Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm term Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg good
Speaker 1: friend of mine, a good friend of the program, of course,
Speaker 1: and a gentleman then ignored the happy talk of the
Speaker 1: v shaped recovery in the middle of February when the
Speaker 1: equity market was hitting all time highs. A gentleman who said,
Speaker 1: do not buy that deep when many people ventured back
Speaker 1: in as we got that initial correction, I'm pleased to
Speaker 1: say he joins us now. Mohammad al Arian, Alliance chief
Speaker 1: economic advisor and Bloomberg opinion columnist. Mohammed, Let's begin with credit.
Speaker 1: Why is that so much of a bigger focus on
Speaker 1: a morning like this morning, Because it is the way
Speaker 1: in which the disruptions will transmit who are not just
Speaker 1: market segments, but the real economy. Credit has been vulnerable
Speaker 1: because it has been very decoupled from the underlying fundamentals.
Speaker 1: So when you shock it, as it's being shocked right
Speaker 1: now by a combination of no economic anchor, no technical anchor,
Speaker 1: and no policy anchor. What you're going to get is
Speaker 1: a liquidity price gapping and the closure of the primary
Speaker 1: issuance market. The primary has been seized that for a
Speaker 1: couple of weeks. It opened a little bit last week.
Speaker 1: Let's some pick some of these different themes. I want
Speaker 1: to start with the parallel that we can draw at
Speaker 1: the moment. Clearly we've gone beyond December. It's fifteen sixteen,
Speaker 1: the last time we had a crude route and a
Speaker 1: growth shark. Is that a decent playbook for you right now, Mohammed?
Speaker 1: Or is this radically different? It is decent because that
Speaker 1: fall in oil prices was triggered by the same thing
Speaker 1: that this one was, which is the decision of Saudi
Speaker 1: Arabia to no longer play the swing producer role in
Speaker 1: an attempt to imposet discipline on other oil producers. So
Speaker 1: the cause is the same. However, the context is more difficult,
Speaker 1: first because global demand is slipping very quickly, and second
Speaker 1: because now you need to Russia two turn around in
Speaker 1: a very humiliating fashion. So this one is going to
Speaker 1: be a little bit trickier for Saudi Arabia to achieve
Speaker 1: what is trying to achieve Muhamadalarian with his folks with aliens,
Speaker 1: and of course writing for Bloomberg Opinion, of course joining
Speaker 1: Cambridge University here in the Autumn Folks. One of the
Speaker 1: books you can read in this if you want to
Speaker 1: grab onto something is Dr Larian is The Only Game
Speaker 1: in Town. Look for the movie fourth of July two
Speaker 1: thousand twenty two. I believe Dicaprios in that movie Dr
Speaker 1: Larian in the Only Game in Town. Let me quote
Speaker 1: from chapter one. Like ancient doctors who tried to explain
Speaker 1: the causes of diseases while knowing nothing about germs or acteria,
Speaker 1: academics sought to describe the functioning of developed economies, etcetera.
Speaker 1: The great Ferdinando Giuliano who writes for Bloomberg Opinion as well.
Speaker 1: How are we doing with the germs and bacteria this morning?
Speaker 1: How are our institutions doing and understanding where we are?
Speaker 1: But I'm starting to wake up to where we are? Um,
Speaker 1: But they are having to play massive catch up. Tom,
Speaker 1: You and I have been discussing this for years. We've
Speaker 1: overrelied on central banks. Central banks themselves got caught hostage
Speaker 1: by markets. We lost a lot of policy flexibility, and
Speaker 1: most importantly, we did not invest in what genuinely produces
Speaker 1: economic growth, so we have massive catch up to play.
Speaker 1: It might be done, but it requires a complete change
Speaker 1: in mindset. The single most important question Dr Larion at
Speaker 1: Davos was John Faraoh to a guy running a hedge fund,
Speaker 1: and he said, the sickle the cycles out there, the
Speaker 1: boom bus don't function the same at zero bound. We're
Speaker 1: more at the zero bound than we were in January.
Speaker 1: In Switzerland, we're at the zero bound. Does a cyc
Speaker 1: locality of the financial system still work? Oh? Absolutely, and
Speaker 1: you're gonna see it. We're gonna overshoot on the way
Speaker 1: down because technicals are now in control. And the big
Speaker 1: risk is not only do we converge quickly to the
Speaker 1: most sluggish fundamentals from elevated asset prises, but we overshoot
Speaker 1: them so well. Cycles were never dead. I think we
Speaker 1: got complacent in so many ways, And the last eight
Speaker 1: weeks illustrate to you how complacent we became. You had
Speaker 1: that comments out of Davos. We had a G twenty
Speaker 1: meeting in which the coronavirus was hardly discussed. And now
Speaker 1: we're all waking up to the realities on the ground.
Speaker 1: Can we just talk about the economics affair just very quickly,
Speaker 1: Mahabted's something you've written about over the weekend, and I
Speaker 1: think it's something that would be of interest to our
Speaker 1: audience as well. Walk us through that dynamic. It's very simple.
Speaker 1: When you are taking out of your comfort zone, behavioral
Speaker 1: scientists will tell you two reactions are most likely paralysis
Speaker 1: and insecurity. And we are being taken out of our
Speaker 1: comfort zone by the coronavirus, which means that we are
Speaker 1: paralyzed in terms of economic activity, which means we become
Speaker 1: so insecure that we become two risker verse. We exaggerate
Speaker 1: the probability of getting sick, and that results in demand
Speaker 1: and supply destruction. I remember where the outset of this
Speaker 1: coronavirus sphere. I told you guys on the radio, and
Speaker 1: I remember exactly where I was. I was at an
Speaker 1: airport when I told you. Remember the notion of economic
Speaker 1: sudden stops. It doesn't occur in modern based economies. It
Speaker 1: occurs mostly in fragile and sales states. But when it occurs,
Speaker 1: it is particularly dangerous because it destroys both demand and
Speaker 1: supply and that is what we're living through right now. Mohammed,
Speaker 1: Let's talk about the salve to that culture of fear,
Speaker 1: that fear that we see pervading through markets, that we
Speaker 1: see when you go to the grocery store and you
Speaker 1: see pure l being hoarded behind the counter with a
Speaker 1: sign that says only three per customer. I want to
Speaker 1: talk about the FEDS role and Boston Feds. Rose and
Speaker 1: Gren on Friday came out and hinted at the potential
Speaker 1: for the FED to engage in e c B and
Speaker 1: Bank of Japan style asset purchases, saying, in a situation
Speaker 1: where both short term interest rates conten your treasury rates
Speaker 1: approach the zero lower bound, allowing the FED to purchase
Speaker 1: a broader range of assets could be important. Do you
Speaker 1: foresee the possibility of the FED buying corporate bonds and stocks?
Speaker 1: From here? I foresee whatever it takes policy approach that
Speaker 1: is gonna be both in central banks and government agency.
Speaker 1: But having said that, it's important to understand what the
Speaker 1: FET can and cannot do. The set can support balance feets.
Speaker 1: It can do so, it can put money in people's
Speaker 1: hands and support balances. It cannot restore the type of
Speaker 1: confidence needed for economic activity to pick up. So the
Speaker 1: FED has to understand that it's using policy ammunition in
Speaker 1: a very ineffective way, and it's got to make a
Speaker 1: judgment as to when to use it. I was against
Speaker 1: the fifty basis point cut last week. I thought it
Speaker 1: would do nothing at all and it would take away
Speaker 1: policy flexibility. That's what happened. The most important thing for
Speaker 1: the said and this major responsibility to the system is
Speaker 1: to laser like focus on market market functioning, understand how
Speaker 1: markets are functioning, better understand market technicals, and address the
Speaker 1: pockets of liquidity that are going to arise and that
Speaker 1: risk becoming systemic. That is what the fact you're doing.
Speaker 1: It should not be trying to flood the system in
Speaker 1: a way that's gonna end up being very inefficient and
Speaker 1: use up flexibility that we will need. Eater on Muhamdalarian
Speaker 1: with us and he will continue with this in moments.
Speaker 1: Will have in a couple of minutes, I should say,
Speaker 1: scheduled to Francisco, blanche a Bank of America and oil done.
Speaker 1: What is at a general state, but that's the moving crude,
Speaker 1: but the move in future obviously we're limited down so
Speaker 1: we can get you an early read on the SMP
Speaker 1: five hundred through the spider SMP five ETF, and we
Speaker 1: are now session lows down a little more than seven
Speaker 1: percentage points. I'd also know the German two year as well.
Speaker 1: Point nine seven five is one of those global litmus
Speaker 1: paper thirty year bond a little better in the last
Speaker 1: twenty minutes. Why don't you pick it up, John and
Speaker 1: Dr Man. Many people today, of course, will draw parallels
Speaker 1: between now and two thousand and eight, and obviously for
Speaker 1: many people we are nowhere near that situation. It was
Speaker 1: a different world. But you just as concerned about corporate
Speaker 1: bannon sheets as you were about the household balad sheet
Speaker 1: back then. I'm no drawn. I mean, ironically, this is
Speaker 1: not two thousand and eight, which is both good and bad. Um,
Speaker 1: It's not two thousand and eight in a good sense
Speaker 1: because I'm not worried about the bank, and therefore I'm
Speaker 1: not worried about the payments and settlement system. Remember, the
Speaker 1: payments and settlement system is the nerve center of any
Speaker 1: modern based market economy. If that is no longer functioning,
Speaker 1: everything will stop. And that was the reality of two
Speaker 1: thousand and eight. So there's a good way that we're
Speaker 1: not similar to two thousand and eight. But there's another
Speaker 1: way we're not similar to two thousand and eight, which
Speaker 1: I worried about, the extent of global policy coordination is
Speaker 1: much lower. And whether it's the coronavirus, whether the whether
Speaker 1: it's the excessive reliance on liquidity, whether it is markets
Speaker 1: that have been miss priced for a long time, this
Speaker 1: is a global problem that requires collective actions. So the
Speaker 1: bad thing really to through thousand and eight is that
Speaker 1: we're not going to get a London summit quickly that
Speaker 1: will allow to put an economic bottoming. We need advances
Speaker 1: on the medical side, and that's going to require a
Speaker 1: lot better global coordination. Mohammed. When does the sell off
Speaker 1: that we're expecting to deepen in the high old bond
Speaker 1: market in credit markets more broadly, when does it become
Speaker 1: a buying opportunity when you get distressed levels. So I'm
Speaker 1: excited in a sense that as much as the next
Speaker 1: as the immediate peered ahead is going to be very treacherous,
Speaker 1: as much as that we are going to have massive opportunities.
Speaker 1: But understand where these opportunities are going to arise, They're
Speaker 1: not going to arise by buying a passive index and
Speaker 1: just betting on the whole marketplace. It's going to be
Speaker 1: very selective. It's going to be in distressed credit, it's
Speaker 1: going to be instructured credit, it's going to be in
Speaker 1: relative value, and it's going to be in good companies
Speaker 1: with strong balance sheets, high cash that are trading at
Speaker 1: bargain prices. That is where the opportunities are going to arise.
Speaker 1: It's going to start selectively, and then when when we
Speaker 1: start seeing high probability of medical advances to contain the
Speaker 1: spread of the virus, an increase immunities, vaccine, then we're
Speaker 1: going to establish a bottom for the more general interesting
Speaker 1: through in the index. By mommed before we let you go.
Speaker 1: Just the final question. Tom brought up your book The
Speaker 1: Only Game in Town, And I know you were running
Speaker 1: up a new addition and I was looking forward to
Speaker 1: it coming out later this year. Do you need to
Speaker 1: rewrite the start all over again and get back to it. Yeah,
Speaker 1: you know, it's a pain because the book is coming
Speaker 1: out in just a few weeks. And the reason why
Speaker 1: I wanted to bring it out because when it came
Speaker 1: out in sixteen it was too early. My timing was
Speaker 1: way too early. People didn't realize what happens when you
Speaker 1: rely excessively on central banks, that we were planting many
Speaker 1: seeds of future economic and financial malaise. So so that's
Speaker 1: why I wanted to bring it out again. Um, when
Speaker 1: people have realized that that's where we are. But the
Speaker 1: coroner virus pressed fast forward on everything. Mamma got to
Speaker 1: catch up with you and looking forward to the release
Speaker 1: in a couple of weeks time. I hammad all are
Speaker 1: in the alliance is chiefly can advise and Bloomberg opinion
Speaker 1: columnist on the road ahead. Do you want to guess
Speaker 1: on the phone, I'm pleased to say, is Francisco Blanche
Speaker 1: Bank for America the lower head of commodities and derivatives research.
Speaker 1: What a pleasure privilege to have Francisco with us on
Speaker 1: the show in the morning, like this morning. Francisco, let's
Speaker 1: talk about the potential the Opeque glass together with Russia.
Speaker 1: You can get back together at some point in the
Speaker 1: near future and strike a deal. Um, hey, John, thanks
Speaker 1: for having me on the show. Um, I'm not sure. Um,
Speaker 1: I'm not sure if they'll they'll come in and have
Speaker 1: a deal anytime soon, because it's not clear what the
Speaker 1: russianale behind this last move has been um. I think
Speaker 1: the Russians were very reluctant to cut the supply uh
Speaker 1: to begin with, to deal with this virus UM. They
Speaker 1: made their position very clear to the Sudies. The Sudies, um,
Speaker 1: I wanted to kind a million a half barrel today
Speaker 1: are supplied. That's the proposal to Helen Table last week.
Speaker 1: And ultimately that either the talks broke down, which is
Speaker 1: what possibility, or maybe the Russians uh swaite houses and
Speaker 1: convince them that maybe you know, it's also about to
Speaker 1: let the market running course and and ultimately clean up
Speaker 1: the US shell sector. Uh. That both have been wanting
Speaker 1: to do it for a while, and I guess this
Speaker 1: is the opportunity has ever I see in all the
Speaker 1: research knows this morning from the sophisticates like yourself, Francisco,
Speaker 1: everybody's talking about hedge exposure. Forget about like Russia loses,
Speaker 1: somebody wins, Brazil loses whatever that kind of macro maologna is.
Speaker 1: Explain the hedge exposure right now? Who loses the most
Speaker 1: when you see a twenty move in something that's supposed
Speaker 1: to be certain? Well, uh, I mean I think I
Speaker 1: think the people that will probably end up listening a
Speaker 1: lot this is those that have hedging mismatches. So there
Speaker 1: could be trading houses UM, traders, UH, potentially some some
Speaker 1: broken dealers have exposure to this. UM. The principal exposure
Speaker 1: that is not if you're a broker, which if you're
Speaker 1: a broke dealer, UM and UM, and it could also
Speaker 1: be I mean and and Frankly, the biggest losers are
Speaker 1: going to be the oil companies themselves that have not hedged.
Speaker 1: And remember a lot of companies were underheaded because at
Speaker 1: the end of last year we had something called the
Speaker 1: Phase one US China trade deal, which was supposed to
Speaker 1: put the global economy back on track. We were supposed
Speaker 1: to see a restocking cycle of manufactured goods. We were
Speaker 1: supposed to see a stronger economy. And I think a
Speaker 1: lot of people may have actually just lightened up on
Speaker 1: their hedging heading into the first half, which which and
Speaker 1: those are the ones that are gonna be heard the most. Now,
Speaker 1: who benefits UM, I think it's gonna be consumers benefiting here. Obviously,
Speaker 1: consumers in many parts of the world are are not
Speaker 1: really traveling that much because of the coronavirus but if
Speaker 1: you are able to travel, you're going to get a
Speaker 1: pretty good deal with with the drop in fuel prices
Speaker 1: that we're saying right now. Francisco, I'm looking right now
Speaker 1: at the cash bond market, the high yield bond market,
Speaker 1: which actually opened it eight on Wall Street, and we're
Speaker 1: seeing just some violent moves in the shale debt. We're
Speaker 1: looking at forty moves lower, huge, huge kinds of shifts,
Speaker 1: And I'm wondering going forward, is this going to reshape
Speaker 1: the shale industry profoundly and actually curtail production in the
Speaker 1: US for the longer term. Um So, I think the
Speaker 1: answer to those questions, both of those questions is yes,
Speaker 1: we will see a car talent of production and we
Speaker 1: will see a profound impact on the industry. Remember, this
Speaker 1: industry has been already UM hit in all fronts. During
Speaker 1: the industry, UH probably wasted about a hundred dollars of
Speaker 1: investor money, both in terms of equity and debt issuance,
Speaker 1: So very few investors actually want to own any any
Speaker 1: energy to begin with. Um And I think this this
Speaker 1: last low is going to hurt the particularly the levered players,
Speaker 1: the smaller players, those you mentioned high yield remember high
Speaker 1: yields UH characterized not only because it has a wider
Speaker 1: differential to investment great debt, but also because has shorter maturity.
Speaker 1: Um So, a lot of this death is due in
Speaker 1: the next twelve eighteen months, and that's that's gonna that's
Speaker 1: gonna come to the front. And then the other thing
Speaker 1: that's gonna happen is banks are probably gonna look at
Speaker 1: their reserve based lending practices and reduced the money that
Speaker 1: they land um that they lend the the the oil
Speaker 1: and gas developers against their assets. So so we're gonna
Speaker 1: see a very meaningful reduction in capital right to where
Speaker 1: we were a month ago, which was already pretty bad.
Speaker 1: RecA San Francisco, just to jump in with, we're exploring
Speaker 1: different parallels. Just give me a snapshot of where we
Speaker 1: are right now. The supply demand dynamic just quite simply
Speaker 1: compared to where we were in fifteen sixteen when we
Speaker 1: saw these kind of things plank out, Now in days
Speaker 1: similar worse. What is it right now? Um So, So,
Speaker 1: I think from a demand standpoint, this is definitely way worse.
Speaker 1: We're going to see a global demand construction this year,
Speaker 1: most likely for oil and UH, and we haven't seen
Speaker 1: one since put us on eighth plus and nine. So
Speaker 1: in terms of demand, it looks a little more like
Speaker 1: eight or nine than definitely on it does like fifteen
Speaker 1: and sixteen. From a supply standpoint, it's unclear how much
Speaker 1: this audis are going to be ramping up supplies here. Um,
Speaker 1: they've aggressively is counted their crewed and uh, and there
Speaker 1: is talk about South increasing production over ten million barrells
Speaker 1: a day, maybe over eleven million dollars a day. There's
Speaker 1: different numbers they're throwing around, but but you know, definitely, Uh,
Speaker 1: it's going to be it's going to be almost just
Speaker 1: as battles fifteen sixteen. It's almost in a way it
Speaker 1: is a combination of eight and fifteen and sixteen pretty
Speaker 1: bad for oil prices. That's when we think we could
Speaker 1: go back into the twenties year for brand. What is
Speaker 1: the ramifications going back into the twenties for brand and
Speaker 1: the equivalent seated West Texas Intermediate For America's will independence
Speaker 1: do we sacrifice that is Permian Basin shuts down? Um, well,
Speaker 1: we will definitely see a pullback in in supplies, and uh,
Speaker 1: it will hurt American's energy independence. But here's the good news.
Speaker 1: We know we can create America's energy independence again at
Speaker 1: prices of forty forty five floors barrel, which are still
Speaker 1: very very good for consumers. So um. While as while
Speaker 1: as I'm certainly concerned about the industry and certainly concerned
Speaker 1: about the potential fallout of this move, I will also
Speaker 1: say that that that if prices were to rise lords barrel,
Speaker 1: we will get the industry back back up and running.
Speaker 1: So so I think, I mean, I think that it's, um,
Speaker 1: it's definitely gonna be a blow against the U S
Speaker 1: energy independence story. Um, But but it's the blow that
Speaker 1: is is manageable for consumers. Um. The question we have
Speaker 1: to ask ourselves is going to be a big blow
Speaker 1: to some states in particular like Texas and Oklahoma. Who
Speaker 1: was the last time or do they have a more
Speaker 1: diversity of economy and they can hand a little better.
Speaker 1: So that's that's I think a big, big question mark
Speaker 1: out there. This has been wonderful. Franstance, good Burns, thank
Speaker 1: you so much, greatly greatly appreciated with Bank of America.
Speaker 1: Let's bring a John Raith show, UBS, head of UK
Speaker 1: rate Strategy, joined us on the phone. John fantastic to
Speaker 1: have you with us. I was up waiting for the
Speaker 1: bond market to open up last night and just wow
Speaker 1: to see the long end come in forty three basis
Speaker 1: points and dropped like a stone beneath one percent your
Speaker 1: first stage, John, I mean, this is just a colossal
Speaker 1: flight to safety going on everywhere. Um. We haven't seen
Speaker 1: anything like this, of course in the past, and um,
Speaker 1: and the reasons are well understood. You know, we're seeing
Speaker 1: a perfect storm essentially, which is forcing huge waves of
Speaker 1: money into the bond markets. Front end yields now everywhere, um,
Speaker 1: sort of crashing down towards zero or even well but
Speaker 1: low in certain markets. And as a result, money now
Speaker 1: sort of flooding further down those yeel curves as as
Speaker 1: you know, investors run for cover. So that's you know,
Speaker 1: everything going into the bond markets and pushing these yields
Speaker 1: to unprecedented levels. John, Lisa and I have been talking
Speaker 1: about what we're modeling in the bond market. What are
Speaker 1: we modeling now, zero race on FED funds, recession perhaps inevitably,
Speaker 1: what are we talking about now? Yeah, I mean we're
Speaker 1: we're rapidly heading there. Certainly if you look at the
Speaker 1: sid funds features. John, You know, you can see that
Speaker 1: the markets anticipating the rate getting very close to zero
Speaker 1: in in fairly short order, as it is um in
Speaker 1: the UK. Clearly in the Eurozone we're already well into
Speaker 1: negative territory and markets expecting to go deeper into that.
Speaker 1: I think one thing that's different. You know, we have
Speaker 1: seen short yields at these levels in the past. If
Speaker 1: you look at see your treasuries for example, for all
Speaker 1: the sort of headlong fall, we're still fifteen basis points
Speaker 1: or so above the levels we got to back in
Speaker 1: sort of two thousand and eleven UM. What's different is
Speaker 1: these long yields. They've never been down at these levels um.
Speaker 1: And it is a sign that the markets think, essentially
Speaker 1: it's going to take even longer for any sort of
Speaker 1: recovery to build, and so people are happy to buy
Speaker 1: longer bonds at these levels as well. John, What does
Speaker 1: your world tell central bankers? Just very simply, if we
Speaker 1: impute deflation in disinflation is suggests they're far far behind.
Speaker 1: What does it tell them? And can we see central
Speaker 1: bank action this morning? I mean, it's it's certainly possible, Tom,
Speaker 1: But I think what it tells them, or rather what
Speaker 1: they'll use the market moves more precisely to tell fiscal
Speaker 1: authorities is that they have done or are expected to do,
Speaker 1: in the case of those who haven't already reached the
Speaker 1: zero lower bound, everything in their power. You know, they
Speaker 1: will cut raps to the floor if if they haven't already,
Speaker 1: they will engage in more asset purchases. But when yields
Speaker 1: are at these levels, it's telling you, I think that
Speaker 1: they have run out of road, or that they don't
Speaker 1: have tools which are going to materially change the trajectory here. Therefore,
Speaker 1: the focus needs to turn to governments and the ability
Speaker 1: of fiscal the seed to try and um well at
Speaker 1: this stage, pushing the expected impact on demand, and then
Speaker 1: try and sort of lift these economies and get them
Speaker 1: moving forward again. I want to pick up exactly on
Speaker 1: that point, the idea that the market is implying that
Speaker 1: central banks around the world are out of about of tools.
Speaker 1: Tom John, I'm looking right now fed funds futures pricing
Speaker 1: in basically zero interest rates in the United States over
Speaker 1: the next few meetings, and it's quickly coming in. And
Speaker 1: I'm looking meanwhile at the fact that the yield curves
Speaker 1: are just collapsing. We are seeing an absolute flattening. The
Speaker 1: implication here, John, no inflation, This is not going to
Speaker 1: work period. So I think that's what we're seeing off
Speaker 1: the back of another massive move lower in crude. And John,
Speaker 1: there's another thing we've got to think about to the
Speaker 1: dynamic that leads a just pictured for us, for our
Speaker 1: listeners on radio, when the Fed cuts rates, we're not
Speaker 1: just adjusting the front end to that reality. We seem
Speaker 1: to be pushing it right the way through the curve.
Speaker 1: So when the Fed comes down fifty basis points tens thirties,
Speaker 1: they start to rally too. We used to be able
Speaker 1: to generate what's called that bull steam in a way,
Speaker 1: you start to aggressively pull down the run end and
Speaker 1: you get a little bit of a lift at the
Speaker 1: back end. Why an't we seeing that this time around? Yeah?
Speaker 1: I mean, I think part of this is the view
Speaker 1: that you know that the market of concluding central banks
Speaker 1: do not have the ability to lift inflation and medium
Speaker 1: term growth forecast. I mentioned that, See, your treasury yields
Speaker 1: are still above the levels they got to in in
Speaker 1: two thousand and eleven. At that time, ten your treasury
Speaker 1: yields were up close to two percents, a way above
Speaker 1: where we are now. Because of that all steepening, as
Speaker 1: you mentioned, John, and some trust that, you know, the
Speaker 1: measures taken by the central banks would reflate these economies
Speaker 1: that seems to have gone um and they will do
Speaker 1: what they can. They're obviously also provide liquidity measures and
Speaker 1: try and avoid any sort of deterioration in the situation
Speaker 1: as a result of a credit runch. But ultimately, you know,
Speaker 1: as they deploy all of the tools in their in
Speaker 1: their in their ammunition box, if that isn't enough, then
Speaker 1: fiscal policy is going to have to come to the
Speaker 1: rescue sooner rather than later. Let's talk about some of
Speaker 1: the other tools at central banks have. What are the
Speaker 1: key intervene since that we should be looking for at
Speaker 1: this point, given the fact that we are seeing stress
Speaker 1: pick up in report markets and other key areas of
Speaker 1: the financial system. Well, interestingly, I mean, we were so
Speaker 1: happens in the UK that we've got the budget coming
Speaker 1: in a couple of days in the middle of all
Speaker 1: of this and all the measures that are being discussed
Speaker 1: now the focus has turned away from all the sort
Speaker 1: of typical you know, fiscal measures and investment and infrastructure
Speaker 1: plans and things, and towards the short term measures that
Speaker 1: are going to help in the anticipated situation confronting corporates.
Speaker 1: That will certainly include the provision of liquidity and as
Speaker 1: I said, any survival business having access to credit at
Speaker 1: fair and reasonable prices. As the banks sort of fight
Speaker 1: on various different fronts, um, the governments are keen to
Speaker 1: make sure that doesn't get passed on through higher borrowing
Speaker 1: cost to companies. I think the governments are going to
Speaker 1: bring in measures like giving companies longer to pay their
Speaker 1: their their taxes and addressing sort of supply chain disruption
Speaker 1: that comes about on the back of the pretent short
Speaker 1: disruption coming from the coronavirus situation. As all of these
Speaker 1: supply chains, um, you know, get get damaged along the way.
Speaker 1: So you know, the intent is for governments to do
Speaker 1: what they can and central banks of course as well,
Speaker 1: to try and ensure that any viable companies are able
Speaker 1: to continue functioning as well as possible and don't get
Speaker 1: unfairly and you know, long term detrimentally impacted by by
Speaker 1: these sort of short term problems coming down their supply chains.
Speaker 1: And through the banking system. John, stay close for our
Speaker 1: listeners worldwide, just tune again. We will go commercial free
Speaker 1: as much as we can over the next couple of hours.
Speaker 1: Right here on Bloomberg. Surveillance equity futures are limited down
Speaker 1: so and I have a read for you there. Where
Speaker 1: I do have a read is on the SMP five
Speaker 1: spider et F and a pre market down around about
Speaker 1: five point nine four for any of you thinking about
Speaker 1: the cash open now at nine thirty. The rules as
Speaker 1: follows the SMP five hundred. This is a level one
Speaker 1: breach can drop seven percent from the previous close. This
Speaker 1: is after fifteen minutes, and then trading will be halted
Speaker 1: the fifteen minutes if you have a gap blow up
Speaker 1: of more than seven percent off the fifteen minutes. So
Speaker 1: just a couple of levels you've got to think about
Speaker 1: today session. The kind of things that I didn't expect
Speaker 1: to be talking about at the beginning of twenty twenty,
Speaker 1: but here we are. They've been hugely debated over the
Speaker 1: years and rarely used, particularly at that kind of fifteen
Speaker 1: minute hall, but in today's day and age, I mean,
Speaker 1: I get it a long time ago where it was
Speaker 1: yelling and screaming on the floor and all the romance
Speaker 1: of the exchange today it seems almost quaint. Well actually,
Speaker 1: some people are saying that it's actually exacerbated some of
Speaker 1: the price moves overnight and other markets, because you have
Speaker 1: the US market halted, and the implication to other markets
Speaker 1: is that things are so terrible that things had to
Speaker 1: be frozen, and that's sort of one concern people have.
Speaker 1: I'd let it go. Um, you know, my basic point
Speaker 1: uh with it is it's quaint and it will be tested.
Speaker 1: It will be interesting to see what we see this morning,
Speaker 1: but the point is we will get when open the
Speaker 1: vict I haven't even correlated where the vixes. There's some
Speaker 1: good no time there over the over the weekend, but
Speaker 1: within the data check I'm looking at euroswissy one oh
Speaker 1: five eight four four. George serve els with that incredibly
Speaker 1: important note for Deutsche Bank, and you know you wonder
Speaker 1: here and that, where are the surprises going to be
Speaker 1: given these market moves? John, what's the surprise you see?
Speaker 1: We'll come back to John Wright in a minute. The
Speaker 1: surprise for me was just saying the move in oil,
Speaker 1: not that we didn't expect the move lower of course
Speaker 1: we did. But to see crude gap lower by thirty
Speaker 1: one percent is stunning and many of us, of course
Speaker 1: got up early for the European open this morning just
Speaker 1: to see this series of red headlines just crater through
Speaker 1: the bloomberg, the decks falling as much as seven point
Speaker 1: four percent set to went to bear market, the stocks
Speaker 1: fifty down four point seven percent set to enter a
Speaker 1: bear market is stock six hundred the foot seat. These
Speaker 1: headlines just kept coming through the terminal at this brutal speed,
Speaker 1: And when you see things lighting up that way, I
Speaker 1: think at least it just adds to the panic of
Speaker 1: the moment, isn't it. Absolutely? Also the question is where
Speaker 1: are the stress points? Again? I go back to, you know,
Speaker 1: what's going on in the currency markets, in particular the
Speaker 1: japan is yen very much in focus, with a dollar
Speaker 1: plunging three versus the yen, raising questions about whether this
Speaker 1: is margin trades being unwound, whether this is sort of
Speaker 1: leverage currency bets uh and and sort of when does
Speaker 1: the Japanese government step in, given the fact that their
Speaker 1: economy is not doing well and wasn't doing well ahead
Speaker 1: of the coronavirus. Away from the major Paris, folks, and
Speaker 1: this is inside baseball. But you look at dollar yen, yeah,
Speaker 1: you look at euro yen yeah? How about something like
Speaker 1: yen Singapore dollar. It's eight standard deviations off trend. All
Speaker 1: you need to know is that's worse than a medical chart,
Speaker 1: to be honest, I mean, eight standard deviations is a huge,
Speaker 1: huge move. John, I look at these distortions in the market,
Speaker 1: and I'm sorry central bankers have to have to. I'll
Speaker 1: give you a worse currency pair than that awaging CRONI
Speaker 1: US at the Japanese yen at one point overnight, a
Speaker 1: six percentage point move on a currency path. Unreal. Let's
Speaker 1: turn back to John right, Chann we and talk about
Speaker 1: the next central bank move. US had a UK right
Speaker 1: strategy still with us, John. On Thursday, there's an a
Speaker 1: c being meeting. Imagine President the Guard wanted a little
Speaker 1: bit more time to get a feed under the desk
Speaker 1: and get used to her surroundings. How difficult does it
Speaker 1: hurt for her right now to get that government council
Speaker 1: on site to deploy something this Thursday? I mean unbelievably difficult,
Speaker 1: because unlike the others, although everyone's rapidly heading that way,
Speaker 1: you know they have to a large degree and has
Speaker 1: been the case for a world run out of ammunition.
Speaker 1: I mean, the markets expecting I think another sort of
Speaker 1: twenty five basis points of ETV easing over the sort
Speaker 1: of of course of the rest of this year. But
Speaker 1: you know, given where they're starting from, it's really questionable
Speaker 1: whether that's going to have any impact on anything. They
Speaker 1: can obviously resume, step up intensify government bomb purchases, but
Speaker 1: they need to change issuer limits to be able to
Speaker 1: do that in any significant way. John, this is so important.
Speaker 1: Mark they're being overcome by events in the event is
Speaker 1: disinflation and outright deflation. I mean, how does central banks
Speaker 1: act to the impulse of disinflation that we're living right now?
Speaker 1: This is more me Um. Well, and you know if
Speaker 1: they'd had ammunition then clearly that they would they would
Speaker 1: be under pressure to deploy in a very significant way,
Speaker 1: which is why we're pricing in what we are for
Speaker 1: the FED for example, and to a degree the Bank
Speaker 1: of England in terms of ray cuts and Kewie and
Speaker 1: so on. As I say, the ETP is already there,
Speaker 1: so um that the sort of pressure on fiscal policy
Speaker 1: is going to be even more significant and come even earlier.
Speaker 1: There then you have the problems of course in the
Speaker 1: Eurozone of the fiscal Compact and the either unwillingness or
Speaker 1: inability of governments to borrow within those rules. So you know,
Speaker 1: the problems there are even more intense at a time
Speaker 1: when monetary policy has its foot to the floor, and
Speaker 1: yet we are now being assailed by this perfect storm
Speaker 1: of events all pushing in the same direction in a
Speaker 1: very severe and almost unprecedented way. I mean, it really is,
Speaker 1: you know, emergency stations for all of these central banks
Speaker 1: and governments, and in the case of the the Eurozone,
Speaker 1: the monetary policy makers are pretty much run out of road,
Speaker 1: and the fiscal policy makers are constrained are these rules.
Speaker 1: So it's it's probably an even more severe situation and
Speaker 1: even more worrying one there than elsewhere. I would argue, John,
Speaker 1: we would saw this morning two year in five year
Speaker 1: UK rates fall below zero for the first time, and
Speaker 1: I'm wondering what is the prospect of negative rates over
Speaker 1: in the United Kingdom as well as potentially even the
Speaker 1: United States. Yeah, I mean, we had guilt yields. They're
Speaker 1: back out sort of zero or slightly above now, but
Speaker 1: we did have as you say, short to Sam guilty
Speaker 1: eels drop below zero. They can certainly go lower. Still,
Speaker 1: you know there is this this mantra now that it's
Speaker 1: about the return of capital, not the return on capital,
Speaker 1: and short dated sovereign bonds of well rated issues are
Speaker 1: are the safest status out there, so people will keep
Speaker 1: buying them even at negative yields in this sort of environment.
Speaker 1: When you look at the swaps, market rates are still
Speaker 1: some way above zero in the UK in the US
Speaker 1: and likely to stay there as long as both the
Speaker 1: central banks say, you know we can cut, we will
Speaker 1: cut towards zero. Going negative brings counterproductive consequences by squeezing
Speaker 1: banks margins excessively. The markets, the financial markets so far
Speaker 1: have leaved that um that line, and therefore swap rates
Speaker 1: I think have a very hard floor somewhere around twenty
Speaker 1: five basis points or so, which we're sort of rapidly
Speaker 1: heading towards. But I don't think they can go negative
Speaker 1: unless negative policy rates becomes more realistic. I think we're
Speaker 1: still some way from that in markets like the UK
Speaker 1: in the US, John Greater catch, you appreciate your time
Speaker 1: on such a busy morning. This morning, John right there
Speaker 1: of Ubs, Gina Martin Adams running all of Bloomberg Intelligence
Speaker 1: equity for US as well. Corporations after price and disinflation
Speaker 1: deflation as well, do they have sector to sector with
Speaker 1: your vast team that you've got, folks that takes up
Speaker 1: a football, it's like a football field of securities research.
Speaker 1: You look at your team. Do corporations have the elasticity,
Speaker 1: the malee ability to adjust to what we see on
Speaker 1: our screen? You know? I think it depends on what corporations.
Speaker 1: Obviously energy companies are at the center of weakness, but
Speaker 1: if you look at you look at consumer staples companies,
Speaker 1: you look at healthcare companies, you look at even technology companies,
Speaker 1: it's a completely different ball game. So I think what
Speaker 1: you need to do is be a bit discerning in
Speaker 1: within your equity market exposure. Obviously, the value in high
Speaker 1: vall stocks are going to continue to suffer. Obviously the energy,
Speaker 1: some of the industrials and materials names are going to
Speaker 1: continue to suffer. But there are potential beneficiaries. And I
Speaker 1: think over the course of this day, you're going to
Speaker 1: see some cooler heads start to prevail, and you're going
Speaker 1: to see people start to think about Okay, what do
Speaker 1: zero percent interest rates and thirty dial dollar oil prices
Speaker 1: really mean for behavior longer term and function functionally? They
Speaker 1: mean it's effectively a tax cut for the U. S.
Speaker 1: Consumer once we get through coronavirus. It's very supportive and
Speaker 1: very stimulative. It's hard to see in an environment of
Speaker 1: panic and an environment like this, but the reality is
Speaker 1: in this cycle, we've dealt with a lot of shocks.
Speaker 1: Two thousand eleven, we had a contraction in GDP growth
Speaker 1: for a quarter. We almost had a contraction in GDP
Speaker 1: growth as well. So I do think that markets are very,
Speaker 1: very volatile in the short run, but ultimately typed. This
Speaker 1: type of panic behavior creates an opportunity for investors. What's
Speaker 1: the panic in the bank stocks? As John was talking about,
Speaker 1: what's that implying? I mean, it's the bank stocks are
Speaker 1: also value stocks, right, values getting thrown completely out. We
Speaker 1: got and we did a little bit analysis of the
Speaker 1: momentum relative to value trade. It's very typical that what
Speaker 1: you see in an environment of markets following value stocks
Speaker 1: fall the most. It also is a function of interest
Speaker 1: rates are falling, right, the yield curve is still very flat.
Speaker 1: Interest rates are falling, so there's an assumption that interest
Speaker 1: margin is going to get squeezed. Obviously, capital markets activity
Speaker 1: is going to be very very light for the first
Speaker 1: quarter at the very least, because there's no activity their
Speaker 1: high beta, so they also are going to fall faster
Speaker 1: than the market. So they're unfortunately just in a bad
Speaker 1: position sort of structurally. Now, big big stocks like JP Morgan,
Speaker 1: big companies like that, they're just getting diseaser babies that
Speaker 1: are getting thrown out with the bathwater. And I'm looking
Speaker 1: John at JP Morgan, I'm trying to do the math now.
Speaker 1: I think it's down twenties something from the peak from
Speaker 1: thee on the year basis. You know, from the peak
Speaker 1: it's trading at nineties seven right now. Dividend the north
Speaker 1: of three percent on JP Morgan, on the likes of
Speaker 1: Will's far north of five percent. Obviously, in an environment
Speaker 1: like this, the dividendials are gonna look nice because the
Speaker 1: stock is adjusting so quickly, and the dividends may well
Speaker 1: change on some of these big energy players, on some
Speaker 1: of the big financials as well. I also think it's
Speaker 1: always worth emphasizing that point. But income in equities right now,
Speaker 1: it must look ridiculously attractive China. It is, though, I
Speaker 1: think you again have to pick your spots carefully because
Speaker 1: if you'd of segment the income stream the dividend income
Speaker 1: payers in the SMP five D, you look at the
Speaker 1: highest yielders, they're actually becoming higher and higher beta stocks.
Speaker 1: I mean many of them are energy companies. Many of
Speaker 1: them are you would qualify them as near junk the risk, right,
Speaker 1: and that's the risk. So you want to be really
Speaker 1: careful on the divenand sustainability as you make that point.
Speaker 1: I actually don't think the financials difendstainable sustainability is an
Speaker 1: issue at all. I think it's very sustainable. The financials
Speaker 1: never took on leverage this cycle. They're very low leverage,
Speaker 1: especially relative to where they were in the last cycle. However,
Speaker 1: the energy companies are certainly at risk, and you're seeing
Speaker 1: that reflected in energy stocks. I mean, small cap energy
Speaker 1: stocks dropped ten percent on Friday. They're going to get
Speaker 1: absolutely crushed again. What are they going to stay in business?
Speaker 1: Do they have the solveigncy liquidity issues that Lisa Bramwitz
Speaker 1: is talking about some of the small caps probably not,
Speaker 1: And we've already seen a bankruptcy and small cap energy.
Speaker 1: This year we'll probably see a couple of more because
Speaker 1: it's not sustainable. At a level of thirty dollars twenty
Speaker 1: five dollars, these companies will not be able to stay
Speaker 1: in business. Uh, John the two year German zero point
Speaker 1: nine seven three straight down, No no capture yet, absolutely incredible.
Speaker 1: Jenne Fan Tansy to catch out with you. What a
Speaker 1: morning busy for everyone, and thank you very much for
Speaker 1: being by the Sumple impact right he out. If you're
Speaker 1: fighting for a wild card spot and you go out
Speaker 1: to the West Coast and you play the three patsy
Speaker 1: teams of the National Hockey League and you go L
Speaker 1: L L, that's not a good thing. We thought he'd
Speaker 1: be out today, not with the virus, but just suffering
Speaker 1: with the Toronto maple Lea's Luke Kawa joins us this morning.
Speaker 1: I mean before they went out into the West Coast swing,
Speaker 1: that's supposed to be www, right, I mean, but like
Speaker 1: whenever anyone goes on the West Coast swing, they was right,
Speaker 1: Like the Penguins just did that West Coast swing right
Speaker 1: before the leaves and they went and three too. But yeah,
Speaker 1: if I if I had to stay at home with
Speaker 1: a broken ego. I'd be at home every day. So
Speaker 1: we're we're in the office again today. Look how with us?
Speaker 1: And he was exceptionally strong over the weekend. Look, you
Speaker 1: put out a spectacular chart of the volatility of the
Speaker 1: ten year yield, and are you willing to say we're
Speaker 1: back to Lehman territory? Oh no, we're We're above that.
Speaker 1: It's like the the t y VIX, which is the
Speaker 1: it's the same construction methodology as a VIX, So it's
Speaker 1: actually measuring the volatility of the price and the ten
Speaker 1: year note rather than rather than the yield. So you
Speaker 1: you could say just because of base effects, uh, you know,
Speaker 1: you should be thinking you're getting jump here as we
Speaker 1: approached zero. But yeah, that we got as high as
Speaker 1: essentially fourteen seven five I believe this morning. What that
Speaker 1: means in practical terms is essentially you're betting for the
Speaker 1: tenure note to move about one percentage point per day,
Speaker 1: which is just a crazy degree of volatility in bonds expected.
Speaker 1: So yeah, that's that's happened when you draining electricity in
Speaker 1: Manhattan and loaded up the three Bloombergs this morning, what
Speaker 1: did you see on the screen. Oh, when I loaded
Speaker 1: up this morning. The main thing that saw that you know,
Speaker 1: freaked me out and is freaking and everyone out, is
Speaker 1: the the extent to which how quickly this became credic
Speaker 1: centric concern. So last week you had a really odd
Speaker 1: dichotomy where you had cd X investment grade and high
Speaker 1: yield widening by you know, meaningful amounts, and stocks were
Speaker 1: still up. The amount of that discrepancy was very, very rare,
Speaker 1: and the last time we saw anything like everything exploded.
Speaker 1: Like right now, if you're looking at high yield or
Speaker 1: investment grade c d X relative to its three month average,
Speaker 1: it's we're getting into the six sigmas, to which I
Speaker 1: know you folks, this is the protection of credit to
Speaker 1: false swaps against all of these troubled debt securities. And
Speaker 1: they're on a trend, and then when they get off
Speaker 1: the trend, they go out one or two standard deviations.
Speaker 1: Three is normal, four is ugly, and the medical business
Speaker 1: six standard deviations is ugly. In this check the late Jack, well,
Speaker 1: just six sigma, isn't it. Yeah? That's that's yeah. I
Speaker 1: I couldn't I certainly couldn't do it any better. And yeah,
Speaker 1: the this is the yeah, so like this is essentially
Speaker 1: what we're seeing is a lot of this has to
Speaker 1: do obviously with energy and energy being a focal point
Speaker 1: in the high yield universe, but the extent to which
Speaker 1: this is also in investment grade also really makes you
Speaker 1: think this is about more generalized credit stress and people
Speaker 1: kind of all jump into the same place at once.
Speaker 1: Which makes these product weird is that everyone's loved hedging
Speaker 1: with I, G C, d X, just because you know,
Speaker 1: when everything hits the fan, you know, it has that convexity,
Speaker 1: it gets a real jump. But what the what that
Speaker 1: means though, is if is if this is the one
Speaker 1: that everyone wants to own, it also is the one
Speaker 1: that dealers are the most short. So you have the
Speaker 1: effect of buying this back just to kind of had
Speaker 1: your exposure. Let me translate this. You own something and
Speaker 1: you want to protect. Shouldn't have guessed it, So you
Speaker 1: hedge with this fancy pants investment, great security. It's gone
Speaker 1: bad in the last twenty four hours, right, Oh it's
Speaker 1: I mean, if you've if you've hatched with this, it's
Speaker 1: gone good. Your hedge has gone good. The you know,
Speaker 1: the underlying market itself definitely not good. But you know,
Speaker 1: the hedges, the hedges performing in a way I think
Speaker 1: people would expect it to at a time like this, which, uh,
Speaker 1: you know, there are a lot of things out there
Speaker 1: that haven't necessarily done that. So look if you as
Speaker 1: you look across asset classes here as the equities kind
Speaker 1: of limited down, uh, the yield curve below one percent
Speaker 1: for the first time ever, oil falling out of bed.
Speaker 1: Is it panic in the market right now? Is this
Speaker 1: different than maybe last week? Yeah, I'd say the main
Speaker 1: thing to watch for, like your your clear sign of panic.
Speaker 1: And I remember this from when I was talking with
Speaker 1: Tom on the morning of February and I believe we
Speaker 1: were wondering, like, why the heck this is huge risk off.
Speaker 1: We just had the biggest one day jumping volcualty on record.
Speaker 1: Why are short term treasury yields growing up? And Tom said, oh,
Speaker 1: that's easy there. You know, they're being used as a
Speaker 1: source of funds. Once the treasury market starts to become
Speaker 1: a source of funds, then that probably means we're we're
Speaker 1: in true, true panic. However, things look, you know, I
Speaker 1: you can't not call this panic, but things can get
Speaker 1: panicky or panicky or looking at gold here a little
Speaker 1: bit of a bid there that continues that trajectory. So
Speaker 1: that's just your traditional flight to quality. Look yeah, I
Speaker 1: mean the flight to quality message is actually used. Something
Speaker 1: you see very uniformly cross markets. If you look at
Speaker 1: factors in the equity market, what's held up the best
Speaker 1: the profitability factor. If you look at a basket of
Speaker 1: Goldman stacks stocks that have strong balance sheets relative to
Speaker 1: the weak ones, that's at its best level since two
Speaker 1: thousand twelve. So this is where people are hiding. It
Speaker 1: to yield, and it's in quality. And although the energy
Speaker 1: companies have one in the yield, they don't have the other. Okay,
Speaker 1: well we're gonna do Here's do a data check in
Speaker 1: the market opening. We're thrilled to Mr Kawa and his
Speaker 1: entourage will stay with us through the market opening and
Speaker 1: will continue this really sophistic gig conversation, trying to get
Speaker 1: convexity into every third minute discussion as well. Convexity, folks,
Speaker 1: is when you have to get out. It's the acceleration
Speaker 1: of trade going the opposite uh way. What you need
Speaker 1: to know right now is many of these safe havens
Speaker 1: have moved and moved abruptly forty five seconds away from
Speaker 1: the market open. Gold up thirteen dollars sixty six ounces,
Speaker 1: and critically, Japanese yen right now is testing the strength
Speaker 1: that we saw at three a m. And somewhat near
Speaker 1: where we were at eleven pm last night in the
Speaker 1: early Asia morning. The en right now, Paul Sweeney one
Speaker 1: oh one eighty four, Yes, search for it, as Lucas
Speaker 1: is mentioning search for safe haven. We see that again
Speaker 1: at one one eight five. Uh. It's interesting here at
Speaker 1: this looking at crewed here off even here thirty two
Speaker 1: dollars sixty seven cents for w t I right here.
Speaker 1: So clearly that supply demand issue really weighing on the
Speaker 1: markets here given the Saudi news. This is Bloomberg Radio World.
Speaker 1: Why we welcome here from New York and Bloomberg eleven
Speaker 1: three oh Sirius XM channel one nineteen Bloomberg one oh
Speaker 1: six one in Boston are special coverage today. We are
Speaker 1: commercial free, and we thank our sponsors very much for
Speaker 1: allowing us to do this today. The Dow opens off
Speaker 1: seventeen hundred points. There's variant limit constraints as well. Paul,
Speaker 1: I'll pick it up here as you look at the data.
Speaker 1: But it's something to say, we're down five thousand plus
Speaker 1: points from where we were not that long ag Yeah,
Speaker 1: three weeks ago, Tom, we were you know, talking about
Speaker 1: we're talking about daily highst almost every day here. So
Speaker 1: what's changed here, Well, what's changed is you know that
Speaker 1: just the outlook for global GDP growth driven by the
Speaker 1: pronuct of virus probably picked up as well. The d
Speaker 1: X why that blended index ninety four point eight zero,
Speaker 1: the yen one two rounded up euro dollar one one
Speaker 1: fourteen sixty four itself. We're down seventeen hundred, make it
Speaker 1: eighteen hundred points in the dow and we'll settle out
Speaker 1: in over the next fifteen minutes or so. The levels
Speaker 1: standard and poors five seven zero to seven seven zero
Speaker 1: and did doubt thousand thirty five right now our opening
Speaker 1: bell always brought to you by SEI. Today's competitive marketplace
Speaker 1: requires asset managers to become more operationally adept. See how
Speaker 1: you can transform your business with SEIS Global Platform at
Speaker 1: s e I C dot com slash i M S
Speaker 1: as well Brazilian Real looking at e M that's out
Speaker 1: the new levels four point seven seven even Turkish leer
Speaker 1: with all the idiosyncrasies there of the border and with
Speaker 1: Syria and Russia, Turkish lire a week or today, as
Speaker 1: well as six point one one Mexican pays one point
Speaker 1: one two, and I bringing up South African rand but
Speaker 1: I can't because Mike my terminals on fire here. Well,
Speaker 1: I I can't remember if I've ever seen a negative
Speaker 1: one eight zero zero rowe, no doubt, no I have not.
Speaker 1: You know, we're down seven percent here across the equity
Speaker 1: indices right here. Uh, look as we look at the
Speaker 1: opening here a couple of minutes into it, you know again,
Speaker 1: equity markets now just kind of opening up here. How
Speaker 1: do you think? What do you think of these expectations
Speaker 1: for on the average trading desk out there? You are
Speaker 1: they saying, hey, we gotta step in here and provide
Speaker 1: some support, or are they just kind of saying this
Speaker 1: is really outside of all of our models. Let's stay
Speaker 1: on the sidelines, unless you know, we really have to
Speaker 1: get in there. The main thing I've heard from people
Speaker 1: who I've been talking to you over the weekend, because
Speaker 1: everyone who's been anyone has been in over the weekend
Speaker 1: gaming out like what our vulnerabilities, etcetera, etcetera. That's the
Speaker 1: main concern. Nobody is trying to get greedy right here,
Speaker 1: Like there's that line when the time comes to buy,
Speaker 1: you won't want to. That's very much the order of
Speaker 1: the day right now. Folks are mainly interested in, Okay,
Speaker 1: where's our leverage, where's our vulnerable positions that are going
Speaker 1: to be tough to exit, and let's make sure we
Speaker 1: do that now. Look, how can you stay with us
Speaker 1: for a few more minutes, Luke? You've got a pressing
Speaker 1: day calendar as well, Apple Computer negative twenty one. That's
Speaker 1: a seven point five percent move added up over three
Speaker 1: days seven eight eleven. I'm gonna call twelve percent down
Speaker 1: Apple Computer. How about JP Morgan is another indicator of
Speaker 1: where we are down thirteen percent uh plus nine make
Speaker 1: a ten over the last uh two days, So in
Speaker 1: three days, that's twenty two ish percent on JP Morgan
Speaker 1: as well, am I as you go with another high flyer,
Speaker 1: Luke Howard driving that big machine that he drives, Tesla
Speaker 1: down thirteen percent plus six makes an eighteen nine over
Speaker 1: the last three days. Some of the indications that we
Speaker 1: see out there in negative eighteen fifty five on the
Speaker 1: down Paul, we haven't. We haven't captured a big yet
Speaker 1: on the opening, have we? No, we really haven't. Here Again,
Speaker 1: we've been sitting down here, you know, Tom down about
Speaker 1: seven percent here and again it's a term that we've
Speaker 1: used a little bit over the last couple of weeks,
Speaker 1: and we've heard some of our strategist talk about it,
Speaker 1: which is price discovery. Here. There's so many new variables
Speaker 1: in the marketplace, and we're seeing it on the up
Speaker 1: end down moves. Uh, kind of investors looking for some
Speaker 1: levels here. You know, look what a flows ben in
Speaker 1: our our institutions flush with cash right now. That's been
Speaker 1: a difficult thing to get a handle on. I think
Speaker 1: you know that's Eric ball Tunas, our senior et f
Speaker 1: A strategist, can probably give you a lot better handle
Speaker 1: on that. I I do subscribe to the theory though
Speaker 1: that in general coming into this, if you just look
Speaker 1: at kind of notional exposure uh that you would estimate
Speaker 1: through your SMPE, many's kind of the the build up
Speaker 1: in those contracts, etcetera, uh NASDAC to those were those
Speaker 1: are relatively high across the asset management space, and it
Speaker 1: does suggest you know that We were going into this
Speaker 1: a little a little happier about risk that we had
Speaker 1: been in several years. Look, you can leave. We have
Speaker 1: a trading halt. Look here, well this is a level
Speaker 1: one trading halt. These have been put in place ages ago,
Speaker 1: and Lee is you know, not to make light about it,
Speaker 1: but this is for the good of discovering market stability
Speaker 1: in our indiscoverable pricing call, isn't it look Howard thinking.
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