WEBVTT - Fed Balance Sheet Will Be At $9 Trillion Next Year: BI's Jersey 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast on Paul Swing You. 0:00:05.360 --> 0:00:07.800 Along with my co host Lisa Brahmas, each day we 0:00:07.880 --> 0:00:10.440 bring you the most noteworthy and useful interviews for you 0:00:10.560 --> 0:00:12.640 and your money. Whether at the grocery store or the 0:00:12.680 --> 0:00:16.000 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.160 --> 0:00:18.079 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:21.480 Bloomberg dot com. There's a big question and it has 0:00:21.520 --> 0:00:23.759 been underpinning a lot of the market activity over the 0:00:23.800 --> 0:00:27.240 past few weeks, and that is the treasury market, this 0:00:27.480 --> 0:00:32.120 massive funding market and frankly offering benchmark rates for around 0:00:32.200 --> 0:00:35.800 the world, and it has been beset by incredible dysfunction. 0:00:35.840 --> 0:00:38.120 Ira Jersey has been covering it all. He's been covering 0:00:38.120 --> 0:00:41.360 it all for decades back at Credit Suite and beyond. 0:00:41.479 --> 0:00:43.920 Now he is our head of US interest rate strategy 0:00:44.159 --> 0:00:48.440 at Bloomberg Intelligence. Ira, is the dysfunction over and I 0:00:48.479 --> 0:00:50.720 think that this is sort of the key question is 0:00:50.760 --> 0:00:53.520 people look at the lack of liquidity in this key 0:00:53.600 --> 0:00:58.040 market as being unprecedented and highly disruptive, regardless of what 0:00:58.160 --> 0:01:01.040 we see out of Washington, d C. Well, it's been 0:01:01.080 --> 0:01:04.880 better the last the last twenty four hours for sure, Um, 0:01:04.880 --> 0:01:07.600 but it's still it's still very spotty. It's not what 0:01:07.720 --> 0:01:09.800 it used to be. And I think a big part 0:01:09.800 --> 0:01:12.360 of that is not necessarily because the Fed is buying 0:01:12.400 --> 0:01:14.200 a lot of bonds. In fact, I think that at 0:01:14.240 --> 0:01:17.479 some level that's helping at least a little bit UM. 0:01:17.600 --> 0:01:20.080 But I think it's just this lack of risk appetite. 0:01:20.120 --> 0:01:22.199 And and like you mentioned, Lisa, you know, there's gonna 0:01:22.200 --> 0:01:24.520 be a lot more bonds to come. I mean if 0:01:24.560 --> 0:01:27.959 if um, you know, even even if there's a smaller 0:01:28.040 --> 0:01:30.920 fiscal stimulus plan, like closer to a trillion than the 0:01:31.000 --> 0:01:34.120 two trillion, you're still going to have a massive um. 0:01:34.880 --> 0:01:37.120 Lack of tax receipts, for example, is going to be 0:01:37.120 --> 0:01:38.760 a big thing that you're going to see over the 0:01:38.800 --> 0:01:41.400 next couple of months at least. So there's gonna be 0:01:41.440 --> 0:01:44.040 a lot more supply of treasuries over the next year, 0:01:44.760 --> 0:01:49.080 regardless of exactly how big the um the fiscal stimulus 0:01:49.120 --> 0:01:52.080 plan ultimately becomes. Well, all right, that's actually where I 0:01:52.080 --> 0:01:54.560 wanted to go. Okay, so we have some stability, still 0:01:54.560 --> 0:01:58.360 pockets of great illiquidity. But now the quick question shifts 0:01:58.360 --> 0:02:02.400 to financing this massive stimulus bill. That we're expecting, especially 0:02:02.400 --> 0:02:04.880 without those tax receipts that you were talking about. With 0:02:04.920 --> 0:02:08.040 the deadline push back to July, how is the government 0:02:08.040 --> 0:02:09.720 going to do this? We've heard something about a twenty 0:02:09.760 --> 0:02:12.640 year bond, about a fifty year bond, but ultimately doesn't 0:02:12.680 --> 0:02:14.880 it come back to T bill issuance in the short run, 0:02:14.960 --> 0:02:17.600 just to stave off the cash deficit. Yeah, that that's 0:02:17.600 --> 0:02:19.720 a percent right. In fact, we put out a piece 0:02:19.800 --> 0:02:23.120 just just this morning about that very that very thing 0:02:23.160 --> 0:02:26.240 where um, basically T bill issuance is probably gonna go up, 0:02:26.240 --> 0:02:29.959 but I'm gonna use this letter. Remember it's trillion, probably 0:02:30.000 --> 0:02:33.520 go up over one trillion dollars over the next six 0:02:33.560 --> 0:02:35.680 months or so. And one of the reasons for that 0:02:35.960 --> 0:02:39.320 is is twofold. One is it will take a little 0:02:39.320 --> 0:02:41.560 bit of time for the Treasury Department to ramp up 0:02:42.240 --> 0:02:44.840 the amount of coupon issues. So that's the amount of 0:02:44.880 --> 0:02:46.520 longer term death that they're going to issue. So they 0:02:46.520 --> 0:02:48.480 will be issuing a twenty year They said that. They 0:02:48.480 --> 0:02:50.800 said that it's going to debut in in May and 0:02:50.880 --> 0:02:52.560 kind of just in time for a lot of this 0:02:52.680 --> 0:02:56.240 fiscal stimulus to be funded. Um. I think that there's 0:02:56.240 --> 0:02:58.359 a chance that they might do a longer term the 0:02:58.400 --> 0:03:02.400 fifty year ultra bond, but I still think it's there's 0:03:02.600 --> 0:03:05.000 a question about how much demand they'll have for that, 0:03:05.040 --> 0:03:07.720 so there's a shot. But yes, there is likely to 0:03:07.760 --> 0:03:10.680 be maybe up to three and a half trillion dollars 0:03:10.680 --> 0:03:13.320 of T bills outstanding. Now what's interesting is even at 0:03:13.360 --> 0:03:16.760 those massive levels, that's about the same percentage of the 0:03:16.800 --> 0:03:20.960 treasury market um that the that that there was back 0:03:21.080 --> 0:03:24.640 before two thousand seven when the Treasury Department reduced the 0:03:24.639 --> 0:03:27.079 amount of tea bills that it issued so um, So 0:03:27.480 --> 0:03:30.080 basically you're going back to historical norms in terms of 0:03:30.120 --> 0:03:32.440 how much tea bills might be the size of the market, 0:03:32.440 --> 0:03:34.280 and I think that that's going to be something you 0:03:34.320 --> 0:03:36.680 to see. So so anyone who really wants super safe 0:03:36.720 --> 0:03:40.200 assets can get them. What's what's neat about that now 0:03:40.240 --> 0:03:42.760 that the Treasury Department will like is t bolls. Right 0:03:42.760 --> 0:03:45.400 now in the short short end, so one month and 0:03:45.480 --> 0:03:49.080 three months te bills are trading at zero, so they 0:03:49.080 --> 0:03:51.680 don't yield anything. So you know, if there was a 0:03:51.720 --> 0:03:54.080 time to issue you know, short term debt, it's now 0:03:54.120 --> 0:03:57.360 when you can basically fund it for free. Are so 0:03:57.480 --> 0:04:00.720 in the treasury market, the market participants say, hey, the 0:04:00.800 --> 0:04:03.200 FED has done pretty much everything it can do, it 0:04:03.240 --> 0:04:05.320 needs to do, it should do. Now it's really up 0:04:05.360 --> 0:04:08.560 to Congress and the administration to really push on the 0:04:08.560 --> 0:04:12.840 pedal of fiscal stimulus. Yeah. So so the so fiscal 0:04:12.840 --> 0:04:14.920 stimulus is needed for two reasons. I mean, one is 0:04:15.280 --> 0:04:18.680 because you know, the Federal Reserve is designed to kind 0:04:18.680 --> 0:04:23.640 of help market function and allow the financial institutions to 0:04:23.760 --> 0:04:27.160 be able to lend to other institutions. Right, So, so 0:04:27.240 --> 0:04:29.800 that's the job of the FED by going in and 0:04:29.839 --> 0:04:31.800 doing some of the facilities like they are doing like 0:04:31.839 --> 0:04:35.960 buying corporate credit for example. It's not completely unprecedented, but 0:04:36.000 --> 0:04:39.159 it's pretty close. And and that has to be back 0:04:39.240 --> 0:04:42.200 stopped by the by the federal government because the Federal 0:04:42.240 --> 0:04:45.920 Reserve doesn't like to take credit risk. They basically make 0:04:46.000 --> 0:04:49.040 loans with big haircuts because they don't want to take 0:04:49.080 --> 0:04:53.200 credit losses. So fiscal stimulus needs to uh come to 0:04:53.279 --> 0:04:56.240 help like small and medium sized businesses where it's difficult 0:04:56.240 --> 0:04:59.360 for the FED to go directly to those businesses and help. 0:04:59.480 --> 0:05:01.960 So you know the fact that they've announced that they 0:05:01.960 --> 0:05:04.839 want to do a facility through the SBA through the 0:05:04.839 --> 0:05:08.120 Small Business Administration to help those uh, those types of 0:05:08.120 --> 0:05:11.719 businesses which the Federal Reserve can help fund. But ultimately 0:05:11.760 --> 0:05:15.760 it's a governmental organization that needs to really focus on that. 0:05:15.800 --> 0:05:18.080 And that's one of the reasons why we're looking at 0:05:18.640 --> 0:05:22.359 um this fiscal stimulus plan to maybe even add more 0:05:22.400 --> 0:05:25.240 ammunition to what the FED has been doing, um and 0:05:25.360 --> 0:05:27.720 uh and and provide the more equity capital so they 0:05:27.720 --> 0:05:31.920 can even help help more. Just real quickly here, Ira, 0:05:32.080 --> 0:05:34.240 I'm looking right now at the Fed's balance sheet, which 0:05:34.320 --> 0:05:38.640 surged on March eighteen, last week to four point six 0:05:39.000 --> 0:05:41.800 seven trillion dollars. How big is it going to get 0:05:41.800 --> 0:05:44.320 by the end of all of this? So I'm actually 0:05:44.360 --> 0:05:46.720 looking at the spreadsheet right now that I've been working on, 0:05:46.800 --> 0:05:48.760 So I can't tell you the exact number, but I 0:05:48.760 --> 0:05:54.040 can say much much larger double at least, yeah, at 0:05:54.120 --> 0:05:56.479 least double. So in other words, you're expecting at least 0:05:56.520 --> 0:05:59.479 a nine trillion dollar Federal Reserve balance sheet I say 0:05:59.680 --> 0:06:02.720 this time next year. Uh, that would not surprise me. Yeah, 0:06:02.720 --> 0:06:04.960 that that's kind of in line with what we're talking about. 0:06:04.960 --> 0:06:07.279 I think a big part of that is how how 0:06:07.320 --> 0:06:09.480 what is the take of of some of these new facilities. 0:06:09.520 --> 0:06:11.960 So even if the Federal Reserve, you know, kind of 0:06:12.000 --> 0:06:15.880 slows down its purchases of mortgages and treasuries, which I 0:06:15.880 --> 0:06:19.479 think eventually it will do, is the SBA facility, for example, 0:06:19.520 --> 0:06:21.520 which is really where the pain point is in this 0:06:21.560 --> 0:06:24.440 whole uh, in this whole mass with the central distancing 0:06:24.960 --> 0:06:27.279 um is uh is that going to get to a 0:06:27.320 --> 0:06:28.839 trillion dollars or not? And that's going to be a 0:06:28.839 --> 0:06:31.320 big question. All right, Jersey, thank you so much for 0:06:31.400 --> 0:06:33.719 joining us. We really appreciate your commentary here and what 0:06:33.760 --> 0:06:36.599 has been a very busy period in the U S. 0:06:36.640 --> 0:06:39.719 Treasury markets. Our Jersey chief US interest rate strategist for 0:06:39.839 --> 0:06:42.080 Bloomberg Intelligence joining us on a phone. Lisa, Yeah, that 0:06:42.120 --> 0:06:45.600 was enough that at me more than doubling. Uh you 0:06:45.640 --> 0:06:47.800 know in terms of the balance sheet, Wow, that means 0:06:47.839 --> 0:06:49.840 more than nine trillion dollars that will be the it's 0:06:49.839 --> 0:06:52.240 balance sheet. And I believe that that will be a 0:06:52.240 --> 0:06:55.359 hot potato political issue for a lot of people and 0:06:55.440 --> 0:06:59.120 yet viewed as crucial and stabilizing the market right now. Yeah, absolutely, 0:06:59.160 --> 0:07:02.320 and that market uh a much stronger day today, Lisa's 0:07:02.320 --> 0:07:05.159 we've been saying, uh, the dall up seven. That's four 0:07:05.480 --> 0:07:08.760 hundred points on uh the DAL so again a risk 0:07:08.839 --> 0:07:10.960 on day today as a market tries to price in 0:07:11.200 --> 0:07:16.920 where this is all going. This is Bloomberg. All right, 0:07:17.000 --> 0:07:18.680 let's talk to a professional about what to do with 0:07:18.720 --> 0:07:21.800 these markets. Matt Maylei, chief market strategist at Miller Tebec 0:07:21.880 --> 0:07:25.000 Joints us here, Matt, thanks so much for joining us. Wow. Okay, 0:07:25.000 --> 0:07:26.760 so we've got the green on the screen today, but 0:07:26.840 --> 0:07:29.840 just help us put into perspective what we're seeing in 0:07:30.120 --> 0:07:32.080 the markets really over the last couple of weeks, but 0:07:32.120 --> 0:07:35.200 certainly over the last several days. Well, if you know, 0:07:35.280 --> 0:07:38.480 it's it's it's funny because back in when the thing 0:07:38.760 --> 0:07:42.040 first to hit, uh, we were saying that people should 0:07:42.080 --> 0:07:43.960 raise some you know, the market was priced for profession 0:07:44.000 --> 0:07:47.440 and people should raise some cash because if we get 0:07:47.480 --> 0:07:50.160 a severe downturn, you'd be able to you know, be 0:07:50.200 --> 0:07:52.120 able to put that cash to work. And now we're 0:07:52.200 --> 0:07:54.560 kind of seeing the the the the opposite situation where 0:07:54.560 --> 0:07:56.720 we're gonna be a little bit more comfortable, uh, not 0:07:56.760 --> 0:07:58.560 saying that the bottom is going to is in and 0:07:58.640 --> 0:08:01.560 today's markets doing better. But you can't, you can't, I 0:08:01.600 --> 0:08:04.560 think it's impossible to grab the h uh, the exact pick, 0:08:04.600 --> 0:08:06.880 the exact bottom. So if you're tipping your toe back 0:08:06.920 --> 0:08:10.120 in here and usual in buying more on a very 0:08:10.120 --> 0:08:13.160 gradual scale down basis, Uh, you know a year now 0:08:13.240 --> 0:08:14.600 or a year from now or two years from now, 0:08:14.600 --> 0:08:17.640 you're gonna look quite good because uh, once it does mound, 0:08:17.680 --> 0:08:19.120 it's gonna be impossible to chase it. So you do 0:08:19.200 --> 0:08:21.320 have to take advantage of it whence down. Man, I 0:08:21.360 --> 0:08:23.760 want to follow up on that, the concept of once 0:08:23.800 --> 0:08:27.080 it bounces, you won't be able to chase it. That 0:08:27.200 --> 0:08:29.320 sort of implies that we are going to see some 0:08:29.440 --> 0:08:33.040 massive recovery, and that doesn't seem to be the consensus 0:08:33.160 --> 0:08:36.000 right now of my at least economists who I speak to. 0:08:36.160 --> 0:08:38.520 Can you talk about the market recovery and how it 0:08:38.600 --> 0:08:42.080 might look versus some of the economic estimates that we're 0:08:42.080 --> 0:08:45.640 hearing that are not so optimistic. Well, we've always got 0:08:45.640 --> 0:08:48.240 to understand that that that that the stock market moves, 0:08:48.440 --> 0:08:51.000 especially on the way back ups, and in this case 0:08:51.280 --> 0:08:53.440 it was only was a very mild delay. Usually there's 0:08:53.440 --> 0:08:57.560 a big uh the stock market rolls over, but you know, 0:08:57.600 --> 0:08:59.960 six months in front of the uh, the economy. Now, 0:09:00.160 --> 0:09:02.520 you know, because of this kind of you know, black 0:09:02.559 --> 0:09:06.200 swan event, it only happened shortly after uh it became 0:09:06.520 --> 0:09:09.400 evident that it was a rear its ugly head. And 0:09:09.520 --> 0:09:11.720 but the thing is when the when the market uh tends, 0:09:12.160 --> 0:09:14.760 it bounces a lot earlier, I mean, and and the 0:09:14.800 --> 0:09:17.760 simple reason is is that it sells off very much 0:09:17.800 --> 0:09:20.640 more quickly than the economy slows down, so it prices 0:09:20.679 --> 0:09:23.400 in some of the worst case scenarios much more quickly. 0:09:23.679 --> 0:09:25.800 Now again that's not to say that this market can't 0:09:25.800 --> 0:09:30.360 go down further, uh, but the important thing is for 0:09:30.400 --> 0:09:34.360 investors to do is to uh separate what's going on 0:09:34.360 --> 0:09:36.160 in the stock market to what's going on in in 0:09:36.240 --> 0:09:39.360 the economy because there's always that lag. And one of 0:09:39.360 --> 0:09:42.160 the key reasons why people, I mean people I don't 0:09:42.200 --> 0:09:43.600 really want to have a lot of conference to buying 0:09:43.600 --> 0:09:46.240 these stocks until things feel better. But you know something, 0:09:46.559 --> 0:09:49.240 history shows us that when things really feel better, the 0:09:49.280 --> 0:09:51.720 markets already seen a big bounce and a big move up. 0:09:51.800 --> 0:09:55.000 So to gradually buy stocks uh and on over the 0:09:55.040 --> 0:09:56.400 next few months. And I'm not just saying to the 0:09:56.400 --> 0:09:58.720 next week or two, over the next few months is 0:09:58.720 --> 0:10:00.200 going to be a good way to take advantag of 0:10:00.200 --> 0:10:03.080 this severe downturn. So as you think about it, you know, 0:10:03.080 --> 0:10:05.360 the volatility that we've seen in the market, we continue 0:10:05.440 --> 0:10:08.600 to see in the market some um, you know, sectors 0:10:08.679 --> 0:10:12.320 really at historically low valuations. Um. I'm thinking about you know, 0:10:12.360 --> 0:10:14.040 some of the cruise lines and some of the leisure 0:10:14.320 --> 0:10:16.920 lines that got hit the most and earliest. How would 0:10:16.960 --> 0:10:19.880 you suggest people do get back into the market to 0:10:19.960 --> 0:10:21.520 the extent they want to kind of dip their toes 0:10:21.600 --> 0:10:24.800 or dollar cost average or however you gonna swing it, right, 0:10:24.800 --> 0:10:26.520 I mean, one of the things, of course, we we 0:10:26.720 --> 0:10:30.200 know that these cruise lines are the the airlines, etcetera. 0:10:30.520 --> 0:10:33.120 You know, when they turn around, boy, you're it's going 0:10:33.200 --> 0:10:35.640 to be a Grand Slam home run. Whoever can pick 0:10:35.720 --> 0:10:37.960 that bottom. But like I said, it's almost impossible to 0:10:38.000 --> 0:10:42.040 do that. The thing is, with so many high quality names, uh, 0:10:42.080 --> 0:10:45.400 and you know companies with great balance, she's of great managements, 0:10:45.760 --> 0:10:47.719 uh and things like that, you're still gonna be able 0:10:47.720 --> 0:10:49.640 to hit a two run homer. So why you know, 0:10:49.679 --> 0:10:51.440 why go for the Grand Slam when you can hit 0:10:51.440 --> 0:10:54.720 two run homer. Usually you only get an opportunity where jeez, 0:10:54.720 --> 0:10:56.959 I can get a beaten down stock or beaten down 0:10:57.000 --> 0:10:59.079 group because it's separate from what's going on in the 0:10:59.160 --> 0:11:01.280 rest of the world. Therefore, the best I can do 0:11:01.360 --> 0:11:03.600 in the really quality names as a single, the boy 0:11:03.640 --> 0:11:05.600 I can hit a grand slam with this other one. Now, 0:11:05.640 --> 0:11:08.000 if you can hit a home run or a double, 0:11:08.240 --> 0:11:10.560 why not go with the high quality names? And that's why, 0:11:10.640 --> 0:11:13.320 you know, uh, there's much less risk, but still a 0:11:13.360 --> 0:11:16.560 lot of reward and those uh, those high quality names. 0:11:16.840 --> 0:11:19.560 We're speaking with Matt Malee, chief market strategist at Miller 0:11:19.640 --> 0:11:22.720 Tabac and Matt, you know, your argument sounds compelling. It 0:11:22.840 --> 0:11:24.840 makes sense based on the by the dip kind of 0:11:24.840 --> 0:11:28.560 mentality that we've seen over the past decade. There's a question, though, 0:11:28.600 --> 0:11:32.760 that the disruption here is fundamentally changing the economic outlook 0:11:32.800 --> 0:11:35.520 and fundamentally changing the balance sheets of a lot of companies, 0:11:36.040 --> 0:11:39.640 and it doesn't seem like all of them will be rescued. 0:11:39.880 --> 0:11:43.720 How do you sort of get confidence that this time 0:11:43.760 --> 0:11:45.840 will be like the others and by the dip will 0:11:45.880 --> 0:11:50.000 work at a time of such incredible uncertainty just about 0:11:50.120 --> 0:11:52.679 you know how quickly this will recover, whether we might 0:11:52.679 --> 0:11:56.040 be heading into a depression, Well, I think one of 0:11:56.040 --> 0:11:58.079 the things that's going to be you know, first of all, 0:11:58.200 --> 0:11:59.880 you know again, I just want to admit to say 0:12:00.000 --> 0:12:01.840 that I I you know, when when the markets started 0:12:01.880 --> 0:12:04.160 heading down, I was saying, you know, sell sell, sell 0:12:04.200 --> 0:12:07.400 the bounces. So you know, I was early calling for 0:12:07.720 --> 0:12:10.560 UH investors to be careful, raise some cash. And really 0:12:10.600 --> 0:12:13.040 when the market is still down twenty I was saying 0:12:13.040 --> 0:12:16.640 the same thing, raise cash on bounces. However, the thing is, 0:12:17.600 --> 0:12:20.480 and you're absolutely right, the at least the one of 0:12:20.520 --> 0:12:22.080 the things that we people will stay as your jeez, 0:12:22.120 --> 0:12:23.679 I can go back in and it's much more than 0:12:23.720 --> 0:12:25.800 a dip this time, it's a big it's a crash basically. 0:12:26.040 --> 0:12:27.360 But what do I do do I just buy the 0:12:27.360 --> 0:12:29.839 stock market and buy everything like I've I've done it. 0:12:30.040 --> 0:12:31.480 I did in two thousand and eighteen, I did in 0:12:31.520 --> 0:12:34.120 two thousand and sixteen. That works like a charm. Now 0:12:34.200 --> 0:12:37.240 you have to be much much more careful. Uh, it's 0:12:37.240 --> 0:12:39.360 now becoming a stock Because market people have been saying 0:12:39.400 --> 0:12:42.760 that was gonna happen for a while, it's happening now. Uh. 0:12:42.800 --> 0:12:45.600 You know, I believe that to a certain degree that 0:12:45.679 --> 0:12:49.160 the passive investing is gonna be is dying. Uh and 0:12:49.360 --> 0:12:53.439 and so therefore investors need to be thinking about specific companies. Uh, 0:12:53.679 --> 0:12:56.920 not just specific industries, but specific countries within the best industries. 0:12:57.320 --> 0:13:00.480 And you know you talk to your investment advisor. Uh. 0:13:00.640 --> 0:13:04.559 Use the mutual funds uh that that have traditions of 0:13:05.240 --> 0:13:07.360 having really good stock pickers. Is not that there's not 0:13:07.400 --> 0:13:09.720 a huge amount of those, but there are several they 0:13:09.720 --> 0:13:11.959 are very very good. And that's why I think people 0:13:12.000 --> 0:13:14.360 can can dip their toes back in and cost U 0:13:15.000 --> 0:13:17.800 dollar cost average down rather than jump back in and say, geez, 0:13:17.800 --> 0:13:19.520 I'm just gonna buy the smpor or some sort of 0:13:19.559 --> 0:13:23.040 etf uh with my eyes with my eyes closed somehow, 0:13:23.160 --> 0:13:24.440 What are you looking at right now? What are the 0:13:24.520 --> 0:13:26.760 names today that you're looking at, or the sectors today 0:13:26.840 --> 0:13:30.120 that you're looking at. Well, one of the things it's funny, 0:13:30.160 --> 0:13:33.000 is this whole toole technology thing. And I've been a 0:13:33.040 --> 0:13:35.880 little surprised by this, but I shouldn't have been. Now, 0:13:35.960 --> 0:13:41.240 this whole technology thing, this whole smart phone, it's just amazing. 0:13:41.400 --> 0:13:44.400 I mean the funny but in years, Paddy, when I 0:13:44.480 --> 0:13:46.959 you know, in the in the nineteen eighties, nineteen ninies, 0:13:47.000 --> 0:13:49.959 even into the especially after the tech bubble, uh in 0:13:50.240 --> 0:13:52.199 the in the in the next stecond in two thousand's 0:13:52.360 --> 0:13:54.760 the odds, I guess, as they call them. Uh, the 0:13:54.800 --> 0:13:56.520 people would say, oh, geez, you know when you go 0:13:56.600 --> 0:13:58.400 back in, you don't want to go right back into 0:13:58.440 --> 0:14:00.640 the tech area because that's the most real more risky Yeah, 0:14:00.760 --> 0:14:03.960 more more reward. But it's a very very risky area, 0:14:04.440 --> 0:14:07.400 uh this time. And therefore they tend to do better 0:14:07.400 --> 0:14:08.720 on the on the way up, and then they get 0:14:08.760 --> 0:14:12.160 clobbered on the way down. But now technology has become 0:14:12.360 --> 0:14:14.960 so such a backbone of our economy. It's not the 0:14:15.040 --> 0:14:17.720 risky part of it. Uh. You know, there's certainly parts 0:14:17.760 --> 0:14:21.040 of technology they are more risky than others. But you've 0:14:21.040 --> 0:14:23.440 got some great companies out there that they're the backbone 0:14:23.440 --> 0:14:26.400 of the U S industry. It's not general motors anymore, 0:14:26.720 --> 0:14:29.600 it's not general electric anymore. It's the Apples and the 0:14:29.600 --> 0:14:32.240 Microsoft's of the world. Uh, that are the backbone of 0:14:32.240 --> 0:14:34.680 of our and and we've seen that in the way 0:14:34.760 --> 0:14:37.840 that the market has gone down instead of underperforming it 0:14:38.040 --> 0:14:41.800 the Nasdaq, which is obviously heavily weighted in technology shares, 0:14:42.080 --> 0:14:44.280 it has gone down the same amount of the SMP. 0:14:44.600 --> 0:14:47.560 It didn't underperform on the way down, even though it 0:14:47.600 --> 0:14:50.840 did outperform nicely on the way up. And that's encouraging 0:14:50.840 --> 0:14:52.840 to me that some of the names you'd wanted to 0:14:52.880 --> 0:14:57.400 avoid it avoid in past sell offs, at least early on. Uh, 0:14:57.480 --> 0:15:00.600 these technology names, especially the high qualit ones, are the 0:15:00.640 --> 0:15:02.280 ones you do want to be buying, and they have 0:15:02.320 --> 0:15:04.840 outperformed over the last six trading days. And so I 0:15:04.840 --> 0:15:07.400 think that tells you something right there, Matt Maylee, thank 0:15:07.440 --> 0:15:09.320 you so much for taking the time. Matt Maylee, chief 0:15:09.320 --> 0:15:12.760 market strategist at Miller, Ta Back and Company, joining us 0:15:12.920 --> 0:15:15.800 on the phone. And Uh, those iPhones. I think that 0:15:15.880 --> 0:15:18.000 I think that the smart phone industry is onto something, Paul. 0:15:18.040 --> 0:15:20.000 I think people are going to still use their their 0:15:20.040 --> 0:15:23.760 smartphones after this coronavirus disruption catch on to be a thing, 0:15:24.400 --> 0:15:26.560 I think. So I think that that might be a 0:15:26.600 --> 0:15:29.560 place of of of use. Actually interesting to think about 0:15:29.600 --> 0:15:33.040 how much actually cloud computing and all tech is going 0:15:33.080 --> 0:15:38.960 to get a boost from this. Time to check in 0:15:38.960 --> 0:15:42.600 with Bloomberg Opinion, we're joined by opinion calumnist Gary Shilling. 0:15:42.920 --> 0:15:44.960 No better person here to chat to in terms of 0:15:44.960 --> 0:15:49.119 getting some long term perspective on the US economic condition 0:15:49.560 --> 0:15:52.640 and how it may fare given this coronavirus. Gary, thanks 0:15:52.680 --> 0:15:54.840 so much for joining us. We just heard Larry Cudlow 0:15:55.440 --> 0:15:59.120 make the comments that he believes the An administration believes 0:15:59.240 --> 0:16:02.600 that this stimulus package will set up the US economy 0:16:02.600 --> 0:16:06.200 for strong second half. Do you uh entertained that type 0:16:06.200 --> 0:16:09.480 of optimism. No, I don't. I think the kind of 0:16:09.560 --> 0:16:13.840 disruptions we've had people pulling their horns. You look at 0:16:13.880 --> 0:16:16.320 what happened after nine eleven. I mean, it was over 0:16:16.760 --> 0:16:19.520 in a matter of minutes, but people worried about follow 0:16:19.600 --> 0:16:22.160 on attacks and so on and so forth. I think 0:16:22.200 --> 0:16:25.120 this is going to have a decided impact on on 0:16:25.320 --> 0:16:30.080 confidence of consumers and and and businesses in this country. 0:16:30.600 --> 0:16:33.160 And there are other important things too. I think that 0:16:33.200 --> 0:16:38.280 it's uh, it's marking a further pull away from globalism. 0:16:38.440 --> 0:16:41.920 Had bloom another Bloomberg column on that one. And you 0:16:41.960 --> 0:16:45.200 know the point is, with the disruption of supply chains 0:16:45.200 --> 0:16:47.560 and so on, I think this place of the hands 0:16:47.600 --> 0:16:51.560 of people like Trump who are very protectionists, the idea 0:16:51.600 --> 0:16:57.560 of more self sufficiency, pulling away from globalism. Dr Schilling, Gary, 0:16:57.760 --> 0:17:01.000 it's wonderful having you because you have had a forecasting 0:17:01.040 --> 0:17:04.359 record like no other, and in nine you're one of 0:17:04.359 --> 0:17:07.000 the few people who thought that a recession would start 0:17:07.119 --> 0:17:10.320 late in the year it did. Looking out now at 0:17:10.359 --> 0:17:13.600 the same site of the same type of foresight, I'm wondering, 0:17:14.119 --> 0:17:19.120 do you see a similar sort of downturn, protracted downturn 0:17:19.720 --> 0:17:25.479 that monetary policy, fiscal policy just can't stop. Yeah, I 0:17:25.520 --> 0:17:27.560 think that's the case. I mean, you know, this is 0:17:27.560 --> 0:17:29.879 a big debate. Now, do you have a you have 0:17:29.920 --> 0:17:32.840 a v bottom. I think it more maybe looking more 0:17:32.880 --> 0:17:36.040 like an endless l you have a decline and then 0:17:36.080 --> 0:17:40.160 a very slow recovery. Sure you get the initial drop, 0:17:40.560 --> 0:17:43.560 a lot of money being put into people's hands. Uh, 0:17:43.600 --> 0:17:46.239 and low income people will spend it. They spend at 0:17:46.280 --> 0:17:49.760 least of their incomes. But other people, businesses, I think 0:17:49.800 --> 0:17:51.760 are going to be a lot more, a lot more 0:17:51.800 --> 0:17:55.960 cautious on this. And also to restart all these supplies change. 0:17:56.000 --> 0:17:58.520 I mean, China is you know, they're talking about people 0:17:58.560 --> 0:18:00.960 going back to work, but to get things re established 0:18:01.000 --> 0:18:03.959 and get the supplies, it's a very supply chains are 0:18:04.119 --> 0:18:07.960 very intricate. You can have you can have a semiconductors 0:18:08.000 --> 0:18:11.639 producing Korea. They go to Taiwan for siginal assembly for 0:18:11.880 --> 0:18:14.879 our sub assembly, than to China to go into cell phones, 0:18:14.960 --> 0:18:16.840 and in our export of the US. You have all 0:18:16.880 --> 0:18:19.280 these supply chains and it takes a long time to 0:18:19.320 --> 0:18:24.439 get those things re established. So it's interesting Gary the 0:18:24.960 --> 0:18:26.719 you know, a lot of the Wall Street economists are 0:18:26.760 --> 0:18:29.400 kind of looking for that V shaped recovery. So it'll 0:18:29.440 --> 0:18:31.879 be interesting to see whether that comes to fruition. Give 0:18:31.960 --> 0:18:34.120 us your sense of what you think the FED has done. 0:18:34.200 --> 0:18:37.280 Fed had a very busy day yesterday, really came on 0:18:37.400 --> 0:18:40.800 strong with more quantitative easing. Give us what your your 0:18:40.800 --> 0:18:42.840 thoughts on how you think the FED is handling this. Yeah, 0:18:42.880 --> 0:18:45.080 they used to call this pushing on a string, you know, 0:18:45.160 --> 0:18:47.440 and you pull on the string, you get results. You're 0:18:47.440 --> 0:18:49.960 tight monetary policy. But when you push on a string, 0:18:50.320 --> 0:18:53.080 it just goes limb. I think that's a situation. I mean, 0:18:53.119 --> 0:18:57.560 the FET is basically made uh. Plenty of money available, uh, 0:18:57.600 --> 0:19:00.479 and and the question is it is and so much 0:19:00.760 --> 0:19:04.199 a question of liquidity as a question of solvency, and 0:19:04.240 --> 0:19:06.840 the question of of who wants to borrow, who wants 0:19:06.840 --> 0:19:10.240 to who wants to spend h So you really shift 0:19:10.320 --> 0:19:14.119 over to fiscal policy. As having to carry the have 0:19:14.240 --> 0:19:18.080 to carry the the the water. The FED just the 0:19:18.119 --> 0:19:20.600 Fed is just I mean they've done vertaly everything they 0:19:20.600 --> 0:19:24.640 can except literally dumb money out of helicopters. Yeah. Well, 0:19:24.680 --> 0:19:27.199 and given the fact that you have served on the 0:19:27.200 --> 0:19:30.960 staff that the San Francisco Fed, UH Bank of America, 0:19:31.560 --> 0:19:34.040 I'm wondering how concerned you are about the idea of 0:19:34.160 --> 0:19:36.520 the IRA. Jersey was just talking about that the Fed's 0:19:36.560 --> 0:19:39.200 balance she could climb beyond nine trillion dollars in short 0:19:39.280 --> 0:19:43.639 order here. Well, uh, you know the thing is that 0:19:43.640 --> 0:19:47.800