WEBVTT - The Fed Should Go Negative: Former Fed President Kocherlakota 0:00:02.680 --> 0:00:05.360 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 0:00:05.400 --> 0:00:07.720 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.280 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.560 you and your money, whether at the grocery store or 0:00:12.600 --> 0:00:15.480 the trading floor. Find a Bloomberg Penil podcast on Apple 0:00:15.560 --> 0:00:18.000 podcast or wherever you listen to podcasts, as well as 0:00:18.000 --> 0:00:21.599 that Bloomberg dot Com. Time for Bloomberg Opinion right now, 0:00:21.680 --> 0:00:25.320 we turned to Bloomberg Opinion calumnist Narayana culture Lakota, former 0:00:25.400 --> 0:00:28.400 Minneapolis FED president also a professor of economics at the 0:00:28.440 --> 0:00:32.240 University of Rochester. Uh Nariana, thanks so much for joining 0:00:32.320 --> 0:00:36.440 us here. Boys, we think about the response to the pandemic. 0:00:36.640 --> 0:00:39.000 The US Federal Reserve Bank, I think is generally getting 0:00:39.280 --> 0:00:44.199 very good marks from the marketplace in terms of acting early, 0:00:44.360 --> 0:00:48.199 acting acting decisively. But you make the argument that the 0:00:48.240 --> 0:00:52.200 Fed should really consider going negative in terms of interest rates. 0:00:52.200 --> 0:00:54.960 Give us your thoughts there. Yeah, thanks a lot for 0:00:55.000 --> 0:00:57.960 having me on. Um. You know, I think the chairman 0:00:58.040 --> 0:01:00.800 laid out the case pretty well on it'ss conference, so 0:01:01.000 --> 0:01:03.640 he certainly didn't go make the next step of actually 0:01:03.640 --> 0:01:05.880 going negative with rates which is he said that the 0:01:05.920 --> 0:01:08.360 FED has to be prepared to use all its tools 0:01:08.360 --> 0:01:13.240 to support the economy and the recovery that we hope 0:01:13.280 --> 0:01:17.160 it will be coming soon, and that that um that 0:01:17.240 --> 0:01:21.560 means include to me means including going negative with rates. UH. 0:01:21.720 --> 0:01:26.160 Pushing rates down further would stimulate spending um and stimulate 0:01:26.240 --> 0:01:28.200 on the part of the households and stimula investment on 0:01:28.240 --> 0:01:30.720 the part of businesses as it always does, and that 0:01:30.760 --> 0:01:33.199 would be helpful for the for the U S economy. 0:01:33.360 --> 0:01:35.480 What is your view? I mean, I guess you know, 0:01:35.640 --> 0:01:40.559 people look at say Japan, Germany, you know, developed countries 0:01:40.560 --> 0:01:43.800 with negative rates. It just doesn't seem right, doesn't seem 0:01:43.840 --> 0:01:47.400 like the right strategy, the right policy. How do you 0:01:47.480 --> 0:01:52.040 view this negative and interstrates in general? You know, I 0:01:52.080 --> 0:01:56.520 think what's what's happened is that economies turned to them, 0:01:57.560 --> 0:01:59.880 as would be true in the US case, whence the 0:02:00.040 --> 0:02:02.240 situation is bad. So you can't just look at a 0:02:02.320 --> 0:02:05.000 raw correlation between who's using negative rates and the what 0:02:05.040 --> 0:02:07.760 their situations like and say, gee, it looks like all 0:02:07.800 --> 0:02:11.440 the countries that that have negative rates have are not 0:02:11.480 --> 0:02:13.880 doing that well economically. Well, that's because they view them 0:02:13.880 --> 0:02:17.800 as this emergency tool they only turn to when when 0:02:18.280 --> 0:02:21.520 the situation is going badly. Um. The other problem is 0:02:21.720 --> 0:02:24.800 that there're there's a limit to how negative to being 0:02:24.840 --> 0:02:26.960 able to go, are willing to go in something? In 0:02:27.040 --> 0:02:31.560 some instances, and you know, a quarter percentage point are 0:02:32.040 --> 0:02:35.880 fifty basis point cut in interest rates. It's helpful, it's supportive, 0:02:36.360 --> 0:02:40.720 but it's absolutely not a panacea for all possible economic ills. 0:02:41.240 --> 0:02:44.000 That's the US ever done that for any appreciable amount 0:02:44.040 --> 0:02:48.080 of time as a policy matter before. Uh, you know, 0:02:48.200 --> 0:02:51.119 now you're taking a little bit out of my knowledge base. 0:02:51.240 --> 0:02:54.520 But my understanding is that rates did go negative for 0:02:54.639 --> 0:02:58.240 some time in the during the Great Depression. But but 0:02:58.320 --> 0:03:00.480 other than that, no, I don't think right, it's not 0:03:00.520 --> 0:03:03.520 something typically in the toolbox for the US FED. So 0:03:03.840 --> 0:03:05.720 one of the things when we think about the actions 0:03:05.840 --> 0:03:10.840 by the FED, UM, is that the concern or the expectation, 0:03:10.919 --> 0:03:14.880 the assumption is that this pandemic has relatively short life 0:03:14.919 --> 0:03:18.520 measured in quarters. How about if it you know, if 0:03:18.520 --> 0:03:21.760 it's just one in a series of waves of this 0:03:21.880 --> 0:03:24.600 virus and actually goes much longer, what does the FED do? Then? 0:03:26.080 --> 0:03:28.160 I think that's a great question. I think the FED 0:03:28.720 --> 0:03:31.760 and Congress. Uh, you know, I think and and Treasury. 0:03:31.800 --> 0:03:34.399 I think there's you know, there's basically been been all 0:03:34.480 --> 0:03:37.600 these entities in the government I've been working together. The 0:03:37.920 --> 0:03:41.560 perspective is by the time we get into this to 0:03:41.640 --> 0:03:45.200 the certainly we get into the fourth quarter of the year, um, 0:03:45.360 --> 0:03:47.240 the economy is going to be in a very robust 0:03:47.240 --> 0:03:54.000 recovery path and uh, they won't need the further further 0:03:54.040 --> 0:03:56.520 back stopping from from the FED at that point. And 0:03:56.560 --> 0:04:00.440 I think that's led the FED in other entities to say, boy, 0:04:00.720 --> 0:04:04.320 the main job here is to keep businesses alive, try 0:04:04.440 --> 0:04:09.360 to freeze the economy where it was in February. Well, 0:04:09.400 --> 0:04:11.240 that might be acceptable if you're talking about three or 0:04:11.280 --> 0:04:15.600 four months intervention, but if you're talking to three ten years, 0:04:15.680 --> 0:04:18.440 I mean ten is obviously quite extreme, but to three 0:04:18.520 --> 0:04:21.159 years even you're really getting in the way of the 0:04:21.240 --> 0:04:26.160 dynamic flow and processes that really drive us economy. Where 0:04:26.000 --> 0:04:28.719 we want companies to go out of business because they're 0:04:28.760 --> 0:04:31.840 not as being as effective at fulfilling what consumers want. 0:04:32.279 --> 0:04:34.040 And we want workers to be able to move from 0:04:34.160 --> 0:04:38.400 job to job, um, because they're not there may be 0:04:38.440 --> 0:04:40.520 more productive that new job than they were the old one. 0:04:40.960 --> 0:04:45.479 So I worry that, uh, these these interventions are really 0:04:45.520 --> 0:04:48.919 designed to be temporary. As the shock becomes more persistent, 0:04:48.960 --> 0:04:52.240 they're gonna introduce more and more distortions in the economy, 0:04:52.320 --> 0:04:56.479 leading to to worsten worse outcomes. So just real quick seconds, 0:04:56.600 --> 0:04:58.240 what do you think about the Fed's decision to kind 0:04:58.240 --> 0:05:02.440 of go into the corporate bond market. Yeah, I think 0:05:02.480 --> 0:05:08.520 that it's uh uh, I think that the So it's 0:05:08.560 --> 0:05:11.800 a questionable one because I think of the fact that basically, 0:05:12.000 --> 0:05:13.760 I think companies should be facing a lot of risk 0:05:13.880 --> 0:05:15.960 right now, it's appropriate for them to be borrowing at 0:05:16.000 --> 0:05:18.800 high interest rates because it's a very risky world. I 0:05:18.800 --> 0:05:21.560 think the Fed's intervention is getting in the way of 0:05:21.600 --> 0:05:24.760 that signal from the market. Interesting enough to see how 0:05:24.839 --> 0:05:26.560 that plays out in the coming weeks and months. In 0:05:26.600 --> 0:05:31.160 Narayana Culture Lakota, former Minneapolis FED president and Bloomberg Opinion columnists, 0:05:31.200 --> 0:05:34.359 also professor of economics at the University of Rochester, we 0:05:34.400 --> 0:05:37.600 appreciate uh you coming on. You can uh read all 0:05:37.640 --> 0:05:41.599 of Narayana's work at Bloomberg dot Com, Slash Opinion, and 0:05:41.720 --> 0:05:44.440 O P I n Go. That's where you can find 0:05:44.800 --> 0:05:47.400 all of the Bloomberg Opinion work, which is so good 0:05:47.440 --> 0:05:50.599 and we love having the folks on here talking about 0:05:50.680 --> 0:05:52.120 kind of what is going on in the markets in 0:05:52.200 --> 0:05:57.080 the broader implications for the markets. Well, we're right in 0:05:57.120 --> 0:05:59.080 the midst of earning season. We've gotten a lot of 0:05:59.120 --> 0:06:01.200 the numbers coming had a big tech last night. We 0:06:01.200 --> 0:06:04.360 had Amazon and Apple, uh some some big numbers. Next 0:06:04.360 --> 0:06:06.160 week we have some more a lift in Uber and 0:06:06.200 --> 0:06:09.440 some other names. Dan i'ves, managing director equity research at 0:06:09.440 --> 0:06:12.280 what but Securities is a fantastic person to chat with 0:06:12.320 --> 0:06:14.800 when we think about big tech. Dan, thanks so much 0:06:14.839 --> 0:06:17.799 for joining us here. Let's start with those Apple numbers 0:06:17.920 --> 0:06:22.400 last night. I guess all in all, pretty solid numbers, right, yeah, 0:06:22.560 --> 0:06:26.880 better than feared. I mean investors including ourselves were respecting 0:06:26.880 --> 0:06:30.359 a horror show a Friday the thirteen type quarter, just 0:06:30.440 --> 0:06:33.440 giving the pandemic and the supply chain issues, and when 0:06:33.440 --> 0:06:35.880 you ripped the band aid off was better than expected. 0:06:35.920 --> 0:06:38.360 And I think you combine that with at least some 0:06:39.000 --> 0:06:42.360 you know, ways of hoop in China from a demand perspective, 0:06:42.760 --> 0:06:45.159 I think that was enough for investor to network on 0:06:45.200 --> 0:06:47.040 the other side of this dark valley and by the 0:06:47.120 --> 0:06:50.320 stock so Dan, what do you make of them? I guess, 0:06:50.600 --> 0:06:52.960 you know, not giving guidances, that's I mean, obviously a 0:06:52.960 --> 0:06:55.839 lot of companies are not giving guidance, but for Apple, uh, 0:06:55.960 --> 0:06:58.840 that's pretty unusual. They usually been pretty solid about giving 0:06:58.839 --> 0:07:01.560 you at least a range of guidance in terms of 0:07:01.600 --> 0:07:05.839 some of the big items. Yeah, it's unprecedented for Apple, 0:07:05.880 --> 0:07:07.680 and I think for many companies. And I think the 0:07:07.800 --> 0:07:10.920 knee jerk you saw last night with the stockdown, and 0:07:10.920 --> 0:07:13.160 I've talked to some investors that are worried about that, 0:07:13.240 --> 0:07:16.200 but I take a step back. I mean, right now, 0:07:16.240 --> 0:07:19.560 when you look at June quarter, given all the variables, 0:07:19.600 --> 0:07:22.960 all the demand issues, it would be like cook playing 0:07:22.960 --> 0:07:27.080 a game of blindfolded darts to give guidance for June, 0:07:27.520 --> 0:07:30.120 and I think that would be imprudent. And I think 0:07:30.200 --> 0:07:34.360 right now Moose investors are looking past June into September, 0:07:34.480 --> 0:07:37.640 into next year. That's what the valuations offer. And the 0:07:37.680 --> 0:07:42.120 important thing is services. That's the rocket Gibraltar for Apple. 0:07:42.160 --> 0:07:45.680 I mean, that's continuing to be very strong. That midteam 0:07:45.720 --> 0:07:48.240 growth that's something like in live actually be focused on 0:07:48.280 --> 0:07:51.560 along with China. So Dan, I know there's been some 0:07:51.760 --> 0:07:54.360 discussion about some of the new products, A mid price phone, 0:07:54.920 --> 0:07:58.520 uh five G phone, you know, perhaps a new supercycle 0:07:58.560 --> 0:08:03.520 if you will, for the five G phone pandemic, this crisis, 0:08:03.560 --> 0:08:09.200 this economic uncertainty impacting those product rollouts. Yeah, that's really 0:08:09.240 --> 0:08:12.200 I think the bigger question. If you look at what 0:08:12.360 --> 0:08:16.320 we're seeing with unemployment, the average consumer focus more about 0:08:16.320 --> 0:08:19.440 their health, groceries and hand sanitized and their thousand now 0:08:19.480 --> 0:08:23.000 our plus iPhones. What does the man look like over 0:08:23.040 --> 0:08:25.760 the next six, twelve, eighteen months, you know, and I 0:08:25.840 --> 0:08:29.160 see at least right now from our data points in Asia, 0:08:29.720 --> 0:08:32.120 it's showing that this is going to be what I 0:08:32.120 --> 0:08:35.880 would call a moderate products cycle, not the initial supercycle 0:08:36.280 --> 0:08:39.680 from five G, but it's a two parts supercycle which 0:08:39.720 --> 0:08:42.240 goes in two thousand twenty one. I mean, you'll see 0:08:42.240 --> 0:08:45.880 about ten to fifteen percent taken off units. But when 0:08:45.920 --> 0:08:49.880 you look at that, you have nine million I phones. 0:08:50.000 --> 0:08:53.440 Just to put numbers around it, three hundred fifty million 0:08:53.480 --> 0:08:56.640 of those iPhones have not upgraded their phone in forty 0:08:56.679 --> 0:08:59.880 two months, so there's massive pent up demand. But that's 0:09:00.040 --> 0:09:02.360 us and why they have the lower end version on 0:09:02.440 --> 0:09:05.440 the FD with three nine nine price points, which could 0:09:05.440 --> 0:09:09.040 be attractive to many consumers in this type of environment. 0:09:10.040 --> 0:09:11.560 All right, da, in time we have Left, I want 0:09:11.559 --> 0:09:13.160 to switch gears a little bit. We've got Uber and 0:09:13.520 --> 0:09:16.880 Lift coming up earnings wise. Boy, when you think about 0:09:16.920 --> 0:09:20.720 those companies, um, I just is there's just no demand 0:09:20.840 --> 0:09:22.720 for those products? Is that just kind of dry up? 0:09:22.760 --> 0:09:27.079 What's the status of Lift and Uber? It's a category 0:09:27.160 --> 0:09:29.120 five storm. I mean when you think about the gig 0:09:29.160 --> 0:09:32.280 economy from an Airbnb to Uber and left, they're really 0:09:32.440 --> 0:09:35.840 in the eye of the storm. Now for Uber uber Eats, 0:09:36.160 --> 0:09:39.400 which was really i'd say the black cloud on the 0:09:39.400 --> 0:09:43.240 story has now actually become a benefit. But this is 0:09:43.240 --> 0:09:47.080 another one'll ride. We cut our numbers. Wow, But I 0:09:47.120 --> 0:09:49.360 think it's one where you look, if you look at 0:09:49.360 --> 0:09:53.439 the valuation, can they navigate through the small equity perspective? 0:09:53.440 --> 0:09:55.960 We think the answers yes, and then you look at 0:09:56.000 --> 0:09:59.480 obviously a much more moderate growth profile. But I think 0:09:59.480 --> 0:10:01.560 it's a pro offitable one and it's one of these 0:10:01.600 --> 0:10:06.080 investors they're looking out six twelve, eighteen months with an 0:10:06.160 --> 0:10:10.960 Uber with you in a semi normalized environment obviously one 0:10:11.000 --> 0:10:15.559 that has you know, just massive uncertainty abound. So as 0:10:15.600 --> 0:10:19.080 you talk to the companies and Dan, are they concerned 0:10:19.080 --> 0:10:22.319 at all about consumer behavior? May there may be some 0:10:22.520 --> 0:10:26.040 permanent changes to consumer behavior that will either work in 0:10:26.080 --> 0:10:28.640 the favor or maybe against the kind of the ride 0:10:28.640 --> 0:10:32.000 hailing business model in general. Yeah, in terms of the 0:10:32.000 --> 0:10:35.199 gig economy and ride handling, it's all headwards. I mean, 0:10:35.200 --> 0:10:38.920 there's really no glimmer of positive in this environment. I 0:10:38.960 --> 0:10:42.040 think they're from a business model perspective, going to have 0:10:42.120 --> 0:10:45.520 to do things to get consumers comfortable with the sefety 0:10:45.640 --> 0:10:50.559 of the vehicles. From a COVID perspective, and there are concerns, 0:10:50.600 --> 0:10:52.920 and I think there's one when you look at ride 0:10:53.000 --> 0:10:56.520 charns what the market opportunity looks like on the other 0:10:56.559 --> 0:10:58.920 side of this dark valley, And I think you're gonna 0:10:58.960 --> 0:11:02.319 have tend to sifteam scent of consumers that will not 0:11:02.480 --> 0:11:05.480 get into a ride sharing vehicle, let alone maybe a 0:11:05.600 --> 0:11:09.840 taxire or mass transportation. So that's definitely a big issue 0:11:09.920 --> 0:11:13.000 here that needs to be navigated for these comings. But 0:11:13.080 --> 0:11:18.200 next week leaches the first step to getting some visibility here. 0:11:18.760 --> 0:11:20.920 And just real quick twenty seconds, how are the balance 0:11:20.920 --> 0:11:25.120 sheets right now? The balance sheets? We they'll get through 0:11:25.160 --> 0:11:27.199 the storm, and I have some more equity perspective. But 0:11:27.200 --> 0:11:29.160 they're gonna have to cut cost. I mean it's gonna 0:11:29.200 --> 0:11:32.840 be some you know, some pain ahead from a cost 0:11:32.880 --> 0:11:35.760 kind of perspective. Hey, Dan, thanks so much for joining us. 0:11:35.800 --> 0:11:38.720 We always appreciate your perspective on all things technology. Dan 0:11:38.800 --> 0:11:42.320 ives is a senior technology analys for web Bush Securities. Uh. 0:11:42.360 --> 0:11:43.960 You know, we had some good numbers out of Apple, 0:11:44.120 --> 0:11:46.720 and as Dan was suggesting here, the business model, uh, 0:11:46.920 --> 0:11:49.679 is pretty robust when you take a look at the Apple, 0:11:50.080 --> 0:11:51.880 when you take a look at the new products they 0:11:51.880 --> 0:11:54.560 have coming as well as the growth of their services business, 0:11:54.559 --> 0:11:56.439 which is Dan has said has really been kind of 0:11:56.480 --> 0:11:59.680 the bedrock for the company and the growth story going 0:11:59.760 --> 0:12:02.440 for or so Apple some solid results stock after trading 0:12:02.480 --> 0:12:05.880 off initially kind of coming back so uh, investors kind 0:12:05.880 --> 0:12:12.280 of looking towards the other side of that right now. 0:12:12.320 --> 0:12:14.280 We're taking a look at the markets. Uh, you know, 0:12:14.320 --> 0:12:15.920 a red day in the markets here when you take 0:12:15.920 --> 0:12:19.800 a look at the SMP five thirty three decline that 0:12:20.000 --> 0:12:23.040 sell off we had as a pandemic really became apparent 0:12:23.120 --> 0:12:25.720 for investors. We clawed back almost half of that. The 0:12:25.800 --> 0:12:28.280 question is where do we go from here to help 0:12:28.360 --> 0:12:31.400 us with that we welcome uh and Witty Bahuguna. Uh. 0:12:31.600 --> 0:12:34.199 She is a head of multi asset strategy at Columbia 0:12:34.280 --> 0:12:36.920 thread Needle Investments. Uh, and Witty, we thank you so 0:12:37.040 --> 0:12:39.000 much for joining us here. I think a lot of 0:12:39.040 --> 0:12:41.840 investors are just trying to get a handle on has 0:12:41.880 --> 0:12:45.719 the market bounced back too much? Given what we are 0:12:45.840 --> 0:12:48.400 seeing in terms of macro economic data, given what we're 0:12:48.440 --> 0:12:51.880 seeing in terms of eight earnings and lack of earnings forecast? 0:12:52.120 --> 0:12:53.520 How do you what do you make of the market 0:12:53.559 --> 0:12:57.680 right here? And Witty Hi, Paul um, Yes, I think 0:12:58.360 --> 0:13:01.599 the rebound from the often we saw in March have 0:13:01.800 --> 0:13:07.680 been spectacular. Part of it understandable given the amount of 0:13:08.600 --> 0:13:13.720 monetary and physical support we have seen announced since the 0:13:13.720 --> 0:13:18.160 crisis began. But the speed of the rebound have been 0:13:18.200 --> 0:13:22.600 spectacular and does seem a bit ahead of fundamental given 0:13:22.720 --> 0:13:27.720 what lies ahead for the next forceable couple of quarters 0:13:27.760 --> 0:13:32.600 at least. Paul, alright, so it's really interesting here again 0:13:32.640 --> 0:13:36.319 we had to these incredible gyrations down first and then up. 0:13:36.320 --> 0:13:39.000 How do you How should investors, to the extent they 0:13:39.080 --> 0:13:42.400 want to look to the other side of this pandemic, 0:13:42.640 --> 0:13:47.520 how should they be positioning themselves right here. So I 0:13:47.559 --> 0:13:51.880 think if you're thinking twelve to eighteen months ahead, where 0:13:52.120 --> 0:13:56.719 we hopefully Paul have much clarity on UM, not just 0:13:57.240 --> 0:14:01.160 the not not just how they NOMY will respond, but 0:14:01.320 --> 0:14:05.920 whether we have some sort of vaccine or therapeutics to 0:14:06.040 --> 0:14:12.760 help the economy open up substantially, not just gradually. I 0:14:12.800 --> 0:14:16.199 think twelve months to eighteen months ahead we should not 0:14:16.320 --> 0:14:19.120 see much difference in our positioning we I think we 0:14:19.120 --> 0:14:22.800 should see equities, big bonds and your standard as a 0:14:22.880 --> 0:14:27.000 allocation will make sense looking ahead look twelve to eighteen months. 0:14:27.040 --> 0:14:31.080 But in the short term, the bounce back has been, 0:14:31.120 --> 0:14:35.040 as you mentioned, spectacular and appears a bit ahead of 0:14:35.200 --> 0:14:39.520 where the fundamentals are currently. So looking a few quarters ahead, 0:14:39.560 --> 0:14:41.600 I think it's probably best to be a little more 0:14:41.600 --> 0:14:50.080 cautiously positioned UM and think about how this economy opens up, 0:14:50.160 --> 0:14:53.080 and what do we see in terms of people coming back, 0:14:53.120 --> 0:14:57.600 consumers spending again, businesses opening up, and the production take off. 0:14:59.320 --> 0:15:01.880 And cautially yeah, exactly, because one of the things that 0:15:01.920 --> 0:15:05.920 I know is has many economists and investors concerned is 0:15:05.960 --> 0:15:08.080 just the state of the labor market. This is a 0:15:08.120 --> 0:15:11.840 consumer driven economy and we've had boy over thirty million 0:15:11.960 --> 0:15:15.640 jobs lost just in the last five to six weeks, 0:15:15.640 --> 0:15:19.560 just stunning, stunning numbers. Um, how does that suggest to 0:15:19.640 --> 0:15:23.120 you that this economy will come back? How are you guys? 0:15:23.280 --> 0:15:26.800 What's your base case for how the economy uh will bottom? 0:15:26.880 --> 0:15:30.080 Where will bottom? And how will come back up? So 0:15:30.160 --> 0:15:33.080 that is the key question everyone's asking these days, and 0:15:33.160 --> 0:15:35.680 our base cases that we will not see a V 0:15:35.880 --> 0:15:40.200 shaped rebound in the economy. Now, the markets may behave differently, Paul, 0:15:40.280 --> 0:15:42.880 and as you can see, they already are, but the 0:15:43.040 --> 0:15:48.400 economy will most likely see a protracted recovery. The numbers 0:15:48.440 --> 0:15:52.440 you mentioned are stunning. These are very expected though, because 0:15:52.480 --> 0:15:56.960 this is a policy induced shutdown of the economy. Um. 0:15:57.040 --> 0:16:02.000 So we are encouraging people not to work. But the 0:16:03.080 --> 0:16:07.440 recovery will be from from those levels of unemployment is 0:16:07.520 --> 0:16:12.000 never quite immediate. Companies go out of business, it takes 0:16:12.000 --> 0:16:16.400 a time to restart. Employment takes time, some people decide 0:16:16.440 --> 0:16:19.920 to leave the labor force. All those dynamics makes us 0:16:19.960 --> 0:16:24.120 think that this will be a protracted, you shaped or 0:16:25.040 --> 0:16:29.680 um slower recovery then, UM, then then you then you 0:16:29.680 --> 0:16:33.240 would think if it was a simple exogenous shock. I 0:16:33.280 --> 0:16:36.000 think what would be really critical is to build people's 0:16:36.040 --> 0:16:42.480 confidence to come back to um to to to sports arenas, theaters, 0:16:42.600 --> 0:16:45.920 and and start enjoying life again, which drives a large 0:16:45.960 --> 0:16:49.200 part of the U S economy, and we expect that 0:16:49.280 --> 0:16:52.280 will be a slow process. Now, what would completely change 0:16:52.280 --> 0:16:56.160 the dynamics is that if we have a sure um 0:16:56.480 --> 0:16:59.480 medical solution to all this, as you can see if 0:16:59.480 --> 0:17:02.080 pisotic leave, when we get some confidence that there will 0:17:02.120 --> 0:17:05.159 be a vaccine, there will be a heteropeutic drug that 0:17:05.280 --> 0:17:09.399 helps us fight even the even the virus if someone 0:17:09.440 --> 0:17:12.760 gets it. Those sort of medical developments can change the 0:17:12.840 --> 0:17:17.000 dynamic very quickly. But right now our expectations are that 0:17:17.080 --> 0:17:22.320 those are slower movie uh solutions and and likely we 0:17:22.400 --> 0:17:26.199 are going to see it retracted. And I'm sorry I 0:17:26.200 --> 0:17:29.200 have to interrupt here. We have to go to Connecticut 0:17:29.240 --> 0:17:32.600 Governor Ned Lamont and Witty Bahuguna head a multi asset strategy, 0:17:32.640 --> 0:17:38.120 Columba thread Little thanks so much. Well, we're looking as 0:17:38.119 --> 0:17:40.639 we hear more and more from state governors around the country, 0:17:40.640 --> 0:17:43.119 where you're really coming to get us get a sense 0:17:43.200 --> 0:17:47.240 of the fiscal pressures put upon state and local municipal budgets. 0:17:47.280 --> 0:17:49.440 Of question is what does that mean for the municipal 0:17:49.480 --> 0:17:52.879 bond investors that have been supporting uh, these entities to 0:17:52.960 --> 0:17:56.120 do that. We welcome Joe my sec He covers all 0:17:56.160 --> 0:17:59.680 things municipal bonds for Bloomberg Briefs. Joe, thanks so much 0:17:59.720 --> 0:18:03.879 for joining us again. So let's talk about this the 0:18:04.240 --> 0:18:08.080 I guess the stress that states are being put under 0:18:08.280 --> 0:18:10.800 the finances of these states and how much can the 0:18:10.840 --> 0:18:15.600 federal government actually help them out. Well, nice to be 0:18:15.720 --> 0:18:19.520 with you, Mr Sweeney. Um, you know, it's uh that 0:18:19.680 --> 0:18:26.000 the federal government is so far providing help in the 0:18:26.040 --> 0:18:29.280 form of basically no borrowing from the Fed, but it's 0:18:29.359 --> 0:18:34.199 also now looking at possibly one trillion dollar package. This 0:18:34.280 --> 0:18:37.880 is going to be next uh you know aid package. 0:18:38.119 --> 0:18:42.679 Nancy Pelosi said she's heard that there are demands were 0:18:42.720 --> 0:18:46.639 up to a trillion dollars. So we'll see, um, you know. 0:18:46.760 --> 0:18:51.280 Then you know in Congress they're not they're not meeting 0:18:51.400 --> 0:18:54.440 right now about it, and the states and municipalities are 0:18:54.480 --> 0:18:57.840 really uh in a spot they're they're looking forward to 0:18:57.840 --> 0:19:00.439 getting some of this money. Well, it's in interesting what 0:19:00.480 --> 0:19:02.879 we've seen, Joe, as you well know, is this virus 0:19:03.040 --> 0:19:05.800 is has not you know, been equal across the country. 0:19:05.840 --> 0:19:08.919 Certain hotspots, whether it's on the coast or something like that, 0:19:08.960 --> 0:19:13.439 in states like New Jersey, Connecticut, Uh, New York certainly 0:19:13.480 --> 0:19:17.280 even California, you know, bearing a higher a brunt of 0:19:17.320 --> 0:19:20.399 this than some other states. How the securities how he 0:19:20.440 --> 0:19:22.440 missed a bond market kind of treated some of those 0:19:22.520 --> 0:19:27.439 high risk states. Uh, you know, it's it's uh, you know, 0:19:27.520 --> 0:19:32.200 the bond market right now is uh, it's it's it's 0:19:32.320 --> 0:19:36.240 trying desperately to get back to normal. So we've seen 0:19:37.320 --> 0:19:40.520 sales new issue sales the last you know, three weeks 0:19:40.600 --> 0:19:42.720 or so, it's wee or four weeks. So we've we've 0:19:42.760 --> 0:19:46.239 seen people come to market. Um, we haven't seen uh, 0:19:47.040 --> 0:19:50.720 you know, ballout spreads. But you know, you talk about 0:19:50.720 --> 0:19:53.840 the states under pressure, you know, it's obviously you know, 0:19:53.880 --> 0:19:56.560 a good idea for for New Jersey not to come 0:19:56.600 --> 0:20:00.119 to market, you know, possibly right now, although it's as 0:20:00.119 --> 0:20:03.119 similarly enough, Illinois plans to come to market in a 0:20:03.160 --> 0:20:08.240 couple of weeks. And another issue I wrote about today, Uh, 0:20:08.400 --> 0:20:12.560 the Metropolitan Transportation Authority is coming to market next week, 0:20:12.960 --> 0:20:17.720 which is sort of astounding because these you know, Illinois 0:20:17.720 --> 0:20:20.040 and the m T a h in addition to New 0:20:20.119 --> 0:20:22.600 York city, of course, have been sort of the faces 0:20:22.640 --> 0:20:26.000 of the pandemic so far. What kind of premium are 0:20:26.000 --> 0:20:28.200 they will they have to pay? Do you think to 0:20:28.280 --> 0:20:31.719 get back into the market given what's really changed for 0:20:31.880 --> 0:20:37.320 their finances in their states? Wow? Okay, so Illinois. Uh, 0:20:37.720 --> 0:20:41.439 they are about four other basis points over the triple 0:20:41.520 --> 0:20:45.520 A benchmark in ten years now, so you know that's 0:20:45.720 --> 0:20:49.679 in the five maybe in the sixes, uh, which you 0:20:49.680 --> 0:20:52.960 know right now the triple A bench markets at one 0:20:53.080 --> 0:20:55.320 forty two, So that's what you're getting one of forty 0:20:55.359 --> 0:20:58.080 two tax exempt in ten years. Uh? Now are you 0:20:58.119 --> 0:21:00.359 going to get four hundred or five hundred bases points? 0:21:00.400 --> 0:21:03.200 I don't know. A lot could happen in two weeks, 0:21:03.240 --> 0:21:09.200 but you know it's possible. M T A Uh, you know, 0:21:09.520 --> 0:21:13.840 obviously Les because M T A is higher rating. He's 0:21:13.920 --> 0:21:18.200 rated eight too with bestment grade by Booty's and uh, 0:21:18.240 --> 0:21:21.920 you know, it's it's it's amazing there's a credit where 0:21:22.000 --> 0:21:26.920 the subway ridership has dropped, so it's the cash is 0:21:27.560 --> 0:21:32.000 has evaporated, and they've gone to the federal government. They've 0:21:32.080 --> 0:21:35.560 got to uh, you know, everyone you could think of 0:21:36.440 --> 0:21:40.720 asking for money, and uh, you know, it's just such 0:21:40.760 --> 0:21:44.080 a fixture in New York though that you know, it's 0:21:44.119 --> 0:21:47.520 I suspect it won't do, you know, as badly as 0:21:47.720 --> 0:21:51.920 perhaps Illinois. Interesting, I see that state unemployment funds also 0:21:52.000 --> 0:21:55.200 another area of risk here. They're you know, going broke 0:21:55.280 --> 0:21:59.000 from the flood of claims California, New York, Texas among states. 0:21:59.040 --> 0:22:01.640 They're also seeking federal loans. How do you think that's 0:22:01.640 --> 0:22:04.960 going to play out. I think there will be no 0:22:05.119 --> 0:22:08.400 choice but for a Congress to make sure that those 0:22:08.720 --> 0:22:14.520 funds are topped up. Uh, it's just it's just it's 0:22:14.520 --> 0:22:17.840 an unfortunate squeeze. But this is what happens when you 0:22:18.080 --> 0:22:22.960 decided to shut down. I guess it's about of your 0:22:22.960 --> 0:22:28.280 economy and so well. See federal government to the rescue. 0:22:28.359 --> 0:22:31.960 Joe my Sac, Editor Bloomberg Brief for Bloomberg News, giving 0:22:32.040 --> 0:22:33.760 us are everything we need to know about the miss 0:22:33.920 --> 0:22:36.520 bond market, and of course, as we hear from governors 0:22:36.760 --> 0:22:39.359 around the country. Ned Lamont of Connecticut we heard earlier 0:22:39.359 --> 0:22:42.480 today talking about the uh the deficit in the state 0:22:42.480 --> 0:22:44.879 of Connecticut for this fiscal year. We've heard about that 0:22:44.960 --> 0:22:50.760 from Governor Cuomo as well. But we had some really 0:22:50.760 --> 0:22:53.840 tough results out of the oil giants Chevron and Exxon 0:22:53.920 --> 0:22:56.400 Mobile here not surprising, I guess with what we've seen 0:22:56.440 --> 0:23:00.080 the decline in global oil prices as supplying to and 0:23:00.160 --> 0:23:03.400 dynamics just really fall apart for global crude. To help 0:23:03.440 --> 0:23:05.560 us walk us through the details, who welcome our good 0:23:05.560 --> 0:23:10.320 friend Fernando Valier, oil and gas analysts for Bloomberg Intelligence. Fernando, 0:23:10.320 --> 0:23:12.280 thank you so much for joining us. Give us kind 0:23:12.280 --> 0:23:15.639 of the key takeaways at thirty foot takeaways you have 0:23:16.040 --> 0:23:19.960 from these two giants Chevron and ex On Mobile and Paul, 0:23:20.040 --> 0:23:22.919 great to be here. I think you know. With excell 0:23:22.960 --> 0:23:25.800 And it's really just a tight rope. They have to 0:23:26.000 --> 0:23:29.520 balance uh their balance shoot at the same time as 0:23:29.640 --> 0:23:32.240