WEBVTT - Despite All the Noise, PPE Is Only 1% of 3M's Bottom Line 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg penl podcast. I'm Paul swing you, 0:00:05.400 --> 0:00:07.720 along with my co host Lisa Brahma wits. Each day 0:00:07.760 --> 0:00:10.280 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.560 you and your money. Whether at the grocery store or 0:00:12.600 --> 0:00:15.520 the trading floor. Find a Bloomberg Penil podcast on Apple 0:00:15.560 --> 0:00:18.000 podcast or wherever you listen to podcasts, as well as 0:00:18.000 --> 0:00:22.400 at Bloomberg dot com. Let's talk industrial earnings. We had 0:00:22.440 --> 0:00:26.160 three M, we had Caterpillar out today, Lots of uncertainty 0:00:26.160 --> 0:00:28.720 in a second quarter, lots of uncertainty to the point 0:00:28.760 --> 0:00:31.080 of withdrawing guidance, as we've seen from a lot of 0:00:31.200 --> 0:00:33.920 other companies, from some of these industrial companies as well. 0:00:34.040 --> 0:00:36.159 When we want to talk industrial companies, we talked to 0:00:36.159 --> 0:00:39.640 town double Heart. She's covered this space for decades. She's 0:00:39.640 --> 0:00:42.199 with Bloomberg Intelligence. Karen, thanks so much for joining us. 0:00:42.440 --> 0:00:46.080 So three M and Caterpillar take whatever you want. The 0:00:46.159 --> 0:00:49.199 highlights you think we need to know. Um, I'd say 0:00:49.280 --> 0:00:52.360 number one, the breath of of the decline. So everybody 0:00:52.400 --> 0:00:55.000 knew things are gonna be down and down double digits, 0:00:55.040 --> 0:00:59.000 but cat every region, every segment. UM three M did 0:00:59.000 --> 0:01:02.800 a little better because of the diversity UM. So it's 0:01:02.840 --> 0:01:06.279 really the swiftness of the drop that UM is the issue. 0:01:06.520 --> 0:01:09.920 Second thing is costs are doing pretty well. The decrimental 0:01:09.959 --> 0:01:14.160 margins were not that at Caterpillar, given two cent sales declines. 0:01:14.200 --> 0:01:16.800 They really didn't do that badly on costs because a 0:01:16.959 --> 0:01:19.120 they haven't taking out structural costs for years and B 0:01:19.280 --> 0:01:22.640 they did move fa UM on three m You know, 0:01:22.760 --> 0:01:25.559 they have a diversity that actually helps them. And I 0:01:25.600 --> 0:01:28.600 am a fan of the UM multies if they're well run, 0:01:28.680 --> 0:01:31.120 although they're out of favor at the moment. And U 0:01:31.440 --> 0:01:34.440 they also saw declines and they're gonna expect double digit 0:01:34.480 --> 0:01:37.880 declines in April, but not as significant as, of course, 0:01:37.880 --> 0:01:40.679 the deep cyclicals UM. I'd say. The other point is 0:01:40.680 --> 0:01:44.120 everybody was talking about three ms ppe impact, you know, 0:01:44.200 --> 0:01:47.080 all the respirators. It's less than one percent of sales. 0:01:47.160 --> 0:01:50.680 It's certainly helped, but it wasn't a big deal. And yes, 0:01:50.680 --> 0:01:53.320 they're all eliminating guidance, you know, go ahead, go ahead. 0:01:53.320 --> 0:01:55.440 I'm sorry, Well, no, no, I'm wondering. I was reading 0:01:55.480 --> 0:01:59.200 a story the other day about how executives never like 0:01:59.320 --> 0:02:01.680 to waste a good crisis, and that basically it's a 0:02:01.680 --> 0:02:06.120 fantastic opportunity to to accelerate moves that they would already 0:02:06.960 --> 0:02:09.760 be doing or find it prudent to do under the 0:02:09.840 --> 0:02:12.919 cover of it's a crisis. And there's no place that 0:02:12.919 --> 0:02:16.280 that actually is more relevant than in the industrial space, 0:02:16.320 --> 0:02:19.640 where there's been an incredible transformation, whether it's downsizing and 0:02:19.639 --> 0:02:24.440 shrinking and becoming more focused or other moves. What do 0:02:24.520 --> 0:02:27.880 you glean from the earning so far in terms of 0:02:28.120 --> 0:02:30.280 ways that they are reshaping in the wake of this 0:02:30.760 --> 0:02:33.880 that they may have done anyway. Yeah, I mean in 0:02:33.919 --> 0:02:35.960 the case of the two we're talking about today, CAT 0:02:36.000 --> 0:02:38.799 and three M, they both have long term structural programs 0:02:38.800 --> 0:02:41.800 going on, and they have I mean CAT use the example. 0:02:42.240 --> 0:02:44.880 Uh there there s g n A and their R 0:02:44.960 --> 0:02:48.079 and D in sort of their non manufacturing custs were 0:02:48.080 --> 0:02:53.919 flat um from nineteen while revenues were so I mean, 0:02:53.960 --> 0:02:57.560 they have already been taken big chumps of um costs 0:02:57.560 --> 0:03:00.720 and people, etcetera out of their business. But certainly they're 0:03:00.720 --> 0:03:03.680 going to accelerate that. They're gonna call it more structuring, 0:03:03.760 --> 0:03:05.480 but I'm sure they're going to try to hold on 0:03:06.080 --> 0:03:08.880 to as much of the cost production as they can. 0:03:08.919 --> 0:03:10.919 I mean. The other big change is going to happen, 0:03:10.960 --> 0:03:13.360 of course, is supply chain is going to change a 0:03:13.400 --> 0:03:16.720 lot because why did we learn how long supply chain 0:03:17.080 --> 0:03:19.920 from abroad are not good? And um, so you're gonna 0:03:19.960 --> 0:03:21.960 see a lot more. I mean three M does a 0:03:21.960 --> 0:03:24.040 lot of local for locals still as Cato killer, but 0:03:24.120 --> 0:03:26.080 around the margin, there's going to be changes in that 0:03:26.160 --> 0:03:29.600 as well. Um And you know, so I think it's 0:03:29.600 --> 0:03:31.919 going to be a continuation um. And they're going to 0:03:32.000 --> 0:03:34.600 try to hold on as much as as much of 0:03:34.639 --> 0:03:37.440 the cyclical structuring that they're doing as they can. So 0:03:37.480 --> 0:03:40.320 that's I would agree with you there. So, Karen, I 0:03:40.360 --> 0:03:42.600 know a lot of these companies, industrial companies have been 0:03:42.600 --> 0:03:46.240 pulling their guidance like a lot of other sectors as well. 0:03:46.560 --> 0:03:48.600 But did the management give you a sense of kind 0:03:48.600 --> 0:03:51.240 of what their playbook is. Are they thinking that this 0:03:51.680 --> 0:03:54.880 economic contraction that we're is occurring in the second quarter 0:03:54.960 --> 0:03:57.720 is going to be lower for longer or do they 0:03:57.720 --> 0:04:00.040 expect this economy wants it's to we start to but 0:04:00.200 --> 0:04:02.160 up to to re accelerate in the second half of 0:04:02.200 --> 0:04:05.120 the year. I think the general seems so far is 0:04:05.160 --> 0:04:07.320 lower for longer, Like you know, second quota is going 0:04:07.360 --> 0:04:09.200 to be terrible. Third quota is not going to be 0:04:09.240 --> 0:04:11.640 great either. And you know a lot of these guys 0:04:11.640 --> 0:04:14.160 still have significant US exposure where it's going to roll 0:04:14.280 --> 0:04:16.440 down and of the shutdowns and it's probably gonna be 0:04:16.440 --> 0:04:20.400 a roll back up. Um. Both Caterpillar M three M 0:04:20.520 --> 0:04:23.440 did mention the snap back in China, but that's the 0:04:23.520 --> 0:04:26.680 managed economy, so they shut it down quickly and they're 0:04:26.720 --> 0:04:30.520 spending money, um, you know, on on stimulation and of 0:04:30.640 --> 0:04:33.320 the economy and getting people back to work quickly as well. 0:04:33.360 --> 0:04:35.560 So I would not and in fact that question came 0:04:35.600 --> 0:04:37.320 up in the three M call. Could we use that 0:04:37.360 --> 0:04:41.320 as a playbook? China is different, Um, Europe is snapping 0:04:41.320 --> 0:04:43.880 back a little bit. US is going to roll out slowly. 0:04:44.000 --> 0:04:47.440 Is the general sense is going to definitely be a 0:04:47.480 --> 0:04:49.920 tough year. I will say one thing on China three 0:04:50.040 --> 0:04:52.119 M is the economy with the diversity of their product 0:04:52.200 --> 0:04:54.719 line they set across the boards map back. It isn't 0:04:54.760 --> 0:04:57.880 just you know, one or two segments, So that economy 0:04:57.960 --> 0:05:01.080 is starting to roll back up. That's that's interesting. And 0:05:01.320 --> 0:05:03.479 just real quick here, Karen, do we have a sense 0:05:03.600 --> 0:05:06.400 of whether the pace of the snap back is I 0:05:06.480 --> 0:05:09.160 hate saying this. I actually am feeling a visceral response 0:05:09.360 --> 0:05:12.360 v shaped or is it a slower it douns back 0:05:13.279 --> 0:05:19.320 or a w or you um, the China feels like 0:05:19.520 --> 0:05:23.640 a the you know, um us probably pretty slow roller. 0:05:23.760 --> 0:05:25.599 And and I don't think you're gonna see good numbers still, 0:05:27.080 --> 0:05:31.280 you know, because you know there are you know, we're 0:05:31.320 --> 0:05:33.640 we're fighting over house fess we're gonna come back, you know. 0:05:33.880 --> 0:05:37.279 And uh so I and really the companies are really saying, 0:05:37.320 --> 0:05:40.119 we're going month by month, we don't know. And April, 0:05:40.160 --> 0:05:42.359 we know is going to be down in the in 0:05:42.480 --> 0:05:47.200 like the multi in the cyclicals, you know, but we 0:05:47.320 --> 0:05:50.200 don't really know. And and three M, which who never 0:05:50.360 --> 0:05:53.800 gives monthly orders, are giving monthly orders right now until 0:05:54.279 --> 0:05:56.760 we know what the heck is going on. Emerson is 0:05:56.839 --> 0:05:59.560 also doing it, so they don't know, but they're going 0:05:59.600 --> 0:06:01.360 to try to give us as much as they can 0:06:01.400 --> 0:06:04.360 along the way. They don't know. Seems to be the 0:06:04.360 --> 0:06:07.039 theme of this earning season. Karen yu Bilhard, thank you 0:06:07.040 --> 0:06:09.840 so much for being with US senior industrials analyst for 0:06:10.000 --> 0:06:13.719 Bloomberg Intelligence. And you know, honestly, John Farrows raised this point. 0:06:13.720 --> 0:06:16.440 A number of times. How can any company actually give 0:06:16.480 --> 0:06:19.000 guidance at this point given the fact that people have 0:06:19.600 --> 0:06:21.760 a real lack of clarity around what's going to happen. 0:06:21.880 --> 0:06:25.080 But the fact that they're giving monthly order numbers just 0:06:25.120 --> 0:06:27.919 to say, hey, we'll give you the data as quickly 0:06:28.080 --> 0:06:30.720 as we get it. Yeah, exactly, And the questions, well, 0:06:31.080 --> 0:06:33.080 what will this do to forward guidance going forward? Will 0:06:33.120 --> 0:06:38.960 companies give less of it? Maybe it's time to check 0:06:39.000 --> 0:06:41.760 in with Bloomberg Opinion. We're pleased to be joined by 0:06:41.760 --> 0:06:45.960 opinion communist Dr Ellen Wall. She's a president of Transversal Consulting, 0:06:46.000 --> 0:06:49.080 also a Bloomberg Opinion contributor. Uh. Dr Wall, thank you 0:06:49.120 --> 0:06:51.480 so much for joining us. Boy, you know this, what 0:06:51.520 --> 0:06:54.039 we're seeing in the oil market is just extraordinary. We 0:06:54.040 --> 0:06:57.000 had negative prices just a week ago. We had tremendous 0:06:57.080 --> 0:06:59.840 volatility so far, uh this week a little bit of 0:07:00.040 --> 0:07:02.600 it today. What if you could just set the stage, 0:07:02.640 --> 0:07:04.919 Force Ellen, and just give us a sense of where 0:07:05.000 --> 0:07:08.960 you think the supply and demand dynamics are today for 0:07:09.000 --> 0:07:14.640 global crude. Yeah, the supply and dynamic dynamics for um 0:07:14.720 --> 0:07:18.760 for crude are not good. Looking at what's happening and 0:07:19.320 --> 0:07:23.600 we've still gone I think, by the way, not good 0:07:23.760 --> 0:07:28.000 carry on good. So that way too much oil oil 0:07:28.080 --> 0:07:30.920 production coming on the market on the market right now, 0:07:31.320 --> 0:07:34.600 and not nearly enough demand, and that's resulted in a 0:07:34.680 --> 0:07:38.200 massive build in storage. And we're not just talking about 0:07:38.200 --> 0:07:42.400 storage of crude. We're talking about gasoline stocks are way up, 0:07:43.080 --> 0:07:46.800 diesel fuel, jet fuel. Massive amounts of this stuff is 0:07:46.800 --> 0:07:50.760 piling up. And even though refineries are cutting their runs now, 0:07:51.000 --> 0:07:54.080 that's leading to even more build up of crude oil. 0:07:54.360 --> 0:07:57.040 And so that's really the main issue here as I 0:07:57.040 --> 0:07:59.200 think this in balance and supply and demand, which was 0:07:59.240 --> 0:08:02.720 not helped, by the way by Saudi Arabia, which increased 0:08:02.760 --> 0:08:06.480 its oil production to its maximum level of twelve million 0:08:06.520 --> 0:08:10.360 barrels per day in April, and at the beginning of April, 0:08:10.560 --> 0:08:12.440 you know, it seemed like that that might be okay, 0:08:12.480 --> 0:08:16.720 but but really, uh runs economies around the world, we're 0:08:16.760 --> 0:08:20.320 clearly shutting down. We maintain that production when clearly there 0:08:20.360 --> 0:08:23.120 wasn't enough demand. So that kind of just piled on 0:08:23.680 --> 0:08:27.000 to all of the other issues. So this complete imbalance 0:08:27.040 --> 0:08:30.480 has been manifested, most significantly in the negative pricing in 0:08:30.480 --> 0:08:33.880 the May w t I contract that just rolled. We're 0:08:33.880 --> 0:08:37.000 seeing an exodus from the June contract as the biggest 0:08:37.040 --> 0:08:42.040 oil et F in the United States amends it's it's contracts, 0:08:42.120 --> 0:08:45.160 it's it's it's provisions, yet again in terms of what 0:08:45.200 --> 0:08:48.679 it is willing to buy. My question is how long 0:08:48.720 --> 0:08:51.720 will this complete imbalance last? A lot of people putting 0:08:51.800 --> 0:08:54.360 faith that by to lie, things will start to ease 0:08:54.400 --> 0:08:57.240 and people will start to use cars and fly around more. 0:08:57.559 --> 0:09:01.160 Do you think that that optimism is misplaced? Well, I 0:09:01.160 --> 0:09:05.200 think that that's a that's a it's not a bad assessment. Um, 0:09:05.280 --> 0:09:07.400 I would say that's it's it's optimistic, But I don't 0:09:07.400 --> 0:09:10.160 think it's it's too optimistic. I do think a lot 0:09:10.240 --> 0:09:15.760 will depend on, uh, the psychological effects of this lockdown 0:09:15.760 --> 0:09:19.920 in these quarantines, because even as states in the United 0:09:19.920 --> 0:09:23.680 States we're seeing them start to lift quarantine restrictions and 0:09:23.720 --> 0:09:27.520 lockdown restrictions. The question really is are people going to 0:09:27.600 --> 0:09:31.079 feel comfortable going out of their houses, going back to work, 0:09:31.400 --> 0:09:35.080 sending kids to school or camp? And that I think 0:09:35.120 --> 0:09:38.079 will really set the tone for whether we're going to 0:09:38.200 --> 0:09:42.680 seek demand roaring back or kind of slowly trickling back. 0:09:43.040 --> 0:09:46.560 And that could really, you know, that could spill over 0:09:46.600 --> 0:09:50.199 past the summer and then over into into the fall 0:09:50.280 --> 0:09:55.320 and winter. Even win demand is traditionally lower, so were 0:09:55.640 --> 0:09:58.240 we could even compound the problem if we don't have 0:09:58.400 --> 0:10:03.040 strong summer demand by by heading into winter with lower demands. 0:10:03.080 --> 0:10:06.320 On the other hand, okay, we could see a massive 0:10:06.400 --> 0:10:09.160 search in gasoline demand in the United States, for example, 0:10:09.280 --> 0:10:11.719 as if things get back to normal and people are 0:10:12.040 --> 0:10:16.040 psychologically ready to get back out there, but air travels 0:10:16.040 --> 0:10:18.040 not back, we could see a huge surge in gasoline 0:10:18.080 --> 0:10:21.000 demand as people drive a lot more. So. It really, 0:10:21.040 --> 0:10:24.440 I think depends a lot on how comfortable people feel, 0:10:24.679 --> 0:10:28.000 and also how comfortable they're made to feel by the 0:10:28.080 --> 0:10:32.480 authorities and medical professionals. So, Ellen, how bad is it 0:10:32.559 --> 0:10:34.599 going to get for our friends in the U S. 0:10:34.640 --> 0:10:39.360 Shail patch? It's already bad h and I think it's 0:10:39.400 --> 0:10:43.720 only going to get worse. It's it's very bad. Companies 0:10:43.760 --> 0:10:46.600 are shutting down. And the question I think now is 0:10:46.600 --> 0:10:49.600 not just is it going to be bad for those 0:10:49.679 --> 0:10:51.760 in the upstream, but is it going to spill over 0:10:51.800 --> 0:10:54.920 into the midstream, into the pipeline, into the people who 0:10:54.920 --> 0:10:57.920 are who are doing the midstream business? Uh? And are 0:10:57.920 --> 0:11:00.520 we going to see it spilling into into that area 0:11:00.679 --> 0:11:04.560 because um we're we're seeing we can expect more layoffs. 0:11:04.559 --> 0:11:07.360 I think we've already seen a lot bankruptcies. But then 0:11:07.400 --> 0:11:09.560 the question is does is still into midstream and do 0:11:09.640 --> 0:11:14.120 we see long term damage to our midstream infrastructure and 0:11:14.200 --> 0:11:17.440 our ability to um you get that oil to where 0:11:17.480 --> 0:11:21.080 it needs to go, because that has for many years 0:11:21.200 --> 0:11:23.680 been kind of the limiting factor and we were just 0:11:23.679 --> 0:11:27.640 starting to get over that issue right when this hits 0:11:28.160 --> 0:11:30.600 just real quick here, Allen, I'm wondering what this means 0:11:30.640 --> 0:11:33.160 in terms of the swining oil prices for Saudi Arabia 0:11:33.640 --> 0:11:38.080 and any potential political threat. Given how much of the 0:11:38.160 --> 0:11:42.400 nation's budget relies on crude. I think that's that's an 0:11:42.400 --> 0:11:45.800 issue that cannot be ignored, particularly at this point because 0:11:46.280 --> 0:11:49.440 crude oil, I mean we have we have Brent barely 0:11:49.640 --> 0:11:54.160 above twenty barrel, and at that level, Saudi Arabia is 0:11:54.200 --> 0:11:58.400 making just a few dollars in royalties off of every 0:11:58.440 --> 0:12:02.160 barrel of oil it and that's not good for the 0:12:02.160 --> 0:12:05.800 Saudy budget. And so far, what we've seen is basically 0:12:06.080 --> 0:12:10.440 a complete dismissal of these issues. The Socauty government is 0:12:10.480 --> 0:12:14.280 choosing to rely on um borrowing money and that's not 0:12:14.320 --> 0:12:16.839 a bad idea, said, maybe it definitely has more room 0:12:16.920 --> 0:12:20.800 to borrow, but they're not. I think we're seeing them 0:12:20.800 --> 0:12:23.680 not really look at the long term nifications here. Dubai 0:12:23.760 --> 0:12:27.160 just announced that they're cutting cutting their expenses, and so 0:12:27.320 --> 0:12:30.200 it's really unclear as to whether they're going to see 0:12:30.200 --> 0:12:33.520 a need to cut expenses. Uh, the country could could 0:12:33.559 --> 0:12:36.800 be seeing some serious financial problems, which, as we know, 0:12:36.880 --> 0:12:40.160 can lead to political unrest. Ellen Wall, thank you so 0:12:40.240 --> 0:12:42.880 much for being with us. Ellen Wild, President of Transversal 0:12:42.920 --> 0:12:51.439 Consulting and a Bloomberg opinion contributor. In some ways, the 0:12:51.520 --> 0:12:53.960 US equity market is going to be put to the 0:12:54.000 --> 0:12:57.760 test this week as the big tech companies report earnings. 0:12:57.760 --> 0:13:01.760 The question is how much further can US talks rally 0:13:01.800 --> 0:13:05.000 if they don't necessarily have the leadership of the tech 0:13:05.000 --> 0:13:08.000 giants joining us. Now Jim Pulse in chief investment strategist 0:13:08.520 --> 0:13:11.960 at the Loophole Group joining us. I'm wondering, Jim, do 0:13:12.000 --> 0:13:16.880 you feel like the market cannot continue rallying without the support. 0:13:16.960 --> 0:13:18.839 And I don't want to say big tech. We're really 0:13:18.840 --> 0:13:24.760 talking Amazon, Microsoft and Netflix here. I think I could. 0:13:24.920 --> 0:13:28.640 I think I think that it. It would be hard 0:13:28.720 --> 0:13:32.080 if they are going to collapse, Lisa, you know, over 0:13:32.120 --> 0:13:34.960 a sustained period, have a big collapse. I think that 0:13:35.000 --> 0:13:39.800 would be hard for the market to avoid going down 0:13:39.840 --> 0:13:43.200 again in a big way. But if they just underperformed, 0:13:43.640 --> 0:13:47.600 I think that's maybe even to be expected somewhat in 0:13:47.640 --> 0:13:52.040 the sense that UM, you know, look look where we 0:13:52.080 --> 0:13:55.800 are here, where there's now greater expectations of restarting the 0:13:55.880 --> 0:14:03.640 economy after shutting it off the position UM and with 0:14:03.800 --> 0:14:07.440 that comes I think new leadership, and you're seeing that 0:14:08.240 --> 0:14:11.480 and things like the performance of the high Beata SMP, 0:14:11.720 --> 0:14:19.400 Hiberta Index, small caps, cyclical stocks, you know, over defensive stocks, UM, 0:14:19.440 --> 0:14:24.320 even international markets doing better. I think it's real likely, 0:14:24.360 --> 0:14:27.240 which often happens at the start of a new recovery. 0:14:27.520 --> 0:14:30.320 If you off the markets starting to look in discount path, 0:14:31.280 --> 0:14:34.560 is that's the type of leadership you get. UM, So 0:14:34.680 --> 0:14:36.920 it might well be the new era of growth if 0:14:36.920 --> 0:14:40.240 you will, does have a period of under performance as 0:14:40.320 --> 0:14:43.920 the economy re emerges from the code UH from the 0:14:43.920 --> 0:14:48.720 coronavirus crisis, and I don't I think that could happen 0:14:48.760 --> 0:14:51.520 within the context of the general rising market. Even though 0:14:51.600 --> 0:14:55.720 under performance by some of these most popular areas. So, James, 0:14:55.880 --> 0:14:58.800 the you're hearing more and more from scientists and medical 0:14:58.800 --> 0:15:03.440 professionals that it's possible, probably likely that the virus or 0:15:03.600 --> 0:15:06.880 return in some form and the fall in winter. Do 0:15:06.880 --> 0:15:09.640 you think the market's discounting that risk properly as we 0:15:09.680 --> 0:15:12.600 start thinking about reopening and and maybe a V or 0:15:12.680 --> 0:15:14.720 a U shaped recovery at the end of the year. 0:15:17.760 --> 0:15:20.040 Who knows for sure, Paul. I mean, there's very little 0:15:20.080 --> 0:15:24.520 about this whole crisis that everyone knows, um including myself. 0:15:26.160 --> 0:15:28.680 But you know, I do think one of the things 0:15:28.720 --> 0:15:31.960 that's likely to happen that there hasn't been a lot 0:15:31.960 --> 0:15:36.200 of discussion about, is sure, it's gonna take a while 0:15:36.240 --> 0:15:39.720 before this virus is gone. It's going to take a 0:15:39.720 --> 0:15:43.120 while before we get all parts of the economy back 0:15:43.200 --> 0:15:49.320 functioning again, even in general, let alone at full capacity. However, 0:15:50.080 --> 0:15:53.480 that does not mean that there might come sort of 0:15:53.520 --> 0:16:00.280 an appreciation among investors in general, companies, police officials that 0:16:00.440 --> 0:16:06.480 both this virus and the economy can coexist, and you know, 0:16:06.680 --> 0:16:11.240 both can be there and be a functioning capacity. I 0:16:11.280 --> 0:16:14.280 don't think it's one or the other necessary, which is 0:16:14.320 --> 0:16:17.560 what we had here of late. I think in part 0:16:17.640 --> 0:16:21.400 because the primary issue has been the hospital crisis, and 0:16:21.440 --> 0:16:24.720 we've come a long ways in increasing our capacity and 0:16:24.720 --> 0:16:27.640 abilities there, and we're probably even if we have a 0:16:27.680 --> 0:16:31.240 re emergency, viruses not like to be as severe as 0:16:31.320 --> 0:16:36.280 the first time, And that combination means that we might 0:16:36.440 --> 0:16:41.400 certainly have re emergent virus problems down the road, but 0:16:42.040 --> 0:16:43.960 that doesn't necessarily mean we're going to have to close 0:16:44.000 --> 0:16:47.080 everything back up again. I think we're already learning how 0:16:47.080 --> 0:16:51.520 to operate within the context of a live virus so um. 0:16:51.560 --> 0:16:53.760 I think one of the realizations that even the market 0:16:53.840 --> 0:16:59.960 might be coming to is that both can coexist. Collection 0:17:00.080 --> 0:17:03.320 and your calm assessment of markets is a very nice 0:17:03.720 --> 0:17:07.160 contrast with sometimes my my gut fear when I read 0:17:07.200 --> 0:17:09.840 some of the headlines that cross and you know, Moody's 0:17:09.880 --> 0:17:14.840 sending me a report fair enough, but you know, at 0:17:14.880 --> 0:17:17.600 least you know you know there there is there is 0:17:17.640 --> 0:17:20.000 sort of sanity and preservation. Right now. We should note 0:17:20.000 --> 0:17:22.920 that we are seeing the NASDAC turned down negative seven 0:17:22.920 --> 0:17:24.960 tenths of a percent right now, in the SP is 0:17:25.000 --> 0:17:27.159 just up a tenth of a percent to do up 0:17:27.320 --> 0:17:29.760 about a quarter of a percent, And I think to 0:17:29.840 --> 0:17:32.280 your point, you could have both the sort of reality 0:17:32.320 --> 0:17:35.560 of the unfolding crisis and also look to the other 0:17:35.720 --> 0:17:39.440 side of this. I guess, then, are you buying into 0:17:39.440 --> 0:17:41.720 this rally? Are you just sort of sitting tight and 0:17:41.760 --> 0:17:49.919 not expecting armageddon? Um? I definitely. And my approach, I 0:17:49.920 --> 0:17:55.320 guess is what we're doing star gapl Boil is kind 0:17:55.359 --> 0:18:00.520 of sitting with an overweight new era UM a mile overweight. 0:18:00.600 --> 0:18:07.159 I think, yeah, well, not just not just tech but 0:18:07.400 --> 0:18:09.960 kind of new era growth. It's a little broader than 0:18:10.000 --> 0:18:13.240 just tech, but certainly teching colms, part of healthcare, part 0:18:13.240 --> 0:18:19.000 of consumer discretionary. UM. You know, I I think I'm 0:18:19.040 --> 0:18:22.840 okay with with sitting in an overweight in that area. 0:18:23.119 --> 0:18:26.160 But what I'm doing is taking advantage of any weak 0:18:26.280 --> 0:18:29.159 periods here, which will probably have some more and I 0:18:29.200 --> 0:18:33.639 would start to add more in the broader participation is 0:18:33.680 --> 0:18:36.440 in this market that haven't done that well even in 0:18:36.440 --> 0:18:39.240 the last bowl. I look, as I said to High 0:18:39.280 --> 0:18:43.000 Beta SMP high Baya, that I'd looked to cyclical sectors 0:18:43.359 --> 0:18:46.320 would look too small caps. I've looked at international and 0:18:46.480 --> 0:18:50.200 add some of those compoets here because I think they 0:18:50.280 --> 0:18:53.800 are likely to have leadership over the next year as 0:18:53.800 --> 0:18:56.800 we as we sort of re emerge from this this thing. 0:18:56.880 --> 0:19:01.040 You know, you mentioned the fear, and to me, that's 0:19:01.040 --> 0:19:05.160 a that's a good thing. I think historically whenever we've 0:19:05.160 --> 0:19:08.600 had really high levels of fear, and we've got all 0:19:08.720 --> 0:19:10.879 three fears in this one. If you're losing your money 0:19:10.880 --> 0:19:13.439 in the stock market, if you're losing your job, and 0:19:13.440 --> 0:19:16.720 the fear of losing your life, if you're on steroids, 0:19:16.720 --> 0:19:20.240 if you will. Typically that's led to good returns and 0:19:20.320 --> 0:19:27.120 risk assets. Look, I know, but look where we are 0:19:27.119 --> 0:19:29.840 in this crisis too. You know. We we start when 0:19:29.840 --> 0:19:32.200 it first hit in China, we thought, well that that's 0:19:32.200 --> 0:19:35.800 not really a problem. And then well, it's just gonna 0:19:35.800 --> 0:19:39.280 be a temporary problem. And then it was this is 0:19:39.359 --> 0:19:45.200 full blown crisis. And now it's evolved too. Oh, it's 0:19:45.240 --> 0:19:47.800 never gonna go away. It's gonna last wherever, it's gonna 0:19:47.880 --> 0:19:52.400 fundamentally change capitalism. It's never gonna go away. I think 0:19:52.440 --> 0:19:55.720 that's the stages of a crisis that we're in the 0:19:55.800 --> 0:19:59.359 last stage at least committing Hey, James, thanks so much 0:19:59.400 --> 0:20:03.879 for joining us. We appreciate it, appreciate your calm perception 0:20:03.960 --> 0:20:05.880 of what's going on in the Marcus James Paulson, chief 0:20:05.920 --> 0:20:09.200 investment Strategies for the Luthold Group, on the phone from Minneapolis. 0:20:09.240 --> 0:20:11.680 We always appreciate his thoughts in the markets here, and 0:20:11.720 --> 0:20:13.240 at least you were just mentioning you kind of did 0:20:13.240 --> 0:20:15.159 a quick market check here. The market's really kind of 0:20:15.320 --> 0:20:18.520 rolled over after a strong opening here as I guess, 0:20:18.520 --> 0:20:21.520 we're digesting earnings and thinking about what the Fed may 0:20:21.680 --> 0:20:24.760 or may not say tomorrow. Yeah, good luck, good luck 0:20:24.800 --> 0:20:27.480 trying to find a narrative for this market. That's all 0:20:27.520 --> 0:20:29.639 I want to say. I mean, for minutes a minute, 0:20:29.720 --> 0:20:31.720 you could change the narrative, and it's easy to do 0:20:31.760 --> 0:20:36.320 it one way or another. Right now, let's take a 0:20:36.359 --> 0:20:39.119 look at the pharmaceutical industry after we did get some 0:20:39.160 --> 0:20:42.399 results from Merk and Fiser, and before we dig into those, 0:20:42.600 --> 0:20:45.400 we are going to be joined by Max Niece and biotech, 0:20:45.440 --> 0:20:48.200 pharma and healthcare columnist for Bloomberg Opinion. And I never 0:20:48.240 --> 0:20:50.960 want to miss up a chance to ask Max about 0:20:51.040 --> 0:20:54.399 vaccine development, where we are in terms of that, and 0:20:54.560 --> 0:21:00.000 how well international pharmaceutical companies as well as scientists are 0:21:00.000 --> 0:21:03.240 cooperating to move as quickly as possible to make this happen. 0:21:04.640 --> 0:21:07.439 So it does seem like there there is a broad 0:21:07.560 --> 0:21:14.040 movement towards cooperation UM companies, sharing science, beginning to focus 0:21:14.040 --> 0:21:17.720 on the issue of manufacturing its scale, which is the 0:21:17.760 --> 0:21:19.439 thing you have to worry about once you actually have 0:21:19.480 --> 0:21:22.800 an effective vaccine UM. There there was a report this 0:21:22.840 --> 0:21:26.280 week from from an organization called SEPPI that's working to 0:21:26.440 --> 0:21:29.600 do some that coordination in advanced candidates that they hope 0:21:29.600 --> 0:21:32.640 there may be a vaccine available for sort of limited 0:21:32.640 --> 0:21:35.760 emergency use by by the end of this year. But 0:21:35.840 --> 0:21:39.280 again that would be in very small quantities and only 0:21:39.320 --> 0:21:42.919 if everything goes very very right. So I still looking 0:21:42.960 --> 0:21:45.720 probably at at some time next year or later for 0:21:45.960 --> 0:21:49.560 first sort of the broadly available vaccine that it would 0:21:49.600 --> 0:21:52.160 take to to really get get life back to normal. 0:21:52.800 --> 0:21:55.760 So Mark did report earnings today and they waited in 0:21:56.160 --> 0:21:58.359 on the potential for a vaccine. What do they have 0:21:58.400 --> 0:22:02.600 to say? So Mark is a company that that has 0:22:02.600 --> 0:22:05.080 been a little bit later to to sort of join 0:22:05.200 --> 0:22:09.679 the fray UM. They they are actually the one company 0:22:09.720 --> 0:22:13.720 of the major pharmaceutical groups that's actually successfully developed a 0:22:13.800 --> 0:22:16.960 vaccine in a response to pandemic. So anything that they 0:22:17.040 --> 0:22:20.200 end up doing is worth responding or at least worth 0:22:20.240 --> 0:22:23.439 watching very closely, though they will be at least to 0:22:23.560 --> 0:22:27.240 some extent behind some of the other efforts that started sooner, 0:22:27.440 --> 0:22:30.600 of course, hopeful that that that past experience will lead 0:22:30.640 --> 0:22:34.600 them to a faster and more effective result at some point. 0:22:35.480 --> 0:22:38.040 So Max, So that's the the updil on the vaccine. 0:22:38.040 --> 0:22:42.000 How about testing, that's the more immediate issue here, Testing equipment, 0:22:42.040 --> 0:22:48.200 testing laboratories. Where are we on that? So there has 0:22:48.240 --> 0:22:51.040 been some some genuine improvement and in the last week 0:22:51.160 --> 0:22:53.680 or so in terms of the testing rate, and and 0:22:53.720 --> 0:22:57.439 we just got a plan from the Trump administration um 0:22:57.480 --> 0:23:00.320 that that should hopefully bring a little bit more of 0:23:00.520 --> 0:23:06.200