WEBVTT - Misbehaving in a Pandemic 0:00:13.600 --> 0:00:16.680 Hello, and welcome to What Goes Up, a Bloomberg Weekly 0:00:16.760 --> 0:00:20.239 Markets podcast. I'm Sarah pont sec, a reporter on the 0:00:20.280 --> 0:00:23.560 Cross Asset team, and I'm Mike Reagan, a senior editor 0:00:23.640 --> 0:00:26.159 on the Markets team. This week on the show, a 0:00:26.160 --> 0:00:29.560 Bloomberg Economics model that projects the probability of a US 0:00:29.640 --> 0:00:32.440 recession in the next twelve months is now at one 0:00:34.000 --> 0:00:36.440 after the jobs data, though over the last couple of weeks, 0:00:36.720 --> 0:00:39.000 you could have said that that much was clear. So 0:00:39.080 --> 0:00:42.599 how should you actually invest through an economic recession? Our 0:00:42.640 --> 0:00:45.599 guests will break it all down. That's right, Sarah, And 0:00:45.720 --> 0:00:48.680 of course we'll close the episode with the craziest thing 0:00:48.840 --> 0:00:52.320 we saw in markets this week. And sorry, before we 0:00:52.360 --> 0:00:54.400 get into all that, I want, I would love an 0:00:54.440 --> 0:00:56.720 update on your situation. I know you made a mad 0:00:56.960 --> 0:01:00.680 dash escape from New York. Tell us exactly what you did. 0:01:00.720 --> 0:01:04.400 You drove all the way to Florida's all right? I did? Um. 0:01:04.480 --> 0:01:07.000 So I decided I had been self quarantining in New 0:01:07.040 --> 0:01:09.880 York for quite a while, for over two weeks, so 0:01:10.400 --> 0:01:13.000 I decided to try to make the Great escape. So 0:01:13.200 --> 0:01:15.200 I did the drive all on one day. I didn't 0:01:15.240 --> 0:01:19.360 want to go through an airport so Saturday, seventeen hours, 0:01:19.440 --> 0:01:22.920 woke up right and early. We drove all the way 0:01:22.959 --> 0:01:26.959 down to South Florida. UM. We had to stop for 0:01:27.000 --> 0:01:29.679 gas a couple of times, of course, had masks gloves 0:01:29.800 --> 0:01:32.880 in uh, certain areas that were a little bit more remote. 0:01:33.040 --> 0:01:35.479 I think people were looking at us like we were insane. 0:01:35.560 --> 0:01:37.800 It looked like there weren't many people around. What they 0:01:37.800 --> 0:01:40.479 were going on with their lives as usual, And there 0:01:40.520 --> 0:01:46.240 we are chloroxing the entire gas station. UM. But but 0:01:46.400 --> 0:01:50.280 made it down and other than stopping at gas stations, 0:01:50.320 --> 0:01:53.920 didn't make a single stop. So now I have to 0:01:53.920 --> 0:01:56.920 self quarantine by law in Florida. So I'm quarantining for 0:01:56.960 --> 0:02:00.080 fourteen days here. UM. But I'm at least happy to 0:02:00.160 --> 0:02:02.840 have more space than my New York apartment. So how 0:02:02.840 --> 0:02:04.920 does that work? They stopped you at the state line 0:02:05.600 --> 0:02:07.880 because of the Yeah, so at the at the at 0:02:07.880 --> 0:02:11.240 the Florida Georgia border, UM wasn't backed up at all. 0:02:11.280 --> 0:02:13.400 They didn't have to go through any traffic or weight 0:02:13.480 --> 0:02:16.720 or anything like that. But I had to go through 0:02:16.760 --> 0:02:20.040 a checkpoint. So essentially you drive through, they ask you 0:02:20.080 --> 0:02:22.720 where you're traveling from. UM. I told him I was 0:02:22.760 --> 0:02:24.480 coming from New York. So then they make you circle 0:02:24.520 --> 0:02:27.520 back around to a different checkpoint area where they make 0:02:27.560 --> 0:02:30.000 you feel out of form. You have to give them 0:02:30.040 --> 0:02:33.320 your contact information where you will be self quarantining in 0:02:33.360 --> 0:02:35.440 case they want to check in on you, and you 0:02:35.520 --> 0:02:39.120 have to sign a form saying that you are aware 0:02:39.360 --> 0:02:41.760 that by Florida Lock, if you break the quarantine, you 0:02:41.760 --> 0:02:44.480 can be subject to a finer up to sixty days 0:02:44.480 --> 0:02:48.800 in jail. So I am quarantining, you know. I think, Sarah, 0:02:48.840 --> 0:02:51.640 you realize that my dad instincts were kicking in on 0:02:51.680 --> 0:02:53.600 this trip, and I was very worried. I thought you 0:02:53.639 --> 0:02:55.480 making it dounce, So you did. You did tell me 0:02:55.560 --> 0:02:57.919 when you arrived safely. I appreciate. As soon as I arrived, 0:02:57.919 --> 0:03:01.960 I let you know I was worried about that trip, 0:03:02.120 --> 0:03:06.840 but glad to hear you're safe and sound, uh than quarantine. 0:03:06.919 --> 0:03:10.680 And I think um our guest is in quarantine not 0:03:10.840 --> 0:03:13.840 far from me here in New Jersey where we're basically 0:03:13.919 --> 0:03:17.200 all in quarantine. But we're very welcome to have her 0:03:17.360 --> 0:03:20.840 return to the show. She is an investment strategist at 0:03:20.960 --> 0:03:24.520 Edward Jones. Her name is Nila Richardson. Neila, welcome back 0:03:24.520 --> 0:03:26.800 to the show. Thank you, Mike. It's great to be 0:03:26.880 --> 0:03:30.000 with you both. And how are you surviving the quarantine? 0:03:30.080 --> 0:03:33.040 Is every is the family behaving and there you Uh, 0:03:33.400 --> 0:03:38.600 you have enough supplies? You know, supplies have changed definition. Um, 0:03:38.680 --> 0:03:42.240 do we have enough of what we need? And the 0:03:42.320 --> 0:03:44.680 family is doing well. Thanks for asking me. I have 0:03:44.800 --> 0:03:48.840 two teenage boys, and so the question is not keeping 0:03:48.840 --> 0:03:51.160 them entertained. It's getting them to talk to you on 0:03:51.200 --> 0:03:56.400 a regular basis. And so you know, every so often 0:03:56.440 --> 0:03:58.920 I just check in their rooms, make sure they're they're 0:03:58.960 --> 0:04:02.760 still function ng and and they're doing quite well. Um, 0:04:02.920 --> 0:04:04.920 they don't seem to be missing school as much as 0:04:05.000 --> 0:04:08.280 I imagined that they would be. Well now they have 0:04:08.320 --> 0:04:10.880 plenty of time to find time to speak with you 0:04:10.960 --> 0:04:14.080 and the facts. That's right. We're breaking breaking out the 0:04:14.120 --> 0:04:18.720 board games and the puzzle, so plenty to do. Well. Hey, 0:04:18.760 --> 0:04:21.400 I have teenage girls, So when I hear that teenage 0:04:21.400 --> 0:04:23.760 boys are quarantined, I'm happy about that. I hope that 0:04:23.839 --> 0:04:29.960 continues past the past the pestivirus dating things kicking in. 0:04:31.640 --> 0:04:34.960 But no, I'm curious, you know, as an investment strategist, 0:04:36.320 --> 0:04:38.080 how do you do your job these days? You must 0:04:38.120 --> 0:04:40.200 be getting a lot of calls. A lot of people 0:04:40.240 --> 0:04:42.479 wondering is the is the bottom in the market in 0:04:43.279 --> 0:04:45.760 Is this a new bowl market we're seeing given all 0:04:45.760 --> 0:04:50.760 the stimulus that's going on. Um like me, I'm sure 0:04:50.760 --> 0:04:53.240 your clients are throwing a million questions at you at once. 0:04:53.279 --> 0:04:54.800 So what is you know? What are you saying when 0:04:54.800 --> 0:04:58.000 you answer the phone these days? Well, you're right, Mike, 0:04:58.040 --> 0:05:00.960 we are talking to clients. Are out reach to clients 0:05:00.960 --> 0:05:05.320 and to financial advisors have has aunt up considerably over 0:05:05.360 --> 0:05:08.760 the course of the month. And that constant communication is 0:05:08.800 --> 0:05:12.200 critical because what we're focused on it is not just 0:05:12.279 --> 0:05:16.560 the markets, but the emotional reaction to the markets. And 0:05:16.600 --> 0:05:20.400 this is the time where the behavioral economics come into play. 0:05:20.440 --> 0:05:23.480 All those things that we warn about the investors do, 0:05:23.560 --> 0:05:27.360 the mistakes investors make, This is the time where they 0:05:27.400 --> 0:05:31.120 make those mistakes right. They try to time the bottom 0:05:31.120 --> 0:05:35.080 of the market, they try to sell uh at at 0:05:35.120 --> 0:05:39.360 the peak, and along the way they miss the rally. 0:05:39.440 --> 0:05:42.839 And we've seen the markets rally over the last few 0:05:42.920 --> 0:05:47.560 days here. So we're trying to both inform them at 0:05:47.560 --> 0:05:52.159 a market level, but also make sure that their behavioral 0:05:52.240 --> 0:05:56.240 reactions are not ones that make them drail their long 0:05:56.320 --> 0:06:01.080 term goals and that's quite a balance. So given that, uh, 0:06:01.200 --> 0:06:05.240 it's pretty certain, it's virtually certain that we know that 0:06:05.279 --> 0:06:08.240 we are now in a recession, and sure this time 0:06:08.279 --> 0:06:12.719 around it could be completely unique considering the reasons why 0:06:12.760 --> 0:06:16.800 we have seen the economy react as it has due 0:06:16.839 --> 0:06:20.000 to a spreading viral outbreak. But can you maybe just 0:06:20.040 --> 0:06:24.440 walk us through how markets actually typically react through a recession, 0:06:24.440 --> 0:06:27.240 span from from start to the point in which you 0:06:27.360 --> 0:06:31.400 actually start seeing a recovery. Well, as you know, this 0:06:31.960 --> 0:06:35.240 recession is quite different than what's typical, and if you 0:06:35.279 --> 0:06:40.080 think about the typical timeline of of an expansion path, 0:06:40.520 --> 0:06:44.000 it's really affected by the path of inflation. We see 0:06:44.040 --> 0:06:47.839 that economies, they typically they grow for a very long time, 0:06:48.200 --> 0:06:52.600 they become overheated, consumer prices start to increase, and then 0:06:52.600 --> 0:06:56.280 there's this inflation threat that's an overhang. That's when the 0:06:56.279 --> 0:07:00.320 Fed comes with their butcher knives and tries to choke 0:07:00.400 --> 0:07:05.159 off this expansion by raising interest rates. We're not seeing 0:07:05.200 --> 0:07:07.880 anything like that right now. What we're seeing is an 0:07:07.920 --> 0:07:12.280 economy that's not broken, but has basically put itself into 0:07:12.320 --> 0:07:16.200 a medically induced comma in order to attack a disease. 0:07:16.680 --> 0:07:20.400 And that's we've done that by social containment. And the 0:07:20.480 --> 0:07:23.240 real threat right now in terms of the economy is 0:07:23.280 --> 0:07:27.600 not inflation, it's deflation UH and the fact that that 0:07:27.680 --> 0:07:31.560 people can't work and the economy is tackling a hit 0:07:31.640 --> 0:07:36.040 to both supply and demand. So the market reaction is 0:07:36.120 --> 0:07:40.120 actually following I think a traditional playbook. We're seeing that 0:07:40.160 --> 0:07:45.160 the markets typically lead a recession for a period of 0:07:45.200 --> 0:07:49.600 time UM and that since it's correct, before we knew 0:07:49.720 --> 0:07:53.000 the extent of this downturn and before we saw those 0:07:53.080 --> 0:07:56.640 jobless claims, the market had already reacted. Now, the key 0:07:56.720 --> 0:08:01.160 difference is the market reacted really quickly. It typically takes 0:08:01.160 --> 0:08:04.800 about nine months to see that dropped from a record 0:08:04.920 --> 0:08:08.840 high all the way down to a bear market. That decline, 0:08:10.440 --> 0:08:15.440 this bear market happened in twenty two calendar days. I mean, 0:08:15.560 --> 0:08:19.800 the speed of the market reaction has been really unprecedented, 0:08:19.840 --> 0:08:23.680 and I think that's what's different along with the composition 0:08:23.760 --> 0:08:28.600 of this UH expansion to recession timeline. I think that's 0:08:28.600 --> 0:08:32.440 a great analogy that medically induced coma. Neil, and I 0:08:32.480 --> 0:08:36.680 know you have an economics background, So what I think 0:08:36.760 --> 0:08:39.560 the big question I have and and maybe other people have, 0:08:39.920 --> 0:08:43.439 is that Okay, we take that patient out of that coma, 0:08:43.800 --> 0:08:47.640 you know, and and quote unquote reopened the economy. I 0:08:47.760 --> 0:08:51.839 just can't help but wonder how long the headwinds UH 0:08:51.960 --> 0:08:56.800 to the economy last after that process, because I'm thinking, um, 0:08:56.960 --> 0:08:59.280 you know, it would be a while personally before I 0:08:59.280 --> 0:09:01.720 would be comfort will say, going to a movie theater, 0:09:01.800 --> 0:09:06.080 going to a stadium, flying on a plane, going to 0:09:06.120 --> 0:09:10.320 a hotel, all of those things until the vaccine comes, 0:09:10.360 --> 0:09:13.200 which is you know, hypothetically, I guess still probably at 0:09:13.240 --> 0:09:16.199 least a year out. So once we do, you know, 0:09:16.280 --> 0:09:20.120 quote unquote reopen the economy, how strong do you think 0:09:20.120 --> 0:09:24.200 those headwinds will be as far as consumer behavior and 0:09:24.360 --> 0:09:27.840 getting back to that normal uh that we we were 0:09:27.840 --> 0:09:30.079 in before the virus. Well, I think there's a lot 0:09:30.120 --> 0:09:32.560 of uncertainty. I don't know about you, my can Sarah, 0:09:32.640 --> 0:09:34.480 but I want to break out of this house and 0:09:34.480 --> 0:09:37.120 go to a restaurant in a bar like nobody's business. 0:09:39.200 --> 0:09:42.280 You might see a surgeon economic activity. I would love 0:09:42.320 --> 0:09:44.360 to go to the mall in shop right now. I 0:09:44.400 --> 0:09:48.080 would there are many things. I'm looking forward to the 0:09:48.120 --> 0:09:51.080 next Marvel movie and seeing it in a theater. So 0:09:52.640 --> 0:09:54.600 you've got that Short Hills mall near you. I can't 0:09:54.600 --> 0:09:56.360 blame you. It's a good mall. It's it's the mall 0:09:56.400 --> 0:09:59.319 I was thinking of when I said it. So, But 0:10:00.120 --> 0:10:02.760 have to think that even these activities are going to 0:10:02.800 --> 0:10:06.440 be scaled down. Yes, maybe movie theaters will reopen, but 0:10:06.679 --> 0:10:11.720 they'll be at maybe fifty capacity instead of acent capacity. 0:10:11.840 --> 0:10:15.920 There will still respect the six ft of distance between us, 0:10:15.920 --> 0:10:19.560 at least initially, until we get enough test kits and 0:10:19.720 --> 0:10:23.800 security that people are on the other side of of 0:10:23.800 --> 0:10:26.680 of a viral outbreak and that it won't lead to 0:10:26.760 --> 0:10:30.760 this huge community contagion that we've seen. And I think 0:10:30.840 --> 0:10:33.520 in terms of the market perspective, the market has done 0:10:33.679 --> 0:10:36.600 a fantastic job of pricing and I think a lot 0:10:36.640 --> 0:10:39.640 of bad news already and that's why we can see 0:10:39.679 --> 0:10:44.920 this huge uptick and jobless claims and the market still 0:10:45.040 --> 0:10:48.960 rally on a weekly basis. But but I don't think 0:10:49.000 --> 0:10:51.440 the market has done a very good job of pricing 0:10:51.480 --> 0:10:54.840 in a recovery or the timeline to that recovery. And 0:10:54.880 --> 0:10:57.520 I think that's the biggest risk. We're in a recession. 0:10:57.800 --> 0:11:01.000 We know it's going to be deep, but we don't 0:11:01.040 --> 0:11:04.320 know how quickly the economy gets back online, and that 0:11:04.520 --> 0:11:07.920 is the huge question mark, you know. I have seen 0:11:07.960 --> 0:11:11.040 others say that it is possible that if we do 0:11:11.120 --> 0:11:14.960 get a reopening of the economy by say June, then 0:11:15.240 --> 0:11:16.760 the season will pick up that you see in the 0:11:16.800 --> 0:11:19.400 economy over the summer. You still might see that occur 0:11:19.559 --> 0:11:22.840 because you might see people wanting to go out um 0:11:22.880 --> 0:11:25.559 and get out of the house and really take part 0:11:25.640 --> 0:11:28.000 in some of those activities are traveling. But it's yet 0:11:28.040 --> 0:11:30.839 to be seen. And NILA's something I've been thinking about 0:11:31.080 --> 0:11:35.760 is the idea that okay, the leveling off that we 0:11:35.840 --> 0:11:40.800 have seen in some hotspots as it relates to coronavirus cases, 0:11:40.840 --> 0:11:44.559 some investors have said that's been encouraging as it relates 0:11:44.640 --> 0:11:47.800 to the idea that maybe the economy can open sooner 0:11:47.920 --> 0:11:52.520 rather than later. But Peter Zacchini, one strategist, he pointed 0:11:52.520 --> 0:11:54.760 out to me in a colleague of mine that the 0:11:54.880 --> 0:11:57.440 reason that we're seeing this leveling off is the fact 0:11:57.440 --> 0:12:01.560 that social distancing and self quarantine is in fact working. 0:12:02.000 --> 0:12:04.560 So do you ever think about or do you get 0:12:04.559 --> 0:12:07.839 worried about this possibility that until we do have a 0:12:07.920 --> 0:12:12.040 vaccine or science develops further, that this is maybe the 0:12:12.120 --> 0:12:14.800 only way to combat the spread of the virus, which 0:12:14.840 --> 0:12:18.560 means the economy won't be able to open holy for 0:12:18.679 --> 0:12:23.960 quite a long period of time. It it is a concern, uh, 0:12:24.360 --> 0:12:30.360 the medical progress will lead everything. You know, this is 0:12:30.400 --> 0:12:33.520 not a problem that the FED can fix, and we 0:12:33.520 --> 0:12:36.079 we saw that the FED even this week has come 0:12:36.080 --> 0:12:41.760 out with even new kitchen sink approaches to ensuring the 0:12:41.760 --> 0:12:44.800 flow of liquidity. This is not a problem that just 0:12:44.920 --> 0:12:48.400 fiscal dollars alone to consumers can fix, so that will 0:12:48.440 --> 0:12:52.240 help turn in the economy. This is a problem that 0:12:52.360 --> 0:12:58.640 it takes medical ingenuity, progress and innovation. Now that may 0:12:58.640 --> 0:13:01.760 not just rest on a vaccine. It could be expanded 0:13:01.800 --> 0:13:07.559 testing procedures or other things that uh that the medical community, 0:13:07.760 --> 0:13:11.440 with ample help from from the FED and state governments 0:13:11.480 --> 0:13:14.440 can do to build confidence so that we can go 0:13:14.520 --> 0:13:19.080 outside and not feel threatened just going into a grocery store. 0:13:19.120 --> 0:13:21.960 And that's going to take some uh some time, I 0:13:22.000 --> 0:13:41.480 think to get over that psychology. You know. You you 0:13:41.559 --> 0:13:46.000 mentioned that kitchen sink approach from the FED. Are our communist? 0:13:46.040 --> 0:13:49.559 Cameron christ had a funny line saying, well, yeah, it's 0:13:49.559 --> 0:13:52.680 also the coverbs, the sideboard and even a few paper 0:13:52.679 --> 0:13:55.679 plates and plastic cups they dredged up from a closet 0:13:56.200 --> 0:14:00.680 launch room. I wonder, Nila, they clearly are are doing 0:14:00.720 --> 0:14:05.240 everything under the sun, uh, to to add liquidity to 0:14:05.320 --> 0:14:10.000 the market. UM. I worry though, if there's a little 0:14:10.040 --> 0:14:15.600 bit of improvisation and experimenting experimentation here going on. I 0:14:15.600 --> 0:14:19.200 feel like this this quote unquote whatever it takes approach. Um, 0:14:20.080 --> 0:14:23.080 it's difficult for central bankers, at least in the US, 0:14:23.200 --> 0:14:25.760 and for the government to do when the recession is 0:14:25.800 --> 0:14:30.600 caused by sort of, uh, you know, an endogenous financial 0:14:30.680 --> 0:14:34.680 system issue like say, the the financial crisis. I think 0:14:35.040 --> 0:14:38.360 you know, the public did not have a good taste 0:14:38.360 --> 0:14:40.960 in their mouth about a lot of those bank bailouts 0:14:41.040 --> 0:14:44.800 and and the various programs that went on. In this case, 0:14:45.000 --> 0:14:48.320 it seems since you know, it's this virus that was 0:14:49.040 --> 0:14:52.120 the fault of no human as far as we know. Um, 0:14:52.480 --> 0:14:55.040 you know, this real exogenous shock to the economy that 0:14:55.640 --> 0:15:00.120 it's almost like it's it's freed the reins of the 0:15:00.120 --> 0:15:03.720 FED and the government to basically really do whatever it takes. 0:15:04.240 --> 0:15:06.160 But once we get through this, I wonder where the 0:15:06.280 --> 0:15:08.920 risk is. And you had mentioned that that the near 0:15:09.080 --> 0:15:13.720 term threat is deflation. Um, are we again going to 0:15:13.800 --> 0:15:17.840 be worrying about inflation at the other end of this um? 0:15:17.880 --> 0:15:20.320 And I know people have been worried about inflation throughout 0:15:20.360 --> 0:15:24.760 the entire bullmarket that that just finished UM and the 0:15:24.960 --> 0:15:28.360 entire economic cycle. But is it is there any reason 0:15:28.360 --> 0:15:30.840 to believe that this time could be different, that that 0:15:30.960 --> 0:15:35.880 this will be the potential for an inflationary shock once 0:15:35.920 --> 0:15:40.320 we're through uh, you know, the the economic slump that's 0:15:40.360 --> 0:15:43.560 being caused by the the quarantines and the isolation. Is 0:15:43.600 --> 0:15:47.000 all this liquidity and money being thrown at this problem 0:15:47.040 --> 0:15:49.120 going to come back and bite us down the line. 0:15:49.320 --> 0:15:51.480 That's a great question. I'm going to take that in part. 0:15:51.600 --> 0:15:55.240 I'll start with your your last statement on inflation. What's 0:15:55.280 --> 0:15:58.960 remarkable about this downturn is it's both a hit to 0:15:59.480 --> 0:16:02.920 demand end in a hit to supply. Now, the global 0:16:02.960 --> 0:16:05.960 hit to demand we've seen and we understand, and that's 0:16:05.960 --> 0:16:10.680 what's deflationary. But what's inflationary is the global hit to supply. 0:16:11.760 --> 0:16:13.840 I think, I mean Sarah went to a couple of 0:16:13.840 --> 0:16:18.000 gas stations. I think gas stations are the mecca for 0:16:18.160 --> 0:16:22.240 the supply and demand shock illustration. Why I want to 0:16:22.280 --> 0:16:24.760 say that at one gas station we stopped out, We 0:16:24.880 --> 0:16:27.880 paid one seventy eight gallon. There you go, There you go. 0:16:28.120 --> 0:16:30.640 Was that the was that the low of the that 0:16:30.760 --> 0:16:32.440 was the lowest that we should have had? You do 0:16:32.480 --> 0:16:37.320 a chart everywhere we stopped Yeah, I mean they were 0:16:37.360 --> 0:16:39.080 all very low, but yeah, a couple of couple of 0:16:39.080 --> 0:16:42.720 spots remarkable. So there you go. There's the UH, the 0:16:42.760 --> 0:16:47.040 oil price shock, the slump and demand, and then they 0:16:47.160 --> 0:16:50.920 break down into OPEC talks recently hopefully that's improving soon, 0:16:51.040 --> 0:16:55.560 which led to UH the announcement of more supply. So 0:16:55.640 --> 0:16:57.840 that's it. But if you go into that gas station 0:16:57.880 --> 0:17:00.800 and try to buy a bottle of a pack of water, 0:17:00.960 --> 0:17:04.720 you might see eighteen dollar water for twenty four bottles. 0:17:04.840 --> 0:17:07.920 Let's how you're seeing some inflation and and and things 0:17:07.960 --> 0:17:11.760 like bullet paper and water and and and rice and basics. 0:17:12.119 --> 0:17:16.840 So if if, if, if global demand rebounds, but we 0:17:16.880 --> 0:17:20.920 still have these supply shots, you could see the dominance 0:17:21.000 --> 0:17:25.399 of of slagging demand be outweighed by the dominance of 0:17:25.400 --> 0:17:28.560 the shock and supply, and that would be inflationary. And 0:17:28.600 --> 0:17:32.359 so there's a huge amount of uncertainty in terms of 0:17:32.400 --> 0:17:36.000 how this plays out into the recovering and then just 0:17:36.080 --> 0:17:39.320 briefly you asked, UH what we be paying for this 0:17:39.480 --> 0:17:43.080 somehow the kitchen sink approach by the Fed and by 0:17:43.400 --> 0:17:47.800 UH fiscal government sometime down the road, Well, we already 0:17:47.840 --> 0:17:51.040 know that deficits were high trillion dollars as far as 0:17:51.119 --> 0:17:54.040 the I can see every year, UH deficits are about 0:17:54.080 --> 0:17:57.040 to to search further though, in the context of low 0:17:57.160 --> 0:18:02.120 interest rates, economists are really concerned about incentives, and when 0:18:02.119 --> 0:18:05.639 you have a kitchen sync approach, you don't think a 0:18:05.640 --> 0:18:11.160 lot about incentives UH in and doing that kind of legislation. 0:18:11.520 --> 0:18:13.920 And so that could be where the rubber meets the road. 0:18:14.080 --> 0:18:18.720 Are we changing behavior in unexpected ways by the way 0:18:18.760 --> 0:18:21.080 that we are trying to stimulate the economy in a 0:18:21.160 --> 0:18:26.040 time of crisis. So i'd imagine, of course the inflation outlook, 0:18:26.040 --> 0:18:28.480 which is a little bit muddied at this point in time, 0:18:28.560 --> 0:18:30.680 is something you have to take it into account when 0:18:30.720 --> 0:18:34.199 thinking about how to position portfolio is going forward. But 0:18:34.320 --> 0:18:36.320 I also want to dive a little bit deeper into 0:18:36.440 --> 0:18:39.040 something you mentioned earlier in the show. Was that was 0:18:39.720 --> 0:18:45.320 you feel like the market priced in the downturn relatively well, 0:18:45.359 --> 0:18:49.639 but hasn't been as good at pricing in a recovery. 0:18:49.760 --> 0:18:52.639 And it made me think of a chart, uh that 0:18:52.720 --> 0:18:55.359 I received from Credit Suites where they've been looking at 0:18:55.359 --> 0:18:58.359 what they call fresh estimates, where they only take into 0:18:58.400 --> 0:19:02.400 account bottom up company profit estimates that have been revised 0:19:02.440 --> 0:19:05.040 recently UM and what they looked at and what they 0:19:05.119 --> 0:19:08.399 highlighted this week was that because of the falling e 0:19:08.880 --> 0:19:11.119 and multiple expansion that we've seen this week with the 0:19:11.200 --> 0:19:14.200 rally is the fact that we're actually at now a 0:19:14.359 --> 0:19:19.359 nineteen times multiple, matching the multiple from the February nineteenth 0:19:19.400 --> 0:19:22.320 high in the stock market. And it's been hard for 0:19:22.359 --> 0:19:24.600 me to wrap my mind abound around. But it makes 0:19:24.600 --> 0:19:27.359 me also think, do you get a sense that the 0:19:27.359 --> 0:19:31.520 market doesn't really care about earnings the idea that yeah, 0:19:31.560 --> 0:19:35.160 everyone knows this year is going to be really rough, 0:19:35.720 --> 0:19:39.680 particularly in the next two quarters as we get those results, 0:19:39.960 --> 0:19:45.920 and that instead investors in the market are looking forward too, 0:19:46.040 --> 0:19:50.119 trying to envision what that rebound might look like. I 0:19:50.160 --> 0:19:53.760 think Steph Curry said it best if a couple of 0:19:53.800 --> 0:19:58.040 months ago we should just forget that's what that's what 0:19:58.160 --> 0:20:00.919 the markets want to do. They want to move to 0:20:02.240 --> 0:20:06.160 and they're anxious to do that, and and and so yes, 0:20:06.240 --> 0:20:09.119 I think a lot of this bad news is being dismissed. 0:20:09.200 --> 0:20:12.800 It's either already priced in or will be dismissed going forward. 0:20:13.080 --> 0:20:16.119 But it also shows a concern because this bear market 0:20:16.200 --> 0:20:20.879 rally may have further to fall once that economic news 0:20:20.920 --> 0:20:25.640 and earnings news comes in differently than the market projects. 0:20:26.119 --> 0:20:31.120 So they eventually the market as it looks to the future, 0:20:31.800 --> 0:20:35.280 which in my mind is it's going to be anchored 0:20:35.320 --> 0:20:39.119 by the reality of the present and and still a 0:20:39.240 --> 0:20:42.720 slog to get through this year. I'm glad you brought 0:20:42.760 --> 0:20:44.399 up Steph Curry. There was a great story in the 0:20:44.480 --> 0:20:48.680 journal about how he found himself quarantined at home and 0:20:48.880 --> 0:20:51.520 he didn't have a basketball hoop in his own driveway, 0:20:51.600 --> 0:20:53.240 so he had a order one online and it took 0:20:53.280 --> 0:20:58.280 him like five hours together. Shocking. I can't believe you 0:20:58.280 --> 0:21:01.800 didn't have its own back right, you know. Uh. I 0:21:01.920 --> 0:21:07.240 envisioned every single NBA player having their own basketball. Maybe 0:21:07.320 --> 0:21:14.000 someone just don't like working from home. I say, leave 0:21:14.080 --> 0:21:19.360 it in the gym. Uh. You know, Neilie, you made 0:21:19.680 --> 0:21:24.199 a very I think, super important point earlier in the 0:21:24.240 --> 0:21:28.679 interview when you talked about that investor psychology. Um, I 0:21:28.760 --> 0:21:33.679 know my own uh mentality about this virus shifted dramatically 0:21:33.720 --> 0:21:35.520 this week. I had an old colleague I used to 0:21:35.520 --> 0:21:38.040 work at the Associated Press way back when, an old 0:21:38.119 --> 0:21:41.560 colleague and it's just then and uh, guy was fifty 0:21:41.600 --> 0:21:45.240 one years old, a marathon runner, one of the nicest 0:21:45.240 --> 0:21:48.560 people you'd ever meet, UM, caught this bug and died 0:21:48.600 --> 0:21:51.119 from it. And it really sort of it was like 0:21:51.160 --> 0:21:53.320 a gut punch to me. You know, I'd kind of 0:21:53.320 --> 0:21:56.320 been dealing like I deal with every everything like this 0:21:56.359 --> 0:21:58.720 with with bad jokes, you know, and it really kind 0:21:58.720 --> 0:22:02.200 of made my head spin when you start to get 0:22:02.560 --> 0:22:06.520 sort of, um, people in your lives being affected by 0:22:06.560 --> 0:22:08.800 this rather than just watching it on the TV, watching 0:22:08.840 --> 0:22:13.080 it in the newspaper. And I'm curious about that sort 0:22:13.119 --> 0:22:16.240 of the consumer confidence element of this, uh, the investors 0:22:16.240 --> 0:22:20.000 psychology element of this. Um. You know when you go 0:22:20.040 --> 0:22:22.240 to that when you when you're finally allowed out of 0:22:22.280 --> 0:22:24.080 your house and you go to that Short Hills mall 0:22:24.560 --> 0:22:25.960 and sorry, I don't know if you're familiar with the 0:22:25.960 --> 0:22:27.600 Short Hills Mall. To the only mall I know that 0:22:27.640 --> 0:22:32.359 has you can take a helicopter to. Um, Yeah, that's 0:22:32.359 --> 0:22:34.160 the thing. Yeah, we'll have to fly you out there. 0:22:34.200 --> 0:22:36.639 Sometimes Nil is gonna get her helicopter and pick you 0:22:36.720 --> 0:22:38.520 up and we'll go shopping. When this is all I'm 0:22:39.440 --> 0:22:42.160 my helicopter looks like a ten year old Volvo. Don't 0:22:42.200 --> 0:22:49.520 be surprised, But I wonder, you know that first trip 0:22:49.560 --> 0:22:53.960 through the mall, how much is our people's psychology is 0:22:53.960 --> 0:22:56.000 going to be affected for for years to come? You know, 0:22:56.000 --> 0:22:58.240 are you gonna be You're gonna be doing more windows 0:22:58.240 --> 0:23:01.520 shopping than actual spending at the mall all? And you 0:23:01.560 --> 0:23:04.760 know how does that work in the in the investment 0:23:04.880 --> 0:23:08.280 landscape to are people going to be risk adverse? Were 0:23:08.320 --> 0:23:12.320 more risk averse than they were um for quite a 0:23:12.400 --> 0:23:16.040 while at the back end of this in your opinion, Well, 0:23:16.119 --> 0:23:18.520 first of all, Mike, I'm really sorry for your last 0:23:18.600 --> 0:23:22.600 and I'm really sorry for all of these tragic stories 0:23:23.160 --> 0:23:26.080 that I've heard and that people are being touched with. 0:23:26.240 --> 0:23:30.159 I think I think this will be with us for 0:23:30.200 --> 0:23:32.760 a while. When you think about other tragedies, you think 0:23:32.760 --> 0:23:37.320 about nine eleven. It does change how you view things 0:23:37.840 --> 0:23:41.920 and it changes how you operate. You think of those 0:23:42.000 --> 0:23:44.760 nine eleven changes in New York and Washington, d C. 0:23:45.040 --> 0:23:47.879 Where I was living at the time. It was profound 0:23:47.920 --> 0:23:51.440 the changes at the time that happened as a result 0:23:51.440 --> 0:23:54.800 of the tragedy, but over time you kind of got 0:23:54.880 --> 0:23:58.440 used to them and those changes began to blend into 0:23:58.480 --> 0:24:01.560 the background. And I expect that there will be changes 0:24:01.640 --> 0:24:05.680 made this time around. We will be different, we will 0:24:05.800 --> 0:24:11.760 shop different, we will approach crowds differently. Over it's going 0:24:11.840 --> 0:24:14.919 to feel strange, but over time, it's going to be 0:24:15.040 --> 0:24:18.720 business as usual and it'll those changes will fade into 0:24:18.760 --> 0:24:22.760