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Speaker 1: Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keane

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Joining

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Speaker 1: us right now on these elasticities as they are called

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Speaker 1: as Emory decent. She is absolutely fabulous at the dynamics

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Speaker 1: of supply and demand. Emory to throw out your textbook

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Speaker 1: right now, explain to us the linear or log elasticities

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Speaker 1: of demand. Coming back, John just highlighted the Goldben thought.

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Speaker 1: Is it linear gradual at a at a unit pace

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Speaker 1: or is there some acceleration tendencies where boom, we get

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Speaker 1: back to a better price. That's does it is morning

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Speaker 1: matter only when you can actually drive or fly. I

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Speaker 1: think that's the problem we have with a lot of

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Speaker 1: these models that we're running. Um, you know, given the

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Speaker 1: prices right now, demand would be phenomenally strong in a

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Speaker 1: few months time, but it doesn't work when everybody is

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Speaker 1: in lockdown. UM, we've been we've been calling for ten

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Speaker 1: dollar oil for Brent as well for a while, and

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Speaker 1: you know we've we've absolutely looked at the single digit prices.

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Speaker 1: So this has to happen because the only way you're

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Speaker 1: going to balance this market right now for prices to

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Speaker 1: go to levels to get supplies to shut and you're

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Speaker 1: finally setting that in motion tanks upside. Yeah, but in

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Speaker 1: some ways parces have also done the work to get

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Speaker 1: supplies running. Brent, Brent getting a ten dollars Just to

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Speaker 1: give you some perspective, the June contract currently trading just

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Speaker 1: under twenty dollars a barrel, so that means a loss

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Speaker 1: of almost fifty that you foresee in the near future.

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Speaker 1: I want to understand here. And now we've study tankers

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Speaker 1: barreling down on the Gulf coast with tons, billions, millions

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Speaker 1: of barrels of oil ready to be deployed. You have

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Speaker 1: the fact is that all of the storage capacity has

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Speaker 1: nearly filled up. The tanks are topping out. What happens

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Speaker 1: when we run out of storage, which many experts think

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Speaker 1: will happen within weeks. Here, I think that's the critical question.

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Speaker 1: And you know, this is why we were never bullish

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Speaker 1: even after the OPEC deals, because for us, it was

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Speaker 1: a little too late. Because the surgeon April is going

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Speaker 1: to hit at a time when demand is at its worse,

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Speaker 1: but be the scale of the cutbacks is simply not

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Speaker 1: enough to offset the demand folds. The issue is if

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Speaker 1: we're going to get tanks ups in the next couple

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Speaker 1: of weeks, that's why prices need to go down to

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Speaker 1: levels people crazy negative levels, because you're essentially they could

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Speaker 1: produce as stop producing right now. And that's why we

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Speaker 1: are still thinking we're not out of the woods yet.

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Speaker 1: I don't think there's a lot more downside right now

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Speaker 1: because it meant but even though Brant is in the team,

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Speaker 1: a lot of the physical differentials, like dated Brent is

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Speaker 1: actually half of the price. But we have already achieved

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Speaker 1: that price target. It's not the future that we're talking about.

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Speaker 1: We're talking about the physical market here. But I think

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Speaker 1: the critical thing is that you can't expect prices to

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Speaker 1: start rising. They need to stay here for a while.

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Speaker 1: Production has to have to shop in very, very quickly,

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Speaker 1: because once we hit tank ups, you have to get

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Speaker 1: supply equal in demand from the very moment. And Rata,

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Speaker 1: I wanted you to help me understand the following line.

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Speaker 1: It came from sock Jen and it was something that

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Speaker 1: I actually didn't realize and it goes as follows. Quote.

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Speaker 1: Unlike Brent, the w t I future contract is physically

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Speaker 1: delivered and has no cash settlement option. Can you just

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Speaker 1: give us a little bit more detail on that. The

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Speaker 1: difference between a Brent contract and w t I am retail.

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Speaker 1: I think very broadly speaking, the point to remember is

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Speaker 1: that pushing where w T is delivered is still kind

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Speaker 1: of a landlocked hub. Yes it has pike clines in

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Speaker 1: and out, but unlike Brain that can't really get on water,

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Speaker 1: Brent always has the optionality to put that cowde on

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Speaker 1: a boat and it can find storage anywhere in the world,

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Speaker 1: whereas a w t I is really about cushing, and

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Speaker 1: that's why it can get stranded and you can get

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Speaker 1: to these negative numbers which you won't get good breaks

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Speaker 1: and Rita. I'm curious about President Trump's comments that he

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Speaker 1: wants to support the energy industry in the United States.

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Speaker 1: What are his options. We know that the that potentially

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Speaker 1: the Energy Administration can potentially buy oil for their strategic reserves.

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Speaker 1: We know that they can pay producers to keep oil

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Speaker 1: in the ground, and then there's just the let it

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Speaker 1: rip go ahead, produce as much as you want and

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Speaker 1: let the chips forward. They may which is the best

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Speaker 1: or least worst option of those? Well, I think the

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Speaker 1: fantastic question. I mean, even if they buy for the

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Speaker 1: spr that's only million barrels more or less, that's going

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Speaker 1: to be a drop in the option given the kind

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Speaker 1: of denand losses we've seen right now, Um, I think

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Speaker 1: look bailing companies out and in any way however that

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Speaker 1: the support comes through, the reality is, um, we have

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Speaker 1: to get the market do the work now, and the

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Speaker 1: market is doing it right. That's why prices out where

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Speaker 1: they are and the only way supplies can come back

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Speaker 1: is when you actually start to get prices or rather

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Speaker 1: infantry is coming down. It doesn't really matter. And again

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Speaker 1: remember even if there's some bailout packages, private equity money

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Speaker 1: has dried up. Banks are not going to lend. So

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Speaker 1: I think for the shild patch in particular, it's going

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Speaker 1: to be very difficult for them to come back to

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Speaker 1: engin as prices right. And read there's a recollection here

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Speaker 1: of Midlands of a number of years ago, in six

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Speaker 1: of a number of years ago, and we all trotted

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Speaker 1: out at the prize. We read it cover to cover

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Speaker 1: and said Daniel Jurgen was a genius and were thrilled it.

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Speaker 1: He wrote The Quest as a follow on as well

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Speaker 1: in six I was a primal scream from OPEC do something,

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Speaker 1: and they did it, and there was geo politics and

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Speaker 1: military involved in there and the rest. What's the primal

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Speaker 1: scream right now from the cartel? What? What's there? Do

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Speaker 1: something right now? Well? I think first and foremost for them, yes,

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Speaker 1: they have done a historical deal right. Yes, it kicks

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Speaker 1: in and made. That's part of the problem because the

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Speaker 1: deal kicks and after they've search production and therefore we

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Speaker 1: can still hit tank of before that. Um, they know

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Speaker 1: they might have to do more, but they are also

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Speaker 1: very aware that this is a demand problem. There's no

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Speaker 1: way they can step in and cut certain million dollars,

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Speaker 1: but they and they're also very clear why should they

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Speaker 1: be the ones to cut. I think everybody needs to

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Speaker 1: a contribute and that's absolutely fair, and that's again why

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Speaker 1: the market to work. You're not going to get US

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Speaker 1: and Canada to commit to cut legally, right So I

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Speaker 1: think that's where we are right now. They know they

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Speaker 1: need to stabilize the market, but they also know that

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Speaker 1: there's not very much they can do in the very

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Speaker 1: short term. That's why I think the two Europea deal

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Speaker 1: is very important. They know they need to continue with

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Speaker 1: cooperation for a longer period of time because this is

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Speaker 1: going to be the market that takes a long time

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Speaker 1: to recover and read to thank you so much. Just

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Speaker 1: love having you on Emory to sign with this energy

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Speaker 1: aspects UH this morning. Small business in America really struggling

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Speaker 1: at this point, and we're lucky to have with us today,

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Speaker 1: Karen Mills, the Harvard Business School, City of Fellow and

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Speaker 1: form ahead of the US Small Business Administration. Karen, fantastic

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Speaker 1: to have you with us today. Just tell me straight

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Speaker 1: off the top, what more can be done to help

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Speaker 1: a really struggling area of this economy. The smallest small businesses,

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Speaker 1: as you all know, missed out on the last rash

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Speaker 1: of the paycheck protection plan. And the good news is

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Speaker 1: that hopefully, hopefully Congress will actually pass this and it

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Speaker 1: will start flowing this week. Now. The question is what's

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Speaker 1: going to be different this time? And I think maybe

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Speaker 1: I'm a little more up domestic because last time it

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Speaker 1: went through the banks first, and their bigger clients got

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Speaker 1: to the front of the line with all their paperwork.

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Speaker 1: This time, there's something different, which is that a bunch

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Speaker 1: of the new players like Square and PayPal have gotten

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Speaker 1: their approvals and they're all queued up and their loans

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Speaker 1: in their queue. They tell me average twenty five tho

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Speaker 1: dollars forty dollars instead of the two hundred and forty

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Speaker 1: thousand we saw go out in the last So if

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Speaker 1: they flipped the switch and those folks get their loans funded,

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Speaker 1: which is still an if because we don't know if

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Speaker 1: it's all gonna work as seamlessly as as they hope,

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Speaker 1: then a bunch more of the small businesses may get

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Speaker 1: through this. There's a few other provisions to this is fascinating.

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Speaker 1: I want to pick up on the Squares of the

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Speaker 1: world and their involvement in this. When you talk about

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Speaker 1: the funds that are being allocated from the federal government,

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Speaker 1: are are the Squares and the PayPal was of the

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Speaker 1: world getting equal types of allocations to the big Bank

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Speaker 1: America and JP Morgan's of the world. Interestingly, there's no allocations.

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Speaker 1: There's just one big pot of money. Now in this

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Speaker 1: new bill, there's a second pot of money. And what

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Speaker 1: I had a recommendation I spoke to Pelosi's office in Congress,

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Speaker 1: and I said, look, make the second pot of money

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Speaker 1: a hundred billion set aside for small loans, loans under

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Speaker 1: forty dollars. But instead they said it's going to be

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Speaker 1: set aside for community banks and community financial organizations, which

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Speaker 1: I love those folks, but they are not the most

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Speaker 1: swift and technologically savvy. So well, you know, waiting to

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Speaker 1: see if they're a good conduit. But the sixty billion

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Speaker 1: that only goes through them, everybody else square and all

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Speaker 1: those other folks go in the main pot, and it's

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Speaker 1: first come, first served. Now, the good news is the

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Speaker 1: technology is such that everybody he is now automated, they

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Speaker 1: tell me, and to end, they're going to press the

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Speaker 1: button and we'll see what the Etrian system takes. Karen

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Speaker 1: to John's question and his absolute bewilderment over America's distrust

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Speaker 1: of providing income support to people. Long ago, in far

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Speaker 1: away there was a struggling company called Tutsie Roll, of

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Speaker 1: which you've got a nodding acquaintance. And there's a point

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Speaker 1: in every company's cycle where they just need money. Why

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Speaker 1: are we so afraid to just cut checks to small

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Speaker 1: small businesses? You know, I am totally in your camp,

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Speaker 1: because sometimes America forgets about its small businesses and they

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Speaker 1: don't even get to the front of the line. I mean,

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Speaker 1: why has it taken another week for us to replenish it.

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Speaker 1: We should know they need the money. Other countries are

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Speaker 1: cutting checks directly into the hands of small business owners,

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Speaker 1: So why why aren't we? One of the answers is

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Speaker 1: we actually don't have up the kind of tracking data

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Speaker 1: that they have in Germany and in Denmark on our

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Speaker 1: small businesses. Maybe we should have that, Karen, don't we

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Speaker 1: have a lack of trust data? To John's good question,

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Speaker 1: I mean, there just seems to be a distrust of

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Speaker 1: handy thousand dollar check to a struggling small business and

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Speaker 1: saying we trust you to pay your salary, et cetera,

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Speaker 1: with guidelines. Where did where did that evaporate from America? Well,

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Speaker 1: we should have more trust in our small business owners

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Speaker 1: because they are the ones keeping the economy afloat, and

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Speaker 1: as you all have said, they really need it now.

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Speaker 1: And you know, if there's somebody out there who took

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Speaker 1: the money, who shouldn't shame on them. And I hope

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Speaker 1: they look themselves in the mirror and they feel badly

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Speaker 1: because they took it out of the hands of the

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Speaker 1: corner store and the people in our community who are

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Speaker 1: desperate for it um. But we shouldn't mistrust them. They

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Speaker 1: are really our our livelihood, and I hope my concern

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Speaker 1: is this is not enough money. My number is at

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Speaker 1: least seven fifty, and we're getting close to that, but

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Speaker 1: I think we're going to be out of money end

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Speaker 1: of the week. Cart something that you touched off at

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Speaker 1: the start of this conversation. I think it's absolutely critical.

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Speaker 1: How do we stop big companies competing with the small

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Speaker 1: businesses that you're talking about. I'm not talking about five

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Speaker 1: hundred people. I'm talking about less than fifty, the really

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Speaker 1: small Momo poth stores across America that don't have the

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Speaker 1: army of accountants, that can't get the paperwork done quickly enough,

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Speaker 1: and cannot compete with public companies in America that was

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Speaker 1: still able to tap this fund. How do we stop that? Well?

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Speaker 1: My solution was to set aside a large part of

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Speaker 1: it for small loans. We know the gap is loans

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Speaker 1: under forty dollars. That's the most vulnerable people, the women

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Speaker 1: owned businesses, the minority owned businesses, the independent contractors. There's

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Speaker 1: twenty four million jobs at stake. Really people whose livelihood

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Speaker 1: you know, they can't they can't go cut the hair.

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Speaker 1: So those people, I'm telling them, go to Square, go

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Speaker 1: to PayPal and sign up now so that you can

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Speaker 1: be in the queue. They have the software that will

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Speaker 1: help you put in your correct information. Kind right to

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Speaker 1: cant show with you this monic fantastic to have you

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Speaker 1: with us on this produgram Kinra mills that have a

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Speaker 1: business goes City, a fellow form ahead of US Small

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Speaker 1: Business Administration. There's some extraordinary pandemic, the epps and flows

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Speaker 1: of it and with it now well there's some changes,

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Speaker 1: there are some better statistics out there, but still it

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Speaker 1: is very difficult in the emergency rooms across America. Laurence

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Speaker 1: Sawer where us with Johns Hopkins University. She's expert in

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Speaker 1: emergency medicine. Here's an update from Laurence Soer. We have

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Speaker 1: a lot of cast in the United States, but unfortunately,

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Speaker 1: I think they're not distributed in a way that allows

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Speaker 1: us to do systematic and broad testing. And that testing

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Speaker 1: is sort of the lyn Japan of all the other

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Speaker 1: public health measures that were put being into place. So

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Speaker 1: we definitely need to ramp up testing UM, and we

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Speaker 1: need to make sure testing is happening in these hardest

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Speaker 1: hit places. How do you see the lockdown ending, so

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Speaker 1: do we just return to normal or will there be

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Speaker 1: very specific health measures of social distancing that need to

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Speaker 1: be kept A great question. I think you know everyone's

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Speaker 1: looking forward to the lockdown ending, but we have to

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Speaker 1: do it carefully or we'll be back right in this

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Speaker 1: situation or possibly even worse after we reopen everything. UM.

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Speaker 1: Testing is going to be critical to ending this lockdown.

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Speaker 1: And then you link that testing with quick access to

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Speaker 1: care contact tracing, which is identifying people who had contact

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Speaker 1: with people who are sick UM and making sure that

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Speaker 1: they stay isolated or quarantined UM if they're not sick

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Speaker 1: until they pass their their possible window of getting other sick.

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Speaker 1: Those are the key measures for sure, Lauren. You are

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Speaker 1: expert in emergency medicine, which I learned a long time ago.

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Speaker 1: As a process driven event. You go from step to

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Speaker 1: step to step to step. What part of the testing

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Speaker 1: steps plural is the one that's the constraint. What's the

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Speaker 1: thing that makes it so it's so darn hard to

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Speaker 1: get tests done in this pandemic. I think basically what

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Speaker 1: happened is we had a not so great strategy and

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Speaker 1: then we executed that strategy in not in a not

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Speaker 1: so great way, in a poor way, and and so

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Speaker 1: we were starting from behind from the get go. And

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Speaker 1: so now we don't have sort of this systematic approach

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Speaker 1: to test thing. It's a it's a patchwork across across

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Speaker 1: the United States, and people are making their own decisions.

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Speaker 1: They're they're working with what they have UM to get

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Speaker 1: people tested. But it's not systematic, and no one has

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Speaker 1: visibility on the whole system. And so there's breakdowns in

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Speaker 1: where tests are being done, the all the pieces that

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Speaker 1: go to it UM, the reagents that the swabs. You know,

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Speaker 1: there's small breakdowns, and those small breakdowns add up quickly exactly.

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Speaker 1: So you know, I say this with great respect for

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Speaker 1: the exhausted people doing this. Every day, I hear the

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Speaker 1: clapping in New York City at seven pm. It's coast

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Speaker 1: to coast great, where is c d C? And all this?

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Speaker 1: I mean when I was in school, it was always

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Speaker 1: c d C to the rescue. Shouldn't c d C

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Speaker 1: with a full force of the Speaker, the Senate Majority

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Speaker 1: Leader and the President of the United States affect a

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Speaker 1: uniform test. I absolutely think so. I think you know,

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Speaker 1: we're hearing from the federal leadership that there's enough tests

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Speaker 1: and that might be that might be the truth, but

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Speaker 1: because they're not spread out and implemented in that systematic manner,

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Speaker 1: it doesn't matter. We need leadership from CDC, we need

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Speaker 1: leadership from ASPER, we need leadership from NIH, all supported

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Speaker 1: by the administration to roll out abroad and systematic testing program. Absolutely,

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Speaker 1: what can we do better in the US to make

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Speaker 1: sure there's enough personal protection equipment? UM? I think we

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Speaker 1: need to look really hard at our supply chain and

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Speaker 1: we need to be careful about how we're using PPE closely,

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Speaker 1: and one of the pieces of that is making sure

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Speaker 1: that we don't reopen too quickly so that we're we

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Speaker 1: have time UM to build up our stores of PPE again,

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Speaker 1: we have time to distribute it again before we see

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Speaker 1: another increase in cases if we if we do open

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Speaker 1: too quickly, So that's key for sure, UM. And then

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Speaker 1: training people to use it effectively and appropriately continues to

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Speaker 1: be really really important. So as new people come on

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Speaker 1: to work, UM, as new people come into the health

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Speaker 1: care system, making sure they understand what it's for, how

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Speaker 1: to use it, and how to be safe while putting

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Speaker 1: it on and off. Laurence are another terrific update there

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Speaker 1: from the Johns Hopkins University School of Medicine, and of

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Speaker 1: course their emergency room effort. Now sebastied Galli with us,

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Speaker 1: I'm already asset management, He writes, a wonderfully ellective research

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Speaker 1: note on a more macro macro, but also with a

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Speaker 1: real bet towards foreign exchange as well. Uh Bastion, I

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Speaker 1: know that Paul Sweeney has got all sorts of interesting questions.

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Speaker 1: I want to go Minutia and you right now Mexico

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Speaker 1: with a rake cut out of nowhere, Turkey with a

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Speaker 1: capitulation they out of nowhere? What are idiosyncratic em economy

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Speaker 1: signaling when they see these surprise rake cuts. What it's

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Speaker 1: telling you there is that there you have countries which

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Speaker 1: have strong men which are in charging, countries which are

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Speaker 1: fairly democratic, and countries which have a strong man in charge.

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Speaker 1: You have a certain tendency to be very aggressive into

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Speaker 1: monetary as well as physical policy because you do need

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Speaker 1: a course support from the population. You can't exist without it.

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Speaker 1: And that makes me say, are very sensitive to it.

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Speaker 1: I mean to accept a much higher level of inflation.

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Speaker 1: And that's what you can be expected in in some countries.

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Speaker 1: Others are much more democratic, it is more mitigated. They

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Speaker 1: take measures and might be less aggressive, which might actually

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Speaker 1: be the wrong decision initially. And you're seeing that, for

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Speaker 1: example in the gaves of Mexico where their cut rates.

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Speaker 1: And if you look in the case of Turkey, you

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Speaker 1: can see that the real interest rate so interested that

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Speaker 1: you see the minus inflation is uh. It's very unappealing

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Speaker 1: for foreign investors. There's a very high level inflation. A

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Speaker 1: lot of it is because it's a very weak currency

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Speaker 1: which is importing a lot of inflation through the country.

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Speaker 1: And it's a country deeply in trouble because it's also

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Speaker 1: a large manufacturing based at the same at the time

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Speaker 1: when there's not a lot of appeal. If you think

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Speaker 1: more Brawley about idiosyncratic risk, this is the particularity of

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Speaker 1: emerging markets. They tend to break breaking you in a

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Speaker 1: different ways than breaking in old and well understood ways.

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Speaker 1: And what we're seeing is a mixture of things breaking

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Speaker 1: and things also performing very well. So people will think

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Speaker 1: of Taiwan and Singapore is being in merged markets. They

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Speaker 1: are not, but they're part of the same basket and

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Speaker 1: they're performing extremely well. So Sebastian, what do you make

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Speaker 1: of what we've seen in the oil market over the

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Speaker 1: last several days? Negative prices on that may contract a

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Speaker 1: couple of days ago, just really really once in a

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Speaker 1: lifetime kind of stuff. What's your view? Well, would you

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Speaker 1: there are two elements. One is the easy part of

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Speaker 1: the supply. Hasn't they cut enough? I think that was

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Speaker 1: evident for a lot of people in the market, and

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Speaker 1: so it was not a surprise that all prices continued

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Speaker 1: to tumble afterwards. Was to surprise that would good to

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Speaker 1: zero and to a negative rate, so quite a few

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Speaker 1: commentators that meant making that that point a few weeks ago,

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Speaker 1: so not a complete surprise. What also was part of

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Speaker 1: the process is most likely a fear that there would

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Speaker 1: not be a delivery of the contract, that there would

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Speaker 1: be a default. Uh, And and that's probably something also

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Speaker 1: what you're we're going to discover in the next few weeks,

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Speaker 1: in the next a few days, that there are some

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Speaker 1: very significant accident in the market. And I think every

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Speaker 1: time the future gets to close the delivery, there will

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Speaker 1: be uh, in the next few weeks, the next few months, party,

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Speaker 1: it's going to be a fear of delivery mixed or mixed.

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Speaker 1: Was also fear of creditors. Sebastian, what's the fallout of

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Speaker 1: disinflation and the goods outright deflation off of this collapse

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Speaker 1: in oil. Well, if you're Japanese, if you imagine the

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Speaker 1: way they lived there for for a now decades, it's great.

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Speaker 1: Deflation is not an issue. You do great that you go,

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Speaker 1: you go purchase your stuff and it's cheaper than what's before.

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Speaker 1: It doesn't mean the economy is classing. It just means

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Speaker 1: the economy in some cases it is not doing very well.

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Speaker 1: What it is is a gigantic transfer well from Russia

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Speaker 1: and Sati rabe get to the West, not all of

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Speaker 1: America because Texas, of course and some parts of the

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Speaker 1: United States are or energy producing, but broadly speaking, a

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Speaker 1: transfer wealth to most American of a very large scale.

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Speaker 1: So it's gonna last for a few months. And as yep, well,

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Speaker 1: this is really I don't mean to interrupt, but this

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Speaker 1: is really really important for our domestic listeners. Uh, Sebastian,

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Speaker 1: are you suggesting that the president should be celebrating these

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Speaker 1: oil price declines and that the majority of Americans will

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Speaker 1: see wealth benefit from lower oil prices. It's a complicated

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Speaker 1: question because one is that the energy producing regions are

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Speaker 1: typically more Republicans, and so he's very sensitive by definitions.

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Speaker 1: It it's a strategic part of the US economy and

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Speaker 1: it cannot sustain these levels of prices for very long.

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Speaker 1: People have hedged. A lot of these companies have hedged,

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Speaker 1: but these hedges because they are not large company, they're

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Speaker 1: not multinationals. In many cases, it will be hedge over

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Speaker 1: three months. So as these three months go zero, they

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Speaker 1: get into into very severe type of trouble, and that

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Speaker 1: means he doesn't have to intervene. But probably speaking, it's

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Speaker 1: great for America. Does do they need to input terris

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Speaker 1: on non existing imports from Saudi Arabia or Russia? Let

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Speaker 1: them do it. It won't make much of a difference

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Speaker 1: if if any does. The US need to be part

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Speaker 1: of um fixing organized system with with the OPEC. Plus

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Speaker 1: that's in I guess in an open question, it's clear

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Speaker 1: that there's a massive amount of supply. This supply will

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Speaker 1: fall from the United States in the next few weeks,

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Speaker 1: very rapidly, first from the factors, then from the big

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Speaker 1: oilers as their hedge roll over. And so there's going

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Speaker 1: to be natural stabilization of the process. And that can

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Speaker 1: be seen if you look on your Boomberg screen in

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Speaker 1: the term structure of old prices, they are much higher

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Speaker 1: in the future than they are now. And that tells

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Speaker 1: you that people think that it's gonna eventually normalize. And

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Speaker 1: I learned that function just a couple of days ago

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Speaker 1: from John Farris. I still don't know, still learning sebashion.

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Speaker 1: So we're gonna get another in here in the United

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Speaker 1: States tomorrow. Another jobless claims UH number coming out likely

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Speaker 1: to be ugly once again. More than twenty million Americans

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Speaker 1: have lost their job in the last month or so.

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Speaker 1: How do you think about how this economy, given what

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Speaker 1: it's gonna be just extraordinary jobless unemployment rate, how do

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Speaker 1: you think this economy is going to play out over

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Speaker 1: the next several quarters? Can we get people, can we

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Speaker 1: get this economy reopen them back to work? Or is

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Speaker 1: this gonna be a long term build? So yeah, I

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Speaker 1: mean we're expecting on the Gloomer consensus is for four

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Speaker 1: point five million are coming in the initial claims a

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Speaker 1: Deutsche Bank is calling for unemployment. It's a huge, gigantic

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Speaker 1: shock and for some like the hotel industry to longer

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Speaker 1: term shots. For retails and the likes, it's probably a

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Speaker 1: shorter term shocks. And what you have is a mixture

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Speaker 1: of things which are very intense but don't last very long,

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Speaker 1: and things that can last much longer because there are

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Speaker 1: default companies which have permanently off and because also the

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Speaker 1: consumer is weaken even though when things they're normalized, people

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Speaker 1: are going to go in shop for stuff they need,

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Speaker 1: a lot of younger households, for example, have their rent

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Speaker 1: that they may or may not have paid. They'll be

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Speaker 1: concern they're gonna be rebuilding their savings. So she means

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Speaker 1: it's going to take them probably five six eight months

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Speaker 1: basically to start normalizing their their consumption. So a mixture

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Speaker 1: of different event which means that in two to four quarters,

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Speaker 1: I think we're gonna be okay, but it probably will

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Speaker 1: take four quarters. Sebasti Gali with a Signoria Sebastian I

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Speaker 1: just got an email from Christine and Frankford and she

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Speaker 1: noted that we haven't duck talked anything about Europe today

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Speaker 1: at all, so let's jump into it right now. How

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Speaker 1: critical Sebastian is it that europe find a togetherness on

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Speaker 1: debt what is called mutualization? How critical is that or

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Speaker 1: is that just a dodge for the fact they've got

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Speaker 1: to finally do something with the present instruments they have,

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Speaker 1: like e s M. So they do have an instruence

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Speaker 1: such as the s M to to do something, but

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Speaker 1: probably and they cost that there's a penalty basically to

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Speaker 1: participated and yet them you lose control of your policy,

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Speaker 1: which the Italians are very reluctant to do. So they're

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Speaker 1: having a phone call on the CB side today. On

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Speaker 1: the European side, are the no, no, that's an interesting question.

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Speaker 1: But the the the the European basically are have no

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Speaker 1: romat or barely of a romance, have no goals that

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Speaker 1: they're trying to reach which are very clear, and no

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Speaker 1: way to fund them. And the main reason is um

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Speaker 1: is called the ants in the Grasshopper story and it's

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Speaker 1: an old poem in French and then empty ant Um

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Speaker 1: basically works the entire summer, the grasshopper plays and answers,

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Speaker 1: and when the winter comes to grasshopper comes to the

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Speaker 1: ant and ask for help and the ansen, well, you've you've,

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Speaker 1: you've danced all summer, please continue. And this is Germany

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Speaker 1: and Netherlands, so they it's seen as cruel from one

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Speaker 1: point of view. It's also seen as the fact that

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Speaker 1: Italy and the lives particularly Itally hasn't reformed. Now we

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Speaker 1: have to pay for the fact that they haven't done

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Speaker 1: their job. It's Europe, which means that eventually something will

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Speaker 1: be done, but it's not gonna happen soon and and

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Speaker 1: it also means that Itally will have to go to

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Speaker 1: the s M within six months um. For now they're

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Speaker 1: being held by the TV which is buying BTPs, but

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Speaker 1: they might be downgraded so badly that they may or

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Speaker 1: may not be able to use them as collateral. Sebastian,

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Speaker 1: thank you so much, just brilliant. Sebastian Galley with US

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Speaker 1: folks Manoritia Asset Management. Thanks for listening to the Bloomberg

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Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keane Before the podcast, you can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio