1 00:00:02,600 --> 00:00:13,040 Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. 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 --> 00:00:27,720 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Ready 5 00:00:27,720 --> 00:00:30,240 Speaker 1: please to stay joining us in the studio. Julian Emmanuel 6 00:00:30,320 --> 00:00:33,879 Speaker 1: bt i G Chief Equity and derivative strategist Jinian What 7 00:00:33,920 --> 00:00:36,559 Speaker 1: a moment nine p m. East in time last night. 8 00:00:36,640 --> 00:00:39,400 Speaker 1: Let's get you to that moment, the President delivering his address. 9 00:00:39,840 --> 00:00:44,519 Speaker 1: Your response as those words came out, Look, the market 10 00:00:44,600 --> 00:00:47,919 Speaker 1: told you everything you needed to know that. You know, 11 00:00:48,080 --> 00:00:51,400 Speaker 1: there was h too much of an element of backward 12 00:00:51,479 --> 00:00:55,280 Speaker 1: looking this. There was a little bit too much self congratulation. 13 00:00:55,720 --> 00:00:59,120 Speaker 1: This is a time for humility, but more importantly, this 14 00:00:59,200 --> 00:01:02,200 Speaker 1: is a time for action. Um. We saw the sketches, 15 00:01:02,280 --> 00:01:05,360 Speaker 1: the outlines of it. Um. But I would suggest to 16 00:01:05,440 --> 00:01:09,360 Speaker 1: you that the single most important thing that we could 17 00:01:09,400 --> 00:01:13,040 Speaker 1: see as a sign of backstopping confidence in the financial 18 00:01:13,080 --> 00:01:16,319 Speaker 1: markets right now would be a meeting between President Trump 19 00:01:16,680 --> 00:01:20,200 Speaker 1: and Speaker Pelosi and Senator Schumer. And that's what needs 20 00:01:20,280 --> 00:01:22,039 Speaker 1: to happen. Would that be enough for you? Would that 21 00:01:22,040 --> 00:01:25,320 Speaker 1: be the canta cyclical circuit breaker this market, this economy 22 00:01:25,360 --> 00:01:30,040 Speaker 1: desperately needs right now. Well, you know, frankly, in you know, 23 00:01:30,120 --> 00:01:34,160 Speaker 1: in an environment where volatility in every financial asset is 24 00:01:34,200 --> 00:01:37,800 Speaker 1: off the charts, and you're dealing with, you know, a 25 00:01:37,880 --> 00:01:41,199 Speaker 1: health emergency which we really don't fully have our hands around. 26 00:01:41,520 --> 00:01:44,680 Speaker 1: To say that one thing is enough is probably not 27 00:01:44,760 --> 00:01:46,959 Speaker 1: the correct thing to say, but I think it would 28 00:01:46,959 --> 00:01:49,120 Speaker 1: be very, very meaningful. I want to go to the 29 00:01:49,160 --> 00:01:52,400 Speaker 1: point that Muhammadalarian raises, which is are we watching an 30 00:01:52,520 --> 00:01:55,720 Speaker 1: orderly or a disorderly unraveling of the market. Is this 31 00:01:55,880 --> 00:01:58,520 Speaker 1: just sort of the market pricing in a new reality 32 00:01:58,560 --> 00:02:01,280 Speaker 1: with the economy or were watching a sort of the 33 00:02:01,320 --> 00:02:06,240 Speaker 1: functionality breakdown? So? Uh, what we would say there is 34 00:02:06,640 --> 00:02:12,040 Speaker 1: um Really until frankly, the last twelve hours, it has 35 00:02:12,120 --> 00:02:17,200 Speaker 1: been relatively orderly, relatively orderly. Um. You know, you've had rallies, 36 00:02:17,760 --> 00:02:20,320 Speaker 1: you know, thousand points up, a thousand points down, but 37 00:02:20,440 --> 00:02:23,480 Speaker 1: the liquidity has been there. What we've been focused on 38 00:02:23,680 --> 00:02:27,040 Speaker 1: for the last several months is this whole idea that 39 00:02:27,240 --> 00:02:30,040 Speaker 1: sell off was likely to be contained by the two 40 00:02:30,120 --> 00:02:33,240 Speaker 1: hundred week moving average in the SMP five, which is 41 00:02:33,360 --> 00:02:36,120 Speaker 1: essentially where you are now, where the futures are pricing 42 00:02:36,520 --> 00:02:41,400 Speaker 1: um below that you have the potential to fundamentally alter 43 00:02:41,560 --> 00:02:45,359 Speaker 1: the psychology, which could cause disorderliness. Credit is in the 44 00:02:45,440 --> 00:02:47,359 Speaker 1: driving seat in a big way over the last couple 45 00:02:47,400 --> 00:02:49,079 Speaker 1: of days for me, and that's been the big flip. 46 00:02:49,400 --> 00:02:51,440 Speaker 1: Over the last couple of weeks or so, we saw 47 00:02:51,480 --> 00:02:53,760 Speaker 1: the primary market freeze up. Would expect that in a 48 00:02:53,800 --> 00:02:56,800 Speaker 1: period of market volatility, that's exactly what happened. But to 49 00:02:56,840 --> 00:02:59,240 Speaker 1: start to see things like spreads and I think you 50 00:02:59,280 --> 00:03:01,359 Speaker 1: noted le sort of investment right, Spreads have doubled in 51 00:03:01,400 --> 00:03:03,919 Speaker 1: Wall a weak two wakes a couple of weeks just 52 00:03:03,960 --> 00:03:06,840 Speaker 1: like that rapidly. So the magnitude of the move in 53 00:03:06,840 --> 00:03:08,320 Speaker 1: the pace and the move, Julian, how much does that 54 00:03:08,400 --> 00:03:11,640 Speaker 1: concern you in this very moment? It really is the 55 00:03:11,680 --> 00:03:15,720 Speaker 1: single most concerning factors. Uh I was talking with Tom earlier. 56 00:03:15,760 --> 00:03:20,919 Speaker 1: The issue here is that having been at all time 57 00:03:21,000 --> 00:03:23,919 Speaker 1: highs in the equity markets basically a month ago, there 58 00:03:23,919 --> 00:03:27,240 Speaker 1: have only been three other times where you've had this 59 00:03:27,320 --> 00:03:31,359 Speaker 1: kind of volatility begin as rapidly as it has two thousand, 60 00:03:31,480 --> 00:03:35,560 Speaker 1: seven oh eight, the Financial crisis, seven the stock market 61 00:03:35,560 --> 00:03:39,280 Speaker 1: crash and nine and we see the Bloomberg Financial Conditions 62 00:03:39,280 --> 00:03:41,240 Speaker 1: Index force. I'll try to get that chart out on 63 00:03:41,280 --> 00:03:43,400 Speaker 1: LinkedIn and Twitter here in a bid and it's measured 64 00:03:43,400 --> 00:03:46,760 Speaker 1: by standard deviations. And we're not the Leaman low levels, 65 00:03:46,760 --> 00:03:49,000 Speaker 1: but boy are we on our way. They are exceeding 66 00:03:49,080 --> 00:03:53,040 Speaker 1: other tensions that we've seen before. You've highlighted, Julian Emmanuel 67 00:03:53,120 --> 00:03:56,040 Speaker 1: that the arch tension is a so called interest parity trade, 68 00:03:56,560 --> 00:03:59,000 Speaker 1: and they just to make it a real generalized thing 69 00:03:59,080 --> 00:04:03,080 Speaker 1: for you know, simple Thursday, I own some equities, leverage 70 00:04:03,080 --> 00:04:06,520 Speaker 1: your own leverage, usually leveraged, and I do a treasury 71 00:04:06,600 --> 00:04:10,520 Speaker 1: trade against that in along the way, I have to 72 00:04:10,640 --> 00:04:16,240 Speaker 1: rehedge or reset the trade. Our people are sophisticates able 73 00:04:16,320 --> 00:04:20,080 Speaker 1: to do that in this market? Are you able to rehedge? 74 00:04:20,800 --> 00:04:25,320 Speaker 1: So yesterday actually saw the first sort of breakdown in 75 00:04:25,320 --> 00:04:28,760 Speaker 1: in that risk parity trade because you actually saw yields 76 00:04:28,880 --> 00:04:33,159 Speaker 1: rise as the equity market was falling. Now, UM, from 77 00:04:33,160 --> 00:04:36,120 Speaker 1: our point of view, the paradigm of risk on risk 78 00:04:36,200 --> 00:04:39,800 Speaker 1: off has been with us for essentially a generation. It 79 00:04:39,880 --> 00:04:44,520 Speaker 1: was not that way prior to UM. And I might 80 00:04:44,560 --> 00:04:48,200 Speaker 1: take slight issue with what John said before, is that yes, 81 00:04:48,400 --> 00:04:51,120 Speaker 1: it was. It was part of a scary moment. But 82 00:04:51,440 --> 00:04:56,159 Speaker 1: on balance, particularly if we get fiscal measures, it could 83 00:04:56,200 --> 00:04:59,000 Speaker 1: be that the feedback loop of ten year yields moving 84 00:04:59,080 --> 00:05:02,560 Speaker 1: higher is a What is the measure that the Secretary 85 00:05:02,640 --> 00:05:05,479 Speaker 1: secretary can do, particularly with all the other Washington and 86 00:05:05,560 --> 00:05:08,880 Speaker 1: political burdens. What does he do to assist too big 87 00:05:08,920 --> 00:05:13,039 Speaker 1: to fail banks now attempting to affect or process their 88 00:05:13,120 --> 00:05:18,000 Speaker 1: desire to re hedge. How does he help Wall Street? Well, again, 89 00:05:18,160 --> 00:05:21,840 Speaker 1: it's you know, it's it's being front and center. I 90 00:05:21,880 --> 00:05:24,960 Speaker 1: would say that, you know, the Treasury sector Terry is 91 00:05:25,040 --> 00:05:29,960 Speaker 1: taking his orders elsewhere, um, but you know, staying out 92 00:05:30,000 --> 00:05:32,600 Speaker 1: there with with small businesses. And I would say that 93 00:05:32,880 --> 00:05:35,840 Speaker 1: small businesses are more important. But come about JP Morgan 94 00:05:35,960 --> 00:05:38,640 Speaker 1: is not a small business, right, No, it isn't. But 95 00:05:39,160 --> 00:05:42,719 Speaker 1: the fact is that in this kind of situation, JP 96 00:05:42,920 --> 00:05:46,440 Speaker 1: Morrigan's solvency is not in question. And the single sentence 97 00:05:46,520 --> 00:05:48,919 Speaker 1: John from Sara Vallis's note, he's calling for a hundred 98 00:05:49,000 --> 00:05:51,720 Speaker 1: beeps and do it fast. Yeah, this big expectations. Look, 99 00:05:51,720 --> 00:05:53,560 Speaker 1: there was a silver lining over the last couple of days. 100 00:05:53,600 --> 00:05:55,520 Speaker 1: I know it's been very stressful for a lot of people, 101 00:05:55,920 --> 00:05:59,440 Speaker 1: policymakers are starting to focus on the right things. It's 102 00:05:59,440 --> 00:06:02,599 Speaker 1: happened last week. I've been disappointed that it's been late, 103 00:06:02,800 --> 00:06:05,480 Speaker 1: but it's starting to happen, and that's encouraging. You took 104 00:06:05,520 --> 00:06:07,600 Speaker 1: issue with something I said. I've got to follow up. 105 00:06:07,920 --> 00:06:10,520 Speaker 1: Why is the feedback of high yield an environment like 106 00:06:10,680 --> 00:06:16,160 Speaker 1: yesterday encouraging? Because honestly, what you want to see, frankly, 107 00:06:16,600 --> 00:06:20,720 Speaker 1: the whole concept of interest rates in the US going 108 00:06:20,760 --> 00:06:24,120 Speaker 1: back to the zero bound, particularly on the long end, 109 00:06:24,720 --> 00:06:27,479 Speaker 1: is very sure, Julian. But I want high yields because 110 00:06:27,600 --> 00:06:30,920 Speaker 1: growth expectations are higher, inflation expectations are high. I don't 111 00:06:30,920 --> 00:06:33,320 Speaker 1: want high yields because people's traits have just blown up. 112 00:06:33,480 --> 00:06:36,720 Speaker 1: But and and again that that is, that is the 113 00:06:36,760 --> 00:06:40,520 Speaker 1: story of yesterday. However, we have to see if you 114 00:06:40,640 --> 00:06:43,680 Speaker 1: end up again in concrete fiscal stimulus in the next 115 00:06:43,760 --> 00:06:49,200 Speaker 1: several days, the appropriate reaction should be higher yields. Smart Julian, Emanuel, 116 00:06:49,240 --> 00:06:51,560 Speaker 1: thank you so much. With bt I g not only inequities, 117 00:06:51,560 --> 00:06:54,279 Speaker 1: but on the derivative space, as they say as well. 118 00:07:05,600 --> 00:07:07,640 Speaker 1: Right now, where's Gina Martin Adams As we look at 119 00:07:07,680 --> 00:07:10,320 Speaker 1: the equity market, She of course drives all of our 120 00:07:10,360 --> 00:07:14,440 Speaker 1: equity work and research at Bloomberg Intelligence. A lot of 121 00:07:14,440 --> 00:07:19,120 Speaker 1: discussion here about people that own equities and they wrap 122 00:07:19,240 --> 00:07:24,840 Speaker 1: a bond trade around them, dampening risk until it doesn't work. 123 00:07:24,960 --> 00:07:28,280 Speaker 1: Are we at a point where a blended equity and 124 00:07:28,440 --> 00:07:33,119 Speaker 1: bond trade where the equities often are leverage, borrowing money 125 00:07:33,120 --> 00:07:35,840 Speaker 1: to get bigger return when it works out, Are we 126 00:07:35,920 --> 00:07:38,680 Speaker 1: at a point where that trade doesn't work anymore? Yeah? 127 00:07:38,720 --> 00:07:40,480 Speaker 1: I mean, I think it depends on whether you're talking 128 00:07:40,520 --> 00:07:43,360 Speaker 1: about risk parity, which is really about volatility in the 129 00:07:43,400 --> 00:07:48,680 Speaker 1: asset prices, or simply about price combination. Price combination is 130 00:07:48,680 --> 00:07:53,640 Speaker 1: still working right, Bonds are still rallying effectively. Yesterday might 131 00:07:53,680 --> 00:07:55,160 Speaker 1: have been the beginning of a little bit of a 132 00:07:55,160 --> 00:07:57,800 Speaker 1: bond sell off, but we'll see after today, after the ECB, 133 00:07:58,680 --> 00:08:01,000 Speaker 1: after all the action in the any market, you could 134 00:08:01,000 --> 00:08:03,160 Speaker 1: have a reflight back in the bonds. The trouble is 135 00:08:03,200 --> 00:08:06,080 Speaker 1: with parity strategies, which are really based upon the volatility 136 00:08:06,080 --> 00:08:09,520 Speaker 1: of those two asset classes. You've got the move index spiking, 137 00:08:09,560 --> 00:08:13,840 Speaker 1: you've got the vixendex spiking. They're both completely off the charts. 138 00:08:14,360 --> 00:08:16,680 Speaker 1: That's creating a lot of trouble for anybody with a 139 00:08:16,760 --> 00:08:19,800 Speaker 1: volatility focus, but when you talk about sort of the 140 00:08:19,800 --> 00:08:23,920 Speaker 1: asset classes themselves, you're still seeing a benefit from having 141 00:08:23,960 --> 00:08:27,880 Speaker 1: that bond exposure. In general, it's just a very very 142 00:08:27,960 --> 00:08:30,760 Speaker 1: volatile landscape, and when you're talking about ten year treasuries 143 00:08:30,800 --> 00:08:34,720 Speaker 1: below fifty basis points, obviously a lot of investors get nervous. 144 00:08:34,720 --> 00:08:36,400 Speaker 1: That we had for the zero bound Gina, this is 145 00:08:36,440 --> 00:08:38,800 Speaker 1: such a punishing market right now. If I told many 146 00:08:38,840 --> 00:08:42,520 Speaker 1: people that in yesterday's session, before we started, yields would 147 00:08:42,520 --> 00:08:44,199 Speaker 1: be higher at the long end, the curve would be 148 00:08:44,200 --> 00:08:46,719 Speaker 1: steeper where a bank's going to be, I'm not sure 149 00:08:46,800 --> 00:08:48,839 Speaker 1: many people would say banks would be down around about 150 00:08:48,840 --> 00:08:54,600 Speaker 1: six spire. What's happening beyond just the concern about rates, Well, 151 00:08:54,640 --> 00:08:56,600 Speaker 1: I think it's panic. I mean, this is just sheer 152 00:08:56,600 --> 00:09:00,120 Speaker 1: panic where this morning it's definitely panic and it has 153 00:09:00,160 --> 00:09:02,079 Speaker 1: been though. I Mean, this is what's really interesting about 154 00:09:02,120 --> 00:09:04,560 Speaker 1: this sell off over the last three or so weeks 155 00:09:04,600 --> 00:09:06,560 Speaker 1: relative to any sell off with that we've been through, 156 00:09:06,600 --> 00:09:10,080 Speaker 1: including two thousand and eight, is from the very beginning 157 00:09:10,200 --> 00:09:13,160 Speaker 1: we had signs of panic. We had signs of absolute 158 00:09:13,200 --> 00:09:15,240 Speaker 1: wash out and sentiment. I mean, you just don't get 159 00:09:15,320 --> 00:09:18,160 Speaker 1: five percent, six percent down seven percent, down days at 160 00:09:18,160 --> 00:09:21,120 Speaker 1: the beginning of a crash. That's extremely unusual. You guys 161 00:09:21,240 --> 00:09:23,040 Speaker 1: keep this going. But can I point out to the 162 00:09:23,080 --> 00:09:27,280 Speaker 1: panic free that gold hasn't moved, although we can go 163 00:09:27,320 --> 00:09:29,720 Speaker 1: back to so what you can not what you want to, 164 00:09:29,800 --> 00:09:33,280 Speaker 1: and you can discuss the dynamics they're underpinning gold. Gina, 165 00:09:33,720 --> 00:09:36,640 Speaker 1: use word panic. One reason why I always love speaking 166 00:09:36,640 --> 00:09:38,800 Speaker 1: with you is that you look at the fundamentals and 167 00:09:38,840 --> 00:09:41,640 Speaker 1: you take an even headed approach to what we're actually 168 00:09:41,679 --> 00:09:45,560 Speaker 1: pricing in at this point, given the declines that we've seen, 169 00:09:45,640 --> 00:09:48,720 Speaker 1: in the declines that were poised for today, what are 170 00:09:48,760 --> 00:09:51,000 Speaker 1: we pricing into the US equity market? We are now 171 00:09:51,000 --> 00:09:53,880 Speaker 1: pricing recession in the U S We're pricing a light 172 00:09:53,960 --> 00:09:57,160 Speaker 1: recession allah two thousand one. I mean, it's been so 173 00:09:57,280 --> 00:10:00,000 Speaker 1: long since we had a light recession. It's really difficult 174 00:10:00,080 --> 00:10:02,520 Speaker 1: for many to remember. But two thousand one was a 175 00:10:02,600 --> 00:10:04,880 Speaker 1: year in which we had two quarters of negative growth. 176 00:10:04,920 --> 00:10:07,840 Speaker 1: They were split apart because we were kind of climbing 177 00:10:07,880 --> 00:10:10,640 Speaker 1: our way out of a slow growth period when September 178 00:10:10,640 --> 00:10:13,040 Speaker 1: eleven hit and then we had more panics. So we've 179 00:10:13,080 --> 00:10:15,640 Speaker 1: done a lot of comparisons back to two thousand one. 180 00:10:15,800 --> 00:10:18,400 Speaker 1: But if you look over time at your average compression 181 00:10:18,440 --> 00:10:22,520 Speaker 1: and PE multiples were there over the last multiple crisis 182 00:10:22,559 --> 00:10:24,599 Speaker 1: in the equity market, you get an average decline in 183 00:10:24,679 --> 00:10:28,800 Speaker 1: PE of about we've had a compression, you get an 184 00:10:28,800 --> 00:10:32,920 Speaker 1: average earnings drop of about four percent. So we've priced 185 00:10:32,920 --> 00:10:35,680 Speaker 1: a light recession. We have not priced something like a 186 00:10:35,720 --> 00:10:40,520 Speaker 1: two two thousand nine catastrophic recession experience based on cash 187 00:10:40,520 --> 00:10:43,520 Speaker 1: flow estimates of all of the analysts a Bloomberg intelligence, 188 00:10:43,920 --> 00:10:46,880 Speaker 1: Does this seem appropriate? Are the levels that we're looking 189 00:10:46,880 --> 00:10:50,320 Speaker 1: at right now and the declines in earnings? Uh? Is 190 00:10:50,360 --> 00:10:52,840 Speaker 1: that is that accurate? You know, it's really difficult to 191 00:10:52,840 --> 00:10:55,319 Speaker 1: say of it. Just to be completely honest, no one 192 00:10:55,400 --> 00:10:57,600 Speaker 1: knows how long the panic is going to last. And 193 00:10:57,640 --> 00:11:01,280 Speaker 1: this is the trouble with this situation is we're not 194 00:11:01,360 --> 00:11:06,120 Speaker 1: talking about rational sort of behavior. We're talking about panic behavior. 195 00:11:06,160 --> 00:11:08,440 Speaker 1: We're talking about panic behavior in the real economy with 196 00:11:08,480 --> 00:11:12,000 Speaker 1: the grocery store shelves somewhat empty. We're talking about panic. 197 00:11:11,760 --> 00:11:18,600 Speaker 1: The behavior in try to do a primoder last night, 198 00:11:18,640 --> 00:11:24,440 Speaker 1: not deliver six cases of John Courage days. Okay, a panic? 199 00:11:24,480 --> 00:11:27,600 Speaker 1: And this goes to what Dr Larian said Hilarian's joining 200 00:11:27,600 --> 00:11:31,200 Speaker 1: you in the night. Nine o'clock Muhammad Larian with John Pharall, 201 00:11:31,200 --> 00:11:34,760 Speaker 1: look at that on another feral property. Okay, fine, there's panic, 202 00:11:34,760 --> 00:11:39,160 Speaker 1: But as Dr Larian mentions, it's orderly panic. I don't 203 00:11:39,400 --> 00:11:43,520 Speaker 1: did you see yesterday within the electronics of the day, 204 00:11:43,880 --> 00:11:47,560 Speaker 1: it's not an image of nine. I'm sorry. Markets are 205 00:11:47,600 --> 00:11:52,440 Speaker 1: acting orderly. I don't see gap bids do I not yet, 206 00:11:52,880 --> 00:11:57,240 Speaker 1: though I will see. The percentage changes are very disorderly. 207 00:11:57,400 --> 00:12:01,280 Speaker 1: So I think it depends on your perspective. Again, the 208 00:12:01,280 --> 00:12:07,920 Speaker 1: way that we you know, the way that said anyway, 209 00:12:07,920 --> 00:12:11,320 Speaker 1: shape or form. The way that asset prices are moving 210 00:12:11,440 --> 00:12:14,960 Speaker 1: so viciously and so rapidly is akin to a two 211 00:12:14,960 --> 00:12:20,600 Speaker 1: thousand eight or seven or nine. That rapidity itself is 212 00:12:20,760 --> 00:12:25,840 Speaker 1: very very different, and you can clear trades in a crunch, right, 213 00:12:25,840 --> 00:12:30,480 Speaker 1: there's no liquidity crunch. Nonetheless, there is this really vicious 214 00:12:30,559 --> 00:12:33,960 Speaker 1: repricing that is extremely unusual. Day to check, folks. I 215 00:12:34,000 --> 00:12:36,920 Speaker 1: just want to say, in the a afternoon of seven, 216 00:12:36,920 --> 00:12:39,840 Speaker 1: when you started buying shares, you didn't know for three 217 00:12:39,920 --> 00:12:43,760 Speaker 1: days what you've got. I mean, I know it sounds 218 00:12:43,800 --> 00:12:48,640 Speaker 1: like ancient. No, I think it's worth pointy gap. That's 219 00:12:48,679 --> 00:12:50,640 Speaker 1: that's why I worry about this is why I worry 220 00:12:50,640 --> 00:12:53,360 Speaker 1: about the pay word, because it is so subjective and 221 00:12:53,360 --> 00:12:55,480 Speaker 1: it's I think it's important to put numbers on it 222 00:12:55,760 --> 00:12:57,319 Speaker 1: in the way that you guys are doing, Genu, it's 223 00:12:57,320 --> 00:13:09,920 Speaker 1: fantastic to see you and tell it you. Let's bring 224 00:13:09,960 --> 00:13:12,439 Speaker 1: in someone truly expert down this here is a city 225 00:13:12,440 --> 00:13:16,360 Speaker 1: group and that is an esteemed European program put together 226 00:13:16,400 --> 00:13:18,920 Speaker 1: by Villain Powder and of course by Catherine Man as well. 227 00:13:19,000 --> 00:13:23,920 Speaker 1: Christian Schultz joins with a very much European perspective. Christian, 228 00:13:23,960 --> 00:13:30,200 Speaker 1: what is a surprise here? Well, to us, not that much. 229 00:13:31,120 --> 00:13:34,560 Speaker 1: Our focus was mainly on quee. We had hoped for 230 00:13:34,640 --> 00:13:38,920 Speaker 1: a bigger increase in the purchases of government bonds in particular. 231 00:13:38,960 --> 00:13:41,560 Speaker 1: And the logic here for us was, um, this is 232 00:13:41,559 --> 00:13:44,280 Speaker 1: going to be a shock to the real economies equity 233 00:13:44,640 --> 00:13:46,640 Speaker 1: um so, companies are going to burn through a lot 234 00:13:46,640 --> 00:13:48,679 Speaker 1: of cash um And that's not just a liquidity bill 235 00:13:48,720 --> 00:13:52,679 Speaker 1: to a solvency issue. The ECB cannot give equity to companies. 236 00:13:52,960 --> 00:13:55,160 Speaker 1: Governments can. So what the ECB has to do is 237 00:13:55,200 --> 00:13:59,520 Speaker 1: make sure that government can socialize losses um so, create 238 00:13:59,559 --> 00:14:03,280 Speaker 1: fiscal room, and that requires buying government bonds. Now the 239 00:14:03,360 --> 00:14:07,520 Speaker 1: fact that they're buying private sector bonds is a bit evasive, 240 00:14:07,760 --> 00:14:10,880 Speaker 1: I'd say there. So it seems that the limits that 241 00:14:10,920 --> 00:14:13,200 Speaker 1: they've set themselves to throw the three limits and have 242 00:14:13,280 --> 00:14:15,920 Speaker 1: scared them away from buying more governments. And that's not 243 00:14:15,960 --> 00:14:18,360 Speaker 1: good news. Is this the influence of the Germans? I mean, 244 00:14:18,400 --> 00:14:20,600 Speaker 1: are you suggesting there should have been more except for 245 00:14:20,680 --> 00:14:26,280 Speaker 1: German reticence? Well, the Germans, I guess, would have liked 246 00:14:26,320 --> 00:14:29,520 Speaker 1: a rate cut. M that's not happened, and that's probably 247 00:14:29,560 --> 00:14:31,760 Speaker 1: not happened because the fear is that that would be 248 00:14:31,800 --> 00:14:34,360 Speaker 1: worse for banks than it is good for the economy 249 00:14:34,360 --> 00:14:36,800 Speaker 1: as a whole, so that it would be net negative 250 00:14:36,840 --> 00:14:39,200 Speaker 1: for the economy just highlights that we had the limit 251 00:14:39,280 --> 00:14:43,280 Speaker 1: for rate cuts at this point for the the for 252 00:14:43,320 --> 00:14:45,760 Speaker 1: the asset purchases. Yes, indeed, I mean government buying government 253 00:14:45,800 --> 00:14:48,080 Speaker 1: bonds and not something which is very popular in Germany. 254 00:14:48,360 --> 00:14:51,200 Speaker 1: Buying corporate bonds pretty more popular. So yes, indeed there's 255 00:14:51,200 --> 00:14:54,960 Speaker 1: some resistance that seem EUROSWISSI stay strongest Swiss for those 256 00:14:55,000 --> 00:14:57,400 Speaker 1: that are playing inside baseball at least, so we're starting 257 00:14:57,440 --> 00:15:00,560 Speaker 1: to get in research and Sebastian Galley, and already he 258 00:15:00,680 --> 00:15:03,680 Speaker 1: doesn't mince words about it. He says, this shows a 259 00:15:03,760 --> 00:15:07,720 Speaker 1: complete lack of coordination between the United States and the 260 00:15:07,760 --> 00:15:10,640 Speaker 1: European Union, which really is the key issue here is 261 00:15:10,760 --> 00:15:14,280 Speaker 1: will there be sufficient response and coordination from all central 262 00:15:14,320 --> 00:15:18,840 Speaker 1: banks in order to stave off some sort of serious crisis? 263 00:15:18,880 --> 00:15:21,400 Speaker 1: And right now there is a question that I have 264 00:15:21,680 --> 00:15:26,520 Speaker 1: looking at this response, is it sufficient? And Christian, what's 265 00:15:26,560 --> 00:15:29,400 Speaker 1: your take? Do you think that the ECB has responded 266 00:15:29,440 --> 00:15:34,600 Speaker 1: effectively to the issues at hand, well within what they 267 00:15:34,640 --> 00:15:37,200 Speaker 1: can do. They probably have, As I said, it would 268 00:15:37,200 --> 00:15:40,040 Speaker 1: have been better to buy more government bonds, to be 269 00:15:40,040 --> 00:15:42,200 Speaker 1: more aggressive on the government bond side, because that's really 270 00:15:42,240 --> 00:15:44,280 Speaker 1: what we need right now. We need fiscal space or 271 00:15:44,320 --> 00:15:46,760 Speaker 1: government so that they can socialize losses that necessary and 272 00:15:46,840 --> 00:15:51,080 Speaker 1: that incluence countries such as Italy. If the additional purchases 273 00:15:51,120 --> 00:15:54,720 Speaker 1: which aren't great, I mean, I'm calculating maybe twelve ten 274 00:15:54,840 --> 00:15:58,920 Speaker 1: month um. If that's gear towards the private sector rather 275 00:15:59,000 --> 00:16:03,320 Speaker 1: than the public, then I'm afraid that sort of misses 276 00:16:03,400 --> 00:16:06,560 Speaker 1: that point that governments have to have fiscal space. Here. 277 00:16:07,320 --> 00:16:09,760 Speaker 1: The phrase you just said, Christian, is why we love 278 00:16:09,840 --> 00:16:14,720 Speaker 1: having you on the ability to socialize losses. That's the 279 00:16:14,800 --> 00:16:19,120 Speaker 1: heart of the financial political in nexus, I should point 280 00:16:19,160 --> 00:16:21,280 Speaker 1: euro strength. All of a sudden, we did get a 281 00:16:21,280 --> 00:16:27,360 Speaker 1: one thirteen print briefly one slightly stronger uh, slightly stronger 282 00:16:27,440 --> 00:16:30,640 Speaker 1: euro here off this historic moment, Christian shows, what do 283 00:16:30,680 --> 00:16:37,640 Speaker 1: you mean, well, I translate for us socialized losses. Well, 284 00:16:38,240 --> 00:16:43,640 Speaker 1: companies also households of course, will have less income, you know, 285 00:16:43,720 --> 00:16:47,320 Speaker 1: through that period where we're effectively on lockdown right now 286 00:16:47,320 --> 00:16:50,920 Speaker 1: in Italy but potentially in other countries shortly. Um so 287 00:16:51,000 --> 00:16:54,680 Speaker 1: that will burn down the equity that the debt liment 288 00:16:54,720 --> 00:16:58,040 Speaker 1: to remain the same. So companies are running out of 289 00:16:58,080 --> 00:17:00,320 Speaker 1: equity and they're certainly it's difficult to get new equity 290 00:17:00,360 --> 00:17:03,280 Speaker 1: from the markets right now, so they have turned to 291 00:17:03,360 --> 00:17:07,639 Speaker 1: governments for income subsidies, and not just for bridge lawns, 292 00:17:07,680 --> 00:17:11,239 Speaker 1: but literally for grants. And that requires bigger deficits. That's 293 00:17:11,280 --> 00:17:13,639 Speaker 1: what I'm called socializing loss The taxpayer will have to 294 00:17:13,640 --> 00:17:16,600 Speaker 1: come up for a lot of them. There, that's what 295 00:17:16,640 --> 00:17:19,199 Speaker 1: you're looking for, That's what I was looking for, folks. 296 00:17:19,480 --> 00:17:22,920 Speaker 1: He's so delicate about it. Christian shows is a gentleman 297 00:17:23,400 --> 00:17:26,000 Speaker 1: at Lisa This has been the conundrum for twelve years. 298 00:17:26,480 --> 00:17:30,320 Speaker 1: Is it any creative destruction? However, you want to put 299 00:17:30,320 --> 00:17:33,960 Speaker 1: a good morning, Mr Shape with great memories there. But 300 00:17:34,200 --> 00:17:37,040 Speaker 1: I'll tell you, Lisa, all this is, and the wonderful 301 00:17:37,160 --> 00:17:40,639 Speaker 1: language of socialized losses is when does the tax payer 302 00:17:40,680 --> 00:17:43,159 Speaker 1: pony up? That's really what this is all about. And 303 00:17:43,280 --> 00:17:46,679 Speaker 1: ultimately it seems like that will be the answer. But 304 00:17:46,720 --> 00:17:49,359 Speaker 1: there's also a question what is the role of the 305 00:17:49,440 --> 00:17:52,400 Speaker 1: central bank right in terms of making sure that financial 306 00:17:52,400 --> 00:17:55,960 Speaker 1: markets function versus fiscal stimulus? Christian? Based on what you've 307 00:17:55,960 --> 00:17:58,560 Speaker 1: seen the lack of coordination as we've talked about globally 308 00:17:58,600 --> 00:18:02,199 Speaker 1: with between the central banks and in fiscal policymakers, what 309 00:18:02,240 --> 00:18:05,160 Speaker 1: are you looking to add in terms of the European economy. 310 00:18:05,280 --> 00:18:07,840 Speaker 1: Are we headed towards recession? Are we already there? How 311 00:18:07,880 --> 00:18:12,640 Speaker 1: long will it last? It seems very difficult right now 312 00:18:12,680 --> 00:18:14,920 Speaker 1: to avoid recession if you have the definition of two 313 00:18:15,480 --> 00:18:18,400 Speaker 1: successive negative quarters, or even if we do avoid two 314 00:18:18,440 --> 00:18:21,800 Speaker 1: successive negative quarters, we probably have as much decline in 315 00:18:21,840 --> 00:18:25,880 Speaker 1: one quarter that we can call that recession by all means, 316 00:18:25,920 --> 00:18:29,760 Speaker 1: So recession widening of the output gap, and you know, 317 00:18:29,880 --> 00:18:33,160 Speaker 1: rising unemployment rates and these things, I think that would 318 00:18:33,160 --> 00:18:35,440 Speaker 1: be inevitable. Of course, right now, the hope is still 319 00:18:35,480 --> 00:18:38,439 Speaker 1: that we will have some form of V shape or 320 00:18:38,520 --> 00:18:40,760 Speaker 1: U shape or any kind of recovery so that we 321 00:18:40,840 --> 00:18:43,840 Speaker 1: get back to the levels that we had as output 322 00:18:43,840 --> 00:18:46,200 Speaker 1: at the end of last year relatively quickly, in which case, 323 00:18:46,280 --> 00:18:48,520 Speaker 1: you know, the you know, the socializing of losses and 324 00:18:48,560 --> 00:18:51,560 Speaker 1: the liquidity support from the central bank can be temporary. 325 00:18:51,840 --> 00:18:53,920 Speaker 1: But of course there's a big risk if we don't 326 00:18:54,160 --> 00:18:56,760 Speaker 1: blood losses that we will get a permanent shock and 327 00:18:56,840 --> 00:19:01,160 Speaker 1: the parablel shift in the in the GDP curve. Hugely informative. 328 00:19:01,240 --> 00:19:04,399 Speaker 1: Christian Shills, thank you so much. In economics in Europe 329 00:19:04,680 --> 00:19:07,920 Speaker 1: with City Group, just wonderful, the director of City Group 330 00:19:08,200 --> 00:19:23,680 Speaker 1: Economics team, and we will pause. There is a small 331 00:19:24,040 --> 00:19:27,720 Speaker 1: blue book of two shades of blue color put out 332 00:19:28,000 --> 00:19:30,760 Speaker 1: right after Robert Frost took the part in the road 333 00:19:31,520 --> 00:19:34,720 Speaker 1: and the gentleman from Amer's College, a physicist wrote a 334 00:19:34,760 --> 00:19:40,320 Speaker 1: book where he talked about good and bad deflation. And 335 00:19:40,359 --> 00:19:44,159 Speaker 1: as I've written, let's chart paragraph, chart paragraph, it's the 336 00:19:44,359 --> 00:19:48,679 Speaker 1: Dheimens School of economics. Say something and show it. And 337 00:19:48,720 --> 00:19:52,439 Speaker 1: we're honored on this truly historic day that Dr Shilling 338 00:19:52,520 --> 00:19:55,760 Speaker 1: would join us kids can't say it. Folks by the 339 00:19:55,800 --> 00:19:58,960 Speaker 1: book Deflation, read it and reread it every three years, 340 00:19:59,160 --> 00:20:04,560 Speaker 1: Gary Shilling? Are we in good or bad disinflation? I 341 00:20:04,600 --> 00:20:08,240 Speaker 1: think we're probably in bad uh and bad disinflation. What's 342 00:20:08,240 --> 00:20:11,280 Speaker 1: the difference, Well, the addition edition is do you have 343 00:20:11,880 --> 00:20:15,240 Speaker 1: do you have a high productivity which pushes down prices, 344 00:20:15,680 --> 00:20:18,560 Speaker 1: you have access supply, or do you have deficient demand? 345 00:20:19,160 --> 00:20:21,639 Speaker 1: And I think we're more in the deficient demand stage 346 00:20:21,760 --> 00:20:25,560 Speaker 1: right now with particularly with the virus. I know DiCaprio 347 00:20:25,600 --> 00:20:28,600 Speaker 1: has it rights to the book Deflation, but but if 348 00:20:28,600 --> 00:20:30,960 Speaker 1: you were to write a new version of it, now, 349 00:20:31,400 --> 00:20:36,360 Speaker 1: how do you full technology into that productivity and a 350 00:20:36,400 --> 00:20:41,600 Speaker 1: good disinflation versus the bad disinflation? So many of our listeners, well, 351 00:20:41,640 --> 00:20:44,919 Speaker 1: I think in the long run, product that we are 352 00:20:44,960 --> 00:20:50,920 Speaker 1: going to see productivity blossom things like robotics, uh, artificial 353 00:20:50,960 --> 00:20:53,720 Speaker 1: intelligence and so on when they get big enough to 354 00:20:53,800 --> 00:20:56,880 Speaker 1: really drive productivity. But they're still in their infancy. They're 355 00:20:56,920 --> 00:20:58,879 Speaker 1: not you know, they're growing a hundred percent a year 356 00:20:58,920 --> 00:21:00,639 Speaker 1: or more, but they're not big enough. You have to 357 00:21:01,119 --> 00:21:03,760 Speaker 1: really move the overall productivity needles. So I think in 358 00:21:03,800 --> 00:21:06,760 Speaker 1: the meanwhile, particularly when we're looking at the at the 359 00:21:06,840 --> 00:21:09,120 Speaker 1: virus and the effect. Right now, it's more the it's 360 00:21:09,160 --> 00:21:11,320 Speaker 1: more of the bad deflation. The e t F sp 361 00:21:11,520 --> 00:21:14,080 Speaker 1: X breaks down, Paul, we're now down seven point one percent. 362 00:21:14,160 --> 00:21:16,919 Speaker 1: We just touched new weakness there for the morning below 363 00:21:16,960 --> 00:21:20,720 Speaker 1: the lockdown of negative one forty on smp futures. Deutsche 364 00:21:20,720 --> 00:21:23,760 Speaker 1: Bank just as a European proxy from a five point 365 00:21:23,840 --> 00:21:26,919 Speaker 1: five zero to a five point four three. Where's the 366 00:21:26,960 --> 00:21:30,560 Speaker 1: euro right now? One sort of hunched as well, Paul 367 00:21:30,600 --> 00:21:33,720 Speaker 1: Sweeney would be great, Gary showing So Gary, what I 368 00:21:33,760 --> 00:21:35,600 Speaker 1: think people are trying to get a sense of is 369 00:21:35,600 --> 00:21:38,080 Speaker 1: they try to put into context what's happening over the 370 00:21:38,080 --> 00:21:40,200 Speaker 1: past couple of weeks with this coronavirus. Is trying to 371 00:21:40,359 --> 00:21:43,680 Speaker 1: put this crisis in context with maybe two thousand eight. 372 00:21:43,880 --> 00:21:47,760 Speaker 1: How do you compare the two Well, two thousand and 373 00:21:47,800 --> 00:21:49,800 Speaker 1: eight was of course a big bubble, it was a 374 00:21:49,960 --> 00:21:52,640 Speaker 1: it was a subprime mortgage. It was really a collapse 375 00:21:53,080 --> 00:21:56,840 Speaker 1: in the housing factor. Right now, what we're what we're 376 00:21:56,840 --> 00:21:59,400 Speaker 1: dealing with was an economy of the world which are 377 00:21:59,440 --> 00:22:02,760 Speaker 1: slow and slowing now. Of course the stock bowls are 378 00:22:02,760 --> 00:22:04,960 Speaker 1: going to claim it everything was just hunky dory until 379 00:22:05,000 --> 00:22:07,520 Speaker 1: the virus came along, but that it was that that's 380 00:22:07,560 --> 00:22:09,760 Speaker 1: not true. It really isn't. I don't care. I was 381 00:22:09,800 --> 00:22:15,159 Speaker 1: on tripley. I read your newsletter, all right, but but 382 00:22:15,320 --> 00:22:18,200 Speaker 1: you but you look at you look at job openings, 383 00:22:18,200 --> 00:22:20,480 Speaker 1: you look at ways increases and so on. They all 384 00:22:20,480 --> 00:22:24,480 Speaker 1: were really slipping. And of course China, China has been slipping. 385 00:22:24,520 --> 00:22:27,439 Speaker 1: So the point is when you take a slow and 386 00:22:27,600 --> 00:22:31,840 Speaker 1: slow slowing economy and then you create this shock of 387 00:22:31,920 --> 00:22:35,720 Speaker 1: the coronavirus, that's what tips it into recession in my view, 388 00:22:36,480 --> 00:22:38,560 Speaker 1: And is this kind of I guess we're past the 389 00:22:38,560 --> 00:22:43,200 Speaker 1: discussion point of maybe a v shaped recession because obviously 390 00:22:43,200 --> 00:22:47,080 Speaker 1: now it's appears to be more pandemic, this concern and globally, 391 00:22:47,280 --> 00:22:48,720 Speaker 1: how do you think this is gonna play out? Because 392 00:22:48,720 --> 00:22:51,840 Speaker 1: we're already starting to see China get back to work, um, 393 00:22:51,920 --> 00:22:53,840 Speaker 1: And so there was a two to three month type 394 00:22:53,840 --> 00:22:56,520 Speaker 1: of situation. Do you expect that kind of timing here 395 00:22:56,560 --> 00:22:58,680 Speaker 1: for the rest of the world. Well, I mean you 396 00:22:59,040 --> 00:23:01,400 Speaker 1: do have a lag situation. I mean, first of all, 397 00:23:01,480 --> 00:23:04,840 Speaker 1: China has a very different situation. They deny that it existed, 398 00:23:04,920 --> 00:23:07,280 Speaker 1: and then of course then they locked down everything. You 399 00:23:07,320 --> 00:23:09,480 Speaker 1: can do that with the top down society. You can't 400 00:23:09,480 --> 00:23:11,919 Speaker 1: do that in the West. So things are much more 401 00:23:11,960 --> 00:23:13,800 Speaker 1: stretched out, and they want them stretched out because they 402 00:23:13,840 --> 00:23:16,400 Speaker 1: haven't got enough hospital besify if they wanted the whole 403 00:23:16,440 --> 00:23:19,879 Speaker 1: thing to to to peek immediately, h but then to 404 00:23:20,000 --> 00:23:23,080 Speaker 1: re establish the supply change and you know, we're in 405 00:23:23,080 --> 00:23:25,520 Speaker 1: a change world now. I think that the globalists, the 406 00:23:26,160 --> 00:23:28,280 Speaker 1: Davos crowd, are on the way out. They have are 407 00:23:28,280 --> 00:23:30,520 Speaker 1: you looking at me like that? They have to see 408 00:23:30,680 --> 00:23:33,239 Speaker 1: we did that happen for years? Do I look like 409 00:23:33,280 --> 00:23:36,919 Speaker 1: the doors bow tie for you today? Because it was 410 00:23:37,280 --> 00:23:40,600 Speaker 1: man of you know, western Massachusetts. You know, it's a 411 00:23:40,680 --> 00:23:45,879 Speaker 1: it's a you know but but but the point is 412 00:23:45,920 --> 00:23:47,639 Speaker 1: that this is a nail on the coffin of the 413 00:23:47,680 --> 00:23:51,120 Speaker 1: of the globalists, the Davos crowd, and and it's really 414 00:23:51,160 --> 00:23:53,920 Speaker 1: a threat to globalization because now you say, you look 415 00:23:53,960 --> 00:23:56,040 Speaker 1: at drugs, where do we get your nary drugs? Will 416 00:23:56,040 --> 00:23:58,119 Speaker 1: get them from China? And you say, wait a minute, 417 00:23:58,200 --> 00:24:01,400 Speaker 1: this is this is uh, this is is not only 418 00:24:01,440 --> 00:24:05,280 Speaker 1: sell sufficiently, this is uh, this is defense protection, this 419 00:24:05,359 --> 00:24:08,320 Speaker 1: is this is national security. And I think we're gonna 420 00:24:08,359 --> 00:24:10,000 Speaker 1: have I think this is really going to change and 421 00:24:10,040 --> 00:24:12,560 Speaker 1: of course that's where Trump has been all along. He's 422 00:24:13,040 --> 00:24:16,760 Speaker 1: blamed everything on on immigration and imports, and it just 423 00:24:16,800 --> 00:24:19,560 Speaker 1: sliper reinforces that whole feeling. So I think we're in 424 00:24:19,560 --> 00:24:22,000 Speaker 1: a very very changed Worland. It's gonna take a long 425 00:24:22,040 --> 00:24:25,480 Speaker 1: time for this to get reorganized. Five minutes to the Guard, 426 00:24:25,640 --> 00:24:27,840 Speaker 1: five minutes to the Guard. So so do you are 427 00:24:27,840 --> 00:24:31,240 Speaker 1: you forecasting a recession in and if so, how deep 428 00:24:31,280 --> 00:24:32,960 Speaker 1: do you think it could be? Oh? Yeah, I think 429 00:24:33,000 --> 00:24:35,640 Speaker 1: we're probably you know, you never know where you are 430 00:24:35,760 --> 00:24:37,679 Speaker 1: until you get all the data and the revisions in, 431 00:24:37,760 --> 00:24:40,960 Speaker 1: but we probably are in a recession already, and I 432 00:24:41,000 --> 00:24:43,680 Speaker 1: think it could. I think it could be deep. Probably 433 00:24:43,720 --> 00:24:47,000 Speaker 1: not as deep as the as a sub primorias collapse 434 00:24:47,119 --> 00:24:50,760 Speaker 1: real GDP decline four points h two porcent, then maybe 435 00:24:50,800 --> 00:24:55,119 Speaker 1: it's more like a three percent decline, but it could. 436 00:24:55,160 --> 00:24:58,760 Speaker 1: It could be stretched out. Do we clear markets? Christian 437 00:24:58,800 --> 00:25:02,399 Speaker 1: Shoals was brilliant with City Group moments ago from just 438 00:25:02,480 --> 00:25:07,480 Speaker 1: the Great, great Great European economists by talking about socializing losses. 439 00:25:07,960 --> 00:25:11,439 Speaker 1: You and I remember Paul's too young to remember, Continental Illinois, 440 00:25:11,800 --> 00:25:15,920 Speaker 1: where we socialize losses over like what three cups of coffee, 441 00:25:16,280 --> 00:25:18,520 Speaker 1: they went under, We got over it, we moved on. 442 00:25:18,680 --> 00:25:21,760 Speaker 1: Was essentially we don't do that anymore, do we? Well, 443 00:25:22,720 --> 00:25:26,320 Speaker 1: maybe not, but relative to Japan, we're doing let's put it. Okay, 444 00:25:26,400 --> 00:25:28,679 Speaker 1: I'll take your point. Are you going to write a 445 00:25:28,720 --> 00:25:31,200 Speaker 1: newsletter this week when you're done take petting and bees 446 00:25:31,480 --> 00:25:34,320 Speaker 1: where you're gonna you're gonna talk about the Japanification of 447 00:25:34,359 --> 00:25:38,240 Speaker 1: Europe and now the Japanification of Missouri. Well, I I 448 00:25:39,000 --> 00:25:41,280 Speaker 1: think I think we're you know there, that is, that 449 00:25:41,400 --> 00:25:43,480 Speaker 1: is a good point. But but I, you know, I 450 00:25:44,280 --> 00:25:46,800 Speaker 1: mean the socialization of debt. Of course, if you if 451 00:25:46,840 --> 00:25:48,880 Speaker 1: you get Bernie Sanders in there, you don't worry about 452 00:25:48,880 --> 00:25:51,800 Speaker 1: it's all. It's all socialized. But but yeah, there's there's 453 00:25:51,800 --> 00:25:54,640 Speaker 1: probably more of that. But I think what's probably gonna 454 00:25:54,640 --> 00:25:58,440 Speaker 1: happen here is we're going to get massive fiscal stimulus. 455 00:25:58,800 --> 00:26:01,840 Speaker 1: You know, you're no longer have any impediment to uh 456 00:26:01,880 --> 00:26:05,760 Speaker 1: two devasits that one out that's called modern monetary theory. 457 00:26:05,840 --> 00:26:07,880 Speaker 1: You know, theory always follows facts. You get the facts, 458 00:26:07,920 --> 00:26:09,679 Speaker 1: then you get the theory and the ideas. You have 459 00:26:09,720 --> 00:26:12,439 Speaker 1: big devasits. Interest rates come down so it don't matter. 460 00:26:12,760 --> 00:26:16,760 Speaker 1: So that pediments, so we're gonna get I think big similars, 461 00:26:16,760 --> 00:26:18,199 Speaker 1: but it takes two or three years for that to 462 00:26:18,240 --> 00:26:21,480 Speaker 1: actually get spent. One more question, and then we got 463 00:26:21,520 --> 00:26:22,719 Speaker 1: to let you go because we had to get back 464 00:26:22,760 --> 00:26:24,920 Speaker 1: to the markets before Karen Moscow gives us the full 465 00:26:25,000 --> 00:26:27,080 Speaker 1: day to check and all that. And then Christine Laguard 466 00:26:27,480 --> 00:26:30,200 Speaker 1: in an historic moment, what would you suggest as the 467 00:26:30,240 --> 00:26:34,840 Speaker 1: best practice right now for Chairman Paul fade back in punt. 468 00:26:35,160 --> 00:26:37,359 Speaker 1: I don't think. I don't think that the FED makes 469 00:26:37,400 --> 00:26:42,159 Speaker 1: much difference. Lower interests, Donald Trump, lower interest rates are 470 00:26:42,200 --> 00:26:45,439 Speaker 1: not going to get supply change reestablished. They're not going 471 00:26:45,440 --> 00:26:48,400 Speaker 1: to get people getting out of their their their bomb 472 00:26:48,480 --> 00:26:51,200 Speaker 1: shelters and going out and spending. UM, I don't think 473 00:26:51,200 --> 00:26:54,879 Speaker 1: it makes much difference. I got about fourteen more questions 474 00:26:54,880 --> 00:26:57,240 Speaker 1: that were no more time, Gary showing thank you so much, 475 00:26:57,280 --> 00:26:59,800 Speaker 1: really honored to have you here on this historic day. 476 00:26:59,840 --> 00:27:03,040 Speaker 1: I'll get out on Twitter and LinkedIn, folks. I really 477 00:27:03,080 --> 00:27:06,040 Speaker 1: can't say enough about a seminal book of what when 478 00:27:06,400 --> 00:27:08,800 Speaker 1: that book come out forty two years ago, and you 479 00:27:08,840 --> 00:27:14,359 Speaker 1: know I was frost I think amous just from what 480 00:27:14,400 --> 00:27:17,920 Speaker 1: I remember anyways, the book deflation, I can't say enough 481 00:27:17,960 --> 00:27:20,840 Speaker 1: about it as a primer on good and bad deflation 482 00:27:20,920 --> 00:27:24,119 Speaker 1: and Paul you here Dr Schilling parts there that strange 483 00:27:24,119 --> 00:27:39,359 Speaker 1: word productivity. Watch you this moment with a VIC sixties 484 00:27:39,400 --> 00:27:44,920 Speaker 1: seven point seven six up fourteen big figures. Is Marcus Ashworth. 485 00:27:45,000 --> 00:27:46,720 Speaker 1: We had him on earlier in the hour and we're 486 00:27:46,720 --> 00:27:49,720 Speaker 1: honored that he could come back to us as well. Marcus, 487 00:27:49,760 --> 00:27:55,240 Speaker 1: what I see as a parsing of bankers helping the 488 00:27:55,320 --> 00:27:59,520 Speaker 1: credit markets in a credit liquidity even a solvency crisis, 489 00:28:00,160 --> 00:28:03,720 Speaker 1: and am I right ignoring the equity markets? Is that 490 00:28:03,760 --> 00:28:08,040 Speaker 1: how it works? Well? Funny to say that I'm just looking, 491 00:28:08,040 --> 00:28:11,040 Speaker 1: I'm listening to Christine Legard. I'm I'm actually slightly wondering 492 00:28:11,080 --> 00:28:14,600 Speaker 1: why I'm bothering. Um, I'm quite close to the window, 493 00:28:14,680 --> 00:28:16,920 Speaker 1: but thankful it's it's solid glass so I can't shot back. 494 00:28:17,000 --> 00:28:19,240 Speaker 1: But that was that we did that without the surveillance. 495 00:28:19,280 --> 00:28:21,720 Speaker 1: You have to thank PARSWENI and John Ferrell did that. 496 00:28:21,760 --> 00:28:25,520 Speaker 1: Be sure there's no open window with the top market 497 00:28:25,760 --> 00:28:29,200 Speaker 1: is just absolutely collapsing as um. You know, we were 498 00:28:29,240 --> 00:28:32,239 Speaker 1: listened to Christine Garteller's that she's going to use all 499 00:28:32,240 --> 00:28:33,840 Speaker 1: the flexibilities you can do the X and Y and 500 00:28:33,920 --> 00:28:36,760 Speaker 1: Z there, but no literally no one cares. Um. You 501 00:28:36,840 --> 00:28:39,200 Speaker 1: mentioned Deutsche Bank earlier. I just kind of mentioned that 502 00:28:39,240 --> 00:28:44,680 Speaker 1: they didn't call a perpetual bond yesterday. Um, that bond 503 00:28:44,760 --> 00:28:48,680 Speaker 1: is now training. It's below seventy cents in the dollar, 504 00:28:49,280 --> 00:28:51,560 Speaker 1: and that is an extraordinary thing if you think about 505 00:28:51,960 --> 00:28:54,960 Speaker 1: and it is a perpetual bond, and you know, not 506 00:28:55,040 --> 00:28:56,880 Speaker 1: read too much into it. It It was at ninety four 507 00:28:57,040 --> 00:29:00,000 Speaker 1: before they announced that decision. It's now down twenty five 508 00:29:00,120 --> 00:29:02,760 Speaker 1: points since then. So just to put it into context 509 00:29:02,800 --> 00:29:05,320 Speaker 1: of what's happening out there at the moment, you know, 510 00:29:05,360 --> 00:29:08,200 Speaker 1: we're worrying about liquidity and the treasure market, like seriously 511 00:29:08,240 --> 00:29:10,480 Speaker 1: worrying about whether or not there the US treasure and 512 00:29:10,520 --> 00:29:13,040 Speaker 1: the most liquid market in the world is actually fit 513 00:29:13,120 --> 00:29:17,680 Speaker 1: for purpose. And we've got a create clear decision with 514 00:29:17,720 --> 00:29:21,280 Speaker 1: the UFA Central Bank that rates can for. Marcus have 515 00:29:21,320 --> 00:29:24,760 Speaker 1: got to interrupt because this dovetails beautifully with two brilliant people, 516 00:29:24,800 --> 00:29:27,720 Speaker 1: Marcus Ashworth and a guy named Gartman down in Virginia. 517 00:29:27,760 --> 00:29:31,040 Speaker 1: Dennis Gartman brings up the S word, which is the 518 00:29:31,240 --> 00:29:36,920 Speaker 1: distance from liquidity to solvency. To make that distinction, Marcus Ashworth, 519 00:29:37,080 --> 00:29:40,560 Speaker 1: how do you define liquidity where we are now versus 520 00:29:40,600 --> 00:29:44,840 Speaker 1: worries of solvency, Well, it's it's a return of role 521 00:29:44,920 --> 00:29:47,479 Speaker 1: than return on the capital. And I think that's exactly 522 00:29:47,520 --> 00:29:50,080 Speaker 1: what we're looking at in certain entities now. It's certainly 523 00:29:50,200 --> 00:29:53,600 Speaker 1: very excellent companies in certain ways, and our trading literally 524 00:29:53,680 --> 00:29:57,920 Speaker 1: as if they are in distress and mildly trouble. Companies 525 00:29:57,960 --> 00:30:01,040 Speaker 1: are trading in in profit distress. And that's something which 526 00:30:01,120 --> 00:30:04,200 Speaker 1: is going to think an awful long time to sort out. 527 00:30:04,520 --> 00:30:06,520 Speaker 1: Look not to the two fun point here, Tom, The 528 00:30:06,520 --> 00:30:08,440 Speaker 1: simple point here is the world is looking now the 529 00:30:08,560 --> 00:30:12,080 Speaker 1: United States. You guys have got to do something big 530 00:30:12,240 --> 00:30:15,360 Speaker 1: and soon. I think market is expecting a said right cut, 531 00:30:15,440 --> 00:30:19,280 Speaker 1: possibly eaten today, another big one, and we really really 532 00:30:19,320 --> 00:30:21,880 Speaker 1: need something out of the White House with Congress Marcus. 533 00:30:21,880 --> 00:30:24,320 Speaker 1: Thank you so much again, Just very kind of you 534 00:30:24,400 --> 00:30:27,960 Speaker 1: to stay with us. Thanks for listening to the Bloomberg 535 00:30:28,040 --> 00:30:34,000 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 536 00:30:34,360 --> 00:30:38,560 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 537 00:30:38,600 --> 00:30:42,880 Speaker 1: Tom Keane Before the podcast, you can always catch us worldwide. 538 00:30:43,320 --> 00:30:44,400 Speaker 1: I'm Bloomberg Radio