1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,680 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. There's 5 00:00:27,680 --> 00:00:29,720 Speaker 1: one house in particular over the last couple of months 6 00:00:29,760 --> 00:00:32,480 Speaker 1: has stood out as being more constructive than the rest. 7 00:00:32,479 --> 00:00:34,320 Speaker 1: There's been more Constanley, and I'm pleased to say that 8 00:00:34,360 --> 00:00:37,640 Speaker 1: Andrew Sheets, the chief cross assets strategist at more Than Stanley, 9 00:00:37,960 --> 00:00:40,599 Speaker 1: joined us now. Andrew fantastic to catch up with you, Sir. 10 00:00:40,720 --> 00:00:43,400 Speaker 1: I've said continually for three months there is nothing normal 11 00:00:43,720 --> 00:00:46,840 Speaker 1: about this, but your argument has been entirely opposite. It's 12 00:00:46,880 --> 00:00:51,920 Speaker 1: more normal than most people appreciate. Why is that, well, 13 00:00:51,960 --> 00:00:54,200 Speaker 1: I I think so in good morning, I think there 14 00:00:54,200 --> 00:00:56,120 Speaker 1: are a couple of things that we've been following. I 15 00:00:56,200 --> 00:00:58,840 Speaker 1: think the fact that a lot of the conditions that 16 00:00:58,920 --> 00:01:02,400 Speaker 1: preceded this session had a lot of very normal late 17 00:01:02,440 --> 00:01:05,520 Speaker 1: cycle characteristics in terms of what we're seeing with city 18 00:01:05,600 --> 00:01:10,160 Speaker 1: unemployment rate or the yield curve, or valuations or volatility. 19 00:01:10,200 --> 00:01:11,880 Speaker 1: We had a lot of very i think normal late 20 00:01:11,920 --> 00:01:16,160 Speaker 1: cycle dynamics. The way the markets bottomed in March ahead 21 00:01:16,200 --> 00:01:19,200 Speaker 1: of the data followed a very kind of normal pattern 22 00:01:19,319 --> 00:01:22,520 Speaker 1: of markets leading the economy. And I think the type 23 00:01:22,560 --> 00:01:25,840 Speaker 1: of recovery that our economist forecasts are commis of Morgan Stanley, 24 00:01:26,080 --> 00:01:29,240 Speaker 1: I think are above consensus on on the speed of 25 00:01:29,280 --> 00:01:32,200 Speaker 1: this recovery and how v shape they think it will be. 26 00:01:32,600 --> 00:01:35,400 Speaker 1: That that will also make it look more normal than 27 00:01:35,440 --> 00:01:40,200 Speaker 1: have normal going forward. Inderstrates what's so important here is 28 00:01:40,240 --> 00:01:44,400 Speaker 1: how cross s does given money costs nothing. We see 29 00:01:44,480 --> 00:01:47,760 Speaker 1: Mr Buffett today pony up a new obligation of nine 30 00:01:47,800 --> 00:01:51,559 Speaker 1: point seven billion, four billion cash and a five point 31 00:01:51,640 --> 00:01:54,559 Speaker 1: seven billion in dat as well for the Dominion gas 32 00:01:54,600 --> 00:01:57,120 Speaker 1: lines as well. Is that howvard your of things to come? 33 00:01:57,160 --> 00:02:00,480 Speaker 1: Are we going to see exceptional M and A which 34 00:02:00,520 --> 00:02:04,880 Speaker 1: buttresses this bull market? Well, I think it's a good 35 00:02:05,080 --> 00:02:08,200 Speaker 1: it's it's a very good question. Our expectation would actually 36 00:02:08,240 --> 00:02:10,520 Speaker 1: be that I think companies remain a little bit more cautious. 37 00:02:10,600 --> 00:02:14,280 Speaker 1: It's actually I think consumers who were counting on to 38 00:02:14,720 --> 00:02:17,440 Speaker 1: continue the growth momentum, because I think companies will be 39 00:02:17,480 --> 00:02:22,640 Speaker 1: looking at a the continued uncertainty over the economic backdrop. 40 00:02:22,760 --> 00:02:25,000 Speaker 1: The fact that I think for a lot of them, 41 00:02:25,080 --> 00:02:28,400 Speaker 1: given the strain that was in credit markets as recently 42 00:02:28,440 --> 00:02:31,920 Speaker 1: as April, we really see a focus to protect balance 43 00:02:32,000 --> 00:02:35,360 Speaker 1: sheets not take on kind of aggressive new action. And 44 00:02:35,400 --> 00:02:38,360 Speaker 1: then you also obviously have a US presidential election coming 45 00:02:38,440 --> 00:02:42,720 Speaker 1: up in early November, which could also change either regulatory 46 00:02:42,840 --> 00:02:47,080 Speaker 1: tax policy, trade policy the like, which would be another 47 00:02:47,120 --> 00:02:49,840 Speaker 1: reason to kind of wait on this activity. So I 48 00:02:49,880 --> 00:02:52,400 Speaker 1: think for for both of those reasons, we'd actually expect 49 00:02:52,440 --> 00:02:55,760 Speaker 1: kind of businesses to lag the rebadded activity we see 50 00:02:55,760 --> 00:02:59,720 Speaker 1: on the consumer side. And still you are bullish with 51 00:03:00,080 --> 00:03:04,320 Speaker 1: back to going further into risk and moving from growth 52 00:03:04,400 --> 00:03:09,360 Speaker 1: to value stocks. What does value mean anymore? Well, I 53 00:03:09,440 --> 00:03:13,040 Speaker 1: think what's what's pretty interesting about this market is that 54 00:03:13,400 --> 00:03:17,000 Speaker 1: on the surface, it would seem like the equity markets 55 00:03:17,000 --> 00:03:19,480 Speaker 1: have embraced a V shaped recovery. And certainly I think 56 00:03:19,480 --> 00:03:21,280 Speaker 1: there's a lot of focus, a lot of very reasonable 57 00:03:21,320 --> 00:03:24,440 Speaker 1: focus on this idea that you know, the smps trading 58 00:03:24,480 --> 00:03:27,600 Speaker 1: at twenty one times forward earnings and yet the economy 59 00:03:27,680 --> 00:03:30,639 Speaker 1: is clearly still very weak. It's it's recovering, but it's 60 00:03:30,720 --> 00:03:33,000 Speaker 1: it's very weak, and and this must mean that the 61 00:03:33,040 --> 00:03:37,360 Speaker 1: market is discounting with these high valuations an extremely strong recovery. 62 00:03:37,400 --> 00:03:39,760 Speaker 1: And yet you know, you look at what's what's driven 63 00:03:39,800 --> 00:03:41,520 Speaker 1: that market rebound, or you look at the way the 64 00:03:41,520 --> 00:03:45,040 Speaker 1: markets valued, and and there's there's rarely been a more 65 00:03:45,120 --> 00:03:48,120 Speaker 1: extreme gap between what the markets paying for what it 66 00:03:48,120 --> 00:03:51,360 Speaker 1: considers kind of the best, highest quality companies and what 67 00:03:51,440 --> 00:03:53,200 Speaker 1: the market is paying for the rest. And so I 68 00:03:53,200 --> 00:03:56,680 Speaker 1: think it's that gap, that extreme gap that you know, 69 00:03:56,760 --> 00:03:59,080 Speaker 1: and and this idea that the market kind of cares 70 00:03:59,120 --> 00:04:01,840 Speaker 1: about is worried valuation at the headline level, and it 71 00:04:01,960 --> 00:04:05,720 Speaker 1: has no no problem embracing many of the market's most 72 00:04:05,720 --> 00:04:09,600 Speaker 1: expensive companies. We think that that those factors can lead 73 00:04:09,640 --> 00:04:13,400 Speaker 1: the market to have a more balanced, a more balanced approach, 74 00:04:13,440 --> 00:04:17,240 Speaker 1: a broader equity market participation they would leave. They will 75 00:04:17,320 --> 00:04:20,440 Speaker 1: lead some of the smaller and cheaper companies to perform, 76 00:04:20,839 --> 00:04:24,560 Speaker 1: to perform better. At the epicentre of this debate is 77 00:04:24,640 --> 00:04:27,440 Speaker 1: zero rights. Tom Caine, you mentioned that money costs nothing. 78 00:04:27,560 --> 00:04:29,000 Speaker 1: We should look at it the other way as well. 79 00:04:29,279 --> 00:04:32,240 Speaker 1: Money earns nothing right now, and for a lot of people, 80 00:04:32,279 --> 00:04:34,480 Speaker 1: including miss the Buffett of Berkshire Hathaway, they've got to 81 00:04:34,520 --> 00:04:38,640 Speaker 1: get that capital to work. Yeah, this is really really 82 00:04:38,680 --> 00:04:41,480 Speaker 1: important inside John and What's so important here, Andrew, is 83 00:04:41,520 --> 00:04:44,840 Speaker 1: the idea that dominion in this transaction will go right 84 00:04:44,880 --> 00:04:47,720 Speaker 1: where you said, they'll go to a more conservative structure, 85 00:04:48,000 --> 00:04:51,520 Speaker 1: They'll go to a more conservative dividend payout ratio, et cetera. 86 00:04:52,160 --> 00:04:54,320 Speaker 1: What do you think of all the money that John 87 00:04:54,320 --> 00:04:57,599 Speaker 1: mentions that Warren Buffett has, the billions he has, the 88 00:04:57,680 --> 00:05:01,040 Speaker 1: billions of tech company has, the billions of private equity has. 89 00:05:01,360 --> 00:05:05,800 Speaker 1: It's kind of it's kinda find a warm place, right. Well, 90 00:05:06,080 --> 00:05:07,479 Speaker 1: So I think if we think about this from a 91 00:05:07,520 --> 00:05:10,280 Speaker 1: corporate perspective, I think tech is a great example, right. 92 00:05:10,320 --> 00:05:12,440 Speaker 1: I think, you know, for a long time, there was 93 00:05:12,440 --> 00:05:15,400 Speaker 1: some criticism of these large cash balances that many large 94 00:05:15,400 --> 00:05:18,320 Speaker 1: tech companies were holding. And yet when the pandemic hit, 95 00:05:18,440 --> 00:05:21,840 Speaker 1: that became, you know, yet another reason why investors favored 96 00:05:21,839 --> 00:05:23,520 Speaker 1: a lot of these big tech names because they had 97 00:05:23,520 --> 00:05:27,520 Speaker 1: these fortress balance sheets with enormous financial flexibility to kind 98 00:05:27,520 --> 00:05:30,600 Speaker 1: of see them through any any scenarios. So in some 99 00:05:30,640 --> 00:05:35,479 Speaker 1: ways that could reward or encourage companies to remain somewhat conservative. 100 00:05:35,880 --> 00:05:37,800 Speaker 1: And I think we've seen the same thing on the 101 00:05:38,080 --> 00:05:41,200 Speaker 1: from the investor side, from the retail investor side, um 102 00:05:41,200 --> 00:05:44,080 Speaker 1: where you know, We've seen a lot of investors raised 103 00:05:44,120 --> 00:05:48,720 Speaker 1: cash in marches the pandemic was was intensifying as as 104 00:05:48,800 --> 00:05:51,680 Speaker 1: markets were falling, and in many cases they really haven't 105 00:05:51,720 --> 00:05:53,960 Speaker 1: redeployed that money back into the market. And I think 106 00:05:53,960 --> 00:05:56,000 Speaker 1: there are a number of reasons for that. The fact 107 00:05:56,000 --> 00:05:59,000 Speaker 1: that you know, markets rebounded relatively quickly, the fact that 108 00:05:59,040 --> 00:06:02,680 Speaker 1: you still serve in the US. Clearly um have a 109 00:06:02,760 --> 00:06:05,960 Speaker 1: severe public health challenge that's all around us. But you know, 110 00:06:06,000 --> 00:06:09,120 Speaker 1: I think for those, uh, it's not just about the businesses. 111 00:06:09,200 --> 00:06:13,039 Speaker 1: We we do think actually on the on the investors side, 112 00:06:13,080 --> 00:06:15,680 Speaker 1: there are still above average levels of cash balance, which 113 00:06:15,680 --> 00:06:17,680 Speaker 1: we need to monitor, but at the moment remain a 114 00:06:17,720 --> 00:06:22,479 Speaker 1: supportive factor. How much more do you expect returns to 115 00:06:22,560 --> 00:06:25,039 Speaker 1: increase this year in equities? In other words, what's the 116 00:06:25,080 --> 00:06:28,440 Speaker 1: full year total return going to look like? Yeah, I 117 00:06:28,480 --> 00:06:30,600 Speaker 1: think it's a good question. I mean, we we are positive, 118 00:06:30,640 --> 00:06:33,560 Speaker 1: we've we've been positive, but I feel I need to 119 00:06:33,600 --> 00:06:36,040 Speaker 1: cappy out that. You know, we we do think at 120 00:06:36,040 --> 00:06:38,440 Speaker 1: the overall level the games will be modest. That for 121 00:06:38,800 --> 00:06:42,320 Speaker 1: US and European equities, we're looking at kind of you know, uh, 122 00:06:42,960 --> 00:06:45,880 Speaker 1: mid to high single digit type of returns for for 123 00:06:45,920 --> 00:06:48,400 Speaker 1: the SMP five hundred for Europe. You know, my colleague 124 00:06:48,400 --> 00:06:52,120 Speaker 1: Mike Wilson has a thirty three fifty target for the 125 00:06:52,200 --> 00:06:55,040 Speaker 1: SMP five hundred by the middle of next year. So 126 00:06:55,320 --> 00:06:58,040 Speaker 1: it's still positive, it's still higher, it's still better than 127 00:06:58,560 --> 00:07:03,120 Speaker 1: cash um in credit. We see kind of modest spread tightening. 128 00:07:03,360 --> 00:07:06,040 Speaker 1: I agree with the earlier comment we think volatility can 129 00:07:06,200 --> 00:07:08,520 Speaker 1: can fall. You can probably follow a reasonable amount here 130 00:07:08,560 --> 00:07:10,960 Speaker 1: over the next twelve months. But I do think you know, 131 00:07:11,080 --> 00:07:14,200 Speaker 1: you could potentially see the bigger movement won't be at 132 00:07:14,680 --> 00:07:17,640 Speaker 1: the headline equity market level. It would be at more 133 00:07:17,680 --> 00:07:21,000 Speaker 1: of these rotations under the surface, as some more of 134 00:07:21,000 --> 00:07:25,360 Speaker 1: the traditional early cycle things do better. Andrew what was 135 00:07:25,360 --> 00:07:28,480 Speaker 1: saying in the economy quite clearly a serious upside surprises, 136 00:07:28,520 --> 00:07:30,800 Speaker 1: but there is evidence of scarring this reason to worry. 137 00:07:31,040 --> 00:07:33,240 Speaker 1: Yet at the same time, I wonder whether this continued 138 00:07:33,320 --> 00:07:37,440 Speaker 1: positive forward momentum, whether that is sufficient to continue the 139 00:07:37,520 --> 00:07:42,480 Speaker 1: durable rotation that you're looking for. Yeah, I think that's 140 00:07:42,480 --> 00:07:44,920 Speaker 1: a great question and something where I think we might 141 00:07:45,040 --> 00:07:49,320 Speaker 1: know the case this month. Um. A big part of 142 00:07:49,360 --> 00:07:53,040 Speaker 1: our our positive economic view, specifically in the US, is 143 00:07:53,080 --> 00:07:58,480 Speaker 1: the expectation that that Congress will pass another round of stimulus, 144 00:07:58,480 --> 00:08:01,400 Speaker 1: will extend the Cares Act, and that's very important we 145 00:08:01,440 --> 00:08:06,200 Speaker 1: think for supporting the consumer, reducing the severity of that 146 00:08:06,360 --> 00:08:09,560 Speaker 1: scarring that you mentioned. Um. But there's a certain irony 147 00:08:09,640 --> 00:08:11,920 Speaker 1: here where there's a risk that if if there's a 148 00:08:12,000 --> 00:08:15,840 Speaker 1: perception that the data is improving very quickly, maybe that 149 00:08:15,920 --> 00:08:20,240 Speaker 1: reduces the impetus on the government act, which would in 150 00:08:20,280 --> 00:08:22,960 Speaker 1: the long term be we think the worst scenario, which 151 00:08:22,960 --> 00:08:26,600 Speaker 1: would increase the risk that the recovery is slower and 152 00:08:26,680 --> 00:08:30,000 Speaker 1: more prolonged. So we one of the reasons we're positive 153 00:08:30,040 --> 00:08:32,960 Speaker 1: is we do think that stimulus passes, but if it doesn't, 154 00:08:33,040 --> 00:08:37,120 Speaker 1: that would be a severe risk to our scenario. Andrew 155 00:08:37,160 --> 00:08:39,560 Speaker 1: Shades and Morgan Stanley. Andrew, always great to catch up 156 00:08:39,559 --> 00:08:41,360 Speaker 1: with you, and the same been great to hear you 157 00:08:41,480 --> 00:08:44,160 Speaker 1: challenge the less constructive view in this market over the 158 00:08:44,200 --> 00:08:47,000 Speaker 1: last several months. Andrew sets that joining us from Morgan 159 00:08:47,080 --> 00:09:01,040 Speaker 1: Stanley right now, we're going to speak on finance and 160 00:09:01,120 --> 00:09:04,760 Speaker 1: economics and reframe for the rest of this year. We 161 00:09:04,800 --> 00:09:08,080 Speaker 1: can do that with Catherine Mann of City Group, but 162 00:09:08,200 --> 00:09:11,000 Speaker 1: far more importantly and John Farrell Folks has been really 163 00:09:11,040 --> 00:09:14,360 Speaker 1: out front on focusing on China US. I think he's 164 00:09:14,360 --> 00:09:16,960 Speaker 1: almost got the advantage being from England and that he 165 00:09:16,960 --> 00:09:20,120 Speaker 1: can look at China US with a different prism. Doctor 166 00:09:20,240 --> 00:09:24,439 Speaker 1: Man has led with our analysis of the international economics 167 00:09:24,559 --> 00:09:28,400 Speaker 1: and codependency of Beijing and Washington, and I must start 168 00:09:28,480 --> 00:09:31,520 Speaker 1: there this morning, Doctor Man, give us an update on 169 00:09:31,600 --> 00:09:38,040 Speaker 1: the codependency that we see right now between Beijing and Washington. Well, Tom, 170 00:09:38,040 --> 00:09:40,880 Speaker 1: it's great to be with you again. Um, the codependency 171 00:09:40,920 --> 00:09:43,360 Speaker 1: seems to have taken a bit of a turn, uh 172 00:09:43,440 --> 00:09:47,319 Speaker 1: to the negative. Um. We had thought that the relationship 173 00:09:47,679 --> 00:09:53,840 Speaker 1: as of January was was one that was a tentative truth. Um. 174 00:09:53,880 --> 00:09:57,120 Speaker 1: But of course things have deteriorated since then, not only 175 00:09:57,200 --> 00:09:59,760 Speaker 1: because of all the issues with regard to the disease, 176 00:10:00,200 --> 00:10:03,800 Speaker 1: but also because, um, there's you know, there's some there's 177 00:10:03,800 --> 00:10:07,520 Speaker 1: some lack of ability on the part of China to 178 00:10:07,559 --> 00:10:10,440 Speaker 1: really buy all the things that the US would like 179 00:10:10,559 --> 00:10:13,200 Speaker 1: to sell. I mean, we've been talking and calling this 180 00:10:13,280 --> 00:10:16,800 Speaker 1: a shopping list for quite some time since back last year. 181 00:10:17,080 --> 00:10:19,160 Speaker 1: And when we look at the items on the shopping 182 00:10:19,200 --> 00:10:22,640 Speaker 1: list that the U s would like China to buy, Um, 183 00:10:22,679 --> 00:10:25,320 Speaker 1: you know, the agg is there, that the energy is there, 184 00:10:25,320 --> 00:10:27,040 Speaker 1: but some of the other products they're just not going 185 00:10:27,080 --> 00:10:29,600 Speaker 1: to be able to buy, and there's certainly a sense 186 00:10:29,640 --> 00:10:31,200 Speaker 1: in which they're not going to be able to buy 187 00:10:31,280 --> 00:10:34,120 Speaker 1: in bulk in order to reach those targets by the 188 00:10:34,280 --> 00:10:37,760 Speaker 1: by the time it matters, which is later on this year, 189 00:10:37,800 --> 00:10:41,640 Speaker 1: but not the end of the year. Dr Man. The 190 00:10:41,679 --> 00:10:44,000 Speaker 1: heart of your research this weekend goes to the heart 191 00:10:44,120 --> 00:10:48,840 Speaker 1: of microeconomics and macroeconomics. Is it's taught, which is finance 192 00:10:49,080 --> 00:10:53,679 Speaker 1: is an afterthought. You know, the booming financial economy is 193 00:10:53,720 --> 00:10:57,319 Speaker 1: compared to the economic economy, which is grim, grim, grimm. 194 00:10:57,760 --> 00:11:01,160 Speaker 1: How do we bring the two together? Well, this is 195 00:11:01,320 --> 00:11:03,120 Speaker 1: you know, this has been a conundrum and are really 196 00:11:03,160 --> 00:11:06,560 Speaker 1: a puzzle even for from for my financial market folks, 197 00:11:06,559 --> 00:11:09,959 Speaker 1: particularly those in the equity markets, who have been arguing that, 198 00:11:10,040 --> 00:11:13,200 Speaker 1: you know, the the earnings per share that's consistent with 199 00:11:13,280 --> 00:11:16,240 Speaker 1: the economic data is quite a bit different than than 200 00:11:16,280 --> 00:11:18,960 Speaker 1: what we see the market pricing in now. Um, there 201 00:11:19,000 --> 00:11:21,240 Speaker 1: are a couple of theories that kind of would make 202 00:11:21,320 --> 00:11:27,080 Speaker 1: this apparent levitation of the financial markets makes sense. One 203 00:11:27,160 --> 00:11:32,640 Speaker 1: of them is that you know, everybody's looking through and 204 00:11:32,679 --> 00:11:38,559 Speaker 1: the error of that, I think is individually a a 205 00:11:38,600 --> 00:11:42,439 Speaker 1: stock analysts can say, well, my stock is saying they're 206 00:11:42,480 --> 00:11:44,960 Speaker 1: going to be you know, be lean. They're going to 207 00:11:45,040 --> 00:11:49,160 Speaker 1: cut in order to maintain earnings going into one. But 208 00:11:49,240 --> 00:11:51,880 Speaker 1: you know, if everybody cuts, you know, your cut is 209 00:11:51,960 --> 00:11:56,320 Speaker 1: my revenue. So it doesn't add up macroeconomically. And that's 210 00:11:56,320 --> 00:11:59,240 Speaker 1: where the puzzle really comes in. In terms of the market. 