Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jai 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,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Tiffany Wilding,
Speaker 1: you have to brief portfolio managers at PIMCOT. There are
Speaker 1: some shell shocked, others I'm sure are finding this opportunistic.
Speaker 1: What is your message to fixeding managers at PIMCO this morning? Well, so,
Speaker 1: I think you kind of have to put the whole
Speaker 1: you know, coronavirus situation in perspective, um, and that is
Speaker 1: to be humble about it, because I know, you know, historically,
Speaker 1: you know, instances like this. Ultimately, you know the you know,
Speaker 1: the virus subsides at some point, and when that happens,
Speaker 1: you have economic activity that rebounds rich turns to normal.
Speaker 1: But there's a lot of uncertainty around the path to
Speaker 1: get there. Um. The depth of the type of disruption
Speaker 1: and the how long that disruption lasts is very uncertain UM.
Speaker 1: And it's certainly possible you know that this could you know,
Speaker 1: push the US and and other developed market economies into
Speaker 1: recession before we get the ultimate rebound. Okay, well, PIMCO
Speaker 1: had a brilliant call on this. I'm not going to
Speaker 1: give you all the credit that that PIMCO deserves, but
Speaker 1: you were certainly part of a team that was exceptionally
Speaker 1: cautious I'm g d p Uh into eighteen months ago
Speaker 1: and into twelve months ago, You're where you thought you'd be, right, Um, yeah,
Speaker 1: I mean, so you know, we were. We were more
Speaker 1: cautious on on the potential impact of you know, the
Speaker 1: trade war um, and we called it a window of
Speaker 1: weakness late last year. Um, you know, because we thought
Speaker 1: that could you know, disrupt manufacturing um in the US.
Speaker 1: We ultimately got the trade deal, um, which we thought
Speaker 1: was a little bit better. Uh So, coming into the coronavirus,
Speaker 1: actually things the initial conditions in the U. S economy
Speaker 1: were actually you know, looking somewhat better, as were they
Speaker 1: in the rest of the world. Um. You know, actually
Speaker 1: global manufacturing growth looked like it was stabilizing and maybe
Speaker 1: even rebounding, led by China. And now, of course all
Speaker 1: of that, uh you know comes into question now that
Speaker 1: we have you know, this coronavirus outbreak. So Tiffany, The
Speaker 1: FED you know, is trying its best, I guess is
Speaker 1: a great way to a good way to kind of
Speaker 1: phrase it. You know, with that intromediing and intermeding rate
Speaker 1: cut earlier this week, what do you think the FED
Speaker 1: is going to do going forward? And is there much
Speaker 1: it can do? Um? Well, you know we so if
Speaker 1: you look at one way to think about this is
Speaker 1: just to look at historical precedent and if you look
Speaker 1: at the emergency rate cuts are intermeding rate cuts that
Speaker 1: we've seen, um, you know over called you know, since
Speaker 1: the early nineties, we've had seven instances of them, um,
Speaker 1: each of them. The meeting directly after that intermeding rate cut,
Speaker 1: the FED also cut um. You know. So I think
Speaker 1: by that historical precident, we should absolutely expect a cut
Speaker 1: at the meeting in March. You know. One thing that
Speaker 1: I thought was interesting was that the you know, before
Speaker 1: the blackout period which actually starts tomorrow, we had several
Speaker 1: speakers overnight. They didn't really push back against the current
Speaker 1: market pricing, you know, which which is pricing in a
Speaker 1: probability that they could even cut fifty again, um. And
Speaker 1: you know, certainly that would be consistent with historical precedent
Speaker 1: as well. What is the efficacy to our listeners of
Speaker 1: a hundred basis point rate cut over three cups of
Speaker 1: pimcoat coffee? What's it mean? Yeah? Well, you know, I
Speaker 1: think certainly and the Federal Reserve understands this. You know,
Speaker 1: monetary policy is not going to stop the spread of
Speaker 1: the virus. It's not going to be particularly effective against
Speaker 1: supply chain disruptions that we expect. But what monetary policy
Speaker 1: can do, you know, and and and Powell talked about
Speaker 1: this is monetary policy can try to create conditions that,
Speaker 1: instead of exacerbating an economic shock, um, you know, they
Speaker 1: try to buffer it. So what tends to happen when
Speaker 1: you have a growth shock is that can lead to
Speaker 1: market panic, It can lead to tighter financial conditions, bank
Speaker 1: pull banks pulling back on credit, um, you know, and
Speaker 1: that ultimately exacerbates exacerbates the economic sharks. So I think
Speaker 1: the Fed wants to try to set conditions to where
Speaker 1: they do it doesn't do that, it's going to be
Speaker 1: we'll get to next week. Keivity Welding, thank you so much.
Speaker 1: Let's talk about the virus. The number of cases globally
Speaker 1: nearing a hundred of thousand. More infections have now been
Speaker 1: reported in the United States, in Germany, and in South Korea. Finally,
Speaker 1: Clighorn of the Palladium Group, he is the health director
Speaker 1: that joining us now from Washington to discuss all of this. Finally,
Speaker 1: let's talk about what we know and what we don't know.
Speaker 1: What we know is that we don't have enough test kids,
Speaker 1: and by extension, therefore, we don't know exactly how many
Speaker 1: people have got the virus, how fast it's spreading, what
Speaker 1: the delta is. What can you tell us, Well, that's
Speaker 1: exactly correct, thank you. Um, we don't have enough test
Speaker 1: gits in the US. We don't seem to be able
Speaker 1: to operationalize enough test gits to get them to the
Speaker 1: right people. What do I mean by that, Well, we
Speaker 1: need to understand how many people are being exposed, how
Speaker 1: many people have acquired the infection, how many people developed
Speaker 1: clinical symptoms, and then how many people developed severe disease. Obviously,
Speaker 1: the last step is how many people die. And in
Speaker 1: the US, the last estimate I've seen is that we've
Speaker 1: only done about fifteen hundred tests so far, and there
Speaker 1: have been quite a lot of missed opportunities. UH. In
Speaker 1: order to get to a broader implementation of testing so
Speaker 1: that we have a much better picture of the epidemiology
Speaker 1: off this virus in the country. Doctor. It's wonderful to
Speaker 1: have you with us in particularly with your decades out
Speaker 1: of Johns Hopkins University and your direct work with the
Speaker 1: government facilities. I'm not going to mince words, doctor, and
Speaker 1: You've been very delicate out this. There is a party
Speaker 1: of the ways between the President of the United States
Speaker 1: and the people like you representing the institutions of science
Speaker 1: in the government. How do we get this fixed by
Speaker 1: Monday morning? How do we get the virologists to be
Speaker 1: front and center and advising the public given the messaging
Speaker 1: we're seeing from the executive branch. Well, one way is
Speaker 1: to activate mechanisms that are tried and tested by for example,
Speaker 1: the Ebola Academic where we have a platform in a country,
Speaker 1: and the US of course does have such a platform. Uh.
Speaker 1: It's called the One Health Platform. It's a whole of government,
Speaker 1: very articulated system from top to bottom, where the government
Speaker 1: in charge, the executive branch as well as branches of
Speaker 1: government that have responsibility for health and safety, are coordinated
Speaker 1: with state governments and local government wants and there is
Speaker 1: a plan of action that allows people to take actions
Speaker 1: without doing it on their own. And this is something
Speaker 1: that we have not seen in the last few days
Speaker 1: in the US. We definitely need more coordination. As I said, uh,
Speaker 1: the ability to test people is a critical part of
Speaker 1: understanding the epidemiology off of virus. I mean this is
Speaker 1: very important, folks. Just to give you the local field
Speaker 1: ard our world headquarters. Two of our major prep schools
Speaker 1: collegiate in the Spend school are actually closed today. Is
Speaker 1: they clean those buildings and we all have our you know,
Speaker 1: individual local community stories. Dr I look at the complexities
Speaker 1: of the test kit. It's c d C and I
Speaker 1: don't want to get into a discussion of RNA or
Speaker 1: DNA dynamics, which your expert in. How complex are the
Speaker 1: test kits? How easy are they to replicate, manufacture in
Speaker 1: introduce to the public. Well, these tests are are viral
Speaker 1: nucleic tests. That is, they're actually looking for proteins that
Speaker 1: are in the virus and using a method called PCR,
Speaker 1: which is poliminaries chain reaction. So essentially you take some
Speaker 1: human tissue which comes from your nose, your mouth, your throat,
Speaker 1: your tra chia and you subjected to this test where
Speaker 1: you're looking to amplify these bits of viral RNA. So
Speaker 1: it's an r T PCR tests. Uh. The results should
Speaker 1: be available in twenty four hours. The problem is we
Speaker 1: have not licensed or leveraged the private sector enough to
Speaker 1: get enough test kits out to the American public. And
Speaker 1: this is in stark contrast to for example, China and
Speaker 1: South Korea. South Korea has done over a hundred thousand
Speaker 1: tests to date. Uh, they're using their own homegrown tests.
Speaker 1: R T PCR is actually not that hard to do.
Speaker 1: You simply have to have the facilities to get the
Speaker 1: primers made and to get them out to the people
Speaker 1: who can run the tests. Now, a new step occurred
Speaker 1: over the last couple of days where private sector developed
Speaker 1: tests can in fact be used, and that is going
Speaker 1: to rapidly increase the number of tests available in the US.
Speaker 1: Doctor our countries with universal healthcare more capable of dealing
Speaker 1: with dealing with this far ast than those that don't. Well.
Speaker 1: I think in terms of planning, we mentioned planning that
Speaker 1: the idea is to do enough risk assessments so you
Speaker 1: can plan appropriately and and and then to have a
Speaker 1: risk communications strategy that avoids fear and confusion, which is
Speaker 1: what you get when you don't have an articulated plan.
Speaker 1: And we you know, some of the volatility in the
Speaker 1: stock market we're seeing represents fear and volatility. And uh so,
Speaker 1: in order it for um systems health system to respond appropriately,
Speaker 1: they must have as part of that plan identified the
Speaker 1: number of rooms, for example, in I c U s
Speaker 1: that can provide the kind of complex respiratory care for
Speaker 1: patients who have severe disease and who are at the
Speaker 1: risk of death. These are primarily older people who have
Speaker 1: concomitant illness and who developed pneumonia after they become infected. Now,
Speaker 1: in many countries, even highly developed health systems that are
Speaker 1: single payer health systems like the UK, if you had
Speaker 1: a sustained epidemic over time, it would really stress the
Speaker 1: system so that you would have to bring into play
Speaker 1: new new respiratory I see us. The problem in the
Speaker 1: US is we are a system of systems, so as
Speaker 1: far as I know yet, we do not have a
Speaker 1: coordinated plan for an expanded epidemic where we would need
Speaker 1: more respiratory I see us. But this is wonderful because
Speaker 1: of time. I've only got one more question, and I'm
Speaker 1: gonna be very delicate here. I'm at home with my daughter, afterthought,
Speaker 1: and we're washing our hands with soap and water, singing
Speaker 1: happy birthday. I mean, that's what has come down to
Speaker 1: this weekend. Let me go to the most jinguistic racist
Speaker 1: idea right now floating around to get our viewers worldwide
Speaker 1: through the weekend. The number one thing collapsing in America
Speaker 1: are Chinese restaurants. Would you order Chinese take out this weekend?
Speaker 1: Would you go into a Chinese restaurant? I mean, if
Speaker 1: that's the height of the paranoia we're facing right now,
Speaker 1: I want to hear from you, as a Johns Hopkins expert.
Speaker 1: Can I take Chinese takeout this weekend? Yes? You should one,
Speaker 1: because you're helping the economy too. Because the very notion
Speaker 1: of just having Chinese food and increasing your risk for
Speaker 1: coronavirus is to me borders on racist. So I think, yes,
Speaker 1: you should have Chinese food. I hope it's good Chinese
Speaker 1: food that you're going to have. Uh, and lather up
Speaker 1: because twenty seconds with soap and water, the secret is
Speaker 1: in the lather So if you don't up, Yeah, it's
Speaker 1: those bubbles that break down micro organisms. That's great. That's
Speaker 1: good to know it will be your guy and I
Speaker 1: have to write so dcor, this has been extremely valuable.
Speaker 1: We look forward to speaking to you again. Drygaring with
Speaker 1: Palladium Group is their health director. Hugely informative place decide
Speaker 1: that why aren't get on the bond market now? Jeff Rosenberg,
Speaker 1: City of PM on black Rock Systematic Fixed Income Team, Jeff,
Speaker 1: fantastic to have you with us. Your first take place. Well,
Speaker 1: I think you said it. It's you know, the most
Speaker 1: um you know, irrelevant payroll report we've had in a
Speaker 1: long time. I'd love to talk about the payroll report
Speaker 1: because it's some good news and as you said, it
Speaker 1: doesn't really matter. It's backward looking. It does remind us
Speaker 1: of how strong the economy was going into this coronavirus.
Speaker 1: But this this information is dated. That's why it's not
Speaker 1: market moving. I guess what you can say is at
Speaker 1: least it's not bad news. If it was bad news
Speaker 1: into the coronavirus fears, who knows how the panic might
Speaker 1: have accelerated. But this is a reminder of the strength
Speaker 1: of the economy going into the shock. What we had
Speaker 1: last week was the monetary policy response. I mean, obviously
Speaker 1: we had it this week, but last week's declines in
Speaker 1: the equity markets prompted this week's monetary policy response. This
Speaker 1: week's equity market response, next week's story is the fiscal
Speaker 1: policy response, and that's what we're gonna be talking about.
Speaker 1: I think we're gonna move to that conversation because there's
Speaker 1: a very limited amount of what monetary policy can do,
Speaker 1: and it's gonna be much greater about the focus on
Speaker 1: fiscal policy. If we get a strong, coherent, robust response,
Speaker 1: I think that could be very beneficial. But to the
Speaker 1: earlier question, we don't know what the demand side shock
Speaker 1: is to the supply from this supply side shock, but
Speaker 1: you need a fiscal policy response to to address that.
Speaker 1: Monetary policy is limited. Jeff, to your point about momentum,
Speaker 1: and this is something that Jim was talking about too,
Speaker 1: that the momentum was there in the U. S economy
Speaker 1: before this shock. Why does that matter? What does that
Speaker 1: tell you in terms of the shape of the recovery
Speaker 1: and the scope of the recovery. Well, it tells you
Speaker 1: that you you have the ability to limit the damage
Speaker 1: to the economy because you're dealing with a shock from
Speaker 1: a position of strength as opposed to dealing with a
Speaker 1: shock from a position of weakness and a position of
Speaker 1: vulnerability from a fundamental economic perspective. Now, I think what's
Speaker 1: going on in terms of the financial markets is that
Speaker 1: you had a shock from a fundamental economic perspective to
Speaker 1: a financial market that was very vulnerable. You had complacency,
Speaker 1: you had valuations at very high levels, you had very
Speaker 1: little cushion, So a lot of the drop is coming
Speaker 1: from very high levels. If we think about it from
Speaker 1: the fixed income perspective, a lot of the widening and
Speaker 1: credit spread is coming from very tight levels. You're getting
Speaker 1: big moves and spreads, but the levels that you're at
Speaker 1: are hardly anything near recessionary type levels. They're getting you
Speaker 1: back into kind of fair value, mid mid expansion kind
Speaker 1: of level. So there was a bit of over uh.
Speaker 1: If you look at the delta, the change looks very aggressive,
Speaker 1: but it's coming from a very tight level. So financial
Speaker 1: markets were a bit more vulnerable, the economy was much
Speaker 1: more resilient. You can make the argument that stocks are
Speaker 1: not pricing in a recession pe multiple still very high. Bonds, however,
Speaker 1: are do you think that bonds are overdone, that they're
Speaker 1: over bought at this level. No, I I think you
Speaker 1: gotta be careful about, you know, bonds pricing in a
Speaker 1: recession versus bonds pricing in a pre emptive policy reaction. Uh,
Speaker 1: and in some sense forcing that preemptive policy reaction. That's
Speaker 1: the kind of strange world that we're in, is that
Speaker 1: is that financial conditions matter so much to the FED
Speaker 1: that the bond market reaction is in anticipation ation of
Speaker 1: the FED reacting to financial market conditions, and so the
Speaker 1: bond market is kind of previewing where the Fed is
Speaker 1: going to go. We saw that this week with fifty
Speaker 1: basis points. You're seeing it again with another fifty basis
Speaker 1: points anticipated. So you know, does that predict recession? Not sure?
Speaker 1: Does it predict policy response absolutely? And then the question
Speaker 1: is is the combined policy response again monetary and fiscal,
Speaker 1: enough to forestall the recession. Jeffrey Rosenberg with us, of course,
Speaker 1: with his wonderful strategy work at Black Rocket. Of course,
Speaker 1: the mathematics of Carnegie Mellen as well. Jeff I want
Speaker 1: to go Matthew right now. I've got a fancy log
Speaker 1: chart of two year yield. The abruptness, the first derivative
Speaker 1: moves a second derivative acceleration that we're seeing has been extraordinary.
Speaker 1: The Greek letter for this is gamma. Should our listeners
Speaker 1: care about gamma? Does does the abruptness of all these
Speaker 1: moves really matter forward? Well, you know, there's a lot
Speaker 1: of technical aspects to financial markets that encourage this rate
Speaker 1: of change and acceleration. At a conversation, another terminology for
Speaker 1: gammas convexity. You have a lot of convexity in the market.
Speaker 1: I mean, this is a remarkable world where you know,
Speaker 1: the the financial people want to talk about uh, the virus,
Speaker 1: but the but but but you can have the doctors
Speaker 1: wanting to talk about refinancing their mortgages. And so when
Speaker 1: you're refinancing your mortgage, what you're getting is a lot
Speaker 1: of that gamma in the market. It's a huge marketplace,
Speaker 1: it has a lot of dynamics, and it's one of
Speaker 1: the factors behind the accelerated move. Certainly, there's a fundamental factor,
Speaker 1: which is the expectation for policy change, but it gets
Speaker 1: exacerbated by these technical factors of a demand for duration.
Speaker 1: When the rest of us are going to look at
Speaker 1: this as an opportunity to refinance our mortgages, when we
Speaker 1: do that, the demand for replacing that interest rate risk
Speaker 1: drives these rates even or so there's a lot of
Speaker 1: that going on in the bond market. That's just quickly
Speaker 1: from me. My final question, just picking up on the
Speaker 1: pace of this move two mondays ago, the higher session
Speaker 1: for the two year yield on the thirty year yield
Speaker 1: is south of that right now in the two years
Speaker 1: now only forty six basis points. When things move this quick,
Speaker 1: and I want you to take me inside the tentacles
Speaker 1: in the market. When things move this quick, the things bright. Well,
Speaker 1: that's the question of financial vulnerabilities, right and and you
Speaker 1: know in the in the rate market, part of that
Speaker 1: rate hedging, that's a very liquid market. It's a very
Speaker 1: liquid market. It's a functional market, and it's not breaking,
Speaker 1: but it's it's bending. And when I say bending, it's
Speaker 1: accelerating the moves in terms of the breakage of the market.
