WEBVTT - I Can't Remember A More Difficult Time For EM: Bill Rhodes 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast on Paul Swing You. 0:00:05.360 --> 0:00:07.800 Along with my co host Lisa Brahmas, each day we 0:00:07.880 --> 0:00:10.440 bring you the most noteworthy and useful interviews for you 0:00:10.560 --> 0:00:12.640 and your money. Whether at the grocery store or the 0:00:12.680 --> 0:00:16.000 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.160 --> 0:00:18.079 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:21.880 Bloomberg dot com. I am so pleased to say we 0:00:21.960 --> 0:00:25.360 are going to focus on emerging markets, assets and the 0:00:25.440 --> 0:00:29.000 nations themselves with somebody who has been a pivotal player 0:00:29.160 --> 0:00:31.960 in many of the restructuring is done throughout the developing 0:00:32.000 --> 0:00:35.760 world over the past number of decades. Bill Rhodes, Senior 0:00:35.760 --> 0:00:39.479 Advisor for City who helped in the nineteen eighties and 0:00:39.560 --> 0:00:43.839 nineties negotiate a lot of the rescue financing packages in 0:00:43.880 --> 0:00:47.080 the developing world. Currently President, chief executive officer of William 0:00:47.159 --> 0:00:50.320 Rhodes Global Advisors. Bill, always phenomenal to have you on 0:00:50.360 --> 0:00:53.760 the show. And I want to start with the coronavirus 0:00:53.800 --> 0:00:58.040 and its impact, the humanitarian impact on emerging markets. We 0:00:58.080 --> 0:01:01.240 don't talk about it that much. What do you glean 0:01:01.400 --> 0:01:03.720 as you travel? As you talk? You know, whether it's 0:01:03.720 --> 0:01:06.440 travel virtually or talk with your contacts as far as 0:01:06.520 --> 0:01:09.479 how how prevalent the virus is and how damaging it's been. 0:01:10.400 --> 0:01:12.360 First of all, it's great to be on you with 0:01:12.400 --> 0:01:16.680 you guys, Lisa, and I think the impact is going 0:01:16.680 --> 0:01:21.440 to be substantial on most parts of the emerging markets. 0:01:21.840 --> 0:01:26.039 I think, UH, we're already seeing this UM in UH 0:01:26.120 --> 0:01:30.880 in Latin America, UH, in case of Brazil, it's hitting Mexico. 0:01:31.360 --> 0:01:33.920 And of course in Asia we've you know, we've seen 0:01:33.959 --> 0:01:36.360 a lot of it because it started in in China, 0:01:36.840 --> 0:01:39.199 migrated to South Korea, and I must say the South 0:01:39.280 --> 0:01:41.640 Koreans have done the best job of getting testing out 0:01:41.640 --> 0:01:45.520 there and controlling it. But some of the economies UH 0:01:45.600 --> 0:01:49.560 in Southeast Asia are also being hit very hard. India, UH, 0:01:49.640 --> 0:01:54.640 you've had a second wave in UH, in Singapore, Malaysia. 0:01:55.600 --> 0:01:58.320 So I think that in countries like Turkey, in the 0:01:58.320 --> 0:02:01.560 Middle East and others are being hit. So I think 0:02:01.600 --> 0:02:04.720 this is delayed reaction. The area that people are most 0:02:04.760 --> 0:02:09.200 concerned about at this point is Africa because they don't 0:02:09.200 --> 0:02:12.280 have the hospitals UH and they don't have the health 0:02:12.320 --> 0:02:16.040 systems in place. UH. And so I think that the 0:02:16.080 --> 0:02:19.200 emerging markets are going to be hit particularly hard, much 0:02:19.240 --> 0:02:22.480 more than the developed markets that we've seen today. So 0:02:22.800 --> 0:02:26.760 it's interesting. Bill. Let's focus a little bit on Latin America. UM, 0:02:26.880 --> 0:02:28.600 where is some of the big risks there? You know, 0:02:28.639 --> 0:02:30.639 some of the issues you highlight about Africa in terms 0:02:30.720 --> 0:02:33.640 of health care and sanitation, so once a lot of 0:02:33.639 --> 0:02:36.160 that applies to many parts of Latin America. What are 0:02:36.160 --> 0:02:39.880 you most concerned about? Well, I think the situation in Brazil. 0:02:39.960 --> 0:02:43.919 It's the largest country and the president boll Conaro doesn't 0:02:43.960 --> 0:02:46.840 want to admit that there's a problem, and he's battling 0:02:46.880 --> 0:02:49.959 with his own uh, with his own Congress and many 0:02:50.000 --> 0:02:52.880 of the governors, and the fear there because it's a 0:02:52.919 --> 0:02:57.360 country of two hundred fifteen twenty million people, and the 0:02:57.440 --> 0:03:01.200 fear there is that this thing could get out of hand. 0:03:01.200 --> 0:03:04.440 And of course they've been going through a period of 0:03:04.520 --> 0:03:07.959 difficulty in an economy for the last five years. UH, 0:03:08.000 --> 0:03:09.960 And so I think this this could be a very 0:03:10.000 --> 0:03:13.400 difficult situation. UH. You also have the impact of the 0:03:13.480 --> 0:03:17.200 Venezuelan refugees all throughout Latin Americas, some five million of them, 0:03:18.040 --> 0:03:20.880 which exacerbates the situation because a lot of them bring 0:03:20.960 --> 0:03:23.960 things like millary and other things with them, and so 0:03:24.080 --> 0:03:26.919 it's a it's a real problem. I was earlier this year, 0:03:26.919 --> 0:03:29.640 I was in Trinidad in Guyana, where you have a 0:03:29.639 --> 0:03:34.840 lot of Venezuelan refugees, and also northern Brazil in the 0:03:34.880 --> 0:03:39.040 state of Roraima. Venezuela as a complete disaster area in 0:03:39.080 --> 0:03:43.960 the sense that the health system completely has collapsed already 0:03:44.120 --> 0:03:48.080 under Maduro, and what could happen there is could be 0:03:48.120 --> 0:03:52.800 a real humanitarian crisis with COVID nineteen in a place 0:03:52.840 --> 0:03:54.920 like Venezuela. So if you ask me what country I'm 0:03:54.960 --> 0:03:58.520 most concerned about in the sense of the hit, it's 0:03:58.560 --> 0:04:01.720 probably Venezuela as far as the impact on the most 0:04:01.800 --> 0:04:04.920 number of people, who would be Brazil. So I'm curious 0:04:05.040 --> 0:04:08.040 the the answer in the developing world. In the developed world, 0:04:08.080 --> 0:04:12.760 I should say, has been to socially distance shutdown. Businesses 0:04:12.920 --> 0:04:16.200 and governments are just flooding people with money, are trying 0:04:16.200 --> 0:04:19.080 to in order to stave off the economic damage. What 0:04:19.200 --> 0:04:22.560 has the response been like, both financially as well as 0:04:22.600 --> 0:04:27.880 socially in some of these developing markets, particularly in Latin America. Well, 0:04:27.880 --> 0:04:31.719 I think that we're still I think unfortunately at the 0:04:31.760 --> 0:04:34.479 early stages you know, I did this op ed on 0:04:34.560 --> 0:04:39.240 the eighth of April. UH talking about my concerns is 0:04:39.279 --> 0:04:43.760 that the markets were underestimating the dangers of of COVID 0:04:43.839 --> 0:04:48.039 nineteen because to me it smells somewhat of the Spanish 0:04:48.040 --> 0:04:52.839 flu problems of eighteen nineteen and twenty, where the first 0:04:52.880 --> 0:04:57.760 Browns gave people the feeling that it was all over 0:04:57.960 --> 0:05:00.919 and they and the real hit came in the second round, 0:05:01.240 --> 0:05:04.120 second and third rounds, and and so there's real concern 0:05:05.120 --> 0:05:09.560 that the worst is yet to come. So Bill, we 0:05:09.600 --> 0:05:11.880 haven't really necessarily it's a kind of in country by 0:05:11.920 --> 0:05:14.440 country and even within the United States, state by state, 0:05:14.880 --> 0:05:19.280 focusing on efforts to get this under control. Is there 0:05:19.279 --> 0:05:21.560 a mechanism for a kind of a global response, because 0:05:21.560 --> 0:05:23.360 I think about some of these emerging markets and I'm 0:05:23.360 --> 0:05:25.159 just not sure they can do it on their own. 0:05:25.920 --> 0:05:28.880 I think that's very correct. Well, I can't. And what 0:05:29.000 --> 0:05:32.800 I advocated my up ed was sort of a recreation 0:05:32.920 --> 0:05:36.239 of the spirit of Gordon Brown when he put together 0:05:36.920 --> 0:05:42.159 UH the G twenty Countries um as a response to 0:05:42.279 --> 0:05:45.120 the global economic crisis at that time when he was 0:05:45.160 --> 0:05:47.240 Prime Minister in two thousand nine, was heading the G 0:05:47.400 --> 0:05:49.760 twenty and I think