Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Leye.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. We
Speaker 1: begin the program this Wednesday with someone who was constructive
Speaker 1: when others were bullish when many were still bearish, and
Speaker 1: name Lisa Shalott of Morgan Stanley Weafth Management. Lisa Shalott,
Speaker 1: fantastic to catch up with you, and I will say
Speaker 1: out front, you have been right over the last couple
Speaker 1: of months, but over the last couple of weeks that
Speaker 1: cyclical rotation has started to fade. There is a defensive
Speaker 1: bias creeping back into this market. What's the message for
Speaker 1: clients this morning? Lisa, Yeah, Look, I think that that
Speaker 1: as you articulated, I think that the concerns over the
Speaker 1: recent spike in cases um is something that investors are
Speaker 1: definitely grappling with. And to your point, we have seen, uh,
Speaker 1: you know, a defensive rotation. Albeit on the one hand,
Speaker 1: uh you know, people sustained by the fuel of the bed.
Speaker 1: But on the other hand, you know, buying things like gold,
Speaker 1: like utilities, uh, like staples, you know, leading the smoke
Speaker 1: it so, UM, you know we have uh, you know,
Speaker 1: articulated that we thought that period um, you know really
Speaker 1: from game through the end of the year was going
Speaker 1: to be a very volatile and trade range bound uh,
Speaker 1: a range bound market, and you know we're we're sticking
Speaker 1: with that. Um. We still think there's opportunities to buy
Speaker 1: those cyclicals for what ultimately happened two. But we understand
Speaker 1: that we're in a very very toppy critical period here. Uh,
Speaker 1: and we're not surprised by this defensive rotation and certainly,
Speaker 1: uh it is validated by that news low the Tom
Speaker 1: talked about the the the pick up um in in
Speaker 1: the virus numbers are staggering in the last week A Lisa,
Speaker 1: compared to what we were a couple of weeks ago,
Speaker 1: you sound relatively more cautious. So I hope that's a
Speaker 1: fair characterization of where you stand. And I just wonder
Speaker 1: what's the epicenter of that term for you. UM, yeah, No,
Speaker 1: it's it's as I said, UM, I think we are
Speaker 1: a little bit more cautious. Look, we're still very uh
Speaker 1: strongly in that range that we've talked about between two hundred.
Speaker 1: But as we look at um, you know, these the
Speaker 1: spike in the COVID nineteen cases. Um, while we don't
Speaker 1: think that there's appetite either human will or political will
Speaker 1: to really go back to both the style of all
Speaker 1: out lockdowns that we saw in March and April. UM,
Speaker 1: these are numbers that are going to cause people, uh,
Speaker 1: you know, local town cities, uh, concern and and stress
Speaker 1: and and again to Tom's point, UM, if you start
Speaker 1: hitting limits in certain cities and innsicitalities on their hospital capacity,
Speaker 1: they will have no choice, but you once again restrict
Speaker 1: economic activity. H. And I think that that you know,
Speaker 1: that's kind of what you're seeing in the numbers. People
Speaker 1: get the joke you can't fight the FED, but they
Speaker 1: also worry that the only things that are going to work, um,
Speaker 1: you know, in an environment where the recovery is very
Speaker 1: lumpy and impeded by the virus. Uh. Maybe you know
Speaker 1: with with those very defensive uh names. Alica Shelley, you
Speaker 1: good morning. You've always been research based, of course, with
Speaker 1: the acclaim of Sanford Bernstein and the wonderful Black Books
Speaker 1: and all that, You've always led with research First, what
Speaker 1: are you learning from the Morgan Stanley cell Side research
Speaker 1: team about this nation and its corporations? What is the
Speaker 1: spirit they're hearing they're feeling going into the summer into
Speaker 1: the mystery of the fall months. Yeah, I think one
Speaker 1: of the the UM you know, most interesting things that
Speaker 1: we're debating is the extent to which UM companies are
Speaker 1: going to resume their capital spending. UH. And so one
Speaker 1: of the reasons that we as a house I think
Speaker 1: have been somewhat more bullish UH than many And where
Speaker 1: why you know, our global economists in chet Naya UM
Speaker 1: you know, have stuck to this more bullish V shaped
Speaker 1: recovery forecast is because we are seeing a pickup in
Speaker 1: capital spending intentions. And that UM was something that I
Speaker 1: think earlier in the year was much more hotly debated.
Speaker 1: Now a lot of the capital spending does UM you know,
Speaker 1: seem to be focused on technology and the cloud and
Speaker 1: you know, digital present UM. But UM you know, that's
Speaker 1: that's really I think, UM, you know, where we still
Speaker 1: remain very bullish and constructive UM that that capital spending
Speaker 1: UM you know helps the STEM is Lisa, We're gonna
Speaker 1: be very lucky to have CHATNYA with us tomorrow, your colleague.
Speaker 1: A question coming up from a listener, Cliff Marine at
Speaker 1: mass Mutual, And this really goes to the angst of
Speaker 1: a lot of investors out there. Has the easy money
Speaker 1: been made? Can we just expect lower returns going forward? Well,
Speaker 1: that's certainly our our view. Um. I mean, if if
Speaker 1: you just look at the last decade, um, and we
Speaker 1: talked about this all the time. You know, over the
Speaker 1: last eleven years, the sup from whom you know has
Speaker 1: compounded at close to fifteen percent per year, which two
Speaker 1: times normal. Uh. The corporate credit returns of compounds at
Speaker 1: nine person that's about three times normal um. And so
Speaker 1: if you look at this on it, any of you know,
Speaker 1: set normalized metrics, either normalized earnings or normalized it just
Speaker 1: you know, avery expensive market. So in the in the
Speaker 1: the of a you know, Robert ship type plant work, Um,
Speaker 1: you know, we're looking at returns over the next three
Speaker 1: to five years that there's going to be a lot
Speaker 1: more like four to five percent, not seven or eight percent.
Speaker 1: And a lot of of clients you know, have historically
Speaker 1: expected so um, you know, certainly the fan is throwing
Speaker 1: unbelievable amounts of ammunition at this the the federal government
Speaker 1: is doing its part on fiscal but it's really hard
Speaker 1: to see. Um, you know how financial assets, uh, you know,
Speaker 1: appreciate materially without us really getting into a dangerous bubble
Speaker 1: territory at Lisa shout out of Morgan Stanley. Lisa, always
Speaker 1: appreciate your insight and perspective, and we thank you for
Speaker 1: your time. This morning got best to you and the
Speaker 1: whole of the same erom Morgan Stanley right now a
Speaker 1: really wonderful conversation, conversation on how we're framing our expectations forward.
Speaker 1: Michelle Meyer came to the attention of all of Global
Speaker 1: Wall Street where their financial modeling learned at Boston University.
Speaker 1: She did brilliant work for Bank of America on real estate,
Speaker 1: on the thinking of the underpinnings of the economy. She
Speaker 1: joins us now with Bank of America. Michelle to the
Speaker 1: model's work right now, can you use conventional Michelle Meyer
Speaker 1: economics to look forward or do you have to make
Speaker 1: it up as you go? Um? So, I think what
Speaker 1: we've learned is that right now it's really important to
Speaker 1: do a bottoms up exercise, the bottoms up modeling, right
Speaker 1: because the shock is so sector specific and it's hitting
Speaker 1: the economy in many different ways. So think about it
Speaker 1: for jobs, for example, probably the best way to forecast
Speaker 1: the path forward for the labor marketing Unemplymary, is to
Speaker 1: think carefully about each major sector. How is how are
Speaker 1: retail jobs going to recover, versus construction, versus autos, versus
Speaker 1: leisure on hospitality, and from that you can then kind
Speaker 1: of add up and and think about the big picture.
Speaker 1: But it's really important to look at the economy on
Speaker 1: a center to sector basis. Right now, I agree with
Speaker 1: that in the partition of goods and services, we've seen
Speaker 1: goods disinflation and outright deflation at times. Do you suggest
Speaker 1: we will see service sector disinflation? Look, this is a
Speaker 1: service sector shock, um and and you're right. Typically it's
Speaker 1: good that swings around a lot more. It's goods that
Speaker 1: tend to be the most vulnerable in a recession. But
Speaker 1: consider the consumer basket that we've seen in the past
Speaker 1: a few months since COVID hit. People have been spending
Speaker 1: on durable goods. They've been spending on household appliances, they've
Speaker 1: been spending on autos, they've been spending on housing, and
Speaker 1: they haven't been spending on services, so the big demand
Speaker 1: destruction has been much more on services. Now part of
Speaker 1: that comes back, It already is coming back upon reopening,
Speaker 1: but not fully so. The big oppraise adjustments happened to services.
Speaker 1: I don't think it was the outright deflation for broad
Speaker 1: services because the lodging component, the rental component in there
Speaker 1: is so broad. But we're going to flirt with that,
Speaker 1: and certainly many cadgories will be uh disinflation area and
Speaker 1: and and some will be in deflation territory. Michelle, I'm
Speaker 1: going to steal from your research the three phases to
Speaker 1: all of this, the shutdown, the bounce, the recovery. You've
Speaker 1: talked about that bounce off the trampoline followed by a
Speaker 1: long climb up a rope. What are you learning from
Speaker 1: the bounce in the last month, so, you know, I
Speaker 1: think it's been stronger than maybe we would have anticipated.
Speaker 1: And part of that because the reopening was also earlier,
Speaker 1: So it's it's happened earlier, it's it's been strong. Consumer
Speaker 1: confidence is so so um it picks up pretty meaningfully,
Speaker 1: so people also feel better about the world. There's clearly
Speaker 1: a desire to re engage. That said, we're now starting
Speaker 1: to see very early evidence that things are leveling off,
Speaker 1: whether you look at it in terms of some of
Speaker 1: the high frequency data around consumer spending or small business
Speaker 1: openings from a variety of alternative data sources as well,
Speaker 1: things are starting to kind of peek out, particularly in
Speaker 1: the states that are further along in the reopening process.
Speaker 1: So that tells us that next phase, and thank you
Speaker 1: for referencing those three phases, UM, that next phase, the
Speaker 1: the true healing and the recovery phase. UM. We're starting
Speaker 1: to approach that, and and that's going to be a
Speaker 1: much more challenging one in my view. And Michelle, another
Speaker 1: challenging aspect here is the road ahead for housing. So far,
Speaker 1: we've seen amazing resilience, and I know this is one
Speaker 1: of your expertise, is dating back to two thousand, five
Speaker 1: thousand six, and I'm wondering how long this can last
Speaker 1: if we don't see a further resurgence, especially since these
Speaker 1: are really being driven by mortgage rates at all time lows. Yeah,
Speaker 1: you know, I think for housing, clearly, the balance has
Speaker 1: been incredible mortgage purchase applications and eleven year high new
Speaker 1: construction in particular benefiting the most because of the ability
Speaker 1: and the ease of of searching for new construction versus
Speaker 1: existing UM so mortgage rates I think is one factor.
Speaker 1: I think pandemic related relocations is another factor, particularly out
Speaker 1: of urban areas. We've seen a lot of survey evidence
Speaker 1: to that effect. UM and then the demographics in general
Speaker 1: have been also favorable for for housing and this factor continues.
Speaker 1: So no, we won't expect this rate of growth to
Speaker 1: persist for housing. This is this is a this is
Speaker 1: a sharp move up UM given the situation UM, but
Speaker 1: the fundamentals are still pretty UM supportive and if we
Speaker 1: could assume, and I think rightfully so, that interest rates
Speaker 1: are going to remain very low for the medium term,
Speaker 1: housing should continue to be underpinned. Michelle, when you talk
Speaker 1: about the migration out of urban areas, is it going
Speaker 1: to leave zombie lands and some of the big metropolitan
Speaker 1: areas where there's an incredible amount of commercial real estate
Speaker 1: that won't necessarily get filled up as well as residential
Speaker 1: it's been built up over the past few years. So
Speaker 1: I think there will be some real consequences, of course,
Speaker 1: from these considerable shifts in population and where people want
Speaker 1: to live where people want to work. Um, but remember
Speaker 1: that their short term adjustments in the end, urban centers
Speaker 1: are still vibrant. It's still where you know, the heart
Speaker 1: of businesses tend to lie and and and you know
Speaker 1: the city is particularly to think New York City. They've
Speaker 1: been through these shocks over the years and they do
Speaker 1: bounce back. But I do think in the short term
Speaker 1: we will be seeing a pretty meaningful adjustment. And if
Speaker 1: you think that even just a real estate market in
Speaker 1: in in in some of the cities versus the suburbs,
Speaker 1: you're ready starting to see some of that praise convergence
Speaker 1: even before COVID hit. So the COVID shock just amplifies
Speaker 1: what was already underway in terms of the migration paths.
Speaker 1: Michelle is a real worried that the infection increase of
Speaker 1: the last several weeks in several states, including Texas, is
Speaker 1: going to constrain the reopening process and start to hit
Speaker 1: the data. My worry, just looking at this from an
Speaker 1: economics perspective, is that the sequential improvement is banned to
Speaker 1: continue because places like New York are just starting to reopen,
Speaker 1: those forces will be really powerful. So the africant numbers
Speaker 1: over the next couple of months might still look strong.
Speaker 1: Do you think that could mask some fragility underneath and
Speaker 1: we might miss what is happening in places like Texas, California,
Speaker 1: Florida and elsewhere. So you're absolutely right in that, you know,
Speaker 1: and you think about the aggregate. You have the states
Speaker 1: that are further along in reopening where the viruses are rising.
Speaker 1: Things might be starting to slow there because just the
Speaker 1: length of time post reopening and now they have the
Speaker 1: virus concerns. But that's the offset by New York, fu Jersey, Massachusetts,
Speaker 1: um moving into the reopening process for the along and
Speaker 1: the reopening process. So that's why it's absolutely critical to
Speaker 1: look at high frequency data on a state basis. So
Speaker 1: we do a lot of work where we're trying to
Speaker 1: um pick out the states, you know, kind of bucket
Speaker 1: the states into the degree of reopening and track daily
Speaker 1: weekly data in terms of understanding what economic activity is doing.
Speaker 1: And I think the most important indicator will be if
Speaker 1: the states that are further along in reopening that now
Speaker 1: have viruses on the rise, as you said, Texas, Florida,
Speaker 1: hours out, Arizona, and South Carolina in that bucket, if
Speaker 1: you start to see behavior switch even before there's government
Speaker 1: policies that that demand that right, just from personal preferences.
Speaker 1: I think that will be a very important sign. What
Speaker 1: should we look for in the high Freak can see
Speaker 1: data tomorrow morning at claims Statistics. So we love claims.
Speaker 1: Claims there are a great piece of information, but they
Speaker 1: are flawed and we've learned that, Um, they're flawed in
Speaker 1: part because there's backlog issues presumably in terms of how
Speaker 1: to process these these these indicators. Um, there's all different
Speaker 1: changes to the claims programs in terms of eligibility and
Speaker 1: criteria for receiving claims. So I think you need to
Speaker 1: take them with a grain of salt when you're translating
Speaker 1: those claims numbers into actual hiring, and more important, firing
Speaker 1: really is what you're capturing with it. That said, the
Speaker 1: stickiness that we've seen from claims has been a sign
Speaker 1: of a reason to be concerned because it tells you
Speaker 1: that there's still some firing going on even when we
Speaker 1: know there's hiring from reopening. So for claims tomorrow, we
Speaker 1: do think we're gonna these some models moved down in
Speaker 1: initial jobs claims remaining above a million and continuing your
Speaker 1: job is claims, which is probably really one of the
Speaker 1: more critical indicators when you're trying to to map this
Speaker 1: to an unemployment a rate. Um. You know, I would
Speaker 1: imagine it comes down a bit, but I don't think
Speaker 1: we should expect these dramatic falls right now in claims.
Speaker 1: Certainly the data hasn't shown that. Michelle, my Bank for America, Michelle,
Speaker 1: always enjoy hearing from you and the whole of the team.
Speaker 1: My best to even yours. Michelle off by the yield
Speaker 1: differentials and of course the flow differentials, and that's something
Speaker 1: show have joll News knows well. A credit suites originally
Speaker 1: after Singapore Desk and out of the London School of Economics,
Speaker 1: grind shall have good morning to you. What is the
Speaker 1: credit suite call on the US dollar morning. We are
Speaker 1: looking for a weekly dollar linked to some of the
Speaker 1: points you've already made. Firstly, we do have a situation
Speaker 1: where the stud is still buying in effect around eight
Speaker 1: billion dollars a month of treasuries UH. And the banner
Speaker 1: ship expansion is conclete is continuing with maybe slightly slower
Speaker 1: than the peak levels that we saw, but still by
Speaker 1: any historical standard at a fast pace. You also have
Speaker 1: still took of yield cuve control rate stressors. For example,
Speaker 1: Things to Market is still parting around a chance of
Speaker 1: yield cuve control being introduced in the US within the
Speaker 1: next three months um some field that the FAT has
Speaker 1: already decided to do that, and it's the question of
Speaker 1: working out implementation to these factors together with very low
Speaker 1: nominal rates. We talked about real rates, but nominal rates
Speaker 1: are also very low obviously, and and so yield differentials
Speaker 1: even the nominal terms and did not preclude being short
Speaker 1: dollars these days, unlike the last few years. And in folks,
Speaker 1: for those of you on our simulkas this is really important.
Speaker 1: How we folded our conversation of yesterday with James Bullard
Speaker 1: over to the foreign exchange realities of Shahab. John, the
Speaker 1: news and yield curve control Shahab, do you just assume
Speaker 1: that means lower and longer at the zero bound, And
Speaker 1: as John Farrell mentions, the interst rate market must adapt
Speaker 1: to that, and that's expressed in your world of foreign exchange.
Speaker 1: I think that's right. I think in our world of
Speaker 1: fign exchange, you know clearly real yields do matter. In
Speaker 1: the long run, but in the very short term nominal
Speaker 1: reds matter too. That's that's basically the real cost world,
Speaker 1: the cost of carrier that you pay for being long
Speaker 1: or short currency. And at this point in time, unlike
Speaker 1: recent years, the dollar in nominal terms, does not offer
Speaker 1: any significant yield pick up, and yield can control would
Speaker 1: ensure that that would be the case going forward for
Speaker 1: a long time as well. So all of a sudden,
Speaker 1: currencies like the euro or the yen or the Swiss
Speaker 1: franc that have some positive characteristics from a fiscal perspective
Speaker 1: relative to the US or from a current account perspective,
Speaker 1: they don't look so bad all of a sudden, because
Speaker 1: now they don't have a yield negative yield differential relatives
Speaker 1: to the US dollar, So owning them becomes much more attractive.
Speaker 1: And I think that's that's the state of play that
Speaker 1: we're in right Now's your heart, What does yield curve
Speaker 1: control mean to you? When you say you were spect
Speaker 1: to see it, what are you expecting to see? Well,
Speaker 1: we believe if it's going to be introduced, it's more
Speaker 1: likely to be um a bit like the Australian case,
Speaker 1: for example, in the three to five the three year
Speaker 1: ten o or maybe up to the five year tenner um,
Speaker 1: where the fall would effectively signal to the market that
Speaker 1: is not going to let yields move above a certain level,
Speaker 1: a certain very low level up to that point in time. Now,
Speaker 1: in other countries, for example, in Japan, you have yeld
Speaker 1: cup control all the way out to ten years. Now,
Speaker 1: you probably don't need to move into that space quite
Speaker 1: quite yet. We'll see what happens with inflation expectations. But
Speaker 1: given the inflation expectations are going up already in the US,
Speaker 1: presumably you don't need to go that far up be curse.
Speaker 1: But but even in the three year tenor for example,
Speaker 1: it's still a major innovation for the US to move
Speaker 1: to yueld cup control um. And it's a it's a
Speaker 1: new challenge for the dollar. And the problem here, of
Speaker 1: course of the dollar as well as nobody really considers
Speaker 1: it to be a cheap currency. If anything, most evaluation
Speaker 1: models would probably have it at the at the expensive
Speaker 1: end of any long term valuation level, particularlygainst the likes
Speaker 1: of the yen and the euro. So it makes the
Speaker 1: trade easier to be short dollars when you know that
Speaker 1: it's not even seen as cheap by anybody well sharp
Speaker 1: looking at where the treasuries are right now out to
Speaker 1: the belly the curve, We're already there for the Fed,
Speaker 1: aren't we At thirty three basis points on a five
Speaker 1: year just outside of the range on the FED funds rate.
Speaker 1: And I'm just trying to work out what difference yield
Speaker 1: curve control is actually going to make. Who is the
Speaker 1: twenty basis points? How much lower can they go? Well,
Speaker 1: that's that's true, And as I said, I think the
Speaker 1: market is already a long way towards pricing in yield
Speaker 1: cup control being introduced just as recently, so as soon
Speaker 1: as the next three months. So um, it's definitely something
Speaker 1: that's in the consciousness of the market already. But the
Speaker 1: fact is, when you look at the dollar from a
Speaker 1: longer term perspective, it's not simply the surprise element of
Speaker 1: more yield cup control and more aggresive yield of control
Speaker 1: that could take it lower. Is the especially adding this
Speaker 1: to an already difficult picture for the dollar. For example,
Speaker 1: when you look at it from the perspective evaluation, as
Speaker 1: I mentioned, it wasn't cheap when you look at it
Speaker 1: in terms of things like the US is likely fiscal
Speaker 1: trajectory or current account trajectory. Those aren't looking good. Um.
Speaker 1: Then you look at political risk, for example, the possibility
Speaker 1: of unrest around the election in November of the presidential election,
Speaker 1: but also congressional elections, all of these it's it's the
Speaker 1: whole picture put together that makes the dollar look difficult
Speaker 1: right now. And the other thing, of course, to notice
Speaker 1: that in the rest of the world you actually have
Speaker 1: some positive developments going on, particularly in the case of
Speaker 1: the Euro where um, finally you have a move being
Speaker 1: made that that seems tangible towards a form of fiscal
Speaker 1: risk commutualization UM. And that's in the shape of the
Speaker 1: European Recovery Fund. We'll find out more about this next
Speaker 1: month when EU leaders meet to discuss it properly. But
Speaker 1: if that comes through, then you do have a major,
Speaker 1: maybe a multi year innovation. UM. That's that's going to
Speaker 1: be Euro positive exactly at the time as the dollar
Speaker 1: is facing these problems. And it's these kinds of divergences
Speaker 1: that tend to lead to effects trends, and if these
Speaker 1: come through together, that's the kind of thing that would
Speaker 1: make for example, you're a dollar look a likely candidate
Speaker 1: to go back up above one twenty within this year. Wow,
Speaker 1: that's a big call. I'm wondering that's your highest conviction
Speaker 1: calls that the Euro will strength and versus the dollar
Speaker 1: this year. What about emerging market currencies? Is this just
Speaker 1: a broad risk on trend for the rest of the
Speaker 1: world versus the US so I think generally speaking, when
Speaker 1: the Euro is going up, it tends to act as
Speaker 1: a tail wind for for emerging markets as well relative
Speaker 1: to the US dollar. Of course, one issue now with
Speaker 1: emerging markets is that interest rates have come down a
Speaker 1: lot in those countries as well, so the risk premium, uh,
Speaker 1: what you get paid for that is much less than
Speaker 1: it used to be, So that's that's something to consider.
Speaker 1: The Secondly, there are regional differences to consider. So, for example,
Speaker 1: in Latin America right now, there are countries like Chile
Speaker 1: and Brazils that have been heavily affected by by the
Speaker 1: pandemic and continue to be, so we probably would shy
Speaker 1: away of buying those currencies at this point in time.
Speaker 1: Um In fact, we like being short the Chilean pesso
Speaker 1: and the Brazilian rail for choice. But there's other currencies
Speaker 1: in the emerging market space where some of these risks
Speaker 1: are slightly less immediate, and maybe the fiscal positions coming
Speaker 1: into the crisis were more robust. Um, I'm thinking of
Speaker 1: things like the Korean one, the Indonesian repair, whether Russian roubles.
Speaker 1: So those types of currencies do still look to us
Speaker 1: like they could be winners in a world where the
Speaker 1: dollar is falling against the era. You have always great
Speaker 1: to get thoughts, send out the best to detainment credis way.
Speaker 1: You have jil and knows on this fex market, looking
Speaker 1: for your dollar to get out to one twenty before
Speaker 1: year and right now, Henrietta trades with us with Beta
Speaker 1: partners as we look to Washington and policy. Just a
Speaker 1: magnificent career with actual legislative work on the hill, in
Speaker 1: a course with Marty's y years ago. Uh, Henrietta, I'm
Speaker 1: wonderful to have you with us. I've got a dumb question,
Speaker 1: but an obvious question. How do the people you follow,
Speaker 1: how do they change in the summer before a big election.
Speaker 1: What's the behavior that adapts and changes when the heat
Speaker 1: is on? Well, Tommy never asked a dumb question. Thank
Speaker 1: you so much. Um, I feel like our clients have
Speaker 1: been with us first so long that they start to
Speaker 1: ask the really good questions early. So they're already skipping
Speaker 1: ahead past the election onto you know, what does tax
Speaker 1: policy look like under Abiden administration? What can we expect
Speaker 1: from further U S EU tensions? Where are we on China? Uh? Uh?
Speaker 1: They are already into you know, November four who whoa
Speaker 1: wait a minute, are they assuming the election of the
Speaker 1: vice president? Um? I think that's the base case for
Speaker 1: a lot of folks. I think that's what the math
Speaker 1: tells you. Um. That's certainly what we see from everything
Speaker 1: since the two thousand and sixteen elections, the various mid terms,
Speaker 1: specifically proven by Super Tuesday. We look a lot at
Speaker 1: the generic polling data, which suggests that Democrats have a
Speaker 1: lead just in sheer voter turnout of plus ten UM.
Speaker 1: That suggests a wave that is on far with two
Speaker 1: thousand and eight. And that's literally just the math. So UM,
Speaker 1: I think that for investors and our clients who have
Speaker 1: been through so many elections now and follow the mid
Speaker 1: terms very closely, understand that the House senator sometimes more
Speaker 1: important than who gets elected to the White House. That's
Speaker 1: where they're prioritizing, So we do a lot of conversations
Speaker 1: around what does reconciliation instructions look like, where can the
Speaker 1: corporate tax rate go? Um, What are we looking at
Speaker 1: on infrastructure? What are the prior or two priorities with
Speaker 1: deficit and spending, um. So they are very much preparing
Speaker 1: for that, which I think is very appropriate. Henrietta, six
Speaker 1: months ago, when President Trump looked like he might be
Speaker 1: losing a little bit of ground to the Democratic candidate,
Speaker 1: stock sold off. Now there is little move why um,
Speaker 1: that is interesting. I think there is some confusion around
Speaker 1: obviously coronavirus that gets in the way of that development.
Speaker 1: I would say that six months ago we were still
Speaker 1: dealing with the potential for Bernie Sanders versus Biden. So
Speaker 1: there was actually a huge relief when Biden won the
Speaker 1: Super Tuesday state so it became clear that he was
Speaker 1: going to be the Democratic nominee. Because a lot of
Speaker 1: investors have been very fearful of just the outside chance
Speaker 1: that Bernie Sanders could have been the nominee. So I
Speaker 1: think there's been a lot of flip flopping back and
Speaker 1: forth there um, but a really nuanced view of what
Speaker 1: could happen under a Biden administration is frankly not all
Speaker 1: that much to the downside and a lot to the upside.
Speaker 1: If you're looking for economic stimulus in the market, the
Speaker 1: question is really what's the scale and scope of any
Speaker 1: stimulus going to be. Is it gonna be a two
Speaker 1: trillion dollar infrastructure package or is it gonna be you know,
Speaker 1: diminimus five billion dollar bill um. We air on the
Speaker 1: side of two trillion UM. We use the two thousand
Speaker 1: and nine Biden as a pretty fantastic example. He was
Speaker 1: literally in the White House during a very similar economic environment,
Speaker 1: and uh he deficits spent and passed the A R
Speaker 1: A at the time, which was a huge bill for
Speaker 1: two thousand nine numbers pills in comparison to what we're
Speaker 1: seeing this year. Um. And that's that's really our rumor
Speaker 1: for what we'd expect from Biden, Henrietta. It also speaks
Speaker 1: to the potential stimulus that we may get ahead of
Speaker 1: the election. You wrote in a recent note that if
Speaker 1: it takes longer to get a stimulus package passed, it
Speaker 1: will likely big be bigger. Can you please elaborate on that. Yeah,
Speaker 1: I actually was having a great conversation with a super
Speaker 1: smart guy UM focused on the auto industry and we've
Speaker 1: been working with them. Just understand, you know, hey, where
Speaker 1: are the stimulus bailout is going to come? We saw
Speaker 1: the airlines sailouts and the Cares Act. Are there going
Speaker 1: to be others? You know, there's been rumors of an
Speaker 1: oil bailout or um questions about cruise lines and hotels, etcetera.
Speaker 1: The reality is that there's very it's unlikely that we're
Speaker 1: gonna see bailouts for any specific sectors. Congress still gets
Speaker 1: gunshy around that after the you know, bailouts of the
Speaker 1: financial services space essentially in the Great Recession. So there's
Speaker 1: a version to sector specific bailouts. But right now, if
Speaker 1: you were looking at Republican Senate staff, UM and Senate members,
Speaker 1: there are I would say at least thirteen members who
Speaker 1: are very opposed to meaningful deficit spending in July. They
Speaker 1: are expecting robust June employment numbers. We're going to get
Speaker 1: a roll off of the p p P and the
Speaker 1: eight weeks of employment requirement there, which will make July
Speaker 1: employment numbers shrink meaningfully, is the expectation. So right now,
Speaker 1: the economic figures don't look so bad, and we get
Speaker 1: to numbers. People are expecting them on Capitol Hell to
Speaker 1: be pretty robust. Once we get July numbers in August,
Speaker 1: that sets us up for the legislative debate period in September.
Speaker 1: Things are going to look much worse. If things look
Speaker 1: much worse, then you can get more money gold out.
Speaker 1: It's obviously just two months before the election. You could
Speaker 1: get some concerted efforts from President Trump to say, hey,
Speaker 1: we really need more stimulus, and then they could loosen
Speaker 1: the purse strings a little bit. But for right now,
Speaker 1: they just want to hold on to all their cash
Speaker 1: with sort of a tight fest. And we had a
Speaker 1: fantastic to catch out with you. As always a really
Speaker 1: important discussion one will continue through the next few weeks
Speaker 1: and months as we count you dance in November. Right
Speaker 1: now with our question, the most important interview we could
Speaker 1: do in this fair city of five boroughs of New
Speaker 1: York City, then trying to get our restaurants open for
Speaker 1: the society, the culture, and yes, the food that our
Speaker 1: restaurants bring. It's everything from McDonald us to a bistro
Speaker 1: to this and that. In Daniel Blue is at the
Speaker 1: top of the heap. Not only the many different restaurants
Speaker 1: that he has, including Danielle, but also his management of
Speaker 1: the people, the management of the kitchens in the front
Speaker 1: of the house as well. Daniel Blue joins us this
Speaker 1: morning here on Bloomberg Surveillance. Danielle, what do you need
Speaker 1: right now from Mayor do Blasio, What do you need
Speaker 1: from Governor Cuomo. Of course, we got into phase two
Speaker 1: and I'm opening our west side restaurants Barburu and EP
Speaker 1: three Boloo with a big terras. And of course they
Speaker 1: have been flexible with giving the chance to Restaurctor to
Speaker 1: be able to put tables in the street and open
Speaker 1: their restaurant. But it's not the only solution. I think
Speaker 1: we need the city of Zante, New York to be
Speaker 1: very vigilant and very safe. We need to keep up
Speaker 1: that very safe. Of course, we need to keep up,
Speaker 1: but we need to also continue to support the economy
Speaker 1: better by bringing back more customers. We have done take out,
Speaker 1: and take out has been good with Danielle Burick Kitchen,
Speaker 1: we started uh home delivery and uh you know, we
Speaker 1: have even delivered to the emptoms and all that. But
Speaker 1: I think from from the governor, of course, we are
Speaker 1: gonna need a lot of support, and we are asking
Speaker 1: for the government to really be sensitive to our industry.
Speaker 1: Of course, we need to bring people back to work.
Speaker 1: Is this once in for Danielle, that we do what
Speaker 1: Europe does effortlessly, which is granted its summer, that we
Speaker 1: need to move the restaurants outside, across the sidewalks and
Speaker 1: indeed out into the streets. Do we have to change
Speaker 1: the rules of where the walls are restaurants so you
Speaker 1: can break even And I think, but the summer in
Speaker 1: New York can be so hot then it can be
Speaker 1: very very uncomfortable as well to be outside. And uh,
Speaker 1: we're looking also maybe at Danielle to be able to
Speaker 1: transform the restaurant in something more casual, more summary, more Mediterranean,
Speaker 1: and and do a little pop up for a couple
Speaker 1: of months and take people in a different sort of
Speaker 1: set of mind and set of place with a lot
Speaker 1: of stake, immager And but you know, we have to
Speaker 1: make sure first and foremost then the city of New
Speaker 1: York is safe to be able to reopen inside as well,
Speaker 1: and we need we need to serious didance from the
Speaker 1: city and the States to do that. Chef casual dining
Speaker 1: definitely has a place. Fine dining is dead. That according
Speaker 1: to Danny Meyer of Union Square Hospitality, is that he's
Speaker 1: not going to open his finer dining restaurants until there
Speaker 1: is a vaccine. What's your view on that something of
Speaker 1: fine dining will be dead, but at the fine dining
Speaker 1: will be suffering, and the one who can survive is
Speaker 1: the one who maybe have to do a good negotiation
Speaker 1: with the landload. The landload has to be very important
Speaker 1: to that. But I believe that we uh you know,
Speaker 1: every uh, every fine craft will still exist and continue
Speaker 1: to exist. We have the fact that we have the
Speaker 1: ability to scale down. We have the ability to be
Speaker 1: able to approach customer with something more centraler, more more soulful,
Speaker 1: more cheaper, and I think we're going to try to
Speaker 1: work on all directions with that. I think it's not
Speaker 1: because we have fine dinings and we don't know what
Speaker 1: to cook anything else. And I have proven that with
Speaker 1: also my all all the different restaurants I have, and
Speaker 1: fine dining around the world is not going away. I
Speaker 1: mean Lordon, Sangapore and Paris from everywhere. So I don't
Speaker 1: think we want America to lose this fine dining for sure. Daniel.
Speaker 1: One final question, I want you to speak to all
Speaker 1: of our listeners and viewers right now wondering what's going
Speaker 1: on in the kitchen. How do you maintain a new
Speaker 1: level of cleanliness in the kitchen. Well, we have very
Speaker 1: free gasign just with the little crew we have right
Speaker 1: now for doing our takeout. We take everybody go to
Speaker 1: an exam on a regular basis to be checked everyone
Speaker 1: when they arrive. We we we have tables with of
Speaker 1: course gloves and mask and and we want them to
Speaker 1: challenge everything from where they come from. Outside. We we
Speaker 1: make sure that they have spray also to spray themselves
Speaker 1: they go to change and uh, and then we we
Speaker 1: we respect the fact that we have to wear a
Speaker 1: mask and be protected and be safe. We tried the
Speaker 1: social disc and think of course in the kitchen is
Speaker 1: very important. Right now we're producing about six thousand meals
Speaker 1: every day every week every week to seeking me along
Speaker 1: Wheel downtown and you know it's a lot of work
Speaker 1: and we try to be very careful with that. We're
Speaker 1: really uh, it's so beside the chargeable work the home
Speaker 1: that take out cooking with Daniel bud kitchen is important.
Speaker 1: But we also are giving up next week to open
Speaker 1: even at the end of this week. This weekend we're
Speaker 1: opening on the West Side, so we hope and we're
Speaker 1: gonna learn, but we're gonna make a top skills of course,
Speaker 1: comfortable to its best right in Danielle, as I always say,
Speaker 1: if I own say BMP, Perry Bys have to say
Speaker 1: that I owned shares in it. I have to say, folks.
Speaker 1: At times in the recent years, I've had the oysters
Speaker 1: Rockefeller at one of daniel blues wonderful establishments one too
Speaker 1: many times. Daniel Blue, thank you so much for joining
Speaker 1: us to today. We'll be fascinating to see the restaurants
Speaker 1: open across this nation. Thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.