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US-China Relations Are The Worst I've Ever Seen: Stephen Orlins · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
• 0:06
  Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
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  Speaker 1: along with essential market moving news. Find the Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. Well, under the Trump administration,
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  Speaker 1: the tensions the with and the relationships with China have
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  Speaker 1: become rather strained. First it was trade tensions, tariffs, uh,
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  Speaker 1: and mostly on the economic front. Now it's kind of
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  Speaker 1: spilling into the political realm as well. We can get
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  Speaker 1: the latest on all things he was China. We can
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  Speaker 1: do that with Stephen Orleans, president of the National Committee
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  Speaker 1: on US China Relations based in New York City. Steven,
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  Speaker 1: thanks so much for joining us here. You've had such
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  Speaker 1: a long history in China, dealing with the US and China,
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  Speaker 1: the relationship they're doing business in China as well. What
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  Speaker 1: if you could give us maybe your thirty thousand foot
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  Speaker 1: view about the US China relationship right now from both sides. Well,
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  Speaker 1: I've been working on it, i guess for forty three years,
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  Speaker 1: since my time in the State Department and at Leban
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  Speaker 1: Brothers in the Carlisle Group and now as President of
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  Speaker 1: the National Committee on US China Relations. And I think
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  Speaker 1: it's fair to say this is the worst that I've
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  Speaker 1: ever seen the relationship. And it's a confluence of three factors,
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  Speaker 1: and you have to look at the factors are related,
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  Speaker 1: but to some degree there's still separate. One. You have
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  Speaker 1: to remember the April seventeenth memo that leaked from the
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  Speaker 1: Republican National Committee, which is when when the administration is
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  Speaker 1: attacked on coronavirus issues there to say we banned Chinese
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  Speaker 1: from coming and then blame China. So there has been
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  Speaker 1: this very strong uh statements by the administration to blame
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  Speaker 1: China for everything. That's that's one, So electoral politics is
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  Speaker 1: a role. Second is what are called of the Navarro
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  Speaker 1: Pompeo parts of the administration um where they really believe
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  Speaker 1: China is an existential threat and they want and it's
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  Speaker 1: going to change our way of life, and they're trying
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  Speaker 1: to put in place policies which are irreversible. And the
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  Speaker 1: third is Chinese actions where their actions in Hong Kong's,
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  Speaker 1: their actions in xin Jong in the South China see
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  Speaker 1: create an environment in the United States where there is
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  Speaker 1: not huge opposition to these policies which get put in place.
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  Speaker 1: And we're seeing pushback on on TikTok on w chat now,
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  Speaker 1: but it's it's um, it's not as strong as it
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  Speaker 1: would be if China wasn't acting the way it shouldn't be. Stephen,
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  Speaker 1: when you say irreversible policies, what do you mean what
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  Speaker 1: can't be reversed? Well, if you take, for instance, the
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  Speaker 1: for sale of TikTok, that's irreversible. So if Microsoft and
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  Speaker 1: ends up buying TikTok, then either a President Trump that
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  Speaker 1: changes his mind or a President Biden can't go to Microsoft.
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  Speaker 1: So how you spent and was just getting you can
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  Speaker 1: you can now reverse that sale. So those kinds of
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  Speaker 1: actions are irreversible, setting kind of a putting in place.
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  Speaker 1: You know, the the Houston consulate closing is not irreversible.
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  Speaker 1: That actually, you know, a new president or President Trump
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  Speaker 1: changes his mind and says, okay, let's reopen the consulate,
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  Speaker 1: and as a result of the American consulate in cheng
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  Speaker 1: Doo will reopen. So there's reversible actions in their irreversible actions.
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  Speaker 1: So Stephen, you know, I think maybe one of the
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  Speaker 1: most reasonable views I've heard is that uh, okay, we
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  Speaker 1: we as the United States, need to take a tougher
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  Speaker 1: stance on China. A lot of people on both sides
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  Speaker 1: of the ais'll agree upon that China has not been
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  Speaker 1: fair and some of its relations, particularly economic and trade
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  Speaker 1: relations with the US. But the way that President Trump
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  Speaker 1: and his administration are going about it, uh is all wrong.
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  Speaker 1: What's your view, It needs to be multilateral. To go
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  Speaker 1: about this unilaterally will not work. So take as an
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  Speaker 1: example one which kind of matters to your listeners, the
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  Speaker 1: blocking of listings of Chinese companies in the United States.
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  Speaker 1: When you do that unilaterally, you're playing whack a mole.
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  Speaker 1: We haven't agreed with Hong Kong, Singapore, Tokyo, London to
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  Speaker 1: have the same restrictions. So what happens is Nasdaq and
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  Speaker 1: ny SE lose that business. The Chinese don't lose anything
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  Speaker 1: that they basically will will issue in Hong Kong, Singapore, London,
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  Speaker 1: or Tokyo. So if you don't have a multilateral approach,
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  Speaker 1: this getting tough is really uh not an effective way
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  Speaker 1: of of of operating. And a lot of the things
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  Speaker 1: they want to get tough on our our, our, our
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  Speaker 1: fictional You know, we have to have a real analysis.
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  Speaker 1: We have to have a nuanced view of what is
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  Speaker 1: going on in China. We don't. We saw today the
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  Speaker 1: Chinese are expanding their digital currency. Central bank digital currency
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  Speaker 1: is now uh it's in an experimental phase, but it's
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  Speaker 1: going to expand greatly. That is a Chinese government competitor
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  Speaker 1: to we chat, an alley pay that the Chinese government
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  Speaker 1: is putting in place, competitors to these people who we
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  Speaker 1: are trying to block in the United States. It's just
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  Speaker 1: not there's no nuance in these views. What's the right
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  Speaker 1: way to proceed. If Joe Biden were to win, and
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  Speaker 1: obviously that's not at all you know, something that we
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  Speaker 1: can predict, how would he proceed? I don't well, he
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  Speaker 1: will have I mean, the biggest difference will be a
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  Speaker 1: multilateral approach that Chinese that a lot of Chinese who
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  Speaker 1: have a there who who believe China should exceed to
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  Speaker 1: be the number one power in the world. Like President Trump,
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  Speaker 1: they feel that his unilateral approaches, you know, his tariffs
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  Speaker 1: on Canada, his his diminution of NATO, a lot of
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  Speaker 1: things where he makes our allies less inclined to work
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  Speaker 1: with US is good for China. That basically lays a
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  Speaker 1: path for China to operate. What President Biden will operate
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  Speaker 1: on is a multilateral approach, and that can be very
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  Speaker 1: problematic for some of China's plans. So if we had
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  Speaker 1: something equivalent to a t p P UH, it would
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  Speaker 1: force China to change its trade policies, it's investment policies,
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  Speaker 1: it's protection of data policies. That t p P had
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  Speaker 1: lots of things in it which China would have had
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  Speaker 1: to agree to in the end or would have been
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  Speaker 1: excluded from this global training system. So I think the
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  Speaker 1: big difference is multilateral versus unilateral. Alright, Steven, thirty seconds left.
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  Speaker 1: What is your view or what do you think the
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  Speaker 1: view is in with within China as it relates to
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  Speaker 1: kind of how they should proceed with the United States
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  Speaker 1: over the next ten years. Well, they're they're worried about
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  Speaker 1: the next eight three days, you know. They they think
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  Speaker 1: that they're they're very focused on not overreacting to the
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  Speaker 1: provocations from the Trump administration. They believe that either a
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  Speaker 1: re elected President Trump or an elected President Biden would
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  Speaker 1: have different policies towards China. I think in the long
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  Speaker 1: term they're looking for China. You know, again, there is
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  Speaker 1: no Chinese government view. It's it's a lack of nuance.
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  Speaker 1: There are people in the Chinese government with different views.
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  Speaker 1: Some want a very constructive, productive relationship with the United States,
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  Speaker 1: some want to confront the United States. So we need
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  Speaker 1: to adopt policies which reward those who want to cooperate
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  Speaker 1: with the United States. And again, you need nuance in
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  Speaker 1: policy and need people who understand China in government to
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  Speaker 1: make those decisions. Stephen, we have to leave it there,
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  Speaker 1: but it is an excellent, you know, chance to speak
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  Speaker 1: with you. Steven Orleans as President of the National Committee
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  Speaker 1: in US China Relations. So we know, we tale that's
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  Speaker 1: had a tough time. It's been having a tough time,
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  Speaker 1: as they say. And now bankruptcies have started in earnest.
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  Speaker 1: Let's bring in somebody who is a bit more at
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  Speaker 1: the cold face of retail and husband for decades, Craig Johnson,
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  Speaker 1: as president of Customer Growth Partners. Craig, where are we
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  Speaker 1: in the bankruptcy you know cycle? Are we halfway through? Yes?
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  Speaker 1: Are we? You done well in terms of the bankruptcies
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  Speaker 1: that occurred so far. We think we're i'd say about
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  Speaker 1: halfway done, maybe fifth or sixth spending. Um. This actually
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  Speaker 1: isn't a sign of unhealth on the behalf of retailers.
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  Speaker 1: It's really a sign of weeding out of the poor
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  Speaker 1: performers and the poor players and what has been a
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  Speaker 1: vastly overcapacity industry that should have been right sizing normally
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  Speaker 1: five every year, weeding out the week stores, the weak competitors,
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  Speaker 1: and has put that up. So what we've had, by
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  Speaker 1: dint of the whole cod but closures is a forced
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  Speaker 1: right sizing, and that's what we're saying. It's interesting, it
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  Speaker 1: seems like when we've listened to a lot of the retailers,
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  Speaker 1: particularly the Parker stores, it seems like over the last
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  Speaker 1: several years we've been hearing announcements of a hundred stores here,
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  Speaker 1: two hundred stores there. Are you saying that that's still
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  Speaker 1: not enough, that this industry really needs a We're still
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  Speaker 1: you know, overstored by maybe thirty in this country. I
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  Speaker 1: would maybe not thirty percent, but by a good And yes,
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  Speaker 1: there have been cutbacks that the department stars. Remember you
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  Speaker 1: go back to generation ago, comprised ten per cent of
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  Speaker 1: the entire retail market. Now it's down to zero point
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  Speaker 1: nine percent. So you do the math, Craig, Who's next? Um,
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  Speaker 1: I'm not I'm not sure who is next. We don't
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  Speaker 1: like to speculate on on on on people going through
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  Speaker 1: chapter eleven. But I can say that you know the
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  Speaker 1: people who are that that are the share gainers of
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  Speaker 1: these companies? Are you know? Round up that the top
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  Speaker 1: six usual suspects, you know, Walmart, Amazon, Costco, Target, Home
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  Speaker 1: depoet lows All, had Stour are having stellar quarters, had
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  Speaker 1: stellar cards, haven't reported still beginning, But we can identify
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  Speaker 1: some of those that have been lagging, right, Craig, I
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  Speaker 1: mean some of those who just were not prepared for
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  Speaker 1: a downturn in the economy, who weren't getting consumer tastes right,
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  Speaker 1: who were maybe over discounting or not discounting enough. I mean,
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  Speaker 1: what were the mistakes? If we can't, if you can't
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  Speaker 1: mention the names, then at least let's mention some of
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  Speaker 1: the mistakes they make. Absolutely, So you take let's take
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  Speaker 1: a couple of department stores where the J C. Panni
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  Speaker 1: your name and markers are most recently like a day
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  Speaker 1: after ago, um Stein mart Um, and the commonality is
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  Speaker 1: is that they did not shrink their store footprint in commencially,
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  Speaker 1: um with the decline in aggregate to man people, just
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  Speaker 1: what department stores offer, even includings Markman markers, is not
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  Speaker 1: as relevant to customers as it was even five years ago,
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  Speaker 1: much less twenty years ago. And um so those are few.
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  Speaker 1: The other part of it as apparel, apparel is shrunk
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  Speaker 1: dramatically over the years in terms of aggregate demand, um,
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  Speaker 1: and yet there still seems to be plenty of retail
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  Speaker 1: square feet out there even after the closes we've had,
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  Speaker 1: uh in the apparel sector. And you know, as the
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  Speaker 1: senior brand, you know, a parent of an Taylor and
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  Speaker 1: Justice and Lost and so forth, they went chapter eleven
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  Speaker 1: months and a half or so ago, and you know,
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  Speaker 1: we're wouldn't be at all surprised, as the other folks
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  Speaker 1: go that way as well. So Craig, I was in
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  Speaker 1: New York City, UH last week for the first time
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  Speaker 1: since the lockdown in March, and I was just shocked
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  Speaker 1: at driving in about you know, all the empty storefronts,
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  Speaker 1: all the sales saying, you know, store front for for
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  Speaker 1: rent and for lease and all that type of stuff.
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  Speaker 1: And I'm I really fear for not so much the
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  Speaker 1: walmarts and costcos of the world on the on the
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  Speaker 1: retail front, but really the mom and pop retailers, it
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  Speaker 1: looks like they're just getting really really impacted here. Yeah,
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  Speaker 1: you're on Fifth Avenue or your lower Fifth and lower
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  Speaker 1: Broadway and soho. Um, it's like a retail ghost town.
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  Speaker 1: It's uh, it's really sad in a sense. Um. But
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  Speaker 1: if customers don't want to go, Joeghi Barritt used to say,
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  Speaker 1: if people don't want to go to the ballpark, you're
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  Speaker 1: not going to stop them. And that's what we have here,
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  Speaker 1: is that people just don't want to go into the city.
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  Speaker 1: They don't feel safe, comfortable, and when they see pa
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  Speaker 1: boarded up and uh, you know, looting going on with it.
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  Speaker 1: I'm I'm in Chicago and originally was very sad to
• 12:30
  Speaker 1: see the entire magnivocent mile just trashed a few days ago.
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  Speaker 1: And well, because I live very clost to certain areas
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  Speaker 1: and and you know, there was some looting in the
• 12:40
  Speaker 1: early days, and then there was a little bit of
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  Speaker 1: looting in Chicago, but let's not overpainted as as mass looting.
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  Speaker 1: Fifth Avenue, for example, back when there are lots of
• 12:48
  Speaker 1: reports that it was being looted, was only in parts damaged,
• 12:53
  Speaker 1: and a lot of the inventory had already been taken
• 12:54
  Speaker 1: out of thanks to coronavirus or just putting that out there,
• 12:59
  Speaker 1: so it's too would maybe, but just consumers. Consumers had
• 13:03
  Speaker 1: great confidence and what's going on, and then we would
• 13:06
  Speaker 1: see more traffic, and without traffic, a lot of these
• 13:09
  Speaker 1: stories are not gonna make it. I mean, yes, the
• 13:11
  Speaker 1: Sacks will make it, and LV is gonna make it,
• 13:14
  Speaker 1: and god knows, Costco and Wombark they're fine. But stories
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  Speaker 1: that don't have that kind of financial strength or customer
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  Speaker 1: strength are going to be challenged. So, Craig, this is pandemic.
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  Speaker 1: I mean, I guess the question for a lot of
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  Speaker 1: retailers is how permanent has the accelerated shift to online shopping,
• 13:31
  Speaker 1: how permanent wi LEPP be, or when we do get
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  Speaker 1: back to quote unquote a normal day to day life,
• 13:37
  Speaker 1: will people go back to stores. What's your view? Well,
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  Speaker 1: UM last year online comprised about eighteen percent of total
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  Speaker 1: retail sales. UH This year at the peak of the
• 13:49
  Speaker 1: pandemic period, UM in April jumped up to about twenty
• 13:54
  Speaker 1: and the since ratchet back a little bit as the
• 13:56
  Speaker 1: stories are reopened in May and June et cetera. Um,
• 14:00
  Speaker 1: so that penetration is down to about But what that
• 14:05
  Speaker 1: means is we have usually online grows about at one
• 14:08
  Speaker 1: point a year ballpark, and what we've done essentially is
• 14:12
  Speaker 1: packed five years of growth into five months. Other with's
• 14:16
  Speaker 1: the eighteen to and so we think things are going
• 14:19
  Speaker 1: to stabilize at about and then proceed to the normal
• 14:24
  Speaker 1: you know about what adding about a point or two
• 14:26
  Speaker 1: a point say a penetration a year, uh, and that
• 14:29
  Speaker 1: is that we think that is a permanent change with
• 14:32
  Speaker 1: this obviously with this ratchet, big ratchet, five point ratchet
• 14:36
  Speaker 1: up this this year very interesting. Really appreciate that. Craig Johnson,
• 14:40
  Speaker 1: thanks so much for joining us. Craig Johnson, President of
• 14:42
  Speaker 1: Customer Growth Partners. Well, we are so fortunate to have
• 14:47
  Speaker 1: the good folks at Johns Hopkins University lend us their
• 14:50
  Speaker 1: time to hear Bloomberg Radio to help us stay educated
• 14:55
  Speaker 1: and stay on the top of the news on what's
• 14:57
  Speaker 1: going on with this virus and remedies and pretend chi vaccines.
• 15:00
  Speaker 1: Lauren Sour has been a great friend to Bloomberg Radio
• 15:03
  Speaker 1: and keeping us up to date on all the latest developments.
• 15:05
  Speaker 1: Lauren is the Assistant Professor of Emergency Medicine at John's
• 15:08
  Speaker 1: Hopson School of Medicine. I should note that Bloomberg School
• 15:12
  Speaker 1: a Public Health is supported by Michael Are Bloomberg, founder
• 15:14
  Speaker 1: of Bloomberg LP and Bloomberg Philanthropies, and this radio and
• 15:17
  Speaker 1: TV station. So, Lauren, let's start a little bit with vaccines,
• 15:22
  Speaker 1: because I'm I'm really I'm just kind of wondering what
• 15:25
  Speaker 1: is going on in Russia. They say they have a
• 15:28
  Speaker 1: COVID vaccine, they say it's safe, but there really hasn't
• 15:32
  Speaker 1: been any real phase three testing. Has there? No, there hasn't,
• 15:37
  Speaker 1: And that is one of the biggest concerns that we
• 15:38
  Speaker 1: have right now. UM, when we look at what's happening
• 15:41
  Speaker 1: in Russia with their vaccine clan UM, it's being rolled
• 15:44
  Speaker 1: out uh without phase three UM, which can lead to
• 15:48
  Speaker 1: a lot of downstream challenges that normally you would see
• 15:51
  Speaker 1: during that phase three process. So UM, different effects that
• 15:56
  Speaker 1: the vaccine can have on a population, different challenges with
• 15:59
  Speaker 1: rolling out just the operational process of rolling out vaccine,
• 16:02
  Speaker 1: and even more safety data is gathered during that phase
• 16:05
  Speaker 1: three as well. And so by skipping that, they not
• 16:08
  Speaker 1: only have the potential to harm the population that is
• 16:12
  Speaker 1: receiving the vaccine, but there are significant downstream effects that
• 16:15
  Speaker 1: can happen as well outside of that specific vaccinated population. Yeah,
• 16:20
  Speaker 1: can you explain a bit further, Lauren as to what
• 16:23
  Speaker 1: that might look like. Sure, So, UM, the vaccine can
• 16:28
  Speaker 1: create UM antibody dependent effects. UM that can impact how
• 16:33
  Speaker 1: the virus spreads in the community for those who have
• 16:36
  Speaker 1: been vaccine those who haven't been vaccinated. In addition their
• 16:40
  Speaker 1: challenges like, uh, if we find that there are safety
• 16:44
  Speaker 1: effects in this broader population, this more diverse population. When
• 16:47
  Speaker 1: we do phase one and phase two studies, we're looking
• 16:50
  Speaker 1: for relatively healthy population with certain levels of potential exposure,
• 16:54
  Speaker 1: and that Phase three moves us into a population that's
• 16:58
  Speaker 1: more representative of the general community, and so we may
• 17:02
  Speaker 1: identify safety challenges that um, we didn't see in those
• 17:06
  Speaker 1: early phases that could could could create dramatic health effects
• 17:11
  Speaker 1: for people who are receiving the vaccine more broadly that
• 17:13
  Speaker 1: we didn't see early. So, Lauren, just we'll just finish
• 17:17
  Speaker 1: up on this Russia aspect, will you? And other folks
• 17:21
  Speaker 1: in the Western the healthcare field, we have the opportunity
• 17:24
  Speaker 1: to kind of see what's going on in Russia. Do
• 17:26
  Speaker 1: you think they're going to be disclosing credible information so
• 17:29
  Speaker 1: that we can even get a read on how this
• 17:31
  Speaker 1: is proceeding. I think that's the hope. You know, we UM,
• 17:35
  Speaker 1: we recognize that we may not have the full picture,
• 17:38
  Speaker 1: but I think, UM, some of the safety information, some
• 17:41
  Speaker 1: of this potential a D issue will be seen UM,
• 17:44
  Speaker 1: whether or not it's seen through the you know, formally
• 17:48
  Speaker 1: transmitted data or more informally through UM observation external observation. UM.
• 17:54
  Speaker 1: We are hoping I think that they that they actually
• 17:58
  Speaker 1: consider coming back to the idea of ducting a phase
• 18:00
  Speaker 1: three trial before they push it more broadly UM. And
• 18:04
  Speaker 1: and I think only time will tell them that, Lauren,
• 18:07
  Speaker 1: where are we in the sort of evolution of the
• 18:11
  Speaker 1: coronavirus across the United States? You know, have we hit peak? Yes?
• 18:16
  Speaker 1: Will there be further peaks? When does it come back
• 18:19
  Speaker 1: to the East coast and in in in bigger numbers.
• 18:23
  Speaker 1: But we have a lot to learn about how the
• 18:25
  Speaker 1: virus is UM going to have potential seasonality or how
• 18:29
  Speaker 1: it will UM come and go UM from the various populations.
• 18:32
  Speaker 1: And some of that also will inform us a bit
• 18:35
  Speaker 1: more about likelihood of reinfection and how immunity lasts. UM.
• 18:39
  Speaker 1: So I think in a lot of places across the country,
• 18:42
  Speaker 1: we are starting to see a leveling off and we
• 18:44
  Speaker 1: hope that that maintains, and we hope that UM that
• 18:47
  Speaker 1: buys us time to create some of these pharmaceutical interventions
• 18:51
  Speaker 1: and improve some of the pharmaceutical interventions like vaccines and
• 18:54
  Speaker 1: some of our therapeutics. You know, therapeutics don't stop outbreaks,
• 18:58
  Speaker 1: they improve outcomes, and so are the vaccine is one
• 19:01
  Speaker 1: of our highest priorities. But we are going to see
• 19:04
  Speaker 1: peaks moving UM, you know, and and communities that seem
• 19:08
  Speaker 1: to have had the viruses under the virus under control
• 19:11
  Speaker 1: have follow on peaks again as people get less get
• 19:15
  Speaker 1: more lenient with their behaviors or their UM, you know,
• 19:18
  Speaker 1: their adherence to these new behaviors, and just the general
• 19:22
  Speaker 1: mixing and the population with the fall UM and the
• 19:25
  Speaker 1: challenges associated with back to school, which were already seeing
• 19:28
  Speaker 1: UM with the potential for UH flu season, and UM
• 19:32
  Speaker 1: with the holidays. So, Lauren, when vaccines do become available,
• 19:38
  Speaker 1: hopefully sometime next year, is the expectation within the healthcare
• 19:42
  Speaker 1: community that I guess vulnerable populations will be targeted first
• 19:47
  Speaker 1: for distribution and then maybe more broadly after that. Yeah,
• 19:51
  Speaker 1: there's several groups working on some different prioritization strategies UM.
• 19:56
  Speaker 1: And this is something that we have done for a
• 19:58
  Speaker 1: long time with a lot of different facts scene. So
• 20:00
  Speaker 1: there are several groups that are are very UM skilled
• 20:04
  Speaker 1: in in this and and can use the population data
• 20:08
  Speaker 1: to prioritize who should get the vaccine first. UM. We
• 20:12
  Speaker 1: do think a lot about our vulnerable communities. We also
• 20:15
  Speaker 1: think a lot about essential personnel, particularly healthcare workers who
• 20:18
  Speaker 1: have that higher level of exposure. UM. And then some
• 20:21
  Speaker 1: of the vaccines the early vaccine data in the Phase
• 20:23
  Speaker 1: three data will help us will help inform these groups
• 20:26
  Speaker 1: on how they target UM their priority rollout. Lauren, what
• 20:31
  Speaker 1: what is the top things that people should watch now
• 20:36
  Speaker 1: that it's sort of back to school era and UM,
• 20:39
  Speaker 1: you know, maybe there's a little bit of fatigue sitting
• 20:41
  Speaker 1: in Yeah. I think it's um, it's a slightly worrying combination.
• 20:46
  Speaker 1: So UM, you know, we we as a country sort
• 20:50
  Speaker 1: of made the choice to reopen broad broad communities and um,
• 20:54
  Speaker 1: you know, things like bars and restaurants, and that I
• 20:56
  Speaker 1: think is impacting our ability now to safely reopen school halls.
• 21:00
  Speaker 1: You know, up to the up to early July, we
• 21:04
  Speaker 1: had about two hundred thousand pieces of COVID nineteen nine kids,
• 21:07
  Speaker 1: and from July to now we have almost the exact
• 21:09
  Speaker 1: same amount. So that's worrisome and I think is indicative
• 21:13
  Speaker 1: of some changes that need to happen with how we
• 21:15
  Speaker 1: safely reopened schools. When you think about that, coupled with
• 21:19
  Speaker 1: possible flu season, um, even if it is a later
• 21:22
  Speaker 1: flu season, because of this distancing, we're very worried, um
• 21:25
  Speaker 1: and we have to pay really close attention to it.
• 21:27
  Speaker 1: Lauren Sawery Johns Hopkins University. Always an absolute pleasure, and
• 21:31
  Speaker 1: thank you for your time. So let's bring in the
• 21:36
  Speaker 1: editor of the Bloomberg Brief on Municipal markets, Joe Mysak.
• 21:39
  Speaker 1: He comes to us in our Interactive broker's studio in
• 21:42
  Speaker 1: New York. Joe, Obviously, the chat about further stimulus is
• 21:47
  Speaker 1: a tiny bit put on polls because actually we're not
• 21:49
  Speaker 1: getting any signals at all out of Washington that there
• 21:52
  Speaker 1: will be further stimulus, but there have to be. Is
• 21:54
  Speaker 1: the MENI market getting ready? Oh wow? Is the topic
• 22:01
  Speaker 1: on everyone's minds, and some people think that yeah, this
• 22:05
  Speaker 1: is gonna get done. Others don't. There was one line
• 22:08
  Speaker 1: in the story we carried today by Bloomberg Billy House,
• 22:14
  Speaker 1: and uh, it was a quote from Mitch McConnell, and
• 22:17
  Speaker 1: it was this. It was it was bizarre, I think
• 22:20
  Speaker 1: he said, quote. Democrats think they smell an opening. They
• 22:24
  Speaker 1: have wanted for years to make Uncle Sam bailout decades
• 22:27
  Speaker 1: of mismanagement at broken policies in places like New York,
• 22:31
  Speaker 1: New Jersey, and California. Not just you know, stop right there,
• 22:37
  Speaker 1: New York, New Jersey, California. These three states make up
• 22:42
  Speaker 1: twenty five percent of the nation's GDP. California is what
• 22:46
  Speaker 1: I think, the fifth largest economy in the world if
• 22:49
  Speaker 1: taken on its own. I don't see where McConnell gets that.
• 22:54
  Speaker 1: New Jersey, yes, is that some pension problems. Surprise you
• 22:57
  Speaker 1: didn't bring up illinoisa there. Uh, certainly should bring up Kentucky,
• 23:01
  Speaker 1: which has a notable pension shortfall problem. Anyway, So yeah,
• 23:06
  Speaker 1: this is this is really the issue on everyone's bend
• 23:10
  Speaker 1: right now. All right, Joe, you mentioned the great state
• 23:12
  Speaker 1: of New Jersey. I'm sitting smack dab in that state
• 23:15
  Speaker 1: right now, and I saw some news recently that the
• 23:17
  Speaker 1: top court approved the state's planned to borrow up to
• 23:21
  Speaker 1: I guess close to ten billion dollars to cover its deficit.
• 23:24
  Speaker 1: What does the meaning bond market think about that? Well,
• 23:28
  Speaker 1: you know, I'll tell you we have almost microscopic yields
• 23:34
  Speaker 1: right now. And to the extent that New Jersey sells
• 23:40
  Speaker 1: all the bonds part of them. Um, and there's any
• 23:44
  Speaker 1: kind of yield at all attached to him. Uh, you know,
• 23:47
  Speaker 1: marketed either right up. Because New Jersey again it's I think,
• 23:51
  Speaker 1: uh number eight, eight, eight or nine in the rankings
• 23:55
  Speaker 1: of states listed by g d P. So you know,
• 23:58
  Speaker 1: New Jersey is a is a it's a little financial
• 24:01
  Speaker 1: engine too, if you will, you know, yeah, they've had
• 24:04
  Speaker 1: problems with the pension and problems with the budget. Murphy
• 24:07
  Speaker 1: governor Worthy seems like, you you know, kind of a
• 24:10
  Speaker 1: steady hand at the wheel. Um. So yeah, I had
• 24:13
  Speaker 1: to walk. I would eat these up because right now
• 24:15
  Speaker 1: the market is uh, you know, we haven't seen a
• 24:18
  Speaker 1: tremendous amount of supply, so yeah, these are the marketing
• 24:22
  Speaker 1: got up, Joe. I mean remember when Mary do with
• 24:27
  Speaker 1: he made that prediction way back after the financial crisis,
• 24:31
  Speaker 1: and you know it sort of could have gone either way.
• 24:33
  Speaker 1: I mean a lot of people believe what she had
• 24:35
  Speaker 1: to say and thought that armageddon was coming for municipalities.
• 24:38
  Speaker 1: Is there any chance that that something like that is
• 24:41
  Speaker 1: on the horizon now? You know, Yeah, that's a the
• 24:47
  Speaker 1: doomsday scenario. It always comes around. And I talked to
• 24:52
  Speaker 1: you know, this week, I talked to Paul Bolloy and
• 24:55
  Speaker 1: Vanguard Group and he manages twillion dollars plots, which is
• 25:01
  Speaker 1: the size and in my market, and uh, he doesn't
• 25:06
  Speaker 1: see it. And the reason it is because uh, states
• 25:10
  Speaker 1: and localities of providing funding for essential services, so they're
• 25:14
  Speaker 1: an absolute must for the economic recovery. And he says
• 25:20
  Speaker 1: that he sees that Congress will do something, Congress will
• 25:23
  Speaker 1: stop being intransigent and uh, you know, so eventually there
• 25:29
  Speaker 1: will be some some rescue money there some release because
• 25:32
  Speaker 1: the alternative is uh, you know, to all we will
• 25:35
  Speaker 1: think about uh you know, but but really what would
• 25:38
  Speaker 1: that mean? You would need some of the faults? Uh
• 25:41
  Speaker 1: you know, maybe you know he's a couple of Chapter
• 25:45
  Speaker 1: nine bankruptcies at the local level. Um, you know that,
• 25:49
  Speaker 1: but but a whole the doomsday scenario is so oversold
• 25:53
  Speaker 1: and not accurate when it comes to meetings. So I know,
• 25:57
  Speaker 1: before the pandemic hit, the taxable municipal bond market was
• 26:01
  Speaker 1: red hot. We had lots of international buyers coming into
• 26:04
  Speaker 1: that market, just desperate for yield. How's that market trading
• 26:08
  Speaker 1: right now? How's the fund slows the new issuance? How's
• 26:10
  Speaker 1: that market looking to you? Oh? Baby, taxable bonds are
• 26:14
  Speaker 1: are you know, it's like the it's the flavored d
• 26:17
  Speaker 1: jur in the medi market right now. Because municipalities, you know,
• 26:21
  Speaker 1: fund that rates are solo, they could sell taxable bonds,
• 26:24
  Speaker 1: which as you say, are attractive to uh, out of
• 26:27
  Speaker 1: country buyers as well as in country buyers. Um, they
• 26:31
  Speaker 1: could sell those taxable and refund advanced refund bonds that
• 26:37
  Speaker 1: they sold the tax exempt market a few years ago,
• 26:39
  Speaker 1: three four or five years ago. And of course the
• 26:43
  Speaker 1: most recent tax Act prohibited the use of the tax
• 26:46
  Speaker 1: exempt financing for advance refundings. So, yeah, taxables are going crazy,
• 26:51
  Speaker 1: and you know one of they uh you know it's uh,
• 26:54
  Speaker 1: you know, it's a portion of the market. Maybe it's
• 26:57
  Speaker 1: six hundred and fifty billion out of the point nine
• 27:00
  Speaker 1: truly beauty market. But I read a report this week
• 27:03
  Speaker 1: that you are an analyst said, you can easily see
• 27:05
  Speaker 1: it go off to you know, nine hundred billion portion
• 27:08
  Speaker 1: of the market in the next couple of years here,
• 27:10
  Speaker 1: So yeah, it's just we'll keep an eye on that.
• 27:13
  Speaker 1: Joe Mai Sak. Thank you once again, Joe Mesac, edit
• 27:17
  Speaker 1: editor Bloomberg Brief, keeping us up to date on all
• 27:19
  Speaker 1: things going on a must the bond market. Thanks for
• 27:23
  Speaker 1: listening to Bloomberg Markets podcast. You can subscribe and listen
• 27:26
  Speaker 1: to interviews at Apple Podcasts or whatever a podcast platform
• 27:30
  Speaker 1: you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn,
• 27:34
  Speaker 1: and I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
• 27:36
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 27:39
  Speaker 1: Bloomberg Radio.