1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Leye. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,159 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We 5 00:00:27,240 --> 00:00:30,160 Speaker 1: begin the program this Wednesday with someone who was constructive 6 00:00:30,280 --> 00:00:33,280 Speaker 1: when others were bullish when many were still bearish, and 7 00:00:33,360 --> 00:00:36,640 Speaker 1: name Lisa Shalott of Morgan Stanley Weafth Management. Lisa Shalott, 8 00:00:36,680 --> 00:00:39,080 Speaker 1: fantastic to catch up with you, and I will say 9 00:00:39,120 --> 00:00:41,600 Speaker 1: out front, you have been right over the last couple 10 00:00:41,640 --> 00:00:43,320 Speaker 1: of months, but over the last couple of weeks that 11 00:00:43,400 --> 00:00:47,040 Speaker 1: cyclical rotation has started to fade. There is a defensive 12 00:00:47,120 --> 00:00:50,000 Speaker 1: bias creeping back into this market. What's the message for 13 00:00:50,040 --> 00:00:53,680 Speaker 1: clients this morning? Lisa, Yeah, Look, I think that that 14 00:00:53,800 --> 00:00:57,600 Speaker 1: as you articulated, I think that the concerns over the 15 00:00:58,040 --> 00:01:02,120 Speaker 1: recent spike in cases um is something that investors are 16 00:01:02,160 --> 00:01:06,440 Speaker 1: definitely grappling with. And to your point, we have seen, uh, 17 00:01:06,560 --> 00:01:09,720 Speaker 1: you know, a defensive rotation. Albeit on the one hand, 18 00:01:10,040 --> 00:01:13,360 Speaker 1: uh you know, people sustained by the fuel of the bed. 19 00:01:14,280 --> 00:01:17,240 Speaker 1: But on the other hand, you know, buying things like gold, 20 00:01:17,440 --> 00:01:21,479 Speaker 1: like utilities, uh, like staples, you know, leading the smoke 21 00:01:21,560 --> 00:01:24,800 Speaker 1: it so, UM, you know we have uh, you know, 22 00:01:24,920 --> 00:01:29,080 Speaker 1: articulated that we thought that period um, you know really 23 00:01:29,160 --> 00:01:31,440 Speaker 1: from game through the end of the year was going 24 00:01:31,480 --> 00:01:36,440 Speaker 1: to be a very volatile and trade range bound uh, 25 00:01:36,840 --> 00:01:39,640 Speaker 1: a range bound market, and you know we're we're sticking 26 00:01:39,640 --> 00:01:42,759 Speaker 1: with that. Um. We still think there's opportunities to buy 27 00:01:42,840 --> 00:01:49,080 Speaker 1: those cyclicals for what ultimately happened two. But we understand 28 00:01:49,120 --> 00:01:53,000 Speaker 1: that we're in a very very toppy critical period here. Uh, 29 00:01:53,040 --> 00:01:56,960 Speaker 1: and we're not surprised by this defensive rotation and certainly, 30 00:01:57,560 --> 00:02:00,600 Speaker 1: uh it is validated by that news low the Tom 31 00:02:00,640 --> 00:02:04,520 Speaker 1: talked about the the the pick up um in in 32 00:02:04,640 --> 00:02:08,560 Speaker 1: the virus numbers are staggering in the last week A Lisa, 33 00:02:08,840 --> 00:02:10,560 Speaker 1: compared to what we were a couple of weeks ago, 34 00:02:10,760 --> 00:02:13,400 Speaker 1: you sound relatively more cautious. So I hope that's a 35 00:02:13,400 --> 00:02:15,720 Speaker 1: fair characterization of where you stand. And I just wonder 36 00:02:15,760 --> 00:02:19,560 Speaker 1: what's the epicenter of that term for you. UM, yeah, No, 37 00:02:19,720 --> 00:02:22,200 Speaker 1: it's it's as I said, UM, I think we are 38 00:02:22,240 --> 00:02:25,280 Speaker 1: a little bit more cautious. Look, we're still very uh 39 00:02:25,440 --> 00:02:30,440 Speaker 1: strongly in that range that we've talked about between two hundred. 40 00:02:31,080 --> 00:02:34,400 Speaker 1: But as we look at um, you know, these the 41 00:02:34,480 --> 00:02:38,519 Speaker 1: spike in the COVID nineteen cases. Um, while we don't 42 00:02:38,720 --> 00:02:43,800 Speaker 1: think that there's appetite either human will or political will 43 00:02:43,919 --> 00:02:47,720 Speaker 1: to really go back to both the style of all 44 00:02:47,760 --> 00:02:51,000 Speaker 1: out lockdowns that we saw in March and April. UM, 45 00:02:51,160 --> 00:02:54,600 Speaker 1: these are numbers that are going to cause people, uh, 46 00:02:54,639 --> 00:02:59,720 Speaker 1: you know, local town cities, uh, concern and and stress 47 00:02:59,720 --> 00:03:03,040 Speaker 1: and and again to Tom's point, UM, if you start 48 00:03:03,160 --> 00:03:08,840 Speaker 1: hitting limits in certain cities and innsicitalities on their hospital capacity, 49 00:03:09,120 --> 00:03:13,840 Speaker 1: they will have no choice, but you once again restrict 50 00:03:13,919 --> 00:03:17,600 Speaker 1: economic activity. H. And I think that that you know, 51 00:03:17,720 --> 00:03:19,919 Speaker 1: that's kind of what you're seeing in the numbers. People 52 00:03:20,040 --> 00:03:23,040 Speaker 1: get the joke you can't fight the FED, but they 53 00:03:23,120 --> 00:03:26,800 Speaker 1: also worry that the only things that are going to work, um, 54 00:03:26,840 --> 00:03:29,919 Speaker 1: you know, in an environment where the recovery is very 55 00:03:30,040 --> 00:03:34,200 Speaker 1: lumpy and impeded by the virus. Uh. Maybe you know 56 00:03:34,280 --> 00:03:39,120 Speaker 1: with with those very defensive uh names. Alica Shelley, you 57 00:03:39,200 --> 00:03:42,080 Speaker 1: good morning. You've always been research based, of course, with 58 00:03:42,160 --> 00:03:45,640 Speaker 1: the acclaim of Sanford Bernstein and the wonderful Black Books 59 00:03:45,720 --> 00:03:48,960 Speaker 1: and all that, You've always led with research First, what 60 00:03:49,000 --> 00:03:53,520 Speaker 1: are you learning from the Morgan Stanley cell Side research 61 00:03:53,640 --> 00:03:58,400 Speaker 1: team about this nation and its corporations? What is the 62 00:03:58,600 --> 00:04:03,040 Speaker 1: spirit they're hearing they're feeling going into the summer into 63 00:04:03,080 --> 00:04:05,960 Speaker 1: the mystery of the fall months. Yeah, I think one 64 00:04:05,960 --> 00:04:09,600 Speaker 1: of the the UM you know, most interesting things that 65 00:04:09,640 --> 00:04:14,960 Speaker 1: we're debating is the extent to which UM companies are 66 00:04:15,000 --> 00:04:18,760 Speaker 1: going to resume their capital spending. UH. And so one 67 00:04:18,760 --> 00:04:21,360 Speaker 1: of the reasons that we as a house I think 68 00:04:21,360 --> 00:04:25,719 Speaker 1: have been somewhat more bullish UH than many And where 69 00:04:25,760 --> 00:04:29,240 Speaker 1: why you know, our global economists in chet Naya UM 70 00:04:29,279 --> 00:04:31,960 Speaker 1: you know, have stuck to this more bullish V shaped 71 00:04:32,040 --> 00:04:36,960 Speaker 1: recovery forecast is because we are seeing a pickup in 72 00:04:37,760 --> 00:04:41,200 Speaker 1: capital spending intentions. And that UM was something that I 73 00:04:41,240 --> 00:04:44,719 Speaker 1: think earlier in the year was much more hotly debated. 74 00:04:45,120 --> 00:04:48,640 Speaker 1: Now a lot of the capital spending does UM you know, 75 00:04:48,720 --> 00:04:52,440 Speaker 1: seem to be focused on technology and the cloud and 76 00:04:52,480 --> 00:04:56,480 Speaker 1: you know, digital present UM. But UM you know, that's 77 00:04:56,600 --> 00:05:00,160 Speaker 1: that's really I think, UM, you know, where we still 78 00:05:00,160 --> 00:05:04,880 Speaker 1: remain very bullish and constructive UM that that capital spending 79 00:05:05,120 --> 00:05:08,320 Speaker 1: UM you know helps the STEM is Lisa, We're gonna 80 00:05:08,360 --> 00:05:11,600 Speaker 1: be very lucky to have CHATNYA with us tomorrow, your colleague. 81 00:05:12,080 --> 00:05:14,920 Speaker 1: A question coming up from a listener, Cliff Marine at 82 00:05:14,960 --> 00:05:17,600 Speaker 1: mass Mutual, And this really goes to the angst of 83 00:05:17,640 --> 00:05:20,039 Speaker 1: a lot of investors out there. Has the easy money 84 00:05:20,440 --> 00:05:24,279 Speaker 1: been made? Can we just expect lower returns going forward? Well, 85 00:05:24,320 --> 00:05:28,039 Speaker 1: that's certainly our our view. Um. I mean, if if 86 00:05:28,040 --> 00:05:32,599 Speaker 1: you just look at the last decade, um, and we 87 00:05:32,680 --> 00:05:35,400 Speaker 1: talked about this all the time. You know, over the 88 00:05:35,480 --> 00:05:38,520 Speaker 1: last eleven years, the sup from whom you know has 89 00:05:38,640 --> 00:05:42,320 Speaker 1: compounded at close to fifteen percent per year, which two 90 00:05:42,400 --> 00:05:47,200 Speaker 1: times normal. Uh. The corporate credit returns of compounds at 91 00:05:47,279 --> 00:05:50,640 Speaker 1: nine person that's about three times normal um. And so 92 00:05:50,680 --> 00:05:53,440 Speaker 1: if you look at this on it, any of you know, 93 00:05:53,480 --> 00:05:58,359 Speaker 1: set normalized metrics, either normalized earnings or normalized it just 94 00:05:59,120 --> 00:06:02,920 Speaker 1: you know, avery expensive market. So in the in the 95 00:06:02,920 --> 00:06:08,520 Speaker 1: the of a you know, Robert ship type plant work, Um, 96 00:06:08,560 --> 00:06:12,160 Speaker 1: you know, we're looking at returns over the next three 97 00:06:12,240 --> 00:06:14,279 Speaker 1: to five years that there's going to be a lot 98 00:06:14,320 --> 00:06:18,200 Speaker 1: more like four to five percent, not seven or eight percent. 99 00:06:18,279 --> 00:06:21,320 Speaker 1: And a lot of of clients you know, have historically 100 00:06:21,360 --> 00:06:25,080 Speaker 1: expected so um, you know, certainly the fan is throwing 101 00:06:25,520 --> 00:06:29,920 Speaker 1: unbelievable amounts of ammunition at this the the federal government 102 00:06:30,320 --> 00:06:33,560 Speaker 1: is doing its part on fiscal but it's really hard 103 00:06:33,640 --> 00:06:38,000 Speaker 1: to see. Um, you know how financial assets, uh, you know, 104 00:06:38,080 --> 00:06:41,800 Speaker 1: appreciate materially without us really getting into a dangerous bubble 105 00:06:41,920 --> 00:06:44,720 Speaker 1: territory at Lisa shout out of Morgan Stanley. Lisa, always 106 00:06:44,760 --> 00:06:47,080 Speaker 1: appreciate your insight and perspective, and we thank you for 107 00:06:47,080 --> 00:06:49,120 Speaker 1: your time. This morning got best to you and the 108 00:06:49,120 --> 00:06:55,000 Speaker 1: whole of the same erom Morgan Stanley right now a 109 00:06:55,160 --> 00:07:00,720 Speaker 1: really wonderful conversation, conversation on how we're framing our expectations forward. 110 00:07:00,760 --> 00:07:03,800 Speaker 1: Michelle Meyer came to the attention of all of Global 111 00:07:03,839 --> 00:07:08,040 Speaker 1: Wall Street where their financial modeling learned at Boston University. 112 00:07:08,120 --> 00:07:11,679 Speaker 1: She did brilliant work for Bank of America on real estate, 113 00:07:11,760 --> 00:07:14,920 Speaker 1: on the thinking of the underpinnings of the economy. She 114 00:07:15,080 --> 00:07:18,160 Speaker 1: joins us now with Bank of America. Michelle to the 115 00:07:18,200 --> 00:07:22,640 Speaker 1: model's work right now, can you use conventional Michelle Meyer 116 00:07:22,800 --> 00:07:25,200 Speaker 1: economics to look forward or do you have to make 117 00:07:25,240 --> 00:07:28,440 Speaker 1: it up as you go? Um? So, I think what 118 00:07:28,520 --> 00:07:31,120 Speaker 1: we've learned is that right now it's really important to 119 00:07:31,160 --> 00:07:34,840 Speaker 1: do a bottoms up exercise, the bottoms up modeling, right 120 00:07:34,880 --> 00:07:38,160 Speaker 1: because the shock is so sector specific and it's hitting 121 00:07:38,160 --> 00:07:41,000 Speaker 1: the economy in many different ways. So think about it 122 00:07:41,000 --> 00:07:44,200 Speaker 1: for jobs, for example, probably the best way to forecast 123 00:07:44,240 --> 00:07:47,120 Speaker 1: the path forward for the labor marketing Unemplymary, is to 124 00:07:47,200 --> 00:07:50,400 Speaker 1: think carefully about each major sector. How is how are 125 00:07:50,440 --> 00:07:54,960 Speaker 1: retail jobs going to recover, versus construction, versus autos, versus 126 00:07:55,000 --> 00:07:58,480 Speaker 1: leisure on hospitality, and from that you can then kind 127 00:07:58,520 --> 00:08:00,920 Speaker 1: of add up and and think about the big picture. 128 00:08:00,960 --> 00:08:03,840 Speaker 1: But it's really important to look at the economy on 129 00:08:03,880 --> 00:08:06,760 Speaker 1: a center to sector basis. Right now, I agree with 130 00:08:06,800 --> 00:08:09,560 Speaker 1: that in the partition of goods and services, we've seen 131 00:08:09,600 --> 00:08:13,720 Speaker 1: goods disinflation and outright deflation at times. Do you suggest 132 00:08:13,800 --> 00:08:18,360 Speaker 1: we will see service sector disinflation? Look, this is a 133 00:08:18,400 --> 00:08:22,440 Speaker 1: service sector shock, um and and you're right. Typically it's 134 00:08:22,520 --> 00:08:24,800 Speaker 1: good that swings around a lot more. It's goods that 135 00:08:24,840 --> 00:08:27,200 Speaker 1: tend to be the most vulnerable in a recession. But 136 00:08:27,320 --> 00:08:30,160 Speaker 1: consider the consumer basket that we've seen in the past 137 00:08:30,720 --> 00:08:33,160 Speaker 1: a few months since COVID hit. People have been spending 138 00:08:33,200 --> 00:08:36,480 Speaker 1: on durable goods. They've been spending on household appliances, they've 139 00:08:36,520 --> 00:08:38,840 Speaker 1: been spending on autos, they've been spending on housing, and 140 00:08:38,880 --> 00:08:41,640 Speaker 1: they haven't been spending on services, so the big demand 141 00:08:41,640 --> 00:08:44,080 Speaker 1: destruction has been much more on services. Now part of 142 00:08:44,080 --> 00:08:47,160 Speaker 1: that comes back, It already is coming back upon reopening, 143 00:08:47,360 --> 00:08:50,560 Speaker 1: but not fully so. The big oppraise adjustments happened to services. 144 00:08:50,600 --> 00:08:52,960 Speaker 1: I don't think it was the outright deflation for broad 145 00:08:53,000 --> 00:08:56,120 Speaker 1: services because the lodging component, the rental component in there 146 00:08:56,160 --> 00:08:58,679 Speaker 1: is so broad. But we're going to flirt with that, 147 00:08:59,080 --> 00:09:03,320 Speaker 1: and certainly many cadgories will be uh disinflation area and 148 00:09:03,320 --> 00:09:06,000 Speaker 1: and and some will be in deflation territory. Michelle, I'm 149 00:09:06,000 --> 00:09:08,400 Speaker 1: going to steal from your research the three phases to 150 00:09:08,480 --> 00:09:12,200 Speaker 1: all of this, the shutdown, the bounce, the recovery. You've 151 00:09:12,200 --> 00:09:14,720 Speaker 1: talked about that bounce off the trampoline followed by a 152 00:09:14,840 --> 00:09:17,960 Speaker 1: long climb up a rope. What are you learning from 153 00:09:18,000 --> 00:09:20,760 Speaker 1: the bounce in the last month, so, you know, I 154 00:09:20,800 --> 00:09:24,040 Speaker 1: think it's been stronger than maybe we would have anticipated. 155 00:09:24,080 --> 00:09:26,440 Speaker 1: And part of that because the reopening was also earlier, 156 00:09:26,520 --> 00:09:29,880 Speaker 1: So it's it's happened earlier, it's it's been strong. Consumer 157 00:09:29,920 --> 00:09:33,160 Speaker 1: confidence is so so um it picks up pretty meaningfully, 158 00:09:33,160 --> 00:09:36,000 Speaker 1: so people also feel better about the world. There's clearly 159 00:09:36,040 --> 00:09:40,280 Speaker 1: a desire to re engage. That said, we're now starting 160 00:09:40,320 --> 00:09:43,480 Speaker 1: to see very early evidence that things are leveling off, 161 00:09:43,480 --> 00:09:44,880 Speaker 1: whether you look at it in terms of some of 162 00:09:44,920 --> 00:09:48,640 Speaker 1: the high frequency data around consumer spending or small business 163 00:09:48,640 --> 00:09:51,800 Speaker 1: openings from a variety of alternative data sources as well, 164 00:09:52,040 --> 00:09:54,560 Speaker 1: things are starting to kind of peek out, particularly in 165 00:09:54,559 --> 00:09:57,240 Speaker 1: the states that are further along in the reopening process. 166 00:09:57,520 --> 00:09:59,800 Speaker 1: So that tells us that next phase, and thank you 167 00:09:59,880 --> 00:10:03,400 Speaker 1: for referencing those three phases, UM, that next phase, the 168 00:10:03,120 --> 00:10:07,280 Speaker 1: the true healing and the recovery phase. UM. We're starting 169 00:10:07,320 --> 00:10:09,480 Speaker 1: to approach that, and and that's going to be a 170 00:10:09,559 --> 00:10:13,520 Speaker 1: much more challenging one in my view. And Michelle, another 171 00:10:13,640 --> 00:10:16,680 Speaker 1: challenging aspect here is the road ahead for housing. So far, 172 00:10:16,679 --> 00:10:19,000 Speaker 1: we've seen amazing resilience, and I know this is one 173 00:10:19,000 --> 00:10:21,920 Speaker 1: of your expertise, is dating back to two thousand, five 174 00:10:22,080 --> 00:10:24,800 Speaker 1: thousand six, and I'm wondering how long this can last 175 00:10:25,120 --> 00:10:28,160 Speaker 1: if we don't see a further resurgence, especially since these 176 00:10:28,160 --> 00:10:33,520 Speaker 1: are really being driven by mortgage rates at all time lows. Yeah, 177 00:10:33,559 --> 00:10:36,000 Speaker 1: you know, I think for housing, clearly, the balance has 178 00:10:36,040 --> 00:10:40,160 Speaker 1: been incredible mortgage purchase applications and eleven year high new 179 00:10:40,200 --> 00:10:43,600 Speaker 1: construction in particular benefiting the most because of the ability 180 00:10:43,880 --> 00:10:46,360 Speaker 1: and the ease of of searching for new construction versus 181 00:10:46,360 --> 00:10:49,240 Speaker 1: existing UM so mortgage rates I think is one factor. 182 00:10:49,280 --> 00:10:52,760 Speaker 1: I think pandemic related relocations is another factor, particularly out 183 00:10:52,800 --> 00:10:54,840 Speaker 1: of urban areas. We've seen a lot of survey evidence 184 00:10:54,840 --> 00:10:57,680 Speaker 1: to that effect. UM and then the demographics in general 185 00:10:57,720 --> 00:11:01,520 Speaker 1: have been also favorable for for housing and this factor continues. 186 00:11:01,840 --> 00:11:03,960 Speaker 1: So no, we won't expect this rate of growth to 187 00:11:04,000 --> 00:11:06,040 Speaker 1: persist for housing. This is this is a this is 188 00:11:06,080 --> 00:11:09,720 Speaker 1: a sharp move up UM given the situation UM, but 189 00:11:09,960 --> 00:11:13,200 Speaker 1: the fundamentals are still pretty UM supportive and if we 190 00:11:13,240 --> 00:11:15,839 Speaker 1: could assume, and I think rightfully so, that interest rates 191 00:11:15,880 --> 00:11:19,000 Speaker 1: are going to remain very low for the medium term, 192 00:11:19,200 --> 00:11:22,880 Speaker 1: housing should continue to be underpinned. Michelle, when you talk 193 00:11:22,920 --> 00:11:26,000 Speaker 1: about the migration out of urban areas, is it going 194 00:11:26,040 --> 00:11:29,239 Speaker 1: to leave zombie lands and some of the big metropolitan 195 00:11:29,280 --> 00:11:31,880 Speaker 1: areas where there's an incredible amount of commercial real estate 196 00:11:31,880 --> 00:11:34,760 Speaker 1: that won't necessarily get filled up as well as residential 197 00:11:34,800 --> 00:11:37,319 Speaker 1: it's been built up over the past few years. So 198 00:11:37,360 --> 00:11:40,880 Speaker 1: I think there will be some real consequences, of course, 199 00:11:41,080 --> 00:11:45,880 Speaker 1: from these considerable shifts in population and where people want 200 00:11:45,880 --> 00:11:49,400 Speaker 1: to live where people want to work. Um, but remember 201 00:11:49,640 --> 00:11:53,200 Speaker 1: that their short term adjustments in the end, urban centers 202 00:11:53,240 --> 00:11:56,840 Speaker 1: are still vibrant. It's still where you know, the heart 203 00:11:56,880 --> 00:11:59,960 Speaker 1: of businesses tend to lie and and and you know 204 00:12:00,160 --> 00:12:02,440 Speaker 1: the city is particularly to think New York City. They've 205 00:12:02,480 --> 00:12:05,240 Speaker 1: been through these shocks over the years and they do 206 00:12:05,320 --> 00:12:08,280 Speaker 1: bounce back. But I do think in the short term 207 00:12:08,280 --> 00:12:11,240 Speaker 1: we will be seeing a pretty meaningful adjustment. And if 208 00:12:11,240 --> 00:12:13,240 Speaker 1: you think that even just a real estate market in 209 00:12:13,240 --> 00:12:16,160 Speaker 1: in in in some of the cities versus the suburbs, 210 00:12:16,200 --> 00:12:18,360 Speaker 1: you're ready starting to see some of that praise convergence 211 00:12:18,559 --> 00:12:22,600 Speaker 1: even before COVID hit. So the COVID shock just amplifies 212 00:12:22,679 --> 00:12:26,280 Speaker 1: what was already underway in terms of the migration paths. 213 00:12:26,800 --> 00:12:29,000 Speaker 1: Michelle is a real worried that the infection increase of 214 00:12:29,000 --> 00:12:32,439 Speaker 1: the last several weeks in several states, including Texas, is 215 00:12:32,480 --> 00:12:34,880 Speaker 1: going to constrain the reopening process and start to hit 216 00:12:34,920 --> 00:12:37,600 Speaker 1: the data. My worry, just looking at this from an 217 00:12:37,640 --> 00:12:40,800 Speaker 1: economics perspective, is that the sequential improvement is banned to 218 00:12:40,840 --> 00:12:44,080 Speaker 1: continue because places like New York are just starting to reopen, 219 00:12:44,120 --> 00:12:47,200 Speaker 1: those forces will be really powerful. So the africant numbers 220 00:12:47,200 --> 00:12:49,280 Speaker 1: over the next couple of months might still look strong. 221 00:12:49,600 --> 00:12:53,000 Speaker 1: Do you think that could mask some fragility underneath and 222 00:12:53,040 --> 00:12:56,319 Speaker 1: we might miss what is happening in places like Texas, California, 223 00:12:56,400 --> 00:12:59,840 Speaker 1: Florida and elsewhere. So you're absolutely right in that, you know, 224 00:13:00,000 --> 00:13:01,679 Speaker 1: and you think about the aggregate. You have the states 225 00:13:01,720 --> 00:13:04,520 Speaker 1: that are further along in reopening where the viruses are rising. 226 00:13:04,760 --> 00:13:06,839 Speaker 1: Things might be starting to slow there because just the 227 00:13:06,920 --> 00:13:09,439 Speaker 1: length of time post reopening and now they have the 228 00:13:09,520 --> 00:13:13,680 Speaker 1: virus concerns. But that's the offset by New York, fu Jersey, Massachusetts, 229 00:13:13,960 --> 00:13:16,719 Speaker 1: um moving into the reopening process for the along and 230 00:13:16,720 --> 00:13:19,640 Speaker 1: the reopening process. So that's why it's absolutely critical to 231 00:13:19,760 --> 00:13:23,199 Speaker 1: look at high frequency data on a state basis. So 232 00:13:23,240 --> 00:13:25,360 Speaker 1: we do a lot of work where we're trying to 233 00:13:26,040 --> 00:13:29,960 Speaker 1: um pick out the states, you know, kind of bucket 234 00:13:30,000 --> 00:13:33,080 Speaker 1: the states into the degree of reopening and track daily 235 00:13:33,200 --> 00:13:36,720 Speaker 1: weekly data in terms of understanding what economic activity is doing. 236 00:13:36,760 --> 00:13:39,320 Speaker 1: And I think the most important indicator will be if 237 00:13:39,360 --> 00:13:41,560 Speaker 1: the states that are further along in reopening that now 238 00:13:41,600 --> 00:13:44,280 Speaker 1: have viruses on the rise, as you said, Texas, Florida, 239 00:13:44,559 --> 00:13:47,800 Speaker 1: hours out, Arizona, and South Carolina in that bucket, if 240 00:13:47,840 --> 00:13:51,280 Speaker 1: you start to see behavior switch even before there's government 241 00:13:51,360 --> 00:13:55,600 Speaker 1: policies that that demand that right, just from personal preferences. 242 00:13:55,880 --> 00:13:58,440 Speaker 1: I think that will be a very important sign. What 243 00:13:58,480 --> 00:14:00,360 Speaker 1: should we look for in the high Freak can see 244 00:14:00,440 --> 00:14:04,520 Speaker 1: data tomorrow morning at claims Statistics. So we love claims. 245 00:14:04,559 --> 00:14:07,120 Speaker 1: Claims there are a great piece of information, but they 246 00:14:07,120 --> 00:14:09,880 Speaker 1: are flawed and we've learned that, Um, they're flawed in 247 00:14:09,880 --> 00:14:13,360 Speaker 1: part because there's backlog issues presumably in terms of how 248 00:14:13,440 --> 00:14:17,439 Speaker 1: to process these these these indicators. Um, there's all different 249 00:14:17,520 --> 00:14:20,400 Speaker 1: changes to the claims programs in terms of eligibility and 250 00:14:20,400 --> 00:14:23,480 Speaker 1: criteria for receiving claims. So I think you need to 251 00:14:23,480 --> 00:14:25,560 Speaker 1: take them with a grain of salt when you're translating 252 00:14:25,600 --> 00:14:29,440 Speaker 1: those claims numbers into actual hiring, and more important, firing 253 00:14:29,480 --> 00:14:32,600 Speaker 1: really is what you're capturing with it. That said, the 254 00:14:32,840 --> 00:14:37,600 Speaker 1: stickiness that we've seen from claims has been a sign 255 00:14:37,640 --> 00:14:40,200 Speaker 1: of a reason to be concerned because it tells you 256 00:14:40,240 --> 00:14:44,920 Speaker 1: that there's still some firing going on even when we 257 00:14:45,000 --> 00:14:48,360 Speaker 1: know there's hiring from reopening. So for claims tomorrow, we 258 00:14:48,440 --> 00:14:50,640 Speaker 1: do think we're gonna these some models moved down in 259 00:14:50,640 --> 00:14:54,360 Speaker 1: initial jobs claims remaining above a million and continuing your 260 00:14:54,400 --> 00:14:56,520 Speaker 1: job is claims, which is probably really one of the 261 00:14:56,600 --> 00:14:59,200 Speaker 1: more critical indicators when you're trying to to map this 262 00:14:59,280 --> 00:15:01,880 Speaker 1: to an unemployment a rate. Um. You know, I would 263 00:15:01,920 --> 00:15:04,280 Speaker 1: imagine it comes down a bit, but I don't think 264 00:15:04,360 --> 00:15:07,520 Speaker 1: we should expect these dramatic falls right now in claims. 265 00:15:07,680 --> 00:15:11,160 Speaker 1: Certainly the data hasn't shown that. Michelle, my Bank for America, Michelle, 266 00:15:11,320 --> 00:15:14,040 Speaker 1: always enjoy hearing from you and the whole of the team. 267 00:15:14,080 --> 00:15:20,360 Speaker 1: My best to even yours. Michelle off by the yield 268 00:15:20,400 --> 00:15:23,280 Speaker 1: differentials and of course the flow differentials, and that's something 269 00:15:23,320 --> 00:15:26,800 Speaker 1: show have joll News knows well. A credit suites originally 270 00:15:26,840 --> 00:15:30,520 Speaker 1: after Singapore Desk and out of the London School of Economics, 271 00:15:30,560 --> 00:15:33,320 Speaker 1: grind shall have good morning to you. What is the 272 00:15:33,320 --> 00:15:37,280 Speaker 1: credit suite call on the US dollar morning. We are 273 00:15:37,320 --> 00:15:40,800 Speaker 1: looking for a weekly dollar linked to some of the 274 00:15:40,800 --> 00:15:44,320 Speaker 1: points you've already made. Firstly, we do have a situation 275 00:15:44,320 --> 00:15:47,280 Speaker 1: where the stud is still buying in effect around eight 276 00:15:47,400 --> 00:15:51,280 Speaker 1: billion dollars a month of treasuries UH. And the banner 277 00:15:51,320 --> 00:15:56,520 Speaker 1: ship expansion is conclete is continuing with maybe slightly slower 278 00:15:56,560 --> 00:15:58,440 Speaker 1: than the peak levels that we saw, but still by 279 00:15:58,480 --> 00:16:02,320 Speaker 1: any historical standard at a fast pace. You also have 280 00:16:02,440 --> 00:16:05,720 Speaker 1: still took of yield cuve control rate stressors. For example, 281 00:16:05,800 --> 00:16:09,080 Speaker 1: Things to Market is still parting around a chance of 282 00:16:09,160 --> 00:16:12,120 Speaker 1: yield cuve control being introduced in the US within the 283 00:16:12,160 --> 00:16:14,880 Speaker 1: next three months um some field that the FAT has 284 00:16:14,880 --> 00:16:17,320 Speaker 1: already decided to do that, and it's the question of 285 00:16:17,360 --> 00:16:20,720 Speaker 1: working out implementation to these factors together with very low 286 00:16:20,760 --> 00:16:23,720 Speaker 1: nominal rates. We talked about real rates, but nominal rates 287 00:16:23,720 --> 00:16:27,040 Speaker 1: are also very low obviously, and and so yield differentials 288 00:16:27,080 --> 00:16:29,760 Speaker 1: even the nominal terms and did not preclude being short 289 00:16:29,800 --> 00:16:33,360 Speaker 1: dollars these days, unlike the last few years. And in folks, 290 00:16:33,440 --> 00:16:36,200 Speaker 1: for those of you on our simulkas this is really important. 291 00:16:36,240 --> 00:16:39,800 Speaker 1: How we folded our conversation of yesterday with James Bullard 292 00:16:39,960 --> 00:16:42,720 Speaker 1: over to the foreign exchange realities of Shahab. John, the 293 00:16:42,800 --> 00:16:46,720 Speaker 1: news and yield curve control Shahab, do you just assume 294 00:16:46,800 --> 00:16:50,560 Speaker 1: that means lower and longer at the zero bound, And 295 00:16:50,560 --> 00:16:54,680 Speaker 1: as John Farrell mentions, the interst rate market must adapt 296 00:16:54,680 --> 00:16:57,960 Speaker 1: to that, and that's expressed in your world of foreign exchange. 297 00:16:58,720 --> 00:17:00,920 Speaker 1: I think that's right. I think in our world of 298 00:17:01,000 --> 00:17:04,040 Speaker 1: fign exchange, you know clearly real yields do matter. In 299 00:17:04,080 --> 00:17:07,360 Speaker 1: the long run, but in the very short term nominal 300 00:17:07,359 --> 00:17:10,360 Speaker 1: reds matter too. That's that's basically the real cost world, 301 00:17:10,359 --> 00:17:14,080 Speaker 1: the cost of carrier that you pay for being long 302 00:17:14,200 --> 00:17:17,040 Speaker 1: or short currency. And at this point in time, unlike 303 00:17:17,160 --> 00:17:20,720 Speaker 1: recent years, the dollar in nominal terms, does not offer 304 00:17:20,880 --> 00:17:24,600 Speaker 1: any significant yield pick up, and yield can control would 305 00:17:24,640 --> 00:17:27,960 Speaker 1: ensure that that would be the case going forward for 306 00:17:28,000 --> 00:17:30,520 Speaker 1: a long time as well. So all of a sudden, 307 00:17:30,600 --> 00:17:33,080 Speaker 1: currencies like the euro or the yen or the Swiss 308 00:17:33,080 --> 00:17:38,359 Speaker 1: franc that have some positive characteristics from a fiscal perspective 309 00:17:38,440 --> 00:17:41,359 Speaker 1: relative to the US or from a current account perspective, 310 00:17:41,760 --> 00:17:43,560 Speaker 1: they don't look so bad all of a sudden, because 311 00:17:43,600 --> 00:17:49,080 Speaker 1: now they don't have a yield negative yield differential relatives 312 00:17:49,080 --> 00:17:52,280 Speaker 1: to the US dollar, So owning them becomes much more attractive. 313 00:17:52,359 --> 00:17:54,080 Speaker 1: And I think that's that's the state of play that 314 00:17:54,080 --> 00:17:57,840 Speaker 1: we're in right Now's your heart, What does yield curve 315 00:17:57,880 --> 00:18:00,280 Speaker 1: control mean to you? When you say you were spect 316 00:18:00,280 --> 00:18:03,280 Speaker 1: to see it, what are you expecting to see? Well, 317 00:18:03,640 --> 00:18:06,360 Speaker 1: we believe if it's going to be introduced, it's more 318 00:18:06,440 --> 00:18:09,720 Speaker 1: likely to be um a bit like the Australian case, 319 00:18:09,760 --> 00:18:11,960 Speaker 1: for example, in the three to five the three year 320 00:18:12,000 --> 00:18:14,280 Speaker 1: ten o or maybe up to the five year tenner um, 321 00:18:14,760 --> 00:18:18,879 Speaker 1: where the fall would effectively signal to the market that 322 00:18:19,000 --> 00:18:21,840 Speaker 1: is not going to let yields move above a certain level, 323 00:18:22,600 --> 00:18:26,120 Speaker 1: a certain very low level up to that point in time. Now, 324 00:18:27,160 --> 00:18:29,360 Speaker 1: in other countries, for example, in Japan, you have yeld 325 00:18:29,400 --> 00:18:31,480 Speaker 1: cup control all the way out to ten years. Now, 326 00:18:31,520 --> 00:18:35,119 Speaker 1: you probably don't need to move into that space quite 327 00:18:35,440 --> 00:18:39,159 Speaker 1: quite yet. We'll see what happens with inflation expectations. But 328 00:18:39,440 --> 00:18:42,840 Speaker 1: given the inflation expectations are going up already in the US, 329 00:18:42,960 --> 00:18:45,440 Speaker 1: presumably you don't need to go that far up be curse. 330 00:18:45,920 --> 00:18:48,159 Speaker 1: But but even in the three year tenor for example, 331 00:18:48,240 --> 00:18:50,840 Speaker 1: it's still a major innovation for the US to move 332 00:18:50,880 --> 00:18:53,399 Speaker 1: to yueld cup control um. And it's a it's a 333 00:18:53,400 --> 00:18:56,159 Speaker 1: new challenge for the dollar. And the problem here, of 334 00:18:56,160 --> 00:18:58,520 Speaker 1: course of the dollar as well as nobody really considers 335 00:18:58,560 --> 00:19:01,879 Speaker 1: it to be a cheap currency. If anything, most evaluation 336 00:19:01,920 --> 00:19:04,200 Speaker 1: models would probably have it at the at the expensive 337 00:19:04,320 --> 00:19:08,600 Speaker 1: end of any long term valuation level, particularlygainst the likes 338 00:19:08,600 --> 00:19:10,520 Speaker 1: of the yen and the euro. So it makes the 339 00:19:10,560 --> 00:19:13,080 Speaker 1: trade easier to be short dollars when you know that 340 00:19:13,200 --> 00:19:17,680 Speaker 1: it's not even seen as cheap by anybody well sharp 341 00:19:17,800 --> 00:19:19,680 Speaker 1: looking at where the treasuries are right now out to 342 00:19:19,720 --> 00:19:22,080 Speaker 1: the belly the curve, We're already there for the Fed, 343 00:19:22,119 --> 00:19:24,280 Speaker 1: aren't we At thirty three basis points on a five 344 00:19:24,359 --> 00:19:26,359 Speaker 1: year just outside of the range on the FED funds rate. 345 00:19:26,400 --> 00:19:28,560 Speaker 1: And I'm just trying to work out what difference yield 346 00:19:28,560 --> 00:19:31,520 Speaker 1: curve control is actually going to make. Who is the 347 00:19:31,640 --> 00:19:35,159 Speaker 1: twenty basis points? How much lower can they go? Well, 348 00:19:35,280 --> 00:19:37,760 Speaker 1: that's that's true, And as I said, I think the 349 00:19:37,840 --> 00:19:41,760 Speaker 1: market is already a long way towards pricing in yield 350 00:19:41,760 --> 00:19:45,560 Speaker 1: cup control being introduced just as recently, so as soon 351 00:19:45,600 --> 00:19:48,560 Speaker 1: as the next three months. So um, it's definitely something 352 00:19:48,600 --> 00:19:51,239 Speaker 1: that's in the consciousness of the market already. But the 353 00:19:51,240 --> 00:19:52,600 Speaker 1: fact is, when you look at the dollar from a 354 00:19:52,680 --> 00:19:57,479 Speaker 1: longer term perspective, it's not simply the surprise element of 355 00:19:57,560 --> 00:20:00,000 Speaker 1: more yield cup control and more aggresive yield of control 356 00:20:00,080 --> 00:20:03,880 Speaker 1: that could take it lower. Is the especially adding this 357 00:20:04,040 --> 00:20:07,960 Speaker 1: to an already difficult picture for the dollar. For example, 358 00:20:08,000 --> 00:20:10,080 Speaker 1: when you look at it from the perspective evaluation, as 359 00:20:10,080 --> 00:20:12,240 Speaker 1: I mentioned, it wasn't cheap when you look at it 360 00:20:12,240 --> 00:20:15,400 Speaker 1: in terms of things like the US is likely fiscal 361 00:20:15,400 --> 00:20:19,280 Speaker 1: trajectory or current account trajectory. Those aren't looking good. Um. 362 00:20:19,600 --> 00:20:23,040 Speaker 1: Then you look at political risk, for example, the possibility 363 00:20:23,280 --> 00:20:27,199 Speaker 1: of unrest around the election in November of the presidential election, 364 00:20:27,800 --> 00:20:31,040 Speaker 1: but also congressional elections, all of these it's it's the 365 00:20:31,040 --> 00:20:34,320 Speaker 1: whole picture put together that makes the dollar look difficult 366 00:20:34,400 --> 00:20:36,159 Speaker 1: right now. And the other thing, of course, to notice 367 00:20:36,240 --> 00:20:38,560 Speaker 1: that in the rest of the world you actually have 368 00:20:38,640 --> 00:20:41,600 Speaker 1: some positive developments going on, particularly in the case of 369 00:20:41,600 --> 00:20:45,240 Speaker 1: the Euro where um, finally you have a move being 370 00:20:45,240 --> 00:20:50,280 Speaker 1: made that that seems tangible towards a form of fiscal 371 00:20:50,640 --> 00:20:53,439 Speaker 1: risk commutualization UM. And that's in the shape of the 372 00:20:53,440 --> 00:20:56,680 Speaker 1: European Recovery Fund. We'll find out more about this next 373 00:20:56,720 --> 00:20:59,720 Speaker 1: month when EU leaders meet to discuss it properly. But 374 00:21:00,320 --> 00:21:03,560 Speaker 1: if that comes through, then you do have a major, 375 00:21:04,359 --> 00:21:07,679 Speaker 1: maybe a multi year innovation. UM. That's that's going to 376 00:21:07,720 --> 00:21:10,400 Speaker 1: be Euro positive exactly at the time as the dollar 377 00:21:10,520 --> 00:21:13,480 Speaker 1: is facing these problems. And it's these kinds of divergences 378 00:21:13,560 --> 00:21:16,000 Speaker 1: that tend to lead to effects trends, and if these 379 00:21:16,000 --> 00:21:18,320 Speaker 1: come through together, that's the kind of thing that would 380 00:21:18,320 --> 00:21:21,040 Speaker 1: make for example, you're a dollar look a likely candidate 381 00:21:21,080 --> 00:21:26,160 Speaker 1: to go back up above one twenty within this year. Wow, 382 00:21:26,200 --> 00:21:28,840 Speaker 1: that's a big call. I'm wondering that's your highest conviction 383 00:21:28,880 --> 00:21:30,960 Speaker 1: calls that the Euro will strength and versus the dollar 384 00:21:31,040 --> 00:21:33,879 Speaker 1: this year. What about emerging market currencies? Is this just 385 00:21:33,920 --> 00:21:36,240 Speaker 1: a broad risk on trend for the rest of the 386 00:21:36,280 --> 00:21:41,640 Speaker 1: world versus the US so I think generally speaking, when 387 00:21:41,880 --> 00:21:45,439 Speaker 1: the Euro is going up, it tends to act as 388 00:21:45,440 --> 00:21:49,640 Speaker 1: a tail wind for for emerging markets as well relative 389 00:21:49,680 --> 00:21:52,639 Speaker 1: to the US dollar. Of course, one issue now with 390 00:21:52,720 --> 00:21:55,639 Speaker 1: emerging markets is that interest rates have come down a 391 00:21:55,640 --> 00:22:01,160 Speaker 1: lot in those countries as well, so the risk premium, uh, 392 00:22:01,240 --> 00:22:03,199 Speaker 1: what you get paid for that is much less than 393 00:22:03,200 --> 00:22:05,280 Speaker 1: it used to be, So that's that's something to consider. 394 00:22:05,880 --> 00:22:10,359 Speaker 1: The Secondly, there are regional differences to consider. So, for example, 395 00:22:10,400 --> 00:22:13,560 Speaker 1: in Latin America right now, there are countries like Chile 396 00:22:13,960 --> 00:22:17,399 Speaker 1: and Brazils that have been heavily affected by by the 397 00:22:17,440 --> 00:22:21,520 Speaker 1: pandemic and continue to be, so we probably would shy 398 00:22:21,560 --> 00:22:24,560 Speaker 1: away of buying those currencies at this point in time. 399 00:22:24,960 --> 00:22:27,240 Speaker 1: Um In fact, we like being short the Chilean pesso 400 00:22:27,480 --> 00:22:31,000 Speaker 1: and the Brazilian rail for choice. But there's other currencies 401 00:22:31,080 --> 00:22:34,040 Speaker 1: in the emerging market space where some of these risks 402 00:22:34,040 --> 00:22:39,440 Speaker 1: are slightly less immediate, and maybe the fiscal positions coming 403 00:22:39,480 --> 00:22:42,919 Speaker 1: into the crisis were more robust. Um, I'm thinking of 404 00:22:42,960 --> 00:22:46,800 Speaker 1: things like the Korean one, the Indonesian repair, whether Russian roubles. 405 00:22:46,800 --> 00:22:50,439 Speaker 1: So those types of currencies do still look to us 406 00:22:50,480 --> 00:22:52,320 Speaker 1: like they could be winners in a world where the 407 00:22:52,359 --> 00:22:56,920 Speaker 1: dollar is falling against the era. You have always great 408 00:22:56,960 --> 00:22:59,120 Speaker 1: to get thoughts, send out the best to detainment credis way. 409 00:22:59,200 --> 00:23:01,800 Speaker 1: You have jil and knows on this fex market, looking 410 00:23:01,840 --> 00:23:03,840 Speaker 1: for your dollar to get out to one twenty before 411 00:23:03,920 --> 00:23:10,399 Speaker 1: year and right now, Henrietta trades with us with Beta 412 00:23:10,480 --> 00:23:13,280 Speaker 1: partners as we look to Washington and policy. Just a 413 00:23:13,400 --> 00:23:17,240 Speaker 1: magnificent career with actual legislative work on the hill, in 414 00:23:17,280 --> 00:23:20,479 Speaker 1: a course with Marty's y years ago. Uh, Henrietta, I'm 415 00:23:20,480 --> 00:23:22,719 Speaker 1: wonderful to have you with us. I've got a dumb question, 416 00:23:22,800 --> 00:23:26,840 Speaker 1: but an obvious question. How do the people you follow, 417 00:23:27,560 --> 00:23:32,080 Speaker 1: how do they change in the summer before a big election. 418 00:23:32,640 --> 00:23:36,800 Speaker 1: What's the behavior that adapts and changes when the heat 419 00:23:36,960 --> 00:23:40,440 Speaker 1: is on? Well, Tommy never asked a dumb question. Thank 420 00:23:40,480 --> 00:23:44,320 Speaker 1: you so much. Um, I feel like our clients have 421 00:23:44,440 --> 00:23:46,000 Speaker 1: been with us first so long that they start to 422 00:23:46,040 --> 00:23:49,520 Speaker 1: ask the really good questions early. So they're already skipping 423 00:23:49,560 --> 00:23:52,359 Speaker 1: ahead past the election onto you know, what does tax 424 00:23:52,440 --> 00:23:56,080 Speaker 1: policy look like under Abiden administration? What can we expect 425 00:23:56,200 --> 00:24:00,560 Speaker 1: from further U S EU tensions? Where are we on China? Uh? Uh? 426 00:24:00,720 --> 00:24:05,960 Speaker 1: They are already into you know, November four who whoa 427 00:24:06,800 --> 00:24:09,560 Speaker 1: wait a minute, are they assuming the election of the 428 00:24:09,720 --> 00:24:13,159 Speaker 1: vice president? Um? I think that's the base case for 429 00:24:13,240 --> 00:24:14,960 Speaker 1: a lot of folks. I think that's what the math 430 00:24:15,119 --> 00:24:18,600 Speaker 1: tells you. Um. That's certainly what we see from everything 431 00:24:19,480 --> 00:24:22,520 Speaker 1: since the two thousand and sixteen elections, the various mid terms, 432 00:24:22,920 --> 00:24:25,720 Speaker 1: specifically proven by Super Tuesday. We look a lot at 433 00:24:25,760 --> 00:24:28,440 Speaker 1: the generic polling data, which suggests that Democrats have a 434 00:24:28,560 --> 00:24:32,120 Speaker 1: lead just in sheer voter turnout of plus ten UM. 435 00:24:32,200 --> 00:24:34,920 Speaker 1: That suggests a wave that is on far with two 436 00:24:35,000 --> 00:24:38,399 Speaker 1: thousand and eight. And that's literally just the math. So UM, 437 00:24:38,560 --> 00:24:41,399 Speaker 1: I think that for investors and our clients who have 438 00:24:41,480 --> 00:24:43,639 Speaker 1: been through so many elections now and follow the mid 439 00:24:43,760 --> 00:24:47,000 Speaker 1: terms very closely, understand that the House senator sometimes more 440 00:24:47,080 --> 00:24:49,160 Speaker 1: important than who gets elected to the White House. That's 441 00:24:49,160 --> 00:24:52,320 Speaker 1: where they're prioritizing, So we do a lot of conversations 442 00:24:52,359 --> 00:24:55,680 Speaker 1: around what does reconciliation instructions look like, where can the 443 00:24:55,720 --> 00:24:58,679 Speaker 1: corporate tax rate go? Um, What are we looking at 444 00:24:58,760 --> 00:25:01,159 Speaker 1: on infrastructure? What are the prior or two priorities with 445 00:25:01,280 --> 00:25:05,320 Speaker 1: deficit and spending, um. So they are very much preparing 446 00:25:05,440 --> 00:25:09,080 Speaker 1: for that, which I think is very appropriate. Henrietta, six 447 00:25:09,119 --> 00:25:11,680 Speaker 1: months ago, when President Trump looked like he might be 448 00:25:11,800 --> 00:25:14,600 Speaker 1: losing a little bit of ground to the Democratic candidate, 449 00:25:14,720 --> 00:25:18,720 Speaker 1: stock sold off. Now there is little move why um, 450 00:25:19,160 --> 00:25:23,880 Speaker 1: that is interesting. I think there is some confusion around 451 00:25:24,160 --> 00:25:28,040 Speaker 1: obviously coronavirus that gets in the way of that development. 452 00:25:28,119 --> 00:25:30,920 Speaker 1: I would say that six months ago we were still 453 00:25:31,000 --> 00:25:35,320 Speaker 1: dealing with the potential for Bernie Sanders versus Biden. So 454 00:25:35,520 --> 00:25:37,840 Speaker 1: there was actually a huge relief when Biden won the 455 00:25:37,880 --> 00:25:40,040 Speaker 1: Super Tuesday state so it became clear that he was 456 00:25:40,080 --> 00:25:42,200 Speaker 1: going to be the Democratic nominee. Because a lot of 457 00:25:42,280 --> 00:25:45,120 Speaker 1: investors have been very fearful of just the outside chance 458 00:25:45,200 --> 00:25:47,480 Speaker 1: that Bernie Sanders could have been the nominee. So I 459 00:25:47,520 --> 00:25:49,440 Speaker 1: think there's been a lot of flip flopping back and 460 00:25:49,560 --> 00:25:53,280 Speaker 1: forth there um, but a really nuanced view of what 461 00:25:53,480 --> 00:25:56,959 Speaker 1: could happen under a Biden administration is frankly not all 462 00:25:57,040 --> 00:25:59,719 Speaker 1: that much to the downside and a lot to the upside. 463 00:25:59,760 --> 00:26:02,159 Speaker 1: If you're looking for economic stimulus in the market, the 464 00:26:02,280 --> 00:26:04,680 Speaker 1: question is really what's the scale and scope of any 465 00:26:04,720 --> 00:26:06,360 Speaker 1: stimulus going to be. Is it gonna be a two 466 00:26:06,400 --> 00:26:09,440 Speaker 1: trillion dollar infrastructure package or is it gonna be you know, 467 00:26:09,800 --> 00:26:13,200 Speaker 1: diminimus five billion dollar bill um. We air on the 468 00:26:13,240 --> 00:26:16,040 Speaker 1: side of two trillion UM. We use the two thousand 469 00:26:16,240 --> 00:26:20,320 Speaker 1: and nine Biden as a pretty fantastic example. He was 470 00:26:20,440 --> 00:26:24,200 Speaker 1: literally in the White House during a very similar economic environment, 471 00:26:24,480 --> 00:26:28,200 Speaker 1: and uh he deficits spent and passed the A R 472 00:26:28,320 --> 00:26:31,600 Speaker 1: A at the time, which was a huge bill for 473 00:26:31,840 --> 00:26:34,360 Speaker 1: two thousand nine numbers pills in comparison to what we're 474 00:26:34,359 --> 00:26:36,960 Speaker 1: seeing this year. Um. And that's that's really our rumor 475 00:26:37,080 --> 00:26:41,240 Speaker 1: for what we'd expect from Biden, Henrietta. It also speaks 476 00:26:41,280 --> 00:26:44,000 Speaker 1: to the potential stimulus that we may get ahead of 477 00:26:44,040 --> 00:26:46,600 Speaker 1: the election. You wrote in a recent note that if 478 00:26:46,680 --> 00:26:49,639 Speaker 1: it takes longer to get a stimulus package passed, it 479 00:26:49,720 --> 00:26:53,800 Speaker 1: will likely big be bigger. Can you please elaborate on that. Yeah, 480 00:26:53,920 --> 00:26:56,320 Speaker 1: I actually was having a great conversation with a super 481 00:26:56,359 --> 00:26:59,400 Speaker 1: smart guy UM focused on the auto industry and we've 482 00:26:59,480 --> 00:27:02,200 Speaker 1: been working with them. Just understand, you know, hey, where 483 00:27:02,200 --> 00:27:04,200 Speaker 1: are the stimulus bailout is going to come? We saw 484 00:27:04,280 --> 00:27:07,119 Speaker 1: the airlines sailouts and the Cares Act. Are there going 485 00:27:07,160 --> 00:27:09,080 Speaker 1: to be others? You know, there's been rumors of an 486 00:27:09,160 --> 00:27:14,480 Speaker 1: oil bailout or um questions about cruise lines and hotels, etcetera. 487 00:27:14,880 --> 00:27:17,800 Speaker 1: The reality is that there's very it's unlikely that we're 488 00:27:17,800 --> 00:27:21,000 Speaker 1: gonna see bailouts for any specific sectors. Congress still gets 489 00:27:21,040 --> 00:27:25,320 Speaker 1: gunshy around that after the you know, bailouts of the 490 00:27:25,359 --> 00:27:29,720 Speaker 1: financial services space essentially in the Great Recession. So there's 491 00:27:30,119 --> 00:27:35,280 Speaker 1: a version to sector specific bailouts. But right now, if 492 00:27:35,400 --> 00:27:39,960 Speaker 1: you were looking at Republican Senate staff, UM and Senate members, 493 00:27:40,280 --> 00:27:42,639 Speaker 1: there are I would say at least thirteen members who 494 00:27:42,680 --> 00:27:47,280 Speaker 1: are very opposed to meaningful deficit spending in July. They 495 00:27:47,400 --> 00:27:50,679 Speaker 1: are expecting robust June employment numbers. We're going to get 496 00:27:50,720 --> 00:27:52,320 Speaker 1: a roll off of the p p P and the 497 00:27:52,400 --> 00:27:56,000 Speaker 1: eight weeks of employment requirement there, which will make July 498 00:27:56,320 --> 00:28:01,000 Speaker 1: employment numbers shrink meaningfully, is the expectation. So right now, 499 00:28:01,240 --> 00:28:04,120 Speaker 1: the economic figures don't look so bad, and we get 500 00:28:04,200 --> 00:28:07,000 Speaker 1: to numbers. People are expecting them on Capitol Hell to 501 00:28:07,040 --> 00:28:10,440 Speaker 1: be pretty robust. Once we get July numbers in August, 502 00:28:10,760 --> 00:28:13,600 Speaker 1: that sets us up for the legislative debate period in September. 503 00:28:13,920 --> 00:28:16,520 Speaker 1: Things are going to look much worse. If things look 504 00:28:16,640 --> 00:28:18,920 Speaker 1: much worse, then you can get more money gold out. 505 00:28:19,000 --> 00:28:21,760 Speaker 1: It's obviously just two months before the election. You could 506 00:28:21,800 --> 00:28:24,639 Speaker 1: get some concerted efforts from President Trump to say, hey, 507 00:28:24,680 --> 00:28:26,800 Speaker 1: we really need more stimulus, and then they could loosen 508 00:28:26,840 --> 00:28:28,359 Speaker 1: the purse strings a little bit. But for right now, 509 00:28:28,440 --> 00:28:30,240 Speaker 1: they just want to hold on to all their cash 510 00:28:30,320 --> 00:28:32,119 Speaker 1: with sort of a tight fest. And we had a 511 00:28:32,160 --> 00:28:34,400 Speaker 1: fantastic to catch out with you. As always a really 512 00:28:34,400 --> 00:28:37,359 Speaker 1: important discussion one will continue through the next few weeks 513 00:28:37,400 --> 00:28:42,800 Speaker 1: and months as we count you dance in November. Right 514 00:28:42,840 --> 00:28:46,720 Speaker 1: now with our question, the most important interview we could 515 00:28:46,760 --> 00:28:49,239 Speaker 1: do in this fair city of five boroughs of New 516 00:28:49,320 --> 00:28:53,560 Speaker 1: York City, then trying to get our restaurants open for 517 00:28:53,680 --> 00:28:57,040 Speaker 1: the society, the culture, and yes, the food that our 518 00:28:57,120 --> 00:29:01,200 Speaker 1: restaurants bring. It's everything from McDonald us to a bistro 519 00:29:01,640 --> 00:29:04,440 Speaker 1: to this and that. In Daniel Blue is at the 520 00:29:04,920 --> 00:29:08,719 Speaker 1: top of the heap. Not only the many different restaurants 521 00:29:09,120 --> 00:29:13,920 Speaker 1: that he has, including Danielle, but also his management of 522 00:29:14,040 --> 00:29:17,000 Speaker 1: the people, the management of the kitchens in the front 523 00:29:17,120 --> 00:29:19,920 Speaker 1: of the house as well. Daniel Blue joins us this 524 00:29:20,080 --> 00:29:24,160 Speaker 1: morning here on Bloomberg Surveillance. Danielle, what do you need 525 00:29:24,400 --> 00:29:27,920 Speaker 1: right now from Mayor do Blasio, What do you need 526 00:29:28,080 --> 00:29:33,600 Speaker 1: from Governor Cuomo. Of course, we got into phase two 527 00:29:33,800 --> 00:29:39,200 Speaker 1: and I'm opening our west side restaurants Barburu and EP 528 00:29:39,360 --> 00:29:43,160 Speaker 1: three Boloo with a big terras. And of course they 529 00:29:43,200 --> 00:29:46,760 Speaker 1: have been flexible with giving the chance to Restaurctor to 530 00:29:46,840 --> 00:29:50,240 Speaker 1: be able to put tables in the street and open 531 00:29:50,360 --> 00:29:53,400 Speaker 1: their restaurant. But it's not the only solution. I think 532 00:29:53,440 --> 00:29:56,640 Speaker 1: we need the city of Zante, New York to be 533 00:29:56,920 --> 00:30:00,719 Speaker 1: very vigilant and very safe. We need to keep up 534 00:30:00,760 --> 00:30:03,200 Speaker 1: that very safe. Of course, we need to keep up, 535 00:30:03,680 --> 00:30:07,840 Speaker 1: but we need to also continue to support the economy 536 00:30:08,000 --> 00:30:12,400 Speaker 1: better by bringing back more customers. We have done take out, 537 00:30:12,720 --> 00:30:15,400 Speaker 1: and take out has been good with Danielle Burick Kitchen, 538 00:30:15,880 --> 00:30:19,960 Speaker 1: we started uh home delivery and uh you know, we 539 00:30:20,040 --> 00:30:22,400 Speaker 1: have even delivered to the emptoms and all that. But 540 00:30:22,760 --> 00:30:26,680 Speaker 1: I think from from the governor, of course, we are 541 00:30:26,880 --> 00:30:30,440 Speaker 1: gonna need a lot of support, and we are asking 542 00:30:31,760 --> 00:30:35,840 Speaker 1: for the government to really be sensitive to our industry. 543 00:30:36,000 --> 00:30:38,000 Speaker 1: Of course, we need to bring people back to work. 544 00:30:38,640 --> 00:30:41,720 Speaker 1: Is this once in for Danielle, that we do what 545 00:30:41,880 --> 00:30:46,560 Speaker 1: Europe does effortlessly, which is granted its summer, that we 546 00:30:46,640 --> 00:30:50,960 Speaker 1: need to move the restaurants outside, across the sidewalks and 547 00:30:51,080 --> 00:30:55,080 Speaker 1: indeed out into the streets. Do we have to change 548 00:30:55,200 --> 00:30:58,960 Speaker 1: the rules of where the walls are restaurants so you 549 00:30:59,080 --> 00:31:02,440 Speaker 1: can break even And I think, but the summer in 550 00:31:02,520 --> 00:31:04,960 Speaker 1: New York can be so hot then it can be 551 00:31:05,240 --> 00:31:09,719 Speaker 1: very very uncomfortable as well to be outside. And uh, 552 00:31:10,080 --> 00:31:12,920 Speaker 1: we're looking also maybe at Danielle to be able to 553 00:31:13,080 --> 00:31:18,560 Speaker 1: transform the restaurant in something more casual, more summary, more Mediterranean, 554 00:31:18,880 --> 00:31:20,960 Speaker 1: and and do a little pop up for a couple 555 00:31:21,040 --> 00:31:24,360 Speaker 1: of months and take people in a different sort of 556 00:31:24,600 --> 00:31:27,560 Speaker 1: set of mind and set of place with a lot 557 00:31:27,640 --> 00:31:30,960 Speaker 1: of stake, immager And but you know, we have to 558 00:31:31,080 --> 00:31:34,360 Speaker 1: make sure first and foremost then the city of New 559 00:31:34,440 --> 00:31:38,120 Speaker 1: York is safe to be able to reopen inside as well, 560 00:31:38,240 --> 00:31:41,880 Speaker 1: and we need we need to serious didance from the 561 00:31:42,000 --> 00:31:44,960 Speaker 1: city and the States to do that. Chef casual dining 562 00:31:45,120 --> 00:31:48,280 Speaker 1: definitely has a place. Fine dining is dead. That according 563 00:31:48,320 --> 00:31:51,280 Speaker 1: to Danny Meyer of Union Square Hospitality, is that he's 564 00:31:51,360 --> 00:31:53,800 Speaker 1: not going to open his finer dining restaurants until there 565 00:31:53,880 --> 00:31:57,160 Speaker 1: is a vaccine. What's your view on that something of 566 00:31:57,800 --> 00:32:00,760 Speaker 1: fine dining will be dead, but at the fine dining 567 00:32:00,840 --> 00:32:05,400 Speaker 1: will be suffering, and the one who can survive is 568 00:32:05,480 --> 00:32:10,600 Speaker 1: the one who maybe have to do a good negotiation 569 00:32:10,720 --> 00:32:13,320 Speaker 1: with the landload. The landload has to be very important 570 00:32:13,400 --> 00:32:17,000 Speaker 1: to that. But I believe that we uh you know, 571 00:32:17,280 --> 00:32:23,880 Speaker 1: every uh, every fine craft will still exist and continue 572 00:32:23,920 --> 00:32:25,920 Speaker 1: to exist. We have the fact that we have the 573 00:32:25,960 --> 00:32:29,040 Speaker 1: ability to scale down. We have the ability to be 574 00:32:29,120 --> 00:32:34,880 Speaker 1: able to approach customer with something more centraler, more more soulful, 575 00:32:35,040 --> 00:32:38,160 Speaker 1: more cheaper, and I think we're going to try to 576 00:32:38,320 --> 00:32:41,920 Speaker 1: work on all directions with that. I think it's not 577 00:32:42,080 --> 00:32:43,880 Speaker 1: because we have fine dinings and we don't know what 578 00:32:44,000 --> 00:32:47,520 Speaker 1: to cook anything else. And I have proven that with 579 00:32:47,880 --> 00:32:52,640 Speaker 1: also my all all the different restaurants I have, and 580 00:32:53,200 --> 00:32:56,120 Speaker 1: fine dining around the world is not going away. I 581 00:32:56,200 --> 00:33:02,160 Speaker 1: mean Lordon, Sangapore and Paris from everywhere. So I don't 582 00:33:02,200 --> 00:33:05,840 Speaker 1: think we want America to lose this fine dining for sure. Daniel. 583 00:33:05,920 --> 00:33:08,240 Speaker 1: One final question, I want you to speak to all 584 00:33:08,360 --> 00:33:11,320 Speaker 1: of our listeners and viewers right now wondering what's going 585 00:33:11,400 --> 00:33:14,320 Speaker 1: on in the kitchen. How do you maintain a new 586 00:33:14,480 --> 00:33:19,160 Speaker 1: level of cleanliness in the kitchen. Well, we have very 587 00:33:19,480 --> 00:33:23,080 Speaker 1: free gasign just with the little crew we have right 588 00:33:23,120 --> 00:33:27,120 Speaker 1: now for doing our takeout. We take everybody go to 589 00:33:27,480 --> 00:33:31,280 Speaker 1: an exam on a regular basis to be checked everyone 590 00:33:31,680 --> 00:33:37,800 Speaker 1: when they arrive. We we we have tables with of 591 00:33:37,920 --> 00:33:40,640 Speaker 1: course gloves and mask and and we want them to 592 00:33:40,840 --> 00:33:45,040 Speaker 1: challenge everything from where they come from. Outside. We we 593 00:33:45,280 --> 00:33:48,040 Speaker 1: make sure that they have spray also to spray themselves 594 00:33:48,640 --> 00:33:51,760 Speaker 1: they go to change and uh, and then we we 595 00:33:52,120 --> 00:33:55,120 Speaker 1: we respect the fact that we have to wear a 596 00:33:55,240 --> 00:33:59,240 Speaker 1: mask and be protected and be safe. We tried the 597 00:33:59,360 --> 00:34:01,480 Speaker 1: social disc and think of course in the kitchen is 598 00:34:01,600 --> 00:34:05,920 Speaker 1: very important. Right now we're producing about six thousand meals 599 00:34:06,040 --> 00:34:09,200 Speaker 1: every day every week every week to seeking me along 600 00:34:09,239 --> 00:34:12,399 Speaker 1: Wheel downtown and you know it's a lot of work 601 00:34:12,440 --> 00:34:14,680 Speaker 1: and we try to be very careful with that. We're 602 00:34:14,800 --> 00:34:19,799 Speaker 1: really uh, it's so beside the chargeable work the home 603 00:34:20,840 --> 00:34:24,920 Speaker 1: that take out cooking with Daniel bud kitchen is important. 604 00:34:24,960 --> 00:34:29,800 Speaker 1: But we also are giving up next week to open 605 00:34:30,320 --> 00:34:32,200 Speaker 1: even at the end of this week. This weekend we're 606 00:34:32,200 --> 00:34:34,719 Speaker 1: opening on the West Side, so we hope and we're 607 00:34:34,760 --> 00:34:38,160 Speaker 1: gonna learn, but we're gonna make a top skills of course, 608 00:34:38,360 --> 00:34:42,520 Speaker 1: comfortable to its best right in Danielle, as I always say, 609 00:34:42,560 --> 00:34:45,319 Speaker 1: if I own say BMP, Perry Bys have to say 610 00:34:45,400 --> 00:34:47,920 Speaker 1: that I owned shares in it. I have to say, folks. 611 00:34:48,239 --> 00:34:51,040 Speaker 1: At times in the recent years, I've had the oysters 612 00:34:51,200 --> 00:34:56,520 Speaker 1: Rockefeller at one of daniel blues wonderful establishments one too 613 00:34:56,640 --> 00:34:59,640 Speaker 1: many times. Daniel Blue, thank you so much for joining 614 00:34:59,719 --> 00:35:02,360 Speaker 1: us to today. We'll be fascinating to see the restaurants 615 00:35:02,440 --> 00:35:07,520 Speaker 1: open across this nation. Thanks for listening to the Bloomberg 616 00:35:07,560 --> 00:35:13,480 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 617 00:35:13,880 --> 00:35:18,080 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 618 00:35:18,160 --> 00:35:22,360 Speaker 1: Tom Keene before the podcast. You can always catch us worldwide. 619 00:35:22,880 --> 00:35:23,919 Speaker 1: I'm Bloomberg Radio.