1 00:00:00,080 --> 00:00:13,800 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,960 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Joining 5 00:00:28,040 --> 00:00:31,000 Speaker 1: us now Sunny kind of coach genoency equity strategist. He 6 00:00:31,080 --> 00:00:32,879 Speaker 1: joined us on a five tinny rights to a a head 7 00:00:32,880 --> 00:00:35,680 Speaker 1: from you, sir? Are you more preoccupied with what's going 8 00:00:35,800 --> 00:00:39,000 Speaker 1: right or what could go wrong? So jump back in 9 00:00:39,040 --> 00:00:40,839 Speaker 1: two thousand and nine. I remember I was sitting in 10 00:00:40,840 --> 00:00:45,960 Speaker 1: an industrial um industrial company conference and they were going 11 00:00:46,040 --> 00:00:49,599 Speaker 1: through multiple slides of what their contingency plans were. This 12 00:00:49,640 --> 00:00:51,320 Speaker 1: was in the summer of two thousand nine, so the 13 00:00:51,360 --> 00:00:54,040 Speaker 1: market was up, but you were still kind of in 14 00:00:54,080 --> 00:00:56,920 Speaker 1: the grip of the Great Financial Crisis and people were 15 00:00:56,960 --> 00:00:58,720 Speaker 1: looking at each other, son, how can the market be 16 00:00:58,800 --> 00:01:02,000 Speaker 1: up so much? So this conferences companies talking about what 17 00:01:02,080 --> 00:01:05,280 Speaker 1: could their contingency plans on what could go wrong if 18 00:01:05,880 --> 00:01:08,480 Speaker 1: when it goes wrong. I raised my hand and I said, 19 00:01:08,520 --> 00:01:11,160 Speaker 1: have you guys got a contingency plan of what could 20 00:01:11,200 --> 00:01:14,080 Speaker 1: go right? And then what could go right? Is always 21 00:01:14,080 --> 00:01:16,920 Speaker 1: revolved around credit, and I was reading a Bloomberg story. 22 00:01:16,920 --> 00:01:18,720 Speaker 1: I'm gonna look away from the camera for one second 23 00:01:19,040 --> 00:01:20,640 Speaker 1: just so I can read a little bit out of 24 00:01:20,640 --> 00:01:25,800 Speaker 1: the story. Um Alphabet Chevron. Chevron priced a two year 25 00:01:25,840 --> 00:01:30,360 Speaker 1: bond yield yesterday with a point three three three coupon. 26 00:01:31,200 --> 00:01:34,160 Speaker 1: You had on the high yield side. Aluminum packaging company 27 00:01:34,200 --> 00:01:37,280 Speaker 1: Ball Corp. Sold one point three billion of ten year 28 00:01:37,319 --> 00:01:43,920 Speaker 1: notes at two point eight seven high yield two. So 29 00:01:43,959 --> 00:01:47,240 Speaker 1: you go into an economic and market kind of catastrophe 30 00:01:47,480 --> 00:01:49,920 Speaker 1: or problem when you have a need for money with 31 00:01:50,160 --> 00:01:53,559 Speaker 1: limited or no access to it. Clearly that's not the case. 32 00:01:53,720 --> 00:01:55,440 Speaker 1: How do you stand full of the credit market? Keep 33 00:01:55,480 --> 00:01:59,920 Speaker 1: on stocks? Yeah, that's I hate to listen the guys 34 00:02:00,000 --> 00:02:03,680 Speaker 1: printing the money keep telling us their game plan. They're 35 00:02:03,960 --> 00:02:06,360 Speaker 1: they're not even thinking about thinking about thinking about I mean, 36 00:02:06,360 --> 00:02:09,120 Speaker 1: you can go on and on about not thinking about 37 00:02:09,400 --> 00:02:16,560 Speaker 1: raising race. It's for guidance and potentially for the rest 38 00:02:16,560 --> 00:02:18,960 Speaker 1: of my career unless you get a major surge of 39 00:02:19,000 --> 00:02:22,639 Speaker 1: inflation that's sustainable. Remember the tenure inflation break evens are 40 00:02:22,680 --> 00:02:26,000 Speaker 1: still at about one point six percent. They want core 41 00:02:26,040 --> 00:02:29,800 Speaker 1: inflation at an average of two percent. These guys are 42 00:02:29,800 --> 00:02:32,480 Speaker 1: going to have their foot on the pedal until the 43 00:02:32,520 --> 00:02:35,560 Speaker 1: fur for the foreseeable future, and as a result of that, 44 00:02:35,960 --> 00:02:39,520 Speaker 1: the need for returns and pension plans is creating a 45 00:02:39,639 --> 00:02:43,559 Speaker 1: demand equation. Is Lisa pointed out not just for treasurieson 46 00:02:43,639 --> 00:02:47,480 Speaker 1: is that Bloomberg story pointed out for for investment grade 47 00:02:47,520 --> 00:02:52,640 Speaker 1: and speculative credit. Tony, When does the real economy matter? Well, 48 00:02:53,320 --> 00:02:56,320 Speaker 1: so this is an incredible time, Lisa, because what we 49 00:02:56,400 --> 00:03:00,320 Speaker 1: have is this access liquidity we've never seen before, coupled 50 00:03:00,360 --> 00:03:02,080 Speaker 1: with At the same time, if you look at the 51 00:03:02,120 --> 00:03:04,799 Speaker 1: o e c D, which is the Organization of Economic 52 00:03:04,840 --> 00:03:08,600 Speaker 1: Cooperation and Development, they tracked thirty seven countries as of 53 00:03:08,680 --> 00:03:10,760 Speaker 1: their end of June data and it works with a 54 00:03:10,800 --> 00:03:13,440 Speaker 1: six week lags, so it's really mid May. At the 55 00:03:13,520 --> 00:03:16,519 Speaker 1: end of June, they were saying that there were zero 56 00:03:16,639 --> 00:03:20,000 Speaker 1: of the thirty seven economies that were showing positive or 57 00:03:20,040 --> 00:03:26,800 Speaker 1: above average UM composite leading indicators that pivoted to month 58 00:03:26,840 --> 00:03:29,800 Speaker 1: to month. So we have an economy that has largely 59 00:03:29,840 --> 00:03:33,239 Speaker 1: been in collapse that is just beginning to pivot higher. 60 00:03:33,600 --> 00:03:36,680 Speaker 1: Whenever that's happened in the past, you've had to sustained 61 00:03:36,680 --> 00:03:41,000 Speaker 1: economic recovery so it's really important that we don't need 62 00:03:41,080 --> 00:03:44,839 Speaker 1: an incredible surgeon economic activity, because that would that would 63 00:03:44,880 --> 00:03:47,360 Speaker 1: change the whole dynamic of credit. You want what we're 64 00:03:47,400 --> 00:03:50,080 Speaker 1: getting well a little better than we're getting, especially for 65 00:03:50,120 --> 00:03:53,000 Speaker 1: the small businesses than people that need the money. You 66 00:03:53,120 --> 00:03:56,360 Speaker 1: are beginning to get that inflection higher. You've got to 67 00:03:56,360 --> 00:03:58,920 Speaker 1: concept to some degree that the economic story is beneath 68 00:03:58,960 --> 00:04:01,280 Speaker 1: the index. With text all absolutely ripping. I think the 69 00:04:01,320 --> 00:04:05,480 Speaker 1: tech sector up about yet today the KBW Bank index 70 00:04:05,520 --> 00:04:08,880 Speaker 1: is still down around about That's not because the economy 71 00:04:08,960 --> 00:04:12,720 Speaker 1: is doing well, it's because it isn't. Yeah, there is discretion, 72 00:04:12,960 --> 00:04:16,320 Speaker 1: certainly that is beneath the surface of some of these indexes. 73 00:04:16,800 --> 00:04:19,600 Speaker 1: Hard pressed to find the discretion though in a junk 74 00:04:19,640 --> 00:04:22,720 Speaker 1: bond yielding two point eight seven five, Hard to find 75 00:04:22,760 --> 00:04:25,920 Speaker 1: the discretion in a record amount of issue ends across 76 00:04:25,960 --> 00:04:28,320 Speaker 1: the board, in more junk bond issue in so far 77 00:04:28,680 --> 00:04:32,480 Speaker 1: year to date than all of last year. Tony. Looking forward, 78 00:04:32,520 --> 00:04:35,280 Speaker 1: there is a question here of how sustainable this is, 79 00:04:35,400 --> 00:04:38,520 Speaker 1: especially in light of some pretty serious potholes. For example, 80 00:04:38,600 --> 00:04:40,680 Speaker 1: there is no deal in Washington, and the time is 81 00:04:40,680 --> 00:04:45,799 Speaker 1: ticking and the pain is deepening. Can you imagine Washington 82 00:04:45,920 --> 00:04:47,599 Speaker 1: is not going to come to a deal, and they're 83 00:04:47,600 --> 00:04:49,960 Speaker 1: gonna let the only purpose of the government is to 84 00:04:50,000 --> 00:04:53,920 Speaker 1: support people, and they're gonna let everybody fail. So our 85 00:04:54,000 --> 00:04:57,120 Speaker 1: underlying assumption is they will get. Pain is the motivate 86 00:04:57,240 --> 00:05:00,440 Speaker 1: motivator for change and growth. They will get, and enough 87 00:05:00,480 --> 00:05:03,839 Speaker 1: pain the feedwill back loop will become negative enough that 88 00:05:03,920 --> 00:05:07,680 Speaker 1: they will come to a deal. But again, we've got 89 00:05:07,680 --> 00:05:11,279 Speaker 1: to separate what um is good or bad, right or wrong. 