Speaker 1: This is Bloomberg Wall Street Week. What's the state of
Speaker 1: corporate government? So the deficit is a real issue. The
Speaker 1: US economy continues to send mixed signals, the financial stories
Speaker 1: that cheap our world fed action to con concerns over
Speaker 1: dollar liquidity and encouraging China data the five hundred wealthiest
Speaker 1: people in the world. Through the eyes of the most
Speaker 1: influential voices Larry Summers, the former Treasury Secretary, START CEO,
Speaker 1: Kevin Johnson sec Chairman j Clayton. Bloomberg wool Street Week
Speaker 1: with David Weston from Bloomberg Radio. A cold dose of
Speaker 1: reality from the experts and equities appear to pay attention.
Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. Welcome back.
Speaker 1: Let's turn to the state of Connecticut. Now it has
Speaker 1: had more than thirty thousand COVID cases so far and
Speaker 1: very sadly were the three thousand deaths. But at the
Speaker 1: same time, hospitalizations are coming down as it looks toward
Speaker 1: a possible deadline for maybe some relief from some of
Speaker 1: the restrictions coming up on May twenty were welcome now
Speaker 1: an exclusive interview the governor of the state of Connecticut.
Speaker 1: He is ned Lamont and Mr Governor, thank you so
Speaker 1: much for joining said giving a sense, your sense of
Speaker 1: where the disease is in your state and what do
Speaker 1: you need to see between now and May twenty to
Speaker 1: relieve at least some of those restrictions. Well, Connecticut got
Speaker 1: pretty hard. We were right next to a New York
Speaker 1: city which was many ways the wuhan province of the
Speaker 1: pandemic here in the United States. And but now it's
Speaker 1: uh you know, six weeks later, all those curves are
Speaker 1: bending in the right direction. We have extra hospitalization capacity there,
Speaker 1: which was a key metric. We're finally getting the PP
Speaker 1: We delivered it ourselves, brought it from China, complicated process,
Speaker 1: I might say, we got track and trace and testing
Speaker 1: ready to go, and these are the key metrics we
Speaker 1: needed to give people confidence we could begin to reopen
Speaker 1: on May. Governor, can you give us any sense of
Speaker 1: the distribution across the state, And I mean, I guess
Speaker 1: both socio economic but also geographic. We see some differences
Speaker 1: in some states. In fact, of course New York is
Speaker 1: a larger geographic state. There's gonna be differences in the reopening.
Speaker 1: Is that going to apply in Connecticut? Well, first, of all, UM,
Speaker 1: we were hit in different ways in different regions. You know,
Speaker 1: Fairfield County, which is closest to New York City, was
Speaker 1: hit the hardest, hit the earliest, went right down Metro
Speaker 1: North and up through a Bridgeport New Haven, Hartford. That
Speaker 1: was the area that probably got hit the hardest because
Speaker 1: of the proximity to New York. And now we've got
Speaker 1: eastern Connecticut, which is the New London area, and maybe
Speaker 1: a little bit of Boston is coming down that way
Speaker 1: as well. But we're a pretty small states. So our
Speaker 1: anticipation is we're gonna open on a statewide basis, uh,
Speaker 1: on a very thoughtful way, and on some things, we
Speaker 1: want to do it in the association with our neighboring governors.
Speaker 1: It doesn't do me any good to UM close down
Speaker 1: bars and restaurants if Andrew Cuomo opens them up in
Speaker 1: Westchester County, So we're doing some things in conjunction. Yeah,
Speaker 1: govern As you mentioned, there's so much integration between Connecticut
Speaker 1: and particularly New York City and the New York City area.
Speaker 1: What about those commuter trains, well, that posed a particularly
Speaker 1: challenge for you because we have a lot of people
Speaker 1: going back and forth between Connecticut and New York every
Speaker 1: single on those trains. Uh there were a lot of
Speaker 1: people going back and forth, and we thought about that,
Speaker 1: but within a few weeks ridership was down. So I
Speaker 1: think people have voted with their feet, so to speak.
Speaker 1: They started staying at home and they started telecommuting, or
Speaker 1: they drove if they had to, which was a good thing.
Speaker 1: So um governor call and I thought about what we
Speaker 1: should do with sayt Metro North the rail system decided
Speaker 1: it was probably first responders and people that really had
Speaker 1: no other way to get to work. So we did
Speaker 1: keep it open on a limited basis. But as you reopen,
Speaker 1: as as we reopened, will we'll be looking at certain curtailment,
Speaker 1: for example, a capacity of the seating arrangement, things like that.
Speaker 1: In the commuter trains, we're certainly going to be very
Speaker 1: strict about um uh de sanitizing and making sure everything
Speaker 1: is clean on a real basis, probably gonna discourage people
Speaker 1: from going in the train for the near term, Probably
Speaker 1: gonna strongly recommended everybody used mass in the train for
Speaker 1: the near term. But I think even bigger, I think
Speaker 1: you're gonna find that um the old idea of the
Speaker 1: commuter going into New York City five days a week.
Speaker 1: Maybe an idea of this behind us. I think we
Speaker 1: found at the end of this COVID session UM that
Speaker 1: we're realizing the telecommunity in many cases work. So maybe
Speaker 1: you have a great job that seems to be a
Speaker 1: geographically located New York City you can do with two
Speaker 1: thirds of the time from you're a home in Stanford.
Speaker 1: As you look towards possible reopening, Uh, what is your
Speaker 1: situation this stick to testing sort of tracing and hospital capacity.
Speaker 1: You said you have the hospital capacity you need right now,
Speaker 1: but in case there's a flare up, how much capacity
Speaker 1: do you have to deal with it? Well, we have
Speaker 1: capacity now, and I think that's a pretty good benchmark.
Speaker 1: If there's a flare up, I would rethink things if
Speaker 1: we got the eighty or nine capacity. Obviously we have
Speaker 1: capacity now. In fact, they're going back and doing some
Speaker 1: of the so called electors, many of which were important
Speaker 1: operations that were put off and should be taking place now.
Speaker 1: The testing, UM, we've ramped that up. We're doubled it
Speaker 1: from last week. We'll double it again next week. So
Speaker 1: we'll be doing about forty two thousand tests a week
Speaker 1: starting next week. Governor. You mentioned that PPE, that personal
Speaker 1: protective equipment that you bought from China, a fair amount
Speaker 1: of it. Now, have you had any issues with the
Speaker 1: quality of that, because there have been some other places
Speaker 1: around the world and even around the country who bought
Speaker 1: things from China and it turns out it didn't work
Speaker 1: so well. Whether it's testing kits or whether it's PPE.
Speaker 1: We had to be very careful and how you vet this,
Speaker 1: that's that's a good question. And let's face it, you know,
Speaker 1: a month or so ago when people were really scrambling
Speaker 1: the globe, but everybody had a friend who had a
Speaker 1: cousin in Ukraine who did some work with Rhody Giuliani,
Speaker 1: and you didn't know where you were getting this stuff from.
Speaker 1: We didn't do any of that, but we found this.
Speaker 1: We vetted it very carefully, working closely with the government
Speaker 1: of China, working with some strong relationships we had here
Speaker 1: with the business people in Connecticut. So I have it
Speaker 1: on high confidence this is the right stuff going forward.
Speaker 1: And you've been coordinating with Governor Cuomo, Governor Murphy down
Speaker 1: in New Jersey and things like that. Do you envision
Speaker 1: a world in which those three states and maybe more
Speaker 1: really get together in the manufacturing and purchasing a ppe
Speaker 1: and stockpiling. Yeah, I think that makes all the sense
Speaker 1: in the world. You know, we've got a buying consortium now,
Speaker 1: so it's not little Connecticut going all the way to
Speaker 1: China to buy this product. But even more importantly, we
Speaker 1: ought to figure out who is good at manufacturing what.
Speaker 1: We've got a facility here in this state that makes vents.
Speaker 1: Gina Romando up in Rhode Island has a growth that's
Speaker 1: making a mass in a significant way. Phil Murphy. They've
Speaker 1: got some of the best pharma in the country and
Speaker 1: are doing the saliva tests. So I think there are
Speaker 1: a lot of ways we can mix and match. That
Speaker 1: was Connecticut Governor Ned Lamont coming up looking for green shoots.
Speaker 1: Could the auto industry point the way toward a rebound?
Speaker 1: We talked with Wall Street veteran and architect of the
Speaker 1: auto industry recovery, Steve Rattner. That's next on Wall Street
Speaker 1: Week on Bloombergo. This is Bloomberg Wall Street Week with
Speaker 1: David weston bloom Bird Radio. Whether driven by electricity or
Speaker 1: internal combustion engines, autobiles have long been an important indicator
Speaker 1: of the overall economy. And they may be showing some
Speaker 1: slight signs of a rebound. Steve Ratner is a veteran
Speaker 1: of Wall Street who also headed up Prisoner Obama's efforts
Speaker 1: to save the auto industry, and we asked him whether
Speaker 1: he could see some indications of a rebound overall economy
Speaker 1: from what we're seeing from autobiles. David, I think we
Speaker 1: have to be careful not to be misled by early
Speaker 1: signs of what may seem like spring we are going
Speaker 1: to see. And there's already a little bit of a
Speaker 1: tiny little bit of evidence of a pick up in
Speaker 1: car sales from obviously an abysmally low level in the
Speaker 1: month of a month of April. But this is this
Speaker 1: is all going to be relatively small potatoes compared to
Speaker 1: the distance we have to go to get back to
Speaker 1: where we were before all this started. And I am
Speaker 1: pretty pessimistic about our ability to get back to that
Speaker 1: point at any time in the immediate or imaginable future. Well,
Speaker 1: we heard some of the pessismism, or at least realism
Speaker 1: perhaps from the Fed chair J. Powey and his remarks
Speaker 1: where he really warned about things like mass bankruptcy and unemployment.
Speaker 1: If we don't do even more in the financial financial,
Speaker 1: the fiscal and the monetary side. Is there more that
Speaker 1: Cannon should be done to try to bring that recovery sooner? Yes, absolutely,
Speaker 1: I I am completely in agreement with Chairman Powell, not
Speaker 1: that he needs my support for his for his thoughts. Look,
Speaker 1: as I said, I think I think the notion that
Speaker 1: we are facing a V shaped recovery where it's all
Speaker 1: going to bounce back. Car sales are gonna go back
Speaker 1: to seventeen million, people are going to travel and spend
Speaker 1: and go to Disney World and all those kinds of
Speaker 1: things is frankly a fantasy. Uh. This has been an
Speaker 1: enormous shock to the economic system. There's been much permanent
Speaker 1: job loss. Factories that are never going to reopen, restaurants
Speaker 1: that are never going to reopen, companies that are never
Speaker 1: going to rehire back or at least not in the
Speaker 1: foreseeable future, all the people that they have laid off.
Speaker 1: And so we do need to do more. But I
Speaker 1: think it needs to be not just providing income support
Speaker 1: to Americans who have lost their jobs and businesses that
Speaker 1: are in danger of failing, but also we need to
Speaker 1: really rebuild America. We need to finally do something on infrastructure.
Speaker 1: We need to do something about retraining and finding jobs
Speaker 1: for the people who are not going back to their
Speaker 1: old jobs, because this whole economy is going to shift
Speaker 1: into a somewhat different focus. And so yeah, there's an
Speaker 1: enormous amount of Congress can do. The question is whether
Speaker 1: they have the will to do it. In the meantime,
Speaker 1: we have a big investors trying to decide what to do.
Speaker 1: We heard Stanley Duckomer and on temperate thing. They're very
Speaker 1: concerned with the equity markets, being overallly optimistic about the future.
Speaker 1: As an investor, what do you do in that environment
Speaker 1: where equities actually a bounced back a long way from
Speaker 1: the trial frankly, and they may not be justified by
Speaker 1: the economic data. I think many of us have been
Speaker 1: scratching our heads about the resurgence of the equity market,
Speaker 1: and we can debate the reasons for it. Uh. I
Speaker 1: think the most important reason is probably all the liquidity
Speaker 1: the FED has pumped into the system. But nonetheless, I
Speaker 1: think what Stanley Druck and Miller and David Tepper and
Speaker 1: others have been saying makes a lot of sense in
Speaker 1: terms of being concerned about the level of the equity market.
Speaker 1: How do you hedge it? Well, the simplest thing to
Speaker 1: do is simply sell. Uh. There are then if you
Speaker 1: if you for whatever reason want something more esoteric, you
Speaker 1: can do things with options. You can do things with
Speaker 1: tail risk. There are more sophisticated ways. But at the
Speaker 1: bottom line is either if you don't have a positive
Speaker 1: view about the equity market, you simply need to reduce
Speaker 1: your exposure to the equity market, give up the possible upside,
Speaker 1: and protect yourself again against the downside. We still are
Speaker 1: in a world of quite efficient markets and are no
Speaker 1: silver bullets or magic ways to take out the downside
Speaker 1: but keep the upside. So I guess it was Margaret
Speaker 1: Thatchrick to talk about Tina that there is no alternative.
Speaker 1: Is there an alternative? I mean you have to put
Speaker 1: your money somewhere. Is it better off under the mattress
Speaker 1: or there are other asset classes that offer at least
Speaker 1: some solace. I don't think there are any. Again, there's
Speaker 1: no magic bullets or simple solutions. Part of again, why
Speaker 1: the equity markets have been so robust is because people
Speaker 1: look around and see relatively interest rates relatively near zero
Speaker 1: and decide that's not a particularly attractive place to put
Speaker 1: their money. And you can make two or three percent
Speaker 1: just on the dividend yield on the S and T,
Speaker 1: so that seems pretty interesting. But then you're taking all
Speaker 1: this risk on your actual capital value. UM. So no,
Speaker 1: there are no there are again, there are unfortunately no
Speaker 1: secret places you can put your money. I don't think
Speaker 1: any of us feel that corporate credit, corporate bonds, things
Speaker 1: like that are particularly attractive at these levels either, and
Speaker 1: so I think the best advice I would give would
Speaker 1: be a mix of some equity exposure so that if
Speaker 1: in fact it turns out these levels of the stock
Speaker 1: market makes some sense, you can participate in it with
Speaker 1: good companies, combined with maintaining a very low leverage level
Speaker 1: of leverage if any at all, and a high on
Speaker 1: a high amount of a cash balance on which you
Speaker 1: should not expect to earn any interest, but you're not
Speaker 1: gonna lose any money. And what about cross border exposure.
Speaker 1: There's a lot of talk now that the supply chains
Speaker 1: may never be the same. Certainly there's a lot of
Speaker 1: focus on China right now, with the President really certainly
Speaker 1: rattling a saber about China. Does that indicate that you're
Speaker 1: better off with more domestic exposure and not as exposed
Speaker 1: to globalization. We have to see how that unfolds. There's
Speaker 1: certainly a lot of talk by the President, but frankly,
Speaker 1: with the president is mostly talked. There's some talk among
Speaker 1: c e O s and that we should pay close
Speaker 1: attention to. I think we've all learned a lesson here
Speaker 1: about long supply chains. But as we look around the
Speaker 1: world as investors, we find Europe exceedingly uninteresting. UH. They
Speaker 1: have huge structural problems. Their companies are not the companies
Speaker 1: that are most likely to do well, and in post
Speaker 1: COVID environment, a lot of old economy industrial companies. China
Speaker 1: has done and is continuing to do amazingly well, both
Speaker 1: in terms of keeping the virus under troll but in
Speaker 1: getting people back to work and in UH and in
Speaker 1: getting their economy going again. And the biggest risk in
Speaker 1: China is the one that you identified, which is essentially
Speaker 1: will they have customers either because the economies elsewhere not
Speaker 1: in great shape or because the supply lines are too long.
Speaker 1: We'll have to see how that infolds. But we have
Speaker 1: been before all this and continue to be as an
Speaker 1: economic matter, not as a political matter, not as a
Speaker 1: any other matter of that sort, but as a purely
Speaker 1: economic matter. We continue to find China very interesting as
Speaker 1: investors and are disproportionately invested. There is the big issue
Speaker 1: right now for the United States and maybe for the
Speaker 1: globe demand. I mean we hear about things like demand
Speaker 1: destruction or or a doom loop. Is that what you
Speaker 1: believe Sherman Power was talking about and he said there
Speaker 1: could be really long term, maybe even permanent damage the economy.
Speaker 1: Are we in danger of permanently destroying demand? I think
Speaker 1: we have a problem on both the supply and the
Speaker 1: demand side. We clearly have a problem on the demand
Speaker 1: side when you have what is effectively when you make
Speaker 1: the right adjustments and things, probably of Americans out of
Speaker 1: work getting their unemployment insurance but not their their real wages,
Speaker 1: and with huge uncertainty since the unemployment insurance does expire
Speaker 1: the extra six dollars after eight weeks, obviously people are
Speaker 1: going to spend less. And of course when they're essentially
Speaker 1: trapped in their houses, they're going to spend less. And
Speaker 1: you see that in the consumer spending data that was
Speaker 1: Steve Rattner, Chairman and CEO of Will and Advisers, which
Speaker 1: invests the private and filmthropic funds of Michael R. Bloomberg,
Speaker 1: the founder of our parent company, Coming Up. Oil has
Speaker 1: added to the concern over the economy overall. We talk
Speaker 1: with Dan Boreyette, Secretary of the Department of Energy, about
Speaker 1: the prospects for oil. That's next on Wall Street Week
Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio. Oil has been one of the
Speaker 1: darkest corners a gloomy economic picture, but with Saudi Arabia
Speaker 1: this week announcing unilateral production cuts, things may be looking up.
Speaker 1: That's what Secretary of Energy Dan Briette says, anything that
Speaker 1: applies to both the supply and the demand side. Yes,
Speaker 1: it is starting to look really good. Has the President
Speaker 1: has been saying for quite some time now. We're on
Speaker 1: the verge of a transition to greatness and we're starting
Speaker 1: to see it. We now have states that are opening,
Speaker 1: there are local economies that represents roughly the gasoline demand
Speaker 1: in the United States. We're starting to see oil prices stabilize.
Speaker 1: I think it's very important to note that, um, you know,
Speaker 1: this increase is good for consumers in the sense of
Speaker 1: jobs are protected all across the economy, and we see
Speaker 1: no dramatic impact on gasoline prices across the country, which
Speaker 1: I think is very important as well. So Mr Secretary,
Speaker 1: take us behind the scenes a little bit, if you can.
Speaker 1: We know the President Trump has a very good relationship
Speaker 1: with the Crown Princess Saudi Arabia, Mohammad ben Sell Mine
Speaker 1: was that cut at all something that the President helped
Speaker 1: encourage or even arrange. The Presidents have been personally engaged
Speaker 1: in this conversation for the last few weeks. Um. You know,
Speaker 1: as we talked about in the past, OPEC began its
Speaker 1: conversations around the March time frame, early March time frame,
Speaker 1: and Saudi Arabia and Russia got themselves into a bit
Speaker 1: of a dispute over their production numbers. And when the
Speaker 1: Saudi's decided to take some actions right at the beginning
Speaker 1: of this pandemic that led to both increased production and
Speaker 1: a reduction in the pricing of oil across the world.
Speaker 1: That impacted the U S producers very dramatically. And the
Speaker 1: President saw that early. He engaged with the head of
Speaker 1: state in both countries, both Russia. He's talked to President
Speaker 1: Putin several times, and he's also engaged personally with the
Speaker 1: King of Saudi Arabia. The point of those conversations is
Speaker 1: to bring stability to the marketplace and stability to the
Speaker 1: producing community, and that's really our goal here. Is there
Speaker 1: any risk that actually the US Prussian may come back
Speaker 1: too far, too fast? I mean, I just read there's
Speaker 1: energy transfer LP came out and said that at least
Speaker 1: in the premium basin that actually shales coming about quite fast.
Speaker 1: US that went down about eight percent, and now a
Speaker 1: full quarter that is back online. Are you at all
Speaker 1: concerned that that might undermine some of the efforts here
Speaker 1: to stabilize the price. No, I don't think so, David.
Speaker 1: I think what we're gonna see here very shortly, If
Speaker 1: if you're familiar with our Energy Information Administration what we
Speaker 1: referred to as e i A. They just put out
Speaker 1: a report. It talks about the economic boom that I
Speaker 1: think we're just on the verge of seeing. So the
Speaker 1: third and fourth quarters in twenty and certainly into twenty
Speaker 1: one are going to be very very robust. So the
Speaker 1: production will come back online as this economy begins to
Speaker 1: take off. And if you look at those numbers, I
Speaker 1: think you'll see that that that what the President has
Speaker 1: referred to as a V shaped recovery looks very clear
Speaker 1: in the charts right now, so you'll see the production
Speaker 1: tend to match that V shaped curve. So Mr. Sextually,
Speaker 1: it wasn't that long ago we were talking about what
Speaker 1: kinds of accommodations you need to make. The President designated you,
Speaker 1: along with Secretary Manution, to really help out the US
Speaker 1: oil industry, and you're talking about certain things like lending facilities.
Speaker 1: We also have the Fed now doing that well, changing
Speaker 1: their rules. Do we need that support anymore? Is that
Speaker 1: taken care of pretty much? Well, too loorally to tell,
Speaker 1: and it various company by company. But what the Secretary
Speaker 1: directed both Secretary Manuchin and myself to do was to
Speaker 1: evaluate the programs that were passed by the Congress and
Speaker 1: ensure but there is access for these energy industries to
Speaker 1: those programs. And that's what we've done. Secretary Manuchin worked
Speaker 1: very closely with the Federal Reserve. We adjusted the program,
Speaker 1: the main Street lending program, and made that program available
Speaker 1: to what we refer to as MidCap sized companies. You know,
Speaker 1: there are companies in America that are investment grade, Um,
Speaker 1: they perhaps do not need the same level of economic
Speaker 1: help that others do in the marketplace, and they have
Speaker 1: access to capital and access to liquidity perhaps others don't have.
Speaker 1: But there are many companies out there that simply didn't
Speaker 1: have that option. So making available this program that was
Speaker 1: passed by Converse was very, very important, and I applaud
Speaker 1: Secretary Manuchi in the Federal Reserve and others from moving
Speaker 1: so aggressively to do exactly that. So, Mr Secretary, when
Speaker 1: you implement a program like that, how do you deal
Speaker 1: with what a lot of people call moral hazard? As
Speaker 1: you said, the investigrade companies don't really need it so much.
Speaker 1: Others do because they're not nearly as good shape. But
Speaker 1: sometimes that's because they, let's be frank, borrowed too much.
Speaker 1: This tends to be a bit of a boom and
Speaker 1: bust business as I understand it in the oil patch.
Speaker 1: How do you make sure that we're not encouraging almost
Speaker 1: reckless behavior when it comes to financing. That's absolutely corrective.
Speaker 1: I mean, there's no question that moral hazard exists. That
Speaker 1: exists in every form of the banking industry. So you know,
Speaker 1: when we apply these types of UM you know, or
Speaker 1: we create these types of programs, we apply very strict
Speaker 1: lending standards to them. And what Secretary Manichul and I
Speaker 1: did was to identify those companies that really were impacted
Speaker 1: by COVID, I mean, but for the COVID pandemic, they
Speaker 1: would be strong ongoing concerns, and we looked at those
Speaker 1: companies for potentially UM making loans available to them. We
Speaker 1: you know, we're very very clear and very strict about this.
Speaker 1: There are some companies that were on the verge of
Speaker 1: insolvency and they were highly leveraged, and we're perhaps not
Speaker 1: going to make it under any circumstance. Those companies are
Speaker 1: going to be excluded from these types of programs, and
Speaker 1: I think rightfully so. That was Secretary of Energy Dan
Speaker 1: Briet coming up. We wrap up the week with our
Speaker 1: special contributor Larry Summers. This is Wall Street Week on Bloomber.
Speaker 1: Social distancing slows the spread of coronavirus, So stay a
Speaker 1: minimum of six ft away from others and stay home
Speaker 1: if you can. More info at Coronavirus dot gov. Let's
Speaker 1: all do our part because we're all hashtag alone together.
Speaker 1: Brought to you by the ad Council. This is Bloomberg
Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. The
Speaker 1: experts spoke this week, and for once, investors seemed to
Speaker 1: take heed. Dr Anthony Fauci warned that opening the economy
Speaker 1: who soon could lead not only to illness and even death,
Speaker 1: but also it could do more harm than good for
Speaker 1: the economy. And President Trump he would have none of it.
Speaker 1: Luck he wants to play all sides of the equation.
Speaker 1: I think we're going to have a tremendous fourth quarter.
Speaker 1: And then FED Chair J. Powell warned of potential mass
Speaker 1: bankruptcies and unemployment. He said that we may need more
Speaker 1: fiscal and monetary stimulus, and once again, President Trump, he disagreed.
Speaker 1: I disagree with him on one thing now, and that's
Speaker 1: negative rates. But Wall Street heavyweights like Stan drucken Miller
Speaker 1: and David Tepper sided with the experts, saying the talk
Speaker 1: of a V shaped recovery was really just a fantasy
Speaker 1: and the equities are more overvalued than in any time since.
Speaker 1: It was a week of cheer leading from the administration,
Speaker 1: even as those on the front lines, from governors to investors,
Speaker 1: talked of caution and of worry. And one of those
Speaker 1: who has been expressing ashton and even war has been
Speaker 1: our very on Wall Street Week contributor Larry Summers. From
Speaker 1: the very beginning, he's been talking about some of the
Speaker 1: problems we have in store. This is someone what he
Speaker 1: said in the past on this program. The first plank
Speaker 1: in that UH right economic strategy is an aggressive health strategy.
Speaker 1: I think the market's reflecting a sense that there's a
Speaker 1: wall of money okay, and we're delighted to have with
Speaker 1: us now Wall Street were contributor from Harvard Form Prijory
Speaker 1: Treasury Secretary Lauren Summers. So, Larry, give us a sense
Speaker 1: why is it so difficult for us as a people
Speaker 1: to really follow the science, follow the facts, because it
Speaker 1: seems like the more we see it, the less we
Speaker 1: pay attention. I wish I knew, and I wish I
Speaker 1: fully understood. We're not getting presidential leadership. That's emphasizing what
Speaker 1: the scientific community UH mostly believes. We all want to
Speaker 1: believe that problems aren't there and that we can go
Speaker 1: out uh with uh equanimity. So there's always a desire
Speaker 1: to grab onto UH good news, and we're not being
Speaker 1: given a solid plan beyond grabbing at flailing attempts that
Speaker 1: could possibly UH work. The reality is that viruses like
Speaker 1: this UH go into remission just like cases of cancer do,
Speaker 1: but there's always a very great risk that they'll come back,
Speaker 1: and you have to manage that risk very aggressively if
Speaker 1: you want to succeed. And my great threat fear is
Speaker 1: that we're not managing that risk aggressively. We're letting everything
Speaker 1: back into the open before any of the criteria that
Speaker 1: at Spurts have laid out have been fully uh met,
Speaker 1: and we may not pay for it, but I think
Speaker 1: the best guess has to be that whether it's soon
Speaker 1: in the next couple of months or whether it's deferred
Speaker 1: towards fall and winter, we will pay a price for
Speaker 1: that in more cases, more fear and apprehension, ultimately less
Speaker 1: economy UM, more job loss, more reductions in income. So
Speaker 1: I'm not very comfortable with the path UH that we're on,
Speaker 1: which seems to me to be translating hope UH into
Speaker 1: a strategy. I could conceive it we turned out to
Speaker 1: be wrong, but it's not a prudent bet UH that
Speaker 1: we're making. It's not a prudent bet that so many
Speaker 1: people are not wearing masks. It's not a prudent bet
Speaker 1: that we're engaged in so little testing and so little
Speaker 1: contact tracing. It's not a prudent bet that we haven't
Speaker 1: made more substantial efforts to separate and target aging and
Speaker 1: vulnerable UH populations. Our strategy seems to be we're just
Speaker 1: tired of this and we're gonna let it all go.
Speaker 1: And it might work, but it's not something I think
Speaker 1: we can count on. Well. Where as you say you
Speaker 1: may be wrong, and we hope you're wrong, but thus
Speaker 1: far you've been pretty close to right in all of
Speaker 1: your caution. Look Out now over the next month or
Speaker 1: two months, what might be maybe on the radar stream
Speaker 1: but not in the center of it, that you think
Speaker 1: may well end up in the center of it. I
Speaker 1: think there's a risk that they're going to be big
Speaker 1: increases in the number of cases in at least some
Speaker 1: of the places that have opened up, and that we're
Speaker 1: going to have more hotspots that may not be as
Speaker 1: bad as New York, but are going to be in
Speaker 1: the direction of what happened in New York, and that
Speaker 1: that's going to freak people out. I think there's a
Speaker 1: risk UH that the law is gonna let up, but
Speaker 1: people are going to realize that they're actually pretty scared
Speaker 1: to go to stores, and they're pretty scared to sit
Speaker 1: in restaurants, and people are going to realize that life
Speaker 1: is going to be more or less like this until
Speaker 1: we have a vaccine, and that that's gonna be a while,
Speaker 1: and that that's gonna lead to some reassessment that there's
Speaker 1: more uncertainty and lower incomes ahead and that that's hardly
Speaker 1: going to be a positive factor UH for UH for markets.
Speaker 1: I think there's a risk that we're gonna understand that
Speaker 1: there's much more financial strain ahead as people can start
Speaker 1: running out of the short cash reserves they had and
Speaker 1: not paying rent, not making UH mortgage payments, not making
Speaker 1: credit card payments, and I think there's an associated risk
Speaker 1: that landing is going to decline and that that's going
Speaker 1: to create something of an adverse uh financial uh spiral.
Speaker 1: I think there's a risk and Larry, Larry, if I
Speaker 1: could just interrupt on that point, and that specifically we've
Speaker 1: heard from I'm sorry for we heard from fetch heare
Speaker 1: j Pal this week saying if this goes on very
Speaker 1: long as be trouble and then at the very end
Speaker 1: of the week, the ft itself came out and ward
Speaker 1: about potentially significant asset price declines if in fact, this
Speaker 1: pandemic lasts too much longer, if this crisis last went
Speaker 1: too much longer. At the same time, we have a
Speaker 1: debate between the Democrats and Republicans by and large in
Speaker 1: Congress about how fast we need to have the next
Speaker 1: reflief package. How much time do we have. Every week
Speaker 1: we delay committee to supporting the incomes of unemployed Americans,
Speaker 1: supporting new investments, in testing, in contact tracing, in addressing
Speaker 1: this virus. Every week we delay supporting state and local
Speaker 1: governments is a week that we are weakening the foundation
Speaker 1: of the economy, prolonging UH the downturn, reducing the speed
Speaker 1: of UH the upturn. We should be making the necessary
Speaker 1: commitment to keep supporting UH the economy within the next
Speaker 1: two weeks, and it looks less likely now that we're
Speaker 1: going to do it. Does Nancy Pelosi have exactly the
Speaker 1: right formula? I think she's got many of the right
Speaker 1: elements health investments, state and local government, unemployment insurance UH
Speaker 1: in particular. But we need to be getting UH somewhere,
Speaker 1: and UH I hope that we can find in the
Speaker 1: face of this most extraordinary of emergencies, some capacity for
Speaker 1: bipartisan cooperation. Is the best way to help the workers
Speaker 1: directly to the workers, or is it go through the
Speaker 1: states through block grants or to the companies. I think
Speaker 1: we I think we need to have generous unemployment insurance
Speaker 1: and we need it needs to be there for gig workers.
Speaker 1: It needs to be there, whether your job ends, it
Speaker 1: needs to be there, whether you're on temporary, I owe, whatever.
Speaker 1: Exactly the circumstances that people have lost their ability to work,
Speaker 1: we need to be supporting their incomes and those are
Speaker 1: their families. We've got municipalities who do vital work. They
Speaker 1: fight the fires, they keep the streets UH safe. They
Speaker 1: will have to educate the children, perhaps in uh new
Speaker 1: ways UH given uh this challenge. This is no time
Speaker 1: for them to be cutting their budgets because of balanced
Speaker 1: budget amendments and reduced tax collections. This is no time
Speaker 1: for hospitals to be closing. This is no time for
Speaker 1: doctors and nurses to be furloughed. And if we're going
Speaker 1: to avoid that, we need to be supporting state and
Speaker 1: local governments and we need to get off of defense.
Speaker 1: We need to start playing offense and start using a
Speaker 1: moment when commodities are cheap, when there's all kinds of
Speaker 1: unemployed people to do the work, whether it's renewing the
Speaker 1: country's infrastructure, whether it's building a caring economy, to do
Speaker 1: the work that's always been essential um for us as
Speaker 1: a UH country. Yeah, yeah, it's it's fascinating. A lot
Speaker 1: of work to be done, not to speak of infrastructure,
Speaker 1: which is something you've talked about more than one occasional
Speaker 1: renew the infrastructure, and that's what we need to be
Speaker 1: moved forward with, not debating about having a state bankruptcy code,
Speaker 1: which is the proposal that McConnell put forth some time ago. Okay,
Speaker 1: thank you so much, Larry. It's always a great treat
Speaker 1: to have you with us. As in Larry Summer's former
Speaker 1: treasures are great now at harbor and he also is,
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