Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane
Speaker 1: jay Ley. 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. Right now,
Speaker 1: we are really going to dive into not only the
Speaker 1: market response, but what the market is saying to the FED.
Speaker 1: With us is Michael Darta of m CAM Partners. His
Speaker 1: work particularly on demand and supply dynamics across the greater
Speaker 1: economy out of Wisconsin or near legendary for such a
Speaker 1: young guy, and we're gonna talk to him now because
Speaker 1: he is an outlier with Mr Kachola Coode of Minnesota
Speaker 1: on what a FED needs to do. And Michael, your
Speaker 1: basic theme is it's not a FED in a static environment.
Speaker 1: In this is dynamic economics and cultula quota is correct.
Speaker 1: They've got a cut because it's a moving target right
Speaker 1: now for the FED on real rates. That's exactly right,
Speaker 1: Tom so um By new by doing nothing, the central
Speaker 1: banks are doing something. They're actually allowing monetary conditions to tighten.
Speaker 1: Because if you have a big shock to confidence in
Speaker 1: the neutral interest rate collapses and central banks stay steady
Speaker 1: with the policy rate. That's effectively a tightening of monetary policy.
Speaker 1: How do we know that's the case. Look at the
Speaker 1: bond market, Look at inflation expectations. They're plunging. If this
Speaker 1: were a first order textbook supply side shock, inflation expectations
Speaker 1: would be going up as real rates fell. That is
Speaker 1: not what's happening. So yes, the first order effect is
Speaker 1: a supply side shock from the coronavirus, but the second
Speaker 1: order effect can be a monetary shock of central books
Speaker 1: don't respond to this and a timely enforce beautifully explained.
Speaker 1: But then go to the x axis and take the
Speaker 1: part wi differential of the time function across those first
Speaker 1: and second ordered functions. The answer is nobody's talking about
Speaker 1: the sequential path of when the disinflation clicks in. Is
Speaker 1: it weeks, months or do we have to wait quarters
Speaker 1: for the evidence for them to move. I said this
Speaker 1: last year when the FED was presiding over an inverted
Speaker 1: yield curve, and my view was they really need to
Speaker 1: act sooner rather than later, and much more forcefully rather
Speaker 1: than in a tepid fashion. The longer they wait, the
Speaker 1: more they'll have to do in the less effective it
Speaker 1: will likely be because they're allowing a situation in which
Speaker 1: the neutral interest rate is moving down. You know, this
Speaker 1: happened in two thousand and eight when the FED got
Speaker 1: so distracted fighting the financial crisis they forgot about monetary policy.
Speaker 1: The neutral interest rate collapsed through the floor. The FED
Speaker 1: was late, and nominal GDP one off a cliff. By definition,
Speaker 1: if you have a nominal GDP shock, monetary policy failed.
Speaker 1: So the first order of business is to avoid that.
Speaker 1: Come Mike. What I hate from you though, is that
Speaker 1: the most important thing for them to do is manage
Speaker 1: financial conditions. Is that what I'm hearing? Well, financial conditions
Speaker 1: are sort of you know, it's a bit of a
Speaker 1: slippery concept, and you know that's a byproduct of of
Speaker 1: a of a monetary shock taking place, and most people
Speaker 1: end up looking at the stock market. You know, a
Speaker 1: lot of these financial conditions into seas are a little
Speaker 1: strange because sometimes they have interest rate levels in them
Speaker 1: and conditions than ease in the models of you know,
Speaker 1: discount risk free rates fall and that may not actually
Speaker 1: be the proper way to to think about this um
Speaker 1: But if you have inflation expectations moving lower because you've
Speaker 1: had a shock, and that's associated with risk spreads widening
Speaker 1: and now a big plunge in equity prices. Yes, you
Speaker 1: can define that as a tightening in financial conditions, and
Speaker 1: so to stay neutral, policy rates need to come down.
Speaker 1: That's my point. By doing nothing, central banks are doing something.
Speaker 1: They're actually presiding over a typing of monetary conditions, and
Speaker 1: that's how you end up creating a situation where, um,
Speaker 1: you know, the coronavirus actually can morph into my recession.
Speaker 1: How the lower rights cascade through an economy like the
Speaker 1: United States that could face a supply shock and demands
Speaker 1: shock as well in this environment, which is very very unique,
Speaker 1: it's a health situation, a public health situation. How the
Speaker 1: lower rights cascade through the economy, Well, the markets are
Speaker 1: already doing it. But if the Fed does not follow suit,
Speaker 1: and it's holding its policy rate above market rates, which
Speaker 1: is what's happening now right, we've had a reinversion of
Speaker 1: the of the yield curve, the entire curve, the short
Speaker 1: dated curve was already inverted coming into the year. Now
Speaker 1: the tenure yield is plunged back below the FED funds
Speaker 1: rate and and the t build rate um So that
Speaker 1: tells you that the Fed is actually holding interest rates
Speaker 1: at levels that are too high for the economy to survive. Now,
Speaker 1: you know, some guests will come on here and say, oh,
Speaker 1: that doesn't matter. The yield curve doesn't matter anymore as
Speaker 1: an indicator. But take a look at business cycle history,
Speaker 1: and this is not something you want to play Russian
Speaker 1: roulette with right now. If you look at the FED
Speaker 1: funds futures market pricing in almost four rate cuts by
Speaker 1: the end of January, to your point, just to put
Speaker 1: a number on the diminishing inflation expectations, the break even
Speaker 1: rate over the next five ten years has fallen to
Speaker 1: the lowest sixteen one and a half percent, now well
Speaker 1: below the two percent target of the Federal Reserve. I'm wondering,
Speaker 1: if the Federal Reserve comes out and confirms market expectations
Speaker 1: for this many rate cuts, do you expect longer term
Speaker 1: inflation expectations to go up? You know, that is a
Speaker 1: great question, and that is basically the problem. And and
Speaker 1: so you know, we came into this crisis with you know,
Speaker 1: already low inflation expectations. Why is that the case? A
Speaker 1: lot of people say, well, the FED tried to raise
Speaker 1: inflation and couldn't do it. Are you trying to raise
Speaker 1: inflation when you raise rates eight times and cut the
Speaker 1: balance sheet by half a trillion dollars when inflation is
Speaker 1: only a two pent of the time, which was the
Speaker 1: rate hiking and monetary tightening environment. So the FED is
Speaker 1: a tremendous amount of credibility and keeping inflation low but
Speaker 1: not in raising inflation to ur above its target. And
Speaker 1: now we're dealing with limited ammunition. And if you go
Speaker 1: back to FED New York FED President John Williams speech
Speaker 1: of you know a year or so ago, in an
Speaker 1: environment where you're in the vicinity of the zero lower bound,
Speaker 1: preserving ammunition is exactly what you don't do. That's a
Speaker 1: way to fail. You want to move sooner and much
Speaker 1: more aggressively, or your actions may be totally inadequate. And
Speaker 1: to your point, if they do move now, if it's
Speaker 1: twenty five basis points, you may not see a big
Speaker 1: recovery and inflation expectations, but it's certainly better than than
Speaker 1: doing nothing, in which you know these expectations could continue
Speaker 1: to roll over. Recession risks are elevated, they were still
Speaker 1: elevated coming into the year, and now they've they've moved
Speaker 1: up even more so. Afraid when I listened to a
Speaker 1: lot of other commentators, they're just simply missing the boat
Speaker 1: on this telling you know, the fed not to not
Speaker 1: to act, not to panic. No, in this environment, you
Speaker 1: actually move aggressively and sooner rather than later. I Mike
Speaker 1: got to catch out with your Mike data of m
Speaker 1: camp fount is, let's get the view on the straight show.
Speaker 1: We Stave Lighting joining us on the phone. City Private
Speaker 1: Bank Global Chief Investment strategist, Stay fantastic to have you
Speaker 1: with us. Walk me through your message for clients on
Speaker 1: a morning like this morning. What do you tell them? Well, look,
Speaker 1: I think it's just getting through the initial message that
Speaker 1: the success that China seemed to have in slowing down
Speaker 1: the coronavirus gave a false impression that this could be
Speaker 1: contained to a regional event. So what we learned over
Speaker 1: the weekend with for example, just to start of this
Speaker 1: Italy and Korea, but going from a very small number
Speaker 1: of infections to something that was more in love with
Speaker 1: vir bologists had thought that this was not going to
Speaker 1: be containable, right, that there would be widespread it's not infections,
Speaker 1: but but certainly exposure to the virus that that changed
Speaker 1: this from a regional story to a global one. And
Speaker 1: so therefore some of the economic effects, the disruption effects
Speaker 1: that we've seen in China, which were been very severe, um,
Speaker 1: but some of that that we would see in other
Speaker 1: parts of the world. So that's the thing. This is
Speaker 1: a much larger than simply regional uh disruption effect, but
Speaker 1: it's going to be something that's much more widespread, and
Speaker 1: that's going to mean greater uncertainty about the economic outlook
Speaker 1: and greater depressing effects uh in economies. UM, you know,
Speaker 1: just trying to avoid uh, the dispersion of virus for
Speaker 1: the economy. So our outlook has changed from the economy, UH,
Speaker 1: and what we would think, you know, earnings do, what
Speaker 1: you know activity in the economy does, and uh, therefore
Speaker 1: what financial assets would do. Here for a while, so
Speaker 1: Steve walk us through that the idea of the economic
Speaker 1: effect and how you price that in and how you
Speaker 1: measure that against the market effect where there seems to
Speaker 1: be fear being baked in that does not seem to
Speaker 1: be abating this morning. So figuring out exactly how to
Speaker 1: measure this is not something that's going to be to
Speaker 1: be easily done. I mean, we're just going to assume
Speaker 1: that travel transport, uh, that those industries will see double
Speaker 1: digit declines uh and in very similar to what you
Speaker 1: might see in a severe recession. But this much more,
Speaker 1: very deliberate. Um that this is like having you could
Speaker 1: almost say, like a national strike effect and r big
Speaker 1: industrial activity or natural disaster that that's probably going to
Speaker 1: happen a bit over time, and in region by region,
Speaker 1: country by country to predict unpredictable way. What I heard
Speaker 1: just talking about really about what economic data points you
Speaker 1: can look at, and honestly, very little data outside of
Speaker 1: perhaps from the China data. But but this is much
Speaker 1: more than a China story. Um, very little data is
Speaker 1: going to reflect any of this. Yet. I think some
Speaker 1: of the consumable commodities are the things that you're going
Speaker 1: to say that, look, we have to use this or
Speaker 1: will it will show up in storage. Those types of
Speaker 1: commodities will be used for tracking real come activity. Stave.
Speaker 1: How would you respond if the Feds down to the
Speaker 1: signal they make a move in March? So far little
Speaker 1: signal of that whatsoever. I'm just interested in trying to
Speaker 1: get my head around how investors would respond to a
Speaker 1: central bank willing to step back in because so far
Speaker 1: seeing little signal, little sign of that coming from the
Speaker 1: e c B, all the Federal Reserve, how would you
Speaker 1: respond to that stage positively? So they're not in an
Speaker 1: easy place. And and clearly they would be correct to
Speaker 1: say that a monetary policy response, which has long labs
Speaker 1: in terms of its impact on the economy, UM, is
Speaker 1: uh not something that's going to sort of cure a disease.
Speaker 1: At the same time, what you have to think about
Speaker 1: is what if they don't move and um, if the
Speaker 1: Federal Reserve or other central banks would stand in the
Speaker 1: way of a market adjustment right, um, and keep policy
Speaker 1: rates higher than the market is looking for, then they
Speaker 1: create an artificial tightening. Um. And you know what we
Speaker 1: have to think about. And if you want people to
Speaker 1: look over the valley, UM, it's that, Yes, if the
Speaker 1: Federal Reserve eases, it probably will be easier too long.
Speaker 1: It's not going to tighten when the when the impact
Speaker 1: of the coronavirus is over. But in a way we
Speaker 1: need that. Um. We just simply say, well, let's suspend
Speaker 1: the Fed funds rate for a while um and lower
Speaker 1: borrowing costs and on the way out of this and
Speaker 1: certainly doesn't stand the way of an adjustment and financial conditions.
Speaker 1: That's that's less severe than what otherwise would Stephen Whiting
Speaker 1: when you look at your expertise, which is linking profits
Speaker 1: in into market performance and into economics as well. What
Speaker 1: if I'm fascinating is what portion of this slowdown and
Speaker 1: revenue revenue growth, earnings, flat earnings, negative earnings, whatever it is,
Speaker 1: what portion of that will be recoverable down the road?
Speaker 1: Have you in City group done any work on that, yes,
Speaker 1: and and it's it would tend to be a large
Speaker 1: part of it. And exactly when is not clear. Um,
Speaker 1: But again if you are so, so, a couple of
Speaker 1: things need to happen. Now some of the pale risks
Speaker 1: that you can talk about again have increased. That credit
Speaker 1: would negatively affect the economy even in a scenario in
Speaker 1: which the coronavirus dissipates. That that is what central banks
Speaker 1: should want to avoid, and that's why fiscal policymakers need, um,
Speaker 1: you know, disaster relief, right, that's the kind of thing
Speaker 1: that happens in a great, big natural disaster. Um, you
Speaker 1: need fiscal easing to address weak creditors. I think China
Speaker 1: will do that, for example, very easily. I think that
Speaker 1: other authorities should be considering that when the time comes,
Speaker 1: they think that they will. And if you do that,
Speaker 1: then you don't really damage economic potential, this longer term
Speaker 1: ability to recover. And you know, again we you know, ideally, um,
Speaker 1: there's some break in as virus, and then people have
Speaker 1: short memories and suddenly they go back to travel, purchasing
Speaker 1: things that they would otherwise, and economic activity can normalize
Speaker 1: pretty fast. Always great gay thoughts stay wanting their city
Speaker 1: Private Bank global chief investment strategist, speaking as we do
Speaker 1: any credit group chief economists, typically constructive. We usually drained
Speaker 1: the drama and the hyperbole from the conversation with Eric,
Speaker 1: and I look forward to doing that now. Eric. March twelfth,
Speaker 1: the ECB convenes. What is the house view on that
Speaker 1: meeting as things stand from your perspective, Well, good morning, yeah,
Speaker 1: I I don't think they're gonna do anything. Christine Lagat
Speaker 1: said according to the Financial Times that that so far
Speaker 1: they haven't seen any things that would have sort of
Speaker 1: a material longer term impact. Uh. Now it's not on
Speaker 1: their website as far as I can see, So I'm
Speaker 1: not sure there's been a big discussion inside the ECB.
Speaker 1: But but I I I it's clear that Europe is
Speaker 1: going to take a serious hit on growth in the
Speaker 1: first quarter. But there's a big question what a sense
Speaker 1: of bank can do and what the e c B
Speaker 1: should do this earlier. So my guess is that we
Speaker 1: will get some some wording on being nervous or watching
Speaker 1: it carefully, but but no action. He should follow up
Speaker 1: paric what kind of policy leavers do you need to
Speaker 1: pull it in an environment like the one we're going into. Well,
Speaker 1: that's a very good question. Number one. If it's a
Speaker 1: supply shock, which it is predominantly U, there's really not
Speaker 1: much you can do. If you are, for for a reason,
Speaker 1: the virus shotting down movie theaters. You can put any
Speaker 1: amount of money or or credit to people, they will
Speaker 1: not go to the movie theater period, right. So it's
Speaker 1: so if it's a supply shock, there is not much
Speaker 1: you can do apart from providing liquidity to companies so
Speaker 1: that don't go bust. If that takes two, it turns
Speaker 1: into bad loans. The problem potentially in particular in China
Speaker 1: but there's also there is also a demand side, particularly
Speaker 1: in Europe where a lot of of of restrained traveling.
Speaker 1: Now we started to come into place, and some of
Speaker 1: that travel may take place may if you had more
Speaker 1: money on your hand. I cannot doubt it. So this
Speaker 1: comes down to potentially supporting the market a bit, and
Speaker 1: there it is balance sheet expansion rather than interest rates.
Speaker 1: You need to use um. But we're not there yet. Eric.
Speaker 1: What's the likelihood of a global recession from here? I
Speaker 1: wouldn't put a percentage on, but it's if you if
Speaker 1: you record it technically, if you will, then it's I
Speaker 1: think it's very high now because China is going to
Speaker 1: take a big hit in the first course. Also, our
Speaker 1: very sort of preliminary guests is that you're seeing something
Speaker 1: like a growth rate of maybe half of what you
Speaker 1: had coming out last years or maybe three. This is
Speaker 1: a coincroal five percent drop, but they're about then that
Speaker 1: automatically it's into Europe with a bit of a negative number. Small,
Speaker 1: but then you have the European effected itself and the
Speaker 1: US also. I mean, may I say here from Europe
Speaker 1: on one word on on the US, yes, to fall
Speaker 1: look good, but it was all this knit export effect, right,
Speaker 1: that complete right, right? The number so the US is
Speaker 1: a lot weaker than people realized. So so yes, high probability.
Speaker 1: Now that's a really important observation on the dynamics of
Speaker 1: exports and imports. Eric Nielsen. One thing we've missed this
Speaker 1: week or talked less about with the market news and
Speaker 1: of course things front and center, is the effect on
Speaker 1: em UniCredit has a real Eastern Europe and Southern Europe
Speaker 1: feel as well. I've got Turkish lira out, the new weakness,
Speaker 1: six point to three, Brazilian relics, etcetera. What are the
Speaker 1: knock on effects of this pandemic and the knock on
Speaker 1: effects of the big economies onto the lesser smaller economies. Well,
Speaker 1: it's a good question, tom, and and it's and it's significant, right,
Speaker 1: I mean, And and here's the ublem we're facing is
Speaker 1: it's too effect. We are shutting down businesses in the
Speaker 1: in the big or the G seven economies and China,
Speaker 1: and that by definition has this spill ful effect. And
Speaker 1: then there's the financial monet effect, which it comes with
Speaker 1: this move to safer assets. We saw your dollar now
Speaker 1: is coming back a little bit again. But we have
Speaker 1: seen them generally speak speaking risk conversion coming on. Look
Speaker 1: at how your credit for example, and that hits the
Speaker 1: e merchandise as for example. You also pointed out so
Speaker 1: this this would be an accelerator out there. Unfortunately, Eric
Speaker 1: great to get your viewers aunts olwise, Erry Nelson, there
Speaker 1: only great a Crow chief economist calling son potentially botannical recession.
Speaker 1: This is the interview of the day. If you need
Speaker 1: a synthesis of what's going on, and I will advise
Speaker 1: you that. If you need a reason to sign up
Speaker 1: for linked In, it is James Bianco of Bianco Research
Speaker 1: l l C. What's the l l C man, It's
Speaker 1: like only fancy people that the people that go to
Speaker 1: Wrigley Field do that. Jim Bianco with us right now,
Speaker 1: his feet on LinkedIn is a must read for Global
Speaker 1: Wall Street and of course is good research as well. Um,
Speaker 1: I just did the mathematics gym, which I usually don't do,
Speaker 1: and eighteen down bear markets twenty four thousand, two hundred,
Speaker 1: bear markets twenties three thousand, six hundred. Are we going
Speaker 1: to get there? Are we going to a bear market?
Speaker 1: You'd almost have to say that we are, and I
Speaker 1: wouldn't even be surprised if we were to see it
Speaker 1: in the next day or two at the rate that
Speaker 1: this market seems to be plunging right now. I think
Speaker 1: what we need to understand is that, first of all,
Speaker 1: if the market made a mistake or is making mistake,
Speaker 1: it was after it sold off in early in late
Speaker 1: January on the in the original cornervious spheres. It rallied
Speaker 1: to new highs by February. That was the mistake. So
Speaker 1: it has to correct that, and it has to now
Speaker 1: price in a new era. I think I'm with Scott Minored.
Speaker 1: This might be a bigger deal than the financial crisis.
Speaker 1: This is a change in the way that the global
Speaker 1: economy is going to work. There was a serious break
Speaker 1: that just happened. We're not going back to the way
Speaker 1: we used to work pre January with the global but
Speaker 1: we get viruses end, Jim, Yes, but not the attitude
Speaker 1: that it will bring won't end. We're going to deglobalize,
Speaker 1: We're going to change things. We are not going to
Speaker 1: have a collapse. We're not going to have a great depression.
Speaker 1: Let me put it to your market terms. The S
Speaker 1: and P was trading in a forward rate pe ratio
Speaker 1: of twenty before this virus hit. It's going to trade
Speaker 1: at attendant Fife ratio coming out of it. It's not
Speaker 1: going back to that heavy twenty growth and that optimism
Speaker 1: that we're going to have this booming global economy like
Speaker 1: we had before. We're going to deglobalize. That's going to
Speaker 1: mean to pull big things back from China. That's gonna
Speaker 1: bean more inflation, that's gonna be more friction in business.
Speaker 1: That's what the President Sanders is gonna come in. He's
Speaker 1: gonna eliminate the terroiffs like first eight he's in office.
Speaker 1: You know, things that we can't predict, they're gonna happen.
Speaker 1: And I'm not saying we go to twenty multiple or
Speaker 1: twelve multiple. That's our job. But I am going to say,
Speaker 1: on a medical basis, there's an ample history that viruses end.
Speaker 1: And you're saying we can't go back. No, I'm saying
Speaker 1: we can't go back to a p e sky is
Speaker 1: the limit um global economy. That's where we were. I'm
Speaker 1: saying we're gonna go back to a little bit more
Speaker 1: circumspecte maybe a twelve pe if you will, economy. That's
Speaker 1: enough to knock down the stock mar not not a
Speaker 1: great depression, but we're going to take the starch out
Speaker 1: of this market right now. That's what you're seeing the
Speaker 1: market do an immediate rep. Markets don't explain, they don't complain,
Speaker 1: they say, oh, I got it wrong, new era, let's
Speaker 1: just reprice the new era. That's exactly what we're seeing
Speaker 1: happen in the market right now. Now there's a possibility
Speaker 1: it's getting it wrong. And getting it wrong means China
Speaker 1: comes back and we go back by this summer to
Speaker 1: thinking how do we continue to close every job in
Speaker 1: the United States that we can and send it to China.
Speaker 1: We go back to that attitude, which is lower cost,
Speaker 1: faster growth. We'll get back to the highs. But I
Speaker 1: think what we're seeing in the market saying we're not
Speaker 1: going back to that attitude. This is a new era
Speaker 1: that we're going into, not a disastrous era, but a
Speaker 1: new era of slower growth, a more circumspect kind of world. Hey, Jim,
Speaker 1: can you give us a sense of the delta you're
Speaker 1: thinking about, because you know, we were already thinking about
Speaker 1: a lower growth four longer in terms of global GDP,
Speaker 1: and you know one to two kind of what do
Speaker 1: you think the new era might be post crisis. Well,
Speaker 1: I think that there's two steps with it. First of all,
Speaker 1: we have to get through the crisis. The immediate thing
Speaker 1: that's going to happen in the next two weeks or so,
Speaker 1: we will find out if this virus does start to
Speaker 1: spread widely in the United States, that is a palpable
Speaker 1: fear and we see widespread school closures and disclosures like
Speaker 1: we've seen in other countries. If that happens, we could
Speaker 1: see an immediate contraction of GDP in the second quarter. Now,
Speaker 1: if and if that does happen, coming out of that,
Speaker 1: you're going to get attitudes a lot more conservative then
Speaker 1: you would if we don't see that. So I do
Speaker 1: think you're going to get conservative attitudes, but they could
Speaker 1: be a lot worse if we have to go through
Speaker 1: what say Japan is going through South Korea is going through.
Speaker 1: Right now, Jim Bianca with US Bianco Research, let me
Speaker 1: do a day to check here quickly. We're a negative
Speaker 1: six plus on the UH out on negative for fifty
Speaker 1: trading here. We are open for business twenty five thousand,
Speaker 1: three fifty one in the Dow SPX, decisively below that
Speaker 1: three thousand level. The VIX went out forty seven I
Speaker 1: believe it was forty one point one six. Now on
Speaker 1: the VIX the action was in the two year yield
Speaker 1: down to a point nine one handle. Again, we've had
Speaker 1: a bounce here in the last number of minutes. Uh
Speaker 1: and uh, I'll just mentioned oil for thirty three. Jim Bianco,
Speaker 1: you show this on LinkedIn today within your good research,
Speaker 1: which has been our theme of the morning, which is
Speaker 1: gaming FED prospects and Marianna Cucho Dakota of Minnesota and
Speaker 1: Rochester and Michael Darta MKM Partners and Bob Michael JP
Speaker 1: Morgan sit enough. The FED has to act because even
Speaker 1: if they staypat with disinflation, they're tightening in an indirect manner.
Speaker 1: Do you agree that the FED needs to get out
Speaker 1: front of this. Yeah. I think they need to get
Speaker 1: out front of this in one of two ways that
Speaker 1: there talk of. We have to wait to see the data. Uh.
Speaker 1: Jim Bullard's speech that was released a little while ago,
Speaker 1: he's the dove. I'm not ready to move just yet.
Speaker 1: Smacks of them hiding under their desk and shell shock.
Speaker 1: And they need to recognize what the markets think and
Speaker 1: that there is something significant that's happening in terms of
Speaker 1: the attitudes of the global economy, in the U S economy,
Speaker 1: and start to at least acknowledge that they don't have
Speaker 1: to move today. But I think that they need to
Speaker 1: at least acknowledge that something significant is going on. And eventually, yes,
Speaker 1: I'm with them that if this economy pulls back, the
Speaker 1: act of doing nothing is a tightening and that they
Speaker 1: will have to think about moving down with the economy.
Speaker 1: And kind yeah, I want to bring this up. It's
Speaker 1: amazing how I missed the stuff. You know, I'm supposed
Speaker 1: to be all wired up. You know, I've got four
Speaker 1: log ins and on all the upper east side dims
Speaker 1: out when I come in the morning. But I missed this.
Speaker 1: And thank you to Ian Shepherdson free of AMIS and
Speaker 1: all at Pantheon. They mentioned the Bloomberg Financial Conditions Index.
Speaker 1: I call it the Michael Rosenberg Index, which was many
Speaker 1: standard deviations ugly in two thousand and eight. We're nowhere
Speaker 1: near that. But we've really come in from a positive
Speaker 1: benign financial conditions we're now down one standard deviation. I
Speaker 1: didn't know that it's it's starting to the data. It's
Speaker 1: just migrating end a week towards a point of Oh, really, Jim,
Speaker 1: do you think the federal you think there needs to
Speaker 1: be some type of fiscal stimulus on a part of
Speaker 1: the US government if this gets uh, you know, more
Speaker 1: widespread in the US. And again we have it. It's
Speaker 1: been very limited in the US to date this virus,
Speaker 1: but to the extent that we see similar migrations that
Speaker 1: we've seen in some other countries. Do you think fiscal
Speaker 1: stimulus may be needed by the government. Well, don't do it.
Speaker 1: I mean, there's no doubt that they will attempt to
Speaker 1: do it, and especially if it if it migrates into
Speaker 1: this country, the fiscal stimulus might just be combating with
Speaker 1: the virus itself and what they'll um, what they'll have
Speaker 1: to spend at least in terms of testing and identification
Speaker 1: and trying to mitigate the slowdown in the economy and
Speaker 1: the like. So yeah, I think they will not. A
Speaker 1: question is will it be effective, because what you've got
Speaker 1: going on now is an immediate supply shock that could
Speaker 1: also turn into a demand shock if the virus comes
Speaker 1: to United States. I don't think we've ever seen both
Speaker 1: at the same time to this degree, which is what
Speaker 1: the risk is that we face Jim. Thank you so much,
Speaker 1: Jim Bianco. And again, folks, I can't say enough. First
Speaker 1: thing you sign up for on LinkedIn after Paul Sweeney's
Speaker 1: glorious site is Jim Bianco is just really extraordinary out
Speaker 1: on LinkedIn with Bianco Research LLC is well. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keane before the podcas as
Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio