WEBVTT - Surveillance: Unprecedented GDP Drop With Blanchflower 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.480 Bloomberg dot Com, and of course on the Bloomberg Daniel 0:00:27.520 --> 0:00:30.240 Katson with us with the MP Perry BA a wonderful 0:00:30.280 --> 0:00:34.479 French bank. He's had a foreign exchange strategy North America. Dan, 0:00:34.720 --> 0:00:37.600 what will you listen for? Is we all listen to 0:00:37.640 --> 0:00:41.839 the Leguard press conference on fiscal matters. She has to 0:00:41.880 --> 0:00:46.800 address that Europe is not a great fiscal power, is it? No? 0:00:46.880 --> 0:00:48.360 I agree with you. I think there will be a 0:00:48.360 --> 0:00:52.040 discussion of fiscal issues in the press conference and some 0:00:52.840 --> 0:00:56.320 job owning towards directed at the at the finance ministers 0:00:56.320 --> 0:00:58.720 and and ads of government to move in that direction. 0:00:58.920 --> 0:01:00.360 But you know, at the end of the day, Uh, 0:01:00.520 --> 0:01:04.120 just as Powell yesterday said, a lot of this is 0:01:04.160 --> 0:01:07.400 outside of their remit, and all they can do is 0:01:07.480 --> 0:01:11.000 kind of nudge gently in the right direction. Now, how 0:01:11.080 --> 0:01:14.839 pur audience said, just how large is a CB asset purchases? 0:01:15.040 --> 0:01:17.080 Right now? They've got all these different programs, put them 0:01:17.080 --> 0:01:20.040 together just how big is monthly quee are the European 0:01:20.120 --> 0:01:22.600 Central Bank at the moment, it's I mean, it's you know, 0:01:22.640 --> 0:01:24.920 it's not it's not that different from how the FED story, 0:01:24.959 --> 0:01:27.640 where you have a range of programs. You have the 0:01:27.720 --> 0:01:30.679 que programs which are more traditional and in fact larger 0:01:30.760 --> 0:01:33.840 on the ECB side than than than what the FED 0:01:33.920 --> 0:01:35.560 is doing. But then you have to have all this 0:01:35.680 --> 0:01:38.080 alphabet soup that you're kind of referred to of of 0:01:38.080 --> 0:01:40.560 credit easing measures, and you know these there's so many 0:01:40.560 --> 0:01:43.840 programs because there's so many different things that the FED 0:01:43.880 --> 0:01:45.760 and the ECB are trying to to fix. But the 0:01:45.760 --> 0:01:48.240 bottom line is are trying to make sure that markets 0:01:48.240 --> 0:01:53.000 are functioning smoothly, that there's no pockets of liquidity, and 0:01:53.000 --> 0:01:55.960 that they're kind of getting their transmission into all the 0:01:56.080 --> 0:01:58.920 right places. There's another loan program for banks, because I'm 0:01:58.920 --> 0:02:00.760 sure it's going to be a topic for the news 0:02:00.840 --> 0:02:03.400 conference a little bit later this morning. The Canary and 0:02:03.480 --> 0:02:05.760 most people's coal mines right now is a bt P. 0:02:06.400 --> 0:02:09.800 The Italian boond the tenure right now up seven basis points. 0:02:09.800 --> 0:02:12.239 Off the back of this decision is the focus still 0:02:12.280 --> 0:02:15.040 on whether the ECB will buy junk debt from here 0:02:15.040 --> 0:02:16.880 on out, not just on the sulfuring side, but on 0:02:16.919 --> 0:02:19.960 the credit side. To Dan, I think there was also 0:02:20.040 --> 0:02:23.560 some hope that they might do more to address some 0:02:23.639 --> 0:02:25.720 of the pressure on the very front end of the 0:02:25.760 --> 0:02:28.080 market that you know you've seen in at least for 0:02:28.240 --> 0:02:31.639 part of April higher higher your Eyebork fixings uh and 0:02:32.440 --> 0:02:36.959 some hope they might add financial commercial paper or or 0:02:37.040 --> 0:02:40.480 T bills to their their their purchase programs. Instead, what 0:02:40.480 --> 0:02:43.760 they've done is out of these these additional uh T 0:02:43.919 --> 0:02:45.800 L t r os that you mentioned, so that may 0:02:45.840 --> 0:02:47.440 be coming up a bit short of what the market 0:02:47.480 --> 0:02:49.560 was helping for, and that may be why you see 0:02:49.560 --> 0:02:52.639 some of the pressure on the euro right after decision 0:02:52.680 --> 0:02:56.920 and also on the BTPs. Dan, I remember when currencies 0:02:57.040 --> 0:03:00.160 used to be a debate on which central bank was 0:03:00.200 --> 0:03:04.320 either tightening fastest or easing fastest. So I'm wondering if 0:03:04.360 --> 0:03:07.280 it still is a relative game in terms of who's 0:03:07.320 --> 0:03:10.760 easing most quickly, who's got the most ammunition to do so, 0:03:11.080 --> 0:03:13.680 who's winning here? Where is the pressure right now on 0:03:13.840 --> 0:03:17.120 a weeker dollar or a week or weaker euro. Well, 0:03:17.160 --> 0:03:18.799 I think we're kind of like where we got to 0:03:18.919 --> 0:03:21.080 in two thousand nine. Already we got your very quickly 0:03:21.080 --> 0:03:24.200 where everybody is all in. Everybody's at zero, and now 0:03:24.280 --> 0:03:28.080 they're just making adjustments along the margins to make sure 0:03:28.120 --> 0:03:32.320 that the transmissions working, so everyone's all in. Rate differentials 0:03:32.320 --> 0:03:34.880 have come down to about zero. It's about, you know, 0:03:35.040 --> 0:03:38.720 seventies sixty seventy basis points three months rate differential between 0:03:38.800 --> 0:03:42.320 Europe and US based on the FX forwards. And that 0:03:42.360 --> 0:03:44.000 means that you know, the currencies that are going to 0:03:44.040 --> 0:03:46.320 do well are the ones where investor you have a 0:03:46.320 --> 0:03:49.040 current account surplust investors have no more reason to keep 0:03:49.480 --> 0:03:53.560 our risk in overseas markets, and you'll see hedging away 0:03:54.240 --> 0:03:57.680 of overseas effects composure. So that's bad news for the dollar. Basically, 0:03:57.880 --> 0:03:59.560 I don't want to get you in trouble with Paris Daan, 0:03:59.640 --> 0:04:02.720 But let's try what's the optimal point for euro right now? 0:04:03.120 --> 0:04:07.120 What's the multi efficacious euro dollar pricing right now? For 0:04:07.240 --> 0:04:12.320 Christine Legard, Well, we think euro is cheap versus the dollar. 0:04:12.600 --> 0:04:15.640 We think a long term equilibrium is in one thirties area. 0:04:15.800 --> 0:04:18.720 So obviously that's a long way away. And and then 0:04:18.839 --> 0:04:20.919 you know, I'm not gonna that's not gonna happen very quickly. 0:04:21.360 --> 0:04:24.479 But we think you could get considerably higher from where 0:04:24.520 --> 0:04:26.680 you are now. And um, that would be a much 0:04:26.680 --> 0:04:31.880 more neutral place for facts that cats catch you. You 0:04:31.920 --> 0:04:38.520 joint to us from BMP powder bite. Here if the 0:04:38.560 --> 0:04:43.280 surveillance home studio in the oak paneled library with a 0:04:43.320 --> 0:04:47.920 bloody mary board, I can look at a book the 0:04:47.960 --> 0:04:52.479 Wage Curve Blanche Flower Oswald, and I can open the 0:04:52.560 --> 0:04:56.240 book and see the first sentence. Work on this monograph 0:04:56.839 --> 0:05:01.680 began in nineteen eighties seven. David blanche Flower joins us 0:05:01.680 --> 0:05:04.400 now from Dartmouth, where he saw twelve copies of the 0:05:04.440 --> 0:05:09.720 Wage Curve. David, is this the worst you've seen since seven? 0:05:09.839 --> 0:05:15.599 Is this is? This is stunning economic decline, isn't it? Well? 0:05:15.680 --> 0:05:19.640 It certainly is the worst. But I'm a historian as well, 0:05:19.680 --> 0:05:23.240 and I can't see anything worse than this ever. Um, 0:05:23.360 --> 0:05:24.960 I mean, I was looking at the numbers you were 0:05:24.960 --> 0:05:27.600 talking about this morning. Got numbers for Europe. We've got 0:05:27.640 --> 0:05:31.680 numbers for France but also Spain and Belgium and Austria, 0:05:32.040 --> 0:05:35.560 and we're looking at, I mean, unprecedented numbers. And just 0:05:35.600 --> 0:05:39.240 to put what John said in context, France, of course 0:05:39.279 --> 0:05:43.760 had a negative quarter the one before that, so basically interesting. 0:05:44.000 --> 0:05:46.400 Certainly now even before we get to Q two. I mean, 0:05:46.440 --> 0:05:50.200 these numbers are completely unprecedented, and they're all going to 0:05:50.279 --> 0:05:51.840 get a lot worse, and we're going to see another 0:05:51.920 --> 0:05:55.120 number at age thirty. My guess is four million or 0:05:55.240 --> 0:05:58.159 so you I claims. It's a bit difficult to follow 0:05:58.200 --> 0:06:00.599 because if you look at place like k because there's 0:06:00.640 --> 0:06:03.400 been a big increase there, But these are these are 0:06:03.480 --> 0:06:05.799 numbers that are you know, the only way to describe 0:06:05.800 --> 0:06:08.680 it is a falling night. This is just collapsing through 0:06:08.680 --> 0:06:13.159 the floor. Danny. For ten years, you said, don't raise 0:06:13.240 --> 0:06:16.160 interest rates. You kept saying, don't raise interest rates because 0:06:16.200 --> 0:06:18.719 this labor market has still got a load of slack. 0:06:18.839 --> 0:06:20.560 There's still a load of work to do, there's still 0:06:20.600 --> 0:06:22.520 more and more people that need to come back. They 0:06:22.640 --> 0:06:25.800 raised interest rates. Chair Yelen flirted with the idea of 0:06:25.880 --> 0:06:28.440 running things hard. She didn't run things hard. Chair how 0:06:28.520 --> 0:06:30.839 quickly realized after a couple of years on the job 0:06:30.880 --> 0:06:34.160 that maybe they should be leaving things to run hard, 0:06:34.200 --> 0:06:37.400 because there is more work to do in the labor market. Danny, 0:06:37.400 --> 0:06:39.800 when we come out of this in twelve months time, 0:06:39.839 --> 0:06:42.360 eighteen months time, whenever that is, in two years time, 0:06:42.800 --> 0:06:45.320 the reluctance to do what they did last time around 0:06:45.400 --> 0:06:48.279 is going to be absolutely massive. Can you help frame 0:06:48.360 --> 0:06:51.240 for our audience just how long rates are going to 0:06:51.320 --> 0:06:53.920 be at these levels because of the lessons that were 0:06:53.960 --> 0:06:58.719 learned over the last five ten years. What a great question. 0:06:59.000 --> 0:07:01.960 I mean, obviously, on your program many times I took 0:07:02.000 --> 0:07:04.960 a view that the bed was mistaken and it's great 0:07:05.080 --> 0:07:08.080 rises from two thousand fifteen to two thousand and eighteen 0:07:08.560 --> 0:07:11.640 and left the economy weaker than it should have been 0:07:11.640 --> 0:07:15.640 when this shot came along. Um, I think we need 0:07:15.680 --> 0:07:18.280 to look back at what happened both from two thousand 0:07:18.280 --> 0:07:21.160 and eight onwards, and it seemed to me that people 0:07:21.240 --> 0:07:25.760 underestimated to the shock. The fiscal authorities tightened too much, 0:07:25.800 --> 0:07:28.760 and that put pressure on the central thing. And I 0:07:28.800 --> 0:07:31.080 think we haven't learned the lesson. I used to quote 0:07:31.080 --> 0:07:35.360 this quote a lot Kane's in one talked about the 0:07:35.440 --> 0:07:39.160 long dragging conditions of semi slump, and he said the 0:07:39.240 --> 0:07:43.240 issue was not so much the crash itself, but what follows. 0:07:43.560 --> 0:07:46.200 And so I think that's a really great question of yours, John, 0:07:46.280 --> 0:07:49.520 that the reality is that you have this great shock 0:07:50.000 --> 0:07:51.840 and then you need to worry about what's coming. And 0:07:51.920 --> 0:07:54.320 I think if we look back that the biggest mistake 0:07:54.400 --> 0:07:56.559 that was made was to assume it was all over 0:07:57.320 --> 0:07:59.360 um and then you could sort of anchor back. And 0:07:59.400 --> 0:08:01.360 then if you hear and now your steerings of all 0:08:01.400 --> 0:08:04.040 talking about well, now in eighteen months or so, we're 0:08:04.040 --> 0:08:06.320 gonna we'll go back to where where we can raise rate, 0:08:06.480 --> 0:08:09.400 we can fight. And I think the reality what we 0:08:09.520 --> 0:08:12.440 know in these giant shops is that their long lapsing. Literally, 0:08:12.520 --> 0:08:15.440 So how come John Ferrell only has all great questions? 0:08:15.480 --> 0:08:17.840 What is that about? Danny and I talked before we 0:08:17.880 --> 0:08:24.480 do the shape you coordinate and you brob him. I agree, 0:08:24.520 --> 0:08:26.720 and I want to build on it. Uh, Danny and 0:08:27.080 --> 0:08:30.160 the idea of the slack in the economy and in 0:08:30.200 --> 0:08:32.080 the jobs market, and you wrote a really good paper 0:08:32.080 --> 0:08:35.560 about this recently, looking at the preliminary data about the 0:08:35.640 --> 0:08:38.760 job destruction and the mass of it in the United 0:08:38.800 --> 0:08:41.640 States and in the United Kingdom and the wake of 0:08:41.679 --> 0:08:45.680 the coronavirus shutdowns, and you talked about the widening wealth gap, 0:08:45.760 --> 0:08:50.199 the widening income gap, the disproportionate hit on lower income 0:08:50.240 --> 0:08:54.120 individuals is a fed effectively widening this wealth gap with 0:08:54.120 --> 0:08:58.880 its programs. Well, I mean the issue is who are 0:08:58.880 --> 0:09:01.679 you going to rescue? I mean, we had an initial 0:09:01.720 --> 0:09:05.079 piece of data from the BLX for its March release, 0:09:05.080 --> 0:09:07.440 and we're going to get the release for a rape 0:09:07.600 --> 0:09:11.240 coming shortly. If you look, the biggest group that were 0:09:11.280 --> 0:09:14.720 impacted with a young, So the young had a three 0:09:14.760 --> 0:09:18.360 point three percentage point rise in their unemployment rate. So 0:09:18.440 --> 0:09:20.680 obviously the issue here is that there's going to be 0:09:20.760 --> 0:09:24.880 distributional consequences here. And obviously the FED action we know 0:09:24.960 --> 0:09:29.760 in two thousand and eight onwards rescued people who owned assets, 0:09:29.800 --> 0:09:31.520 and what we're going to see here is that that's 0:09:31.559 --> 0:09:34.120 the same thing going to happen. The question is what 0:09:34.240 --> 0:09:37.360 happens in terms of the distributional consequences, And of course 0:09:37.400 --> 0:09:40.760 what we're seeing a distributional consequences of the virus itself, 0:09:41.280 --> 0:09:45.800 so people into the poorer people, people without health insurance, 0:09:45.840 --> 0:09:49.280 people owing up so well, so that that's obviously an issue. 0:09:49.600 --> 0:09:52.240 And the question always for a central bank is Okay, 0:09:52.440 --> 0:09:55.280 we're going to have an effect on distribution. We only 0:09:55.320 --> 0:09:58.520 have limited tools. It's up to the fiscal authorities to 0:09:58.640 --> 0:10:01.199 do something about it. And obviously the issue is that 0:10:01.200 --> 0:10:02.840 are they going to do that? And I think the 0:10:02.880 --> 0:10:05.559 second issue is that we see around the country are 0:10:05.559 --> 0:10:07.520 they going to get food to the people who need it? 0:10:07.600 --> 0:10:10.520 So I think distributional things are really important. And something 0:10:10.520 --> 0:10:12.640 else I should flag is that we're going to look 0:10:12.640 --> 0:10:15.120 at you, I claims. But the big deal going forward 0:10:15.200 --> 0:10:17.319 is going to be under employment, which is even that 0:10:17.440 --> 0:10:20.199 people are in work, they don't have enough hours, and 0:10:20.280 --> 0:10:22.840 that's sort of huge hit as well. Are we going 0:10:22.840 --> 0:10:25.839 to see big hits from that? So it's not just unemployment, 0:10:26.040 --> 0:10:28.439 it's about underemployment. And the people who are going to 0:10:28.640 --> 0:10:32.360 be under employed are the weakest spoke that. You're right, 0:10:32.400 --> 0:10:35.120 the FED will not essentially be be getting too because 0:10:35.120 --> 0:10:38.080 they can't do everything, but but the central government and 0:10:38.120 --> 0:10:40.080 the Congress have to get to those books and they 0:10:40.120 --> 0:10:42.360 aren't it. So what we've seen is the people who 0:10:42.440 --> 0:10:44.439 do best in the boom are the people who do 0:10:44.600 --> 0:10:47.520 worst in the slump. So the least educated, the young 0:10:47.520 --> 0:10:50.720 we're going to worry about. And the FED really has no, no, 0:10:50.840 --> 0:10:53.360 no part of play in that game. Danny. Politicians have 0:10:53.440 --> 0:10:55.080 done a lot over the last couple of months, and 0:10:55.080 --> 0:10:57.840 one of the things they've done is enhanced employment benefits 0:10:57.960 --> 0:10:59.920 in the United States of America? Does it rather contra 0:11:00.040 --> 0:11:02.600 vercial question being asked in America now over the last 0:11:02.600 --> 0:11:06.360 several weeks about the unintended consequences of that decision. Can 0:11:06.400 --> 0:11:08.520 you walk us through how you're thinking about that particular 0:11:08.559 --> 0:11:12.560 dilemma at the moment enhanced unemployment benefits which for some 0:11:12.640 --> 0:11:15.240 people they may well be doing better off without a 0:11:15.320 --> 0:11:21.400 job financially speaking, certainly, not psychologically speaking, but financially speaking. Well, 0:11:21.440 --> 0:11:24.160 the first thing we know from from all the work 0:11:24.200 --> 0:11:26.840 that I and many other people in paper economics have 0:11:27.640 --> 0:11:32.079 is that the biggest happiness inducer, if you like, is 0:11:32.120 --> 0:11:36.040 a job. And so obviously the question now is well, 0:11:36.080 --> 0:11:39.760 should you go in and help people who have lost 0:11:39.800 --> 0:11:43.640 the job through no fault of their own. So that's 0:11:43.679 --> 0:11:48.640 the first point. So you put in benefits, and we've 0:11:48.640 --> 0:11:51.840 traditionally have done it on a bypassing basis to help 0:11:51.920 --> 0:11:56.240 people through this shock. The issue, I guess is you've 0:11:56.280 --> 0:11:59.079 helped these people and then you say, well, are they 0:11:59.160 --> 0:12:01.400 just lazy? Are going to just sit there and not 0:12:01.600 --> 0:12:03.560 look for all the jobs that are out there? And 0:12:03.600 --> 0:12:05.600 then you get to the point of well, what jobs 0:12:05.640 --> 0:12:08.160 are there out there. The point of the point in 0:12:08.200 --> 0:12:11.120 this great recession where we've seen German unemployment rights and 0:12:11.200 --> 0:12:14.800 having a huge numbers coming just thirty million odd increase 0:12:14.880 --> 0:12:19.040 in unemployment claims is because there's no demand, oil price 0:12:20.240 --> 0:12:24.120 driving UM. The restaurants are closingest people aren't going to them. 0:12:24.360 --> 0:12:28.840 So this is to temporarily take help the people who 0:12:28.840 --> 0:12:32.840 have no fold with their own have been made unemployed. UM. 0:12:33.040 --> 0:12:35.760 And so to argue that we shouldn't help those people, 0:12:36.160 --> 0:12:39.160 we shouldn't deal with the difficult issues that are going 0:12:39.160 --> 0:12:44.480 on right now, seems well heartless as good as well, 0:12:44.520 --> 0:12:47.640 said Danny. Very well, said David blanch For thank you 0:12:47.679 --> 0:12:53.679 so much. He is with Dartmouth College. We have talked 0:12:53.840 --> 0:12:56.240 all sorts of good people. We think Stephen Riley of 0:12:56.320 --> 0:13:00.600 Imperial College for joining Bloomberg Surveillance today out of London. 0:13:01.200 --> 0:13:04.120 Right now, my conversation that I have with Francie Laqui, 0:13:04.280 --> 0:13:09.240 with Jason Farley with it Johns Hopkins University School of Nursing. 0:13:09.360 --> 0:13:12.200 Let's listen, We've got great data about the way we 0:13:12.320 --> 0:13:17.160 position patients UM that will actually help improve oxygen saturations 0:13:17.240 --> 0:13:19.520 or the amount of oxygen in the blood. UM. It 0:13:19.559 --> 0:13:23.680 can actually slow down if a patient's progressing towards the 0:13:23.760 --> 0:13:26.960 need for ventilation, by placing them on their stomach. We 0:13:27.000 --> 0:13:30.679 call that prone position or proning the patients. We can 0:13:30.720 --> 0:13:33.240 do that before a patient gets ventilated, we can do 0:13:33.320 --> 0:13:36.439 that after a patient gets ventilated. It actually helps to 0:13:36.679 --> 0:13:40.040 buy gravity improve the amount of oxygen in a patient's blood. 0:13:40.240 --> 0:13:42.840 So that's one thing. The second thing, and I think 0:13:42.920 --> 0:13:45.360 more importantly what Dr Fauci is referring to in this 0:13:45.480 --> 0:13:49.040 proof of concept is do we have any drug that 0:13:49.080 --> 0:13:53.319 shows it can help improve the way um it responds 0:13:53.400 --> 0:13:55.760 or it causes the virus to respond in the body. 0:13:55.960 --> 0:13:58.880 And that, I think is more what Dr Fauci is 0:13:58.880 --> 0:14:01.680 we're speaking to in his comments yesterday, the proof of 0:14:01.720 --> 0:14:04.160 concept that we now share a single drug that may 0:14:04.400 --> 0:14:07.440 offer a benefit. What is our proof of concept right 0:14:07.480 --> 0:14:11.760 now with our testing? It seems to be complex. People 0:14:11.760 --> 0:14:14.400 talk about the swabs and the rest of it. Is 0:14:14.400 --> 0:14:19.040 our testing up to proof of concept level? Well? Well, certainly, 0:14:19.080 --> 0:14:21.680 when we when we talk about proof of concept, it 0:14:21.800 --> 0:14:25.760 simply means that we have you know, we've theorized an issue. 0:14:25.960 --> 0:14:29.640 And when we understand that there is a at least 0:14:29.640 --> 0:14:32.520 something that gives us an idea that the hypothesis we 0:14:32.560 --> 0:14:36.240 originally proposed is actually has merit, right, and that's the 0:14:36.280 --> 0:14:40.120 proof of concept. So right now, our proof of concept 0:14:40.160 --> 0:14:42.520 is that we can stand up across the United States 0:14:42.560 --> 0:14:45.120 without the help of the federal government, you know, testing, 0:14:45.200 --> 0:14:47.560 and we can stand that testing up. Uh. You know, 0:14:47.680 --> 0:14:50.640 it takes it's a slow process. It's their supply thing 0:14:50.680 --> 0:14:54.440 that's used. But we are now testing across the United States, um, 0:14:54.480 --> 0:14:57.760 you know, hundreds of thousands of people a day. Um. 0:14:57.840 --> 0:15:02.280 That being said, it's remained a very slow process. So 0:15:02.440 --> 0:15:05.600 we do need to scale up. And the administration's estimate 0:15:05.640 --> 0:15:08.600 of testing two percent of the general population per day 0:15:08.840 --> 0:15:10.840 with you know, we've heard estimates that that would take 0:15:10.920 --> 0:15:14.480 up approximately four years to get to the right level 0:15:14.480 --> 0:15:17.320 of testing that we need. So we we definitely know 0:15:17.400 --> 0:15:20.360 that we need to speed up our testing capacity, need 0:15:20.400 --> 0:15:23.600 to speed up the number of people being tested. Dr Farley, 0:15:23.640 --> 0:15:25.960 what is you know, what are you most hopeful about 0:15:26.000 --> 0:15:27.440 right now? I know that there are a couple of 0:15:27.440 --> 0:15:31.960 clinical trials actually showing that Rodzeviere could be working. How 0:15:32.000 --> 0:15:34.840 long until we have you know, an almost certain answer 0:15:34.960 --> 0:15:38.440 on what drugs can help us fighting this pandemic certainly, 0:15:38.480 --> 0:15:41.520 so I understand. You know that the data that came 0:15:41.520 --> 0:15:46.240 out from the NIH yesterday was an interim analysis and 0:15:46.240 --> 0:15:49.400 and basically what that means is that the that there's 0:15:49.400 --> 0:15:52.680 a data safety and monitoring board that's independent to the 0:15:52.680 --> 0:15:55.720 investigative team. They look at the data and they've done that, 0:15:55.960 --> 0:15:59.520 and in that interim analysis, there is a statistical benefit 0:16:00.040 --> 0:16:03.800 in terms of recovery time. It's the four day benefits. 0:16:03.880 --> 0:16:08.280 So patients who received the drug redem severe received eleven 0:16:08.360 --> 0:16:11.440 day over all time to resolution, whereas people who received 0:16:11.440 --> 0:16:15.480 placebo was a fifteen day time to resolution. Now that's 0:16:15.560 --> 0:16:18.440 our first as we were saying before, proof of concept 0:16:18.480 --> 0:16:21.480 of the drug may have some level of benefits when 0:16:21.480 --> 0:16:26.440 it comes to survival UM. There was a trend toward 0:16:26.680 --> 0:16:31.680 survivability UM that was not exactly statistical significant at this point, 0:16:32.200 --> 0:16:35.360 meaning that you know, the metric we look at as 0:16:35.360 --> 0:16:39.680 scientists to say, is this different one drug AID versus 0:16:39.720 --> 0:16:42.120 drug B. And the answer to that is right now, 0:16:42.640 --> 0:16:45.240 it was. It appears that it's moving in that direction, 0:16:45.280 --> 0:16:48.440 but it was not yet statistically different. But the data. 0:16:48.520 --> 0:16:51.840 What the data did show was the eight percent mortality 0:16:51.920 --> 0:16:55.440 in the redemped severe arm versus eleven point six percent 0:16:55.560 --> 0:16:58.440 mortality in the placebo arm so that is at least 0:16:58.600 --> 0:17:04.120 some benefit it that we can see mathematically emerging. Jesson 0:17:04.160 --> 0:17:07.120 Farrowy the School Nursing Jena, because university owners should mention 0:17:07.240 --> 0:17:10.720 also affiliated with the Bloomberg School of Public Health at 0:17:10.800 --> 0:17:13.560 j h U. And of course we should mention Michael Bloomberg, 0:17:13.600 --> 0:17:17.840 founder of Bloomberg LP this radio and television operation as well. 0:17:18.000 --> 0:17:21.720 He has given generously to his School of Engineering and 0:17:21.760 --> 0:17:29.640 the rest of the Johns Hopkins University. Apple's taken over 0:17:29.760 --> 0:17:32.320 our lives, and they're becoming more and more integral as 0:17:32.320 --> 0:17:34.680 we are staying at home and consuming more and more 0:17:34.720 --> 0:17:38.800 media on our devices. Chris Sankar covers Apple for Counter 0:17:38.880 --> 0:17:42.000 Companies of Senior Research Channels Tom and he joins us here. Chris, 0:17:42.040 --> 0:17:45.119 thanks so much for joining us. Um, what do you 0:17:45.160 --> 0:17:48.359 expect from Apple after the close tonight when they report 0:17:48.520 --> 0:17:53.560 their earnings? Yeah, Hi, thanks for having me, and everyone 0:17:53.680 --> 0:17:55.399 is a very you know, Apple's party the first one 0:17:55.440 --> 0:17:58.760 to pull the guidance because of COVID back in mid February. 0:17:58.800 --> 0:18:01.920 So I would say that consensus numbers are all over 0:18:01.960 --> 0:18:04.040 the map. But if you look at the midpoint of 0:18:04.080 --> 0:18:07.679 it roughly around like you know, low to mid fifty 0:18:07.680 --> 0:18:10.359 billion and revenues. I do expect them to come in 0:18:10.400 --> 0:18:13.440 line with that number. And keep in mind that used 0:18:13.440 --> 0:18:17.360 to be sixty five billion, you know, pre guidance withdrawals, 0:18:17.359 --> 0:18:20.320 so you've seen quite a bit of tious king over there. 0:18:20.760 --> 0:18:22.800 So I do expect them largely to come in line 0:18:23.240 --> 0:18:25.840 at this point. I do not expect them to give 0:18:25.840 --> 0:18:29.280 a June quarter guidance. And the rationalt for that is 0:18:29.280 --> 0:18:32.520 pretty simple, right, So in jan thirty during the last 0:18:32.520 --> 0:18:35.360 earnings called, they give a March guidance. Two weeks later 0:18:35.400 --> 0:18:38.040 they pulled it at the time because the supply chain 0:18:38.119 --> 0:18:41.040 is disrupted due to the COVID And now the supply 0:18:41.119 --> 0:18:43.879 chain is up and running, but you have to forecast 0:18:43.880 --> 0:18:47.960 demand for June based on some geographies that haven't even 0:18:47.960 --> 0:18:51.159 opened up yet. So I think the demand forecasting is 0:18:51.240 --> 0:18:54.960 much more challenging than the supply ramifications at this point. 0:18:54.960 --> 0:18:57.240 So I would say, given all of that, I do 0:18:57.359 --> 0:19:00.200 not expect them to give a June quarter guidance about 0:19:00.200 --> 0:19:03.760 our forecast. It is to be largely flattish on a 0:19:03.800 --> 0:19:07.600 sequential basis, alright, So Chris, so I know they had 0:19:07.680 --> 0:19:11.000 some new phones UH is scheduled to be launched kind 0:19:11.000 --> 0:19:14.480 of a lower our mid price phone UH as well 0:19:14.520 --> 0:19:17.360 as perhaps a five G phone in the fall. Where 0:19:17.400 --> 0:19:20.040 do you think some of those new product launches are 0:19:20.040 --> 0:19:21.720 going to be impact? There are we gonna see some 0:19:21.800 --> 0:19:26.119 significant delays in some of their new product launches. So 0:19:26.160 --> 0:19:28.240 in term of like the mid rangers, I should say 0:19:28.240 --> 0:19:29.840 the low class phone they did come out of the 0:19:29.840 --> 0:19:32.240 two weeks ago the iPhone SC, you know, which the 0:19:32.240 --> 0:19:35.360 price phone is anywhere from three at the low end 0:19:35.359 --> 0:19:37.760 to five nine in the in the in the upper end. 0:19:38.160 --> 0:19:40.080 So I think they did come out of the iPhone SC. 0:19:40.200 --> 0:19:42.080 You know, in a normal environment, it has seen a 0:19:42.119 --> 0:19:46.080 little bit more fanfare official launch this time on it 0:19:46.200 --> 0:19:49.680 was an online launch, so I think that does add 0:19:49.840 --> 0:19:53.359 to some upside into the unit forecast in June, but 0:19:53.440 --> 0:19:56.520 more realistically into the half of the year. And then 0:19:56.720 --> 0:19:59.440 um the five D phone, which is scheduled for a 0:19:59.520 --> 0:20:02.840 later at the here. Typically Apple comes out with a 0:20:02.880 --> 0:20:06.040 new iPhone, you know, in the September October time frames. 0:20:06.640 --> 0:20:08.879 Looks like it might be shifted by maybe a month. 0:20:09.119 --> 0:20:10.919 But I would say, you know, in the grand scheme 0:20:10.920 --> 0:20:14.520 of things, whether the new iPhone five G gets lit 0:20:14.560 --> 0:20:17.120 by a month or two months, it doesn't really matter, 0:20:17.280 --> 0:20:19.600 you know, it doesn't matter to the thesis, it doesn't 0:20:19.640 --> 0:20:21.520 matter to the supply chain. If it's like a couple 0:20:21.560 --> 0:20:23.560 of months push out. I would say that if you 0:20:23.640 --> 0:20:26.680 are six or nine months push out, and uh, there's 0:20:26.720 --> 0:20:29.960 probably some ramistications in the in the medium term, but 0:20:30.000 --> 0:20:32.560 I would say a few months push out really doesn't 0:20:32.600 --> 0:20:36.400 change the land of the five adoption into calendar one. 0:20:36.840 --> 0:20:39.320 I can predict you know that all my kids iPhones 0:20:39.320 --> 0:20:42.680 will break one week before the rollout of five, six 0:20:42.800 --> 0:20:45.840 or seven. Gee. I got one question here, with all 0:20:45.840 --> 0:20:49.399 of this upside down demands supply dynamics, what do you 0:20:49.480 --> 0:20:53.359 model out for the growth of their free cash flow 0:20:53.640 --> 0:20:57.600 and for the sustainability of two hundred and seven jillion 0:20:57.680 --> 0:21:00.480 dollars of cash? I mean, there's a ball she got 0:21:00.480 --> 0:21:04.679 adjusted year off of cash flow or not? Yeah, I 0:21:04.680 --> 0:21:06.240 think that's a good question. And you know, one of 0:21:06.240 --> 0:21:08.200 the things I would say is that, you know, the 0:21:08.240 --> 0:21:11.479 stability of the balance. She has been a major selling 0:21:11.520 --> 0:21:14.600 point for many Apple shareholders, and you know, I mean 0:21:14.640 --> 0:21:16.399 the free cash if you look at it, you know 0:21:16.560 --> 0:21:19.919 last year it was around like two percent. You know, 0:21:20.720 --> 0:21:22.760 if these things are going to be down quite a 0:21:22.800 --> 0:21:24.800 bit this year, we actually don't expect the free cash 0:21:24.920 --> 0:21:28.480 or to diminish dramatically. In other words, right now forecasts like, 0:21:28.520 --> 0:21:31.320 you know, just under twenty percent free cash flow margins 0:21:31.560 --> 0:21:36.360 for physical twenty was his twenty two in fiscal nineteen. 0:21:36.840 --> 0:21:38.199 So I think that's kind of like the beauty of 0:21:38.200 --> 0:21:40.679 the model. The other thing that we have assumed in 0:21:40.760 --> 0:21:44.080 our model is that there's really no buy backs in 0:21:44.119 --> 0:21:46.959 the June quarter. You know, clearly Apple has been funding 0:21:46.960 --> 0:21:49.919