1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,240 Speaker 1: Bloomberg dot Com, and of course, on the Bloomber We 5 00:00:27,320 --> 00:00:31,320 Speaker 1: begin the program with Marfin Low State Street Senior Global 6 00:00:31,360 --> 00:00:33,800 Speaker 1: market strategist, Mom and fantastic to have you with us. 7 00:00:34,040 --> 00:00:35,880 Speaker 1: Let me bring this quote to our audience. It comes 8 00:00:35,880 --> 00:00:39,320 Speaker 1: from Goldman Over the weekend, the SMP five hundred trades 9 00:00:39,360 --> 00:00:43,440 Speaker 1: just sevent below it's all time high. Mediaan SMP five 10 00:00:43,680 --> 00:00:48,360 Speaker 1: dred constituents trade twenty eight percent below record highs. Sharp 11 00:00:48,440 --> 00:00:51,840 Speaker 1: declines in market breadth in the past have often signaled 12 00:00:52,240 --> 00:00:55,680 Speaker 1: large market draw downs. Can we just start there, Marvin, 13 00:00:55,720 --> 00:00:58,960 Speaker 1: Can you speak to the weakness the market breadth the 14 00:00:59,000 --> 00:01:03,040 Speaker 1: story of the last ever wakes Yes, certainly, Um, you know, 15 00:01:03,120 --> 00:01:07,120 Speaker 1: it's it's it's a bit of the story that we've had, certainly, um, 16 00:01:07,160 --> 00:01:10,800 Speaker 1: since the middle of last year, where a handful of 17 00:01:10,840 --> 00:01:14,640 Speaker 1: you know, growth technology stocks have driven a large part 18 00:01:14,680 --> 00:01:16,479 Speaker 1: of the returns we we we had a little bit 19 00:01:16,480 --> 00:01:18,319 Speaker 1: of period where there was a little bit of a 20 00:01:18,360 --> 00:01:20,399 Speaker 1: reflation trade. You know, maybe a little bit more out 21 00:01:20,400 --> 00:01:23,720 Speaker 1: performance from cyclicals versus defensive but you know that certainly 22 00:01:23,760 --> 00:01:25,520 Speaker 1: was in the past and last year, and we're not 23 00:01:25,560 --> 00:01:28,160 Speaker 1: seeing any of it, um, even though even though stocks 24 00:01:28,160 --> 00:01:31,080 Speaker 1: have rallied, you know, quite impressively over the last few weeks. 25 00:01:31,319 --> 00:01:33,800 Speaker 1: You know, all all that really shows is a concentration 26 00:01:34,000 --> 00:01:36,600 Speaker 1: in in a few names that people can get their 27 00:01:37,200 --> 00:01:39,880 Speaker 1: minds around a little bit more. But in terms of 28 00:01:40,240 --> 00:01:42,839 Speaker 1: you know, all of this central bank put potentially making 29 00:01:42,840 --> 00:01:45,479 Speaker 1: its way into the real economy, UM, I think those 30 00:01:45,520 --> 00:01:48,840 Speaker 1: internals and that breath is not saying that. That's not 31 00:01:48,920 --> 00:01:52,680 Speaker 1: saying that the bet is currently on central banks to 32 00:01:52,760 --> 00:01:56,000 Speaker 1: backstock markets. Just to be clear, is that what you're saying. Yeah, well, 33 00:01:56,240 --> 00:01:59,560 Speaker 1: you know, certainly certainly to provide liquidity, UM a certain 34 00:01:59,560 --> 00:02:02,520 Speaker 1: degree of act stop from the perspective of making sure 35 00:02:02,600 --> 00:02:06,360 Speaker 1: they function, but that money making its way into the 36 00:02:06,360 --> 00:02:08,960 Speaker 1: real economy and actually driving kind of the economic growth 37 00:02:09,000 --> 00:02:14,480 Speaker 1: that we need to see a sustainable um return to 38 00:02:14,560 --> 00:02:17,880 Speaker 1: economic activity UM, you know, is not being shown in 39 00:02:17,880 --> 00:02:20,960 Speaker 1: either those uh, those internals and or a lot of 40 00:02:20,960 --> 00:02:24,200 Speaker 1: the other asset classes that are that are more flashing yellow. 41 00:02:25,000 --> 00:02:27,799 Speaker 1: Marvin Tom Keene here as well. Good morning everyone, Good 42 00:02:27,800 --> 00:02:32,120 Speaker 1: morning John and Lisa uh on a really different Monday morning. Marvin, 43 00:02:32,200 --> 00:02:34,480 Speaker 1: A long time ago you were with a firm called 44 00:02:34,480 --> 00:02:37,200 Speaker 1: hand Wrecked in Quist, So you've got a viral DNA 45 00:02:37,320 --> 00:02:42,840 Speaker 1: of technology like nobody in macro strategy. Ben Laidler wrote 46 00:02:42,880 --> 00:02:45,880 Speaker 1: a blistering note out of London in the last six 47 00:02:46,000 --> 00:02:50,840 Speaker 1: hours which basically says, everybody gloomy on the fangs, get 48 00:02:51,000 --> 00:02:56,160 Speaker 1: over it. They're going to dominate. Do you agree? UM? 49 00:02:56,280 --> 00:02:59,920 Speaker 1: You know, I think I think that UM their competitive 50 00:03:00,040 --> 00:03:02,520 Speaker 1: vantage is something that they can maintain. UM. You know, 51 00:03:02,600 --> 00:03:06,440 Speaker 1: certainly first mover has has helped all of these companies 52 00:03:06,639 --> 00:03:09,720 Speaker 1: UM put themselves into position from a cash flow as 53 00:03:09,760 --> 00:03:13,760 Speaker 1: well as you know, dominating what UM the world is 54 00:03:13,800 --> 00:03:17,359 Speaker 1: consuming to a certain degree going forward. UM from a 55 00:03:17,400 --> 00:03:20,160 Speaker 1: market breath perspective, however, UM, you know, I think I 56 00:03:20,160 --> 00:03:23,480 Speaker 1: think you have bigger concerns about where overall stocks go. 57 00:03:23,680 --> 00:03:26,320 Speaker 1: But you know, certainly these companies UM do have some 58 00:03:26,440 --> 00:03:29,240 Speaker 1: kind of competitive advantages that they can maintain. The top 59 00:03:29,280 --> 00:03:31,639 Speaker 1: five make up about a fifth of the overall index 60 00:03:31,720 --> 00:03:36,280 Speaker 1: is the same as the bottom three fifty on Marvin, 61 00:03:36,360 --> 00:03:37,880 Speaker 1: is just a belief that when we come out of this. 62 00:03:38,000 --> 00:03:40,520 Speaker 1: On the other side, the big can get a whole 63 00:03:40,560 --> 00:03:43,560 Speaker 1: lot bigger that the competitive landscape is going to change. 64 00:03:43,600 --> 00:03:45,480 Speaker 1: These are the companies with the banners, sheets, with the 65 00:03:45,480 --> 00:03:47,760 Speaker 1: access to capital markets, with the cast ready to go. 66 00:03:48,560 --> 00:03:52,280 Speaker 1: They've got a huge advantage on the other side, haven't they. Yeah, 67 00:03:52,320 --> 00:03:54,680 Speaker 1: I think they do. Um. You know, they certainly had it, 68 00:03:55,000 --> 00:03:59,160 Speaker 1: um even as there was broader market market participation last year, 69 00:03:59,520 --> 00:04:03,840 Speaker 1: but you know only um uh they outperformed. And really 70 00:04:03,880 --> 00:04:07,280 Speaker 1: the cash flow aspect kind of given how this virus 71 00:04:07,320 --> 00:04:11,200 Speaker 1: has really collapsed cash flows for for you know, everybody 72 00:04:11,240 --> 00:04:14,600 Speaker 1: and every company at the same time is a big advantage, Marvin. 73 00:04:14,960 --> 00:04:16,960 Speaker 1: Not all of the big tech names are the same. 74 00:04:16,960 --> 00:04:19,359 Speaker 1: I'm looking at Facebook, which is such a report on Wednesday. 75 00:04:19,400 --> 00:04:22,200 Speaker 1: It's down more than seven percent year to date. Apple 76 00:04:22,279 --> 00:04:25,520 Speaker 1: shares down more than three percent year to date. Amazon 77 00:04:25,760 --> 00:04:27,960 Speaker 1: is what we're talking about here. Amazon shares up more 78 00:04:28,000 --> 00:04:30,880 Speaker 1: than thirty percent year to date. How much longer could 79 00:04:30,880 --> 00:04:34,760 Speaker 1: Amazon carry the entire market on its back? You know, 80 00:04:34,960 --> 00:04:38,400 Speaker 1: from from the perspective of of um individual companies, that's 81 00:04:38,440 --> 00:04:42,280 Speaker 1: that's not necessarily my purview, UM, but you know, really 82 00:04:42,320 --> 00:04:46,200 Speaker 1: it's unhealthy to certainly does have five companies that are 83 00:04:46,320 --> 00:04:48,240 Speaker 1: driving all the games. You know, it's pretty easy to 84 00:04:48,240 --> 00:04:50,680 Speaker 1: say that, No, Marvin, when you come out Bloomberg Surveillance, 85 00:04:50,720 --> 00:04:52,760 Speaker 1: we don't need to know bi holes selling Amazon, but 86 00:04:52,800 --> 00:04:55,280 Speaker 1: we just want to note to five dollars what level 87 00:04:55,320 --> 00:04:59,320 Speaker 1: we should acquire Amazon. No big deal, Marvin. I want 88 00:04:59,320 --> 00:05:01,719 Speaker 1: to ask you about world of Lisa Bramos, which is 89 00:05:01,760 --> 00:05:05,320 Speaker 1: credit spreads and the idea of how do I use 90 00:05:05,440 --> 00:05:09,120 Speaker 1: them as a signal of better things to come? How 91 00:05:09,160 --> 00:05:12,280 Speaker 1: do you observe credit spreads if you want to try 92 00:05:12,360 --> 00:05:16,919 Speaker 1: to figure out if this market is higher UM? You know, 93 00:05:17,040 --> 00:05:19,920 Speaker 1: I think that we need to separate kind of the 94 00:05:20,240 --> 00:05:23,719 Speaker 1: fed put UM that has been effective in stabilizing credit 95 00:05:23,720 --> 00:05:29,160 Speaker 1: spreads UM and then start to see UM positive performance 96 00:05:29,200 --> 00:05:33,200 Speaker 1: from a spread perspective UM across all of the different 97 00:05:33,560 --> 00:05:36,120 Speaker 1: rating categories. UM. You know, we certainly got a big 98 00:05:36,200 --> 00:05:39,440 Speaker 1: up updraft UM spread compression over the over the three 99 00:05:39,480 --> 00:05:42,480 Speaker 1: weeks UM following some of the announcement of SAD facilities. 100 00:05:42,760 --> 00:05:45,480 Speaker 1: But you know, really we are waning in terms of 101 00:05:45,680 --> 00:05:50,200 Speaker 1: further improvement and UM really parsing out the concept of 102 00:05:50,320 --> 00:05:53,360 Speaker 1: liquidity versus solvency, I think is where we are at 103 00:05:53,400 --> 00:05:56,560 Speaker 1: this stage and um, you know from from corporate America 104 00:05:56,680 --> 00:05:59,640 Speaker 1: we are hearing just how tight cash flows are, you know, 105 00:05:59,680 --> 00:06:03,000 Speaker 1: either from the respective of we only have X number 106 00:06:03,000 --> 00:06:05,800 Speaker 1: of weeks months left in castle and or you know 107 00:06:05,839 --> 00:06:08,599 Speaker 1: some of those on bankruptcy and defaults that we're starting 108 00:06:08,600 --> 00:06:11,640 Speaker 1: to hear about. Always great skate phillis in a program. 109 00:06:11,680 --> 00:06:13,160 Speaker 1: I appreciate your time. I hope you and yours it 110 00:06:13,200 --> 00:06:15,440 Speaker 1: do him well. I'm often love that off stay straight 111 00:06:18,560 --> 00:06:21,680 Speaker 1: for signifying. The middle ground for the Republican Party is 112 00:06:21,800 --> 00:06:24,479 Speaker 1: french Hill, the second district in Arkansas. He is the 113 00:06:24,520 --> 00:06:28,080 Speaker 1: congressman from Little Rock French I want you to talk 114 00:06:28,240 --> 00:06:30,719 Speaker 1: about the battle that's not in the media, not in 115 00:06:30,720 --> 00:06:34,039 Speaker 1: the headlines, which is the middle ground of the Republican 116 00:06:34,120 --> 00:06:37,480 Speaker 1: Party and the middle ground of the Democratic Party. What 117 00:06:37,600 --> 00:06:40,400 Speaker 1: does the president need to do to tilt that in 118 00:06:40,440 --> 00:06:45,440 Speaker 1: the appropriate direction? Well, good morning, Tom, thanks for having me. Look, 119 00:06:45,560 --> 00:06:50,560 Speaker 1: it's so important that the president deliver the fight against 120 00:06:50,560 --> 00:06:55,520 Speaker 1: the virus successfully, carefully balanced, reopened the economy with our governors, 121 00:06:56,040 --> 00:06:59,560 Speaker 1: and then get our economy back towards full capacity. I 122 00:06:59,600 --> 00:07:02,320 Speaker 1: think that how he'll be measured now. He didn't pick 123 00:07:02,440 --> 00:07:06,200 Speaker 1: this fight. Uh, Yeah, he's got it. And I think 124 00:07:06,240 --> 00:07:09,640 Speaker 1: for the middle and listening to members of Congress in 125 00:07:09,720 --> 00:07:13,360 Speaker 1: the middle talking to the President, that's what they're focused on, 126 00:07:13,920 --> 00:07:17,640 Speaker 1: safety of their folks at home and getting the economy 127 00:07:17,680 --> 00:07:23,000 Speaker 1: back open. Kevin surreally just spoke about the regionalness, the 128 00:07:23,160 --> 00:07:27,880 Speaker 1: state by state feel of this. You have a meat crisis, 129 00:07:27,880 --> 00:07:31,559 Speaker 1: a meat processing crisis in your Arkansas and of course 130 00:07:31,640 --> 00:07:34,400 Speaker 1: all of the Middle West of this nation. How do 131 00:07:34,440 --> 00:07:37,760 Speaker 1: you explain to Governor Cuomo of New York that he 132 00:07:37,880 --> 00:07:42,320 Speaker 1: needs to be sensitive to this huge tangible issue of 133 00:07:42,480 --> 00:07:47,440 Speaker 1: viruses in our meat processing facilities. Thom, It's a super 134 00:07:47,480 --> 00:07:51,040 Speaker 1: important question and one every American I think we'll read 135 00:07:51,120 --> 00:07:54,280 Speaker 1: and know more about incoming days. When New York and 136 00:07:54,360 --> 00:07:58,480 Speaker 1: California demanded at Chuck Schumer a six hundred dollar a 137 00:07:58,600 --> 00:08:03,200 Speaker 1: week unemployed an insurance bonus for the pandemic on top 138 00:08:03,360 --> 00:08:06,960 Speaker 1: of what the states offer, you've created a huge wage 139 00:08:07,040 --> 00:08:11,800 Speaker 1: disparity in many meat processing jobs, so you have them 140 00:08:11,960 --> 00:08:15,400 Speaker 1: able to make more money, uh not working number one. 141 00:08:15,520 --> 00:08:18,840 Speaker 1: Number two, there's fear of COVID and these plants that 142 00:08:18,920 --> 00:08:22,320 Speaker 1: the plants don't have adequate ppe. And then finally, of 143 00:08:22,360 --> 00:08:25,960 Speaker 1: course we've had outbreaks of COVID and some of these plants. 144 00:08:26,440 --> 00:08:30,400 Speaker 1: This is coming together in a perfect storm of disrupting 145 00:08:30,840 --> 00:08:34,400 Speaker 1: our supply chain. I would say to Governor Cuomo, You've 146 00:08:34,440 --> 00:08:37,600 Speaker 1: got to have empathy there because it's going to affect 147 00:08:37,760 --> 00:08:40,200 Speaker 1: every state in the in the country if we don't 148 00:08:40,240 --> 00:08:45,439 Speaker 1: have a functioning protein supply chain. Well, two times, very 149 00:08:45,480 --> 00:08:48,880 Speaker 1: important point about the state by state and nature of 150 00:08:48,960 --> 00:08:51,720 Speaker 1: the efforts to combat the coronavirus, at least in the 151 00:08:51,760 --> 00:08:56,080 Speaker 1: economic uh perspective. There have been complaints that there isn't 152 00:08:56,120 --> 00:09:01,160 Speaker 1: a more comprehensive, federally driven reopening plan that has been 153 00:09:01,400 --> 00:09:04,800 Speaker 1: doled out, And I'm wondering what your sense of that is. 154 00:09:04,960 --> 00:09:07,120 Speaker 1: You know, is there some sort of blueprint in the 155 00:09:07,160 --> 00:09:10,559 Speaker 1: works to get things on on board in a way 156 00:09:10,760 --> 00:09:14,480 Speaker 1: that enables supply chains, etcetera, to operate in a way 157 00:09:14,520 --> 00:09:17,840 Speaker 1: that that works. Well, let me step back from the 158 00:09:17,840 --> 00:09:19,960 Speaker 1: supply chain just for a moment and say, I think 159 00:09:19,960 --> 00:09:26,640 Speaker 1: that the CDC Coronavirus Task Force guidelines on phasing excuse 160 00:09:26,640 --> 00:09:29,640 Speaker 1: me are being adopted by our governors and connected with 161 00:09:29,880 --> 00:09:34,600 Speaker 1: local conditions on the ground, infections, hospitalizations, and the ability 162 00:09:34,640 --> 00:09:37,080 Speaker 1: to get certain kinds of businesses back and I think 163 00:09:37,080 --> 00:09:39,720 Speaker 1: you'll see that diversity across the country. I think that's 164 00:09:39,720 --> 00:09:43,040 Speaker 1: how it should be. On the supply chain issue, I'm 165 00:09:43,080 --> 00:09:46,360 Speaker 1: not so sure there shouldn't be more leadership and engagement 166 00:09:46,440 --> 00:09:50,560 Speaker 1: from Sunny Purdue, our Aggs Secretary, our labor unions, and 167 00:09:50,600 --> 00:09:53,960 Speaker 1: our corporate management. To recognize this could be a major 168 00:09:54,040 --> 00:09:58,640 Speaker 1: national issue requires the media a coordinated attention. What would 169 00:09:58,679 --> 00:10:01,640 Speaker 1: you like to see on that front? Well, I think 170 00:10:01,679 --> 00:10:04,840 Speaker 1: Tyson Food you saw put national ads and all the 171 00:10:04,880 --> 00:10:07,800 Speaker 1: major newspapers in the country talking about paying a bonus 172 00:10:07,840 --> 00:10:14,080 Speaker 1: to labor, UH, providing PPE, providing a safe workplace. That's 173 00:10:14,080 --> 00:10:17,320 Speaker 1: how important this has become. We have almost no over 174 00:10:17,480 --> 00:10:21,880 Speaker 1: thirty plants negatively impacted by labor concerns of the virus 175 00:10:22,160 --> 00:10:26,840 Speaker 1: or by actual concerns. And I think this unemployment insurance 176 00:10:26,960 --> 00:10:30,320 Speaker 1: right that the big States insisted in the CARES Act 177 00:10:30,360 --> 00:10:32,600 Speaker 1: has contributed to it. There's just no doubt about that. 178 00:10:34,080 --> 00:10:38,880 Speaker 1: French Hill, you are a Southern gentleman. The Southern senators 179 00:10:39,080 --> 00:10:43,440 Speaker 1: of the GOP seemed to be removed and comfortable within 180 00:10:43,480 --> 00:10:46,440 Speaker 1: the structure of the Senate and how they're voting. What 181 00:10:46,520 --> 00:10:50,760 Speaker 1: would be your counsel to the Senate leadership is they 182 00:10:50,800 --> 00:10:54,120 Speaker 1: go to the first Tuesday of November. What's the the 183 00:10:54,280 --> 00:10:56,560 Speaker 1: thing they need to be aware of so you don't 184 00:10:56,640 --> 00:11:00,400 Speaker 1: end up with a Democratic House, a Democratic center, and 185 00:11:00,440 --> 00:11:05,480 Speaker 1: maybe a democratic president. Well time, I believe the world 186 00:11:05,600 --> 00:11:09,439 Speaker 1: is now turning on as I've said, how we are 187 00:11:09,520 --> 00:11:13,400 Speaker 1: successful working with our state and our federal response on 188 00:11:13,520 --> 00:11:18,480 Speaker 1: beating this virus and um and getting our economy back. 189 00:11:18,760 --> 00:11:22,560 Speaker 1: And I think it's just going to be a leadership 190 00:11:22,720 --> 00:11:28,319 Speaker 1: focused election, delivering leadership at that local mayors, state governors, 191 00:11:28,559 --> 00:11:30,880 Speaker 1: and at the top of the government, the president and 192 00:11:30,960 --> 00:11:34,400 Speaker 1: his cabinet. When I look, we're going to run on 193 00:11:34,559 --> 00:11:37,240 Speaker 1: I think, I think really truly elections this ball are 194 00:11:37,240 --> 00:11:41,040 Speaker 1: going to run on leadership and they will be evaluated 195 00:11:41,160 --> 00:11:45,600 Speaker 1: on what kind of success. But leadership brings both success 196 00:11:45,679 --> 00:11:49,280 Speaker 1: and failure, and you can still be successful even when 197 00:11:49,320 --> 00:11:51,520 Speaker 1: you have set back. So what would you do with 198 00:11:51,559 --> 00:11:54,880 Speaker 1: this press conference? John Farrell's glued to the press conference 199 00:11:55,040 --> 00:11:58,760 Speaker 1: every single day, watching the theater of that French Hill 200 00:11:58,800 --> 00:12:02,600 Speaker 1: doesn't care about us, well, you know, I mean John, 201 00:12:02,640 --> 00:12:05,200 Speaker 1: actually you know because you were Brad Pitt would do 202 00:12:05,320 --> 00:12:08,840 Speaker 1: Dr Fauci and Saturday Live this weekend. Congressman, what what 203 00:12:08,920 --> 00:12:11,839 Speaker 1: would be your recommendation of the president is he loves 204 00:12:11,880 --> 00:12:15,600 Speaker 1: to create theater. Well, he does love to create theater. 205 00:12:15,720 --> 00:12:19,600 Speaker 1: He has a a primetime running show with a great 206 00:12:19,600 --> 00:12:25,000 Speaker 1: supporting cast. He has an outstanding enemy, which is the virus. 207 00:12:25,120 --> 00:12:29,559 Speaker 1: So that's been thrust upon us by foreign activity. So 208 00:12:30,240 --> 00:12:33,600 Speaker 1: it is good theater. But the President is demonstrating his 209 00:12:34,600 --> 00:12:38,680 Speaker 1: leadership and engagement there. I think he shows his humanity 210 00:12:38,679 --> 00:12:41,200 Speaker 1: in these press conferences. But I would make them shorter. 211 00:12:42,160 --> 00:12:44,800 Speaker 1: I would make them. I would provide the information that 212 00:12:44,800 --> 00:12:50,520 Speaker 1: America needs. Let his experts provide economic and public health information. 213 00:12:50,960 --> 00:12:53,200 Speaker 1: But I do find them informative, and I know John 214 00:12:53,320 --> 00:12:59,080 Speaker 1: is fascinated by because they globally informative. But I'd stick 215 00:12:59,160 --> 00:13:02,400 Speaker 1: to stick to the facts. Reduced the speculation. But I 216 00:13:02,440 --> 00:13:07,080 Speaker 1: do think it shows President Trump's humanity, his engagement, his 217 00:13:08,520 --> 00:13:11,760 Speaker 1: uh So, anyway, I do, I would make them shorter. 218 00:13:11,840 --> 00:13:14,120 Speaker 1: As the answer to your question, french Hill, thank you 219 00:13:14,160 --> 00:13:17,160 Speaker 1: so much. Greatly appreciated the congressman from Little Rock, of course, 220 00:13:17,240 --> 00:13:26,120 Speaker 1: from Arkansas. He writes the most granular report on the 221 00:13:26,160 --> 00:13:30,520 Speaker 1: business of hydrocarbon's. He can tell you about the wholesale 222 00:13:30,559 --> 00:13:34,319 Speaker 1: price of gasoline and fargo he can tell you about 223 00:13:34,440 --> 00:13:38,319 Speaker 1: something in Houston I can't even pronounce. Stephen Short joins 224 00:13:38,360 --> 00:13:43,520 Speaker 1: us truly expert on America's hydrocarbon market. Stephen, if you, 225 00:13:43,640 --> 00:13:45,760 Speaker 1: as you write your note this morning, what is the 226 00:13:46,080 --> 00:13:51,640 Speaker 1: single item our audience needs to know and all that granularity, Uh, 227 00:13:51,720 --> 00:13:54,360 Speaker 1: the fact that oil right now at thirteen dollars and 228 00:13:54,920 --> 00:13:57,960 Speaker 1: cents on then ime x Uh, I'm still asking myself 229 00:13:58,040 --> 00:14:02,839 Speaker 1: why is oil that expensive? We have a situation where obviously, uh, 230 00:14:02,840 --> 00:14:06,280 Speaker 1: there is no demand. The economy is dead. We're not 231 00:14:06,400 --> 00:14:09,600 Speaker 1: in a recession, We're in a great depression. It's bad 232 00:14:09,640 --> 00:14:13,120 Speaker 1: and it's only getting worse from here. So that said, 233 00:14:13,640 --> 00:14:16,720 Speaker 1: there is a reason why oil is probably once again 234 00:14:16,840 --> 00:14:20,640 Speaker 1: going back to zero, Stephen, going back to zero. When 235 00:14:20,680 --> 00:14:24,400 Speaker 1: do we breach the tops of these storage facilities? You know, 236 00:14:24,480 --> 00:14:27,320 Speaker 1: it's funny. Five five weeks ago, our estimates in the 237 00:14:27,360 --> 00:14:30,200 Speaker 1: Short report was that we were going to max out capacity. 238 00:14:30,280 --> 00:14:33,760 Speaker 1: When I say capacity, that is the storage complex in Pushing, 239 00:14:33,800 --> 00:14:36,360 Speaker 1: Oklahoma where you have to make and take delivery of 240 00:14:36,400 --> 00:14:39,480 Speaker 1: the futures contract in New York Mercantile Exchange. That working 241 00:14:39,520 --> 00:14:43,560 Speaker 1: capacity taken into account, pipelines, oil and transit is anywhere 242 00:14:43,560 --> 00:14:47,440 Speaker 1: between seventy six to seventy eight million barrels. We were 243 00:14:47,440 --> 00:14:51,280 Speaker 1: about capacity five six weeks ago. I thought by the 244 00:14:51,320 --> 00:14:54,160 Speaker 1: fourth of July holiday we would be at that seventy 245 00:14:54,200 --> 00:14:58,280 Speaker 1: six seventy seventy eight capacity. By all intents now we're 246 00:14:58,280 --> 00:15:01,080 Speaker 1: going to be there by the end of next month 247 00:15:01,200 --> 00:15:04,600 Speaker 1: at the latest. So there's a phenomena in the market 248 00:15:04,640 --> 00:15:07,280 Speaker 1: now with the term structure, that is prices going out 249 00:15:07,320 --> 00:15:11,200 Speaker 1: into the future. I could buy oil today, sell the 250 00:15:11,280 --> 00:15:15,160 Speaker 1: futures contract one year out and have a net guaranteed 251 00:15:15,160 --> 00:15:19,120 Speaker 1: gross profit of fifty cent. So when you introduce that 252 00:15:19,200 --> 00:15:22,600 Speaker 1: kind of arbitrage into the market, obviously you're going to 253 00:15:22,720 --> 00:15:26,520 Speaker 1: max occapacity. So that's where we're at right now. We're 254 00:15:26,560 --> 00:15:30,240 Speaker 1: not fully the barrels physically are not a capacity, but 255 00:15:30,320 --> 00:15:34,080 Speaker 1: that storage and cushion is booked. So as we look 256 00:15:34,160 --> 00:15:38,800 Speaker 1: forward to the summer, we're gonna look at probably perhaps 257 00:15:38,800 --> 00:15:42,280 Speaker 1: as many as forty million Americans or commuters that don't 258 00:15:42,320 --> 00:15:44,920 Speaker 1: have their jobs anymore. If if we believe these estimates 259 00:15:44,960 --> 00:15:48,080 Speaker 1: from the Federalies Bank of St. Louis, fifty three million 260 00:15:48,080 --> 00:15:52,240 Speaker 1: Americans unemployed translates to forty million commuters who will not 261 00:15:52,280 --> 00:15:54,720 Speaker 1: be driving to work on July one, and that does 262 00:15:54,760 --> 00:15:57,360 Speaker 1: not take into account to tendon millions who are still 263 00:15:57,440 --> 00:16:00,280 Speaker 1: fortunate enough to have their jobs. They'll still be muting 264 00:16:00,360 --> 00:16:05,480 Speaker 1: from home. So we'll have no demand virtually, and we're 265 00:16:05,560 --> 00:16:07,720 Speaker 1: still going to be producing even though we are making 266 00:16:07,760 --> 00:16:10,160 Speaker 1: production cuts. But but when you don't have any demand 267 00:16:10,160 --> 00:16:14,040 Speaker 1: whatever you produce and you don't have storage, comply, futures 268 00:16:14,120 --> 00:16:16,600 Speaker 1: have to reflect the reality of the physical market, and 269 00:16:16,640 --> 00:16:19,280 Speaker 1: we will head lower. So Stephen, let's do some back 270 00:16:19,280 --> 00:16:22,240 Speaker 1: of the envelope, Matt, shall we Quite clearly the June 271 00:16:22,280 --> 00:16:25,000 Speaker 1: contract could get sucked down towards zero if the dynamics 272 00:16:25,000 --> 00:16:27,840 Speaker 1: that you describe continue later in the summer. Though, if 273 00:16:27,840 --> 00:16:30,760 Speaker 1: we got a slow reopening, let's think about what's happened 274 00:16:30,760 --> 00:16:33,840 Speaker 1: out where big production cuts? What by what about ten 275 00:16:33,840 --> 00:16:38,400 Speaker 1: million would that be correct? Demand demand collapse right now 276 00:16:38,480 --> 00:16:42,400 Speaker 1: in and around twenty million twenty odd per day, So 277 00:16:42,480 --> 00:16:45,120 Speaker 1: let's think about what it would take to get into 278 00:16:45,120 --> 00:16:48,360 Speaker 1: balance coming out of the summer. Well, we're not going 279 00:16:48,440 --> 00:16:50,880 Speaker 1: to see any sort of balance and coming out of 280 00:16:50,880 --> 00:16:53,960 Speaker 1: the summer because the summer is your your busiest time 281 00:16:54,440 --> 00:16:57,920 Speaker 1: to to consume gasoline. So as we go into the 282 00:16:57,960 --> 00:17:01,760 Speaker 1: peak demand season, you have this phenomena where where the 283 00:17:01,760 --> 00:17:05,679 Speaker 1: oil is there. We have of a daily global supply 284 00:17:05,760 --> 00:17:08,040 Speaker 1: of oil sitting in oil tankers right now off the 285 00:17:08,040 --> 00:17:11,840 Speaker 1: coast of California. So so to reintroduce that, of course, 286 00:17:11,880 --> 00:17:13,960 Speaker 1: it's gonna be dribs and drabs. But let's keep in 287 00:17:14,000 --> 00:17:17,679 Speaker 1: mind we're looking at unemployment of perhaps as many as 288 00:17:17,720 --> 00:17:20,920 Speaker 1: fifty million people. When we get that economy started. Those 289 00:17:20,960 --> 00:17:23,439 Speaker 1: fifty million people aren't it's not this isn't a breaker. 290 00:17:23,520 --> 00:17:25,520 Speaker 1: We're just not gonna hit the switch and these people 291 00:17:25,560 --> 00:17:28,760 Speaker 1: are gonna start coming back to work and the slow, 292 00:17:28,960 --> 00:17:33,600 Speaker 1: arduous process. So we're looking at long, systemic high unemployment 293 00:17:33,640 --> 00:17:36,760 Speaker 1: for the foreseeable future. So it is years, not market, 294 00:17:37,160 --> 00:17:39,000 Speaker 1: not the end of the summer's years before we get 295 00:17:39,040 --> 00:17:41,960 Speaker 1: back to a normal market. And I got to get medicated. 296 00:17:42,000 --> 00:17:45,479 Speaker 1: I've never heard Stephen shark this negative. Steven, tell me 297 00:17:45,560 --> 00:17:50,359 Speaker 1: about midstream and downstream everything the romance diamonds, you know, 298 00:17:50,480 --> 00:17:53,080 Speaker 1: diamond offshore out of business, I get it. Tell me 299 00:17:53,119 --> 00:17:55,840 Speaker 1: about the broad midstream of the market that nobody ever 300 00:17:55,920 --> 00:17:59,680 Speaker 1: talks about. How are they gonna do? Yeah, they well, 301 00:17:59,760 --> 00:18:01,640 Speaker 1: you know, let's start with the downstream and then work 302 00:18:01,640 --> 00:18:05,040 Speaker 1: our way back up downstream. It's it's all the demand story, 303 00:18:05,320 --> 00:18:08,320 Speaker 1: uh for and if the economics aren't there in the 304 00:18:08,320 --> 00:18:11,879 Speaker 1: midstream the processing moving it from from the production area 305 00:18:12,040 --> 00:18:15,200 Speaker 1: i e. The upstream to your refinery to your gas 306 00:18:15,200 --> 00:18:18,040 Speaker 1: process and plants so forth. If the demand is not there, 307 00:18:18,040 --> 00:18:20,720 Speaker 1: if the economy is not there, if the Congressional Budget 308 00:18:20,720 --> 00:18:23,800 Speaker 1: Office is correct and used, economy contracts in the second 309 00:18:23,880 --> 00:18:29,400 Speaker 1: quarter by tent. Regardless of how cheap you make a commodity, 310 00:18:29,640 --> 00:18:33,359 Speaker 1: cheap commodities do not spur economic growth. So without that 311 00:18:33,400 --> 00:18:37,639 Speaker 1: economic growth, it is a mess on all sides. I 312 00:18:37,680 --> 00:18:41,119 Speaker 1: mean quite frankly. With oil at thirteen dollars a barrel, 313 00:18:41,200 --> 00:18:44,399 Speaker 1: refineries should be doing well. Right the crack differential to 314 00:18:44,480 --> 00:18:47,840 Speaker 1: spread between the product gasoline just the fuel jet fuel 315 00:18:48,280 --> 00:18:51,720 Speaker 1: is such on a percentage return, you're looking at fine 316 00:18:52,280 --> 00:18:55,719 Speaker 1: uh return on your investment. If you are a refinery. 317 00:18:55,880 --> 00:18:58,080 Speaker 1: The problem is you don't have anyone to sell your 318 00:18:58,119 --> 00:19:02,720 Speaker 1: product to. So even though margins for refiners have returned 319 00:19:02,720 --> 00:19:06,800 Speaker 1: to very good levels from a percentage standpoint. For instance, 320 00:19:06,960 --> 00:19:10,320 Speaker 1: in the just expired May contract, the guest line was 321 00:19:10,359 --> 00:19:14,000 Speaker 1: trading out of fifty five zero percent premium to w 322 00:19:14,320 --> 00:19:16,800 Speaker 1: T I when you have w t I in the 323 00:19:16,880 --> 00:19:19,400 Speaker 1: single digits. But the problem is, there's a reason why 324 00:19:19,520 --> 00:19:21,600 Speaker 1: w t I is in the single digits. There's just 325 00:19:21,640 --> 00:19:24,320 Speaker 1: simply no demand. So so whether you're the guy taking 326 00:19:24,320 --> 00:19:27,520 Speaker 1: the battles out of the ground, processing them, moving them 327 00:19:27,520 --> 00:19:30,320 Speaker 1: through the midstream through the end user, with out the 328 00:19:30,520 --> 00:19:33,359 Speaker 1: demand component, it's it's a brutal for everybody. What does 329 00:19:33,440 --> 00:19:35,879 Speaker 1: John do with the barrels he's got in his closet? No, 330 00:19:36,000 --> 00:19:39,320 Speaker 1: I mean sorry, you know he took delivery, Stephen. We've 331 00:19:39,320 --> 00:19:40,960 Speaker 1: gotta let you go. Grat to catch up with you. 332 00:19:41,160 --> 00:19:45,639 Speaker 1: As a way, Stephen shot describing the problem tob pretty well. 333 00:19:45,720 --> 00:19:47,719 Speaker 1: If you want to buy it, there's very plea places 334 00:19:47,800 --> 00:19:49,359 Speaker 1: to store it, and hardly only want to sell it 335 00:19:49,400 --> 00:19:51,800 Speaker 1: on too. Yeah, it's amazing And if if you haven't 336 00:19:51,800 --> 00:19:53,639 Speaker 1: seen the short report, try to get a copy of 337 00:19:53,680 --> 00:19:59,919 Speaker 1: it through Stephens. All of us trying to figure out 338 00:20:00,520 --> 00:20:03,439 Speaker 1: the path forward on this pandemic. Paul I walked by 339 00:20:03,520 --> 00:20:08,200 Speaker 1: Mount Sinai and still very very difficult there with very 340 00:20:08,280 --> 00:20:11,600 Speaker 1: brave people working huge hours in the middle of the pandemic. 341 00:20:12,119 --> 00:20:15,240 Speaker 1: Of course, it comes down to the path forward. We 342 00:20:15,359 --> 00:20:18,720 Speaker 1: spoke today with a gentleman from the Johns Hopkins University 343 00:20:18,800 --> 00:20:21,640 Speaker 1: Bloomberg School of Public Health. I should say that Mr 344 00:20:21,680 --> 00:20:25,600 Speaker 1: Bloomberg is the founder of Bloomberg GILP this television radio 345 00:20:25,760 --> 00:20:30,520 Speaker 1: operation as well, and we talked to Joshua Sharfstein about 346 00:20:30,560 --> 00:20:34,000 Speaker 1: the path forward. Like with most viral infections, there will 347 00:20:34,040 --> 00:20:37,280 Speaker 1: be some particle of immunity, particularly for people who experience 348 00:20:37,359 --> 00:20:39,960 Speaker 1: ill mass. How much and for how long it is 349 00:20:40,000 --> 00:20:43,320 Speaker 1: not known, and it's also not known which tacts will 350 00:20:43,359 --> 00:20:46,919 Speaker 1: really capture that. So I don't think um there is 351 00:20:48,080 --> 00:20:51,960 Speaker 1: concern that this will behave very, very differently than everything else, 352 00:20:52,080 --> 00:20:56,080 Speaker 1: But there's a desire to really understand the spacifics before 353 00:20:56,160 --> 00:21:01,680 Speaker 1: making policy. The glide pass are clearly get better. When 354 00:21:01,720 --> 00:21:04,879 Speaker 1: do we get to where we flattened the curve? I 355 00:21:04,880 --> 00:21:07,879 Speaker 1: mean if you extrampole it out any given of the 356 00:21:07,960 --> 00:21:11,919 Speaker 1: myriad logarrhithmic glide pass Are we flattening the curve in 357 00:21:12,080 --> 00:21:15,760 Speaker 1: days weeks or does it take months to flatten or 358 00:21:15,800 --> 00:21:19,480 Speaker 1: curve to be like New Zealand. Well, New Zealand is 359 00:21:19,520 --> 00:21:21,960 Speaker 1: going to be a high bar for places that have 360 00:21:22,200 --> 00:21:25,040 Speaker 1: so much virus, and in in particularly where there's a lot 361 00:21:25,080 --> 00:21:28,520 Speaker 1: of people living together you know, in dense areas, So 362 00:21:28,880 --> 00:21:31,840 Speaker 1: I think the curve may look different in different places, 363 00:21:31,920 --> 00:21:36,399 Speaker 1: and you know, model will model one thing one way, 364 00:21:36,640 --> 00:21:39,960 Speaker 1: but what actually happens may be different, and the models 365 00:21:40,000 --> 00:21:42,840 Speaker 1: will have to be adjopted. So I think we're learning 366 00:21:42,880 --> 00:21:44,600 Speaker 1: what it's like on the other side of the peak 367 00:21:44,640 --> 00:21:47,080 Speaker 1: of the curve, which is better than being on the 368 00:21:47,080 --> 00:21:48,720 Speaker 1: front side of the curve and not knowing when it's 369 00:21:48,760 --> 00:21:52,680 Speaker 1: gonna stop rising, But is still um, you know, a 370 00:21:52,720 --> 00:21:55,399 Speaker 1: lot of uncertainty about when we'll be able to return 371 00:21:55,480 --> 00:21:58,639 Speaker 1: to normal life. Josh, what are the new studies that 372 00:21:58,720 --> 00:22:01,120 Speaker 1: give us more of an indication of what drugs actually 373 00:22:01,400 --> 00:22:06,440 Speaker 1: are used to rightly show in order to combat COVID nineteen. Yeah, 374 00:22:06,840 --> 00:22:10,840 Speaker 1: hydroxy coorquin has not been um being shown to work 375 00:22:10,880 --> 00:22:14,240 Speaker 1: in different studies UM and may even be dangerous although 376 00:22:14,600 --> 00:22:18,120 Speaker 1: the best close, high quality studies really haven't been published 377 00:22:18,119 --> 00:22:22,119 Speaker 1: for that UM. And there's also a whole bunch of 378 00:22:22,119 --> 00:22:24,720 Speaker 1: studies coming out on some density or which is an 379 00:22:24,760 --> 00:22:28,400 Speaker 1: anti viral drug that have yet to come out UM. 380 00:22:28,640 --> 00:22:31,159 Speaker 1: And there will be some studies, I think in the 381 00:22:31,480 --> 00:22:35,679 Speaker 1: relatively short term about the effectiveness of convalescent plasma. And 382 00:22:35,680 --> 00:22:37,920 Speaker 1: there may be others that come out. I think we're 383 00:22:37,920 --> 00:22:40,119 Speaker 1: going to hit a period where there will be a 384 00:22:40,160 --> 00:22:43,680 Speaker 1: lot of studies coming out, and you know, it's important 385 00:22:43,680 --> 00:22:46,280 Speaker 1: to look at different things, not just the overall results, 386 00:22:46,320 --> 00:22:48,440 Speaker 1: but if there is an effect, how big an effect 387 00:22:48,600 --> 00:22:51,200 Speaker 1: at what point in the illness is the study being done? 388 00:22:51,240 --> 00:22:54,480 Speaker 1: Because there could be a medication that works very well 389 00:22:54,520 --> 00:22:57,840 Speaker 1: early but not so well late, or vice versa. There's 390 00:22:57,840 --> 00:23:00,800 Speaker 1: gonna be a lot of information coming out, and you know, 391 00:23:00,880 --> 00:23:02,960 Speaker 1: what I'm gonna be doing is looking at people who 392 00:23:03,720 --> 00:23:06,080 Speaker 1: really understand viral illness and how to treat it, to 393 00:23:06,160 --> 00:23:09,080 Speaker 1: kind of interpret all the different studies that are will 394 00:23:09,119 --> 00:23:11,800 Speaker 1: be around. But Josh, how long does it take to 395 00:23:11,840 --> 00:23:15,919 Speaker 1: actually understand all of the unintended consequences of a drug? 396 00:23:16,280 --> 00:23:19,080 Speaker 1: And as you rightly say, at what stage they should 397 00:23:19,119 --> 00:23:22,560 Speaker 1: be administered? Are we three months six months to better 398 00:23:22,640 --> 00:23:25,560 Speaker 1: understand it? Well? You know, for a particular drug, it 399 00:23:25,640 --> 00:23:28,359 Speaker 1: depends the studies that are available, you know, and how 400 00:23:28,400 --> 00:23:31,840 Speaker 1: they all get uh looked at together. But I think 401 00:23:31,880 --> 00:23:35,119 Speaker 1: it's for many of these it will be months, not 402 00:23:35,320 --> 00:23:38,199 Speaker 1: many months, but months, not weeks or days, um. But 403 00:23:38,280 --> 00:23:40,960 Speaker 1: I think we will know more about what works than 404 00:23:41,040 --> 00:23:46,000 Speaker 1: at one point in the courtmen, what is Joshua Sharfsty's 405 00:23:46,040 --> 00:23:49,280 Speaker 1: social distance? I guess we've arbitrarily said at six ft 406 00:23:49,359 --> 00:23:52,680 Speaker 1: or you know, whatever it is, what's your social distance 407 00:23:52,680 --> 00:23:55,520 Speaker 1: when you're trotting around? Um. I just tried to steer 408 00:23:55,600 --> 00:23:58,080 Speaker 1: clear from people as much as I can. You know, 409 00:23:58,200 --> 00:24:00,800 Speaker 1: I'm obviously wearing a mask if I've come and encounter 410 00:24:00,960 --> 00:24:04,200 Speaker 1: somebody along the way. Um, um, headed to the grocery 411 00:24:04,240 --> 00:24:07,080 Speaker 1: store or something like that. But you know, and I 412 00:24:07,200 --> 00:24:11,800 Speaker 1: also uh somewhat of assa about watching my hands before 413 00:24:11,800 --> 00:24:14,679 Speaker 1: and after, bringing hand sanitizer with me, you know, the 414 00:24:14,880 --> 00:24:21,320 Speaker 1: the usual. It's um, it's really a challenge to kind 415 00:24:21,320 --> 00:24:23,760 Speaker 1: of keep it top of mind. But I think it's 416 00:24:23,800 --> 00:24:25,960 Speaker 1: that chim just getting a little easier with the passage 417 00:24:26,000 --> 00:24:27,960 Speaker 1: of every day. Now. I think it will be for 418 00:24:28,160 --> 00:24:30,600 Speaker 1: quite a while that work a little bit. You know 419 00:24:30,680 --> 00:24:32,720 Speaker 1: that that we're going to have to change our routines, 420 00:24:33,520 --> 00:24:37,719 Speaker 1: and it might as well start now. Joshua Sharsty from 421 00:24:37,800 --> 00:24:41,879 Speaker 1: Jahns Hopkins Bloomberg School at Public Health Hugely, hugely qualified 422 00:24:41,880 --> 00:24:47,680 Speaker 1: and infectious Diseases joining us down. The former chairman of 423 00:24:47,720 --> 00:24:51,760 Speaker 1: the President Consule of Economic Advisers for Mr Obama Austin 424 00:24:51,800 --> 00:24:55,119 Speaker 1: Goulsby joins us out of the Boost School in Chicago. 425 00:24:55,200 --> 00:24:58,240 Speaker 1: Austin the President making comments on economists last week, we 426 00:24:58,240 --> 00:24:59,760 Speaker 1: don't need to go over and I made a minute, 427 00:24:59,760 --> 00:25:01,159 Speaker 1: put a in a script and made a lot of 428 00:25:01,440 --> 00:25:05,840 Speaker 1: ha ha jokes about it. Economists this week have incredible power. 429 00:25:05,960 --> 00:25:08,960 Speaker 1: All these central banks reporting, all these fancy people with 430 00:25:09,080 --> 00:25:12,200 Speaker 1: fancy educations are going to get out front and try 431 00:25:12,280 --> 00:25:17,439 Speaker 1: to think forward. Do the conventional theories that you learned 432 00:25:17,480 --> 00:25:22,679 Speaker 1: in school still apply to the microeconomics and the macro 433 00:25:22,880 --> 00:25:27,200 Speaker 1: economics that we knew before. Do those models and beliefs 434 00:25:27,200 --> 00:25:31,800 Speaker 1: and theories still work? M M, that's a great question. 435 00:25:31,840 --> 00:25:36,520 Speaker 1: Thanks for having me back again. Tom uh I would say, 436 00:25:36,800 --> 00:25:42,080 Speaker 1: we're still processing whether that statement is right about the 437 00:25:42,160 --> 00:25:47,840 Speaker 1: models as regards the financial crisis, but almost everybody would 438 00:25:47,880 --> 00:25:52,280 Speaker 1: agree that those models do not apply to virus economics, 439 00:25:52,560 --> 00:25:58,800 Speaker 1: that that the slow down slash lockdown of this virus 440 00:25:58,960 --> 00:26:05,360 Speaker 1: are really pretty different than a regular business cycle. So Professor, 441 00:26:05,440 --> 00:26:07,680 Speaker 1: for trying to gauge out our game out how this 442 00:26:07,760 --> 00:26:11,800 Speaker 1: might play out for the remainder this year. In discussions 443 00:26:11,840 --> 00:26:14,399 Speaker 1: of we know the second quarter GDP print is going 444 00:26:14,440 --> 00:26:18,080 Speaker 1: to be extraordinarily ugly, it's gonna be historic. But then 445 00:26:18,640 --> 00:26:21,120 Speaker 1: that's what kind of the debate really begins, as people 446 00:26:21,160 --> 00:26:24,800 Speaker 1: think about how this economy might start to come back 447 00:26:24,840 --> 00:26:26,480 Speaker 1: and over what time frame. How do you think it's 448 00:26:26,480 --> 00:26:28,720 Speaker 1: going to play out given all of the moves that 449 00:26:28,720 --> 00:26:31,879 Speaker 1: are being made by central banks around the world. Well, 450 00:26:32,480 --> 00:26:36,320 Speaker 1: you know, I think the central banks are thinking creatively 451 00:26:36,440 --> 00:26:40,000 Speaker 1: the way that they should. But I just don't think 452 00:26:40,080 --> 00:26:42,600 Speaker 1: we should get our hopes up that central banks are 453 00:26:42,640 --> 00:26:46,439 Speaker 1: the main thing that's driving you know it here. The 454 00:26:46,560 --> 00:26:50,359 Speaker 1: virus is the boss. And the number one rule of 455 00:26:50,480 --> 00:26:54,159 Speaker 1: virus economics, as I say, is the best thing you 456 00:26:54,160 --> 00:26:56,960 Speaker 1: can do for economics is get control on the spread 457 00:26:57,000 --> 00:27:02,080 Speaker 1: of the virus. Because the collapse apps and lockdown begins 458 00:27:02,160 --> 00:27:05,800 Speaker 1: before there were any lockdown orders. Okay, they people stop 459 00:27:05,880 --> 00:27:10,040 Speaker 1: going out, stop participating the economy because they're afraid. So 460 00:27:10,600 --> 00:27:15,320 Speaker 1: how this plays out Number one depends on how successful 461 00:27:15,359 --> 00:27:17,880 Speaker 1: we are at slowing the spread of the virus, which 462 00:27:17,960 --> 00:27:22,440 Speaker 1: I think means following the path of the now five 463 00:27:22,520 --> 00:27:27,840 Speaker 1: or six countries that have done enough testing that they've 464 00:27:27,880 --> 00:27:30,439 Speaker 1: gotten themselves out of lockdown. So the only people that 465 00:27:30,480 --> 00:27:34,280 Speaker 1: go into quarantine are the people who actually have the 466 00:27:34,359 --> 00:27:39,200 Speaker 1: disease and not the majority can't go all the way 467 00:27:39,240 --> 00:27:42,359 Speaker 1: back to where you were before, but people can come 468 00:27:42,440 --> 00:27:46,520 Speaker 1: out of hiding. Um, if we do that, I think 469 00:27:46,560 --> 00:27:51,840 Speaker 1: the White House's timeline new timeline, not the Eastern timeline 470 00:27:51,960 --> 00:27:55,440 Speaker 1: or you know, fourteen days from that timeline, but this 471 00:27:55,600 --> 00:27:59,359 Speaker 1: timeline that quarter two is horrible, and we start to 472 00:27:59,440 --> 00:28:02,480 Speaker 1: see some come back by quarter three if we do 473 00:28:02,520 --> 00:28:05,960 Speaker 1: it up testing. I think that that that could be realistic. 474 00:28:06,400 --> 00:28:10,160 Speaker 1: If we don't and we just kind of follow the 475 00:28:10,240 --> 00:28:13,240 Speaker 1: model of the mayor of Las Vegas or Georgia or 476 00:28:13,280 --> 00:28:16,840 Speaker 1: something and say, hey, let's just start opening up because 477 00:28:17,320 --> 00:28:20,960 Speaker 1: we're sick of being at home. I fear that's gonna 478 00:28:20,960 --> 00:28:24,840 Speaker 1: put us back to Zra. We're gonna shut down again. Awesome. 479 00:28:24,840 --> 00:28:26,920 Speaker 1: I've mentioned this twice today and I'm gonna mention the 480 00:28:26,960 --> 00:28:28,960 Speaker 1: third time. Folks was so important. The essay of the 481 00:28:28,960 --> 00:28:32,880 Speaker 1: weekend was Tyler Burulet, who's a magazine magnet, a monocle. 482 00:28:32,920 --> 00:28:35,760 Speaker 1: He does a great job sort of in the spirit 483 00:28:35,800 --> 00:28:38,520 Speaker 1: of global and what cities are doing and all that, 484 00:28:39,080 --> 00:28:42,560 Speaker 1: and you know, he was writing on the risks involved 485 00:28:42,640 --> 00:28:46,880 Speaker 1: in getting society back into shape versus a virus, and 486 00:28:46,920 --> 00:28:50,280 Speaker 1: so Austin. When I heard you're gonna be on the 487 00:28:50,320 --> 00:28:53,440 Speaker 1: Old what would so and so do? With great respect 488 00:28:53,520 --> 00:28:59,280 Speaker 1: for Chicago, what would Gary Becker do? The great sociologist 489 00:28:59,400 --> 00:29:04,520 Speaker 1: that and of thinking about the philosophy of our society 490 00:29:04,720 --> 00:29:08,960 Speaker 1: given a pandemic, What would Gary Becker do in terms 491 00:29:09,000 --> 00:29:12,560 Speaker 1: of bending the curve and getting the society back to work? 492 00:29:13,520 --> 00:29:18,720 Speaker 1: What a fascinating question. Write a character. I knew him 493 00:29:18,960 --> 00:29:24,760 Speaker 1: quite well. I think that the Old School's Chicago view 494 00:29:26,040 --> 00:29:29,800 Speaker 1: would have had a heavy component of let's call it 495 00:29:30,000 --> 00:29:34,800 Speaker 1: self corrective behavior. That they would have been suspicious of 496 00:29:34,960 --> 00:29:39,040 Speaker 1: government involvement and of lockdown rules and of stuff like that, 497 00:29:39,160 --> 00:29:42,800 Speaker 1: and they would have said people will take their own 498 00:29:43,680 --> 00:29:50,000 Speaker 1: safety into account and adjust their behavior accordingly. They It's 499 00:29:50,040 --> 00:29:53,240 Speaker 1: in the same style you remember others of the Chicago 500 00:29:53,280 --> 00:29:57,840 Speaker 1: School arguing that seat belts don't save lives because if 501 00:29:57,880 --> 00:29:59,920 Speaker 1: people know they have a seat belt, then they're gonna 502 00:30:00,080 --> 00:30:03,480 Speaker 1: ride more recklessly. Um. I think there would be some 503 00:30:04,040 --> 00:30:09,640 Speaker 1: component of that. I don't find that super persuasive at 504 00:30:09,640 --> 00:30:13,000 Speaker 1: a moment like this because of the you know, in 505 00:30:13,040 --> 00:30:17,800 Speaker 1: the economist phrase, the externalities. It's an infectious disease, and 506 00:30:18,320 --> 00:30:21,200 Speaker 1: there are a bunch of people who have mild symptoms 507 00:30:21,240 --> 00:30:26,600 Speaker 1: but are able to deliver crippling blows to uh, including 508 00:30:26,960 --> 00:30:31,400 Speaker 1: an up to an including mortality on other people. Um. 509 00:30:31,680 --> 00:30:34,120 Speaker 1: So I kind of think this one begs out for 510 00:30:34,160 --> 00:30:40,600 Speaker 1: a more government centered solution. So, Professor, is internationalism, you know, 511 00:30:40,840 --> 00:30:43,959 Speaker 1: really dealt a death blow here? Um? Just because it 512 00:30:44,040 --> 00:30:48,880 Speaker 1: looks like societies, people, cities are just gonna be really 513 00:30:48,920 --> 00:30:53,120 Speaker 1: looking more inward. Now, is that a concern for you? Yeah? 514 00:30:53,640 --> 00:30:55,880 Speaker 1: I don't know if it's a death blow. It's certainly 515 00:30:57,120 --> 00:31:03,080 Speaker 1: suppressing blow, and that's historically not there's nothing unusual about that. 516 00:31:03,240 --> 00:31:09,040 Speaker 1: You know, Plagues, plagues and people's have throughout the millennia 517 00:31:09,440 --> 00:31:13,560 Speaker 1: brought on a bunch of inward looking nationalist behavior and 518 00:31:14,120 --> 00:31:17,480 Speaker 1: often an ugly side of point. Uh, we only have 519 00:31:17,720 --> 00:31:20,880 Speaker 1: this plague because you didn't pray enough, Because people like 520 00:31:21,040 --> 00:31:23,560 Speaker 1: you came from somewhere else. We gotta get them, you know. 521 00:31:23,680 --> 00:31:26,320 Speaker 1: So let's let's hope we don't. We've already seen a 522 00:31:26,400 --> 00:31:29,120 Speaker 1: bunch of that, and let's hope that we don't see 523 00:31:29,160 --> 00:31:31,320 Speaker 1: more of it. Oh so, let me ask you about 524 00:31:31,320 --> 00:31:34,920 Speaker 1: the FED policy. And there's forty five central banks reporting today. 525 00:31:34,960 --> 00:31:37,120 Speaker 1: I guess the e C b is a most interest. 526 00:31:37,200 --> 00:31:41,760 Speaker 1: But all of it wraps around the theory that these 527 00:31:41,760 --> 00:31:45,440 Speaker 1: central banks have. Do you discern a theory within their 528 00:31:45,520 --> 00:31:48,680 Speaker 1: rules and within their discretion? Is there a theory out 529 00:31:48,680 --> 00:31:52,040 Speaker 1: there right now with interest at or beneath the lower bound? 530 00:31:54,360 --> 00:31:56,479 Speaker 1: I kind of think there's not a theory. You know. 531 00:31:56,560 --> 00:31:59,880 Speaker 1: The only theory that they have is a very short 532 00:32:00,160 --> 00:32:06,520 Speaker 1: run theory which goes whatever level you're at of rates, 533 00:32:06,560 --> 00:32:11,880 Speaker 1: of queue, of whatever, if conditions deteriorate, you should loosen. 534 00:32:12,120 --> 00:32:17,200 Speaker 1: If conditions improve, you can tighten. So in a way 535 00:32:17,240 --> 00:32:21,120 Speaker 1: that theories says the level of the interest rate doesn't 536 00:32:21,160 --> 00:32:24,120 Speaker 1: make any difference. We're at a negative rate, so what 537 00:32:24,520 --> 00:32:29,280 Speaker 1: if it gets worse? Cut in UM, that's part now 538 00:32:29,560 --> 00:32:34,240 Speaker 1: the said separate from these other central banks, they at 539 00:32:34,320 --> 00:32:38,360 Speaker 1: least have more of a of a defensible theory, I think, 540 00:32:38,520 --> 00:32:43,360 Speaker 1: because because we're not we're not in negative territory. Maybe 541 00:32:43,400 --> 00:32:47,920 Speaker 1: we never will be UM, But once you're too negative rates. Look, 542 00:32:48,320 --> 00:32:51,280 Speaker 1: we've talked about this before. When I was a student, 543 00:32:52,520 --> 00:32:56,560 Speaker 1: they told us negative rates can't exist because you could 544 00:32:56,560 --> 00:32:59,440 Speaker 1: always put your money under your bed, and so why 545 00:32:59,480 --> 00:33:03,040 Speaker 1: would you hey someone to hold it? So I think 546 00:33:03,800 --> 00:33:07,280 Speaker 1: that that old intuition at least, hold, you can't have 547 00:33:07,480 --> 00:33:12,080 Speaker 1: massively negative rates. H And so once you're already in 548 00:33:12,120 --> 00:33:14,600 Speaker 1: the negative, it's just a matter of time. You know. 549 00:33:14,640 --> 00:33:17,000 Speaker 1: There's only a little bit you can do. But Paul, 550 00:33:17,000 --> 00:33:19,840 Speaker 1: it's okay because now that oils, Now that oil has 551 00:33:19,840 --> 00:33:26,440 Speaker 1: been negative as a barrel oil, and Austin, Austin's got 552 00:33:26,440 --> 00:33:29,840 Speaker 1: a barrel of oil under his bed. Austin Colson, thank 553 00:33:29,880 --> 00:33:33,240 Speaker 1: you so much, greatly appreciated former chairman at the President's 554 00:33:33,240 --> 00:33:36,600 Speaker 1: Council of Economic Advice, is truly one of our broadestant, 555 00:33:36,800 --> 00:33:39,400 Speaker 1: great great minds out there. Thanks for listening to the 556 00:33:39,400 --> 00:33:45,920 Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 557 00:33:46,280 --> 00:33:50,480 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 558 00:33:50,520 --> 00:33:54,800 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 559 00:33:55,240 --> 00:34:01,280 Speaker 1: I'm Bloomberg Radio.