WEBVTT - Don't See More Than 50bp Emergency Cut: Amundi's Todd 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:20.360 at Bloomberg dot com. We have been talking a lot 0:00:20.400 --> 0:00:24.040 about stocks, as the SMP and NASDAC enter correction territory. 0:00:24.079 --> 0:00:27.200 There is a question though about the bond market, in 0:00:27.240 --> 0:00:30.200 particular the risk your credit markets. I'm really glad to 0:00:30.200 --> 0:00:32.720 say that we've got Christine Todd, head of US Fixed 0:00:32.760 --> 0:00:35.800 Income with us from a MOONDI pioneer which oversees ninety 0:00:35.800 --> 0:00:39.000 billion dollars. Christine, thank you so much for being with us. 0:00:39.240 --> 0:00:42.040 I want to start with high yield bonds because we're 0:00:42.080 --> 0:00:46.040 seeing unprecedented outflows from the biggest e t f s 0:00:46.120 --> 0:00:48.960 that invest in these uh in these securities, and we're 0:00:49.000 --> 0:00:53.400 also seeing the shares of those ETFs decline significantly today 0:00:53.479 --> 0:00:55.400 h y G, which is the biggest of it. UH 0:00:55.720 --> 0:01:00.000 thinking the most is how concerned are you? Without getting 0:01:00.040 --> 0:01:01.920 to the esoterics of E T F S versus the 0:01:01.960 --> 0:01:05.280 underlying market. How concerned are you about some sort of 0:01:05.319 --> 0:01:08.640 liquidity spiral that's going to really push prices down a 0:01:08.640 --> 0:01:13.000 lot more? From here in bonds, we more see it 0:01:13.000 --> 0:01:17.320 as an opportunity than a concern. UM. When you're an 0:01:17.319 --> 0:01:21.759 active manager and you see that there is UM fear 0:01:21.800 --> 0:01:27.720 based selling UM not fundamentally based UM, then you really 0:01:27.720 --> 0:01:33.280 are seeing correlations separate and that the opportunity for bond 0:01:33.319 --> 0:01:38.080 picking increases. So we can take advantage of forced selling 0:01:38.520 --> 0:01:44.399 causing dislocation and valuations and improve the UM credit profile 0:01:44.880 --> 0:01:51.640 and the yield profile of the portfolios as this is happening. UM. Interesting, Well, 0:01:51.680 --> 0:01:55.040 I was going to say that, UM, you're you're really 0:01:55.080 --> 0:01:58.920 seeing a process of price discovery and that when you 0:01:58.960 --> 0:02:03.640 look at ind see and UM marked prices, Uh, it's 0:02:03.720 --> 0:02:09.480 it's really more a gauge than a execution level. So 0:02:09.560 --> 0:02:12.440 that too is something that you can take thorough advantage of. 0:02:13.000 --> 0:02:15.799 And that the ets being four sellers are at the 0:02:15.840 --> 0:02:19.680 mercy of so Christine. So if someone was brave enough 0:02:19.720 --> 0:02:22.000 to dip their toe back into the bond market, here 0:02:22.000 --> 0:02:26.560 where some sectors that you think they should look for initially, Well, 0:02:26.720 --> 0:02:29.600 the obvious place to look is in the energy sector 0:02:30.200 --> 0:02:34.080 UM that is taking the biggest hit from the fears 0:02:34.120 --> 0:02:39.120 around the coronavirus, and the more stable subsectors with energy 0:02:39.680 --> 0:02:44.240 UM like pipelines are are less leveraged to the price 0:02:44.280 --> 0:02:47.519 of the commodity, and we think there are really strong 0:02:47.520 --> 0:02:52.320 opportunities there. What we're doing is really topping up our 0:02:52.360 --> 0:02:56.720 best ideas rather than adding new names to the portfolio, 0:02:56.880 --> 0:03:01.000 So sticking with our convictions and doubling down on where 0:03:01.040 --> 0:03:04.040 we see value. So are you doubling down on pipelines? 0:03:05.320 --> 0:03:09.480 We are reaching our targets, which is UM an equal 0:03:09.520 --> 0:03:13.520 to overweight an energy via exposure to pipelines. And why 0:03:13.520 --> 0:03:17.360 did you start doing that? So we've been active in 0:03:17.840 --> 0:03:21.640 UH managing around the subsectors of energy, and we've been 0:03:21.680 --> 0:03:24.160 accelerating that process in the last couple of days, but 0:03:25.080 --> 0:03:28.560 not phrenetically. I mean, the key here is to be patient. 0:03:29.200 --> 0:03:32.440 And we don't think that we've seen floor and prices 0:03:32.440 --> 0:03:35.640 in the wides and yields UM. You know, we've only dropped, 0:03:35.920 --> 0:03:37.920 you know, in high yields in the terms of the 0:03:37.960 --> 0:03:41.760 index you know, call it eighties and ninety basis points 0:03:41.800 --> 0:03:46.480 since the UM Corona scare really took hold and we're 0:03:46.560 --> 0:03:49.960 down you know, over our d and twenty basis points 0:03:50.000 --> 0:03:51.960 since the beginning of two thousand nineteen. So this is 0:03:52.000 --> 0:03:56.320 not UM, you know, a wide by recommendation. This is 0:03:56.400 --> 0:03:59.440 being very selective in the names that you pick and 0:03:59.760 --> 0:04:03.880 UM sticking with your convictions from a bottom up fundamental analysis. So, Christine, 0:04:03.880 --> 0:04:06.720 I'm looking at my Bloomberg termal here to your treasury 0:04:06.760 --> 0:04:11.000 one point zero five, very near the all time low. 0:04:11.240 --> 0:04:13.560 Do we need to be on a zero interst rate 0:04:13.640 --> 0:04:16.760 watch for the two year? Do you think? Well? The 0:04:16.800 --> 0:04:19.880 Feed has been very clear about wanting to stay very 0:04:19.920 --> 0:04:24.919 far away from zero bound interest rates and UH. The 0:04:25.200 --> 0:04:28.839 at some point though the FED is resisting. At some point, 0:04:28.920 --> 0:04:32.640 the Fed is going to want to see UM longer 0:04:32.720 --> 0:04:36.240 term rates rise more than shorter term rates UM, but 0:04:36.320 --> 0:04:40.760 to see optimism in the markets. So you might see 0:04:41.120 --> 0:04:45.400 the front end of the curve come down with the 0:04:45.400 --> 0:04:50.280 FED succumbing to pressure UM from the coronavirus, mainly from 0:04:50.320 --> 0:04:56.159 tighter financial conditions UM, not so much from the administration UM, 0:04:56.279 --> 0:04:59.960 but in reaction to UM. You know, the consumer retrend 0:05:00.040 --> 0:05:03.080 shan and probably what you'd see is a fifty basis 0:05:03.120 --> 0:05:06.880 point move UM characterized as an emergency cut that could 0:05:06.920 --> 0:05:11.360 be walked back when the crisis subsides. So the answer 0:05:11.400 --> 0:05:14.520 to that is, we could see lower two year rates, 0:05:15.040 --> 0:05:18.440 but UM, the market wouldn't come down to zero because 0:05:18.440 --> 0:05:24.240 they would be optimism around the stimulative leaning of the 0:05:24.279 --> 0:05:28.040 Fed and the stability of economic growth. Christine, just real 0:05:28.120 --> 0:05:30.640 quick here thirty seconds. I'm looking right now. It Fed 0:05:30.680 --> 0:05:33.800 funds rates pricing in almost three and a half rate 0:05:33.800 --> 0:05:36.440 cuts by the end of January. Do you think that 0:05:36.440 --> 0:05:38.520 that's reasonable? Do you expect the Fed to cut that 0:05:38.680 --> 0:05:44.359 that much? We do not. UM. We are very confident 0:05:44.600 --> 0:05:49.640 that the FED is influenced by the economic fundamentals and 0:05:49.760 --> 0:05:52.760 that the pressure from as I said, the yield curve 0:05:52.839 --> 0:05:58.880 the administration UM can be avoided. UM though UH, a 0:05:59.080 --> 0:06:02.640 consumer retrend MINT and the reversal of some of the 0:06:02.800 --> 0:06:06.560 very strong economic numbers that we've seen would cause the 0:06:06.600 --> 0:06:11.760 Fed to act. And as mentioned UH, an emergency move 0:06:11.920 --> 0:06:15.159 of fifty basis points could be easily walked back, but 0:06:15.279 --> 0:06:22.240 we don't see a strategic plotting towards easier policy because 0:06:22.520 --> 0:06:25.359 of the fear in the market of the coronavirus. It 0:06:25.360 --> 0:06:29.520 would be based on the fundamentals the consumer, the housing market, 0:06:29.520 --> 0:06:31.960 the job market, et cetera. Christine Todd, thanks so much 0:06:31.960 --> 0:06:34.839 for joining us to really appreciate your, uh, your thoughts 0:06:34.880 --> 0:06:36.839 on the fixed income market. Christine is the head of 0:06:36.920 --> 0:06:39.960 US fixed income