Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Jason Kelly on Bloomberg Radio. So we do want to
Speaker 1: get to our next guest um. In terms of news
Speaker 1: out of the FED today, the Federal Reserve said, when
Speaker 1: we start a financial crisis error program to help US
Speaker 1: companies borrow through the commercial paper market after it came
Speaker 1: under considerable strain due to the coronavirus pandemic, and this,
Speaker 1: of course after a second emergency rate cut that took
Speaker 1: rates down to zero. We got that second emergency cut
Speaker 1: on Sunday. Stephen Skanky, his chief economic advisor at keel Point,
Speaker 1: his former U. S. Treasury and White House National Security
Speaker 1: Council staff member, based typically in Washington, but joining us
Speaker 1: from Cape Canaveral, Florida. Stephen, really good to have you
Speaker 1: here with us. Steve, tell us a little bit about
Speaker 1: what you've seen from the FED so far. Logical makes
Speaker 1: sense and is it what we needed? Well? Carol, thanks
Speaker 1: and sorry, it's great to be with you. And it's
Speaker 1: been interesting to watch the FED act decisively and preemptively
Speaker 1: over this this past week. It's interesting that what they
Speaker 1: did on Sunday night didn't seemed to please the markets
Speaker 1: very much when they sold off incredibly yesterday. Why did
Speaker 1: the market sell often your view, why did they? I
Speaker 1: think it was two things. That one is, Uh, the
Speaker 1: Fed took a lot of actions and it's hard to
Speaker 1: understand what all of them mean in a short period
Speaker 1: of time. And because it was so was significant and
Speaker 1: happened on a Sunday evening, I think markets were afraid
Speaker 1: that maybe the freid the Fed was afraid of something
Speaker 1: that wasn't apparent to them. So it was really fearing
Speaker 1: what the Fed was fearing to uh, to be so
Speaker 1: preemptive on a Sunday evening. I think the second thing
Speaker 1: is that, uh, everyone is still waiting to hear what
Speaker 1: the fiscal support and stimulus is going to be. There's
Speaker 1: been a lot of talk about it. The House passed
Speaker 1: to bill last Friday. UH, they continue to talk about it. Obviously,
Speaker 1: after the announcements and some of the comments made yesterday
Speaker 1: from the White House, the markets took a beat, a
Speaker 1: big dive after that. I think I got a concern
Speaker 1: that good discussion, but a more prolonged period from the
Speaker 1: views of the policy managers of the White House. I
Speaker 1: think that folks have been expecting and no specific action
Speaker 1: on caring for consumers, supporting consumers, spending and doing the
Speaker 1: things that the government needs to do on the fiscal
Speaker 1: side in addition to what they're trying to do on
Speaker 1: the care side. Yeah, and and so Steve, let's talk
Speaker 1: a little bit about that. I mean, you've worked inside
Speaker 1: the Treasure you understand sort of all the levers that
Speaker 1: can be pulled. We have seen we were talking about
Speaker 1: this with one of our colleagues earlier. We've really seen
Speaker 1: the Secretary of the Treasury step into this in a
Speaker 1: clear leadership role. The chief negotiator with the Congress, Stephen Manuchin,
Speaker 1: has been Is that something you expected? How needed is
Speaker 1: that element? At this point? It's been very needed. He
Speaker 1: was He was very present in the negotiations last week
Speaker 1: with a House and with Speaker Pelosi, and they came
Speaker 1: to a good first step agreement and I think that
Speaker 1: that was well received and it got pasted on Friday.
Speaker 1: But nothing happened with the Senate over the weekend, and
Speaker 1: there was a lot of conversation and the Secretary Manuchin
Speaker 1: was not part of the discussion yesterday, which focused on
Speaker 1: the epidemiology and care and testing UH and The President
Speaker 1: clearly said that you know this, this could continue with
Speaker 1: us through July and August, and I think he was
Speaker 1: being wise in saying that, but it was said with
Speaker 1: a little bit of imprecision, without sort of articulating that
Speaker 1: might mean in terms of what the government could do
Speaker 1: the Congress from the White House on the fiscal support
Speaker 1: side of things. And so that was missed yesterday at markets.
Speaker 1: Markets closed in the midst of that. They kind of
Speaker 1: made it pay for that lack of detail, didn't they yesterday?
Speaker 1: They really did. They extracted a big price, uh, as
Speaker 1: a result of that lack of clarity on that point. Right, So,
Speaker 1: how what are you telling your team at keel point?
Speaker 1: I mean, we're seeing lots of stories come out about
Speaker 1: you know, big Wall Street firms saying okay, Morgan Stanley
Speaker 1: Goldman declared global recession is underway. You know, um, how
Speaker 1: do you see it? What are you telling your team?
Speaker 1: Is it a case of it's it's two quarters and
Speaker 1: then we do bounce back pretty quickly once we get
Speaker 1: through it. How do you see it? Steve? It's going
Speaker 1: to depend significantly on on what happens in this next
Speaker 1: quarter and what we also see from U China's uh
Speaker 1: dive in this uh this first quarter. You know, they're
Speaker 1: about two and a half months ahead of the rest
Speaker 1: of us. They really they really started to feel the
Speaker 1: effects and try to do something about this in early
Speaker 1: to mid January. UH. And and so here we are,
Speaker 1: I'll just say, two and a half months later, and
Speaker 1: they're starting to come out the other side. They're reopenings
Speaker 1: and factories, they're starting to refill the supply chain, and
Speaker 1: and that's actually quite encouraging to see that. Steve, I
Speaker 1: want to pick up where we left off, which is
Speaker 1: this whole notion of understanding the rest of the world
Speaker 1: and specifically China. You know, Carol raised this possibility that
Speaker 1: we've heard from some of our reporting that you know,
Speaker 1: maybe China, as they tend to do, is gaming the
Speaker 1: data a little bit to show an improvement. How much
Speaker 1: do you worry about that, especially as you model out
Speaker 1: a global economic recovery from this virus. Well, we always
Speaker 1: have to be concerned about that. And as you know,
Speaker 1: and as Carol pointed out, we're always looking at alternative
Speaker 1: indicators of Chinese economic activity. The rest of the world
Speaker 1: has typically has one estimate of China GDP growth and
Speaker 1: China has another one that it reports. But what I was,
Speaker 1: what I was mentioning earlier, is that even though no
Speaker 1: doubt there is, there is some amount of turning on
Speaker 1: the lights and trying to suggests that there's economic activity
Speaker 1: when there's not there. There is also some anecdotal information
Speaker 1: that just floats by UM, some of which probably is credible,
Speaker 1: so maybe not, but indicates that there is a restarting
Speaker 1: of the production process and feeling this the supplying UH
Speaker 1: from China and to the extent that that's happening, that's
Speaker 1: just helpful information in terms of but dating what we
Speaker 1: might think to be the timeline of this cycle UH.
Speaker 1: Where the United States is the in it compared to
Speaker 1: where China was and how they processed through maybe completely different.
Speaker 1: But it's one thing to think that you can come
Speaker 1: through the illness part of it in two and a
Speaker 1: half months that it is to think that it might
Speaker 1: be five or six months. And so the more we
Speaker 1: can get out of China that that gives us insight
Speaker 1: into that, the more it will be helpful to economic
Speaker 1: planners and throughly the financial markets and trying to gauge
Speaker 1: is this going to be in the United States. A
Speaker 1: deep dive for economic growth and economic indicators and corporate
Speaker 1: earnings in the second quarter and then start to come
Speaker 1: out of it in the bard UM. I think it's
Speaker 1: pretty clear that earnings are going to suffer, certainly in
Speaker 1: the second and third quarter. Uh. Can they come out
Speaker 1: on the fourth Maybe It all depends on how quickly
Speaker 1: production and spending rebound, But those are things that we're
Speaker 1: watching for. You probably saw that consumer spending numbers came
Speaker 1: in fairly positive for the month of February. That was encouraging.
Speaker 1: They were off a little bit because of auto sales
Speaker 1: and lower gasoline prices. The consumer competence numbers that came
Speaker 1: out a few days ago still from early March and
Speaker 1: UH and not fully reflecting what we're what we're experiencing,
Speaker 1: but but relatively positive. All to say that we're coming
Speaker 1: into this very challenging period of time with a pretty
Speaker 1: strong face. Do you feel like the financial markets accurately
Speaker 1: reflect what's going on? Um? The financial markets have so
Speaker 1: much information coming at them. It's really hard to digest
Speaker 1: and act um in real time with all that we're
Speaker 1: seeing and experiencing, and that's part of what contributes to
Speaker 1: the markets being off twelve yesterday and up six today,
Speaker 1: And if you sort of go back, it's almost every
Speaker 1: other day or every other two days that we get
Speaker 1: a rebound. And part of the rebound that we had
Speaker 1: today was just uh coming back to to a more
Speaker 1: logical point from over selling off yesterday and the information
Speaker 1: that comes in real time. I mean, yesterday the White
Speaker 1: House press conference with the President and and that other
Speaker 1: array of UH talnge and senior leaders in government was
Speaker 1: happening in the last hour of the market. You know,
Speaker 1: how can you expect the market to process that, uh
Speaker 1: in a way that fully incorporates uh, the information that
Speaker 1: they're getting and that they just have a different perspective
Speaker 1: on overnight. Right. Well, and it's clear that also, and
Speaker 1: there's been a lot written by us and others about this,
Speaker 1: that you also have humans fighting machines in the market
Speaker 1: to to be honest, and and that is in part
Speaker 1: accounting for a lot of these wild swings. You know, Steve,
Speaker 1: before we let you go, I just got to ask you.
Speaker 1: I feel like we'd be remiss if we didn't you
Speaker 1: help staff the White House, a National Security Council, you
Speaker 1: worked in the in the Treasury. What do you make
Speaker 1: of this administration's response. At this point, you've been in
Speaker 1: those rooms. You understand the high stakes, UH that are
Speaker 1: involved here. Where are we in terms of the administration's response.
Speaker 1: I think the administration is is is struggling and what
Speaker 1: is a very difficult situation. We don't encounter these things
Speaker 1: all the time. But but one of the things that
Speaker 1: I would say that I see that's different, UM, is
Speaker 1: the resources, the intellectual talent and capacity of the U. S.
Speaker 1: Government is extraordinary and well beyond what is for the
Speaker 1: most part, ever tapped into U And I do think
Speaker 1: if we if we just sort of look at it objectively, UM,
Speaker 1: the the leadership in the executive branch, I think was
Speaker 1: a little bit slow to get fully tapped into all
Speaker 1: of that talent and resources to as quickly as they
Speaker 1: might have. And so we're a little bit slow out
Speaker 1: of the gate. And when when you saw the team
Speaker 1: that they had a read there yesterday, top talent that
Speaker 1: they but they may be started a little bit late
Speaker 1: and to and so they're an overdrive to UH to
Speaker 1: catch up. And that's just hard anytime you're in government
Speaker 1: and you're behind the you're behind the curve, and you've
Speaker 1: got you've got indicators that are just pummeling you daily,
Speaker 1: and and you're trying to create a sense of calm
Speaker 1: when it's very hard to do that from behind the wave. Yeah,
Speaker 1: all right, we're gonna leave it there. Really enjoyed catching
Speaker 1: up the great perspective as always. Dr Steven Skanky is
Speaker 1: chief economic advisor for a keel Point Johns from Florida.
Speaker 1: He also worked in the Treasury and helps staff the
Speaker 1: White House National Security Council. He knows what he's talking about, folks,
Speaker 1: and some really good insights in and Carol, I daresay
Speaker 1: a little bit of optimism there that maybe we're starting
Speaker 1: to get our arms around where we may go from here.