Speaker 1: M. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane
Speaker 1: Jai Ley. We bring you inside from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Robini
Speaker 1: and I, to be direct, go way back. We go
Speaker 1: back to his incredible foresight in seeing the challenges of
Speaker 1: OH eight and oh nine in two thousand five. In
Speaker 1: two thousand six, we go back to that morning when
Speaker 1: Osama bin Laden was killed. That was a shock as
Speaker 1: he and I took the stage at milk And Institute.
Speaker 1: And now, in the stunningly historic moment for this nation,
Speaker 1: we speak with Oriel at Rubini. Oriel, what is so important?
Speaker 1: Here is the guestimate of your profession, done with great
Speaker 1: care and great respect. I was dumbfounded today that the
Speaker 1: Bank of England framed negative four percent g d P
Speaker 1: with an abrupt reversal to positive fifteen percent. Would you explain,
Speaker 1: just shortly here, why will we not see a V
Speaker 1: shaped recovery? Well, there are many reasons. I wrote a
Speaker 1: paper where I presented the fourteen reasons decide to be Yeah,
Speaker 1: But I think the main point is as follows. The
Speaker 1: balance sheets and the pennas of both at the household
Speaker 1: sector and the corporate sector have damaged, and the corporate
Speaker 1: sector had too much leverage. So coming out of the crisis,
Speaker 1: people will have first of all, less income, and secondly,
Speaker 1: because of what happened, they need to have more precautionary
Speaker 1: savings because if you end up with another second or
Speaker 1: third wave, you're really in troubled. So you have let's income,
Speaker 1: you have to because your saving grades, so your consumption
Speaker 1: is gonna slow down sharply in order to build up
Speaker 1: your savings. Investment of the household factors do not collapse.
Speaker 1: Investment means searches of new homes because credit scores are
Speaker 1: gonna be damaged and people cannot take the risk of
Speaker 1: buying a home if they don't have you a home,
Speaker 1: a job. And on the corporate sector, the same thing.
Speaker 1: You have the highly leverage corporate sector. It has to
Speaker 1: be leverage by increasing savings and reducing intent attacks. What
Speaker 1: are the savings of the corporate sector revenue minus cost
Speaker 1: which cannot cost gonna cut labor costs. We've been shedding
Speaker 1: thirty to fourty million dollars jobs right now. So that's
Speaker 1: a rebalancing of the financial balances of households and corporate
Speaker 1: More saving, less investment implies the recovery like financial to
Speaker 1: be a you Nooral, your term here, even with your
Speaker 1: public service to the nation of serving President Clinton, is
Speaker 1: you have an old world ethos, your study, your academics
Speaker 1: out of Italy, and your your real focus on the
Speaker 1: European view putting the same tall a sort of in
Speaker 1: that same cultural sphere and even dr al Arian folks
Speaker 1: as well, Noural with this pandemic, do we lose the
Speaker 1: American spirit and American exceptionalism and American optimism or are
Speaker 1: you optimistic we can get that optimism back. I'm worried
Speaker 1: about America because during the crisis, America is not leading.
Speaker 1: After nine eleven, the US created a coalition to fight
Speaker 1: al Qaeda and the terrorists. After the global financial crisis,
Speaker 1: US led the global efforts to find a coordination to
Speaker 1: these crisis. This time around, the US is missing in action.
Speaker 1: Is unilateralist, his protectionists, his isolation is and both the
Speaker 1: hard power, but more importantly the soft power of the
Speaker 1: US is falling. And look at China. The virus started
Speaker 1: in China. But China is very aggressive in providing financially
Speaker 1: to other countries, medical equipment, rights, you name it, and
Speaker 1: they're on a charm offensive and they're winning it. So
Speaker 1: soft power of China is rising. The soft power of
Speaker 1: the US is really declining because the US is missing
Speaker 1: in action, is a well on the international stage, even
Speaker 1: among our own allies. So I think that the American
Speaker 1: exceptionalist is gone. The American power is declining in relative
Speaker 1: and absolute terms, and you leve a decline of US
Speaker 1: power and the rise of power of China, and the
Speaker 1: Cold War between US and China is going to become
Speaker 1: a colder war because of this crisis. So, professor, are
Speaker 1: you to what extent do you think that global globalism
Speaker 1: in general is on the decline? Is that? Is that
Speaker 1: just clear to you that globalism is on the decline
Speaker 1: and nationalism is on the uh you know, uh increase. Yes,
Speaker 1: I think that we reach already peak globalization. At the
Speaker 1: time of the global financial crisis, were already movements towards
Speaker 1: protection and inter nationalism, the election, for example of Donald Trump.
Speaker 1: But because of this crisis, the tendency towards the globalization
Speaker 1: decoupling between US and China, volcanization of global supply chains,
Speaker 1: first in the text factor, pharma products. Even the food
Speaker 1: chain is going to be volcanized because people want to
Speaker 1: keep their food at home, because they worry about food supply,
Speaker 1: and fragmentation of the global economy. All these things were
Speaker 1: already occurring and it's gonna be accelerating. And whilst there's
Speaker 1: gonna be some reshoring of economic activity from China and
Speaker 1: Asia to the United States in Europe, that's not gonna
Speaker 1: great jobs because we're going to produce from places where
Speaker 1: there is lower level costs to places whether it's highly
Speaker 1: for costs. And therefore that reshoring is the will be
Speaker 1: capital intensive, more Baltic, more automation, more AI. So it's
Speaker 1: not going to have the job that is shoring of
Speaker 1: economic activity back to North America. Alright, So, professor, how
Speaker 1: long do you think this contraction will last? So for
Speaker 1: not in the V shaped recovery, it's just two, three
Speaker 1: or four quarters or maybe even something more. No, I
Speaker 1: do believe it's gonna be only a two quarter profession
Speaker 1: first and second quarter. We're gonna see positively growth to
Speaker 1: our the world. In the third quarter of the year.
Speaker 1: And by the way, in the third quarter you could
Speaker 1: see even actually growth rates for the US that are
Speaker 1: double digits at the analyzed rate for one quarter, because
Speaker 1: you know, you're the complete collapse of economic activity for
Speaker 1: two quarters. So once you start from that low base,
Speaker 1: it's very easy to show a quarter of say twelve
Speaker 1: percent growth analyzed. Twelve percent rows analyzed means three percent
Speaker 1: within the quarter is nothing. Three percent, but analyzed looks
Speaker 1: like twelve So it can happens for a quarter or
Speaker 1: a second quarter. But my view is that these forces
Speaker 1: they're gonna bring new first of all to the second wave,
Speaker 1: in the third wave of the virus, they're gonna lead
Speaker 1: you to such a massive loss of income and the
Speaker 1: precautionary savings of the house of factor. You can reopen
Speaker 1: the stores as much as you want, like in Berlin,
Speaker 1: like in Germent, like in China, people are not gonna
Speaker 1: spend the income and they are scared. Therefore, by next year,
Speaker 1: the MS is expecting that easier roper cross goos down
Speaker 1: three percent and next year is growing six percent, twice
Speaker 1: as much as potential. In fact, instead this year is
Speaker 1: down three percent, with consensus on that the next year
Speaker 1: when I fairly growth for the global economy, so we're
Speaker 1: not gonna make up for the loss of jobs and
Speaker 1: income and GDP of this year. That's the basest story
Speaker 1: about easier the next year. The U is a story
Speaker 1: about next year within the jobs report and the better
Speaker 1: equity markets. I thought we'd digress here and we can
Speaker 1: do that with a new digital project of Nora Rabini.
Speaker 1: He has been a pioneer and market economics folded into
Speaker 1: his first rate academic international economics at the New York University,
Speaker 1: and he's gone off digital honus with the stylish stud
Speaker 1: photographic image on Oriel today dot com, Dr Roubini, what
Speaker 1: is Noriel today dot com? Well, twice a week I
Speaker 1: do a broadcast of about an hour and a half,
Speaker 1: but I discuss what's going on in the global economy,
Speaker 1: in the market and topics like the all market, what's
Speaker 1: gonna happen to the Eurozone? That future of money and
Speaker 1: digital currency is the wha they were in a bubble
Speaker 1: and assort the topic. The format that is much longer
Speaker 1: now and a half rather than a five minutes. Okay, great,
Speaker 1: so so basically so basically you're competing with me. I
Speaker 1: love it. No real wonderful oil. Let us talk about
Speaker 1: let's talk about the Zeitgeistnial and this, folks, is so important.
Speaker 1: And trust me, folks, I the only time I've ever
Speaker 1: seen Billions is when my kids called me up and said,
Speaker 1: oh my god, you I was on it like in
Speaker 1: the background on a TV image. And that's all my
Speaker 1: kids care about. Norial, even Billions. The TV show is
Speaker 1: talking about bitcoin this year, and let's be blunt. You
Speaker 1: are scathing and your criticism of bitcoin. What does everybody
Speaker 1: enthused get wrong? Well, first of all, there was a
Speaker 1: bubble in bitcoin and crypto into thousand and seven seen,
Speaker 1: but they already has gone bast I mean Bitcoin, you
Speaker 1: will reached a pick of two twenty thousand and even
Speaker 1: with the Raality series a bit depending on the day,
Speaker 1: fifty five to sixty percent below its peak. Other top
Speaker 1: ten cryptocurrencies are about eighty percent down from the peak
Speaker 1: and three thousand class of those what I call technically
Speaker 1: ship coins, they have lost their value. So this is
Speaker 1: a bubble that has already gone past. Secondly, some people
Speaker 1: say that the bitcoin is a good hatch against risk
Speaker 1: of episodes when the markets are down. Is a head
Speaker 1: to be like hedge funds. Look at what happened in
Speaker 1: February and March. The stock market US went done by
Speaker 1: thirty five percent, Bitcoin went down by fifty and the
Speaker 1: other top ten crypto currency went done by sixty five.
Speaker 1: So when markets are in risk off bitcoin and crypto
Speaker 1: doesn't go up, it's not a hedge. It goes done
Speaker 1: more than the market. So it's not even a hedge
Speaker 1: against risk off or in the a negative animal spirits.
Speaker 1: It just doesn't. Okay, just because the time, Nora, and
Speaker 1: you're gonna do this, folks. You can tune into Noral
Speaker 1: today dot com with Dr Rubini. I believe it's tomorrow,
Speaker 1: and he's gonna go on for this for eight hours
Speaker 1: Noral in a couple of minutes. Here you even go
Speaker 1: after the institutions talking up blockchain, and the line I
Speaker 1: get is, yeah, bitcoin suspect, but blockchain is a real deal,
Speaker 1: and you don't agree with that. Blockchain is the most
Speaker 1: overhyped and least useful technology in human history. By the way,
Speaker 1: it's a blockchain in name only because all these corporate
Speaker 1: lt or corporate blockchain is not a really blockchain's private
Speaker 1: rather than public is permissions rather than permission. Less centralized.
Speaker 1: Rather they centralized, and it's based on a system of
Speaker 1: fasters that a thought is validating it rather than being fastlisted.
Speaker 1: So they call it a kind of a blockchain because e'xactly,
Speaker 1: But there's nothing to be blockchain. It's just a glorified
Speaker 1: that is what they called blockchain. It's not blockchain. And
Speaker 1: everything blockchain has failed. There's not a single use case
Speaker 1: of blockchain that's work. Visions of dollars. They've done use cases.
Speaker 1: They don't have a single app. Okay, noral. So you
Speaker 1: and I heard the Expresso bar and Davos that were
Speaker 1: hanging out with all the star oats and all that,
Speaker 1: and Brian Moyne had a Bank of America, Bill Winter's
Speaker 1: of Standard Charter or Mr Diamond from JP Morgan. They
Speaker 1: wandered by, and you're gonna tell them their banking blockchain
Speaker 1: business is suspect. Well, the money and made an interview
Speaker 1: recently and he said, we spent tons of money on
Speaker 1: blockchain experiments. We have done actually tons of happens on
Speaker 1: blockchain stuff, and we have not seen yet a single
Speaker 1: application works. He said so. The CEO of master Cat
Speaker 1: said so. They CEEO west Father said so, they all
Speaker 1: have invested tons of money. Blockchain. They tried it because
Speaker 1: it was a new technology and the schedule. They were saying,
Speaker 1: why don't he try? They tried it, and like tons
Speaker 1: of other technology, it doesn't work, work, and they're not
Speaker 1: using it. Nobody's using it. The joke, what else are
Speaker 1: you gonna talk about with blockchain and bitcoin? I mean,
Speaker 1: nor are you gonna This is gonna be on firefolks.
Speaker 1: This will be out on our podcast and you know
Speaker 1: the Bitcoin CREWI is gonna go nuts. Are you're telling
Speaker 1: me it's going to zero? Or does it have a
Speaker 1: fair value? The real value, the real value of bitcoin
Speaker 1: and cryptocurrency is not zero, is negative because that energy hawks.
Speaker 1: Since you have a fifty thou validators validating every transaction
Speaker 1: on bitcoin, the amount of energy is used is more
Speaker 1: than the entire energy used by Switzerland in a year.
Speaker 1: So it's an environmental disaster. If we're taxing properly for
Speaker 1: this negative externality, the fly should not be zero, should
Speaker 1: be negative because you have to impose a tax for
Speaker 1: something it's such an environmental disaster and energy hall. The
Speaker 1: value is negative, It's not positive. No real today dot
Speaker 1: com folks tune in Friday where Dr Rubini is gonna
Speaker 1: go mental and bitcoin and that was just a whisper
Speaker 1: of what you will hear as well. Are Obedient n
Speaker 1: y u and again his new blog No Real today
Speaker 1: dot com just turning that to the Bank of England
Speaker 1: leaving policy unchanged today, but the Governor signaling that could
Speaker 1: be stimulus ahead. We've made a very strong commitment that
Speaker 1: says this is more and faster than the Bank of
Speaker 1: in and has ever done before, but keeping more option
Speaker 1: open to my colleagues on the committee voted to do
Speaker 1: more quee now. Other members of the committee thought that
Speaker 1: it was a sensible decision to take in in our
Speaker 1: next meeting that we're not ruling anything out at the
Speaker 1: moment because it would be unwis of us to rule
Speaker 1: anything out in terms of responses. So I don't want
Speaker 1: to say we're nearer to negative rates, but we're not
Speaker 1: ruling anything out. Governor Andrew Bailey speaking to Bloomberg a
Speaker 1: little bit earlier on on the road ahead, Tom and
Speaker 1: the road ahead it looks like it has more stimulus
Speaker 1: and more QUI in John, this is so important, folks.
Speaker 1: And there was a know Excel spreadsheet with two underlying
Speaker 1: red marks. It is preposterous, John, to model negative team
Speaker 1: percent with an immediate reversal up fifteen percent. How did
Speaker 1: they come up with that? Well, I think it's also
Speaker 1: impossible to model the recovery Tom, which I wonder is
Speaker 1: the reason why they waited to do stimulus in June,
Speaker 1: because they don't know how big they're going to fail
Speaker 1: to go. And I think perhaps they want a month
Speaker 1: of reopening behind them before they project forwards how much
Speaker 1: stimulus they're gonna need. I think it's inevitable at this point,
Speaker 1: given what we heard from Hassman sawn As this morning,
Speaker 1: given what we've just heard from the governor that more
Speaker 1: quie is coming. Is just how big is the next
Speaker 1: stimulus package, the next envelope from the b A we
Speaker 1: gonna be. We welcome all of your coast to coast
Speaker 1: here in America. John, let me ask a simple question.
Speaker 1: I'll go to Ian Shepherdson and Newcastle because that football
Speaker 1: team is they're they're I'm glace, they're glad Premier League
Speaker 1: shut down. What's the difference in a labor depression in England,
Speaker 1: in London, in your Mayfair, John versus Newcastle? Well, quite
Speaker 1: clearly tom the cities and how they're going to reopen.
Speaker 1: It's going to be very different to how things open
Speaker 1: in the north of England, and I think we're gonna
Speaker 1: see that across states in the United States as well.
Speaker 1: We're gonna have different sequencing of reopenings for different parts
Speaker 1: of the country. That's advanced this discussion. Marcus Ashworth joins
Speaker 1: us right now Bloombering opinion. Marcus Lord Skodowski was on
Speaker 1: yesterday talking about a depression with inflation. Is that even
Speaker 1: feasible in the ash for Ashworth universe? Yeah, And I
Speaker 1: even saw something right about hyper deflation, which is a
Speaker 1: new one on me. But I think what we're gonna
Speaker 1: have is this horrid dual hits of certain things. Seeing
Speaker 1: sharp inflation, clearly food prices. I think that's something can
Speaker 1: be really far harder than emerging markets. But at the
Speaker 1: same time, overall deflation and we're seeing that. You look
Speaker 1: at the numbers out of South Korea, that's gonna be
Speaker 1: a very big warning sign for China. Low inflation coming
Speaker 1: into deflation. That's going to hit in Europe very evidently,
Speaker 1: if it's not there already. We're going to get that
Speaker 1: round round the globe, and that's why the bangaming and
Speaker 1: governor isn't ruling out negative rates. I think it's the
Speaker 1: Fed in the bangoving. Really you really don't want to
Speaker 1: go down there. But as John was saying earlier, QUI
Speaker 1: is going to keep on coming. It has to the
Speaker 1: Bank of England will finish its buy backs probably by
Speaker 1: the end of June into July. It needs to reload.
Speaker 1: This is a big wall of supply coming and I
Speaker 1: think we'll see a hundred billion worth of QUI minimum
Speaker 1: in June and another again in August from the Bank
Speaker 1: of England. Marcus, how much do you expect the Bank
Speaker 1: of England to expand into corporate debt and how far
Speaker 1: into particularly junk bonds the way that the United States
Speaker 1: fitters are has shown a willingness to do A fantastic question.
Speaker 1: And I note, according to Jeff good Lack that maybe
Speaker 1: the said hasn't quite actually really bought any jump bonds
Speaker 1: yet or not very much. But the point is they
Speaker 1: put it out there that they will. They've done this
Speaker 1: corporate so commercial paper buying stuff. We're seeing some signs
Speaker 1: that the European Central Bank might do it. They're taking
Speaker 1: in collaps or already they wouldn't rule it out for the
Speaker 1: the last meeting. The Bank of England has got about
Speaker 1: twenty billion worth of corporate bomb buying to do. It's
Speaker 1: a previously done ten billion and stopped. This is you
Speaker 1: know a few years, a couple of years ago or so.
Speaker 1: I think it will skew more towards corporate But again
Speaker 1: a bit like John said, they're gonna waiting to a
Speaker 1: lot of stuff to for a month worth of of
Speaker 1: re reopening. See how the economy has reacted in June
Speaker 1: and it was needed. They'll go into the real economy more.
Speaker 1: They'll buy corporate bonds more. You know, we we've seen
Speaker 1: some big signs in a Glads has climbed at a
Speaker 1: one and a half billion pound bond issue this week.
Speaker 1: More of that sort of stuff. It's helping spread than possibly.
Speaker 1: Also they go to jump ones as well. As they said,
Speaker 1: they're not really anything out. As you know though, Marcus,
Speaker 1: the Sterling credit market just does not have the depth
Speaker 1: compared to what you would see here in the United
Speaker 1: States for the Bank of England to make a difference.
Speaker 1: They've got to work for the banking channel, haven't they.
Speaker 1: What else can they do well there's no doubt about
Speaker 1: there's nothing like the US corporal market, but the Sterling
Speaker 1: one has its moments. But the thing that the Bank
Speaker 1: of England did last time around after the Brexit referendum
Speaker 1: in twenty sixteen was a sing called Term Funding Scheme
Speaker 1: t f F. They're doing it again. It transformed the
Speaker 1: mortgage market by boosting all the challenger banks. The second
Speaker 1: they turn those tear fest apps off, the challenge of
Speaker 1: banks are nowhere that it clearly works. They are trying
Speaker 1: to put stuff into the economy. They're trying to get
Speaker 1: banks to lend. They're realizing that they're the first game
Speaker 1: didn't work. They're going to have to go up to
Speaker 1: fifty of loans guaranteed by the government. They're looking at
Speaker 1: anything and everything, very much like the European model of
Speaker 1: Teltro's of going into real economy loans, so they'll be
Speaker 1: they'll be working on everything and everything. Marcus Ashworth. Always
Speaker 1: great to get your thoughts on a program, Marcus, fantastic
Speaker 1: to catch up with you, sir, Marcus Ashworth, joining us
Speaker 1: out of London on the road ahead for the Bank
Speaker 1: of England. We start with Ben Laidler of Tower Hudson Research.
Speaker 1: The CEO joined us on the phone right now, Ben,
Speaker 1: fantastic to catch up with you. Let's just talk about
Speaker 1: this economy as we reopened, before we turn to equities.
Speaker 1: How quickly can this labor market? Hell? I think it's
Speaker 1: going to be reasonably slow. I mean we can argue
Speaker 1: whether it's a switch or you or or whatever it is.
Speaker 1: But I just I mean, the numbers are dramatic. You've
Speaker 1: touched on them, right, I mean, we're gonna have the
Speaker 1: headline job blurst. I mean it's not quite as bad
Speaker 1: as that. I mean a lot of those are furloughed,
Speaker 1: rale and unemployed, but it's completely unprecedented. We we get
Speaker 1: sort of slightly, you know, numbed by the numbers, right,
Speaker 1: I mean we talked about three million, as if it's
Speaker 1: you know, yeah, better than last week, but completely unprecedented
Speaker 1: versus where we were six weeks ago. I looked then
Speaker 1: at all this news flow and if we can take
Speaker 1: it over to your United Kingdom, and we're thrilled you
Speaker 1: can come to us from London today and if we
Speaker 1: look at a collapsing labor academy, the stock market seems removed.