for a Mundi pioneer of about ninety 0:06:40.040 --> 0:06:47.840 billion dollars under management based in Boston. There's sort of 0:06:47.880 --> 0:06:51.080 an expectation that at a certain point there will be 0:06:51.160 --> 0:06:54.080 some sort of stimulus, whether it be monetary as is 0:06:54.120 --> 0:06:57.239 currently being priced into the Fed funds features, or whether 0:06:57.279 --> 0:07:00.080 it will be fiscal. And this certainly comes as the 0:07:00.080 --> 0:07:03.360 Democratic debates heat up as we head into Super Tuesday, 0:07:03.720 --> 0:07:07.440 leading to a question, what is the cost of some 0:07:07.520 --> 0:07:10.120 of these fiscal stimulus plans, in particular those put out 0:07:10.120 --> 0:07:13.000 by Bernie Sanders And doesn't matter? Ben Holland took a 0:07:13.000 --> 0:07:15.800 look at that. He's a political economy editor for Bloomberg News, 0:07:15.880 --> 0:07:18.640 joining us from our ninety now on studios in Washington, 0:07:18.720 --> 0:07:22.160 d C. Ben, you wrote that perhaps it doesn't even 0:07:22.280 --> 0:07:26.360 matter whether Bernie Sanders is numbers actually add up because 0:07:26.400 --> 0:07:30.760 borrowing rates are just so low. Can you explain? Yeah, 0:07:30.800 --> 0:07:33.080 I think what's striking here is that there is this 0:07:33.200 --> 0:07:35.760 debate going on in the Democratic Party, you have Bernie 0:07:35.760 --> 0:07:38.920 Sanders with all these very big, you know, unprecedented in 0:07:39.040 --> 0:07:42.320 recent history spending plans. He says he's going to pay 0:07:42.360 --> 0:07:45.760 for them all by raising taxes on various things, and 0:07:45.840 --> 0:07:48.000 his opponents say, oh, well, but your numbers don't add up, 0:07:48.560 --> 0:07:50.840 and Bernie Sanders says, yes they do, and the opponents say, no, 0:07:50.920 --> 0:07:53.200 they don't. And what's old is that while all this 0:07:53.280 --> 0:07:55.760 is going on, the cost of government borrowing in the 0:07:55.840 --> 0:07:58.360 United States has plunged to levels that have never been 0:07:58.360 --> 0:08:00.640 seen before. So you might think it would be a 0:08:00.680 --> 0:08:03.040 good time for both Bonie Sounders and the other Democrats 0:08:03.080 --> 0:08:05.480 to say, well, if these plans don't in fact that 0:08:05.760 --> 0:08:07.720 it doesn't matter, it might be a good thing. Maybe 0:08:07.760 --> 0:08:11.960 the economy could use some more physical stimulants. So it's interesting, 0:08:12.000 --> 0:08:15.560 Ben It raises a question, don't deficits matter? Doesn't the 0:08:15.680 --> 0:08:19.680 national debt matter anymore? I think there's I don't think 0:08:19.720 --> 0:08:22.400 that many people would make the case that deficits don't matter, 0:08:22.520 --> 0:08:24.520 but I think more and more economists would make the 0:08:24.560 --> 0:08:27.559 case that there is no reason why we should worry 0:08:27.600 --> 0:08:30.760 about the ones that the United States is running right now, 0:08:31.200 --> 0:08:34.280 because there's running deficits of around five percent of gross 0:08:34.280 --> 0:08:38.280 domestic product. That's pretty big. It's nothing like you had 0:08:38.320 --> 0:08:42.000 in two thousand and ten after the crisis, but for us, 0:08:42.200 --> 0:08:44.800 you know, for a decade into an expansion, it's a 0:08:44.800 --> 0:08:47.760 pretty big deficit. It's not causing inflation, it's not causing 0:08:47.760 --> 0:08:51.120 flight from bond markets, it's not causing yields to go up, 0:08:51.160 --> 0:08:53.719 it's not crowding out any investment. So a lot of 0:08:53.760 --> 0:08:56.920 economists have concluded, well, it's not something we need to 0:08:56.920 --> 0:09:00.640 worry about right now. Ben, what's the alternative? Certain here 0:09:00.920 --> 0:09:04.000 that the more debt that an economy takes on, the 0:09:04.080 --> 0:09:07.320 more that you head into a deflationary spiral where it's 0:09:07.360 --> 0:09:10.120 sort of a weight hanging over the economy and it 0:09:10.200 --> 0:09:15.080 doesn't act in a stimulative manner. Well, I think that 0:09:15.240 --> 0:09:17.520 is a concern. But I think what's happened if if 0:09:17.559 --> 0:09:19.280 you look at Japan, which has kind of led the 0:09:19.320 --> 0:09:20.960 way and a lot of this stuff, and a lot 0:09:21.000 --> 0:09:23.640 of other developed economies like the United States and Europe 0:09:23.679 --> 0:09:26.560 are kind of getting that what you had was was 0:09:26.600 --> 0:09:30.960 a big build up in private debt, and when that crashed, 0:09:31.160 --> 0:09:32.959 which was about ten years before it crashed in the 0:09:33.040 --> 0:09:36.760 United States. So in the late n what the government 0:09:36.800 --> 0:09:39.640 was doing was really stepping in with deficit spending to 0:09:39.720 --> 0:09:42.040 fill that big hole in demand that have been left 0:09:42.040 --> 0:09:44.719 by the bursting of a private credit bubble. Well that's 0:09:44.720 --> 0:09:47.480 pretty much what happened in the United States ten years later, 0:09:48.040 --> 0:09:50.800 and the United States ever since two thousand eight, the 0:09:50.840 --> 0:09:53.600 government has been stepping in just like the Japanese government 0:09:53.640 --> 0:09:56.880 did to fill the gap in demand by its own 0:09:56.880 --> 0:10:00.560 deficit spending. So Ben this sounds to me a lot 0:10:00.640 --> 0:10:04.240 like modern monetary theory or M empty. Can you explain 0:10:04.320 --> 0:10:07.680 what M empty is and is it becoming more accepted 0:10:07.720 --> 0:10:11.840 by more economists? If you listen to what the most 0:10:11.840 --> 0:10:14.640 economists say about m MT, you'd probably conclude that it 0:10:14.720 --> 0:10:17.200 isn't becoming more accepted. But then if you listen to 0:10:17.240 --> 0:10:20.320 the way that the economists talk about things like deficits 0:10:20.360 --> 0:10:22.960 and government that I think you'd conclude that it is 0:10:23.080 --> 0:10:26.120 becoming more accepted. So it's kind of creeping into the debate. 0:10:26.559 --> 0:10:29.160 And the essential argument of m m T is that 0:10:30.600 --> 0:10:34.400 when governments run depth sits, the thing that they have 0:10:34.440 --> 0:10:36.960 to worry about is inflation. They don't have to worry 0:10:36.960 --> 0:10:40.040 about going bankrupt. They might do if they're using another 0:10:40.080 --> 0:10:42.000 you know, if they're borrowing in another currency. But if 0:10:42.000 --> 0:10:45.040 you're the United States, if you're Japan, the United Kingdom, 0:10:45.200 --> 0:10:47.440 you don't have to worry about going bankrupt. You have 0:10:47.520 --> 0:10:50.000 to worry about, well, will I spend too much money 0:10:50.280 --> 0:10:56.240 and create inflation? That's clearly not a problem right now. Fascinating. 0:10:56.440 --> 0:10:58.800 Ben Holland, thank you so much for joining. I spend 0:10:58.800 --> 0:11:01.960 hard political economy at for Bloomberg News, joining us from 0:11:02.559 --> 0:11:05.000 One Studios in Washington, d C. And I will say, Paul, 0:11:05.360 --> 0:11:08.439 the conversation comes at a really salient point, especially as 0:11:08.440 --> 0:11:11.959 Hong Kong starts to do helicopter money, essentially giving each 0:11:12.040 --> 0:11:15.319 family a certain quotation of just cash to go out 0:11:15.360 --> 0:11:29.959 and spend an on street of us. And just walked 0:11:30.000 --> 0:11:32.480 into the Bloomberg Atta Active Broker Studios in his hoodie, 0:11:32.559 --> 0:11:35.520 his Bloomberg Intelligence hoodie, and he said, the world's melting down, 0:11:35.520 --> 0:11:38.040 and you want me to talk about ink cartridges And 0:11:38.080 --> 0:11:39.920 we said, yes, that is exactly what we want to 0:11:39.960 --> 0:11:42.520 talk about. Because even though we do have the coronavirusphere 0:11:42.600 --> 0:11:45.760 spreading and concerns about what that means, there is actual 0:11:45.800 --> 0:11:48.679 business getting done and discussion of it and we want 0:11:48.679 --> 0:11:51.480 to bring in Austin Carr, technology reporter for Bloomberg News, 0:11:51.520 --> 0:11:53.200 as well as an on screen of Austin senior semi 0:11:53.200 --> 0:11:56.200 conductor and hardware analyst. And Austin you wrote a story 0:11:56.320 --> 0:11:59.160 for Business Week that Xerox and HPR and a thirty 0:11:59.160 --> 0:12:03.000 five billion dollar fight over in cartridges, which is comical 0:12:03.040 --> 0:12:05.560 considering the fact that the concept of paper and ink 0:12:05.840 --> 0:12:08.640 seems to be going the way of the cart and horse. 0:12:09.160 --> 0:12:11.440 What was sort of the gist of the piece. Well, 0:12:11.640 --> 0:12:13.920 I think first of all, we should just clarify that 0:12:13.960 --> 0:12:16.760 the printer market is still massive. In fact, it's estimated 0:12:16.800 --> 0:12:19.839 that between the consumer and office market there's still about 0:12:19.880 --> 0:12:23.360 three point two trillion pieces of paper printed every year. 0:12:23.400 --> 0:12:25.080 So that takes a lot of ink, That takes a 0:12:25.080 --> 0:12:27.600 lot of printer sales um So this is really a 0:12:27.600 --> 0:12:30.719 story about two aging innovation giants the twentieth century. They 0:12:30.720 --> 0:12:34.080 own the innovation market if Silicon Valley, they arguably invented 0:12:34.080 --> 0:12:37.200 the sort of garage startup, and yet they've seen in 0:12:37.240 --> 0:12:39.920 the last decade or so this disruption in the digital 0:12:39.920 --> 0:12:42.200 market and then just hanging on to their old world 0:12:42.600 --> 0:12:46.040 products like printers and ink, which really is what accounts 0:12:46.080 --> 0:12:49.000 for a large portion of their profits. So this is 0:12:49.000 --> 0:12:51.400 a story about Xerox trying to take over a much 0:12:51.480 --> 0:12:54.240 larger aging giant to see whether they can create some 0:12:54.320 --> 0:12:58.240 sort of printer super giant as the market continues to consolidate. 0:12:58.559 --> 0:13:00.400 So on, and give us a sense here, I'm looking Zerox. 0:13:00.440 --> 0:13:03.120 It's a much smaller company than HP. How are they 0:13:03.160 --> 0:13:08.559 going to finance this thing debt? Quite quite simply today 0:13:08.600 --> 0:13:11.160 than it was back in November when they proposed the deal. Absolutely, 0:13:11.240 --> 0:13:14.160 and and this has become a point of contention to 0:13:15.040 --> 0:13:18.920 UM for for HP in its refusal and its continuing 0:13:18.960 --> 0:13:25.120 refusal of of the Xerox M and AM approach is 0:13:25.160 --> 0:13:28.280 that it will be too debt heavy. UM and our 0:13:28.400 --> 0:13:32.560 take is that, in fact, HP looked at xerox um 0:13:32.679 --> 0:13:36.800 last year and they spurned that deal potentially because they 0:13:36.840 --> 0:13:39.880 weren't enough cost synergies and they couldn't make the deal work. 0:13:40.320 --> 0:13:43.720 Look in the grand scheme of things, right, So Austin 0:13:43.880 --> 0:13:48.360 story is on point in that supplies is what matters. UM. 0:13:48.400 --> 0:13:51.320 If you look at the supplies business, it is roughly 0:13:52.280 --> 0:13:55.400 of overall HP sales. It's a very very all of 0:13:55.480 --> 0:13:59.960 supply printing, including the consumer business and the corporate business 0:14:00.040 --> 0:14:02.880 and supplies has a six operating margin which they want 0:14:02.880 --> 0:14:06.520 to take to seventeen. Supplies alone probably is well into 0:14:06.559 --> 0:14:10.800 the twenties UM. And they've tried to sort of use 0:14:10.880 --> 0:14:15.240 this four box model in the previous CEO's tenure to 0:14:15.360 --> 0:14:19.440 try and push more printers um and have it be 0:14:19.520 --> 0:14:22.280 sticky over a long term with an office such that 0:14:22.320 --> 0:14:25.040 it can drag the supplies business and so they'll give 0:14:25.040 --> 0:14:27.640 you the printer at their discount. In the consumer business, 0:14:27.720 --> 0:14:30.800 that hasn't necessarily worked because the consumers are buying the 0:14:30.880 --> 0:14:34.120 cheap printers and then going to the fake printing supplies 0:14:34.160 --> 0:14:37.600 from off brands and using that, so you you're not 0:14:37.720 --> 0:14:40.800 sort of benefiting from that. I love the quote Austin 0:14:40.800 --> 0:14:43.240 and your story. The industry may not be sexy, but 0:14:43.320 --> 0:14:46.240 it's not going anywhere. There is a question though, and 0:14:46.280 --> 0:14:47.960 I do want to bring it forward since and now 0:14:48.040 --> 0:14:50.440 you did come in here and then the coronavirus is 0:14:50.600 --> 0:14:53.920 the headline right now? What about supply chains? What about 0:14:54.280 --> 0:14:57.000 some other aspects of these companies? Both of them shares 0:14:57.040 --> 0:14:59.680 down more than three percent on a daylight today and 0:14:59.760 --> 0:15:01.560 on I'd love you to take a crack of that, 0:15:01.600 --> 0:15:03.320 I mean, do you have a sense of how much 0:15:03.440 --> 0:15:06.880 they are affected? Here? Absolutely? Look, I mean the entire 0:15:07.760 --> 0:15:11.120 tech ecosystem supply chain goes through China, and this is 0:15:11.200 --> 0:15:15.120 the downside of having become concentrated in that part of 0:15:15.160 --> 0:15:18.760 the world of the last twenty years, given logistics, ease, 0:15:19.040 --> 0:15:25.440 cost preference, etcetera, etcetera. And so um uh and and 0:15:26.120 --> 0:15:28.560 you're going to be impacted. One queue is done, right, 0:15:28.600 --> 0:15:30.760 so you're gonna take numbers down for one queue. The 0:15:30.840 --> 0:15:33.840 question is what does two Q look like, both from 0:15:33.840 --> 0:15:37.760 a demand perspective as well as from a supply perspective, 0:15:37.800 --> 0:15:40.080 and can you get product out the door to meet 0:15:40.120 --> 0:15:43.800 that demand? And that's going to be the telling sign 0:15:44.160 --> 0:15:46.800 if you don't have enough product and if demand is 0:15:46.840 --> 0:15:50.520 week that matchup of those two will determine how you 0:15:50.600 --> 0:15:53.160 shape up for the full year. Um and we have 0:15:53.240 --> 0:15:57.600 some sensitivity here from from our work if you and 0:15:57.640 --> 0:16:00.360 supplies are a big portion of that to what happens 0:16:00.400 --> 0:16:03.440 is if you take supplies down, you take margins down 0:16:03.480 --> 0:16:06.080 with it pretty hard. I mean, because because PCs are 0:16:06.160 --> 0:16:10.080 a low to mid single digit operating margin business, it 0:16:10.120 --> 0:16:13.680 ain't sexy by any stretch, right, So the printer, the 0:16:13.720 --> 0:16:16.720 printer business and the supplies business is what's carrying HP. 0:16:17.160 --> 0:16:20.760 You ding that business, coronavirus dings that and you print 0:16:20.800 --> 0:16:26.160 even less then EPs is disproportionately her Austin, is this 0:16:26.200 --> 0:16:28.800 still going to get done well? I think that's the 0:16:29.000 --> 0:16:32.040 big question about the announcement that they had earlier this 0:16:32.080 --> 0:16:34.760 week attached to their earnings, is that they're pushing back 0:16:34.760 --> 0:16:37.200 on this deal by announcing, uh, you know, this big 0:16:37.200 --> 0:16:41.160 boost of fifteen billion dollars in buy backs, uh, huge 0:16:41.160 --> 0:16:43.640 cost savings is not just mentioned that they're looking for. 0:16:44.200 --> 0:16:46.400 And so if you see any disruption that supply chain 0:16:46.480 --> 0:16:49.280 or slow down in PC or printer sales even more 0:16:49.320 --> 0:16:52.000 than what they've seen, that's gonna put a lot of 0:16:52.000 --> 0:16:55.080 pressure on HP to sort of explore this deal more. 0:16:55.160 --> 0:16:57.680 In Enrica, Laura's who came in a CEO in November 0:16:58.200 --> 0:17:01.080 basically said, you know what, we're sort of going we 0:17:01.120 --> 0:17:03.320 have a winning strategy. He dis xerox a bunch on 0:17:03.360 --> 0:17:05.680 the earnings call, but at the same time he kept saying, 0:17:05.720 --> 0:17:07.639 we're open to this idea. But a lot of if 0:17:07.640 --> 0:17:09.919 you talk to analysts, they do feel like, you know, 0:17:10.440 --> 0:17:12.040 there may be more of a likelihood of that HP 0:17:12.200 --> 0:17:15.119 ends up buying Xerox than the other way around. Just 0:17:15.359 --> 0:17:18.000 on the call. On the call, he was very explicit 0:17:18.080 --> 0:17:20.520 about he says, they don't have good technology, they're they're 0:17:20.560 --> 0:17:24.200 small by comparison, and uh, you know. And we spoke 0:17:24.240 --> 0:17:26.320 to him after the call and he was, uh, he 0:17:26.359 --> 0:17:28.040 said he was pumped up about how well it went. 0:17:28.480 --> 0:17:32.119 Austo Car, thanks so much for joining Austin Car, technology 0:17:32.119 --> 0:17:34.479 reporter for Bloomberg News and on Entreni bast and our 0:17:34.520 --> 0:17:38.280 senior UH technology analyst for Bloomberg Telenges posts joining us 0:17:38.280 --> 0:17:48.359 here in our Bloomberg Interactive Broker studio. Well. Last night, 0:17:48.400 --> 0:17:51.120 President Trump held a press conference along with members of 0:17:51.160 --> 0:17:54.520 the CDC to talk about the coronavirus and the state 0:17:54.560 --> 0:17:57.359 of US preparedness for the virus. Let's tick a listen. 0:17:57.560 --> 0:18:01.280 Because of all we've done, the risk to the American 0:18:01.520 --> 0:18:04.480 people remains very low. We're ready to adapt and we're 0:18:04.480 --> 0:18:07.639 ready to do whatever we have to. This one is different, 0:18:07.840 --> 0:18:10.440 much different. This is a flu. This is like a flu. 0:18:10.640 --> 0:18:13.840 I think the stock market will recover. Uh, the economy 0:18:13.880 --> 0:18:18.159 is very strong. We are totally ready, willing enabled. That 0:18:18.280 --> 0:18:21.000 was President Trump last evening at the White House talking 0:18:21.040 --> 0:18:24.959 about the coronavirus and the preparedness of the United States 0:18:25.000 --> 0:18:27.840 for that. Let's take a little bit deeper onto that 0:18:28.040 --> 0:18:32.080 state of preparedness uh by the US government and economy. 0:18:32.160 --> 0:18:34.800 Vivian Ho she's at James A. Baker, the Third Institute 0:18:34.880 --> 0:18:38.560 Chair in Health Economics and Director Center for Health and 0:18:38.600 --> 0:18:42.960 Biosciences at Rice University in Houston, Texas. Vivian, thanks so 0:18:43.040 --> 0:18:46.040 much for joining us. Give us a sense of kind 0:18:46.040 --> 0:18:48.800 of where you think the US is in terms of 0:18:48.880 --> 0:18:54.080 preparedness for dealing with a potential wider outbreak of the 0:18:54.119 --> 0:18:58.680 coronavirus in the US. I think the US is actually 0:18:58.880 --> 0:19:00.920 in a fair amount of trouble in terms of what's 0:19:00.920 --> 0:19:05.360 going to happen with the coronavirus, because the speech yesterday 0:19:05.400 --> 0:19:08.800 basically told citizens that there wasn't much to worry about. 0:19:08.840 --> 0:19:12.200 But we see the spread of the disease all over 0:19:12.280 --> 0:19:15.040 the world. There are several countries with cases now, which 0:19:15.080 --> 0:19:18.280 means it's only a matter of time before the disease 0:19:18.520 --> 0:19:21.639 reaches the US unless the President wants to make a 0:19:21.640 --> 0:19:24.639 decision that we cut off all trade in goods and 0:19:24.680 --> 0:19:27.719 services and people traveling, which we could. We could do 0:19:27.760 --> 0:19:30.280 that and we could then shut down the economy because 0:19:30.320 --> 0:19:33.680 of how much of our economy depends on trade and 0:19:34.520 --> 0:19:38.120 UM transfer of goods and services and people across borders 0:19:38.160 --> 0:19:42.320 and so UM. We have local governments and schools and 0:19:42.320 --> 0:19:46.200 and other UM places not prepared for what will happen 0:19:46.240 --> 0:19:49.280 when this disease actually reaches this country. So what Vivian 0:19:49.359 --> 0:19:53.080 should they be doing to prepare well? I thought that 0:19:53.240 --> 0:19:58.720 UM when Anthony Fauci spoke yesterday afterwards, UM you know 0:19:58.840 --> 0:20:03.240 he's he and others are saying, UM, try not to 0:20:03.320 --> 0:20:08.320 be two alarmed. This is this is something like a flu. 0:20:08.480 --> 0:20:12.600 We're going to have cases of UM diseases similar to 0:20:12.760 --> 0:20:15.879 say to pneumonia, and those are of high risk to 0:20:16.119 --> 0:20:21.040 seniors and those