Speaker 1: This is Bloomberg Business Week. I'm Carol Masser. Every day
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Speaker 1: listening to Bloomberg Business Week Carol Masser along with Paul Sweeney.
Speaker 1: So we do need to get into the virus and
Speaker 1: take a look at some of the headlines, certainly that
Speaker 1: we've seen, because what we're seeing is COVID nineteen cases
Speaker 1: really tick higher around the globe. Let's get our daily
Speaker 1: check on the virus. So when we've reached out to
Speaker 1: several times over the summer, most recently in late August,
Speaker 1: is Dr Seth Letterman. He's chairman, president, CEO, and founder
Speaker 1: of the New York based specialty pharmaceutical company Tonics Pharmaceuticals,
Speaker 1: and he joins us on the phone in New York City.
Speaker 1: Dr Letterman, so great to have you here with Paul
Speaker 1: and myself. How are you? Um well, thank you, but
Speaker 1: alarmed at the increasing cases in some of these states.
Speaker 1: We'll talk to me about that. I too am alarmed.
Speaker 1: And you know, I was talking last week that I
Speaker 1: was watching some of the evening news programs and just
Speaker 1: to see the maps where there are increasing cases of
Speaker 1: COVID nineteen again, and basically the country was blanketed with
Speaker 1: increases in cases. I look around the globe, I'm seeing
Speaker 1: the same thing. And you know, what we talked about
Speaker 1: last week is here we go. Here is the second wave,
Speaker 1: it seems in some of the places, for example Montana,
Speaker 1: maybe the Dakotas, it's really the first wave. And it's
Speaker 1: unfortunate that the message about mask wearing and social distancing
Speaker 1: didn't get out in front of it. But I think
Speaker 1: that part of part of the problem in places they're
Speaker 1: experiencing their first wave is that there was perhaps it
Speaker 1: come lacency that it wouldn't happen to them. But I'm
Speaker 1: encouraged that in places like New York City and other
Speaker 1: places have already had fair number of COVID cases that
Speaker 1: the increase is much more blunted, and I think it's
Speaker 1: evidence of both some amount of herd immunity and also
Speaker 1: that people are more concerned about social distancing and more
Speaker 1: compliant with wearing masks. So dr you know, I watched
Speaker 1: a lot of football over the weekend, college football, professional football,
Speaker 1: and boy, I saw a lot of people in the stands,
Speaker 1: particularly in a lot of the markets and Texas and
Speaker 1: other places. Not so much uh in the Northeast, But
Speaker 1: it still seems to be a regional issue about some
Speaker 1: of the basic principles have been trying to follow social distancing,
Speaker 1: wearing masks, washing hands, and it's just not resoning with people.
Speaker 1: And I just to me that is probably as big
Speaker 1: an issue as the impending cold weather. It's frustrating to me.
Speaker 1: I'm a as you know, a doctor and a drug developer,
Speaker 1: So why people resist wearing masses beyond my understanding. All
Speaker 1: I can say is that if people did follow the
Speaker 1: basic tenants of wearing masks, observing social distancing, washing hands,
Speaker 1: that there would be a lot less pain and suffering.
Speaker 1: But I'm not sure how in a free society we
Speaker 1: can mandate it further than it has been mandated well,
Speaker 1: it does make me wonder then you know what we do.
Speaker 1: It's interesting. I was watching was It sixty minutes over
Speaker 1: the weekend and they did a whole thing on some
Speaker 1: of the treatments that are out there in terms of
Speaker 1: treating the virus and asked, you know, various doctors and
Speaker 1: they made a point in the piece of saying when
Speaker 1: they were asking what would you rather have a vaccine
Speaker 1: or mask? And I think I'm to all of them
Speaker 1: were like, I want to mask. We know it works,
Speaker 1: it's really easy. It makes such a difference. But but
Speaker 1: you're right, it's you know, in Asia, it's you know,
Speaker 1: in a lot of Asian countries, it's mandatory. There's an
Speaker 1: app like there's all these things that you don't really
Speaker 1: have a choice. In the US, um it's a very
Speaker 1: very different story. So so Dr Letterman, where do we
Speaker 1: go from here? What? What how do you see like
Speaker 1: the next six months or twelve months playing out for us? Well,
Speaker 1: there's some encouraging signs. I think that as I mentioned
Speaker 1: New York City, there's widespread mask wearing, almost universal, and
Speaker 1: things are really I think roaring back people are they
Speaker 1: know how serious this can be and and and how
Speaker 1: effective mask wearing and other UH standard practices can be
Speaker 1: But I'm also very encouraged by the developments of therapeutics
Speaker 1: and vaccines and uh, contrary to I guess the plur
Speaker 1: lality of opinions on sixty minutes, I would prefer to
Speaker 1: have a vaccine, but it would have to be a
Speaker 1: vaccine that will take a while to develop, that would
Speaker 1: provide durable immunity and would optimally prevent spreading, because that's
Speaker 1: really the type of vaccine that can stop a pandemic
Speaker 1: in its tracks. Well, but how long does that take?
Speaker 1: Adorable because I'm sorry, no, no, please go ahead. It
Speaker 1: takes a while, because what we really need to know.
Speaker 1: I think that the first vaccines that are being studied now,
Speaker 1: and some of them seem very interesting, they will have
Speaker 1: data from people who have been infected within a month
Speaker 1: or two or three months after getting vaccinated, and I
Speaker 1: think it's likely that the protection of the vaccines some
Speaker 1: maybe all of them that are in part of Operation
Speaker 1: warp speed will provide that kind of short term protection.
Speaker 1: But a really important question is whether they will be
Speaker 1: protective a year out, And the difference between that early
Speaker 1: protection and later protection is mostly antibodies. So antibodies protect
Speaker 1: early on, but then they fade, and what's important in
Speaker 1: long term protection is T cell immunity. So I think
Speaker 1: that it will take a while two show that a
Speaker 1: vaccine will have durable protection. All right, So, dr is
Speaker 1: this gonna be a cocktail of potential remedies vaccines or
Speaker 1: do you think one blockbuster is gonna come on the
Speaker 1: market and just kind of be the one. Well, I
Speaker 1: think it will be an evolution. I think the first
Speaker 1: vaccines may not be the best, and there will be
Speaker 1: an evolution, That's what I imagine. And then it may
Speaker 1: very likely be that different vaccines will be better for
Speaker 1: people at different stages of life. For example, older people
Speaker 1: may need a different vaccine, which is already the case
Speaker 1: for flu and other vaccines. And then there could be
Speaker 1: different vaccines for people with different levels of immune competence.
Speaker 1: So people with healthy immune systems may benefit from call
Speaker 1: it a stronger vaccine, and people who have problems in
Speaker 1: their immune system might benefit from call it a weaker vaccine.
Speaker 1: That the important thing about a really effective vaccine is
Speaker 1: a really effective vaccine can stop people from spreading it
Speaker 1: so that they can really end this phenotype of a
Speaker 1: super spreader and and if that becomes nullified, and obviously
Speaker 1: a lot of lives will be saved. And Dr Letterman,
Speaker 1: you know, I think one of the issues is where
Speaker 1: there's the science part of it, and that's so difficult,
Speaker 1: but we've got some great minds around the world focusing
Speaker 1: on it. And then assuming the science has worked out
Speaker 1: in a vaccine or vaccines plural is UH found, then
Speaker 1: the question becomes, all, now we've got to produce this thing,
Speaker 1: We've got to distribute this thing becomes the whole sales channel,
Speaker 1: the whole uh and that is a daunting task. How
Speaker 1: are you thinking about that? Well, and it's an issue certainly,
Speaker 1: but Operation Warp Speed has been remarkable in the way
Speaker 1: that they have planned to distribute approximately a hundred million
Speaker 1: doses of six to eight different vaccines and now a
Speaker 1: number of therapies to many Americans. There's also obviously the
Speaker 1: global issue um and issues that global access, but just
Speaker 1: focusing on the United States, it is a huge logistical challenge,
Speaker 1: but one that is being tackled by by Warp Speed,
Speaker 1: at least with these medicines. And I believe there's been
Speaker 1: discussion about since the administration has UM paid for the
Speaker 1: development of these products, UM and in some cases purchase
Speaker 1: them that even the cost of obtaining them is going
Speaker 1: to be reasonable or subsidized by the government, which is
Speaker 1: kind of mind blowing that whole process. So you know,
Speaker 1: one thing I want to know, um, Dr Letterman, is
Speaker 1: you guys have a couple of vaccines, specifically, can you
Speaker 1: just give us an update on on where they are
Speaker 1: and and the progress of them. Sure, our vaccines are
Speaker 1: based on live replicating viruses. One is based on horsebox,
Speaker 1: the other on something called Bovon Perry influenza virus. And
Speaker 1: we are working on live replicating viruses because they are
Speaker 1: known to to trigger T cell immunity, and we will
Speaker 1: not be the first. We're not part of warp Speed,
Speaker 1: but we think that the long term solution of this
Speaker 1: is to have vaccines that trigger T cell immunity. We
Speaker 1: envision that either Hours or one of the other companies
Speaker 1: working in this small area of the vaccine programs might
Speaker 1: someday become a childhood vaccine, something like MMR Mum's Measles Rebella.
Speaker 1: Because we think we have to think not only about
Speaker 1: the people that are alive today, but future generations are
Speaker 1: going to have to contend with COVID nineteen. This this
Speaker 1: virus is not going anywhere, and it will be something
Speaker 1: we believe that humans will have to contend with for
Speaker 1: the rest of time. Hey, just a quick follow Just
Speaker 1: got about forty seconds here I mentioned herd mentality. I
Speaker 1: know that it's been talked about, some have said it
Speaker 1: could be productive here. We're going to talk about it
Speaker 1: a bit a little bit later on our broadcast. Just
Speaker 1: quickly your take on that. I think the good news
Speaker 1: is that it appears there's that people who recover have
Speaker 1: an immunity to the virus. It's something that we couldn't
Speaker 1: have said six months ago. The virus only been around
Speaker 1: for nine months. So um, that's very encouraging. And certainly
Speaker 1: I think the flat UH infection rates and sickness rates
Speaker 1: in New York suggests that there's some level of her immunity.
Speaker 1: It's surprising because the number of people with antibody responses
Speaker 1: are lower than you would expect to be required for
Speaker 1: her immunity. But we believe that the missing piece is
Speaker 1: that there are a number of people with T cell
Speaker 1: immunity that either don't have antibodies or had antibodies in
Speaker 1: one way. So I am encouraged about the prospects of
Speaker 1: her immunity and we may get it before there's even
Speaker 1: a vaccine. So glad to get your thoughts on that.
Speaker 1: Really really appreciate that. Dr Seth Ledderman, thank you so much,
Speaker 1: Chief Executive Officer, Tonics Pharmaceuticals, on the phone from New
Speaker 1: York City. But it's you know, I feel like every
Speaker 1: time I have a conversation with someone, Paul, from the
Speaker 1: medical community, you know, you really do learn something, whether
Speaker 1: it's t sales, whether it's you know, the different paths
Speaker 1: to like getting this under control. Yep, absolutely, and we
Speaker 1: just need to be continued on that learning curve. Yeah,
Speaker 1: no doubt. This is Bloomberg Business Week with Cairol Masser
Speaker 1: on Bloomberg Radio. You're listening to Bloomberg Business Week Carol
Speaker 1: Masser along with Paul Sweeney on this Monday. So P
Speaker 1: P P. You know, the Paycheck Protection Program was part
Speaker 1: of the two trillion dollar Cares Act. Well, it was
Speaker 1: set up to offer forgivable loans to small businesses that
Speaker 1: would help kind of keep them going through the lockdowns
Speaker 1: here in the US. But things didn't go exactly as plan.
Speaker 1: They never do. Here with her Business Week story, Bloomberg
Speaker 1: News Finance reporter Michelle Davis. She's on the phone in
Speaker 1: Vermont along with Joel Webber, Bloomberg business Week editor. He
Speaker 1: joins us on the phone from Massachusetts. You know, Joe,
Speaker 1: it's just never straight lines, especially when you're dealing with
Speaker 1: tons and tons of money and trying to get it
Speaker 1: out to people fast. Yeah. What's what's interesting about this story? Um.
Speaker 1: That totally caught our attention the moment that Michelle started
Speaker 1: talking to us about it was that, you know, this
Speaker 1: is the story is about the best intentions, um. And
Speaker 1: when the p p P program originated, there there were
Speaker 1: a ton of small businesses that were left in a
Speaker 1: world of hurt because they didn't have existing relationships with
Speaker 1: the big banks. So the big banks actually turned to
Speaker 1: the vendors who they had existing relationships with, and within
Speaker 1: a blink of an eye, two thirds of that money
Speaker 1: was out the door and small businesses were left reeling.
