1 00:00:02,680 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you 2 00:00:05,360 --> 00:00:07,800 Speaker 1: along with my co host Lisa Brahmas. Each day we 3 00:00:07,920 --> 00:00:10,440 Speaker 1: bring you the most noteworthy and useful interviews for you 4 00:00:10,560 --> 00:00:12,639 Speaker 1: and your money, whether at the grocery store or the 5 00:00:12,680 --> 00:00:15,960 Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast 6 00:00:16,160 --> 00:00:18,079 Speaker 1: or wherever you listen to podcasts, as well as at 7 00:00:18,079 --> 00:00:21,600 Speaker 1: Bloomberg dot com. We really need to focus our attention 8 00:00:21,600 --> 00:00:24,520 Speaker 1: on restaurants which you have been uniquely hammered. They've been 9 00:00:24,560 --> 00:00:27,040 Speaker 1: tourced to shut their doors, and there's a question of 10 00:00:27,080 --> 00:00:29,600 Speaker 1: how quickly they will be able to get back online 11 00:00:29,640 --> 00:00:31,720 Speaker 1: and how many of them will even survive throughout this. 12 00:00:31,800 --> 00:00:36,240 Speaker 1: Mike Hallen joining us now, senior restaurant analyst for Bloomberg Intelligence, 13 00:00:36,320 --> 00:00:38,800 Speaker 1: joining us on the phone. Mike, do you have a 14 00:00:38,960 --> 00:00:42,599 Speaker 1: sense of the proportion of restaurants that have closed their 15 00:00:42,640 --> 00:00:45,720 Speaker 1: doors that will easily get back up and going And 16 00:00:45,720 --> 00:00:47,760 Speaker 1: I know your look specifically in a lot of the 17 00:00:47,840 --> 00:00:52,440 Speaker 1: chains that have already closed their doors. Yeah, So you 18 00:00:52,440 --> 00:00:58,040 Speaker 1: know it's really going to depend on on the business model, right. So, um, 19 00:00:58,120 --> 00:01:00,960 Speaker 1: you know, in our in our rolled with the publicly 20 00:01:01,040 --> 00:01:03,360 Speaker 1: traded chains, if you're a fast food and you're doing 21 00:01:03,480 --> 00:01:06,880 Speaker 1: you know, between fifty and seventy percent of your business 22 00:01:06,880 --> 00:01:10,160 Speaker 1: through the drive through and probably another fifteen to twenty 23 00:01:10,400 --> 00:01:13,960 Speaker 1: via delivery, you're not going to be impacted as much. 24 00:01:14,000 --> 00:01:15,720 Speaker 1: I mean, granted, you are going to be impacted the 25 00:01:15,880 --> 00:01:18,680 Speaker 1: less less people commuting to work. Right, people aren't going 26 00:01:18,720 --> 00:01:22,080 Speaker 1: out and um running errands and doing some shopping and 27 00:01:22,440 --> 00:01:25,600 Speaker 1: stopping for a burger while they're out so much, and 28 00:01:25,600 --> 00:01:28,559 Speaker 1: they're doing a lot more shopping at the grocery store 29 00:01:28,560 --> 00:01:31,360 Speaker 1: and cooking at home. So sales are still gonna be down. 30 00:01:31,400 --> 00:01:32,840 Speaker 1: But if you're a fast food and you have a 31 00:01:32,920 --> 00:01:36,240 Speaker 1: drive through, you know, you're in pretty good shape, you know. 32 00:01:36,360 --> 00:01:39,600 Speaker 1: But for casual dining, for full service restaurants, it's a 33 00:01:39,760 --> 00:01:44,040 Speaker 1: very very different situation, you know. Uh, you know, for example, 34 00:01:44,080 --> 00:01:46,640 Speaker 1: Texas Roadhouse, a great chain, they only do about seven 35 00:01:46,640 --> 00:01:48,960 Speaker 1: percent of their sales and to go and they don't 36 00:01:49,000 --> 00:01:51,680 Speaker 1: have any delivery, and obviously they don't have any drive through. 37 00:01:51,840 --> 00:01:54,880 Speaker 1: So you know, on casual dining land, you know, for 38 00:01:54,880 --> 00:01:58,080 Speaker 1: for restaurants that close their dining room, they could lose 39 00:01:58,640 --> 00:02:03,520 Speaker 1: you know, between seventy five their sales. So, Mike, it 40 00:02:03,560 --> 00:02:06,080 Speaker 1: give us a sense of kind of how these companies 41 00:02:06,120 --> 00:02:08,280 Speaker 1: are trying to cope with it? Will they make it? 42 00:02:08,320 --> 00:02:10,720 Speaker 1: Are they how are they trying to kind of deal 43 00:02:10,760 --> 00:02:14,360 Speaker 1: with this complete lack of revenue. Yeah, so for for 44 00:02:14,400 --> 00:02:16,959 Speaker 1: the casual dining chains, and now we're starting to see 45 00:02:17,000 --> 00:02:20,079 Speaker 1: with with fast food chains as well. Uh they're fully 46 00:02:20,280 --> 00:02:24,160 Speaker 1: drawing down on their revolving credit facilities. Uh, they're suspending 47 00:02:24,200 --> 00:02:27,760 Speaker 1: by backs and and uh suspending their dividends to try 48 00:02:27,800 --> 00:02:31,120 Speaker 1: to UM hold onto whatever cash flow and raise whatever 49 00:02:31,160 --> 00:02:34,800 Speaker 1: cash they can. Uh, they're gonna they're closing stores where 50 00:02:34,840 --> 00:02:39,280 Speaker 1: it makes sense, um, you know, and they're trying to 51 00:02:39,360 --> 00:02:43,880 Speaker 1: push delivery and to go as as much as possible, 52 00:02:43,919 --> 00:02:46,360 Speaker 1: try to grow grow that business as quickly as possible 53 00:02:46,400 --> 00:02:49,080 Speaker 1: so that they can continue to employ some of their employees, 54 00:02:49,680 --> 00:02:52,000 Speaker 1: uh stay in front of the customers for whenever this 55 00:02:52,200 --> 00:02:57,320 Speaker 1: does end. Um. You know. So you know, chains are 56 00:02:57,440 --> 00:03:00,800 Speaker 1: kind of doing whatever they can, but we expect a 57 00:03:00,800 --> 00:03:04,240 Speaker 1: lot of UM store closures. We also saw a note 58 00:03:04,320 --> 00:03:09,200 Speaker 1: yesterday out that that said Chiefecake Factory is saying that 59 00:03:09,280 --> 00:03:11,880 Speaker 1: they're not going to pay rent until they can reopen. So, 60 00:03:12,600 --> 00:03:14,960 Speaker 1: you know, rents are a pretty big expense even if 61 00:03:14,960 --> 00:03:17,919 Speaker 1: you're shut you know, the rent bill continues to keep coming, 62 00:03:18,560 --> 00:03:20,840 Speaker 1: so we expect to hear a lot more of this 63 00:03:20,919 --> 00:03:25,160 Speaker 1: as well, where the the restaurant chains are gonna maybe 64 00:03:25,160 --> 00:03:27,600 Speaker 1: hold off on paying rent until they can open their 65 00:03:27,639 --> 00:03:30,440 Speaker 1: doors again. Mike, I wonder how much this just accelerates 66 00:03:30,440 --> 00:03:32,760 Speaker 1: a trend that already was in place, because we saw 67 00:03:32,760 --> 00:03:35,680 Speaker 1: a restaurant traffic go down some of these casual dining 68 00:03:35,720 --> 00:03:39,880 Speaker 1: places even before the coronavirus, and even amid a really 69 00:03:39,880 --> 00:03:43,120 Speaker 1: good consumer confidence. I mean, how many of these bankruptcies 70 00:03:43,120 --> 00:03:48,119 Speaker 1: would have happened anyway. Yeah. Well, and also there's been 71 00:03:48,520 --> 00:03:52,560 Speaker 1: you know, low interest rates helping to keep zombie chains 72 00:03:52,600 --> 00:03:56,040 Speaker 1: alive for quite some time, right, So yeah, I agree, 73 00:03:56,120 --> 00:03:59,080 Speaker 1: I think this is definitely going to speed up the process. 74 00:03:59,120 --> 00:04:01,600 Speaker 1: You're gonna see some of the casual dining chains that 75 00:04:01,640 --> 00:04:05,280 Speaker 1: do do not have a loyal customer base any longer 76 00:04:05,400 --> 00:04:08,360 Speaker 1: start to close even more stores. I mean, we've seen 77 00:04:08,400 --> 00:04:12,120 Speaker 1: a lot, We've seen chains like Applebee's, you know, close 78 00:04:12,160 --> 00:04:14,640 Speaker 1: a lot of stores over the last couple of years. 79 00:04:14,640 --> 00:04:18,960 Speaker 1: We expect uh store closures to to accelerate. So yeah, 80 00:04:19,000 --> 00:04:22,120 Speaker 1: it is kind of accelerating a trend. But you know, 81 00:04:22,600 --> 00:04:25,400 Speaker 1: some of these you know, you know, I'm going to 82 00:04:25,480 --> 00:04:28,440 Speaker 1: say the FED and and UM kind of the Wall 83 00:04:28,440 --> 00:04:32,880 Speaker 1: Street echo chamber and the management teams altogether, uh, kind 84 00:04:32,880 --> 00:04:34,960 Speaker 1: of put themselves in in a tough position. You know, 85 00:04:35,000 --> 00:04:37,839 Speaker 1: half of the companies we cover have levered up to 86 00:04:38,040 --> 00:04:42,400 Speaker 1: buy buy back stock. Uh, you know at thirty times earnings, 87 00:04:42,960 --> 00:04:44,760 Speaker 1: you know, and now that these stocks are down six 88 00:04:45,680 --> 00:04:49,240 Speaker 1: off their highs, they're suspending their buy back programs, right, 89 00:04:49,279 --> 00:04:52,680 Speaker 1: so you know, their balance sheets on in a in 90 00:04:52,720 --> 00:04:55,479 Speaker 1: a great spot heading into this which we think is 91 00:04:55,480 --> 00:04:58,839 Speaker 1: going to exacerbate the problem. Hey, mikew about the mom 92 00:04:58,839 --> 00:05:01,880 Speaker 1: and pop restaurants, the local restaurants that are shut down, 93 00:05:02,600 --> 00:05:07,440 Speaker 1: just typically how much how long can they last like that? Yeah, 94 00:05:07,560 --> 00:05:09,360 Speaker 1: it's the same type of thing. It's going to depend 95 00:05:09,440 --> 00:05:12,120 Speaker 1: on their bound sheet. But it's hard. You know, in 96 00:05:12,200 --> 00:05:16,919 Speaker 1: the restaurant business, you're basically you know, making money, you know, 97 00:05:17,040 --> 00:05:19,280 Speaker 1: one month out of the year, right, one month out 98 00:05:19,279 --> 00:05:22,000 Speaker 1: of the year is all your profits. The other eleven 99 00:05:22,000 --> 00:05:25,840 Speaker 1: months goes towards paying your labor, you know, paying your 100 00:05:25,880 --> 00:05:29,000 Speaker 1: food costs, paying the rent. It's a very low margin business. 101 00:05:29,040 --> 00:05:31,960 Speaker 1: We're talking about mid single digit net margin business. So 102 00:05:32,000 --> 00:05:35,000 Speaker 1: a lot of these chains can't stay open for long. 103 00:05:35,040 --> 00:05:38,600 Speaker 1: You know. Thankfully there's some provisions in here, uh for 104 00:05:38,920 --> 00:05:41,600 Speaker 1: the independence as well as the larger change we covered 105 00:05:42,360 --> 00:05:45,600 Speaker 1: two uh you know, ball some money. They're gonna get 106 00:05:45,600 --> 00:05:49,000 Speaker 1: some tax breaks and hopefully hopefully be able to to 107 00:05:49,480 --> 00:05:51,800 Speaker 1: you know, weather the storm for at least a few months. 108 00:05:51,800 --> 00:05:54,760 Speaker 1: But just as uum, just to give you some color, 109 00:05:54,800 --> 00:05:57,240 Speaker 1: you know, the one of the best run chains we 110 00:05:57,360 --> 00:06:00,200 Speaker 1: cover is Darting. They were the adults in the room. 111 00:06:00,279 --> 00:06:02,200 Speaker 1: They did not lever up to buy back their stock. 112 00:06:02,320 --> 00:06:04,880 Speaker 1: They use their cash flow to do it. They increase 113 00:06:04,960 --> 00:06:08,680 Speaker 1: their sales and their margins by providing very you know, 114 00:06:09,000 --> 00:06:12,919 Speaker 1: very good service and good food and motivating the customers 115 00:06:12,960 --> 00:06:18,159 Speaker 1: to return. Right. So, so you know, they they have 116 00:06:18,279 --> 00:06:21,560 Speaker 1: only six months of cash basically at their current burn rate, 117 00:06:21,800 --> 00:06:23,160 Speaker 1: we're gonna have to leave it there. Mike cal And, 118 00:06:23,240 --> 00:06:28,000 Speaker 1: senior restaurant analyst for Bloomberg Intelligence, really highlighting what is 119 00:06:28,040 --> 00:06:35,440 Speaker 1: being felt across the restaurant sector around the country. The 120 00:06:35,520 --> 00:06:38,159 Speaker 1: Federal Reserve is throwing the kitchen sink at markets in 121 00:06:38,279 --> 00:06:42,480 Speaker 1: large part in response to the apparent dollar shortage, increasing 122 00:06:42,600 --> 00:06:45,800 Speaker 1: strains in the dollar funding market, and this has hit 123 00:06:45,880 --> 00:06:50,440 Speaker 1: emerging markets particularly hard. Damian Sassour has been tracking its 124 00:06:50,640 --> 00:06:54,560 Speaker 1: as chief market strategist at Bloomberg Intelligence and he joins 125 00:06:54,640 --> 00:06:56,800 Speaker 1: US now. Damien, I'm wondering, we are seeing the dollar 126 00:06:56,800 --> 00:06:58,680 Speaker 1: a week in a bit in the past few sessions, 127 00:06:58,720 --> 00:07:01,719 Speaker 1: but still the move of it is to be stronger, 128 00:07:01,760 --> 00:07:05,080 Speaker 1: and I'm wondering how bad has it been in the 129 00:07:05,120 --> 00:07:08,920 Speaker 1: emerging markets complex? Yeah, you know, I've been feeling a 130 00:07:08,960 --> 00:07:11,240 Speaker 1: lot of questions asking what happens if this dollar just 131 00:07:11,360 --> 00:07:13,920 Speaker 1: keeps rising in em can't pay their debts and dollar 132 00:07:14,160 --> 00:07:16,720 Speaker 1: and UM with the broad trade weighted US D now 133 00:07:16,760 --> 00:07:18,640 Speaker 1: at a fifty year high, you're really left with two 134 00:07:18,680 --> 00:07:21,160 Speaker 1: options if if you're an EM sovereign that's got you know, 135 00:07:21,200 --> 00:07:24,560 Speaker 1: dollar obligations, UM, do you do not? I mean what 136 00:07:24,640 --> 00:07:26,720 Speaker 1: was the U S do? Does it do nothing about them? Default? 137 00:07:26,800 --> 00:07:30,240 Speaker 1: Does it offer debt forgiveness? In both scenarios, Lisa, they're 138 00:07:30,360 --> 00:07:34,840 Speaker 1: very inflationary, right, so, especially as the US fiscal situation worsens. 139 00:07:34,880 --> 00:07:36,720 Speaker 1: I mean, two trillion stimulus is just the tip of 140 00:07:36,760 --> 00:07:39,520 Speaker 1: the iceberg. It teems and the government reluctant to offer 141 00:07:39,560 --> 00:07:42,920 Speaker 1: bailouts to Boeing in big companies, I imagine they're not 142 00:07:42,960 --> 00:07:45,560 Speaker 1: going to be very open to a new Brady plan either. 143 00:07:45,680 --> 00:07:47,800 Speaker 1: So so EM is going to have a tough time here, 144 00:07:48,640 --> 00:07:50,480 Speaker 1: So damon give us a sense of kind of where 145 00:07:50,520 --> 00:07:53,000 Speaker 1: the greatest risk is that you see out there in 146 00:07:53,120 --> 00:07:56,600 Speaker 1: EM world. Yeah, you know, I mean it's hard to 147 00:07:56,680 --> 00:07:58,400 Speaker 1: kind of pick and choose, but you know, there are 148 00:07:58,480 --> 00:08:01,840 Speaker 1: things that investors can do, uh, you know, if they 149 00:08:01,880 --> 00:08:03,880 Speaker 1: are indeed willing to take that plunge and invest in 150 00:08:03,960 --> 00:08:07,120 Speaker 1: emerging market. You know, local assets want us to diversify 151 00:08:07,160 --> 00:08:10,560 Speaker 1: your funding sources, right, I mean most people dollar investors think, okay, 152 00:08:10,640 --> 00:08:12,800 Speaker 1: you know, I'm taking the dollars in my pocket, I'm 153 00:08:12,800 --> 00:08:15,440 Speaker 1: converting them into e M currencies and investing. But what 154 00:08:15,520 --> 00:08:18,680 Speaker 1: you can do is you can also spread the dollar exposure, 155 00:08:18,760 --> 00:08:22,400 Speaker 1: your short dollar exposure now around other developed market companies 156 00:08:22,440 --> 00:08:24,480 Speaker 1: like the Swiss frank, like the Japanese yea and the 157 00:08:24,480 --> 00:08:26,800 Speaker 1: British pound, the euro, etcetera. And if you do that, 158 00:08:27,240 --> 00:08:30,239 Speaker 1: you actually have a much more attractive risk adjusted return 159 00:08:30,320 --> 00:08:34,800 Speaker 1: profile of historically speaking, obviously, and you can definitely protect 160 00:08:35,080 --> 00:08:38,400 Speaker 1: protect if the dollar does indeed continue to decline here, 161 00:08:38,640 --> 00:08:40,800 Speaker 1: So you know, there is some benefit there. There are 162 00:08:40,800 --> 00:08:43,600 Speaker 1: ways that you can kind of manage around this. But yeah. 163 00:08:43,679 --> 00:08:45,840 Speaker 1: I mean it's going to be very volatile, very whippy, 164 00:08:46,040 --> 00:08:48,880 Speaker 1: and the structure of emerging markets really doesn't offer itself 165 00:08:48,960 --> 00:08:51,439 Speaker 1: to taking short term risk, if you follow me. I 166 00:08:51,440 --> 00:08:53,800 Speaker 1: mean some of these markets are very liquid. Yeah, And 167 00:08:53,880 --> 00:08:56,320 Speaker 1: talking about that, there's also a question of just how 168 00:08:56,400 --> 00:08:59,400 Speaker 1: much debt has been incurred by some of these developing 169 00:08:59,480 --> 00:09:03,080 Speaker 1: markets companies there, and the idea that this imbalanced in 170 00:09:03,120 --> 00:09:06,480 Speaker 1: dollars isn't just simply a technical problem, but just an 171 00:09:06,640 --> 00:09:10,600 Speaker 1: overall imbalance where too many, too many dollars were borrowed 172 00:09:10,640 --> 00:09:13,560 Speaker 1: by a lot of these countries. And I'm wondering, you know, yes, 173 00:09:13,600 --> 00:09:16,439 Speaker 1: we're seeing some of the stress eased up, but how 174 00:09:16,520 --> 00:09:19,280 Speaker 1: much pressure is there still that's going to cause a 175 00:09:19,400 --> 00:09:21,600 Speaker 1: rash of defaults that people are expecting that may not 176 00:09:21,640 --> 00:09:24,560 Speaker 1: be fully priced an't even yet. Well, I think you 177 00:09:24,559 --> 00:09:26,160 Speaker 1: have to look at those that are most exposed, right 178 00:09:26,160 --> 00:09:28,080 Speaker 1: at least so for me, you know, just looking at 179 00:09:28,120 --> 00:09:31,360 Speaker 1: you know, you know, you know, emerging market sovereigns that 180 00:09:31,360 --> 00:09:34,559 Speaker 1: are borrowed in dollars. It's the frontier sovereigns, the oil 181 00:09:34,640 --> 00:09:38,160 Speaker 1: exporting frontier sovereigns like Nigeria and Gola, gabone. I mean 182 00:09:38,160 --> 00:09:40,080 Speaker 1: you've seen Ecuador and now file for default. I mean, 183 00:09:40,080 --> 00:09:42,040 Speaker 1: those are the ones that are obviously front and center, 184 00:09:42,400 --> 00:09:44,600 Speaker 1: but you know it's all of those other sovereigns that 185 00:09:44,679 --> 00:09:47,120 Speaker 1: have um you know, that are relying on tourist revenues, 186 00:09:47,160 --> 00:09:49,920 Speaker 1: you know, Dominican Republic, Costa Rica. These are big issuers 187 00:09:49,920 --> 00:09:51,880 Speaker 1: in e M and so you know, there's a lot 188 00:09:51,960 --> 00:09:53,480 Speaker 1: of dead out there and dollars they're gonna have a 189 00:09:53,520 --> 00:09:55,880 Speaker 1: lot of difficulty paying them back. But the question becomes 190 00:09:55,920 --> 00:09:58,440 Speaker 1: a political one. You know, who do we you know, 191 00:09:58,520 --> 00:10:00,520 Speaker 1: who do we bail out and who don't we? And 192 00:10:00,720 --> 00:10:03,800 Speaker 1: you know that can potentially ignite a virtuous cycle of 193 00:10:03,800 --> 00:10:07,280 Speaker 1: sovereign restructurings that really would break the buck and cause 194 00:10:07,520 --> 00:10:10,680 Speaker 1: you know, hyper hyperinflationary scare in my mind, So you know, 195 00:10:10,720 --> 00:10:12,920 Speaker 1: there's really no no easy way to go about it. 196 00:10:12,960 --> 00:10:14,679 Speaker 1: But I don't think you can ignore it. I mean, 197 00:10:14,760 --> 00:10:17,240 Speaker 1: what what the U S has done here post It's 198 00:10:17,240 --> 00:10:20,240 Speaker 1: ignored a lot of the things that could potentially go wrong, 199 00:10:20,400 --> 00:10:23,200 Speaker 1: you know, post Doccer, post dog Frank. Now we're just 200 00:10:23,280 --> 00:10:26,440 Speaker 1: paying for it here. To ignore this would be shortsighted 201 00:10:26,440 --> 00:10:29,000 Speaker 1: in my view. Alright, so give us a sense of 202 00:10:29,000 --> 00:10:32,000 Speaker 1: timing Damien, where are we going to see the biggest 203 00:10:32,000 --> 00:10:35,440 Speaker 1: problems first, do you think? Right? So, it's definitely going 204 00:10:35,480 --> 00:10:38,280 Speaker 1: to hit the oil exporters first and foremost. They definitely 205 00:10:38,280 --> 00:10:40,760 Speaker 1: have some capacity to manage through it in the near term, 206 00:10:41,000 --> 00:10:43,520 Speaker 1: even more so if the dollar continues to come off here. 207 00:10:43,760 --> 00:10:46,160 Speaker 1: But if the dollar does another you know about face 208 00:10:46,240 --> 00:10:49,160 Speaker 1: and really ripped to the upside for whatever reason. You know, 209 00:10:49,240 --> 00:10:51,520 Speaker 1: Paul Um, you're really going to see a lot of 210 00:10:51,559 --> 00:10:53,720 Speaker 1: them start, you know, going to the IMF, going to 211 00:10:53,760 --> 00:10:55,400 Speaker 1: the World Bank. I mean, you've already seen those two 212 00:10:55,400 --> 00:10:57,800 Speaker 1: big multilaterals turned to the US and say, hey, we 213 00:10:57,840 --> 00:11:00,760 Speaker 1: need we need help here to sort of to sort 214 00:11:00,760 --> 00:11:03,080 Speaker 1: of stem the tide. But you know, it's it's it's 215 00:11:03,120 --> 00:11:06,079 Speaker 1: no real easy question to say. I mean, look, I 216 00:11:06,080 --> 00:11:07,719 Speaker 1: wouldn't be sitting here talking to I'd be on a 217 00:11:07,760 --> 00:11:10,599 Speaker 1: beach somewhere if I knew the timing around this, right. So, 218 00:11:10,600 --> 00:11:12,360 Speaker 1: So I think that's really what it comes down to. 219 00:11:12,400 --> 00:11:14,199 Speaker 1: You just have to watch all these little pockets in 220 00:11:14,240 --> 00:11:17,160 Speaker 1: the market and hope for the best. I mean, you've 221 00:11:17,200 --> 00:11:18,959 Speaker 1: been covering this market for decades, You've got a lot 222 00:11:18,960 --> 00:11:21,040 Speaker 1: of contacts. And one reason why I always love speaking 223 00:11:21,040 --> 00:11:22,480 Speaker 1: with you is you can kind of get a feel 224 00:11:22,920 --> 00:11:25,400 Speaker 1: for the mood. And honestly, the people who I speak 225 00:11:25,440 --> 00:11:27,480 Speaker 1: to just seem exhausted. It's just been a ping pong 226 00:11:27,559 --> 00:11:31,280 Speaker 1: kind of market going in different directions, popped by uncertainty, 227 00:11:31,360 --> 00:11:34,320 Speaker 1: poked by depression, and popked by isolation. And I'm wondering 228 00:11:34,640 --> 00:11:36,720 Speaker 1: where are we in that cycle? I mean, are people 229 00:11:36,760 --> 00:11:39,800 Speaker 1: actually starting to look for opportunities or people just sort 230 00:11:39,800 --> 00:11:43,319 Speaker 1: of sitting out and saying this one I don't understand. Alright, 231 00:11:43,400 --> 00:11:45,760 Speaker 1: So I mean the first and foremost, you know, i'd 232 00:11:45,760 --> 00:11:48,679 Speaker 1: have to address. All right, let me my sleeves, let's go, 233 00:11:49,800 --> 00:11:53,280 Speaker 1: let's do it. Um. So you know, the Japanese currency basis, 234 00:11:53,360 --> 00:11:55,440 Speaker 1: which was the last one to blow, is finally narrowed, 235 00:11:55,440 --> 00:11:58,200 Speaker 1: and it's narrowed by overnight, right, I mean you saw 236 00:11:58,600 --> 00:12:00,959 Speaker 1: you may see that the euro in the pounds are 237 00:12:01,000 --> 00:12:04,080 Speaker 1: now very very positive, which means they're flushed with dollars. 238 00:12:04,120 --> 00:12:06,480 Speaker 1: So the dollar hoarding, yes, well it's still you know, 239 00:12:06,679 --> 00:12:09,200 Speaker 1: persists off. Sure, a lot of dollars being brought at 240 00:12:09,200 --> 00:12:11,679 Speaker 1: the issues. So I think this whole you know, thought 241 00:12:11,720 --> 00:12:13,560 Speaker 1: that there are you know, the top recording not enough 242 00:12:13,559 --> 00:12:15,600 Speaker 1: dollars let's put that to bed for a minute now. 243 00:12:15,679 --> 00:12:18,480 Speaker 1: Where the bottlenecks coming up there? Obviously in credit land, 244 00:12:18,600 --> 00:12:21,120 Speaker 1: no question about it. You've seen the moving spreads. Everyone's 245 00:12:21,120 --> 00:12:24,720 Speaker 1: seen it, everyone's watching it. And it's the um. It's 246 00:12:24,720 --> 00:12:26,600 Speaker 1: really the mortgage market that scares me the most. I 247 00:12:26,600 --> 00:12:28,640 Speaker 1: mean that was the epicenter back in two thousand and eight. 248 00:12:28,640 --> 00:12:30,480 Speaker 1: We're starting to see some of these mortgage reads roll, 249 00:12:30,600 --> 00:12:33,120 Speaker 1: you know, get meet, they're unable to meet margin calls. 250 00:12:33,280 --> 00:12:35,679 Speaker 1: And these aren't just anyone. These are invest Goo Angelo 251 00:12:35,720 --> 00:12:38,760 Speaker 1: Gordon tpg UM and and their portfolio is getting taken 252 00:12:38,760 --> 00:12:41,400 Speaker 1: over by banks and and and being liquidated in the market, 253 00:12:41,480 --> 00:12:43,320 Speaker 1: and and you know it's it's it's just you know, 254 00:12:43,400 --> 00:12:45,720 Speaker 1: to bring in people in my mind, like you know 255 00:12:46,200 --> 00:12:48,600 Speaker 1: who kind of helped us in the past, like Paulson 256 00:12:48,679 --> 00:12:50,800 Speaker 1: and Guysner and black Rock. I mean that's while that's 257 00:12:50,840 --> 00:12:53,240 Speaker 1: all said and good. You know I've said it before, 258 00:12:53,240 --> 00:12:55,640 Speaker 1: I'll say it again. I'd love to see simmer Simon 259 00:12:55,640 --> 00:12:58,280 Speaker 1: Potter back at the New York Center Reserve because you know, 260 00:12:58,800 --> 00:13:00,640 Speaker 1: he used to run the markets. To if there's one 261 00:13:00,679 --> 00:13:02,240 Speaker 1: person to know where the land mines are and where 262 00:13:02,240 --> 00:13:04,200 Speaker 1: the bodies are buried at Simon, and so you know, 263 00:13:04,280 --> 00:13:06,400 Speaker 1: it's interesting how quiet things have been on that front. 264 00:13:06,400 --> 00:13:08,440 Speaker 1: I'd really like to just see some more clarity as 265 00:13:08,480 --> 00:13:10,320 Speaker 1: to how we're going to address some of the bottlenecks 266 00:13:10,360 --> 00:13:12,120 Speaker 1: that we're seeing abroad. And you know, we see the 267 00:13:12,120 --> 00:13:15,240 Speaker 1: cross Curency basis and places like Korea are still pretty 268 00:13:15,240 --> 00:13:17,520 Speaker 1: wide that they still don't have enough dollars and and 269 00:13:17,559 --> 00:13:19,600 Speaker 1: so you know, we just have to kind of watch 270 00:13:19,679 --> 00:13:21,880 Speaker 1: all these little elements of the market on the periphery 271 00:13:22,120 --> 00:13:24,720 Speaker 1: and hope everyone can kind of come out of this. Okay, 272 00:13:24,760 --> 00:13:30,000 Speaker 1: I guess. I mean, yeah, so Damien thirty seconds any 273 00:13:30,000 --> 00:13:33,920 Speaker 1: place to hide in emerging markets. So we definitely still 274 00:13:33,960 --> 00:13:36,839 Speaker 1: like um receiving an Indonesia on these spikes. I mean, 275 00:13:36,880 --> 00:13:38,559 Speaker 1: and I think the Indonesian roupie has been one of 276 00:13:38,600 --> 00:13:41,120 Speaker 1: the better performers today. UM the pace has come off 277 00:13:41,120 --> 00:13:42,880 Speaker 1: a long way. You've seen that come all the way back. 278 00:13:42,920 --> 00:13:46,839 Speaker 1: I I like countries that have a geostrategic importance to 279 00:13:46,880 --> 00:13:49,840 Speaker 1: the United States for no other reason than because the 280 00:13:49,920 --> 00:13:52,200 Speaker 1: U s print dollars. So you know, there's a lot 281 00:13:52,240 --> 00:13:53,520 Speaker 1: of them out there. There's a lot of them that 282 00:13:53,520 --> 00:13:55,400 Speaker 1: aren't there, and you know, I think that that's where 283 00:13:55,440 --> 00:13:57,000 Speaker 1: you kind of want to focus if you're looking to 284 00:13:57,000 --> 00:13:59,920 Speaker 1: wait it out a bit. Damien Sasur, thanks so much 285 00:14:00,040 --> 00:14:03,200 Speaker 1: for joining us. We always appreciate your perspective on emerging 286 00:14:03,240 --> 00:14:06,439 Speaker 1: markets UH lots of altility, even above and bound where 287 00:14:06,440 --> 00:14:08,560 Speaker 1: we're seeing in the broader market. Statement sass Our, chief 288 00:14:08,600 --> 00:14:16,320 Speaker 1: Emerging markets credit strategist for Bloomberg Intelligence. As we talked 289 00:14:16,320 --> 00:14:19,680 Speaker 1: about that two point two trillion dollar plan that the 290 00:14:19,720 --> 00:14:23,400 Speaker 1: Congress UH is expected to pass today, there is a 291 00:14:23,520 --> 00:14:25,760 Speaker 1: question of how quickly it can get money out the 292 00:14:25,800 --> 00:14:28,800 Speaker 1: door and who it gives money to. A big focus 293 00:14:28,840 --> 00:14:32,800 Speaker 1: has been small and medium sized businesses. Our next guest 294 00:14:32,840 --> 00:14:34,960 Speaker 1: has a lot of experience with the balance sheets in 295 00:14:35,040 --> 00:14:39,440 Speaker 1: all conditions of these companies. Adam Leviton, Professor of Law 296 00:14:39,560 --> 00:14:44,440 Speaker 1: and of Georgetown Law in Washington, d C. Professor, thank 297 00:14:44,480 --> 00:14:46,520 Speaker 1: you so much for being with us. You recently penned 298 00:14:46,880 --> 00:14:48,560 Speaker 1: up ed in the New York Times how to get 299 00:14:48,600 --> 00:14:52,000 Speaker 1: money to small businesses fast. Passing through the details, it 300 00:14:52,040 --> 00:14:55,520 Speaker 1: seems like the three hundred and fifty billion dollars estimated 301 00:14:55,560 --> 00:14:58,920 Speaker 1: to go to small and mid sized businesses grants will 302 00:14:58,960 --> 00:15:02,960 Speaker 1: be administered by the Small Business Administration, which has four 303 00:15:03,040 --> 00:15:07,040 Speaker 1: thousand employees. Are you concerned about the logistics getting the 304 00:15:07,080 --> 00:15:10,600 Speaker 1: money out the door? Absolutely? The money is not going 305 00:15:10,640 --> 00:15:13,120 Speaker 1: to move as fast as as we really need it 306 00:15:13,160 --> 00:15:17,120 Speaker 1: to move. Small businesses are already laying off employees and 307 00:15:17,160 --> 00:15:20,600 Speaker 1: having trouble meeting their meeting their bills, and they need 308 00:15:20,680 --> 00:15:23,360 Speaker 1: they need the money not today, they needed it yesterday. 309 00:15:23,400 --> 00:15:26,480 Speaker 1: And it's going to take weeks, if not longer, for 310 00:15:26,640 --> 00:15:30,400 Speaker 1: um these new small business loans, and they're for their 311 00:15:30,440 --> 00:15:33,920 Speaker 1: forgivable loans, but the interest, the interest is not forgivable 312 00:15:33,920 --> 00:15:37,680 Speaker 1: on them. Um, it's going to take weeks, if not longer, 313 00:15:37,720 --> 00:15:39,880 Speaker 1: for that money to get too small businesses. There's gonna 314 00:15:39,880 --> 00:15:42,520 Speaker 1: have to be a process whereby small businesses apply for 315 00:15:42,560 --> 00:15:45,640 Speaker 1: the loan, the loans get processed, and then finally the 316 00:15:46,480 --> 00:15:51,440 Speaker 1: checks will be dispersed. It is not going to happen instantaneously. So, Professor, 317 00:15:51,520 --> 00:15:54,640 Speaker 1: is there any mechanism that would be preferable to that? 318 00:15:54,680 --> 00:15:58,080 Speaker 1: I mean, in reality, can you in fact get cash 319 00:15:58,080 --> 00:16:02,280 Speaker 1: as small businesses any quicker? Um, there's one way to 320 00:16:02,320 --> 00:16:05,640 Speaker 1: get cash into small businesses pretty much. Actually, there are 321 00:16:05,640 --> 00:16:08,280 Speaker 1: two ways to get it into small businesses immediately. One 322 00:16:08,400 --> 00:16:11,800 Speaker 1: is in the bill, Um, it's a delay in um 323 00:16:11,960 --> 00:16:15,120 Speaker 1: payroll taxes because some of the some of the payroll 324 00:16:15,160 --> 00:16:18,920 Speaker 1: taxes are paid by the business basically your tax withholding, 325 00:16:19,480 --> 00:16:23,680 Speaker 1: and the bill is allowing businesses to dip into the 326 00:16:23,720 --> 00:16:26,840 Speaker 1: funds they withhold from your payroll and just pay it 327 00:16:27,240 --> 00:16:29,120 Speaker 1: to Treasury later. That is one thing to get some 328 00:16:29,240 --> 00:16:32,400 Speaker 1: cash immediately. And another thing that could get them cash 329 00:16:32,440 --> 00:16:36,400 Speaker 1: immediately is a debt moratorium or a debt collection moratorium. 330 00:16:36,840 --> 00:16:38,840 Speaker 1: And what that does is it if it would affect 331 00:16:38,960 --> 00:16:40,200 Speaker 1: and that's not in the bill, and I want to 332 00:16:40,200 --> 00:16:44,680 Speaker 1: be clear, but that would effectively force um UH float 333 00:16:44,760 --> 00:16:47,400 Speaker 1: in a sort of an extension of payment terms from 334 00:16:48,000 --> 00:16:52,400 Speaker 1: things like landlords and and lenders to small businesses. That 335 00:16:52,440 --> 00:16:55,560 Speaker 1: would allow small businesses to prioritize their cash to con 336 00:16:55,600 --> 00:16:59,880 Speaker 1: maintaining payroll. And then Congress could in theory at least 337 00:17:00,360 --> 00:17:03,440 Speaker 1: UH compensate lenders and landlords on the back end with something, 338 00:17:03,520 --> 00:17:06,600 Speaker 1: you say, attacks credit for their UH in the future. 339 00:17:07,640 --> 00:17:10,359 Speaker 1: So You've had a lot of experience in this, both 340 00:17:10,440 --> 00:17:14,400 Speaker 1: in bankruptcy commercial law, but also as former special counsel 341 00:17:14,520 --> 00:17:18,439 Speaker 1: to the Congressional Oversight Panel for TARP, the Troubled Asset 342 00:17:18,480 --> 00:17:21,400 Speaker 1: Relief Program back in two thousand eight and two thousand nine. 343 00:17:21,480 --> 00:17:25,040 Speaker 1: I'm wondering what you think of the process of this bill. 344 00:17:25,119 --> 00:17:27,800 Speaker 1: If you talk to representatives, they say, this has moved 345 00:17:27,840 --> 00:17:30,000 Speaker 1: as fast as anything can move in Washington, d C. 346 00:17:30,440 --> 00:17:32,600 Speaker 1: If you speak to the businesses, they say, what you say, 347 00:17:32,880 --> 00:17:35,080 Speaker 1: We needed the checks last week and we've already laid 348 00:17:35,119 --> 00:17:39,080 Speaker 1: people off. What's your sense those are both true? Um, 349 00:17:39,320 --> 00:17:44,520 Speaker 1: there's no contradiction there. This This bill moved remark remarkably fast. 350 00:17:44,920 --> 00:17:47,440 Speaker 1: You know, this is the largest federal spending bill we've 351 00:17:47,480 --> 00:17:52,720 Speaker 1: ever seen, and it went as Congress goes, at lightning speed. 352 00:17:52,800 --> 00:17:55,720 Speaker 1: The problem is that Congress is not set up to 353 00:17:56,880 --> 00:18:00,320 Speaker 1: deal Uh, it's it's meant to be a deliberative in 354 00:18:00,400 --> 00:18:02,720 Speaker 1: some sense, and it's not set up for dealing with 355 00:18:02,800 --> 00:18:06,200 Speaker 1: emergencies with speed. It's there's just an attention between the 356 00:18:06,240 --> 00:18:10,640 Speaker 1: design of our institutions and the needs of the moment. So, professor, 357 00:18:10,680 --> 00:18:15,400 Speaker 1: how do you think this stimulus will in fact impact 358 00:18:15,480 --> 00:18:20,760 Speaker 1: small and midsize businesses over the next coming weeks and months. Well, 359 00:18:20,800 --> 00:18:23,119 Speaker 1: there are some small, small and medium sized businesses for 360 00:18:23,160 --> 00:18:24,720 Speaker 1: which this money is just going to be too late. 361 00:18:25,000 --> 00:18:27,920 Speaker 1: And um, we don't have a sense of how many 362 00:18:27,960 --> 00:18:31,359 Speaker 1: of them there are that fall in that category that 363 00:18:31,400 --> 00:18:34,600 Speaker 1: the there's surprised that the limited data we have on 364 00:18:34,640 --> 00:18:38,840 Speaker 1: small businesses, and it's it's all kind of problematic because 365 00:18:38,840 --> 00:18:43,560 Speaker 1: small businesses are don't don't fit one profile. You know, 366 00:18:43,600 --> 00:18:47,520 Speaker 1: the the dry cleaner, the restaurant looks very different than 367 00:18:47,600 --> 00:18:51,440 Speaker 1: the than the small manufacturer, let's say. But in general, 368 00:18:51,600 --> 00:18:56,200 Speaker 1: small businesses don't have enormous cash reserves. That probably the 369 00:18:56,240 --> 00:18:59,480 Speaker 1: best guesses that they may maybe have a few weeks 370 00:18:59,560 --> 00:19:03,200 Speaker 1: or a month cash reserves on hand and and on average, 371 00:19:03,280 --> 00:19:05,600 Speaker 1: and that means that there are plenty that have less, 372 00:19:05,640 --> 00:19:07,480 Speaker 1: and those that have less are going to be in 373 00:19:07,520 --> 00:19:09,159 Speaker 1: real trouble and may not be able to make it 374 00:19:09,240 --> 00:19:15,960 Speaker 1: until they until government assistance arrives. The one the ones 375 00:19:16,000 --> 00:19:19,040 Speaker 1: that can last until they get the assistance. This will keep. 376 00:19:19,680 --> 00:19:22,080 Speaker 1: What what this will do, it will keep. It will 377 00:19:22,080 --> 00:19:24,640 Speaker 1: basically put them on life support. The government will take 378 00:19:25,119 --> 00:19:31,280 Speaker 1: effectively take over payroll and utilities and rent and mortgages 379 00:19:31,320 --> 00:19:35,879 Speaker 1: and other debt service um for for for quite a while. 380 00:19:37,000 --> 00:19:40,960 Speaker 1: The real question is how long does the crisis last? Absolutely, 381 00:19:40,960 --> 00:19:43,480 Speaker 1: that's kind of been the key question. Adam Levitton, thank 382 00:19:43,520 --> 00:19:45,440 Speaker 1: you so much for joining US and giving us your 383 00:19:45,480 --> 00:19:49,280 Speaker 1: thoughts at perspective. Adam Leviton is at Georgetown Law professor 384 00:19:49,320 --> 00:19:52,720 Speaker 1: and former Special counsel to the Congressional Oversight Panel of TARK. 385 00:19:55,080 --> 00:19:57,959 Speaker 1: We are seeing gains, as Charlie was saying, in equity markets, 386 00:19:57,960 --> 00:20:01,359 Speaker 1: which is interesting when you contrast it with the unbelievable number, 387 00:20:01,680 --> 00:20:05,840 Speaker 1: a record number of unemployment initial jobless claims filed three 388 00:20:05,880 --> 00:20:09,520 Speaker 1: point three million. It raises a question here. We knew 389 00:20:09,560 --> 00:20:12,440 Speaker 1: it was bad, we don't know how bad. This indicates 390 00:20:12,520 --> 00:20:16,159 Speaker 1: it's very, very bad. And yet is the indication in 391 00:20:16,240 --> 00:20:20,199 Speaker 1: markets right now that the U. S. Congress can save it, 392 00:20:20,400 --> 00:20:23,240 Speaker 1: or that the Fed and the Congress and Congress together 393 00:20:24,040 --> 00:20:26,680 Speaker 1: can somehow cushion the blow and that we've priced in 394 00:20:26,760 --> 00:20:28,720 Speaker 1: most of the pain. Navals Sym Bloomberg stocks that are 395 00:20:28,800 --> 00:20:32,840 Speaker 1: joining us now. Carra Kadonna, chief US economist with Bloomberg Economics. Dave, 396 00:20:33,040 --> 00:20:35,160 Speaker 1: I want to start with you, is that the implication 397 00:20:35,280 --> 00:20:37,600 Speaker 1: from the two point seven percent rally we're seeing right 398 00:20:37,640 --> 00:20:40,359 Speaker 1: now on the SMP. Boy, it sure looks that way, Lisa, 399 00:20:40,600 --> 00:20:44,320 Speaker 1: especially when you consider what's leading the advance in the 400 00:20:44,520 --> 00:20:48,480 Speaker 1: S and P five hundred. We're talking synchrony financial capital 401 00:20:48,520 --> 00:20:51,600 Speaker 1: One and Discover Financial. All these companies are in the 402 00:20:51,640 --> 00:20:54,000 Speaker 1: credit card business. Now you talk about an area of 403 00:20:54,040 --> 00:20:57,240 Speaker 1: the market. We could think people would be concerned given 404 00:20:57,240 --> 00:21:00,199 Speaker 1: the jump and jobless claims that we just saw, you know, 405 00:21:00,280 --> 00:21:02,480 Speaker 1: raising the issue of whether people are going to be 406 00:21:02,520 --> 00:21:04,959 Speaker 1: able to keep up the payments on their credit cards. 407 00:21:05,280 --> 00:21:09,360 Speaker 1: And yet these stocks are all up like twelve or more, 408 00:21:09,520 --> 00:21:12,600 Speaker 1: Synchrony up thirteen and a half percent of Capital One 409 00:21:13,040 --> 00:21:17,160 Speaker 1: actually got an upgrade over at Oppenheimer. The firm moved 410 00:21:17,160 --> 00:21:19,280 Speaker 1: to the equivalent to buy from hold on the stock. 411 00:21:19,359 --> 00:21:23,840 Speaker 1: They basically say that company, will you hold up? Okay? 412 00:21:23,880 --> 00:21:28,160 Speaker 1: I mean given you everything that's coming in terms of credits, 413 00:21:28,200 --> 00:21:30,840 Speaker 1: So you know that that's something that really jumps out 414 00:21:30,880 --> 00:21:32,560 Speaker 1: of this is to see as peers go up as 415 00:21:32,640 --> 00:21:35,120 Speaker 1: much as they have. I mean, it really gets your attention. Yeah, 416 00:21:35,160 --> 00:21:37,760 Speaker 1: and and really this is exactly where I wanted to go, Carl. 417 00:21:37,880 --> 00:21:41,240 Speaker 1: How much is the high number a good thing? And 418 00:21:41,680 --> 00:21:43,959 Speaker 1: good is in quotes, not a good thing. It's terrible 419 00:21:44,000 --> 00:21:46,359 Speaker 1: and a tragedy for all those people losing their jobs, 420 00:21:46,640 --> 00:21:49,040 Speaker 1: but a sign that at least millions of people will 421 00:21:49,080 --> 00:21:53,560 Speaker 1: be receiving unemployment benefits potentially cushioning the lack of revenue 422 00:21:53,560 --> 00:21:56,360 Speaker 1: that they're getting elsewhere, the turn of the market. That's 423 00:21:56,359 --> 00:21:58,600 Speaker 1: really a signal of a couple of things. Uh. And 424 00:21:58,640 --> 00:22:01,440 Speaker 1: so first of all, you know, j Pale this morning 425 00:22:01,520 --> 00:22:03,760 Speaker 1: on the Today Show said that the Fed is nowhere 426 00:22:03,880 --> 00:22:07,920 Speaker 1: near running out of ammunition to confront the crisis. Yesterday 427 00:22:08,160 --> 00:22:11,600 Speaker 1: there was a Bloomberg News scoop that the ECB is 428 00:22:11,640 --> 00:22:15,399 Speaker 1: getting ready to act more aggressively as well. Uh. And 429 00:22:15,440 --> 00:22:18,639 Speaker 1: then also what today we see very convincing signs that 430 00:22:18,720 --> 00:22:22,520 Speaker 1: were close to Congress finally passing the physical stimulus, which 431 00:22:22,560 --> 00:22:26,480 Speaker 1: two trillion dollars has some multiplicative effects throughout the economy, 432 00:22:26,520 --> 00:22:28,919 Speaker 1: so the administration is claiming two trillion is more like 433 00:22:29,359 --> 00:22:32,960 Speaker 1: uh four to six trillion. Nonetheless, this is all providing 434 00:22:33,040 --> 00:22:36,720 Speaker 1: important economic support. And to your point, Lisa, a lot 435 00:22:36,760 --> 00:22:39,679 Speaker 1: of individuals who may have been out of work at 436 00:22:39,720 --> 00:22:42,440 Speaker 1: least are getting some transfer payments from the government, and 437 00:22:42,520 --> 00:22:45,440 Speaker 1: in fact, with the fiscal stimulus bill that they can 438 00:22:45,480 --> 00:22:48,720 Speaker 1: take an additional six hundred dollars per week onto that 439 00:22:48,800 --> 00:22:52,000 Speaker 1: transfer payment. That certainly doesn't bridge the gap, but it 440 00:22:52,080 --> 00:22:54,840 Speaker 1: helps to at least offset some of the sting from 441 00:22:54,880 --> 00:22:57,600 Speaker 1: this hard stop in the economy. So, Carl, I just 442 00:22:57,760 --> 00:22:59,840 Speaker 1: wanted to get your latest thought coming out of bloomber 443 00:22:59,880 --> 00:23:02,560 Speaker 1: Gap Economics. How do you think GDPs can look for 444 00:23:02,960 --> 00:23:05,680 Speaker 1: the US this year. We've seen a lot of forecast 445 00:23:05,720 --> 00:23:07,720 Speaker 1: coming out of Wall Street. Just one of our bloomerk 446 00:23:07,760 --> 00:23:11,600 Speaker 1: Economics is sure So looking at the second quarter, we're 447 00:23:11,640 --> 00:23:15,480 Speaker 1: looking for a nine percent contraction in the downside scenario. 448 00:23:15,560 --> 00:23:18,560 Speaker 1: We think that could be closer to fourteen percent. But 449 00:23:18,640 --> 00:23:21,639 Speaker 1: this entirely depends on the extent of the lockdown. If 450 00:23:21,640 --> 00:23:24,320 Speaker 1: we're looking at a lockdown of forty five to sixty days, 451 00:23:24,920 --> 00:23:27,320 Speaker 1: then those forecasts will be roughly on the market. If 452 00:23:27,320 --> 00:23:29,840 Speaker 1: we reopen too soon and have to walk back down, 453 00:23:30,359 --> 00:23:33,000 Speaker 1: or if the lockdown lasts through the entirety of the 454 00:23:33,040 --> 00:23:36,000 Speaker 1: second quarter, then we're looking for a sharper contraction in 455 00:23:36,080 --> 00:23:38,399 Speaker 1: the economy. But I think it's too early to be 456 00:23:38,520 --> 00:23:41,840 Speaker 1: making that call, Dave. On the market side, there's a 457 00:23:41,920 --> 00:23:46,000 Speaker 1: question of the actual economic effect of the shutdowns, and 458 00:23:46,000 --> 00:23:49,360 Speaker 1: then there's the effect of whatever is going to probably 459 00:23:49,400 --> 00:23:51,840 Speaker 1: be passed today by Congress. Do we have a sense 460 00:23:51,880 --> 00:23:54,720 Speaker 1: of how much the market gain today is hinging on 461 00:23:54,840 --> 00:23:59,399 Speaker 1: that bill getting passed today? Bowling in the airline stocks, 462 00:23:59,440 --> 00:24:02,040 Speaker 1: and you talk about two areas that stand to benefit. 463 00:24:02,400 --> 00:24:05,080 Speaker 1: You know, we've reported the people familiar with the matter 464 00:24:05,160 --> 00:24:08,080 Speaker 1: telling us that that Boeing, you know, it may end 465 00:24:08,160 --> 00:24:10,880 Speaker 1: up with as much as sixty billion dollars in assistance 466 00:24:10,920 --> 00:24:13,840 Speaker 1: when you count in their suppliers as well. Uh. Coming 467 00:24:13,840 --> 00:24:16,760 Speaker 1: out of the deal. Boweling shares up twelve percent at 468 00:24:16,760 --> 00:24:18,760 Speaker 1: the moment, and you look across the board, you see 469 00:24:18,800 --> 00:24:22,200 Speaker 1: the airlines higher and they're due for fifty billion dollars 470 00:24:22,200 --> 00:24:25,160 Speaker 1: and loans and loan guarantees. Delta leading the way there 471 00:24:25,160 --> 00:24:28,399 Speaker 1: with a gain of almost seven percent. Uh. And actually 472 00:24:28,400 --> 00:24:31,240 Speaker 1: the airlines are doing substantially better than the cruise lines 473 00:24:31,280 --> 00:24:33,879 Speaker 1: at this point, which aren't in the same position to 474 00:24:33,920 --> 00:24:37,240 Speaker 1: get assistance under the measure. I mean, carnivals up, but 475 00:24:37,359 --> 00:24:40,360 Speaker 1: you've got Royal Caribbean and Norwegian Cruise Line down. So 476 00:24:40,600 --> 00:24:42,919 Speaker 1: you know, it goes to show you that there is 477 00:24:42,920 --> 00:24:46,280 Speaker 1: a real focus on the winners. And I wouldn't say 478 00:24:46,320 --> 00:24:48,320 Speaker 1: the losers. I mean they certainly if you think about 479 00:24:48,320 --> 00:24:51,320 Speaker 1: the cruise lines, they've lost plenty already. But the companies 480 00:24:51,320 --> 00:24:53,199 Speaker 1: that are going to get the most benefit out of 481 00:24:53,200 --> 00:24:57,480 Speaker 1: this bill are doing relatively well on today's trading. Carl, 482 00:24:57,560 --> 00:24:59,200 Speaker 1: just real quick here, I would love to get your 483 00:24:59,320 --> 00:25:01,560 Speaker 1: sense of whether we're going to see another three point 484 00:25:01,600 --> 00:25:06,440 Speaker 1: three million initial jobless claims next reading. Well, I think 485 00:25:06,440 --> 00:25:09,120 Speaker 1: we're going to see something in the million plus territory 486 00:25:09,280 --> 00:25:11,800 Speaker 1: for sure. The issue we're contending with here as we 487 00:25:11,840 --> 00:25:14,960 Speaker 1: look at the numbers is that there's a significant backlog 488 00:25:15,000 --> 00:25:18,040 Speaker 1: of applicants who have not been able to file. Websites 489 00:25:18,080 --> 00:25:22,520 Speaker 1: are crashing, and Coal center are overwhelmed with the capacity constraints. 490 00:25:22,560 --> 00:25:24,760 Speaker 1: So I think that we will see at least a 491 00:25:24,800 --> 00:25:28,479 Speaker 1: couple more weeks with jobs claimed. The initial claims UH 492 00:25:28,720 --> 00:25:31,880 Speaker 1: north of a million, it could be two or three million. 493 00:25:31,920 --> 00:25:34,080 Speaker 1: I don't think we'll see as high of readings going 494 00:25:34,119 --> 00:25:38,000 Speaker 1: forward as we saw today. Looking at today's number implies 495 00:25:38,160 --> 00:25:40,280 Speaker 1: five and a half percent on the unemployment rate, so 496 00:25:40,320 --> 00:25:43,399 Speaker 1: almost at two point increase. We continue to see this, 497 00:25:43,560 --> 00:25:46,800 Speaker 1: then we're talking about, you know, seven eight percent unemployment 498 00:25:46,840 --> 00:25:49,600 Speaker 1: in the second quarter. Caracadona, Chief you as economist with 499 00:25:49,600 --> 00:25:52,280 Speaker 1: Bloomberg Economics and Dave Wilson Bloomberg Sock Center. Thank you 500 00:25:52,880 --> 00:25:54,800 Speaker 1: both of you and Paul. Just to get a sense 501 00:25:55,200 --> 00:25:58,560 Speaker 1: of how significant is three point three million number. Was. 502 00:25:58,680 --> 00:26:02,440 Speaker 1: It was quadruple the prior record in the nineteen eighties. 503 00:26:04,520 --> 00:26:06,960 Speaker 1: Thanks for listening to the Bloomberg pen L podcast. You 504 00:26:07,000 --> 00:26:09,679 Speaker 1: can subscribe and listen to interviews at Apple Podcasts or 505 00:26:09,680 --> 00:26:12,679 Speaker 1: whatever podcast platform you prefer. I'm Paul Sweeney. I'm on 506 00:26:12,720 --> 00:26:15,359 Speaker 1: Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm on 507 00:26:15,400 --> 00:26:18,240 Speaker 1: Twitter at Lisa abram woits one before the podcast. You 508 00:26:18,280 --> 00:26:20,840 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.