WEBVTT - PGIM's Tipp: Virus Won't Likely Send US To Recession 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:20.079 at Bloomberg dot com. I think the big issue here 0:00:20.120 --> 0:00:22.760 is we've got equity markets off, you know, roughly fiftent 0:00:22.760 --> 0:00:26.880 over the last seven trading days, just an extraordinary trade 0:00:27.400 --> 0:00:30.480 down in the equity markets and financial markets. The question 0:00:30.520 --> 0:00:32.440 I think now for a lot of investors is will 0:00:32.479 --> 0:00:36.960 the central bankers try to come in and stop the carnage. 0:00:37.000 --> 0:00:39.640 There's absolutely nobody better to talk to about this issue 0:00:39.640 --> 0:00:42.280 than Robert Tip. He's a chief investment strategist in Ahead 0:00:42.320 --> 0:00:45.440 of Global Bonds for p G I M fixed income. 0:00:45.720 --> 0:00:47.840 He has crossed the river from the Jersey side, joining 0:00:47.920 --> 0:00:51.000 us here in a Bloomberg eleven three oh studio. So, Robert, 0:00:51.960 --> 0:00:54.560 what will the Fed do? When will they do it? 0:00:54.680 --> 0:00:58.240 And will anybody even care? I think people will care 0:00:58.840 --> 0:01:02.520 because there is a fundamental situation where uncertainty is rising, 0:01:02.520 --> 0:01:06.920 and activity levels, especially abroad already in the world's biggest 0:01:06.959 --> 0:01:11.240 driver of growth, China, have been seriously impacted. Uh. You know, 0:01:11.360 --> 0:01:13.759 bottom line numbers like GDP and so on, those will 0:01:13.800 --> 0:01:16.600 come out much later. But auto sales, for example, we're 0:01:16.600 --> 0:01:21.720 down spectacularly, manufacturing, electricity usage and so on, and now 0:01:21.760 --> 0:01:24.120 the cases around the world are kind of that a 0:01:24.200 --> 0:01:29.160 geometric increasing stage, and so there is going to be 0:01:29.240 --> 0:01:32.040 a shock. The FED is away from their mandate, which 0:01:32.120 --> 0:01:35.319 is not on the maximum employment side they're find there, 0:01:35.440 --> 0:01:39.120 but inflation is persistently away from target. This morning we 0:01:39.200 --> 0:01:43.240 had their preferred indicator of inflation, the PC print, and 0:01:43.280 --> 0:01:47.160 if anything, that is moving systematically further away from their 0:01:47.160 --> 0:01:51.760 target on the downside. So it would seem like there's 0:01:51.800 --> 0:01:54.680 a great case for them to make an insurance cut 0:01:55.120 --> 0:01:59.120 pretty much at any time. And uh that could be 0:01:59.200 --> 0:02:01.400 helpful because what we're seeing now is a tightening of 0:02:01.440 --> 0:02:07.000 financial conditions. Granted, financial conditions were very easy a handful 0:02:07.000 --> 0:02:10.239 of weeks ago, but you know now it's going to 0:02:10.320 --> 0:02:14.919 make a difference going forward. Uh, financial conditions tightening, making 0:02:14.960 --> 0:02:18.960 whatever is going to happen that would uh materialize in 0:02:19.040 --> 0:02:22.639 terms of a weekend economy weakening, economy worse. So I 0:02:22.639 --> 0:02:24.480 think there's a pretty good argument for them to do 0:02:24.520 --> 0:02:30.000 that now. Whether this is like that transition where they're 0:02:30.080 --> 0:02:33.000 hiking way too late and it took them a little 0:02:33.000 --> 0:02:35.960 bit of time to to change the rhetoric around and 0:02:35.960 --> 0:02:39.000 they really exacerbated things with that rate hike, or they'll 0:02:39.000 --> 0:02:42.160 have a quicker turn. Uh, it remains to be seen. 0:02:42.200 --> 0:02:46.000 But the initial indications are are not that good. But 0:02:46.040 --> 0:02:48.280 hopefully they'll get the signal from the market quicker this time. 0:02:48.360 --> 0:02:50.680 And Jim Bullard coming out this morning and sort of 0:02:50.720 --> 0:02:53.320 taking a rather sanguent tone about the sell off and 0:02:53.400 --> 0:02:56.799 not necessarily signaling the rate cut that people were expecting. Nevertheless, 0:02:57.040 --> 0:02:59.040 you are seeing in the Fed funds futures market to 0:02:59.280 --> 0:03:02.800 full rate cut. It's being priced in frankly before June 0:03:03.120 --> 0:03:05.440 h and three rate cuts before the end of the year, 0:03:05.480 --> 0:03:07.560 four rate cuts by the beginning of next year. So 0:03:07.760 --> 0:03:09.919 if the Fed doesn't capitulate, the market just seems to 0:03:09.960 --> 0:03:12.640 be moving further and further away from them. I just 0:03:12.680 --> 0:03:16.480 want to ask you, though, how much will that loosen conditions? 0:03:16.760 --> 0:03:19.920 How much will that entice you as a portfolio manager 0:03:19.960 --> 0:03:24.440 to go out and buy risk your debt at these levels, right, 0:03:25.560 --> 0:03:27.919 I think it will make a big difference. And when 0:03:27.919 --> 0:03:31.960 you look at what happened after August of last year 0:03:32.160 --> 0:03:34.920 was the most recent incident of where the market got 0:03:35.000 --> 0:03:37.480 way ahead of the fat in terms of expectations for 0:03:37.560 --> 0:03:41.840 ease on concerns about downside risks that you know, once 0:03:41.880 --> 0:03:45.440 the underlying situation had stabilized, investor confidence returned, and this 0:03:45.480 --> 0:03:48.480 time it didn't require the FED. But once that confidence returned, 0:03:48.880 --> 0:03:52.280 the market will ease up and we'll take these rate 0:03:52.320 --> 0:03:56.120 cuts out of the market after they cut maybe you 0:03:56.160 --> 0:03:58.400 know once and you can have a recovery and risk 0:03:58.400 --> 0:04:01.640 and so on. So do you expe spreads to retest 0:04:01.680 --> 0:04:04.880 their lows the extra yield that investors earned over benchmark 0:04:05.000 --> 0:04:07.160 rates on high yield and investment grade credit? Do you 0:04:07.240 --> 0:04:09.680 expect a lot of tightening later in the year an 0:04:09.680 --> 0:04:13.560 incredible outperformance there. I think that this correction is the 0:04:13.600 --> 0:04:16.000 same as the corrections we've had over the last handful 0:04:16.000 --> 0:04:18.240 of years. This is this is not going to be 0:04:18.760 --> 0:04:22.400 the beginning, I would guess, of a major crisis in 0:04:22.520 --> 0:04:25.039 terms of a bear market in that goes on for 0:04:25.080 --> 0:04:27.760 a year or two. This is probably something that's going 0:04:27.839 --> 0:04:31.000 to be more measured in weeks or months after which 0:04:31.200 --> 0:04:33.120 we go back to an environment it's not a feel 0:04:33.160 --> 0:04:37.960 good environment for people. It's a very slow economic growth backdrop. UM. 0:04:38.040 --> 0:04:42.400 But the down shifting of risk free interest rates around 0:04:42.400 --> 0:04:44.080 the world, which is still kind of happening on a 0:04:44.080 --> 0:04:48.320 secular basis, it's not been fully priced yet on the coronavirus, 0:04:48.400 --> 0:04:51.520 is accelerating that those low discount rates are gonna then 0:04:52.040 --> 0:04:55.280 fuel refuel that search for yield, and that is going 0:04:55.320 --> 0:04:58.440 to pull the spreads in and UH and boost returns 0:04:58.440 --> 0:05:00.960 on higher fixed income. But you have to get past 0:05:01.000 --> 0:05:03.839 this first. So I'm looking at the two year, you know, 0:05:04.040 --> 0:05:07.080 zero point nine percent, a ten year one point one 0:05:07.160 --> 0:05:11.640 six percent or zero percent rates reasonable to discount at all. 0:05:13.160 --> 0:05:16.120 I think in the short term that's that's not where 0:05:16.120 --> 0:05:18.880 we're headed, unless this turns into a major economic crisis 0:05:18.920 --> 0:05:21.800 and the FED is forced to go into panic mode. UM. 0:05:21.839 --> 0:05:25.279 But I think that the range has really continued to 0:05:25.320 --> 0:05:28.120 shift lower. We have the FED would like to maintain 0:05:28.160 --> 0:05:31.520 a zero lower bound. They should be able to do that, UM. 0:05:31.560 --> 0:05:35.120 But the top end of the rate cycle has gone 0:05:35.120 --> 0:05:39.680 from twenty you know, back in eighty down to nine 0:05:39.880 --> 0:05:43.680 three quarters in nine to six and a half in 0:05:43.760 --> 0:05:47.559 two thousand to the mid twos last year, and that's 0:05:47.640 --> 0:05:50.720 the new high water mark for Fed funds. And it's 0:05:50.720 --> 0:05:52.400 going to be a zero to three range on the 0:05:52.400 --> 0:05:55.800 Fed funds and probably a one and a half central 0:05:55.800 --> 0:05:59.359 tendency for the tenure treasury. Yeah. Well, right now, I 0:05:59.400 --> 0:06:01.800 just want to say, we're looking at spreads on Highel 0:06:01.880 --> 0:06:06.160 debt for four point six percent and the first two 0:06:06.160 --> 0:06:09.400 point six percentage points over benchmark rates. Literally one word 0:06:09.480 --> 0:06:12.840 answer Bob Michael of JP morgan As Management saying he 0:06:12.880 --> 0:06:14.640 sees them going up to six dred before it's a 0:06:14.680 --> 0:06:17.760 buying opportunity. Where's the sort of tipping point you know, 0:06:17.800 --> 0:06:19.360 I don't know where that's going to be. I would 0:06:19.360 --> 0:06:23.919 guess it's lower and uh and before it turns. But 0:06:24.040 --> 0:06:26.080 that you know, it is going to be a bond 0:06:26.120 --> 0:06:28.640 pickers market. Right. There will be areas of trouble, but 0:06:28.720 --> 0:06:32.279 in the long term, I think spread product is attractive. 0:06:33.040 --> 0:06:35.200 Robert Tip, thank you so much as always, and I 0:06:35.240 --> 0:06:37.240 wish I had an hour with you. We would have 0:06:37.440 --> 0:06:40.040 such a great time. Yes, well, I mean this is 0:06:40.040 --> 0:06:42.680 such an interesting market. Robert Tip, Chief Investment Strategies, of 0:06:42.720 --> 0:06:52.680 PJIM Fixed Income. Well, that's a coronavirus spreads outside of 0:06:52.760 --> 0:06:55.120 China's first to the Middle East and then the other 0:06:55.160 --> 0:06:57.960 parts of Asia than uh, the European continent with Italy. 0:06:58.000 --> 0:07:02.120 The concerns is how prepared is the US for a 0:07:02.200 --> 0:07:05.160 potential outbreak of the coronavirus here in the US. To 0:07:05.160 --> 0:07:08.320 help us answer that, we welcome Dr Philip Chan. He's 0:07:08.360 --> 0:07:11.880 a CEO and president of Cytosorbents Corporation that trades on 0:07:12.000 --> 0:07:16.280 Nastack symbol ct s O. Up thirty six percent today, 0:07:16.560 --> 0:07:19.360 up eight five percent year to date. Uh. Dr Chan, 0:07:19.440 --> 0:07:20.640 thank you so much for joining us here in our 0:07:20.640 --> 0:07:24.520 Bloomberg Interactive Broker's studio. Just from your expertise in the 0:07:24.560 --> 0:07:27.200 healthcare industry, just give us a sense of kind of 0:07:27.240 --> 0:07:30.680 how you think the US is prepared for what might 0:07:30.800 --> 0:07:34.480 be an outbreak of the coronavirus. Well, thank you very 0:07:34.520 --> 0:07:36.480 much Paul Lisa for having me on the show. Um, 0:07:36.520 --> 0:07:39.320 I think to basically put my comments though in perspective, 0:07:39.440 --> 0:07:41.160 just to give you a little bit of background about 0:07:41.160 --> 0:07:44.240 my company. Citos Orbans is a medical device company that 0:07:44.320 --> 0:07:49.000 specializes in blood purification to treat deadly inflammation often associated 0:07:49.040 --> 0:07:53.400 with life threatening infection such as influenza, factoral pneumonia, virus 0:07:53.440 --> 0:07:58.000 infections potentially like coronavirus, etcetera. UH. Cytosorp is approved in 0:07:58.040 --> 0:08:01.520 the European Union, has accumulate more than eighty thousand uses 0:08:01.560 --> 0:08:04.600 over fifty eight countries UH and has generated about twenty 0:08:04.600 --> 0:08:07.960 three million in sales last year. The cold goal of 0:08:07.960 --> 0:08:11.080 Cytosaur is to control the deadly inflammatory response that these 0:08:11.160 --> 0:08:15.400 viral illnesses and bacterial illnesses often generate that can then 0:08:15.520 --> 0:08:19.000 lead rapidly to organ failure and death of patients from 0:08:19.000 --> 0:08:21.080 the failure of organs like the heart, the lungs, and 0:08:21.120 --> 0:08:23.640 the kidneys. Now, in the United States, we are not 0:08:23.720 --> 0:08:26.800 yet approved. We're still an investigational product, but we are 0:08:26.800 --> 0:08:29.520 actually in a process. We're in the regulatory process of 0:08:29.520 --> 0:08:31.800 trying to get approved here in the United States. So 0:08:31.840 --> 0:08:34.360 in terms of your question about how prepared are we, 0:08:34.400 --> 0:08:38.840 I think coronavirus COVID nineteen represents a very unique challenge 0:08:38.960 --> 0:08:43.719 because one we've never seen it before, It's a novel infection. 0:08:44.040 --> 0:08:46.719 No one has immenity to it. There are no antiviral 0:08:46.800 --> 0:08:49.120 agents that are approved to treat it, and there are 0:08:49.120 --> 0:08:53.400 no vaccinations approved also to treat it. And the problem 0:08:53.480 --> 0:08:56.640 with this virus is that it's kind of an insidious virus. 0:08:56.760 --> 0:09:01.640 It lays dormant UH and people remain asymptomatic for up 0:09:01.679 --> 0:09:03.800 to fourteen days. They may have it, they may be 0:09:03.840 --> 0:09:06.200 spreading it all over the community, but they would never 0:09:06.280 --> 0:09:08.240 know that they have it, and so only until they 0:09:08.280 --> 0:09:11.839 start manifesting the common symptoms of fever, cough, and and 0:09:12.160 --> 0:09:15.800 just UH shortness of breath and fatigue that they know 0:09:15.880 --> 0:09:18.120 that they have it. So this is why, all of 0:09:18.160 --> 0:09:21.520 a sudden you see these massive outcroppings of virus happening 0:09:21.520 --> 0:09:24.040 all over the world, and so in the United States, 0:09:24.120 --> 0:09:27.640 I think that we need better ways to prevent the spread, 0:09:28.160 --> 0:09:31.040 and I think the initiatives that we heard about recently, 0:09:31.280 --> 0:09:33.439 the two point five billion dollars that are going towards this, 0:09:33.640 --> 0:09:37.760 will be helpful. But prevention and controlling the spread of 0:09:37.760 --> 0:09:41.600 this outbreak is key, but also is controlling the deadly 0:09:42.080 --> 0:09:46.400 complications of lung failure and shock and other things that 0:09:46.480 --> 0:09:49.040 currently we have no approved therapies to treat today, and 0:09:49.080 --> 0:09:52.280 that's what Citosorb is doing our product. Have you had 0:09:52.280 --> 0:09:57.400 conversations with the government about expediting UH the accreditation of 0:09:57.440 --> 0:10:00.320 your product given what the threat is. Yeah, we've had 0:10:00.320 --> 0:10:04.640 a longstanding dialogue with MAY many agencies throughout the US government. 0:10:04.640 --> 0:10:07.200 In fact, we've gotten more than twenty nine million dollars 0:10:07.200 --> 0:10:10.160 in grants and contracts towards our technology over the years 0:10:10.200 --> 0:10:13.160 because of that. But we have been in touch, most 0:10:13.200 --> 0:10:16.080 recently with BARDA, for example, that is leading the charge 0:10:16.080 --> 0:10:22.080 against developing potential countermeasures against UH coronavirus. We have we 0:10:22.160 --> 0:10:24.840 are still in the early stages of those discussions, but 0:10:25.200 --> 0:10:28.640 UM our hope is that UH they understand the fact 0:10:28.679 --> 0:10:32.040 that there are no approved treatments for this illness and 0:10:32.080 --> 0:10:34.720 that one of the hallmark features of what is killing 0:10:34.760 --> 0:10:37.160 people is this out of control immune response, and that 0:10:37.320 --> 0:10:40.400 is what we are very well positioned to do. Do you. 0:10:40.720 --> 0:10:43.120 Are you aware of any patients that may have been 0:10:43.600 --> 0:10:45.600 as part of the treatment outside of the US, may 0:10:45.640 --> 0:10:49.600 have been prescribed or using your product. So the product 0:10:49.600 --> 0:10:52.079 again has been used in more than eighty thousand cumulative 0:10:52.120 --> 0:10:54.760 treatments to date, but we don't have any indication that 0:10:54.800 --> 0:10:57.600 it's yet been used for coronavirus since it is so new. 0:10:57.960 --> 0:11:00.920 I think some of the exciting news that we announced 0:11:00.920 --> 0:11:04.680 today is that through a partnership with China Medical System 0:11:04.720 --> 0:11:09.520 Holdings Limited in China. UM that we have now UH 0:11:09.559 --> 0:11:12.840 that hospitals in the Wuhan, China area have now received 0:11:13.000 --> 0:11:17.080 our Cytosaur product and are well positioned to potentially use 0:11:17.120 --> 0:11:21.160 this on act on patients with coronavirus infection. We just 0:11:21.240 --> 0:11:25.000 did the training just very recently of key physicians in 0:11:25.040 --> 0:11:30.520 those hospitals in the United States, So I can tell 0:11:30.559 --> 0:11:33.800 you that when we had the swine flu epidemic that 0:11:33.920 --> 0:11:37.240 the intensive care units, which receives the sickest of the 0:11:37.280 --> 0:11:40.480 sick patients of the hospital and we're cito survice typically used, 0:11:40.600 --> 0:11:44.440 were inundated with patients. And UH that is really a 0:11:44.559 --> 0:11:48.559 key concern should this uh, should this outbreak turn into 0:11:48.840 --> 0:11:51.760 a full blown pandemic. But I think that UM to 0:11:51.800 --> 0:11:54.880 put it into perspective. You know, flu this year has 0:11:54.920 --> 0:11:57.880 already infected thirty million people in the United States alone, 0:11:58.280 --> 0:12:02.319 killing eighteen thousand people. Right, that's one in two thousand 0:12:02.320 --> 0:12:04.600 people have died from the flu here in the United States, 0:12:04.840 --> 0:12:07.640 And even though it was considered a fairly severe outbreak, 0:12:07.679 --> 0:12:10.319 it's not the worst we've seen. One year when the 0:12:10.360 --> 0:12:13.440 swine flu outbreak, eighty people died here in the United States, 0:12:13.760 --> 0:12:16.679 so compare that to coronavirus. It is still the major 0:12:16.720 --> 0:12:20.559 health concern today. Dr Philip Chan, thank you so much 0:12:20.600 --> 0:12:23.480 for being with us. Dr Philip Chan, CEO and President 0:12:23.520 --> 0:12:39.600 of Psyto Sorbins Corporation. Right now, we are looking at 0:12:39.600 --> 0:12:42.200 a market that has been clying back from some of 0:12:42.240 --> 0:12:45.760 its earlier losses, although it really is whipping around. NASDAC 0:12:45.840 --> 0:12:49.400 now had been briefly positive, now down nine tenths of 0:12:49.440 --> 0:12:52.800 a percent. The key, uh, the key issue here is 0:12:52.960 --> 0:12:55.840 a lack of conviction, a lack of understanding of the 0:12:55.960 --> 0:12:59.360 threat that we're dealing with. Michael Tiedenman joining us now 0:12:59.440 --> 0:13:02.960 chief executi of Officer of Titamin Advisers with billion dollars 0:13:02.960 --> 0:13:05.440 of assets under management. Michael, there are a lot of 0:13:05.440 --> 0:13:09.079 calls saying that recession is now likely in the United States, 0:13:09.160 --> 0:13:11.880 if not globally, as a result of the spread of 0:13:11.880 --> 0:13:16.959 the coronavirus. Is that becoming your base case? First of all, 0:13:17.000 --> 0:13:18.760 thank you for having me on such a quiet week. 0:13:19.120 --> 0:13:22.120 We it's not our base case, but there's no question 0:13:22.160 --> 0:13:25.240 there's gonna be short term economic impact. What you're really 0:13:25.280 --> 0:13:28.120 we think the lasting impact will be on lower quality 0:13:28.280 --> 0:13:30.880 higher lever's businesses that had less room coming into this 0:13:31.080 --> 0:13:34.640 less room for air. Higher quality businesses with great balance 0:13:34.640 --> 0:13:39.000 sheets will obviously have an impact, certainly one they can 0:13:39.040 --> 0:13:42.720 sustain and earn their way out of inventories. You also 0:13:42.760 --> 0:13:44.640 have to remember, depending on how short this is right now, 0:13:44.679 --> 0:13:48.559 things are moving so quickly as inventories run off, then 0:13:48.559 --> 0:13:51.199 you're gonna begin in seeing some supply chain issues that 0:13:51.240 --> 0:13:54.760 people have been worried about. The big delta going out 0:13:54.800 --> 0:13:57.680 to three or four weeks will be if demand people 0:13:57.720 --> 0:14:00.520 stop going in restaurant, if it really if there's a shift, 0:14:01.000 --> 0:14:07.240 dramatic shift of US service demand and consumer activity. So 0:14:07.640 --> 0:14:09.480 one of the things that we've been discussing this morning 0:14:09.520 --> 0:14:11.280 is kind of the market seems to be really pricing 0:14:11.320 --> 0:14:14.880 in three maybe four rate cuts by the Federal Reserve 0:14:14.960 --> 0:14:17.560 over the next twelve months. How do you think that 0:14:17.559 --> 0:14:21.000 Fed's going to try to address what has been a 0:14:21.080 --> 0:14:24.080 supply issue today but could morph into you know, a 0:14:24.160 --> 0:14:27.600 demand issue. There's only so much they can do, but 0:14:27.880 --> 0:14:29.840 I think they will, they will be sensitive to it. 0:14:29.840 --> 0:14:31.520 I think they're obviously going to be speaking with a 0:14:31.520 --> 0:14:34.680 lot of corporations and CEOs and the leven idea of 0:14:34.680 --> 0:14:37.200 any pressures that are throughout the economic system. But I 0:14:37.240 --> 0:14:40.080 don't think it's that's not that that's a blunt tool 0:14:40.440 --> 0:14:42.720 when you need a lot of other tools possibility deal 0:14:42.720 --> 0:14:45.000 with something this. How many frantic phone calls have you 0:14:45.040 --> 0:14:48.680 fielded from your clients saying should I sell everything? We've 0:14:48.680 --> 0:14:51.720 had a few, um, but only a few. I think 0:14:51.760 --> 0:14:55.800 there's always an inverse correlation between phone calls incoming from 0:14:55.800 --> 0:14:59.360 clients and directions of markets. So this is pretty extreme, 0:14:59.360 --> 0:15:01.560 but it's been very quick. You know, it's this really 0:15:01.720 --> 0:15:06.040 a five day dramatic sell off, So it's it's coming. 0:15:06.040 --> 0:15:09.000 But there's also just a lack of information that everyone has. 0:15:09.560 --> 0:15:12.800 That's the real issue is that no one can Investors 0:15:12.880 --> 0:15:15.800 won't make a decision until they understand exactly what their 0:15:15.840 --> 0:15:19.760 analysis is. Traders have one decision, sell or short, so 0:15:19.800 --> 0:15:22.280 you've got this sort of one community of people that 0:15:22.480 --> 0:15:24.760 have a very easy decision to make. In longer term 0:15:24.760 --> 0:15:27.280 investors are looking in the market that you know, after 0:15:27.320 --> 0:15:30.960 a fifteen percent corraction, it's still pretty fairly valued. You know, 0:15:31.040 --> 0:15:33.520 we were here a month ago talking about growth expectations 0:15:33.560 --> 0:15:37.200 being h we're too high. That seems like a good 0:15:37.200 --> 0:15:40.680 protection every day. But so the investing base is going 0:15:40.720 --> 0:15:43.360 to sit and watch and wait, and that doesn't help 0:15:43.400 --> 0:15:46.600 market short term. So what do you tell those folks 0:15:46.640 --> 0:15:49.280 who call you up frantically? Um, is it kind of 0:15:49.320 --> 0:15:52.640 just kind of the we're long term investors here, you know, 0:15:53.000 --> 0:15:57.160 don't panic, you know, we we do. Luckily, we begin 0:15:57.280 --> 0:16:01.720 trimming some of our equity positions in Q four exclusively 0:16:01.760 --> 0:16:05.200 because evaluations, and we always have hedges on, but we 0:16:05.240 --> 0:16:08.920 actually avalued the hedges not to do the coronavirus just 0:16:08.920 --> 0:16:12.080 because cost of protection and evaluations in at the end 0:16:12.080 --> 0:16:15.360 of January. So we have some some good narrative to 0:16:15.400 --> 0:16:18.120 tell our clients and that there's some protective elements of 0:16:18.160 --> 0:16:21.480 our portfolio. But ultimately, quality assets survived periods like this, 0:16:22.440 --> 0:16:26.960 lower quality assets are challenged, and the corporate credit market 0:16:27.000 --> 0:16:30.200 with gearing and really the high yield market, there's a 0:16:30.280 --> 0:16:33.400 big imbalance there that this maybe that's that bears watching. 0:16:33.440 --> 0:16:35.320 That would say that's the one thing that we're going 0:16:35.360 --> 0:16:36.800 to keep an eye on over the next couple of 0:16:36.800 --> 0:16:39.480 weeks and months. So the FED very much in focus 0:16:39.560 --> 0:16:43.880 today as people ramp up their rate cutting expectations. Charles 0:16:43.880 --> 0:16:46.720 Retzky over at Missoojo Security is putting out a note 0:16:47.280 --> 0:16:49.760 talking about the last time the FED actually had an 0:16:49.760 --> 0:16:53.560 inter meeting rate cut was February two and eight. We 0:16:53.560 --> 0:16:56.640 know what happened after that, UM, But I am wondering 0:16:56.680 --> 0:17:00.320 from your perspective, is that a sure bed and well 0:17:00.360 --> 0:17:03.720 that support markets? The FED comes out and does what 0:17:03.760 --> 0:17:05.760 the what what traders are certainly pricing in, which is 0:17:05.800 --> 0:17:10.679 more than two rate cuts by June. I think the 0:17:10.680 --> 0:17:13.440 news flow will still dominate markets. It will be helpful, clearly, 0:17:13.480 --> 0:17:17.200 it's always helpful. But I think ultimately the the information 0:17:17.440 --> 0:17:21.880 that is gathered either incrementally positive information about the virus, 0:17:22.359 --> 0:17:27.679 greater understanding new rules UH and maybe containment of spread, 0:17:27.800 --> 0:17:30.720 that will have a much more pronounced and back to 0:17:30.760 --> 0:17:34.800 markets or the converse. So again, I think a monetary 0:17:34.880 --> 0:17:38.000 tool is helpful. It's certainly helpful of corporations or that 0:17:38.000 --> 0:17:40.639 are levered and have you know, real interest rates and 0:17:40.640 --> 0:17:43.640 all of a sudden they may have a sharp drop 0:17:43.680 --> 0:17:46.520 from the demand. But I think the news from this, 0:17:46.680 --> 0:17:49.320 it's all about this right now. So how do you 0:17:49.359 --> 0:17:51.280 typically in your I mean, you can think back that 0:17:51.320 --> 0:17:53.320 the fourth quarter of eighteen or certainly going back to 0:17:53.320 --> 0:17:57.120 the financial crisis. But when you see markets falling like 0:17:57.200 --> 0:18:01.200 this again in fifteen six, just in seven trade days, um, 0:18:02.000 --> 0:18:04.840 it's kind of that falling knife analogy comes here, and 0:18:04.840 --> 0:18:06.720 you don't want to be the person catching that falling knife. 0:18:07.160 --> 0:18:10.040 Do you wait for a day or two of green 0:18:10.119 --> 0:18:12.320 on the screen before you say, okay, I think this 0:18:12.359 --> 0:18:16.520 thing might have found bottom. Generally well, from a trading standpoint, 0:18:16.600 --> 0:18:19.879 three huge down days, high volume days, that's generally a 0:18:19.880 --> 0:18:23.320 capitulation point. Um. And we're we've seen some of that. 0:18:23.359 --> 0:18:25.360 I don't think we've seen enough of that candidly, but 0:18:25.680 --> 0:18:28.040 we're not traders. In the end of Q for eighteen, 0:18:28.359 --> 0:18:31.080 we saw that as a non fundamental We disagreed with 0:18:31.119 --> 0:18:34.240 the market analysis that we're entering our session. That's why 0:18:34.280 --> 0:18:39.080 we added risk exposure at that time. Today where everyone's 0:18:39.080 --> 0:18:41.200 in a huge void of information. Every you know, you're 0:18:41.200 --> 0:18:43.600 seeing cancelate this week alone, you look at the news 0:18:43.640 --> 0:18:47.800 flow about cancelations and people banning, you know, corporations not 0:18:47.880 --> 0:18:50.159 allowing people to fly out of the country, mean, etcetera. 0:18:50.480 --> 0:18:55.399 It's expanding. Schools are being getting emails about my kids preschools, 0:18:55.400 --> 0:18:59.679 and you know, so all this stuff is very fluid. Um. 0:18:59.720 --> 0:19:02.320 It's uh, it's no, this is not what people are 0:19:02.320 --> 0:19:06.199 trained analyze. Ultimately, Michael, just lastly to wrap it all 0:19:06.240 --> 0:19:07.960 up and put a sort of a bow on the day. 0:19:08.040 --> 0:19:12.320 Today is another day to find a haven investment. What's 0:19:12.359 --> 0:19:19.120 the best haven big side? Yea, we have such a 0:19:19.160 --> 0:19:22.240 negative forward view and treasury, so it's been the best 0:19:22.280 --> 0:19:24.800 haven and gold we own gold. We think that is 0:19:24.840 --> 0:19:26.399 just but that's not a trade. We think that's just 0:19:26.480 --> 0:19:28.960 a generally a good asset to have in the mix. 0:19:29.440 --> 0:19:32.800 So you're basically, uh, putting cash in a mattress and 0:19:32.880 --> 0:19:35.680 sleeping as well as you possibly. Yeah, I never agreed 0:19:35.720 --> 0:19:37.520 with the cash is trash quote that came out a 0:19:37.560 --> 0:19:41.040 couple of months ago. Every great long term investor always 0:19:41.080 --> 0:19:44.359 has a little liquidity when things like this happen. Interesting, Okay, 0:19:44.400 --> 0:19:46.600 Michael Teaman, thanks so much for joining us. Michael Taman 0:19:46.600 --> 0:19:49.560 is a chief executive officer for Team Advisors, twenty one 0:19:49.560 --> 0:19:54.040 billion dollars under management, so lots of capital in the marketplace, 0:19:54.280 --> 0:19:56.720 joining us here in our Bloomberg in Direactive broker studio. 0:20:01.800 --> 0:20:04.560 The message to the Federal Reserve today is we don't 0:20:04.600 --> 0:20:08.160 care what you say. We are expecting for rate cuts 0:20:08.240 --> 0:20:10.440 by the end of January. That at least is the 0:20:10.480 --> 0:20:13.920 impression from markets joining us now to discuss. Brian Schappato 0:20:14.000 --> 0:20:16.879 is a Blueberg opinion columnist covering all things debt related, 0:20:16.920 --> 0:20:19.960 and Brian, I'm looking right now, it's nearly a full 0:20:20.080 --> 0:20:23.000 four rate cuts by the end of January currently priced. 0:20:23.080 --> 0:20:27.000 And this comes even after Jim Bullard, the Fed's Jim 0:20:27.000 --> 0:20:30.720 Bullard came out earlier today and basically said, yeah, I 0:20:30.760 --> 0:20:33.000 guess we'll cut if it's a pandemic, but you know 0:20:33.080 --> 0:20:36.520 it's too early to know, which wasn't comforting to markets, right. Yeah, 0:20:36.560 --> 0:20:39.520 the base case is still for keeping policy on hold 0:20:39.720 --> 0:20:42.280 and for the federal reserve. Not from markets. No, from 0:20:42.400 --> 0:20:44.760 I mean, I mean markets, like people are hedging effectively 0:20:44.800 --> 0:20:47.200 for rates hitting the zero bound, like by mid year 0:20:47.240 --> 0:20:49.520 at this point, which is just kind of nuts. I mean, 0:20:49.520 --> 0:20:52.479 obviously you've got a hedge, so you don't necessarily the 0:20:52.600 --> 0:20:54.120 rates to hit zero by then, but I mean it's 0:20:54.160 --> 0:20:57.800 just kind of crazy. Um, the Fed is not willing 0:20:57.920 --> 0:21:01.359 to appease the market. It's at least not to this extent. 0:21:01.400 --> 0:21:04.119 I think it's just a massive market meltdown in a 0:21:04.200 --> 0:21:06.520 freak out right now, and people are just buying things up, 0:21:06.560 --> 0:21:09.000 and that's of course causing the pricing to look like 0:21:09.280 --> 0:21:11.040 there's going to be a lot of cuts. But I 0:21:11.040 --> 0:21:13.960 mean people talk about inter meeting cuts like happening over 0:21:13.960 --> 0:21:17.280 the weekend or on Monday morning if stocks keep falling. 0:21:17.720 --> 0:21:19.879 I just don't see that at all. So but Brian 0:21:19.920 --> 0:21:22.560 one could argue with a cynical mind, like we have 0:21:22.600 --> 0:21:27.199 some cynics around. He just pointed to who are Wadio 0:21:27.359 --> 0:21:30.080 on radio that this is a friend who maybe has 0:21:30.240 --> 0:21:32.679 responded to the markets, maybe more than they should have. 0:21:33.320 --> 0:21:36.280 Um still though, you think they're gonna be focusing on 0:21:36.480 --> 0:21:39.760 the data. Yeah, I mean Robert Kaplan said it's a 0:21:39.800 --> 0:21:42.040 Fox Business today. He said, I will make a decision 0:21:42.040 --> 0:21:44.359 on a rate cut by March seventeenth, eighteenth, which is 0:21:44.400 --> 0:21:47.119 their meeting. And I expect a rate cut at the 0:21:47.160 --> 0:21:49.680 March meeting. I mean, I don't unless the markets somehow 0:21:49.720 --> 0:21:52.200 rebound tremendously. I think they would lose a lot of 0:21:52.200 --> 0:21:55.119 credibility if they don't do anything. But for them to 0:21:55.160 --> 0:21:58.320 do something extraordinary right now doesn't seem likely. It's not 0:21:58.400 --> 0:22:01.560 like I think pretty much everyone conclude that one rate 0:22:01.600 --> 0:22:06.480