Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly
Speaker 1: Markets podcast. I'm Sarah pont sec, a reporter on the
Speaker 1: Cross Asset team, and I'm Mike Reagan, a senior editor
Speaker 1: on the Markets team. This week on the show, a
Speaker 1: Bloomberg Economics model that projects the probability of a US
Speaker 1: recession in the next twelve months is now at one
Speaker 1: after the jobs data, though over the last couple of weeks,
Speaker 1: you could have said that that much was clear. So
Speaker 1: how should you actually invest through an economic recession? Our
Speaker 1: guests will break it all down. That's right, Sarah, And
Speaker 1: of course we'll close the episode with the craziest thing
Speaker 1: we saw in markets this week. And sorry, before we
Speaker 1: get into all that, I want, I would love an
Speaker 1: update on your situation. I know you made a mad
Speaker 1: dash escape from New York. Tell us exactly what you did.
Speaker 1: You drove all the way to Florida's all right? I did? Um.
Speaker 1: So I decided I had been self quarantining in New
Speaker 1: York for quite a while, for over two weeks, so
Speaker 1: I decided to try to make the Great escape. So
Speaker 1: I did the drive all on one day. I didn't
Speaker 1: want to go through an airport so Saturday, seventeen hours,
Speaker 1: woke up right and early. We drove all the way
Speaker 1: down to South Florida. UM. We had to stop for
Speaker 1: gas a couple of times, of course, had masks gloves
Speaker 1: in uh, certain areas that were a little bit more remote.
Speaker 1: I think people were looking at us like we were insane.
Speaker 1: It looked like there weren't many people around. What they
Speaker 1: were going on with their lives as usual, And there
Speaker 1: we are chloroxing the entire gas station. UM. But but
Speaker 1: made it down and other than stopping at gas stations,
Speaker 1: didn't make a single stop. So now I have to
Speaker 1: self quarantine by law in Florida. So I'm quarantining for
Speaker 1: fourteen days here. UM. But I'm at least happy to
Speaker 1: have more space than my New York apartment. So how
Speaker 1: does that work? They stopped you at the state line
Speaker 1: because of the Yeah, so at the at the at
Speaker 1: the Florida Georgia border, UM wasn't backed up at all.
Speaker 1: They didn't have to go through any traffic or weight
Speaker 1: or anything like that. But I had to go through
Speaker 1: a checkpoint. So essentially you drive through, they ask you
Speaker 1: where you're traveling from. UM. I told him I was
Speaker 1: coming from New York. So then they make you circle
Speaker 1: back around to a different checkpoint area where they make
Speaker 1: you feel out of form. You have to give them
Speaker 1: your contact information where you will be self quarantining in
Speaker 1: case they want to check in on you, and you
Speaker 1: have to sign a form saying that you are aware
Speaker 1: that by Florida Lock, if you break the quarantine, you
Speaker 1: can be subject to a finer up to sixty days
Speaker 1: in jail. So I am quarantining, you know. I think, Sarah,
Speaker 1: you realize that my dad instincts were kicking in on
Speaker 1: this trip, and I was very worried. I thought you
Speaker 1: making it dounce, So you did. You did tell me
Speaker 1: when you arrived safely. I appreciate. As soon as I arrived,
Speaker 1: I let you know I was worried about that trip,
Speaker 1: but glad to hear you're safe and sound, uh than quarantine.
Speaker 1: And I think um our guest is in quarantine not
Speaker 1: far from me here in New Jersey where we're basically
Speaker 1: all in quarantine. But we're very welcome to have her
Speaker 1: return to the show. She is an investment strategist at
Speaker 1: Edward Jones. Her name is Nila Richardson. Neila, welcome back
Speaker 1: to the show. Thank you, Mike. It's great to be
Speaker 1: with you both. And how are you surviving the quarantine?
Speaker 1: Is every is the family behaving and there you Uh,
Speaker 1: you have enough supplies? You know, supplies have changed definition. Um,
Speaker 1: do we have enough of what we need? And the
Speaker 1: family is doing well. Thanks for asking me. I have
Speaker 1: two teenage boys, and so the question is not keeping
Speaker 1: them entertained. It's getting them to talk to you on
Speaker 1: a regular basis. And so you know, every so often
Speaker 1: I just check in their rooms, make sure they're they're
Speaker 1: still function ng and and they're doing quite well. Um,
Speaker 1: they don't seem to be missing school as much as
Speaker 1: I imagined that they would be. Well now they have
Speaker 1: plenty of time to find time to speak with you
Speaker 1: and the facts. That's right. We're breaking breaking out the
Speaker 1: board games and the puzzle, so plenty to do. Well. Hey,
Speaker 1: I have teenage girls, So when I hear that teenage
Speaker 1: boys are quarantined, I'm happy about that. I hope that
Speaker 1: continues past the past the pestivirus dating things kicking in.
Speaker 1: But no, I'm curious, you know, as an investment strategist,
Speaker 1: how do you do your job these days? You must
Speaker 1: be getting a lot of calls. A lot of people
Speaker 1: wondering is the is the bottom in the market in
Speaker 1: Is this a new bowl market we're seeing given all
Speaker 1: the stimulus that's going on. Um like me, I'm sure
Speaker 1: your clients are throwing a million questions at you at once.
Speaker 1: So what is you know? What are you saying when
Speaker 1: you answer the phone these days? Well, you're right, Mike,
Speaker 1: we are talking to clients. Are out reach to clients
Speaker 1: and to financial advisors have has aunt up considerably over
Speaker 1: the course of the month. And that constant communication is
Speaker 1: critical because what we're focused on it is not just
Speaker 1: the markets, but the emotional reaction to the markets. And
Speaker 1: this is the time where the behavioral economics come into play.
Speaker 1: All those things that we warn about the investors do,
Speaker 1: the mistakes investors make, This is the time where they
Speaker 1: make those mistakes right. They try to time the bottom
Speaker 1: of the market, they try to sell uh at at
Speaker 1: the peak, and along the way they miss the rally.
Speaker 1: And we've seen the markets rally over the last few
Speaker 1: days here. So we're trying to both inform them at
Speaker 1: a market level, but also make sure that their behavioral
Speaker 1: reactions are not ones that make them drail their long
Speaker 1: term goals and that's quite a balance. So given that, uh,
Speaker 1: it's pretty certain, it's virtually certain that we know that
Speaker 1: we are now in a recession, and sure this time
Speaker 1: around it could be completely unique considering the reasons why
Speaker 1: we have seen the economy react as it has due
Speaker 1: to a spreading viral outbreak. But can you maybe just
Speaker 1: walk us through how markets actually typically react through a recession,
Speaker 1: span from from start to the point in which you
Speaker 1: actually start seeing a recovery. Well, as you know, this
Speaker 1: recession is quite different than what's typical, and if you
Speaker 1: think about the typical timeline of of an expansion path,
Speaker 1: it's really affected by the path of inflation. We see
Speaker 1: that economies, they typically they grow for a very long time,
Speaker 1: they become overheated, consumer prices start to increase, and then
Speaker 1: there's this inflation threat that's an overhang. That's when the
Speaker 1: Fed comes with their butcher knives and tries to choke
Speaker 1: off this expansion by raising interest rates. We're not seeing
Speaker 1: anything like that right now. What we're seeing is an
Speaker 1: economy that's not broken, but has basically put itself into
Speaker 1: a medically induced comma in order to attack a disease.
Speaker 1: And that's we've done that by social containment. And the
Speaker 1: real threat right now in terms of the economy is
Speaker 1: not inflation, it's deflation UH and the fact that that
Speaker 1: people can't work and the economy is tackling a hit
Speaker 1: to both supply and demand. So the market reaction is
Speaker 1: actually following I think a traditional playbook. We're seeing that
Speaker 1: the markets typically lead a recession for a period of
Speaker 1: time UM and that since it's correct, before we knew
Speaker 1: the extent of this downturn and before we saw those
Speaker 1: jobless claims, the market had already reacted. Now, the key
Speaker 1: difference is the market reacted really quickly. It typically takes
Speaker 1: about nine months to see that dropped from a record
Speaker 1: high all the way down to a bear market. That decline,
Speaker 1: this bear market happened in twenty two calendar days. I mean,
Speaker 1: the speed of the market reaction has been really unprecedented,
Speaker 1: and I think that's what's different along with the composition
Speaker 1: of this UH expansion to recession timeline. I think that's
Speaker 1: a great analogy that medically induced coma. Neil, and I
Speaker 1: know you have an economics background, So what I think
Speaker 1: the big question I have and and maybe other people have,
Speaker 1: is that Okay, we take that patient out of that coma,
Speaker 1: you know, and and quote unquote reopened the economy. I
Speaker 1: just can't help but wonder how long the headwinds UH
Speaker 1: to the economy last after that process, because I'm thinking, um,
Speaker 1: you know, it would be a while personally before I
Speaker 1: would be comfort will say, going to a movie theater,
Speaker 1: going to a stadium, flying on a plane, going to
Speaker 1: a hotel, all of those things until the vaccine comes,
Speaker 1: which is you know, hypothetically, I guess still probably at
Speaker 1: least a year out. So once we do, you know,
Speaker 1: quote unquote reopen the economy, how strong do you think
Speaker 1: those headwinds will be as far as consumer behavior and
Speaker 1: getting back to that normal uh that we we were
Speaker 1: in before the virus. Well, I think there's a lot
Speaker 1: of uncertainty. I don't know about you, my can Sarah,
Speaker 1: but I want to break out of this house and
Speaker 1: go to a restaurant in a bar like nobody's business.
Speaker 1: You might see a surgeon economic activity. I would love
Speaker 1: to go to the mall in shop right now. I
Speaker 1: would there are many things. I'm looking forward to the
Speaker 1: next Marvel movie and seeing it in a theater. So
Speaker 1: you've got that Short Hills mall near you. I can't
Speaker 1: blame you. It's a good mall. It's it's the mall
Speaker 1: I was thinking of when I said it. So, But
Speaker 1: have to think that even these activities are going to
Speaker 1: be scaled down. Yes, maybe movie theaters will reopen, but
Speaker 1: they'll be at maybe fifty capacity instead of acent capacity.
Speaker 1: There will still respect the six ft of distance between us,
Speaker 1: at least initially, until we get enough test kits and
Speaker 1: security that people are on the other side of of
Speaker 1: of a viral outbreak and that it won't lead to
Speaker 1: this huge community contagion that we've seen. And I think
Speaker 1: in terms of the market perspective, the market has done
Speaker 1: a fantastic job of pricing and I think a lot
Speaker 1: of bad news already and that's why we can see
Speaker 1: this huge uptick and jobless claims and the market still
Speaker 1: rally on a weekly basis. But but I don't think
Speaker 1: the market has done a very good job of pricing
Speaker 1: in a recovery or the timeline to that recovery. And
Speaker 1: I think that's the biggest risk. We're in a recession.
Speaker 1: We know it's going to be deep, but we don't
Speaker 1: know how quickly the economy gets back online, and that
Speaker 1: is the huge question mark, you know. I have seen
Speaker 1: others say that it is possible that if we do
Speaker 1: get a reopening of the economy by say June, then
Speaker 1: the season will pick up that you see in the
Speaker 1: economy over the summer. You still might see that occur
Speaker 1: because you might see people wanting to go out um
Speaker 1: and get out of the house and really take part
Speaker 1: in some of those activities are traveling. But it's yet
Speaker 1: to be seen. And NILA's something I've been thinking about
Speaker 1: is the idea that okay, the leveling off that we
Speaker 1: have seen in some hotspots as it relates to coronavirus cases,
Speaker 1: some investors have said that's been encouraging as it relates
Speaker 1: to the idea that maybe the economy can open sooner
Speaker 1: rather than later. But Peter Zacchini, one strategist, he pointed
Speaker 1: out to me in a colleague of mine that the
Speaker 1: reason that we're seeing this leveling off is the fact
Speaker 1: that social distancing and self quarantine is in fact working.
