1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:22,880 Speaker 1: at Bloomberg dot com. Right now, expressed in markets extreme 8 00:00:22,960 --> 00:00:25,479 Speaker 1: stress if you look at certain credit gauges, if you 9 00:00:25,520 --> 00:00:28,360 Speaker 1: look at uh, certainly the sell off that is deepening, 10 00:00:28,400 --> 00:00:30,520 Speaker 1: and but really the place where you're seeing stress or 11 00:00:30,640 --> 00:00:34,000 Speaker 1: or perhaps the sort of rush of cash is in 12 00:00:34,000 --> 00:00:36,320 Speaker 1: the treasury market, where you're seeing the biggest one day 13 00:00:36,400 --> 00:00:39,240 Speaker 1: drop in thirty year yields since two thousand and nine 14 00:00:39,320 --> 00:00:43,440 Speaker 1: at least, and you're seeing just in general, everyone reprice 15 00:00:43,640 --> 00:00:48,239 Speaker 1: rates closer and closer to zero. Leno Shlietiev of Bloomberg 16 00:00:48,280 --> 00:00:50,680 Speaker 1: Economics here with us and and Lena. I just want 17 00:00:50,680 --> 00:00:53,479 Speaker 1: to get your response to what Larry Cudlow said, And 18 00:00:53,520 --> 00:00:56,200 Speaker 1: he was talking about how strong the economy was heading 19 00:00:56,240 --> 00:00:58,639 Speaker 1: into this and that it will be resilient and can 20 00:00:58,680 --> 00:01:02,560 Speaker 1: recover quickly. Do you were grey well, we agree with 21 00:01:02,640 --> 00:01:05,080 Speaker 1: him that it will be temporary in a sense that 22 00:01:05,720 --> 00:01:09,400 Speaker 1: with the current policy response, the slowdown will soon transition 23 00:01:09,440 --> 00:01:12,960 Speaker 1: into a contraction, and therefore the slow down part will 24 00:01:13,000 --> 00:01:17,920 Speaker 1: indeed prove temporary. But back to your question, is the 25 00:01:18,000 --> 00:01:21,360 Speaker 1: economy is strong enough? Going into that, I would say 26 00:01:21,400 --> 00:01:25,119 Speaker 1: that the latest payrolls report did show that the economy 27 00:01:25,200 --> 00:01:29,160 Speaker 1: had some strength, and this is the key premise for 28 00:01:29,240 --> 00:01:32,080 Speaker 1: us to think that we will not deep into a recession, 29 00:01:32,480 --> 00:01:35,679 Speaker 1: so at least our base case scenario. But the numbers 30 00:01:35,720 --> 00:01:38,600 Speaker 1: today did not uh, you know, they were not as 31 00:01:38,600 --> 00:01:41,760 Speaker 1: strong as uh it was looking at the first glance. 32 00:01:42,120 --> 00:01:45,280 Speaker 1: So first of all, the number was inflated by the 33 00:01:45,319 --> 00:01:50,440 Speaker 1: construction sector hiring, which was mainly due to weather which 34 00:01:50,520 --> 00:01:53,440 Speaker 1: was very warm during this winter. So if you see 35 00:01:53,760 --> 00:01:57,880 Speaker 1: this reversing in the spring, this will exacerbate the slow down. 36 00:01:58,040 --> 00:02:01,720 Speaker 1: That will cause the services to slow down as well. 37 00:02:01,880 --> 00:02:05,040 Speaker 1: So I would say, yes, the economy is relatively strong, 38 00:02:05,120 --> 00:02:09,239 Speaker 1: but the response should be quick and not targeted. It 39 00:02:09,280 --> 00:02:12,320 Speaker 1: should be a massive response if we want to avoid 40 00:02:12,320 --> 00:02:14,760 Speaker 1: the recession at least. We're also very fortunate today to 41 00:02:14,760 --> 00:02:16,880 Speaker 1: have in our Bloomberg and Actor Broker studio Mike Collins 42 00:02:16,960 --> 00:02:19,480 Speaker 1: joining us Mike as a senior investment officer and senior 43 00:02:19,480 --> 00:02:23,160 Speaker 1: portfolio manager for p JIM Fixed Income. Uh, Mike, thanks 44 00:02:23,160 --> 00:02:25,680 Speaker 1: so much for joining us here. You guys have I'm 45 00:02:25,680 --> 00:02:28,000 Speaker 1: gonna call it a good jillion and one dollars under management. 46 00:02:28,040 --> 00:02:30,520 Speaker 1: You see the markets on a global scale. What are 47 00:02:30,560 --> 00:02:33,480 Speaker 1: you seeing today and over the past couple of weeks. Yeah, well, 48 00:02:33,520 --> 00:02:37,400 Speaker 1: you're finally starting to see the capitulation phase right up 49 00:02:37,480 --> 00:02:40,120 Speaker 1: until just a couple of days ago, as we're talking 50 00:02:40,160 --> 00:02:43,320 Speaker 1: to our high yield traders and portfolio managers and all 51 00:02:43,320 --> 00:02:45,680 Speaker 1: of our different credit sectors, and we said, listen, what 52 00:02:45,760 --> 00:02:47,840 Speaker 1: can you buy cheap? And they said, there's no real 53 00:02:48,080 --> 00:02:50,919 Speaker 1: force selling yet. There aren't that many opportunities as much 54 00:02:50,919 --> 00:02:53,240 Speaker 1: as you would think given the widening we've seen in 55 00:02:53,280 --> 00:02:55,880 Speaker 1: credit spreads. But I think that's changing a little bit 56 00:02:55,880 --> 00:02:59,000 Speaker 1: on the margin here, and we're actually in the mode 57 00:02:59,040 --> 00:03:02,320 Speaker 1: of looking for opera tunities to add risk here. Right 58 00:03:02,760 --> 00:03:04,640 Speaker 1: to Lena's point, I mean, I think there are are 59 00:03:04,720 --> 00:03:08,000 Speaker 1: a few big considerations. One, the momentum we had in 60 00:03:08,000 --> 00:03:11,200 Speaker 1: the economy was really solid, and every data point we 61 00:03:11,240 --> 00:03:14,799 Speaker 1: get kind of reveals the strength going into this too. 62 00:03:15,320 --> 00:03:17,799 Speaker 1: There's already been a lot of monetary stimulus, and there 63 00:03:17,800 --> 00:03:21,360 Speaker 1: will be more. UH. Interest rates for corporates are much lower. 64 00:03:21,760 --> 00:03:26,359 Speaker 1: Leverage loan issuers and borrowers see their funding costs automatically 65 00:03:26,400 --> 00:03:28,800 Speaker 1: go down right because their yields are based off liebor 66 00:03:29,120 --> 00:03:33,800 Speaker 1: so they go down instantaneously right to reduce their interest expense. Three, 67 00:03:33,840 --> 00:03:38,080 Speaker 1: there will be a huge UH coordinated global policy response 68 00:03:38,120 --> 00:03:41,520 Speaker 1: above and beyond what we're seeing from central banks. And 69 00:03:41,600 --> 00:03:44,800 Speaker 1: four these things tend to be seasonal. This isn't like 70 00:03:44,840 --> 00:03:47,160 Speaker 1: OH eight where you never saw the endgame where people 71 00:03:47,200 --> 00:03:49,839 Speaker 1: were worried that maybe this is a nine thirties great 72 00:03:49,840 --> 00:03:52,240 Speaker 1: depression in at last ten years. Here there is some 73 00:03:52,360 --> 00:03:56,240 Speaker 1: seasonal aspects to this type of virus. So UM, I 74 00:03:56,280 --> 00:03:58,520 Speaker 1: would bet in six months you're gonna look back and say, Wow, 75 00:03:58,560 --> 00:04:01,800 Speaker 1: I wish I bought more stuff UH in the in 76 00:04:01,840 --> 00:04:04,440 Speaker 1: the February and March of of two thousand twenty, Mike, 77 00:04:04,480 --> 00:04:07,240 Speaker 1: Before I dive into exactly how you buy this dip 78 00:04:07,280 --> 00:04:09,360 Speaker 1: and what gives you confidence that you're not catching a 79 00:04:09,400 --> 00:04:12,000 Speaker 1: falling knife, I want to take a bigger picture of 80 00:04:12,280 --> 00:04:15,080 Speaker 1: question about what Larry Cudlow is talking about and the 81 00:04:15,120 --> 00:04:19,040 Speaker 1: fiscal response. I mean, what is the potential risk here 82 00:04:19,360 --> 00:04:22,800 Speaker 1: that there is not a sufficient fiscal response, And that's 83 00:04:22,839 --> 00:04:26,320 Speaker 1: something that's temporary becomes something much more permanent as companies 84 00:04:26,400 --> 00:04:29,240 Speaker 1: run out of money and are unable to finance themselves 85 00:04:29,240 --> 00:04:31,760 Speaker 1: at costs that are feasible. I mean, I'm looking at 86 00:04:31,760 --> 00:04:35,040 Speaker 1: American airlines borrowing costs going from less than three to 87 00:04:35,080 --> 00:04:38,279 Speaker 1: more than in a matter of days. How do you 88 00:04:38,320 --> 00:04:40,360 Speaker 1: sort of save off that risk? Ye? So, so there 89 00:04:40,360 --> 00:04:43,479 Speaker 1: are two to me, two big risks, right. One is 90 00:04:43,520 --> 00:04:46,479 Speaker 1: that you actually have a big earnings contraction here. Right, 91 00:04:46,760 --> 00:04:49,799 Speaker 1: so the IBADA or cash flow part of the leverage 92 00:04:49,839 --> 00:04:53,440 Speaker 1: statistic debt to IBADA really plummets, and your leverage goes up, 93 00:04:53,480 --> 00:04:56,240 Speaker 1: and you do get downgrades and you did get funding stresses. 94 00:04:56,279 --> 00:04:59,359 Speaker 1: There too is a liquidity risk in the markets that 95 00:04:59,400 --> 00:05:02,559 Speaker 1: you do get or capitulation and people panic and get 96 00:05:02,560 --> 00:05:05,080 Speaker 1: out of the markets in big size. And we really 97 00:05:05,080 --> 00:05:07,840 Speaker 1: have not seen that yet. Right. We've seen some big 98 00:05:07,880 --> 00:05:10,599 Speaker 1: redemptions out of et f s and high yield and loans. 99 00:05:11,160 --> 00:05:14,080 Speaker 1: Investment grade credit have generally until the last day or so, 100 00:05:14,160 --> 00:05:17,440 Speaker 1: seeing big inflows as their yields are at new lows 101 00:05:17,440 --> 00:05:20,159 Speaker 1: and their prices are up significantly. If there's a lot 102 00:05:20,160 --> 00:05:23,520 Speaker 1: of for selling, which we really have not seen yet. Uh, 103 00:05:23,560 --> 00:05:25,640 Speaker 1: then people have to scramble and raise money, and even 104 00:05:25,640 --> 00:05:28,360 Speaker 1: the highest quality bonds, even the best securities, go down 105 00:05:28,400 --> 00:05:31,240 Speaker 1: in price because you need to sell them to raise money. So, 106 00:05:31,440 --> 00:05:34,800 Speaker 1: Lena Bloomberg Economics, your base case is not a recession. 107 00:05:35,240 --> 00:05:37,960 Speaker 1: What are the data points that you're looking at that 108 00:05:38,800 --> 00:05:41,720 Speaker 1: could push you into recession scenario? What are the key 109 00:05:41,720 --> 00:05:44,400 Speaker 1: things you guys are looking sure, So we recently downgraded 110 00:05:44,680 --> 00:05:47,920 Speaker 1: growth forecast to just one percent in the first half 111 00:05:48,000 --> 00:05:51,080 Speaker 1: of the year. In terms of GDP, we were above 112 00:05:51,160 --> 00:05:55,159 Speaker 1: two I think just before it all started. So I 113 00:05:55,160 --> 00:05:59,560 Speaker 1: think we need to look at how growth is evolving. 114 00:05:59,640 --> 00:06:02,719 Speaker 1: So if we get to a stall speed for year 115 00:06:02,720 --> 00:06:04,840 Speaker 1: over year growth in the vicinity of one and a 116 00:06:04,880 --> 00:06:09,120 Speaker 1: half percent, that's where this is a tipping point basically. 117 00:06:09,160 --> 00:06:13,800 Speaker 1: So if growth slows down below that, uh, that basically 118 00:06:13,839 --> 00:06:17,120 Speaker 1: passes the point of no return and we will go 119 00:06:17,200 --> 00:06:20,559 Speaker 1: into a recession. So that's why, you know, I think 120 00:06:21,560 --> 00:06:24,560 Speaker 1: policy has to be more proactive. Look at what the 121 00:06:24,600 --> 00:06:27,680 Speaker 1: fit did. They were proactive. They cut rates, So you 122 00:06:27,680 --> 00:06:29,719 Speaker 1: didn't you weren't necessarily impressed by what you just heard 123 00:06:29,839 --> 00:06:35,160 Speaker 1: absolutely not. I think it does require a massive policy response, 124 00:06:35,240 --> 00:06:38,200 Speaker 1: not a targeted one. While they're looking at the data 125 00:06:38,240 --> 00:06:40,799 Speaker 1: and collecting all of the data that he was talking about, 126 00:06:40,880 --> 00:06:42,800 Speaker 1: you know, the FED will have to cut to a 127 00:06:42,920 --> 00:06:46,920 Speaker 1: zero zero low bound and how much ammunition will they 128 00:06:46,960 --> 00:06:51,159 Speaker 1: have left. So the earlier the fiscal response comes, the 129 00:06:51,240 --> 00:06:53,919 Speaker 1: better it is. So I want to get your sense 130 00:06:53,960 --> 00:06:56,800 Speaker 1: here because right now you talked about liquidity pressures that 131 00:06:56,800 --> 00:06:59,440 Speaker 1: we haven't really seen it so far that we actually 132 00:06:59,440 --> 00:07:02,320 Speaker 1: say in those to investment grade credit, the high yield 133 00:07:02,320 --> 00:07:05,479 Speaker 1: bond outflows have been controlled. Trading in the market has 134 00:07:05,520 --> 00:07:08,920 Speaker 1: withstood it. Today, however, we are starting to see a 135 00:07:08,960 --> 00:07:12,000 Speaker 1: little bit of a different tone in markets. What are 136 00:07:12,000 --> 00:07:13,920 Speaker 1: you looking for and how close do you think we 137 00:07:13,960 --> 00:07:17,120 Speaker 1: are to some sort of liquidity event. Yeah, I think 138 00:07:17,160 --> 00:07:20,240 Speaker 1: we're still far away from that. I mean, even this morning, 139 00:07:20,280 --> 00:07:24,080 Speaker 1: we are seeing people looking for for offerings, looking for 140 00:07:24,160 --> 00:07:26,920 Speaker 1: bonds to buy, right I mean, we've instructed our high 141 00:07:27,000 --> 00:07:30,040 Speaker 1: yield team to really try to be aggressive here and 142 00:07:30,120 --> 00:07:34,200 Speaker 1: buy our favorite higher quality high yield bonds um at 143 00:07:34,320 --> 00:07:37,360 Speaker 1: much wider spreads and much lower prices. And believe me, 144 00:07:37,400 --> 00:07:39,480 Speaker 1: it's been much more difficult than you would think. Based 145 00:07:39,480 --> 00:07:41,640 Speaker 1: on what you see on the screens right bid offer 146 00:07:41,680 --> 00:07:46,600 Speaker 1: spreads have widened, and we still see credit investors recognizing 147 00:07:46,880 --> 00:07:49,080 Speaker 1: that low interest rates are probably going to be here 148 00:07:49,120 --> 00:07:51,440 Speaker 1: for a long time. Right right now, the Fed funds 149 00:07:51,440 --> 00:07:55,080 Speaker 1: futures market are basically pricing in zero funds rate um 150 00:07:55,200 --> 00:07:57,560 Speaker 1: for the next year and a half or so. And 151 00:07:57,640 --> 00:08:00,840 Speaker 1: in that environment, again, if there's a dissipation in the 152 00:08:00,840 --> 00:08:03,360 Speaker 1: spread of the virus, and if there's any stabilization and 153 00:08:03,400 --> 00:08:06,480 Speaker 1: growth in six months from now, that reach for yield 154 00:08:06,480 --> 00:08:09,160 Speaker 1: will be will be dramatic. And you are seeing people 155 00:08:09,240 --> 00:08:11,360 Speaker 1: looking to buy on these dips still in the in 156 00:08:11,400 --> 00:08:13,880 Speaker 1: the credit markets, at least in the higher quality credits, 157 00:08:14,080 --> 00:08:17,320 Speaker 1: and we're in that camp. So, Elena, if it is 158 00:08:17,480 --> 00:08:21,920 Speaker 1: up to the central banks, we've seen the fed B preemptive. 159 00:08:21,960 --> 00:08:24,480 Speaker 1: What are you saying around the world, there's our coordination there. 160 00:08:24,520 --> 00:08:26,960 Speaker 1: Do you think there needs to be more? Uh? If 161 00:08:26,960 --> 00:08:29,720 Speaker 1: the fiscal maybe is not on the front burner right now, 162 00:08:29,840 --> 00:08:32,880 Speaker 1: I'm not a big believing that. Actually, yeah, if it 163 00:08:32,880 --> 00:08:35,560 Speaker 1: gets to a credit crunch and things like that, yes, 164 00:08:35,640 --> 00:08:39,400 Speaker 1: central banks will need to coordinate some sort of currency 165 00:08:39,480 --> 00:08:43,000 Speaker 1: swaps and other tools they that they engaged during the 166 00:08:43,040 --> 00:08:46,120 Speaker 1: financial crisis, but in terms of the policy, so we 167 00:08:46,320 --> 00:08:49,560 Speaker 1: still have some ammunition left in terms of interest rates. 168 00:08:49,679 --> 00:08:53,000 Speaker 1: So each central bank will do what they need to 169 00:08:53,040 --> 00:08:57,240 Speaker 1: do for their respective economies, but you know, the fiscal 170 00:08:57,320 --> 00:09:00,640 Speaker 1: policies again in each different and I mean, we'll have 171 00:09:00,679 --> 00:09:03,440 Speaker 1: to engage. So I don't really see that much in 172 00:09:03,520 --> 00:09:06,000 Speaker 1: terms of what can be done in terms of coordination 173 00:09:06,120 --> 00:09:09,520 Speaker 1: rather than just agreeing that the response should be a 174 00:09:09,600 --> 00:09:12,320 Speaker 1: big one. Mike, I'm struck by the idea that we 175 00:09:12,400 --> 00:09:15,840 Speaker 1: are looking at bigger companies still having access to credit markets, 176 00:09:16,120 --> 00:09:19,120 Speaker 1: and we're looking at the prospect of small to medium 177 00:09:19,200 --> 00:09:23,079 Speaker 1: size not businesses not having the same sort of financing function. 178 00:09:23,400 --> 00:09:26,840 Speaker 1: Whether banks are hoarding cash, whether their inventories go down, 179 00:09:26,840 --> 00:09:29,920 Speaker 1: they have to hold more capital in order to preserve 180 00:09:30,000 --> 00:09:33,800 Speaker 1: their capital buffers. I'm just wondering, from your perspective, there's 181 00:09:33,840 --> 00:09:36,320 Speaker 1: been all this money raised in the private debt markets. 182 00:09:36,720 --> 00:09:38,920 Speaker 1: Is this going to be an opportunity or is this 183 00:09:39,000 --> 00:09:41,400 Speaker 1: going to be another risk factor as we start to 184 00:09:41,400 --> 00:09:44,240 Speaker 1: see weakness in some of these portfolios. Yeah, I mean, 185 00:09:44,280 --> 00:09:47,200 Speaker 1: we've definitely for a long time now been concerned and 186 00:09:47,280 --> 00:09:51,000 Speaker 1: raise some concerns about the huge influx of money into 187 00:09:51,080 --> 00:09:55,160 Speaker 1: private debt strategies. I think these are loans too, relatively 188 00:09:55,200 --> 00:09:59,839 Speaker 1: speculative companies, pretty concentrated portfolios of loans in some k 189 00:10:00,000 --> 00:10:02,559 Speaker 1: as in summer on a lever basis, And if you 190 00:10:02,640 --> 00:10:06,520 Speaker 1: do actually see credit cracks in some of those portfolios, 191 00:10:07,080 --> 00:10:09,040 Speaker 1: I think it could get a little bit ugly. Right, So, 192 00:10:09,120 --> 00:10:10,400 Speaker 1: I think that is one of the parts of the 193 00:10:10,480 --> 00:10:14,160 Speaker 1: market that's a little susceptible to to some weakness here. 194 00:10:14,320 --> 00:10:16,600 Speaker 1: But again, the policy response I think will be targeted 195 00:10:16,640 --> 00:10:20,520 Speaker 1: to provide liquidity and financing to some of these smaller companies. 196 00:10:20,559 --> 00:10:22,880 Speaker 1: Even in China they have these things called coronavirus bonds 197 00:10:23,120 --> 00:10:26,520 Speaker 1: where companies that need the capital are financing their their 198 00:10:26,600 --> 00:10:29,120 Speaker 1: businesses in their capital shotfalls at really low interest rates. 199 00:10:29,120 --> 00:10:31,199 Speaker 1: But is there a bigger takeaway here the idea that 200 00:10:31,280 --> 00:10:33,679 Speaker 1: all of this money was raised for these private credit 201 00:10:33,760 --> 00:10:36,520 Speaker 1: funds that sort of we're supposed to supplant the big 202 00:10:36,600 --> 00:10:39,199 Speaker 1: banks and their lending function, and this is the time 203 00:10:39,280 --> 00:10:41,959 Speaker 1: that they should be swooping in and they should be saying, 204 00:10:42,280 --> 00:10:44,720 Speaker 1: we have money, we have a record amount of dry powder, 205 00:10:45,000 --> 00:10:48,040 Speaker 1: let's deploy it in order to make these investments. You know, 206 00:10:48,559 --> 00:10:50,560 Speaker 1: what does it say if they are not, or if 207 00:10:50,559 --> 00:10:53,000 Speaker 1: they are incapable of doing so because they're trying to 208 00:10:53,080 --> 00:10:56,439 Speaker 1: meet marching calls, are other sort of liquidity issues, or 209 00:10:56,559 --> 00:10:59,640 Speaker 1: just frankly default in their existing portfolios. Yeah, I mean 210 00:10:59,800 --> 00:11:02,280 Speaker 1: lee in my dream world, right, the FED will tap 211 00:11:02,360 --> 00:11:04,360 Speaker 1: the banks on the shoulders and say, hey, guys, this 212 00:11:04,559 --> 00:11:07,000 Speaker 1: is why we forced you to have so much capital, 213 00:11:07,080 --> 00:11:08,679 Speaker 1: this is why we forced you to have so much 214 00:11:08,720 --> 00:11:11,760 Speaker 1: liquidity and your asset qualities pristine. You should actually be 215 00:11:11,880 --> 00:11:14,800 Speaker 1: supporting the economy now. Right. In all past cycles, the 216 00:11:14,840 --> 00:11:18,120 Speaker 1: banks were piling onto the weakness by being forced sellers 217 00:11:18,440 --> 00:11:20,280 Speaker 1: because they had all the loans and they had a 218 00:11:20,360 --> 00:11:22,120 Speaker 1: lot of leverage in the system. They are not in 219 00:11:22,240 --> 00:11:24,480 Speaker 1: that position. So our long running view has been the 220 00:11:24,520 --> 00:11:27,880 Speaker 1: banks will not make things worse, and maybe they can 221 00:11:27,880 --> 00:11:30,800 Speaker 1: actually provide support. Here on the flip side, will some 222 00:11:30,960 --> 00:11:34,199 Speaker 1: of these private credit funds or these big alternative investment 223 00:11:34,240 --> 00:11:37,960 Speaker 1: funds become systemically risky in a new kind of way 224 00:11:38,160 --> 00:11:39,880 Speaker 1: it remembers so, so a lot of these are are 225 00:11:39,960 --> 00:11:42,800 Speaker 1: locked up. These are long term pools that are locked up. 226 00:11:42,880 --> 00:11:45,280 Speaker 1: That is really important. Right, This is not oh eight, 227 00:11:45,360 --> 00:11:47,839 Speaker 1: This is not a global margin call about to happen 228 00:11:48,280 --> 00:11:51,400 Speaker 1: even the bank loan market is owned almost largely now 229 00:11:51,480 --> 00:11:54,000 Speaker 1: by c l os. This is long term money that 230 00:11:54,200 --> 00:11:56,679 Speaker 1: is locked up right. They are not for sellers, and 231 00:11:56,760 --> 00:11:58,959 Speaker 1: I think that's really important. I think the structure of 232 00:11:59,040 --> 00:12:01,000 Speaker 1: the markets are much different than they were in a 233 00:12:01,080 --> 00:12:03,319 Speaker 1: weight You don't have the inherent leverage in the system 234 00:12:03,400 --> 00:12:06,240 Speaker 1: that's going to force a lot of selling and a 235 00:12:06,320 --> 00:12:08,760 Speaker 1: margin calls. I think that will help lends stability to 236 00:12:08,840 --> 00:12:12,880 Speaker 1: the system ultimately. Elena Larry Cutler rightfully so on Bloomberg 237 00:12:12,960 --> 00:12:16,040 Speaker 1: Television talking up the strong jobs numbers two seventy three 238 00:12:16,040 --> 00:12:19,559 Speaker 1: thousand jobs. Obviously that's likely to be the last jobs 239 00:12:19,559 --> 00:12:22,280 Speaker 1: report that we get pre Corona crisis, if you will, 240 00:12:22,720 --> 00:12:25,439 Speaker 1: what is the your outloo of Bloomberg economics for kind 241 00:12:25,480 --> 00:12:27,640 Speaker 1: of how this could trend over the next several months. 242 00:12:28,040 --> 00:12:31,240 Speaker 1: So we looked at the numbers just based on the 243 00:12:31,360 --> 00:12:35,599 Speaker 1: financial shock before even all the quarantine measures kicking. So 244 00:12:36,400 --> 00:12:40,839 Speaker 1: that implies a reduction to the average pasing jobs to 245 00:12:41,000 --> 00:12:44,559 Speaker 1: something like a hundred and fifty thousand on a trend basis. 246 00:12:44,960 --> 00:12:50,080 Speaker 1: But when we start seeing all the services spending slowing down, 247 00:12:50,160 --> 00:12:53,640 Speaker 1: you know, people not going out, people like canceling conferences 248 00:12:54,040 --> 00:12:56,599 Speaker 1: and so on. That will probably get us to the 249 00:12:56,720 --> 00:13:02,439 Speaker 1: point to the replacement rate of around hundreds thousand months. 250 00:13:02,720 --> 00:13:06,160 Speaker 1: So that would mean that the unemployment rate will stop 251 00:13:06,240 --> 00:13:09,959 Speaker 1: falling and potentially could rise, uh, you know, causing a 252 00:13:10,040 --> 00:13:12,800 Speaker 1: growth recession. Mike, just real quick here to wrap it 253 00:13:12,840 --> 00:13:14,520 Speaker 1: all up and to tie it together. You said that 254 00:13:14,559 --> 00:13:17,280 Speaker 1: you were selectively buying on the dip. When do you 255 00:13:17,400 --> 00:13:20,320 Speaker 1: go in and just say buy everything? I mean, are 256 00:13:20,360 --> 00:13:23,800 Speaker 1: we getting close to that point when you talk about capitulation? Yeah, 257 00:13:23,920 --> 00:13:27,599 Speaker 1: you do it when um, you have huge blocks of 258 00:13:27,760 --> 00:13:31,640 Speaker 1: bonds for sale, names you like that you own that 259 00:13:31,760 --> 00:13:34,200 Speaker 1: are down five or ten points and you can actually 260 00:13:34,320 --> 00:13:36,400 Speaker 1: buy them and execute. And we have not seen that 261 00:13:37,120 --> 00:13:39,319 Speaker 1: at all to this point. Right, And that's when you 262 00:13:39,440 --> 00:13:41,920 Speaker 1: really go in with with both feet and and maybe 263 00:13:42,000 --> 00:13:45,840 Speaker 1: that will happen my senses, it probably won't my counts. 264 00:13:45,880 --> 00:13:47,800 Speaker 1: Thanks so much for joining us. We really appreciate you 265 00:13:48,000 --> 00:13:51,320 Speaker 1: making the trip across the river from the Jersey side 266 00:13:51,360 --> 00:13:53,599 Speaker 1: over here to our Bloomberg Interactor Broker studio. Mike's a 267 00:13:53,840 --> 00:13:57,280 Speaker 1: senior investment officer and senior portfolio manager for PIGIM Fixed 268 00:13:57,320 --> 00:14:01,120 Speaker 1: Income and you Sliva Senior you s Economist for Bloomberg 269 00:14:01,120 --> 00:14:03,560 Speaker 1: Economics both joining us here again in our Bloomberg eleven 270 00:14:03,559 --> 00:14:16,240 Speaker 1: three year studio. Right now in focus, we're looking at markets. 271 00:14:16,240 --> 00:14:18,480 Speaker 1: They're clawing back some of their earlier losses, so we're 272 00:14:18,480 --> 00:14:21,280 Speaker 1: not seeing as steep of a decline. Actually a pretty 273 00:14:21,320 --> 00:14:24,400 Speaker 1: significant pairing of the laws. Still solidly in the redd 274 00:14:24,520 --> 00:14:27,160 Speaker 1: SMP down one point eight percent, nastacked down at one 275 00:14:27,240 --> 00:14:32,000 Speaker 1: point seven percent. Oil however, very much in focus, with 276 00:14:32,120 --> 00:14:35,360 Speaker 1: crude prices absolutely tumbling down at one point more than 277 00:14:35,440 --> 00:14:39,480 Speaker 1: seven percent after OPEC plus did not come to an 278 00:14:39,520 --> 00:14:43,520 Speaker 1: agreement on production cuts. OPEC, remember, agreed to production cuts alone. 279 00:14:43,920 --> 00:14:47,160 Speaker 1: They went to alone, hoping that Russia would join up 280 00:14:47,320 --> 00:14:50,280 Speaker 1: and do the same, but Russia did not. Joining us now. 281 00:14:50,400 --> 00:14:53,920 Speaker 1: Julian Lee, Bloomberg oil strategist in London, Julian, can you 282 00:14:53,960 --> 00:14:55,960 Speaker 1: just give us a sense of what we learned today? 283 00:14:57,560 --> 00:15:00,400 Speaker 1: I think we've learned that this is an organization appears 284 00:15:00,440 --> 00:15:05,960 Speaker 1: to be in complete disarray. Um. What OPEC said yesterday, um, 285 00:15:06,240 --> 00:15:11,280 Speaker 1: sort of late afternoon, was that they were proposing a 286 00:15:11,680 --> 00:15:14,120 Speaker 1: cut of one and a half million barrels a day, 287 00:15:14,640 --> 00:15:17,480 Speaker 1: of which the OPEC members would take a million, and 288 00:15:17,720 --> 00:15:21,320 Speaker 1: then non OPAQUE partners would take the other half million 289 00:15:22,200 --> 00:15:25,680 Speaker 1: UM that cut would would last throughout the second quarter, 290 00:15:25,800 --> 00:15:28,680 Speaker 1: so till the end of June. UM. They then sort 291 00:15:28,680 --> 00:15:32,200 Speaker 1: of hastily got together in an informal gathering in the 292 00:15:32,320 --> 00:15:37,720 Speaker 1: evening UM and issued another press statement later later in 293 00:15:37,800 --> 00:15:39,600 Speaker 1: the day to say that in fact they were going 294 00:15:39,680 --> 00:15:41,880 Speaker 1: to propose that this one and a half million barrel 295 00:15:41,920 --> 00:15:45,560 Speaker 1: a day cut be extended to the end of t UM. 296 00:15:45,760 --> 00:15:49,000 Speaker 1: None of these discussions involved Russia or the other UM 297 00:15:49,160 --> 00:15:53,240 Speaker 1: non opaque members. The Russian alldminister arrived back in Vienna 298 00:15:53,320 --> 00:15:55,560 Speaker 1: today for a meeting that was scheduled to start at 299 00:15:55,640 --> 00:15:59,680 Speaker 1: ten o'clock UM. It eventually started at round about three 300 00:15:59,800 --> 00:16:02,680 Speaker 1: p m. UM. He spent the time before that in 301 00:16:02,960 --> 00:16:07,240 Speaker 1: in bilateral meetings, mostly with Saudi Arabia's or minister. We 302 00:16:07,440 --> 00:16:10,600 Speaker 1: hear that in the last fifteen minutes or so the 303 00:16:10,720 --> 00:16:15,160 Speaker 1: meeting has broken up without an agreement. UM. And this 304 00:16:15,400 --> 00:16:18,000 Speaker 1: is I mean in some senses this is this is 305 00:16:18,640 --> 00:16:22,600 Speaker 1: even worse than it sounds for for OPEC and its 306 00:16:22,760 --> 00:16:26,680 Speaker 1: and its allies, because UM, their current agreement to cut 307 00:16:26,840 --> 00:16:30,320 Speaker 1: two point one million barrels a day expires at the 308 00:16:30,440 --> 00:16:33,240 Speaker 1: end of this month. UM. And so without an agreement, 309 00:16:33,680 --> 00:16:37,320 Speaker 1: at least on paper, those two point one million barrels 310 00:16:37,320 --> 00:16:39,360 Speaker 1: are going to come back onto the market. So not 311 00:16:39,520 --> 00:16:41,200 Speaker 1: only are we not going to get a deeper cut, 312 00:16:41,320 --> 00:16:44,160 Speaker 1: but we may well get oil coming back. So Julian, 313 00:16:44,200 --> 00:16:46,440 Speaker 1: that just begs the question, how did we get here? 314 00:16:46,480 --> 00:16:48,800 Speaker 1: There was a time when OPEC or OPEC plus was 315 00:16:48,880 --> 00:16:52,920 Speaker 1: pretty cohesive, able to push things through. What's changed here? 316 00:16:54,640 --> 00:16:56,600 Speaker 1: I think that's a very good question, and I think 317 00:16:56,680 --> 00:17:00,800 Speaker 1: it's it's very unclear at the moment what has changed. 318 00:17:01,640 --> 00:17:05,359 Speaker 1: Ministers and their delegates are are being very close mouthed 319 00:17:05,440 --> 00:17:08,840 Speaker 1: at the moment um. They're clearly dealing with the situation 320 00:17:08,960 --> 00:17:12,960 Speaker 1: that that none of them likes being in. I think 321 00:17:13,080 --> 00:17:16,800 Speaker 1: that that perhaps what has changed is that there are 322 00:17:17,080 --> 00:17:22,560 Speaker 1: very different views about how to deal with a crisis 323 00:17:22,680 --> 00:17:26,399 Speaker 1: that is created by a collapse in demand. Um. Saudi 324 00:17:26,400 --> 00:17:31,840 Speaker 1: Arabia wants to make a corresponding cut in supply to 325 00:17:31,960 --> 00:17:34,560 Speaker 1: try and balance markets, to try and prop up prices 326 00:17:34,600 --> 00:17:38,560 Speaker 1: a bit. The sense that we're getting coming from from Russia, 327 00:17:38,560 --> 00:17:41,680 Speaker 1: and it really is only a sense um, is that 328 00:17:42,000 --> 00:17:45,240 Speaker 1: they don't feel that that is perhaps the right response. 329 00:17:45,440 --> 00:17:48,680 Speaker 1: That what the world needs is a period of lower 330 00:17:48,760 --> 00:17:53,920 Speaker 1: oil prices hopefully to stimulate some demand, whether that is um, 331 00:17:54,400 --> 00:17:56,800 Speaker 1: you know, final end user demand, or whether it is 332 00:17:56,880 --> 00:18:00,680 Speaker 1: countries like China buying more oil to put into stockpiles um. 333 00:18:00,880 --> 00:18:05,040 Speaker 1: And there may be a real philosophical difference around how 334 00:18:05,200 --> 00:18:08,760 Speaker 1: you proceed in an environment like this. There's also a 335 00:18:08,880 --> 00:18:13,120 Speaker 1: question about whether OPEC has completely lost control in every way, 336 00:18:13,280 --> 00:18:16,639 Speaker 1: because ultimately, this is not a production issue. This is 337 00:18:16,760 --> 00:18:20,200 Speaker 1: a demand issue, and there is going to be a 338 00:18:20,359 --> 00:18:24,560 Speaker 1: decline in demand that we've seen escalate as travel gets 339 00:18:24,600 --> 00:18:28,200 Speaker 1: rearranged and as global industries do start to slow in 340 00:18:28,240 --> 00:18:30,800 Speaker 1: the wake of the coronavirus. I'm just wondering, from your 341 00:18:30,960 --> 00:18:34,959 Speaker 1: perspective how that sort of factors into the calculus here. 342 00:18:35,040 --> 00:18:38,080 Speaker 1: The idea that even if they cut production a lot, 343 00:18:38,640 --> 00:18:42,560 Speaker 1: it may not make a material difference in the short run. Yeah, 344 00:18:42,600 --> 00:18:44,879 Speaker 1: I think that is That is a real concern, and 345 00:18:44,960 --> 00:18:47,280 Speaker 1: I think that's one of one of the Russian concerns. 346 00:18:47,400 --> 00:18:50,280 Speaker 1: You know. The view is that, yes, there's going to 347 00:18:50,359 --> 00:18:53,959 Speaker 1: be a very significant hit to oil demand. We can 348 00:18:54,119 --> 00:18:57,640 Speaker 1: we can see that happening already. UM. But the view 349 00:18:57,920 --> 00:19:01,280 Speaker 1: perhaps in Moscow is that bad as it may be, 350 00:19:01,840 --> 00:19:04,440 Speaker 1: it is going to be temporary you know, this is 351 00:19:04,600 --> 00:19:09,560 Speaker 1: this is not a structural um change in in demand. 352 00:19:09,720 --> 00:19:12,639 Speaker 1: This is this is a response to a very specific 353 00:19:13,400 --> 00:19:17,560 Speaker 1: um in this case virus outbreak. But it is something 354 00:19:17,640 --> 00:19:21,320 Speaker 1: that will have an end and and demand will return UM. 355 00:19:21,400 --> 00:19:24,040 Speaker 1: And I think this, this perhaps is part of the 356 00:19:24,119 --> 00:19:28,360 Speaker 1: difference that is emerging. So Julian, there's a I've heard 357 00:19:28,440 --> 00:19:30,879 Speaker 1: some conspiracy theories out there that this might be Russia 358 00:19:31,320 --> 00:19:34,520 Speaker 1: maybe trying to put additional pressure on the US shell 359 00:19:34,680 --> 00:19:38,080 Speaker 1: industry given the precarious financial position of the many of 360 00:19:38,119 --> 00:19:40,399 Speaker 1: the producers there. Does that have any Does that ring 361 00:19:40,440 --> 00:19:43,000 Speaker 1: true to you at all? I don't know. I mean, 362 00:19:43,040 --> 00:19:46,000 Speaker 1: I I think it's always tempting to you know, to 363 00:19:46,240 --> 00:19:53,159 Speaker 1: to find um conspiracies, to to build around anybody's position. Uh. 364 00:19:53,440 --> 00:19:58,000 Speaker 1: You know another country that that may have desires to 365 00:19:58,560 --> 00:20:02,479 Speaker 1: to cause damage to the U S shale sector is Iran. 366 00:20:02,640 --> 00:20:06,679 Speaker 1: But Iran has been wholeheartedly behind output cuts. I mean, 367 00:20:06,800 --> 00:20:08,640 Speaker 1: it's not going to have to make any because it's 368 00:20:08,800 --> 00:20:12,439 Speaker 1: producing really only pretty much what it needs for its 369 00:20:12,520 --> 00:20:16,680 Speaker 1: domestic consumption. UM. But Iran isn't trying to to engineer 370 00:20:16,760 --> 00:20:20,359 Speaker 1: a collapse in oil prices to to hurt US shale. 371 00:20:20,400 --> 00:20:23,959 Speaker 1: And I personally, I doubt that that's the Russian motivation. 372 00:20:24,760 --> 00:20:26,639 Speaker 1: So right now I'm looking I just to reset here, 373 00:20:27,080 --> 00:20:31,160 Speaker 1: Crude oil absolutely tumbling. Crude traded on the IMAX down 374 00:20:31,240 --> 00:20:36,320 Speaker 1: to forty cents a barrel, That is down by three 375 00:20:36,400 --> 00:20:39,720 Speaker 1: dollars and fifteen cents just today, giving you a sense. 376 00:20:39,800 --> 00:20:43,040 Speaker 1: Brent traded in London at forty six dollars eighty two 377 00:20:43,119 --> 00:20:45,679 Speaker 1: cents of barrel. I'm wondering, what is the lower bound 378 00:20:45,800 --> 00:20:50,040 Speaker 1: here for this demand side crash that we're seeing play 379 00:20:50,119 --> 00:20:53,200 Speaker 1: out across markets. Well, I think, you know, we We've 380 00:20:53,280 --> 00:20:56,119 Speaker 1: had a number of analysts coming out with with all 381 00:20:56,200 --> 00:20:59,600 Speaker 1: sorts of numbers UM. You know, I I've seen numbers 382 00:21:00,320 --> 00:21:04,320 Speaker 1: suggesting that prices will quite easily fall below thirty dollars 383 00:21:04,320 --> 00:21:07,680 Speaker 1: a barrel. I've seen, you know, people saying that we're 384 00:21:07,760 --> 00:21:12,080 Speaker 1: in for a return to the collapses that we've seen 385 00:21:12,119 --> 00:21:14,600 Speaker 1: in the past of of you know, really low double 386 00:21:14,680 --> 00:21:18,800 Speaker 1: digits UM. And I think, you know, very much is 387 00:21:18,840 --> 00:21:24,320 Speaker 1: going to depend on how individual producers respond to UM 388 00:21:24,440 --> 00:21:26,640 Speaker 1: what appears to be a failure to reach a deal. 389 00:21:27,400 --> 00:21:30,600 Speaker 1: Does this mean that Saudi Arabia is going to abandon 390 00:21:30,640 --> 00:21:32,920 Speaker 1: its own output restraint? Are we going to see Saudi 391 00:21:32,920 --> 00:21:36,640 Speaker 1: Arabia pumping more UM. That would certainly, I think, push 392 00:21:36,760 --> 00:21:40,880 Speaker 1: prices down. If we continue to see restraint within OPAQ, 393 00:21:41,000 --> 00:21:44,439 Speaker 1: that that may um, you know, give a little bit 394 00:21:44,480 --> 00:21:47,359 Speaker 1: of support to prices. But I think that, you know, 395 00:21:47,520 --> 00:21:50,240 Speaker 1: the really big issue at the moment is is just 396 00:21:50,520 --> 00:21:54,359 Speaker 1: how fast um and and how widespread the collapse in 397 00:21:54,480 --> 00:21:56,800 Speaker 1: demand is going to be. And that is still an 398 00:21:56,840 --> 00:22:00,560 Speaker 1: evolving picture as as this virus spreads around the world. 399 00:22:01,200 --> 00:22:02,840 Speaker 1: Julian Lee, thank you so much for joining us. We 400 00:22:02,920 --> 00:22:06,080 Speaker 1: really appreciate your thoughts here. Julian Lee's oil strategies for 401 00:22:06,160 --> 00:22:18,320 Speaker 1: Bloomberg News, joining us on the phone from London. Boy, 402 00:22:18,359 --> 00:22:21,879 Speaker 1: the headlines crossing across my Bloomberg terminal this morning just 403 00:22:22,040 --> 00:22:25,160 Speaker 1: almost too much to take in. You've got the coronavirus latest, 404 00:22:25,200 --> 00:22:28,040 Speaker 1: you've got the Democratic race really heating up, and you've 405 00:22:28,040 --> 00:22:31,399 Speaker 1: got better than expected actually stellar jobs numbers. Fortunate. Our 406 00:22:31,440 --> 00:22:33,400 Speaker 1: next guest can help us pass through all of these 407 00:22:33,480 --> 00:22:36,680 Speaker 1: things and more. Chris lou Senior fellow, University of Virginia 408 00:22:36,720 --> 00:22:39,520 Speaker 1: Miller Center and also a former Deputy Secretary of Labor 409 00:22:39,840 --> 00:22:42,840 Speaker 1: under President Obama, on the phone from Charlottesville. Chris, thanks 410 00:22:42,880 --> 00:22:44,920 Speaker 1: so much for joining us. Let's just start real quickly 411 00:22:44,960 --> 00:22:46,760 Speaker 1: with the news today. I guess you know, this is 412 00:22:46,800 --> 00:22:48,879 Speaker 1: the last piece of economic news will get kind of 413 00:22:49,000 --> 00:22:51,840 Speaker 1: pre coronavirus in terms of jobs. And it was pretty 414 00:22:51,920 --> 00:22:55,360 Speaker 1: darn good, wasn't It was surprisingly good? And I think 415 00:22:55,600 --> 00:22:58,879 Speaker 1: people they need to take with a grain of salt, obviously. Uh, 416 00:22:59,480 --> 00:23:02,399 Speaker 1: this data has collected the week of February tenth, so 417 00:23:02,600 --> 00:23:06,159 Speaker 1: that's before the first coronavirus death the United States. Before 418 00:23:06,560 --> 00:23:09,840 Speaker 1: you know, airlines start cutting back flights and uh, people 419 00:23:09,880 --> 00:23:12,959 Speaker 1: start canceling conferences and so this this may be I mean, 420 00:23:13,840 --> 00:23:16,479 Speaker 1: all the data is lagging indicators, but this is perhaps 421 00:23:16,560 --> 00:23:18,720 Speaker 1: I think, less useful, although it may be an interesting 422 00:23:18,760 --> 00:23:22,000 Speaker 1: benchmark to see as this coronavirus goes on as to 423 00:23:22,080 --> 00:23:24,760 Speaker 1: how far we fall from this. Yeah, well, Chris, and 424 00:23:24,800 --> 00:23:26,639 Speaker 1: this is what it goes to the point of momentum 425 00:23:26,720 --> 00:23:29,280 Speaker 1: heading into the downturn, and I want to talk about 426 00:23:29,400 --> 00:23:33,200 Speaker 1: how important that momentum actually is. How much will that 427 00:23:33,440 --> 00:23:37,720 Speaker 1: buoy any potential ramifications from the spread of the coronavirus 428 00:23:37,800 --> 00:23:42,159 Speaker 1: and subsequent business shutdowns going forward. So I have to 429 00:23:42,200 --> 00:23:44,040 Speaker 1: say I was surprised by this number for a couple 430 00:23:44,080 --> 00:23:46,359 Speaker 1: of reasons. I mean, we know that retail sales have 431 00:23:46,560 --> 00:23:49,240 Speaker 1: been um or a lot of retailers cutting jobs. We 432 00:23:49,320 --> 00:23:51,800 Speaker 1: know that Boeing, which is a huge part of the economy, 433 00:23:51,840 --> 00:23:54,760 Speaker 1: continues to struggle. We know that the manufacturing sector is 434 00:23:54,840 --> 00:23:57,359 Speaker 1: sort of inching itself out of recession. And there's a 435 00:23:57,440 --> 00:24:00,280 Speaker 1: lot of uncertainty in terms of UM the ability of 436 00:24:00,400 --> 00:24:02,680 Speaker 1: China to make good on their Phase one trade deal. 437 00:24:02,800 --> 00:24:05,760 Speaker 1: So I was expecting a much lower number. So yeah, 438 00:24:05,960 --> 00:24:09,639 Speaker 1: so this number is curious to me. UM, But I 439 00:24:09,680 --> 00:24:13,240 Speaker 1: think I think the issue going forward is coronavirus more 440 00:24:13,320 --> 00:24:16,480 Speaker 1: like a hurricane for instance, which case there's kind of 441 00:24:16,520 --> 00:24:20,560 Speaker 1: a dip in spending, a dip in UM economic productivity, 442 00:24:20,600 --> 00:24:22,240 Speaker 1: and then all of a sudden you kind of come 443 00:24:22,280 --> 00:24:24,040 Speaker 1: out of that. In fact, you are rebuilding and people 444 00:24:24,080 --> 00:24:26,119 Speaker 1: spend and you sort of come back out of it quickly. 445 00:24:26,280 --> 00:24:29,520 Speaker 1: Or is it kind of a constant drag on the economy. 446 00:24:29,960 --> 00:24:32,080 Speaker 1: And the question is is you know, with all of 447 00:24:32,160 --> 00:24:36,480 Speaker 1: these businesses, you know, starting to issue earning warnings and 448 00:24:37,000 --> 00:24:39,360 Speaker 1: you know, conferences and other things like that being cut back, 449 00:24:39,560 --> 00:24:43,280 Speaker 1: when do employers start laying off workers? And if that happens, 450 00:24:43,720 --> 00:24:46,720 Speaker 1: then this can kind of go south pretty fast. So Chris, 451 00:24:46,840 --> 00:24:49,320 Speaker 1: we in terms of governmental response, we've had to fed 452 00:24:49,560 --> 00:24:53,320 Speaker 1: aggressively move here with that emergency cut, um, and you know, 453 00:24:53,400 --> 00:24:55,680 Speaker 1: the market's discounting even more rate cuts coming up, maybe 454 00:24:55,680 --> 00:24:58,560 Speaker 1: as soon as the next meeting. We had Larry Cutlow 455 00:24:58,560 --> 00:25:01,479 Speaker 1: on Bloomberg Television earlier and Jonathan Fara from Bloomberg Television 456 00:25:01,520 --> 00:25:04,359 Speaker 1: was really pressing them on maybe some fiscal type of 457 00:25:04,520 --> 00:25:07,280 Speaker 1: stimulus and it Mr Carlo didn't seem to want to 458 00:25:07,320 --> 00:25:09,920 Speaker 1: go there. What do you think needs to happen from 459 00:25:09,960 --> 00:25:12,800 Speaker 1: in terms of governmental response, Well, this is the problem. 460 00:25:12,840 --> 00:25:15,520 Speaker 1: I mean, set rates are actually pretty low, historically low. 461 00:25:15,640 --> 00:25:18,200 Speaker 1: Right now. Um, we've had you know, a trillion and 462 00:25:18,200 --> 00:25:20,600 Speaker 1: a half dollars of stimulants through a tax cut, and 463 00:25:20,680 --> 00:25:23,399 Speaker 1: so right now we're facing a budget deficits of a 464 00:25:23,480 --> 00:25:26,320 Speaker 1: trillion dollars a year. So a lot of the normal 465 00:25:26,480 --> 00:25:29,720 Speaker 1: levels you would have as a government policymaker in a 466 00:25:29,840 --> 00:25:35,080 Speaker 1: time of um uh an economic downturn aren't really available 467 00:25:35,160 --> 00:25:37,520 Speaker 1: to you at this moment. And truth the truth be told. 468 00:25:37,960 --> 00:25:39,720 Speaker 1: You know, if the issue is in terms of supply 469 00:25:39,880 --> 00:25:43,200 Speaker 1: chains in China or people not traveling as much, it's 470 00:25:43,240 --> 00:25:46,680 Speaker 1: hard to say what um stimulus package, you could get 471 00:25:46,680 --> 00:25:49,960 Speaker 1: those things up and running again. Let's talk about the 472 00:25:50,080 --> 00:25:53,960 Speaker 1: concept of zero over zero present overnight interest rates, because 473 00:25:53,960 --> 00:25:56,439 Speaker 1: that seems to be what's increasingly being priced into markets. 474 00:25:56,760 --> 00:25:59,600 Speaker 1: Thirty year yells tumbling the most since two thousand nine. Meanwhile, 475 00:25:59,600 --> 00:26:03,280 Speaker 1: we've got another fifty basis point rate cut being priced 476 00:26:03,359 --> 00:26:06,440 Speaker 1: in to the feds March eighteenth meeting, And I'm just wondering, 477 00:26:06,840 --> 00:26:09,240 Speaker 1: do you think this will hurt or help or or 478 00:26:09,400 --> 00:26:13,640 Speaker 1: sort of on the margins? Do anything in response to this? Well, 479 00:26:13,800 --> 00:26:15,440 Speaker 1: when we had to cut the other day, you know, 480 00:26:15,640 --> 00:26:17,560 Speaker 1: Powell was very clear that you know, this is not 481 00:26:17,640 --> 00:26:19,720 Speaker 1: going to make vaccines come out faster, It's not gonna 482 00:26:19,840 --> 00:26:22,359 Speaker 1: unstick supply chains. And I think if anything in the 483 00:26:22,480 --> 00:26:25,600 Speaker 1: market view that as kind of an active panic, which 484 00:26:25,640 --> 00:26:28,840 Speaker 1: I think then sent to market down even more. Um. Look, 485 00:26:28,920 --> 00:26:31,400 Speaker 1: I think any kind of stimulus like that is helpful, 486 00:26:31,480 --> 00:26:34,800 Speaker 1: but I'm not sure it ultimately addresses the problem here, 487 00:26:34,880 --> 00:26:38,680 Speaker 1: which is there's an incredible amount of uncertainty. Um. The 488 00:26:38,760 --> 00:26:41,439 Speaker 1: answers I will come from n i H and CDC 489 00:26:41,560 --> 00:26:44,560 Speaker 1: and the World Health Organization, they won't necessarily come from 490 00:26:44,640 --> 00:26:47,800 Speaker 1: economic policymakers. And I think what you really need more 491 00:26:47,880 --> 00:26:50,000 Speaker 1: than anything is you need to kind of a calm, 492 00:26:50,160 --> 00:26:53,000 Speaker 1: stable leadership at the top of government that's kind of 493 00:26:53,080 --> 00:26:58,320 Speaker 1: steering the ship through you know, increasingly turbulent waters. Chris 494 00:26:58,560 --> 00:27:01,080 Speaker 1: Let's search gears a little bit too politics. It was 495 00:27:01,160 --> 00:27:04,000 Speaker 1: a very very busy and important week for the Democrats. 496 00:27:04,520 --> 00:27:07,480 Speaker 1: Um down to two candidates. Now give us your lay 497 00:27:07,520 --> 00:27:09,480 Speaker 1: of the land of how you think it might shape 498 00:27:09,560 --> 00:27:14,119 Speaker 1: up between Bernie Sanders and Elizabeth Warren, Bernie Sanders and 499 00:27:14,240 --> 00:27:19,080 Speaker 1: Liza Born. Yes, Warren's right, Um, well with you know, look, 500 00:27:19,119 --> 00:27:22,800 Speaker 1: I think she did an interesting interview last night, Senator Warren, 501 00:27:23,000 --> 00:27:27,359 Speaker 1: where um she didn't I'm sorry, Senator Biden, and sat 502 00:27:27,440 --> 00:27:29,800 Speaker 1: that what I thought, actually, Vice President Biden, Um, I 503 00:27:29,880 --> 00:27:32,960 Speaker 1: don't think, um, this race is over anytime soon. I 504 00:27:33,000 --> 00:27:35,000 Speaker 1: think we've got a couple of important states coming down 505 00:27:35,080 --> 00:27:37,480 Speaker 1: the road. We've got Michigan next Tuesday, and then some 506 00:27:37,600 --> 00:27:41,840 Speaker 1: really kind of key battleground states of Arizona, Florida, I 507 00:27:41,920 --> 00:27:44,480 Speaker 1: think on March tenth and so. And obviously the way 508 00:27:44,520 --> 00:27:48,240 Speaker 1: that Democrats allocate delegates is on up on a kind 509 00:27:48,280 --> 00:27:50,600 Speaker 1: of a threshold basis, so you can continue to rack 510 00:27:50,720 --> 00:27:53,480 Speaker 1: up delegates all through this process, and we obviously have 511 00:27:53,520 --> 00:27:56,680 Speaker 1: another big presidential debate coming up in about nine days, 512 00:27:56,760 --> 00:27:58,840 Speaker 1: and so there's a lot of dynamics. And I think 513 00:27:58,880 --> 00:28:01,080 Speaker 1: what's been sort of head spinning for all of us 514 00:28:01,119 --> 00:28:03,560 Speaker 1: that have been politics a long time is how quickly 515 00:28:03,960 --> 00:28:06,400 Speaker 1: the narrative has changed over the last couple of weeks. 516 00:28:06,480 --> 00:28:09,800 Speaker 1: And so I would not be surprised if it changes again, uh, 517 00:28:09,960 --> 00:28:12,960 Speaker 1: you know, multiple times before we next talk. But I 518 00:28:13,000 --> 00:28:15,480 Speaker 1: think this race will go you know, well into March 519 00:28:15,560 --> 00:28:18,320 Speaker 1: and potentially into April if Senator Sanders is able to 520 00:28:18,400 --> 00:28:21,400 Speaker 1: mount some kind of comeback. Chris, let's bring up both 521 00:28:21,440 --> 00:28:23,840 Speaker 1: what's going on in markets as well as politics together. 522 00:28:23,920 --> 00:28:25,960 Speaker 1: And it really is you are the perfect person to 523 00:28:26,040 --> 00:28:28,280 Speaker 1: do so, given the fact that you've spent decades in 524 00:28:28,359 --> 00:28:32,840 Speaker 1: public service, including seven years in the Obama administration. What 525 00:28:33,160 --> 00:28:37,080 Speaker 1: should the response be by the Democratic candidates to the 526 00:28:37,280 --> 00:28:40,360 Speaker 1: escalating coronavirus to show that they can, you know, take 527 00:28:40,520 --> 00:28:44,120 Speaker 1: charge and pose some sort of alternative. Well, I think 528 00:28:44,160 --> 00:28:46,600 Speaker 1: this really plays right into the Vice president's hands. I mean, 529 00:28:46,720 --> 00:28:51,000 Speaker 1: you know, he's trying to project normalcy, stability, competence, you know. 530 00:28:51,080 --> 00:28:53,960 Speaker 1: And again, whatever you think about his policies, whatever you 531 00:28:54,040 --> 00:28:57,000 Speaker 1: think about his you know, debating style. UM, this is 532 00:28:57,040 --> 00:28:59,760 Speaker 1: a person who's been in Washington a long time. One 533 00:28:59,800 --> 00:29:03,560 Speaker 1: of his first key UM assignments under President Obama was 534 00:29:03,640 --> 00:29:07,200 Speaker 1: managing the eight billion dollars stimulus back in two thousand nine, 535 00:29:07,240 --> 00:29:08,920 Speaker 1: and his charge was to get the money out the 536 00:29:08,960 --> 00:29:12,440 Speaker 1: doors fast as possible. UM, to look for shove already projects. 537 00:29:12,440 --> 00:29:15,400 Speaker 1: And so he knows how to manage a crisis. UM. 538 00:29:15,520 --> 00:29:18,320 Speaker 1: He knows how to up pull the different levels of 539 00:29:18,400 --> 00:29:22,160 Speaker 1: government programs to get an economy backup and running. So UM, 540 00:29:22,320 --> 00:29:25,880 Speaker 1: I think this I think is perfect for him in 541 00:29:26,000 --> 00:29:28,760 Speaker 1: this moment to stand as a contrast. I think, you 542 00:29:28,840 --> 00:29:31,360 Speaker 1: know what even some of the president supporter would say 543 00:29:31,400 --> 00:29:33,800 Speaker 1: has been a less than clear message coming out of 544 00:29:33,840 --> 00:29:35,960 Speaker 1: the White House these days. Chris lou thank you so 545 00:29:36,080 --> 00:29:38,360 Speaker 1: much for being with us. We really appreciated. Chris lew 546 00:29:38,560 --> 00:29:41,200 Speaker 1: former Deputy Secretary of Labor and senior fellow at the 547 00:29:41,280 --> 00:29:45,600 Speaker 1: University of Virginia Miller Center. Really important to have his perspective, 548 00:29:45,680 --> 00:29:49,640 Speaker 1: given his experiences decades in public service, understanding sort of 549 00:29:49,680 --> 00:29:53,239 Speaker 1: the nexus of the economy and the private sector as 550 00:29:53,320 --> 00:29:56,280 Speaker 1: well as governmental response at this day where we see 551 00:29:56,320 --> 00:30:00,240 Speaker 1: markets unclear of how to price uh the coronavius IRUs 552 00:30:00,400 --> 00:30:14,480 Speaker 1: risk other than simply by vond Well, as a coronavirus 553 00:30:14,600 --> 00:30:18,840 Speaker 1: continues to spread globally, strategist economists and investors trying to 554 00:30:19,240 --> 00:30:23,240 Speaker 1: gauge out what the economic impact will be. Ultimately, the 555 00:30:23,280 --> 00:30:25,520 Speaker 1: good folks at your Asia Group have some thoughts there. 556 00:30:25,600 --> 00:30:28,920 Speaker 1: Robert Cohn, Director Global Strategy and Global Macro at the 557 00:30:28,920 --> 00:30:31,720 Speaker 1: Your Asier Group based in New York City, joins us. Robert, 558 00:30:31,760 --> 00:30:33,880 Speaker 1: thanks so much for joining us. I know you folks 559 00:30:34,000 --> 00:30:35,960 Speaker 1: at your Asia Group have done somewhere kind of trying 560 00:30:36,000 --> 00:30:40,040 Speaker 1: to game out some scenarios here about how the economic 561 00:30:40,120 --> 00:30:42,240 Speaker 1: impact could play out. What are some of the thoughts, 562 00:30:42,280 --> 00:30:45,320 Speaker 1: What are some of the takeaways from your analysis? Well, Paul, 563 00:30:45,400 --> 00:30:47,560 Speaker 1: thanks for having me on the program, And yeah, we've 564 00:30:47,600 --> 00:30:51,560 Speaker 1: spent a lot of time trying to provide more clarity 565 00:30:52,120 --> 00:30:56,080 Speaker 1: on the political and the economic dynamics across various scenarios. 566 00:30:56,400 --> 00:31:00,440 Speaker 1: We don't pretend to have great insight into the epideam theology. 567 00:31:00,520 --> 00:31:02,880 Speaker 1: We leave that to the medical professionals, but we did 568 00:31:03,040 --> 00:31:08,800 Speaker 1: take three alternative paths for the virus and then looked 569 00:31:08,800 --> 00:31:12,080 Speaker 1: at the consequences of that. In the three paths, one 570 00:31:12,200 --> 00:31:15,560 Speaker 1: is what we call up the nine scenario may be mislabeled, 571 00:31:15,600 --> 00:31:19,360 Speaker 1: maybe just an optimistic one, which is where the virus 572 00:31:19,640 --> 00:31:23,080 Speaker 1: peaks within about six weeks, and that's based on a 573 00:31:23,720 --> 00:31:26,480 Speaker 1: view that China and the other frontline states are able 574 00:31:26,520 --> 00:31:29,880 Speaker 1: to contain it and there's more a very active strategy 575 00:31:29,920 --> 00:31:33,200 Speaker 1: across the industrial world. We then also look at two 576 00:31:33,320 --> 00:31:36,640 Speaker 1: more serious scenarios. One is where the peak in the 577 00:31:37,200 --> 00:31:40,000 Speaker 1: in the propagation of the virus doesn't come to the 578 00:31:40,120 --> 00:31:43,120 Speaker 1: middle of the year to something like July, and then 579 00:31:43,200 --> 00:31:47,160 Speaker 1: a third pandemic scenario in which the virus really continues 580 00:31:47,240 --> 00:31:50,880 Speaker 1: to spread and propagate aggressively through the end of the year. 581 00:31:51,720 --> 00:31:55,440 Speaker 1: What we find is that the political and economic dynamics 582 00:31:55,560 --> 00:31:58,760 Speaker 1: are much more adverse in those second two scenarios, the 583 00:31:58,880 --> 00:32:02,000 Speaker 1: July scenario in the end year scenario, And in a 584 00:32:02,080 --> 00:32:06,320 Speaker 1: way it's kind of intuitive that the countries are the 585 00:32:06,480 --> 00:32:09,920 Speaker 1: politics and a lot of the industrial world are still 586 00:32:10,040 --> 00:32:12,320 Speaker 1: kind of focusing with on the day to day. There 587 00:32:12,480 --> 00:32:15,400 Speaker 1: is a political resiliency to deal with this for a while. 588 00:32:16,280 --> 00:32:19,160 Speaker 1: UH firms can deal with supply chains disruptions for a 589 00:32:19,240 --> 00:32:22,240 Speaker 1: period of time, but if this extends beyond the middle 590 00:32:22,280 --> 00:32:24,880 Speaker 1: of the year, we get to we see a lot 591 00:32:24,960 --> 00:32:28,160 Speaker 1: more fracturing of the politics, We see a lot more 592 00:32:28,280 --> 00:32:32,240 Speaker 1: pressure on supply chains, particularly in major companies and in 593 00:32:32,320 --> 00:32:35,120 Speaker 1: the front line sort of industries that are being affected, 594 00:32:35,480 --> 00:32:38,280 Speaker 1: and we begin to worry a lot more about financial stress. 595 00:32:38,920 --> 00:32:41,080 Speaker 1: And that's going to of course create some really big 596 00:32:41,280 --> 00:32:44,920 Speaker 1: challenges for our leaders in terms of who to bail 597 00:32:45,600 --> 00:32:48,520 Speaker 1: and who to fail. Public policy will face some very 598 00:32:48,600 --> 00:32:51,320 Speaker 1: tough choices in those scenarios, and so that's the direction 599 00:32:51,480 --> 00:32:53,680 Speaker 1: in which we looked at in these scenarios. So, Robert, 600 00:32:53,760 --> 00:32:56,840 Speaker 1: what kind of probabilities if you did at all, did 601 00:32:56,880 --> 00:32:59,600 Speaker 1: you assign to these three scenarios? Are they fairly equal? 602 00:32:59,680 --> 00:33:01,280 Speaker 1: Way to it? Is one more likely than the other. 603 00:33:01,320 --> 00:33:05,520 Speaker 1: At this point we try to avoid putting specific probabilities 604 00:33:05,560 --> 00:33:08,680 Speaker 1: on it because at the beginning we we there's so 605 00:33:08,760 --> 00:33:11,960 Speaker 1: many different views out of the scientific community and so 606 00:33:12,160 --> 00:33:15,120 Speaker 1: much uncertainty now not just about the spread of the 607 00:33:15,160 --> 00:33:18,040 Speaker 1: disease but also the lethality of it. What I do 608 00:33:18,320 --> 00:33:24,520 Speaker 1: stress to uh to our clients though, is that you know, 609 00:33:24,680 --> 00:33:26,720 Speaker 1: if you if you go back a few weeks, we 610 00:33:26,800 --> 00:33:29,480 Speaker 1: were really very much focused on up a NIGN scenario. 611 00:33:30,160 --> 00:33:32,280 Speaker 1: It was easy to look at what happened in Stars 612 00:33:32,480 --> 00:33:34,920 Speaker 1: and look at some of the other disease threats where 613 00:33:34,960 --> 00:33:38,600 Speaker 1: the markets bounced back very quickly after the initial shock, 614 00:33:38,680 --> 00:33:40,960 Speaker 1: and to be hopeful for that. And I think now 615 00:33:41,440 --> 00:33:43,640 Speaker 1: a lot of the people we I talked to really 616 00:33:43,680 --> 00:33:46,640 Speaker 1: are starting to focus, particularly that middle scenario, that's serious 617 00:33:46,720 --> 00:33:50,600 Speaker 1: scenario in which the disease spreads aggressively through them until 618 00:33:50,640 --> 00:33:53,080 Speaker 1: the middle of the year, and are paying more attention 619 00:33:53,120 --> 00:33:54,760 Speaker 1: to that. And I think what I would argue is 620 00:33:54,920 --> 00:33:57,600 Speaker 1: that's not fully priced into our markets or to our 621 00:33:57,680 --> 00:34:00,680 Speaker 1: political discussions. And so we are folks. We're trying to 622 00:34:00,760 --> 00:34:02,720 Speaker 1: encourage people to pay more attention to that, but I 623 00:34:02,800 --> 00:34:05,240 Speaker 1: am avoiding trying to put a probability on it because 624 00:34:05,600 --> 00:34:08,719 Speaker 1: I would probably get that wrong. Yeah, interesting, Robert. We 625 00:34:08,840 --> 00:34:11,960 Speaker 1: had Larry Cudlow, the director of the National Economic Council, 626 00:34:12,000 --> 00:34:15,160 Speaker 1: on Bloomberg Television this morning with our own Jonathan Pharaoh, 627 00:34:15,200 --> 00:34:18,200 Speaker 1: and Jonathan was really pressing him on government, what the 628 00:34:18,280 --> 00:34:20,799 Speaker 1: government is actually doing. I mean, we've seen the FED, 629 00:34:21,239 --> 00:34:23,040 Speaker 1: you know, come to the rescue with a what we 630 00:34:23,120 --> 00:34:26,719 Speaker 1: call an emergency rate cut earlier this week. But some 631 00:34:26,840 --> 00:34:28,719 Speaker 1: people are concerned that maybe the U. S. Government is 632 00:34:28,760 --> 00:34:32,080 Speaker 1: not moving fast enough, maybe with some fiscal stimulus along 633 00:34:32,120 --> 00:34:33,879 Speaker 1: those lines. What does what do your views there about 634 00:34:34,000 --> 00:34:37,000 Speaker 1: kind of what the U. S. Government has done to date? Well, 635 00:34:37,040 --> 00:34:38,840 Speaker 1: first of all, I listened to that interview and Jonathan 636 00:34:38,840 --> 00:34:41,480 Speaker 1: did a spectacular job on it because he raised exactly 637 00:34:41,560 --> 00:34:44,239 Speaker 1: the right issues. I fed rate cut I think was 638 00:34:44,320 --> 00:34:48,759 Speaker 1: perfectly appropriate to provide some underpinning to demand, But particularly 639 00:34:48,800 --> 00:34:51,840 Speaker 1: in the serious and severe scenarios, you have to be 640 00:34:51,960 --> 00:34:55,840 Speaker 1: focused on the supply side dislocations, and so then you 641 00:34:55,920 --> 00:34:58,360 Speaker 1: have to ask yourself, you know, what is it we 642 00:34:58,520 --> 00:35:02,240 Speaker 1: really need to be debating and preparing. Now it goes beyond, 643 00:35:02,760 --> 00:35:05,839 Speaker 1: it goes beyond helping households who can't get to work 644 00:35:06,080 --> 00:35:08,920 Speaker 1: and helping small and medium firms. Those are really important steps. 645 00:35:09,400 --> 00:35:11,920 Speaker 1: But we have to be debating what do we do 646 00:35:12,040 --> 00:35:17,400 Speaker 1: on tariffs because lightening tariffs does in fact alleviate the 647 00:35:17,440 --> 00:35:20,360 Speaker 1: supply chain pressures and allows firms to go elsewhere and 648 00:35:20,440 --> 00:35:22,600 Speaker 1: get the critical supplies they're not able to get from 649 00:35:22,640 --> 00:35:26,360 Speaker 1: their main suppliers. We have to address issues like we 650 00:35:26,440 --> 00:35:28,560 Speaker 1: did in two thousand and eight, of whether or not 651 00:35:28,680 --> 00:35:33,560 Speaker 1: we're going to provide facilities to whole industries, particularly including 652 00:35:33,640 --> 00:35:35,960 Speaker 1: large firms, and I understand the politics are tough there, 653 00:35:36,080 --> 00:35:39,160 Speaker 1: but we need to be confronting those kind of issues. 654 00:35:39,239 --> 00:35:41,600 Speaker 1: And while the FED has some capacity to do that, 655 00:35:41,760 --> 00:35:44,960 Speaker 1: and I'm sure is thinking about that, if we get 656 00:35:45,000 --> 00:35:47,920 Speaker 1: into the extended scenarios, there are solvency questions. It's not 657 00:35:48,080 --> 00:35:50,200 Speaker 1: just the liquidity, which is what the FED is supposed 658 00:35:50,239 --> 00:35:53,040 Speaker 1: to deal with. It really then becomes a fiscal issue 659 00:35:53,080 --> 00:35:55,440 Speaker 1: as well. And so those were the right questions to 660 00:35:55,560 --> 00:35:58,719 Speaker 1: put to Larry Um. He obviously couldn't go too far, 661 00:35:58,880 --> 00:36:01,799 Speaker 1: but I wish he had been a bit more forthcoming 662 00:36:01,880 --> 00:36:05,040 Speaker 1: on on the direction of travel for this administration. So, Robert, 663 00:36:05,160 --> 00:36:06,879 Speaker 1: you know, in the work that you and your team 664 00:36:06,960 --> 00:36:10,320 Speaker 1: did on the scenario analysis, what have we learned you 665 00:36:10,400 --> 00:36:13,200 Speaker 1: know from China how this is played out in China 666 00:36:13,239 --> 00:36:14,920 Speaker 1: In terms of timing, I guess we're seven or eight 667 00:36:14,960 --> 00:36:17,640 Speaker 1: weeks into this playing out in China. What do we 668 00:36:17,760 --> 00:36:20,880 Speaker 1: learned there? Well, one big thing we learned is that 669 00:36:21,040 --> 00:36:25,520 Speaker 1: there's a fascinating and important trade off between very tough 670 00:36:25,600 --> 00:36:31,759 Speaker 1: containment and economic rejuviation rejuvenation. And as I'm sure you know, 671 00:36:31,840 --> 00:36:33,840 Speaker 1: the scientists do debate whether you know, if you have 672 00:36:33,920 --> 00:36:35,840 Speaker 1: a problem the city, So you just shut down the 673 00:36:35,880 --> 00:36:39,840 Speaker 1: whole city. Where do you focus on identifying the cases 674 00:36:40,000 --> 00:36:42,560 Speaker 1: and tracing the contacts and the treating those people in 675 00:36:42,600 --> 00:36:46,880 Speaker 1: a more limited fashion. The Chinese obviously had the political 676 00:36:46,960 --> 00:36:49,840 Speaker 1: will and the capacity to shut down a whole province. 677 00:36:50,280 --> 00:36:53,440 Speaker 1: They are now finding it is more difficult to reanimate 678 00:36:54,239 --> 00:36:57,279 Speaker 1: UH economic activity at the end of that and get 679 00:36:57,360 --> 00:36:59,439 Speaker 1: people back to work, and I think that type of tension, 680 00:36:59,480 --> 00:37:02,160 Speaker 1: that's certainly one of the lessons we're learning. The other 681 00:37:02,320 --> 00:37:05,520 Speaker 1: thing I think we're seeing is this issue of you know, 682 00:37:05,680 --> 00:37:08,720 Speaker 1: protracted scarring of balance sheets, and this is a lesson. 683 00:37:09,000 --> 00:37:11,160 Speaker 1: I think we also learned in two thousand and eight 684 00:37:11,560 --> 00:37:15,880 Speaker 1: that when you have these deep financial UH and economic crisis, 685 00:37:16,520 --> 00:37:19,200 Speaker 1: however they come, and admittedly two thousand eight it was 686 00:37:19,239 --> 00:37:21,279 Speaker 1: a different style of crisis that we're facing now, but 687 00:37:21,360 --> 00:37:24,120 Speaker 1: I think there's a common point here that when you 688 00:37:24,239 --> 00:37:27,320 Speaker 1: have that, it leaves scars on the balance sheets of households, 689 00:37:27,920 --> 00:37:31,000 Speaker 1: on the balance sheets of corporations, and it does take 690 00:37:31,160 --> 00:37:33,440 Speaker 1: a long time to recover. And so the longer this 691 00:37:33,640 --> 00:37:36,239 Speaker 1: goes on, but the less likely it is you can 692 00:37:36,280 --> 00:37:38,840 Speaker 1: get a v UH and it's going to be a 693 00:37:38,920 --> 00:37:41,239 Speaker 1: more like some other letter of the alphabet. I think 694 00:37:41,280 --> 00:37:43,440 Speaker 1: even the Chinese now, and we even wrote about it 695 00:37:43,480 --> 00:37:46,520 Speaker 1: today to clients, the Chinese are understanding that a V 696 00:37:46,719 --> 00:37:49,320 Speaker 1: shaped recovery may not be in the cards. Hey, Robert 697 00:37:49,360 --> 00:37:51,400 Speaker 1: con thank you so much for joining us. Robert Khn 698 00:37:51,520 --> 00:37:54,040 Speaker 1: is a director Global Strategy and Global Macro. For you. 699 00:37:54,160 --> 00:37:56,480 Speaker 1: Raise your group out with a really interesting report trying 700 00:37:56,520 --> 00:37:59,600 Speaker 1: to game out some scenarios for how this coronavirus may 701 00:37:59,640 --> 00:38:03,520 Speaker 1: impact economies globally. UH markets again selling off your equity 702 00:38:03,560 --> 00:38:07,719 Speaker 1: markets off over two percent, coming up, UH, Balance of Power. 703 00:38:07,920 --> 00:38:10,200 Speaker 1: David Weston coming up in just moments. He will drive 704 00:38:10,280 --> 00:38:15,560 Speaker 1: the conversation forward risk off day. This is Bloomberg. Thanks 705 00:38:15,600 --> 00:38:17,719 Speaker 1: for listening to the Bloomberg P and L podcast. You 706 00:38:17,800 --> 00:38:20,400 Speaker 1: can subscribe and listen to interviews at Apple Podcasts or 707 00:38:20,480 --> 00:38:23,759 Speaker 1: whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter 708 00:38:23,880 --> 00:38:26,439 Speaker 1: at pt Sweeney. I'm Lisa Abram Woyds I'm on Twitter 709 00:38:26,560 --> 00:38:29,040 Speaker 1: at Lisa A. Bram Woyds One. Before the podcast, you 710 00:38:29,080 --> 00:38:31,600 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio