1 00:00:02,200 --> 00:00:06,800 Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio. 2 00:00:07,240 --> 00:00:09,600 Speaker 1: This week. On the podcast, I have an old friend 3 00:00:09,760 --> 00:00:13,360 Speaker 1: and a prior guest. His name is David Rosenberg, better 4 00:00:13,400 --> 00:00:16,520 Speaker 1: known as Rosie. I know Rosie for I don't know forever, 5 00:00:16,960 --> 00:00:21,040 Speaker 1: it seems like, and I have been hectoring him to 6 00:00:21,200 --> 00:00:24,599 Speaker 1: launch his own firm, really since the days of the 7 00:00:24,680 --> 00:00:28,840 Speaker 1: financial crisis, when he was the chief economist at Merrow 8 00:00:28,920 --> 00:00:34,920 Speaker 1: Lynch and really was I think chafing at the strictures 9 00:00:34,960 --> 00:00:37,560 Speaker 1: of a giant firm. I thought he would be better 10 00:00:37,600 --> 00:00:40,920 Speaker 1: off with those harnesses removed. And you know the old 11 00:00:40,920 --> 00:00:45,080 Speaker 1: expression with horses has given them their head, meaning loosening 12 00:00:45,120 --> 00:00:47,840 Speaker 1: up the reins and let them run where they want. Uh. 13 00:00:47,920 --> 00:00:51,960 Speaker 1: And he's finally pulled the trigger and done that funny story. 14 00:00:52,400 --> 00:00:56,440 Speaker 1: In the process of hectoring him to launch his own firm, 15 00:00:56,800 --> 00:00:58,440 Speaker 1: we were chatting one day and he said, well, what 16 00:00:58,480 --> 00:01:01,400 Speaker 1: would the name be. I'm like, that's Odds Rosenberg Research. 17 00:01:01,920 --> 00:01:05,160 Speaker 1: And I nagged him to go out and reserve that 18 00:01:05,200 --> 00:01:08,800 Speaker 1: domain name, which, being Dave, he never got around to 19 00:01:08,920 --> 00:01:11,880 Speaker 1: doing it. So I grabbed it. I grabbed want to 20 00:01:12,040 --> 00:01:15,080 Speaker 1: I think it was said, go daddy, I grabbed Rosenberg 21 00:01:15,120 --> 00:01:17,680 Speaker 1: research dot com and forgot about it. You know, every 22 00:01:17,760 --> 00:01:21,759 Speaker 1: year just automatically renews. And one day he says to me, 23 00:01:22,400 --> 00:01:25,720 Speaker 1: I've been thinking about going out on my own, but 24 00:01:25,880 --> 00:01:29,440 Speaker 1: I can't use the name Rosenberg Research. Someone has that domain. 25 00:01:30,040 --> 00:01:33,280 Speaker 1: And I said to him, really well, let me show 26 00:01:33,319 --> 00:01:35,160 Speaker 1: you how to look it up and you could see 27 00:01:35,160 --> 00:01:38,199 Speaker 1: who owns it. I show him the who is search 28 00:01:38,280 --> 00:01:41,240 Speaker 1: feature and he goes through this whole process to identify 29 00:01:41,280 --> 00:01:44,800 Speaker 1: who owns it, and he says, wait a second, that's you. 30 00:01:45,280 --> 00:01:47,960 Speaker 1: And my response was, yeah, I know what a high 31 00:01:48,000 --> 00:01:50,200 Speaker 1: functioning idiot you are, and you would never get around 32 00:01:50,200 --> 00:01:52,760 Speaker 1: to doing it, and someone else would have grabbed it. 33 00:01:52,800 --> 00:01:55,560 Speaker 1: So I thought I would grab it for you, and 34 00:01:55,680 --> 00:01:58,560 Speaker 1: lo and behold, Rosenberg research dot com is where his 35 00:01:58,800 --> 00:02:02,200 Speaker 1: uh website us. I don't know anybody with a greater 36 00:02:02,280 --> 00:02:08,520 Speaker 1: facility for economic data numbers. Dave can reel this information 37 00:02:08,560 --> 00:02:10,679 Speaker 1: off the top of his head. What was the U 38 00:02:10,840 --> 00:02:15,520 Speaker 1: three unemployment rate in seven in February. He knows that 39 00:02:15,560 --> 00:02:17,760 Speaker 1: he's he's a little bit of a rain man when 40 00:02:17,760 --> 00:02:21,919 Speaker 1: it comes to that. Nobody understands this data better than him. 41 00:02:22,040 --> 00:02:26,080 Speaker 1: Nobody understands how it interacts with the financial markets in 42 00:02:26,160 --> 00:02:29,680 Speaker 1: as great detail as Dave. So rather than me babbling 43 00:02:30,000 --> 00:02:35,519 Speaker 1: with no further ado, my conversation with David Rosenberg. This 44 00:02:36,000 --> 00:02:40,079 Speaker 1: is Masters in Business with Barry Ridholts on Bloomberg Radio. 45 00:02:40,720 --> 00:02:43,560 Speaker 1: My special guest this week is an old friend. His 46 00:02:43,680 --> 00:02:48,400 Speaker 1: name is David Rosenberg. He is probably best known as 47 00:02:48,440 --> 00:02:52,720 Speaker 1: the former chief economist for North America for investing Giant 48 00:02:52,760 --> 00:02:56,600 Speaker 1: Merrill lynch Uh. He is now running his own shop 49 00:02:56,760 --> 00:03:02,919 Speaker 1: called Rosenberg Research, headquartered in Toronto. David Rosenberg, Welcome to 50 00:03:03,080 --> 00:03:06,280 Speaker 1: Masters in Business. It's great to be on the show, Barry, 51 00:03:06,320 --> 00:03:09,080 Speaker 1: thanks for inviting me. Right, you can't say here anymore 52 00:03:09,120 --> 00:03:13,240 Speaker 1: because no one knows where here is. So let's jump 53 00:03:13,520 --> 00:03:18,200 Speaker 1: right into it. Based on that comments prior to the 54 00:03:18,280 --> 00:03:22,280 Speaker 1: COVID nineteen pandemic, prior to the lockdown, how did you 55 00:03:22,320 --> 00:03:27,799 Speaker 1: see the state of the economy, let's call it fourth quarter. Well, 56 00:03:27,960 --> 00:03:32,839 Speaker 1: I had seen the situation before the calamity hit, as 57 00:03:32,880 --> 00:03:36,360 Speaker 1: I've seen the entire cycle all along, which was a 58 00:03:36,440 --> 00:03:41,840 Speaker 1: cycle that was very weak, very weak structural underpinnings, a 59 00:03:41,920 --> 00:03:47,360 Speaker 1: decade of very little productivity growth, very little capital spending. 60 00:03:47,400 --> 00:03:50,720 Speaker 1: In fact, I was saying most of last year even 61 00:03:50,720 --> 00:03:54,080 Speaker 1: though it wasn't a technical recession. Verry I was saying 62 00:03:54,080 --> 00:03:57,440 Speaker 1: that there was certainly a recession in corporate profits, there 63 00:03:57,520 --> 00:04:01,520 Speaker 1: was recession in capital spending, there was a recession in 64 00:04:01,600 --> 00:04:05,400 Speaker 1: non residential construction. And really what was keeping the glue 65 00:04:05,400 --> 00:04:10,760 Speaker 1: together was the consumer, which is d P and you 66 00:04:10,840 --> 00:04:14,160 Speaker 1: just don't get a plane procession in a real sense 67 00:04:14,440 --> 00:04:17,440 Speaker 1: without the consumer playing a part. But it was a 68 00:04:17,600 --> 00:04:23,320 Speaker 1: very uneven economic performance. It continued into the opening months 69 00:04:23,360 --> 00:04:26,920 Speaker 1: of this year. It's very interesting when I hear people say, well, 70 00:04:27,040 --> 00:04:30,080 Speaker 1: you know, just wait till the pandemic ends and we 71 00:04:30,160 --> 00:04:33,120 Speaker 1: get the vaccine and will revert back to what the 72 00:04:33,120 --> 00:04:36,680 Speaker 1: economy looked like previously. But the economy what it looked 73 00:04:36,680 --> 00:04:41,120 Speaker 1: like previously was very uneven, an economy where the corporate 74 00:04:41,160 --> 00:04:45,560 Speaker 1: sector embarked on the most pronounced debt requity swap of 75 00:04:45,560 --> 00:04:48,640 Speaker 1: all time. You know, when I went to school, you 76 00:04:48,760 --> 00:04:53,120 Speaker 1: learned about how companies would issue debt to finance capital expenditure. 77 00:04:53,880 --> 00:04:56,440 Speaker 1: But the record debt issuance in the business sector went 78 00:04:56,560 --> 00:05:00,360 Speaker 1: for stock buy backs. So really the whole bullmark, when 79 00:05:00,360 --> 00:05:04,719 Speaker 1: you think about it, um was in financial engineering. I 80 00:05:04,800 --> 00:05:08,680 Speaker 1: called it the Potempkan bull market. In the economy and 81 00:05:08,720 --> 00:05:11,320 Speaker 1: in the stock market. But actually what was very interesting 82 00:05:11,360 --> 00:05:14,000 Speaker 1: to me, that's how we had one of the pronounced 83 00:05:14,240 --> 00:05:16,840 Speaker 1: bull markets of all time and equities in the context 84 00:05:16,839 --> 00:05:20,520 Speaker 1: of the weakest economic expansion. So did I see the 85 00:05:20,560 --> 00:05:23,360 Speaker 1: pandemic hitting at no? Did I see that we were 86 00:05:23,360 --> 00:05:27,400 Speaker 1: going to be shutting down the economy? The answer is no. 87 00:05:28,120 --> 00:05:31,920 Speaker 1: I did always in my mind have fragility as part 88 00:05:32,040 --> 00:05:35,719 Speaker 1: of my theme, and that even the smallest shock could 89 00:05:35,720 --> 00:05:38,000 Speaker 1: send that the economy into a downturn. And I want 90 00:05:38,000 --> 00:05:40,600 Speaker 1: to take you just back to that period in the 91 00:05:40,600 --> 00:05:43,800 Speaker 1: final months of two thousand and eighteen, when God forbid, 92 00:05:43,839 --> 00:05:46,040 Speaker 1: all G. Powell did was take the funds rate to 93 00:05:46,080 --> 00:05:48,200 Speaker 1: two and a half percent. And that two and a 94 00:05:48,279 --> 00:05:51,560 Speaker 1: half percent, Oh my god, how can we get survived 95 00:05:51,560 --> 00:05:54,080 Speaker 1: with rates that high? Well, that's the point that I 96 00:05:54,120 --> 00:05:56,680 Speaker 1: think we have to come to grips with is that 97 00:05:56,960 --> 00:06:00,240 Speaker 1: once again we continue to fight these cycles of of 98 00:06:00,320 --> 00:06:03,320 Speaker 1: debt with even more debt, and we're doing it now 99 00:06:03,440 --> 00:06:07,359 Speaker 1: for a host reasons which are probably justified for the 100 00:06:07,400 --> 00:06:09,080 Speaker 1: here and now. We'll have to clean up this mass 101 00:06:09,080 --> 00:06:12,640 Speaker 1: at some point in the future. But I think that's 102 00:06:12,680 --> 00:06:14,760 Speaker 1: the major point, is what sort of cycle is it 103 00:06:15,520 --> 00:06:18,200 Speaker 1: for all the bulls out there? What does it mean 104 00:06:18,760 --> 00:06:22,039 Speaker 1: when you have a new Central Bank Chairman J Powell 105 00:06:22,200 --> 00:06:25,359 Speaker 1: telling you repeatedly when he took over the helm in 106 00:06:25,400 --> 00:06:28,279 Speaker 1: early two thousand and eighteen, and he kept on saying 107 00:06:28,279 --> 00:06:30,680 Speaker 1: over and over again, it is time to normalize interest 108 00:06:30,760 --> 00:06:33,080 Speaker 1: rates and normal to the fat back then was three 109 00:06:33,120 --> 00:06:35,920 Speaker 1: percent plus two and a half percent peak in the 110 00:06:35,920 --> 00:06:38,919 Speaker 1: fat funds rate was the lowest peak in the fat 111 00:06:38,960 --> 00:06:42,000 Speaker 1: funds rate since the nineteen thirties. UM. That tells you 112 00:06:42,000 --> 00:06:46,440 Speaker 1: a lot that we could not even withstand a normalization 113 00:06:46,480 --> 00:06:50,560 Speaker 1: of interest rates, and it's because the whole economy, despite 114 00:06:50,600 --> 00:06:54,479 Speaker 1: the facade created by the stock market, the economy was 115 00:06:54,560 --> 00:06:58,080 Speaker 1: actually still in an abnormal state UM coming out of 116 00:06:58,160 --> 00:07:01,960 Speaker 1: the Great Recession. Notwithstanding you know how well capitalized the 117 00:07:02,000 --> 00:07:05,400 Speaker 1: banks were. The banks became well capitalized, but they also 118 00:07:05,440 --> 00:07:09,560 Speaker 1: became regulated utilities, and so the debt boom didn't happen 119 00:07:09,600 --> 00:07:12,560 Speaker 1: in the banking sector this time. It happened outside the 120 00:07:12,560 --> 00:07:15,800 Speaker 1: confines of the banking sector, which was in public sector 121 00:07:15,920 --> 00:07:19,360 Speaker 1: but was in public issuance of corporate debt, which took 122 00:07:19,680 --> 00:07:21,960 Speaker 1: it up to fifty percent of GDP, which we've never 123 00:07:22,000 --> 00:07:25,400 Speaker 1: seen before. I want to stay with the idea that 124 00:07:26,280 --> 00:07:29,640 Speaker 1: low interest rates are a key aspect of what's been 125 00:07:29,720 --> 00:07:33,320 Speaker 1: going on. Is it safe to say that you believe 126 00:07:33,480 --> 00:07:37,559 Speaker 1: the recovery off of the O nine lows are due 127 00:07:37,600 --> 00:07:41,840 Speaker 1: in part to the engineering by the Federal Reserve and 128 00:07:41,920 --> 00:07:45,960 Speaker 1: the unusually low rates longer for lower Is that a 129 00:07:46,000 --> 00:07:49,960 Speaker 1: fair statement. Well, I would actually say that the primary 130 00:07:50,000 --> 00:07:54,800 Speaker 1: reasons for the recovery that we saw, you know, really 131 00:07:54,880 --> 00:07:59,720 Speaker 1: stemmed from the dramatic increase that we saw in corporate 132 00:07:59,720 --> 00:08:03,240 Speaker 1: debt showance that went into stop buy backs create this 133 00:08:03,360 --> 00:08:08,040 Speaker 1: illusion of a fundamentally based equity market rally, and that 134 00:08:08,160 --> 00:08:10,920 Speaker 1: you had some trickle down impact in terms of equity 135 00:08:10,960 --> 00:08:14,440 Speaker 1: wealth effects on spending. On top of that, we had 136 00:08:14,840 --> 00:08:18,560 Speaker 1: tremendous physical stimulus through most of the period. UH. It 137 00:08:18,640 --> 00:08:21,360 Speaker 1: started in China trying to continue to pump the system 138 00:08:21,400 --> 00:08:25,960 Speaker 1: with physical stimulus throughout the entire bull market in the 139 00:08:25,960 --> 00:08:31,240 Speaker 1: global economy, and you had the Obama UH physical stimulus 140 00:08:31,240 --> 00:08:33,920 Speaker 1: in terms of the infrastructure spending early on, which took 141 00:08:33,920 --> 00:08:36,520 Speaker 1: a while to percolate. UH. And then of course the 142 00:08:36,559 --> 00:08:41,160 Speaker 1: book ends with the historic tax cuts in two thousands 143 00:08:41,160 --> 00:08:44,839 Speaker 1: and eighteen by the Trump administration. So we had a 144 00:08:44,960 --> 00:08:48,000 Speaker 1: tremendous stimulus. I'm not. You know, the question becomes, I 145 00:08:48,000 --> 00:08:51,400 Speaker 1: guess you know, we're low interest rates a cause of 146 00:08:51,440 --> 00:08:55,400 Speaker 1: whatever economic growth that we saw. You know, it's um. 147 00:08:55,440 --> 00:08:58,040 Speaker 1: You know, I'm almost gonna talk like a classic economist here. 148 00:08:58,080 --> 00:09:00,079 Speaker 1: It's it's a one hand another hand. It's really be 149 00:09:00,120 --> 00:09:04,000 Speaker 1: a two sided argument because you could argue all low 150 00:09:04,040 --> 00:09:08,040 Speaker 1: interest rates give you the impetus um to issue debt um. 151 00:09:08,160 --> 00:09:11,480 Speaker 1: Certainly low interest rates gives you the impetus to go 152 00:09:11,720 --> 00:09:14,720 Speaker 1: and buy risky assets because all we heard also belong 153 00:09:14,840 --> 00:09:18,320 Speaker 1: was tina uh, there is no alternative. So there's that 154 00:09:18,440 --> 00:09:21,280 Speaker 1: aspect to it too. It's called financial oppression. You want 155 00:09:21,280 --> 00:09:24,920 Speaker 1: to punish traditional risk reverse savers, to push them in 156 00:09:24,960 --> 00:09:27,800 Speaker 1: the risk curve, to get animal spirits up and to 157 00:09:27,880 --> 00:09:31,240 Speaker 1: generate a recovery that way. And there's a good part 158 00:09:31,240 --> 00:09:34,040 Speaker 1: of the reason why we had an expansion was because 159 00:09:34,080 --> 00:09:36,720 Speaker 1: of that. But at the same time, what do little 160 00:09:36,760 --> 00:09:39,319 Speaker 1: interest rates as a price signal tell you an interest 161 00:09:39,400 --> 00:09:42,040 Speaker 1: rates there's certainly something that you borrow at is something 162 00:09:42,080 --> 00:09:44,640 Speaker 1: that you certainly will do your calculations on your dividend 163 00:09:44,679 --> 00:09:49,200 Speaker 1: discount model, or you will do your long term discount 164 00:09:49,200 --> 00:09:52,800 Speaker 1: and earnings projections off the discount rate. But the interest 165 00:09:52,880 --> 00:09:57,200 Speaker 1: rate itself isn't just a lending rate or boring rate. 166 00:09:57,320 --> 00:10:00,679 Speaker 1: It is a price signal, just like in Japan, or 167 00:10:00,800 --> 00:10:03,520 Speaker 1: just like in Europe where we've had negative rates. What 168 00:10:03,720 --> 00:10:09,480 Speaker 1: do these extremely low interest rates tell you about the economy? 169 00:10:09,480 --> 00:10:12,640 Speaker 1: It tells you that we have a very weak long 170 00:10:12,760 --> 00:10:15,200 Speaker 1: term economic outlook. That's what it's telling you these low 171 00:10:15,240 --> 00:10:18,520 Speaker 1: interest rates. It doesn't it also say that the credit 172 00:10:18,559 --> 00:10:23,400 Speaker 1: worthiness of the United States is good and the bond 173 00:10:23,440 --> 00:10:26,720 Speaker 1: market doesn't see any inflation any time left in the future. 174 00:10:27,200 --> 00:10:29,160 Speaker 1: I think that there's a good part of that that 175 00:10:29,760 --> 00:10:32,920 Speaker 1: you've got. Look, you've got various components of what makes up, 176 00:10:33,280 --> 00:10:36,560 Speaker 1: say the interest rate. There's the term premium, which is 177 00:10:36,600 --> 00:10:41,320 Speaker 1: related to your expectations of the FED. There is inflation expectations, 178 00:10:41,360 --> 00:10:43,880 Speaker 1: which you actually just mentioned. But there's also a real 179 00:10:43,920 --> 00:10:46,960 Speaker 1: interest rate component, which tells you something about expectations of 180 00:10:47,000 --> 00:10:51,080 Speaker 1: real economic growth. So really there's all three. Now you 181 00:10:51,120 --> 00:10:52,960 Speaker 1: can say to me, well, jeez, you know, it's so 182 00:10:53,000 --> 00:10:56,000 Speaker 1: great to have low inflation expectations, to have low inflation, 183 00:10:56,400 --> 00:10:58,880 Speaker 1: you do look back in the nineteen seventies and eighties, 184 00:10:58,960 --> 00:11:02,120 Speaker 1: very we were for lower inflation. We couldn't week to 185 00:11:02,160 --> 00:11:05,640 Speaker 1: have lower inflation. And now over the past number of years, 186 00:11:06,080 --> 00:11:09,640 Speaker 1: we had just too much of lower inflation. But lower 187 00:11:09,640 --> 00:11:14,440 Speaker 1: inflation means lower inflation epso facto means lower pricing power, 188 00:11:14,800 --> 00:11:17,920 Speaker 1: and lower pricing power means that we have compressed margins. 189 00:11:18,000 --> 00:11:20,480 Speaker 1: So how you kept the gravy train growing throughout this 190 00:11:20,520 --> 00:11:22,839 Speaker 1: whole period? Remember last year, last year, we had a 191 00:11:22,840 --> 00:11:26,360 Speaker 1: bona fide earnings recession. There was no pricing power last year, 192 00:11:26,760 --> 00:11:29,719 Speaker 1: and yet the stock market finished with a run up. 193 00:11:30,080 --> 00:11:32,600 Speaker 1: And that had to do with the Powell pivot and 194 00:11:32,679 --> 00:11:34,240 Speaker 1: it had to do with the re expansion of the 195 00:11:34,240 --> 00:11:37,560 Speaker 1: Fed balance sheets starting in the fourth quarter. So let's 196 00:11:37,679 --> 00:11:44,480 Speaker 1: talk about this lockdown, quarantine, pandemic situation. This is Memorial 197 00:11:44,600 --> 00:11:48,480 Speaker 1: Day week. What is the state of the economy today? Well, 198 00:11:48,840 --> 00:11:53,120 Speaker 1: I say that we are right now still in the 199 00:11:53,120 --> 00:11:56,040 Speaker 1: are coming out of called the vertical down phase. Here, 200 00:11:56,200 --> 00:11:59,040 Speaker 1: that we really were hit with a double vammy of 201 00:11:59,200 --> 00:12:04,720 Speaker 1: a shock that affected the demand. Because even before the lockdowns, 202 00:12:05,320 --> 00:12:08,480 Speaker 1: the economy was starting to sputter because people were getting 203 00:12:08,480 --> 00:12:14,000 Speaker 1: panicky over becoming sick over the coronavirus. And then so 204 00:12:14,080 --> 00:12:17,480 Speaker 1: even before call it the middle of March. Already things 205 00:12:17,480 --> 00:12:19,560 Speaker 1: are starting to really cool off. You can see that 206 00:12:19,640 --> 00:12:22,640 Speaker 1: in the data through February and in the March. And 207 00:12:22,679 --> 00:12:25,880 Speaker 1: then look, we've shut down most of the economy and 208 00:12:26,400 --> 00:12:29,319 Speaker 1: there's no precedent for this. There's no playbook for I mean, 209 00:12:29,320 --> 00:12:32,280 Speaker 1: there's a playbook for a pandemic, but you've got to 210 00:12:32,320 --> 00:12:36,080 Speaker 1: go back at least a century. But a playbook for 211 00:12:36,160 --> 00:12:39,280 Speaker 1: shutting down really, when you think about the entire global 212 00:12:39,280 --> 00:12:41,880 Speaker 1: economy for a period of time, well that we haven't 213 00:12:41,880 --> 00:12:46,000 Speaker 1: seen before, and especially an economy globally that's so intertwined. 214 00:12:46,320 --> 00:12:49,640 Speaker 1: So this was simultaneously a demand shock and a supply shock. 215 00:12:50,160 --> 00:12:53,120 Speaker 1: So Dave on that note of demand shock and supply 216 00:12:53,200 --> 00:12:57,920 Speaker 1: shock simultaneously, give me a snapshot. What is the unemployment 217 00:12:58,000 --> 00:13:00,560 Speaker 1: rate today? You forget the b L S D. What 218 00:13:00,640 --> 00:13:02,800 Speaker 1: do you think the unemployment rate is? What do you 219 00:13:02,840 --> 00:13:06,000 Speaker 1: think US GDP is and what do you think global 220 00:13:06,040 --> 00:13:09,319 Speaker 1: GDP is? Well, I think that you know the unemployment 221 00:13:09,400 --> 00:13:12,240 Speaker 1: rate right now. I think as well over if it's 222 00:13:12,280 --> 00:13:16,719 Speaker 1: measured accurately and on its way soon above and look, 223 00:13:16,760 --> 00:13:18,640 Speaker 1: these are numbers at the St. Louis bed was talking 224 00:13:18,640 --> 00:13:21,320 Speaker 1: about even a couple of months ago, and as far 225 00:13:21,360 --> 00:13:23,679 Speaker 1: as GDP is concerned in the US, I think you're 226 00:13:23,679 --> 00:13:26,760 Speaker 1: talking at least negative for the second quarter. It could 227 00:13:26,760 --> 00:13:29,480 Speaker 1: be worse than that, and I think that the entire 228 00:13:29,520 --> 00:13:32,520 Speaker 1: world is probably pretty well very close to that. I mean, 229 00:13:32,600 --> 00:13:36,120 Speaker 1: China has already come out of its worst detonation from 230 00:13:36,120 --> 00:13:39,000 Speaker 1: this and the world's second largest economy, So it could 231 00:13:39,040 --> 00:13:42,360 Speaker 1: be just a timing thing that the US economy is 232 00:13:42,440 --> 00:13:45,079 Speaker 1: contracting a sharper rate than is everywhere else is because 233 00:13:45,200 --> 00:13:47,640 Speaker 1: China's come out. But you know you're talking about for 234 00:13:47,760 --> 00:13:49,720 Speaker 1: this year. I think global GDP is going to be 235 00:13:49,760 --> 00:13:52,600 Speaker 1: down at least ten percent for the year. Now. Where 236 00:13:52,640 --> 00:13:55,400 Speaker 1: we are right now, well, look, you're seeing a pulse 237 00:13:55,600 --> 00:13:58,680 Speaker 1: in the economy now, so it's not surprising that we're 238 00:13:58,720 --> 00:14:01,880 Speaker 1: probably going to get some sort of a bounce in 239 00:14:01,960 --> 00:14:04,200 Speaker 1: the third quarter. You know, I think that we're going 240 00:14:04,240 --> 00:14:07,920 Speaker 1: to be down four in the second quarter and then um, 241 00:14:07,920 --> 00:14:11,320 Speaker 1: we're probably up maybe twenty or better in the third quarter. 242 00:14:11,360 --> 00:14:13,240 Speaker 1: It's going to be a heck of a bounce. But 243 00:14:13,320 --> 00:14:15,840 Speaker 1: you know, it's like turning the light switch on. Um, 244 00:14:15,880 --> 00:14:19,520 Speaker 1: you know, after you've turned up the all the electricity 245 00:14:19,520 --> 00:14:21,360 Speaker 1: off in the house for a period of time. So 246 00:14:21,800 --> 00:14:23,960 Speaker 1: I think it's going to end up being a square 247 00:14:24,040 --> 00:14:26,440 Speaker 1: root sort of a recovery. We're going to get some 248 00:14:26,480 --> 00:14:29,160 Speaker 1: sort of a bounce. It's logical because we are reopening 249 00:14:29,160 --> 00:14:32,520 Speaker 1: there will be some activity, but there is no return 250 00:14:32,640 --> 00:14:36,560 Speaker 1: to normality until we either get a vaccine, which would 251 00:14:36,560 --> 00:14:40,480 Speaker 1: be preferable, or some sort of effective treatment. Because we 252 00:14:40,520 --> 00:14:43,400 Speaker 1: can reopen the economy, but we're not going to get 253 00:14:43,440 --> 00:14:46,280 Speaker 1: a perpetual increase in production and hiring and get going 254 00:14:46,320 --> 00:14:49,840 Speaker 1: to play right back down without demand. The demand has 255 00:14:49,920 --> 00:14:52,480 Speaker 1: to show up, and that's the wild card. Because we 256 00:14:52,520 --> 00:14:55,320 Speaker 1: can reopen the economy, and I frankly don't believe that 257 00:14:55,440 --> 00:14:57,520 Speaker 1: even if we get a second wave, we're not going 258 00:14:57,520 --> 00:15:00,960 Speaker 1: back to locking things down again. That might happen sporadically 259 00:15:00,960 --> 00:15:03,520 Speaker 1: and in some hotspots, but there's no more national lockdown. 260 00:15:03,560 --> 00:15:06,080 Speaker 1: That's not going to happen. But for the economy to 261 00:15:06,480 --> 00:15:09,240 Speaker 1: regain any verve whatsoever on a sustained basis, we need 262 00:15:09,240 --> 00:15:12,160 Speaker 1: to demand. And uh, you know, when you're asking me 263 00:15:12,200 --> 00:15:14,520 Speaker 1: the question about you know, where are we there's no 264 00:15:14,520 --> 00:15:17,160 Speaker 1: playbook or something like this. This isn't like waiting like 265 00:15:17,200 --> 00:15:19,440 Speaker 1: in March of oh nine, we have the ha moment, 266 00:15:19,880 --> 00:15:22,440 Speaker 1: the ring fence in the banking system, we capitalize the banks, 267 00:15:22,480 --> 00:15:25,440 Speaker 1: we could move on. You know, in two thousand and two, 268 00:15:25,600 --> 00:15:28,240 Speaker 1: we we mop up all the excess capacity and the 269 00:15:28,280 --> 00:15:31,320 Speaker 1: technology sector of Valla, we're off to a new bull market. 270 00:15:32,000 --> 00:15:34,480 Speaker 1: When the RTC was created and cleaned up the mass 271 00:15:34,520 --> 00:15:37,280 Speaker 1: left over by the savings alone crisis and commercial real estate, 272 00:15:37,320 --> 00:15:39,840 Speaker 1: well there we had the event that we could point 273 00:15:39,840 --> 00:15:42,160 Speaker 1: to that. Okay, now we can start getting things back 274 00:15:42,200 --> 00:15:44,120 Speaker 1: to normal. This is this is this has to do 275 00:15:44,160 --> 00:15:47,040 Speaker 1: with a vaccine basically. So let's say we get a 276 00:15:47,120 --> 00:15:49,520 Speaker 1: vaccine by the end of the year. Let's say December, 277 00:15:49,560 --> 00:15:53,280 Speaker 1: there's a vaccine. How long beyond that does it take 278 00:15:53,840 --> 00:15:59,480 Speaker 1: for us to regain the economic peak of Well, the 279 00:15:59,520 --> 00:16:02,280 Speaker 1: whole was created is so big that could still take 280 00:16:02,320 --> 00:16:04,520 Speaker 1: a lease a year. But if we got a vaccine, 281 00:16:04,560 --> 00:16:06,280 Speaker 1: I mean, look, the stock market is telling you that 282 00:16:06,360 --> 00:16:08,440 Speaker 1: right now. The stock market is telling you that they're 283 00:16:08,440 --> 00:16:10,840 Speaker 1: expecting there's going to be an announcement on a vaccine 284 00:16:10,880 --> 00:16:13,680 Speaker 1: by Labor Day that will be ready for a broad 285 00:16:13,760 --> 00:16:17,600 Speaker 1: distribution no later than early next year. So if we 286 00:16:17,640 --> 00:16:20,280 Speaker 1: get a vaccine in the next six or twelve months, 287 00:16:20,320 --> 00:16:22,400 Speaker 1: I mean that's a game changer. That is a game 288 00:16:22,480 --> 00:16:25,840 Speaker 1: changer basically, UM, that will take us on the road 289 00:16:25,880 --> 00:16:29,160 Speaker 1: back to normality. Not everything will return to normal, because 290 00:16:29,360 --> 00:16:33,320 Speaker 1: you know, months of isolation and lockdown has had some 291 00:16:33,400 --> 00:16:36,960 Speaker 1: impact on psychology and UH and has had an impact 292 00:16:37,000 --> 00:16:39,800 Speaker 1: on how we're going to approach our commercial and our 293 00:16:39,840 --> 00:16:42,200 Speaker 1: personal lives going forward. There will be I'm not gonna 294 00:16:42,200 --> 00:16:45,320 Speaker 1: even say scars, but there's going to be a second 295 00:16:45,360 --> 00:16:47,960 Speaker 1: or change in behavior that comes out of this be 296 00:16:48,120 --> 00:16:50,200 Speaker 1: that as the mate. A vaccine is a game changer 297 00:16:50,240 --> 00:16:52,160 Speaker 1: because think of a vaccine, we can actually go to 298 00:16:52,200 --> 00:16:54,640 Speaker 1: Yankee Stadium and watch a baseball game. We can actually 299 00:16:54,680 --> 00:16:56,800 Speaker 1: open up the malls. We're not going to be fearful 300 00:16:57,320 --> 00:17:00,400 Speaker 1: of getting the disease anymore, neither getting sick or post 301 00:17:00,560 --> 00:17:03,360 Speaker 1: and possibly dying. I mean, depending on the demography. But 302 00:17:03,440 --> 00:17:06,560 Speaker 1: the vaccine is the game changer. So I'll tell you 303 00:17:06,640 --> 00:17:09,119 Speaker 1: right now, Barry, I will turn if I start getting 304 00:17:09,119 --> 00:17:12,359 Speaker 1: the signs. Now, everybody speaks to everybody. Everybody's got the 305 00:17:12,480 --> 00:17:15,800 Speaker 1: group of infectious disease specialists they speak to. We will 306 00:17:15,840 --> 00:17:18,760 Speaker 1: watch Scott Leave and Fauci on TV. UM. You know, 307 00:17:19,280 --> 00:17:21,600 Speaker 1: my sources for whatever they're worth. It's telling me that 308 00:17:21,640 --> 00:17:24,159 Speaker 1: a vaccine is going to be coming. Most of the 309 00:17:24,160 --> 00:17:26,719 Speaker 1: people I speak to that are knowledgeable are you know, 310 00:17:26,760 --> 00:17:29,440 Speaker 1: there's no such thing as a percent. But a vaccine 311 00:17:29,480 --> 00:17:32,280 Speaker 1: is coming, probably not un till the spring or summer 312 00:17:32,280 --> 00:17:34,960 Speaker 1: of next year. And that's good news and bad news 313 00:17:34,960 --> 00:17:37,199 Speaker 1: because it means they're going to have a vaccine, But 314 00:17:37,240 --> 00:17:39,920 Speaker 1: it does mean that the big recovery is going to 315 00:17:40,000 --> 00:17:42,800 Speaker 1: be delayed. And the longer it takes for that to happen, 316 00:17:43,000 --> 00:17:45,720 Speaker 1: you know, unless the government continues with the fiscals big, 317 00:17:45,720 --> 00:17:47,920 Speaker 1: it's the more bankruptcy and unemployment we're going to see 318 00:17:47,920 --> 00:17:50,639 Speaker 1: along the way. So let me address something you brought 319 00:17:50,720 --> 00:17:56,520 Speaker 1: up earlier about weakness in the economy and the pre 320 00:17:56,640 --> 00:18:00,359 Speaker 1: pandemic economy. You know, if we look at the Milan meals, 321 00:18:00,359 --> 00:18:04,200 Speaker 1: they're the biggest demographic group at least since the baby boomers, 322 00:18:04,240 --> 00:18:08,200 Speaker 1: and they're now answering their thirties. We just saw them 323 00:18:08,320 --> 00:18:12,520 Speaker 1: start to increase household formation and housing demand was starting 324 00:18:12,520 --> 00:18:16,680 Speaker 1: to tick up amongst that demographic. What does it mean 325 00:18:16,800 --> 00:18:22,040 Speaker 1: for this group that was potentially starting a secular growth 326 00:18:22,040 --> 00:18:26,480 Speaker 1: story for this pandemic? Is this just temporarily delay them 327 00:18:26,520 --> 00:18:29,399 Speaker 1: a year or two or does this scar them as 328 00:18:29,560 --> 00:18:33,520 Speaker 1: as you implied earlier. Well, I don't think it scars them. 329 00:18:33,600 --> 00:18:37,400 Speaker 1: It really comes down to where they working. If these 330 00:18:37,400 --> 00:18:41,480 Speaker 1: are skilled millennials, they'll be fine. I mean, I estimate 331 00:18:41,560 --> 00:18:46,080 Speaker 1: that ten million jobs I've been eliminated permanently. Okay, one 332 00:18:46,080 --> 00:18:48,280 Speaker 1: thing that we wait, wait wait, ten million out of 333 00:18:48,280 --> 00:18:50,760 Speaker 1: the thirty nine million who were laid off or ten 334 00:18:50,760 --> 00:18:53,880 Speaker 1: million across the whole economy. Well both, I'm saying ten 335 00:18:53,880 --> 00:18:57,240 Speaker 1: million out of the rough and ten million out of 336 00:18:57,280 --> 00:19:00,560 Speaker 1: the thirty million workforce. I think that we've we've lost 337 00:19:00,560 --> 00:19:04,399 Speaker 1: ten million jobs permanently, Okay, in the sectors of the 338 00:19:04,440 --> 00:19:07,680 Speaker 1: economy that are not going to come back nearly as much. 339 00:19:07,960 --> 00:19:10,000 Speaker 1: And they'll be and that includes some of the offsets 340 00:19:10,000 --> 00:19:14,520 Speaker 1: will see because some Amazon like companies and industries will 341 00:19:14,560 --> 00:19:16,960 Speaker 1: be hiring. Look at what we did, what we discovered 342 00:19:16,960 --> 00:19:19,240 Speaker 1: in this it's great to have discovery. Even though this 343 00:19:19,320 --> 00:19:24,399 Speaker 1: was a horrible situation that we we shut down economy 344 00:19:24,720 --> 00:19:27,600 Speaker 1: that was called a non essential economy because they left 345 00:19:27,600 --> 00:19:30,480 Speaker 1: the essential economy open. So here we figure out, well, 346 00:19:30,480 --> 00:19:35,399 Speaker 1: that's very interesting that of the economy isn't essential. Well, 347 00:19:35,480 --> 00:19:38,320 Speaker 1: that's a revelation, isn't it. We're talking about, you know, 348 00:19:38,440 --> 00:19:44,199 Speaker 1: in this whole two thousand and nine jobs boom, Uh, 349 00:19:44,359 --> 00:19:46,960 Speaker 1: the jobs boom that brought the unemployment of three and 350 00:19:46,960 --> 00:19:49,159 Speaker 1: a percent. As anybody ever bothered to see where these 351 00:19:49,240 --> 00:19:53,040 Speaker 1: jobs were created, they were created in low skilled, low 352 00:19:53,119 --> 00:19:57,800 Speaker 1: value added consumer cyclical industries. Okay, we don't produce anything 353 00:19:57,800 --> 00:20:02,159 Speaker 1: anymore now. Maybe as we on shore manufacturing in some 354 00:20:02,280 --> 00:20:04,680 Speaker 1: areas that will come back, but look at the industrial 355 00:20:04,680 --> 00:20:08,160 Speaker 1: production and manufacturing, look at the realifed sport data. We've 356 00:20:08,160 --> 00:20:11,760 Speaker 1: become really a society and economy that was really geared 357 00:20:11,760 --> 00:20:17,200 Speaker 1: towards entertainment and leisure and restaurants and retail and so 358 00:20:17,400 --> 00:20:19,280 Speaker 1: a lot of these jobs aren't coming back. But when 359 00:20:19,320 --> 00:20:21,879 Speaker 1: you're talking about the millennials, they're going to benefit from 360 00:20:21,920 --> 00:20:24,000 Speaker 1: one thing, which is that interest rates you're gonna remain 361 00:20:24,000 --> 00:20:27,320 Speaker 1: at the floor for a longer period of time than 362 00:20:27,400 --> 00:20:29,720 Speaker 1: they ever would have where you have a deflationary gap 363 00:20:29,800 --> 00:20:33,120 Speaker 1: to deal with. UH, and Powell's already said that they 364 00:20:33,119 --> 00:20:34,840 Speaker 1: are not going to raise interest rates as far as 365 00:20:34,880 --> 00:20:38,240 Speaker 1: the eye can see. So if you have a job, 366 00:20:39,040 --> 00:20:41,000 Speaker 1: if you're skilled, you have a job, and you have 367 00:20:41,080 --> 00:20:44,080 Speaker 1: job security. I mean, your financing constantly gonna be close 368 00:20:44,119 --> 00:20:47,400 Speaker 1: to zero to perpetuity. So I think actually in terms 369 00:20:47,440 --> 00:20:49,679 Speaker 1: of housing, and that's going to be what type of 370 00:20:49,720 --> 00:20:51,320 Speaker 1: housing and what's going to come out of this, and 371 00:20:51,520 --> 00:20:55,480 Speaker 1: probably more positive for single family than it is, say 372 00:20:55,560 --> 00:20:59,040 Speaker 1: for condos or apartments. I think the multiples take a 373 00:20:59,119 --> 00:21:03,080 Speaker 1: hit because once again, uh, we went through an experiment 374 00:21:03,480 --> 00:21:07,439 Speaker 1: what is it like to be isolated and to have 375 00:21:07,480 --> 00:21:11,119 Speaker 1: your mobility restricted in a condominium or an apartment against 376 00:21:11,160 --> 00:21:14,520 Speaker 1: the single family house with a backyard. And then of 377 00:21:14,520 --> 00:21:16,320 Speaker 1: course I think there's gonna be a lot of sensitivity 378 00:21:16,320 --> 00:21:19,320 Speaker 1: about what sort of density, what sort of urban density 379 00:21:19,359 --> 00:21:21,400 Speaker 1: do you want to be living in. So I think 380 00:21:21,400 --> 00:21:23,920 Speaker 1: this is going to be very good for suburban dwelling, 381 00:21:23,960 --> 00:21:26,760 Speaker 1: and I think that actually housing is going to come 382 00:21:26,800 --> 00:21:29,760 Speaker 1: out of this just fine, you know, as you're seeing 383 00:21:29,800 --> 00:21:32,320 Speaker 1: already in some of the numbers housing and for the 384 00:21:32,359 --> 00:21:35,840 Speaker 1: millennials that actually are in uh, the areas of the 385 00:21:35,840 --> 00:21:42,119 Speaker 1: economy that are essential or utility like and look, a 386 00:21:42,200 --> 00:21:44,680 Speaker 1: lot of millennials are in the technology industry. And as 387 00:21:44,680 --> 00:21:47,359 Speaker 1: we've seen in the cycle, the text talk sells up 388 00:21:47,400 --> 00:21:49,920 Speaker 1: well because we found out that tex stalks are a 389 00:21:49,960 --> 00:21:54,040 Speaker 1: lot like consumer staples, they are a necessity. So um, 390 00:21:54,160 --> 00:21:56,760 Speaker 1: I think that they'll be just fine. Job security is 391 00:21:56,800 --> 00:21:58,399 Speaker 1: going to be the key though, but they're going to 392 00:21:58,520 --> 00:22:01,760 Speaker 1: have the low financing costs that's going to escape them onside. 393 00:22:02,280 --> 00:22:05,840 Speaker 1: So Dave, we were talking about policy decisions. I can't help, 394 00:22:05,840 --> 00:22:10,520 Speaker 1: but notice you're in Toronto. It seems that Canada did 395 00:22:10,560 --> 00:22:14,840 Speaker 1: a much better job responding quickly to the COVID nineteen 396 00:22:14,880 --> 00:22:17,679 Speaker 1: pandemic than than we did down here in the US. 397 00:22:18,640 --> 00:22:23,359 Speaker 1: What sort of impact will this delayed response of the 398 00:22:23,520 --> 00:22:26,320 Speaker 1: US have, What does it mean to the state of 399 00:22:26,359 --> 00:22:28,600 Speaker 1: the economy today, and what does it mean to how 400 00:22:28,720 --> 00:22:31,280 Speaker 1: quickly we'll be able to recover? Well, you know, it's 401 00:22:31,359 --> 00:22:33,600 Speaker 1: it's a I don't even know if I look at 402 00:22:33,600 --> 00:22:37,040 Speaker 1: it country against country, because I mean, there are some 403 00:22:37,119 --> 00:22:39,600 Speaker 1: areas of the states that did better than than others. 404 00:22:40,040 --> 00:22:42,120 Speaker 1: You know, I think that you know, you can point 405 00:22:42,119 --> 00:22:46,040 Speaker 1: to Ohio, say in Canada, British Columbia is actually way 406 00:22:46,040 --> 00:22:49,439 Speaker 1: ahead of Ontario in terms of bending the curve. So 407 00:22:49,480 --> 00:22:51,600 Speaker 1: it's hard. It's hard to say, you know, Canada, it's 408 00:22:51,600 --> 00:22:55,240 Speaker 1: going to be I think a tougher slog here because 409 00:22:55,560 --> 00:22:58,159 Speaker 1: we're not gonna when it comes time to getting the vaccines, 410 00:22:58,200 --> 00:23:00,719 Speaker 1: I'm sure that they're going to be just first and 411 00:23:00,720 --> 00:23:02,879 Speaker 1: foremost in the in the States, then they're going to 412 00:23:02,920 --> 00:23:05,159 Speaker 1: be in Canada. And I would just say in the 413 00:23:05,200 --> 00:23:09,760 Speaker 1: Canadian situation, you know, here in Toronto, I mean we're 414 00:23:09,760 --> 00:23:12,480 Speaker 1: still pretty well on lockdown mode. And you know, look 415 00:23:12,480 --> 00:23:15,560 Speaker 1: we're doing a delicate balance here. You know, Uh, do 416 00:23:15,600 --> 00:23:18,320 Speaker 1: you reopen to early, get a second wave? But if 417 00:23:18,359 --> 00:23:21,679 Speaker 1: you don't reopen you destroy the economy. Uh. You know 418 00:23:21,720 --> 00:23:24,600 Speaker 1: here in Ontario, which is called it, you know, over 419 00:23:24,640 --> 00:23:27,520 Speaker 1: a third of the Canadian economy. You know, we're still 420 00:23:27,520 --> 00:23:29,920 Speaker 1: locked down. There's there's nothing here that's really opening yet. 421 00:23:30,359 --> 00:23:32,399 Speaker 1: But it's a it's a double ledged sword. Only history 422 00:23:32,440 --> 00:23:35,280 Speaker 1: we will be able to tell whether or not the 423 00:23:35,359 --> 00:23:38,680 Speaker 1: U S reopened early. Only history will tell whether Canada 424 00:23:39,000 --> 00:23:41,800 Speaker 1: waited too long to reopen. I mean, we don't really know, 425 00:23:41,960 --> 00:23:43,840 Speaker 1: and I don't I don't know, you know, if if 426 00:23:43,840 --> 00:23:46,760 Speaker 1: it matters really from an economic standpoint, because we can 427 00:23:46,800 --> 00:23:50,000 Speaker 1: point to Sweden. People like to look at the Sweden example. 428 00:23:50,160 --> 00:23:54,080 Speaker 1: Sweden had a much more lacy, fair attitude um much 429 00:23:54,160 --> 00:23:59,080 Speaker 1: higher mortality rate than anywhere else, including its European neighbors. 430 00:23:59,600 --> 00:24:02,280 Speaker 1: And while people had greater freedom and they didn't really 431 00:24:02,280 --> 00:24:06,560 Speaker 1: go through a lockdown outside of recommended social distancing, Sweden's 432 00:24:06,560 --> 00:24:09,760 Speaker 1: economy is still poised to contract ten percent this year, 433 00:24:09,800 --> 00:24:11,800 Speaker 1: which is what they're saying. All of Europe has going 434 00:24:11,840 --> 00:24:14,680 Speaker 1: to contract. So there's there was no evidence that even 435 00:24:15,400 --> 00:24:18,760 Speaker 1: not having your economy lockdown, that it did a lot 436 00:24:18,760 --> 00:24:20,480 Speaker 1: of good for your economy. And I'll just say why, 437 00:24:20,720 --> 00:24:23,560 Speaker 1: because there's a supply aspect and I said earlier demand 438 00:24:23,600 --> 00:24:27,119 Speaker 1: aspect um. We had a supply and demand shock, but 439 00:24:27,359 --> 00:24:29,520 Speaker 1: in Sweden they didn't have a supply shock, but they 440 00:24:29,520 --> 00:24:32,000 Speaker 1: had a pure demand shok. Because if people are fearful 441 00:24:32,040 --> 00:24:34,320 Speaker 1: and people are cautious, it doesn't matter whether they lost 442 00:24:34,320 --> 00:24:37,560 Speaker 1: down or not. They're just not going to expect. Quite fascinating, Dave. 443 00:24:37,680 --> 00:24:43,120 Speaker 1: Let's talk a little bit about launching your own firm 444 00:24:43,200 --> 00:24:45,920 Speaker 1: and full disclosure, I've been begging you to do this 445 00:24:46,040 --> 00:24:48,399 Speaker 1: for I don't know a decade. How long have you 446 00:24:48,680 --> 00:24:52,560 Speaker 1: and I've been talking about this, So so tell us 447 00:24:52,920 --> 00:24:58,119 Speaker 1: what made you decide to go independent? Well, you know, 448 00:24:58,200 --> 00:25:02,960 Speaker 1: it's a it's aunt percent true, Barry, and you were. 449 00:25:02,960 --> 00:25:06,520 Speaker 1: You were a great inspiration. You still are Uh. You know. Look, 450 00:25:06,840 --> 00:25:10,800 Speaker 1: I left mary Lynch in two thousand and nine uh 451 00:25:11,000 --> 00:25:14,280 Speaker 1: to come back home from New York. The truth is 452 00:25:14,920 --> 00:25:17,919 Speaker 1: I didn't really like my long absences from my young family. 453 00:25:17,960 --> 00:25:21,560 Speaker 1: They were still in Toronto, and after a decade at Merrill, 454 00:25:21,640 --> 00:25:24,840 Speaker 1: I achieved all the goals I set out anyways, Uh. 455 00:25:24,880 --> 00:25:27,639 Speaker 1: You know. One of them was, of course, this daily 456 00:25:27,680 --> 00:25:31,320 Speaker 1: market note that's now called Breakfast with Dave that I 457 00:25:31,280 --> 00:25:35,360 Speaker 1: had started back and by the time I left mary 458 00:25:35,440 --> 00:25:39,159 Speaker 1: Lynch in two thousand nine, uh, much to my surprise, actually, 459 00:25:39,200 --> 00:25:40,960 Speaker 1: I was told that it was the most widely read 460 00:25:41,000 --> 00:25:44,880 Speaker 1: piece of research coming out of the Meryl system. So 461 00:25:45,480 --> 00:25:48,760 Speaker 1: when I left Meryll, I had numerous folks, by the way, 462 00:25:48,760 --> 00:25:54,720 Speaker 1: including you, uh, urging me to start my own firm. Uh. 463 00:25:54,720 --> 00:25:58,040 Speaker 1: And we both remember that. So the bottom line is 464 00:25:58,080 --> 00:26:01,639 Speaker 1: that starting Rosenberg Research spend on my mind for many years. 465 00:26:02,160 --> 00:26:05,080 Speaker 1: The reality, though a decade ago, is I wanted to 466 00:26:05,119 --> 00:26:08,560 Speaker 1: spend more time with my family. Starting a new business 467 00:26:08,800 --> 00:26:12,760 Speaker 1: would have conflicted with that, uh, And instead I chose 468 00:26:12,800 --> 00:26:15,320 Speaker 1: to take an offer from Gluskin Chef. They gave me 469 00:26:15,359 --> 00:26:19,000 Speaker 1: the work family balance that I was looking for, but 470 00:26:19,119 --> 00:26:23,520 Speaker 1: the beauty about my relationship with my prior firm, UH 471 00:26:23,760 --> 00:26:28,359 Speaker 1: was that we sold my research to the outside world, 472 00:26:28,400 --> 00:26:32,040 Speaker 1: as in to non Glusk and Chef clients, whether they 473 00:26:32,040 --> 00:26:35,600 Speaker 1: are a conference called speeches or my daily We went 474 00:26:35,640 --> 00:26:38,560 Speaker 1: to the paywall and we split the proceeds, and it 475 00:26:38,560 --> 00:26:41,520 Speaker 1: turned out to be a very nice business. So I 476 00:26:41,600 --> 00:26:45,080 Speaker 1: really already had an existing business that I just spun 477 00:26:45,160 --> 00:26:48,120 Speaker 1: out at the beginning of the year. I guess you'd 478 00:26:48,160 --> 00:26:52,480 Speaker 1: ask me about the timing and or the even the rationale, 479 00:26:53,119 --> 00:26:56,760 Speaker 1: and you know, I've long identified a shortage out there 480 00:26:57,320 --> 00:27:02,679 Speaker 1: of truly high quality, un biased research and research that 481 00:27:02,760 --> 00:27:06,640 Speaker 1: takes the economics to the financial markets and provides investors 482 00:27:07,320 --> 00:27:10,080 Speaker 1: with the degree of clarity that they're not going to 483 00:27:10,200 --> 00:27:14,000 Speaker 1: get anywhere else. And this realization often makes me think 484 00:27:14,400 --> 00:27:17,040 Speaker 1: that I probably should have done this earlier. UM. But 485 00:27:17,640 --> 00:27:20,040 Speaker 1: I'm grateful to have had made a decision to strike 486 00:27:20,080 --> 00:27:22,760 Speaker 1: out to my own because it also comes down to 487 00:27:22,880 --> 00:27:27,399 Speaker 1: better late than never. But in that period when I 488 00:27:27,440 --> 00:27:31,840 Speaker 1: was a buy side economist, I had the luxury of 489 00:27:31,960 --> 00:27:36,000 Speaker 1: reading uh everybody else, whether it was on Wall Street 490 00:27:36,119 --> 00:27:40,200 Speaker 1: or Bay Street, or Montgomery Street or Wilson Street, UM, 491 00:27:40,440 --> 00:27:43,320 Speaker 1: and I just found that it all sounded the same 492 00:27:43,359 --> 00:27:47,959 Speaker 1: to me. And so many economists out there. I found 493 00:27:48,119 --> 00:27:50,600 Speaker 1: over the past decade, in particulars I could read my 494 00:27:51,080 --> 00:27:54,480 Speaker 1: former competitors research, and I guess my current competitor's research 495 00:27:54,960 --> 00:27:57,160 Speaker 1: is that there's so many economists out there that are 496 00:27:57,240 --> 00:28:01,520 Speaker 1: just too fearful of being wrong to make a call. 497 00:28:02,440 --> 00:28:05,119 Speaker 1: And I guess that is what has set me apart. 498 00:28:05,280 --> 00:28:08,960 Speaker 1: I really just wanted to take the opportunity now at 499 00:28:09,000 --> 00:28:14,199 Speaker 1: fifty nine years of age UH, to produce research that 500 00:28:14,400 --> 00:28:21,040 Speaker 1: is unique. Of course, it's provocative, but also uncovers things 501 00:28:21,119 --> 00:28:24,639 Speaker 1: around the bend that other people aren't looking at. Because 502 00:28:24,640 --> 00:28:27,560 Speaker 1: so much of economics is a commodity, and so the 503 00:28:27,640 --> 00:28:32,320 Speaker 1: most important thing is to make the research a non commodity, 504 00:28:32,359 --> 00:28:35,239 Speaker 1: to make it unique and to make it differentiated. And 505 00:28:35,240 --> 00:28:38,080 Speaker 1: that's always some of my ethos going back thirty years. 506 00:28:38,840 --> 00:28:41,760 Speaker 1: But now I had the financial resources to do it myself, 507 00:28:42,240 --> 00:28:46,520 Speaker 1: and and and the opportunity, and it's been a phenomenon. 508 00:28:46,760 --> 00:28:49,200 Speaker 1: We're only four months into this, and it's been great 509 00:28:49,880 --> 00:28:54,040 Speaker 1: to direct my own traffic and to allocate the research 510 00:28:54,080 --> 00:28:56,840 Speaker 1: initiatives this tour. I think it's most appropriate for our 511 00:28:56,880 --> 00:29:01,720 Speaker 1: client base. Dave, what's been the biggest prize of launching 512 00:29:01,720 --> 00:29:07,200 Speaker 1: your own farm. Both positive and negative. Well, look for 513 00:29:07,440 --> 00:29:10,880 Speaker 1: you know, the positive really has been um, you know, 514 00:29:11,040 --> 00:29:15,720 Speaker 1: the the ability to uh you know, staff up. I 515 00:29:15,760 --> 00:29:18,880 Speaker 1: would say with the best macro team I've ever had 516 00:29:18,960 --> 00:29:22,600 Speaker 1: under my wing. I know that's a big statement, that's true. 517 00:29:23,400 --> 00:29:26,480 Speaker 1: Uh And so that's been a big part of it. Uh. 518 00:29:26,680 --> 00:29:29,320 Speaker 1: You know, I'm staffed up with the conomics and strategists 519 00:29:29,320 --> 00:29:32,960 Speaker 1: and I've got a hold uh marketing team. They're all 520 00:29:33,000 --> 00:29:36,000 Speaker 1: in their thirties. So they most positive thing is that 521 00:29:36,160 --> 00:29:40,200 Speaker 1: they make me feel young again. Uh And um, you 522 00:29:40,240 --> 00:29:44,000 Speaker 1: know we are. I'm learning a lot about being an entrepreneur. Uh. 523 00:29:44,160 --> 00:29:47,800 Speaker 1: And that's the roller coachter ride and uh as I 524 00:29:47,880 --> 00:29:51,440 Speaker 1: was warned it was going to be um, but it's um, 525 00:29:51,520 --> 00:29:54,080 Speaker 1: you know what we were expanding. I mean, you know, 526 00:29:54,080 --> 00:29:58,560 Speaker 1: when I left Gluskin Chefs, we had a subscription lest 527 00:29:58,800 --> 00:30:02,320 Speaker 1: globally we're in Ford countries by the way, Um, we 528 00:30:02,400 --> 00:30:06,120 Speaker 1: had almost two thousand subscribers. Now we have north to 529 00:30:06,200 --> 00:30:10,440 Speaker 1: four thousand people reading our material. So I'm very proud 530 00:30:10,520 --> 00:30:13,800 Speaker 1: of that that you know that we have, that we 531 00:30:13,840 --> 00:30:18,240 Speaker 1: have that reach. So that's probably the proud of the 532 00:30:18,280 --> 00:30:24,520 Speaker 1: cousemen so far has been our ability through almost little 533 00:30:24,640 --> 00:30:28,280 Speaker 1: effort to expand our readership, which means that we are 534 00:30:29,400 --> 00:30:34,200 Speaker 1: we're hitting the right the right nerve points with investors 535 00:30:34,200 --> 00:30:39,400 Speaker 1: out there in terms of you know, looking at anything 536 00:30:39,480 --> 00:30:44,120 Speaker 1: that's negative or anything that is Has it met my expectations? 537 00:30:44,520 --> 00:30:47,640 Speaker 1: I mean it's early days yet, but so far, i'd 538 00:30:47,640 --> 00:30:49,520 Speaker 1: have to say that all the check marks are in 539 00:30:49,560 --> 00:30:55,400 Speaker 1: the plus column. How has the pandemic impacted what you 540 00:30:55,440 --> 00:30:59,360 Speaker 1: would normally be doing running a research shop? And I 541 00:30:59,400 --> 00:31:03,080 Speaker 1: know you travel, you speaking a lot of conferences, you 542 00:31:03,200 --> 00:31:07,440 Speaker 1: visit a lot of clients. Now that we're especially in Toronto, 543 00:31:07,600 --> 00:31:11,520 Speaker 1: still in a lockdown situation. How has that impacted running 544 00:31:11,640 --> 00:31:15,560 Speaker 1: a service business like yours? M hm, you know that's 545 00:31:15,600 --> 00:31:17,800 Speaker 1: a that's a great point. Well, listen again, is as 546 00:31:17,840 --> 00:31:23,640 Speaker 1: part of really assembling a great team um and um 547 00:31:23,720 --> 00:31:27,080 Speaker 1: and uh, you know, everybody knowing you know, uh, you 548 00:31:27,120 --> 00:31:29,840 Speaker 1: know what they have to do and and coming to 549 00:31:30,320 --> 00:31:33,560 Speaker 1: a variety of consensus. And that comes not just to 550 00:31:33,720 --> 00:31:36,360 Speaker 1: say when we're formulating a forecast, but what we're going 551 00:31:36,400 --> 00:31:39,040 Speaker 1: to do regarding the business. Uh. You know. So we 552 00:31:39,040 --> 00:31:42,440 Speaker 1: were early and very well prepared, and I'm going to 553 00:31:42,520 --> 00:31:47,520 Speaker 1: tip my hat to my entire team because we had 554 00:31:47,560 --> 00:31:50,400 Speaker 1: a feeling that something like this might happen. We had 555 00:31:50,480 --> 00:31:53,320 Speaker 1: a We didn't know that, you know, there was going 556 00:31:53,400 --> 00:31:56,440 Speaker 1: to be a situation where one evening the NBA says 557 00:31:56,880 --> 00:31:59,080 Speaker 1: season is over, and then it's lights out for the 558 00:31:59,200 --> 00:32:02,600 Speaker 1: entire economy. But we had a plan, uh. And I 559 00:32:02,600 --> 00:32:05,040 Speaker 1: got to thank my team for that. We had a 560 00:32:05,040 --> 00:32:07,480 Speaker 1: plan as to what would happen if So we had 561 00:32:07,520 --> 00:32:10,640 Speaker 1: a plan B. And we were already set up with 562 00:32:10,800 --> 00:32:14,280 Speaker 1: our server and with our technology that if we had 563 00:32:14,280 --> 00:32:19,000 Speaker 1: to work remotely, uh, we could work remotely. And so 564 00:32:19,120 --> 00:32:21,760 Speaker 1: you know, we had a really nice office in downtown 565 00:32:22,160 --> 00:32:27,120 Speaker 1: Toronto right by the lake in Brookville Place, really one 566 00:32:27,120 --> 00:32:31,960 Speaker 1: of the prime a commercial space in the city. Uh. 567 00:32:32,000 --> 00:32:35,080 Speaker 1: And so that's where we were uh. And at any 568 00:32:35,080 --> 00:32:36,880 Speaker 1: moment of time, though, we could all just do this 569 00:32:37,000 --> 00:32:40,360 Speaker 1: from our from our home offices where I'm for example, 570 00:32:40,440 --> 00:32:43,360 Speaker 1: calling you right now. And so it went out without 571 00:32:43,360 --> 00:32:46,240 Speaker 1: a hitch, Like I was amazed on day one, crossing 572 00:32:46,280 --> 00:32:48,800 Speaker 1: my fingers when we were putting out our variety of 573 00:32:48,840 --> 00:32:53,240 Speaker 1: research material. Nothing went out late. There wasn't one blitch. Um. 574 00:32:53,480 --> 00:32:56,160 Speaker 1: So look, it's a matter of road working remote Lee. 575 00:32:56,760 --> 00:32:59,000 Speaker 1: We're keeping in touch with each other in a variety 576 00:32:59,000 --> 00:33:01,320 Speaker 1: different ways. You know, I've had a bunch of speaking 577 00:33:01,360 --> 00:33:05,800 Speaker 1: engagements in a lot of places, especially in the States, 578 00:33:05,840 --> 00:33:09,800 Speaker 1: that turned into doing it on zoom or just doing 579 00:33:09,840 --> 00:33:12,720 Speaker 1: conference calls like I'm doing with you. I remember years 580 00:33:12,720 --> 00:33:15,800 Speaker 1: ago doing a radio interview with you, you know, at 581 00:33:15,840 --> 00:33:19,200 Speaker 1: the at the Bloomberg office, and you know, I wish 582 00:33:19,280 --> 00:33:21,800 Speaker 1: I was there right now. So you know, everything right 583 00:33:21,800 --> 00:33:23,959 Speaker 1: now is just be done remotely. It's either done you know, 584 00:33:24,120 --> 00:33:29,120 Speaker 1: via teleconference or via zoom, just like everybody else. So 585 00:33:29,640 --> 00:33:31,840 Speaker 1: i'd have to say, though, Look, I'll tell you right now, 586 00:33:31,960 --> 00:33:35,040 Speaker 1: it's not like I don't enjoy traveling, but um, I 587 00:33:35,040 --> 00:33:39,160 Speaker 1: don't miss going to airports. I mean, I mess who 588 00:33:39,800 --> 00:33:43,640 Speaker 1: I missed. I missed the human interaction, I missed the applause, 589 00:33:43,640 --> 00:33:46,080 Speaker 1: I missed the booze, I missed the cat calls. If 590 00:33:46,160 --> 00:33:48,680 Speaker 1: it's weird giving a speech that you know, there's a 591 00:33:48,680 --> 00:33:51,959 Speaker 1: thousand people out there, but you know you can't hear them, 592 00:33:52,000 --> 00:33:54,280 Speaker 1: you know, you can't gauge their body language, and that's 593 00:33:54,360 --> 00:33:58,360 Speaker 1: pretty weird. Um. But you know, so we're all learning 594 00:33:59,040 --> 00:34:02,720 Speaker 1: about this this new phenomenon called work at home. But 595 00:34:02,800 --> 00:34:04,120 Speaker 1: I can tell you that you know, we're going to 596 00:34:04,240 --> 00:34:07,320 Speaker 1: have some sort of consensus once things that we get 597 00:34:07,360 --> 00:34:09,600 Speaker 1: past the eye the storm and things in trying to 598 00:34:09,640 --> 00:34:12,320 Speaker 1: open up, and will come to some sort of consensus 599 00:34:12,400 --> 00:34:14,719 Speaker 1: as to you know, what we'll do with that office downtown, 600 00:34:14,880 --> 00:34:18,439 Speaker 1: or we'll probably have something rotational, I imagine. But things 601 00:34:18,520 --> 00:34:20,279 Speaker 1: are not going back to the way that they were, 602 00:34:20,440 --> 00:34:23,480 Speaker 1: that much is for sure. You know, our mutual friend 603 00:34:23,560 --> 00:34:28,719 Speaker 1: John Walden held his strategic investor conference recently and I 604 00:34:28,840 --> 00:34:33,680 Speaker 1: interviewed somebody for that event, and you could see at 605 00:34:33,719 --> 00:34:36,560 Speaker 1: the bottom of the screen how many attendees are present, 606 00:34:37,120 --> 00:34:39,759 Speaker 1: and it just doesn't feel like you're talking to a 607 00:34:39,880 --> 00:34:42,960 Speaker 1: room of a thousand to two thousand people. It's like 608 00:34:43,040 --> 00:34:46,120 Speaker 1: a zoom call. And it definitely is going to take 609 00:34:46,120 --> 00:34:51,880 Speaker 1: a little getting getting used to. Yeah, and uh, I 610 00:34:51,920 --> 00:34:54,160 Speaker 1: think frankly that we're going to see a lot more 611 00:34:54,160 --> 00:34:57,120 Speaker 1: of that. And that's because I think that even if 612 00:34:57,160 --> 00:35:02,640 Speaker 1: we start to go back towards something that's quasi normal, 613 00:35:02,719 --> 00:35:07,760 Speaker 1: even I think the one thing that comes back the 614 00:35:07,760 --> 00:35:11,480 Speaker 1: the longest is going to be air travel, especially business 615 00:35:11,480 --> 00:35:15,600 Speaker 1: air travel and conferences and events. Um So for people 616 00:35:15,640 --> 00:35:18,399 Speaker 1: like me and you, this will be a a new 617 00:35:18,440 --> 00:35:22,239 Speaker 1: normal for a lot longer, to say the least, So 618 00:35:23,080 --> 00:35:25,319 Speaker 1: I don't want to call this a v recovery in 619 00:35:25,360 --> 00:35:29,120 Speaker 1: the stock market. We had one of the fastest collapses 620 00:35:29,200 --> 00:35:32,400 Speaker 1: on record in the month of March, and here we 621 00:35:32,480 --> 00:35:36,000 Speaker 1: are within spinning distance of all time highs. What do 622 00:35:36,040 --> 00:35:39,400 Speaker 1: you think of this decline and rebound. I think that 623 00:35:39,920 --> 00:35:44,520 Speaker 1: the first leg of the rebound was policy driven, with 624 00:35:44,680 --> 00:35:47,480 Speaker 1: the fad, with all the fiscal support. And you have 625 00:35:47,600 --> 00:35:50,480 Speaker 1: to remember then in that period from mid February to 626 00:35:50,520 --> 00:35:54,200 Speaker 1: mid March, there was a lot about the coronavirus we 627 00:35:54,200 --> 00:35:56,520 Speaker 1: didn't know about, and all of a sudden, we went 628 00:35:56,560 --> 00:36:03,399 Speaker 1: from complacency in February uh to panic. Uh. I mean 629 00:36:03,440 --> 00:36:06,360 Speaker 1: people were comparing it to the Black plague, and people 630 00:36:06,400 --> 00:36:09,520 Speaker 1: are comparing it to the Spanish flu. Of course it's 631 00:36:09,560 --> 00:36:11,560 Speaker 1: it's needed one of those, but we didn't know it 632 00:36:11,600 --> 00:36:13,680 Speaker 1: was it going to mutate? Um, you know, what was 633 00:36:13,719 --> 00:36:15,640 Speaker 1: the mortality rate going to be? And then you looked 634 00:36:15,680 --> 00:36:18,960 Speaker 1: at all these official projections, which of course proved to 635 00:36:19,000 --> 00:36:22,319 Speaker 1: be wrong. It created a commendous amount of fear, and 636 00:36:22,360 --> 00:36:24,960 Speaker 1: then when we had the lockdown, you know, it was 637 00:36:25,040 --> 00:36:28,600 Speaker 1: really a frightening experience. You know, it's interesting that the 638 00:36:28,600 --> 00:36:33,040 Speaker 1: stock market as a whole didn't even go down uh 639 00:36:33,160 --> 00:36:36,640 Speaker 1: during that period. Um, and uh, you know we went 640 00:36:36,719 --> 00:36:41,640 Speaker 1: down in the last cycle, we went down in attack wreck. 641 00:36:42,160 --> 00:36:44,160 Speaker 1: This was vertical down. But there were a lot of 642 00:36:44,200 --> 00:36:47,160 Speaker 1: sectors of the market that held in reasonably well, parts 643 00:36:47,160 --> 00:36:51,200 Speaker 1: of healthcare, you know, biotech, big tech, and you know 644 00:36:51,280 --> 00:36:54,320 Speaker 1: consumer staples. And then of course you had all the 645 00:36:54,320 --> 00:36:57,040 Speaker 1: the deep cyclicles. Uh they were in a deep dive, 646 00:36:57,160 --> 00:36:59,560 Speaker 1: but they had such a small share of the stock 647 00:36:59,600 --> 00:37:03,280 Speaker 1: market that it didn't really register with a complete collapse. 648 00:37:03,280 --> 00:37:05,720 Speaker 1: But people talked about, well, it was the biggest decline 649 00:37:05,719 --> 00:37:09,239 Speaker 1: in the stock market in a short period of time. Um, 650 00:37:09,280 --> 00:37:11,640 Speaker 1: there were some sectors of hungan really well, and then 651 00:37:11,680 --> 00:37:13,800 Speaker 1: there were other ones that just detonated. And of course 652 00:37:13,960 --> 00:37:17,359 Speaker 1: uh um they've taken the longest to sort of come back. 653 00:37:17,400 --> 00:37:20,719 Speaker 1: And you've got this rotation right now happening towards these 654 00:37:20,760 --> 00:37:24,400 Speaker 1: more value cyclical trades because people have gotten excited about 655 00:37:24,400 --> 00:37:28,840 Speaker 1: the reopenings, and people are getting excited about a treatment 656 00:37:28,920 --> 00:37:31,560 Speaker 1: or vaccine coming to the fore you know, by the 657 00:37:31,640 --> 00:37:33,560 Speaker 1: end of the summer. That's what the market's got priced 658 00:37:33,600 --> 00:37:36,440 Speaker 1: in right now. So look, I would just say, and 659 00:37:36,520 --> 00:37:39,279 Speaker 1: as I said, earlier. You're always trying to identify, you know, 660 00:37:39,360 --> 00:37:42,600 Speaker 1: what is the inflection point, and the inflection point is 661 00:37:42,600 --> 00:37:46,160 Speaker 1: always built initially off of expectations. Will the expectations come 662 00:37:46,200 --> 00:37:48,600 Speaker 1: to fruition or not. If you remember, we thought the 663 00:37:48,640 --> 00:37:53,200 Speaker 1: market bottomed in October of two thousand and eight after 664 00:37:53,239 --> 00:37:55,719 Speaker 1: the Lehman collapsed because we thought we had TARP one 665 00:37:55,760 --> 00:37:57,920 Speaker 1: and that was going to be enough, and the market 666 00:37:58,000 --> 00:38:01,000 Speaker 1: rallied and then rolled over the lows and it didn't 667 00:38:01,040 --> 00:38:04,439 Speaker 1: hit the lows until TARP two, which we then deemed well, 668 00:38:04,440 --> 00:38:07,560 Speaker 1: that was enough ring fence the banking system, we capitalized 669 00:38:08,200 --> 00:38:12,440 Speaker 1: and we drove on UH. This time around, it's really Barry. 670 00:38:12,520 --> 00:38:16,920 Speaker 1: It's all about the vaccine, and if you take a 671 00:38:16,960 --> 00:38:19,880 Speaker 1: look at the market, it's a very interesting situation that 672 00:38:19,920 --> 00:38:23,439 Speaker 1: we have on our hands that you know, whenever we've 673 00:38:23,480 --> 00:38:26,839 Speaker 1: had i'd say since the middle of April, we've had 674 00:38:26,880 --> 00:38:30,440 Speaker 1: four days when there were some exciting major market movie 675 00:38:30,440 --> 00:38:33,799 Speaker 1: news over a vaccine or treatment. UM. You know, we 676 00:38:33,920 --> 00:38:36,719 Speaker 1: had a couple of them related to Gilead. We had 677 00:38:36,760 --> 00:38:41,640 Speaker 1: the Maderna, we had novovax UH and UM. Every time 678 00:38:41,680 --> 00:38:46,520 Speaker 1: we get UM something major, whether it's a first trial 679 00:38:46,640 --> 00:38:49,680 Speaker 1: or a second trial, the market just rips. And in fact, 680 00:38:50,280 --> 00:38:52,600 Speaker 1: in the four days that we had something that was 681 00:38:52,640 --> 00:38:57,319 Speaker 1: announced an announcement effect, the down in those four days collectively, 682 00:38:57,400 --> 00:38:59,840 Speaker 1: and this is just since the middle of April, the 683 00:39:00,040 --> 00:39:03,359 Speaker 1: collective rally was almost three thousand points in the Dow, 684 00:39:03,520 --> 00:39:08,040 Speaker 1: including the five point rally we saw yesterday. Um so 685 00:39:08,080 --> 00:39:10,879 Speaker 1: actually it wasn't for these announcement effects that that would 686 00:39:10,920 --> 00:39:14,080 Speaker 1: be below twenty four thousands a day instead of call 687 00:39:14,160 --> 00:39:18,000 Speaker 1: it twenty plus. So the markets are given a float 688 00:39:18,040 --> 00:39:22,040 Speaker 1: of information here and it's called hope and it's called fate. 689 00:39:22,440 --> 00:39:25,520 Speaker 1: But you know, the the stock market is a beast 690 00:39:25,760 --> 00:39:30,680 Speaker 1: that is often influenced by expectations and by sentiment, and 691 00:39:30,680 --> 00:39:33,120 Speaker 1: that's what animal spirits are all about. It doesn't have 692 00:39:33,160 --> 00:39:36,800 Speaker 1: to be really anything more fundamental than that. So clearly 693 00:39:36,880 --> 00:39:41,200 Speaker 1: biotech is leading the end Pharmaceutical and hopes on a 694 00:39:41,280 --> 00:39:45,560 Speaker 1: vaccine or a treatment is what's giving the animal spirits 695 00:39:45,600 --> 00:39:50,440 Speaker 1: some hope. What do you think about more discretionary sectors? 696 00:39:50,520 --> 00:39:54,560 Speaker 1: And what is oil and the energy sector telling you 697 00:39:55,320 --> 00:39:58,720 Speaker 1: about the future path of the economy. The energy sector 698 00:39:58,800 --> 00:40:03,920 Speaker 1: is only telling me about the discipline at OPEC and 699 00:40:04,080 --> 00:40:08,040 Speaker 1: OPEC plus, so there's nothing really telling me much about 700 00:40:08,120 --> 00:40:10,880 Speaker 1: demand as far as the old price is concerned. This 701 00:40:11,000 --> 00:40:15,239 Speaker 1: is really all came after the Emergency meeting and the 702 00:40:15,360 --> 00:40:19,520 Speaker 1: draconian production cuts. And by the way, not just among 703 00:40:20,080 --> 00:40:24,080 Speaker 1: OPEC and Russia, but also the shale guys unlike two 704 00:40:25,280 --> 00:40:28,839 Speaker 1: have also cut production dramatically. So, um, that just tells 705 00:40:28,880 --> 00:40:31,120 Speaker 1: me there's more pain in the energy sector from a 706 00:40:31,200 --> 00:40:34,680 Speaker 1: real economic standpoint. But obviously we needed to have a 707 00:40:34,719 --> 00:40:38,560 Speaker 1: supply shock in this direction to revive the old price. 708 00:40:38,719 --> 00:40:41,000 Speaker 1: What about some other commodities. What do you think of gold, 709 00:40:41,480 --> 00:40:44,320 Speaker 1: which has held up really, really well and is close 710 00:40:44,440 --> 00:40:48,799 Speaker 1: to decade long highs Well, I say that that's one 711 00:40:48,800 --> 00:40:52,200 Speaker 1: of my key investment ideas for this current state of 712 00:40:52,239 --> 00:40:55,319 Speaker 1: the world. I think that the gold gold is a 713 00:40:55,440 --> 00:40:59,840 Speaker 1: very good hedge against the instability that the extremes of 714 00:41:00,040 --> 00:41:05,120 Speaker 1: deflation and inflation. Brain If there is deflation, and the 715 00:41:05,200 --> 00:41:08,720 Speaker 1: almost certainly is, interest rates are going to remain low 716 00:41:09,200 --> 00:41:14,160 Speaker 1: or go negative, and that's going to make the opportunity 717 00:41:14,200 --> 00:41:19,520 Speaker 1: cost of holding gold basically nil. Historic inverse correlation between 718 00:41:19,560 --> 00:41:22,520 Speaker 1: real interest rates will will go more negative and the 719 00:41:22,560 --> 00:41:24,239 Speaker 1: price of gold, and it's not going to be a 720 00:41:24,239 --> 00:41:27,840 Speaker 1: straight line up. Um. But the second or bull market 721 00:41:28,160 --> 00:41:31,000 Speaker 1: that I really begin six years ago with the basic 722 00:41:31,080 --> 00:41:34,760 Speaker 1: formation is going to be intact now if there is inflation, gold, 723 00:41:34,840 --> 00:41:37,960 Speaker 1: as we all know, will do very well as a 724 00:41:38,080 --> 00:41:41,120 Speaker 1: store of value, and we've got a view all this 725 00:41:41,520 --> 00:41:45,200 Speaker 1: central bank alchemy has led to I think these ever 726 00:41:45,520 --> 00:41:50,240 Speaker 1: increasingly unstable markets. I mean, the volatility has been dramatic 727 00:41:50,320 --> 00:41:53,160 Speaker 1: in both directions. People don't only think about volatility when 728 00:41:53,160 --> 00:41:55,920 Speaker 1: the market's going down, but it's been a roller coaster 729 00:41:56,040 --> 00:41:57,960 Speaker 1: ride really for the past couple of months. And I 730 00:41:58,000 --> 00:42:01,600 Speaker 1: think gold will work well against the hedge in an 731 00:42:01,640 --> 00:42:05,720 Speaker 1: increasingly unstable financial market environment. So I'd say Barry's actually 732 00:42:05,920 --> 00:42:09,359 Speaker 1: at this point my highest conviction call, and I'd had 733 00:42:09,400 --> 00:42:11,840 Speaker 1: that if for any of the reason that you have 734 00:42:11,960 --> 00:42:14,319 Speaker 1: to look at gold today is a currency that is 735 00:42:14,360 --> 00:42:18,200 Speaker 1: no government's liability. You look at gold. Why has gold 736 00:42:18,280 --> 00:42:20,920 Speaker 1: always been viewed as something that you want to be 737 00:42:21,000 --> 00:42:26,080 Speaker 1: measured against is because the production growth of gold runs 738 00:42:26,080 --> 00:42:29,399 Speaker 1: at a pretty reliable and constant one percent annual rate. 739 00:42:30,000 --> 00:42:33,000 Speaker 1: Look at the production of money right now, look at 740 00:42:33,160 --> 00:42:35,040 Speaker 1: M one M to look at all the money numbers. 741 00:42:35,080 --> 00:42:37,680 Speaker 1: In fact, globally they're running it over a thirty percent 742 00:42:37,760 --> 00:42:40,680 Speaker 1: annual rate. So as I look at it as an economist, 743 00:42:41,360 --> 00:42:45,800 Speaker 1: at the relative supply fundamentals now and in the future 744 00:42:45,840 --> 00:42:50,040 Speaker 1: between gold production and the production of FIA money, I 745 00:42:50,080 --> 00:42:53,799 Speaker 1: think the conclusion is rather obvious, quite quite fascinating. You 746 00:42:53,840 --> 00:42:59,160 Speaker 1: mentioned technology earlier, which leads me to the question about 747 00:42:59,800 --> 00:43:04,759 Speaker 1: the dominance of growth over value. Is value investing dead 748 00:43:05,000 --> 00:43:08,080 Speaker 1: and if not, what's going to eventually turn it around 749 00:43:08,080 --> 00:43:12,520 Speaker 1: for value investing. Well, it's interesting because you know, you 750 00:43:12,600 --> 00:43:15,960 Speaker 1: get a few days of value stocks, you know, recovering, 751 00:43:16,960 --> 00:43:20,520 Speaker 1: you know, from their lows, and there's been a dramatic 752 00:43:20,600 --> 00:43:24,880 Speaker 1: increase recently in the airline stocks and the casino stock, 753 00:43:25,000 --> 00:43:30,040 Speaker 1: the hotel stocks because the economy has the economy has reopened, 754 00:43:30,360 --> 00:43:32,799 Speaker 1: and there's a view that people are going to be 755 00:43:32,880 --> 00:43:36,440 Speaker 1: spending more money. And as it reopens, the value stocks 756 00:43:36,480 --> 00:43:39,319 Speaker 1: are going to do better because the growth stocks are 757 00:43:39,360 --> 00:43:44,040 Speaker 1: so populated with these uh work at home thematics. The 758 00:43:44,080 --> 00:43:47,480 Speaker 1: answer is that, no, I'm not a believer that this 759 00:43:47,719 --> 00:43:49,720 Speaker 1: value trade is going to have a lot of legs. 760 00:43:49,800 --> 00:43:54,440 Speaker 1: It's really being premised on the reopening of the economy, 761 00:43:54,480 --> 00:43:56,600 Speaker 1: but also on the view that there will be a 762 00:43:56,719 --> 00:43:59,680 Speaker 1: vaccine and that people will start to spend again, and 763 00:43:59,719 --> 00:44:04,480 Speaker 1: there's hard to spend on these value areas in consumer 764 00:44:04,520 --> 00:44:08,399 Speaker 1: civil services that were so downbeat. I'm not so sure 765 00:44:08,440 --> 00:44:13,680 Speaker 1: about that. I think that I want to be focused on, 766 00:44:13,880 --> 00:44:17,600 Speaker 1: as I said earlier, things that people are going to need, 767 00:44:18,239 --> 00:44:22,000 Speaker 1: not what they want. People don't need restaurants. Of course, 768 00:44:22,040 --> 00:44:25,680 Speaker 1: there'll be an initial rush because we've been in our 769 00:44:25,719 --> 00:44:28,720 Speaker 1: homes and we've been locked up. There'll be an initial rush. 770 00:44:28,920 --> 00:44:32,719 Speaker 1: But I found it very interesting, and again because economics 771 00:44:33,160 --> 00:44:36,720 Speaker 1: at its root is a behavioral science, and I found 772 00:44:36,760 --> 00:44:40,839 Speaker 1: actually that behaviorally speaking, look at what consumers have spent 773 00:44:40,920 --> 00:44:43,360 Speaker 1: their money on in the past two months of the lockdown, 774 00:44:43,520 --> 00:44:48,840 Speaker 1: besides canned food, toilet paper and booze, garden supplies, bread makers, 775 00:44:48,960 --> 00:44:53,440 Speaker 1: jigsaw puzzles, and anything related to warring up your home 776 00:44:53,520 --> 00:44:56,279 Speaker 1: to become your new office. Dave, you have clients in 777 00:44:56,440 --> 00:45:01,200 Speaker 1: over forty countries. Your firm is an international no firm. 778 00:45:01,280 --> 00:45:05,759 Speaker 1: We've seen international stocks lagging US stocks, and we've seen 779 00:45:05,800 --> 00:45:11,080 Speaker 1: the international economy lagging the US. Is that a permanent 780 00:45:11,239 --> 00:45:15,040 Speaker 1: change or is that something that is cyclical and eventually 781 00:45:15,040 --> 00:45:18,200 Speaker 1: the rest of the world catches up to the United States. Well, 782 00:45:18,239 --> 00:45:21,520 Speaker 1: I'm not so sure. About the premise bury that that 783 00:45:21,640 --> 00:45:24,440 Speaker 1: the rest of the world has done worse than the 784 00:45:24,480 --> 00:45:28,240 Speaker 1: U S from an economic standpoint, because China, uh, China 785 00:45:28,280 --> 00:45:31,000 Speaker 1: is already recovering, and we're going to see second quarter 786 00:45:31,080 --> 00:45:33,400 Speaker 1: numbers in the US that are gonna be negative forty negative. 787 00:45:34,320 --> 00:45:36,120 Speaker 1: The ID to storm in China was back in the 788 00:45:36,160 --> 00:45:39,200 Speaker 1: first quarter, and you think of the US reaction, in 789 00:45:39,200 --> 00:45:41,400 Speaker 1: some sense, they were quite a bit later than other countries. 790 00:45:41,440 --> 00:45:45,080 Speaker 1: I mean, countries like Germany and even Japan ultimately had 791 00:45:45,160 --> 00:45:48,960 Speaker 1: much better testing and tracing procedures, and it wouldn't surprise 792 00:45:48,960 --> 00:45:52,080 Speaker 1: me if they probably come back ahead of the US does. 793 00:45:52,280 --> 00:45:55,440 Speaker 1: But look at its uh, we're just talking. We're talking 794 00:45:55,520 --> 00:45:58,239 Speaker 1: minus thirty, minus coorting minus fifty. You know, what's a 795 00:45:58,239 --> 00:46:01,680 Speaker 1: handful of basis points. But the U S stock market 796 00:46:01,920 --> 00:46:04,960 Speaker 1: is not the U S economy, and the U stock 797 00:46:05,040 --> 00:46:08,520 Speaker 1: market is chock full of the sort of stocks that 798 00:46:08,600 --> 00:46:10,680 Speaker 1: you probably want to own in this environment where you're 799 00:46:10,719 --> 00:46:15,000 Speaker 1: talking about defensive growth. You know how many other countries 800 00:46:15,000 --> 00:46:17,960 Speaker 1: in the world have like a Microsoft, which is defensive growth. 801 00:46:18,360 --> 00:46:22,160 Speaker 1: Amazon is a US company. Well, Amazon, as we found 802 00:46:22,200 --> 00:46:26,400 Speaker 1: out if we didn't discover earlier, Amazon has become a utility. 803 00:46:26,640 --> 00:46:29,160 Speaker 1: How many other stock markets in the world have a 804 00:46:29,640 --> 00:46:33,440 Speaker 1: have a company that big that has become an essential 805 00:46:33,560 --> 00:46:37,120 Speaker 1: I guess you could argue that Google has become a utility. 806 00:46:37,480 --> 00:46:39,520 Speaker 1: So I say that when you look at these parts 807 00:46:39,560 --> 00:46:42,839 Speaker 1: of the market, you look at healthcare, you look at 808 00:46:42,960 --> 00:46:47,680 Speaker 1: big tech, but big tech that have taken on utility characteristics, 809 00:46:47,680 --> 00:46:50,239 Speaker 1: which is something that we have to take an appreciation 810 00:46:50,320 --> 00:46:53,360 Speaker 1: of during the past couple of months. And we focus 811 00:46:53,440 --> 00:46:57,840 Speaker 1: on consumer staples and brand names. Well, stock A surprised 812 00:46:57,840 --> 00:46:59,400 Speaker 1: to me that the U S stock market in the 813 00:46:59,480 --> 00:47:01,520 Speaker 1: land of the line, the one eyed man is king, 814 00:47:01,560 --> 00:47:04,120 Speaker 1: and so that is the market if you're bullish on stocks. 815 00:47:04,120 --> 00:47:07,800 Speaker 1: They want to focus on the most quite quite interesting, 816 00:47:07,800 --> 00:47:09,920 Speaker 1: all right, I know I only have you for a 817 00:47:09,960 --> 00:47:13,240 Speaker 1: few moments left, so let's jump to our speed round. 818 00:47:13,280 --> 00:47:17,120 Speaker 1: These are our five lockdown questions we ask all our guests, 819 00:47:17,400 --> 00:47:19,439 Speaker 1: and let's bang through them as quickly as we can. 820 00:47:20,560 --> 00:47:24,719 Speaker 1: Speaking of essential utilities, what are you watching on Netflix 821 00:47:24,719 --> 00:47:28,280 Speaker 1: and Amazon Prime? What are you streaming these days? Well, 822 00:47:28,360 --> 00:47:32,760 Speaker 1: I really liked the last dance. I really liked Unorthodox 823 00:47:33,440 --> 00:47:38,160 Speaker 1: and um and Ozarks I thought was actually uh um, 824 00:47:38,200 --> 00:47:40,440 Speaker 1: you know, not quite up here with breaking bad, but 825 00:47:40,480 --> 00:47:44,200 Speaker 1: it was kept me engaged. You know. At some point though, 826 00:47:44,280 --> 00:47:46,279 Speaker 1: I think maybe we should hold us basically, you know, 827 00:47:46,440 --> 00:47:48,920 Speaker 1: pick up a couple of books and not gauge the 828 00:47:48,960 --> 00:47:51,880 Speaker 1: TV set so much. So let me jump right to 829 00:47:51,960 --> 00:47:53,920 Speaker 1: that question. What are your favorite books? What are you 830 00:47:53,960 --> 00:47:56,879 Speaker 1: reading now under lockdown? And what are some of your 831 00:47:56,920 --> 00:48:01,440 Speaker 1: favorite all time books? My favorite book as far as uh, 832 00:48:02,239 --> 00:48:05,600 Speaker 1: you know, this businessess concerned was the classic that was 833 00:48:05,640 --> 00:48:10,279 Speaker 1: written by Charles Kindlerberger Mannix, Panics and Crashes, and I 834 00:48:10,320 --> 00:48:13,319 Speaker 1: think everybody should be reading that. The one that I 835 00:48:13,440 --> 00:48:17,320 Speaker 1: was just getting through was the classic by Robert Gordon, 836 00:48:18,080 --> 00:48:21,919 Speaker 1: The Rise and Fall of American Growth, And uh, I'm 837 00:48:21,960 --> 00:48:26,160 Speaker 1: going to be getting on to uh, the latest biography 838 00:48:26,239 --> 00:48:29,200 Speaker 1: that was penned by Henry Kissinger. So those are the 839 00:48:29,200 --> 00:48:32,560 Speaker 1: ones that are on the shelf right now. Fascinating. What 840 00:48:32,719 --> 00:48:35,360 Speaker 1: sort of advice would you give someone who was a 841 00:48:35,440 --> 00:48:40,200 Speaker 1: recent college graduate who was thinking about going into economics 842 00:48:40,440 --> 00:48:45,560 Speaker 1: as a profession. Yeah, I'd say that you want to 843 00:48:45,600 --> 00:48:51,560 Speaker 1: make sure that as you become quantitatively proficient in this profession, 844 00:48:51,920 --> 00:48:54,719 Speaker 1: and that's where a lot of the emphasis is. I 845 00:48:54,760 --> 00:48:58,800 Speaker 1: would say, spend as much time as possible learning about 846 00:48:58,880 --> 00:49:03,520 Speaker 1: history ja as many economic and financial and market history 847 00:49:03,600 --> 00:49:08,719 Speaker 1: courses as you possibly can alongside your statistics and your econometrics, 848 00:49:08,760 --> 00:49:12,799 Speaker 1: because I found over the past three decades looking at 849 00:49:12,840 --> 00:49:16,600 Speaker 1: these recurring patterns in the markets, in the economy, understanding 850 00:49:17,239 --> 00:49:20,000 Speaker 1: that these extremes of fear and greed have always been 851 00:49:20,040 --> 00:49:23,399 Speaker 1: with us, and how the influence behavior that I think 852 00:49:23,440 --> 00:49:26,719 Speaker 1: that you want to constantly focus on history, read as 853 00:49:26,800 --> 00:49:30,480 Speaker 1: much about history as you possibly can. Quite fascinating. And 854 00:49:30,520 --> 00:49:33,080 Speaker 1: our final question, what do you know about the world 855 00:49:33,120 --> 00:49:36,719 Speaker 1: of economics today and econometrics today that you wish you 856 00:49:36,800 --> 00:49:40,600 Speaker 1: knew thirty or so years ago when you were a green, 857 00:49:40,800 --> 00:49:44,520 Speaker 1: young economist. Well, you know, I wish there was a 858 00:49:44,600 --> 00:49:49,680 Speaker 1: way that we can actually forecast our way through an 859 00:49:49,719 --> 00:49:52,839 Speaker 1: event that we've never seen before. You know, that would 860 00:49:52,840 --> 00:49:55,960 Speaker 1: be something brand spaking new, because usually we're running regressions 861 00:49:56,000 --> 00:49:58,319 Speaker 1: that are based on a sample size of things that 862 00:49:58,440 --> 00:50:01,520 Speaker 1: actually have happened before. So wouldn't it be nice to 863 00:50:01,560 --> 00:50:04,480 Speaker 1: actually have with the samplifies of one which is today's 864 00:50:04,520 --> 00:50:08,319 Speaker 1: pandemic and the reaction uh as, to actually take that 865 00:50:08,440 --> 00:50:11,560 Speaker 1: and model something into the future. Because I'd say that 866 00:50:11,719 --> 00:50:14,440 Speaker 1: right now, the confidence intervals run any forecast or as 867 00:50:14,480 --> 00:50:16,560 Speaker 1: why as I've ever seen In the thirty five years 868 00:50:16,600 --> 00:50:19,080 Speaker 1: in this business, I've seen a lot. Thanks Dave for 869 00:50:19,120 --> 00:50:21,840 Speaker 1: being so generous with your time. We have been speaking 870 00:50:21,840 --> 00:50:25,680 Speaker 1: with David Rosenberg. He is the founder of Rosenberg Research. 871 00:50:26,120 --> 00:50:28,920 Speaker 1: If you enjoy this conversation, well look up an inch 872 00:50:28,960 --> 00:50:31,439 Speaker 1: or down an inch on Apple iTunes and you could 873 00:50:31,440 --> 00:50:35,000 Speaker 1: see all of the previous three hundred plus conversations we've 874 00:50:35,000 --> 00:50:38,399 Speaker 1: had over the past six years. You can find that 875 00:50:38,600 --> 00:50:44,719 Speaker 1: at iTunes, Spotify, Google Podcast, Overcast, Stitcher, wherever final podcasts 876 00:50:44,760 --> 00:50:48,960 Speaker 1: are sold. We love your comments, feedback in suggestions right 877 00:50:49,040 --> 00:50:52,359 Speaker 1: to us at m IB podcast at Bloomberg dot net. 878 00:50:52,760 --> 00:50:57,120 Speaker 1: Check out my weekly column on Bloomberg dot com slash Opinion. 879 00:50:57,680 --> 00:51:01,040 Speaker 1: Follow me on Twitter at Ridholtz. Sign up for our 880 00:51:01,120 --> 00:51:04,960 Speaker 1: daily reads at Riholts dot com. I would be remiss 881 00:51:05,000 --> 00:51:07,000 Speaker 1: if I did not thank the crack staff that helps 882 00:51:07,040 --> 00:51:12,160 Speaker 1: put this conversation together each week. Michael Boyle is my producer. 883 00:51:12,880 --> 00:51:15,920 Speaker 1: Michael Batnick is my head of research. A. Tiko val 884 00:51:16,000 --> 00:51:19,960 Speaker 1: Bron is our project manager. I'm Barry Riholts. You've been 885 00:51:20,040 --> 00:51:23,240 Speaker 1: listening to Masters in Business on Bloomberg Radio