WEBVTT - Bloomberg Wall Street Week: Rieder & Diamond 0:00:00.160 --> 0:00:03.360 This is Bloomberg Wall Street Week. What's the state of 0:00:03.400 --> 0:00:06.360 corporate governance? The deficit is a real issue. The US 0:00:06.400 --> 0:00:09.920 economy continues to send mixed signals. The financial stories that 0:00:10.039 --> 0:00:13.000 cheap our world fed action to con concerns over dollar 0:00:13.039 --> 0:00:16.520 liquidity and encouraging China data. The five hundred wealthiest people 0:00:16.520 --> 0:00:19.160 in the world. Through the eyes of the most influential 0:00:19.239 --> 0:00:23.320 voices Larry Summers, the former Treasury Secretary, Star CEO, Kevin Johnson, 0:00:23.440 --> 0:00:27.040 sec Chairman j Clayton, Bloomberg Wall Street Week with David 0:00:27.080 --> 0:00:31.080 Weston from Bloomberg Radio. One story dominated Wall Street this 0:00:31.120 --> 0:00:33.760 week and the business world and the world itself. The 0:00:33.800 --> 0:00:37.120 coronavirus made its presence known even as its spread in 0:00:37.159 --> 0:00:41.920 ways detected and undetected, and the markets reacted violently, raising 0:00:41.960 --> 0:00:44.040 for some the question whether we're on the brink of 0:00:44.080 --> 0:00:47.640 another two thousand eight great recession. Something Bloomberg Wall Street 0:00:47.680 --> 0:00:52.199 we contributed. Larry Summers waited on another way I like 0:00:52.320 --> 0:00:55.360 to think about it is weird a moment like where 0:00:55.360 --> 0:00:59.560 we were after Bear Stearns. That wasn't yet where we 0:00:59.560 --> 0:01:04.200 were after Leahman, but it was a pretty critical moment, 0:01:04.720 --> 0:01:07.920 and in retrospect, the time was largely wasted, and it 0:01:07.959 --> 0:01:12.000 would have been better if we had acted much more promptly. Uh, 0:01:12.080 --> 0:01:17.760 I don't think there is uh time to lose. To 0:01:17.800 --> 0:01:20.800 help us sort out the reaction from the overreaction, we 0:01:20.840 --> 0:01:23.360 convene now our Wall Street Week Round Table with Bob 0:01:23.400 --> 0:01:26.080 Diamond of Atlas Merchant Capital. Bob, of course, was the 0:01:26.080 --> 0:01:29.160 CEO of Barclays in the aftermath of the Great Financial Crisis, 0:01:29.520 --> 0:01:31.880 and Rick Reader of black Rock, where he is Chief 0:01:31.959 --> 0:01:34.319 Investment Officer for Global fixed Income. But he's not just 0:01:34.360 --> 0:01:37.040 a bond guy. He also is lead portfolio manager for 0:01:37.080 --> 0:01:40.360 black Rocks multisector fund. So Rick, Bob, welcome. Good to 0:01:40.400 --> 0:01:42.360 have you here. Bob, let me start with you still. 0:01:42.480 --> 0:01:44.120 I think he took over Barkers in two dozen ten 0:01:44.200 --> 0:01:45.880 or so, so just just as we were getting into 0:01:45.880 --> 0:01:49.120 the Great Financial Crisis. What are the differences and similarities? 0:01:49.120 --> 0:01:51.040 I mean, Larry was careful and saying, we're not yet 0:01:51.400 --> 0:01:53.760 the layman, but we may be a bar certains. I mean, 0:01:53.800 --> 0:01:56.720 there's similarities in terms of fear, but I think there 0:01:56.720 --> 0:01:58.880 are more differences. I mean, two thousand and eight was 0:01:58.920 --> 0:02:01.520 a banking crisis, it was a liquidity crisis, it was 0:02:01.560 --> 0:02:06.720 a solvency for many institutions in financial services, and you know, 0:02:06.760 --> 0:02:08.960 particularly in the US today, I don't think we could 0:02:09.000 --> 0:02:13.440 have a stronger banking system from capital levels and all 0:02:13.440 --> 0:02:17.040 the way through. UM. And I think right now, obviously 0:02:17.040 --> 0:02:20.320 it's a health crisis number one, but in terms of 0:02:20.360 --> 0:02:23.600 the impact and the economy, my sense is that we 0:02:23.639 --> 0:02:27.680 are dramatically underestimating the impact in the near term in 0:02:27.800 --> 0:02:31.679 terms of the economy UM, and we may be overestimating 0:02:31.760 --> 0:02:34.520 the medium to long term. And that's very dependent on 0:02:35.200 --> 0:02:39.160 UM any resolution to to the health crisis. UM. I 0:02:39.200 --> 0:02:44.040 think secondly, UM, while this isn't a U, I don't 0:02:44.080 --> 0:02:46.240 think anyone would think of this as a banking crisis. 0:02:46.320 --> 0:02:48.400 One of the things we're all trying to figure out 0:02:48.960 --> 0:02:51.000 is how can the banks be part of the solution. 0:02:51.240 --> 0:02:54.440 They're definitely not part of the problem. UH. And then lastly, 0:02:54.440 --> 0:02:56.400 i'd say, David, is I think you know when I 0:02:56.400 --> 0:02:59.160 look at the fault points, UM, if I look down 0:02:59.200 --> 0:03:03.240 the road, easily envisioned a significant bounce in the equity markets, 0:03:03.320 --> 0:03:06.720 because you know, I think, UM, the near term impact 0:03:06.840 --> 0:03:10.760 on the economy could potentially unwind over time. But I 0:03:10.800 --> 0:03:12.240 think when you look at the low end of the 0:03:12.360 --> 0:03:15.680 US dollar corporate credit market. UM, I think that may 0:03:15.680 --> 0:03:19.160 be more permanent in terms of UM loss of value. 0:03:19.480 --> 0:03:22.960 So I wonder if one difference might be not very advantageous, 0:03:22.960 --> 0:03:25.760 and that is this, we had a level of cooperation 0:03:26.120 --> 0:03:28.880 even across the aisle in two eight and between fiscal 0:03:28.919 --> 0:03:32.320 and monetary authorities. Uh, that we seem to lack right now. 0:03:32.680 --> 0:03:34.960 People say we should be coordinated. It doesn't feel very 0:03:35.000 --> 0:03:37.440 accordinate to what the government's doing. Yeah, I mean, I 0:03:37.440 --> 0:03:39.040 think that's right. I mean, first, what I would say 0:03:39.040 --> 0:03:41.360 one thing, The crises tend to bring people together, and 0:03:41.360 --> 0:03:42.720 so I think you'll see a bit more of that 0:03:42.760 --> 0:03:45.440 by your right here before you haven't really seen that. Listen, 0:03:45.480 --> 0:03:47.680 I think you know what people like to grain us 0:03:47.840 --> 0:03:49.400 in the markets. We like to grasp on a history 0:03:49.400 --> 0:03:51.320 because it gives us a pretty good playbook for how 0:03:51.360 --> 0:03:53.360 to think about this going forward. But you know, it's 0:03:53.360 --> 0:03:55.760 interesting every time you'll have one of these disruptions, it's 0:03:55.800 --> 0:03:57.760 different than the one before, and they're usually the reason 0:03:57.800 --> 0:04:00.320 why they're so potent in terms of at the markets 0:04:00.400 --> 0:04:02.240 is you can't really go back and say, how did 0:04:02.240 --> 0:04:05.640 this play out before? The things that are significant are 0:04:05.760 --> 0:04:10.680 I mean this is an exogenous shock of of significant proportion. Listen, 0:04:10.720 --> 0:04:12.320 We've never seen this before. We have people working in 0:04:12.360 --> 0:04:15.040 different offices, what is liquidity? How do people interface with 0:04:15.120 --> 0:04:17.560 one another? And that is really uncertain, So you know, 0:04:17.600 --> 0:04:19.000 we've got to work through that part of it. But 0:04:19.040 --> 0:04:20.599 I think what Bob said is right. It's not a 0:04:20.640 --> 0:04:23.440 it's not a leverage problem per se. And the other 0:04:23.480 --> 0:04:25.599 thing that I think is significant about this one and 0:04:25.640 --> 0:04:28.080 part of why we'll talk about you need that coordination. 0:04:28.120 --> 0:04:29.800 You need fiscal policy. The markets are not going to 0:04:29.880 --> 0:04:32.880 stabilize until you have something tangible from a fiscal policy 0:04:32.920 --> 0:04:35.920 point of view. Listen, the economy up to this point, 0:04:36.640 --> 0:04:39.799 and it's different regionally. Europe was still I would argue 0:04:39.800 --> 0:04:41.600 more about in terms of in terms of growth. The 0:04:41.720 --> 0:04:45.119 US economy was actually surprisingly this late in whatever whatever 0:04:45.160 --> 0:04:48.920 business cycle there is, it was particularly strong. You look 0:04:48.960 --> 0:04:50.960 at hiring, you look at where we were from a 0:04:51.040 --> 0:04:54.599 housing point of view, Retail sales was good, and even 0:04:54.640 --> 0:04:58.080 even manufacturing was was doing okay in a secular decline. 0:04:58.760 --> 0:05:00.960 Now it's like, how do you get from here to there? 0:05:01.120 --> 0:05:02.760 And how do you get to the other side. Listen, 0:05:02.760 --> 0:05:05.800 I'm more enthusiastic about I agree with Bob said, there's 0:05:05.800 --> 0:05:07.840 going to be some permanent tail to it, particularly in 0:05:07.839 --> 0:05:10.640 the credit markets. But this is something we've got a bridge. 0:05:10.640 --> 0:05:14.560 What is a really deep slowdown in the economy, and 0:05:14.640 --> 0:05:17.320 you have some sense that particularly Asia, particularly China and 0:05:17.400 --> 0:05:20.240 the US, there is some real vibrancy of those economies. 0:05:20.279 --> 0:05:21.640 We just got a bridge from here to there, and 0:05:21.880 --> 0:05:23.640 that is uncertain how we get there. Well. Are you 0:05:23.680 --> 0:05:25.400 worried that the markets are not responding in ways you 0:05:25.480 --> 0:05:28.000 might have expected? We had last week the FED cut 0:05:28.040 --> 0:05:30.320 fifty basis points, market went down. They didn't like it 0:05:30.360 --> 0:05:32.400 at all. This week we had to FED step up 0:05:32.400 --> 0:05:35.320 on liquidity and injective quiality. Initially reacted and then they 0:05:35.360 --> 0:05:37.760 came off again. Are you're worried that maybe the buttons 0:05:37.800 --> 0:05:39.920 that we're pushing or neck in the reaction we would expect. 0:05:40.560 --> 0:05:42.320 Yes and no. So I think it's a tale of 0:05:42.760 --> 0:05:45.520 two sides. I completely agree with what Rick said is 0:05:45.560 --> 0:05:48.279 what we need more than anything right now, if if 0:05:48.279 --> 0:05:51.480 we're correct that the near term impact and the economy 0:05:51.560 --> 0:05:54.240 is going to be severe, we need fiscal stimulus, and 0:05:54.279 --> 0:05:58.320 particularly in Europe. Having said that, um, I think what 0:05:58.440 --> 0:06:01.920 the ECB and the Bank of England have done in 0:06:02.040 --> 0:06:06.279 terms of providing liquidity, making sure banks have money to lend, 0:06:06.279 --> 0:06:08.479 particularly in Europe, with the banks are nowhere near as 0:06:08.520 --> 0:06:12.120 healthy as they are in the US um more asset 0:06:13.200 --> 0:06:18.159 acquisition programs, and in the case of the UK UM 0:06:18.520 --> 0:06:24.599 both Governor Karney and incoming Governor Bailey have reduced one 0:06:24.640 --> 0:06:27.560 of the buffers so that banks have more capital to 0:06:27.640 --> 0:06:31.120 lend to small businesses. So being focused on getting the 0:06:31.200 --> 0:06:34.320 right fiscal stimulus in the right areas and getting bipartisan 0:06:34.400 --> 0:06:36.839 support is critical. Okay, we are going to be back 0:06:36.880 --> 0:06:40.360 with our continuings. Bob Diamond and Rick Reader coming up. 0:06:40.520 --> 0:06:48.880 Can the central banks save us again? This is Bloomberg 0:06:48.920 --> 0:06:53.200 Wall Street Week with David Weston from Bloomberg Radio. ECB 0:06:53.320 --> 0:06:55.560 President Christine Lagarde is in the middle of a full 0:06:55.560 --> 0:06:59.160 blown crisis just four months into her job, with investors 0:06:59.160 --> 0:07:01.719 and businesses outing on her to avoid the worst of 0:07:01.720 --> 0:07:05.000 the economic damage to come from the coronavirus, so she 0:07:05.040 --> 0:07:08.440 announced a similar package this week, including a billion euros 0:07:08.440 --> 0:07:10.680 and quantitative easing over the rest of the year and 0:07:10.760 --> 0:07:14.760 ramping up liquidity and lending capacity, but leaving rates where 0:07:14.800 --> 0:07:18.240 they were In this week's contributors take Stephanie Flanders, Bloomberg's 0:07:18.320 --> 0:07:21.440 senior executive editor for Economics, takes us through the highs 0:07:21.480 --> 0:07:25.840 and the loans. Christine the Guard was very calm and 0:07:25.880 --> 0:07:29.240 deliberate in her press conference, which was a very unusual 0:07:29.240 --> 0:07:31.040 one to look at because the room was half empty. 0:07:31.080 --> 0:07:33.040 I think most of the reporters who were normally there 0:07:33.320 --> 0:07:35.680 had either not been able to travel to Frankfurt's or 0:07:35.720 --> 0:07:38.080 were working from home and were submitting many of their 0:07:38.160 --> 0:07:42.720 questions online. But the President of the European Central Bank 0:07:42.800 --> 0:07:46.280 announced what she called a surgical, comprehensive set of measures 0:07:46.320 --> 0:07:50.400 to help the Eurozone economy through the impact of the coronavirus. 0:07:50.440 --> 0:07:53.920 There was a big new long term lending program for banks, 0:07:54.320 --> 0:07:58.280 ideally aimed at them helping small and medium sized businesses 0:07:58.280 --> 0:08:01.720 affected by the virus. Along with that, there was some 0:08:01.840 --> 0:08:04.280 word from the regulator side of the eu CB that 0:08:04.320 --> 0:08:06.880 they were going to soften up some of their regulation 0:08:06.960 --> 0:08:09.760 of banks, perhaps to to make those banks more relaxed 0:08:09.760 --> 0:08:12.000 about the impact that that help for small and medium 0:08:12.000 --> 0:08:15.400 sized businesses might have on their balance sheets. And you 0:08:15.520 --> 0:08:19.040 had an expansion of QUEI, of the bond purchasing program 0:08:19.160 --> 0:08:21.040 of the European Central Bank, which we think will be 0:08:21.080 --> 0:08:26.440 oriented towards corporate lending, corporate debt, not government bond. What 0:08:26.560 --> 0:08:30.200 you clearly didn't see was the ECB follow the FED 0:08:30.280 --> 0:08:33.920 and the Bank of England in cutting the key policy rate, 0:08:35.040 --> 0:08:38.120 which is already though at minus not point five percent. 0:08:38.280 --> 0:08:40.160 That was possibly because they didn't think that would make 0:08:40.240 --> 0:08:43.360 much difference, and I think also they would point to 0:08:43.400 --> 0:08:46.160 the fact that the interest rate on that new lending 0:08:46.320 --> 0:08:48.880 for banks was actually going to be below the policy 0:08:48.960 --> 0:08:51.199 Rate's going to be a quarter of a point below, 0:08:51.320 --> 0:08:54.840 not point five. So in a sense, the rate has 0:08:54.920 --> 0:08:57.400 been cut for that kind of lending, it just hasn't 0:08:57.400 --> 0:09:01.560 been extended to the rest of the Eurozone economy. You know, investors, 0:09:01.559 --> 0:09:04.680 we saw, we're not we're not overwhelmed initially by what 0:09:04.760 --> 0:09:07.560 the ECB had announced. But actually Christine Legard herself said 0:09:07.920 --> 0:09:11.720 the CV was not the only actor in this story. 0:09:11.880 --> 0:09:14.600 What was going to be crucial, she repeated, was a 0:09:14.720 --> 0:09:19.760 coordinated fiscal effort from Eurasone governments to confront this crisis. 0:09:19.800 --> 0:09:22.040 And I think we've seen that generally. The idea that 0:09:22.240 --> 0:09:23.920 we have to see not just that the grown ups 0:09:23.920 --> 0:09:26.040 are in charge, if you like, but that they're really 0:09:26.160 --> 0:09:28.520 in top of, on top of the kind of micro 0:09:28.760 --> 0:09:32.080 measures and expenditures that are going to be needed to 0:09:32.160 --> 0:09:35.160 help cushion the blow of this crisis. We've seen that 0:09:35.200 --> 0:09:37.680 a bit from Italy. The UK had the good luck 0:09:37.720 --> 0:09:39.480 this week to have a budget schedule for this week, 0:09:39.520 --> 0:09:41.920 so we've seen a lot of quite decisive fiscal action 0:09:42.160 --> 0:09:45.880 from the UK, from other governments and specifically from Germany. 0:09:46.280 --> 0:09:49.200 Not so much that was a contributor to take from Loomberg, 0:09:49.200 --> 0:09:51.520 Stephanie Flanders. We're back now with Bob Diamond and Rick 0:09:51.559 --> 0:09:54.400 Reader for more of our roundtable discussion. So this was 0:09:54.440 --> 0:09:56.920 not a bazooka were you used or next shark? And 0:09:58.280 --> 0:10:00.800 is it enough? So? I thank you. Think we're beyond 0:10:01.000 --> 0:10:03.560 the idea of monetary policy comes to save the dime. 0:10:03.640 --> 0:10:06.599 And I think people compare this to the eighties or 0:10:06.679 --> 0:10:09.160 nineties when interest rates were significantly higher. When you move 0:10:09.280 --> 0:10:11.640 right down you can have a real effect. There's no 0:10:11.960 --> 0:10:15.520 interest rates are not symmetric when you reach the lower bound. 0:10:15.559 --> 0:10:18.440 When you get to zero, you hurt pension funds, insurance companies, 0:10:18.480 --> 0:10:21.000 individuals when you get to negative interest rates. So with 0:10:21.160 --> 0:10:23.559 Christine Legard did there were some benefits there t L 0:10:23.640 --> 0:10:26.120 t r Oh was good. You're getting at targeted lending, 0:10:26.120 --> 0:10:28.800 which I think is a big deal. Listen, I think 0:10:28.840 --> 0:10:30.560 what you said is right. This has got to get 0:10:30.640 --> 0:10:32.760 to the fiscal side. This has got to get the 0:10:32.760 --> 0:10:34.520 only way you're gonna get velocity in the system. You 0:10:34.520 --> 0:10:37.240 need to get innovation, you need to get equity investment, 0:10:37.360 --> 0:10:40.439 and fiscal will do that. So, Bob, you worked over 0:10:40.559 --> 0:10:42.880 in London. You know the London system very well. Did 0:10:42.880 --> 0:10:44.560 they show everybody the way it's supposed to be done 0:10:44.600 --> 0:10:46.240 this week? Because they had the Bank of England club 0:10:46.240 --> 0:10:47.760 with the right cut and they brought out their budget 0:10:47.760 --> 0:10:49.840 at the same time, it seemed to be quite coordinated. 0:10:50.280 --> 0:10:53.240 I thought that the response from the Bank of England 0:10:53.320 --> 0:10:56.959 and the joint presentation from Governor Karney and Governor elect 0:10:57.040 --> 0:11:01.280 Bailey was very thoughtful. UM, very effective. I think, well, 0:11:01.360 --> 0:11:04.640 I think it will be very effective. Um and UM. 0:11:04.720 --> 0:11:09.080 I think both UM allowing one of the buffers to 0:11:09.160 --> 0:11:11.160 be removed from the bank so that they can get 0:11:11.160 --> 0:11:14.880 more lending into the real economy. I thought they're liquidity 0:11:14.920 --> 0:11:18.440 measures um. And if you think back to the financial 0:11:18.440 --> 0:11:20.520 crisis in two thousand and eight, those types of things 0:11:20.600 --> 0:11:23.480 weren't done at that time, so I think it is helpful. 0:11:23.520 --> 0:11:24.960 But I'll come back to the point wheck and I 0:11:25.000 --> 0:11:27.839 have been making it now Christine leguard Um, we need 0:11:27.880 --> 0:11:31.160 fiscal stimulus as well. What about the backing offense of 0:11:31.200 --> 0:11:34.200 the reserve corners of the banks, because they also did that. 0:11:34.240 --> 0:11:36.440 There's talking about that here as well. I mean, everybody 0:11:36.440 --> 0:11:38.199 think I think I thinks it was a good thing 0:11:38.280 --> 0:11:40.480 to designate what we did make the bank stronger. We 0:11:40.520 --> 0:11:42.319 need him right now. But should we be backing off 0:11:42.360 --> 0:11:44.520 some for the time being. Yeah, I mean the regular 0:11:44.520 --> 0:11:46.360 star dynamic is really said. But you think about what 0:11:46.440 --> 0:11:48.880 happened in the in the off the run treasury market. 0:11:48.880 --> 0:11:52.240 I've never seen that before the bidas spread. Some of 0:11:52.280 --> 0:11:55.400 the off the run treasuries was multiple points. That is, 0:11:55.440 --> 0:11:58.120 that is a function of the banking system getting gummed up. 0:11:58.120 --> 0:11:59.719 You look at companies that are drawn on their bank 0:11:59.800 --> 0:12:02.760 long etcetera. When the banks don't have the ability to 0:12:02.800 --> 0:12:04.480 get in there. You need to do that, and by 0:12:04.480 --> 0:12:06.000 the way, can be in the short term nature. You 0:12:06.000 --> 0:12:09.040 don't need to do permanent change, but you need the 0:12:09.080 --> 0:12:11.280 bridge the dynamic where you're getting more liquid in the 0:12:11.280 --> 0:12:14.800 system and you're getting a better functioning environment. Some regulatory 0:12:14.880 --> 0:12:17.720 relief would be really helpful. Is liquidity more important than 0:12:17.760 --> 0:12:19.640 actually the interest rate right at the moment, for example, 0:12:19.679 --> 0:12:22.119 for the Fed, are they better off really just injecting 0:12:22.120 --> 0:12:26.800 dollars into the system. And I think, uh, my opinion, 0:12:26.920 --> 0:12:29.360 just one of many opinions, is we used a bullet 0:12:29.440 --> 0:12:32.040 we didn't need to use with the rate cut here 0:12:32.600 --> 0:12:36.640 UM recently, UM, I don't think that Governor Powell wants 0:12:36.640 --> 0:12:38.400 to go to negative interest rates. I don't think the 0:12:38.480 --> 0:12:40.440 UK wants to go to negative interest rates. And we 0:12:40.520 --> 0:12:45.760 used a bullet. What is really impressive is the bazooka 0:12:45.800 --> 0:12:48.240 they used in the repo markets. And you know, one 0:12:48.280 --> 0:12:51.080 of the businesses that we've invested in, South Street Securities 0:12:51.600 --> 0:12:55.439 is an independent UM broker dealer, a non bank holding 0:12:55.480 --> 0:12:58.920 company that does US Treasury and mortgage repo I see 0:12:58.920 --> 0:13:01.559 in that business. The liquidity in the short end of 0:13:01.600 --> 0:13:04.679 the market has never been more robust in I think 0:13:04.720 --> 0:13:06.640 since two thousand and eight and two thousand nine than 0:13:06.679 --> 0:13:10.040 it is now. Because your recalled, David that during UM 0:13:10.240 --> 0:13:13.720 Dodd Frank there were changes to open market operations that 0:13:13.760 --> 0:13:15.880 the New York Fed could operate in and a lot 0:13:15.920 --> 0:13:19.400 of that is being um um kind of taken back 0:13:19.520 --> 0:13:21.800 a little bit, and we're seeing much more activity from 0:13:21.840 --> 0:13:25.280 the fed UH to ensure that liquidity and the repo markets. 0:13:25.320 --> 0:13:27.400 And I think, you know, for the functioning of the 0:13:27.400 --> 0:13:29.640 short end of the curve, I think it's enormously helpful. 0:13:29.679 --> 0:13:31.959 And I think you're spot on. I think that's been 0:13:32.000 --> 0:13:34.560 more important than the than the right cut. So that 0:13:34.559 --> 0:13:37.240 that did act this week to injecttion liquidity. But was 0:13:37.280 --> 0:13:41.959 it enough, Yes, I mean that was it was, It was, 0:13:42.080 --> 0:13:44.280 it was. It was inspiring in terms of the amount 0:13:44.320 --> 0:13:46.679 they did. And when you put that sort of liquidity 0:13:46.679 --> 0:13:48.120 and you know, you were starting to see pressures in 0:13:48.160 --> 0:13:50.920 the mortgage market. Listen, the mortgage market. When you bring 0:13:50.960 --> 0:13:52.760 interest rates down, mortgage is supposed to come down in 0:13:52.760 --> 0:13:55.360 a parallel way, if not more so. Mortgage rates Actually 0:13:55.360 --> 0:13:57.120 we're moving higher. While was that the case? The system 0:13:57.200 --> 0:13:59.680 is gummed up? You need to provide better funding, which 0:13:59.720 --> 0:14:02.439 was what happened. You need to provide better liquidity. And 0:14:02.480 --> 0:14:04.640 the other thing that I don't think people consider enough. 0:14:04.960 --> 0:14:07.400 When you put liquidity in the system, it takes pressure 0:14:07.400 --> 0:14:10.959 off the dollar. We operate in a global financial system 0:14:10.960 --> 0:14:12.760 when you take pressure off the dollar. It takes it 0:14:12.800 --> 0:14:15.320 makes it easier for emerging market. So it's emerging markets 0:14:15.320 --> 0:14:17.640 go and in act policy on their on their own. 0:14:18.200 --> 0:14:20.440 That is a really big deal. Liquidity gets in the 0:14:20.480 --> 0:14:22.880 system and it's got it's got a real velocity to it, 0:14:23.120 --> 0:14:24.720 and they addressed it, and they had to do it. 0:14:24.760 --> 0:14:27.960 But you were seeing some cracks in the mechanism, and 0:14:28.000 --> 0:14:30.320 you can't buy other assets. You can't buy equities, you 0:14:30.360 --> 0:14:33.800 can't buy credit until the core asset, the wrist free rate, 0:14:34.360 --> 0:14:37.240 is solved. And it's the it's the number one used 0:14:37.280 --> 0:14:39.480 of collateral in the world. It's what we build. I 0:14:39.600 --> 0:14:42.200 was called the fan of dispersion. Until you know where 0:14:42.200 --> 0:14:44.320 the wrist free rate is, I can't build my models 0:14:44.360 --> 0:14:45.720 to how do I think about all the way down 0:14:45.800 --> 0:14:48.120 to equity and and so you have to fix that 0:14:48.160 --> 0:14:50.000 asset and they did. Okay, we're gonna be back with 0:14:50.040 --> 0:14:57.160 our contributors. This is Wall Street Week. This is Bloomberg 0:14:57.200 --> 0:15:00.880 Wall Street Week with David Weston from bloom Bird Radio. 0:15:01.040 --> 0:15:03.440 The one thing everyone seems to agree on is the 0:15:03.520 --> 0:15:06.560 ultimate source of the market turmoil. It's that we don't 0:15:06.600 --> 0:15:10.760 know how or when the coronavirus crisis will end. Most immediately. 0:15:10.800 --> 0:15:13.280 We need a treatment such as the gilead ebola drug 0:15:13.320 --> 0:15:16.360 that they're trying out right now in Washington, But ultimately 0:15:16.520 --> 0:15:18.880 it's a vaccine that the world needs, and that is 0:15:18.880 --> 0:15:22.600 going to take some time. Although this is the fastest 0:15:22.960 --> 0:15:27.080 we have ever gone from a sequence of a virus 0:15:27.160 --> 0:15:31.000 to a trial, it still will not be any applicable 0:15:31.320 --> 0:15:35.320 to the epidemic unless we really wait about a year 0:15:35.440 --> 0:15:38.760 to a year and a half. But eighteen months seems 0:15:38.800 --> 0:15:41.600 an awfully long time to wait right now, which leads 0:15:41.640 --> 0:15:44.360 some to ask whether our combination of science and technology 0:15:44.400 --> 0:15:47.320 could get us there faster. Welcome now, someone who's trying 0:15:47.320 --> 0:15:50.440 to do just that. Dave Turk is a vice president 0:15:50.440 --> 0:15:53.720 of technical computing IBM Cognitive Systems, and he joins us 0:15:53.720 --> 0:15:55.960 now for a second opinion on what could be done 0:15:56.160 --> 0:15:58.200 about the coronavirus. So, Dave, welcome, it's good to have 0:15:58.240 --> 0:16:00.440 you here. Thank you. So explained to us a exactly 0:16:00.480 --> 0:16:03.000 what's being done, what's IBMS roll in this thing? How 0:16:03.040 --> 0:16:05.560 could we actually maybe get a vaccine a bit sooner. 0:16:06.040 --> 0:16:09.680 So the largest supercomputer in the world is Ochrid's National Laboratory, 0:16:10.440 --> 0:16:14.400 constructed by IBM and this system has a capability of 0:16:14.440 --> 0:16:20.640 merging concepts of artificial intelligence with standard mathematical representations of problems. 0:16:20.680 --> 0:16:22.440 So what we do is when we look at the 0:16:22.480 --> 0:16:27.240 possibilities of efficacious treatment for something like corona looking for 0:16:27.280 --> 0:16:29.440 a virus, what you want to do is you want 0:16:29.440 --> 0:16:31.520 to follow a lot of different paths because you don't 0:16:31.560 --> 0:16:33.880 know which path will be the one that pays off. 0:16:34.440 --> 0:16:37.080 So in particular at Oakridge, they've looked at eight thousand 0:16:37.160 --> 0:16:40.520 different compounds and with a supercomputer they've called that down 0:16:40.560 --> 0:16:44.240 to seventy seven compounds in just two days. So those 0:16:44.240 --> 0:16:47.040 seventy seven compounds then go into a wet lab where 0:16:47.080 --> 0:16:49.400 they begin doing the experimentation on to see if they 0:16:49.440 --> 0:16:51.720 work or not. So how do you get from there 0:16:51.760 --> 0:16:54.520 to a vaccine? I mean, are you basically understanding the 0:16:54.560 --> 0:16:58.280 mechanism by which the virus works. It's it's a variety 0:16:58.320 --> 0:17:01.200 of things done in concerts. So you look at things 0:17:01.200 --> 0:17:03.800 sort of in our time, you know, a second, a minute, 0:17:03.840 --> 0:17:06.080 a day, but a lot of the modeling goes on 0:17:06.280 --> 0:17:09.520 extraordinarily small pieces of time tend to the minus fourteen 0:17:10.040 --> 0:17:13.439 you know, at atomic level, atomic kind of clock speed, 0:17:14.000 --> 0:17:16.280 and you begin to build up your understanding of the 0:17:16.320 --> 0:17:19.720 systems by operating simulating things at every one of those 0:17:19.760 --> 0:17:22.880 time steps, then aggregating them up to clock time where 0:17:22.880 --> 0:17:26.240 we're generally used to, and then looking at that over days, weeks, 0:17:26.240 --> 0:17:30.280 etcetera tremendous amount of compute power that's just a molecule 0:17:30.280 --> 0:17:32.359 by itself. Then you look at it in concert with 0:17:32.440 --> 0:17:34.760 the disease, then you look at it in concert with 0:17:34.800 --> 0:17:37.639 the human organism, and you begin to look at the 0:17:37.640 --> 0:17:41.200 interplay of all these factors to understand what the probabilities 0:17:41.200 --> 0:17:44.239 are of having a successful event. Has this ever been 0:17:44.240 --> 0:17:48.480 done before? So yes. In fact, IBM worked um with 0:17:48.640 --> 0:17:52.639 some of the previously emergent new strains of flu uh 0:17:52.680 --> 0:17:54.879 the last h one and one thing I think that 0:17:55.000 --> 0:17:58.320 came out of Mexico. We used our technology at that 0:17:58.400 --> 0:18:02.200 time to do some modeling of the evolutionary pathway of that. 0:18:02.560 --> 0:18:04.360 So if you look at flu viruses and the flu 0:18:04.440 --> 0:18:06.879 shots that you get every fall, it's a matter of 0:18:06.920 --> 0:18:11.000 looking scientifically at what's going on, but also predictively at 0:18:11.080 --> 0:18:13.600 how that virus will evolve over the course of time, 0:18:14.040 --> 0:18:15.840 and you take a shot at where the puck is 0:18:15.840 --> 0:18:18.239 gonna be, and then you build your virus for that 0:18:18.280 --> 0:18:21.320 and hope for the best. So it's a complicated mathematical 0:18:21.480 --> 0:18:24.880 construct that you need to examine. So I won't hold 0:18:24.880 --> 0:18:27.560 you to this because I'm sure there's no noble answer 0:18:27.560 --> 0:18:31.320 to it. But in success, if it worked perfectly, could 0:18:31.320 --> 0:18:33.159 you take time off that eighteen months? And if so, 0:18:33.280 --> 0:18:35.919 how much I think they're I think there are a 0:18:35.920 --> 0:18:38.119 couple of ways to look at this. One is, in 0:18:38.160 --> 0:18:42.520 the absence of the computer, you're basically throwing um darts 0:18:42.560 --> 0:18:45.600 at a dartboard in the dark, and so you don't 0:18:45.600 --> 0:18:48.520 know if you're even close to the target. So what 0:18:48.560 --> 0:18:51.520 we've done is we've winnowed that down quite dramatically. So 0:18:51.680 --> 0:18:54.200 now the lights are on, you know where the dartboard is, 0:18:54.520 --> 0:18:56.000 you know what the darts are in your hand, and 0:18:56.000 --> 0:18:58.240 you can start taking a shot at it. That's a 0:18:58.280 --> 0:19:01.720 tremendous advantage for the sign to working on this. The 0:19:01.760 --> 0:19:03.959 eighteen month is a lot of it is human trials 0:19:03.960 --> 0:19:06.240 and so on, so it's not going to do so 0:19:06.320 --> 0:19:09.800 much to compress that time span. But what it has 0:19:09.840 --> 0:19:12.879 done is it's really accelerated the starting step. So instead 0:19:12.880 --> 0:19:14.960 of waiting for a year to come up or two 0:19:15.040 --> 0:19:17.760 years or three years with that set of seventy seven 0:19:18.040 --> 0:19:19.920 we've got in a couple of days. That's a big 0:19:19.960 --> 0:19:22.760 step forward. Who owns this technique? Who's the I P 0:19:22.920 --> 0:19:24.800 in this? So so the I P is all being 0:19:24.840 --> 0:19:28.920 generated by the scientists involve UM. The Power nine technology 0:19:28.920 --> 0:19:32.320 which underscores the computer is all IBM. The ownership of 0:19:32.359 --> 0:19:35.080 the system is Zokridge National Lab is an agent for 0:19:35.119 --> 0:19:37.440 the Department of Energy. Have you tried this for other 0:19:37.520 --> 0:19:39.760 medical applications besides virus? As you said, you did it 0:19:39.800 --> 0:19:42.600 with the H one N one Mexico. Are you trying 0:19:42.640 --> 0:19:44.879 it with other medical applications? You know, we haven't. We 0:19:44.920 --> 0:19:47.720 have a group called Watson Health inside of IBM that 0:19:47.760 --> 0:19:53.200