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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along

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Speaker 1: with my co host of Bonnie Quinn. Every business day

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Speaker 1: we bring you interviews from CEOs, A, market pros, and

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Speaker 1: Bloomberg experts, along with essential market moving news. Find the

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Speaker 1: Bloomberg Markets Podcast on Apple Podcasts or wherever you listen

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Speaker 1: to podcasts, and on Bloomberg dot com. Well, the US

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Speaker 1: has spent more than half of three trillion dollars in

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Speaker 1: economic rescue funds passed by Congress, however, with little of

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Speaker 1: the oversight intended to ensure that the money goes to

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Speaker 1: the right places. To get more color on this, we

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Speaker 1: welcome lad Davison Sherroda, a fantastic story on this city's

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Speaker 1: congressional tax reporter for Bloomberg News, joining us from on

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Speaker 1: the phone from Washington, d C. So, Laura, how can

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Speaker 1: a billion and a a half dollars be spent with little

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Speaker 1: to know oversight? Well, part of this was the way

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Speaker 1: that Congress designed it is. They wanted to get a

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Speaker 1: bunch of money into the economy really quickly. You know

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Speaker 1: those stimulus checks that went out, use those p P

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Speaker 1: P loans, all of these things, because people and businesses

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Speaker 1: needed money right away is basically ground to a halt

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Speaker 1: in March. The problem though, is, as we're finding out,

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Speaker 1: is that when you move quickly, you sometimes break things

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Speaker 1: and there are problems and and there's no one there

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Speaker 1: watching how the money is being spent. Who is going

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Speaker 1: to so it opens up a lot of doors for

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Speaker 1: for potential for fraud um or as well as just

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Speaker 1: you know, things that that aren't spent in the in

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Speaker 1: the best way. So Laura, who was supposed to be

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Speaker 1: watching this UM, well it's not just Secretary Manu and

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Speaker 1: there were supposed to be somebody's watching this right Yes, Yeah,

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Speaker 1: there's actually a bunch of different groups. So there's a

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Speaker 1: there's a group in Congress that that's overseeing this UM.

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Speaker 1: They are really just getting started that the it's a

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Speaker 1: bipartisan group. Both Pelosi and McConnell get to appoint people,

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Speaker 1: but there's been a lot of disagreement over who should

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Speaker 1: be chairman. It has to be a bipartisan pick. They've

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Speaker 1: been back and forth on this for several months and

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Speaker 1: they haven't been able to agree on someone. So so

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Speaker 1: that group is well, it exists, has has not really

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Speaker 1: been able to do much yet. There's also a new

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Speaker 1: special and Factor General that will be overseeing a lot

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Speaker 1: of this money. Um that pick was just approved earlier

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Speaker 1: this month. He really doesn't even have an office space yet.

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Speaker 1: So this is a you know, you're you're really talking

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Speaker 1: about people that don't have letterhead paper, they don't have

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Speaker 1: you know, a phone system set up. There's there's really

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Speaker 1: not infrastructure for them to even you know, send emails,

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Speaker 1: much less conduct a lot of big oversight work. Yeah,

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Speaker 1: the sp A reporting that loans have been approved for

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Speaker 1: four point six million small businesses already, Laura five billion

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Speaker 1: dollars worth. So there's still about a hundred and thirty

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Speaker 1: billion and funding remaining. Will it be all you know,

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Speaker 1: applied for if you like, because what do you get

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Speaker 1: like two months son, you have to keep everybody on

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Speaker 1: your staff, and you know a lot of small businesses

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Speaker 1: aren't not even applying for it because in two months

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Speaker 1: time it may not may not be worth it for

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Speaker 1: them to have some two high percent of their staff

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Speaker 1: on their payrolls. Still. Yes, Yeah, so there's as you mentioned,

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Speaker 1: there's about a hundred and thirty billion dollars left in

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Speaker 1: that pot of funds and and applications for that money

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Speaker 1: closed at the end of the month. And it's it's

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Speaker 1: very likely that there will be tens of billions, if

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Speaker 1: not more than a hundred billion dollars um left um

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Speaker 1: of that money. So the question is sort of what

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Speaker 1: happens with it? Does Congress reappropriate that for for other purposes.

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Speaker 1: Maybe businesses who have already gotten some money could come

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Speaker 1: back for for a second loan. Those are all, you know,

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Speaker 1: kind of things that that Congress is still having to

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Speaker 1: think about right now. Um and and but it's it's

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Speaker 1: very likely that that there will be some money left

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Speaker 1: because a lot of businesses have decided that it's either

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Speaker 1: to apply for this money or uh you know. There's

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Speaker 1: also some political risk because we saw with with larger

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Speaker 1: companies who applied qualified for the money, but uh you know,

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Speaker 1: shake shack and pot bellies who were then um, you know,

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Speaker 1: shamed by by politicians saying, hey, this is really should

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Speaker 1: be for the for the little guys. So Laura is there.

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Speaker 1: Tim O'Brien was on with us earlier today. He has

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Speaker 1: a column out suggesting that a lot of this money

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Speaker 1: is not getting to the small business owner, maybe the

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Speaker 1: small business owner of color, some of the folks who

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Speaker 1: really needed the most is there concern within Washington that

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Speaker 1: this program is not being uh, the money is not

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Speaker 1: being spent correctly or wisely. There's a lot of concern,

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Speaker 1: particularly from Democrats on the um the minority issue of

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Speaker 1: is this money going to rural communities, to my minority communities, uh,

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Speaker 1: to to underserve communities. UH. There's been several hearings on

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Speaker 1: Capitol Hill and there's a big push UH on Secretary

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Speaker 1: Magnution to release sort of the granular levels data on

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Speaker 1: the program. You know, which businesses have received this money

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Speaker 1: and how much they've gotten. Monution said last week that

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Speaker 1: he was not planning to release that instance. Then you

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Speaker 1: seed a big outcry from remembers of both parties saying, hey,

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Speaker 1: you know this is this is taxpayer money. We should

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Speaker 1: be able to see where it's going. I mean, the

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Speaker 1: problem with opening an investigation now is that, as you say,

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Speaker 1: you know, more than five billion dollars of this has

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Speaker 1: already been dispersed. So if there has been fraud, what

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Speaker 1: happens to that money? And will it be too late

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Speaker 1: for the small businesses that ended up having to chose

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Speaker 1: because they weren't able to get access to some of

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Speaker 1: that money in the early days. You know that that's

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Speaker 1: a really good question. There's a lot of unknowns there,

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Speaker 1: you know, inter terms of recouping some of the money.

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Speaker 1: You know, if there is you know, cases of outline fraud,

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Speaker 1: you know, the government could go and pursue legal action

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Speaker 1: against that. But if it's just sort of a you know,

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Speaker 1: the money didn't maybe wasn't allocated in the best way possible,

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Speaker 1: and um, some businesses got fell through the cracks. That's

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Speaker 1: really more of a question for Congress of do they

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Speaker 1: want to have a second loan program for for some

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Speaker 1: of these businesses that didn't get helped the first round. Um,

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Speaker 1: that's certainly possible, that that would be very politically difficult

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Speaker 1: right now is there's lots of debate in Washington about

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Speaker 1: if there should be another stimulus bill and if so,

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Speaker 1: how much should that encompass. Yeah, it's a great story, Laura.

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Speaker 1: I mean we've we've heard, you know, some hedge funds

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Speaker 1: have applied for this and so on. But you you

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Speaker 1: point to the reality television personality who tapped a two

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Speaker 1: million dollar loan from the p p P and actually

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Speaker 1: went and Boltz and Diamond Jutlry under roll lex Watch

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Speaker 1: because we can't who can't have a role Lex Watch

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Speaker 1: and Diamond jutlry together at the same time. Lauras, thank

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Speaker 1: you for joining us today. There's Laura Davison, Congressional tax

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Speaker 1: reporter for Bloomberg. Boy is she going to be busy.