Speaker 1: Where you have greater vulnerabilities is really in different parts
Speaker 1: of the fixed income market where you see liquidity and
Speaker 1: cash flows and difficulties of refinancing. That's a bit what
Speaker 1: the preempt of monetary policy is partly to address. Let's
Speaker 1: make sure there's ample amounts of look quidity. There's no
Speaker 1: technical defaults because someone can't get access to liquidity. And
Speaker 1: you certainly see that in a global perspective when you
Speaker 1: look at, say, for example, the Chinese response and the
Speaker 1: fiscal monetary policy response to ensure that small medium enterprises
Speaker 1: are getting access to rolling over as they're having a
Speaker 1: short term cash flow issue. So those policy interventions can
Speaker 1: help in those circumstances prevent markets from breaking and exacerbating
Speaker 1: losses where they otherwise wouldn't need to occur. Mr Rosenberg
Speaker 1: with us. He is a senior portfolio manager of black
Speaker 1: Rock and their systemic fixed income team. Jeff, I want
Speaker 1: you to go short term systemic right now. I call
Speaker 1: it the trust market, folks. This is well inside the
Speaker 1: two years space. It is a trust of overnight money.
Speaker 1: It is a trust of three day money, it is
Speaker 1: a trust of ninety day money. How's the trust market doing,
Speaker 1: Jeff Rosenberg? Um, I'm not sure. I'm totally fall allowing
Speaker 1: uh that. But if you're talking about short term confidence,
Speaker 1: short term confidence is evidenced by the short term paper
Speaker 1: market into the weekend. Yeah. I mean, look, the short
Speaker 1: term markets are are fine. There's a there's a demand
Speaker 1: for cash, there's a there's a flight to quality, there's
Speaker 1: a flight out of risk. That's what the markets are saying.
Speaker 1: That's uh, a normal expected reaction to a lot of
Speaker 1: panic and a lot of uncertainty and a lot of
Speaker 1: risk that people have had in their in their equity portfolios.
Speaker 1: And we looked at equity allocations over the last five
Speaker 1: years from you know, some of the data sources that
Speaker 1: provide you kind of aggregate holdings. Everybody's equity allocations have
Speaker 1: drifted higher, uh, not a huge amount, but they've been
Speaker 1: willing to drift higher because it's been a great fundamental
Speaker 1: market and you have this outside shock that no one predicted,
Speaker 1: and you came into it. As I was saying in
Speaker 1: the earlier section, you know, the economy came into it resilient,
Speaker 1: but financial markets came into it vulnerable. And so what
Speaker 1: you're having here is a forced rebalancing. And then as
Speaker 1: part of that forced rebalancing, the beneficiaries are our cash
Speaker 1: and safe haven assets and bonds. As we're as we're
Speaker 1: clearly seeing and and you're also seeing that now in
Speaker 1: terms of the relative underperformance of higher risk segments of
Speaker 1: the equity markets. With the exception of some weird days
Speaker 1: last week, you're seeing that again today. Reads, utilities, interest rates,
Speaker 1: bond proxies doing better. That's all, you know, normal behavior,
Speaker 1: but it is reflective of this de risking portfolio. And
Speaker 1: it goes, Lisa, right to where your wheelhouse. As we
Speaker 1: do this, folks of the futures back over to negative
Speaker 1: ninety four. Lisa, that's right to the spread study you've
Speaker 1: been looking at all week. I'm just wondering, from your perspective,
Speaker 1: do you think that the corollary for this is two
Speaker 1: thousand seven No, no, and and and really, guys, let's
Speaker 1: not do this. Let's not panic people. Uh, In in
Speaker 1: that way that what happened in two thousand seven eight
Speaker 1: was very unique. And why you saw that happen in
Speaker 1: commercial paper markets and in the credit markets was because
Speaker 1: the center of the crisis was in the financial system. Right,
Speaker 1: let's calm people down a little bit rather than rilling
Speaker 1: them up. This financial system is much more resilient to
Speaker 1: an external shock of coronavirus than to an external shock
Speaker 1: of subprime mortgages, which was an external It was central,
Speaker 1: and it broke the financial system. And that's why you
Speaker 1: saw the commercial paper markets blow up and create more
Speaker 1: panic and more uncertainty. Those markets are resilient, they're operating
Speaker 1: as they should, They're reflective of flight to quality. But
Speaker 1: the issues and the concerns are not there. The issues
Speaker 1: and the concerns are with the uncertainty over what a
Speaker 1: virus does to economic activity. We're all feeling it in
Speaker 1: terms of we're getting emails from our schools. Are they
Speaker 1: shutting down our companies where we're working. That's where the
Speaker 1: panic is. Let's not panic people in other areas where
Speaker 1: there is into panic. Those markets are working well. There's
Speaker 1: more resilience. We will get through this once the uncertainty
Speaker 1: of how bad the impact of the economy is, and
Speaker 1: as I said earlier, we're gonna need a little bit
Speaker 1: of help from our policymakers, and we're going to get
Speaker 1: it in terms of a fiscal policy response that will
Speaker 1: be robust and will help to offset the demand side shock.
Speaker 1: And we'll wake up and we'll see what the payroll
Speaker 1: report is reminding us of, which is, Hey, we came
Speaker 1: into this with a pretty resilient account and resilience will
Speaker 1: be our source of strength when this uncertainty pass. Half
Speaker 1: a million jobs in ninety days is and excuse me,
Speaker 1: in sixty days is a big number. Jeffrey Rosenberger, Black Rock,
Speaker 1: thank you so much for the White House is here
Speaker 1: on the Charlton fold in place to say we joined
Speaker 1: on Blindberg Television and on Blindberg Radio by Larry Cardlo,
Speaker 1: National Economic Council Director Larry and I must be exhausted,
Speaker 1: give me a twot so far this morning, so let's
Speaker 1: get straight into it. The good news is the labor
Speaker 1: market going into this growth scale looks pretty decent. Yes, right,
Speaker 1: by the way, I feel great, and thanks for having
Speaker 1: me back on the show, Jonathan, labor market looks excellent,
Speaker 1: very strong, and incidentally, most sectors in the economy look strong.
Speaker 1: We're through the first two months of the of the
Speaker 1: first quarter, right, so we got January and February, and
Speaker 1: some of the China influence is already affecting us. But
Speaker 1: the numbers are probably better named by thought. Um you
Speaker 1: maybe two and a half to three in the first quarter.
Speaker 1: I know as a realist um economic growth is likely
Speaker 1: to slow in the second quarter and maybe the third.
Speaker 1: I don't want to get too far ahead of it
Speaker 1: because some of these UH virus numbers in China coming
Speaker 1: way down outside China not so much. But I'm just
Speaker 1: saying the U. S economy is very strong. Two hundred
Speaker 1: seventy three thousand jobs and as you know, Jonathan, with revisions,
Speaker 1: three hundred and fifty thousand jobs, that's a blowout. And
Speaker 1: wage rates still rising, and you know, the blue collar
Speaker 1: boom we've talked about still there. From these data, middle income,
Speaker 1: lower wage people are out performing their managers. Unemployment rate
Speaker 1: three point five across the board, every single demographic group,
Speaker 1: So that's awfully good. Housing is improving, building is improving
Speaker 1: yet a lot of construction jobs in this report, and
Speaker 1: a pickup and manufacturing. So yes, the economic base is strong.
Speaker 1: The fundamentals of the economy is strong. We are going
Speaker 1: to see some issues coming up from the coronavirus. I
Speaker 1: get that, but I think for the United States this
Speaker 1: is gonna be temporary problems, Larry, not a time to panic,
Speaker 1: but as time to be prepared, and I hope it's
Speaker 1: temporary as well. We've seen the right cuts from the
Speaker 1: federal Reserve, an emergency fifty basis point cut. What's the
Speaker 1: administration working on to complement that, you know, any of
Speaker 1: our fiscal policies, uh, sect term munition, and I'm talking
Speaker 1: about it. Treasury and NBC and other groups are helping us.
Speaker 1: We're in the camp, Jonathan, that wants timely and targeted
Speaker 1: micro measures, not large sweeping you know, hundreds and hundreds
Speaker 1: of billions of dollars UH, that don't affect incentives and
Speaker 1: don't affect growth in any permanent way. You know, we're
Speaker 1: worried about people who may have problems with jobs in
Speaker 1: wages because they have to stay home. We're worried about
Speaker 1: small businesses, for example, that might need some help to
Speaker 1: get through this if it turns out. We're worried about
Speaker 1: certain sectors of the economy. Airlines coming to mind, but
Speaker 1: I don't want to get too deep on that that
Speaker 1: might need some help. We're looking for targeted measures that
Speaker 1: will do the most good in a short period of time,
Speaker 1: not large macro kinds of solutions which don't help economic
Speaker 1: incentives and have no permanent impact on growth. We want
Speaker 1: to just get through this and help folks as much
Speaker 1: as we can in a targeted way. Alowry, that's music
Speaker 1: to my ears, because we've got a bit of a
Speaker 1: problem here. This can be temporary, it's a one off shock.
Speaker 1: It will fade. But what will determine how temporary this
Speaker 1: is the kind of tools we have ready to deploy
Speaker 1: to how pessimese to have some people who are struggling
Speaker 1: if they've got to stay at home. So walk me
Speaker 1: through the policies, the actual policies. You're having the discussion.
Speaker 1: When do we start to get some results, Um, stay tuned,
Speaker 1: stay with us. We may have more to say about
Speaker 1: this next week. You know, I think we need to
Speaker 1: do this, Jonathan, when the actual facts come in. Now
Speaker 1: we're getting reports from industries. We had the airline people
Speaker 1: in the White House earlier this week. President Trumps talking
Speaker 1: a lot of major UH sectors across the economy. We
Speaker 1: just want to keep gathering as many facts and information
Speaker 1: as we can before we come up with the specific
Speaker 1: But we are looking at this and as I say,
Speaker 1: temporary and targeted to get through this, which will be
Speaker 1: God willing a temporary virus a problem. You know, that's
Speaker 1: our approach. We're not looking for big picture, gigantic packages
Speaker 1: that will not help growth. We've learned in the past
Speaker 1: and will be Um, you know, huge budget busters and Larry,
Speaker 1: something you've said concerns me though that we're gonna wait.
Speaker 1: We're gonna wait to see what the data says. And
Speaker 1: what I've seen so far is not just the administration,
Speaker 1: but signs coming from policymakers elsewhere that they're just being
Speaker 1: held hostage by say what happens in the next move
Speaker 1: in financial markets, and they haven't got the tools ready
Speaker 1: to deploy when they need to. This should be the
Speaker 1: planning stage. We should be ready to go if we
Speaker 1: seriously got no policies ready to deploy if things get
Speaker 1: worse next week, the week after uh MA sure answers. Yes,
Speaker 1: we can move very rapidly, and we're doing a lot
Speaker 1: of homework right now on all these points, Jonathan. I
Speaker 1: don't want to put them out publicly because I understand,
Speaker 1: but it's still my confidence because we have a moment
Speaker 1: now where there's a real lack of confidence, Larry, and
Speaker 1: you know me, I don't like to lay it on thick.
Speaker 1: This isn't about making people fearful of things. I just
Speaker 1: think there's a lack of confidence in global officials. Not
Speaker 1: on the medical side, and that's not for you and
Speaker 1: I to discuss today, but on the economic side. Talk
Speaker 1: to me about the policies have we've got payroll tax
Speaker 1: cuts ready to go. Do we have a targeted lending
Speaker 1: program to west some he is ready to go? Do
Speaker 1: we have a tax forgiveness season ready to deploy if
Speaker 1: we need to. We have made decisions on some of that. Again,
Speaker 1: peril tax cuts, we can debate the pros and cons.
Speaker 1: I lean against them. We've tried them in the past.
Speaker 1: Temporary tax that costs a lot of money, you know,
Speaker 1: six fifty billion dollars. They don't last. There's no incentive
Speaker 1: effect because they're temporary. Again, Johnathan, I think the basic
Speaker 1: view here amongst my colleagues is temporary and targeted. So
Speaker 1: if cash injections are needed to help folks who are
Speaker 1: at home because of the virus one way or another
Speaker 1: and lose a paycheck or two, we want to help them.
Speaker 1: If small businesses are in our condition in certain parts
Speaker 1: of the country, we can inject some cash. That could
Speaker 1: be true in farming, that could be true in manufacturing,
Speaker 1: that can be true in transportation and a lot of
Speaker 1: other places. So to pull that trigger will not take
Speaker 1: much time at all, and probably we'd like to do
Speaker 1: it internally. You know, if we can buy executive order.
Speaker 1: We just got the eight billion dollar package from Congress.
Speaker 1: That's good helping us on the on the medical side
Speaker 1: of this very important. Thank them, Thank them for it.
Speaker 1: We may need to come back. If we need to
Speaker 1: go back to Congress, we will. We won't hesitate, but
Speaker 1: we we are in the playing stage. And by the way, uh,
Speaker 1: you know, Secretary Manuition reminds me the G seven just
Speaker 1: had a very important conference call and all these big
Speaker 1: countries are making their own plans as things develop in
Speaker 1: those countries. So I don't want to be premature, but yes,
Speaker 1: this can all be done in a very timely way.
Speaker 1: We just need, you know, information gathering is very important, Jonathan,
Speaker 1: and I will say this to you with respect to
Speaker 1: the job's report today, which was a blowout number. I mean,
Speaker 1: employment is blown out under President Trump, way beyond what
Speaker 1: anybody thought possible. But that good income numbers, good consumers spending,
Speaker 1: good housing numbers. Let's not assume the worst. You've got
Speaker 1: a menu of options here, alright. Some options are negative,
Speaker 1: some options are either less negative or rather positive, and
Speaker 1: I want to, you know, wait and see how that
Speaker 1: plays out. The same is true with the actual medical
Speaker 1: reports on the contagion of the virus. But let's just
Speaker 1: wait and see. Let's not extrapolatest case. And I don't
Speaker 1: want to teach you how to be a policy make
Speaker 1: you a far more experience than me. But you know
Speaker 1: what this is about. You hope for the best, you
Speaker 1: prepare for the worst. You've told me to ready some
Speaker 1: move quickly. Let's talk about threshold. I've got a bond market,
Speaker 1: we deal to all time loaves. I've got crewed down
Speaker 1: seven on my screen right now, my Bloomberg terminals lighting up.
Speaker 1: It's lighting up. It's the threshold is what will determine
Speaker 1: you to move and deploy those tools that you say
Speaker 1: are ready to go in a timey fashion. Does the
Speaker 1: market dictate that? Does the data dictate that? What dictates that? Well, look,
Speaker 1: both will dictate that, but we we can't. We Look,
Speaker 1: you've got myself, Terry manution, others President Trump for that matter.
Speaker 1: We all have a lot of market experience. We all
Speaker 1: have a lot of private sector business experience. So yes,
Speaker 1: of course we watch financial markets. On the other hand,
Speaker 1: you have to watch the actual data on the ground,
Speaker 1: economic data, the health data, the virus related data. So
Speaker 1: that's we have to do that. We can't just make
Speaker 1: a move because the bond does thus, you know, in
Speaker 1: two hours on on Thursday or Friday, we can't do that.
Speaker 1: We're watching it. We're trying to We're trying to do
Speaker 1: our homework and watch everything. I just want to say though, Jonathan, again,
Speaker 1: I'm not the medical expert. I am part of the
Speaker 1: task force. I'm in constant touch on a daily basis
Speaker 1: with our really experienced uh C d C people and
Speaker 1: others who have done such a fabulous job. I mean,
Speaker 1: I gotta give him a lot of credit. They're all
Speaker 1: over it. Um. Most Americans are not at risk. That
Speaker 1: is their view. Most Americans are not at risk. The
Speaker 1: biggest risk cohort is, in fact the seniors, the elderly folks,
Speaker 1: and they need to be extra cautious. The younger you are,
Speaker 1: the less risk you're facing. And most Americans over recover
Speaker 1: rather easily should they get the virus. I want to
Speaker 1: put that out because my point is if you're healthy,
Speaker 1: if you're healthy, and you exercise common sense about washing
Speaker 1: your hands and clean excess for sneezing and coughing and
Speaker 1: things of that nature, and you avoid the obvious places
Speaker 1: where there are travel advisors. But most Americans are healthy
Speaker 1: and should go about their business. That's what I'm saying.
Speaker 1: The data is suggested. I respect to you a lot,
Speaker 1: and you know that, but neither of us a medical
Speaker 1: professionals and have a duty a care to my audience
Speaker 1: that neither of the medical professionals, and I want to
Speaker 1: focus on the economic data, not the data is from
Speaker 1: the virus. On the economic data. It's clear already the
Speaker 1: delivery times in the p M eyes are stretching, gout,
Speaker 1: they're getting longer. We've got a supply chain issue. An
Speaker 1: easy way of addressing the supply chain issue would be
Speaker 1: to drop some of the tariffs. Why are we not
Speaker 1: talking about that? You said it's about the data. There's
Speaker 1: an easy policy response, there's no follow through. Why not, um,
Speaker 1: just quickly, the supply chain data shows some slowdown and deliveries. Yes,
Speaker 1: not huge, imine airge Jathan, not yet, not huge. It
Speaker 1: may be out there, but so far really quite manageable.
Speaker 1: UM with respected terror policy, I've not heard the President
Speaker 1: and mentioned that it's done seen beyond the table right now.
Speaker 1: We would undoubtedly like to focus much more our our
Speaker 1: domestic issues, whether they're economic issues or their health related issues.
Speaker 1: So the tariff question is not being addressed at the
Speaker 1: present time. But Larry, final question, can you see why
Speaker 1: this is a problem for global markets right now that
Speaker 1: the president is signing a bill and the only policy
Speaker 1: initiative is talking about is coming rates again again in
Speaker 1: the fete to stimulate and you and I and I
Speaker 1: know you know this. There's a policy ready to go
Speaker 1: to offset a lot of fear out there at the moment,
Speaker 1: whether it's justified or not, and there is a reluctance
Speaker 1: to deploy it. And I just don't understand why. Well, Jonathan,
Speaker 1: we have to be thoughtful and careful and analytic. We
Speaker 1: want to do We don't want to willy nilly throw
Speaker 1: three hundred four hundred billion dollars with a thousand dollars
Speaker 1: check to every mark that kind of stuff about, and
Speaker 1: it doesn't work in the past. Moving tarists, I'm not
Speaker 1: talking about helicopter drops, you know, regarding the s s A.
Speaker 1: Removing tariffs. Uh. Not everyone agrees with your analysis. Uh,
Speaker 1: it's something that thus far as not surfacing. Yet. We
Speaker 1: like our China policy and we like the fact that
Speaker 1: China has cut its own tariffs. And by the way,
Speaker 1: when this virus period ends, as it will, You're gonna
Speaker 1: see a major export boom from the United States to
Speaker 1: China that is going to grow the economy by at
Speaker 1: least another percentage point in the years ahead. And I
Speaker 1: wouldn't be surprised if we saw that towards the end
Speaker 1: of the year. Regarding other measures that I mentioned, measures
Speaker 1: that would be timely and targeted towards individuals or small
Speaker 1: businesses or perhaps some industrial sectors, that's on the table.
Speaker 1: We are in the planet, we are in the discussion
Speaker 1: and planning phase, Jonavan. Again, we have to exercise some
Speaker 1: caution and analysis. We are in touch with everybody in
Speaker 1: the economy, every single sector. They're coming to visit us
Speaker 1: on a daily basis, and the President is deeply involved.
Speaker 1: And my hats off to the Vice President who's leading
Speaker 1: this healthcare task for us. So Johnavan, don't be impatient.
Speaker 1: You've got to exercise some judgment before you jump in.
Speaker 1: But we're on it. Trust me, we're on it. I'm
Speaker 1: telling you this morning, probably more than has been put
Speaker 1: out publicly, we are on it, and we are looking
Speaker 1: at these various targeted approaches. Larry, you know I respect
Speaker 1: you and I appreciate your transparency today and thank you
Speaker 1: for giving us your time. Larry could that the White
Speaker 1: House National Economic Castle Director. Thanks for listening to the
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio