WEBVTT - Surveillance: Recovery Risk With Deustche Bank's Ryan 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Dailey. 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 --> 0:00:27.120 Bloomberg dot Com, and of course on the Bloomberg with 0:00:27.240 --> 0:00:30.520 the son Michael Clody with ubs out of US rates strategies. 0:00:30.720 --> 0:00:33.360 Let's start with that idea, Michael Clorty, who has their 0:00:33.360 --> 0:00:37.879 foot on the two year yield? Well, the Fed does, um, 0:00:37.880 --> 0:00:40.760 so you know with their guidance um, you know they're 0:00:41.440 --> 0:00:43.360 they're sort of suggestion that they're gonna keep race low 0:00:43.400 --> 0:00:46.280 for a long time. Uh, they all continue to hold 0:00:46.479 --> 0:00:48.320 this front end down. I think when you look at 0:00:48.320 --> 0:00:49.920 the bottom market, you want to look at the Fed's 0:00:50.400 --> 0:00:52.960 actions in in two different parts of the curve. So 0:00:53.000 --> 0:00:54.960 the front of the curve is all about what they're 0:00:54.960 --> 0:00:57.040 gonna tell us they're gonna do with the policy rate. 0:00:57.440 --> 0:00:59.960 The back of the curve is sort of chewy driven. 0:01:00.520 --> 0:01:03.360 But the Treasury is issuing a lot more at the 0:01:03.400 --> 0:01:05.720 back of the curve than the FEDS buying. So let's 0:01:05.760 --> 0:01:08.480 talk about the issuance here. Issuance is a flood of 0:01:08.560 --> 0:01:11.800 paper onto the market, and to be clear, that means 0:01:11.920 --> 0:01:15.320 yield up priced down. How much of that movement would 0:01:15.360 --> 0:01:18.840 you calculate? So what's been surprising is how well we've 0:01:18.880 --> 0:01:21.840 been able to handle the supply so far. That said, 0:01:21.880 --> 0:01:25.720 it's it's just relentless. So if we look again, only 0:01:25.760 --> 0:01:29.960 focusing on the long end front end supply, during Operation Twists, 0:01:30.040 --> 0:01:33.720 the FEDS sold six thirty billion dollars of three year 0:01:33.720 --> 0:01:36.200 and shorter treasuries and it barely moved yields at all. 0:01:36.640 --> 0:01:40.039 So long end is where the supply matters. Seven year 0:01:40.080 --> 0:01:44.600 and longer auctions between March and October is going to 0:01:44.680 --> 0:01:47.919 be up eight fo So even though the Feds buying 0:01:48.360 --> 0:01:51.920 it's peanuts relative to what the Treasury is issuing out there. Um, 0:01:52.040 --> 0:01:54.000 you know, we think we're just gonna see this steady 0:01:54.320 --> 0:01:57.760 weight of supply dragging yields a bit higher. Michael, Not 0:01:57.840 --> 0:02:01.360 a trick question, a genuine cure us from me. What's 0:02:01.400 --> 0:02:05.200 the history of supply mattering in the treasury market? So 0:02:05.400 --> 0:02:08.799 generally it matters that extremes. So it mattered a lot 0:02:09.000 --> 0:02:11.440 when the US ran a surplus for four years UM 0:02:11.600 --> 0:02:15.200 back around the turn of the sentry UM. So back 0:02:15.240 --> 0:02:19.639 then we saw two S tens invert fifty basis points 0:02:19.840 --> 0:02:22.440 two S tens swaps stayed positive that whole time. So 0:02:22.480 --> 0:02:27.000 you had this incredible richness of long treasuries back then. Um, 0:02:27.040 --> 0:02:29.920 you know it, it mattered a little bit coming out 0:02:29.960 --> 0:02:33.080 of the last crisis when we saw you know, a 0:02:33.080 --> 0:02:37.000 lot the Treasury initially issued lots of bills to handle 0:02:37.600 --> 0:02:39.920 the jump in supply. As they turned it out, it 0:02:39.960 --> 0:02:42.840 really did offset some of the effects of QUE. And 0:02:42.960 --> 0:02:45.760 that's what we think right here is is the issuance 0:02:45.840 --> 0:02:49.480 matters more than QUE right now. Um, you know, the 0:02:49.520 --> 0:02:53.520 Fed would have to upsize enormously to offset this supply. Well, 0:02:53.560 --> 0:02:55.840 let me throw this in there, Micaul. What matters ultimately 0:02:55.880 --> 0:02:59.160 more the outlook for inflation or the outlook for supply 0:02:59.240 --> 0:03:02.040 the long end, right, So, so the I guess within 0:03:02.480 --> 0:03:07.480 this inflation will set a fundamental level for bond yields. Supply, 0:03:07.880 --> 0:03:11.720 can you know, create some significant swings within that. Um, 0:03:11.800 --> 0:03:14.360 so we think we're so low right now, there's just 0:03:14.400 --> 0:03:16.840 not much upside. I mean, we we've seen a lot. 0:03:17.080 --> 0:03:20.280 We saw equities move pretty substantially in the last month 0:03:20.800 --> 0:03:23.720 tenure and yields stayed in the six basis point range 0:03:23.760 --> 0:03:26.560 the whole month, So you know, you're just not seeing 0:03:26.720 --> 0:03:30.080 much of a hedge benefit from treasuries at these levels. 0:03:30.720 --> 0:03:34.120 That means there's less fundamental value in treasuries. Treasury is 0:03:34.160 --> 0:03:37.200 underperform corporates the vast majority of the time. The only 0:03:37.200 --> 0:03:40.120 reason you own a treasury is because when the outperform 0:03:40.200 --> 0:03:43.880 corporates is when the equity market gets hurt. When you 0:03:43.920 --> 0:03:48.320 lose some of that hedge value, that diversification value, uh, 0:03:48.560 --> 0:03:52.360 treasury is fundamentally worthless. This is such an important point, 0:03:52.400 --> 0:03:53.960 and it's one that a lot of people are highlighting 0:03:54.000 --> 0:03:56.920 this morning, saying that treasuries can no longer be a 0:03:56.920 --> 0:03:58.760 hedge right, they never could, no longer can be a 0:03:58.800 --> 0:04:01.680 ballast to your sixty forty portfolio. Do you think that 0:04:01.760 --> 0:04:04.800 it is too soon to ring the death tool for 0:04:05.520 --> 0:04:08.000 bond's acting as this ballast or or do you think 0:04:08.000 --> 0:04:11.160 that this is an accurate characterization. I think these ear 0:04:11.280 --> 0:04:13.320 levels is accurate. You know, we back up a little 0:04:13.320 --> 0:04:16.159 bit in yields and I think it will the behavior 0:04:16.200 --> 0:04:20.560 will come back. But you know, with with the US 0:04:20.720 --> 0:04:23.359 rates pended zero on the front end, you know, the 0:04:23.400 --> 0:04:25.880 Fed is repeatedly said they're not going to go through zero. 0:04:26.000 --> 0:04:29.279 If they do go through zero, it threatens disruptions in 0:04:29.320 --> 0:04:32.599 the repo market. Um, when the Uncle Sam has twenty 0:04:32.680 --> 0:04:35.600 trillion dollars of debt to roll over, the last thing 0:04:35.640 --> 0:04:38.120 you want to do is interfere with the funding of 0:04:38.160 --> 0:04:41.640 those treasuries. So you know, at these ear levels, I 0:04:41.640 --> 0:04:44.920 don't think there's much benefit if we cheapen a little bit. 0:04:45.240 --> 0:04:47.680 I do think it comes back, all right. Uh so 0:04:47.720 --> 0:04:49.440 can you give us a sense of where you start 0:04:49.520 --> 0:04:51.440 seeing value again? Just to give you a perspective. The 0:04:51.440 --> 0:04:54.080 thirty year treasure yield right now the highest since June 0:04:54.279 --> 0:04:58.000 at one point of five. Yeah, I think we we 0:04:58.040 --> 0:05:00.520 need to sort of back up another twenty bit before 0:05:01.480 --> 0:05:04.320 uh you get a little more interested, and then before 0:05:04.320 --> 0:05:06.440 we get some of that hedge value back in the 0:05:06.480 --> 0:05:10.840 equation with pointing out Tom here today long treasuries t 0:05:11.080 --> 0:05:15.120 l T, the E t F. I think the key 0:05:15.160 --> 0:05:17.440 clause in what Michael is pushing right now is just 0:05:17.480 --> 0:05:21.000 the idea that at these levels they don't present the 0:05:21.040 --> 0:05:23.960 same opportunity they did this year. And let's think about 0:05:24.000 --> 0:05:26.880 how many people came on the program last year saying 0:05:26.880 --> 0:05:29.800 that the next test for treasuries the budget deficit, all 0:05:29.800 --> 0:05:33.040 those bad things, and what happened to treasuries when things 0:05:33.080 --> 0:05:36.880 hit the fan? They rallied and they rallied aggressive. I mean, 0:05:36.960 --> 0:05:40.080 this is really important, Michael, Clarity very quickly here. I 0:05:40.200 --> 0:05:43.520 just think it's so important. The great measurement of a 0:05:43.560 --> 0:05:47.360 bond bear market is when your clients gets three months 0:05:47.360 --> 0:05:49.839 in a row statements of their for sure, like a 0:05:49.960 --> 0:05:54.839 rock bond portfolio going down in price, where's that equivalent 0:05:54.920 --> 0:05:57.360 ten year yield? Now, I mean on a full faith 0:05:57.440 --> 0:06:01.520 and credit tenure, where does the pain really click? And well, 0:06:01.520 --> 0:06:03.920 again that's that's one of the issues is at these 0:06:04.000 --> 0:06:07.719 year levels, I'm not seeing much income, um. So you know, 0:06:07.839 --> 0:06:10.240 normally you could have prices fall a little bit, but 0:06:10.279 --> 0:06:13.719 it gets offset by the income. Getting these year levels. 0:06:14.040 --> 0:06:17.680 My income is so small um that you know, again 0:06:17.680 --> 0:06:21.880 it all depends on distribution. But we get up. We 0:06:21.880 --> 0:06:25.440 we sort of sell off five basis points a month 0:06:25.480 --> 0:06:30.239 and more than gets you there into negative territor. Michael, 0:06:30.240 --> 0:06:32.480 would you still call the US the high yolda compared 0:06:32.520 --> 0:06:35.039 to what's playing out in Europe at the moment? Given 0:06:35.080 --> 0:06:37.440 what we on a ten year in Germany negative fifty 0:06:37.440 --> 0:06:41.320 four basis points for a foreign investor right now from 0:06:41.320 --> 0:06:43.720 an international perspective look into the United States, just how 0:06:43.760 --> 0:06:49.359 attractive our things that actually there's still some value there. Um. 0:06:49.400 --> 0:06:51.880 You know, what we've seen is some of the the 0:06:52.760 --> 0:06:57.320 FX hedging costs have actually come down, um recently. There 0:06:57.320 --> 0:06:59.640 seems to be a lot of street balance sheet out 0:06:59.640 --> 0:07:03.120 there right now that's reduced those costs. So there is 0:07:03.160 --> 0:07:05.520 a little bit of value for some of those foreign investors. 0:07:06.000 --> 0:07:08.400 But you know, again not exactly to jump up and 0:07:08.440 --> 0:07:11.280 down sort of price. Michael clad to catch up, sir, 0:07:11.360 --> 0:07:13.840 Thank you, Michael Clotty. There of ubs on this right. 0:07:13.880 --> 0:07:21.480 Smart David Riley gets started with the asset management. We're 0:07:21.480 --> 0:07:24.080 thrilled you could join us today, David. First, chart I 0:07:24.120 --> 0:07:27.160 looked at today where those five year out, five year 0:07:27.280 --> 0:07:31.160 forward break evens so different for the United States with 0:07:31.240 --> 0:07:35.080 a whiff of inflation versus the disinflation of Europe. What 0:07:35.120 --> 0:07:37.600 does that signal? Well, I think that signal is that 0:07:38.520 --> 0:07:41.880 Europe is in a very difficult situation in terms of 0:07:41.920 --> 0:07:46.360 the extent of the bitch inflationary deflationary forces. I mean, 0:07:46.360 --> 0:07:50.880 we've had a record loot um inflation prints recently, and 0:07:51.560 --> 0:07:54.920 I think that's going to prompt THECP too UM and 0:07:55.040 --> 0:07:58.120 spent more policy action, but probably not until the end 0:07:58.160 --> 0:08:02.200 of the year or um early next year. Well, I 0:08:02.240 --> 0:08:05.760 think in the US, you know, there is still a 0:08:05.840 --> 0:08:08.280 challenge on the inflation from but I think there's more 0:08:09.120 --> 0:08:13.000 upside potential, particularly if we do get a substantive physical 0:08:13.080 --> 0:08:16.800 stimulus after the U S elections. Given that, David, do 0:08:16.840 --> 0:08:19.040 you think that the euro, the rally that we've seen 0:08:19.360 --> 0:08:23.280 versus the dollar is overdone? Well, I think if we 0:08:23.480 --> 0:08:28.040 get a situation where um, you know you were discussing before, 0:08:28.160 --> 0:08:32.600 let's you know, a Democrat clean suite, then I think 0:08:32.640 --> 0:08:37.760 market expectations will be for a very significant um US 0:08:37.840 --> 0:08:42.480 physical stimulus sometime in the early one I think it's 0:08:42.520 --> 0:08:46.840 going to be associated, at least initially with a weaker dollar. Um, 0:08:46.960 --> 0:08:49.440 I think you're rightly does that play out with a 0:08:49.520 --> 0:08:54.000 stronger euro. I actually think it will benefit the sort 0:08:54.000 --> 0:08:57.320 of laggered of this recent dollar weakness which has been 0:08:57.440 --> 0:09:01.720 emerging market currencies. I think a sort of Biden and 0:09:01.840 --> 0:09:06.360 Democratic clean sweep is unambiguously positive for emerging market assets, 0:09:06.360 --> 0:09:10.560 including currency. So that's where I'd rather play. Where I 0:09:10.600 --> 0:09:13.880 think we're going to see some future dollar weakness. Is 0:09:13.880 --> 0:09:17.120 that just a trade policy trade David? What is that? Yeah? 0:09:17.160 --> 0:09:20.880 I mean I do think that there is a sort 0:09:20.880 --> 0:09:29.280 of trade policy premium uncertainty associated with a Trump administration, 0:09:29.920 --> 0:09:35.199 and that extends not just too obviously relationships with China, 0:09:35.320 --> 0:09:38.000 but also the way that tariff policy is being used 0:09:38.040 --> 0:09:43.000 with a number of trading partners, including allies of UM 0:09:43.120 --> 0:09:45.000 the US as well. So I think if you take 0:09:45.080 --> 0:09:49.200 that out that other things being called, that implies a 0:09:49.440 --> 0:09:52.439 weaker dollar, and I think a big US past stimulus 0:09:52.480 --> 0:09:55.320 package would also be then a sort of signal for 0:09:55.360 --> 0:09:58.920 the market to sort of more aggressively would decisively go 0:09:59.000 --> 0:10:01.960 into a rotation trade and a kind of global reflation trade. 0:10:02.000 --> 0:10:04.800 I think you get a steeper treasury curve. But as 0:10:04.880 --> 0:10:06.720 part of that as well, I think he gets some 0:10:06.880 --> 0:10:10.400 rotation from dare I say, from growth to value, but 0:10:10.480 --> 0:10:13.680 also into I think some of those assets like emerging 0:10:13.760 --> 0:10:17.480 markets that do better in a sort of global reflation world. 0:10:18.040 --> 0:10:21.000 Dare I say, you said it, David, So let's discuss it. 0:10:21.080 --> 0:10:25.480 This rotation, the elusive rotation, this idea that banks can 0:10:25.520 --> 0:10:27.800 start doing wow, that curves can start stepening. I mean, 0:10:27.800 --> 0:10:30.679 that's the European trade that's the long right there, That's 0:10:30.720 --> 0:10:33.720 the trade everyone wants to see work and just hasn't 0:10:34.040 --> 0:10:36.360 for so long. David, If it work in the United States, 0:10:36.360 --> 0:10:40.080 can it work in Europe? Um? Well? Yeah, I mean 0:10:40.120 --> 0:10:42.560 I think it can help. I think if we see 0:10:42.600 --> 0:10:44.960 that kind of move in in the US and steeper curves, 0:10:45.000 --> 0:10:48.280 then to some extent, that would sort of show the 0:10:48.360 --> 0:10:51.720 way for European policymakers. I mean, we have seen a 0:10:51.800 --> 0:10:56.000 better and more coherent policy response from European policymakers, particularly 0:10:56.000 --> 0:10:59.080 on the fiscal side, in this crisis, um, than we've 0:10:59.080 --> 0:11:03.559 seen in previous crisis. But I do think that a 0:11:03.760 --> 0:11:06.880 part of you know, in order to get that take 0:11:06.920 --> 0:11:10.280 how that kind of Japanization story for for for Europe, 0:11:10.559 --> 0:11:14.440 We're going to need continued fiscal policy support, and I 0:11:14.480 --> 0:11:16.760 think the ECB is going to have to accommodate that 0:11:16.800 --> 0:11:20.640 by extending its asset purchases, but eventually saying we're going 0:11:20.640 --> 0:11:25.640 to backstop government borrowing and don't worry about how much 0:11:25.679 --> 0:11:28.320 debt there is right now, keep on borrowing, keep on 0:11:28.360 --> 0:11:31.280 supporting the recovery. And I think if we get that 0:11:31.360 --> 0:11:33.439 as a story not only in the US but also 0:11:33.679 --> 0:11:37.120 in Europe, then I think we will seem stupid curves, 0:11:37.160 --> 0:11:40.120 and I think it will be beneficial for the cyclicals 0:11:40.600 --> 0:11:44.320 and value like financials. David, what's your hedge? What's your 0:11:44.320 --> 0:11:48.000 go to asset to counteract if you're wrong about this 0:11:48.040 --> 0:11:53.920 reflation trade? Yeah, I mean it's it's actually um you know, 0:11:54.120 --> 0:11:57.920 not an easy thing to do to find hedges for 0:11:58.559 --> 0:12:01.920 portfolios right now, bigause. I think the way that fixed 0:12:01.960 --> 0:12:05.959 income has behaved core government bonds, you know, during September, 0:12:06.000 --> 0:12:08.959 shows that it has become very asymmetric. I think it's 0:12:09.000 --> 0:12:11.440 hard for those shields to go much lower. And I 0:12:11.480 --> 0:12:14.920 think if we do get some positive news incremental policy news, 0:12:14.920 --> 0:12:17.200 particularly on the fiscal side, but but also in terms 0:12:17.200 --> 0:12:20.880 for example a vaccine before year end, then then I 0:12:20.920 --> 0:12:23.400 think those shields sort of moved higher. How do you 0:12:23.400 --> 0:12:25.600 try to sort of mitigate that risk a little bit? 0:12:25.640 --> 0:12:27.200 I mean, we've reduced some of the risk within our 0:12:27.240 --> 0:12:30.080 portfolio has given the level of uncertainty at the moment, 0:12:30.400 --> 0:12:33.439 but also you stick with your biased to sort of 0:12:33.520 --> 0:12:38.320 up in quality to sectors like utilities, um in high 0:12:38.400 --> 0:12:41.120 grade credit, de Haven greater catch up. As always get 0:12:41.120 --> 0:12:43.520 to see a Sir David running their fluid asset manage 0:12:43.520 --> 0:12:49.079 around the latest in Europe. We're not Julie Norman with 0:12:49.240 --> 0:12:52.920 us with UCL Professor of Political Science. And what's fascinating 0:12:53.280 --> 0:12:56.439 about her is her study and her expertise and academics 0:12:56.480 --> 0:13:00.959 for conflict. Her focuses on arab Is really uh conflicts 0:13:01.000 --> 0:13:04.080 and particularly a focus around the Palestinians, But far more 0:13:04.640 --> 0:13:08.640 it is just simply about the politics of our conflict. Julie. 0:13:08.679 --> 0:13:10.800 I don't mean to make light of it, but you 0:13:10.880 --> 0:13:13.800 could take your conflict over the culture wars of the 0:13:13.920 --> 0:13:17.400 United States of America. How will they play out in 0:13:17.480 --> 0:13:20.880 the next twenty nine days. Well, Tom, that's certainly what 0:13:20.960 --> 0:13:22.880 we're all going to be looking at. This has obviously 0:13:23.000 --> 0:13:27.400 been such a polarized gear, a very polarized election, and 0:13:27.960 --> 0:13:31.560 with the events of the recent days, with Trump's diagnosis, 0:13:32.000 --> 0:13:34.760 with the response to that, it's looking like the end 0:13:34.800 --> 0:13:37.319 of the campaign is going to look even more different 0:13:37.360 --> 0:13:39.839 than we had thought before. We all chained up in 0:13:40.000 --> 0:13:42.920 both Dividing campaign and the Trump campaign and how they 0:13:43.000 --> 0:13:45.720 move forward in its crucial time leading up to election 0:13:45.800 --> 0:13:48.200 day in November. I mean, you lead up to election 0:13:48.280 --> 0:13:50.640 day in November, all the focus on the president tweeting 0:13:50.679 --> 0:13:54.520 out massively single line all cap tweets. He just put 0:13:54.559 --> 0:13:56.440 out moments ago one that looked like it was pre 0:13:56.600 --> 0:13:59.920 programmed an election tweet as well. What should we look 0:14:00.040 --> 0:14:03.880 for from the other guy from Vice President Biden? Well, 0:14:04.120 --> 0:14:06.920 Biden really needs to keep up his own momentum for 0:14:07.320 --> 0:14:11.800 these crucial weeks. He has already decided to suspend negative 0:14:11.840 --> 0:14:15.480 ads while Trump is is sick and has counseled a 0:14:15.559 --> 0:14:18.360 few events, but for the most part is moving ahead 0:14:18.760 --> 0:14:21.800 with his plans of planned events on starting and sported 0:14:21.880 --> 0:14:25.480 this week. So it's really crucial that Biden keeps that going. 0:14:25.800 --> 0:14:27.800 He needs to make sure that he gets out the 0:14:27.880 --> 0:14:30.520 vote and keeps that enthusiasm going as it gets closer 0:14:30.600 --> 0:14:33.320 to November, and doesn't play it to safe even though 0:14:33.360 --> 0:14:35.720 he's the head in the polls. Julia, at what point 0:14:35.800 --> 0:14:38.480 do some of these Senate Republicans look at these polls 0:14:38.880 --> 0:14:41.840 and start to break away and go solo. Well, you know, 0:14:42.000 --> 0:14:44.680 that's something that we've been wondering really from the start 0:14:44.880 --> 0:14:50.440 of Trump's ascendency, and so far most Republican senators have 0:14:50.800 --> 0:14:53.720 stayed aligned with Trump, of course, with a few pretty 0:14:53.800 --> 0:14:57.760 notable exceptions, But I think for Senate Republicans right now, 0:14:58.120 --> 0:15:01.960 especially with the Amy Coney rate nomination trying to push 0:15:02.000 --> 0:15:06.080 through the Senate, there's a sense of commitment to conservative values, 0:15:06.200 --> 0:15:09.240 conservative policies, and really trying to look more at the 0:15:09.400 --> 0:15:13.600 long game of staying committed to those aims rather than 0:15:13.840 --> 0:15:17.120 necessarily making a break from Trump and saying keeping a 0:15:17.760 --> 0:15:21.320 kind of a standard strong front with the Republican Party 0:15:21.560 --> 0:15:24.080 with the conservative values seems to be the best way 0:15:24.160 --> 0:15:26.960 forward for most of those Senators right now. Judy, just 0:15:27.040 --> 0:15:29.760 on process, just quickly, how difficult is it to get 0:15:29.800 --> 0:15:32.800 the Senate operational now, given that some Senate Republicans have 0:15:32.840 --> 0:15:36.040 actually been exposed to COVID nineteen. Can you walk us 0:15:36.040 --> 0:15:37.680 through the process just briefly for the next couple of 0:15:37.680 --> 0:15:40.560 weeks what that might look like down in Washington. Sure. So, 0:15:40.920 --> 0:15:44.360 we've heard from Mitch McConnell's that most Senate activity will 0:15:44.360 --> 0:15:47.440 be suspended this week and not start again until on 0:15:47.600 --> 0:15:51.280 the week of October twelfth at least um. But McConnell 0:15:51.440 --> 0:15:55.960 has emphasized that the confirmation process for Anny Tony Barrett 0:15:56.040 --> 0:15:59.160 will move forward in that regards some of the meetings 0:15:59.240 --> 0:16:03.240 and procedures they're currently having people even if they're sick 0:16:03.320 --> 0:16:06.480 or don't feel face coming in can tune in virtually. 0:16:07.040 --> 0:16:09.320 Where that's going to change and change is when there's 0:16:09.320 --> 0:16:11.640 actually a vote for a vote, they will actually need 0:16:11.720 --> 0:16:15.040 senators to come and be physically present, and so that 0:16:15.280 --> 0:16:18.000 is really when it will probably depend on the health 0:16:18.080 --> 0:16:21.120 of those senators who have been infected so far and 0:16:21.280 --> 0:16:24.040 the extent to which the virus has moved between other 0:16:24.400 --> 0:16:27.480 other numbers. By that point, there's so much confusion around 0:16:27.480 --> 0:16:30.760 the virus and how it's hitting Washington and President Trump, 0:16:30.840 --> 0:16:34.320 even with conflicting data, conflicting information from his own doctors 0:16:34.440 --> 0:16:38.640 over the weekend, Julie, from an international relations perspective, given 0:16:38.640 --> 0:16:41.040 the fact that President Trump is on the end, he 0:16:41.120 --> 0:16:43.440 does appear to be. Although there is such a lack 0:16:43.480 --> 0:16:46.160 of consistency and the information. How much does it put 0:16:46.200 --> 0:16:48.560 the US at risk or put the US at a 0:16:48.640 --> 0:16:53.760 more vulnerable position when it comes to dealing with other countries. Well, 0:16:53.920 --> 0:16:56.560 you know, we we have seen some reports, even as 0:16:56.840 --> 0:16:59.800 recently is today, that this is a rather vulnerable loan 0:17:00.160 --> 0:17:05.120 for the United States. Having the president hospitalized, so, as 0:17:05.200 --> 0:17:07.880 you noted, does seem to be recovering, and hopefully we'll 0:17:08.080 --> 0:17:10.800 confer within the next few days, but hopefully you have 0:17:10.880 --> 0:17:14.120 a president who is um who is hospitalized. You also 0:17:14.240 --> 0:17:17.119 have a number of other members from the highest levels 0:17:17.160 --> 0:17:20.840 of government who are sick or potential for being thick. 0:17:21.080 --> 0:17:24.200 And also just the country really quite distracted at this 0:17:24.400 --> 0:17:27.000 moment um. You know, from the security point of view, 0:17:27.440 --> 0:17:31.080 the United States is uh, you know, relatively vulnerable. But 0:17:31.119 --> 0:17:35.360 I say that relatively uh strongly the US. Everything else 0:17:35.400 --> 0:17:38.359 that we have is in place. There are so many 0:17:38.680 --> 0:17:41.520 agencies and people beyond the President and beyond the White 0:17:41.600 --> 0:17:44.680 House that are really gage much more of our international 0:17:44.760 --> 0:17:48.199 relations that this is not a time to be afraid, 0:17:48.280 --> 0:17:50.159 so to speak, but just to be mindful that it 0:17:50.320 --> 0:17:54.240 is a rather unprecedented situation. Late start to the year 0:17:54.440 --> 0:17:56.560 for universities here in the United Kingdom if you're not 0:17:56.600 --> 0:17:59.160 familiar with the education system, and I believe first day 0:17:59.600 --> 0:18:02.399 of the term today over us. Good luck jo He 0:18:02.440 --> 0:18:05.440 tries to catch up Julie Norman, University College, London, Professor 0:18:05.800 --> 0:18:12.280 of Political Science, Brett Ryan with us a Dutsche Banker, 0:18:12.359 --> 0:18:15.359 senior US economist, and he went right to where I 0:18:15.560 --> 0:18:19.040 was in. The unemployment report is a good report, mixed report. 0:18:19.200 --> 0:18:22.240 Markets certainly reacting to it. But Bret Ryan, you went 0:18:22.400 --> 0:18:28.000 to median duration, which really shows two America's discuss what 0:18:28.240 --> 0:18:33.400 you saw in a little bit more difficult media duration statistic. Right, 0:18:33.480 --> 0:18:37.800 So the median duration is basically how many weeks people 0:18:37.840 --> 0:18:40.440 have been unemployed. And so you know, one of the 0:18:40.520 --> 0:18:43.480 things that we've been following is people that say their 0:18:43.520 --> 0:18:47.720 own temporary layoff versus permanent layoff. And the issue with 0:18:47.880 --> 0:18:51.480 that is those it's sort of a distinction without a 0:18:51.520 --> 0:18:55.440 difference when the number of weeks that people are unemployed 0:18:55.680 --> 0:18:58.600 keeps extending. And so right now you're seeing the media 0:18:58.680 --> 0:19:02.920 duration go out to uh, seventeen point six weeks. That's 0:19:03.000 --> 0:19:07.840 the longest um really uh. And so you know, one 0:19:07.880 --> 0:19:09.840 of the issues that we had in the last in 0:19:09.920 --> 0:19:13.159 the week of the financial crisis was long term unemployed 0:19:13.600 --> 0:19:15.440 because the longer you're out of out of a job, 0:19:15.680 --> 0:19:17.920 the more your skills around, and the harder news to 0:19:17.960 --> 0:19:19.720 get back into the end of the labor force. But 0:19:19.880 --> 0:19:21.919 to Peter Hooper, team has absolutely nailed this, I mean 0:19:22.000 --> 0:19:24.560 full disclosure force. Deutsche Bank has its moments where it's 0:19:24.640 --> 0:19:27.679 very optimistic on the direction and you guys rolled over 0:19:27.760 --> 0:19:31.320 here a number of weeks reaffirm right now, your caution 0:19:31.560 --> 0:19:35.439 on the American recovery. Yeah, so, you know, it's been 0:19:35.480 --> 0:19:38.280 a faster it's been a certainly surprisingly fast start out 0:19:38.320 --> 0:19:40.880 of the gates. There's no question about that. We've recovered 0:19:40.920 --> 0:19:44.200 half of the jobs lost between February and April. The 0:19:44.320 --> 0:19:48.760 problem is looking forward, and every member of the Federal 0:19:48.800 --> 0:19:53.159 Reserve has basically said, we need more fiscal support. Without that, 0:19:53.720 --> 0:19:57.080 without f PUC benefits, which have now been used up, 0:19:57.640 --> 0:20:00.320 the seam of money is now gone. That's three billion 0:20:00.359 --> 0:20:03.680 in income that's going to be lost between Q three 0:20:03.720 --> 0:20:06.960 and Q four. That's gonna come during the holiday spending season, 0:20:07.320 --> 0:20:10.240 and it's going to come upon those with the least 0:20:10.280 --> 0:20:13.600 amount of savings and the highest marginal propensity to consume. 0:20:14.160 --> 0:20:17.000 So that's why, you know, while we've had a faster start, 0:20:17.680 --> 0:20:21.000 looking forward, it only gets more difficult for here. And 0:20:21.080 --> 0:20:23.840 there's a real risk that consumer spending could be negative 0:20:24.280 --> 0:20:26.360 in Q four and that's one of the reasons why 0:20:26.359 --> 0:20:29.680 we're more cautious. Right there's a narrative that's becoming increasingly 0:20:29.800 --> 0:20:32.280 popular that even if we don't get fiscal support from 0:20:32.359 --> 0:20:35.440 Washington before the election, we'll get it at some point, 0:20:35.560 --> 0:20:38.040 and it doesn't really matter when it will help support 0:20:38.080 --> 0:20:40.560 the economic recovery on the other side. And then you 0:20:40.640 --> 0:20:43.200 have other people say, well, if you get bad data, 0:20:43.320 --> 0:20:46.640 if it really shows a market deterioration of the economic situation, 0:20:47.040 --> 0:20:49.960 that changes the dynamic and you have to start counting 0:20:50.040 --> 0:20:53.280 for that in your calculus when you decide whether to invest. 0:20:53.520 --> 0:20:56.200 Have we already crossed that rubicon? Are we already at 0:20:56.240 --> 0:20:59.159 the point where the data is showing a material deterioration 0:20:59.280 --> 0:21:01.960 in the momentum of the economic recovery and people have 0:21:02.119 --> 0:21:04.679 to take count of it? Well, I think number one. 0:21:04.720 --> 0:21:06.840 I mean, tell that to the twenty million people who 0:21:06.880 --> 0:21:10.080 are collecting some from unemployment insurance right now and they're 0:21:10.119 --> 0:21:12.720 seeing their income cut and half. You know, tell that 0:21:12.880 --> 0:21:15.439 to the restaurants that are going into the winter season. 0:21:15.920 --> 0:21:18.400 The p P P loan money has dried up. There's 0:21:18.400 --> 0:21:21.360 a hundred and thirty billions still sitting there. Why why 0:21:21.400 --> 0:21:23.560 not allow them to take out another loan and get 0:21:23.600 --> 0:21:27.240 through the winter. Because these programs were designed to deal 0:21:27.359 --> 0:21:30.400 with a four to six months shutdown, not a year 0:21:30.440 --> 0:21:35.320 shutdown or at least restricting capacity. Uh. And these businesses 0:21:35.400 --> 0:21:39.360 need help now, and airlines as well, they need help now, 0:21:39.920 --> 0:21:41.800 not three months from now, because you're going to have 0:21:42.320 --> 0:21:44.639 you know, businesses that go under in the meantime. So 0:21:44.640 --> 0:21:48.080 I think that's the one the one thing. Um. But yes, 0:21:48.520 --> 0:21:51.320 will there be fisicals debates at some point, yes, but 0:21:51.760 --> 0:21:54.040 it's more important for that You're going to delay the 0:21:54.160 --> 0:21:59.000 recovery by causing hardship over the next three months for 0:21:59.440 --> 0:22:02.120 thousands of businesses restaurants that are going to go under 0:22:02.119 --> 0:22:05.240 if they don't get more PPP money, um, And you're 0:22:05.280 --> 0:22:09.679 gonna it's it's gonna hurt demand, especially during the holiday season, 0:22:10.200 --> 0:22:13.560 and so companies are gonna be less likely or less 0:22:13.600 --> 0:22:16.680 willing at least to hire. And it just sets you 0:22:16.760 --> 0:22:20.000 back unnecessarily. Okay, a lot of policymakers will say, show 0:22:20.040 --> 0:22:22.320 me the numbers, right, how much will it set us back? 0:22:22.359 --> 0:22:23.800 If it sets us back a little bit, but we 0:22:23.880 --> 0:22:26.320 can remove some of the political silly season around us, 0:22:26.720 --> 0:22:29.280 then it's worth it. How much does it set us 0:22:29.320 --> 0:22:32.000 back if we don't get fiscal support before the election, 0:22:32.080 --> 0:22:35.040 it's prolonged for months to come. Well, I think it 0:22:35.480 --> 0:22:38.840