WEBVTT - American Consumers Weakening Even Before Virus: DB's Slok 0:00:02.640 --> 0:00:05.280 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.760 along with my co host Lisa Brahmas. Each day we 0:00:07.880 --> 0:00:10.399 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.600 and your money, whether at the grocery store or the 0:00:12.640 --> 0:00:15.920 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.000 or wherever you listen to podcasts, as well as that 0:00:18.040 --> 0:00:22.040 Bloomberg dot com. I am so excited for this next 0:00:22.120 --> 0:00:24.720 next conversation because there has been one economist who has 0:00:24.760 --> 0:00:28.040 uniquely been focused on the consumer, on the health of 0:00:28.040 --> 0:00:32.880 the balance sheets of Americans for frankly years, and now 0:00:33.240 --> 0:00:36.640 his research is all that much more poignant. Torsten Slock, 0:00:36.720 --> 0:00:39.960 Deutsche Bank chief economists joining us now and Torsten, you 0:00:40.080 --> 0:00:43.640 sent out a chart this morning that was pretty stark. 0:00:43.760 --> 0:00:49.000 It was global discretionary consumer spending a one percent decline 0:00:49.440 --> 0:00:52.120 in two weeks. Can you give us a sense towards 0:00:52.200 --> 0:00:54.560 and of what we have seen so far in terms 0:00:54.640 --> 0:00:57.960 of the economic impact and what it might say if 0:00:58.000 --> 0:01:01.520 you extrapolate it further given the all the closures and 0:01:01.600 --> 0:01:05.160 shut down to the way of the coronavirus. Yeah, I mean, 0:01:05.200 --> 0:01:08.200 the unfortunate thing is that we went into this with 0:01:08.400 --> 0:01:11.640 the liquacy rates and consumer loans already going up. We 0:01:11.680 --> 0:01:13.920 have seen a particularly auto loans the liquacy rates go 0:01:14.000 --> 0:01:16.840 up for several years. This has to do with loans 0:01:17.200 --> 0:01:20.840 were given to people who unfortunately were not able to 0:01:20.920 --> 0:01:23.720 pay their auto loans on time, so that meant that 0:01:23.720 --> 0:01:26.560 the dilquaty rate had already been slowly moving higher on 0:01:26.600 --> 0:01:29.199 a number of different consumer loans. So this of course 0:01:29.280 --> 0:01:32.080 is now the backdrop for the chart that I sent 0:01:32.120 --> 0:01:34.319 out that you're mentioning exactly that we're beginning to see 0:01:34.640 --> 0:01:37.480 quite a significant drop off in discrestionary spending. And this 0:01:37.600 --> 0:01:42.000 resonary spending basically means everything from cars to washers and dryers, 0:01:42.000 --> 0:01:46.640 to furniture to electronics, things that normally require financing or 0:01:46.680 --> 0:01:49.680 things that are normally bigger purchases. The nuance, of course 0:01:49.760 --> 0:01:52.680 is that with many people working at home, you could 0:01:52.680 --> 0:01:56.240 expect to see some categories of consumer durable goods, meaning 0:01:56.240 --> 0:01:59.520 electronics and computers and other things that could be doing better. 0:01:59.720 --> 0:02:03.400 But adaly speaking, this chart specifically showed for restaurants. We 0:02:03.440 --> 0:02:06.360 have seen and this is more on the anecdotal side, 0:02:06.360 --> 0:02:08.880 but we've seen a number of indicators begin to show 0:02:08.919 --> 0:02:10.960 that the unfortunately, the global consumer and this is not 0:02:11.000 --> 0:02:14.079 only a US phenomenon, The global consumer is importively stepping 0:02:14.080 --> 0:02:16.600 pretty hard on the brakes when it comes to discursion 0:02:16.639 --> 0:02:19.040 or spending, and that is of course not particularly good 0:02:19.040 --> 0:02:21.200 news when you think about the overall picture for the 0:02:21.200 --> 0:02:25.320 global economy. So Torsen. Over the weekend, we've seen a 0:02:25.400 --> 0:02:28.359 lot of forecasts come out economic forecast about US economic 0:02:28.400 --> 0:02:32.160 impact with obviously a significant contraction in the second quarter, 0:02:32.200 --> 0:02:36.000 but most of them have a pretty swift rebound INCUS 0:02:36.280 --> 0:02:39.240 three and four, suggesting a little bit of the type 0:02:39.280 --> 0:02:42.360 of scenario where do you come out on what the 0:02:42.400 --> 0:02:46.280 economic impact could be here? Yeah, this is afterlutely critical, 0:02:46.320 --> 0:02:48.240 and this is also critical for markets. I mean, what 0:02:48.320 --> 0:02:51.080 will the other leg of this v or even whatever, 0:02:51.120 --> 0:02:52.720 If it will be a you, what will that look like? 0:02:53.600 --> 0:02:55.200 The fear we have is that it will be a 0:02:55.320 --> 0:03:00.040 muted rebound. And the muted aspect comes essentially from the 0:03:00.480 --> 0:03:03.480 fact that once we are on the other side of 0:03:03.520 --> 0:03:06.960 the virus, if there are fears that the virus is 0:03:06.960 --> 0:03:10.320 not quite defeated everywhere in the world, if they're fears 0:03:10.320 --> 0:03:12.799 that some countries still have it, if there fears that 0:03:12.880 --> 0:03:15.360 it might still be in some emerging markets. Then you 0:03:15.440 --> 0:03:17.720 do begin to wonder but one of them. The implications 0:03:17.840 --> 0:03:21.679 of course also for travel, not only traveled globally, but 0:03:21.760 --> 0:03:24.480 even travel domestically. What are the implications in terms of 0:03:24.520 --> 0:03:27.640 how people think about what the longer term planning is 0:03:27.680 --> 0:03:30.160 in terms of vacations, the longer term planning in terms 0:03:30.200 --> 0:03:33.880 of businesses doing things. So the reason why the reason 0:03:33.919 --> 0:03:36.320 to be somewhat cautious about the second leg of the 0:03:36.400 --> 0:03:38.560 v or the leg and the second leg of the 0:03:38.600 --> 0:03:41.760 move higher is that we will probably come out more 0:03:41.960 --> 0:03:44.800 scarred as consumers on the other side, and corporates will 0:03:44.880 --> 0:03:47.120 quite frank. We probably also come up most card where 0:03:47.120 --> 0:03:49.920 everyone will have higher stavings and you, as you know 0:03:50.000 --> 0:03:51.760 too well, if you have higher stavings, that means that 0:03:51.840 --> 0:03:54.280 consumption will also be muted. If you have higher savings. 0:03:54.320 --> 0:03:56.720 For corporates, that also means that cap expending is also 0:03:56.720 --> 0:03:59.320 going to be muted. So the risks are that the 0:04:00.040 --> 0:04:04.680 rebound here is going to be more nuded and more 0:04:05.400 --> 0:04:08.320 limited relative to the speed with which we are folding. 0:04:08.360 --> 0:04:12.320 At the moment we're speaking with Torsten Slock, you economist 0:04:12.520 --> 0:04:15.920 at Deutsche Bank, and Torsten You've done a lot of 0:04:15.960 --> 0:04:19.120 work about the fact that a lot of American households 0:04:19.160 --> 0:04:23.360 don't have an extra four hundred dollars to cover emergency expenses. 0:04:23.400 --> 0:04:28.080 You've also talked about how the lower wage workers are 0:04:28.120 --> 0:04:31.360 going to get harder hit by the disruptions caused by 0:04:31.360 --> 0:04:35.080 the coronavirus. And I'm just wondering going forward, do you 0:04:35.120 --> 0:04:38.680 have a sense of whether the fiscal stimulus currently being 0:04:38.680 --> 0:04:43.000 bandied about in Washington, d C. Adequately gets money to 0:04:43.080 --> 0:04:45.880 the people who would need it in order to continue 0:04:45.920 --> 0:04:48.960 their lifestyles and at least cushion the blow a little 0:04:48.960 --> 0:04:51.800 bit to get back to the kind of recovery that 0:04:51.839 --> 0:04:55.280 you're looking for hoping for on the other side of this. Yeah, 0:04:55.360 --> 0:04:58.240 this is absolutely a key question from a follcastic perspective, 0:04:58.240 --> 0:05:00.719 both of the economy and for markets. The problem is, 0:05:01.200 --> 0:05:03.480 as you know, and as you just mentioned that you 0:05:03.560 --> 0:05:07.920 look at the fit data about of the population would 0:05:07.960 --> 0:05:09.599 not be able to come up with four hundred dollars 0:05:09.640 --> 0:05:12.880 if they had an emergency expense. Data from two thousand 0:05:13.000 --> 0:05:17.440 nineteen shows that a roughly half of US households don't 0:05:17.480 --> 0:05:20.160 have an emergency savings account, and that means that they 0:05:20.160 --> 0:05:22.520 don't have a savings account with money put aside if 0:05:22.600 --> 0:05:25.760 there is some unexpected expenses. And if you also look 0:05:25.800 --> 0:05:29.240 at the distribution of this, it is distributed more among 0:05:29.440 --> 0:05:32.240 lower income households. And if you also then look at 0:05:32.520 --> 0:05:35.559 the issues in terms of age distribution, it is also 0:05:35.680 --> 0:05:39.640 distributed more in terms of the younger people and the 0:05:39.720 --> 0:05:43.360 younger generations who don't have savings. So it will certainly 0:05:43.440 --> 0:05:48.120 have a significant impact distributional terms on the consumer. What 0:05:48.160 --> 0:05:50.680 we're going through here, and to your question about the 0:05:50.720 --> 0:05:54.360 package that's being discussed, we need to see exactly how 0:05:54.440 --> 0:05:57.560 the design is as you cover so well, this is 0:05:57.560 --> 0:06:00.200 still being debated, but it is pretty clear that they're 0:06:00.240 --> 0:06:03.200 from a market perspective for every day then we don't 0:06:03.240 --> 0:06:06.560 get a solution, then there is a risk that this 0:06:06.640 --> 0:06:10.080 will be a deeper slowdown simply because something is needed 0:06:10.279 --> 0:06:11.719 right now. And if you go back and look at 0:06:11.760 --> 0:06:15.280 what happened in two thousand nine, then when the Congress 0:06:15.520 --> 0:06:19.320 voted on sending checks out to consumers, it took two 0:06:19.360 --> 0:06:22.080 months from the bill was voted on until the checks 0:06:22.120 --> 0:06:24.960 actually arrived, and two months forward from today. That brings 0:06:24.960 --> 0:06:27.760 you too late may that's a very very long period 0:06:28.000 --> 0:06:30.599 for consumers while they still have to pay their bills 0:06:30.640 --> 0:06:34.240 on their rent, the mobile phones, the groceries, everything that's 0:06:34.279 --> 0:06:37.400 going on. And that's why the discretionary spending does get 0:06:37.680 --> 0:06:41.320 a bit lower priority in that scale of things. Is 0:06:41.320 --> 0:06:45.360 it already too late? I wouldn't say it's too late, 0:06:46.160 --> 0:06:48.760 but I mean, as as we all know, and if 0:06:48.760 --> 0:06:51.600 you take the statistic into account that they have, the 0:06:51.680 --> 0:06:54.960 US households really only had their checking account and the 0:06:55.040 --> 0:06:56.920 money that they had in that. And if you are 0:06:56.960 --> 0:06:59.280 so unfortunate that you lost your job through this, and 0:06:59.360 --> 0:07:01.800 you so unfortunately you don't have any savings, I mean, 0:07:01.839 --> 0:07:04.320 we have a rent payment coming off here and April 0:07:04.360 --> 0:07:07.640 the first, and maybe we'll be able to get through that. 0:07:07.920 --> 0:07:10.040 But the longer that we had to go through rent 0:07:10.040 --> 0:07:13.080 payments and payments and mobile phones, the more the more 0:07:13.080 --> 0:07:17.360 cautious and more hesitant and reluctant the US continuers probably get. 0:07:17.400 --> 0:07:21.200 So that's why the more confidence how US households and 0:07:21.360 --> 0:07:24.200 markets can get that package is coming in. It's coming sooner, 0:07:24.240 --> 0:07:26.120 run and later. I do think that that will be 0:07:26.240 --> 0:07:29.400 very sumportive, of course importantly for markets, but most importantly 0:07:29.440 --> 0:07:33.160 ultimately for the US economy. Torsten slack. Thanks so much 0:07:33.200 --> 0:07:36.200 for joining us. We really appreciate your perspective. Torsten slock Is, 0:07:36.280 --> 0:07:42.440 Deutsche Banks chief Economists. Well, certainly the news of the 0:07:42.480 --> 0:07:47.200 morning is the Federal Reserve unvailing unlimited quantitative easing to 0:07:47.280 --> 0:07:50.040 aid for businesses and states. To get some details, we 0:07:50.120 --> 0:07:53.160 welcome our good friend Michael McKee, international economics and policy 0:07:53.160 --> 0:07:56.160 correspondent for Bloomberg. Mike, thanks so much for joining us. 0:07:56.320 --> 0:07:59.000 What are the salient details here of what the Fed 0:07:59.000 --> 0:08:02.680 announced this morning. I think the most important is the 0:08:02.800 --> 0:08:06.240 unlimited que and the fact that they're starting this week 0:08:06.600 --> 0:08:13.120 by basically doing that six billion dollars in treasuries in 0:08:13.240 --> 0:08:16.960 mortgage securities every day this week. That dwarfs anything we 0:08:17.000 --> 0:08:20.320 saw during the quee one, two and three period, so 0:08:20.400 --> 0:08:23.360 they are going all in on that. And then the 0:08:23.400 --> 0:08:26.520 fact that they're buying corporate bonds. Now they're setting up 0:08:26.560 --> 0:08:29.960 a special purpose vehicle. The idea is keep these things 0:08:30.080 --> 0:08:33.880 off the FEDS books. Technically they're not allowed to buy 0:08:34.040 --> 0:08:37.559 corporate paper, so by setting up a special purpose vehicle 0:08:37.600 --> 0:08:39.920 they can sort of get around that. And you mentioned 0:08:39.960 --> 0:08:43.559 that the FED is is putting up for this. It's 0:08:43.559 --> 0:08:47.080 also the Treasury Department in the corporate bond programs and 0:08:47.120 --> 0:08:50.120 the asset back program. The Treasury is taking an equity 0:08:50.160 --> 0:08:54.280 stake in that as well, so they're working together on that. 0:08:54.440 --> 0:08:57.160 And one important thing to keep in mind is that 0:08:57.280 --> 0:09:01.280 if the stimulus bill puts more money into the Exchange 0:09:01.280 --> 0:09:04.440 Stabilization Fund at the Treasury, as it's sort of scheduled 0:09:04.440 --> 0:09:06.640 to do, they can ramp these up even farther and 0:09:07.160 --> 0:09:11.440 by even greater amounts. So the FED and Treasury working 0:09:11.480 --> 0:09:14.040 together to do as much as they can to try 0:09:14.080 --> 0:09:15.720 to take some of the pressure off in the markets. 0:09:16.040 --> 0:09:18.720 So the feders are really sort of reinstating some of 0:09:18.720 --> 0:09:21.920 the crisis era programs. The program you were talking about 0:09:21.960 --> 0:09:24.960 is telf right the term Asset BacT Securities Loan Facility 0:09:25.000 --> 0:09:29.560 that they're reinstating, and basically, uh, the idea here is 0:09:29.679 --> 0:09:32.640 to create a way to lever up to free up 0:09:32.640 --> 0:09:35.920 cash based on existing loans and securities that are held 0:09:36.320 --> 0:09:40.000 on dealers and investors balance sheet. I'm trying to understand 0:09:40.440 --> 0:09:43.520 the credit risk that the FED is taking on here. Yes, 0:09:43.559 --> 0:09:46.079 this is providing more cash to the system. Are they 0:09:46.160 --> 0:09:50.560 also essentially bearing the credit risk for these instruments too? Well? 0:09:50.600 --> 0:09:53.400 The special purpose vehicle will at least for the corporate 0:09:53.400 --> 0:09:57.960 bonds bear the credit risk. They are insisting that what 0:09:58.040 --> 0:10:01.120 you can put up is got to be investment grade, 0:10:01.120 --> 0:10:04.280 but they're going down to triple B minus, so they're 0:10:04.320 --> 0:10:07.240 they're willing to take, um, you know, some risk that 0:10:08.320 --> 0:10:10.719 some of this stuff may fall if the corporation is 0:10:10.800 --> 0:10:16.400 ultimately downgraded then um the TALF program is triple A 0:10:16.520 --> 0:10:21.080 rated assets, so they're taking as little credit risk as possible. 0:10:21.120 --> 0:10:24.640 They have a requirement in the new Dodd Frank law 0:10:24.720 --> 0:10:29.120 that they can't lose money. Basically, they can't put financing 0:10:29.160 --> 0:10:31.880 at risk. So they can only go so far with that, 0:10:31.960 --> 0:10:33.720 and that's one of the reasons you have the Treasury 0:10:33.720 --> 0:10:37.360 involved in this taking the first trunch of risk. Hey, Mike. 0:10:37.360 --> 0:10:40.160 In terms of scope at scale, how does this action 0:10:40.200 --> 0:10:44.679 compared to two eight? They've gone beyond uh, two thou 0:10:44.960 --> 0:10:49.080 eight and in two ways, one in size there are 0:10:49.160 --> 0:10:52.920 more programs now buying more things, and also in speed. 0:10:53.559 --> 0:10:56.240 There has since two thousand eight been a doctrine sort 0:10:56.240 --> 0:10:59.640 of developed an economics called optimal control, which is a 0:10:59.760 --> 0:11:03.200 nur the term for go big, go fast. When you're 0:11:03.240 --> 0:11:06.280 facing a crisis, throw everything you've got at it as 0:11:06.320 --> 0:11:08.959 quickly as possible to get ahead of it, and don't 0:11:09.040 --> 0:11:12.880 chase it down the market, you know, don't chase the 0:11:12.920 --> 0:11:15.599 market down. And so that's what they seem to be 0:11:15.679 --> 0:11:17.480 applying here. They seem to be all in on that 0:11:17.559 --> 0:11:20.760 if we do everything we can now, it will put 0:11:20.760 --> 0:11:23.840 a floor onto the markets. Obviously, the floor is going 0:11:23.880 --> 0:11:26.160 to depend on what your outlook is in the markets 0:11:26.240 --> 0:11:27.960 for how long this is going to go on, But 0:11:28.320 --> 0:11:30.800 the FAN is signaling it's going to do everything possible 0:11:31.160 --> 0:11:35.320 is out. Does it have anything left? Uh, it doesn't 0:11:35.360 --> 0:11:39.280 have a whole lot left unless it could take on 0:11:39.360 --> 0:11:42.280 more credit risk. I'm not sure what else they could buy. 0:11:42.720 --> 0:11:45.840 They're pretty much buying every asset except equities, which they're 0:11:45.920 --> 0:11:49.200 legally over here. If they want it, they could have it. 0:11:49.240 --> 0:11:53.240 They come get it. Yeah, we'll have a flea market sale. 0:11:54.480 --> 0:11:57.120 They can buy that. But the Fan is doing everything 0:11:57.120 --> 0:12:00.600 they can do now. There. They did mention that they're 0:12:00.600 --> 0:12:04.240 going to set up a main street lending program, but 0:12:04.360 --> 0:12:06.960 we don't have any details on that. It does seem 0:12:06.960 --> 0:12:09.600 to be tied to whatever comes out of Capitol Hill, 0:12:10.160 --> 0:12:13.880 and we'll see how that works. There was some thought 0:12:13.880 --> 0:12:16.199 at the FED that they didn't really want to be 0:12:16.240 --> 0:12:19.760 in the position of being the lender to main Street 0:12:19.800 --> 0:12:22.600 because they don't have the bureaucratic set up to do it. 0:12:22.920 --> 0:12:25.600 That banks would be better off doing that, and banks 0:12:25.600 --> 0:12:28.719 could be funded directly through the fiscal program. But it 0:12:29.200 --> 0:12:30.360 may be that the Fed is going to have a 0:12:30.440 --> 0:12:33.520 role here. Michael McKee, thank you so much for for 0:12:33.520 --> 0:12:35.400 breaking it down for us, and we'll continue to get 0:12:35.600 --> 0:12:37.880 details and we'll bring them to you, but definitely throwing 0:12:37.880 --> 0:12:39.920 the kitchen sink at it. The Federals are trying to 0:12:39.960 --> 0:12:42.520 cut out ahead of what will inevitably be a really 0:12:42.520 --> 0:12:45.880 difficult time in the economy. Michael McKee, International Economics and 0:12:45.880 --> 0:12:51.000 Policy correspondent for Bloomberg. Really amazing the speed and the 0:12:51.080 --> 0:12:53.880 scope to which they are acting. Perhaps they learned from 0:12:53.880 --> 0:12:56.520 the last time around. It does not help anything to 0:12:56.559 --> 0:13:00.199 be slow, certainly when Congress is not passing their bill 0:13:00.600 --> 0:13:06.880 in the fashion that everybody would like. Let's bring out 0:13:06.880 --> 0:13:10.559 our good friend, Kid Jukes, Global ffex Strategist for Society 0:13:10.720 --> 0:13:12.800 is General kit Thanks so much for joining us. We 0:13:12.840 --> 0:13:16.520 know you're busy talking with your clients, keeping in touch 0:13:16.720 --> 0:13:19.080 with the market. Give us a sense of you know, 0:13:19.120 --> 0:13:21.160 We've seen the dollar, the d X, Y and next 0:13:21.240 --> 0:13:24.200 just rallies so dramatically over the last couple of weeks. 0:13:24.760 --> 0:13:29.679 What's your sense about kind of the currency markets right here? Um, 0:13:30.000 --> 0:13:32.920 that they're comments today than they've been, which doesn't mean 0:13:32.920 --> 0:13:38.880 they calm um you, last week was a mad scramble 0:13:39.240 --> 0:13:41.760 for for dollars. We know, we know the dollars the 0:13:41.760 --> 0:13:44.480 world's global currency. We know there's a lot of folks 0:13:44.559 --> 0:13:48.079 who have dollar assets that they financed with short term 0:13:48.080 --> 0:13:52.000 dollar liabilities. Whether they're boring and lending dollars from Americans 0:13:52.040 --> 0:13:54.800 or not, doesn't matter. They need them, and they needed 0:13:54.800 --> 0:13:57.920 them immediately. That the FED has, you know, along with 0:13:58.120 --> 0:14:02.280 Pizza's mother in law's as Incinc. Whoever think he had 0:14:02.320 --> 0:14:06.280 involved in this particular exercise, that they were very quick 0:14:06.320 --> 0:14:08.440 to expand the group of central banks that they do 0:14:08.559 --> 0:14:12.360 swap arrangements with to get more dollars more widely into 0:14:12.360 --> 0:14:16.320 the system. They seem to have calmed down the domestic 0:14:16.440 --> 0:14:19.440 front end of the money market. Um, but it's a 0:14:19.520 --> 0:14:21.720 huge problem. So so on any given day we look 0:14:21.760 --> 0:14:24.000 at it and you know, I couldn't promise you that 0:14:24.000 --> 0:14:27.560 we wouldn't start feeling dollars tight again later this evening, 0:14:27.760 --> 0:14:30.680 you know, before I go home. But but today, um, 0:14:30.720 --> 0:14:33.640 as the FED has ramped up yet again. You know 0:14:33.680 --> 0:14:36.160 that the dollar is a little bit lower against something 0:14:36.160 --> 0:14:39.720 against the euro and the and the end the currencies 0:14:39.760 --> 0:14:42.200 that are still it's a lot weaker by the way, 0:14:42.200 --> 0:14:44.920 against things like you know, the Norwegian chrona for example, 0:14:44.960 --> 0:14:46.840 which is sort of getting itself out of gael But 0:14:46.920 --> 0:14:50.080 it's it's still um. The weakest currencies are sort of 0:14:50.080 --> 0:14:51.800 half related to that, which are the ones which are 0:14:52.360 --> 0:14:54.840 um most all sensitive. So some of the emerging market 0:14:54.840 --> 0:14:58.720 currencies a week week, generally the oil sensitive currencies, um, 0:14:59.000 --> 0:15:01.680 they have you know, they have a whole problem of 0:15:01.760 --> 0:15:04.760 their own really with the collapse and in all prices 0:15:05.480 --> 0:15:07.840 gave them this kind of unique double wemmy. But but 0:15:07.880 --> 0:15:12.120 the FED is doing a fantastic job of of of 0:15:12.480 --> 0:15:14.640 doing more than the ECB did when they did whatever 0:15:14.680 --> 0:15:16.920 it takes. If if everything is bigger than that, then 0:15:17.320 --> 0:15:20.000 then then this is where we are, and it could 0:15:20.000 --> 0:15:21.640 I think most of the people who I was speaking 0:15:21.640 --> 0:15:24.600 with over the weekend agreed with you, but they still 0:15:24.640 --> 0:15:28.360 felt rather catastrophic. And I'm wondering from your perspective, there 0:15:28.440 --> 0:15:31.280 is a feeling out there a very big fear that 0:15:31.400 --> 0:15:34.120 all of the borrowing, the leverage that was built into 0:15:34.120 --> 0:15:37.840 the system, with especially emerging markets borrowing in dollars and 0:15:37.920 --> 0:15:40.680 corporates around the world just borrowing as much as they 0:15:40.680 --> 0:15:43.400 could do things like you know, share buy backs and 0:15:43.520 --> 0:15:47.280 pay out dividends, that the FED can't stop this, and 0:15:47.400 --> 0:15:50.640 that possibly fiscal stimulus can't either, and the system just 0:15:50.720 --> 0:15:54.360 needs to kind of exhaust itself before people can really 0:15:54.640 --> 0:15:57.520 start to reassess the damage. Do you think there's any 0:15:57.520 --> 0:16:01.640 credence to that view. I'm worried about that being true, 0:16:01.640 --> 0:16:04.280 and I think central banks can can get to gross 0:16:04.320 --> 0:16:07.160 with this that you know, I mean, there's a there's 0:16:07.160 --> 0:16:10.160 a problem that comes later, which is that if you know, 0:16:10.240 --> 0:16:13.120 if if if the if. Corporate America for example, has 0:16:13.200 --> 0:16:16.560 re levied itself since the financial crisis, so there's even 0:16:16.600 --> 0:16:20.120 more leverage than there was last time. Um. Is it 0:16:20.160 --> 0:16:23.640 great that we all get sorted out with infinite, infinite 0:16:23.680 --> 0:16:27.160 free short term money to make everything okay? Um? You 0:16:27.160 --> 0:16:29.280 know we we we do actually have to clean the 0:16:29.320 --> 0:16:32.160 system out, so but but I don't think we need 0:16:32.200 --> 0:16:35.440 to clean this out in the middle of a human crisis. 0:16:35.440 --> 0:16:39.240 Thanks that's not a useful piece. So I do think 0:16:39.280 --> 0:16:42.000 that we will that we will get through. But but 0:16:42.040 --> 0:16:44.400 you're right, it's enormous, you know. I mean again over 0:16:44.440 --> 0:16:47.040 the weekend, you know, the kind of the charts that 0:16:47.080 --> 0:16:50.760 were being floated around. We're all armageddon ones in terms 0:16:50.760 --> 0:16:54.480 of how bad some of these things. Outflows from outflows 0:16:54.520 --> 0:16:58.680 from bond funds, from ets, the weakness that we were 0:16:58.720 --> 0:17:02.840 seeing in things, and um, what what I what I 0:17:02.880 --> 0:17:05.280 think though, if there's a chromos comfort is that what 0:17:05.320 --> 0:17:10.639 we've learned over several cycles now it is to to 0:17:10.800 --> 0:17:15.040 go in large, not worry about inflation um and society 0:17:15.119 --> 0:17:19.040 up later, but but go in and really make sure 0:17:19.160 --> 0:17:23.320 that the financial system doesn't make the economic problems and 0:17:23.359 --> 0:17:26.120 the real life problems worse than they have to be already. 0:17:26.560 --> 0:17:30.400 I think they'll succeed. But I am not anising other 0:17:30.480 --> 0:17:36.000 than anxiously staring at screens all like the rest of us. Yeah, 0:17:36.080 --> 0:17:37.920 Kit Jukes, thanks so much for joining us. We really 0:17:37.920 --> 0:17:39.800 appreciate you taking some time out of your busy day. 0:17:39.880 --> 0:17:43.879 Kit Jukes, global effects strategist for Society General, joining us 0:17:43.960 --> 0:17:46.960 on the phone again. The d X Y index off 0:17:47.000 --> 0:17:48.680 a little bit less than one percent but has been 0:17:48.760 --> 0:17:51.520 so strong over the past couple of weeks, Lisa, as 0:17:51.640 --> 0:17:55.880 investors just flocked to the you know that the US dollar, Yeah, 0:17:55.880 --> 0:17:58.160 you know. Frankly, I'm getting a little bit of confidence 0:17:58.200 --> 0:18:00.959 today that gold is up, it spot world is up 0:18:01.040 --> 0:18:04.080 because there was a fear last week that everything was broken, 0:18:04.280 --> 0:18:06.960 with bond yields rising and gold prices falling in this 0:18:07.119 --> 0:18:09.760 idea that you could just sell whatever you can and 0:18:10.200 --> 0:18:12.400 there wasn't really a bid for anything other than cash 0:18:12.520 --> 0:18:14.439 or dollars on the other side of it, And there 0:18:14.520 --> 0:18:17.280 does feel like there is a different tone today. The 0:18:17.400 --> 0:18:20.159 question is whether it'll be enough to really lubricate the 0:18:20.200 --> 0:18:23.720 system and get people to have conviction going into risk 0:18:23.800 --> 0:18:27.720 your credit at a time of a really uncertain economic backdrop. 0:18:30.840 --> 0:18:34.360 There's a question, Paul. A lot of people, particularly wealthier individuals, 0:18:34.400 --> 0:18:38.239 had been getting rather cautious in the months leading up 0:18:38.320 --> 0:18:42.879 to the coronavirus induced disruption that we've seen recently. There 0:18:43.000 --> 0:18:45.760 is a question of how they got cautious moving more 0:18:45.840 --> 0:18:48.920 into real estate, whether they have the cash to actually 0:18:48.960 --> 0:18:51.520 start deploying it, and whether they're starting to get perhaps 0:18:51.880 --> 0:18:53.680 a little bit more I don't want to say bullish, 0:18:54.359 --> 0:18:57.000 but starting to pick over some of the rubble in 0:18:57.160 --> 0:18:59.240 amid this sell off. Joining us now as someone with 0:18:59.320 --> 0:19:02.240 a very unique an important perspective on this, Michael Sonnenfeldt, 0:19:02.520 --> 0:19:05.840 chairman and founder of Tiger twenty one. It's a pure 0:19:05.960 --> 0:19:10.880 organization of ultra wealthy individuals that come together and share 0:19:10.920 --> 0:19:15.320 their investing strategies and views. Has seven members more than 0:19:15.400 --> 0:19:19.720 seventies seven billion dollars in assets. Michael, I remember last 0:19:19.760 --> 0:19:22.520 time we spoke with you, you were talking about how 0:19:22.680 --> 0:19:25.680 there is an increasing focus on real estate. Can you 0:19:25.760 --> 0:19:28.560 give us a sense of how some of the members 0:19:28.680 --> 0:19:31.960 of of of of your organization or position heading into 0:19:32.040 --> 0:19:35.680 this and what they're talking about right now? Sure, well, 0:19:35.840 --> 0:19:39.720 everybody is obviously sucked into their homes and gone through 0:19:39.760 --> 0:19:44.359 a transformation of being virtual, so that's new for everybody. 0:19:44.960 --> 0:19:48.560 Going into this are members which are not just wealthy, 0:19:48.680 --> 0:19:52.840 their entrepreneurs. It's a subset of people with certain levels 0:19:52.880 --> 0:19:56.040 of wealth, but because of entrepreneurs that allows them to 0:19:56.119 --> 0:19:59.240 think about this quite differently. And for the last year 0:19:59.600 --> 0:20:02.600 people been getting nervous about the market. But of course 0:20:02.720 --> 0:20:08.959 nobody could have anticipated the coronavirus, nor the Russia uh 0:20:09.119 --> 0:20:12.960 Saudi Arabia oil debacle. It's sort of like having a 0:20:13.080 --> 0:20:17.040 tsunami and an earthquake at the same time. So will 0:20:17.359 --> 0:20:20.760 While real estate has remained tops for our members at 0:20:20.760 --> 0:20:25.239 about of assets, it's actually come down as well. They 0:20:25.280 --> 0:20:28.160 had taken chips off the table over the last year 0:20:28.680 --> 0:20:33.000 and maintain very strong cash reserves at twelve percent so 0:20:33.200 --> 0:20:36.720 that they're not forced to sell at a bottom like this, 0:20:37.000 --> 0:20:41.119 but have enough living expenses so that they can power 0:20:41.320 --> 0:20:44.600 through or survive to the best of ability. But obviously 0:20:44.680 --> 0:20:48.119 there's a lot of devastation all around. Michael, what are 0:20:48.160 --> 0:20:52.000 your clients thinking here as to you know, kind of 0:20:52.080 --> 0:20:55.240 the duration here? Are they thinking kind of police's question, 0:20:55.280 --> 0:20:58.960 maybe time to maybe look at certain names or certain 0:20:59.000 --> 0:21:01.440 asset classes. Are they take any boy, this could be 0:21:01.800 --> 0:21:05.440 a much longer, lower for longer type scenario. So I 0:21:05.520 --> 0:21:08.919 don't think there's any one view. It's a collection of views. 0:21:09.480 --> 0:21:12.760 And our members who are typically in groups that meet 0:21:12.840 --> 0:21:16.560 in person now are meeting virtually. We've shifted the organization 0:21:16.760 --> 0:21:21.040 completely to virtual meetings on a dime, so to speak. 0:21:21.560 --> 0:21:26.359 Um and obviously some members are looking for opportunities. A 0:21:26.480 --> 0:21:30.600 number of us traded shorts at the first sign of 0:21:30.720 --> 0:21:35.600 coronavirus of the market, and that trade has turned out 0:21:35.640 --> 0:21:40.200 to be very good. But you almost in most cases 0:21:40.520 --> 0:21:45.040 the profits from those shorts has simply offset the clins 0:21:45.119 --> 0:21:48.760 in the portfolio because you can't liquidate private equity and 0:21:48.840 --> 0:21:52.320 real estate in a month, and that's where we have 0:21:52.440 --> 0:21:56.320 a large concentration. But as to timing, I think everybody 0:21:56.440 --> 0:22:00.440 understands this is this is totally unique and the the 0:22:00.600 --> 0:22:04.520 medical issues, the health issues are likely to peak within 0:22:05.440 --> 0:22:09.639 three to six months, as has happened everywhere else. But 0:22:09.760 --> 0:22:13.600 when you have the kind of economic dislocation, the question 0:22:13.760 --> 0:22:16.440 is how long will it take for the economy to 0:22:16.520 --> 0:22:20.000 bounce back? And the only insight that we have is 0:22:20.560 --> 0:22:24.439