WEBVTT - Surveillance: Mass Transit Recovery With MTA's Foye 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:26.920 Bloomberg dot Com, and of course on the Bloomberg And 0:00:26.960 --> 0:00:28.840 we've got a style on this market. What a rally 0:00:28.880 --> 0:00:31.160 we've seen off the bottom over the last counple of months. 0:00:31.160 --> 0:00:34.600 Make Swallick element Sacks joins us now, Mike Friday, What 0:00:34.680 --> 0:00:37.680 did Friday change for you as you look ahead to 0:00:37.800 --> 0:00:41.440 the weeks and months ahead through I think that Friday 0:00:41.640 --> 0:00:44.960 was just an example of a continuation of the impact 0:00:45.080 --> 0:00:48.720 of government policy, so big impact on the TESCO, big 0:00:48.720 --> 0:00:53.479 impact of monetary policy, that the rally can continue because 0:00:53.479 --> 0:00:57.240 the level of support from the government has been so significant, 0:00:57.600 --> 0:01:00.800 creating an enormous amount of cash that is really looking 0:01:00.840 --> 0:01:03.319 for a reason to get invested. I think that when 0:01:03.320 --> 0:01:05.640 you look at the employment report and the discussion you've 0:01:05.680 --> 0:01:08.920 had earlier today about the questions in the number, we're 0:01:08.959 --> 0:01:12.760 a long ways away from getting American workers back to 0:01:12.880 --> 0:01:15.880 work in a very meaningful way. So the job situation 0:01:15.959 --> 0:01:17.319 is going to be one that is going to continue 0:01:17.360 --> 0:01:19.880 to be an issue for the next six months to 0:01:19.920 --> 0:01:23.000 a year, and so I wouldn't necessarily call victory with 0:01:23.080 --> 0:01:24.800 regard to the job picture. I think we have a 0:01:24.840 --> 0:01:26.759 long long way to go, and I think what you're 0:01:26.800 --> 0:01:29.800 seeing right now in markets is the more the impact 0:01:30.000 --> 0:01:36.080 of um UH significant significant policy liquidity, more so than 0:01:36.520 --> 0:01:40.000 confidence in in in reopening. The policy effort is clearly 0:01:40.000 --> 0:01:43.039 were the federal reserved objective was to divorce financial conditions 0:01:43.040 --> 0:01:44.800 from the real economy. We've done that. I think a 0:01:44.800 --> 0:01:46.640 lot of people looking at the date to Mike and 0:01:46.720 --> 0:01:50.480 trying to work out whether the economic conditions catches up 0:01:50.520 --> 0:01:52.600 with where financial conditions has taken us. Is that a 0:01:52.680 --> 0:01:54.440 challenge for the next couple of months or a challenge 0:01:54.480 --> 0:01:58.240 for the turn of the year. UH. That is the 0:01:58.360 --> 0:02:00.920 number one, two, and three questions regard to how you 0:02:00.920 --> 0:02:04.040 think about financial markets here and UM at Goman Sacks. 0:02:04.120 --> 0:02:06.400 But we did last week we have a daily forum 0:02:06.400 --> 0:02:08.840 where we get together all different investors. We brought in 0:02:08.880 --> 0:02:12.200 our multi asset people are fundamental equity investors as well 0:02:12.200 --> 0:02:14.440 as fixed income and had kind of a cage match 0:02:14.639 --> 0:02:17.760 around this topic. And the conclusion that we came to 0:02:17.960 --> 0:02:20.840 is that Number one the financial conditions that have been 0:02:20.880 --> 0:02:24.000 supported by the FED and by uh by governments through 0:02:24.040 --> 0:02:26.920 fiscal policy will dominate in the near term, but in 0:02:26.919 --> 0:02:29.960 the long term it's going to be earnings and jobs 0:02:30.000 --> 0:02:33.160 that are going to matter. And I think that it's 0:02:33.240 --> 0:02:36.200 too early to call victory with regard to where earnings 0:02:36.200 --> 0:02:38.160 are gonna end up. I think a lot of investors 0:02:38.200 --> 0:02:40.200 are saying that, you know, we're going to jump back 0:02:40.639 --> 0:02:45.000 in one to the earnings that we saw in We 0:02:45.080 --> 0:02:47.280 have a long, long way to go, and I think 0:02:47.280 --> 0:02:49.720 that there's a lot more repair that has to happen 0:02:49.960 --> 0:02:53.240 in the economy that we really don't know how companies 0:02:53.240 --> 0:02:56.280 are going to react to a different state of of 0:02:56.280 --> 0:03:00.280 of of a global economy when we have a UH issue, 0:03:00.680 --> 0:03:02.560 a medical issue that's going to be so significant to 0:03:02.639 --> 0:03:04.880 change the way that we do business. So our view 0:03:04.960 --> 0:03:07.560 right now is that for the near term, policy wins 0:03:07.840 --> 0:03:10.480 stay long risk assets, but over the longer term it's 0:03:10.480 --> 0:03:13.240 going to be all about earnings and jobs. Michael Swell, 0:03:13.320 --> 0:03:15.160 I want to go to your work with Goldman Sachs 0:03:15.160 --> 0:03:18.519 and before that with Freeman fbr Is well with your 0:03:18.600 --> 0:03:23.360 expertise and mortgage backed securities. A lot of rents aren't 0:03:23.400 --> 0:03:26.800 being paid. A lot of commercial real estate of every 0:03:26.840 --> 0:03:30.079 gradation isn't going to work out, And there's all the 0:03:30.120 --> 0:03:33.720 loans and the fancy derivative instruments off the back of that. 0:03:34.200 --> 0:03:38.120 Are you troubled at all by a pending real estate 0:03:38.200 --> 0:03:43.200 crisis in the nation because rents are not being paid? Um? 0:03:43.720 --> 0:03:47.400 I would say that the residential picture is going to 0:03:47.440 --> 0:03:51.800 be correlated to the job picture. So if we expect 0:03:51.800 --> 0:03:54.040 to continue to get America back to work and we 0:03:54.040 --> 0:03:58.640 can drive the true unemployment rate below ten, we're likely 0:03:58.720 --> 0:04:01.040 not to have a housing more get issue, whether on 0:04:01.160 --> 0:04:04.200 the price issue or whether on the rent issue. Uh. 0:04:04.440 --> 0:04:07.080 And So I think in terms of housing, we we 0:04:07.160 --> 0:04:10.040 don't have oversupply like we had to oversupply in two 0:04:10.080 --> 0:04:13.320 thousand seven, and we don't have um too much leverage 0:04:13.320 --> 0:04:15.880 in the system. We've kind of fixed the very very 0:04:15.960 --> 0:04:19.760 high LTV loan situation, the interest only loan situation. We 0:04:19.760 --> 0:04:22.320 we don't have borrowers that our leverages they were before. 0:04:22.360 --> 0:04:24.320 We're really going to be dependent upon jobs. So I 0:04:24.360 --> 0:04:26.880 think if we continue to see jobs improve, we don't 0:04:26.880 --> 0:04:28.520 have a housing market issue. I do think in the 0:04:28.520 --> 0:04:32.680 commercial real estate market there's a lot of adjustment that 0:04:32.720 --> 0:04:35.800 has to occur. There's gonna be a decent amount of 0:04:36.040 --> 0:04:39.280 restructuring of loans, there's gonna be some defaults, obviously on 0:04:39.320 --> 0:04:41.800 the retail side. But if you look at the commercial 0:04:42.200 --> 0:04:44.760 real estate market, there's a big debate there. If we 0:04:44.800 --> 0:04:46.400 think that we're going to see a lot of companies 0:04:46.440 --> 0:04:50.679 move out of UH, move out of major hubs, major cities, 0:04:50.720 --> 0:04:54.080 and and and and diversify their their exposure, having a 0:04:54.120 --> 0:04:56.719 negative impact on commercial real estate, the other side of 0:04:56.720 --> 0:04:59.200 that is, in a socially distant world, you're finding the 0:04:59.200 --> 0:05:02.880 companies are actually looking for more square footage to be 0:05:02.920 --> 0:05:05.440 able to bring workers back in a a in a 0:05:05.800 --> 0:05:08.840 safe way. So we actually think that the commercial real 0:05:08.960 --> 0:05:12.159 estate market is one that has has still has a 0:05:12.160 --> 0:05:15.040 lot of opportunity. If we see reopening of the economy, 0:05:15.080 --> 0:05:17.320 like the equity market is telling you, you ought to 0:05:17.360 --> 0:05:20.200 see stabilization in the commercial real estate market. And if 0:05:20.200 --> 0:05:21.640 you look in the world that we live in, not 0:05:21.760 --> 0:05:24.240 in the direct commercial real estate market, but in the 0:05:24.240 --> 0:05:28.039 commercial real estate securities market, we have not seen a 0:05:28.120 --> 0:05:31.520 significant recovery in pricing there. If we see the economy 0:05:31.520 --> 0:05:33.520 get back like the equity market is telling you, we 0:05:33.560 --> 0:05:35.479 think there's gonna be a lot of opportunity in some 0:05:35.600 --> 0:05:38.960 of the mezzanine securities and commercial mortgage backed security to 0:05:39.000 --> 0:05:42.000 be able to our an equity like returns. Mike, I'm 0:05:42.040 --> 0:05:44.000 just wondering. You were saying, is it time to stay 0:05:44.160 --> 0:05:46.920 risk on? And certainly a lot of people have been 0:05:47.040 --> 0:05:48.960 risk on. If you look at HILED bonds in the US, 0:05:49.000 --> 0:05:52.839 they've gained twenty two percent since late March, and we've 0:05:52.839 --> 0:05:55.719 seen three and a half billion dollars flow into the 0:05:55.720 --> 0:05:58.960 biggest high old bond et F in the past week alone. 0:05:59.360 --> 0:06:01.799 Don't fight the FED, but you can front run it. 0:06:01.880 --> 0:06:04.440 Has the FED already been front run fully? Or are 0:06:04.480 --> 0:06:08.040 there further opportunities here? I don't think fully. I still 0:06:08.120 --> 0:06:11.360 think there's going to be a lot of demand for 0:06:11.839 --> 0:06:15.200 US credit related assets. Keep in mind, it's not just 0:06:15.279 --> 0:06:18.520 front running the FED, but we're in a global interest 0:06:18.640 --> 0:06:21.320 rate environment where there are no interest rates. We're basically 0:06:21.440 --> 0:06:24.640 zero around the globe, and the US credit market still 0:06:24.680 --> 0:06:28.120 is a market that offers investors yield. Demand for yield 0:06:28.240 --> 0:06:31.000 is very, very significant, and I think people will continue 0:06:31.000 --> 0:06:33.880 to view not only the US treasury market, but also 0:06:33.960 --> 0:06:37.800 the US corporate credit market as in general safe haven, 0:06:38.040 --> 0:06:40.640 so I do think there's more room to run. However, 0:06:41.400 --> 0:06:44.920 more broadly around the question around risk assets and where 0:06:44.920 --> 0:06:47.359 we go from here. In the short term, we do 0:06:47.480 --> 0:06:50.640 think that policy zero rates are going to driver risk 0:06:50.640 --> 0:06:53.640 assets higher from here, but that's not gonna last forever. 0:06:53.920 --> 0:06:55.719 In the end, it's going to be about earnings. And 0:06:55.760 --> 0:06:59.080 so in our discussion last week, our cage match around 0:06:59.120 --> 0:07:01.040 where we go from here and have risk guests that's 0:07:01.040 --> 0:07:03.720 gone too far, we definitely came to the conclusion that 0:07:04.080 --> 0:07:07.039 this is going to be a winners and losers market, 0:07:07.279 --> 0:07:09.440 both on the equity side and the credit side, and 0:07:09.480 --> 0:07:12.840 it's time to think a little bit about moving away 0:07:12.840 --> 0:07:15.920 from just kind of being long beta and really focusing 0:07:15.960 --> 0:07:19.120 on the types of companies that will be the survivors 0:07:19.120 --> 0:07:20.920 and will gain market share. And so we do think 0:07:20.960 --> 0:07:23.440 active management will be a very important part of future 0:07:23.480 --> 0:07:25.800 returns versus just the beta they might. We just want 0:07:25.800 --> 0:07:28.080 to know who wins a cage fight, a Golment sacks, 0:07:28.240 --> 0:07:30.560 How does that work out out of the awakened when 0:07:30.560 --> 0:07:34.000 that plays out. I'm six ft five pounds, so I'm 0:07:34.000 --> 0:07:36.120 the biggest person. Who I I was? I was win? 0:07:36.800 --> 0:07:42.520 Um who win the the the answer is short term risk. 0:07:42.600 --> 0:07:46.160 On long term, long term, it's going to really rely 0:07:46.240 --> 0:07:48.240 upon earnings, and that the data that we have so 0:07:48.320 --> 0:07:53.920 far is irrelevant to the longer term macro picture. Stay tuned. 0:07:54.200 --> 0:07:56.600 Follow what's going on in China, Follow what's going on 0:07:56.640 --> 0:07:59.280 in South Korea in terms of reopening, and what's going 0:07:59.280 --> 0:08:01.760 on with consuming or what's going on with corporate earnings 0:08:01.920 --> 0:08:04.400 in those countries, because those will be leading indicators for 0:08:04.480 --> 0:08:07.240 what goes on here. Mike Swell, fantastic work has always 0:08:07.280 --> 0:08:09.680 always appreciate your time. So Mike Swell, that of Gallman 0:08:09.720 --> 0:08:15.920 Sacks joining US now and RITA cent of Energy aspects 0:08:16.280 --> 0:08:22.160 and ridascent is outstanding at the dynamics of supply and demand. 0:08:22.240 --> 0:08:25.880 Em Rita, I want to dovetail your wonderful narrow work 0:08:26.360 --> 0:08:30.679 with those that take a more geopolitical strategic work because 0:08:30.720 --> 0:08:34.680 it folds in. If OPEC plus members and let's go 0:08:34.760 --> 0:08:39.240 with OPEC, if they cheat, how does that affect your 0:08:39.280 --> 0:08:43.280 world of the minutia of supply and demand? Him a 0:08:43.360 --> 0:08:46.360 morning tom Um. I think in terms of the question 0:08:46.400 --> 0:08:50.480 you asked about compliance, Um, if the cheat, which by 0:08:50.520 --> 0:08:52.680 the way, we are ressuming in our balances we just 0:08:52.960 --> 0:08:57.400 cannot see how Iraq, Nigeria, Kazakhstan, given their fiscal broader 0:08:57.440 --> 0:09:01.319 fiscal issues, they just is so cash up will comply. 0:09:01.960 --> 0:09:05.360 It just means that the rebalancing takes longer. It is 0:09:05.480 --> 0:09:09.280 simply that supplies are now falling faster than demand. We've 0:09:09.320 --> 0:09:11.120 been saying this right from the start, that the stock 0:09:11.200 --> 0:09:14.720 draws will start from early June, and they have begun. Um. 0:09:15.040 --> 0:09:18.040 But the more these guys cheat, it just means that 0:09:18.400 --> 0:09:21.520 the overall supply number the reduction from OPEC plus will 0:09:21.520 --> 0:09:24.719 be less than what the headline numbers suggests. MENA. I'm 0:09:24.760 --> 0:09:28.240 struggling to understand the supply demand dynamic right now. A 0:09:28.240 --> 0:09:31.079 lot of people saying that the promised cuts of OPEC 0:09:31.160 --> 0:09:34.400 plus and the potential enforcement of them, which has been 0:09:34.440 --> 0:09:37.920 a challenge for years, that that has been the main 0:09:38.080 --> 0:09:40.439 driver of some of the recent price gains, and other 0:09:40.480 --> 0:09:43.880 people raise the concern that the shale patch is slowly 0:09:43.920 --> 0:09:46.720 starting to bring rigs back on. How much is this 0:09:46.840 --> 0:09:49.320 the story and how much is demand still the main 0:09:49.400 --> 0:09:52.480 driver here? How quickly the global economy can get back 0:09:52.559 --> 0:09:55.760 up to speed. I think you're exactly right, um, I 0:09:55.800 --> 0:09:58.600 think the global demand I at least in our view, 0:09:58.679 --> 0:10:01.880 is still very much the key riper. We did fall 0:10:01.960 --> 0:10:04.320 to record low levels in terms of demand. Now we 0:10:04.360 --> 0:10:07.719 are recovering um and that just means that you do 0:10:07.840 --> 0:10:12.199 need higher supplies now. I still stand by the problem 0:10:12.280 --> 0:10:14.560 we have in the market in you oil, that is, 0:10:14.679 --> 0:10:17.640 the data is opaque, The data is very lagged. We 0:10:17.760 --> 0:10:20.200 still don't know just how much we fell by. So 0:10:20.320 --> 0:10:22.040 if we don't know how much we fell by, but 0:10:22.120 --> 0:10:25.080 the markets assumed we would hit tank tops. I remember 0:10:25.080 --> 0:10:27.560 talking to you guys about that, but we never did. 0:10:27.640 --> 0:10:31.080 Because it may be demandedn't fall by as much as expected, 0:10:31.120 --> 0:10:33.959 even though it was very very weak, and because of 0:10:34.040 --> 0:10:38.760 negative prices, supplies fell tremendously, and that's what caught us 0:10:38.800 --> 0:10:42.000 to overshoot to the downside. In some respect, we have 0:10:42.160 --> 0:10:44.840 overshot to the upside right now, but we do need 0:10:44.920 --> 0:10:47.640 that some of that supply back because now refineries are 0:10:47.679 --> 0:10:50.640 bringing back production and demand is rising. I still think 0:10:50.640 --> 0:10:53.679 we've gone a bit too far because the demand is fragile. 0:10:53.880 --> 0:10:56.480 Supplies from the US are going to start to come back, 0:10:56.840 --> 0:10:59.080 so you know, it's not like a slamdown that of 0:10:59.120 --> 0:11:01.440 course prices should be from here. I'm rated do you 0:11:01.480 --> 0:11:04.000 find the supply in the United States is more elastic 0:11:04.040 --> 0:11:07.240 when prices roll over aggressively than when they rally. Yes, 0:11:07.840 --> 0:11:10.200 I think that the rate of change is absolutely the 0:11:10.200 --> 0:11:12.199 critical thing. But you know the main thing I will 0:11:12.240 --> 0:11:14.760 say for right now, especially because you ask about the 0:11:14.840 --> 0:11:18.280 US and in relation to gasoline demand, it's unemployment on 0:11:18.600 --> 0:11:22.400 our all our economic models. That's the biggest driver, even 0:11:22.440 --> 0:11:24.320 more so than prices. I just want to fit in 0:11:24.320 --> 0:11:27.319 a final question as well. I'm rating New York City reopening. 0:11:27.360 --> 0:11:29.000 I think we're all trying to get our hands around 0:11:29.480 --> 0:11:33.040 how quickly demand recovers. This is a slow, slow process 0:11:33.080 --> 0:11:35.720 for New York City, but going global to the United 0:11:35.760 --> 0:11:38.280 States beyond China, where we have at least the longer 0:11:38.360 --> 0:11:40.480 data set, what's the recovery and demand look like at 0:11:40.520 --> 0:11:42.800 the moment? I'm rated for these economies reopening. I mean, 0:11:43.440 --> 0:11:46.680 if you believe that the demand felt by about million 0:11:46.679 --> 0:11:49.319 barrels per day at the bottom, which was in April, 0:11:49.720 --> 0:11:53.880 we have easily recovered about ten to twelve million barrels 0:11:53.880 --> 0:11:56.480 per day in May alone, and right now we believe 0:11:56.559 --> 0:11:59.240 global all demand is about ninety million barrels. But they 0:11:59.280 --> 0:12:03.120 give ortake again China parts of China actually back above 0:12:03.240 --> 0:12:06.480 last year's levels because the government has um it's basically 0:12:06.559 --> 0:12:09.600 driving a big stimulus package. Europe isn't. US isn't. It's 0:12:09.600 --> 0:12:12.840 going to take a long time, particularly in the aviation sector. 0:12:13.200 --> 0:12:15.840 But yes, economies are opening up around the world because 0:12:16.200 --> 0:12:19.959 lockdown simply isn't sustainable for growth in the medium. Tom, 0:12:20.160 --> 0:12:22.720 I'm really sent ad energy aspects. I'm very fantastic to 0:12:22.760 --> 0:12:24.880 catch up with you to get your thoughts. As always, 0:12:28.600 --> 0:12:30.240 we're going to do a lot of this through this 0:12:30.320 --> 0:12:34.160 week of Bloomberg surveillance, market analysis, and there's no one 0:12:34.240 --> 0:12:38.800 better to coalesce all of these emotions, intentions, and Daniel 0:12:38.800 --> 0:12:43.560 Morris sees with BNP Perry, but with market strategy as well. Daniel, 0:12:43.600 --> 0:12:47.520 we have come so far, so fast in this equity market. 0:12:47.800 --> 0:12:50.839 How do you restructure? How do you reframe on the 0:12:50.920 --> 0:12:53.640 Monday morning in June. Well, I think it depends on 0:12:53.679 --> 0:12:55.880 the attitude that you had before we got all the 0:12:55.920 --> 0:12:59.120 news and we've been in the camp. I think, like 0:12:59.200 --> 0:13:02.000 a lot of people, it had been too much, too soon, 0:13:02.080 --> 0:13:05.920 and if we got more and sooner than we had before, 0:13:06.040 --> 0:13:09.559 you've either capitulated or you've just become that much more 0:13:09.559 --> 0:13:12.200 nervous and unfortunate. We're probably to stop much more nervous. 0:13:12.200 --> 0:13:14.480 I mean, certainly the data was good, it's helpful, but 0:13:14.559 --> 0:13:16.320 when you try to think about how things are going 0:13:16.400 --> 0:13:18.640 to be three and six months from now, and in 0:13:18.679 --> 0:13:21.640 particular when you look at earnings forecast for the end 0:13:21.640 --> 0:13:24.200 of the year, there still seems to be a fairly 0:13:24.240 --> 0:13:28.240 significant disconnect that if anything has gotten bigger. Okay, I 0:13:28.320 --> 0:13:30.600 totally take that point in the chart of the earnings 0:13:30.600 --> 0:13:34.960 disconnect is known by anybody listening and watching this program. Great, 0:13:35.360 --> 0:13:38.160 Then what it comes down to a central bank support? 0:13:38.480 --> 0:13:41.440 Did that go away over the weekend? Well, I guess 0:13:41.480 --> 0:13:44.920 it comes down to how what's the mechanism for that 0:13:45.000 --> 0:13:47.040 central bank support? I mean, if we think about low 0:13:47.120 --> 0:13:49.679 interest rates, right, we've had that for for a very 0:13:49.720 --> 0:13:53.840 long time. The increase in money supply, you know, certainly 0:13:53.880 --> 0:13:56.040 there's no lack of liquidity, but I don't think it's 0:13:56.040 --> 0:13:59.600 necessarily that that's strugging up to market. So on the margin, 0:14:00.040 --> 0:14:02.440 guess it comes back to if you do have any 0:14:02.520 --> 0:14:05.600 kind of setback, if there's any disappointments when we get 0:14:05.640 --> 0:14:09.000 into the fall and increase in infections and concerns about 0:14:09.000 --> 0:14:11.760 the reimposition of the lockdowns. You know, we will come 0:14:11.800 --> 0:14:15.000 back inevitably either to the question, you know, how much 0:14:15.040 --> 0:14:17.760 more consentral banks do when they've already done so much, 0:14:18.160 --> 0:14:22.080 and or if it's been the need for further fiscal stimulus. 0:14:22.320 --> 0:14:24.240 At some point, we've got to worry about the death 0:14:24.240 --> 0:14:26.640 that's being issued. So I think if there is one 0:14:26.680 --> 0:14:28.600 good thing that has come out about this, and I 0:14:28.640 --> 0:14:30.960 think you alluded to it a bit sooner, you know, 0:14:31.000 --> 0:14:33.760 we may not now get as much stimulus in the 0:14:33.840 --> 0:14:35.960 next rounds from the US as you would have thought 0:14:36.000 --> 0:14:39.320 before given this data. And you know, I really actually 0:14:39.360 --> 0:14:41.440 think that is a good thing, because it is because 0:14:41.480 --> 0:14:43.680 the data is better, so you don't need it. And 0:14:43.720 --> 0:14:46.120 then also again we are going to have to worry 0:14:46.120 --> 0:14:48.000 about the dead levels at some point, and at least 0:14:48.000 --> 0:14:49.640 on the margin, that's not quite as big of a 0:14:49.680 --> 0:14:51.760 problem as you might have feared. Dan. A lot of 0:14:51.760 --> 0:14:54.880 people say that the rally in stocks hasn't been entirely 0:14:54.960 --> 0:14:59.560 driven by FED stimulus, but just the fact that Facebook, Amazon, 0:14:59.800 --> 0:15:02.600 My or soft Apple have all done well in this 0:15:02.760 --> 0:15:05.480 environment with a push to the digital and if you 0:15:05.480 --> 0:15:09.920 look at the combined capitalization of the top five holdings 0:15:09.960 --> 0:15:12.880 in the S and P it has doubled since two 0:15:12.880 --> 0:15:16.960 thousand thirteen. How much can we see this rotation into 0:15:17.000 --> 0:15:19.640 the other sectors that are less loved, given the fact 0:15:19.960 --> 0:15:22.240 that we're not clear on how much of a fundamental 0:15:22.280 --> 0:15:25.040 recover we have that in the economy. Yeah, I think 0:15:25.080 --> 0:15:27.000 it's exactly the right way to be thinking about it. 0:15:27.040 --> 0:15:29.320 And I would actually divide up the market and probably 0:15:29.360 --> 0:15:32.840 three different bins. So one, you certainly have technology, which 0:15:32.880 --> 0:15:35.000 we all understand is going to be a long term 0:15:35.000 --> 0:15:37.360 winner from the pandemic. But at the same time we 0:15:37.440 --> 0:15:41.160 also appreciate that valuations have gotten very high. Just by 0:15:41.200 --> 0:15:43.520 one measure of price to book for the sector is 0:15:43.560 --> 0:15:47.040 eight times, which is the all time high for the sector. 0:15:47.120 --> 0:15:49.560 So even if you know, we love those growth prospects, 0:15:49.800 --> 0:15:52.040 you're paying a lot for that right now. So without 0:15:52.120 --> 0:15:55.960 question of vulnerability, at least in the near tom poor technology. 0:15:56.000 --> 0:15:58.840 I think the other part where we've seen those parts 0:15:58.840 --> 0:16:01.640 of the market that had massively the underperformed until recently. 0:16:01.720 --> 0:16:05.120 You think anything around tourism, uh and leisure and so on, 0:16:05.200 --> 0:16:08.400 you know, a pretty significant opportunity there for those sectors 0:16:08.440 --> 0:16:11.960 to rebound. Now, maybe not sustainably because a lot of 0:16:12.000 --> 0:16:15.720 this will come down ultimately how optimistic we are about 0:16:15.720 --> 0:16:18.520 getting a virus excuse me of vaccine and when. But 0:16:18.760 --> 0:16:22.160 you know, from evaluation point of view, that's clearly an opportunity. 0:16:22.280 --> 0:16:24.000 And then I think the other risk we need to 0:16:24.080 --> 0:16:27.800 keep in mind are exactly those defensive sectors that have 0:16:27.960 --> 0:16:30.560 done well, but have done well because we've been living 0:16:30.640 --> 0:16:33.720 under lockdowns because we haven't had a vaccine. And as 0:16:33.800 --> 0:16:37.400 that starts to ease, these sectors, which have also become 0:16:37.480 --> 0:16:40.160 quite expensive, aren't going to see that long term earning 0:16:40.240 --> 0:16:43.640 support the way you see in technology. So you think around, 0:16:43.720 --> 0:16:48.120 say the market excusing the hypermarkets, you think about, you know, 0:16:48.200 --> 0:16:51.960 cleaning supplies and any other defensive sectors. I think that's 0:16:52.000 --> 0:16:54.200 probably the other key vulnerability that you need to keep 0:16:54.240 --> 0:16:56.560 in mind when you're looking at your portfolio. Dan, is 0:16:56.560 --> 0:16:59.080 the market right now pricing in a second wave? I 0:16:59.120 --> 0:17:01.960 think that the questions to fold, so when will there 0:17:01.960 --> 0:17:03.960 be a second wave? And I think most people are 0:17:04.040 --> 0:17:05.879 pretty sure that there will be. I mean, it certainly 0:17:05.880 --> 0:17:08.919 seems likely, but it's trying to anticipate then what the 0:17:08.960 --> 0:17:10.520 response is going to be. And I think there's at 0:17:10.560 --> 0:17:13.359 least there there's some ground for optimism that even if 0:17:13.359 --> 0:17:17.080 there is a second wave, the economic impact won't necessarily 0:17:17.080 --> 0:17:19.440 be so great. I think there's two reasons for that one. 0:17:19.920 --> 0:17:21.840 You know, as opposed to the first wave, we know 0:17:21.960 --> 0:17:24.040 this one is coming, or at least we can anticipate it, 0:17:24.080 --> 0:17:27.000 so we'll be more prepared, you know, hopefully hospitals will 0:17:27.040 --> 0:17:30.560 be ready, we'll have you know, better capability around tracking 0:17:30.560 --> 0:17:33.080 and tracing, so hopefully we can have a more focused, 0:17:33.080 --> 0:17:36.800 targeted response to whatever increase we do see, and we 0:17:36.840 --> 0:17:39.600 won't need to have nationwide lockdowns where we've had so far. 0:17:39.680 --> 0:17:43.720 So again, the economic impact will be hopefully much less 0:17:43.760 --> 0:17:45.480 than we saw in the first round. And I think 0:17:45.520 --> 0:17:48.160 the second thing that certainly changed over the last couple 0:17:48.200 --> 0:17:50.320 of weeks is to some degree you could argue the 0:17:50.359 --> 0:17:53.320 media attention has shifted a bit. It's not every day 0:17:53.359 --> 0:17:58.159 on the front page, seven on the TV about the pandemic. 0:17:58.240 --> 0:18:01.280 And you think about the psychological impact to that, you know, 0:18:01.359 --> 0:18:05.199 people's desire to consume, to go out. If by the 0:18:05.240 --> 0:18:07.440 time we get to the autumn, if the media attention 0:18:07.480 --> 0:18:10.680 has faded someone, I think that will be at least 0:18:10.680 --> 0:18:13.719 beneficial in terms of psychology, even though it's with our 0:18:13.800 --> 0:18:16.560 questions are going to be a very serious health health issue. 0:18:16.640 --> 0:18:20.679 People maybe may not feel quite so concerned and stressed 0:18:20.680 --> 0:18:23.320 about the environment, and therefore you will have on the 0:18:23.359 --> 0:18:26.040 margin a greater propensity to consume in a way that 0:18:26.080 --> 0:18:28.040 we haven't seen over the last several months. Night, and 0:18:28.200 --> 0:18:29.679 we've got to leave you that down. Always great to 0:18:29.680 --> 0:18:31.399 catch out with you, Mike down mars that have been 0:18:31.440 --> 0:18:37.639 prepared on this market. One of the great things that 0:18:37.800 --> 0:18:41.720 is true is we take it for granted. And what 0:18:41.880 --> 0:18:45.520 we take for granted is very simply the getting around 0:18:45.680 --> 0:18:48.480 of New York. It can be seventy thod plus people, 0:18:49.040 --> 0:18:52.320 It can be by any means of conveyance, but it 0:18:52.359 --> 0:18:56.040 looks a lot easier than it actually is. Patrick Foy 0:18:56.200 --> 0:18:58.639 is with us on this day of reopening for New 0:18:58.720 --> 0:19:01.359 York City. We welcome in and across this nation and 0:19:01.400 --> 0:19:04.320 to a worldwide audience. He is a small job as 0:19:04.400 --> 0:19:11.200 chief executive Officer of the MTA, the Metropolitan Transit Authority. Patrick, 0:19:11.400 --> 0:19:16.679 congratulations on getting to this point in this pandemic. It 0:19:16.760 --> 0:19:21.040 has been an extraordinary effort. Give us an update on 0:19:21.119 --> 0:19:26.200 the last two months. What surprised you about what needed 0:19:26.240 --> 0:19:29.280 to be done in this City for the m t 0:19:29.480 --> 0:19:32.719 A first. Thanks for having me. It's not a surprise, 0:19:32.880 --> 0:19:37.320 but I am awe struck uh and overwhelmed by the 0:19:37.600 --> 0:19:41.840 job that the m t A operating folks did subways, buses, 0:19:41.880 --> 0:19:45.360 metro North Long Island Railroad, bridges and tunnels. They were 0:19:45.400 --> 0:19:50.720 literally heroes, moving hero uh. The pandemic has obviously had 0:19:50.760 --> 0:19:53.159 the epicenter has been New York City and the New 0:19:53.240 --> 0:19:59.359 York New Jersey region UH, and the losses, whether fatalities, 0:20:00.080 --> 0:20:04.240 nous is economic damage had been extensive. But the MTA 0:20:04.320 --> 0:20:07.960 workforce has done a tremendous job. The second thing that 0:20:08.000 --> 0:20:12.720 strikes me, obviously is the precipitous decline in ridership, which 0:20:13.119 --> 0:20:16.159 paradoxically in this context is a good thing. It was 0:20:16.240 --> 0:20:21.960 New Yorkers responding to Governor Cuomo's directive and suggestions directive 0:20:22.040 --> 0:20:24.679 by executive order with the force of state law, but 0:20:24.760 --> 0:20:28.800 also his suggestions that the way to minimize the number 0:20:28.800 --> 0:20:32.480 of cases and fatalities UH in New York, New York 0:20:32.520 --> 0:20:34.680 City and New York State was for people to stay 0:20:34.680 --> 0:20:38.760 home and not ride public transit except for first responders 0:20:38.760 --> 0:20:42.760 and essential employees. And New Yorkers answered that call happily 0:20:42.840 --> 0:20:47.040 today we're restoring full service on the subway services good 0:20:47.040 --> 0:20:51.480 this morning. Last week we did a physical survey of 0:20:51.520 --> 0:20:55.960 about the nearly fifty thousand customers, and mass compliance, which 0:20:56.000 --> 0:21:00.320 is now a part of state law, was the most 0:21:00.359 --> 0:21:03.359 important that our customers. Sorry, the most important thing our 0:21:03.400 --> 0:21:06.200 customers can do is to wear masks to protect themselves 0:21:06.760 --> 0:21:09.840 and their co commuters, and our and our employees. And 0:21:09.880 --> 0:21:13.240 that is an impressively high number. In one we want 0:21:13.240 --> 0:21:16.960 to drive higher. How are you going to police usage 0:21:16.960 --> 0:21:19.640