WEBVTT - Fed Leaves Rates Near Zero 0:00:00.720 --> 0:00:03.720 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:03.800 --> 0:00:06.320 Jason Kelly. We're right here every day bringing you the 0:00:06.400 --> 0:00:11.160 latest news from the world's of business and finance, plus technology, politics, economics, 0:00:11.240 --> 0:00:14.280 all harnessing the power of Business Week reporters and editors, 0:00:14.440 --> 0:00:16.439 and of course Carol that's part of a team of 0:00:16.520 --> 0:00:19.959 twenty seven hundred journalists and analysts and more than a 0:00:20.040 --> 0:00:22.959 hundred and twenty countries and Jason. You can download Bloomberg 0:00:22.960 --> 0:00:26.079 Business Week on iTunes, SoundCloud, blo Bloomberg dot com. You 0:00:26.079 --> 0:00:28.280 can also listen to our radio show at two pm 0:00:28.320 --> 0:00:31.159 Eastern on Bloomberg Radio every weekday, or watch us on 0:00:31.200 --> 0:00:36.280 YouTube by searching Bloomberg Global News Live from New York. 0:00:36.400 --> 0:00:40.880 It is FED day. Let's get into it. The FED 0:00:41.720 --> 0:00:45.880 coming out with its monthly meeting, FED extending Central Bank 0:00:45.920 --> 0:00:49.520 dollar ripo and swap lanes to March one, holds rates 0:00:49.560 --> 0:00:51.839 near zero. This is the headline you want, says virus 0:00:51.880 --> 0:00:56.840 poses considerable risk. Those are the red heads on the Bloomberg. 0:00:57.280 --> 0:01:01.080 We're gonna dig into it in death with our team. 0:01:01.160 --> 0:01:05.280 Look at the equity reaction, the fixing, income reaction, everything 0:01:05.400 --> 0:01:08.720 you need to know about the underlying economy. And we're 0:01:08.720 --> 0:01:12.040 gonna hear from j Powell in just about half an hour, 0:01:12.120 --> 0:01:15.640 the FED Chair taking questions about where the FED goes 0:01:15.680 --> 0:01:19.240 from here. It has been heroic in many people's eyes 0:01:19.360 --> 0:01:22.560 in fighting the effects of this coronavirus. All right, let's 0:01:22.640 --> 0:01:25.560 break it down. Got the perfect experts to give us 0:01:25.600 --> 0:01:28.440 all the context you need. Kathleen Hayes Gluble, Economics and 0:01:28.480 --> 0:01:31.759 Policy editor for Bloomberg. She's in our Bloomberg Interactive Broker 0:01:31.800 --> 0:01:35.640 Studio home base. Dave Wilson, Stocks editor for Bloomberg. He 0:01:35.720 --> 0:01:39.080 joins us from New Jersey, k h. I want to 0:01:39.160 --> 0:01:43.560 start with you, Uh, what'd you see here? We see 0:01:43.560 --> 0:01:47.600 a feder reserve that is signaling what we expected, Jason, 0:01:47.880 --> 0:01:52.360 because look, there's a considerable risk to the economy from 0:01:52.360 --> 0:01:55.640 the virus. The Fed also saying again that they're gonna 0:01:55.680 --> 0:01:59.360 keep rates very low until they're confidence that the recovery 0:01:59.400 --> 0:02:03.000 is under way. I think another more specific thing that 0:02:03.800 --> 0:02:06.680 is highlighted. In fact, it's even of our famous red 0:02:06.680 --> 0:02:10.880 hot stickies. The FED is extending uh their dollar repo 0:02:11.040 --> 0:02:14.520 and swaplinds to March thirty one. This These are the 0:02:14.240 --> 0:02:18.200 the dollar borrowing lines that the FED sets up for 0:02:18.480 --> 0:02:25.160 overseas central banks, right, so if you're leading liquidity in Japan, 0:02:25.600 --> 0:02:28.520 the UK, wherever, you can reach out to the FED. 0:02:28.680 --> 0:02:31.520 So again, I think it underscores that the FED is 0:02:32.080 --> 0:02:36.560 saying what we think. The virus unfortunately has not really 0:02:36.639 --> 0:02:40.079 lightened up its impact on the US economy, for example, 0:02:40.480 --> 0:02:42.680 that much. In some cases, it's gotten worse in the 0:02:42.680 --> 0:02:45.079 States where things are resurgent. New York of course doing 0:02:45.080 --> 0:02:47.040 a bit better. I like to always remind people of that, 0:02:47.520 --> 0:02:52.160 but uh, overall the impact is negative. I think what 0:02:52.520 --> 0:02:56.160 markets are wanting to know is what did the FED 0:02:56.240 --> 0:03:03.720 discuss about cementing, narrowing down, formalizing forward guidance. All the 0:03:03.840 --> 0:03:06.560 reports are that they're talking about it now, they've been 0:03:06.600 --> 0:03:08.760 talking about this, and what it would allow them to 0:03:08.800 --> 0:03:12.360 do is underscore that they've got an easy policy and 0:03:12.440 --> 0:03:14.720 so that will keep bond yields low and you know, 0:03:14.800 --> 0:03:17.720 the whole, the whole, the you know, the businesses will 0:03:17.720 --> 0:03:20.320 be reassured, maybe even people want to get a mortgage 0:03:20.320 --> 0:03:23.480 will be assured. Uh, and they can do that by 0:03:23.520 --> 0:03:25.799 with their forward guidance. I think we're not going to 0:03:25.840 --> 0:03:29.480 get anything specific on that until the press conference with J. Powell, 0:03:29.480 --> 0:03:31.959 because every reporter who's asking questions is going to ask 0:03:32.000 --> 0:03:34.360 about that. But so far on the headlines and probably 0:03:34.400 --> 0:03:36.560 in the policy statement that was released, which is where 0:03:36.560 --> 0:03:39.360 we get these headlines, there's there's not too much. There's 0:03:39.400 --> 0:03:41.960 not enough to be flashing it yet, right, all right, 0:03:42.080 --> 0:03:45.840 So about twenty six minutes we expect to hear from J. Powell. 0:03:46.080 --> 0:03:48.920 Uh So much more to dig into Kathleen Hayes, But 0:03:49.080 --> 0:03:52.120 first let's get to Dave Wilson. Dave talked to me 0:03:52.160 --> 0:03:56.280 about the equity reaction here. There was a nice run 0:03:56.600 --> 0:04:00.160 in the equity market ahead of this, some anticipation, and 0:04:00.200 --> 0:04:02.600 then it popped. What did you see, right? I mean 0:04:03.080 --> 0:04:06.280 you saw, you know, in the first few moments after 0:04:06.320 --> 0:04:08.920 the headlines came out, the SMP five hundred hits high 0:04:09.000 --> 0:04:11.960 the day, and then it's sort of backed off a bit, 0:04:12.080 --> 0:04:14.120 really and keeping with what it had been doing in 0:04:14.120 --> 0:04:18.080 the last half hour or so before uh the announcement. 0:04:18.480 --> 0:04:21.360 And so what you're left with is a market that's 0:04:21.360 --> 0:04:24.599 solidly higher, and as much as anything, the other big 0:04:24.640 --> 0:04:28.080 event of the day is not really roiling stocks, and 0:04:28.400 --> 0:04:32.320 that would be the testimony of the four big tech 0:04:32.520 --> 0:04:36.320 c e O S before the Half Judiciary Committee. Uh, 0:04:36.360 --> 0:04:40.040 you know, Jeff Bezos said Amazon, Tim Cook at Apple, 0:04:40.440 --> 0:04:44.919 Mark Zuckerberg at Facebook, and Sindar Pecai at Alphabet, the 0:04:44.960 --> 0:04:47.920 owner of Google. All those shares are higher at the moment, 0:04:48.120 --> 0:04:51.320 and they're helping stocks move up as they have for 0:04:51.400 --> 0:04:54.200 some time now. So it's not like what we saw 0:04:54.360 --> 0:04:58.560 the FED really changed that equation. Interesting, and we're gonna 0:04:58.560 --> 0:05:00.960 talk a lot more about tech as we go throughout 0:05:01.040 --> 0:05:04.240 the afternoon, and uh this program, we're gonna hear from 0:05:04.279 --> 0:05:06.320 Tom Giles later in the show about what he heard 0:05:06.480 --> 0:05:11.119 on Capitol Hill. Getting back to the Fed, Kathleen, what 0:05:11.560 --> 0:05:13.800 I want to go back to that second redhead that 0:05:13.839 --> 0:05:17.200 you talked about, because if it's a redhead at Bloomberg, 0:05:17.360 --> 0:05:19.800 I've been here long enough to know it's important. It's 0:05:19.800 --> 0:05:23.039 important to the broader world, is what I heard you say. 0:05:23.240 --> 0:05:27.599 Help us understand from the an investor's perspective, why this 0:05:27.640 --> 0:05:30.680 is important, what this signals to the world and and 0:05:30.760 --> 0:05:33.039 maybe more importantly, the markets. Well, one thing I'd like 0:05:33.080 --> 0:05:35.400 to point out and remind us is yesterday was day 0:05:35.400 --> 0:05:37.800 one of the FEDS to day meeting. What did they 0:05:37.800 --> 0:05:41.480 announce yesterday that they were extending until the end of 0:05:41.520 --> 0:05:45.479 the year. Seven of their nine emergency lending programs and 0:05:45.520 --> 0:05:47.640 the only two they didn't extend or weren't on the 0:05:47.680 --> 0:05:49.520 list was that they were already going to go to 0:05:49.520 --> 0:05:51.920 the end of the year or beyond. So basically it 0:05:52.040 --> 0:05:54.120 shows I think it shows us that the feder Reserve 0:05:54.680 --> 0:05:56.960 is ready to do whatever he needs. And importantly, though 0:05:57.800 --> 0:06:01.120 there remember back in June, you know, April was a 0:06:01.200 --> 0:06:03.680 terrible month, but a lot of people really thought maybe 0:06:03.720 --> 0:06:06.640 we'd be in a more of a recovery terrible second 0:06:06.720 --> 0:06:10.760 quarter rebound in the third quarter. That that has faded 0:06:10.760 --> 0:06:12.760 a bit, hasn't it. Maybe we'll get the three throw 0:06:12.880 --> 0:06:15.200 quarter rebound. But it doesn't feel like we're ready to, 0:06:15.279 --> 0:06:17.640 for example, not need more stimulus from the Fed, or 0:06:17.760 --> 0:06:21.280 for that matter, not to need more fiscal stimulus. That's 0:06:21.279 --> 0:06:23.760 something else that J. Powell probably asked a lot about 0:06:23.800 --> 0:06:26.800 at the press conference. And when we look overseas, even 0:06:26.839 --> 0:06:30.120 in countries that supposedly did better than United States, everything's fine, Well, 0:06:30.160 --> 0:06:35.520 there they have cases popping up. The virus isn't vanquished yet, 0:06:35.920 --> 0:06:38.520 and uh, it's probably not going to be vanquished for 0:06:38.560 --> 0:06:41.560 a while. And so you never know what is going 0:06:41.600 --> 0:06:43.560 to happen again in one of the countries that has 0:06:43.600 --> 0:06:46.680 access to the FEDS swap lines. It's it's like extending 0:06:46.720 --> 0:06:50.000 credit to other to foreign countries. Uh. I think it 0:06:50.040 --> 0:06:52.760 also shows this sense, well, let's extended to to March, 0:06:53.440 --> 0:06:55.400 because we don't know what's going to happen. We're not 0:06:55.480 --> 0:06:57.040 in that position now where we think, oh, we're on 0:06:57.080 --> 0:06:59.120 the verge of you know, a lot better situation for 0:06:59.160 --> 0:07:01.720 the economy, or past the worst of the virus. We're 0:07:01.760 --> 0:07:05.080 at a point where everybody is still responding to it, 0:07:05.200 --> 0:07:07.919 locking down in some cases, reopening a bit in other cases. 0:07:08.120 --> 0:07:11.040 But consumers more than ever, of course, even though they 0:07:11.120 --> 0:07:13.280 spending a lot. I want to just segue a little 0:07:13.280 --> 0:07:16.160 bit to this fiscal question, because she's gonna get pounded 0:07:16.200 --> 0:07:21.400 with that. Uh. I was speaking to Patricia Mosster this morning. 0:07:21.640 --> 0:07:23.520 She was at the New York Fed for many years. 0:07:23.520 --> 0:07:26.440 She's at Columbia University Seepa now, but she's been there, 0:07:26.480 --> 0:07:29.040 done that, you know, really hands on with the whole 0:07:29.040 --> 0:07:31.040 bond market side of it and all. She says that 0:07:31.080 --> 0:07:32.480 the reason why, and I think a lot of people 0:07:32.480 --> 0:07:34.120 say this one of the reasons the stimulus is so 0:07:34.200 --> 0:07:37.280 important and giving people the unemployment checks is so they'll 0:07:37.360 --> 0:07:39.920 keep spending money, because that's one of the things that 0:07:40.000 --> 0:07:42.920 has responded better. And without that extra money, a lot 0:07:43.000 --> 0:07:45.640 of people are likely to say, well, I got some 0:07:45.680 --> 0:07:48.360 Now I better hold onto whatever I have, especially if 0:07:48.360 --> 0:07:51.600 the unemployment benefits I've been getting are going to get cut. 0:07:52.080 --> 0:07:54.679 So and again, same thing is gonna be playing out overseas. 0:07:54.680 --> 0:07:56.520 So to come back to your original question, I just 0:07:56.600 --> 0:07:59.440 think broadly this shows the FED is still in defensive 0:07:59.480 --> 0:08:01.520 mode in the sense of waiting to see what the 0:08:01.600 --> 0:08:05.240 virus does to us, but also an offensive mode saying, well, 0:08:05.240 --> 0:08:07.720 I'm going to keep certain players on the field right 0:08:08.000 --> 0:08:10.920 to perform certain tasks because you know this game isn't 0:08:10.920 --> 0:08:14.920 over yet. Yeah. Absolutely, And so Dave Wilson, I mean 0:08:15.000 --> 0:08:17.840 I turned to you and ask how much is the 0:08:17.840 --> 0:08:20.120 market I'm glad you pointed out that the market is 0:08:20.160 --> 0:08:25.120 looking and investors looking to Capitol Hill for the tech stars, 0:08:25.120 --> 0:08:27.920 the tech CEOs. How much is the market now looking 0:08:28.640 --> 0:08:31.400 to Capitol Hill for exactly what Kathleen was talking about, 0:08:31.440 --> 0:08:35.640 which is some new fiscal stimulus. Well that really does 0:08:35.720 --> 0:08:39.439 become front center, because I mean it's Kathleen's pointing out 0:08:39.440 --> 0:08:42.040 you know, monetary policy is sort of on a track 0:08:42.080 --> 0:08:44.480 at this point, so you know, it's a matter of 0:08:44.559 --> 0:08:47.840 what's going to change, and we know that there are 0:08:47.880 --> 0:08:50.760 going to be changes in the unemployment benefits at the 0:08:50.840 --> 0:08:55.280 end of this week. Uh, even potentially if Congress and 0:08:55.600 --> 0:08:58.240 you know, the Trump administration can get together on a 0:08:58.280 --> 0:09:01.880 plan moving forward, so that becomes more of an issue, 0:09:01.960 --> 0:09:04.960 just because you know, you have the potential to see 0:09:05.000 --> 0:09:08.920 more of an effect from whatever they managed to agree on. Right, 0:09:09.480 --> 0:09:12.040 most important question, I think I know the answer, Kathleen 0:09:12.120 --> 0:09:15.800 has most important question for j pow. Wow. Oh, it's 0:09:15.800 --> 0:09:17.360 got to be for a guidance. I mean, that's gonna 0:09:17.360 --> 0:09:19.480 guess that in so many ways, and I think that 0:09:19.559 --> 0:09:22.719 might be part of the broader question. Look, there are 0:09:22.720 --> 0:09:25.040 people right now who are very concerned that we again 0:09:25.080 --> 0:09:27.400 we make it a three quarter rebound because the numbers 0:09:27.400 --> 0:09:29.200 are gonna be so beaten up in the second quarter. 0:09:29.280 --> 0:09:31.880 What are Bloomer consensus for tomorrow for the second quarter 0:09:31.920 --> 0:09:35.599 GDPs down? Some people have bigger numbers, some smaller, but 0:09:35.600 --> 0:09:37.840 they're all terrible, right, So it's not too hard to 0:09:38.440 --> 0:09:40.680 you know, to get out of the deepest pit you 0:09:40.679 --> 0:09:44.319 could possibly be in. But I think the question will 0:09:44.360 --> 0:09:47.600 be if things get worse instead of better, what can 0:09:47.720 --> 0:09:52.160 you do? You've done everything? And in that context, how 0:09:52.240 --> 0:09:56.240 much of a difference can forward guidance make? Uh? And 0:09:56.280 --> 0:09:59.160 of course the but but every Republican is gonna want 0:09:59.160 --> 0:10:01.360 to know is have we done? We have to make 0:10:01.400 --> 0:10:02.760 do more? But don't we have to worry about that? 0:10:02.800 --> 0:10:05.400 But budget deficit every day? Democrats gonna want to know 0:10:05.400 --> 0:10:07.839 why you know, no, we barely are going to get 0:10:07.880 --> 0:10:09.840 do enough we get our three and a half trillion 0:10:09.880 --> 0:10:13.280 dollar bill passed. But again I think uh. And in fact, 0:10:13.320 --> 0:10:15.319 you know reporters may ask versions of that as well. 0:10:15.440 --> 0:10:17.960 I think the most important one is are you guys done? 0:10:18.240 --> 0:10:19.680 Is there anything more you can do? And is the 0:10:19.679 --> 0:10:22.760 ball in somebody else's court like Congress? And how prescriptive 0:10:22.800 --> 0:10:25.480 do you think he will be in terms of the 0:10:25.520 --> 0:10:27.800 fiscal side, because I feel like he's pushed it a 0:10:27.840 --> 0:10:30.920 little bit. Maybe then we might have expected in terms 0:10:31.000 --> 0:10:35.160 of saying what at least he needed action obviously from 0:10:35.240 --> 0:10:38.320 Capitol Hill. Do you think he will be so forward 0:10:38.360 --> 0:10:41.679 as to be prescriptive or no, he won't be prescriptive, 0:10:41.679 --> 0:10:43.719 but you know you make I'm glad you mentioned that 0:10:43.760 --> 0:10:46.440 because it's very important. People who haven't watched the Federal 0:10:46.440 --> 0:10:49.280 Reserve as long as I have, or you have, or Dave, 0:10:49.679 --> 0:10:52.040 you know, think back, we back early for you got 0:10:52.040 --> 0:10:54.240 Bill Paul Volker, but think of Alan Greensman. He went 0:10:54.240 --> 0:10:56.520 out of his way not even to say the word, 0:10:57.040 --> 0:11:01.120 you know, fiscal or budget uh. And Jay Powell. I 0:11:01.120 --> 0:11:04.720 think people were stunned, some a little bit precautiously and 0:11:04.800 --> 0:11:07.560 some people gladly that he has been more willing to say, 0:11:07.600 --> 0:11:10.480 maybe not exactly what you need to do, but you 0:11:10.600 --> 0:11:13.560 do have to spend more money. Congress has to do something. 0:11:13.960 --> 0:11:16.440 This is the worst crisis is economy has seen, at 0:11:16.480 --> 0:11:19.440 least since the Great Depression, and that is where he 0:11:19.480 --> 0:11:22.360 has he has stood out again. I don't know what 0:11:22.400 --> 0:11:24.160 he'll be ready to say tomorrow, but I suspect that 0:11:24.200 --> 0:11:26.199 will be. Whatever you do, just do it and do 0:11:26.320 --> 0:11:29.120 it fast. People can't wait, all right, Kathleen his Global 0:11:29.160 --> 0:11:32.520 economics policyiator for Bloomberg. Great to get the instant context 0:11:32.559 --> 0:11:35.880 from you back to the FED back in anticipation of 0:11:35.960 --> 0:11:40.439 hearing from FED Chair J Powell in roughly fourteen minutes. 0:11:40.480 --> 0:11:42.520 We will take you there live. But in the meantime 0:11:42.880 --> 0:11:45.920 let's dig in a little further understand what we have 0:11:46.040 --> 0:11:48.160 heard from the FED so far and what it means, 0:11:48.280 --> 0:11:51.520 especially in the context of everything going on, all these 0:11:51.559 --> 0:11:54.320 negotiations on Capitol Hill, the role that FED has played, 0:11:54.360 --> 0:11:57.000 the world that Congress will play, and the administration, and 0:11:57.040 --> 0:11:59.959 what investors make of it. Delighted to have Ira Jersey, 0:12:00.400 --> 0:12:03.800 chief US interest rate strategist for Bloomberg Intelligence. He joins 0:12:03.840 --> 0:12:07.480 me from New Jersey and Dr Steven Skanky back with 0:12:07.600 --> 0:12:10.440 the chief economic advisor for Keel point of course, former U. S. 0:12:10.440 --> 0:12:14.640 Treasury and White House National Security Council staff member, just 0:12:14.920 --> 0:12:17.120 the guy that we want to talk to for all 0:12:17.160 --> 0:12:19.520 the context. This is a very holistic approach we're going 0:12:19.559 --> 0:12:23.239 to take to this, Ira. I want to start with you, um, 0:12:23.280 --> 0:12:26.120 from your perspective, from what you watch when it comes 0:12:26.120 --> 0:12:29.000 to interest rates and the reaction of the market. What's 0:12:29.040 --> 0:12:31.840 the most important thing to read here? So so, I 0:12:31.840 --> 0:12:35.160 think that there's two things that the FED continues to be, 0:12:35.679 --> 0:12:40.240 you know, hyper focused on the level of the coronavirus cases, 0:12:40.320 --> 0:12:43.920 so that they even added an entire sentence, which for 0:12:43.920 --> 0:12:46.200 for the FED to do that, uh and make their 0:12:46.240 --> 0:12:49.120 only significant change something to do with the coronavirus, I 0:12:49.120 --> 0:12:51.360 think is very telling. And the second thing that I 0:12:51.400 --> 0:12:55.320 think is generally important to the market is the fact 0:12:55.400 --> 0:12:58.440 that the Fed has extended their swap lines and their 0:12:58.960 --> 0:13:02.640 UH dollar repo facilities with other central banks through the 0:13:02.760 --> 0:13:07.040 end of March. And this is important because if you remember, 0:13:07.080 --> 0:13:10.440 at the beginning of this crisis in March, you had 0:13:10.480 --> 0:13:14.520 a lot of volatility with in the treasury market because um, 0:13:14.600 --> 0:13:17.800 there was not enough dollars overseas. So this will keep 0:13:17.800 --> 0:13:21.000 plenty of dollars overseas. So things like Lieboard, the London 0:13:21.000 --> 0:13:23.840 Interbrank Orford rate, as well as treasuries that are held 0:13:23.840 --> 0:13:26.280 overseas are going to be easier to fund because of 0:13:26.320 --> 0:13:27.920 that for a long time. So that that gets rid 0:13:27.960 --> 0:13:31.480 of a potential worry that maybe some of the markets 0:13:31.480 --> 0:13:34.520 would have had come September when these facilities were supposed 0:13:34.559 --> 0:13:37.840 to we're supposed to end, right, all right, Steven Skanky, 0:13:37.920 --> 0:13:40.760 come on in here. Um, let's take a step back 0:13:40.800 --> 0:13:45.040 if we can, because you have said, I think among 0:13:45.280 --> 0:13:47.559 a number of people, this seems to be the consensus 0:13:47.559 --> 0:13:49.720 that j Pal and his friends at the Federal Reserve, 0:13:50.000 --> 0:13:52.360 they've done a pretty good job. They have been on 0:13:52.480 --> 0:13:55.520 the front foot. They've been pretty active, they have made 0:13:55.520 --> 0:13:58.240 a lot of moves, and yet they come into this 0:13:58.400 --> 0:14:01.200 latest meeting. They came into this late, this meeting with 0:14:01.320 --> 0:14:05.320 the backdrop that they probably didn't anticipate or certainly didn't 0:14:05.800 --> 0:14:10.000 want to anticipate. It is not an optimistic view of 0:14:10.040 --> 0:14:13.880 the world right now. Tell me about them. Well, the 0:14:13.960 --> 0:14:19.720 fan as you, as you point out Jason, has been preemptive, proactive, aggressive. 0:14:20.160 --> 0:14:23.600 They they really are satisfied with all the things that 0:14:23.640 --> 0:14:26.000 they've done. There are certainly not satisfied with what's going 0:14:26.040 --> 0:14:29.040 on in the world, in the US economy, and so 0:14:29.120 --> 0:14:36.880 their bewilderment is is obviously something of interest. They got 0:14:36.880 --> 0:14:39.920 things going in a good way. They promised that they 0:14:39.920 --> 0:14:42.360 would do all that needed to be done, and with 0:14:42.480 --> 0:14:46.400 their two point six trillion dollars in emergency credit facilities 0:14:46.600 --> 0:14:49.400 are ready to go. Uh, they found that they didn't 0:14:49.400 --> 0:14:52.080 even have to use all that much of it because 0:14:52.120 --> 0:14:55.360 once they said that they were there, and then they 0:14:55.360 --> 0:14:58.560 extended credit a few times. Good example is the money 0:14:58.600 --> 0:15:04.240 market mutual fun liquidity facility. Some money was extended, it 0:15:04.320 --> 0:15:07.720 was paid back, the market understands the fet is standing by. 0:15:07.840 --> 0:15:11.160 All of that settled down Uh. And we were on 0:15:11.240 --> 0:15:14.880 a good trajectory from the end of April right up 0:15:15.040 --> 0:15:19.560 until pretty much the end of June when the reopenings 0:15:20.600 --> 0:15:24.760 and almost a disregard for the virus in some locations 0:15:26.000 --> 0:15:28.840 caught people by surprise. And all of the whole the 0:15:28.880 --> 0:15:34.000 virus is back and people are sick, hospitals are filling up. Uh. 0:15:34.040 --> 0:15:37.920 And that old concern comes back again. And even though 0:15:37.960 --> 0:15:41.840 we don't expect and no one expected that state and 0:15:41.880 --> 0:15:44.440 local governments were gonna shut down the way they had 0:15:44.480 --> 0:15:49.680 in March. UH, people self shutter, self, shelter in place 0:15:50.200 --> 0:15:52.040 as a result of they're concerned about being in the 0:15:52.080 --> 0:15:56.360 marketplace or the workplace. So the FETE is out there 0:15:56.400 --> 0:15:58.400 doing what it can. You know, the fact that it's 0:15:58.440 --> 0:16:03.080 added three threeion dollars would balance sheets since January. Uh, And, 0:16:03.160 --> 0:16:06.000 as you rightly point out, is committed to using its 0:16:06.040 --> 0:16:09.480 full range of tools doing all that it needs to 0:16:09.600 --> 0:16:13.160 do to support the economy in this challenging time there 0:16:13.200 --> 0:16:18.240 there and after ready. But as you also mentioned, uh, Pow, 0:16:18.640 --> 0:16:23.880 unlike his predecessors, has been pretty straight, pretty straightforward about 0:16:23.920 --> 0:16:27.160 their needing to be fiscal stimulus to do things that 0:16:27.240 --> 0:16:31.360 monetary policy cannot Uh. And that also is a source 0:16:31.400 --> 0:16:35.240 of disappointment that you know that here we are with 0:16:35.440 --> 0:16:40.160 a an immediate need for um extending some of the 0:16:40.200 --> 0:16:45.320 fiscal stimulus programs that have been previously enacted, and uh, 0:16:45.600 --> 0:16:49.360 Congress is not encouraging that it's going to happen anytime soon. No, 0:16:49.640 --> 0:16:53.280 And that certainly is the viber getting in and and 0:16:53.440 --> 0:16:56.000 let's talk if we can ira a little bit about 0:16:56.040 --> 0:16:58.760 that disconnect that and there are a number of disconnects 0:16:58.760 --> 0:17:01.360 I feel like we're looking at, especially when we look 0:17:01.360 --> 0:17:05.960 through the eyes of investors or look at investors actions here. 0:17:06.480 --> 0:17:10.280 Help me understand kind of what you see in the 0:17:10.320 --> 0:17:13.320 numbers and in the data and as you talk to 0:17:13.320 --> 0:17:16.920 your colleagues and folks on Wall Street about how the 0:17:17.000 --> 0:17:23.000 market broadly defined is reacting to this current situation, because 0:17:23.600 --> 0:17:27.160 as Steven just pointed out, it's not looking great out there, 0:17:27.320 --> 0:17:32.560 and yet here we are in a fairly optimistic dare 0:17:32.600 --> 0:17:37.320 I say enthusiastic uh investment environment? Well we lost Ara, 0:17:37.600 --> 0:17:40.000 So Steven Skanky, I'm gonna turn to you and turn 0:17:40.080 --> 0:17:43.680 back to you. Let's talk more about that. You talk 0:17:43.760 --> 0:17:46.560 to me about that disconnected if we can, because I'm 0:17:46.600 --> 0:17:49.200 I continue to be sort of bufuddled by it, do you? 0:17:49.400 --> 0:17:52.280 Or is this just how kind of markets work? That 0:17:52.480 --> 0:17:56.480 the the gap, the chasm between the kind of real 0:17:56.560 --> 0:18:00.600 life and what investors seem to be uh investing against 0:18:01.080 --> 0:18:05.920 it doesn't add up to me. It is certainly perplexing, 0:18:06.240 --> 0:18:09.879 and there's a lot of good reason to be skeptical 0:18:10.080 --> 0:18:12.640 and doubtful in all this. But but as we continue 0:18:12.640 --> 0:18:14.760 to watch it and look how the market reacts to 0:18:14.760 --> 0:18:19.119 any particular news, it's mostly driven by an expectation of 0:18:19.160 --> 0:18:23.760 getting the virus under control. Vaccines therapeutics. We saw good 0:18:23.800 --> 0:18:28.840 news announced late yesterday about some vaccine results that all 0:18:28.880 --> 0:18:31.480 the market was off a little yesterday. It's it's vow 0:18:32.320 --> 0:18:36.600 rebounding positively again today. The other thing that's been a 0:18:36.640 --> 0:18:40.520 bit of a surprise is the smp OR earnings so far. 0:18:40.640 --> 0:18:46.600 They're they're beating estimates, uh self identified estimates, guidance from 0:18:46.640 --> 0:18:51.399 the companies, and bottom up calculations of earning estimates, and 0:18:51.440 --> 0:18:54.080 they're beating them at a rate that's greater than usual 0:18:54.160 --> 0:18:58.120 that we usually see in the second quarter. So so 0:18:58.280 --> 0:19:04.320 the the rebound seems to be greater than believed. Part 0:19:04.359 --> 0:19:07.480 of it is this this peculiar bifurcation that we have 0:19:08.240 --> 0:19:12.960 going on, where the hardest hit companies are the smaller 0:19:13.240 --> 0:19:16.320 non publicly traded companies that don't have access to the 0:19:16.359 --> 0:19:22.280 credit markets that larger publicly traded companies do and UH 0:19:22.520 --> 0:19:25.560 and and some of those companies are are naturally benefiting 0:19:25.760 --> 0:19:31.440 from smaller competitives competitors just not being able to UH 0:19:31.560 --> 0:19:35.960 to continue and to hold on UM even even in 0:19:36.040 --> 0:19:40.879 the earnings outlook it I mean, we're still expecting the 0:19:40.960 --> 0:19:47.760 thirty decline and earnings for the second quarter, which is significant, extraordinary, 0:19:48.359 --> 0:19:54.000 what is better than forecast that was UM. There's been 0:19:54.040 --> 0:19:58.399 trending out there. So the chasm, the gap, what do 0:19:58.480 --> 0:20:01.440 you do and something is to frightening really to spend 0:20:01.480 --> 0:20:06.200 much time looking at it. You look beyond and sure enough, 0:20:06.400 --> 0:20:08.879 sure enough, they're they're looking to the other side and 0:20:08.960 --> 0:20:13.679 the third quarter economic rebound and some rebound in earnings 0:20:14.359 --> 0:20:18.440 in the third in court quarters and then on into well, 0:20:18.680 --> 0:20:21.680 I think there's this is I think there's a couple 0:20:21.760 --> 0:20:23.840 of things. I think one is that when you look 0:20:23.880 --> 0:20:26.280 at the bond market, right the market that I focus on, 0:20:26.720 --> 0:20:28.880 it's still telling you that there's going to be very 0:20:29.000 --> 0:20:33.720 weak economic activity and relatively low inflation for years to come. 0:20:33.800 --> 0:20:37.399 So you know, the bond market's not necessarily telling you 0:20:37.480 --> 0:20:39.480 the same thing that maybe the stock market might be 0:20:39.520 --> 0:20:41.280 on first blush. But I think one of the things 0:20:41.320 --> 0:20:45.880 that's happening with risk asset's generally everywhere is the reaction 0:20:45.960 --> 0:20:50.760 function that that the Federal Reserve and other monetary authorities 0:20:50.760 --> 0:20:54.920 globally are going to keep monetary policy easy even after 0:20:54.960 --> 0:20:57.119 the whole COVID crisis has gone right, So that's one 0:20:57.200 --> 0:20:59.679 of the things that that the Fed reiterated today at 0:20:59.720 --> 0:21:02.240 certain what you've seen in the dots back in June 0:21:02.800 --> 0:21:05.480 is the Federals are basically committing that they're going to 0:21:05.520 --> 0:21:08.800 hold rates where they are now basically zero until at 0:21:08.840 --> 0:21:12.800 least and then the markets even thinking that if they hike, 0:21:12.920 --> 0:21:15.679 it's going to be like once every six months. So 0:21:15.840 --> 0:21:20.119 you're not talking about monetary policy getting restrictive anytime in 0:21:20.160 --> 0:21:23.240 the next four or five years. So um, you know, 0:21:23.280 --> 0:21:26.560 so it does make sense that valuations, maybe based on 0:21:26.600 --> 0:21:30.960 current earnings, are you know, relatively high. But but like 0:21:31.000 --> 0:21:33.880 you're the other guest said, maybe over the next three years, 0:21:34.200 --> 0:21:37.000 earnings wind up getting back to some level that they were, 0:21:37.119 --> 0:21:40.080 say prior to uh, to the whole COVID issue. So 0:21:40.240 --> 0:21:42.359 so I think that's that that you're having this this 0:21:42.440 --> 0:21:46.240 whole um, you know, systemic difference in what you're seeing 0:21:46.320 --> 0:21:50.800 between different markets. Yeah, absolutely so, Steven Skanky taking this 0:21:50.960 --> 0:21:54.280 from a policy perspective, because you know all the levers 0:21:54.320 --> 0:21:58.920 in Washington that canon can't be pulled. Many have been, 0:21:59.040 --> 0:22:02.160 but some are slower to to act, as you alluded 0:22:02.200 --> 0:22:05.480 to with the fiscal side, and maybe the frustration even 0:22:05.520 --> 0:22:07.680 if he's not showing it on the part of j. 0:22:07.840 --> 0:22:11.800 Powell and his colleagues, what needs to happen here and 0:22:11.840 --> 0:22:16.679 why isn't it happening? It seems that there's still a 0:22:16.720 --> 0:22:20.600 certain amount of denial about the seriousness of the virus. 0:22:21.040 --> 0:22:24.639 If you even just look at the trend in and 0:22:24.800 --> 0:22:28.239 whether the presidents wearing a face mask or not. You know, 0:22:28.320 --> 0:22:31.760 for for three days in a row or three press 0:22:31.760 --> 0:22:35.480 announcements in a row, he's patting the benefits of face 0:22:35.520 --> 0:22:40.320 mask wearing, social distancing, washing your hands, uh. And then 0:22:40.359 --> 0:22:43.639