Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you
Speaker 1: along with my co host Lisa Brahma Waits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money. Whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. There's a question, especially since there
Speaker 1: is going to be some sort of recovery the virus
Speaker 1: will end, where do you find value? How do you
Speaker 1: find a compass in an unprecedented period of time? Joining
Speaker 1: us now, Carl Weinberg, Founder and chief International economist at
Speaker 1: High Frequency Economics in New York, and based on your
Speaker 1: deckies of experience, including the restructuring of Latin American crisis
Speaker 1: back in the eighties, I'm wondering, what are you looking
Speaker 1: for to determine the floor here and get a sense
Speaker 1: of its time to buy? Hi? Good morning. Well, you
Speaker 1: know time to buy is more complicated than just economics.
Speaker 1: I'm focused on the where the economy is going to
Speaker 1: be and how we're going to get through this. This
Speaker 1: bump in my experience, a difference between a downturn and
Speaker 1: a crisis is whether or not things break. And the
Speaker 1: question is whether this break and income is going to
Speaker 1: be severe enough to cause institutions, companies to fail and
Speaker 1: get us to a point where when we come back,
Speaker 1: we're not as strong as we were as when we
Speaker 1: went into all of this. So, Carl, what are some
Speaker 1: of the type of data that you're going to be
Speaker 1: looking at going forward to get a sense of whether
Speaker 1: this is a little bit more of a short term
Speaker 1: issue once we get to the other side of the virus,
Speaker 1: or perhaps something more fundamental to the global economy. Well,
Speaker 1: here's what we're going to be discussing in our global
Speaker 1: webinar at High Frequent Economics later this week on Thursday morning.
Speaker 1: I believe I'm looking at the data from China and
Speaker 1: I'm looking at January February figures, and I'm seeing plus
Speaker 1: down on retail sells over a year for the January
Speaker 1: February numbers. I've seen thirteen and a half percent down
Speaker 1: year over your on industrial production. And I'm wondering, could
Speaker 1: that happen here with our lockdown? You know they locked down,
Speaker 1: we're locking down. Why wouldn't we get the same result?
Speaker 1: And if we got that. I'm trying to guest of it,
Speaker 1: because I've never seen anything like this before. What the
Speaker 1: impact of two or three months at that level of
Speaker 1: the press activity would mean for the solvency of small
Speaker 1: and medium enterprises, and for that matter, for the solvency
Speaker 1: of big enterprises and the banks that serviced them. This
Speaker 1: is the kind of the scale of the question that
Speaker 1: I'm thinking about, and it's framed very much by the
Speaker 1: data from China. Auto production in China, by the way,
Speaker 1: dropped almost eight year over year in February. These are
Speaker 1: enormous numbers, and again one has to ask, if it
Speaker 1: happened there, why would similar clients happen here, and what
Speaker 1: would the consequences be. So have you started to model
Speaker 1: that out? I've started to think about I can't really model,
Speaker 1: at least because I don't have any historical data to
Speaker 1: hold it up against. So we're really in the realm
Speaker 1: of guests of it. And that puts economics of the
Speaker 1: same places where the medicine is. We're looking at potentially
Speaker 1: an unprecedented shock I'll call it a supply shock by
Speaker 1: that reduces our capacity to work. It reduces the number
Speaker 1: of people who can get to their jobs, and that
Speaker 1: means we can produce left stuff. And along that sliding
Speaker 1: that supply curve to the left, we end up with
Speaker 1: shortages of stuff, higher prices, speculation scenario with dramatically lower output,
Speaker 1: and frankly, Lisa, I'm just beginning to think about how
Speaker 1: to think about it. So, Carl, we've seen the side
Speaker 1: of reserve come in aggressively over the weekend last night
Speaker 1: with lower rates and some QE. What do you think
Speaker 1: is that? Do you think that what this economy really
Speaker 1: needs is a comprehensive fiscal package coming out of Washington. Um,
Speaker 1: we need a package coming out of Washington, But I
Speaker 1: don't think we need traditional fiscal stimulus, all right. What
Speaker 1: we need is we need to keep our our financial
Speaker 1: systems sound and safe. And I give the fit and
Speaker 1: all the central of the banks of the world except
Speaker 1: maybe for the Bank of Japan hagh marks for ensuring
Speaker 1: that banks remain liquid, that they push credit to peep
Speaker 1: ball and companies so that they can use it. That
Speaker 1: the only way to survive this kind of a shock
Speaker 1: is to introducing a financing and credit into the economy
Speaker 1: so that we can spread the pain over an affordable
Speaker 1: piani survivable period of time. So what we need our
Speaker 1: programs to ensure that banks, whether they want to or not,
Speaker 1: pump credit out the companies that are suffering cash for
Speaker 1: shore falls and household make it a credit, not a transfer,
Speaker 1: and then use that space of time that the credit
Speaker 1: allows to recover from what appears to be a much
Speaker 1: bigger shock than anyone had been thinking about until recently.
Speaker 1: So you said that that traditional uh fiscal stimulus would
Speaker 1: not be necessarily what was required, and yet you have
Speaker 1: a growing amount of speculation that anything from helicopter money
Speaker 1: to bailing out entire industries would be a productive and
Speaker 1: not only productive, but crucial part of our recovery. I'm
Speaker 1: just going to throw this out there. A q R
Speaker 1: Capital Management's Cliff Assness, who is a self described libertarian
Speaker 1: in at times, said today on Twitter, I am not
Speaker 1: a libertarian about coronavirus and say we need and I
Speaker 1: don't think I've ever said this before, fiscal help. We
Speaker 1: need fiscal relief for individuals and small and maybe large businesses.
Speaker 1: If that action was fine, and those who dismiss it
Speaker 1: are wrong, we should use all possible tools. Do you agree?
Speaker 1: Um um? Sort of but not entirely. You know, if
Speaker 1: this is a supply shock, all right, means we're making
Speaker 1: less stuff. So if we give people money in their
Speaker 1: pockets to replace the money they're not earning a right
Speaker 1: to make the stuff that's not being produced, we're going
Speaker 1: to have more money than good and we're going to
Speaker 1: create an inflation. Shifting the demand curve to the right
Speaker 1: I think is the wrong policy. Right, we need to
Speaker 1: get that supply curve moving back to the left, and
Speaker 1: we need the cushion what is an inevitable decline and
Speaker 1: income and loss of income and must wealth coming out
Speaker 1: of this, And that's when we have to start being
Speaker 1: realistic that if we keep people away from work for
Speaker 1: weeks or months, we're going to be poorer as a
Speaker 1: result of that. And the challenge is not to replace
Speaker 1: the income that's lost. You can the challenges to bridge
Speaker 1: the adjustment to that lower level of income the lower
Speaker 1: level of wealth so that it's survivable. So I think
Speaker 1: that fiscal policy credit is the right tool to do that.
Speaker 1: And the government's role in all of this is to
Speaker 1: ensure that banks make loans the people that they normally
Speaker 1: wouldn't make. Right, if you go to the bank, then
Speaker 1: you say, I'm sort of cash, I need a loan.
Speaker 1: You're not going to get it all right, when the
Speaker 1: banks have to be prepared to make these kinds of
Speaker 1: bridging loans, I'll call them, so that people can get
Speaker 1: the credits they need to survive the next six months,
Speaker 1: so that when the virus goes away, businesses are still
Speaker 1: in business and households having lost their homes and their
Speaker 1: life savings and all of that. So we need to
Speaker 1: bridge through this trauma and then recover over time from it.
Speaker 1: Carl Winbert, thanks very much for joining us. We appreciate
Speaker 1: your thoughts as always. Uh, interesting to put in context.
Speaker 1: I guess it's question, Lisa's just kind of how long
Speaker 1: uh this um, the medical aspect of this at last?
Speaker 1: Is it a month? Is a two months? Obviously the
Speaker 1: longer ago, Lisa, the more profound the economic impact will be.
Speaker 1: And then that raises the question of what type of
Speaker 1: rebound will we have on the way back out. Yeah,
Speaker 1: it's gonna be a really tricky situation. People talking about
Speaker 1: five billion, six hundred billion dollar type of fiscal stimulus.
Speaker 1: There's also a question of timing. How quickly, uh can
Speaker 1: they end up getting it? Given the fact that this
Speaker 1: seems to be imminent, there's more of a concern that
Speaker 1: there's going to be actually a failure of some companies
Speaker 1: to be able to make their bills. In your term,
Speaker 1: why even the big behemoths like Apple and Facebook are
Speaker 1: just getting hammered when a lot of people view them
Speaker 1: as likely to be uh, you know, absolutely withstand this
Speaker 1: and then continue to gain on the other side. David
Speaker 1: Garrity has been tracking this, chief market strategist for leid
Speaker 1: Law and Company and partner at bt Block. I'd love
Speaker 1: to get your sense of of Big text involvement in Washington,
Speaker 1: d C. Stories about how they're trying to help basically
Speaker 1: assess testing, trying to figure out ways to do it
Speaker 1: so that people don't have to go to the doctor's office,
Speaker 1: as well as just gaming out hospital bed availability in
Speaker 1: real time. How will this end up reshaping big tech
Speaker 1: in its relationship with Washington. Well, I think to the
Speaker 1: extent from an overall public policy standpoint, does a major
Speaker 1: effort underway right now to try to flatten the curve
Speaker 1: of coronavirus infection and certainly, you know, an important way
Speaker 1: to make that happen. Apart from saying that you know,
Speaker 1: we shouldn't have gatherings of more than fifty people in
Speaker 1: one place for the next two months, you know, the
Speaker 1: way to really make society operators to be able to
Speaker 1: use technology to operate on a more distributed basis. Uh So,
Speaker 1: you know, certainly from that standpoint, big tech has a
Speaker 1: very significant role to play. Um you know, whether you
Speaker 1: want to go from looking at you cloud computing companies,
Speaker 1: uh e commerce to distributed workforce productivity names like zoom,
Speaker 1: slad or distance learning providers such as to you. Uh So,
Speaker 1: you know clearly we're going into a mode here for
Speaker 1: you know, maybe the next two months of where you know,
Speaker 1: consumers are basically going to be you know, living at
Speaker 1: home and staying at home and working at home. And
Speaker 1: you know what we have to think about here is
Speaker 1: that to the extent that this is a significant crisis,
Speaker 1: to the extent that people's behavior is being changed as
Speaker 1: a result of it, you know, here's a real chance
Speaker 1: for these companies to the technology sector to become even
Speaker 1: more of an integral part of people's daily lives than
Speaker 1: they were prior to this. So, David, I know you
Speaker 1: have a lot of experience with technology stocks. Is it
Speaker 1: your call um that you know, these are still fundamentally
Speaker 1: you know, good businesses going into the crisis. They're gonna
Speaker 1: be fundamentally good businesses coming out of the crisis. And
Speaker 1: you're going to have some extraordinary entry points. Um. Or
Speaker 1: you just kind of scared about the valuation, you might
Speaker 1: want to get more defensive given this tremendous amount of
Speaker 1: uncertaint involved they have. I mean, look, these are these
Speaker 1: are certainly going to be core holdings for anybody's portfolio
Speaker 1: we think going forward. Um. You know, the question that
Speaker 1: we have to ask ourselves is sort of looking at
Speaker 1: broader market levels, you know, where does it perhaps become
Speaker 1: you know, more balanced in terms of the risk reward
Speaker 1: ratio um. You know, sort of looking at the SMP
Speaker 1: five hundreds, historically, uh, the SMP five hundred kind of
Speaker 1: bottoms out at thirteen times prior PEK earnings twenty times
Speaker 1: current trough. You know, if we think that SP five
Speaker 1: hurtings are gonna be down this year, you know, that
Speaker 1: kind of puts a floor on the SMP five hundred
Speaker 1: about level. You know, granted that was down from what
Speaker 1: we were trading pre market, but it certainly says you
Speaker 1: know that that's a level where we think that kind
Speaker 1: of in between here and there, um, you know, there's
Speaker 1: gonna be some real opportunities for investors to come in
Speaker 1: and pick the right names. Uh. And and certainly we
Speaker 1: think that these names you mentioned earlier are going to
Speaker 1: be playing an even more important part in people's lives
Speaker 1: going forward than they were before. I wanted to pick
Speaker 1: up on exactly that point because certainly one aspect of
Speaker 1: this whole epidemic pandemic has been the importance of being
Speaker 1: interconnected via social media, via Slack, via zoom. And I'm
Speaker 1: wondering who are the biggest winners that maybe are not
Speaker 1: as obvious as the Zooms and the slacks of the world. Well,
Speaker 1: I mean, certainly, if we're looking at places where it's
Speaker 1: you know, safe to keep your data stored, cloud computing
Speaker 1: continues to be quite strong. I think one of the
Speaker 1: names you mentioned earlier in terms of distance learning, there's
Speaker 1: a company to you, mid cap company, about two billion
Speaker 1: dollar market cap. They work with educational academic institutions to
Speaker 1: help enable their distance learning capabilities in terms of the
Speaker 1: ability with their programs out um, you know, to students.
Speaker 1: And certainly from that standpoint, that's going to be significant
Speaker 1: going forward. Um, we know that Pierce Publishing Company had
Speaker 1: a company called the Blackboard that they had acquired that
Speaker 1: that on its own, I think is a really small
Speaker 1: part of the overall enterprise, and maybe not may not
Speaker 1: be so much of a cure play as some of
Speaker 1: these other names. So you know, clearly we're looking at
Speaker 1: a market here where investors are looking for large liquid names,
Speaker 1: albeit today to sell to raise cash, but looking at
Speaker 1: large liquid names that people can easily own a part
Speaker 1: of going forward, you know, looking at some of the
Speaker 1: names that have been mentioned along this line, even a
Speaker 1: were to be Slack re Zoom, I think are also
Speaker 1: two quite good names um to be looking at here
Speaker 1: as well. There's also a question about cybersecurity, especially as
Speaker 1: more of the information moves to the cloud, and this
Speaker 1: is all the more relevant today when we learned the
Speaker 1: US Health and Human Services Department suffered a cyber attack
Speaker 1: on its computer system Sunday night. It said that this
Speaker 1: did not affect its response, the timing, or the scope
Speaker 1: of its response to the spreading coronavirus. But still very
Speaker 1: much front and center is the cyber security. What's your
Speaker 1: sense about how good that is in terms of the
Speaker 1: big tech giants is an increasing amount of business and
Speaker 1: activity moves online. Now, I mean you've raised a very
Speaker 1: very good point because you know, not only are we
Speaker 1: operating operating in a real economy environment here where people's
Speaker 1: personal hygiene is critical, but also to the extent that
Speaker 1: life is shifting more to be supported online or virtually
Speaker 1: looking at our technology, our tech hygiene is critical in
Speaker 1: this regarden. So, yes, cybersecurity is an area where there
Speaker 1: is an alarming a number of security breaches or hacks,
Speaker 1: and so from that standpoint, you know, the need to
Speaker 1: improve cybersecurity is necessary from here certainly as we're looking
Speaker 1: at an environment right now, people's attention is focused on
Speaker 1: you know, what are we going to be doing here
Speaker 1: to support people's incomes? Is you know, unemployment rates probably
Speaker 1: spike over ten percent more um. You know, we also
Speaker 1: be thinking about a public private sector initiative that goes
Speaker 1: more towards enhancing the cybersecurity not just of the U. S. Government,
Speaker 1: but that of the individual citizens. David Garretty, thank you
Speaker 1: so much for joining us David Garritty laid Law and
Speaker 1: Company sharing his thoughts on the market. We always appreciate
Speaker 1: David's thoughts particularly on technology. And again, you know, I
Speaker 1: think a lot investors are selling tech along with everything else.
Speaker 1: As David mentioned, I want to take a look at
Speaker 1: the medical side of coronavirus, in particular, how we track it,
Speaker 1: how we test for it, and frankly, how close we
Speaker 1: are to actually crying it or solving it, or a
Speaker 1: merely rating at least the effects. Luckily, we have Max
Speaker 1: Nis and Bloomberg opinion columnists covering all things healthcare with
Speaker 1: us today. Max, I want to start with Anthony Fauci,
Speaker 1: who is the director of the National Institute for Allergy
Speaker 1: and Infectious Disease. Yesterday he was testifying in front of Congress,
Speaker 1: and he said, he admitted that it was a failing
Speaker 1: of the US health care system that we did not
Speaker 1: have sufficient testing at the outset. Can you just walk
Speaker 1: through why we did not have better testing available right
Speaker 1: away so that we could track and isolate people immediately.
Speaker 1: So there you know, any number of reasons or failures
Speaker 1: for this um you know, a failure of cooperation between
Speaker 1: agencies like the CDC and the f D, a failure
Speaker 1: to bring in private companies and state labs rapidly enough,
Speaker 1: decision at the outset instead of using w h O
Speaker 1: developed tests, one that's been deployed all over the world.
Speaker 1: We decided to develop our own, which turned out to
Speaker 1: have problems. The introducing those problems obviously created difficulties and
Speaker 1: and slow the raw and beyond that, um just an
Speaker 1: overall decision by the government for um, you know, not
Speaker 1: necessarily the best reasons to restrict deliberately the number of
Speaker 1: tests that were deployed and developed, and and like the
Speaker 1: number are people that were tested, limiting it only to
Speaker 1: people with the direct travel history to China in spite
Speaker 1: of the fact that there was you know, already evidence
Speaker 1: of spread in other parts of the world, and you
Speaker 1: know the reality that the earlier you know, better to
Speaker 1: overtest and under test. And we really didn't even get
Speaker 1: to that that mindset until just a few weeks ago.
Speaker 1: So failure of leadership, failure of science, failure on on
Speaker 1: many many levels has led to this this point, Max,
Speaker 1: where are we right now in terms of the number
Speaker 1: of kits we have in this country, how widely dispersed
Speaker 1: they are right now, how easy is it for somebody
Speaker 1: to get a test? And and just kind of where
Speaker 1: are we today? Do you think Unfortunately, all that we
Speaker 1: really have are sort of these ad hoc estimates. UM.
Speaker 1: I'll point people to former FDA Commissioner Scott Gottlieb, who
Speaker 1: has been you know, talking to state labs of the CDC,
Speaker 1: private companies trying to come up with a reasonable estimate. UM.
Speaker 1: So we we really don't have a confer number unfortunately,
Speaker 1: And UM it seems to be the case that you know,
Speaker 1: your ability to get tested really depends on where you are.
Speaker 1: Are you in a state that that took early steps
Speaker 1: to to you know, develop its own tests to stand
Speaker 1: up at more capacity than it needed any any given
Speaker 1: moment um, where we're still not at a point where
Speaker 1: everyone who needs to be tested can be unfortunately, and
Speaker 1: probably won't be for a little bit to come. Although
Speaker 1: Anthony Fauci did say today that he expects the number
Speaker 1: of tests to increase dramatically over the upcoming weeks and
Speaker 1: part because the US government is partnering with private companies.
Speaker 1: Can you talk a little bit about that, Yeah, absolutely,
Speaker 1: So this is basically you know, looking to companies like
Speaker 1: lab Corp and and Quests, UM, you know, these sort
Speaker 1: of brand name companies that have labs all over the country,
Speaker 1: and UM, just basically making sure that they too are
Speaker 1: are part of this effort that you know, if if
Speaker 1: a public lab is overwhelmed, if there isn't one available,
Speaker 1: send it to these companies and they're finally beginning to
Speaker 1: to stand up capacity to to get you know, validate
Speaker 1: these tests and begin to run them. That will be
Speaker 1: a huge help because they're they're more dispersed um and
Speaker 1: and potentially you know, quite capable of running a lot
Speaker 1: of tests. You know, we're not at the stage where
Speaker 1: even they are are going to provide all the capacity
Speaker 1: we need, but they will certainly help a lot. Let's
Speaker 1: talk about cost, Max, I know you're out with account.
Speaker 1: A really interesting coronavirus crisis makes a case for medicare
Speaker 1: for all. Talk to us about that. Does that actually
Speaker 1: have some legs? Yeah, so, you know, the it's a
Speaker 1: uniquely American um phenomenon that in addition to people worrying
Speaker 1: about getting coronavirus, if they're smart, they will also be
Speaker 1: worried about the cost of getting coronavirus um. You know.
Speaker 1: The first step is obviously testing. There's been an effort
Speaker 1: from insurers and from individual states and the government to
Speaker 1: make sure that that that that people won't be faced
Speaker 1: with costs. But that's you know, you actually have to
Speaker 1: take really aggressive steps to make sure that even testing
Speaker 1: in a pandemic is not going to cost people thousands
Speaker 1: of dollars. And then you get to the stage of
Speaker 1: of whether when people actually have a hospital stay. UM,
Speaker 1: you know a lot of people that don't use their
Speaker 1: health insurance that often assume that they're protected from unexpected bills.
Speaker 1: But if you end up with an inpatient hospital stay,
Speaker 1: you're gonna hit your deductible UM, You're gonna potentially face coinsurance,
Speaker 1: and that will get you to your plans out of
Speaker 1: pocket maximum, which in many cases is in the thousands
Speaker 1: of dollars. And that's a financial strain on many companies.
Speaker 1: And that's the best case scenario. There. There are steps
Speaker 1: of the government can take in an emergency to kind
Speaker 1: of prevent that from happening, to protect people from costs.
Speaker 1: UH still in the works and and unclear whether it
Speaker 1: will be broad enough to help. I'd argue that you
Speaker 1: might want a system in this what I arg you
Speaker 1: might call them where you don't have to take emergency
Speaker 1: steps to protect people from those costs. Max Kinison, thanks
Speaker 1: so much for joining us. We always appreciate your perspective
Speaker 1: on all things healthcare. Maximison is a biotech farm at
Speaker 1: Healthcare Commas for Bloomberg Opinion. Joining is here in a
Speaker 1: Bloomberg eleven three oh studio. Thank you, Max. I mean, honestly,
Speaker 1: that's just to me. Highlights a lot of weak spots,
Speaker 1: and you know, there's there's a question of how much
Speaker 1: is going to be temporary and how much will this
Speaker 1: entire episode reshape the way some people think about a
Speaker 1: variety of different issues, this medicaid from medicare for all.
Speaker 1: I think we'll be back on the table, certainly for
Speaker 1: the Democrats as they think about, you know, kind of
Speaker 1: how to position uh, the US against some of these pandemics.
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
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Speaker 1: Twitter at Lisa abramoits one before the podcast. You can
Speaker 1: always catch us worldwide on Bloomberg Radio.