Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley.
Speaker 1: We bring you inside from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg At
Speaker 1: Skybridge Capital. What they do is they're fund to fund.
Speaker 1: They take money they allocated out to hedge funds, and
Speaker 1: they have had a sporting pandemic, as have so many others.
Speaker 1: They've made a choice now to go with familiar names
Speaker 1: like Dahlio, like Lobe, and like Howard Marks as well.
Speaker 1: Troy Gayski joins us the engineer from m I T
Speaker 1: Troy Gayski, How are you and Mr Scaramuchi gonna engineer
Speaker 1: forward with Dahlia, Lobe, Marks and the likes. What will
Speaker 1: be different now versus the debacco of the last twelve months. Yeah, well,
Speaker 1: don't know about twelve months, but certainly in March. But thanks,
Speaker 1: not great but great to hear talk to you as well. John,
Speaker 1: has been too long, but no, so look, I think
Speaker 1: you know any process, you have to evolve, and you
Speaker 1: have to try to use information that perhaps was the
Speaker 1: president at the time and you know, look at the
Speaker 1: reality is is we fully expect a recovery, and the
Speaker 1: primary way we're going to play that is through distress credit,
Speaker 1: both distress structure credit, whether it's rmbs or to a
Speaker 1: much lesser extent CMBs and cellos, or whether it's through
Speaker 1: good old fashioned distress restructuring. And you know, one of
Speaker 1: the things that will be different is well we'll have
Speaker 1: more exposure to larger managers that have a much more
Speaker 1: stable capital base and much more staying power if we
Speaker 1: do get another laid down that some people expect in
Speaker 1: the fall. I mean, we're pretty certain the economy's bottoming
Speaker 1: and markets have bottomed, but clearly we could be wrong.
Speaker 1: And managers, whether it's Howard Marks or or Dan Loebe
Speaker 1: or Josh Freeman Canyon, I mean, these are multi cycle
Speaker 1: distress investors that have done a tremendous job. And that's
Speaker 1: always been where you've gotten your best returns coming out
Speaker 1: of any economic dislocation. And as you guys know, like
Speaker 1: we always say that, you know, every cycle is different,
Speaker 1: but every cycle is the same um and and so
Speaker 1: you could argue that for some unknown reason, you know,
Speaker 1: the returns and distressed won't be as attractive as they
Speaker 1: were in the past. But if you look at the
Speaker 1: divergence between equity markets and credit of all stripes right now,
Speaker 1: it's as large as it's been, you know, since the
Speaker 1: financial crisis, if not larger. So on a go forward basis,
Speaker 1: that's where you're gonna get your best risk a jested
Speaker 1: returns and doing it with managers that have strong hands
Speaker 1: that can uh, you know, restructure individual companies or favor
Speaker 1: structured credit versus corporate is the is we think the
Speaker 1: way to go. But we'll still maintain a healthy exposure
Speaker 1: to smaller midsized managers that are laser focused on a
Speaker 1: few particular niche themes. Try. I understand the argument that
Speaker 1: stocks and credit are diverging in ways really haven't been
Speaker 1: seen historically. However, there are some real reasons for this.
Speaker 1: I mean, when we talk about the equity advance, we're
Speaker 1: talking about the big tech names that stand to benefit
Speaker 1: from the current environment. When you talk about some of
Speaker 1: these credits, what some of these credits, you're talking about
Speaker 1: commercial mortgage backed securities, residential real estate, and big cities
Speaker 1: that are going to be profoundly changed by this entire episode.
Speaker 1: Isn't there some real reason for why some of these
Speaker 1: assets are selling off, and also some reason for why
Speaker 1: some of these equities are gaining right now. Oh yeah, No. Look,
Speaker 1: as you know, there's the real economy, there's corporate fundamentals,
Speaker 1: and then there's capital markets. And to your point, you know,
Speaker 1: equity markets are becoming less and less reflective over time
Speaker 1: of the real economy. Uh So, uh that being said,
Speaker 1: you I don't think anyone could actually argue that the
Speaker 1: equity rebound has been driven by improving fundamentals. For the
Speaker 1: majority cases, particularly where multiples are the equity rebound has
Speaker 1: been driven by massive expansion of monetary supply after suffering
Speaker 1: a tremendous draw down. UM. Our primary focus will be
Speaker 1: on residential UH single family credit as opposed to uh CMBs.
Speaker 1: We will have a little bit of that exposure. We
Speaker 1: agree with you that clearly the fundamentals in hospitality are
Speaker 1: lodging in retail are very problematic. UM. But at the
Speaker 1: same time, you know, multifamilies hung in there exceptionally well,
Speaker 1: you know, a lot of the benefit of the p
Speaker 1: p P and more importantly, enhanced unemployment has allowed has
Speaker 1: allowed renters to continue to make their payments at a
Speaker 1: pretty shocking rate. Now everyone expects it's going to deteriate
Speaker 1: further in May, but so far, so good. So you know,
Speaker 1: within commercial real estate you have to be very specific
Speaker 1: to sector when you're doing your forward analysis UM. And
Speaker 1: in terms of residential housing, look, I mean, you know,
Speaker 1: coming into this, we had the best most pristine mortgage
Speaker 1: credit in at least a generation in terms of debt
Speaker 1: to GDP or debt to income UM if you looked
Speaker 1: at mortgage servicing costs, and so obviously there's been deterioration
Speaker 1: forbearance requests have gone up substantially UM in the markets,
Speaker 1: pricing in about a fifteen percent total forbearance requests with
Speaker 1: somewhere between two and five percent ultimate foreclosures UM. But
Speaker 1: as the economy recovers, we may end up with much
Speaker 1: less home price declines than were initially expected, particularly given
Speaker 1: you know, again when you think through the ramifications of
Speaker 1: ultra loose or hyper loose monetary policy, you know, the
Speaker 1: likelihood of a material loss of property value and residential
Speaker 1: housing is fair fairly low. I mean, we're modeling out
Speaker 1: down ten percent, but there are many forecasters I think
Speaker 1: it's going to be closer to flat or only down five.
Speaker 1: And when you have LTVs that are as low as
Speaker 1: they were coming into this um, even in the event
Speaker 1: of a foreclosure, which would happen you know, say two,
Speaker 1: your recovery value much higher. So you know, when when
Speaker 1: we think through uh, you know, let's call it non
Speaker 1: vanilla structured credit or non vanilla credit. Residential how Z
Speaker 1: is clearly going to be a big winner as well
Speaker 1: multi family commercial real estate. We think those sectors have
Speaker 1: the most upside by far. And then you know, back
Speaker 1: to the conversation with regard to Lobe or a Mars
Speaker 1: or a or a Josh Freeman, I mean they're they're
Speaker 1: also very focused on corporate credit, right and when you
Speaker 1: think of the four team percent for twelve month of
Speaker 1: fault rates is going to be in high yield? Do
Speaker 1: you think of these seven or eight percent it's going
Speaker 1: to be present in levered loans. You know, that's going
Speaker 1: to provide them ample supply to do good old fashioned
Speaker 1: distress restructurings. Which again, if you look at the last
Speaker 1: two cycles or even the H. W. Bush recession, um
Speaker 1: that that was the most profitable hedge fund strategy by far.
Speaker 1: So I think a lot of people will be sitting
Speaker 1: here thinking why do you want to pay a hedge
Speaker 1: fund so that when the photo reserves stepped in and
Speaker 1: the distressed opportunities aren't anything like they were after all
Speaker 1: oh nine. Well, look, I mean, I don't know which
Speaker 1: analysis one would suspect or suggest isn't as great as
Speaker 1: at the end of eight or O nine. Admittedly there
Speaker 1: there won't be the same returns to high yield or
Speaker 1: distressed as you did post immediately after the Lehman failure
Speaker 1: when spreads hit their wides, but spreads it tighten in
Speaker 1: quite substantially prior to O nine, and you still have
Speaker 1: spectacular returns UM. And then back to your direct point. Look,
Speaker 1: the if you think of um where high yield is today? Right,
Speaker 1: So say you're an investor and you want to buy credit, Well,
Speaker 1: you're more than likely going to buy it through high yield.
Speaker 1: You're you're in an eight percent effective yield, which to
Speaker 1: your point is much tighter than it was coming into
Speaker 1: oh nine. Um, your your law suggested yield is basically
Speaker 1: minus two the next twelve months when you adjust for defaults.
Speaker 1: So the better opportunity is going to be in the
Speaker 1: companies that get kicked out of the ETFs or get
Speaker 1: downgraded out of the indices that have to go through restructurings.
Speaker 1: As long as you're careful and avoid too much energy exposure,
Speaker 1: you know, that's where you'll have the high teens or
Speaker 1: low twenty type returns. Whereas to your point, if you're
Speaker 1: just sticking to liquid vanilla on the un ETFs, it's
Speaker 1: being much harder to put up a tract of returns
Speaker 1: the next several years. Truck, I ask you, thank you
Speaker 1: so much. Thanks Skybridge Capital, greatly appreciated. There's a math
Speaker 1: to it in the heritage of Society General and their
Speaker 1: derivatives effort, their math centric effort as well, and of
Speaker 1: course that's scene in their rate strategy with Sobrado Rajapa
Speaker 1: who joins us right now, Sobrad, I'm gonna cut to
Speaker 1: the chase on a Friday, John can ask all the
Speaker 1: fancy questions with Lisa. The real yield, phenominal yield, John
Speaker 1: is a real yield coming back. I don't know. Hopefully,
Speaker 1: careful negotiations, if we get things back together, hopefully we
Speaker 1: can bring it back. Saying broad, I get distracted. I
Speaker 1: want you to give me the levels. I'm ten year
Speaker 1: in thirty year where you really break into a sweat.
Speaker 1: Where's the ten year level that matters? Lower yield, where's
Speaker 1: the thirty year bond yield, lower yield, where things really
Speaker 1: fall apart um, I'd be concerned, especially in the tenure,
Speaker 1: if we break through forty basis points. I feel like that,
Speaker 1: to me is a low that we've seen that's far
Speaker 1: during the crisis that I think the market can manage.
Speaker 1: But I think anything below that the market there definitely
Speaker 1: be a little bit of a concern over how bad
Speaker 1: this can get, and that you know, that would be um,
Speaker 1: you know, a new paradigm shifting mappin in because what
Speaker 1: I think currently the markets pricing in is exactly what
Speaker 1: set share pouse that which is a range of possible outcomes.
Speaker 1: I would say that's broader disagreement on virtually every topic
Speaker 1: of discussion, whether it be the direction of rates, inflation,
Speaker 1: inflation expectations, and now you're starting to see that even
Speaker 1: the equity market, there's very little agreement on the future
Speaker 1: direction of how things are headed. So I would argue
Speaker 1: that the of the markets are basically pricing in a
Speaker 1: range of possible outcomes, and you're seeing that born out
Speaker 1: in some of the pricing we're seeing in the bond
Speaker 1: market sobadre You could take a look at the low
Speaker 1: yields and say this is negative, it's a commentary on
Speaker 1: low expected inflation. You could also say it's a positive
Speaker 1: because the US has to buy a borrow a lot
Speaker 1: a lot of money and they're doing it at record
Speaker 1: low costs. Next week twenty year bond issue is the
Speaker 1: first one since the nineteen eighties, is expected to come
Speaker 1: with a yield of one point zero nine percent. Why
Speaker 1: aren't we seeing a fifty year or a hundred year
Speaker 1: issuance from the US. Well, because there's really no natural
Speaker 1: buyer or fifty hundred year bonds in the US. I
Speaker 1: mean the alan community or the asset liability managers in
Speaker 1: the US like pensions and insurance companies typically don't want
Speaker 1: to buy very very long duration bonds. So really it's
Speaker 1: it's a question of where the demand's going to come from,
Speaker 1: and from the studies that the Treasury has done um
Speaker 1: as well as the the Advisory Committee. Really the sweet
Speaker 1: spart for issuing more is in the twenty years factor,
Speaker 1: because that's really where insurance companies can step in and
Speaker 1: and take down some of the supply. Speaking of taking
Speaker 1: down the supply SEVTRA, how much of this supply will
Speaker 1: the FETE be buying? Um. The set typically doesn't buy
Speaker 1: on their own issues, but they have been sort of
Speaker 1: buying at a piece of VOT, say anywhere between seventy
Speaker 1: ten billion on average for the last couple of I
Speaker 1: just mean in terms of scize evat, not of course,
Speaker 1: not participating in the primary market. I just mean in
Speaker 1: terms of size. Once they start buying these treasuries, in
Speaker 1: terms of the supply versus how much the feed will
Speaker 1: be buying, will they be buying more than than is
Speaker 1: actually supplied by the treasury um. That's a very good
Speaker 1: question because it's you know, the set has been extraordinarily
Speaker 1: careful and not sort of showing its card. They have
Speaker 1: not told us or pre announced the the size of
Speaker 1: the asset purchases and for how long they're going to
Speaker 1: continue to purchase. I think the broad consensus is that
Speaker 1: if asset purchases were intended to provide the quidity, they've
Speaker 1: already accomplished that. So maybe they're continuing to sort of
Speaker 1: have skin in the game to keep interest rates low
Speaker 1: so that you don't see a pop and yields with
Speaker 1: the uh, you know, they're you just to buy your
Speaker 1: name hit the markets, brot. I got like four questions here,
Speaker 1: but I'm gonna go right to where you were. I
Speaker 1: still don't understand how a central bank effects yield curve control,
Speaker 1: which is what you're talking about. They're showing they're not
Speaker 1: they're hiding their cards because they're trying to control movements.
Speaker 1: I get that maybe that's a precursor to yield curve control.
Speaker 1: Do you have confidence at sock Chin that any central
Speaker 1: bank and quote unquote control the yield curve? Well, I
Speaker 1: think some of the you know, I mean the US
Speaker 1: for instance, or Japan or even Europe. I think that
Speaker 1: you know, you have the luxury of being a reserve currency,
Speaker 1: and you know, people are always going to flock to
Speaker 1: safe haven assets, and there's a lot of credibility for
Speaker 1: these these large governments and in central banks. So I
Speaker 1: think for these countries, you know, there's the FED policy
Speaker 1: and FED actions, We're going to keep a lid on
Speaker 1: treasury or it really depends on you know, the credit
Speaker 1: worthiness of the country, and that's really where you tend
Speaker 1: to see yields move high. I just don't think that's
Speaker 1: going to happen in the US, Savadra Rajapa of Society General.
Speaker 1: You've nailed it again and again when it comes to
Speaker 1: expecting guilds to go lower before the pandemic, when a
Speaker 1: lot of people expected them to start heading higher. I
Speaker 1: want to ask you about the political ramifications for the
Speaker 1: Federal Reserve as it essentially monetizes the debt of the
Speaker 1: United States. As the former chief economist of PIMCO said,
Speaker 1: we've had a merger of monetary and fiscal policy. We've
Speaker 1: broken down the church and state separation between the two.
Speaker 1: How consequential is that a you know, it's it's it's
Speaker 1: quite consequential, and it's meaningful at the current time, UM
Speaker 1: that the Fed is intervening because you know, we've had,
Speaker 1: as you know, a very unprecedented rise and deficits in
Speaker 1: a very short period of time. You know, three point
Speaker 1: four trillion for physically or twenty and you know two
Speaker 1: trillion plus for fiscal or and this is just as
Speaker 1: of now. We're not accommodating new plans that are put
Speaker 1: forth by UM the House. And you know, I mean
Speaker 1: to the odds of that passing are probably low, but
Speaker 1: definit gro only rise from here, not you know, go
Speaker 1: lower over the next couple of years. So in that context,
Speaker 1: you know, FED support is extraordinarily welcome. But I think,
Speaker 1: you know, we're going to look back at this and
Speaker 1: and pass judgment. But in my opinion, I feel like
Speaker 1: the FETs doing the right thing to support the broader economy.
Speaker 1: I think a lot of people feel the same. Wise
Speaker 1: a better of course, you'll always get people criticizing the
Speaker 1: FEED and often on that side of things. But yeah,
Speaker 1: I think they've done a brilliant job stepping in and
Speaker 1: really alleviating some of the financial pain on the financial
Speaker 1: condition side. Just to wrap things up and build on
Speaker 1: what Tom said, the Bank Japan did a brilliant job
Speaker 1: of capin a tenure yield in Japan, and they don't
Speaker 1: really need to participate much in the bond market now
Speaker 1: to do it. When you think of yield curve control,
Speaker 1: is that what you're thinking could happen in the United
Speaker 1: States what we've seen play out in Japan. Absolutely, I
Speaker 1: think that that's really the the the the important feature.
Speaker 1: It says, what I desire out of yota control is
Speaker 1: that you know, the communication channel works just as effectively,
Speaker 1: so the seed doesn't have to uh, you know, continue
Speaker 1: to buy assets and and and blow up its balance sheet.
Speaker 1: I mean, as we all know, during the post crisis period,
Speaker 1: it took the FED a long time, over ten years
Speaker 1: before it could start thinking about unwinding its balance sheet.
Speaker 1: If anything, it started raising rates before it started unwinding
Speaker 1: it's it's balancy. This was a debate earlier on on
Speaker 1: what they should do. First, they shouldn't mind the balance.
Speaker 1: She did then raise rates, but then they landed up
Speaker 1: raising rates and then gradually unminding its bound. She is
Speaker 1: the balance. She gets to be too large, and the
Speaker 1: aspiration of ever bringing it back down is going to
Speaker 1: is going to fail. So I think the yield curve
Speaker 1: control from that perspective is a great tool because the
Speaker 1: communication channel tends to work just as effectively as as
Speaker 1: the as as actually going out and purchasing uh, you know,
Speaker 1: treasuries to keep yields low. So um, I think that
Speaker 1: that's when you know, once they've done exhausting uh, once
Speaker 1: they've done bump purchasing as much as they can, I
Speaker 1: think that they will they will try to employ yield
Speaker 1: curve control subaal fantastic to catch up with you this morning,
Speaker 1: My best to you and yours er the whole of
Speaker 1: the same as sok Gen sabatras Jampa there the head
Speaker 1: of US Right Strategy sat as General Andrew holln Holst
Speaker 1: a city joining us now place to site to get
Speaker 1: the lightest on his perspective, and they have few out
Speaker 1: for a city group. Andrew, your first take off the
Speaker 1: back of this dice of place. Yeah, wow, this is
Speaker 1: just more evidence of how deep this contraction is in
Speaker 1: April in particular and in Q two overall. You know,
Speaker 1: I think really what we're thinking about now is not
Speaker 1: so much the April data where we knew we were
Speaker 1: going to see these big contractions. And yeah, I've been
Speaker 1: looking at this number of anything even bigger than what
Speaker 1: has been forecast. Um. But the question that is where
Speaker 1: do we go from here? Um? Can we rebound off
Speaker 1: of the very very negative numbers that we're seeing for
Speaker 1: April and for Q two? Andrew, I was so shocked
Speaker 1: I forgot to bring in, and John saved me and
Speaker 1: brought you in because I'm looking at these numbers and
Speaker 1: they're absolutely shocking. From where you sit with Katherine Mander.
Speaker 1: They change the political debate in Washington Yeah, it's so interesting. Right.
Speaker 1: We have a large fiscal package that's being debated right now,
Speaker 1: and I think the numbers do matter. I think the
Speaker 1: activity numbers matter. I think the jobless numbers matter a
Speaker 1: lot as we're thinking about unemployment insurance and what we're
Speaker 1: doing to top of incomes which are obviously being very
Speaker 1: very deeply impacted by this. So that the debate is
Speaker 1: probably going to continue to play out over over weeks,
Speaker 1: but certainly the I can data place into that, Lisa,
Speaker 1: I just got the control group in Folks. This is
Speaker 1: the number. I look at the retail sales Folks is
Speaker 1: like jobs claims. Tons of data comes out. The control
Speaker 1: group is taking out the goofy stuff, gasoline, building materials,
Speaker 1: um all sorts of different things, spam. It takes out spama. Yes,
Speaker 1: the retail control group. We went from minus two percent, Lisa,
Speaker 1: to a survey minus five and we clocked in with
Speaker 1: a minus fifteen percent. That says it all. It's brutal,
Speaker 1: it's depressing, and I gotta say, if any del Judas
Speaker 1: every time he gives one of these data reads, you
Speaker 1: can feel the weight of these numbers on his voice. Andrew,
Speaker 1: a lot of people saying, we will get a big
Speaker 1: recovery when people can go out and spend. And yet,
Speaker 1: as we saw from the Chinese data overnight, it's not
Speaker 1: that simple. People aren't that willing to go to restaurants
Speaker 1: how quickly. As John was saying, how quickly can we
Speaker 1: rebound based on what we are seeing in China, Yeah,
Speaker 1: I think it's definitely not that simple for categories like restaurants,
Speaker 1: for categories like travel, and it's not that simple for
Speaker 1: the economy overall. I think we are seeing some positive
Speaker 1: signs in the US now. We're watching a lot of
Speaker 1: high frequency data that we don't usually watch daily data
Speaker 1: on things like gasoline demand, on things like driving their
Speaker 1: people driving their cars, um what we're hearing from auto
Speaker 1: dealerships or that are reopening as they're seeing a similar
Speaker 1: amount of demand to what they saw before the COVID
Speaker 1: nineteen downturn. So I mean, very very early days on this,
Speaker 1: but I think they'll do this this very differential effect
Speaker 1: where you'll see some industry some sectors that come back quickly,
Speaker 1: and other travel staurans are good examples where that could
Speaker 1: be a much longer story. Andrew, there was a story
Speaker 1: in the Wall Street Journal this morning, the headline coronavirus
Speaker 1: finishes the retail reckoning that Amazon started, and talked about
Speaker 1: the expectation for about a hundred thousand stores to close
Speaker 1: over the next five years, bankruptcies to surge among brick
Speaker 1: and mortar retailers. How much does this accelerate that trend? Yeah,
Speaker 1: I think we'll see a big acceleration of that. That.
Speaker 1: That was one of our initial thoughts when stores started closing,
Speaker 1: is I think we all knew, we all expected that
Speaker 1: there would be further brick and mortar closing of stores
Speaker 1: in coming months and coming years. Now that you were
Speaker 1: forced to close down, there's just gonna be a lot
Speaker 1: of store owners to say it doesn't make sense to
Speaker 1: reopen again. So we've seen the shift online, we've seen
Speaker 1: shift away from brick and mortar. Definitely accelerate that substantially.
Speaker 1: I mean, Tom, we've been talking about this for years.
Speaker 1: This is what we've been seeing on the avenues of
Speaker 1: New York City. In Manhattan, if you go high enough
Speaker 1: up on Lexington, in fact, if you come down towards Midtown,
Speaker 1: we've seen shut store fronts for long time. I totally agree,
Speaker 1: But Andrew, what's so importantly, here is when the facts change.
Speaker 1: Politicians change. At eight thirty this morning, six minutes ago,
Speaker 1: did the facts just change for our August politicians? Again,
Speaker 1: I think it's probably more the labor market that's going
Speaker 1: to matter. And in some ways that's that's that's a
Speaker 1: good way of looking at it, because you really want
Speaker 1: to think about what is the negative impact that this
Speaker 1: is having on individuals? And we know that it's huge.
Speaker 1: We know it's huge from the jobless claims data, we
Speaker 1: know it's huge from the jobs reports that have come
Speaker 1: out already. So um so again, I think the economic
Speaker 1: data matter. Does you know one retail sales reading change significantly?
Speaker 1: The political calculus, I'm not sure we can make that stapent.
Speaker 1: The two things that I think market participants are going
Speaker 1: to really have to grapple within the months to come.
Speaker 1: Andrew quite clearly, quite clearly, will get some sequential month
Speaker 1: on month improvement as we work our way through summer.
Speaker 1: That's clear to everybody. How do you establish the limit
Speaker 1: to that sequential month a month improvement, the limits of
Speaker 1: the over will recovery, the limits of normalizing. How do
Speaker 1: you get your hands around that? Yeah, I think that's
Speaker 1: what we really need to be watching day by day
Speaker 1: and week to week. So so some of this is
Speaker 1: related to how different policies ease, how quickly some activity
Speaker 1: is allowed to return to normal. And I think what
Speaker 1: we're thinking about more and again in the context of
Speaker 1: the Chinese data, for instance, is how quickly do behaviors
Speaker 1: change or not change, And so that's again it's gonna
Speaker 1: be very different for different sectors. And I can see
Speaker 1: things like auto demand is a good example. We could
Speaker 1: actually have increased auto demand because maybe more people want
Speaker 1: to be driving their cars instead of using public transport.
Speaker 1: Um you know, there's to be various shifts in the
Speaker 1: makeup of economic activity, so we have to be watching that.
Speaker 1: But how quickly does behavior go back to something that
Speaker 1: looks more close to normal, I think right now is
Speaker 1: very uncertain and something we have to be evaluating in
Speaker 1: real time. I was struck by a survey by open
Speaker 1: Table showing that one in every four US restaurants will
Speaker 1: go out of business is due to the pandemic. And
Speaker 1: I'm just struck with what's going to take up all
Speaker 1: the space that all of these restaurants and retail stores
Speaker 1: currently do. Andrew, and I know you're saying cars could
Speaker 1: be a bright spot. Is there anything else that's a
Speaker 1: bright spot? Yeah, I think there is a large amount
Speaker 1: of reallocation that's going to occur. So this is certainly
Speaker 1: not good news for any of the you know, perhaps
Speaker 1: it could be as much as a quarter like that
Speaker 1: service suggested of restaurants that are going out of business,
Speaker 1: But there is just a large shift that's going on
Speaker 1: in that sector, you know, like we were talking about
Speaker 1: in other sectors. So you know, you may have less
Speaker 1: of the smaller restaurants UM and more restaurants that are
Speaker 1: offering more to go service. You always see pizza go
Speaker 1: every for instance, UM, which is which is increasing UM.
Speaker 1: Now it's still a costly process for the economy to
Speaker 1: go through that reallocation process. M. But you know, ultimately
Speaker 1: those storefronts will be occupied again, it just might be
Speaker 1: different businesses. Andrew, nobody's listening to the show this morning,
Speaker 1: so I'm on, I'm not embarrassed to ask this question,
Speaker 1: But how are you going to amend your gross US
Speaker 1: forecasts off of this dramatically worse retail report? Does this
Speaker 1: bring your your judgment in by tenths of a percentage
Speaker 1: point or does it bring it in by full percentage points.
Speaker 1: So we said back in March that forecast changes are
Speaker 1: in general going to be in the percentage point week
Speaker 1: to week. So I think that's really what people should
Speaker 1: be thinking about. With these numbers, you're essentially getting, you know,
Speaker 1: what would usually be, you know, month's worth, if not
Speaker 1: a year's worth of economic data in terms of change
Speaker 1: to the forecasts, and just one of these numbers, so
Speaker 1: we can easily move our forecasts by percentage points with
Speaker 1: any one number that's coming out for April. John, this
Speaker 1: is just shocking. I can't convey how unimaginable that Control
Speaker 1: Groups Statistic is. Just breaking down the numbers tell O
Speaker 1: thirteen major categories decreasing let by seventy eight point eight
Speaker 1: per central clothing store, sixty point six percent. Decline at
Speaker 1: electronics and applying stores. Really not pretty. The only category
Speaker 1: that recorded again, Tom, just to point out non store
Speaker 1: sales of course, online Amazon et cetera increased eight point
Speaker 1: four percent. I don't want to get in a shout
Speaker 1: fest on politics, but I would defer everybody to Dr
Speaker 1: Hooper in his esteemed experience or Katherine Manett City Group,
Speaker 1: Hooper Deutsche Bank. John on three trillion dollars to them,
Speaker 1: to those people in a lot of money. I mentioned
Speaker 1: that Jennifer Rome of UCL in London today, the great
Speaker 1: viroologists there, andrews Pecos Johns Hopkins University and of course
Speaker 1: at the Bloomberg School of Public Health there. I should
Speaker 1: mention Mr Bloomberg as a founder of Bloomberg Lpters Radio,
Speaker 1: this television property as well and as a philanthropist to
Speaker 1: his Johns Hopkins University. And I was talking to Dr
Speaker 1: Rome about Andrew Pekosh and the idea of testing it
Speaker 1: in the view forward of how we judge our virology
Speaker 1: in America. Let's listen. A few things came up yesterday
Speaker 1: in terms of the efficiency of testing and the accuracy
Speaker 1: of testing. UM. I'll emphasize something that I've tried to
Speaker 1: emphasize before. UM the test matters, but who gives the
Speaker 1: test and who is also important. And one has to
Speaker 1: understand that just because someone has a test for COVID
Speaker 1: nineteen doesn't mean that it's an accurate. Testing doesn't mean
Speaker 1: that it's being performed accurately. And I think you know,
Speaker 1: we have to think about moving to a different way
Speaker 1: of monitoring for disease UM as we're trying to open
Speaker 1: up the economy. We're no longer going to be chasing cases.
Speaker 1: We want to get ahead of the cases. We want
Speaker 1: to find individuals who are ill and then start testing
Speaker 1: the people who come in contact with so we can
Speaker 1: identify them earlier, quarantine them, and limit the spread of
Speaker 1: the virus in that way. How do we do that
Speaker 1: in America? With our social history? The public health interventions
Speaker 1: UM are difficult. It's very clear to me and my
Speaker 1: family actually how difficult this has been. But these are
Speaker 1: the necessities. UM. What other countries have have demonstrated is
Speaker 1: if you loosen these public health parameters and you're not
Speaker 1: ready to institute large amounts of testing in a very
Speaker 1: different way than we're doing it now, then you'll see
Speaker 1: these bounce backs. And we do risk the the the
Speaker 1: the the the the chance to UM to recover quickly. Now,
Speaker 1: if we fall back and go back into three or
Speaker 1: four weeks of public health, of of stay at home UM,
Speaker 1: that effect of the economy will be much greater than
Speaker 1: trying to slowly come back into it. Right now, Dr Pecosh,
Speaker 1: what do we know about antibody testing? I mean, I
Speaker 1: know I keep on asking about it, but it seems
Speaker 1: key to know how what percentage of the population have
Speaker 1: had this and whether they're immune. When will we actually
Speaker 1: have a clearer picture What are some of the testing
Speaker 1: or schemes out there. Yeah, you're absolutely correct in terms
Speaker 1: of asking this question, because it will be one of
Speaker 1: the things that has the potential to really change the
Speaker 1: way we approach this. Uh, the the the outbreak. UM.
Speaker 1: There seems to be lots of data coming out from
Speaker 1: many different places showing that most people who are infected
Speaker 1: with the COVID nut with COVID nineteen do have antibody responses,
Speaker 1: so their body responds UM. They have decent levels of
Speaker 1: the antibodies that we think are the protective antibodies. So
Speaker 1: so far things are looking good in terms of how
Speaker 1: people are responding immunologically to the infection. UM. What we
Speaker 1: really need to know now is how long these responses
Speaker 1: are going to last. Are they going to fade in
Speaker 1: a few months or are they going to stay for
Speaker 1: a year or longer UM. And we also need to
Speaker 1: monitor these people who are antibody positive to see if
Speaker 1: they can become reinfected. That will be the proof that
Speaker 1: says that some of these antibody tests are actually telling
Speaker 1: us what we want them to tell us, which is
Speaker 1: that if you're antibody positive, you won't be able to
Speaker 1: be infected or at least very easily with the virus.
Speaker 1: Do we have any idea of, you know, whether the
Speaker 1: antibody test is positive, how long you're immune to this virus.
Speaker 1: Is it something that we'll just have to live with.
Speaker 1: Is this the kind of seasonal flu that you know
Speaker 1: that we will see kind of you're you're in and
Speaker 1: you're out in various mutations. Right now, the virus hasn't
Speaker 1: seen a large amount of people who have immunity to
Speaker 1: it UM, So what do I mean by that there's
Speaker 1: so many of us that have no immunity to it
Speaker 1: that the virus is easily finding those people and infecting
Speaker 1: those people um Somewhere Over time, as more and more
Speaker 1: people get infected, it's going to start seeing people that
Speaker 1: have antibodies to the virus. And the big question then
Speaker 1: is will this virus respond like influenza does, and mutations
Speaker 1: will accumulate and the virus will find a way to
Speaker 1: get around that immunity, or will it respond to the
Speaker 1: ways that some of our other more classic viral infections
Speaker 1: like measles does, and you will continue to be protected
Speaker 1: from infection and the virus won't be able to infect you.
Speaker 1: So that's the big question that we want to ask
Speaker 1: about the about the virus, and again that's another question
Speaker 1: that's gonna take some time for us to get an
Speaker 1: answer to. Andrew Pecco. So the Johns Hopkins University just
Speaker 1: a brilliant conversation there. Thanks for listening to the Bloomberg
Speaker 1: Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio