WEBVTT - Surveillance: Economic Shock With Shilling 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 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 --> 0:00:27.200 Bloomberg dot Com, and of course on the Bloomberg. We 0:00:27.280 --> 0:00:30.200 start with the markets with Joe quinnin this morning Meryl 0:00:30.320 --> 0:00:33.240 and Bank America Private Bank, head of c i O 0:00:33.520 --> 0:00:36.240 Market Strategy. Soo fantastic to catch up with you, sir. 0:00:36.320 --> 0:00:38.839 Let's just start there because the question that comes up 0:00:38.880 --> 0:00:41.920 again and again that we filled a lot, the distinction, 0:00:42.000 --> 0:00:44.159 the difference, the spread between what is happening on Main 0:00:44.200 --> 0:00:46.639 Street and what is happening on Wall Street right now, Joe, 0:00:46.680 --> 0:00:49.520 how do you answer that question? Well, it's a good question. 0:00:49.640 --> 0:00:51.520 Is top of mind with our investors as well. They're 0:00:51.560 --> 0:00:54.160 kind of scratching your head what's going on? But I 0:00:54.200 --> 0:00:57.600 mean you have to kind of part of the divide 0:00:57.680 --> 0:01:01.080 rest with the Fed Central banks on the world flooding 0:01:01.440 --> 0:01:03.800 the system with liquidity that's being put to use in 0:01:03.880 --> 0:01:08.040 the higher yielding asset class called equities. There is also 0:01:08.120 --> 0:01:12.280 the speed in quotes from Congress getting that package out 0:01:12.280 --> 0:01:15.200 of the fiscal package aggressiveness on the part of the 0:01:15.280 --> 0:01:18.280 e c B. So I think maybe it's misplaced, but 0:01:18.280 --> 0:01:20.679 I don't think it's misfounded in the sense that the 0:01:20.840 --> 0:01:24.800 policy response all of this time versus oh eight or nine, 0:01:25.240 --> 0:01:29.400 much more directed focus Zuokas, and I think I do 0:01:29.520 --> 0:01:33.080 think that gives a floor beneath equities as we grind higher. 0:01:33.080 --> 0:01:35.320 Now is it over, No, no, no doubt about it. 0:01:35.520 --> 0:01:38.080 We need to have signs that all the stimulus is 0:01:38.080 --> 0:01:42.880 actually going to help mainstream. That's the next big test test, Joe. 0:01:42.920 --> 0:01:45.120 I know we've got a lot of unknown unknowns, but 0:01:45.240 --> 0:01:48.160 what's your unknown unknown on the equity markets in terms 0:01:48.160 --> 0:01:52.960 of choosing or selecting or allocating where to put the 0:01:53.040 --> 0:01:56.880 marginal equity dollar? Now, is it large cap, bigger is better? 0:01:57.040 --> 0:02:01.520 Small cap? International? How do you reset towards May fifteen? 0:02:02.920 --> 0:02:06.640 I mean, Tom, we're trying not to be too much 0:02:06.640 --> 0:02:10.080 of that crowded trade in and around healthcare and technology, 0:02:10.280 --> 0:02:13.400 but we're sticking with those two sectors. We're putting a 0:02:13.440 --> 0:02:15.120 little bit, you know, warming up a little bit here 0:02:15.160 --> 0:02:18.800 to financials because one of our thesis is bigger is better, 0:02:19.160 --> 0:02:21.640 the banks are well capitalized, are gonna work through this 0:02:21.760 --> 0:02:24.400 problem and we do like the small cap companies, there 0:02:24.440 --> 0:02:29.359 could be some opportunities in and around biotechnology, biosecurity. So 0:02:29.480 --> 0:02:33.320 it's very selective, it's very difficult. We don't like to 0:02:33.360 --> 0:02:35.840 be stock pickers. Were not, but you've got to have 0:02:35.919 --> 0:02:38.280 to kind of step back, be careful though, where the 0:02:38.360 --> 0:02:41.440 valuations are today in certain sectors where they're not, and 0:02:41.480 --> 0:02:46.720 how you play that out. So biosecurity, biotech, healthcare, and 0:02:46.760 --> 0:02:51.800 financials look for us some opportunities. What about international? I mean, John, 0:02:52.320 --> 0:02:54.840 help me, you're John. Remind me we had one quarter 0:02:54.919 --> 0:02:58.400 or quarter and a half of decent international performance? Is 0:02:58.400 --> 0:03:00.680 that right, John? One quarter of being kind? I think 0:03:00.680 --> 0:03:02.079 we've had a couple of days in the context of 0:03:02.080 --> 0:03:07.480 a massive decade long rally in the Joy It's John's correct, 0:03:07.520 --> 0:03:11.799 as usual, with seven days, we're international performed. Joe, When 0:03:11.800 --> 0:03:14.200 do I get on board international? I mean, come on, 0:03:14.280 --> 0:03:17.359 it's in the it's it's it's tanked, it's take time, 0:03:17.360 --> 0:03:19.000 and I would just I would do it on a 0:03:19.120 --> 0:03:23.720 sector by sector basis. So technology Northeast Asia, so that's 0:03:23.760 --> 0:03:26.720 South Korea, that's gonna be Taiwan, that's gonna be Japan, 0:03:27.000 --> 0:03:29.720 and the e commerce giants of China. We know who 0:03:29.760 --> 0:03:33.120 they are because we're gonna bifur kate the technological divide 0:03:33.160 --> 0:03:36.000 here globally. They're gonna have their own system and we're 0:03:36.000 --> 0:03:39.120 gonna have our own as well, and they'll be Korea 0:03:39.160 --> 0:03:41.400 and Taiwan stuck in the middle, so to speak. So 0:03:41.640 --> 0:03:43.240 there's not much to talk about when it comes to 0:03:43.280 --> 0:03:47.200 Europe technology. But like sciences in Europe, are these a 0:03:47.360 --> 0:03:51.200 very good companies, great scientists, human capital histories. If you 0:03:51.200 --> 0:03:53.320 look at history of the drug company started in Europe, 0:03:53.400 --> 0:03:55.440 right it's gonna come back to Europe as we solve 0:03:55.560 --> 0:04:00.320 these problems. So the sector specific as opposed to country system, 0:04:00.480 --> 0:04:03.720 Joe taking a stepped back, there's a question about the 0:04:03.800 --> 0:04:06.080 risk on field that we have right now and what 0:04:06.160 --> 0:04:08.640 it's pricing in. I think that Mike Wilson over at 0:04:08.640 --> 0:04:11.000 Morgan Stanley put it well, saying that there is a 0:04:11.040 --> 0:04:14.160 bearishness still in markets, but it shifted. He said, it's 0:04:14.160 --> 0:04:16.880 a different kind of barishness, one that accepts the extraordinary 0:04:16.920 --> 0:04:20.080 policy responses having done its job to stop the decline, 0:04:20.480 --> 0:04:24.280 but skeptical that it can lead to a sustainable recovery. 0:04:24.440 --> 0:04:27.200 Do you agree with the first premise that the policy 0:04:27.279 --> 0:04:30.359 response so far has done its job to stop the 0:04:30.400 --> 0:04:33.400 decline for the foreseeable future, even as we see an 0:04:33.480 --> 0:04:37.680 unemployment rate that will likely climb up to or beyond 0:04:38.000 --> 0:04:41.120 according to some estimates. Yeah, I mean the short answer 0:04:41.240 --> 0:04:44.960 is yes, because J. Powell Company moved so quickly to 0:04:45.279 --> 0:04:48.840 provide the liquidity to all parts of the capital markets 0:04:48.880 --> 0:04:52.280 that staved off any huge blowout in credit spreads or 0:04:52.320 --> 0:04:55.640 any type of solvency issues thus far overlaid that with 0:04:55.640 --> 0:04:58.520 a fiscal response as well. So I do think that 0:04:58.600 --> 0:05:02.760 policy response, as big in its spast, gives us some 0:05:02.760 --> 0:05:05.719 some comfort. They're going forward, however, that we have to 0:05:05.760 --> 0:05:08.880 see Main Street kind of settled down, I think, and 0:05:08.920 --> 0:05:11.200 it's gonna come. When I mentioned this earlier in the 0:05:11.200 --> 0:05:13.520 sense that the healthcare industry, if you look at the 0:05:13.560 --> 0:05:17.680 GDP numbers, took up beating. But around the country hospitals 0:05:17.680 --> 0:05:21.120 are now reopening. If you want one sector to reopen, right, 0:05:21.240 --> 0:05:24.760 it's not necessarily airlines or restaurants, it's the healthcare system, 0:05:24.839 --> 0:05:27.359 the hospitals, and they're doing just that. And so I 0:05:27.360 --> 0:05:29.919 think that's gonna alleviate some of the unemployment plane in 0:05:30.000 --> 0:05:32.880 healthcare services, and that's going to be a surprise on 0:05:32.920 --> 0:05:36.080 the upside. But I do think we've got to bottom in. 0:05:36.440 --> 0:05:40.159 But we have to be realistic about the mexicansolidation phase 0:05:40.240 --> 0:05:43.480 before we get another significant leg up. I just wanted 0:05:43.520 --> 0:05:45.279 to run things out with a delicate question just on 0:05:45.320 --> 0:05:48.200 the psychology of things right now. Was something that had 0:05:48.279 --> 0:05:51.279 for manager Dan McMurtry alluded to over the weekend. Do 0:05:51.279 --> 0:05:54.160 you think there's a social stigma attached with being long 0:05:54.240 --> 0:05:58.400 this market at the moment? So what was there? Stigma? 0:05:58.400 --> 0:06:01.440 Being a text? It's just a social stigma attached to 0:06:01.480 --> 0:06:04.680 being long this market at the moment. I don't think so, 0:06:04.839 --> 0:06:08.039 not not necessarily a social stigma. I mean being along 0:06:08.120 --> 0:06:10.200 the market. And if you're in the right let me 0:06:10.279 --> 0:06:11.960 let me, let me rEFInd a question joke coming on 0:06:12.000 --> 0:06:14.919 a question like this, how difficult on a program like this, 0:06:15.040 --> 0:06:17.640 How difficult is it to say that you're long the 0:06:17.720 --> 0:06:22.120 market when we have this dreadful data in the labor 0:06:22.160 --> 0:06:26.120 market in the United States and worldwide? Okay, I would 0:06:26.200 --> 0:06:30.280 I would say, look at history, We're worked through this pandemic. 0:06:31.480 --> 0:06:35.080 Look to the other side. When it comes to the leaders, 0:06:35.120 --> 0:06:38.240 who's gonna be technology, health care, bio security. So it 0:06:38.400 --> 0:06:41.720 is difficult because we're right in the midst of the trough, 0:06:41.800 --> 0:06:44.240 right where where this is it. This is the point 0:06:44.240 --> 0:06:47.000 of maximum pain with the numbers coming in. But the 0:06:47.080 --> 0:06:51.279 markets and looking forward think of we're gonna be a ballparks, 0:06:51.560 --> 0:06:54.440 We're gonna be in restaurants. So that's I think we're 0:06:54.480 --> 0:06:56.560 the equity markets. And you can say they're projecting too 0:06:56.640 --> 0:06:59.480 far ahead, too fast. I wouldn't disagree. But when you 0:06:59.520 --> 0:07:02.920 look out eighteen twenty four months from now, we're having 0:07:02.920 --> 0:07:07.880 a totally different conversation about probably debt, inflation and other issues. 0:07:07.920 --> 0:07:10.880 But I do think there's growth on the other side, 0:07:10.960 --> 0:07:14.400 and there's opportunities now to put money to work. So Quinlin, 0:07:14.440 --> 0:07:17.480 thank you so much. Always brilliant Bank of America, greatly appreciated. 0:07:20.760 --> 0:07:22.160 Let's do this, folks, I want to do this for 0:07:22.200 --> 0:07:24.120 Global Wall Street. We can talk about the VIX. We 0:07:24.160 --> 0:07:27.480 can talk about volatility. My amateur take is, you know, 0:07:27.560 --> 0:07:30.880 bigger number means more fear, lower number means less fear, 0:07:31.240 --> 0:07:33.920 but it gets a lot more sophisticated. Dean Current joins 0:07:34.000 --> 0:07:37.160 us now Macros Advisors and Dean I want to go right. 0:07:37.240 --> 0:07:40.440 So there's a curve, which is the VIX and then 0:07:40.480 --> 0:07:43.880 there's the guestimate of where the vixes out any number 0:07:43.960 --> 0:07:48.800 of months, and that curve now is very steep, which 0:07:48.880 --> 0:07:52.640 I don't understand that. What does it mean, Dean when 0:07:52.680 --> 0:07:59.040 you see a steep futures market for volatility? Right? Thanks? Um. So, 0:07:59.360 --> 0:08:03.000 it actually is quite interesting right now to look at, um, 0:08:03.080 --> 0:08:05.760 the combination of the level of the VIX, which is 0:08:06.160 --> 0:08:08.920 of course way down from its incredible peak, but also 0:08:09.000 --> 0:08:12.680 still relative to history quite high. Um. So to see 0:08:12.720 --> 0:08:15.280 a high VIX, but also to see, as you noted, 0:08:15.360 --> 0:08:18.800 an upward sloping curve is actually pretty rare. UM. So 0:08:18.920 --> 0:08:21.720 let me just give you a quick bit of perspective 0:08:21.760 --> 0:08:23.640 on that. So the end of two thousand eight, team, 0:08:23.640 --> 0:08:26.840 remember we had that big risk off. Powell was tightening 0:08:26.840 --> 0:08:30.520 in the face of the market. Um, the VIX reached 0:08:30.560 --> 0:08:36.319 about thirty one on December, but six month volatility was 0:08:36.440 --> 0:08:39.600 much lower. So that's an inverted vall curve. The VIX 0:08:39.640 --> 0:08:41.640 is higher than the future volatility, and now you have 0:08:41.720 --> 0:08:44.360 the opposite. So if I look, for example, at one 0:08:44.400 --> 0:08:48.120 month implied volatility on the SMP, that's where the VIX 0:08:48.200 --> 0:08:52.000 comes from. That's about But if I look at six months, 0:08:52.360 --> 0:08:56.440 it's about so you have that upward slope. How do 0:08:56.520 --> 0:08:58.760 I read that? I think it's a function of just 0:08:58.880 --> 0:09:02.880 the amount of artificiality that is in asset prices right now. 0:09:02.920 --> 0:09:04.840 I'm not saying it's good or bad. It's just that 0:09:05.360 --> 0:09:08.440 folks are really struggling to make sense of what to 0:09:08.520 --> 0:09:12.079 do here. Um, there's been a massive economic sudden stop, 0:09:12.600 --> 0:09:15.679 a gigantic policy of response from the government and the Fed, 0:09:16.360 --> 0:09:19.800 and it's just really difficult to know where asset prices 0:09:19.840 --> 0:09:22.320 are going to land. And so in some ways we've 0:09:22.360 --> 0:09:26.080 punted that uncertainty out a couple of months, and that's 0:09:26.080 --> 0:09:29.360 why I see longer dated volatility out, you know, call 0:09:29.400 --> 0:09:32.920 it six months, clearing it at higher levels of the fixes. Dean, 0:09:33.160 --> 0:09:35.760 what you said is really important for this moment, the 0:09:35.880 --> 0:09:40.000 artificiality of current pricing, And do you have a sense 0:09:40.400 --> 0:09:43.000 of kind of where that artificiality is coming from. Is 0:09:43.040 --> 0:09:46.320 it coming from basically what is becoming guild curve controlled 0:09:46.360 --> 0:09:49.360 by the Federal Reserve. Is it coming from Washington, d C. 0:09:49.679 --> 0:09:52.000 Or is it coming from the hopium that we're going 0:09:52.080 --> 0:09:54.880 to see something more akin to a V shaped recovery 0:09:54.880 --> 0:09:58.840 at least in markets as we go forward. I think 0:09:58.840 --> 0:10:01.160 it's really least of the first two rather than the hope. 0:10:01.240 --> 0:10:07.160 I think that the degree of of support provided by 0:10:07.240 --> 0:10:10.040 UH Congress, in the White House and a bipartisan fashion 0:10:10.120 --> 0:10:15.400 so far has been unbelievably strong. UH So one metric 0:10:15.440 --> 0:10:18.360 that said, on a Q two basis, personal income is 0:10:18.400 --> 0:10:20.600 actually gonna be up. Um. So it just shows you 0:10:20.640 --> 0:10:22.440 how much of the whole that, at least for now, 0:10:22.840 --> 0:10:25.040 the government is silling in. And then on the second front, 0:10:25.080 --> 0:10:27.800 of course, the Fed. Wow, what a tremendous amount of 0:10:27.880 --> 0:10:32.440 you know, both explicit buying, a tremendous amount of forward guidance, 0:10:32.559 --> 0:10:36.080 you know, waiting into the private UH markets, and it's 0:10:36.120 --> 0:10:40.520 put a floor in a large way under under asset prices. 0:10:40.559 --> 0:10:43.000 And it's just listen, the old adage of don't fight 0:10:43.040 --> 0:10:45.600 the Fed. I don't think it couldn't be you know, 0:10:45.640 --> 0:10:49.920 more relevant than right now. It's really difficult to UH 0:10:50.040 --> 0:10:52.600 to get in front of this UH And to some extent, 0:10:52.640 --> 0:10:55.000 I think this is the markets in a waiting game. 0:10:55.080 --> 0:10:59.440 You know, we're trying to gauge the policy response not 0:10:59.520 --> 0:11:01.800 just now, at the future wherewithal and you're starting to 0:11:01.840 --> 0:11:05.920 see some breakdown of that in terms of the depth 0:11:05.920 --> 0:11:08.680 of its gold in Washington. You know, McConnell's starting to 0:11:09.520 --> 0:11:12.600 um discuss that there are limitations to what we can 0:11:12.640 --> 0:11:16.360 do UM. So it's it's that that part is challenging. 0:11:16.400 --> 0:11:18.600 And then I think the other part that the we're 0:11:18.640 --> 0:11:21.840 just trying to gauge is that the reopening, the efficacy 0:11:21.880 --> 0:11:24.520 of reopening, at least so far from my perspective, the 0:11:24.600 --> 0:11:28.600 scorecard there doesn't look promising. If you look at other countries, 0:11:28.640 --> 0:11:30.800 it's it's still obviously very early, but there's been a 0:11:30.840 --> 0:11:34.440 couple of setbacks in South Korea and China, in Germany 0:11:34.480 --> 0:11:38.080 and Spain UM, And so I think that's where ultimately 0:11:38.120 --> 0:11:40.000 the market is going to have to find some metrics 0:11:40.040 --> 0:11:42.800 to watch UM. But I think the low vix right 0:11:42.800 --> 0:11:45.280 now points to that it it isn't a little bit 0:11:45.320 --> 0:11:47.480 of no man's land in terms of figuring out the mark. 0:11:47.559 --> 0:11:50.400 You know what risk really is adating with that in mind, 0:11:50.400 --> 0:11:52.600 and you've touched on something quite important. The risk of 0:11:52.600 --> 0:11:55.040 reopening in a second wave is something likely to sit 0:11:55.080 --> 0:11:57.360 on sentiment for quite a while. Do you think that 0:11:57.400 --> 0:12:00.400 makes it difficult to rotate to the most sickly laritys 0:12:00.400 --> 0:12:02.360 of the market that have lacked in the rally off 0:12:02.360 --> 0:12:05.600 the bottom over the last two months, I think, so 0:12:05.760 --> 0:12:09.120 I was just looking at the just growth versus value. 0:12:09.120 --> 0:12:13.679 The divergence this year is on the order of performance 0:12:13.679 --> 0:12:17.080 growth versus value, and so you know, if if value 0:12:17.200 --> 0:12:21.080 is is UH embodied insty locality, I do think it's 0:12:21.240 --> 0:12:24.720 very tricky to to really get you know, behind the 0:12:24.760 --> 0:12:28.640 notion that one people will be able to come back 0:12:28.720 --> 0:12:31.520 because the infection rates are clearly coming down, and then too, 0:12:31.559 --> 0:12:34.800 I think the psychology never is too long, but I 0:12:34.800 --> 0:12:37.079 think the psychology is pretty important. You know, folks, even 0:12:37.080 --> 0:12:39.400 if they were given the opportunity to come back, some are, 0:12:39.880 --> 0:12:42.319 but many are not. And I you know, just given 0:12:42.360 --> 0:12:45.200 the leverage inherent and a lot of cyclical businesses, the 0:12:45.240 --> 0:12:49.040 balance sheet UH considerations and the degree to which they 0:12:49.080 --> 0:12:52.000 really need you know, whether it's a fully stocked hotel 0:12:52.520 --> 0:12:55.160 a plane with no seats empty, it's going to be 0:12:55.280 --> 0:12:58.559 very difficult U And I think, you know, the psychology 0:12:58.600 --> 0:13:00.840 makes that more challenging. Tom. I think this is the 0:13:00.920 --> 0:13:02.959 decision at the moment to make it really really simple. 0:13:03.040 --> 0:13:05.480 Do you stick with what's worked over the last six 0:13:05.520 --> 0:13:08.400 weeks or do you rotate to what hasn't and what's 0:13:08.400 --> 0:13:10.679 worked is Big Tech, the Big five all positive year 0:13:10.720 --> 0:13:14.839 today the SMP five hundred lower on the year. It's 0:13:14.840 --> 0:13:16.840 just unreal how much out performance we've had from the 0:13:16.840 --> 0:13:19.400 Big five. You know, what's so interesting here is is 0:13:19.440 --> 0:13:22.120 you but to sit up against this liquidity solvency you 0:13:22.160 --> 0:13:25.000 ssue John that we've seen over the weekend, and certainly 0:13:25.080 --> 0:13:28.400 you know with the Columbia Airlines Avianca their bankruptcy, and 0:13:28.840 --> 0:13:31.160 you know, you look at Liftansa with a full bailout 0:13:31.200 --> 0:13:34.840 in Germany with potential ownership by the government. It's not 0:13:34.880 --> 0:13:37.719 only two worlds, it's almost three worlds out there. Yeah, Dean, 0:13:37.800 --> 0:13:40.360 I think Tom's brought up something important. Things are still breaking, 0:13:40.640 --> 0:13:43.040 and you've shared something that that I share with you 0:13:43.160 --> 0:13:46.559 that when things move fast, they break. Have we seen 0:13:46.760 --> 0:13:50.040 all the broken parts of this huge move very very 0:13:50.120 --> 0:13:53.079 quickly in the last few months. Yeah, I think that 0:13:53.120 --> 0:13:56.600 would be way too optimistic to suggest that even as 0:13:57.000 --> 0:14:00.200 three VIX is probably not coming back, that the after 0:14:00.280 --> 0:14:03.600 shocks are likely not fully appreciated yet. You know, just 0:14:03.640 --> 0:14:06.880 think about post the financial crisis in two thousand ten, 0:14:07.360 --> 0:14:10.040 we had the flash crash. Two eleven and twelve is 0:14:10.080 --> 0:14:14.160 when the Eurozone sovereign crisis began in full earnest, and 0:14:14.240 --> 0:14:17.000 those were in some ways after shocks of the Great 0:14:17.000 --> 0:14:20.880 Financial Crisis. UM. I just don't think so UM when 0:14:20.920 --> 0:14:24.040 you're seeing I know, you guys just covered the you know, 0:14:24.400 --> 0:14:27.560 uh FED funds futures trading north of a hundred implied 0:14:27.680 --> 0:14:32.120 rates in the US below um, you know, below zero. UM. 0:14:32.160 --> 0:14:36.160 We obviously saw the crude meltdown. It's just in a 0:14:36.240 --> 0:14:39.480 world where things are moving so fast and the policy 0:14:39.560 --> 0:14:44.120 response is just so enormous UM, and the deflationary forces 0:14:44.360 --> 0:14:48.320 upon which the policy responses built are so enormous, it's 0:14:48.360 --> 0:14:52.440 just really difficult to think that we've got some you know, 0:14:52.520 --> 0:14:55.320 resolution that's not going to see some you know, some 0:14:55.360 --> 0:14:58.080 crazy things happen. UM. And I think this is where 0:14:58.120 --> 0:14:59.800 one of the things, you know, we spent a lot 0:14:59.800 --> 0:15:02.000 of I'm in hedging at Macro Risk Advisors, but also 0:15:02.080 --> 0:15:06.359 on portfolio construction. And I just think that gold deserves 0:15:06.800 --> 0:15:10.920 an increasing allocation in the portfolio. It's an asset that 0:15:11.360 --> 0:15:15.240 has negative correlation attributes to the risk complex. UM. And 0:15:15.360 --> 0:15:18.040 it I'd like to say it's just long paranoia. And 0:15:18.120 --> 0:15:22.359 I think we are entering into a period of increasing 0:15:22.480 --> 0:15:27.320 Unfortunately paranoia in the monetary system, as we're gonna come 0:15:27.360 --> 0:15:30.240 to the market with three trillion dollars of issuance in 0:15:30.400 --> 0:15:33.800 one quarter. It's just we're kind of in no man's land. 0:15:33.880 --> 0:15:36.240 And so I'm just continuing to recommend to folks to 0:15:36.480 --> 0:15:39.280 really take a hard look at gold. Dain't really really 0:15:39.280 --> 0:15:45.040 thoughtful stuff didn't kind of the macro risk advisors. We 0:15:45.160 --> 0:15:47.320 turned to the great stimulus debate in Washington now, and 0:15:47.360 --> 0:15:49.840 I've said repeatedly over the last few months, I've been 0:15:49.880 --> 0:15:53.360 really impressed with how while the administration has worked with 0:15:53.400 --> 0:15:57.280 the Democrats to get significant bills over the line, the 0:15:57.360 --> 0:16:00.360 question for many people in this market, Tom is long 0:16:00.720 --> 0:16:03.600 does that unity lost? Yeah? It goes once twice and 0:16:03.640 --> 0:16:05.360 then there's a third time. I John, you and I 0:16:05.400 --> 0:16:08.320 were talking about early May is being the time of 0:16:08.320 --> 0:16:10.880 the next discussion, and we're nowhere near that. We're past 0:16:10.920 --> 0:16:14.880 early May, folks, and now staggering into a later May 0:16:14.960 --> 0:16:18.520 looking for the next fiscal stimulus. It's good to get 0:16:18.520 --> 0:16:21.080 away from the three zip codes that we look at 0:16:21.120 --> 0:16:24.720 here in New York and possibly wander out to Indiana. 0:16:24.800 --> 0:16:28.160 Trey Hollingsworth is with the ninth District this is the 0:16:28.240 --> 0:16:31.920 path from Indianapolis on down to Louisville and of course 0:16:32.040 --> 0:16:36.480 encompassing the University of Indiana as well. Congressmen, wonderful to 0:16:36.520 --> 0:16:41.760 speak to you today. How far removed are the Republicans 0:16:41.760 --> 0:16:45.680 of the House and the Republicans of the middle ground 0:16:46.240 --> 0:16:51.640 from the arch Senate conservatives that are there. It's a 0:16:51.640 --> 0:16:55.120 great question. Looks there are many Republicans in the House 0:16:55.160 --> 0:16:58.080 that are concerned about the devas that that are concerned 0:16:58.200 --> 0:17:02.560 about total US debt. However, there is a strong push 0:17:02.600 --> 0:17:05.600 and it continues strong push from Republicans to find a 0:17:05.680 --> 0:17:08.560 pathway to build economic growth back. I mean, we saw 0:17:08.680 --> 0:17:12.359 a terrible job report on Friday. People want to ensure 0:17:12.400 --> 0:17:15.919 that those losses are temporary and not permanent, because the 0:17:16.000 --> 0:17:18.200 last thing we want to see right now is this 0:17:18.400 --> 0:17:22.320 exogenous coronavirus shock to the economy become a long term 0:17:22.680 --> 0:17:26.480 demand crippling shock to the economy. This is so important, Congress, 0:17:26.520 --> 0:17:28.800 and I really want to emphasize this. There's a belief 0:17:28.960 --> 0:17:33.320 out there that the pent unemployment heading to Kevin Hasses 0:17:34.840 --> 0:17:38.119 is located in the city is it's where the viruses 0:17:38.200 --> 0:17:41.520 where the President makes clear these are blue regions that 0:17:41.600 --> 0:17:44.960 he doesn't care about etcetera. How have you seen the 0:17:45.119 --> 0:17:50.439 job economy in the ninth Congressional District Now? It is 0:17:50.480 --> 0:17:52.320 not just in the cities, It is not just in 0:17:52.359 --> 0:17:54.879 blue state. I live in a very red state, and 0:17:54.920 --> 0:17:57.879 the job losses are real. I hear from families every 0:17:57.920 --> 0:18:00.760 single day that say, I thought and I had a 0:18:00.880 --> 0:18:03.560 long term job. I was seeing my wages grow up 0:18:03.640 --> 0:18:05.960 until just a month ago, and now I don't have 0:18:06.000 --> 0:18:08.640 a job and don't have prospects for getting a job 0:18:08.720 --> 0:18:12.199 anytime soon. And I think this is really challenging getting 0:18:12.280 --> 0:18:17.280 back businesses open safely while mitigating risk, getting back individuals 0:18:17.320 --> 0:18:20.199 to being able to purchase things for their families for 0:18:20.359 --> 0:18:23.320 their futures. It's hugely important that confidence has to start 0:18:23.359 --> 0:18:26.159 in Washington, d C. That leadership has to start in 0:18:26.200 --> 0:18:31.440 Washington DCING represent Representative Hungsworth. You've been a small business owner. 0:18:32.040 --> 0:18:36.879 We've seen reports that the small business bankruptcies could rise 0:18:36.960 --> 0:18:40.640 to forty percent of all of the companies in six 0:18:40.720 --> 0:18:44.320 months if the shutdowns continue. How concerned are you that 0:18:44.400 --> 0:18:47.600 the program put into place so far has been ineffective. 0:18:47.920 --> 0:18:51.160 It's staving off these insolvencies as well as the subsequent 0:18:51.240 --> 0:18:56.119 layoffs that obviously are just escalating. Well, I think you 0:18:56.200 --> 0:18:57.760 hit the nail on the head, which is, how do 0:18:57.800 --> 0:19:01.040 we determine how effective this is? And the reality is 0:19:01.080 --> 0:19:03.480 the program was just designed to be a short term 0:19:03.520 --> 0:19:06.960 bridge to opening up the economy again, a short term 0:19:07.000 --> 0:19:09.720 bridge to enable firms to get back to hiring, get 0:19:09.720 --> 0:19:12.399 back to doing business as normal. If we are not 0:19:12.480 --> 0:19:14.439 able to get the economy open safely, if we're not 0:19:14.480 --> 0:19:17.080 able to hold down the level of infections and transmissions 0:19:17.119 --> 0:19:19.320 once we open with the the economy, there isn't enough money 0:19:19.359 --> 0:19:22.520 in Washington to save businesses in the long term. This 0:19:22.680 --> 0:19:26.159 has to bring a bridge to empowering the economy to 0:19:26.200 --> 0:19:29.359 get back to healing itself. That's the only way in 0:19:29.400 --> 0:19:31.919 the long term we can keep these businesses afloat, going 0:19:32.240 --> 0:19:35.199 and expanding. Congressman, how do we understand this from the 0:19:35.280 --> 0:19:38.439 debt perspective? What is the concern right now about the 0:19:38.480 --> 0:19:42.520 debt just specifically, what's the big concern? Well, Look, I 0:19:42.520 --> 0:19:46.240 think the big concern is the large amount of deficits 0:19:46.280 --> 0:19:50.119 that we're spending this year alone, and what that means 0:19:50.200 --> 0:19:53.280 from a long term perspective on where rates go back 0:19:53.320 --> 0:19:55.639 to once they normalized. Look, it's hard to look at 0:19:55.640 --> 0:19:57.400 the ten uere today and say, gosh, there's a debt 0:19:57.440 --> 0:20:00.440 problem in the United States, right, But once interest rates 0:20:00.440 --> 0:20:01.919 to begin to normally, as we get back to a 0:20:01.960 --> 0:20:05.919 more normal looking economy, the question is will we be 0:20:06.040 --> 0:20:08.600 able to hold interest rates at an appropriate level or 0:20:08.600 --> 0:20:11.440 will interest costs continue to rise in the US, pushing 0:20:11.440 --> 0:20:13.760 out and crowding at all the other important spending that 0:20:13.800 --> 0:20:16.920 we think is there right, research and development on future 0:20:17.040 --> 0:20:19.320 cures for diseases, A lot of that goes through NIH 0:20:19.560 --> 0:20:21.560 defense spending. All these things will be crowded out by 0:20:21.640 --> 0:20:24.760 larger and larger interest payments on our debt. Should interest 0:20:24.800 --> 0:20:27.480 rates return to their normal levels, you think there could 0:20:27.520 --> 0:20:30.800 be a problem with debt sustainability in America. Is that 0:20:30.880 --> 0:20:34.879 something you actually worry about? Well, I do worry about that, 0:20:34.920 --> 0:20:36.600 and I think the important thing is to worry about 0:20:36.640 --> 0:20:40.200 it before it becomes a problem. I think the important 0:20:40.240 --> 0:20:41.639 question we have to ask ourselves is what are the 0:20:41.720 --> 0:20:44.320 changes we need to make today? What are the changes 0:20:44.359 --> 0:20:46.359 we need to make over the next year to ensure 0:20:46.520 --> 0:20:48.040 that we can put ourselves on the path that this 0:20:48.080 --> 0:20:50.160 SPS just need to building. This isn't a problem today, 0:20:50.200 --> 0:20:51.720 as you will are toy. This isn't gonna be a 0:20:51.720 --> 0:20:55.560 problem tomorrow or next year. But ultimately one goes bankrupt 0:20:55.600 --> 0:20:57.800 slowly at first, then suddenly the key is to catch 0:20:57.800 --> 0:21:00.719 it in the slow phase, not in the sudden phase. Representative, 0:21:00.760 --> 0:21:03.960 I want to make sure to understand what you're saying. 0:21:04.200 --> 0:21:07.000 Are you saying that we should not add some sort 0:21:07.000 --> 0:21:10.479 of effort to pump money into the economy at this 0:21:10.600 --> 0:21:15.160 point for fear of that future escalation of debt costs? 0:21:15.320 --> 0:21:19.159 Is that your argument here? So? I think my argument is, 0:21:19.240 --> 0:21:22.800 we have spent two point nine trillion dollars of Americans 0:21:22.800 --> 0:21:26.399 harder at taxpayer dollars. Before we start spending more, we 0:21:26.440 --> 0:21:30.000 should ensure that the programs are effective, As you will 0:21:30.080 --> 0:21:33.680 asked earlier, we should ensure that we're solving the right problems. 0:21:33.680 --> 0:21:35.920 We're ensuring that these are the right programs to be 0:21:35.960 --> 0:21:37.760 able to get the economy back on its feet so 0:21:37.800 --> 0:21:40.520 we can normalize again. But I think in the long 0:21:40.840 --> 0:21:43.879 term question for Americans, and we were already at a 0:21:43.880 --> 0:21:47.760 definite of a trillion dollars before coronavirus happened, how can 0:21:47.840 --> 0:21:50.880 we put ourselves on the path of sustainability even outside 0:21:50.880 --> 0:21:54.440 of this large acute dip so that we can see 0:21:54.480 --> 0:21:57.120 a brighter, brighter future for Americans and not hand down 0:21:57.160 --> 0:22:00.040