211 00:11:59,679 --> 00:12:03,160 Speaker 1: What it implies is that a lot of looking below 212 00:12:03,360 --> 00:12:08,000 Speaker 1: the index at the individual stocks. This is what financed 213 00:12:08,040 --> 00:12:11,800 Speaker 1: people are to be doing at this point. And Catherine, 214 00:12:11,840 --> 00:12:14,600 Speaker 1: for economists, we've got to look below the headline economic 215 00:12:14,640 --> 00:12:17,920 Speaker 1: figures as well the aggregate numbers, paying a constructive picture 216 00:12:17,960 --> 00:12:20,360 Speaker 1: of a really nice bounce beneath the surface. This comes 217 00:12:20,360 --> 00:12:23,200 Speaker 1: from Bank of America. Over the weekend, there were twelve 218 00:12:23,280 --> 00:12:26,400 Speaker 1: point four million people who flowed into the labor market 219 00:12:26,600 --> 00:12:31,880 Speaker 1: hired seven and a half million people who flowed out separations. Catherine, 220 00:12:31,880 --> 00:12:34,800 Speaker 1: you look at the same numbers, the same data. How 221 00:12:34,840 --> 00:12:40,200 Speaker 1: are we meant to digest churn that big? Well, I 222 00:12:40,200 --> 00:12:42,760 Speaker 1: mean we are in unprecedented times in terms of you know, 223 00:12:43,559 --> 00:12:47,120 Speaker 1: the numbers turn has always been big. This of course 224 00:12:47,160 --> 00:12:50,720 Speaker 1: puts it in a completely different category. What I think 225 00:12:50,840 --> 00:12:53,800 Speaker 1: is concerning is that yet in some in some sense, 226 00:12:54,240 --> 00:12:57,080 Speaker 1: there was a sector of the economy, the leisure and 227 00:12:57,120 --> 00:13:01,800 Speaker 1: hospitality um, many of whom the workers who were completely 228 00:13:01,920 --> 00:13:04,160 Speaker 1: out of work because of the way that was shut down. 229 00:13:04,960 --> 00:13:07,760 Speaker 1: But there's this second shoot, a drop, which is, as 230 00:13:07,760 --> 00:13:12,079 Speaker 1: I say, thinking about how are firms planning on weathering 231 00:13:12,520 --> 00:13:15,840 Speaker 1: the next half of year in order to survive into 232 00:13:16,840 --> 00:13:19,600 Speaker 1: They're going to do that by cutting, and they're looking 233 00:13:19,679 --> 00:13:21,679 Speaker 1: now at how am I going to do that? And 234 00:13:21,720 --> 00:13:24,000 Speaker 1: that's where we get a lot of the separations from 235 00:13:24,040 --> 00:13:27,679 Speaker 1: It's a different category of workers than than who than 236 00:13:27,720 --> 00:13:30,800 Speaker 1: those who are coming in from leisure and hospitality. I 237 00:13:31,200 --> 00:13:34,000 Speaker 1: also think that you know, in keeping with what what 238 00:13:34,280 --> 00:13:37,839 Speaker 1: we were talking about before, the levitation of the stock 239 00:13:37,920 --> 00:13:42,160 Speaker 1: market indexes in general is of course looking below that 240 00:13:42,240 --> 00:13:45,000 Speaker 1: to what the Federal Reserve is doing. We cannot talk 241 00:13:45,040 --> 00:13:49,120 Speaker 1: about the strength of the financial markets in in absence 242 00:13:49,120 --> 00:13:52,320 Speaker 1: of talking about the extent to which the Central Bank 243 00:13:52,559 --> 00:13:56,920 Speaker 1: is on a supportive track. The next phase forward God 244 00:13:57,000 --> 00:13:59,200 Speaker 1: is seemingly for the Federals of Catherine. How do you 245 00:13:59,240 --> 00:14:01,520 Speaker 1: think that would take in the coming months the coming 246 00:14:01,559 --> 00:14:05,160 Speaker 1: mate takes well. This is a real challenge because, of course, 247 00:14:05,600 --> 00:14:08,719 Speaker 1: true forward guidance is where you talk about it that 248 00:14:08,800 --> 00:14:11,360 Speaker 1: has the appropriate effects. So there's you don't actually have 249 00:14:11,440 --> 00:14:14,960 Speaker 1: to do anything. So true forward guidance is one where 250 00:14:14,960 --> 00:14:18,320 Speaker 1: the Fed says, I stand behind you, but then the 251 00:14:18,440 --> 00:14:21,480 Speaker 1: market takes on its own dynamic in order to make 252 00:14:21,560 --> 00:14:25,760 Speaker 1: things uh appropriate. Again this time, you know, the market 253 00:14:25,800 --> 00:14:27,680 Speaker 1: has taken off a little bit too much, in part 254 00:14:27,960 --> 00:14:31,120 Speaker 1: because it's not just forward guidance that the Federal Reserve 255 00:14:31,160 --> 00:14:35,520 Speaker 1: has provided, it's actual implementation of all of those programs 256 00:14:35,520 --> 00:14:38,280 Speaker 1: that they've put into place. Now. Back in March, that 257 00:14:38,440 --> 00:14:41,040 Speaker 1: was the appropriate thing, forward guidance, putting in the programs 258 00:14:41,040 --> 00:14:43,840 Speaker 1: in place, being ready in case you know, there was 259 00:14:43,880 --> 00:14:48,720 Speaker 1: another real um, you know, collapse in the markets. But unfortunately, 260 00:14:48,920 --> 00:14:51,120 Speaker 1: what we have right now is a replay of what 261 00:14:51,240 --> 00:14:53,200 Speaker 1: I wrote about last year, which is the Central bank 262 00:14:53,240 --> 00:14:57,520 Speaker 1: but dilemma. Yes, they want to prevent a fire sales situation, 263 00:14:57,840 --> 00:15:00,520 Speaker 1: which we have the financial system cascade eads into a 264 00:15:00,560 --> 00:15:04,680 Speaker 1: second GFC two point oh. On the other hand, how 265 00:15:04,760 --> 00:15:07,440 Speaker 1: much do they want to contribute to moral hazard, which 266 00:15:07,520 --> 00:15:10,760 Speaker 1: is things are as I say levitated um and so 267 00:15:10,840 --> 00:15:13,840 Speaker 1: any kind of decline from where we are now really 268 00:15:13,880 --> 00:15:17,920 Speaker 1: puts the Central Bank into a dilemma situation. How much 269 00:15:17,960 --> 00:15:23,720 Speaker 1: do they really want to see existing level Catherine? How 270 00:15:23,800 --> 00:15:27,600 Speaker 1: much at this point are FED policies actually bringing jobs 271 00:15:27,600 --> 00:15:31,240 Speaker 1: back or providing a supportive environment to allow job growth 272 00:15:31,280 --> 00:15:35,560 Speaker 1: going forward. Well, that's always you know, the relationship between 273 00:15:35,840 --> 00:15:39,480 Speaker 1: central bank actions and actions in the real economy have 274 00:15:39,600 --> 00:15:42,520 Speaker 1: a lot of different links in the chain. And what 275 00:15:42,640 --> 00:15:45,360 Speaker 1: I can say right now is that the dynamics of 276 00:15:45,400 --> 00:15:48,120 Speaker 1: some of the fiscal programs, the p p P of 277 00:15:48,200 --> 00:15:50,960 Speaker 1: which there is also of course the main street lending 278 00:15:51,480 --> 00:15:54,640 Speaker 1: in in the US, that matters. But we've done some 279 00:15:54,720 --> 00:15:59,360 Speaker 1: work that looks at things like um possible downgrades from 280 00:15:59,480 --> 00:16:03,280 Speaker 1: investment raid into high yield and then from high yield 281 00:16:03,320 --> 00:16:08,160 Speaker 1: into default, and we have worked with our our analysts 282 00:16:08,160 --> 00:16:10,960 Speaker 1: in those in those two categories of asset classes and 283 00:16:11,040 --> 00:16:16,400 Speaker 1: evaluated what are the employment effects of a downgrade on 284 00:16:16,440 --> 00:16:20,880 Speaker 1: the investment grade or a default out of high yield. 285 00:16:21,120 --> 00:16:23,080 Speaker 1: And what we've found is is that, you know, those 286 00:16:23,080 --> 00:16:25,640 Speaker 1: are pretty pretty big numbers, especially on the high yield 287 00:16:25,640 --> 00:16:30,200 Speaker 1: going into default, have pretty significant implications for employment. So 288 00:16:30,400 --> 00:16:33,360 Speaker 1: there is a rationale for the FED to be in 289 00:16:33,360 --> 00:16:37,440 Speaker 1: a supportive mode to try to avoid having fallen angels, 290 00:16:37,280 --> 00:16:39,920 Speaker 1: as you know, those are those are investment investment grade 291 00:16:39,960 --> 00:16:42,200 Speaker 1: that turned in high yield uh and and they had 292 00:16:42,200 --> 00:16:45,560 Speaker 1: a particular um UH date put on them for the 293 00:16:45,640 --> 00:16:48,880 Speaker 1: Fed reserve programs and then um and then the cash 294 00:16:48,920 --> 00:16:52,320 Speaker 1: availability and the liquidity to try to tide over on 295 00:16:52,400 --> 00:16:55,760 Speaker 1: the high yield. But of course you know underlying this 296 00:16:56,000 --> 00:16:58,400 Speaker 1: it's it's got to be the real economy that performs, 297 00:16:59,000 --> 00:17:01,080 Speaker 1: otherwise none of these companies are going to be able 298 00:17:01,120 --> 00:17:07,119 Speaker 1: to make it through. Your projection is that markets or 299 00:17:07,160 --> 00:17:09,560 Speaker 1: cities have projection is that markets will catch up to 300 00:17:09,640 --> 00:17:13,880 Speaker 1: the economic reality which is bleaker than stocks and corporate 301 00:17:13,920 --> 00:17:17,920 Speaker 1: bonds are portraying. Is the sense here that the solvency 302 00:17:18,000 --> 00:17:22,200 Speaker 1: issues will overwhelm the liquidity solution that the Federal Reserve 303 00:17:22,280 --> 00:17:25,919 Speaker 1: has presented the market. Well, the problem here is is that, 304 00:17:25,960 --> 00:17:29,760 Speaker 1: I mean, liquidity is important, but solvency depends on the 305 00:17:29,800 --> 00:17:33,520 Speaker 1: return of the real economy to a pre covid um 306 00:17:34,520 --> 00:17:39,000 Speaker 1: situation um and and and we don't have that um under. 307 00:17:39,160 --> 00:17:41,879 Speaker 1: We have several different scenarios for the U s economy 308 00:17:42,160 --> 00:17:46,320 Speaker 1: um and and. Under a very optimistic scenario, the US 309 00:17:46,680 --> 00:17:49,320 Speaker 1: returns to pre covid level of GDP in the middle 310 00:17:49,359 --> 00:17:52,840 Speaker 1: of next year, but that still represents an entire year 311 00:17:53,760 --> 00:17:57,080 Speaker 1: where firms are not generating revenue along the path that 312 00:17:57,160 --> 00:18:00,200 Speaker 1: they had expected. Now some of them have replaced at 313 00:18:00,400 --> 00:18:03,639 Speaker 1: by borrowing and you know, issuing equity and issuing bonds 314 00:18:03,680 --> 00:18:06,760 Speaker 1: just from amazing issue and historic issues in order to 315 00:18:06,800 --> 00:18:10,240 Speaker 1: give them their own liquidity in order to tie them over. 316 00:18:10,600 --> 00:18:13,880 Speaker 1: But you know, even even then, you know, if we don't, 317 00:18:14,359 --> 00:18:18,560 Speaker 1: there's still a whole year where there's no new revenue generation, 318 00:18:18,640 --> 00:18:21,600 Speaker 1: and of course no one has a return to three 319 00:18:21,600 --> 00:18:25,040 Speaker 1: and a half percent unemployment. So you know that that 320 00:18:25,160 --> 00:18:28,520 Speaker 1: argument that by next year everything will be okay is 321 00:18:28,720 --> 00:18:35,040 Speaker 1: really optimistic, really optimistic. Catherine, Really appreciate and enjoy your insight, 322 00:18:35,160 --> 00:18:47,600 Speaker 1: especially this morning, Catherine Mane of City. We have been 323 00:18:47,640 --> 00:18:51,040 Speaker 1: thrilled that the Lieutenant Governor could come in week after 324 00:18:51,160 --> 00:18:55,879 Speaker 1: week after week and give our national audience perspective on 325 00:18:55,960 --> 00:19:00,399 Speaker 1: the success New York State is having unlessening of cases 326 00:19:00,400 --> 00:19:03,800 Speaker 1: of the virus and much lower deaths of the virus 327 00:19:03,840 --> 00:19:08,280 Speaker 1: as well. Kathy Hokel joins us this morning the Lieutenant Governor, Kathy, 328 00:19:08,320 --> 00:19:10,720 Speaker 1: I need you to give me an update on what 329 00:19:10,920 --> 00:19:15,360 Speaker 1: everyone wants to know if New York is responsible unlike 330 00:19:15,440 --> 00:19:21,200 Speaker 1: other states when do we get the restaurants open. Well, 331 00:19:21,240 --> 00:19:22,920 Speaker 1: thank you for having me back on the show again 332 00:19:22,920 --> 00:19:25,280 Speaker 1: and allowing me to have this conversation with you, because 333 00:19:25,280 --> 00:19:28,840 Speaker 1: it's so important people understand where our minds are, what 334 00:19:28,960 --> 00:19:31,640 Speaker 1: the governor is thinking about, what our administration is thinking 335 00:19:31,640 --> 00:19:34,240 Speaker 1: about when we make determinations on what or not a 336 00:19:34,320 --> 00:19:37,280 Speaker 1: region can go into the next phase. So, first of all, 337 00:19:37,359 --> 00:19:40,320 Speaker 1: New York City. New York City is now in Phase three. 338 00:19:40,359 --> 00:19:42,719 Speaker 1: There was no pause, No one said you can't go 339 00:19:42,760 --> 00:19:46,840 Speaker 1: into phase three. So personal services are still allowed. A 340 00:19:46,880 --> 00:19:49,920 Speaker 1: lot of the you know, the hair salons have been opened, 341 00:19:49,960 --> 00:19:52,440 Speaker 1: but they can do more services, to have two parlors. 342 00:19:52,440 --> 00:19:53,760 Speaker 1: I mean, there's just a lot of things that had 343 00:19:53,800 --> 00:19:56,359 Speaker 1: been shut down in the past that now can be open, 344 00:19:56,440 --> 00:20:00,560 Speaker 1: massage salons, etcetera. However, the reason there is they delay 345 00:20:00,880 --> 00:20:05,480 Speaker 1: in the allowance of indoor dining is that, first of all, 346 00:20:05,760 --> 00:20:09,560 Speaker 1: we have seen an incredible spike in cases nationwide. We 347 00:20:09,640 --> 00:20:13,040 Speaker 1: are also concerned about local enforcement to make sure that 348 00:20:13,040 --> 00:20:15,359 Speaker 1: that is going to go in a very robust fashion 349 00:20:15,400 --> 00:20:18,760 Speaker 1: in order to ensure compliance. And second, a third late 350 00:20:19,359 --> 00:20:22,160 Speaker 1: personal compliance. I mean you don't have to go very 351 00:20:22,160 --> 00:20:26,960 Speaker 1: far to see constant social media pictures of people people 352 00:20:27,040 --> 00:20:29,280 Speaker 1: in New York City not adhering to what we've asked 353 00:20:29,280 --> 00:20:31,560 Speaker 1: them to do. Now that the jury, I would say, 354 00:20:31,600 --> 00:20:34,679 Speaker 1: are doing well, But it doesn't take but a small 355 00:20:34,720 --> 00:20:38,359 Speaker 1: minority of people to lagually violate the rules to shut 356 00:20:38,400 --> 00:20:40,679 Speaker 1: us down again. So that is why we are not 357 00:20:40,800 --> 00:20:45,120 Speaker 1: going into Phase three element respect to indoor dining. We've 358 00:20:45,119 --> 00:20:47,880 Speaker 1: allowed the expansion of outdoor dining, and we can here 359 00:20:48,000 --> 00:20:51,000 Speaker 1: continue to courage people to support their restaurants so they 360 00:20:51,000 --> 00:20:54,239 Speaker 1: can hang on by ordering takeout. But we don't have 361 00:20:54,280 --> 00:20:57,000 Speaker 1: a dancewerer question, Tom. It is just not safe to 362 00:20:57,080 --> 00:21:00,359 Speaker 1: say that the usually smaller restaurants in your suit of 363 00:21:00,400 --> 00:21:03,720 Speaker 1: very intimate and with the indoor circulation of air which 364 00:21:03,760 --> 00:21:06,960 Speaker 1: is now becoming a more well known phenomenon, what this 365 00:21:07,040 --> 00:21:09,600 Speaker 1: is doing to the spread of the COVID pandemic and 366 00:21:09,720 --> 00:21:12,639 Speaker 1: co COVID virus. We can't take that risk. We are 367 00:21:12,680 --> 00:21:15,080 Speaker 1: where we are in New York States. Your risk averse 368 00:21:15,160 --> 00:21:18,360 Speaker 1: and we're not going to do that. Well, that's the point. 369 00:21:18,400 --> 00:21:20,360 Speaker 1: I mean, you go right to it. We're risk averse 370 00:21:20,440 --> 00:21:24,119 Speaker 1: and we're looking for perfection. That falls right over into 371 00:21:24,160 --> 00:21:28,119 Speaker 1: the school year as well. It's July and we're getting 372 00:21:28,240 --> 00:21:31,760 Speaker 1: into July. To you and all the other governors of 373 00:21:31,760 --> 00:21:35,760 Speaker 1: our great fifty states, the District of Columbia and of Guam, 374 00:21:35,920 --> 00:21:40,480 Speaker 1: are we going to get a school in September? Well, yeah, 375 00:21:40,520 --> 00:21:42,720 Speaker 1: I don't think being risk averse when you're in a 376 00:21:42,720 --> 00:21:45,239 Speaker 1: global pandemic is a problem. I mean that we're not 377 00:21:45,320 --> 00:21:49,560 Speaker 1: striving for perfection. We're striving to save lives and we 378 00:21:49,600 --> 00:21:52,600 Speaker 1: are going to continue monitoring the data as it unfolds. 379 00:21:52,640 --> 00:21:55,000 Speaker 1: That we think about the fact that back in March, 380 00:21:55,520 --> 00:21:58,240 Speaker 1: no one was even talking about wearing a mask. Everyone 381 00:21:58,320 --> 00:22:00,720 Speaker 1: thought if you washed your hands, you're going to be okay. 382 00:22:00,880 --> 00:22:03,840 Speaker 1: Now we're understanding, just very recently that this is more 383 00:22:03,880 --> 00:22:06,480 Speaker 1: airborne than we had thought, and the droplets can linker 384 00:22:06,480 --> 00:22:08,640 Speaker 1: in the air for a longer period of time. So 385 00:22:08,840 --> 00:22:12,720 Speaker 1: we have to have the benefit of the ability to 386 00:22:12,720 --> 00:22:14,680 Speaker 1: turn on a dime to say, you know, what we 387 00:22:14,760 --> 00:22:17,560 Speaker 1: thought was right based on global experts, and in New 388 00:22:17,640 --> 00:22:20,119 Speaker 1: York name is being advised by global experts, not just 389 00:22:20,200 --> 00:22:22,840 Speaker 1: the CDC, who are you know, always having a question 390 00:22:22,880 --> 00:22:26,200 Speaker 1: the motivation there from the President's influence. We want to trust, 391 00:22:26,240 --> 00:22:28,800 Speaker 1: but we also have to verify. We want to make 392 00:22:28,840 --> 00:22:30,840 Speaker 1: sure we get it right with respect to restaurants and 393 00:22:30,920 --> 00:22:33,680 Speaker 1: particularly with respect to schools. This is not an area 394 00:22:33,720 --> 00:22:36,119 Speaker 1: we're going to make a mistake with the health and 395 00:22:36,160 --> 00:22:38,800 Speaker 1: well being of New York children. And we only wish 396 00:22:38,840 --> 00:22:41,640 Speaker 1: that the rest of the nation had followed our lead 397 00:22:41,680 --> 00:22:47,879 Speaker 1: and taking extremely serious this pandemic and taking precautionary measures 398 00:22:47,920 --> 00:22:51,840 Speaker 1: and enforcing the social distin wearing the mask, shutting down, 399 00:22:51,880 --> 00:22:54,480 Speaker 1: but now coming back in a way that's thoughtful and 400 00:22:54,600 --> 00:22:56,879 Speaker 1: based on the data, not just the emotion that we 401 00:22:56,920 --> 00:22:59,040 Speaker 1: all want to get back to normal and back to school. 402 00:22:59,200 --> 00:23:02,480 Speaker 1: We can't pop least say in July what this pandemic 403 00:23:02,520 --> 00:23:04,760 Speaker 1: the landscape is going to look like when children should 404 00:23:04,760 --> 00:23:07,639 Speaker 1: be starting school in September. We're planning for it, but 405 00:23:07,760 --> 00:23:12,040 Speaker 1: we're not going to guarantee at this point, Lieutenant Governor. 406 00:23:12,280 --> 00:23:15,840 Speaker 1: So important to be cautious and to care for people's health. 407 00:23:16,080 --> 00:23:19,119 Speaker 1: There's also a question of how long this state and 408 00:23:19,200 --> 00:23:22,920 Speaker 1: New York City in particular, can last financially as things 409 00:23:22,960 --> 00:23:25,359 Speaker 1: do not get back to normal, and as people who 410 00:23:25,440 --> 00:23:29,080 Speaker 1: have left the region stay away as things don't return 411 00:23:29,119 --> 00:23:31,840 Speaker 1: to normal, and frankly, as people are worried about cuts 412 00:23:31,880 --> 00:23:35,320 Speaker 1: to basic services, whether it's police or sanitation. Where are 413 00:23:35,400 --> 00:23:39,760 Speaker 1: we on that front. There is a very simple solution, 414 00:23:40,320 --> 00:23:43,480 Speaker 1: and that is that the federal government, the President has 415 00:23:43,520 --> 00:23:46,600 Speaker 1: to recognize that this is not a state phenomenon. This 416 00:23:46,680 --> 00:23:49,360 Speaker 1: is not one hurricane that hits New York City. It 417 00:23:49,400 --> 00:23:51,560 Speaker 1: is a hurricane that it's hit the entire nation. And 418 00:23:51,560 --> 00:23:54,199 Speaker 1: if they don't realize this by now that this is 419 00:23:54,240 --> 00:23:56,679 Speaker 1: beyond the borders of New York, New Jersey and Connecticut, 420 00:23:56,680 --> 00:23:58,640 Speaker 1: that the that the rest of the nation is being 421 00:23:58,680 --> 00:24:00,640 Speaker 1: hit hard. And I only need to name a few 422 00:24:00,680 --> 00:24:03,040 Speaker 1: states like Texas, Arizona, and Florida, and you know what 423 00:24:03,040 --> 00:24:05,840 Speaker 1: I'm talking about that we need the settle government to 424 00:24:05,920 --> 00:24:08,840 Speaker 1: get back to business. Congress, the House has been on 425 00:24:08,880 --> 00:24:10,920 Speaker 1: our side. We need the Senate and the President to 426 00:24:11,080 --> 00:24:16,840 Speaker 1: sign a very very robust, large and impactful stimulus plan 427 00:24:16,960 --> 00:24:19,920 Speaker 1: to help support our local governments so we could help 428 00:24:19,960 --> 00:24:22,280 Speaker 1: the states, help the local governments, so we can have 429 00:24:22,320 --> 00:24:26,080 Speaker 1: fund the very essential services you're referring to, police, health 430 00:24:26,119 --> 00:24:29,280 Speaker 1: care workers, teachers, and not miss a beat, and that 431 00:24:29,400 --> 00:24:31,680 Speaker 1: they do what they're supposed to do, we can. It 432 00:24:31,720 --> 00:24:34,160 Speaker 1: will help our recovery. And I've said on your show 433 00:24:34,200 --> 00:24:38,520 Speaker 1: before there is no recovery for this nation without the 434 00:24:38,560 --> 00:24:41,399 Speaker 1: recovery of New York State. We are the epicenter. We 435 00:24:41,560 --> 00:24:44,159 Speaker 1: beat it back, We've contained the beast. We are the 436 00:24:44,240 --> 00:24:46,080 Speaker 1: role model for the rest of nations that we want 437 00:24:46,119 --> 00:24:48,520 Speaker 1: to start jump starting our economy and we know how 438 00:24:48,520 --> 00:24:50,360 Speaker 1: to do it. We need help in the settle government, 439 00:24:51,920 --> 00:24:55,280 Speaker 1: Lieutenant Governor the debate of this month, that's for sure, 440 00:24:55,359 --> 00:25:08,480 Speaker 1: and maybe beyond. We appreciate you continued engagement with this program. 441 00:25:08,760 --> 00:25:11,800 Speaker 1: Right now, we're gonna bring in Alicia Levine. She is wonderful, 442 00:25:11,960 --> 00:25:16,120 Speaker 1: just wonderful on the equity markets and really a more 443 00:25:16,200 --> 00:25:19,800 Speaker 1: holistic view of what to do for Alicia, you have 444 00:25:19,880 --> 00:25:23,280 Speaker 1: been absolutely wonderful at b n Y Melon on the 445 00:25:23,480 --> 00:25:28,080 Speaker 1: idea of staying in the market nervous. How do you 446 00:25:28,119 --> 00:25:31,959 Speaker 1: accomplish that to the end of the year. Good morning, 447 00:25:32,040 --> 00:25:35,359 Speaker 1: great show, guys, Great to see you as always. Yes, 448 00:25:35,920 --> 00:25:41,560 Speaker 1: staying in the market nervous and that is still our message. UM, 449 00:25:41,600 --> 00:25:45,480 Speaker 1: it's extraordinary. UM. I think we're all scratching our heads, 450 00:25:45,480 --> 00:25:47,399 Speaker 1: but the market is telling you you've got to be 451 00:25:47,480 --> 00:25:50,920 Speaker 1: in it. And I listened to the classes and that's 452 00:25:50,920 --> 00:25:54,760 Speaker 1: what they're telling us. So, Alicia, something you said over 453 00:25:54,800 --> 00:25:56,879 Speaker 1: the last couple of weeks, and I think it's really important, 454 00:25:57,040 --> 00:25:59,520 Speaker 1: not about the pace of the recovery, just about the 455 00:25:59,560 --> 00:26:01,600 Speaker 1: direct and I think that's something a lot of people 456 00:26:01,600 --> 00:26:04,800 Speaker 1: have failed to appreciate. The direction of traveler is not 457 00:26:04,960 --> 00:26:07,000 Speaker 1: a whole lot to this market. It means a whole 458 00:26:07,040 --> 00:26:09,960 Speaker 1: lot to you too, doesn't it. That's right. So the 459 00:26:10,000 --> 00:26:13,040 Speaker 1: thing is, we think that this summer could be a 460 00:26:13,080 --> 00:26:17,199 Speaker 1: bit of a test and some consolidation and choppy and 461 00:26:17,240 --> 00:26:19,000 Speaker 1: that not at least of which is that the third 462 00:26:19,080 --> 00:26:23,679 Speaker 1: quarter tends to be the worst performing quarter historically. So 463 00:26:23,760 --> 00:26:25,440 Speaker 1: when you add that with some of the news items 464 00:26:25,480 --> 00:26:27,840 Speaker 1: that you three have been talking about, you could get 465 00:26:27,880 --> 00:26:32,400 Speaker 1: that here. However, the direction of travel is upward overall, 466 00:26:32,960 --> 00:26:35,080 Speaker 1: and I don't think this should be shaken out here. 467 00:26:35,600 --> 00:26:38,760 Speaker 1: And you can hedge, and you can change your sectors 468 00:26:38,760 --> 00:26:41,560 Speaker 1: that you're interested in. There are many sectors that simply 469 00:26:41,560 --> 00:26:44,840 Speaker 1: have not participated yet. But the direction of travel for 470 00:26:44,920 --> 00:26:49,080 Speaker 1: the economy is upward, even its shallower than we hope 471 00:26:49,119 --> 00:26:53,520 Speaker 1: two weeks ago, so upward. The consensus view is that 472 00:26:53,600 --> 00:26:55,840 Speaker 1: this is the bounce, and the recovery starts to slow 473 00:26:56,200 --> 00:26:58,200 Speaker 1: in late summer. And I keep going back to this question. 474 00:26:58,200 --> 00:27:02,040 Speaker 1: Alicia whether anemic owth in the future is sufficient to 475 00:27:02,160 --> 00:27:05,719 Speaker 1: carry on driving equity gangs. Do you think it is? So? 476 00:27:05,760 --> 00:27:09,040 Speaker 1: I think we have to separate what the support for 477 00:27:09,240 --> 00:27:14,000 Speaker 1: the market and economy are versus what the fundamentals of 478 00:27:13,760 --> 00:27:17,960 Speaker 1: the corporate sector are. And in the end, the overwhelming 479 00:27:17,960 --> 00:27:21,720 Speaker 1: amount of stimulus coming from the FED and from Congress, 480 00:27:21,800 --> 00:27:24,080 Speaker 1: and we do have the fiscal clip, as you said, 481 00:27:24,160 --> 00:27:26,680 Speaker 1: we do expect something will be passed. And by the way, 482 00:27:27,040 --> 00:27:30,280 Speaker 1: because the resurgence in cases is happening in the South, 483 00:27:30,840 --> 00:27:34,080 Speaker 1: I expect that that next stimulus feels to be larger 484 00:27:34,119 --> 00:27:36,800 Speaker 1: than one trillion dollars because it's going to hit home 485 00:27:37,160 --> 00:27:39,240 Speaker 1: for many more people in the Senate, and I think 486 00:27:39,240 --> 00:27:42,120 Speaker 1: it's going to be larger, and there's there's an understanding 487 00:27:42,160 --> 00:27:45,919 Speaker 1: that what's kept the economy going are the transfer payments 488 00:27:45,920 --> 00:27:48,840 Speaker 1: from the government to households that have been out of 489 00:27:48,840 --> 00:27:51,240 Speaker 1: work and have been affected by this and will be longer. 490 00:27:51,520 --> 00:27:53,119 Speaker 1: So we think we're going to get that. And the 491 00:27:53,160 --> 00:27:57,040 Speaker 1: FED is out there having every single asset class supported. 492 00:27:57,480 --> 00:28:00,680 Speaker 1: So with that, even if it's a mean nick growth, 493 00:28:01,200 --> 00:28:06,520 Speaker 1: markets will be supported. Markets will be supported. There is 494 00:28:06,520 --> 00:28:08,800 Speaker 1: a question of what companies will do with the fact 495 00:28:09,040 --> 00:28:11,520 Speaker 1: that balance sheets on the consumer side are strong and 496 00:28:11,560 --> 00:28:14,160 Speaker 1: their own balance sheets are flooded with cash. We saw 497 00:28:14,440 --> 00:28:17,200 Speaker 1: Warren Buffett take a stab over the weekend, and then 498 00:28:17,200 --> 00:28:19,960 Speaker 1: this morning Uber is said to be agreeing to buy 499 00:28:19,960 --> 00:28:23,000 Speaker 1: Postmates for two point six five billion dollars. Uber shares 500 00:28:23,080 --> 00:28:26,160 Speaker 1: up nearly eight percent ahead of the open. How much 501 00:28:26,160 --> 00:28:29,520 Speaker 1: will consolidation, as Tom was asking about earlier, how much 502 00:28:29,520 --> 00:28:32,879 Speaker 1: will that consolidation really be the hallmark of the months 503 00:28:32,960 --> 00:28:37,040 Speaker 1: to come as companies look for any advantage for economies 504 00:28:37,080 --> 00:28:40,800 Speaker 1: of scale perspective in this economy, look, I think you 505 00:28:40,840 --> 00:28:43,320 Speaker 1: will see a lot more m n A here simply 506 00:28:43,400 --> 00:28:48,800 Speaker 1: because the primary funding markets are open and cash is available, 507 00:28:49,120 --> 00:28:50,960 Speaker 1: and there are going to be winners and losers. And 508 00:28:51,000 --> 00:28:55,120 Speaker 1: this is a kind of economy and market where relative 509 00:28:55,240 --> 00:28:58,760 Speaker 1: strength will matter more than if you have a decently 510 00:28:59,120 --> 00:29:01,320 Speaker 1: growing economy, and so I think you will see more 511 00:29:01,360 --> 00:29:03,280 Speaker 1: in then A and that is positive for the market. 512 00:29:03,560 --> 00:29:06,440 Speaker 1: I think that Berkshire Hathaway news over the weekends also 513 00:29:06,560 --> 00:29:08,280 Speaker 1: very positive. I think that's part of the reason you're 514 00:29:08,320 --> 00:29:11,680 Speaker 1: seeing the future is up this morning. That's simply buffets 515 00:29:11,680 --> 00:29:14,520 Speaker 1: back in, and it buffets back in. It can't be 516 00:29:14,600 --> 00:29:18,680 Speaker 1: that bad when you said, oh, you were looking at 517 00:29:18,760 --> 00:29:21,440 Speaker 1: your outlook and you said, the economy of twenty thirty 518 00:29:21,880 --> 00:29:24,520 Speaker 1: was brought forward ten years? What does that mean in 519 00:29:24,640 --> 00:29:27,520 Speaker 1: terms of where you want to invest? So, what that 520 00:29:27,560 --> 00:29:30,920 Speaker 1: means is the structural changes that we've all been aware of, 521 00:29:30,920 --> 00:29:34,080 Speaker 1: whether it's retail or tech or five G. You know, 522 00:29:34,160 --> 00:29:37,959 Speaker 1: these kinds of consumer behaviors that were slowly happening, that 523 00:29:38,040 --> 00:29:43,200 Speaker 1: were visible and creating some shakeouts now have been turbocharged. 524 00:29:43,560 --> 00:29:46,080 Speaker 1: So whatever you thought the economy was going to look 525 00:29:46,120 --> 00:29:48,600 Speaker 1: like in we're getting it now and we're getting it 526 00:29:48,680 --> 00:29:52,000 Speaker 1: next year. So it means that certain soft line retail 527 00:29:52,400 --> 00:29:57,720 Speaker 1: is probably going to struggle very sharply, and you've already 528 00:29:57,720 --> 00:30:01,120 Speaker 1: seen it. Uh, Certain certain kinds of businesses simply cannot 529 00:30:01,160 --> 00:30:05,640 Speaker 1: survive this going forward. Consumer behavior will not change entirely, 530 00:30:05,720 --> 00:30:07,720 Speaker 1: but it will on the margins, and that's where you're 531 00:30:07,760 --> 00:30:09,959 Speaker 1: going to see problems. I think the health care sector 532 00:30:10,480 --> 00:30:12,760 Speaker 1: is a huge place to invest here. You will see 533 00:30:12,800 --> 00:30:16,560 Speaker 1: so much money and investment coming both at biotech and 534 00:30:16,680 --> 00:30:20,400 Speaker 1: large cap pharma and and tech to deal with some 535 00:30:20,520 --> 00:30:22,960 Speaker 1: of these um some of the data issues that you 536 00:30:23,040 --> 00:30:29,240 Speaker 1: need to get healthcare right. That's all going to be accelerated, Alicia, 537 00:30:29,240 --> 00:30:32,840 Speaker 1: Will corporate behavior change and is the thing that we're 538 00:30:32,840 --> 00:30:35,240 Speaker 1: missing here is we're going to see an M and 539 00:30:35,320 --> 00:30:40,720 Speaker 1: a boom like we've never ever experienced before. So this 540 00:30:40,840 --> 00:30:43,240 Speaker 1: is the interesting question. And I think this is where 541 00:30:43,280 --> 00:30:45,600 Speaker 1: politics comes in a little bit. I think you will 542 00:30:45,640 --> 00:30:48,800 Speaker 1: see an M N a boom um. There's not a 543 00:30:48,800 --> 00:30:51,440 Speaker 1: lot of time left to get these deals done before 544 00:30:51,480 --> 00:30:54,960 Speaker 1: the election, so I think, you know, left left to 545 00:30:55,000 --> 00:30:56,920 Speaker 1: their own, that you will see a boom. I think 546 00:30:56,960 --> 00:31:00,200 Speaker 1: there has to be some uh. I to at the 547 00:31:00,240 --> 00:31:03,640 Speaker 1: regulatory picture is going to look like after November and 548 00:31:03,760 --> 00:31:06,680 Speaker 1: whether certain high ups will be viable or not. But 549 00:31:06,760 --> 00:31:09,360 Speaker 1: everything else being equal, you should see an M and 550 00:31:09,440 --> 00:31:12,880 Speaker 1: a boom here. Yet cash is plentiful, Alicia Levine, love 551 00:31:12,920 --> 00:31:14,760 Speaker 1: getting you on the program right to catch up on 552 00:31:14,800 --> 00:31:18,000 Speaker 1: this secrete market. Thanks for time this morning. Thanks for 553 00:31:18,080 --> 00:31:22,480 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 554 00:31:22,640 --> 00:31:28,400 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 555 00:31:28,920 --> 00:31:32,280 Speaker 1: I'm on Twitter at Tom Keene before the podcast. You 556 00:31:32,320 --> 00:31:35,720 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio