WEBVTT - Surveillance: Expect More Virus Cases, Rasmussen Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.600 Bloomberg dot Com, and of course on the Bloomberg Julian 0:00:27.640 --> 0:00:30.880 Emmanuel with us right now with bt I g of 0:00:30.880 --> 0:00:33.720 course expert in equities and derivatives. Julian, what does the 0:00:33.840 --> 0:00:36.760 derivative markets say to you right now? What are the 0:00:36.800 --> 0:00:41.839 indicators and derivatives that gives you direction in regular common stock? 0:00:42.920 --> 0:00:46.320 Sure so, so yesterday was was critical in our view 0:00:46.400 --> 0:00:50.920 because as you made lower low in the SMP five 0:00:51.000 --> 0:00:55.000 hundred and all the major indexes, you didn't make a 0:00:55.080 --> 0:00:57.560 higher high in the VIX. And when you put that 0:00:57.680 --> 0:01:01.160 in the context of the fact that between limit down 0:01:01.480 --> 0:01:04.960 Sunday night, then massive rally on the back of the 0:01:05.000 --> 0:01:09.120 FED and then a collapse, a total movement of almost 0:01:10.440 --> 0:01:13.240 of the value of the s and P five from 0:01:13.319 --> 0:01:16.679 low to high to low um, it basically tells you 0:01:16.959 --> 0:01:20.160 that for the most part, sellers are exhausted. They may 0:01:20.200 --> 0:01:23.160 not be finished, but they are exhausted at the moment, 0:01:23.200 --> 0:01:25.680 and so that's the start of a bottoming process and 0:01:25.720 --> 0:01:29.480 our view, Judy, I'm realty hot to make the argument 0:01:29.520 --> 0:01:31.360 that things of bottom in an equity when we haven't 0:01:31.400 --> 0:01:33.960 seen that happening credit yet, how it spreads out to 0:01:34.000 --> 0:01:37.800 about eleven hundred basis points, the non energy component getting 0:01:37.800 --> 0:01:40.760 out to near a thousand now and the direction of 0:01:40.800 --> 0:01:43.440 travel is still concerning. Can you construct an argument the 0:01:43.440 --> 0:01:47.960 equities of bottoming opposite of a bottoming gall in credit? Uh? Well, 0:01:48.080 --> 0:01:51.480 I think basically, you know you you spoke about it 0:01:51.800 --> 0:01:54.640 a little while ago, in that you know, the government 0:01:54.880 --> 0:01:58.560 is now uh in the business of picking winners and 0:01:58.640 --> 0:02:02.160 losers more than perhaps in two thousand and eight, I 0:02:02.160 --> 0:02:05.280 would argue, well more than than two thousand and eight. 0:02:05.400 --> 0:02:10.880 And clearly the priority is on the employers, the you know, 0:02:11.000 --> 0:02:15.360 the larger companies. UM. This will be a process that 0:02:15.400 --> 0:02:19.760 will get managed. Ultimately, the FED will oversee the high 0:02:19.800 --> 0:02:23.640 yield market. Um. And as you said, there will be bankruptcies. 0:02:24.000 --> 0:02:26.560 But the fact is that you know, the for the 0:02:26.600 --> 0:02:30.080 most part, you tend to look through these types of things. 0:02:30.080 --> 0:02:32.320 And I would suggest that when you look at the 0:02:32.360 --> 0:02:36.280 first quarter of two thousand and sixteen, and obviously the 0:02:36.600 --> 0:02:39.760 bankruptcies in high yield will be you know, far in 0:02:39.880 --> 0:02:46.600 excess of that that you know down thirty could be 0:02:46.639 --> 0:02:50.800 the beginning of of discounting in the equity market. So, Julian, 0:02:51.000 --> 0:02:53.360 there is a question about the fiscal response. We're talking 0:02:53.400 --> 0:02:56.240 about the government and support for some of these companies. 0:02:56.639 --> 0:02:58.320 But I want to go back to the FED and 0:02:58.320 --> 0:03:00.960 trying to support market function and I'm trying to pass 0:03:01.000 --> 0:03:04.120 through market functioning versus credit risk. And I'm looking, for example, 0:03:04.440 --> 0:03:07.520 at some mortgage funds that are unable to meet margin calls. 0:03:07.520 --> 0:03:12.120 Investal Mortgage Capital the latest one crossing the Bloomberg earlier today. 0:03:12.120 --> 0:03:15.440 You're seeing a lot of distress fire sales over the weekend, 0:03:15.520 --> 0:03:17.280 trying to get rid of some of the assets to 0:03:17.360 --> 0:03:21.519 meet redemptions and margin calls. At what point is this 0:03:21.639 --> 0:03:25.280 going to be an ongoing problem for the system versus 0:03:25.320 --> 0:03:29.840 just idiosyncratic potholes that are blowing up amid the volatility. Well, 0:03:29.960 --> 0:03:34.160 I think it actually has been a systemic problem, which 0:03:34.240 --> 0:03:37.600 is why you've seen the said do what what it's doing. 0:03:37.680 --> 0:03:40.000 From our point of view, you really want to look 0:03:40.000 --> 0:03:42.880 at commercial paper um and you want to look at 0:03:42.960 --> 0:03:47.960 you know, frankly, training and clearing volume in in all 0:03:48.000 --> 0:03:51.080 of the fixed income markets because to us, one of 0:03:51.120 --> 0:03:54.480 the interesting things about this environment is that if you 0:03:54.520 --> 0:03:58.160 look at it, the equity market to function much much, 0:03:58.440 --> 0:04:01.080 you know, far superior in terms of liquidity than the 0:04:01.120 --> 0:04:04.920 fixed income markets. We will be watching commercial paper very 0:04:05.040 --> 0:04:08.040 very carefully. Julian, what have you? This may be an 0:04:08.080 --> 0:04:10.640 unfair question, but I'm gonna go that it's unfair. Tuesday, 0:04:11.280 --> 0:04:14.360 what have you learned about active versus passive in this creator? 0:04:14.720 --> 0:04:16.680 I mean, act has been waiting for a creator for 0:04:16.800 --> 0:04:19.520 years to say actives better than pass Have you had 0:04:19.520 --> 0:04:24.479 any wisdom on that? Well, what we're learning is is 0:04:24.600 --> 0:04:28.479 that the combination of of of the government intervening is 0:04:28.560 --> 0:04:32.200 causing active versus passive to look a little different than 0:04:32.240 --> 0:04:36.520 perhaps we might have expected. Um And you know, typically 0:04:36.920 --> 0:04:39.960 you might see some more of the value type areas 0:04:40.240 --> 0:04:44.479 start to emerge and stabilize first. But again when you 0:04:44.560 --> 0:04:46.680 look at it and you think about the waiting in 0:04:46.680 --> 0:04:50.120 the index, uh, you really you know, you look at 0:04:50.200 --> 0:04:54.800 at the value of technology, financials, health care, and communication 0:04:54.920 --> 0:04:58.760 services and they dominate uh the index as a whole, 0:04:59.279 --> 0:05:01.880 and those to be the area is that the government 0:05:01.960 --> 0:05:05.359 is likely to put you winners over losers. John Pharaoh, 0:05:05.480 --> 0:05:07.680 is Apple looking for a bail out. I don't think 0:05:07.720 --> 0:05:10.599 Apples looking from a bailout. I think that's a silver 0:05:10.640 --> 0:05:12.880 lining on a morning like this, sitting down the couch. 0:05:13.040 --> 0:05:15.760 You know, John, underneath my culture's probably three pair of 0:05:16.040 --> 0:05:20.000 airs been lost. You're supporting the company is still unpleased 0:05:20.000 --> 0:05:24.120 to keep on. Julie, and I want to transition to 0:05:24.160 --> 0:05:26.560 a really complex question right now that it's got a 0:05:26.560 --> 0:05:28.320 whole lot more fuel in the last twenty four hours, 0:05:28.320 --> 0:05:30.719 and it's something investors increasingly might have to think about. 0:05:31.400 --> 0:05:33.359 I don't want you space to speak directly to the 0:05:33.360 --> 0:05:35.080 health issue, and I know that's difficult at a moment 0:05:35.120 --> 0:05:37.440 like this, but just explore the following with me. The 0:05:37.480 --> 0:05:40.520 President is making it pretty clear that he's thinking about 0:05:41.520 --> 0:05:44.840 the cost benefit analysis, and it's a tragic store and 0:05:44.880 --> 0:05:48.760 it's an ugly process of remaining shut down, and whether 0:05:48.839 --> 0:05:52.839 the cure is worse than the illness. And the reason 0:05:52.880 --> 0:05:55.680 I think investors need to start thinking about this is 0:05:55.720 --> 0:05:58.440 if they pulled back on the mitigation efforts too early, 0:05:59.080 --> 0:06:01.159 and then we have to think about bringing them back 0:06:01.200 --> 0:06:03.880 in in the summer and bringing back in in the full. 0:06:04.320 --> 0:06:06.440 I just wonder how chopping, how messy this could get 0:06:06.800 --> 0:06:09.320 if we don't shut it down, what it wants for markets, 0:06:09.360 --> 0:06:11.680 that is, from a market's perspective, from what you hear 0:06:11.720 --> 0:06:13.960 from the President at the moment, Judi. And how complex 0:06:14.040 --> 0:06:17.360 is this issue. So if you look at the evolution 0:06:17.520 --> 0:06:20.360 of the last sixteen hours or so, it's very clear 0:06:21.040 --> 0:06:23.679 that part of the reason that the market started rallying 0:06:23.720 --> 0:06:28.160 overnight is because there was an expectation that the President 0:06:28.279 --> 0:06:33.280 intends to bring the economy back sooner than expect You know, 0:06:33.400 --> 0:06:37.479 you can openine on on what the health implications of 0:06:37.520 --> 0:06:41.200 that are, um, but there's no question about that from 0:06:41.240 --> 0:06:46.080 the market point of view that that is how we reacted. Look, 0:06:46.360 --> 0:06:50.840 it's an incredibly difficult trade off, and and what we 0:06:50.839 --> 0:06:54.159 we're thinking is that the actions that the Fed took 0:06:54.320 --> 0:06:59.000 yesterday UM in concert with what we certainly hope and 0:06:59.000 --> 0:07:02.239 and honestly, if we don't get a bill today or tomorrow, 0:07:02.360 --> 0:07:06.000 the level of your responsibility in Washington will just be 0:07:06.480 --> 0:07:10.600 you know, off the charts. Um that the combination of 0:07:10.640 --> 0:07:14.200 those things can get us, you know, to manage the 0:07:14.280 --> 0:07:17.920 economic trough into the summer. But the real question is, 0:07:18.240 --> 0:07:21.240 you know, in mitigation, you know, do people want to 0:07:21.240 --> 0:07:24.000 get on airplanes and eat out come the fall? We 0:07:24.080 --> 0:07:27.360 need to get to that point, Jude mny Well, great 0:07:27.400 --> 0:07:35.160 to catch you out with you without question, folks. The 0:07:35.160 --> 0:07:39.360 Bloomberg Surveillance interview of the day on this crisis. She 0:07:39.480 --> 0:07:42.960 is out of Northampton, Massachusetts and Smith College, where she 0:07:43.040 --> 0:07:45.800 took a liking to the creb cycle and then had 0:07:45.800 --> 0:07:50.560 a sterling academic career in microbiology, including uh time at 0:07:50.560 --> 0:07:56.040 Columbia University, her Columbia University, and the University of Washington program, 0:07:56.080 --> 0:08:01.559 which is world class. Angela Rasmussen choice. Now, Angela, help 0:08:01.680 --> 0:08:05.960 me with the density of population, whether it is Italy 0:08:06.640 --> 0:08:11.880 or Wuhan or Brooklyn, New York, the density of population 0:08:12.480 --> 0:08:17.640 seems to be a determining factor. Yeah, so viruses have 0:08:17.760 --> 0:08:22.040 to spread between people. Um Viruses can be picked up 0:08:22.080 --> 0:08:24.920 from the environment, but they generally don't last long on 0:08:25.080 --> 0:08:29.600 say surfaces, for example. Um So, in general, when the 0:08:29.640 --> 0:08:33.480 population is more dense, you're more risk of coming across 0:08:33.480 --> 0:08:36.360 somebody who is also infected, who could possibly transmit a 0:08:36.440 --> 0:08:40.199 virus to you. So, Angelo, what have we learned from 0:08:40.520 --> 0:08:46.160 Wuhan and from northern Italy about the timeline here? Flattening 0:08:46.240 --> 0:08:48.840 that curve. Where are we kind of here in the 0:08:48.920 --> 0:08:52.280 US on that curve. Well, it's very difficult to say, 0:08:52.360 --> 0:08:55.400 because our testing capacity is not at the point where 0:08:55.400 --> 0:08:59.800 we can truly accurately determine the prevalence of Star's coronavirus 0:09:00.000 --> 0:09:04.520 to in our population. However, um, and I'm cautioning this pison. 0:09:04.600 --> 0:09:08.520 I'm not an epidemiologist, but all the current epidemiological models 0:09:08.520 --> 0:09:11.160 that I've seen suggestion that we're still on the uptick. 0:09:11.640 --> 0:09:15.800 You can expect more cases. I mean, this is so important. 0:09:15.800 --> 0:09:18.079 Folks and the Ft and the New York Times have 0:09:18.160 --> 0:09:21.680 done great charts on this, and Angela their log charts. 0:09:22.120 --> 0:09:24.560 And the answer is you want to bend the curve over, 0:09:24.640 --> 0:09:28.400 as Paul Sweeney says, the Asians have successfully done this 0:09:28.559 --> 0:09:32.720 period and in Europe it's a struggle. What's so important 0:09:32.840 --> 0:09:38.640 is the slope of those trajectories. Our slope Angela is frightening. 0:09:39.040 --> 0:09:43.679 How do we bring that slope down? Unfortunately, because we 0:09:43.760 --> 0:09:48.200 don't know the prevalence in our population very accurately right now, 0:09:48.720 --> 0:09:51.320 the only way to do that is by these large scale, 0:09:51.480 --> 0:09:54.959 very very strict social distancing. How do you respond, I 0:09:54.960 --> 0:09:57.920 don't mean to interrupt it, just because of time. Dr Rasmussen, 0:09:58.160 --> 0:10:00.400 how do you respond to the president's an hour and 0:10:00.520 --> 0:10:04.640 forty eight minute briefing yesterday, which is to get America 0:10:04.720 --> 0:10:07.000 back to work? How do you, as a grizzled pro 0:10:07.200 --> 0:10:11.080 respond that. I was very concerned about that statement. I 0:10:11.120 --> 0:10:13.440 don't think that we're anywhere near the point where we 0:10:13.480 --> 0:10:16.280 can begin to say that. UM. I think that it 0:10:16.360 --> 0:10:20.320 does need to be evaluated uh as we go along. UM. 0:10:20.360 --> 0:10:22.360 I don't think though, that it saves to say that 0:10:22.400 --> 0:10:25.040 people can go back to work unless we can determine 0:10:25.480 --> 0:10:29.839 if they have been infected before and may have protective immunity. So, 0:10:30.200 --> 0:10:33.840 Dr the what is the sense of the treatment? How 0:10:33.880 --> 0:10:36.360 do you think the treatment will evolve over the next 0:10:36.480 --> 0:10:40.800 several months. Obviously there's not a COVID nineteen treatment flu shot, 0:10:40.840 --> 0:10:42.800 for example, But how do you think the treatment will evolve? 0:10:43.960 --> 0:10:46.480 I think if there is a treatment, and certainly some 0:10:46.559 --> 0:10:50.199 of the treatments that have been discussed hydroxychlor quinn rum 0:10:50.280 --> 0:10:53.319 does a view, for example, are in clinical trials. Now 0:10:53.960 --> 0:10:57.360 it's incumbent on us to to complete those clinical trials 0:10:57.400 --> 0:11:00.680 as quickly as possible, because having in a ailable treatment 0:11:00.720 --> 0:11:04.240 that's effective could really dramatically change this for all of us. 0:11:05.880 --> 0:11:07.719 So a sense of timing on that, I know it's 0:11:07.880 --> 0:11:10.720 you know, we usually kind of measure these things in years. 0:11:11.600 --> 0:11:17.040 Is there a possibility to compress that to months? Yes, certainly. 0:11:17.320 --> 0:11:21.240 UM for chloroquine, M hydroxy chloroquine and super mycen and 0:11:21.360 --> 0:11:24.200 ram doeser here. Those trials I believe are already ongoing. 0:11:25.000 --> 0:11:28.000 A trial has already been completed in China um on 0:11:28.320 --> 0:11:31.640 to HIV drugs that unfortunately did not turn out to work. 0:11:32.240 --> 0:11:35.480 But um, since the remdesivie and chloroquine trials have also 0:11:35.559 --> 0:11:37.920 been going on, I think we can expect it to 0:11:38.000 --> 0:11:41.720 be a matter of weeks. Um eight to twelve weeks 0:11:41.880 --> 0:11:47.280 is what I've heard versus six months to a year. Doctor. 0:11:47.360 --> 0:11:49.839 It's interesting, Tom, you know, it's uh, it's just kind 0:11:49.840 --> 0:11:52.440 of we're still in that upward part of the curve 0:11:52.480 --> 0:11:57.040 here in the United States, certainly New York City. Dr. Yeah, yeah, 0:11:57.679 --> 0:12:00.319 I don't mean to interrupt, but thank you John Tucker 0:12:00.400 --> 0:12:03.840 for sending in this headline. Mr Cudlow at the White House, 0:12:03.880 --> 0:12:07.559 as quote, may try to reopen parts of the economy 0:12:07.760 --> 0:12:11.079 around months end. Dr rasmuson what's that part of the 0:12:11.120 --> 0:12:13.560 economy gonna be. Is it going to be that famous 0:12:13.679 --> 0:12:16.439 coffee house up in Northampton? Are they going to try 0:12:16.520 --> 0:12:19.199 to open the Iron Horse Cafe just to keep the 0:12:19.280 --> 0:12:23.360 economy going? I mean, what do they open? That is 0:12:23.400 --> 0:12:26.160 an excellent question, and I have no idea. UM. I 0:12:26.320 --> 0:12:29.640 do think that in many places some of those service 0:12:29.840 --> 0:12:34.199 businesses UM and retail are still open. I know that 0:12:34.400 --> 0:12:36.640 not in New York, cannot in Seattle, where I'm calling 0:12:36.760 --> 0:12:40.400 from right now. UM, But I really don't know what 0:12:40.840 --> 0:12:45.080 parts of the economy Mr Cudlo is speaking of. UM. 0:12:45.160 --> 0:12:47.959 I think though, that indiscriminately opening up parts of the 0:12:48.040 --> 0:12:52.520 economy is a bad idea without further testing. Thank you 0:12:52.640 --> 0:12:55.120 so much for being with los Angele Rasmuson of Columbia 0:12:55.200 --> 0:12:58.560 University and in Seattle, of course, the University of Washington. 0:12:58.679 --> 0:13:03.920 Thank you so much for being with. That's what we've 0:13:03.960 --> 0:13:06.079 been trying to do is go to experts in the field. 0:13:06.360 --> 0:13:10.000 Whether it's Peter Styre we talked to at Mount Sinai, 0:13:10.160 --> 0:13:14.400 Brooklyn yesterday, Robert Crandall joining us, the emeritus chairman of 0:13:14.480 --> 0:13:18.800 American Airlines earlier now Randall Crossinger, the former governor of 0:13:18.840 --> 0:13:23.360 the Federal Reserve System, Randy Crossinger Joints from the Boost School, Chicago. 0:13:24.040 --> 0:13:27.000 Professor Krasser, wonderful to have you with us. I want 0:13:27.040 --> 0:13:29.400 to go to the mathiness. There is a point in 0:13:29.600 --> 0:13:33.560 physics where you forget about the fanciness of the equation 0:13:34.240 --> 0:13:38.000 and you just look at the magnitude or what's called 0:13:38.240 --> 0:13:44.400 the amplitude. Do we have any understanding of the amplitudes 0:13:44.760 --> 0:13:48.880 of this shock, the size of the shock we're confronting. 0:13:50.800 --> 0:13:54.199 We really haven't seen something like this before, because this 0:13:55.000 --> 0:13:59.439 is both a natural disaster and one that in order 0:13:59.480 --> 0:14:03.400 to respond into the finatural disaster, we're taking policy actions 0:14:03.760 --> 0:14:06.719 that are significantly slow in the economy. And I don't 0:14:06.760 --> 0:14:11.199 think we've ever seen that specific combination before. We have 0:14:11.360 --> 0:14:14.520 not seen it before, but we have to sort our 0:14:14.559 --> 0:14:18.600 way through it. Do the formulas in the theories work here? 0:14:19.480 --> 0:14:21.600 Or is it just just to throw a lot of 0:14:21.640 --> 0:14:25.880 money at the wall. No, No, I think they still uh, 0:14:25.960 --> 0:14:28.120 you know, we don't have you know, we don't know 0:14:28.320 --> 0:14:30.680 for sure, but I think we still have guidance from 0:14:31.000 --> 0:14:33.400 from other examples of the past, whether it's from the 0:14:34.160 --> 0:14:37.200 pandemic in the early part of the twentieth century or 0:14:37.400 --> 0:14:40.800 other challenges that have occurred. I think it's really clear 0:14:40.920 --> 0:14:44.760 that the lessons from the financial crisis and two thousand eight, 0:14:44.800 --> 0:14:47.800 two thousand nine are that a fundamental is that you 0:14:47.880 --> 0:14:51.280 need to keep the financial system operating, and I think 0:14:51.320 --> 0:14:54.080 that's what the FED is trying to do. Obviously, the 0:14:54.200 --> 0:14:58.720 shock is coming from something very different than the mortgage market, um. 0:14:58.920 --> 0:15:00.960 But I think the less since have been learned there 0:15:01.200 --> 0:15:02.880 and they stood up a lot of the programs that 0:15:03.040 --> 0:15:05.800 we did back when I was there a decade ago, 0:15:06.120 --> 0:15:08.240 and they're doing new things, which I think is great. 0:15:09.000 --> 0:15:11.320 Professor Krauster, you so I want to talk a little 0:15:11.320 --> 0:15:13.440 bit about those new things that that you talk about. 0:15:13.680 --> 0:15:16.520 Do they have anything left based on your experience in 0:15:16.560 --> 0:15:19.960 the crisis era at the Fedure Reserve and based on 0:15:20.040 --> 0:15:23.640 what we're seeing right now, well, they've done a lot 0:15:23.880 --> 0:15:26.520 and a lot of this is still being implemented. We'll 0:15:26.600 --> 0:15:30.720 see the exact magnitude um and and you see they're 0:15:30.720 --> 0:15:33.480 able to revive some of these They originally buying uh 0:15:34.400 --> 0:15:37.640 billion dollars worth of treasuries billion dollars worth of mortgage 0:15:37.640 --> 0:15:40.400 backed securities, and now that will be unlimited, and so 0:15:41.160 --> 0:15:44.280 they may and they are starting to enter other markets 0:15:44.480 --> 0:15:48.800 and they can increase their firepower in purchasing assets in 0:15:48.920 --> 0:15:53.880 those those other markets. Uh, they are introducing or talked 0:15:53.920 --> 0:15:57.680 about introducing a main street lending program. I think that 0:15:57.760 --> 0:16:00.520 could be helpful for small and medium sized business and 0:16:00.720 --> 0:16:03.800 for for consumers. So I think they've done a lot. 0:16:04.120 --> 0:16:07.080 I think there's still more ammunition left, both in terms 0:16:07.120 --> 0:16:09.720 of the magnitude of programs that really and now as 0:16:09.800 --> 0:16:12.400 well as some specific programs like a main street lending program. 0:16:12.560 --> 0:16:14.240 And Professor, we've talked a lot about what they've done, 0:16:14.280 --> 0:16:16.320 and they've done a lot. Let's talk about what they've achieved. 0:16:16.400 --> 0:16:17.960 What have they achieved in the last couple of weeks 0:16:18.000 --> 0:16:21.000 with this whole range of tools that they've basically deployed 0:16:21.040 --> 0:16:23.200 to really get at the functioning of the market and 0:16:23.360 --> 0:16:27.480 the financial conditions as well. So I think the markets 0:16:27.680 --> 0:16:31.800 are still functioning, not perfectly, but much better than if 0:16:31.920 --> 0:16:34.840 the FIT had and other central banks hadn't undertaken the 0:16:34.880 --> 0:16:39.400 actions that that they had. But when the shot comes 0:16:39.440 --> 0:16:44.280 from something like a virus, the FED can do what's necessary, 0:16:44.640 --> 0:16:47.560 but it's not sufficient. And I think UM, the reason 0:16:47.600 --> 0:16:52.560 that we haven't seen um the markets stopped that stopping 0:16:52.560 --> 0:16:54.760 the tunnels in the markets. It is because it's now 0:16:54.840 --> 0:16:57.720 with the health authorities and fiscal authorities, and they've been 0:16:57.800 --> 0:17:01.960 mixed messages. Some countries doing more, some trunter is doing less. UM. 0:17:02.440 --> 0:17:06.000 It's obviously the debates in Congress over you know, what 0:17:06.160 --> 0:17:09.200 kind of package, whether the package will be passed and when. 0:17:10.040 --> 0:17:12.320 That's creating a lot of a lot of uncertainty and 0:17:12.359 --> 0:17:15.200 tumult a lot of division in Washington, d C. So 0:17:15.280 --> 0:17:18.800 let's talk about how the effort in Washington could complement 0:17:18.840 --> 0:17:20.520 what we've seen on the montery policy side. What do 0:17:20.640 --> 0:17:23.280 you need to say literally yesterday as soon as possible 0:17:23.680 --> 0:17:28.080 from Washington. On the political side of things, I think 0:17:28.480 --> 0:17:31.720 getting an agreement that in and of itself will be 0:17:31.880 --> 0:17:34.000 very valuable to the market to see that, I guess 0:17:34.359 --> 0:17:37.359 they can get something together and they can act against 0:17:37.480 --> 0:17:43.119 this um uh this uh this pandemic. Then, in particular, 0:17:43.400 --> 0:17:45.359 I think would be really valuable to make sure that 0:17:45.480 --> 0:17:49.520 it's very well focused on what are the issues. The First, 0:17:49.720 --> 0:17:54.760 making sure that there's sufficient funding for healthcare and uh 0:17:54.920 --> 0:17:58.560 that um giving incentives for healthcare workers in retirement to 0:17:58.640 --> 0:18:02.399 come come back in that's I think something very important. Second, 0:18:02.560 --> 0:18:06.480 making sure that vulnerable people continue to be able to 0:18:06.880 --> 0:18:10.280 get income, and in particular that their incentive is not 0:18:10.480 --> 0:18:13.480 to go into work but to stay home during this 0:18:13.640 --> 0:18:16.959 period but still be able to receive income. You can 0:18:17.040 --> 0:18:19.040 do that through sending checks to people. You can do 0:18:19.160 --> 0:18:23.520 that through various support to small and medium sized business 0:18:23.600 --> 0:18:26.480 to get them to continue to pay the wages of 0:18:26.600 --> 0:18:30.320 people who would be happy staying at home. UM. Those 0:18:30.600 --> 0:18:32.760 those are some of the first things that I would 0:18:33.080 --> 0:18:36.360 I would focus on Professor Krausner. Last week and even 0:18:36.359 --> 0:18:39.440 the week before, we were really talking about a financial 0:18:39.560 --> 0:18:43.080 crisis in addition to the economic crisis unfolding. Has the 0:18:43.200 --> 0:18:47.720 FED effectively stopped that? Have we avoided a financial crisis 0:18:47.800 --> 0:18:51.680 at this point or is it too early to say? Well, 0:18:51.960 --> 0:18:54.679 given my experiences back in two two nine, I never 0:18:54.720 --> 0:18:57.680 say never about anything, but I think that the FED 0:18:57.760 --> 0:19:02.120 actions have been crucial in avoiding financial crisis so far. 0:19:02.640 --> 0:19:05.679 And I think if the fiscal and health authorities act 0:19:05.960 --> 0:19:10.240 in um expeditiously and effectively, then I think we will 0:19:10.280 --> 0:19:13.320 have will have been able to get through that. But 0:19:13.560 --> 0:19:16.520 it really will depend on the size of the economic shock, 0:19:17.080 --> 0:19:21.280 and and that's now on the court of the fiscal 0:19:21.320 --> 0:19:24.359 and monetary and fiscal health authorities, and now as we 0:19:24.440 --> 0:19:29.400 do for for surveillance. It's Math Tuesday with Randall Croster 0:19:29.520 --> 0:19:34.320 of Chicago, Grandy Paul Wilmot, the giant of Imperial College, 0:19:35.000 --> 0:19:37.919 and a guy named Todd. Ab gave a rave review 0:19:38.080 --> 0:19:43.080 years ago to Kent Osmond's masterpiece Iceberg Risk, which was 0:19:43.200 --> 0:19:48.440 basically a complete refusentation of the central limit theorem. Are 0:19:48.480 --> 0:19:51.240 we are we doing that again? Are we so fancy 0:19:51.320 --> 0:19:56.360 at our crosser like math certitude that once again we've 0:19:56.480 --> 0:20:00.720 learned the once in a lifetime event come along every 0:20:00.800 --> 0:20:07.200 twelve years? Well? Yeah, Well, I think if you we've 0:20:07.240 --> 0:20:09.640 talked about this before. I think on on your program 0:20:09.960 --> 0:20:12.800 that I get worried when other people aren't worried. So 0:20:13.040 --> 0:20:17.159 I focus a lot on um uh, doing scenario planning, 0:20:17.480 --> 0:20:21.800 doing stress tests, and risk analysis for things where you're 0:20:21.880 --> 0:20:23.960 just not sure you don't have the data. Fork it 0:20:24.040 --> 0:20:27.760 hasn't happened, but let's see what if? Can you? Can 0:20:27.840 --> 0:20:30.560 you withstand anything like that? And so these are the 0:20:30.640 --> 0:20:32.720 things that you have to to think about. Can you 0:20:32.800 --> 0:20:36.040 perfectly plans for them? Of course not. Can you have 0:20:36.720 --> 0:20:39.720 better readiness for them? Yes? And I think in some 0:20:39.880 --> 0:20:43.359 sense we've learned a number of lessons from two thousand 0:20:43.520 --> 0:20:45.800 two thousand nine, and it helped to allow the FED 0:20:45.880 --> 0:20:48.600 to respond much more rapidly. Because they didn't have to 0:20:48.680 --> 0:20:52.520 create programs like the commercial paper Facility and the money 0:20:52.560 --> 0:20:57.000 market Facility and so many of the others whole cloth 0:20:57.160 --> 0:20:59.480 like we didn't, they could stand them up quickly, and 0:20:59.560 --> 0:21:03.760 that gives opportunity to ramp them up, move them to scale, 0:21:03.960 --> 0:21:07.400 and do some new thing. To borrow phrase from Nicholas 0:21:07.480 --> 0:21:11.200 tell Ub, and that would be just simply skin in 0:21:11.280 --> 0:21:13.240 the game. I guess we've all got skin in the 0:21:13.320 --> 0:21:15.760 game now with this horrific crisis. I don't mean to 0:21:15.840 --> 0:21:19.880 make a joke about it, folks, but Randy, the recovery rate, 0:21:20.000 --> 0:21:23.720 the glide path to recovery. We forget out of the depression. 0:21:23.840 --> 0:21:26.520 It took a war and stimulus of a war to 0:21:26.600 --> 0:21:28.720 get equities to lift back to where they were in 0:21:28.880 --> 0:21:33.399 nine after nineteen thirty seven. How do you envision a 0:21:33.520 --> 0:21:39.360 recovery here to Dow twenty nine thousand. So I think 0:21:39.440 --> 0:21:44.240 that ultimately will be related to the underlying economics, and 0:21:44.840 --> 0:21:48.360 can we make sure as best as possible to try 0:21:48.400 --> 0:21:51.040 to make this a v shape recovery rather than the 0:21:51.119 --> 0:21:54.040 U shape or an L shape sort of sort of 0:21:54.119 --> 0:21:58.560 thing that is out of the hands of the FIT. UM. 0:21:58.840 --> 0:22:02.200 The FIT had very important role in making sure we 0:22:02.640 --> 0:22:07.080 we had a recovery in over the last decade. Here 0:22:07.280 --> 0:22:09.479 they can make sure we can avoid a financial crisis, 0:22:09.960 --> 0:22:12.240 but the recovery pieces will have to come on the 0:22:12.320 --> 0:22:14.960 health side and on that metiscal side. If we can 0:22:15.000 --> 0:22:17.920 get agreements, if we can get some movement forward, I 0:22:18.000 --> 0:22:20.280 think we can get there and hopefully make it much 0:22:20.320 --> 0:22:23.680 more rapid than in uh in a great depression. Professor Krauser, 0:22:23.800 --> 0:22:27.000 thank you so much, greatly greatly appreciated that. Too much 0:22:27.080 --> 0:22:36.040 math just enough. Robert Crandell with us now, who was 0:22:36.119 --> 0:22:40.000 identified with the airline business starting with t W a 0:22:40.119 --> 0:22:43.600 years ago and then his leadership at American Airlines single 0:22:43.760 --> 0:22:47.159 handedly inventing frequent flyer miles and the rest of it, 0:22:47.680 --> 0:22:50.200 and now a well preserved eighty five year and he 0:22:50.320 --> 0:22:53.080 joins us this morning. Bob Crandell, were so honored to 0:22:53.119 --> 0:22:55.760 have you with us. You have seen the ups and 0:22:55.920 --> 0:22:59.840 downs of airline bankruptcy and bailout. Does the a via 0:23:00.040 --> 0:23:05.040 an industry need another bailout or nationalization this morning? Well, 0:23:05.080 --> 0:23:07.119 I do think it needs help, Tom. I mean the 0:23:08.000 --> 0:23:11.560 keep in mind, you know, we've only got one big 0:23:11.760 --> 0:23:16.480 intercity transportation system, that's the airline business. The airline business 0:23:16.600 --> 0:23:20.920 and associated travel businesses are you know, they've they account 0:23:20.960 --> 0:23:23.960 from millions of jobs. So we've got to keep the 0:23:24.040 --> 0:23:28.160 ail in and it's the functional And I do think 0:23:28.240 --> 0:23:29.960 at the moment that what we're going to have to 0:23:30.040 --> 0:23:33.720 do is make a public investment in the airline industry 0:23:33.800 --> 0:23:36.200 to sort of sustained it during a period of time 0:23:36.240 --> 0:23:38.360 when cash is just running out the door in the river. 0:23:39.200 --> 0:23:41.720 So I think, and I think the Trade Office, this 0:23:42.240 --> 0:23:44.879 is probably a good public investment. It needs to be 0:23:45.040 --> 0:23:48.160 off with some controls. I mean, we can't we can't 0:23:48.200 --> 0:23:51.120 have the al in business taking public money and then 0:23:51.200 --> 0:23:53.720 turning around and using its free cash phot to buy 0:23:53.760 --> 0:23:56.760 back shares, which is what it's done over the last 0:23:56.800 --> 0:24:00.240 six years. And we need to be sure that if 0:24:00.400 --> 0:24:04.040 if we're going to help the airline industry, okay, but 0:24:04.280 --> 0:24:07.040 that people don't get laid off and we were not 0:24:07.240 --> 0:24:11.760