WEBVTT - Surveillance: Market Sell-Off With Matus 0:00:00.080 --> 0:00:12.960 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 0:00:13.480 --> 0:00:17.560 Daily 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 --> 0:00:27.640 Bloomberg dot Com, and of course on the Bloomberg. The 0:00:27.760 --> 0:00:30.200 Dow a long from long way from ten percent correction 0:00:30.320 --> 0:00:33.080 negative four percent, maybe negative five percent, and the VIX 0:00:33.200 --> 0:00:36.480 that measurement twenty two point three two it was above 0:00:36.520 --> 0:00:39.240 twenty three. To put that in perspective in the great 0:00:39.280 --> 0:00:43.360 markets of Vix's twelve thirteen. Maybe you expand out in 0:00:43.440 --> 0:00:46.120 the new regime of the VIX to seventeen or eighteen 0:00:46.120 --> 0:00:48.400 and we come out as well. We have the perfect 0:00:48.479 --> 0:00:51.760 guest to frame this this morning, Drewmatics, not only with 0:00:51.920 --> 0:00:54.960 the clarin An Award winning economic work for years, but 0:00:55.080 --> 0:00:59.160 it met life now driving forward their strategy as well. 0:00:59.280 --> 0:01:05.120 Drewmatics of till your equity strategy into your first class economics. 0:01:05.120 --> 0:01:08.080 How do you fit those two together right now? Well, 0:01:08.120 --> 0:01:10.440 I you know, I think what you're seeing. Um, so 0:01:10.520 --> 0:01:12.560 there's there's two factors. One, it's just kind of the 0:01:12.680 --> 0:01:15.240 risk on, risk off, which we've talked about everyone decided 0:01:15.280 --> 0:01:17.200 they didn't want to be long over the weekend. That 0:01:17.400 --> 0:01:19.720 seemed to have been the right call this time. UM, 0:01:19.840 --> 0:01:23.119 and so people went risk off and they were rewarded 0:01:23.160 --> 0:01:27.280 for it. UM. I think if you look ahead, we 0:01:27.280 --> 0:01:29.880 were kind of drifting in this environment where where margin 0:01:29.920 --> 0:01:32.360 compression was beginning to happen. It looked like, in our 0:01:32.400 --> 0:01:34.800 view at least corporations, we're begetting to pull back on 0:01:34.880 --> 0:01:37.720 hiring and we're going to drift into a recession sometime 0:01:37.760 --> 0:01:39.520 in kind of like the middle of next year. That 0:01:39.600 --> 0:01:41.679 seemed to be, you know, that was the scenario we 0:01:41.680 --> 0:01:44.400 were working with. UH. In the current environment, you have 0:01:44.440 --> 0:01:46.080 to you have to maybe be pulling that forward a 0:01:46.120 --> 0:01:48.040 little bit and thinking to yourself, you know, if these 0:01:48.040 --> 0:01:51.240 trends continue in terms of disruptions to supply chains, that 0:01:51.440 --> 0:01:54.280 that you know, maybe, um, maybe those margins compressed a 0:01:54.280 --> 0:01:57.000 little faster, Maybe from back a little faster. Maybe they're 0:01:57.040 --> 0:01:59.440 disinclined to invest heading into something where they have as 0:01:59.480 --> 0:02:02.120 much uncer and t is the average consumer has drew. 0:02:02.280 --> 0:02:07.360 Is the concept of a V shaped recovery dead? I no, 0:02:07.520 --> 0:02:10.400 I but I think you know it requires the right 0:02:10.480 --> 0:02:14.520 kind of construct. But I think what what you're pointing towards, though, 0:02:14.600 --> 0:02:16.240 is something that I think a lot of people have 0:02:16.280 --> 0:02:19.960 focused on, which is um for the vast majority of people, 0:02:20.400 --> 0:02:22.000 not the vast majority of people, but for a lot 0:02:22.000 --> 0:02:23.800 of people. And for I think the vast majority of 0:02:23.800 --> 0:02:26.720 people on Wall Street actually who actually are are charged 0:02:26.760 --> 0:02:30.120 with trading. Uh, two thousand eight is the recession. They know, 0:02:30.760 --> 0:02:33.720 that's the only recession they know. They don't remember two 0:02:33.720 --> 0:02:36.840 thousand one, where if you blinked you could have missed it. Um. 0:02:36.880 --> 0:02:42.000 They don't remember kind of the slowdown. UM. So you know, 0:02:42.040 --> 0:02:44.200 the the actual life experience for a lot of people 0:02:44.200 --> 0:02:47.280 on Wall Street, it doesn't include recessions that don't look 0:02:47.320 --> 0:02:50.000 like two thousand eight. And and so I don't think 0:02:50.000 --> 0:02:52.119 a two thousand eight V shaped re car I don't 0:02:52.120 --> 0:02:54.320 think a V shaped recovery is dead. But you're not 0:02:54.360 --> 0:02:55.840 going to get one if you have a recession like 0:02:55.840 --> 0:02:58.040 two thousand and eight. Fortunately we're not expecting one like 0:02:58.080 --> 0:02:59.919 two thousand and eight. So, Drew, I mean a lot 0:02:59.919 --> 0:03:02.480 of times we've been talking over the last week or two, 0:03:02.560 --> 0:03:05.560 is this coronavirus kind of evolved and we saw a 0:03:05.639 --> 0:03:07.960 lot of impacts, say in the commodity markets, in the 0:03:07.960 --> 0:03:12.519 bond market, we didn't necessarily see a concern consistent in 0:03:12.560 --> 0:03:14.520 the equity markets. Maybe we're seeing a little bit of 0:03:14.520 --> 0:03:16.920 it today. Are you concerned that maybe the equity markets 0:03:16.960 --> 0:03:20.600 is not are not discounting the long term economic impacts 0:03:20.600 --> 0:03:23.840 of what a coronavirus could mean. Uh? You know, I 0:03:23.880 --> 0:03:26.280 I think that they're struggling with it, and I think 0:03:26.320 --> 0:03:30.440 that's that's the problem is this. Uh it's very hard 0:03:30.520 --> 0:03:33.960 to assign weighted probabilities to all the different outcomes because 0:03:33.960 --> 0:03:36.840 there's so many potential outcomes. Uh. And then if you 0:03:36.920 --> 0:03:39.240 take that sector by sector and company by company, you 0:03:39.680 --> 0:03:43.480 just you could drive yourself nuts going through the permutations. Um. 0:03:43.600 --> 0:03:46.400 And so people then just go into do I want 0:03:46.400 --> 0:03:47.600 to be along the market? Do I want to be 0:03:47.640 --> 0:03:50.160 short the market? And people are now saying, hey, you 0:03:50.160 --> 0:03:51.960 know what, I don't want to be along it because 0:03:52.000 --> 0:03:54.200 I don't know what's going on and I think that 0:03:54.280 --> 0:03:56.880 kind of environment is going to continue. So I'm struggling though, 0:03:56.880 --> 0:03:59.080 because I'm looking right now at the FED model. This 0:03:59.120 --> 0:04:00.920 has been one of the big humans for why to 0:04:00.960 --> 0:04:03.880 buy stocks that basically bond yields go lower, making the 0:04:03.880 --> 0:04:08.760 relative valuation case for stocks better. Today that valuation case 0:04:08.920 --> 0:04:11.520 got a whole lot better. Even still, as thirty year 0:04:11.520 --> 0:04:16.520 treasury yields go further into record low territory, why shouldn't 0:04:16.560 --> 0:04:20.680 people buy this dip? Well, it's not a so we 0:04:20.720 --> 0:04:22.640 don't really focus on equities in my life. But I'll 0:04:22.640 --> 0:04:25.719 just I'll just say this. This is why you can't 0:04:25.760 --> 0:04:30.720 just blindly follow models. Right. The question is the relationship 0:04:30.760 --> 0:04:32.880 is a good and an interesting one to use as 0:04:32.880 --> 0:04:35.880 a factor. All right, so components your model. But if 0:04:35.880 --> 0:04:38.400 you just close your eyes and say it doesn't matter 0:04:38.440 --> 0:04:40.719 why the bond yield is going down, then you're going 0:04:40.760 --> 0:04:43.240 to put yourself into a situation where you're taking more 0:04:43.320 --> 0:04:45.960 risk than you ever thought was possible. Uh, and you're 0:04:46.000 --> 0:04:49.119 and you're blind to it because you're following this model 0:04:49.200 --> 0:04:51.200 that just works off of why the yield is moving, 0:04:51.720 --> 0:04:54.120 or that the yield is moving, rather than why is 0:04:54.160 --> 0:04:56.920 the yield moving? And that's that's why I don't really 0:04:56.920 --> 0:04:59.560 worry about artificial intelligence. You know, like I play my 0:04:59.640 --> 0:05:02.320 son and you know in FIFA, and it's like the 0:05:02.440 --> 0:05:04.880 A I never does what I wanted to do um 0:05:05.120 --> 0:05:09.640 and and I'm thinking to myself, can't even run the 0:05:09.680 --> 0:05:13.000 soccer probes explain why the Thoughts got crushed by Chelsea 0:05:13.120 --> 0:05:16.560 this weekend for the failure, but my son was happy 0:05:16.600 --> 0:05:19.960 to see the bluest triumph over over Tottenham. Oh really, 0:05:20.040 --> 0:05:23.080 thank you? I mean John emails in where John John 0:05:23.080 --> 0:05:27.960 emails in from Turks and Caicos No excuse me antigua 0:05:27.960 --> 0:05:30.760 of course more. You know it's fancier Farrell, he wanted 0:05:31.040 --> 0:05:33.720 he brought this up. Chelsea like crushed the Thoughts this weekend. 0:05:34.120 --> 0:05:39.200 Farrell's not even Lisa's like, what I'm learning, I'm studying? Yeah, 0:05:39.360 --> 0:05:42.360 she's yes, so am I let met me tell you 0:05:42.400 --> 0:05:45.320 every day. This is really critical. You say that MetLife 0:05:45.360 --> 0:05:48.839 isn't focused on uh stocks, that's because it's an adult 0:05:48.920 --> 0:05:52.240 house focused on our futures. Do you assume going to 0:05:52.279 --> 0:05:55.000 work every day that your actual assumption is going to 0:05:55.120 --> 0:05:58.440 come down and that that locked in boggie rate that 0:05:58.520 --> 0:06:00.760 we have is not going to be ex percent. It's 0:06:00.760 --> 0:06:03.400 going to come down down, down, you know. I. I 0:06:03.440 --> 0:06:06.560 think what we assume is, um, we have to plan 0:06:06.680 --> 0:06:10.240 for every environment that we can imagine UM. And I 0:06:10.279 --> 0:06:12.920 think when you think about the current world we've been 0:06:12.920 --> 0:06:14.560 in for a long time, we've been in a very 0:06:14.640 --> 0:06:16.960 low rate environment for a very long period of time, 0:06:17.360 --> 0:06:20.080 and I think you know, the ongoing assumption you know 0:06:20.160 --> 0:06:22.680 has been you know, you can't expect just because you 0:06:22.720 --> 0:06:24.640 want you'ld to move higher, you can't expect that they 0:06:24.680 --> 0:06:28.799 are going to move higher. Do you sell jump ons here? Uh? 0:06:28.839 --> 0:06:31.240 You know, I leave that to our credit portfolio managers. 0:06:32.400 --> 0:06:34.600 How about so all right, we're more than eighty percent 0:06:34.600 --> 0:06:37.600 away through the earnings this quarter? Your key takeaways here? 0:06:37.600 --> 0:06:39.160 Do you feel a little bit better? You feel a 0:06:39.160 --> 0:06:42.440 little bit more concerned the last time I looked at earnings? 0:06:42.520 --> 0:06:44.400 What what you know? So one of our one of 0:06:44.400 --> 0:06:46.160 our thoughts is, you know, when you're trying to time 0:06:46.200 --> 0:06:48.279 the recession, how do you time it? And the way 0:06:48.320 --> 0:06:50.760 that I'm trying to work it is looking at the 0:06:50.760 --> 0:06:53.240 erosion of margins in the economy as a whole, So 0:06:53.279 --> 0:06:55.640 not just SMP five hundreds. So but if we look 0:06:55.640 --> 0:06:57.680 at if we look at those earnings numbers, I'm seeing 0:06:57.720 --> 0:07:01.120 revenue go up and I'm seeing or you know, um 0:07:01.240 --> 0:07:03.440 earnings go up by less and so that tells me 0:07:03.560 --> 0:07:05.640 that the margins are compressing a little bit further. So 0:07:05.680 --> 0:07:08.920 it's consistent with our view that that erosion is continuing Um, 0:07:09.000 --> 0:07:13.320 and that's you know, you know, absent other factors. It 0:07:13.400 --> 0:07:15.640 still looks to me like one is when we have 0:07:15.720 --> 0:07:17.960 to really think about there being a recession in the US. 0:07:18.280 --> 0:07:24.880 Drew manis thank you so much for that right now 0:07:24.920 --> 0:07:26.920 on politics and we'll be jumping back and forth on 0:07:26.960 --> 0:07:29.920 this end of the Tuesday UH debate in South Carolina, 0:07:29.960 --> 0:07:33.480 Todd Marianna joins us from eur Asia Group. Todd. Every weekend, 0:07:33.520 --> 0:07:35.080 I go, I have a panic, and I go, I 0:07:35.080 --> 0:07:38.720 gotta get smarter fast on something. And without question, off 0:07:38.760 --> 0:07:43.720 of Mr Saunders relative performance in Las Vegas and Nevada. UM, 0:07:43.760 --> 0:07:46.840 I had to read it on a Latino vote. Latino vote, 0:07:46.880 --> 0:07:51.680 help me here? How important will Latino vote be? Super Tuesday? 0:07:52.320 --> 0:07:54.440 Good morning, Tom. Great to be with you as always, 0:07:54.640 --> 0:07:57.640 And I think we're all of that same camp these days, 0:07:57.720 --> 0:08:00.800 given uh all that's going on in politics, trying to 0:08:00.800 --> 0:08:03.800 get smart on things over the weekend. The Latino vote is, 0:08:04.200 --> 0:08:06.880 you know, it's it's something that's become of increasing importance 0:08:06.920 --> 0:08:10.840 to US politics generally, Um, but of critical importance to 0:08:11.160 --> 0:08:15.760 winning the Democratic nomination, and Nevada showed that very clearly. 0:08:16.040 --> 0:08:19.320 But UM, you know we've known that for several cycles. Now, 0:08:19.360 --> 0:08:21.840 what I think is different here in Nevada is the 0:08:21.880 --> 0:08:25.200 fact that a candidate like Sanders could come out with 0:08:25.440 --> 0:08:28.679 entrance polls, you know, uh, indicating that he had above 0:08:28.760 --> 0:08:32.240 fifty Latino vote. He struggled with minority votes the last 0:08:32.240 --> 0:08:35.280 time around. And again, as we said, we've known for 0:08:35.320 --> 0:08:38.720 several cycles that Latino vote is growing. That's places like 0:08:38.920 --> 0:08:43.200 you know, South Carolina, Texas obviously, but across the South 0:08:43.240 --> 0:08:45.920 and even the Midwest. So the fact that a candidate 0:08:45.920 --> 0:08:48.600 like Sanders could get that kind of draw, I think 0:08:48.720 --> 0:08:51.480 is a real important lesson of Nevada. The money question 0:08:51.559 --> 0:08:53.719 this morning, Greg Valier wrote it up. I know you've 0:08:53.760 --> 0:08:58.320 been looking at it as well, is if Sunder Sanders prevails, 0:08:58.920 --> 0:09:03.600 is a Democratic House at risk? I think it is 0:09:03.600 --> 0:09:06.840 at risk. You know what, what exactly that risk is, 0:09:07.559 --> 0:09:10.080 um kind of remains to be determined. It's still it's 0:09:10.120 --> 0:09:12.400 still early to say, but I mean, I think the 0:09:12.440 --> 0:09:15.640 fact that it's at least at risk is what's motivating 0:09:15.640 --> 0:09:17.719 a lot of Democratic leaders and the elites as a 0:09:17.800 --> 0:09:21.600 party to have feared of Bernie Sanders candidacy, you know, 0:09:21.760 --> 0:09:24.960 from from the get go, from t and certainly continuing 0:09:25.000 --> 0:09:28.240 through this cycle. UM, you know, you you don't look 0:09:28.280 --> 0:09:31.760 at the national level there, you look on a district 0:09:31.800 --> 0:09:34.680 by district basis, where you know, Republicans are going to 0:09:34.760 --> 0:09:39.320 hammer a message, an anti socialist message, and in places like, 0:09:39.440 --> 0:09:43.240 for example, the Virginia seventh district, which which was flipped 0:09:43.320 --> 0:09:47.800 very very famously in UM, that message will probably resonate. 0:09:47.840 --> 0:09:49.920 So it's it's at least at risk. But we don't 0:09:49.960 --> 0:09:53.280 know is how many new people and disaffected voters Bernie 0:09:53.360 --> 0:09:55.320 could turn out at the polls. That's that's the real 0:09:55.400 --> 0:09:58.520 argument behind his candidacy. But the risk is clearly there. 0:09:58.880 --> 0:10:02.000 So Todd, what's ex what's at stake on the debate 0:10:02.200 --> 0:10:06.679 tomorrow in South Carolina? Number one? I think that Um, 0:10:07.080 --> 0:10:10.560 Michael Bloomberg certainly has has you know, some some work 0:10:10.600 --> 0:10:13.719 to do, I think to uh to get past the 0:10:14.240 --> 0:10:17.000 you know what what happened last week, and you know 0:10:17.559 --> 0:10:20.360 many indications that that certainly can happen. We we've seen 0:10:20.400 --> 0:10:24.439 that before. Um. You know, Joe Biden another he's another 0:10:24.679 --> 0:10:29.040 I think strong debate performance to uh solidify his lead 0:10:29.080 --> 0:10:32.240 in South Carolina. Last year, bid Fleet in South Carolina 0:10:32.360 --> 0:10:35.480 was you know, double digits, getting into the twenties at points, 0:10:35.559 --> 0:10:38.680 and you know, on average, he's up about three points 0:10:38.679 --> 0:10:42.520 about over standers now, So that's good news for Biden 0:10:42.559 --> 0:10:44.560 if you can take home in South Carolina went heading 0:10:44.600 --> 0:10:47.440 into Super Tuesday. But the fact that it's so close 0:10:47.520 --> 0:10:51.080 means that um certainly that I think there's more pressure 0:10:51.120 --> 0:10:54.400 on him in in this debate than before. The third 0:10:54.400 --> 0:10:56.560 thing I'd say is whether the candidates can really kind 0:10:56.600 --> 0:10:59.440 of circle the wagons and attack Burnie Sanders if they 0:10:59.520 --> 0:11:02.120 really don't want him to be the nominee. I think 0:11:02.120 --> 0:11:06.000 it behooves them to stop fighting among themselves for you 0:11:06.120 --> 0:11:09.680 to say the moderate vote and uh and and turn 0:11:09.760 --> 0:11:13.320 on him. But there's there's certainly a sense among campaign 0:11:13.320 --> 0:11:16.320 strategies that it that it might be too late. Do 0:11:16.440 --> 0:11:19.120 you mentioned Michael Bloomberg, the founder a majority owner of 0:11:19.160 --> 0:11:22.520 Bloomberg LP, the owner of this radio station and Bloomberg News, 0:11:22.520 --> 0:11:25.240 And I am wondering if this is a make it 0:11:25.360 --> 0:11:28.520 or break it moment for him, given that he was 0:11:28.600 --> 0:11:32.640 widely panned and his performance at the last debate. I 0:11:32.640 --> 0:11:35.080 don't think it's naked or break it for him because 0:11:35.160 --> 0:11:38.839 he is he's self financed number one and all along 0:11:38.960 --> 0:11:42.440 he's had a Super Tuesday strategy. So the real maker 0:11:42.480 --> 0:11:46.120 breaks with him, I think comes on Tuesday, where he's 0:11:46.120 --> 0:11:49.920 already made you very significant in rows across a whole 0:11:50.040 --> 0:11:53.360 host of states that you know that it's been a 0:11:53.360 --> 0:11:56.800 little bit surprising, and I think a reflection of the 0:11:56.840 --> 0:11:58.920 weakness of some other candidates in the race that just 0:11:59.000 --> 0:12:02.760 be undecided of Democratic voters in general. But it's it's 0:12:02.800 --> 0:12:05.160 clearly a very important moment for him, I think, to 0:12:05.240 --> 0:12:10.880 keep that momentum going facing you know, the American public again, 0:12:11.080 --> 0:12:13.000 of which he had not you know, up until his 0:12:13.040 --> 0:12:16.280 debate last week. So Todd, you know, if I'm the 0:12:16.320 --> 0:12:20.000 Democratic National Committee, if I'm the establishment, the Democratic establishment, 0:12:20.360 --> 0:12:24.280 how am I thinking about Bernie Sanders here to the 0:12:24.320 --> 0:12:27.199 extent that he is the front runner and his potential 0:12:27.320 --> 0:12:31.800 in November. I think I think you're very worried, you know, 0:12:31.960 --> 0:12:36.160 quite frankly, because, uh, the argument for Bernie is that 0:12:36.200 --> 0:12:40.559 he could be like Trump in and you know, the 0:12:40.960 --> 0:12:45.720 sort of anti establishment vote could confound expectations and you know, 0:12:45.800 --> 0:12:49.480 provide a lot of surprise, uh in this in this race. 0:12:49.600 --> 0:12:51.640 But the reason you're worried is that Bernie is so 0:12:51.720 --> 0:12:55.040 much more extreme, you know, across the board, uh than 0:12:55.240 --> 0:12:57.839 than Trump as ever was. Trump has you know, many 0:12:57.880 --> 0:13:02.520 positions which are very orthodox Republican views on you know, 0:13:03.240 --> 0:13:07.040 economic policy judges, things like that. Bernie, there's not an 0:13:07.040 --> 0:13:09.880 issue out there on which he's not extreme. So they're 0:13:09.920 --> 0:13:12.520 they're very nervous because again, like I was saying, that 0:13:12.640 --> 0:13:16.440 argument for his candidacy was completely contested. I mean, this 0:13:16.520 --> 0:13:20.000 came up over cocktails last night and and uh, todmer 0:13:20.200 --> 0:13:23.040 Marianna with us your Aisier group right now. I mean, 0:13:23.120 --> 0:13:26.920 who of the candidates would you see dovetail with Senator 0:13:27.000 --> 0:13:30.520 Sanders if he tries to put together a ticket. I mean, 0:13:31.200 --> 0:13:33.640 I mean it's ridiculous to talk about a vice presidential 0:13:33.679 --> 0:13:36.480 prospect right now. I get that. But are all of 0:13:36.520 --> 0:13:42.000 these different candidates so removed from his democratic socialism that 0:13:42.120 --> 0:13:46.000 they would be uncomfortable even standing with him? I think 0:13:46.040 --> 0:13:48.640 most of them would be. And so you know, again 0:13:48.679 --> 0:13:50.800 you could you could see something very similar to to 0:13:50.880 --> 0:13:54.440 Trump sixteen, where Bernie would be reaching beyond you know, 0:13:54.480 --> 0:13:57.199 the the usual back bench, the usual names that are 0:13:57.280 --> 0:14:01.319 that are floated here. Um. I mean, you know, people 0:14:01.360 --> 0:14:06.320 talk about a potential Lawrence Sanders tickets. I I myself think, uh, 0:14:06.360 --> 0:14:09.559 you know, standers would probably look for, you know, a 0:14:09.640 --> 0:14:13.280 little bit more diversity in in the ticket, but you know, 0:14:13.320 --> 0:14:16.439 in terms of policy positions, the establishment will pressure him 0:14:16.480 --> 0:14:19.520 to moderate. I think Bernie could credibly argue that he 0:14:19.560 --> 0:14:22.320 hasn't gotten this far by moderating. Is there any is 0:14:22.360 --> 0:14:28.280 there any history of Senator Sanders quote unquote moderating If 0:14:28.400 --> 0:14:31.560 if there is, it's not significant, and I'm and I'm 0:14:31.600 --> 0:14:33.800 not aware of it. You know, his his views are 0:14:33.960 --> 0:14:36.520 are very similar to you know, what they what they 0:14:36.520 --> 0:14:39.200 were in the nineteen eighties. When you hear sometimes is 0:14:39.240 --> 0:14:43.560 that his support for certain groups, especially in foreign policy, 0:14:43.800 --> 0:14:46.160 has you know, has moderated versus some of the people 0:14:46.240 --> 0:14:49.840 he was supporting in the nineteen eighties, which will hear 0:14:49.880 --> 0:14:54.600 plenty about if he's the nominee against Trump, Latin dictatorships 0:14:54.640 --> 0:14:57.480 and all that kind of Well, there's a question here 0:14:57.520 --> 0:15:00.840 to about momentum and how much moment tim the Democrats 0:15:00.880 --> 0:15:03.160 have or don't have due to how big the field is. 0:15:03.400 --> 0:15:05.880 Who are the next candidates that you expect to drop out? 0:15:07.400 --> 0:15:09.920 I think the spotlight is really on Elizabeth Warren and 0:15:09.960 --> 0:15:13.720 Amy Clobature. For me, I think Pete boota judge probably 0:15:13.800 --> 0:15:18.160 has enough money to stay in through Super Tuesday. Elizabeth 0:15:18.160 --> 0:15:21.360 Warren probably does as well. But you know, unlike boota 0:15:21.440 --> 0:15:24.040 judge who at least had good results in Ireland at Hampshire, 0:15:24.440 --> 0:15:27.720 you know, Warren has been you know, sort of relegated 0:15:28.160 --> 0:15:30.520 in the ranking so far. I think that's why you 0:15:30.640 --> 0:15:34.680 saw her pivot back to sort of protecting the progressive 0:15:34.680 --> 0:15:38.440 agenda in the debate rather than necessarily you know, selling 0:15:38.440 --> 0:15:41.440 her own candidacy. There's not really a state on Super 0:15:41.480 --> 0:15:44.960 Tuesday in which she u is very likely to win. 0:15:45.000 --> 0:15:48.040 She's competitive in her homestead of Massachusetts. Clobature is also 0:15:48.080 --> 0:15:51.960 competitive in Minnesota, which both Super Tuesday. Um, but both 0:15:52.000 --> 0:15:54.360 of them. I think the odds are against their Their 0:15:54.400 --> 0:15:58.440 candidacy is going a lot further. The trouble there is that, um, 0:15:58.480 --> 0:16:00.400 you know, that's not going to provide much of a 0:16:00.480 --> 0:16:03.520 tailwind for the other candidates and the Ray simply because 0:16:03.560 --> 0:16:06.480 they're not um you know, uh, grabbing a whole lot 0:16:06.480 --> 0:16:09.240 of boat share at the moment. Anyway, let's leave it there. 0:16:09.240 --> 0:16:11.080 Thank you so much, Todd, Marianna, thank you so much 0:16:11.120 --> 0:16:13.520 for the briefing. Here is all everybody tries to adjust 0:16:14.000 --> 0:16:17.400 digest Rather what we saw Saturday and onto that CBS 0:16:17.920 --> 0:16:27.000 debate Tuesday in Charleston, South Carolina. Our focus this morning, 0:16:27.040 --> 0:16:29.840 as in the last twelve hours, has been on the 0:16:29.880 --> 0:16:32.240 spread of the virus and the let's be clear here, 0:16:32.280 --> 0:16:36.320 there's been no annwn statement of epidemic to pandemic, and 0:16:36.400 --> 0:16:39.360 yet that is a source of conversation this morning. We 0:16:39.440 --> 0:16:42.080 need a briefing now on China and get that in 0:16:42.160 --> 0:16:46.560 Beijing from our Selena waiting Selena, Selena very simply here, 0:16:47.200 --> 0:16:50.160 is there a better outlook on a Monday into your 0:16:50.200 --> 0:16:56.160 Tuesday in China? Well, Tom, the only outlook that seems 0:16:56.200 --> 0:16:58.880 to be somewhat improving, it's at the rate of use. 0:16:59.400 --> 0:17:02.320 Who they taught in China do seem to be stabilizing that. 0:17:02.360 --> 0:17:04.680 As you said, the conversation is now growing around whether 0:17:04.760 --> 0:17:07.920 or not the World Health Organization escalates this from an 0:17:07.960 --> 0:17:11.879 international public health emergency to a global pandemic, which essentially 0:17:11.960 --> 0:17:15.520 means us a sustained during of cases outside of that 0:17:15.600 --> 0:17:18.800 outbreak area. And because there's seeing an increased cases outside 0:17:18.800 --> 0:17:21.840 of China and Italy, new cases emerging in the Middle East, 0:17:22.000 --> 0:17:25.560 a very strong ramp up of stasies in South Korea, 0:17:25.600 --> 0:17:28.720 that does beg the question of just how much faster 0:17:28.840 --> 0:17:30.840 this is when to continue to accelerate outside of the 0:17:30.880 --> 0:17:33.480 center of the outbreak, Selena, can you put that into 0:17:33.520 --> 0:17:36.919 perspective when we hear about a reopening of some of 0:17:36.960 --> 0:17:41.760 the previously quarantined areas in China, is this because basically 0:17:42.240 --> 0:17:48.000 Beijing is admitting conceding that containment has failed, so we 0:17:48.119 --> 0:17:51.840 aren't seeing the reopening of the lockdown area. There was 0:17:51.880 --> 0:17:55.679 a bit of confusion, so essentially, at first China had 0:17:55.760 --> 0:17:59.920 released a statement allowing some travel for non residents out 0:18:00.040 --> 0:18:03.560 side of the hunt, but then that was very shortly reversed. 0:18:04.080 --> 0:18:06.879 The top officials said that that was not authorized, that 0:18:06.960 --> 0:18:09.679 was a mistake. So this has brought a lot of 0:18:09.760 --> 0:18:14.400 continued confusion after Cuba Province has changed their county methodology 0:18:14.480 --> 0:18:17.280 multiple times over the past month as well. But to 0:18:17.320 --> 0:18:20.399 put things into perspective, there are now more than seventy 0:18:20.480 --> 0:18:24.240 seven thousand cases in China. This is still the vast 0:18:24.280 --> 0:18:27.280 majority of total cases around the world. You do still 0:18:27.320 --> 0:18:30.800 have sweeping craft downs in terms of travel restrictions and 0:18:30.880 --> 0:18:34.200 quarantines across the country. You have seen some provinces sees 0:18:34.320 --> 0:18:37.640 that slightly, but overall people's travel and movement are still 0:18:37.720 --> 0:18:40.760 respected across the country. So Selena, give us a sense 0:18:40.840 --> 0:18:43.719 of one of the areas that we've been seeing some 0:18:44.000 --> 0:18:47.959 reporting recently, is this concept getting back to work in China. 0:18:48.359 --> 0:18:50.919 What is the expectation of the government of trying to 0:18:51.119 --> 0:18:54.400 ramp up production, get people back into the factories back 0:18:54.440 --> 0:18:59.480 to work. Where are we in that regard, Yeah, exactly, 0:18:59.520 --> 0:19:01.919 that's a really the problem right now is trying to 0:19:01.960 --> 0:19:05.200 get those migrant workers that are stuck in their hometowns 0:19:05.240 --> 0:19:07.680 to get back to their place of work. For instance, 0:19:07.680 --> 0:19:11.360 in Beijing, they had earlier instituted this looking day quarantine 0:19:11.400 --> 0:19:14.600 for people who were coming back for places outside of Beijing, 0:19:14.640 --> 0:19:17.120 so a lot of people have a trouble getting out 0:19:17.119 --> 0:19:19.000 of their city, but be also are buried that once 0:19:19.000 --> 0:19:20.399 when they get to where they need to be that 0:19:20.400 --> 0:19:22.560 they're going to have to be self quarantined again. So 0:19:22.600 --> 0:19:25.680 that's been a really big problem because according to Boomberg Economics, 0:19:25.760 --> 0:19:28.400 China's econmuny is only running about half of its capacity 0:19:28.760 --> 0:19:31.000 over the past week, and a lot of these companies 0:19:31.040 --> 0:19:34.640 as well are having trouble paying their employees. Access. Survey 0:19:34.640 --> 0:19:36.879 of small and medium sized companies in China said that 0:19:36.960 --> 0:19:38.680 only a third of them had enough cash to cover 0:19:39.200 --> 0:19:42.399 expenses for a month. What do you see on the streets? 0:19:42.480 --> 0:19:45.200 I mean, Selena, through the weekend and into your all 0:19:45.320 --> 0:19:48.840 day Monday. Now it's there. Let's call it seven pm 0:19:49.119 --> 0:19:52.400 almost eight p m Monday evening. What did you actually 0:19:52.400 --> 0:19:57.360 observe in the streets this weekend. Well, it's really interesting 0:19:57.400 --> 0:20:01.520 because across Beijing, different communities, how different levels of activities. 0:20:01.560 --> 0:20:03.760 So around where I live at a pretty commercial disference, 0:20:03.800 --> 0:20:06.359 and it's still very quiet. A lot of shops and 0:20:06.480 --> 0:20:09.840 restaurants are still closed. Everybody is required to wear masks 0:20:09.880 --> 0:20:12.880 out side, a lot of big public gatherings are are 0:20:12.920 --> 0:20:16.280 not allowed to occur. And if you lost when I 0:20:16.320 --> 0:20:18.800 just went over the weekend, when East do a mall 0:20:18.800 --> 0:20:21.600 and there are some more residential areas, you actually started 0:20:21.600 --> 0:20:23.639 to see more movement on the streets. And actually some 0:20:23.680 --> 0:20:26.199 of the public parks not quite crowded. I went to 0:20:26.240 --> 0:20:31.680 Reton Park. The elderly folk still exercising and walking out 0:20:31.680 --> 0:20:33.879 and about with the government does not encourage that, but 0:20:33.880 --> 0:20:36.280 people are really getting stick inside of being stuck inside 0:20:36.280 --> 0:20:39.120 all day. Selena, thank you so much. Loved that anecdotal 0:20:39.160 --> 0:20:42.440 work from Beijing as well. Selena Wayne reporting from Beijing. 0:20:45.920 --> 0:20:48.760 Let's dive into a global Wall Street conversation, and this 0:20:48.840 --> 0:20:52.480 really works to Lesa's theme this morning, which is Catharsis. 0:20:52.480 --> 0:20:58.560 Stewart Kaiser writes exceptionally detailed notes for Ubs on the 0:20:58.640 --> 0:21:01.560 moments of the mark. This is the mathematics. You know, 0:21:01.600 --> 0:21:04.320 the bell curve in high school folks. And then there's 0:21:04.320 --> 0:21:07.960 a squishiness to the bell curve, which is variants and 0:21:08.040 --> 0:21:11.480 a thing called skewness or skewness if you're British. And 0:21:11.520 --> 0:21:14.080 then this thing called crotosis, which is not the mold 0:21:14.080 --> 0:21:16.639 in your feet. Right now, do you have any idea, 0:21:16.720 --> 0:21:19.600 Mr Kaiser, where the cross moments are right now? Well, 0:21:19.680 --> 0:21:21.840 I mean obviously this uh the move this morning. You're 0:21:21.840 --> 0:21:23.919 gonna change things a little bit um on the pricing 0:21:23.920 --> 0:21:25.800 if you look at it coming into this week, you know, 0:21:25.840 --> 0:21:28.199 the vix curved flattened out, which is sort of what 0:21:28.240 --> 0:21:30.000 happens when the market is a little bit confused about 0:21:30.040 --> 0:21:32.480 what's going on. Um, what we're gonna see today, which 0:21:32.480 --> 0:21:34.720 we are seeing, is the curve getting very steeply inverted 0:21:35.160 --> 0:21:37.000 and effectively, if you think of what the VIX is, 0:21:37.000 --> 0:21:39.919 the vix is the twenty five delta put implied volatility loosely, 0:21:39.960 --> 0:21:42.480 which is telling you it's the price for protection to 0:21:42.520 --> 0:21:45.439 head your portfolio, and that's back above twenty. So what 0:21:45.480 --> 0:21:47.680 you're seeing is a very big bid for skew and 0:21:47.760 --> 0:21:49.560 that's happening in the US, that tends to happen in 0:21:49.560 --> 0:21:51.920 the SMP. This is great. I mean, this suppis will 0:21:51.960 --> 0:21:55.240 be jargonted a hockey games alta new Jerseys out in 0:21:55.280 --> 0:21:57.600 the Garden State Parkway and drove off the road three 0:21:57.640 --> 0:22:02.320 times on let's unpass what you said in English. The 0:22:02.359 --> 0:22:06.960 bottom line is, guys like you look at the dynamics 0:22:07.000 --> 0:22:10.800 of the volatility of the SMP five hundred as a 0:22:10.840 --> 0:22:14.160 guestimate of confidence in the market. Did I get that right? Yeah? 0:22:14.160 --> 0:22:15.800 So the victure is gonna tell you two things. Just 0:22:15.800 --> 0:22:18.520 gonna tell you how concerned people are, I how much 0:22:18.520 --> 0:22:21.120 they're willing to pay for insurance. And then because there's 0:22:21.119 --> 0:22:23.600 a term structure, they'll tell you when they want that insurance. 0:22:23.880 --> 0:22:26.240 And what you see when the market is really really 0:22:26.280 --> 0:22:29.000 stressed like it is today, is they want insurance really badly, 0:22:29.040 --> 0:22:30.439 and they wanted a meetia. I'm like, come on, this 0:22:30.520 --> 0:22:34.360 is an August of two thousand seven or August. I mean, 0:22:34.400 --> 0:22:37.879 how stressed is stressed today? Sweeney's you know, got you 0:22:38.000 --> 0:22:41.200 get your brokers on the phone here, you're not ready 0:22:41.240 --> 0:22:43.320 to do a toime keen you go all to cash? Right? 0:22:43.960 --> 0:22:47.000 How stressed are we? Look? I think there's there's three 0:22:47.080 --> 0:22:50.120 aspects to this. The first is the psychology part, which 0:22:50.160 --> 0:22:52.040 which Amy touched on, which is when we got the 0:22:52.080 --> 0:22:54.879 initial sell off on China, it was relative. It's at 0:22:54.920 --> 0:22:58.159 least Amy Amy's in last week It's ok, you can 0:22:58.200 --> 0:23:02.240 call me Amy, it's two sell of it worked, I apologize, 0:23:05.520 --> 0:23:11.359 ke So what happened in late January was the market 0:23:11.359 --> 0:23:14.760 didn't sell off very much, and that's suggested by the mentality. Um. 0:23:14.800 --> 0:23:16.600 We think that also might have been impacted by the 0:23:16.600 --> 0:23:19.200 fact that people would already hedge their portfolios against election 0:23:19.320 --> 0:23:22.119 risk because you had all that coming in early February. 0:23:22.560 --> 0:23:25.800 The second thing is what's going on with growth? And 0:23:25.960 --> 0:23:27.840 last week what we saw in Europe was the p 0:23:28.000 --> 0:23:30.240 m I S printed strong, but within the p M 0:23:30.280 --> 0:23:33.439 I S was a very long increase in delivery times. 0:23:33.680 --> 0:23:36.000 Typically that's right, is positive for growth. We actually read 0:23:36.040 --> 0:23:38.080 that as negative for growth because what that means today 0:23:38.160 --> 0:23:40.960 is that the supply change, you're getting massively disrupted. The 0:23:41.000 --> 0:23:43.000 third part is you know what's going on from a 0:23:43.000 --> 0:23:46.040 global perspective, and you know this is now affected the 0:23:46.040 --> 0:23:48.480 West and it's in Europe, so that's gonna you know, 0:23:48.600 --> 0:23:50.600 hit a third aspect of us. You're seeing three sort 0:23:50.600 --> 0:23:52.359 of impacts I think on the market. So from a 0:23:52.400 --> 0:23:56.440 technical perspective, there's a question do you sell your holdings 0:23:56.520 --> 0:23:59.399 if this is going to be temporary. How much do 0:23:59.480 --> 0:24:01.600 you look at the VIX curve? How much do you 0:24:01.640 --> 0:24:04.160 look at what people are doing there as a way 0:24:04.280 --> 0:24:07.920 of hedging without selling, sort of the knee jerk response 0:24:08.160 --> 0:24:11.000 that could give some sense of just how much fear 0:24:11.280 --> 0:24:13.320 could end up bleeding in to the market and causing 0:24:13.320 --> 0:24:16.760 forced sales. Yeah, look, I mean I think the mentality 0:24:16.840 --> 0:24:19.919 market is probably still too by the dip um. But 0:24:20.240 --> 0:24:22.600 when you see these types of moves in the market, 0:24:22.640 --> 0:24:24.280 I mean, the SMP is down almost two and a 0:24:24.320 --> 0:24:26.800 half percent overnight. I think the worst selloff we had 0:24:26.840 --> 0:24:28.840 in January was probably one to one and a half percent, 0:24:28.880 --> 0:24:30.480 So this is a different degree of it. So I 0:24:30.520 --> 0:24:32.480 think generally speaking, what you're probably going to see is 0:24:32.520 --> 0:24:36.119 people keep their core portfolio intact and hedge it unless 0:24:36.119 --> 0:24:39.160 and until and so then. In other words, how much 0:24:39.480 --> 0:24:41.560 do you have to see the vics spike up from 0:24:41.600 --> 0:24:43.600 here right now? At one point it was the most 0:24:43.640 --> 0:24:46.119 since two thousand and eighteen. How much more do we 0:24:46.200 --> 0:24:48.560 have to see before we really are starting to feel 0:24:48.560 --> 0:24:52.679 the capitulation? The catharsis at least expressed in derivatives. I 0:24:52.680 --> 0:24:54.560 think from my perspective, you know, come and talk to 0:24:54.560 --> 0:24:57.480 me when it's on a handle um and I think 0:24:57.560 --> 0:24:59.880 that that type of level suggests, like in the scrim 0:25:00.040 --> 0:25:02.320 and in discriminate hedge, what's the bet in the market 0:25:02.400 --> 0:25:04.480 right now? I mean, Paul helped me here. The the 0:25:04.760 --> 0:25:08.960 idea that we've seen is institutional money has been comfortable 0:25:09.000 --> 0:25:12.439 in bonds, in cash and has been reticent to pile 0:25:12.520 --> 0:25:15.200 into equities. Is at a generally correct statement? I think? 0:25:15.200 --> 0:25:17.880 So I'm looking at the tenure on one thirty night time. 0:25:18.000 --> 0:25:20.280 What do you do? I mean, what's the what's the 0:25:20.359 --> 0:25:23.919 bet on the street right now? Around the derivative strategies 0:25:23.920 --> 0:25:26.240 you live in every day? I mean, what are people 0:25:26.280 --> 0:25:31.240 putting on? Look at? I think what you've actually seen? 0:25:31.520 --> 0:25:34.879 You think more Grave Simmons is taking over products that 0:25:36.200 --> 0:25:38.360 I would say what I think you've seen more generally 0:25:38.600 --> 0:25:41.720 is two things. One some hedging, usually or mostly around 0:25:41.760 --> 0:25:44.840 election risks, and the second is people frankly buying upside 0:25:44.880 --> 0:25:47.720 in more cyclical parts of the market on the assumption 0:25:47.760 --> 0:25:49.520 that US growth is going to bottom at the end 0:25:49.560 --> 0:25:51.399 of the first quarter of the early second quarter, and 0:25:51.440 --> 0:25:53.400 this China thing is gonna be temporary. And I want 0:25:53.400 --> 0:25:55.479 to explosure. Let's go a Greek letter right now. How 0:25:55.520 --> 0:25:58.560 are you managing Gamma right now? The second derivative the 0:25:58.640 --> 0:26:02.160 accelerations in the market. Are you thrilled to buy Gamma 0:26:02.240 --> 0:26:04.560 and believe we're going to accelerate or you selling it 0:26:04.880 --> 0:26:08.200 bringing in premium because you think the acceleration call is wrong. 0:26:08.680 --> 0:26:10.840 I think it's a very hard thing to estimate what 0:26:10.880 --> 0:26:14.960 the neck Gamma position, but we do that Gama. I 0:26:15.000 --> 0:26:17.960 would say that generally the street has probably been caught 0:26:18.280 --> 0:26:23.040 short Gamma for the most excuse me, um, excuse me. 0:26:23.080 --> 0:26:25.920 The market is generally been caught long Gamma. The street has. 0:26:26.280 --> 0:26:29.280 And the reason what happens when that happened is when 0:26:29.320 --> 0:26:32.080 the market moves. You have selling. When market was up, 0:26:32.119 --> 0:26:33.760 you have selling. Me the market moves down to your buying, 0:26:33.760 --> 0:26:35.159 and that's one of the reasons that market has been 0:26:35.200 --> 0:26:37.639 so well behaved recently because the street just kind of 0:26:37.640 --> 0:26:41.320 been in that position and will that change today? It could? 0:26:41.400 --> 0:26:43.800 You know, we're busting chops here, folks, but Stewart kais 0:26:43.840 --> 0:26:46.639 just killing it here on how adults on Wall st 0:26:47.280 --> 0:26:51.440 long gamma they did flock of seagulls like, alright, alphabeta 0:26:51.440 --> 0:26:53.920 gamma delta. What am I buying here? To say? What 0:26:53.960 --> 0:26:56.080 do you think? What are you seeing on your desk? 0:26:56.520 --> 0:26:58.800 You know, you know, maybe over the last several days, 0:26:58.840 --> 0:27:00.800 are people kind of going out on the risk curve 0:27:00.880 --> 0:27:02.439 or they saying I'm pulling in my horns. I'm kind 0:27:02.440 --> 0:27:04.840 of going conservatives. From from an equity perspective, I think 0:27:04.840 --> 0:27:07.160 people were moving up the risk curve until the middle 0:27:07.200 --> 0:27:10.800 of last week, and the the Apple News last week 0:27:11.200 --> 0:27:13.560 caught people, I think a little bit wrong footed. And 0:27:13.600 --> 0:27:15.720 the reason I say that is because most people expected 0:27:15.760 --> 0:27:18.240 this to be a very sharp V shaped recovery and 0:27:18.280 --> 0:27:21.320 the Apple you know, the speed with which they were 0:27:21.359 --> 0:27:23.200 willing to cut or you know, say we're gonna miss 0:27:23.200 --> 0:27:25.280 our guidance basically in less than two weeks. I think 0:27:25.280 --> 0:27:27.199 people say, wait a second, is this going to be 0:27:27.200 --> 0:27:29.959 a deeper pullback or perhaps some more pronounced pullback than 0:27:30.000 --> 0:27:32.120 I expected. If a company of that size is willing 0:27:32.119 --> 0:27:34.119 to move their guidance that quickly, so I think that 0:27:34.160 --> 0:27:36.240 was kind of shot across the bow. And now what 0:27:36.280 --> 0:27:38.240 you see in the last couple of days is obviously 0:27:38.320 --> 0:27:41.240 a different but an acceleration or an expansion of that. 0:27:41.320 --> 0:27:43.640 This has been a wonderful Stewart Kaiser, thank you so much. 0:27:43.640 --> 0:27:47.520 With UBS really adult RelA, we again we protect the 0:27:47.560 --> 0:27:49.800 copyright of all of our guests. If you want this 0:27:49.920 --> 0:27:54.920 exquisite mathematics from UBS, get it from UBS. Mr Kaiser, 0:27:55.000 --> 0:28:03.080 how to derivatives there with right now we start strong 0:28:03.480 --> 0:28:07.560 with Christina Hooper. She is with strategy at Investco. Christine 0:28:07.600 --> 0:28:10.960 and Arianna Cuta Dakota published in Bloomer Opinion in the 0:28:11.040 --> 0:28:14.760 last hour. Very important statement. This from the former head 0:28:14.800 --> 0:28:17.159 of the Minneapolis Fed and now at Rochester, one of 0:28:17.160 --> 0:28:22.080 our great mathematicians, great students of the dynamics of the economy. 0:28:22.320 --> 0:28:24.680 He says, the Fed can't wait, they should cut rates now. 0:28:24.720 --> 0:28:28.720 He even says, or fifty basis points, what's the urgency 0:28:28.760 --> 0:28:33.280 of the Fed to accommodate this virus? I'm not sure 0:28:33.320 --> 0:28:35.480 there should be an urgency of the FED. I think 0:28:35.520 --> 0:28:38.480 a lot of it has to do with business confidence, 0:28:38.800 --> 0:28:41.440 and if we do see an erosion there, that's when 0:28:41.440 --> 0:28:44.320 the FED does need to step in, at least to 0:28:44.800 --> 0:28:48.800 make more statements that suggests that it stands ready to 0:28:48.920 --> 0:28:52.840 provide an insurance cut for the purposes of fending off 0:28:52.960 --> 0:28:56.560 the negative impact of the coronavirus. I don't. I don't 0:28:56.560 --> 0:28:58.840 think there's a sense of urgency yet, although there does 0:28:58.880 --> 0:29:01.080 seem to be a feeling of I know, earlier today 0:29:01.120 --> 0:29:03.400 you talked about how it felt like a controlled sell off. 0:29:03.440 --> 0:29:05.720 I think that changed a bit out of control. I 0:29:05.760 --> 0:29:08.000 think that's not a bit out of control sincent exactly. 0:29:08.200 --> 0:29:10.440 And so I think that the said has to be 0:29:10.520 --> 0:29:14.320 measured and thoughtful. It can't be completely reactionary, but is 0:29:14.440 --> 0:29:18.800 clearly um suggested that it's willing to provide insurance cuts 0:29:18.840 --> 0:29:20.800 just by its behavior last year and the way we 0:29:20.840 --> 0:29:23.000 triangulate that. Folks on the Bloomberg and I've got the 0:29:23.040 --> 0:29:25.560 Bloomberg launch pad in front of me. It's got probably 0:29:25.600 --> 0:29:28.640 a hundred and fifty data points. As you triangulate, Paul, 0:29:29.320 --> 0:29:34.080 certain trends away from the blunt instrument of the vix 0:29:34.120 --> 0:29:36.200 at twenty three point two one to tape a little 0:29:36.200 --> 0:29:39.880 better in the last fifteen minutes. I triangulate by looking 0:29:39.920 --> 0:29:43.480 at stronger yet and critically Paul to Christina's perfect point, 0:29:43.920 --> 0:29:45.920 how we've given away to a little bit of sweat 0:29:46.320 --> 0:29:50.040 Nimex crew. The West Texas Intermediate was a solid fifty one. 0:29:50.400 --> 0:29:54.240 It's now fifty point nine five, down two dollars three cents, 0:29:54.280 --> 0:29:56.520 So that's oil giving way as well. Yeah, that's down 0:29:56.520 --> 0:30:00.120 four and a half percent, so clearly reflecting potentially our 0:30:00.160 --> 0:30:02.240 global growth. Christina. So when you look at the price 0:30:02.320 --> 0:30:06.200 performance this morning, is this healthy? Is this a reasonable 0:30:06.440 --> 0:30:09.280 reaction to what is a dynamic story as it relates 0:30:09.320 --> 0:30:13.920 to the coronavirus. Well, I think it may not be reasonable, 0:30:14.080 --> 0:30:17.640 but it is perfectly understandable given that markets in the 0:30:17.760 --> 0:30:21.040 short term are voting machines and only in the longer 0:30:21.160 --> 0:30:24.160 term are weighing machines. So I think it's it's perfectly 0:30:24.240 --> 0:30:27.880 understandable and not surprising. What I'm a bit more surprised 0:30:27.880 --> 0:30:31.720 about is what we've seen with the plummet in UH 0:30:31.920 --> 0:30:35.719 yields on treasuries UH to see where the tenure is, 0:30:35.800 --> 0:30:39.160 where the thirty year is is a bit surprising, especially 0:30:39.160 --> 0:30:42.720 since I've always believed that the Tenure U S Treasury 0:30:42.800 --> 0:30:46.280 yield is a better fear gage than the vix Um. 0:30:46.280 --> 0:30:48.000 But I will tell you, I'll give you the caveat 0:30:48.080 --> 0:30:51.000 that the Tenure does not have medical training, and I 0:30:51.040 --> 0:30:53.400 think that's an important point to make. We'll believe their 0:30:53.480 --> 0:30:57.400 Christine over way too short today, but very very valuable 0:30:57.480 --> 0:31:00.360 on of course, so she is with invest what we're 0:31:00.360 --> 0:31:02.600 gonna do as we drive forward through this half, however, 0:31:02.760 --> 0:31:05.680 special coverage with do we get the negative one thousand? 0:31:05.760 --> 0:31:08.760 I don't think. We don't think first we bounced up 0:31:08.760 --> 0:31:11.520 a hundred points negative eight fifty nine now on the 0:31:11.600 --> 0:31:14.280 Dow that we're gonna bring in a select number of guests, 0:31:14.320 --> 0:31:16.520 all of them with different views. Cameron christ joins us 0:31:16.520 --> 0:31:19.080 now with Bloomberg, and of course he has a wonderful 0:31:19.080 --> 0:31:22.640 ability to synthesize correlation into all this. Cameron, what do 0:31:22.680 --> 0:31:26.200 you see within the correlations of the market. Well, I 0:31:26.240 --> 0:31:30.280 mean right now, everything is uh uh, it is pricing 0:31:30.320 --> 0:31:33.640 fair right um for the equi market. That's a relatively 0:31:33.680 --> 0:31:38.520 recent phenomenon. Obviously we had last month's episode, but it 0:31:38.560 --> 0:31:40.440 was only a few days ago. This time last week, 0:31:40.480 --> 0:31:45.240 we were pretty much the dingy um treasury or government bonds. 0:31:45.600 --> 0:31:49.520 I've been fairly consistent since the whole virus thing um 0:31:49.720 --> 0:31:53.000 broke UH pricing risk aversion. I think it's the previous 0:31:53.000 --> 0:31:56.680 gustum guest mentioned. And the interesting nexus in between the 0:31:56.680 --> 0:31:59.880 two is credit um, where I think you can are 0:32:00.120 --> 0:32:03.680 you that high yield at the moment is trading like 0:32:03.720 --> 0:32:08.760 a government bond um, and that is pretty unsustainable if 0:32:08.800 --> 0:32:14.200 there is a legitimate economic hit um that spreads from 0:32:14.240 --> 0:32:16.440 the from from the virus. That looks like a particular 0:32:16.480 --> 0:32:20.560 point of vulnerability to name, How does factor investing play 0:32:20.600 --> 0:32:22.520 into this? Paul just mentioned. You know, it can be 0:32:22.520 --> 0:32:24.760 the virus, or it can be other things as well. 0:32:25.120 --> 0:32:29.280 When you look at the vogue of momentum or value 0:32:29.720 --> 0:32:33.560 or style investment and all the other almost marketing ideas 0:32:33.560 --> 0:32:37.840 wrapped around a legitimate finance theory called factors, how do 0:32:38.040 --> 0:32:40.760 factors play in when you see a four or five 0:32:41.280 --> 0:32:45.080 drop from the top and intiquities, Well, I think what's 0:32:45.080 --> 0:32:49.120 happening is that you've got an increasing number investors piling 0:32:49.160 --> 0:32:54.240 into an increasingly narrow range of night um, whether it's 0:32:54.280 --> 0:32:59.760 hedge funds or retail kind of everybody has decided that 0:32:59.800 --> 0:33:03.080 they cap tech um is where to be. And it 0:33:03.120 --> 0:33:05.400 takes a lot of the boxes that you see in 0:33:05.520 --> 0:33:08.720 terms of these factors, certainly in terms of momentum UH, 0:33:08.800 --> 0:33:12.959 in terms of growth, which as we know, has trounced value, 0:33:13.200 --> 0:33:18.840 and insofar as the human animal is ultimately a momentum 0:33:18.880 --> 0:33:23.360 based animal, deducing that that which happened yesterday and that 0:33:23.440 --> 0:33:27.880 which happens today is likely to happen tomorrow. UM, that 0:33:28.000 --> 0:33:32.920 we've got everyone kind of long these these relatively narrow 0:33:33.000 --> 0:33:37.240 basket of names. The risk, obviously is if it goes wrong, UM, 0:33:37.480 --> 0:33:40.720 that the exit door might not be sufficiently large to 0:33:40.760 --> 0:33:43.480 accommodate everyone who wants to get out at the same time. 0:33:43.520 --> 0:33:46.960 And Um. The upshot, I think is that liquidity is 0:33:47.000 --> 0:33:48.400 going to be is going to is going to be 0:33:48.440 --> 0:33:52.959 at a premium, and the volatility of volatility UH is 0:33:53.040 --> 0:33:56.120 going to remain elevant. It's very important, folks, that phrase 0:33:56.160 --> 0:34:00.320 of volatility of volatility is Mr christ gets a little 0:34:00.520 --> 0:34:04.160 Matthew Paul, let me frame uh here where we are 0:34:04.160 --> 0:34:07.880 on the opening. We're down five point four percent from 0:34:07.880 --> 0:34:11.160 the recent highs of middle February. I think that will 0:34:11.200 --> 0:34:14.640 be called the Valentine Day high and after that the massacre. Uh, 0:34:14.719 --> 0:34:18.719 and a correction on the Dow is if I can 0:34:18.719 --> 0:34:23.279 get the fame cursorout, twenty six thousand, six hundred would 0:34:23.280 --> 0:34:27.560 be a traditional correction, right, we're points above that down 0:34:27.640 --> 0:34:31.279 known eight d one point. Lukawa just darkened the door, 0:34:31.320 --> 0:34:34.439 as you like to say, Tom Lukawa, Bloomberg News cross 0:34:34.440 --> 0:34:37.719 asset reporter joining us with the camera crisis as well. 0:34:37.800 --> 0:34:41.040 So Luke kind of a rocky opening to the market, 0:34:41.040 --> 0:34:43.080 a little bit of a new view, it seems like 0:34:43.080 --> 0:34:47.040 from financial markets on the potential risk of this Corona crisis. 0:34:47.040 --> 0:34:48.920 What are your early thoughts here as we're you know, 0:34:48.920 --> 0:34:52.040 about eight minutes into the opening of the cash equities markets. Oh, many, 0:34:52.160 --> 0:34:55.640 many assorted thoughts. So let's start with Mark Dow of 0:34:56.120 --> 0:34:59.640 Dow Global Advisors is frequent market commentator, former I M 0:34:59.680 --> 0:35:02.000 F A. Anymous. He's pointed out a lot of the 0:35:02.000 --> 0:35:05.800 times that markets have this tendency to have belated overreaction. 0:35:05.920 --> 0:35:08.880 So we all know what the event is. Not many 0:35:08.920 --> 0:35:10.960 facts about the event of change. There's a lot of 0:35:10.960 --> 0:35:13.760 the knowns, but then we just freak out later anyways, 0:35:13.880 --> 0:35:16.560 rather than when we first hear about it. This strikes 0:35:16.560 --> 0:35:20.120 me as quite memorable compared to the Chinese evaluation that 0:35:20.160 --> 0:35:23.120 did not happen at the end of August. That happened 0:35:23.120 --> 0:35:25.840 with August twelve, and yet it took, you know, a 0:35:25.840 --> 0:35:28.800 couple of weeks later before we open limit down. Second 0:35:28.800 --> 0:35:31.960 of which which ties into this the strictures of the 0:35:32.040 --> 0:35:36.319 options market and how that leads to realize volatility. Last 0:35:36.320 --> 0:35:39.160 Friday was options expiry. When you have all of that 0:35:39.480 --> 0:35:42.880 open interest in strikes hanging around and then it completely 0:35:42.920 --> 0:35:45.799 falls off the table. This is freedom to move, and 0:35:45.840 --> 0:35:48.560 what you're seeing this morning is definitely freedom to move 0:35:48.600 --> 0:35:51.040 to the downside. Look and camera Christ with us with 0:35:51.120 --> 0:35:54.279 down negative seven seven two the vix twenty two points 0:35:54.320 --> 0:35:56.640 three for a better tape in the last five minutes 0:35:56.960 --> 0:36:00.960 here often ugly almost down one thousand, opening to the 0:36:01.080 --> 0:36:03.960 both of you and Luke, let me start with you 0:36:04.160 --> 0:36:07.240 right now. What do institutions do when they see this drop? 0:36:07.320 --> 0:36:09.839 I mean they're in cash? Are they deploying now? Or 0:36:10.080 --> 0:36:13.759 how do they measure the mood the catharsis? Do they 0:36:13.760 --> 0:36:16.239 revert to technical analysis? What do they do where they 0:36:16.320 --> 0:36:19.200 say here's the entry point? Well, are they really in 0:36:19.320 --> 0:36:21.839 cash is the first question. And if you've looked at 0:36:21.960 --> 0:36:23.840 you know, like SMP five under, if you look at 0:36:23.880 --> 0:36:27.759 the asset managers UH in the CFTC and their allocation 0:36:27.800 --> 0:36:30.600 to stocks, that's those numbers in terms of what we 0:36:30.680 --> 0:36:33.239 get are actually quite high. So the real question would 0:36:33.239 --> 0:36:36.440 be is, I think, is how much is institutional dumping 0:36:36.480 --> 0:36:39.680 on this and joining the party? And by the fact 0:36:39.719 --> 0:36:43.279 that what you're seeing from this phase of the coronavirus 0:36:43.280 --> 0:36:46.520 correction that's different from the late January one is all 0:36:46.520 --> 0:36:49.080 of your beloved stocks are joining in and not only 0:36:49.160 --> 0:36:51.640 joining in, their leading to the downside. So you know, 0:36:51.840 --> 0:36:54.239 if you were all up in Microsoft, will be all 0:36:54.320 --> 0:36:57.040 up in Apple, all up in those expensive text stocks, 0:36:57.160 --> 0:36:59.960 especially in software, those are the ones that are get 0:37:00.160 --> 0:37:02.120 hit more now, which does suggest that you know, there 0:37:02.200 --> 0:37:05.719 is a bit more of an active selling component and 0:37:05.800 --> 0:37:09.080 cutting even exposure to the stocks you love that is 0:37:09.160 --> 0:37:11.799 taking place this time around. So Camra christ I'm looking 0:37:11.880 --> 0:37:15.239 at the three months to the ten year treasury UH 0:37:15.360 --> 0:37:19.120 minus seventeen here down eight and a half points today, 0:37:20.200 --> 0:37:21.719 is that what is that telling you? Should we really 0:37:21.719 --> 0:37:23.920 pay close attention to that because we've seen that go 0:37:24.040 --> 0:37:28.279 negative in the past with no real implications. Yeah, I 0:37:28.320 --> 0:37:32.080 mean that curve. I don't think it's particularly useful on 0:37:32.120 --> 0:37:34.680 a sort of very very high frequency basis, because really 0:37:34.680 --> 0:37:38.760 it's just telling what the tenure does because um, three 0:37:38.800 --> 0:37:41.400 month bills don't really you know, three month bill yields 0:37:41.400 --> 0:37:44.960 don't really um don't really move so much. Twos tens 0:37:45.480 --> 0:37:50.840 perhaps offers a little more forward looking um uh color 0:37:51.200 --> 0:37:54.520 and uh, it's interesting that curve hasn't really moved at 0:37:54.520 --> 0:37:57.600 all today. It's been a parallel shift, UM to the 0:37:57.600 --> 0:38:00.479 to the downside. What is the camera that's well said. 0:38:00.520 --> 0:38:03.160 What is a parallel shift where all yields go down? 0:38:03.640 --> 0:38:05.919 What is that signal to a fete? I mean, is 0:38:05.920 --> 0:38:11.719 is that signaling to them? Signals signals cut rates and 0:38:11.800 --> 0:38:14.440 keep them down. Um. Now, I think you could make 0:38:14.480 --> 0:38:17.640 a pretty good argument that rape cuts UM, while they 0:38:17.719 --> 0:38:22.759 might cheer up UM equity investors temporarily, would have a 0:38:22.880 --> 0:38:27.440 vanishingly small impact on on the real economy. Um. You know, 0:38:27.640 --> 0:38:29.360 not only in the United States, but sort of in 0:38:29.400 --> 0:38:32.680 the rest of the world. UM. You know, uh, you know. 0:38:32.719 --> 0:38:35.760 In terms of the previous discussion of what's actually changed, well, 0:38:35.880 --> 0:38:38.120 I think something has changed, which is that you've started 0:38:38.120 --> 0:38:42.279 to see an economic impact extend beyond China's borders. UM 0:38:42.680 --> 0:38:45.920 for Venice to to cancel the carnival is I mean, 0:38:45.920 --> 0:38:48.160 they're not doing that because interest rates are too high. 0:38:48.400 --> 0:38:51.200 They're doing it as a public health scare. UM schools 0:38:51.200 --> 0:38:55.640 are closing. That's something that that I think has impacted 0:38:56.600 --> 0:39:00.239 or infected, if you will, um uh investor in best 0:39:00.480 --> 0:39:04.320 investor consciousness, because it was kind of easy to write 0:39:04.320 --> 0:39:07.359 off UM as an ephemeral thing or a contained thing, 0:39:07.400 --> 0:39:10.200 and it was contained within China. But when you're starting 0:39:10.200 --> 0:39:13.720 to see business UM and the economy being impacted outside 0:39:13.719 --> 0:39:16.279 of China, then it's kind of like who let the 0:39:16.280 --> 0:39:18.600 dogs out? And how do we get them back in 0:39:18.640 --> 0:39:21.799 the cage? And that's a that's a more difficult proposition. 0:39:22.000 --> 0:39:23.960 Kevin Christ, thank you so much for joining us in 0:39:24.000 --> 0:39:27.520 a short notice today with Bloomberg of course, looking particularly 0:39:27.520 --> 0:39:29.920 at the cross at space, Paul Sweni and Tim King 0:39:30.000 --> 0:39:34.360 worldwide with our special coverage, we are without commercial interruption 0:39:34.480 --> 0:39:36.840 in this special half hour getting the markets open. We 0:39:36.920 --> 0:39:40.200 opened near negative one thousand, and the down down negative 0:39:40.239 --> 0:39:44.200 eight three seven down. We went captured, the bid, bounced 0:39:44.239 --> 0:39:46.200 back up, and we went back a little bit with 0:39:46.239 --> 0:39:49.359 a vix was a twenty four handle now twenty two 0:39:49.400 --> 0:39:53.080 point seven eight. The yield is in ten basis points 0:39:53.160 --> 0:39:56.640 were in eleven earlier one point three six seven two 0:39:56.680 --> 0:40:00.120 on the tenure, Luke, is it general? You know? I 0:40:00.080 --> 0:40:02.480 I make jokes about your three Bloombergs, but it's true. 0:40:02.719 --> 0:40:05.960 It isn't What is? What is? That's a hell of 0:40:06.000 --> 0:40:09.560 a monthly bill that we say, thank you? What What 0:40:09.640 --> 0:40:12.759 do you see right now off your Bloomberg screen? Like 0:40:12.840 --> 0:40:18.160 what's the the delineating feature of panic or critically non panic? 0:40:19.600 --> 0:40:21.960 To me, it'll still be kind of the the starting 0:40:22.000 --> 0:40:24.880 point where we were for this and how quickly things change. 0:40:25.000 --> 0:40:27.960 So like equity put call ratios in terms of the 0:40:28.000 --> 0:40:30.120 volumes traded on the put side versus the call side, 0:40:30.480 --> 0:40:33.680 they've been below one pretty much every day this year, 0:40:33.719 --> 0:40:37.680 a k more calls changing hands, then puts. I. I 0:40:37.760 --> 0:40:42.200 want to see how dramatically something like that changes, just 0:40:42.280 --> 0:40:46.320 like I want to see not only does the greed disappear, 0:40:46.440 --> 0:40:49.920 but also does the demand for protection orally skyrocket, because 0:40:50.160 --> 0:40:53.279 really you haven't had both things happen consistently. Even in 0:40:53.360 --> 0:40:57.359 late January. He's so seventies. He's like Wall Street he's 0:40:57.400 --> 0:40:59.840 wearing a shirt today that could have been worn with 0:41:00.080 --> 0:41:04.880 leud Wolfson, Gordon g Michael Holland would have warned twenty 0:41:04.960 --> 0:41:07.560 years ago. It's got the blue stripe, that's got the 0:41:07.600 --> 0:41:11.200 Glary Caudlow statement blue stripe shirt with the white cord. 0:41:11.280 --> 0:41:15.440 And this this is my Kevin really special pull off 0:41:15.480 --> 0:41:20.200 something like this. It's very it's very fashion forward. Daward 0:41:20.440 --> 0:41:24.200 Ay time joining us with Lucawa. We have Gina Martin Adams. Uh. 0:41:24.440 --> 0:41:29.319 She's our strategist for Bloomberg Intelligence giving us I think 0:41:29.360 --> 0:41:32.320 so yes, she that's kind of where she was. So Gina, 0:41:32.400 --> 0:41:35.480 thanks so much for joining us. Give us your perspective 0:41:35.520 --> 0:41:39.120 on this opening here and what may be different here 0:41:39.880 --> 0:41:43.680 for the US equity markets. Well, I think the equity 0:41:43.719 --> 0:41:46.839 market has been riding on the hotels of the better 0:41:46.840 --> 0:41:50.320 than expected fourth quarter earning season and able to therefore 0:41:50.480 --> 0:41:56.080 dismiss underlying weaknesses in the earning stream related to coronavirus 0:41:56.239 --> 0:42:01.000 um dampened outlook which has emerged in revision. It's pretty persistently. 0:42:01.000 --> 0:42:04.399 But now the earning season is fading, and you've had 0:42:04.520 --> 0:42:07.680 really strong spikes in a sort of risk off tone 0:42:07.719 --> 0:42:10.919 across other asset classes. The equity market is following suit. 0:42:11.120 --> 0:42:13.840 So if you actually look at the technicals of the 0:42:13.840 --> 0:42:16.200 equity market, the two week rally that we had in 0:42:16.360 --> 0:42:19.040 early February was really running on steals anyway. It was 0:42:19.120 --> 0:42:22.560 largely supported by just a few names and tech and 0:42:22.760 --> 0:42:25.840 some defensive rotation into utilities. So it was signaling that 0:42:25.880 --> 0:42:28.400 the equity market was on fairly weak footing as it was. 0:42:29.160 --> 0:42:31.000 But I do think that the end of earning season 0:42:31.640 --> 0:42:34.080 was inevitably going to be difficult for stocks, and we're 0:42:34.120 --> 0:42:37.000 going to go through a period of churning here, probably 0:42:37.040 --> 0:42:40.280 a modest correction related to the fact that the economic 0:42:40.320 --> 0:42:42.439 outlook is not going to improve in the short run 0:42:42.480 --> 0:42:44.359 and estimates are a little too high for the next 0:42:44.400 --> 0:42:48.120 couple of quarters of growth. The rule of thumbs as 0:42:48.120 --> 0:42:51.879 a correction, is that still true or the markets so 0:42:51.960 --> 0:42:55.600 adjusted or boloxed up right now that we're on the 0:42:55.640 --> 0:42:59.080 cusp of a correction? Now, which is it? You know, 0:42:59.200 --> 0:43:02.120 I think it's some the arbitrary, honestly, Tom, it's a 0:43:02.120 --> 0:43:04.839 ten percent is known as the correction, is known as 0:43:04.840 --> 0:43:07.319 a bear market. Some people would say we haven't had 0:43:07.360 --> 0:43:09.960 any bear markets over the course of the last ten years. 0:43:10.040 --> 0:43:14.040 I would say, we've actually had three, maybe even four, 0:43:14.320 --> 0:43:16.760 just based on the fact that we had very severe 0:43:16.840 --> 0:43:21.440 contraction in the equity market nearing. So, you know, I 0:43:21.440 --> 0:43:24.840 think that any correction always feels somewhat difficult, whether it 0:43:24.920 --> 0:43:28.160 be five percent, ten percent, or fifteen percent, particularly when 0:43:28.160 --> 0:43:30.920 in the company's of really strong spike and volatility and 0:43:30.960 --> 0:43:35.160 a strong risk off tone. That's likely what we're in 0:43:35.280 --> 0:43:38.520 for um at least for the next couple of days. 0:43:38.560 --> 0:43:41.480 Just the massive rally that we saw in gold, the 0:43:41.640 --> 0:43:44.200 big rally we saw in the thirty year on Friday, 0:43:44.239 --> 0:43:46.160 would have indicated that we were in for weakness at 0:43:46.239 --> 0:43:48.120 least in the short run here in the equity market. 0:43:48.160 --> 0:43:52.320 And I think unless you get some really really strong 0:43:52.360 --> 0:43:55.919 earnest results from the retailers, which is highly unlikely, it's 0:43:56.080 --> 0:43:57.880 just going to continue for the near terms, kind of 0:43:57.880 --> 0:43:59.799 blowing off some of the excess that we had to 0:43:59.800 --> 0:44:02.040 see left earlier this year. Well, I look for a 0:44:02.160 --> 0:44:06.000 forward your team and they're writing this afternoon from Bloomberg Intelligence, 0:44:06.080 --> 0:44:09.960 Gina Martin Adams out of all of our equity coverage today, Paul, Yeah, 0:44:10.239 --> 0:44:12.040 look at you know, I'm looking at my commodity screen 0:44:12.080 --> 0:44:14.839 that g l C O screen, which is just for us, 0:44:14.960 --> 0:44:17.600 you know, equity people just the savior. And I'm seeing 0:44:17.680 --> 0:44:21.279 so much red across the commodities uh space here And 0:44:21.440 --> 0:44:24.440 is this just you know, the US equity markets just 0:44:24.520 --> 0:44:26.719 kind of catching up with what commodity has been telling us, 0:44:26.719 --> 0:44:30.399 which is global growth is you know, tepid at best 0:44:30.480 --> 0:44:32.719 and may even be at risk with this coronavirus. Is 0:44:32.760 --> 0:44:34.120 that kind of we're just seeing maybe a little bit 0:44:34.120 --> 0:44:37.399 of catchup, as maybe Gina suggested, Yeah, I totally think 0:44:37.480 --> 0:44:39.920 there's you know, that's that's the way to frame it 0:44:39.920 --> 0:44:41.799 when you look at how commodities have been on a 0:44:41.840 --> 0:44:45.799 sustained basis coppercruede week for quite a while. Commodities have 0:44:45.960 --> 0:44:50.560 been showing the demand implications of the coronavirus for quite 0:44:50.560 --> 0:44:54.520 some time. Equity markets have been focused on the temporary 0:44:54.560 --> 0:44:57.440 supply implications of the coronavirus for quite a while. So 0:44:57.480 --> 0:44:59.680 the kind of scaring that circle here is is a 0:44:59.760 --> 0:45:01.799 law of what we see. And one one thing that's 0:45:01.800 --> 0:45:04.160 really jumping out to me right now is I'm looking 0:45:04.160 --> 0:45:07.480 at implied correlations for the SMP five hundred, So the 0:45:07.520 --> 0:45:10.600 extent to which things are expected to move together, you know, 0:45:10.680 --> 0:45:13.920 generally in a crisis. Does one do that? Uh, the 0:45:14.160 --> 0:45:17.360 SPX one month, I see bee ball index on your terminal. 0:45:18.000 --> 0:45:20.480 And so one thing that's really struck me is this 0:45:20.520 --> 0:45:23.600 was one of the rare occasions where you had correlations spike, 0:45:23.840 --> 0:45:28.000 implied correlations spike in late January and then immediately immediately 0:45:28.040 --> 0:45:30.319 fade to where they were before. Generally, when you have 0:45:30.400 --> 0:45:33.120 a spike and implied correlations, it means, hey, there's some 0:45:33.200 --> 0:45:35.600 kind of macro thing going on that we're going to 0:45:35.640 --> 0:45:37.879 worry about for a while. It's gonna be some kind 0:45:37.920 --> 0:45:39.959 of episode that we have to work our way through. 0:45:40.320 --> 0:45:42.160 Been the case for, you know, for the trade war, 0:45:42.360 --> 0:45:45.160 was the case in late was the case during the 0:45:45.160 --> 0:45:49.799 the Chinese hard landing fears. Right now those are still 0:45:49.840 --> 0:45:51.920 probably subdued. So if you're looking for a way for 0:45:52.000 --> 0:45:54.880 volatility to move up, it's through this conduit where we 0:45:54.920 --> 0:45:57.759 start pricing in everything moving together to the downside. And 0:45:57.800 --> 0:46:00.160 I just put that up on the screen, and we're 0:46:00.160 --> 0:46:03.120 now out the four standard deviations is a general of 0:46:03.160 --> 0:46:06.919 four standard deviation. Move is where the sweat clicks in 0:46:07.440 --> 0:46:09.960 and we're getting there. We're getting we're getting there, but 0:46:10.000 --> 0:46:13.200 we're not quite there yet. So looking at the you know, 0:46:13.200 --> 0:46:15.279 we we talk a little bit about crude oil and 0:46:15.280 --> 0:46:18.640 it's down about four percent or four point two barrel. 0:46:18.840 --> 0:46:20.160 I mean, is that kind of a is that a 0:46:20.200 --> 0:46:23.680 place where people should look for, you know, where is 0:46:23.719 --> 0:46:26.600 global growth going to be? And if I see weakness 0:46:26.600 --> 0:46:29.840 in that commodity, that's really a flag for me. I 0:46:29.880 --> 0:46:32.960 mean probably copper would be the even bigger one, or 0:46:33.000 --> 0:46:35.520 the or the complementary, or you know, at least both 0:46:35.520 --> 0:46:39.160 of them telling the same story. Yeah, it's I would 0:46:39.200 --> 0:46:43.320 say definitely commodities are pricing in the lower demand global 0:46:43.320 --> 0:46:46.799 growth outlook much more than any asset class has been 0:46:46.960 --> 0:46:50.120 for a while. But hey, commodities have been financialized for 0:46:50.200 --> 0:46:53.359 quite some time, more than they are necessarily indicative of 0:46:53.360 --> 0:46:56.680 supply demand conditions for real end users for quite some time. 0:46:56.920 --> 0:46:59.440 So probably more of a tendency to overshoot in both cases. 0:46:59.560 --> 0:47:02.279 Very good. I don't knowough jargon from Calah, but I 0:47:02.360 --> 0:47:04.319 learned a new function today, so you know that was 0:47:04.480 --> 0:47:06.919 there was as good as Stewart Kaiser from ubs time. 0:47:07.120 --> 0:47:09.440 It was pretty good. Do we get through this without 0:47:09.480 --> 0:47:12.520 mentioning a backup goaltender, because that's that's that's how bad 0:47:12.600 --> 0:47:15.719 things must be right now, Michael Reagan with us here 0:47:15.760 --> 0:47:17.720 as we look at that, He's trying to log onto 0:47:17.760 --> 0:47:21.840 the hurt when I'm like the backup goaltender around here 0:47:21.920 --> 0:47:26.960 driving the surveillance. When when the market goes down a 0:47:26.960 --> 0:47:30.880 thousand points, Michael, can you log on? I'd rather not. 0:47:30.920 --> 0:47:32.279 I should have said I should have work at home. 0:47:32.320 --> 0:47:34.520 But what is the color of the market you? Michael 0:47:34.560 --> 0:47:37.560 Reagan was, folks, leading just all of our intellectual coverage 0:47:37.560 --> 0:47:40.279 in Bloomberg News on the equity markets. You go into 0:47:40.280 --> 0:47:43.080 a morning call, what's the theme that you want to 0:47:43.120 --> 0:47:47.200 attack here? Negative seven sixties seven on the dough? Well, 0:47:47.280 --> 0:47:49.520 I guess you know. Obviously the question on everyone's mind 0:47:49.560 --> 0:47:53.080 is gonna be how bad will this get? God bless 0:47:53.080 --> 0:47:54.960 anyone who can even attempt to try to answer that. 0:47:55.000 --> 0:47:58.200 I mean, I think obviously the Italian outbreak is really 0:47:58.360 --> 0:48:01.680 the focus of everyone uh ire right now. And just 0:48:01.719 --> 0:48:03.960 looking at sort of the leadership in the stock market, 0:48:04.160 --> 0:48:06.040 what do you see that? Well, a lot of that 0:48:06.160 --> 0:48:09.600 sort of the high flyers are leading your Apple, Microsoft, Amazon, 0:48:09.640 --> 0:48:12.000 the ones that we're really sort of leading this this 0:48:12.239 --> 0:48:15.640 uh rally on the way up. What I find interesting 0:48:15.640 --> 0:48:17.799 he's looking at the healthcare stocks. They're pretty much down 0:48:17.840 --> 0:48:20.279 across the board. I mean, Gillyad is up because they 0:48:20.360 --> 0:48:22.720 might have the vaccine. What are you seeing in Johnson 0:48:22.719 --> 0:48:25.160 and Johnson might have a well that's the thing. Everything's 0:48:25.239 --> 0:48:29.439 down pretty steeply. And I find it interesting because less 0:48:29.480 --> 0:48:32.160 we forget Bernie Sanders did win a pretty a pretty 0:48:32.160 --> 0:48:36.600 big better than my mind had was thirty nine percent, folks, 0:48:36.600 --> 0:48:40.440 And he's clocking here with yeah, so I would be curious. 0:48:40.440 --> 0:48:43.799 It's hard to isolate what is happening to say, the 0:48:43.840 --> 0:48:47.080 managed care stocks. United Healthcare is down like seven, so 0:48:47.160 --> 0:48:49.800 obviously that you know, could could be a lot of 0:48:49.800 --> 0:48:52.240 the coronavirus fear. But you also gotta wonder if Bernie 0:48:52.280 --> 0:48:53.920 is in the market a little bit too. I don't know, 0:48:54.040 --> 0:48:56.400 but um it's hard to separate the two because obviously 0:48:56.400 --> 0:48:58.239 a coronavirus is not gonna be good for your your 0:48:58.239 --> 0:49:01.600 healthcare stocks, but neither is so um uh, you know, 0:49:01.640 --> 0:49:04.040 I would love to see what this market was would 0:49:04.040 --> 0:49:05.600 look like this morning if it had just been the 0:49:05.600 --> 0:49:07.920 Bernie news over the weekend and not the not the virus. 0:49:07.960 --> 0:49:11.040 And Michael Reagan with us and he'll continue on Bloemark 0:49:11.120 --> 0:49:13.520 Radio with reports through the day. Right now, we have 0:49:13.600 --> 0:49:16.440 to digress for a global audience for something that was 0:49:16.719 --> 0:49:20.000 absolutely extraordinary this weekend. There's been a lot of coverage 0:49:20.000 --> 0:49:23.760 in it in America and certainly within Canada as well. 0:49:23.800 --> 0:49:26.719 This is where two goalies get hurt and you don't 0:49:26.760 --> 0:49:29.880 have another goalie, and every team has an agreement that 0:49:29.920 --> 0:49:33.279 there's always an emergency goalie who if they play, gets 0:49:33.400 --> 0:49:37.160 five hundred dollars and they get to keep their jersey. Yeah, 0:49:37.200 --> 0:49:41.080 it's it's in the contract and the agreement, and this occurs, 0:49:41.080 --> 0:49:45.120 but it doesn't occur like it did this weekend in Toronto. 0:49:45.800 --> 0:49:49.000 Is Carolina had two people injured and Luke it was 0:49:49.160 --> 0:49:53.920 absolutely extraordinary, without question, I've never seen it before. Tavarus 0:49:54.040 --> 0:49:57.400 took the giant John Tavirus took that first shot and 0:49:57.440 --> 0:50:01.000 he looked like a goalie completely out of his well 0:50:01.320 --> 0:50:03.719 that's because he was a goalie completely out of his 0:50:03.800 --> 0:50:07.239 league too. So for backstory here, the Carolina Hurricanes two 0:50:07.239 --> 0:50:10.480 goalies injured, they had to turn to the leaf's appointed 0:50:11.239 --> 0:50:14.560 back up, who is the Zamboni drivers, and the teams 0:50:15.800 --> 0:50:18.680 have an in Toronto, but so in front of a 0:50:18.800 --> 0:50:22.040 home team, we embarrass ourselves like this so Carolina has 0:50:22.080 --> 0:50:25.480 to turn to the Merley's Zamboni driver. The Toronto Marley 0:50:25.560 --> 0:50:29.080 Zamboni driver ted into net before he had even faced 0:50:29.080 --> 0:50:32.000 a shot. He hadn't even bigger lead than he started with. 0:50:32.160 --> 0:50:34.359 He himself got a shot on net, banking it off 0:50:34.400 --> 0:50:36.719 the boards, and he made I believe, seven saves in 0:50:36.760 --> 0:50:39.239 the third period. But Tom, if you remember the old 0:50:39.280 --> 0:50:42.279 Scott Stevens era in New Jersey Devils, I have not 0:50:42.560 --> 0:50:46.279 seen a team play suffocating defense like that there was. 0:50:46.440 --> 0:50:48.319 You couldn't get a puck through to the net. Not 0:50:48.440 --> 0:50:51.120 that the Leafs are really trying. This will go down 0:50:51.200 --> 0:50:54.400 is perhaps more embarrassing than the four one collapse in 0:50:54.400 --> 0:50:58.640 Game seven to the Brewers look very quickly. And we'll 0:50:58.640 --> 0:51:01.640 expand on this later. Ex going to our audience, his 0:51:01.840 --> 0:51:04.879 junior banus, I was at a junior B level when 0:51:04.880 --> 0:51:07.520 I was you know, Colorado, million years ago. But what 0:51:07.560 --> 0:51:12.480 does junior B now mean versus the minors or the NHL. 0:51:13.600 --> 0:51:15.960 I would say Junior B in a lot of cases 0:51:16.040 --> 0:51:19.120 means you care about the sport, you stuck around to 0:51:19.160 --> 0:51:21.279 play it for a while, but you were not one 0:51:21.280 --> 0:51:25.160 of the top tier talented guys. You're nobody had a 0:51:25.239 --> 0:51:28.400 chance at this level to play an the NHL. Essentially, 0:51:28.640 --> 0:51:30.520 oh yeah, that's you. You're not going to go to junior. 0:51:30.560 --> 0:51:33.720 Being Austin Matthews had the puck off the left side 0:51:34.760 --> 0:51:38.319 in his stomach. He shot it. Even I could have 0:51:38.360 --> 0:51:41.640 stopped that. He he dotted the eye in canes. As 0:51:41.680 --> 0:51:45.759 we say, see the suffering there. It's like if he 0:51:45.920 --> 0:51:49.640 was long Apple calls here yesterday, Luke Kawa, Thank you 0:51:49.680 --> 0:51:52.279 so much for that perspective on the markets, and of 0:51:52.320 --> 0:51:55.319 course I'm truly an historic moment. Thanks for listening to 0:51:55.400 --> 0:51:59.880 the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 0:52:00.000 --> 0:52:05.799 Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 0:52:05.840 --> 0:52:09.160 on Twitter at Tom Keene before the podcast. You can 0:52:09.200 --> 0:52:12.360 always catch us worldwide. I'm Bloomberg Radio.