WEBVTT - Years Before U.S. Gets Full Employment Back: HFE's Weinberg 0:00:02.640 --> 0:00:05.560 Welcome to the Bloomberg PENL podcast. I'm Paul Swinging along 0:00:05.600 --> 0:00:08.080 with my co host Lisa Brahmas. Each day we bring 0:00:08.119 --> 0:00:10.640 you the most noteworthy and useful interviews for you and 0:00:10.760 --> 0:00:13.280 your money, whether at the grocery store or the trading floor. 0:00:13.400 --> 0:00:16.599 Find a Bloomberg Penl podcast on Apple podcast or wherever 0:00:16.640 --> 0:00:20.279 you listen to podcasts, as well as at Bloomberg dot com. Paul, 0:00:20.280 --> 0:00:22.599 I gotta say I'm looking forward to the time when 0:00:22.640 --> 0:00:26.759 economic data releases are less emotional, when you don't sort 0:00:26.760 --> 0:00:30.720 of feel this sort of stunning shock every time you 0:00:30.800 --> 0:00:34.240 see a new unemployment print. I gotta say, yes, the 0:00:34.320 --> 0:00:38.600 jobless claims came in, uh less terrible than people had expected. 0:00:38.800 --> 0:00:43.559 Five point two million people lost their jobs, and we're 0:00:43.600 --> 0:00:47.760 just seeing one statistic after another defy any historical precedent, 0:00:47.760 --> 0:00:50.800 and it raises a question with an economy and free fall, 0:00:50.960 --> 0:00:53.720 how quickly will it take to climb out of this hole? 0:00:54.120 --> 0:00:55.960 And joining us as someone who's been tracking this for 0:00:56.040 --> 0:00:59.400 decades and who has a good sense of what perhaps 0:00:59.640 --> 0:01:02.400 is the historical pressed or lack there of Carl Weinberg, 0:01:02.440 --> 0:01:04.640 I'm so glad to say a founder in chief international 0:01:04.640 --> 0:01:09.240 economist of high frequency economics joining us now, Carl, when 0:01:09.240 --> 0:01:12.479 you take a look at these jobless claims, what's your 0:01:12.640 --> 0:01:15.679 sense of how many of them can actually come back 0:01:16.280 --> 0:01:19.320 once the economy starts to restart and we do see 0:01:19.360 --> 0:01:23.119 a sign of a plateau ing of the pandemic. Hi, Lisa, 0:01:23.240 --> 0:01:26.360 good morning on this grim day for data. UM. The 0:01:26.400 --> 0:01:29.720 answer to your question is simple, I don't know, and 0:01:29.920 --> 0:01:31.880 UM not to go anything to get that answer a 0:01:31.880 --> 0:01:34.280 lot for me today. In order to be able to 0:01:34.360 --> 0:01:36.320 forecast the future, I think we have to have at 0:01:36.400 --> 0:01:38.480 least three basic facts that we do know, none of 0:01:38.520 --> 0:01:41.760 which are evident right now. How long is this going 0:01:41.800 --> 0:01:44.880 to go on this lockdown? Number two? How low will 0:01:44.920 --> 0:01:47.360 the economy for what will be the bottom for GDP 0:01:47.560 --> 0:01:51.360 growth and for the peak for unemployment? And number three, 0:01:51.360 --> 0:01:53.480 how many firms are going to not make it through 0:01:53.480 --> 0:01:55.560 all of this and not come back, because that will 0:01:55.760 --> 0:01:58.680 give us the starting level of the unemployment rate when 0:01:58.680 --> 0:02:01.640 we come back. If uh ten percent of the firms 0:02:01.680 --> 0:02:04.560 that that are out there don't come back, then ten 0:02:04.600 --> 0:02:06.560 percent of the jobs will be last will be starting 0:02:06.560 --> 0:02:09.840 with an unemployment rate in the double digits, and that 0:02:10.120 --> 0:02:12.840 will gauge how long will we come back. How long 0:02:12.880 --> 0:02:15.440 it takes us to get back. So Carl, give us 0:02:15.440 --> 0:02:18.720 a sense of how critical it is for this the 0:02:18.760 --> 0:02:22.200 folks down in Washington, in in in Congress to really 0:02:22.240 --> 0:02:26.720 be consistent and aggressive with fiscal stimulus that we just 0:02:27.120 --> 0:02:30.160 heard today. That's small business part of the initial fiscal 0:02:30.200 --> 0:02:34.679 stimulus that has been exhausted as of today. Um really 0:02:34.720 --> 0:02:38.120 putting pressure on Congress to act once again. Yeah, I 0:02:38.160 --> 0:02:41.360 mean it's critical. I wouldn't call it fiscal stimulus, Plaul, 0:02:41.560 --> 0:02:43.400 I would give it a different name. I would call 0:02:43.440 --> 0:02:47.160 it bridge financing. What we're really doing here is we're 0:02:47.160 --> 0:02:50.600 taking companies that have an unsurvivable hit to their cash 0:02:50.639 --> 0:02:53.920 flows and we're letting them finance that hit over an 0:02:53.919 --> 0:02:57.160 affordable period time of time. It's it's the oldest trick 0:02:57.200 --> 0:03:00.480 in banking. It's restructuring. We're restructuring the pain. So I 0:03:00.520 --> 0:03:03.200 would say that we have to get bridge financing in 0:03:03.200 --> 0:03:06.239 the hands of companies that needed a S a P. 0:03:06.520 --> 0:03:09.560 Because once they fold and the jobs are lost, then 0:03:09.760 --> 0:03:13.280 no matter when we unlocked down, we're still going to 0:03:13.360 --> 0:03:14.959 be at a very We're not going to be able 0:03:14.960 --> 0:03:17.680 to put these people back to work. So based on 0:03:17.840 --> 0:03:20.320 what we've seen in China. Some people are saying the 0:03:20.360 --> 0:03:25.320 economy can restart uh in a fairly robust manner just 0:03:25.440 --> 0:03:29.680 looking at copper demand and other gauges out of China. 0:03:30.080 --> 0:03:34.080 Do you clean the same kind of optimistic signs based 0:03:34.080 --> 0:03:37.000 on what we're saying, Well, you know, I'm questioning our 0:03:37.040 --> 0:03:40.720 high frequency economics readers not to use China as a 0:03:40.720 --> 0:03:43.600 blueprint for what to expect here. And the reason is 0:03:43.600 --> 0:03:48.560 is that they're rather draconian. Lockdown probably I'm going to 0:03:48.640 --> 0:03:53.040 say probably contained the virus to one province, and even 0:03:53.080 --> 0:03:55.240 though it was a big province, it's only five of 0:03:55.240 --> 0:03:59.320 the economy. So they never locked down the entire economy 0:03:59.520 --> 0:04:02.000 as we did, so the pain is felt in a 0:04:02.240 --> 0:04:04.440 in a smaller portion. I was sure that the supply 0:04:04.560 --> 0:04:07.480 chains words are linked, but we didn't see companies failing 0:04:08.000 --> 0:04:12.760 around the nation. Now everybody's going to say that Old 0:04:12.800 --> 0:04:15.760 China is lying, they're not reporting the numbers, blah blah blah. 0:04:15.800 --> 0:04:18.720 All right, but if we had seen a national shutdown 0:04:18.720 --> 0:04:21.520 there rather than just the provincial shutdown there, there's no 0:04:21.560 --> 0:04:24.400 way to cover that up. Alright, China has definitely been hit, 0:04:24.600 --> 0:04:27.360 but I think they were nicked a lot less than 0:04:27.400 --> 0:04:29.520 we're being nicked over then we're being hit over here, 0:04:30.480 --> 0:04:32.880 And Carl, I think the initially there is hope. I 0:04:32.880 --> 0:04:34.440 think I'm going to use the word hope as opposed 0:04:34.480 --> 0:04:37.960 to anything else for a V shaped recovery here. But 0:04:38.000 --> 0:04:39.320 it just seems if we're going to get some of 0:04:39.360 --> 0:04:41.640 the numbers that people are talking about, i e. Thirty 0:04:42.440 --> 0:04:45.360 decline in second quarter g d P, you know, kind 0:04:45.360 --> 0:04:51.520 of plus unemployment, that type of shock to the system 0:04:51.600 --> 0:04:56.360 suggests that that may cause some real structural, longer term damage. 0:04:56.720 --> 0:04:59.719 How are you kind of thinking about those aspects. I 0:04:59.760 --> 0:05:02.120 think people who see the solution as a V shape 0:05:02.200 --> 0:05:05.360 recovery defined in terms of growth have to rethink their 0:05:05.400 --> 0:05:08.599 arithmetic starting from day one. You know, the rate of 0:05:08.640 --> 0:05:11.599 growth of GDP is irrelevant to how we're going to 0:05:11.640 --> 0:05:15.200 come back. The unemployment rate is linked or the number 0:05:15.200 --> 0:05:18.080 of the level of employment is linked to the level 0:05:18.120 --> 0:05:22.120 of economic activity. So if we go down in terms 0:05:22.160 --> 0:05:24.240 of level, right, and then we come back to the 0:05:24.240 --> 0:05:27.120 same two percent GDP growth rate that we had before, 0:05:27.600 --> 0:05:30.080 then yes, we will have a V shaped recovery in 0:05:30.160 --> 0:05:33.880 terms of growth, but we'll be starting with fewer jobs 0:05:33.880 --> 0:05:35.760 in the economy, and it's going to take a really 0:05:35.760 --> 0:05:38.200 long time to come back from that. The V shape 0:05:38.240 --> 0:05:40.560 in terms of growth is a nice thing to think about. 0:05:40.600 --> 0:05:42.720 It makes us feel good, but the real problem is 0:05:42.760 --> 0:05:45.120 of V shape in terms of the level of GDP, 0:05:45.440 --> 0:05:47.400 and that's going to take years to get back. So 0:05:47.480 --> 0:05:52.200 it'll be years before we get our full employment back. Well. Interesting, Yeah, 0:05:52.200 --> 0:05:54.280 that's kind of I think where some people as more 0:05:54.279 --> 0:05:56.960 and more data comes in, kind of thinking discounting that 0:05:57.040 --> 0:06:01.080 V shaped recovery called Winberg Founder and Teeth, International Economists 0:06:01.080 --> 0:06:03.240 for High Frequency Economics. Thanks so much for joining us. 0:06:03.480 --> 0:06:08.960 Always appreciate your perspective. So, Lisa, kind of an interesting 0:06:09.040 --> 0:06:11.400 day to the markets here, kind of very mixed. You've 0:06:11.400 --> 0:06:13.880 got the NAST deck up over one percent, but the 0:06:13.960 --> 0:06:16.840 down and SMP just kind of flatished now actually down 0:06:16.880 --> 0:06:19.760 about half a percent. So it's kind of a strange 0:06:19.880 --> 0:06:23.200 day in the marketplace. We had that terrible jobs number 0:06:23.200 --> 0:06:26.039 again again, the cumulative million jobs lost over the last 0:06:26.080 --> 0:06:29.080 several weeks. That's equal to the total amount of jobs 0:06:29.080 --> 0:06:32.880 that were created since the financial crisis, So just extraordinary. 0:06:33.279 --> 0:06:35.760 People are just trying to question how do I position 0:06:35.800 --> 0:06:38.800 myself in this market? Nobody better to chat about that 0:06:39.000 --> 0:06:43.360 Lisa Than Barry Ridholtz, rid Holts Capital Management, Bloomberg Opinion columnists, 0:06:43.400 --> 0:06:47.599 and podcast extraordinaire. Barry, thanks so much for joining us. Okay, 0:06:47.600 --> 0:06:49.800 the job's number came in ugly. We're gonna get some 0:06:49.880 --> 0:06:52.200 terrible unemployment numbers. We're gonna get some terrible g d 0:06:52.320 --> 0:06:55.680 P numbers. Is it reasonable for this equity market to 0:06:55.720 --> 0:06:59.160 be looking to the other side? Yes and no. I 0:06:59.200 --> 0:07:02.040 mean a lot of what the market is looking at 0:07:02.520 --> 0:07:08.440 is what's what's unknown and what sort of probability bet 0:07:08.640 --> 0:07:12.640 markets can make. Look, we already know that we're in 0:07:12.760 --> 0:07:16.760 a deep recession of not a depression. We're probably coming 0:07:17.000 --> 0:07:20.520 close to the numbers we saw during the Great Depression. 0:07:20.600 --> 0:07:23.720 I've seen some some people say we have eight or 0:07:23.800 --> 0:07:28.600 nine or ten percent unemployment, that that's a way legging number. 0:07:28.600 --> 0:07:31.840 We're probably closer to twenty on our way to if 0:07:31.840 --> 0:07:35.680 this lockdown continues much longer. So the market already understands 0:07:35.680 --> 0:07:38.640 that the market is already reflecting that. The question is 0:07:38.760 --> 0:07:42.800 as we start to see various things to test, as 0:07:42.840 --> 0:07:46.800 we start to see various ways of treating the virus, 0:07:46.560 --> 0:07:49.920 as we come to the end of the really really 0:07:50.120 --> 0:07:55.160 bad part of not knowing what happens next. Markets are 0:07:55.200 --> 0:07:58.360 making up half the losses and then some. I certainly 0:07:58.360 --> 0:08:00.960 wouldn't be surprised if we saw a retest of those 0:08:01.000 --> 0:08:04.080 prior lows, and if the news doesn't get any better, 0:08:04.280 --> 0:08:08.720 we could make new lows um But historically markets are 0:08:08.800 --> 0:08:11.840 trying to figure out where is the greater risk to 0:08:11.920 --> 0:08:14.760 the upside or to the down side. When you fall 0:08:16.040 --> 0:08:19.120 in a month, the risk tends to be towards the upside. 0:08:19.600 --> 0:08:22.520 And that's what the market has been working off the 0:08:22.560 --> 0:08:26.600 past couple of weeks. That and a two trillion dollar stimulus. Right, Barry, 0:08:26.760 --> 0:08:28.760 here's what I'm struggling with. It all makes sense if 0:08:28.760 --> 0:08:31.440 you're a long term investor, these companies have value, we 0:08:31.480 --> 0:08:34.040 will bounce back. Blah blah blah. I get it. I 0:08:34.160 --> 0:08:36.360 hear it every day and I and I buy it 0:08:36.400 --> 0:08:39.319 to an extent. And then you have people who are 0:08:39.400 --> 0:08:43.000 basically saying the entire paradigm is changing. You cannot put 0:08:43.040 --> 0:08:45.800 the world on hold. People are staying at home. But 0:08:45.840 --> 0:08:48.680 there's a transformation going on in terms of business, in 0:08:48.760 --> 0:08:51.840 terms of priorities, in terms of savings and household wealth. 0:08:52.280 --> 0:08:55.439 And will the other side of this look profoundly different, 0:08:55.480 --> 0:08:58.880 with a different inflationary point of view, with a different 0:08:58.920 --> 0:09:03.840 tax structure, with a different social kind of fiber. Well, 0:09:03.880 --> 0:09:06.079 there's an easy answer to that, and and and then 0:09:06.120 --> 0:09:08.439 the more challenging answer to that, and let me take 0:09:08.480 --> 0:09:12.360 into that order. The easy answer is, pre existing trends 0:09:12.360 --> 0:09:15.920 are going to accelerate, and things that were already beginning 0:09:15.920 --> 0:09:18.400 to happen are going to happen much more quickly. And 0:09:18.520 --> 0:09:21.679 a couple of quick examples. The United States has been 0:09:21.720 --> 0:09:24.880 over retailed, much more square footage on a per capita 0:09:24.960 --> 0:09:29.800 basis for retail stores then say the UK or Japan 0:09:30.760 --> 0:09:36.120 or Italy, and so that giant footprint of retail stores 0:09:36.200 --> 0:09:40.240 were already pressured. This is just going to accelerate that. 0:09:40.600 --> 0:09:42.920 This is going to accelerate the move towards online. It's 0:09:42.920 --> 0:09:47.360 going to accelerate the move to get rid of giant 0:09:47.400 --> 0:09:50.720 shopping malls. They're gonna have to come up with something 0:09:51.280 --> 0:09:55.360 beyond here's some stuff, come buy it as a business model. 0:09:55.520 --> 0:09:58.760 But that's been in place for that trend has been 0:09:58.760 --> 0:10:02.840 in existence for two decades. Same with the remote work, 0:10:02.920 --> 0:10:06.800 the virtual work, the work from home. I mean I've 0:10:06.800 --> 0:10:09.720 been working at home on Fridays over the summer for 0:10:09.880 --> 0:10:12.400 years and years, and over the past couple of years 0:10:12.400 --> 0:10:15.120 it became easy to keep doing that. I wonder how 0:10:15.160 --> 0:10:17.680 this is going to impact office space. It dawned on 0:10:17.800 --> 0:10:21.240 me that for the for the ten thousand square feet 0:10:21.360 --> 0:10:24.600 I have in my office, I could probably fit double 0:10:24.679 --> 0:10:27.120 the number of people if if people don't need to 0:10:27.120 --> 0:10:30.960 work nine to five Monday to Friday, you can change that. 0:10:30.960 --> 0:10:34.080 That's a something that was already in the works over 0:10:34.080 --> 0:10:37.199 the past couple of years. That's going to accelerate. And 0:10:37.240 --> 0:10:42.319 then they're generally speaking, the move towards service economy away 0:10:42.360 --> 0:10:47.760 from actually physically manufacturing goods. That continues to accelerate. The 0:10:47.880 --> 0:10:51.680 more difficult question is what's going to reverse the fact 0:10:51.760 --> 0:10:55.600 that we have just in time deliveries and just in 0:10:55.679 --> 0:10:59.440 time supply chains. That's gonna have to change in some way. 0:10:59.679 --> 0:11:03.280 Thea that we don't make all sorts of essential equipment 0:11:03.600 --> 0:11:07.679 from ventilators too, and nine mass too, god knows what else. 0:11:08.400 --> 0:11:11.480 There's gonna be a national security question of why isn't 0:11:11.520 --> 0:11:15.560 this manufactured on the continental United States. It's anybody's guests 0:11:15.880 --> 0:11:18.440 how that resolves, And and there are gonna be a 0:11:18.440 --> 0:11:23.000 lot of other questions about national security, about trade, about 0:11:23.040 --> 0:11:25.720 a variety of issues that's going to have a significant 0:11:25.720 --> 0:11:29.320 impact on the economy. Figuring out how that plays out 0:11:29.520 --> 0:11:32.319 is going to be a function of how the virus 0:11:32.320 --> 0:11:38.200 and its um management evolves over the next year. And 0:11:38.240 --> 0:11:40.040 I certainly think and I don't want to turn this 0:11:40.080 --> 0:11:43.480 into a political debate, but I think everybody is very 0:11:43.559 --> 0:11:47.120 much an agreement that the outcome of the November election 0:11:47.320 --> 0:11:50.319 is going to have a significant impact on a variety 0:11:50.520 --> 0:11:57.319 of different things. Whether it's national medical supply, emergency stockpiling, 0:11:57.640 --> 0:12:00.680 or an infrastructure build out. There's going to be some 0:12:00.760 --> 0:12:05.840 significant changes relative to this next election, and so trying 0:12:05.880 --> 0:12:07.480 to figure out where the market is going to go 0:12:07.600 --> 0:12:11.160 relative to all those variables, it's always the best guess. 0:12:11.200 --> 0:12:15.120 It's always a probabilistic exercise. But no one really has 0:12:15.160 --> 0:12:18.520 a clear view as to what we're gonna look like 0:12:19.000 --> 0:12:22.280 six months or a year from now. Some trends are obvious, 0:12:22.400 --> 0:12:24.160 there's a lot of things that are happening below the 0:12:24.200 --> 0:12:27.120 surface that we really won't know about. Barry rit Holt, 0:12:27.160 --> 0:12:29.280 thank you so much for being with us. Barry rid 0:12:29.320 --> 0:12:32.760 Holt's founder of Reholt's Wealth Management, A Bloomberg Opinion calumnist 0:12:32.800 --> 0:12:35.760 and of course the host of Masters of Business on 0:12:36.000 --> 0:12:42.720 Bloomberg Radio. Tree not Rage and that covers all things 0:12:42.720 --> 0:12:45.320 financials for us here at Bloomberg News and joins us 0:12:45.360 --> 0:12:47.400 now Street. I want to talk a little bit about 0:12:47.480 --> 0:12:50.120 Morgan Stanley's earnings and sort of how it highlights the 0:12:50.160 --> 0:12:54.600 trend we're seeing across Wall Street trading revenues beating expectations 0:12:54.640 --> 0:12:57.679 across the board, definitely plugging a bit of a hole 0:12:57.920 --> 0:13:01.080 when it comes to low lost provisions and other areas 0:13:01.120 --> 0:13:04.719 of the bank. How long can that continue? Morning? We 0:13:04.840 --> 0:13:08.439 so absolutely like the trading revenue part, not just that 0:13:08.559 --> 0:13:11.839 Morgan Stanley, pretty much every other bank everyone Blue Pass 0:13:11.920 --> 0:13:14.480 estimates it was a phenomenal quarter for all of the 0:13:14.480 --> 0:13:17.720 Wall Street trading death and it was extremely critical that 0:13:17.800 --> 0:13:22.000 they had a blowout quarter because of the big holes 0:13:22.080 --> 0:13:24.880 opening up in other parts of the business. Every bank 0:13:24.920 --> 0:13:27.960 has been taking huge loan loss provision, tread loss provision, 0:13:28.000 --> 0:13:31.440 market market losses, and it really was the trading desk 0:13:31.600 --> 0:13:35.000 that saves the baken for them. But then the important 0:13:35.000 --> 0:13:38.360 part is what happens going forward into your question, do 0:13:38.840 --> 0:13:42.400 they have the stamina to continue like this? Well, John 0:13:42.480 --> 0:13:45.600 Truz and mom Stally Stapo offered us the first clue 0:13:45.640 --> 0:13:48.480 today that that might not be the kid. While volumes 0:13:48.520 --> 0:13:51.560 are still elevated from what we saw in January and February, 0:13:51.880 --> 0:13:55.680 they're already down about twenty from the craziness of March, 0:13:55.800 --> 0:13:58.760 is what he's saying. So you could have a situation 0:13:58.880 --> 0:14:04.400 where the second quarter, the protracted lockdown continues. It brings 0:14:04.520 --> 0:14:06.640 with it all the negatives that you saw in the 0:14:06.679 --> 0:14:10.839 first quarter without the trading boon accompanying it, and that's 0:14:10.840 --> 0:14:13.480 the wiring signs of the bank. Sure, what was your 0:14:13.880 --> 0:14:17.680 Some of your takeaways from Eric Schatzer's discussion with Mr 0:14:17.760 --> 0:14:23.520 Gorman just now, look, I always find Government to be 0:14:23.560 --> 0:14:28.240 a fascinating interviews. He's emotional, passion and even before the 0:14:28.280 --> 0:14:31.840 TV interview when he was on the call with analyst investors, 0:14:31.840 --> 0:14:34.680 you could send that you know he was emotional. Obviously, 0:14:34.720 --> 0:14:37.840 Government has just recovered from the coronavirus. Not a serious kid, 0:14:38.080 --> 0:14:40.160 but still one of the most senior executives on Wall 0:14:40.200 --> 0:14:43.160 streets to have tested positive for it. He worked through 0:14:43.200 --> 0:14:45.840 it and he didn't have to be hospitalized. But again, 0:14:45.880 --> 0:14:48.720 now you know that he made some critical points. One 0:14:48.760 --> 0:14:50.440 of One of the things he said was this is 0:14:50.880 --> 0:14:53.760 a shock to the global economic system that we haven't 0:14:53.840 --> 0:14:57.440 seen since the Great Depression, not since the financial crisis 0:14:57.440 --> 0:15:00.760 of two thousand eight, since the Great Depression. You cannot 0:15:00.840 --> 0:15:03.680 model that. He was he was clear about that early on. 0:15:03.840 --> 0:15:05.760 He said, we're not going to be in a position 0:15:05.800 --> 0:15:09.080 to meet our target. Any CEO who says that they're 0:15:09.120 --> 0:15:11.720 going to be able to make their short term target 0:15:12.600 --> 0:15:15.720 is living on a different planet. That is subtle dig 0:15:15.760 --> 0:15:18.400 at government tax who came out yesterday and said, you know, 0:15:18.440 --> 0:15:21.520 we're not changing our medium term target. Maybe maybe not. 0:15:21.720 --> 0:15:23.680 I guess the distinction there is between short term and 0:15:23.720 --> 0:15:27.160 medium term, but it does highlight and really what government 0:15:27.240 --> 0:15:29.520 was playing on. The interview with Eric also highlighted that 0:15:29.640 --> 0:15:34.760 we are entering a period of high uncertainty. It's completely 0:15:34.840 --> 0:15:38.040 unclear to everyone from from the late person to the 0:15:38.080 --> 0:15:41.080 folks running these big banks as to how this will 0:15:41.120 --> 0:15:44.640 pan out. And that is why you're hearing everyone taking 0:15:44.680 --> 0:15:48.200 on a conservative posture as we move ahead. All right, so, 0:15:48.240 --> 0:15:50.440 since you brought it up, let's talk about the rivalship. 0:15:50.760 --> 0:15:55.240 The rivalry between Morgan Stanley and Goldman Sachs, who won 0:15:55.280 --> 0:16:00.400 this quarter yeah, I think to be honest, both of 0:16:00.440 --> 0:16:04.720 them in the same boat. Again, what holds government and 0:16:04.880 --> 0:16:07.000 Marvel Family apart from the rest of the industry, And 0:16:07.000 --> 0:16:09.280 I think that's the comparison we should be making Government 0:16:09.280 --> 0:16:12.560 and Long Family was So the their other big banks 0:16:12.560 --> 0:16:17.000 of JPM City, Bery Wells is they don't have that 0:16:17.240 --> 0:16:21.640 same ft commercial loan book to consumer loan exposure like 0:16:21.720 --> 0:16:23.600 those banks. So where you were seeing on the one 0:16:23.640 --> 0:16:27.080 hand eight billion dollar loan lost provision four billions, four billions, 0:16:27.080 --> 0:16:30.120 five billion, Uh, these guys had a much smaller figure, 0:16:30.160 --> 0:16:32.960 a much more manageable figure because they don't have that 0:16:33.080 --> 0:16:36.680 kind of exposure, so they were insulated from it. The 0:16:36.880 --> 0:16:39.640 training desks, which are really top of the line, the 0:16:39.640 --> 0:16:43.080 best on the street, really outperformed and really did work. 0:16:43.280 --> 0:16:47.480 The real question is if that slows down and you 0:16:47.560 --> 0:16:49.640 don't have any of the boons from the other side, 0:16:49.720 --> 0:16:52.200 it's it's going to be troubling period for the banks, 0:16:52.200 --> 0:16:54.280 and I don't think it's going to be one way. 0:16:54.320 --> 0:16:58.560 You will necessarily see if you separating themselves from the others, 0:16:58.640 --> 0:17:01.720 I think they all write same boat going forward, so 0:17:01.800 --> 0:17:05.960 surely coming into this crisis that I think they accepted 0:17:06.000 --> 0:17:07.960 wisdom was that the banks are a much better place 0:17:08.040 --> 0:17:11.840 financially from a balance sheet perspective. Okay, I get that, 0:17:12.040 --> 0:17:15.160 but this is a totally different type of animal we're 0:17:15.200 --> 0:17:18.520 dealing with in terms of the decline in the global economy. 0:17:18.760 --> 0:17:20.440 Is that still the feeling that you heard on these 0:17:20.440 --> 0:17:22.760 conference calls from the CEOs that they feel confident in 0:17:22.800 --> 0:17:28.359 their balance sheets? Pretty much? The caveat to that is 0:17:28.800 --> 0:17:30.840 you could probably go back to early two thousand eight, 0:17:30.920 --> 0:17:32.560 late two thousand seven, and I don't think you would 0:17:32.560 --> 0:17:34.359 have found to see on once we would have said 0:17:34.520 --> 0:17:36.520 we're really concerned about the state of a balance sheet. 0:17:36.520 --> 0:17:38.879 They were. They were confident back then also. But the 0:17:38.920 --> 0:17:40.840 reality is, and when you talk to and listen the 0:17:40.840 --> 0:17:44.879 folks doing the numbers things stand, banks do seem to 0:17:44.960 --> 0:17:49.280 be in a much better position. They're really well capitalized 0:17:49.320 --> 0:17:51.399 compared to ten years ago. And the feeling is that 0:17:51.560 --> 0:17:55.320 risk might have shifted elsewhere, not that the risk have disappeared, 0:17:55.359 --> 0:17:58.080 but they might have shifted outside the banking system. The 0:17:58.119 --> 0:18:01.040 only thing to keep in mind is what that uh 0:18:01.040 --> 0:18:05.360 this period of heightened volatility and this crisis. Apart from 0:18:05.480 --> 0:18:08.439 say that to help make crisis war, it took a 0:18:08.480 --> 0:18:10.800 good amount of time for the government to act. It 0:18:10.800 --> 0:18:13.080 took a good amount of time to depread to intervene. 0:18:13.320 --> 0:18:16.320 It's thinks very different this time around. The spread the government. 0:18:16.400 --> 0:18:19.520 Everyone has jumped in right from the get go, and 0:18:19.600 --> 0:18:22.880 that has also given confidence to folks that this isn't 0:18:22.920 --> 0:18:26.000 a systemic issue from from the point of view of 0:18:26.359 --> 0:18:28.920 what will happen to the banks, But that doesn't take 0:18:28.920 --> 0:18:32.480 away from the fact that there is still great economic uncertainty. 0:18:32.520 --> 0:18:35.919 There is a real crisis growing out there, and ultimately, 0:18:35.960 --> 0:18:40.280 the healthful bank is intricately tied to the health of 0:18:40.320 --> 0:18:43.400 the broader economy. So if that doesn't recover, you will 0:18:43.480 --> 0:18:46.080 have to worry about banks at some point. Shod Naturaj 0:18:46.200 --> 0:18:48.240 and thank you so much for being with us Bloomberg 0:18:48.280 --> 0:18:54.600 Finance Reporter, joining us and Morgan Stanley earnings. There is 0:18:54.720 --> 0:18:59.680 an incredible swell of joblessness that defies all historical precedent. 0:19:00.040 --> 0:19:04.080 Twenty two million American jobs lost in four weeks, wiping 0:19:04.080 --> 0:19:08.520 out a decade of gains. Meanwhile, we've got federal governments 0:19:08.560 --> 0:19:12.400 around the world pumping trillions of dollars into the economy. 0:19:12.440 --> 0:19:15.679 What are we looking at here in terms of money 0:19:15.720 --> 0:19:19.840 and pricing going forward stagflation, deflation inflation joining US now 0:19:20.200 --> 0:19:23.119 Vincent de Loard, a global macro strategistic I n T 0:19:23.480 --> 0:19:28.520 LFC Stone based in San Francisco, joining US now Vincent. 0:19:28.560 --> 0:19:30.200 When you take a look at the job losses, you 0:19:30.200 --> 0:19:34.000 can take a look at the unprecedented stimulus packages being 0:19:34.040 --> 0:19:37.600 pumped into the economy to keep it afloat during this period. 0:19:37.920 --> 0:19:40.600 What are we looking at in terms of price increases 0:19:40.640 --> 0:19:45.960 going forward? Well, high, great to be here, Uh, for 0:19:46.119 --> 0:19:49.679 the moment, it's almost impossible to tell. I mean, the 0:19:49.720 --> 0:19:53.200 CPI is a basket of goods, witch and goods and 0:19:53.240 --> 0:19:55.640 services which most of the country cannot buy right now, 0:19:55.760 --> 0:19:58.480 and presumably there will be some restriction as to what 0:19:58.640 --> 0:20:02.080 can be bought in do future. So the the near 0:20:02.200 --> 0:20:06.119 term inflation picture is really anyone's guess. Uh. You know, 0:20:06.200 --> 0:20:08.520 you certainly will have a lot of impact from from 0:20:08.560 --> 0:20:11.120 the collapse of all prices, and we could indeed get 0:20:11.280 --> 0:20:14.680 you know, a couple of months of negative CPR readings. However, 0:20:15.040 --> 0:20:17.000 over the medium to long term, I think what we 0:20:17.000 --> 0:20:20.800 are witnessing today is really planting the seats for what 0:20:20.840 --> 0:20:24.320 I would expect to be a decade of stagflation. What 0:20:24.680 --> 0:20:27.360 is a decade of stag flash? All right, defined for audience, 0:20:27.880 --> 0:20:30.760 your view of what is stagflation and what would cause 0:20:30.840 --> 0:20:34.639 to be such a long term phenomena in this economy. Well, so, 0:20:35.080 --> 0:20:38.960 you know, stagflation is literally economic stagnation or let's say 0:20:39.000 --> 0:20:42.240 below a rich growth. Uh and at the same time 0:20:42.840 --> 0:20:45.639 rapid increase in price. I mean, that's that was a 0:20:45.720 --> 0:20:48.480 condition that we saw in the seventies in the US, 0:20:49.200 --> 0:20:54.440 uh and in um Many throughout the twentieth century, in 0:20:54.720 --> 0:20:58.440 many parts of Latin America, parts of European the nineteen thirties, 0:20:59.000 --> 0:21:02.400 um so be economic growth, I think is something that's 0:21:02.440 --> 0:21:06.520 increasingly getting obvious that we're not going to get very 0:21:08.000 --> 0:21:11.280 rapid v shape recovery. I mean, even in the markets 0:21:11.280 --> 0:21:14.000 that are indeed coming out of this, you know, nothing 0:21:14.040 --> 0:21:18.480 has come back to normal. Uh Some consumption pattern of change, 0:21:18.520 --> 0:21:21.960 investment has changed, usually for the worse. And it will 0:21:21.960 --> 0:21:25.080 also have to deal with the consequences of the bailouts 0:21:25.119 --> 0:21:29.480 that we so casually made. I mean, if anything, the 0:21:29.480 --> 0:21:32.160 experience in Europe shows that there's no such thing as 0:21:32.440 --> 0:21:36.280 an emergency lending program. Uh. So that's on the real 0:21:36.359 --> 0:21:39.199 economy side, and then on the monetary economy. I mean, 0:21:39.280 --> 0:21:43.960 we have a lot of of monetory and fiscal accommodation 0:21:44.000 --> 0:21:47.520 that's simply the world hasn't seen before. Um right now, 0:21:47.560 --> 0:21:50.520 it doesn't matter because the velocity of money people people 0:21:50.640 --> 0:21:53.400 looked at home, But as soon as the economy reopened, 0:21:53.400 --> 0:21:55.960 it's really any anyone guess where it can go. And 0:21:55.960 --> 0:21:58.920 it seems to me that the sole focused on deflation 0:21:59.040 --> 0:22:02.159 is is very misplaced. East. Let's talk about what we 0:22:02.280 --> 0:22:05.120 mean when we say stagflation, because I'm looking at your 0:22:05.119 --> 0:22:09.880 report and typically stagflation means rising prices of the things 0:22:09.920 --> 0:22:13.520 you need to buy, and wages not necessarily keeping pace, 0:22:13.640 --> 0:22:17.760 and basically consumption remaining flatter, declining, and just sort of 0:22:17.760 --> 0:22:22.240 the global energy of business just sort of remaining it 0:22:22.359 --> 0:22:25.680 in stalls speed. Is that a bad thing? And is 0:22:25.720 --> 0:22:31.080 that an accurate reflection of what you're talking about with stagflation? Right? 0:22:31.119 --> 0:22:35.000 I mean generally, Uh, staclation is not a good environment 0:22:35.200 --> 0:22:40.080