the I m F, World Bank 0:05:50.000 --> 0:05:52.279 were all involved in that, but I think this is 0:05:52.360 --> 0:05:55.279 much more serious. And you see they're talking about uh 0:05:55.480 --> 0:05:59.240 suspension of debt payments. Uh, you know for the most 0:05:59.279 --> 0:06:02.000 needy country these UH, the I m F, the World Bank, 0:06:02.080 --> 0:06:05.560 and UH, the G twenty has talked about that through 0:06:05.600 --> 0:06:07.080 the end of the year. But that's not going to 0:06:07.120 --> 0:06:10.400 be sufficient. And then you have you have the aid 0:06:10.520 --> 0:06:13.760 that for instance, the Europeans and the US have been 0:06:13.760 --> 0:06:16.320 giving these countries drive along and they're now in this 0:06:16.400 --> 0:06:19.320 strap situation. We're speaking with our good friend Bill Rhodes. 0:06:19.360 --> 0:06:22.479 Bill as a president CEO of William Rhodes Global Advisors, 0:06:22.480 --> 0:06:26.080 whose former chairman at City Bank. We're talking about the 0:06:26.120 --> 0:06:29.720 outsized effect likely to have on emerging markets from the 0:06:29.720 --> 0:06:32.279 coronavirus and Bill, does there really need to be a 0:06:32.279 --> 0:06:35.720 global response to help out some of these emerging markets 0:06:35.760 --> 0:06:39.080 which may have, you know, limited capabilities to kind of 0:06:39.360 --> 0:06:42.159 take care of their own populations. I think, without a 0:06:42.200 --> 0:06:45.240 doubt there needs to be something more done than the 0:06:45.279 --> 0:06:47.240 G twenty is done. I think the I m F 0:06:47.240 --> 0:06:52.000 and World Bank are looking at announcing additional programs, although 0:06:52.200 --> 0:06:55.800 they are now talking about programs that they've never done before, 0:06:56.200 --> 0:06:58.440 and so you have to have a united response through 0:06:58.480 --> 0:07:02.040 the G twenty rather than a one off type situation. 0:07:02.640 --> 0:07:05.880 And uh, then just to change it for a moment, 0:07:05.960 --> 0:07:08.000 when you take a look at the EU and U 0:07:09.120 --> 0:07:12.160 and the e C, you know, it's the situation that 0:07:12.240 --> 0:07:15.720 the EU is going through. Who have been major suppliers 0:07:15.720 --> 0:07:17.960 of aid to a lot of these countries, they are 0:07:18.000 --> 0:07:20.840 in a difficult situation themselves. I mean Spain's had over 0:07:20.880 --> 0:07:26.120 twenty one deaths, Italy very similar, and they are struggling 0:07:26.120 --> 0:07:29.840 to keep the EU together and talking about a rescue 0:07:29.840 --> 0:07:33.520 package for those countries of a trillion to a trillion 0:07:33.560 --> 0:07:38.000 and a half euros. Uh. And this type of thing 0:07:38.000 --> 0:07:41.680 will also help the emerging markets because uh, that will 0:07:41.720 --> 0:07:45.400 push I think the G twenty to do more if 0:07:45.400 --> 0:07:47.680 their own economies are being taken care of to help 0:07:47.680 --> 0:07:50.800 the emerging markets. But this is the most difficult period 0:07:50.920 --> 0:07:53.920 I can remember for the emerging markets in my lifetime, 0:07:54.640 --> 0:07:56.400 in your lifetime, I mean more even in the Latin 0:07:56.440 --> 0:08:00.320 American crisis. More even in the Latin American crisis, Asian 0:08:00.360 --> 0:08:06.200 financial crisis, uh, any of them. Because this is coming 0:08:06.200 --> 0:08:09.200 out of nowhere and a lot of these countries uh 0:08:09.480 --> 0:08:13.000 leaves you and I have discussed with Paul in the past. 0:08:14.000 --> 0:08:17.520 Um have borrowed very heavily in foreign currencies uh to 0:08:17.560 --> 0:08:21.240 support their economies and with a strong dollar, Uh, this 0:08:21.360 --> 0:08:22.880 is gonna be a real problem. So I think you're 0:08:22.920 --> 0:08:25.520 gonna have a wave of debt restructurings are also going 0:08:25.560 --> 0:08:27.360 to hit the emerging markets, and they're going to be 0:08:27.440 --> 0:08:31.720 very very difficult because the creditors themselves have problems. So 0:08:31.760 --> 0:08:35.440 we're in for a very very difficult strain period, uh, 0:08:35.480 --> 0:08:37.600 you know, with without a doubt. And then of course 0:08:37.920 --> 0:08:40.440 a number of these countries are royal exporters that has 0:08:40.480 --> 0:08:43.960 oil up uh, you know Brazil, I could run through them, 0:08:43.960 --> 0:08:46.439 a number of countries in Africa and they're going to 0:08:46.559 --> 0:08:48.880 be hard hit because of the collapse in the price 0:08:49.480 --> 0:08:53.480 the price of crude, the price of oil. So all told, 0:08:53.600 --> 0:08:56.080 it's going to be very difficult period for the emerging 0:08:56.120 --> 0:08:59.040 markets in the immediate future. There's also a question of 0:08:59.120 --> 0:09:03.920 China's role in financing some of the developing worlds. We've heard. 0:09:03.960 --> 0:09:05.679 I mean, they don't report the numbers, but there are 0:09:05.679 --> 0:09:09.880 billions of dollars of loans that China has extended throughout 0:09:10.200 --> 0:09:14.360 that entire world. How does that complicate efforts to restructure 0:09:14.400 --> 0:09:17.960 some of these debts. I think it's a very important point, Leads, 0:09:18.040 --> 0:09:21.240 because you know, the one Belt of One Road UH 0:09:21.440 --> 0:09:24.920 program which Shijunping has been pushing for the last seven 0:09:25.000 --> 0:09:28.400 or eight years, has led hundreds of billions of dollars 0:09:28.480 --> 0:09:30.839 to these countries, and a lot of the terms are 0:09:30.840 --> 0:09:35.080 not clear. And one of the concerns is UH is 0:09:35.120 --> 0:09:38.640 how the Chinese are going to push these countries to repay, 0:09:38.760 --> 0:09:41.599 and so far the Chinese haven't announced any sort of 0:09:41.679 --> 0:09:45.360 program of debt forgiveness. They're talking about taking assets in 0:09:45.400 --> 0:09:48.600 these countries or stretching it out. The other thing, which 0:09:48.640 --> 0:09:50.599 since you mentioned China, which I think we have to 0:09:50.679 --> 0:09:53.920 keep in mind, is remembering the great recession the country 0:09:54.080 --> 0:09:55.839 and you have to give them their due. That helped 0:09:56.040 --> 0:09:58.480 pull the world out of what could have been a 0:09:58.520 --> 0:10:02.160 great depression was China because they pushed anywhere from eight 0:10:02.240 --> 0:10:06.000 hundred billion to a threeion dollars UH into the markets. 0:10:06.040 --> 0:10:09.960 Because their financial system was very strong on commodities, UH 0:10:10.160 --> 0:10:14.800 in particular benefited construction UH. This is why Brazil and 0:10:14.800 --> 0:10:16.960 a number of the emerging market countries were able to 0:10:16.960 --> 0:10:19.079 get through because they were able to sell their commodities 0:10:19.160 --> 0:10:22.280 to China. The Chinese, because of their high debtload, are 0:10:22.280 --> 0:10:26.880 no longer in the position themselves to pull the world out, 0:10:27.360 --> 0:10:30.720 So we can't look any for any particular savior at 0:10:30.720 --> 0:10:32.840 this point. That's why the work of the G twenty 0:10:33.520 --> 0:10:36.400 needs to be UH needs to be worked out in 0:10:36.440 --> 0:10:39.240 an orderly fashion because no one country is going to 0:10:39.320 --> 0:10:42.280 pull us out. So Bill, I kind of always when 0:10:42.320 --> 0:10:44.280 I think about emerging markets, you know, people tell me 0:10:44.320 --> 0:10:46.520 the I m F is there, but I always feel 0:10:46.520 --> 0:10:49.200 like the I m F is fairly limited in their resources, 0:10:49.200 --> 0:10:51.640 and it will come down to the G twenty or 0:10:51.679 --> 0:10:54.160 maybe even the United States of America. How do you 0:10:54.240 --> 0:10:56.880 think the US will What do you think the U 0:10:56.920 --> 0:10:58.320 s will have to do here as we think about 0:10:58.320 --> 0:11:02.880 the emerging markets in terms of support. Well, it's that's 0:11:02.920 --> 0:11:05.440 a good question because it's not clear where Trump stands 0:11:05.440 --> 0:11:08.000 on this, where President Trump stands on this, And you're 0:11:08.080 --> 0:11:10.959 right about the I m F, even with the additional 0:11:11.000 --> 0:11:13.840 resources they're trying to put in UH. One of the 0:11:13.880 --> 0:11:16.000 suggestions had been they go back to the idea of 0:11:16.000 --> 0:11:19.440 having a special drawing rights, But so far the G 0:11:19.600 --> 0:11:22.480 seven countries haven't agreed to that, including the United States, 0:11:22.480 --> 0:11:25.440 which which would beef up uh their ability to help 0:11:25.480 --> 0:11:29.320 these countries. Uh So the United States is very key. 0:11:29.360 --> 0:11:32.720 The two countries, let's say, the three entities are key 0:11:32.960 --> 0:11:36.760 to the revival of the emerging markets are the United States, China, 0:11:37.320 --> 0:11:41.400 and the EU. Pul Rhodes, thank you so much for 0:11:41.440 --> 0:11:44.240 being with us. We always love hearing your insights. A 0:11:44.320 --> 0:11:46.600 really important time to be getting them. Banker to the 0:11:46.600 --> 0:11:50.240 World Bill Rhodes, author of the book That is A 0:11:50.280 --> 0:11:52.520 Banker to the World. I recommend you read it. It 0:11:52.600 --> 0:11:55.200 is a fascinating read. He is also the president, chief 0:11:55.200 --> 0:11:59.079 executive officer of William Rose Global Advisors and a senior 0:11:59.080 --> 0:12:01.760 advisor to a group. I mean, it's really, uh an 0:12:01.800 --> 0:12:05.240 amazing perspective to have Paul, given his the restructions that 0:12:05.280 --> 0:12:08.880 he's been involved with in a number of different places. 0:12:09.040 --> 0:12:11.800 Right now, we are looking at emerging market currencies that 0:12:11.920 --> 0:12:14.360 have been clawbered. I mean, this has been a really 0:12:14.440 --> 0:12:17.880 rough year for them as the dollar has remained ascending, 0:12:17.960 --> 0:12:19.760 although you are seeing a little bit of a reprieve 0:12:19.840 --> 0:12:25.840 from that now, so at least I'm looking at gold. 0:12:25.880 --> 0:12:27.440 We've been spending a lot of time looking at oil 0:12:27.559 --> 0:12:29.520 or the past few days, but gold just continues to 0:12:29.600 --> 0:12:32.760 march higher, up another one point three percent today to 0:12:32.880 --> 0:12:37.400 seven dollars per ounce. A very good looking chart as well. 0:12:37.440 --> 0:12:41.960 Everett Millman, precious metals strategist for Gainesville Coins, joins us 0:12:42.040 --> 0:12:45.000 on the phone based in Gainesville, Florida. So every thanks 0:12:45.040 --> 0:12:47.559 so much for joining us here. Give us the story 0:12:47.679 --> 0:12:52.800 behind this nice looking chart for gold. Yeah, thanks for 0:12:52.880 --> 0:12:55.960 having me on. Paul um. Well, the conventional wisdom over 0:12:56.000 --> 0:12:58.600 the past two decades or so has been don't fight 0:12:58.640 --> 0:13:01.440 the Fed, right it. In this case, not fighting the 0:13:01.480 --> 0:13:05.080 Fed means having exposure to gold. Um. The huge heap 0:13:05.120 --> 0:13:07.599 of stimulus that has come from the Federal Reserve and 0:13:07.679 --> 0:13:10.600 other central banks is definitely a tail wind for gold 0:13:10.679 --> 0:13:13.800 right now, and the amount of that stimulus and added 0:13:13.800 --> 0:13:17.600 liquidity are only expected to grow in the coming months. Um. So, 0:13:17.640 --> 0:13:20.640 we've seen really a repricing of assets in terms of 0:13:20.640 --> 0:13:23.480 relative value to one another, and gold has emerged from 0:13:23.520 --> 0:13:27.240 that as the biggest beneficiary. Now. If you consider that 0:13:27.320 --> 0:13:29.600 the last time that the dollar, the d X Y 0:13:29.679 --> 0:13:32.880 index was consistently around a hundred as it is right now, 0:13:33.240 --> 0:13:37.079 back in two thousand seventeen, gold was trading below hundred. 0:13:37.600 --> 0:13:39.440 Uh so we've rallied quite a bit in a short 0:13:39.440 --> 0:13:42.240 amount of time. Gold has definitely picked up some ground 0:13:42.240 --> 0:13:44.760 on the dollar and on other assets. But I wouldn't 0:13:44.880 --> 0:13:48.079 be at all surprised to see some near term weakness 0:13:48.120 --> 0:13:52.079 given how fast this rally has come. That's interesting near 0:13:52.200 --> 0:13:54.559 term weakness. I was looking at some reports a lot 0:13:54.600 --> 0:13:57.880 of people bullish over the medium term Bank of America 0:13:58.000 --> 0:14:00.959 raising it's eighteen month gold priced tar get to three 0:14:01.040 --> 0:14:05.080 thousand dollars and ounce, which is more above where it 0:14:05.160 --> 0:14:07.839 is currently trading. I'm just wondering, Everett. A lot of 0:14:07.840 --> 0:14:11.760 people think of gold as a hedge against risk off 0:14:11.840 --> 0:14:15.520 periods of time. It has not behaved in a predictable 0:14:15.520 --> 0:14:17.520 manner on a day to day basis. In that way, 0:14:17.800 --> 0:14:21.720 it also is considered a hedge against inflation, and right now, 0:14:21.760 --> 0:14:25.320 inflation is nowhere to be found in interest rate traders 0:14:25.680 --> 0:14:29.120 projections if you take a lookout five ten years. So 0:14:29.440 --> 0:14:34.440 what's the argument for gold on a theoretical level, right? Um, 0:14:34.640 --> 0:14:37.520 We've absolutely seen that these intra day moves have been 0:14:37.720 --> 0:14:40.520 rather noisy. It's been a bit of a roller coaster ride, 0:14:40.840 --> 0:14:42.760 and I think that has to do with some of 0:14:42.800 --> 0:14:46.760 the patterns we've seen that are in parallel to UM. 0:14:46.880 --> 0:14:49.280 What the Federal Reserve dating two thousand eight to try 0:14:49.320 --> 0:14:52.640 and rescue the economy, they followed a very similar playbook 0:14:53.040 --> 0:14:55.720 in terms of scope and scale, and we've seen that 0:14:55.800 --> 0:14:58.480 volatility has been elevated and gold has traded in a 0:14:58.480 --> 0:15:02.720 wider range all that huge draft of stimulus, at some 0:15:02.800 --> 0:15:05.440 point down the road we would expect to be rather 0:15:05.520 --> 0:15:09.400 inflationary and that would be gold positive UM. But as 0:15:09.440 --> 0:15:12.000 I said, the near term weakness is still a possible 0:15:12.080 --> 0:15:16.520 concern given this wide volatility UM. Remember that as recently 0:15:16.560 --> 0:15:19.000 the last summer less than a year ago, gold futures 0:15:19.040 --> 0:15:22.960 hadn't cracked above thirteen sixty an ounces in almost seven years, 0:15:23.520 --> 0:15:25.920 So these these are levels that we haven't seen in 0:15:26.000 --> 0:15:28.840 quite a while. I think there will be some consolidation 0:15:29.040 --> 0:15:31.800 following that. And something else that I've been taking note 0:15:31.800 --> 0:15:35.960 of is that algorithmic traders and some automatic rebalancing in 0:15:36.000 --> 0:15:40.240 portfolios during these risk off situations could trigger some more 0:15:40.320 --> 0:15:43.080 sell off and gold UM. And the most recent data 0:15:43.120 --> 0:15:46.320 from the CMME shows that a significant amount of activity 0:15:46.400 --> 0:15:49.440 in gold futures UM, as much as possibly two thirds 0:15:49.760 --> 0:15:52.360 has been driven by the algos and that suggests that 0:15:52.400 --> 0:15:55.600 the volatile swings for gold may not be over UM. 0:15:55.680 --> 0:15:57.640 One of the lessons that we've learned from two thousand 0:15:57.720 --> 0:16:00.720 eight is that gold tends to shine brightest once the 0:16:00.760 --> 0:16:03.640 economy starts recovering from a crisis like this. So I 0:16:03.680 --> 0:16:06.920 think once we get some recipite from the coronavirus pandemic 0:16:07.000 --> 0:16:09.120 or on the other side of this, that is when 0:16:09.160 --> 0:16:12.400 I will be most bullish for gold over the medium term. 0:16:12.480 --> 0:16:14.520 So Everett, I look at the year to day performance 0:16:14.680 --> 0:16:16.560 spot gold up about twelve and a half percent. Then 0:16:16.560 --> 0:16:19.240 I look at another metal, silver, and I thought I'd 0:16:19.280 --> 0:16:23.040 see something similar, but no, it's off almost here today. 0:16:23.080 --> 0:16:27.760 What's the story on silver? We could see at least 0:16:28.240 --> 0:16:31.239 for a short period of time, silver kind of decoupling 0:16:31.320 --> 0:16:33.760 from gold. UM as we look at the gold of 0:16:33.840 --> 0:16:37.040 silver ratio is still well above one ten I think 0:16:37.040 --> 0:16:41.520 close to one thirteen UM. That's obviously a historical extreme, 0:16:42.040 --> 0:16:44.840 but it's been pretty durable, this gap between gold and silver, 0:16:45.040 --> 0:16:48.320 and it challenges some of our assumptions about whether or 0:16:48.360 --> 0:16:51.480 not silver will continue to follow gold in terms of 0:16:51.480 --> 0:16:54.560 safe haven demand. We may not see silver prices catch 0:16:54.640 --> 0:16:57.520 up with gold until later this year. Because of its 0:16:57.560 --> 0:17:01.240 sensitivity to the health of the industrial sector, that really 0:17:01.280 --> 0:17:04.720 doesn't bode well for silver until the global economy start 0:17:04.800 --> 0:17:07.680 to reopen um. So that is what I'll be looking 0:17:07.720 --> 0:17:11.199 for in terms of silver, you know, reclaiming some of 0:17:11.240 --> 0:17:14.040 its precious metal status because otherwise right now it has 0:17:14.080 --> 0:17:18.159 behaved much like an industrial metal. Interesting, Everett, as we 0:17:18.240 --> 0:17:20.640 talk about oil, and really the focus in the commodity 0:17:20.640 --> 0:17:24.240 space has been on oil and how the physical presence 0:17:24.280 --> 0:17:26.879 of it is not desired right now. How is the 0:17:26.920 --> 0:17:31.000 physical commodity of gold and silver trading in comparison with 0:17:31.040 --> 0:17:35.520 futures contracts. That is a fantastic question. Um. We've seen 0:17:35.560 --> 0:17:38.960 that those physical markets over the counter market have become 0:17:38.960 --> 0:17:42.080 a bit on moored um from paper trading, and that's 0:17:42.119 --> 0:17:45.080 because you do have two different sets of motivations for 0:17:45.119 --> 0:17:48.560 those market participants. UM. In gold futures, on one side, 0:17:48.600 --> 0:17:52.000 you have a lot of institutional players. They are basically 0:17:52.080 --> 0:17:55.359 chasing the short term price dynamics of gold. But in 0:17:55.400 --> 0:17:58.159 the physical market you have almost the opposite motivation. You 0:17:58.200 --> 0:18:01.480 have retail buyers who um, they want to buy and 0:18:01.520 --> 0:18:04.520 hold physical to keep for the long term. So this 0:18:04.640 --> 0:18:07.720 spread that we've seen between future and spot prices, it 0:18:07.840 --> 0:18:11.840 is unusually wide. It means that arbitralge is not functioning 0:18:11.880 --> 0:18:15.760 normally and price discoveries perhaps a bit impaired. But two 0:18:15.760 --> 0:18:18.080 things should help alleviate that and we should see that 0:18:18.080 --> 0:18:20.879 spread come back into a more normal range. Once the 0:18:22.040 --> 0:18:26.480 reopening of several government mints in Canada, Western Australia, the 0:18:26.560 --> 0:18:28.760 RAM refinery in South Africa, and as of yesterday the 0:18:28.800 --> 0:18:30.800 West Point branch of the U S Mint is also 0:18:30.840 --> 0:18:35.600 resuming operations. And then secondly, the flexible CME gold futures 0:18:35.640 --> 0:18:39.080 contracts should also clear up some of those logistical backlogs 0:18:39.160 --> 0:18:42.960 that are causing that gap between futures and spot. Everett Milman, 0:18:43.000 --> 0:18:44.439 thank you so much for being with us, and all 0:18:44.480 --> 0:18:47.360 my best to you. Everett Milman, precious metal specialist at 0:18:47.359 --> 0:18:50.800 Gainesville Coins. Talking about the future of gold in the 0:18:50.840 --> 0:18:55.760 near as well as the medium term at least, I'm 0:18:55.760 --> 0:18:57.720 looking at some of these airline stocks. We've been talking 0:18:57.720 --> 0:18:59.840 about them really since the beginning of the crisis. Really 0:18:59.840 --> 0:19:02.360 one of the first groups to get hit and get 0:19:02.440 --> 0:19:04.399 hit the hardest delta year to date. These are all 0:19:04.480 --> 0:19:08.000 year to date numbers Delta down, six, United down, seventy, 0:19:08.040 --> 0:19:11.639 American down, nearly sevent of just getting decimated. We had 0:19:11.640 --> 0:19:14.399 some numbers out of Delta. Let's get the latest. We 0:19:14.400 --> 0:19:18.919 welcome Bloomberg Intelligent Senior aerospace analyst George Ferguson has been 0:19:18.960 --> 0:19:21.800 covering the space for decades. George, thanks so much for 0:19:22.080 --> 0:19:25.959 joining us. What did we learn here from Delta with 0:19:26.000 --> 0:19:30.160 the numbers? A good morning. I think what we learned 0:19:30.200 --> 0:19:35.280 is that, UM, the way forward is very unclear, I 0:19:35.320 --> 0:19:38.400 think is what we learned. And they burned a bit 0:19:38.440 --> 0:19:42.400 more cash than we had expected, working very very hard 0:19:42.440 --> 0:19:45.520 to bring down cash burn every day. They think they 0:19:45.560 --> 0:19:49.680 can get themselves to fifty million dollars of cash burn 0:19:50.080 --> 0:19:54.240 per day by the beginning of May, which I thought 0:19:54.280 --> 0:19:59.199 it was quite interesting. UM, and they confirmed when asked 0:19:59.200 --> 0:20:03.440 about Ford lookings, they confirm that we continue, I think, 0:20:03.520 --> 0:20:07.040 in the direct quote from Delta management, we continue to 0:20:07.080 --> 0:20:12.479 bounce along the bottom about five of what we did 0:20:12.560 --> 0:20:14.680 last year. You know that that's the that's a number 0:20:14.680 --> 0:20:18.400 of people at flying this year, just people that absolutely 0:20:18.480 --> 0:20:23.840 have to fly. Demand is about zero. So demand zero. 0:20:24.160 --> 0:20:27.960 The question is and when and when? The discussion on 0:20:28.000 --> 0:20:30.960 the earnings call is not about earnings at all, but 0:20:31.040 --> 0:20:34.479 just how they can stay alive for the foreseeable future. 0:20:35.000 --> 0:20:37.520 Do we have a sense of how long the big 0:20:37.560 --> 0:20:41.720 airlines can continue to bleed cash until the economy gets 0:20:41.760 --> 0:20:44.679 back up to at least even half pace or a 0:20:44.680 --> 0:20:49.280 fraction of what it once was. Yeah, so Delta, Delta 0:20:49.359 --> 0:20:52.240 did actually, you know, give their their give a sense 0:20:52.240 --> 0:20:54.840 for how long they thought they could survive. And I 0:20:54.840 --> 0:20:57.199 actually thought that was actually also something quite interesting. They 0:20:57.200 --> 0:20:59.920 thought they could survive until the end of the year 0:21:00.080 --> 0:21:02.760 or you know, we'd have to dig deeper into some 0:21:02.800 --> 0:21:06.600 of those assumptions. They definitely have to raise some more money, uh, 0:21:06.880 --> 0:21:08.840 just to hit their target for where they want to 0:21:08.840 --> 0:21:12.320 be for cash at the end of the second quarter. 0:21:12.760 --> 0:21:15.080 But you know, yeah, I think in the next for 0:21:15.200 --> 0:21:17.280 two Q and three Q, the discussion is really going 0:21:17.280 --> 0:21:20.520 to be at all the major airlines about how much 0:21:20.560 --> 0:21:23.640 they can get cash burned down. I'm gonna say they 0:21:23.680 --> 0:21:26.600 told us thirty three percent of their employees that to 0:21:26.640 --> 0:21:30.160 make sure that number was right, took voluntary leave, right, 0:21:30.200 --> 0:21:32.760 So they're really trying to lay off that labor costs 0:21:32.760 --> 0:21:35.560 pretty hard and get cash burned down. Remember, Delta, though, 0:21:35.680 --> 0:21:38.359 was one of the one of the better position airlines 0:21:38.880 --> 0:21:41.960 going into the downturn. They were investment grade. They've been 0:21:42.000 --> 0:21:45.200 digging through the balance sheet to find anything and everything 0:21:46.160 --> 0:21:49.520 that they could use for collateral for loans um and 0:21:49.600 --> 0:21:51.359 so that means that if they can survive an end 0:21:51.400 --> 0:21:55.679 of the year, others others can't. So George, give us 0:21:55.680 --> 0:21:58.240 a sense, just a snapshot, how the industry did in 0:21:58.320 --> 0:22:01.600 terms of fiscal stimus, getting money, uh support from the government. 0:22:01.640 --> 0:22:05.960 What they've gotten and what maybe they're still trying to get. Yes, 0:22:06.080 --> 0:22:08.840 so Delta said they gotta I think it was two 0:22:08.920 --> 0:22:12.400 point seven billion dollars then already. I mean, really where 0:22:12.440 --> 0:22:14.840