1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,960 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Looking 5 00:00:27,960 --> 00:00:30,360 Speaker 1: ahead to several key events including that events on Wednesday, 6 00:00:30,360 --> 00:00:33,000 Speaker 1: pay Rolls Friday just around the corner as well. Fantastic 7 00:00:33,040 --> 00:00:35,160 Speaker 1: lineup of guests for you through the week and this 8 00:00:35,200 --> 00:00:37,519 Speaker 1: morning as well. And we begin this morning's program with 9 00:00:37,560 --> 00:00:40,600 Speaker 1: Matt Hornback of Morecan Stanley. We're lucky to have access 10 00:00:40,640 --> 00:00:43,879 Speaker 1: to several great rate strategists on the street. Matt, I'm 11 00:00:43,880 --> 00:00:45,800 Speaker 1: pleased to say it's one of them. Matt. Fantastic to 12 00:00:45,800 --> 00:00:47,800 Speaker 1: have you with us on the program. Let's just start 13 00:00:47,800 --> 00:00:49,839 Speaker 1: with the price action right in front of our faces 14 00:00:49,960 --> 00:00:53,120 Speaker 1: right now, equitris law again and a bond market that's 15 00:00:53,120 --> 00:00:57,520 Speaker 1: really not doing a whole lot. Why so, Matt, Hey, John, 16 00:00:57,840 --> 00:01:00,360 Speaker 1: thanks for having me on. So you know, look, this 17 00:01:00,520 --> 00:01:03,200 Speaker 1: goes back to an issue that we actually talked about 18 00:01:03,280 --> 00:01:05,480 Speaker 1: a couple of weeks back, which is the idea that 19 00:01:06,120 --> 00:01:09,720 Speaker 1: bond markets are caught between a fiscal rock and a 20 00:01:09,920 --> 00:01:14,280 Speaker 1: quee hard place right where's basically talking about. Uh, this 21 00:01:14,280 --> 00:01:17,840 Speaker 1: this interplay between all of the issuance coming to market 22 00:01:18,360 --> 00:01:21,000 Speaker 1: and all of the issuance that's ultimately going to be 23 00:01:21,080 --> 00:01:25,559 Speaker 1: bought in the secondary by the Federal Reserve UM. You know, now, 24 00:01:25,760 --> 00:01:29,440 Speaker 1: what we're seeing recently is the FED peeling back on 25 00:01:29,640 --> 00:01:32,920 Speaker 1: the pace at which it is buying treasuries. UM. That's 26 00:01:32,959 --> 00:01:36,440 Speaker 1: probably one of the reasons why on a daylight today 27 00:01:36,480 --> 00:01:39,800 Speaker 1: where the SMP is down about a percentage point, uh, 28 00:01:39,840 --> 00:01:43,000 Speaker 1: you're only getting a basis point rally in the treasury market. 29 00:01:43,520 --> 00:01:48,520 Speaker 1: Investors are very worried about the supply matt If you 30 00:01:48,560 --> 00:01:50,600 Speaker 1: look at the two year yield in the US, it's 31 00:01:50,720 --> 00:01:53,960 Speaker 1: linear and certainly log linear, and it's just grinding ever 32 00:01:54,120 --> 00:01:57,560 Speaker 1: lower yield. Do you extrapolate that out to an ever 33 00:01:57,760 --> 00:02:00,880 Speaker 1: lower and lower and lower yield or can the FED 34 00:02:01,040 --> 00:02:06,480 Speaker 1: actually can control that guide glide path at the end 35 00:02:06,480 --> 00:02:09,840 Speaker 1: of the day, That that the FED um has a 36 00:02:09,919 --> 00:02:13,520 Speaker 1: monoicum of control over the markets during certain periods of time, 37 00:02:13,600 --> 00:02:16,560 Speaker 1: and then there are other periods of time. Remember the 38 00:02:16,720 --> 00:02:20,920 Speaker 1: Taper tantrum in two thousand thirteen, where it completely loses 39 00:02:20,960 --> 00:02:24,280 Speaker 1: control of the market based on you know, a handful 40 00:02:24,320 --> 00:02:27,840 Speaker 1: of words coming out of somebody's mouth, and so it's 41 00:02:27,880 --> 00:02:31,280 Speaker 1: a it's a very delicate balance. Um. I'd say at 42 00:02:31,360 --> 00:02:35,280 Speaker 1: this point, what the FED is trying to figure out 43 00:02:35,400 --> 00:02:39,080 Speaker 1: is what kind of forward guidance can can get them 44 00:02:39,120 --> 00:02:43,400 Speaker 1: to allow yields to remain low and yet when the 45 00:02:43,440 --> 00:02:46,840 Speaker 1: time is right, allow those yields to start to gradually rise. 46 00:02:47,120 --> 00:02:49,240 Speaker 1: It's a very tough balance. This is not an easy 47 00:02:49,280 --> 00:02:52,079 Speaker 1: thing to accomplish. Matt. What would yield to be if 48 00:02:52,320 --> 00:02:57,200 Speaker 1: the US for not selling record amounts of debt right now? 49 00:02:57,440 --> 00:03:00,120 Speaker 1: I think yeah, I like I think they would They 50 00:03:00,120 --> 00:03:03,760 Speaker 1: would probably be much lower. Um. You you could easily 51 00:03:03,800 --> 00:03:06,960 Speaker 1: see the tenure treasury yield revisit the all time low 52 00:03:07,040 --> 00:03:11,080 Speaker 1: of thirty basis points. Again, the amount of securities that 53 00:03:11,160 --> 00:03:15,840 Speaker 1: the FED is removing from the market is unprecedented. And 54 00:03:15,880 --> 00:03:19,240 Speaker 1: when we talk about the supply demand balance between what 55 00:03:19,320 --> 00:03:21,760 Speaker 1: the Treasury will issue and what the FED is buying, 56 00:03:22,040 --> 00:03:24,320 Speaker 1: we also have to put that into the context of 57 00:03:24,639 --> 00:03:27,280 Speaker 1: coupon bonds. Right now, we we know that there has 58 00:03:27,320 --> 00:03:30,040 Speaker 1: been a tremendous amount of Treasury bills that have been 59 00:03:30,040 --> 00:03:32,960 Speaker 1: issued this year. We also know that towards the end 60 00:03:33,000 --> 00:03:35,080 Speaker 1: of last year, the FED was buying a lot of 61 00:03:35,080 --> 00:03:37,920 Speaker 1: treasury bills. Now the FEED is buying a lot of 62 00:03:37,960 --> 00:03:43,040 Speaker 1: treasury coupon bearing bonds. UH. And if they weren't, if 63 00:03:43,080 --> 00:03:45,160 Speaker 1: if the US government wasn't going to issue any of 64 00:03:45,200 --> 00:03:48,920 Speaker 1: those coupon bonds, almost certainly the tenure yield would be 65 00:03:48,920 --> 00:03:51,840 Speaker 1: closer to zero than one. Man. You've got a macro 66 00:03:51,920 --> 00:03:54,600 Speaker 1: mandate for Morgan Stanley right now, let's macro over to 67 00:03:54,640 --> 00:03:58,960 Speaker 1: Ellen Zanner. Combine her inflation view with your view of 68 00:03:59,000 --> 00:04:02,600 Speaker 1: fixed income as indicator a choice for our listeners. Are 69 00:04:02,640 --> 00:04:05,280 Speaker 1: they ever going to garner a constructive real yield? I 70 00:04:05,280 --> 00:04:07,760 Speaker 1: don't mean a positive real yield, I mean one that 71 00:04:07,800 --> 00:04:12,160 Speaker 1: they can actually bank well. I mean this has been 72 00:04:12,200 --> 00:04:15,720 Speaker 1: a phenomenon in the world over And the answer, probably 73 00:04:15,800 --> 00:04:19,520 Speaker 1: for the next five years is no. Um, you know it. 74 00:04:19,640 --> 00:04:23,360 Speaker 1: It's you know, real yield is a scarce sset these days, 75 00:04:24,279 --> 00:04:27,839 Speaker 1: especially when the FED is removing so many of those 76 00:04:27,880 --> 00:04:32,279 Speaker 1: securities that would otherwise offer you a positive real yield. 77 00:04:32,839 --> 00:04:35,039 Speaker 1: I think you would need to see in order in 78 00:04:35,120 --> 00:04:37,720 Speaker 1: order for me to be wrong on that, you would 79 00:04:37,800 --> 00:04:42,919 Speaker 1: need to see the government expand the deficit UH in 80 00:04:42,960 --> 00:04:45,919 Speaker 1: a continuous way, I'm not talking about one year of 81 00:04:46,000 --> 00:04:49,480 Speaker 1: higher deficits or two years of higher deficits. I'm talking 82 00:04:49,480 --> 00:04:54,919 Speaker 1: about year after year after year of continuously expanding deficits. 83 00:04:54,920 --> 00:04:58,159 Speaker 1: This is about a rate of change, not just a 84 00:04:58,240 --> 00:05:01,320 Speaker 1: nominal number every year. We need to see that happen 85 00:05:01,760 --> 00:05:05,560 Speaker 1: in order for real yells to really start going considerably higher. 86 00:05:05,720 --> 00:05:07,719 Speaker 1: Let's talk about the recovery as well, Matt. A little 87 00:05:07,720 --> 00:05:09,279 Speaker 1: bit later this morning, I'll be catching up with your 88 00:05:09,320 --> 00:05:11,640 Speaker 1: colleague chat and I Ah the chief economist at more 89 00:05:11,680 --> 00:05:15,080 Speaker 1: Con Stanley. There is a focus on consumption, and as 90 00:05:15,080 --> 00:05:17,479 Speaker 1: I look at the sequencing of the reopening across Europe 91 00:05:17,480 --> 00:05:20,800 Speaker 1: in a place like Italy, it's manufacturing last first rather 92 00:05:21,080 --> 00:05:22,640 Speaker 1: and then at the back end it will be the 93 00:05:22,680 --> 00:05:26,400 Speaker 1: consumer facing sectors of the economy that opened last. And 94 00:05:26,440 --> 00:05:29,279 Speaker 1: you guys are pointing out the consumption will be the 95 00:05:29,360 --> 00:05:32,120 Speaker 1: LaGG art here, the slowest to recover. Now with that 96 00:05:32,200 --> 00:05:34,279 Speaker 1: in mind, how hopeful can you be about a short, 97 00:05:34,320 --> 00:05:38,000 Speaker 1: sharp recovery if consumer facing sectors the economy a last 98 00:05:38,080 --> 00:05:41,880 Speaker 1: to open and consumption will be the laggett here. Well, 99 00:05:41,920 --> 00:05:45,960 Speaker 1: I mean particularly in the US. John. If if that's 100 00:05:46,040 --> 00:05:48,880 Speaker 1: the case, it's it's going to be a long slog 101 00:05:48,920 --> 00:05:51,159 Speaker 1: because at the end of the day of the US 102 00:05:51,240 --> 00:05:55,880 Speaker 1: economy is mostly a consumer based economy, and so if 103 00:05:55,880 --> 00:05:58,799 Speaker 1: we experience the same type of dynamic that we're seeing 104 00:05:58,839 --> 00:06:02,120 Speaker 1: play out in China, for example, Uh, then it is 105 00:06:02,160 --> 00:06:04,440 Speaker 1: going to be a slow recovery. And that is what 106 00:06:04,520 --> 00:06:08,920 Speaker 1: our economists are suggesting in their forecast. We're not really 107 00:06:08,960 --> 00:06:13,320 Speaker 1: getting back to any any kind of consistent level of 108 00:06:13,440 --> 00:06:17,880 Speaker 1: potential growth until two uh, you know, and and that 109 00:06:18,040 --> 00:06:20,680 Speaker 1: is something that, um, we're all going to have to 110 00:06:20,720 --> 00:06:23,960 Speaker 1: deal with, right It's the U s economy is is 111 00:06:24,040 --> 00:06:28,760 Speaker 1: driven by consumption. I'm struck by Warren Buffett and what 112 00:06:28,800 --> 00:06:31,120 Speaker 1: he said this weekend. He was saying that he didn't 113 00:06:31,160 --> 00:06:34,880 Speaker 1: get calls because, frankly, or the fact that he was 114 00:06:34,920 --> 00:06:38,200 Speaker 1: getting calls were not actually in terms that were attractive 115 00:06:38,320 --> 00:06:40,919 Speaker 1: to him based on what the FED had done, based 116 00:06:40,960 --> 00:06:44,240 Speaker 1: on the intervention that basically they had artificially propped up 117 00:06:44,279 --> 00:06:46,880 Speaker 1: some of these companies and lowered borrowing costs. Do you 118 00:06:46,960 --> 00:06:51,360 Speaker 1: think that investors who are investing alongside the FED ultimately 119 00:06:51,560 --> 00:06:54,440 Speaker 1: will be struck with insolvencies and losses or do you 120 00:06:54,440 --> 00:06:57,520 Speaker 1: think that they just won't get very big returns. Well, 121 00:06:57,560 --> 00:06:59,360 Speaker 1: I just I don't think they're going to get very 122 00:06:59,360 --> 00:07:02,240 Speaker 1: big return please. Uh. At the end of the day 123 00:07:02,320 --> 00:07:06,120 Speaker 1: that the government, um has the government and the Fed 124 00:07:06,200 --> 00:07:09,560 Speaker 1: in the sense have a have a special ability uh 125 00:07:09,800 --> 00:07:13,080 Speaker 1: that it is not sort of commonplace in the sense 126 00:07:13,120 --> 00:07:15,800 Speaker 1: that they can go in uh and they can increase 127 00:07:15,840 --> 00:07:19,240 Speaker 1: their debtload. Right, the government can increase its debtload, um. 128 00:07:19,360 --> 00:07:23,880 Speaker 1: And and the cost of that over time ultimately would 129 00:07:23,880 --> 00:07:26,680 Speaker 1: be borne out through the currency. Right. And and what 130 00:07:26,720 --> 00:07:30,160 Speaker 1: we're seeing um over the over recent months is that 131 00:07:30,200 --> 00:07:33,120 Speaker 1: the currency hasn't had a problem with it. Now, that's 132 00:07:33,120 --> 00:07:35,880 Speaker 1: not to say that it will never have a problem 133 00:07:35,920 --> 00:07:38,400 Speaker 1: with it. And in fact, we do believe that the 134 00:07:38,480 --> 00:07:41,040 Speaker 1: dollar is evolving through a topping process. And at the 135 00:07:41,200 --> 00:07:43,680 Speaker 1: end of the end of the this year, the end 136 00:07:43,720 --> 00:07:46,080 Speaker 1: of of of the next year, the dollar is going 137 00:07:46,120 --> 00:07:49,840 Speaker 1: to be weaker, perhaps substantially weaker than it is today. 138 00:07:50,200 --> 00:07:53,800 Speaker 1: But that's ultimately where you would see uh see the 139 00:07:53,880 --> 00:07:58,160 Speaker 1: pain if you will, hitting the government and the government's 140 00:07:58,160 --> 00:08:00,520 Speaker 1: balance sheet uh is through the current see and we 141 00:08:00,520 --> 00:08:02,960 Speaker 1: have not yet really seen that to any degree worth 142 00:08:03,240 --> 00:08:05,640 Speaker 1: worth writing home about. Matt. We've gotta leave it that 143 00:08:05,720 --> 00:08:07,440 Speaker 1: sam My bestaid of saying, well you mouhm back that 144 00:08:07,840 --> 00:08:10,480 Speaker 1: of Morgan Stanley on the latest and the Treasury market 145 00:08:10,480 --> 00:08:23,800 Speaker 1: beyond right now is a really important interview, folks. I'm 146 00:08:23,800 --> 00:08:27,120 Speaker 1: looking down at the Plaza Hotel here on Central Park. 147 00:08:27,240 --> 00:08:29,560 Speaker 1: Jane Foley knows the history of the Plaza Hotel, but 148 00:08:29,600 --> 00:08:33,200 Speaker 1: what she really knows is eighteen months, seventeen months after 149 00:08:33,240 --> 00:08:36,280 Speaker 1: the Plaza Chord, three or five years ago, there was 150 00:08:36,320 --> 00:08:39,959 Speaker 1: the Louver Accord. The coffee was better there, and and Jane, 151 00:08:39,960 --> 00:08:43,239 Speaker 1: what's so important here is you can have dollar dynamics 152 00:08:43,240 --> 00:08:46,160 Speaker 1: and all this international economics and China in the US 153 00:08:46,240 --> 00:08:49,439 Speaker 1: now and all that, and then it leads to instabilities 154 00:08:49,480 --> 00:08:51,880 Speaker 1: where you've got to have a brand new meeting. How 155 00:08:51,920 --> 00:08:57,240 Speaker 1: close are we to instabilities in the Jane Foley world? Well, 156 00:08:57,240 --> 00:08:59,120 Speaker 1: I mean that is quite interesting. I think if the 157 00:08:59,559 --> 00:09:03,160 Speaker 1: dollar continued to be at these sorts of levels, maybe 158 00:09:03,240 --> 00:09:05,959 Speaker 1: for the next year or so, then I certainly think 159 00:09:06,000 --> 00:09:08,920 Speaker 1: that politics would certainly be coming into that equation. But 160 00:09:08,960 --> 00:09:11,880 Speaker 1: I think for now it's perhaps too early to be 161 00:09:12,360 --> 00:09:14,880 Speaker 1: wondering whether or not politics are going to come in, 162 00:09:14,960 --> 00:09:18,120 Speaker 1: what politics are going to potentially do. But I think 163 00:09:18,120 --> 00:09:20,200 Speaker 1: there's one thing that we can say is that we 164 00:09:20,240 --> 00:09:22,840 Speaker 1: are still, I think very much in the early phases 165 00:09:22,840 --> 00:09:25,880 Speaker 1: of this crisis. What you've just been outlining with respect 166 00:09:25,920 --> 00:09:29,720 Speaker 1: to unemployment is really just still the beginnings of the 167 00:09:29,840 --> 00:09:32,840 Speaker 1: demand site aspect of this crisis. If we get to 168 00:09:32,880 --> 00:09:36,160 Speaker 1: the end of the year, and as most economists untokipating, 169 00:09:36,480 --> 00:09:41,360 Speaker 1: we've still got very elevated unemployment used very suppressed wage inflation, 170 00:09:41,679 --> 00:09:45,160 Speaker 1: then we are still looking at very poor demand dynamic, 171 00:09:45,280 --> 00:09:49,600 Speaker 1: and that is going to feed back into stock market valuations. 172 00:09:49,640 --> 00:09:51,960 Speaker 1: It's going to feed through into all the economic data 173 00:09:52,000 --> 00:09:53,679 Speaker 1: that we're going to see, and it's not going to 174 00:09:53,760 --> 00:09:56,000 Speaker 1: be a pretty site, and gay not the way that 175 00:09:56,040 --> 00:09:58,199 Speaker 1: people are trying to Our governments are trying to plug 176 00:09:58,240 --> 00:10:01,520 Speaker 1: this gap, this demand gap is by printing money and 177 00:10:01,520 --> 00:10:03,880 Speaker 1: by issuing record amounts of debt. And we've talked about 178 00:10:03,920 --> 00:10:07,360 Speaker 1: the U s set to announce its quarterly funding on 179 00:10:07,640 --> 00:10:10,400 Speaker 1: Wednesday with record badge of debt sales. But it's not 180 00:10:10,440 --> 00:10:13,240 Speaker 1: just the US. It's also China, which is set to 181 00:10:13,400 --> 00:10:16,160 Speaker 1: issue a record amount of local government debt. It's also 182 00:10:16,200 --> 00:10:18,160 Speaker 1: in Europe or the e c B is expanding its 183 00:10:18,160 --> 00:10:21,480 Speaker 1: balance sheet. What is the long term consequence of this 184 00:10:21,720 --> 00:10:26,280 Speaker 1: massive sale of debt in nations worldwide. Well, I think 185 00:10:26,280 --> 00:10:28,720 Speaker 1: it depends which nation that you're in, because if you're 186 00:10:28,760 --> 00:10:32,199 Speaker 1: issuing debt in the currency that people really want to have, 187 00:10:32,280 --> 00:10:35,840 Speaker 1: which would be really most Western economies of the US 188 00:10:35,920 --> 00:10:39,400 Speaker 1: obviously and then European economies, they can issue debt and 189 00:10:39,679 --> 00:10:42,920 Speaker 1: they'll they'll they'll probably do okay. But if you want 190 00:10:42,960 --> 00:10:45,040 Speaker 1: to issue debt and you happen to be an emerging 191 00:10:45,080 --> 00:10:48,640 Speaker 1: market nation and you do not have at the patients 192 00:10:48,800 --> 00:10:51,640 Speaker 1: of international investors just wanting or lining up to buy 193 00:10:51,640 --> 00:10:54,600 Speaker 1: your debt, then you have an issue. And that is 194 00:10:54,640 --> 00:10:57,560 Speaker 1: I think again a real aspect of this crisis. I 195 00:10:57,600 --> 00:11:00,599 Speaker 1: think that the crisis that the emerging markets suffer it 196 00:11:00,640 --> 00:11:04,200 Speaker 1: could be really quite marked. And whereas Western governments can 197 00:11:04,280 --> 00:11:06,200 Speaker 1: find a way through this, and it's going to be 198 00:11:06,240 --> 00:11:08,679 Speaker 1: pretty tough. I think it's going to be really, really 199 00:11:08,720 --> 00:11:11,480 Speaker 1: tough if you happened to be in a very poor country. 200 00:11:11,840 --> 00:11:14,160 Speaker 1: Jen Let's touch on the US dollar as well. Many 201 00:11:14,160 --> 00:11:16,200 Speaker 1: people were talking about this for a long long time 202 00:11:16,280 --> 00:11:19,000 Speaker 1: that in the next downturn, any crisis, whatever shape it 203 00:11:19,080 --> 00:11:22,480 Speaker 1: might take, we might question the riskman againing characteristics of 204 00:11:22,480 --> 00:11:25,040 Speaker 1: the U. S dollar. Have we just cemented the status 205 00:11:25,200 --> 00:11:27,800 Speaker 1: as the haven currency. Do your in fact for a 206 00:11:27,800 --> 00:11:31,040 Speaker 1: whole lot longer the U S Dollar. I think we 207 00:11:31,120 --> 00:11:32,880 Speaker 1: have to be honest, and I think this is a 208 00:11:32,960 --> 00:11:35,319 Speaker 1: function of, you know, the last ten years. Maybe that's 209 00:11:35,320 --> 00:11:38,079 Speaker 1: the last twenty years, but certainly the last ten infer instance, 210 00:11:38,080 --> 00:11:39,440 Speaker 1: if you look at the data from the Bank of 211 00:11:39,480 --> 00:11:42,360 Speaker 1: International Secuments over the last ten years, really after the 212 00:11:42,400 --> 00:11:45,480 Speaker 1: global financial crisis, a huge amount of debt started to 213 00:11:45,520 --> 00:11:48,520 Speaker 1: be issued in US dollars. A huge amount of cash 214 00:11:48,800 --> 00:11:51,240 Speaker 1: of U. S. Dollars is held outside of the U S. 215 00:11:51,280 --> 00:11:53,959 Speaker 1: A lot of this is used for transactional purposes, again 216 00:11:54,040 --> 00:11:56,480 Speaker 1: in emerging market countries, and because a lot of these 217 00:11:56,480 --> 00:11:59,360 Speaker 1: have grown really very significantly in the last ten years, 218 00:11:59,640 --> 00:12:03,079 Speaker 1: there's just the need for dollars just to carry out businesses. 219 00:12:03,480 --> 00:12:06,400 Speaker 1: So from that point of view, the dollar is a 220 00:12:06,520 --> 00:12:09,679 Speaker 1: sort of a practical safe haven for many types of 221 00:12:09,960 --> 00:12:13,840 Speaker 1: smaller businesses and people around the world, particularly in e M. 222 00:12:13,880 --> 00:12:16,760 Speaker 1: And that's why I think when the dollar does eventually 223 00:12:16,760 --> 00:12:19,080 Speaker 1: turn lower, it could be a while, yeah, and it 224 00:12:19,120 --> 00:12:21,720 Speaker 1: could be linked to when confidence really does come back 225 00:12:21,720 --> 00:12:25,240 Speaker 1: in emerging markets. Jane, this is fascinating to me because 226 00:12:25,240 --> 00:12:28,640 Speaker 1: the implication here is that the Fed essentially monetizing the 227 00:12:28,679 --> 00:12:31,320 Speaker 1: debt of the United States and the United States selling 228 00:12:31,360 --> 00:12:36,079 Speaker 1: an unprecedented amount of treasuries will have no effective consequence 229 00:12:36,400 --> 00:12:38,120 Speaker 1: on the nation. I mean that is sort of the 230 00:12:38,120 --> 00:12:41,400 Speaker 1: the implication here if the dollar remains the funding source 231 00:12:41,480 --> 00:12:44,200 Speaker 1: to your and and and the the prime way that 232 00:12:44,200 --> 00:12:46,400 Speaker 1: that that people look for the currency. Is that correct? 233 00:12:46,440 --> 00:12:49,120 Speaker 1: Is that your is that your take? It certainly does 234 00:12:49,160 --> 00:12:51,240 Speaker 1: seem to be like that. And to put that into perspective, 235 00:12:51,280 --> 00:12:53,720 Speaker 1: I remember righting essays on this when I was at university, 236 00:12:53,720 --> 00:12:55,840 Speaker 1: and that was a long time ago. And yet you know, 237 00:12:56,000 --> 00:12:58,839 Speaker 1: we we can project ourselves forwards till today and we're 238 00:12:58,840 --> 00:13:02,360 Speaker 1: still at this situation. You know, when does the market crack? Now, 239 00:13:02,400 --> 00:13:05,280 Speaker 1: if you like, you can liken this to Japan. Now, 240 00:13:05,320 --> 00:13:07,199 Speaker 1: in Japan, of course, they've got a huge amount of that, 241 00:13:07,360 --> 00:13:10,199 Speaker 1: much larger than the US, and they have been issuing 242 00:13:10,920 --> 00:13:14,480 Speaker 1: huge amounts of Jgbsdvangage, Bannabeen hoovering up huge amounts of 243 00:13:14,760 --> 00:13:18,200 Speaker 1: of jgbs as well, and for years the market I said, well, 244 00:13:18,440 --> 00:13:20,240 Speaker 1: you know, our investor is going to give up on 245 00:13:20,320 --> 00:13:22,199 Speaker 1: this is as wrong as a yel is going to 246 00:13:22,280 --> 00:13:24,600 Speaker 1: go up, and yet they haven't. And it seems as 247 00:13:24,679 --> 00:13:29,160 Speaker 1: long as credit rating agencies remain calm, then the market 248 00:13:29,240 --> 00:13:32,200 Speaker 1: carries on buying this step. And it seems as long 249 00:13:32,280 --> 00:13:36,200 Speaker 1: as the government's do just enough to give this era 250 00:13:36,440 --> 00:13:41,040 Speaker 1: of fiscal control, then the market seems to poke with 251 00:13:41,120 --> 00:13:44,360 Speaker 1: this quite well. Jane, thank you so much, Jane, fully 252 00:13:44,559 --> 00:13:58,240 Speaker 1: with rabble banking. Julian, Emanuel, I read every word of 253 00:13:58,320 --> 00:14:00,520 Speaker 1: us note. He's got a note for so then they've 254 00:14:00,520 --> 00:14:03,880 Speaker 1: got seven pages of Excel spreadsheet in a fund that 255 00:14:04,000 --> 00:14:06,520 Speaker 1: I think I couldn't read when I was seventeen. I 256 00:14:06,679 --> 00:14:09,480 Speaker 1: certainly can't read it now. So Emmanuel of bt I, 257 00:14:09,600 --> 00:14:12,120 Speaker 1: you can claiming about the guest before they even get 258 00:14:12,200 --> 00:14:14,960 Speaker 1: to speak, But come on, he's one of these guys. 259 00:14:15,040 --> 00:14:17,840 Speaker 1: It's it's like at the end of the conversation, it's 260 00:14:17,880 --> 00:14:21,440 Speaker 1: like something off of a hieroglyphic, a fault museum of art. 261 00:14:21,720 --> 00:14:24,320 Speaker 1: So when it was Julian translate forest right now and 262 00:14:24,400 --> 00:14:27,520 Speaker 1: this and this continuum, Julian, Emmanuel, where do you fit 263 00:14:27,680 --> 00:14:31,520 Speaker 1: in on sell in May and go away? Well, Tom, 264 00:14:31,800 --> 00:14:34,280 Speaker 1: I hope you're going to disinfect the package with the 265 00:14:34,360 --> 00:14:37,680 Speaker 1: magnifying glass. That's gonna be on your doorstep tomorrow. So 266 00:14:38,080 --> 00:14:40,960 Speaker 1: that's the first thing I'd say, Look, if you if 267 00:14:41,000 --> 00:14:43,880 Speaker 1: you think about it, it's very clear that the rally 268 00:14:44,120 --> 00:14:48,800 Speaker 1: Austin the March is very much about the fat injections 269 00:14:48,840 --> 00:14:53,200 Speaker 1: of liquidity. Obviously the fiscal policy as well. And now 270 00:14:53,320 --> 00:14:55,720 Speaker 1: we're at this point where we've we've come all this 271 00:14:55,880 --> 00:14:59,960 Speaker 1: way and and frankly, what we're looking at is seven 272 00:15:00,000 --> 00:15:03,480 Speaker 1: are weeks of uncertainty. How does the economy reopen? What 273 00:15:04,120 --> 00:15:07,760 Speaker 1: does that look like? And you know, crucially, do we 274 00:15:07,960 --> 00:15:13,920 Speaker 1: have a spike in the coronavirus? Julian Gray is risk okay? Beautifully, 275 00:15:14,000 --> 00:15:17,760 Speaker 1: frank Julian Robert Kirby, the giant of capital Guardian Trust 276 00:15:17,800 --> 00:15:22,920 Speaker 1: of a million years ago, would say, opportunity, uncertainty go together. 277 00:15:23,520 --> 00:15:27,680 Speaker 1: Is this with this uncertainty, lousy March grade April is 278 00:15:27,720 --> 00:15:32,760 Speaker 1: now the mother of all times to reaffirm optimism. We 279 00:15:33,920 --> 00:15:37,360 Speaker 1: don't think it's right now. We think May could be rocky. Ultimately, 280 00:15:37,480 --> 00:15:40,720 Speaker 1: we do think that in the bigger picture it is 281 00:15:40,760 --> 00:15:43,320 Speaker 1: a time to reaffirm optimism. But I think we have 282 00:15:43,480 --> 00:15:46,360 Speaker 1: to be very honest and upfront about this. There is 283 00:15:46,440 --> 00:15:49,680 Speaker 1: an element of medicine that needs to progress over the 284 00:15:49,800 --> 00:15:52,240 Speaker 1: next five or six months. We're not exactly sure what 285 00:15:52,360 --> 00:15:55,800 Speaker 1: it is. Obviously a vaccine would be the best case scenario, 286 00:15:56,160 --> 00:15:58,920 Speaker 1: but we do need some sort of medical events or 287 00:15:59,040 --> 00:16:02,320 Speaker 1: some signs that the virus is going to be less 288 00:16:02,440 --> 00:16:05,120 Speaker 1: of an issue as we reopened the economy. But tell 289 00:16:05,160 --> 00:16:06,480 Speaker 1: you a great judy and science is going to be 290 00:16:06,480 --> 00:16:08,480 Speaker 1: a huge factor in the reopening of all of this. 291 00:16:08,600 --> 00:16:10,680 Speaker 1: I think there are some basic economic assumptions that you 292 00:16:10,760 --> 00:16:13,000 Speaker 1: can make and start to think about the kinds of equities, 293 00:16:13,080 --> 00:16:15,720 Speaker 1: the kinds of businesses you want to own in those scenarios. 294 00:16:15,760 --> 00:16:17,880 Speaker 1: So let's talk about it, Julian. This could be a 295 00:16:18,000 --> 00:16:20,920 Speaker 1: high debt, low growth world. Goldman is saying, for that reason, 296 00:16:21,200 --> 00:16:23,640 Speaker 1: you want to pay up for growth by the big players, 297 00:16:23,920 --> 00:16:26,640 Speaker 1: by the big five, by the big tech companies. That 298 00:16:26,720 --> 00:16:28,320 Speaker 1: seems to be the call for a lot of people 299 00:16:28,360 --> 00:16:31,520 Speaker 1: on Wall Street at the moment, increasingly a call on 300 00:16:31,600 --> 00:16:33,640 Speaker 1: the margin of the conversation. Is something we discussed at 301 00:16:33,640 --> 00:16:35,800 Speaker 1: the top of this program. Start to get exposure to 302 00:16:35,840 --> 00:16:38,520 Speaker 1: small caps, the most cyclical aspects of this equity market. 303 00:16:38,800 --> 00:16:41,880 Speaker 1: How do you manage your equity exposure right now, Julian, 304 00:16:42,960 --> 00:16:46,440 Speaker 1: So we are on the small cap cyclical side. We 305 00:16:46,640 --> 00:16:49,880 Speaker 1: looked at every bear market over the last thirty years 306 00:16:50,080 --> 00:16:53,800 Speaker 1: and and absolutely with consistency, and think about it, it 307 00:16:53,920 --> 00:16:56,880 Speaker 1: did very two thousand and eight, the financials led the 308 00:16:56,920 --> 00:17:00,600 Speaker 1: way down, two thousand technology led the way down, etcetera. 309 00:17:01,120 --> 00:17:04,560 Speaker 1: But invariably what we saw is all the sectors and 310 00:17:04,680 --> 00:17:08,320 Speaker 1: the styles and the market caps that were the worst 311 00:17:08,400 --> 00:17:12,520 Speaker 1: performers during the bear market phase ultimately lead the market 312 00:17:12,600 --> 00:17:15,639 Speaker 1: higher once you made the transition to a newable market. 313 00:17:15,760 --> 00:17:19,240 Speaker 1: And for us, that means financials, that means small caps, 314 00:17:19,560 --> 00:17:23,560 Speaker 1: that means energy and industrials. It does not mean fang 315 00:17:23,840 --> 00:17:26,160 Speaker 1: and it doesn't mean sort of the shelter and place 316 00:17:26,240 --> 00:17:28,359 Speaker 1: ministers who's which we think are going to be sources 317 00:17:28,440 --> 00:17:32,080 Speaker 1: of fun as we make this transition to a newable market, 318 00:17:32,320 --> 00:17:38,520 Speaker 1: which is Lisa. Sources of fun is Julian Emmanuel talk 319 00:17:38,680 --> 00:17:42,520 Speaker 1: is they're going to sell the puppies. Sell the puppies. Actually, 320 00:17:42,840 --> 00:17:44,200 Speaker 1: you could get a lot of buyers right now. I 321 00:17:44,280 --> 00:17:46,520 Speaker 1: hear the pounds are actually out of puppies because everyone's 322 00:17:46,520 --> 00:17:48,840 Speaker 1: adopting puppies. Julian. I do want to get a sense though, 323 00:17:49,240 --> 00:17:52,479 Speaker 1: of the numbers versus the hope, and I'm looking right now, 324 00:17:52,640 --> 00:17:55,600 Speaker 1: there's about halfway. We're about halfway through the first quarter 325 00:17:55,680 --> 00:17:58,880 Speaker 1: earnings reporting season, and the Russell two thousand Small Cap 326 00:17:58,960 --> 00:18:03,680 Speaker 1: Index report companies are down sixteen point four percent year 327 00:18:03,800 --> 00:18:07,200 Speaker 1: over year, that is with respect to earnings, and that 328 00:18:07,280 --> 00:18:09,480 Speaker 1: as much more than you're seeing in the SMP five 329 00:18:10,000 --> 00:18:12,120 Speaker 1: in terms of the of the companies that have reported there. 330 00:18:12,440 --> 00:18:14,800 Speaker 1: How do you square that with the optimism that you're 331 00:18:14,840 --> 00:18:19,080 Speaker 1: expressing and recommending that investors go and buy these companies. Well, 332 00:18:19,440 --> 00:18:21,560 Speaker 1: you square with this whole idea that if you think 333 00:18:21,600 --> 00:18:25,400 Speaker 1: about the relative return of the SMP for the versus 334 00:18:25,480 --> 00:18:29,440 Speaker 1: the Russell that is very largely discounted. You also look 335 00:18:29,480 --> 00:18:31,320 Speaker 1: at it and we think about it in terms of 336 00:18:31,359 --> 00:18:35,040 Speaker 1: the risk. Several weeks ago, the Russell two thousand vics 337 00:18:35,359 --> 00:18:38,359 Speaker 1: got to an all time wide versus the S and 338 00:18:38,400 --> 00:18:41,080 Speaker 1: P five vics, and that told you that, you know, 339 00:18:41,280 --> 00:18:45,240 Speaker 1: it was absolute abject panic in the small cap universe, 340 00:18:45,440 --> 00:18:48,160 Speaker 1: even after the market had turned. And then the last 341 00:18:48,200 --> 00:18:50,800 Speaker 1: thing we say about is, you know, think about the 342 00:18:51,040 --> 00:18:54,920 Speaker 1: targeting of the stimulus. We're not you know, we're buying 343 00:18:55,000 --> 00:19:00,040 Speaker 1: large targeting industries, but overall the emphasis is on a 344 00:19:00,280 --> 00:19:03,680 Speaker 1: small town, you know, small main Street us A companies, 345 00:19:03,920 --> 00:19:06,240 Speaker 1: which by the way, make up a large part of 346 00:19:06,280 --> 00:19:08,680 Speaker 1: the electorate this November. So we think it's it's in 347 00:19:08,760 --> 00:19:11,200 Speaker 1: the price, So Julie, and this conversation has gone the 348 00:19:11,200 --> 00:19:13,720 Speaker 1: way if many of these conversations go, which is why 349 00:19:13,720 --> 00:19:15,120 Speaker 1: do you want to buy X? And then I get 350 00:19:15,200 --> 00:19:17,920 Speaker 1: told because in history it shows X, Y and C. 351 00:19:18,440 --> 00:19:20,400 Speaker 1: And I think we can all agree that this shutdown 352 00:19:20,640 --> 00:19:24,920 Speaker 1: this economic downtown. It's totally unprecedented. So with that in mind, 353 00:19:25,640 --> 00:19:29,200 Speaker 1: isn't the comflict branket of history totally redundant as we 354 00:19:29,280 --> 00:19:35,159 Speaker 1: exit this? Uh? No, I don't think so, because this 355 00:19:35,400 --> 00:19:39,440 Speaker 1: has been so extraordinary that there really are only a 356 00:19:39,520 --> 00:19:42,159 Speaker 1: couple of periods that you can measure against um and 357 00:19:42,280 --> 00:19:45,360 Speaker 1: if you look at it, sort of the the incredible 358 00:19:45,440 --> 00:19:47,760 Speaker 1: craft off of an all time high coming in a 359 00:19:47,840 --> 00:19:53,520 Speaker 1: month or two really only harkins. And from our view, 360 00:19:53,680 --> 00:19:57,720 Speaker 1: the reason this isn't nine where you wouldn't say, you know, 361 00:19:58,080 --> 00:20:02,119 Speaker 1: cyck locality is is on the verge of bankruptcy and 362 00:20:02,200 --> 00:20:05,400 Speaker 1: so on and so forth, is because of the response 363 00:20:05,560 --> 00:20:09,879 Speaker 1: that you know, we are now over of us g 364 00:20:10,040 --> 00:20:14,200 Speaker 1: d P in enacted and proposed stimulus, right, and and 365 00:20:14,280 --> 00:20:18,040 Speaker 1: the question is can that last? Yeah, it's it's an 366 00:20:18,080 --> 00:20:22,240 Speaker 1: incredible number. Can that last long enough? There's an optionality 367 00:20:22,320 --> 00:20:25,040 Speaker 1: to it that putting our derivatives at on, there's an 368 00:20:25,080 --> 00:20:28,520 Speaker 1: optionality to can it last long enough to get to 369 00:20:28,960 --> 00:20:33,119 Speaker 1: a medical solution um that helps reopen the economy. And 370 00:20:33,240 --> 00:20:35,040 Speaker 1: we think the answer is likely going to be yea, 371 00:20:35,560 --> 00:20:47,760 Speaker 1: Julia Manuel, thank you so much, great briefing. Bill Smede 372 00:20:47,800 --> 00:20:51,639 Speaker 1: joins us right now. Smede Capital. Of course, value investors 373 00:20:51,760 --> 00:20:56,080 Speaker 1: they sort of like sequoil like stocks, some real concentration. 374 00:20:56,160 --> 00:20:59,840 Speaker 1: They're less diversified, uh, and they're in the value space. 375 00:21:00,000 --> 00:21:03,119 Speaker 1: Will speed your track record over long term is nothing 376 00:21:03,240 --> 00:21:05,680 Speaker 1: short of an act of God. It is a miracle 377 00:21:06,640 --> 00:21:08,960 Speaker 1: unlike the last year, you know, anyway you want to 378 00:21:09,000 --> 00:21:11,040 Speaker 1: look at it, it's been a tough, tough slog for 379 00:21:11,160 --> 00:21:14,600 Speaker 1: large cap vailue away from the seven or eight stocks 380 00:21:14,680 --> 00:21:18,560 Speaker 1: doing well. How do you manage that forward? Well? You 381 00:21:18,960 --> 00:21:22,119 Speaker 1: you get more excited about it. Tom. We took a 382 00:21:22,200 --> 00:21:26,040 Speaker 1: lot look about a week ago at the year to date, 383 00:21:26,119 --> 00:21:28,720 Speaker 1: one year, three year, five year, and tenure on the 384 00:21:28,840 --> 00:21:31,960 Speaker 1: Russell one thousand value versus the Russell one thousand growth, 385 00:21:32,760 --> 00:21:40,720 Speaker 1: and the spreads were and a hundred. Uh So, so 386 00:21:41,000 --> 00:21:43,520 Speaker 1: what it tells you that in virtually every single time 387 00:21:43,560 --> 00:21:46,679 Speaker 1: period for the last ten years, growth has beaten value. 388 00:21:47,480 --> 00:21:50,720 Speaker 1: And and that's we find that really a key in 389 00:21:51,000 --> 00:21:54,960 Speaker 1: the for example, the Birrthire Hathaway meeting. Because from a 390 00:21:55,080 --> 00:21:58,159 Speaker 1: value standpoint, today is a great day to be a 391 00:21:58,240 --> 00:22:02,119 Speaker 1: Ben Graham person, right, this is a great point in 392 00:22:02,200 --> 00:22:05,040 Speaker 1: time to be somebody that looks at asset values and 393 00:22:05,119 --> 00:22:08,439 Speaker 1: cash flows and all those kind of important things for today. 394 00:22:09,119 --> 00:22:13,200 Speaker 1: And and we we uh we definitely like this market 395 00:22:13,280 --> 00:22:16,280 Speaker 1: for that reason. All right, so we give us your 396 00:22:16,359 --> 00:22:21,120 Speaker 1: sense of your takeaways from Warren Buffett over the weekend. 397 00:22:21,359 --> 00:22:25,960 Speaker 1: Uh you know, he's always been enthusiastic about America long 398 00:22:26,160 --> 00:22:30,320 Speaker 1: term American exceptionalism, but it didn't necessarily come across in 399 00:22:30,400 --> 00:22:34,200 Speaker 1: some of his actions. What were your takeaways? Well, first 400 00:22:34,240 --> 00:22:38,960 Speaker 1: of all, you have to understand the capital structure of 401 00:22:39,119 --> 00:22:42,600 Speaker 1: what he's running, Right, He's running a five hundred billion 402 00:22:42,680 --> 00:22:45,920 Speaker 1: dollar market cap company with a hundred and thirty some 403 00:22:46,119 --> 00:22:49,200 Speaker 1: billion dollars in cash, And for him to be able 404 00:22:49,240 --> 00:22:52,000 Speaker 1: to buy something, it's got to be a very large 405 00:22:52,080 --> 00:22:56,560 Speaker 1: company that is very deeply out of favor and the 406 00:22:56,760 --> 00:23:00,400 Speaker 1: very largest companies. As Tom mentioned in the intro, they've 407 00:23:00,480 --> 00:23:06,080 Speaker 1: had favor uh uh. Mason Hawkins calls it quality at 408 00:23:06,119 --> 00:23:10,000 Speaker 1: any price. See when when you're buying a dip and 409 00:23:10,119 --> 00:23:13,399 Speaker 1: you're paying thirty times for Costco or thirty five times 410 00:23:13,480 --> 00:23:17,359 Speaker 1: for Visa, or or uh eighty times or a hundred 411 00:23:17,440 --> 00:23:20,600 Speaker 1: times for Netflix and Amazon because they seem to be 412 00:23:20,720 --> 00:23:25,359 Speaker 1: benefiting from the misery, you're exacerbating the growth trend. And 413 00:23:25,480 --> 00:23:28,960 Speaker 1: then you're there's massive selling on the value side and 414 00:23:29,000 --> 00:23:31,680 Speaker 1: there's no capital in the hands of the value people 415 00:23:32,080 --> 00:23:34,560 Speaker 1: to sit there and buy with bids below the market. Yeah, 416 00:23:34,600 --> 00:23:37,639 Speaker 1: but what Bill, Bill, I I get that. But the 417 00:23:37,880 --> 00:23:42,840 Speaker 1: fact of the matter is their revenue profile forward. It's 418 00:23:42,880 --> 00:23:46,960 Speaker 1: like Mars and Venus. I. I mean, the revenue profile 419 00:23:47,160 --> 00:23:51,600 Speaker 1: of some of those high flying texts is extraordinary compared 420 00:23:51,640 --> 00:23:56,280 Speaker 1: to most single digit If revenue profiles were important, and 421 00:23:56,560 --> 00:24:01,000 Speaker 1: that was the most important thing, uh. Targets revenues are 422 00:24:01,119 --> 00:24:05,040 Speaker 1: up eight mostly on the back of their their e 423 00:24:05,160 --> 00:24:10,160 Speaker 1: commerce business exploding and groceries which are low. In other words, 424 00:24:10,520 --> 00:24:13,159 Speaker 1: the thing that's doing the best for Target at the 425 00:24:13,320 --> 00:24:17,960 Speaker 1: moment is the thing that Amazon does, and Amazon is 426 00:24:18,000 --> 00:24:20,440 Speaker 1: finding our our targets, finding out the same thing that 427 00:24:20,560 --> 00:24:23,359 Speaker 1: Amazon's finding out is that even when the business is 428 00:24:23,359 --> 00:24:26,000 Speaker 1: as good as it could possibly be, there's no margins 429 00:24:26,040 --> 00:24:29,080 Speaker 1: in it. And where where targets gonna make a lot 430 00:24:29,119 --> 00:24:32,040 Speaker 1: of money is We're gonna have a zillion four year 431 00:24:32,080 --> 00:24:35,800 Speaker 1: old kids in four years and the Oshkosh bagsh overall 432 00:24:36,119 --> 00:24:39,320 Speaker 1: of overalls is gonna fly off the shelves and there's 433 00:24:39,440 --> 00:24:42,480 Speaker 1: huge margins in that. And by the way, a week ago, 434 00:24:42,640 --> 00:24:45,000 Speaker 1: there was a survey in the states that were about 435 00:24:45,040 --> 00:24:47,440 Speaker 1: to reopen and they asked people what are the three 436 00:24:47,520 --> 00:24:49,879 Speaker 1: things they'd most like to do that they haven't been 437 00:24:49,920 --> 00:24:56,160 Speaker 1: able to do. It was travel, close, and entertainment exactly. 438 00:24:57,080 --> 00:25:01,399 Speaker 1: So Bill, are you concerned? Paul, Yeah, I'm gonna go. 439 00:25:01,560 --> 00:25:04,719 Speaker 1: I'm gonna tap into kind of your experience here, uh, 440 00:25:04,920 --> 00:25:07,640 Speaker 1: your vast experience in the markets. One of the things 441 00:25:07,680 --> 00:25:09,680 Speaker 1: people are concerned about, or not concerned about, it just 442 00:25:09,720 --> 00:25:14,600 Speaker 1: wondering about, is will consumer behaviors be altered, you know, 443 00:25:15,160 --> 00:25:18,240 Speaker 1: maybe permanently by what's happening here in the pandemic? Is 444 00:25:18,280 --> 00:25:21,600 Speaker 1: this something akin to the Great Depression of the thirties 445 00:25:21,640 --> 00:25:25,639 Speaker 1: were kind of impacted a generation and consumer behavior? Are 446 00:25:25,680 --> 00:25:28,479 Speaker 1: you thinking about some of those bigger issues and how 447 00:25:28,680 --> 00:25:34,240 Speaker 1: people's uh consumer behavior might be impacted. I personally believe 448 00:25:34,359 --> 00:25:37,720 Speaker 1: and we as a company believe that people are drastically 449 00:25:38,000 --> 00:25:43,160 Speaker 1: overestimating this. They're overestimating. And let me give you an example. 450 00:25:43,920 --> 00:25:47,600 Speaker 1: Uh when when I was fifteen years old, sixteen years old, 451 00:25:47,600 --> 00:25:49,199 Speaker 1: I kind of got bored with a lot of subject 452 00:25:49,240 --> 00:25:51,159 Speaker 1: in high school, but I was always excited to go 453 00:25:51,280 --> 00:25:54,080 Speaker 1: there every day because the state had a mode howdn 454 00:25:54,119 --> 00:25:56,560 Speaker 1: eighty days a year, the cuterst girls in my hometown 455 00:25:56,640 --> 00:26:01,960 Speaker 1: had to go there. Year old girls? Okay, appropriate, you know, okay, 456 00:26:02,760 --> 00:26:05,959 Speaker 1: what what's gonna happen? What's just gonna happen? As soon 457 00:26:06,000 --> 00:26:08,880 Speaker 1: as we open up the fifteen to five year old 458 00:26:08,920 --> 00:26:11,800 Speaker 1: kids are all going to gather somewhere where where they 459 00:26:11,840 --> 00:26:14,240 Speaker 1: think that the opposite sex is going to be there. 460 00:26:15,880 --> 00:26:19,080 Speaker 1: How that'll try the economy? I don't remember this in 461 00:26:19,119 --> 00:26:23,880 Speaker 1: the cf A Curriculum bill. Are you under diversified? Now? 462 00:26:23,960 --> 00:26:27,720 Speaker 1: When you have this shock? When you have a economic backdrop, 463 00:26:27,880 --> 00:26:31,680 Speaker 1: we've got should I be smeet diversified or should I 464 00:26:31,760 --> 00:26:35,480 Speaker 1: try to be more over diversified? No, just the opposite 465 00:26:35,480 --> 00:26:38,639 Speaker 1: to see, that's the deal with Explain that to our 466 00:26:38,680 --> 00:26:42,879 Speaker 1: audience please. Yeah. So, so here's Buffett recommending the S 467 00:26:42,960 --> 00:26:47,640 Speaker 1: and T index. He started his talk explaining that from 468 00:26:47,760 --> 00:26:51,280 Speaker 1: ninety nine to nineteen fifty four, the index of the 469 00:26:51,400 --> 00:26:54,560 Speaker 1: day in ninety nine was the DOO and it went 470 00:26:54,680 --> 00:26:57,640 Speaker 1: nowhere for twenty five years. Now, think of the time 471 00:26:57,680 --> 00:27:01,360 Speaker 1: period since then. Uh, From fifty fifty four to sixty six, 472 00:27:01,480 --> 00:27:04,240 Speaker 1: the index was good. From sixty six to eighty two, 473 00:27:04,320 --> 00:27:08,000 Speaker 1: the index was terrible. From eighty two to ninety nine, 474 00:27:08,080 --> 00:27:11,359 Speaker 1: the index was good. From two th eleven, the index 475 00:27:11,480 --> 00:27:14,920 Speaker 1: was terrible, and then up until two months ago, the 476 00:27:15,160 --> 00:27:17,960 Speaker 1: index was really good for nine years. Okay, So what 477 00:27:18,040 --> 00:27:20,280 Speaker 1: does that tell you? It tells you that half the 478 00:27:20,400 --> 00:27:24,280 Speaker 1: time the index is terrible and the index the index 479 00:27:24,600 --> 00:27:27,520 Speaker 1: is usually terrible, beginning with a point in time where 480 00:27:27,680 --> 00:27:30,960 Speaker 1: it's extremely popular and it gets heavily overweighted in the 481 00:27:31,040 --> 00:27:33,440 Speaker 1: most popular stocks. And that's one of the reasons why 482 00:27:33,440 --> 00:27:37,680 Speaker 1: we're starting again. Well, one final question, what do you 483 00:27:37,720 --> 00:27:40,520 Speaker 1: think of the financials? Our audience wants to know if 484 00:27:40,560 --> 00:27:43,080 Speaker 1: you find value in the financials, do you have to 485 00:27:43,119 --> 00:27:46,200 Speaker 1: go to Europe to look at their bank valuations. No, 486 00:27:46,400 --> 00:27:49,480 Speaker 1: we're we're excited about the financials. Uh, the fact that 487 00:27:49,560 --> 00:27:52,360 Speaker 1: Buffett couldn't say more nice things about him, even though 488 00:27:52,400 --> 00:27:54,200 Speaker 1: he thinks very highly of him, to me was a 489 00:27:54,240 --> 00:27:59,879 Speaker 1: bi signal. Did he give a bicycle on the airlines? Uh? 490 00:28:00,119 --> 00:28:02,560 Speaker 1: You know, it's funny you mentioned that because I looked. 491 00:28:02,600 --> 00:28:04,760 Speaker 1: I thought, gosh, if those things go down, see they're 492 00:28:04,800 --> 00:28:07,040 Speaker 1: a lot lower than where Buffetts told them, and then 493 00:28:07,080 --> 00:28:11,760 Speaker 1: they're probably down another ten percent. Today said, well, yeah, 494 00:28:12,040 --> 00:28:16,240 Speaker 1: I remember to two instances. We stopped flying for eighteen 495 00:28:16,320 --> 00:28:19,000 Speaker 1: days after nine eleven, and it took a while to recover. 496 00:28:19,440 --> 00:28:23,360 Speaker 1: And then uh, in oh nine, o eight oh nine, 497 00:28:23,400 --> 00:28:26,480 Speaker 1: obviously things backed way off in the in the airlines, 498 00:28:26,840 --> 00:28:29,639 Speaker 1: and I can remember we were out starting to promote 499 00:28:29,640 --> 00:28:31,720 Speaker 1: our company. We started in oh seven, and the funds 500 00:28:31,720 --> 00:28:33,760 Speaker 1: started at the beginning of away. So in oh nine, 501 00:28:33,840 --> 00:28:35,800 Speaker 1: oh ten, o eleven we went on what we called 502 00:28:35,840 --> 00:28:37,920 Speaker 1: the No Tour. We flew all over the country and 503 00:28:38,000 --> 00:28:41,040 Speaker 1: pitched what we were doing, and everyone said no. But 504 00:28:41,160 --> 00:28:44,240 Speaker 1: the fares were cheap. But by the end of it, 505 00:28:44,280 --> 00:28:46,600 Speaker 1: the fairs weren't keep right. In other words, by two 506 00:28:46,680 --> 00:28:48,600 Speaker 1: or three years into it, everybody was back to fly 507 00:28:48,720 --> 00:28:53,240 Speaker 1: it Like I'm gonna steal that from Bill Speed. The 508 00:28:53,320 --> 00:28:57,800 Speaker 1: surveillance and no tour bill Speed always, thank you so much. 509 00:28:57,840 --> 00:29:12,880 Speaker 1: It best to value invest with speed capital. With the pandemic, 510 00:29:12,960 --> 00:29:15,720 Speaker 1: with all the different news flows that we've had from it, 511 00:29:15,800 --> 00:29:18,760 Speaker 1: and the statistics occur flattenings that we've seen in such, 512 00:29:19,280 --> 00:29:22,080 Speaker 1: it's been important to get the perspective of the Johns 513 00:29:22,120 --> 00:29:27,360 Speaker 1: Hopkins University. Joshua Sharfstein is with the Bloomberg School of 514 00:29:27,440 --> 00:29:30,240 Speaker 1: Public Health. They should point out that Mr Bloomberger is 515 00:29:30,240 --> 00:29:32,680 Speaker 1: of course the founder of Bloomberg LP, this radio and 516 00:29:32,800 --> 00:29:36,880 Speaker 1: television property as well, and he's been a philanthropist to 517 00:29:37,040 --> 00:29:40,160 Speaker 1: his engineering school at Johns Hopkins and of course the 518 00:29:40,240 --> 00:29:45,400 Speaker 1: greater university. Here is Joshua Sharfstein. An update on the 519 00:29:45,480 --> 00:29:49,440 Speaker 1: pandemic overall, at the plateau in the United States, that's 520 00:29:49,480 --> 00:29:53,760 Speaker 1: not really going down particularly quickly, and her, you know, 521 00:29:53,840 --> 00:29:57,800 Speaker 1: there are certainly places like New York where it is declining, 522 00:29:57,880 --> 00:30:00,080 Speaker 1: but there are also quite a few places, even some 523 00:30:00,200 --> 00:30:03,840 Speaker 1: smaller cities, where it is increasing, well, it's recreasing increasing 524 00:30:03,920 --> 00:30:06,960 Speaker 1: as well. Can they use the same methods from New York? 525 00:30:07,360 --> 00:30:10,240 Speaker 1: I mean, what is the difference in medical treatment in 526 00:30:10,360 --> 00:30:14,720 Speaker 1: Baltimore or New York versus the remoteness of some of 527 00:30:14,800 --> 00:30:17,800 Speaker 1: these new places in America. You mean, you're putting your 528 00:30:17,880 --> 00:30:20,560 Speaker 1: finger on an important issue, which is that the hospital 529 00:30:20,680 --> 00:30:24,120 Speaker 1: that some is not nearly as robots. In many places, 530 00:30:24,320 --> 00:30:28,240 Speaker 1: many of the hospitals have been have closed in rural areas. 531 00:30:28,360 --> 00:30:33,240 Speaker 1: Those that are open are very small and financially unstable, 532 00:30:33,800 --> 00:30:37,520 Speaker 1: and so, UM, this has created an enormous challenge if 533 00:30:37,560 --> 00:30:42,120 Speaker 1: people are gonna and so it creates this dynamic where UM, 534 00:30:42,560 --> 00:30:44,920 Speaker 1: people may feel like, oh, you know, we're never gonna 535 00:30:44,960 --> 00:30:46,800 Speaker 1: have a problem like New York. But it doesn't take 536 00:30:46,840 --> 00:30:49,560 Speaker 1: a problem like New York to tip that entire local 537 00:30:49,640 --> 00:30:53,280 Speaker 1: healthcare system over There is all sorts of issues here 538 00:30:53,680 --> 00:30:56,920 Speaker 1: about getting out of lockdown. Every you know, all the 539 00:30:57,000 --> 00:30:59,560 Speaker 1: images over the weekend and all that. What do you 540 00:30:59,800 --> 00:31:03,160 Speaker 1: learn earned in the last twenty four hours about getting 541 00:31:03,200 --> 00:31:07,680 Speaker 1: out of lockdown? Well, I think that people, um have 542 00:31:07,880 --> 00:31:12,080 Speaker 1: to look past just the overall government decision. I think 543 00:31:12,120 --> 00:31:16,520 Speaker 1: what's really going to matter is whether all of us, 544 00:31:16,760 --> 00:31:21,720 Speaker 1: all the businesses are following good public health guidance to 545 00:31:21,840 --> 00:31:25,840 Speaker 1: stay away from each other, to continue to physically distance 546 00:31:25,920 --> 00:31:29,080 Speaker 1: from each other. You know that that is as important, 547 00:31:29,240 --> 00:31:32,480 Speaker 1: I think as some of the specific policies that are 548 00:31:32,520 --> 00:31:35,400 Speaker 1: put into place. UM. If people just go out and 549 00:31:35,560 --> 00:31:38,280 Speaker 1: defy what's being done, it's going to be very hard 550 00:31:38,400 --> 00:31:41,360 Speaker 1: to keep this disease under control. And if we open 551 00:31:41,600 --> 00:31:44,440 Speaker 1: a little which may be appropriate in some areas, could 552 00:31:44,440 --> 00:31:46,520 Speaker 1: people take that as a green light to do whatever 553 00:31:46,640 --> 00:31:49,360 Speaker 1: they want to do. It's really going to be a problem. 554 00:31:49,480 --> 00:31:52,720 Speaker 1: There's nothing holding this disease back except our ability to 555 00:31:52,760 --> 00:31:55,360 Speaker 1: stay away from each other. Right now, Josh, what are 556 00:31:55,400 --> 00:31:57,400 Speaker 1: we going to be able to understand this disease better? 557 00:31:57,480 --> 00:31:59,040 Speaker 1: So there are a number of studies also trying to 558 00:31:59,120 --> 00:32:02,120 Speaker 1: understand genetics to try and understand why in certain countries, 559 00:32:02,520 --> 00:32:05,120 Speaker 1: you know, the mortality rate isn't much higher than others, 560 00:32:05,560 --> 00:32:08,320 Speaker 1: although the lockdowns were very similar. What are some of 561 00:32:08,360 --> 00:32:11,880 Speaker 1: the questions that you want answered to to understand it 562 00:32:12,000 --> 00:32:14,920 Speaker 1: better and how soon can those answers come? I think 563 00:32:14,960 --> 00:32:18,200 Speaker 1: there are some very important questions, you know, including some 564 00:32:18,640 --> 00:32:22,400 Speaker 1: continued questions about how the disease is transmitted UM and 565 00:32:22,520 --> 00:32:26,080 Speaker 1: the role particularly the children play in transmitting the disease. 566 00:32:26,560 --> 00:32:28,400 Speaker 1: I think that's going to be very important as we 567 00:32:28,480 --> 00:32:32,479 Speaker 1: think about whether and how to open up schools UM. 568 00:32:32,880 --> 00:32:37,320 Speaker 1: There's also some basic issues about the illness, why people 569 00:32:37,480 --> 00:32:40,959 Speaker 1: with certain conditions are so much higher risk of dying UM, 570 00:32:41,120 --> 00:32:43,520 Speaker 1: and is there any way to predict early in the 571 00:32:43,600 --> 00:32:46,160 Speaker 1: courts of disease who is going to have a more 572 00:32:46,240 --> 00:32:49,680 Speaker 1: severe illness. I'm also very intrigued by the report that 573 00:32:50,880 --> 00:32:55,680 Speaker 1: perhaps earlier medical treatment of certain kinds really helps. I mean, 574 00:32:55,760 --> 00:32:58,760 Speaker 1: if that can be established, that could be very very important. 575 00:32:59,600 --> 00:33:02,680 Speaker 1: If it's in doubt that earlier oxygen therapy or some 576 00:33:02,880 --> 00:33:07,240 Speaker 1: other type of UM intervention matters, that might change the 577 00:33:07,280 --> 00:33:09,680 Speaker 1: way that medical services are organized and keep a number 578 00:33:09,680 --> 00:33:12,400 Speaker 1: of people out of the hospital. So I do think 579 00:33:12,440 --> 00:33:15,280 Speaker 1: that we've gotten a lot of scientific information, and we're 580 00:33:15,280 --> 00:33:17,840 Speaker 1: going to see every week more and more insights. I 581 00:33:17,920 --> 00:33:21,920 Speaker 1: think the frustration is that science doesn't necessarily operate by, 582 00:33:22,360 --> 00:33:24,840 Speaker 1: you know, one big headline and everyone agrees it's going 583 00:33:24,920 --> 00:33:28,000 Speaker 1: to be like these little, you know, incremental steps, a 584 00:33:28,040 --> 00:33:30,200 Speaker 1: couple of steps back, a couple of steps forward. But 585 00:33:30,680 --> 00:33:32,560 Speaker 1: it's the kind of thing when you look backwards you'll 586 00:33:32,560 --> 00:33:35,200 Speaker 1: see how far I think we've come in our understanding. 587 00:33:36,040 --> 00:33:39,120 Speaker 1: What can you tell us about the gilly add therapy? 588 00:33:39,280 --> 00:33:41,280 Speaker 1: So there was a setback and now it seems to 589 00:33:41,600 --> 00:33:44,479 Speaker 1: be on better track again. Can we find out by 590 00:33:44,520 --> 00:33:46,760 Speaker 1: the summer. If this is one of the biggest hopes 591 00:33:46,800 --> 00:33:49,840 Speaker 1: for the world, this particular therapy, I think it's going 592 00:33:49,880 --> 00:33:53,240 Speaker 1: to be as potentially some benefit, but most likely not 593 00:33:53,400 --> 00:33:57,520 Speaker 1: as like a major, you know, tremendous benefit I think. 594 00:33:58,200 --> 00:34:00,600 Speaker 1: But I mentioned last time, I still think, which is 595 00:34:00,600 --> 00:34:02,880 Speaker 1: we're gonna have to see the ongoing studies which are 596 00:34:03,160 --> 00:34:07,120 Speaker 1: are using that drug at different stages of the illness, 597 00:34:07,480 --> 00:34:10,360 Speaker 1: because the medicine might work so so at one stage 598 00:34:10,400 --> 00:34:12,520 Speaker 1: the illness, but work much better or not at all 599 00:34:12,640 --> 00:34:14,880 Speaker 1: at a different stage. And so it's going to be 600 00:34:15,000 --> 00:34:18,360 Speaker 1: like a bunch of little studies that will add up 601 00:34:18,440 --> 00:34:20,759 Speaker 1: to a much greater understanding. And then when as we 602 00:34:20,920 --> 00:34:24,399 Speaker 1: learn more about a particular medication, we'll learn more about 603 00:34:24,440 --> 00:34:27,840 Speaker 1: the disease. If it turns out that, you know, trying 604 00:34:27,880 --> 00:34:30,640 Speaker 1: to block viral replication really makes a lot of the 605 00:34:30,719 --> 00:34:34,080 Speaker 1: difference if it's given early, the drugs given early, that 606 00:34:34,239 --> 00:34:37,200 Speaker 1: might help us target other kinds of therapies. So I'm 607 00:34:37,239 --> 00:34:40,520 Speaker 1: hopeful that we'll learn more um from these other studies 608 00:34:40,560 --> 00:34:44,080 Speaker 1: that will will round out the picture from the vier gesture. 609 00:34:44,160 --> 00:34:49,080 Speaker 1: Sure see the Johns Hopkins University, Bloomberg School of Public Health. 610 00:34:49,880 --> 00:34:53,960 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 611 00:34:54,160 --> 00:34:59,400 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 612 00:34:59,480 --> 00:35:02,839 Speaker 1: platform him you prefer. I'm on Twitter at Tom Keane 613 00:35:03,400 --> 00:35:07,040 Speaker 1: before the podcast. You can always catch us worldwide. I'm 614 00:35:07,080 --> 00:35:07,960 Speaker 1: Bloomberg Radio