Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom keene Jailey.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: begin the program though by talking about this market. We
Speaker 1: can bring it in Rob Waldner of invest Go. Rob,
Speaker 1: you've made it pretty clear you think it's time to
Speaker 1: move to a more cautious risk stance on risky assets.
Speaker 1: I'll stop it to show at want why well, John,
Speaker 1: thanks for having me this morning. What's driving markets here?
Speaker 1: Is is really policy right? And I'll give you a
Speaker 1: few statistics we have. You know, we talked about treasuries
Speaker 1: just a moment ago. You know, real yields in the
Speaker 1: tragedy market are are are very low. So if you
Speaker 1: look at real yields, have could need to decline. We
Speaker 1: have five year really yields about minus a hundred basis
Speaker 1: points real tenure yields minus ad basis points. We have
Speaker 1: a fed that it continues to be active in the market,
Speaker 1: which is the reason why we've gotten this big bounce
Speaker 1: off of the bottom and if you look at what
Speaker 1: happened in June, it becomes very very clear what that
Speaker 1: that is what's driving things. So in June we saw
Speaker 1: investment grade, which we know that the Fed is buying,
Speaker 1: continue to rally. Investments grade, investment grades, spreads tightened by
Speaker 1: twenty four basis points or so in June. High yield
Speaker 1: UH did not rally as much. Spreads titan much less,
Speaker 1: and you know, bank loans kind of went sideways in June.
Speaker 1: And the reason for that is that that the i
Speaker 1: G is is very closely tied to UH FED policy,
Speaker 1: as the Fed is actually buying. So our mantra has
Speaker 1: been by what the central banks are buying, by what
Speaker 1: the central banks are supporting, because the fundamentals themselves, undguing
Speaker 1: fundamentals disease are not that positive. Rob Dan cass Of
Speaker 1: of BMP berry bat was it's out in the last
Speaker 1: hour talking about you know, nominal yields can stay or
Speaker 1: they are folks, the visible interest rate that we see,
Speaker 1: and yet with rising inflation, those real yields could drive
Speaker 1: ever ever lower. I have trouble believing that's a stable process.
Speaker 1: Will that be a stable process or do you look
Speaker 1: for bond price volatility. Well, Tom, the FED I think
Speaker 1: is trying to make sure that's as stable process as possible.
Speaker 1: You know, the treasury volatility, to take the move index
Speaker 1: for instance, which is a measure of treasury volatility, is
Speaker 1: at its lows. So the FED I think is with
Speaker 1: their with their for guidance and what what they their
Speaker 1: Their policy going forward will be to try and maintain
Speaker 1: that stability in the short end of the market at
Speaker 1: least so that you can have these really yields continue
Speaker 1: to decline. Obviously there's a point of breaking point where
Speaker 1: they may lose control, but that will be well in
Speaker 1: the future in our view, so they will continue to
Speaker 1: be able to control all the level of nominal rates
Speaker 1: to some extent um and its inflation expectations rise, which
Speaker 1: they have been recently in the is priced and market
Speaker 1: that means really ill to go down. Robert, What does
Speaker 1: a cautious stance mean at a time when there is
Speaker 1: discretion in markets where you have the best quality assets
Speaker 1: with extremely high prices and the riskiest assets the ones
Speaker 1: where you see companies closest to default priced as such,
Speaker 1: how are you cautious in this environment? So what we
Speaker 1: get what we would advocate is you know, own what
Speaker 1: the FED is buying or what the central banks are buying.
Speaker 1: So in Europe that is corporate bonds. In the US
Speaker 1: here it is i g. It is mortgages because those
Speaker 1: assets you know, will be supported the central banks are
Speaker 1: driving that. We're a little bit more cautious on assets
Speaker 1: that are more dependent upon the economic recovery. So the
Speaker 1: economic recovery we clearly bottomed. I think some good news
Speaker 1: in our view is that we've on a little bit
Speaker 1: you know less down in the United States and in
Speaker 1: terms of the economy that didn't dip quite as much
Speaker 1: as we were fearing. Um. But this open reopening processes
Speaker 1: and train. But it is not clear to us at
Speaker 1: all how this reopening process is going to go, especially
Speaker 1: given the viral pickups track pickup that we've seen in
Speaker 1: some states recently. Rob Lasa touches on something really really important.
Speaker 1: Now everybody is crowding into the same trades. You're not
Speaker 1: the first, you won't be the last to come on
Speaker 1: this program and talk about following the FED coming against
Speaker 1: the US investment grade, do you need to think about
Speaker 1: redefining what is considered safe in this market? Well, you
Speaker 1: know the I'm sure that if I when I came
Speaker 1: on the program the last time, I would have said
Speaker 1: exactly that, which is by what the FED is buying.
Speaker 1: And you know the fact is that in June that worked. UM.
Speaker 1: In June that worked. We think probably in July that
Speaker 1: will continue to work. UM. Redefining what is safe? Uh?
Speaker 1: You know that that the fundamental problem for the market here, John,
Speaker 1: because uh, you know, the safe asset now has very
Speaker 1: very little yield to it. So as we think about
Speaker 1: building portfolios, and I think there's a portfolio construction question
Speaker 1: really right, But with with such a low rate of
Speaker 1: yield for the risk free asset, we need to think
Speaker 1: about other assets that we can use to support that.
Speaker 1: And again, investment grade bonds, uh, you know, spreads and
Speaker 1: one forty over right now, um investment grade bonds where
Speaker 1: we did the risk of imminent default is not there. Um,
Speaker 1: the volatility comes and spread and the FED is in
Speaker 1: managing that volatility. That seems like a pretty safe asset
Speaker 1: to us, Rob, Where's the unsafe asset? I mean the
Speaker 1: real question here is I get I get the idea
Speaker 1: of I G but where do I not want to
Speaker 1: be in fixed income? Well? You know, I think the
Speaker 1: things that that you might want to be that that
Speaker 1: require so rather than say don't want to be there,
Speaker 1: where you really have to do your fundamental work is
Speaker 1: is in assets that are more directly tied to specific
Speaker 1: sectors of the economy. So we know, for instance, the
Speaker 1: you know, the high yield default rate is picked up.
Speaker 1: We're what running about three and a half percent I
Speaker 1: think now, and how yield defaults. That's not a big number, um,
Speaker 1: but there are hidden in that, there are idiosyncratic issues.
Speaker 1: We know the defaults have picked up an energy and
Speaker 1: a couple of other sectors. So you know what we
Speaker 1: would say, Tom, is those things that are that are
Speaker 1: tied more directly to the economic outcomes we need to be.
Speaker 1: You need to do your homework on John. I find
Speaker 1: this conversation so interesting because to your point you're talking
Speaker 1: about earlier, a lot of people are following the FED.
Speaker 1: Initially it was trying to front run the FED. Now
Speaker 1: it's don't fight the FED and follow the FED. And
Speaker 1: you're seeing this and flows incoming into the biggest investment
Speaker 1: grade corporate e t F. I just want to give
Speaker 1: you this nugget. There has been one point two billion
Speaker 1: dollars put into this fund in the past week alone.
Speaker 1: With them, they're two hundred and two million dollars put overnight.
Speaker 1: This trend has not gone away, and it does raise
Speaker 1: a question, John, at what point has a FED fully
Speaker 1: been priced in? And are they going to be unwilling
Speaker 1: to continue to backstop credit markets? And how does that
Speaker 1: rearrange what we are going to see going forward? At
Speaker 1: least there's an important question, and I think Rob's addressing
Speaker 1: the portfolio construction component of that question. I think it's
Speaker 1: really important Rob, in the next draw down, in the
Speaker 1: next downturn, what's going to give me that downside protection?
Speaker 1: And my portfolio with ten years try some real it's
Speaker 1: just stuck between ten, say sixty to seventy basis points
Speaker 1: on a ten year. Well we make a great point, Johnathan,
Speaker 1: which is that that you know, there's less there's obviously
Speaker 1: much less downside for yields in portfolios right now. So
Speaker 1: you have to be a little bit more sophisticated now
Speaker 1: you build your portfolio. And again, uh, you know, investigrade
Speaker 1: is a good is a good way to think about, uh,
Speaker 1: adding some safety. But you traditional way of using treasuries
Speaker 1: as your risk free asset to your point is valid,
Speaker 1: which is there's much less downside available and yields right now,
Speaker 1: so much less underlying protection. If you like Rob, always
Speaker 1: appreciate your time, sir. I'll best that the team I've
Speaker 1: read of robball into that off Investco advices right now,
Speaker 1: get out the calendar. It is July, and it is
Speaker 1: July ish on the way too well, you know earning season.
Speaker 1: It is total chaos. But we need perspective. When we
Speaker 1: get that from the Bank of America and their equity strategist,
Speaker 1: Chill carry Hall, Jill. There's eight ways to go here,
Speaker 1: and I love the detail of your research. Note given
Speaker 1: the present chaos, I want to go to somewhat minutia,
Speaker 1: which is the wiggle room corporations have with capital expenditures.
Speaker 1: The way they do this is they reduced them in crisis.
Speaker 1: Is that's what's happening now, hieah, thanks for having me. Definitely,
Speaker 1: we're seeing that, um, you know, overall corporate cash deployment
Speaker 1: has come down. We've seen about the spending buy backs,
Speaker 1: We've seen a little over ten percent of the index
Speaker 1: of spending dividends. And then capex has really been an
Speaker 1: area that that corporations have cut back on UM. When
Speaker 1: when we look at you know, what happened last quarter
Speaker 1: capex spending was it was essentially flatish UM, and then
Speaker 1: the quarter week you think it will continue to remain
Speaker 1: week when we look at capex guidance, which some companies
Speaker 1: will give on their plans spending, that's been extremely weak. Um.
Speaker 1: You have very few companies you know giving it now
Speaker 1: to begin with, is overall guidance has here but for
Speaker 1: the one the ones that are, it's you know, pretty
Speaker 1: close to two thousand nine levels. So they're sort of
Speaker 1: that disconnect between the improvement we've seen in the i
Speaker 1: SM and just very negative. What I note, Jill is
Speaker 1: Mr Buffett and Berkshire Hathaway take out Dominion and Dominion
Speaker 1: is actually going to deploy the billions. So Mr Buffett
Speaker 1: over to a more conservative tone on their balance sheet.
Speaker 1: Would you expect that to happen throughout all of corporate America? Well,
Speaker 1: I think what we've seen when you look at you know,
Speaker 1: the Bank of America Global Fund Managers survey, investors have
Speaker 1: really honed in on companies balance sheets. Um. There's a
Speaker 1: lot of leverage out there, particularly down the market cap spectrum.
Speaker 1: So investors have been wanting companies to use their excess
Speaker 1: cash to clean up their balance sheets over other cash uses.
Speaker 1: Now we have been in the lackluster capex environment, so
Speaker 1: you know, I think there is sort of a demand
Speaker 1: for that as well. You know, where where companies can
Speaker 1: invest in areas that it makes sense UM and and
Speaker 1: certainly that that's beneficiary for for companies UM, whether it's
Speaker 1: tech capex or more traditional industrial capex UM. But I
Speaker 1: think right now a lot of companies are really being
Speaker 1: cautious on undeploying big projects given the uncertain environment. UM. So,
Speaker 1: so we're not looking for a big cap XCHUME this year,
Speaker 1: but but certainly if UM economic conditions continue to to improve,
Speaker 1: we'll be watching the guidance closely to to see effects.
Speaker 1: Suggest to pick up Joe. We're sitting that this morning,
Speaker 1: Walgreen's coming out kind of have a full thousand jobs,
Speaker 1: suspending the ship buy backs. So yesterday evening bet Bath
Speaker 1: and beyond cutting stores as well. We say this every
Speaker 1: single day. Is this why you think we need to
Speaker 1: own the mega cap stocks with the strongest balance sheets
Speaker 1: versus the small cap stocks with something a little bit
Speaker 1: more frati alebernate the surface. Yeah, so we continue to
Speaker 1: prefer larger were small cops right now, I think, you know, overall,
Speaker 1: the fundamental backdrop is so much we grew down the
Speaker 1: cap spectrums. So this this sarning season which kicks off
Speaker 1: next week, large cap earnings should fall about every year UM.
Speaker 1: Small cap earnings are going to be falling a lot
Speaker 1: greater analysts are looking for about you know, dred percent
Speaker 1: you're your decline and earnings for small caps UM. So
Speaker 1: So even though UM, you know, recovery certainly benefits small caps,
Speaker 1: if we we see a more sustainable recovery and we
Speaker 1: stop seeing a pickup in cases, that that could be positive.
Speaker 1: But obviously the fact that UM, you know, there's a
Speaker 1: lot of fear right now about the rising cases UM.
Speaker 1: Small caps have been generally underperforming again since the early
Speaker 1: June escalating trade tensions or another risk there and one
Speaker 1: of the key reasons smaller stocks underperformed in in so
Speaker 1: you also have really expensive valuations not across the cap spectrum,
Speaker 1: but for small and mid caps there at at record
Speaker 1: highs right now UM. And and a lot of the
Speaker 1: economic data on reopening suggests you're starting to see stalling
Speaker 1: or decelerating trends for small businesses. So um, you know,
Speaker 1: as you mentioned, balance sheets are a lot cleaner for
Speaker 1: for larger stocks. You have a lot higher quality for
Speaker 1: for the SMP five relative to small cap benchmarks. So
Speaker 1: you know that that's still something we're thinking about right now.
Speaker 1: But but certainly if you are an investor in small caps,
Speaker 1: still opportunities that you know, if we do see a
Speaker 1: bit of a tactical rotation into into value, um, you
Speaker 1: know that that's something we expect could work across the market.
Speaker 1: But but being more selective within small caps makes sense.
Speaker 1: I just given that that a lot of the value
Speaker 1: stocks within small caps have been become increasingly synonymous with
Speaker 1: with leverage and risk. Jill, your comments make a lot
Speaker 1: of sense. Your caution makes a lot of sense with
Speaker 1: the bigger picture of the pandemic and the accelerating job
Speaker 1: losses in some sectors. At the same time, valuations have
Speaker 1: reflected this. And there's a theory out there put out
Speaker 1: by JP Morgan that really the surp eyes could be
Speaker 1: to the upside if we get a stalling out of
Speaker 1: the pandemic or better than expected data, and you could
Speaker 1: see the small caps rally and some of the larger
Speaker 1: caps the mega tech stocks sell off given where valuations are,
Speaker 1: Why is that flawed in your opinion? Well, I think
Speaker 1: if we if we do see a much more sustainable recovery.
Speaker 1: You know that that is when when we've looked at
Speaker 1: size and style performance, you do tend to see UM
Speaker 1: small cap stocks. Value stocks tend to rally during those
Speaker 1: those early recovery stages of the cycle. So we obviously
Speaker 1: saw some early innings of that, and now that's that's
Speaker 1: called into question. You know, I think one risk this
Speaker 1: time is that small caps were just a lot worse
Speaker 1: position going into this crisis than they were going into
Speaker 1: a lot of the prior recessions. UM. You know, they
Speaker 1: had record leverage ratios that they've never had before. They've
Speaker 1: benefited from uh keewee and all the actors to cheap capital. Um.
Speaker 1: You know, there are a lot of or quality today.
Speaker 1: So and it's a crisis that hurts small businesses. So
Speaker 1: I think there's some additional risks there as well as
Speaker 1: around trunk Jill Jill, this is a huge deal. Come on,
Speaker 1: We've got this company boot John Farrell mentioned Boots out
Speaker 1: with layoffs. We got Walgreens with layoffs, and on and on.
Speaker 1: And on there's gonna be a job curnage out there,
Speaker 1: the chances of the exchequers spoke about it yesterday. Vice
Speaker 1: President Biden is going to speak about it today. What
Speaker 1: is the elasticity of those job cuts to the revenue
Speaker 1: line of small, mid and large cap? The answer is
Speaker 1: small cap is gonna get absolutely crushed on this, right. Yeah.
Speaker 1: I mean, I think the labor market backdrop and like
Speaker 1: I said that, the data we've been seeing kind of
Speaker 1: stalling and decelerating for small businesses is a big risk.
Speaker 1: And you know, overall for for the market, we think
Speaker 1: there's a lot of risk of you know, just pay
Speaker 1: risk because we've seen all the stimulus and moving on
Speaker 1: into your end and then as if soolatility picks up
Speaker 1: around the election. So you know, we're at this point,
Speaker 1: we're even for the SMP five hundred, the markets treating
Speaker 1: above targets for a year end. So um, so we're
Speaker 1: more neutral on equities at this point and think it
Speaker 1: makes sense for investors. So it's really kind of picture spots. Okay,
Speaker 1: the one final question then, and folks, I'm distraught this
Speaker 1: morning because I have my pasta maker on order at
Speaker 1: sir La Tabla and they announced are going bankrupt this
Speaker 1: morning or last night or whatever. And I'm never able
Speaker 1: to make a pasta to have Faraoh over. So you
Speaker 1: can get some really good quality Tom Kinge Italian pasta.
Speaker 1: That's all great, but it's gonna come in an Amazon box.
Speaker 1: What does the capex reduction? What do the job layoffs
Speaker 1: do to the top line fundamentals of Apple and Amazon
Speaker 1: and the others. Are they immune from this dynamic? Well,
Speaker 1: I think you know, and and Amazon and some of
Speaker 1: those companies are are actually the ones that have been
Speaker 1: been the cap ex spenders during this current crisis and
Speaker 1: kind of keeping SMP five hundred capex positive as all
Speaker 1: of the commodity oriented areas have cut back significantly. Um.
Speaker 1: But but then in terms of capex beneficiaries, you've certainly
Speaker 1: seen kind of a slowdown across the board in terms
Speaker 1: of both more cyclical capex spending from the commodity complex
Speaker 1: and then overall spending on tech. But but if we
Speaker 1: are in a more permanent, you know, work from home
Speaker 1: type of environment, certainly some of the mega cap tech
Speaker 1: companies have benefited. We're we're equal weight tech overall. We
Speaker 1: think tech looks very positive fundamentally strong balance sheets. Um.
Speaker 1: But but obviously that's one sector where there could potentially
Speaker 1: be regulatory risks. Um that the tech has largely escaped
Speaker 1: up until this point. Um. So as we go into
Speaker 1: the election, that's, you know, one of the reasons we've
Speaker 1: just been equal weight. Uh. In addition to obviously the
Speaker 1: very strong run it's had. Joe brilliant catching up with
Speaker 1: you as always, love hearing from you, My best to you.
Speaker 1: Entertainment Banks America they like to surbata for us as well.
Speaker 1: Do you carry hold that off Bank of America to
Speaker 1: give us perspective in the dynamic here and particularly to
Speaker 1: get to August Michael Gape and joined some Barclay's capital. Michael,
Speaker 1: do you have any ability to forecast estimate a judge
Speaker 1: August right now? Not a lot. I think that we would,
Speaker 1: as Jonathan said, give a little more credibility to some
Speaker 1: of these high frequency mobility data's restaurant bookings. I've in
Speaker 1: particular watch the Dallas FEDS Mobility and Engagement Index. The
Speaker 1: claims data just don't have as clear of a signal
Speaker 1: For all the reasons that you've discussed in recent weeks,
Speaker 1: including backlogs and processing, and we're in this very strange
Speaker 1: situation where where the separation side of the labor market
Speaker 1: is still bad, but claims really only tell us about
Speaker 1: half the story. The other half has been a tremendous
Speaker 1: pick up in in the hiring rates. So we're in
Speaker 1: this odd period where we can have a high level
Speaker 1: of claims, unusually extraordinarily high level of claims, but still
Speaker 1: have an improving labor market. So August, I think it's
Speaker 1: probably more more about COVID cases, a willingness to move
Speaker 1: around still, not so much about what the labor market
Speaker 1: is saying today. And what's so important that insight, folks,
Speaker 1: is from Dr Gape and the idea of claims being
Speaker 1: a one sided view. Can there be a one or
Speaker 1: two or even three sided view of the distinction between
Speaker 1: furloughs and layoffs and firings in the short run yes,
Speaker 1: Somewhere in the long run no. And so there's this
Speaker 1: tension in labor markets, as you know, where where most
Speaker 1: the vast majority of people unemployed right now consider themselves
Speaker 1: temporarily unemployed. But as we've seen, even though the labor
Speaker 1: market has been improving and the number of unemployed has
Speaker 1: come down, a greater share of those layoffs are unemployed
Speaker 1: are now starting to be booked as more permanent unemployments.
Speaker 1: So as as this gets prolonged into August, September, and October,
Speaker 1: I think no, there's there's that difference is just a
Speaker 1: name only, and we risk a temporary unemployed worker turning
Speaker 1: into a long term unemployed worker. And that's the scarring
Speaker 1: that the Federal Reserve, of course, is trying to avoid,
Speaker 1: and we're seeing that in the numbers. Michael, the churn.
Speaker 1: Beneath the surface, the net change is positive, but beneath
Speaker 1: the surface, we're starting to see permanent layoffs build again.
Speaker 1: We've had so many different companies in the last twenty
Speaker 1: four hours announced job cuts, store closures, the worries about
Speaker 1: the second wave of layoffs. Are we starting to see
Speaker 1: evidence of it? Yes? Absolutely. I think there's been a
Speaker 1: narrative that that says that business models under pressure. Retail
Speaker 1: is the most obvious case of this, that if firms
Speaker 1: we're thinking of making major transformations over two to three
Speaker 1: year horizon, that those would be brought forward. So COVID
Speaker 1: is accelerating some of those structural changes, and I think
Speaker 1: what you're seeing now is firms have had several months
Speaker 1: to assess the state of play. They're now making plans,
Speaker 1: and so we're getting some some word and some releases
Speaker 1: that those those plans include more layoffs. I think those
Speaker 1: are probably layoffs that are being brought forward relative to
Speaker 1: where plans would have stood in January and February. Michael,
Speaker 1: some analysts and some traders would say economists are just
Speaker 1: being chicken little right now. And you're seeing this in
Speaker 1: the economic surprise Index in the United States, which is
Speaker 1: surging to a record high as economist projections come in
Speaker 1: too low again and again and again, and certainly today
Speaker 1: with the jobs report. Do you take that as a
Speaker 1: sign that economists are being too pessimistic and it's sort
Speaker 1: of accounting for a greater amount of permanent layoffs in
Speaker 1: the market really will sustain or do you view this
Speaker 1: as just how difficult it is to gauge a labor
Speaker 1: market in such dramatic flux. Well, I'm six nine, so
Speaker 1: I've never really been described as as little um. But
Speaker 1: the way that I look at this is we I mean, yes,
Speaker 1: it is true that we've been surprised to the upside,
Speaker 1: but it's my view it's been mainly on the good
Speaker 1: side of the economy. The good sector can rebound quickly.
Speaker 1: It has been the case that that has happened has
Speaker 1: happened in the US, and globally, spending by households on
Speaker 1: goods is only a little bit short of where it
Speaker 1: was in February. That's rebounded from here, though, is if
Speaker 1: the rest of the economy is going to recover and
Speaker 1: we're going to get continued upside surprises, it had to
Speaker 1: come out of services. So while the good sectors recovered
Speaker 1: about half of the lost jobs that we saw in
Speaker 1: March and April, the service sectors only recovered about a third.
Speaker 1: So I think it's what we're seeing at the moment,
Speaker 1: is the good sector rebounding quickly. Economists are still thinking
Speaker 1: a little bit more longer term about well, this is
Speaker 1: a service oriented economy. It's roughly seventy percent of where
Speaker 1: the economy is going, and there's still a lot of
Speaker 1: after effects from COVID that could affect the services sector.
Speaker 1: So I think we're thinking a little more longer term.
Speaker 1: But have we have to accept the fact that the
Speaker 1: near term bounds has been stronger than we thought. He said,
Speaker 1: Rules of engagement. We insult the economists after the interview,
Speaker 1: not during the interview. Just save it just for a
Speaker 1: couple more minutes. Michael, I do have a question voice
Speaker 1: about the recovery and when you expected to flatten it out?
Speaker 1: Is a story we should look for for the back
Speaker 1: end of August later this summer. Where are you focused
Speaker 1: on the calendar? I think that's exactly right. We uh,
Speaker 1: it happened about two to three weeks quicker than we thought.
Speaker 1: And given the flows and the magnitudes that we're discussing,
Speaker 1: it's it's meant a lot of outperformance. Uh And and
Speaker 1: so therefore I think you're you're seeing May and June
Speaker 1: and July are probably gonna be pretty strong numbers. And
Speaker 1: then as you get into August and September, if we're
Speaker 1: still dealing with coronavirus outbreaks, increased hospitalizations, and back pedaling
Speaker 1: on phased reopenings, then you you'd likely see a sluffing
Speaker 1: offer at least a moderation in the rate of improvement
Speaker 1: from from there. And that's why I think we and
Speaker 1: others are still calling on on Phase four. Stimulus is
Speaker 1: needed to help bridge the economy a little further into
Speaker 1: the year. So if we get the ads for stimulus,
Speaker 1: I think it will help. Certainly we would expect a
Speaker 1: larger slepting off and activity if if we don't. So
Speaker 1: it is a critical piece of the forecast, as well
Speaker 1: as what's happening underneath in in terms of COVID and
Speaker 1: a willingness to rehire. To be clear, John, I knew
Speaker 1: that Michael was very tall, so I knew he could
Speaker 1: handle being referred to in a profession of chicken littles,
Speaker 1: because that is sort of some people are saying. So
Speaker 1: to be very clear, but Michael, I do want to
Speaker 1: get your sense when you talk about stimulus. Can you
Speaker 1: talk to our earlier conversation with Claudia some about the
Speaker 1: most effective stimulus that we have seen thus far coming
Speaker 1: from the US government. I think, well, I think it's
Speaker 1: been I think it's been twofold one. I mean, I'm
Speaker 1: going to include some policy here as stimulus because it's
Speaker 1: just Emergency Liquidity Provision. But I think the combination of
Speaker 1: of the p PP it came late, and it needed
Speaker 1: to be remodified and it needed to be upsized. But
Speaker 1: I think we saw in May and June that it
Speaker 1: likely help hold in a lot of employment. So I
Speaker 1: think the p p P at the end of the
Speaker 1: day has been fairly successful. And then I think on
Speaker 1: the other side of it, it's it's just tax rebate
Speaker 1: payments or rebate payments to households plus the unemployment benefits.
Speaker 1: So this is not traditional stimulus in the sense of
Speaker 1: households have a lot of income and we're trying to
Speaker 1: add something on top of that that wasn't expected. This
Speaker 1: is about income replacement, and so I think that I
Speaker 1: would say number one has been the income replacement on
Speaker 1: household balance sheets, and number two has been you know,
Speaker 1: getting some wage and salary support to small and medium
Speaker 1: business through the p p P. To me, those two
Speaker 1: have been the most important. Michael always gret to catch
Speaker 1: up with the sad my best of the team, Michael
Speaker 1: Cape and now about leaves the chief US Economists. Right
Speaker 1: now it is front and center. I'm sure the Vice
Speaker 1: President will address it as with the resident today as well.
Speaker 1: Vice President Pence, I should point out, and that is
Speaker 1: this continuing pandemic. You've been following it, the case dynamics,
Speaker 1: the death dynamics. Just recently we started to see hospital
Speaker 1: supplies running low again. We get perspective from Jason Farley
Speaker 1: the Johns Hopkins University. Yeah, well he who just came
Speaker 1: out with reasons data actually from six of ten different
Speaker 1: states and local regions, and they used the blood supply basically,
Speaker 1: so if you've had blood obtained for any particular reason
Speaker 1: in a commercial lab UM in the United sent in
Speaker 1: sixteen graphic regions. They took samples that were used for
Speaker 1: other tests and tested them for antibody. And what they
Speaker 1: found was that the increase actual prevalence of antibody positivity
Speaker 1: was between six and twenty four times higher than current
Speaker 1: estimates and so just really large estimates of population penetrance
Speaker 1: of this virus. And so what that means, however, is
Speaker 1: is to be determined. We don't know how many people
Speaker 1: got tested and has already lost antibody. We don't also
Speaker 1: know how many people might have tested fault positive. Although
Speaker 1: we think it's it's a smaller proportion, there are there
Speaker 1: are people who can test fault positive for antibody UM.
Speaker 1: So it's it's a really important data point, uh, and
Speaker 1: it really tells us that we are missing still a
Speaker 1: lot of cases in the community. So, Jason, the infections
Speaker 1: between six to twenty four times higher rates of infection.
Speaker 1: What does that give us, like ten percent of the
Speaker 1: population could have already had COVID nineteen. Well, most estimates
Speaker 1: are generally less than five per cent, but when you
Speaker 1: look really at these numbers, UM, you're really showing upwards
Speaker 1: of ten percent in some localities. UM. So it's really
Speaker 1: it's really critical that people continue all of the non
Speaker 1: parmacal logical interventions social distancing, why, math wearing, uh and
Speaker 1: and really just to understand that a fairly large number
Speaker 1: of people in a geneographic region have been exposed to
Speaker 1: the virus. Jason. Another you know, I guess repercussion because
Speaker 1: of COVID nineteen is that the student and exchange visitor
Speaker 1: program in the US has been modified so people that
Speaker 1: that tad a visa but now we're on online courses
Speaker 1: have I believe been asked to maybe go back to
Speaker 1: the countries where they were initially from. Does that mean
Speaker 1: that this is also being used as an immigration policy. Well,
Speaker 1: it's certainly putting restraints on the waves in which we
Speaker 1: in colleges and universities of the country can flex our programs.
Speaker 1: For the fall, we had had restrictions for the F
Speaker 1: one VIA program to be the program that allows foreign
Speaker 1: nationals to study in the United States UH gluosened in
Speaker 1: the spring semess or UH through the summer, have now
Speaker 1: received a word that that is not going to be
Speaker 1: the case for the fall, suggesting that anyone on our
Speaker 1: visa for for academic purposes must attend face to face classes.
Speaker 1: They can attend at most one class that's fully online,
Speaker 1: which really hampers our ability to think about the ways
Speaker 1: in which we plan for the fall UH semesters. So,
Speaker 1: in other words, faculty staff, students who are on F
Speaker 1: one visas, the students in particular on F one visas
Speaker 1: must be in a classroom, face, face to face and
Speaker 1: not online. And it really does put UM universities and
Speaker 1: in a quite a pick bull, frankly when we think
Speaker 1: about the way which we can offer education to those students.
Speaker 1: Jason with the Johns Hopkins University in updating the pandemic.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
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