WEBVTT - Lowering S&P Target to 3,100 By December: Stifel's Bannister 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:22.800 and on Bloomberg dot com. So I mentioned yesterday that 0:00:23.000 --> 0:00:25.080 we saw the Dow sell off six point nine percent, 0:00:25.160 --> 0:00:27.720 the SMP down five point nine percent, then as Jack 0:00:27.800 --> 0:00:31.159 down five percent. John authors Bloomberg opinion piece earlier on 0:00:31.200 --> 0:00:34.720 the President being at least partially responsible. He says this 0:00:34.840 --> 0:00:37.280 the chief culprit isn't Powell or fear of a second wave. 0:00:37.320 --> 0:00:40.680 The best single narrative is that Trump's growing political problems 0:00:40.680 --> 0:00:43.360 and the prospect of a democratic majority's ability to enact 0:00:43.479 --> 0:00:47.080 market unfriendly policy reached a critical mass. Let's get to 0:00:47.120 --> 0:00:50.720 somebody now who also shares at least some of this opinion. 0:00:50.880 --> 0:00:54.160 Barry Banisters, head of Institutional equity Strategy at Stevel Nicholas. 0:00:54.160 --> 0:00:56.800 He's lowering his target on the SMB five hundred to 0:00:58.400 --> 0:01:02.680 December precisely because of election risk. Very great to chat 0:01:02.680 --> 0:01:05.240 with you this morning. Now, you are lowering your target. 0:01:05.280 --> 0:01:07.360 But is it too early for the market to be 0:01:07.400 --> 0:01:11.200 positioning this way. No, not really. I mean a lot 0:01:11.240 --> 0:01:14.240 can change in five months until the election. But we 0:01:14.280 --> 0:01:20.160 had a amazing rally off the bottom in March. I 0:01:20.160 --> 0:01:24.479 mean we were up on NASDAC and SMP five. If 0:01:24.480 --> 0:01:27.120 you annualized those seventy seven days, it was four hundred 0:01:27.160 --> 0:01:31.800 and sevent annual gain. Um. I would say yesterday felt 0:01:31.840 --> 0:01:35.080 like a fever breaking in this case of speculative fever 0:01:35.840 --> 0:01:39.800 and our view as the market consolidates recent gains, awaiting 0:01:40.040 --> 0:01:44.160 more clarity on second half growth prospects. So Barry, give 0:01:44.200 --> 0:01:46.399 us your sense. I mean that the last twenty four 0:01:46.400 --> 0:01:48.440 hours in the market, it's just been extraordinary again as 0:01:48.520 --> 0:01:52.480 Vanney was describing as exceptional declines yesterday in the markets. 0:01:52.560 --> 0:01:55.240 Now we bouncing back and I don't see any material 0:01:55.320 --> 0:01:57.960 news out there. How do you think about the volatility 0:01:58.000 --> 0:02:01.600 just over the past couple of days, Well, it is 0:02:01.640 --> 0:02:04.880 a little disturbing. Um. I've been doing this a long time. 0:02:04.960 --> 0:02:08.560 I remember, for example, just in the last two major tops, 0:02:09.520 --> 0:02:12.640 we had large swings in the NASDAC in March of 0:02:12.680 --> 0:02:15.519 two thousand as it was topping at five thousand before 0:02:15.560 --> 0:02:19.280 falling something like seventy In the next two years, I 0:02:19.320 --> 0:02:21.720 believe we were up and down four hundred points day 0:02:22.000 --> 0:02:24.800 day on day back to back, which at the time 0:02:24.880 --> 0:02:28.359 was more than five six seven percent days um. Also 0:02:28.520 --> 0:02:32.840 in the two thousand seven eight nine financial crisis, as 0:02:32.880 --> 0:02:35.760 we topped out in oh seven, you would see financial 0:02:35.840 --> 0:02:39.760 stocks up and down thirty and in a day back 0:02:39.800 --> 0:02:42.920 to back. So when I see this kind of volatility 0:02:42.960 --> 0:02:45.920 at the top and the speculative fever like Hurts, which 0:02:45.960 --> 0:02:49.840 is bankrupt considering a one billion dollar equity offering because 0:02:49.880 --> 0:02:53.520 of the speculative buying that's going on. Or Chesapeake on 0:02:53.560 --> 0:02:56.360 the weekend of the sixth and seventh of June rising 0:02:56.400 --> 0:03:00.120 a hundred eighty two percent despite being nearly bank up. 0:03:00.680 --> 0:03:04.079 I think it's just too much money chasing too few 0:03:04.120 --> 0:03:08.400 good ideas. Venture J. Powell was asked that towards the 0:03:08.440 --> 0:03:11.440 end of the news conference the other day, asked if 0:03:11.639 --> 0:03:14.400 the FED was worried about a bubble or at least, 0:03:14.440 --> 0:03:17.760 you know, severe fraltiness. He didn't really answer the question 0:03:17.800 --> 0:03:21.280 in great detail. Is the FED worried about it? Well, 0:03:21.760 --> 0:03:24.040 the FED has to be somewhat political. They you know, 0:03:24.120 --> 0:03:28.840 they can't say things that are not socially correct, but 0:03:29.080 --> 0:03:31.760 the reality is uh and we analyzed it in a 0:03:31.840 --> 0:03:34.520 report that came out last night. There's a concept in 0:03:34.600 --> 0:03:39.920 bonds called convexity. It's abnormally strong bond price changes as 0:03:39.960 --> 0:03:43.760 you reach lower and lower levels of yield. The same 0:03:43.800 --> 0:03:47.240 applies to equities. We have what's called a negative real yield, 0:03:47.360 --> 0:03:51.800 meaning the ten year yield minus inflation is a negative number. 0:03:52.000 --> 0:03:55.080 Imagine that's a starting point for a discount rate for 0:03:55.120 --> 0:03:58.720 earnings that gives you an enormous valuation. So what we 0:03:58.800 --> 0:04:01.880 have seen through convey City in the equity market with 0:04:01.920 --> 0:04:05.680 negative real yields is a huge spike in the price 0:04:05.680 --> 0:04:09.720 to earnings ratio in just the last few months. And 0:04:09.760 --> 0:04:13.560 that's well in front of the growth and earnings and 0:04:13.640 --> 0:04:16.520 so I I think it would be wise to step 0:04:16.520 --> 0:04:19.520 back a minute and just wait for the growth signs 0:04:19.520 --> 0:04:21.720 in the back half. We did a lot of damage 0:04:21.760 --> 0:04:23.800 to the economy with the shutdowns, and we'll see what 0:04:23.920 --> 0:04:26.920 the damages as we try to grow in the second half. 0:04:27.640 --> 0:04:29.919 Al Right, Barry, So, as you know concerns amount in 0:04:29.960 --> 0:04:32.800 the marketplace, here are we kind of going back to 0:04:32.880 --> 0:04:35.400 that strategy where let's get out of some of these 0:04:35.400 --> 0:04:39.120 cyclical sectors and maybe into more defensive sectors such as 0:04:39.279 --> 0:04:42.960 utilities and so on. Mm hmmm, Well, growth is its 0:04:42.960 --> 0:04:46.640 own defense. But then the growth relative to value which 0:04:46.680 --> 0:04:49.040 you think about is like high price to book relative 0:04:49.080 --> 0:04:53.040 to low price to book stocks or technology relative to financials. 0:04:53.040 --> 0:04:56.479 For example, growth relative to value is that one of 0:04:56.520 --> 0:05:01.279 only three levels of overbought seen in one hundred years 0:05:01.400 --> 0:05:03.520 of monthly data that we have going back to the 0:05:03.960 --> 0:05:08.760 early nine twenties. So growth is its own defense. Yes, 0:05:08.800 --> 0:05:11.080 you can grow, and you deserve a high multiple for it, 0:05:11.120 --> 0:05:13.440 but you're paying an awful lot for that relative to 0:05:13.480 --> 0:05:18.600 these sort of cyclical industrial value names. On the defenses 0:05:18.839 --> 0:05:23.800 which you mentioned, like utilities or healthcare or food companies 0:05:24.120 --> 0:05:29.000 and so forth. We have seen cyclicals vastly outperform these 0:05:29.000 --> 0:05:34.160 defensive stocks since the top of defensives in March nineteenth, 0:05:34.240 --> 0:05:38.080 which was only two days before the market bottomed, two 0:05:38.120 --> 0:05:41.480 trading days. And so in effect, I do think we're 0:05:41.520 --> 0:05:45.760 over bought on cyclical and oversold on defensive. And I 0:05:45.839 --> 0:05:50.440 do look for, uh, some disappointing news to cause the 0:05:50.480 --> 0:05:52.880 market to pull back within a range, but not a 0:05:52.920 --> 0:05:55.359 big one. So we're saying around a five percent trading 0:05:55.440 --> 0:05:58.719 range of yesterday's close is what we had expect into 0:05:58.720 --> 0:06:01.440 the summer. Hey, Barry, thanks so much for joining us. 0:06:01.480 --> 0:06:05.360 We always appreciate your thoughts and insight. Barry Banister, he's 0:06:05.400 --> 0:06:09.200 had a uh institutional equity strategy at Steeple based in 0:06:09.360 --> 0:06:12.840 Charmed City, that's Baltimore, Maryland. Vannie, I look at the 0:06:12.920 --> 0:06:14.880 volatility here and I'm just not sure. You know, we've 0:06:14.880 --> 0:06:19.520 had that just extraordinary sell off yesterday that really felt significant, 0:06:20.040 --> 0:06:22.440 um and you know, not just a normal saut but 0:06:22.560 --> 0:06:25.200 something different. Yet we bounced back today and I'm not 0:06:25.240 --> 0:06:28.000 sure on what news per se, but it's just interesting 0:06:28.040 --> 0:06:31.039 to note, if nothing else, the volatility definitely is shaking 0:06:31.040 --> 0:06:34.760 out of positions. You heard Barry, though, there's going to 0:06:34.839 --> 0:06:37.120 be a trading range of five percent, so we may 0:06:37.160 --> 0:06:39.599 see many many more days like this through the summer. 0:06:39.640 --> 0:06:42.120 And interestingly, Barry, while he's lowering his target, he's still 0:06:42.120 --> 0:06:44.960 looking for thirty one by December, which we should note 0:06:45.040 --> 0:06:47.679 is above where we are right now on the SMP exactly. 0:06:47.680 --> 0:06:50.479 We're thirty sixty eight on the SMP. We're up two 0:06:50.480 --> 0:06:53.400 point two percent today on the SMP. This is Bloomberg. 0:06:56.120 --> 0:06:58.560 So let's get to our next guest, now, somebody who 0:06:58.560 --> 0:07:00.799 knows a lot about what's going on around the country 0:07:00.800 --> 0:07:04.800 in terms of the virus. Lawrence Hour is JOHNS Hopkins University, 0:07:04.800 --> 0:07:08.640 a system professor of emergency medicine doctors. Our thanks for 0:07:08.720 --> 0:07:11.560 joining us once again, always thrilled to get your updates. 0:07:11.920 --> 0:07:16.360 Talk to us about how reopenings and even the protests 0:07:16.480 --> 0:07:20.280 may have impacted the spread of COVID. Absolutely so, we 0:07:20.360 --> 0:07:24.280 are seeing states moving UM towards reopening broadly across the 0:07:24.320 --> 0:07:28.680 country UM, all the while still seeing hotspots continuing. The 0:07:28.760 --> 0:07:31.520 hot spots seemed to be moving from major cities UM 0:07:31.600 --> 0:07:35.840 in some circumstances to more rural areas. But we're seeing 0:07:36.760 --> 0:07:39.360 I think as many as fourteen states across the country 0:07:39.400 --> 0:07:41.960 having their highest seven day average in new cases, which 0:07:42.040 --> 0:07:44.560 is concerning since many of those are the same states 0:07:44.600 --> 0:07:48.680 that are you know, broadly reopening. The protests will definitely 0:07:49.040 --> 0:07:52.040 continue to to be a factor in driving spread and 0:07:52.080 --> 0:07:56.400 transmission UM, although we've heard reports that processors are working 0:07:56.480 --> 0:07:59.040 very hard to ensure that they're doing the best they 0:07:59.040 --> 0:08:01.360 can to social distance in the protest to continue to 0:08:01.400 --> 0:08:04.080 wear face coverings UM but we do know that these 0:08:04.120 --> 0:08:07.680 events will be drivers of transmission. Is there anything that 0:08:07.720 --> 0:08:11.200 we've learned about some of these newer cases. Are they 0:08:11.240 --> 0:08:13.920 any different from the original wave or is it just 0:08:14.040 --> 0:08:17.520 that same old virus UM. The virus we've heard is 0:08:17.520 --> 0:08:22.120 not actually mutating that much from from the recent research UM, 0:08:22.200 --> 0:08:24.560 so it is the same virus. I think what we're 0:08:24.640 --> 0:08:26.800 learning is how to care for these patients better. We're 0:08:26.840 --> 0:08:29.120 learning a lot more about how the virus acts in 0:08:29.120 --> 0:08:32.040 the body and then how to manage patients UM. We 0:08:32.080 --> 0:08:35.640 also are seeing that the social distancing and masking and 0:08:35.720 --> 0:08:38.840 other public health interventions are working. So that's really important 0:08:38.840 --> 0:08:42.400 to driving down that UM spread and flattening the curve, 0:08:42.400 --> 0:08:44.280 which we are still working to do. We have to 0:08:44.320 --> 0:08:47.280 continue to protect hospitals and health systems in the second wave. 0:08:48.280 --> 0:08:52.000 Should lockdowns be continuing? Dr Saur, I mean if if 0:08:52.040 --> 0:08:54.800 if it was only a question of public health, would 0:08:54.800 --> 0:08:58.320 you suggest that that should be the case. I think 0:08:58.320 --> 0:09:01.120 we need to be very careful when we think about reopening. 0:09:01.200 --> 0:09:03.319 We don't have a ton of new tools in our 0:09:03.360 --> 0:09:05.600 tool kit right. We don't have a vaccine yet, we 0:09:05.640 --> 0:09:07.800 don't have a lot of new therapeutics that we know 0:09:07.880 --> 0:09:10.800 work very well, um, and we do have a very 0:09:10.840 --> 0:09:14.400 susceptible population still, so a lot of people across the 0:09:14.400 --> 0:09:18.120 country still have not gotten COVID. So we have to 0:09:18.280 --> 0:09:23.240 consider the fact that as lockdowns are relaxed, that we 0:09:23.320 --> 0:09:26.080 will see another increase. Now it may be that we 0:09:26.120 --> 0:09:28.679 see in warmer weather less spread. We we don't know 0:09:28.760 --> 0:09:32.440 a lot about, um how the seasonality will affect this virus. 0:09:32.480 --> 0:09:34.360 But given the fact that so many people in our 0:09:34.360 --> 0:09:37.120 population are are still susceptible, we have to be really 0:09:37.120 --> 0:09:41.240 careful with how we consider reducing lockdown. So, Lauren, I 0:09:41.280 --> 0:09:43.800 think you know, most Americans are at this point now, 0:09:43.800 --> 0:09:46.320 and maybe many government officials are at the point where 0:09:46.360 --> 0:09:48.760 we have to weigh, you know, the economic impact of 0:09:48.960 --> 0:09:52.360 complete lockdowns versus um you know, the health risk of 0:09:52.559 --> 0:09:55.360 reopening here is it is it the belief within the 0:09:55.400 --> 0:09:59.680 medical community that you know, our reopening can occur, but 0:09:59.760 --> 0:10:02.720 it's has to be following the protocols of mass of 0:10:02.880 --> 0:10:06.840 social distancing, of you know, tracing, tracking and tracing. Is 0:10:06.880 --> 0:10:09.960 that probably the preferred way to go? Yeah, I think 0:10:10.040 --> 0:10:13.280 no one, you know, especially us in the health field 0:10:13.320 --> 0:10:16.080 and in the public health field. We we understand the 0:10:16.080 --> 0:10:19.520 impact that these lockdowns can create on on many other 0:10:19.559 --> 0:10:22.800 aspects of health and public health to not just the economy. 0:10:22.840 --> 0:10:25.800 So we understand that the lockdowns have to stop. I 0:10:25.800 --> 0:10:28.640 think the challenge is that we have to make sure 0:10:28.679 --> 0:10:32.439 that people are willing to reverse course if necessary if 0:10:32.480 --> 0:10:35.079 we start to see massive amounts of new spread UM 0:10:35.120 --> 0:10:37.800 and our health systems get bogged down. And I think 0:10:37.880 --> 0:10:41.400 people have to take these other activities seriously. Social distancing 0:10:41.440 --> 0:10:46.040 wherever you can, UM not you know, not leaving your 0:10:46.040 --> 0:10:48.240 mask at home and running to the store anyway, or 0:10:48.800 --> 0:10:51.920 UM making sure that you're using those good hygiene practices. 0:10:52.000 --> 0:10:54.120 So those have two people have to be really diligent 0:10:54.160 --> 0:10:58.199 about that if we're going to safely and carefully reopen talk. 0:10:58.280 --> 0:10:59.560 So I'm not sure if you had a chance to 0:10:59.600 --> 0:11:01.480 have a look at the Wold Street Journal reward that 0:11:02.000 --> 0:11:04.880 New York's response to the coronavirus actually made the pandemic. 0:11:04.960 --> 0:11:08.760 Worris studied that the Wolstreet Journal conducted, And would you 0:11:08.800 --> 0:11:12.560 have any insight into whether that's now changing, whether responses 0:11:12.600 --> 0:11:16.080 will be different in future to pandemics. I haven't seen 0:11:16.120 --> 0:11:19.160 that um that Wall Street Journal article yet, but I 0:11:19.800 --> 0:11:23.440 caution against sort of armchair quarterback in the New York response, 0:11:23.480 --> 0:11:25.239 I mean, I think it was one of the earliest, 0:11:25.640 --> 0:11:29.360 you know, largest hits on a major city, and UM, 0:11:29.440 --> 0:11:32.400 many people in New York did a ton of work 0:11:32.480 --> 0:11:35.839 to ensure that we save the most lives, that people 0:11:35.880 --> 0:11:40.440 were protected, and that rapidly issued guidance was implemented effectively. 0:11:40.520 --> 0:11:42.120 I think we're going to learn a lot of lessons 0:11:42.160 --> 0:11:44.360 from the New York response, and I think people are 0:11:44.400 --> 0:11:47.040 already making changes based on what we saw working and 0:11:47.120 --> 0:11:51.800 not working. UM, But I hesitate to say that that 0:11:51.920 --> 0:11:55.240 it made things work. So Lauren, just give us an 0:11:55.320 --> 0:11:57.839 update on kind of where what you're hearing within the 0:11:58.240 --> 0:12:01.839 medical community, the HEALTHCARECUM energy about kind of where we 0:12:01.880 --> 0:12:06.960 are with some treatments UH and maybe even some vaccines. Yeah, 0:12:06.960 --> 0:12:10.080 there's a lot of work being done in both areas. UM. 0:12:10.160 --> 0:12:12.320 You may have seen the recent news that the rem 0:12:12.400 --> 0:12:15.760 doze vere drug that has was um on in multiple 0:12:15.800 --> 0:12:19.880 clinical trials UM early in the pandemic UM has some 0:12:19.960 --> 0:12:24.240 really promising UH data and that it that it may 0:12:24.360 --> 0:12:29.880 reduce UM morbid immortality and may UH improve hospital stays, 0:12:29.920 --> 0:12:33.040 which is great. UM. I think that's it is preliminary data, 0:12:33.080 --> 0:12:34.559 and I think we have a lot of lessons to 0:12:34.640 --> 0:12:37.240 learn about or sorry, a lot of research to do 0:12:37.440 --> 0:12:39.320 on um Rem does a vie, but it is a 0:12:39.360 --> 0:12:42.559 promising drug that we now have under emergency use authorization 0:12:42.679 --> 0:12:45.520 in our toolkit UM. There's a lot of other drugs 0:12:45.520 --> 0:12:49.280 being studied in clinical trial. We're looking at convalescent plasma 0:12:49.280 --> 0:12:52.040 as a possible option UM and those studies are running 0:12:52.040 --> 0:12:55.199 broadly across the country and across the globe. And people 0:12:55.200 --> 0:12:58.480 are doing a ton of work on various vaccine options, 0:12:58.600 --> 0:13:02.040 different platforms, testing vaccines that may be further down in 0:13:02.080 --> 0:13:06.599 the pipeline, and developing new models for vaccine development and distribution. 0:13:06.920 --> 0:13:09.760 A ton of work left to do, but some promising option. 0:13:10.280 --> 0:13:13.280 Briefly dr antibody testing. Is it to the point yet 0:13:13.320 --> 0:13:16.440 where we can trust results? I think there's still too 0:13:16.480 --> 0:13:19.760 many questions of antibody testing UM, particularly in what it 0:13:19.800 --> 0:13:23.720 means for lasting immunity and so what what do you 0:13:23.800 --> 0:13:26.199 do with that information that you get from an antibody 0:13:26.240 --> 0:13:29.640 test UM. I think it's it's very early in what 0:13:29.720 --> 0:13:32.600 antibody tests can and can't be used for and how 0:13:32.880 --> 0:13:35.800 UM reliable and valid the results are. And there's so 0:13:35.800 --> 0:13:38.640 many different types of antibody tests out there, Um, it's 0:13:38.679 --> 0:13:41.560 really hard to message what that information means for the 0:13:41.600 --> 0:13:44.960 person receiving it. Lauren Sour, thanks so much for joining us. 0:13:45.040 --> 0:13:48.640 We appreciate it as always. Lauren Sour, Assistant Professor of 0:13:48.720 --> 0:13:53.040 Emergency Medicine at Johns Hopkins University. We are so fortunate 0:13:53.040 --> 0:13:54.920 to have the smart folks at Johns Hopkins and others 0:13:55.120 --> 0:13:57.720 join us to give us the medical perspective. The Bloomberg 0:13:57.720 --> 0:14:00.400 School of Public Health is supported by Michael Bloomberg, founder 0:14:00.400 --> 0:14:06.800 of Bloomberg LP and Bloomberg Philanthropies. It is time for 0:14:06.880 --> 0:14:10.560 Bloomberg Opinion. We're joined by Bloomberg Opinion Comms Jim Bianco. 0:14:10.640 --> 0:14:13.840 He has a president and founder of Bianco Research. Jim, 0:14:13.840 --> 0:14:16.400 thanks so much for joining us here. I want to 0:14:16.400 --> 0:14:20.080 get a sense, you know, you've been a very cautious 0:14:20.160 --> 0:14:23.520 outlook on the economy and on the markets. Here. I 0:14:23.520 --> 0:14:25.960 want to get a sense of kind of what your 0:14:26.080 --> 0:14:29.440 takeaway is from, you know, the equity market trading we've 0:14:29.440 --> 0:14:31.800 seen over the past couple of days yesterday seemed to 0:14:31.840 --> 0:14:35.160 really signal uh and awakening by the market of the 0:14:35.320 --> 0:14:37.360 risk too that are really out there in terms of 0:14:37.400 --> 0:14:39.680 the economy yet today we kind of bounced back. What 0:14:39.720 --> 0:14:40.640 do you what do you make of what's going on 0:14:40.680 --> 0:14:43.840 in the market. Yeah, yeah, I have been a bit 0:14:43.880 --> 0:14:46.920 cautious on the economy, and I think that has been 0:14:47.960 --> 0:14:51.000 more correct than not, and that has translated into a 0:14:51.000 --> 0:14:53.880 cautiousness in the in the equity markets, and that has 0:14:53.920 --> 0:14:58.320 not been more correct than not until yesterday. I do 0:14:58.440 --> 0:15:02.240 think what you've seen happened in the stock market in 0:15:02.400 --> 0:15:07.800 bigger picture has been a federal reserve and a federal government, 0:15:07.880 --> 0:15:09.880 let's not leave them out of the equation, the Treasury 0:15:09.880 --> 0:15:15.760 Department promising bailouts, promising support, basically telling everybody that we 0:15:15.800 --> 0:15:19.040 need the markets to go back up. Chairman Paul underscored 0:15:19.080 --> 0:15:22.240 that at his press conference earlier this week when he 0:15:22.640 --> 0:15:25.160 refused to even answer Mike mckie's question about the stock 0:15:25.200 --> 0:15:28.520 market being overvalued, suggesting that they don't care. They're more 0:15:28.600 --> 0:15:33.560 interested in getting markets up in order to give confidence 0:15:33.800 --> 0:15:36.960 and financing to keep the economy going, and they fled 0:15:37.000 --> 0:15:40.280 to a big speculative rush in the markets, which I 0:15:40.320 --> 0:15:43.640 think reversed yesterday. Down six percent in a day. Doesn't 0:15:43.720 --> 0:15:46.080 happen because you had you had bad news about a 0:15:46.200 --> 0:15:50.480 second wave. It also happens because you had a lot 0:15:50.520 --> 0:15:54.120 of speculative fever in the market that rushed out yesterday 0:15:54.160 --> 0:15:57.480 as well too. But Jim, if markets carred that much 0:15:57.840 --> 0:16:00.280 about trying to tell the Feds on things, to give 0:16:00.280 --> 0:16:02.160 the FED a message, would they really be back up 0:16:02.200 --> 0:16:07.080 two percents already today, unless, of course, you know, we'll 0:16:07.120 --> 0:16:09.680 thinking of markets as a monolith with that question, and 0:16:09.720 --> 0:16:12.760 they are not a monolith right now. There is a 0:16:12.920 --> 0:16:16.520 certain aspect of the market that is, and that is 0:16:16.600 --> 0:16:19.200 that small retail trader that is really rushed into the 0:16:19.200 --> 0:16:22.360 market in the last couple of months, maybe even in 0:16:22.400 --> 0:16:25.640 the last year or so. Yes, they matter. They're big 0:16:25.800 --> 0:16:30.160 in total, even though their trades individually are small, and 0:16:30.360 --> 0:16:33.000 prices are set at the margin, and they are the 0:16:33.000 --> 0:16:36.080 player at the margin, so they are in the market. 0:16:36.160 --> 0:16:39.600 So I wouldn't necessarily look at the market day to 0:16:39.680 --> 0:16:43.200 day machinations, even when it's followl like this and suggest 0:16:43.240 --> 0:16:46.840 that there's a big economic meaning to it. Jim. You know, 0:16:46.960 --> 0:16:50.680 we seen, as you have noted, you know, the FED 0:16:50.760 --> 0:16:54.040 kind of being early, being aggressive and kind of quote 0:16:54.120 --> 0:16:57.120 unquote backstopping this market. And we've actually also seen some 0:16:57.640 --> 0:17:01.160 decent federal stimulus at three trillion dollar stimulus bill was 0:17:01.240 --> 0:17:06.480 just historic. Does the market need to have another federal 0:17:06.520 --> 0:17:11.440 stimulus bill um coming out of Washington. I think it's 0:17:11.480 --> 0:17:15.159 gonna need to see either signs that the economy is 0:17:15.440 --> 0:17:19.560 seriously rebounding or it's going to need more stimulus. In 0:17:19.600 --> 0:17:22.200 other words, if if it gets that rebound, it won't 0:17:22.200 --> 0:17:23.880 need it. Now, let me be clear on what I'm 0:17:23.920 --> 0:17:27.520 talking about. I'll give you a statistic. One statistic. At 0:17:27.520 --> 0:17:31.520 the bottom of the two thousand eight recovery, output in 0:17:31.560 --> 0:17:35.159 the economy was of what it was at the two 0:17:35.200 --> 0:17:38.440 thousand seven high. We only dropped four That was enough 0:17:38.480 --> 0:17:40.400 to have the stock market and produce a ten percent 0:17:40.520 --> 0:17:44.840 unemployment rate. This time around, we're thinking that the economy 0:17:45.200 --> 0:17:51.159 dropped at its worst point. Maybe it's getting better, but 0:17:51.240 --> 0:17:56.600 if it doesn't get back to ent of output, uh, 0:17:56.680 --> 0:18:00.840 it will be a very bad recession. Mar de Blasio 0:18:00.960 --> 0:18:03.640 said that, Uh, this writership on the New York City 0:18:03.640 --> 0:18:07.760 subway was up in the last week. It's still off 0:18:07.760 --> 0:18:10.560 of its high. It's got to get back to in 0:18:10.680 --> 0:18:13.240 order for there to be some kind of semblance of 0:18:13.320 --> 0:18:16.840 normal returning. If you get that, you don't need the stimulus. 0:18:16.840 --> 0:18:19.239 Short of that, I do think that the market and 0:18:19.320 --> 0:18:23.080 the economy will be disappointed if there is a not 0:18:23.280 --> 0:18:27.760 any more stimulus coming now, Jim, Treasury yields of un 0:18:28.080 --> 0:18:31.520 run this movement in stocks right, was this also response 0:18:31.560 --> 0:18:35.920 to the FED chair? Uh? Yeah, I think treasury yields 0:18:36.320 --> 0:18:39.320 have two things going for them. Are are bigger picture 0:18:39.359 --> 0:18:41.199 going for them, and that is there's gonna be a 0:18:41.320 --> 0:18:45.359 tremendous amount of issuance three trillion dollars just this quarter, 0:18:45.720 --> 0:18:49.040 which we're working through right now. What has happened over 0:18:49.080 --> 0:18:52.400 the last eight ten weeks is the Fed had been 0:18:52.400 --> 0:18:56.200 buying more than had been being issued. So this bond 0:18:56.200 --> 0:18:58.639 market was in an unusual situation that it was actually 0:18:58.640 --> 0:19:01.639 shrinking in size when you remove the Fed out of 0:19:01.680 --> 0:19:05.000 the equation, and that had been holding prices very steady. 0:19:05.480 --> 0:19:07.960 It was in the last two weeks or so that 0:19:08.320 --> 0:19:10.959 issue its started to overtake what the Fed was doing 0:19:11.040 --> 0:19:15.080 in yield started up. But Wednesday, Chairman Paul said that 0:19:15.440 --> 0:19:19.000 their bond buying has probably found the floor and around 0:19:19.000 --> 0:19:22.160 a hundred and twenty billion dollars a month, so it's 0:19:22.200 --> 0:19:23.960 not going to get any lower than that. A trillion 0:19:24.000 --> 0:19:26.119 dollars a year is what that works out to. You know, 0:19:26.160 --> 0:19:28.320 it's a hard number to understand, a trillion a year, 0:19:28.800 --> 0:19:31.360 and that I think gave the market some support, which 0:19:31.400 --> 0:19:34.320 is why you saw the rally and bonds right after that. Oh, 0:19:34.359 --> 0:19:37.239 we just found for sure we've got at least a 0:19:37.320 --> 0:19:41.000 trillion dollar buyer of bonds as we move forward, helping 0:19:41.040 --> 0:19:44.240 to alleviate some of that crush of supply that's coming. 0:19:44.560 --> 0:19:47.080 And that's what I think was the positive news for 0:19:47.119 --> 0:19:50.000 the bond market this week. Jim, it is always fascinating 0:19:50.040 --> 0:19:52.199 to speak with you. Thank you for that. Jim Bianco 0:19:52.320 --> 0:19:55.040 is president and founder of Bianco Research, of course also 0:19:55.119 --> 0:19:59.000 Bloomberg opinion columnist and Paul. It is fascinating because the 0:19:59.040 --> 0:20:02.000 worst of the corporate spreads have seen a retracement this 0:20:02.040 --> 0:20:05.520 week of almost fifty percent, so they've been big moves 0:20:05.640 --> 0:20:09.200 underneath the hood of the bond markets. Also, what Jim 0:20:09.320 --> 0:20:11.639 was talking about their the retail Trader. We have a 0:20:11.680 --> 0:20:14.199 fascinating story on the Bloomberg today about the bar Stool 0:20:14.280 --> 0:20:19.200 Sports founder who's find him on Twitter. It's kind of fun, yeah, 0:20:19.280 --> 0:20:22.000 I mean it's it's just a strange story. Apparently, you know, 0:20:22.080 --> 0:20:25.800 he's he's bringing huge numbers of people into the retail 0:20:25.920 --> 0:20:29.280 day trading side of things. But he's now decided that 0:20:29.280 --> 0:20:30.880 he's going to be a buy and hold kind of guy. 0:20:30.960 --> 0:20:36.000 So we'll we'll see what Dave Portnoy does next. Well. 0:20:36.000 --> 0:20:40.000 One of the most key fallouts from an economic perspective 0:20:40.000 --> 0:20:42.520 of this pandemic has been the job loss is just 0:20:42.640 --> 0:20:47.000 extraordinary job losses across the US and across the globe. 0:20:47.000 --> 0:20:49.919 One of the questions for investors and economists is how 0:20:50.000 --> 0:20:52.680 much are those or how many of those jobs are 0:20:52.720 --> 0:20:56.399 temporarily lost and they'll come back as the pandemic wains, 0:20:56.440 --> 0:20:58.840 and how much of those are structurally lost at i e. 0:20:59.040 --> 0:21:01.680 They will not come back. To answer that question, we 0:21:01.800 --> 0:21:04.720 welcome you Van Roya. He's a senior global economist for 0:21:04.760 --> 0:21:08.000 Bloomberg Economics. He's based in Frankfurt, Germany. Ifan, thanks so 0:21:08.040 --> 0:21:09.960 much for joining us here. I know you guys have 0:21:10.040 --> 0:21:12.480 done some work here on kind of taking a look 0:21:12.480 --> 0:21:15.679 at the unemployment and you know it's kind of the 0:21:15.720 --> 0:21:17.919 structure of that unemployment. How much is temporary and how 0:21:17.960 --> 0:21:22.800 much is permanent? What did you guys find? Yeah, many 0:21:22.880 --> 0:21:25.840 thanks for having me up all um. Yes, indeed, we 0:21:25.880 --> 0:21:29.879 have looked at at unemployment increases in advanced economies, and 0:21:29.920 --> 0:21:32.480 as a as an example, we took the United States 0:21:32.920 --> 0:21:37.919 and we have found busily that the probability of about 0:21:37.960 --> 0:21:39.800 certain percent of workers to have a lot of their 0:21:39.880 --> 0:21:42.680 jobs is very high that they will remain an unemployment 0:21:42.680 --> 0:21:45.159 while certainly percent of the workers that have lots of 0:21:45.160 --> 0:21:48.000 their jobs are likely to get im back to employment 0:21:48.080 --> 0:21:51.600 very soon. We would that result in in terms of 0:21:51.640 --> 0:21:54.439 the overall numbers, It wouldn't be obviously a thirty resented 0:21:54.520 --> 0:21:59.119 employment rate, would it. No, No, it's the absolute numbers 0:21:59.200 --> 0:22:02.000 of the people who love their jobs. So we're talking 0:22:02.000 --> 0:22:05.160 to in the COVID nineteen crisis in the United States, 0:22:05.160 --> 0:22:08.439 for example, about nineteen million people, so as third of 0:22:08.480 --> 0:22:12.720 it basically, which would translate into six million people where 0:22:12.760 --> 0:22:16.119 the probability in getting back to employment will be elevated 0:22:16.359 --> 0:22:19.679 to remain an unemployment. So pre what are we going 0:22:19.720 --> 0:22:22.080 to get a sense of kind of how this plays out. 0:22:22.119 --> 0:22:24.240