Speaker 1: And to make up for that in the second round
Speaker 1: of p p P loans, by that point, um uh,
Speaker 1: they the rules sort of got a little bit looser
Speaker 1: and instead of just having big banks be the ones
Speaker 1: that could be lenders, they also turned to fintech and
Speaker 1: in the process, turns out months later we can look
Speaker 1: back on some of this data and as Michelle did,
Speaker 1: and it turns out that there was a fair amount
Speaker 1: of fraudsters that were taking handouts and all of this. Michelle,
Speaker 1: how did you find out that that that was that
Speaker 1: was even happening and what did the data show? So
Speaker 1: I read through all of the criminal complaints that have
Speaker 1: come out on PPP fraud, you know, all of the
Speaker 1: Department of Justice UH filings and all of the court systems,
Speaker 1: and I cross referenced a lot of the information there
Speaker 1: with some data that the Small Business Administration UH releases
Speaker 1: publicly on you know, how many loans have been awarded
Speaker 1: and the lenders on the other side of those loans,
Speaker 1: and in you know, identifying these lenders, I found that
Speaker 1: UH fin techs and non bank online lenders handled seventy
Speaker 1: for seventy percent of the loans that are currently you know,
Speaker 1: being probed for fraud, even though when you look at
Speaker 1: the five point two million loans that were issued as
Speaker 1: part of the program, FinTechs were only on fifteen percent
Speaker 1: of those, So, you know, fifteen versus seventy five percent
Speaker 1: percent of the ones that are currently being looked at
Speaker 1: for fraud. It's definitely a pretty alarming trend. And part
Speaker 1: of the issue seems to be that in the rush
Speaker 1: to get this money out, a lot of these FinTechs,
Speaker 1: you know, they had good intentions, which was to to
Speaker 1: get money to entities, but banks weren't doing business with
Speaker 1: because you know, they didn't have existing religion just with
Speaker 1: But it seems because a lot of it was automated,
Speaker 1: there wasn't a lot of due diligence done, and so
Speaker 1: you know, in a lot of the cases I looked at,
Speaker 1: it was evident that if if someone had just conducted
Speaker 1: a public record records sarach or you know, Google there
Speaker 1: these companies, they would have realized that millions of dollars
Speaker 1: were being sent to businesses that didn't exist, didn't have employees,
Speaker 1: or you know, had been dormant for years before the
Speaker 1: pandemic started. Wow. So, Michelle, this is a fascinating story. Unfortunately,
Speaker 1: when we heard about the p p P program, we
Speaker 1: kind of said, boy, this looks like an area we're
Speaker 1: gonna see a lot of money changing hands in area
Speaker 1: right for fraud? Do we have any senses to the
Speaker 1: total dollars kind of involved here. So the cases brought
Speaker 1: by d o J so far only represent around a
Speaker 1: hundred and seventy five million in alleged alleged fraud, which is,
Speaker 1: you know, a really small fraction of the five billion
Speaker 1: in loans that have been approved. But I talked to
Speaker 1: someone at pay net, which is a unit of Equifax,
Speaker 1: and they, you know, conducted an analysis of all the
Speaker 1: loans larger than a hundred fifty thousand dollars, and they
Speaker 1: said about five percent of those raised red flags to
Speaker 1: them and looked you know, sketchy, warranted some due diligence.
Speaker 1: So that's about up to twenty billion dollars worth of
Speaker 1: potential fraud. And that's just for loans bigger than a
Speaker 1: hundred fifty thousand. The same person that paint out said
Speaker 1: if if he had access to the smaller loans, the
Speaker 1: number would probably be a lot bigger because those are
Speaker 1: you know, loans that don't get as much scrutiny. Another
Speaker 1: interesting trend related to that is that the fintex actually
Speaker 1: tended to process some of these smaller loans that even
Speaker 1: the SBA has said it's not going to audit as
Speaker 1: much as the bigger loans and and Michelle, you're reporting
Speaker 1: it was pretty fascinating. I thought it was telling that
Speaker 1: some of these loans were actually processed by fintech so
Speaker 1: quickly that the people who were requesting the money were
Speaker 1: actually shocked at how quickly they got it. Who were
Speaker 1: some of the big fintech players and all of this.
Speaker 1: So Cabbage Online lender, who before this had never processed
Speaker 1: the single SBA loan, ended up becoming the second biggest
Speaker 1: PPP leunder by application volume, you know, after they got
Speaker 1: approval to participate, and they appeared quite a bit in
Speaker 1: my analysis, as did lenders like Crossover Bank and UH
Speaker 1: Celtic Bank, which these are kind of these behind the
Speaker 1: scenes fintech banks. That partner was a ton of fintech
Speaker 1: and they provide the funding while the fintech, you know,
Speaker 1: we'll do the processing on the front end. Blue Line
Speaker 1: was another one that showed up a ton and UH.
Speaker 1: An interesting stat related to Cabbage in particular was that
Speaker 1: it turns out seventy of the applications but Cabbage process
Speaker 1: flowed through without any human intervention or manual review, and
Speaker 1: they said that the medium approval time for you know,
Speaker 1: their loans was four hours, but I found people who
Speaker 1: who got their loans approved in as little as an hour.
Speaker 1: That's including like not only process by the fintech but
Speaker 1: also SPA has already you know, signed off in the
Speaker 1: proof that agreed to issue the funds and meanwhile, you know,
Speaker 1: thanks were taking weeks in some cases to spend some
Speaker 1: of this money out. So I don't want to get
Speaker 1: ahead of myself here in Michelle. But if there were
Speaker 1: to be more stimulus that could help small businesses, is
Speaker 1: there any sense if there are any additional sort of
Speaker 1: fail safes that are in place yet or could be
Speaker 1: and put in place before a new wave of help
Speaker 1: went out to small businesses. I think a lot of
Speaker 1: this revolved around the actual Cares Act, which UH in it,
Speaker 1: it says that you know that the government will hold
Speaker 1: harmless any lenders that basically take borrowers representations at face value.
Speaker 1: So if the borrowers says like I'm eligible for this loan,
Speaker 1: the lender can't get in trouble for you know, believing
Speaker 1: that if that turns out to be true. But there
Speaker 1: is a lot of questions around, you know, just what
Speaker 1: how do you define negligence if if someone says I
Speaker 1: deserve this loan, but actually, you know, there's no record
Speaker 1: of there being a business. You know, what is the
Speaker 1: wonder's responsibility? And that's instance. I think it's the law.
Speaker 1: You know, if there were a little more clarity around
Speaker 1: what they were responsible for, how much diligence is required,
Speaker 1: this sort of situation can probably be avoided. Yeah, we
Speaker 1: knew that there were gonna be problems as we rushed
Speaker 1: out to get money because people really needed it. But nonetheless,
Speaker 1: as the details come out as you report, Michelle, it's
Speaker 1: just a little bit um, you know, unsettling, to say
Speaker 1: the least. Jill Webber, of course, editor of Bloomberg Business Week,
Speaker 1: on the fund from Massachusetts and check out Michelle Davis
Speaker 1: is her story. It's in the current issue of Bloomberg
Speaker 1: Business Week that's online on the Bloomberg and on newsstand.
Speaker 1: She's finance reporter at Bloomberg News. You're listening to Bloomberg
Speaker 1: Business Week with Carol Messer on Bloomberg Radio. All right, everybody,
Speaker 1: time for the Monday edition of Bloomberg Business Week. Economics.
Speaker 1: There a new survey out from Pew Research. They talked
Speaker 1: with our surveyed fourteen nations with advanced economies. And while
Speaker 1: many of the findings are to be expected, some not
Speaker 1: so much. So let's get into it with Blueberg New
Speaker 1: Economy editorial director Andy Brown. It's his latest column, and
Speaker 1: Andy joins Paul. So we need me on the phone
Speaker 1: from New Hampshire. So Andy tell us UM a little
Speaker 1: bit about this survey and what they set out to do. Yeah. So,
Speaker 1: Pew has been running these surveys now for many years.
Speaker 1: It's the survey of global opinion and national opinion. And
Speaker 1: what has joined everybody's attention this year is that global
Speaker 1: views of China have turned sharply negative. UM. And it's
Speaker 1: obvious why. Most people around the world, according to this survey,
Speaker 1: believe that China had watched the response the coronavirus. There
Speaker 1: was a cover off. They denied. Local officials in whant
Speaker 1: denied that was human to human transmission, and they silence doctors,
Speaker 1: whistle blow are doctors? Um? And you know, as a
Speaker 1: result of that, the image of President Ji Jimping has
Speaker 1: suffered very badly. Majorities around the world. In these fourteen countries,
Speaker 1: the world's richest, most advanced democracies don't trust Jiping to
Speaker 1: do the right thing in global affairs according to the
Speaker 1: Peace that's the story everybody focused on, But it's only
Speaker 1: half of the story. The country that did way way
Speaker 1: worse than China and the leader that performed more even
Speaker 1: more poorly than Ji jimping with the United States and
Speaker 1: Donald Trump, and you know, the story there, frankly, is
Speaker 1: that there is no global leadership. Both of these great
Speaker 1: powers have come out of coronavirus with their reputation in
Speaker 1: castle globally. So it's interesting here is there a concern
Speaker 1: as it relates to China, that this wasn't something that
Speaker 1: just escaped from the country, that perhaps it was something
Speaker 1: from the central government, as some conspiracy theorists believe. Yeah,
Speaker 1: you know, that's that's that's what the conspiracy conspiracy theorists say.
Speaker 1: But look, this was a response in two parts. I mean,
Speaker 1: so the first part of this was the botched initial response.
Speaker 1: Much of this occurred at the local level, and of
Speaker 1: course it's it's it points up failures in China's government system.
Speaker 1: A lot of people think that local officials basically didn't
Speaker 1: want to put up the balloon in Wuhan because they
Speaker 1: thought that the central leadership didn't want to hear bad news.
Speaker 1: The second part of the story, however, is that China
Speaker 1: came through this way better than almost any other country
Speaker 1: in the world. Their response was decisive. They went into lockdown.
Speaker 1: They more or less they completely not see the virus
Speaker 1: under control. And now the country has opened back up
Speaker 1: the game. They're having rock concerts in Wuhant where it
Speaker 1: all began. So really very much as you know, two
Speaker 1: stories there on COVID well, and I do wonder like
Speaker 1: now what you know, it's remarkable, right as you said,
Speaker 1: both leaders, you know, not very good global views on
Speaker 1: either of them, but it is remarkable that the US
Speaker 1: is even worth you know, is it is it all
Speaker 1: Donald Trump? And is it all his handling of the
Speaker 1: virus or is it really kind of the past four years? Um?
Speaker 1: So you know, essentially what's happened, what's occurred now is
Speaker 1: that and and and and the surprise, I guess the
Speaker 1: surprising thing from this survey is that attitudes towards both
Speaker 1: China and the US were measured in countries that are
Speaker 1: all allies or close friends of the United States. And
Speaker 1: you know, what's what's what's probably shocking and should be shocking.
Speaker 1: I think to exchange to the White House, is that
Speaker 1: this occurred in a year when China was condemned internationally
Speaker 1: for human rights abuses in hi Jong, for cracking down
Speaker 1: on civililities in Hong Kong, for intimidation of Taiwan, for
Speaker 1: it's asserted policies in the self China. See all of
Speaker 1: this combined, and yet the United States UH and the
Speaker 1: Trump administration still come come across UH come out of this,
Speaker 1: so they worse than China. So it really tells you
Speaker 1: I think, you know, yes about China standing in the world,
Speaker 1: but I think much more dramatically about America standing and
Speaker 1: so any that kind of begs the question that, you know,
Speaker 1: as we get past this pandemic on a global scale
Speaker 1: again not sure when that is, but what will be
Speaker 1: the role of the United States visa v. China. It
Speaker 1: really seems like China was on this ascendency, the US
Speaker 1: pulling back with this America First credo. But I'm not
Speaker 1: sure that's still the case here. I mean, I don't think,
Speaker 1: as you point out here at the Pew research data,
Speaker 1: neither of the supposed leaders scored well exactly. So you know,
Speaker 1: there are some people that think that as a result
Speaker 1: of this election that will snap back where it was
Speaker 1: before in the United States was going to reclaim its
Speaker 1: position of leadership in the liberal global order, whatever that
Speaker 1: may need. Other people, on the other hand, think that
Speaker 1: China is going to take advantage of its surgeic economy
Speaker 1: the way that it came back and and it's done
Speaker 1: so well, Uh, there's the coronavirus and is going to
Speaker 1: replace the United States going to build a parallel set
Speaker 1: of institutions. Neither, of course, according or the inference from
Speaker 1: this sub is forget it. Neither of those scenarios is
Speaker 1: going to happen. The world is leadership lacking leadership right now.
Speaker 1: The best that we can expect, I think, is a
Speaker 1: far more transactional type of relationship between between the United
Speaker 1: States and China and the world that really um lacks direction.
Speaker 1: UM have shifting coalitions between groups of countries, UM, but
Speaker 1: essentially nobody in chop well you know, and you know, Andy,
Speaker 1: we've talked about this before. I do wonder, depending you know,
Speaker 1: the outcome of the November election, if we do have
Speaker 1: a change in the White House, how quickly, how easily
Speaker 1: can let's say, a Biden White House repair some of
Speaker 1: the strained relationships that have resulted over the last for
Speaker 1: four years. And just got about forty seconds here. Yeah,
Speaker 1: I don't think that it's it's possible to heal uh
Speaker 1: this trust deficit uh quickly? Um. Uh, you know, trust
Speaker 1: once it's the trade is very difficult to rebuild. China's
Speaker 1: in denial. It blames the foreigners of cause for foreign
Speaker 1: forces for all its problems. The United States at least
Speaker 1: it does have an opportunity to correct. And this is
Speaker 1: said to be one of the great strengths of democracy. Uh.
Speaker 1: Is this writing mechanism, and there is an opportunity that
Speaker 1: voters have and in November uh to um to start
Speaker 1: to to fix the problem. Yeah. Interesting, Andy Brown, thank
Speaker 1: you so much for joining us. We appreciate it all
Speaker 1: the time. We appreciate your perspective of all things China.
Speaker 1: Bloomberg New Economy Editorial director Andy Brown. There, I mean
Speaker 1: really causing the question. I love your your question. There
Speaker 1: is it just simply calling up all allies and saying,
Speaker 1: just forget the last four years, we're back right exactly.
Speaker 1: And he's written about this. I mean there's a lot
Speaker 1: that's already happened, and you know, nations and alliances have
Speaker 1: moved forward as we've moved in a different direction as
Speaker 1: a nation. So um time will certainly tell, and of
Speaker 1: course certainly be on. I would think on the top
Speaker 1: of the to do list for the next present, whoever
Speaker 1: that may be. I bro journal now, but you let
Speaker 1: me drive. Oh no, no, no no, no, honey, please, I'll
Speaker 1: do the riding drivels me. I want to drive, Just drive, baby,
Speaker 1: the questions trying. This is the drive to the globe.
Speaker 1: Thanks well, drying us on Bloomberg Radio. Caroli was just
Speaker 1: looking the drive to the close today. Carol's me with J. J. Kinahan,
Speaker 1: chief market stratagist TV A merritory. He joins us on
Speaker 1: the phone from Chicago. J J. Carro and I have
Speaker 1: been batting back and forth here and as investors have
Speaker 1: as well. Kind of the disconnect between financial markets and
Speaker 1: the economy. Is it simply a function of Federal Reserve
Speaker 1: j pal having the spickets on and showing no signs
Speaker 1: of turning them off. If that's what this trade is
Speaker 1: all about, well, if, well, I think that's part of it.
Speaker 1: I also think that if you look at a day
Speaker 1: like today, you know, the faint stock let's face it
Speaker 1: over the last few weeks have not been exact, had
Speaker 1: much fang to them, so to speak. Uh, those coming alive.
Speaker 1: I think also shows that people are looking a little
Speaker 1: bit forward and saying, okay, if if, if we do
Speaker 1: have a market sell off, you know, because of election
Speaker 1: or anything like that, or some sort of slow down,
Speaker 1: which stocks still do well. They do. And actually if
Speaker 1: we go back to work, which stocks still do well.
Speaker 1: And again it becomes primarily the technolog argy stocks because
Speaker 1: they've added clients and they've added sticking clients during the
Speaker 1: past few months. So there's also let's face at Apple
Speaker 1: and you know, Amazon leading the way with a little
Speaker 1: bit of excitement because they both have major events coming
Speaker 1: up tomorrow. And you wonder how much of this is
Speaker 1: the sort of by the rumors sell the news a
Speaker 1: little bit, which they both have a little bit of
Speaker 1: a history of. Not to say that longer term they
Speaker 1: haven't gone higher after that, but often they rally into
Speaker 1: either Prime Day or Apple conference. Speaking major events, it's
Speaker 1: a big week for banks, and I do wonder what
Speaker 1: are your expectations and how they might kind of help
Speaker 1: the trade here JJ and maybe overshadow some of investors
Speaker 1: focus on the virus if you will, and on further
Speaker 1: relief and aid from policymakers. Sure, girl. I think that
Speaker 1: that's going to come down to one major thing, you know,
Speaker 1: as you see it early, and that's going to be
Speaker 1: their trading and how well they've gone there be because
Speaker 1: that's obviously been a big part of their earnings the
Speaker 1: last two quarters, and I think will be another big
Speaker 1: part of their earnings dis quarter because although the interest
Speaker 1: rate environment has improved for them a little bit, uh
Speaker 1: you know, let's be honest, if we're getting excited about
Speaker 1: eight basis points on the ten year rate, you know,
Speaker 1: you certainly hope that's not the long term view. So
Speaker 1: uh much of it. I think also, as you know,
Speaker 1: covering this uh so many times, is going to go
Speaker 1: to with the statements that they make going forward. Uh
Speaker 1: you know, what is Mr Diamond gonna come out and
Speaker 1: say tomorrow about the rest of the world and his
Speaker 1: last couple of quarters. He has moved the market a
Speaker 1: little bit with some of the things he's had to say,
Speaker 1: So I think them setting the table for the earning
Speaker 1: scene is also important. I think this will be the
Speaker 1: last quarter where companies can get away with just showing
Speaker 1: some improvement even if they don't necessarily meet the numbers
Speaker 1: that are expected. And I think those companies that missed
Speaker 1: on this round of earnings are death real. You're going
Speaker 1: to be punished timely. Hey j J. As I look
Speaker 1: at this market, it seems a little bit like a
Speaker 1: head's eye win tails, you lose for equities and other
Speaker 1: risk assets in the sense that, Okay, if I see
Speaker 1: some data out there like we did over the weekend,
Speaker 1: the pandemic numbers are getting worse, that suggest that, you know,
Speaker 1: the economic recovery may bee pushed down the road. Then
Speaker 1: if in that scenario, I buy the big growth things
Speaker 1: like we're seeing trading today, the amazons of the world. Conversely,
Speaker 1: you know, if I see, oh boy, we're gonna get
Speaker 1: a fat vaccine data and we're gonna get a vaccine
Speaker 1: quickly by the end of the year, then people will
Speaker 1: be back to work next year, then I want to
Speaker 1: rotate into cyclical names. It's it's kind of an odd
Speaker 1: the way the market is kind of viewing this. Is
Speaker 1: that kind of how you view it as well. Yeah,
Speaker 1: it's really been amazing, and I think a lot of
Speaker 1: people are scratching their heads saying, uh, you know, how
Speaker 1: do I play this incasive will pull back and not
Speaker 1: that I want to throw water on the parade, so
Speaker 1: to speak. But it's something you should be considering, and
Speaker 1: I think we may get if the rest of the
Speaker 1: week goes pretty well. But one thing that I think
Speaker 1: you may start to see next week. To be honest,
Speaker 1: I don't think you've seen a huge attention of the
Speaker 1: market on the election so far. I think next week
Speaker 1: we begin to pay a little bit more attention because
Speaker 1: you know, four years ago, I think the one thing
Speaker 1: people learned was don't get caught up sort of too
Speaker 1: early in polls, etcetera. And it'll be interesting to see
Speaker 1: for me to see next week if we start to see,
Speaker 1: particularly in UH sectors like healthcare a little bit and
Speaker 1: financials actually a little bit more jockeying there as people consider,
Speaker 1: you know, will the Democrats take the House and senate,
Speaker 1: the presidency, etcetera, and what the expected policies will be
Speaker 1: coming forward for that. I think this is one last
Speaker 1: week of hoping out, holding out hope for stimulus. If
Speaker 1: stimulus doesn't come out by the rest of the week,
Speaker 1: I think you may see the market's focus change a
Speaker 1: little bit too. Okay, now we have either way. I
Speaker 1: think we're gonna change to Okay, now we have to
Speaker 1: concentrate on the election and what that means a little
Speaker 1: bit longer count. So listen, I gotta take a step
Speaker 1: back here, because you know, none of none of this
Speaker 1: really matters until we get this virus under control. And
Speaker 1: I do wonder and obviously stimulus does matter. But you know,
Speaker 1: I'm looking at virus cases in Illinois seven day average
Speaker 1: of new COVID nineteen cases at a new high, topping
Speaker 1: numbers from early May. Thirty more deaths reported on Monday.
Speaker 1: You gotta be watching this, j j um. What did
Speaker 1: you seeing what's going on around you? Guys? Well, I
Speaker 1: think that that's a great point, Carroll, because uh, no
Speaker 1: matter what else happens, that's sort of the overhanging uh
Speaker 1: piece of news that can change the market at any moment.
Speaker 1: And so you have all these other sub stories that
Speaker 1: are all one. A COVID is definitely number one. But
Speaker 1: until we get some real progress on COVID or I
Speaker 1: think a major change in the cases, I think it's
Speaker 1: gonna take a little bit of oh wow, we have
Speaker 1: to keep our eye there, but nothing is significantly changing
Speaker 1: and I think you and see that a little bit
Speaker 1: today on just what you see a in the market overall.
Speaker 1: But you're making a great point for those who watch
Speaker 1: the volatility. You see the VIX up a little bit today,
Speaker 1: and so you're saying that it's no big deal, But
Speaker 1: that's not how it should react on a day like today.
Speaker 1: It should actually be lower. It's still holding on at
Speaker 1: twenty five level, and it's been between twenty five and thirty,
Speaker 1: and I think many traders are looking at it that
Speaker 1: if we're below twenty five, that's a little bit more
Speaker 1: of an all clear, and if we're above thirty, that's
Speaker 1: time to say, hey, you know something to consider here.
Speaker 1: And one of the interesting things to me is is
Speaker 1: I look out at the election. We see the futures
Speaker 1: putting in an expecting expectation for higher, higher volatility, which
Speaker 1: of course made sense, but then that volatility staying elevated
Speaker 1: for the few weeks after the election because now you
Speaker 1: have the mail in ballots which may take longer to
Speaker 1: actually decide who the winners are. Yeah, that BIGS trade
Speaker 1: is an important point. We talked about that a little
Speaker 1: bit last week because we saw that, you know, we've
Speaker 1: seen that where stocks are up and you're seeing the
Speaker 1: vix still move up, and that doesn't quite make complete sense.
Speaker 1: So um, good thing to point out. J. J. Kinahan,
Speaker 1: thank you so much, as I always Chief Market Strategy,
Speaker 1: a T D marriage trade on the front from Chicago
Speaker 1: and yeah, you know, you know, apology, you look around
Speaker 1: these cities and just seeing the numbers go up. Um,
Speaker 1: you know, until we get it under control. It's kind
Speaker 1: of the same old story, you know that we're going
Speaker 1: to be talking about. It really is, and uh, it's
Speaker 1: just it's kind of it's gotten regional. Um. Fortunately the
Speaker 1: New York metro area is doing a good job. But
Speaker 1: I saw El Paso, Texas is a new hotspot in
Speaker 1: the continent of U S. So it kind of moves
Speaker 1: around based upon I think behavior. Yeah, exactly. Thanks so
Speaker 1: much for listening to Bloomberg Business Week. Download the podcast
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