1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:13,960 --> 00:00:17,000 Speaker 1: we bring you insight from the best in economics, finance, 3 00:00:17,040 --> 00:00:23,520 Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,640 --> 00:00:27,840 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Interesting 5 00:00:27,920 --> 00:00:30,960 Speaker 1: Dynamics and of course all of us folks overwhelmed by 6 00:00:31,040 --> 00:00:34,239 Speaker 1: so many cross currents, so many events, including, as Jonathan 7 00:00:34,880 --> 00:00:39,000 Speaker 1: mentioned there, the pandemic, the new news, the new iterative news, 8 00:00:39,080 --> 00:00:43,120 Speaker 1: if you will, of this terrible virus. He has been 9 00:00:43,320 --> 00:00:49,440 Speaker 1: hugely visible, persistently prolific, but Muhammad Alarian always writing smartly 10 00:00:49,960 --> 00:00:55,480 Speaker 1: about economics, finance and investment from his core foundation of 11 00:00:55,600 --> 00:00:58,360 Speaker 1: game theory. We're thrilled that Dr Alarian could join us 12 00:00:58,360 --> 00:01:01,840 Speaker 1: this morning. Of course, writing too often for Bloomberg Opinion. 13 00:01:01,960 --> 00:01:05,880 Speaker 1: He will take up a modest position at Cambridge University 14 00:01:06,000 --> 00:01:09,880 Speaker 1: in the autumn months. Mohammed, wonderful to have you with us. 15 00:01:10,319 --> 00:01:13,240 Speaker 1: Everybody out there right now has to make a t 16 00:01:13,520 --> 00:01:16,920 Speaker 1: decision of do they want to play on the markets 17 00:01:17,040 --> 00:01:19,880 Speaker 1: or in fear, do they want to remove themselves from 18 00:01:19,920 --> 00:01:24,240 Speaker 1: the markets. How do you approach that T decision? Good morning, Tom, 19 00:01:24,240 --> 00:01:27,639 Speaker 1: and good morning for having me. Look, it fundamentally comes 20 00:01:27,640 --> 00:01:30,759 Speaker 1: down to how you feel about the disconnect between finance 21 00:01:31,040 --> 00:01:33,800 Speaker 1: and the economy. If you believe, like I do, that 22 00:01:33,920 --> 00:01:39,800 Speaker 1: ultimately fundamentals will assert themselves, then you are more cautious 23 00:01:39,840 --> 00:01:42,880 Speaker 1: about this market, and you're worried not just about the 24 00:01:43,000 --> 00:01:46,040 Speaker 1: level of the market, but you're starting to get worried 25 00:01:46,080 --> 00:01:50,440 Speaker 1: also about relative pricing. If, however, you believe that technicals 26 00:01:51,560 --> 00:01:54,400 Speaker 1: call them fomo, the fear of missing out called them tina, 27 00:01:54,480 --> 00:01:57,560 Speaker 1: there was no alternative. And if you believe that central 28 00:01:57,600 --> 00:02:01,360 Speaker 1: banks will continue to protect every asset, then you can 29 00:02:01,400 --> 00:02:05,200 Speaker 1: participate in this market on the longside, regardless of fundamentals. 30 00:02:05,240 --> 00:02:07,800 Speaker 1: So it really comes down to how where it are 31 00:02:07,840 --> 00:02:11,600 Speaker 1: you that fundamentals matter? So have it. Let's talk about 32 00:02:11,600 --> 00:02:13,680 Speaker 1: the fundamentals. You and I have discussed this now for 33 00:02:13,760 --> 00:02:17,280 Speaker 1: several weeks. What matters the initial improvement sequentially month or 34 00:02:17,280 --> 00:02:20,600 Speaker 1: month week on week, or the overall limits of the recovery, 35 00:02:20,639 --> 00:02:23,000 Speaker 1: the limits of normalization. There's just a real push and 36 00:02:23,000 --> 00:02:25,320 Speaker 1: pull there. One of those things will be a dominant 37 00:02:25,400 --> 00:02:28,400 Speaker 1: driver for quite a while. Which one is it? So 38 00:02:28,440 --> 00:02:32,560 Speaker 1: it's now both because of the level of the marketplace. 39 00:02:32,600 --> 00:02:35,960 Speaker 1: So in the beginning, it was about the the the 40 00:02:36,080 --> 00:02:41,880 Speaker 1: sequential improvement, and markets got reinforcement of sequentially improving situation 41 00:02:41,960 --> 00:02:46,480 Speaker 1: on health and therefore on the economy, and Marcus got 42 00:02:46,520 --> 00:02:52,240 Speaker 1: carried away. So now the implicit valuation is that not 43 00:02:52,400 --> 00:02:56,720 Speaker 1: only will the journey be a pleasant one, but you're 44 00:02:56,720 --> 00:03:01,040 Speaker 1: also certain about the destination. And we've been getting over 45 00:03:01,080 --> 00:03:05,040 Speaker 1: the last couple of days are digitimate questions are both 46 00:03:05,080 --> 00:03:08,600 Speaker 1: about the journey and the destination. What we haven't been 47 00:03:08,639 --> 00:03:13,120 Speaker 1: getting is any question mark about central bank support that 48 00:03:13,360 --> 00:03:18,960 Speaker 1: is consistent and strong. No, really about market fundamentals, market technicals. 49 00:03:19,000 --> 00:03:22,560 Speaker 1: You see again today the buy the dip mentality, the 50 00:03:22,639 --> 00:03:25,320 Speaker 1: conditioning to buy the dip is very deeply embedded in 51 00:03:25,360 --> 00:03:28,000 Speaker 1: this market. Scarring, Mohammed. Scarring is something I want to 52 00:03:28,040 --> 00:03:29,679 Speaker 1: talk about with you. The I m F mentioned that 53 00:03:29,720 --> 00:03:32,080 Speaker 1: in the last twenty four hours, the permanent job losses, 54 00:03:32,160 --> 00:03:35,960 Speaker 1: the bankruptcies, the sectors that just won't come back. I've 55 00:03:36,000 --> 00:03:38,120 Speaker 1: got a headline crossing a Blimberg terminal right now. The 56 00:03:38,160 --> 00:03:43,080 Speaker 1: American airlines see second quarter revenue decline of about capacity 57 00:03:43,160 --> 00:03:47,119 Speaker 1: down sev in the second quarter. Have you got your 58 00:03:47,160 --> 00:03:49,520 Speaker 1: hands around the amount of scarring that we will have 59 00:03:50,080 --> 00:03:52,560 Speaker 1: coming out of the other side of this pandemic. Yes, 60 00:03:52,680 --> 00:03:55,600 Speaker 1: more on the supply side than on demand side. So 61 00:03:55,640 --> 00:03:58,800 Speaker 1: on the supply side, we're going to see hits to 62 00:03:59,000 --> 00:04:02,880 Speaker 1: both the productive dy on on on the capital side 63 00:04:02,920 --> 00:04:05,080 Speaker 1: and on the labor side, we are going to see 64 00:04:05,120 --> 00:04:10,640 Speaker 1: a process of deglobalization that is driven by households, governments, 65 00:04:10,720 --> 00:04:14,520 Speaker 1: and the corporate sector. And the result of that absent 66 00:04:14,600 --> 00:04:16,960 Speaker 1: And I want to stress there's nothing we DestinE depends 67 00:04:17,000 --> 00:04:20,640 Speaker 1: on policies, but absence policies to improve productivity will be 68 00:04:20,800 --> 00:04:24,080 Speaker 1: lower productibility and lower growth. And that's what you hear 69 00:04:24,120 --> 00:04:26,040 Speaker 1: from the IMF, you heard it from the O E, 70 00:04:26,120 --> 00:04:28,760 Speaker 1: c D, you heard it from the World Bank. What's 71 00:04:28,760 --> 00:04:31,640 Speaker 1: more uncertain is the demand side, John, we don't know 72 00:04:32,360 --> 00:04:37,039 Speaker 1: what's going to happen to people's marginal propensities to consume. 73 00:04:37,160 --> 00:04:40,840 Speaker 1: How willing will people be to spend money, How willing 74 00:04:41,240 --> 00:04:45,720 Speaker 1: will people be to um continue behavior that the U. S. 75 00:04:45,760 --> 00:04:48,720 Speaker 1: Consumer has been so good at, which is drive the economy. 76 00:04:48,800 --> 00:04:51,920 Speaker 1: Will we come out with a more frugal society or not? 77 00:04:52,120 --> 00:04:54,880 Speaker 1: That's still a question mark Mohammed. I want to talk 78 00:04:54,920 --> 00:04:58,039 Speaker 1: about this decline and productivity and growth that you're talking about. 79 00:04:58,120 --> 00:05:02,040 Speaker 1: Paired with the question marks are round demand and deglobalization, 80 00:05:02,200 --> 00:05:04,680 Speaker 1: which a lot of people think will actually be inflationary 81 00:05:04,720 --> 00:05:07,240 Speaker 1: because if you bring supply chains home, you won't necessarily 82 00:05:07,279 --> 00:05:11,760 Speaker 1: capture the efficiencies of cost that some of the globalization did. 83 00:05:11,960 --> 00:05:15,840 Speaker 1: I'm wondering, does this feel like a stagflationary environment? Is 84 00:05:15,880 --> 00:05:18,479 Speaker 1: that what you're portraying here? Well, you do have two 85 00:05:18,480 --> 00:05:22,920 Speaker 1: inflationary pressures. One is simply the rewiring of supply chains 86 00:05:23,680 --> 00:05:26,440 Speaker 1: and the inefficiencies that come with that, and the other 87 00:05:26,520 --> 00:05:29,839 Speaker 1: one is we are seeing least a significant increase in 88 00:05:29,880 --> 00:05:33,599 Speaker 1: industrial concentration. The big firms are getting bigger and we're 89 00:05:33,640 --> 00:05:37,320 Speaker 1: losing the mid size and the small firm. However, to 90 00:05:37,440 --> 00:05:42,760 Speaker 1: translate that into a stagflationary projection, to say inflation will 91 00:05:42,800 --> 00:05:46,560 Speaker 1: result means that you have a view on demand, and 92 00:05:46,600 --> 00:05:49,160 Speaker 1: as I said earlier, the demand side is really uncertain 93 00:05:49,279 --> 00:05:53,440 Speaker 1: right now, Mohammed, you are going to go to Cambridge 94 00:05:53,720 --> 00:05:57,800 Speaker 1: and the legacy there of all this mathematics and foundational 95 00:05:57,920 --> 00:06:01,200 Speaker 1: theory is Frank ram Zee, who we lost at a 96 00:06:01,360 --> 00:06:06,400 Speaker 1: shockingly young age, distant distant distant ago. Right now, our 97 00:06:06,440 --> 00:06:10,800 Speaker 1: foundations are being shaken to the ground, we've got a pandemic, 98 00:06:10,920 --> 00:06:15,120 Speaker 1: we've got the shocks of this economy, and really original 99 00:06:15,279 --> 00:06:20,400 Speaker 1: economics and monetary theory. Do you understand the foundations right 100 00:06:20,440 --> 00:06:25,040 Speaker 1: now that we're standing on or is the mathematics broken. Look, 101 00:06:25,040 --> 00:06:30,040 Speaker 1: we're dealing with unusual uncertainty to use per Nankee's term, 102 00:06:30,200 --> 00:06:34,400 Speaker 1: or radical uncertainty to use morfern king. So the structure 103 00:06:34,440 --> 00:06:37,720 Speaker 1: of the economy is in play. And as you know, 104 00:06:38,440 --> 00:06:40,839 Speaker 1: when the structure of the economy is in play, you've 105 00:06:40,880 --> 00:06:44,880 Speaker 1: got to bring in many elements um of economics or 106 00:06:44,880 --> 00:06:48,040 Speaker 1: behavioral finance, of game theory to try to understand what's 107 00:06:48,080 --> 00:06:50,760 Speaker 1: going on. I keep on stressing to people the most 108 00:06:50,760 --> 00:06:52,919 Speaker 1: important thing right now is not what you think, but 109 00:06:53,080 --> 00:06:55,840 Speaker 1: how you think. It is this ability to bring in 110 00:06:55,880 --> 00:06:59,720 Speaker 1: a multidisciplinary approach to try and figure out what are 111 00:06:59,720 --> 00:07:03,039 Speaker 1: the questions and what you should be monitoring and talk 112 00:07:03,120 --> 00:07:06,120 Speaker 1: about monitoring. Look, Tom, even the data that you and 113 00:07:06,200 --> 00:07:08,600 Speaker 1: I look at these days, it's completely different from four 114 00:07:08,640 --> 00:07:10,800 Speaker 1: months ago. We didn't look at mobility data, we didn't 115 00:07:10,800 --> 00:07:13,400 Speaker 1: look at the restaurant booking data. But that's what we're 116 00:07:13,400 --> 00:07:16,360 Speaker 1: looking at right now to try and understand what's going on. 117 00:07:16,720 --> 00:07:19,640 Speaker 1: So I think it's a different challenge. What it's exciting 118 00:07:20,240 --> 00:07:23,280 Speaker 1: for economists is they have the tools, but they have 119 00:07:23,360 --> 00:07:26,280 Speaker 1: to make sure that they adapt accordingly. Somehippens. Let's just 120 00:07:26,280 --> 00:07:28,800 Speaker 1: finish that. The data point that you are laser focused 121 00:07:28,800 --> 00:07:31,320 Speaker 1: on at the moment, the high frequency data. Maybe what 122 00:07:31,440 --> 00:07:34,120 Speaker 1: is it? So I look, like everybody else, at the 123 00:07:34,200 --> 00:07:37,440 Speaker 1: high high frequency data. UM so I look at mobility data, 124 00:07:37,880 --> 00:07:40,200 Speaker 1: certainly at health data. I look at infections, I look 125 00:07:40,240 --> 00:07:43,840 Speaker 1: at hospitalization, I look at what how how is the 126 00:07:44,120 --> 00:07:49,280 Speaker 1: individual household interacting with the economy travel data. I mean, 127 00:07:49,560 --> 00:07:51,920 Speaker 1: you're just trying to get a notion of three things, John. 128 00:07:52,040 --> 00:07:56,760 Speaker 1: One is what is the health situation? Two is our 129 00:07:56,880 --> 00:08:01,800 Speaker 1: households engaging? And three is our humping is engaging. Remember 130 00:08:02,320 --> 00:08:05,080 Speaker 1: it's these thweet things are not of health because there 131 00:08:05,080 --> 00:08:07,160 Speaker 1: are people who are whisk loving the people who are 132 00:08:07,160 --> 00:08:11,280 Speaker 1: whisker verse who react differently to health indicators. So we've 133 00:08:11,320 --> 00:08:15,400 Speaker 1: got to keep all three under close monitoring, and they'll 134 00:08:15,440 --> 00:08:18,560 Speaker 1: give you some feel for how we are going through 135 00:08:18,560 --> 00:08:21,200 Speaker 1: this journey. It is going to be a checkmark, it's 136 00:08:21,200 --> 00:08:23,240 Speaker 1: not going to be a shop v and it's going 137 00:08:23,320 --> 00:08:25,960 Speaker 1: to be one subject to a lot of volatility. Mohammed. 138 00:08:26,080 --> 00:08:28,280 Speaker 1: Always great to catch out with you five ten on 139 00:08:28,320 --> 00:08:30,440 Speaker 1: the West coast. Can you apologize to the family on 140 00:08:30,440 --> 00:08:32,720 Speaker 1: our behalf if we've welkened them up with this interview? 141 00:08:32,760 --> 00:08:39,760 Speaker 1: Muhammad Alarian a Bloomberg opinion. Some of all Street hides 142 00:08:40,160 --> 00:08:43,240 Speaker 1: in the Greek letters. We hide in the derivative dynamics 143 00:08:43,280 --> 00:08:47,280 Speaker 1: and expert at that is Dean Current at mcrow Risk Advisors. 144 00:08:47,280 --> 00:08:50,280 Speaker 1: I'll be direct, I don't understand half of his research. 145 00:08:50,400 --> 00:08:56,679 Speaker 1: Note he does extremely sophisticated analysis of the interior dynamics 146 00:08:56,720 --> 00:08:59,200 Speaker 1: of the market and he joins us right now, Dean, 147 00:08:59,280 --> 00:09:02,679 Speaker 1: you were the first name we mentioned yesterday. Basically it 148 00:09:02,720 --> 00:09:06,959 Speaker 1: was get Dean Currentent. What did you observe in the 149 00:09:07,000 --> 00:09:12,920 Speaker 1: interior dynamics yesterday? Yeah, thanks Tom. A tremendous move obviously 150 00:09:12,920 --> 00:09:16,559 Speaker 1: in the SPUM So we were running at about a 151 00:09:16,679 --> 00:09:20,000 Speaker 1: twenty five implied volatility, so that's about a one point 152 00:09:20,080 --> 00:09:23,360 Speaker 1: five move a day. That that's high in of course 153 00:09:23,440 --> 00:09:27,360 Speaker 1: historical context. We moved six percent, so that's a four 154 00:09:27,400 --> 00:09:31,480 Speaker 1: standard deviation move. Our little normal distribution table is going 155 00:09:31,559 --> 00:09:33,840 Speaker 1: to tell us that's supposed to happen once every sixty 156 00:09:33,880 --> 00:09:37,240 Speaker 1: three years. So first we know of course markets aren't 157 00:09:37,240 --> 00:09:41,040 Speaker 1: normally distributed. That the tails are fat and they're active. Um. 158 00:09:41,040 --> 00:09:44,120 Speaker 1: But the biggest I think conclusion from yesterday is just 159 00:09:44,360 --> 00:09:48,120 Speaker 1: below the surface of the market UM. As has been 160 00:09:48,160 --> 00:09:52,560 Speaker 1: discussed widely, the factor rotation is violent. UM. So I 161 00:09:52,640 --> 00:09:56,319 Speaker 1: keep track of a market neutral index from momentum stocks, 162 00:09:56,360 --> 00:10:00,280 Speaker 1: and again I underscore market neutral and it has had 163 00:10:00,400 --> 00:10:03,439 Speaker 1: seven straight days of four and four point five pc 164 00:10:03,679 --> 00:10:06,800 Speaker 1: moves or more, and that's a hundred volve for a 165 00:10:06,880 --> 00:10:12,000 Speaker 1: market neutral index. It's it's just it's staggering. So again 166 00:10:12,040 --> 00:10:15,480 Speaker 1: it's it's just negative stocks moving like panty stock staying. 167 00:10:15,520 --> 00:10:18,320 Speaker 1: It's been absolutely remarkable, and I think what we're looking 168 00:10:18,360 --> 00:10:20,880 Speaker 1: for are signs that maybe the coast is clear. And 169 00:10:20,880 --> 00:10:22,839 Speaker 1: I know that's the trillion dollar question it always is. 170 00:10:22,880 --> 00:10:24,440 Speaker 1: But as you look at the VIX curve right now, 171 00:10:24,840 --> 00:10:27,520 Speaker 1: what signal do you take away from that at the moment. Yeah, So, 172 00:10:27,800 --> 00:10:30,640 Speaker 1: I think what what the VIX is telling us is 173 00:10:30,760 --> 00:10:34,440 Speaker 1: that the market was really unprepared for this. So anytime 174 00:10:34,480 --> 00:10:36,400 Speaker 1: the market moves down like it did, the VIX is 175 00:10:36,440 --> 00:10:40,679 Speaker 1: obviously going to fly higher. It outperformed the move uh 176 00:10:40,800 --> 00:10:43,880 Speaker 1: lower in the SMP by quite a bit. So so 177 00:10:43,960 --> 00:10:46,800 Speaker 1: the move higher involved is telling us the degree to 178 00:10:46,880 --> 00:10:50,040 Speaker 1: which people were caught off side, and I think that 179 00:10:50,160 --> 00:10:53,400 Speaker 1: can be confirmed by looking at open interest in VIX 180 00:10:53,440 --> 00:10:57,040 Speaker 1: options had gotten very quiet, so the ownership of let's 181 00:10:57,040 --> 00:11:00,000 Speaker 1: say things like upside calls to protect portfolios was quite 182 00:11:00,120 --> 00:11:04,080 Speaker 1: low coming into this. Dean taking a step back. After 183 00:11:04,160 --> 00:11:06,160 Speaker 1: two thousand ten, a lot of people were saying that 184 00:11:06,200 --> 00:11:10,080 Speaker 1: the FED stimulus and involvement in markets had dampened volatility dramatically, 185 00:11:10,480 --> 00:11:13,680 Speaker 1: and we saw a real flat market, a real calm market. 