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Speaker 1: But he now November and then beyond November, no doubt

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Speaker 1: as well. Paul, Yeah, because I think there's, you know,

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Speaker 1: the next thing coming down, Bonnie, is another piece of

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Speaker 1: fiscal stimulus coming from Congress, so and that will be

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Speaker 1: much more political than I think this most recent package

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Speaker 1: of three trillion dollars exactly, And you know, you you

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Speaker 1: just have to wonder if it's going to be as

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Speaker 1: big a package and when it will come, and you know,

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Speaker 1: if it will start to to get into election season

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Speaker 1: at that point, and how that will impact things. Time

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Speaker 1: now to look ahead to the FED chairs second day

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Speaker 1: of his Humphrey Hawkins testimony on Capitol Hill Today, we'll

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Speaker 1: digest what he said yesterday and also pose some questions

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Speaker 1: and pointed questions to our next guest, who is Christina Hooper,

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Speaker 1: Chief Global Market Strategies. To add Investco assets under management

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Speaker 1: there of more than a trillion dollars. Christina you were

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Speaker 1: watching the FED chairs performance last week very very closely,

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Speaker 1: as is everybody. Right now, what do you think the

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Speaker 1: FED is responsible for in these markets? Not the economy,

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Speaker 1: but just in these markets. I was reading or to

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Speaker 1: pearently of Cornerstone the other day and he talks about

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Speaker 1: looking at more than ten million different valuation models for

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Speaker 1: the S and P five hundred and finding that nine

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Speaker 1: of them, say, the SMP five D is overvalued today

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Speaker 1: by a weighted average about twelve percentage points. What say you,

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Speaker 1: I would agree, Uh, there is a lot that FED

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Speaker 1: share Powell is responsible for. He has created an enormous

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Speaker 1: amount of confidence in markets UM. But in doing so,

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Speaker 1: he has also created UM or I should say, has

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Speaker 1: skewed risk reward profiles for different asset classes. Now this

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Speaker 1: is nothing new. We saw this happen during the global

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Speaker 1: financial crisis when the FED stepped in with what was

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Speaker 1: then very extraordinary monetary policy, and it really altered the

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Speaker 1: risk reward profiles up. Treasuries UM were altered as well

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Speaker 1: as stocks UM. What's interesting is this time around, the

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Speaker 1: FED has been more expansive and the kind of policy

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Speaker 1: tools it's using, and so it's altering a lot of

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Speaker 1: risk assets, not just stocks, but in particular stocks have

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Speaker 1: certainly benefited, and I would argue the FED has decoupled

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Speaker 1: the stock market from the economy. So, Christina, given that

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Speaker 1: last comment that perhaps the fetis de coupled the stock

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Speaker 1: market from the economy. As an equity investor, what are

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Speaker 1: you doing now? Well, what you need to do is,

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Speaker 1: of course, maintain a focus on the long term, be

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Speaker 1: well diversified, but have adequate exposure to risk assets. We're

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Speaker 1: actually in a better place than we were during the

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Speaker 1: global financial crisis, just because we saw how that played

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Speaker 1: out UM, and of course investors need to maintain exposure

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Speaker 1: to risk assets. In fact, perhaps the biggest lesson learned

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Speaker 1: from the global financial crisis was to not get out

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Speaker 1: when you get scared UM, stay in, stay diversified UM,

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Speaker 1: but don't lock in your losses and stand on the sidelines.

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Speaker 1: One thing we know about stretched valuations is that they

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Speaker 1: are not predictive of performance in the short run, and

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Speaker 1: so it's one of those things where investors need to

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Speaker 1: be well diversified, hold their nose and maintain long term allocations.

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Speaker 1: How do you define the short term in these times, Christina?

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Speaker 1: Is there a different definition of time when we're in

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Speaker 1: a pandemic. Well, that could very well be the case.

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Speaker 1: But what we have and what we have to recognize,

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Speaker 1: is that there is not a lot of insight into

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Speaker 1: what's going to happen in the coming months. Right, we

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Speaker 1: have more than one in three companies in the SMP

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Speaker 1: have dispensed with earnings guidance this year. Now, that really

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Speaker 1: sends a message about how cloudy um things are. And

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Speaker 1: so of course investors need to look longer term because

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Speaker 1: it is very very difficult to look in the short run,

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Speaker 1: and we need to look at a variety of the

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Speaker 1: a factors because the shape of this economic recovery will

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Speaker 1: be dictated by the events that unfold from here in

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Speaker 1: terms of the kind of fiscal stimulus that is past

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Speaker 1: going forward, as well as the kind of developments we

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Speaker 1: see on the health front. We still know so little

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Speaker 1: about this virus. We're learning more and more each day

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Speaker 1: about how it can be controlled. Uh, and we're learning

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Speaker 1: more and more based on the kind of events that

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Speaker 1: are occurring black Black Lives Matter protests and the kind

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Speaker 1: of infection rates coming out of that, on the kind

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Speaker 1: of infection rates coming out of reopening of economy. So

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Speaker 1: we're learning more each day, and we're also working on

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Speaker 1: the development of therapies and ultimately an effective vaccine. So

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Speaker 1: all those different factors are going to dictate the course

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Speaker 1: of the economic recovery. But one key thing to remember

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Speaker 1: is that the stock market has largely decoupled from that economy.

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Speaker 1: So Christina, how do you feel about valuation right here?

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Speaker 1: We've had a really strong rebound off the bottom that

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Speaker 1: we saw kind of late March early April. Yet you know,

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Speaker 1: the earnings have just been dismal there in the first

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Speaker 1: quarter are going to be even worse here in the

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Speaker 1: second quarter. How do you feel about valuation? Well, evaluations

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Speaker 1: are certainly stretched, UM, but this is an environment where

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Speaker 1: UM much it has been altered by what the FED

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Speaker 1: has done, and especially in an environment where yield has

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Speaker 1: become even more scarce, Investors have to make trade offs.

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Speaker 1: They need to be well diversified, but they can't walk

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Speaker 1: away from exposure to risk assets like stocks. So it's

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Speaker 1: about finding pockets of attractive valuations to balance out the

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Speaker 1: more expensive parts of the market. UM. That includes exposure

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Speaker 1: outside the US. There are parts of emerging markets that

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Speaker 1: look very attractive from evaluation standpoint, and also look attractive

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Speaker 1: in terms of where they are with regards to the

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Speaker 1: economic recovery. Christina, thank you so much for joining us.

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Speaker 1: We really appreciate your thoughts and perspective. As always, Christina Hoover,

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Speaker 1: Chief Global Strategies for Investco, based in Atlanta. Solovanni, I

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Speaker 1: think you know the issue here is, you know, this

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Speaker 1: market has moved higher off the bottom earnings, you know,

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Speaker 1: not necessarily there. But I think my key takeaway from

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Speaker 1: Christina's comments was how she feels like the market is

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Speaker 1: really disconnected, perhaps from the underlying economy. Yeah, and I

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Speaker 1: think that you'll see that reflected in a lot of

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Speaker 1: commentary these days. Even Roberto Party, who I quoted at

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Speaker 1: the beginning of the interview, even he says that from

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Speaker 1: a purely statistical perspective, we would expect only three percent

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Speaker 1: of the correndover evaluation to adjust over the next month

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Speaker 1: all else equals. So I think the lesson is, with

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Speaker 1: the FED basically under writing this market costs all asset classes,

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Speaker 1: there's really not much to do until something changes. Yeah.

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Speaker 1: I like the I like the characterization that the FED

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Speaker 1: is backstopping uh this market. Here. It seems like we're

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Speaker 1: talking more and more about pharmaceutical companies, biotech companies, as

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Speaker 1: we talk about treatments for COVID and potently vaccines. Of course,

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Speaker 1: there's always a lot of M and A in this space,

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Speaker 1: and there's always new drugs coming onto the market that

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Speaker 1: can really impact the market. And when we do talk

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Speaker 1: about these things, there's nobody better to chat with them about.

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Speaker 1: In San Fazelli, he's a director of research in Europe

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Speaker 1: for Bloomberg Intelligence, but as I like to say, his

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Speaker 1: day job is that he is one of the best

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Speaker 1: healthcare analysts in the city of London. Sam, thanks so

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Speaker 1: much for joining us here. Let's start with Lily here.

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Speaker 1: They that stock had a pop recently on some breast

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Speaker 1: cancer data coming out. What's the latest on Eli Lily? First,

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Speaker 1: thank you very much for your very kind words, Paul

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Speaker 1: um Eli Lily. Well, there's not very often that you

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Speaker 1: see a large farmer company share price jump fifteen sixteen.

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Speaker 1: At one point it was up like eight yesterday. So

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Speaker 1: they had a success where I think most people have

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Speaker 1: decided there was not going to be one m A

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Speaker 1: drug they have for breast cancer succeeded earlier, I must say,

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Speaker 1: a year early earlier than expected. In terms of the

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Speaker 1: readoubt preventing reducing the recordance of disease UM in a

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Speaker 1: post operative breast cancer patients in high risk post operative

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Speaker 1: breast cancerpation. So that's that's that's the positive. And of

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Speaker 1: course the reason people were I think being negative about

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Speaker 1: the possibility was because Fiser failed in the same setting. Now,

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Speaker 1: this adds significantly to the revenue potential for this drug.

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Speaker 1: Some people calculate up to four billion potentially and that

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Speaker 1: has a major impact of margins. So the rest of

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Speaker 1: the story falls into place. There are people now going

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Speaker 1: up to you know, staying still. There's another teen per

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Speaker 1: cent or so upside on the stock on the cell side.

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Speaker 1: So that's what drove that one up a complete surprise.

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Speaker 1: Not only did Visor failed, but it failed having already

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Speaker 1: had a head start on ELI Lily by what at

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Speaker 1: least two years, And there was also no varteses cascali treatment.

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Speaker 1: Some what's happening with that? Yes, So so there just

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Speaker 1: quick to touch on this. There's two ways or reasons

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Speaker 1: why I really might have worked UM and where fights

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Speaker 1: it did and finds it went into a much earlier

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Speaker 1: patient group patients with much less advanced or lower risk disease,

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Speaker 1: so to a degree, really loaded the dice in its favor.

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Speaker 1: Not a problem, It just it's that means a smaller

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Speaker 1: population of patients. And also the drug is different um

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Speaker 1: and that is dost constantly as opposed to having to

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Speaker 1: take a drug holiday with the other two including no Artist.

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Speaker 1: Now Novartist is running a similar trial to to Lily,

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Speaker 1: not completely the same, but similar, And they're expecting data

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Speaker 1: by two which therefore why now we mean that it

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Speaker 1: should also read that early. So this is not without competition, alright, Sam,

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Speaker 1: Let's switch cares a little bit to the topic of

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Speaker 1: the day, COVID nineteen. You know, folks in the Trump

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Speaker 1: administration certainly talked they continue to talk about a vaccine

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Speaker 1: availability this calendar year. And as i've you know, talked

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Speaker 1: to you and read your research and other healthcare research,

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Speaker 1: it's just been years and years and years again a

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Speaker 1: drug kind of to market here. What is your sense

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Speaker 1: for you know, the likelihood of the timing of some

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Speaker 1: type of vaccine into the market here. Yes, so I

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Speaker 1: love the phrase you just used at the end, the

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Speaker 1: timing of some type of vaccine. I think the timing

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Speaker 1: of some type of vaccine is very possible to be

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Speaker 1: by the end of this year. The question is, will

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Speaker 1: we have a vaccine that's been through the best and

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Speaker 1: most rigorous safety and long term testing. No, it's impossible.

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Speaker 1: Will we have a vaccine that's available for treating people

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Speaker 1: in a world which God forbid has a real hardcore

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Speaker 1: second wave in the winter? Um and take some risk

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Speaker 1: in terms of accept some potential longer term safety issues.

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Speaker 1: That is something that government and regulators have to accept

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Speaker 1: if they want to inject people with these vaccines that

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Speaker 1: are just being developed. So will there be one that

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Speaker 1: looks like it's working. Yes, yeah, And as you say,

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Speaker 1: we'll likely need several some During this whole time, I've

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Speaker 1: been wondering why it has been easier to change supply chains,

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Speaker 1: ramp up production and what's needed send it to the

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Speaker 1: parts of the world that needed. And it seems like

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Speaker 1: all these months later, there is still a shortage of

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Speaker 1: things like nine masks and places where they're needed, despite

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Speaker 1: all sorts of companies, including three M saying that they will,

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Speaker 1: you know, swap some of their machines out and retool

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Speaker 1: some other machines. Why is this happening in this day

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Speaker 1: and age? Well, I think you know, I think we

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Speaker 1: potentially underestimate the effort that's required to get these things

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Speaker 1: actually moving. You know, we did it with companies that

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Speaker 1: are equivalents of Juggernauts, and all he think is to

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Speaker 1: try and move them quickly. It is very difficult. Just

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Speaker 1: give you the opposite argument. Biotech company Moderna wasn't really

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Speaker 1: spending an enormous amount of time just on vaccines. They

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Speaker 1: were working quite a lot on on on cancer therapies

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Speaker 1: with their technology. But they can turn on a on

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Speaker 1: a dime and just say right, we're just ware company.

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Speaker 1: We could do what we want. Next thing we're gonna

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Speaker 1: do is work on um the copy vaccines. Whereas where

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Speaker 1: you've got a massive company that that needs to retool, etcetera,

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Speaker 1: it takes time. And let's not forget it's only been

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Speaker 1: five months. So I don't want to beat them up

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Speaker 1: for this. I think it just takes a lot of time.

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Speaker 1: Raw materials got to be in the right place, just

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Speaker 1: takes a lot of time. Yeah, No, I don't certainly

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Speaker 1: don't mean to be the moup. I'm just I just

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Speaker 1: find the whole thing so curious that if there's a

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Speaker 1: market for us, you know that it won't come. I

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Speaker 1: mean Maderna for example, it may not make anything from

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Speaker 1: from making the pivot to to COVID treatments and COVID research.

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Speaker 1: But anyway, Sam, it's a conversation. We will continue. So

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Speaker 1: thanks for joining us today. Sam Fazali, Bloomberg Intelligence, London.

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Speaker 1: He's they're pharmaceutical expert over there, and a great one

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Speaker 1: he is too. As the US economy continues to reopen,

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Speaker 1: we're getting some mixed economic signals. We had retail sales

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Speaker 1: surprised to the upside, but we also had industrial production

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Speaker 1: weaker than expected. And now we have fed shair Pal

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Speaker 1: once again warning of uncertainty surrounding the timing and strength

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Speaker 1: of the recovery. So what is an economist to do?

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Speaker 1: We'll put that the car Winburg, Chief economists at High

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Speaker 1: Frequency Economics. Carl, thanks so much for joining us here.

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Speaker 1: What is your sense of kind of where we are in,

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Speaker 1: you know, starting to build perhaps a little bit of

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Speaker 1: recovery coming out of the pandemic. Hi, Paul Hiboni, good morning.

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Speaker 1: Thanks for having me on the show. So you know,

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Speaker 1: recovery is a relative thing right now rather than an

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Speaker 1: absolute thing. You take that retail sales number and compared

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Speaker 1: to expectations, it certainly was stronger than expected, and it

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Speaker 1: certainly was was up, but on compared to the averages

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Speaker 1: of what we've seen for retail sales in the months

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Speaker 1: of the quarters going into the pandemic, we're still way

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Speaker 1: below where we were before, and that's where we're going

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Speaker 1: to be for a long time. We're going to see

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Speaker 1: some growth from month to months, from quarter to quarter,

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Speaker 1: from week to week, we'll see improvement, but we're going

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Speaker 1: to remain in a depressed state for quite some time. Yeah,

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Speaker 1: I mean, I'm surprised there isn't more concentration on the

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Speaker 1: idea that much of the better economic data recently has

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Speaker 1: been thanks to fiscal stimulus as well as monetary policy obviously, Carl,

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Speaker 1: But once the employment benefits for people that are not

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Speaker 1: employed run out, you're going to have twenty million people

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Speaker 1: out there trying to find jobs when they can't even work.

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Speaker 1: What happens, that's what? Yeah, Well, that's good high freaking

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Speaker 1: see economics warned about in our note the clients this morning.

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Speaker 1: You know that when the supplemental unemployment benefit comes out,

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Speaker 1: there will be a reduction in fiscal stimulus, and that

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Speaker 1: will have to be replaced by something in less or,

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Speaker 1: I should say, or there will be a reduction in

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Speaker 1: detail spending and householding comes and so forth. The PPT,

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Speaker 1: you can look at it in two different ways. One

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Speaker 1: way is to look at it as a an increase

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Speaker 1: in cash flow the businesses. That's temporary, and when that

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Speaker 1: goes away, then the benefit goes goes with it. Another

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Speaker 1: way to look at it, which I prefer, to look

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Speaker 1: at it as a recapitalization, which is a permanent increase

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Speaker 1: in the cash balances these companies that are being used

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Speaker 1: to get through the pandemic, for sure, but it's a

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Speaker 1: capital increase. It's an injection and investment by the government,

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Speaker 1: and for many companies that will last for a long time.

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Speaker 1: That's a plus. But of course there's the income LUs

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Speaker 1: that has to be transcended. I think fed Share Powell

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Speaker 1: said the best of anyone yesterday. The longer the pandemic

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Speaker 1: those The longer the pandemic continues, the greater the damage

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Speaker 1: to the economy, and therefore the more fiscal stimulus would

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Speaker 1: have to be implemented in order to offset that. And um,

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Speaker 1: this can only go on for so long, this fiscal stimulus,

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Speaker 1: so let's go to that fiscal stimulus car where you

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Speaker 1: you know how to build uh, I think advanced by

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Speaker 1: the House several weeks ago, but it doesn't seem to

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Speaker 1: have much support in the center where at the White House? Here,

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Speaker 1: how critical is it to get a fiscal stimulus plant?

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Speaker 1: You know, another fiscal stimulus bill in the next you know,

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Speaker 1: several weeks or more months, and one that perhaps focuses

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Speaker 1: a little bit more on dates and local municipalities. Well, Paul,

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Speaker 1: I agree with that we need something if we're not

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Speaker 1: going to fall off a cliff. There's that old thing,

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Speaker 1: the fiscal cliff. And you also want to think not

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Speaker 1: only in terms of weeks and months, but also in

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Speaker 1: terms of years. If you have to say three trillion

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Speaker 1: dollars worth a fiscal stimulus this year, and you don't

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Speaker 1: put six trillion dollars worth of stimulus into the economy

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Speaker 1: next year, then fiscal policy is going to become a

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Speaker 1: drag on growth. And if you just replace three trillion

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Speaker 1: with another three trillion next year, then fiscal policy becomes neutral.

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Speaker 1: In other words, and this is just arithmetic, you have

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Speaker 1: to keep on increasing it if you're going to keep

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Speaker 1: on stimulating growth. So we have a fis have to

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Speaker 1: face a fiscal cliff problem. At some point in time,

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Speaker 1: the government is going to have to stop increasing the stimulus.

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Speaker 1: And it's just a question that it's a raised if

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Speaker 1: you will, and I can predict the answer as to

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Speaker 1: whether the government will run out with the run out

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Speaker 1: of capacity to increase stimulus before the economy stops being

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Speaker 1: dragged down by this virus. And let's face it, Carl,

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Speaker 1: I mean, this is just the latest problem that was

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Speaker 1: on the horizon for the economy before the pandemic even

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Speaker 1: came to our attention. We were already in trouble in

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Speaker 1: terms of trying to replace trade, you know, losses to

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Speaker 1: China and so on, given that there was going to

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Speaker 1: be a trade war. So there's there's other challenges out

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Speaker 1: there too. Why are so many economists looking then for

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Speaker 1: a V shaped recovery? Um, well, I don't know. I mean,

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Speaker 1: the I m F has called for a V shaped recovery,

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Speaker 1: and no one ever got fired for agreeing with the

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Speaker 1: I m F. But the reality of it is is

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Speaker 1: that even a V shaped recovery in terms of growth rates,

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Speaker 1: in other words, if we go back to the growth

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Speaker 1: rates that we enjoyed before. Recovery and growth does not

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Speaker 1: mean a recovery from levels. We would start that growth

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Speaker 1: from a very very depressed level, ten fIF lower than

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Speaker 1: where we were before. And even if we recover faster

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Speaker 1: than we were going before, it will take three or

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Speaker 1: four or five or six years to catch up to

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Speaker 1: where we were before. So a V shaped recovery is,

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Speaker 1: you know, a nice turn of words, but it's not

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Speaker 1: necessarily in prediction of a return to prosperity. We can't

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Speaker 1: expect to get back to where we work for at

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Speaker 1: least the next several years. So, Carl, it seems like

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Speaker 1: an odd time. I'm looking at us. A story on

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Speaker 1: the Bloomberg today, the US plans a broader reset of

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Speaker 1: its w t O tariff commitments. Here looks like the

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Speaker 1: White House is trying to renegotiate some of these tariffs.

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Speaker 1: Here is this the right time to be doing that?

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Speaker 1: Do you think this is never the right time to

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Speaker 1: be tearing down the world globalization progress? You know, the

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Speaker 1: United States has complaints that our tariffs are lower than

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Speaker 1: the tariffs of our trading partners. That's that's the gist

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Speaker 1: of it. And when you're in that situation, you can

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Speaker 1: do three things right. Number One, you can do what

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Speaker 1: the Trump administration is doing, which is you can raise

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Speaker 1: your tariffs to match to the rest of the world,

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Speaker 1: and that creates a loss. Number Two, you can work

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Speaker 1: through organizations like the w t O to try to

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Speaker 1: collectively bring down tariffs where they're too high. That's what

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Speaker 1: we've been doing in the post World War two period,

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Speaker 1: using the w t O to achieve massive reductions in

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Speaker 1: tariffs around the world, and it's worked, and I don't

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Speaker 1: see why it can't work in the future unless the

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Speaker 1: WTO is taken apart. And then the third thing you

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Speaker 1: can do is you can do nothing and except that

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Speaker 1: your tariffs are lower than everybody else's and use economic influence.

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Speaker 1: The fact that you're giving other countries an advantage to

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Speaker 1: get into the US market is a way to affect

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Speaker 1: political to influence political decisions elsewhere, which is the oldest

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Speaker 1: diplomatic game in the world, using economic policy to achieve

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Speaker 1: political influence. But you don't have to raise tariffs in

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Speaker 1: the US in order to level the playing field. That's

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Speaker 1: just the tactic that the Trump administeration has chosen. And personally,

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Speaker 1: we are high frequency economics Stone agreemented Carl, how much

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Speaker 1: are you thinking about the next election and how it

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Speaker 1: changes the arithmetic, because if there were to be changes

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Speaker 1: in personnel, some of these conversations would have to start

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Speaker 1: from scratch, right, Yes, the conversations would be different under

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Speaker 1: a different administration. I've I'm going to begain to speculate

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Speaker 1: about what happens with the next administration. As far as

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Speaker 1: I'm concertain, I'm pretty much out of time to do

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Speaker 1: a lot of things between now in the election in

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Speaker 1: terms of you know, broad economic policy and trade policy.

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Speaker 1: So I'm watching to see what happens, and but there

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Speaker 1: will be a different conversation with a different president. Carl.

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Speaker 1: Thank you. As always, as Carl says, we will not

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Speaker 1: get back to where you were for at least the

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Speaker 1: next several years. Chilling words from Carl Winebury. They're of

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Speaker 1: high frequency economics. Thanks for listening to Boomberg Markets podcast.

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Speaker 1: You can subscribe and listen to interviews at Apple Podcasts

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Speaker 1: or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm

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Speaker 1: on Twitter at Bonny Quinn, and I'm Paul Sweeney. I'm

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Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can

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Speaker 1: always catch us worldwide at Bloomberg Radio,