Speaker 1: So do you ever think about or do you get
Speaker 1: worried about this possibility that until we do have a
Speaker 1: vaccine or science develops further, that this is maybe the
Speaker 1: only way to combat the spread of the virus, which
Speaker 1: means the economy won't be able to open holy for
Speaker 1: quite a long period of time. It it is a concern, uh,
Speaker 1: the medical progress will lead everything. You know, this is
Speaker 1: not a problem that the FED can fix, and we
Speaker 1: we saw that the FED even this week has come
Speaker 1: out with even new kitchen sink approaches to ensuring the
Speaker 1: flow of liquidity. This is not a problem that just
Speaker 1: fiscal dollars alone to consumers can fix, so that will
Speaker 1: help turn in the economy. This is a problem that
Speaker 1: it takes medical ingenuity, progress and innovation. Now that may
Speaker 1: not just rest on a vaccine. It could be expanded
Speaker 1: testing procedures or other things that uh that the medical community,
Speaker 1: with ample help from from the FED and state governments
Speaker 1: can do to build confidence so that we can go
Speaker 1: outside and not feel threatened just going into a grocery store.
Speaker 1: And that's going to take some uh some time, I
Speaker 1: think to get over that psychology. You know. You you
Speaker 1: mentioned that kitchen sink approach from the FED. Are our communist?
Speaker 1: Cameron christ had a funny line saying, well, yeah, it's
Speaker 1: also the coverbs, the sideboard and even a few paper
Speaker 1: plates and plastic cups they dredged up from a closet
Speaker 1: launch room. I wonder, Nila, they clearly are are doing
Speaker 1: everything under the sun, uh, to to add liquidity to
Speaker 1: the market. UM. I worry though, if there's a little
Speaker 1: bit of improvisation and experimenting experimentation here going on. I
Speaker 1: feel like this this quote unquote whatever it takes approach. Um,
Speaker 1: it's difficult for central bankers, at least in the US,
Speaker 1: and for the government to do when the recession is
Speaker 1: caused by sort of, uh, you know, an endogenous financial
Speaker 1: system issue like say, the the financial crisis. I think
Speaker 1: you know, the public did not have a good taste
Speaker 1: in their mouth about a lot of those bank bailouts
Speaker 1: and and the various programs that went on. In this case,
Speaker 1: it seems since you know, it's this virus that was
Speaker 1: the fault of no human as far as we know. Um,
Speaker 1: you know, this real exogenous shock to the economy that
Speaker 1: it's almost like it's it's freed the reins of the
Speaker 1: FED and the government to basically really do whatever it takes.
Speaker 1: But once we get through this, I wonder where the
Speaker 1: risk is. And you had mentioned that that the near
Speaker 1: term threat is deflation. Um, are we again going to
Speaker 1: be worrying about inflation at the other end of this um?
Speaker 1: And I know people have been worried about inflation throughout
Speaker 1: the entire bullmarket that that just finished UM and the
Speaker 1: entire economic cycle. But is it is there any reason
Speaker 1: to believe that this time could be different, that that
Speaker 1: this will be the potential for an inflationary shock once
Speaker 1: we're through uh, you know, the the economic slump that's
Speaker 1: being caused by the the quarantines and the isolation. Is
Speaker 1: all this liquidity and money being thrown at this problem
Speaker 1: going to come back and bite us down the line.
Speaker 1: That's a great question. I'm going to take that in part.
Speaker 1: I'll start with your your last statement on inflation. What's
Speaker 1: remarkable about this downturn is it's both a hit to
Speaker 1: demand end in a hit to supply. Now, the global
Speaker 1: hit to demand we've seen and we understand, and that's
Speaker 1: what's deflationary. But what's inflationary is the global hit to supply.
Speaker 1: I think, I mean Sarah went to a couple of
Speaker 1: gas stations. I think gas stations are the mecca for
Speaker 1: the supply and demand shock illustration. Why I want to
Speaker 1: say that at one gas station we stopped out, We
Speaker 1: paid one seventy eight gallon. There you go, There you go.
Speaker 1: Was that the was that the low of the that
Speaker 1: was the lowest that we should have had? You do
Speaker 1: a chart everywhere we stopped Yeah, I mean they were
Speaker 1: all very low, but yeah, a couple of couple of
Speaker 1: spots remarkable. So there you go. There's the UH, the
Speaker 1: oil price shock, the slump and demand, and then they
Speaker 1: break down into OPEC talks recently hopefully that's improving soon,
Speaker 1: which led to UH the announcement of more supply. So
Speaker 1: that's it. But if you go into that gas station
Speaker 1: and try to buy a bottle of a pack of water,
Speaker 1: you might see eighteen dollar water for twenty four bottles.
Speaker 1: Let's how you're seeing some inflation and and and things
Speaker 1: like bullet paper and water and and and rice and basics.
Speaker 1: So if if, if, if global demand rebounds, but we
Speaker 1: still have these supply shots, you could see the dominance
Speaker 1: of of slagging demand be outweighed by the dominance of
Speaker 1: the shock and supply, and that would be inflationary. And
Speaker 1: so there's a huge amount of uncertainty in terms of
Speaker 1: how this plays out into the recovering and then just
Speaker 1: briefly you asked, UH what we be paying for this
Speaker 1: somehow the kitchen sink approach by the Fed and by
Speaker 1: UH fiscal government sometime down the road, Well, we already
Speaker 1: know that deficits were high trillion dollars as far as
Speaker 1: the I can see every year, UH deficits are about
Speaker 1: to to search further though, in the context of low
Speaker 1: interest rates, economists are really concerned about incentives, and when
Speaker 1: you have a kitchen sync approach, you don't think a
Speaker 1: lot about incentives UH in and doing that kind of legislation.
Speaker 1: And so that could be where the rubber meets the road.
Speaker 1: Are we changing behavior in unexpected ways by the way
Speaker 1: that we are trying to stimulate the economy in a
Speaker 1: time of crisis. So i'd imagine, of course the inflation outlook,
Speaker 1: which is a little bit muddied at this point in time,
Speaker 1: is something you have to take it into account when
Speaker 1: thinking about how to position portfolio is going forward. But
Speaker 1: I also want to dive a little bit deeper into
Speaker 1: something you mentioned earlier in the show. Was that was
Speaker 1: you feel like the market priced in the downturn relatively well,
Speaker 1: but hasn't been as good at pricing in a recovery.
Speaker 1: And it made me think of a chart, uh that
Speaker 1: I received from Credit Suites where they've been looking at
Speaker 1: what they call fresh estimates, where they only take into
Speaker 1: account bottom up company profit estimates that have been revised
Speaker 1: recently UM and what they looked at and what they
Speaker 1: highlighted this week was that because of the falling e
Speaker 1: and multiple expansion that we've seen this week with the
Speaker 1: rally is the fact that we're actually at now a
Speaker 1: nineteen times multiple, matching the multiple from the February nineteenth
Speaker 1: high in the stock market. And it's been hard for
Speaker 1: me to wrap my mind abound around. But it makes
Speaker 1: me also think, do you get a sense that the
Speaker 1: market doesn't really care about earnings the idea that yeah,
Speaker 1: everyone knows this year is going to be really rough,
Speaker 1: particularly in the next two quarters as we get those results,
Speaker 1: and that instead investors in the market are looking forward too,
Speaker 1: trying to envision what that rebound might look like. I
Speaker 1: think Steph Curry said it best if a couple of
Speaker 1: months ago we should just forget that's what that's what
Speaker 1: the markets want to do. They want to move to
Speaker 1: and they're anxious to do that, and and and so yes,
Speaker 1: I think a lot of this bad news is being dismissed.
Speaker 1: It's either already priced in or will be dismissed going forward.
Speaker 1: But it also shows a concern because this bear market
Speaker 1: rally may have further to fall once that economic news
Speaker 1: and earnings news comes in differently than the market projects.
