WEBVTT - Surveillance: Deflation A Bigger Concern, Says Jones 0:00:09.880 --> 0:00:13.880 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jelie. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.159 Bloomberg dot Com, and of course on the bloom We 0:00:27.200 --> 0:00:30.479 saw the pictures of beaches open over the weekend and 0:00:30.520 --> 0:00:33.080 the beaches were packed, and I made the point in 0:00:33.120 --> 0:00:35.720 the last twenty four hours, and I think how that 0:00:35.840 --> 0:00:37.800 made you feel probably tell us a lot about what 0:00:37.840 --> 0:00:40.680 you think about this market. For many people, it triggered 0:00:40.680 --> 0:00:43.640 fears of a second way. For others, it fueled hopes 0:00:43.680 --> 0:00:47.640 that will reopen quicker and better than expected. To bring 0:00:47.720 --> 0:00:49.559 someone int who can give us more clarity on what 0:00:49.600 --> 0:00:51.760 he thinks on that situation. I'm really pleased to say 0:00:51.760 --> 0:00:54.560 that Judy Mamanuel joined us now of BT. I g Judy, 0:00:54.560 --> 0:00:57.840 and let's talk about that. Did the weekend's photographs, the 0:00:57.880 --> 0:01:01.120 pictures of people getting back to normal, did it trigger 0:01:01.400 --> 0:01:04.200 phase of a second wave or fuel hopes that we 0:01:04.240 --> 0:01:10.240 can normalize faster. I think it actually fueled both. John. Uh. 0:01:10.280 --> 0:01:13.760 You know, it's first of all, it's very clear that 0:01:13.840 --> 0:01:16.559 the last several months have made this a more emotional 0:01:16.600 --> 0:01:19.600 time than usual. But I think when when people saw 0:01:19.680 --> 0:01:24.560 those pictures, you had both you know, and again somewhat 0:01:24.600 --> 0:01:28.160 dependent on the state you live in, whether the cases 0:01:28.200 --> 0:01:31.319 are rising or falling, and how the progress is, but 0:01:31.480 --> 0:01:34.360 it really drew out emotions. And then if you look 0:01:34.360 --> 0:01:37.200 at the weather, it was reasonably nice across the country, 0:01:37.240 --> 0:01:40.720 which I think has sort of fed into the optimism 0:01:40.800 --> 0:01:44.600 of share prices in the last several days. All right, 0:01:44.640 --> 0:01:48.320 so let's talk Julianne about the emotion in stocks right now? 0:01:48.360 --> 0:01:52.560 What kind of reopening our equity investors pricing in one 0:01:52.600 --> 0:01:55.960 that is steady and contained and doesn't include a second 0:01:56.000 --> 0:01:58.920 wave or is it something that comes and fits and starts, 0:01:58.920 --> 0:02:02.960 but at least as a beginning, so it feels to 0:02:03.120 --> 0:02:06.639 us as if it's more a fits and starts type 0:02:06.680 --> 0:02:10.160 of issue. We've called this the potential for you know, 0:02:10.200 --> 0:02:13.120 everyone's using letters to describe the recovery. We call it 0:02:13.120 --> 0:02:16.880 a bathtub shape recovery, so that you know, you basically 0:02:16.919 --> 0:02:22.400 the US extended sort of into one, as it were. Um. 0:02:22.440 --> 0:02:26.280 But what really matters, I think, as much as the 0:02:26.360 --> 0:02:31.920 recovery itself, is what people are pricing in with regard 0:02:31.960 --> 0:02:35.800 to the medicine and where stocks are right now, uh 0:02:35.840 --> 0:02:39.639 to us, you know, basically indicates that people are believing 0:02:40.000 --> 0:02:43.959 that there will be some sort of vaccine not necessarily 0:02:44.000 --> 0:02:47.560 available for this fall, implying that there could be a 0:02:47.600 --> 0:02:51.360 second wave, but certainly for you know, the fall of 0:02:53.960 --> 0:02:56.519 the big challenge for so many people, most investors in 0:02:56.560 --> 0:02:59.359 the security market right now, Julian is finding that right 0:02:59.400 --> 0:03:04.200 balance elebrating your exposure to cyclicality to safety. How do 0:03:04.240 --> 0:03:06.280 you balance those two things right now? We just saw 0:03:06.320 --> 0:03:10.360 this classic risk one move yesterday with a huge cyclical till, 0:03:10.840 --> 0:03:13.600 the stay at home stocks, the likes of Netflix lower, 0:03:13.680 --> 0:03:17.160 the reopening names, the likes of Delta, the airlines ripping higher. 0:03:17.320 --> 0:03:19.560 How do you want to balance between the two going 0:03:19.560 --> 0:03:23.840 forward from here? Julian, So it's been our view and 0:03:23.880 --> 0:03:25.760 and we've looked at a lot of data going back 0:03:25.840 --> 0:03:28.680 the last thirty or forty years, and what we saw 0:03:28.880 --> 0:03:32.960 is with the remarkable consistency the stocks and sectors that 0:03:33.040 --> 0:03:36.440 were under performers during the bear market phase, once you 0:03:36.560 --> 0:03:39.640 transition to a ball market tended to be the leaders. 0:03:39.920 --> 0:03:42.640 Now we're not entirely sold on the fact that you've 0:03:42.760 --> 0:03:46.400 gone into a new ball market. Um, you know, we 0:03:46.480 --> 0:03:49.920 actually think that at around this level of three thousand 0:03:49.960 --> 0:03:52.280 and SPX, you probably need to do a bit of 0:03:52.320 --> 0:03:56.120 work time wise. But in order to sort of account 0:03:56.160 --> 0:03:58.920 for that risk, and we've seen this the last several weeks, 0:03:59.360 --> 0:04:03.560 is that people are rotating into small caps, into energy, 0:04:03.680 --> 0:04:07.600 into financials and taking some chips off the table, uh, 0:04:07.680 --> 0:04:10.240 from the shelter and play stocks. And we think that's 0:04:10.240 --> 0:04:14.320 a prudence strategy to keep to keep doing. Jenny, what 0:04:14.320 --> 0:04:16.680 would give you more confidence that that move was durable, 0:04:16.720 --> 0:04:19.039 that that rally was sustainable, that it's more than just 0:04:19.080 --> 0:04:25.920 a squeeze. Uh. If if a number of companies went 0:04:25.960 --> 0:04:30.599 into Phase three trials would be a first thing. A 0:04:30.720 --> 0:04:34.839 second thing is if Washington would listen to Chairman Powell, 0:04:35.080 --> 0:04:38.839 who has been adamantly for the last month insisting that 0:04:39.120 --> 0:04:42.800 more fiscal stimulus is necessary, particularly when you look at 0:04:42.920 --> 0:04:47.360 at small business USA. The time to put politics aside 0:04:47.560 --> 0:04:50.480 was a long time ago, and you know, from our 0:04:50.520 --> 0:04:53.520 point of view, they need to, you know, consider how 0:04:53.560 --> 0:04:56.560 that package is going to look before the fall. Um. 0:04:56.760 --> 0:05:00.520 Those are probably the biggest things for US. I was 0:05:00.560 --> 0:05:03.600 struck this morning by something that Bank of America Global 0:05:03.640 --> 0:05:06.800 Research put out they said, Hoping that either fundamentals will 0:05:06.800 --> 0:05:10.120 improve at record speed or that they simply don't matter 0:05:10.320 --> 0:05:13.800 is a real risk given markets inability to decouple from 0:05:13.800 --> 0:05:16.960 recessions in the last ninety years. I'm struck by what 0:05:17.000 --> 0:05:19.000 you said, Julie, and the fact that people are looking 0:05:19.000 --> 0:05:22.880 at the medicine perhaps not the underlying fundamentals. How much 0:05:23.200 --> 0:05:27.120 does the FOMO rally. Does this incredible boost risk assets 0:05:27.240 --> 0:05:30.760 right now decrease some of the pressure on policymakers to 0:05:30.800 --> 0:05:37.280 continue with the medicine? Well, I know, the medical aspect 0:05:37.360 --> 0:05:40.120 of it has got to be sort of full speed ahead. 0:05:40.160 --> 0:05:41.960 And I think if you look at the last couple 0:05:41.960 --> 0:05:46.640 of days, several other companies announcing that they felt good about, 0:05:46.800 --> 0:05:49.880 you know, moving into face. No excuse me, Juliet, when 0:05:49.880 --> 0:05:53.599 I say medicine, I'm talking about the fiscal medicine, the 0:05:53.640 --> 0:05:59.320 idea of policy coming out of Washington's getting together. Yes, yeah, Well, 0:05:59.440 --> 0:06:02.560 so you know this is an election here, Lisa, and 0:06:02.680 --> 0:06:05.960 you certainly have a lull right now, given the fact 0:06:05.960 --> 0:06:08.840 that the equity markets have moved where they have. But 0:06:09.400 --> 0:06:12.520 another aspect of it is that certainly what we've seen 0:06:12.560 --> 0:06:15.159 in the last several weeks, is it ratcheting up of 0:06:15.240 --> 0:06:18.520 pressure with regard to China, and that is something that 0:06:18.680 --> 0:06:20.920 sort of, you know, is one of the caps in 0:06:21.160 --> 0:06:24.839 the marketplace as well. We actually think that as the 0:06:24.960 --> 0:06:29.840 data continues to it's not going to improve dramatically, you know. Certainly, 0:06:29.960 --> 0:06:33.640 Jamie Diamond coming out and saying that a rebound, a 0:06:33.720 --> 0:06:38.680 stronger rebound is looking more likely, is encouraging. But the 0:06:38.680 --> 0:06:42.279 fact is is that the employment situation and small business 0:06:42.279 --> 0:06:46.320 America is still very much you know, at risk. And 0:06:46.400 --> 0:06:48.839 the closer you get to the fall and the closer 0:06:48.880 --> 0:06:51.720 you get to the election, the more imperative is going 0:06:51.800 --> 0:06:55.360 to be forgiven that those are the constituents who are 0:06:55.360 --> 0:06:58.279 going to be casting ballot um, you know, to to 0:06:58.400 --> 0:07:02.280 really do a bit more to get us through to 0:07:02.480 --> 0:07:06.520 where we're at the point next year where you actually 0:07:06.600 --> 0:07:11.320 do get a more durable recovery. You mentioned China, and 0:07:11.360 --> 0:07:14.000 this is a key ingredient to markets right now. So far, 0:07:14.120 --> 0:07:17.040 I can find a little evidence of worry that this 0:07:17.240 --> 0:07:20.200 escalation and tensions between the US and China is leading 0:07:20.240 --> 0:07:23.240 to any dampening in the risk on trade. Do you 0:07:23.280 --> 0:07:26.840 think that right now investors are overly complacent that we're 0:07:26.840 --> 0:07:28.720 not going to see a ramping up of tensions that 0:07:28.800 --> 0:07:31.800 will have a drag on global growth, especially heading into 0:07:31.800 --> 0:07:36.840 the election. Well, I think it's it's it's probably more 0:07:37.000 --> 0:07:40.680 bluster heading into the election. Um. But if you actually 0:07:40.680 --> 0:07:43.120 look at the options market, which as you know, we do, 0:07:43.720 --> 0:07:47.840 what you've seen again is that the the hedging for 0:07:47.920 --> 0:07:51.760 the term just past the election has become cautionary. Again. 0:07:51.800 --> 0:07:56.160 Downside puts have become very expensive relative to upside calls, 0:07:56.400 --> 0:07:59.200 which tells you that the risk, particularly with regard to 0:07:59.320 --> 0:08:04.400 your polity, is more an issue. And we think that's applicable, 0:08:04.520 --> 0:08:09.920 you know, regardless of who wins the election in November. Julian, 0:08:09.960 --> 0:08:11.800 always great to catch up with you send our best 0:08:11.800 --> 0:08:13.720 of the family. Weren't you brilliant to hear from your 0:08:13.760 --> 0:08:19.200 Julian and many were there of BT I g to 0:08:19.240 --> 0:08:21.480 talk about the bond market. Let's bring in a good 0:08:21.480 --> 0:08:24.040 friend of this program, Kathy Jones of SHOs Schwab. Kathy, 0:08:24.120 --> 0:08:27.040 fantastic to have you with us. I've been thinking about 0:08:27.120 --> 0:08:29.320 what I know you've been thinking about, what would create 0:08:29.360 --> 0:08:32.000 the most amount of pain in this market for the 0:08:32.040 --> 0:08:36.680 most amount of people. Inflation? How underpriced is inflation coming 0:08:36.720 --> 0:08:41.160 out of this as we reopened, Kathy. Oh, it's really underpriced. 0:08:41.200 --> 0:08:43.240 And you know, let me be clear, we're not looking 0:08:43.360 --> 0:08:45.560 for a lot of inflation. We have to get through 0:08:45.600 --> 0:08:49.320 the deflation before we get to worrying about the inflation. 0:08:49.800 --> 0:08:52.760 But when you look at the way the markets priced 0:08:52.840 --> 0:08:56.760 right now, there's really no there's no expectation built into 0:08:56.800 --> 0:09:00.400 the bond market of inflation, and so it's a huge 0:09:00.400 --> 0:09:03.160 concern that keeps coming up with our clients, even though 0:09:03.320 --> 0:09:05.839 we think it's a couple of years down the road, 0:09:05.880 --> 0:09:09.079 if it's out there at all. It just seems to 0:09:09.120 --> 0:09:11.840 be some confidence, much more so about the front end 0:09:11.880 --> 0:09:13.559 of any yield curve at the moment, Cathy, And for 0:09:13.640 --> 0:09:16.439 good reason as well. It's really anchored central banks are 0:09:16.440 --> 0:09:18.240 just going to sit there for a long long time. 0:09:18.400 --> 0:09:20.360 It seems to be a lot more uncertainty about the 0:09:20.400 --> 0:09:23.400 longer end have a ten year and out response to 0:09:23.440 --> 0:09:26.040 any pick up in inflation, Cathy, What are your thoughts 0:09:26.040 --> 0:09:28.400 on that at the moment, particularly specifically here in the 0:09:28.400 --> 0:09:34.240 treasury market. Yeah, I think that there is the expectation 0:09:34.360 --> 0:09:37.120 that a worst case scenario, the Fed goes to yield 0:09:37.120 --> 0:09:41.200 curve control, and that keeps the short intermediate term at 0:09:41.280 --> 0:09:44.560 least anchored, and that they would take whatever moves they 0:09:44.559 --> 0:09:47.680 would need to take in order to anchor the long 0:09:47.800 --> 0:09:50.000 end of the curve as well as much as they 0:09:50.080 --> 0:09:53.720 did in that post World War two era. UM. But 0:09:53.800 --> 0:09:55.600 I do think that, you know, for people who are 0:09:55.640 --> 0:09:59.160 worried about inflation or at this this point, the cheapest 0:09:59.200 --> 0:10:03.400 way to hedge it is probably tips. Um There there's 0:10:03.559 --> 0:10:07.360 almost no yield. In some cases they have negative yields, 0:10:07.400 --> 0:10:10.520 but um in terms of hedging tail rift tips are 0:10:10.520 --> 0:10:13.560 a very efficient way to do that. And we do 0:10:13.679 --> 0:10:16.760 see people kind of barbelling their portfolio, so they're buying 0:10:16.840 --> 0:10:19.679 kind of short term credit and long term tips as 0:10:19.760 --> 0:10:24.320 a way to play both ends of the spectrum. I'm 0:10:24.320 --> 0:10:27.000 struggling to understand that where the inflation would come from. 0:10:27.000 --> 0:10:30.160 People talking about how money printing in the past hasn't 0:10:30.240 --> 0:10:33.000 led to inflation. Certainly we didn't see it after two 0:10:33.240 --> 0:10:36.680 and eight. I do wonder though, whether the trade issues 0:10:36.720 --> 0:10:39.360 and the deglobalization that we were talking about early on 0:10:39.400 --> 0:10:43.559 the program will lead to inflation. The idea that overseas 0:10:43.760 --> 0:10:46.760 production was cheaper, you bring it back on shore, it 0:10:46.800 --> 0:10:49.520 gets more expensive. How much is that driving the sort 0:10:49.559 --> 0:10:52.920 of barbel idea that you have. There's quite a bit 0:10:52.960 --> 0:10:55.800 of thought about that. Um, I'm a little bit skeptical 0:10:55.880 --> 0:11:00.480 that companies are really going to reshore that much because 0:11:01.080 --> 0:11:03.640 it's still going to be a big leap in terms 0:11:03.640 --> 0:11:06.520 of their costs, and can they really pass those costs 0:11:06.600 --> 0:11:11.359 on to consumers and um, and not just hurt their margins. 0:11:11.360 --> 0:11:15.080 So I could see that you'll see some movement of 0:11:15.520 --> 0:11:18.920 concentration out of China, as we've already seen, but a 0:11:18.920 --> 0:11:21.480 lot of it is still going to places that the 0:11:21.640 --> 0:11:24.680 labor costs are cheaper and you still have sort of 0:11:24.679 --> 0:11:28.920 this access to global supply chains a Latin America, obviously 0:11:29.200 --> 0:11:32.439 the rest of Southeast Asia. So you know, if it's 0:11:32.440 --> 0:11:34.760 going to happen, if the globalization is going to happen, 0:11:34.800 --> 0:11:37.559 I think it's a long term process, just a globalization 0:11:37.800 --> 0:11:41.160 was so, Um, we're just not seeing the kind of 0:11:41.240 --> 0:11:45.280 inputs to inflation that I think will produce it in 0:11:45.320 --> 0:11:49.600 the next year two or probably even three. But at 0:11:49.640 --> 0:11:51.959 some point down the road, you know, there's always a 0:11:52.000 --> 0:11:55.559 possibility it could materialize, and I frankly think central banks 0:11:55.559 --> 0:11:58.280 would welcome it, right, they'd be very tolerant of an 0:11:58.320 --> 0:12:02.120 overshoot on inflation at this age of the game. Well, 0:12:02.160 --> 0:12:04.440 that's the point, isn't it, Kathy, that'd be tolerant of it. 0:12:04.679 --> 0:12:07.520 Let's talk about that reaction function, how they would respond 0:12:07.559 --> 0:12:09.600 to any of this. Do you think they'd respond at all? 0:12:11.360 --> 0:12:14.120 Not initially, um, you know, if you think that the 0:12:14.320 --> 0:12:17.600 safe for the FED. They've undershot their inflation target for 0:12:17.800 --> 0:12:20.800 I don't know how many years now. UM. We've heard 0:12:20.880 --> 0:12:23.640 from Powell that you know, the emphasis on this is 0:12:23.679 --> 0:12:27.040 a symmetric target at two percent on the core PCE 0:12:27.160 --> 0:12:30.760 or really whatever measure UM you want to use. And 0:12:30.840 --> 0:12:34.200 so I think they would be quite tolerant if UM, 0:12:34.800 --> 0:12:37.719 because I think the central banks believe the inflation is 0:12:37.760 --> 0:12:40.319 the problem they can solve. They've done this in the past, 0:12:40.400 --> 0:12:43.520 they know what it takes, UM, and so this is 0:12:43.559 --> 0:12:46.320 not their big concern. That deflation is the bigger concern. 0:12:46.400 --> 0:12:48.520 So I think they would let it run for a 0:12:48.559 --> 0:12:51.040 bit as long as it was a mild acceleration and 0:12:51.120 --> 0:12:55.800 not a runaway acceleration. Let's talk about another problem that 0:12:55.800 --> 0:12:58.120 the federers are of another central banks can't solve, or 0:12:58.160 --> 0:13:00.640 perhaps have been unwilling to solve, and that's bankruptcy. And 0:13:00.679 --> 0:13:04.040 John and I were talking about this earlier, this idea 0:13:04.160 --> 0:13:07.680 that is there any discomfort emerging from f O m 0:13:07.679 --> 0:13:11.240 C members given the fact that we're seeing a rally 0:13:11.400 --> 0:13:14.520 in the riskiest debt this month, which is actually outperforming 0:13:14.559 --> 0:13:18.280 safer notes as investors get more complacent that they'll be 0:13:18.320 --> 0:13:21.840 back stopped by the FED and fiscal stimulus. I'm wondering 0:13:22.040 --> 0:13:25.520 how much that disconnect has led to elevated prices. In 0:13:25.559 --> 0:13:27.400 other words, how much pain are people going to feel 0:13:27.400 --> 0:13:31.280 who are buying triple C bonds right now. Yeah, it's 0:13:31.280 --> 0:13:33.880 been quite remarkable to me how people have sort of 0:13:33.920 --> 0:13:37.600 piled in UM because of the perception that the FED 0:13:37.679 --> 0:13:40.040 is going to buy the whole high heal bond market. 0:13:40.160 --> 0:13:42.240 I mean, if you if you listen to what they 0:13:42.280 --> 0:13:44.360 said and look at the term sheet, they're not buying 0:13:44.360 --> 0:13:47.800 the entire market. I can see that spreads were so 0:13:47.880 --> 0:13:51.480 elevated that they needed to come down that. I think 0:13:51.480 --> 0:13:54.160 that that makes sense. Just the provision of liquidity help that. 0:13:54.920 --> 0:13:57.319 But you know, they've been very specific about buying some 0:13:57.480 --> 0:14:01.440 fallen angels UM a small all amount, a limited amount 0:14:01.480 --> 0:14:05.320 of e TF. But you know, people are trained now. 0:14:05.400 --> 0:14:08.480 I think there's just conditioned now if the fet is 0:14:08.520 --> 0:14:11.079 buying it. They're buying it, and the perception is that 0:14:11.120 --> 0:14:14.080 the FETE is supporting the high yield market broadly speaking, 0:14:14.520 --> 0:14:16.480 and a lot of people have running. If you look 0:14:16.520 --> 0:14:20.160 at the assets under management and some of the bigger 0:14:20.200 --> 0:14:24.880 e t F they've jumped in the last couple of weeks, 0:14:24.920 --> 0:14:29.280 so clearly a lot of people are chasing the trade. Yeah, 0:14:29.320 --> 0:14:31.600 it's been shocking to me. I've been watching h y G, 0:14:31.840 --> 0:14:34.760 the Black Rock High Old bondy TF. It's seen nearly 0:14:34.880 --> 0:14:37.800 two billion dollars of the influence over the past week, 0:14:38.120 --> 0:14:40.680 more than five billion dollars so far year. Today, I'm 0:14:40.680 --> 0:14:43.040 just wondering, are you selling this? Are you basically saying 0:14:43.360 --> 0:14:46.080 we're out, We're done. We think you guys are overpricing 0:14:46.080 --> 0:14:48.480 the FED put and right now we just want to 0:14:48.560 --> 0:14:52.360 hide out an investment grade and treasuries well, we definitely 0:14:52.400 --> 0:14:56.440 prefer investment grade UM and at the shorter end, you know, 0:14:56.480 --> 0:14:58.640 one to five years, which is what the FET is 0:14:58.680 --> 0:15:02.520 buying on. On the higher we're neutral, but we're being 0:15:02.560 --> 0:15:06.000 really cautious because a lot of these companies won't qualify 0:15:06.160 --> 0:15:09.520 for the FENS program. UM. We do look for defaults 0:15:09.600 --> 0:15:12.120 to pick up maybe and as high as ten percent 0:15:13.000 --> 0:15:16.240 in the speculative default, and we think recovery rates are 0:15:16.280 --> 0:15:19.720 going to be low so UM, particularly with you know, 0:15:19.760 --> 0:15:22.760 the triple cs and the very low rated bonds UM, 0:15:22.840 --> 0:15:26.920 we would definitely be out of that me, Lisa, this 0:15:27.000 --> 0:15:28.480 is the pain trade, isn't it? And we saw it 0:15:28.560 --> 0:15:30.800 play out in Europe over the last ten years. Once 0:15:30.800 --> 0:15:33.320 the central bank gets involved in an asset class, it's 0:15:33.360 --> 0:15:36.800 totally divorced from fundamentals. You can get spreads grinding tighter 0:15:37.320 --> 0:15:39.520 even as the economy hardly picks up. We saw that 0:15:39.560 --> 0:15:42.120 over the last ten years, and I do wonder, Lisa, 0:15:42.160 --> 0:15:44.760 whether that is the playbook this time around, or whether 0:15:44.800 --> 0:15:51.080 things are somewhat different. You can't have fed money preventing bankruptcies. 0:15:51.200 --> 0:15:54.400 There's only so long that asset prices can remain elevated 0:15:54.400 --> 0:15:57.320 at a time when these companies are getting no revenues. 0:15:57.360 --> 0:15:59.720 That's what I'm struggling with, and the idea that some 0:15:59.760 --> 0:16:04.280 of these companies are putting up islands and cruise ships 0:16:04.280 --> 0:16:06.600 in order to raise more money and stay alive. At 0:16:06.600 --> 0:16:09.280 a certain point the time runs out, which I guess, Cathy, 0:16:09.360 --> 0:16:12.280 that's my question. What's sort of the tipping point at 0:16:12.280 --> 0:16:15.680 which these companies become insolvent and no amount of fedbackstop 0:16:15.720 --> 0:16:19.640 can help them. Yeah, I think it's coming, you know, 0:16:19.680 --> 0:16:23.160 I think it will probably materialize later this year. Um, 0:16:23.160 --> 0:16:25.560 we're not seeing the revenue pickup that a lot of 0:16:25.600 --> 0:16:28.960 these companies need. A lot have been living on rolling 0:16:29.000 --> 0:16:31.680 over short term debt in the bank loan market, and 0:16:31.720 --> 0:16:36.400 that that market is has deteriorated pretty quickly. So I 0:16:36.440 --> 0:16:38.760 think it's coming later this year. For the really low 0:16:38.840 --> 0:16:41.960 rated credits. This has been the initial kind of euphoric 0:16:42.120 --> 0:16:47.600 move of recovery off of you know, spreads at over treasuries, 0:16:47.680 --> 0:16:49.720 and now they've come down to something that's you know, 0:16:50.280 --> 0:16:55.200 closer to realistic, I guess, given the backdrop. But even um, 0:16:55.240 --> 0:16:58.800 even if if the whole country opens up, and even 0:16:58.840 --> 0:17:00.880 if you know, we start to see recovery, I think 0:17:00.960 --> 0:17:03.000 some of those companies just can't make it. Their debts 0:17:03.040 --> 0:17:06.080 are too high. They're not going to recover um to 0:17:06.200 --> 0:17:10.480 profitability anytime soon. And I think their leverage ratios just 0:17:10.600 --> 0:17:13.919 got two out of control. So I think it's coming 0:17:14.000 --> 0:17:18.280 probably late this year. Cathy Jones will continue the conversation, 0:17:18.320 --> 0:17:25.239 no doubt. Kathy from Cha Shwa Lisa, just a lot 0:17:25.280 --> 0:17:27.359 of optimism over the last couple of days relative to 0:17:27.359 --> 0:17:29.679 where we were several weeks ago about how quickly we 0:17:29.760 --> 0:17:32.560 can reopen, but not only that, how quickly we can 0:17:32.560 --> 0:17:35.960 get back to normal. Yeah, if you look at the 0:17:36.000 --> 0:17:39.560 pictures over the weekend, the pandemics over John, that's apparent 0:17:39.680 --> 0:17:43.040 from the Lake of Ozarks. Apparently as everybody gathers in 0:17:43.359 --> 0:17:46.919 and crowds pools. My question is, are we going to 0:17:47.040 --> 0:17:50.199 see a second wave of infection in two weeks that 0:17:50.240 --> 0:17:52.320 will reverse what we've seen, or is this going to 0:17:52.440 --> 0:17:54.639 give fuel to people who think that perhaps some of 0:17:54.680 --> 0:17:57.840 the shutdowns have been overdone, giving more of a lift 0:17:58.040 --> 0:18:01.040 to equity market. It's a big question mark and ultimately 0:18:01.640 --> 0:18:04.040 it will be one of the determining factors of what's 0:18:04.040 --> 0:18:08.679 to come this summer. Let's have that conversation on reopening 0:18:08.720 --> 0:18:11.119 the conversation of the Morning on that very topic. I'm 0:18:11.160 --> 0:18:13.320 pleased to say that the fifty four mayor of Boston 0:18:13.400 --> 0:18:16.639 joins us now. Ma't Marty Welsh, Mr Maynor, fantastic to 0:18:16.640 --> 0:18:18.560 have you with us on the program. I'd love to 0:18:18.560 --> 0:18:21.000 get your thoughts on this. There is so much discussion 0:18:21.000 --> 0:18:23.160 at the federal level, how quickly we should open up 0:18:23.320 --> 0:18:25.240 At the state level, can you talk to us about 0:18:25.240 --> 0:18:28.239 the city level why Boston needs to go at its 0:18:28.280 --> 0:18:30.760 own pace. I mean, first of all, thank you for 0:18:30.800 --> 0:18:34.040 having me this morning. Or secondly, I think that Boston 0:18:34.119 --> 0:18:36.800 is a very densely populated city. We're about seven hundred 0:18:36.840 --> 0:18:40.960 thousand people and about forty seven square miles. Every day 0:18:41.320 --> 0:18:44.560 when we're in normal circumstances, are city doubles in size 0:18:44.880 --> 0:18:47.040 for people coming in to go to work here in Boston. 0:18:47.440 --> 0:18:49.840 And during college season, we had another hundred and fifty 0:18:49.880 --> 0:18:52.720 to two hundred thousand college students in our city, graduate 0:18:52.760 --> 0:18:55.359 students that are learning here in the city of Boston. 0:18:55.560 --> 0:18:57.920 So what I want to make sure is is we reopen, 0:18:58.000 --> 0:19:01.159 we get it right. I'm and about a second surge, 0:19:01.640 --> 0:19:03.959 and I don't think that our economy and necessarily can 0:19:04.000 --> 0:19:06.520 handle a second surge and a complete shutdown. So I 0:19:06.560 --> 0:19:08.760 think it's very important that as we as we reopened, 0:19:08.760 --> 0:19:12.200 whether it's office buildings or manufacturing or whatever it might be, 0:19:12.280 --> 0:19:14.800 that we do it in a in a very thoughtful, 0:19:15.080 --> 0:19:18.240 methodical approach, so that we so we don't have to 0:19:18.720 --> 0:19:22.680 in the event of a second surge. Again. Well, it's 0:19:22.680 --> 0:19:24.720 just in terms of the education system. And you've touched 0:19:24.760 --> 0:19:27.200 on that, let's expand on it. What's the city prepared 0:19:27.200 --> 0:19:29.159 for just in terms of how quickly we can get 0:19:29.200 --> 0:19:33.600 the schools reopened. Well, the colleges and universities are making 0:19:33.720 --> 0:19:36.400 having conversations now. Uh, some of them have already made 0:19:36.440 --> 0:19:38.640 statements that they'll be back in August, and I hope 0:19:38.680 --> 0:19:41.920 they are. Uh. They're talking about doing massive testing and 0:19:42.040 --> 0:19:46.080 tracing and also potential ices self isolation and if if 0:19:46.080 --> 0:19:48.600 somebody tests positive. You know, it's a big part of 0:19:48.600 --> 0:19:50.440 our economy here in the city of Boston. It's a 0:19:50.520 --> 0:19:53.040 large employer in these college students that come in and 0:19:53.080 --> 0:19:55.000 spend a lot of money in our city. They in 0:19:55.040 --> 0:19:58.160 our restaurants, they shop on our store. So it would 0:19:58.200 --> 0:20:00.560 be great to see schools open. But the way that's 0:20:00.600 --> 0:20:03.640 really important for me anyways, Mayor, is to make sure 0:20:03.720 --> 0:20:05.560 that they're healthy as well. I mean this this is 0:20:05.600 --> 0:20:08.960 in health, health care, adversity, economy. This all has to 0:20:09.000 --> 0:20:12.000 be together. Public health is vitally employed. Right now as 0:20:12.000 --> 0:20:14.600 you move forward, Uh, you know, nearly over three hundred 0:20:14.600 --> 0:20:18.000 thousand people have lost their life. Assume me three three 0:20:18.160 --> 0:20:21.080 thousand people lost life in the world A hundred hundred 0:20:21.080 --> 0:20:23.640 thou in the United States of America, and quite honestly, 0:20:23.880 --> 0:20:25.960 if we didn't take all the precautions that we did 0:20:26.200 --> 0:20:28.359 over the last three months, that number would be five greater. 0:20:28.880 --> 0:20:32.480 In Massachusetts, were the fourth highest state for the number 0:20:32.480 --> 0:20:34.439 of cases, in the third highest state for deaths. And 0:20:34.960 --> 0:20:36.840 that's not where you want to be. And it's important 0:20:36.840 --> 0:20:39.920 that we take continue to take this serious and now 0:20:40.040 --> 0:20:43.600 is not the time to let our guy down. Mr Mayer. 0:20:43.640 --> 0:20:48.280 I'm wondering whether reopening plans can be determined locally, city 0:20:48.280 --> 0:20:50.800 by city, or whether in order to be effective they 0:20:50.880 --> 0:20:54.320 really have to be federally coordinated. I don't think they 0:20:54.320 --> 0:20:57.679 did federally coordinated. I think they have to be state coordinated, 0:20:57.720 --> 0:21:00.160 and I think they have to be almost in in 0:21:00.280 --> 0:21:02.439 massagus as we usually go by cities and towns. But 0:21:02.640 --> 0:21:05.560 if you can do about county uh in Massachusetts, the 0:21:05.600 --> 0:21:08.200 two of the highest counties that have the highest number 0:21:08.200 --> 0:21:10.840 of cases of Middlesex County in southak County, we're in 0:21:10.840 --> 0:21:14.040 southa County and Middlesexes next door. If there's an opportunity 0:21:14.080 --> 0:21:15.920 for us to look at kind of the approach of 0:21:15.960 --> 0:21:18.239 New York was looking at letting some counties open up 0:21:18.920 --> 0:21:21.959 ease and restrictions. You have rural and and and uh 0:21:22.359 --> 0:21:26.320 and in suburban areas, uh you know, uh so, so 0:21:26.359 --> 0:21:29.920 it really is important to think about the thought fulm 0:21:29.920 --> 0:21:32.760 when you think about reopening. You can't just blankely reopen 0:21:32.800 --> 0:21:36.520 across the country. You know, Massachusetts, Michigan, New York, New Jersey, 0:21:36.560 --> 0:21:39.040 the highest states. What we're dealing with a different The 0:21:39.160 --> 0:21:42.040 challenges in our states are a lot different than than Wyoming, 0:21:42.119 --> 0:21:44.879 North Dakota, South Dakota, and and and and you know 0:21:44.920 --> 0:21:49.639 maybe uh Louisville, so Kentucky, I should say. So, I 0:21:49.720 --> 0:21:51.560 don't think it can be a state by state. It 0:21:51.600 --> 0:21:55.160 has to be um can't. It can't be by the country. 0:21:55.240 --> 0:21:56.760 Should say, it has to be state by state. And 0:21:56.760 --> 0:21:59.560 we're also sharing best practices. So what I watched is 0:21:59.600 --> 0:22:01.439 going on in Seattle. I watched going in l a 0:22:01.520 --> 0:22:04.760 and New York, in Houston and Austin places like that. 0:22:05.000 --> 0:22:08.000