1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,280 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Let's 5 00:00:27,320 --> 00:00:29,360 Speaker 1: get the Call from the Straight Show. Were bringing David Kelly, 6 00:00:29,400 --> 00:00:33,120 Speaker 1: JP Morganest Management Chief Global Strategist David fantastic to have 7 00:00:33,200 --> 00:00:34,960 Speaker 1: you with us on the phone. Just walk me through 8 00:00:35,000 --> 00:00:36,600 Speaker 1: what you want to hear, what you want to see 9 00:00:36,600 --> 00:00:39,720 Speaker 1: in that statement as that co starts between G seven 10 00:00:39,760 --> 00:00:43,279 Speaker 1: finance chiefs and central bankers. Well, I think there needs 11 00:00:43,320 --> 00:00:45,680 Speaker 1: to be an air of calm. I don't want to 12 00:00:45,720 --> 00:00:49,879 Speaker 1: see immediate action. Actually, I think that the bed meats 13 00:00:49,960 --> 00:00:53,240 Speaker 1: on March seventeen, eighteen, I think that would be good 14 00:00:53,240 --> 00:00:55,240 Speaker 1: time to put in a rate cut. The problem is 15 00:00:55,280 --> 00:00:56,920 Speaker 1: if you put in the rate cut right now and 16 00:00:56,920 --> 00:00:59,279 Speaker 1: then people people will say, well, what's next, and so 17 00:00:59,320 --> 00:01:01,880 Speaker 1: you could quickly down to zero. And the Federal Reserve 18 00:01:02,000 --> 00:01:05,119 Speaker 1: is really the only central bank with the capability of producing, 19 00:01:05,520 --> 00:01:08,880 Speaker 1: of providing major rate cuts and the rate any rate 20 00:01:08,880 --> 00:01:11,320 Speaker 1: cuts won't really help the economy. I mean that that 21 00:01:11,360 --> 00:01:14,280 Speaker 1: should be clear. What rate cuts do is they validate 22 00:01:14,319 --> 00:01:17,520 Speaker 1: the drop and long term interest rates, and those very 23 00:01:17,560 --> 00:01:20,000 Speaker 1: low long term interestrates one ten on a tenure treasury 24 00:01:20,400 --> 00:01:22,679 Speaker 1: make it very difficult for people to avoid stocks. And 25 00:01:22,720 --> 00:01:24,600 Speaker 1: so what what I think lower rates really do is 26 00:01:24,640 --> 00:01:26,399 Speaker 1: they put a floor under global stocks. I think they 27 00:01:26,400 --> 00:01:28,200 Speaker 1: should do it, but I think they should take their 28 00:01:28,240 --> 00:01:30,880 Speaker 1: time because we're only the early chapters of what this 29 00:01:30,959 --> 00:01:33,759 Speaker 1: virus could mean for the global economy. John, We've gone 30 00:01:33,920 --> 00:01:37,919 Speaker 1: almost bear market negative seventeen percent or so at the worst, 31 00:01:38,000 --> 00:01:40,040 Speaker 1: and we're back up to a correctional level. I mean, 32 00:01:40,040 --> 00:01:42,720 Speaker 1: we're not supposed to be hysterical at a correction level. Yeah. 33 00:01:42,720 --> 00:01:44,840 Speaker 1: The question I heard a lot over the last twenty 34 00:01:44,840 --> 00:01:46,720 Speaker 1: four hours is whether you should reach for the post 35 00:01:46,800 --> 00:01:50,640 Speaker 1: q FO playbook and whether you just write this rally now. 36 00:01:50,960 --> 00:01:53,440 Speaker 1: I think somethings are very different compared to what they 37 00:01:53,440 --> 00:01:56,080 Speaker 1: were eighteen months ago. Let's say David Kelly, I mean, 38 00:01:56,080 --> 00:01:58,080 Speaker 1: what's the compared and contrast here If it's not q 39 00:01:58,280 --> 00:02:02,160 Speaker 1: for two eighteen, are you comparing this to Dr Kelly? Well, 40 00:02:02,160 --> 00:02:03,840 Speaker 1: of course, the whole point is that there isn't an 41 00:02:03,840 --> 00:02:06,520 Speaker 1: easy playbook. If there was an easy playbook, the uncertainty 42 00:02:06,560 --> 00:02:09,000 Speaker 1: wouldn't be as great and the markets would bounced back faster. 43 00:02:09,600 --> 00:02:11,200 Speaker 1: I think, you know, it's one of those cases we've 44 00:02:11,200 --> 00:02:12,760 Speaker 1: got to think about what do we know and what 45 00:02:12,840 --> 00:02:14,400 Speaker 1: don't we know. There's a lot we don't know. We 46 00:02:14,400 --> 00:02:16,160 Speaker 1: don't know how far this virus is going to spread. 47 00:02:16,200 --> 00:02:17,920 Speaker 1: We don't know how many of these people this virus 48 00:02:17,960 --> 00:02:20,280 Speaker 1: is that they're going to kill. What we do know 49 00:02:20,360 --> 00:02:21,919 Speaker 1: is it's not gonna last forever. I mean, this is 50 00:02:21,960 --> 00:02:24,960 Speaker 1: not a multi year event. Um, it will take a 51 00:02:25,000 --> 00:02:26,920 Speaker 1: while to get a vaccine up and running, but I'm 52 00:02:26,960 --> 00:02:29,679 Speaker 1: sure that they will get that done. You know, so 53 00:02:29,960 --> 00:02:32,080 Speaker 1: twelve eighteen months down the road, we're gonna be talking 54 00:02:32,080 --> 00:02:34,960 Speaker 1: about the recovery from whatever this was. And I think 55 00:02:34,960 --> 00:02:36,800 Speaker 1: for long term investors, then what you have to think 56 00:02:36,840 --> 00:02:38,720 Speaker 1: about as well, what do I own that can ride 57 00:02:38,720 --> 00:02:41,080 Speaker 1: at the storm? And this is when good balance sheets matter. 58 00:02:41,520 --> 00:02:43,040 Speaker 1: What what do I own the can ride at the 59 00:02:43,040 --> 00:02:45,120 Speaker 1: storm and can benefit from a rebound? So I think 60 00:02:45,120 --> 00:02:46,960 Speaker 1: people need to take a long term view on this. 61 00:02:47,000 --> 00:02:49,160 Speaker 1: But you know, this could The whole point is this 62 00:02:49,200 --> 00:02:51,720 Speaker 1: could get very bad for the global economy because this 63 00:02:51,720 --> 00:02:54,160 Speaker 1: this virus is just lethal enough for everybody to pay 64 00:02:54,200 --> 00:02:57,360 Speaker 1: attention and for to slow down the global economy and 65 00:02:57,400 --> 00:03:00,240 Speaker 1: called social distancing and so forth, And then does it 66 00:03:00,240 --> 00:03:03,720 Speaker 1: seems to be contagious enough that it could become very widespread? 67 00:03:03,760 --> 00:03:06,240 Speaker 1: But we really still have some some questions in that. 68 00:03:06,360 --> 00:03:08,880 Speaker 1: So there's there's tough times ahead. I mean, I think 69 00:03:08,880 --> 00:03:11,280 Speaker 1: the way to think about this is was going to 70 00:03:11,320 --> 00:03:14,000 Speaker 1: be the year of the election, that that script has 71 00:03:14,040 --> 00:03:16,639 Speaker 1: gone twenties, the year of the virus. But if you're 72 00:03:16,680 --> 00:03:19,160 Speaker 1: an investor, you should be investing not just for but 73 00:03:19,120 --> 00:03:22,280 Speaker 1: also two and so forth. So you've got to take 74 00:03:22,280 --> 00:03:23,760 Speaker 1: a long term view. We don't know how deep it 75 00:03:23,760 --> 00:03:25,560 Speaker 1: will be, we do kind of know how long it 76 00:03:25,600 --> 00:03:27,800 Speaker 1: will last. So, David, if you want to take a 77 00:03:27,800 --> 00:03:30,400 Speaker 1: long view and you don't think that rate cuts are 78 00:03:30,400 --> 00:03:33,400 Speaker 1: really going to do that much in the short term, 79 00:03:33,520 --> 00:03:36,920 Speaker 1: what are you doing in terms of selling into the 80 00:03:36,960 --> 00:03:38,840 Speaker 1: brief rally or sort of how are you trying to 81 00:03:38,840 --> 00:03:42,120 Speaker 1: take advantage of the big swings one direction or another 82 00:03:42,600 --> 00:03:45,680 Speaker 1: that seemed to be driven by sentiment right now? Well, 83 00:03:45,720 --> 00:03:49,320 Speaker 1: of course, portfolio managers are working very very hard on 84 00:03:49,360 --> 00:03:52,000 Speaker 1: this at a micro level. I mean, I think for 85 00:03:52,120 --> 00:03:55,040 Speaker 1: long term investors, the sort of advice i'd give is 86 00:03:55,040 --> 00:03:58,040 Speaker 1: is you know, just the question is not when do 87 00:03:58,120 --> 00:03:59,600 Speaker 1: not try and get the time of this right. The 88 00:03:59,680 --> 00:04:01,800 Speaker 1: question is what do you have a portfolio that is 89 00:04:01,840 --> 00:04:04,080 Speaker 1: appropriate for where you are in life? And are you 90 00:04:04,120 --> 00:04:06,840 Speaker 1: over invest in stuff that's just too expensive? So I 91 00:04:06,880 --> 00:04:09,640 Speaker 1: think this is a time to be somewhat conservative. Make 92 00:04:09,680 --> 00:04:12,880 Speaker 1: sure that you're your owning companies with good balance sheets, 93 00:04:12,880 --> 00:04:15,040 Speaker 1: with good cash flow, with an ability to wide out 94 00:04:15,040 --> 00:04:17,600 Speaker 1: what could be you know, a pretty rough year. What 95 00:04:17,640 --> 00:04:20,400 Speaker 1: are you doing to adjust your economic growth numbers? I mean, 96 00:04:20,440 --> 00:04:22,760 Speaker 1: let's get out front of Bruce Kasman and your acclaimed 97 00:04:22,760 --> 00:04:26,599 Speaker 1: weekly Prospects Friday afternoon, David Kelly, what are you doing 98 00:04:26,880 --> 00:04:29,520 Speaker 1: in terms of the economic call wrapped around this G 99 00:04:29,720 --> 00:04:33,920 Speaker 1: seven meeting. It's um, It's it's very it's very tricky. 100 00:04:33,920 --> 00:04:36,479 Speaker 1: I mean, the problem is that the traditional macroeconomic models 101 00:04:36,480 --> 00:04:38,400 Speaker 1: are not going to give you the answer here. Um. 102 00:04:38,520 --> 00:04:40,720 Speaker 1: In fact, it's also if this turns into recessions, a 103 00:04:40,760 --> 00:04:43,600 Speaker 1: very unusual recession, because this one will be centered now 104 00:04:43,640 --> 00:04:45,960 Speaker 1: I think in the service sector. You know, I know, 105 00:04:46,240 --> 00:04:49,080 Speaker 1: global manufacturing just hit its worst number since May of 106 00:04:49,200 --> 00:04:51,920 Speaker 1: two thousand and nine. The global p M I s yesterday. 107 00:04:51,960 --> 00:04:55,520 Speaker 1: But but actually the real risk global global services, and 108 00:04:55,560 --> 00:04:57,960 Speaker 1: we haven't seen that, so we just don't know. You know, 109 00:04:58,040 --> 00:05:02,680 Speaker 1: if you take entertainment, hotels, airlines, travel, you add all 110 00:05:02,720 --> 00:05:05,040 Speaker 1: that together, how much of it drages I put in 111 00:05:05,040 --> 00:05:07,880 Speaker 1: the economy. It's very hard to model this. So we're 112 00:05:08,000 --> 00:05:10,000 Speaker 1: we're we're feeling in the dark a little bit here. 113 00:05:10,080 --> 00:05:12,599 Speaker 1: It's I think that I think we may try and 114 00:05:12,600 --> 00:05:16,160 Speaker 1: look at this more from an employment perspective rather than 115 00:05:16,320 --> 00:05:20,000 Speaker 1: a demand perspective because the usual models of pent up demand, 116 00:05:20,200 --> 00:05:22,920 Speaker 1: cyclical goods, that's not going to drive this at these 117 00:05:22,920 --> 00:05:24,839 Speaker 1: economic models. We're gonna have to think a little bit 118 00:05:24,839 --> 00:05:27,000 Speaker 1: more about what it really means for the employment decision 119 00:05:27,360 --> 00:05:31,040 Speaker 1: by companies, particularly companies in the service sectors and take use. 120 00:05:31,160 --> 00:05:32,760 Speaker 1: It takes a little while to get to get a 121 00:05:32,800 --> 00:05:34,920 Speaker 1: handle on that. What this is really important then, because 122 00:05:34,920 --> 00:05:37,320 Speaker 1: we can put together some policies that help these companies 123 00:05:37,360 --> 00:05:39,920 Speaker 1: through this rough part of the economy through the early 124 00:05:39,920 --> 00:05:42,120 Speaker 1: part of twenty What would you like to see from 125 00:05:42,160 --> 00:05:45,239 Speaker 1: policymakers with that in mind, Well, yeah, I think certainly 126 00:05:45,279 --> 00:05:48,039 Speaker 1: some of some significant help from a small business administration. 127 00:05:48,040 --> 00:05:49,839 Speaker 1: I mean that there there are some companies of course, 128 00:05:49,880 --> 00:05:53,400 Speaker 1: who are over levered for for bad reasons, you know, 129 00:05:53,600 --> 00:05:54,880 Speaker 1: and you don't want to sort of have a moral 130 00:05:54,920 --> 00:05:57,000 Speaker 1: hazard issue here, but I think there are a lot 131 00:05:57,120 --> 00:06:02,320 Speaker 1: of smaller companies, particularly in those ism, travel, entertainment, leisure sectors, 132 00:06:02,480 --> 00:06:04,679 Speaker 1: who are going to be really strapped for cash flow. 133 00:06:04,960 --> 00:06:08,480 Speaker 1: And I think anything the government can do to UM, 134 00:06:08,520 --> 00:06:11,560 Speaker 1: you know, extend low interest loans, maybe give them some 135 00:06:11,600 --> 00:06:14,400 Speaker 1: sort of tax break, something to help small businesses and 136 00:06:14,520 --> 00:06:19,640 Speaker 1: entertainment leisure industry businesses to keep them all afloat through 137 00:06:20,920 --> 00:06:25,600 Speaker 1: and UM will be a very good thing. And also 138 00:06:25,760 --> 00:06:29,720 Speaker 1: things that perhaps help companies keep people employed. And you know, 139 00:06:29,760 --> 00:06:32,599 Speaker 1: they just don't don't lay off all workers and just 140 00:06:32,640 --> 00:06:34,440 Speaker 1: because businesses sewing down, so you've got to try and 141 00:06:34,560 --> 00:06:36,680 Speaker 1: focus on that point to this statement is actually where 142 00:06:36,680 --> 00:06:38,360 Speaker 1: I have a little bit of faith in the e C. Bay. 143 00:06:38,360 --> 00:06:40,160 Speaker 1: There's been so much talking markets that they don't have 144 00:06:40,200 --> 00:06:42,480 Speaker 1: any bullets left. They can't cut rights, they can't do 145 00:06:42,520 --> 00:06:45,159 Speaker 1: more key way. Actually think they already have the tools 146 00:06:45,200 --> 00:06:48,600 Speaker 1: in place to do some targeted lending done. They well, yeah, 147 00:06:48,640 --> 00:06:50,160 Speaker 1: that's that's right. And I think we I think we 148 00:06:50,360 --> 00:06:53,240 Speaker 1: this is a this is there aren't many things that 149 00:06:53,279 --> 00:06:55,120 Speaker 1: we can do on a macro level to try and 150 00:06:55,160 --> 00:06:57,680 Speaker 1: help things out, because this is not something you know. Again, 151 00:06:57,720 --> 00:06:59,680 Speaker 1: if you have a problem, which is in the cyclical 152 00:06:59,680 --> 00:07:02,120 Speaker 1: sector things like housing, you cut mortgage rates, people want 153 00:07:02,160 --> 00:07:04,040 Speaker 1: to buy houses. Cutting mortgag rates are not going to 154 00:07:04,080 --> 00:07:06,000 Speaker 1: make you want to go to the theater, um and 155 00:07:06,040 --> 00:07:09,000 Speaker 1: so that so that's that's a problem. But I think, yes, 156 00:07:09,120 --> 00:07:11,240 Speaker 1: a small business lending, cheaper lending, but also I think 157 00:07:11,240 --> 00:07:13,240 Speaker 1: you may need something of the physical side so that 158 00:07:13,680 --> 00:07:15,680 Speaker 1: we're not encouraging banks just to lose money on this. 159 00:07:15,720 --> 00:07:19,880 Speaker 1: We're gonna have to fund some way remunerating lenders um 160 00:07:20,200 --> 00:07:23,000 Speaker 1: or otherwise getting money to small businesses to to make 161 00:07:23,040 --> 00:07:26,200 Speaker 1: them help them write this out. David Kelly, thank you 162 00:07:26,280 --> 00:07:29,240 Speaker 1: so much. Thanks, I greatly appreciate this morning. Good brief there, 163 00:07:29,280 --> 00:07:34,960 Speaker 1: and of course across their wide platform. I'm sure Christopher 164 00:07:35,040 --> 00:07:37,760 Speaker 1: run is something folks, I'm a big believer in because 165 00:07:37,800 --> 00:07:40,320 Speaker 1: he refuses to catch the knife in the dark. That's 166 00:07:40,320 --> 00:07:44,840 Speaker 1: called stochastic analysis. He and I share an affection for 167 00:07:44,960 --> 00:07:47,880 Speaker 1: not doing stochastic analysis, John, which means you've got to 168 00:07:47,920 --> 00:07:50,560 Speaker 1: find the trend. John, have you seen the trend in 169 00:07:50,600 --> 00:07:54,120 Speaker 1: the last forty eight hours out there somewhere forty hours, 170 00:07:54,120 --> 00:07:55,680 Speaker 1: the trend looks a little bit better than what it 171 00:07:55,680 --> 00:07:58,440 Speaker 1: looked like maybe a week ago. Are you comfortable with this? 172 00:07:58,600 --> 00:08:01,400 Speaker 1: Christopher Royan s frateaguous plotner had a technical Macris strategy, 173 00:08:01,480 --> 00:08:03,720 Speaker 1: joins us. Now, how comfortably you with the routy? Well, 174 00:08:03,760 --> 00:08:06,040 Speaker 1: these moves are never meant to be comfortable. Let's get 175 00:08:06,080 --> 00:08:07,880 Speaker 1: that on the record here. And I think when you 176 00:08:07,920 --> 00:08:11,040 Speaker 1: go back and you look historically at how markets bottom, 177 00:08:11,120 --> 00:08:14,280 Speaker 1: it's a process and there's drama involved, and it's never easy. 178 00:08:14,680 --> 00:08:17,520 Speaker 1: Went back and we looked at the low, the eleven 179 00:08:17,600 --> 00:08:22,080 Speaker 1: low and low, that initial decline, that bang as we 180 00:08:22,160 --> 00:08:25,160 Speaker 1: call it, always got you within about eighty percent of 181 00:08:25,240 --> 00:08:28,080 Speaker 1: what was ultimately the final low. So you know, let's 182 00:08:28,080 --> 00:08:32,959 Speaker 1: go back to the low last week somewhere around fifty. 183 00:08:33,000 --> 00:08:35,640 Speaker 1: I would feel pretty good in saying I would guess 184 00:08:35,640 --> 00:08:38,440 Speaker 1: where within eighty or what will be the final low 185 00:08:38,480 --> 00:08:40,520 Speaker 1: of this move. But I don't want to get too cute. 186 00:08:40,760 --> 00:08:43,360 Speaker 1: You have price extremes and you have sentiment extremes. While 187 00:08:43,400 --> 00:08:46,400 Speaker 1: there maybe a process, I think we're close enough where 188 00:08:46,400 --> 00:08:48,640 Speaker 1: the conditions for a tradeable low are certainly in place. 189 00:08:48,760 --> 00:08:50,440 Speaker 1: Told me about a sentiment extremes. When you look at 190 00:08:50,440 --> 00:08:53,000 Speaker 1: the options market right now, if we wash things out, 191 00:08:53,000 --> 00:08:54,680 Speaker 1: what does that look like in the moment? Yeah, that 192 00:08:54,800 --> 00:08:56,640 Speaker 1: is the one place where I think the signals are 193 00:08:56,640 --> 00:08:59,240 Speaker 1: probably most compelling. Here we had one of the biggest 194 00:08:59,240 --> 00:09:02,280 Speaker 1: backwardation in the VIX curve that we've ever seen. Uh 195 00:09:02,360 --> 00:09:06,120 Speaker 1: spot vix was trading almost points above the third month future, 196 00:09:06,200 --> 00:09:10,200 Speaker 1: so certainly extreme there. Put call ratios have spiked for 197 00:09:10,280 --> 00:09:13,280 Speaker 1: five days in a row. That is very very rare, 198 00:09:13,440 --> 00:09:17,240 Speaker 1: and historically it's very very bullish. I'm wondering going forward, 199 00:09:17,480 --> 00:09:20,320 Speaker 1: the marginal buyer who you're looking at to sort of 200 00:09:20,360 --> 00:09:21,959 Speaker 1: tip the difference. I mean, a lot of people are 201 00:09:21,960 --> 00:09:24,040 Speaker 1: watching the mom and pop investor to see whether they're 202 00:09:24,040 --> 00:09:26,520 Speaker 1: going to withdraw funds. How much how closely do you 203 00:09:26,559 --> 00:09:28,520 Speaker 1: pay attention to that. I mean, I say this out 204 00:09:28,520 --> 00:09:30,480 Speaker 1: of respect, but I think this whole cycle, the mom 205 00:09:30,480 --> 00:09:33,360 Speaker 1: and pop investor has really been irrelevant. This hasn't been 206 00:09:33,400 --> 00:09:35,920 Speaker 1: the driver of this bull market. This bull market has 207 00:09:35,920 --> 00:09:39,320 Speaker 1: been driven by the corporations themselves, right, and get bond 208 00:09:39,360 --> 00:09:42,760 Speaker 1: yields down, that's an incentive for more buy backs. And 209 00:09:42,760 --> 00:09:45,720 Speaker 1: I think secondly, the big buyer or the big player 210 00:09:45,720 --> 00:09:48,520 Speaker 1: in this cycle has been passive, right, And what is 211 00:09:48,640 --> 00:09:51,240 Speaker 1: very very tied to passive is four oh one k 212 00:09:51,440 --> 00:09:54,080 Speaker 1: money every two weeks. So I think if we're going 213 00:09:54,120 --> 00:09:56,800 Speaker 1: to make a structural call, I think the employment data 214 00:09:56,840 --> 00:09:59,120 Speaker 1: is going to be really important given the extent to 215 00:09:59,200 --> 00:10:01,600 Speaker 1: which um they were such a big driver of passive. 216 00:10:01,760 --> 00:10:04,560 Speaker 1: Do you expect that companies will come back in here 217 00:10:04,640 --> 00:10:06,719 Speaker 1: and do share buy backs given the fact that their 218 00:10:06,720 --> 00:10:09,080 Speaker 1: shares are discounted substantially from where they were a couple 219 00:10:09,080 --> 00:10:11,400 Speaker 1: of weeks. You know, it's always been interesting every time 220 00:10:11,400 --> 00:10:14,920 Speaker 1: we've gotten bond yields lower so quickly over such a 221 00:10:14,960 --> 00:10:17,960 Speaker 1: fast period. We've actually seen Apple come into the debt 222 00:10:18,000 --> 00:10:21,520 Speaker 1: market and do something, and that's kind of provided some 223 00:10:21,600 --> 00:10:24,280 Speaker 1: type of a confidence low. So I'm actually really curious 224 00:10:24,320 --> 00:10:26,280 Speaker 1: to see if you see some big tech companies enter 225 00:10:26,320 --> 00:10:28,720 Speaker 1: the debt markets and issues some bonds. Here let's talk 226 00:10:28,800 --> 00:10:32,120 Speaker 1: trend based technical analysis. It's always fun to do on radio. 227 00:10:32,160 --> 00:10:35,080 Speaker 1: We'll try to do that, folks, without people driving off 228 00:10:35,960 --> 00:10:38,520 Speaker 1: the road as they can. How do you form a bottom? 229 00:10:38,600 --> 00:10:41,680 Speaker 1: Is it? Is it John Maggie of a double bottom 230 00:10:41,679 --> 00:10:43,800 Speaker 1: and up you go? Is it is a point and 231 00:10:43,880 --> 00:10:47,800 Speaker 1: figure of a low low pole top of Hugh bloom 232 00:10:47,840 --> 00:10:53,720 Speaker 1: intil How does Chrisparone structurally see a bottom in SPX. 233 00:10:54,559 --> 00:10:57,280 Speaker 1: We use a phrase where we call a bang and 234 00:10:57,320 --> 00:11:01,200 Speaker 1: a whimper. The bangs that initial club mactic high drama 235 00:11:01,240 --> 00:11:03,040 Speaker 1: to cline. Now, that's when we get the decent cup 236 00:11:03,120 --> 00:11:05,600 Speaker 1: of coffee here, and then the whimpers when we realize 237 00:11:07,240 --> 00:11:09,360 Speaker 1: the whimper is a couple of weeks or a couple 238 00:11:09,400 --> 00:11:12,400 Speaker 1: of months later, where you've had time to justify everything 239 00:11:12,440 --> 00:11:15,240 Speaker 1: that can go wrong. You see the EPs downgrades, you 240 00:11:15,320 --> 00:11:18,520 Speaker 1: see the growth downgrades, and it always feels worse on 241 00:11:18,559 --> 00:11:21,440 Speaker 1: that whimper, but the internals are actually better. You tend 242 00:11:21,440 --> 00:11:25,600 Speaker 1: to see fewer stocks breaking down, less volatility. So that's 243 00:11:25,640 --> 00:11:27,960 Speaker 1: a pretty decent playbook. I think we've had the bang 244 00:11:28,120 --> 00:11:29,760 Speaker 1: last week was the bang. The whipper might be in 245 00:11:29,760 --> 00:11:32,800 Speaker 1: front explaining I'm death on this folks, Just full disclosure here. 246 00:11:32,920 --> 00:11:37,240 Speaker 1: The death cross, the the live cross, or well, thank 247 00:11:37,280 --> 00:11:39,480 Speaker 1: god I haven't seen that in the last forty eight hours. 248 00:11:39,760 --> 00:11:41,920 Speaker 1: To me, the death Cross is the greatest about them 249 00:11:41,920 --> 00:11:44,400 Speaker 1: technical malarkey ever known to man kind? Am I on 250 00:11:44,760 --> 00:11:47,360 Speaker 1: the vine page? Yeah, I would tend to agree with that. 251 00:11:47,440 --> 00:11:49,199 Speaker 1: I think what's more important is when you look at 252 00:11:49,640 --> 00:11:52,439 Speaker 1: Malarkey's Joe Biden phrase, we should do as disclaimer the 253 00:11:52,520 --> 00:11:56,080 Speaker 1: Vice President United States uses that word on Super Tuesday. Continue. 254 00:11:56,120 --> 00:11:59,360 Speaker 1: When you look at the setup proceding the last several weeks, 255 00:11:59,440 --> 00:12:02,080 Speaker 1: we entered this period with eight percent of stocks in 256 00:12:02,080 --> 00:12:03,840 Speaker 1: the SMP in an up t end. We entered this 257 00:12:03,880 --> 00:12:07,800 Speaker 1: period with seventeen of twenty twenty markets recently making a 258 00:12:07,800 --> 00:12:09,640 Speaker 1: new fifty two week high. That is typically not where 259 00:12:09,640 --> 00:12:12,600 Speaker 1: bear markets come from. Bear markets are often proceeded with 260 00:12:13,200 --> 00:12:16,400 Speaker 1: decay from the inside markets rolling over, we tend to 261 00:12:16,440 --> 00:12:19,720 Speaker 1: see credit conditions as well, credit leading lower that didn't 262 00:12:19,760 --> 00:12:21,960 Speaker 1: proceed this decline. So I think, if this is going 263 00:12:22,040 --> 00:12:24,280 Speaker 1: to be the start of some bigger problem, and that's 264 00:12:24,320 --> 00:12:25,840 Speaker 1: not our call, but if this is the start of 265 00:12:25,920 --> 00:12:28,120 Speaker 1: some bigger problem, we're gonna learn that over time. Yeah, 266 00:12:28,160 --> 00:12:29,600 Speaker 1: I think to say the end of the bull market, 267 00:12:29,640 --> 00:12:31,400 Speaker 1: you've got to believe that we're gonna have a recession 268 00:12:31,520 --> 00:12:33,120 Speaker 1: in the United States, or at least you've got to 269 00:12:33,120 --> 00:12:35,200 Speaker 1: believe the laber market gets hit in the material white. 270 00:12:35,200 --> 00:12:37,040 Speaker 1: Can you imagine a bear market in America with the 271 00:12:37,040 --> 00:12:40,000 Speaker 1: setup that we have, absolutely us recession, Well, This is 272 00:12:40,040 --> 00:12:41,679 Speaker 1: where I might push back a little bit, Jonathan. I 273 00:12:41,720 --> 00:12:43,800 Speaker 1: think we've had three bear markets over the last ten years. 274 00:12:44,040 --> 00:12:45,800 Speaker 1: I think twenty eleven was a bear market. I think 275 00:12:46,760 --> 00:12:48,920 Speaker 1: sixteen was one, and I think eighteen was one as well. 276 00:12:49,360 --> 00:12:51,640 Speaker 1: I recognize we never got SMP down twenty, but you 277 00:12:51,720 --> 00:12:54,920 Speaker 1: had seventy of all global stocks down twenty or more. 278 00:12:55,040 --> 00:12:57,199 Speaker 1: So you know, one thing we always tell clients and 279 00:12:57,280 --> 00:12:59,600 Speaker 1: we write in our own work is we just reject 280 00:12:59,679 --> 00:13:02,840 Speaker 1: the idea it's a myth of a tenura bawl market. 281 00:13:02,920 --> 00:13:06,160 Speaker 1: There have been some meaningful shakeouts along the way. If 282 00:13:06,200 --> 00:13:09,560 Speaker 1: you're just joining us Bloomberg Radio worldwide with huge news 283 00:13:09,600 --> 00:13:11,640 Speaker 1: slow this morning, we've had a little green and then 284 00:13:11,720 --> 00:13:14,000 Speaker 1: we really pulled back here nicely with red and green 285 00:13:14,040 --> 00:13:17,240 Speaker 1: on the screen. SMP future is flat right now with 286 00:13:17,400 --> 00:13:21,679 Speaker 1: us is Christopher Verona Strategious Research Partners as we try 287 00:13:21,720 --> 00:13:25,040 Speaker 1: to glean the market direction. John just getting the headline 288 00:13:25,040 --> 00:13:27,719 Speaker 1: from Taro Aso, the Japanese finance minister, that that G 289 00:13:27,880 --> 00:13:31,920 Speaker 1: seven teleconference call with finance ministers has been held. Waiting 290 00:13:31,960 --> 00:13:33,920 Speaker 1: to see what the statement is. That headline just coming 291 00:13:33,920 --> 00:13:36,560 Speaker 1: across the bloom they've had the call. We decided to 292 00:13:36,600 --> 00:13:38,640 Speaker 1: publish a G seven statement on this, So it's the 293 00:13:38,720 --> 00:13:41,319 Speaker 1: Japanese finance mr drive in the news flow at the moment. 294 00:13:41,320 --> 00:13:43,640 Speaker 1: I haven't seen the statement yet, but just for Anny 295 00:13:43,640 --> 00:13:46,440 Speaker 1: one listening right now, this news is starting to come out. 296 00:13:46,559 --> 00:13:50,920 Speaker 1: This call has been we've call has taken place. Now 297 00:13:50,960 --> 00:13:52,720 Speaker 1: the finance misters is starting to release some of the 298 00:13:52,760 --> 00:13:55,920 Speaker 1: details of that kill. Chris to the technicals here and 299 00:13:56,400 --> 00:13:58,800 Speaker 1: you did a great work on this in your latest deck. 300 00:13:59,120 --> 00:14:03,160 Speaker 1: High beta, low beta. Describe what beta is to our audience, 301 00:14:03,480 --> 00:14:06,720 Speaker 1: and do you choose the volatile, the high beta or 302 00:14:06,720 --> 00:14:10,240 Speaker 1: do you choose the low the toothpaste companies to be in. 303 00:14:11,320 --> 00:14:13,960 Speaker 1: I think what's been remarkable about the last several weeks 304 00:14:14,320 --> 00:14:17,600 Speaker 1: is for a very risk off macro environment, things like 305 00:14:17,679 --> 00:14:20,920 Speaker 1: staples and utilities have been flushed and wrenched just like 306 00:14:20,960 --> 00:14:23,920 Speaker 1: every other group, right there was that indiscriminate selling that 307 00:14:23,960 --> 00:14:26,760 Speaker 1: you often see towards the end of these corrective phases. Now, 308 00:14:26,920 --> 00:14:29,920 Speaker 1: what we've seen historically coming off of the low the 309 00:14:30,040 --> 00:14:33,240 Speaker 1: higher beta, the higher volatile stocks tend to be pretty 310 00:14:33,280 --> 00:14:35,600 Speaker 1: big outperformers. So I think if you're looking for clues 311 00:14:35,640 --> 00:14:37,160 Speaker 1: over the next couple of weeks, that's going to be 312 00:14:37,200 --> 00:14:39,920 Speaker 1: really important. Another clue has been the Rustle two thousand 313 00:14:40,000 --> 00:14:43,480 Speaker 1: small and MidCap shares, which have consistently underperformed year after 314 00:14:43,600 --> 00:14:45,520 Speaker 1: year and are down to almost twice as much or 315 00:14:45,560 --> 00:14:47,560 Speaker 1: more than twice as much as the SMP five hundred 316 00:14:47,600 --> 00:14:49,960 Speaker 1: year to date. I'm trying to understand the signal from that, 317 00:14:49,960 --> 00:14:54,320 Speaker 1: because typically that's pretty barished. I completely disagree, I respectfully 318 00:14:54,320 --> 00:15:00,720 Speaker 1: disagree when you look historically, continue that, when you look 319 00:15:00,760 --> 00:15:03,440 Speaker 1: historically in the great secular bow markets of all time 320 00:15:04,200 --> 00:15:08,080 Speaker 1: six to nineteen sixty nine to two thousand, small caps 321 00:15:08,080 --> 00:15:11,360 Speaker 1: are massive underperformers in both of those periods. Small caps 322 00:15:11,440 --> 00:15:14,560 Speaker 1: underperform always in secular bow markets because if you're still 323 00:15:14,560 --> 00:15:17,040 Speaker 1: a small cap ten years into advance, what have you 324 00:15:17,080 --> 00:15:19,360 Speaker 1: done wrong? Right? Why are you still small cap stock 325 00:15:19,400 --> 00:15:22,840 Speaker 1: ten years into a rally? Shouldn't you have graduated? And conversely, 326 00:15:23,080 --> 00:15:25,520 Speaker 1: the bad large caps, you know where they go, they 327 00:15:25,560 --> 00:15:28,520 Speaker 1: go down, right, the bad midcaps they go down the 328 00:15:28,520 --> 00:15:31,800 Speaker 1: cap scale. So by the ten fifteen years into an advance, 329 00:15:31,880 --> 00:15:35,040 Speaker 1: you're left with the most undesirable constituency at Christopher ro 330 00:15:35,040 --> 00:15:38,240 Speaker 1: And Mastratiguez, pondent and head of Tennicala mac tries strategy 331 00:15:41,520 --> 00:15:44,360 Speaker 1: right now to get us not to March eighteenth, but 332 00:15:44,440 --> 00:15:46,960 Speaker 1: far more importantly, to get us to the night. We 333 00:15:47,040 --> 00:15:50,560 Speaker 1: have truly one of the leaders in doing more intelligent polling. 334 00:15:50,920 --> 00:15:53,880 Speaker 1: Muhammed Units is editor in chief with Gallop, and he 335 00:15:53,960 --> 00:15:56,600 Speaker 1: joins us now on the way they look at the 336 00:15:56,640 --> 00:15:59,360 Speaker 1: presidential horse race, and they look at it much differently 337 00:15:59,440 --> 00:16:02,000 Speaker 1: than you know, numbers here and numbers there. Well, but 338 00:16:02,120 --> 00:16:04,480 Speaker 1: what is a key insight of your new data release 339 00:16:04,600 --> 00:16:09,400 Speaker 1: this morning? Um, Well, this morning and little little later tonight, 340 00:16:09,440 --> 00:16:12,840 Speaker 1: we will officially be releasing our new presidential approval number. 341 00:16:13,040 --> 00:16:18,280 Speaker 1: We have President Trump at forty seven percent approval disapproval UM. 342 00:16:18,360 --> 00:16:20,440 Speaker 1: That's a little bit low from his high which he 343 00:16:20,520 --> 00:16:26,920 Speaker 1: came to right after the impeachment situation unfolded. But more importantly, Um, 344 00:16:26,960 --> 00:16:29,320 Speaker 1: you know what you're just discussing in your earlier segment 345 00:16:29,400 --> 00:16:32,480 Speaker 1: is really I think where a huge question is for 346 00:16:32,560 --> 00:16:34,560 Speaker 1: us at Gallup that will track its just the economy 347 00:16:34,560 --> 00:16:38,200 Speaker 1: and how people feel about it. Um. The president tends 348 00:16:38,240 --> 00:16:41,280 Speaker 1: to get his best numbers on that Americans approve of 349 00:16:41,320 --> 00:16:44,760 Speaker 1: how he's managing the economy. We know from previous elections 350 00:16:44,760 --> 00:16:47,320 Speaker 1: that the economy is the number one issue that people 351 00:16:47,400 --> 00:16:49,840 Speaker 1: mention when we ask you know, what do you think 352 00:16:49,840 --> 00:16:52,600 Speaker 1: about when you're voting for president? UM. It's quickly followed 353 00:16:52,600 --> 00:16:56,400 Speaker 1: by healthcare and immigration. So the concern with the virus, 354 00:16:56,480 --> 00:16:59,880 Speaker 1: the market reaction last week, UM, and what that means 355 00:17:00,040 --> 00:17:03,720 Speaker 1: for Americans and their assessment of their economic outlook as 356 00:17:03,760 --> 00:17:06,920 Speaker 1: we get closer to November are really going to be key. UM. 357 00:17:06,960 --> 00:17:09,680 Speaker 1: The other critical metric I think for today really super 358 00:17:09,720 --> 00:17:13,560 Speaker 1: Tuesday in this UH. The competition we see unfolding very 359 00:17:13,640 --> 00:17:17,400 Speaker 1: dramatically now between Vice President Biden and Senator Sanders is 360 00:17:18,040 --> 00:17:21,080 Speaker 1: whether or not Americans will vote for a socialist. Right now, 361 00:17:21,119 --> 00:17:24,359 Speaker 1: we have Americans that have for years, would you vote 362 00:17:24,359 --> 00:17:28,720 Speaker 1: for somebody who was qualified but happens to be black, Hispanic, 363 00:17:28,800 --> 00:17:32,199 Speaker 1: day or lesbian, etcetera. The most resistance of all of 364 00:17:32,240 --> 00:17:35,600 Speaker 1: the categories we ask, including atheist, is actually socialists. So 365 00:17:35,680 --> 00:17:38,000 Speaker 1: fifty percent of Americans say they would not vote for 366 00:17:38,040 --> 00:17:41,080 Speaker 1: a socialist, forty three percent say they would just to 367 00:17:41,119 --> 00:17:44,639 Speaker 1: give your listeners. In comparison, they say they vote for 368 00:17:44,640 --> 00:17:48,760 Speaker 1: a black candidate, ninety four for a Hispanic So the 369 00:17:48,840 --> 00:17:52,720 Speaker 1: socialism thing is still a major challenge on the national level. 370 00:17:52,720 --> 00:17:56,040 Speaker 1: At least of course within the Democratic Party. Uh, there 371 00:17:56,080 --> 00:17:59,159 Speaker 1: are different attitudes than at the national level. But obviously 372 00:17:59,240 --> 00:18:02,919 Speaker 1: the debate that Democrats are having now is, um, is 373 00:18:03,040 --> 00:18:06,360 Speaker 1: that gonna be enough to beat President Trump. We've been 374 00:18:06,359 --> 00:18:10,080 Speaker 1: asking Democrats what they prioritize in this election, whether they 375 00:18:10,080 --> 00:18:11,639 Speaker 1: want to vote for something they agree with all the 376 00:18:11,680 --> 00:18:14,119 Speaker 1: issues or beat President Trump. And beating President Trump is 377 00:18:14,160 --> 00:18:17,159 Speaker 1: their priorities. Somehowme it makes me wonder why does Senator 378 00:18:17,200 --> 00:18:19,040 Speaker 1: Sanders do so one on the head to head poles 379 00:18:19,520 --> 00:18:23,679 Speaker 1: was the president of the States. Um. It's it really 380 00:18:23,760 --> 00:18:28,400 Speaker 1: depends on how those polls are gathered and how many 381 00:18:28,480 --> 00:18:32,080 Speaker 1: people are answering the really represented the population in those states. 382 00:18:32,119 --> 00:18:34,480 Speaker 1: State to state polling is very challenging here in the 383 00:18:34,560 --> 00:18:37,840 Speaker 1: United States. UM. The other thing to keep in mind 384 00:18:37,960 --> 00:18:41,080 Speaker 1: is turnout, so people can say what they want in 385 00:18:41,119 --> 00:18:44,359 Speaker 1: a poll. But if these candidates can't really get people 386 00:18:44,720 --> 00:18:47,080 Speaker 1: out on the day to vote, and we saw Senators 387 00:18:47,080 --> 00:18:50,560 Speaker 1: Standards for example, in the VATA really getting aggressive in 388 00:18:50,680 --> 00:18:53,600 Speaker 1: trying to get people to vote early. UM, it's still 389 00:18:53,720 --> 00:18:55,919 Speaker 1: you know, the polls are helpful safe to state, but 390 00:18:56,160 --> 00:18:59,560 Speaker 1: ultimately will have to see tonight where things lie. A 391 00:18:59,680 --> 00:19:02,040 Speaker 1: really critical part in some of these states is going 392 00:19:02,080 --> 00:19:05,399 Speaker 1: to be demographic. So we saw South Carolina and the 393 00:19:05,440 --> 00:19:09,560 Speaker 1: black vote really sort of bring President Biden much more 394 00:19:09,600 --> 00:19:13,320 Speaker 1: strongly into the forefront of the race. UM. But you 395 00:19:13,320 --> 00:19:15,919 Speaker 1: know he's gonna have challenges in other places where you 396 00:19:15,960 --> 00:19:18,720 Speaker 1: have younger voters, UM, and people that are much more 397 00:19:18,760 --> 00:19:22,720 Speaker 1: comfortable with questioning the establishment and the status quo, people 398 00:19:22,760 --> 00:19:27,040 Speaker 1: who gravitate more towards a narrative that Senator standards has 399 00:19:27,080 --> 00:19:29,920 Speaker 1: been provided. Moment just to just drew wrap things up, 400 00:19:30,000 --> 00:19:33,640 Speaker 1: I'm wondering, from your perspective with the economy, how closely 401 00:19:33,760 --> 00:19:37,879 Speaker 1: tied is sentiment to the stock market versus just whether 402 00:19:37,880 --> 00:19:42,480 Speaker 1: people can get jobs. That's a great question. Um. There 403 00:19:42,560 --> 00:19:45,919 Speaker 1: isn't an easy answer because it tends to change. Um. 404 00:19:46,000 --> 00:19:48,280 Speaker 1: One of the challenges and giving a straight answer. So 405 00:19:48,359 --> 00:19:51,960 Speaker 1: that really is the Great Recession, because people that are 406 00:19:52,000 --> 00:19:55,720 Speaker 1: assessing the economy today probably remember that and associate the 407 00:19:55,800 --> 00:20:00,919 Speaker 1: market very strongly with unemployment. You know, it's gonna be 408 00:20:01,240 --> 00:20:04,359 Speaker 1: hard to imagine a reality where the market tanks and 409 00:20:04,400 --> 00:20:08,080 Speaker 1: people still feel great about the economy. One thing that's 410 00:20:08,119 --> 00:20:11,720 Speaker 1: interesting that we found over time is that people claim 411 00:20:11,760 --> 00:20:14,040 Speaker 1: at least to be less invested in the economy than 412 00:20:14,080 --> 00:20:16,520 Speaker 1: they in the market, excuse me, than they were in 413 00:20:16,560 --> 00:20:19,399 Speaker 1: two thousand and eight. So when you compare, I'm asking 414 00:20:19,400 --> 00:20:21,879 Speaker 1: Americans do you have money in the stock market in 415 00:20:21,960 --> 00:20:25,160 Speaker 1: two thousand and eight? There are ten percent fewer Americans 416 00:20:25,240 --> 00:20:27,800 Speaker 1: today that say they have money in the stock market, 417 00:20:27,800 --> 00:20:30,680 Speaker 1: which is pretty remarkable considering how much growth we see 418 00:20:31,040 --> 00:20:34,320 Speaker 1: in the extremely thoughtful Mohammed units. Thank you so much. 419 00:20:34,320 --> 00:20:41,399 Speaker 1: It is different polling that from Gallop. This morning we 420 00:20:41,600 --> 00:20:44,040 Speaker 1: bring diet swamp grant thought and Chase economist. She joins 421 00:20:44,119 --> 00:20:46,439 Speaker 1: us on the phone for more diant fantastic to have 422 00:20:46,520 --> 00:20:48,680 Speaker 1: you with us, your expectations and how much weight you'll 423 00:20:48,680 --> 00:20:51,840 Speaker 1: put on the data as the week grows older, Well, 424 00:20:51,840 --> 00:20:54,520 Speaker 1: it is important we are going to see uh sort 425 00:20:54,560 --> 00:20:58,119 Speaker 1: of bounce back or rebound to the downside from the 426 00:20:58,200 --> 00:21:01,320 Speaker 1: unseasonably mild winter weathering or we got forty four thousand 427 00:21:01,320 --> 00:21:05,720 Speaker 1: construction worker jobs that added to that thousand in January 428 00:21:05,720 --> 00:21:08,639 Speaker 1: with unseasonally bought mild winter weather. We got the I 429 00:21:08,840 --> 00:21:12,359 Speaker 1: S M on manufacturing now and the coronavirus did show 430 00:21:12,480 --> 00:21:15,560 Speaker 1: up as one of the issues disrupting production activity. We 431 00:21:15,600 --> 00:21:18,160 Speaker 1: know moning is going to continue to decline, and then 432 00:21:18,200 --> 00:21:21,480 Speaker 1: we've got the ongoing restructuring in retail with retail closing. 433 00:21:21,560 --> 00:21:23,320 Speaker 1: So I think we're going to get a pretty weak 434 00:21:23,400 --> 00:21:25,880 Speaker 1: number around a hundred and forty thousand or so, which 435 00:21:25,880 --> 00:21:29,720 Speaker 1: will have only a small tinge of the coronavirus in it. 436 00:21:30,160 --> 00:21:32,760 Speaker 1: But we are coming off that high number in January. 437 00:21:32,840 --> 00:21:34,840 Speaker 1: It's a bit of a you know, sort of snap 438 00:21:34,880 --> 00:21:39,440 Speaker 1: back to normal after that unseasonally mild weather boosted the 439 00:21:39,520 --> 00:21:42,240 Speaker 1: January figure. Diana, I wanted to pick up on the 440 00:21:42,280 --> 00:21:45,119 Speaker 1: coronavirus effect and how bad it could be in the 441 00:21:45,160 --> 00:21:46,960 Speaker 1: United States. A lot of people saying that the US 442 00:21:47,040 --> 00:21:49,640 Speaker 1: is somewhat immune to the severe effects that we saw 443 00:21:49,760 --> 00:21:52,400 Speaker 1: over in China. But if you do get some sort 444 00:21:52,400 --> 00:21:56,480 Speaker 1: of slow down, how much could employment be reduced? The 445 00:21:56,560 --> 00:21:59,159 Speaker 1: great question. Actually, I don't think we are immune to 446 00:21:59,200 --> 00:22:01,440 Speaker 1: the effects. I think that's a foolish way to look 447 00:22:01,440 --> 00:22:03,520 Speaker 1: at it. Of course, I'm coming from someone whose child 448 00:22:03,560 --> 00:22:06,520 Speaker 1: just returned from Japan and another child who is severely 449 00:22:06,880 --> 00:22:09,800 Speaker 1: asthmatic and cannot afford to get pneumonia, and we already 450 00:22:09,840 --> 00:22:11,920 Speaker 1: went through the swine flu in my family, so I'm 451 00:22:12,040 --> 00:22:14,760 Speaker 1: very aware of how these things work. But on the 452 00:22:14,760 --> 00:22:16,399 Speaker 1: other side of it, I think it's very important. We've 453 00:22:16,440 --> 00:22:19,440 Speaker 1: already seen I've lost count of the number of cancelations. 454 00:22:19,480 --> 00:22:21,719 Speaker 1: I can't go to a meeting that I have at 455 00:22:21,720 --> 00:22:24,840 Speaker 1: the Chicago Fed on Friday this week because my daughter 456 00:22:24,880 --> 00:22:28,080 Speaker 1: just came back from Japan. These are really important because 457 00:22:28,080 --> 00:22:31,359 Speaker 1: those kind of interruptions to business activity, staying at home, 458 00:22:31,680 --> 00:22:34,879 Speaker 1: the nesting, these sort of preparing to deal with a 459 00:22:34,960 --> 00:22:37,680 Speaker 1: larger contagion is going to have an impact on the 460 00:22:37,760 --> 00:22:40,639 Speaker 1: US economy. Travel plans have already been canceled, the new 461 00:22:40,720 --> 00:22:43,199 Speaker 1: yorlines are being really hard hit, and we're looking at 462 00:22:43,200 --> 00:22:45,080 Speaker 1: about a half percent growth in the first half of 463 00:22:45,080 --> 00:22:47,880 Speaker 1: the year. That will nudge up the unemployment rate. That's 464 00:22:47,960 --> 00:22:49,879 Speaker 1: right where I wanted to go. Is a linkage of 465 00:22:49,960 --> 00:22:53,760 Speaker 1: that half percent of real g d P and what 466 00:22:53,960 --> 00:22:56,520 Speaker 1: is the mathematics to bring that over to the weekly 467 00:22:56,600 --> 00:23:00,199 Speaker 1: claims or to the monthly non farm payroll statistic. You know, 468 00:23:00,200 --> 00:23:01,600 Speaker 1: we're not going to see that for a couple of 469 00:23:01,600 --> 00:23:03,760 Speaker 1: weeks that I don't think we'll see this week. The 470 00:23:04,040 --> 00:23:08,159 Speaker 1: uptick in flows in layoffs related to the coronavirus. I 471 00:23:08,200 --> 00:23:09,840 Speaker 1: think that's going to show up more as we move 472 00:23:09,920 --> 00:23:12,879 Speaker 1: into marches or leg between when people first get for 473 00:23:12,920 --> 00:23:15,240 Speaker 1: a load in the layoffs on how they're going to 474 00:23:15,320 --> 00:23:17,679 Speaker 1: show up in the numbers. But I think as we 475 00:23:17,720 --> 00:23:19,760 Speaker 1: get into March, you're going to start to really see 476 00:23:19,800 --> 00:23:22,920 Speaker 1: these numbers, and you'll do it below that hundred thousand thresholds. 477 00:23:23,000 --> 00:23:26,159 Speaker 1: We need to keep the unemployment rate study. Dian swunk 478 00:23:26,240 --> 00:23:28,080 Speaker 1: with this folks, with Grant Thorte, and of course with 479 00:23:28,160 --> 00:23:32,960 Speaker 1: our Michigan academics and her heritage with Chicago straddling the 480 00:23:33,040 --> 00:23:36,480 Speaker 1: line between the White Sox and the Cubs. Always good 481 00:23:36,520 --> 00:23:38,879 Speaker 1: to speak to her of the spirit of the Midwest. Dian. 482 00:23:38,960 --> 00:23:42,560 Speaker 1: You know, well that path out of Chicago down south 483 00:23:42,680 --> 00:23:46,480 Speaker 1: into the auto heartland, all the auto suppliers and such. 484 00:23:46,920 --> 00:23:49,960 Speaker 1: How are they doing in the Midwest right now? So 485 00:23:50,160 --> 00:23:52,840 Speaker 1: right now, the automakers have done pretty well at being 486 00:23:52,880 --> 00:23:56,560 Speaker 1: able to sort of stump stem shortages and resource supply. 487 00:23:57,000 --> 00:24:00,400 Speaker 1: That said, the smallest suppliers in middle markets of players 488 00:24:00,440 --> 00:24:03,000 Speaker 1: that trickle up into the automakers are starting to have 489 00:24:03,040 --> 00:24:06,080 Speaker 1: real problems. We already know places like Long Beach where 490 00:24:06,080 --> 00:24:08,600 Speaker 1: a lot of parts and imports from trying to come 491 00:24:08,640 --> 00:24:11,359 Speaker 1: in the port is half of the long term and 492 00:24:11,400 --> 00:24:13,680 Speaker 1: have been laid off there, and I think that's very 493 00:24:13,680 --> 00:24:15,880 Speaker 1: important because you're going to start to see these parts 494 00:24:15,920 --> 00:24:19,679 Speaker 1: shortages work their way through the manufacturing spector much more 495 00:24:19,760 --> 00:24:22,240 Speaker 1: dramatically as we get into the first weeks of March. 496 00:24:22,480 --> 00:24:24,720 Speaker 1: Things that could keep going because they prepared for the 497 00:24:24,760 --> 00:24:27,520 Speaker 1: lunar New Year are now starting to catch up with them. 498 00:24:27,560 --> 00:24:30,679 Speaker 1: So from the moment, we're starting to see it trickle in, 499 00:24:30,760 --> 00:24:33,160 Speaker 1: but it will compound fairly rapidly as we get into 500 00:24:33,160 --> 00:24:35,640 Speaker 1: the weeks of March. Diane, this is such an important point, 501 00:24:35,760 --> 00:24:38,560 Speaker 1: especially as we talk about some sort of policy response 502 00:24:38,600 --> 00:24:42,560 Speaker 1: with the G seven meeting today and financial ministers meeting 503 00:24:42,600 --> 00:24:46,000 Speaker 1: and central bankers. The question is how much does that 504 00:24:46,119 --> 00:24:49,920 Speaker 1: offset furloughed workers, people not getting paid because there just 505 00:24:50,080 --> 00:24:52,399 Speaker 1: isn't business, whether it's at a convention or a hotel 506 00:24:52,480 --> 00:24:55,960 Speaker 1: or an airline. And I'm wondering, what's the precedent historically 507 00:24:56,040 --> 00:24:59,399 Speaker 1: for policymakers to step in and actually ameliorate some of 508 00:24:59,440 --> 00:25:02,959 Speaker 1: the effects miss paychecks from people who are probably on 509 00:25:03,000 --> 00:25:07,080 Speaker 1: the margins less capable of offsetting that lost income. Well, 510 00:25:07,080 --> 00:25:08,840 Speaker 1: we don't have a lot of precedent, except for when 511 00:25:08,880 --> 00:25:11,600 Speaker 1: we have natural disasters in the set actually can do 512 00:25:11,800 --> 00:25:13,800 Speaker 1: some guidance when it cut threes, I think by a 513 00:25:13,840 --> 00:25:16,560 Speaker 1: half percent in it mad It's March meeting. We'll see 514 00:25:16,560 --> 00:25:19,360 Speaker 1: a decisive move there. But we all also can see 515 00:25:19,359 --> 00:25:22,240 Speaker 1: guidance in terms of allowing consumers who have been laid 516 00:25:22,240 --> 00:25:25,840 Speaker 1: off and businesses that have been um furloughed or taking 517 00:25:25,880 --> 00:25:28,600 Speaker 1: the brunt of this and unable to fully service their 518 00:25:28,640 --> 00:25:31,760 Speaker 1: debt obligations, there is some leeway in their guidance to 519 00:25:31,760 --> 00:25:33,640 Speaker 1: be able to allow them to give them a little 520 00:25:33,720 --> 00:25:36,280 Speaker 1: room in a little space. It's something that China is 521 00:25:36,320 --> 00:25:38,600 Speaker 1: looking at their ordering it a little different than in 522 00:25:38,640 --> 00:25:41,720 Speaker 1: the United States, and it's something that Italy is looking 523 00:25:41,720 --> 00:25:44,600 Speaker 1: at now as well. I've never asked this question. It's 524 00:25:44,640 --> 00:25:47,639 Speaker 1: a good question for Diane Swank. If I'm employed in 525 00:25:47,760 --> 00:25:51,439 Speaker 1: Long Beach is an example, and I'm laid off, what 526 00:25:51,520 --> 00:25:53,880 Speaker 1: do I get when I go in for jobless claims? 527 00:25:54,280 --> 00:25:56,200 Speaker 1: You know how much do I get X per cent 528 00:25:56,240 --> 00:25:58,840 Speaker 1: of my salary? Do you know? Do I make money 529 00:25:58,840 --> 00:26:01,400 Speaker 1: doing this? What? What do you yet? You don't make 530 00:26:01,440 --> 00:26:03,440 Speaker 1: money doing it, It's still less than what you get 531 00:26:03,440 --> 00:26:06,200 Speaker 1: if you're earning your your pay and you're certainly networking 532 00:26:06,200 --> 00:26:09,600 Speaker 1: over time, hours and it reduces hours work. But you do, 533 00:26:09,720 --> 00:26:12,080 Speaker 1: you know, if you don't think the layoff is going 534 00:26:12,119 --> 00:26:14,679 Speaker 1: to be temperary, you do go ahead and apply for 535 00:26:14,840 --> 00:26:18,680 Speaker 1: unemployment insurance. We often see that, Um, the ripple effects 536 00:26:18,680 --> 00:26:21,639 Speaker 1: from strikes take a while off the striking workers, but 537 00:26:21,680 --> 00:26:23,280 Speaker 1: the other workers. It takes a while for people to 538 00:26:23,280 --> 00:26:25,679 Speaker 1: actually apply for unemployment insurance as they think they're going 539 00:26:25,720 --> 00:26:28,399 Speaker 1: to be called back quickly. How does that work in England? Johns? 540 00:26:28,520 --> 00:26:31,120 Speaker 1: Do they have weekly jobs claims in England? We don't 541 00:26:31,119 --> 00:26:32,920 Speaker 1: get the date to the way you guys get the data, 542 00:26:33,119 --> 00:26:35,080 Speaker 1: but we do have a claimate account. Do you get 543 00:26:35,600 --> 00:26:38,280 Speaker 1: does a government like step in much more overtly and 544 00:26:38,359 --> 00:26:43,080 Speaker 1: socialist Great Britain versus actually Britain has never been late. 545 00:26:45,640 --> 00:26:48,520 Speaker 1: I don't know. I'm just well, you know, in all fairness, 546 00:26:48,560 --> 00:26:50,560 Speaker 1: let's bring this up as well. The UK is now 547 00:26:50,640 --> 00:26:53,440 Speaker 1: warned that, um, you know, if we don't take care 548 00:26:53,440 --> 00:26:56,119 Speaker 1: of this and don't contain this, it could be of 549 00:26:56,160 --> 00:26:59,480 Speaker 1: the labor force that's outsick. And so many people say, well, 550 00:26:59,560 --> 00:27:01,840 Speaker 1: you know, these efforts to contain it are causing the 551 00:27:01,840 --> 00:27:04,399 Speaker 1: economic shocks. But if you don't contain it, you have 552 00:27:04,480 --> 00:27:07,399 Speaker 1: an even larger economic impact on your labor force unable 553 00:27:07,440 --> 00:27:10,199 Speaker 1: to earn I mean, we're not talking G seven sixty 554 00:27:10,640 --> 00:27:13,159 Speaker 1: feet stuff job, but this is germane to like what 555 00:27:13,240 --> 00:27:16,480 Speaker 1: could actually happen in April. This is the important conversation 556 00:27:16,480 --> 00:27:18,040 Speaker 1: we've been trying to have on this program for the 557 00:27:18,080 --> 00:27:20,720 Speaker 1: last couple of weeks, that interest rate cuts on the 558 00:27:20,760 --> 00:27:24,000 Speaker 1: remedy we need right hand right now. What we need 559 00:27:24,240 --> 00:27:26,040 Speaker 1: is a set of tools than they're going to stop 560 00:27:26,040 --> 00:27:29,159 Speaker 1: this economic shock that would otherwise be temporary from becoming 561 00:27:29,200 --> 00:27:32,320 Speaker 1: a financial shock that lasts a whole lot longer. They're 562 00:27:32,320 --> 00:27:33,960 Speaker 1: looking at doing that, as you say, in Italy, with 563 00:27:34,040 --> 00:27:36,560 Speaker 1: tax credits for struggling companies. In China, they're working with 564 00:27:36,560 --> 00:27:38,920 Speaker 1: the banks as well. What tools do we have available 565 00:27:38,920 --> 00:27:41,280 Speaker 1: in America? Well, this is you know, we have much 566 00:27:41,320 --> 00:27:43,560 Speaker 1: more marginalized tours and I don't think um, you know, 567 00:27:43,600 --> 00:27:45,760 Speaker 1: will be interesting to see whether Congress has more tools 568 00:27:45,800 --> 00:27:47,960 Speaker 1: with discoposity, we have some guidance of the FED can 569 00:27:48,040 --> 00:27:51,160 Speaker 1: issue and make it easier with the Community Reinvestment Act 570 00:27:51,200 --> 00:27:53,640 Speaker 1: to deal with this as a crisis and to say 571 00:27:53,680 --> 00:27:56,119 Speaker 1: be more lenient and you know, we will be more 572 00:27:56,200 --> 00:27:59,920 Speaker 1: lenient with you as your regulator. That's important, but more broadly, 573 00:28:00,040 --> 00:28:02,680 Speaker 1: you need fiscal policy that deals with this more directly. 574 00:28:02,760 --> 00:28:05,040 Speaker 1: And you know, just calling for rate cuts doesn't cure 575 00:28:05,080 --> 00:28:07,919 Speaker 1: what alls us literally in terms of the coronavirus. It 576 00:28:07,960 --> 00:28:11,280 Speaker 1: doesn't open idle factories or open convention centers that have 577 00:28:11,359 --> 00:28:14,200 Speaker 1: been shuttered because of this. But we can use fiscal 578 00:28:14,240 --> 00:28:18,040 Speaker 1: policy to span the issue so that it doesn't morph 579 00:28:18,160 --> 00:28:21,680 Speaker 1: into a finicial crisis, as you said, Jonathan, and already 580 00:28:21,760 --> 00:28:24,520 Speaker 1: last week we saw the junk bond market basically sees up. 581 00:28:24,800 --> 00:28:27,359 Speaker 1: That's really important right now, given some of the inflated 582 00:28:27,760 --> 00:28:29,800 Speaker 1: ratings we've seen on bonds that could dip into that 583 00:28:29,800 --> 00:28:34,280 Speaker 1: trunk bond status. Diane Swalk, what is quote unquote fiscal 584 00:28:34,440 --> 00:28:38,120 Speaker 1: policy to ex per cent of people that see reduced wages, 585 00:28:38,160 --> 00:28:41,560 Speaker 1: they're laid off, they take extra vacation days or whatever. 586 00:28:41,800 --> 00:28:45,560 Speaker 1: Are you advocating fiscal helicopter money? Are you advocating a 587 00:28:45,680 --> 00:28:49,760 Speaker 1: road between Peoria and maulin? What's not really um fiscal 588 00:28:49,800 --> 00:28:52,840 Speaker 1: helicopter money? It is actually you know in Hong Kong 589 00:28:52,880 --> 00:28:55,680 Speaker 1: are actually giving cash checks out to people, and even 590 00:28:55,760 --> 00:28:58,040 Speaker 1: that's not enough to get people who are still afraid 591 00:28:58,080 --> 00:29:01,479 Speaker 1: to go out and bend. But it is important for 592 00:29:01,520 --> 00:29:03,960 Speaker 1: people to have money, to be able to buy groceries. 593 00:29:04,080 --> 00:29:06,080 Speaker 1: And you know, you're talking about people being able to 594 00:29:06,120 --> 00:29:09,160 Speaker 1: pay for rent, and thinking about some kind of plans 595 00:29:09,160 --> 00:29:12,160 Speaker 1: that give people more of a bridge and just unemployment 596 00:29:12,160 --> 00:29:16,120 Speaker 1: insurance or make unemployment insurance temporarily a little more generous 597 00:29:16,200 --> 00:29:18,800 Speaker 1: and kick in much more rapidly. I think those are 598 00:29:18,800 --> 00:29:20,840 Speaker 1: the things that we need to be thinking about right now. 599 00:29:21,160 --> 00:29:22,680 Speaker 1: And those are the things you know, we haven't been 600 00:29:22,680 --> 00:29:25,600 Speaker 1: thinking about our automatic stabilizers. The set has been pleading 601 00:29:26,160 --> 00:29:28,320 Speaker 1: along with central banks the world over with you know, 602 00:29:28,360 --> 00:29:33,520 Speaker 1: the fiscal Congress and fiscal policy setters elected officials to 603 00:29:33,640 --> 00:29:36,120 Speaker 1: start thinking about how would they deal with the recession? Well, 604 00:29:36,120 --> 00:29:39,160 Speaker 1: this one is really unique. This kind of economic disruption 605 00:29:39,480 --> 00:29:42,760 Speaker 1: is really unique and will require some effort by Congress 606 00:29:42,840 --> 00:29:46,200 Speaker 1: to get it right. Diane, just real quick here, How 607 00:29:46,240 --> 00:29:48,600 Speaker 1: convinced are you about a doom loop that will take 608 00:29:48,640 --> 00:29:51,840 Speaker 1: hold with supply and demand kind of circling each other 609 00:29:51,920 --> 00:29:55,280 Speaker 1: down if there isn't some sort of fiscal response, Well, 610 00:29:55,320 --> 00:29:57,479 Speaker 1: I doubt I doubt there won't be any fiscal response. 611 00:29:57,520 --> 00:29:59,040 Speaker 1: I do think there will be. The questions, will it 612 00:29:59,120 --> 00:30:02,160 Speaker 1: be the right fiscal response. UM, I'm still hopeful. I 613 00:30:02,200 --> 00:30:04,240 Speaker 1: have to stay hopeful, and I think that's the way 614 00:30:04,240 --> 00:30:08,080 Speaker 1: we have to stay and and it's remarkable how resilient 615 00:30:08,200 --> 00:30:10,880 Speaker 1: we've been. But we are talking about what's you know, 616 00:30:11,480 --> 00:30:14,120 Speaker 1: a growth recession here in the United States, and what's 617 00:30:14,160 --> 00:30:16,000 Speaker 1: you know in the rest of the world for all 618 00:30:16,200 --> 00:30:19,840 Speaker 1: intensive purposes, a recession in the first half of the year. Dan, 619 00:30:20,040 --> 00:30:22,880 Speaker 1: thank you so much. Thanks with Grant Thornton. Thanks for 620 00:30:23,000 --> 00:30:27,360 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 621 00:30:27,520 --> 00:30:33,280 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 622 00:30:33,840 --> 00:30:37,160 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 623 00:30:37,200 --> 00:30:40,600 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.