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Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul Swee you.

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Speaker 1: Along with my co host Lisa brahma Witz. Each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. Well, it has been an historic

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Speaker 1: forty eight hours for the global energy markets. We have

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Speaker 1: w t I crewed yesterday trading well negative for the

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Speaker 1: first time ever. We're a little bit positive today on

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Speaker 1: that May contract. That's the last day for the trading

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Speaker 1: of the May contract. To give us a sense of

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Speaker 1: what is going on in the global oil markets. Who

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Speaker 1: welcome John Kilduff, founding partner of Again Capital, based in

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Speaker 1: New York City, New York City, John, thanks so much

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Speaker 1: for joining us. What does negative oil negative? W t A.

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Speaker 1: What did that mean yesterday? Well, it meant that there's

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Speaker 1: just an abject gluts of oil uh in the US,

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Speaker 1: particularly you're in the Gulf Coast in the Pushing Oklahoma region,

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Speaker 1: that any more additional barrels are having a problem finding

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Speaker 1: a home. Basically, the folks who have storage all of

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Speaker 1: a sudden found themselves not sitting on a oil tank,

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Speaker 1: but sits sitting in the penthouse. And uh, we're able

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Speaker 1: to charge accordingly. Other words, not only am I going

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Speaker 1: to get free oil, you're gonna pay me to take

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Speaker 1: your oil. And again, it's because of what's happened here

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Speaker 1: over the past number of weeks now, and it's just

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Speaker 1: crash in demand both globally and hearing United States, where,

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Speaker 1: for example, gasoline demand has so John, I'm looking right

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Speaker 1: now at the June contract w T I, which has

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Speaker 1: plummeted to about fourteen dollars of barrel, just to give

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Speaker 1: you a sense. Back in March, when things we're not

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Speaker 1: looking too pretty, Uh, they were twenty almost twenty four

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Speaker 1: dollars a barrel, comparatively high. Um where we headed here.

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Speaker 1: Are we going to see the same kind of trading

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Speaker 1: activity in the June contract as we did in the

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Speaker 1: May one? Yeah, it's very much my sense that we

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Speaker 1: we will. I mean that this is going to be

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Speaker 1: a steady march lower. The physical market conditions are only

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Speaker 1: going to worsen over the next several weeks for a

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Speaker 1: couple of reasons. Um, even though we have the US

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Speaker 1: recount plunging and we are starting to finally see some

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Speaker 1: US oil production get get reined in and decline by

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Speaker 1: about seven thousand barrels from the recent peak by the way,

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Speaker 1: but this market is going to have to stare down

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Speaker 1: a massive amount of Saddi Arabian crude. Oh, the Sadie's

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Speaker 1: are going in for the kill here. It looks like,

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Speaker 1: and um really just you know, put a knockout blow

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Speaker 1: onto our domestic producers, particularly the shale players, because they

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Speaker 1: have barrel schedule to be heading our way over the

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Speaker 1: course of the next couple of months here that are

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Speaker 1: going to compete for what little available storage space remains,

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Speaker 1: uh and use that crew to run it through their

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Speaker 1: refinery in Texas. That will preclude them from you know

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Speaker 1: what they usually do, which is by at least some

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Speaker 1: US Gulf of Mexico produced crude oil. So, Um, this

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Speaker 1: is gonna get a lot worse still before it gets better,

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Speaker 1: all right, So give us a sense of what that's

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Speaker 1: going to mean for the US oil producers, the shale

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Speaker 1: patch uh companies. Um, you expect a wave of bankruptcies

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Speaker 1: consolidation if in fact this does come to pass unless

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Speaker 1: the administration comes through with some kind of aid package.

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Speaker 1: There's been some hint of that. Yes, there's there's no

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Speaker 1: one there's no way around it that these and these

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Speaker 1: negative prices are are just uh, they're problematic for even

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Speaker 1: companies as large as Conuco and Exxon Mobile, although they

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Speaker 1: will withstand it, uh, and they will you know, be

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Speaker 1: on the other side of this thing and probably be

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Speaker 1: the ones picking up the pieces. Here. You're going to

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Speaker 1: see a consolidation and concentration u emerge in the industry

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Speaker 1: where there's probably only be a handful of really significant

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Speaker 1: the large players because they're the ones with the deep

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Speaker 1: pockets that can afford to a whether this arm and

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Speaker 1: then you know, buy out or or buy these assets

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Speaker 1: out from the auctions and bankruptcies that ensue. So, John,

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Speaker 1: you did mention President Trump's uh pledged support of the

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Speaker 1: energy industry. So let's go there, President Trump tweeting earlier

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Speaker 1: this morning, we will never let the great US oil

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Speaker 1: and gas industry down. I have instructed the Secretary of

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Speaker 1: Energy and Secretary of the Treasury to formulate a plan

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Speaker 1: which will make funds available so that these very important

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Speaker 1: companies and jobs will be secured long into the future.

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Speaker 1: How much do you sort of uh foresee that helping

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Speaker 1: things given the fact that, yes, federal law does authorize

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Speaker 1: the Energy Department to set aside emergency supplies, but the

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Speaker 1: agency has only ever used about two thirds of that capacity.

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Speaker 1: So how much are we can actually end up seeing here? Well,

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Speaker 1: I mean, for starters, you know, you know that the

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Speaker 1: Saudi Arabia has never been a friend of ours. Whenever

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Speaker 1: there's oil market turmoil, when the prices are sky high,

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Speaker 1: they're very slow to put moral on the market to

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Speaker 1: help us out. And then and and right now, Um,

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Speaker 1: I don't you know, I don't want to be over

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Speaker 1: the top about what they're doing, but I mean they

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Speaker 1: are really coming at us hard here. Uh. This is

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Speaker 1: not something an ally or a friend were certainly a

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Speaker 1: country that benefits from our protection should be doing. If

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Speaker 1: I was the president, I had urged the president to

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Speaker 1: embargo there oil and keep these forty tankers off and

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Speaker 1: away from this market. But um, what we don't want

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Speaker 1: to have happened here, um, is for the oil industry

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Speaker 1: to get wrecked and then we find ourselves once again

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Speaker 1: vulnerable to the policies of OPEC. Plus and Russia and UM,

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Speaker 1: and we get a tight market where consumers, the US

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Speaker 1: consumers get squeezed again, we go through the whole cycle

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Speaker 1: one more time. UM. That's what I'm concerned about. And

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Speaker 1: I think to the extent that the administration can lend

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Speaker 1: some kind of aid and prop up at least a

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Speaker 1: portion of the industry, they should. They should definitely do it.

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Speaker 1: They should get oil into the Strategic Patrolling Reserve. I

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Speaker 1: have always been an advocate of using that aggressively because

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Speaker 1: we're up against the cartel. Um. You know, we least

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Speaker 1: the oil when when when OPEC is tightening the spigot,

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Speaker 1: and build it up now when prices are super low,

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Speaker 1: and we'll have an insurance policy in the future, so

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Speaker 1: you know, hopefully they'll get aggressive on an administration we

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Speaker 1: can do something about this. This is not an entirely

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Speaker 1: free market. That's the problem. John Kildeff, thank you so

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Speaker 1: much for being with us. John kilda founder of Again

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Speaker 1: Capital on the oil markets not entirely a free market.

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Speaker 1: Although you can get oil for free if you can

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Speaker 1: store it somewhere, in fact, someone will pay you to

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Speaker 1: take it off their hands. At least when it came

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Speaker 1: to the main contract. Interesting to see whether we'll see

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Speaker 1: the same dynamic again play out with the June contract.

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Speaker 1: John Kilduff saying it looks like it's the very likely

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Speaker 1: possibility given the supplied to Man dynamic and the glut

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Speaker 1: out there of crude. Well, one thing I think investors

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Speaker 1: are beginning to become accustomed to in this coronavirus era

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Speaker 1: in terms of the markets is volatility. I'm looking at

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Speaker 1: the VIX right now up a little more than three

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Speaker 1: full points here to forty seven. That's a long way,

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Speaker 1: certainly from the peak several weeks ago about eighty, but

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Speaker 1: it's also a long way from where we've historically been

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Speaker 1: trading in the thirteen fifteen kind of level, So a

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Speaker 1: higher risk environment for short. Someone to give us some perspective,

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Speaker 1: there's nobody better than David Kotok. He's a chairman and

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Speaker 1: chief investment officer of Kumblan Advisors, about three billion dollars

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Speaker 1: under management. So David, thanks so much for joining us.

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Speaker 1: I don't think we've really chatted much at all since

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Speaker 1: this coronavirus has really become the narrative of not only

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Speaker 1: our lives but also financial markets as well. I would

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Speaker 1: love to get your long term perspective on kind of

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Speaker 1: how you're thinking about this new world that that we're

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Speaker 1: in and how to allocate capital. Well, thank you, Paul.

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Speaker 1: We are hunker down as everyone else in the world

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Speaker 1: who can hunker down just doing our view is a

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Speaker 1: cash reserve in equity portfolios is necessary in bond portfolios

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Speaker 1: highest grade credits. We are about to watch the dismemberment

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Speaker 1: of the credits related to lower grade energy sector, and

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Speaker 1: we expect that to be a worldwide phenomenon. And we

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Speaker 1: have to wait for the elements that we know we

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Speaker 1: must obtain, and they are testing, testing, testing, immune system

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Speaker 1: enhancement antibodies, vaccines, and robust, credible treatments. And as soon

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Speaker 1: as we have those, we can open up and we

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Speaker 1: can get back to work and we can eventually fully recover.

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Speaker 1: We cannot recover before we have these things, and any

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Speaker 1: attempts to recover before you have them is a high

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Speaker 1: risk gamut. We're about to tell that in the United States,

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Speaker 1: where we see people in bowling alleys in Georgia and

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Speaker 1: on the beaches in Jacksonville and assembled at state capitals protesting,

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Speaker 1: and we're gonna find out in two or three or

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Speaker 1: four weeks. If there are infectious surges in those locations

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Speaker 1: or tied to people who participated in those activities, we're

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Speaker 1: going to have that evidence very soon. And a lot

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Speaker 1: of people are worried about what the economic damage would

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Speaker 1: be from a resurgence of cases. You're saying that it's

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Speaker 1: important to hide out in the safest of investments through

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Speaker 1: this all as there is a washout effect of the shutdowns,

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Speaker 1: and we're seeing that certainly in the bond market today.

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Speaker 1: Tenure treasure yelled back at near all time lows zero

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Speaker 1: point five FO. You've been covering treasuries, you could cover.

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Speaker 1: You understood the FED inside now for decades. Where do

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Speaker 1: you think the tenure yield is going basis points here, Oh,

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Speaker 1: I don't know, because the FED is trying to follow

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Speaker 1: a world war to model. Lisa and the World Work

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Speaker 1: to model essentially took the FED and said, we're going

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Speaker 1: to help the Treasury finance all it has to finance,

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Speaker 1: and we're going to become partners with Treasury, and we're

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Speaker 1: gonna set aside moral hazard discussions for later. We're gonna

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Speaker 1: set aside FED independence for later, and we'll deal with

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Speaker 1: that after the crisis and that's what's it worked. So

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Speaker 1: in World War Two, the FED stabilize the entire treasury

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Speaker 1: curve within a few basis points and it became predictable

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Speaker 1: and a reference point. My expectation is the FED will

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Speaker 1: get to that here as well, and we'll have a

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Speaker 1: positive of lee sloped full yield curve of treasuries managed

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Speaker 1: and stabilized by the FED. I sure hope so, because

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Speaker 1: that will then become a platform reference for high grade

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Speaker 1: credit for the entire world, and it is much needed

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Speaker 1: right now. David Kotalk, this is fantastic and really interesting.

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Speaker 1: In other words, yield curve control will be the policy

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Speaker 1: from the Federal Reserve, as it essentially monetizes the debts

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Speaker 1: of the United States by buying up the excess treasuries

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Speaker 1: that the US government sells cells to plug its deficit.

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Speaker 1: Given that model, how big can the Federal Reserve balance

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Speaker 1: sheet get? My estimate is the Federal Reserve balance sheet

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Speaker 1: could grow to between eight and eleven or twelve trillion,

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Speaker 1: and it would be able to be financed and managed

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Speaker 1: and maybe larger. In World War two, when once Pearl

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Speaker 1: Harbor occurred and the FED policy changed in it went

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Speaker 1: on for four years. The Federal Reserve assisted the United

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Speaker 1: States of America in financing the war, and the debt

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Speaker 1: to GDP exceeded a hundred percent, and it had to

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Speaker 1: do it, and we were able at the end to

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Speaker 1: be victorious in a war. This is a different kind

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Speaker 1: of war, but the models of the same and federal

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Speaker 1: finances needed. It's needed in the states and hospitals, in

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Speaker 1: the cities, in agencies and nonprofits for assistance to business

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Speaker 1: or else. We will have a mass of financial failures

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Speaker 1: and bankruptcies and there's no reason to have them. If

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Speaker 1: the policy is to gap across the valley to the

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Speaker 1: other side of the crisis in science and medicine will

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Speaker 1: fit this. So, David, about thirty seconds, just give us

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Speaker 1: your sense of what the government's fiscal stimulus to date

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Speaker 1: and what else you think needs happen. Well, we have

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Speaker 1: two trillion direct, we have an argument of three or

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Speaker 1: four trillion which would be indirect, and we have a

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Speaker 1: current debate for another half a trillion. My view is

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Speaker 1: will need a number of more chanchas of that, and

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Speaker 1: sooner is better than later. So I hope politicians realize

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Speaker 1: it and deliver it. David Kotalk, thank you so much

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Speaker 1: for taking the time. All my best to your family

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Speaker 1: and to yourself as you manage through this. David Kotalk,

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Speaker 1: chairman and chief investment officer at Cumberland Advisers talking yield control,

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Speaker 1: your guild, curve control, and that's actually something that a

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Speaker 1: number of strategists are saying. We seem to be headed

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Speaker 1: towards with the federal reserve buying. The bulk of the

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Speaker 1: treasury issue is that the federal that the U. S.

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Speaker 1: Treasury is selling to plug the skill deficit that we

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Speaker 1: are developing to pay for some of these necessary bridges

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Speaker 1: to get together side. Paul, Yeah, and David suggested it

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Speaker 1: from a fiscal stimulus perspective, there's very likely going to

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Speaker 1: need to be more just given our sense of timing

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Speaker 1: of how this may play out here. So you know,

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Speaker 1: it looks like the government is going to have to

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Speaker 1: remain pretty active here. The Fed has certainly done its

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Speaker 1: job as the dollar continues to strengthen. In light of

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Speaker 1: this flight to haven, flight to quality is the fate

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Speaker 1: of emerging markets, and especially given the fact that the

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Speaker 1: developed nations really have been strapped on their own and

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Speaker 1: dealing with the coronavirus We're so lucky Eric Fine joining

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Speaker 1: US portfolio manager of focusing on Emerging markets fixed income

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Speaker 1: strategy at van Eck Global. We have touched with it,

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Speaker 1: based with him yesterday after the I M F meetings

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Speaker 1: and some of the focuses that everyone is looking at.

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Speaker 1: I just want to start with the flight of cash

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Speaker 1: from developing markets. How much appetite are you hearing from

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Speaker 1: your colleagues and from frankly uh staff within your own

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Speaker 1: company about putting money to work within the developing world

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Speaker 1: given the pain that we're seeing in in places like

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Speaker 1: the United States and Europe and the lack of wellness

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Speaker 1: to take risk. Thanks for the question, and uh So,

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Speaker 1: first of all, last week saw the first influence e

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Speaker 1: M bond funds UM. So that's a narrow answer to

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Speaker 1: your question. Second, I'd say more broadly, e M is

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Speaker 1: different from the pre global financial crisis e M. Before

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Speaker 1: the before the Global financial crisis, when I spent about

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Speaker 1: half of my career UM when something went wrong in

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Speaker 1: the world, all the money flowed out and that was

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Speaker 1: the end of the story. UM. After the Global financial crisis,

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Speaker 1: markets learned that having high real interest rates, independent central banks,

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Speaker 1: good fiscal policy. UM actually generated good returns. And so

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Speaker 1: the big change from this I m US meeting compared

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Speaker 1: to UH past crisis meetings was the discussion was very

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Speaker 1: much who are the winners? Who are the losers? Obviously

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Speaker 1: everything is kind of a loser, right, so it's going

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Speaker 1: to be a big relative question to a big extent. Um.

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Speaker 1: But uh, last week we saw the first inflows in general. Right.

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Speaker 1: I can't talk specifically about my company, of course, um.

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Speaker 1: Um yet um, because that's a matter of official timing issues. Um.

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Speaker 1: But uh, but it hasn't been as bad as it's

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Speaker 1: as it's been in the past. And the other thing,

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Speaker 1: I'd say official support. A lot of this official support

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Speaker 1: is not just to their own economies, it's to the

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Speaker 1: e m s and that's also a big change. So, Eric,

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Speaker 1: we've seen just unprecedented volatility and energy markets over the

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Speaker 1: last couple of days. How does that kind of impact

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Speaker 1: emerging markets broadly defined? Great question? Um. The problem with

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Speaker 1: oil is it tends to correlate with everything, and when

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Speaker 1: the markets seat oiled down, they think it's risk down

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Speaker 1: because they think it's demand down. Um. I think that's

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Speaker 1: generally right, but I don't think that's the right characterization

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Speaker 1: of why oil is down right now. Um, it is

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Speaker 1: about a storage capacity, and it is about a supply shock,

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Speaker 1: not necessarily a demand shock. So that's the broadest point

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Speaker 1: I'd made. The second point I'd make is there are

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Speaker 1: winners and losers. UM. Consumer the consumption basket. The typical

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Speaker 1: consumption basket in an emerging economy is food and energy.

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Speaker 1: So a lot of these countries are seeing their inflation

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Speaker 1: going down. UM. They are not just a bunch of

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Speaker 1: oil exporters. UM. There are even some explicit winners, like

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Speaker 1: South Africa. Strikes me, so I thought that it's complicated

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Speaker 1: and all these countries, but they export gold and their

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Speaker 1: import of oil. UM. So the oil story generally correlates

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Speaker 1: badly and for legitimate reasons. But for me, it's all

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Speaker 1: about the details. UM. And there are winners and losers.

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Speaker 1: And I was glad to see and I m meetings

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Speaker 1: that the focus was not oh, just exit and sell everything. UM,

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Speaker 1: it was very much careful analysis of country by country

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Speaker 1: and what it means. One of the biggest countries in

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Speaker 1: this complex is China, and I've heard a real bullcase

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Speaker 1: made that China will recover first, given the fact that

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Speaker 1: they were first to experience the coronavirus, and we did

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Speaker 1: see signs of that in the economic data. However, they

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Speaker 1: are now facing the decline into band for the supply

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Speaker 1: chain items that they have previously supplied. Given the fact

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Speaker 1: that the rest of the world is shut down, what's

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Speaker 1: the prospect there? Yeah, China is UM. China is one

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Speaker 1: of the most important countries, not just because it's the

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Speaker 1: largest economy and PPP terms from you know, second biggest UM,

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Speaker 1: but UH, if you're going to see a V recovery anyway,

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Speaker 1: it seems to me it's most likely a V shaped recovery.

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Speaker 1: Letters are probably not the best way to answer economic

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Speaker 1: questions this time around, but the most likely to see V.

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Speaker 1: This is the biggest fiscal sting know US they've had ever. Basically,

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Speaker 1: UMU the lockdown team to have been working and they're

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Speaker 1: unwinding and the early data, as you refer to is

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Speaker 1: has been positive. Another key feature of China is it's

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Speaker 1: acting as a global stabilizer. UM. They are keeping their

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Speaker 1: effects stable. That is a very unusual role and it's

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Speaker 1: an important anchor for UH for the e m UM.

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Speaker 1: You will also, I think a big signal will be

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Speaker 1: on whether the Policy Committee coming up gets delayed or

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Speaker 1: not on the last one I see on China is

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Speaker 1: look for lower rates in our framework. Real interest rates

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Speaker 1: are too low there, but you know what frameworks. There's

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Speaker 1: a time for frameworks, and then there's a time for

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Speaker 1: sort of more narrative common sense thinking. UM. I would

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Speaker 1: I I don't think looking at zero percent or a

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Speaker 1: zero is an extreme sort of UH grabbing statement. But

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Speaker 1: I think much much lower interest rates in China as

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Speaker 1: it stimulates fiscally is a very very reasonable um uestion

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Speaker 1: to be asking, and that would boost it. But I

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Speaker 1: would say it's the likeliest to be UM. There are

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Speaker 1: some early signs UM and UH, and so this some

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Speaker 1: of this optimism UM is not unfounded. Hey, Eric, thanks

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Speaker 1: so much for joining us. Really appreciate your thoughts. Eric Fine,

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Speaker 1: portfolio manager for Emerging Markets fixed Income Strategy at van

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Speaker 1: Eck Global, based in UH New York City. So it's

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Speaker 1: interestingly so you think about the risk UH that emerging

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Speaker 1: market investors typically take on for that presumably better return.

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Speaker 1: One could argue there's quite amount of risk of potential

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Speaker 1: return in more developed markets. Now, given some of the

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Speaker 1: pullbacks we've seen in the volatility, we've seen. Yeah. I

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Speaker 1: think what Eric was saying though about the details is important.

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Speaker 1: The idea that lower oil prices will be beneficial for

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Speaker 1: countries that import, even though they could decimate, say the

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Speaker 1: budgets of the likes of Nigeria. Yeah exactly, yeah, exactly.

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Speaker 1: So one one one hand, it's good in terms of inflation.

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Speaker 1: On the other hand, if you're producing that commodity like

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Speaker 1: a lot of the emerging markets do clearly a big issue.

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Speaker 1: Market selling off today SMP off two point nine. We'll

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Speaker 1: have more. This is Bloomberg. As we watch oil prices plunge,

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Speaker 1: the question is what does this mean for inflation when

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Speaker 1: you see that the FED is trying to fight it

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Speaker 1: with everything that they have. The idea of this disinflationary trend,

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Speaker 1: the FED would like to see more inflation. We are

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Speaker 1: yet seeing inflation expectations fall once again. Ira Jersey joining us.

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Speaker 1: He's been talking about the disinflationary pressures. He's chief US

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Speaker 1: interest rate strategist for Bloomberg Intelligence. I want to start there.

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Speaker 1: Given the price of oil, what we're seeing, how correlated

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Speaker 1: has that been to inflation expectations in the near and

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Speaker 1: long term and the fedsibility to change that yeah, so,

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Speaker 1: so traditionally it's been very high. So the correlation between

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Speaker 1: short term inflation expectations, like you know one year and

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Speaker 1: two year is at times over well over correlated. Now,

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Speaker 1: I think the issue with the current move is that

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Speaker 1: even though UH front end contracts of oil so you know, May, June, July,

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Speaker 1: those are all coming down, but when you look at

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Speaker 1: what the markets still expecting for oil in say UH January,

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Speaker 1: it's still over thirty dollars. So the so the thing is,

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Speaker 1: even though we might have a short term dip in

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Speaker 1: headline inflation because of what's going on with the spot

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Speaker 1: oil price, and then your trim oil prices, if they

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Speaker 1: do go back up to those kind of thirty ish levels,

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Speaker 1: then you wind up seeing um basically an unchanged energy

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Speaker 1: component of cp I. So so actually today, ironically and

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Speaker 1: even yesterday, you didn't get significant moves in the market's

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Speaker 1: expectations of inflation. So I were thinking about, you know,

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Speaker 1: all the money that the government is spending here in

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Speaker 1: fiscal stimulus, how concerned is the treasury market for you know,

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Speaker 1: the US budget deficit made quadruple this year to almost

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Speaker 1: four trillion dollars. How's that being reflected in the market place.

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Speaker 1: At some point, we gotta start paying this stuff back.

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Speaker 1: It's not being reflected at all, UM And in fact,

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Speaker 1: it's just the other way. So that you know what

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Speaker 1: what tends to happen with treasuries. So unless you think

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Speaker 1: that the federal government actually will be UM in default

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Speaker 1: at some point in the future, what what tends to

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Speaker 1: happen is treasure yields tend to go down as the

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Speaker 1: Treasury is issuing more and more debt. And the reason

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Speaker 1: for that is because they're issuing that debt into economic weakness.

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Speaker 1: So two things occurred during during those periods. One is

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Speaker 1: there's a lack of appetite for other fixed income assets,

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Speaker 1: and people want to be in the safest assets, so

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Speaker 1: they jumping in by treasuries. And that's exactly what you've seen.

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Speaker 1: That's the flight the quality bid that UM that's been

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Speaker 1: in a lot of the government bond markets over the

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Speaker 1: past couple of weeks. UM. The other the other thing

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Speaker 1: is is that when the I think the expectation by

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Speaker 1: the market is that the Federal Reserve will continue to

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Speaker 1: be very large buyers of the treasury market. And because

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Speaker 1: of that UM there's not a lot of impetus, and

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Speaker 1: and it's very hard to get short the market because

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Speaker 1: you're worried that the that the Federal Reserve is just

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Speaker 1: going to keep on buying and buying and buying, so

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Speaker 1: you won't be able to um to profit from being

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Speaker 1: short the market, except maybe in very short term trade.

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Speaker 1: This is sort of a strange concept. The FED has

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Speaker 1: thrown everything it can think of and may try to

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Speaker 1: throw more at the markets, with its balance sheet expanding

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Speaker 1: by two trillion dollars in a month. You've got Congress

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Speaker 1: expanding its deficit, and yet you have city analysts rate

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Speaker 1: strategists saying that they don't think the Fed's views are

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Speaker 1: expansionary enough that they aren't necessarily easy and accommodative to

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Speaker 1: the degree that would be required given the shock that

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Speaker 1: we're seeing to the economy. Do you agree? So? I

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Speaker 1: disagree with them because I think that there's nothing zero

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Speaker 1: that central banks can do that will stimulate the economy

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Speaker 1: without getting people back to work and having physical distancing

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Speaker 1: rules change at the end of the day, and economy

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Speaker 1: is made up of transactions, and when you have a

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Speaker 1: significant reduction in those transactions that are occurring, and I

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Speaker 1: mean real money transactions, I mean me, you know, I

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Speaker 1: just take me as an anecdote, I've gotten I used

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Speaker 1: to get gas once a week in my car. I

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Speaker 1: have not gotten gas in a month. Right, So you

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Speaker 1: know you wonder why oil prices are low, Well, right,

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Speaker 1: there is the reason and that and you do that

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Speaker 1: over mill Yeah exactly, well, in in part, in part

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Speaker 1: it is and that's because you know of this physical

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Speaker 1: distancing that we're all doing. So because you know our

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Speaker 1: economic activity is lower by ten twenty percent, you know,

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Speaker 1: anything that the Fed does is not going to stimulate

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Speaker 1: demand for credit growth, and that's what you need in

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00:25:43,160 --> 00:25:46,840
Speaker 1: order to UM And that's how monetary policy helps, is

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Speaker 1: that it helps people who want loans to be able

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00:25:50,160 --> 00:25:52,639
Speaker 1: to get them at much cheaper levels. And they just

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Speaker 1: you know who who's getting out alone at this point

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Speaker 1: to start a business or to buy a car that

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00:25:57,480 --> 00:25:59,000
Speaker 1: you can't go to a car show room, so how

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Speaker 1: are you going to buy a car? So alright, just

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Speaker 1: quickly we had we saw negative oil prices yesterday, or

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00:26:05,160 --> 00:26:08,919
Speaker 1: we can see negative interest rates. Um well you have

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Speaker 1: in a lot of places, and in fact in the

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Speaker 1: treasury bills traded negative earlier today, so you have, um,

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Speaker 1: I don't think that the Federal Reserve will cut interest

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Speaker 1: rates to negative But you know, is it possible for

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Speaker 1: T bills to trade their on occasion? I think there is,

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Speaker 1: just because of that flight the quality bid that the

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Speaker 1: markets continuing to absorb. Thank you so much, Yeah, thanks

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Speaker 1: so much for joining us. We appreciate that. Ira Jersey,

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Speaker 1: Chief Interest rate Strategists for Bloomberg Intelligence. Thanks for listening

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00:26:40,080 --> 00:26:42,480
Speaker 1: to the Bloomberg P and L podcast. You can subscribe

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00:26:42,480 --> 00:26:45,280
Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast

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Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.

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Speaker 1: I'm Lisa bram Woyd's I'm on Twitter at Lisa A.

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Speaker 1: Bram Woit's one before the podcast. You can always catch

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Speaker 1: us worldwide. I'm Bloomberg Radio