1 00:00:10,640 --> 00:00:14,600 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,680 --> 00:00:21,800 Speaker 1: I'm Joe Wisenthal and I'm Tracy hall Away. Tracy, I, 3 00:00:21,800 --> 00:00:23,960 Speaker 1: I don't even don't really know where to begin right now, 4 00:00:24,920 --> 00:00:28,080 Speaker 1: you know. I the thought that keeps coming to my 5 00:00:28,160 --> 00:00:32,040 Speaker 1: head was that life, at least here in the US 6 00:00:33,080 --> 00:00:37,120 Speaker 1: and the markets in general, are so different than they 7 00:00:37,159 --> 00:00:41,800 Speaker 1: were exactly a week ago. At this time. The pace 8 00:00:41,880 --> 00:00:45,680 Speaker 1: of change of what we're experiencing is almost is just 9 00:00:45,720 --> 00:00:49,239 Speaker 1: completely bewildering and unprecedented. It feels like, so I know 10 00:00:49,280 --> 00:00:51,160 Speaker 1: what you mean, but I am going to say, we're 11 00:00:51,200 --> 00:00:55,760 Speaker 1: recording this on March sixte and a week ago. We 12 00:00:55,760 --> 00:01:00,320 Speaker 1: were limited down on spatures, and we were limited down 13 00:01:00,520 --> 00:01:03,960 Speaker 1: again this morning. So it's Monday. Therefore we must have 14 00:01:04,040 --> 00:01:06,440 Speaker 1: hit the circuit breakers. I say that with sarcasm. This 15 00:01:06,520 --> 00:01:08,960 Speaker 1: is not normal. We've hit limit down I think like 16 00:01:09,200 --> 00:01:13,080 Speaker 1: three times in the past week, right and I think 17 00:01:13,080 --> 00:01:16,000 Speaker 1: we've hit limit up at least once or maybe twice. 18 00:01:16,600 --> 00:01:20,640 Speaker 1: The volatility that we're seeing is just relentless, and the 19 00:01:20,680 --> 00:01:24,600 Speaker 1: pace of change in life. You know, last weekend, I 20 00:01:24,720 --> 00:01:27,320 Speaker 1: was still out. I took my daughter to the park. 21 00:01:28,120 --> 00:01:30,280 Speaker 1: I saw some friends at the park. I wasn't like 22 00:01:30,319 --> 00:01:33,440 Speaker 1: going inside to bars or anything like that or restaurants. 23 00:01:33,800 --> 00:01:36,880 Speaker 1: This weekend, I was alone. I walked through some of 24 00:01:36,880 --> 00:01:40,199 Speaker 1: the same neighborhoods that I walked through last weekend. And 25 00:01:40,440 --> 00:01:43,320 Speaker 1: to say that it was the vibe was different, it 26 00:01:43,440 --> 00:01:46,520 Speaker 1: was truly is truly an understatement. So many of the 27 00:01:46,520 --> 00:01:49,200 Speaker 1: places that I saw people where they were still lining up, 28 00:01:49,320 --> 00:01:53,120 Speaker 1: just completely empty. And what we're what would normally be 29 00:01:53,600 --> 00:01:55,960 Speaker 1: busy parts of New York on a sort of like 30 00:01:56,320 --> 00:02:00,400 Speaker 1: nice pre spring day. All I'm gonna say is welcome 31 00:02:00,480 --> 00:02:03,560 Speaker 1: to my world. And I think you were forewarned having 32 00:02:03,600 --> 00:02:06,400 Speaker 1: listened to me complain about this for six weeks. But 33 00:02:06,880 --> 00:02:11,359 Speaker 1: social distancing has been well into effect here in Hong Kong. 34 00:02:11,480 --> 00:02:14,480 Speaker 1: We've had hoarding, we've had fights over a toilet paper, 35 00:02:14,639 --> 00:02:18,160 Speaker 1: We've experienced it all. Um. So, yeah, it's kind of 36 00:02:18,200 --> 00:02:21,240 Speaker 1: surreal to watch the rest of the world, especially Europe 37 00:02:21,280 --> 00:02:23,880 Speaker 1: and the US, now go through what we saw in 38 00:02:24,080 --> 00:02:26,400 Speaker 1: Hong Kong and China and some other parts of Asia 39 00:02:26,520 --> 00:02:30,040 Speaker 1: just six weeks ago. Yeah, surreal to say the least. 40 00:02:30,480 --> 00:02:34,840 Speaker 1: It's also, of course creating some very rapid changes in 41 00:02:34,919 --> 00:02:39,560 Speaker 1: our own uh you know, micro podcasting schedule because even 42 00:02:39,880 --> 00:02:44,240 Speaker 1: the guests that we're talking about and that have scheduled, 43 00:02:44,240 --> 00:02:47,760 Speaker 1: we're actually having to change the topics on the fly 44 00:02:47,960 --> 00:02:52,920 Speaker 1: because the original plan, the original discussion suddenly doesn't feel 45 00:02:52,919 --> 00:02:56,359 Speaker 1: as relevant as it did even say, two weeks ago. Yeah, 46 00:02:56,520 --> 00:02:59,839 Speaker 1: it's been challenging scheduling all thoughts episodes. And I think 47 00:03:00,080 --> 00:03:03,800 Speaker 1: the sheer speed with which markets have sold off is 48 00:03:03,880 --> 00:03:07,400 Speaker 1: absolutely astounding. So I saw one analysis from Bank of 49 00:03:07,440 --> 00:03:09,959 Speaker 1: America Merrill Lynch where they were talking about how it's 50 00:03:09,960 --> 00:03:13,200 Speaker 1: been the fastest bearer market on record because we've had 51 00:03:13,280 --> 00:03:16,480 Speaker 1: just twenty one days from the trough until we felt 52 00:03:17,440 --> 00:03:21,040 Speaker 1: from that. The next fastest one was back in nine. 53 00:03:22,280 --> 00:03:25,960 Speaker 1: It's never that great to see twenty right up against 54 00:03:26,120 --> 00:03:29,840 Speaker 1: nineteen twenty nine on a comparative markets chart. But I 55 00:03:29,880 --> 00:03:32,840 Speaker 1: will say one thing that's remarkable about the current market 56 00:03:32,840 --> 00:03:35,920 Speaker 1: sell off, and it really puts you in mind of 57 00:03:35,920 --> 00:03:39,800 Speaker 1: of whether or not this is technically driven or at 58 00:03:39,880 --> 00:03:43,520 Speaker 1: least being exacerbated by technical factors, or how much of 59 00:03:43,560 --> 00:03:47,240 Speaker 1: it is driven by actual fears of the economy. And 60 00:03:47,280 --> 00:03:49,160 Speaker 1: to me, it could go either way. Right if you 61 00:03:49,240 --> 00:03:52,040 Speaker 1: assume that big parts of Europe and the US and 62 00:03:52,200 --> 00:03:54,560 Speaker 1: maybe Asia again, as we get a second wave of 63 00:03:54,600 --> 00:03:58,560 Speaker 1: infections are going to be shut down for the foreseeable future. 64 00:03:58,640 --> 00:04:02,000 Speaker 1: Then clearly that is a serious economic problem. But on 65 00:04:02,040 --> 00:04:04,840 Speaker 1: the other hand, some of the action that you've seen 66 00:04:04,920 --> 00:04:07,560 Speaker 1: in markets, these weird moves like limit up one day 67 00:04:07,600 --> 00:04:10,000 Speaker 1: and then limit down the next, these sort of self 68 00:04:10,040 --> 00:04:13,920 Speaker 1: reflexive moves, do seem to indicate some sort of technical 69 00:04:14,000 --> 00:04:19,039 Speaker 1: driver as well. Yeah. Absolutely, so, we were originally going 70 00:04:19,160 --> 00:04:22,560 Speaker 1: to UH schedule today's guest. We scheduled a few weeks 71 00:04:22,560 --> 00:04:27,680 Speaker 1: ago because he had an interesting thesis that UH congress 72 00:04:27,760 --> 00:04:31,400 Speaker 1: or Senator Bernie Sanders, who's running for president, although he 73 00:04:31,600 --> 00:04:36,120 Speaker 1: is a socialist, might not be as bad for pretext 74 00:04:36,160 --> 00:04:40,560 Speaker 1: corporate profits as many people had expected. And we're like, okay, 75 00:04:40,640 --> 00:04:44,400 Speaker 1: that's a it's a contrarian viewpoint, given the well known 76 00:04:44,440 --> 00:04:48,440 Speaker 1: antipathy towards Sanders and his brand of socialism on Wall Street. Yeah, 77 00:04:48,480 --> 00:04:51,680 Speaker 1: how about we get a fund manager to talk about that, 78 00:04:51,760 --> 00:04:54,360 Speaker 1: and that will be a sort of classic odd Loxy 79 00:04:54,560 --> 00:04:57,480 Speaker 1: Odd Lots episode to just sort of talk about something 80 00:04:57,880 --> 00:05:00,880 Speaker 1: kind of weird like that. But us for a few 81 00:05:00,920 --> 00:05:04,520 Speaker 1: weeks times have changed. For one thing, it uh appears 82 00:05:04,560 --> 00:05:07,400 Speaker 1: now that Bernie Sanders is an extreme long shot to win, 83 00:05:07,520 --> 00:05:11,440 Speaker 1: given the setback that he had in recent votes and 84 00:05:11,480 --> 00:05:15,240 Speaker 1: so on, and just generally this sort of the big 85 00:05:15,279 --> 00:05:19,520 Speaker 1: macro questions, whereas once a lot of focus about it's like, well, 86 00:05:19,680 --> 00:05:22,159 Speaker 1: Trump is probably going to win the election, but what 87 00:05:22,240 --> 00:05:25,799 Speaker 1: happens if Warren wins, or what happens if Sanders wins, 88 00:05:25,880 --> 00:05:28,279 Speaker 1: or what happens in Biden wins. Some of these debates 89 00:05:28,279 --> 00:05:32,520 Speaker 1: are certainly far from people's mind right now. That being said, 90 00:05:33,240 --> 00:05:35,919 Speaker 1: it's it's never a bad time to talk to a 91 00:05:36,040 --> 00:05:39,920 Speaker 1: very smart macro hedge fund manager, right and even though 92 00:05:40,400 --> 00:05:44,279 Speaker 1: no one cares anymore about our original podcast episode idea, 93 00:05:44,760 --> 00:05:46,919 Speaker 1: I think this kind of gets to the technical versus 94 00:05:46,960 --> 00:05:51,960 Speaker 1: fundamental point, like, how would a macro manager actually be 95 00:05:52,040 --> 00:05:56,200 Speaker 1: approaching the current market? You set yourself up to deal 96 00:05:56,320 --> 00:05:59,000 Speaker 1: with moves of the size and the speed that we've seen. 97 00:05:59,560 --> 00:06:04,640 Speaker 1: It'll be yeah, it'll be good. Let's get right to it. So, 98 00:06:04,760 --> 00:06:07,919 Speaker 1: without further ado, I want to bring a novel Sonala. 99 00:06:08,200 --> 00:06:12,760 Speaker 1: He is a strategist and portfolio manage manager at e 100 00:06:12,920 --> 00:06:17,320 Speaker 1: I A All Weather Alpha Partners. Uh novel. Thank you 101 00:06:17,400 --> 00:06:19,720 Speaker 1: very much for joining us, Thank you for having me. 102 00:06:19,760 --> 00:06:23,920 Speaker 1: Appreciate it so I'm curious, you know. Start off, I 103 00:06:23,960 --> 00:06:26,560 Speaker 1: think one of the things that has really been asking 104 00:06:26,839 --> 00:06:32,839 Speaker 1: striking two people is historical comparisons, and nobody really has 105 00:06:33,000 --> 00:06:37,400 Speaker 1: any sort of great UH analogies that they can reach for. 106 00:06:37,960 --> 00:06:40,720 Speaker 1: But from your perspective, I'm curious when you look at 107 00:06:40,760 --> 00:06:45,560 Speaker 1: the history of markets from a volatility standpoint, liquidity standpoint, 108 00:06:45,720 --> 00:06:50,560 Speaker 1: price action standpoint, UH, difficulty of gauging the risk standpoint, 109 00:06:51,400 --> 00:06:54,400 Speaker 1: this environment that we're in right now, what is it? 110 00:06:54,800 --> 00:06:58,479 Speaker 1: Is there any historical analog in your view in terms 111 00:06:58,480 --> 00:07:01,400 Speaker 1: of liquidity is similar to oh A like for example, 112 00:07:01,839 --> 00:07:05,680 Speaker 1: there's this interbank funding spread between you know, Library and 113 00:07:05,720 --> 00:07:08,320 Speaker 1: O I S and that is quite wide right now, 114 00:07:08,440 --> 00:07:10,960 Speaker 1: and you know, the FED stepped in and you know 115 00:07:11,040 --> 00:07:13,480 Speaker 1: they're they're, they're, they're they're going the kitchen sake at 116 00:07:13,480 --> 00:07:15,720 Speaker 1: this in terms of both balance sheets as well as 117 00:07:15,800 --> 00:07:17,680 Speaker 1: you know, we're back to the year rate and we're 118 00:07:17,680 --> 00:07:20,120 Speaker 1: still seeing you know Library, I asked quite why. So 119 00:07:20,160 --> 00:07:23,040 Speaker 1: there's that element which is interesting. But in terms of 120 00:07:23,080 --> 00:07:25,600 Speaker 1: the real economy shock, this is kind of to me, 121 00:07:26,080 --> 00:07:28,320 Speaker 1: it's kind of like a nine eleven if it were 122 00:07:28,600 --> 00:07:31,160 Speaker 1: like over a very long period of time, and that 123 00:07:31,240 --> 00:07:34,720 Speaker 1: you know, this is just shutting down services activity. Even 124 00:07:34,720 --> 00:07:36,280 Speaker 1: in Oa, you know, you still have to go out 125 00:07:36,320 --> 00:07:39,400 Speaker 1: and get a haircut, right, But in this, in this 126 00:07:39,440 --> 00:07:42,120 Speaker 1: type of shock, it's I would say the closest analog 127 00:07:42,280 --> 00:07:45,160 Speaker 1: I can come up with would be something like eleven 128 00:07:45,440 --> 00:07:47,920 Speaker 1: over a longer period of time. So what does that 129 00:07:47,960 --> 00:07:50,800 Speaker 1: mean exactly for the economic impact? Does that mean we 130 00:07:50,880 --> 00:07:55,000 Speaker 1: have something more extreme but hopefully the economy recovers in 131 00:07:55,040 --> 00:07:58,000 Speaker 1: a few months, or does it mean that we have 132 00:07:58,240 --> 00:08:01,080 Speaker 1: a lasting impact. And I got to say, you know, 133 00:08:01,160 --> 00:08:04,200 Speaker 1: having been in Hong Kong for well, for all of 134 00:08:04,240 --> 00:08:07,320 Speaker 1: this and seeing how it plays out, even as the 135 00:08:07,360 --> 00:08:11,960 Speaker 1: cases kind of ebb over here, consumer behavior is still 136 00:08:12,120 --> 00:08:14,240 Speaker 1: very different to where it was at the beginning of 137 00:08:14,240 --> 00:08:16,280 Speaker 1: the year. People just aren't going out as much and 138 00:08:16,360 --> 00:08:19,120 Speaker 1: people aren't really working as normally. So is it going 139 00:08:19,200 --> 00:08:22,480 Speaker 1: to be a short impact or lasting impact? Right? I 140 00:08:22,760 --> 00:08:24,840 Speaker 1: think there's two elements of this. One is kind of 141 00:08:24,880 --> 00:08:27,200 Speaker 1: the behavior all of it you talked about, and so 142 00:08:27,240 --> 00:08:29,800 Speaker 1: we're we're tracking, um, We're very interested to see kind 143 00:08:29,800 --> 00:08:33,319 Speaker 1: of like how the Chinese and Hong Kong you know, 144 00:08:33,400 --> 00:08:37,560 Speaker 1: quote unquote reopenings work, you know, to what extents there's 145 00:08:37,600 --> 00:08:40,960 Speaker 1: a bounce back in psychology, we would expect that, um, 146 00:08:40,960 --> 00:08:44,160 Speaker 1: this would have a relatively lasting impact in terms of 147 00:08:44,240 --> 00:08:47,400 Speaker 1: like behavioral dynamics. But then the other element is policy, right, 148 00:08:47,480 --> 00:08:51,800 Speaker 1: so like how quickly do you open reopened the economy? Um, 149 00:08:51,840 --> 00:08:54,080 Speaker 1: you know, that's the whole debate right between V shape 150 00:08:54,120 --> 00:08:57,199 Speaker 1: you shape W shaps, L shaped recovery host reopening. But 151 00:08:57,320 --> 00:08:59,679 Speaker 1: it's not just a matter of how quickly you reopen 152 00:08:59,840 --> 00:09:03,319 Speaker 1: or how durable the social distancing procedures are. It's also 153 00:09:03,360 --> 00:09:05,360 Speaker 1: a function of the policy that we've already kind of 154 00:09:05,440 --> 00:09:08,440 Speaker 1: had in terms of how quick how quick were the 155 00:09:08,440 --> 00:09:12,600 Speaker 1: policymakers in terms of identifying the problem and reacting to it, 156 00:09:12,720 --> 00:09:14,200 Speaker 1: and at least in the case of for the U, 157 00:09:14,320 --> 00:09:17,640 Speaker 1: s quite a very related response in terms of public health, 158 00:09:17,720 --> 00:09:21,960 Speaker 1: and to this moment um nothing substantial fiscally, so um, 159 00:09:22,000 --> 00:09:25,000 Speaker 1: we would expect this to be quite a lasting shock. Um. 160 00:09:25,000 --> 00:09:27,880 Speaker 1: We expect some sort of policy in terms of fistical 161 00:09:27,960 --> 00:09:30,559 Speaker 1: policy to be cobbled together over the next couple of weeks, 162 00:09:30,800 --> 00:09:33,800 Speaker 1: hopefully something substantent, but for the time being, because of 163 00:09:33,840 --> 00:09:36,080 Speaker 1: how related the response was in the US from the 164 00:09:36,120 --> 00:09:39,120 Speaker 1: top down, Um, it's very difficult to like imagine a 165 00:09:39,200 --> 00:09:41,880 Speaker 1: Sparrea where we kind of just read the engine right 166 00:09:41,880 --> 00:09:44,360 Speaker 1: back up or able to have like a V shaped 167 00:09:44,720 --> 00:09:47,680 Speaker 1: reopening of these economies which are really just starting now 168 00:09:48,000 --> 00:09:51,760 Speaker 1: to shut down here in the US. So as noted, 169 00:09:51,760 --> 00:09:58,640 Speaker 1: we're recording this Monday Merge sixteen futures are currently limited down. 170 00:09:59,280 --> 00:10:03,040 Speaker 1: Last night it we got an emergency action from the 171 00:10:03,040 --> 00:10:06,520 Speaker 1: Federal Reserve slashing rates all the way de facto to 172 00:10:06,960 --> 00:10:12,600 Speaker 1: zero and also initiating a very substantial asset purchase more 173 00:10:12,679 --> 00:10:15,280 Speaker 1: or less QUEI. I think we can call it to 174 00:10:15,360 --> 00:10:18,120 Speaker 1: the tune of seven billion as far as I could tell, 175 00:10:18,400 --> 00:10:21,680 Speaker 1: essentially hit zero market impact. I was thinking when I 176 00:10:21,720 --> 00:10:23,720 Speaker 1: saw it, I was like, all right, this isn't gonna 177 00:10:23,720 --> 00:10:26,000 Speaker 1: be enough, but it will do something for risk appetite. 178 00:10:26,040 --> 00:10:30,760 Speaker 1: Maybe we get a brief bounce whatever. It's almost impossible 179 00:10:30,840 --> 00:10:34,480 Speaker 1: to discern any positive that got out of it. How 180 00:10:34,520 --> 00:10:37,679 Speaker 1: are you How surprised are you by how the swift 181 00:10:38,200 --> 00:10:41,959 Speaker 1: reaction this with or this with lack of reaction, and 182 00:10:42,000 --> 00:10:45,360 Speaker 1: then what that tells us at least personally I could 183 00:10:45,360 --> 00:10:48,760 Speaker 1: speak for for like our fund, both the emergency fifty 184 00:10:48,840 --> 00:10:51,720 Speaker 1: dipths cut as well as this cut to zero rates 185 00:10:51,720 --> 00:10:55,120 Speaker 1: and expanding QUEI h we sold the news immediately. I've 186 00:10:55,160 --> 00:10:58,520 Speaker 1: seen as the markets epen so um, I'm not surprised 187 00:10:58,559 --> 00:11:01,480 Speaker 1: that we're seeing this type of odds. And in terms 188 00:11:01,520 --> 00:11:04,200 Speaker 1: of in terms of portfolio managers, you know, given all 189 00:11:04,240 --> 00:11:07,439 Speaker 1: the volatility balance sheets are is grossing down across the board, 190 00:11:07,840 --> 00:11:10,920 Speaker 1: there's still like there's still an element of even dealer 191 00:11:10,960 --> 00:11:13,960 Speaker 1: balance sheets appear to be constrained, um, and and they're 192 00:11:13,960 --> 00:11:16,319 Speaker 1: not able to kind of pass along these lower rates 193 00:11:16,559 --> 00:11:19,200 Speaker 1: to other sectors of the economy, which is why you 194 00:11:19,240 --> 00:11:23,319 Speaker 1: see these inter bank credit spreads remain wide for this moment. 195 00:11:23,400 --> 00:11:25,800 Speaker 1: So I think what the market saying is like, look, 196 00:11:26,040 --> 00:11:29,200 Speaker 1: thanks FED for getting you know, getting down to zero out, expanding, 197 00:11:29,360 --> 00:11:31,120 Speaker 1: you know, doing doing what you can for to like 198 00:11:31,160 --> 00:11:33,680 Speaker 1: alleviate with cleary issues. But at the end of the day, 199 00:11:33,840 --> 00:11:36,840 Speaker 1: this is going to require very very strong fiscal policy response, 200 00:11:37,240 --> 00:11:40,000 Speaker 1: and so far, you know, we haven't really seen anything 201 00:11:40,040 --> 00:11:42,800 Speaker 1: of real substance. And and I'm kind of I'm glad 202 00:11:42,840 --> 00:11:44,520 Speaker 1: that the sect kind of got itself out of the 203 00:11:44,559 --> 00:11:47,520 Speaker 1: way quickly because now the debate goes you know, there 204 00:11:47,800 --> 00:11:50,400 Speaker 1: is no there's no Trump versus how will debate anywhere. 205 00:11:50,440 --> 00:11:52,880 Speaker 1: You know, we're down to zero, and it's time for 206 00:11:52,960 --> 00:11:55,280 Speaker 1: DC to get going. And so I think that's kind 207 00:11:55,280 --> 00:11:57,640 Speaker 1: of the calculus, um and and so that's why I'm 208 00:11:57,679 --> 00:12:00,560 Speaker 1: not too surprised that, you know, it has been quite 209 00:12:00,640 --> 00:12:14,360 Speaker 1: enough for the market that kind of feel better. Just 210 00:12:14,520 --> 00:12:18,200 Speaker 1: on the inter bank market point, we have seen a 211 00:12:18,200 --> 00:12:22,760 Speaker 1: lot of weird sort of plumbing issues there. So um, 212 00:12:22,800 --> 00:12:25,120 Speaker 1: as we're recording this, I just saw a headline float 213 00:12:25,120 --> 00:12:28,800 Speaker 1: past about commercial paper sort of drying up, which for 214 00:12:28,840 --> 00:12:31,200 Speaker 1: anyone who was watching the markets back in two thousand 215 00:12:31,280 --> 00:12:34,640 Speaker 1: eight is going to stir some really uneasy memories. But 216 00:12:34,679 --> 00:12:37,640 Speaker 1: we've also had some weirdness in US treasuries, lots of 217 00:12:37,679 --> 00:12:42,320 Speaker 1: talk about liquidity there, um, some really geeky, weird stuff 218 00:12:42,360 --> 00:12:46,600 Speaker 1: happening with the futures versus the cash market, something that 219 00:12:46,720 --> 00:12:49,959 Speaker 1: was important enough and weird enough for FED Chairman Jerome 220 00:12:50,040 --> 00:12:53,840 Speaker 1: Powell to actually mention on Sunday how much do those 221 00:12:53,880 --> 00:12:57,280 Speaker 1: sort of liquidity inter bank issues worry you at the 222 00:12:57,320 --> 00:13:00,240 Speaker 1: moment or how much do they factor into your sort 223 00:13:00,240 --> 00:13:03,400 Speaker 1: of day to day investment pieces. As we were watching 224 00:13:03,480 --> 00:13:06,880 Speaker 1: you know, bonds just not like you know usually if 225 00:13:07,080 --> 00:13:08,920 Speaker 1: before the crisis, it was kind of funny because you 226 00:13:08,920 --> 00:13:12,240 Speaker 1: would see like stocks would be like flat to like 227 00:13:12,480 --> 00:13:15,280 Speaker 1: barely down, and bonds would just you know, surge and 228 00:13:15,360 --> 00:13:18,120 Speaker 1: if stocks are ripping higher, bonds would be like flat. 229 00:13:18,320 --> 00:13:20,800 Speaker 1: It's kind of opposite that, right, So, like when we're 230 00:13:20,800 --> 00:13:23,679 Speaker 1: seeing big, like ten percent down days in the stock 231 00:13:23,720 --> 00:13:27,480 Speaker 1: market and bonds are only down, that's very concerning because 232 00:13:27,480 --> 00:13:31,320 Speaker 1: it reflects the fact that bonds and treasuries are not 233 00:13:31,440 --> 00:13:35,160 Speaker 1: hedging risk assets on a day to day basis. And 234 00:13:35,360 --> 00:13:37,960 Speaker 1: that was to me, that reflects just like a complete 235 00:13:38,240 --> 00:13:43,160 Speaker 1: you know, price and sensitive balance sheet, uh like grossing 236 00:13:43,160 --> 00:13:46,400 Speaker 1: down among the by side, just pure liquidations anything that 237 00:13:46,559 --> 00:13:49,119 Speaker 1: likewid just get out of and the lack of capacity 238 00:13:49,200 --> 00:13:52,600 Speaker 1: for dealers to absorb that on their balance sheet for 239 00:13:52,920 --> 00:13:56,000 Speaker 1: variety of reasons. You know, there's this combination of Bontel 240 00:13:56,040 --> 00:13:58,520 Speaker 1: three regulations as well as the U you know, the 241 00:13:59,280 --> 00:14:02,800 Speaker 1: ex extra federal deficits under Trump's tax cuts and spending, 242 00:14:03,000 --> 00:14:05,560 Speaker 1: and those kind of combined for this pretty perfect storm. 243 00:14:05,640 --> 00:14:08,320 Speaker 1: So I think the liquidity is destinately playing a role here. 244 00:14:08,559 --> 00:14:11,040 Speaker 1: You know, the FED stepping in on commercial paper would 245 00:14:11,040 --> 00:14:13,800 Speaker 1: be good. I also think though, like you know, these 246 00:14:13,840 --> 00:14:15,640 Speaker 1: these types of issues are a big deal. But even 247 00:14:15,640 --> 00:14:18,200 Speaker 1: if you stem them, you still need that physical response, 248 00:14:18,200 --> 00:14:21,080 Speaker 1: which is why I think that what would be what 249 00:14:21,080 --> 00:14:23,600 Speaker 1: would make for a good cocktail policy would be a 250 00:14:23,720 --> 00:14:27,120 Speaker 1: very very strong discor response with direct cash transfers and 251 00:14:27,240 --> 00:14:29,840 Speaker 1: the FED stepping in to buy municipal bonds to to 252 00:14:29,920 --> 00:14:32,720 Speaker 1: alleviate the burdens that state and local governments are going 253 00:14:32,760 --> 00:14:34,960 Speaker 1: to have. You know, they're the ones who are operationally 254 00:14:34,960 --> 00:14:37,080 Speaker 1: gonna have to try to alleviate a lot of what's 255 00:14:37,080 --> 00:14:39,200 Speaker 1: going on, and their tax revenues are gonna be punging. 256 00:14:39,280 --> 00:14:42,440 Speaker 1: So I think those those two things are are kind 257 00:14:42,440 --> 00:14:45,160 Speaker 1: of important. You know, buying treasuries is good so far, 258 00:14:45,680 --> 00:14:47,800 Speaker 1: it seems like treasuries are starting to have a little 259 00:14:47,800 --> 00:14:51,200 Speaker 1: bit more of portfolio hedge value. But we're gonna we're 260 00:14:51,200 --> 00:14:52,920 Speaker 1: probably gonna need a lot more than this, even if 261 00:14:52,960 --> 00:14:57,800 Speaker 1: we alleviate liquidity issues. So let's talk about the fiscal response. 262 00:14:57,880 --> 00:15:01,360 Speaker 1: And we're in this sort of interesting moment where I 263 00:15:01,360 --> 00:15:03,160 Speaker 1: don't know about what's going on in d C, and 264 00:15:03,200 --> 00:15:06,520 Speaker 1: I don't understand the brains of people who have been 265 00:15:06,560 --> 00:15:08,160 Speaker 1: in d C too long. I think it sort of 266 00:15:08,240 --> 00:15:11,240 Speaker 1: rots a lot of people's brains, but a lot of 267 00:15:11,240 --> 00:15:16,360 Speaker 1: smart people who I respect, who have different preexisting ideologies, 268 00:15:16,760 --> 00:15:22,400 Speaker 1: say a fiscal response, an aggressive fiscal response is necessary. 269 00:15:22,480 --> 00:15:27,520 Speaker 1: Explain to us first why fiscal not just monetary policy 270 00:15:28,040 --> 00:15:31,120 Speaker 1: is to you an important element of getting this right. 271 00:15:31,400 --> 00:15:35,440 Speaker 1: And then in terms of fiscal response design, what is 272 00:15:35,840 --> 00:15:39,640 Speaker 1: the best way to think about it? Well, so for 273 00:15:39,720 --> 00:15:42,160 Speaker 1: your first question, you think, you think her rates and 274 00:15:42,280 --> 00:15:44,920 Speaker 1: the price of money is long as far as he wants. 275 00:15:44,960 --> 00:15:48,400 Speaker 1: But unless folks want to take risks, it's not really 276 00:15:48,400 --> 00:15:51,720 Speaker 1: doing anything. Unique folks who are actually expanding balance sheet, 277 00:15:51,720 --> 00:15:55,040 Speaker 1: who are taking risks in order to you know, access 278 00:15:55,120 --> 00:15:57,720 Speaker 1: the lower funding costs that are available. So in the 279 00:15:57,760 --> 00:16:00,360 Speaker 1: case of what's happening right now, you're seeing, He's like, 280 00:16:00,720 --> 00:16:04,360 Speaker 1: restaurant traffic is down to the seventy percent already. And 281 00:16:04,680 --> 00:16:07,640 Speaker 1: you know, right now I'm looking outside, um through my 282 00:16:08,240 --> 00:16:11,280 Speaker 1: apartment window here in Dunlo, Brooklyn, I still see folks, 283 00:16:11,320 --> 00:16:14,720 Speaker 1: you know, biking on the Manhattan Bridge and public t 284 00:16:14,760 --> 00:16:17,080 Speaker 1: raeducation is still open, so like it could get much 285 00:16:17,080 --> 00:16:20,400 Speaker 1: worse still, And so in this type of environment, what 286 00:16:20,560 --> 00:16:24,480 Speaker 1: happens to folks who you know, work at places where 287 00:16:24,840 --> 00:16:28,800 Speaker 1: there's no traffic. What happens to folks who um just 288 00:16:28,800 --> 00:16:32,600 Speaker 1: just don't have the capacity to make anthony, whether it's 289 00:16:32,640 --> 00:16:36,080 Speaker 1: you know, paying electrical bills or you know, your mortgage. 290 00:16:36,640 --> 00:16:39,880 Speaker 1: The only way to alleviate that would be direct cash fanswers. 291 00:16:40,280 --> 00:16:42,720 Speaker 1: And I think that's why, um, you know, there's this 292 00:16:42,800 --> 00:16:45,360 Speaker 1: there's this big push now to recognize that. Look, you know, 293 00:16:45,720 --> 00:16:48,920 Speaker 1: there's there's no real risk appetite either in the markets 294 00:16:49,040 --> 00:16:51,440 Speaker 1: or in the real economy. No one's spending money. So 295 00:16:51,720 --> 00:16:54,560 Speaker 1: you know, cutting racist is helpful in terms of doing 296 00:16:54,600 --> 00:16:56,480 Speaker 1: all you can, but it's not going to really move 297 00:16:56,480 --> 00:16:59,480 Speaker 1: the needle in an ideal world. And you know, Joe 298 00:16:59,560 --> 00:17:01,760 Speaker 1: and I have talked about this a little bit on 299 00:17:01,800 --> 00:17:06,359 Speaker 1: previous episodes, but you mentioned the FED possibly buying up 300 00:17:06,480 --> 00:17:08,840 Speaker 1: UNI vons. But when it comes to the federal government, 301 00:17:09,240 --> 00:17:11,840 Speaker 1: what would you ideally like to see in terms of 302 00:17:11,840 --> 00:17:16,600 Speaker 1: fiscal policy? Right So, I mean there's there's a lot 303 00:17:16,640 --> 00:17:20,119 Speaker 1: of proposals out there right now, and you know, everyone 304 00:17:20,359 --> 00:17:21,879 Speaker 1: kind of has their own take, but I think the 305 00:17:21,920 --> 00:17:24,439 Speaker 1: one thing that kind of unifies all of them is 306 00:17:24,520 --> 00:17:27,959 Speaker 1: direct cash transfers, mail some checks or like you know, 307 00:17:28,080 --> 00:17:32,320 Speaker 1: electronically credit them to accounts, because you're gonna need kind 308 00:17:32,320 --> 00:17:36,120 Speaker 1: of like a federal government bridge loan to consumers and businesses, 309 00:17:36,520 --> 00:17:40,640 Speaker 1: the kind of whether the financial shock while we are 310 00:17:40,720 --> 00:17:43,439 Speaker 1: in this kind of social distancing environment. So there's a 311 00:17:43,480 --> 00:17:44,960 Speaker 1: variety of way to do it, and there's a variety 312 00:17:44,960 --> 00:17:48,240 Speaker 1: of way to target it. But that's the main issue is, yes, 313 00:17:48,280 --> 00:17:50,880 Speaker 1: you can cut taxes and all this stuff, but primarily 314 00:17:51,000 --> 00:17:55,120 Speaker 1: especially among the most vulnerable financial financially, most vulnerable parts 315 00:17:55,119 --> 00:17:57,600 Speaker 1: of the population, we're gonna you know, either be furloughed, 316 00:17:57,640 --> 00:18:00,320 Speaker 1: laid off, or don't have you know, savings to kind 317 00:18:00,320 --> 00:18:03,399 Speaker 1: of draw down from. It has to be direct cash 318 00:18:03,440 --> 00:18:07,119 Speaker 1: transwers to those hooks. Before we go any further. Actually, 319 00:18:07,240 --> 00:18:11,600 Speaker 1: I'm curious, you know, I introduced you as a portfolio 320 00:18:11,680 --> 00:18:16,040 Speaker 1: manager at e I a All Weather Elpha Partners. But actually, 321 00:18:16,080 --> 00:18:17,840 Speaker 1: just give us a little bit more about your background. 322 00:18:17,840 --> 00:18:20,520 Speaker 1: What's your what does your firm do? It's a hedge fund, 323 00:18:20,600 --> 00:18:22,560 Speaker 1: but tell us a little bit more about that and 324 00:18:22,640 --> 00:18:26,680 Speaker 1: how you generally go about your framework for thinking about 325 00:18:26,800 --> 00:18:30,359 Speaker 1: markets in any environment. Right, So, yes, we're hedge fund. 326 00:18:30,560 --> 00:18:33,399 Speaker 1: Um there's a macro element to it, and there's a 327 00:18:33,480 --> 00:18:36,439 Speaker 1: launch short element to it, so march or equity. So 328 00:18:36,520 --> 00:18:39,399 Speaker 1: my partner, he runs a launch short equity side of 329 00:18:39,400 --> 00:18:43,639 Speaker 1: the portfolio, and UM, I do both UM discretionary macro 330 00:18:44,280 --> 00:18:46,679 Speaker 1: as well as on top of that, UM you know, 331 00:18:47,160 --> 00:18:50,800 Speaker 1: because we're all others fund a lot of the risk allocations, 332 00:18:50,880 --> 00:18:55,040 Speaker 1: risk exposure allocations across different economic scenarios, across different athletic classes. 333 00:18:55,480 --> 00:18:58,240 Speaker 1: So the way we kind of work is, um, you know, 334 00:18:58,280 --> 00:19:00,280 Speaker 1: we start from the top and we think of what 335 00:19:00,320 --> 00:19:03,639 Speaker 1: are the you know, key trends and themes in the 336 00:19:03,640 --> 00:19:06,680 Speaker 1: macro economy, what are the best regions, asked the classes 337 00:19:06,800 --> 00:19:09,560 Speaker 1: to be looking in, and we just drilled down from there. 338 00:19:09,800 --> 00:19:12,000 Speaker 1: UM my partner will be doing a lot more single 339 00:19:12,080 --> 00:19:15,480 Speaker 1: name stock picking and looking for you know, in industry 340 00:19:15,520 --> 00:19:19,120 Speaker 1: have a trends. I'm more focused on broader macro pictures 341 00:19:19,240 --> 00:19:21,080 Speaker 1: and so, um you know a lot of a lot 342 00:19:21,080 --> 00:19:23,919 Speaker 1: of different frameworks that I utilized. A big part of it, 343 00:19:24,000 --> 00:19:27,639 Speaker 1: again is just kind of understanding the interlinkages between balance sheets, 344 00:19:27,640 --> 00:19:30,120 Speaker 1: so like which balance sheets and the global economy are 345 00:19:30,200 --> 00:19:33,160 Speaker 1: able to expand which ones are contracting and what does 346 00:19:33,200 --> 00:19:36,280 Speaker 1: that mean to different economic indicators and financial market edifications. 347 00:19:36,800 --> 00:19:39,399 Speaker 1: So walk us through what a typical day looks like 348 00:19:39,440 --> 00:19:41,600 Speaker 1: for you at the moment. You know, we've mentioned a 349 00:19:41,600 --> 00:19:43,320 Speaker 1: couple of times. Now that we are a limit down 350 00:19:43,359 --> 00:19:47,040 Speaker 1: this Monday, March sixteen, what do you do when you 351 00:19:47,080 --> 00:19:48,960 Speaker 1: sort of come into the office and how do you 352 00:19:49,200 --> 00:19:54,360 Speaker 1: position yourself or think about things? Well, Um, during this crisis, 353 00:19:54,480 --> 00:19:56,200 Speaker 1: we were lucky enough to be kind of on top 354 00:19:56,240 --> 00:19:58,120 Speaker 1: of it. So we we've you know, we've been quite 355 00:19:58,160 --> 00:20:01,080 Speaker 1: short and the large short side the portfolio has been 356 00:20:01,160 --> 00:20:04,200 Speaker 1: quite grossed down. So we've been we've been navigating this 357 00:20:04,600 --> 00:20:07,439 Speaker 1: relatively well. But like in these types of environments, Um, 358 00:20:07,480 --> 00:20:10,480 Speaker 1: you know, a lot of it is just um, you know, tactical, 359 00:20:10,520 --> 00:20:13,960 Speaker 1: tactical trade. So the market plunges and we want to 360 00:20:14,000 --> 00:20:15,760 Speaker 1: make sure that you know, okay, we made a little 361 00:20:15,800 --> 00:20:17,600 Speaker 1: bit of money there are we able to kind of 362 00:20:17,720 --> 00:20:21,000 Speaker 1: protect ourselves from the volatility of its just stepping right back, 363 00:20:21,320 --> 00:20:23,400 Speaker 1: but at the same time not trying to just enter 364 00:20:23,440 --> 00:20:26,399 Speaker 1: exit enter excellent. So just looking across like a lot 365 00:20:26,440 --> 00:20:28,560 Speaker 1: of what I do is I look across assets to 366 00:20:28,680 --> 00:20:31,880 Speaker 1: see which asset class in the moment provides the best 367 00:20:31,920 --> 00:20:35,360 Speaker 1: asymmetry for upside and downside for risk exposures. But I mean, 368 00:20:35,600 --> 00:20:38,520 Speaker 1: this is certainly not a typical type of environment. My 369 00:20:38,560 --> 00:20:41,840 Speaker 1: day to day is certainly not as active as it 370 00:20:41,960 --> 00:20:45,080 Speaker 1: is these days. Um usually you know, I'm just I'm 371 00:20:45,119 --> 00:20:48,920 Speaker 1: tracking macroeconomic indicators. I'm chatting with folks I consider to 372 00:20:49,240 --> 00:20:51,399 Speaker 1: be smart. You know. The number one thing I'm always 373 00:20:51,400 --> 00:20:53,879 Speaker 1: looking at how the forward great curves across the world 374 00:20:53,880 --> 00:20:56,240 Speaker 1: to see what's priced into interest rates and then how 375 00:20:56,240 --> 00:20:59,399 Speaker 1: does that affect asset clashes across the board. But in 376 00:20:59,480 --> 00:21:02,000 Speaker 1: this type of vironments, it's literally just the only way 377 00:21:02,040 --> 00:21:04,440 Speaker 1: to trade. It is just technicals and watching the cross 378 00:21:04,480 --> 00:21:07,320 Speaker 1: asset picture for signals, and it really it really requires 379 00:21:07,359 --> 00:21:09,720 Speaker 1: kind of like a quick trigger finger and a reliance 380 00:21:09,760 --> 00:21:12,399 Speaker 1: on a little bit of instincts and and gut dutt feeling. 381 00:21:12,840 --> 00:21:14,720 Speaker 1: This isn't of the environments where you know, you're you're 382 00:21:14,720 --> 00:21:17,159 Speaker 1: sitting on it cl mapping out you know, what's the 383 00:21:17,280 --> 00:21:20,680 Speaker 1: right multiple for the stock market. This is a purely 384 00:21:20,800 --> 00:21:25,880 Speaker 1: behavioral base case or scenario right now. So it's literally 385 00:21:25,920 --> 00:21:30,960 Speaker 1: it's the cash trading in the market. Of course, futures 386 00:21:30,960 --> 00:21:33,520 Speaker 1: have been going on night. Cash trading is about to start, 387 00:21:33,960 --> 00:21:37,680 Speaker 1: so you gotta do some trades. Well, so let's see 388 00:21:37,720 --> 00:21:40,560 Speaker 1: where this market opens. I'm thinking it might actually just 389 00:21:40,960 --> 00:21:45,719 Speaker 1: hit the level two circuit breaker. Let's see if it doesn't, 390 00:21:45,800 --> 00:21:48,760 Speaker 1: then um, perhaps there's there's a little bit of room 391 00:21:48,880 --> 00:21:52,400 Speaker 1: before I can get there, but um yeah, mostly like 392 00:21:52,440 --> 00:21:54,639 Speaker 1: what I'm in our in our tactical side of our 393 00:21:54,640 --> 00:21:57,280 Speaker 1: micro portfolio, we're quite short right now. So if the 394 00:21:57,320 --> 00:21:59,720 Speaker 1: market opens and there's a little bit of trading, I'm 395 00:21:59,760 --> 00:22:02,119 Speaker 1: looking to just kind of lock in a little bit 396 00:22:02,119 --> 00:22:05,320 Speaker 1: of profits and then trail my stop bosses a little 397 00:22:05,320 --> 00:22:07,760 Speaker 1: bit to tighten up the risk sports we have. Because 398 00:22:07,800 --> 00:22:10,240 Speaker 1: even if you're barished and you're doing wongless environments, the 399 00:22:10,280 --> 00:22:14,000 Speaker 1: snap back roullies are just as longtile So we're we're 400 00:22:14,040 --> 00:22:16,040 Speaker 1: trying to take advantage of like these limit down dates 401 00:22:16,080 --> 00:22:19,240 Speaker 1: that slowly start to gross our our portfolio down a 402 00:22:19,280 --> 00:22:21,240 Speaker 1: little bit and and raise our cash levels. So that 403 00:22:21,359 --> 00:22:22,959 Speaker 1: you mean, when you say gross it down, just for 404 00:22:23,000 --> 00:22:25,960 Speaker 1: people who don't know the terminology, what does that mean? Right? So, 405 00:22:26,040 --> 00:22:28,040 Speaker 1: like in a portfolio, you can be long something, you 406 00:22:28,040 --> 00:22:30,320 Speaker 1: can be short something, and so like you know, let's 407 00:22:30,359 --> 00:22:33,000 Speaker 1: say you're long ten units of risk and short five 408 00:22:33,119 --> 00:22:35,920 Speaker 1: units of risk, that would mean you're net long five 409 00:22:35,920 --> 00:22:39,239 Speaker 1: in this In this environment, we're trying to reduce our 410 00:22:39,240 --> 00:22:42,159 Speaker 1: exposures on both the long and short side, especially because 411 00:22:42,400 --> 00:22:44,399 Speaker 1: we were able to capture the lion's share of the 412 00:22:44,440 --> 00:22:48,879 Speaker 1: move since the middle late February. So at this point, um, 413 00:22:49,040 --> 00:22:51,840 Speaker 1: given all the volatility and all the policy, all the 414 00:22:51,840 --> 00:22:55,440 Speaker 1: potential policy coming coming about, we're trying to just reduce 415 00:22:55,480 --> 00:22:58,200 Speaker 1: our exposure on boats on the long and short side 416 00:22:58,440 --> 00:23:02,040 Speaker 1: of our macro portfolio. And I would imagine my my, 417 00:23:02,240 --> 00:23:04,639 Speaker 1: my partner, he will be starting to kind of gross up, 418 00:23:04,920 --> 00:23:08,200 Speaker 1: so finally starting to bargain hunts and start to buy 419 00:23:08,240 --> 00:23:11,040 Speaker 1: a little bit um into these into these little peaks. 420 00:23:11,080 --> 00:23:13,400 Speaker 1: But um, and this is especially important in terms of grossing, 421 00:23:13,640 --> 00:23:16,000 Speaker 1: especially important because you know, there's rumors of market my 422 00:23:16,040 --> 00:23:18,880 Speaker 1: clothes at some point this week, and I'm not really 423 00:23:18,920 --> 00:23:21,360 Speaker 1: sure you know what's going to happen in the interim 424 00:23:21,359 --> 00:23:24,159 Speaker 1: if markets close. So it looks like, you know, Marcus 425 00:23:24,160 --> 00:23:25,840 Speaker 1: will be opening in about a minute. So let's see 426 00:23:25,840 --> 00:23:29,560 Speaker 1: if if they're able to avoid a circuit breaker or not. 427 00:23:30,960 --> 00:23:34,240 Speaker 1: This is really exciting. We just wanted to reiterate. I mean, 428 00:23:34,880 --> 00:23:37,520 Speaker 1: we have no reporting that markets are about to close. 429 00:23:37,560 --> 00:23:40,400 Speaker 1: Of course by the time this comes out, who knows. 430 00:23:40,920 --> 00:23:44,240 Speaker 1: But it has happened at times of national emergency at 431 00:23:44,600 --> 00:23:48,120 Speaker 1: in the past. We don't like spread any under rumors, 432 00:23:48,119 --> 00:23:51,040 Speaker 1: but it is something that people are talking about right 433 00:23:51,080 --> 00:23:54,879 Speaker 1: now as a concern, as a risk. Officials have denied 434 00:23:54,920 --> 00:23:58,560 Speaker 1: that it's something uh imminent or various arguments for against. 435 00:23:58,880 --> 00:24:01,680 Speaker 1: So I just want to put that out there, depending 436 00:24:01,920 --> 00:24:04,159 Speaker 1: on when people are listening that as far as we 437 00:24:04,240 --> 00:24:07,879 Speaker 1: know at this point at Monday nine, nine March sixteen, 438 00:24:08,560 --> 00:24:12,399 Speaker 1: there is no actual evidence yet that a closure of 439 00:24:12,440 --> 00:24:14,920 Speaker 1: this temporary closure of the stock market is something in 440 00:24:14,960 --> 00:24:20,359 Speaker 1: the cards, but it is It is certainly trader chatter, 441 00:24:20,480 --> 00:24:23,120 Speaker 1: to say the least, and it's getting discussed in some 442 00:24:23,160 --> 00:24:26,600 Speaker 1: parts of the media. So here we go. It's almost 443 00:24:26,640 --> 00:24:31,919 Speaker 1: nine thirty and we'll see how imminently. Um, yeah, we'll 444 00:24:31,960 --> 00:24:35,399 Speaker 1: see if we imminently hit the circuit breakers. There we 445 00:24:35,440 --> 00:24:37,720 Speaker 1: got I'm not in front of a Bloomberg terminal. You 446 00:24:37,760 --> 00:24:40,160 Speaker 1: guys are gonna have to narrate this. Yeah, we're gonna 447 00:24:40,200 --> 00:24:42,600 Speaker 1: have to narrate in front of are we not? For 448 00:24:42,720 --> 00:24:45,800 Speaker 1: we at we got level one. So for people who 449 00:24:46,080 --> 00:24:49,560 Speaker 1: don't know what that means, the circuit breakers and level one, 450 00:24:49,600 --> 00:24:51,479 Speaker 1: what does that mean? Like? What does that? What does 451 00:24:51,520 --> 00:24:55,480 Speaker 1: that tell us? Right? So, um, there's three levels, the 452 00:24:55,520 --> 00:24:59,400 Speaker 1: circuit breakers one or seven percent down they on down 453 00:24:59,440 --> 00:25:01,960 Speaker 1: day one percent down day. When a level one hits, 454 00:25:02,359 --> 00:25:08,719 Speaker 1: then trading halts UM for fifty minutes. And then if 455 00:25:08,760 --> 00:25:11,240 Speaker 1: if it reopens and it gets to the level two level, 456 00:25:11,840 --> 00:25:15,359 Speaker 1: which is thirteen percent down, it's closed for another fifteen minutes, 457 00:25:15,760 --> 00:25:20,320 Speaker 1: and then if it hits the final down level three trigger, 458 00:25:20,720 --> 00:25:23,560 Speaker 1: then trading is halted for the rest of the day. Okay, 459 00:25:23,880 --> 00:25:26,840 Speaker 1: So we hit level one, UM, we opened at DRED, 460 00:25:27,040 --> 00:25:30,840 Speaker 1: which is about fifty five points lower there than where 461 00:25:30,840 --> 00:25:34,520 Speaker 1: we close with the circuit breaker last night with the 462 00:25:34,560 --> 00:25:38,560 Speaker 1: limit down last night, UM, and about two points from 463 00:25:38,680 --> 00:25:41,560 Speaker 1: where we close on Friday. So markets are gonna be 464 00:25:41,560 --> 00:25:45,320 Speaker 1: closed until and then they're gonna reopen, and if we 465 00:25:45,480 --> 00:25:48,440 Speaker 1: get to that level, which is a thirteen per cent 466 00:25:48,480 --> 00:25:51,560 Speaker 1: circuit breaker level two, then they'll close again till ten 467 00:25:52,240 --> 00:25:55,280 Speaker 1: and then we'll see, um, are we able to avoid 468 00:25:55,320 --> 00:25:58,040 Speaker 1: more or do we see some sort of short tweas, 469 00:25:58,160 --> 00:26:00,560 Speaker 1: especially if we see some policy say r something. But 470 00:26:00,800 --> 00:26:03,400 Speaker 1: but yeah, like there was there was nothing I could do. UM. 471 00:26:03,800 --> 00:26:07,200 Speaker 1: Markets markets just open spin closed. So I'm just kind 472 00:26:07,200 --> 00:26:11,480 Speaker 1: of I'm available talking to you guys. Okay, So just 473 00:26:11,520 --> 00:26:14,640 Speaker 1: thinking about that level three circuit breaker, which would shut 474 00:26:14,680 --> 00:26:16,760 Speaker 1: down the market for a whole day. We have seen 475 00:26:16,800 --> 00:26:19,119 Speaker 1: some people start to talk and some people start to 476 00:26:19,119 --> 00:26:23,240 Speaker 1: advocate as well for getting that market closure, like a 477 00:26:23,840 --> 00:26:26,680 Speaker 1: temporary market closure, but one that would last for more 478 00:26:26,720 --> 00:26:30,560 Speaker 1: than a day, just to help everyone sort of relax 479 00:26:30,640 --> 00:26:33,440 Speaker 1: and maybe even help with some of that social distancing 480 00:26:33,520 --> 00:26:36,240 Speaker 1: on Wall Street. What do you think about that idea? 481 00:26:36,280 --> 00:26:38,080 Speaker 1: Do you think it would be helpful at this point 482 00:26:38,840 --> 00:26:41,159 Speaker 1: to an extent? I think there might be something to it, 483 00:26:41,240 --> 00:26:44,439 Speaker 1: especially if we're like having like a you know, down 484 00:26:44,520 --> 00:26:46,400 Speaker 1: day in the market. Also, you know, after the FED 485 00:26:46,480 --> 00:26:48,840 Speaker 1: cuts of the zero you know, it's possible that like 486 00:26:49,240 --> 00:26:51,120 Speaker 1: at some point, what ends up happening if you could 487 00:26:51,119 --> 00:26:53,840 Speaker 1: see the way economy is working is that there's multiple 488 00:26:54,480 --> 00:26:56,760 Speaker 1: so like you could see a scenario where, you know, 489 00:26:56,880 --> 00:27:01,520 Speaker 1: even if we have optimal policy and v shaped recovery 490 00:27:01,520 --> 00:27:04,199 Speaker 1: and activity which people going even see, even then just 491 00:27:04,240 --> 00:27:07,520 Speaker 1: a financial hit alone could create emergent feedback loops and 492 00:27:07,600 --> 00:27:10,639 Speaker 1: to create kind of like a permanent damage, like irreversible damage. 493 00:27:10,720 --> 00:27:13,359 Speaker 1: You know, there's there's a case be made to you know, 494 00:27:13,520 --> 00:27:15,919 Speaker 1: shut down markets for a couple of days, for a 495 00:27:15,920 --> 00:27:18,359 Speaker 1: few days a week or so, as long as in 496 00:27:18,400 --> 00:27:23,280 Speaker 1: the interim, there's a very very powerful physcal policy being crafted, 497 00:27:23,560 --> 00:27:26,680 Speaker 1: especially if it's a coordinated globally coordinated as the type 498 00:27:26,720 --> 00:27:28,800 Speaker 1: of policy. If you're gonna shut down the markets and 499 00:27:28,880 --> 00:27:31,119 Speaker 1: not do anything in the meantime, um, you know, you're 500 00:27:31,119 --> 00:27:34,600 Speaker 1: just gonna have like a massive, massive list of cell 501 00:27:34,720 --> 00:27:37,840 Speaker 1: orders that are just gonna hit immediately when the markets reopen. 502 00:27:38,240 --> 00:27:41,480 Speaker 1: Pakistan in two thousand eight kind of they create they 503 00:27:41,520 --> 00:27:44,840 Speaker 1: like implemented the floor to the to the Karake stocket change, 504 00:27:44,840 --> 00:27:48,040 Speaker 1: which is effectively showing the Marcus when they reopened. It 505 00:27:48,040 --> 00:27:51,679 Speaker 1: was so like you have to utilize the time in 506 00:27:51,720 --> 00:27:54,320 Speaker 1: the interim, otherwise you're just gonna make the problem worse 507 00:27:54,440 --> 00:27:57,040 Speaker 1: because you're just gonna have price and sensitive cell orders 508 00:27:57,160 --> 00:27:59,159 Speaker 1: and like I like right now, for example, because the 509 00:27:59,200 --> 00:28:01,719 Speaker 1: Marcuts are closed, the stock you know, the stock market supposts. 510 00:28:01,800 --> 00:28:04,919 Speaker 1: You're seeing oil get hit for that is anything that's liquid, 511 00:28:05,000 --> 00:28:07,840 Speaker 1: anything you can trade. Um, you know, that's how people 512 00:28:07,880 --> 00:28:10,080 Speaker 1: are kind of shedding risk or hedging risk because they 513 00:28:10,119 --> 00:28:13,080 Speaker 1: can't trade the stocks. So in the end, you could 514 00:28:13,080 --> 00:28:15,720 Speaker 1: shut down one part of the market, but in an 515 00:28:15,840 --> 00:28:20,200 Speaker 1: environment in which the demand is I need cash right now, 516 00:28:20,640 --> 00:28:23,359 Speaker 1: they'll just find something that's trading and sell that as 517 00:28:23,400 --> 00:28:26,040 Speaker 1: a proxy. Yeah. So, like you know, if you shut 518 00:28:26,040 --> 00:28:28,160 Speaker 1: down the futures exchanges, it gets a little bit more 519 00:28:28,160 --> 00:28:31,200 Speaker 1: difficult to you know, trade you know, crude oil futures 520 00:28:31,280 --> 00:28:33,480 Speaker 1: or like gold or soilar features. But you know that 521 00:28:33,560 --> 00:28:35,360 Speaker 1: you can always do it in physical you know, that's 522 00:28:35,359 --> 00:28:37,119 Speaker 1: still there. I don't know, so I don't really know 523 00:28:37,160 --> 00:28:40,320 Speaker 1: how you would do that right now, given the social distancing. 524 00:28:40,440 --> 00:28:43,360 Speaker 1: But you know, they're like, at the at the very least, 525 00:28:43,400 --> 00:28:45,360 Speaker 1: you have a scenario where you just have like a 526 00:28:45,480 --> 00:28:49,640 Speaker 1: massive set of cell orders that would all hit at once, 527 00:28:49,880 --> 00:28:51,320 Speaker 1: which is kind of what we're seeing with each of 528 00:28:51,320 --> 00:28:53,600 Speaker 1: these circuit breakers. But speaking to your point about this 529 00:28:53,720 --> 00:28:57,440 Speaker 1: raising cash, you know, like silver's down to day, gold 530 00:28:57,520 --> 00:29:02,520 Speaker 1: is down four to day. These aren't necessarily super cyclical asset. 531 00:29:02,760 --> 00:29:05,959 Speaker 1: It's just anything that you can get out of. They exist, 532 00:29:06,120 --> 00:29:09,800 Speaker 1: they exist, and so the only safe haven is something 533 00:29:09,840 --> 00:29:12,640 Speaker 1: that like all the liabilities are denominated, and in this 534 00:29:12,720 --> 00:29:17,240 Speaker 1: case is just the occurrency. Yeah. So, now, as we 535 00:29:17,280 --> 00:29:21,480 Speaker 1: originally said in our intro, the original topic we were 536 00:29:21,520 --> 00:29:24,840 Speaker 1: going to have you to discuss back before the world 537 00:29:25,120 --> 00:29:28,040 Speaker 1: went crazy, was your sort of kind of contrarian view 538 00:29:28,120 --> 00:29:32,560 Speaker 1: that Bernie Sanders presidency could actually be good for U 539 00:29:33,040 --> 00:29:36,720 Speaker 1: pretext corporate profits, contrary to what most people on Wall 540 00:29:36,720 --> 00:29:40,000 Speaker 1: Street would assume. And I guess you know that specific 541 00:29:40,120 --> 00:29:44,280 Speaker 1: angle has lost some timeliness. Nonetheless, it does sort of 542 00:29:44,280 --> 00:29:47,560 Speaker 1: relate to something that you said a few minutes ago 543 00:29:47,600 --> 00:29:51,240 Speaker 1: about how your sort of core macro framework that you 544 00:29:51,320 --> 00:29:53,920 Speaker 1: used to think about markets in any in any condition, 545 00:29:54,600 --> 00:29:58,600 Speaker 1: whether it's crisis or not, is about the balance sheet 546 00:29:58,720 --> 00:30:03,040 Speaker 1: perspective and thinking about interlocking balance sheets between different sectors 547 00:30:03,080 --> 00:30:05,640 Speaker 1: of the economy. Why do you talk about like what 548 00:30:05,640 --> 00:30:08,640 Speaker 1: what is the balance sheet framework that you talk about? 549 00:30:09,080 --> 00:30:14,640 Speaker 1: And then how does it apply to crisis economics? Right? So, um, 550 00:30:14,680 --> 00:30:17,640 Speaker 1: you know, there's there's been some really really cool um 551 00:30:17,760 --> 00:30:20,120 Speaker 1: conceptual frameworks that have been developed, a lot of them 552 00:30:20,160 --> 00:30:23,320 Speaker 1: by post Kaneci economics like Hyman Minsky for example. The 553 00:30:23,360 --> 00:30:25,600 Speaker 1: way it's kind of framed is that you kind of 554 00:30:25,600 --> 00:30:28,720 Speaker 1: break down the global economy into different sectors. Like you 555 00:30:28,760 --> 00:30:32,600 Speaker 1: have the public sector, like the federal governmance have households 556 00:30:32,600 --> 00:30:36,840 Speaker 1: and consumers, you have businesses, you have you know the 557 00:30:37,080 --> 00:30:39,719 Speaker 1: forum sector, right, so like the you know, the trade 558 00:30:40,000 --> 00:30:42,520 Speaker 1: and so like if you if you're able to kind 559 00:30:42,560 --> 00:30:46,080 Speaker 1: of algebraically take all of the different sectors of the economy. 560 00:30:46,400 --> 00:30:50,040 Speaker 1: You're able to create kind of axiomatic models, so like 561 00:30:50,120 --> 00:30:53,600 Speaker 1: you're able to say, no matter what happens, these these 562 00:30:53,600 --> 00:30:56,640 Speaker 1: things are kind of accounting identities, and from there you 563 00:30:56,680 --> 00:30:59,479 Speaker 1: can kind of navigate through to see, Okay, you know, 564 00:31:00,400 --> 00:31:02,320 Speaker 1: as money flows from one sector any time and to 565 00:31:02,400 --> 00:31:04,840 Speaker 1: the other, what does that mean? And then how do 566 00:31:04,880 --> 00:31:08,040 Speaker 1: you kind of model out the full effect of that. So, 567 00:31:08,120 --> 00:31:11,120 Speaker 1: for example, speaking to your contrarian view of like, um, 568 00:31:11,160 --> 00:31:14,880 Speaker 1: you know, Bernie Sanders have a policy could be actually 569 00:31:14,880 --> 00:31:17,600 Speaker 1: a good thing for pre tax corporate profit growth. Um, 570 00:31:17,640 --> 00:31:20,280 Speaker 1: there's something called the collech Key leaving profit equation. I 571 00:31:20,320 --> 00:31:22,400 Speaker 1: know you've had a string of bos servandantae on a 572 00:31:22,400 --> 00:31:24,640 Speaker 1: couple of times. He's kind of likezing in my opinion, 573 00:31:24,640 --> 00:31:26,280 Speaker 1: like expert on this. And the way it kind of 574 00:31:26,320 --> 00:31:30,760 Speaker 1: works is that you can derive the profits in the economy, 575 00:31:30,800 --> 00:31:33,160 Speaker 1: the corporate profits in the economy, by looking at all 576 00:31:33,160 --> 00:31:36,040 Speaker 1: the other sectors of the economy. The things that help 577 00:31:36,080 --> 00:31:40,880 Speaker 1: corporate profits are net investments dividends, and the things that 578 00:31:41,080 --> 00:31:45,920 Speaker 1: curt profits are non business saving. So like if personal state, 579 00:31:46,080 --> 00:31:49,080 Speaker 1: household savings rates go up, if foreign savings rates go up, 580 00:31:49,120 --> 00:31:51,560 Speaker 1: which would mean uh, you know, in terms of the 581 00:31:51,560 --> 00:31:53,880 Speaker 1: trade account, and if government saving can s go up, 582 00:31:53,920 --> 00:31:58,760 Speaker 1: which would mean the deficit declines. Those things axiomatically would 583 00:31:58,800 --> 00:32:05,160 Speaker 1: harm profits growth, while corporate investments dividends, those things actiomatically 584 00:32:05,400 --> 00:32:07,560 Speaker 1: help profit growth. That's kind of how the flow of 585 00:32:07,600 --> 00:32:12,000 Speaker 1: funds work. So the question becomes which of these you know, 586 00:32:12,200 --> 00:32:14,560 Speaker 1: when you break it down into all these individual sectors, 587 00:32:14,600 --> 00:32:18,000 Speaker 1: which ones would see expanding balance sheets in terms of 588 00:32:18,200 --> 00:32:21,800 Speaker 1: expanding investments or expanding the federal budget, and which one 589 00:32:21,840 --> 00:32:24,640 Speaker 1: would see contracting balance sheet. And then when you look 590 00:32:24,680 --> 00:32:26,880 Speaker 1: through and net them all out, you're able to derive 591 00:32:27,000 --> 00:32:29,760 Speaker 1: corporate profits. So I can kind of see how that 592 00:32:29,760 --> 00:32:34,240 Speaker 1: would work in semi normal times, but I guess we're 593 00:32:34,320 --> 00:32:37,680 Speaker 1: far from normal times now. So how would that framework 594 00:32:37,760 --> 00:32:41,160 Speaker 1: apply to the current situation. Is it all about figuring 595 00:32:41,160 --> 00:32:44,800 Speaker 1: out where federal government funds actually flow into or is 596 00:32:44,840 --> 00:32:49,240 Speaker 1: there also a sort of movement of money between certain 597 00:32:49,280 --> 00:32:52,560 Speaker 1: parts of the private sector? Right, and and and it's 598 00:32:52,600 --> 00:32:55,240 Speaker 1: true that, like you know, where in the private sector 599 00:32:55,320 --> 00:32:58,240 Speaker 1: money is flowing, it does matter, Like, for example, you know, 600 00:32:58,280 --> 00:33:01,280 Speaker 1: wealthy folks, they say most of what they earned because 601 00:33:01,400 --> 00:33:04,320 Speaker 1: you know, they have plenty of free cash flow and 602 00:33:04,400 --> 00:33:06,320 Speaker 1: that that money it was in the stocks and bonds. 603 00:33:06,600 --> 00:33:09,680 Speaker 1: Whereas folks who are further down in the income distribution, 604 00:33:10,120 --> 00:33:13,440 Speaker 1: you know, they're like hands the mouth, you know, access 605 00:33:13,480 --> 00:33:16,360 Speaker 1: cash in their in their income. Most of that gets 606 00:33:16,400 --> 00:33:18,840 Speaker 1: respent right right back into the economy. So there's different 607 00:33:19,240 --> 00:33:21,760 Speaker 1: multipliers as well within the private sector. But for example, 608 00:33:22,600 --> 00:33:25,080 Speaker 1: let's let's talk about this framework right here, right now, 609 00:33:25,160 --> 00:33:28,320 Speaker 1: right for for this current scenario, this current situation. Okay, 610 00:33:28,360 --> 00:33:31,640 Speaker 1: so what's gonna happen to the corporate net investments? Well, 611 00:33:31,880 --> 00:33:35,680 Speaker 1: why would you expand investments when demand is collapsive? Right, 612 00:33:36,040 --> 00:33:38,800 Speaker 1: So that looks to be probably going to be taking 613 00:33:38,800 --> 00:33:42,760 Speaker 1: a big hit. Household savings. Our household is gonna be 614 00:33:42,760 --> 00:33:45,720 Speaker 1: spending or are they are savings race gonna rise? Most 615 00:33:45,760 --> 00:33:49,560 Speaker 1: likely they're gonna be rising. Both of those things are 616 00:33:49,560 --> 00:33:53,560 Speaker 1: bad for bad for core profits, growth, foreign saving. Right, 617 00:33:53,880 --> 00:33:58,240 Speaker 1: are we gonna see the current account a deficit expand 618 00:33:58,400 --> 00:34:01,400 Speaker 1: or contract and in this case it's again trade shutting 619 00:34:01,400 --> 00:34:04,520 Speaker 1: down the same situation, and so what you're left with 620 00:34:04,680 --> 00:34:08,080 Speaker 1: is government savings. You need the government to dramatically dis 621 00:34:08,160 --> 00:34:11,360 Speaker 1: save two offset all of what I just mentioned beforehand. 622 00:34:11,600 --> 00:34:15,520 Speaker 1: And so if the government has a very large expansion 623 00:34:15,520 --> 00:34:18,440 Speaker 1: of a deficit and it's you know, and it's targeted properly, 624 00:34:18,480 --> 00:34:22,080 Speaker 1: hopefully then you can start to see the offset the 625 00:34:22,160 --> 00:34:25,160 Speaker 1: corporate profits start to occur. But without it, you can't 626 00:34:25,160 --> 00:34:27,479 Speaker 1: rely on the private sector alone to do this. There's 627 00:34:27,480 --> 00:34:30,160 Speaker 1: just there's no there's no ability for the private sector 628 00:34:30,239 --> 00:34:33,960 Speaker 1: to do this myself. How confident are you that we 629 00:34:34,040 --> 00:34:38,759 Speaker 1: are at some point going to see the public sector bazuka, 630 00:34:39,160 --> 00:34:42,399 Speaker 1: the big guns come out that uh come that will 631 00:34:42,440 --> 00:34:45,000 Speaker 1: have to be voted through by Congress, which is split, 632 00:34:45,120 --> 00:34:47,520 Speaker 1: and have to be signed into law by President Trump. 633 00:34:47,840 --> 00:34:49,799 Speaker 1: How confident are you that we will see that at 634 00:34:49,840 --> 00:34:52,240 Speaker 1: some point? And how big do you think it needs 635 00:34:52,280 --> 00:34:57,360 Speaker 1: to be to provide the necessary level of economic stabilization 636 00:34:57,800 --> 00:35:01,080 Speaker 1: so that this is not turned into a great depression 637 00:35:01,120 --> 00:35:05,040 Speaker 1: type scenario, right? I mean, those are both tough questions. 638 00:35:06,440 --> 00:35:11,480 Speaker 1: We kind of have been relatively pessimistic about the response. Um, 639 00:35:11,520 --> 00:35:13,640 Speaker 1: you know, there was such a belated response to the 640 00:35:13,680 --> 00:35:18,160 Speaker 1: public health aspect of it that we didn't really anticipate, Um, 641 00:35:18,200 --> 00:35:20,440 Speaker 1: the White House would be necessarily really on top of 642 00:35:20,440 --> 00:35:23,600 Speaker 1: the wall. Um, in terms of the size and scope 643 00:35:24,000 --> 00:35:28,400 Speaker 1: of of a fiscal simulas required. However, at this point 644 00:35:28,440 --> 00:35:30,719 Speaker 1: there's gotta be some panic in d C and not 645 00:35:30,960 --> 00:35:33,239 Speaker 1: just in the White House. I would think at some 646 00:35:33,320 --> 00:35:37,320 Speaker 1: point we're going to see UM a quite strong response. 647 00:35:37,640 --> 00:35:38,840 Speaker 1: You know. The way I've kind of been we've been 648 00:35:38,880 --> 00:35:40,480 Speaker 1: to kind of think about it is like kind of 649 00:35:40,480 --> 00:35:43,040 Speaker 1: like the trade deal, like phase one, Phase de phase three. 650 00:35:43,320 --> 00:35:46,000 Speaker 1: So like the phase one, we kind of got, like 651 00:35:46,120 --> 00:35:48,799 Speaker 1: you know, the blow seed bill, which you know, it's 652 00:35:48,960 --> 00:35:50,880 Speaker 1: just not going to move the needle that much. Like 653 00:35:51,200 --> 00:35:54,319 Speaker 1: you know, we're talking about only population is really going 654 00:35:54,400 --> 00:35:57,360 Speaker 1: to get paid sickly, and it's just it's just not 655 00:35:57,400 --> 00:36:00,680 Speaker 1: gonna be there's no like helicopter drops us that we 656 00:36:00,800 --> 00:36:04,280 Speaker 1: probably get a phase two in response to the recent 657 00:36:04,320 --> 00:36:07,600 Speaker 1: market facility, and hopefully there's some sort of global coordination 658 00:36:07,680 --> 00:36:10,239 Speaker 1: with that. UM if it if it's if it surprises 659 00:36:10,280 --> 00:36:12,799 Speaker 1: the markets en US perfect, we don't need a phase three, 660 00:36:13,200 --> 00:36:15,680 Speaker 1: but I wouldn't be surprised if it kind of creates 661 00:36:15,680 --> 00:36:18,920 Speaker 1: a squeeze higher the markets, and then the markets ultimately 662 00:36:18,960 --> 00:36:21,680 Speaker 1: are still you know, there's still risk to be shed, 663 00:36:21,960 --> 00:36:23,800 Speaker 1: and it goes a little lower, and then maybe we 664 00:36:23,840 --> 00:36:27,399 Speaker 1: get a phase three where you know you'll all out Bazuka. Originally, 665 00:36:27,960 --> 00:36:31,440 Speaker 1: you know, like back in back last month. Um, you know, 666 00:36:31,480 --> 00:36:34,080 Speaker 1: we were saying, if we do implement social distancing quick enough, 667 00:36:34,440 --> 00:36:38,600 Speaker 1: then you know, maybe something like two hundred billions could 668 00:36:38,680 --> 00:36:42,799 Speaker 1: be sufficient. Because of just how related everything has been. 669 00:36:42,880 --> 00:36:45,200 Speaker 1: I mean, even in New York today to this moment, 670 00:36:45,520 --> 00:36:49,400 Speaker 1: there's really not that much testing being done. Um, I 671 00:36:49,400 --> 00:36:52,160 Speaker 1: I know folks who are symptomatic and being turned away 672 00:36:52,200 --> 00:36:56,080 Speaker 1: because of how late the response has been. We think 673 00:36:56,200 --> 00:36:58,440 Speaker 1: by the day is growing. So like you know, the 674 00:36:58,480 --> 00:37:00,399 Speaker 1: I m F just announced that or so just they're 675 00:37:00,400 --> 00:37:03,200 Speaker 1: gonna do a trillion dollars of of a package. You know, 676 00:37:03,280 --> 00:37:06,279 Speaker 1: maybe maybe we're talking you know, like two thousand eight 677 00:37:06,400 --> 00:37:09,240 Speaker 1: hard type of numbers. You know, at this at this stage, 678 00:37:09,400 --> 00:37:11,600 Speaker 1: it really is just past dependent. The way to do 679 00:37:11,640 --> 00:37:15,000 Speaker 1: it is just aim big and go and like you know, 680 00:37:15,160 --> 00:37:18,279 Speaker 1: don't worry about if it's too big. There's there's no 681 00:37:18,320 --> 00:37:20,920 Speaker 1: inflation in the economy, which is the constraint of this stuff. 682 00:37:21,280 --> 00:37:23,759 Speaker 1: And it's not like you can't take it back or 683 00:37:23,800 --> 00:37:26,360 Speaker 1: retract some of this stuff in the future, but in 684 00:37:26,400 --> 00:37:29,239 Speaker 1: the in the in the interim, you know, I would say, definitely, 685 00:37:29,719 --> 00:37:32,400 Speaker 1: you know, multiple hud hundreds of billions and growing by 686 00:37:32,400 --> 00:37:35,760 Speaker 1: this day. Um, you know, the first the first fiscal 687 00:37:36,120 --> 00:37:39,319 Speaker 1: package that was suggested was eight points three billions, and 688 00:37:39,360 --> 00:37:41,520 Speaker 1: I was on a podcast last month with with the 689 00:37:41,560 --> 00:37:44,040 Speaker 1: colleague of yours, Mike Reagan, and I was saying, you know, 690 00:37:44,280 --> 00:37:46,600 Speaker 1: out of zero to that minimum, right, if you look 691 00:37:46,640 --> 00:37:49,160 Speaker 1: at nine eleven, you know, you look at you look 692 00:37:49,160 --> 00:37:51,240 Speaker 1: at these types of shocks, you know, even Hurricane Katrine 693 00:37:51,280 --> 00:37:54,440 Speaker 1: and Sandy. You know, we're fifty hundred billion bilk packages. 694 00:37:54,920 --> 00:37:58,040 Speaker 1: We have a much much bigger shock and we're just 695 00:37:58,160 --> 00:38:00,400 Speaker 1: not there yet. In term of the pistol response, the 696 00:38:00,480 --> 00:38:04,240 Speaker 1: markets are perhaps scaring them into long We just reopened. 697 00:38:04,280 --> 00:38:07,080 Speaker 1: We're now at twenty four and nineteen, so it looks 698 00:38:07,120 --> 00:38:08,920 Speaker 1: like we are going to have a little bit of 699 00:38:08,960 --> 00:38:11,800 Speaker 1: trading for a time being. Let's see if if we 700 00:38:11,880 --> 00:38:14,160 Speaker 1: get to level two or not. We're down about ten 701 00:38:14,200 --> 00:38:18,640 Speaker 1: percent right now. The impulse macroeconomically from China is very 702 00:38:18,640 --> 00:38:21,319 Speaker 1: different than it was in eight and it's also very 703 00:38:21,320 --> 00:38:24,640 Speaker 1: often than it was during stars. So the reopening of 704 00:38:24,719 --> 00:38:27,799 Speaker 1: Chinese economy is can be really important to gauge you know, 705 00:38:28,480 --> 00:38:30,560 Speaker 1: what's what's the long term impact and if be like, 706 00:38:30,600 --> 00:38:32,960 Speaker 1: are their behavioral ships that occur and what's the duration 707 00:38:33,040 --> 00:38:36,600 Speaker 1: of these social distiline procedures. Yeah, I gotta say we 708 00:38:36,600 --> 00:38:39,239 Speaker 1: we did get some China Eco data out today that 709 00:38:39,360 --> 00:38:42,640 Speaker 1: was much much worse than forecast. So industrial output down. 710 00:38:42,680 --> 00:38:44,799 Speaker 1: I think it was thirteen and a half percent for 711 00:38:44,880 --> 00:38:48,120 Speaker 1: January in February, and the forecast was for a three 712 00:38:48,160 --> 00:38:52,560 Speaker 1: percent drop. Obviously that's backward looking. But yeah, all eyes 713 00:38:52,640 --> 00:38:56,040 Speaker 1: on China for the foreseeable future, and make sure to 714 00:38:56,120 --> 00:38:59,759 Speaker 1: wash your hands yet. Yeah, that's the that's the key thing. 715 00:39:00,080 --> 00:39:02,719 Speaker 1: Good good last message. Absolutely, thanks so much for having me, 716 00:39:02,800 --> 00:39:06,640 Speaker 1: Joe and Tracy. Yeah, that was fantastic. I really appreciate 717 00:39:06,680 --> 00:39:10,080 Speaker 1: you joining us, and that was pretty fun watching, uh, 718 00:39:10,320 --> 00:39:13,919 Speaker 1: watching one of the most historic market open in real 719 00:39:14,000 --> 00:39:17,320 Speaker 1: time with someone trading at live. So I really appreciate 720 00:39:17,320 --> 00:39:19,960 Speaker 1: you taking the time to do that with us. Absolutely. 721 00:39:20,360 --> 00:39:34,560 Speaker 1: Thanks that was great U Joe, that was really fun. 722 00:39:34,600 --> 00:39:37,600 Speaker 1: As you said, I'm kind of disappointed that we immediately 723 00:39:37,640 --> 00:39:39,560 Speaker 1: hit the circuit breakers and we didn't actually get to 724 00:39:39,600 --> 00:39:43,839 Speaker 1: trade anything, but I guess that's unfortunately becoming the norm 725 00:39:43,920 --> 00:39:47,279 Speaker 1: now days. Yeah, no, it totally is. Um. I mean 726 00:39:47,440 --> 00:39:49,839 Speaker 1: so much. It's just like I don't even know where 727 00:39:49,920 --> 00:39:54,240 Speaker 1: to begin with talking about markets anymore, because the size 728 00:39:54,239 --> 00:39:57,560 Speaker 1: and scope of the moves are so far outside of 729 00:39:57,640 --> 00:40:00,640 Speaker 1: the bounds of anything that I'm is too, that I've 730 00:40:00,640 --> 00:40:04,840 Speaker 1: covered the last ten years. I was hearing another fund 731 00:40:04,840 --> 00:40:10,600 Speaker 1: manager talk trying to reach for analogies. He mentioned novels, 732 00:40:10,920 --> 00:40:14,040 Speaker 1: the post and eleven analogy, but also shades of the 733 00:40:14,080 --> 00:40:16,799 Speaker 1: Great Financial Crisis and the euro crisis and the long 734 00:40:16,920 --> 00:40:20,400 Speaker 1: term capital management blow up and the flash crash that 735 00:40:20,520 --> 00:40:24,200 Speaker 1: we had in two thousand eleven or whenever that was. 736 00:40:24,480 --> 00:40:28,000 Speaker 1: So there's like it's almost like people can't find any 737 00:40:28,040 --> 00:40:31,319 Speaker 1: analogies for what's going on in this market, and it's 738 00:40:31,360 --> 00:40:34,360 Speaker 1: like the sum of all analogies, which explains in part 739 00:40:35,200 --> 00:40:39,400 Speaker 1: why the speed of the decline, of the speed of 740 00:40:39,440 --> 00:40:42,319 Speaker 1: this bear market is really just unlike anything we've ever 741 00:40:42,320 --> 00:40:45,480 Speaker 1: seen before. Yeah. Absolutely, And I think that's where the 742 00:40:45,560 --> 00:40:49,719 Speaker 1: technical versus fundamental stuff becomes really really important. And the 743 00:40:49,719 --> 00:40:53,440 Speaker 1: thing that worries me at the moment is the fiscal 744 00:40:53,600 --> 00:40:55,880 Speaker 1: factor that we've all been talking about. The notion that 745 00:40:55,920 --> 00:40:58,880 Speaker 1: if the government can get its act together and announce 746 00:40:59,120 --> 00:41:01,480 Speaker 1: the big bazooka, that the market seems to want it 747 00:41:01,520 --> 00:41:05,560 Speaker 1: to announce that only works if people genuinely if markets 748 00:41:05,600 --> 00:41:09,520 Speaker 1: are genuinely moving because people are concerned about the economy, 749 00:41:09,560 --> 00:41:12,000 Speaker 1: and that's certainly part of it. But if markets are 750 00:41:12,040 --> 00:41:15,360 Speaker 1: moving because we're getting a weird sort of liquidity driven 751 00:41:15,480 --> 00:41:18,759 Speaker 1: dynamic or you know, a value at risk shock, I 752 00:41:18,800 --> 00:41:22,000 Speaker 1: think it becomes a lot harder to stop those sort 753 00:41:22,040 --> 00:41:26,520 Speaker 1: of self reflexive moves. That's what worries me. But on 754 00:41:26,560 --> 00:41:30,640 Speaker 1: the other hand, markets aside, we know that just what 755 00:41:30,719 --> 00:41:34,440 Speaker 1: we've seen so far already have been absolutely devastating two 756 00:41:34,480 --> 00:41:37,279 Speaker 1: huge swaths of the economy, especially anyone who works in 757 00:41:37,719 --> 00:41:43,200 Speaker 1: tourist industry, hospitality. I mean, those are real. The numbers are. 758 00:41:44,000 --> 00:41:46,600 Speaker 1: I read in a Seattle Times this weekend, fifty restaurants 759 00:41:46,600 --> 00:41:49,200 Speaker 1: already shut down. They called it the Great Recession on 760 00:41:49,320 --> 00:41:52,360 Speaker 1: hyper drive. So no matter what's going on in the market, 761 00:41:53,200 --> 00:41:56,359 Speaker 1: there are people already massively hurting for real who could 762 00:41:56,480 --> 00:41:59,879 Speaker 1: use serious support right now, right Stopping the sell off 763 00:42:00,120 --> 00:42:04,120 Speaker 1: markets is clearly not the first reason that or the 764 00:42:04,160 --> 00:42:06,640 Speaker 1: primary reason that we should be implementing some sort of 765 00:42:06,640 --> 00:42:10,879 Speaker 1: fiscal support at this moment in time. It's rough out there. 766 00:42:11,120 --> 00:42:14,960 Speaker 1: But on the plus side, and you know, we're always 767 00:42:14,960 --> 00:42:17,560 Speaker 1: trying to find the silver lining when we can. As 768 00:42:17,560 --> 00:42:20,719 Speaker 1: an offa saying, we are starting to get a sort 769 00:42:20,760 --> 00:42:24,640 Speaker 1: of return to normalcy in China and in Hong Kong. 770 00:42:24,719 --> 00:42:27,279 Speaker 1: There's an open question about whether or not we're going 771 00:42:27,320 --> 00:42:31,360 Speaker 1: to get a second wave of infections as the disease 772 00:42:31,400 --> 00:42:34,160 Speaker 1: sorts of sort of heats up in Europe and the US. 773 00:42:34,760 --> 00:42:38,760 Speaker 1: But if everything goes okay, we should have some idea 774 00:42:38,920 --> 00:42:42,520 Speaker 1: of how and to what extent things start returning to 775 00:42:42,600 --> 00:42:46,279 Speaker 1: normal after this type of disruption. Exactly right. One other 776 00:42:46,320 --> 00:42:49,120 Speaker 1: point I wanted to make a novel mentioned. You know, 777 00:42:49,160 --> 00:42:52,160 Speaker 1: we've had screen of us of the Jerome Levy Institute 778 00:42:52,320 --> 00:42:54,880 Speaker 1: on a few times and his thoughts are helpful. I 779 00:42:54,880 --> 00:42:57,200 Speaker 1: also been thinking about, like some of our conversations with 780 00:42:57,239 --> 00:43:01,480 Speaker 1: the Sultan Postar and his point at it's like, you know, 781 00:43:01,719 --> 00:43:05,400 Speaker 1: the sort of traditional economic models that mainstream economy is 782 00:43:05,520 --> 00:43:08,560 Speaker 1: use DSG E model is that sort of assumes some 783 00:43:08,640 --> 00:43:12,920 Speaker 1: sort of equilibrium. We know they fail massively all the time. 784 00:43:13,520 --> 00:43:17,040 Speaker 1: And Sultan's perspective, it's like it's all about the balance sheet, 785 00:43:17,080 --> 00:43:19,600 Speaker 1: It's all about who has money and who needs it? 786 00:43:20,280 --> 00:43:25,399 Speaker 1: Uh is really what comes into view in times like this, 787 00:43:25,520 --> 00:43:29,400 Speaker 1: because the only priority that most economic actors have, whether 788 00:43:29,440 --> 00:43:33,320 Speaker 1: it's a company or a household, is who I want cash? 789 00:43:33,440 --> 00:43:37,280 Speaker 1: Everyone wants it. Everyone wants to hold on to cash. 790 00:43:37,400 --> 00:43:39,279 Speaker 1: Cash is gold. That's how you you know, it's like 791 00:43:39,320 --> 00:43:42,000 Speaker 1: it's Sultan said one of our own episodes. He's like, 792 00:43:42,440 --> 00:43:46,000 Speaker 1: cash or ripo is how you live to survive another day. 793 00:43:46,239 --> 00:43:49,080 Speaker 1: Cash is how you survived another day. And when you 794 00:43:49,120 --> 00:43:51,959 Speaker 1: see the liquidations in gold and the liquidations and oil 795 00:43:52,000 --> 00:43:54,799 Speaker 1: and the liquidations and selling anything off, we're in this 796 00:43:54,920 --> 00:43:57,600 Speaker 1: environment in which the name of the game for everyone 797 00:43:57,719 --> 00:44:01,200 Speaker 1: is survive another day by getting their hands on cash. Right, So, 798 00:44:01,239 --> 00:44:03,960 Speaker 1: even if there was a good investment thesis for gold 799 00:44:04,120 --> 00:44:06,160 Speaker 1: at the moment, and you know, I'm not going to 800 00:44:06,280 --> 00:44:08,719 Speaker 1: say whether there is or there isn't, but even if 801 00:44:08,760 --> 00:44:12,560 Speaker 1: there was, I could still experience a massive move down 802 00:44:12,640 --> 00:44:15,000 Speaker 1: because it's the only thing that's trading at the moment 803 00:44:15,040 --> 00:44:18,280 Speaker 1: and the only thing that you can actually convert into cash. 804 00:44:18,360 --> 00:44:21,799 Speaker 1: And again, that's how we get to this position where 805 00:44:21,800 --> 00:44:25,279 Speaker 1: we are seeing all these weird and somewhat unexpected moves 806 00:44:25,280 --> 00:44:30,080 Speaker 1: in the market. Absolutely, right, should we wrap it up there? Yes? 807 00:44:30,160 --> 00:44:34,600 Speaker 1: On that happy note, of complete randomness and liquidity issues 808 00:44:34,680 --> 00:44:38,040 Speaker 1: and meltdowns in markets. This has been another episode of 809 00:44:38,080 --> 00:44:40,920 Speaker 1: the Odd Thoughts podcast. I'm Tracy Alloway. You can follow 810 00:44:40,920 --> 00:44:44,400 Speaker 1: me on Twitter at Tracy Alloway and I'm Joe Why 811 00:44:44,480 --> 00:44:47,920 Speaker 1: Isn't Thal? You can follow me on Twitter at the Stalwart, 812 00:44:48,040 --> 00:44:51,319 Speaker 1: and you should follow our guest on Twitter if he'll 813 00:44:51,400 --> 00:44:56,040 Speaker 1: let you follow him. He's novel Sinala at Novel Sinala 814 00:44:56,200 --> 00:45:00,200 Speaker 1: at e i A all Weather Macro Partners, and you 815 00:45:00,239 --> 00:45:03,319 Speaker 1: should follow our producer on Twitter, Laura Carlson. She's at 816 00:45:03,400 --> 00:45:07,160 Speaker 1: Laura M. Carlson. You should follow the Bloomberg head of podcast, 817 00:45:07,239 --> 00:45:12,040 Speaker 1: Francesco Levy at Francesca Today, and check out all of 818 00:45:12,080 --> 00:45:16,200 Speaker 1: our podcasts at Bloomberg under the handle at podcasts. Thanks 819 00:45:16,280 --> 00:45:16,760 Speaker 1: for listening.