WEBVTT - Surveillance: Stringer Urges NYC’s Wealthy To Set Up 0:00:09.880 --> 0:00:12.960 Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jai Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.440 Bloomberg dot Com, and of course on the Bloomberg. Paul 0:00:27.680 --> 0:00:30.880 Donovan joins US with UBS, their global chief economists and 0:00:31.000 --> 0:00:34.680 just a wonderful perspective on the Pacific rim. The upside 0:00:34.720 --> 0:00:38.519 surprise Paul Donovan has been China. I want to go 0:00:38.560 --> 0:00:41.760 back to the UBS heritage of Jonathan Anderson from years 0:00:41.760 --> 0:00:44.720 ago in the U b S expertise. I don't want 0:00:44.760 --> 0:00:48.159 to know about Hong Kong, or Shanghai or Beijing. Paul Donovan, 0:00:48.320 --> 0:00:51.400 What does U b SC and the rest of China 0:00:51.479 --> 0:00:55.320 we never speak of. So the Chinese economy we sold 0:00:55.360 --> 0:00:58.960 this morning with the industrial production data, production is kicking, 0:00:59.000 --> 0:01:02.520 my kid. China is is a very interesting comparison to 0:01:02.600 --> 0:01:06.000 what we're seeing in the US and in Europe because 0:01:06.040 --> 0:01:09.440 the US and Europe what's happened is consumers saved money 0:01:09.560 --> 0:01:12.840 during lockdown, and then as lockdowns have ended, they've started 0:01:12.880 --> 0:01:16.040 to spend it because that's what consumers do. But in China, 0:01:16.400 --> 0:01:19.600 the consumer was less able to save money, so the 0:01:19.680 --> 0:01:21.880 domestic economy was sort of a little bit on the 0:01:21.920 --> 0:01:24.120 back foot as it came out of lockdown. Unless you 0:01:24.160 --> 0:01:26.759 were middle class, you didn't really have savings to spend. 0:01:27.360 --> 0:01:29.960 But what's now happening, of course, is that we're seeing 0:01:30.080 --> 0:01:33.600 global consumer demand picking up and that's working its way 0:01:33.640 --> 0:01:36.600 up the supply chains, and we're seeing these better production 0:01:36.680 --> 0:01:40.960 numbers coming out of China beating expectations. I don't have 0:01:40.959 --> 0:01:43.679 a lot of faith at the expectations particularly accurate. The 0:01:43.800 --> 0:01:46.800 range of forecast is very wide, but certainly a decent 0:01:46.920 --> 0:01:50.960 number coming out reflecting that improvement in global activity. Okay, 0:01:50.960 --> 0:01:53.800 you can extrapolate it to Australia, and John Farrell was 0:01:53.920 --> 0:01:56.480 more to the house a long Australia here into the 0:01:56.560 --> 0:01:58.960 end of the year. Can you extrapolate it to the 0:01:59.000 --> 0:02:03.160 rest of the world. Can you extrampolate Chinese better over 0:02:03.160 --> 0:02:06.720 to America and over to the continent of Europe. I 0:02:06.720 --> 0:02:09.520 think it has to be taken a looking at both sides. 0:02:09.600 --> 0:02:13.239 So China is a linking global supply chains. It's now 0:02:13.280 --> 0:02:17.600 the world's largest manufacturer UM, It's a key part of 0:02:18.000 --> 0:02:21.440 global supply chains. So if we're seeing better production in China, 0:02:21.639 --> 0:02:24.680 if we're seeing improvements in the export numbers, that is 0:02:24.680 --> 0:02:27.919 telling us something about global levels of demand. And we're 0:02:27.960 --> 0:02:32.240 seeing it also come through in terms of proper indications 0:02:32.280 --> 0:02:35.600 about confidence in the economy. You're not these useless surveys, 0:02:35.800 --> 0:02:41.239 but detailed behavior of consumers, of individuals in Europe and 0:02:41.280 --> 0:02:44.680 the US is pointing towards a better economic outlook. And 0:02:44.720 --> 0:02:48.680 this is always the case. Markets are always always too 0:02:48.720 --> 0:02:52.840 pessimistic about recovery from a crisis. This was no different 0:02:52.840 --> 0:02:56.680 to previous crisis. The markets have failed to understand the 0:02:56.760 --> 0:02:59.440 speed of the bounce back, the resilience of consumers and 0:03:00.080 --> 0:03:04.280 businesses in the face of a challenge, Paul, is there 0:03:04.280 --> 0:03:08.800 anything unique about the willingness of many people to still 0:03:08.880 --> 0:03:14.040 under appreciate this rebound in this economy? So, I think 0:03:14.080 --> 0:03:18.000 we've got some complications here. Um, So we've got problems 0:03:18.040 --> 0:03:20.360 with the data itself. I mean, the data quality has 0:03:20.400 --> 0:03:23.040 been deteriorating for several years, but it's it's been really 0:03:23.080 --> 0:03:26.400 really bad during this crisis, and we're now seeing the 0:03:26.480 --> 0:03:29.760 inconsistencies in the data. So the fact that different countries 0:03:29.880 --> 0:03:33.440 use different methods to calculate GDP. Your only economists get 0:03:33.440 --> 0:03:35.800 excited about this most of the time. But now it's 0:03:35.840 --> 0:03:38.800 leading to these absolute a normalies in the data when 0:03:38.800 --> 0:03:41.920 you do international comparisons. So that's throwing up a lot 0:03:41.960 --> 0:03:45.000 of problems. But also, of course what's happening throughout all 0:03:45.000 --> 0:03:51.040 of this is the pandemic has accelerated the structural changes 0:03:51.080 --> 0:03:54.920 of the Fourth Industrial Revolution and also the environmental credit crunch. 0:03:55.280 --> 0:03:59.760 Both of those big, big structural issues have been sped 0:03:59.840 --> 0:04:02.520 up throughout this and that means of course that we 0:04:02.600 --> 0:04:05.160 may be failing to capture some of what's going on 0:04:05.200 --> 0:04:07.920 in the economy. So to give just one example, we 0:04:08.000 --> 0:04:13.280 have seen an absolute search in business creation in America, 0:04:13.400 --> 0:04:18.400 in the UK and France, in Japan, in Singapore, huge 0:04:18.480 --> 0:04:22.000 huge increase in business creation since lockdowns ended. That's not 0:04:22.200 --> 0:04:24.880 likely to be properly reflected in the data. You know, 0:04:25.000 --> 0:04:27.520 some of the entrepreneurship is just going to be missed 0:04:27.560 --> 0:04:29.640 because the satisticians aren't going to be looking for it. 0:04:30.040 --> 0:04:33.080 So do you think that right now, going forward, we're 0:04:33.120 --> 0:04:35.599 going to see ongoing improvement in the data, or do 0:04:35.640 --> 0:04:38.680 you think that with the pullback in fiscal support we'll 0:04:38.680 --> 0:04:40.600 see a PLATEAUA I mean, do you think that right 0:04:40.600 --> 0:04:43.080 now people are still getting it wrong and expecting a 0:04:43.160 --> 0:04:46.400 cool down in the recovery, So there will be a 0:04:46.400 --> 0:04:48.880 call down. I mean, let's be realistic. What's what's really 0:04:48.880 --> 0:04:52.400 fueling this is the fact that most people accumulated about 0:04:52.400 --> 0:04:55.240 a month's worth of income in savings while so we're 0:04:55.279 --> 0:04:58.240 stuck in lockdown, unable to do anything. And of course, 0:04:58.240 --> 0:05:01.119 as soon as lockdown ends, you know, you've just spent 0:05:01.200 --> 0:05:03.520 you know whatever it is, two months stuck at home 0:05:03.640 --> 0:05:06.960 with you, your your close family, as as companions. You're 0:05:07.040 --> 0:05:09.039 desperate to get out and get away from them, and 0:05:09.080 --> 0:05:10.880 they go out and spend money. And that's what's happening. 0:05:10.880 --> 0:05:14.240 And that's the surge of the third quarter. Now that's 0:05:14.240 --> 0:05:17.760 not gonna last. It's like a tax rebate. Within six months, 0:05:17.760 --> 0:05:19.640 this money is going to be gone and with them 0:05:19.680 --> 0:05:22.240 back into a more normal pattern of growth. But I 0:05:22.279 --> 0:05:26.520 think that that will still be fairly resilient because the 0:05:26.640 --> 0:05:29.720 labor market is bouncing back more strongly, and we do 0:05:29.800 --> 0:05:33.240 get fiscal support, particularly in Europe obviously, but also potentially 0:05:33.240 --> 0:05:36.880 in the States next year. The other thing to remember is, 0:05:36.920 --> 0:05:39.080 of course, that we've been seeing an awful lot of 0:05:39.240 --> 0:05:44.240 upward revisions to numbers. So once business got a bit 0:05:44.360 --> 0:05:48.000 back to normal, we saw statisticians being able to go 0:05:48.040 --> 0:05:51.119 out and collect data a bit more reliably. And so 0:05:51.440 --> 0:05:54.200 in both Europe and in the United States, there's been 0:05:54.240 --> 0:05:57.480 a lot of upward revisions. Sort of. The the Revision Index, 0:05:57.560 --> 0:06:02.520 which looks at revising data, has ticking up since lockdown ended, 0:06:02.760 --> 0:06:05.200 and that's also telling us that actually things weren't quite 0:06:05.200 --> 0:06:07.919 as bad as we thought in the second quarter. The 0:06:07.960 --> 0:06:10.080 other aspect of this, and you wrote an essay on 0:06:10.080 --> 0:06:13.320 this I thought was fascinating, was that you believe homeworking 0:06:13.680 --> 0:06:17.360 actually boosts growth. Can you talk a little bit about that, 0:06:17.520 --> 0:06:20.240 especially if that growth may not be in the big 0:06:20.279 --> 0:06:24.200 cities that traditionally were the economic engines. So I think 0:06:24.200 --> 0:06:26.480 the first point about this is this was going to 0:06:26.520 --> 0:06:29.800 be happening anyway. The technological changes that the changes of 0:06:29.800 --> 0:06:33.600 the Fourth Industrial Revolution fascinating from an economic point of view, 0:06:33.600 --> 0:06:37.440 in many ways, reverses the social shifts of the First 0:06:37.480 --> 0:06:40.120 Industrial Revolution. You know, we're leaving the cities and going 0:06:40.160 --> 0:06:43.640 back to rural areas or out of town. But what 0:06:43.680 --> 0:06:48.200 that does, of course, is it changes patterns, It changes 0:06:48.240 --> 0:06:52.640 work time. So I'm not traveling to work on London underground, 0:06:52.640 --> 0:06:55.920 spending half an hour to and from work every day, 0:06:56.040 --> 0:06:58.440 stuck on the Central Line. My daily community if I'm 0:06:58.480 --> 0:07:01.560 working here from home, is me stumbling five yards from 0:07:01.560 --> 0:07:04.360 my bedroom to my home office. That's it. So I'm 0:07:04.400 --> 0:07:07.000 saving myself an hour a day. And what am I 0:07:07.040 --> 0:07:09.279 doing with that? Well, you know, I'm looking for entertainment. 0:07:09.279 --> 0:07:11.520 I'm looking for leisure, and I may spend money in 0:07:11.600 --> 0:07:15.240 doing that. And this, of course has been the progression 0:07:15.480 --> 0:07:19.360 throughout the twentieth century. Lord Caine's very famously wrote that 0:07:19.400 --> 0:07:23.800 we'd all be working fifteen our days by the year. 0:07:24.680 --> 0:07:27.119 I'm sure that's that's true for Tom, but we're average 0:07:27.160 --> 0:07:30.960 economist is not working a fifteen day. We're we're really 0:07:31.000 --> 0:07:33.320 having to push the hours. It so Kings was looking 0:07:33.320 --> 0:07:35.960 at this big, big drop in terms of the amount 0:07:35.960 --> 0:07:39.080 of time that people were spending at work, and it happened. 0:07:39.600 --> 0:07:42.680 But it happened because we spent less time doing chores 0:07:42.720 --> 0:07:45.080 outside of work, less time doing housework, less time commuting, 0:07:45.200 --> 0:07:47.440 and we have more leisure. That's what's going to come 0:07:47.440 --> 0:07:49.960 out of this. I think homeworking is not something to 0:07:50.000 --> 0:07:53.080 be shunned. It changes the structured the economy, but it 0:07:53.160 --> 0:07:55.920 changes it in a good way, which gives people more 0:07:56.000 --> 0:07:58.360 free time, and it gives them the opportunity to spend 0:07:58.400 --> 0:08:01.840 money in different ways and to use their standard of John. 0:08:01.920 --> 0:08:05.000 It's just amazing that Paul Donovan, in this pandemic is 0:08:05.080 --> 0:08:10.280 graduated from the muhammadal Area pile on Tom school, he says, 0:08:12.400 --> 0:08:18.040 he pretending it. There's a seventy Just tell everyone go on, go, 0:08:18.680 --> 0:08:20.760 I mean to go, Okay, I'll go. Paul Donovan, what's 0:08:20.800 --> 0:08:23.560 so important here in the time we're in and there's 0:08:23.600 --> 0:08:28.200 such a respect for the holistic nature of your research reports? 0:08:28.840 --> 0:08:32.080 What do we need to focus on on global trade? 0:08:32.120 --> 0:08:35.800 I mean Stigletts talks about the globalization and our discontent 0:08:35.920 --> 0:08:39.840 and all that. What's the thing forward on world trade? 0:08:40.360 --> 0:08:46.120 We need to focus on. So globalization, the rise of 0:08:46.160 --> 0:08:50.440 global trade, of SHRIF of GDP, that's over. That's done, um, 0:08:50.480 --> 0:08:53.679 because the globalization story of the last twenty five years 0:08:54.080 --> 0:08:59.840 was about increasingly complex, increasingly long supply chains and that's 0:09:00.040 --> 0:09:02.800 no longer desirable. And again, this is a change. It's 0:09:02.800 --> 0:09:05.960 not being brought about by the pandemic. It's being accelerated 0:09:05.960 --> 0:09:08.280 by the pandemic, and we're now i think, going to 0:09:08.360 --> 0:09:12.320 see a fairly steady decline in Global Trader of Share GDP. 0:09:12.840 --> 0:09:15.960 But there are two possible ways this happened, and they 0:09:16.000 --> 0:09:19.600 have very very different implications. If we go down the 0:09:19.720 --> 0:09:24.480 route of trade taxes tariffs, that is not good news 0:09:25.080 --> 0:09:29.040 because that is telling companies, right, you've chosen the best 0:09:29.080 --> 0:09:32.120 possible location for your production. We're going to force you 0:09:32.200 --> 0:09:35.199 to go to somewhere that second best. No company wants 0:09:35.200 --> 0:09:38.200 to go to second best. That's less efficient. That's going 0:09:38.240 --> 0:09:41.920 to lead to either squeezed profits or higher prices of 0:09:41.960 --> 0:09:47.719 the consumer, or some combination. But if we see automation, robotics, 0:09:47.720 --> 0:09:51.160 digitization coming in, then what that is going to be 0:09:51.200 --> 0:09:57.240 doing is leading to localization of production. You start producing 0:09:57.520 --> 0:10:01.280 close to the consumer because it is efficient to do so, 0:10:01.960 --> 0:10:04.439 and that's going to be a very very different situation 0:10:04.640 --> 0:10:07.160 because that means lower prices for the consumer, or higher 0:10:07.200 --> 0:10:09.640 profits for the producer, or some combination of the two. 0:10:09.960 --> 0:10:13.040 So what we've got to focus on is look globalization 0:10:13.440 --> 0:10:16.160 as we've recorded it. It's going into reverse. There is 0:10:16.200 --> 0:10:21.040 a negative story around trade taxes and autarchy and all 0:10:21.080 --> 0:10:23.920 that sort of stuff, but there's also a positive story 0:10:24.160 --> 0:10:27.440 about it's just more efficient to be producing closer to 0:10:27.480 --> 0:10:31.360 the consumer because of the technological changes, and so working 0:10:31.480 --> 0:10:35.320 out which of those two options is predominant that's going 0:10:35.360 --> 0:10:39.600 to be key. The shortest nine minute interview we've ever done, Paul, 0:10:39.840 --> 0:10:41.760 it just went too quickly. We're gonna do it much 0:10:41.840 --> 0:10:44.080 much along the next time, Paul Donovan Greater to catch up. 0:10:44.160 --> 0:10:50.800 UBS global chief economists to speak of the American economy. 0:10:50.840 --> 0:10:53.560 Lindsay p Exit joins us right now with Stephile. Their 0:10:53.600 --> 0:10:56.920 chief economists Lindsey John Ferroll brought up twenty minutes ago 0:10:57.360 --> 0:11:01.120 the idea of the all in United Kingdom unemployment rate? 0:11:01.480 --> 0:11:05.160 What is the all in US unemployment rate? Is it 0:11:05.240 --> 0:11:08.480 double digit? It could be right now. Of course, we 0:11:08.520 --> 0:11:11.840 know that the civilian rate, the rate reported from the BLS, 0:11:11.880 --> 0:11:14.080 has come down to eight point four, and we do 0:11:14.160 --> 0:11:16.680 know that there has been vast improvement from that peak 0:11:16.720 --> 0:11:18.840 that we saw early on in the pandemic, but we 0:11:18.880 --> 0:11:21.680 don't know if that's fully capturing what's been happening out 0:11:21.720 --> 0:11:24.679 in the labor market. As you said, the true unemployment 0:11:24.760 --> 0:11:27.160 rate is much likely to be closer to that double 0:11:27.240 --> 0:11:30.480 digit range. But as we wait for the Fed's decision 0:11:30.679 --> 0:11:33.920 later this week tomorrow exactly. We do think that the 0:11:33.920 --> 0:11:36.720 FED is going to emphasize that improvement that we've seen 0:11:36.800 --> 0:11:39.640 in the labor market, that further growth that we've seen 0:11:39.720 --> 0:11:42.679 in terms of hiring, that further decline in the unemployment rate, 0:11:42.720 --> 0:11:45.600 as well as the decline in jobless claims. So the 0:11:45.600 --> 0:11:47.680 FEED is going to be focusing on the improvement that 0:11:47.720 --> 0:11:51.360 we've seen, as opplosed to some of that that more 0:11:51.480 --> 0:11:56.200 tertiary or secondary numbers that suggest a higher level of 0:11:56.320 --> 0:11:58.720 joblessness in the US labor market. And then they they're 0:11:58.720 --> 0:12:00.839 going to get to the November I FED meeting, which 0:12:00.880 --> 0:12:03.080 I assume was going to be a virtually silent meeting 0:12:03.120 --> 0:12:05.680 just with respect to the American election. We may not 0:12:05.720 --> 0:12:08.680 even have results by then. Lindsey, I want you to 0:12:08.720 --> 0:12:11.520 take us out to December and into two thousand twenty one. 0:12:11.920 --> 0:12:15.560 What's the economic run rate right now? Right now, the 0:12:15.600 --> 0:12:19.120 economy does seem to be improving. We are seeing improvement, 0:12:19.120 --> 0:12:21.520 as I mentioned, in the labor market, in the housing market, 0:12:21.520 --> 0:12:24.439 we've seen improvement in the manufacturing numbers. So it does 0:12:24.520 --> 0:12:26.960 suggest that the U s economy is rebounding from that 0:12:27.040 --> 0:12:29.800 extremely low level that we saw in the second quarter, 0:12:29.920 --> 0:12:32.640 But I hesitate to say that we're in the position 0:12:32.720 --> 0:12:35.840 for a v shaped recovery. As the FED is pointed out, 0:12:36.000 --> 0:12:39.000 COVID remains the number one risk to the outlook, so 0:12:39.320 --> 0:12:42.440 we can't get complacent at this point. Yet. There still 0:12:42.480 --> 0:12:44.840 is a tremendous amount of risk that the virus poses 0:12:44.880 --> 0:12:47.520 to the economy, that it poses to the outlook, and 0:12:47.600 --> 0:12:51.360 if we need to, we should remain very vigilant in 0:12:51.480 --> 0:12:54.840 terms of the safety protocols, in terms of wearing masks, 0:12:54.880 --> 0:12:57.760 social distancing, in order to keep the economy open and 0:12:57.800 --> 0:13:01.200 continuing to move towards that point of full employment. But 0:13:01.679 --> 0:13:03.800 I don't think we're there yet, and we do run 0:13:03.840 --> 0:13:07.000 the risk of a second wave of cases, a second 0:13:07.080 --> 0:13:10.280 round of layoffs, which could keep the economy very anemic 0:13:10.640 --> 0:13:13.520 going into one And this is exactly why the FED 0:13:13.600 --> 0:13:16.600 has said that they're not even thinking about thinking about 0:13:16.679 --> 0:13:19.600 raising rates at this point. Interest rates are likely to 0:13:19.679 --> 0:13:23.720 stay in this very near zero range, this very low range, 0:13:23.800 --> 0:13:28.160 for the foreseeable future, for several years to come. Well, NSI, 0:13:28.280 --> 0:13:30.440 let's talk about how they manage that message tomorrow then, 0:13:30.480 --> 0:13:34.000 because tomorrow, surely the unemployment forecast has to get an 0:13:34.040 --> 0:13:37.920 upgrade given where unemployment has come down to absolutely that 0:13:38.000 --> 0:13:40.240 we do get that summary of economic projections, and the 0:13:40.320 --> 0:13:43.120 unemployment rate is likely to be lowered in terms of 0:13:43.120 --> 0:13:46.120 the FEDS forecast reflecting the improvement that we have seen 0:13:46.440 --> 0:13:49.200 in the labor market. I wouldn't expect much change around 0:13:49.200 --> 0:13:52.640 the inflation figure. I wouldn't expect much more optimism to 0:13:52.679 --> 0:13:55.839 be priced in terms of their GDP forecast, But you're 0:13:55.880 --> 0:13:58.800 right the unemployment rate their forecast is likely to come 0:13:58.800 --> 0:14:02.080 down again reflecting that improvement. But I think it's more 0:14:02.080 --> 0:14:05.440 important what we hear from the chairman during the press conference, 0:14:05.720 --> 0:14:07.600 and he's going to be very careful to walk that 0:14:07.679 --> 0:14:10.720 line between patting the FED on the back, saying the 0:14:10.760 --> 0:14:13.440 swift and decisive action that we took helped stem a 0:14:13.600 --> 0:14:16.480 further downturn, so the the conditions that we saw in 0:14:16.480 --> 0:14:18.960 the second quarter could have been much more dire, and 0:14:19.000 --> 0:14:22.080 again balancing that against the risk as I mentioned, the 0:14:22.200 --> 0:14:25.760 virus still remains out there. Businesses have been able to 0:14:26.120 --> 0:14:29.360 stem that bridge uh in terms of staying open for 0:14:29.400 --> 0:14:32.000 several months. But if we don't see a meaningful way 0:14:32.040 --> 0:14:34.560 of separating the healthy from the sick, or if we 0:14:34.640 --> 0:14:38.920 don't see additional fiscal stimulus to help bridge that gap 0:14:39.000 --> 0:14:41.880 for businesses and the American families. It's going to be 0:14:41.960 --> 0:14:44.360 very difficult to keep the U. S economy on this 0:14:44.520 --> 0:14:48.920 pathway back to a more prosperous and sustainable growth level. Lindsay, 0:14:48.960 --> 0:14:50.960 there seems to be a divergence between the C suite 0:14:50.960 --> 0:14:53.680 in America and economists. The C suite saying we're seeing 0:14:53.680 --> 0:14:56.880 petter than expected business performance across the board, and you 0:14:56.920 --> 0:14:59.520 have economists saying, well, you do now, but as this 0:14:59.560 --> 0:15:02.800 fiscal support runs off, you will see it lose a 0:15:02.800 --> 0:15:06.960 lot of luster. Have economists lost credibility in a meaningful 0:15:07.000 --> 0:15:10.400 way or are are they looking at something that perhaps 0:15:10.440 --> 0:15:14.360 the C suite isn't seeing? I think right now, I 0:15:14.400 --> 0:15:17.320 think most of management, most of corporate America is focused 0:15:17.320 --> 0:15:20.480 on the near term outlook, and they're focused on the 0:15:20.520 --> 0:15:23.680 minimal improvement that we have seen from those low levels 0:15:23.920 --> 0:15:26.280 at the onset of the pandemic. I think economists are 0:15:26.320 --> 0:15:29.200 taking more of a longer term picture, a longer term 0:15:29.280 --> 0:15:32.320 view of where the economy is headed. Remember, the economy 0:15:32.400 --> 0:15:36.120 was already losing momentum as we were heading into We 0:15:36.160 --> 0:15:38.240 had slowed from a three percent growth rate down to 0:15:38.320 --> 0:15:41.480 two percent, Yet corporate America was still elated with the 0:15:41.520 --> 0:15:45.960 prospects of continuing the expansion. So economists were already recognizing 0:15:45.960 --> 0:15:48.480 that loss of momentum. And I think that loss of 0:15:48.520 --> 0:15:50.880 momentum has carried through and kept the economy in this 0:15:51.000 --> 0:15:55.320 extremely fragile position. Then you layer on this pandemic and 0:15:55.360 --> 0:15:57.920 it's going to be increasingly difficult for us to get 0:15:57.960 --> 0:16:00.960 back to a more sustainable organ ne level of growth. 0:16:01.320 --> 0:16:03.440 So it could also be that corporate America has become 0:16:03.480 --> 0:16:08.640 complacent with this unprecedented support from monetary and fiscal policies. Okay, 0:16:08.640 --> 0:16:11.560 so we don't get another fiscal round of support. Where 0:16:11.560 --> 0:16:13.400 do you see the year ending with respect to the 0:16:13.480 --> 0:16:16.640 US unemployment rate. I think that it's going to remain 0:16:16.680 --> 0:16:19.480 elevated in this eight to nine percent level. I don't 0:16:19.520 --> 0:16:21.840 think we've pushed back towards that double digit level that 0:16:21.920 --> 0:16:24.400 we saw again at the onset of the pandemic. But 0:16:24.480 --> 0:16:28.000 the labor market still is under an extreme amount of pressure. Again, 0:16:28.080 --> 0:16:31.160 businesses have been able to recall some workers, we have 0:16:31.280 --> 0:16:34.760 been able to see some new payrolls created. But if 0:16:34.800 --> 0:16:37.560 we don't see additional fiscal stimas if we don't see 0:16:37.560 --> 0:16:41.360 additional federal funding. If we don't see that vaccine, it's 0:16:41.360 --> 0:16:43.800 going to be difficult to continue these conditions that have 0:16:43.840 --> 0:16:47.200 allowed businesses to take on those new hires or to 0:16:47.440 --> 0:16:49.880 rehire some of those workers that have been pushed to 0:16:49.920 --> 0:16:52.600 the sideline. So we could actually see a second wave 0:16:53.080 --> 0:16:55.920 of layoffs or furloughs towards the end of the year, 0:16:56.000 --> 0:16:59.120 which would keep that unemployment rate artificially high in that 0:16:59.200 --> 0:17:03.640 eight to nine that range Lindsey Pa. Yesterday, William Gross 0:17:04.080 --> 0:17:07.399 talked about a six trillion dollar need, a six trillion 0:17:07.440 --> 0:17:11.640 dollar deficit call others have you know come up about 0:17:11.680 --> 0:17:14.560 that number as well. We're talking one and two trillion. 0:17:15.080 --> 0:17:18.000 Is an arguing point. Are we able to go out 0:17:18.040 --> 0:17:21.480 and find three or four or five or six trillion 0:17:21.680 --> 0:17:25.120 of new debt to fold under the American balance sheet? 0:17:26.240 --> 0:17:28.440 I think we could. The question is do we want 0:17:28.480 --> 0:17:30.720 to We have to be very careful. We want to 0:17:30.720 --> 0:17:33.080 make sure that we're finding enough stimulus in the near 0:17:33.200 --> 0:17:36.119 term to get the economy back on track, but we 0:17:36.200 --> 0:17:39.120 also don't want to create additional barriers on the back 0:17:39.280 --> 0:17:42.280 end when the economy does begin to recover. Are we 0:17:42.720 --> 0:17:46.919 are we struggling under this insurmountable amount of debt that 0:17:46.960 --> 0:17:50.960 creates future barriers for growth and future generation. So I 0:17:51.000 --> 0:17:53.440 do think it's a it's a delicate balance. We want 0:17:53.440 --> 0:17:55.280 to make sure again that we get the economy back 0:17:55.320 --> 0:17:57.840 on track, but not just in the short term, that 0:17:57.880 --> 0:18:00.639 we're putting it on a longer term ur tect jury 0:18:00.680 --> 0:18:05.240 towards a higher level of prosperity. Lindsay half delicate is 0:18:05.280 --> 0:18:08.000 that balance right now and asked to no seriousness with 0:18:08.080 --> 0:18:10.280 ten yere yields at the moment at zero point six. 0:18:12.320 --> 0:18:15.360 I think it's extremely delicate. As we've seen the deficit, 0:18:15.520 --> 0:18:18.960 the total debt held by the American public at record levels. 0:18:19.000 --> 0:18:21.359 In fact, debt to GDP is the highest level that 0:18:21.400 --> 0:18:24.720 we've seen in post World War two history. So we 0:18:24.800 --> 0:18:29.240 are on an unsustainable trajectory in terms of continuing to 0:18:29.400 --> 0:18:32.359 load debt onto the balance sheet. That being said, there's 0:18:32.400 --> 0:18:34.879 not much we can do during these unprecedented times. We 0:18:34.960 --> 0:18:37.280 have to take on additional debt, but we don't need 0:18:37.320 --> 0:18:39.440 to be irresponsible about it. We want to make sure 0:18:39.480 --> 0:18:42.320 that the programs that the federal government is putting into 0:18:42.400 --> 0:18:45.679 into play is going to those that is going to 0:18:45.880 --> 0:18:49.000 the businesses that need it to to continue to bridge 0:18:49.040 --> 0:18:51.720 this gap. We don't want fraud or we don't want 0:18:51.720 --> 0:18:55.159 abuse of these programs. That's very important at this point, 0:18:55.440 --> 0:18:57.600 and I think the American public has a much lower 0:18:57.680 --> 0:19:00.640 tolerance at this point for any sort of lot around 0:19:00.720 --> 0:19:03.040 those programs, given what we did see with the first 0:19:03.119 --> 0:19:06.800 round in the pp prief program as well. Oh absolutely, 0:19:06.840 --> 0:19:08.840 I think most people would agree with that sentiment. Lindsay, 0:19:08.880 --> 0:19:10.840 great to catch up, Lindsay, p x of that A 0:19:10.920 --> 0:19:20.040 staffel Robert for a few seconds with Jones Day. He's 0:19:20.080 --> 0:19:23.359 head of mergers and acquisitions, but that barely describes his 0:19:23.520 --> 0:19:28.040 decades as many decades experience in all different shades of 0:19:28.280 --> 0:19:30.600 M and A. We're thrilled he could join us again above. 0:19:30.640 --> 0:19:33.480 It's been way, way, way too long since you've been on. 0:19:33.720 --> 0:19:37.560 What's different this time around? In the many billions of 0:19:37.600 --> 0:19:42.080 the M and A Derby, Well, the biggest difference I 0:19:42.160 --> 0:19:47.320 think is obviously the markets have been fabulous in many respects. 0:19:47.320 --> 0:19:51.960 Everybody focuses on the equity capital markets, but the debt 0:19:52.000 --> 0:19:57.639 markets are just mind blowing way supportive. Now, you know, 0:19:58.000 --> 0:20:00.280 the others on your show always talk about out how 0:20:00.320 --> 0:20:03.119 that supports the equity markets too. But it really is 0:20:03.160 --> 0:20:05.840 is A is a great bone for M and A. 0:20:06.600 --> 0:20:08.960 Um And you know, if you if you stand back 0:20:09.200 --> 0:20:12.720 over those decades, M and A generally tracks what the 0:20:12.720 --> 0:20:17.200 equity markets, uh do um and I think we're starting 0:20:17.240 --> 0:20:20.360 to see that now. A lot of people said, well, 0:20:20.440 --> 0:20:24.760 yesterday is a one off thing. TikTok is political, not 0:20:24.880 --> 0:20:31.480 an economic event. Um. Uh. The soft Bank deal, it 0:20:31.600 --> 0:20:34.440 was kind of a for sale because of other issues 0:20:34.480 --> 0:20:38.160 that that the soft Bank has. Well, yeah, that's true, 0:20:38.200 --> 0:20:40.439 but there was a lot of other stuff. All the 0:20:40.440 --> 0:20:43.600 headline deals got of course the headlines, but there were 0:20:43.640 --> 0:20:47.280 many other deals or including including a deal for Verizon, 0:20:47.840 --> 0:20:50.080 the New York Mets. They are all sorts of stuff. 0:20:50.080 --> 0:20:52.480 So it's it's much more active, no question about it. 0:20:52.560 --> 0:20:55.879 Well that's great. Are we at the point Robert Busk 0:20:56.240 --> 0:20:59.640 where we're seeing transactions so the other guy doesn't get 0:20:59.680 --> 0:21:02.520 the company, like Steve Cohen goes out and takes some 0:21:02.640 --> 0:21:05.440 metso Hilarion can't buy them. I mean, are we at 0:21:05.480 --> 0:21:09.320 that point across all of them and A? Well, yes, 0:21:09.480 --> 0:21:13.120 we're at a. M and A is strategic right now. 0:21:13.119 --> 0:21:16.520 There's there's a lot of financial transactions. In fact, I 0:21:16.880 --> 0:21:21.199 at least in my my personal world. It started for 0:21:22.040 --> 0:21:25.159 to pick up again in August with some private equity deals, 0:21:25.160 --> 0:21:29.280 but it's mostly strategic. Um. I don't think that they 0:21:29.440 --> 0:21:33.280 deal probably was not even mentioned yesterday. The Verizon deal. Um, 0:21:33.640 --> 0:21:37.119 And that's a not a huge deal at least by 0:21:37.160 --> 0:21:39.440 comparison to the others. But it was almost seven billion 0:21:40.160 --> 0:21:43.199 and it's and it's uh designed to build out a 0:21:43.240 --> 0:21:46.240 part of the Horizons platform. They don't have the prepaid 0:21:46.240 --> 0:21:49.760 phone prepaid cards. For sure. There are a lot of 0:21:49.800 --> 0:21:52.719 deals that are strategic and looking to buy revenue at 0:21:52.720 --> 0:21:55.960 a time of meager growth. But things have gotten a 0:21:55.960 --> 0:21:58.760 lot more political, and I'm wondering how much TikTok is 0:21:58.800 --> 0:22:02.240 representative of the increase recently politicized m and a backdrop 0:22:02.640 --> 0:22:07.800 versus a sort of idiosyncratic affair. Uh. There's no question 0:22:07.880 --> 0:22:12.320 that nationalism um is a factor. You wouldn't have said 0:22:12.359 --> 0:22:16.639 this before the current administration, but um, it isn't just 0:22:16.880 --> 0:22:21.000 the USUM. And nationalism is a real issue in terms 0:22:21.040 --> 0:22:25.040 of cross border deals, UM, no question about it. Um. 0:22:25.160 --> 0:22:28.800 And how we deal with how we deal with this 0:22:28.840 --> 0:22:33.080 stuff going forward could have an impact whenever a significant 0:22:33.160 --> 0:22:36.479 cross border transaction shows up in the boardroom, you got 0:22:36.520 --> 0:22:39.320 a lot of directors kind of you know, saying, do 0:22:39.359 --> 0:22:43.240