --> 0:10:50.640 how we should prepare within the medical community. And again 0:10:50.679 --> 0:10:53.319 you mentioned but on some conference calls with interested parties, 0:10:53.760 --> 0:10:58.320 what's kind of the scenario analysis. The scenario analysis for 0:10:58.520 --> 0:11:03.040 premier healthcare systems and providers is that ninety plus percent 0:11:03.120 --> 0:11:07.160 of them are worrying about the supply and demand and 0:11:07.240 --> 0:11:11.400 with the ability for this virus to spread, um, are 0:11:11.400 --> 0:11:13.640 they going to be able to protect their healthcare workers 0:11:13.720 --> 0:11:17.240 and are we going to have enough supply for um 0:11:17.280 --> 0:11:20.640 everybody that needs this protective attire. So I would say 0:11:20.679 --> 0:11:24.640 that healthcare systems are initiating policies to protect their employees. 0:11:25.440 --> 0:11:30.000 Many companies, healthcare and otherwise are canceling travel UH and 0:11:30.080 --> 0:11:33.080 limiting large group meetings and those kinds of things. So 0:11:33.120 --> 0:11:37.520 we're trying to slow the or suppress the the spread 0:11:37.559 --> 0:11:41.280 of this. And at the same time, Premiere is trying 0:11:41.320 --> 0:11:44.800 to unite all of these healthcare providers and work with 0:11:44.840 --> 0:11:48.640 the federal estate governments to to really try to ensure 0:11:48.720 --> 0:11:51.240 we have adequate supply of the of the products that 0:11:51.280 --> 0:11:53.680 are needed. Susan, thanks so much for joining us. We 0:11:53.679 --> 0:11:56.559 know you're incredibly busy in your team at Premiere kind 0:11:56.559 --> 0:11:59.000 of working through this as the healthcare communities in general. 0:11:59.040 --> 0:12:03.280 Susan Divore, chief executive officer for healthcare services company Premier 0:12:03.320 --> 0:12:16.240 that based in Charlotte, North Carolina. Right now, let's get 0:12:16.240 --> 0:12:18.720 a sense of what's going on in Italy. More news 0:12:18.760 --> 0:12:21.840 coming out there as they extend, expand the travel band 0:12:22.040 --> 0:12:24.600 to or lockdown if you will, to the entire country. 0:12:24.760 --> 0:12:30.040 Fernando Giuliano is an editor for Bloomberg Opinion based in Milan. Fernando, 0:12:30.080 --> 0:12:31.880 thanks so much for joining us. It just seems to 0:12:31.920 --> 0:12:34.240 be no end in sight in Italy. Can you give 0:12:34.280 --> 0:12:38.480 us the latest on what's going on in Italy? Well, 0:12:38.480 --> 0:12:43.640 the latest is that the Prime Minister decided to extend 0:12:44.120 --> 0:12:47.280 this lockdown which we've had in the region of Lombardy 0:12:47.360 --> 0:12:50.160 around Milan and did a number of other northern provinces 0:12:50.760 --> 0:12:53.840 through the whole of the country. Now, that doesn't mean 0:12:53.880 --> 0:12:56.400 that people can't leave their home. This is not like 0:12:56.679 --> 0:13:00.520 one in China. You're allowed to leave your house, but 0:13:00.720 --> 0:13:04.679 only for work. Related health related reasons, or if you 0:13:04.720 --> 0:13:09.040 need to go and do some food shopping. On top 0:13:09.080 --> 0:13:11.920 of that, there are a number of sick restrictions on 0:13:12.280 --> 0:13:16.520 For example, you know, things like Kim's swimming pools, ski 0:13:16.559 --> 0:13:20.960 slopes are all closed. Football matches have been canceled together 0:13:21.000 --> 0:13:25.280 with any supporting activities, and you've had the schools are 0:13:25.280 --> 0:13:28.920 closed until the start of April, and the government doesn't 0:13:28.920 --> 0:13:33.880 want people to do even small gatherings outside. In parts, 0:13:34.480 --> 0:13:38.200 they're really trying very hard to enforce uh you know, 0:13:38.280 --> 0:13:41.200 this social distance as they call because they think this 0:13:41.280 --> 0:13:45.120 is the only way to stop this outbreak. Fernando. There 0:13:45.240 --> 0:13:47.920 is the immediate concern just stopping the spread of the 0:13:47.960 --> 0:13:52.800 coronavirus Italy seeing the cases explode, and they're trying to 0:13:52.920 --> 0:13:55.679 prevent that. They're also getting some other countries in Europe 0:13:56.080 --> 0:13:59.080 closing their borders to Italy, trying to stave off the 0:13:59.120 --> 0:14:02.720 spread in their nations. There's also a larger question if 0:14:02.760 --> 0:14:04.920 you take a step back and not take away from 0:14:04.960 --> 0:14:09.079 the humanitarian issue of people getting very ill and dying um, 0:14:09.240 --> 0:14:13.079 but taking a step back, is democracy equipped to handle 0:14:13.120 --> 0:14:17.600 this as well as say, an authoritarian regime like what 0:14:17.640 --> 0:14:20.920 we've saw in China, where they just basically shut down 0:14:21.040 --> 0:14:24.720 entire cities and had the authority to throw people in 0:14:24.800 --> 0:14:28.600 jail if they didn't comply. Well, that's the question which 0:14:28.680 --> 0:14:31.680 I tried to, you know, pose in a column recently. 0:14:32.240 --> 0:14:37.440 Now clearly is harder. I mean, here the government really 0:14:37.520 --> 0:14:41.200 has to convince people to stick by the rules. Yes, 0:14:41.240 --> 0:14:45.000 there are policemen going around, and you need to prove 0:14:45.080 --> 0:14:47.920 to the policeman that you're going to work. There are 0:14:48.040 --> 0:14:51.560 fines and even small chandel terms for people to break 0:14:51.600 --> 0:14:55.480 the rooms. But you know, it's incredibly hard to enforce this. 0:14:55.640 --> 0:15:00.720 It's sold down to really persuasion and conviction. And now 0:15:01.120 --> 0:15:04.080 the good news I find is that South Korea seems 0:15:04.120 --> 0:15:08.880 to be at last, you know, containing the virus quite effectively. 0:15:08.880 --> 0:15:11.680 South Korea is a democracy, of course, is an Asian democracy. 0:15:11.720 --> 0:15:14.000 They have different traditions, different culture, and they had the 0:15:14.000 --> 0:15:18.560 experience of stars which really taught them an important lesson. 0:15:19.200 --> 0:15:22.120 But I think, you know, I still think Western democracies 0:15:22.200 --> 0:15:25.400 can do it. I just think they need to take measures, 0:15:25.440 --> 0:15:27.840 and I don't see other countries across Europe or even 0:15:27.840 --> 0:15:32.000 the United States during the same unfortunately, So Fernando, we 0:15:32.000 --> 0:15:34.760 we know there's been cases have been generally limited to 0:15:34.800 --> 0:15:37.400 the north of Italy. How has it has it progressed 0:15:37.440 --> 0:15:39.680 in the southern part of the country, if so, to 0:15:39.680 --> 0:15:42.360 what degree? And the expect the folks in the south 0:15:42.440 --> 0:15:45.880 of all this as well more slowly. I mean, the 0:15:46.120 --> 0:15:49.560 the big outbreak was here in southern Lamberty, and this 0:15:49.720 --> 0:15:52.960 is a big concern for the government. I Mean, what's outstanding, 0:15:53.000 --> 0:15:55.480 and I'm not sure people are quite grasped, is that 0:15:55.840 --> 0:15:58.520 the health care system in Lamberti, the region around Milan 0:15:58.920 --> 0:16:01.320 is one of the best in Europe. You know, access 0:16:01.400 --> 0:16:05.000 is very easy and free and and the healthcare system 0:16:05.240 --> 0:16:08.720 is very efficient. And yet they are overwhelmed with the 0:16:08.800 --> 0:16:12.520 number of patients, particularly people who need intensive care. There's 0:16:12.560 --> 0:16:16.680 just not enough you know, bed too or around to 0:16:16.920 --> 0:16:21.760 help the increasing quantity of people. Now Salvin Italy is 0:16:21.880 --> 0:16:27.520 poorer and the healthcare system is less effective there. So 0:16:27.640 --> 0:16:30.720 the government is trying really hard to contain the outbreak 0:16:30.760 --> 0:16:33.600 now because the theory is if it moves south, you're 0:16:33.640 --> 0:16:35.240 not going to be able to have the kind of 0:16:35.280 --> 0:16:38.200 response which are seeing from doctors and nurses here in 0:16:38.640 --> 0:16:43.720 regions like Lombardy, which has been just outstanding Fernando. There's 0:16:43.760 --> 0:16:46.840 this perception out there and it's been edified by a 0:16:46.920 --> 0:16:51.080 number of stories that people in Italy are are basically 0:16:51.320 --> 0:16:54.160 not submissive, but they're going out and they're saying, basically, 0:16:54.200 --> 0:16:56.800 I'll drinks of wine and it'll be fine. Is that 0:16:56.840 --> 0:16:59.200 the mood when you go out and when you're on 0:16:59.240 --> 0:17:04.280 the street or are people taking some of the curbs seriously? Look, 0:17:04.320 --> 0:17:06.399 I mean, I think last weekend there was an issue 0:17:06.440 --> 0:17:12.280 with you know, some people. You saw photos of crowds 0:17:12.320 --> 0:17:15.040 which were gathering outside. You know, there were it was 0:17:15.080 --> 0:17:19.439 a sunny day and people were making the most of it. 0:17:19.520 --> 0:17:21.400 Part of it is is natural, you know, you don't 0:17:21.400 --> 0:17:23.560 think this is going to happen to you. But there's also, 0:17:24.720 --> 0:17:29.320 if you want a generational problem, young people feel they 0:17:29.359 --> 0:17:33.120 are kind of immune, you know, from this virus because 0:17:33.160 --> 0:17:35.200 if you look at the lestality of the virus is 0:17:35.240 --> 0:17:39.640 mainly for older people and and so they go around 0:17:39.680 --> 0:17:42.360 as they think they have very little to fear. Now 0:17:42.359 --> 0:17:45.640 that's not completely true, because you do see people maybe 0:17:45.680 --> 0:17:49.159 in their twenties and thirties who who can have serious 0:17:49.200 --> 0:17:52.640 consequences of the virus. But it creates a problem. Now 0:17:52.680 --> 0:17:55.560 the government is trying very hard on clumping down this. 0:17:55.680 --> 0:17:58.600 For example, they shut down the ski slopes, which was 0:17:59.520 --> 0:18:04.240 one of the images last week, which calls some problem. 0:18:04.640 --> 0:18:07.360 Let's see whether it walks. Fernando, thank you so much 0:18:07.400 --> 0:18:09.879 for being with us. Stay safe, stay healthy, and we 0:18:09.920 --> 0:18:14.480 appreciate all your reporting and insights. Fernando Giuliano Alber opinion editor, 0:18:14.560 --> 0:18:19.000 joining us from Italy where there the nation is shut down. Currently, 0:18:29.840 --> 0:18:32.919 we are seeing the sell off wayne a bit. We 0:18:32.960 --> 0:18:36.360 had seen gains up over three percent, now in Nasdak 0:18:36.440 --> 0:18:39.760 up two point two percent. We are, though getting a 0:18:39.840 --> 0:18:43.480 sense of just the incredible volatility this wish to buy 0:18:43.480 --> 0:18:45.679 the dip that we saw yesterday that was the worst 0:18:45.960 --> 0:18:48.879 one day sell off since the financial crisis in the 0:18:48.960 --> 0:18:52.640 United States and frankly the world, which raises a question, 0:18:52.960 --> 0:18:55.440 are we fundamentally in the same place that we were 0:18:55.520 --> 0:18:57.960 three weeks ago, just with a virus that needs to 0:18:57.960 --> 0:18:59.679 be dealt with, gotten rid of, and then we can 0:18:59.720 --> 0:19:01.800 resist whom the rally and to buy everything and that 0:19:01.880 --> 0:19:05.040 there is no alternative trade, or are we in a 0:19:05.240 --> 0:19:10.120 fundamentally new situation that is much more likely poised for 0:19:10.160 --> 0:19:13.200 a recession? Joining us now, David Kat's chief investment officer 0:19:13.240 --> 0:19:16.439 at Matrix Asset Advisors based in New York, joining us 0:19:16.440 --> 0:19:19.120 by phones, so we don't give each other coronavirus. David, 0:19:19.160 --> 0:19:20.800 I'd love to get your sense here. I mean, on 0:19:20.840 --> 0:19:23.680 a day like yesterday, with such violent moves not only 0:19:23.720 --> 0:19:27.600 in stocks, but very much in bonds, government bonds absolutely surging, 0:19:27.800 --> 0:19:31.320 yields ripping to new lows, credits selling off, with the 0:19:31.400 --> 0:19:34.160 high yield energy sector seeing its biggest one day move 0:19:34.200 --> 0:19:39.480 and spreads since ever. Actually, um, were you buying, were 0:19:39.480 --> 0:19:43.960 you standing back? What was the mood? So the mood 0:19:44.040 --> 0:19:48.680 it's clearly very worrisome. However, if you have been through 0:19:48.720 --> 0:19:51.960 these before, and unfortunately or fortunately, we've been through them 0:19:51.960 --> 0:19:53.600 for quite a long time. We've been doing this for 0:19:53.600 --> 0:19:56.840 about thirty five years. We think we're in a tail 0:19:56.960 --> 0:20:00.480 end of a panic, uh, significant bear market sell off, 0:20:00.480 --> 0:20:03.000 and the key to being successful as an investor is 0:20:03.440 --> 0:20:06.240 not to get caught up in the mania of the moment, 0:20:06.720 --> 0:20:09.919 So not to lock into thirty year bonds that are 0:20:09.960 --> 0:20:13.080 paying one percent for thirty years, which is absurd, uh, 0:20:13.119 --> 0:20:14.959 And not to get scared out of stocks. You know, 0:20:15.680 --> 0:20:19.879 we think that the coronavirus ultimately will be able to 0:20:19.960 --> 0:20:23.320 be handled. Hopefully there will be some sort of treatment. 0:20:23.680 --> 0:20:26.120 Hopefully the governments will start to do better in terms 0:20:26.119 --> 0:20:29.480 of containing it. UH. And we think that the economic 0:20:29.560 --> 0:20:31.800 slowdown that you're going to see in the first and 0:20:31.920 --> 0:20:35.320 second quarters UH as a result of this, are going 0:20:35.359 --> 0:20:37.600 to be reversed at least by half in the third 0:20:37.600 --> 0:20:40.680 and fourth quarters. And if you look at crisis is 0:20:41.000 --> 0:20:44.879 historically the market is going to discount the negatives and 0:20:44.880 --> 0:20:47.879 start to look for the recovery. So the moral of 0:20:47.920 --> 0:20:51.040 that is take a longer term view. Nine to twelve 0:20:51.119 --> 0:20:54.679 months are able to buy some great businesses at great prices. Uh. 0:20:54.720 --> 0:20:57.280 You're gonna feel stupid a day later, a week later, 0:20:57.359 --> 0:20:59.760 a month later, but there's an enormous likelihood stocks are 0:20:59.760 --> 0:21:03.120 gonna be a lot higher twelve months out. So, David, 0:21:03.160 --> 0:21:05.760 if I do have the courage to look through to 0:21:05.840 --> 0:21:07.840 the other side, what are some names I should be 0:21:07.840 --> 0:21:10.520 thinking about here? What are some kind of strategies I 0:21:10.520 --> 0:21:13.320 should be thinking about? So we're going to give you 0:21:13.440 --> 0:21:16.840 a list of names that are sort of low risk. 0:21:16.960 --> 0:21:19.480 They're paying about a four and a half percent income stream, 0:21:19.560 --> 0:21:21.840 so you're getting paid while you wait. Compare that to 0:21:21.880 --> 0:21:24.480 getting points six in a tenure bond, so names like 0:21:24.520 --> 0:21:28.680 A T and T AB, the uh CBF, Cisco Home Depot, 0:21:28.800 --> 0:21:33.920 JP Morgan, Murk, p n C, Verizon, Viacom, and Wells Fargo. 0:21:34.480 --> 0:21:37.880 UH ten great businesses selling at ten times earnings, four 0:21:37.920 --> 0:21:41.120 and a half percent yield, And interestingly, they're really not 0:21:41.200 --> 0:21:44.800 going to be negatively impacted by the coronavirus. You know, 0:21:44.880 --> 0:21:47.000 their business might be down a little bit, but it 0:21:47.160 --> 0:21:51.120 definitely is not going to be severely impacted. And these 0:21:51.160 --> 0:21:54.359 businesses are worth as much today as they were three 0:21:54.359 --> 0:21:56.480 months ago, and you're getting them in a great price. 0:21:56.840 --> 0:22:01.240 What's your time horizon. UH, we're looking out nine twelve months. 0:22:01.320 --> 0:22:02.919 We think things will be a lot higher. I mean 0:22:03.000 --> 0:22:05.280 quite possibly if there's any sort of relief in terms 0:22:05.280 --> 0:22:09.240 of the coronavirus. UH have been quicker, but as an investor, 0:22:09.320 --> 0:22:12.520 be prepared for stocks to go lower first. When you 0:22:12.560 --> 0:22:15.680 have a big problem like the coronavirus or the oil 0:22:16.080 --> 0:22:19.480 price war that took called yesterday, you get very big solutions. 0:22:19.520 --> 0:22:22.240 So you're starting to hear both the US government and 0:22:22.280 --> 0:22:25.639 the global government's talking about relief, whether it's on a 0:22:25.680 --> 0:22:29.160 monetary or fiscal policy. UH science is going to kick 0:22:29.200 --> 0:22:32.160 in a huge way. They are enormous incentives for companies 0:22:32.200 --> 0:22:35.280 to find treatment for this. Hospitals are going to start 0:22:35.280 --> 0:22:38.359 to do better. So generally happens is when you have 0:22:38.400 --> 0:22:42.720 a crisis, people straightline the crisis, assume it lasts forever. Uh, 0:22:42.760 --> 0:22:47.040 and usually there are solutions along the way. Having said that, 0:22:47.520 --> 0:22:50.879 I'm sorry, but arguably that's exactly what was being priced 0:22:50.880 --> 0:22:53.639 into the market this morning before it opened with the 0:22:53.720 --> 0:22:56.400 rally that we saw, and it's being stifled a bit 0:22:56.480 --> 0:22:59.120 by news out of CNBC, in particular with the reporting 0:22:59.119 --> 0:23:02.399 at the White House may not release any details on 0:23:02.600 --> 0:23:05.560 any kind of fiscal stimulus today as they had said 0:23:05.560 --> 0:23:08.480 that they would yesterday. I'm just wondering, let's say we 0:23:08.600 --> 0:23:12.600 don't get a response on the fiscal side. What that Well, 0:23:13.280 --> 0:23:16.920 you know, everybody is a media gratification oriented. The reality 0:23:17.040 --> 0:23:19.480 is whether the government comes out of response today or 0:23:19.560 --> 0:23:21.640 to come out with a response next week, there will 0:23:21.720 --> 0:23:24.560 be a response, you know. To is a crisis. The 0:23:24.600 --> 0:23:28.640 economy is slowing substantially. Uh. The government needs to react. 0:23:28.680 --> 0:23:31.080 They need to take actions that will protect workers so 0:23:31.119 --> 0:23:33.359 that if you're sick, you can stay at home and 0:23:33.760 --> 0:23:37.920