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PGIM's Tipp: Virus Won't Likely Send US To Recession · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you,
• 0:05
  Speaker 1: along with my co host Lisa Brahma wits. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
• 0:10
  Speaker 1: you and your money, whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. I think the big issue here
• 0:20
  Speaker 1: is we've got equity markets off, you know, roughly fiftent
• 0:22
  Speaker 1: over the last seven trading days, just an extraordinary trade
• 0:27
  Speaker 1: down in the equity markets and financial markets. The question
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  Speaker 1: I think now for a lot of investors is will
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  Speaker 1: the central bankers try to come in and stop the carnage.
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  Speaker 1: There's absolutely nobody better to talk to about this issue
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  Speaker 1: than Robert Tip. He's a chief investment strategist in Ahead
• 0:42
  Speaker 1: of Global Bonds for p G I M fixed income.
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  Speaker 1: He has crossed the river from the Jersey side, joining
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  Speaker 1: us here in a Bloomberg eleven three oh studio. So, Robert,
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  Speaker 1: what will the Fed do? When will they do it?
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  Speaker 1: And will anybody even care? I think people will care
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  Speaker 1: because there is a fundamental situation where uncertainty is rising,
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  Speaker 1: and activity levels, especially abroad already in the world's biggest
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  Speaker 1: driver of growth, China, have been seriously impacted. Uh. You know,
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  Speaker 1: bottom line numbers like GDP and so on, those will
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  Speaker 1: come out much later. But auto sales, for example, we're
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  Speaker 1: down spectacularly, manufacturing, electricity usage and so on, and now
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  Speaker 1: the cases around the world are kind of that a
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  Speaker 1: geometric increasing stage, and so there is going to be
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  Speaker 1: a shock. The FED is away from their mandate, which
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  Speaker 1: is not on the maximum employment side they're find there,
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  Speaker 1: but inflation is persistently away from target. This morning we
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  Speaker 1: had their preferred indicator of inflation, the PC print, and
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  Speaker 1: if anything, that is moving systematically further away from their
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  Speaker 1: target on the downside. So it would seem like there's
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  Speaker 1: a great case for them to make an insurance cut
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  Speaker 1: pretty much at any time. And uh that could be
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  Speaker 1: helpful because what we're seeing now is a tightening of
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  Speaker 1: financial conditions. Granted, financial conditions were very easy a handful
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  Speaker 1: of weeks ago, but you know now it's going to
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  Speaker 1: make a difference going forward. Uh, financial conditions tightening, making
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  Speaker 1: whatever is going to happen that would uh materialize in
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  Speaker 1: terms of a weekend economy weakening, economy worse. So I
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  Speaker 1: think there's a pretty good argument for them to do
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  Speaker 1: that now. Whether this is like that transition where they're
• 2:30
  Speaker 1: hiking way too late and it took them a little
• 2:33
  Speaker 1: bit of time to to change the rhetoric around and
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  Speaker 1: they really exacerbated things with that rate hike, or they'll
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  Speaker 1: have a quicker turn. Uh, it remains to be seen.
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  Speaker 1: But the initial indications are are not that good. But
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  Speaker 1: hopefully they'll get the signal from the market quicker this time.
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  Speaker 1: And Jim Bullard coming out this morning and sort of
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  Speaker 1: taking a rather sanguent tone about the sell off and
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  Speaker 1: not necessarily signaling the rate cut that people were expecting. Nevertheless,
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  Speaker 1: you are seeing in the Fed funds futures market to
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  Speaker 1: full rate cut. It's being priced in frankly before June
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  Speaker 1: h and three rate cuts before the end of the year,
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  Speaker 1: four rate cuts by the beginning of next year. So
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  Speaker 1: if the Fed doesn't capitulate, the market just seems to
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  Speaker 1: be moving further and further away from them. I just
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  Speaker 1: want to ask you, though, how much will that loosen conditions?
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  Speaker 1: How much will that entice you as a portfolio manager
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  Speaker 1: to go out and buy risk your debt at these levels, right,
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  Speaker 1: I think it will make a big difference. And when
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  Speaker 1: you look at what happened after August of last year
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  Speaker 1: was the most recent incident of where the market got
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  Speaker 1: way ahead of the fat in terms of expectations for
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  Speaker 1: ease on concerns about downside risks that you know, once
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  Speaker 1: the underlying situation had stabilized, investor confidence returned, and this
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  Speaker 1: time it didn't require the FED. But once that confidence returned,
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  Speaker 1: the market will ease up and we'll take these rate
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  Speaker 1: cuts out of the market after they cut maybe you
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  Speaker 1: know once and you can have a recovery and risk
• 3:58
  Speaker 1: and so on. So do you expe spreads to retest
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  Speaker 1: their lows the extra yield that investors earned over benchmark
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  Speaker 1: rates on high yield and investment grade credit? Do you
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  Speaker 1: expect a lot of tightening later in the year an
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  Speaker 1: incredible outperformance there. I think that this correction is the
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  Speaker 1: same as the corrections we've had over the last handful
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  Speaker 1: of years. This is this is not going to be
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  Speaker 1: the beginning, I would guess, of a major crisis in
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  Speaker 1: terms of a bear market in that goes on for
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  Speaker 1: a year or two. This is probably something that's going
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  Speaker 1: to be more measured in weeks or months after which
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  Speaker 1: we go back to an environment it's not a feel
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  Speaker 1: good environment for people. It's a very slow economic growth backdrop. UM.
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  Speaker 1: But the down shifting of risk free interest rates around
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  Speaker 1: the world, which is still kind of happening on a
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  Speaker 1: secular basis, it's not been fully priced yet on the coronavirus,
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  Speaker 1: is accelerating that those low discount rates are gonna then
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  Speaker 1: fuel refuel that search for yield, and that is going
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  Speaker 1: to pull the spreads in and UH and boost returns
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  Speaker 1: on higher fixed income. But you have to get past
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  Speaker 1: this first. So I'm looking at the two year, you know,
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  Speaker 1: zero point nine percent, a ten year one point one
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  Speaker 1: six percent or zero percent rates reasonable to discount at all.
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  Speaker 1: I think in the short term that's that's not where
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  Speaker 1: we're headed, unless this turns into a major economic crisis
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  Speaker 1: and the FED is forced to go into panic mode. UM.
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  Speaker 1: But I think that the range has really continued to
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  Speaker 1: shift lower. We have the FED would like to maintain
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  Speaker 1: a zero lower bound. They should be able to do that, UM.
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  Speaker 1: But the top end of the rate cycle has gone
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  Speaker 1: from twenty you know, back in eighty down to nine
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  Speaker 1: three quarters in nine to six and a half in
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  Speaker 1: two thousand to the mid twos last year, and that's
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  Speaker 1: the new high water mark for Fed funds. And it's
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  Speaker 1: going to be a zero to three range on the
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  Speaker 1: Fed funds and probably a one and a half central
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  Speaker 1: tendency for the tenure treasury. Yeah. Well, right now, I
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  Speaker 1: just want to say, we're looking at spreads on Highel
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  Speaker 1: debt for four point six percent and the first two
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  Speaker 1: point six percentage points over benchmark rates. Literally one word
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  Speaker 1: answer Bob Michael of JP morgan As Management saying he
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  Speaker 1: sees them going up to six dred before it's a
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  Speaker 1: buying opportunity. Where's the sort of tipping point you know,
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  Speaker 1: I don't know where that's going to be. I would
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  Speaker 1: guess it's lower and uh and before it turns. But
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  Speaker 1: that you know, it is going to be a bond
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  Speaker 1: pickers market. Right. There will be areas of trouble, but
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  Speaker 1: in the long term, I think spread product is attractive.
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  Speaker 1: Robert Tip, thank you so much as always, and I
• 6:35
  Speaker 1: wish I had an hour with you. We would have
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  Speaker 1: such a great time. Yes, well, I mean this is
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  Speaker 1: such an interesting market. Robert Tip, Chief Investment Strategies, of
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  Speaker 1: PJIM Fixed Income. Well, that's a coronavirus spreads outside of
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  Speaker 1: China's first to the Middle East and then the other
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  Speaker 1: parts of Asia than uh, the European continent with Italy.
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  Speaker 1: The concerns is how prepared is the US for a
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  Speaker 1: potential outbreak of the coronavirus here in the US. To
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  Speaker 1: help us answer that, we welcome Dr Philip Chan. He's
• 7:08
  Speaker 1: a CEO and president of Cytosorbents Corporation that trades on
• 7:12
  Speaker 1: Nastack symbol ct s O. Up thirty six percent today,
• 7:16
  Speaker 1: up eight five percent year to date. Uh. Dr Chan,
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  Speaker 1: thank you so much for joining us here in our
• 7:20
  Speaker 1: Bloomberg Interactive Broker's studio. Just from your expertise in the
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  Speaker 1: healthcare industry, just give us a sense of kind of
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  Speaker 1: how you think the US is prepared for what might
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  Speaker 1: be an outbreak of the coronavirus. Well, thank you very
• 7:34
  Speaker 1: much Paul Lisa for having me on the show. Um,
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  Speaker 1: I think to basically put my comments though in perspective,
• 7:39
  Speaker 1: just to give you a little bit of background about
• 7:41
  Speaker 1: my company. Citos Orbans is a medical device company that
• 7:44
  Speaker 1: specializes in blood purification to treat deadly inflammation often associated
• 7:49
  Speaker 1: with life threatening infection such as influenza, factoral pneumonia, virus
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  Speaker 1: infections potentially like coronavirus, etcetera. UH. Cytosorp is approved in
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  Speaker 1: the European Union, has accumulate more than eighty thousand uses
• 8:01
  Speaker 1: over fifty eight countries UH and has generated about twenty
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  Speaker 1: three million in sales last year. The cold goal of
• 8:07
  Speaker 1: Cytosaur is to control the deadly inflammatory response that these
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  Speaker 1: viral illnesses and bacterial illnesses often generate that can then
• 8:15
  Speaker 1: lead rapidly to organ failure and death of patients from
• 8:19
  Speaker 1: the failure of organs like the heart, the lungs, and
• 8:21
  Speaker 1: the kidneys. Now, in the United States, we are not
• 8:23
  Speaker 1: yet approved. We're still an investigational product, but we are
• 8:26
  Speaker 1: actually in a process. We're in the regulatory process of
• 8:29
  Speaker 1: trying to get approved here in the United States. So
• 8:31
  Speaker 1: in terms of your question about how prepared are we,
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  Speaker 1: I think coronavirus COVID nineteen represents a very unique challenge
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  Speaker 1: because one we've never seen it before, It's a novel infection.
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  Speaker 1: No one has immenity to it. There are no antiviral
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  Speaker 1: agents that are approved to treat it, and there are
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  Speaker 1: no vaccinations approved also to treat it. And the problem
• 8:53
  Speaker 1: with this virus is that it's kind of an insidious virus.
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  Speaker 1: It lays dormant UH and people remain asymptomatic for up
• 9:01
  Speaker 1: to fourteen days. They may have it, they may be
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  Speaker 1: spreading it all over the community, but they would never
• 9:06
  Speaker 1: know that they have it, and so only until they
• 9:08
  Speaker 1: start manifesting the common symptoms of fever, cough, and and
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  Speaker 1: just UH shortness of breath and fatigue that they know
• 9:15
  Speaker 1: that they have it. So this is why, all of
• 9:18
  Speaker 1: a sudden you see these massive outcroppings of virus happening
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  Speaker 1: all over the world, and so in the United States,
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  Speaker 1: I think that we need better ways to prevent the spread,
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  Speaker 1: and I think the initiatives that we heard about recently,
• 9:31
  Speaker 1: the two point five billion dollars that are going towards this,
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  Speaker 1: will be helpful. But prevention and controlling the spread of
• 9:37
  Speaker 1: this outbreak is key, but also is controlling the deadly
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  Speaker 1: complications of lung failure and shock and other things that
• 9:46
  Speaker 1: currently we have no approved therapies to treat today, and
• 9:49
  Speaker 1: that's what Citosorb is doing our product. Have you had
• 9:52
  Speaker 1: conversations with the government about expediting UH the accreditation of
• 9:57
  Speaker 1: your product given what the threat is. Yeah, we've had
• 10:00
  Speaker 1: a longstanding dialogue with MAY many agencies throughout the US government.
• 10:04
  Speaker 1: In fact, we've gotten more than twenty nine million dollars
• 10:07
  Speaker 1: in grants and contracts towards our technology over the years
• 10:10
  Speaker 1: because of that. But we have been in touch, most
• 10:13
  Speaker 1: recently with BARDA, for example, that is leading the charge
• 10:16
  Speaker 1: against developing potential countermeasures against UH coronavirus. We have we
• 10:22
  Speaker 1: are still in the early stages of those discussions, but
• 10:25
  Speaker 1: UM our hope is that UH they understand the fact
• 10:28
  Speaker 1: that there are no approved treatments for this illness and
• 10:32
  Speaker 1: that one of the hallmark features of what is killing
• 10:34
  Speaker 1: people is this out of control immune response, and that
• 10:37
  Speaker 1: is what we are very well positioned to do. Do you.
• 10:40
  Speaker 1: Are you aware of any patients that may have been
• 10:43
  Speaker 1: as part of the treatment outside of the US, may
• 10:45
  Speaker 1: have been prescribed or using your product. So the product
• 10:49
  Speaker 1: again has been used in more than eighty thousand cumulative
• 10:52
  Speaker 1: treatments to date, but we don't have any indication that
• 10:54
  Speaker 1: it's yet been used for coronavirus since it is so new.
• 10:57
  Speaker 1: I think some of the exciting news that we announced
• 11:00
  Speaker 1: today is that through a partnership with China Medical System
• 11:04
  Speaker 1: Holdings Limited in China. UM that we have now UH
• 11:09
  Speaker 1: that hospitals in the Wuhan, China area have now received
• 11:13
  Speaker 1: our Cytosaur product and are well positioned to potentially use
• 11:17
  Speaker 1: this on act on patients with coronavirus infection. We just
• 11:21
  Speaker 1: did the training just very recently of key physicians in
• 11:25
  Speaker 1: those hospitals in the United States, So I can tell
• 11:30
  Speaker 1: you that when we had the swine flu epidemic that
• 11:33
  Speaker 1: the intensive care units, which receives the sickest of the
• 11:37
  Speaker 1: sick patients of the hospital and we're cito survice typically used,
• 11:40
  Speaker 1: were inundated with patients. And UH that is really a
• 11:44
  Speaker 1: key concern should this uh, should this outbreak turn into
• 11:48
  Speaker 1: a full blown pandemic. But I think that UM to
• 11:51
  Speaker 1: put it into perspective. You know, flu this year has
• 11:54
  Speaker 1: already infected thirty million people in the United States alone,
• 11:58
  Speaker 1: killing eighteen thousand people. Right, that's one in two thousand
• 12:02
  Speaker 1: people have died from the flu here in the United States,
• 12:04
  Speaker 1: And even though it was considered a fairly severe outbreak,
• 12:07
  Speaker 1: it's not the worst we've seen. One year when the
• 12:10
  Speaker 1: swine flu outbreak, eighty people died here in the United States,
• 12:13
  Speaker 1: so compare that to coronavirus. It is still the major
• 12:16
  Speaker 1: health concern today. Dr Philip Chan, thank you so much
• 12:20
  Speaker 1: for being with us. Dr Philip Chan, CEO and President
• 12:23
  Speaker 1: of Psyto Sorbins Corporation. Right now, we are looking at
• 12:39
  Speaker 1: a market that has been clying back from some of
• 12:42
  Speaker 1: its earlier losses, although it really is whipping around. NASDAC
• 12:45
  Speaker 1: now had been briefly positive, now down nine tenths of
• 12:49
  Speaker 1: a percent. The key, uh, the key issue here is
• 12:52
  Speaker 1: a lack of conviction, a lack of understanding of the
• 12:55
  Speaker 1: threat that we're dealing with. Michael Tiedenman joining us now
• 12:59
  Speaker 1: chief executi of Officer of Titamin Advisers with billion dollars
• 13:02
  Speaker 1: of assets under management. Michael, there are a lot of
• 13:05
  Speaker 1: calls saying that recession is now likely in the United States,
• 13:09
  Speaker 1: if not globally, as a result of the spread of
• 13:11
  Speaker 1: the coronavirus. Is that becoming your base case? First of all,
• 13:17
  Speaker 1: thank you for having me on such a quiet week.
• 13:19
  Speaker 1: We it's not our base case, but there's no question
• 13:22
  Speaker 1: there's gonna be short term economic impact. What you're really
• 13:25
  Speaker 1: we think the lasting impact will be on lower quality
• 13:28
  Speaker 1: higher lever's businesses that had less room coming into this
• 13:31
  Speaker 1: less room for air. Higher quality businesses with great balance
• 13:34
  Speaker 1: sheets will obviously have an impact, certainly one they can
• 13:39
  Speaker 1: sustain and earn their way out of inventories. You also
• 13:42
  Speaker 1: have to remember, depending on how short this is right now,
• 13:44
  Speaker 1: things are moving so quickly as inventories run off, then
• 13:48
  Speaker 1: you're gonna begin in seeing some supply chain issues that
• 13:51
  Speaker 1: people have been worried about. The big delta going out
• 13:54
  Speaker 1: to three or four weeks will be if demand people
• 13:57
  Speaker 1: stop going in restaurant, if it really if there's a shift,
• 14:01
  Speaker 1: dramatic shift of US service demand and consumer activity. So
• 14:07
  Speaker 1: one of the things that we've been discussing this morning
• 14:09
  Speaker 1: is kind of the market seems to be really pricing
• 14:11
  Speaker 1: in three maybe four rate cuts by the Federal Reserve
• 14:14
  Speaker 1: over the next twelve months. How do you think that
• 14:17
  Speaker 1: Fed's going to try to address what has been a
• 14:21
  Speaker 1: supply issue today but could morph into you know, a
• 14:24
  Speaker 1: demand issue. There's only so much they can do, but
• 14:27
  Speaker 1: I think they will, they will be sensitive to it.
• 14:29
  Speaker 1: I think they're obviously going to be speaking with a
• 14:31
  Speaker 1: lot of corporations and CEOs and the leven idea of
• 14:34
  Speaker 1: any pressures that are throughout the economic system. But I
• 14:37
  Speaker 1: don't think it's that's not that that's a blunt tool
• 14:40
  Speaker 1: when you need a lot of other tools possibility deal
• 14:42
  Speaker 1: with something this. How many frantic phone calls have you
• 14:45
  Speaker 1: fielded from your clients saying should I sell everything? We've
• 14:48
  Speaker 1: had a few, um, but only a few. I think
• 14:51
  Speaker 1: there's always an inverse correlation between phone calls incoming from
• 14:55
  Speaker 1: clients and directions of markets. So this is pretty extreme,
• 14:59
  Speaker 1: but it's been very quick. You know, it's this really
• 15:01
  Speaker 1: a five day dramatic sell off, So it's it's coming.
• 15:06
  Speaker 1: But there's also just a lack of information that everyone has.
• 15:09
  Speaker 1: That's the real issue is that no one can Investors
• 15:12
  Speaker 1: won't make a decision until they understand exactly what their
• 15:15
  Speaker 1: analysis is. Traders have one decision, sell or short, so
• 15:19
  Speaker 1: you've got this sort of one community of people that
• 15:22
  Speaker 1: have a very easy decision to make. In longer term
• 15:24
  Speaker 1: investors are looking in the market that you know, after
• 15:27
  Speaker 1: a fifteen percent corraction, it's still pretty fairly valued. You know,
• 15:31
  Speaker 1: we were here a month ago talking about growth expectations
• 15:33
  Speaker 1: being h we're too high. That seems like a good
• 15:37
  Speaker 1: protection every day. But so the investing base is going
• 15:40
  Speaker 1: to sit and watch and wait, and that doesn't help
• 15:43
  Speaker 1: market short term. So what do you tell those folks
• 15:46
  Speaker 1: who call you up frantically? Um, is it kind of
• 15:49
  Speaker 1: just kind of the we're long term investors here, you know,
• 15:53
  Speaker 1: don't panic, you know, we we do. Luckily, we begin
• 15:57
  Speaker 1: trimming some of our equity positions in Q four exclusively
• 16:01
  Speaker 1: because evaluations, and we always have hedges on, but we
• 16:05
  Speaker 1: actually avalued the hedges not to do the coronavirus just
• 16:08
  Speaker 1: because cost of protection and evaluations in at the end
• 16:12
  Speaker 1: of January. So we have some some good narrative to
• 16:15
  Speaker 1: tell our clients and that there's some protective elements of
• 16:18
  Speaker 1: our portfolio. But ultimately, quality assets survived periods like this,
• 16:22
  Speaker 1: lower quality assets are challenged, and the corporate credit market
• 16:27
  Speaker 1: with gearing and really the high yield market, there's a
• 16:30
  Speaker 1: big imbalance there that this maybe that's that bears watching.
• 16:33
  Speaker 1: That would say that's the one thing that we're going
• 16:35
  Speaker 1: to keep an eye on over the next couple of
• 16:36
  Speaker 1: weeks and months. So the FED very much in focus
• 16:39
  Speaker 1: today as people ramp up their rate cutting expectations. Charles
• 16:43
  Speaker 1: Retzky over at Missoojo Security is putting out a note
• 16:47
  Speaker 1: talking about the last time the FED actually had an
• 16:49
  Speaker 1: inter meeting rate cut was February two and eight. We
• 16:53
  Speaker 1: know what happened after that, UM, But I am wondering
• 16:56
  Speaker 1: from your perspective, is that a sure bed and well
• 17:00
  Speaker 1: that support markets? The FED comes out and does what
• 17:03
  Speaker 1: the what what traders are certainly pricing in, which is
• 17:05
  Speaker 1: more than two rate cuts by June. I think the
• 17:10
  Speaker 1: news flow will still dominate markets. It will be helpful, clearly,
• 17:13
  Speaker 1: it's always helpful. But I think ultimately the the information
• 17:17
  Speaker 1: that is gathered either incrementally positive information about the virus,
• 17:22
  Speaker 1: greater understanding new rules UH and maybe containment of spread,
• 17:27
  Speaker 1: that will have a much more pronounced and back to
• 17:30
  Speaker 1: markets or the converse. So again, I think a monetary
• 17:34
  Speaker 1: tool is helpful. It's certainly helpful of corporations or that
• 17:38
  Speaker 1: are levered and have you know, real interest rates and
• 17:40
  Speaker 1: all of a sudden they may have a sharp drop
• 17:43
  Speaker 1: from the demand. But I think the news from this,
• 17:46
  Speaker 1: it's all about this right now. So how do you
• 17:49
  Speaker 1: typically in your I mean, you can think back that
• 17:51
  Speaker 1: the fourth quarter of eighteen or certainly going back to
• 17:53
  Speaker 1: the financial crisis. But when you see markets falling like
• 17:57
  Speaker 1: this again in fifteen six, just in seven trade days, um,
• 18:02
  Speaker 1: it's kind of that falling knife analogy comes here, and
• 18:04
  Speaker 1: you don't want to be the person catching that falling knife.
• 18:07
  Speaker 1: Do you wait for a day or two of green
• 18:10
  Speaker 1: on the screen before you say, okay, I think this
• 18:12
  Speaker 1: thing might have found bottom. Generally well, from a trading standpoint,
• 18:16
  Speaker 1: three huge down days, high volume days, that's generally a
• 18:19
  Speaker 1: capitulation point. Um. And we're we've seen some of that.
• 18:23
  Speaker 1: I don't think we've seen enough of that candidly, but
• 18:25
  Speaker 1: we're not traders. In the end of Q for eighteen,
• 18:28
  Speaker 1: we saw that as a non fundamental We disagreed with
• 18:31
  Speaker 1: the market analysis that we're entering our session. That's why
• 18:34
  Speaker 1: we added risk exposure at that time. Today where everyone's
• 18:39
  Speaker 1: in a huge void of information. Every you know, you're
• 18:41
  Speaker 1: seeing cancelate this week alone, you look at the news
• 18:43
  Speaker 1: flow about cancelations and people banning, you know, corporations not
• 18:47
  Speaker 1: allowing people to fly out of the country, mean, etcetera.
• 18:50
  Speaker 1: It's expanding. Schools are being getting emails about my kids preschools,
• 18:55
  Speaker 1: and you know, so all this stuff is very fluid. Um.
• 18:59
  Speaker 1: It's uh, it's no, this is not what people are
• 19:02
  Speaker 1: trained analyze. Ultimately, Michael, just lastly to wrap it all
• 19:06
  Speaker 1: up and put a sort of a bow on the day.
• 19:08
  Speaker 1: Today is another day to find a haven investment. What's
• 19:12
  Speaker 1: the best haven big side? Yea, we have such a
• 19:19
  Speaker 1: negative forward view and treasury, so it's been the best
• 19:22
  Speaker 1: haven and gold we own gold. We think that is
• 19:24
  Speaker 1: just but that's not a trade. We think that's just
• 19:26
  Speaker 1: a generally a good asset to have in the mix.
• 19:29
  Speaker 1: So you're basically, uh, putting cash in a mattress and
• 19:32
  Speaker 1: sleeping as well as you possibly. Yeah, I never agreed
• 19:35
  Speaker 1: with the cash is trash quote that came out a
• 19:37
  Speaker 1: couple of months ago. Every great long term investor always
• 19:41
  Speaker 1: has a little liquidity when things like this happen. Interesting, Okay,
• 19:44
  Speaker 1: Michael Teaman, thanks so much for joining us. Michael Taman
• 19:46
  Speaker 1: is a chief executive officer for Team Advisors, twenty one
• 19:49
  Speaker 1: billion dollars under management, so lots of capital in the marketplace,
• 19:54
  Speaker 1: joining us here in our Bloomberg in Direactive broker studio.
• 20:01
  Speaker 1: The message to the Federal Reserve today is we don't
• 20:04
  Speaker 1: care what you say. We are expecting for rate cuts
• 20:08
  Speaker 1: by the end of January. That at least is the
• 20:10
  Speaker 1: impression from markets joining us now to discuss. Brian Schappato
• 20:14
  Speaker 1: is a Blueberg opinion columnist covering all things debt related,
• 20:16
  Speaker 1: and Brian, I'm looking right now, it's nearly a full
• 20:20
  Speaker 1: four rate cuts by the end of January currently priced.
• 20:23
  Speaker 1: And this comes even after Jim Bullard, the Fed's Jim
• 20:27
  Speaker 1: Bullard came out earlier today and basically said, yeah, I
• 20:30
  Speaker 1: guess we'll cut if it's a pandemic, but you know
• 20:33
  Speaker 1: it's too early to know, which wasn't comforting to markets, right. Yeah,
• 20:36
  Speaker 1: the base case is still for keeping policy on hold
• 20:39
  Speaker 1: and for the federal reserve. Not from markets. No, from
• 20:42
  Speaker 1: I mean, I mean markets, like people are hedging effectively
• 20:44
  Speaker 1: for rates hitting the zero bound, like by mid year
• 20:47
  Speaker 1: at this point, which is just kind of nuts. I mean,
• 20:49
  Speaker 1: obviously you've got a hedge, so you don't necessarily the
• 20:52
  Speaker 1: rates to hit zero by then, but I mean it's
• 20:54
  Speaker 1: just kind of crazy. Um, the Fed is not willing
• 20:57
  Speaker 1: to appease the market. It's at least not to this extent.
• 21:01
  Speaker 1: I think it's just a massive market meltdown in a
• 21:04
  Speaker 1: freak out right now, and people are just buying things up,
• 21:06
  Speaker 1: and that's of course causing the pricing to look like
• 21:09
  Speaker 1: there's going to be a lot of cuts. But I
• 21:11
  Speaker 1: mean people talk about inter meeting cuts like happening over
• 21:13
  Speaker 1: the weekend or on Monday morning if stocks keep falling.
• 21:17
  Speaker 1: I just don't see that at all. So but Brian
• 21:19
  Speaker 1: one could argue with a cynical mind, like we have
• 21:22
  Speaker 1: some cynics around. He just pointed to who are Wadio
• 21:27
  Speaker 1: on radio that this is a friend who maybe has
• 21:30
  Speaker 1: responded to the markets, maybe more than they should have.
• 21:33
  Speaker 1: Um still though, you think they're gonna be focusing on
• 21:36
  Speaker 1: the data. Yeah, I mean Robert Kaplan said it's a
• 21:39
  Speaker 1: Fox Business today. He said, I will make a decision
• 21:42
  Speaker 1: on a rate cut by March seventeenth, eighteenth, which is
• 21:44
  Speaker 1: their meeting. And I expect a rate cut at the
• 21:47
  Speaker 1: March meeting. I mean, I don't unless the markets somehow
• 21:49
  Speaker 1: rebound tremendously. I think they would lose a lot of
• 21:52
  Speaker 1: credibility if they don't do anything. But for them to
• 21:55
  Speaker 1: do something extraordinary right now doesn't seem likely. It's not
• 21:58
  Speaker 1: like I think pretty much everyone conclude that one rate
• 22:01
  Speaker 1: cut will not solve the coronavirus, right, and it's unclear
• 22:06
  Speaker 1: whether it's kind of comical. I mean, I mean, I mean,
• 22:09
  Speaker 1: it's unclear whether anybody out there who's pounding the table
• 22:12
  Speaker 1: for a rate cut. I mean, if you've got a
• 22:14
  Speaker 1: basis rate cut this afternoon, would you be buying stocks?
• 22:17
  Speaker 1: I'm not sure. Well, this actually is a really interesting question.
• 22:21
  Speaker 1: What will it take for people to go in buy
• 22:23
  Speaker 1: stocks by risk or debt? I mean you came into
• 22:26
  Speaker 1: the studio and you said, you know, people have been
• 22:28
  Speaker 1: saying they're just waiting for an opportunity to buy the
• 22:30
  Speaker 1: dip here it is. I'm not going to fall I'm
• 22:34
  Speaker 1: not going to catch this falling knife. What do they
• 22:36
  Speaker 1: have to see? What are the people you're talking to saying? Yeah?
• 22:38
  Speaker 1: I mean, it sounds like people just want some clarity
• 22:41
  Speaker 1: around how uh you know, elected officials are gonna get
• 22:45
  Speaker 1: their hands around the coronavirus. And there's nothing that the
• 22:49
  Speaker 1: Fed canoe again. I mean, they have a few options.
• 22:52
  Speaker 1: They can either go back to quee and they're still
• 22:54
  Speaker 1: already buying treasury bills. So for all those who said, oh,
• 22:57
  Speaker 1: you know, they're buying treasury bills and that's causing the
• 22:59
  Speaker 1: stock market to melt up. I mean, they're still doing
• 23:01
  Speaker 1: that but doesn't really matter right now, or they can
• 23:04
  Speaker 1: cut rates, and neither of those things provides any certainty
• 23:07
  Speaker 1: around the coronavirus front. You see Mick Mulvaney come out
• 23:10
  Speaker 1: today and say it's possible schools will have to close
• 23:13
  Speaker 1: in the US and people get really freaked out, like
• 23:15
  Speaker 1: they don't want their daily lives to be affected by this.
• 23:18
  Speaker 1: And even if borrowing costs are the cheapest they've ever been, uh,
• 23:23
  Speaker 1: that's not going to really resolve that concern. So, I
• 23:26
  Speaker 1: mean that kind of goes to the issue. I think
• 23:28
  Speaker 1: what we're seeing maybe in some of this accelerating risk
• 23:31
  Speaker 1: off field, it's just every day is you know, there's
• 23:35
  Speaker 1: another potentially big shoe to drop, and that is, you know,
• 23:38
  Speaker 1: a spread within the U S which we really haven't
• 23:41
  Speaker 1: seen yet. That's the headline risk that I think a
• 23:44
  Speaker 1: lot of traders probably don't want to deal with its
• 23:46
  Speaker 1: hold on a second, do you think that the market
• 23:48
  Speaker 1: that for at the market, that the economy isn't starting
• 23:51
  Speaker 1: to prepare for that? I mean, how many people have
• 23:53
  Speaker 1: you known who've been stockpiling food? Answer to your question
• 23:58
  Speaker 1: is no, I don't think the market is discounted. UM
• 24:01
  Speaker 1: A spread a material spread in the US. But I
• 24:04
  Speaker 1: think that potentially what I think that's just kind of
• 24:07
  Speaker 1: what the market is telling is maybe. And the thing
• 24:08
  Speaker 1: is is you saw Christine Lagarde yesterday come out and say,
• 24:12
  Speaker 1: even on the E c B side, we don't see
• 24:15
  Speaker 1: it necessary monetary policy responses yet, and that you know,
• 24:19
  Speaker 1: she oversees Italy obviously, and Italy has had quite an
• 24:21
  Speaker 1: outbreak over there. So even even people who are overseeing
• 24:26
  Speaker 1: economies that have been hit by this are saying this
• 24:30
  Speaker 1: is not a monetary policy issue. I don't know what
• 24:32
  Speaker 1: you want from US, UM. And that's gonna be really
• 24:35
  Speaker 1: interesting for markets to digest because to the point about
• 24:38
  Speaker 1: last year's rate cuts, I mean, they effectively backstopped a
• 24:42
  Speaker 1: trade war, and trade war could have been stopped by
• 24:45
  Speaker 1: elected officials and this cannot necessarily be so the Fed
• 24:49
  Speaker 1: used a bunch of ammunition on a problem that could
• 24:53
  Speaker 1: be resolved by people relatively easily. UM. And this is
• 24:57
  Speaker 1: gonna be a lot harder branch about it. Thanks so
• 25:00
  Speaker 1: much for joining us. We appreciate your thoughts. We know
• 25:02
  Speaker 1: you are busy. Uh here you can read Brian's a
• 25:05
  Speaker 1: great opinion, work at on the Terminal at O P
• 25:08
  Speaker 1: I n Go, and on Bloomberg dot com slash Opinion.
• 25:13
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 25:15
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 25:18
  Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney. I'm
• 25:21
  Speaker 1: on Twitter at pt Sweeney. I'm Lisa abram Woy. It's
• 25:23
  Speaker 1: I'm on Twitter at Lisa abram woits one before the podcast.
• 25:26
  Speaker 1: You can always catch us worldwide on Bloomberg Radio