Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.
Speaker 1: Daily we bring you insight from the best in economics, finance, investment,
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Speaker 1: of kind of co generity. Tony always fantastic to catch
Speaker 1: up with you, sir. Let's just think about things we
Speaker 1: can solidate and you want to add risk as we
Speaker 1: can solidate. Why is that, Tony? Well, John, I think
Speaker 1: ultimately there's two phrases that we've all come to know,
Speaker 1: and that's don't fight the FED and don't fight the tape.
Speaker 1: The FED is extraordinary here you have a FED that
Speaker 1: is literally looked into a television camera and said, we're
Speaker 1: just printing the money and don't worry about that. Now
Speaker 1: is not the time to worry about that. And we're
Speaker 1: gonna issue unlimited support for the credit markets. And the
Speaker 1: phrase that really, I think has has hurt so many
Speaker 1: portfolio managers and myself frankly, over time is it's not
Speaker 1: it's different this time. That's the phrase we all love
Speaker 1: to talk about. I think the real phrase that really
Speaker 1: hurts performances. This will end badly because of course it's
Speaker 1: going to add badly. You cannot fix exponential debt with
Speaker 1: infinity debt. However, in the current framework, the FET is
Speaker 1: very driven to obtain their to um. There's only two
Speaker 1: mandates full employment, which clearly even with a game we're
Speaker 1: not going to get on over any over the near term,
Speaker 1: and stable core inflation, which they want to be at
Speaker 1: two percent so recently last week at one. They're a
Speaker 1: long way off. So this FET is going to be
Speaker 1: sending the money in and I don't want to fight that.
Speaker 1: I mean, so this is really really important because you've
Speaker 1: been very clear that you're modeling a caution in a
Speaker 1: bear market even off of a recession. Well we got
Speaker 1: an m v e R recession, but you're putting a
Speaker 1: big asterisk next to it, right, Well, there's so we
Speaker 1: downgraded the market on January because we just we wanted
Speaker 1: to take some risk off the table and it's just
Speaker 1: gotten way too excessive. Then of course I didn't expect
Speaker 1: a thirty you know that. I was glad we took
Speaker 1: some risk down. We added risk when we came out
Speaker 1: of what actually when FED chair Powell Tom said into
Speaker 1: the camera on sixty Miss CBS is sixty minutes that
Speaker 1: we're just printing the money. I never thought you and
Speaker 1: I have been doing this a long time. Did you
Speaker 1: ever think that the FED would actually not even use
Speaker 1: great terms like q E or buying trade. They're just
Speaker 1: saying they literally were printing the money. So at that
Speaker 1: point you know that they're going to try to um
Speaker 1: increase economic activity, not stop until they do, Tony, don't
Speaker 1: fight the FED is certainly one theme that we've had
Speaker 1: this year. The other theme is don't fight the big
Speaker 1: tech rally, but that's getting three reatened by the Facebook
Speaker 1: advertising boycott is really raising questions in general about the
Speaker 1: advertising budgets of big companies. How much could that influence
Speaker 1: the rally going forward? Well, I think that that could
Speaker 1: create a little bit. So once we have created the market,
Speaker 1: you've got this incredible runoff of that trading range. So
Speaker 1: on June five, we thought that the market would go
Speaker 1: into a period consolidation because these stocks has seen extraordinary
Speaker 1: moves right there. It's just even the economically sense of stocks.
Speaker 1: You had a two week rally in the banks of
Speaker 1: thirty and it was time to take a little bit
Speaker 1: of that. That is an extraordinary thing that's never happened.
Speaker 1: So it's time to take a little bit. It was
Speaker 1: time to take a little bit of money off the table.
Speaker 1: So actually, the market has been consolidating since early June.
Speaker 1: So if you look at the percentage of stocks above
Speaker 1: the ten day, it's dropped uh SMP components above their
Speaker 1: ten day moving average, it's all the way back to
Speaker 1: only if you look at the percentage of stocks above
Speaker 1: their fifty day in the SMP just two and a
Speaker 1: half weeks ago, that reading was over. It was it's
Speaker 1: now so you've dropped, or so you you're already internally
Speaker 1: consolidating the market. Now it's catching up at the indices
Speaker 1: because some of those big mega caps stay at home
Speaker 1: stocks are starting to get hit, Tony A. We're redefining
Speaker 1: what a defensive asset actually is. Is a groat stock
Speaker 1: of software stock with an anovated multiple of thirty times
Speaker 1: forward earnings is not a defensive asset right now, buddy,
Speaker 1: I I'll tell you time you meet. At least all
Speaker 1: of us have been doing this a while. The NASDAC
Speaker 1: mega cap stocks are considered the defensive stocks, which I
Speaker 1: just that is unique to this cycle. Um, So when
Speaker 1: you put those stocks, if you're making an offensive bet,
Speaker 1: you've got to be believing that there's going to be
Speaker 1: a reopening of economic activity. And again, our our target
Speaker 1: is a story. It's not you know, in the next
Speaker 1: fifteen minutes, we're off to the races. I think what
Speaker 1: you want to do is use periods of liquidity on
Speaker 1: the downside to add exposure. Okay, but Tony, where are
Speaker 1: you putting new money? You got new money, you're putting
Speaker 1: it to work? Where are you putting it to work?
Speaker 1: So we're we've been thinking if you're gonna put money
Speaker 1: into the market, it's got to be on this economic
Speaker 1: reopening or an offensive sector allocation, which would be in
Speaker 1: the beleaguered banks, which got absolutely smoked on Friday on
Speaker 1: the Fed decision. Um. What was interesting about Friday though,
Speaker 1: even though the market was pretty pretty weak, as you know,
Speaker 1: the industrials and materials actually significantly outperformed the SMP. So
Speaker 1: we're looking to go into those areas time that benefit
Speaker 1: from an economic reopening and not a stay at home forever.
Speaker 1: But again, this is something we're looking at over the
Speaker 1: next twelve eighteen months, not the twelve next twelve eighteen minutes. John,
Speaker 1: I've struck by Tony's comments and frankly the comments that
Speaker 1: we get from a lot of investment managers, this idea
Speaker 1: that we could have more upside and stocks even though
Speaker 1: the economy faces a lot of uncertainty and downside surprise.
Speaker 1: And again, I'm just struck by this dissonance between stocks
Speaker 1: not necessarily representing the underlying economy where the bottom fifth
Speaker 1: of all earners in America are currently about below employment
Speaker 1: level seen in February. I'm just wondering how this is
Speaker 1: going to filter into equities if ever, Well, least you've
Speaker 1: said it a million times, the equity market is not
Speaker 1: the economy, and Tony with just five big names making
Speaker 1: up about a quarter of the SMP five hundred, it's
Speaker 1: something we've just got to accept, isn't it. Some people
Speaker 1: are really struggling with this still, that the equity market
Speaker 1: somehow has to be a reflection of where this economy
Speaker 1: is and where it's going. Well. Which equity market though,
Speaker 1: um so, and again I think that's the most important phrase.
Speaker 1: Would I would I chase some of those megacap stocks
Speaker 1: that have had such an extraordinary move. I wouldn't have.
Speaker 1: For example, Facebook on Friday gave back all the games
Speaker 1: that had had in the prior month and change. So
Speaker 1: what what you have is elevated risk. When you have
Speaker 1: parabolic moves higher or such focused move higher, I want
Speaker 1: to I want to invest in America or or um
Speaker 1: economic activity in a reopening of the economy. I don't
Speaker 1: want to. I don't want to be chasing the stay
Speaker 1: at home work theme forever. Clearly that has been working
Speaker 1: and that has been such a driver of the equity
Speaker 1: market thus far. But again, if you look at the
Speaker 1: well at the performance of the Russell one thousand growth
Speaker 1: versus the Russell one thousand value, you're seeing not just
Speaker 1: an absolute uh test of what happened in the dot
Speaker 1: com era, but even on a ten week rade of change,
Speaker 1: you saw a peak and it is now kind of
Speaker 1: pulling back a little bit. So I think the move is,
Speaker 1: to Tom's question, is value over growth and it's not played.
Speaker 1: It's not been the great theme coming off the low,
Speaker 1: but coming out of a recession. Going to Lisa's point,
Speaker 1: coming out of a recession, typically your your outperformers are
Speaker 1: finance anchials, industrials, materials, and consumer discretionarya Those are the
Speaker 1: areas if you believe that the economy is ultimately going
Speaker 1: to recover, the global economy is ultimately going to recover,
Speaker 1: those are the sectors that you want to buy into
Speaker 1: the weakness that we've been expecting and could see a
Speaker 1: little bit more. The two main problems that everybody had
Speaker 1: for the market was what about the second wave and
Speaker 1: what about if the Democrats do some kind of sweep. Well,
Speaker 1: the polling is pulling forward the political side, and the
Speaker 1: expansion of the COVID nineteen cases in the South is
Speaker 1: clearly telling us what the second wave could look like.
Speaker 1: So that's this consolidation period. Instead of happening in the fall,
Speaker 1: it's happening now, and I think that creates the opportunity
Speaker 1: for investing in those reopening areas over the next few months.
Speaker 1: Cound of coach Intimacy Tony always fantastic to catch up with.
Speaker 1: You appreciate the transparency the honest state joining us from
Speaker 1: Duke Downs. Jonathan Quick, and what is so important about
Speaker 1: Dr Quick is not only his exceptionally Prussian book The
Speaker 1: End of Epidemics, but also it's a commitment over multiple
Speaker 1: decades to looking at the epidemic turned to pandemic. Dr Quick,
Speaker 1: What everyone wants to know is what is your solution
Speaker 1: for the political chaos that we're in right now? It's
Speaker 1: not much different than an Albert Camus the plague. How
Speaker 1: do you extricate yourself from the political chaos to end
Speaker 1: with a better medical outcome? Well, I I think the
Speaker 1: first thing is that we need to keep persisting in
Speaker 1: getting the getting the public, everybody to see the reality
Speaker 1: in front of us, and to do what works. Um,
Speaker 1: We're sitting here in the US seeing explosive increases, UH,
Speaker 1: with at least thirty of the states seeing increases. Yet
Speaker 1: we look around the world and we see what works. Um.
Speaker 1: I think we've had the worst of a pandemic communication
Speaker 1: in the sense that we have our leaders, um, you know,
Speaker 1: not on a on a common message. And that's that's
Speaker 1: part of it. And UM, I think right now we're
Speaker 1: based on the Rockefeller Foundations, we're working to build an
Speaker 1: alliance of public organizations to get a consistent message out
Speaker 1: to the public about the viruses here. And so if
Speaker 1: the leaders aren't coming together, I think society has to
Speaker 1: come together. But keep pushing the leaders with facing the
Speaker 1: reality we've got this pandemic. We know it will be
Speaker 1: with us for a while and we know what to
Speaker 1: do to to slow it down. Your work included six
Speaker 1: years of the World Health Organization, and you are a
Speaker 1: good filter of all the literature that is out there.
Speaker 1: If we see the case count explode in Florida to Arizona,
Speaker 1: do you just correlate correlate that over to a rising
Speaker 1: death count in the coming weeks. Well, yes, with with
Speaker 1: the recognition that the shift early in the outbreak, it
Speaker 1: was really a lot of at risk, all the people
Speaker 1: we weren't protecting the most vulnerable. Um, so we're seeing
Speaker 1: now cases rise, but the death account at the point,
Speaker 1: at the present time is is holding steady. So um,
Speaker 1: we will see more deaths, we will see proportionally fewer
Speaker 1: because more of the cases are younger people who don't
Speaker 1: don't die is often. But yes, indeed we will see
Speaker 1: rises in death count as as the increase now mostly
Speaker 1: in the in the youth gets filters up to the
Speaker 1: middle age and older. So yeah, I expect we will
Speaker 1: see the death count coming back up dr quick. This
Speaker 1: distinction is so important, This idea that you're seeing the
Speaker 1: case count rise exponentially in some areas, but the death
Speaker 1: count not expected to rise as much and not rising
Speaker 1: significantly at this point. Could this be interpreted as perhaps
Speaker 1: these flare ups not being as dangerous as the initial
Speaker 1: ones and being just another sign of reopening economy, young
Speaker 1: people getting back into the workforce and managing through the
Speaker 1: virus to get some sort of herd immunity without necessarily
Speaker 1: a vaccine on the on the horizon for the next
Speaker 1: couple of months. Well, I mean, honestly, I think that's UH.
Speaker 1: I think that's a wishful thinking in the sense that
Speaker 1: um UH is a bigger outbreak, even if proportionally more
Speaker 1: of it is in the youth, it's still gonna claim lives.
Speaker 1: The virus hasn't changed changed, And I think one reality
Speaker 1: is it's not UM saving lives of saving the economy.
Speaker 1: That's a false choice. We can do both, But our
Speaker 1: biggest failure has been not to really reinforce those basic
Speaker 1: personal protective behaviors which we know work distancing face mailk handwashing,
Speaker 1: avoid large gatherings. UM. I think there's an in between
Speaker 1: where we I mean, staying indoors for three months didn't
Speaker 1: change the virus. It's still just as contagious. And whether
Speaker 1: you whether you start with a youth epidemic because they're
Speaker 1: not following enough that these personal protective behaviors um it
Speaker 1: will eventually continue um and and affect the whole population.
Speaker 1: So we we we do have to reopen, but we
Speaker 1: have to we have to do it in a way
Speaker 1: which really applies the lessons of what has worked in
Speaker 1: other countries to plateau at least the virus and and
Speaker 1: minimize UH and reduce the desks and and all of
Speaker 1: the knock on effects. Dr Quick, how long do you
Speaker 1: think it will be until we have a vaccine? Well,
Speaker 1: I have to say I'm encouraged by the vaccine work
Speaker 1: that's going on now because we have UH we have
Speaker 1: at least nearly twenty vaccines and human trials and that's exciting.
Speaker 1: And we've got a couple that are going into the
Speaker 1: Astrozenic University of Oxford one and the MODERNA one. Both
Speaker 1: of those are going into to the last phase of
Speaker 1: human trials where we really go on a large scale
Speaker 1: to test the safety and efficacy. UM So I'm encouraged.
Speaker 1: That said, the whole process of scaling up production and
Speaker 1: all I think we'll start seeing some coming out in
Speaker 1: the spring is for so hope, but I don't see
Speaker 1: large scale vaccine availability that changes things fundamentally until until
Speaker 1: the uh, you know latter half of as as folks
Speaker 1: have been saying since the beginning, I think that hasn't changed.
Speaker 1: But I do think the speed has been historic and
Speaker 1: um and the companies are really looking at how to
Speaker 1: maximize production quick of the Rockefeller Foundation Dot Defense has
Speaker 1: to catch up with you say, you've got to come
Speaker 1: back on soon. This is a really interesting interview because
Speaker 1: he's a very interesting guy. His father basically made modern
Speaker 1: Miami Beach. Seymour Gelbert was the mayor of Miami Beach forever,
Speaker 1: lived at the lofty age of years old, and his
Speaker 1: son Dan has carried the torch forward. Steeped in Florida politics,
Speaker 1: he's one of the most interesting Democratic voices across the
Speaker 1: Sun Belt, and he is the the mayor of Miami Beach.
Speaker 1: Mayor Gilbert, thank you so much for joining us. If
Speaker 1: I went down to the Vetsy Hotel this morning, could
Speaker 1: I have a beverage of my choice on that wonderful
Speaker 1: veranda looking out across Miami Beach. Well, if it we're open,
Speaker 1: you could, because it's a restaurant, not a bar. Bars
Speaker 1: have been closed in our city since we we sheltered
Speaker 1: in place. We're the first city in Florida to do so.
Speaker 1: So we don't have bars right now anywhere, but we
Speaker 1: do allow restaurants with limited capacity. At this point, what
Speaker 1: is the capacity you need from your state government, including
Speaker 1: your Republican governor, and what do you need from Washington
Speaker 1: right now? Well, first of all, from Washington, we need
Speaker 1: people to start sending out a message that you need
Speaker 1: to do the things that we're asking people to do.
Speaker 1: You know, I always describe you know, mayors in South
Speaker 1: Florida know about hurricanes. They happen all the time, or
Speaker 1: at least they seem to, uh, you know, be be
Speaker 1: coming towards our way generally during hurricane season. So we
Speaker 1: all prepare and there's never any discussion about whose fault
Speaker 1: it is, or whether it's what party it is, or
Speaker 1: everybody just does what they need to do, and they
Speaker 1: tend to help everybody else. They tend to listen to
Speaker 1: the direction of their political and health management leaders, and
Speaker 1: they tend to sort of get in line and help people.
Speaker 1: They don't even know this. For whatever reason, the messaging
Speaker 1: from Washington has not been help everybody else, help yourself.
Speaker 1: It's been don't wear a mask, or stand up against this,
Speaker 1: or stand up against that. It's so unhelpful. Right now,
Speaker 1: the biggest concern we have is getting people to simply
Speaker 1: do what every health expert tells them they should do,
Speaker 1: which is to wear a mask. Wear a mask when
Speaker 1: you're near somebody, wear a master, protect your parents, wear
Speaker 1: a master, protect yourself. And they're not complying. And young
Speaker 1: people are especially not complying. And since my city is
Speaker 1: in the middle of this, because we get so many guests,
Speaker 1: so many visitors, so many uh you know, hospitality workers,
Speaker 1: all in this little interchange that happens in this little island,
Speaker 1: we see it in a big way and it has
Speaker 1: to We need direction, and we need leadership. As you
Speaker 1: look to leadership, there is a question about some of
Speaker 1: the hard decisions that you have to make as a
Speaker 1: leader of your city and as a parent. I know
Speaker 1: the conversation very much among my friends is a question
Speaker 1: about when summer camps can get back up and running,
Speaker 1: when we can get schools back up and running. I
Speaker 1: know that summer camps have been open in your region.
Speaker 1: At what point will you shut them down and keep
Speaker 1: schools closed come the fall. Well, you know, we have
Speaker 1: tried very hard to follow very directly the advice of
Speaker 1: the health care professionals. So CDC allows for summer camps
Speaker 1: if all of these other visions are taken care of.
Speaker 1: And I think the Pediatric Association today really wants people
Speaker 1: to strive to open up schools in some way because
Speaker 1: they're worried about the impact of not having schools open
Speaker 1: and the failure to socialize and all those issues. So
Speaker 1: we're going to try to, you know, to do what
Speaker 1: we can within the confines and constraints of all of
Speaker 1: what the healthcare professionals say. This is a healthcare issue
Speaker 1: and it should be treated that way. That said, you know,
Speaker 1: a lot of it is what parents are going to permit.
Speaker 1: We opened up virtual and regular summer camps with with
Speaker 1: lots of restrictions, and we got a good number of
Speaker 1: people interested, but many obviously didn't. Um The reason we
Speaker 1: opened up summer camps and the reason why schools are
Speaker 1: trying to open up is obviously people can't work if
Speaker 1: their kids are at home, especially their younger children, and
Speaker 1: and so it's part of not just the kids development,
Speaker 1: but the economy. So We're trying very hard to navigate.
Speaker 1: But right now, given the spikes that we've the enormous
Speaker 1: spikes we've seen in the in the county, in the state, uh,
Speaker 1: you know, we're not sure what we're going to be doing,
Speaker 1: because if we can't get a handle on this, then
Speaker 1: obviously the health care concerns will override everything else. Mayor
Speaker 1: not an easy decision in tom I'm really struck, especially
Speaker 1: in what the mayor was talking about in terms of
Speaker 1: the economic concerns people not getting back to work if
Speaker 1: their kids are not in school, and the idea of
Speaker 1: what could happen if we have children congregating they don't
Speaker 1: social distance, and what happens with respect to all the
Speaker 1: little victors of disease who go home to their families. So, yeah,
Speaker 1: it's interesting here, Mayor gil Well, go ahead, please, Mayor Gilbert,
Speaker 1: go ahead. But what's interesting here too, euro up, What
Speaker 1: I was gonna say, excuse the delay, Mayor Gilbert. What
Speaker 1: I was gonna say is your father basically invented the
Speaker 1: idea of moving from New York down to Miami Beach.
Speaker 1: You took advantage of that out of Tufts and all that.
Speaker 1: How do you do the winter season in Miami Beach
Speaker 1: this year. How do you convince those Northerners to get
Speaker 1: down there when it gets chilly? Well, the first question
Speaker 1: is how we're going to tolerate crowds. I mean, my
Speaker 1: little city and I'm just a small part of the
Speaker 1: county has four thousand New York addresses people, you know,
Speaker 1: four thousand units are owned by New Yorkers, So we
Speaker 1: we have already a pretty natural influx of either people
Speaker 1: visiting or people living part of the year here, sometimes
Speaker 1: six months in a day for tax reasons. Um. But
Speaker 1: the tip of the matter is the market is going
Speaker 1: to determine some things because some people will simply not travel.
Speaker 1: So much of our hospitality economy is tethered two planes
Speaker 1: and boats, and the ships that are not gonna you know,
Speaker 1: the cruise line seem to be moored for quite some time.
Speaker 1: Right now. People are traveling by planes as much as
Speaker 1: they do, so we're seeing probably a little bit more
Speaker 1: regional tourism. But I don't know, I mean a lot
Speaker 1: of I mean we're worried. Obviously, we have huge events
Speaker 1: every year. Uh down here, we just had a Super Bowl,
Speaker 1: We've got the n C Double A championships obviously aren't
Speaker 1: bossil in December. We have lots of things that we
Speaker 1: rely on and that we enjoy. I mean, look, we
Speaker 1: are a community that is built to not socially distance ourselves.
Speaker 1: We are a community built for all the other gatherings
Speaker 1: that we want. Mr Matt, we gotta leave you that
Speaker 1: I appreciate your time this morning. Mac Alba that on
Speaker 1: a situation on Miami Beach and across Florida. Tiffany Wilding
Speaker 1: of PIMCOA, she does very careful economic work that their
Speaker 1: portfolio managers bounce off of. Tiffany, what is your calling off?
Speaker 1: I want an update from you on how V the
Speaker 1: V is. How's the V shaped recovery going? Well, I
Speaker 1: think it's gonna look like a V. First first, thanks
Speaker 1: for having me. I think it's going to look like
Speaker 1: a V in the first several months of this recovery. Now,
Speaker 1: what one thing that I would say is, I think
Speaker 1: it's very important to note so we think we came
Speaker 1: out of recession in May UM and as we came
Speaker 1: out of that recession is not only the deepest recession UM,
Speaker 1: but it's also the shortest recession. So we clearly saw
Speaker 1: growth in the payroll figures as well as retail sales
Speaker 1: and things like that in May. So we probably came
Speaker 1: out of recession in May. And I think what's going
Speaker 1: to happen is this these next couple of months are
Speaker 1: going to look very much like a v shape recovery
Speaker 1: as we get this spurt of activity, as people you know,
Speaker 1: start to get back to work, um and and start
Speaker 1: to reopen the economy. Um. But after that, we think
Speaker 1: the recovery is going to be much slower. And I
Speaker 1: think you're you know, you're starting to see some of
Speaker 1: the effects of reopening the economy with um, you know,
Speaker 1: some of the rising cases within the Sung Belt within
Speaker 1: the United States of of the COVID virus. You know.
Speaker 1: So after that kind of initial spurt of activity, things
Speaker 1: are going to be much more slow going. We think, okay, well,
Speaker 1: you know a lot of the reports over the weekend,
Speaker 1: Tiffany have this down you go, and there's sort of
Speaker 1: this you know, nudging up in business activity. We spent
Speaker 1: a lot of time on a consumer with a pandemic.
Speaker 1: What does PIMCO observe about business spirit across this nation? Well,
Speaker 1: look for businesses are actually a little bit more cautious.
Speaker 1: I would say they're getting going a little bit more
Speaker 1: slowly of than the consumer sector. You know, so I
Speaker 1: mentioned retail sales, you know, clearly with a bounce back
Speaker 1: in a pretty dramatic bounce back in and sort of
Speaker 1: durable goods types of things. It looks like consumers are
Speaker 1: they're still standing of the spending data that that we
Speaker 1: look at, and durable goods actually looks like it might
Speaker 1: be similar to where it was pre COVID. So services
Speaker 1: are down a lot still bit, but consumers are still
Speaker 1: spending their shifting some of their they're spending over On
Speaker 1: the other side of that, you know, busises look a
Speaker 1: little bit more tentative of UM. The business survey, we
Speaker 1: do think that is m this week does bounce back
Speaker 1: to fifty, which means that the business or the manufacturing
Speaker 1: sector is expanding. But keep in mind, it doesn't tell
Speaker 1: you how much it's expanding. Those isn't manufacturing industry, and
Speaker 1: it just tells you that about fifty percent of firms
Speaker 1: are So, you know, I think I think that they
Speaker 1: will be a little bit more slow going. Still a
Speaker 1: lot of uncertainty out there. You make sure there's a
Speaker 1: lot of uncertainty about what the virus path will be.
Speaker 1: You know, I just don't see businesses really investing in
Speaker 1: in UM the things that will project that will could
Speaker 1: take five years to get going. If you're pretty uncertain
Speaker 1: about about how the you know, how things are going
Speaker 1: to be tyfity right now, this is the main issue
Speaker 1: for investors because of the fragility in the reopening process
Speaker 1: across some states across America right now. Just how instructive
Speaker 1: will the aggregate day to be in the common weeks
Speaker 1: and months, How instructor will it be? UM, How instructive
Speaker 1: will it be the economy and how it's going UM.
Speaker 1: You know, I think I think data Tiffany, let me
Speaker 1: let me clarify and make it super clear for our
Speaker 1: for our lists and viewers as well. If the Advocate
Speaker 1: data continues to show an improvement because of the mechanical
Speaker 1: reopening of say a state like New York, does it
Speaker 1: master the fragility in places like Florida, Texas, California, which
Speaker 1: is struggling with the reopening process. I do, yeah, so yeah,
Speaker 1: I think you absolutely have to go from more of
Speaker 1: a kind of national um analysis to a very regional analysis.
Speaker 1: And that's certainly been the case, you know, with the
Speaker 1: you know, the hospitalization than the the COVID virus new
Speaker 1: cases itself. On a national level, you know, actually looks
Speaker 1: like the new cases daily to case talents are coming
Speaker 1: downs and you're looking great. But if you if you
Speaker 1: dispect the data, you know, there there's a very concerning
Speaker 1: trend um evening after controlling for testing. So we're doing
Speaker 1: more testing, which is great news, but even after controlling
Speaker 1: for testing, a lot of these COVID cases, new COVID
Speaker 1: cases and hospitalization in some of the Southern states are
Speaker 1: doing very poorly. So we're actually watching, um, you know,
Speaker 1: some of our high freak and see data on credit
Speaker 1: card sales for example, to see if our consumers actually
Speaker 1: reacting to those increases in cases or increased outbreaks in
Speaker 1: those areas. And we're monitoring this pretty closely. So far,
Speaker 1: we haven't really seen that big of a drop off
Speaker 1: in sales, for example, in those regions. But I think
Speaker 1: it's just going to be more like a light switch,
Speaker 1: if you will. So people are going to continue, i think,
Speaker 1: to try to get on with our lives until one day,
Speaker 1: you know, things are maybe going to get that enough
Speaker 1: where you know, they kind of stopped consuming um and
Speaker 1: and that's the kind of thing that we're waiting for,
Speaker 1: not a maniar process. That's something that has to be
Speaker 1: monitored on a regional basis at this point. And Tiffany,
Speaker 1: that's one reason why a lot of people are saying
Speaker 1: that there could be a series of downside surprises on
Speaker 1: the economic data front going forward in the next couple
Speaker 1: of months. At the same time, so I'm including yourself,
Speaker 1: seemed to believe that there may be an upside surprise
Speaker 1: when it comes to the policy response, which sort of
Speaker 1: sums comes as a surprise to me because it feels
Speaker 1: as if the market is baking in a re upping
Speaker 1: of the enhancement employment benefits. What is the market pricing
Speaker 1: in and what do you see as likely when it
Speaker 1: comes to fiscal stimulus. Well, I mean, I think that
Speaker 1: the markets grappling with right now is that we are
Speaker 1: going to have a ciscal cliff, if you will, um,
Speaker 1: kind of in the neighborhood of July, if Congress doesn't
Speaker 1: do more so, as you mentioned, the unemployment insurance benefits
Speaker 1: a sixty six hundred a week, they will expire. You
Speaker 1: also have that delay in the April fifteenth tax deadline
Speaker 1: that people have to pay their taxes. Now in July fifteens,
Speaker 1: that sort of expires, you know, the PPP, which is
Speaker 1: a paycheck protection something goes away. There's also a lot
Speaker 1: going on in the state and local level. If state
Speaker 1: and locals because they have to have balanced budgets and
Speaker 1: because their fiscal year end it's ending in June, they're
Speaker 1: gonna have to start slashing UH spending and that means
Speaker 1: really cutting jobs and services. So there's a really big
Speaker 1: potential fiscal cliffs that we could see in July. I
Speaker 1: think markets are weighing that with you know, will will
Speaker 1: federal government federal lawmakers get together and do something. Ultimately
Speaker 1: we think that they will, um, you know, because at
Speaker 1: this point the economy is still quite fragile. I think
Speaker 1: the reason why we're seeing this re suit recovering in
Speaker 1: the first couple of months is precisely because we've gotten
Speaker 1: the large amount of fiscal stimulus that we've gotten, you know,
Speaker 1: So those household rebate checks and things like that, they
Speaker 1: are being spitched and the economy. We can see that
Speaker 1: in the retail sales do that, you know, so it
Speaker 1: would be I think very bad for the economy if
Speaker 1: the center of the federal government, uh, you know, sort
Speaker 1: of pulled back on spending now when the economy so fragile.
Speaker 1: So ultimately we think that it does happen because it's
Speaker 1: in needs to and we think we could get another
Speaker 1: trillion dollar fiscal stimulus plan you know, kind of in
Speaker 1: the neighborhood of July that basically thwart this fiscal cliff
Speaker 1: that's coming tyfically, let's talk about the composition of that
Speaker 1: plan where the fiscal effort should be directed. What is
Speaker 1: the optimal composition of the next fiscal effort in the
Speaker 1: next thirty days. Well, so that I think, I think
Speaker 1: you have to be I think the maskers should be
Speaker 1: a little bit careful because what we are starting to
Speaker 1: see is that this this crisis, like others will have,
Speaker 1: you know, because we call basting scars, you know. So
Speaker 1: one of those things is and I kind of alluded
Speaker 1: to this before, is that consumers are changing their behavior
Speaker 1: and we think that they'll probably change, you know, they'll
Speaker 1: kind of be permanently changed. So some of the things
Speaker 1: that we're seeing is it's kind of interesting. You know,
Speaker 1: people are you know for the summer, you know, they're
Speaker 1: buying more camping gear for example, as opposed to you know,
Speaker 1: taking you in a flight or going to a hotel. Uh,
Speaker 1: they're they're buying a sporting equipment instead of going out
Speaker 1: and going to the workout studios that they used to
Speaker 1: go to and things like that. So we think, because
Speaker 1: consumers are sort of buying these durable goods to substitute
Speaker 1: for what we're services, this is going to be a
Speaker 1: bit more of than ingrained behavioral change because they're investing
Speaker 1: in these things, like our views are camping equipment. Um,
Speaker 1: you know, that's kind of on a micro basis, but
Speaker 1: I think it does really speak to this idea that
Speaker 1: you're gonna have to have shifting economic resources from stuff
Speaker 1: industries into other industries. And I think government, regular government
Speaker 1: stimulas needs to understand that that's going to happen, allow
Speaker 1: it to happen, you know, and not slow it down,
Speaker 1: but at the same time sort of pad pad the
Speaker 1: economy while that transition is happening. I think the best
Speaker 1: way to do that is to basically focus on unemployment
Speaker 1: and sharing for example, maybe carefully calibrated so you don't
Speaker 1: just incentivize people to work, but focus on things that
Speaker 1: will help the household really gap that income loss while
Speaker 1: um you know, they're looking for new jobs and new industries.
Speaker 1: Finally tuning the policy effort. A huge, huge decision to
Speaker 1: make in the next thirty days. Tiffinitely fantasticic cash show
Speaker 1: with you. My best to you and the team of pimcow.
Speaker 1: Tiffitely Wilding there the chief economists of a pimcow in
Speaker 1: the United States. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
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Speaker 1: Key before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.