Latest / Bloomberg Intelligence / Years Before U.S. Gets Full Employment Back: HFE's Weinberg

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Years Before U.S. Gets Full Employment Back: HFE's Weinberg · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg PENL podcast. I'm Paul Swinging along
• 0:05
  Speaker 1: with my co host Lisa Brahmas. Each day we bring
• 0:08
  Speaker 1: you the most noteworthy and useful interviews for you and
• 0:10
  Speaker 1: your money, whether at the grocery store or the trading floor.
• 0:13
  Speaker 1: Find a Bloomberg Penl podcast on Apple podcast or wherever
• 0:16
  Speaker 1: you listen to podcasts, as well as at Bloomberg dot com. Paul,
• 0:20
  Speaker 1: I gotta say I'm looking forward to the time when
• 0:22
  Speaker 1: economic data releases are less emotional, when you don't sort
• 0:26
  Speaker 1: of feel this sort of stunning shock every time you
• 0:30
  Speaker 1: see a new unemployment print. I gotta say, yes, the
• 0:34
  Speaker 1: jobless claims came in, uh less terrible than people had expected.
• 0:38
  Speaker 1: Five point two million people lost their jobs, and we're
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  Speaker 1: just seeing one statistic after another defy any historical precedent,
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  Speaker 1: and it raises a question with an economy and free fall,
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  Speaker 1: how quickly will it take to climb out of this hole?
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  Speaker 1: And joining us as someone who's been tracking this for
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  Speaker 1: decades and who has a good sense of what perhaps
• 0:59
  Speaker 1: is the historical pressed or lack there of Carl Weinberg,
• 1:02
  Speaker 1: I'm so glad to say a founder in chief international
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  Speaker 1: economist of high frequency economics joining us now, Carl, when
• 1:09
  Speaker 1: you take a look at these jobless claims, what's your
• 1:12
  Speaker 1: sense of how many of them can actually come back
• 1:16
  Speaker 1: once the economy starts to restart and we do see
• 1:19
  Speaker 1: a sign of a plateau ing of the pandemic. Hi, Lisa,
• 1:23
  Speaker 1: good morning on this grim day for data. UM. The
• 1:26
  Speaker 1: answer to your question is simple, I don't know, and
• 1:29
  Speaker 1: UM not to go anything to get that answer a
• 1:31
  Speaker 1: lot for me today. In order to be able to
• 1:34
  Speaker 1: forecast the future, I think we have to have at
• 1:36
  Speaker 1: least three basic facts that we do know, none of
• 1:38
  Speaker 1: which are evident right now. How long is this going
• 1:41
  Speaker 1: to go on this lockdown? Number two? How low will
• 1:44
  Speaker 1: the economy for what will be the bottom for GDP
• 1:47
  Speaker 1: growth and for the peak for unemployment? And number three,
• 1:51
  Speaker 1: how many firms are going to not make it through
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  Speaker 1: all of this and not come back, because that will
• 1:55
  Speaker 1: give us the starting level of the unemployment rate when
• 1:58
  Speaker 1: we come back. If uh ten percent of the firms
• 2:01
  Speaker 1: that that are out there don't come back, then ten
• 2:04
  Speaker 1: percent of the jobs will be last will be starting
• 2:06
  Speaker 1: with an unemployment rate in the double digits, and that
• 2:10
  Speaker 1: will gauge how long will we come back. How long
• 2:12
  Speaker 1: it takes us to get back. So Carl, give us
• 2:15
  Speaker 1: a sense of how critical it is for this the
• 2:18
  Speaker 1: folks down in Washington, in in in Congress to really
• 2:22
  Speaker 1: be consistent and aggressive with fiscal stimulus that we just
• 2:27
  Speaker 1: heard today. That's small business part of the initial fiscal
• 2:30
  Speaker 1: stimulus that has been exhausted as of today. Um really
• 2:34
  Speaker 1: putting pressure on Congress to act once again. Yeah, I
• 2:38
  Speaker 1: mean it's critical. I wouldn't call it fiscal stimulus, Plaul,
• 2:41
  Speaker 1: I would give it a different name. I would call
• 2:43
  Speaker 1: it bridge financing. What we're really doing here is we're
• 2:47
  Speaker 1: taking companies that have an unsurvivable hit to their cash
• 2:50
  Speaker 1: flows and we're letting them finance that hit over an
• 2:53
  Speaker 1: affordable period time of time. It's it's the oldest trick
• 2:57
  Speaker 1: in banking. It's restructuring. We're restructuring the pain. So I
• 3:00
  Speaker 1: would say that we have to get bridge financing in
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  Speaker 1: the hands of companies that needed a S a P.
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  Speaker 1: Because once they fold and the jobs are lost, then
• 3:09
  Speaker 1: no matter when we unlocked down, we're still going to
• 3:13
  Speaker 1: be at a very We're not going to be able
• 3:14
  Speaker 1: to put these people back to work. So based on
• 3:17
  Speaker 1: what we've seen in China. Some people are saying the
• 3:20
  Speaker 1: economy can restart uh in a fairly robust manner just
• 3:25
  Speaker 1: looking at copper demand and other gauges out of China.
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  Speaker 1: Do you clean the same kind of optimistic signs based
• 3:34
  Speaker 1: on what we're saying, Well, you know, I'm questioning our
• 3:37
  Speaker 1: high frequency economics readers not to use China as a
• 3:40
  Speaker 1: blueprint for what to expect here. And the reason is
• 3:43
  Speaker 1: is that they're rather draconian. Lockdown probably I'm going to
• 3:48
  Speaker 1: say probably contained the virus to one province, and even
• 3:53
  Speaker 1: though it was a big province, it's only five of
• 3:55
  Speaker 1: the economy. So they never locked down the entire economy
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  Speaker 1: as we did, so the pain is felt in a
• 4:02
  Speaker 1: in a smaller portion. I was sure that the supply
• 4:04
  Speaker 1: chains words are linked, but we didn't see companies failing
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  Speaker 1: around the nation. Now everybody's going to say that Old
• 4:12
  Speaker 1: China is lying, they're not reporting the numbers, blah blah blah.
• 4:15
  Speaker 1: All right, but if we had seen a national shutdown
• 4:18
  Speaker 1: there rather than just the provincial shutdown there, there's no
• 4:21
  Speaker 1: way to cover that up. Alright, China has definitely been hit,
• 4:24
  Speaker 1: but I think they were nicked a lot less than
• 4:27
  Speaker 1: we're being nicked over then we're being hit over here,
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  Speaker 1: And Carl, I think the initially there is hope. I
• 4:32
  Speaker 1: think I'm going to use the word hope as opposed
• 4:34
  Speaker 1: to anything else for a V shaped recovery here. But
• 4:38
  Speaker 1: it just seems if we're going to get some of
• 4:39
  Speaker 1: the numbers that people are talking about, i e. Thirty
• 4:42
  Speaker 1: decline in second quarter g d P, you know, kind
• 4:45
  Speaker 1: of plus unemployment, that type of shock to the system
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  Speaker 1: suggests that that may cause some real structural, longer term damage.
• 4:56
  Speaker 1: How are you kind of thinking about those aspects. I
• 4:59
  Speaker 1: think people who see the solution as a V shape
• 5:02
  Speaker 1: recovery defined in terms of growth have to rethink their
• 5:05
  Speaker 1: arithmetic starting from day one. You know, the rate of
• 5:08
  Speaker 1: growth of GDP is irrelevant to how we're going to
• 5:11
  Speaker 1: come back. The unemployment rate is linked or the number
• 5:15
  Speaker 1: of the level of employment is linked to the level
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  Speaker 1: of economic activity. So if we go down in terms
• 5:22
  Speaker 1: of level, right, and then we come back to the
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  Speaker 1: same two percent GDP growth rate that we had before,
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  Speaker 1: then yes, we will have a V shaped recovery in
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  Speaker 1: terms of growth, but we'll be starting with fewer jobs
• 5:33
  Speaker 1: in the economy, and it's going to take a really
• 5:35
  Speaker 1: long time to come back from that. The V shape
• 5:38
  Speaker 1: in terms of growth is a nice thing to think about.
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  Speaker 1: It makes us feel good, but the real problem is
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  Speaker 1: of V shape in terms of the level of GDP,
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  Speaker 1: and that's going to take years to get back. So
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  Speaker 1: it'll be years before we get our full employment back. Well. Interesting, Yeah,
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  Speaker 1: that's kind of I think where some people as more
• 5:54
  Speaker 1: and more data comes in, kind of thinking discounting that
• 5:57
  Speaker 1: V shaped recovery called Winberg Founder and Teeth, International Economists
• 6:01
  Speaker 1: for High Frequency Economics. Thanks so much for joining us.
• 6:03
  Speaker 1: Always appreciate your perspective. So, Lisa, kind of an interesting
• 6:09
  Speaker 1: day to the markets here, kind of very mixed. You've
• 6:11
  Speaker 1: got the NAST deck up over one percent, but the
• 6:13
  Speaker 1: down and SMP just kind of flatished now actually down
• 6:16
  Speaker 1: about half a percent. So it's kind of a strange
• 6:19
  Speaker 1: day in the marketplace. We had that terrible jobs number
• 6:23
  Speaker 1: again again, the cumulative million jobs lost over the last
• 6:26
  Speaker 1: several weeks. That's equal to the total amount of jobs
• 6:29
  Speaker 1: that were created since the financial crisis, So just extraordinary.
• 6:33
  Speaker 1: People are just trying to question how do I position
• 6:35
  Speaker 1: myself in this market? Nobody better to chat about that
• 6:39
  Speaker 1: Lisa Than Barry Ridholtz, rid Holts Capital Management, Bloomberg Opinion columnists,
• 6:43
  Speaker 1: and podcast extraordinaire. Barry, thanks so much for joining us. Okay,
• 6:47
  Speaker 1: the job's number came in ugly. We're gonna get some
• 6:49
  Speaker 1: terrible unemployment numbers. We're gonna get some terrible g d
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  Speaker 1: P numbers. Is it reasonable for this equity market to
• 6:55
  Speaker 1: be looking to the other side? Yes and no. I
• 6:59
  Speaker 1: mean a lot of what the market is looking at
• 7:02
  Speaker 1: is what's what's unknown and what sort of probability bet
• 7:08
  Speaker 1: markets can make. Look, we already know that we're in
• 7:12
  Speaker 1: a deep recession of not a depression. We're probably coming
• 7:17
  Speaker 1: close to the numbers we saw during the Great Depression.
• 7:20
  Speaker 1: I've seen some some people say we have eight or
• 7:23
  Speaker 1: nine or ten percent unemployment, that that's a way legging number.
• 7:28
  Speaker 1: We're probably closer to twenty on our way to if
• 7:31
  Speaker 1: this lockdown continues much longer. So the market already understands
• 7:35
  Speaker 1: that the market is already reflecting that. The question is
• 7:38
  Speaker 1: as we start to see various things to test, as
• 7:42
  Speaker 1: we start to see various ways of treating the virus,
• 7:46
  Speaker 1: as we come to the end of the really really
• 7:50
  Speaker 1: bad part of not knowing what happens next. Markets are
• 7:55
  Speaker 1: making up half the losses and then some. I certainly
• 7:58
  Speaker 1: wouldn't be surprised if we saw a retest of those
• 8:01
  Speaker 1: prior lows, and if the news doesn't get any better,
• 8:04
  Speaker 1: we could make new lows um But historically markets are
• 8:08
  Speaker 1: trying to figure out where is the greater risk to
• 8:11
  Speaker 1: the upside or to the down side. When you fall
• 8:16
  Speaker 1: in a month, the risk tends to be towards the upside.
• 8:19
  Speaker 1: And that's what the market has been working off the
• 8:22
  Speaker 1: past couple of weeks. That and a two trillion dollar stimulus. Right, Barry,
• 8:26
  Speaker 1: here's what I'm struggling with. It all makes sense if
• 8:28
  Speaker 1: you're a long term investor, these companies have value, we
• 8:31
  Speaker 1: will bounce back. Blah blah blah. I get it. I
• 8:34
  Speaker 1: hear it every day and I and I buy it
• 8:36
  Speaker 1: to an extent. And then you have people who are
• 8:39
  Speaker 1: basically saying the entire paradigm is changing. You cannot put
• 8:43
  Speaker 1: the world on hold. People are staying at home. But
• 8:45
  Speaker 1: there's a transformation going on in terms of business, in
• 8:48
  Speaker 1: terms of priorities, in terms of savings and household wealth.
• 8:52
  Speaker 1: And will the other side of this look profoundly different,
• 8:55
  Speaker 1: with a different inflationary point of view, with a different
• 8:58
  Speaker 1: tax structure, with a different social kind of fiber. Well,
• 9:03
  Speaker 1: there's an easy answer to that, and and and then
• 9:06
  Speaker 1: the more challenging answer to that, and let me take
• 9:08
  Speaker 1: into that order. The easy answer is, pre existing trends
• 9:12
  Speaker 1: are going to accelerate, and things that were already beginning
• 9:15
  Speaker 1: to happen are going to happen much more quickly. And
• 9:18
  Speaker 1: a couple of quick examples. The United States has been
• 9:21
  Speaker 1: over retailed, much more square footage on a per capita
• 9:24
  Speaker 1: basis for retail stores then say the UK or Japan
• 9:30
  Speaker 1: or Italy, and so that giant footprint of retail stores
• 9:36
  Speaker 1: were already pressured. This is just going to accelerate that.
• 9:40
  Speaker 1: This is going to accelerate the move towards online. It's
• 9:42
  Speaker 1: going to accelerate the move to get rid of giant
• 9:47
  Speaker 1: shopping malls. They're gonna have to come up with something
• 9:51
  Speaker 1: beyond here's some stuff, come buy it as a business model.
• 9:55
  Speaker 1: But that's been in place for that trend has been
• 9:58
  Speaker 1: in existence for two decades. Same with the remote work,
• 10:02
  Speaker 1: the virtual work, the work from home. I mean I've
• 10:06
  Speaker 1: been working at home on Fridays over the summer for
• 10:09
  Speaker 1: years and years, and over the past couple of years
• 10:12
  Speaker 1: it became easy to keep doing that. I wonder how
• 10:15
  Speaker 1: this is going to impact office space. It dawned on
• 10:17
  Speaker 1: me that for the for the ten thousand square feet
• 10:21
  Speaker 1: I have in my office, I could probably fit double
• 10:24
  Speaker 1: the number of people if if people don't need to
• 10:27
  Speaker 1: work nine to five Monday to Friday, you can change that.
• 10:30
  Speaker 1: That's a something that was already in the works over
• 10:34
  Speaker 1: the past couple of years. That's going to accelerate. And
• 10:37
  Speaker 1: then they're generally speaking, the move towards service economy away
• 10:42
  Speaker 1: from actually physically manufacturing goods. That continues to accelerate. The
• 10:47
  Speaker 1: more difficult question is what's going to reverse the fact
• 10:51
  Speaker 1: that we have just in time deliveries and just in
• 10:55
  Speaker 1: time supply chains. That's gonna have to change in some way.
• 10:59
  Speaker 1: Thea that we don't make all sorts of essential equipment
• 11:03
  Speaker 1: from ventilators too, and nine mass too, god knows what else.
• 11:08
  Speaker 1: There's gonna be a national security question of why isn't
• 11:11
  Speaker 1: this manufactured on the continental United States. It's anybody's guests
• 11:15
  Speaker 1: how that resolves, And and there are gonna be a
• 11:18
  Speaker 1: lot of other questions about national security, about trade, about
• 11:23
  Speaker 1: a variety of issues that's going to have a significant
• 11:25
  Speaker 1: impact on the economy. Figuring out how that plays out
• 11:29
  Speaker 1: is going to be a function of how the virus
• 11:32
  Speaker 1: and its um management evolves over the next year. And
• 11:38
  Speaker 1: I certainly think and I don't want to turn this
• 11:40
  Speaker 1: into a political debate, but I think everybody is very
• 11:43
  Speaker 1: much an agreement that the outcome of the November election
• 11:47
  Speaker 1: is going to have a significant impact on a variety
• 11:50
  Speaker 1: of different things. Whether it's national medical supply, emergency stockpiling,
• 11:57
  Speaker 1: or an infrastructure build out. There's going to be some
• 12:00
  Speaker 1: significant changes relative to this next election, and so trying
• 12:05
  Speaker 1: to figure out where the market is going to go
• 12:07
  Speaker 1: relative to all those variables, it's always the best guess.
• 12:11
  Speaker 1: It's always a probabilistic exercise. But no one really has
• 12:15
  Speaker 1: a clear view as to what we're gonna look like
• 12:19
  Speaker 1: six months or a year from now. Some trends are obvious,
• 12:22
  Speaker 1: there's a lot of things that are happening below the
• 12:24
  Speaker 1: surface that we really won't know about. Barry rit Holt,
• 12:27
  Speaker 1: thank you so much for being with us. Barry rid
• 12:29
  Speaker 1: Holt's founder of Reholt's Wealth Management, A Bloomberg Opinion calumnist
• 12:32
  Speaker 1: and of course the host of Masters of Business on
• 12:36
  Speaker 1: Bloomberg Radio. Tree not Rage and that covers all things
• 12:42
  Speaker 1: financials for us here at Bloomberg News and joins us
• 12:45
  Speaker 1: now Street. I want to talk a little bit about
• 12:47
  Speaker 1: Morgan Stanley's earnings and sort of how it highlights the
• 12:50
  Speaker 1: trend we're seeing across Wall Street trading revenues beating expectations
• 12:54
  Speaker 1: across the board, definitely plugging a bit of a hole
• 12:57
  Speaker 1: when it comes to low lost provisions and other areas
• 13:01
  Speaker 1: of the bank. How long can that continue? Morning? We
• 13:04
  Speaker 1: so absolutely like the trading revenue part, not just that
• 13:08
  Speaker 1: Morgan Stanley, pretty much every other bank everyone Blue Pass
• 13:11
  Speaker 1: estimates it was a phenomenal quarter for all of the
• 13:14
  Speaker 1: Wall Street trading death and it was extremely critical that
• 13:17
  Speaker 1: they had a blowout quarter because of the big holes
• 13:22
  Speaker 1: opening up in other parts of the business. Every bank
• 13:24
  Speaker 1: has been taking huge loan loss provision, tread loss provision,
• 13:28
  Speaker 1: market market losses, and it really was the trading desk
• 13:31
  Speaker 1: that saves the baken for them. But then the important
• 13:35
  Speaker 1: part is what happens going forward into your question, do
• 13:38
  Speaker 1: they have the stamina to continue like this? Well, John
• 13:42
  Speaker 1: Truz and mom Stally Stapo offered us the first clue
• 13:45
  Speaker 1: today that that might not be the kid. While volumes
• 13:48
  Speaker 1: are still elevated from what we saw in January and February,
• 13:51
  Speaker 1: they're already down about twenty from the craziness of March,
• 13:55
  Speaker 1: is what he's saying. So you could have a situation
• 13:58
  Speaker 1: where the second quarter, the protracted lockdown continues. It brings
• 14:04
  Speaker 1: with it all the negatives that you saw in the
• 14:06
  Speaker 1: first quarter without the trading boon accompanying it, and that's
• 14:10
  Speaker 1: the wiring signs of the bank. Sure, what was your
• 14:13
  Speaker 1: Some of your takeaways from Eric Schatzer's discussion with Mr
• 14:17
  Speaker 1: Gorman just now, look, I always find Government to be
• 14:23
  Speaker 1: a fascinating interviews. He's emotional, passion and even before the
• 14:28
  Speaker 1: TV interview when he was on the call with analyst investors,
• 14:31
  Speaker 1: you could send that you know he was emotional. Obviously,
• 14:34
  Speaker 1: Government has just recovered from the coronavirus. Not a serious kid,
• 14:38
  Speaker 1: but still one of the most senior executives on Wall
• 14:40
  Speaker 1: streets to have tested positive for it. He worked through
• 14:43
  Speaker 1: it and he didn't have to be hospitalized. But again,
• 14:45
  Speaker 1: now you know that he made some critical points. One
• 14:48
  Speaker 1: of One of the things he said was this is
• 14:50
  Speaker 1: a shock to the global economic system that we haven't
• 14:53
  Speaker 1: seen since the Great Depression, not since the financial crisis
• 14:57
  Speaker 1: of two thousand eight, since the Great Depression. You cannot
• 15:00
  Speaker 1: model that. He was he was clear about that early on.
• 15:03
  Speaker 1: He said, we're not going to be in a position
• 15:05
  Speaker 1: to meet our target. Any CEO who says that they're
• 15:09
  Speaker 1: going to be able to make their short term target
• 15:12
  Speaker 1: is living on a different planet. That is subtle dig
• 15:15
  Speaker 1: at government tax who came out yesterday and said, you know,
• 15:18
  Speaker 1: we're not changing our medium term target. Maybe maybe not.
• 15:21
  Speaker 1: I guess the distinction there is between short term and
• 15:23
  Speaker 1: medium term, but it does highlight and really what government
• 15:27
  Speaker 1: was playing on. The interview with Eric also highlighted that
• 15:29
  Speaker 1: we are entering a period of high uncertainty. It's completely
• 15:34
  Speaker 1: unclear to everyone from from the late person to the
• 15:38
  Speaker 1: folks running these big banks as to how this will
• 15:41
  Speaker 1: pan out. And that is why you're hearing everyone taking
• 15:44
  Speaker 1: on a conservative posture as we move ahead. All right, so,
• 15:48
  Speaker 1: since you brought it up, let's talk about the rivalship.
• 15:50
  Speaker 1: The rivalry between Morgan Stanley and Goldman Sachs, who won
• 15:55
  Speaker 1: this quarter yeah, I think to be honest, both of
• 16:00
  Speaker 1: them in the same boat. Again, what holds government and
• 16:04
  Speaker 1: Marvel Family apart from the rest of the industry, And
• 16:07
  Speaker 1: I think that's the comparison we should be making Government
• 16:09
  Speaker 1: and Long Family was So the their other big banks
• 16:12
  Speaker 1: of JPM City, Bery Wells is they don't have that
• 16:17
  Speaker 1: same ft commercial loan book to consumer loan exposure like
• 16:21
  Speaker 1: those banks. So where you were seeing on the one
• 16:23
  Speaker 1: hand eight billion dollar loan lost provision four billions, four billions,
• 16:27
  Speaker 1: five billion, Uh, these guys had a much smaller figure,
• 16:30
  Speaker 1: a much more manageable figure because they don't have that
• 16:33
  Speaker 1: kind of exposure, so they were insulated from it. The
• 16:36
  Speaker 1: training desks, which are really top of the line, the
• 16:39
  Speaker 1: best on the street, really outperformed and really did work.
• 16:43
  Speaker 1: The real question is if that slows down and you
• 16:47
  Speaker 1: don't have any of the boons from the other side,
• 16:49
  Speaker 1: it's it's going to be troubling period for the banks,
• 16:52
  Speaker 1: and I don't think it's going to be one way.
• 16:54
  Speaker 1: You will necessarily see if you separating themselves from the others,
• 16:58
  Speaker 1: I think they all write same boat going forward, so
• 17:01
  Speaker 1: surely coming into this crisis that I think they accepted
• 17:06
  Speaker 1: wisdom was that the banks are a much better place
• 17:08
  Speaker 1: financially from a balance sheet perspective. Okay, I get that,
• 17:12
  Speaker 1: but this is a totally different type of animal we're
• 17:15
  Speaker 1: dealing with in terms of the decline in the global economy.
• 17:18
  Speaker 1: Is that still the feeling that you heard on these
• 17:20
  Speaker 1: conference calls from the CEOs that they feel confident in
• 17:22
  Speaker 1: their balance sheets? Pretty much? The caveat to that is
• 17:28
  Speaker 1: you could probably go back to early two thousand eight,
• 17:30
  Speaker 1: late two thousand seven, and I don't think you would
• 17:32
  Speaker 1: have found to see on once we would have said
• 17:34
  Speaker 1: we're really concerned about the state of a balance sheet.
• 17:36
  Speaker 1: They were. They were confident back then also. But the
• 17:38
  Speaker 1: reality is, and when you talk to and listen the
• 17:40
  Speaker 1: folks doing the numbers things stand, banks do seem to
• 17:44
  Speaker 1: be in a much better position. They're really well capitalized
• 17:49
  Speaker 1: compared to ten years ago. And the feeling is that
• 17:51
  Speaker 1: risk might have shifted elsewhere, not that the risk have disappeared,
• 17:55
  Speaker 1: but they might have shifted outside the banking system. The
• 17:58
  Speaker 1: only thing to keep in mind is what that uh
• 18:01
  Speaker 1: this period of heightened volatility and this crisis. Apart from
• 18:05
  Speaker 1: say that to help make crisis war, it took a
• 18:08
  Speaker 1: good amount of time for the government to act. It
• 18:10
  Speaker 1: took a good amount of time to depread to intervene.
• 18:13
  Speaker 1: It's thinks very different this time around. The spread the government.
• 18:16
  Speaker 1: Everyone has jumped in right from the get go, and
• 18:19
  Speaker 1: that has also given confidence to folks that this isn't
• 18:22
  Speaker 1: a systemic issue from from the point of view of
• 18:26
  Speaker 1: what will happen to the banks, But that doesn't take
• 18:28
  Speaker 1: away from the fact that there is still great economic uncertainty.
• 18:32
  Speaker 1: There is a real crisis growing out there, and ultimately,
• 18:35
  Speaker 1: the healthful bank is intricately tied to the health of
• 18:40
  Speaker 1: the broader economy. So if that doesn't recover, you will
• 18:43
  Speaker 1: have to worry about banks at some point. Shod Naturaj
• 18:46
  Speaker 1: and thank you so much for being with us Bloomberg
• 18:48
  Speaker 1: Finance Reporter, joining us and Morgan Stanley earnings. There is
• 18:54
  Speaker 1: an incredible swell of joblessness that defies all historical precedent.
• 19:00
  Speaker 1: Twenty two million American jobs lost in four weeks, wiping
• 19:04
  Speaker 1: out a decade of gains. Meanwhile, we've got federal governments
• 19:08
  Speaker 1: around the world pumping trillions of dollars into the economy.
• 19:12
  Speaker 1: What are we looking at here in terms of money
• 19:15
  Speaker 1: and pricing going forward stagflation, deflation inflation joining US now
• 19:20
  Speaker 1: Vincent de Loard, a global macro strategistic I n T
• 19:23
  Speaker 1: LFC Stone based in San Francisco, joining US now Vincent.
• 19:28
  Speaker 1: When you take a look at the job losses, you
• 19:30
  Speaker 1: can take a look at the unprecedented stimulus packages being
• 19:34
  Speaker 1: pumped into the economy to keep it afloat during this period.
• 19:37
  Speaker 1: What are we looking at in terms of price increases
• 19:40
  Speaker 1: going forward? Well, high, great to be here, Uh, for
• 19:46
  Speaker 1: the moment, it's almost impossible to tell. I mean, the
• 19:49
  Speaker 1: CPI is a basket of goods, witch and goods and
• 19:53
  Speaker 1: services which most of the country cannot buy right now,
• 19:55
  Speaker 1: and presumably there will be some restriction as to what
• 19:58
  Speaker 1: can be bought in do future. So the the near
• 20:02
  Speaker 1: term inflation picture is really anyone's guess. Uh. You know,
• 20:06
  Speaker 1: you certainly will have a lot of impact from from
• 20:08
  Speaker 1: the collapse of all prices, and we could indeed get
• 20:11
  Speaker 1: you know, a couple of months of negative CPR readings. However,
• 20:15
  Speaker 1: over the medium to long term, I think what we
• 20:17
  Speaker 1: are witnessing today is really planting the seats for what
• 20:20
  Speaker 1: I would expect to be a decade of stagflation. What
• 20:24
  Speaker 1: is a decade of stag flash? All right, defined for audience,
• 20:27
  Speaker 1: your view of what is stagflation and what would cause
• 20:30
  Speaker 1: to be such a long term phenomena in this economy. Well, so,
• 20:35
  Speaker 1: you know, stagflation is literally economic stagnation or let's say
• 20:39
  Speaker 1: below a rich growth. Uh and at the same time
• 20:42
  Speaker 1: rapid increase in price. I mean, that's that was a
• 20:45
  Speaker 1: condition that we saw in the seventies in the US,
• 20:49
  Speaker 1: uh and in um Many throughout the twentieth century, in
• 20:54
  Speaker 1: many parts of Latin America, parts of European the nineteen thirties,
• 20:59
  Speaker 1: um so be economic growth, I think is something that's
• 21:02
  Speaker 1: increasingly getting obvious that we're not going to get very
• 21:08
  Speaker 1: rapid v shape recovery. I mean, even in the markets
• 21:11
  Speaker 1: that are indeed coming out of this, you know, nothing
• 21:14
  Speaker 1: has come back to normal. Uh Some consumption pattern of change,
• 21:18
  Speaker 1: investment has changed, usually for the worse. And it will
• 21:21
  Speaker 1: also have to deal with the consequences of the bailouts
• 21:25
  Speaker 1: that we so casually made. I mean, if anything, the
• 21:29
  Speaker 1: experience in Europe shows that there's no such thing as
• 21:32
  Speaker 1: an emergency lending program. Uh. So that's on the real
• 21:36
  Speaker 1: economy side, and then on the monetary economy. I mean,
• 21:39
  Speaker 1: we have a lot of of monetory and fiscal accommodation
• 21:44
  Speaker 1: that's simply the world hasn't seen before. Um right now,
• 21:47
  Speaker 1: it doesn't matter because the velocity of money people people
• 21:50
  Speaker 1: looked at home, But as soon as the economy reopened,
• 21:53
  Speaker 1: it's really any anyone guess where it can go. And
• 21:55
  Speaker 1: it seems to me that the sole focused on deflation
• 21:59
  Speaker 1: is is very misplaced. East. Let's talk about what we
• 22:02
  Speaker 1: mean when we say stagflation, because I'm looking at your
• 22:05
  Speaker 1: report and typically stagflation means rising prices of the things
• 22:09
  Speaker 1: you need to buy, and wages not necessarily keeping pace,
• 22:13
  Speaker 1: and basically consumption remaining flatter, declining, and just sort of
• 22:17
  Speaker 1: the global energy of business just sort of remaining it
• 22:22
  Speaker 1: in stalls speed. Is that a bad thing? And is
• 22:25
  Speaker 1: that an accurate reflection of what you're talking about with stagflation? Right?
• 22:31
  Speaker 1: I mean generally, Uh, staclation is not a good environment
• 22:35
  Speaker 1: for the owners of capital and assets. I mean, it's
• 22:40
  Speaker 1: your worst outcome. It means that you know your stocks
• 22:42
  Speaker 1: are not doing so great because invasion is high Martin's compress.
• 22:48
  Speaker 1: Uh growth is not that great, ayth in real term
• 22:50
  Speaker 1: and and your bombs really get hit. The words I mean,
• 22:53
  Speaker 1: that's what happened in seventies. I mean savage baermarkets for
• 22:56
  Speaker 1: equities they want nowhere for a decade and then um,
• 22:58
  Speaker 1: really devastation on market. And also usually see is the
• 23:03
  Speaker 1: correation between stocks and bomb turning from negative as it
• 23:06
  Speaker 1: is today to to positive. UM. I tend to be
• 23:10
  Speaker 1: a little more optimistic about the real economy. I think
• 23:15
  Speaker 1: at the end of the day, it you know, some
• 23:18
  Speaker 1: period of high inflation could be uh, a real price
• 23:21
  Speaker 1: inflation at least, and deflation of the asset price could
• 23:24
  Speaker 1: be what's needed to solve the strong generational imbalances that
• 23:28
  Speaker 1: we are seeing in the US. I think there is
• 23:30
  Speaker 1: a a you generational problem that's hiding today between the
• 23:36
  Speaker 1: young who is who are mostly poor and who are
• 23:39
  Speaker 1: bearing the cost of the lockdowns, and the older generation
• 23:43
  Speaker 1: that leonso the asset and you know, curious a decade
• 23:49
  Speaker 1: of inflation could actually help that transfer which must take place.
• 23:54
  Speaker 1: Vincent Danielar, thank you so much for joining us. We
• 23:56
  Speaker 1: appreciate your thoughts and your most recent research report entitled
• 24:00
  Speaker 1: a Crazy but Logical Call for Stagflation. Vincent Ward Global
• 24:05
  Speaker 1: Macro strategist for I N T L F C Stone,
• 24:09
  Speaker 1: based in San Francisco. Thanks for listening to the Bloomberg
• 24:13
  Speaker 1: P and L podcast. You can subscribe and listen to
• 24:15
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• 24:19
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• 24:25
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• 24:27
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