1 00:00:02,640 --> 00:00:05,360 Speaker 1: Welcome to the Bloomberg Penl podcast on Paul Swing You. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa brahma Witz, each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,320 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple 6 00:00:15,520 --> 00:00:18,000 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:18,000 --> 00:00:22,959 Speaker 1: at Bloomberg dot com. Two trillion dollars US stimulus package 8 00:00:22,960 --> 00:00:26,520 Speaker 1: coming out that SCO's about ten of the nation's total output. 9 00:00:26,560 --> 00:00:30,200 Speaker 1: The question is is it enough. Francis Donald, managing director, 10 00:00:30,360 --> 00:00:32,680 Speaker 1: chief Economists and head of macro Strategy at Manual Life 11 00:00:32,720 --> 00:00:36,240 Speaker 1: Investment Management, joins us to lend her thoughts. So, Francis, 12 00:00:36,240 --> 00:00:38,239 Speaker 1: thanks so much for joining us. We're starting to get 13 00:00:38,280 --> 00:00:42,599 Speaker 1: some initial details about this stimulus plan. What is your 14 00:00:42,600 --> 00:00:45,600 Speaker 1: early read as to kind of the scope and scale 15 00:00:45,600 --> 00:00:49,800 Speaker 1: of this plan. Well, like almost every data point in 16 00:00:49,880 --> 00:00:54,400 Speaker 1: policy move, we get unprecedented, huge, massive, But just like 17 00:00:54,480 --> 00:00:57,360 Speaker 1: every other policy we've seen from other governments, it's not 18 00:00:57,400 --> 00:01:00,440 Speaker 1: going to be enough to prevent a massive dislowcation in 19 00:01:00,480 --> 00:01:03,560 Speaker 1: this economy. We are still going to experience a recession 20 00:01:03,680 --> 00:01:05,959 Speaker 1: what I call it compressed recession in a very short 21 00:01:06,000 --> 00:01:09,920 Speaker 1: period of time. This passage is about mitigating just how 22 00:01:09,959 --> 00:01:13,119 Speaker 1: bad that might be and preventing it from creating other 23 00:01:13,160 --> 00:01:16,759 Speaker 1: spillovers that last an extended period of time. So for me, 24 00:01:17,080 --> 00:01:19,399 Speaker 1: this doesn't really change how I think the next three 25 00:01:19,440 --> 00:01:21,920 Speaker 1: months ago. It does give me more hope that by 26 00:01:21,959 --> 00:01:24,600 Speaker 1: the year end we have seen a little bit more 27 00:01:24,640 --> 00:01:27,119 Speaker 1: of that recovery. I'm not in V shaped recovery. I'm 28 00:01:27,120 --> 00:01:29,360 Speaker 1: in U shaped recovery. I'm not sure how much the 29 00:01:29,400 --> 00:01:32,880 Speaker 1: distinction matters. It's good news, it's not a savior. So 30 00:01:33,000 --> 00:01:35,080 Speaker 1: a lot of people are looking ahead to initial jobless 31 00:01:35,120 --> 00:01:38,280 Speaker 1: claims tomorrow. A lot of economists are just throwing up 32 00:01:38,319 --> 00:01:40,720 Speaker 1: their hands and saying, we don't know. I mean, this 33 00:01:40,800 --> 00:01:44,319 Speaker 1: seems unprecedented. The range of outcomes is so wide that 34 00:01:44,360 --> 00:01:46,760 Speaker 1: it's very hard to make a forecast. What are you 35 00:01:46,840 --> 00:01:49,520 Speaker 1: looking at? To give you some sort of compass through 36 00:01:49,520 --> 00:01:52,280 Speaker 1: this period? We have to look at a lot of 37 00:01:52,320 --> 00:01:55,680 Speaker 1: different alternative data sets, things I've never looked at before, 38 00:01:55,840 --> 00:01:59,280 Speaker 1: like subway ridership. How many people are They're looking at 39 00:01:59,560 --> 00:02:03,400 Speaker 1: open table reservations, looking at surveys that we maybe haven't 40 00:02:03,440 --> 00:02:08,000 Speaker 1: seen before. This is really difficult to forecast, and there's 41 00:02:08,000 --> 00:02:10,480 Speaker 1: a reason why the set through up its hands and 42 00:02:10,520 --> 00:02:14,200 Speaker 1: said we're not giving you the summary of economic projections. Basically, 43 00:02:14,240 --> 00:02:16,799 Speaker 1: the only way to do forecasting here is to take 44 00:02:16,800 --> 00:02:20,280 Speaker 1: an economic model and break it, push through a bunch 45 00:02:20,320 --> 00:02:23,800 Speaker 1: of assumptions that are based on just various scenarios, and 46 00:02:23,880 --> 00:02:26,440 Speaker 1: hope it gives you some point forecast. But that is 47 00:02:26,520 --> 00:02:29,200 Speaker 1: false precision. What we need to be doing now is 48 00:02:29,240 --> 00:02:33,880 Speaker 1: thinking about the progression, the quarter by quarter progression, and 49 00:02:34,280 --> 00:02:36,600 Speaker 1: how does anything that happened in the next three months 50 00:02:36,680 --> 00:02:39,520 Speaker 1: create longer term damage. I do think we need to 51 00:02:39,560 --> 00:02:43,040 Speaker 1: realize that we can't and we probably will not unwind 52 00:02:43,200 --> 00:02:45,200 Speaker 1: all of the damage that we see in the next 53 00:02:45,240 --> 00:02:48,040 Speaker 1: three to six months, that there are structural changes that 54 00:02:48,040 --> 00:02:50,680 Speaker 1: are coming from this, and most importantly, a lot of 55 00:02:50,680 --> 00:02:53,600 Speaker 1: the policies that were put in place monetary and fiscal 56 00:02:53,840 --> 00:02:57,359 Speaker 1: are not going to be unwind unwounded three months. So 57 00:02:57,520 --> 00:02:59,720 Speaker 1: we kind of have to distinguish here between what's going 58 00:02:59,800 --> 00:03:03,160 Speaker 1: to rebound and what isn't. That conversation is so much 59 00:03:03,200 --> 00:03:05,959 Speaker 1: more important than what is the GDP hit, what is 60 00:03:06,000 --> 00:03:08,400 Speaker 1: initial jobs claim is going to be? So what do 61 00:03:08,400 --> 00:03:12,079 Speaker 1: you think some of the structural changes might result out 62 00:03:12,120 --> 00:03:16,120 Speaker 1: of this Friensis. The biggest one is if I'm opening 63 00:03:16,120 --> 00:03:19,720 Speaker 1: a company right now, I'm thinking twice three times about 64 00:03:19,840 --> 00:03:22,480 Speaker 1: do I want to global supply chain. We haven't just 65 00:03:22,600 --> 00:03:25,560 Speaker 1: had one hit to global supply chains. The paraffs who've 66 00:03:25,639 --> 00:03:28,840 Speaker 1: now had a second entirely different one. So if I'm 67 00:03:28,840 --> 00:03:31,200 Speaker 1: opening a company, I'm thinking, yeah, maybe, And you have 68 00:03:31,240 --> 00:03:33,920 Speaker 1: to pay for domestic labor, which is more expensive, but 69 00:03:34,000 --> 00:03:36,800 Speaker 1: that's a form of insurance. I also think that we're 70 00:03:36,800 --> 00:03:39,080 Speaker 1: going to get a sense that people can work remotely 71 00:03:39,360 --> 00:03:42,320 Speaker 1: and do not need to travel into downtown cores. That 72 00:03:42,360 --> 00:03:45,480 Speaker 1: could change housing markets, It can change the way companies operate, 73 00:03:45,560 --> 00:03:48,560 Speaker 1: It can change the push towards new and better technologies 74 00:03:48,600 --> 00:03:52,040 Speaker 1: for remote working. These are the types of conversation that 75 00:03:52,080 --> 00:03:54,680 Speaker 1: we need to have. Um of course, the biggest one 76 00:03:54,920 --> 00:03:57,960 Speaker 1: is we have now, you know, expanded the sets balance 77 00:03:58,000 --> 00:04:01,920 Speaker 1: sheet to something unprecedented. We now have deficits that will 78 00:04:01,920 --> 00:04:04,360 Speaker 1: blow out across the entire world. And I don't think 79 00:04:04,360 --> 00:04:06,160 Speaker 1: you're going to have anyone who says we shouldn't have 80 00:04:06,200 --> 00:04:09,600 Speaker 1: spent that amount of money. So even our notions of 81 00:04:09,640 --> 00:04:12,640 Speaker 1: what's the appropriate rule of a central bank and how 82 00:04:12,720 --> 00:04:16,440 Speaker 1: much money should government spend is going to change as well. Francis, 83 00:04:16,440 --> 00:04:18,680 Speaker 1: That's exactly where I wanted to go, this idea that 84 00:04:18,680 --> 00:04:21,279 Speaker 1: the deficit is now going to double to where it was. 85 00:04:21,400 --> 00:04:24,440 Speaker 1: You've got helicopters dropping money, You've got the FED basically 86 00:04:24,480 --> 00:04:27,039 Speaker 1: saying we'll buy whatever you want with expectations at the 87 00:04:27,040 --> 00:04:29,440 Speaker 1: Fed's balance sheet, which already is at a record high 88 00:04:29,480 --> 00:04:31,680 Speaker 1: now is going to at least double in the next 89 00:04:31,720 --> 00:04:33,960 Speaker 1: twelve months, if not far sooner than that, to more 90 00:04:34,000 --> 00:04:37,960 Speaker 1: than nine trillion dollars. At what point is this inflationary 91 00:04:38,120 --> 00:04:45,479 Speaker 1: versus deflationary, So eventually that will create some inflation. And 92 00:04:45,640 --> 00:04:48,080 Speaker 1: this is why I think we're seeing a steeper curve. 93 00:04:48,440 --> 00:04:50,680 Speaker 1: It's why you're going to hear people say I'm a 94 00:04:50,720 --> 00:04:54,200 Speaker 1: seller of the thirty year that inflation is coming. Um. 95 00:04:54,240 --> 00:04:55,919 Speaker 1: This is why you're going to see people who like 96 00:04:56,040 --> 00:04:58,960 Speaker 1: gold in this type of environment. But for the meantime, 97 00:04:59,120 --> 00:05:01,320 Speaker 1: particularly in the next six months, we're going to have 98 00:05:01,400 --> 00:05:04,080 Speaker 1: to deal with demand destruction, and in my view, that 99 00:05:04,120 --> 00:05:07,240 Speaker 1: demand destruction it's going to be so much more powerful 100 00:05:07,360 --> 00:05:11,440 Speaker 1: than any sort of inflationary dynamics that come from these policies. 101 00:05:11,760 --> 00:05:14,839 Speaker 1: We also have a very strong US dollar, and that 102 00:05:14,960 --> 00:05:17,680 Speaker 1: is a deflationary force. I don't think that strong US 103 00:05:17,720 --> 00:05:20,760 Speaker 1: dollar is going to unwind significantly this year. So yes, 104 00:05:20,839 --> 00:05:24,039 Speaker 1: do we need to think about inflation. Absolutely, Do we 105 00:05:24,080 --> 00:05:25,839 Speaker 1: need to think about it in the next twelve months 106 00:05:25,880 --> 00:05:29,080 Speaker 1: or even twenty four months, I don't think so. So. 107 00:05:29,279 --> 00:05:33,839 Speaker 1: Francisk you're talking about you more of a U shaped recovery, 108 00:05:34,000 --> 00:05:36,000 Speaker 1: do you? In fact? And I think that we will 109 00:05:36,000 --> 00:05:37,640 Speaker 1: see a recovery in the third quarters that can be 110 00:05:37,640 --> 00:05:39,760 Speaker 1: pushed out maybe more to the fourth quarter. This could 111 00:05:39,760 --> 00:05:42,760 Speaker 1: be a lower for longer type of hit to the 112 00:05:42,800 --> 00:05:47,160 Speaker 1: second quarter. I suspect you're going to see some seeds 113 00:05:47,160 --> 00:05:49,440 Speaker 1: of the recovery by the third quarter, and by that 114 00:05:49,520 --> 00:05:52,080 Speaker 1: I mean you will see shops open back up and 115 00:05:52,120 --> 00:05:56,039 Speaker 1: some rehiring activity. Are we truly back online? Do we 116 00:05:56,080 --> 00:05:58,600 Speaker 1: start to see an economy that even resembled where we 117 00:05:58,600 --> 00:06:01,960 Speaker 1: were in January? Probably not till the fourth quarter. You know, 118 00:06:02,040 --> 00:06:04,240 Speaker 1: we have a supply shock and then we have two 119 00:06:04,240 --> 00:06:07,480 Speaker 1: types of demand shocks. Here. We have forced closures, which 120 00:06:07,520 --> 00:06:09,480 Speaker 1: means even if you want to buy a latte at 121 00:06:09,480 --> 00:06:11,520 Speaker 1: the coffee shop, you can't, And then you have this 122 00:06:11,560 --> 00:06:14,119 Speaker 1: other type of demand shops, which is just confidence based, 123 00:06:14,160 --> 00:06:16,600 Speaker 1: which is saying, you know, even if the store is open, 124 00:06:16,760 --> 00:06:19,560 Speaker 1: I'm too afraid for my personal safety to go outside 125 00:06:19,560 --> 00:06:21,719 Speaker 1: the house. Right now, a lot of these can be 126 00:06:21,760 --> 00:06:24,440 Speaker 1: cleared up. Supply chains are already coming back online out 127 00:06:24,480 --> 00:06:27,200 Speaker 1: of China. That's good news. You can press a button 128 00:06:27,440 --> 00:06:29,440 Speaker 1: and or sign a paper and open up a segment 129 00:06:29,440 --> 00:06:31,520 Speaker 1: of the economy. But it's probably going to take a 130 00:06:31,520 --> 00:06:33,720 Speaker 1: little bit of time before we have people who are 131 00:06:33,760 --> 00:06:36,800 Speaker 1: generally happy to go to concerts through movies. Again, that's 132 00:06:36,839 --> 00:06:38,920 Speaker 1: the more of a confidence shock. Those are really difficult 133 00:06:38,920 --> 00:06:41,599 Speaker 1: to forecast. But you know, just thinking it true, I 134 00:06:41,600 --> 00:06:43,599 Speaker 1: don't think we're all going to be going around shaking 135 00:06:43,640 --> 00:06:47,280 Speaker 1: hands by June Francis. Just real quick here, I'm wondering 136 00:06:47,400 --> 00:06:50,839 Speaker 1: how much of the economy is still online that's getting discounted, 137 00:06:50,880 --> 00:06:54,599 Speaker 1: basically that the American business community hasn't gone to zero 138 00:06:54,640 --> 00:06:58,560 Speaker 1: as people shop online and uh and order stuff online. 139 00:06:59,560 --> 00:07:02,160 Speaker 1: Yeah right, And we see a variety of different types 140 00:07:02,200 --> 00:07:05,200 Speaker 1: of companies that are hiring because there's a segment of 141 00:07:05,200 --> 00:07:07,600 Speaker 1: this economy that isn't just holding place, but it's going 142 00:07:07,640 --> 00:07:10,880 Speaker 1: to re accelerate. And what they're seeing is just like 143 00:07:11,680 --> 00:07:13,520 Speaker 1: you know, the full weakness of the economy isn't going 144 00:07:13,560 --> 00:07:16,800 Speaker 1: to redown. I suspect the strength in those particular industries, 145 00:07:16,840 --> 00:07:20,280 Speaker 1: everything from telecom to online shopping. They're not going to 146 00:07:20,480 --> 00:07:22,720 Speaker 1: lose all of this stump either as we continue to 147 00:07:22,760 --> 00:07:25,440 Speaker 1: have the structural shift. So certainly we're going to see 148 00:07:25,440 --> 00:07:28,200 Speaker 1: some front loading activity in March. Wash grocery store sales 149 00:07:28,440 --> 00:07:30,920 Speaker 1: for March, they're gonna be through the roof, um, but 150 00:07:31,080 --> 00:07:34,400 Speaker 1: it's going to be substantially offset by the significant amount 151 00:07:34,840 --> 00:07:39,600 Speaker 1: of downward pressure we have from small businesses, restaurants, job losses, um. 152 00:07:39,640 --> 00:07:42,880 Speaker 1: Those are going to significantly outweigh Francis Donald. Thank you 153 00:07:42,960 --> 00:07:45,360 Speaker 1: so much for being with us. Frances Donald, chief economists 154 00:07:45,560 --> 00:07:49,120 Speaker 1: and head of macroeconomic strategy for MANU Life Asset Management. 155 00:07:49,200 --> 00:07:52,680 Speaker 1: Joining us on the phone from Toronto really interesting to 156 00:07:52,760 --> 00:07:56,560 Speaker 1: try to forecast what the society might look like on 157 00:07:56,600 --> 00:07:58,520 Speaker 1: the other side of this. We don't know how long 158 00:07:58,560 --> 00:08:00,640 Speaker 1: it's gonna be, Paul, but they're us seem to be 159 00:08:00,680 --> 00:08:02,880 Speaker 1: a feeling things are going to be very different in 160 00:08:02,960 --> 00:08:06,720 Speaker 1: certain ways at least. Yeah, absolutely, and again her economic 161 00:08:06,720 --> 00:08:09,040 Speaker 1: outlook more of a U shaped recovery than some of 162 00:08:09,040 --> 00:08:11,440 Speaker 1: the V shaped recoveries. That we've seen come out of 163 00:08:11,440 --> 00:08:16,600 Speaker 1: Wall Street. Over the last three or four days, we've 164 00:08:16,640 --> 00:08:20,520 Speaker 1: been hearing consistently about some of the growing strains on 165 00:08:20,560 --> 00:08:23,840 Speaker 1: the health care system, particularly in New York City and 166 00:08:24,040 --> 00:08:27,600 Speaker 1: Javit Center being outfitted with hundreds of beds in order 167 00:08:27,640 --> 00:08:31,040 Speaker 1: to accommodate the influx of expected patients. Joining us now 168 00:08:31,160 --> 00:08:34,480 Speaker 1: someone with a lot of experience planning and existing within 169 00:08:34,559 --> 00:08:38,360 Speaker 1: this type of ecosystem. Dr Lena When, emergency physician as 170 00:08:38,400 --> 00:08:42,439 Speaker 1: well as a public health professor towards Washington University previously 171 00:08:42,520 --> 00:08:45,880 Speaker 1: serving as Baltimore as Health Commissioner. Dr When, thank you 172 00:08:45,920 --> 00:08:47,960 Speaker 1: so much for being with us. I want to just 173 00:08:48,000 --> 00:08:50,800 Speaker 1: get a sense of a state of play. How close 174 00:08:50,880 --> 00:08:53,000 Speaker 1: are we in New York City and some of the 175 00:08:53,000 --> 00:08:57,200 Speaker 1: other epicenters to a an Italy type situation where we 176 00:08:57,320 --> 00:09:02,160 Speaker 1: end up with just hundreds of people dying a day. Well, 177 00:09:02,200 --> 00:09:06,800 Speaker 1: if you talk to any of our frontline healthcare providers 178 00:09:07,040 --> 00:09:10,480 Speaker 1: in New York and in other epicenters around the country, 179 00:09:10,520 --> 00:09:14,440 Speaker 1: they will say that we are already at this breaking point. 180 00:09:15,000 --> 00:09:20,360 Speaker 1: We are already seeing our hospital system stretched to capacity. 181 00:09:20,400 --> 00:09:24,800 Speaker 1: And what's extremely worrisome is that our healthcare providers for 182 00:09:24,960 --> 00:09:28,640 Speaker 1: on the front lines don't even have the basic equipment 183 00:09:28,679 --> 00:09:31,720 Speaker 1: that they need in order to protect themselves, which frankly 184 00:09:31,760 --> 00:09:34,160 Speaker 1: is something that I never thought we would see in 185 00:09:34,200 --> 00:09:36,320 Speaker 1: this country. I mean, it was just two months ago 186 00:09:36,360 --> 00:09:39,679 Speaker 1: that we saw the images emerging from China of nurses 187 00:09:39,720 --> 00:09:42,440 Speaker 1: who had to reuse their masks for several days at 188 00:09:42,440 --> 00:09:47,080 Speaker 1: a time, doctors whom had to fashion their own gowns 189 00:09:47,160 --> 00:09:50,079 Speaker 1: out of garbage bags. And now we're seeing this playing 190 00:09:50,120 --> 00:09:54,160 Speaker 1: out all over the country. First we're ratcheting masks, then 191 00:09:54,240 --> 00:09:56,280 Speaker 1: we're going to run out of doctors, and then we're 192 00:09:56,320 --> 00:09:59,240 Speaker 1: also going to run out of hospital beds and I 193 00:09:59,320 --> 00:10:02,719 Speaker 1: see you bed and other critical capabilities that will keep 194 00:10:02,720 --> 00:10:06,000 Speaker 1: patients alive. I mean, I hate to present this dire picture, 195 00:10:06,040 --> 00:10:08,559 Speaker 1: but this is what's happening in our country due to 196 00:10:08,720 --> 00:10:12,280 Speaker 1: lack of preparedness. But all is not lost. We do 197 00:10:12,400 --> 00:10:16,120 Speaker 1: have an opportunity to ramp up production dramatically in this 198 00:10:16,160 --> 00:10:20,840 Speaker 1: country through a coordinated national effort, and we need everyone 199 00:10:20,920 --> 00:10:24,600 Speaker 1: to continue to do their part to do social distancing 200 00:10:24,679 --> 00:10:27,520 Speaker 1: and other measures that can reduce the rate of transmission 201 00:10:27,960 --> 00:10:31,439 Speaker 1: in these epicenters, but as critically in other parts of 202 00:10:31,440 --> 00:10:34,880 Speaker 1: the country, to to prevent every part of our country 203 00:10:34,960 --> 00:10:38,960 Speaker 1: from turning into the China and Italy scenario that we 204 00:10:39,000 --> 00:10:42,160 Speaker 1: have seen playing out so dr when there has been 205 00:10:42,200 --> 00:10:44,520 Speaker 1: some growing discussion over the last week or so that 206 00:10:44,600 --> 00:10:47,320 Speaker 1: perhaps it's time to think about getting in the country 207 00:10:47,360 --> 00:10:50,480 Speaker 1: quote unquote back to work and perhaps kind of open 208 00:10:50,559 --> 00:10:54,360 Speaker 1: up the economy somewhat. From your perspective on the healthcare side, 209 00:10:54,600 --> 00:10:57,720 Speaker 1: how do you view that? I mean, I understand the 210 00:10:57,840 --> 00:11:01,079 Speaker 1: desire to get back to normal, because frankly, right now 211 00:11:01,160 --> 00:11:04,560 Speaker 1: life is not normal at all. It's not imaginable compared 212 00:11:04,559 --> 00:11:08,000 Speaker 1: to where we were a month ago or two months ago. 213 00:11:08,640 --> 00:11:10,760 Speaker 1: But we also have to look at the reality of 214 00:11:10,880 --> 00:11:13,680 Speaker 1: where things are. We can't navigate based on our wish list. 215 00:11:13,720 --> 00:11:16,560 Speaker 1: We have to navigate based on the reality and what 216 00:11:16,640 --> 00:11:19,120 Speaker 1: the reality is that we have this urgent need to 217 00:11:19,120 --> 00:11:22,240 Speaker 1: stabilize our health care system. We have an urgent need 218 00:11:22,280 --> 00:11:24,680 Speaker 1: to ramp up testing because unless we do that, we 219 00:11:24,720 --> 00:11:27,560 Speaker 1: have no idea of where we actually are. We have 220 00:11:27,679 --> 00:11:29,839 Speaker 1: case counts every day of the number of people who 221 00:11:29,840 --> 00:11:33,079 Speaker 1: are infected, but we don't know how accurate these counts are. 222 00:11:33,120 --> 00:11:36,480 Speaker 1: In fact, basically every public health expert I know thinks 223 00:11:36,520 --> 00:11:39,880 Speaker 1: that these counts are far off because we just don't 224 00:11:39,880 --> 00:11:43,280 Speaker 1: have the testing capability to understand what's happening in our country. 225 00:11:43,760 --> 00:11:46,400 Speaker 1: So unless we can shore up our health care system, 226 00:11:46,480 --> 00:11:48,920 Speaker 1: unless we can get real data about what's going on, 227 00:11:49,559 --> 00:11:53,320 Speaker 1: we can't let up on really the only effective intervention 228 00:11:53,360 --> 00:11:55,760 Speaker 1: that we have at this time, which is social distancing. 229 00:11:56,320 --> 00:11:58,319 Speaker 1: I wish that this were not the case. Don't get 230 00:11:58,320 --> 00:12:00,400 Speaker 1: me wrong. I wish that we had testing up and running. 231 00:12:00,440 --> 00:12:03,439 Speaker 1: I wish that our hospitals were not overflowing. But given 232 00:12:03,480 --> 00:12:06,360 Speaker 1: the situation that we're in, we can't let up, or 233 00:12:06,440 --> 00:12:09,520 Speaker 1: else we are going to have tens of thousands of 234 00:12:09,559 --> 00:12:13,959 Speaker 1: people die, maybe even more because of our own in action. 235 00:12:14,920 --> 00:12:18,240 Speaker 1: Dr when I'm wondering right now, we're looking at a 236 00:12:18,280 --> 00:12:22,960 Speaker 1: recommendation that anyone from New York quarantine themselves for fourteen 237 00:12:23,080 --> 00:12:27,160 Speaker 1: days if they travel outside of this state. How prevalent 238 00:12:27,679 --> 00:12:31,040 Speaker 1: is your estimates is the research currently is the virus 239 00:12:31,120 --> 00:12:33,920 Speaker 1: in the United States beyond New York? In other words, 240 00:12:34,280 --> 00:12:36,720 Speaker 1: if some of the hot spots are contained, will that 241 00:12:36,760 --> 00:12:39,960 Speaker 1: be enough to sort of stave off a crisis situation 242 00:12:40,120 --> 00:12:43,199 Speaker 1: the rest of the United States. It's a great question. 243 00:12:43,880 --> 00:12:46,080 Speaker 1: I think the answer is that we don't know, because 244 00:12:46,080 --> 00:12:49,240 Speaker 1: we don't know the true prevalence in other communities, but 245 00:12:49,320 --> 00:12:51,920 Speaker 1: there's reason to believe that you can do both of 246 00:12:51,960 --> 00:12:54,640 Speaker 1: these things at the same time. So mitigation efforts, meaning 247 00:12:54,679 --> 00:12:58,480 Speaker 1: mitigation in these hotspot areas as well as containment in 248 00:12:58,600 --> 00:13:02,560 Speaker 1: areas that probably are not yet so affected, although very 249 00:13:02,640 --> 00:13:04,920 Speaker 1: likely they are much more affective than we think, but 250 00:13:05,160 --> 00:13:07,640 Speaker 1: still there is a chance at that, and I think 251 00:13:07,640 --> 00:13:10,360 Speaker 1: as long as there's a chance, we should be trying 252 00:13:10,760 --> 00:13:13,920 Speaker 1: to do both, trying to to um do every day 253 00:13:13,960 --> 00:13:16,160 Speaker 1: we can to both to the healthcare system in these 254 00:13:16,200 --> 00:13:19,520 Speaker 1: hot spots and to reduce the rate of of transmission 255 00:13:19,640 --> 00:13:23,040 Speaker 1: in other areas too. Dr Lena When, thank you so 256 00:13:23,080 --> 00:13:26,080 Speaker 1: much for joining us. We really appreciate your learned perspective 257 00:13:26,200 --> 00:13:29,040 Speaker 1: on this issue. Dr Lena When is an emergency physician 258 00:13:29,520 --> 00:13:33,280 Speaker 1: and public health professor George Washington University. She previously served 259 00:13:33,320 --> 00:13:37,280 Speaker 1: as Baltimore's health commissioner. So, Lisa, still, I think what 260 00:13:37,320 --> 00:13:40,480 Speaker 1: we're hearing from Dr When is that, obviously we are 261 00:13:40,520 --> 00:13:43,920 Speaker 1: still at the relatively critical stages here, particularly in some 262 00:13:43,960 --> 00:13:47,000 Speaker 1: of the hot spots, so perhaps a little bit premature 263 00:13:47,160 --> 00:13:50,040 Speaker 1: I think about opening up the economy. There was a 264 00:13:50,120 --> 00:13:53,959 Speaker 1: story that caught my attention this morning about how New 265 00:13:54,000 --> 00:13:58,120 Speaker 1: York hospital workers are basically foregoing tests to see whether 266 00:13:58,120 --> 00:14:00,720 Speaker 1: they have the virus. If they don't have symptoms, they're 267 00:14:00,720 --> 00:14:03,320 Speaker 1: being told just to come to work because a they're 268 00:14:03,360 --> 00:14:05,840 Speaker 1: needed and be there aren't enough tests, and it just 269 00:14:05,840 --> 00:14:08,880 Speaker 1: sort of highlights the fear felt by a lot of 270 00:14:08,880 --> 00:14:11,480 Speaker 1: people currently in the healthcare system. And I will tell 271 00:14:11,520 --> 00:14:14,480 Speaker 1: you personally, I've spoken to people who are nurses in 272 00:14:14,480 --> 00:14:18,120 Speaker 1: this situation, and it is a frightening situation at this point, 273 00:14:18,120 --> 00:14:20,720 Speaker 1: and it's expected to peak in about two weeks, so 274 00:14:21,120 --> 00:14:24,640 Speaker 1: a lot of concern about whether people who could potentially 275 00:14:24,680 --> 00:14:27,000 Speaker 1: be saved will be able to saved, as well as 276 00:14:27,040 --> 00:14:28,640 Speaker 1: the lives of a lot of the people who are 277 00:14:28,680 --> 00:14:34,840 Speaker 1: on the front lines as hospital workers. Our next guest 278 00:14:34,960 --> 00:14:37,920 Speaker 1: Hans Olsa, and he'sa chief investment officer food Shary Trust 279 00:14:37,920 --> 00:14:42,200 Speaker 1: company in Boston with about fourteen billion dollars under management. Hans, 280 00:14:42,240 --> 00:14:44,120 Speaker 1: thanks so much for joining us. What do you make 281 00:14:44,120 --> 00:14:46,200 Speaker 1: of the market performance of the last couple of days? 282 00:14:46,200 --> 00:14:48,120 Speaker 1: Are just kind of forming maybe a little bit of 283 00:14:48,120 --> 00:14:51,600 Speaker 1: a bottom here? Is this just a dead cat bounce? No, 284 00:14:51,840 --> 00:14:55,400 Speaker 1: I think we're in the very early stages of a bottom. 285 00:14:55,480 --> 00:15:00,840 Speaker 1: Formation here with the Setter reserves action being joined by 286 00:15:00,920 --> 00:15:03,960 Speaker 1: the Congress's actions, I think we have the conditions now 287 00:15:04,440 --> 00:15:08,520 Speaker 1: to start to put a double line underneath this episode. 288 00:15:08,640 --> 00:15:11,520 Speaker 1: So I think we're in the early stages. There's definitely 289 00:15:12,080 --> 00:15:16,440 Speaker 1: um some some probably shockingly difficult headlines will have to 290 00:15:16,480 --> 00:15:19,040 Speaker 1: deal with in the week ahead, but most important, I 291 00:15:19,040 --> 00:15:22,000 Speaker 1: think we've got the beginnings of a base being formed. 292 00:15:22,480 --> 00:15:24,840 Speaker 1: You know, there's a question here how you get some 293 00:15:24,920 --> 00:15:29,080 Speaker 1: conviction at a time of such lack of conviction when 294 00:15:29,080 --> 00:15:32,040 Speaker 1: it comes to economic forecasts. I'd love to get your sense. 295 00:15:32,240 --> 00:15:36,160 Speaker 1: How do you gain a sense of assurance behind your 296 00:15:36,200 --> 00:15:38,640 Speaker 1: call that we're getting stability and it's time to perhaps 297 00:15:38,720 --> 00:15:41,720 Speaker 1: buy well. I think you have to look at the 298 00:15:42,000 --> 00:15:45,040 Speaker 1: credit market, because in our commercial lives, the sort of 299 00:15:45,080 --> 00:15:47,560 Speaker 1: the well spring of all the activity starts with credit, 300 00:15:47,680 --> 00:15:50,960 Speaker 1: right with money changing hands and the ability to get 301 00:15:51,400 --> 00:15:55,160 Speaker 1: credit to to transact UH. And you know, what we've 302 00:15:55,200 --> 00:15:58,400 Speaker 1: seen over the last week or so is severe dislocation. 303 00:15:58,480 --> 00:16:02,200 Speaker 1: We're right out through right cross the credit landscape, and 304 00:16:02,200 --> 00:16:05,560 Speaker 1: what we're starting to see now is some normalization beginning 305 00:16:05,600 --> 00:16:08,920 Speaker 1: to happen in that that space, whether it be UH 306 00:16:09,160 --> 00:16:13,480 Speaker 1: yield spreads on investment grade bonds or high yields starting 307 00:16:13,480 --> 00:16:16,320 Speaker 1: to come down. Once that we start to get a 308 00:16:16,320 --> 00:16:19,520 Speaker 1: return of normalization there, that will flow through to the 309 00:16:19,520 --> 00:16:21,560 Speaker 1: equity markets, and I think they're both happening at the 310 00:16:21,560 --> 00:16:24,680 Speaker 1: same time at the moment. So, Hans, one of the 311 00:16:24,720 --> 00:16:27,200 Speaker 1: areas that's been a little bit troubled obviously in the 312 00:16:27,240 --> 00:16:30,080 Speaker 1: credit side of the business is the mortgage markets. What's 313 00:16:30,120 --> 00:16:31,600 Speaker 1: your take on what's going on there and kind of 314 00:16:31,600 --> 00:16:34,440 Speaker 1: what the response has been from the FED. I think 315 00:16:34,440 --> 00:16:37,840 Speaker 1: the Fed's efforts have been really good, uh in addressing 316 00:16:37,840 --> 00:16:41,280 Speaker 1: the primary markets. We need to get into the secondary markets, 317 00:16:41,920 --> 00:16:46,880 Speaker 1: especially in commercial back uh, commercial back mortgage paper and 318 00:16:46,920 --> 00:16:49,680 Speaker 1: the like. I think there needs to be some help 319 00:16:49,800 --> 00:16:51,400 Speaker 1: there on the part of the set of reserve there. 320 00:16:51,480 --> 00:16:54,280 Speaker 1: They need to basically supply capital to that part of 321 00:16:54,280 --> 00:16:58,280 Speaker 1: the market so that um uh, some liquidity is there 322 00:16:58,360 --> 00:17:00,920 Speaker 1: and we get a sort of beginning of a return 323 00:17:01,000 --> 00:17:03,520 Speaker 1: to normal trading. It's not there yet. There's still some 324 00:17:03,600 --> 00:17:07,679 Speaker 1: distress sellers and liquidations occurring. But if the FED turns, 325 00:17:07,760 --> 00:17:12,960 Speaker 1: it's considerable resources there that will start to tamp down 326 00:17:13,000 --> 00:17:17,200 Speaker 1: as well. Hans. We're speaking with Hans Olsen, chief Investment 327 00:17:17,200 --> 00:17:21,000 Speaker 1: Officer a fiduciary trust company in Boston. Hans, I'd love 328 00:17:21,080 --> 00:17:23,600 Speaker 1: to get your sense of how you go about buying 329 00:17:23,720 --> 00:17:26,880 Speaker 1: in this situation, given the fact that it's very hard 330 00:17:26,920 --> 00:17:29,919 Speaker 1: to depend on any actual data that we've previously relied on, 331 00:17:30,040 --> 00:17:32,359 Speaker 1: like earnings or estimates, to get a sense of what 332 00:17:32,400 --> 00:17:36,080 Speaker 1: the financial picture is. Yeah, I think that's a two 333 00:17:36,119 --> 00:17:38,480 Speaker 1: part process. One you have to sort of look through 334 00:17:38,640 --> 00:17:40,920 Speaker 1: to the other side of this. So if we if 335 00:17:40,960 --> 00:17:43,240 Speaker 1: we fixate on the data that we see in front 336 00:17:43,240 --> 00:17:46,080 Speaker 1: of us right now, we're always two to three weeks 337 00:17:46,080 --> 00:17:49,439 Speaker 1: behind the curve and uh, you know, whether it's the 338 00:17:49,480 --> 00:17:52,240 Speaker 1: p M I like only actually with the p M I, 339 00:17:52,320 --> 00:17:54,960 Speaker 1: some of them are just beginning to to to reflect 340 00:17:55,040 --> 00:17:58,160 Speaker 1: the UH sort of the severity of the draw down. 341 00:17:58,640 --> 00:18:00,960 Speaker 1: But I think if you focus through to UH and 342 00:18:00,960 --> 00:18:03,560 Speaker 1: and to a recovery, when we get a return to 343 00:18:03,680 --> 00:18:06,119 Speaker 1: a bit of normalcy, then I think it's just a 344 00:18:06,160 --> 00:18:09,359 Speaker 1: matter of having exposure. It's really more of a beta 345 00:18:09,440 --> 00:18:12,320 Speaker 1: play than it is trying to pick an individual stock 346 00:18:12,400 --> 00:18:16,480 Speaker 1: here or there. Things have sold off so so systemically, 347 00:18:16,560 --> 00:18:19,840 Speaker 1: and in some cases in such a disorderly way. Uh, 348 00:18:19,920 --> 00:18:23,879 Speaker 1: just exposure to markets now in the base formation is 349 00:18:24,320 --> 00:18:28,399 Speaker 1: I think the first step into a successful um re 350 00:18:28,480 --> 00:18:32,400 Speaker 1: emergence of this from this period son for the brave 351 00:18:32,480 --> 00:18:34,199 Speaker 1: of heart that are willing and able to look to 352 00:18:34,240 --> 00:18:38,719 Speaker 1: the other side of this, where should they be looking? Well, 353 00:18:38,760 --> 00:18:41,480 Speaker 1: I think the US is the first place. And we 354 00:18:41,480 --> 00:18:44,960 Speaker 1: we have liked international names for for some time, UM, 355 00:18:45,760 --> 00:18:50,400 Speaker 1: but it's hard to imagine the global economy emerging from 356 00:18:50,400 --> 00:18:53,080 Speaker 1: this global slowdown, of this global crisis without the US 357 00:18:53,200 --> 00:18:55,320 Speaker 1: leading the way. We tend to be the most vibrant 358 00:18:55,880 --> 00:18:59,520 Speaker 1: uh and most creative economy. Uh. And you know it 359 00:18:59,560 --> 00:19:02,560 Speaker 1: would it would be a break with history for US 360 00:19:02,600 --> 00:19:04,840 Speaker 1: to come out of a global slowdown without the US 361 00:19:05,240 --> 00:19:07,280 Speaker 1: leading the way. So I think the US is the 362 00:19:07,320 --> 00:19:09,639 Speaker 1: first place to be. I think credit is beginning to 363 00:19:09,640 --> 00:19:13,000 Speaker 1: look pretty interesting. Uh. I think I would go credit 364 00:19:13,080 --> 00:19:16,800 Speaker 1: first and then equities second, just because credit has to 365 00:19:16,840 --> 00:19:20,119 Speaker 1: recover before equities can recover. So if you have incremental 366 00:19:20,160 --> 00:19:23,760 Speaker 1: money UM, splitting it between those two sectors of the 367 00:19:23,800 --> 00:19:25,919 Speaker 1: capital markets would seem to me to be a good idea. 368 00:19:26,520 --> 00:19:28,520 Speaker 1: All right, So we're in credit because we've seen an 369 00:19:28,560 --> 00:19:30,680 Speaker 1: out performance in the past couple of days, and investment 370 00:19:30,720 --> 00:19:33,959 Speaker 1: grade as a federal reserve backstops that as a class, 371 00:19:34,000 --> 00:19:36,719 Speaker 1: but high yield has continued to underperform as people expect 372 00:19:36,720 --> 00:19:39,480 Speaker 1: the default rate to spike in the wake of the 373 00:19:39,760 --> 00:19:44,320 Speaker 1: of the shutdowns. The places that we're looking at right 374 00:19:44,359 --> 00:19:47,919 Speaker 1: now haven't pulled the trigger, but we're doing the work 375 00:19:48,000 --> 00:19:50,760 Speaker 1: on would be levered loans those are down trading in 376 00:19:50,800 --> 00:19:54,639 Speaker 1: the seventies. Now on those are applying implying default rates 377 00:19:54,640 --> 00:19:59,840 Speaker 1: and recovery rates that probably won't come to pass, give 378 00:20:00,000 --> 00:20:02,320 Speaker 1: and all the extraordinary efforts on the part of the 379 00:20:02,320 --> 00:20:06,280 Speaker 1: Central Bank and now Congress, and then once that starts 380 00:20:06,320 --> 00:20:08,400 Speaker 1: to catch a bid, I think we'll see a bit 381 00:20:08,400 --> 00:20:11,200 Speaker 1: of a recovery and high yield already, though high yield 382 00:20:11,920 --> 00:20:15,720 Speaker 1: oh a s is down from the peak that achieved 383 00:20:15,760 --> 00:20:19,360 Speaker 1: just a couple of days ago. So Hans, it's interesting 384 00:20:19,440 --> 00:20:23,560 Speaker 1: the looking out to the other side. Are there sectors 385 00:20:24,240 --> 00:20:26,159 Speaker 1: in the economy that you would look at? Would you 386 00:20:26,200 --> 00:20:27,879 Speaker 1: look at the ones that got really crushed, whether it 387 00:20:27,920 --> 00:20:30,600 Speaker 1: be leisure or the airlines, transports, that type of thing. 388 00:20:32,119 --> 00:20:35,280 Speaker 1: I think that for for us, where we would look 389 00:20:35,359 --> 00:20:40,080 Speaker 1: first would be various, Like um um industrials actually is 390 00:20:40,119 --> 00:20:42,640 Speaker 1: pretty good. Picking in technology, although that hasn't sold off 391 00:20:42,680 --> 00:20:45,439 Speaker 1: as much energy. Some of the top names, and energy 392 00:20:45,560 --> 00:20:47,240 Speaker 1: might make a lot of sense here. They have the 393 00:20:47,280 --> 00:20:49,639 Speaker 1: wear with all the balance sheet, of the depth of 394 00:20:49,640 --> 00:20:53,520 Speaker 1: business and the access to resources. UH. In order to 395 00:20:53,640 --> 00:20:56,040 Speaker 1: lead out our way out, we start to get a 396 00:20:56,040 --> 00:20:59,040 Speaker 1: bid for for energy prices, so it would be energy, 397 00:20:59,119 --> 00:21:01,840 Speaker 1: it would be health there, it would be UH. Financials 398 00:21:01,880 --> 00:21:03,280 Speaker 1: at some point here in the States are going to 399 00:21:03,320 --> 00:21:05,359 Speaker 1: look pretty interesting. So some of the areas that have 400 00:21:05,400 --> 00:21:08,520 Speaker 1: gotten hit harder. But it's but focusing really on the 401 00:21:08,600 --> 00:21:11,959 Speaker 1: larger companies in that in those sectors, because those are 402 00:21:11,960 --> 00:21:15,359 Speaker 1: the ones that will lead out. In an environment like this, 403 00:21:15,440 --> 00:21:17,520 Speaker 1: it's hard to see how the smaller companies lead us 404 00:21:17,560 --> 00:21:19,840 Speaker 1: out of this. Hans Olson, thank you so much for 405 00:21:19,880 --> 00:21:21,720 Speaker 1: being with us, and take care of yourself. Hans Olsen 406 00:21:21,760 --> 00:21:26,120 Speaker 1: as chief investment officer, a fiduciary trust company in Boston. 407 00:21:28,840 --> 00:21:31,120 Speaker 1: Volatility markets a little bit of weak this year today 408 00:21:31,160 --> 00:21:35,679 Speaker 1: after that tremendous and historic rally yesterday, was at the 409 00:21:35,680 --> 00:21:38,600 Speaker 1: start of something new or just a bear market bounce. 410 00:21:39,160 --> 00:21:42,640 Speaker 1: We have Aaron Dunne, co director of Value and Equity 411 00:21:42,720 --> 00:21:46,200 Speaker 1: Investing and portfolio manager at Eaton Vance with us. Aaron, 412 00:21:46,240 --> 00:21:49,000 Speaker 1: thanks so much for joining us. Give us your thoughts 413 00:21:49,000 --> 00:21:51,000 Speaker 1: of kind of what we're seeing in the market over 414 00:21:51,040 --> 00:21:54,520 Speaker 1: the last several days. Obviously tremendous volatility, but what are 415 00:21:54,520 --> 00:21:58,680 Speaker 1: some of the themes you're looking at. Well, I thank you. 416 00:21:58,920 --> 00:22:01,600 Speaker 1: You've gone through a couple of weeks here where you've 417 00:22:01,600 --> 00:22:03,840 Speaker 1: had a lot of technical issues in the market, whether 418 00:22:03,880 --> 00:22:06,720 Speaker 1: it be sort of UH leverage calls, et cetera, that 419 00:22:06,800 --> 00:22:10,560 Speaker 1: are exacerbating massive moves in the market here. UM. I 420 00:22:10,640 --> 00:22:13,919 Speaker 1: think more technical factors have been driving the market. What 421 00:22:14,040 --> 00:22:16,320 Speaker 1: I think we're starting to see, though, is a little 422 00:22:16,320 --> 00:22:19,960 Speaker 1: bit more of a an attention to fundamentals. And it's 423 00:22:20,000 --> 00:22:23,520 Speaker 1: really what we're trying to uh shift, you know, to 424 00:22:23,880 --> 00:22:26,920 Speaker 1: sift through for ourselves in terms of UM, how we 425 00:22:27,040 --> 00:22:28,960 Speaker 1: come out on the other side of this. And you know, 426 00:22:29,000 --> 00:22:32,600 Speaker 1: this is an unprecedented time. It's a downturn that many 427 00:22:32,680 --> 00:22:36,480 Speaker 1: struggle to foresee, UM and so I think it's sifting 428 00:22:36,560 --> 00:22:38,720 Speaker 1: through the winners and losers on the other side of this. 429 00:22:38,760 --> 00:22:41,679 Speaker 1: I don't think it's gonna be UM back to business 430 00:22:41,760 --> 00:22:44,440 Speaker 1: as usual in a month or two. I think there's 431 00:22:44,720 --> 00:22:47,800 Speaker 1: gonna be some lasting impacts. And I think the UM 432 00:22:48,000 --> 00:22:51,160 Speaker 1: the American public is probably UH at some point here 433 00:22:51,160 --> 00:22:53,800 Speaker 1: We're gonna get very anxious to get out and get 434 00:22:53,800 --> 00:22:57,040 Speaker 1: back to life as normal. So, um, sort of looking 435 00:22:57,080 --> 00:22:58,680 Speaker 1: at that and saying, who are who are the big 436 00:22:58,680 --> 00:23:01,600 Speaker 1: winners here? Uh? And maybe a little bit of a 437 00:23:01,600 --> 00:23:03,520 Speaker 1: new world who are some you know that? I think 438 00:23:03,520 --> 00:23:05,119 Speaker 1: we're going to struggle once we get on the other 439 00:23:05,160 --> 00:23:07,760 Speaker 1: side of this, Aaron, That's exactly where I wanted to go. 440 00:23:07,840 --> 00:23:09,919 Speaker 1: I was looking at some of your research ahead of this, 441 00:23:10,080 --> 00:23:12,080 Speaker 1: and you were saying, don't look at the next round 442 00:23:12,119 --> 00:23:15,480 Speaker 1: of earnings. It's no longer a leading indicator. Look beyond that, 443 00:23:16,000 --> 00:23:18,720 Speaker 1: but it enters the realm of theory, of sort of 444 00:23:18,800 --> 00:23:21,879 Speaker 1: philosophy of what will sort of be the most missed 445 00:23:21,920 --> 00:23:24,680 Speaker 1: aspects of people's lives. So how do you cope out 446 00:23:24,760 --> 00:23:27,800 Speaker 1: kind of handicapping the big winners on the other side 447 00:23:27,840 --> 00:23:29,879 Speaker 1: when you really cannot look at the number is to 448 00:23:29,920 --> 00:23:33,080 Speaker 1: determine that? Now, Yeah, I think the numbers are so 449 00:23:33,200 --> 00:23:36,560 Speaker 1: in flux that you know the next quarters earnings. I 450 00:23:36,600 --> 00:23:38,920 Speaker 1: mean you had basically half a quarter in the books 451 00:23:39,359 --> 00:23:41,200 Speaker 1: if it's the calendar quarter earnings, and we had Nike 452 00:23:41,320 --> 00:23:44,200 Speaker 1: come out today that had some excellent results driven by 453 00:23:44,440 --> 00:23:48,159 Speaker 1: the rebounded Shauna and some of the online UH sales 454 00:23:48,160 --> 00:23:51,000 Speaker 1: they were able to book. I think that's one differentiator 455 00:23:51,040 --> 00:23:54,400 Speaker 1: for retail companies. UM. For us, we look we want 456 00:23:54,400 --> 00:23:57,240 Speaker 1: to really look at because the current environments in such 457 00:23:57,359 --> 00:24:00,679 Speaker 1: flux and earnings numbers are in such flows. In a 458 00:24:00,720 --> 00:24:02,879 Speaker 1: company with a calendar quarter that has a call in 459 00:24:02,960 --> 00:24:05,199 Speaker 1: late April, I don't know that there's a ton of 460 00:24:05,280 --> 00:24:08,720 Speaker 1: informational value and what they're going to report right, they're 461 00:24:08,760 --> 00:24:11,359 Speaker 1: gonna say it's really challenging. UH. We want to make 462 00:24:11,400 --> 00:24:14,240 Speaker 1: sure we have liquidity to make it through. UH don't 463 00:24:14,240 --> 00:24:15,920 Speaker 1: know when people are you know, really gonna go back 464 00:24:15,960 --> 00:24:19,280 Speaker 1: to life as usual. So there is some fundamental look 465 00:24:19,320 --> 00:24:21,760 Speaker 1: here on what liquidity looks like. And that's one thing 466 00:24:21,800 --> 00:24:24,439 Speaker 1: we've also been very focused on. We like to own 467 00:24:24,520 --> 00:24:28,480 Speaker 1: quality companies with with low leverage UH at eaton bands, 468 00:24:28,520 --> 00:24:30,840 Speaker 1: and so we're looking at make sure our companies have 469 00:24:30,920 --> 00:24:32,520 Speaker 1: plenty of liquidity to get to other side of this. 470 00:24:33,040 --> 00:24:35,560 Speaker 1: And so some some things we're looking at our you know, 471 00:24:35,760 --> 00:24:40,840 Speaker 1: very liquid, well capitalized retailers UM looking at derivative plays 472 00:24:40,880 --> 00:24:44,560 Speaker 1: on on the other side of this, so UM, you know, 473 00:24:44,600 --> 00:24:49,000 Speaker 1: maybe not owning capital intensive airlines or cruise ships. We're 474 00:24:49,040 --> 00:24:51,160 Speaker 1: not really interested in going there. We're not interesting something 475 00:24:51,240 --> 00:24:53,560 Speaker 1: that's gonna get a bail out. But there's some derivative 476 00:24:53,600 --> 00:24:56,840 Speaker 1: plays on the other side of this that are interesting. Um, 477 00:24:56,880 --> 00:24:59,720 Speaker 1: you know. I think one example one is we look 478 00:24:59,720 --> 00:25:03,280 Speaker 1: at as as uh plain vanilla as this. Maybe we 479 00:25:03,320 --> 00:25:07,359 Speaker 1: look at corrugated box manufacturs, right, I mean Amazon is 480 00:25:07,400 --> 00:25:11,080 Speaker 1: still delivering, Um, They've announced a big increase in employee 481 00:25:11,080 --> 00:25:14,080 Speaker 1: based so plays like that where you can see some 482 00:25:14,119 --> 00:25:17,000 Speaker 1: fundamentals that come back much quicker. They actually go through 483 00:25:17,040 --> 00:25:19,600 Speaker 1: this with smooth sailing. Stuff like that I think is 484 00:25:19,680 --> 00:25:24,520 Speaker 1: extremely interesting here and looking at kind of two what 485 00:25:24,680 --> 00:25:27,439 Speaker 1: layer this year when the market looks forward, what is 486 00:25:27,760 --> 00:25:30,880 Speaker 1: what's normalized earnings number? Look like? That's how I think 487 00:25:30,880 --> 00:25:34,239 Speaker 1: you sift through today's environment. To the other side of 488 00:25:34,240 --> 00:25:37,119 Speaker 1: this is looking at what the impacts are today, but 489 00:25:37,200 --> 00:25:41,119 Speaker 1: look at what the impacts are. Two is going to 490 00:25:41,240 --> 00:25:46,959 Speaker 1: really embed a lot of upside in portfolios today and 491 00:25:47,000 --> 00:25:50,160 Speaker 1: go along a lot of pajamas because that's what people 492 00:25:50,160 --> 00:25:53,320 Speaker 1: are doing right now, exactly exactly. So Aaron as co 493 00:25:53,400 --> 00:25:57,240 Speaker 1: director of Value Equity Investing, how's value done in this 494 00:25:57,359 --> 00:26:00,840 Speaker 1: market route? It's been very tough, and I'll tell you why. 495 00:26:00,840 --> 00:26:02,840 Speaker 1: It's I mean, I think we were looking at coming 496 00:26:02,840 --> 00:26:04,680 Speaker 1: into this, you had really a couple of years where 497 00:26:04,760 --> 00:26:08,640 Speaker 1: growth outperformed value massively, and that's because you had these 498 00:26:08,680 --> 00:26:11,960 Speaker 1: big growth tech companies that excellent balance sheets, and so 499 00:26:12,040 --> 00:26:14,520 Speaker 1: in our view, as we went through last year and 500 00:26:14,520 --> 00:26:17,119 Speaker 1: in early this year, the market got very narrow in 501 00:26:17,320 --> 00:26:18,960 Speaker 1: a lot of these big tech company and then look 502 00:26:18,960 --> 00:26:21,159 Speaker 1: how big Apple was in the index. Look how big 503 00:26:21,480 --> 00:26:23,440 Speaker 1: um some of these other companies were in the index. 504 00:26:24,000 --> 00:26:27,359 Speaker 1: Um they you know, they grow so much of the 505 00:26:27,440 --> 00:26:29,800 Speaker 1: upside relative to the rest of the market. The value 506 00:26:29,800 --> 00:26:32,520 Speaker 1: benches tend to be very uh have much more of 507 00:26:32,520 --> 00:26:35,280 Speaker 1: a cyclical grouping. And that's happened over the last couple 508 00:26:35,320 --> 00:26:38,040 Speaker 1: of years is energies falling more into value. You know, 509 00:26:38,119 --> 00:26:41,560 Speaker 1: materials have fallen more industrials, So the value bench tends 510 00:26:41,600 --> 00:26:44,760 Speaker 1: to be very um more a little more cyclical. Now 511 00:26:44,880 --> 00:26:48,320 Speaker 1: have let's have more exposure to defensive groups like utilities, reads, 512 00:26:48,359 --> 00:26:50,919 Speaker 1: et cetera. So if you look at performance of values, 513 00:26:50,920 --> 00:26:54,520 Speaker 1: say versus growth, if that's your comparison, values and performed 514 00:26:54,520 --> 00:26:57,600 Speaker 1: growth quite a bit um. But I also think that's 515 00:26:58,040 --> 00:27:00,119 Speaker 1: the opportunity here is a lot of these spaces that 516 00:27:00,160 --> 00:27:03,960 Speaker 1: have really been um decimated. Have the opportunity to sort of, 517 00:27:04,280 --> 00:27:06,919 Speaker 1: uh to rebound the most on the other side of this, 518 00:27:06,960 --> 00:27:09,760 Speaker 1: as we get a little more visibility and the cyclical 519 00:27:09,800 --> 00:27:12,520 Speaker 1: work every here. Aaron Done, thank you so much for 520 00:27:12,600 --> 00:27:15,040 Speaker 1: being with us. Take care of yourself and your family. 521 00:27:15,080 --> 00:27:18,280 Speaker 1: Aaron Done, co director of Value Equity Investing in portfolio 522 00:27:18,320 --> 00:27:21,480 Speaker 1: manager at Eaton Advance. Talking about the road forward, how 523 00:27:21,560 --> 00:27:24,640 Speaker 1: you even start to sort of game out what might 524 00:27:24,720 --> 00:27:28,160 Speaker 1: be the other side, Paul, I mean, honestly, the concept 525 00:27:28,200 --> 00:27:32,919 Speaker 1: of even collective working and the concept of exercise. I mean, 526 00:27:32,920 --> 00:27:34,680 Speaker 1: you just have to wonder how much we'll go back 527 00:27:34,680 --> 00:27:38,439 Speaker 1: to the same versus be fundamentally changed. Yeah, it's really 528 00:27:38,520 --> 00:27:40,159 Speaker 1: it's gonna be interesting to see how we all come 529 00:27:40,160 --> 00:27:44,000 Speaker 1: out on the other side of this. Thanks for listening 530 00:27:44,000 --> 00:27:46,400 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 531 00:27:46,400 --> 00:27:49,240 Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast 532 00:27:49,240 --> 00:27:52,800 Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. 533 00:27:52,840 --> 00:27:55,080 Speaker 1: I'm Lisa abram Woids. I'm on Twitter at Lisa A. 534 00:27:55,119 --> 00:27:57,919 Speaker 1: Bramwoit's one before the podcast. You can always catch us 535 00:27:58,040 --> 00:28:03,080 Speaker 1: worldwide on Bloomberg Radio three.