Speaker 1: Why is that? I think a couple of things, right,
Speaker 1: I mean, equity market is there's not the economy, right,
Speaker 1: there's a lot more tech. There's a lot less small business,
Speaker 1: a lot less consumer, a lot less real estate. So
Speaker 1: you know, you're comparing apples and oranges a little bit. Um,
Speaker 1: you know, equity markets forward looking. I mean, the incremental
Speaker 1: data is from here is frankly all positive. Right. Um,
Speaker 1: you know we're getting less jobless. It's still three million,
Speaker 1: still a ghastly number, but it's a lot better than
Speaker 1: it was last week and the week the week before that.
Speaker 1: And that goes for Frankie, every single data point you're
Speaker 1: looking at from here. I think earnings have been slashed,
Speaker 1: slashed and up to q ones. Actually, I would argue
Speaker 1: better than expected. I mean, so I think we've just
Speaker 1: discounted this awful lot sentiment terrible, and the incremental data
Speaker 1: point from here is is going to continue to be
Speaker 1: positive for you know, certainly for the near future. Wildly
Speaker 1: against your call are those that say the things are overdone.
Speaker 1: I saw some chart somewhere overnight of the continued extension
Speaker 1: of the things relative to everything else. Why is that
Speaker 1: I have a problem with at all? I mean, you know,
Speaker 1: they have more than double um the profitability growth, much
Speaker 1: better balance sheets of anything else out there, and relative
Speaker 1: to that, I think valuations are actually very undermanding that
Speaker 1: it's going to be one sector that comes out of
Speaker 1: this crisis in much better shape. And then it went
Speaker 1: in you less competition, arguably less regulatary oversight um And
Speaker 1: and that's an important call. I mean, as you know,
Speaker 1: you know, fangs close market at this point, and I
Speaker 1: would argue, you know, the real the real anchor here.
Speaker 1: Implicit in your call for Fangs and this idea that
Speaker 1: they've got a consolidation of business and less scrutiny from
Speaker 1: regulators is a loss of business in other areas of
Speaker 1: the economy and a huge transformation, frankly, of the way
Speaker 1: business is done to a bigger focus, even on the
Speaker 1: online space. I'm just wondering. You said furloughs are not
Speaker 1: the same things as layoffs, and yet Sean Donnan and
Speaker 1: Joe Doo of Bloomberg News wrote a story yesterday basically
Speaker 1: saying a lot of these temporary layoffs are becoming permanent.
Speaker 1: How much do you see that accelerating. There's a lot
Speaker 1: of these old economy businesses don't find a reason to
Speaker 1: exist in the same way that they did in the past. Yeah,
Speaker 1: that's a huge risk. And you know, what you're seeing
Speaker 1: and with the earnings numbers or what you're seeing with
Speaker 1: the economy is just this this, this this bifurcation is
Speaker 1: just getting sort of even more brutal. And you see
Speaker 1: that in your face. In the first quarter numbers, you know,
Speaker 1: you're either in a sector whose earnings were down plus
Speaker 1: or you're in the other fifty percent of the sectors
Speaker 1: in the US we are earnings are up five um.
Speaker 1: You know, forget about the absolute numbers, but you know
Speaker 1: that is very little in between. So the debate really
Speaker 1: really bad right now or or or things are okay.
Speaker 1: And just to jump in and ask a question, Ben,
Speaker 1: this is the debate of the moment. Will there be
Speaker 1: a reopening rotation? Are you saying there won't be? I
Speaker 1: think there will absolutely will be as a margin, right,
Speaker 1: I mean, but you know, if you look at what
Speaker 1: we own today, I think those sort of quality growth sectors,
Speaker 1: you know, tech, healthcare absolutely core positions, you know, regardless
Speaker 1: of what's happening. I think now though with the reopening,
Speaker 1: I mean you look globally, you know that sort of
Speaker 1: that that index of you know, lockdown of of loosened
Speaker 1: by sort of five six seven percent, and that's driven
Speaker 1: a rebound in the last couple of weeks of our
Speaker 1: sort of proxy for economic activity. You need to look
Speaker 1: for things that are exposed to that off the bottom.
Speaker 1: So you know, if we like small cap, we we
Speaker 1: we like you know, we like real estate. We've just upgraded,
Speaker 1: you know, we've become less sarish on on things like energy.
Speaker 1: So you know we're running a bit of a Barbel portfolio.
Speaker 1: But quality growth definitely the sort of core of it.
Speaker 1: But I would be definitely adding sort of cyclicals here.
Speaker 1: As again that incremental data point is positive. You're adding
Speaker 1: real estate. Really, I am really interested to know whether
Speaker 1: you're actually adding office space as well, especially as the
Speaker 1: likes of JP Morgan says that some of these work
Speaker 1: from home arrangements might become a permanent feature. Yeah, I mean,
Speaker 1: so the history of really a real estate has changed.
Speaker 1: I mean a lot of it is is not the
Speaker 1: sort of traditional real estate, and you've sort of historically
Speaker 1: looked at and then the baby's sort of been thrown
Speaker 1: out with the barthwater a little bit in that sort
Speaker 1: of downturn. A lot of it is sort of industrial
Speaker 1: specialized data centers, etcetera, etcetera, which are pretty pretty immun here.
Speaker 1: You know, real estate did very very well off the
Speaker 1: bottom of the of the global financial crisis. Obviously things
Speaker 1: are a little bit sort of different this time around,
Speaker 1: but in many cases for the better, right, a lot
Speaker 1: less lee ridge, more sustainable dividends. Absolutely, some sub subsegments
Speaker 1: are going to see some pretty significant changes. But you know,
Speaker 1: as I think some of these people are going to
Speaker 1: find out, it's a lot more difficult to go out
Speaker 1: of your office least is sometimes than than you might
Speaker 1: want been. One thing we haven't talked about, and I
Speaker 1: know you're US centric in big cap centric as well,
Speaker 1: is we all look at portfolios the international stacks seem
Speaker 1: way way behind. Are they an uncommon value now or
Speaker 1: is that just something to walk away from for years?
Speaker 1: I definitely think the opportunities there. I mean, we've argued
Speaker 1: for a while with China. You know, is the safe
Speaker 1: haven here, the sort of first in to the crisis,
Speaker 1: first out of the crisis, you know, very cheap market,
Speaker 1: a lot of policy flexibility. Um, so you know, wory
Speaker 1: avoid Chinese equities. You know we added to European banks
Speaker 1: not so long ago. I mean it sounds crazy, but
Speaker 1: again following that sort of stim first out sort of narrative,
Speaker 1: you know, Europe's sort of opening up here and and
Speaker 1: the whole is part. You know, it's just huge in Europe.
Speaker 1: I mean, you've got a sense of it with a
Speaker 1: negative fourteen percent you know UK GDP forecast, but you
Speaker 1: know Europe is you know, the epicenter of this sort
Speaker 1: of GDP slowdown, and we're looking for things that are
Speaker 1: you know, the most exposed to that sort of incremental
Speaker 1: data point of off the bottom here and banks, I
Speaker 1: mean it's pretty much European banks pretty much the cheaper
Speaker 1: sector in the world. John to here, Ben Ladler say
Speaker 1: minus fourteen percent u K g d P. I'm sorry,
Speaker 1: I'm not incredible to it. And folks, these numbers were
Speaker 1: talking to you about we've never framed just a confirm
Speaker 1: for for Bennett does sound crazy? You're right, and we'll
Speaker 1: find out in a number of months if it was
Speaker 1: a crazy idea and we'll cash out with you against soon.
Speaker 1: Be appreciate your had some research joining us on the
Speaker 1: road ahead for the economy and what you should do
Speaker 1: in this market X or A x A is a
Speaker 1: wonderful French institution, and they have David Paige. He is
Speaker 1: one of the most acute analysts of this mixture of
Speaker 1: policy economics and then rolling it over into the markets
Speaker 1: and the long term responsibilities of acts on mr Page
Speaker 1: joins us. Right now, David, we're having this historic moment,
Speaker 1: this place in it, and yet we still come down
Speaker 1: to the micro data in today, a more difficult claims
Speaker 1: report than many expected. Well, this adjust your call for
Speaker 1: tomorrow's jobs report, not really, And I think you know,
Speaker 1: in terms of detail of April's number, you know it's
Speaker 1: going to be a horrible number. We actually forecast an
Speaker 1: unemployment rate of fifteen and a half decent. To some extent,
Speaker 1: if it's fifteen and a half decent or sixteen spent
Speaker 1: or sixteen and a half, you know, it doesn't matter.
Speaker 1: It's a it's a poor number, and it's gonna it was.
Speaker 1: I mean, I think you're right to focus on you're
Speaker 1: in claims. There is strangely a couple of factors that
Speaker 1: are seeing a cumulative initial claims coming way above that
Speaker 1: the continuing claims. There are new jobs being created, and
Speaker 1: that's reducing it a bit. And there's also a bit
Speaker 1: of uncertainty about who's furloughed and who's not furloughed, and
Speaker 1: that that uncertainty is gonna las till the end of June.
Speaker 1: But May looks like based on what we're seeing today,
Speaker 1: that we'll see a higher number whatever the number we
Speaker 1: get tomorrow for April, but we do think that May
Speaker 1: will be the peak. Trying to judge how quickly unemployment
Speaker 1: falls thereafter is very difficult, and there's much more uncertainty
Speaker 1: in the U S market than, for example, in Europe,
Speaker 1: where's a much more rigorous sort of job support scheme
Speaker 1: being put in place by the government, but you know,
Speaker 1: US government is trying to do that as well. We've
Speaker 1: seeing the PPE so the PPP program supporting paychecks, trying
Speaker 1: to keep work as furloughed. So we do expect to
Speaker 1: see unemployment fallback very, very sharply from you know, probably
Speaker 1: from higher levels in May that are close to twenty
Speaker 1: percent we think unemployment in May. But we do think
Speaker 1: that as you get into the sort of final months
Speaker 1: of this year, that will be back down so sort
Speaker 1: of below certainly below kemp cent. We're looking at a
Speaker 1: figure around seven and a half per cent. The Federal
Speaker 1: Reserve of Atlanta Plus has an interesting serve a few
Speaker 1: days back where they suggested at seven to five of
Speaker 1: gross claimants were probably temporarily unemployed and so should move back.
Speaker 1: So that gives you a sort of very sharp heart
Speaker 1: swinging in unemployment, but also looks like you'll see a
Speaker 1: very sharp drop as well. Yeah, what leads to the
Speaker 1: scale of the second half recovery, but there's a great
Speaker 1: degree of uncertainty around its side. Well, David, I wanted
Speaker 1: to go to that uncertainty right now. I'm hearing you
Speaker 1: talk about a sharp bounce back, and certainly that seems
Speaker 1: to be the sentiment among a lot of equity traders
Speaker 1: as you see equity futures that are near session highs
Speaker 1: right now ahead of the US open. Even after this
Speaker 1: devastating number of these devastating economic figures, we keep getting
Speaker 1: how can you model that at a time when it's
Speaker 1: so unclear whether even people will go back to movie
Speaker 1: theaters and restaurants and sports events, whether sports will even
Speaker 1: be open, whether we're going to see a resurgence and viruses,
Speaker 1: what the lag effect will be for people who lost
Speaker 1: their jobs, who suddenly will be less willing to make
Speaker 1: that discretionary expenditure. How do you model for that well,
Speaker 1: as you suggest, with a large career of humility and
Speaker 1: with very wide confidence intervals. I mean, it's incredibly, like,
Speaker 1: incredibly plausible that you see a much worst outcome come through.
Speaker 1: And of course what we can't model for, what we
Speaker 1: just simply don't know is what the virus is going
Speaker 1: to do in the second half of the year. Our
Speaker 1: projections are based on a benign scenario where social easing
Speaker 1: or restrictions of social measures continue at a measured pace
Speaker 1: across the second half, and that allows for recovery to
Speaker 1: come back, but we don't know. Particularly in the US,
Speaker 1: where the easing of restrictions has come through much quicker
Speaker 1: than we've seen in other parts of the globe, we
Speaker 1: would argue that there is a greater risk of a
Speaker 1: second wave developing. If that second wave does actually come
Speaker 1: about in the US or elsewhere in the clobe, then
Speaker 1: that going to have a material impact as well. So
Speaker 1: we do have to recognize that there's a significant uncertainty
Speaker 1: around that and then try and make some suggestions on
Speaker 1: top of that. What what we're arguing is that given
Speaker 1: the economic supports that the US government has provided the
Speaker 1: labor market, a lot of this material number, this materially
Speaker 1: increasing unemployment should be temporary. But you know a lot
Speaker 1: of it will obviously be policy dependent, not just you know,
Speaker 1: support for the labor market, but as you say, how
Speaker 1: much of restrictions are going to come back and how
Speaker 1: much what the new normal is going to look like? Well, David,
Speaker 1: let's talk about the support that we have had from
Speaker 1: the administration and when that support actually fades. We've had
Speaker 1: enhanced unemployment benefits, We've had checks sent out to everyday Americans.
Speaker 1: When does that fade pretty soon? I mean, it sounds bizarre.
Speaker 1: We're talking about, you know, a headline measure that's about
Speaker 1: twelve and a half decenter GDP. It's a huge stimulus,
Speaker 1: and yet we think it's in terms of the fiscal support,
Speaker 1: we think it's primarily saleties over the next few months.
Speaker 1: We know that the extension to unemployment benefits, for example,
Speaker 1: runs for four months, it runs through July, and at
Speaker 1: this stage that's it. Now, that's brilliant in terms of
Speaker 1: trying to fill in the hole that the dropping activity
Speaker 1: is going to produce, and it does that pretty well.
Speaker 1: I think there's a good chance that, for example, household
Speaker 1: incomes don't don't fall in the second court, which would
Speaker 1: be incredibly successful terms of policy if that can be achieved.
Speaker 1: But as you suggest, there is going to be needs
Speaker 1: to stimulus thereafter, and at the moment it's lacking, and
Speaker 1: I think that's where you start thinking about this space
Speaker 1: force stimulus that's already being discussed being employed. David Chris
Speaker 1: rup MUFG interpretates the jobs data and he looks forward
Speaker 1: to tomorrow. He says, it interprets to an unemployment rate
Speaker 1: of twenty four point nine percent. Quote, it's official. The
Speaker 1: pandemic job losses in the United States are depression magnitude.
Speaker 1: What is the David Page policy prescription to take us
Speaker 1: down from Mr Rutky's interpretation of unemployment? What does it
Speaker 1: say that that's not what our forecast is on the
Speaker 1: back of these not understood over fifteen But even though
Speaker 1: it's it's a large number, the policy prescription is effectively
Speaker 1: what we've got in placed from the federal reserve. We've
Speaker 1: got material stimulus that's going to be ongoing, that's not
Speaker 1: going to fade in the second half of this year,
Speaker 1: and that does provide growth not just for this year
Speaker 1: but actually primarily for next year and the year after,
Speaker 1: but we will need to see further symptiscal stimulus. You
Speaker 1: need to build a vigorous recovery. You need to be
Speaker 1: economic growth above potential, driven above potential. Consumers aren't going
Speaker 1: to do that alone. There's too much income lost because
Speaker 1: unemployment will stay higher than it was before the crisis.
Speaker 1: Corporates aren't going to do that. Corporates are coming out
Speaker 1: of this with much more debt, and they're going to
Speaker 1: be much more cautious in how they conduct their spending,
Speaker 1: both hiring and investment. Therefore, it's going to be down
Speaker 1: to governments to drive this um and in the US
Speaker 1: it means more fiscal stimulus is needed. This is this
Speaker 1: is critical, and I think it's really really important. Language matters,
Speaker 1: and through much of the last few months, people I
Speaker 1: think mistakenly have used the word stimulus when actually it
Speaker 1: was aid. You don't try and stimulate an economy when
Speaker 1: it's going a shutdown. When we come out of this,
Speaker 1: we have to switch from aid to stimulus. Now I'm
Speaker 1: trying to understand what those policy tools look like as
Speaker 1: we reopen. David can you get your head around that,
Speaker 1: because we've seen so much already, how does it change.
Speaker 1: How do they recalibrate the policy effort in Washington to
Speaker 1: adapt for the fact that we are coming out of
Speaker 1: a shutdown and we reopen. Well, some of it's likely
Speaker 1: to be in terms of doing still what they're doing,
Speaker 1: so they're providing unemployment benefits, making sure that those that
Speaker 1: are employed that have lost their jobs because of this
Speaker 1: virus aren't suddenly seeing income drop off. If you see
Speaker 1: that income drop back for households, and that just makes
Speaker 1: it harder for households to spend, it being too dropping
Speaker 1: consumer spending. So you could expect to see a further extension,
Speaker 1: I think, and through of unemployment benefits. But some of
Speaker 1: this is going to be about trying to invigorate corporate
Speaker 1: spending coming through again, and that's likely to involve different
Speaker 1: tax incentives. It's likely to involve trying to incentivize invest
Speaker 1: to spend, and so that's going to be slightly different.
Speaker 1: And you're right, that is slightly different from a perspective
Speaker 1: where you're just providing a lifeline to these corporates to
Speaker 1: say to say float, I think that is the sort
Speaker 1: of areas you'll see a difference comes through devid. Appreciate
Speaker 1: your time to s monic. It's a tough time for
Speaker 1: a lot of people, especially the people behind those statistics.
Speaker 1: David Page, their actual investment manager's head of macro research
Speaker 1: on the jobless claims we had twelve minutes ago. It
Speaker 1: is National Nurses Week, but it is different this year.
Speaker 1: We've gotten some good perspective, particularly from the Johns Hopkins
Speaker 1: University in the Bloomberg School of Public Health, all of
Speaker 1: their medical platform. We should point out that Michael Bloomberg
Speaker 1: is a founder of Bloomberg LP, you know the terminal
Speaker 1: and also this radio and television operation as well, and
Speaker 1: he is a philanthropist to his engineering school at Johns
Speaker 1: Hopkins University and much much more. We spoke to their
Speaker 1: Jason Fairley, Professor of nurse saying at j h U
Speaker 1: about the state of the profession. We are seeing glimmers
Speaker 1: of hope were in patient bed capacity is stable. We
Speaker 1: have a wonderful Field hospital started by our governor who
Speaker 1: is helping to unpack the hospital from from those who
Speaker 1: have less acute illness and who need to convalesce in
Speaker 1: a controlled environment. And our ventilator capacity is holding strong,
Speaker 1: So we are all of those metrics are glimmers of
Speaker 1: hope that we see at our health system, doesn't farley?
Speaker 1: Do genetics play a very big role? And who dies
Speaker 1: from COVID nineteen, You know, I think that's an important question,
Speaker 1: and we're currently investigating a variety of different types of
Speaker 1: genetic analyzes. So there's very important differences in viral genetics.
Speaker 1: So are there differences in strains. We've heard lots about
Speaker 1: strains that come from China, strains that came from Europe.
Speaker 1: Uh So pathogenicity of the virus itself is under investigation
Speaker 1: and those viral genetics, but more importantly is our host genetics.
Speaker 1: We as humans, what do our genes and how does
Speaker 1: our immune system respond? And so what we're seeing are
Speaker 1: evidence of individuals that may have some form of weakened immunity,
Speaker 1: may have what we call a less of a strong cide,
Speaker 1: a kind storm, meaning the immune system doesn't respond as briskly,
Speaker 1: and therefore they may become ill. But as a results
Speaker 1: of their immune system not responding as briskly, they actually
Speaker 1: are the ones somewhat protected. In moving forward into the
Speaker 1: need for mechanical ventilation because because when the immune system
Speaker 1: doesn't act as briskly, you're not as overwhelmed by its response.
Speaker 1: So that's remembrance, not the virus that actually does the
Speaker 1: bad thing. It's your immune systems response to how it
Speaker 1: responds to the virus. Jason, are there also disparities because
Speaker 1: of gender and race? And if there are, how how
Speaker 1: can we protect the people most at risk? Yeah? Well,
Speaker 1: when we think about from uh gender perspective, we are
Speaker 1: seeing data that men are at greater risks than women
Speaker 1: in terms of a bad outcome. Um, we we have
Speaker 1: to pay very close attention related to there are increased
Speaker 1: cardiovass in our respiratory diseases in general, the prevalence is
Speaker 1: higher in men versus women the same when you look
Speaker 1: at race. This has nothing to do genetically that we
Speaker 1: know of right now. This is to do with access
Speaker 1: to care, poverty, health disparities between populations. And so if
Speaker 1: you live in a community across any part of the
Speaker 1: world that in which your community hospital, for example, is
Speaker 1: a low resource hospital, it's more of a district non
Speaker 1: academic hospital. You may have less available intensive care beds,
Speaker 1: you may have less to care available ventilator capacity, You
Speaker 1: may have less options of accessing a primary care provider,
Speaker 1: and that may mean you present later to care for evaluation.
Speaker 1: And so there are many things in that in that
Speaker 1: that question that need to be unpacked in relations to
Speaker 1: things may influence differences in both gender and racial disparities
Speaker 1: that we are seeing with this virus. Jason Farley of
Speaker 1: Johns Hopkins at University. Thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio