1 00:00:06,320 --> 00:00:12,960 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm term Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,040 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg good 5 00:00:28,080 --> 00:00:30,360 Speaker 1: friend of mine, a good friend of the program, of course, 6 00:00:30,400 --> 00:00:32,280 Speaker 1: and a gentleman then ignored the happy talk of the 7 00:00:32,320 --> 00:00:34,280 Speaker 1: v shaped recovery in the middle of February when the 8 00:00:34,320 --> 00:00:37,440 Speaker 1: equity market was hitting all time highs. A gentleman who said, 9 00:00:37,479 --> 00:00:40,840 Speaker 1: do not buy that deep when many people ventured back 10 00:00:40,840 --> 00:00:43,600 Speaker 1: in as we got that initial correction, I'm pleased to 11 00:00:43,640 --> 00:00:46,760 Speaker 1: say he joins us now. Mohammad al Arian, Alliance chief 12 00:00:46,800 --> 00:00:51,440 Speaker 1: economic advisor and Bloomberg opinion columnist. Mohammed, Let's begin with credit. 13 00:00:51,520 --> 00:00:53,600 Speaker 1: Why is that so much of a bigger focus on 14 00:00:53,600 --> 00:00:56,280 Speaker 1: a morning like this morning, Because it is the way 15 00:00:56,320 --> 00:01:00,600 Speaker 1: in which the disruptions will transmit who are not just 16 00:01:00,800 --> 00:01:05,200 Speaker 1: market segments, but the real economy. Credit has been vulnerable 17 00:01:05,240 --> 00:01:08,480 Speaker 1: because it has been very decoupled from the underlying fundamentals. 18 00:01:08,959 --> 00:01:11,479 Speaker 1: So when you shock it, as it's being shocked right 19 00:01:11,520 --> 00:01:18,320 Speaker 1: now by a combination of no economic anchor, no technical anchor, 20 00:01:18,360 --> 00:01:21,280 Speaker 1: and no policy anchor. What you're going to get is 21 00:01:21,520 --> 00:01:27,240 Speaker 1: a liquidity price gapping and the closure of the primary 22 00:01:27,400 --> 00:01:30,160 Speaker 1: issuance market. The primary has been seized that for a 23 00:01:30,160 --> 00:01:32,280 Speaker 1: couple of weeks. It opened a little bit last week. 24 00:01:32,560 --> 00:01:34,720 Speaker 1: Let's some pick some of these different themes. I want 25 00:01:34,760 --> 00:01:36,960 Speaker 1: to start with the parallel that we can draw at 26 00:01:37,000 --> 00:01:42,040 Speaker 1: the moment. Clearly we've gone beyond December. It's fifteen sixteen, 27 00:01:42,160 --> 00:01:43,840 Speaker 1: the last time we had a crude route and a 28 00:01:43,880 --> 00:01:47,320 Speaker 1: growth shark. Is that a decent playbook for you right now, Mohammed? 29 00:01:47,440 --> 00:01:51,200 Speaker 1: Or is this radically different? It is decent because that 30 00:01:52,160 --> 00:01:55,200 Speaker 1: fall in oil prices was triggered by the same thing 31 00:01:55,680 --> 00:01:58,559 Speaker 1: that this one was, which is the decision of Saudi 32 00:01:58,560 --> 00:02:03,080 Speaker 1: Arabia to no longer play the swing producer role in 33 00:02:03,160 --> 00:02:07,360 Speaker 1: an attempt to imposet discipline on other oil producers. So 34 00:02:07,400 --> 00:02:12,160 Speaker 1: the cause is the same. However, the context is more difficult, 35 00:02:12,240 --> 00:02:16,359 Speaker 1: first because global demand is slipping very quickly, and second 36 00:02:17,000 --> 00:02:22,560 Speaker 1: because now you need to Russia two turn around in 37 00:02:22,600 --> 00:02:25,400 Speaker 1: a very humiliating fashion. So this one is going to 38 00:02:25,440 --> 00:02:27,600 Speaker 1: be a little bit trickier for Saudi Arabia to achieve 39 00:02:27,680 --> 00:02:31,200 Speaker 1: what is trying to achieve Muhamadalarian with his folks with aliens, 40 00:02:31,200 --> 00:02:33,520 Speaker 1: and of course writing for Bloomberg Opinion, of course joining 41 00:02:33,560 --> 00:02:37,440 Speaker 1: Cambridge University here in the Autumn Folks. One of the 42 00:02:37,480 --> 00:02:39,280 Speaker 1: books you can read in this if you want to 43 00:02:39,280 --> 00:02:42,680 Speaker 1: grab onto something is Dr Larian is The Only Game 44 00:02:42,720 --> 00:02:45,400 Speaker 1: in Town. Look for the movie fourth of July two 45 00:02:45,440 --> 00:02:49,400 Speaker 1: thousand twenty two. I believe Dicaprios in that movie Dr 46 00:02:49,520 --> 00:02:52,400 Speaker 1: Larian in the Only Game in Town. Let me quote 47 00:02:52,400 --> 00:02:56,240 Speaker 1: from chapter one. Like ancient doctors who tried to explain 48 00:02:56,280 --> 00:03:00,959 Speaker 1: the causes of diseases while knowing nothing about germs or acteria, 49 00:03:01,120 --> 00:03:05,160 Speaker 1: academics sought to describe the functioning of developed economies, etcetera. 50 00:03:05,400 --> 00:03:09,480 Speaker 1: The great Ferdinando Giuliano who writes for Bloomberg Opinion as well. 51 00:03:09,760 --> 00:03:12,520 Speaker 1: How are we doing with the germs and bacteria this morning? 52 00:03:12,600 --> 00:03:16,239 Speaker 1: How are our institutions doing and understanding where we are? 53 00:03:17,639 --> 00:03:20,799 Speaker 1: But I'm starting to wake up to where we are? Um, 54 00:03:20,840 --> 00:03:25,720 Speaker 1: But they are having to play massive catch up. Tom, 55 00:03:25,760 --> 00:03:28,080 Speaker 1: You and I have been discussing this for years. We've 56 00:03:28,120 --> 00:03:32,919 Speaker 1: overrelied on central banks. Central banks themselves got caught hostage 57 00:03:33,040 --> 00:03:37,440 Speaker 1: by markets. We lost a lot of policy flexibility, and 58 00:03:37,520 --> 00:03:41,080 Speaker 1: most importantly, we did not invest in what genuinely produces 59 00:03:41,160 --> 00:03:44,320 Speaker 1: economic growth, so we have massive catch up to play. 60 00:03:44,480 --> 00:03:47,960 Speaker 1: It might be done, but it requires a complete change 61 00:03:47,960 --> 00:03:51,440 Speaker 1: in mindset. The single most important question Dr Larion at 62 00:03:51,480 --> 00:03:54,520 Speaker 1: Davos was John Faraoh to a guy running a hedge fund, 63 00:03:54,880 --> 00:03:57,320 Speaker 1: and he said, the sickle the cycles out there, the 64 00:03:57,360 --> 00:04:01,480 Speaker 1: boom bus don't function the same at zero bound. We're 65 00:04:01,480 --> 00:04:04,040 Speaker 1: more at the zero bound than we were in January. 66 00:04:04,720 --> 00:04:08,080 Speaker 1: In Switzerland, we're at the zero bound. Does a cyc 67 00:04:08,160 --> 00:04:12,800 Speaker 1: locality of the financial system still work? Oh? Absolutely, and 68 00:04:12,800 --> 00:04:14,880 Speaker 1: you're gonna see it. We're gonna overshoot on the way 69 00:04:14,920 --> 00:04:18,760 Speaker 1: down because technicals are now in control. And the big 70 00:04:18,880 --> 00:04:21,839 Speaker 1: risk is not only do we converge quickly to the 71 00:04:21,880 --> 00:04:25,560 Speaker 1: most sluggish fundamentals from elevated asset prises, but we overshoot 72 00:04:25,600 --> 00:04:29,000 Speaker 1: them so well. Cycles were never dead. I think we 73 00:04:29,160 --> 00:04:32,920 Speaker 1: got complacent in so many ways, And the last eight 74 00:04:32,960 --> 00:04:35,960 Speaker 1: weeks illustrate to you how complacent we became. You had 75 00:04:36,000 --> 00:04:38,760 Speaker 1: that comments out of Davos. We had a G twenty 76 00:04:38,839 --> 00:04:43,680 Speaker 1: meeting in which the coronavirus was hardly discussed. And now 77 00:04:43,720 --> 00:04:46,560 Speaker 1: we're all waking up to the realities on the ground. 78 00:04:46,680 --> 00:04:49,479 Speaker 1: Can we just talk about the economics affair just very quickly, 79 00:04:49,480 --> 00:04:52,200 Speaker 1: Mahabted's something you've written about over the weekend, and I 80 00:04:52,200 --> 00:04:53,800 Speaker 1: think it's something that would be of interest to our 81 00:04:53,839 --> 00:04:58,360 Speaker 1: audience as well. Walk us through that dynamic. It's very simple. 82 00:04:58,440 --> 00:05:01,799 Speaker 1: When you are taking out of your comfort zone, behavioral 83 00:05:01,880 --> 00:05:06,320 Speaker 1: scientists will tell you two reactions are most likely paralysis 84 00:05:07,240 --> 00:05:10,240 Speaker 1: and insecurity. And we are being taken out of our 85 00:05:10,279 --> 00:05:13,640 Speaker 1: comfort zone by the coronavirus, which means that we are 86 00:05:13,760 --> 00:05:17,559 Speaker 1: paralyzed in terms of economic activity, which means we become 87 00:05:17,600 --> 00:05:23,040 Speaker 1: so insecure that we become two risker verse. We exaggerate 88 00:05:23,600 --> 00:05:29,040 Speaker 1: the probability of getting sick, and that results in demand 89 00:05:29,560 --> 00:05:33,400 Speaker 1: and supply destruction. I remember where the outset of this 90 00:05:33,520 --> 00:05:36,560 Speaker 1: coronavirus sphere. I told you guys on the radio, and 91 00:05:36,600 --> 00:05:38,760 Speaker 1: I remember exactly where I was. I was at an 92 00:05:38,760 --> 00:05:41,839 Speaker 1: airport when I told you. Remember the notion of economic 93 00:05:41,960 --> 00:05:47,880 Speaker 1: sudden stops. It doesn't occur in modern based economies. It 94 00:05:47,920 --> 00:05:51,760 Speaker 1: occurs mostly in fragile and sales states. But when it occurs, 95 00:05:52,400 --> 00:05:56,359 Speaker 1: it is particularly dangerous because it destroys both demand and 96 00:05:56,440 --> 00:05:59,760 Speaker 1: supply and that is what we're living through right now. Mohammed, 97 00:06:00,040 --> 00:06:02,919 Speaker 1: Let's talk about the salve to that culture of fear, 98 00:06:02,960 --> 00:06:05,760 Speaker 1: that fear that we see pervading through markets, that we 99 00:06:05,839 --> 00:06:07,800 Speaker 1: see when you go to the grocery store and you 100 00:06:07,839 --> 00:06:10,440 Speaker 1: see pure l being hoarded behind the counter with a 101 00:06:10,480 --> 00:06:13,479 Speaker 1: sign that says only three per customer. I want to 102 00:06:13,480 --> 00:06:16,280 Speaker 1: talk about the FEDS role and Boston Feds. Rose and 103 00:06:16,360 --> 00:06:20,120 Speaker 1: Gren on Friday came out and hinted at the potential 104 00:06:20,160 --> 00:06:22,080 Speaker 1: for the FED to engage in e c B and 105 00:06:22,160 --> 00:06:26,520 Speaker 1: Bank of Japan style asset purchases, saying, in a situation 106 00:06:26,520 --> 00:06:29,440 Speaker 1: where both short term interest rates conten your treasury rates 107 00:06:29,480 --> 00:06:32,160 Speaker 1: approach the zero lower bound, allowing the FED to purchase 108 00:06:32,240 --> 00:06:35,440 Speaker 1: a broader range of assets could be important. Do you 109 00:06:35,520 --> 00:06:39,479 Speaker 1: foresee the possibility of the FED buying corporate bonds and stocks? 110 00:06:39,520 --> 00:06:45,440 Speaker 1: From here? I foresee whatever it takes policy approach that 111 00:06:45,680 --> 00:06:49,360 Speaker 1: is gonna be both in central banks and government agency. 112 00:06:49,400 --> 00:06:52,599 Speaker 1: But having said that, it's important to understand what the 113 00:06:52,640 --> 00:06:57,960 Speaker 1: FET can and cannot do. The set can support balance feets. 114 00:06:58,480 --> 00:07:02,200 Speaker 1: It can do so, it can put money in people's 115 00:07:02,240 --> 00:07:06,320 Speaker 1: hands and support balances. It cannot restore the type of 116 00:07:06,360 --> 00:07:10,720 Speaker 1: confidence needed for economic activity to pick up. So the 117 00:07:10,760 --> 00:07:17,760 Speaker 1: FED has to understand that it's using policy ammunition in 118 00:07:17,800 --> 00:07:20,960 Speaker 1: a very ineffective way, and it's got to make a 119 00:07:21,040 --> 00:07:23,480 Speaker 1: judgment as to when to use it. I was against 120 00:07:23,480 --> 00:07:25,400 Speaker 1: the fifty basis point cut last week. I thought it 121 00:07:25,440 --> 00:07:27,560 Speaker 1: would do nothing at all and it would take away 122 00:07:27,600 --> 00:07:31,920 Speaker 1: policy flexibility. That's what happened. The most important thing for 123 00:07:31,960 --> 00:07:35,800 Speaker 1: the said and this major responsibility to the system is 124 00:07:35,840 --> 00:07:40,320 Speaker 1: to laser like focus on market market functioning, understand how 125 00:07:40,400 --> 00:07:45,680 Speaker 1: markets are functioning, better understand market technicals, and address the 126 00:07:45,800 --> 00:07:49,000 Speaker 1: pockets of liquidity that are going to arise and that 127 00:07:49,160 --> 00:07:51,640 Speaker 1: risk becoming systemic. That is what the fact you're doing. 128 00:07:51,720 --> 00:07:54,600 Speaker 1: It should not be trying to flood the system in 129 00:07:54,640 --> 00:07:57,480 Speaker 1: a way that's gonna end up being very inefficient and 130 00:07:57,640 --> 00:08:01,680 Speaker 1: use up flexibility that we will need. Eater on Muhamdalarian 131 00:08:01,720 --> 00:08:04,200 Speaker 1: with us and he will continue with this in moments. 132 00:08:04,240 --> 00:08:05,880 Speaker 1: Will have in a couple of minutes, I should say, 133 00:08:06,000 --> 00:08:09,560 Speaker 1: scheduled to Francisco, blanche a Bank of America and oil done. 134 00:08:09,560 --> 00:08:12,640 Speaker 1: What is at a general state, but that's the moving crude, 135 00:08:12,640 --> 00:08:15,480 Speaker 1: but the move in future obviously we're limited down so 136 00:08:15,520 --> 00:08:17,160 Speaker 1: we can get you an early read on the SMP 137 00:08:17,280 --> 00:08:20,600 Speaker 1: five hundred through the spider SMP five ETF, and we 138 00:08:20,640 --> 00:08:23,360 Speaker 1: are now session lows down a little more than seven 139 00:08:23,480 --> 00:08:26,520 Speaker 1: percentage points. I'd also know the German two year as well. 140 00:08:26,680 --> 00:08:29,320 Speaker 1: Point nine seven five is one of those global litmus 141 00:08:29,320 --> 00:08:32,200 Speaker 1: paper thirty year bond a little better in the last 142 00:08:32,240 --> 00:08:33,760 Speaker 1: twenty minutes. Why don't you pick it up, John and 143 00:08:33,800 --> 00:08:36,520 Speaker 1: Dr Man. Many people today, of course, will draw parallels 144 00:08:36,600 --> 00:08:39,040 Speaker 1: between now and two thousand and eight, and obviously for 145 00:08:39,080 --> 00:08:41,520 Speaker 1: many people we are nowhere near that situation. It was 146 00:08:41,520 --> 00:08:44,720 Speaker 1: a different world. But you just as concerned about corporate 147 00:08:44,760 --> 00:08:47,440 Speaker 1: bannon sheets as you were about the household balad sheet 148 00:08:47,720 --> 00:08:52,760 Speaker 1: back then. I'm no drawn. I mean, ironically, this is 149 00:08:52,760 --> 00:08:55,840 Speaker 1: not two thousand and eight, which is both good and bad. Um, 150 00:08:55,840 --> 00:08:57,760 Speaker 1: It's not two thousand and eight in a good sense 151 00:08:57,880 --> 00:09:01,120 Speaker 1: because I'm not worried about the bank, and therefore I'm 152 00:09:01,120 --> 00:09:04,199 Speaker 1: not worried about the payments and settlement system. Remember, the 153 00:09:04,200 --> 00:09:07,319 Speaker 1: payments and settlement system is the nerve center of any 154 00:09:07,440 --> 00:09:11,440 Speaker 1: modern based market economy. If that is no longer functioning, 155 00:09:11,600 --> 00:09:14,120 Speaker 1: everything will stop. And that was the reality of two 156 00:09:14,120 --> 00:09:18,679 Speaker 1: thousand and eight. So there's a good way that we're 157 00:09:18,720 --> 00:09:20,520 Speaker 1: not similar to two thousand and eight. But there's another 158 00:09:20,559 --> 00:09:22,960 Speaker 1: way we're not similar to two thousand and eight, which 159 00:09:23,000 --> 00:09:26,560 Speaker 1: I worried about, the extent of global policy coordination is 160 00:09:26,640 --> 00:09:30,680 Speaker 1: much lower. And whether it's the coronavirus, whether the whether 161 00:09:30,720 --> 00:09:35,040 Speaker 1: it's the excessive reliance on liquidity, whether it is markets 162 00:09:35,040 --> 00:09:37,680 Speaker 1: that have been miss priced for a long time, this 163 00:09:37,880 --> 00:09:43,160 Speaker 1: is a global problem that requires collective actions. So the 164 00:09:43,320 --> 00:09:45,520 Speaker 1: bad thing really to through thousand and eight is that 165 00:09:45,559 --> 00:09:48,560 Speaker 1: we're not going to get a London summit quickly that 166 00:09:48,600 --> 00:09:52,400 Speaker 1: will allow to put an economic bottoming. We need advances 167 00:09:52,440 --> 00:09:54,480 Speaker 1: on the medical side, and that's going to require a 168 00:09:54,520 --> 00:09:58,400 Speaker 1: lot better global coordination. Mohammed. When does the sell off 169 00:09:58,400 --> 00:10:01,439 Speaker 1: that we're expecting to deepen in the high old bond 170 00:10:01,480 --> 00:10:04,280 Speaker 1: market in credit markets more broadly, when does it become 171 00:10:04,320 --> 00:10:11,560 Speaker 1: a buying opportunity when you get distressed levels. So I'm 172 00:10:11,600 --> 00:10:14,520 Speaker 1: excited in a sense that as much as the next 173 00:10:15,280 --> 00:10:18,760 Speaker 1: as the immediate peered ahead is going to be very treacherous, 174 00:10:19,559 --> 00:10:23,359 Speaker 1: as much as that we are going to have massive opportunities. 175 00:10:23,679 --> 00:10:26,559 Speaker 1: But understand where these opportunities are going to arise, They're 176 00:10:26,600 --> 00:10:30,840 Speaker 1: not going to arise by buying a passive index and 177 00:10:30,920 --> 00:10:33,000 Speaker 1: just betting on the whole marketplace. It's going to be 178 00:10:33,160 --> 00:10:36,800 Speaker 1: very selective. It's going to be in distressed credit, it's 179 00:10:36,800 --> 00:10:39,280 Speaker 1: going to be instructured credit, it's going to be in 180 00:10:39,320 --> 00:10:42,719 Speaker 1: relative value, and it's going to be in good companies 181 00:10:42,800 --> 00:10:46,880 Speaker 1: with strong balance sheets, high cash that are trading at 182 00:10:47,040 --> 00:10:50,480 Speaker 1: bargain prices. That is where the opportunities are going to arise. 183 00:10:50,679 --> 00:10:53,840 Speaker 1: It's going to start selectively, and then when when we 184 00:10:53,920 --> 00:10:58,760 Speaker 1: start seeing high probability of medical advances to contain the 185 00:10:58,800 --> 00:11:02,719 Speaker 1: spread of the virus, an increase immunities, vaccine, then we're 186 00:11:02,720 --> 00:11:06,079 Speaker 1: going to establish a bottom for the more general interesting 187 00:11:06,480 --> 00:11:08,960 Speaker 1: through in the index. By mommed before we let you go. 188 00:11:09,160 --> 00:11:11,480 Speaker 1: Just the final question. Tom brought up your book The 189 00:11:11,480 --> 00:11:13,079 Speaker 1: Only Game in Town, And I know you were running 190 00:11:13,120 --> 00:11:14,800 Speaker 1: up a new addition and I was looking forward to 191 00:11:14,800 --> 00:11:16,200 Speaker 1: it coming out later this year. Do you need to 192 00:11:16,200 --> 00:11:19,560 Speaker 1: rewrite the start all over again and get back to it. Yeah, 193 00:11:19,640 --> 00:11:21,320 Speaker 1: you know, it's a pain because the book is coming 194 00:11:21,320 --> 00:11:24,400 Speaker 1: out in just a few weeks. And the reason why 195 00:11:24,520 --> 00:11:26,560 Speaker 1: I wanted to bring it out because when it came 196 00:11:26,559 --> 00:11:29,679 Speaker 1: out in sixteen it was too early. My timing was 197 00:11:29,800 --> 00:11:33,680 Speaker 1: way too early. People didn't realize what happens when you 198 00:11:33,720 --> 00:11:38,120 Speaker 1: rely excessively on central banks, that we were planting many 199 00:11:38,200 --> 00:11:44,840 Speaker 1: seeds of future economic and financial malaise. So so that's 200 00:11:44,840 --> 00:11:47,480 Speaker 1: why I wanted to bring it out again. Um, when 201 00:11:47,520 --> 00:11:50,840 Speaker 1: people have realized that that's where we are. But the 202 00:11:50,880 --> 00:11:54,559 Speaker 1: coroner virus pressed fast forward on everything. Mamma got to 203 00:11:54,600 --> 00:11:56,120 Speaker 1: catch up with you and looking forward to the release 204 00:11:56,440 --> 00:11:57,960 Speaker 1: in a couple of weeks time. I hammad all are 205 00:11:58,040 --> 00:12:01,120 Speaker 1: in the alliance is chiefly can advise and Bloomberg opinion 206 00:12:01,360 --> 00:12:13,760 Speaker 1: columnist on the road ahead. Do you want to guess 207 00:12:13,800 --> 00:12:15,760 Speaker 1: on the phone, I'm pleased to say, is Francisco Blanche 208 00:12:15,760 --> 00:12:18,800 Speaker 1: Bank for America the lower head of commodities and derivatives research. 209 00:12:19,080 --> 00:12:21,559 Speaker 1: What a pleasure privilege to have Francisco with us on 210 00:12:21,600 --> 00:12:24,240 Speaker 1: the show in the morning, like this morning. Francisco, let's 211 00:12:24,240 --> 00:12:28,080 Speaker 1: talk about the potential the Opeque glass together with Russia. 212 00:12:28,240 --> 00:12:29,840 Speaker 1: You can get back together at some point in the 213 00:12:29,840 --> 00:12:35,200 Speaker 1: near future and strike a deal. Um, hey, John, thanks 214 00:12:35,240 --> 00:12:38,520 Speaker 1: for having me on the show. Um, I'm not sure. Um, 215 00:12:38,760 --> 00:12:40,920 Speaker 1: I'm not sure if they'll they'll come in and have 216 00:12:40,960 --> 00:12:43,760 Speaker 1: a deal anytime soon, because it's not clear what the 217 00:12:43,840 --> 00:12:47,600 Speaker 1: russianale behind this last move has been um. I think 218 00:12:47,640 --> 00:12:50,960 Speaker 1: the Russians were very reluctant to cut the supply uh 219 00:12:51,120 --> 00:12:54,199 Speaker 1: to begin with, to deal with this virus UM. They 220 00:12:54,240 --> 00:12:58,480 Speaker 1: made their position very clear to the Sudies. The Sudies, um, 221 00:12:58,520 --> 00:13:00,360 Speaker 1: I wanted to kind a million a half barrel today 222 00:13:00,400 --> 00:13:03,000 Speaker 1: are supplied. That's the proposal to Helen Table last week. 223 00:13:03,520 --> 00:13:06,800 Speaker 1: And ultimately that either the talks broke down, which is 224 00:13:06,800 --> 00:13:10,400 Speaker 1: what possibility, or maybe the Russians uh swaite houses and 225 00:13:10,440 --> 00:13:12,599 Speaker 1: convince them that maybe you know, it's also about to 226 00:13:12,640 --> 00:13:15,240 Speaker 1: let the market running course and and ultimately clean up 227 00:13:15,240 --> 00:13:18,040 Speaker 1: the US shell sector. Uh. That both have been wanting 228 00:13:18,040 --> 00:13:20,120 Speaker 1: to do it for a while, and I guess this 229 00:13:20,320 --> 00:13:22,840 Speaker 1: is the opportunity has ever I see in all the 230 00:13:22,880 --> 00:13:26,480 Speaker 1: research knows this morning from the sophisticates like yourself, Francisco, 231 00:13:26,559 --> 00:13:31,400 Speaker 1: everybody's talking about hedge exposure. Forget about like Russia loses, 232 00:13:31,600 --> 00:13:36,080 Speaker 1: somebody wins, Brazil loses whatever that kind of macro maologna is. 233 00:13:36,559 --> 00:13:41,480 Speaker 1: Explain the hedge exposure right now? Who loses the most 234 00:13:41,640 --> 00:13:45,160 Speaker 1: when you see a twenty move in something that's supposed 235 00:13:45,200 --> 00:13:50,200 Speaker 1: to be certain? Well, uh, I mean I think I 236 00:13:50,240 --> 00:13:52,560 Speaker 1: think the people that will probably end up listening a 237 00:13:52,559 --> 00:13:56,680 Speaker 1: lot this is those that have hedging mismatches. So there 238 00:13:56,679 --> 00:14:01,959 Speaker 1: could be trading houses UM, traders, UH, potentially some some 239 00:14:02,000 --> 00:14:06,160 Speaker 1: broken dealers have exposure to this. UM. The principal exposure 240 00:14:06,200 --> 00:14:08,240 Speaker 1: that is not if you're a broker, which if you're 241 00:14:08,240 --> 00:14:12,680 Speaker 1: a broke dealer, UM and UM, and it could also 242 00:14:12,760 --> 00:14:15,000 Speaker 1: be I mean and and Frankly, the biggest losers are 243 00:14:15,000 --> 00:14:17,880 Speaker 1: going to be the oil companies themselves that have not hedged. 244 00:14:18,440 --> 00:14:21,640 Speaker 1: And remember a lot of companies were underheaded because at 245 00:14:21,640 --> 00:14:24,240 Speaker 1: the end of last year we had something called the 246 00:14:24,320 --> 00:14:27,440 Speaker 1: Phase one US China trade deal, which was supposed to 247 00:14:27,440 --> 00:14:30,720 Speaker 1: put the global economy back on track. We were supposed 248 00:14:30,760 --> 00:14:34,080 Speaker 1: to see a restocking cycle of manufactured goods. We were 249 00:14:34,080 --> 00:14:37,480 Speaker 1: supposed to see a stronger economy. And I think a 250 00:14:37,520 --> 00:14:39,840 Speaker 1: lot of people may have actually just lightened up on 251 00:14:39,840 --> 00:14:42,520 Speaker 1: their hedging heading into the first half, which which and 252 00:14:42,560 --> 00:14:44,680 Speaker 1: those are the ones that are gonna be heard the most. Now, 253 00:14:44,680 --> 00:14:49,160 Speaker 1: who benefits UM, I think it's gonna be consumers benefiting here. Obviously, 254 00:14:49,200 --> 00:14:51,400 Speaker 1: consumers in many parts of the world are are not 255 00:14:51,480 --> 00:14:55,040 Speaker 1: really traveling that much because of the coronavirus but if 256 00:14:55,080 --> 00:14:56,880 Speaker 1: you are able to travel, you're going to get a 257 00:14:56,880 --> 00:14:59,960 Speaker 1: pretty good deal with with the drop in fuel prices 258 00:15:00,040 --> 00:15:02,880 Speaker 1: that we're saying right now. Francisco, I'm looking right now 259 00:15:03,080 --> 00:15:06,320 Speaker 1: at the cash bond market, the high yield bond market, 260 00:15:06,320 --> 00:15:09,120 Speaker 1: which actually opened it eight on Wall Street, and we're 261 00:15:09,120 --> 00:15:12,160 Speaker 1: seeing just some violent moves in the shale debt. We're 262 00:15:12,160 --> 00:15:17,240 Speaker 1: looking at forty moves lower, huge, huge kinds of shifts, 263 00:15:17,240 --> 00:15:20,600 Speaker 1: And I'm wondering going forward, is this going to reshape 264 00:15:20,600 --> 00:15:24,600 Speaker 1: the shale industry profoundly and actually curtail production in the 265 00:15:24,720 --> 00:15:28,760 Speaker 1: US for the longer term. Um So, I think the 266 00:15:28,760 --> 00:15:31,920 Speaker 1: answer to those questions, both of those questions is yes, 267 00:15:32,040 --> 00:15:34,560 Speaker 1: we will see a car talent of production and we 268 00:15:34,560 --> 00:15:37,640 Speaker 1: will see a profound impact on the industry. Remember, this 269 00:15:37,760 --> 00:15:42,320 Speaker 1: industry has been already UM hit in all fronts. During 270 00:15:42,360 --> 00:15:48,360 Speaker 1: the industry, UH probably wasted about a hundred dollars of 271 00:15:48,520 --> 00:15:51,680 Speaker 1: investor money, both in terms of equity and debt issuance, 272 00:15:52,320 --> 00:15:56,000 Speaker 1: So very few investors actually want to own any any 273 00:15:56,120 --> 00:15:59,080 Speaker 1: energy to begin with. Um And I think this this 274 00:15:59,600 --> 00:16:04,680 Speaker 1: last low is going to hurt the particularly the levered players, 275 00:16:04,680 --> 00:16:08,520 Speaker 1: the smaller players, those you mentioned high yield remember high 276 00:16:08,560 --> 00:16:11,600 Speaker 1: yields UH characterized not only because it has a wider 277 00:16:11,600 --> 00:16:14,720 Speaker 1: differential to investment great debt, but also because has shorter maturity. 278 00:16:15,280 --> 00:16:17,640 Speaker 1: Um So, a lot of this death is due in 279 00:16:17,680 --> 00:16:20,960 Speaker 1: the next twelve eighteen months, and that's that's gonna that's 280 00:16:20,960 --> 00:16:22,280 Speaker 1: gonna come to the front. And then the other thing 281 00:16:22,320 --> 00:16:24,400 Speaker 1: that's gonna happen is banks are probably gonna look at 282 00:16:24,480 --> 00:16:29,160 Speaker 1: their reserve based lending practices and reduced the money that 283 00:16:29,200 --> 00:16:33,880 Speaker 1: they land um that they lend the the the oil 284 00:16:33,920 --> 00:16:38,160 Speaker 1: and gas developers against their assets. So so we're gonna 285 00:16:38,240 --> 00:16:40,800 Speaker 1: see a very meaningful reduction in capital right to where 286 00:16:40,840 --> 00:16:44,120 Speaker 1: we were a month ago, which was already pretty bad. 287 00:16:44,800 --> 00:16:47,400 Speaker 1: RecA San Francisco, just to jump in with, we're exploring 288 00:16:47,440 --> 00:16:50,320 Speaker 1: different parallels. Just give me a snapshot of where we 289 00:16:50,320 --> 00:16:53,520 Speaker 1: are right now. The supply demand dynamic just quite simply 290 00:16:53,520 --> 00:16:56,400 Speaker 1: compared to where we were in fifteen sixteen when we 291 00:16:56,440 --> 00:16:59,080 Speaker 1: saw these kind of things plank out, Now in days 292 00:16:59,160 --> 00:17:04,080 Speaker 1: similar worse. What is it right now? Um So, So, 293 00:17:04,160 --> 00:17:06,720 Speaker 1: I think from a demand standpoint, this is definitely way worse. 294 00:17:07,320 --> 00:17:09,480 Speaker 1: We're going to see a global demand construction this year, 295 00:17:09,560 --> 00:17:12,920 Speaker 1: most likely for oil and UH, and we haven't seen 296 00:17:12,960 --> 00:17:14,639 Speaker 1: one since put us on eighth plus and nine. So 297 00:17:14,680 --> 00:17:17,000 Speaker 1: in terms of demand, it looks a little more like 298 00:17:17,280 --> 00:17:20,040 Speaker 1: eight or nine than definitely on it does like fifteen 299 00:17:20,000 --> 00:17:23,520 Speaker 1: and sixteen. From a supply standpoint, it's unclear how much 300 00:17:23,520 --> 00:17:26,680 Speaker 1: this audis are going to be ramping up supplies here. Um, 301 00:17:26,880 --> 00:17:30,680 Speaker 1: they've aggressively is counted their crewed and uh, and there 302 00:17:30,760 --> 00:17:34,040 Speaker 1: is talk about South increasing production over ten million barrells 303 00:17:34,080 --> 00:17:36,320 Speaker 1: a day, maybe over eleven million dollars a day. There's 304 00:17:36,320 --> 00:17:40,560 Speaker 1: different numbers they're throwing around, but but you know, definitely, Uh, 305 00:17:40,680 --> 00:17:43,399 Speaker 1: it's going to be it's going to be almost just 306 00:17:43,440 --> 00:17:45,359 Speaker 1: as battles fifteen sixteen. It's almost in a way it 307 00:17:45,480 --> 00:17:47,919 Speaker 1: is a combination of eight and fifteen and sixteen pretty 308 00:17:47,920 --> 00:17:49,760 Speaker 1: bad for oil prices. That's when we think we could 309 00:17:49,760 --> 00:17:52,439 Speaker 1: go back into the twenties year for brand. What is 310 00:17:52,440 --> 00:17:56,119 Speaker 1: the ramifications going back into the twenties for brand and 311 00:17:56,160 --> 00:18:01,119 Speaker 1: the equivalent seated West Texas Intermediate For America's will independence 312 00:18:01,119 --> 00:18:07,439 Speaker 1: do we sacrifice that is Permian Basin shuts down? Um, well, 313 00:18:07,640 --> 00:18:11,040 Speaker 1: we will definitely see a pullback in in supplies, and uh, 314 00:18:11,080 --> 00:18:14,359 Speaker 1: it will hurt American's energy independence. But here's the good news. 315 00:18:15,040 --> 00:18:18,000 Speaker 1: We know we can create America's energy independence again at 316 00:18:18,040 --> 00:18:20,640 Speaker 1: prices of forty forty five floors barrel, which are still 317 00:18:20,720 --> 00:18:25,560 Speaker 1: very very good for consumers. So um. While as while 318 00:18:25,600 --> 00:18:30,439 Speaker 1: as I'm certainly concerned about the industry and certainly concerned 319 00:18:30,440 --> 00:18:33,560 Speaker 1: about the potential fallout of this move, I will also 320 00:18:33,640 --> 00:18:37,600 Speaker 1: say that that that if prices were to rise lords barrel, 321 00:18:38,080 --> 00:18:40,720 Speaker 1: we will get the industry back back up and running. 322 00:18:40,760 --> 00:18:45,359 Speaker 1: So so I think, I mean, I think that it's, um, 323 00:18:45,400 --> 00:18:47,840 Speaker 1: it's definitely gonna be a blow against the U S 324 00:18:47,920 --> 00:18:52,119 Speaker 1: energy independence story. Um, But but it's the blow that 325 00:18:52,280 --> 00:18:55,280 Speaker 1: is is manageable for consumers. Um. The question we have 326 00:18:55,359 --> 00:18:57,160 Speaker 1: to ask ourselves is going to be a big blow 327 00:18:57,200 --> 00:19:00,160 Speaker 1: to some states in particular like Texas and Oklahoma. Who 328 00:19:00,200 --> 00:19:02,280 Speaker 1: was the last time or do they have a more 329 00:19:02,280 --> 00:19:04,280 Speaker 1: diversity of economy and they can hand a little better. 330 00:19:04,600 --> 00:19:06,880 Speaker 1: So that's that's I think a big, big question mark 331 00:19:06,880 --> 00:19:10,120 Speaker 1: out there. This has been wonderful. Franstance, good Burns, thank 332 00:19:10,119 --> 00:19:20,920 Speaker 1: you so much, greatly greatly appreciated with Bank of America. 333 00:19:21,640 --> 00:19:23,760 Speaker 1: Let's bring a John Raith show, UBS, head of UK 334 00:19:23,920 --> 00:19:26,359 Speaker 1: rate Strategy, joined us on the phone. John fantastic to 335 00:19:26,359 --> 00:19:28,240 Speaker 1: have you with us. I was up waiting for the 336 00:19:28,280 --> 00:19:30,800 Speaker 1: bond market to open up last night and just wow 337 00:19:31,080 --> 00:19:33,920 Speaker 1: to see the long end come in forty three basis 338 00:19:33,960 --> 00:19:36,720 Speaker 1: points and dropped like a stone beneath one percent your 339 00:19:36,760 --> 00:19:40,480 Speaker 1: first stage, John, I mean, this is just a colossal 340 00:19:41,119 --> 00:19:44,760 Speaker 1: flight to safety going on everywhere. Um. We haven't seen 341 00:19:44,800 --> 00:19:47,439 Speaker 1: anything like this, of course in the past, and um, 342 00:19:47,440 --> 00:19:49,760 Speaker 1: and the reasons are well understood. You know, we're seeing 343 00:19:49,760 --> 00:19:53,159 Speaker 1: a perfect storm essentially, which is forcing huge waves of 344 00:19:53,200 --> 00:19:57,320 Speaker 1: money into the bond markets. Front end yields now everywhere, um, 345 00:19:57,359 --> 00:19:59,879 Speaker 1: sort of crashing down towards zero or even well but 346 00:20:00,040 --> 00:20:02,800 Speaker 1: low in certain markets. And as a result, money now 347 00:20:02,880 --> 00:20:05,320 Speaker 1: sort of flooding further down those yeel curves as as 348 00:20:05,800 --> 00:20:07,760 Speaker 1: you know, investors run for cover. So that's you know, 349 00:20:08,520 --> 00:20:11,359 Speaker 1: everything going into the bond markets and pushing these yields 350 00:20:11,359 --> 00:20:13,600 Speaker 1: to unprecedented levels. John, Lisa and I have been talking 351 00:20:13,640 --> 00:20:16,120 Speaker 1: about what we're modeling in the bond market. What are 352 00:20:16,119 --> 00:20:20,520 Speaker 1: we modeling now, zero race on FED funds, recession perhaps inevitably, 353 00:20:20,520 --> 00:20:23,000 Speaker 1: what are we talking about now? Yeah, I mean we're 354 00:20:23,040 --> 00:20:24,920 Speaker 1: we're rapidly heading there. Certainly if you look at the 355 00:20:24,920 --> 00:20:27,600 Speaker 1: sid funds features. John, You know, you can see that 356 00:20:27,720 --> 00:20:31,160 Speaker 1: the markets anticipating the rate getting very close to zero 357 00:20:31,240 --> 00:20:34,280 Speaker 1: in in fairly short order, as it is um in 358 00:20:34,320 --> 00:20:37,240 Speaker 1: the UK. Clearly in the Eurozone we're already well into 359 00:20:37,280 --> 00:20:40,840 Speaker 1: negative territory and markets expecting to go deeper into that. 360 00:20:40,880 --> 00:20:42,480 Speaker 1: I think one thing that's different. You know, we have 361 00:20:42,640 --> 00:20:45,000 Speaker 1: seen short yields at these levels in the past. If 362 00:20:45,000 --> 00:20:47,560 Speaker 1: you look at see your treasuries for example, for all 363 00:20:47,600 --> 00:20:50,840 Speaker 1: the sort of headlong fall, we're still fifteen basis points 364 00:20:50,920 --> 00:20:53,639 Speaker 1: or so above the levels we got to back in 365 00:20:53,760 --> 00:20:57,080 Speaker 1: sort of two thousand and eleven UM. What's different is 366 00:20:57,160 --> 00:20:59,719 Speaker 1: these long yields. They've never been down at these levels um. 367 00:20:59,800 --> 00:21:02,160 Speaker 1: And it is a sign that the markets think, essentially 368 00:21:02,160 --> 00:21:04,439 Speaker 1: it's going to take even longer for any sort of 369 00:21:04,480 --> 00:21:06,880 Speaker 1: recovery to build, and so people are happy to buy 370 00:21:06,920 --> 00:21:09,600 Speaker 1: longer bonds at these levels as well. John, What does 371 00:21:09,640 --> 00:21:14,040 Speaker 1: your world tell central bankers? Just very simply, if we 372 00:21:14,119 --> 00:21:19,440 Speaker 1: impute deflation in disinflation is suggests they're far far behind. 373 00:21:20,080 --> 00:21:22,440 Speaker 1: What does it tell them? And can we see central 374 00:21:22,440 --> 00:21:27,880 Speaker 1: bank action this morning? I mean, it's it's certainly possible, Tom, 375 00:21:27,880 --> 00:21:29,840 Speaker 1: But I think what it tells them, or rather what 376 00:21:29,920 --> 00:21:34,199 Speaker 1: they'll use the market moves more precisely to tell fiscal 377 00:21:34,240 --> 00:21:37,520 Speaker 1: authorities is that they have done or are expected to do, 378 00:21:37,600 --> 00:21:39,399 Speaker 1: in the case of those who haven't already reached the 379 00:21:39,800 --> 00:21:42,840 Speaker 1: zero lower bound, everything in their power. You know, they 380 00:21:42,840 --> 00:21:45,520 Speaker 1: will cut raps to the floor if if they haven't already, 381 00:21:46,200 --> 00:21:48,560 Speaker 1: they will engage in more asset purchases. But when yields 382 00:21:48,560 --> 00:21:50,280 Speaker 1: are at these levels, it's telling you, I think that 383 00:21:50,320 --> 00:21:52,680 Speaker 1: they have run out of road, or that they don't 384 00:21:52,680 --> 00:21:56,880 Speaker 1: have tools which are going to materially change the trajectory here. Therefore, 385 00:21:56,880 --> 00:21:59,320 Speaker 1: the focus needs to turn to governments and the ability 386 00:21:59,359 --> 00:22:02,520 Speaker 1: of fiscal the seed to try and um well at 387 00:22:02,520 --> 00:22:05,360 Speaker 1: this stage, pushing the expected impact on demand, and then 388 00:22:05,400 --> 00:22:07,320 Speaker 1: try and sort of lift these economies and get them 389 00:22:07,359 --> 00:22:09,480 Speaker 1: moving forward again. I want to pick up exactly on 390 00:22:09,600 --> 00:22:12,000 Speaker 1: that point, the idea that the market is implying that 391 00:22:12,119 --> 00:22:15,240 Speaker 1: central banks around the world are out of about of tools. 392 00:22:15,320 --> 00:22:18,280 Speaker 1: Tom John, I'm looking right now fed funds futures pricing 393 00:22:18,320 --> 00:22:22,080 Speaker 1: in basically zero interest rates in the United States over 394 00:22:22,080 --> 00:22:24,719 Speaker 1: the next few meetings, and it's quickly coming in. And 395 00:22:24,720 --> 00:22:27,359 Speaker 1: I'm looking meanwhile at the fact that the yield curves 396 00:22:27,400 --> 00:22:30,840 Speaker 1: are just collapsing. We are seeing an absolute flattening. The 397 00:22:30,880 --> 00:22:34,159 Speaker 1: implication here, John, no inflation, This is not going to 398 00:22:34,240 --> 00:22:36,600 Speaker 1: work period. So I think that's what we're seeing off 399 00:22:36,600 --> 00:22:39,280 Speaker 1: the back of another massive move lower in crude. And John, 400 00:22:39,280 --> 00:22:40,720 Speaker 1: there's another thing we've got to think about to the 401 00:22:40,760 --> 00:22:43,400 Speaker 1: dynamic that leads a just pictured for us, for our 402 00:22:43,520 --> 00:22:46,679 Speaker 1: listeners on radio, when the Fed cuts rates, we're not 403 00:22:46,760 --> 00:22:49,000 Speaker 1: just adjusting the front end to that reality. We seem 404 00:22:49,040 --> 00:22:50,920 Speaker 1: to be pushing it right the way through the curve. 405 00:22:51,240 --> 00:22:54,200 Speaker 1: So when the Fed comes down fifty basis points tens thirties, 406 00:22:54,240 --> 00:22:56,480 Speaker 1: they start to rally too. We used to be able 407 00:22:56,480 --> 00:22:58,440 Speaker 1: to generate what's called that bull steam in a way, 408 00:22:58,440 --> 00:23:00,440 Speaker 1: you start to aggressively pull down the run end and 409 00:23:00,480 --> 00:23:01,760 Speaker 1: you get a little bit of a lift at the 410 00:23:01,800 --> 00:23:05,440 Speaker 1: back end. Why an't we seeing that this time around? Yeah? 411 00:23:05,480 --> 00:23:07,000 Speaker 1: I mean, I think part of this is the view 412 00:23:07,000 --> 00:23:09,399 Speaker 1: that you know that the market of concluding central banks 413 00:23:09,400 --> 00:23:11,960 Speaker 1: do not have the ability to lift inflation and medium 414 00:23:12,040 --> 00:23:15,040 Speaker 1: term growth forecast. I mentioned that, See, your treasury yields 415 00:23:15,040 --> 00:23:16,879 Speaker 1: are still above the levels they got to in in 416 00:23:16,920 --> 00:23:19,879 Speaker 1: two thousand and eleven. At that time, ten your treasury 417 00:23:19,920 --> 00:23:22,520 Speaker 1: yields were up close to two percents, a way above 418 00:23:22,560 --> 00:23:24,760 Speaker 1: where we are now. Because of that all steepening, as 419 00:23:24,800 --> 00:23:28,560 Speaker 1: you mentioned, John, and some trust that, you know, the 420 00:23:28,960 --> 00:23:32,280 Speaker 1: measures taken by the central banks would reflate these economies 421 00:23:32,320 --> 00:23:34,960 Speaker 1: that seems to have gone um and they will do 422 00:23:35,040 --> 00:23:38,320 Speaker 1: what they can. They're obviously also provide liquidity measures and 423 00:23:38,320 --> 00:23:41,840 Speaker 1: try and avoid any sort of deterioration in the situation 424 00:23:41,840 --> 00:23:44,879 Speaker 1: as a result of a credit runch. But ultimately, you know, 425 00:23:44,960 --> 00:23:47,919 Speaker 1: as they deploy all of the tools in their in 426 00:23:48,000 --> 00:23:51,880 Speaker 1: their in their ammunition box, if that isn't enough, then 427 00:23:51,960 --> 00:23:53,439 Speaker 1: fiscal policy is going to have to come to the 428 00:23:53,440 --> 00:23:56,000 Speaker 1: rescue sooner rather than later. Let's talk about some of 429 00:23:56,040 --> 00:23:58,600 Speaker 1: the other tools at central banks have. What are the 430 00:23:58,720 --> 00:24:01,320 Speaker 1: key intervene since that we should be looking for at 431 00:24:01,359 --> 00:24:04,120 Speaker 1: this point, given the fact that we are seeing stress 432 00:24:04,600 --> 00:24:08,119 Speaker 1: pick up in report markets and other key areas of 433 00:24:08,119 --> 00:24:11,919 Speaker 1: the financial system. Well, interestingly, I mean, we were so 434 00:24:12,080 --> 00:24:15,040 Speaker 1: happens in the UK that we've got the budget coming 435 00:24:15,040 --> 00:24:16,520 Speaker 1: in a couple of days in the middle of all 436 00:24:16,560 --> 00:24:18,640 Speaker 1: of this and all the measures that are being discussed 437 00:24:18,680 --> 00:24:20,680 Speaker 1: now the focus has turned away from all the sort 438 00:24:20,680 --> 00:24:24,880 Speaker 1: of typical you know, fiscal measures and investment and infrastructure 439 00:24:24,880 --> 00:24:27,520 Speaker 1: plans and things, and towards the short term measures that 440 00:24:27,560 --> 00:24:32,280 Speaker 1: are going to help in the anticipated situation confronting corporates. 441 00:24:32,320 --> 00:24:35,280 Speaker 1: That will certainly include the provision of liquidity and as 442 00:24:35,320 --> 00:24:38,840 Speaker 1: I said, any survival business having access to credit at 443 00:24:38,880 --> 00:24:41,600 Speaker 1: fair and reasonable prices. As the banks sort of fight 444 00:24:41,680 --> 00:24:45,159 Speaker 1: on various different fronts, um, the governments are keen to 445 00:24:45,200 --> 00:24:48,240 Speaker 1: make sure that doesn't get passed on through higher borrowing 446 00:24:48,280 --> 00:24:50,080 Speaker 1: cost to companies. I think the governments are going to 447 00:24:50,160 --> 00:24:53,560 Speaker 1: bring in measures like giving companies longer to pay their 448 00:24:53,600 --> 00:24:57,440 Speaker 1: their their taxes and addressing sort of supply chain disruption 449 00:24:57,480 --> 00:25:00,359 Speaker 1: that comes about on the back of the pretent short 450 00:25:00,400 --> 00:25:04,000 Speaker 1: disruption coming from the coronavirus situation. As all of these 451 00:25:04,040 --> 00:25:07,240 Speaker 1: supply chains, um, you know, get get damaged along the way. 452 00:25:07,320 --> 00:25:09,600 Speaker 1: So you know, the intent is for governments to do 453 00:25:09,640 --> 00:25:11,879 Speaker 1: what they can and central banks of course as well, 454 00:25:12,200 --> 00:25:15,920 Speaker 1: to try and ensure that any viable companies are able 455 00:25:15,960 --> 00:25:18,400 Speaker 1: to continue functioning as well as possible and don't get 456 00:25:19,040 --> 00:25:24,840 Speaker 1: unfairly and you know, long term detrimentally impacted by by 457 00:25:24,880 --> 00:25:27,639 Speaker 1: these sort of short term problems coming down their supply chains. 458 00:25:27,640 --> 00:25:30,280 Speaker 1: And through the banking system. John, stay close for our 459 00:25:30,280 --> 00:25:32,840 Speaker 1: listeners worldwide, just tune again. We will go commercial free 460 00:25:32,840 --> 00:25:34,560 Speaker 1: as much as we can over the next couple of hours. 461 00:25:34,640 --> 00:25:37,680 Speaker 1: Right here on Bloomberg. Surveillance equity futures are limited down 462 00:25:37,760 --> 00:25:39,080 Speaker 1: so and I have a read for you there. Where 463 00:25:39,080 --> 00:25:41,199 Speaker 1: I do have a read is on the SMP five 464 00:25:41,640 --> 00:25:43,680 Speaker 1: spider et F and a pre market down around about 465 00:25:43,720 --> 00:25:46,720 Speaker 1: five point nine four for any of you thinking about 466 00:25:46,720 --> 00:25:49,760 Speaker 1: the cash open now at nine thirty. The rules as 467 00:25:49,880 --> 00:25:53,000 Speaker 1: follows the SMP five hundred. This is a level one 468 00:25:53,119 --> 00:25:56,600 Speaker 1: breach can drop seven percent from the previous close. This 469 00:25:56,680 --> 00:25:59,880 Speaker 1: is after fifteen minutes, and then trading will be halted 470 00:26:00,040 --> 00:26:02,919 Speaker 1: the fifteen minutes if you have a gap blow up 471 00:26:03,440 --> 00:26:05,879 Speaker 1: of more than seven percent off the fifteen minutes. So 472 00:26:05,960 --> 00:26:07,600 Speaker 1: just a couple of levels you've got to think about 473 00:26:07,640 --> 00:26:10,080 Speaker 1: today session. The kind of things that I didn't expect 474 00:26:10,160 --> 00:26:12,920 Speaker 1: to be talking about at the beginning of twenty twenty, 475 00:26:12,920 --> 00:26:15,720 Speaker 1: but here we are. They've been hugely debated over the 476 00:26:15,840 --> 00:26:19,480 Speaker 1: years and rarely used, particularly at that kind of fifteen 477 00:26:19,480 --> 00:26:22,560 Speaker 1: minute hall, but in today's day and age, I mean, 478 00:26:22,600 --> 00:26:24,879 Speaker 1: I get it a long time ago where it was 479 00:26:24,960 --> 00:26:27,800 Speaker 1: yelling and screaming on the floor and all the romance 480 00:26:27,840 --> 00:26:31,199 Speaker 1: of the exchange today it seems almost quaint. Well actually, 481 00:26:32,800 --> 00:26:35,000 Speaker 1: some people are saying that it's actually exacerbated some of 482 00:26:35,040 --> 00:26:37,439 Speaker 1: the price moves overnight and other markets, because you have 483 00:26:37,480 --> 00:26:41,120 Speaker 1: the US market halted, and the implication to other markets 484 00:26:41,160 --> 00:26:44,000 Speaker 1: is that things are so terrible that things had to 485 00:26:44,040 --> 00:26:46,639 Speaker 1: be frozen, and that's sort of one concern people have. 486 00:26:46,880 --> 00:26:49,320 Speaker 1: I'd let it go. Um, you know, my basic point 487 00:26:49,720 --> 00:26:53,080 Speaker 1: uh with it is it's quaint and it will be tested. 488 00:26:53,080 --> 00:26:54,960 Speaker 1: It will be interesting to see what we see this morning, 489 00:26:54,960 --> 00:26:57,159 Speaker 1: but the point is we will get when open the 490 00:26:57,280 --> 00:26:59,560 Speaker 1: vict I haven't even correlated where the vixes. There's some 491 00:26:59,600 --> 00:27:02,199 Speaker 1: good no time there over the over the weekend, but 492 00:27:02,280 --> 00:27:05,240 Speaker 1: within the data check I'm looking at euroswissy one oh 493 00:27:05,240 --> 00:27:07,879 Speaker 1: five eight four four. George serve els with that incredibly 494 00:27:07,920 --> 00:27:11,439 Speaker 1: important note for Deutsche Bank, and you know you wonder 495 00:27:11,480 --> 00:27:14,399 Speaker 1: here and that, where are the surprises going to be 496 00:27:14,720 --> 00:27:17,320 Speaker 1: given these market moves? John, what's the surprise you see? 497 00:27:17,320 --> 00:27:18,800 Speaker 1: We'll come back to John Wright in a minute. The 498 00:27:18,880 --> 00:27:20,720 Speaker 1: surprise for me was just saying the move in oil, 499 00:27:21,160 --> 00:27:23,040 Speaker 1: not that we didn't expect the move lower of course 500 00:27:23,040 --> 00:27:24,920 Speaker 1: we did. But to see crude gap lower by thirty 501 00:27:24,960 --> 00:27:26,960 Speaker 1: one percent is stunning and many of us, of course 502 00:27:26,960 --> 00:27:29,119 Speaker 1: got up early for the European open this morning just 503 00:27:29,160 --> 00:27:32,440 Speaker 1: to see this series of red headlines just crater through 504 00:27:32,480 --> 00:27:35,200 Speaker 1: the bloomberg, the decks falling as much as seven point 505 00:27:35,240 --> 00:27:37,760 Speaker 1: four percent set to went to bear market, the stocks 506 00:27:37,800 --> 00:27:40,240 Speaker 1: fifty down four point seven percent set to enter a 507 00:27:40,240 --> 00:27:42,920 Speaker 1: bear market is stock six hundred the foot seat. These 508 00:27:42,920 --> 00:27:46,679 Speaker 1: headlines just kept coming through the terminal at this brutal speed, 509 00:27:46,680 --> 00:27:49,119 Speaker 1: And when you see things lighting up that way, I 510 00:27:49,119 --> 00:27:50,960 Speaker 1: think at least it just adds to the panic of 511 00:27:50,960 --> 00:27:54,480 Speaker 1: the moment, isn't it. Absolutely? Also the question is where 512 00:27:54,480 --> 00:27:57,040 Speaker 1: are the stress points? Again? I go back to, you know, 513 00:27:57,119 --> 00:27:59,480 Speaker 1: what's going on in the currency markets, in particular the 514 00:27:59,560 --> 00:28:02,840 Speaker 1: japan is yen very much in focus, with a dollar 515 00:28:02,880 --> 00:28:07,199 Speaker 1: plunging three versus the yen, raising questions about whether this 516 00:28:07,320 --> 00:28:09,840 Speaker 1: is margin trades being unwound, whether this is sort of 517 00:28:09,920 --> 00:28:13,160 Speaker 1: leverage currency bets uh and and sort of when does 518 00:28:13,280 --> 00:28:16,040 Speaker 1: the Japanese government step in, given the fact that their 519 00:28:16,040 --> 00:28:18,600 Speaker 1: economy is not doing well and wasn't doing well ahead 520 00:28:18,600 --> 00:28:20,960 Speaker 1: of the coronavirus. Away from the major Paris, folks, and 521 00:28:21,000 --> 00:28:24,240 Speaker 1: this is inside baseball. But you look at dollar yen, yeah, 522 00:28:24,359 --> 00:28:27,159 Speaker 1: you look at euro yen yeah? How about something like 523 00:28:27,280 --> 00:28:32,520 Speaker 1: yen Singapore dollar. It's eight standard deviations off trend. All 524 00:28:32,520 --> 00:28:35,240 Speaker 1: you need to know is that's worse than a medical chart, 525 00:28:35,359 --> 00:28:38,280 Speaker 1: to be honest, I mean, eight standard deviations is a huge, 526 00:28:38,640 --> 00:28:41,680 Speaker 1: huge move. John, I look at these distortions in the market, 527 00:28:41,720 --> 00:28:44,480 Speaker 1: and I'm sorry central bankers have to have to. I'll 528 00:28:44,480 --> 00:28:46,840 Speaker 1: give you a worse currency pair than that awaging CRONI 529 00:28:46,960 --> 00:28:49,640 Speaker 1: US at the Japanese yen at one point overnight, a 530 00:28:49,760 --> 00:28:53,120 Speaker 1: six percentage point move on a currency path. Unreal. Let's 531 00:28:53,120 --> 00:28:54,800 Speaker 1: turn back to John right, Chann we and talk about 532 00:28:54,800 --> 00:28:56,800 Speaker 1: the next central bank move. US had a UK right 533 00:28:56,880 --> 00:28:59,520 Speaker 1: strategy still with us, John. On Thursday, there's an a 534 00:28:59,600 --> 00:29:02,280 Speaker 1: c being meeting. Imagine President the Guard wanted a little 535 00:29:02,280 --> 00:29:03,920 Speaker 1: bit more time to get a feed under the desk 536 00:29:04,120 --> 00:29:06,800 Speaker 1: and get used to her surroundings. How difficult does it 537 00:29:06,880 --> 00:29:08,960 Speaker 1: hurt for her right now to get that government council 538 00:29:09,080 --> 00:29:14,040 Speaker 1: on site to deploy something this Thursday? I mean unbelievably difficult, 539 00:29:14,040 --> 00:29:17,600 Speaker 1: because unlike the others, although everyone's rapidly heading that way, 540 00:29:17,680 --> 00:29:20,200 Speaker 1: you know they have to a large degree and has 541 00:29:20,280 --> 00:29:22,000 Speaker 1: been the case for a world run out of ammunition. 542 00:29:22,040 --> 00:29:24,719 Speaker 1: I mean, the markets expecting I think another sort of 543 00:29:25,080 --> 00:29:28,080 Speaker 1: twenty five basis points of ETV easing over the sort 544 00:29:28,120 --> 00:29:30,400 Speaker 1: of of course of the rest of this year. But 545 00:29:30,520 --> 00:29:33,080 Speaker 1: you know, given where they're starting from, it's really questionable 546 00:29:33,080 --> 00:29:35,680 Speaker 1: whether that's going to have any impact on anything. They 547 00:29:35,720 --> 00:29:39,960 Speaker 1: can obviously resume, step up intensify government bomb purchases, but 548 00:29:40,000 --> 00:29:42,480 Speaker 1: they need to change issuer limits to be able to 549 00:29:42,560 --> 00:29:46,440 Speaker 1: do that in any significant way. John, this is so important. 550 00:29:46,880 --> 00:29:50,040 Speaker 1: Mark they're being overcome by events in the event is 551 00:29:50,120 --> 00:29:55,120 Speaker 1: disinflation and outright deflation. I mean, how does central banks 552 00:29:55,280 --> 00:29:59,480 Speaker 1: act to the impulse of disinflation that we're living right now? 553 00:29:59,520 --> 00:30:03,120 Speaker 1: This is more me Um. Well, and you know if 554 00:30:03,160 --> 00:30:05,840 Speaker 1: they'd had ammunition then clearly that they would they would 555 00:30:05,840 --> 00:30:08,000 Speaker 1: be under pressure to deploy in a very significant way, 556 00:30:08,000 --> 00:30:09,480 Speaker 1: which is why we're pricing in what we are for 557 00:30:09,480 --> 00:30:11,680 Speaker 1: the FED for example, and to a degree the Bank 558 00:30:11,720 --> 00:30:13,640 Speaker 1: of England in terms of ray cuts and Kewie and 559 00:30:13,640 --> 00:30:15,400 Speaker 1: so on. As I say, the ETP is already there, 560 00:30:15,480 --> 00:30:18,440 Speaker 1: so um that the sort of pressure on fiscal policy 561 00:30:18,520 --> 00:30:21,040 Speaker 1: is going to be even more significant and come even earlier. 562 00:30:21,080 --> 00:30:23,840 Speaker 1: There then you have the problems of course in the 563 00:30:23,880 --> 00:30:26,800 Speaker 1: Eurozone of the fiscal Compact and the either unwillingness or 564 00:30:26,840 --> 00:30:30,800 Speaker 1: inability of governments to borrow within those rules. So you know, 565 00:30:31,560 --> 00:30:34,840 Speaker 1: the problems there are even more intense at a time 566 00:30:34,920 --> 00:30:38,239 Speaker 1: when monetary policy has its foot to the floor, and 567 00:30:38,320 --> 00:30:41,520 Speaker 1: yet we are now being assailed by this perfect storm 568 00:30:41,520 --> 00:30:44,640 Speaker 1: of events all pushing in the same direction in a 569 00:30:44,800 --> 00:30:47,960 Speaker 1: very severe and almost unprecedented way. I mean, it really is, 570 00:30:48,320 --> 00:30:51,000 Speaker 1: you know, emergency stations for all of these central banks 571 00:30:51,000 --> 00:30:54,280 Speaker 1: and governments, and in the case of the the Eurozone, 572 00:30:54,640 --> 00:30:57,520 Speaker 1: the monetary policy makers are pretty much run out of road, 573 00:30:57,560 --> 00:31:00,680 Speaker 1: and the fiscal policy makers are constrained are these rules. 574 00:31:00,720 --> 00:31:03,360 Speaker 1: So it's it's probably an even more severe situation and 575 00:31:03,440 --> 00:31:06,480 Speaker 1: even more worrying one there than elsewhere. I would argue, John, 576 00:31:06,640 --> 00:31:09,640 Speaker 1: we would saw this morning two year in five year 577 00:31:10,000 --> 00:31:13,680 Speaker 1: UK rates fall below zero for the first time, and 578 00:31:13,720 --> 00:31:17,640 Speaker 1: I'm wondering what is the prospect of negative rates over 579 00:31:17,800 --> 00:31:20,320 Speaker 1: in the United Kingdom as well as potentially even the 580 00:31:20,400 --> 00:31:24,760 Speaker 1: United States. Yeah, I mean, we had guilt yields. They're 581 00:31:24,760 --> 00:31:26,960 Speaker 1: back out sort of zero or slightly above now, but 582 00:31:27,040 --> 00:31:28,760 Speaker 1: we did have as you say, short to Sam guilty 583 00:31:28,800 --> 00:31:31,360 Speaker 1: eels drop below zero. They can certainly go lower. Still, 584 00:31:31,880 --> 00:31:34,640 Speaker 1: you know there is this this mantra now that it's 585 00:31:34,640 --> 00:31:37,280 Speaker 1: about the return of capital, not the return on capital, 586 00:31:37,760 --> 00:31:40,960 Speaker 1: and short dated sovereign bonds of well rated issues are 587 00:31:41,160 --> 00:31:43,520 Speaker 1: are the safest status out there, so people will keep 588 00:31:43,520 --> 00:31:47,080 Speaker 1: buying them even at negative yields in this sort of environment. 589 00:31:47,080 --> 00:31:50,080 Speaker 1: When you look at the swaps, market rates are still 590 00:31:50,200 --> 00:31:52,920 Speaker 1: some way above zero in the UK in the US 591 00:31:53,080 --> 00:31:55,040 Speaker 1: and likely to stay there as long as both the 592 00:31:55,080 --> 00:31:58,120 Speaker 1: central banks say, you know we can cut, we will 593 00:31:58,160 --> 00:32:04,040 Speaker 1: cut towards zero. Going negative brings counterproductive consequences by squeezing 594 00:32:04,040 --> 00:32:08,040 Speaker 1: banks margins excessively. The markets, the financial markets so far 595 00:32:08,160 --> 00:32:12,200 Speaker 1: have leaved that um that line, and therefore swap rates 596 00:32:12,320 --> 00:32:15,680 Speaker 1: I think have a very hard floor somewhere around twenty 597 00:32:15,720 --> 00:32:17,960 Speaker 1: five basis points or so, which we're sort of rapidly 598 00:32:18,000 --> 00:32:20,360 Speaker 1: heading towards. But I don't think they can go negative 599 00:32:21,080 --> 00:32:25,080 Speaker 1: unless negative policy rates becomes more realistic. I think we're 600 00:32:25,120 --> 00:32:27,920 Speaker 1: still some way from that in markets like the UK 601 00:32:28,000 --> 00:32:30,560 Speaker 1: in the US, John Greater catch, you appreciate your time 602 00:32:30,560 --> 00:32:32,680 Speaker 1: on such a busy morning. This morning, John right there 603 00:32:32,960 --> 00:32:46,600 Speaker 1: of Ubs, Gina Martin Adams running all of Bloomberg Intelligence 604 00:32:46,640 --> 00:32:50,600 Speaker 1: equity for US as well. Corporations after price and disinflation 605 00:32:50,640 --> 00:32:53,520 Speaker 1: deflation as well, do they have sector to sector with 606 00:32:53,640 --> 00:32:56,080 Speaker 1: your vast team that you've got, folks that takes up 607 00:32:56,080 --> 00:32:59,520 Speaker 1: a football, it's like a football field of securities research. 608 00:33:00,040 --> 00:33:03,880 Speaker 1: You look at your team. Do corporations have the elasticity, 609 00:33:03,960 --> 00:33:07,080 Speaker 1: the malee ability to adjust to what we see on 610 00:33:07,120 --> 00:33:10,000 Speaker 1: our screen? You know? I think it depends on what corporations. 611 00:33:10,040 --> 00:33:13,560 Speaker 1: Obviously energy companies are at the center of weakness, but 612 00:33:14,360 --> 00:33:17,760 Speaker 1: if you look at you look at consumer staples companies, 613 00:33:17,800 --> 00:33:21,040 Speaker 1: you look at healthcare companies, you look at even technology companies, 614 00:33:21,080 --> 00:33:23,360 Speaker 1: it's a completely different ball game. So I think what 615 00:33:23,440 --> 00:33:26,120 Speaker 1: you need to do is be a bit discerning in 616 00:33:26,840 --> 00:33:30,320 Speaker 1: within your equity market exposure. Obviously, the value in high 617 00:33:30,360 --> 00:33:33,480 Speaker 1: vall stocks are going to continue to suffer. Obviously the energy, 618 00:33:33,560 --> 00:33:35,560 Speaker 1: some of the industrials and materials names are going to 619 00:33:35,600 --> 00:33:38,880 Speaker 1: continue to suffer. But there are potential beneficiaries. And I 620 00:33:38,920 --> 00:33:40,800 Speaker 1: think over the course of this day, you're going to 621 00:33:40,920 --> 00:33:43,520 Speaker 1: see some cooler heads start to prevail, and you're going 622 00:33:43,560 --> 00:33:45,760 Speaker 1: to see people start to think about Okay, what do 623 00:33:46,880 --> 00:33:50,440 Speaker 1: zero percent interest rates and thirty dial dollar oil prices 624 00:33:50,520 --> 00:33:54,640 Speaker 1: really mean for behavior longer term and function functionally? They 625 00:33:54,720 --> 00:33:57,080 Speaker 1: mean it's effectively a tax cut for the U. S. 626 00:33:57,120 --> 00:34:01,120 Speaker 1: Consumer once we get through coronavirus. It's very supportive and 627 00:34:01,200 --> 00:34:04,200 Speaker 1: very stimulative. It's hard to see in an environment of 628 00:34:04,240 --> 00:34:07,680 Speaker 1: panic and an environment like this, but the reality is 629 00:34:07,760 --> 00:34:10,840 Speaker 1: in this cycle, we've dealt with a lot of shocks. 630 00:34:11,040 --> 00:34:13,560 Speaker 1: Two thousand eleven, we had a contraction in GDP growth 631 00:34:13,560 --> 00:34:17,040 Speaker 1: for a quarter. We almost had a contraction in GDP 632 00:34:17,160 --> 00:34:20,160 Speaker 1: growth as well. So I do think that markets are very, 633 00:34:20,239 --> 00:34:24,560 Speaker 1: very volatile in the short run, but ultimately typed. This 634 00:34:24,600 --> 00:34:28,040 Speaker 1: type of panic behavior creates an opportunity for investors. What's 635 00:34:28,040 --> 00:34:31,360 Speaker 1: the panic in the bank stocks? As John was talking about, 636 00:34:31,719 --> 00:34:34,719 Speaker 1: what's that implying? I mean, it's the bank stocks are 637 00:34:34,719 --> 00:34:39,360 Speaker 1: also value stocks, right, values getting thrown completely out. We 638 00:34:39,440 --> 00:34:41,000 Speaker 1: got and we did a little bit analysis of the 639 00:34:41,000 --> 00:34:44,560 Speaker 1: momentum relative to value trade. It's very typical that what 640 00:34:44,680 --> 00:34:47,480 Speaker 1: you see in an environment of markets following value stocks 641 00:34:47,520 --> 00:34:50,280 Speaker 1: fall the most. It also is a function of interest 642 00:34:50,360 --> 00:34:52,960 Speaker 1: rates are falling, right, the yield curve is still very flat. 643 00:34:53,000 --> 00:34:55,440 Speaker 1: Interest rates are falling, so there's an assumption that interest 644 00:34:55,520 --> 00:34:59,120 Speaker 1: margin is going to get squeezed. Obviously, capital markets activity 645 00:34:59,160 --> 00:35:01,480 Speaker 1: is going to be very very light for the first 646 00:35:01,560 --> 00:35:04,279 Speaker 1: quarter at the very least, because there's no activity their 647 00:35:04,360 --> 00:35:07,400 Speaker 1: high beta, so they also are going to fall faster 648 00:35:07,520 --> 00:35:10,239 Speaker 1: than the market. So they're unfortunately just in a bad 649 00:35:10,320 --> 00:35:14,880 Speaker 1: position sort of structurally. Now, big big stocks like JP Morgan, 650 00:35:14,960 --> 00:35:17,480 Speaker 1: big companies like that, they're just getting diseaser babies that 651 00:35:17,520 --> 00:35:20,680 Speaker 1: are getting thrown out with the bathwater. And I'm looking 652 00:35:20,760 --> 00:35:22,680 Speaker 1: John at JP Morgan, I'm trying to do the math now. 653 00:35:22,680 --> 00:35:28,200 Speaker 1: I think it's down twenties something from the peak from 654 00:35:28,200 --> 00:35:30,120 Speaker 1: thee on the year basis. You know, from the peak 655 00:35:30,760 --> 00:35:33,319 Speaker 1: it's trading at nineties seven right now. Dividend the north 656 00:35:33,320 --> 00:35:35,960 Speaker 1: of three percent on JP Morgan, on the likes of 657 00:35:35,960 --> 00:35:39,880 Speaker 1: Will's far north of five percent. Obviously, in an environment 658 00:35:39,920 --> 00:35:42,440 Speaker 1: like this, the dividendials are gonna look nice because the 659 00:35:42,480 --> 00:35:44,759 Speaker 1: stock is adjusting so quickly, and the dividends may well 660 00:35:44,840 --> 00:35:47,040 Speaker 1: change on some of these big energy players, on some 661 00:35:47,080 --> 00:35:48,960 Speaker 1: of the big financials as well. I also think it's 662 00:35:49,000 --> 00:35:53,359 Speaker 1: always worth emphasizing that point. But income in equities right now, 663 00:35:53,800 --> 00:35:57,000 Speaker 1: it must look ridiculously attractive China. It is, though, I 664 00:35:57,040 --> 00:35:59,399 Speaker 1: think you again have to pick your spots carefully because 665 00:35:59,400 --> 00:36:02,920 Speaker 1: if you'd of segment the income stream the dividend income 666 00:36:02,960 --> 00:36:05,160 Speaker 1: payers in the SMP five D, you look at the 667 00:36:05,239 --> 00:36:08,120 Speaker 1: highest yielders, they're actually becoming higher and higher beta stocks. 668 00:36:08,120 --> 00:36:11,560 Speaker 1: I mean many of them are energy companies. Many of 669 00:36:11,560 --> 00:36:15,319 Speaker 1: them are you would qualify them as near junk the risk, right, 670 00:36:15,360 --> 00:36:17,040 Speaker 1: and that's the risk. So you want to be really 671 00:36:17,080 --> 00:36:20,160 Speaker 1: careful on the divenand sustainability as you make that point. 672 00:36:20,200 --> 00:36:23,160 Speaker 1: I actually don't think the financials difendstainable sustainability is an 673 00:36:23,160 --> 00:36:25,480 Speaker 1: issue at all. I think it's very sustainable. The financials 674 00:36:25,520 --> 00:36:28,800 Speaker 1: never took on leverage this cycle. They're very low leverage, 675 00:36:28,880 --> 00:36:32,000 Speaker 1: especially relative to where they were in the last cycle. However, 676 00:36:32,080 --> 00:36:34,479 Speaker 1: the energy companies are certainly at risk, and you're seeing 677 00:36:34,480 --> 00:36:36,560 Speaker 1: that reflected in energy stocks. I mean, small cap energy 678 00:36:36,560 --> 00:36:39,080 Speaker 1: stocks dropped ten percent on Friday. They're going to get 679 00:36:39,080 --> 00:36:41,680 Speaker 1: absolutely crushed again. What are they going to stay in business? 680 00:36:41,680 --> 00:36:44,640 Speaker 1: Do they have the solveigncy liquidity issues that Lisa Bramwitz 681 00:36:44,719 --> 00:36:47,319 Speaker 1: is talking about some of the small caps probably not, 682 00:36:47,400 --> 00:36:50,120 Speaker 1: And we've already seen a bankruptcy and small cap energy. 683 00:36:50,360 --> 00:36:52,759 Speaker 1: This year we'll probably see a couple of more because 684 00:36:52,800 --> 00:36:55,479 Speaker 1: it's not sustainable. At a level of thirty dollars twenty 685 00:36:55,520 --> 00:36:57,480 Speaker 1: five dollars, these companies will not be able to stay 686 00:36:57,480 --> 00:37:02,040 Speaker 1: in business. Uh, John the two year German zero point 687 00:37:02,120 --> 00:37:06,400 Speaker 1: nine seven three straight down, No no capture yet, absolutely incredible. 688 00:37:06,440 --> 00:37:08,160 Speaker 1: Jenne Fan Tansy to catch out with you. What a 689 00:37:08,239 --> 00:37:10,120 Speaker 1: morning busy for everyone, and thank you very much for 690 00:37:10,160 --> 00:37:22,799 Speaker 1: being by the Sumple impact right he out. If you're 691 00:37:22,840 --> 00:37:25,719 Speaker 1: fighting for a wild card spot and you go out 692 00:37:25,760 --> 00:37:28,320 Speaker 1: to the West Coast and you play the three patsy 693 00:37:28,440 --> 00:37:31,960 Speaker 1: teams of the National Hockey League and you go L 694 00:37:32,440 --> 00:37:36,480 Speaker 1: L L, that's not a good thing. We thought he'd 695 00:37:36,480 --> 00:37:38,920 Speaker 1: be out today, not with the virus, but just suffering 696 00:37:38,960 --> 00:37:42,200 Speaker 1: with the Toronto maple Lea's Luke Kawa joins us this morning. 697 00:37:42,239 --> 00:37:44,920 Speaker 1: I mean before they went out into the West Coast swing, 698 00:37:44,960 --> 00:37:48,120 Speaker 1: that's supposed to be www, right, I mean, but like 699 00:37:48,360 --> 00:37:50,799 Speaker 1: whenever anyone goes on the West Coast swing, they was right, 700 00:37:50,800 --> 00:37:53,000 Speaker 1: Like the Penguins just did that West Coast swing right 701 00:37:53,000 --> 00:37:55,279 Speaker 1: before the leaves and they went and three too. But yeah, 702 00:37:55,560 --> 00:37:57,080 Speaker 1: if I if I had to stay at home with 703 00:37:57,120 --> 00:37:59,200 Speaker 1: a broken ego. I'd be at home every day. So 704 00:37:59,280 --> 00:38:02,640 Speaker 1: we're we're in the office again today. Look how with us? 705 00:38:02,680 --> 00:38:06,040 Speaker 1: And he was exceptionally strong over the weekend. Look, you 706 00:38:06,120 --> 00:38:11,080 Speaker 1: put out a spectacular chart of the volatility of the 707 00:38:11,200 --> 00:38:13,640 Speaker 1: ten year yield, and are you willing to say we're 708 00:38:13,680 --> 00:38:17,160 Speaker 1: back to Lehman territory? Oh no, we're We're above that. 709 00:38:17,480 --> 00:38:21,239 Speaker 1: It's like the the t y VIX, which is the 710 00:38:21,360 --> 00:38:23,520 Speaker 1: it's the same construction methodology as a VIX, So it's 711 00:38:23,520 --> 00:38:26,399 Speaker 1: actually measuring the volatility of the price and the ten 712 00:38:26,480 --> 00:38:29,520 Speaker 1: year note rather than rather than the yield. So you 713 00:38:29,520 --> 00:38:31,960 Speaker 1: you could say just because of base effects, uh, you know, 714 00:38:32,040 --> 00:38:34,080 Speaker 1: you should be thinking you're getting jump here as we 715 00:38:34,400 --> 00:38:37,759 Speaker 1: approached zero. But yeah, that we got as high as 716 00:38:37,840 --> 00:38:41,600 Speaker 1: essentially fourteen seven five I believe this morning. What that 717 00:38:41,640 --> 00:38:44,040 Speaker 1: means in practical terms is essentially you're betting for the 718 00:38:44,120 --> 00:38:48,360 Speaker 1: tenure note to move about one percentage point per day, 719 00:38:48,400 --> 00:38:52,080 Speaker 1: which is just a crazy degree of volatility in bonds expected. 720 00:38:52,120 --> 00:38:56,040 Speaker 1: So yeah, that's that's happened when you draining electricity in 721 00:38:56,080 --> 00:38:58,440 Speaker 1: Manhattan and loaded up the three Bloombergs this morning, what 722 00:38:58,440 --> 00:39:01,360 Speaker 1: did you see on the screen. Oh, when I loaded 723 00:39:01,400 --> 00:39:03,920 Speaker 1: up this morning. The main thing that saw that you know, 724 00:39:03,960 --> 00:39:06,120 Speaker 1: freaked me out and is freaking and everyone out, is 725 00:39:06,160 --> 00:39:09,760 Speaker 1: the the extent to which how quickly this became credic 726 00:39:09,840 --> 00:39:13,400 Speaker 1: centric concern. So last week you had a really odd 727 00:39:13,400 --> 00:39:17,399 Speaker 1: dichotomy where you had cd X investment grade and high 728 00:39:17,480 --> 00:39:21,239 Speaker 1: yield widening by you know, meaningful amounts, and stocks were 729 00:39:21,239 --> 00:39:25,319 Speaker 1: still up. The amount of that discrepancy was very, very rare, 730 00:39:25,560 --> 00:39:30,480 Speaker 1: and the last time we saw anything like everything exploded. 731 00:39:30,560 --> 00:39:33,719 Speaker 1: Like right now, if you're looking at high yield or 732 00:39:34,080 --> 00:39:37,640 Speaker 1: investment grade c d X relative to its three month average, 733 00:39:37,800 --> 00:39:40,719 Speaker 1: it's we're getting into the six sigmas, to which I 734 00:39:40,719 --> 00:39:46,400 Speaker 1: know you folks, this is the protection of credit to 735 00:39:46,480 --> 00:39:51,799 Speaker 1: false swaps against all of these troubled debt securities. And 736 00:39:51,840 --> 00:39:54,919 Speaker 1: they're on a trend, and then when they get off 737 00:39:54,960 --> 00:39:58,440 Speaker 1: the trend, they go out one or two standard deviations. 738 00:39:59,120 --> 00:40:03,200 Speaker 1: Three is normal, four is ugly, and the medical business 739 00:40:03,320 --> 00:40:06,480 Speaker 1: six standard deviations is ugly. In this check the late Jack, well, 740 00:40:06,560 --> 00:40:10,040 Speaker 1: just six sigma, isn't it. Yeah? That's that's yeah. I 741 00:40:10,600 --> 00:40:13,080 Speaker 1: I couldn't I certainly couldn't do it any better. And yeah, 742 00:40:13,080 --> 00:40:17,120 Speaker 1: the this is the yeah, so like this is essentially 743 00:40:17,120 --> 00:40:19,560 Speaker 1: what we're seeing is a lot of this has to 744 00:40:19,560 --> 00:40:22,160 Speaker 1: do obviously with energy and energy being a focal point 745 00:40:22,520 --> 00:40:25,040 Speaker 1: in the high yield universe, but the extent to which 746 00:40:25,080 --> 00:40:28,000 Speaker 1: this is also in investment grade also really makes you 747 00:40:28,040 --> 00:40:31,160 Speaker 1: think this is about more generalized credit stress and people 748 00:40:31,239 --> 00:40:33,479 Speaker 1: kind of all jump into the same place at once. 749 00:40:33,680 --> 00:40:37,240 Speaker 1: Which makes these product weird is that everyone's loved hedging 750 00:40:38,080 --> 00:40:40,440 Speaker 1: with I, G C, d X, just because you know, 751 00:40:40,640 --> 00:40:43,200 Speaker 1: when everything hits the fan, you know, it has that convexity, 752 00:40:43,200 --> 00:40:45,839 Speaker 1: it gets a real jump. But what the what that 753 00:40:45,920 --> 00:40:48,120 Speaker 1: means though, is if is if this is the one 754 00:40:48,160 --> 00:40:50,319 Speaker 1: that everyone wants to own, it also is the one 755 00:40:50,400 --> 00:40:52,920 Speaker 1: that dealers are the most short. So you have the 756 00:40:52,920 --> 00:40:55,319 Speaker 1: effect of buying this back just to kind of had 757 00:40:55,360 --> 00:40:58,840 Speaker 1: your exposure. Let me translate this. You own something and 758 00:40:58,920 --> 00:41:01,120 Speaker 1: you want to protect. Shouldn't have guessed it, So you 759 00:41:01,280 --> 00:41:05,480 Speaker 1: hedge with this fancy pants investment, great security. It's gone 760 00:41:05,480 --> 00:41:08,239 Speaker 1: bad in the last twenty four hours, right, Oh it's 761 00:41:08,280 --> 00:41:10,040 Speaker 1: I mean, if you've if you've hatched with this, it's 762 00:41:10,080 --> 00:41:12,319 Speaker 1: gone good. Your hedge has gone good. The you know, 763 00:41:12,360 --> 00:41:16,200 Speaker 1: the underlying market itself definitely not good. But you know, 764 00:41:16,360 --> 00:41:18,920 Speaker 1: the hedges, the hedges performing in a way I think 765 00:41:18,960 --> 00:41:22,760 Speaker 1: people would expect it to at a time like this, which, uh, 766 00:41:22,800 --> 00:41:24,120 Speaker 1: you know, there are a lot of things out there 767 00:41:24,160 --> 00:41:26,799 Speaker 1: that haven't necessarily done that. So look if you as 768 00:41:26,840 --> 00:41:29,799 Speaker 1: you look across asset classes here as the equities kind 769 00:41:29,800 --> 00:41:33,120 Speaker 1: of limited down, uh, the yield curve below one percent 770 00:41:33,160 --> 00:41:35,279 Speaker 1: for the first time ever, oil falling out of bed. 771 00:41:36,160 --> 00:41:38,840 Speaker 1: Is it panic in the market right now? Is this 772 00:41:38,920 --> 00:41:42,280 Speaker 1: different than maybe last week? Yeah, I'd say the main 773 00:41:42,320 --> 00:41:45,600 Speaker 1: thing to watch for, like your your clear sign of panic. 774 00:41:45,600 --> 00:41:47,520 Speaker 1: And I remember this from when I was talking with 775 00:41:47,560 --> 00:41:52,359 Speaker 1: Tom on the morning of February and I believe we 776 00:41:52,360 --> 00:41:55,239 Speaker 1: were wondering, like, why the heck this is huge risk off. 777 00:41:55,239 --> 00:41:57,760 Speaker 1: We just had the biggest one day jumping volcualty on record. 778 00:41:57,960 --> 00:42:01,000 Speaker 1: Why are short term treasury yields growing up? And Tom said, oh, 779 00:42:01,040 --> 00:42:02,680 Speaker 1: that's easy there. You know, they're being used as a 780 00:42:02,719 --> 00:42:05,800 Speaker 1: source of funds. Once the treasury market starts to become 781 00:42:05,840 --> 00:42:09,080 Speaker 1: a source of funds, then that probably means we're we're 782 00:42:09,120 --> 00:42:12,759 Speaker 1: in true, true panic. However, things look, you know, I 783 00:42:13,200 --> 00:42:15,160 Speaker 1: you can't not call this panic, but things can get 784 00:42:15,160 --> 00:42:18,120 Speaker 1: panicky or panicky or looking at gold here a little 785 00:42:18,160 --> 00:42:21,160 Speaker 1: bit of a bid there that continues that trajectory. So 786 00:42:21,239 --> 00:42:24,640 Speaker 1: that's just your traditional flight to quality. Look yeah, I 787 00:42:24,640 --> 00:42:27,200 Speaker 1: mean the flight to quality message is actually used. Something 788 00:42:27,239 --> 00:42:30,319 Speaker 1: you see very uniformly cross markets. If you look at 789 00:42:30,400 --> 00:42:33,120 Speaker 1: factors in the equity market, what's held up the best 790 00:42:33,320 --> 00:42:36,239 Speaker 1: the profitability factor. If you look at a basket of 791 00:42:36,280 --> 00:42:40,160 Speaker 1: Goldman stacks stocks that have strong balance sheets relative to 792 00:42:40,200 --> 00:42:42,799 Speaker 1: the weak ones, that's at its best level since two 793 00:42:42,800 --> 00:42:45,080 Speaker 1: thousand twelve. So this is where people are hiding. It 794 00:42:45,160 --> 00:42:48,280 Speaker 1: to yield, and it's in quality. And although the energy 795 00:42:48,320 --> 00:42:51,240 Speaker 1: companies have one in the yield, they don't have the other. Okay, 796 00:42:51,239 --> 00:42:52,680 Speaker 1: well we're gonna do Here's do a data check in 797 00:42:52,719 --> 00:42:54,840 Speaker 1: the market opening. We're thrilled to Mr Kawa and his 798 00:42:55,080 --> 00:42:57,440 Speaker 1: entourage will stay with us through the market opening and 799 00:42:57,480 --> 00:43:01,520 Speaker 1: will continue this really sophistic gig conversation, trying to get 800 00:43:01,520 --> 00:43:05,520 Speaker 1: convexity into every third minute discussion as well. Convexity, folks, 801 00:43:05,600 --> 00:43:08,080 Speaker 1: is when you have to get out. It's the acceleration 802 00:43:08,160 --> 00:43:12,279 Speaker 1: of trade going the opposite uh way. What you need 803 00:43:12,360 --> 00:43:14,840 Speaker 1: to know right now is many of these safe havens 804 00:43:14,840 --> 00:43:18,480 Speaker 1: have moved and moved abruptly forty five seconds away from 805 00:43:18,520 --> 00:43:22,520 Speaker 1: the market open. Gold up thirteen dollars sixty six ounces, 806 00:43:22,560 --> 00:43:27,520 Speaker 1: and critically, Japanese yen right now is testing the strength 807 00:43:27,600 --> 00:43:31,600 Speaker 1: that we saw at three a m. And somewhat near 808 00:43:31,680 --> 00:43:34,480 Speaker 1: where we were at eleven pm last night in the 809 00:43:34,520 --> 00:43:38,799 Speaker 1: early Asia morning. The en right now, Paul Sweeney one 810 00:43:38,800 --> 00:43:41,600 Speaker 1: oh one eighty four, Yes, search for it, as Lucas 811 00:43:41,640 --> 00:43:43,919 Speaker 1: is mentioning search for safe haven. We see that again 812 00:43:43,960 --> 00:43:46,960 Speaker 1: at one one eight five. Uh. It's interesting here at 813 00:43:46,960 --> 00:43:50,560 Speaker 1: this looking at crewed here off even here thirty two 814 00:43:50,560 --> 00:43:53,359 Speaker 1: dollars sixty seven cents for w t I right here. 815 00:43:53,400 --> 00:43:56,799 Speaker 1: So clearly that supply demand issue really weighing on the 816 00:43:56,800 --> 00:43:59,960 Speaker 1: markets here given the Saudi news. This is Bloomberg Radio World. 817 00:44:00,040 --> 00:44:02,240 Speaker 1: Why we welcome here from New York and Bloomberg eleven 818 00:44:02,320 --> 00:44:06,000 Speaker 1: three oh Sirius XM channel one nineteen Bloomberg one oh 819 00:44:06,080 --> 00:44:09,239 Speaker 1: six one in Boston are special coverage today. We are 820 00:44:09,280 --> 00:44:12,840 Speaker 1: commercial free, and we thank our sponsors very much for 821 00:44:12,880 --> 00:44:16,640 Speaker 1: allowing us to do this today. The Dow opens off 822 00:44:16,719 --> 00:44:21,080 Speaker 1: seventeen hundred points. There's variant limit constraints as well. Paul, 823 00:44:21,160 --> 00:44:23,000 Speaker 1: I'll pick it up here as you look at the data. 824 00:44:23,040 --> 00:44:26,160 Speaker 1: But it's something to say, we're down five thousand plus 825 00:44:26,200 --> 00:44:29,200 Speaker 1: points from where we were not that long ag Yeah, 826 00:44:29,400 --> 00:44:31,280 Speaker 1: three weeks ago, Tom, we were you know, talking about 827 00:44:31,280 --> 00:44:34,000 Speaker 1: we're talking about daily highst almost every day here. So 828 00:44:34,040 --> 00:44:36,680 Speaker 1: what's changed here, Well, what's changed is you know that 829 00:44:37,000 --> 00:44:40,680 Speaker 1: just the outlook for global GDP growth driven by the 830 00:44:40,719 --> 00:44:43,040 Speaker 1: pronuct of virus probably picked up as well. The d 831 00:44:43,239 --> 00:44:46,359 Speaker 1: X why that blended index ninety four point eight zero, 832 00:44:46,480 --> 00:44:51,040 Speaker 1: the yen one two rounded up euro dollar one one 833 00:44:51,120 --> 00:44:55,120 Speaker 1: fourteen sixty four itself. We're down seventeen hundred, make it 834 00:44:55,239 --> 00:44:58,200 Speaker 1: eighteen hundred points in the dow and we'll settle out 835 00:44:58,200 --> 00:45:01,680 Speaker 1: in over the next fifteen minutes or so. The levels 836 00:45:01,719 --> 00:45:06,719 Speaker 1: standard and poors five seven zero to seven seven zero 837 00:45:07,000 --> 00:45:11,960 Speaker 1: and did doubt thousand thirty five right now our opening 838 00:45:12,000 --> 00:45:15,960 Speaker 1: bell always brought to you by SEI. Today's competitive marketplace 839 00:45:16,480 --> 00:45:21,520 Speaker 1: requires asset managers to become more operationally adept. See how 840 00:45:21,719 --> 00:45:26,080 Speaker 1: you can transform your business with SEIS Global Platform at 841 00:45:26,280 --> 00:45:30,960 Speaker 1: s e I C dot com slash i M S 842 00:45:31,120 --> 00:45:34,200 Speaker 1: as well Brazilian Real looking at e M that's out 843 00:45:34,200 --> 00:45:37,640 Speaker 1: the new levels four point seven seven even Turkish leer 844 00:45:37,719 --> 00:45:40,960 Speaker 1: with all the idiosyncrasies there of the border and with 845 00:45:41,120 --> 00:45:44,520 Speaker 1: Syria and Russia, Turkish lire a week or today, as 846 00:45:44,520 --> 00:45:47,920 Speaker 1: well as six point one one Mexican pays one point 847 00:45:47,920 --> 00:45:50,640 Speaker 1: one two, and I bringing up South African rand but 848 00:45:50,840 --> 00:45:55,440 Speaker 1: I can't because Mike my terminals on fire here. Well, 849 00:45:55,480 --> 00:45:58,120 Speaker 1: I I can't remember if I've ever seen a negative 850 00:45:58,480 --> 00:46:02,759 Speaker 1: one eight zero zero rowe, no doubt, no I have not. 851 00:46:03,160 --> 00:46:05,320 Speaker 1: You know, we're down seven percent here across the equity 852 00:46:05,360 --> 00:46:08,400 Speaker 1: indices right here. Uh, look as we look at the 853 00:46:08,400 --> 00:46:10,680 Speaker 1: opening here a couple of minutes into it, you know again, 854 00:46:11,000 --> 00:46:14,080 Speaker 1: equity markets now just kind of opening up here. How 855 00:46:14,080 --> 00:46:16,360 Speaker 1: do you think? What do you think of these expectations 856 00:46:16,400 --> 00:46:18,319 Speaker 1: for on the average trading desk out there? You are 857 00:46:18,360 --> 00:46:20,960 Speaker 1: they saying, hey, we gotta step in here and provide 858 00:46:21,000 --> 00:46:23,719 Speaker 1: some support, or are they just kind of saying this 859 00:46:23,880 --> 00:46:26,520 Speaker 1: is really outside of all of our models. Let's stay 860 00:46:26,520 --> 00:46:28,440 Speaker 1: on the sidelines, unless you know, we really have to 861 00:46:28,480 --> 00:46:31,240 Speaker 1: get in there. The main thing I've heard from people 862 00:46:31,480 --> 00:46:33,320 Speaker 1: who I've been talking to you over the weekend, because 863 00:46:33,640 --> 00:46:36,120 Speaker 1: everyone who's been anyone has been in over the weekend 864 00:46:36,200 --> 00:46:40,160 Speaker 1: gaming out like what our vulnerabilities, etcetera, etcetera. That's the 865 00:46:40,160 --> 00:46:43,160 Speaker 1: main concern. Nobody is trying to get greedy right here, 866 00:46:43,200 --> 00:46:45,439 Speaker 1: Like there's that line when the time comes to buy, 867 00:46:45,520 --> 00:46:47,800 Speaker 1: you won't want to. That's very much the order of 868 00:46:47,800 --> 00:46:50,760 Speaker 1: the day right now. Folks are mainly interested in, Okay, 869 00:46:50,760 --> 00:46:53,719 Speaker 1: where's our leverage, where's our vulnerable positions that are going 870 00:46:53,760 --> 00:46:56,359 Speaker 1: to be tough to exit, and let's make sure we 871 00:46:56,400 --> 00:46:59,239 Speaker 1: do that now. Look, how can you stay with us 872 00:46:59,239 --> 00:47:01,920 Speaker 1: for a few more minutes, Luke? You've got a pressing 873 00:47:02,000 --> 00:47:05,680 Speaker 1: day calendar as well, Apple Computer negative twenty one. That's 874 00:47:05,719 --> 00:47:08,879 Speaker 1: a seven point five percent move added up over three 875 00:47:09,000 --> 00:47:11,799 Speaker 1: days seven eight eleven. I'm gonna call twelve percent down 876 00:47:12,200 --> 00:47:16,520 Speaker 1: Apple Computer. How about JP Morgan is another indicator of 877 00:47:16,560 --> 00:47:20,480 Speaker 1: where we are down thirteen percent uh plus nine make 878 00:47:20,520 --> 00:47:23,040 Speaker 1: a ten over the last uh two days, So in 879 00:47:23,160 --> 00:47:27,600 Speaker 1: three days, that's twenty two ish percent on JP Morgan 880 00:47:28,120 --> 00:47:30,720 Speaker 1: as well, am I as you go with another high flyer, 881 00:47:30,800 --> 00:47:34,320 Speaker 1: Luke Howard driving that big machine that he drives, Tesla 882 00:47:34,400 --> 00:47:38,759 Speaker 1: down thirteen percent plus six makes an eighteen nine over 883 00:47:38,760 --> 00:47:41,480 Speaker 1: the last three days. Some of the indications that we 884 00:47:41,520 --> 00:47:44,799 Speaker 1: see out there in negative eighteen fifty five on the 885 00:47:44,840 --> 00:47:47,239 Speaker 1: down Paul, we haven't. We haven't captured a big yet 886 00:47:47,239 --> 00:47:50,080 Speaker 1: on the opening, have we? No, we really haven't. Here Again, 887 00:47:50,120 --> 00:47:52,200 Speaker 1: we've been sitting down here, you know, Tom down about 888 00:47:52,200 --> 00:47:54,560 Speaker 1: seven percent here and again it's a term that we've 889 00:47:54,640 --> 00:47:56,160 Speaker 1: used a little bit over the last couple of weeks, 890 00:47:56,160 --> 00:47:58,200 Speaker 1: and we've heard some of our strategist talk about it, 891 00:47:58,200 --> 00:48:01,120 Speaker 1: which is price discovery. Here. There's so many new variables 892 00:48:01,160 --> 00:48:03,040 Speaker 1: in the marketplace, and we're seeing it on the up 893 00:48:03,239 --> 00:48:06,520 Speaker 1: end down moves. Uh, kind of investors looking for some 894 00:48:06,640 --> 00:48:09,759 Speaker 1: levels here. You know, look what a flows ben in 895 00:48:09,760 --> 00:48:14,719 Speaker 1: our our institutions flush with cash right now. That's been 896 00:48:14,760 --> 00:48:16,959 Speaker 1: a difficult thing to get a handle on. I think 897 00:48:17,400 --> 00:48:20,359 Speaker 1: you know that's Eric ball Tunas, our senior et f 898 00:48:20,360 --> 00:48:23,240 Speaker 1: A strategist, can probably give you a lot better handle 899 00:48:23,280 --> 00:48:25,520 Speaker 1: on that. I I do subscribe to the theory though 900 00:48:25,560 --> 00:48:28,040 Speaker 1: that in general coming into this, if you just look 901 00:48:28,080 --> 00:48:31,320 Speaker 1: at kind of notional exposure uh that you would estimate 902 00:48:31,480 --> 00:48:34,799 Speaker 1: through your SMPE, many's kind of the the build up 903 00:48:34,800 --> 00:48:38,200 Speaker 1: in those contracts, etcetera, uh NASDAC to those were those 904 00:48:38,200 --> 00:48:41,239 Speaker 1: are relatively high across the asset management space, and it 905 00:48:41,280 --> 00:48:43,560 Speaker 1: does suggest you know that We were going into this 906 00:48:43,960 --> 00:48:46,160 Speaker 1: a little a little happier about risk that we had 907 00:48:46,200 --> 00:48:48,640 Speaker 1: been in several years. Look, you can leave. We have 908 00:48:48,680 --> 00:48:54,080 Speaker 1: a trading halt. Look here, well this is a level 909 00:48:54,320 --> 00:48:58,880 Speaker 1: one trading halt. These have been put in place ages ago, 910 00:48:59,280 --> 00:49:02,040 Speaker 1: and Lee is you know, not to make light about it, 911 00:49:02,400 --> 00:49:06,359 Speaker 1: but this is for the good of discovering market stability 912 00:49:06,880 --> 00:49:10,600 Speaker 1: in our indiscoverable pricing call, isn't it look Howard thinking. 913 00:49:12,080 --> 00:49:16,319 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 914 00:49:16,360 --> 00:49:21,680 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 915 00:49:21,719 --> 00:49:25,960 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 916 00:49:26,000 --> 00:49:30,200 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.