90 00:05:11,360 --> 00:05:14,160 Speaker 1: Those don't matter, Okay, I frankly, I don't think this 91 00:05:14,320 --> 00:05:17,240 Speaker 1: incredible use of debt ultimately is going to be a 92 00:05:17,279 --> 00:05:20,520 Speaker 1: good thing, but that doesn't matter. It is. So what 93 00:05:20,600 --> 00:05:23,479 Speaker 1: I try to guide our institutional clients and wealth management 94 00:05:23,480 --> 00:05:27,920 Speaker 1: clients overseas is try to get by what intuitively seems 95 00:05:27,960 --> 00:05:30,240 Speaker 1: good or bad, right or wrong, and just focus on 96 00:05:30,279 --> 00:05:34,080 Speaker 1: what is. We've had almost one or two frillion dollars 97 00:05:34,080 --> 00:05:38,120 Speaker 1: of corporate credit new issues, which allows those companies to 98 00:05:38,279 --> 00:05:41,719 Speaker 1: bridge the gap until we get the continued pivot and 99 00:05:41,760 --> 00:05:45,680 Speaker 1: economic activity that historically, when you look back at periods 100 00:05:45,680 --> 00:05:49,440 Speaker 1: of similar high volatility followed by a drop, you know 101 00:05:49,480 --> 00:05:52,840 Speaker 1: a retracement of the volatility. When you see correlations as 102 00:05:52,920 --> 00:05:56,599 Speaker 1: high as they were in March. Those are periods where 103 00:05:56,880 --> 00:05:59,560 Speaker 1: it's the beginning of a new economic and market cycle, 104 00:06:00,000 --> 00:06:03,039 Speaker 1: and that's really the differentiator. Is it the beginning of 105 00:06:03,279 --> 00:06:06,560 Speaker 1: a new and economic and market cycle? And the data 106 00:06:06,680 --> 00:06:09,400 Speaker 1: that we have suggests that it is. It's only something's 107 00:06:09,400 --> 00:06:11,919 Speaker 1: gotta break. And I'm just wondering what breaks first. Is 108 00:06:11,920 --> 00:06:14,240 Speaker 1: it the market and the market rally over the last 109 00:06:14,240 --> 00:06:16,800 Speaker 1: few months, or is it the resolve down in Washington, 110 00:06:16,880 --> 00:06:19,000 Speaker 1: Because right now, I'm with you, of course they've got 111 00:06:19,000 --> 00:06:22,120 Speaker 1: to get something done. But at the moment, this economic 112 00:06:22,200 --> 00:06:25,080 Speaker 1: dates in America is fairly resilient relative to what people 113 00:06:25,120 --> 00:06:27,960 Speaker 1: expected to see coming into Walkers And I'm just wondering 114 00:06:28,000 --> 00:06:33,080 Speaker 1: what breaks the resolve down in Washington again, John, Like, 115 00:06:33,160 --> 00:06:34,880 Speaker 1: if you look at the t s A numbers, even 116 00:06:34,960 --> 00:06:37,919 Speaker 1: with the increasing case of COVID nineteen over the last month, 117 00:06:38,200 --> 00:06:41,719 Speaker 1: the T s A numbers are still going up. So 118 00:06:42,000 --> 00:06:45,200 Speaker 1: what's happening is you've taken something that's gone from extraordinary 119 00:06:45,520 --> 00:06:48,880 Speaker 1: and it's moving more towards normal. And at the same time, 120 00:06:48,920 --> 00:06:50,640 Speaker 1: like I said, you're going to get this pressure in 121 00:06:50,680 --> 00:06:54,520 Speaker 1: Washington to actually get something done. But again, with all 122 00:06:54,560 --> 00:06:58,760 Speaker 1: of that in the game, you're having incredible money pushed 123 00:06:58,760 --> 00:07:01,880 Speaker 1: into the system that bridges the gap. Now, of course 124 00:07:01,880 --> 00:07:03,480 Speaker 1: you're gonna have to have a deal in Washington. You're 125 00:07:03,480 --> 00:07:06,159 Speaker 1: gonna have to have the economy recover. And that's where 126 00:07:06,200 --> 00:07:08,960 Speaker 1: you have to when you look at the historical data, 127 00:07:09,200 --> 00:07:11,520 Speaker 1: when it is set up like it is, you do 128 00:07:11,640 --> 00:07:14,320 Speaker 1: get those things to happen. I will say it's the 129 00:07:14,400 --> 00:07:17,120 Speaker 1: tao of Tony Dwyer. Just look at what is and 130 00:07:17,160 --> 00:07:19,400 Speaker 1: that is the wall of money. If you're looking at 131 00:07:19,440 --> 00:07:21,800 Speaker 1: the wall of money, why not just invest in small 132 00:07:21,840 --> 00:07:24,120 Speaker 1: cap stocks and call it a day. Say, eventually the 133 00:07:24,200 --> 00:07:26,920 Speaker 1: rally will get to some of the less loved sectors 134 00:07:27,120 --> 00:07:29,120 Speaker 1: and that's where you're gonna actually get the biggest returns. 135 00:07:29,840 --> 00:07:32,720 Speaker 1: And that's that's our call. So when when John asked, 136 00:07:32,840 --> 00:07:36,360 Speaker 1: you know what breaks first the market, Let's define the market. 137 00:07:36,720 --> 00:07:38,360 Speaker 1: So here's what we have. We have the stay at 138 00:07:38,360 --> 00:07:41,280 Speaker 1: home stocks which are now defensive in nature, the megacap 139 00:07:41,640 --> 00:07:45,320 Speaker 1: fang stocks which are now defensive in nature. So let's 140 00:07:45,360 --> 00:07:48,600 Speaker 1: say the economy gets a lot better, they should correct. 141 00:07:49,160 --> 00:07:51,160 Speaker 1: As the economy is what's been happening over the last 142 00:07:51,160 --> 00:07:54,200 Speaker 1: couple of weeks, where the economically sensitive small cap emerging 143 00:07:55,200 --> 00:07:58,600 Speaker 1: markets do way better because you're starting to price in 144 00:07:59,000 --> 00:08:02,800 Speaker 1: return economic activity. While it's it's into this very interesting. 145 00:08:03,040 --> 00:08:05,360 Speaker 1: People keep thinking that this is like the bubble of 146 00:08:05,840 --> 00:08:09,080 Speaker 1: the dot com boom because only a few stocks are 147 00:08:09,160 --> 00:08:12,240 Speaker 1: driving the index gains. But it's totally opposite when you 148 00:08:12,280 --> 00:08:15,160 Speaker 1: look at the average stock. The ny SC composite uh 149 00:08:15,640 --> 00:08:19,280 Speaker 1: New New uh ny SC advanced to client line cumulative 150 00:08:19,560 --> 00:08:21,840 Speaker 1: advanced to client line. I think made a new high 151 00:08:22,200 --> 00:08:25,320 Speaker 1: this week, all time high. It was in a two 152 00:08:25,400 --> 00:08:27,800 Speaker 1: year down trend by the time you hit the dot 153 00:08:27,840 --> 00:08:31,320 Speaker 1: com bubble peak. So yes, a few stocks are definitely 154 00:08:31,400 --> 00:08:34,199 Speaker 1: driving the gains, and I think it's far. It's excessive, 155 00:08:34,240 --> 00:08:37,800 Speaker 1: there's no question. However, a lot of stocks, even the banks, 156 00:08:37,800 --> 00:08:40,240 Speaker 1: if you look at from the low, they're highly there's 157 00:08:40,240 --> 00:08:42,679 Speaker 1: still a high correlation because they've been going up, just 158 00:08:42,760 --> 00:08:45,840 Speaker 1: not as much. And that's where the opportunity exists, is 159 00:08:45,840 --> 00:08:47,599 Speaker 1: where you get some of the fang stocks maybe to 160 00:08:47,640 --> 00:08:52,320 Speaker 1: go sideways, consolidate their gains with economic activity improving, while 161 00:08:52,400 --> 00:08:56,679 Speaker 1: these other areas, the economically sensitive recovery areas really start 162 00:08:56,720 --> 00:08:59,000 Speaker 1: to ramp Tony, you am more than welcome to join 163 00:08:59,080 --> 00:09:00,960 Speaker 1: us anytime you like to it. It's a Bloomberg story 164 00:09:01,000 --> 00:09:06,600 Speaker 1: in the morning, whenever your life just a little bit, 165 00:09:06,920 --> 00:09:08,760 Speaker 1: just a little bit, Tony, send my best to the 166 00:09:08,800 --> 00:09:11,880 Speaker 1: family trying to catch out Tony to of countercur generite. 167 00:09:12,000 --> 00:09:24,120 Speaker 1: Thank you very much. Joining us now is the wonderful 168 00:09:24,200 --> 00:09:28,439 Speaker 1: Lisa Hornby Investments US Fixed income portfolio manager Lisa HORNBI 169 00:09:28,520 --> 00:09:32,000 Speaker 1: fantastic to catch up with you. Policy has been the 170 00:09:32,000 --> 00:09:34,880 Speaker 1: bigg issue this year in I could have told you 171 00:09:34,920 --> 00:09:37,360 Speaker 1: every single data point and many people still would have 172 00:09:37,440 --> 00:09:39,800 Speaker 1: got the market call wrong. What's the policy focus for 173 00:09:39,840 --> 00:09:43,920 Speaker 1: you right now, Lisa, I mean, it's clearly an extension 174 00:09:44,000 --> 00:09:48,200 Speaker 1: of these benefits. UM. You know, I think the points 175 00:09:48,200 --> 00:09:50,560 Speaker 1: you both were making, or you three were making right 176 00:09:50,600 --> 00:09:53,720 Speaker 1: before I came on, we're right. Will the will the 177 00:09:53,760 --> 00:09:58,400 Speaker 1: central government get it together and UM continue these unemployment benefits? 178 00:09:58,400 --> 00:10:01,720 Speaker 1: I mean right now, the to me is surviving on stimulus. 179 00:10:01,960 --> 00:10:04,439 Speaker 1: You know, you think about UM some of the packages 180 00:10:04,520 --> 00:10:07,160 Speaker 1: that are going to that are going to be rolling 181 00:10:07,200 --> 00:10:10,840 Speaker 1: off potentially the unemployment benefits. The question as to whether 182 00:10:10,920 --> 00:10:13,520 Speaker 1: or not state and local government to get release. I mean, 183 00:10:13,640 --> 00:10:16,200 Speaker 1: these are some of the big economic questions we're asking 184 00:10:16,200 --> 00:10:20,160 Speaker 1: ourselves in state and local governments. Employee eighteen million people 185 00:10:20,720 --> 00:10:24,840 Speaker 1: um small businesses right, they employed sixty million people. Surveys 186 00:10:24,880 --> 00:10:27,280 Speaker 1: there are showing that optimism and hiring plans are well 187 00:10:27,320 --> 00:10:30,439 Speaker 1: below where they were pre pandemic. These are the kind 188 00:10:30,440 --> 00:10:32,440 Speaker 1: of questions that we're asking, Are we going to see 189 00:10:32,480 --> 00:10:35,719 Speaker 1: some kind of fiscal relief package that continues what we've 190 00:10:35,760 --> 00:10:39,480 Speaker 1: seen before, that potentially even expands on it. From a 191 00:10:39,520 --> 00:10:42,600 Speaker 1: fixed income investors standpoint, do you bet on the FED 192 00:10:42,640 --> 00:10:45,160 Speaker 1: poot just the idea that, no matter what, there is 193 00:10:45,200 --> 00:10:48,440 Speaker 1: going to be a pinning of treasure yields roughly where 194 00:10:48,480 --> 00:10:51,480 Speaker 1: they are regardless of policy, Or do you really look 195 00:10:51,559 --> 00:10:54,440 Speaker 1: to some sort of resurgence and inflation and some sort 196 00:10:54,480 --> 00:10:59,319 Speaker 1: of economic data to sort of get your guidelines um 197 00:11:00,080 --> 00:11:02,960 Speaker 1: To an extent, there's a FED put So we we 198 00:11:04,520 --> 00:11:07,360 Speaker 1: first and foremost look at evaluations when we're evaluating markets, 199 00:11:07,360 --> 00:11:12,120 Speaker 1: when we're evaluating credit um, and valuations today tell us 200 00:11:12,160 --> 00:11:15,400 Speaker 1: they're more or less median level. So things are not expensive, 201 00:11:15,400 --> 00:11:17,559 Speaker 1: things are not cheap. But what keeps us engaged in 202 00:11:17,600 --> 00:11:21,000 Speaker 1: the markets despite them being just fair value is the 203 00:11:21,040 --> 00:11:23,800 Speaker 1: fact that we do have this tremendous liquidity environment. So 204 00:11:23,880 --> 00:11:26,559 Speaker 1: the FED keeps us perhaps more engaged in fixed income 205 00:11:26,600 --> 00:11:28,959 Speaker 1: because we do think there is some degree of a backstop. 206 00:11:29,240 --> 00:11:32,920 Speaker 1: But we will continue to become or we will become 207 00:11:33,000 --> 00:11:35,240 Speaker 1: much more cautious if we start to see spreads really 208 00:11:35,240 --> 00:11:38,520 Speaker 1: wretched in here, because there is still a tremendous dislocation 209 00:11:38,640 --> 00:11:42,400 Speaker 1: between where markets are trading today and what the underlying 210 00:11:42,400 --> 00:11:44,679 Speaker 1: economy tells us. And this is not something that we 211 00:11:44,720 --> 00:11:46,760 Speaker 1: think will be gone in just a couple of months time. 212 00:11:46,800 --> 00:11:50,720 Speaker 1: There are going to be sustaining pressures on certain points 213 00:11:50,720 --> 00:11:53,840 Speaker 1: of the economy for a long time to come. There's 214 00:11:53,840 --> 00:11:57,440 Speaker 1: a question about the intelligence of buying treasuries as an 215 00:11:57,440 --> 00:11:59,920 Speaker 1: investment right now given the negative real yields. Where are 216 00:12:00,080 --> 00:12:01,719 Speaker 1: you on that? I mean, do you see treasuries is 217 00:12:01,720 --> 00:12:07,959 Speaker 1: truly acting as a hedge against equity volatility going forward? Um? 218 00:12:08,000 --> 00:12:11,040 Speaker 1: You know, we're fairly neutral duration here in our portfolios. 219 00:12:11,120 --> 00:12:13,440 Speaker 1: I think the FED is the backstop. I find it 220 00:12:13,440 --> 00:12:17,600 Speaker 1: really difficult to see rates moving aggressively, to be honest, 221 00:12:17,600 --> 00:12:21,040 Speaker 1: in either direction. Um, at this point in time, I 222 00:12:21,040 --> 00:12:24,680 Speaker 1: think we're kind of in a range. And you know, yes, 223 00:12:24,720 --> 00:12:26,240 Speaker 1: I think that you want to have some treasuries in 224 00:12:26,280 --> 00:12:28,800 Speaker 1: your portfolio if we do have another risk off event. 225 00:12:28,920 --> 00:12:31,880 Speaker 1: But equally, I think that we're going to see the 226 00:12:31,920 --> 00:12:34,480 Speaker 1: government response very very quickly, both on the FED and 227 00:12:34,480 --> 00:12:37,880 Speaker 1: the fiscal side, if we do have another major downturn 228 00:12:38,000 --> 00:12:41,079 Speaker 1: in financial assets. I think they learned their lesson this 229 00:12:41,200 --> 00:12:44,640 Speaker 1: time around. I mean, the magnitude and the briskness of 230 00:12:44,640 --> 00:12:48,360 Speaker 1: the response was just incredible, and that's what stabilized markets 231 00:12:48,360 --> 00:12:51,200 Speaker 1: in a in an actually very short period of time. 232 00:12:51,360 --> 00:12:53,800 Speaker 1: Lisa Homeby this market is taken down a tremendous amount 233 00:12:53,800 --> 00:12:55,680 Speaker 1: of supply on both the sulfon and the credit side. 234 00:12:55,679 --> 00:13:01,000 Speaker 1: Are you seeing any signs of it? Take whatsoever? You know? 235 00:13:01,080 --> 00:13:03,760 Speaker 1: From my perspective, it seems that investors just can't get enough. 236 00:13:03,880 --> 00:13:07,320 Speaker 1: I mean, the US is still the highest yielding developed 237 00:13:07,360 --> 00:13:11,360 Speaker 1: market in the world bar italy um, and so we 238 00:13:11,480 --> 00:13:15,160 Speaker 1: are still seeing that international demand. Hedging costs have gone 239 00:13:15,200 --> 00:13:17,440 Speaker 1: all the way down, you know, a couple of percentage 240 00:13:17,440 --> 00:13:19,400 Speaker 1: points if you look back over the last eighteen months. 241 00:13:19,400 --> 00:13:23,080 Speaker 1: So we are still seeing that international demand. It seems insatiable. 242 00:13:23,320 --> 00:13:26,640 Speaker 1: And we're even seeing domestic um sort of retail demand 243 00:13:26,679 --> 00:13:29,959 Speaker 1: as well. Uh So, right now, it seems that people 244 00:13:29,960 --> 00:13:32,040 Speaker 1: are just can't get enough of credit. You look at 245 00:13:32,040 --> 00:13:34,440 Speaker 1: the deals that have come um in the market. Over 246 00:13:34,480 --> 00:13:37,320 Speaker 1: the last few weeks, the concessions have been completely erased. 247 00:13:37,320 --> 00:13:40,000 Speaker 1: I mean in many cases they're coming twenty basis points 248 00:13:40,000 --> 00:13:42,720 Speaker 1: through where the initial price talk is. So the demand 249 00:13:42,800 --> 00:13:45,720 Speaker 1: is still there. Um, you know, the FED is still 250 00:13:45,720 --> 00:13:47,640 Speaker 1: there as a back stop. People, I think are looking 251 00:13:47,640 --> 00:13:50,760 Speaker 1: through this congressional impass at the moment and thinking something 252 00:13:50,800 --> 00:13:54,480 Speaker 1: will get done. Um. And you know, I think some 253 00:13:54,600 --> 00:13:57,480 Speaker 1: of that risk premium is probably not I think there 254 00:13:57,480 --> 00:14:01,040 Speaker 1: should be a somewhat greater degree of risk premium in markets, 255 00:14:01,080 --> 00:14:03,560 Speaker 1: just given some of the uncertainty that's out there. But 256 00:14:03,640 --> 00:14:06,000 Speaker 1: at the moment, you know, it's kind of it's a 257 00:14:06,040 --> 00:14:08,240 Speaker 1: little bit to kind of calm. Lisa Hollby, just a 258 00:14:08,240 --> 00:14:10,959 Speaker 1: final question from me. We face this really strange dynamic 259 00:14:10,960 --> 00:14:13,679 Speaker 1: and credit right now. It feels like a momentum trade 260 00:14:13,679 --> 00:14:16,040 Speaker 1: where lower yields get lower yields, and the strong gets 261 00:14:16,040 --> 00:14:18,200 Speaker 1: stronger the week get weaker. And when I say to 262 00:14:18,240 --> 00:14:20,560 Speaker 1: people what's the money being used for when they issue 263 00:14:20,560 --> 00:14:22,480 Speaker 1: this debt, they'll sets to lock in low rates. And 264 00:14:22,520 --> 00:14:25,800 Speaker 1: that's a good thing because average borrowing costs are lower, 265 00:14:26,080 --> 00:14:28,320 Speaker 1: and therefore I want to buy the credit. But Lisa, 266 00:14:28,400 --> 00:14:29,800 Speaker 1: that just tells me you want to buy the credit 267 00:14:29,840 --> 00:14:32,040 Speaker 1: because average boring costs are lower, so you buy the credit. 268 00:14:32,080 --> 00:14:34,760 Speaker 1: Then they issue some more than boring costs come lower again, 269 00:14:34,800 --> 00:14:37,240 Speaker 1: so you buy some more. At least, it just feels 270 00:14:37,280 --> 00:14:39,880 Speaker 1: like this weird cycle where leverage might be going up, 271 00:14:39,920 --> 00:14:43,040 Speaker 1: but because average boring costs are lower, people want to 272 00:14:43,120 --> 00:14:48,600 Speaker 1: buy Lisa. What breaks that trend? I mean, that's that's 273 00:14:48,600 --> 00:14:50,320 Speaker 1: been the story of the last ten years, if you 274 00:14:50,360 --> 00:14:52,160 Speaker 1: think about it right. Rates have been going down for 275 00:14:52,240 --> 00:14:55,160 Speaker 1: that almost entire period of time, and companies have been 276 00:14:55,200 --> 00:14:58,160 Speaker 1: issuing more debt UM. I think what breaks if there's 277 00:14:58,160 --> 00:15:01,920 Speaker 1: a few things that break it? Um the central banks 278 00:15:01,920 --> 00:15:04,440 Speaker 1: starting to deliver a different message than the one which 279 00:15:04,480 --> 00:15:07,320 Speaker 1: they're delivering now, so that they're no longer going to 280 00:15:07,360 --> 00:15:10,840 Speaker 1: be as supportive as they were. I think inflation coming 281 00:15:10,840 --> 00:15:14,680 Speaker 1: through UM in a material, material and very sustained way, 282 00:15:14,760 --> 00:15:17,720 Speaker 1: nothing like what we saw yesterday that was just you know, 283 00:15:18,520 --> 00:15:20,800 Speaker 1: one data print. I think that you need to see 284 00:15:20,840 --> 00:15:25,040 Speaker 1: serious inflation for them to change their tune. UM. You know, 285 00:15:25,080 --> 00:15:27,880 Speaker 1: there's a million other potential variables that could change things. 286 00:15:27,920 --> 00:15:30,680 Speaker 1: But that's why I think you use valuations as your guide. 287 00:15:30,680 --> 00:15:34,080 Speaker 1: And as as credit becomes more expensive, Um, you have 288 00:15:34,200 --> 00:15:37,160 Speaker 1: to be really judicious about which companies you own. There 289 00:15:37,200 --> 00:15:39,960 Speaker 1: are certainly still companies out there that are buying back 290 00:15:40,000 --> 00:15:42,440 Speaker 1: debt that that are actually taking some of the higher 291 00:15:42,440 --> 00:15:44,880 Speaker 1: coupon debt out of the market, so leverage, you know, 292 00:15:44,960 --> 00:15:47,640 Speaker 1: maybe more or less unchanged. They have large cash buffers 293 00:15:48,320 --> 00:15:50,200 Speaker 1: as well. Um. So I think you just have to 294 00:15:50,240 --> 00:15:52,480 Speaker 1: be cautious about which companies you're buying and stick to 295 00:15:52,560 --> 00:15:55,280 Speaker 1: high quality, more defensive names. Lisa. Before we let you go, 296 00:15:55,360 --> 00:15:58,240 Speaker 1: can we sec congratulations from my family, the Bloombergs of 297 00:15:58,320 --> 00:16:01,480 Speaker 1: Veileance family to yours and stand. There's a new little 298 00:16:01,520 --> 00:16:05,840 Speaker 1: Hornby in the family. What's his name, Alexander? Thank you 299 00:16:05,960 --> 00:16:09,000 Speaker 1: very much. He's a he's a proud but Bloomberg watcher. 300 00:16:09,040 --> 00:16:11,280 Speaker 1: He's been watching between the last few months at He's 301 00:16:11,320 --> 00:16:13,960 Speaker 1: a lucky little boys. Have a great mom. Lisa. Fantastic 302 00:16:13,960 --> 00:16:16,320 Speaker 1: to catch up with you as always, are best to 303 00:16:16,400 --> 00:16:30,080 Speaker 1: your family, Lisa, Hornbie there of Schroeder's. A little bit 304 00:16:30,120 --> 00:16:31,960 Speaker 1: later this week, there will be a conversation between the 305 00:16:32,000 --> 00:16:34,240 Speaker 1: United States and China on the Phase one agreement. We 306 00:16:34,320 --> 00:16:36,800 Speaker 1: understand that China would also like to bring in We 307 00:16:37,040 --> 00:16:39,600 Speaker 1: chatted TikTok into the chat as well. This is what 308 00:16:39,640 --> 00:16:41,840 Speaker 1: the Wall Street Journal reported this morning. We reported it 309 00:16:41,880 --> 00:16:43,880 Speaker 1: a little bit earlier on let me repeat it again 310 00:16:43,960 --> 00:16:46,200 Speaker 1: for you. This from the Wall Street Journal a couple 311 00:16:46,200 --> 00:16:49,000 Speaker 1: of hours ago. More than a dozen major US multinational 312 00:16:49,040 --> 00:16:51,800 Speaker 1: companies raised concerns in a call with White House officials 313 00:16:51,880 --> 00:16:55,480 Speaker 1: just yesterday about the potential broad scope and impact of 314 00:16:55,600 --> 00:16:59,040 Speaker 1: Mr Trump's executive order targeting we chat set to take 315 00:16:59,080 --> 00:17:01,960 Speaker 1: effect in the next month. On that coal arrange of 316 00:17:01,960 --> 00:17:05,760 Speaker 1: companies including Apple and the Walt Disney Company joining us. Now, 317 00:17:05,800 --> 00:17:08,000 Speaker 1: a man who understands this issue better than most. It's 318 00:17:08,080 --> 00:17:10,600 Speaker 1: Lee the Miller of China based book Leland. Great to 319 00:17:10,640 --> 00:17:13,480 Speaker 1: catch up with you, sir. Let's start there the tension 320 00:17:14,080 --> 00:17:18,240 Speaker 1: between these two countries over this specific issue tech. Where 321 00:17:18,359 --> 00:17:22,040 Speaker 1: is this heading, Leland? Well, A lot of it depends 322 00:17:22,080 --> 00:17:24,480 Speaker 1: on whether or not we see the trade deal last 323 00:17:24,560 --> 00:17:27,119 Speaker 1: through the election. That's holding a lot of this back. 324 00:17:27,600 --> 00:17:30,840 Speaker 1: But on the tech side specifically, the problem is the 325 00:17:30,840 --> 00:17:33,360 Speaker 1: White House wants to do something. It wants to take 326 00:17:33,359 --> 00:17:35,960 Speaker 1: ownership of the issue. It wants to push back on 327 00:17:36,040 --> 00:17:39,199 Speaker 1: some some very legitimate national security issues related to TikTok 328 00:17:39,240 --> 00:17:41,639 Speaker 1: and related to wa chat. But it hasn't really fleshed 329 00:17:41,640 --> 00:17:43,040 Speaker 1: them out. And I mean it's not an accident that 330 00:17:43,080 --> 00:17:45,680 Speaker 1: we saw forty five day kick out on any action 331 00:17:46,000 --> 00:17:48,880 Speaker 1: on TikTok and wheat Chat, particularly when you're talking about 332 00:17:48,880 --> 00:17:51,679 Speaker 1: wheat Chat. They just don't know how to pull it 333 00:17:51,720 --> 00:17:54,080 Speaker 1: back to to to restrict parts of it and not 334 00:17:54,480 --> 00:17:58,359 Speaker 1: dramatically hurt us companies like Apple and others who used 335 00:17:58,359 --> 00:18:00,920 Speaker 1: the watch at the payment of ration for for huge 336 00:18:00,960 --> 00:18:03,320 Speaker 1: chunks of their sale. So they haven't really thought this through. 337 00:18:03,359 --> 00:18:05,280 Speaker 1: They want to be aggressive, but but there's but the 338 00:18:05,359 --> 00:18:07,240 Speaker 1: jury still out of which direction they're gonna go on this? 339 00:18:07,720 --> 00:18:09,720 Speaker 1: Which direction they're gonna go on this? Does this mean 340 00:18:09,760 --> 00:18:11,720 Speaker 1: that you expect them to pull it back? Does this 341 00:18:11,840 --> 00:18:13,920 Speaker 1: just imagine? Do you expect that they're going to put 342 00:18:13,960 --> 00:18:17,960 Speaker 1: provisions within the band that allow the companies like Apple 343 00:18:18,280 --> 00:18:22,400 Speaker 1: to sell we chat on on their eye store Apple Store? 344 00:18:22,640 --> 00:18:25,879 Speaker 1: Was it E store? I like that? Yeah. Look, I 345 00:18:25,920 --> 00:18:28,199 Speaker 1: think look TikTok should have a sale. I think that 346 00:18:28,240 --> 00:18:30,160 Speaker 1: could end this if if you see a sale within 347 00:18:30,240 --> 00:18:32,440 Speaker 1: within the coming weeks, I think that's very likely. We 348 00:18:32,600 --> 00:18:35,919 Speaker 1: chats a much more difficult issue, and I think that 349 00:18:35,960 --> 00:18:39,120 Speaker 1: the chances are that you see a broad based aggressive 350 00:18:39,880 --> 00:18:42,280 Speaker 1: solution is very low. I think there's a chance that 351 00:18:42,320 --> 00:18:45,080 Speaker 1: this thing gets kicked out past the election. They're gonna 352 00:18:45,119 --> 00:18:46,920 Speaker 1: have to do something, but there are plenty of remedial 353 00:18:46,960 --> 00:18:49,360 Speaker 1: actions from Cyphius and others in which they can sort 354 00:18:49,359 --> 00:18:52,200 Speaker 1: of tweak things at the margins. The more they're getting 355 00:18:52,200 --> 00:18:54,400 Speaker 1: into this issue, the more they realize that they don't 356 00:18:54,480 --> 00:18:57,240 Speaker 1: understand the second and third order effects. So they want 357 00:18:57,240 --> 00:19:01,040 Speaker 1: the political om from doing a big, broad anti China action, 358 00:19:01,440 --> 00:19:03,280 Speaker 1: but they're not prepared for the fallout, so I think 359 00:19:03,320 --> 00:19:05,320 Speaker 1: it'll be less than people expect. Headline cross on a 360 00:19:05,320 --> 00:19:07,399 Speaker 1: Bloomberg Leland, let me bring it to you that India 361 00:19:07,480 --> 00:19:09,720 Speaker 1: is set to be poised a band Huawei and z 362 00:19:09,920 --> 00:19:12,880 Speaker 1: t A from five G network trials. This is not 363 00:19:12,920 --> 00:19:15,600 Speaker 1: just about the United States and China, Leland, It's about 364 00:19:15,720 --> 00:19:19,080 Speaker 1: China and a whole host of countries. How are they 365 00:19:19,160 --> 00:19:21,720 Speaker 1: handling this right now? And do you think President she 366 00:19:21,800 --> 00:19:24,720 Speaker 1: has pushed things a little bit too far? Yeah, I 367 00:19:24,720 --> 00:19:26,639 Speaker 1: think that they're handling us about as poorly as you 368 00:19:26,640 --> 00:19:29,280 Speaker 1: could possibly handle this issue. One of the mistakes people 369 00:19:29,320 --> 00:19:31,800 Speaker 1: make is is thinking that Huawei and zt are just 370 00:19:32,080 --> 00:19:35,800 Speaker 1: another Chinese company or two, they're not, They're there, and 371 00:19:35,880 --> 00:19:38,919 Speaker 1: there are five. You know, Huawei in particular is the 372 00:19:39,040 --> 00:19:43,399 Speaker 1: Chinese semiconductor champion uh in terms of building out five G, 373 00:19:43,600 --> 00:19:47,040 Speaker 1: and so you have an enormous nation national security issue 374 00:19:47,320 --> 00:19:51,160 Speaker 1: where where countries are now becoming aware of just how 375 00:19:51,400 --> 00:19:55,439 Speaker 1: dangerous it might be to to integrate Huawei into all 376 00:19:55,480 --> 00:19:59,240 Speaker 1: of their new next generation telecommunications. The US has has 377 00:19:59,240 --> 00:20:01,640 Speaker 1: been pushing on the but it wasn't until China really 378 00:20:01,680 --> 00:20:05,520 Speaker 1: antagonize the entire universe during and in the aftermath of 379 00:20:05,560 --> 00:20:08,399 Speaker 1: their COVID hit that that that that the countries are 380 00:20:08,440 --> 00:20:10,520 Speaker 1: really taking notice on this. So, you know, this is 381 00:20:10,560 --> 00:20:13,160 Speaker 1: something in which Chijn Ping, I think has overplayed his cards. 382 00:20:13,440 --> 00:20:15,520 Speaker 1: He just this is just going in the wrong direction 383 00:20:15,560 --> 00:20:18,040 Speaker 1: for China. It's a real problem because they're not going 384 00:20:18,119 --> 00:20:20,920 Speaker 1: to be able to pull this back if if UAWE 385 00:20:21,000 --> 00:20:23,560 Speaker 1: gets cut off. The narrative over the past few months 386 00:20:23,560 --> 00:20:25,920 Speaker 1: has been that China will recover faster than the rest 387 00:20:25,920 --> 00:20:28,960 Speaker 1: of the world from the pandemic because they clamped down 388 00:20:29,080 --> 00:20:32,840 Speaker 1: harder and there, and they had the virus first. Is 389 00:20:32,880 --> 00:20:35,800 Speaker 1: what you're saying that that is not necessarily the case 390 00:20:35,880 --> 00:20:38,959 Speaker 1: because they are facing these other pressures due to some 391 00:20:39,040 --> 00:20:44,160 Speaker 1: of their international trade policies. Well, they may recover faster 392 00:20:44,240 --> 00:20:47,800 Speaker 1: and first, but recovery no longer means what people think 393 00:20:47,840 --> 00:20:49,960 Speaker 1: it used to mean. So you know, if you're looking 394 00:20:49,960 --> 00:20:53,360 Speaker 1: at at a month on month improvement qure and quarter improvement, 395 00:20:53,520 --> 00:20:55,199 Speaker 1: we're seeing that in our data. You're seeing that in 396 00:20:55,240 --> 00:20:57,080 Speaker 1: the p M I s. What you're not seeing is 397 00:20:57,080 --> 00:20:59,800 Speaker 1: a return to normalcy. You're not seeing on your growth. 398 00:21:00,160 --> 00:21:03,159 Speaker 1: Our last data show no on your growth whatsoever. And and 399 00:21:03,080 --> 00:21:05,120 Speaker 1: and quite frankly, that's not what the p M eyes 400 00:21:05,119 --> 00:21:07,639 Speaker 1: are showing either. People have decided they don't understand how 401 00:21:07,680 --> 00:21:09,160 Speaker 1: to read the p M I s, which have no 402 00:21:09,880 --> 00:21:11,919 Speaker 1: bearing on your and your trends. So I think you 403 00:21:11,920 --> 00:21:15,040 Speaker 1: are seeing recovery partly because China was hit with COVID 404 00:21:15,600 --> 00:21:19,080 Speaker 1: first and so they're emerging fastest, But you're not seeing 405 00:21:19,160 --> 00:21:21,040 Speaker 1: a real recovery. And then you've got all these geo 406 00:21:21,040 --> 00:21:24,160 Speaker 1: political tensions and trade tensions and technology tensions they're adding 407 00:21:24,200 --> 00:21:26,520 Speaker 1: on to this. So I would be very hesited about 408 00:21:26,520 --> 00:21:30,200 Speaker 1: declaring this a banner recovery story, even if they're doing 409 00:21:30,240 --> 00:21:32,320 Speaker 1: better than most. I love the p M I shade. 410 00:21:32,880 --> 00:21:37,800 Speaker 1: That's such a blimperg conversation Leland, It's okay. I appreciate it. 411 00:21:37,880 --> 00:21:40,240 Speaker 1: Little bit of that of the China Facebook. Thank you, sir, 412 00:21:40,600 --> 00:21:52,280 Speaker 1: Thank you very much. Let's get to a Lennon shall 413 00:21:52,320 --> 00:21:54,760 Speaker 1: wait of BMO Capital Markets see joins us right now 414 00:21:55,000 --> 00:21:58,080 Speaker 1: in your thoughts on the trajectory of the recovery and 415 00:21:58,160 --> 00:22:01,320 Speaker 1: what you're seeing in the Tyson right now. Well, when 416 00:22:01,320 --> 00:22:03,760 Speaker 1: I take a look at the economic data, we see 417 00:22:04,040 --> 00:22:07,399 Speaker 1: a pause in some of the improvement that we have 418 00:22:07,520 --> 00:22:10,160 Speaker 1: been seeing, which is troubling. And the reason that it's 419 00:22:10,200 --> 00:22:13,520 Speaker 1: so troubling is because we're entering this period where the 420 00:22:13,560 --> 00:22:17,080 Speaker 1: market is not going to trust the economic data, not 421 00:22:17,160 --> 00:22:20,359 Speaker 1: because of data collection issues, but rather because the recent 422 00:22:20,400 --> 00:22:25,480 Speaker 1: spike in COVID nineteen cases hasn't ultimately flowed through to 423 00:22:26,000 --> 00:22:29,880 Speaker 1: the labor market. I think that the August non farm 424 00:22:29,880 --> 00:22:33,040 Speaker 1: payrolls report is going to be very telling, and to 425 00:22:33,080 --> 00:22:34,480 Speaker 1: a large extent, the market is going to be in 426 00:22:34,480 --> 00:22:38,479 Speaker 1: a holding pattern and tell then, at least in treasury space, 427 00:22:38,720 --> 00:22:41,720 Speaker 1: obviously we see what's going on with the equity market. 428 00:22:41,760 --> 00:22:45,520 Speaker 1: They seem to be trading off of an entirely different 429 00:22:45,600 --> 00:22:48,920 Speaker 1: set of facts and expectations as we have in rates 430 00:22:48,960 --> 00:22:51,679 Speaker 1: at the moment. You know, it's important to bring up 431 00:22:52,040 --> 00:22:54,640 Speaker 1: just the idea that there is this pessimism based into 432 00:22:54,640 --> 00:22:57,119 Speaker 1: the rates market, that yields are so low, not just 433 00:22:57,200 --> 00:22:59,720 Speaker 1: because of a FED poot, but because people have very 434 00:22:59,760 --> 00:23:02,879 Speaker 1: low expectations for the US economy. There wasn't much of 435 00:23:02,880 --> 00:23:06,240 Speaker 1: a market response to this better than expected unemployment report, 436 00:23:06,320 --> 00:23:10,520 Speaker 1: but the tenure yields did turn up, price down, yields higher. 437 00:23:10,680 --> 00:23:13,680 Speaker 1: For I believe a fifth day ian. If we do 438 00:23:13,840 --> 00:23:17,240 Speaker 1: see a better than expected trend in the data, how 439 00:23:17,320 --> 00:23:21,360 Speaker 1: high could those yields go. Well. I think it's important 440 00:23:21,359 --> 00:23:25,160 Speaker 1: to keep in context that yesterday we had the August 441 00:23:25,200 --> 00:23:28,320 Speaker 1: refunding auction of new ten years, and we get new 442 00:23:28,359 --> 00:23:30,800 Speaker 1: thirty years today. So a bit of what's going on 443 00:23:30,880 --> 00:23:34,200 Speaker 1: right now is an auction, an auction concession, so pricing 444 00:23:34,280 --> 00:23:37,280 Speaker 1: a new supply. In the event that the data does 445 00:23:37,400 --> 00:23:43,160 Speaker 1: turn and sentiment broadly improves, there's nothing to keep a 446 00:23:43,200 --> 00:23:47,560 Speaker 1: move toward the seventy five basis point level in TINS 447 00:23:48,200 --> 00:23:50,960 Speaker 1: from occurring over the course of the next six to 448 00:23:51,040 --> 00:23:56,159 Speaker 1: eight weeks. We do have constructive seasonals for treasuries between 449 00:23:56,160 --> 00:23:59,440 Speaker 1: now and the middle of the necessisis point coal I 450 00:23:59,480 --> 00:24:04,479 Speaker 1: have a two months basically that already, Um, I mean, 451 00:24:04,520 --> 00:24:06,480 Speaker 1: we're not going to one per cent in the next 452 00:24:06,520 --> 00:24:09,120 Speaker 1: two months. I agree with you on what you're saying here. 453 00:24:09,119 --> 00:24:11,040 Speaker 1: I understand what you're trying to say. I don't necessarily 454 00:24:11,080 --> 00:24:13,040 Speaker 1: agree with the call, but we slam bang in the 455 00:24:13,040 --> 00:24:14,720 Speaker 1: middle of the range of the last two or three 456 00:24:14,720 --> 00:24:17,040 Speaker 1: months fifty basis point the low end of the range. 457 00:24:17,080 --> 00:24:19,119 Speaker 1: We saw that last week, the top end of the 458 00:24:19,200 --> 00:24:22,400 Speaker 1: range ninety basis points from the beginning of June. There's 459 00:24:22,400 --> 00:24:25,040 Speaker 1: an idea that some people have that somehow the Fed 460 00:24:25,080 --> 00:24:27,679 Speaker 1: can cap the long end and not just anker the 461 00:24:27,720 --> 00:24:31,400 Speaker 1: front end. And what's your thoughts on that. Well, they 462 00:24:31,440 --> 00:24:34,840 Speaker 1: are in actively buying treasuries certainly further out of the 463 00:24:34,840 --> 00:24:38,000 Speaker 1: curve as well, so quee in and of itself creates 464 00:24:38,000 --> 00:24:42,360 Speaker 1: a structural demand. Now, whether they can actually cap ten 465 00:24:42,440 --> 00:24:46,280 Speaker 1: in thirty year yields using their monetary policy in the 466 00:24:46,320 --> 00:24:50,680 Speaker 1: front end, it's an open question, but an operation twist 467 00:24:50,880 --> 00:24:53,919 Speaker 1: or overweighting purchases further out of the curve would do it. 468 00:24:54,280 --> 00:24:57,879 Speaker 1: And frankly, at this moment, what's really driving ten thirty 469 00:24:57,920 --> 00:25:00,159 Speaker 1: year yields even though they are within that defined will 470 00:25:00,280 --> 00:25:04,480 Speaker 1: range is global growth and inflation expectations. So an uptick 471 00:25:04,800 --> 00:25:09,760 Speaker 1: in inflation comparable to what we saw yesterday, that that extends. 472 00:25:10,080 --> 00:25:13,800 Speaker 1: I think that would be the missing ingredient to really 473 00:25:13,920 --> 00:25:15,960 Speaker 1: reprice the longer and entire and a lot of people 474 00:25:15,960 --> 00:25:18,159 Speaker 1: would agree with you HSBC coming out and saying, if 475 00:25:18,160 --> 00:25:20,840 Speaker 1: the Fed hadn't stepped in treasure, yields may actually be 476 00:25:21,119 --> 00:25:24,200 Speaker 1: even lower, not higher, than where they are now because 477 00:25:24,240 --> 00:25:26,560 Speaker 1: growth would be that much slower. Which brings me to 478 00:25:26,600 --> 00:25:28,520 Speaker 1: the balance sheet. A lot of people when the FED 479 00:25:28,600 --> 00:25:31,560 Speaker 1: was originally ramping up its program in response to the pandemic, 480 00:25:31,600 --> 00:25:33,760 Speaker 1: we're expecting the balance sheet to get to ten trillion 481 00:25:33,760 --> 00:25:35,920 Speaker 1: dollars by the end of the year. Right now, it's 482 00:25:36,119 --> 00:25:38,600 Speaker 1: a little bit around seven trillion dollars. It's kind of 483 00:25:38,600 --> 00:25:40,600 Speaker 1: bouncing up and down depending on the week. It seems 484 00:25:40,600 --> 00:25:43,720 Speaker 1: to have stabilized. Have you rotchet to back your expectations 485 00:25:43,760 --> 00:25:46,320 Speaker 1: of how many assets the Fed will have to or 486 00:25:46,560 --> 00:25:49,720 Speaker 1: want to buy before your end in order to support markets. 487 00:25:51,119 --> 00:25:54,280 Speaker 1: I think at this point the Fed has told us 488 00:25:54,320 --> 00:25:57,000 Speaker 1: the pace that they're going to continue purchasing at, and 489 00:25:57,040 --> 00:26:02,080 Speaker 1: that does keep a target um growing in trillions by 490 00:26:03,040 --> 00:26:06,600 Speaker 1: one on the table. I don't think that what's playing 491 00:26:06,600 --> 00:26:10,399 Speaker 1: out right now in the real economy is giving the 492 00:26:10,560 --> 00:26:13,960 Speaker 1: FED any confidence that they'll need to buy less. And 493 00:26:14,080 --> 00:26:18,399 Speaker 1: if anything, as the economic data continues to unfold throughth 494 00:26:18,440 --> 00:26:22,120 Speaker 1: balanced the year, will probably see a risk for an 495 00:26:22,200 --> 00:26:26,439 Speaker 1: expansion of some of the existing programs rather than a 496 00:26:26,600 --> 00:26:30,160 Speaker 1: contraction unless there's a decidedly positive turn that I don't 497 00:26:30,200 --> 00:26:32,520 Speaker 1: think anyone in the market is currently expecting. And at 498 00:26:32,520 --> 00:26:35,320 Speaker 1: this point, given where we are given more borrowing costs, 499 00:26:35,320 --> 00:26:39,080 Speaker 1: are is a fens effort doing anything to actually help 500 00:26:39,200 --> 00:26:43,640 Speaker 1: the economy. Well, what the SET is doing is they're 501 00:26:43,680 --> 00:26:47,160 Speaker 1: trying to push investors further out the yield curve, further 502 00:26:47,240 --> 00:26:50,680 Speaker 1: out the credit curve, and further through the capital structure, 503 00:26:50,880 --> 00:26:53,520 Speaker 1: which is why we're seeing equities performing the way that 504 00:26:53,960 --> 00:26:56,480 Speaker 1: the way that they are at the moment, and ideally 505 00:26:57,040 --> 00:27:00,919 Speaker 1: that then provides an incentive for FUR to continue to 506 00:27:01,040 --> 00:27:05,240 Speaker 1: expand and higher back, or to expand and higher back. 507 00:27:05,320 --> 00:27:07,840 Speaker 1: Some of the people that were laid off, recall, we 508 00:27:08,000 --> 00:27:13,480 Speaker 1: lost twenty five million jobs. We've only gained back of that, 509 00:27:13,840 --> 00:27:15,919 Speaker 1: so there's still a lot of work left to go, 510 00:27:16,359 --> 00:27:18,920 Speaker 1: and the FETE has made it clear that they're okay 511 00:27:19,080 --> 00:27:23,760 Speaker 1: risking bubbles at this point, given that the reality is 512 00:27:23,880 --> 00:27:26,760 Speaker 1: that they need to re employ the labor force, writes 513 00:27:26,760 --> 00:27:29,080 Speaker 1: to catch up. As oh, I stand touchwa you in 514 00:27:29,240 --> 00:27:42,639 Speaker 1: linen that of being a capital markets now joining us 515 00:27:42,640 --> 00:27:44,919 Speaker 1: to talk about fiscal action. As Jason Furman, he's Harvard 516 00:27:44,960 --> 00:27:47,560 Speaker 1: Kennedy School professor and from a chairman of the Council 517 00:27:47,600 --> 00:27:51,679 Speaker 1: of Economic Advisors during the ADMABA administration. Jason, thank you 518 00:27:51,720 --> 00:27:54,000 Speaker 1: for joining us. When you look at how far apart 519 00:27:54,080 --> 00:27:57,040 Speaker 1: Democrats and Republicans actually are, I think it's over one 520 00:27:57,040 --> 00:27:59,760 Speaker 1: trillion dollars. Is it a bit like Europe? They're far apart. 521 00:27:59,800 --> 00:28:02,199 Speaker 1: They're the overture as I get shot down. But at 522 00:28:02,240 --> 00:28:04,080 Speaker 1: the end of the day, they'll find a deal in 523 00:28:04,119 --> 00:28:09,000 Speaker 1: the eleventh hour or is it different Frenzying, It is 524 00:28:09,680 --> 00:28:14,800 Speaker 1: past midnight already. UM. One of these programs expired at 525 00:28:14,800 --> 00:28:18,119 Speaker 1: the end of June. The other program expired at the 526 00:28:18,240 --> 00:28:23,359 Speaker 1: end of July. And you know, the lead negotiator for 527 00:28:23,400 --> 00:28:27,280 Speaker 1: one of the sides has now gone on vacation. So 528 00:28:27,440 --> 00:28:31,680 Speaker 1: I am very worried about you know, when the two 529 00:28:31,680 --> 00:28:35,280 Speaker 1: sides will come together. I assume at some point they will, UM, 530 00:28:35,320 --> 00:28:38,440 Speaker 1: but I think it could you know it's unlikely to 531 00:28:38,480 --> 00:28:42,200 Speaker 1: happen this month, Jason doesn't make a difference. So we 532 00:28:42,240 --> 00:28:44,560 Speaker 1: understand that one of the biggest sticking points is actually 533 00:28:44,640 --> 00:28:47,600 Speaker 1: aided to stay in local governments. Does it make it 534 00:28:47,800 --> 00:28:49,440 Speaker 1: or how much of a different does it make if 535 00:28:49,480 --> 00:28:51,720 Speaker 1: we have something in August or if we have something 536 00:28:51,720 --> 00:28:56,400 Speaker 1: in September? Is it Is it going to scar the economy? Yeah? 537 00:28:56,480 --> 00:28:58,480 Speaker 1: I think it makes a big difference. I think we're 538 00:28:58,520 --> 00:29:04,640 Speaker 1: already doing irreversible or not irreversible, but persistent harm to 539 00:29:04,840 --> 00:29:08,479 Speaker 1: the economy. UM states and localities should have had this 540 00:29:08,600 --> 00:29:12,520 Speaker 1: aid months and months ago before they set their budgets 541 00:29:12,560 --> 00:29:16,840 Speaker 1: for this year. The school year has begun in many 542 00:29:16,960 --> 00:29:20,920 Speaker 1: states in the United States, and they have enormous expenditures 543 00:29:20,960 --> 00:29:23,440 Speaker 1: they need to make in order to make schools safe. 544 00:29:24,360 --> 00:29:28,640 Speaker 1: If they can't make school safe, they can't have the students, 545 00:29:29,000 --> 00:29:31,840 Speaker 1: which makes it harder for their parents to work, which 546 00:29:31,880 --> 00:29:36,600 Speaker 1: has another um not gone effect on the economy, where 547 00:29:36,680 --> 00:29:40,920 Speaker 1: right now in the largest fiscal contraction the United States 548 00:29:40,920 --> 00:29:44,200 Speaker 1: has ever seen, as the Cares Act, which was roughly 549 00:29:44,240 --> 00:29:48,000 Speaker 1: five billion dollars a month, has gone down to what 550 00:29:48,080 --> 00:29:52,080 Speaker 1: I would estimated at about forty five billion dollars. Given 551 00:29:52,120 --> 00:29:56,000 Speaker 1: the president's executive order, that's about how much stimulus UM 552 00:29:56,080 --> 00:30:00,440 Speaker 1: that is worth. So a huge fiscal contraction state behind 553 00:30:00,480 --> 00:30:04,840 Speaker 1: the curve knock on effects for parents working UM. This 554 00:30:04,920 --> 00:30:08,440 Speaker 1: is not at all good for the US economy, Jason. 555 00:30:08,480 --> 00:30:10,200 Speaker 1: People on the other side would argue, we're seeing a 556 00:30:10,200 --> 00:30:14,080 Speaker 1: pretty rapid improvement, that we're seeing jobless claims fall from 557 00:30:14,120 --> 00:30:17,280 Speaker 1: their peaks, that the unemployment rate, while still incredibly high 558 00:30:17,280 --> 00:30:21,320 Speaker 1: based on historical normalcy, is still a lot lower than 559 00:30:21,360 --> 00:30:23,760 Speaker 1: it was during the peak of the shutdowns. What would 560 00:30:23,800 --> 00:30:26,400 Speaker 1: you say to people saying we're just on the path 561 00:30:26,480 --> 00:30:30,480 Speaker 1: to recovery. Sit tight, Wait, don't increase the deficit because 562 00:30:30,480 --> 00:30:34,840 Speaker 1: we're getting there. I would say to those people that 563 00:30:35,120 --> 00:30:38,080 Speaker 1: all of those economic data and it has been a 564 00:30:38,240 --> 00:30:43,600 Speaker 1: rapid recovery varies. Employments recovered less than half, consumer spending 565 00:30:44,040 --> 00:30:46,880 Speaker 1: has gone almost all the way UM. But all of 566 00:30:46,920 --> 00:30:49,840 Speaker 1: that rapid recovery has been in the face of a massive, 567 00:30:50,240 --> 00:30:55,280 Speaker 1: massive policy response. And if you end that massive policy response, 568 00:30:55,560 --> 00:30:59,719 Speaker 1: the prop underlying that will be gone. Disposable personal income 569 00:30:59,760 --> 00:31:02,480 Speaker 1: was up ten not even at an annual rate in 570 00:31:02,520 --> 00:31:05,840 Speaker 1: the second quarter. That's why consumption got all the way 571 00:31:05,880 --> 00:31:08,760 Speaker 1: back to where it was a year ago. That helped 572 00:31:09,360 --> 00:31:11,880 Speaker 1: support the job recovery. That didn't happen on its own. 573 00:31:11,920 --> 00:31:15,320 Speaker 1: That happened because people had massive amounts of cash, and 574 00:31:15,360 --> 00:31:18,960 Speaker 1: we're now about to take that away, all right, Jason. 575 00:31:19,240 --> 00:31:22,440 Speaker 1: There's an argument that if they add to the extra 576 00:31:22,520 --> 00:31:25,360 Speaker 1: six hundred dollars a week or six hundred dollars an 577 00:31:25,360 --> 00:31:28,680 Speaker 1: extra stimulus for people who are unemployed, that that will 578 00:31:28,680 --> 00:31:31,880 Speaker 1: actually lead to people not going back to the workforce. 579 00:31:31,960 --> 00:31:33,760 Speaker 1: But there was a study done by the University of 580 00:31:33,880 --> 00:31:38,120 Speaker 1: Chicago and fivety eight that suggested that actually a decrease 581 00:31:38,200 --> 00:31:42,480 Speaker 1: in unemployment benefits would lead to an increase in joblessness. 582 00:31:42,480 --> 00:31:45,840 Speaker 1: Do you agree? Does that make sense to you? I 583 00:31:45,880 --> 00:31:48,440 Speaker 1: think the higher the unemployment benefit, the debt or the 584 00:31:48,480 --> 00:31:51,120 Speaker 1: economy is in the next couple of months because people 585 00:31:51,120 --> 00:31:54,040 Speaker 1: have more money to spend, and that's the most important 586 00:31:54,080 --> 00:31:57,840 Speaker 1: direct effect. I think at some point it has a 587 00:31:57,960 --> 00:32:02,920 Speaker 1: labor disincentive, and so I personally would taper that number down, 588 00:32:03,440 --> 00:32:07,520 Speaker 1: start reducing it from six hundred dollars a week um 589 00:32:07,520 --> 00:32:10,520 Speaker 1: To date that it's been completely fine, all the evidences, 590 00:32:10,560 --> 00:32:13,360 Speaker 1: it's completely fine. I don't think six hundred dollars a 591 00:32:13,360 --> 00:32:16,880 Speaker 1: week is the right number for December. Something more like 592 00:32:16,920 --> 00:32:20,880 Speaker 1: four hundred dollars a week would both support consumption but 593 00:32:21,000 --> 00:32:23,880 Speaker 1: have a better balance with the work incentives that will 594 00:32:23,960 --> 00:32:28,000 Speaker 1: matter more in the future than they have in the past. Jason, 595 00:32:28,040 --> 00:32:34,160 Speaker 1: when should we start worrying about deficits? Not not this year, 596 00:32:34,400 --> 00:32:38,640 Speaker 1: probably not next year. Interest rates are really low. In fact, 597 00:32:38,640 --> 00:32:43,320 Speaker 1: they're negative adjusted for inflation. The economy is way below 598 00:32:44,240 --> 00:32:47,320 Speaker 1: where it should be. I just don't think that needs 599 00:32:47,360 --> 00:32:51,280 Speaker 1: to be a concern for a while, unless, for in seeing, 600 00:32:51,280 --> 00:32:54,040 Speaker 1: you're you're passing something permanent. If you want to do 601 00:32:54,080 --> 00:32:57,000 Speaker 1: a new health reform that last forever, I think you 602 00:32:57,040 --> 00:32:59,640 Speaker 1: should be paying for that. But if these are temporary 603 00:32:59,680 --> 00:33:03,280 Speaker 1: measure is um people want to lend money at a 604 00:33:03,360 --> 00:33:06,720 Speaker 1: negative interest rate, we should be taking those loans and 605 00:33:06,800 --> 00:33:09,800 Speaker 1: not worrying about them. And Jason, you know what you 606 00:33:10,000 --> 00:33:12,200 Speaker 1: did at is as much as money that the fight 607 00:33:12,240 --> 00:33:15,920 Speaker 1: between Republicans and the Democrats is actually how about you 608 00:33:15,920 --> 00:33:18,720 Speaker 1: know the economy Wolffair in the months ahead, if we 609 00:33:18,760 --> 00:33:20,960 Speaker 1: don't have a stimulus, what's your base case for what 610 00:33:21,040 --> 00:33:23,200 Speaker 1: the US economy will look like at the end of 611 00:33:23,200 --> 00:33:27,960 Speaker 1: the year without a stimulus, you have a w shaped recovery, 612 00:33:28,040 --> 00:33:31,280 Speaker 1: because consumption, as I said, is back to where it 613 00:33:31,360 --> 00:33:34,640 Speaker 1: was pre crisis. Even though the unemployment rate is ten percent, 614 00:33:35,560 --> 00:33:38,480 Speaker 1: you would have expected consumption to be down about ten 615 00:33:39,840 --> 00:33:43,280 Speaker 1: given the state of the labor market. That's what would 616 00:33:43,360 --> 00:33:48,200 Speaker 1: happen if there's no new stimulus and a ten percent 617 00:33:48,280 --> 00:33:52,920 Speaker 1: decline and consumption would be a very sharp contraction, might 618 00:33:52,960 --> 00:33:56,200 Speaker 1: show up in Q three, might show up in Q four, 619 00:33:56,640 --> 00:34:00,880 Speaker 1: would be compounded by further cutbacks at the state and 620 00:34:00,960 --> 00:34:04,040 Speaker 1: local level. Francy and really interesting to see that we 621 00:34:04,040 --> 00:34:06,719 Speaker 1: were expected to be talking about the phase two of 622 00:34:06,800 --> 00:34:09,000 Speaker 1: the trade deal between the US and China. Right now 623 00:34:09,239 --> 00:34:11,319 Speaker 1: we are still talking about Phase one, and we're going 624 00:34:11,360 --> 00:34:14,200 Speaker 1: to be assessing Phase one. US and China negotiators meeting 625 00:34:14,200 --> 00:34:16,960 Speaker 1: on Saturday, still with us to talk about some of 626 00:34:16,960 --> 00:34:20,600 Speaker 1: the international implications here. Jason Furman, Harvard Kennedy School professor 627 00:34:20,640 --> 00:34:23,719 Speaker 1: and former chair of the Council of Economical Advisors under 628 00:34:23,960 --> 00:34:28,319 Speaker 1: President Obama's era. I'm wondering, Jason, from your perspective, how 629 00:34:28,360 --> 00:34:31,880 Speaker 1: significant are these Phase one trade talks given the fact 630 00:34:32,080 --> 00:34:34,279 Speaker 1: that we're supposedly we're supposed to have a deal that 631 00:34:34,400 --> 00:34:37,160 Speaker 1: China isn't really close to complying with it based on 632 00:34:37,239 --> 00:34:40,160 Speaker 1: the pandemic, and that tension seemed to be rising between 633 00:34:40,160 --> 00:34:44,080 Speaker 1: the two nations. I agree with everything you said, except 634 00:34:44,080 --> 00:34:48,520 Speaker 1: that based on the pandemic caveat, I didn't expect China 635 00:34:48,840 --> 00:34:52,400 Speaker 1: to comply with it. I didn't think it made sense 636 00:34:52,600 --> 00:34:55,839 Speaker 1: even to negotiate this type of managed trade where they 637 00:34:55,880 --> 00:35:00,560 Speaker 1: promise to buy certain things. The whole US approach to 638 00:35:00,680 --> 00:35:06,480 Speaker 1: China has failed because it's been entirely unilateral, ignored. The 639 00:35:06,680 --> 00:35:10,560 Speaker 1: w t O hasn't worked with our allies, has focused 640 00:35:10,560 --> 00:35:14,480 Speaker 1: on illegitimate objective, which is these purchasing goals, and we 641 00:35:14,600 --> 00:35:17,640 Speaker 1: need to change all of that because it's really important 642 00:35:17,680 --> 00:35:20,560 Speaker 1: to put pressure on China to do it in a consistent, 643 00:35:20,600 --> 00:35:25,040 Speaker 1: effective and multilateral manner. Well, President Trump wretchetting up the 644 00:35:25,040 --> 00:35:29,360 Speaker 1: pressure on China, particular banning US companies from doing business 645 00:35:29,400 --> 00:35:32,880 Speaker 1: with we Chat of ten Cent as well as TikTok, 646 00:35:33,280 --> 00:35:36,160 Speaker 1: and trying to understand here why we're not seeing this 647 00:35:36,239 --> 00:35:39,760 Speaker 1: reflected markets. Given the fact that Apple among other companies, 648 00:35:39,800 --> 00:35:42,400 Speaker 1: have said that this could potentially be a big hit 649 00:35:42,480 --> 00:35:45,360 Speaker 1: to their profitability for a business that accounts for nearly 650 00:35:45,360 --> 00:35:48,279 Speaker 1: a fifth of the revenues yeah. And I think what 651 00:35:48,320 --> 00:35:50,920 Speaker 1: President Trump is doing, you know, when he talks for 652 00:35:51,200 --> 00:35:54,520 Speaker 1: getting a share of the revenue on the TikTok deal, 653 00:35:55,239 --> 00:35:58,600 Speaker 1: is just sending exactly the wrong message to the Chinese. 654 00:35:58,960 --> 00:36:03,560 Speaker 1: We should be sending him message of consistent adherents to law, 655 00:36:03,840 --> 00:36:07,240 Speaker 1: neutral treatment, um and the like. So I think it's terrible. 656 00:36:07,680 --> 00:36:11,000 Speaker 1: He also has a record, though, President Trump, of backtracking 657 00:36:11,400 --> 00:36:14,960 Speaker 1: when he needs to, especially for the sake of the market. 658 00:36:15,000 --> 00:36:18,160 Speaker 1: I think one author called it the Trump put and 659 00:36:18,239 --> 00:36:21,399 Speaker 1: that's what the market seems to expect will happen here, 660 00:36:21,440 --> 00:36:24,040 Speaker 1: or maybe they think Joe Biden will save them with 661 00:36:24,080 --> 00:36:27,080 Speaker 1: its policy. It's gonna be very tough on China, but 662 00:36:27,160 --> 00:36:31,080 Speaker 1: not I wouldn't expect as erratic and inconsistent as what 663 00:36:31,120 --> 00:36:34,719 Speaker 1: we've seen in recent years. And Jason, how would you 664 00:36:34,760 --> 00:36:40,239 Speaker 1: advise a Biden administration in their dealings with China. I 665 00:36:40,239 --> 00:36:43,719 Speaker 1: would say that the United States does not have enough 666 00:36:43,800 --> 00:36:47,800 Speaker 1: leverage all by itself. So let's settle the trade wars 667 00:36:47,840 --> 00:36:51,320 Speaker 1: with Canada, with Mexico, with Germany, with other countries around 668 00:36:51,320 --> 00:36:55,520 Speaker 1: the world, and let's make common cause and let's reorient 669 00:36:55,640 --> 00:36:58,880 Speaker 1: the objectives. It isn't how much American stuffed China buys 670 00:36:59,000 --> 00:37:02,560 Speaker 1: Germany isn't gonna help negotiate a deal for China to 671 00:37:02,640 --> 00:37:09,680 Speaker 1: buy Boeing jets UM. It's China's intellectual property rules, neutral 672 00:37:09,719 --> 00:37:13,440 Speaker 1: treatment under the law, UM and the like. So a 673 00:37:13,719 --> 00:37:18,400 Speaker 1: renewed US multilateralism can actually be stronger in pushing China, 674 00:37:18,600 --> 00:37:24,400 Speaker 1: but pushing it in a more principled and rules based manner. Jason, 675 00:37:24,440 --> 00:37:26,839 Speaker 1: when you look at the pandemic, and you know the way, 676 00:37:26,840 --> 00:37:30,120 Speaker 1: it's kind of resetting what maybe some of our priorities are. 677 00:37:30,160 --> 00:37:32,759 Speaker 1: It could be health, it could be investing in climate change, 678 00:37:33,040 --> 00:37:35,800 Speaker 1: it could be all sorts of things. Will it actually 679 00:37:35,880 --> 00:37:40,920 Speaker 1: will this pandemic end our obsession with economic growth? I 680 00:37:40,920 --> 00:37:43,600 Speaker 1: don't think it's gonna end our obsestion with employment. UM. 681 00:37:43,680 --> 00:37:46,800 Speaker 1: That is a problem now, and I think in all 682 00:37:46,840 --> 00:37:50,040 Speaker 1: of our economies in Europe, the United States, a year, 683 00:37:50,200 --> 00:37:52,399 Speaker 1: two years, three years from now, we're gonna have vary 684 00:37:52,480 --> 00:37:58,960 Speaker 1: success unemployment and bringing that down will be a major 685 00:37:59,800 --> 00:38:02,200 Speaker 1: of jective. The public policy is going to struggle with 686 00:38:02,719 --> 00:38:06,320 Speaker 1: UM for years to come. And you know, we've also 687 00:38:06,400 --> 00:38:10,760 Speaker 1: seen you giving people cash, whether through unemployment, through checks, 688 00:38:10,760 --> 00:38:16,879 Speaker 1: through other mechanisms, has to some degree helps solve this problem, 689 00:38:16,920 --> 00:38:19,319 Speaker 1: at least in the short run for many households, and 690 00:38:19,360 --> 00:38:21,880 Speaker 1: so I don't think this is going to make cash 691 00:38:21,920 --> 00:38:25,800 Speaker 1: and money any less important than it was before. Wait, Jason, 692 00:38:25,880 --> 00:38:28,919 Speaker 1: are you advocating for some sort of MMT, some sort 693 00:38:28,920 --> 00:38:33,120 Speaker 1: of modern monetary theory? Here? Modern monetary theory is like 694 00:38:33,160 --> 00:38:36,479 Speaker 1: a stopped clock that's right twice a day, and now 695 00:38:36,640 --> 00:38:38,719 Speaker 1: is one of those rights. So you're not saying going 696 00:38:38,760 --> 00:38:41,200 Speaker 1: forward that this is your your policy. What do you 697 00:38:41,200 --> 00:38:44,040 Speaker 1: think about the de globalization shift in general and in 698 00:38:44,120 --> 00:38:47,719 Speaker 1: the possibility that it's going to increase prices and purchasing 699 00:38:47,920 --> 00:38:50,919 Speaker 1: decreased purchasing power for the average consumer in the US. 700 00:38:51,040 --> 00:38:54,239 Speaker 1: Is that something you're worried about. I'm a little bit 701 00:38:54,280 --> 00:38:56,480 Speaker 1: worried about it. I mean, it's two types of deglobalization. 702 00:38:56,760 --> 00:39:01,800 Speaker 1: One is an artificial one because where incapable of getting 703 00:39:01,800 --> 00:39:04,920 Speaker 1: along as countries. I think that's a big problem. Um. 704 00:39:04,960 --> 00:39:07,640 Speaker 1: The other is a natural one that you know. It 705 00:39:07,640 --> 00:39:10,839 Speaker 1: turns out the cost of globalization just to your balance sheet, 706 00:39:10,840 --> 00:39:12,759 Speaker 1: your bottom line is a bit higher than your thought 707 00:39:12,760 --> 00:39:16,000 Speaker 1: because of these unexpected events happening a little bit more 708 00:39:16,040 --> 00:39:19,279 Speaker 1: often around the world. And so I think there's some 709 00:39:19,960 --> 00:39:24,120 Speaker 1: natural retrenchment. But I also do think that the economic 710 00:39:24,160 --> 00:39:29,160 Speaker 1: benefits of globalization are so enormous that in any scenario, 711 00:39:29,600 --> 00:39:32,520 Speaker 1: companies consumers are going to find a way to have 712 00:39:32,600 --> 00:39:36,200 Speaker 1: a lot of it. Jason, if we don't have stimulus 713 00:39:36,239 --> 00:39:38,520 Speaker 1: in the US, will the Democrats be blamed for it? 714 00:39:41,640 --> 00:39:44,439 Speaker 1: The Republicans will blame the Democrats. The Democrats will blame 715 00:39:44,480 --> 00:39:49,520 Speaker 1: the Republicans. I think ultimately, UM, the president, fairly or 716 00:39:49,600 --> 00:39:52,480 Speaker 1: unfairly in this case, I would say fairly, UM bears 717 00:39:52,480 --> 00:39:57,000 Speaker 1: the blame when there's dysfunction and failure. All right, Jason, 718 00:39:57,040 --> 00:39:58,840 Speaker 1: thank you as always for joining us Jason Firm and 719 00:39:58,840 --> 00:40:01,720 Speaker 1: their Harvard Kennedy School professor and former chairman the Council 720 00:40:01,760 --> 00:40:06,560 Speaker 1: of Economic Advisor. Thanks for listening to the Bloomberg Surveillance podcast. 721 00:40:06,920 --> 00:40:11,880 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 722 00:40:12,000 --> 00:40:16,320 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 723 00:40:16,440 --> 00:40:20,319 Speaker 1: Keane before the podcast. You can always catch us worldwide. 724 00:40:20,760 --> 00:40:21,840 Speaker 1: I'm Bloomberg Radio.