1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 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 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,639 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. With 5 00:00:27,760 --> 00:00:31,280 Speaker 1: us in London is David folkers Landau of Deutsche Bank, 6 00:00:31,400 --> 00:00:34,320 Speaker 1: not only leading the research team at Deutsche Bank, but 7 00:00:34,360 --> 00:00:38,560 Speaker 1: with his important research over the decades on flows of capital. David, 8 00:00:38,600 --> 00:00:42,000 Speaker 1: you have been clear and straightforward on negative interest rates. 9 00:00:42,080 --> 00:00:45,400 Speaker 1: We just heard Christine Lagarde speak of the lower bound 10 00:00:45,440 --> 00:00:48,479 Speaker 1: that we're at. Give us an update on what negative 11 00:00:48,479 --> 00:00:54,959 Speaker 1: interest rates are doing to continental Europe. Well, firstgot has 12 00:00:55,000 --> 00:00:57,120 Speaker 1: been dealt a bad hand in the sense that she 13 00:00:57,200 --> 00:00:59,800 Speaker 1: stuck with this situation and she inherited, and the question 14 00:00:59,880 --> 00:01:01,840 Speaker 1: is how to get out of it. I believe there 15 00:01:01,920 --> 00:01:05,880 Speaker 1: is a strong consensus at the political level developing that 16 00:01:06,000 --> 00:01:09,839 Speaker 1: negative interest rates are to to quite a large extent, 17 00:01:09,920 --> 00:01:15,560 Speaker 1: responsible for discontent within the broader population for a feeling 18 00:01:15,640 --> 00:01:20,280 Speaker 1: that we're no longer we meaning central banks, and are 19 00:01:20,319 --> 00:01:23,040 Speaker 1: no longer in control of of what's going on of 20 00:01:23,080 --> 00:01:26,319 Speaker 1: monetary policy. Anybody looking saying that I put money in 21 00:01:26,360 --> 00:01:29,199 Speaker 1: my savings account and I lose fifty BIPs, says to himself, 22 00:01:29,240 --> 00:01:31,600 Speaker 1: something is fundamentally wrong here. And when I when I 23 00:01:31,600 --> 00:01:33,840 Speaker 1: talk to my German relatives and my mother said, what 24 00:01:33,920 --> 00:01:36,520 Speaker 1: what are you guys doing? You can't even get this right? 25 00:01:36,560 --> 00:01:38,479 Speaker 1: How can we trust you? So I think this does 26 00:01:38,720 --> 00:01:40,959 Speaker 1: torculate down to that level and then back up to 27 00:01:41,000 --> 00:01:45,040 Speaker 1: the political and creating pressure. So I believe that this 28 00:01:45,360 --> 00:01:49,000 Speaker 1: negative interest rates from here on out not the policy 29 00:01:49,040 --> 00:01:51,240 Speaker 1: tool of choice. The question is how to get out 30 00:01:51,240 --> 00:01:53,000 Speaker 1: of it now. You can't all of a sudden have 31 00:01:53,120 --> 00:01:55,360 Speaker 1: a have a flipper switch and go back to zero. 32 00:01:55,880 --> 00:01:59,160 Speaker 1: But our strong forecast and our sort of what we 33 00:01:59,240 --> 00:02:03,040 Speaker 1: hear from very angles in Vayos segments is that there 34 00:02:03,360 --> 00:02:05,920 Speaker 1: that the searches for a way out rather than thinking 35 00:02:05,960 --> 00:02:08,679 Speaker 1: of it as a positive tool. Same same when you 36 00:02:08,720 --> 00:02:13,160 Speaker 1: look at them. The FEDS review of its monetary policy 37 00:02:13,360 --> 00:02:15,280 Speaker 1: tools and instruments to be going on not for more 38 00:02:15,280 --> 00:02:18,040 Speaker 1: than a year. Again, there is there's a very strong 39 00:02:18,240 --> 00:02:21,720 Speaker 1: dislike for negative interest rates because of the secondary impact 40 00:02:21,800 --> 00:02:24,640 Speaker 1: on the financial sector, on the general feeling in the 41 00:02:24,639 --> 00:02:27,640 Speaker 1: population that something is wrong. So if we have today 42 00:02:27,639 --> 00:02:33,400 Speaker 1: on the Bloomberg an official of MS Miracle's party associating 43 00:02:33,400 --> 00:02:37,240 Speaker 1: the far right in Germany with Nazis. This is loaded language. 44 00:02:37,360 --> 00:02:42,679 Speaker 1: Dr folkers land out. Can you equate this economic experiment, 45 00:02:42,800 --> 00:02:46,480 Speaker 1: even if well intentioned, with the type of GDP and 46 00:02:46,560 --> 00:02:49,960 Speaker 1: economic growth of Europe over to us? You just said 47 00:02:50,080 --> 00:02:54,240 Speaker 1: people have lost their bargain with institutions is personified by 48 00:02:54,320 --> 00:02:58,800 Speaker 1: negative interest rates. If the institution's broken the relationship with 49 00:02:58,919 --> 00:03:03,480 Speaker 1: the people. It's tempting to be attempting to say yes, 50 00:03:03,480 --> 00:03:04,960 Speaker 1: But that wouldn't be quite right. I mean, there are 51 00:03:04,960 --> 00:03:07,840 Speaker 1: many other factors that are involved here. There is a 52 00:03:07,919 --> 00:03:11,080 Speaker 1: general breakdown of the center right in the center left 53 00:03:11,080 --> 00:03:14,639 Speaker 1: dominance of European politics. You see this in Spain with Fox, 54 00:03:14,680 --> 00:03:17,560 Speaker 1: you see this in Italy with the League, and you 55 00:03:17,600 --> 00:03:19,280 Speaker 1: see this in Germany with the a f D. And 56 00:03:19,280 --> 00:03:22,760 Speaker 1: I think I think that there we have a real 57 00:03:22,880 --> 00:03:25,200 Speaker 1: problem in the sense that we have any We have 58 00:03:25,240 --> 00:03:28,359 Speaker 1: economies that are performing reasonably well and nowhere near large 59 00:03:28,400 --> 00:03:32,120 Speaker 1: unemployment numbers, in fact almost full employment. Yet there is 60 00:03:32,160 --> 00:03:35,040 Speaker 1: there's discontent that pushes people away from the center into 61 00:03:35,120 --> 00:03:37,120 Speaker 1: the fringes. And I think this is a This is 62 00:03:37,160 --> 00:03:41,120 Speaker 1: probably the most serious political problem of our generation. There's 63 00:03:41,160 --> 00:03:44,560 Speaker 1: no question that it does in fact policy both macro 64 00:03:44,760 --> 00:03:47,960 Speaker 1: and both monetary and fiscal, and as it should. Indeed, 65 00:03:48,720 --> 00:03:50,920 Speaker 1: this is too important to ignore. So Anglo Marco also 66 00:03:51,000 --> 00:03:53,720 Speaker 1: called her party's decision to align with this far right 67 00:03:53,800 --> 00:03:58,240 Speaker 1: party unforgivable and she quote said it is a bad 68 00:03:58,320 --> 00:04:01,440 Speaker 1: day for democracy. Now she's talking during visit to South Africa. 69 00:04:01,960 --> 00:04:07,640 Speaker 1: Can this be reversed. It's difficult to reverse it by feared, 70 00:04:07,720 --> 00:04:10,040 Speaker 1: but it can be reversed by lots of pressure. Obviously, 71 00:04:10,200 --> 00:04:12,280 Speaker 1: I think to put this in perspective, you have to 72 00:04:12,320 --> 00:04:15,400 Speaker 1: recall this is the first time since the Roma Republic 73 00:04:15,760 --> 00:04:22,920 Speaker 1: that far right, radical far right party helped forming a government. 74 00:04:22,920 --> 00:04:25,480 Speaker 1: They're not in the government, they're just elect the government 75 00:04:25,839 --> 00:04:29,440 Speaker 1: left the state premier. Now that means they're going to 76 00:04:29,520 --> 00:04:31,240 Speaker 1: have not much control over it, but a little bit 77 00:04:31,240 --> 00:04:34,080 Speaker 1: of control. But but it's very symbolic, particularly in Germany, 78 00:04:34,080 --> 00:04:36,720 Speaker 1: and I think it's it's probably underestimated in the international 79 00:04:36,720 --> 00:04:39,040 Speaker 1: process to how important is this for the German psyche. 80 00:04:39,279 --> 00:04:43,680 Speaker 1: So it's definitely an earthquake political event inside Germany, one 81 00:04:43,720 --> 00:04:46,720 Speaker 1: that has to be taken seriously, but will change policies. Right, 82 00:04:46,760 --> 00:04:49,120 Speaker 1: So you look at this wrangling marcle you do you know, 83 00:04:49,279 --> 00:04:52,560 Speaker 1: without going into whether this changes the head of the CDU, 84 00:04:52,720 --> 00:04:55,919 Speaker 1: which it could, does it change how you speak to 85 00:04:55,920 --> 00:04:58,920 Speaker 1: your citizens and economic policies in place. There's no doubt 86 00:04:59,000 --> 00:05:01,279 Speaker 1: that it will. There's no doubt that it will lead 87 00:05:01,320 --> 00:05:05,440 Speaker 1: to a soul searching of why haven't we brought the 88 00:05:05,440 --> 00:05:08,720 Speaker 1: rest of the country with us into the into this 89 00:05:08,839 --> 00:05:11,200 Speaker 1: economic boom that it almost this and why do we 90 00:05:11,240 --> 00:05:14,080 Speaker 1: have this discontent? And this will have an impact on 91 00:05:14,400 --> 00:05:17,599 Speaker 1: fiscal policy within Germany, no question. There will be more 92 00:05:18,360 --> 00:05:23,080 Speaker 1: inclination to spend on infrastructure, and it also may on 93 00:05:23,080 --> 00:05:24,920 Speaker 1: the European side or there it's a little more difficult 94 00:05:24,960 --> 00:05:27,279 Speaker 1: to implement that. But so from that point of view, 95 00:05:27,360 --> 00:05:29,120 Speaker 1: and the same of the negative interest rates, That's why 96 00:05:29,120 --> 00:05:31,840 Speaker 1: I think negative interest rates are thing of the past. 97 00:05:31,839 --> 00:05:33,960 Speaker 1: We try to get out of it. Fiscal policy will 98 00:05:34,000 --> 00:05:38,320 Speaker 1: be expansionary and there this is going to impact policy, yes, 99 00:05:38,360 --> 00:05:43,000 Speaker 1: but but but more than that, um it is what 100 00:05:43,120 --> 00:05:47,680 Speaker 1: it has done. It has legitimized the the role of 101 00:05:48,839 --> 00:05:53,800 Speaker 1: really far right party in German politics and and and 102 00:05:53,800 --> 00:05:56,479 Speaker 1: it's going to have international repercussions in terms of reputation 103 00:05:56,520 --> 00:05:59,160 Speaker 1: and so so I think the quicker we can reverse 104 00:05:59,360 --> 00:06:02,000 Speaker 1: is the better, but you can't just MECCA does not 105 00:06:02,120 --> 00:06:04,560 Speaker 1: have the administrated power to reverse it, not not as 106 00:06:04,600 --> 00:06:06,839 Speaker 1: a KK This is something that has to get done 107 00:06:06,839 --> 00:06:11,520 Speaker 1: by lots of pressureent and and I presume that the 108 00:06:11,600 --> 00:06:14,800 Speaker 1: three parties coordinated this before and they thought about all 109 00:06:14,800 --> 00:06:18,159 Speaker 1: the consequences the FDPA and it city you and that 110 00:06:18,200 --> 00:06:19,960 Speaker 1: it is not going to be so easy to reverse. 111 00:06:20,440 --> 00:06:22,080 Speaker 1: I want to again and bring this up to date. 112 00:06:22,120 --> 00:06:26,119 Speaker 1: Our Patrick Donahue and Arn Adults reporting Chancellor Miracle's party 113 00:06:26,200 --> 00:06:29,640 Speaker 1: lines up with German far right in shock vote and 114 00:06:29,680 --> 00:06:32,760 Speaker 1: it's been extraordinary to see the language. David, what is 115 00:06:32,800 --> 00:06:36,000 Speaker 1: the sched list for institutions? You are one of the 116 00:06:36,040 --> 00:06:40,080 Speaker 1: advantage of the elite of Germany. What is the institutional 117 00:06:40,160 --> 00:06:46,160 Speaker 1: mandate to turn Germany towards a more moderate path? Well, 118 00:06:46,200 --> 00:06:50,080 Speaker 1: I think it's important that that institutions, that the firm 119 00:06:50,240 --> 00:06:52,680 Speaker 1: stick to their primary business and in our case that 120 00:06:52,800 --> 00:06:55,760 Speaker 1: is intermediating between savers and investors. And we're not a 121 00:06:55,760 --> 00:06:58,800 Speaker 1: political actor, but we have strong views about this. There's 122 00:06:58,839 --> 00:07:02,960 Speaker 1: no doubt that uh, this is bad for everybody concerned, 123 00:07:03,279 --> 00:07:07,480 Speaker 1: and we play we prepared. There are there are political 124 00:07:07,520 --> 00:07:10,160 Speaker 1: issues that that where we can actually do something. This 125 00:07:10,240 --> 00:07:11,960 Speaker 1: is less so. But we can do a lot about 126 00:07:12,360 --> 00:07:16,760 Speaker 1: for instance, about sustainability uh and and we have done that. 127 00:07:17,680 --> 00:07:20,200 Speaker 1: But on this issue, all we can do is voices 128 00:07:20,280 --> 00:07:22,160 Speaker 1: to those that are critical, and we are and our 129 00:07:22,240 --> 00:07:25,440 Speaker 1: CEO has done that already. So I think we speak 130 00:07:25,440 --> 00:07:28,640 Speaker 1: out strongly. And if you strom me about this, extraordinary comments. 131 00:07:28,960 --> 00:07:44,320 Speaker 1: David Fulkers, Lando Is with joutsche Bank. Let's springing, Jeff Calry, 132 00:07:44,320 --> 00:07:48,280 Speaker 1: Showy Golvin Sacks, Global head of Commodities Research, Donna Soul Jeff, 133 00:07:48,440 --> 00:07:52,600 Speaker 1: what is the cult? Well, when we look at the 134 00:07:52,600 --> 00:07:57,600 Speaker 1: current coronavirus and pandemic, we'd say the biggest impact is 135 00:07:57,640 --> 00:08:01,280 Speaker 1: coming from the quarantine. You're shutting down fact, shutting down school, 136 00:08:01,360 --> 00:08:05,560 Speaker 1: shutting down transportation to and fro China. Obviously oil sets 137 00:08:05,600 --> 00:08:07,720 Speaker 1: at the center of us because it's both the activity 138 00:08:07,800 --> 00:08:11,320 Speaker 1: inside China as well as the travel um in and 139 00:08:11,360 --> 00:08:13,680 Speaker 1: out of China. UM. The question is how long will 140 00:08:13,680 --> 00:08:15,680 Speaker 1: this go? I think most people are budgeting sometime to 141 00:08:15,720 --> 00:08:18,440 Speaker 1: at least early March. UM. After that, I would tend 142 00:08:18,480 --> 00:08:20,120 Speaker 1: to think you get a rebound, and I think you'll 143 00:08:20,160 --> 00:08:24,080 Speaker 1: get stimulus that's focused on the consumer to boost consumer 144 00:08:24,120 --> 00:08:26,360 Speaker 1: confidence UM. So you get much more of a V 145 00:08:26,560 --> 00:08:29,960 Speaker 1: shaped check type recovery coming out of it. UM. And 146 00:08:30,200 --> 00:08:32,800 Speaker 1: so the question is what does this due to activity 147 00:08:32,920 --> 00:08:34,840 Speaker 1: in the second half of the year versus today. We 148 00:08:34,880 --> 00:08:38,319 Speaker 1: think all the weakness is up in the near term 149 00:08:38,320 --> 00:08:41,160 Speaker 1: with oil, and sometimes it's two x the economic weakness 150 00:08:41,240 --> 00:08:44,680 Speaker 1: because you're shutting down all that those interconnectivities. UM. But 151 00:08:44,880 --> 00:08:47,880 Speaker 1: when you look let's say out four months, five months out, 152 00:08:47,920 --> 00:08:49,800 Speaker 1: we'd expect to rebound right back up to the same 153 00:08:49,880 --> 00:08:52,040 Speaker 1: levels that we were at before in re you know, 154 00:08:52,400 --> 00:08:54,640 Speaker 1: and actually even be on a faster growth path. So 155 00:08:54,679 --> 00:08:57,880 Speaker 1: one of the biggest demons shelks since the financial crisis solcably, 156 00:08:57,960 --> 00:09:00,679 Speaker 1: but with a K caveat that you think this is transitory, 157 00:09:00,760 --> 00:09:02,840 Speaker 1: You think we get a vacape recovery. What are the 158 00:09:02,960 --> 00:09:05,600 Speaker 1: risks around that view? What the risks around that view 159 00:09:05,640 --> 00:09:07,920 Speaker 1: that you can identify that you can say if that 160 00:09:07,960 --> 00:09:11,880 Speaker 1: materialize is if X happens, we've gotten through an inflection point, 161 00:09:11,920 --> 00:09:13,840 Speaker 1: I'm going to change my mind. I think there's two. 162 00:09:13,920 --> 00:09:16,720 Speaker 1: One is that we've disrupted supply chains around the world. 163 00:09:16,800 --> 00:09:19,520 Speaker 1: It becomes much more difficult to restart. We don't know 164 00:09:19,600 --> 00:09:22,320 Speaker 1: that yet, And that we've seen that historically. UM. That 165 00:09:22,400 --> 00:09:25,480 Speaker 1: the second issue is the contagion. Now, the reason why 166 00:09:25,520 --> 00:09:28,920 Speaker 1: it's having such a profound economic impact today is they're 167 00:09:28,920 --> 00:09:32,680 Speaker 1: trying to contain the contagion by doing a largest quarantine 168 00:09:32,679 --> 00:09:35,360 Speaker 1: I've ever seen in my lifetime, UM, which is why 169 00:09:35,400 --> 00:09:37,679 Speaker 1: you're having the sharp drop today. But I would say 170 00:09:38,000 --> 00:09:40,559 Speaker 1: the bigger issue is we don't know the parameters of 171 00:09:40,559 --> 00:09:43,200 Speaker 1: the contagion. A lot of people are saying that this 172 00:09:43,360 --> 00:09:46,520 Speaker 1: is the containment, largely having to do with the slowdown 173 00:09:46,520 --> 00:09:49,079 Speaker 1: in the economy. I was reading about the Spanish flu 174 00:09:49,280 --> 00:09:53,280 Speaker 1: of uh. The death rate was very similar to the coronavirus. 175 00:09:53,360 --> 00:09:55,960 Speaker 1: It was a one to two percent type of fatality rate, 176 00:09:56,400 --> 00:10:00,640 Speaker 1: but it spread so widely that fifty million people died. 177 00:10:01,360 --> 00:10:05,200 Speaker 1: What's your concern that perhaps people are under bawling the 178 00:10:05,240 --> 00:10:09,120 Speaker 1: potential impact of the coronavirus. Saying it's gonna be fine 179 00:10:09,240 --> 00:10:12,160 Speaker 1: even if it's not contained is basically everyone says it 180 00:10:12,200 --> 00:10:16,120 Speaker 1: will be and it escalates to something that Let's go 181 00:10:16,160 --> 00:10:18,079 Speaker 1: back to why they call it the Spanish flu. Spain 182 00:10:18,160 --> 00:10:19,960 Speaker 1: was the only one that had a media that reported 183 00:10:20,000 --> 00:10:22,800 Speaker 1: on it. Um. You know, there it was an issue 184 00:10:22,800 --> 00:10:25,000 Speaker 1: of transparency and they weren't on top of it. This 185 00:10:25,080 --> 00:10:27,400 Speaker 1: is the exact opposite. Um, they are so much on 186 00:10:27,480 --> 00:10:30,760 Speaker 1: top of that. The extent of the quarantine really demonstrates 187 00:10:30,800 --> 00:10:34,679 Speaker 1: that the ability to maintain the contagion is unprecedented. I mean, 188 00:10:34,720 --> 00:10:37,600 Speaker 1: you're paying the economic costs for it today. Um. But 189 00:10:37,880 --> 00:10:40,679 Speaker 1: but the contagion um is more contained than I think 190 00:10:40,720 --> 00:10:43,000 Speaker 1: we've seen any of the other events. So given that, 191 00:10:43,040 --> 00:10:45,000 Speaker 1: are you surprised that we're not seeing more of a 192 00:10:45,040 --> 00:10:47,600 Speaker 1: boom to oil prices today, given the fact that it's 193 00:10:47,640 --> 00:10:51,280 Speaker 1: risk on because what where this oil is going is 194 00:10:51,280 --> 00:10:54,839 Speaker 1: it's going into storage in China, um or it's being 195 00:10:54,880 --> 00:10:58,440 Speaker 1: backed up onto the global market. Commodities are spot assets. 196 00:10:58,440 --> 00:11:02,120 Speaker 1: They have to price today. Financial markets are anticipatory assets. 197 00:11:02,160 --> 00:11:04,679 Speaker 1: They price tomorrow. So oil has to pay the price 198 00:11:04,720 --> 00:11:06,400 Speaker 1: for the day. All the commodities have to pay the 199 00:11:06,400 --> 00:11:09,640 Speaker 1: price today. The financial markets com price the much more 200 00:11:09,760 --> 00:11:12,360 Speaker 1: positive story that we see, let's say in July or August. 201 00:11:12,400 --> 00:11:14,360 Speaker 1: So incomably with saying that, Jeff, so let's talk about 202 00:11:14,360 --> 00:11:17,000 Speaker 1: a stimulus response, shall we? At the moment you think 203 00:11:17,000 --> 00:11:18,840 Speaker 1: we're gonna see some real stimulus in the back half, 204 00:11:19,360 --> 00:11:20,920 Speaker 1: I just wonder what they'll do because At the moment, 205 00:11:20,960 --> 00:11:23,520 Speaker 1: it's very very short term stuff, liquidity to banks, cutting 206 00:11:23,559 --> 00:11:25,840 Speaker 1: rates on that liquidity to banks, all of that good stuff. 207 00:11:25,960 --> 00:11:28,719 Speaker 1: When we start to see the longer term measures, I 208 00:11:29,000 --> 00:11:31,240 Speaker 1: think you've got to know, we we don't even know 209 00:11:31,280 --> 00:11:33,320 Speaker 1: when this end is when they can actually start doing 210 00:11:33,360 --> 00:11:35,920 Speaker 1: it UM. I think at this point right now, their 211 00:11:35,960 --> 00:11:39,959 Speaker 1: ability they're trying to maintain and deal with the virus 212 00:11:39,960 --> 00:11:42,480 Speaker 1: as opposed to focusing on the economic growth. So we're 213 00:11:42,480 --> 00:11:44,920 Speaker 1: we're just watching for some evidence of the restart. We 214 00:11:45,080 --> 00:11:47,559 Speaker 1: have a bunch of different high frequency variables were focused 215 00:11:47,600 --> 00:11:51,960 Speaker 1: on UM, everything from real estate, transactions, power generation. Once 216 00:11:51,960 --> 00:11:53,719 Speaker 1: we see that began to rebound, I think that's when 217 00:11:53,760 --> 00:11:55,640 Speaker 1: people are going to focus on these other issues. So 218 00:11:55,679 --> 00:11:58,160 Speaker 1: what does riad do? I mean, if the oil demand 219 00:11:58,360 --> 00:12:03,640 Speaker 1: craters in China UH and its oil one price Brent crude, 220 00:12:03,760 --> 00:12:07,240 Speaker 1: what how does OPEC and how does Saudi Arabia react 221 00:12:08,080 --> 00:12:10,400 Speaker 1: to what you're predicting? Well, the question is how much 222 00:12:10,400 --> 00:12:13,119 Speaker 1: of this is backed up onto the global market exactly? 223 00:12:13,440 --> 00:12:16,679 Speaker 1: And you know we would estimate by looking at crude 224 00:12:16,720 --> 00:12:19,079 Speaker 1: runs in China it's probably somewhere around a million barrels 225 00:12:19,120 --> 00:12:21,200 Speaker 1: per day as opposed to the full demand hit. So 226 00:12:21,240 --> 00:12:24,559 Speaker 1: when you think about the numbers that the JTC, the 227 00:12:24,679 --> 00:12:27,440 Speaker 1: Joint Technical Committee of the OPEC recommended last night, there 228 00:12:27,480 --> 00:12:30,160 Speaker 1: are somewhere around six thousand barrels a day, which is 229 00:12:30,200 --> 00:12:32,320 Speaker 1: not too far off the mark, and that probably manages 230 00:12:32,360 --> 00:12:35,480 Speaker 1: the external surplus for a few months, for a few months. 231 00:12:35,720 --> 00:12:38,440 Speaker 1: And the great call here of your four point zero 232 00:12:38,559 --> 00:12:42,520 Speaker 1: percent g d P call is it's gonna be a recovery. 233 00:12:42,679 --> 00:12:45,600 Speaker 1: Can you model that recovery now to a few months 234 00:12:46,080 --> 00:12:48,000 Speaker 1: or is it just you just don't know? I don't know. 235 00:12:48,280 --> 00:12:50,600 Speaker 1: I think that's that's why I'm surprised that the equity 236 00:12:50,600 --> 00:12:54,240 Speaker 1: market is so positive, because you do have Constant's fault. 237 00:12:54,840 --> 00:12:58,760 Speaker 1: That's right, yeah, David, you know, but but the equity 238 00:12:58,800 --> 00:13:01,880 Speaker 1: markets what what why would you suggest, as a commodities guy, 239 00:13:01,960 --> 00:13:05,120 Speaker 1: why Coston's world has a bid to it? Because they're 240 00:13:05,160 --> 00:13:07,880 Speaker 1: looking at the stars like recovery here to three months out. 241 00:13:07,920 --> 00:13:10,040 Speaker 1: I mean, that's the end of the discussion. Yeah, because 242 00:13:10,040 --> 00:13:11,720 Speaker 1: I think that the view is, hey, you've got a 243 00:13:11,720 --> 00:13:14,160 Speaker 1: lot of problems you're dealing with, but the quarantine is 244 00:13:14,200 --> 00:13:16,960 Speaker 1: so large, um, that's most likely going to be effective. 245 00:13:17,040 --> 00:13:19,600 Speaker 1: And you put it, it's a very low probability tail 246 00:13:19,720 --> 00:13:22,200 Speaker 1: risk of something bad happen. Explain to our audiences phrase 247 00:13:22,280 --> 00:13:25,079 Speaker 1: forced masjour. We've got the l en g cruise and 248 00:13:25,320 --> 00:13:28,960 Speaker 1: no we don't think so. I mean every other company today, 249 00:13:29,200 --> 00:13:32,520 Speaker 1: frankly outside of China as well in Singapore is getting 250 00:13:32,520 --> 00:13:34,959 Speaker 1: out the Latin book on forced masjour. Is that Latin 251 00:13:35,040 --> 00:13:41,960 Speaker 1: genre French? I can't remember? Are we? Is it forced masjour? March? Yeah, 252 00:13:42,000 --> 00:13:44,760 Speaker 1: it's gonna be not only in commodities and particularly oil. 253 00:13:44,800 --> 00:13:46,320 Speaker 1: We see it quite a bit. You're gonna see it 254 00:13:46,360 --> 00:13:49,199 Speaker 1: across all types of goods and it goes both directions, 255 00:13:49,440 --> 00:13:51,760 Speaker 1: not only stuff going into China, but stuff coming out 256 00:13:51,760 --> 00:13:54,439 Speaker 1: of China, particularly some of the key commodities that they produce, 257 00:13:54,480 --> 00:13:56,640 Speaker 1: like stealing aluminum. Jeff Carry's on the show. You said 258 00:13:56,640 --> 00:13:58,440 Speaker 1: we have to wrap things up by getting the gold coal. 259 00:13:58,760 --> 00:14:01,200 Speaker 1: What's the gold coal? Now? What is it? What's the 260 00:14:01,280 --> 00:14:03,920 Speaker 1: dynamic around that metal that you're thinking about. By the way, 261 00:14:03,960 --> 00:14:06,960 Speaker 1: the one thing I did not anticipate was the ding 262 00:14:07,120 --> 00:14:10,840 Speaker 1: to jewelry demand in China being significant. It's significant at 263 00:14:10,840 --> 00:14:14,240 Speaker 1: the margin gold's trading um you know, sixteen seventy and 264 00:14:14,360 --> 00:14:17,760 Speaker 1: change right now, our fifteen seventy in change right now. UM. 265 00:14:18,000 --> 00:14:20,840 Speaker 1: Our our target is sixteen hundred. UM. We were pretty 266 00:14:20,840 --> 00:14:23,080 Speaker 1: close to it a few weeks ago, but this demand 267 00:14:23,160 --> 00:14:25,200 Speaker 1: hit has taken some of the tinge out of it. 268 00:14:25,360 --> 00:14:28,040 Speaker 1: We're still positive. We view gold much more as a 269 00:14:28,040 --> 00:14:32,840 Speaker 1: strategic allocation trade as opposed to a directional trade. UM. 270 00:14:32,880 --> 00:14:35,120 Speaker 1: You know. So, and if I were highlight the key 271 00:14:35,160 --> 00:14:38,600 Speaker 1: issues geopolitical risk de dollarization, I think is a big one. 272 00:14:38,880 --> 00:14:41,440 Speaker 1: Central bank buying of gold last year was the highest 273 00:14:41,480 --> 00:14:45,400 Speaker 1: since in Nick scen era, representing global supplies. UM. So 274 00:14:45,440 --> 00:14:47,120 Speaker 1: then nout of that we see some models upside in 275 00:14:47,120 --> 00:14:48,920 Speaker 1: your term your clients, the guys that you speak to 276 00:14:48,960 --> 00:14:51,160 Speaker 1: on a daddy basis, are that becoming more sympathetic to 277 00:14:51,240 --> 00:14:53,520 Speaker 1: your view that boosting their radication to gold in their 278 00:14:53,520 --> 00:14:55,400 Speaker 1: portfolio is just that's something you've witnessed of in the 279 00:14:55,480 --> 00:14:57,920 Speaker 1: last twelve months. Um. In Europe they can't get enough 280 00:14:57,960 --> 00:15:01,080 Speaker 1: of it, but remember they have negative bondyles. UM. In 281 00:15:01,120 --> 00:15:03,520 Speaker 1: the U S it's a it's a hard call because 282 00:15:03,640 --> 00:15:06,200 Speaker 1: you know, the Hans are still positive here. UM. So 283 00:15:06,280 --> 00:15:07,840 Speaker 1: it really depends on where you are in the world. 284 00:15:07,960 --> 00:15:14,240 Speaker 1: Can central bank policy affect your world? Um? Absolutely? Um, Yeah, 285 00:15:14,600 --> 00:15:17,480 Speaker 1: you get a rate cuts, one rate cut to rate cuts. 286 00:15:17,520 --> 00:15:21,760 Speaker 1: Whatever he's saying, is that help commodities find a bid um. 287 00:15:21,840 --> 00:15:25,119 Speaker 1: Not as much as stimulus coming out of China, UM, 288 00:15:25,160 --> 00:15:28,160 Speaker 1: but it is. It is a positive development. This has 289 00:15:28,200 --> 00:15:31,040 Speaker 1: been sphere. Jeff Curry, thank you so much. With a 290 00:15:31,120 --> 00:15:35,520 Speaker 1: really important call there in China GDP before the market clears. 291 00:15:47,680 --> 00:15:50,760 Speaker 1: Right now, Henrietta Trust joins us she director of Economic 292 00:15:50,840 --> 00:15:54,640 Speaker 1: researcher course UH with Data Partners. Henrietta, we need to 293 00:15:54,640 --> 00:15:58,720 Speaker 1: talk about the fractured polarization in Washington. But I've gotta 294 00:15:58,800 --> 00:16:02,640 Speaker 1: ask you, uh what you thought of the Romney moment yesterday. 295 00:16:02,640 --> 00:16:05,800 Speaker 1: I mean, how did that fit into the floor the Senate, 296 00:16:05,920 --> 00:16:09,360 Speaker 1: the house that you know, uh well it was. It 297 00:16:09,400 --> 00:16:13,040 Speaker 1: was certainly very unwelcome news for Republican leadership. We had 298 00:16:13,080 --> 00:16:16,520 Speaker 1: been with staff there throughout the day in real time 299 00:16:16,680 --> 00:16:22,120 Speaker 1: just understanding that, UM, they were extremely displeased with Senator 300 00:16:22,200 --> 00:16:25,960 Speaker 1: Romans decision to get so vocal um. The immediate fear 301 00:16:26,200 --> 00:16:29,880 Speaker 1: is for him to see some substantial backlash. And obviously, okay, 302 00:16:29,880 --> 00:16:32,120 Speaker 1: but I don't mean to interrupt, but I think it's 303 00:16:32,120 --> 00:16:34,920 Speaker 1: so important, Like what backlash you can't get on the 304 00:16:34,960 --> 00:16:38,320 Speaker 1: squash court. I mean, what actually happens to the senator 305 00:16:38,360 --> 00:16:41,760 Speaker 1: from Utah. Um, I don't know that the Senator from 306 00:16:41,880 --> 00:16:43,960 Speaker 1: Utah is the one that's most at risk, but any 307 00:16:44,040 --> 00:16:46,600 Speaker 1: of the vested interests who have supported him are now 308 00:16:46,640 --> 00:16:49,480 Speaker 1: going to get nothing of their agenda accomplished, like Chuck Schumer, 309 00:16:51,560 --> 00:16:55,640 Speaker 1: like Chuch Schumer Shore, or any of the trade associations 310 00:16:55,640 --> 00:16:58,000 Speaker 1: who have donated to him or who are looking to 311 00:16:58,120 --> 00:17:00,760 Speaker 1: him to advance any of their legislation. One of the 312 00:17:00,800 --> 00:17:03,200 Speaker 1: issues that I'm not particularly familiar with, but something to 313 00:17:03,240 --> 00:17:06,840 Speaker 1: do with college sports and his legislation and impetus um, 314 00:17:07,000 --> 00:17:12,160 Speaker 1: something came up there just this the manifest options for 315 00:17:12,200 --> 00:17:15,040 Speaker 1: them to sort of squeeze him are the focus. Now. 316 00:17:15,119 --> 00:17:17,120 Speaker 1: I mean, you're grizzled pro on this, So just one 317 00:17:17,119 --> 00:17:19,400 Speaker 1: more question in the politics of it before John gets 318 00:17:19,440 --> 00:17:22,400 Speaker 1: the policy. But is he a Democrat in Utah? Now? 319 00:17:22,560 --> 00:17:25,520 Speaker 1: I mean, I mean, I'm fascinated by what happens in 320 00:17:25,560 --> 00:17:27,960 Speaker 1: his state right now. I mean, it's like what four 321 00:17:28,000 --> 00:17:31,960 Speaker 1: Democrats in Salt Lake. Yeah, exactly. And Um, it was 322 00:17:32,000 --> 00:17:35,439 Speaker 1: interesting to see the Utah Republican Party and the junior 323 00:17:35,440 --> 00:17:39,320 Speaker 1: Senator from Utah, Mike Lee respond They essentially it's a 324 00:17:39,440 --> 00:17:42,720 Speaker 1: senior senator. Um, you know, we don't agree with anything 325 00:17:42,760 --> 00:17:46,159 Speaker 1: that the detractors had to say, really teaming up against him. 326 00:17:46,240 --> 00:17:49,800 Speaker 1: So that internal politics of Mitt Romney in the state 327 00:17:49,840 --> 00:17:52,320 Speaker 1: I think will be interesting to watch. They were certainly 328 00:17:52,400 --> 00:17:54,879 Speaker 1: very unhappy and to the media publication should expect to 329 00:17:54,880 --> 00:17:56,760 Speaker 1: play this up. Of playing this up, but let's be honest, 330 00:17:56,760 --> 00:17:58,600 Speaker 1: it will be a footnote in the history books. Will 331 00:17:58,600 --> 00:18:01,280 Speaker 1: move on to the election very very quickly in November, 332 00:18:01,320 --> 00:18:03,840 Speaker 1: So let's focus on that. If you want to win elections, 333 00:18:04,040 --> 00:18:05,560 Speaker 1: you're probably going to need a few people from the 334 00:18:05,600 --> 00:18:08,000 Speaker 1: other side of the arts crossover and the made for 335 00:18:08,080 --> 00:18:10,480 Speaker 1: Twitter moments that might entertain the base. That we've seen 336 00:18:10,520 --> 00:18:13,080 Speaker 1: from the Democrats over the last week or so, it's 337 00:18:13,160 --> 00:18:15,440 Speaker 1: just turning go off everyone else. And there is a 338 00:18:15,480 --> 00:18:18,000 Speaker 1: conclusion that many people have come to on both sides 339 00:18:18,040 --> 00:18:19,639 Speaker 1: of the art over the last couple of days that 340 00:18:19,680 --> 00:18:23,080 Speaker 1: the president has had a very good week. How does 341 00:18:23,119 --> 00:18:27,280 Speaker 1: he capitalize on that? Henrietta Absolutely, I think probably the 342 00:18:27,320 --> 00:18:31,160 Speaker 1: most important data point was the underwhelming turnout in Iowa earlier. 343 00:18:31,440 --> 00:18:33,800 Speaker 1: That is a story that doesn't get enough attention. But 344 00:18:33,840 --> 00:18:37,479 Speaker 1: if Democrats are going to win they have to depend 345 00:18:37,640 --> 00:18:41,000 Speaker 1: on a massive voter turnout, and that's something that just 346 00:18:41,160 --> 00:18:43,520 Speaker 1: didn't show up in Iowa. So when you think about 347 00:18:43,560 --> 00:18:46,080 Speaker 1: the president's good week potentially you know, as described to 348 00:18:46,119 --> 00:18:49,320 Speaker 1: us by Republican leadership, maybe his best week ever. Um, 349 00:18:49,359 --> 00:18:53,280 Speaker 1: that's probably the number one driving factor. So Democrats have 350 00:18:53,520 --> 00:18:57,920 Speaker 1: to um, fix what's gone on in the last week, 351 00:18:58,640 --> 00:19:00,680 Speaker 1: immediately get to New hamp or figure out if but 352 00:19:00,920 --> 00:19:02,639 Speaker 1: you're just going to get it bounced from this, figure 353 00:19:02,640 --> 00:19:06,679 Speaker 1: out if the establishment's going to firm up behind Biden. Um, 354 00:19:06,720 --> 00:19:09,320 Speaker 1: they have a lot of decisions to make. The conversations 355 00:19:09,359 --> 00:19:11,920 Speaker 1: I heard from investors on the road were regularly intoning 356 00:19:12,320 --> 00:19:15,000 Speaker 1: um that Mike Bloomberg has a chance to really drive 357 00:19:15,040 --> 00:19:18,400 Speaker 1: and pull away here um to to take on the nomination, 358 00:19:18,480 --> 00:19:21,800 Speaker 1: and the party is pretty unprepared for that in my opinion. 359 00:19:21,880 --> 00:19:24,280 Speaker 1: Of course, Mike Bloomberg the found a majorityano of Bloomberg 360 00:19:24,280 --> 00:19:27,040 Speaker 1: outpay the parent company of Bloomberg News and Henriette for 361 00:19:27,040 --> 00:19:29,800 Speaker 1: the market. It comes down to something quite simple. Do 362 00:19:29,880 --> 00:19:32,480 Speaker 1: we get a progressive candidate or a moderate out of 363 00:19:32,480 --> 00:19:35,320 Speaker 1: the Democrats side. What are you looking for in New Hampshire? 364 00:19:35,359 --> 00:19:37,720 Speaker 1: What's the right through from Iowa to New Hampshire next week. 365 00:19:38,359 --> 00:19:40,399 Speaker 1: The most important thing to me is that Bernie Sanders 366 00:19:40,440 --> 00:19:43,000 Speaker 1: is under performing in New Hampshire. Versus two thousand sixteen, 367 00:19:43,000 --> 00:19:45,520 Speaker 1: he got six of the vote there in sixteen, he's 368 00:19:45,560 --> 00:19:49,560 Speaker 1: getting so now I think that's the story. So the 369 00:19:49,600 --> 00:19:52,359 Speaker 1: potential for a more moderate candidate continues to be my 370 00:19:52,520 --> 00:19:55,680 Speaker 1: most likely outcome. Um, I doubt that it would be Klobachar, 371 00:19:55,760 --> 00:19:58,639 Speaker 1: So I think the contest is between Biden and h 372 00:19:58,720 --> 00:20:02,600 Speaker 1: pet Buttag at this point and Bud has some momentum 373 00:20:02,600 --> 00:20:05,080 Speaker 1: but very little minority support. So it's always been my 374 00:20:05,160 --> 00:20:09,080 Speaker 1: view that other candidates must win both Iowa and New Hampshire. 375 00:20:09,160 --> 00:20:12,679 Speaker 1: Biden doesn't need to win either, so his firewall in 376 00:20:12,680 --> 00:20:16,720 Speaker 1: South Carolina and Super Tuesday make me comfortable with that. 377 00:20:17,119 --> 00:20:18,760 Speaker 1: And there's a question of what the narrative will be 378 00:20:18,760 --> 00:20:21,280 Speaker 1: among the Democrats in terms of how to counter the 379 00:20:21,320 --> 00:20:25,200 Speaker 1: strong economy and the trade achievements that President Trump has made. 380 00:20:25,240 --> 00:20:29,359 Speaker 1: I'm wondering what you think of particularly the trade developments, 381 00:20:29,400 --> 00:20:31,720 Speaker 1: as China does say that they will have tariffs and 382 00:20:31,800 --> 00:20:34,120 Speaker 1: some seventy five billion dollars of imports from the US 383 00:20:34,240 --> 00:20:36,840 Speaker 1: later this month, as we do seem to get progress 384 00:20:36,960 --> 00:20:40,080 Speaker 1: across the board. What's the sort of narrative that he 385 00:20:40,119 --> 00:20:43,560 Speaker 1: can use versus the counter narrative. Well, the counter narrative 386 00:20:43,680 --> 00:20:46,640 Speaker 1: is one that we're hearing from Democrats and increasingly from 387 00:20:46,640 --> 00:20:50,480 Speaker 1: Senate Republicans behind the scenes, which is that the tariff 388 00:20:50,520 --> 00:20:54,680 Speaker 1: rate reduction China announced overnight is potentially being driven by 389 00:20:54,960 --> 00:20:58,360 Speaker 1: a increased sense of reality that China's going to miss 390 00:20:58,359 --> 00:21:02,640 Speaker 1: its purchase commitments. That's the most important thing. Democrats would 391 00:21:02,640 --> 00:21:06,359 Speaker 1: obviously sees on that immediately. It's got ratifications for Senate 392 00:21:06,440 --> 00:21:09,480 Speaker 1: races as well as the administration UM. The key states 393 00:21:09,520 --> 00:21:12,879 Speaker 1: of Iowa and North Carolina are both major pork producers. 394 00:21:12,920 --> 00:21:16,520 Speaker 1: They're looking for massive shipment UH commitments from China in 395 00:21:16,600 --> 00:21:20,720 Speaker 1: that space, and they importantly both have Republican senators at 396 00:21:20,840 --> 00:21:24,800 Speaker 1: risk for re election in Johnie Ernst in Iowa and 397 00:21:25,800 --> 00:21:28,840 Speaker 1: Tom Killis in North Carolina. So for Democrats right now, 398 00:21:28,920 --> 00:21:32,679 Speaker 1: what they are seizing on is this very real anxiety 399 00:21:32,840 --> 00:21:36,359 Speaker 1: from farm state Republican senators and congressmen that China's going 400 00:21:36,400 --> 00:21:38,399 Speaker 1: to miss its purchase commitments and that this drop in 401 00:21:38,480 --> 00:21:42,920 Speaker 1: tireff was driven by that. Um the potential for coronavirus 402 00:21:42,960 --> 00:21:45,679 Speaker 1: and the African swine fever or whatever to impact their 403 00:21:45,680 --> 00:21:49,680 Speaker 1: ability to hold true to their purchase commitments, which behind 404 00:21:49,680 --> 00:21:52,040 Speaker 1: the scenes they'll tell you they think President Trump inflated 405 00:21:52,440 --> 00:21:54,840 Speaker 1: beyond which China was able to commit to in the 406 00:21:54,920 --> 00:21:57,440 Speaker 1: first place. Well, Henry, let's talk about these commitments, because 407 00:21:57,440 --> 00:21:58,920 Speaker 1: there is a clause in the Phase one deal that 408 00:21:58,960 --> 00:22:01,720 Speaker 1: in the event of natural disaster or unforeseeable events, you 409 00:22:01,760 --> 00:22:04,600 Speaker 1: can consult, either side can get together and try and 410 00:22:04,640 --> 00:22:07,480 Speaker 1: work something out. As far as you can see, have 411 00:22:07,600 --> 00:22:09,440 Speaker 1: we seen that from China as yet, because I haven't 412 00:22:09,480 --> 00:22:12,159 Speaker 1: seen any official statement from either side that suggests they 413 00:22:12,160 --> 00:22:14,320 Speaker 1: have made that approach, And do you expect it to 414 00:22:14,320 --> 00:22:18,200 Speaker 1: happen in the coming week. No, we haven't seen that approach. Um. 415 00:22:18,359 --> 00:22:20,840 Speaker 1: I think that the administration is starting to telegraph that 416 00:22:20,920 --> 00:22:23,959 Speaker 1: the coronavirus is a pretty severe issue, and so that 417 00:22:24,040 --> 00:22:26,960 Speaker 1: might smooth the way for eventually having those conversations. They're 418 00:22:26,960 --> 00:22:30,080 Speaker 1: at least laying the groundwork to make that an option 419 00:22:30,080 --> 00:22:33,560 Speaker 1: that's available to folks, um if if we eventually get there. 420 00:22:33,640 --> 00:22:35,760 Speaker 1: China has not to my knowledge, done that yet. There 421 00:22:35,840 --> 00:22:39,160 Speaker 1: is obviously some conflicting reporting going on around there. Um, 422 00:22:39,240 --> 00:22:45,320 Speaker 1: But I think that the given that the option is 423 00:22:45,840 --> 00:22:48,960 Speaker 1: escalating tariffs further from here, which is because ordinarily unwise 424 00:22:49,040 --> 00:22:52,480 Speaker 1: going into an election eight months away. UM, my expectation 425 00:22:52,560 --> 00:22:55,680 Speaker 1: is that if they do miss purchase commitments, there will 426 00:22:55,680 --> 00:22:58,400 Speaker 1: be a very real willingness to blame it on coronavirus 427 00:22:58,480 --> 00:23:02,240 Speaker 1: or whatever and engage in further talking. Henry had one 428 00:23:02,280 --> 00:23:05,440 Speaker 1: final question after this history made yesterday and early over 429 00:23:05,480 --> 00:23:08,679 Speaker 1: the last few weeks in Washington, what happens today on 430 00:23:08,800 --> 00:23:11,640 Speaker 1: Capitol Hill? The people just like come in and get 431 00:23:11,680 --> 00:23:14,359 Speaker 1: their coffee and sit in their office as number like, 432 00:23:14,400 --> 00:23:17,760 Speaker 1: what's the to do list on Capitol Hill today? There 433 00:23:17,880 --> 00:23:20,760 Speaker 1: is no to do list? Um, I imagine everybody will 434 00:23:20,800 --> 00:23:23,960 Speaker 1: go retreat to their corners and come back and talk 435 00:23:23,960 --> 00:23:27,879 Speaker 1: about appropriations in a few weeks. There's Henrietta, thank you 436 00:23:27,960 --> 00:23:44,159 Speaker 1: so much. Brilliant. That was just brilliant. Mike Wilson is 437 00:23:44,160 --> 00:23:47,080 Speaker 1: with Morgan Stanley. He has not said go to cash, 438 00:23:47,119 --> 00:23:50,359 Speaker 1: but he has decidedly been cautious on this great bull market. 439 00:23:50,960 --> 00:23:52,760 Speaker 1: He joins us. Now, Mike, I want to go to 440 00:23:52,800 --> 00:23:56,239 Speaker 1: one of your individual stock selections, but far more than that, 441 00:23:56,280 --> 00:23:58,160 Speaker 1: I want to go to one single sentence in your 442 00:23:58,160 --> 00:24:02,399 Speaker 1: recent note which is up up, but beneath the data, 443 00:24:02,640 --> 00:24:05,399 Speaker 1: there's been some real damage to the markets. What do 444 00:24:05,400 --> 00:24:08,760 Speaker 1: you mean by that, Well, what we've been saying for 445 00:24:08,840 --> 00:24:11,399 Speaker 1: quite a while is that, you know, it's definitely a 446 00:24:11,440 --> 00:24:14,520 Speaker 1: bull market. Uh. You know last year, I think bank 447 00:24:14,560 --> 00:24:17,480 Speaker 1: in October, when it became clear that the central banks 448 00:24:17,480 --> 00:24:20,080 Speaker 1: were going to go to the next level and inject 449 00:24:20,280 --> 00:24:22,520 Speaker 1: money into their balance sheet, and they called it kiwi, 450 00:24:22,680 --> 00:24:26,359 Speaker 1: not keywi, whatever it is, the liquidity bull market took 451 00:24:26,400 --> 00:24:28,399 Speaker 1: over again. And so we're on board with that, and 452 00:24:28,480 --> 00:24:30,440 Speaker 1: we raised our price targets last fall, and we've talked 453 00:24:30,440 --> 00:24:34,040 Speaker 1: about price target for the first half of this year, 454 00:24:34,359 --> 00:24:36,840 Speaker 1: but the fundamentals have really not supported them move. It 455 00:24:36,840 --> 00:24:38,800 Speaker 1: doesn't mean it's you know that they were going to 456 00:24:38,920 --> 00:24:42,199 Speaker 1: roll over into recession in factory economists or quite constructive 457 00:24:42,320 --> 00:24:45,440 Speaker 1: on the global backdrop more than the US, but the 458 00:24:45,480 --> 00:24:47,920 Speaker 1: global backdrop looks quite good. We have this virus which 459 00:24:47,920 --> 00:24:49,760 Speaker 1: is threatening that they think it will end up being 460 00:24:49,760 --> 00:24:51,600 Speaker 1: fine and will end up weathering it, like I think 461 00:24:51,640 --> 00:24:54,359 Speaker 1: most people are saying at this point. And so what 462 00:24:54,400 --> 00:24:56,280 Speaker 1: we have is we have a liquidity driven bull market 463 00:24:56,400 --> 00:25:00,520 Speaker 1: and underneath the surface, tom the market has traded very offensively. 464 00:25:00,600 --> 00:25:03,120 Speaker 1: What do I mean by that? Large caps have handily 465 00:25:03,160 --> 00:25:07,400 Speaker 1: beaten small high quality stocks have continued to beat low 466 00:25:07,480 --> 00:25:10,560 Speaker 1: quality stocks. And the one area we've been focused on 467 00:25:10,600 --> 00:25:14,960 Speaker 1: its defensively oriented stocks have really beaten cynical stocks. So 468 00:25:15,040 --> 00:25:18,080 Speaker 1: just to give you to our portfolio, are you know 469 00:25:18,440 --> 00:25:22,840 Speaker 1: model portfolio that we manage is has basically outperformed the 470 00:25:23,000 --> 00:25:26,679 Speaker 1: SMP by sevent basis points over the last you know, 471 00:25:26,800 --> 00:25:29,440 Speaker 1: eighteen months. And it's very defensive. I mean, it's it's 472 00:25:29,440 --> 00:25:32,800 Speaker 1: a very boring of stocks. But that's worked well and 473 00:25:32,800 --> 00:25:35,119 Speaker 1: so I think that continues. But we're getting closer to 474 00:25:35,160 --> 00:25:36,480 Speaker 1: a point where that may start to revert and we 475 00:25:36,480 --> 00:25:39,720 Speaker 1: should we should try to talk about that too. So, Mike, 476 00:25:40,080 --> 00:25:43,119 Speaker 1: you know, when we think about the move up in 477 00:25:43,119 --> 00:25:46,160 Speaker 1: the SMP last year, there's little to no earnings growth 478 00:25:46,160 --> 00:25:49,879 Speaker 1: accompanying that is mostly multiple expansion. Have you seen anything 479 00:25:49,880 --> 00:25:52,439 Speaker 1: in the current earning cycle to give you confidence that 480 00:25:53,880 --> 00:25:56,480 Speaker 1: can be a high single digit, if not a ten 481 00:25:56,520 --> 00:25:59,480 Speaker 1: percent type of earnings here, We're not quite there yet, 482 00:25:59,520 --> 00:26:02,119 Speaker 1: but what we are seeing is is definitely a troughing. Okay, 483 00:26:02,119 --> 00:26:04,240 Speaker 1: So the earnings recession that we called for I think 484 00:26:04,359 --> 00:26:08,560 Speaker 1: is probably completed. Uh, for now, we're stabilizing. We're not 485 00:26:08,600 --> 00:26:12,159 Speaker 1: seeing a big inflection point in earnings growth, but you know, 486 00:26:12,160 --> 00:26:16,199 Speaker 1: the stabilization is enough to get people excited, and that's 487 00:26:16,240 --> 00:26:18,199 Speaker 1: why multiples went up. You know, you combine that with 488 00:26:18,280 --> 00:26:21,840 Speaker 1: extraordinary monetary accommodation, and that's what you had, and that's 489 00:26:21,880 --> 00:26:24,920 Speaker 1: that's what markets typically do. All we've said is that 490 00:26:24,960 --> 00:26:28,000 Speaker 1: you know that that extension that we've seen is our 491 00:26:28,040 --> 00:26:31,280 Speaker 1: surpass the fundamental uptick, and so now the fundamentality to 492 00:26:31,280 --> 00:26:32,879 Speaker 1: catch up and that and that can happen, right And 493 00:26:33,119 --> 00:26:36,400 Speaker 1: so I think the coronavirus is obviously you know risk 494 00:26:36,960 --> 00:26:39,119 Speaker 1: um the markets, I'll tell you right now. You know 495 00:26:39,200 --> 00:26:42,080 Speaker 1: that's a real risk. And the markets basically shrugged off. 496 00:26:42,440 --> 00:26:44,919 Speaker 1: So that tells me the technical picture of the market 497 00:26:45,040 --> 00:26:48,320 Speaker 1: is very strong. Okay, at the index level, it's still 498 00:26:48,320 --> 00:26:51,200 Speaker 1: buying quality. And what that means is that the liquidity 499 00:26:51,280 --> 00:26:53,960 Speaker 1: driven bull market is intact. What is your partition of 500 00:26:54,040 --> 00:26:57,479 Speaker 1: buying US versus buying international If you're saying your global 501 00:26:57,520 --> 00:27:01,399 Speaker 1: economics is a more constructive international We saw that queue 502 00:27:01,440 --> 00:27:06,440 Speaker 1: for pop in international equities. Do you sustain that? Well? 503 00:27:06,440 --> 00:27:08,359 Speaker 1: We have. It hasn't been the case that obviously this 504 00:27:08,480 --> 00:27:11,760 Speaker 1: year in the US markets have retaken the lead because 505 00:27:11,800 --> 00:27:14,119 Speaker 1: the markets have gotten scared. But we do think in 506 00:27:14,119 --> 00:27:16,800 Speaker 1: the intermediate term, so far our longer term portfolios, we 507 00:27:16,840 --> 00:27:20,320 Speaker 1: are positioned for a global growth rebound and we we 508 00:27:20,320 --> 00:27:22,480 Speaker 1: would argue strongly that there is going to be a 509 00:27:22,600 --> 00:27:25,800 Speaker 1: rotation back towards the kind of more cyclically geared areas. 510 00:27:25,920 --> 00:27:28,320 Speaker 1: And once we get through this most recent concern around 511 00:27:28,320 --> 00:27:30,240 Speaker 1: the virus. That doesn't mean, by the way that U 512 00:27:30,280 --> 00:27:32,719 Speaker 1: S docks can't work. It just means that you know 513 00:27:32,880 --> 00:27:36,359 Speaker 1: that the really fatter, the fatter pitches in in those 514 00:27:36,400 --> 00:27:38,760 Speaker 1: markets outside of the US and in the areas that 515 00:27:38,800 --> 00:27:40,639 Speaker 1: have been beaten up the most. And we're in the 516 00:27:40,720 --> 00:27:43,639 Speaker 1: process now of probably making the final low so we 517 00:27:43,680 --> 00:27:46,400 Speaker 1: can have that next wave of a global reflation. So, Mike, 518 00:27:46,440 --> 00:27:49,200 Speaker 1: taking a look at your research, which we love to read, 519 00:27:49,200 --> 00:27:52,360 Speaker 1: I see you added J and J as a name 520 00:27:52,640 --> 00:27:55,440 Speaker 1: that you think the Morgan Stanley clients should be looking at. 521 00:27:55,440 --> 00:27:58,159 Speaker 1: What's the story behind J and J. Yeah, it's really simple. 522 00:27:58,200 --> 00:28:00,320 Speaker 1: I mean, this is a this is a classic you know, 523 00:28:01,000 --> 00:28:04,240 Speaker 1: defensively oriented growth name. I mean, it doesn't grow fast, 524 00:28:04,320 --> 00:28:08,879 Speaker 1: but it grows, you know, top line, and it's been 525 00:28:08,920 --> 00:28:12,400 Speaker 1: punished because of the litigation concerns that are out there, 526 00:28:12,400 --> 00:28:14,879 Speaker 1: and our analysts thinks that those concerns are overpriced. It's 527 00:28:14,920 --> 00:28:18,320 Speaker 1: trades in the sixth percentile on a relative valuation basis. 528 00:28:18,320 --> 00:28:21,800 Speaker 1: There's obviously been concerned around the healthcare industry because of 529 00:28:21,840 --> 00:28:24,439 Speaker 1: the far left, uh, you know wing candidates in the 530 00:28:24,440 --> 00:28:26,800 Speaker 1: Democratic Party that we're in the lead. That looks to 531 00:28:26,800 --> 00:28:29,439 Speaker 1: be fading now to some degree. And so this is 532 00:28:29,480 --> 00:28:31,919 Speaker 1: just an opportunity for evaluation catch up. And you know, 533 00:28:32,000 --> 00:28:34,800 Speaker 1: we think high quality, defensive growth should contain to work. 534 00:28:34,800 --> 00:28:35,879 Speaker 1: And this is a good This is a good this 535 00:28:35,920 --> 00:28:37,640 Speaker 1: is a good place to put money right now. Hey, Mike, 536 00:28:37,640 --> 00:28:40,280 Speaker 1: thanks so much for that. We appreciate your thoughts as always, 537 00:28:40,320 --> 00:28:43,640 Speaker 1: Mike Wilson. He is Morgan Stanley ke, us equity strategist 538 00:28:43,640 --> 00:28:57,280 Speaker 1: and chief investment officer. We have the perfect guests this 539 00:28:57,320 --> 00:29:00,920 Speaker 1: morning to frame the emotion of yes today afternoon, as 540 00:29:00,920 --> 00:29:05,120 Speaker 1: a Senator from Utah spoke to his Congress, to his state, 541 00:29:05,200 --> 00:29:08,720 Speaker 1: indeed to his family. Lannie chen Is at the Hoover 542 00:29:08,880 --> 00:29:13,440 Speaker 1: Institution that barely describes his path. Is the child of 543 00:29:13,480 --> 00:29:18,680 Speaker 1: Taiwanese immigrants to a sterling academics at Harvard University and 544 00:29:18,720 --> 00:29:23,320 Speaker 1: onto being the and everybody says, without any hesitation, the 545 00:29:23,440 --> 00:29:27,200 Speaker 1: advisor to the Governor of Massachusetts, a senator from Utah, 546 00:29:27,440 --> 00:29:30,320 Speaker 1: Lannie Chen, Have you spoken to Senator Romney in the 547 00:29:30,360 --> 00:29:34,720 Speaker 1: recent hours? I have not. No. You know, it was 548 00:29:34,760 --> 00:29:38,560 Speaker 1: obviously very emotional moment for him yesterday. And you know, 549 00:29:38,680 --> 00:29:41,480 Speaker 1: I think we all understand, or those of us who 550 00:29:41,520 --> 00:29:45,760 Speaker 1: know him understand that he made that decision, uh, with 551 00:29:45,800 --> 00:29:49,000 Speaker 1: some gravity and not lightly and so uh, you know, 552 00:29:49,240 --> 00:29:51,840 Speaker 1: the best to let that decision sit with him and 553 00:29:51,880 --> 00:29:54,760 Speaker 1: his family. You've been in the vortex of the separating 554 00:29:54,800 --> 00:29:58,840 Speaker 1: of the Republican Party. How distant are supporters of the 555 00:29:58,880 --> 00:30:04,040 Speaker 1: Senator of Utah their Republican Party, from the new Republican 556 00:30:04,160 --> 00:30:09,080 Speaker 1: Party of President Trump. It's a great question. I think 557 00:30:09,120 --> 00:30:11,120 Speaker 1: this is going to be the question at the heart 558 00:30:11,160 --> 00:30:14,600 Speaker 1: of conservative politics for many years to come, which is 559 00:30:14,720 --> 00:30:17,040 Speaker 1: you know, you have in a lot of ways a 560 00:30:17,120 --> 00:30:21,920 Speaker 1: separation on a number of different key issues over the years. Now, 561 00:30:22,480 --> 00:30:26,640 Speaker 1: I think increasingly that Trump coalition and the Republican Party 562 00:30:26,720 --> 00:30:29,320 Speaker 1: has matched up. And what you've seen in this most 563 00:30:29,360 --> 00:30:32,640 Speaker 1: recent impeachment vote is the degree to which the president 564 00:30:32,680 --> 00:30:36,600 Speaker 1: and his supporters have managed to essentially take over the 565 00:30:36,760 --> 00:30:40,720 Speaker 1: entirety of the Republican Party and the Republican apparatus. And 566 00:30:40,760 --> 00:30:43,240 Speaker 1: so I think, you know, the issue is going to 567 00:30:43,320 --> 00:30:46,360 Speaker 1: be in the years to come, how much of this 568 00:30:46,520 --> 00:30:49,520 Speaker 1: is lasting beyond the president. How much of the president's 569 00:30:49,520 --> 00:30:53,600 Speaker 1: particular policy proposals, for example, that may not have matched 570 00:30:53,680 --> 00:30:56,480 Speaker 1: up very well with with the Republicans in the past, 571 00:30:56,840 --> 00:30:59,880 Speaker 1: how much of that continues to be the the position 572 00:31:00,040 --> 00:31:02,080 Speaker 1: of the party going forward. I don't know that anybody 573 00:31:02,080 --> 00:31:04,440 Speaker 1: knows the answer to that, but but I do think 574 00:31:04,480 --> 00:31:06,920 Speaker 1: that a lot of that won't get resolved until the 575 00:31:06,960 --> 00:31:10,320 Speaker 1: president leaves office, whether it's this coming January or four 576 00:31:10,400 --> 00:31:13,680 Speaker 1: years from that. Lonnie, are you surprised at all that 577 00:31:13,960 --> 00:31:19,640 Speaker 1: perhaps other senators who may be privately voiced concerns about 578 00:31:19,640 --> 00:31:23,640 Speaker 1: President Trump and maybe specifically about the appeachment, did not join, uh, 579 00:31:23,760 --> 00:31:28,600 Speaker 1: Senator Romney, No, I'm not surprised. I think you know, 580 00:31:28,760 --> 00:31:30,680 Speaker 1: everyone was going to arrive at the decision they were 581 00:31:30,680 --> 00:31:32,800 Speaker 1: going to arrive at based on on the on the 582 00:31:32,840 --> 00:31:35,560 Speaker 1: facts they were looking at, and and you know, important 583 00:31:35,560 --> 00:31:39,080 Speaker 1: factors they were considering. Um. But there are you know, 584 00:31:39,160 --> 00:31:41,880 Speaker 1: as as the Senator Romney said yesterday, there will be 585 00:31:41,920 --> 00:31:45,120 Speaker 1: repercussions for him in terms of having to get blowback 586 00:31:45,200 --> 00:31:48,400 Speaker 1: from Republicans around the country for the decision that he made. 587 00:31:48,920 --> 00:31:51,440 Speaker 1: And you know, I I think it was a very 588 00:31:51,520 --> 00:31:55,000 Speaker 1: difficult decision, and so I it doesn't surprise me that 589 00:31:55,040 --> 00:31:57,680 Speaker 1: others didn't walk the same path, even if they may 590 00:31:57,720 --> 00:32:01,560 Speaker 1: have privately felt looked the president's behavior, um was not 591 00:32:01,680 --> 00:32:05,240 Speaker 1: something they agreed with. So what I think is that 592 00:32:05,320 --> 00:32:08,520 Speaker 1: everybody had to reach their own decision. They reached and 593 00:32:08,600 --> 00:32:10,840 Speaker 1: at the end of the day, everyone's got to consider 594 00:32:10,840 --> 00:32:13,600 Speaker 1: the different factors that that that mattered to them, and 595 00:32:13,640 --> 00:32:15,840 Speaker 1: for Senator Rodney, those factors led to the decision that 596 00:32:15,840 --> 00:32:18,920 Speaker 1: he made. Um, Lonnie, do you think it's accurate or 597 00:32:19,000 --> 00:32:21,280 Speaker 1: fair for the Democrats that came claim a little bit 598 00:32:21,320 --> 00:32:23,360 Speaker 1: of a victory here saying, you know, this was not 599 00:32:23,480 --> 00:32:26,360 Speaker 1: a partisan which that in fact, it was bipartisan. We 600 00:32:26,400 --> 00:32:29,160 Speaker 1: had even if it was just one Republican, but it 601 00:32:29,200 --> 00:32:33,000 Speaker 1: was in factory Republican crossing the aisle. I I don't 602 00:32:33,040 --> 00:32:36,360 Speaker 1: see how they can claim victory because, look, the presence 603 00:32:36,400 --> 00:32:39,720 Speaker 1: approval rating is as high as it's ever been, uh, 604 00:32:39,760 --> 00:32:42,720 Speaker 1: and it's not clear that the American people really felt 605 00:32:42,760 --> 00:32:45,400 Speaker 1: that the exercise that they went through was wholly productive. 606 00:32:45,440 --> 00:32:47,520 Speaker 1: I suppose the ultimate verdict will be rendered by the 607 00:32:47,600 --> 00:32:50,920 Speaker 1: voters in November. Uh and and so we'll see. But 608 00:32:51,440 --> 00:32:54,000 Speaker 1: I have a very difficult time saying how they can 609 00:32:54,040 --> 00:32:56,800 Speaker 1: claim victory on anything. Lonnie chan with this folks, with 610 00:32:56,840 --> 00:33:00,320 Speaker 1: the Hoover Institution, of course, his support of economic annalste 611 00:33:00,440 --> 00:33:04,240 Speaker 1: policy for then presidential candidate Mt Romney a number of 612 00:33:04,360 --> 00:33:07,400 Speaker 1: years ago. We're thrilled I could join us. Thanks for 613 00:33:07,480 --> 00:33:11,880 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 614 00:33:12,040 --> 00:33:17,760 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 615 00:33:18,320 --> 00:33:21,680 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 616 00:33:21,680 --> 00:33:25,120 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.