1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:14,000 --> 00:00:17,599 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,040 --> 00:00:23,560 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, sun Cloud, 4 00:00:23,640 --> 00:00:27,280 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. What 5 00:00:27,360 --> 00:00:30,200 Speaker 1: we'renna do right now is drive forward to the Friday 6 00:00:30,280 --> 00:00:32,360 Speaker 1: job recording. There's no one better to do that with. 7 00:00:32,520 --> 00:00:35,639 Speaker 1: And Lewis Alexander here is with Nomura and has an 8 00:00:35,800 --> 00:00:39,360 Speaker 1: esteemed career in academics out of Yale, out of Stanford 9 00:00:39,640 --> 00:00:42,960 Speaker 1: and also in market economics. LOUI, I know John and 10 00:00:43,040 --> 00:00:45,600 Speaker 1: Lisa want to get to what we'll see Friday, but 11 00:00:45,760 --> 00:00:48,559 Speaker 1: I've got to give you a victory lap on an 12 00:00:48,720 --> 00:00:52,280 Speaker 1: essay you wrote, I'm gonna guess a decade ago, maybe 13 00:00:52,280 --> 00:00:56,040 Speaker 1: coming out of your public service under Secretary Geitner, where 14 00:00:56,080 --> 00:01:00,560 Speaker 1: you talked about technology of the halves and I have not. 15 00:01:01,160 --> 00:01:05,160 Speaker 1: You absolutely nailed at then, Dr Alexander, and now we've 16 00:01:05,160 --> 00:01:09,120 Speaker 1: got the likes of Amazon borrowing at full faith and 17 00:01:09,160 --> 00:01:13,560 Speaker 1: credit yields. Can technology do you just in visualize these 18 00:01:13,600 --> 00:01:18,360 Speaker 1: technology giants just advancing over the coming years, in decades 19 00:01:18,640 --> 00:01:21,640 Speaker 1: to ever bigger ever more dominant. So I think one 20 00:01:21,680 --> 00:01:24,320 Speaker 1: of the questions of the economy of it'll last ten 21 00:01:24,400 --> 00:01:27,319 Speaker 1: years has really been why hasn't productivity growth been stronger 22 00:01:27,880 --> 00:01:31,720 Speaker 1: given how important and how pervasive tech has been. Look, 23 00:01:31,760 --> 00:01:34,039 Speaker 1: we're going through a real time experiment of what we 24 00:01:34,080 --> 00:01:37,880 Speaker 1: can really do with technology, and I think we're going 25 00:01:37,959 --> 00:01:41,520 Speaker 1: to be positively surprised. So in many ways, I do 26 00:01:41,600 --> 00:01:44,760 Speaker 1: think this is an opportunity for that. Um I think 27 00:01:44,760 --> 00:01:48,800 Speaker 1: the question really is is the right industrial structure for 28 00:01:48,840 --> 00:01:52,120 Speaker 1: that a small number of very large firms or do 29 00:01:52,200 --> 00:01:55,040 Speaker 1: you want to see more competition? And that, frankly is 30 00:01:55,080 --> 00:01:58,240 Speaker 1: going to be the policy debate around tech going forward. 31 00:01:58,760 --> 00:02:01,800 Speaker 1: We want to understand, lou, how these companies right size 32 00:02:01,800 --> 00:02:04,160 Speaker 1: themselves in the months to come, the amount of debt 33 00:02:04,200 --> 00:02:06,160 Speaker 1: that many of these companies have hats to borrow, What 34 00:02:06,240 --> 00:02:08,120 Speaker 1: do you expect corporate behavior to look like in the 35 00:02:08,160 --> 00:02:10,800 Speaker 1: next several months, and how would it shape growth? So, look, 36 00:02:10,840 --> 00:02:13,120 Speaker 1: I think it makes all the sense in the world 37 00:02:13,160 --> 00:02:16,080 Speaker 1: for corporations to shore up their liquidity at this point, 38 00:02:16,160 --> 00:02:19,800 Speaker 1: and capital markets are open, credit markets are open for 39 00:02:19,840 --> 00:02:22,120 Speaker 1: good borrowers, and so I think it makes perfect sense 40 00:02:22,520 --> 00:02:25,280 Speaker 1: for them to take advantage of that. Obviously, you're going 41 00:02:25,320 --> 00:02:29,640 Speaker 1: to have some companies that are going to face losses 42 00:02:30,080 --> 00:02:32,960 Speaker 1: over the near term that are very large relative to 43 00:02:33,000 --> 00:02:36,880 Speaker 1: their existing equity base. You think about the you know, 44 00:02:37,000 --> 00:02:41,760 Speaker 1: the auto rental companies, the airlines, they are facing fundamental 45 00:02:41,840 --> 00:02:44,440 Speaker 1: challenges and that's going to be a different kettle of fish. 46 00:02:44,560 --> 00:02:48,000 Speaker 1: But for most corporations who are going to be able 47 00:02:48,000 --> 00:02:50,880 Speaker 1: to ride ride this out, um, it makes all the 48 00:02:50,880 --> 00:02:53,280 Speaker 1: sense in the world for them to be borrowing. Louis 49 00:02:53,320 --> 00:02:56,440 Speaker 1: you said that this market is open for good borrowers, 50 00:02:56,440 --> 00:02:59,640 Speaker 1: and the bifurcation has never been more, never been greater, 51 00:02:59,680 --> 00:03:03,040 Speaker 1: whether the good corporate borrow or a good consumer borrow. 52 00:03:03,080 --> 00:03:05,919 Speaker 1: When we're seeing that bleed out in the economic numbers, 53 00:03:05,919 --> 00:03:08,640 Speaker 1: with the jobless reports on Thursday as well as Friday 54 00:03:08,639 --> 00:03:11,200 Speaker 1: that we're expecting this week, can the U s economy 55 00:03:11,280 --> 00:03:17,600 Speaker 1: maintain some sort of growth trajectory with that divergence intact. So, like, 56 00:03:17,720 --> 00:03:20,560 Speaker 1: one of the things which is different about this shock 57 00:03:20,680 --> 00:03:25,480 Speaker 1: from others is how concentrated it is bisector. So those 58 00:03:25,520 --> 00:03:28,520 Speaker 1: parts of the economy that depend on social contact, the 59 00:03:28,560 --> 00:03:32,760 Speaker 1: most obvious ones being restaurants and entertainment and all of 60 00:03:32,800 --> 00:03:36,640 Speaker 1: that are being devastated by this, other parts of the 61 00:03:36,680 --> 00:03:39,760 Speaker 1: economy that are frankly much less dependent on that and 62 00:03:39,840 --> 00:03:42,000 Speaker 1: can adapt to working from home and all of those 63 00:03:42,000 --> 00:03:46,680 Speaker 1: things are are obviously doing much better. And it's very 64 00:03:46,760 --> 00:03:50,080 Speaker 1: unusual to have a shock like this that has that disparity, 65 00:03:50,120 --> 00:03:53,200 Speaker 1: So it really starts with that. I think as we 66 00:03:53,280 --> 00:03:55,480 Speaker 1: come out of this, as we back away from the 67 00:03:55,520 --> 00:03:58,480 Speaker 1: most extreme version of social distancing, as we learn how 68 00:03:58,480 --> 00:04:00,960 Speaker 1: to do these things without and ringing the same kind 69 00:04:00,960 --> 00:04:04,560 Speaker 1: of exposure, I think you will see those disparities start 70 00:04:04,640 --> 00:04:07,520 Speaker 1: to diminish. But they're going to be with us for 71 00:04:07,560 --> 00:04:11,000 Speaker 1: a long time. So I think the real problem is 72 00:04:11,760 --> 00:04:15,320 Speaker 1: the jobs available for people who have done that stuff 73 00:04:15,360 --> 00:04:18,320 Speaker 1: that depends on social distancing. They're going to be depressed 74 00:04:18,320 --> 00:04:22,400 Speaker 1: for a while. So the US Budget Office came out 75 00:04:22,440 --> 00:04:24,400 Speaker 1: with a projection saying that it may take nearly a 76 00:04:24,440 --> 00:04:27,520 Speaker 1: decade for the US economy to recover from the shock 77 00:04:27,600 --> 00:04:30,400 Speaker 1: that we just saw. What does that mean in terms 78 00:04:30,400 --> 00:04:33,039 Speaker 1: of the unemployment rate going forward on a sort of 79 00:04:33,040 --> 00:04:36,760 Speaker 1: sustainable basis over the next five years. So look, I 80 00:04:36,800 --> 00:04:40,480 Speaker 1: think the experience we had before COVID nineteen, which suggested 81 00:04:40,520 --> 00:04:43,599 Speaker 1: that we could get the unemployment rate down to very 82 00:04:43,640 --> 00:04:46,480 Speaker 1: low levels without having those sorts of problems of inflation 83 00:04:46,520 --> 00:04:48,600 Speaker 1: we've had in the past. I think that is relevant 84 00:04:48,640 --> 00:04:51,160 Speaker 1: experience for what we're going to where we should try 85 00:04:51,240 --> 00:04:54,080 Speaker 1: and get to in the long run. But look, we 86 00:04:54,080 --> 00:04:56,680 Speaker 1: haven't seen unemployment at these levels since a great depression. 87 00:04:57,720 --> 00:05:01,360 Speaker 1: The when we had the Great Recession a decade ago, 88 00:05:01,360 --> 00:05:03,640 Speaker 1: the unemployment rate got to ten percent and it took 89 00:05:03,720 --> 00:05:06,240 Speaker 1: us eight or nine years to get it down below 90 00:05:06,680 --> 00:05:11,839 Speaker 1: four percent. It's over fifteen now. It's going higher before 91 00:05:11,920 --> 00:05:14,440 Speaker 1: this is over. Yes, it is going to take a 92 00:05:14,480 --> 00:05:16,760 Speaker 1: long time for us to get back. I'm not sure 93 00:05:16,760 --> 00:05:18,880 Speaker 1: it's necessarily going to take as long as it did 94 00:05:19,480 --> 00:05:23,000 Speaker 1: following the last big recession, but it's going to take 95 00:05:23,040 --> 00:05:26,279 Speaker 1: a long time. This is the issue, Tom, the number 96 00:05:26,279 --> 00:05:30,320 Speaker 1: one issue, and Lisa raises exactly the right question on unemployment. Tom, 97 00:05:30,440 --> 00:05:32,400 Speaker 1: you and I've been talking about this together with Lisa 98 00:05:32,440 --> 00:05:34,680 Speaker 1: over the last several months or so. We could approach 99 00:05:35,560 --> 00:05:37,520 Speaker 1: we could have some real improvement in the back half 100 00:05:37,520 --> 00:05:39,040 Speaker 1: of this year, but we could still end the year 101 00:05:39,360 --> 00:05:41,640 Speaker 1: at double figures. And that's going to be unacceptable and 102 00:05:41,640 --> 00:05:47,120 Speaker 1: should be unacceptable to absolutely everybody's son. Yeah, it's absolutely true, 103 00:05:47,160 --> 00:05:51,880 Speaker 1: and Dr Alexander. What's so important about that observation is 104 00:05:52,040 --> 00:05:54,840 Speaker 1: what it does to inequality. You know, we don't need 105 00:05:54,920 --> 00:05:58,120 Speaker 1: to go on a Tuesday into the Genie coefficient and 106 00:05:58,160 --> 00:06:05,120 Speaker 1: all the dynamics of inequality. But has it ever been wider? Um, 107 00:06:05,600 --> 00:06:07,520 Speaker 1: You have to go back a long time for it's 108 00:06:07,560 --> 00:06:10,880 Speaker 1: been worse. We've never had a shock that is more disparate. 109 00:06:11,480 --> 00:06:12,880 Speaker 1: One of the things I will just not to bring 110 00:06:12,880 --> 00:06:14,640 Speaker 1: it back to the employment report we're going to get 111 00:06:14,640 --> 00:06:19,280 Speaker 1: on Friday. Um, we're expecting average hourly earnings to go 112 00:06:19,400 --> 00:06:22,400 Speaker 1: up by one point three percentage points on a month 113 00:06:22,560 --> 00:06:26,359 Speaker 1: when we lose over five million jobs. Now, how do 114 00:06:26,400 --> 00:06:28,800 Speaker 1: you make sense of that? The way you make sense 115 00:06:28,839 --> 00:06:31,720 Speaker 1: of that is the jobs were losing, our low edge jobs, 116 00:06:32,200 --> 00:06:35,839 Speaker 1: and it hid that that disparity between what happens with 117 00:06:35,920 --> 00:06:39,160 Speaker 1: average hourly earnings and the headline employment is a direct 118 00:06:39,200 --> 00:06:43,080 Speaker 1: reflection of the inequality of the effects of this. And 119 00:06:43,160 --> 00:06:44,919 Speaker 1: I do think that that is an aspect of this 120 00:06:45,080 --> 00:06:47,680 Speaker 1: which we can't get away from, and it's going to 121 00:06:47,760 --> 00:06:50,960 Speaker 1: affect the politics of this in some ways. These are 122 00:06:50,960 --> 00:06:52,680 Speaker 1: trends that have been out there for a long time. 123 00:06:52,839 --> 00:06:56,400 Speaker 1: They're not really new, but it is very much going 124 00:06:56,480 --> 00:07:00,360 Speaker 1: to sort of highlight those problems, and I think it's 125 00:07:00,360 --> 00:07:03,159 Speaker 1: going to be an important part of the election. What 126 00:07:03,360 --> 00:07:07,599 Speaker 1: is the social policy that begins to nudge us away 127 00:07:07,640 --> 00:07:11,119 Speaker 1: from this abrupt inequality? I mean the tradition of Yale 128 00:07:11,160 --> 00:07:15,600 Speaker 1: academics is Robert Schiller and James Tobin in others where 129 00:07:15,600 --> 00:07:19,920 Speaker 1: there was an advocacy for social policy. This is America 130 00:07:20,000 --> 00:07:23,040 Speaker 1: that's not doing so well on social policy right now. 131 00:07:23,560 --> 00:07:26,880 Speaker 1: What's the best case to begin to take us from 132 00:07:26,960 --> 00:07:30,920 Speaker 1: our inequalities? UM? I think you have to try and 133 00:07:30,960 --> 00:07:34,760 Speaker 1: address UM the underlying causes and start from the beginning, 134 00:07:34,840 --> 00:07:38,480 Speaker 1: and a lot of that is about education, it's about 135 00:07:38,640 --> 00:07:42,360 Speaker 1: access to UM social services. So one of the things 136 00:07:42,400 --> 00:07:46,440 Speaker 1: that's very striking about this is the incidents of mortality 137 00:07:46,440 --> 00:07:50,000 Speaker 1: around COVID nineteen is related to other conditions which are 138 00:07:50,000 --> 00:07:53,720 Speaker 1: related to economic status and your access to healthcare. So 139 00:07:53,760 --> 00:07:56,400 Speaker 1: I think there's some very basic things you can do UM, 140 00:07:56,440 --> 00:08:00,880 Speaker 1: starting with healthcare, but also ultimately coming act to education 141 00:08:00,960 --> 00:08:04,040 Speaker 1: and giving people the skills not only to have higher 142 00:08:04,080 --> 00:08:06,280 Speaker 1: wage jobs, but to have jobs. Frankly, that can be 143 00:08:06,360 --> 00:08:10,880 Speaker 1: done uh remotely. So one of the big disparities again 144 00:08:11,040 --> 00:08:14,400 Speaker 1: is who gets who has the jobs that we can 145 00:08:14,440 --> 00:08:19,160 Speaker 1: do work from home that is in some sense very 146 00:08:19,240 --> 00:08:23,000 Speaker 1: much related to those same inequalities and education that are 147 00:08:23,040 --> 00:08:26,160 Speaker 1: the things we have to start to address. Leu Alexander 148 00:08:26,280 --> 00:08:28,760 Speaker 1: from Namura. Always great to get your thoughts on this program. 149 00:08:28,760 --> 00:08:35,040 Speaker 1: Thanks for your time this morning. Regu Alexander. With this 150 00:08:35,160 --> 00:08:38,600 Speaker 1: moment ago with Namura and John, the backdrop of this, 151 00:08:38,679 --> 00:08:42,160 Speaker 1: if you beautifully stated, is an equity market that's got 152 00:08:42,200 --> 00:08:44,960 Speaker 1: a very much real risk on field, John, do we 153 00:08:45,000 --> 00:08:48,160 Speaker 1: have a wife for that? I don't have a why 154 00:08:48,280 --> 00:08:51,480 Speaker 1: the Federal Reserve sequential improvement as we reopened, Tom, there 155 00:08:51,520 --> 00:08:53,720 Speaker 1: are many reasons. I think there are many, wise, but 156 00:08:54,000 --> 00:08:55,720 Speaker 1: I don't really have a win in a moment like this, 157 00:08:55,800 --> 00:08:58,720 Speaker 1: and why we should be higher. Ectonly futures up thirteen points, 158 00:08:58,800 --> 00:09:01,600 Speaker 1: up four tents of one percent. Let's talk about the 159 00:09:01,640 --> 00:09:03,960 Speaker 1: equity markets. Home came. We can bring in the chief 160 00:09:04,040 --> 00:09:07,439 Speaker 1: US equity strategist of Golman Sachs, a good friend of 161 00:09:07,480 --> 00:09:09,400 Speaker 1: this show. I'm pleased to say David Couston is with 162 00:09:09,480 --> 00:09:13,120 Speaker 1: us now. David, you've called this one unloved. I'd call 163 00:09:13,200 --> 00:09:16,040 Speaker 1: it hated. This move from the bottom all the way 164 00:09:16,080 --> 00:09:19,440 Speaker 1: up and through this morning what's your take at the moment. Well, 165 00:09:19,440 --> 00:09:23,520 Speaker 1: it's interesting the definition between unloved and hated. I guess 166 00:09:23,559 --> 00:09:26,079 Speaker 1: the indifference what Dante said is the really the the 167 00:09:26,360 --> 00:09:33,560 Speaker 1: opposite of but the idea of portfolio managers. They're certainly 168 00:09:33,600 --> 00:09:36,559 Speaker 1: welcomed the idea of a higher market. Most fund managers 169 00:09:36,679 --> 00:09:40,120 Speaker 1: are long biased, long tilted, whether they're a long only 170 00:09:40,120 --> 00:09:42,360 Speaker 1: fun mutual fund or whether hedge fund, they can have 171 00:09:42,400 --> 00:09:45,839 Speaker 1: a long bias. So the rising market has certainly been 172 00:09:46,080 --> 00:09:50,160 Speaker 1: been been welcomed. It's it's been unloved. You could argue 173 00:09:50,440 --> 00:09:54,679 Speaker 1: your your terms hated because most fundationers haven't been positioned 174 00:09:55,760 --> 00:09:59,160 Speaker 1: UH to participated fully in this in this recovery, I 175 00:09:59,160 --> 00:10:03,360 Speaker 1: will certainly stay as strategistic surprise at the magnitude and 176 00:10:03,400 --> 00:10:06,719 Speaker 1: the persistence of the thirty percent moved in the in 177 00:10:06,760 --> 00:10:10,680 Speaker 1: the FMP five. Of course, uh, as you've talked about, 178 00:10:10,760 --> 00:10:13,640 Speaker 1: no doubt and then and others. The rally has been 179 00:10:13,800 --> 00:10:18,640 Speaker 1: so driven by a relatively narrow group of stocks, primarily 180 00:10:18,640 --> 00:10:22,240 Speaker 1: in technology. There's helped lift the indexes, but the the 181 00:10:22,280 --> 00:10:26,840 Speaker 1: underlying typical stock actually hasn't necessarily participated as much as 182 00:10:26,920 --> 00:10:29,800 Speaker 1: the headline index would would would show, and so that's 183 00:10:29,800 --> 00:10:34,160 Speaker 1: an issue that has been of much discussion with with 184 00:10:34,160 --> 00:10:37,760 Speaker 1: with with clients and put foire managers. Now because there's 185 00:10:37,800 --> 00:10:40,840 Speaker 1: one continue to own the leaders of the market. The 186 00:10:40,880 --> 00:10:45,920 Speaker 1: top five concentration UH stocks never been this concentrated in history, 187 00:10:46,240 --> 00:10:49,560 Speaker 1: even back in the Czech bubble of two thousand, the 188 00:10:49,559 --> 00:10:53,280 Speaker 1: top five stocks then we're like eight. Now we're talking 189 00:10:53,280 --> 00:10:56,959 Speaker 1: about one fifth of the market is dominated control the 190 00:10:57,040 --> 00:11:00,600 Speaker 1: represented by by just five companies. So the UH we 191 00:11:00,640 --> 00:11:04,200 Speaker 1: know the drivers diagnostically, and then looking forward the the 192 00:11:04,320 --> 00:11:08,680 Speaker 1: idea of UH the cyclical recovery, which has certainly been 193 00:11:09,240 --> 00:11:11,839 Speaker 1: been been focused in the last couple of weeks, UH 194 00:11:11,920 --> 00:11:15,480 Speaker 1: in the last couple of days, frankly, but the persistence 195 00:11:15,520 --> 00:11:18,040 Speaker 1: of that I would say is is I'm less confident 196 00:11:18,120 --> 00:11:21,560 Speaker 1: about that. Would would focus more strategically on some of 197 00:11:21,559 --> 00:11:25,040 Speaker 1: the market leaders, and whether that's in technology, whether there's 198 00:11:25,080 --> 00:11:28,280 Speaker 1: more secular growth and UH stronger balance sheet, some of 199 00:11:28,280 --> 00:11:31,760 Speaker 1: those characteristics UH, in my view, are more sustainable in 200 00:11:31,840 --> 00:11:34,520 Speaker 1: terms of their drivers. If let's talk about that, it's 201 00:11:34,559 --> 00:11:37,480 Speaker 1: important the reopening rotation has taken place over the last 202 00:11:37,480 --> 00:11:39,880 Speaker 1: couple of weeks. What is it about that rotation that 203 00:11:39,960 --> 00:11:42,280 Speaker 1: you don't think it's durable. What is it about it 204 00:11:42,320 --> 00:11:44,720 Speaker 1: that you don't think it's sustainable? So the key issue 205 00:11:44,960 --> 00:11:50,160 Speaker 1: is the rehiring rates in the United States. The idea is, 206 00:11:50,240 --> 00:11:53,440 Speaker 1: you know, tragically, we have almost forty million people about 207 00:11:53,480 --> 00:11:57,120 Speaker 1: for unemployment initial unemployment over the last nine weeks, and 208 00:11:57,400 --> 00:12:00,920 Speaker 1: how quickly hopefully we'll be quickly, but how how quickly 209 00:12:01,080 --> 00:12:03,680 Speaker 1: and how many? What percentage of those individuals who have 210 00:12:03,720 --> 00:12:06,880 Speaker 1: been laid off for furloughed will be rehired by their employers? 211 00:12:07,520 --> 00:12:11,480 Speaker 1: Basical assumption A lot of people have been making around uh, 212 00:12:11,520 --> 00:12:14,640 Speaker 1: you know, and that will drive the economic activity. And 213 00:12:14,679 --> 00:12:17,880 Speaker 1: as people UH leave shelter in place or begin to 214 00:12:17,960 --> 00:12:20,640 Speaker 1: reopen some of these state economies, does that lead to 215 00:12:21,000 --> 00:12:24,240 Speaker 1: more uh sustainability where you've had a big move already 216 00:12:24,600 --> 00:12:26,520 Speaker 1: uh in a lot of these companies. And I would 217 00:12:26,640 --> 00:12:30,359 Speaker 1: UH answer the question as follows. I prefer and recommend 218 00:12:30,640 --> 00:12:38,960 Speaker 1: that you own domestically facing goods producers as contracted with 219 00:12:39,360 --> 00:12:42,359 Speaker 1: services providers. So every company in the country is classified 220 00:12:42,360 --> 00:12:45,080 Speaker 1: as either a goods producer or a services provider. And 221 00:12:45,120 --> 00:12:48,560 Speaker 1: the lessons from China is that the leading edge of 222 00:12:48,600 --> 00:12:51,720 Speaker 1: the recovery or the restarted the economy Johnathan has been 223 00:12:51,800 --> 00:12:56,840 Speaker 1: led by the toms, led by the industrials, not the consumers. 224 00:12:56,840 --> 00:12:58,920 Speaker 1: So we want to own us companies that are that 225 00:12:58,960 --> 00:13:03,880 Speaker 1: are more business the business you know, of the goods producing. 226 00:13:04,000 --> 00:13:05,760 Speaker 1: Those would be a lot of companies in the in 227 00:13:05,800 --> 00:13:09,480 Speaker 1: the chemical business, uh, chemical space, the machineries of barospace. 228 00:13:10,080 --> 00:13:12,640 Speaker 1: That would be your trade, if you will, your your 229 00:13:12,679 --> 00:13:16,760 Speaker 1: tactical trade. But strategically still looking for stronger balance and 230 00:13:16,880 --> 00:13:21,439 Speaker 1: technology to be offering better returns over time. What's interesting 231 00:13:21,480 --> 00:13:25,000 Speaker 1: your David Costan is small caps. Christopher own over Statigos 232 00:13:25,040 --> 00:13:28,480 Speaker 1: has a brilliant note this morning noticing the elevation of 233 00:13:28,559 --> 00:13:32,320 Speaker 1: small caps, but he asked the golden sacks like question 234 00:13:32,800 --> 00:13:36,480 Speaker 1: of do they on an absolute basis advance and can 235 00:13:36,520 --> 00:13:40,400 Speaker 1: they even advance on a relative basis versus large caps? 236 00:13:40,760 --> 00:13:43,200 Speaker 1: Do you have an affinity for small camps right now? 237 00:13:44,080 --> 00:13:46,839 Speaker 1: I do not, And the reason for that is, UH, 238 00:13:46,920 --> 00:13:49,480 Speaker 1: strictly on the balance sheet. We know the singular risk 239 00:13:49,640 --> 00:13:53,360 Speaker 1: in this UH in this economic dislocation has been a 240 00:13:53,440 --> 00:13:56,560 Speaker 1: collapse in revenues here in the second quarter as most 241 00:13:56,600 --> 00:13:59,160 Speaker 1: of the country, much of the country was was at 242 00:13:59,200 --> 00:14:01,560 Speaker 1: home and just the was a lot of activity and 243 00:14:01,600 --> 00:14:05,480 Speaker 1: therefore liquidity and balancing strengths were key. So the FED 244 00:14:05,640 --> 00:14:08,400 Speaker 1: obviously came in with many programs in terms of the 245 00:14:08,520 --> 00:14:11,480 Speaker 1: UH support in the commercial paper market or in the 246 00:14:11,480 --> 00:14:13,720 Speaker 1: i G market, and back in some of the small 247 00:14:13,760 --> 00:14:16,240 Speaker 1: and angels in the in the high yield market, but 248 00:14:16,520 --> 00:14:20,480 Speaker 1: still the liquidity and solvency or critical issues in the 249 00:14:20,560 --> 00:14:24,160 Speaker 1: uncertain path of recovery, and therefore would rather own companies 250 00:14:24,160 --> 00:14:28,280 Speaker 1: with stronger balanties which characteristically are larger companies as contrasted 251 00:14:28,320 --> 00:14:31,440 Speaker 1: with smaller companies which typically have more leverage and UH 252 00:14:31,480 --> 00:14:34,040 Speaker 1: in just they're less flexibility on the on the on 253 00:14:34,080 --> 00:14:37,480 Speaker 1: the financing side. David, perhaps the theme of the year 254 00:14:37,800 --> 00:14:41,360 Speaker 1: is growing disparity, whether it's in income's low and high 255 00:14:41,400 --> 00:14:44,240 Speaker 1: income households, whether it's the companies that are doing well 256 00:14:44,280 --> 00:14:46,680 Speaker 1: in the stock market or not doing well. And then 257 00:14:46,680 --> 00:14:49,240 Speaker 1: the latest from the US Budget Department coming out and 258 00:14:49,280 --> 00:14:51,440 Speaker 1: showing that the economy is not going to recover in 259 00:14:51,480 --> 00:14:54,400 Speaker 1: the United States for nearly a decade from the shock 260 00:14:54,520 --> 00:14:57,840 Speaker 1: that has just experienced. How long can the US equity 261 00:14:57,880 --> 00:15:02,640 Speaker 1: market as a collective remain divorced from this underlying economic 262 00:15:02,680 --> 00:15:07,000 Speaker 1: reality as put out there by the United States UH. 263 00:15:07,040 --> 00:15:12,320 Speaker 1: As you said, it is the critical question for both 264 00:15:12,360 --> 00:15:17,240 Speaker 1: society and for the investor community about the what appears 265 00:15:17,240 --> 00:15:20,240 Speaker 1: to be clear dislocation between the path of what the 266 00:15:20,240 --> 00:15:23,240 Speaker 1: economy is going through and where the equity markets, which 267 00:15:23,560 --> 00:15:25,960 Speaker 1: we know a couple of things. Number one, the equity 268 00:15:26,000 --> 00:15:28,560 Speaker 1: market is a discounting mechanism, so it looks out into 269 00:15:28,600 --> 00:15:30,960 Speaker 1: the future and brings this forward. So it is clearly 270 00:15:30,960 --> 00:15:37,440 Speaker 1: anticipating a steady restart, basically implying that there's not a 271 00:15:37,520 --> 00:15:40,480 Speaker 1: lot of dislocation, whether that's through the you know, second 272 00:15:40,560 --> 00:15:43,960 Speaker 1: viral wave, various other just it's going to basically be 273 00:15:44,160 --> 00:15:47,960 Speaker 1: a steady renormal normalization of the of the process. And 274 00:15:48,000 --> 00:15:51,680 Speaker 1: that is the first, you know argument and why the 275 00:15:51,680 --> 00:15:54,480 Speaker 1: equity market has been rising so much. But we have 276 00:15:54,520 --> 00:15:57,040 Speaker 1: to understand as well that the stock market is not 277 00:15:57,160 --> 00:16:00,560 Speaker 1: a pure reflection of the economy. It's definitely much more 278 00:16:00,600 --> 00:16:04,600 Speaker 1: skewed towards stronger balance sheet companies for example, Uh, it's 279 00:16:04,960 --> 00:16:09,120 Speaker 1: skewed towards businesses which are more in technology. It's much 280 00:16:09,200 --> 00:16:11,600 Speaker 1: less in the housing market than the rest of the economy. 281 00:16:11,640 --> 00:16:15,000 Speaker 1: So there's because they're not purely uh, you know, representative 282 00:16:15,080 --> 00:16:18,000 Speaker 1: one or the other. But ultimately there is you know, 283 00:16:18,080 --> 00:16:20,840 Speaker 1: you mentioned there were divorced between there's been some linkage 284 00:16:20,880 --> 00:16:24,200 Speaker 1: between the earnings of a company and the overall size 285 00:16:24,240 --> 00:16:27,400 Speaker 1: of the economy, and the economy is basically driving revenues, 286 00:16:27,760 --> 00:16:31,000 Speaker 1: and the expectation is businesses getting is getting better. You 287 00:16:31,040 --> 00:16:34,520 Speaker 1: didn't quite get that, frankly, in the commentary from corporate 288 00:16:34,520 --> 00:16:37,560 Speaker 1: management in the first quarter conference calls that just ended. 289 00:16:37,800 --> 00:16:41,280 Speaker 1: They were generally more subdued to lots of concerns about 290 00:16:41,320 --> 00:16:44,160 Speaker 1: the pace of restart And so it would suggest to 291 00:16:44,240 --> 00:16:47,440 Speaker 1: me the STP valve bundered at these levels is trading 292 00:16:47,440 --> 00:16:49,440 Speaker 1: at a higher level than I half at the end 293 00:16:49,440 --> 00:16:52,360 Speaker 1: of the year right about, you know, roughly they'll same level. 294 00:16:52,440 --> 00:16:54,640 Speaker 1: But three thousand is a target the end of the year. 295 00:16:54,880 --> 00:16:57,240 Speaker 1: And if I think about the risks around this, you're 296 00:16:57,280 --> 00:17:01,160 Speaker 1: looking at modest upside risk maybe five send opportunity and 297 00:17:01,240 --> 00:17:04,320 Speaker 1: five foot to its thirty two. And that's basically because 298 00:17:04,359 --> 00:17:08,480 Speaker 1: positioning is light neutral to light, and that's where it's 299 00:17:08,480 --> 00:17:13,000 Speaker 1: been hovering. So investors have not been super embracing using you, Jonathan, 300 00:17:13,040 --> 00:17:15,280 Speaker 1: your terminology, it's sort of it's, you know, a hated rally. 301 00:17:15,320 --> 00:17:17,840 Speaker 1: They have not participated on the other hand, you have 302 00:17:17,960 --> 00:17:20,479 Speaker 1: the concerns about the pace of the restart and can 303 00:17:20,520 --> 00:17:22,800 Speaker 1: you get all these people back? Do you have a 304 00:17:22,840 --> 00:17:26,720 Speaker 1: sustainable recovery in the market? Therefore, puts down at fifty 305 00:17:26,880 --> 00:17:29,280 Speaker 1: would be ten percent? Is eight in metro skew somewe 306 00:17:29,320 --> 00:17:32,280 Speaker 1: to the downside. Uh from the risk point of view, David, 307 00:17:32,280 --> 00:17:34,119 Speaker 1: I'm happy to wrap up an interview. When you borrow 308 00:17:34,240 --> 00:17:36,199 Speaker 1: a phrase of mine, I'm always happy to lend that 309 00:17:36,200 --> 00:17:38,880 Speaker 1: to you. David Custod of Government Sacks, the chief US 310 00:17:38,920 --> 00:17:40,960 Speaker 1: equity strategistad I have the famili is doing well. We 311 00:17:41,000 --> 00:17:48,399 Speaker 1: appreciate your time this morning. We usually speak on the 312 00:17:48,480 --> 00:17:51,919 Speaker 1: international relations of the in Bremer, but today we speak 313 00:17:51,920 --> 00:17:54,560 Speaker 1: with Dr Bremer. If you raise your group about the 314 00:17:54,600 --> 00:17:58,760 Speaker 1: international and domestic relations of a better America. All of 315 00:17:58,800 --> 00:18:00,919 Speaker 1: us are in search of that and we need to 316 00:18:00,960 --> 00:18:03,879 Speaker 1: fight our way through in the coming nights and days 317 00:18:04,280 --> 00:18:08,040 Speaker 1: to find that better America. Dr Bremer, you were out 318 00:18:08,040 --> 00:18:10,640 Speaker 1: in the streets of Manhattan last night, as we were 319 00:18:11,160 --> 00:18:14,200 Speaker 1: before the curfew. It is the challenges of a New York. 320 00:18:14,600 --> 00:18:17,920 Speaker 1: What is your reading of history of how we somehow 321 00:18:18,040 --> 00:18:22,719 Speaker 1: get beyond looting? Well, you know, we know that looting 322 00:18:22,760 --> 00:18:27,520 Speaker 1: doesn't define the protest movements. Uh, and and nor the 323 00:18:27,560 --> 00:18:32,639 Speaker 1: depth of the level of disaffection that exists in the 324 00:18:32,760 --> 00:18:36,479 Speaker 1: United States right now. This didn't start with Trump. Uh. 325 00:18:36,600 --> 00:18:40,520 Speaker 1: It's the reason we got Trump. Indeed, is because so 326 00:18:40,560 --> 00:18:46,160 Speaker 1: many Americans feel like they don't have the opportunity, that 327 00:18:46,240 --> 00:18:49,600 Speaker 1: the American dream does not apply to them. Uh. Those 328 00:18:49,680 --> 00:18:52,200 Speaker 1: lessons were not learned after two thousand and eight, two 329 00:18:52,200 --> 00:18:55,639 Speaker 1: thousand nine. They weren't learned with the Occupy Wall Street movement. 330 00:18:56,160 --> 00:18:59,879 Speaker 1: Now they've come back in much more dramatic form. And 331 00:19:00,040 --> 00:19:05,600 Speaker 1: part because inequality is worse, in part because unemployment and 332 00:19:05,760 --> 00:19:09,200 Speaker 1: forty million newly unemployed with their slips over the past 333 00:19:09,200 --> 00:19:12,719 Speaker 1: two months, And in part because the least privileged and 334 00:19:12,880 --> 00:19:17,240 Speaker 1: most particularly African Americans in the United States have suffered 335 00:19:17,440 --> 00:19:21,439 Speaker 1: the most dramatically on the back of this horrible coronavirus. 336 00:19:21,520 --> 00:19:24,679 Speaker 1: So you know, these things are cyclical, um, and the 337 00:19:24,760 --> 00:19:28,560 Speaker 1: geopolitics and the economic cycles right now, unfortunately are lining 338 00:19:28,680 --> 00:19:30,879 Speaker 1: up in a very negative way and it's going to 339 00:19:30,960 --> 00:19:32,800 Speaker 1: take us a long time to dig out of this time. 340 00:19:33,080 --> 00:19:36,439 Speaker 1: Dr Bremer give our international audience, and particularly our younger 341 00:19:36,560 --> 00:19:40,400 Speaker 1: viewers and listeners, a primer on what Max Boot alluded 342 00:19:40,440 --> 00:19:44,159 Speaker 1: to in the Washington Post yesterday, which is the similarities 343 00:19:44,200 --> 00:19:48,560 Speaker 1: of the president's tech to George Wallace of another time 344 00:19:48,640 --> 00:19:53,360 Speaker 1: in place. How narrow is the president's perspective or does 345 00:19:53,400 --> 00:19:56,520 Speaker 1: he speak to a much, much greater part of America 346 00:19:56,920 --> 00:20:01,120 Speaker 1: than Governor Wallace of Alabama? Ever? Did I do think 347 00:20:01,160 --> 00:20:06,080 Speaker 1: that Trump speaks to a large percentage of disaffected Americans? 348 00:20:06,119 --> 00:20:11,520 Speaker 1: What's amazing? I just mentioned unemployment, six to eight percent 349 00:20:11,600 --> 00:20:15,680 Speaker 1: contraction expected an economy this year, and yet Trump's approval 350 00:20:15,800 --> 00:20:20,639 Speaker 1: ratings blended at about forty two percent average polls, exactly 351 00:20:20,640 --> 00:20:25,000 Speaker 1: where he was when unemployment was at record lows and 352 00:20:25,040 --> 00:20:28,040 Speaker 1: when we were expecting moderate growth in the United States. 353 00:20:28,480 --> 00:20:32,080 Speaker 1: That that tells you something about how much support Trump has, 354 00:20:32,119 --> 00:20:36,720 Speaker 1: how strong it is, and also how fundamentally divided the 355 00:20:36,760 --> 00:20:39,600 Speaker 1: country is. So if you look at Trump and his 356 00:20:39,800 --> 00:20:44,840 Speaker 1: electoral game plan for November, he doesn't think that he's 357 00:20:45,119 --> 00:20:47,840 Speaker 1: trying to win over black votes. I mean, he'd liked 358 00:20:47,880 --> 00:20:51,000 Speaker 1: them not to vote because it gives them a better shot. 359 00:20:51,080 --> 00:20:55,000 Speaker 1: But Biden's got that locked up. You know, He's not 360 00:20:55,160 --> 00:20:58,919 Speaker 1: trying to pick up you know, voters in California or 361 00:20:58,920 --> 00:21:02,280 Speaker 1: here in New York, city. He's gonna lose the popular vote, 362 00:21:02,320 --> 00:21:04,919 Speaker 1: probably by several million, but he could still win again. 363 00:21:05,400 --> 00:21:09,119 Speaker 1: And the way he wins again um is by ensuring 364 00:21:09,640 --> 00:21:13,080 Speaker 1: that his base, which is narrower than Biden's but much 365 00:21:13,119 --> 00:21:17,840 Speaker 1: more enthusiastic, feels like coming out to the polls, and 366 00:21:17,920 --> 00:21:23,000 Speaker 1: that on the coronavirus side means don't worry about the virus, 367 00:21:23,400 --> 00:21:25,480 Speaker 1: don't wear a mask. If you don't feel like it, 368 00:21:25,800 --> 00:21:30,119 Speaker 1: try hydroxy chlora queen. Maybe it'll work. Get back to work. 369 00:21:30,560 --> 00:21:33,920 Speaker 1: It's normal. While on the blue side of the equation 370 00:21:34,440 --> 00:21:38,600 Speaker 1: it's fear, lockdown, panic, and maybe they won't mote vote 371 00:21:38,600 --> 00:21:42,280 Speaker 1: as much. If you add that to proximate danger of 372 00:21:42,400 --> 00:21:47,639 Speaker 1: national security, domestic tranquility, the national Guard, the military on 373 00:21:47,720 --> 00:21:50,800 Speaker 1: the streets, maybe they can make voting more challenging in 374 00:21:50,840 --> 00:21:55,639 Speaker 1: person in places that he really doesn't want to see turnout. 375 00:21:56,080 --> 00:21:57,919 Speaker 1: And that's what the fight is going to be about 376 00:21:58,000 --> 00:22:00,879 Speaker 1: in November. You'll remember, Tom, when you were at your 377 00:22:00,960 --> 00:22:03,359 Speaker 1: Asia group at the beginning of the year, for the 378 00:22:03,400 --> 00:22:07,760 Speaker 1: first time since I started the firm, the single top 379 00:22:07,920 --> 00:22:12,200 Speaker 1: risk was a domestic us concern. It's never been true. 380 00:22:12,320 --> 00:22:14,680 Speaker 1: You're right. You and I usually talk about the rest 381 00:22:14,720 --> 00:22:18,640 Speaker 1: of the world, because the political risk environment usually comes 382 00:22:19,400 --> 00:22:22,640 Speaker 1: from the rest of the world. But this year it's 383 00:22:22,720 --> 00:22:27,000 Speaker 1: actually the feeling that the system is so badly rigged 384 00:22:27,440 --> 00:22:32,960 Speaker 1: against disenfranchised white warp humdal class, against African Americans facing 385 00:22:33,080 --> 00:22:36,760 Speaker 1: systemic police abuse, and that that is a real concernation. 386 00:22:37,359 --> 00:22:42,360 Speaker 1: Dr Bremer. Let me bring in my colleague John Farrell. Okay, well, 387 00:22:42,359 --> 00:22:44,320 Speaker 1: thanks for that, Tom. I appreciate that he had and 388 00:22:44,359 --> 00:22:46,760 Speaker 1: I've spoken many times and let's build on some of that. 389 00:22:47,000 --> 00:22:49,680 Speaker 1: Whether we are at an inflection point. Do you believe 390 00:22:49,720 --> 00:22:51,920 Speaker 1: we are in an inflection point or were we look 391 00:22:51,960 --> 00:22:54,560 Speaker 1: back at this moment with disappointment that this was just 392 00:22:54,600 --> 00:22:58,800 Speaker 1: another moment in time. But I don't think that we 393 00:22:58,920 --> 00:23:02,560 Speaker 1: are on the brink of civil war the way some 394 00:23:02,720 --> 00:23:06,840 Speaker 1: in the mainstream media we're actually saying yesterday. And I 395 00:23:06,880 --> 00:23:10,280 Speaker 1: don't believe that we're about to become an authoritarian state. 396 00:23:10,320 --> 00:23:13,920 Speaker 1: The United States is not hungary. Separation and balance of 397 00:23:14,040 --> 00:23:18,240 Speaker 1: powers are much stronger, the deep bureaucracy is much stronger. 398 00:23:18,480 --> 00:23:23,040 Speaker 1: But um, I do think that the level of political 399 00:23:23,200 --> 00:23:27,560 Speaker 1: dysfunction in the United States UM is far deeper than 400 00:23:27,560 --> 00:23:29,800 Speaker 1: at any point in my lifetime. I was born in 401 00:23:29,880 --> 00:23:34,600 Speaker 1: sixty nine sixty eight. Clearly in terms of social descent, 402 00:23:34,800 --> 00:23:38,960 Speaker 1: was nearly as bad. Um. But now you also have 403 00:23:39,200 --> 00:23:43,800 Speaker 1: the United States entering into an economic depression, and you 404 00:23:43,920 --> 00:23:46,840 Speaker 1: have a pandemic that we're still fighting through. And indeed, 405 00:23:47,240 --> 00:23:49,960 Speaker 1: all of these people out on the streets, many of 406 00:23:49,960 --> 00:23:53,080 Speaker 1: whom are wearing masks, many of whom are not not 407 00:23:53,240 --> 00:23:56,000 Speaker 1: engaging in social distancing. Here in New York, a lot 408 00:23:56,080 --> 00:23:58,200 Speaker 1: fewer cases, a lot of other places where we're seeing 409 00:23:58,240 --> 00:24:01,840 Speaker 1: these demonstrations still actually have an hour of over one 410 00:24:01,880 --> 00:24:05,480 Speaker 1: point zero. In other words, the pandemic is still expanding, 411 00:24:05,480 --> 00:24:10,080 Speaker 1: not under control. Um. That that's unique. And as I said, 412 00:24:10,119 --> 00:24:12,280 Speaker 1: I don't think this is the beginning of the end 413 00:24:12,320 --> 00:24:15,119 Speaker 1: for the United States domestically. In fact, in many ways 414 00:24:15,320 --> 00:24:18,080 Speaker 1: we're gonna come out of this crisis stronger than our allies, 415 00:24:18,760 --> 00:24:22,040 Speaker 1: because we've got the robust tech companies, because we export 416 00:24:22,119 --> 00:24:25,919 Speaker 1: food and energy. You can't forget about that. But our 417 00:24:25,960 --> 00:24:29,880 Speaker 1: ability to lead the world with soft power, to lead 418 00:24:29,920 --> 00:24:33,960 Speaker 1: by example, which has been eroding steadily now for decades, 419 00:24:34,080 --> 00:24:37,080 Speaker 1: certainly post the collapse of the Soviet Union in ninety one, 420 00:24:37,480 --> 00:24:41,359 Speaker 1: that is at the lowest point today of our lifetimes, 421 00:24:41,400 --> 00:24:46,040 Speaker 1: and that will have true, longstanding and structural effect on 422 00:24:46,200 --> 00:24:48,199 Speaker 1: what the world looks like in the ability of the 423 00:24:48,200 --> 00:24:51,440 Speaker 1: Americans to shape Yeah, and just sort of tying this 424 00:24:51,560 --> 00:24:54,680 Speaker 1: together and quickly here, how vulnerable is the US given 425 00:24:54,720 --> 00:24:59,040 Speaker 1: all the distractions domestically to some sort of international infiltration, 426 00:24:59,160 --> 00:25:01,800 Speaker 1: be it a cyber at hack or disinformation that could 427 00:25:01,840 --> 00:25:05,399 Speaker 1: affect the election, uh, and and disrupt the social unrest 428 00:25:05,440 --> 00:25:08,080 Speaker 1: even more. I mean, of course it doesn't help. And 429 00:25:08,119 --> 00:25:10,720 Speaker 1: at the margins, I think the Russians and perhaps the 430 00:25:10,720 --> 00:25:14,960 Speaker 1: Iranians and Chinese will still be engaging in more propaganda 431 00:25:15,040 --> 00:25:17,840 Speaker 1: fake news. Uh. You know, if you remember Black Lives 432 00:25:17,920 --> 00:25:21,080 Speaker 1: Matter in TwixT the largest Facebook site was actually a 433 00:25:21,119 --> 00:25:24,520 Speaker 1: Russian site. But to be very clear, the damage that 434 00:25:24,680 --> 00:25:28,879 Speaker 1: is being done here is being done by ourselves. We're 435 00:25:28,920 --> 00:25:31,399 Speaker 1: the ones that are so divided, We're the ones that 436 00:25:31,400 --> 00:25:35,600 Speaker 1: are easier to take advantage of internationally, precisely because we 437 00:25:35,640 --> 00:25:37,520 Speaker 1: don't have our own house in order. When the Russians 438 00:25:37,520 --> 00:25:40,920 Speaker 1: tried the same act with the German elections, they got nowhere. 439 00:25:41,200 --> 00:25:43,800 Speaker 1: And that's because the country was much less divided and 440 00:25:44,000 --> 00:25:46,760 Speaker 1: always right, agathos and perspective on this program. Thanks for 441 00:25:46,800 --> 00:25:48,080 Speaker 1: you want to guess this morning, I help you and 442 00:25:48,119 --> 00:25:50,399 Speaker 1: yours are doing well, and that if you right a 443 00:25:50,480 --> 00:25:57,960 Speaker 1: great There is the photograph if the failure of Lehman Brothers, 444 00:25:58,320 --> 00:26:00,720 Speaker 1: and as the camera looks through the window, they're in 445 00:26:00,760 --> 00:26:05,439 Speaker 1: the computer screen of gentlemen seeing their careers disappear. Is 446 00:26:05,480 --> 00:26:10,000 Speaker 1: the Gartman uh letter. It is seven eight nine ten pages. 447 00:26:10,480 --> 00:26:13,040 Speaker 1: And yes, we can talk about gold with Dennis Gartman, 448 00:26:13,520 --> 00:26:16,679 Speaker 1: but maybe we should talk about the politics of the 449 00:26:16,720 --> 00:26:19,640 Speaker 1: moment that make up so much of his letter, particularly 450 00:26:19,920 --> 00:26:22,960 Speaker 1: in the back third as well. Mr Gartman comes to 451 00:26:23,040 --> 00:26:26,280 Speaker 1: us twenty miles somewhere. It's supposed to be no protests. 452 00:26:26,600 --> 00:26:29,760 Speaker 1: It's not the big city. And yet Dennis, in your 453 00:26:29,840 --> 00:26:34,000 Speaker 1: neck of the Virginia Woods, there is protest, isn't there. Yes, 454 00:26:34,080 --> 00:26:36,560 Speaker 1: that it's happened in Virginia Beach. It's happened in Richmond. 455 00:26:36,600 --> 00:26:39,000 Speaker 1: There have been marches in Norfolk. There have been marches 456 00:26:39,040 --> 00:26:41,920 Speaker 1: in Hampton. Portsmouth, where I live has not had anything, 457 00:26:42,000 --> 00:26:44,119 Speaker 1: or where I live very near has not had anything. 458 00:26:44,520 --> 00:26:46,760 Speaker 1: Thus far in Suffolk, where that actually do live, has 459 00:26:46,800 --> 00:26:50,000 Speaker 1: had just a very peaceful march. But all around us, 460 00:26:50,040 --> 00:26:52,320 Speaker 1: my my daughters in the news business in Raleigh and 461 00:26:52,400 --> 00:26:54,520 Speaker 1: Raleigh has been on fire for the past couple of days. 462 00:26:55,000 --> 00:26:58,439 Speaker 1: It's just that this is very frightening, very disconcerting, and 463 00:26:58,480 --> 00:27:00,280 Speaker 1: I think it plays into the hands of the shy needs. 464 00:27:00,280 --> 00:27:01,880 Speaker 1: I think it plays into the hands of the Russians. 465 00:27:02,000 --> 00:27:03,880 Speaker 1: The Chinese are going to look at this and say, look, 466 00:27:04,240 --> 00:27:07,119 Speaker 1: if the United States of America calls in troops to 467 00:27:07,119 --> 00:27:09,480 Speaker 1: to quell the violence, why can't we do the same 468 00:27:09,480 --> 00:27:11,320 Speaker 1: thing in Taiwan. Why can't we do the same thing 469 00:27:11,760 --> 00:27:14,080 Speaker 1: in Hong Kong? And I think that's something that people 470 00:27:14,080 --> 00:27:16,800 Speaker 1: have to start paying attention to. Dennis. Anyone that knows 471 00:27:16,800 --> 00:27:19,200 Speaker 1: your work knows that you have a cast of Abraham 472 00:27:19,280 --> 00:27:22,320 Speaker 1: Lincoln and the Elephant Party. Great, but you were one 473 00:27:22,359 --> 00:27:25,440 Speaker 1: of the first and the harshest critics of this president. 474 00:27:25,840 --> 00:27:29,640 Speaker 1: How does the Republican Party regroup with a one term 475 00:27:29,720 --> 00:27:32,639 Speaker 1: Trump or even with a two term Trump. It's a 476 00:27:32,760 --> 00:27:35,480 Speaker 1: very serious question, isn't it. And with the poll numbers 477 00:27:35,480 --> 00:27:37,360 Speaker 1: coming out in the past couple of days show a 478 00:27:37,480 --> 00:27:40,240 Speaker 1: very marked decline for the popularity of the president and 479 00:27:40,280 --> 00:27:43,480 Speaker 1: the possibility of a democratic president and even worse, a 480 00:27:43,520 --> 00:27:46,520 Speaker 1: democratic Senate, how they're going to resolve this is beyond 481 00:27:46,560 --> 00:27:48,480 Speaker 1: me to be quite honest, Thank goodness, I don't have 482 00:27:48,520 --> 00:27:51,080 Speaker 1: to make that decision. But it does appear that we 483 00:27:51,119 --> 00:27:52,600 Speaker 1: have a president who's going to call in the troops 484 00:27:52,600 --> 00:27:55,399 Speaker 1: and take a very substanti substantive law and order perspective 485 00:27:55,840 --> 00:27:59,480 Speaker 1: that's going to have some support amongst his holdouts that 486 00:27:59,520 --> 00:28:02,399 Speaker 1: are just absolutely trump eastas from the from the start. 487 00:28:02,800 --> 00:28:05,320 Speaker 1: We'll see how that prevails with the other scent of 488 00:28:05,320 --> 00:28:08,119 Speaker 1: the population. But I'm glad I don't have to be 489 00:28:08,160 --> 00:28:10,919 Speaker 1: the one to make the decision. You would think that 490 00:28:11,040 --> 00:28:14,640 Speaker 1: given the fact that the prospect of military troops entering 491 00:28:14,680 --> 00:28:18,520 Speaker 1: America's cities might be somewhat concerning to equity investors. The 492 00:28:18,600 --> 00:28:22,240 Speaker 1: tail risks are increasing and being added to each day, 493 00:28:22,400 --> 00:28:25,480 Speaker 1: and yet we are seeing equity futures higher. And this 494 00:28:25,560 --> 00:28:27,480 Speaker 1: has been a consistent theme, and a lot of people 495 00:28:27,520 --> 00:28:31,800 Speaker 1: point to federal reserve action in particular, the also the 496 00:28:31,920 --> 00:28:35,600 Speaker 1: increase of the fiscal deficit. How does this play out 497 00:28:35,640 --> 00:28:39,680 Speaker 1: in markets? In other words, can fed and fiscal stimulus 498 00:28:39,720 --> 00:28:42,920 Speaker 1: basically offset all of the rising tail risks and make 499 00:28:43,000 --> 00:28:47,040 Speaker 1: you bullish uncertain risk assets. It makes me. The only 500 00:28:47,040 --> 00:28:49,640 Speaker 1: place that I can actually be bullish, even modestly is 501 00:28:49,640 --> 00:28:51,560 Speaker 1: the fact that I do think the yeld curve is 502 00:28:51,560 --> 00:28:53,560 Speaker 1: going to become more positively sloped. The back end of 503 00:28:53,600 --> 00:28:55,280 Speaker 1: the curve rates are going to go higher, the short 504 00:28:55,360 --> 00:28:56,840 Speaker 1: end of the curve rates are going to go lower, 505 00:28:57,240 --> 00:28:59,240 Speaker 1: and that's going to be beneficial to the banking industry. 506 00:28:59,280 --> 00:29:01,760 Speaker 1: But otherwise, other than that, I'm hard pressed to come 507 00:29:01,800 --> 00:29:05,720 Speaker 1: up with a bullish a bullish rationale. As the Lord 508 00:29:05,800 --> 00:29:08,200 Speaker 1: Keys once said, though the market can remain irrational far 509 00:29:08,280 --> 00:29:10,520 Speaker 1: longer than you or I can remain solvent. And the 510 00:29:10,560 --> 00:29:12,760 Speaker 1: fact that the stock market has been predicated upon a 511 00:29:12,800 --> 00:29:15,640 Speaker 1: bull run predicated solely upon it. As far as I 512 00:29:15,640 --> 00:29:19,040 Speaker 1: can see monetary expansionary policies by the Federal Reserve and 513 00:29:19,040 --> 00:29:21,840 Speaker 1: can buy other Federal by other reserve banks around the world, 514 00:29:22,120 --> 00:29:23,760 Speaker 1: I guess We're not supposed to fade the Fed, but 515 00:29:23,800 --> 00:29:26,320 Speaker 1: I do find it difficult being bullish. I'm I applaud 516 00:29:26,320 --> 00:29:28,239 Speaker 1: those who have done it, who have gotten bullish, they 517 00:29:28,280 --> 00:29:30,760 Speaker 1: have been profited, but I I find no sense in 518 00:29:30,760 --> 00:29:33,480 Speaker 1: them whatsoever. Dennis, to your point, we are seeing the 519 00:29:33,520 --> 00:29:37,120 Speaker 1: US yield curve widen quite substantially. The gap between thirty 520 00:29:37,200 --> 00:29:39,600 Speaker 1: year and five year treasury yields now at the whitest 521 00:29:39,640 --> 00:29:43,080 Speaker 1: since two thousand seventeen. What is this pricing end? Does 522 00:29:43,080 --> 00:29:47,320 Speaker 1: this indicate some sort of inflation longer term? I think 523 00:29:47,320 --> 00:29:49,240 Speaker 1: it does least. I think that's exactly what the market 524 00:29:49,280 --> 00:29:52,840 Speaker 1: is beginning to understand that thus far, the monetary expansionary 525 00:29:52,880 --> 00:29:55,480 Speaker 1: policies that have the next cent around the G seven, 526 00:29:55,520 --> 00:29:57,400 Speaker 1: G A, G nine, G twelve, whatever you want to 527 00:29:57,440 --> 00:30:00,560 Speaker 1: call it, have not been inflationary, but the eventually they 528 00:30:00,600 --> 00:30:02,200 Speaker 1: shall be. And I think that's what's going to happen. 529 00:30:02,200 --> 00:30:04,240 Speaker 1: The grain market doesn't make new lows, it starts to 530 00:30:04,320 --> 00:30:07,440 Speaker 1: hold hold its own golden US dollar terms has become 531 00:30:07,800 --> 00:30:10,000 Speaker 1: has has been very strong and likely to continue to 532 00:30:10,040 --> 00:30:13,200 Speaker 1: be strong. We're starting to see inflationary pressures as far 533 00:30:13,240 --> 00:30:15,520 Speaker 1: as labor is concerned. So I do think that that's 534 00:30:15,520 --> 00:30:17,240 Speaker 1: what's happening, and I think that the yel creve gets 535 00:30:17,280 --> 00:30:20,920 Speaker 1: demonstrably more positively sloped. As I said, the back end 536 00:30:20,960 --> 00:30:22,720 Speaker 1: of the curve. I think rates can go up past 537 00:30:22,720 --> 00:30:25,560 Speaker 1: two percent without any difficulty, and I have it's hard 538 00:30:25,600 --> 00:30:27,640 Speaker 1: for me to understand that even how that we've been 539 00:30:27,680 --> 00:30:29,520 Speaker 1: under two percent to begin with, because when I first 540 00:30:29,520 --> 00:30:31,960 Speaker 1: started trading in the nineteen seventies, on the Board of 541 00:30:31,960 --> 00:30:33,880 Speaker 1: Trade in Chicago. The long bond had a fourteen and 542 00:30:33,920 --> 00:30:35,960 Speaker 1: a quarter percent coupon and you couldn't give it away. 543 00:30:36,320 --> 00:30:38,200 Speaker 1: But we're gonna go back above two or three or 544 00:30:38,200 --> 00:30:40,000 Speaker 1: four percent in the long bond, and at the at 545 00:30:40,040 --> 00:30:42,200 Speaker 1: the short end of the curve, overnight said funds are 546 00:30:42,240 --> 00:30:44,320 Speaker 1: likely to remain close to zero. So so the yel 547 00:30:44,360 --> 00:30:48,160 Speaker 1: creve gets demonstrably positively sloped. Dennis Garment, too many themes 548 00:30:48,160 --> 00:30:50,160 Speaker 1: here to talk about. We never even got to gold. 549 00:30:50,240 --> 00:30:52,480 Speaker 1: What we're gonna do is get Mr Garment back on, 550 00:30:52,680 --> 00:30:55,920 Speaker 1: folks in the coming days to speak to us about 551 00:30:55,960 --> 00:30:59,560 Speaker 1: to shift in his gold call. He has been hugely 552 00:31:00,040 --> 00:31:03,720 Speaker 1: tessful with golden Yen and golden Euro and he's made 553 00:31:03,720 --> 00:31:06,600 Speaker 1: an important sea change there and we're gonna get him on. 554 00:31:06,720 --> 00:31:08,280 Speaker 1: I promise you we're gonna get him on in the 555 00:31:08,320 --> 00:31:11,160 Speaker 1: coming days. With this new slow just too hard to 556 00:31:11,160 --> 00:31:14,440 Speaker 1: get to that call today, Dennis Gartman, thank you so much, 557 00:31:14,920 --> 00:31:19,560 Speaker 1: of course, the legendary Gartman letter. Thanks for listening to 558 00:31:19,640 --> 00:31:24,160 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 559 00:31:24,200 --> 00:31:30,040 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 560 00:31:30,080 --> 00:31:33,400 Speaker 1: on Twitter at Tom Keane. Before the podcast, you can 561 00:31:33,440 --> 00:31:36,640 Speaker 1: always catch us worldwide. I'm Bloomberg Radio.