Speaker 1: So they eventually the market as it looks to the future,
Speaker 1: which in my mind is it's going to be anchored
Speaker 1: by the reality of the present and and still a
Speaker 1: slog to get through this year. I'm glad you brought
Speaker 1: up Steph Curry. There was a great story in the
Speaker 1: journal about how he found himself quarantined at home and
Speaker 1: he didn't have a basketball hoop in his own driveway,
Speaker 1: so he had a order one online and it took
Speaker 1: him like five hours together. Shocking. I can't believe you
Speaker 1: didn't have its own back right, you know. Uh. I
Speaker 1: envisioned every single NBA player having their own basketball. Maybe
Speaker 1: someone just don't like working from home. I say, leave
Speaker 1: it in the gym. Uh. You know, Neilie, you made
Speaker 1: a very I think, super important point earlier in the
Speaker 1: interview when you talked about that investor psychology. Um, I
Speaker 1: know my own uh mentality about this virus shifted dramatically
Speaker 1: this week. I had an old colleague I used to
Speaker 1: work at the Associated Press way back when, an old
Speaker 1: colleague and it's just then and uh, guy was fifty
Speaker 1: one years old, a marathon runner, one of the nicest
Speaker 1: people you'd ever meet, UM, caught this bug and died
Speaker 1: from it. And it really sort of it was like
Speaker 1: a gut punch to me. You know, I'd kind of
Speaker 1: been dealing like I deal with every everything like this
Speaker 1: with with bad jokes, you know, and it really kind
Speaker 1: of made my head spin when you start to get
Speaker 1: sort of, um, people in your lives being affected by
Speaker 1: this rather than just watching it on the TV, watching
Speaker 1: it in the newspaper. And I'm curious about that sort
Speaker 1: of the consumer confidence element of this, uh, the investors
Speaker 1: psychology element of this. Um. You know when you go
Speaker 1: to that when you when you're finally allowed out of
Speaker 1: your house and you go to that Short Hills mall
Speaker 1: and sorry, I don't know if you're familiar with the
Speaker 1: Short Hills Mall. To the only mall I know that
Speaker 1: has you can take a helicopter to. Um, Yeah, that's
Speaker 1: the thing. Yeah, we'll have to fly you out there.
Speaker 1: Sometimes Nil is gonna get her helicopter and pick you
Speaker 1: up and we'll go shopping. When this is all I'm
Speaker 1: my helicopter looks like a ten year old Volvo. Don't
Speaker 1: be surprised, But I wonder, you know that first trip
Speaker 1: through the mall, how much is our people's psychology is
Speaker 1: going to be affected for for years to come? You know,
Speaker 1: are you gonna be You're gonna be doing more windows
Speaker 1: shopping than actual spending at the mall all? And you
Speaker 1: know how does that work in the in the investment
Speaker 1: landscape to are people going to be risk adverse? Were
Speaker 1: more risk averse than they were um for quite a
Speaker 1: while at the back end of this in your opinion, Well,
Speaker 1: first of all, Mike, I'm really sorry for your last
Speaker 1: and I'm really sorry for all of these tragic stories
Speaker 1: that I've heard and that people are being touched with.
Speaker 1: I think I think this will be with us for
Speaker 1: a while. When you think about other tragedies, you think
Speaker 1: about nine eleven. It does change how you view things
Speaker 1: and it changes how you operate. You think of those
Speaker 1: nine eleven changes in New York and Washington, d C.
Speaker 1: Where I was living at the time. It was profound
Speaker 1: the changes at the time that happened as a result
Speaker 1: of the tragedy, but over time you kind of got
Speaker 1: used to them and those changes began to blend into
Speaker 1: the background. And I expect that there will be changes
Speaker 1: made this time around. We will be different, we will
Speaker 1: shop different, we will approach crowds differently. Over it's going
Speaker 1: to feel strange, but over time, it's going to be
Speaker 1: business as usual and it'll those changes will fade into
Speaker 1: the background. Now, the markets, there's two inclinations. We saw
Speaker 1: them play out in March. First, it was the inclination
Speaker 1: to sell in panic, sell whatever you can get your
Speaker 1: hands on, and that was the most liquid assets, and
Speaker 1: you saw that really play out in the bond markets.
Speaker 1: But there's this other impulse, which is to buy by
Speaker 1: now it's foamo fear of missing out. So you have
Speaker 1: these two twin dramatic, extreme reactions, either to sell in
Speaker 1: mass or to buy in mass. And that's where investors
Speaker 1: can get caught up because neither of those approaches makes sense.
Speaker 1: If you're a retail long term investor, it's always about
Speaker 1: the plan. It's the plan that takes the emotion of
Speaker 1: investing and it's going to be having a plan in place,
Speaker 1: rules in place, helped by local governments in federal leadership
Speaker 1: that makes people feel comfortable about resuming their normal economic activities. Yeah,
Speaker 1: you know, there's been so many just heartbreaking stories out there. Um,
Speaker 1: Mike again, we're both so sorry, um for your loss,
Speaker 1: but I think, uh, we're all going to be a
Speaker 1: little bit appreciative, but over the fact that it's a
Speaker 1: three day weekend and we can all hopefully get some
Speaker 1: rest and just take it all in UM and zoom
Speaker 1: with families over over the weekend. If that's something we're
Speaker 1: all doing now, we're doing it right now as we speak.
Speaker 1: So so there you go, and hopefully no weirdos show up.
Speaker 1: I keep hearing these stories about people zooming with their
Speaker 1: class or or church group or something in some random
Speaker 1: where I think normality to to what is It's nice
Speaker 1: to know that they haven't gone away all. Well, speaking
Speaker 1: of random weirdos, I think that's our segway, Sarah, that
Speaker 1: is I was waiting for it. We're no random weirdos.
Speaker 1: We're professional weirdos when it comes to the craziest things
Speaker 1: we've seen in markets this week. So so sorry, what
Speaker 1: do you what do you got? So I'm just going
Speaker 1: to bring it back to the kitchen sink that the
Speaker 1: FED has now given us, because it really is just
Speaker 1: pretty crazy. On on Thursday, when they made the announcement
Speaker 1: of more stimulus, that they would provide the fact that
Speaker 1: they are now buying US high yield corporate bonds. So
Speaker 1: the announcement reads the preponderance of et F holdings will
Speaker 1: be of e T s whose primary investment objective is
Speaker 1: exposure to US investment grade corporate bonds, and the remainder
Speaker 1: will be in e T s whose primary our investment
Speaker 1: objective is exposure to US hiled corporate bonds. And what
Speaker 1: it's like, what's left now is is it just stocks
Speaker 1: with the UK in the trunk pretty much all that's left. Yeah,
Speaker 1: the junk in the trunk. But it's it's crazy, it's
Speaker 1: pretty anazy. And what do you think about that? This
Speaker 1: kind of goes back to what I was talking about
Speaker 1: in that the potential risks and I hate to try
Speaker 1: out the old world where moral hazard from this kitchen
Speaker 1: sink approach. Um, I think clearly there's an urgent need
Speaker 1: for the FED to do this in the junk market.
Speaker 1: UM was this inevitable and is it? Does it bother
Speaker 1: you at all? I think what is being done to
Speaker 1: manage a crisis doesn't bother me, But the future does.
Speaker 1: We've seen the FED having a lot of trouble prior
Speaker 1: to this pandemic unwinding uh, the QI that it did
Speaker 1: as a result of two thousand eight. Now they're just
Speaker 1: blowing up their balance sheet and it's hard for me
Speaker 1: to imagine a world in which the FED can comfortably
Speaker 1: unwind a lot of these assets. Now many of them
Speaker 1: are short term assets and they will just roll off.
Speaker 1: But the FED is going to be uh, having this
Speaker 1: huge trillion dollar portfolio, I think, for for a decade
Speaker 1: or more, because it's been uh, it hasn't been able
Speaker 1: to unwind successfully, even in the best of an economic expansion. Yeah,
Speaker 1: I agree, I agree. It's it's once it's in, it's
Speaker 1: hard to take it out. I guess, so unless you,
Speaker 1: like you said, it rolls off and eventually a lot
Speaker 1: witness over the last decade. But all right, Neil, you're
Speaker 1: a veteran to the show, so I know you came
Speaker 1: prepared with the craziest thing you saw. There's so many
Speaker 1: crazy things it's hard to just choose one. But I'm
Speaker 1: going to stick at the bond markets and I'm gonna
Speaker 1: stick with this conversation about the FED. The record level
Speaker 1: of investment grade corporate issuance that we saw this week
Speaker 1: is really outstanding. It's like the the corporate market alternative
Speaker 1: to stockpiling toilet paper. It's just just run on credit
Speaker 1: while you can have it now, I have access. Now,
Speaker 1: you don't know what the future is, so let's just
Speaker 1: get as much as possible. And it seems that's what
Speaker 1: corporations are doing. Who I have the investment grade rating?
Speaker 1: So interesting? Um, it goes right back Mike, to to
Speaker 1: your insights about what's going to happen over the long term. Yeah.
Speaker 1: I think that's a great analogy with the toilet paper.
Speaker 1: It's amazing though, that that hunt for yield is still there,
Speaker 1: that the demand from investors is still there too to
Speaker 1: allow this. I mean, I guess when the FED is
Speaker 1: is uh, that's buying you know. It's it goes back
Speaker 1: to why fight the WI flight the Fed? But pretty fascinating,
Speaker 1: uh phenomenons we're seeing all right? Uh, Sarah, As you know,
Speaker 1: for the crazy things, sometimes I go to the alternative
Speaker 1: asset classes. Um, and I'm going And when I say
Speaker 1: alternative asset classes, I'm not kidding this time. I'm I'm gonna.
Speaker 1: I'm gonna take us to the exotic animal trade. Um.
Speaker 1: And I'm assuming are you are you going to bring
Speaker 1: in some tiger kings right now or you know it
Speaker 1: was coming? Have you guys watched The Tiger King? This
Speaker 1: is what I've I've been doing all quarantine long. Well
Speaker 1: I guess not really because I got through it in
Speaker 1: the matter of two days, but it's helped a couple
Speaker 1: of days out. So I think it was it was
Speaker 1: inevitable that eventually our President Donald Trump would would somehow
Speaker 1: get involved in the tiger Kings saga. I mean that
Speaker 1: was pretty predictable that those two pass would clyde. And
Speaker 1: now there are reports out there, uh, indicating that Trump
Speaker 1: is considering pardoning uh, the Tiger King, Joe Exotic himself. UM.
Speaker 1: And like I said, this is an alternative asset class
Speaker 1: exotic animals, so it counts. I don't know if that
Speaker 1: guy from Hong Kong's in a call in and say
Speaker 1: I'm cheating again, but I'll stand by this, Sam. You're cheating.
Speaker 1: Did did either of you see uh. At one of
Speaker 1: the press conferences, there was a reporter who asked UH
Speaker 1: President Trump about Tiger King and asked if he would
Speaker 1: consider pardoning him, and there was a nice little back
Speaker 1: and forth, some comedic RELI, what do you guys think
Speaker 1: that it was a Joe exotic pardon? Is that going
Speaker 1: to help Trump's re election chances? Having never seen the show,
Speaker 1: I'm not exactly sure what actions are being pardoned, but
Speaker 1: so I'll reserve catch it. Well, you'll have you'll have
Speaker 1: to go watch it. Nila, It's it's pretty unbelievable. I
Speaker 1: don't know. I think has proven she might be the
Speaker 1: only one among us with some actual taste and televisions
Speaker 1: that the fact that she hasn't hasn't seen Neila Richardson,
Speaker 1: thank you so much for coming on the show to deck.
Speaker 1: Thanks for having me. It's always a delight to talk
Speaker 1: with you both. And you take care please you do
Speaker 1: what goes up. We'll be back next week. Until then,
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Speaker 1: can find us on Twitter, follow me at at Sara Panzac,
Speaker 1: Mike is at Reaganonymous, and you can also follow Bloomberg
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Speaker 1: The head of Bloomberg Podcast is Francesco Levie. Thanks for listening,
Speaker 1: See you next time.