WEBVTT - Surveillance: Correction Has Room To Go, Rochester Says 0:00:09.880 --> 0:00:13.840 Welcome to the Bloomberg Surveillance Podcast. I'm term Keene Jay Leye. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.120 Bloomberg dot Com, and of course on the Bloomberg. We 0:00:27.200 --> 0:00:29.800 start this program though, by getting Jordan Rochester on the 0:00:29.800 --> 0:00:32.839 phone the mare a gtain effects strategist to Maura, and 0:00:33.040 --> 0:00:36.760 Jordan's walk me through the house view right now for 0:00:36.800 --> 0:00:38.879 how these kind of shocks are going to roll through 0:00:38.920 --> 0:00:43.760 asset classes, roll through markets in the coming weeks. Hi, John, 0:00:43.840 --> 0:00:46.000 It's it's not going to be fun and I hate 0:00:46.000 --> 0:00:47.839 to be the pair of bad news, but there is 0:00:47.880 --> 0:00:51.400 a lot going on in terms of equity markets. It's 0:00:51.560 --> 0:00:55.000 huge moves and that's feeding through to foreign exchange markets 0:00:55.000 --> 0:00:59.160 in weird, wonderful and slightly confusing ways. So where do 0:00:59.200 --> 0:01:02.280 I start. First, of all, equities were in a world 0:01:02.400 --> 0:01:04.280 of their own for the past couple of weeks. We 0:01:04.319 --> 0:01:08.400 have been watching the situation in China, the rally and 0:01:08.440 --> 0:01:11.400 fixed income, the sell off in commodities, but the equity 0:01:11.440 --> 0:01:15.080 market was making fresh eyes. So we're seeing that corrections 0:01:15.080 --> 0:01:17.080 coming back down to where it should be. And I've 0:01:17.120 --> 0:01:19.920 got these charts on my screen which show me how 0:01:20.120 --> 0:01:23.200 U S equities trade versus growth expectations, and the same 0:01:23.240 --> 0:01:25.960 for Europe. And we've seen sell offs in both markets, 0:01:25.959 --> 0:01:28.600 of course, so they're coming back down towards Earth. The 0:01:28.720 --> 0:01:32.480 US markets have corrected more than the European ones, and 0:01:32.680 --> 0:01:34.560 I think there is actually still more room to go 0:01:34.720 --> 0:01:37.720 because what we're not used to is a supply shock 0:01:37.760 --> 0:01:41.360 of this magnitude if it escalates. We're used to Donald 0:01:41.360 --> 0:01:43.440 Trump being able to do a Phase one deal with China, 0:01:43.520 --> 0:01:45.720 the FED cutting rates and solving the issue with credit 0:01:45.760 --> 0:01:50.320 markets and resolving financial conditions. Supply shocks are very hard 0:01:50.360 --> 0:01:53.880 for central bankers or even policy makers to solve. So 0:01:54.000 --> 0:01:55.920 that's why you're seeing the moves in markets here, and 0:01:55.960 --> 0:01:58.160 it's going to take time, and time will be painful. 0:01:58.560 --> 0:02:01.280 When it comes to the European market, they won't have 0:02:01.320 --> 0:02:03.720 as much flexibility when it comes to rate cuts like 0:02:03.800 --> 0:02:07.600 the ECB. The ECB it has about ten basis points 0:02:07.600 --> 0:02:09.320 of rate cuts they could do. They could maybe do 0:02:09.400 --> 0:02:11.920 quanta to be easing again, but they're already doing it. 0:02:12.600 --> 0:02:16.160 So for me, I think the currency rising today is 0:02:16.200 --> 0:02:18.919 just absolute bonkers. And I think that this is something 0:02:18.960 --> 0:02:22.200 that needs to correct weaker euro and eventually stronger dollar. 0:02:22.480 --> 0:02:24.799 But what's going on, guys, is when you've got big 0:02:24.800 --> 0:02:28.800 moves like list and equities, you've got investors repatriating their money, 0:02:28.919 --> 0:02:32.960 and you have seen those qui outflows drive the U euro. 0:02:33.080 --> 0:02:35.440 Hire here as that money is coming back home, Jenn, 0:02:35.440 --> 0:02:37.799 I want to point out we are nine point zero 0:02:37.919 --> 0:02:42.920 two correction, like we're almost to the cusp of an spres. 0:02:42.919 --> 0:02:45.200 We're close to ten percent over in Germany on the 0:02:45.240 --> 0:02:48.360 equity benchmark in Frankfurt, Jordan, let's talk about the euro 0:02:48.760 --> 0:02:51.799 repat training cash. Are we starting to see some end 0:02:51.840 --> 0:02:56.120 type qualities to the single currency? There is, John m 0:02:56.360 --> 0:02:59.320 I was mentioning it before. So we saw contate of 0:02:59.320 --> 0:03:02.680 easing into a fifteen, and we had extensions, we had 0:03:02.680 --> 0:03:04.800 slowed downs, and we're back in the same game again. 0:03:05.240 --> 0:03:08.040 And when you've got buns at negative yields, they you 0:03:08.080 --> 0:03:12.200 saw massive outflows into US assets, into emerging market assets. 0:03:12.680 --> 0:03:15.120 So what's going on is European investors have got all 0:03:15.120 --> 0:03:18.600 these assets abroad and now having fun redemptions, and so 0:03:18.680 --> 0:03:21.280 they because the risk off tends to see sellers. So 0:03:21.320 --> 0:03:23.480 you're seeing those fun redemptions mean that they have to 0:03:23.480 --> 0:03:26.880 bring that money home and convert it back into Euros. Now, 0:03:26.880 --> 0:03:28.880 this is a flow which is very hard to predict. 0:03:29.080 --> 0:03:31.400 It's very hard to trade, and timing it to be 0:03:31.480 --> 0:03:33.840 very difficult. I think once it does settles, and I 0:03:33.840 --> 0:03:37.119 think if we see a bit of stability, will then 0:03:37.160 --> 0:03:39.680 go back to euro being much more exposed to what's 0:03:39.680 --> 0:03:42.400 going on in China and also the situation escalating in 0:03:42.400 --> 0:03:44.840 Milan as well. So I think short term this is 0:03:44.840 --> 0:03:47.040 what's driving you are higher, but I'm not chasing it, 0:03:47.160 --> 0:03:49.360 and I do think that the currency will come under 0:03:49.400 --> 0:03:52.120 pressure because guys, I think by the end of this 0:03:52.200 --> 0:03:54.560 year we're all gonna be experts in credit risks again. 0:03:54.680 --> 0:03:59.360 We've been so used to rates rallying, ECB easing rates 0:03:59.400 --> 0:04:02.480 for everybody um that we've kind of neglected the credit 0:04:02.560 --> 0:04:05.160 risks that have been building out there. And if we 0:04:05.200 --> 0:04:07.000 have a hit to growth like this, and if the 0:04:07.040 --> 0:04:11.320 lockdowns and the virus spread goes into Q two, maybe 0:04:11.400 --> 0:04:14.200 even we're still here in June talking about it, then 0:04:14.240 --> 0:04:17.080 credit risks will be on everyone's minds when we talk 0:04:17.120 --> 0:04:19.320 about credit risks. Jordan, it seems to be a race 0:04:19.400 --> 0:04:21.200 to the bottom. I was struck by the idea that 0:04:21.240 --> 0:04:25.440 the dollar is actually weakening versus certain Asian currencies because 0:04:25.480 --> 0:04:28.240 people are now treating their focus on the potential for 0:04:28.279 --> 0:04:31.400 the coronavirus to spread in the United States and for 0:04:31.480 --> 0:04:34.479 that not being fully priced in. I mean, yes, the 0:04:34.520 --> 0:04:37.400 euro is expected to weaken more, But how vulnerable is 0:04:37.440 --> 0:04:39.440 the US here given the fact that a lot of 0:04:39.480 --> 0:04:42.440 people viewed it as immune from some of the worst 0:04:42.480 --> 0:04:46.359 impacts here. Yeah, the U S exty market have been 0:04:46.400 --> 0:04:49.159 the safe haven of ecty markets in the world thanks 0:04:49.200 --> 0:04:51.640 to all those share by backs. You guys have been 0:04:51.760 --> 0:04:55.480 enjoying UM. And also you always had the FED rate 0:04:55.520 --> 0:04:58.320 cutting rates as your backup, and the market is now 0:04:58.360 --> 0:05:00.440 pricing that in and you've got a pro We see 0:05:00.720 --> 0:05:05.240 further pricing of that to come. However, let's think more 0:05:05.240 --> 0:05:08.159 about the end game. Most of the world capital is 0:05:08.200 --> 0:05:11.200 still between the New York to Boston corridor. When I 0:05:11.240 --> 0:05:14.560 look at all of my country's I track the biggest 0:05:14.560 --> 0:05:18.720 holders outside of the residents of those countries of equities 0:05:18.800 --> 0:05:23.360 for example, UK eputies, European equities, the US. So if 0:05:23.360 --> 0:05:25.560 everyone's going to repat your eight, the biggest flow is 0:05:25.680 --> 0:05:28.120 going to be back into dollars. Now. It's not going 0:05:28.160 --> 0:05:31.520 to be like the global financial crisis because back then 0:05:31.600 --> 0:05:35.159 there was very little foreign exchange hedging. We've had much 0:05:35.240 --> 0:05:38.359 higher FX hedging ratios. So the impact on the currency 0:05:38.440 --> 0:05:41.359 maybe a lot less than what we saw in the 0:05:41.360 --> 0:05:47.000 Panics of two thousands, seven and eight. Jordan, give us 0:05:47.000 --> 0:05:49.680 some point here and Dolla Yan, what is your adjusted 0:05:49.760 --> 0:05:53.640 target now for dollah Yan? Well, look, we had had 0:05:53.680 --> 0:05:57.400 this big outflow from Japan just the other week. We 0:05:57.440 --> 0:05:59.560 had that push up to one well and dolli and 0:05:59.560 --> 0:06:02.640 that was driven and buy pension flows. Our guys still 0:06:02.720 --> 0:06:06.360 think that will matter um and so we're not chasing 0:06:06.360 --> 0:06:08.520 the yen strength here. But if we start to see 0:06:08.640 --> 0:06:12.040 signs of the Tokyo Olympics being canceled, we're looking out 0:06:12.080 --> 0:06:14.960 for that risk. Maybe something to talk about more in May. 0:06:15.600 --> 0:06:18.279 I think yen still trades like a safe haven tom 0:06:18.360 --> 0:06:20.640 and so at some point there might be some yen strength. 0:06:20.839 --> 0:06:23.080 Are you are you being we're not chasing? Is there 0:06:23.120 --> 0:06:25.920 a big figure play here on Euro? Then? I mean 0:06:25.960 --> 0:06:29.159 within all these huge flows, these titanic moments we're talking about, 0:06:29.520 --> 0:06:31.760 is there like five big figures in Euro one way 0:06:31.839 --> 0:06:35.480 or the other absolutely. I think essentially once we get 0:06:35.520 --> 0:06:38.240 over Friday, so tomorrow's month end, and we're going to 0:06:38.279 --> 0:06:41.000 see some dollar buying. I think when we see those 0:06:41.000 --> 0:06:43.200 flows because of what's been going on, I think Monday 0:06:43.360 --> 0:06:46.000 we come back to work, euros lower and we're tracking 0:06:46.000 --> 0:06:49.000 more towards one oh six one oh seven again over 0:06:49.040 --> 0:06:51.480 the next month. We'll hold you to that. Jordan's great 0:06:51.480 --> 0:06:53.600 to catch out with you, Jordan Rochester. Hopefully we'll catch 0:06:53.640 --> 0:06:54.880 out with him in the next couple of weeks. Now 0:06:54.920 --> 0:07:01.200 More's g said effect strategists. We are committed, folks to 0:07:01.240 --> 0:07:05.400 giving you the best conversations we can from medical professionals. John. 0:07:05.480 --> 0:07:07.200 If you go down fifth even or you know there's 0:07:07.279 --> 0:07:11.160 well you see so many benefactors of Wall Street Mr. Travis, 0:07:11.280 --> 0:07:15.240 Mr Icon and others that have put money where Hope 0:07:15.320 --> 0:07:18.480 and Mouth is in build a first class, world class 0:07:18.560 --> 0:07:23.480 medical set of institutions. Adam Bernheim is with Mount Sinai 0:07:23.640 --> 0:07:28.480 and they own the high ground on medical engineering. Biomedical 0:07:28.600 --> 0:07:31.760 engineering in his case is a study of lungs. He 0:07:31.880 --> 0:07:34.560 is one of the best in the world at these 0:07:34.680 --> 0:07:37.480 viruses and what they do to our lungs. He's a 0:07:37.520 --> 0:07:41.080 cardio thoracic radiologist. I'm really happy to say on this program, 0:07:41.120 --> 0:07:43.160 we've made such a big effort over the last couple 0:07:43.200 --> 0:07:45.560 of weeks, the last few months to really focus on 0:07:45.680 --> 0:07:50.200 leaving the medical issues to the medical professionals. Professionals. Doctor, 0:07:50.280 --> 0:07:52.560 is fantastic to have you with us on the program. 0:07:53.040 --> 0:07:55.080 Something I don't think has done, or a lot of 0:07:55.120 --> 0:07:57.240 people haven't done a good enough job of, is talk 0:07:57.320 --> 0:08:02.680 about the differences between coronavirus, other viruses, other flus. Take 0:08:02.720 --> 0:08:05.200 me inside the body, inside the chest, inside the lungs, 0:08:05.400 --> 0:08:08.120 the pictures that you've seen, Why is this so different? 0:08:08.920 --> 0:08:10.560 Thank you very much for having me. It's a pleasure 0:08:10.600 --> 0:08:13.320 to be here. When we first started looking at scans 0:08:13.320 --> 0:08:15.920 and patients with coronavirus infection from China, we didn't know 0:08:15.960 --> 0:08:18.080 what to expect because this is a new diagnosis that 0:08:18.080 --> 0:08:20.400 we were describing for the first time. But as we 0:08:20.680 --> 0:08:24.040 categorically went through hundreds of cases, we're able to recognize 0:08:24.160 --> 0:08:27.640 clear patterns that were emerging. Importantly, the way that the 0:08:27.720 --> 0:08:31.320 lung was infect affected included lesions that had a predilection 0:08:31.480 --> 0:08:33.560 for a certain area in the lung. They often had 0:08:33.600 --> 0:08:38.160 a certain shape, and certain other imaging characteristics that were suggestive. Notably, 0:08:38.200 --> 0:08:41.120 there are other factors and features on the scans that 0:08:41.120 --> 0:08:44.160 were absent that are found in other infections. For example, 0:08:44.400 --> 0:08:47.960 patients with other pneumonias often have fluid outside the lungs, 0:08:48.320 --> 0:08:52.800 lymph node enlargement, nodules, cavitation which means air cavities within 0:08:52.840 --> 0:08:56.400 the legion, or calcification. These were actually notably absent in 0:08:56.440 --> 0:08:58.600 all of the patients that we went through, So that's 0:08:58.600 --> 0:09:02.920 really helpful for distinguishing disinfection from other infections, including other 0:09:03.000 --> 0:09:09.280 viral infections like influenza. No one single case is one accurate, 0:09:09.480 --> 0:09:12.720 but if there are enough features on any on a scan, 0:09:12.800 --> 0:09:15.959 an index of suspicion is elevated. There are enough features 0:09:15.960 --> 0:09:18.679 that we can be that there are certainly very strongly suggestive, 0:09:18.679 --> 0:09:20.800 and I think that's one of the reasons that radiologists 0:09:20.840 --> 0:09:24.199 and cat scans have emerged as foundational and the algorithm 0:09:24.280 --> 0:09:27.480 of diagnosis of these patients. Dr Bernheim, that's an excellent 0:09:27.520 --> 0:09:32.680 synopsis of the diagnostic developments here. How nations are looking 0:09:32.760 --> 0:09:37.160 to identify coronavirus cases, but how does that translate over 0:09:37.280 --> 0:09:40.600 to the potential remedies and how easy or difficult it 0:09:40.720 --> 0:09:44.800 is to actually cure these cases. I think one of 0:09:44.840 --> 0:09:48.120 the keys is just limiting its spread. So I think 0:09:48.160 --> 0:09:51.240 as a radiologist and one of the key ways that 0:09:51.280 --> 0:09:53.920 we can be huffle is to ensure prompt diagnosis. So, 0:09:54.000 --> 0:09:56.880 for example, one of our findings was that patients very 0:09:56.920 --> 0:10:00.000 early on after symptom onset, if they had a camp 0:10:00.040 --> 0:10:02.480 skin it was negative actually about half of the time, 0:10:02.800 --> 0:10:05.400 and that's important to know that there could be false negatives, 0:10:05.400 --> 0:10:08.680 particularly very early in the disease, so that patients shouldn't 0:10:08.720 --> 0:10:12.800 be taken off isolation. In terms of combating the epidemic 0:10:12.840 --> 0:10:15.840 on a larger global scale and treatment, I think the 0:10:15.880 --> 0:10:18.360 best way is really preventing its spread. So if we 0:10:18.440 --> 0:10:21.880 have patients that may be suspected of having infection, it's 0:10:21.920 --> 0:10:24.199 really helpful to know that we can make a diagnosis 0:10:24.240 --> 0:10:27.200 as early as possible, which is certainly helpful for that 0:10:27.280 --> 0:10:30.200 individual patients, so we can start treatment as early as possible, 0:10:30.360 --> 0:10:33.720 but it's also necessary for a greater public health perspective 0:10:33.880 --> 0:10:36.800 to ensure that patient does remain isolated and will not 0:10:36.840 --> 0:10:39.079 transmit the disease to others. Donctor, you would have heard 0:10:39.080 --> 0:10:41.640 people make the comparison to the seasonal flu many many 0:10:41.679 --> 0:10:43.400 times over the last couple of months. And a question 0:10:43.400 --> 0:10:44.719 I've had for quite a while and I'd love to 0:10:44.760 --> 0:10:49.160 put to you, is why this particular coronavirus requires such 0:10:49.200 --> 0:10:52.760 a huge containment effort to degree that China and others 0:10:52.960 --> 0:10:56.520 are taking it. Why is that the case? The flu 0:10:56.720 --> 0:11:00.800 has some similarities to coronavirus, but also some differences Influenza 0:11:00.840 --> 0:11:03.440 the flu in itself is a very deadly disease that 0:11:03.559 --> 0:11:06.319 is killed about sixteen thousand people already in this year's 0:11:06.360 --> 0:11:10.040 season and hospitalized almost three hundred thousand. So influenza and 0:11:10.120 --> 0:11:13.520 its own right is certainly a very serious infection. However, 0:11:13.640 --> 0:11:18.559 COVID nineteen are coronavirus infection now is concerning in other ways. 0:11:18.559 --> 0:11:22.839 For example, the mortality of an infected patient is actually 0:11:22.920 --> 0:11:25.800 quite a bit higher than influenza. So, for example, the 0:11:25.880 --> 0:11:29.640 chance of any given patient passing away from suluenza infection 0:11:29.760 --> 0:11:32.680 is about point one percent, but the mortality rate here 0:11:32.840 --> 0:11:36.120 is twenty times that about two. That's one feature that's 0:11:36.160 --> 0:11:39.040 different and another, and I think one of the concerns 0:11:39.160 --> 0:11:41.600 is that there's a large percentage of the patients that 0:11:41.640 --> 0:11:45.240 actually have very mild symptoms about of COVID nineteen cases 0:11:45.400 --> 0:11:48.400 are actually patients that have very mild, non specific symptoms, 0:11:48.440 --> 0:11:51.480 perhaps some fever and a cough, shortness of breath and 0:11:51.559 --> 0:11:53.360 little more than that. And there are many that are 0:11:53.400 --> 0:11:57.400 actually asymptomatic for a very long time before the manifest symptoms. 0:11:57.440 --> 0:11:59.760 So one of the concerns and one of the distinguishing 0:11:59.800 --> 0:12:03.640 from influenza, is that you have patients that have sometimes 0:12:03.679 --> 0:12:07.480 no or mild nonsphysics symptoms and are easily transmitting the 0:12:07.480 --> 0:12:10.360 disease to others. Dr Bernhind, you have a good knowledge 0:12:10.640 --> 0:12:14.679 or understanding of the age distribution effect of this virus. 0:12:14.679 --> 0:12:18.040 The bar charts are simplistic. Everybody over eighties in trouble. 0:12:18.800 --> 0:12:21.880 Enlighteness on how you go down to the younger patients 0:12:21.920 --> 0:12:25.360 on that, that's a really interesting question that we're looking at, 0:12:25.440 --> 0:12:29.600 and you're right. Early investigators have noted a higher mortality 0:12:29.640 --> 0:12:32.720 in older patients and those with pre existing lung disease 0:12:32.760 --> 0:12:36.040 like emphysema or fibrosis, and also mail seems to be 0:12:36.080 --> 0:12:38.360 affected a little bit more as well. One of the 0:12:38.360 --> 0:12:41.320 things that we found that was really striking is that 0:12:41.679 --> 0:12:46.040 pediatric patients were characteristically very unaffected. In other words, even 0:12:46.040 --> 0:12:48.839 the patients that even kids that were positive for the 0:12:49.000 --> 0:12:54.000 coronavirus very often had normal CT scans, which is something 0:12:54.080 --> 0:12:57.800 that's uh, not something we necessarily expected. Oh, we have 0:12:57.880 --> 0:13:00.800 ten more questions in no time. Dr Bernheim, thank you 0:13:00.840 --> 0:13:03.880 so much for joining us today with Mount sign A Hospital. 0:13:03.960 --> 0:13:06.520 We look forward to speaking to you again as soon. 0:13:06.600 --> 0:13:14.080 Adam Bernheim abount uh sign Hi, that's just extraordinary. Let's 0:13:14.080 --> 0:13:18.040 bring in Patrick now, Patrick Armstrong Flaim Wealth ce io. Patrick, 0:13:18.320 --> 0:13:21.760 interested to find out what you've been doing in the 0:13:21.800 --> 0:13:23.720 market of the last couple of weeks. What kind of 0:13:23.720 --> 0:13:26.920 moves have you've been making. We've not been doing a 0:13:27.000 --> 0:13:30.320 huge amount, despite a huge amount of volatility, really because 0:13:30.360 --> 0:13:33.400 we were defensively positioned, so we were quite frustrated when 0:13:33.400 --> 0:13:36.120 everything was moving higher together earlier in the year, and 0:13:36.840 --> 0:13:39.680 quite comfortable with our positioning right now at the margins. 0:13:39.720 --> 0:13:42.960 We've been moving away from some sequality and equities. We 0:13:43.080 --> 0:13:48.840 sold air Bus Um yesterday. We bought some alphabet Google. Basically, 0:13:48.840 --> 0:13:51.480 we think Cloud's not going to be impacted by the virus. 0:13:51.760 --> 0:13:55.040 People stay at home, watch YouTube, search will continue to 0:13:55.080 --> 0:13:57.840 do well. So we're looking for companies that have a 0:13:57.840 --> 0:14:00.680 lot of cash, not in new and to the virus 0:14:00.679 --> 0:14:03.640 by the means, but not going to be severely impacted. 0:14:03.679 --> 0:14:05.640 To be clear that, Patrick, you are starting to put 0:14:05.800 --> 0:14:08.800 capital to work then in more offensive areas of the market. 0:14:08.800 --> 0:14:11.480 Would that be a correct a correct observation of what 0:14:11.480 --> 0:14:15.040 you're doing. Sorry, you're just cut out for a second. 0:14:15.040 --> 0:14:17.000 That's okay, Patrick, I'm just wondering if you are starting 0:14:17.040 --> 0:14:19.360 to put fresh capital into more offensive parts of the 0:14:19.400 --> 0:14:21.960 market given the sell off that we've seen over the 0:14:22.000 --> 0:14:26.360 last couple of weeks. Not really so adding off about 0:14:26.520 --> 0:14:30.880 something we did. Um, it's a great company obviously, but 0:14:31.040 --> 0:14:34.600 still not cheap we I think the next move I'm 0:14:34.640 --> 0:14:37.240 going to make is actually selling out of some of 0:14:37.280 --> 0:14:40.320 my treasury positions and moving into the shorter end of 0:14:40.320 --> 0:14:43.600 the old curve, so that that's not really an offensive move. 0:14:43.680 --> 0:14:47.760 But I do think pricing in secular stagnation and that 0:14:47.840 --> 0:14:49.640 you're going to have a sharp hit to the economy 0:14:49.640 --> 0:14:53.920 from this. But twelve months from now, very confident what 0:14:53.920 --> 0:14:56.240 what level of yields is sort of the trigger point 0:14:56.320 --> 0:14:59.720 for you to sell. I've been thinking about it for 0:14:59.840 --> 0:15:02.840 the as few days, and we'll probably pull the trigger today. 0:15:02.880 --> 0:15:07.120 Even the levels now, it's very hard to see how 0:15:07.240 --> 0:15:09.320 when you get a dividend yield on the SMP five 0:15:09.400 --> 0:15:12.280 hundred of one point nine percent versus a ten year 0:15:12.360 --> 0:15:15.520 yield at one point to five and thirty year yield 0:15:15.880 --> 0:15:21.280 one seven, it's I'd rather have equities for the long term. 0:15:21.400 --> 0:15:23.680 Short term, there's a lot of momentum behind bonds and 0:15:23.760 --> 0:15:27.080 a lot of negative momentum on equities. I'm not ready 0:15:27.120 --> 0:15:29.720 to really make a big position on equities yet because 0:15:29.720 --> 0:15:33.520 I still think they're expensive, but I do think the 0:15:33.560 --> 0:15:36.880 bond rally has probably gone too far. Your thoughts one 0:15:36.920 --> 0:15:39.760 final question, your thoughts on financials right now? And not 0:15:39.840 --> 0:15:41.840 talked about the banks, but they've got to deal with 0:15:41.880 --> 0:15:47.080 this unique yield market, don't they. Definitely, And we've owned 0:15:47.080 --> 0:15:48.960 the banks in Europe in the past, and that's been 0:15:48.960 --> 0:15:51.640 a mistake we made. When I was Bush on the banks, 0:15:51.720 --> 0:15:54.720 I expected the ECB to get rates towards zero, and 0:15:54.760 --> 0:15:57.360 I really think that's the catalyst. Don't need to get 0:15:57.360 --> 0:16:00.680 back into that. The negative interest rate engine is such 0:16:00.680 --> 0:16:04.280 a headwind. Unless there is a wave of consolidation in Europe, 0:16:04.360 --> 0:16:05.960 that would also be good news for the banks, but 0:16:06.120 --> 0:16:08.560 you have to allow employees to be fired for that 0:16:08.640 --> 0:16:10.920 to work. Too short of visit Patrick Armston, Thank you 0:16:10.960 --> 0:16:17.600 so much, Plurimi Capital in London joining us. If you 0:16:17.760 --> 0:16:21.000 are in the tech stocks, I will just say flat out, 0:16:21.120 --> 0:16:24.880 this is your interview of the day. She's Shannon Cross 0:16:25.480 --> 0:16:30.720 of Cross Research. She's not like some ginormous uh name 0:16:30.840 --> 0:16:33.200 out there where she's like doing the media trial. And 0:16:33.280 --> 0:16:36.160 we're thrilled to get her on today because she uh 0:16:36.360 --> 0:16:39.480 sticks to her clients and attention of her clients out 0:16:39.520 --> 0:16:44.120 of Berkeley political economics, and she does prodigious tech research. 0:16:44.400 --> 0:16:47.880 Have you changed Shannon your by hold cell on the 0:16:48.000 --> 0:16:53.440 big thing tech names? You know, I haven't. Um, here's 0:16:53.480 --> 0:16:57.120 the interesting thing, whether it's Microsoft or Apple or even 0:16:57.160 --> 0:16:59.280 best by just and I don't cover best Buy, but 0:16:59.600 --> 0:17:01.880 I was just listening to their earnings called. You know, 0:17:02.040 --> 0:17:05.240 everyone at this point continues to say that underlying demand 0:17:05.359 --> 0:17:10.000 remains strong. So yes, the supply chain is interrupted, but 0:17:10.160 --> 0:17:13.040 all of these companies continue to believe that this will be, 0:17:13.280 --> 0:17:17.920 you know, a relatively relatively short term issue. Um. Right now, 0:17:18.000 --> 0:17:21.359 the biggest challenge is getting employees back to the factories 0:17:21.400 --> 0:17:24.080 in China, and you know, it sounds like some of 0:17:24.080 --> 0:17:27.600 the factories are starting to come back online. Clearly you know, 0:17:27.680 --> 0:17:29.520 it seems to be spreading, so we'll have to see 0:17:29.520 --> 0:17:33.320 what that does over time. But you know, demand is 0:17:33.520 --> 0:17:37.320 demand is still there. What do the companies you follow 0:17:37.480 --> 0:17:41.600 do with there once in a century levels of cash? 0:17:41.800 --> 0:17:46.359 I mean, if there were opportunities seven weeks ago, some 0:17:46.440 --> 0:17:51.040 of these stocks are down bear market. Is this where 0:17:51.040 --> 0:17:55.000 we finally see them deploy cash? Well, you know, it 0:17:55.040 --> 0:17:57.240 will be interesting. I mean from an M and A perspective, 0:17:57.280 --> 0:17:59.720 we'll see where things things play out. I mean we've 0:17:59.720 --> 0:18:03.480 been teen HP and Xerox, and obviously that transaction is 0:18:03.520 --> 0:18:05.480 one where Xerox is looking on putting a ton of 0:18:05.560 --> 0:18:08.960 leverage onto the combining company, which frankly doesn't seem particularly 0:18:09.040 --> 0:18:11.040 smart at this point in time. But the ones that 0:18:11.160 --> 0:18:12.800 have a lot of cash, I mean, I would assume 0:18:12.840 --> 0:18:15.399 Apple is going to be out very aggressively buying backstock. 0:18:15.840 --> 0:18:18.639 You know, HP will They just announced a fifteen billion 0:18:18.680 --> 0:18:21.560 dollar share repurchase program. So as soon as they sort 0:18:21.560 --> 0:18:25.240 of get through some of the Xerox tender offer prohibitions 0:18:25.240 --> 0:18:27.840 about buying, they will be you know, and others as well, 0:18:27.920 --> 0:18:31.520 being Microsoft too, So I think, you know, companies are 0:18:31.520 --> 0:18:34.359 going to be smart about this. I don't think they're 0:18:34.520 --> 0:18:37.520 going to overreact. I think the ones I've talked to 0:18:37.560 --> 0:18:40.160 in the management that most of them are being very 0:18:40.160 --> 0:18:42.920 prudent about looking at it. They're protecting their employees, they're 0:18:42.920 --> 0:18:46.479 protecting their partners, and they're assuming that this is going 0:18:46.520 --> 0:18:48.600 to be short term. And again they keep pointing to 0:18:48.680 --> 0:18:51.719 the fact that demand remains very solid. Market negative four 0:18:51.840 --> 0:18:57.080 seventy seven Paul Apple on a weekly chart negative. Yeah, exactly, Shannon. 0:18:57.160 --> 0:18:58.719 You know, we're so happy to have you on here 0:18:58.760 --> 0:19:00.760 because we're you know that Microsoft News just kind of 0:19:00.760 --> 0:19:04.119 added onto the Apple News again, pulling back revenue guidance 0:19:04.160 --> 0:19:07.120 or adjusting revenue guidance. UM. At this point, is it 0:19:07.200 --> 0:19:11.919 primarily a supply chain issue for the tech companies throughout 0:19:11.960 --> 0:19:15.000 the tech stack or is there also, you know, some 0:19:15.119 --> 0:19:16.959 demand issues. I know you mentioned that the companies are 0:19:16.960 --> 0:19:19.480 still talking about good underlying demand, But are they seeing 0:19:19.520 --> 0:19:21.359 canceled orders and mean that type of thing, or is 0:19:21.400 --> 0:19:24.600 this just supply chain not yet I mean, and you know, 0:19:24.680 --> 0:19:26.639 no canceled orders that I've heard of yet. I mean, 0:19:26.640 --> 0:19:29.440 it's it's supply chain. Obviously, sales in China are going 0:19:29.480 --> 0:19:31.879 to be weak this quarter. UM, But you know, I 0:19:31.920 --> 0:19:34.359 think you can not that it's going to make up 0:19:34.359 --> 0:19:36.960 for it, but Apple, for instance, will sell more services 0:19:37.400 --> 0:19:39.600 and I've had sales appaired to be pretty strong because 0:19:39.600 --> 0:19:42.919 people are going to remote um you know, remote learning 0:19:42.960 --> 0:19:46.119 and remote working. Uh, you know, I think that what 0:19:46.240 --> 0:19:49.080 I've heard is it's literally getting the people to the 0:19:49.160 --> 0:19:53.560 factories because obviously transportation and in sorry in China has 0:19:53.600 --> 0:19:56.439 been um impacted, and then you know, people have to 0:19:56.480 --> 0:19:58.159 be quarantined when they get there to make sure they 0:19:58.160 --> 0:20:00.760 don't have the virus, and getting the of factories up 0:20:00.800 --> 0:20:04.800 and running. Um. Interestingly, what I've been told, and I 0:20:04.920 --> 0:20:07.520 some somehow question it, but it's what I've been told 0:20:07.520 --> 0:20:10.280 by several people is that shipping has not been a 0:20:10.320 --> 0:20:13.720 particular issue. So and even access to a lot of 0:20:13.760 --> 0:20:18.639 components haven't been necessarily the issue. It's been the people issue. So, Shannon, 0:20:18.680 --> 0:20:21.000 are the companies that you chat to, are they saying, hey, 0:20:21.240 --> 0:20:24.480 once this passes in China particular, and maybe there's some 0:20:25.040 --> 0:20:28.399 evidence that maybe it's peaking there, that we can ramp 0:20:28.520 --> 0:20:31.560 up quickly and this might be a one quarter type 0:20:31.600 --> 0:20:33.920 issue for them, or this might drag on throughout the year. 0:20:35.119 --> 0:20:36.919 You know, they're there at this point a lot of 0:20:36.920 --> 0:20:38.520 them were saying, look, it will be you know, if 0:20:38.520 --> 0:20:40.600 we can get back to a percent utilization of the 0:20:40.680 --> 0:20:43.520 factory by the end of March, then you know things 0:20:43.560 --> 0:20:46.440 should be good for a second quarter. It might be 0:20:46.480 --> 0:20:48.560 a little optimistic. I mean, you know, we'll see how 0:20:48.680 --> 0:20:50.560 how long it takes to ramp. I mean, I've heard 0:20:50.600 --> 0:20:53.560 from companies that they have some factories that are basically 0:20:53.600 --> 0:20:55.439 making nothing and some factories that are running in a 0:20:55.640 --> 0:20:59.199 dent um. So that's not really helpful, right, but you know, 0:20:59.320 --> 0:21:03.000 it's it's kind have along the spectrum um I would 0:21:03.440 --> 0:21:06.080 I would say, as long as this doesn't expand and 0:21:06.119 --> 0:21:09.440 start hitting economies, you know, and then you know, consumer 0:21:09.480 --> 0:21:12.239 confidence than all of that that you can you can 0:21:12.320 --> 0:21:14.480 kind of get back to normal. I think, you know, 0:21:14.520 --> 0:21:16.840 companies like Apple can probably go a bit above a 0:21:16.920 --> 0:21:20.520 hundred percent in terms of bursts in their factories to 0:21:20.560 --> 0:21:24.359 try to make up for channing Cross with us with 0:21:24.400 --> 0:21:26.439 a Cross research. We do this with another day to 0:21:26.520 --> 0:21:30.200