1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,640 --> 00:00:27,440 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg with Us. 5 00:00:27,440 --> 00:00:30,960 Speaker 1: Now with a broader picture all the emerging markets is 6 00:00:31,040 --> 00:00:35,520 Speaker 1: Carmen Grenhardt. She is at Harvard Kennedy School, but far 7 00:00:35,600 --> 00:00:39,320 Speaker 1: more than that, has been our most astute academic on 8 00:00:39,400 --> 00:00:43,400 Speaker 1: the linkages of the developed world to emerging markets. Carmen, 9 00:00:43,479 --> 00:00:46,159 Speaker 1: John and Lisa really want to dive into emerging markets. 10 00:00:46,159 --> 00:00:49,000 Speaker 1: I totally agree with them. But I've got to ask 11 00:00:49,080 --> 00:00:54,120 Speaker 1: you in your magisterial effort with Ken Rogoff back to 12 00:00:54,200 --> 00:00:58,680 Speaker 1: the Spanish Armada. I remember reading your chapter on this 13 00:00:58,760 --> 00:01:02,360 Speaker 1: time is different in the Spanish Armada. What does your 14 00:01:02,440 --> 00:01:06,720 Speaker 1: tone say about pandemics? What in your study of eight 15 00:01:06,840 --> 00:01:14,040 Speaker 1: hundred years with Ken, what did you learn about pandemics? Uh? Tom, 16 00:01:14,080 --> 00:01:17,960 Speaker 1: I recently wrote a piece for it for Projects Syndicates, 17 00:01:18,040 --> 00:01:23,559 Speaker 1: basically saying, this time it's truly different because we haven't 18 00:01:23,680 --> 00:01:30,360 Speaker 1: lacked pandemics. Uh. But in history, but the kind of 19 00:01:31,120 --> 00:01:36,240 Speaker 1: policy reactions to try to save lives by basically shutting 20 00:01:36,280 --> 00:01:40,360 Speaker 1: down economy. Is this is this is this time is different, 21 00:01:40,520 --> 00:01:46,640 Speaker 1: it's new. So the idea of using path pandemics to 22 00:01:46,800 --> 00:01:50,080 Speaker 1: throw light on what's going on, I don't think it 23 00:01:50,120 --> 00:01:54,240 Speaker 1: will work. The major one that influenza of nineteen eighteen 24 00:01:54,320 --> 00:01:57,600 Speaker 1: was during World War One. We had nine real GDP 25 00:01:57,760 --> 00:02:01,160 Speaker 1: growth in nineteen eighteen because is of the war effort, 26 00:02:01,280 --> 00:02:04,840 Speaker 1: not because you know, there were measures like what we're 27 00:02:04,840 --> 00:02:09,160 Speaker 1: seeing taken today. So it's limited, very limited what we 28 00:02:09,280 --> 00:02:13,520 Speaker 1: can draw. Professor Einhardt Adam Two's a Columbia professor, wrote 29 00:02:13,560 --> 00:02:16,080 Speaker 1: a piece for Foreign Policy that was pretty stark, and 30 00:02:16,120 --> 00:02:18,880 Speaker 1: it said the coronavirus is the biggest emerging markets crisis ever, 31 00:02:19,000 --> 00:02:21,720 Speaker 1: saying that the pandemic is starting to topple one of 32 00:02:21,720 --> 00:02:25,480 Speaker 1: the pillars of the globalization era. His argument was that 33 00:02:25,639 --> 00:02:28,239 Speaker 1: this time is different, as you say, in part because 34 00:02:28,280 --> 00:02:32,320 Speaker 1: the developed market, the developed world cannot assist the emerging 35 00:02:32,360 --> 00:02:35,240 Speaker 1: markets right now, given what we're seeing. Do you agree 36 00:02:35,240 --> 00:02:37,680 Speaker 1: with him that this is the biggest crisis ever facing 37 00:02:37,720 --> 00:02:43,720 Speaker 1: that that sector, Well, it's certainly as big as the nineties, 38 00:02:43,880 --> 00:02:47,680 Speaker 1: which was very big. Uh, and it has the added 39 00:02:47,720 --> 00:02:53,400 Speaker 1: dimensions that it goes well beyond its origins are not 40 00:02:53,800 --> 00:02:57,079 Speaker 1: in the economy, but its origins already helped. So yes, 41 00:02:57,240 --> 00:03:03,600 Speaker 1: it's it's it's a stark start situation. Professor Jonathan here, 42 00:03:03,600 --> 00:03:05,560 Speaker 1: we've talked many times, just to jump in if I 43 00:03:05,600 --> 00:03:09,280 Speaker 1: can forgive me, I've talked many times about dollar denominated 44 00:03:09,360 --> 00:03:12,680 Speaker 1: debt building up in emerging markets over the last ten 45 00:03:12,760 --> 00:03:15,600 Speaker 1: years or so. Are you starting to see those problems 46 00:03:15,960 --> 00:03:18,360 Speaker 1: materialized now in the face of a strong good dollar, 47 00:03:18,760 --> 00:03:22,640 Speaker 1: a shutdown in various economies, and a collapse for the 48 00:03:22,639 --> 00:03:28,600 Speaker 1: backdrop going forward from here? Uh. Look, it's the the 49 00:03:28,880 --> 00:03:32,680 Speaker 1: overused term perfect storm does apply because don't forget that 50 00:03:32,800 --> 00:03:37,880 Speaker 1: underlying as the coronavirus wasn't big enough. We also have 51 00:03:38,160 --> 00:03:43,600 Speaker 1: the Saudi Russia War. Many of these countries are commodity producers, 52 00:03:43,640 --> 00:03:47,200 Speaker 1: oil producers and commodity producers. So they have, going to 53 00:03:47,280 --> 00:03:51,520 Speaker 1: your question, a massive shortage of dollars because their exports. 54 00:03:51,800 --> 00:03:56,440 Speaker 1: The export values are way down, export volumes are down, 55 00:03:56,480 --> 00:04:00,040 Speaker 1: and they do have dollar debt. So the expectation and 56 00:04:00,160 --> 00:04:05,240 Speaker 1: that debt servicing, uh, and that and defaults and restructurings 57 00:04:05,440 --> 00:04:08,560 Speaker 1: are going to be on the rise. Is something to 58 00:04:09,480 --> 00:04:14,240 Speaker 1: you know be expected. We thought many people, not including myself, 59 00:04:14,280 --> 00:04:16,880 Speaker 1: and many people would come on this program, Professor and 60 00:04:17,000 --> 00:04:21,240 Speaker 1: question dollar privacy, dollar hegemony in the next economic downturn. 61 00:04:21,560 --> 00:04:24,120 Speaker 1: We finding out that the dollar is the place to 62 00:04:24,200 --> 00:04:28,920 Speaker 1: be once again, even in this downturn. Well, Uh, it's 63 00:04:28,920 --> 00:04:32,160 Speaker 1: funny you should mention that Ethan el Setki, a former student, 64 00:04:32,279 --> 00:04:36,200 Speaker 1: Ken Roboff, and I have had several recent pieces on 65 00:04:36,240 --> 00:04:39,520 Speaker 1: this very issue. And indeed, what we find is that 66 00:04:39,600 --> 00:04:42,719 Speaker 1: in the ten years after the two thousand eight two 67 00:04:42,720 --> 00:04:48,240 Speaker 1: thou nine UH financial meltdown, UH, the dollar gained a 68 00:04:48,279 --> 00:04:52,560 Speaker 1: lot of ground internationally as the reserve currency. For two reasons. 69 00:04:52,640 --> 00:04:58,200 Speaker 1: One is UH, the euro UH fell back UH concerns 70 00:04:58,240 --> 00:05:03,560 Speaker 1: about its sustainability. It fell back it. And the second 71 00:05:03,720 --> 00:05:08,800 Speaker 1: is Chinese lending, which was has been massive while over 72 00:05:08,839 --> 00:05:13,599 Speaker 1: the world is dollar denominated. So it's Chinese, but it's 73 00:05:13,640 --> 00:05:16,279 Speaker 1: not in Remember, for the most parties in dollars. So 74 00:05:16,720 --> 00:05:21,240 Speaker 1: the dollar, Yes, it's the dominant currency and no evidence 75 00:05:21,240 --> 00:05:25,120 Speaker 1: to the contrary at this stage, so, professor. But tiling 76 00:05:25,160 --> 00:05:28,799 Speaker 1: this forward from a market's perspective, dollar denominated emerging market 77 00:05:28,839 --> 00:05:33,000 Speaker 1: stat just had its worst quarter since nineteen Are we 78 00:05:33,000 --> 00:05:35,080 Speaker 1: going to see more of the same and a rash 79 00:05:35,120 --> 00:05:37,640 Speaker 1: of defaults that rivals what we saw during the nineteen 80 00:05:37,680 --> 00:05:45,080 Speaker 1: eighties and Latin America. It's very possible. It's very possible now. UH. 81 00:05:45,240 --> 00:05:51,880 Speaker 1: I have been hoping that the international community, the multilaterals, 82 00:05:51,960 --> 00:05:58,599 Speaker 1: with the major government moved towards a uh A death 83 00:05:58,640 --> 00:06:04,040 Speaker 1: stand still, you know, a moratorium. Before that the false 84 00:06:04,120 --> 00:06:08,520 Speaker 1: materialized because after all the everybody's incomes. This is that 85 00:06:08,600 --> 00:06:11,479 Speaker 1: the household at the firm level, at the country level 86 00:06:11,839 --> 00:06:16,760 Speaker 1: has been paralyzed. So debt payments should also likewise be 87 00:06:16,920 --> 00:06:22,800 Speaker 1: temporarily UH suspended. But absence that, it's already it's already happening. 88 00:06:22,839 --> 00:06:28,640 Speaker 1: You're seeing the down the downgrades in the credit rating agencies, 89 00:06:28,839 --> 00:06:36,880 Speaker 1: with countries moving into junk and near junk UH status coming. 90 00:06:36,920 --> 00:06:38,599 Speaker 1: Always great to get your thoughts on this program. We 91 00:06:38,600 --> 00:06:41,760 Speaker 1: appreciate time this morning, our thoughts with you and yours. 92 00:06:41,800 --> 00:06:48,720 Speaker 1: Come and run. How there Harvard Kennedy School Professor Cricket 93 00:06:48,680 --> 00:06:52,080 Speaker 1: introduction to our steam guest. He has is the view 94 00:06:52,160 --> 00:06:54,880 Speaker 1: of America more than anyone I know. Mohammed units with 95 00:06:55,000 --> 00:06:59,360 Speaker 1: us of the acclaimed Gallop polling organization. Mohammed, you don't 96 00:06:59,400 --> 00:07:00,880 Speaker 1: look at the horse race. As you look at the 97 00:07:00,880 --> 00:07:04,040 Speaker 1: fabric of the country, it's a country flat on its back. 98 00:07:04,480 --> 00:07:08,800 Speaker 1: What portion of America can't get to the next rent payment? 99 00:07:10,160 --> 00:07:13,280 Speaker 1: According to our estimates and based on the polans we 100 00:07:13,360 --> 00:07:17,280 Speaker 1: were doing last week, percent of employ of those employees 101 00:07:17,320 --> 00:07:21,960 Speaker 1: say that their employers cut jobs, reduced hours, throsen hirings. 102 00:07:21,960 --> 00:07:25,440 Speaker 1: Sixty two percent say that the their financial situation has 103 00:07:25,480 --> 00:07:28,840 Speaker 1: already been affected by it. A third the one and 104 00:07:28,880 --> 00:07:32,840 Speaker 1: seventies million workers in the US cannot get to the 105 00:07:32,920 --> 00:07:37,080 Speaker 1: next paycheck. They're living literally page xcupation. That sixty to 106 00:07:37,160 --> 00:07:40,120 Speaker 1: forty million Americans, UM. And that's just the workers, so 107 00:07:40,200 --> 00:07:44,360 Speaker 1: you can imagine their families. U. At this point, I 108 00:07:44,400 --> 00:07:47,600 Speaker 1: think even with reporting just this morning out of Italy 109 00:07:48,080 --> 00:07:51,240 Speaker 1: on some of the social unrest that now is becoming 110 00:07:51,280 --> 00:07:54,640 Speaker 1: a concerned UM. I think after we all think through 111 00:07:54,760 --> 00:07:57,360 Speaker 1: the public health issues, what we're trying to do at 112 00:07:57,360 --> 00:08:00,520 Speaker 1: Gallup is also attacked. How Americans are feeling UM and 113 00:08:00,560 --> 00:08:05,200 Speaker 1: the impact this will have on social just disintegration. Unfortunately 114 00:08:05,240 --> 00:08:09,040 Speaker 1: in some situation. I'm coming to you, Mohammad from uh 115 00:08:09,240 --> 00:08:12,840 Speaker 1: Central work in New York. It is an island of prosperity. 116 00:08:12,880 --> 00:08:17,360 Speaker 1: I'm looking down at billionaires Row seven skyscrapers. This is 117 00:08:17,440 --> 00:08:22,160 Speaker 1: not America. What is the distance of Governor Culomo's New 118 00:08:22,240 --> 00:08:26,920 Speaker 1: York State or Washington, or even the burgeoning crisis in 119 00:08:26,960 --> 00:08:31,160 Speaker 1: Atlanta or Miami in Boston. What's the distance of those 120 00:08:31,320 --> 00:08:34,520 Speaker 1: urban areas in this pandemic from the rest of a 121 00:08:34,559 --> 00:08:39,480 Speaker 1: more rural, more suburban America. UM. We always see very 122 00:08:39,600 --> 00:08:42,720 Speaker 1: dramatic differences. UM. Once seemed to point out you mentioned 123 00:08:42,800 --> 00:08:45,760 Speaker 1: Governor Clomo. UM. And a lot has been made about 124 00:08:46,559 --> 00:08:49,640 Speaker 1: leadership and how leadership is doing in this crisis. We 125 00:08:49,679 --> 00:08:52,960 Speaker 1: consistently find the Americans are much more positive on than 126 00:08:52,960 --> 00:08:56,360 Speaker 1: a local government at any level compared to the federal government. 127 00:08:56,920 --> 00:09:01,400 Speaker 1: Americans are now most an approval of health care workers 128 00:09:01,400 --> 00:09:05,600 Speaker 1: and their local hospitals in this crisis. UM. How Americans 129 00:09:05,640 --> 00:09:09,320 Speaker 1: react to the situation, of course, depends on what's happening locally. 130 00:09:09,320 --> 00:09:12,640 Speaker 1: It's interesting that the federal government apparently today is going 131 00:09:12,679 --> 00:09:17,600 Speaker 1: to roll out UM guidelines on how local government can 132 00:09:17,640 --> 00:09:20,920 Speaker 1: also react based on their local reality. This is a 133 00:09:21,000 --> 00:09:24,320 Speaker 1: huge country. UM. When we talk about the United States 134 00:09:24,320 --> 00:09:28,400 Speaker 1: to ultimately talking about you know, fifty different countries with 135 00:09:28,440 --> 00:09:33,800 Speaker 1: different realities. The economics that hurt that's happening across the country. 136 00:09:33,800 --> 00:09:37,400 Speaker 1: And now you know, even with the social distancing, uh 137 00:09:37,440 --> 00:09:40,120 Speaker 1: you know, seven to eight out of Pan Americans on 138 00:09:40,160 --> 00:09:43,439 Speaker 1: pretty much every metric now are basically social distance. And 139 00:09:43,480 --> 00:09:46,679 Speaker 1: when we started tracking this, there was only about people 140 00:09:46,720 --> 00:09:49,400 Speaker 1: that said they were going to be changing their lives. 141 00:09:49,559 --> 00:09:54,720 Speaker 1: At this point, everything is uh so the reality of 142 00:09:55,120 --> 00:09:57,760 Speaker 1: not being able to make that paycheck. These is the 143 00:09:57,920 --> 00:10:01,360 Speaker 1: the public health concerns, even just locally, I think are 144 00:10:01,360 --> 00:10:04,240 Speaker 1: going to become the crux of the issue for leadership 145 00:10:04,679 --> 00:10:06,680 Speaker 1: um and it's what we're going to try very closely. 146 00:10:06,760 --> 00:10:09,120 Speaker 1: Is the other thing is just a well being. I 147 00:10:09,200 --> 00:10:13,600 Speaker 1: mean people we've seen now reports of domestic violence uh 148 00:10:13,880 --> 00:10:18,120 Speaker 1: increasing in some localities. How people are managing the stress 149 00:10:18,280 --> 00:10:22,000 Speaker 1: of not only the economic challenges, but also trying to 150 00:10:22,080 --> 00:10:26,240 Speaker 1: jump work if you can, virtually having children at home, 151 00:10:26,679 --> 00:10:30,760 Speaker 1: not having educational institutions operating. All of these things we 152 00:10:30,840 --> 00:10:35,720 Speaker 1: know from our research from other crises over the past 153 00:10:35,720 --> 00:10:40,160 Speaker 1: few decades have a real impact on how society. Paul, 154 00:10:40,240 --> 00:10:43,520 Speaker 1: let me report here on online learning at the Keen Household. 155 00:10:43,559 --> 00:10:47,120 Speaker 1: We're in a free period and Minecraft is being play, 156 00:10:47,400 --> 00:10:49,920 Speaker 1: and Minecraft is being played. I'm sure it is Mohammed 157 00:10:49,960 --> 00:10:52,280 Speaker 1: give us a sense of you know, how much longer 158 00:10:52,360 --> 00:10:55,640 Speaker 1: does he? The most Americans feel like this, we'll go 159 00:10:55,720 --> 00:10:59,640 Speaker 1: on this coronavirus disruption at this point to see one 160 00:10:59,720 --> 00:11:02,520 Speaker 1: for scent of Americans thinks that this will go on 161 00:11:02,800 --> 00:11:06,240 Speaker 1: for a few months. Actually, excuse me, fifty The numbers 162 00:11:06,240 --> 00:11:10,559 Speaker 1: are coming in daily. We started off with about half 163 00:11:10,559 --> 00:11:12,800 Speaker 1: of Americans. It's expecting it to go on for a 164 00:11:12,840 --> 00:11:18,040 Speaker 1: few months. These numbers actually predate President Trump's UM change 165 00:11:18,040 --> 00:11:22,440 Speaker 1: of course, if you will, in expending UH the isolation guidelines, 166 00:11:22,480 --> 00:11:25,679 Speaker 1: so we probably would expect that number to go up. 167 00:11:26,080 --> 00:11:29,360 Speaker 1: That being said, Americans are also overwhelmingly in support of 168 00:11:29,400 --> 00:11:33,719 Speaker 1: the rescue package compared to other UH stimulus packages like 169 00:11:33,880 --> 00:11:37,720 Speaker 1: harpings and then other situations of crisis. Today there be 170 00:11:37,720 --> 00:11:40,120 Speaker 1: seven percent of Americans to prove of it, it's by 171 00:11:40,200 --> 00:11:44,800 Speaker 1: partisan of who will actually Democrats to present one are 172 00:11:44,920 --> 00:11:49,560 Speaker 1: mostly are more likely to support it than than Republicans. UM. 173 00:11:50,080 --> 00:11:54,000 Speaker 1: But this again it gets back to UM what the 174 00:11:54,120 --> 00:11:58,160 Speaker 1: larger picture means. I think for people's pocketbooks of Americans 175 00:11:58,280 --> 00:12:01,360 Speaker 1: right now, think it's very likely that the United States 176 00:12:01,480 --> 00:12:04,320 Speaker 1: that this will send the United States into our procession. 177 00:12:04,440 --> 00:12:06,960 Speaker 1: If you will so people are really planning for the 178 00:12:07,040 --> 00:12:11,200 Speaker 1: worst or expecting the worst, whether they have the wherewithall 179 00:12:11,280 --> 00:12:13,720 Speaker 1: to really get through it. I think it's really up 180 00:12:13,720 --> 00:12:17,320 Speaker 1: for graphs um. I mean in terms of the local 181 00:12:17,400 --> 00:12:20,320 Speaker 1: learning or talent learning. Actually just came up in my 182 00:12:20,360 --> 00:12:23,000 Speaker 1: four year old. He's on a ZOW meeting with his 183 00:12:23,240 --> 00:12:27,800 Speaker 1: other students, uh and teachers and even just for education. 184 00:12:28,040 --> 00:12:33,240 Speaker 1: It's amazing how a lot of this was possible before technologically. 185 00:12:33,920 --> 00:12:37,120 Speaker 1: But again, see a situation where the crisis pushes us 186 00:12:37,160 --> 00:12:43,480 Speaker 1: over the edge, right right, it's been hugely valuable. Mohammed units, 187 00:12:43,480 --> 00:12:49,240 Speaker 1: thank you so much for your good work at Gallup Today. However, 188 00:12:50,520 --> 00:12:53,840 Speaker 1: is in the securities analyst business one of those wonderful 189 00:12:53,880 --> 00:12:57,320 Speaker 1: people that not only writes the reports that actually goes 190 00:12:57,400 --> 00:12:59,959 Speaker 1: in the stores. He can't go in the stores now 191 00:13:00,480 --> 00:13:04,400 Speaker 1: they're all closed. He is with Cowen and joins us today, Oliver, 192 00:13:04,520 --> 00:13:08,520 Speaker 1: there's an American Eagle two blocks down from our world headquarters. 193 00:13:09,000 --> 00:13:12,800 Speaker 1: It's closed. How critical is that they open as soon 194 00:13:12,880 --> 00:13:16,600 Speaker 1: as possible. It's really critical just because the majority of 195 00:13:16,640 --> 00:13:19,760 Speaker 1: sales still happen in store. So for all these retailers, 196 00:13:20,000 --> 00:13:23,200 Speaker 1: they're in survival mode because they're their number one source 197 00:13:23,240 --> 00:13:27,319 Speaker 1: of revenue is is at risk and for the foreseeable future, 198 00:13:27,360 --> 00:13:30,720 Speaker 1: there's so much uncertainty. I mean, the employees are load 199 00:13:30,720 --> 00:13:35,080 Speaker 1: across Macy's gap and polls um it's it's uncertain wind 200 00:13:35,120 --> 00:13:37,680 Speaker 1: stores will open as we pull executives. It could be 201 00:13:37,760 --> 00:13:42,400 Speaker 1: four or more months, and our analysis indicates that liquidity 202 00:13:42,400 --> 00:13:45,520 Speaker 1: is at risk after five So one in four Americans 203 00:13:45,559 --> 00:13:48,800 Speaker 1: work in retail, and retail really played the important art 204 00:13:48,840 --> 00:13:51,880 Speaker 1: in the consumer, so that this is something we're watching. 205 00:13:51,960 --> 00:13:55,640 Speaker 1: And we continue to see a bifurcation where people who 206 00:13:55,679 --> 00:13:59,680 Speaker 1: need household essentials and food and beverages that's really obviously 207 00:13:59,679 --> 00:14:04,120 Speaker 1: worked ing, discretionary purchases are are less important, and at 208 00:14:04,160 --> 00:14:07,440 Speaker 1: home fitness is working too. Oliver. There's a huge amount 209 00:14:07,440 --> 00:14:10,839 Speaker 1: of confusied confusion at the moment over whether Sames who 210 00:14:10,840 --> 00:14:14,520 Speaker 1: decided to follow employees before the aid became available from 211 00:14:14,600 --> 00:14:18,120 Speaker 1: Washington d C, whether they're eligible for any of those loans, 212 00:14:18,200 --> 00:14:21,520 Speaker 1: any of those grants um from the fiscal aid package 213 00:14:21,520 --> 00:14:24,520 Speaker 1: that went through over last week, are they If you 214 00:14:24,600 --> 00:14:28,240 Speaker 1: got any clarity on that whatsoever. Yeah, I think as 215 00:14:28,280 --> 00:14:31,800 Speaker 1: I talked to CEOs and um my contacts on the 216 00:14:31,800 --> 00:14:35,680 Speaker 1: business everybody's analyzing it closely and logging on and looking 217 00:14:36,240 --> 00:14:39,520 Speaker 1: um with with no specific conclusions. So I think it's 218 00:14:39,520 --> 00:14:42,520 Speaker 1: a it's a point of transition where where people are 219 00:14:42,520 --> 00:14:46,360 Speaker 1: really seeking out what what what's available. Also, when you 220 00:14:46,440 --> 00:14:50,640 Speaker 1: furlow a worker, there's different standards by state regarding unemployment, 221 00:14:51,040 --> 00:14:55,320 Speaker 1: So I don't think there's a blanket answer regarding allocating 222 00:14:55,320 --> 00:14:58,680 Speaker 1: these resources to where they're needed most um to be 223 00:14:58,800 --> 00:15:01,400 Speaker 1: frank and we're just seeing all kinds of different efforts 224 00:15:01,440 --> 00:15:04,760 Speaker 1: to support workers and in places of business in the 225 00:15:04,920 --> 00:15:07,880 Speaker 1: time of need. More than five hundred thousands that is 226 00:15:07,920 --> 00:15:11,520 Speaker 1: the number of furloughed or laid off retail employees in 227 00:15:11,520 --> 00:15:15,280 Speaker 1: the United States, Big retailers across the board closing down. 228 00:15:15,560 --> 00:15:18,120 Speaker 1: And I'm looking right now at some of the names 229 00:15:18,200 --> 00:15:23,440 Speaker 1: Victoria's Secret, I'm looking at gap Nemon, Marcus. I'm struggling 230 00:15:23,440 --> 00:15:27,080 Speaker 1: to understand how much this entire episode is going to 231 00:15:27,200 --> 00:15:29,680 Speaker 1: force companies that were already struggling to the break. I mean, 232 00:15:29,680 --> 00:15:32,600 Speaker 1: how much is just just accelerating a process that would 233 00:15:32,600 --> 00:15:35,560 Speaker 1: have been underway already with some of these struggling retailers, 234 00:15:35,640 --> 00:15:41,600 Speaker 1: versus actually killing really viable and strong and Frankly, thriving businesses. Yeah, 235 00:15:41,600 --> 00:15:44,960 Speaker 1: I agree with you regarding what's happening next. It's the 236 00:15:44,960 --> 00:15:49,720 Speaker 1: big getting bigger. So we're moving towards the world of Walmart, Target, Amazon, 237 00:15:50,200 --> 00:15:53,920 Speaker 1: and then mega players like LVMH. So consolidation is one 238 00:15:54,000 --> 00:15:56,880 Speaker 1: key theme with with related m and a of some 239 00:15:56,960 --> 00:16:01,200 Speaker 1: good brands that aren't necessarily as profitable are good valuations. 240 00:16:01,480 --> 00:16:05,440 Speaker 1: UM too, I think we'll see store closures and permanent 241 00:16:05,520 --> 00:16:11,200 Speaker 1: changes in malls. We already had struggling malls about more 242 00:16:11,240 --> 00:16:14,120 Speaker 1: of malls UM are B in C class and that's 243 00:16:14,120 --> 00:16:17,640 Speaker 1: a big issue. And then rethinking rent um the rent 244 00:16:17,720 --> 00:16:20,920 Speaker 1: expenses will need to come down UM and this will 245 00:16:21,040 --> 00:16:25,480 Speaker 1: a lot depend on the pace of recovery. So going forward, UM, 246 00:16:25,560 --> 00:16:28,440 Speaker 1: we believe stores will be closed until May at least, 247 00:16:28,480 --> 00:16:32,080 Speaker 1: if not longer UM. And the pace of the consumer 248 00:16:32,120 --> 00:16:34,200 Speaker 1: coming back will be a big question mark is it 249 00:16:34,480 --> 00:16:38,800 Speaker 1: VU or L And that will matter for long term viability. 250 00:16:38,800 --> 00:16:42,760 Speaker 1: But department stores were already struggling. The big theme I 251 00:16:42,800 --> 00:16:46,440 Speaker 1: also want to mention is this curbside pickup and rethinking 252 00:16:46,560 --> 00:16:49,800 Speaker 1: retail in terms of contact lists and what does experiential 253 00:16:49,880 --> 00:16:53,080 Speaker 1: mean in a contactless world. So we've already been seeing 254 00:16:53,080 --> 00:16:56,360 Speaker 1: the digital innovation with zero check out and curbside pickup 255 00:16:56,720 --> 00:17:00,360 Speaker 1: that's accelerating by a couple of years now, Oliver, I 256 00:17:00,400 --> 00:17:02,320 Speaker 1: want to pick up on the consolidation theme that you 257 00:17:02,400 --> 00:17:06,800 Speaker 1: talked about. Gap, for example, offered information to employees about 258 00:17:06,800 --> 00:17:09,920 Speaker 1: getting jobs at Walmart. I'm wondering, I mean, what kind 259 00:17:09,960 --> 00:17:12,119 Speaker 1: of consolidation. What are some names that you see? I mean, 260 00:17:12,240 --> 00:17:15,680 Speaker 1: is Walmart going to go buy Gap? Anything can happen. 261 00:17:15,760 --> 00:17:17,920 Speaker 1: I think we're we're seeing is um. You know, Walmart 262 00:17:18,040 --> 00:17:21,040 Speaker 1: is the biggest grocer and it also sells lots of 263 00:17:21,080 --> 00:17:25,639 Speaker 1: soft goods and essential the businesses grocery and Amazon grocery 264 00:17:25,720 --> 00:17:29,440 Speaker 1: and apparel um and and rethinking, and Amazon is even 265 00:17:29,440 --> 00:17:34,400 Speaker 1: interested in luxury good So retail has really been fueled 266 00:17:34,400 --> 00:17:39,199 Speaker 1: by scale because even before this, the digital investments, the 267 00:17:39,240 --> 00:17:43,000 Speaker 1: supply chain investments, the need for speed um has really 268 00:17:43,000 --> 00:17:47,600 Speaker 1: been the domain and easier for larger players. The artificial 269 00:17:47,640 --> 00:17:52,840 Speaker 1: intelligence data rethinking data scale matters for the training models 270 00:17:52,840 --> 00:17:55,760 Speaker 1: and the algorithms. So that's something to think of and 271 00:17:55,760 --> 00:17:58,880 Speaker 1: and anything can happen. I think every retailer is working together, 272 00:17:58,920 --> 00:18:00,960 Speaker 1: and this is also a time for the industry to 273 00:18:01,000 --> 00:18:06,200 Speaker 1: come together to reallocate resources where they're needed. And clearly, um, 274 00:18:06,280 --> 00:18:09,639 Speaker 1: there's so many stockouts and labor is necessary as the 275 00:18:09,680 --> 00:18:12,720 Speaker 1: whole country gets ready olive right now, John wants to 276 00:18:12,760 --> 00:18:14,639 Speaker 1: take us in a different direction. You know, as you 277 00:18:14,760 --> 00:18:18,720 Speaker 1: look at retail across America. We had a listener our 278 00:18:18,800 --> 00:18:21,920 Speaker 1: call in vet Bille was barking earlier and Vet Bill 279 00:18:21,960 --> 00:18:24,199 Speaker 1: wants to know. Our dog wants to know what are 280 00:18:24,240 --> 00:18:27,240 Speaker 1: we gonna do with Chewi? I mean, Chewie is hugely successful. 281 00:18:27,640 --> 00:18:31,040 Speaker 1: Is Chewy a no brainer for Amazon? Well, I think 282 00:18:31,400 --> 00:18:34,280 Speaker 1: the reality is this at home experience and taking care 283 00:18:34,320 --> 00:18:37,320 Speaker 1: of your dogs. And also health and wellness is a 284 00:18:37,400 --> 00:18:40,800 Speaker 1: huge theme and rethinking wellness. Um, you know stock we 285 00:18:40,880 --> 00:18:42,800 Speaker 1: like is peloton. I was just on the bike. And 286 00:18:42,880 --> 00:18:46,280 Speaker 1: also we're seeing concepts like Neo Yeah, I was on 287 00:18:46,320 --> 00:18:52,280 Speaker 1: the bike. You know, you know life will be about 288 00:18:52,680 --> 00:18:57,520 Speaker 1: self care as well. Listen to you, Okay, okay, folks, 289 00:18:57,560 --> 00:18:59,639 Speaker 1: I just got We're gonna stop the show here. We 290 00:18:59,720 --> 00:19:02,880 Speaker 1: got aim to do this. John. The number one argument 291 00:19:03,000 --> 00:19:07,040 Speaker 1: of the last three days in our isolation, our kingdom 292 00:19:07,119 --> 00:19:10,840 Speaker 1: of isolation is someone in the house is demanded we 293 00:19:10,920 --> 00:19:14,280 Speaker 1: get a peloton. What happens when the gym reopens again. 294 00:19:14,760 --> 00:19:18,199 Speaker 1: That's what I said, thank you, thank you. I think 295 00:19:18,240 --> 00:19:20,040 Speaker 1: a lot of people thinking in the same way. One 296 00:19:20,080 --> 00:19:22,159 Speaker 1: thing that I think might change, though, Oliver, and it 297 00:19:22,200 --> 00:19:24,919 Speaker 1: came up in conversations that I was having recently as well, 298 00:19:25,400 --> 00:19:28,360 Speaker 1: the rush to go to services like rent the Runway 299 00:19:28,520 --> 00:19:33,600 Speaker 1: through where you're essentially a sharing clothes with a monthly subscription. 300 00:19:33,640 --> 00:19:36,920 Speaker 1: Of course those clothes are cleaned, Oliver. Many companies were 301 00:19:36,920 --> 00:19:39,919 Speaker 1: looking at following Rent the Runways practice through last year 302 00:19:39,960 --> 00:19:41,960 Speaker 1: and the great success it had. Are we going to 303 00:19:42,040 --> 00:19:44,560 Speaker 1: start to question that in a massive way as we 304 00:19:44,640 --> 00:19:46,960 Speaker 1: come through this and come out of it. Well, as 305 00:19:46,960 --> 00:19:48,919 Speaker 1: we come out of it, I think what will happen 306 00:19:49,000 --> 00:19:51,639 Speaker 1: is we have a consumer that's going to be laser 307 00:19:51,760 --> 00:19:55,320 Speaker 1: focused on value. So as you think about rental and 308 00:19:55,520 --> 00:19:58,240 Speaker 1: um and what it can do as well as a 309 00:19:58,280 --> 00:20:01,800 Speaker 1: re commerce it's forty tw eight percent off. So we 310 00:20:01,840 --> 00:20:04,600 Speaker 1: already had the t J Max's of the world be 311 00:20:04,680 --> 00:20:08,080 Speaker 1: really successful in taking share from Macy's and full price 312 00:20:08,160 --> 00:20:11,800 Speaker 1: department stores, but you know, repricing these goods and offering value. 313 00:20:11,960 --> 00:20:14,800 Speaker 1: Of course, the Rent the Runway has a very sophisticated 314 00:20:14,840 --> 00:20:18,520 Speaker 1: cleaning facility, and I think people will want less stuff. 315 00:20:18,680 --> 00:20:22,160 Speaker 1: I think people will care about sustainability and environment and 316 00:20:22,440 --> 00:20:26,840 Speaker 1: everybody's rethought um what experiential means in terms of staying 317 00:20:26,840 --> 00:20:30,560 Speaker 1: home and spending time with with loved ones and others. 318 00:20:31,960 --> 00:20:33,600 Speaker 1: We have a chance, always great, get your thoughts on 319 00:20:33,600 --> 00:20:36,399 Speaker 1: the show. Come and see your equity research analysts on 320 00:20:36,440 --> 00:20:43,320 Speaker 1: the retail outlook and on social distancing. Let's get to 321 00:20:43,359 --> 00:20:45,240 Speaker 1: the first conversation of the morning. Shall we please to 322 00:20:45,240 --> 00:20:47,760 Speaker 1: say that Jaha Chanleus joins us now Credit Sweets head 323 00:20:47,920 --> 00:20:50,840 Speaker 1: of f FX and macro trading strategy. You have always 324 00:20:50,880 --> 00:20:53,280 Speaker 1: great to get you on the program. Let's talk about it, 325 00:20:53,320 --> 00:20:56,400 Speaker 1: shall we? Shahab dollar strength back on the table. Last 326 00:20:56,440 --> 00:20:58,720 Speaker 1: week we thought there was some science of success from 327 00:20:58,720 --> 00:21:02,520 Speaker 1: the Federal Reserve. We're saying signs of stress once again. 328 00:21:03,680 --> 00:21:05,679 Speaker 1: I don't think so. I think what we're seeing right 329 00:21:05,720 --> 00:21:09,600 Speaker 1: now is a much anticipated month end flow linked to 330 00:21:10,200 --> 00:21:13,520 Speaker 1: changing hedge ratios, which this might happen to mean that 331 00:21:14,080 --> 00:21:17,080 Speaker 1: dollar buying is in order. There's there's an anticipation that 332 00:21:17,160 --> 00:21:19,920 Speaker 1: once this is outsd the way, the market will start 333 00:21:19,960 --> 00:21:23,680 Speaker 1: to look again at the underlying drivers at a dollar 334 00:21:23,720 --> 00:21:26,560 Speaker 1: at this point, and that for now more broadly seems 335 00:21:26,600 --> 00:21:30,600 Speaker 1: to be the capacity of FED in particular to to 336 00:21:30,720 --> 00:21:34,040 Speaker 1: provide dollars to the market via its various facilities, but 337 00:21:34,119 --> 00:21:37,720 Speaker 1: also hopes for more US fiscal stimulus, which historically would 338 00:21:37,720 --> 00:21:39,240 Speaker 1: have been seen as a dollar positive, but at the 339 00:21:39,280 --> 00:21:42,280 Speaker 1: moment um this is seen as something that again helps 340 00:21:42,280 --> 00:21:44,760 Speaker 1: put more dollars into the system. So as long as 341 00:21:44,800 --> 00:21:48,040 Speaker 1: these factors are driving the market, I would imagine dollar 342 00:21:48,080 --> 00:21:53,360 Speaker 1: strength to be relatively short term, and then after that 343 00:21:53,680 --> 00:21:55,480 Speaker 1: for the dollar to again start to trade in line 344 00:21:55,520 --> 00:21:59,159 Speaker 1: with markets. More broadly, if we're settling for the end 345 00:21:59,200 --> 00:22:02,719 Speaker 1: of the first quarter, what is your positioning for the 346 00:22:02,760 --> 00:22:07,000 Speaker 1: beginning of the second quarter? What is the Jalones strategy? 347 00:22:07,400 --> 00:22:11,640 Speaker 1: Given the total chaos we're living in It's it's obviously 348 00:22:11,680 --> 00:22:15,240 Speaker 1: a very tactical market. Do we can't pretend to try 349 00:22:15,280 --> 00:22:19,920 Speaker 1: to have a fully strategic position for an entire quarter 350 00:22:20,280 --> 00:22:23,560 Speaker 1: when realized volatility is as as as high as it is. 351 00:22:23,600 --> 00:22:26,560 Speaker 1: We're taking each week as it comes. At this point, 352 00:22:26,920 --> 00:22:29,920 Speaker 1: what I would say, though, is that the market is 353 00:22:29,960 --> 00:22:33,960 Speaker 1: already a pricing and fairly negative outcomes for the second 354 00:22:34,040 --> 00:22:37,960 Speaker 1: quarter in terms of data, So to undershoot these negative 355 00:22:37,960 --> 00:22:41,159 Speaker 1: outcomes in terms of actual outcomes is actually going to 356 00:22:41,200 --> 00:22:43,359 Speaker 1: be quite a tall order now at this point, um, 357 00:22:43,400 --> 00:22:45,040 Speaker 1: And I do believe that there's still more of a 358 00:22:45,080 --> 00:22:49,399 Speaker 1: focus at this point on the possibility of more stimulus measures. 359 00:22:49,400 --> 00:22:52,280 Speaker 1: For example, Japan has just announced or is looking at 360 00:22:52,320 --> 00:22:55,840 Speaker 1: announcing a very large package of its own as well. 361 00:22:55,960 --> 00:22:59,760 Speaker 1: So as these come through, I believe that these still help, 362 00:23:00,520 --> 00:23:03,800 Speaker 1: at least within the g tent space. The pro risk currencies, 363 00:23:03,840 --> 00:23:07,119 Speaker 1: the likes of Australian dollar the Canadian dollar in the 364 00:23:07,200 --> 00:23:10,320 Speaker 1: very years term, UM, But I think in the in 365 00:23:10,359 --> 00:23:13,640 Speaker 1: the medium terms, to see a real turnaround in these 366 00:23:13,640 --> 00:23:16,080 Speaker 1: types of currencies, we do need to see other factors 367 00:23:16,119 --> 00:23:17,680 Speaker 1: comes through. So for example, we do need to see 368 00:23:17,680 --> 00:23:21,919 Speaker 1: oil prices base. We do need to see virus infection 369 00:23:22,320 --> 00:23:26,400 Speaker 1: growth rates come down so that markets can believe transport 370 00:23:26,560 --> 00:23:28,800 Speaker 1: around the world can resume again. These are the types 371 00:23:28,840 --> 00:23:30,520 Speaker 1: of things that they are still the big unknowns from 372 00:23:30,520 --> 00:23:34,119 Speaker 1: medium some perspectives. So those helicopters that Tom Keaton seeks 373 00:23:34,119 --> 00:23:36,879 Speaker 1: to talks about all week and has been talking about 374 00:23:37,320 --> 00:23:40,320 Speaker 1: for the past few weeks dropping money into his triple 375 00:23:40,400 --> 00:23:43,760 Speaker 1: triple leverage cash fund, they're going to continue and in 376 00:23:43,800 --> 00:23:47,119 Speaker 1: the short term maybe that won't necessarily debase the dollar 377 00:23:47,240 --> 00:23:50,160 Speaker 1: over the long term, though, how does the US get 378 00:23:50,160 --> 00:23:52,280 Speaker 1: out of this other than just printing money and leading 379 00:23:52,280 --> 00:23:55,440 Speaker 1: to inflation and in the basement of the dollar, well, look, 380 00:23:55,600 --> 00:23:57,800 Speaker 1: I think the key here is effect at the end 381 00:23:57,800 --> 00:24:00,760 Speaker 1: of the day is a relative price um. And the 382 00:24:00,800 --> 00:24:03,040 Speaker 1: truth of the matter is all the other central banks 383 00:24:03,040 --> 00:24:04,960 Speaker 1: are doing the same thing in one form of another, 384 00:24:05,000 --> 00:24:07,560 Speaker 1: exactive in what you know would have been seen as 385 00:24:07,880 --> 00:24:10,560 Speaker 1: very difficult a few years ago, which is emerging markets 386 00:24:11,119 --> 00:24:15,359 Speaker 1: doing qunstantiveas ing um without necessarily seeing their currency is 387 00:24:15,359 --> 00:24:18,040 Speaker 1: getting crushed. You know, that's also happening right now, so 388 00:24:19,000 --> 00:24:21,520 Speaker 1: across the broad range of emerging markets. So the truth 389 00:24:21,560 --> 00:24:23,280 Speaker 1: of the matter is it's it's very difficult to look 390 00:24:23,280 --> 00:24:26,399 Speaker 1: at the dollar in isolation from that perspective, given that 391 00:24:26,400 --> 00:24:28,560 Speaker 1: everyone else is doing the same thing. So when we 392 00:24:28,600 --> 00:24:30,720 Speaker 1: talk about debasement, it could be the case that we 393 00:24:30,800 --> 00:24:34,560 Speaker 1: see down the line a general rise in price levels 394 00:24:34,600 --> 00:24:38,680 Speaker 1: around the world. Basis, that's not necessarily going to mean 395 00:24:38,720 --> 00:24:42,359 Speaker 1: that the dollar falls against other currencies in a in 396 00:24:42,400 --> 00:24:45,520 Speaker 1: a material way. Um. Given that it's a very common 397 00:24:45,520 --> 00:24:48,000 Speaker 1: policy at this point in time. If someone comes to 398 00:24:48,000 --> 00:24:51,120 Speaker 1: you shab and says, I have a belief oil will 399 00:24:51,200 --> 00:24:54,399 Speaker 1: recover in some way or form. What is the best 400 00:24:54,440 --> 00:24:59,520 Speaker 1: way to express strong oil. Yes, that's a good question. 401 00:25:00,119 --> 00:25:01,520 Speaker 1: I think. You know, if you look at things like 402 00:25:01,800 --> 00:25:07,320 Speaker 1: futures prices, futures, because the situation is that there's so 403 00:25:07,480 --> 00:25:10,560 Speaker 1: little storage available for all right now, it means that 404 00:25:10,640 --> 00:25:14,719 Speaker 1: futures prices are actually much higher than the spot prices, 405 00:25:15,400 --> 00:25:19,720 Speaker 1: and therefore, trying to buy you know, oil for future 406 00:25:19,760 --> 00:25:23,479 Speaker 1: delivery in futures, for example, you'll be paying a much 407 00:25:23,560 --> 00:25:26,439 Speaker 1: higher price than the spot price anyway. So I'm not 408 00:25:26,480 --> 00:25:29,320 Speaker 1: sure that there is a very efficient and simple way 409 00:25:29,359 --> 00:25:32,000 Speaker 1: of getting around this conundrum. If you have access to 410 00:25:32,080 --> 00:25:34,879 Speaker 1: cheap storage, you could try to buy Uh. Yeah, I 411 00:25:34,880 --> 00:25:40,960 Speaker 1: have that. We've we've moved, after thought out in her bedroom, 412 00:25:42,240 --> 00:25:45,199 Speaker 1: barrels of oil. Jerm, we're not all big clash. Har 413 00:25:45,359 --> 00:25:49,360 Speaker 1: we can't go and get a super tanker. Let's talk 414 00:25:49,400 --> 00:25:52,679 Speaker 1: about foreign expect Let's talk about foreign exchange and what 415 00:25:52,720 --> 00:25:55,080 Speaker 1: you're seeing in the dates around of China. Some confusion 416 00:25:55,119 --> 00:25:56,800 Speaker 1: in the p M S. The p M I s 417 00:25:57,440 --> 00:25:59,399 Speaker 1: it's not the twin of g d P, it's a 418 00:25:59,440 --> 00:26:02,199 Speaker 1: derivative of of g d P, and all you're asking 419 00:26:02,240 --> 00:26:04,840 Speaker 1: people in China at the moment, are things better this 420 00:26:04,960 --> 00:26:08,040 Speaker 1: month than last month? And the answer to that question 421 00:26:08,480 --> 00:26:11,080 Speaker 1: is yes, But does that main output is recovered what 422 00:26:11,200 --> 00:26:13,560 Speaker 1: it lost in February. The answer to that is no. 423 00:26:14,119 --> 00:26:16,760 Speaker 1: Social hab talked to me about the trajectory you're looking 424 00:26:16,800 --> 00:26:19,879 Speaker 1: for for the Chinese economy. Yeah, that's a that's a 425 00:26:19,960 --> 00:26:23,480 Speaker 1: very good point. So according to our credits with China economists, 426 00:26:24,200 --> 00:26:27,280 Speaker 1: by his calculations, all the all the big jump in 427 00:26:27,480 --> 00:26:30,720 Speaker 1: the pm MYA shows in March is that the level 428 00:26:30,720 --> 00:26:36,439 Speaker 1: of activity is not only nine, isn't only twenty below 429 00:26:37,240 --> 00:26:40,840 Speaker 1: it's peak levels as opposed to in February. So it's 430 00:26:40,840 --> 00:26:42,880 Speaker 1: still a long way down, it's just improved a bit. 431 00:26:43,520 --> 00:26:47,320 Speaker 1: So in that context, we don't believe that the Chinese 432 00:26:47,320 --> 00:26:50,400 Speaker 1: currency is on the verge of of of a dramatic 433 00:26:50,440 --> 00:26:54,840 Speaker 1: recovery at this point. Ultimately, China just this week cut 434 00:26:54,920 --> 00:26:58,480 Speaker 1: rates again and added more money to the system. Again 435 00:26:58,520 --> 00:27:01,880 Speaker 1: to your points around helicopter money. Um, you know, even 436 00:27:01,920 --> 00:27:06,680 Speaker 1: in China, where there is already a large people fear, 437 00:27:07,160 --> 00:27:10,320 Speaker 1: a large debt problem potentially brewing down the line, what's 438 00:27:10,320 --> 00:27:12,800 Speaker 1: still going on is more money being pumped into the system, 439 00:27:12,920 --> 00:27:15,440 Speaker 1: So we do believe that that will keep the REMEMBER 440 00:27:15,840 --> 00:27:19,320 Speaker 1: somewhat contained. And what applies to the Remember applies across 441 00:27:19,320 --> 00:27:22,399 Speaker 1: the emerging market space. So for those looking for a 442 00:27:22,480 --> 00:27:26,360 Speaker 1: dollar turnaround, it's easier, though view, to play that within 443 00:27:26,400 --> 00:27:31,120 Speaker 1: the detain complex, within the higher quality currencies, you could say, 444 00:27:31,800 --> 00:27:34,920 Speaker 1: than some of the the risky occurrencies at this point 445 00:27:34,920 --> 00:27:38,720 Speaker 1: in time that are still plagued by weak growth. Um 446 00:27:38,880 --> 00:27:41,280 Speaker 1: China as one of those guests, but but again in 447 00:27:41,359 --> 00:27:44,240 Speaker 1: Latim as well, for example, plagued by weak growth, but 448 00:27:44,320 --> 00:27:48,480 Speaker 1: have maybe weaker underlying fundamentals at a structural level as well, 449 00:27:48,760 --> 00:27:51,760 Speaker 1: and are still experimenting with with quintitive easing as well 450 00:27:51,840 --> 00:27:54,119 Speaker 1: in some cases. Brazil is another one that might do this, 451 00:27:54,160 --> 00:27:57,239 Speaker 1: for example. So these these put huge question marks these 452 00:27:57,280 --> 00:28:01,040 Speaker 1: kinds of issues around these risky occurrency job always gad 453 00:28:01,080 --> 00:28:03,200 Speaker 1: skate thoughts on a program. I'm best to you and yours, 454 00:28:03,280 --> 00:28:06,560 Speaker 1: johap John credit Sway, his head of f X and 455 00:28:06,680 --> 00:28:15,159 Speaker 1: Macro training Strategy. Let's begin our labor analysis. Normally, folks, 456 00:28:15,160 --> 00:28:17,160 Speaker 1: we really wouldn't do this on a Tuesday, but we're 457 00:28:17,160 --> 00:28:20,159 Speaker 1: gonna do it today. Break the rules with Julia Carnado 458 00:28:20,200 --> 00:28:23,800 Speaker 1: Macro policy perspective. Quoted I believe in the Washington Post 459 00:28:23,920 --> 00:28:28,280 Speaker 1: lead article this morning on the American economy. Julia, good morning. 460 00:28:28,800 --> 00:28:31,600 Speaker 1: What number do we expect Thursday and claims? Is it 461 00:28:31,680 --> 00:28:34,080 Speaker 1: a guess or can you come up with some form 462 00:28:34,080 --> 00:28:38,320 Speaker 1: of statistic? Well, it's a guest. Uh, it's it is 463 00:28:38,360 --> 00:28:41,120 Speaker 1: the leading indicator. So all we're basing it on is 464 00:28:41,560 --> 00:28:44,600 Speaker 1: um the reports that we're getting from individual states. But 465 00:28:44,680 --> 00:28:47,040 Speaker 1: it looks like we're going to have another record breaking number. 466 00:28:47,160 --> 00:28:50,880 Speaker 1: So the three point two million last week is not 467 00:28:51,000 --> 00:28:54,120 Speaker 1: a one off. We're probably going to see another maybe 468 00:28:54,160 --> 00:28:57,920 Speaker 1: two million in claims this week, UM, and that's going 469 00:28:57,960 --> 00:29:02,800 Speaker 1: to translate into men the millions uh loss of payrolls 470 00:29:02,840 --> 00:29:05,560 Speaker 1: in the April report, not the report throughout this Friday, 471 00:29:05,600 --> 00:29:09,840 Speaker 1: but the following report comes in early May. Julia. The 472 00:29:10,000 --> 00:29:13,400 Speaker 1: expectations are getting increasingly dire. Goldman Sachs came out with 473 00:29:13,480 --> 00:29:16,720 Speaker 1: a forecast a couple of weeks ago saying the US 474 00:29:16,760 --> 00:29:19,920 Speaker 1: will shrink by an annualized in the second quarter. Now 475 00:29:19,960 --> 00:29:22,120 Speaker 1: coming out saying it's going to be thirty four percent 476 00:29:22,160 --> 00:29:26,600 Speaker 1: and saying unemployment will soar to fifteen percent by mid year. 477 00:29:27,200 --> 00:29:29,880 Speaker 1: What are you looking for in the data to either 478 00:29:29,960 --> 00:29:33,520 Speaker 1: confirm that dire view or that perhaps gives you a 479 00:29:33,600 --> 00:29:38,800 Speaker 1: sense of what we're looking at. So claims is probably 480 00:29:38,840 --> 00:29:41,560 Speaker 1: one of the more reliable indicators we have right now 481 00:29:41,600 --> 00:29:45,280 Speaker 1: and timely. Uh So, I think how high it goes 482 00:29:45,320 --> 00:29:50,640 Speaker 1: and how persistent that is. Obviously, in this episode, we're 483 00:29:50,760 --> 00:29:55,200 Speaker 1: bringing forward a contraction um in a really unusual way. 484 00:29:55,840 --> 00:29:58,800 Speaker 1: Um So the duration of this matters a lot, and 485 00:29:58,840 --> 00:30:02,160 Speaker 1: then how much it still go over from the immediately 486 00:30:02,200 --> 00:30:08,360 Speaker 1: impacted sectors hotels, restaurants, the travel industry into other sectors. 487 00:30:08,920 --> 00:30:10,800 Speaker 1: Uh is something that we're going to be watching for. 488 00:30:11,000 --> 00:30:14,880 Speaker 1: So high frequency indicators are much more valuable, uh than 489 00:30:15,320 --> 00:30:18,360 Speaker 1: than usual in the current context. You say, bringing forward 490 00:30:18,360 --> 00:30:21,000 Speaker 1: a contraction, and when people talk about how unusual this 491 00:30:21,120 --> 00:30:24,480 Speaker 1: is a forced shutdown in order to fight a pandemic, 492 00:30:24,880 --> 00:30:27,320 Speaker 1: do we have any sense or or the number is 493 00:30:27,360 --> 00:30:29,440 Speaker 1: going to give us any clues as to how quickly 494 00:30:29,480 --> 00:30:32,920 Speaker 1: some of these people can get their jobs back. You know, 495 00:30:33,000 --> 00:30:37,160 Speaker 1: it really is going to be dependent on how effective 496 00:30:37,480 --> 00:30:40,440 Speaker 1: all of these stimulus measures are. So I think with 497 00:30:40,520 --> 00:30:45,959 Speaker 1: the two trillion and the four trillion in fiscal stimulus 498 00:30:45,960 --> 00:30:48,280 Speaker 1: and the four trillion in lending capacity at the fed. 499 00:30:48,880 --> 00:30:51,720 Speaker 1: How quickly can that get out the door? How much, 500 00:30:52,080 --> 00:30:54,680 Speaker 1: how effectively does that serve as a bridge loan for 501 00:30:54,760 --> 00:30:57,480 Speaker 1: businesses so that they can stay in business and restart 502 00:30:57,520 --> 00:31:00,560 Speaker 1: operations in a timely way. Um I don't think it's 503 00:31:00,560 --> 00:31:04,840 Speaker 1: going to be a v The shutdowns may start to end, 504 00:31:05,080 --> 00:31:07,760 Speaker 1: but then I think we're going to resume normal activity 505 00:31:07,880 --> 00:31:11,800 Speaker 1: very cautiously and gradually. UM So, I think it's going 506 00:31:11,840 --> 00:31:14,520 Speaker 1: to be more of a you And once we really 507 00:31:14,560 --> 00:31:20,240 Speaker 1: get to address this virus and test and develop a vaccine, 508 00:31:20,760 --> 00:31:24,320 Speaker 1: then we can really resume activity with with confidence, and 509 00:31:24,360 --> 00:31:27,360 Speaker 1: that probably won't be util next year, Junior. On a 510 00:31:27,360 --> 00:31:29,280 Speaker 1: program like this, we're really fortunate to have one of 511 00:31:29,320 --> 00:31:32,880 Speaker 1: the most sophisticated smart audiences. I think there is anywhere 512 00:31:33,200 --> 00:31:35,920 Speaker 1: in the world of media worldwide on a program like 513 00:31:35,960 --> 00:31:39,640 Speaker 1: Bloomberg Surveillance, but we have a broader audience when things 514 00:31:39,680 --> 00:31:41,520 Speaker 1: get stressful in markets and we have the kind of 515 00:31:41,600 --> 00:31:43,480 Speaker 1: draw down we've had over the last couple of weeks, 516 00:31:43,680 --> 00:31:44,840 Speaker 1: and I think we need to do a better job 517 00:31:44,880 --> 00:31:46,960 Speaker 1: of trying to translate what the feed is actually doing. 518 00:31:47,000 --> 00:31:49,680 Speaker 1: So a headline just across the Bloomberg just moments ago, 519 00:31:50,000 --> 00:31:51,560 Speaker 1: and I'll read it out the batim. It said, the 520 00:31:51,560 --> 00:31:55,880 Speaker 1: FEED is launching a temporary repo facility with foreign central banks, 521 00:31:56,160 --> 00:31:59,040 Speaker 1: the facility and our central banks to repo treasuries for 522 00:31:59,120 --> 00:32:01,880 Speaker 1: dollars to facility. See is an alternative dollar source to 523 00:32:01,960 --> 00:32:06,440 Speaker 1: selling securities? Can you translate what they're doing for a 524 00:32:06,520 --> 00:32:12,920 Speaker 1: much wider audience and why they're doing what they're doing? So, UM, 525 00:32:13,000 --> 00:32:17,080 Speaker 1: the dollar is the reserve currency of the world us UM. 526 00:32:17,080 --> 00:32:21,600 Speaker 1: How we UH engage in international trade, it's it's contracted 527 00:32:21,600 --> 00:32:25,280 Speaker 1: and executed in dollars. So what we often see in 528 00:32:25,280 --> 00:32:29,200 Speaker 1: a crisis is that there's a shortage of dollars globally. UM. 529 00:32:29,240 --> 00:32:32,760 Speaker 1: A lot of borrowing and commerce and investing is done 530 00:32:32,760 --> 00:32:35,800 Speaker 1: in dollars UH. And when you have a dollar crunch 531 00:32:35,920 --> 00:32:39,000 Speaker 1: like that, it can turn from you know, a recession 532 00:32:39,120 --> 00:32:41,880 Speaker 1: or a contraction and activity into a financial crisis very 533 00:32:42,000 --> 00:32:47,640 Speaker 1: quickly because the dollar shortage can trigger default and de leveraging. 534 00:32:47,720 --> 00:32:49,320 Speaker 1: So I think this is what the SET is trying 535 00:32:49,320 --> 00:32:53,720 Speaker 1: to address by providing that dollars liquidity through global central banks. 536 00:32:53,720 --> 00:32:55,600 Speaker 1: That we did that with the swap lines, now we're 537 00:32:55,600 --> 00:32:59,000 Speaker 1: doing it with ripo UM. So I think it's again 538 00:32:59,080 --> 00:33:02,560 Speaker 1: trying to short circuit. This what is clearly going to 539 00:33:02,600 --> 00:33:06,360 Speaker 1: be a deep and painful recession from becoming a full 540 00:33:06,360 --> 00:33:09,320 Speaker 1: blown financial crisis. And that's been the objective of all 541 00:33:09,360 --> 00:33:12,800 Speaker 1: of these various activities that that has been engaged in. 542 00:33:13,720 --> 00:33:17,160 Speaker 1: And to follow on from John's Wilfriend question, Dr Coronado, 543 00:33:17,960 --> 00:33:20,800 Speaker 1: is the idea here is to get out in front 544 00:33:20,880 --> 00:33:24,840 Speaker 1: of crisis. And as we've all studied that crisis comes 545 00:33:25,040 --> 00:33:28,680 Speaker 1: from emerging markets. Are we at a point where the 546 00:33:28,680 --> 00:33:32,840 Speaker 1: emerging markets in dollar shortage are so fragile and they 547 00:33:32,880 --> 00:33:36,280 Speaker 1: don't have the power against the great reserve currency that 548 00:33:36,320 --> 00:33:42,880 Speaker 1: they're gonna need I m F assistance. Soonest um, more 549 00:33:42,960 --> 00:33:46,280 Speaker 1: than likely we will see some countries in that level 550 00:33:46,360 --> 00:33:50,280 Speaker 1: of distress. Um. Again, I think that the said has 551 00:33:50,320 --> 00:33:52,960 Speaker 1: been very aggressive, very early. So that was one of 552 00:33:52,960 --> 00:33:55,400 Speaker 1: the lessons learned from two thousand and eight. You don't 553 00:33:55,400 --> 00:33:58,360 Speaker 1: hold your ammunition back, um, And I think that will 554 00:33:58,400 --> 00:34:02,840 Speaker 1: help um. But nonetheless, I think we're already seeing signs 555 00:34:02,840 --> 00:34:06,760 Speaker 1: of distress. And UM, you know that this is unfolding 556 00:34:06,800 --> 00:34:11,840 Speaker 1: with unprecedented speed. Uh So you know, whereas as you 557 00:34:11,880 --> 00:34:14,520 Speaker 1: were saying earlier, Tom, just a few months ago, the 558 00:34:14,560 --> 00:34:18,560 Speaker 1: picture looked pretty benign um, boy, have things changed, and 559 00:34:18,640 --> 00:34:21,680 Speaker 1: so UM, I think even some of all of these 560 00:34:21,719 --> 00:34:27,280 Speaker 1: efforts aren't likely to be universally effective in in presenting 561 00:34:27,719 --> 00:34:31,520 Speaker 1: all distress. There will be distress in some countries. And 562 00:34:31,640 --> 00:34:33,400 Speaker 1: back in the U S. There's a question about the 563 00:34:33,440 --> 00:34:37,160 Speaker 1: world's largest economy and the safety net that the consumer had, 564 00:34:37,239 --> 00:34:40,239 Speaker 1: the strong consumer where some reports towards the slock of 565 00:34:40,280 --> 00:34:43,000 Speaker 1: Deutsche Bank in particular coming out and saying they don't 566 00:34:43,040 --> 00:34:46,560 Speaker 1: have six hundred dollars on average to cover an emergency, 567 00:34:46,600 --> 00:34:50,000 Speaker 1: and people are looking to the April one rent which 568 00:34:50,200 --> 00:34:52,680 Speaker 1: may or may not get paid. Do you have a 569 00:34:52,719 --> 00:34:56,280 Speaker 1: sense of just the sort of resources of the consumer 570 00:34:56,400 --> 00:34:59,439 Speaker 1: right now? How strong the household balance she is heading 571 00:34:59,480 --> 00:35:03,480 Speaker 1: into this? Well? I think this is where the distribution 572 00:35:03,560 --> 00:35:07,600 Speaker 1: of income is relevant. Um, We household have strong balance sheets, 573 00:35:07,640 --> 00:35:12,080 Speaker 1: but that those strong balance sheets are concentrated at the 574 00:35:12,160 --> 00:35:15,480 Speaker 1: high end of the income spectrum. Meanwhile, it is the 575 00:35:15,640 --> 00:35:18,640 Speaker 1: lower end of the income spectrum that is most vulnerable 576 00:35:18,640 --> 00:35:23,840 Speaker 1: and experiencing the greatest job losses. So UM, many households, 577 00:35:23,840 --> 00:35:30,800 Speaker 1: most households don't even have four hundred dollars emergency. Households 578 00:35:30,800 --> 00:35:33,160 Speaker 1: can't pay rent on April turns at least, I'm so 579 00:35:33,239 --> 00:35:35,200 Speaker 1: glad you brought this up at Dr Cornada. You go 580 00:35:35,320 --> 00:35:37,680 Speaker 1: right to the heart of the matter. Everyone listening to 581 00:35:37,680 --> 00:35:40,839 Speaker 1: this to the show with or without means maybe they 582 00:35:40,840 --> 00:35:43,880 Speaker 1: have family members that can't get that four hundred dollars 583 00:35:43,920 --> 00:35:47,880 Speaker 1: of that rent check for April. Why is our politechs 584 00:35:47,880 --> 00:35:53,839 Speaker 1: pussy footing around with an alphabet soup of politically generated programs. 585 00:35:53,880 --> 00:36:01,879 Speaker 1: What we need is massive income substitution. Yes, you're absolutely right, Tom, 586 00:36:01,960 --> 00:36:05,279 Speaker 1: and some other countries have been much more aggressive on 587 00:36:05,320 --> 00:36:10,799 Speaker 1: that front, providing rent and mortgage payment holidays for their 588 00:36:10,840 --> 00:36:14,239 Speaker 1: consumers for a number of months. That is what you 589 00:36:14,280 --> 00:36:18,640 Speaker 1: need to bridge Uh, this cash crunch for consumers. Uh, 590 00:36:18,680 --> 00:36:22,719 Speaker 1: and we have not, Julia. You're a huge student of 591 00:36:22,880 --> 00:36:25,640 Speaker 1: history on this. Where where did this come from? Is 592 00:36:25,680 --> 00:36:30,319 Speaker 1: this some lackian Calvinist ethos from the nineteenth century? Is 593 00:36:30,360 --> 00:36:35,160 Speaker 1: it some pseudo Victorian psychology? People? And many folks this 594 00:36:35,239 --> 00:36:40,120 Speaker 1: is Republicans and Democrats they gotta pay the rent? Yeah, yeah, No, 595 00:36:40,280 --> 00:36:44,360 Speaker 1: I I don't. I can't explain the political rationale for this, 596 00:36:44,560 --> 00:36:48,279 Speaker 1: tom Um. And even the Fed has it in its 597 00:36:48,320 --> 00:36:50,880 Speaker 1: power to be more aggressive on this front. They could 598 00:36:50,960 --> 00:36:55,279 Speaker 1: mandate Uh, they have issued supervisory guidance to banks to 599 00:36:55,600 --> 00:37:00,880 Speaker 1: encourage forbearance and um payment holidays. They could be a 600 00:37:00,960 --> 00:37:04,000 Speaker 1: little bit more forceful on that front and really find 601 00:37:04,040 --> 00:37:08,600 Speaker 1: a way to finance a payment holiday for agency mortgages 602 00:37:08,719 --> 00:37:11,120 Speaker 1: and sort of mandated for the banks and figure out 603 00:37:11,120 --> 00:37:15,000 Speaker 1: the financing uh that's required. I think we could see 604 00:37:15,000 --> 00:37:18,280 Speaker 1: a stronger effort from the BED to set the standard 605 00:37:18,320 --> 00:37:22,120 Speaker 1: there and get that use the financing in the creative 606 00:37:22,160 --> 00:37:25,839 Speaker 1: way to address that cash crunch. And I hope that's 607 00:37:25,880 --> 00:37:29,040 Speaker 1: the direction they start to go in, because it certainly 608 00:37:29,080 --> 00:37:31,600 Speaker 1: is within their power. Judy, thank you and thank you 609 00:37:31,600 --> 00:37:34,279 Speaker 1: for this morning. Thank you for taking the time to 610 00:37:34,280 --> 00:37:36,359 Speaker 1: speak with us. We really appreciate it. Judy krn Out 611 00:37:36,360 --> 00:37:40,080 Speaker 1: of that macro policy perspective, FUNDA and president as well. 612 00:37:40,840 --> 00:37:45,040 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 613 00:37:45,120 --> 00:37:50,440 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 614 00:37:50,480 --> 00:37:54,720 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 615 00:37:54,760 --> 00:37:58,560 Speaker 1: the podcast. You can always catch us worldwide. 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