1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,319 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. We 5 00:00:27,440 --> 00:00:29,840 Speaker 1: begin this morning with the President of the United States 6 00:00:29,880 --> 00:00:33,280 Speaker 1: saying the following. Will some people be affected, yes, will 7 00:00:33,320 --> 00:00:36,199 Speaker 1: some people be affected badly? Yes, But we have to 8 00:00:36,240 --> 00:00:38,599 Speaker 1: get our country open, and we have to get it 9 00:00:38,680 --> 00:00:42,000 Speaker 1: open soon. Let's turn out to David Balen, a city 10 00:00:42,000 --> 00:00:45,480 Speaker 1: private bank, the chief investment officer. David, help me out 11 00:00:45,479 --> 00:00:48,400 Speaker 1: with this one. As we reopen, is there a reopening 12 00:00:48,520 --> 00:00:53,800 Speaker 1: rotation in this market? If so, what does it look like? Well, 13 00:00:53,880 --> 00:00:56,760 Speaker 1: in terms of what we're what we're expecting to see, is, 14 00:00:57,000 --> 00:00:59,600 Speaker 1: you know, a reopening that is very much focused on 15 00:00:59,680 --> 00:01:03,160 Speaker 1: two big trends. One is to refill the supply lines 16 00:01:03,280 --> 00:01:06,200 Speaker 1: and you know of the for all industrial products and 17 00:01:06,240 --> 00:01:10,479 Speaker 1: capital expenditures in the second one associated with the consumer um. 18 00:01:10,520 --> 00:01:13,120 Speaker 1: We expected that reopening is right. This quarter is all 19 00:01:13,160 --> 00:01:16,479 Speaker 1: about refilling that pipeline and then obviously the rebound will 20 00:01:16,480 --> 00:01:19,119 Speaker 1: take place in the numbers in Q three and as 21 00:01:19,120 --> 00:01:21,720 Speaker 1: you've been talking about on the show today, we're going 22 00:01:21,800 --> 00:01:24,560 Speaker 1: to continue to see these incredibly bad numbers. And what 23 00:01:24,640 --> 00:01:26,520 Speaker 1: we're gonna need to see on the opposite side of 24 00:01:26,520 --> 00:01:29,360 Speaker 1: this is an enormous amount of re employment. Of the 25 00:01:29,400 --> 00:01:31,640 Speaker 1: thirty odd million people, let's say in the United States 26 00:01:31,680 --> 00:01:34,039 Speaker 1: who are unemployed, we would want to see half of 27 00:01:34,080 --> 00:01:37,360 Speaker 1: those people are more reemployed as we entered Q three. 28 00:01:37,720 --> 00:01:39,840 Speaker 1: And if that's the case, then you can really have 29 00:01:39,920 --> 00:01:42,959 Speaker 1: your meeting the market expectations here. So to me, that's 30 00:01:43,000 --> 00:01:44,920 Speaker 1: what we're gonna be looking for, because that is what's 31 00:01:44,920 --> 00:01:48,840 Speaker 1: going to drive, in my mind, the the the economic power, 32 00:01:48,920 --> 00:01:52,040 Speaker 1: the recovery that will give people confidence that the numbers 33 00:01:52,040 --> 00:01:54,320 Speaker 1: in the markets today are real. How far is the 34 00:01:54,400 --> 00:01:57,360 Speaker 1: stock market looking out right now? The textbook tells me 35 00:01:57,440 --> 00:02:01,000 Speaker 1: six months. We understand that's a guestimate, David. How far 36 00:02:01,080 --> 00:02:04,600 Speaker 1: do you think the stock market is guessing out? Yeah? 37 00:02:04,640 --> 00:02:06,760 Speaker 1: I think that the stock market Tom has to be 38 00:02:06,800 --> 00:02:09,720 Speaker 1: guessing out now about a year. And here's why. First 39 00:02:09,720 --> 00:02:11,359 Speaker 1: of all, you see that nobody is willing to make 40 00:02:11,360 --> 00:02:13,600 Speaker 1: really good predictions about what's actually going to happen quarter 41 00:02:13,680 --> 00:02:16,280 Speaker 1: to quarter for all good reasons. These numbers are unlike 42 00:02:16,320 --> 00:02:19,400 Speaker 1: anything that we've ever seen, including in the Great Financial Crisis. 43 00:02:19,800 --> 00:02:21,960 Speaker 1: So what we need to see as a recovery right 44 00:02:21,960 --> 00:02:24,919 Speaker 1: where we get through this trough and then we actually 45 00:02:25,000 --> 00:02:28,400 Speaker 1: experience the type of earnings that you fore and we 46 00:02:28,440 --> 00:02:31,519 Speaker 1: get some clarity on that, and we're expecting a fifty 47 00:02:31,560 --> 00:02:35,400 Speaker 1: so a very sharp decline you know about decline in 48 00:02:35,480 --> 00:02:38,160 Speaker 1: EPs for the SMP and half of that would be 49 00:02:38,200 --> 00:02:42,799 Speaker 1: captured back in. So once we get into Q three 50 00:02:42,919 --> 00:02:45,320 Speaker 1: and we see the recovery, people will need to believe 51 00:02:45,360 --> 00:02:49,280 Speaker 1: that what they see in Q three will be possible 52 00:02:49,600 --> 00:02:51,600 Speaker 1: and that will be the key determinant as to whether 53 00:02:51,639 --> 00:02:54,480 Speaker 1: or not this market can maintain the types of valuations 54 00:02:54,520 --> 00:02:58,040 Speaker 1: that are being projected when within the elasticities on any 55 00:02:58,080 --> 00:03:03,359 Speaker 1: given big companies UH income statement. What does furlow mean? 56 00:03:03,400 --> 00:03:05,800 Speaker 1: Do you? I mean, John? I mean you, you're up 57 00:03:05,840 --> 00:03:08,600 Speaker 1: to speed on these headlines better than me. British Airways 58 00:03:08,680 --> 00:03:11,840 Speaker 1: is furlowing? You know, general mode as a CFO is 59 00:03:11,880 --> 00:03:13,639 Speaker 1: going to be on with Bloomberg later. I'll bet you 60 00:03:13,720 --> 00:03:19,440 Speaker 1: theugh furlow. What's furlough mean? Well, in terms of what 61 00:03:19,520 --> 00:03:23,840 Speaker 1: we're looking at, furlough means obviously temporary unemployment people who's 62 00:03:23,919 --> 00:03:27,040 Speaker 1: where the company's intention is to re employ them, and 63 00:03:27,120 --> 00:03:30,040 Speaker 1: furlough also means, at least in the US, that those 64 00:03:30,080 --> 00:03:35,040 Speaker 1: furloughed employees will get benefits associated with either company loans 65 00:03:35,080 --> 00:03:38,880 Speaker 1: that are forgiven or because of unemployment benefits that are 66 00:03:38,880 --> 00:03:41,720 Speaker 1: made available. Uh. And then when that furlow period is over, 67 00:03:41,760 --> 00:03:44,720 Speaker 1: there presumably reemployed, and then we'll ultimately be paid by 68 00:03:44,720 --> 00:03:48,480 Speaker 1: the company. David. This sort of goes to the idea 69 00:03:48,640 --> 00:03:51,280 Speaker 1: of what the economy will look like. On the other side, 70 00:03:51,320 --> 00:03:54,600 Speaker 1: the idea of furlowing employees rather than laying them off 71 00:03:54,680 --> 00:03:58,720 Speaker 1: outright because people are expecting the economy to recover. I'm 72 00:03:58,720 --> 00:04:01,360 Speaker 1: struck by the borrowings of some junk raded companies. They 73 00:04:01,360 --> 00:04:03,880 Speaker 1: are paying more than ten percent yields to borrow money 74 00:04:03,920 --> 00:04:07,720 Speaker 1: for four years, and I'm wondering whether the cure is 75 00:04:07,760 --> 00:04:10,040 Speaker 1: worth the worse than the ailment. In other words, how 76 00:04:10,080 --> 00:04:13,080 Speaker 1: many of these companies that are piling on debt and 77 00:04:13,160 --> 00:04:17,200 Speaker 1: keeping employees online are not going to survive after the 78 00:04:17,240 --> 00:04:21,640 Speaker 1: pandemic because they've just simply become overleveraged given economic growth. 79 00:04:23,000 --> 00:04:25,520 Speaker 1: It's it's one of the major issues that you know, 80 00:04:25,760 --> 00:04:29,440 Speaker 1: an unintended and unintended consequences of the FED stepping into 81 00:04:29,440 --> 00:04:32,520 Speaker 1: the market. What you're talking about is the fact that 82 00:04:32,560 --> 00:04:34,440 Speaker 1: the companies that might not have been able to borrow 83 00:04:34,440 --> 00:04:36,279 Speaker 1: are now able to go to the junk market, able 84 00:04:36,320 --> 00:04:39,359 Speaker 1: to obtain, as you said, capital at very expensive rates 85 00:04:39,680 --> 00:04:43,080 Speaker 1: to continue their operations, even though they were probably marginal 86 00:04:43,200 --> 00:04:47,080 Speaker 1: prior to that recapitalization. So the issue there is what 87 00:04:47,200 --> 00:04:48,800 Speaker 1: is the strength of the recovery. And one of the 88 00:04:48,800 --> 00:04:50,880 Speaker 1: reasons why we're very concerned about aspects of the high 89 00:04:50,920 --> 00:04:54,279 Speaker 1: yield bond market is precisely because there is really no 90 00:04:54,360 --> 00:04:57,000 Speaker 1: trajectory for those companies, you know, given the slowness of 91 00:04:57,000 --> 00:04:59,000 Speaker 1: what we expect this recovery will be over the next 92 00:04:59,040 --> 00:05:02,960 Speaker 1: two years, to really give them any acceleration in their businesses. 93 00:05:03,279 --> 00:05:05,719 Speaker 1: So to your point, a lot of companies have seen 94 00:05:05,800 --> 00:05:09,479 Speaker 1: the postponement of what ultimately will be, you know, either 95 00:05:09,560 --> 00:05:11,320 Speaker 1: the failure of the company, the merger of the company, 96 00:05:11,360 --> 00:05:13,760 Speaker 1: or the restructuring of the company, and that's really one 97 00:05:13,800 --> 00:05:17,120 Speaker 1: of the unintended consequences. We're very carefully looking at credits 98 00:05:17,120 --> 00:05:19,040 Speaker 1: at City Private Bank to make sure we do not 99 00:05:19,120 --> 00:05:21,960 Speaker 1: put client capital into those companies because even though the 100 00:05:22,000 --> 00:05:24,800 Speaker 1: yields look very attractive, they are much more risky than 101 00:05:24,839 --> 00:05:27,520 Speaker 1: they appear. So, David, can you square the idea that 102 00:05:27,600 --> 00:05:30,320 Speaker 1: sort of bearish feel with respect to the high old 103 00:05:30,360 --> 00:05:34,240 Speaker 1: bond market with your bullish call on small cap stocks 104 00:05:34,320 --> 00:05:37,160 Speaker 1: which often track the high old bond market in terms 105 00:05:37,160 --> 00:05:40,719 Speaker 1: of performance. That is a great question also, and I 106 00:05:40,720 --> 00:05:42,520 Speaker 1: think you have to look at the balance sheets of 107 00:05:42,520 --> 00:05:45,200 Speaker 1: those companies. So what we've done is we've divided the 108 00:05:45,279 --> 00:05:47,360 Speaker 1: high old market itself. Will We've taken out all of 109 00:05:47,360 --> 00:05:49,400 Speaker 1: the energy securities and taking a look at the remainder 110 00:05:49,400 --> 00:05:51,159 Speaker 1: of the high old mark market bond market and the 111 00:05:51,200 --> 00:05:53,919 Speaker 1: companies that are borrowing those, and then we've further divided 112 00:05:53,920 --> 00:05:57,360 Speaker 1: those companies into those that have resilient business models i e. 113 00:05:57,720 --> 00:06:00,240 Speaker 1: Which have not been as impacted by this more ket 114 00:06:00,240 --> 00:06:04,320 Speaker 1: conditions and specifically associated with healthcare, consumer durables, and things 115 00:06:04,360 --> 00:06:07,799 Speaker 1: like that. Companies that supply parts and services two industries 116 00:06:07,800 --> 00:06:10,440 Speaker 1: that are going to recover. An example would be airline 117 00:06:10,520 --> 00:06:14,839 Speaker 1: services rather than airlines. And by identifying all of those subsegments, 118 00:06:14,920 --> 00:06:17,560 Speaker 1: you're able to build a portfolio companies that are very 119 00:06:17,640 --> 00:06:20,400 Speaker 1: highly likely to rebound and to thrive, and to your 120 00:06:20,480 --> 00:06:22,800 Speaker 1: other point, to the extent that you identify companies that 121 00:06:22,839 --> 00:06:25,600 Speaker 1: are either over leveled or whether business models themselves are 122 00:06:25,640 --> 00:06:28,440 Speaker 1: not in essential categories, we are going to avoid them. 123 00:06:28,680 --> 00:06:31,000 Speaker 1: But it's this level of discrimination. And by the way, 124 00:06:31,000 --> 00:06:33,520 Speaker 1: the market has been fairly discriminating in this regard when 125 00:06:33,600 --> 00:06:36,239 Speaker 1: when you take a little bit small and MidCap equity prices, 126 00:06:36,240 --> 00:06:37,760 Speaker 1: this is the kind of work that you have to 127 00:06:37,839 --> 00:06:41,039 Speaker 1: do in terms of portfolio construction now that just six 128 00:06:41,080 --> 00:06:43,640 Speaker 1: months ago you really didn't need to do because things 129 00:06:43,640 --> 00:06:47,200 Speaker 1: were relatively sanguine. Would have thrive under what conditions, you know, 130 00:06:47,240 --> 00:06:49,400 Speaker 1: let's get back to the main story. We re outake 131 00:06:49,440 --> 00:06:51,400 Speaker 1: care and there's clearly a massive tower risk of a 132 00:06:51,480 --> 00:06:53,840 Speaker 1: second wife. Now for some people, that's not a tower risk, 133 00:06:53,880 --> 00:06:56,280 Speaker 1: that's a base case. Isn't that likely to linger for 134 00:06:56,320 --> 00:06:59,760 Speaker 1: the next several months, So it is a base case. 135 00:06:59,800 --> 00:07:02,200 Speaker 1: And I think that this whole debate in the market 136 00:07:02,279 --> 00:07:04,039 Speaker 1: is to whether or not there is a second wave. 137 00:07:04,160 --> 00:07:07,039 Speaker 1: We are going to see a material increase in the 138 00:07:07,160 --> 00:07:10,040 Speaker 1: number of coronavirus cases, whether that be in Europe or 139 00:07:10,040 --> 00:07:12,240 Speaker 1: in the United States. And in the US you're actually 140 00:07:12,360 --> 00:07:14,920 Speaker 1: going to see potentially even more bad dudes in that 141 00:07:15,000 --> 00:07:17,640 Speaker 1: regard because of the nature of the rolling way that 142 00:07:17,680 --> 00:07:21,119 Speaker 1: they handled the lockdowns and are now handling the the 143 00:07:21,320 --> 00:07:26,040 Speaker 1: reopening of the economy. So the question is do these 144 00:07:26,400 --> 00:07:30,760 Speaker 1: increases in virus cases ultimately once again impact the healthcare system. 145 00:07:31,040 --> 00:07:33,160 Speaker 1: You have to go back to the first premise. The 146 00:07:33,240 --> 00:07:35,800 Speaker 1: reason why we took the step of lockdown was because 147 00:07:35,840 --> 00:07:39,120 Speaker 1: we thought we would overwhelm healthcare systems and completely have 148 00:07:39,240 --> 00:07:42,160 Speaker 1: people literally dying at their homes, dying in the streets, 149 00:07:42,200 --> 00:07:44,560 Speaker 1: you know, and things like that. Unwilling to do that 150 00:07:44,680 --> 00:07:47,800 Speaker 1: as a society, we then stepped into to stop that. 151 00:07:48,000 --> 00:07:49,960 Speaker 1: And now we're going to reopen. And the question is 152 00:07:50,080 --> 00:07:52,040 Speaker 1: how do we make sure that does not happen again. 153 00:07:52,080 --> 00:07:53,520 Speaker 1: And there's only two ways for that to be true. 154 00:07:53,560 --> 00:07:55,640 Speaker 1: One is that the amount of disease goes down, and 155 00:07:55,680 --> 00:07:58,160 Speaker 1: that's this concept of a trough between the waves. And 156 00:07:58,200 --> 00:07:59,720 Speaker 1: then the second is that we know that there will 157 00:07:59,720 --> 00:08:01,480 Speaker 1: be as second wave of barring your treatment or a 158 00:08:01,560 --> 00:08:03,960 Speaker 1: vaccine um and that that the question is how big 159 00:08:04,000 --> 00:08:05,600 Speaker 1: that wave is, and it right now in the United 160 00:08:05,640 --> 00:08:08,200 Speaker 1: States look looks like it could accelerate because of the 161 00:08:08,240 --> 00:08:12,240 Speaker 1: fact that we didn't tamp down the disease sufficiently. David 162 00:08:12,280 --> 00:08:15,200 Speaker 1: gred Skate thow us on a shot. Real appreciate David 163 00:08:15,200 --> 00:08:17,560 Speaker 1: Betton sending up best to the same one City Private 164 00:08:17,560 --> 00:08:23,440 Speaker 1: Banks chief Investment officer. This has been one of the 165 00:08:23,440 --> 00:08:27,880 Speaker 1: pleasant surprises of this tragedy. A weekly conversation even more 166 00:08:27,880 --> 00:08:30,760 Speaker 1: than that with the Lieutenant Governor of the Empire State, 167 00:08:30,840 --> 00:08:33,520 Speaker 1: Kathey Hokel joins us right now, Kathy, I want to 168 00:08:33,520 --> 00:08:38,160 Speaker 1: ask a dumb question. Government can affect policy that makes 169 00:08:38,240 --> 00:08:41,520 Speaker 1: things easy. Why can't the State of New York say 170 00:08:41,640 --> 00:08:44,160 Speaker 1: you can't walk on the streets of New York, New 171 00:08:44,240 --> 00:08:47,880 Speaker 1: York State without a mask on and those plastic gloves on, 172 00:08:47,880 --> 00:08:54,120 Speaker 1: those latex gloves on. Wouldn't that immediately build confidence? We 173 00:08:54,280 --> 00:08:57,319 Speaker 1: build confidence by having the people who listened to us 174 00:08:57,360 --> 00:09:00,520 Speaker 1: every single day as we give very transparent press officers 175 00:09:00,520 --> 00:09:02,840 Speaker 1: and tell like this. We tell them the truth. We 176 00:09:02,960 --> 00:09:05,280 Speaker 1: tell them that if they wear the mask, they couldnt 177 00:09:05,400 --> 00:09:08,000 Speaker 1: just save themselves but also their families and they have 178 00:09:08,040 --> 00:09:11,040 Speaker 1: a responsibility. But we don't have the resources nor the 179 00:09:11,160 --> 00:09:13,280 Speaker 1: desire to have a police state where we go through 180 00:09:13,280 --> 00:09:17,120 Speaker 1: and have to try to convince ninety million people to it. Here. 181 00:09:17,280 --> 00:09:19,040 Speaker 1: We'd love to, but we're not going to that's not 182 00:09:19,120 --> 00:09:21,240 Speaker 1: who we are, it's not our character, but we want 183 00:09:21,320 --> 00:09:24,280 Speaker 1: that same results, and we're appealing to people and their 184 00:09:24,360 --> 00:09:28,160 Speaker 1: desire to protect themselves and their families and friends and neighbors, 185 00:09:28,200 --> 00:09:30,840 Speaker 1: and thus far, I have to say, we are starting 186 00:09:30,880 --> 00:09:33,360 Speaker 1: to see some cracks in this, but people have really 187 00:09:33,480 --> 00:09:36,080 Speaker 1: uniformly throughout the States been adhering to this, and that's 188 00:09:36,080 --> 00:09:39,120 Speaker 1: really actually quite astounding that they are the ones, the 189 00:09:39,120 --> 00:09:42,560 Speaker 1: New Yorkers are the ones who really changed the trend. 190 00:09:42,720 --> 00:09:45,040 Speaker 1: If they hadn't been doing the social disting and now 191 00:09:45,080 --> 00:09:47,360 Speaker 1: the mask, we'd be in a far worse place. So 192 00:09:47,400 --> 00:09:49,480 Speaker 1: you'll see outliers and we hope we can bring them 193 00:09:49,480 --> 00:09:51,640 Speaker 1: back into the fold. But right now I think we're 194 00:09:51,640 --> 00:09:54,640 Speaker 1: doing very well. Governor. When we talk about a May 195 00:09:54,640 --> 00:09:58,080 Speaker 1: fifteenth three opening in New York, we are talking about upstate. 196 00:09:58,160 --> 00:10:00,600 Speaker 1: We are not talking about New York City. How much 197 00:10:00,760 --> 00:10:03,360 Speaker 1: longer do you think it will take for the major 198 00:10:03,440 --> 00:10:07,960 Speaker 1: metropolitan areas in the region to reopen. We have put 199 00:10:08,000 --> 00:10:10,760 Speaker 1: in place the number of metrics better really come from 200 00:10:10,760 --> 00:10:13,200 Speaker 1: the CBC that we're using up state first of all, 201 00:10:13,240 --> 00:10:15,439 Speaker 1: and that is to look at the hospitalization rate, the 202 00:10:15,520 --> 00:10:18,040 Speaker 1: number of vice the you bed being used, the rate 203 00:10:18,040 --> 00:10:21,280 Speaker 1: of infection, how it's spreading. Also the ability to have 204 00:10:21,360 --> 00:10:25,600 Speaker 1: more diagnostic testing available as well as contact tracers. So 205 00:10:25,840 --> 00:10:27,719 Speaker 1: the benefit for New York City is that we will 206 00:10:27,760 --> 00:10:31,319 Speaker 1: be able to trial run this upstate. I'm managing parts 207 00:10:31,320 --> 00:10:34,720 Speaker 1: of upstate Western New York area and looking at these metrics. 208 00:10:34,720 --> 00:10:37,120 Speaker 1: Do we hit them by May fifteenth? If so, we'll 209 00:10:37,160 --> 00:10:41,640 Speaker 1: slowly open manufacturing, some retail we could pick up on 210 00:10:41,679 --> 00:10:44,680 Speaker 1: the curve and construction. This is the same model that 211 00:10:44,720 --> 00:10:46,840 Speaker 1: we would use downstate. But then we're going to take 212 00:10:46,880 --> 00:10:49,920 Speaker 1: two weeks and testency whether or not the numbers have 213 00:10:50,040 --> 00:10:53,319 Speaker 1: gone upwards downwards day the same. And so it's this 214 00:10:53,480 --> 00:10:55,800 Speaker 1: data that's going to help us drive the reopening of 215 00:10:55,800 --> 00:10:58,240 Speaker 1: New York City, which we have to get right. We 216 00:10:58,280 --> 00:11:00,480 Speaker 1: cannot do it a day to really, but not a 217 00:11:00,559 --> 00:11:02,560 Speaker 1: day longer than necessary. That we don't want to have 218 00:11:02,600 --> 00:11:05,920 Speaker 1: the economy held back any longer than is necessary. But 219 00:11:05,960 --> 00:11:08,280 Speaker 1: also the safety is going to continue to be our 220 00:11:08,360 --> 00:11:11,040 Speaker 1: our guide guiding stars. So I think it's good for 221 00:11:11,040 --> 00:11:13,720 Speaker 1: New York City. I don't think there's a single person 222 00:11:13,760 --> 00:11:16,079 Speaker 1: New York City who thinks they're ready. They know that 223 00:11:16,120 --> 00:11:18,760 Speaker 1: they're still seeing the numbers but upstate, we can do 224 00:11:18,840 --> 00:11:21,520 Speaker 1: a trial one of this and then implement that in 225 00:11:21,559 --> 00:11:23,040 Speaker 1: New York City in a few weeks. So we don't 226 00:11:23,040 --> 00:11:26,439 Speaker 1: have a timeline for New York City just yet. Kathy. 227 00:11:26,480 --> 00:11:28,120 Speaker 1: I'm going to ask you, Delica a question, and I 228 00:11:28,160 --> 00:11:30,360 Speaker 1: asked it with the deepest amount of understanding of sympathy 229 00:11:30,360 --> 00:11:33,240 Speaker 1: for the position you're in. When Governor Cuomo says the 230 00:11:33,280 --> 00:11:36,120 Speaker 1: fast that we reopen, the lower the economic costs, but 231 00:11:36,200 --> 00:11:40,520 Speaker 1: the more lives are lost, you guys are in a 232 00:11:40,640 --> 00:11:43,959 Speaker 1: really tough position now where you have to balance reopen 233 00:11:44,000 --> 00:11:47,840 Speaker 1: the economy with loss of life. And when that's communicated 234 00:11:47,840 --> 00:11:52,320 Speaker 1: from Governor Cuomo, it comes across really sincerely, very authentically, 235 00:11:52,600 --> 00:11:54,319 Speaker 1: and I think it resonates with a lot of people 236 00:11:54,440 --> 00:11:57,719 Speaker 1: listening to these news conferences. But behind closed doors, when 237 00:11:57,760 --> 00:11:59,880 Speaker 1: you have to make that calculation, can you give us 238 00:11:59,880 --> 00:12:05,320 Speaker 1: a deeper understanding of how you make those decisions? We've 239 00:12:05,400 --> 00:12:08,400 Speaker 1: heart wrenching. No one in public life ever expects they're 240 00:12:08,400 --> 00:12:10,800 Speaker 1: going to have to make these types of decisions. We 241 00:12:10,880 --> 00:12:13,480 Speaker 1: go into public life to make people's lives better, give 242 00:12:13,480 --> 00:12:17,280 Speaker 1: them education, health care, opportunity for good jobs. You never 243 00:12:17,400 --> 00:12:18,640 Speaker 1: think that you're going to have to be in the 244 00:12:18,720 --> 00:12:22,640 Speaker 1: position to determine between life and death. But it's very 245 00:12:22,640 --> 00:12:25,520 Speaker 1: clear to us we will choose life over death. That 246 00:12:25,520 --> 00:12:28,640 Speaker 1: that has been what has guided us. It's not a 247 00:12:28,679 --> 00:12:31,520 Speaker 1: gray area, it's black and white. And we also know 248 00:12:31,720 --> 00:12:34,520 Speaker 1: that you can have a livelihood without a life. So 249 00:12:34,679 --> 00:12:36,520 Speaker 1: people talk about what we have to bring back to 250 00:12:36,559 --> 00:12:39,160 Speaker 1: economic guests. We do, but we have to bring it 251 00:12:39,200 --> 00:12:42,600 Speaker 1: back in a thoughtful way that will protect people's lives 252 00:12:42,640 --> 00:12:46,679 Speaker 1: and also give employees and customers the assurance that when 253 00:12:46,720 --> 00:12:50,080 Speaker 1: they come to your establishment they will be safe. That's 254 00:12:50,080 --> 00:12:52,240 Speaker 1: why we have to get this right. We could flip 255 00:12:52,240 --> 00:12:54,040 Speaker 1: a switch and open it tomorrow, but there's not a 256 00:12:54,080 --> 00:12:56,880 Speaker 1: single New Yorker, very few who think that it's safe 257 00:12:56,960 --> 00:12:58,520 Speaker 1: enough to go out there now, and they're still seeing 258 00:12:58,520 --> 00:13:00,920 Speaker 1: the numbers that we are. We will get to that point, 259 00:13:01,400 --> 00:13:03,320 Speaker 1: and I'm going to tell you right now, we're already 260 00:13:03,320 --> 00:13:07,080 Speaker 1: planning for a post pandemic future that's even better. Not 261 00:13:07,200 --> 00:13:11,920 Speaker 1: just reopening our economy, but reimagining areas like the workplace, 262 00:13:12,000 --> 00:13:15,240 Speaker 1: how we can make it more flexible for people, Reimagining 263 00:13:15,360 --> 00:13:18,559 Speaker 1: education and making sure it's more accessible truth technology, and 264 00:13:18,600 --> 00:13:20,920 Speaker 1: all the experience that our teachers have had to go 265 00:13:21,000 --> 00:13:24,040 Speaker 1: through teaching children at home in our colleges, and how 266 00:13:24,080 --> 00:13:26,360 Speaker 1: they've had to a debt. We have an opportunity here 267 00:13:26,760 --> 00:13:29,760 Speaker 1: to make this state even stronger than before, and that's 268 00:13:29,760 --> 00:13:31,320 Speaker 1: what we're doing. But we're going to get it right. 269 00:13:32,040 --> 00:13:34,880 Speaker 1: Lieutenant Governor, you said that there really isn't gray area. 270 00:13:35,480 --> 00:13:37,760 Speaker 1: I am guessing that President Trump may agree. He was 271 00:13:37,800 --> 00:13:40,880 Speaker 1: talking about how there are losses on either side. You're 272 00:13:40,880 --> 00:13:45,079 Speaker 1: seeing mental illness rise, uh, you're seeing the the the 273 00:13:45,120 --> 00:13:49,120 Speaker 1: concern about substance abuse, domestic violence. Even Governor Cuomo has 274 00:13:49,120 --> 00:13:53,920 Speaker 1: talked about this. It's not necessarily all all things being equal. 275 00:13:53,960 --> 00:13:56,800 Speaker 1: I'm just wondering how you weigh things on that side. 276 00:13:57,080 --> 00:13:59,840 Speaker 1: As a jobless rate soars to levels not seen in 277 00:14:00,000 --> 00:14:05,040 Speaker 1: our history. Yeah, this is unprecedent. You know, we're not 278 00:14:05,080 --> 00:14:08,400 Speaker 1: trying to increase the job We're trying to save people's lives. 279 00:14:08,440 --> 00:14:10,760 Speaker 1: But we're very thoughtful in this. That's why we've put 280 00:14:10,800 --> 00:14:14,320 Speaker 1: in place different opportunities for people to get assistance. We 281 00:14:14,400 --> 00:14:17,080 Speaker 1: have a hotline and emotional health hotline for not just 282 00:14:17,240 --> 00:14:20,640 Speaker 1: first responders, who I'm sure are going to have lifelong 283 00:14:20,800 --> 00:14:23,280 Speaker 1: impacts on their mental health because of what they've had 284 00:14:23,320 --> 00:14:26,280 Speaker 1: to see and endure during this crisis. But people who 285 00:14:26,280 --> 00:14:28,720 Speaker 1: have been isolated and people who are lonely, and those 286 00:14:28,760 --> 00:14:32,320 Speaker 1: are dealing with the the the havoc in their lives 287 00:14:32,360 --> 00:14:34,440 Speaker 1: from having lost a job when they never dreamed they'd 288 00:14:34,440 --> 00:14:36,320 Speaker 1: be having to spend hours on the phone trying to 289 00:14:36,320 --> 00:14:39,800 Speaker 1: get an unemployment application. And so we know there's a 290 00:14:40,440 --> 00:14:43,600 Speaker 1: severe human toll, and we have assistance for them. We 291 00:14:43,640 --> 00:14:47,040 Speaker 1: have over nineties thousand people answering phone calls to help them. 292 00:14:47,280 --> 00:14:50,400 Speaker 1: But at the end of the day, New Yorkers are resilient. 293 00:14:50,520 --> 00:14:52,920 Speaker 1: We are a tough bunch. We will come out of 294 00:14:52,960 --> 00:14:55,840 Speaker 1: this stronger as long as we continue to protect each 295 00:14:55,880 --> 00:14:58,240 Speaker 1: other with the social distancing and the mass and it's 296 00:14:58,280 --> 00:15:00,320 Speaker 1: not an easy equation, but we're going to get Yeah, 297 00:15:00,680 --> 00:15:03,680 Speaker 1: Lieutenant Governor, thank you so much. This is a joyful 298 00:15:03,760 --> 00:15:10,640 Speaker 1: thank you, Lieutenant Governor. Every week. Joining us right now 299 00:15:10,880 --> 00:15:13,440 Speaker 1: from JP Morgan is John Norman. He has been a 300 00:15:13,480 --> 00:15:17,080 Speaker 1: wonderful supporter of all that we do with surveillance because 301 00:15:17,120 --> 00:15:23,440 Speaker 1: of a wonderful synthesis in his research note across equities, bonds, currencies, commodities. John, 302 00:15:23,880 --> 00:15:28,000 Speaker 1: just exceptional historic import coming up in three days. What 303 00:15:28,080 --> 00:15:31,680 Speaker 1: do you hear from Bruce Casman and your economists that 304 00:15:31,800 --> 00:15:37,200 Speaker 1: you fold into market choice. To me, the most important 305 00:15:37,240 --> 00:15:40,080 Speaker 1: takeaway from the work of our economists is that it's 306 00:15:40,120 --> 00:15:43,320 Speaker 1: going to be an extremely abnormal recovery, meaning it's going 307 00:15:43,360 --> 00:15:46,720 Speaker 1: to take years to recruit the lost output and the 308 00:15:46,800 --> 00:15:50,760 Speaker 1: lost jobs, and that usually equates to a multi year 309 00:15:50,800 --> 00:15:53,280 Speaker 1: process of recouping the lost profits. That that's got to 310 00:15:53,280 --> 00:15:55,440 Speaker 1: be a constraint on how much markets can we trace, 311 00:15:55,640 --> 00:15:57,480 Speaker 1: even if they go up, So that that shape of 312 00:15:57,520 --> 00:16:00,200 Speaker 1: the recovery, to me, is a lot of what is 313 00:16:00,200 --> 00:16:02,920 Speaker 1: the views on the asset markets going forward. The views 314 00:16:02,960 --> 00:16:04,960 Speaker 1: on the asset markets don't seem that dire. If you 315 00:16:04,960 --> 00:16:07,760 Speaker 1: take a look at stock prices, particularly within the tech sector, 316 00:16:07,840 --> 00:16:10,560 Speaker 1: do you think that they're accurately pricing in and I'm 317 00:16:10,600 --> 00:16:13,080 Speaker 1: not just talking about big tech, just broadly, do you 318 00:16:13,080 --> 00:16:15,400 Speaker 1: think that equities are pricing in what you're talking about, 319 00:16:15,400 --> 00:16:18,680 Speaker 1: which is a prolonged period of time with these destroyed 320 00:16:18,760 --> 00:16:23,280 Speaker 1: jobs not coming back anytime soon. No, I think the 321 00:16:23,400 --> 00:16:27,320 Speaker 1: price the over optimistically, meaning they seem to be pricing 322 00:16:27,360 --> 00:16:31,120 Speaker 1: and extremely smooth transition from the lockdown to the restart 323 00:16:31,160 --> 00:16:34,200 Speaker 1: of the economies. So even though the levels that we're 324 00:16:34,200 --> 00:16:38,880 Speaker 1: seeing right now in markets. UM may may may be 325 00:16:39,120 --> 00:16:43,640 Speaker 1: levels that that UH should be seen in six months time. 326 00:16:44,120 --> 00:16:46,240 Speaker 1: It's it's a bit premature to be seeing these now. 327 00:16:46,640 --> 00:16:49,680 Speaker 1: It essentially assumes that the restart is going to be 328 00:16:49,800 --> 00:16:52,160 Speaker 1: all free, and I think it's going to be a 329 00:16:52,200 --> 00:16:54,800 Speaker 1: little more hazard prone than that. So let's talk about it, John, 330 00:16:54,840 --> 00:16:56,880 Speaker 1: How you a capital with all of that in mind? 331 00:16:59,160 --> 00:17:01,320 Speaker 1: So for me, you want to be allocating to markets 332 00:17:01,360 --> 00:17:04,719 Speaker 1: that are still very cheap and have a very direct 333 00:17:04,840 --> 00:17:07,000 Speaker 1: central bank back stop. And to me, this is why 334 00:17:07,040 --> 00:17:10,800 Speaker 1: the credit markets are better risk reward than the equity 335 00:17:10,840 --> 00:17:13,679 Speaker 1: markets over the over this transition period and to restart 336 00:17:13,680 --> 00:17:15,840 Speaker 1: the economies, even though I think equity markets will be 337 00:17:16,000 --> 00:17:18,199 Speaker 1: you know, still higher by by year end, it's just 338 00:17:18,200 --> 00:17:20,200 Speaker 1: sort of recognizing that as we go through this very 339 00:17:20,200 --> 00:17:24,000 Speaker 1: awkward restarting process, UM, there are going to be some 340 00:17:24,080 --> 00:17:27,640 Speaker 1: uncertainties around out the corporate profits outlook, and and it's 341 00:17:27,680 --> 00:17:30,240 Speaker 1: better to have exposure to a market where at least 342 00:17:30,280 --> 00:17:32,560 Speaker 1: someone else is buying regardless of the news flowers and 343 00:17:32,840 --> 00:17:34,639 Speaker 1: that's someone of course is the FED in terms of 344 00:17:34,680 --> 00:17:37,080 Speaker 1: what it's doing in the high grade and high young market. 345 00:17:37,119 --> 00:17:39,360 Speaker 1: So I feel like that's the best risk reward for now, 346 00:17:39,880 --> 00:17:41,960 Speaker 1: even though I still think stocks you're gonna keep up 347 00:17:41,960 --> 00:17:44,719 Speaker 1: performing bonds, let's say over the over the next three quarters. 348 00:17:45,080 --> 00:17:47,040 Speaker 1: This is something you call it. Bob Michael talked about 349 00:17:47,040 --> 00:17:49,240 Speaker 1: as well, co investing with the Federal Reserve, And I 350 00:17:49,280 --> 00:17:51,240 Speaker 1: just wanted to Johmp from your perspective, whether that takes 351 00:17:51,280 --> 00:17:53,359 Speaker 1: you to the United States of the Europe, the United 352 00:17:53,400 --> 00:17:56,040 Speaker 1: States over the rest of the world, just geographically speaking, 353 00:17:56,040 --> 00:18:00,400 Speaker 1: the regional bias, It definitely does. Because there's there's two 354 00:18:00,440 --> 00:18:02,600 Speaker 1: dimensions to this. One is that the FED is just 355 00:18:02,840 --> 00:18:06,720 Speaker 1: a much greater participant in in so many sectors of 356 00:18:06,920 --> 00:18:09,520 Speaker 1: US financial markets compared to the ECP. The ECB actually 357 00:18:09,560 --> 00:18:11,440 Speaker 1: has more latitude the ft the e C. We could 358 00:18:11,440 --> 00:18:14,320 Speaker 1: buy stocks to days we wanted to, but it doesn't. 359 00:18:14,440 --> 00:18:16,600 Speaker 1: And it has latitudes to buy high yield but it doesn't. 360 00:18:16,680 --> 00:18:19,840 Speaker 1: So the FAT is the one that's the the broadest 361 00:18:19,880 --> 00:18:23,040 Speaker 1: investor uh and playing. But there's another dimension to it 362 00:18:23,119 --> 00:18:25,320 Speaker 1: as well, which is when you think about what sectors 363 00:18:25,320 --> 00:18:28,200 Speaker 1: are the end game winners in a post COVID environment, 364 00:18:28,280 --> 00:18:31,800 Speaker 1: it's it's tag communications, and it's and its healthcare, And 365 00:18:31,840 --> 00:18:34,120 Speaker 1: these are ones that probably comprise, you know, a good 366 00:18:34,119 --> 00:18:37,199 Speaker 1: fortent of the US equity market. So if you just 367 00:18:37,240 --> 00:18:40,520 Speaker 1: kind of recognize that there's a structural set of winners here, 368 00:18:40,800 --> 00:18:44,240 Speaker 1: that those winners are much more evident and dominant in 369 00:18:44,280 --> 00:18:47,080 Speaker 1: the US equity market and other equity markets, it's uh, 370 00:18:47,280 --> 00:18:50,120 Speaker 1: it's a hands down view that the US stock market 371 00:18:50,160 --> 00:18:52,920 Speaker 1: is going to continue on performing. John implicit in your 372 00:18:52,960 --> 00:18:56,159 Speaker 1: comments is this feeling like there it will be no 373 00:18:56,320 --> 00:19:01,160 Speaker 1: international consequence to the US is printing trillions of dollars 374 00:19:01,160 --> 00:19:03,320 Speaker 1: of debt, with the Federal reserves balance sheet poise to 375 00:19:03,359 --> 00:19:05,680 Speaker 1: exceed ten trillion dollars by the end of the year. 376 00:19:05,960 --> 00:19:07,679 Speaker 1: A lot of times in the past this would have 377 00:19:07,680 --> 00:19:10,760 Speaker 1: been expressed in a weaker dollar versus other currencies, but 378 00:19:10,800 --> 00:19:13,680 Speaker 1: weaker versus what especially given some of the existential acts 379 00:19:13,800 --> 00:19:17,720 Speaker 1: right now over in the euroregion, Is that true that 380 00:19:17,760 --> 00:19:22,080 Speaker 1: basically there is no consequence to the US monetizing its 381 00:19:22,119 --> 00:19:27,560 Speaker 1: debt and increasing its deficit dramatically. There will be a 382 00:19:27,640 --> 00:19:30,919 Speaker 1: consequence to this, It's more question of time horizon and 383 00:19:31,000 --> 00:19:36,040 Speaker 1: as you suggest, against what asset specifically, so um over 384 00:19:36,080 --> 00:19:38,760 Speaker 1: the long term, there's a concern this could be inflationary 385 00:19:38,840 --> 00:19:41,080 Speaker 1: that that is not a concern right now or for 386 00:19:41,119 --> 00:19:45,439 Speaker 1: this year next year, because you could have particuarly unemployment 387 00:19:45,600 --> 00:19:47,919 Speaker 1: in the in the US um But there is a 388 00:19:47,920 --> 00:19:50,440 Speaker 1: consequence in terms of real interest rates, they're they're extremely 389 00:19:50,440 --> 00:19:52,040 Speaker 1: low in the US and that makes it difficult to 390 00:19:52,040 --> 00:19:54,080 Speaker 1: the US to attract financing. And I think that's one 391 00:19:54,119 --> 00:19:57,440 Speaker 1: of them why you do see the dollars slipping lower 392 00:19:57,560 --> 00:19:59,960 Speaker 1: versus the end and it slips lower versus the goal 393 00:20:00,080 --> 00:20:02,919 Speaker 1: price even though stock and credit markets are very healthy 394 00:20:03,040 --> 00:20:05,879 Speaker 1: right now. So there's there's some I think residual anxiety 395 00:20:05,960 --> 00:20:09,880 Speaker 1: around the dollar, a currency which is feeding through into 396 00:20:10,000 --> 00:20:12,400 Speaker 1: some things like the n gold even though it's it's 397 00:20:12,400 --> 00:20:14,840 Speaker 1: certainly not a you know, a fire sale. Where it 398 00:20:14,880 --> 00:20:16,920 Speaker 1: gets more interesting is if you're in a in a 399 00:20:17,040 --> 00:20:19,280 Speaker 1: much better state of the world in six months time, 400 00:20:19,400 --> 00:20:23,960 Speaker 1: what's the demand for US assets when qwie is bearing 401 00:20:23,960 --> 00:20:27,239 Speaker 1: down on real interest rates and other parts of picking up. 402 00:20:27,520 --> 00:20:29,639 Speaker 1: That's when I think you could see something much bigger 403 00:20:29,680 --> 00:20:32,399 Speaker 1: in terms of payback against the dollar versus and own 404 00:20:32,400 --> 00:20:34,960 Speaker 1: a range of currencies. But that's something for six months 405 00:20:35,000 --> 00:20:38,320 Speaker 1: from now. John, We're six minutes away from the beginning 406 00:20:38,359 --> 00:20:43,000 Speaker 1: of three days of history in America within this economic 407 00:20:43,040 --> 00:20:46,800 Speaker 1: contraction and the sum of it distilled on long term 408 00:20:46,840 --> 00:20:50,800 Speaker 1: planning for our global Wall Street is what's the new 409 00:20:50,920 --> 00:20:56,199 Speaker 1: actual rearial assumption? Do you change your actuarial assumption of 410 00:20:56,359 --> 00:20:59,760 Speaker 1: long term investible assets? Do you have to lower it 411 00:21:00,000 --> 00:21:03,320 Speaker 1: of disinflation or dare say, do you have to actually 412 00:21:03,440 --> 00:21:07,359 Speaker 1: raise it because you see it an inflationary impulse out 413 00:21:07,400 --> 00:21:11,160 Speaker 1: there somewhere. No. I think what you have to do 414 00:21:11,280 --> 00:21:14,399 Speaker 1: is rather than be macro about it, you actually have 415 00:21:14,400 --> 00:21:15,760 Speaker 1: to be more micro and you have to sort of 416 00:21:15,800 --> 00:21:19,600 Speaker 1: recognize that some sectors are either not going to exist 417 00:21:19,720 --> 00:21:21,919 Speaker 1: or the you're not going to exist with nearly the 418 00:21:21,960 --> 00:21:24,720 Speaker 1: same profitability as as they used to, and so you're 419 00:21:25,080 --> 00:21:28,520 Speaker 1: you really have to reset your assumptions around profits, growth 420 00:21:28,640 --> 00:21:31,760 Speaker 1: and margins on a sector bisector basis. And I think 421 00:21:31,760 --> 00:21:34,840 Speaker 1: that's the kind of arithmetic that people just haven't really 422 00:21:34,880 --> 00:21:36,960 Speaker 1: gotten around to doing yet to kind of grappling with 423 00:21:37,000 --> 00:21:39,560 Speaker 1: the first order issue, which is the recession. But there's 424 00:21:39,560 --> 00:21:43,080 Speaker 1: a whole lot more thinking that around what's bible as 425 00:21:43,119 --> 00:21:45,160 Speaker 1: a as a sector and you kind of aggregate those 426 00:21:45,200 --> 00:21:48,080 Speaker 1: into what it might be for profit market as a whole. 427 00:21:48,560 --> 00:21:51,960 Speaker 1: One final question, John Norman we saw Apple or a 428 00:21:52,000 --> 00:21:55,560 Speaker 1: glorious bond effort. I think it was two days ago. 429 00:21:56,200 --> 00:21:58,600 Speaker 1: Everybody can issue bonds right now, can't they? What is 430 00:21:58,640 --> 00:22:02,840 Speaker 1: that signal to our listeners. I don't think everyone can 431 00:22:02,840 --> 00:22:05,879 Speaker 1: issue bonds. I think if you're a or the borrow 432 00:22:05,880 --> 00:22:08,280 Speaker 1: where you can, and that that's a very important distinction. 433 00:22:08,320 --> 00:22:11,880 Speaker 1: You know, when you think about UM, what what booming 434 00:22:11,920 --> 00:22:14,560 Speaker 1: issuance is telling us? It is telling us clearly does 435 00:22:14,600 --> 00:22:16,879 Speaker 1: a demand for fixing compaigner clearly does a lot of 436 00:22:16,880 --> 00:22:21,080 Speaker 1: faith that certain UM higher rated borrowers are are still 437 00:22:21,080 --> 00:22:24,200 Speaker 1: going to be around after after COVID. But it's it's 438 00:22:24,200 --> 00:22:26,920 Speaker 1: a lower quality part that one really has to worry about. 439 00:22:26,920 --> 00:22:29,560 Speaker 1: And obviously the lower quality segments are the ones that 440 00:22:29,600 --> 00:22:31,760 Speaker 1: have really grown over the past several years of of 441 00:22:31,800 --> 00:22:35,479 Speaker 1: easy money. So I wouldn't misread that booming issuance as 442 00:22:35,520 --> 00:22:42,520 Speaker 1: a as a like a health check information across the board. Hi, John, 443 00:22:42,640 --> 00:22:44,680 Speaker 1: great to catch up with the appreciate it's on this morning. 444 00:22:44,640 --> 00:22:46,800 Speaker 1: Sam My best of it saying John Norman that JP 445 00:22:46,920 --> 00:22:56,399 Speaker 1: Morgan had a cross asset fundamental strategy place decide that 446 00:22:56,400 --> 00:22:58,280 Speaker 1: how it Davis? So how it Davis joins us? Now 447 00:22:58,680 --> 00:23:01,359 Speaker 1: the obvious cham and how fantastic to have you with 448 00:23:01,400 --> 00:23:03,320 Speaker 1: us on the program. Can we just spend a moment 449 00:23:03,359 --> 00:23:06,160 Speaker 1: reflecting on these devastating jobs figures that are coming through 450 00:23:06,200 --> 00:23:08,840 Speaker 1: here in America and adaptly likely to be the same 451 00:23:08,880 --> 00:23:11,520 Speaker 1: in the United Kingdom as well, albeit on a different scale. 452 00:23:11,720 --> 00:23:13,800 Speaker 1: How how are you thinking about the recovery and how 453 00:23:13,920 --> 00:23:17,639 Speaker 1: quickly this labor market heals well? The first thing I 454 00:23:17,720 --> 00:23:21,080 Speaker 1: have to think about is the personal tragedies that must 455 00:23:21,160 --> 00:23:23,560 Speaker 1: lie behind these numbers, because there must be a lot 456 00:23:23,560 --> 00:23:28,320 Speaker 1: of very worried people out there. I think that we 457 00:23:28,480 --> 00:23:32,600 Speaker 1: desperately need now some sense of direction on the recovery. 458 00:23:32,760 --> 00:23:36,520 Speaker 1: In some European countries, notably in Germany. Also at some 459 00:23:36,600 --> 00:23:38,480 Speaker 1: extent now in France we are seeing a bit of 460 00:23:38,520 --> 00:23:40,760 Speaker 1: direction and a bit of loosening up, which gives people 461 00:23:40,800 --> 00:23:46,040 Speaker 1: some optimism and might mean that these job losses were temporary. 462 00:23:46,080 --> 00:23:49,520 Speaker 1: But at the moment here I'm afraid we don't have that. 463 00:23:49,560 --> 00:23:51,399 Speaker 1: But we've been told is that we may be told 464 00:23:51,440 --> 00:23:54,200 Speaker 1: something on Sunday about the way in which the recovery 465 00:23:54,320 --> 00:23:58,280 Speaker 1: will emerge. And I think that's increasingly important because the 466 00:23:58,359 --> 00:24:02,000 Speaker 1: assumption behind a lot of government schemes and a lot 467 00:24:02,000 --> 00:24:04,000 Speaker 1: of bank lending has been that we face a V 468 00:24:04,080 --> 00:24:07,199 Speaker 1: shaped recovery, that people will come very quickly up the 469 00:24:07,200 --> 00:24:10,080 Speaker 1: other side of this canyon. But the longer it goes on, 470 00:24:10,359 --> 00:24:13,959 Speaker 1: the much less certain that recovery is. Howard, when you 471 00:24:14,000 --> 00:24:16,639 Speaker 1: look at the Royal Bank of Scotland's workforce and you 472 00:24:16,720 --> 00:24:19,480 Speaker 1: look at the fact that so many people are working 473 00:24:19,520 --> 00:24:23,639 Speaker 1: remotely and getting it done, are you expecting a smaller 474 00:24:23,640 --> 00:24:27,280 Speaker 1: workforce and one that is less centralized in a big 475 00:24:27,280 --> 00:24:31,840 Speaker 1: city going forward? For your bank, we are very busy 476 00:24:31,920 --> 00:24:35,760 Speaker 1: at the moment. We've managed to keep our branches open 477 00:24:36,280 --> 00:24:39,000 Speaker 1: and our I T people, particularly those people dealing with 478 00:24:39,040 --> 00:24:42,600 Speaker 1: small businesses or dealing with people getting mortgage interest holidays, 479 00:24:43,000 --> 00:24:46,960 Speaker 1: are very busy. So we have said we're not laying 480 00:24:47,000 --> 00:24:49,919 Speaker 1: people off at this point. We're not asking for support 481 00:24:49,960 --> 00:24:53,240 Speaker 1: from the government now. In the longer run, if you 482 00:24:53,320 --> 00:24:55,879 Speaker 1: look and say, what are we learning in this crisis 483 00:24:55,960 --> 00:24:58,280 Speaker 1: about the way in which we can operate, you know 484 00:24:58,359 --> 00:25:00,520 Speaker 1: you have to have you will have to ask yourself 485 00:25:00,600 --> 00:25:04,600 Speaker 1: some questions about location of people and numbers of people, 486 00:25:04,640 --> 00:25:08,200 Speaker 1: et cetera. But for the moment, you know, the job 487 00:25:08,359 --> 00:25:10,520 Speaker 1: unemployment numbers are not coming from us because we are 488 00:25:10,560 --> 00:25:14,240 Speaker 1: pretty we are pretty frantic. Actually, your charm, Howard Davies, 489 00:25:14,520 --> 00:25:17,040 Speaker 1: is as a young lad at Oxford, you had the 490 00:25:17,119 --> 00:25:21,359 Speaker 1: courage to study modern history and not something fancy like 491 00:25:21,480 --> 00:25:24,160 Speaker 1: medieval history or the classics and all the rest of it. 492 00:25:24,720 --> 00:25:29,879 Speaker 1: Tell us about our modern history forward, about government in 493 00:25:29,960 --> 00:25:33,479 Speaker 1: our society, and particularly your take on the United States 494 00:25:33,480 --> 00:25:37,560 Speaker 1: of America. Are we actually going to be more government centric? 495 00:25:37,600 --> 00:25:41,480 Speaker 1: Are we gonna push back against the ethos of Ronald Reagan? 496 00:25:42,960 --> 00:25:47,280 Speaker 1: I think you probably. Ah. I'm less expert obviously on 497 00:25:47,320 --> 00:25:49,960 Speaker 1: the United States than I am on the UK, but 498 00:25:50,040 --> 00:25:54,000 Speaker 1: I would have thought that the knee jack rhetoric that says, 499 00:25:54,600 --> 00:25:57,560 Speaker 1: you know, we need as little government as we can. 500 00:25:57,680 --> 00:26:00,280 Speaker 1: The jokes about saying you know, I'm from the government, 501 00:26:00,280 --> 00:26:03,040 Speaker 1: I'm here to help you. That doesn't sound like a joke. Now, 502 00:26:03,400 --> 00:26:08,520 Speaker 1: that sounds as if that's actually serious. Um. And I 503 00:26:08,560 --> 00:26:12,320 Speaker 1: think that will create a sense among the population. Not 504 00:26:12,400 --> 00:26:15,040 Speaker 1: those people who had their minds up as several centuries ago. 505 00:26:15,080 --> 00:26:16,639 Speaker 1: They weren't change, but there will be a lot of 506 00:26:16,680 --> 00:26:18,159 Speaker 1: people in the middle who say, well, do you know 507 00:26:18,200 --> 00:26:20,920 Speaker 1: what this government? You know? Do we want to ridicule 508 00:26:21,000 --> 00:26:24,040 Speaker 1: all these pointyheads within the belt Way or are they 509 00:26:24,119 --> 00:26:27,320 Speaker 1: sometimes useful when the economy really falls into trouble. So 510 00:26:27,440 --> 00:26:29,719 Speaker 1: I do think there will be a change in in rhetoric, 511 00:26:29,760 --> 00:26:32,199 Speaker 1: but of course it will depend on how effectively the 512 00:26:32,240 --> 00:26:35,480 Speaker 1: government is seen to have responded, and that looks rather 513 00:26:35,560 --> 00:26:37,840 Speaker 1: different from place to place. I think there will be 514 00:26:37,840 --> 00:26:39,600 Speaker 1: a change in business and how we do business, and 515 00:26:39,640 --> 00:26:42,440 Speaker 1: that's for sure, Howard, I love your insight on how 516 00:26:42,640 --> 00:26:45,120 Speaker 1: the United Kingdom will change in the years to come, 517 00:26:45,160 --> 00:26:47,320 Speaker 1: particularly with banking now. For many people listening to this 518 00:26:47,320 --> 00:26:50,560 Speaker 1: program in the United States, retail banking in the UK 519 00:26:50,720 --> 00:26:53,320 Speaker 1: has changed radically in the last couple of decades. You 520 00:26:53,320 --> 00:26:55,640 Speaker 1: walk into a bank branch now and you'll see very 521 00:26:55,680 --> 00:26:58,399 Speaker 1: few people, a lot of machines, very few people, and 522 00:26:58,440 --> 00:27:00,600 Speaker 1: the machines are now doing the day to day transactions 523 00:27:00,600 --> 00:27:02,000 Speaker 1: that I think a lot of people are still depending 524 00:27:02,040 --> 00:27:05,240 Speaker 1: on people for in America. How does that just accelerate 525 00:27:05,240 --> 00:27:08,200 Speaker 1: that trend in the UK and beyond. Is there something new, 526 00:27:08,240 --> 00:27:10,000 Speaker 1: a new world of banking that we need to consider 527 00:27:10,040 --> 00:27:12,000 Speaker 1: just in terms of your day to day operations and 528 00:27:12,040 --> 00:27:16,760 Speaker 1: how do you use people? Yes, that's the short answer 529 00:27:16,840 --> 00:27:20,600 Speaker 1: that question is. Yet the crisis has meant that a 530 00:27:20,640 --> 00:27:25,200 Speaker 1: lot of people have switched to digital banking who did 531 00:27:25,240 --> 00:27:28,439 Speaker 1: not wish to do so before. Now the millennials have 532 00:27:28,520 --> 00:27:30,840 Speaker 1: already done that, that's not used to them. But we 533 00:27:30,960 --> 00:27:33,280 Speaker 1: had quite a lot of older customers who found this 534 00:27:33,400 --> 00:27:37,560 Speaker 1: rather frightening and intimidating, and they are now switching because 535 00:27:37,600 --> 00:27:41,320 Speaker 1: they've had to, and they are switching quite quickly. So 536 00:27:41,800 --> 00:27:44,040 Speaker 1: we are going to see an acceleration of the trend 537 00:27:44,200 --> 00:27:48,879 Speaker 1: towards remote banking, and in due course that will undoubtedly 538 00:27:49,320 --> 00:27:53,960 Speaker 1: alter things quite a bit. But I guess also the 539 00:27:54,119 --> 00:27:57,800 Speaker 1: interesting thing about the competitive dynamic is that we have 540 00:27:57,920 --> 00:28:02,639 Speaker 1: got quite a lot of new ventures, new fintech companies, 541 00:28:02,960 --> 00:28:06,880 Speaker 1: new digital only banks, etcetera. Some of them are well 542 00:28:06,960 --> 00:28:10,080 Speaker 1: funded and will survive this crisis and come out stronger, 543 00:28:10,480 --> 00:28:12,880 Speaker 1: and some will fall by the wayside. So I think 544 00:28:12,880 --> 00:28:16,399 Speaker 1: we will see an altered competitive environment in two ways. 545 00:28:16,440 --> 00:28:18,919 Speaker 1: One it will be more digital, but to some of 546 00:28:18,960 --> 00:28:22,520 Speaker 1: the marginal players I suspect we'll find it difficult to survive. 547 00:28:23,160 --> 00:28:25,480 Speaker 1: How it fantastic to get your thoughts this morning. Really 548 00:28:25,480 --> 00:28:27,520 Speaker 1: appreciate it. Thanks for jointing us to Howard Davis there 549 00:28:27,960 --> 00:28:30,720 Speaker 1: RBS chairman, joining us on the latest with the job 550 00:28:30,760 --> 00:28:33,000 Speaker 1: situation and the future of banking as well. In the 551 00:28:33,080 --> 00:28:40,320 Speaker 1: UK and beyond, it's National Nurses Week and that is 552 00:28:40,360 --> 00:28:43,720 Speaker 1: a big deal across this nation. This year. We talked 553 00:28:43,760 --> 00:28:48,200 Speaker 1: to Laurence Sour of the Johns Hopkins University. Everyone is 554 00:28:48,200 --> 00:28:52,520 Speaker 1: working incredibly hard to keep up with the patient load, 555 00:28:52,680 --> 00:28:55,200 Speaker 1: keep up with the demands of using the PPE, keep 556 00:28:55,280 --> 00:28:57,959 Speaker 1: up with the demands of working over time, to make 557 00:28:58,000 --> 00:29:01,000 Speaker 1: sure units get turned into COVID in its UM and 558 00:29:01,880 --> 00:29:07,000 Speaker 1: patients are safely cared for. UM. We're incredibly grateful for 559 00:29:07,040 --> 00:29:09,680 Speaker 1: the work of our nurses. It's really just been unbelievable. 560 00:29:10,240 --> 00:29:13,520 Speaker 1: Laurence Sor what I notice about emergency medicine as you 561 00:29:13,600 --> 00:29:16,800 Speaker 1: try to learn every step of the way. What do 562 00:29:16,880 --> 00:29:21,960 Speaker 1: you know now about the therapeutics of this virus versus 563 00:29:22,000 --> 00:29:25,080 Speaker 1: where you were six weeks ago. Well, we just conducted 564 00:29:25,120 --> 00:29:29,520 Speaker 1: the first phase of UM, the ACT trial UM, which 565 00:29:29,560 --> 00:29:31,600 Speaker 1: is the NIH adaptive trial. In the first arm was 566 00:29:31,680 --> 00:29:34,560 Speaker 1: rem desivare. So we are starting to see some positive data, 567 00:29:34,880 --> 00:29:38,080 Speaker 1: which is really exciting. UM. We're we're learning a lot 568 00:29:38,120 --> 00:29:40,720 Speaker 1: about some of the other drugs that have been tried 569 00:29:40,920 --> 00:29:44,960 Speaker 1: hydroxy chloroquine chloroquine UM. We're learning a lot about proning 570 00:29:44,960 --> 00:29:49,040 Speaker 1: of patients. So there's a lot of studies underway, um 571 00:29:49,240 --> 00:29:52,040 Speaker 1: all throughout the hospital. Laurence Sward talk to me a 572 00:29:52,080 --> 00:29:55,520 Speaker 1: little bit about how first responders are are feeling about, 573 00:29:55,960 --> 00:29:59,280 Speaker 1: you know, the president and the administration saying that they 574 00:29:59,280 --> 00:30:03,200 Speaker 1: want to reopen in the economy, even if it means more, 575 00:30:03,240 --> 00:30:07,440 Speaker 1: you know, rise in debts and infections. How many percentage 576 00:30:07,440 --> 00:30:10,400 Speaker 1: of the population we think have had COVID. You know, 577 00:30:10,560 --> 00:30:12,800 Speaker 1: do we need much more testing to try and understand 578 00:30:13,240 --> 00:30:18,400 Speaker 1: where the viruses and in what phase we are exactly? Yeah, absolutely. UM. 579 00:30:18,640 --> 00:30:21,520 Speaker 1: So I think the first word that comes to mind 580 00:30:21,560 --> 00:30:24,080 Speaker 1: is scared. Um. When you're in the hospital every day 581 00:30:24,240 --> 00:30:28,240 Speaker 1: and you're seeing these patients come in quite sick, and 582 00:30:28,280 --> 00:30:31,160 Speaker 1: knowing that there's so many of the so many of 583 00:30:31,160 --> 00:30:35,240 Speaker 1: the population who are not infected UM yet and who 584 00:30:35,280 --> 00:30:39,640 Speaker 1: maybe as states, as states and locations start to reopen, 585 00:30:40,240 --> 00:30:43,160 Speaker 1: we get really nervous. Um. We're finally starting to see 586 00:30:43,160 --> 00:30:45,360 Speaker 1: a bit of an easing in the number of cases 587 00:30:46,200 --> 00:30:50,320 Speaker 1: in Maryland, and we um, we approach that easing with 588 00:30:50,440 --> 00:30:54,160 Speaker 1: cautious optimism because you know, as you know, as you 589 00:30:54,200 --> 00:30:56,760 Speaker 1: start to reopen, you'll see a spike in cases and 590 00:30:56,560 --> 00:30:58,920 Speaker 1: and in several of the states that are already starting 591 00:30:58,960 --> 00:31:02,080 Speaker 1: to ease restrictions, their cases are still on rapid increase. 592 00:31:02,160 --> 00:31:05,720 Speaker 1: So um, you know in states like Florida, Nebraska, other 593 00:31:05,760 --> 00:31:10,200 Speaker 1: places where they're starting to ease the restrictions there, their 594 00:31:10,280 --> 00:31:13,440 Speaker 1: their case counts are actually on the rise. So I 595 00:31:13,480 --> 00:31:16,240 Speaker 1: think we are all in the health care setting nervous 596 00:31:16,280 --> 00:31:20,120 Speaker 1: that uh, these restrictions will be eased too quickly and 597 00:31:20,120 --> 00:31:22,680 Speaker 1: we'll see a massive spike in the number of cases. 598 00:31:23,320 --> 00:31:25,760 Speaker 1: Do we have more drugs now? And how close are 599 00:31:25,800 --> 00:31:28,360 Speaker 1: we to a vaccine to try and fight this COVID nineteen. 600 00:31:28,720 --> 00:31:31,080 Speaker 1: I think we're still a ways away from a vaccine. 601 00:31:31,080 --> 00:31:34,240 Speaker 1: I mean everyone is app is working over time on 602 00:31:35,040 --> 00:31:38,360 Speaker 1: on the development of a vaccine UM and in fact, 603 00:31:38,440 --> 00:31:42,360 Speaker 1: there was a summit uh late last or sorry earlier 604 00:31:42,440 --> 00:31:46,560 Speaker 1: last week specifically on focused on racing to get a 605 00:31:46,600 --> 00:31:50,280 Speaker 1: vaccine up and up and running. It's a true toward 606 00:31:50,320 --> 00:31:54,440 Speaker 1: a force of global efforts to develop a coronavirus vaccine. 607 00:31:54,880 --> 00:31:59,840 Speaker 1: On the on the therapeutic side, we have remed does 608 00:31:59,840 --> 00:32:02,600 Speaker 1: of year. We saw the positive data come out from 609 00:32:02,720 --> 00:32:05,560 Speaker 1: the first phase of that clinical trial and several other 610 00:32:05,600 --> 00:32:09,280 Speaker 1: clinical trials around reim does a hear um so it's 611 00:32:09,280 --> 00:32:13,080 Speaker 1: it is definitely looking promising. The data are looking promising, 612 00:32:13,120 --> 00:32:15,880 Speaker 1: but you know that is an IVY infusion drug, so 613 00:32:16,000 --> 00:32:19,040 Speaker 1: people have to be given in the hospital. So I 614 00:32:19,080 --> 00:32:22,000 Speaker 1: think there's a lot of people working on drugs that 615 00:32:22,040 --> 00:32:24,920 Speaker 1: can be given orally drugs that can be given administered 616 00:32:24,920 --> 00:32:27,640 Speaker 1: at Homer in the outpatient setting. UM, So we have 617 00:32:27,680 --> 00:32:31,240 Speaker 1: a long ways to go. Laurence So our expert in 618 00:32:31,400 --> 00:32:34,760 Speaker 1: emergency room medicine at the Johns Hopkins University and of 619 00:32:34,800 --> 00:32:37,720 Speaker 1: course part of the Bloomberg School of Public Health. And 620 00:32:37,720 --> 00:32:42,320 Speaker 1: we thank Michael Bloomberg for his support of this company, 621 00:32:42,400 --> 00:32:45,600 Speaker 1: the terminal company, Bloomberg LP, and also this radio television 622 00:32:45,640 --> 00:32:51,000 Speaker 1: station in his philanthropy to his Johns Hopkins University. Thanks 623 00:32:51,000 --> 00:32:55,240 Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen 624 00:32:55,480 --> 00:33:00,280 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever pod cast 625 00:33:00,320 --> 00:33:04,520 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 626 00:33:04,560 --> 00:33:08,400 Speaker 1: the podcast. You can always catch us worldwide. 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