with compromised immune systems UM, and we 0:20:21.119 --> 0:20:24.680 need to be directing more resources towards the c D 0:20:24.800 --> 0:20:28.600 c UM. Apparently we don't have enough test kits that 0:20:28.640 --> 0:20:32.880 are adequate for local UM local governments and state governments 0:20:32.880 --> 0:20:35.359 to be able to test UM patients, So that's going 0:20:35.400 --> 0:20:38.800 to be a problem. We're probably gonna have cases where 0:20:39.320 --> 0:20:42.280 parts of the country are going to try and and 0:20:42.400 --> 0:20:47.400 UM quarantine people at home, closed schools temporarily, UM, close 0:20:47.520 --> 0:20:52.159 work offices temporarily. But my guess is because this is 0:20:52.200 --> 0:20:55.120 so hard to control the spread of the disease, eventually 0:20:55.200 --> 0:20:58.560 officials are going to throw their hands up and say, uh, sorry, 0:20:58.640 --> 0:21:01.600 we can't handle this um and and try and go 0:21:01.680 --> 0:21:05.800 about your normal everyday business or otherwise the economy really 0:21:05.800 --> 0:21:08.920 takes for a significant period of time. So, Vivian, you know, 0:21:08.960 --> 0:21:11.520 over the last several days, it appears that there's kind 0:21:11.520 --> 0:21:15.240 of a disconnect between the CDC and the Trump administration 0:21:15.359 --> 0:21:18.479 different you know, kind of framing the risk profile of 0:21:18.520 --> 0:21:22.199 this disease. How problematic is that for you know, local 0:21:22.240 --> 0:21:25.040 authorities to maybe make the decisions they need to make. 0:21:25.800 --> 0:21:29.720 I think it's extremely problematic because there needs to be 0:21:29.960 --> 0:21:35.520 some guidance and expertise at the top saying what resources, 0:21:36.000 --> 0:21:39.480 um are these governments going to receive and what should 0:21:39.480 --> 0:21:41.840 they be planning for And you need to have that 0:21:42.000 --> 0:21:45.639 coming from the federal level unless there are UM state 0:21:45.720 --> 0:21:47.960 experts who are going to give this guidance. Now, now, 0:21:47.960 --> 0:21:50.679 I think Alexaser is a terrific Secretary of Health and 0:21:50.760 --> 0:21:54.480 Human Services, but it troubles me that that that Vice 0:21:54.520 --> 0:21:57.760 President Pence was put in charge of dealing with this disease. 0:21:58.040 --> 0:22:01.840 You know, when America goes to war or goes to battle, 0:22:02.200 --> 0:22:05.480 we put a general in charge who has military experience. 0:22:05.960 --> 0:22:08.959 Um if we're as a country going to try and 0:22:09.000 --> 0:22:12.280 fight this disease, we should be having a doctor or 0:22:12.320 --> 0:22:16.439 an epidemiologist who understands the spread of infectious diseases calling 0:22:16.480 --> 0:22:19.679 the shots. So let's walk through the iterations of what 0:22:19.720 --> 0:22:23.480 you expect is most likely, because it is highly unlikely 0:22:23.480 --> 0:22:26.720 that the United States at this point would or could 0:22:26.760 --> 0:22:30.119 completely shut off its borders and all trade. What do 0:22:30.200 --> 0:22:33.600 you expect to happen based on the contagiousness of the 0:22:33.600 --> 0:22:36.240 disease that we are familiar with at this point, as 0:22:36.240 --> 0:22:38.720 well as the preparatory measures that have been put in place. 0:22:39.760 --> 0:22:43.240 I think it's I think it's highly unpredictable at this point, 0:22:43.320 --> 0:22:46.040 simply because they're going to be different authorities who are 0:22:46.040 --> 0:22:49.840 going to make different decisions and and and we don't 0:22:49.880 --> 0:22:52.359 know who is going to be giving them counseling. But 0:22:52.440 --> 0:22:56.760 you could have everything from um uh, you know, certain 0:22:56.800 --> 0:23:00.080 governors saying Okay, we're going to declare a holiday and 0:23:00.080 --> 0:23:03.160 and everyone stay home for a week to try and 0:23:03.640 --> 0:23:07.399 get control of what happens to other states saying, well, 0:23:07.600 --> 0:23:10.280 we need to go about our business and let's go 0:23:10.320 --> 0:23:13.040