Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: begin this morning with the President of the United States
Speaker 1: saying the following. Will some people be affected, yes, will
Speaker 1: some people be affected badly? Yes, But we have to
Speaker 1: get our country open, and we have to get it
Speaker 1: open soon. Let's turn out to David Balen, a city
Speaker 1: private bank, the chief investment officer. David, help me out
Speaker 1: with this one. As we reopen, is there a reopening
Speaker 1: rotation in this market? If so, what does it look like? Well,
Speaker 1: in terms of what we're what we're expecting to see, is,
Speaker 1: you know, a reopening that is very much focused on
Speaker 1: two big trends. One is to refill the supply lines
Speaker 1: and you know of the for all industrial products and
Speaker 1: capital expenditures in the second one associated with the consumer um.
Speaker 1: We expected that reopening is right. This quarter is all
Speaker 1: about refilling that pipeline and then obviously the rebound will
Speaker 1: take place in the numbers in Q three and as
Speaker 1: you've been talking about on the show today, we're going
Speaker 1: to continue to see these incredibly bad numbers. And what
Speaker 1: we're gonna need to see on the opposite side of
Speaker 1: this is an enormous amount of re employment. Of the
Speaker 1: thirty odd million people, let's say in the United States
Speaker 1: who are unemployed, we would want to see half of
Speaker 1: those people are more reemployed as we entered Q three.
Speaker 1: And if that's the case, then you can really have
Speaker 1: your meeting the market expectations here. So to me, that's
Speaker 1: what we're gonna be looking for, because that is what's
Speaker 1: going to drive, in my mind, the the the economic power,
Speaker 1: the recovery that will give people confidence that the numbers
Speaker 1: in the markets today are real. How far is the
Speaker 1: stock market looking out right now? The textbook tells me
Speaker 1: six months. We understand that's a guestimate, David. How far
Speaker 1: do you think the stock market is guessing out? Yeah?
Speaker 1: I think that the stock market Tom has to be
Speaker 1: guessing out now about a year. And here's why. First
Speaker 1: of all, you see that nobody is willing to make
Speaker 1: really good predictions about what's actually going to happen quarter
Speaker 1: to quarter for all good reasons. These numbers are unlike
Speaker 1: anything that we've ever seen, including in the Great Financial Crisis.
Speaker 1: So what we need to see as a recovery right
Speaker 1: where we get through this trough and then we actually
Speaker 1: experience the type of earnings that you fore and we
Speaker 1: get some clarity on that, and we're expecting a fifty
Speaker 1: so a very sharp decline you know about decline in
Speaker 1: EPs for the SMP and half of that would be
Speaker 1: captured back in. So once we get into Q three
Speaker 1: and we see the recovery, people will need to believe
Speaker 1: that what they see in Q three will be possible
Speaker 1: and that will be the key determinant as to whether
Speaker 1: or not this market can maintain the types of valuations
Speaker 1: that are being projected when within the elasticities on any
Speaker 1: given big companies UH income statement. What does furlow mean?
Speaker 1: Do you? I mean, John? I mean you, you're up
Speaker 1: to speed on these headlines better than me. British Airways
Speaker 1: is furlowing? You know, general mode as a CFO is
Speaker 1: going to be on with Bloomberg later. I'll bet you
Speaker 1: theugh furlow. What's furlough mean? Well, in terms of what
Speaker 1: we're looking at, furlough means obviously temporary unemployment people who's
Speaker 1: where the company's intention is to re employ them, and
Speaker 1: furlough also means, at least in the US, that those
Speaker 1: furloughed employees will get benefits associated with either company loans
Speaker 1: that are forgiven or because of unemployment benefits that are
Speaker 1: made available. Uh. And then when that furlow period is over,
Speaker 1: there presumably reemployed, and then we'll ultimately be paid by
Speaker 1: the company. David. This sort of goes to the idea
Speaker 1: of what the economy will look like. On the other side,
Speaker 1: the idea of furlowing employees rather than laying them off
Speaker 1: outright because people are expecting the economy to recover. I'm
Speaker 1: struck by the borrowings of some junk raded companies. They
Speaker 1: are paying more than ten percent yields to borrow money
Speaker 1: for four years, and I'm wondering whether the cure is
Speaker 1: worth the worse than the ailment. In other words, how
Speaker 1: many of these companies that are piling on debt and
Speaker 1: keeping employees online are not going to survive after the
Speaker 1: pandemic because they've just simply become overleveraged given economic growth.
Speaker 1: It's it's one of the major issues that you know,
Speaker 1: an unintended and unintended consequences of the FED stepping into
Speaker 1: the market. What you're talking about is the fact that
Speaker 1: the companies that might not have been able to borrow
Speaker 1: are now able to go to the junk market, able
Speaker 1: to obtain, as you said, capital at very expensive rates
Speaker 1: to continue their operations, even though they were probably marginal
Speaker 1: prior to that recapitalization. So the issue there is what
Speaker 1: is the strength of the recovery. And one of the
Speaker 1: reasons why we're very concerned about aspects of the high
Speaker 1: yield bond market is precisely because there is really no
Speaker 1: trajectory for those companies, you know, given the slowness of
Speaker 1: what we expect this recovery will be over the next
Speaker 1: two years, to really give them any acceleration in their businesses.
Speaker 1: So to your point, a lot of companies have seen
Speaker 1: the postponement of what ultimately will be, you know, either
Speaker 1: the failure of the company, the merger of the company,
Speaker 1: or the restructuring of the company, and that's really one
Speaker 1: of the unintended consequences. We're very carefully looking at credits
Speaker 1: at City Private Bank to make sure we do not
Speaker 1: put client capital into those companies because even though the
Speaker 1: yields look very attractive, they are much more risky than
Speaker 1: they appear. So, David, can you square the idea that
Speaker 1: sort of bearish feel with respect to the high old
Speaker 1: bond market with your bullish call on small cap stocks
Speaker 1: which often track the high old bond market in terms
Speaker 1: of performance. That is a great question also, and I
Speaker 1: think you have to look at the balance sheets of
Speaker 1: those companies. So what we've done is we've divided the
Speaker 1: high old market itself. Will We've taken out all of
Speaker 1: the energy securities and taking a look at the remainder
Speaker 1: of the high old mark market bond market and the
Speaker 1: companies that are borrowing those, and then we've further divided
Speaker 1: those companies into those that have resilient business models i e.
Speaker 1: Which have not been as impacted by this more ket
Speaker 1: conditions and specifically associated with healthcare, consumer durables, and things
Speaker 1: like that. Companies that supply parts and services two industries
Speaker 1: that are going to recover. An example would be airline
Speaker 1: services rather than airlines. And by identifying all of those subsegments,
Speaker 1: you're able to build a portfolio companies that are very
Speaker 1: highly likely to rebound and to thrive, and to your
Speaker 1: other point, to the extent that you identify companies that
Speaker 1: are either over leveled or whether business models themselves are
Speaker 1: not in essential categories, we are going to avoid them.
Speaker 1: But it's this level of discrimination. And by the way,
Speaker 1: the market has been fairly discriminating in this regard when
Speaker 1: when you take a little bit small and MidCap equity prices,
Speaker 1: this is the kind of work that you have to
Speaker 1: do in terms of portfolio construction now that just six
Speaker 1: months ago you really didn't need to do because things
Speaker 1: were relatively sanguine. Would have thrive under what conditions, you know,
Speaker 1: let's get back to the main story. We re outake
Speaker 1: care and there's clearly a massive tower risk of a
Speaker 1: second wife. Now for some people, that's not a tower risk,
Speaker 1: that's a base case. Isn't that likely to linger for
Speaker 1: the next several months, So it is a base case.
Speaker 1: And I think that this whole debate in the market
Speaker 1: is to whether or not there is a second wave.
Speaker 1: We are going to see a material increase in the
Speaker 1: number of coronavirus cases, whether that be in Europe or
Speaker 1: in the United States. And in the US you're actually
Speaker 1: going to see potentially even more bad dudes in that
Speaker 1: regard because of the nature of the rolling way that
Speaker 1: they handled the lockdowns and are now handling the the
Speaker 1: reopening of the economy. So the question is do these
Speaker 1: increases in virus cases ultimately once again impact the healthcare system.
Speaker 1: You have to go back to the first premise. The
Speaker 1: reason why we took the step of lockdown was because
Speaker 1: we thought we would overwhelm healthcare systems and completely have
Speaker 1: people literally dying at their homes, dying in the streets,
Speaker 1: you know, and things like that. Unwilling to do that
Speaker 1: as a society, we then stepped into to stop that.
Speaker 1: And now we're going to reopen. And the question is
Speaker 1: how do we make sure that does not happen again.
Speaker 1: And there's only two ways for that to be true.
Speaker 1: One is that the amount of disease goes down, and
Speaker 1: that's this concept of a trough between the waves. And
Speaker 1: then the second is that we know that there will
Speaker 1: be as second wave of barring your treatment or a
Speaker 1: vaccine um and that that the question is how big
Speaker 1: that wave is, and it right now in the United
Speaker 1: States look looks like it could accelerate because of the
Speaker 1: fact that we didn't tamp down the disease sufficiently. David
Speaker 1: gred Skate thow us on a shot. Real appreciate David
Speaker 1: Betton sending up best to the same one City Private
Speaker 1: Banks chief Investment officer. This has been one of the
Speaker 1: pleasant surprises of this tragedy. A weekly conversation even more
Speaker 1: than that with the Lieutenant Governor of the Empire State,
Speaker 1: Kathey Hokel joins us right now, Kathy, I want to
Speaker 1: ask a dumb question. Government can affect policy that makes
Speaker 1: things easy. Why can't the State of New York say
Speaker 1: you can't walk on the streets of New York, New
Speaker 1: York State without a mask on and those plastic gloves on,
Speaker 1: those latex gloves on. Wouldn't that immediately build confidence? We
Speaker 1: build confidence by having the people who listened to us
Speaker 1: every single day as we give very transparent press officers
Speaker 1: and tell like this. We tell them the truth. We
Speaker 1: tell them that if they wear the mask, they couldnt
Speaker 1: just save themselves but also their families and they have
Speaker 1: a responsibility. But we don't have the resources nor the
Speaker 1: desire to have a police state where we go through
Speaker 1: and have to try to convince ninety million people to it. Here.
Speaker 1: We'd love to, but we're not going to that's not
Speaker 1: who we are, it's not our character, but we want
Speaker 1: that same results, and we're appealing to people and their
Speaker 1: desire to protect themselves and their families and friends and neighbors,
Speaker 1: and thus far, I have to say, we are starting
Speaker 1: to see some cracks in this, but people have really
Speaker 1: uniformly throughout the States been adhering to this, and that's
Speaker 1: really actually quite astounding that they are the ones, the
Speaker 1: New Yorkers are the ones who really changed the trend.
Speaker 1: If they hadn't been doing the social disting and now
Speaker 1: the mask, we'd be in a far worse place. So
Speaker 1: you'll see outliers and we hope we can bring them
Speaker 1: back into the fold. But right now I think we're
Speaker 1: doing very well. Governor. When we talk about a May
Speaker 1: fifteenth three opening in New York, we are talking about upstate.
Speaker 1: We are not talking about New York City. How much
Speaker 1: longer do you think it will take for the major
Speaker 1: metropolitan areas in the region to reopen. We have put
Speaker 1: in place the number of metrics better really come from
Speaker 1: the CBC that we're using up state first of all,
Speaker 1: and that is to look at the hospitalization rate, the
Speaker 1: number of vice the you bed being used, the rate
Speaker 1: of infection, how it's spreading. Also the ability to have
Speaker 1: more diagnostic testing available as well as contact tracers. So
Speaker 1: the benefit for New York City is that we will
Speaker 1: be able to trial run this upstate. I'm managing parts
Speaker 1: of upstate Western New York area and looking at these metrics.
Speaker 1: Do we hit them by May fifteenth? If so, we'll
Speaker 1: slowly open manufacturing, some retail we could pick up on
Speaker 1: the curve and construction. This is the same model that
Speaker 1: we would use downstate. But then we're going to take
Speaker 1: two weeks and testency whether or not the numbers have
Speaker 1: gone upwards downwards day the same. And so it's this
Speaker 1: data that's going to help us drive the reopening of
Speaker 1: New York City, which we have to get right. We
Speaker 1: cannot do it a day to really, but not a
Speaker 1: day longer than necessary. That we don't want to have
Speaker 1: the economy held back any longer than is necessary. But
Speaker 1: also the safety is going to continue to be our
Speaker 1: our guide guiding stars. So I think it's good for
Speaker 1: New York City. I don't think there's a single person
Speaker 1: New York City who thinks they're ready. They know that
Speaker 1: they're still seeing the numbers but upstate, we can do
Speaker 1: a trial one of this and then implement that in
Speaker 1: New York City in a few weeks. So we don't
Speaker 1: have a timeline for New York City just yet. Kathy.
Speaker 1: I'm going to ask you, Delica a question, and I
Speaker 1: asked it with the deepest amount of understanding of sympathy
Speaker 1: for the position you're in. When Governor Cuomo says the
Speaker 1: fast that we reopen, the lower the economic costs, but
Speaker 1: the more lives are lost, you guys are in a
Speaker 1: really tough position now where you have to balance reopen
Speaker 1: the economy with loss of life. And when that's communicated
Speaker 1: from Governor Cuomo, it comes across really sincerely, very authentically,
Speaker 1: and I think it resonates with a lot of people
Speaker 1: listening to these news conferences. But behind closed doors, when
Speaker 1: you have to make that calculation, can you give us
Speaker 1: a deeper understanding of how you make those decisions? We've
Speaker 1: heart wrenching. No one in public life ever expects they're
Speaker 1: going to have to make these types of decisions. We
Speaker 1: go into public life to make people's lives better, give
Speaker 1: them education, health care, opportunity for good jobs. You never
Speaker 1: think that you're going to have to be in the
Speaker 1: position to determine between life and death. But it's very
Speaker 1: clear to us we will choose life over death. That
Speaker 1: that has been what has guided us. It's not a
Speaker 1: gray area, it's black and white. And we also know
Speaker 1: that you can have a livelihood without a life. So
Speaker 1: people talk about what we have to bring back to
Speaker 1: economic guests. We do, but we have to bring it
Speaker 1: back in a thoughtful way that will protect people's lives
Speaker 1: and also give employees and customers the assurance that when
Speaker 1: they come to your establishment they will be safe. That's
Speaker 1: why we have to get this right. We could flip
Speaker 1: a switch and open it tomorrow, but there's not a
Speaker 1: single New Yorker, very few who think that it's safe
Speaker 1: enough to go out there now, and they're still seeing
Speaker 1: the numbers that we are. We will get to that point,
Speaker 1: and I'm going to tell you right now, we're already
Speaker 1: planning for a post pandemic future that's even better. Not
Speaker 1: just reopening our economy, but reimagining areas like the workplace,
Speaker 1: how we can make it more flexible for people, Reimagining
Speaker 1: education and making sure it's more accessible truth technology, and
Speaker 1: all the experience that our teachers have had to go
Speaker 1: through teaching children at home in our colleges, and how
Speaker 1: they've had to a debt. We have an opportunity here
Speaker 1: to make this state even stronger than before, and that's
Speaker 1: what we're doing. But we're going to get it right.
Speaker 1: Lieutenant Governor, you said that there really isn't gray area.
Speaker 1: I am guessing that President Trump may agree. He was
Speaker 1: talking about how there are losses on either side. You're
Speaker 1: seeing mental illness rise, uh, you're seeing the the the
Speaker 1: concern about substance abuse, domestic violence. Even Governor Cuomo has
Speaker 1: talked about this. It's not necessarily all all things being equal.
Speaker 1: I'm just wondering how you weigh things on that side.
Speaker 1: As a jobless rate soars to levels not seen in
Speaker 1: our history. Yeah, this is unprecedent. You know, we're not
Speaker 1: trying to increase the job We're trying to save people's lives.
Speaker 1: But we're very thoughtful in this. That's why we've put
Speaker 1: in place different opportunities for people to get assistance. We
Speaker 1: have a hotline and emotional health hotline for not just
Speaker 1: first responders, who I'm sure are going to have lifelong
Speaker 1: impacts on their mental health because of what they've had
Speaker 1: to see and endure during this crisis. But people who
Speaker 1: have been isolated and people who are lonely, and those
Speaker 1: are dealing with the the the havoc in their lives
Speaker 1: from having lost a job when they never dreamed they'd
Speaker 1: be having to spend hours on the phone trying to
Speaker 1: get an unemployment application. And so we know there's a
Speaker 1: severe human toll, and we have assistance for them. We
Speaker 1: have over nineties thousand people answering phone calls to help them.
Speaker 1: But at the end of the day, New Yorkers are resilient.
Speaker 1: We are a tough bunch. We will come out of
Speaker 1: this stronger as long as we continue to protect each
Speaker 1: other with the social distancing and the mass and it's
Speaker 1: not an easy equation, but we're going to get Yeah,
Speaker 1: Lieutenant Governor, thank you so much. This is a joyful
Speaker 1: thank you, Lieutenant Governor. Every week. Joining us right now
Speaker 1: from JP Morgan is John Norman. He has been a
Speaker 1: wonderful supporter of all that we do with surveillance because
Speaker 1: of a wonderful synthesis in his research note across equities, bonds, currencies, commodities. John,
Speaker 1: just exceptional historic import coming up in three days. What
Speaker 1: do you hear from Bruce Casman and your economists that
Speaker 1: you fold into market choice. To me, the most important
Speaker 1: takeaway from the work of our economists is that it's
Speaker 1: going to be an extremely abnormal recovery, meaning it's going
Speaker 1: to take years to recruit the lost output and the
Speaker 1: lost jobs, and that usually equates to a multi year
Speaker 1: process of recouping the lost profits. That that's got to
Speaker 1: be a constraint on how much markets can we trace,
Speaker 1: even if they go up, So that that shape of
Speaker 1: the recovery, to me, is a lot of what is
Speaker 1: the views on the asset markets going forward. The views
Speaker 1: on the asset markets don't seem that dire. If you
Speaker 1: take a look at stock prices, particularly within the tech sector,
Speaker 1: do you think that they're accurately pricing in and I'm
Speaker 1: not just talking about big tech, just broadly, do you
Speaker 1: think that equities are pricing in what you're talking about,
Speaker 1: which is a prolonged period of time with these destroyed
Speaker 1: jobs not coming back anytime soon. No, I think the
Speaker 1: price the over optimistically, meaning they seem to be pricing
Speaker 1: and extremely smooth transition from the lockdown to the restart
Speaker 1: of the economies. So even though the levels that we're
Speaker 1: seeing right now in markets. UM may may may be
Speaker 1: levels that that UH should be seen in six months time.
Speaker 1: It's it's a bit premature to be seeing these now.
Speaker 1: It essentially assumes that the restart is going to be
Speaker 1: all free, and I think it's going to be a
Speaker 1: little more hazard prone than that. So let's talk about it, John,
Speaker 1: How you a capital with all of that in mind?
Speaker 1: So for me, you want to be allocating to markets
Speaker 1: that are still very cheap and have a very direct
Speaker 1: central bank back stop. And to me, this is why
Speaker 1: the credit markets are better risk reward than the equity
Speaker 1: markets over the over this transition period and to restart
Speaker 1: the economies, even though I think equity markets will be
Speaker 1: you know, still higher by by year end, it's just
Speaker 1: sort of recognizing that as we go through this very
Speaker 1: awkward restarting process, UM, there are going to be some
Speaker 1: uncertainties around out the corporate profits outlook, and and it's
Speaker 1: better to have exposure to a market where at least
Speaker 1: someone else is buying regardless of the news flowers and
Speaker 1: that's someone of course is the FED in terms of
Speaker 1: what it's doing in the high grade and high young market.
Speaker 1: So I feel like that's the best risk reward for now,
Speaker 1: even though I still think stocks you're gonna keep up
Speaker 1: performing bonds, let's say over the over the next three quarters.
Speaker 1: This is something you call it. Bob Michael talked about
Speaker 1: as well, co investing with the Federal Reserve, And I
Speaker 1: just wanted to Johmp from your perspective, whether that takes
Speaker 1: you to the United States of the Europe, the United
Speaker 1: States over the rest of the world, just geographically speaking,
Speaker 1: the regional bias, It definitely does. Because there's there's two
Speaker 1: dimensions to this. One is that the FED is just
Speaker 1: a much greater participant in in so many sectors of
Speaker 1: US financial markets compared to the ECP. The ECB actually
Speaker 1: has more latitude the ft the e C. We could
Speaker 1: buy stocks to days we wanted to, but it doesn't.
Speaker 1: And it has latitudes to buy high yield but it doesn't.
Speaker 1: So the FAT is the one that's the the broadest
Speaker 1: investor uh and playing. But there's another dimension to it
Speaker 1: as well, which is when you think about what sectors
Speaker 1: are the end game winners in a post COVID environment,
Speaker 1: it's it's tag communications, and it's and its healthcare, And
Speaker 1: these are ones that probably comprise, you know, a good
Speaker 1: fortent of the US equity market. So if you just
Speaker 1: kind of recognize that there's a structural set of winners here,
Speaker 1: that those winners are much more evident and dominant in
Speaker 1: the US equity market and other equity markets, it's uh,
Speaker 1: it's a hands down view that the US stock market
Speaker 1: is going to continue on performing. John implicit in your
Speaker 1: comments is this feeling like there it will be no
Speaker 1: international consequence to the US is printing trillions of dollars
Speaker 1: of debt, with the Federal reserves balance sheet poise to
Speaker 1: exceed ten trillion dollars by the end of the year.
Speaker 1: A lot of times in the past this would have
Speaker 1: been expressed in a weaker dollar versus other currencies, but
Speaker 1: weaker versus what especially given some of the existential acts
Speaker 1: right now over in the euroregion, Is that true that
Speaker 1: basically there is no consequence to the US monetizing its
Speaker 1: debt and increasing its deficit dramatically. There will be a
Speaker 1: consequence to this, It's more question of time horizon and
Speaker 1: as you suggest, against what asset specifically, so um over
Speaker 1: the long term, there's a concern this could be inflationary
Speaker 1: that that is not a concern right now or for
Speaker 1: this year next year, because you could have particuarly unemployment
Speaker 1: in the in the US um But there is a
Speaker 1: consequence in terms of real interest rates, they're they're extremely
Speaker 1: low in the US and that makes it difficult to
Speaker 1: the US to attract financing. And I think that's one
Speaker 1: of them why you do see the dollars slipping lower
Speaker 1: versus the end and it slips lower versus the goal
Speaker 1: price even though stock and credit markets are very healthy
Speaker 1: right now. So there's there's some I think residual anxiety
Speaker 1: around the dollar, a currency which is feeding through into
Speaker 1: some things like the n gold even though it's it's
Speaker 1: certainly not a you know, a fire sale. Where it
Speaker 1: gets more interesting is if you're in a in a
Speaker 1: much better state of the world in six months time,
Speaker 1: what's the demand for US assets when qwie is bearing
Speaker 1: down on real interest rates and other parts of picking up.
Speaker 1: That's when I think you could see something much bigger
Speaker 1: in terms of payback against the dollar versus and own
Speaker 1: a range of currencies. But that's something for six months
Speaker 1: from now. John, We're six minutes away from the beginning
Speaker 1: of three days of history in America within this economic
Speaker 1: contraction and the sum of it distilled on long term
Speaker 1: planning for our global Wall Street is what's the new
Speaker 1: actual rearial assumption? Do you change your actuarial assumption of
Speaker 1: long term investible assets? Do you have to lower it
Speaker 1: of disinflation or dare say, do you have to actually
Speaker 1: raise it because you see it an inflationary impulse out
Speaker 1: there somewhere. No. I think what you have to do
Speaker 1: is rather than be macro about it, you actually have
Speaker 1: to be more micro and you have to sort of
Speaker 1: recognize that some sectors are either not going to exist
Speaker 1: or the you're not going to exist with nearly the
Speaker 1: same profitability as as they used to, and so you're
Speaker 1: you really have to reset your assumptions around profits, growth
Speaker 1: and margins on a sector bisector basis. And I think
Speaker 1: that's the kind of arithmetic that people just haven't really
Speaker 1: gotten around to doing yet to kind of grappling with
Speaker 1: the first order issue, which is the recession. But there's
Speaker 1: a whole lot more thinking that around what's bible as
Speaker 1: a as a sector and you kind of aggregate those
Speaker 1: into what it might be for profit market as a whole.
Speaker 1: One final question, John Norman we saw Apple or a
Speaker 1: glorious bond effort. I think it was two days ago.
Speaker 1: Everybody can issue bonds right now, can't they? What is
Speaker 1: that signal to our listeners. I don't think everyone can
Speaker 1: issue bonds. I think if you're a or the borrow
Speaker 1: where you can, and that that's a very important distinction.
Speaker 1: You know, when you think about UM, what what booming
Speaker 1: issuance is telling us? It is telling us clearly does
Speaker 1: a demand for fixing compaigner clearly does a lot of
Speaker 1: faith that certain UM higher rated borrowers are are still
Speaker 1: going to be around after after COVID. But it's it's
Speaker 1: a lower quality part that one really has to worry about.
Speaker 1: And obviously the lower quality segments are the ones that
Speaker 1: have really grown over the past several years of of
Speaker 1: easy money. So I wouldn't misread that booming issuance as
Speaker 1: a as a like a health check information across the board. Hi, John,
Speaker 1: great to catch up with the appreciate it's on this morning.
Speaker 1: Sam My best of it saying John Norman that JP
Speaker 1: Morgan had a cross asset fundamental strategy place decide that
Speaker 1: how it Davis? So how it Davis joins us? Now
Speaker 1: the obvious cham and how fantastic to have you with
Speaker 1: us on the program. Can we just spend a moment
Speaker 1: reflecting on these devastating jobs figures that are coming through
Speaker 1: here in America and adaptly likely to be the same
Speaker 1: in the United Kingdom as well, albeit on a different scale.
Speaker 1: How how are you thinking about the recovery and how
Speaker 1: quickly this labor market heals well? The first thing I
Speaker 1: have to think about is the personal tragedies that must
Speaker 1: lie behind these numbers, because there must be a lot
Speaker 1: of very worried people out there. I think that we
Speaker 1: desperately need now some sense of direction on the recovery.
Speaker 1: In some European countries, notably in Germany. Also at some
Speaker 1: extent now in France we are seeing a bit of
Speaker 1: direction and a bit of loosening up, which gives people
Speaker 1: some optimism and might mean that these job losses were temporary.
Speaker 1: But at the moment here I'm afraid we don't have that.
Speaker 1: But we've been told is that we may be told
Speaker 1: something on Sunday about the way in which the recovery
Speaker 1: will emerge. And I think that's increasingly important because the
Speaker 1: assumption behind a lot of government schemes and a lot
Speaker 1: of bank lending has been that we face a V
Speaker 1: shaped recovery, that people will come very quickly up the
Speaker 1: other side of this canyon. But the longer it goes on,
Speaker 1: the much less certain that recovery is. Howard, when you
Speaker 1: look at the Royal Bank of Scotland's workforce and you
Speaker 1: look at the fact that so many people are working
Speaker 1: remotely and getting it done, are you expecting a smaller
Speaker 1: workforce and one that is less centralized in a big
Speaker 1: city going forward? For your bank, we are very busy
Speaker 1: at the moment. We've managed to keep our branches open
Speaker 1: and our I T people, particularly those people dealing with
Speaker 1: small businesses or dealing with people getting mortgage interest holidays,
Speaker 1: are very busy. So we have said we're not laying
Speaker 1: people off at this point. We're not asking for support
Speaker 1: from the government now. In the longer run, if you
Speaker 1: look and say, what are we learning in this crisis
Speaker 1: about the way in which we can operate, you know
Speaker 1: you have to have you will have to ask yourself
Speaker 1: some questions about location of people and numbers of people,
Speaker 1: et cetera. But for the moment, you know, the job
Speaker 1: unemployment numbers are not coming from us because we are
Speaker 1: pretty we are pretty frantic. Actually, your charm, Howard Davies,
Speaker 1: is as a young lad at Oxford, you had the
Speaker 1: courage to study modern history and not something fancy like
Speaker 1: medieval history or the classics and all the rest of it.
Speaker 1: Tell us about our modern history forward, about government in
Speaker 1: our society, and particularly your take on the United States
Speaker 1: of America. Are we actually going to be more government centric?
Speaker 1: Are we gonna push back against the ethos of Ronald Reagan?
Speaker 1: I think you probably. Ah. I'm less expert obviously on
Speaker 1: the United States than I am on the UK, but
Speaker 1: I would have thought that the knee jack rhetoric that says,
Speaker 1: you know, we need as little government as we can.
Speaker 1: The jokes about saying you know, I'm from the government,
Speaker 1: I'm here to help you. That doesn't sound like a joke. Now,
Speaker 1: that sounds as if that's actually serious. Um. And I
Speaker 1: think that will create a sense among the population. Not
Speaker 1: those people who had their minds up as several centuries ago.
Speaker 1: They weren't change, but there will be a lot of
Speaker 1: people in the middle who say, well, do you know
Speaker 1: what this government? You know? Do we want to ridicule
Speaker 1: all these pointyheads within the belt Way or are they
Speaker 1: sometimes useful when the economy really falls into trouble. So
Speaker 1: I do think there will be a change in in rhetoric,
Speaker 1: but of course it will depend on how effectively the
Speaker 1: government is seen to have responded, and that looks rather
Speaker 1: different from place to place. I think there will be
Speaker 1: a change in business and how we do business, and
Speaker 1: that's for sure, Howard, I love your insight on how
Speaker 1: the United Kingdom will change in the years to come,
Speaker 1: particularly with banking now. For many people listening to this
Speaker 1: program in the United States, retail banking in the UK
Speaker 1: has changed radically in the last couple of decades. You
Speaker 1: walk into a bank branch now and you'll see very
Speaker 1: few people, a lot of machines, very few people, and
Speaker 1: the machines are now doing the day to day transactions
Speaker 1: that I think a lot of people are still depending
Speaker 1: on people for in America. How does that just accelerate
Speaker 1: that trend in the UK and beyond. Is there something new,
Speaker 1: a new world of banking that we need to consider
Speaker 1: just in terms of your day to day operations and
Speaker 1: how do you use people? Yes, that's the short answer
Speaker 1: that question is. Yet the crisis has meant that a
Speaker 1: lot of people have switched to digital banking who did
Speaker 1: not wish to do so before. Now the millennials have
Speaker 1: already done that, that's not used to them. But we
Speaker 1: had quite a lot of older customers who found this
Speaker 1: rather frightening and intimidating, and they are now switching because
Speaker 1: they've had to, and they are switching quite quickly. So
Speaker 1: we are going to see an acceleration of the trend
Speaker 1: towards remote banking, and in due course that will undoubtedly
Speaker 1: alter things quite a bit. But I guess also the
Speaker 1: interesting thing about the competitive dynamic is that we have
Speaker 1: got quite a lot of new ventures, new fintech companies,
Speaker 1: new digital only banks, etcetera. Some of them are well
Speaker 1: funded and will survive this crisis and come out stronger,
Speaker 1: and some will fall by the wayside. So I think
Speaker 1: we will see an altered competitive environment in two ways.
Speaker 1: One it will be more digital, but to some of
Speaker 1: the marginal players I suspect we'll find it difficult to survive.
Speaker 1: How it fantastic to get your thoughts this morning. Really
Speaker 1: appreciate it. Thanks for jointing us to Howard Davis there
Speaker 1: RBS chairman, joining us on the latest with the job
Speaker 1: situation and the future of banking as well. In the
Speaker 1: UK and beyond, it's National Nurses Week and that is
Speaker 1: a big deal across this nation. This year. We talked
Speaker 1: to Laurence Sour of the Johns Hopkins University. Everyone is
Speaker 1: working incredibly hard to keep up with the patient load,
Speaker 1: keep up with the demands of using the PPE, keep
Speaker 1: up with the demands of working over time, to make
Speaker 1: sure units get turned into COVID in its UM and
Speaker 1: patients are safely cared for. UM. We're incredibly grateful for
Speaker 1: the work of our nurses. It's really just been unbelievable.
Speaker 1: Laurence Sor what I notice about emergency medicine as you
Speaker 1: try to learn every step of the way. What do
Speaker 1: you know now about the therapeutics of this virus versus
Speaker 1: where you were six weeks ago. Well, we just conducted
Speaker 1: the first phase of UM, the ACT trial UM, which
Speaker 1: is the NIH adaptive trial. In the first arm was
Speaker 1: rem desivare. So we are starting to see some positive data,
Speaker 1: which is really exciting. UM. We're we're learning a lot
Speaker 1: about some of the other drugs that have been tried
Speaker 1: hydroxy chloroquine chloroquine UM. We're learning a lot about proning
Speaker 1: of patients. So there's a lot of studies underway, um
Speaker 1: all throughout the hospital. Laurence Sward talk to me a
Speaker 1: little bit about how first responders are are feeling about,
Speaker 1: you know, the president and the administration saying that they
Speaker 1: want to reopen in the economy, even if it means more,
Speaker 1: you know, rise in debts and infections. How many percentage
Speaker 1: of the population we think have had COVID. You know,
Speaker 1: do we need much more testing to try and understand
Speaker 1: where the viruses and in what phase we are exactly? Yeah, absolutely. UM.
Speaker 1: So I think the first word that comes to mind
Speaker 1: is scared. Um. When you're in the hospital every day
Speaker 1: and you're seeing these patients come in quite sick, and
Speaker 1: knowing that there's so many of the so many of
Speaker 1: the population who are not infected UM yet and who
Speaker 1: maybe as states, as states and locations start to reopen,
Speaker 1: we get really nervous. Um. We're finally starting to see
Speaker 1: a bit of an easing in the number of cases
Speaker 1: in Maryland, and we um, we approach that easing with
Speaker 1: cautious optimism because you know, as you know, as you
Speaker 1: start to reopen, you'll see a spike in cases and
Speaker 1: and in several of the states that are already starting
Speaker 1: to ease restrictions, their cases are still on rapid increase.
Speaker 1: So um, you know in states like Florida, Nebraska, other
Speaker 1: places where they're starting to ease the restrictions there, their
Speaker 1: their case counts are actually on the rise. So I
Speaker 1: think we are all in the health care setting nervous
Speaker 1: that uh, these restrictions will be eased too quickly and
Speaker 1: we'll see a massive spike in the number of cases.
Speaker 1: Do we have more drugs now? And how close are
Speaker 1: we to a vaccine to try and fight this COVID nineteen.
Speaker 1: I think we're still a ways away from a vaccine.
Speaker 1: I mean everyone is app is working over time on
Speaker 1: on the development of a vaccine UM and in fact,
Speaker 1: there was a summit uh late last or sorry earlier
Speaker 1: last week specifically on focused on racing to get a
Speaker 1: vaccine up and up and running. It's a true toward
Speaker 1: a force of global efforts to develop a coronavirus vaccine.
Speaker 1: On the on the therapeutic side, we have remed does
Speaker 1: of year. We saw the positive data come out from
Speaker 1: the first phase of that clinical trial and several other
Speaker 1: clinical trials around reim does a hear um so it's
Speaker 1: it is definitely looking promising. The data are looking promising,
Speaker 1: but you know that is an IVY infusion drug, so
Speaker 1: people have to be given in the hospital. So I
Speaker 1: think there's a lot of people working on drugs that
Speaker 1: can be given orally drugs that can be given administered
Speaker 1: at Homer in the outpatient setting. UM, So we have
Speaker 1: a long ways to go. Laurence So our expert in
Speaker 1: emergency room medicine at the Johns Hopkins University and of
Speaker 1: course part of the Bloomberg School of Public Health. And
Speaker 1: we thank Michael Bloomberg for his support of this company,
Speaker 1: the terminal company, Bloomberg LP, and also this radio television
Speaker 1: station in his philanthropy to his Johns Hopkins University. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever pod cast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg
Speaker 1: Radio