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The Fed Should Go Negative: Former Fed President Kocherlakota · 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
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  Speaker 1: we bring you the most noteworthy and useful interviews for
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  Speaker 1: you and your money, whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple
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  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:18
  Speaker 1: that Bloomberg dot Com. Time for Bloomberg Opinion right now,
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  Speaker 1: we turned to Bloomberg Opinion calumnist Narayana culture Lakota, former
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  Speaker 1: Minneapolis FED president also a professor of economics at the
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  Speaker 1: University of Rochester. Uh Nariana, thanks so much for joining
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  Speaker 1: us here. Boys, we think about the response to the pandemic.
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  Speaker 1: The US Federal Reserve Bank, I think is generally getting
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  Speaker 1: very good marks from the marketplace in terms of acting early,
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  Speaker 1: acting acting decisively. But you make the argument that the
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  Speaker 1: Fed should really consider going negative in terms of interest rates.
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  Speaker 1: Give us your thoughts there. Yeah, thanks a lot for
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  Speaker 1: having me on. Um. You know, I think the chairman
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  Speaker 1: laid out the case pretty well on it'ss conference, so
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  Speaker 1: he certainly didn't go make the next step of actually
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  Speaker 1: going negative with rates which is he said that the
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  Speaker 1: FED has to be prepared to use all its tools
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  Speaker 1: to support the economy and the recovery that we hope
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  Speaker 1: it will be coming soon, and that that um that
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  Speaker 1: means include to me means including going negative with rates. UH.
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  Speaker 1: Pushing rates down further would stimulate spending um and stimulate
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  Speaker 1: on the part of the households and stimula investment on
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  Speaker 1: the part of businesses as it always does, and that
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  Speaker 1: would be helpful for the for the U S economy.
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  Speaker 1: What is your view? I mean, I guess you know,
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  Speaker 1: people look at say Japan, Germany, you know, developed countries
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  Speaker 1: with negative rates. It just doesn't seem right, doesn't seem
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  Speaker 1: like the right strategy, the right policy. How do you
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  Speaker 1: view this negative and interstrates in general? You know, I
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  Speaker 1: think what's what's happened is that economies turned to them,
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  Speaker 1: as would be true in the US case, whence the
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  Speaker 1: situation is bad. So you can't just look at a
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  Speaker 1: raw correlation between who's using negative rates and the what
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  Speaker 1: their situations like and say, gee, it looks like all
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  Speaker 1: the countries that that have negative rates have are not
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  Speaker 1: doing that well economically. Well, that's because they view them
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  Speaker 1: as this emergency tool they only turn to when when
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  Speaker 1: the situation is going badly. Um. The other problem is
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  Speaker 1: that there're there's a limit to how negative to being
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  Speaker 1: able to go, are willing to go in something? In
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  Speaker 1: some instances, and you know, a quarter percentage point are
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  Speaker 1: fifty basis point cut in interest rates. It's helpful, it's supportive,
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  Speaker 1: but it's absolutely not a panacea for all possible economic ills.
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  Speaker 1: That's the US ever done that for any appreciable amount
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  Speaker 1: of time as a policy matter before. Uh, you know,
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  Speaker 1: now you're taking a little bit out of my knowledge base.
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  Speaker 1: But my understanding is that rates did go negative for
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  Speaker 1: some time in the during the Great Depression. But but
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  Speaker 1: other than that, no, I don't think right, it's not
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  Speaker 1: something typically in the toolbox for the US FED. So
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  Speaker 1: one of the things when we think about the actions
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  Speaker 1: by the FED, UM, is that the concern or the expectation,
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  Speaker 1: the assumption is that this pandemic has relatively short life
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  Speaker 1: measured in quarters. How about if it you know, if
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  Speaker 1: it's just one in a series of waves of this
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  Speaker 1: virus and actually goes much longer, what does the FED do? Then?
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  Speaker 1: I think that's a great question. I think the FED
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  Speaker 1: and Congress. Uh, you know, I think and and Treasury.
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  Speaker 1: I think there's you know, there's basically been been all
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  Speaker 1: these entities in the government I've been working together. The
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  Speaker 1: perspective is by the time we get into this to
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  Speaker 1: the certainly we get into the fourth quarter of the year, um,
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  Speaker 1: the economy is going to be in a very robust
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  Speaker 1: recovery path and uh, they won't need the further further
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  Speaker 1: back stopping from from the FED at that point. And
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  Speaker 1: I think that's led the FED in other entities to say, boy,
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  Speaker 1: the main job here is to keep businesses alive, try
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  Speaker 1: to freeze the economy where it was in February. Well,
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  Speaker 1: that might be acceptable if you're talking about three or
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  Speaker 1: four months intervention, but if you're talking to three ten years,
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  Speaker 1: I mean ten is obviously quite extreme, but to three
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  Speaker 1: years even you're really getting in the way of the
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  Speaker 1: dynamic flow and processes that really drive us economy. Where
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  Speaker 1: we want companies to go out of business because they're
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  Speaker 1: not as being as effective at fulfilling what consumers want.
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  Speaker 1: And we want workers to be able to move from
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  Speaker 1: job to job, um, because they're not there may be
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  Speaker 1: more productive that new job than they were the old one.
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  Speaker 1: So I worry that, uh, these these interventions are really
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  Speaker 1: designed to be temporary. As the shock becomes more persistent,
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  Speaker 1: they're gonna introduce more and more distortions in the economy,
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  Speaker 1: leading to to worsten worse outcomes. So just real quick seconds,
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  Speaker 1: what do you think about the Fed's decision to kind
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  Speaker 1: of go into the corporate bond market. Yeah, I think
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  Speaker 1: that it's uh uh, I think that the So it's
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  Speaker 1: a questionable one because I think of the fact that basically,
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  Speaker 1: I think companies should be facing a lot of risk
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  Speaker 1: right now, it's appropriate for them to be borrowing at
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  Speaker 1: high interest rates because it's a very risky world. I
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  Speaker 1: think the Fed's intervention is getting in the way of
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  Speaker 1: that signal from the market. Interesting enough to see how
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  Speaker 1: that plays out in the coming weeks and months. In
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  Speaker 1: Narayana Culture Lakota, former Minneapolis FED president and Bloomberg Opinion columnists,
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  Speaker 1: also professor of economics at the University of Rochester, we
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  Speaker 1: appreciate uh you coming on. You can uh read all
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  Speaker 1: of Narayana's work at Bloomberg dot Com, Slash Opinion, and
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  Speaker 1: O P I n Go. That's where you can find
• 5:44
  Speaker 1: all of the Bloomberg Opinion work, which is so good
• 5:47
  Speaker 1: and we love having the folks on here talking about
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  Speaker 1: kind of what is going on in the markets in
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  Speaker 1: the broader implications for the markets. Well, we're right in
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  Speaker 1: the midst of earning season. We've gotten a lot of
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  Speaker 1: the numbers coming had a big tech last night. We
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  Speaker 1: had Amazon and Apple, uh some some big numbers. Next
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  Speaker 1: week we have some more a lift in Uber and
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  Speaker 1: some other names. Dan i'ves, managing director equity research at
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  Speaker 1: what but Securities is a fantastic person to chat with
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  Speaker 1: when we think about big tech. Dan, thanks so much
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  Speaker 1: for joining us here. Let's start with those Apple numbers
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  Speaker 1: last night. I guess all in all, pretty solid numbers, right, yeah,
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  Speaker 1: better than feared. I mean investors including ourselves were respecting
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  Speaker 1: a horror show a Friday the thirteen type quarter, just
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  Speaker 1: giving the pandemic and the supply chain issues, and when
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  Speaker 1: you ripped the band aid off was better than expected.
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  Speaker 1: And I think you combine that with at least some
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  Speaker 1: you know, ways of hoop in China from a demand perspective,
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  Speaker 1: I think that was enough for investor to network on
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  Speaker 1: the other side of this dark valley and by the
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  Speaker 1: stock so Dan, what do you make of them? I guess,
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  Speaker 1: you know, not giving guidances, that's I mean, obviously a
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  Speaker 1: lot of companies are not giving guidance, but for Apple, uh,
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  Speaker 1: that's pretty unusual. They usually been pretty solid about giving
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  Speaker 1: you at least a range of guidance in terms of
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  Speaker 1: some of the big items. Yeah, it's unprecedented for Apple,
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  Speaker 1: and I think for many companies. And I think the
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  Speaker 1: knee jerk you saw last night with the stockdown, and
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  Speaker 1: I've talked to some investors that are worried about that,
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  Speaker 1: but I take a step back. I mean, right now,
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  Speaker 1: when you look at June quarter, given all the variables,
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  Speaker 1: all the demand issues, it would be like cook playing
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  Speaker 1: a game of blindfolded darts to give guidance for June,
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  Speaker 1: and I think that would be imprudent. And I think
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  Speaker 1: right now Moose investors are looking past June into September,
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  Speaker 1: into next year. That's what the valuations offer. And the
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  Speaker 1: important thing is services. That's the rocket Gibraltar for Apple.
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  Speaker 1: I mean, that's continuing to be very strong. That midteam
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  Speaker 1: growth that's something like in live actually be focused on
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  Speaker 1: along with China. So Dan, I know there's been some
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  Speaker 1: discussion about some of the new products, A mid price phone,
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  Speaker 1: uh five G phone, you know, perhaps a new supercycle
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  Speaker 1: if you will, for the five G phone pandemic, this crisis,
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  Speaker 1: this economic uncertainty impacting those product rollouts. Yeah, that's really
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  Speaker 1: I think the bigger question. If you look at what
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  Speaker 1: we're seeing with unemployment, the average consumer focus more about
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  Speaker 1: their health, groceries and hand sanitized and their thousand now
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  Speaker 1: our plus iPhones. What does the man look like over
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  Speaker 1: the next six, twelve, eighteen months, you know, and I
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  Speaker 1: see at least right now from our data points in Asia,
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  Speaker 1: it's showing that this is going to be what I
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  Speaker 1: would call a moderate products cycle, not the initial supercycle
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  Speaker 1: from five G, but it's a two parts supercycle which
• 8:39
  Speaker 1: goes in two thousand twenty one. I mean, you'll see
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  Speaker 1: about ten to fifteen percent taken off units. But when
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  Speaker 1: you look at that, you have nine million I phones.
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  Speaker 1: Just to put numbers around it, three hundred fifty million
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  Speaker 1: of those iPhones have not upgraded their phone in forty
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  Speaker 1: two months, so there's massive pent up demand. But that's
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  Speaker 1: us and why they have the lower end version on
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  Speaker 1: the FD with three nine nine price points, which could
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  Speaker 1: be attractive to many consumers in this type of environment.
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  Speaker 1: All right, da, in time we have Left, I want
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  Speaker 1: to switch gears a little bit. We've got Uber and
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  Speaker 1: Lift coming up earnings wise. Boy, when you think about
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  Speaker 1: those companies, um, I just is there's just no demand
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  Speaker 1: for those products? Is that just kind of dry up?
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  Speaker 1: What's the status of Lift and Uber? It's a category
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  Speaker 1: five storm. I mean when you think about the gig
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  Speaker 1: economy from an Airbnb to Uber and left, they're really
• 9:32
  Speaker 1: in the eye of the storm. Now for Uber uber Eats,
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  Speaker 1: which was really i'd say the black cloud on the
• 9:39
  Speaker 1: story has now actually become a benefit. But this is
• 9:43
  Speaker 1: another one'll ride. We cut our numbers. Wow, But I
• 9:47
  Speaker 1: think it's one where you look, if you look at
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  Speaker 1: the valuation, can they navigate through the small equity perspective?
• 9:53
  Speaker 1: We think the answers yes, and then you look at
• 9:56
  Speaker 1: obviously a much more moderate growth profile. But I think
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  Speaker 1: it's a pro offitable one and it's one of these
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  Speaker 1: investors they're looking out six twelve, eighteen months with an
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  Speaker 1: Uber with you in a semi normalized environment obviously one
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  Speaker 1: that has you know, just massive uncertainty abound. So as
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  Speaker 1: you talk to the companies and Dan, are they concerned
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  Speaker 1: at all about consumer behavior? May there may be some
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  Speaker 1: permanent changes to consumer behavior that will either work in
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  Speaker 1: the favor or maybe against the kind of the ride
• 10:28
  Speaker 1: hailing business model in general. Yeah, in terms of the
• 10:32
  Speaker 1: gig economy and ride handling, it's all headwards. I mean,
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  Speaker 1: there's really no glimmer of positive in this environment. I
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  Speaker 1: think they're from a business model perspective, going to have
• 10:42
  Speaker 1: to do things to get consumers comfortable with the sefety
• 10:45
  Speaker 1: of the vehicles. From a COVID perspective, and there are concerns,
• 10:50
  Speaker 1: and I think there's one when you look at ride
• 10:53
  Speaker 1: charns what the market opportunity looks like on the other
• 10:56
  Speaker 1: side of this dark valley, And I think you're gonna
• 10:58
  Speaker 1: have tend to sifteam scent of consumers that will not
• 11:02
  Speaker 1: get into a ride sharing vehicle, let alone maybe a
• 11:05
  Speaker 1: taxire or mass transportation. So that's definitely a big issue
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  Speaker 1: here that needs to be navigated for these comings. But
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  Speaker 1: next week leaches the first step to getting some visibility here.
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  Speaker 1: And just real quick twenty seconds, how are the balance
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  Speaker 1: sheets right now? The balance sheets? We they'll get through
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  Speaker 1: the storm, and I have some more equity perspective. But
• 11:27
  Speaker 1: they're gonna have to cut cost. I mean it's gonna
• 11:29
  Speaker 1: be some you know, some pain ahead from a cost
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  Speaker 1: kind of perspective. Hey, Dan, thanks so much for joining us.
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  Speaker 1: We always appreciate your perspective on all things technology. Dan
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  Speaker 1: ives is a senior technology analys for web Bush Securities. Uh.
• 11:42
  Speaker 1: You know, we had some good numbers out of Apple,
• 11:44
  Speaker 1: and as Dan was suggesting here, the business model, uh,
• 11:46
  Speaker 1: is pretty robust when you take a look at the Apple,
• 11:50
  Speaker 1: when you take a look at the new products they
• 11:51
  Speaker 1: have coming as well as the growth of their services business,
• 11:54
  Speaker 1: which is Dan has said has really been kind of
• 11:56
  Speaker 1: the bedrock for the company and the growth story going
• 11:59
  Speaker 1: for or so Apple some solid results stock after trading
• 12:02
  Speaker 1: off initially kind of coming back so uh, investors kind
• 12:05
  Speaker 1: of looking towards the other side of that right now.
• 12:12
  Speaker 1: We're taking a look at the markets. Uh, you know,
• 12:14
  Speaker 1: a red day in the markets here when you take
• 12:15
  Speaker 1: a look at the SMP five thirty three decline that
• 12:20
  Speaker 1: sell off we had as a pandemic really became apparent
• 12:23
  Speaker 1: for investors. We clawed back almost half of that. The
• 12:25
  Speaker 1: question is where do we go from here to help
• 12:28
  Speaker 1: us with that we welcome uh and Witty Bahuguna. Uh.
• 12:31
  Speaker 1: She is a head of multi asset strategy at Columbia
• 12:34
  Speaker 1: thread Needle Investments. Uh, and Witty, we thank you so
• 12:37
  Speaker 1: much for joining us here. I think a lot of
• 12:39
  Speaker 1: investors are just trying to get a handle on has
• 12:41
  Speaker 1: the market bounced back too much? Given what we are
• 12:45
  Speaker 1: seeing in terms of macro economic data, given what we're
• 12:48
  Speaker 1: seeing in terms of eight earnings and lack of earnings forecast?
• 12:52
  Speaker 1: How do you what do you make of the market
• 12:53
  Speaker 1: right here? And Witty Hi, Paul um, Yes, I think
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  Speaker 1: the rebound from the often we saw in March have
• 13:01
  Speaker 1: been spectacular. Part of it understandable given the amount of
• 13:08
  Speaker 1: monetary and physical support we have seen announced since the
• 13:13
  Speaker 1: crisis began. But the speed of the rebound have been
• 13:18
  Speaker 1: spectacular and does seem a bit ahead of fundamental given
• 13:22
  Speaker 1: what lies ahead for the next forceable couple of quarters
• 13:27
  Speaker 1: at least. Paul, alright, so it's really interesting here again
• 13:32
  Speaker 1: we had to these incredible gyrations down first and then up.
• 13:36
  Speaker 1: How do you How should investors, to the extent they
• 13:39
  Speaker 1: want to look to the other side of this pandemic,
• 13:42
  Speaker 1: how should they be positioning themselves right here. So I
• 13:47
  Speaker 1: think if you're thinking twelve to eighteen months ahead, where
• 13:52
  Speaker 1: we hopefully Paul have much clarity on UM, not just
• 13:57
  Speaker 1: the not not just how they NOMY will respond, but
• 14:01
  Speaker 1: whether we have some sort of vaccine or therapeutics to
• 14:06
  Speaker 1: help the economy open up substantially, not just gradually. I
• 14:12
  Speaker 1: think twelve months to eighteen months ahead we should not
• 14:16
  Speaker 1: see much difference in our positioning we I think we
• 14:19
  Speaker 1: should see equities, big bonds and your standard as a
• 14:22
  Speaker 1: allocation will make sense looking ahead look twelve to eighteen months.
• 14:27
  Speaker 1: But in the short term, the bounce back has been,
• 14:31
  Speaker 1: as you mentioned, spectacular and appears a bit ahead of
• 14:35
  Speaker 1: where the fundamentals are currently. So looking a few quarters ahead,
• 14:39
  Speaker 1: I think it's probably best to be a little more
• 14:41
  Speaker 1: cautiously positioned UM and think about how this economy opens up,
• 14:50
  Speaker 1: and what do we see in terms of people coming back,
• 14:53
  Speaker 1: consumers spending again, businesses opening up, and the production take off.
• 14:59
  Speaker 1: And cautially yeah, exactly, because one of the things that
• 15:01
  Speaker 1: I know is has many economists and investors concerned is
• 15:05
  Speaker 1: just the state of the labor market. This is a
• 15:08
  Speaker 1: consumer driven economy and we've had boy over thirty million
• 15:11
  Speaker 1: jobs lost just in the last five to six weeks,
• 15:15
  Speaker 1: just stunning, stunning numbers. Um, how does that suggest to
• 15:19
  Speaker 1: you that this economy will come back? How are you guys?
• 15:23
  Speaker 1: What's your base case for how the economy uh will bottom?
• 15:26
  Speaker 1: Where will bottom? And how will come back up? So
• 15:30
  Speaker 1: that is the key question everyone's asking these days, and
• 15:33
  Speaker 1: our base cases that we will not see a V
• 15:35
  Speaker 1: shaped rebound in the economy. Now, the markets may behave differently, Paul,
• 15:40
  Speaker 1: and as you can see, they already are, but the
• 15:43
  Speaker 1: economy will most likely see a protracted recovery. The numbers
• 15:48
  Speaker 1: you mentioned are stunning. These are very expected though, because
• 15:52
  Speaker 1: this is a policy induced shutdown of the economy. Um.
• 15:57
  Speaker 1: So we are encouraging people not to work. But the
• 16:03
  Speaker 1: recovery will be from from those levels of unemployment is
• 16:07
  Speaker 1: never quite immediate. Companies go out of business, it takes
• 16:12
  Speaker 1: a time to restart. Employment takes time, some people decide
• 16:16
  Speaker 1: to leave the labor force. All those dynamics makes us
• 16:19
  Speaker 1: think that this will be a protracted, you shaped or
• 16:25
  Speaker 1: um slower recovery then, UM, then then you then you
• 16:29
  Speaker 1: would think if it was a simple exogenous shock. I
• 16:33
  Speaker 1: think what would be really critical is to build people's
• 16:36
  Speaker 1: confidence to come back to um to to to sports arenas, theaters,
• 16:42
  Speaker 1: and and start enjoying life again, which drives a large
• 16:45
  Speaker 1: part of the U S economy, and we expect that
• 16:49
  Speaker 1: will be a slow process. Now, what would completely change
• 16:52
  Speaker 1: the dynamics is that if we have a sure um
• 16:56
  Speaker 1: medical solution to all this, as you can see if
• 16:59
  Speaker 1: pisotic leave, when we get some confidence that there will
• 17:02
  Speaker 1: be a vaccine, there will be a heteropeutic drug that
• 17:05
  Speaker 1: helps us fight even the even the virus if someone
• 17:09
  Speaker 1: gets it. Those sort of medical developments can change the
• 17:12
  Speaker 1: dynamic very quickly. But right now our expectations are that
• 17:17
  Speaker 1: those are slower movie uh solutions and and likely we
• 17:22
  Speaker 1: are going to see it retracted. And I'm sorry I
• 17:26
  Speaker 1: have to interrupt here. We have to go to Connecticut
• 17:29
  Speaker 1: Governor Ned Lamont and Witty Bahuguna head a multi asset strategy,
• 17:32
  Speaker 1: Columba thread Little thanks so much. Well, we're looking as
• 17:38
  Speaker 1: we hear more and more from state governors around the country,
• 17:40
  Speaker 1: where you're really coming to get us get a sense
• 17:43
  Speaker 1: of the fiscal pressures put upon state and local municipal budgets.
• 17:47
  Speaker 1: Of question is what does that mean for the municipal
• 17:49
  Speaker 1: bond investors that have been supporting uh, these entities to
• 17:52
  Speaker 1: do that. We welcome Joe my sec He covers all
• 17:56
  Speaker 1: things municipal bonds for Bloomberg Briefs. Joe, thanks so much
• 17:59
  Speaker 1: for joining us again. So let's talk about this the
• 18:04
  Speaker 1: I guess the stress that states are being put under
• 18:08
  Speaker 1: the finances of these states and how much can the
• 18:10
  Speaker 1: federal government actually help them out. Well, nice to be
• 18:15
  Speaker 1: with you, Mr Sweeney. Um, you know, it's uh that
• 18:19
  Speaker 1: the federal government is so far providing help in the
• 18:26
  Speaker 1: form of basically no borrowing from the Fed, but it's
• 18:29
  Speaker 1: also now looking at possibly one trillion dollar package. This
• 18:34
  Speaker 1: is going to be next uh you know aid package.
• 18:38
  Speaker 1: Nancy Pelosi said she's heard that there are demands were
• 18:42
  Speaker 1: up to a trillion dollars. So we'll see, um, you know.
• 18:46
  Speaker 1: Then you know in Congress they're not they're not meeting
• 18:51
  Speaker 1: right now about it, and the states and municipalities are
• 18:54
  Speaker 1: really uh in a spot they're they're looking forward to
• 18:57
  Speaker 1: getting some of this money. Well, it's in interesting what
• 19:00
  Speaker 1: we've seen, Joe, as you well know, is this virus
• 19:03
  Speaker 1: is has not you know, been equal across the country.
• 19:05
  Speaker 1: Certain hotspots, whether it's on the coast or something like that,
• 19:08
  Speaker 1: in states like New Jersey, Connecticut, Uh, New York certainly
• 19:13
  Speaker 1: even California, you know, bearing a higher a brunt of
• 19:17
  Speaker 1: this than some other states. How the securities how he
• 19:20
  Speaker 1: missed a bond market kind of treated some of those
• 19:22
  Speaker 1: high risk states. Uh, you know, it's it's uh, you know,
• 19:27
  Speaker 1: the bond market right now is uh, it's it's it's
• 19:32
  Speaker 1: trying desperately to get back to normal. So we've seen
• 19:37
  Speaker 1: sales new issue sales the last you know, three weeks
• 19:40
  Speaker 1: or so, it's wee or four weeks. So we've we've
• 19:42
  Speaker 1: seen people come to market. Um, we haven't seen uh,
• 19:47
  Speaker 1: you know, ballout spreads. But you know, you talk about
• 19:50
  Speaker 1: the states under pressure, you know, it's obviously you know,
• 19:53
  Speaker 1: a good idea for for New Jersey not to come
• 19:56
  Speaker 1: to market, you know, possibly right now, although it's as
• 20:00
  Speaker 1: similarly enough, Illinois plans to come to market in a
• 20:03
  Speaker 1: couple of weeks. And another issue I wrote about today, Uh,
• 20:08
  Speaker 1: the Metropolitan Transportation Authority is coming to market next week,
• 20:12
  Speaker 1: which is sort of astounding because these you know, Illinois
• 20:17
  Speaker 1: and the m T a h in addition to New
• 20:20
  Speaker 1: York city, of course, have been sort of the faces
• 20:22
  Speaker 1: of the pandemic so far. What kind of premium are
• 20:26
  Speaker 1: they will they have to pay? Do you think to
• 20:28
  Speaker 1: get back into the market given what's really changed for
• 20:31
  Speaker 1: their finances in their states? Wow? Okay, so Illinois. Uh,
• 20:37
  Speaker 1: they are about four other basis points over the triple
• 20:41
  Speaker 1: A benchmark in ten years now, so you know that's
• 20:45
  Speaker 1: in the five maybe in the sixes, uh, which you
• 20:49
  Speaker 1: know right now the triple A bench markets at one
• 20:53
  Speaker 1: forty two, So that's what you're getting one of forty
• 20:55
  Speaker 1: two tax exempt in ten years. Uh? Now are you
• 20:58
  Speaker 1: going to get four hundred or five hundred bases points?
• 21:00
  Speaker 1: I don't know. A lot could happen in two weeks,
• 21:03
  Speaker 1: but you know it's possible. M T A Uh, you know,
• 21:09
  Speaker 1: obviously Les because M T A is higher rating. He's
• 21:13
  Speaker 1: rated eight too with bestment grade by Booty's and uh,
• 21:18
  Speaker 1: you know, it's it's it's amazing there's a credit where
• 21:22
  Speaker 1: the subway ridership has dropped, so it's the cash is
• 21:27
  Speaker 1: has evaporated, and they've gone to the federal government. They've
• 21:32
  Speaker 1: got to uh, you know, everyone you could think of
• 21:36
  Speaker 1: asking for money, and uh, you know, it's just such
• 21:40
  Speaker 1: a fixture in New York though that you know, it's
• 21:44
  Speaker 1: I suspect it won't do, you know, as badly as
• 21:47
  Speaker 1: perhaps Illinois. Interesting, I see that state unemployment funds also
• 21:52
  Speaker 1: another area of risk here. They're you know, going broke
• 21:55
  Speaker 1: from the flood of claims California, New York, Texas among states.
• 21:59
  Speaker 1: They're also seeking federal loans. How do you think that's
• 22:01
  Speaker 1: going to play out. I think there will be no
• 22:05
  Speaker 1: choice but for a Congress to make sure that those
• 22:08
  Speaker 1: funds are topped up. Uh, it's just it's just it's
• 22:14
  Speaker 1: an unfortunate squeeze. But this is what happens when you
• 22:18
  Speaker 1: decided to shut down. I guess it's about of your
• 22:22
  Speaker 1: economy and so well. See federal government to the rescue.
• 22:28
  Speaker 1: Joe my Sac, Editor Bloomberg Brief for Bloomberg News, giving
• 22:32
  Speaker 1: us are everything we need to know about the miss
• 22:33
  Speaker 1: bond market, and of course, as we hear from governors
• 22:36
  Speaker 1: around the country. Ned Lamont of Connecticut we heard earlier
• 22:39
  Speaker 1: today talking about the uh the deficit in the state
• 22:42
  Speaker 1: of Connecticut for this fiscal year. We've heard about that
• 22:44
  Speaker 1: from Governor Cuomo as well. But we had some really
• 22:50
  Speaker 1: tough results out of the oil giants Chevron and Exxon
• 22:53
  Speaker 1: Mobile here not surprising, I guess with what we've seen
• 22:56
  Speaker 1: the decline in global oil prices as supplying to and
• 23:00
  Speaker 1: dynamics just really fall apart for global crude. To help
• 23:03
  Speaker 1: us walk us through the details, who welcome our good
• 23:05
  Speaker 1: friend Fernando Valier, oil and gas analysts for Bloomberg Intelligence. Fernando,
• 23:10
  Speaker 1: thank you so much for joining us. Give us kind
• 23:12
  Speaker 1: of the key takeaways at thirty foot takeaways you have
• 23:16
  Speaker 1: from these two giants Chevron and ex On Mobile and Paul,
• 23:20
  Speaker 1: great to be here. I think you know. With excell
• 23:22
  Speaker 1: And it's really just a tight rope. They have to
• 23:26
  Speaker 1: balance uh their balance shoot at the same time as
• 23:29
  Speaker 1: not cutting too much spending because their portfolio is in
• 23:32
  Speaker 1: dire in dire need of a revamping. And that's what
• 23:35
  Speaker 1: we saw from the call. Even with Darren Woods, they
• 23:38
  Speaker 1: can't really go afford to cut too much because if
• 23:40
  Speaker 1: they do, they just jeopardize their ability to sustain the
• 23:44
  Speaker 1: dividend into the second The other half of this, the
• 23:48
  Speaker 1: rest of the future um. With Chevron, they're in a
• 23:52
  Speaker 1: much more comfortable position. They have a good portfolio, they
• 23:54
  Speaker 1: had a lot of growth that came through over the
• 23:56
  Speaker 1: past several years, and they have the best balance shoot
• 23:59
  Speaker 1: in the business, so they can afford to cut a
• 24:01
  Speaker 1: lot of their capex and still sustain that dividend even
• 24:05
  Speaker 1: due this downturn. So it's really a tale to um
• 24:08
  Speaker 1: what happened ten years ago, paying out now where Chevron
• 24:12
  Speaker 1: really did their homework in the prior decade, and and
• 24:15
  Speaker 1: that they're sitting pretty relative to all of their peers.
• 24:18
  Speaker 1: So for x On Mobile, let's go back to that
• 24:20
  Speaker 1: dividend issue. We're seeing lots of companies across many sectors,
• 24:24
  Speaker 1: you know, reducing or eliminating their dividend because recognizing that
• 24:27
  Speaker 1: this is really going to be a threat to the
• 24:30
  Speaker 1: liquidity and to their capital. What's the feeling at x
• 24:33
  Speaker 1: On there They seem pretty adamant about not cutting their dividend. Well,
• 24:37
  Speaker 1: I'd actually say from the call it was the first
• 24:40
  Speaker 1: time to even entertained the idea that a dividend cut
• 24:43
  Speaker 1: could eventually happen if this lasts for a long time. Uh,
• 24:47
  Speaker 1: Darren Wood's the CEO, painted a fairly optimistic picture about
• 24:50
  Speaker 1: our recovery. We don't know that that materializes as rosy
• 24:55
  Speaker 1: as he's painting it. But you know, after a shell
• 24:57
  Speaker 1: cut their dividend UH sixty seven per sent first time
• 25:00
  Speaker 1: since World War Two. It's really showed that the industry
• 25:03
  Speaker 1: has to rebase to a new future. And and we
• 25:07
  Speaker 1: really don't know how consumption is going to come back.
• 25:10
  Speaker 1: We've seen in China that there's been more gasoline consumption
• 25:13
  Speaker 1: because people are avoiding public transportation. UM. But on the
• 25:17
  Speaker 1: side of trade and certainly on the side of airlines,
• 25:21
  Speaker 1: that domain is going to be subdued for a very
• 25:24
  Speaker 1: long time. And that all impacts their ability to to
• 25:27
  Speaker 1: to recover their profits. And essentially, UH that maintained that
• 25:32
  Speaker 1: capital structure that was built for an oil price at
• 25:35
  Speaker 1: least double what we're seeing currently. So for an, had
• 25:40
  Speaker 1: the big oil companies received any federal support um from
• 25:44
  Speaker 1: the fiscal stimulus plans be seen, uh not so far,
• 25:48
  Speaker 1: not the large cap ones and UH and really there's
• 25:52
  Speaker 1: very limited room for them to to outwardly support uh
• 25:55
  Speaker 1: these companies. The oversupply is global and we're already seeing
• 25:59
  Speaker 1: a response to speak at Dealtec plus cuts. Um. Okay, Fernando, sorry,
• 26:03
  Speaker 1: I have to interrupt, Fernando. We're going to go to
• 26:05
  Speaker 1: Governer Andrew Cuomo, Fernando Vai, Oil and Gas Animal from
• 26:08
  Speaker 1: Bloomberg Intelligence. We thank you so much for talking with us.
• 26:12
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 26:14
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 26:17
  Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney. I'm
• 26:20
  Speaker 1: on Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm
• 26:22
  Speaker 1: on Twitter at Lisa abram Woyds one Before the podcast,
• 26:25
  Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio