WEBVTT - David Rosenberg on Emergency Policy Decisions (Podcast) 0:00:02.200 --> 0:00:06.800 This is Masters in Business with Barry Ridholts on Bloomberg Radio. 0:00:07.240 --> 0:00:09.600 This week. On the podcast, I have an old friend 0:00:09.760 --> 0:00:13.360 and a prior guest. His name is David Rosenberg, better 0:00:13.400 --> 0:00:16.520 known as Rosie. I know Rosie for I don't know forever, 0:00:16.960 --> 0:00:21.040 it seems like, and I have been hectoring him to 0:00:21.200 --> 0:00:24.599 launch his own firm, really since the days of the 0:00:24.680 --> 0:00:28.840 financial crisis, when he was the chief economist at Merrow 0:00:28.920 --> 0:00:34.920 Lynch and really was I think chafing at the strictures 0:00:34.960 --> 0:00:37.560 of a giant firm. I thought he would be better 0:00:37.600 --> 0:00:40.920 off with those harnesses removed. And you know the old 0:00:40.920 --> 0:00:45.080 expression with horses has given them their head, meaning loosening 0:00:45.120 --> 0:00:47.840 up the reins and let them run where they want. Uh. 0:00:47.920 --> 0:00:51.960 And he's finally pulled the trigger and done that funny story. 0:00:52.400 --> 0:00:56.440 In the process of hectoring him to launch his own firm, 0:00:56.800 --> 0:00:58.440 we were chatting one day and he said, well, what 0:00:58.480 --> 0:01:01.400 would the name be. I'm like, that's Odds Rosenberg Research. 0:01:01.920 --> 0:01:05.160 And I nagged him to go out and reserve that 0:01:05.200 --> 0:01:08.800 domain name, which, being Dave, he never got around to 0:01:08.920 --> 0:01:11.880 doing it. So I grabbed it. I grabbed want to 0:01:12.040 --> 0:01:15.080 I think it was said, go daddy, I grabbed Rosenberg 0:01:15.120 --> 0:01:17.680 research dot com and forgot about it. You know, every 0:01:17.760 --> 0:01:21.759 year just automatically renews. And one day he says to me, 0:01:22.400 --> 0:01:25.720 I've been thinking about going out on my own, but 0:01:25.880 --> 0:01:29.440 I can't use the name Rosenberg Research. Someone has that domain. 0:01:30.040 --> 0:01:33.280 And I said to him, really well, let me show 0:01:33.319 --> 0:01:35.160 you how to look it up and you could see 0:01:35.160 --> 0:01:38.199 who owns it. I show him the who is search 0:01:38.280 --> 0:01:41.240 feature and he goes through this whole process to identify 0:01:41.280 --> 0:01:44.800 who owns it, and he says, wait a second, that's you. 0:01:45.280 --> 0:01:47.960 And my response was, yeah, I know what a high 0:01:48.000 --> 0:01:50.200 functioning idiot you are, and you would never get around 0:01:50.200 --> 0:01:52.760 to doing it, and someone else would have grabbed it. 0:01:52.800 --> 0:01:55.560 So I thought I would grab it for you, and 0:01:55.680 --> 0:01:58.560 lo and behold, Rosenberg research dot com is where his 0:01:58.800 --> 0:02:02.200 uh website us. I don't know anybody with a greater 0:02:02.280 --> 0:02:08.520 facility for economic data numbers. Dave can reel this information 0:02:08.560 --> 0:02:10.679 off the top of his head. What was the U 0:02:10.840 --> 0:02:15.520 three unemployment rate in seven in February. He knows that 0:02:15.560 --> 0:02:17.760 he's he's a little bit of a rain man when 0:02:17.760 --> 0:02:21.919 it comes to that. Nobody understands this data better than him. 0:02:22.040 --> 0:02:26.080 Nobody understands how it interacts with the financial markets in 0:02:26.160 --> 0:02:29.680 as great detail as Dave. So rather than me babbling 0:02:30.000 --> 0:02:35.519 with no further ado, my conversation with David Rosenberg. This 0:02:36.000 --> 0:02:40.079 is Masters in Business with Barry Ridholts on Bloomberg Radio. 0:02:40.720 --> 0:02:43.560 My special guest this week is an old friend. His 0:02:43.680 --> 0:02:48.400 name is David Rosenberg. He is probably best known as 0:02:48.440 --> 0:02:52.720 the former chief economist for North America for investing Giant 0:02:52.760 --> 0:02:56.600 Merrill lynch Uh. He is now running his own shop 0:02:56.760 --> 0:03:02.919 called Rosenberg Research, headquartered in Toronto. David Rosenberg, Welcome to 0:03:03.080 --> 0:03:06.280 Masters in Business. It's great to be on the show, Barry, 0:03:06.320 --> 0:03:09.080 thanks for inviting me. Right, you can't say here anymore 0:03:09.120 --> 0:03:13.240 because no one knows where here is. So let's jump 0:03:13.520 --> 0:03:18.200 right into it. Based on that comments prior to the 0:03:18.280 --> 0:03:22.280 COVID nineteen pandemic, prior to the lockdown, how did you 0:03:22.320 --> 0:03:27.799 see the state of the economy, let's call it fourth quarter. Well, 0:03:27.960 --> 0:03:32.839 I had seen the situation before the calamity hit, as 0:03:32.880 --> 0:03:36.360 I've seen the entire cycle all along, which was a 0:03:36.440 --> 0:03:41.840 cycle that was very weak, very weak structural underpinnings, a 0:03:41.920 --> 0:03:47.360 decade of very little productivity growth, very little capital spending. 0:03:47.400 --> 0:03:50.720 In fact, I was saying most of last year even 0:03:50.720 --> 0:03:54.080 though it wasn't a technical recession. Verry I was saying 0:03:54.080 --> 0:03:57.440 that there was certainly a recession in corporate profits, there 0:03:57.520 --> 0:04:01.520 was recession in capital spending, there was a recession in 0:04:01.600 --> 0:04:05.400 non residential construction. And really what was keeping the glue 0:04:05.400 --> 0:04:10.760 together was the consumer, which is d P and you 0:04:10.840 --> 0:04:14.160 just don't get a plane procession in a real sense 0:04:14.440 --> 0:04:17.440 without the consumer playing a part. But it was a 0:04:17.600 --> 0:04:23.320 very uneven economic performance. It continued into the opening months 0:04:23.360 --> 0:04:26.920 of this year. It's very interesting when I hear people say, well, 0:04:27.040 --> 0:04:30.080 you know, just wait till the pandemic ends and we 0:04:30.160 --> 0:04:33.120 get the vaccine and will revert back to what the 0:04:33.120 --> 0:04:36.680 economy looked like previously. But the economy what it looked 0:04:36.680 --> 0:04:41.120 like previously was very uneven, an economy where the corporate 0:04:41.160 --> 0:04:45.560 sector embarked on the most pronounced debt requity swap of 0:04:45.560 --> 0:04:48.640 all time. You know, when I went to school, you 0:04:48.760 --> 0:04:53.120 learned about how companies would issue debt to finance capital expenditure. 0:04:53.880 --> 0:04:56.440 But the record debt issuance in the business sector went 0:04:56.560 --> 0:05:00.360 for stock buy backs. So really the whole bullmark, when 0:05:00.360 --> 0:05:04.719 you think about it, um was in financial engineering. I 0:05:04.800 --> 0:05:08.680 called it the Potempkan bull market. In the economy and 0:05:08.720 --> 0:05:11.320 in the stock market. But actually what was very interesting 0:05:11.360 --> 0:05:14.000 to me, that's how we had one of the pronounced 0:05:14.240 --> 0:05:16.840 bull markets of all time and equities in the context 0:05:16.839 --> 0:05:20.520 of the weakest economic expansion. So did I see the 0:05:20.560 --> 0:05:23.360 pandemic hitting at no? Did I see that we were 0:05:23.360 --> 0:05:27.400 going to be shutting down the economy? The answer is no. 0:05:28.120 --> 0:05:31.920 I did always in my mind have fragility as part 0:05:32.040 --> 0:05:35.719 of my theme, and that even the smallest shock could 0:05:35.720 --> 0:05:38.000 send that the economy into a downturn. And I want 0:05:38.000 --> 0:05:40.600 to take you just back to that period in the 0:05:40.600 --> 0:05:43.800 final months of two thousand and eighteen, when God forbid, 0:05:43.839 --> 0:05:46.040 all G. Powell did was take the funds rate to 0:05:46.080 --> 0:05:48.200 two and a half percent. And that two and a 0:05:48.279 --> 0:05:51.560 half percent, Oh my god, how can we get survived 0:05:51.560 --> 0:05:54.080 with rates that high? Well, that's the point that I 0:05:54.120 --> 0:05:56.680 think we have to come to grips with is that 0:05:56.960 --> 0:06:00.240 once again we continue to fight these cycles of of 0:06:00.320 --> 0:06:03.320 debt with even more debt, and we're doing it now 0:06:03.440 --> 0:06:07.359 for a host reasons which are probably justified for the 0:06:07.400 --> 0:06:09.080 here and now. We'll have to clean up this mass 0:06:09.080 --> 0:06:12.640 at some point in the future. But I think that's 0:06:12.680 --> 0:06:14.760 the major point, is what sort of cycle is it 0:06:15.520 --> 0:06:18.200 for all the bulls out there? What does it mean 0:06:18.760 --> 0:06:22.039 when you have a new Central Bank Chairman J Powell 0:06:22.200 --> 0:06:25.359 telling you repeatedly when he took over the helm in 0:06:25.400 --> 0:06:28.279 early two thousand and eighteen, and he kept on saying 0:06:28.279 --> 0:06:30.680 over and over again, it is time to normalize interest 0:06:30.760 --> 0:06:33.080 rates and normal to the fat back then was three 0:06:33.120 --> 0:06:35.920 percent plus two and a half percent peak in the 0:06:35.920 --> 0:06:38.919 fat funds rate was the lowest peak in the fat 0:06:38.960 --> 0:06:42.000 funds rate since the nineteen thirties. UM. That tells you 0:06:42.000 --> 0:06:46.440 a lot that we could not even withstand a normalization 0:06:46.480 --> 0:06:50.560 of interest rates, and it's because the whole economy, despite 0:06:50.600 --> 0:06:54.479 the facade created by the stock market, the economy was 0:06:54.560 --> 0:06:58.080 actually still in an abnormal state UM coming out of 0:06:58.160 --> 0:07:01.960 the Great Recession. Notwithstanding you know how well capitalized the 0:07:02.000 --> 0:07:05.400 banks were. The banks became well capitalized, but they also 0:07:05.440 --> 0:07:09.560 became regulated utilities, and so the debt boom didn't happen 0:07:09.600 --> 0:07:12.560 in the banking sector this time. It happened outside the 0:07:12.560 --> 0:07:15.800 confines of the banking sector, which was in public sector 0:07:15.920 --> 0:07:19.360 but was in public issuance of corporate debt, which took 0:07:19.680 --> 0:07:21.960 it up to fifty percent of GDP, which we've never 0:07:22.000 --> 0:07:25.400 seen before. I want to stay with the idea that 0:07:26.280 --> 0:07:29.640 low interest rates are a key aspect of what's been 0:07:29.720 --> 0:07:33.320 going on. Is it safe to say that you believe 0:07:33.480 --> 0:07:37.559 the recovery off of the O nine lows are due 0:07:37.600 --> 0:07:41.840 in part to the engineering by the Federal Reserve and 0:07:41.920 --> 0:07:45.960 the unusually low rates longer for lower Is that a 0:07:46.000 --> 0:07:49.960 fair statement. Well, I would actually say that the primary 0:07:50.000 --> 0:07:54.800 reasons for the recovery that we saw, you know, really 0:07:54.880 --> 0:07:59.720 stemmed from the dramatic increase that we saw in corporate 0:07:59.720 --> 0:08:03.240 debt showance that went into stop buy backs create this 0:08:03.360 --> 0:08:08.040 illusion of a fundamentally based equity market rally, and that 0:08:08.160 --> 0:08:10.920 you had some trickle down impact in terms of equity 0:08:10.960 --> 0:08:14.440 wealth effects on spending. On top of that, we had 0:08:14.840 --> 0:08:18.560 tremendous physical stimulus through most of the period. UH. It 0:08:18.640 --> 0:08:21.360 started in China trying to continue to pump the system 0:08:21.400 --> 0:08:25.960 with physical stimulus throughout the entire bull market in the 0:08:25.960 --> 0:08:31.240 global economy, and you had the Obama UH physical stimulus 0:08:31.240 --> 0:08:33.920 in terms of the infrastructure spending early on, which took 0:08:33.920 --> 0:08:36.520 a while to percolate. UH. And then of course the 0:08:36.559 --> 0:08:41.160 book ends with the historic tax cuts in two thousands 0:08:41.160 --> 0:08:44.839 and eighteen by the Trump administration. So we had a 0:08:44.960 --> 0:08:48.000 tremendous stimulus. I'm not. You know, the question becomes, I 0:08:48.000 --> 0:08:51.400 guess you know, we're low interest rates a cause of 0:08:51.440 --> 0:08:55.400 whatever economic growth that we saw. You know, it's um. 0:08:55.440 --> 0:08:58.040 You know, I'm almost gonna talk like a classic economist here. 0:08:58.080 --> 0:09:00.079 It's it's a one hand another hand. It's really be 0:09:00.120 --> 0:09:04.000 a two sided argument because you could argue all low 0:09:04.040 --> 0:09:08.040 interest rates give you the impetus um to issue debt um. 0:09:08.160 --> 0:09:11.480 Certainly low interest rates gives you the impetus to go 0:09:11.720 --> 0:09:14.720 and buy risky assets because all we heard also belong 0:09:14.840 --> 0:09:18.320 was tina uh, there is no alternative. So there's that 0:09:18.440 --> 0:09:21.280 aspect to it too. It's called financial oppression. You want 0:09:21.280 --> 0:09:24.920 to punish traditional risk reverse savers, to push them in 0:09:24.960 --> 0:09:27.800 the risk curve, to get animal spirits up and to 0:09:27.880 --> 0:09:31.240 generate a recovery that way. And there's a good part 0:09:31.240 --> 0:09:34.040 of the reason why we had an expansion was because 0:09:34.080 --> 0:09:36.720 of that. But at the same time, what do little 0:09:36.760 --> 0:09:39.319 interest rates as a price signal tell you an interest 0:09:39.400 --> 0:09:42.040 rates there's certainly something that you borrow at is something 0:09:42.080 --> 0:09:44.640 that you certainly will do your calculations on your dividend 0:09:44.679 --> 0:09:49.200 discount model, or you will do your long term discount 0:09:49.200 --> 0:09:52.800 and earnings projections off the discount rate. But the interest 0:09:52.880 --> 0:09:57.200 rate itself isn't just a lending rate or boring rate. 0:09:57.320 --> 0:10:00.679 It is a price signal, just like in Japan, or 0:10:00.800 --> 0:10:03.520 just like in Europe where we've had negative rates. What 0:10:03.720 --> 0:10:09.480 do these extremely low interest rates tell you about the economy? 0:10:09.480 --> 0:10:12.640 It tells you that we have a very weak long 0:10:12.760 --> 0:10:15.200 term economic outlook. That's what it's telling you these low 0:10:15.240 --> 0:10:18.520 interest rates. It doesn't it also say that the credit 0:10:18.559 --> 0:10:23.400 worthiness of the United States is good and the bond 0:10:23.440 --> 0:10:26.720 market doesn't see any inflation any time left in the future. 0:10:27.200 --> 0:10:29.160 I think that there's a good part of that that 0:10:29.760 --> 0:10:32.920 you've got. Look, you've got various components of what makes up, 0:10:33.280 --> 0:10:36.560 say the interest rate. There's the term premium, which is 0:10:36.600 --> 0:10:41.320 related to your expectations of the FED. There is inflation expectations, 0:10:41.360 --> 0:10:43.880 which you actually just mentioned. But there's also a real 0:10:43.920 --> 0:10:46.960 interest rate component, which tells you something about expectations of 0:10:47.000 --> 0:10:51.080 real economic growth. So really there's all three. Now you 0:10:51.120 --> 0:10:52.960 can say to me, well, jeez, you know, it's so 0:10:53.000 --> 0:10:56.000 great to have low inflation expectations, to have low inflation, 0:10:56.400 --> 0:10:58.880 you do look back in the nineteen seventies and eighties, 0:10:58.960 --> 0:11:02.120 very we were for lower inflation. We couldn't week to 0:11:02.160 --> 0:11:05.640 have lower inflation. And now over the past number of years, 0:11:06.080 --> 0:11:09.640 we had just too much of lower inflation. But lower 0:11:09.640 --> 0:11:14.440 inflation means lower inflation epso facto means lower pricing power, 0:11:14.800 --> 0:11:17.920 and lower pricing power means that we have compressed margins. 0:11:18.000 --> 0:11:20.480 So how you kept the gravy train growing throughout this 0:11:20.520 --> 0:11:22.839 whole period? Remember last year, last year, we had a 0:11:22.840 --> 0:11:26.360 bona fide earnings recession. There was no pricing power last year, 0:11:26.760 --> 0:11:29.719 and yet the stock market finished with a run up. 0:11:30.080 --> 0:11:32.600 And that had to do with the Powell pivot and 0:11:32.679 --> 0:11:34.240 it had to do with the re expansion of the 0:11:34.240 --> 0:11:37.560 Fed balance sheets starting in the fourth quarter. So let's 0:11:37.679 --> 0:11:44.480 talk about this lockdown, quarantine, pandemic situation. This is Memorial 0:11:44.600 --> 0:11:48.480 Day week. What is the state of the economy today? Well, 0:11:48.840 --> 0:11:53.120 I say that we are right now still in the 0:11:53.120 --> 0:11:56.040 are coming out of called the vertical down phase. Here, 0:11:56.200 --> 0:11:59.040 that we really were hit with a double vammy of 0:11:59.200 --> 0:12:04.720 a shock that affected the demand. Because even before the lockdowns, 0:12:05.320 --> 0:12:08.480 the economy was starting to sputter because people were getting 0:12:08.480 --> 0:12:14.000 panicky over becoming sick over the coronavirus. And then so 0:12:14.080 --> 0:12:17.480 even before call it the middle of March. Already things 0:12:17.480 --> 0:12:19.560 are starting to really cool off. You can see that 0:12:19.640 --> 0:12:22.640 in the data through February and in the March. And 0:12:22.679 --> 0:12:25.880 then look, we've shut down most of the economy and 0:12:26.400 --> 0:12:29.319 there's no precedent for this. There's no playbook for I mean, 0:12:29.320 --> 0:12:32.280 there's a playbook for a pandemic, but you've got to 0:12:32.320 --> 0:12:36.080 go back at least a century. But a playbook for 0:12:36.160 --> 0:12:39.280 shutting down really, when you think about the entire global 0:12:39.280 --> 0:12:41.880 economy for a period of time, well that we haven't 0:12:41.880 --> 0:12:46.000 seen before, and especially an economy globally that's so intertwined. 0:12:46.320 --> 0:12:49.640 So this was simultaneously a demand shock and a supply shock. 0:12:50.160 --> 0:12:53.120 So Dave on that note of demand shock and supply 0:12:53.200 --> 0:12:57.920 shock simultaneously, give me a snapshot. What is the unemployment 0:12:58.000 --> 0:13:00.560 rate today? You forget the b L S D. What 0:13:00.640 --> 0:13:02.800 do you think the unemployment rate is? What do you 0:13:02.840 --> 0:13:06.000 think US GDP is and what do you think global 0:13:06.040 --> 0:13:09.319 GDP is? Well, I think that you know the unemployment 0:13:09.400 --> 0:13:12.240 rate right now. I think as well over if it's 0:13:12.280 --> 0:13:16.719 measured accurately and on its way soon above and look, 0:13:16.760 --> 0:13:18.640 these are numbers at the St. Louis bed was talking 0:13:18.640 --> 0:13:21.320 about even a couple of months ago, and as far 0:13:21.360 --> 0:13:23.679 as GDP is concerned in the US, I think you're 0:13:23.679 --> 0:13:26.760 talking at least negative for the second quarter. It could 0:13:26.760 --> 0:13:29.480 be worse than that, and I think that the entire 0:13:29.520 --> 0:13:32.520 world is probably pretty well very close to that. I mean, 0:13:32.600 --> 0:13:36.120 China has already come out of its worst detonation from 0:13:36.120 --> 0:13:39.000 this and the world's second largest economy, So it could 0:13:39.040 --> 0:13:42.360 be just a timing thing that the US economy is 0:13:42.440 --> 0:13:45.079 contracting a sharper rate than is everywhere else is because 0:13:45.200 --> 0:13:47.640 China's come out. But you know you're talking about for 0:13:47.760 --> 0:13:49.720 this year. I think global GDP is going to be 0:13:49.760 --> 0:13:52.600 down at least ten percent for the year. Now. Where 0:13:52.640 --> 0:13:55.400 we are right now, well, look, you're seeing a pulse 0:13:55.600 --> 0:13:58.680 in the economy now, so it's not surprising that we're 0:13:58.720 --> 0:14:01.880 probably going to get some sort of a bounce in 0:14:01.960 --> 0:14:04.200 the third quarter. You know, I think that we're going 0:14:04.240 --> 0:14:07.920 to be down four in the second quarter and then um, 0:14:07.920 --> 0:14:11.320 we're probably up maybe twenty or better in the third quarter. 0:14:11.360 --> 0:14:13.240 It's going to be a heck of a bounce. But 0:14:13.320 --> 0:14:15.840 you know, it's like turning the light switch on. Um, 0:14:15.880 --> 0:14:19.520 you know, after you've turned up the all the electricity 0:14:19.520 --> 0:14:21.360 off in the house for a period of time. So 0:14:21.800 --> 0:14:23.960 I think it's going to end up being a square 0:14:24.040 --> 0:14:26.440 root sort of a recovery. We're going to get some 0:14:26.480 --> 0:14:29.160 sort of a bounce. It's logical because we are reopening 0:14:29.160 --> 0:14:32.520 there will be some activity, but there is no return 0:14:32.640 --> 0:14:36.560 to normality until we either get a vaccine, which would 0:14:36.560 --> 0:14:40.480 be preferable, or some sort of effective treatment. Because we 0:14:40.520 --> 0:14:43.400 can reopen the economy, but we're not going to get 0:14:43.440 --> 0:14:46.280 a perpetual increase in production and hiring and get going 0:14:46.320 --> 0:14:49.840 to play right back down without demand. The demand has 0:14:49.920 --> 0:14:52.480 to show up, and that's the wild card. Because we 0:14:52.520 --> 0:14:55.320 can reopen the economy, and I frankly don't believe that 0:14:55.440 --> 0:14:57.520 even if we get a second wave, we're not going 0:14:57.520 --> 0:15:00.960 back to locking things down again. That might happen sporadically 0:15:00.960 --> 0:15:03.520 and in some hotspots, but there's no more national lockdown. 0:15:03.560 --> 0:15:06.080 That's not going to happen. But for the economy to 0:15:06.480 --> 0:15:09.240 regain any verve whatsoever on a sustained basis, we need 0:15:09.240 --> 0:15:12.160 to demand. And uh, you know, when you're asking me 0:15:12.200 --> 0:15:14.520 the question about you know, where are we there's no 0:15:14.520 --> 0:15:17.160 playbook or something like this. This isn't like waiting like 0:15:17.200 --> 0:15:19.440 in March of oh nine, we have the ha moment, 0:15:19.880 --> 0:15:22.440 the ring fence in the banking system, we capitalize the banks, 0:15:22.480 --> 0:15:25.440 we could move on. You know, in two thousand and two, 0:15:25.600 --> 0:15:28.240 we we mop up all the excess capacity and the 0:15:28.280 --> 0:15:31.320 technology sector of Valla, we're off to a new bull market. 0:15:32.000 --> 0:15:34.480 When the RTC was created and cleaned up the mass 0:15:34.520 --> 0:15:37.280 left over by the savings alone crisis and commercial real estate, 0:15:37.320 --> 0:15:39.840 well there we had the event that we could point 0:15:39.840 --> 0:15:42.160 to that. Okay, now we can start getting things back 0:15:42.200 --> 0:15:44.120 to normal. This is this is this has to do 0:15:44.160 --> 0:15:47.040 with a vaccine basically. So let's say we get a 0:15:47.120 --> 0:15:49.520 vaccine by the end of the year. Let's say December, 0:15:49.560 --> 0:15:53.280 there's a vaccine. How long beyond that does it take 0:15:53.840 --> 0:15:59.480 for us to regain the economic peak of Well, the 0:15:59.520 --> 0:16:02.280 whole was created is so big that could still take 0:16:02.320 --> 0:16:04.520 a lease a year. But if we got a vaccine, 0:16:04.560 --> 0:16:06.280 I mean, look, the stock market is telling you that 0:16:06.360 --> 0:16:08.440 right now. The stock market is telling you that they're 0:16:08.440 --> 0:16:10.840 expecting there's going to be an announcement on a vaccine 0:16:10.880 --> 0:16:13.680 by Labor Day that will be ready for a broad 0:16:13.760 --> 0:16:17.600 distribution no later than early next year. So if we 0:16:17.640 --> 0:16:20.280 get a vaccine in the next six or twelve months, 0:16:20.320 --> 0:16:22.400 I mean that's a game changer. That is a game 0:16:22.480 --> 0:16:25.840 changer basically, UM, that will take us on the road 0:16:25.880 --> 0:16:29.160 back to normality. Not everything will return to normal, because 0:16:29.360 --> 0:16:33.320 you know, months of isolation and lockdown has had some 0:16:33.400 --> 0:16:36.960 impact on psychology and UH and has had an impact 0:16:37.000 --> 0:16:39.800 on how we're going to approach our commercial and our 0:16:39.840 --> 0:16:42.200 personal lives going forward. There will be I'm not gonna 0:16:42.200 --> 0:16:45.320 even say scars, but there's going to be a second 0:16:45.360 --> 0:16:47.960 or change in behavior that comes out of this be 0:16:48.120 --> 0:16:50.200 that as the mate. A vaccine is a game changer 0:16:50.240 --> 0:16:52.160 because think of a vaccine, we can actually go to 0:16:52.200 --> 0:16:54.640 Yankee Stadium and watch a baseball game. We can actually 0:16:54.680 --> 0:16:56.800 open up the malls. We're not going to be fearful 0:16:57.320 --> 0:17:00.400 of getting the disease anymore, neither getting sick or post 0:17:00.560 --> 0:17:03.360 and possibly dying. I mean, depending on the demography. But 0:17:03.440 --> 0:17:06.560 the vaccine is the game changer. So I'll tell you 0:17:06.640 --> 0:17:09.119 right now, Barry, I will turn if I start getting 0:17:09.119 --> 0:17:12.359 the signs. Now, everybody speaks to everybody. Everybody's got the 0:17:12.480 --> 0:17:15.800 group of infectious disease specialists they speak to. We will 0:17:15.840 --> 0:17:18.760 watch Scott Leave and Fauci on TV. UM. You know, 0:17:19.280 --> 0:17:21.600 my sources for whatever they're worth. It's telling me that 0:17:21.640 --> 0:17:24.159 a vaccine is going to be coming. Most of the 0:17:24.160 --> 0:17:26.719 people I speak to that are knowledgeable are you know, 0:17:26.760 --> 0:17:29.440 there's no such thing as a percent. But a vaccine 0:17:29.480 --> 0:17:32.280 is coming, probably not un till the spring or summer 0:17:32.280 --> 0:17:34.960 of next year. And that's good news and bad news 0:17:34.960 --> 0:17:37.199 because it means they're going to have a vaccine, But 0:17:37.240 --> 0:17:39.920 it does mean that the big recovery is going to 0:17:40.000 --> 0:17:42.800 be delayed. And the longer it takes for that to happen, 0:17:43.000 --> 0:17:45.720 you know, unless the government continues with the fiscals big, 0:17:45.720 --> 0:17:47.920 it's the more bankruptcy and unemployment we're going to see 0:17:47.920 --> 0:17:50.639 along the way. So let me address something you brought 0:17:50.720 --> 0:17:56.520 up earlier about weakness in the economy and the pre 0:17:56.640 --> 0:18:00.359 pandemic economy. You know, if we look at the Milan meals, 0:18:00.359 --> 0:18:04.200 they're the biggest demographic group at least since the baby boomers, 0:18:04.240 --> 0:18:08.200 and they're now answering their thirties. We just saw them 0:18:08.320 --> 0:18:12.520 start to increase household formation and housing demand was starting 0:18:12.520 --> 0:18:16.680 to tick up amongst that demographic. What does it mean 0:18:16.800 --> 0:18:22.040 for this group that was potentially starting a secular growth 0:18:22.040 --> 0:18:26.480 story for this pandemic? Is this just temporarily delay them 0:18:26.520 --> 0:18:29.399 a year or two or does this scar them as 0:18:29.560 --> 0:18:33.520 as you implied earlier. Well, I don't think it scars them. 0:18:33.600 --> 0:18:37.400 It really comes down to where they working. If these 0:18:37.400 --> 0:18:41.480 are skilled millennials, they'll be fine. I mean, I estimate 0:18:41.560 --> 0:18:46.080 that ten million jobs I've been eliminated permanently. Okay, one 0:18:46.080 --> 0:18:48.280 thing that we wait, wait wait, ten million out of 0:18:48.280 --> 0:18:50.760 the thirty nine million who were laid off or ten 0:18:50.760 --> 0:18:53.880 million across the whole economy. Well both, I'm saying ten 0:18:53.880 --> 0:18:57.240 million out of the rough and ten million out of 0:18:57.280 --> 0:19:00.560 the thirty million workforce. I think that we've we've lost 0:19:00.560 --> 0:19:04.399 ten million jobs permanently, Okay, in the sectors of the 0:19:04.440 --> 0:19:07.680 economy that are not going to come back nearly as much. 0:19:07.960 --> 0:19:10.000 And they'll be and that includes some of the offsets 0:19:10.000 --> 0:19:14.520 will see because some Amazon like companies and industries will 0:19:14.560 --> 0:19:16.960 be hiring. Look at what we did, what we discovered 0:19:16.960 --> 0:19:19.240 in this it's great to have discovery. Even though this 0:19:19.320 --> 0:19:24.399 was a horrible situation that we we shut down economy 0:19:24.720 --> 0:19:27.600 that was called a non essential economy because they left 0:19:27.600 --> 0:19:30.480 the essential economy open. So here we figure out, well, 0:19:30.480 --> 0:19:35.399 that's very interesting that of the economy isn't essential. Well, 0:19:35.480 --> 0:19:38.320 that's a revelation, isn't it. We're talking about, you know, 0:19:38.440 --> 0:19:44.199 in this whole two thousand and nine jobs boom, Uh, 0:19:44.359 --> 0:19:46.960 the jobs boom that brought the unemployment of three and 0:19:46.960 --> 0:19:49.159 a percent. As anybody ever bothered to see where these 0:19:49.240 --> 0:19:53.040 jobs were created, they were created in low skilled, low 0:19:53.119 --> 0:19:57.800 value added consumer cyclical industries. Okay, we don't produce anything 0:19:57.800 --> 0:20:02.159 anymore now. Maybe as we on shore manufacturing in some 0:20:02.280 --> 0:20:04.680 areas that will come back, but look at the industrial 0:20:04.680 --> 0:20:08.160 production and manufacturing, look at the realifed sport data. We've 0:20:08.160 --> 0:20:11.760 become really a society and economy that was really geared 0:20:11.760 --> 0:20:17.200 towards entertainment and leisure and restaurants and retail and so 0:20:17.400 --> 0:20:19.280 a lot of these jobs aren't coming back. But when 0:20:19.320 --> 0:20:21.879 you're talking about the millennials, they're going to benefit from 0:20:21.920 --> 0:20:24.000 one thing, which is that interest rates you're gonna remain 0:20:24.000 --> 0:20:27.320 at the floor for a longer period of time than 0:20:27.400 --> 0:20:29.720 they ever would have where you have a deflationary gap 0:20:29.800 --> 0:20:33.120 to deal with. UH, and Powell's already said that they 0:20:33.119 --> 0:20:34.840 are not going to raise interest rates as far as 0:20:34.880 --> 0:20:38.240 the eye can see. So if you have a job, 0:20:39.040 --> 0:20:41.000 if you're skilled, you have a job, and you have 0:20:41.080 --> 0:20:44.080 job security. I mean, your financing constantly gonna be close 0:20:44.119 --> 0:20:47.400 to zero to perpetuity. So I think actually in terms 0:20:47.440 --> 0:20:49.679 of housing, and that's going to be what type of 0:20:49.720 --> 0:20:51.320 housing and what's going to come out of this, and 0:20:51.520 --> 0:20:55.480 probably more positive for single family than it is, say 0:20:55.560 --> 0:20:59.040 for condos or apartments. I think the multiples take a 0:20:59.119 --> 0:21:03.080 hit because once again, uh, we went through an experiment 0:21:03.480 --> 0:21:07.439 what is it like to be isolated and to have 0:21:07.480 --> 0:21:11.119 your mobility restricted in a condominium or an apartment against 0:21:11.160 --> 0:21:14.520 the single family house with a backyard. And then of 0:21:14.520 --> 0:21:16.320 course I think there's gonna be a lot of sensitivity 0:21:16.320 --> 0:21:19.320 about what sort of density, what sort of urban density 0:21:19.359 --> 0:21:21.400 do you want to be living in. So I think 0:21:21.400 --> 0:21:23.920 this is going to be very good for suburban dwelling, 0:21:23.960 --> 0:21:26.760 and I think that actually housing is going to come 0:21:26.800 --> 0:21:29.760 out of this just fine, you know, as you're seeing 0:21:29.800 --> 0:21:32.320 already in some of the numbers housing and for the 0:21:32.359 --> 0:21:35.840 millennials that actually are in uh, the areas of the 0:21:35.840 --> 0:21:42.119 economy that are essential or utility like and look, a 0:21:42.200 --> 0:21:44.680 lot of millennials are in the technology industry. And as 0:21:44.680 --> 0:21:47.359 we've seen in the cycle, the text talk sells up 0:21:47.400 --> 0:21:49.920 well because we found out that tex stalks are a 0:21:49.960 --> 0:21:54.040 lot like consumer staples, they are a necessity. So um, 0:21:54.160 --> 0:21:56.760 I think that they'll be just fine. Job security is 0:21:56.800 --> 0:21:58.399 going to be the key though, but they're going to 0:21:58.520 --> 0:22:01.760 have the low financing costs that's going to escape them onside. 0:22:02.280 --> 0:22:05.840 So Dave, we were talking about policy decisions. I can't help, 0:22:05.840 --> 0:22:10.520 but notice you're in Toronto. It seems that Canada did 0:22:10.560 --> 0:22:14.840 a much better job responding quickly to the COVID nineteen 0:22:14.880 --> 0:22:17.679 pandemic than than we did down here in the US. 0:22:18.640 --> 0:22:23.359 What sort of impact will this delayed response of the 0:22:23.520 --> 0:22:26.320 US have, What does it mean to the state of 0:22:26.359 --> 0:22:28.600 the economy today, and what does it mean to how 0:22:28.720 --> 0:22:31.280 quickly we'll be able to recover? Well, you know, it's 0:22:31.359 --> 0:22:33.600