WEBVTT - Surveillance: Markets Negative For A While, Ward Says 0:00:00.080 --> 0:00:13.040 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.400 Bloomberg dot Com, and of course on the Bloomberg Ready 0:00:27.400 --> 0:00:28.880 placed to say, we've got a class act in the 0:00:28.880 --> 0:00:31.840 studio today, how would Wards ce io of Growth Equities 0:00:31.840 --> 0:00:34.320 for Kabelly Funds? Good morning to you, Howard. How much 0:00:34.400 --> 0:00:36.760 damage have we done? How long's it hate to recover 0:00:37.040 --> 0:00:39.479 from something like this? We're up three four percent, We're 0:00:39.479 --> 0:00:42.360 down two percent next day, same thing, following day, different 0:00:42.800 --> 0:00:46.200 well last week um in about seven days the smp 0:00:46.320 --> 0:00:48.600 F i've hond it erased two and a quarter years 0:00:48.600 --> 0:00:53.279 of gains UM. So the damage has been severe. We 0:00:53.280 --> 0:00:57.120 were down on closing prices at the low I think 0:00:58.480 --> 0:01:01.840 from there the high of ten days or so ago. 0:01:02.360 --> 0:01:05.600 So significant damage. And typically when you have that kind 0:01:05.640 --> 0:01:07.880 of damage, the market doesn't snap back. Now, if you 0:01:07.920 --> 0:01:11.760 have a fat finger flash crash where it's not a 0:01:11.800 --> 0:01:15.559 function of deteriorating economic fundamentals, the market can snap right back. 0:01:15.959 --> 0:01:18.480 That's not the case here. We have a global healthcare 0:01:18.560 --> 0:01:23.160 crisis emerging and people are resetting their expectations for growth 0:01:23.200 --> 0:01:27.080 and earnings, and UH stocks are resetting as a result. 0:01:27.200 --> 0:01:29.360 So it takes a while to recover from the amount 0:01:29.400 --> 0:01:31.960 of technical damage the market has incurred. And I'm talking 0:01:31.959 --> 0:01:33.679 about a period of months. You're a good friend of 0:01:33.680 --> 0:01:35.840 this probagram, which makes I'm gonna privilege position to know 0:01:36.040 --> 0:01:38.760 what you're doing, what you're positioned. I'm made a single 0:01:38.800 --> 0:01:41.080 trite a few over the last couple of weeks. No, 0:01:41.440 --> 0:01:45.560 I haven't. Now you know, the the qualifier there is 0:01:45.640 --> 0:01:48.600 that in our Gabelly Growth and Global Growth funds, we 0:01:48.640 --> 0:01:52.200 have had a defensive UH tilt on the portfolio now 0:01:52.240 --> 0:01:55.040 for two years and UH. The good thing is for 0:01:55.120 --> 0:01:59.840 two years, actually defensive growth stocks have generally outperformed, and 0:02:00.040 --> 0:02:03.160 during the crisis of the last two weeks that our 0:02:03.200 --> 0:02:06.480 performance has continued. So I haven't felt compelled to get 0:02:06.560 --> 0:02:10.200 more defensive because we were gaining ground during the during 0:02:10.200 --> 0:02:13.639 the decline. UM. If I had not been defensive, then 0:02:13.680 --> 0:02:15.600 maybe I would have done something. But I literally haven't 0:02:15.639 --> 0:02:18.360 done a trade for the last eight or nine days, 0:02:18.360 --> 0:02:20.080 so I don't know if I'm earning my keep or not. 0:02:20.160 --> 0:02:25.720 But it's questionable. Is Apple of defensive stock um in 0:02:25.760 --> 0:02:27.960 the short run time? I don't think it is um 0:02:28.160 --> 0:02:31.120 And that's because you know, all of the big gains 0:02:31.200 --> 0:02:33.880 last year, which were at the peak about percent year 0:02:33.880 --> 0:02:37.720 over year, were driven by multiple expansion, and part of 0:02:37.720 --> 0:02:40.520 that was market related, and part of that, part of 0:02:40.560 --> 0:02:44.560 that was an anticipation of a big new cycle of 0:02:45.040 --> 0:02:48.360 five G phones coming out in the third quarter or 0:02:48.560 --> 0:02:51.960 actually their fourth quarter later this year. And of course 0:02:52.000 --> 0:02:55.520 now you have the multiples coming in a bit, and 0:02:55.600 --> 0:02:58.960 you have the earnings estimates coming down. Tim Cook has 0:02:58.960 --> 0:03:00.360 already come out and said they're not going to make 0:03:00.400 --> 0:03:03.679 their numbers. They're having supply chain disruption. Of course, they're 0:03:03.960 --> 0:03:07.560 somewhat dependent, more dependent on China than many companies for 0:03:07.680 --> 0:03:11.400 parts and from for assemblage. Why is it only seven 0:03:11.440 --> 0:03:14.760 percent beneath its record high? I mean, you're talking to 0:03:14.760 --> 0:03:17.440 me about a stock down fifteen or and we're not 0:03:17.480 --> 0:03:20.960 observing that some not just Apple, but other stocks as well. 0:03:21.200 --> 0:03:24.639 Why are they holding in so well well? Why? You know, 0:03:24.639 --> 0:03:26.680 I would argue, why is the overall market doing as 0:03:26.680 --> 0:03:28.280 well as it is. I don't think the overall market 0:03:28.320 --> 0:03:32.680 has yet come to the conclusion that the earnings estimates 0:03:32.720 --> 0:03:34.679 on the SMP this year are not going to be 0:03:34.720 --> 0:03:37.800 a hundred seventy five dollars, which was the expectation going in. 0:03:38.000 --> 0:03:39.840 They're not gonna be a hundred and seventy two dollars, 0:03:39.880 --> 0:03:42.600 which is where some analysts are right now. They're probably 0:03:42.640 --> 0:03:44.840 gonna be a hundred sixty five dollars, which will be flat, 0:03:44.880 --> 0:03:47.240 and they might very well be negative. And it's when 0:03:47.280 --> 0:03:53.240 you have negative earnings growth in a period of UH 0:03:53.640 --> 0:03:58.280 widening credit spreads and higher global risks, that's when stocks 0:03:58.440 --> 0:04:02.160 take the most pain. And so I'm being willing to 0:04:02.200 --> 0:04:04.320 air on the side of conservatism here in my in 0:04:04.360 --> 0:04:08.040 my comments to tell people that this market is gonna 0:04:08.240 --> 0:04:10.680 We're gonna have updates in this market, like like we 0:04:10.720 --> 0:04:14.640 did yesterday, but if earnings go negative, we're going to 0:04:14.680 --> 0:04:17.440 new lows. And it might even not even take negative 0:04:17.480 --> 0:04:19.720 earnings to take us to new lows. It's gonna be 0:04:19.760 --> 0:04:22.360 a volatile market, and I think that the trend is 0:04:22.600 --> 0:04:24.640 going to be negative for a while, and at least 0:04:24.640 --> 0:04:26.440 of the read of the morning with our question, John 0:04:26.480 --> 0:04:29.120 Plunder with a substantial article in the FT just on 0:04:29.200 --> 0:04:32.440 that the credit spreads and the challenges within the debt market, 0:04:32.680 --> 0:04:34.719 and now they then fold into the equity market. And 0:04:34.839 --> 0:04:37.240 right now we're seeing spreads Titan. We're actually seeing people 0:04:37.279 --> 0:04:40.039 come into particularly riskier credit on this bet that the 0:04:40.120 --> 0:04:42.000 FED will continue to lower rates and it will push 0:04:42.000 --> 0:04:44.839 money into risk your assets, Howard, though I do wonder 0:04:45.160 --> 0:04:50.360 what will make you buy. I want to see the 0:04:50.480 --> 0:04:54.840 UH newsflow on the virus show that we're over the 0:04:54.920 --> 0:04:57.920 hump and that it is receding. And I have no 0:04:58.000 --> 0:05:00.520 idea when that's going to be, whether that is in 0:05:00.600 --> 0:05:03.159 a month, two months, three months, four months, I don't know, 0:05:03.200 --> 0:05:05.320 and neither does anybody else, and it's really important for 0:05:05.360 --> 0:05:09.400 those just waking up across America. Good morning, Boston, New York, Washington, 0:05:09.520 --> 0:05:13.960 of course early early mornings at Bloomberg the Bay Area, John. 0:05:14.160 --> 0:05:17.080 The major message today is, just as we've heard from 0:05:17.240 --> 0:05:20.760 viral experts, the viral news, the piece here, the piece there, 0:05:20.800 --> 0:05:24.000 the piece there, it's increased substantially this morning. But how 0:05:24.000 --> 0:05:26.640 it's Nowaday and you brought up Happo. We've adjusted the 0:05:26.640 --> 0:05:29.240 earnings estimates for what's happened in China. We haven't even 0:05:29.279 --> 0:05:31.960 started to do that for Europe. We haven't even started 0:05:32.000 --> 0:05:33.799 to look at what it means for the United States. 0:05:34.200 --> 0:05:35.960 And if I was looking at this market right now 0:05:35.960 --> 0:05:38.400 for the second half, the rest of ward profile needs 0:05:38.440 --> 0:05:41.000 to shift rapidly. If you move the eight down a lot, 0:05:41.360 --> 0:05:42.840 a lot, then I imagine how it you might be 0:05:42.880 --> 0:05:44.680 a little bit more constructive. Right now, let me tell 0:05:44.720 --> 0:05:46.960 you what happened in the two thousand two thousand two 0:05:47.480 --> 0:05:53.680 dot com bubble bursts. UM stocks declined obviously substantially, and 0:05:53.800 --> 0:05:57.279 in a number of stocks, particularly technology kinds of stocks 0:05:57.320 --> 0:06:03.520 that we wanted to buy had declined. Uh, and we thought, 0:06:04.040 --> 0:06:09.400 what a great opportunity, let's buy more, and we did 0:06:10.360 --> 0:06:13.039 only and at that point in time, in talking to 0:06:13.080 --> 0:06:16.560 the CEOs of those companies they said business was great. 0:06:18.040 --> 0:06:21.119 It wasn't. They either didn't know, or they weren't being honest, 0:06:21.200 --> 0:06:24.080 or some combination of the above. Earnings estimates then got 0:06:24.080 --> 0:06:27.640 caught another and the stocks went down with them. It 0:06:27.720 --> 0:06:30.240 was a horrible move to be too quick back into 0:06:30.240 --> 0:06:32.120 the market. Equating what we have right now to what 0:06:32.200 --> 0:06:34.480 you and I lived in a one. I'm thinking, I 0:06:35.960 --> 0:06:38.400 don't want to be too gloom and doom, but I 0:06:38.400 --> 0:06:41.680 think the potential is here for a drawn out period 0:06:41.800 --> 0:06:45.400 of estimate reductions because we just don't know now. Having 0:06:45.440 --> 0:06:49.520 said that, when the smoke does start to clear, I 0:06:49.560 --> 0:06:54.200 think we'll have a strong recovery. So you don't want to, 0:06:54.400 --> 0:06:57.040 you know, wanta take your eyes off this situation with 0:06:57.080 --> 0:06:59.840 all this liquidity, with rates, the slow with the economy 0:07:00.000 --> 0:07:02.719 wing well go. You know, through February the economy was fine, 0:07:03.960 --> 0:07:06.120 but when the I want to wait until the smoke 0:07:06.200 --> 0:07:08.840 starts clear, and at that point then you really want 0:07:08.839 --> 0:07:11.040 to I think it more aggressive. But until then because 0:07:11.040 --> 0:07:13.240 we don't know when then then is and from what 0:07:13.440 --> 0:07:16.520 level I'm preaching patients, Well, howbou At this point it 0:07:16.560 --> 0:07:18.360 sounds like you're wanting for more smoke, never mind for 0:07:18.360 --> 0:07:20.240 it to clear, and I'm just wondering to be waiting 0:07:20.280 --> 0:07:23.600 for more more revisions to earnings. Where are you expecting 0:07:23.640 --> 0:07:25.760 them to be concentrated? Which sector right now? Or is 0:07:25.760 --> 0:07:28.320 this broad based on the SMP five, Well, you're more 0:07:28.400 --> 0:07:30.880 cyclical industries tend to be the ones that get hurt 0:07:30.920 --> 0:07:33.480 the most. And where is they're the most pain today? Energy? 0:07:33.720 --> 0:07:36.400 You know you're seeing that with the OPEC talking about 0:07:36.680 --> 0:07:40.800 cutting cutting supply. The commodity based businesses have high beta 0:07:40.840 --> 0:07:45.720 relative to economic growth and so they're going to suffer. Materials, energy, 0:07:46.200 --> 0:07:48.960 and industrials are the three areas that tend to get 0:07:49.040 --> 0:07:52.160 hurt the most during this type of a weakening economy 0:07:52.600 --> 0:07:56.640 estimate reduction period. How would well see? I of growth 0:07:56.640 --> 0:07:59.320 aquities Forcabully Funds. Great to catch up with you this morning. 0:08:01.800 --> 0:08:04.920 Jeffrey Curry joins the snout from London, of course, driving 0:08:04.960 --> 0:08:07.840 all of their commodity coverage as well. Jeffrey, I must 0:08:07.880 --> 0:08:10.200 have you look at the headline. I'm not sure you've 0:08:10.240 --> 0:08:12.240 seen it. It's only been in the last minutes across 0:08:12.240 --> 0:08:16.080 the Bloomberg terminal the Saudi Oil Minister. We will see 0:08:16.120 --> 0:08:20.320 tomorrow if the Russians are on board. Let's talk first principles. 0:08:20.640 --> 0:08:24.280 Why does OPEC and the Saudias need the Russians on board? 0:08:25.440 --> 0:08:27.720 Um because they need to have as large as a 0:08:27.800 --> 0:08:30.520 cut as possible. But we like to argue, no matter what, 0:08:30.680 --> 0:08:34.240 it's too little, too late. The damage to demand, particularly 0:08:34.280 --> 0:08:37.240 in China, occurred three to four weeks ago, UM, and 0:08:37.320 --> 0:08:40.040 now you have it in materializing in the West. The 0:08:40.120 --> 0:08:43.199 total demand decline is somewhere around four to five million 0:08:43.200 --> 0:08:46.160 barrels per day at this point, potentially even larger so 0:08:46.320 --> 0:08:49.360 cutting one and a half million barrels per day in April, 0:08:49.559 --> 0:08:51.760 it's really gonna have no right back. So your downside 0:08:51.840 --> 0:08:54.880 risk is baked in. The question is how can they 0:08:54.920 --> 0:08:57.920 normalize inventories over the course of the year, and they 0:08:57.960 --> 0:09:00.880 need the support from the Russians. Give us one example, 0:09:00.920 --> 0:09:03.520 and this goes back to the Jeff Curry microeconomics of 0:09:03.559 --> 0:09:07.880 decades ago. You're teaching microeconomics at Chicago years ago. Give 0:09:07.960 --> 0:09:12.080 us one example of how microeconomics a just price. Give 0:09:12.160 --> 0:09:15.520 us one example where somebody takes a lower price in 0:09:15.640 --> 0:09:18.800 oil because of a lack of demand. I think that 0:09:18.920 --> 0:09:22.080 the biggest margin of adjustment is going to be as 0:09:22.200 --> 0:09:25.880 inventories begin to fill because of the fact that demand 0:09:26.000 --> 0:09:30.040 is far lower than supply is. Does the building inventories 0:09:30.200 --> 0:09:34.079 overwhelm the ability of the system to accommodate those inventories, 0:09:34.120 --> 0:09:37.199 and we call that breaching inventory capacity. If that were 0:09:37.240 --> 0:09:39.839 to happen, you really open up the downside and oil, 0:09:39.880 --> 0:09:42.520 and we could see prices going sub forty down into 0:09:42.520 --> 0:09:44.920 the low thirties. Our base case is we avoid that 0:09:45.320 --> 0:09:47.360 and we end up with prices in the low forties. 0:09:47.640 --> 0:09:49.880 Low forties. Is still the banks, Brent and that's on 0:09:49.920 --> 0:09:53.840 Bran and this is Brent from doty one cents. Yeah, 0:09:54.400 --> 0:09:57.240 so that's huge. Yeah, you got a lot more downside. 0:09:57.440 --> 0:09:59.839 I mean, let's let's remind you that Hit to the 0:10:00.080 --> 0:10:02.839 Man is on par with oh eight o nine, if 0:10:02.840 --> 0:10:05.840 not even larger in terms of the high frequency data. Um, 0:10:05.880 --> 0:10:07.600 you know, this is one of the biggest events we've 0:10:07.640 --> 0:10:10.200 ever seen in our lifetimes. You just shut down the 0:10:10.240 --> 0:10:14.280 second largest economy in the world. It's going to have ramifications, Jeff. 0:10:14.280 --> 0:10:16.480 The interesting part of this, though, is the other asset 0:10:16.520 --> 0:10:19.520 classes can look through the shock and price in a 0:10:19.600 --> 0:10:22.600 better second half. Just torch us to us about a 0:10:22.600 --> 0:10:27.280 difference between commodities, say, and equities as an asset class 0:10:27.760 --> 0:10:31.520 and why it's just a different story. Excellent question. Um. 0:10:31.640 --> 0:10:34.839 We like to argue that commodities are spot assets. The 0:10:35.000 --> 0:10:38.520 price has to clear today's supply and demand. In contrast, 0:10:38.920 --> 0:10:44.200 financial markets are anticipatory assets. They anticipate the future because 0:10:44.200 --> 0:10:47.119 remember you're taken equity, it's nothing other than the discounted 0:10:47.200 --> 0:10:49.440 some of future earnings, and so they can price in 0:10:49.520 --> 0:10:52.479 the stimulus, the rate cut and all of that. Commodities 0:10:52.520 --> 0:10:54.280 have to deal with the surplus today. So I like 0:10:54.320 --> 0:10:56.880 to say there's a tug of war between surplus and 0:10:56.920 --> 0:11:00.040 stimulus and commodities in particular COT in the middle of 0:11:00.240 --> 0:11:02.920 that tug of war, how are you expecting as a 0:11:02.960 --> 0:11:06.760 result of potentially thirty dollar barrel oil UM? You know, 0:11:06.840 --> 0:11:08.520 I mean that's you know, if we got into that, 0:11:08.520 --> 0:11:10.319 that would it would damage the industry. But I like 0:11:10.440 --> 0:11:14.360 to point out the oil patch was already in very 0:11:14.400 --> 0:11:18.760 poor financial health even at fifty sixty of barrel UM. 0:11:18.800 --> 0:11:20.160 You know, that could be you know, you can see 0:11:20.160 --> 0:11:22.920 it in the equity industries UM that they have come 0:11:23.000 --> 0:11:25.680 down sharply. In fact, I think it was on either 0:11:26.360 --> 0:11:30.040 Friday or Monday the equity energy industry hit an all 0:11:30.080 --> 0:11:34.520 time low. What does XN do? Yeah, I think Exxon 0:11:34.679 --> 0:11:36.440 is unique from the rest of them is that they're 0:11:36.600 --> 0:11:41.440 investing in conventional UM oil supplies UM on a forward basis. 0:11:41.440 --> 0:11:44.559 No other company is making large scale investment like that. 0:11:44.600 --> 0:11:46.880 They're either doing like in Europe, or doing renewables and 0:11:46.920 --> 0:11:50.200 gas UM. So if we look out forward, because of 0:11:50.200 --> 0:11:52.800 the environment right now and the poor financial health of 0:11:52.800 --> 0:11:55.200 the industry, we're going to see under investment when you 0:11:55.200 --> 0:11:58.120 get into one and beyond, And so those who make 0:11:58.160 --> 0:12:00.800 investments right now, are going to be well positioned a 0:12:00.920 --> 0:12:03.559 year or so from now. Jeff, what's the Jeff Curry interview? 0:12:03.559 --> 0:12:05.560 If we don't bring up gold, let's talk about it. 0:12:05.760 --> 0:12:08.480 What's happening? Some dates were down aggressively when I'd expect 0:12:08.520 --> 0:12:10.440 us to have a bit because it's risk off, and 0:12:10.440 --> 0:12:12.240 then we're down on gold and it doesn't make sense 0:12:12.240 --> 0:12:14.520 to me. And people are talking about things like marching cools. 0:12:14.559 --> 0:12:16.360 What is the dynamics that a plank out at gold 0:12:16.400 --> 0:12:19.040 market at the moment? Well, if you think about you know, 0:12:19.080 --> 0:12:22.240 when you have panic um set in because of markets 0:12:22.280 --> 0:12:24.160 coming down, you need to raise cash to hit your 0:12:24.200 --> 0:12:27.240 margin calls. And the most winning position over the last 0:12:27.320 --> 0:12:29.800 year or so really has been being long gold, and 0:12:29.880 --> 0:12:32.280 it was a at a very high level of lengths. 0:12:32.320 --> 0:12:34.680 So when you need to raise cash, you always go 0:12:34.720 --> 0:12:36.440 to your winners and sell them, and that's why you 0:12:36.480 --> 0:12:40.480 get that initial knee jerk reaction. But we've demonstrated as 0:12:40.520 --> 0:12:43.240 you look further out, the longer the sell off goes, 0:12:43.280 --> 0:12:45.400 the better gold begins to perform. And I like to 0:12:45.480 --> 0:12:49.959 argue gold is immune to the to the virus. Right now, 0:12:50.000 --> 0:12:53.040 you know populations can get it, but gold is your 0:12:53.080 --> 0:12:56.679 currency of last resort, your price target. Jeffrey quickly here 0:12:56.760 --> 0:12:59.800 on gold eight hundred dollars and ounce lots of upside 0:12:59.800 --> 0:13:01.959 from here. It's Curry. Thank you so much. Jeffrey Cray 0:13:02.040 --> 0:13:08.280 with Golden Saxas morning from our studios in London. Lisa, 0:13:08.280 --> 0:13:10.320 I wrote an essay for LinkedIn, which is a great 0:13:10.320 --> 0:13:12.840 plurage to do that for Dan Roth and Victoria Taylor 0:13:12.840 --> 0:13:14.920 and the team over at LinkedIn. And you know I'm 0:13:14.920 --> 0:13:16.880 doing stuff like how I mean, people ask me all 0:13:16.920 --> 0:13:18.640 the time, how do you do the reading? How do 0:13:18.679 --> 0:13:20.920 you know what not to read? And all that? And 0:13:20.960 --> 0:13:23.120 I did this one on mathematics, and to make a 0:13:23.120 --> 0:13:25.600 long story short, it was that the whole anst if 0:13:25.600 --> 0:13:27.800 you're out in the business world and you sort of 0:13:27.840 --> 0:13:30.920 remember doing your math like long ago and far away, 0:13:31.559 --> 0:13:34.000 and how do you get back in the math game gently? 0:13:34.040 --> 0:13:35.600 And it was a bunch of books and all that. 0:13:35.960 --> 0:13:38.560 And two thirds of the way through the essay I said, 0:13:38.640 --> 0:13:42.880 you have to read people who do math inherently in 0:13:42.920 --> 0:13:46.040 their work. And one of the best in the world 0:13:46.200 --> 0:13:50.560 is James Bianco. He is just brilliant of how he 0:13:50.800 --> 0:13:54.160 pulls in charts and doesn't mean usually it's in a 0:13:54.200 --> 0:13:56.240 summit what's called a semilog basis. I'm not going to 0:13:56.280 --> 0:13:58.000 go to the math right now. We don't do math 0:13:58.040 --> 0:14:01.320 on Thursday and Bloomberg surveillance, but I was thrilled to meension. 0:14:01.400 --> 0:14:05.240 Jim Bianco is LinkedIn feed is outstanding. Jim Bianco, one 0:14:05.240 --> 0:14:08.120 of my absolute favorites, president and founder of Bianco Research, 0:14:08.200 --> 0:14:11.240 joining us now from Chicago. And Jim, I'm looking right now, 0:14:11.320 --> 0:14:14.600 we've been all watching two your yields plunge to session lows, 0:14:14.880 --> 0:14:17.839 the lowest level since two thousand sixteen, zero point five 0:14:18.000 --> 0:14:20.680 eight five because Tom likes to break it out to 0:14:20.760 --> 0:14:23.800 four h two places. And I'm looking right now at 0:14:23.840 --> 0:14:27.119 the warp screen on the Bloomberg terminal pricing in almost 0:14:27.560 --> 0:14:31.640 four rate cuts now by the end of next jan 0:14:32.240 --> 0:14:36.960 where we are now correct correct the implied rate zero 0:14:37.000 --> 0:14:41.520 point to nine eight percent by January one, And I'm 0:14:41.560 --> 0:14:44.400 trying to understand, Jim, how quickly do we get to zero? 0:14:45.560 --> 0:14:49.160 Maybe two weeks, it could be that quick. Right now, 0:14:49.240 --> 0:14:52.680 your warp screen, which is your world interest rate probability screen, 0:14:53.280 --> 0:14:54.960 is telling us that there's going to be a fifty 0:14:54.960 --> 0:14:58.880 basis point cut on March eighteens, and that would take 0:14:58.960 --> 0:15:02.120 us down to five eighths of percent now without getting 0:15:02.120 --> 0:15:04.280 to in the weeds. The Fed's got another problem that 0:15:04.320 --> 0:15:08.120 they didn't anticipate. As they announced that they're going to 0:15:09.000 --> 0:15:11.600 um cut rates, and as the market expects they're going 0:15:11.680 --> 0:15:15.800 to cut rates, people that have their money in overnight 0:15:16.400 --> 0:15:20.200 UH money like overnight repow or one day maturity type 0:15:20.240 --> 0:15:23.320 of commercial paper and stuff are saying those rates are 0:15:23.320 --> 0:15:25.160 gonna fall, So I'm going to move out to three 0:15:25.200 --> 0:15:29.480 and six months paper to try and mitigate my reinvestment risk. 0:15:29.520 --> 0:15:32.920 I'll take that higher yield UH and I'll lock it 0:15:32.920 --> 0:15:36.560 away for three months. So what's happening is money or 0:15:36.920 --> 0:15:39.360 liquidity is being drained out of the banking system because 0:15:39.360 --> 0:15:42.680 it's leaving the banking system and going to longer securities. 0:15:43.000 --> 0:15:45.760 And that's why you're seeing this big jump in the 0:15:45.840 --> 0:15:49.480 amount of repos that the street is asking for. If 0:15:49.480 --> 0:15:52.280 the FED wants to drag this out and just say 0:15:52.320 --> 0:15:54.600 well we'll we'll cut twenty five or fifty in March 0:15:54.640 --> 0:15:57.160 and maybe fifty in April, there will be no money 0:15:57.240 --> 0:15:59.120 left in the banking So this is this is really 0:15:59.160 --> 0:16:02.160 important to him. Are you saying that the FED needs 0:16:02.200 --> 0:16:05.160 to cut rates by fifty basis points on March eighteen, 0:16:05.560 --> 0:16:09.080 or else we are going to have a fundamental plumbing 0:16:09.080 --> 0:16:12.040 problem in the financial system. I'm gonna go you one 0:16:12.040 --> 0:16:14.080 step further. We have a plumbing problem in the financial 0:16:14.120 --> 0:16:18.200 system right now. Uh and it is being covered by 0:16:18.240 --> 0:16:22.080 the FEDS new facility that they've put in place. But 0:16:22.200 --> 0:16:26.120 the Street Wall Street is asking for more assistance than 0:16:26.200 --> 0:16:29.080 the caps that the FED is put on it. Today, 0:16:29.120 --> 0:16:32.920 they said that they would offer billion dollars of what's 0:16:32.960 --> 0:16:36.360 called fourteen day term repo. The Street asked for seventy 0:16:36.400 --> 0:16:38.840 billion dollars of assistance and they only got twenty in 0:16:38.920 --> 0:16:43.840 help right now. So the reason is all that money 0:16:43.920 --> 0:16:45.960 is leaving because it knows those rates are going to 0:16:46.040 --> 0:16:49.520 go down, and it's going too longer term securities. And 0:16:49.600 --> 0:16:52.160 if the FED is going to drag their feet in 0:16:52.240 --> 0:16:55.880 cutting rates, we will cut meeting five next meeting. This 0:16:55.920 --> 0:16:58.320 is going to create a bigger plumbing problem. So if 0:16:58.360 --> 0:17:01.240 you're ultimately thinking about going to zero by the picking 0:17:01.280 --> 0:17:03.320 half of this year, do it in two weeks. This 0:17:03.360 --> 0:17:06.199 because the time limitations today, Jim Bianco, and this is 0:17:06.240 --> 0:17:11.199 so important. Do you find an efficacy and alternatives to 0:17:11.520 --> 0:17:15.280 rate cuts, or is rate cuts the blunt instrument that 0:17:15.400 --> 0:17:19.080 only works well. Race cuts is the blunt instrument that 0:17:19.160 --> 0:17:21.280 they work. The only other instrument that they have that 0:17:21.359 --> 0:17:24.640 they could use at this point would be to expand 0:17:24.680 --> 0:17:27.680 their balance sheet, which is what we now know as QUEI. 0:17:27.840 --> 0:17:30.240 I wanted to say traditional QUEI, I guess that's what 0:17:30.320 --> 0:17:33.400 it's become now it's more traditional. I don't think negative 0:17:33.440 --> 0:17:36.240 interest rates or any of those other things would be 0:17:36.359 --> 0:17:39.760 very effective effect out. Those would be very counterproductive um 0:17:39.800 --> 0:17:43.560 at this point. So the Feds got kind of two 0:17:43.600 --> 0:17:46.359 targets that they're looking at. Their looking at what this 0:17:46.520 --> 0:17:50.280 virus means, what we're fearing it means for the economy 0:17:50.400 --> 0:17:54.160 in two, three or four weeks whitespread shutdown disruption and 0:17:54.800 --> 0:17:58.359 the fact that they are cutting rates that act is 0:17:58.400 --> 0:18:01.399 creating a plumbing problem on top of everything else. I mean, 0:18:01.440 --> 0:18:05.119 promis being handled for now, but just for now, it 0:18:05.160 --> 0:18:08.240 doesn't mean that they've got it permanently solved. Jimmyako, thank 0:18:08.240 --> 0:18:09.879 you so much. Too short of visit. We look for 0:18:09.920 --> 0:18:14.240 a much longer visit next time. Mr brianco in Chicago 0:18:14.320 --> 0:18:20.119 greatly greatly appreciate it. Right now, the banker who is 0:18:20.160 --> 0:18:23.600 an engineer, Jean Cautriche Jarnes, this is a former president 0:18:23.840 --> 0:18:26.720 of the European Central Bank, and we are thrilled Mr Triche, 0:18:27.080 --> 0:18:29.159 you could be with us today. I want you to 0:18:29.200 --> 0:18:32.919 take your engineering and the dynamics that you know cold 0:18:33.240 --> 0:18:37.560 and that is the new discussion of supply shifting worldwide 0:18:38.040 --> 0:18:42.320 and demand shifting worldwide. Which are you more concerned about 0:18:42.680 --> 0:18:47.520 the supply shocks or the demand shocks? To come well 0:18:47.800 --> 0:18:50.040 first the way, it's a pleasure to be with you, Tom, 0:18:50.080 --> 0:18:52.439 I would say that the problem is that we have 0:18:52.600 --> 0:18:55.560 both the supply shock and the demand shock. At the 0:18:55.680 --> 0:18:59.080 very beginning, one could have said, perhaps it is on 0:18:59.200 --> 0:19:02.639 the supply shock we can do nothing as regards the 0:19:02.680 --> 0:19:05.840 centple banks. Of course, as regards the supply shock, and 0:19:05.840 --> 0:19:10.240 and then let's wait for the cornavirus to be to 0:19:10.400 --> 0:19:13.760 be to be eliminated and then we have a V 0:19:13.880 --> 0:19:20.240 shaped recovery. Unfortunately, we see now taking into account globalization, 0:19:20.440 --> 0:19:24.399 the supply chain at a global level, and all the 0:19:24.440 --> 0:19:29.119 consequences of the fear that is accompanying this epidemic or 0:19:29.200 --> 0:19:33.040 this pandemic, we see that there is a demand shock also, 0:19:33.240 --> 0:19:37.240 and we have both together at the global level. And this, 0:19:37.440 --> 0:19:43.399 of course is something which calls for appropriate decisions not 0:19:43.520 --> 0:19:47.040 only by sample banks, of course, but by all partners 0:19:47.160 --> 0:19:50.840 without exception. And if I may tom, I am a 0:19:50.840 --> 0:19:54.240 little bit annoyed that we hear a lot from the 0:19:54.359 --> 0:19:58.840 G seven from the industrialized country. We I heard nothing 0:19:58.880 --> 0:20:03.600 from the G twenty. And we have clearly a global issue, 0:20:03.600 --> 0:20:07.280 a global problems, with a lot of emerging countries being 0:20:07.720 --> 0:20:10.439 at the heart of the problem, including of course China. 0:20:10.800 --> 0:20:12.479 So it seems to me that it has to be 0:20:12.560 --> 0:20:15.359 taken up at the global level, and not only at 0:20:15.359 --> 0:20:17.359 the level of the G seven. Presidental sharing going to 0:20:17.480 --> 0:20:19.359 rip up the scripture. And I do this with great 0:20:19.400 --> 0:20:23.720 respect for Chairman Power and Christine Lagarde with your criticism 0:20:23.800 --> 0:20:27.520 of a need for a global action. Should we have 0:20:27.560 --> 0:20:32.320 seen a coordinated response with Chairman Powell the other day, 0:20:32.520 --> 0:20:37.800 Did they miss a moment by not linking together their actions. Well, 0:20:38.240 --> 0:20:41.560 you know that I have experienced myself coordinated action with 0:20:41.640 --> 0:20:47.560 a fifty basis point diminishing on October two, after demand bothered. 0:20:48.160 --> 0:20:51.919 I have to say at the time the drama was 0:20:52.040 --> 0:20:56.680 unfolding in a much worse manner. If I may so, 0:20:57.080 --> 0:21:01.560 the idea that we had at the necessity to coordinate 0:21:01.960 --> 0:21:05.320 action at the level of the major central bank was 0:21:05.400 --> 0:21:09.439 something very natural. I'm not sure that it was really 0:21:09.880 --> 0:21:12.960 more appropriate in this time. It could have also had 0:21:13.359 --> 0:21:16.840 an impact of panicking, if I may, or giving the 0:21:16.920 --> 0:21:20.320 message of too much of a panic. So I think 0:21:21.080 --> 0:21:23.560 it's okay. What has been done is okay. I don't 0:21:23.600 --> 0:21:28.800 regret the coordination action. Zean claud Tricia. One of the 0:21:28.920 --> 0:21:31.680 arguments that you could put forward as to why there 0:21:31.840 --> 0:21:35.159 wasn't coordinated action is the other central bankers think the 0:21:35.240 --> 0:21:40.159 coming rates is a mistake. Could that be the case? Well, again, 0:21:40.800 --> 0:21:44.480 each central banks as its own responsibility in its own 0:21:44.840 --> 0:21:48.240 law and legislation or treaty. So I think that there 0:21:48.320 --> 0:21:51.720 is no general rule to apply to everybody. That's one 0:21:51.720 --> 0:21:54.800 of the problems of I would say, governance in Europe 0:21:54.840 --> 0:21:57.119 as well as in the world. It is that the 0:21:57.880 --> 0:22:01.600