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China Beige Book: Could See China Growth Under 2% · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penl podcast on Paul Swing You.
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Speaker 1: Along with my co host Lisa Brahmas, each day we
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Speaker 1: bring you the most noteworthy and useful interviews for you
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Speaker 1: and your money, whether at the grocery store or the
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Speaker 1: trading floor. Find a Bloomberg Penil podcast on Apple podcast
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Speaker 1: or wherever you listen to podcasts, as well as at
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Speaker 1: Bloomberg dot com. Well Leland Miller, a chief executive officer
0:21
Speaker 1: of China beige Book International, has nailed at time and
0:24
Speaker 1: again when it comes to looking at preliminary data coming
0:27
Speaker 1: out of Chinese companies, nonofficial data and estimating the increase
0:32
Speaker 1: or decrease in activity ahead of the official pm MY
0:36
Speaker 1: data that we got out of China that was incredibly
0:38
Speaker 1: ugly record weakness that we saw in the manufacturing sector.
0:42
Speaker 1: Leland Miller was saying that that we were going to
0:43
Speaker 1: see a contraction in the Chinese economy in the first quarter.
0:46
Speaker 1: That seems almost to be an uncertainty. The question now
0:49
Speaker 1: is going forward, how quickly can China ramp back up
0:53
Speaker 1: production and get supply chains working again. Leland Miller joins
0:57
Speaker 1: us here at our Interactive Broker Studios. So do you
0:59
Speaker 1: have a set based on preliminary data luland of how
1:02
Speaker 1: much we're seeing manufacturing come back online from China. Yeah,
1:06
Speaker 1: we're we're seeing firms go back to work, we're seeing
1:10
Speaker 1: workers show up. So we're seeing a trend towards firms opening.
1:13
Speaker 1: But the question is how productive are they are they
1:15
Speaker 1: actually being? Um, you know, there's a there's a real
1:19
Speaker 1: question about this. You know, when we break down the
1:21
Speaker 1: data to how many firms are open, to how many
1:22
Speaker 1: are working in normal operations, the ratio is very low.
1:26
Speaker 1: It's better than it was two weeks ago. Uh, And
1:28
Speaker 1: we're and we're you know, we're tracking this data every
1:30
Speaker 1: single day as it comes in, but this is China's
1:33
Speaker 1: not back to work yet. What we do know is
1:35
Speaker 1: that Beijing has given us their bad data that will
1:38
Speaker 1: be the low no matter what happens. And asteroid could
1:41
Speaker 1: hit Beijing at this point, and they're going to report
1:42
Speaker 1: better data going forward. And so the question is how
1:45
Speaker 1: much of this going back to work will be a
1:47
Speaker 1: cover for rising p M s and A and a
1:50
Speaker 1: better GDP number and better industrial production number when the
1:53
Speaker 1: underlying reality doesn't doesn't reflect that. And I think we're
1:56
Speaker 1: just waiting to see that because China is going back
1:58
Speaker 1: to work, but we don't know whether they're going back
2:00
Speaker 1: to growth. So is this literally, as I think about
2:03
Speaker 1: China going back to work, is it literally moving millions
2:07
Speaker 1: of people who are on their lunar holiday in their
2:10
Speaker 1: villages back to the city's, back to the factories and
2:13
Speaker 1: getting them working again. Is that kind of what we're
2:15
Speaker 1: talking about. That's a big chunk of it. So what
2:17
Speaker 1: we're seeing right now in some cases are buses being
2:20
Speaker 1: filled with micro workers who are being driven with police
2:24
Speaker 1: escorts from certain cities back to where they're needed. Uh.
2:29
Speaker 1: Jent Paying wants growth back at all costs, and so
2:32
Speaker 1: they are they are going to restart factories come hell
2:35
Speaker 1: or high water. But the question is again is you know,
2:39
Speaker 1: is this are we back? You know? Is this? Is
2:41
Speaker 1: this going to stay this way? Are the firms gonna
2:43
Speaker 1: be able to operate this way? Do they have the
2:44
Speaker 1: inputs to be able to build going forward? And none
2:47
Speaker 1: of this is clear at all yet. There was also
2:49
Speaker 1: a story that caught my attention about the potential to
2:52
Speaker 1: fudge data by having factories actually run electricity without necessarily
2:58
Speaker 1: having the workers to do the work. Are you seeing anything?
3:02
Speaker 1: I mean does that seem like a dominant type of
3:05
Speaker 1: development or just sort of a one off example. It's
3:08
Speaker 1: very Chinese. Look, the the Beijing has been doing things
3:13
Speaker 1: like this for years. And the reality is, and we've
3:16
Speaker 1: been warning people for years on this, electricity production is
3:20
Speaker 1: not a gauge of the Chinese economy. There's a lot
3:22
Speaker 1: of reasons for this, but the major reason is is
3:24
Speaker 1: that as soon as you came out with the lead
3:26
Speaker 1: Cut Young index, uh, you know, a number of years ago,
3:30
Speaker 1: the Chinese understood people were using that as a barometer,
3:32
Speaker 1: and they started manipulating the data. So what we've been
3:34
Speaker 1: trying to explain is that if you're out there using
3:36
Speaker 1: the lead Cut Young Index thinking you've got a brometer
3:38
Speaker 1: on economy, you're just listening to the Chinese story like
3:41
Speaker 1: any other piece of data. But this is actually really
3:43
Speaker 1: important because a lot of people have turned to soft
3:45
Speaker 1: data satellite images electricity production as a way to engauge
3:50
Speaker 1: the activity levels in China because they don't trust the
3:53
Speaker 1: official data. You're saying that this is also potentially fudged
3:57
Speaker 1: or being manipulated. What do you look at them for
4:00
Speaker 1: a reliable gauge? Well, look, we when we started trying
4:03
Speaker 1: to figure out different ways of tracking the economy. We
4:05
Speaker 1: went through all the different you know, obviously official data
4:08
Speaker 1: is tainted, but then looking through all the sort of
4:11
Speaker 1: private data sources, and what we found is that if
4:12
Speaker 1: you don't collect the data yourself and it's being used
4:16
Speaker 1: on a broad enough scale, the Chinese figure this out
4:18
Speaker 1: and they start manipulating it. You know, this is not
4:20
Speaker 1: some sort of conspiracy theory. It's very smart on the
4:22
Speaker 1: on on Beijing's bath, they want to make sure they
4:25
Speaker 1: control the narrative. So all these things, whether it's rare
4:27
Speaker 1: rail cargo, whether it's electricity, whether it's whether it's other
4:31
Speaker 1: bits of data. Uh that you know, they want to
4:33
Speaker 1: control the narrative, which means they're going to control the data.
4:35
Speaker 1: And that's why we just got around to collecting it ourselves,
4:39
Speaker 1: because we figured out unless you take Beijing out as
4:41
Speaker 1: the intermediary, you cannot trust the data, particularly in a crisis.
4:45
Speaker 1: All right, so let's talk about China slowly getting back
4:50
Speaker 1: to work. Give us a sense of how you think
4:52
Speaker 1: this might ramp here on the mid first quarter into
4:55
Speaker 1: second quarter and maybe the ultimate impact on for China. Right, Well,
5:00
Speaker 1: so what the Chinese idea is to have everything bottom
5:03
Speaker 1: out in February and to have more workers come back
5:06
Speaker 1: in and be able to announce much better uh much
5:08
Speaker 1: matter data in March and April, and then have if
5:11
Speaker 1: not a v V recovery maybe but you know, just
5:13
Speaker 1: a nice steady recovery that shows the competence of the party.
5:17
Speaker 1: The problem is one, we don't know whether the outbreak
5:20
Speaker 1: has actually been contained, so there are medical issues that
5:22
Speaker 1: we can't we we can't understand yet. The second is
5:24
Speaker 1: this is now spreading around the world and that hits demand,
5:27
Speaker 1: So you have a lot you know, you have a
5:29
Speaker 1: hit to demand domestically as well as it hit to
5:31
Speaker 1: production domestically, and then you have a hit to global
5:33
Speaker 1: demand is hitting tourism, this is hitting all kinds of
5:37
Speaker 1: of of of companies that are normal buyers of Chinese goods,
5:42
Speaker 1: and so the idea that they're going to have a
5:44
Speaker 1: bounce back in demand, I know that's what the narrative is.
5:46
Speaker 1: I know that's what they're aiming for. This now depends
5:50
Speaker 1: as much on what's happening outside of China as what's
5:52
Speaker 1: happening inside China. How low could growth go in China? Well,
5:58
Speaker 1: what will they announce. I won't announce a number less
6:01
Speaker 1: than say, you know, if we had a full on
6:03
Speaker 1: global outbreak, they'll still announce four percent plus GDP. What
6:07
Speaker 1: could it go? Look, I think that you could have
6:11
Speaker 1: Q one contraction. You could have Q one barely positive growth,
6:15
Speaker 1: and then you know you're back to your barely positive growth,
6:18
Speaker 1: and then your normal numbers um are are probably around
6:22
Speaker 1: three at a normal times. I mean, you could have
6:25
Speaker 1: one or two percent growth for the year if things
6:27
Speaker 1: were really bad. The Chinese would never announce that. But
6:31
Speaker 1: the reality is if things got much worse, you could
6:32
Speaker 1: see you could see growth under two percent. Certainly, How
6:35
Speaker 1: much of a problem, if at all, is this crisis
6:38
Speaker 1: for presidency? He's he's having a rough year or two. Yeah,
6:43
Speaker 1: Like Hong Kong and trade war and and and coronavirus. Uh,
6:47
Speaker 1: I think this is more dangerous than all of them,
6:48
Speaker 1: because because this goes to vulnerabilities of the party. It
6:53
Speaker 1: is not a mystery outside of China, but also inside
6:56
Speaker 1: of China that the reason that spread like it did
6:58
Speaker 1: is because officials lied in, covered it up, and and
7:01
Speaker 1: did a bunch of things you're never supposed to do
7:03
Speaker 1: when you've got an illness starting to spread. And this
7:06
Speaker 1: is not a mystery. I mean, you see it on
7:07
Speaker 1: we chat, you see it in domestic conversations. So the
7:10
Speaker 1: question is, how can they throw enough junior people under
7:12
Speaker 1: the bus, redeem the senior officials in terms of the
7:16
Speaker 1: wonderful response, and and sort of redeem the party's role
7:20
Speaker 1: in this. And one of the things you're seeing and
7:22
Speaker 1: you're going to see going forward is China is already
7:24
Speaker 1: starting to sell itself as the global authority on pandemic control.
7:28
Speaker 1: You know, will help you out here. We don't need
7:30
Speaker 1: any favorites United States, Iran, you want our help, it'llly
7:33
Speaker 1: you want our help, We're here, we show you how
7:35
Speaker 1: to do it right. It's a it's a clever narrative.
7:38
Speaker 1: It's ridiculous, but it's a clever narrative narrative. Leland Miller,
7:41
Speaker 1: as always, we appreciate your commentary. When it comes to
7:43
Speaker 1: all things China, we learned so much. Leland Miller is
7:46
Speaker 1: the chief executive officer of China based Book International. My
7:48
Speaker 1: go to person for things on China, which is, uh,
7:51
Speaker 1: you know, you have to really dig under the hood.
7:54
Speaker 1: There a lot of questions surrounding the markets right now.
8:02
Speaker 1: A key one is how long will the effect of
8:06
Speaker 1: the shutdown that we saw in China effect manufacturers in
8:09
Speaker 1: the United States will affect supply chains. There's no one
8:12
Speaker 1: better to talk about that than Brooks Sutherland, Bloomberg opinion
8:15
Speaker 1: columnist cover enjoining us here in our interactive Broker Studios.
8:19
Speaker 1: I want to start with the data that we got
8:21
Speaker 1: out today showing that manufacturing declined more than people expect
8:25
Speaker 1: to the United States in the month of February. I'm
8:28
Speaker 1: trying to understand as people game plan this out, do
8:32
Speaker 1: we have a sense of how long it will take
8:35
Speaker 1: for supply chains to get ramped up manufacturing to get
8:38
Speaker 1: ramped up once we have a sense of stability here.
8:41
Speaker 1: I do think with that I s M number, the
8:43
Speaker 1: headline is somewhat of a misnumber there, because if you
8:46
Speaker 1: look at what's bumping that number up, part of it
8:49
Speaker 1: is a lengthening out of delivery times, and typically that's
8:51
Speaker 1: supposed to be a good thing. It means demand is
8:53
Speaker 1: so strong that suppliers are struggling to meet that. In
8:56
Speaker 1: this case, it is likely an issue with people just
8:59
Speaker 1: not having the parts that they need because they're not
9:01
Speaker 1: able to get them from various different parts of the world.
9:04
Speaker 1: So to me, this says that the worst is yet
9:06
Speaker 1: to come for manufacturers, that you'll likely start to see
9:09
Speaker 1: some of the aftershocks from the supply dick chain disruption
9:12
Speaker 1: later on in the second quarter. So correct me if
9:14
Speaker 1: I'm wrong, Brooke. But is I think back to the
9:15
Speaker 1: list just a few weeks ago, when we were in
9:17
Speaker 1: the thick of earnings, you know, other than Apple and
9:20
Speaker 1: maybe a couple of the companies that were calling out
9:22
Speaker 1: the coronavirus as a reason to change their auto we
9:25
Speaker 1: didn't or did you, Did we hear much of anything
9:27
Speaker 1: from your industrial companies that you come No, not really,
9:30
Speaker 1: which is interesting because their earning season came a little
9:32
Speaker 1: bit earlier, and so at that point in time, most
9:34
Speaker 1: of the outlooks didn't really include any impact from the coronavirus. Now,
9:37
Speaker 1: the exception was Emerson Electric, which did come out at
9:40
Speaker 1: the end of last week and said they're increasing their
9:42
Speaker 1: expectation of the revenue hit from coronavirus to as much
9:45
Speaker 1: as a hundred and fifty million. It had been, you know,
9:48
Speaker 1: significantly lower just a few days before when they had
9:51
Speaker 1: held their investor day conference. So this sort of shows
9:54
Speaker 1: you just how fast moving this is UM Now. I
9:56
Speaker 1: do think you'll probably start to hear some guidance updates
9:59
Speaker 1: from these companies in the coming weeks. Uh. You know,
10:02
Speaker 1: g E is set to report its outlook on Wednesday,
10:05
Speaker 1: and so certainly we'll be keeping an eye on that
10:07
Speaker 1: for any guidance there, particularly around the coronavirus. But you know,
10:10
Speaker 1: I think the key issue for the manufacturing side is
10:14
Speaker 1: this supply chain disruption. But I do think you can
10:16
Speaker 1: look at some of these other companies a sort of
10:18
Speaker 1: a tell as to what we might see. I mean,
10:20
Speaker 1: if you think about a company like three M. On
10:22
Speaker 1: the one hand, they make face masks, which they're seeing
10:24
Speaker 1: a huge spike in demand. On the other hand, they
10:27
Speaker 1: make components for the electronics industry, and we did have
10:29
Speaker 1: Microsoft come out and warn about supply chain disruptions for
10:32
Speaker 1: its Windows PC unit. UM. Honeywell is another company that
10:36
Speaker 1: makes personal protective Year, but it also supplies components to
10:39
Speaker 1: the aerospace industry, and that is a much bigger, much
10:42
Speaker 1: more profitable business for that company. And I do think
10:45
Speaker 1: there's a risk of pretty significant downturn in aerospace when
10:49
Speaker 1: you talk about supply chain. So just think about how
10:51
Speaker 1: China is trying to get everybody back to factories and
10:55
Speaker 1: demonstrate that they are ramping up production. How do we
10:59
Speaker 1: have any precedent historically of how long it takes to
11:02
Speaker 1: get things back up and running and supply chains working
11:05
Speaker 1: as they had been. I don't know that we do,
11:07
Speaker 1: because I think what we've seen is that the response
11:09
Speaker 1: here has been so much more dramatic than what we
11:11
Speaker 1: saw with Stars in two thousand and three. And part
11:14
Speaker 1: of the reason for that is that China didn't account
11:16
Speaker 1: for as much as the of the world's supply chain
11:18
Speaker 1: at that point in time. But I think about Cafe Pacific,
11:21
Speaker 1: so they've cut about seventy of their capacity. And I
11:24
Speaker 1: saw one analyst report this morning saying during Stars that
11:26
Speaker 1: was So that's a really significant shift as you think
11:30
Speaker 1: about sort of the magnitudes of the response here and
11:33
Speaker 1: how we come back from this. But it's not just
11:35
Speaker 1: China anymore. Now we're dealing with Europe. Now, we're possibly
11:38
Speaker 1: dealing with the U S and maybe even travel restrictions domestically.
11:41
Speaker 1: I mean, we just don't know. And as if you
11:43
Speaker 1: start thinking about how you get parts from point A
11:45
Speaker 1: to point B, there's a lot of obstacles and a
11:47
Speaker 1: lot of unknowns, and so I think this is going
11:50
Speaker 1: to take a while for companies to bounce back from
11:52
Speaker 1: So Brooke. While we have you here, um Boeing. I
11:54
Speaker 1: saw a story that they're out there hiring a lot
11:56
Speaker 1: of people for the seven thirty seven Max. Does that
11:59
Speaker 1: suggect that that maybe they're close to getting this thing
12:02
Speaker 1: back in the air, you know, I think they want
12:04
Speaker 1: to be prepared because I think to shut down a
12:07
Speaker 1: manufacturing line for an aircraft is a really significant step
12:12
Speaker 1: for them to do that. I mean, they put that
12:14
Speaker 1: off as long as they possibly could, and that a
12:16
Speaker 1: big reason for that was a concern about having the
12:19
Speaker 1: labor there to be able to manufacture the planes once
12:21
Speaker 1: they do restart that. And there's also a lot of
12:24
Speaker 1: steps involved here with once the Max is on grounded,
12:27
Speaker 1: you have to get all of those planes ready to
12:29
Speaker 1: fly again. We've already seen you know, potential issues with
12:32
Speaker 1: that or bowing and said they've found you know, debris
12:35
Speaker 1: and some of the fuel tanks, whether that be like
12:37
Speaker 1: rags or you know, sort of leftover tools, and so
12:39
Speaker 1: they have to make sure that all of that gets fixed.
12:42
Speaker 1: And you have to bring these planes out of hibernation.
12:43
Speaker 1: I mean that takes time, that takes people, that takes effort.
12:46
Speaker 1: So look, I mean I think Boeing is progressing towards
12:49
Speaker 1: getting this plane ready to fly, but there are niggling
12:52
Speaker 1: issues that keep coming up and you know that may
12:55
Speaker 1: take a little bit of time to work through. There
12:56
Speaker 1: was a important the Seattle time not too long ago
12:58
Speaker 1: about the risk of this timeline potentially slipping a little bit.
13:02
Speaker 1: Now we're not talking about major shifts like we saw
13:04
Speaker 1: the course of last year, but there is potentially a
13:06
Speaker 1: risk there. What is the latest date? Do we have
13:09
Speaker 1: a date for? Boeing is stuck with mid But what
13:13
Speaker 1: means maybe there's some wiggle room there in terms of
13:15
Speaker 1: your definition. So all right, thank you very much brook Sotheran,
13:18
Speaker 1: and thanks so much for joining us. She covers all
13:20
Speaker 1: things industrials for Bloomberg Opinion. You can read her work
13:23
Speaker 1: excellent work on Bloomberg dot Com, Slash Opinion or if
13:26
Speaker 1: you're on a terminal O P I N go for books,
13:28
Speaker 1: work and all the other work from a Bloomberg Opinion.
13:31
Speaker 1: She joins us here in our Bloomberg Interactive Broker Studio. Well,
13:47
Speaker 1: despite the risk on field to the equity markets. Treasury
13:50
Speaker 1: yields continue to grind lower. We got the two year
13:53
Speaker 1: down about eleven basis points to zero point eight four percent,
13:57
Speaker 1: just extraordinary levels on treasuries. To get a sense of
14:00
Speaker 1: where yields could go. We welcome r J. Gallo. He's
14:03
Speaker 1: a senior portfolio manager, head of the Missable Bond Investment
14:06
Speaker 1: Group ahead of the Duration Committee for Federator Hermes. They
14:09
Speaker 1: have about eleven point seven billion under management. They're based
14:13
Speaker 1: in Pittsburgh. Of course, r J, thanks so much for
14:16
Speaker 1: joining us once again. All right, so we the coronavirus
14:20
Speaker 1: is there, it's spreading. Markets are trying to discount the impact.
14:24
Speaker 1: I guess one of the next issues for the market
14:27
Speaker 1: to really get a handle on is when will the
14:29
Speaker 1: FED cut and how much will they cut? What are
14:31
Speaker 1: your thoughts, well, I think it's pretty clear that this
14:36
Speaker 1: central bank, under the leadership of Powell as well as
14:41
Speaker 1: his most recent predecessors, have been eager to be proactive
14:46
Speaker 1: in the when faced with crisis or challenge, Yelling put
14:50
Speaker 1: off a plan tightening because markets got really volved all
14:52
Speaker 1: the way back. I think it's BERNANKI certainly got very aggressive.
14:57
Speaker 1: He's the one who sort of pioneered que all um
15:01
Speaker 1: Inen tightened maybe more than the markets would have liked,
15:05
Speaker 1: maybe more than was perhaps needed at the time, and
15:07
Speaker 1: quickly reversed course. So I don't think they are inertial.
15:12
Speaker 1: And I think the statement that came out last week
15:14
Speaker 1: from Powell indicates that the FED will move. Um. I
15:17
Speaker 1: don't know if in a textbook sense everybody agrees they
15:20
Speaker 1: should move, but I don't think it hurts anything. Uh.
15:23
Speaker 1: They can't cure the virus, they can't produce a vaccine,
15:27
Speaker 1: but they can help cushion the blow economically by lowering
15:30
Speaker 1: short term rates in such a way as to help
15:32
Speaker 1: bolster somewhat interest rate sensitive sectors that otherwise wouldn't get
15:37
Speaker 1: the boost from lower rates. So I think they are
15:39
Speaker 1: going to ease the three eases almost four eases that
15:42
Speaker 1: are on the work now seems extreme to me, but
15:46
Speaker 1: I know some highly respected research firms and research areas
15:50
Speaker 1: in the marketplace names everybody knows, UH suggests they're going
15:53
Speaker 1: to cut hunter basis points. So there's you know, there's
15:55
Speaker 1: your basis point eases. UM. I wouldn't be surprised if
15:59
Speaker 1: it'll be less than that. So yeah, Deutsche Bank and
16:01
Speaker 1: Coleman Sacks primarily among them, coming out with analysts saying
16:05
Speaker 1: they expect for rate cuts or a hundred basis points
16:07
Speaker 1: of cutting. I will just note that as you see
16:10
Speaker 1: stocks rally, the number of expected rate cuts is coming
16:14
Speaker 1: down precipitously. UH four year end now at just about
16:18
Speaker 1: a little over three full rate cuts by the end
16:21
Speaker 1: of January next year, so coming down. And I want
16:24
Speaker 1: to talk about that. How much do you think this
16:27
Speaker 1: erodes FED credibility if basically stock sell off and everyone
16:31
Speaker 1: looks to them to just cut rates to prop up valuations.
16:34
Speaker 1: I mean, is that the single data point that the
16:37
Speaker 1: FED is looking at this point? I actually don't think
16:41
Speaker 1: it is. I think that the FED cares very much
16:43
Speaker 1: about financial conditions. You all provide the Financial Conditions Index. Uh,
16:48
Speaker 1: it's on everybody's terminals. Have people have a terminal in
16:51
Speaker 1: front of them. UM, it's now down uh negative one
16:54
Speaker 1: standard deviation. UH. The FED wants markets to work. They
16:58
Speaker 1: want capital to be provided at reasonable prices. UH. They
17:02
Speaker 1: don't want gapping or volatile markets UH to to present
17:05
Speaker 1: a headwind to economic expansion. And the Financial Conditions Index
17:08
Speaker 1: sort of looks at volatility and valuation and tries to
17:12
Speaker 1: um you know, quantify if you will, that tricky measure
17:15
Speaker 1: of financial conditions, and they've clearly contracted with all that's
17:18
Speaker 1: gone on so rapidly over the last couple of weeks. UM.
17:21
Speaker 1: It's not just the stock market, the high yield corporate
17:24
Speaker 1: markets UH certainly slowed down, and I think the deals
17:27
Speaker 1: got pulled last week. There's no planned issuance at this point.
17:29
Speaker 1: I don't think that's a challenge to the Federal reserves
17:33
Speaker 1: overall framework that they want functioning of financial markets. So
17:36
Speaker 1: the easy isn't just to target a stock price or
17:39
Speaker 1: avoid a loss. I think it's to make sure that
17:42
Speaker 1: the financial UH flows in the economy don't grind to
17:46
Speaker 1: a halt. Twelve years ago when the financial crisis was
17:49
Speaker 1: starting up, it's when those financial flows ground to a halt,
17:53
Speaker 1: When when the provision of liquidity, when the transactions and
17:56
Speaker 1: repo markets, when the issuance of bonds ground to a halt,
17:59
Speaker 1: there was a clear sign of deeply challenging problems that
18:03
Speaker 1: the Fed needed to act to. I don't think we're
18:05
Speaker 1: there right now. I think that we have a more
18:06
Speaker 1: robust financial UM system right now, much better capitalized banks,
18:11
Speaker 1: sharp moves in markets are challenging for many, but financial
18:14
Speaker 1: prices changing does not beget a financial crisis. Um. The
18:18
Speaker 1: feds willingness to ease, on the other hand, is more
18:21
Speaker 1: looking at how the financial markets are sending a signal
18:24
Speaker 1: how the real economy will react in a public health
18:26
Speaker 1: crisis of a magnitude we have not seen if this
18:29
Speaker 1: gets as bad as people think it might. A highly
18:31
Speaker 1: transmissible virus that has a mortality rate that's somewhere around
18:36
Speaker 1: five to ten times the influenza which we did with
18:39
Speaker 1: every year. Um, there are stark steps that are being taken.
18:42
Speaker 1: Look what China did. They shut down cities worth fifty
18:44
Speaker 1: million people. That real economic consequences are very profound. So
18:48
Speaker 1: the Fed's easing isn't just to sort of blow the
18:51
Speaker 1: stock market, uh back up. It's it's to try to
18:55
Speaker 1: cushion the blow from an economic standpoint of all of
18:57
Speaker 1: the measures that may emerge in the United States as
19:00
Speaker 1: testing takes place. We're going to see many more cases
19:03
Speaker 1: in this country, and you're gonna see school district shutting down,
19:06
Speaker 1: you'll see less travel, you'll see events shutdown. That's what
19:10
Speaker 1: the FEDS reacted to. R. J. Gallow thank you so
19:12
Speaker 1: much for being with us. R J. Gallo, senior portfolio
19:14
Speaker 1: manager and a head of the Unicipal Bond Investment Group
19:17
Speaker 1: as well as the Duration Committee it federated. Hermes Let's
19:25
Speaker 1: shaft gears a little bit talk politics. Former Vice President
19:28
Speaker 1: Joe Biden had a landslide win in South Carolina over
19:31
Speaker 1: the weekend, and of course tomorrow is Super Tuesday. To
19:35
Speaker 1: put it all in a framework, we welcome Wendy Schiller.
19:37
Speaker 1: She's a professor of political science and public policy at
19:40
Speaker 1: Brown University in Providence, Rhode Island. Wendy, thanks so much
19:43
Speaker 1: for joining us. Let's start with Saturday. What really changed
19:47
Speaker 1: in the Democratic Party on Saturday? If anything? Well, I
19:51
Speaker 1: think two things came out of South Carolina. One is
19:54
Speaker 1: the you know, absolute importance of African American voters to
19:57
Speaker 1: the Democratic Party's fate in November, but also to each
20:00
Speaker 1: individual candidate running. I think that was really evident. And
20:04
Speaker 1: the resurgence of Joe Biden. I mean, we saw him
20:07
Speaker 1: a little bit better in the in the most recent debate,
20:09
Speaker 1: and he won resounding. It didn't quite pass fifty. I
20:13
Speaker 1: think that would have been really, you know, the striking victory,
20:16
Speaker 1: but he you know, really trounced Bernie Sanders in that respect.
20:19
Speaker 1: So the question is does that pattern hold going into
20:21
Speaker 1: tomorrow's primaries well, And there also is the development of
20:24
Speaker 1: Pete Budge dropping out mayor Pete dropping out of the
20:28
Speaker 1: race and throwing his support behind Joe Biden, And I'm
20:31
Speaker 1: wondering how much momentum you think that does give Biden
20:34
Speaker 1: against the Bernie Sanders ticket. I'm not persuaded that this
20:38
Speaker 1: is an automatic gift to Biden visa vis Sanders, because
20:41
Speaker 1: Sanders did well in Nevada particularly it's a caucus state, granted,
20:46
Speaker 1: not primary, but there are a lot of Latino voters
20:48
Speaker 1: in the DEM Party in Nevada, and Sanders did well
20:51
Speaker 1: with Latinos. So I'm looking at Texas. Obviously California Sanders
20:55
Speaker 1: is polling pretty well, but Texas is also crucial. If
20:57
Speaker 1: Bernie Sanders can show that he can get you fifty
21:01
Speaker 1: six of the Latino voters tomorrow in some of these
21:04
Speaker 1: key states, I think that puts him in the conversation
21:07
Speaker 1: about leading this very diverse party to victory in November
21:12
Speaker 1: and takes a little wind out of Biden's sales because
21:14
Speaker 1: it's not just the African American vote. It's a higher
21:16
Speaker 1: turnout among African Americans, but certainly there are a lot
21:19
Speaker 1: of Latinos, and I think getting um, you know, Democrats
21:22
Speaker 1: get about seventy percent Latinos. Getting that vote and getting
21:25
Speaker 1: that vote up I think gives Bernie Sanderson bragging rights
21:28
Speaker 1: if that's what happens tomorrow. So Whendy, Tomorrow is a
21:31
Speaker 1: super Tuesday, a lot of delegates up for grabs. Who
21:35
Speaker 1: is it make or break for tomorrow? I think the
21:39
Speaker 1: obvious person is Amy Clobachar. So Amy Klobachar is leading
21:42
Speaker 1: in Minnesota right now by sort of national agate poles,
21:46
Speaker 1: but she's not trouncing Sanders right Sanders isn't within striking distance.
21:50
Speaker 1: If for some reason Sanders wins Minnesota and she loses Minnesota,
21:54
Speaker 1: I think there's just it's gonna be very hard for
21:55
Speaker 1: her to stay in the race. If you can't win
21:57
Speaker 1: your home state. Ask Al Gore Circuit two thousand when
21:59
Speaker 1: he law to his home state in the general election.
22:01
Speaker 1: You've got to win your home state. Same thing for
22:03
Speaker 1: Elizabeth Warren. You can make an argument about Massachusetts proximity
22:06
Speaker 1: to Vermont and Bernie Sanders popularity there, but she's got
22:09
Speaker 1: to come really close to winning, if not outright winning
22:12
Speaker 1: Massachusetts to really make a claim that you can, you know,
22:15
Speaker 1: successfully compete at the national level for the presidency. Professor
22:18
Speaker 1: Sheller had given your experience working with a variety of
22:21
Speaker 1: politicians and particularly serving on the staffs of Senator Daniel
22:25
Speaker 1: Patrick moynihan as well as Governor Mario Cuomo of New York,
22:28
Speaker 1: I'm wondering from your perspective, whether the Democrats are consolidating
22:33
Speaker 1: support enough early enough. In other words, what is sort
22:37
Speaker 1: of the make it or break it time when we
22:39
Speaker 1: have to see a certain degree of momentum emerging behind
22:42
Speaker 1: one candidate. Well, I'm not convinced that that they have
22:46
Speaker 1: to do that, because we look at what happened with
22:47
Speaker 1: Trump in UH and you know, there wasn't a lot
22:50
Speaker 1: of consensus there. He kept doing pretty well in terms
22:53
Speaker 1: of the proportional representation states earlier in the in the
22:55
Speaker 1: primaries for the Republicans and just emerged a somebody who
22:57
Speaker 1: they weren't going to be able to beat. That could
22:59
Speaker 1: very well happen with Bernie Sanders. So eventually, you know,
23:03
Speaker 1: Republicans unify, even if they say they didn't want Trump
23:06
Speaker 1: by election day, they got out the door and they
23:08
Speaker 1: voted in a unified way for Trump. Democrats did not
23:11
Speaker 1: do that for Hillary Clinton. So the D Day for
23:14
Speaker 1: Democrats is always election day in the in the national
23:16
Speaker 1: scope of things. But I just think, you know, Democrats
23:19
Speaker 1: have to decide. If they don't unify, they can't win.
23:22
Speaker 1: So this is just gonna be whoever it is. Bloomberg, Sanders,
23:26
Speaker 1: Biden and Bloomberg also could benefit from Pete Bout dropping out.
23:30
Speaker 1: If Amy Klobuchar drops out, then you know, creeping up
23:33
Speaker 1: and sort of being competitive with Biden. If Bloomberg can
23:35
Speaker 1: show that he can get some African American votes tomorrow
23:38
Speaker 1: in addition to latinos, he becomes a viable alternative to
23:41
Speaker 1: Bernie Sanders. So at some point Democrats are going to decide,
23:45
Speaker 1: as Republicans always do, that they're just going to get
23:48
Speaker 1: behind whoever the candidate is. And we should note that
23:51
Speaker 1: Michael Bloomberg is the founder and principal owner of Bloomberg
23:54
Speaker 1: LP and this radio station. So Wendy, let's talk about
23:58
Speaker 1: Mr Sanders here. Bernie Sanders can he beat Trump? And
24:02
Speaker 1: do you think do you agree with the concern that
24:04
Speaker 1: maybe he could actually hurt Democrats down ballot. You know,
24:08
Speaker 1: it's really sort of, you know, exploded all of our
24:12
Speaker 1: ability to predict really the average voters inclination a to
24:15
Speaker 1: get out the door to vote, which is something underestimated
24:18
Speaker 1: in terms of Trump supporters. And that's the magic ticket
24:21
Speaker 1: for Bernie Sanders. If he can win. He wins with
24:24
Speaker 1: the same kind of strategy the Trump had, which is
24:26
Speaker 1: tremendous enthusiasm among his supporters. So you know, people who
24:30
Speaker 1: like Bernie are getting out the door and they're going
24:32
Speaker 1: to make sure to vote. If he can actually, as
24:34
Speaker 1: he says in the debates, if I can expand that
24:36
Speaker 1: number of people who are really enthusiastic about me, he
24:39
Speaker 1: can sort of pull a Trump like victory. I do
24:41
Speaker 1: think there are challenges to that for him in particular areas,
24:44
Speaker 1: in particular swing states, but I don't think it's impossible
24:47
Speaker 1: to do if he follows that same playbook. And the
24:50
Speaker 1: thing to watch is African American turnout turn out generally
24:53
Speaker 1: in the primaries tomorrow among Democrats, but also African American
24:56
Speaker 1: turnout in places like North Carolina. If turnout is high,
24:59
Speaker 1: even if it's because bidens in the race or whatever reason,
25:01
Speaker 1: you want to say, if people vote in the primary,
25:03
Speaker 1: they're gonna vote in the general. That's usually what we see.
25:05
Speaker 1: So if Bernie can generate high turnout in the primaries,
25:08
Speaker 1: he's got an argument that those people will still come
25:10
Speaker 1: back to the polls in November. So I don't think
25:12
Speaker 1: anything should be you know, counted out as a possibility.
25:15
Speaker 1: I think it's going to be harder for him to
25:17
Speaker 1: explain how he'll pay for things that he's promised to do.
25:21
Speaker 1: But enthusiasm is the number one, you know, a component
25:24
Speaker 1: of turnout, and that's Bernie Sanders has that right now
25:27
Speaker 1: amongst a decent size of the Democratic Party. Wendy Schiller,
25:31
Speaker 1: thank you so much for being with us. Wendy Schiller,
25:32
Speaker 1: Professor of political science and public Policy at Brown University
25:36
Speaker 1: in a Providence, Rhode Island. Thanks for listening to the
25:39
Speaker 1: Bloomberg pen L podcast. You can subscribe and listen to
25:42
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
25:45
Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa
25:48
Speaker 1: bram Woyds. I'm on Twitter at Lisa bramw wits one
25:51
Speaker 1: before the podcast. You can always catch us worldwide on
25:54
Speaker 1: Bloomberg Radio,