WEBVTT - Oil Crash and Coronavirus Roil Markets 0:00:00.440 --> 0:00:02.960 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:03.040 --> 0:00:05.480 Jason Kelly. We're here every day bringing you the latest 0:00:05.519 --> 0:00:09.800 news from the world's of business and finance, plus technology, politics, economics, 0:00:09.880 --> 0:00:13.480 all harnessing the power of Bloomberg Business Week reporters and editors, 0:00:13.480 --> 0:00:16.639 not to mention our hundred journalists and analysts more than 0:00:16.680 --> 0:00:19.280 a hundred and twenty countries. You can download Bloomberg Business 0:00:19.320 --> 0:00:22.200 Week on iTunes, SoundCloud, or Bloomberg dot Com. You can 0:00:22.200 --> 0:00:24.520 also listen to our radio show weekdays at two pm 0:00:24.520 --> 0:00:28.760 Eastern only on Bloomberg Radio. Crude oil certainly and the 0:00:28.840 --> 0:00:31.360 energy market is Charlie just mentioned one of our big stories, 0:00:31.360 --> 0:00:33.840 oil slam by a price for both Russia and Saudi 0:00:33.880 --> 0:00:37.160 Arabia uh stood poised to flood the market with chiep 0:00:37.200 --> 0:00:39.559 crude oil. It comes at a rough time because you've 0:00:39.600 --> 0:00:42.760 got the coronavirus spurring the first contraction in demand since 0:00:42.760 --> 0:00:44.760 two thousand nine. So we are getting squeeze certainly on 0:00:44.800 --> 0:00:47.199 the energy markets and really the overall market universe from 0:00:47.240 --> 0:00:50.080 all angles. Ellen Wald is the perfect person to talk 0:00:50.120 --> 0:00:53.520 to about the energy markets. President of Transversal Consulting, senior 0:00:53.560 --> 0:00:57.320 fellow at the Atlantic Council's Global Energy Center. She's also 0:00:57.360 --> 0:00:59.800 a Bloomberg Opinion contributor. She joins us on the phone 0:00:59.800 --> 0:01:03.160 from Jacksonville, Florida. She's also author of the book Saudi inc. 0:01:03.200 --> 0:01:05.840 On the history of a Ramco and Saudi Arabia Ellen. 0:01:05.920 --> 0:01:09.920 What happened this weekend. What happened this weekend is that 0:01:10.080 --> 0:01:16.039 Saudi Arabia and Russia finally um caved to their differences 0:01:16.080 --> 0:01:18.840 and parted ways. This was a rift that had been 0:01:18.840 --> 0:01:20.800 growing for some time, and you could see it in 0:01:20.840 --> 0:01:24.640 the way that Russia was never really adhering to the 0:01:24.680 --> 0:01:29.040 production cuts that it had agreed to, and then at 0:01:29.080 --> 0:01:31.920 the last OPEC meeting in December, Saudi Arabia had to 0:01:32.319 --> 0:01:35.560 promise to make It did make some really significant production 0:01:35.600 --> 0:01:40.160 cuts when Russia was essentially a great agreed to not 0:01:40.240 --> 0:01:43.920 cut its own production, and then everything could have continued 0:01:43.959 --> 0:01:48.520 to limp along, except coronavirus came and Saudi Arabia and 0:01:48.600 --> 0:01:53.280 OPEC wanted a significant response, particularly because Saudi Arabia was 0:01:53.320 --> 0:01:57.680 feeling the pinch. In fact, it's um, it's the oil 0:01:57.840 --> 0:02:00.840 that China was buying from. It was cut by about 0:02:00.920 --> 0:02:04.200 thirty percent, and the problem was that when they went 0:02:04.240 --> 0:02:07.720 into these negotiations, Russia knew the Saudi Abby was getting hit, 0:02:07.960 --> 0:02:11.040 and its position was basically, if you're the one that's 0:02:11.040 --> 0:02:14.400 getting hit from falling Chinese demand, then you take the 0:02:14.480 --> 0:02:16.840 brunt of these cuts, and we're not going to And 0:02:16.880 --> 0:02:19.960 Saudi Arabia has finally stood up and said no, and 0:02:20.000 --> 0:02:23.040 then they each walked out and the world is paying 0:02:23.120 --> 0:02:26.520 quite a price for this today, and certainly the global markets. 0:02:26.800 --> 0:02:28.760 Why is that, I mean, remind us is a very 0:02:28.760 --> 0:02:32.320 basic question, but remind us why the world cares so 0:02:32.400 --> 0:02:36.400 much about the price of oil. Well, the world has 0:02:36.440 --> 0:02:38.040 to care a lot about the price of oil because 0:02:38.040 --> 0:02:41.720 the world still runs on oil. Oil production is about 0:02:41.760 --> 0:02:44.760 a hundred million barrels per day. China is a pretty 0:02:44.800 --> 0:02:48.519 big portion of that. It imports about ten million barrels 0:02:48.520 --> 0:02:51.000 of oil per day. That's about ten percent of global production. 0:02:51.280 --> 0:02:53.840 And in the United States, we like to think about 0:02:53.840 --> 0:02:57.360 it from the perspective of where the world's largest consumer, 0:02:57.880 --> 0:03:00.799 but we're also now the world's largest user, and so 0:03:01.000 --> 0:03:03.160 we need to be thinking about this drop in oil 0:03:03.200 --> 0:03:06.960 prices is for more than just hey, low gas leam prices, 0:03:06.960 --> 0:03:10.720 but oil production is a significant component of our economy, 0:03:10.919 --> 0:03:14.240 and this is really going to hit hard in areas 0:03:14.520 --> 0:03:17.720 that we're fracking is a big part of the economy, 0:03:17.919 --> 0:03:20.040 right I do wonder what kind of shake up you know, 0:03:20.240 --> 0:03:23.680 this will have among the US shale players or the 0:03:23.680 --> 0:03:26.240 global economy of roll. I'm assuming that some of those 0:03:26.280 --> 0:03:29.920 weaker players, they just won't be able to exist. Yeah, 0:03:30.000 --> 0:03:34.920 and that this is a particularly difficult time to have 0:03:35.120 --> 0:03:38.080 a price and production war going on between Russia and 0:03:38.120 --> 0:03:41.400 Saudi Arabia. UM, it's not unexpected. Times of high tensions 0:03:41.440 --> 0:03:45.240 can certainly lead to this. But there are players in 0:03:45.480 --> 0:03:49.520 this shale area where they were really on the margin, 0:03:49.880 --> 0:03:52.120 have a lot of debt. We're doing through great in 0:03:52.160 --> 0:03:54.360 terms of financing, and this is going to push them 0:03:54.360 --> 0:03:57.320 over the edge right now. The upside is that if 0:03:57.360 --> 0:04:01.640 you're on the hunt to acquire so some assets, you 0:04:01.680 --> 0:04:04.400 may find a very good deal out there. The assets 0:04:04.440 --> 0:04:07.720 aren't going away. The oil is still there. Uh. The 0:04:07.760 --> 0:04:09.840 oil will still be needed, it just might not be 0:04:09.920 --> 0:04:13.160 needed in the near future. We're talking about a year 0:04:14.320 --> 0:04:18.359 where global demand for oil may actually decline. We were 0:04:18.400 --> 0:04:22.560 already looking at basically no demand growth, but now we're 0:04:22.600 --> 0:04:26.120 looking at at an actual situation where we may see 0:04:26.120 --> 0:04:29.360 a decline, but that doesn't mean that that will continue 0:04:29.360 --> 0:04:33.000 for and so on. Ellen, how much of this is 0:04:33.040 --> 0:04:35.480 just about the oil and energy markets, and how much 0:04:35.480 --> 0:04:38.080 of this is about geopolitical relationships? And I do think 0:04:38.120 --> 0:04:41.479 about alliances either China has with the Middle East or 0:04:41.560 --> 0:04:43.840 China has with Russia. Because China gets a boost, as 0:04:43.880 --> 0:04:46.719 you wrote in your column for Bloomberg Opinion, from these 0:04:46.720 --> 0:04:51.600 low oil prices, right, they've got to import their oil exactly. 0:04:51.720 --> 0:04:55.080 This is basically like a stimulus plan for China. Um. 0:04:55.200 --> 0:04:58.599 China is looking at a situation where, um, you know, 0:04:58.680 --> 0:05:01.640 it's it's going to have some economic problems getting getting 0:05:01.680 --> 0:05:05.560 things back going after the coronavirus stops to be a 0:05:05.600 --> 0:05:10.479 significant drain on its economy, and essentially Russia's Saudi Arabia 0:05:10.480 --> 0:05:13.599 have handed it a stimulus plan. They said, well, you 0:05:13.640 --> 0:05:15.960 know that ten million barrels of oil you need to 0:05:16.000 --> 0:05:19.080 import every day. Um, you know, now it's going to 0:05:19.320 --> 0:05:22.680 be a lot, lot cheaper. And because before this happened, 0:05:22.760 --> 0:05:24.679 you know, we could have been in a situation where 0:05:25.000 --> 0:05:27.279 China you know, has to import a lot of food, 0:05:27.320 --> 0:05:30.000 they have to import a lot of energy. And if 0:05:30.040 --> 0:05:33.480 they were in a very bad economic situation because of 0:05:33.520 --> 0:05:35.600 the drop in trade. What were they going to choose 0:05:35.960 --> 0:05:39.120 Now they've basically made oil a non issue. They can 0:05:39.120 --> 0:05:41.159 get their oil, and they can get it cheaply, and 0:05:41.240 --> 0:05:43.800 Saudi Arabia and Russia are going to fight over who 0:05:43.800 --> 0:05:47.480 can sellve China more oil and at cheaper prices. Ellen 0:05:47.560 --> 0:05:51.480 thirty seconds left, just debunk the hey oil is cheap, 0:05:51.600 --> 0:05:55.279 gas is cheap good for consumers argument, Well, it is 0:05:55.320 --> 0:05:57.359 good for consumers, but only if you want to go 0:05:57.480 --> 0:06:00.320 somewhere right now, and there are a lot of people 0:06:00.320 --> 0:06:02.840 who don't want to go anywhere right now, So it 0:06:02.960 --> 0:06:06.480 is it is essentially good for consumers. But for producers 0:06:06.520 --> 0:06:09.359 this is really really bad and at a certain point, 0:06:09.800 --> 0:06:12.240 um it's being bad for producers can also make it 0:06:12.279 --> 0:06:16.400 bad for consumers. Crude oil futures right now down well, 0:06:16.440 --> 0:06:19.080 and your five worst performers in the SMP are all 0:06:19.120 --> 0:06:22.760 in the energy patch. Uh marathon down more than fifty 0:06:23.160 --> 0:06:26.719 ellen Wald, fantastic, Thank you so much for that. Context, 0:06:26.760 --> 0:06:29.400 Really the perfect way to start our show. She is 0:06:29.400 --> 0:06:32.320 the president of Transversal Consulting and also a contributor to 0:06:32.360 --> 0:06:35.240 Bloomberg Opinion. If you want to understand this, check out 0:06:35.320 --> 0:06:37.159 her column on the Bloomberg to Day. She joined us 0:06:37.200 --> 0:06:41.440 on the phone from Jacksonville, Florida. This is Bloomberg Business 0:06:41.520 --> 0:06:45.520 Week with Carol Messer and Jason Kelly on Bloomberg Radio. 0:06:45.839 --> 0:06:47.120 All right, so we do want to talk a little 0:06:47.120 --> 0:06:49.400 bit more about what's going on in the bond market. 0:06:49.480 --> 0:06:51.719 As if we've been talking about the entire yield curve 0:06:51.760 --> 0:06:53.919 for US bonds falling below one percent for the first 0:06:53.960 --> 0:06:56.680 time in history. This is after an all out price 0:06:56.680 --> 0:07:00.000 war between the world's biggest oil exporters triggered an unpressed 0:07:00.000 --> 0:07:03.200 sedented global bond rolling. Meantime, the fedlifted the amount of 0:07:03.240 --> 0:07:07.040 temporary cash it's willing to provide markets as pressure intensifies 0:07:07.080 --> 0:07:09.440 for the US Central Bank to tackle the risk of 0:07:09.480 --> 0:07:12.440 a worldwide credit crunch. There is so much to talk 0:07:12.480 --> 0:07:14.840 about with Lindsay Pegs a chief economy is It's Devil 0:07:14.840 --> 0:07:19.160 Financial on the phone Inch in Chicago. So Lindsay, nice 0:07:19.200 --> 0:07:22.960 to check in with you. Recession Are we in one? Well, 0:07:23.000 --> 0:07:25.080 I don't know if we're in recession at this point, 0:07:25.160 --> 0:07:28.080 but we certainly see some of the downside risk that 0:07:28.120 --> 0:07:32.480 could potentially tip the US economy into recession. Now, remember 0:07:32.760 --> 0:07:35.400 some of the data that we're still seeing suggests that 0:07:35.440 --> 0:07:39.640 we were on relatively moderate footing, at least in hindsight 0:07:39.760 --> 0:07:43.040 coming into the new year. The brunt of the pain, however, 0:07:43.240 --> 0:07:46.440 from the impact of the coronavirus from the abruptions to 0:07:46.480 --> 0:07:50.000 the global supply chain aren't likely to hit the data 0:07:50.280 --> 0:07:53.400 until the second quarter, so it's unlikely that we really 0:07:53.480 --> 0:07:56.200 have a true sense of what's happening to the US 0:07:56.240 --> 0:07:59.720 economy until the April or even the May data come 0:07:59.800 --> 0:08:01.880 to ruition. So it's going to be quite some time 0:08:02.000 --> 0:08:04.560 right now. It's a lot of guessing, it's a lot 0:08:04.600 --> 0:08:07.800 of estimating, but we do see a significant slowdown in 0:08:07.840 --> 0:08:10.920 some of the key parts of the economy, which if continued, 0:08:11.200 --> 0:08:14.160 if the depth and duration of this impact extends, we 0:08:14.280 --> 0:08:18.200 very much could see a recession. Our base case scenario 0:08:18.440 --> 0:08:21.320 is one quarter of negative growth, so enough to push 0:08:21.400 --> 0:08:25.240 us in below zero percent GDP, but not enough for 0:08:25.280 --> 0:08:28.880 that technical recession. So lindsay, talk to us about the 0:08:28.880 --> 0:08:32.480 Fed's role here. The Federal Reserve obviously not dealing with 0:08:32.520 --> 0:08:35.040 a lot of AMMO, not coming to this fight with 0:08:35.080 --> 0:08:38.319 a lot of AMMO, to say the least, What are 0:08:38.480 --> 0:08:40.400 what are they thinking about? What are they sort of 0:08:40.400 --> 0:08:43.599 turning over in their meetings. In your estimation, well, I 0:08:43.640 --> 0:08:45.640 think it is a little frustrating because when we look 0:08:45.679 --> 0:08:48.079 back going into the Great Recession, when we look back 0:08:48.120 --> 0:08:51.200 going into the two thousand and one downturn, the FED 0:08:51.320 --> 0:08:54.560 came to the table with four five d basis points 0:08:54.600 --> 0:08:58.760 of potential support for the economy. This time around, as 0:08:58.800 --> 0:09:01.079 you mentioned, we were talking about a hundred and fifty 0:09:01.120 --> 0:09:06.679 basis points, so the FED was already providing extremely accommodative conditions. 0:09:07.120 --> 0:09:10.160 Now with the emergency move, the FED set in part 0:09:10.240 --> 0:09:13.800 that was to ensure further accommodation, but also to help 0:09:13.840 --> 0:09:17.840 boost confidence. Now, it's unlikely that with rates already so low, 0:09:17.920 --> 0:09:20.880 in additional fifty basis points is going to have a 0:09:20.920 --> 0:09:25.280 meaningful impact on boosting investment and consumption as it typically 0:09:25.360 --> 0:09:28.880 would when the economy begins to slow. But we do 0:09:29.000 --> 0:09:33.520 think that this increased preparedness, increased commitment to UH further 0:09:33.559 --> 0:09:36.800 support the economy could help boost confidence on the margin, 0:09:36.880 --> 0:09:39.920 or at least that's the intention, helping to sort of 0:09:40.000 --> 0:09:42.480 slow these knee jerk reactions on a day to day 0:09:42.480 --> 0:09:46.280 basis to incoming data of the coronavirus. Now, obviously today 0:09:46.360 --> 0:09:49.280 buck to that trend, but the FED is hoping that 0:09:49.840 --> 0:09:53.360 increased assistance to the marketplace will help provide a calm 0:09:53.400 --> 0:09:56.400 and help provide a floor if, however, we get to 0:09:56.480 --> 0:10:00.400 the March meeting and the FED decides to lower rates further, However, 0:10:00.480 --> 0:10:03.520 growth continues to deteriorate as we go into the second quarter. 0:10:03.960 --> 0:10:07.600 The question is what additional stimulus does the FED have left. 0:10:08.120 --> 0:10:13.199 They can They can provide explicit forward guidance, We can 0:10:13.240 --> 0:10:16.640 move into some sort of Operation Twist program or large 0:10:16.640 --> 0:10:20.600 scale asset purchases. We also have negative interest rates which 0:10:20.679 --> 0:10:23.319 are on the table, but the FED has most often 0:10:23.320 --> 0:10:25.800 moved away from those. So we were certainly will be 0:10:25.800 --> 0:10:29.360 talking about non traditional metrics given that the FED has 0:10:29.400 --> 0:10:32.440 such very little wiggle room before we hit that lower 0:10:32.559 --> 0:10:34.640 zero bound. How do you see the virus, lindsay, Is 0:10:34.679 --> 0:10:37.079 it is something that once we have the parameters around 0:10:37.080 --> 0:10:40.320 it and understand you know that we start to see 0:10:40.360 --> 0:10:42.480 some containment kind of get on the other side of it. 0:10:42.520 --> 0:10:44.400 When we get to that point, can we assume that 0:10:44.400 --> 0:10:48.040 we'll get a v shaped recovery or not necessarily not 0:10:48.080 --> 0:10:51.640 necessarily even if we start to have control of the virus, 0:10:51.679 --> 0:10:54.880 depending on how widespread the impact is, and how many 0:10:54.920 --> 0:10:58.280 cases we're talking about. It may take us some time 0:10:58.880 --> 0:11:01.960 before confident comes back to the market, before people feel 0:11:02.000 --> 0:11:06.760 comfortable traveling, before people return to offices and factories. So 0:11:07.120 --> 0:11:10.320 I do think that depending on the duration on the 0:11:10.360 --> 0:11:14.200 front end, that will very much impact the recovery on 0:11:14.280 --> 0:11:16.920 the back end. The faster we can get this contained, 0:11:17.040 --> 0:11:19.600 the more likely we will see a V or even 0:11:19.600 --> 0:11:23.000 a short U shaped recovery. But the longer this takes, 0:11:23.040 --> 0:11:27.079 the more likely it is that the extended recovery period 0:11:27.400 --> 0:11:30.760 is quite a bit longer. Alright, Lindsay pex, oh, thank 0:11:30.760 --> 0:11:34.000 you so much. Chief economists for Stephile Financial, joinius on 0:11:34.040 --> 0:11:38.760 the phone from Chicago. This is Bloomberg Business Week with 0:11:38.840 --> 0:11:42.959 Carol Masser and Jason Kelly on Bloomberg Radio. So it 0:11:43.080 --> 0:11:46.120 is the worst day since Lehman for emerging market credit spreads. Meantime, 0:11:46.120 --> 0:11:49.360 the usc'll curve inside one percent, sounding the alarm for 0:11:49.400 --> 0:11:52.480 global bond markets. UH And according to our Peter Coy, 0:11:52.559 --> 0:11:54.080 the U S may already be in a recession. That 0:11:54.080 --> 0:11:56.400 was a story out on Friday. We talked to him 0:11:56.520 --> 0:11:58.240 about it. It was out over the weekend as well. 0:11:58.360 --> 0:12:00.680 Peter Koy Economics Center Business Week Key is on the 0:12:00.679 --> 0:12:03.480 phone in New Jersey. Mike Reagan is senior editor and 0:12:03.559 --> 0:12:05.800 lead blogger at the Bloomberg Markets Live blog in our 0:12:05.840 --> 0:12:10.040 interactive Broker studio along with Chill Weber, Editor Bloomberg Business Week. Micha, 0:12:10.120 --> 0:12:13.360 let's start with you. It's bad. Yeah, it's very bad. 0:12:13.400 --> 0:12:15.959 I mean, looking at an almost eight percent drop in 0:12:16.000 --> 0:12:18.800 the SP five hundred right now, about seven point seven, 0:12:19.600 --> 0:12:25.000 and the energy energy industry complex just absolutely destroyed SP 0:12:25.720 --> 0:12:29.880 energy companies as a group today alone or down. That's 0:12:29.920 --> 0:12:32.920 the biggest drop for them in history. Obviously, it's all 0:12:32.920 --> 0:12:36.040 a result of what appears to be a price war 0:12:36.120 --> 0:12:39.560 going on in in the global energy industry world, with 0:12:39.840 --> 0:12:43.880 Saudi Arabia slashing prices dramatically over the weekend um and 0:12:44.400 --> 0:12:47.520 really no bright spots in the equity market. Pretty much 0:12:47.600 --> 0:12:51.240 every industry group is down. It's it's just triggered massive 0:12:52.240 --> 0:12:55.880 risk off moves throughout the Market's really a historic day 0:12:55.920 --> 0:12:58.400 in the stock market. And and Peter, you were kind 0:12:58.400 --> 0:13:00.480 of all over this on Friday when you wrote you're 0:13:00.520 --> 0:13:03.680 calling about how the US may already be in recession. 0:13:04.440 --> 0:13:07.719 Can you bring it up to speed today? And so 0:13:07.760 --> 0:13:11.240 you feel about it today? Is it no longer may right? Well, 0:13:11.320 --> 0:13:14.040 it's looking more and more likely. Yeah. I mean, if 0:13:14.040 --> 0:13:17.240 the chain of events is, you have markets price for 0:13:17.360 --> 0:13:20.640 perfection at the beginning of the year, and the coronavirus 0:13:20.720 --> 0:13:22.480 hits and it takes a while for people to wrap 0:13:22.520 --> 0:13:25.000 their minds around it. But one thing it does do 0:13:25.200 --> 0:13:27.360 is start to make people think that oil demand is 0:13:27.400 --> 0:13:29.960 going to be lower. So oil prices come under pressure. 0:13:30.760 --> 0:13:34.560 Russia re chooses to go along with Saudi Arabia's requests 0:13:34.600 --> 0:13:38.839 to pull back on production. So what happened now that 0:13:38.880 --> 0:13:42.880 this is the trigger for today's carnage. The Saudi said, look, 0:13:43.080 --> 0:13:46.040 we're gonna call your bluff and we have lower production 0:13:46.080 --> 0:13:49.480 prices than you do. We're gonna step up our production, 0:13:50.320 --> 0:13:52.839 crash the price of oil, and that will force you 0:13:53.320 --> 0:13:56.440 Russia back to the table. And what's happening now is 0:13:56.440 --> 0:13:59.959 that there's enormous collateral damage from this, because first of all, 0:14:00.000 --> 0:14:03.920 it's wiping out the shale sector in the US, which 0:14:03.960 --> 0:14:07.000 cannot tolerate these low prices. A lot of these shale 0:14:07.040 --> 0:14:11.040 companies are highly leveraged. They shouldn't be, but they are, 0:14:11.600 --> 0:14:14.680 and so they're going to be going into defaults, any 0:14:14.920 --> 0:14:18.640 any any energy credit that was a triple be minus 0:14:18.720 --> 0:14:21.280 or something you know, barely investment grade. It's going to 0:14:21.360 --> 0:14:24.040 fall out of investment grade, no longer be eligible to 0:14:24.120 --> 0:14:28.320 be owned by the uh, the firm, the funds that 0:14:28.400 --> 0:14:30.880 own only investment grade stuff. And yet there's no junk 0:14:30.920 --> 0:14:33.760 bond buyers are willing up to step up and buy. 0:14:33.960 --> 0:14:36.200 So that's that's where the cards is coming from. All right, 0:14:36.280 --> 0:14:42.320 So Mike Reagan, uh, what are you hearing from investors? 0:14:42.600 --> 0:14:45.720 Is their real fear? Is it uncertainty? Is it all 0:14:45.760 --> 0:14:47.320 of the above? Like what are people saying as you 0:14:47.320 --> 0:14:49.680 talk to them on the street with the uncertainty? Is 0:14:49.720 --> 0:14:52.600 just overwhelming. I mean when you see so many companies 0:14:52.640 --> 0:14:56.320 simply withdraw their earnings guidance, Uh, not reduce it or 0:14:56.360 --> 0:14:58.800 say you know, we're gonna make tem percent less than 0:14:58.880 --> 0:15:01.040 we thought, but simply say we don' know which draw completely. 0:15:01.120 --> 0:15:04.120 It's just a very unnerving thing. Uh. Liz Ane Saunders 0:15:04.160 --> 0:15:06.640 was on TV earlier saying, you know, both the p 0:15:06.960 --> 0:15:09.200 and the ear in freefall right now. So it's just 0:15:09.320 --> 0:15:13.600 a you know, very unique and disturbing situation. I think 0:15:13.720 --> 0:15:19.320 right now, the big expectation is that the government Congress 0:15:19.360 --> 0:15:21.840 will get together and come up with some sort of 0:15:22.200 --> 0:15:25.840 massive spending package to try to stop the bleeding. That's 0:15:25.880 --> 0:15:28.440 the hope anyway. That said, you know, there's a big 0:15:28.480 --> 0:15:30.600 question of what, you know, what exactly can they do, 0:15:30.640 --> 0:15:32.720 how quickly can they get it done, Will it be 0:15:32.880 --> 0:15:36.440 enough to sort of stop this snowball from rolling down 0:15:36.520 --> 0:15:39.080 the hill that's happening in markets right now? And what's 0:15:39.120 --> 0:15:41.000 the help that companies need? Because I feel like you've 0:15:41.000 --> 0:15:44.200 got small business which aren't in the market but maybe 0:15:44.200 --> 0:15:46.720 there were supplier to a big publicly held company. You know, 0:15:46.760 --> 0:15:49.600 you've got consumers trying to figure out, some of them 0:15:49.600 --> 0:15:52.000 who have no safety nets if they can't go to work. 0:15:52.400 --> 0:15:55.120 So I do wonder, like, what what is the right 0:15:55.200 --> 0:15:57.840 panacea from Washington that makes a difference. Well, that's the thing. 0:15:57.880 --> 0:15:59.560 I don't think there is one. I don't think there's 0:15:59.560 --> 0:16:01.680 a pantasy. I think it's just how can you sort 0:16:01.720 --> 0:16:05.000 of stem the damage as best you can? And you're right, 0:16:05.040 --> 0:16:07.720 there's you know, it's whether it being the corporate bond 0:16:07.720 --> 0:16:10.520 market's gonna need propping up the consumer if there are 0:16:10.680 --> 0:16:12.800 sort of a lot of furloughs all of a sudden, 0:16:13.360 --> 0:16:15.280 you know, at the same time, the government has to 0:16:15.320 --> 0:16:17.280 try to stop the spread of this thing. So it's 0:16:17.280 --> 0:16:19.640 fighting sort of a war on two or three different 0:16:19.960 --> 0:16:23.640 fronts right here. Um. And you know, the market is 0:16:23.680 --> 0:16:27.120 expecting something, even if it's not enough to really stop 0:16:27.160 --> 0:16:29.680 what we're seeing, at least to slow it down. Uh, 0:16:29.760 --> 0:16:31.760 you know, sort of get a floor under this market. 0:16:31.800 --> 0:16:33.960 But UM, well, it's just a way to see game 0:16:33.960 --> 0:16:35.960 at the moment. Do you think Pal wishes he could 0:16:36.000 --> 0:16:39.640 walk back last week's cut. I doubt it. Um. You know, 0:16:39.680 --> 0:16:41.840 I think he's going to be doing another one soon 0:16:42.320 --> 0:16:45.720 by by the next meeting, if not before. So um. 0:16:45.920 --> 0:16:48.680 I you know, there's a lot of money morning quarterback 0:16:48.720 --> 0:16:50.720 and going on about whether they should have waited. I 0:16:50.760 --> 0:16:52.720 don't think it certainly would have helped if he had 0:16:52.720 --> 0:16:55.880 waited on that cut. Peter, that's your world economics. What 0:16:55.920 --> 0:16:59.760 are you seeing in terms of FED and FED policy? No, 0:16:59.880 --> 0:17:02.280 I I think that it was the right thing to 0:17:02.360 --> 0:17:05.920 cut then. And unfortunately, that's when you're that close to 0:17:06.040 --> 0:17:09.359 zero lower bound, you just don't have that much ammunition left. 0:17:09.920 --> 0:17:13.240 That's uh, just a feature of the economy right now, 0:17:13.400 --> 0:17:16.960 not the fault of J. Powell. Um. I would think 0:17:17.040 --> 0:17:19.800 that the FED is going to do more than just cut. 0:17:19.880 --> 0:17:23.720 It's gonna probably do a lot more forward guidance, maybe 0:17:24.520 --> 0:17:28.080 new rounds of quantitative easing. I mean, it's gonna basically 0:17:28.480 --> 0:17:30.280 people are saying, this is not the time to keep 0:17:30.320 --> 0:17:32.600 your powder dry. This is the time to come in 0:17:32.680 --> 0:17:36.600 and and and put put all your firepower at work 0:17:36.640 --> 0:17:40.080 to help us economy. So, Joe Weber, as you put 0:17:40.080 --> 0:17:42.720 together this week's magazine, what are you seeing come in 0:17:42.920 --> 0:17:45.560 that gives you sort of a broader sense of this story. 0:17:45.640 --> 0:17:48.879 I mean, we've been pretty proactive in trying to own 0:17:49.400 --> 0:17:51.679 as many different angles at the coronavirus story as we can. 0:17:52.000 --> 0:17:53.720 But then this weekend, I mean the thing that I think, 0:17:54.040 --> 0:17:56.879 you know, everyone was like, oh my goodness, was the 0:17:56.920 --> 0:18:00.280 oil knife fight. Effectively, I think it's a knife fight 0:18:00.400 --> 0:18:02.399 if you look at it through that lens. It's like 0:18:02.760 --> 0:18:05.399 everyone wants to get back at Texas in the US 0:18:05.520 --> 0:18:08.800 and Shale for up ending everything. But even to the 0:18:08.800 --> 0:18:11.720 point that OPEC plus unravels and you've got Russia and 0:18:11.800 --> 0:18:14.119 NBS and a knife fight now, so it just feels 0:18:14.160 --> 0:18:16.320 like full on knife fight. And these are not people 0:18:16.359 --> 0:18:18.359 that I really want to get knife fights with, right 0:18:18.400 --> 0:18:20.240 and I think it does raise the spectr of this 0:18:20.359 --> 0:18:24.480 being a bigger geopolitical issue than just who's pumping how 0:18:24.520 --> 0:18:26.800 much oil? I mean, I think it just feels like 0:18:26.840 --> 0:18:30.560 a very tense geopolitical moment, that relationships could start to 0:18:30.600 --> 0:18:32.919 sour over this, and and we all might just be 0:18:33.000 --> 0:18:35.040 the start of our worries. Well, and we talked at 0:18:35.040 --> 0:18:37.639 the top of how China benefits by these lower oil prices, 0:18:37.680 --> 0:18:40.399 and we do know, you know, China has certainly in 0:18:40.480 --> 0:18:43.000 terms of its alliances, We've seen it. We've been closer 0:18:43.040 --> 0:18:44.840 to the Middle East and Russia as well well. And 0:18:44.840 --> 0:18:47.120 Peter Coy at a time, just thirty seconds left, when 0:18:47.160 --> 0:18:49.199 you've got a lot of people, big voices calling for 0:18:49.280 --> 0:18:54.960 global coordination, how likely does that? See? Uh? Central banks 0:18:55.480 --> 0:18:59.720 can coordinate for one thing. Uh If if one bank 0:19:00.040 --> 0:19:02.679 huts another dozen, than the bank in the country that 0:19:02.760 --> 0:19:05.840 doesn't cut is at a serious disadvantage because their currency 0:19:05.880 --> 0:19:09.200 starts to appreciate, their their current account evins at widens 0:19:09.200 --> 0:19:12.240 and there in their economy weekends. So for no other 0:19:12.280 --> 0:19:15.119 reason than self preservation, I think you're gonna see coordinated 0:19:15.160 --> 0:19:17.280 central bank rate cuts all right. A lot of phone 0:19:17.320 --> 0:19:20.439 calls happening around the world for sure. Thank you all 0:19:20.480 --> 0:19:23.160 so much. Peter Koy, Economic Center for Business Week joining 0:19:23.200 --> 0:19:27.160 us on the phone. Mike Reagan from Bloomberg Markets Here 0:19:27.200 --> 0:19:31.000 in our studio alongside Joel Webber, the editor of the magazine. 0:19:31.080 --> 0:19:34.679 This is Bloomberg Business Week with Carol Masser and Jason 0:19:34.760 --> 0:19:38.560 Kelly on Bloomberg Radio. Jason, last night, when I was 0:19:38.560 --> 0:19:40.159 watching what was going on the markets, I did a 0:19:40.200 --> 0:19:42.560 shortlist of people I wanted to talk to, and this 0:19:42.600 --> 0:19:45.440 next guest was on that list. Dr Robert Schiller is 0:19:45.480 --> 0:19:48.480 Sterling Professor of Economics at Yale University. We've been talking 0:19:48.520 --> 0:19:52.040 a lot about his recent book that was published last year, 0:19:52.160 --> 0:19:55.800 Narrative Economics, How Stories go viral and drive major economic events. 0:19:55.960 --> 0:19:58.320 He enjoins us right now on the phone. Professor Schiller, 0:19:58.440 --> 0:20:00.800 it is great to have you here. How do you 0:20:00.840 --> 0:20:04.280 see what's going on in the markets right now? Carol? 0:20:05.440 --> 0:20:08.320 I think that what's going on has an obvious connection 0:20:08.680 --> 0:20:13.720 to certain facts that have come up. One of them, notably, 0:20:14.280 --> 0:20:18.920 is that we have a new virus that is contagious 0:20:19.560 --> 0:20:25.120 early before before it's detectable or diagnosable. So it's hard 0:20:25.160 --> 0:20:27.800 to quarantine people if you don't even know they have 0:20:27.960 --> 0:20:31.399 the disease, so it's a new problem. How do we 0:20:31.440 --> 0:20:34.880 contain this kind of epidemic. The other thing is that 0:20:34.920 --> 0:20:42.720 people are seeing how much international travel dominates uh these days. 0:20:42.720 --> 0:20:47.080 So the epidemic has You've seen these maps showing where 0:20:47.080 --> 0:20:50.760 where it's hit, what countries it's hit. It's practically everywhere, 0:20:51.320 --> 0:20:55.320 So we have a pandemic. Those facts have sunk in 0:20:55.960 --> 0:20:58.679 and have been augmented by people's experiences of going to 0:20:59.320 --> 0:21:02.240 a grocery store and finding that all of various products 0:21:02.280 --> 0:21:07.040 are completely sold out. Uh, So they know that something 0:21:07.119 --> 0:21:10.560 is big is going on, and it's scary. It's also 0:21:10.600 --> 0:21:14.000 a situation in which people think I might even die. 0:21:15.400 --> 0:21:18.920 This is rare that it gets that bad, and so 0:21:19.040 --> 0:21:21.560 Dr Schiller. You know, when we speak of narratives, the 0:21:21.640 --> 0:21:25.960 narrative the market today seems to be partially about the coronavirus, 0:21:26.000 --> 0:21:28.720 of course, but also about the oil market. How do 0:21:28.760 --> 0:21:32.960 you synthesize those two things into one story. How connected 0:21:33.000 --> 0:21:36.360 are they or are there just two things that are 0:21:37.080 --> 0:21:41.720