186 00:11:14,120 --> 00:11:17,160 Speaker 1: I'm wondering if there is a larger takeaway from yesterday 187 00:11:17,160 --> 00:11:18,920 Speaker 1: that the FED is throwing the kitchen sink at the 188 00:11:18,960 --> 00:11:21,800 Speaker 1: market in order to improve and smooth out market functioning, 189 00:11:21,840 --> 00:11:25,440 Speaker 1: and you still see these whip saw technical reactions that 190 00:11:25,520 --> 00:11:28,600 Speaker 1: indicate some sort of liquidity issues or high degrees of 191 00:11:28,679 --> 00:11:32,840 Speaker 1: leverage getting unwound. Is there some larger takeaway about the 192 00:11:32,840 --> 00:11:35,960 Speaker 1: FED reaching its limit and in terms of being able 193 00:11:36,000 --> 00:11:40,319 Speaker 1: to dampen volatility, I think it's exactly right there. At 194 00:11:40,320 --> 00:11:46,160 Speaker 1: every turn when we have these significant risk offs two twenty, 195 00:11:46,559 --> 00:11:49,400 Speaker 1: At every turn, the degree to which the policy responses 196 00:11:49,679 --> 00:11:55,840 Speaker 1: larger and more overwhelming and wades further into private markets. UH, 197 00:11:55,880 --> 00:11:58,680 Speaker 1: it just is telling us that the financial system is 198 00:11:58,720 --> 00:12:02,320 Speaker 1: something that's it's unwheeled. UM. I think that that old 199 00:12:02,360 --> 00:12:06,320 Speaker 1: adage don't fight the Fed. UM is of course focused 200 00:12:06,360 --> 00:12:09,440 Speaker 1: on asset prices the stock market, but I think in 201 00:12:09,559 --> 00:12:12,800 Speaker 1: terms of buying volatility buy insurance. Whenever you're doing so, 202 00:12:12,920 --> 00:12:16,080 Speaker 1: you are fighting the FED. And so I we have 203 00:12:16,160 --> 00:12:20,480 Speaker 1: to respect the significance of this move yesterday. It's violent, 204 00:12:20,520 --> 00:12:23,600 Speaker 1: it tells us something. But at the end of the day, UM, 205 00:12:23,640 --> 00:12:27,200 Speaker 1: a stable VIX or a low lower vix UH is 206 00:12:27,240 --> 00:12:30,600 Speaker 1: part of the fed's playbook. It can't sit by idly 207 00:12:31,000 --> 00:12:33,640 Speaker 1: and allow the VIX get that back up into the fifties, 208 00:12:33,679 --> 00:12:37,800 Speaker 1: allow high yield spreads to spiral higher. UM. It'll sit 209 00:12:37,960 --> 00:12:40,360 Speaker 1: for a little bit, but at some point you're going 210 00:12:40,440 --> 00:12:43,160 Speaker 1: to have the FED come back in UM in the 211 00:12:43,240 --> 00:12:46,360 Speaker 1: name of market functioning. And so again, when you buy insurance, 212 00:12:46,360 --> 00:12:48,880 Speaker 1: you've got to keep that in mind. The policy response Dean. 213 00:12:49,040 --> 00:12:51,160 Speaker 1: One final question, and I'm just going to be as 214 00:12:51,200 --> 00:12:53,400 Speaker 1: direct as I can, and you can go nuanced as 215 00:12:53,440 --> 00:12:57,080 Speaker 1: you like. The game is momentum. Do you buy the 216 00:12:57,160 --> 00:13:03,360 Speaker 1: shift from momentum to vailue, momentum to small cap momentum 217 00:13:03,360 --> 00:13:08,360 Speaker 1: to international or do you stay momentum. I stay with momentum. 218 00:13:08,440 --> 00:13:12,319 Speaker 1: I think that the real economy is what is ultimately 219 00:13:13,120 --> 00:13:15,800 Speaker 1: going to drive that relationship. And of course we've seen 220 00:13:15,840 --> 00:13:18,839 Speaker 1: that shift back into small caps and value. It came 221 00:13:18,920 --> 00:13:21,880 Speaker 1: undone violently, UM a lot. So much of it's just 222 00:13:21,960 --> 00:13:25,280 Speaker 1: the function of the success to which the economy reopens. 223 00:13:25,720 --> 00:13:28,360 Speaker 1: I'm skeptical on that. You know, again, you're you're fighting 224 00:13:28,360 --> 00:13:31,440 Speaker 1: the said you're fighting the policy response from the government, 225 00:13:31,840 --> 00:13:35,000 Speaker 1: UM that they are going to feel invested in keeping uh, 226 00:13:35,040 --> 00:13:39,079 Speaker 1: you know, keeping income earners with with income if they 227 00:13:39,080 --> 00:13:42,720 Speaker 1: don't have jobs. But the degree to which these weaker 228 00:13:42,760 --> 00:13:46,280 Speaker 1: companies with weaker balance sheets are gonna be able to 229 00:13:46,040 --> 00:13:49,200 Speaker 1: uh to thrive, I think is very much an open question, 230 00:13:49,320 --> 00:13:51,920 Speaker 1: just given how challenging the reopening the economy is going 231 00:13:51,960 --> 00:13:56,160 Speaker 1: to be. Tancount it a macro risk advisors stay always 232 00:13:56,160 --> 00:13:58,040 Speaker 1: fantastic to catch up with these. My best to you 233 00:13:58,120 --> 00:14:03,280 Speaker 1: and the whold of the scene now is a real 234 00:14:03,400 --> 00:14:06,920 Speaker 1: treat And this is without question the must listen interview 235 00:14:07,559 --> 00:14:10,720 Speaker 1: for Global Wall Street. How good of an interview is this? 236 00:14:11,160 --> 00:14:15,640 Speaker 1: Muhammadalarian will take notes. That's because he knows Jeremy Stein 237 00:14:16,080 --> 00:14:20,760 Speaker 1: owns a high ground of our theoretical finance, the underpinning 238 00:14:21,120 --> 00:14:23,880 Speaker 1: of what we do. He's a former Fed governor, also 239 00:14:23,920 --> 00:14:27,600 Speaker 1: a member of Princeton Gymnastics. Just a few years ago. 240 00:14:27,880 --> 00:14:30,920 Speaker 1: He runs the herd of cats at Harvard known as 241 00:14:30,920 --> 00:14:35,920 Speaker 1: the Harvard Department of Economics. Professor thrilled to have you 242 00:14:36,640 --> 00:14:39,600 Speaker 1: with us. I want to talk about the foundations of 243 00:14:39,680 --> 00:14:43,920 Speaker 1: Marko Witz, of William Sharp Objet trainer from a million 244 00:14:44,000 --> 00:14:48,200 Speaker 1: years ago. Does any of that stuff work at the 245 00:14:48,320 --> 00:14:51,520 Speaker 1: zero bound? Well, some of it works, um, But I 246 00:14:51,560 --> 00:14:53,600 Speaker 1: think one issue with the zero bound is if you're 247 00:14:53,600 --> 00:14:56,920 Speaker 1: a stock market investor, um, you know, there's not a 248 00:14:56,920 --> 00:15:00,320 Speaker 1: lot of other attractive stuff out there, and they want 249 00:15:00,320 --> 00:15:03,200 Speaker 1: to diversify that. Your general risk appetite is pretty hot, 250 00:15:03,440 --> 00:15:05,400 Speaker 1: and I think we're seeing some of that in markets now. 251 00:15:05,960 --> 00:15:08,640 Speaker 1: I look at the zero bound, and of course what 252 00:15:08,760 --> 00:15:13,120 Speaker 1: we do at Bloomberg Surveillance is talk macroeconomics and monetary theory. 253 00:15:13,600 --> 00:15:16,680 Speaker 1: I want you to take the zero bound over to 254 00:15:16,760 --> 00:15:21,960 Speaker 1: the capital asset pricing model, the fundamental theorems that everybody 255 00:15:21,960 --> 00:15:26,320 Speaker 1: on Wall Street uses. How does that geometry work if 256 00:15:26,320 --> 00:15:29,120 Speaker 1: there isn't a real yield if there isn't a virtual 257 00:15:29,200 --> 00:15:33,000 Speaker 1: nominal yield and even negative rates in Europe, how does 258 00:15:33,040 --> 00:15:37,280 Speaker 1: the geometry work. I'm not sure about the geometry, but 259 00:15:38,400 --> 00:15:40,720 Speaker 1: you know, I sit on the board at the Harvard 260 00:15:40,760 --> 00:15:42,440 Speaker 1: and Downland and one of the things that you see 261 00:15:42,440 --> 00:15:46,640 Speaker 1: in Downman's generally a whole class of other investors when 262 00:15:46,720 --> 00:15:50,320 Speaker 1: ranks are zero um and they have targets for returns, 263 00:15:50,400 --> 00:15:53,880 Speaker 1: they end up pushing pretty hard into riskier assets. And 264 00:15:55,000 --> 00:15:57,320 Speaker 1: I think that more than anything is the sort of uh, 265 00:15:57,440 --> 00:16:02,480 Speaker 1: the sort of mechanism that's that's that play days. Professor. 266 00:16:02,520 --> 00:16:05,280 Speaker 1: One concept that people have discussed, not just through this pandemic, 267 00:16:05,280 --> 00:16:07,120 Speaker 1: but over the last several years at the so called 268 00:16:07,160 --> 00:16:10,320 Speaker 1: reversal rate, when rates go beyond a certain level and 269 00:16:10,360 --> 00:16:14,000 Speaker 1: become counter productive. Professor, what are your thoughts on that concept? 270 00:16:14,840 --> 00:16:17,080 Speaker 1: You know, it's an interesting idea, and the basic idea 271 00:16:17,120 --> 00:16:19,800 Speaker 1: is that when rates are very low, it damages the 272 00:16:19,840 --> 00:16:22,680 Speaker 1: profitability of the banking sector, makes it harder for banks 273 00:16:22,680 --> 00:16:26,280 Speaker 1: to lend. It's an interesting idea, I would say, an 274 00:16:26,280 --> 00:16:29,480 Speaker 1: idea that I'm more focused on now that's related is, 275 00:16:29,560 --> 00:16:31,160 Speaker 1: you know, another thing that can make it hard for 276 00:16:31,200 --> 00:16:33,440 Speaker 1: the banks to lend is when their capital position is 277 00:16:33,480 --> 00:16:36,800 Speaker 1: badly repaired. UM And in that vein, you know, well, 278 00:16:36,840 --> 00:16:40,360 Speaker 1: I think the FED has done basically an admirable job, 279 00:16:41,040 --> 00:16:43,400 Speaker 1: and I really want to applaud the Fed and share Powell. 280 00:16:43,520 --> 00:16:46,040 Speaker 1: I think that on a number of dimensions have really 281 00:16:46,120 --> 00:16:49,680 Speaker 1: risen to the moment. One concern I have is that 282 00:16:49,720 --> 00:16:53,400 Speaker 1: they've been more passive UM with respect of the banking 283 00:16:53,440 --> 00:16:56,960 Speaker 1: system than you would ideally like. UM. Another, a number 284 00:16:57,000 --> 00:16:59,880 Speaker 1: of other countries have gotten their banks to stop paying 285 00:17:00,000 --> 00:17:03,280 Speaker 1: of it ends to conserve capital. The bigger thing that 286 00:17:03,440 --> 00:17:05,600 Speaker 1: again that I worry about for the banking system now 287 00:17:05,720 --> 00:17:09,000 Speaker 1: is not the reversal interest rate, but as as we 288 00:17:09,080 --> 00:17:12,200 Speaker 1: saw last time around the global financial crisis, they take 289 00:17:12,200 --> 00:17:14,440 Speaker 1: a big enough hit to their capital, they're going to 290 00:17:14,520 --> 00:17:17,199 Speaker 1: be very impaired in their ability to land any interest 291 00:17:17,280 --> 00:17:20,639 Speaker 1: rate UM And I think Professor, pretty much every CEO 292 00:17:20,880 --> 00:17:22,639 Speaker 1: that would come on a program like this would probably 293 00:17:22,640 --> 00:17:24,399 Speaker 1: tell us that the capital position is strong when they 294 00:17:24,400 --> 00:17:27,680 Speaker 1: can afford their capital RESTERM programs, they've suspended their buy backs, 295 00:17:27,680 --> 00:17:29,680 Speaker 1: and they can meet their dividends. What is it about 296 00:17:29,720 --> 00:17:31,400 Speaker 1: the big banks on Wall Street that you think maybe 297 00:17:31,480 --> 00:17:34,240 Speaker 1: some people are missing? Well, I mean I think it's 298 00:17:34,280 --> 00:17:38,440 Speaker 1: good to to to remember the lessons from last time around. UM. 299 00:17:38,520 --> 00:17:41,160 Speaker 1: So if you think about the financial crisis, last time 300 00:17:41,400 --> 00:17:43,800 Speaker 1: the banks paid I would say something like over a 301 00:17:43,840 --> 00:17:48,639 Speaker 1: hundred billion dollars in UH share repurchases and dividends between 302 00:17:48,720 --> 00:17:52,240 Speaker 1: mid two thousand seven, and women didn't really raise a 303 00:17:52,240 --> 00:17:55,240 Speaker 1: lot of capital, didn't really get to to raising equity 304 00:17:55,320 --> 00:17:59,639 Speaker 1: capital until after the stress test period. UM. You know, 305 00:17:59,760 --> 00:18:03,679 Speaker 1: the thing is deteriorate, and the deterior not necessarily immediately 306 00:18:03,720 --> 00:18:06,440 Speaker 1: all at once. UM. I think here the market is 307 00:18:06,480 --> 00:18:08,880 Speaker 1: trying to tell us something, as it did last time around. 308 00:18:09,280 --> 00:18:12,399 Speaker 1: Banks stocks probably down, bankstockuments. I'm gonna say it's down 309 00:18:12,400 --> 00:18:16,400 Speaker 1: about thirty five relative to an SMP. That's down only 310 00:18:16,440 --> 00:18:20,320 Speaker 1: a handful of percent year to date. UM. Last time around, 311 00:18:20,760 --> 00:18:23,760 Speaker 1: the market was pretty good at being forward looking. Um. 312 00:18:23,960 --> 00:18:26,680 Speaker 1: Those banks who stops declining the most were the ones 313 00:18:26,720 --> 00:18:29,280 Speaker 1: that had the biggest loan losses. But I think, you know, 314 00:18:29,680 --> 00:18:32,880 Speaker 1: this is a very big economic shock. It's a very 315 00:18:32,880 --> 00:18:37,840 Speaker 1: big economic shock. The conventional measures of capitalization that banks 316 00:18:38,000 --> 00:18:41,040 Speaker 1: look at our counting base, they tend to be backward looking. 317 00:18:41,480 --> 00:18:43,720 Speaker 1: If you look at more forward looking indicators, I think 318 00:18:43,760 --> 00:18:47,160 Speaker 1: there's reason and I wouldn't even say it's the baseline expectation. 319 00:18:47,240 --> 00:18:50,840 Speaker 1: But is there a tail whereby you should be seriously concerned. 320 00:18:51,040 --> 00:18:53,399 Speaker 1: I think the answer is probably has Wait. Just to 321 00:18:53,440 --> 00:18:56,760 Speaker 1: be really clear here, professor, are you saying that the 322 00:18:56,880 --> 00:19:00,320 Speaker 1: risk of a banking failure is greater the PHOED to 323 00:19:00,359 --> 00:19:03,399 Speaker 1: reserve is acknowledging right now? Okay, I wouldn't use the 324 00:19:03,440 --> 00:19:05,840 Speaker 1: word to failure. I'm not. I think the banks are 325 00:19:05,920 --> 00:19:08,560 Speaker 1: well enough capitalized that that's not something even in a 326 00:19:08,560 --> 00:19:12,320 Speaker 1: sort of tale scenario. But you know, well before failure, 327 00:19:12,600 --> 00:19:16,040 Speaker 1: if they lose three, four or five basis points of capital, 328 00:19:16,480 --> 00:19:19,560 Speaker 1: that seriously impairs their ability to lend. And so back 329 00:19:19,600 --> 00:19:23,199 Speaker 1: to the sort of concept of the reversal interest rate again, 330 00:19:23,480 --> 00:19:26,600 Speaker 1: the bigger, the bigger constraint on their lending will be 331 00:19:26,920 --> 00:19:29,080 Speaker 1: a shock. Again, it can be a moderate and not 332 00:19:29,320 --> 00:19:32,720 Speaker 1: catastrophic shock to their capital. But if you're thinking about 333 00:19:33,119 --> 00:19:36,240 Speaker 1: you know what will help the recovery um in the 334 00:19:36,280 --> 00:19:39,760 Speaker 1: next year, Having a strongly capitalized banking sector I think 335 00:19:39,760 --> 00:19:42,159 Speaker 1: will be one of the more important, one of the 336 00:19:42,200 --> 00:19:45,560 Speaker 1: more important elements Professor's time. We're talking about some of 337 00:19:45,600 --> 00:19:48,560 Speaker 1: the consequences of the FEDS policies, and you have, uh, 338 00:19:48,600 --> 00:19:51,320 Speaker 1: the potential oversight of banks on one hand, and on 339 00:19:51,400 --> 00:19:54,840 Speaker 1: the other hand, you have a question of capital efficiency. 340 00:19:54,880 --> 00:19:56,479 Speaker 1: And I know you've done a lot of work on this. 341 00:19:56,560 --> 00:19:58,240 Speaker 1: A lot of people saying it doesn't make sense for 342 00:19:58,320 --> 00:20:00,640 Speaker 1: Hurts to be bankrupt, for people to be buying its 343 00:20:00,640 --> 00:20:04,000 Speaker 1: shares and now to be potentially raising additional money and 344 00:20:04,040 --> 00:20:06,840 Speaker 1: selling more shares. It just seems like the market is 345 00:20:06,840 --> 00:20:09,959 Speaker 1: getting less efficient as rates go down, and people look 346 00:20:10,000 --> 00:20:12,879 Speaker 1: at the FED as a perpetual backstop. What is the 347 00:20:12,920 --> 00:20:15,720 Speaker 1: consequence of the lack of efficiency that a lot of 348 00:20:15,760 --> 00:20:19,320 Speaker 1: people are talking about in markets? Well, you know, I think, uh, 349 00:20:19,359 --> 00:20:21,600 Speaker 1: you know, Mark, there's an old saying that markets are 350 00:20:21,960 --> 00:20:24,040 Speaker 1: I think this was to Paul Samuels, and the markets 351 00:20:24,040 --> 00:20:27,560 Speaker 1: are macro inefficient but micro efficient. And I think you 352 00:20:27,600 --> 00:20:29,840 Speaker 1: see some of that now. I mean, I would would 353 00:20:29,840 --> 00:20:32,320 Speaker 1: not want to try to even begin to explain the 354 00:20:32,359 --> 00:20:34,680 Speaker 1: overall level of the market. But again, if you look 355 00:20:34,760 --> 00:20:38,240 Speaker 1: at individual companies, there's some logic there. As I said, 356 00:20:38,240 --> 00:20:41,439 Speaker 1: in the banking sector being one example. Um, you know, 357 00:20:41,440 --> 00:20:44,439 Speaker 1: I think the relative performance of bank stocks tells you something. 358 00:20:44,520 --> 00:20:47,600 Speaker 1: I think even within bank stocks, we're seeing those that 359 00:20:47,640 --> 00:20:51,560 Speaker 1: are most consumer exposed being hit the hardest, And I 360 00:20:51,560 --> 00:20:53,800 Speaker 1: think there's some So I don't think, I don't think. 361 00:20:53,840 --> 00:20:56,080 Speaker 1: I'm not sure. I buy the idea that all this 362 00:20:56,160 --> 00:20:59,639 Speaker 1: sort of micro efficiency has has been taken out of 363 00:20:59,640 --> 00:21:02,640 Speaker 1: the market. Jeremy Stunt, I want to go against your 364 00:21:02,720 --> 00:21:06,600 Speaker 1: expertise and finance right now as a representative of Harvard 365 00:21:06,600 --> 00:21:09,920 Speaker 1: Economics and all of that heritage. Of course, we speak 366 00:21:09,960 --> 00:21:12,720 Speaker 1: to Ken Rogoff and to Benjamin Friedman and back through 367 00:21:12,760 --> 00:21:17,200 Speaker 1: Marty Feldstein. You lost a giant here in this tragic 368 00:21:17,280 --> 00:21:22,960 Speaker 1: summer and Alberto Elisina. How will you replace the unreplaceable 369 00:21:23,000 --> 00:21:28,119 Speaker 1: of Alberto Elisina? How do you replace that beautiful holistics 370 00:21:28,160 --> 00:21:32,639 Speaker 1: of political economics of Professor Ellissina? Did? Wow? Okay, I 371 00:21:32,680 --> 00:21:36,720 Speaker 1: was not expecting that question. That's a very moving question. Um. 372 00:21:36,760 --> 00:21:39,520 Speaker 1: You know, it's just a heartbreaking loss for our department. 373 00:21:39,720 --> 00:21:42,880 Speaker 1: And as you say, um, Um, it's gonna be hard 374 00:21:42,880 --> 00:21:46,080 Speaker 1: to repla very very hard impossible to replace him in 375 00:21:46,160 --> 00:21:48,160 Speaker 1: terms of what he brought as a researcher. I mean, 376 00:21:48,160 --> 00:21:50,560 Speaker 1: this was a guy who was doing really nobel. Calbert 377 00:21:50,680 --> 00:21:54,879 Speaker 1: or Um founded the modern field of political economy in 378 00:21:54,920 --> 00:21:58,159 Speaker 1: many ways. Um, But you know I sat in the 379 00:21:58,160 --> 00:22:01,240 Speaker 1: office basically next to him for twenty so when you know, 380 00:22:01,280 --> 00:22:02,800 Speaker 1: when you raise the question and swert of not like 381 00:22:03,000 --> 00:22:05,240 Speaker 1: thinking of that. I'm just thinking of one of the warmest, 382 00:22:05,720 --> 00:22:09,960 Speaker 1: kindest and most general uh colleagues I had. And you know, 383 00:22:10,240 --> 00:22:12,879 Speaker 1: in talking to others in our department and they think of, 384 00:22:13,080 --> 00:22:15,520 Speaker 1: you know, what we've lost and how we missen. It's 385 00:22:15,520 --> 00:22:18,439 Speaker 1: it's the personal that swort of everybody seems to seems 386 00:22:18,480 --> 00:22:21,159 Speaker 1: to speak to. Jeremy Stein, thank you so much for 387 00:22:21,240 --> 00:22:29,439 Speaker 1: joining Bloomberg Surveillance today. He is at Harvard University for Lisa, 388 00:22:29,680 --> 00:22:33,119 Speaker 1: John and I. Folks, there have been benchmarks through this pandemic, 389 00:22:33,200 --> 00:22:36,399 Speaker 1: and one of them has been good informed in intelligent 390 00:22:36,480 --> 00:22:41,080 Speaker 1: conversations with the Lieutenant Governor of the Empire State, Kathy 391 00:22:41,160 --> 00:22:44,520 Speaker 1: Hokel joins us again for an update of briefing. Kathy, 392 00:22:44,600 --> 00:22:47,520 Speaker 1: let me give you the safe general question first, how 393 00:22:47,640 --> 00:22:50,760 Speaker 1: is the reopening of the state from Buffalo to New 394 00:22:50,840 --> 00:22:53,800 Speaker 1: York and out to the Hampton's how's it going? Thank 395 00:22:53,800 --> 00:22:55,600 Speaker 1: you for having me on the show again. It is 396 00:22:55,640 --> 00:22:58,639 Speaker 1: going phenomenally well. And I say that not just from 397 00:22:58,680 --> 00:23:01,639 Speaker 1: my business Lieutenant Governor, but as someone who literally as 398 00:23:01,680 --> 00:23:05,399 Speaker 1: recently as yesterday walked the streets. I was in Niger Falls, 399 00:23:05,440 --> 00:23:07,760 Speaker 1: I was in Lockport. The day before, I was in Rochester, 400 00:23:08,240 --> 00:23:11,040 Speaker 1: and there is such an excitement about reopening and an 401 00:23:11,160 --> 00:23:14,000 Speaker 1: energy on the streets that I am actually shocked to 402 00:23:14,040 --> 00:23:16,320 Speaker 1: see because I thought people would be more sort of 403 00:23:16,359 --> 00:23:18,800 Speaker 1: depressed and in a dark place after what they've had 404 00:23:18,840 --> 00:23:22,000 Speaker 1: to endure. And the truth is, uh, this just demonstrates 405 00:23:22,040 --> 00:23:24,840 Speaker 1: the resiliency of New Yorkers. So the reopening is going well. 406 00:23:24,880 --> 00:23:27,959 Speaker 1: He's not had complaints as we reopen that we are 407 00:23:28,119 --> 00:23:31,560 Speaker 1: very closely monitoring our health outcomes and the rate of 408 00:23:31,600 --> 00:23:35,280 Speaker 1: transmissions and our hospitalizations. And if you look at the 409 00:23:35,359 --> 00:23:37,960 Speaker 1: charts every single day, as I do and the Governor does, 410 00:23:38,240 --> 00:23:42,160 Speaker 1: you'll see an incredible downward trajectory, unlike what we're seeing 411 00:23:42,200 --> 00:23:44,919 Speaker 1: elsewhere in this country. So the opening is going well. 412 00:23:44,960 --> 00:23:47,679 Speaker 1: We're in phase one in New York City, most of 413 00:23:47,760 --> 00:23:50,800 Speaker 1: Upstate is UH now as of today, just today is 414 00:23:50,840 --> 00:23:55,040 Speaker 1: now in Phase three, which is restaurants and more personal services. 415 00:23:55,400 --> 00:23:59,200 Speaker 1: So people are feeling a sense of normalcy, except they 416 00:23:59,280 --> 00:24:02,280 Speaker 1: know that it link continues if we keep social disclin 417 00:24:02,359 --> 00:24:04,199 Speaker 1: and wearing the mask and all the business owners have 418 00:24:04,280 --> 00:24:07,119 Speaker 1: been really great about complying, Lieutenant Governor. Perhaps they're in 419 00:24:07,160 --> 00:24:09,560 Speaker 1: a dark place and they're turning to retail therapy to 420 00:24:10,080 --> 00:24:13,240 Speaker 1: soothe some of those feelings. I am curious about threatening 421 00:24:13,240 --> 00:24:15,920 Speaker 1: this needle of encouraging people to go back out there 422 00:24:16,280 --> 00:24:19,919 Speaker 1: and embrace the economy while also practicing social distancing and 423 00:24:19,920 --> 00:24:23,000 Speaker 1: some of these other measures. How much are you trying 424 00:24:23,040 --> 00:24:25,600 Speaker 1: to encourage people to come back, and how much are 425 00:24:25,640 --> 00:24:29,080 Speaker 1: you able to deploy tracers, trackers to really make sure 426 00:24:29,600 --> 00:24:32,080 Speaker 1: that people are not super spreaders. At this point, we 427 00:24:32,160 --> 00:24:34,919 Speaker 1: don't see a big resurgence of the virus. You have 428 00:24:35,080 --> 00:24:37,880 Speaker 1: hit on exactly the answer to the problem that I'm 429 00:24:37,920 --> 00:24:39,920 Speaker 1: not seeing going on in the other states that open 430 00:24:40,040 --> 00:24:42,679 Speaker 1: even before New York did, and some people criticize us 431 00:24:42,760 --> 00:24:45,440 Speaker 1: for taking too slow of an approach, but we were 432 00:24:45,480 --> 00:24:48,040 Speaker 1: not going to send a message that any part of 433 00:24:48,040 --> 00:24:51,120 Speaker 1: the state could open until we listen to not just 434 00:24:51,359 --> 00:24:55,600 Speaker 1: national experts, but global healthcare experts. We've enlisted from London 435 00:24:55,880 --> 00:24:58,119 Speaker 1: to US to US in analyzing the data to make 436 00:24:58,160 --> 00:25:01,520 Speaker 1: sure we don't cross that I'm between risk and reward. 437 00:25:01,600 --> 00:25:03,560 Speaker 1: We've always wanted to make sure that we are doing 438 00:25:03,560 --> 00:25:06,880 Speaker 1: this in a smart way. But the answer is testing. 439 00:25:07,320 --> 00:25:09,760 Speaker 1: And there is no state in the nation that tests 440 00:25:09,800 --> 00:25:11,560 Speaker 1: more people than we do here in the State of 441 00:25:11,560 --> 00:25:14,320 Speaker 1: New York, over fifty thousands and I'm sixty five thousand 442 00:25:14,320 --> 00:25:17,720 Speaker 1: a day. And what happens after the testing is that 443 00:25:17,800 --> 00:25:22,960 Speaker 1: information goes directly to our contact tracers, an army of individuals. 444 00:25:23,000 --> 00:25:26,399 Speaker 1: And we think former Mayor Bloomberg for his assistance with 445 00:25:26,440 --> 00:25:28,480 Speaker 1: the State of New York, working with our Governor Andrew 446 00:25:28,480 --> 00:25:31,600 Speaker 1: Cuomo to bring in the resources to allow us to 447 00:25:31,680 --> 00:25:35,160 Speaker 1: have individuals trained, have them in every corner of the state, 448 00:25:35,200 --> 00:25:38,439 Speaker 1: even in most rural areas, and I oversee the reopening 449 00:25:38,520 --> 00:25:41,400 Speaker 1: even in western New York the second largest city of Bussalo, 450 00:25:41,680 --> 00:25:44,560 Speaker 1: but we have incredibly rural areas, small towns, and we 451 00:25:44,640 --> 00:25:48,480 Speaker 1: have contact tracers were ready to jump if anyone tests positive, 452 00:25:48,480 --> 00:25:51,840 Speaker 1: even in the furthest corner of states down in Alleghany County, 453 00:25:51,880 --> 00:25:55,040 Speaker 1: Chautauka County, up in Plattsburgh. So that is what other 454 00:25:55,119 --> 00:25:57,480 Speaker 1: states should be doing, and that is how we can 455 00:25:57,480 --> 00:26:01,360 Speaker 1: get control over this virus. And was frustrating to us 456 00:26:01,359 --> 00:26:03,560 Speaker 1: to New York because we've figured this out. We have 457 00:26:03,760 --> 00:26:06,640 Speaker 1: led the nation in terms of how we've managed this pandemic. 458 00:26:06,720 --> 00:26:09,000 Speaker 1: No one has done a better job than Governor Cuomo. 459 00:26:09,520 --> 00:26:12,600 Speaker 1: And if the other states simply followed our lead, they'd 460 00:26:12,600 --> 00:26:14,679 Speaker 1: be in a far better place today, because we're going 461 00:26:14,720 --> 00:26:18,560 Speaker 1: to continue reopening in a smart way based on healthcare data. 462 00:26:18,680 --> 00:26:21,160 Speaker 1: But we're going to do it. You mentioned former Mayor 463 00:26:21,200 --> 00:26:24,760 Speaker 1: Mike Bloomberg, of course, the parent company Bloomberg Alpa. He 464 00:26:24,840 --> 00:26:26,760 Speaker 1: was the fan of majority Onis still is of course 465 00:26:26,760 --> 00:26:30,679 Speaker 1: of Bloomberg Alpe, the parent company of Bloomberg News. Lieutenant Governor, 466 00:26:30,720 --> 00:26:33,159 Speaker 1: just to continue the conversation, there is clearly some tension 467 00:26:33,520 --> 00:26:36,040 Speaker 1: down in Texas. I've spoken to the administration and they've 468 00:26:36,080 --> 00:26:38,760 Speaker 1: suggested to me that the bar is high for another lockdown. 469 00:26:38,800 --> 00:26:41,159 Speaker 1: Quite clearly. You've suggested that to us as well in 470 00:26:41,160 --> 00:26:43,480 Speaker 1: the last several weeks too. I'm just wondering if you 471 00:26:43,520 --> 00:26:45,760 Speaker 1: can establish some guardrails for us, the kind of data 472 00:26:45,800 --> 00:26:48,760 Speaker 1: that you would need to see to reconsider locking things 473 00:26:48,760 --> 00:26:51,400 Speaker 1: down again. Well, we've said we don't expect to go there, 474 00:26:51,600 --> 00:26:53,639 Speaker 1: and again, this is why we did it right in 475 00:26:53,720 --> 00:26:55,920 Speaker 1: the state of New York. And I can't emphasize that enough. 476 00:26:55,920 --> 00:26:58,280 Speaker 1: That there was another alternative, which was to listen to 477 00:26:58,440 --> 00:27:01,840 Speaker 1: the many voices were saying, you know, we're short on revenues. 478 00:27:01,880 --> 00:27:04,080 Speaker 1: Our county's can't function. You know, the State of New 479 00:27:04,119 --> 00:27:07,520 Speaker 1: York is dire straits in terms of the loss of 480 00:27:07,600 --> 00:27:10,280 Speaker 1: revenue coming in during this three and a half month period. 481 00:27:10,560 --> 00:27:13,239 Speaker 1: But we are never going to sacrifice people's lives in 482 00:27:13,240 --> 00:27:16,399 Speaker 1: public health, and so that what people have to look at. 483 00:27:16,440 --> 00:27:19,440 Speaker 1: When you can go right to forward dot ny dot gov, 484 00:27:19,840 --> 00:27:22,639 Speaker 1: you can literally pull up regional dashboards to see the 485 00:27:22,680 --> 00:27:25,879 Speaker 1: metrics that we're examining. And the one that's most important 486 00:27:25,880 --> 00:27:28,760 Speaker 1: now is the rate of transmission and how we can 487 00:27:28,760 --> 00:27:31,480 Speaker 1: determine what the testing rates are showing. And if you 488 00:27:31,480 --> 00:27:33,800 Speaker 1: look at a place like Western New York a few 489 00:27:33,840 --> 00:27:36,760 Speaker 1: weeks ago, it was nine percent of people are testing positive. 490 00:27:37,119 --> 00:27:40,959 Speaker 1: That number is now point eight percent. That's extraordinary. When 491 00:27:41,000 --> 00:27:44,560 Speaker 1: you look at New York City, where we hadent testing 492 00:27:44,600 --> 00:27:47,320 Speaker 1: positive not long ago, and the numbers are down to 493 00:27:47,440 --> 00:27:51,040 Speaker 1: one to three percent higher in certain neighborhoods that we're 494 00:27:51,080 --> 00:27:53,760 Speaker 1: putting a laser focus on, communities of color have been 495 00:27:53,800 --> 00:27:56,360 Speaker 1: harder hit, and that's why we have even more testing 496 00:27:56,400 --> 00:28:00,400 Speaker 1: and contact tracers deployed there. But that's it's not hard. 497 00:28:00,520 --> 00:28:02,879 Speaker 1: We followed what the Centers for the Ease Control had 498 00:28:02,880 --> 00:28:06,400 Speaker 1: recommended early on in terms of the stazing. These guidelines 499 00:28:06,440 --> 00:28:10,600 Speaker 1: have been out there, but very few states we're enlightened 500 00:28:10,680 --> 00:28:14,960 Speaker 1: enough to actually follow them. And so we're feeling not 501 00:28:15,160 --> 00:28:17,960 Speaker 1: over confidence, but a sense of confidence that this is 502 00:28:18,000 --> 00:28:19,440 Speaker 1: the right path to be on and we're going to 503 00:28:19,480 --> 00:28:22,000 Speaker 1: continue here. And if we see a change in the 504 00:28:22,080 --> 00:28:24,000 Speaker 1: numbers that are alarming, and that's what all of our 505 00:28:24,000 --> 00:28:27,520 Speaker 1: regional control rooms do, we're watching every quarter of the state. Uh, 506 00:28:27,560 --> 00:28:29,280 Speaker 1: then we'll talk about whether or not we had for 507 00:28:29,359 --> 00:28:31,480 Speaker 1: the next days. But thus far we've not had any 508 00:28:31,520 --> 00:28:33,959 Speaker 1: hold ups. The numbers keep going down. New York's new 509 00:28:34,000 --> 00:28:37,000 Speaker 1: tenantant governor on some better News, Kathy. Hopefully we can 510 00:28:37,000 --> 00:28:39,920 Speaker 1: catch up any soon on some mall thank better news 511 00:28:39,920 --> 00:28:42,400 Speaker 1: here in New York. Thanks for listening to the Bloomberg 512 00:28:42,400 --> 00:28:48,360 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 513 00:28:48,760 --> 00:28:52,960 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 514 00:28:53,000 --> 00:28:57,280 Speaker 1: Tom Keane before the podcast, you can always catch us worldwide. 515 00:28:57,720 --> 00:29:05,000 Speaker 1: I'm Bloomberg Radio.