Government Stimulus to Offset Coronavirus Eco Impact

Week on iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show weekdays at two pm Eastern only on Bloomberg Radio. Let's set the business week agenda. First off, Carol. Gina Martin Adams is with us on the phone from New Jersey. She, of course, is chief equity strategist for Blueberg Intelligence, and there with you in Manhattan. Dave Wilson, Stocks Editor, author of the Stock and the Chart of the Date. Dave quickly set the tone for

us in this up trade today. Well, it's been a bit of back and forth that there's definitely a move higher at this point. And you know one group that really jumps out for me as utility stocks, because we've heard all these comparisons to two thousand and eight, two thousand nine, you know, the last bear market. Given the extent of the drop we've seen in stocks. More broadly, the S and People hundred Utilities index is headed for its biggest gains. It's October two thousand and eight, right

smack in the middle of the previous bear market. And what's interesting if you look at the index, you actually saw that's dividendul because these are the kind of shares you buy for their payouts got close to four percent as stocks tumbled yesterday, and that's the highest dividendual on this group in four years. So it's clear that people are stepping in willing to go with a relatively defensive area of the market. And that's true more broadly as well.

I mean, you're seeing, you know, the kind of defensive groups, the ones that tend to do well no matter how the economy is doing so leading the way here. But then you look at you know these stocks, Dominion Energy, you know, Utility in Virginia up seventeen percent, CMS Energy up almost seventeen for the Southern Company Big across the South up almost sixteen percent. I mean, the biggest gains in the S and P five hundred are dominated by these utilities, and you just don't see these moves like

ever except in times of stress. All right, said Gen Martin Adams. Come on in on the trade today and what you're seeing and what you think is either promising or worries them. Um, So I'm kind of a data on this point. You don't usually see utilities lead a sustained rally in the equity market. As a matter of fact, utilities leadership is usually a signal of weakness, not a signal of strength, particularly with bond deals as low as they are and valuations for this group relative to the

index as high as they are. Evaluation multiple three utilities are at their cycle peak already relative to the SMP five have only gotten more expensive and relative terms over the course of the last month or two. So I would say that it's a little bit of a sign of weakness. That's said, The fact that you do have broader participation and you have groups including technology, healthcare, financials, consumer staples, basically every group in the sp accept energy

is up is somewhat encouraging. I think usually at real bottoms you see rotation into laggards, and we really haven't seen that yet. That said, I do think this is a process, right. Bottoms are typically a process. We had very clear capitulation days last Thursday as well as yesterday, setting the stage for potentially still a volatile market, but maybe more of a bottoming process to start to emerge

over the next couple of weeks. Um it remains to be seen whether we actually get that real skyrocketing sort of v bottom which would require rotation, or more of a choppy bottoming process, which is our view and so Gina, is volatility just something we're gonna have to live with for the near term until we see a real clear picture of this virus playing out medically. I think so. I don't know that we're necessarily going to have to

see volatility at yesterday's levels. I mean, yesterday the VIX index reached obviously a new a new high, even high er than at any point during the two nine crisis. So it seems that that was probably our peak volatility point. But if you look at how traders are positioning, the spread between the two months and three month volatility contract is also at a record level, suggesting that traders are

positioned for volatility to remain very very high. I do think that just the information vacuum that we're in right now creates a lot of frayed nerves, a lot of concern on the part of investors with respect to where we're headed, what the real value of shares is in an environment where you can't predict earnings. It's tough, you know. That's said when you have massive volatility spikes likely had yesterday.

Most of the time, the result is pretty positive for investors willing to take on risk in those kinds of uncertain periods over the course of twelve months, and I think that's why we're likely to see pretty choppy price action as investors continually realized the fact that when everyone's else is so fearful, you should probably be starting to get a little greedy. All right, We're gona leave there, Gina Martin Adams, thank you so much, chief equity strategist

for Bloomberg Intelligence. And of course, Dave Wilson stock c will be back with us later on with his chart in Stock of the Day. You're listening to Bloomberg Business Week with Carol Messer and Jason Kelly on Bloomberg Radio speaking about trying to get their heads around the situation and certainly being very, very busy is the medical community.

New York Governor Andrew Cuomo saying earlier today that New York State will be in desperate need of hospital beds and ventilator soon and may need more than twelve times existing intensive care capacity. Let's talk about the medical community how they're dealing with the virus. Dr Ian LUs Beder is back with us, clinical Associate Professor of Medicine at n y U Landgown Medical Center on the phone in New York. Dr LUs Beder, Great to have you back with us. Um, how are you guys coping with this?

Thanks for having me Carol and Jason. Um, you know everyone is coping. Uh, it's sort of amazing. I just came back from the hospital doing uh urching cases. All elective cases are canceled, people are being rescheduled really to conserve equipment, and streets are deserted. You know, there's definitely people calling in a panic, and so I think it's important to understand that the individual risk at this point

is not very high of of death. Certainly, they're probably a number of patients people who are who are have an asymptomatic infection, but in terms of the medical community. Really to rationale is to um be careful with equipment. You certainly don't want out of want to run out of food in the middle of an ocean voyage. And all interactions are really done with what are called ppees

or personal protective equipment. So all the masks are disposable, the masks, the gowns, the gloves, you know, every it's very UM intensive whenever you interact with a patient, and so the concern is really sort of conserving those uh if there's really a surge in the need, and that's where the rationale for for canceling elective surgeries and so forth. Right, So in you know, we've talked with you at extensively over a long period of time, but more recently about

this virus being on the front lines. How worried are you about the system individual hospitals, especially in heavily populated areas like New York City, essentially getting overwhelmed exactly. Well, at this point, fortunately, everything is going smoothly. We've just started testing. So for example, Dana n y U, it's about a hundred patients a day being tested. UM no results back. That takes certainly a few days, and I think there is a bit of anxiety. I think most

physicians are you know, common comfortable, UM. I think patients are are certainly concerned, UM. And I think certainly we have enough equipment now to handle things. But you're exactly right with the population you know, ten fifteen, you know, depending on how far you want to draw the circle, millions of people, even if a small percent become symptomatic or more critically ill. There are contingency plans not only for the intensive cary units, but for surgical areas and

step down units. So I think the governor is right in trying to prepare. The last thing you want to do is do this at the last minute. But at this point everything seems really quite under control. The issue is, you know, conserving all this equipment. It's ironic that many of these masks are made in Wuhan, China, so supplies are somewhat limited. You can't just um open the shelf time and time again and expect it supplies to be there.

So that's really sort of the rationale to you know, rational these carefully not have people come in who really are symptomatic. You have to have certain criteria to get tested. Certainly at n YU you have to have a fever, respiratory symptoms. You know, they worried. Well, we're trying to reassure, right and I think that's what I think the President's team at this point are trying to convey to Americans. What are the signs to look at that say you really need to have a test at this point, because

we don't have a test for everyone right now. Is there a point, a peak point? I know Dr Fauci said it's not going to necessarily be a peak, but I think more like a hump hump, that's what he said. Thanks, Jason um So, is there a point where you feel like we could be as a health care system in our country definitely taxed? That's that's really the theory. You know, we talked about that S curve logarithmic curves. So you know, people shouldn't panic right now. There are certainly going to

be more and more cases reported. Fortunately, deaths in the United States are still below a hundred several thousand cases. You know, worldwide we've seen much more critical situations, but again we don't really you know what the final number will be, and there will be more and more cases. So this is really a matter of just preparing for a worst case scenario. That is, so people, streets are deserted.

I think people are anxious and businesses are suffering. It's important to sort of pull together and do social distancing, personal hygiene, kind of mutual sacrifice or shared sacrifice. Not because anyone is individually in a panic. We don't really know what that final number will be. How many I see you bids will ultimately ultimately be needed. You don't want to be in a situation where someone needs an I CU bed and you don't have it. Quick question,

You've gotta be quick for me twenty seconds. A vaccine? Is that still a kind of thing? Multiple companies are working on it. I think we're going to see it within six to nine months is my guestimate. So I think we'll see it before all right. Dr Ian las Bader, thank you so much. Um. We really do enjoy talking to you and really appreciate your insight on all of this on an ongoing basis. Dr Iain los Bader, Clinical Associate Professor of Medicine, n y U Lango and Medical Center.

On the phone in New York City, you're listening to Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. All Right, what a day, What a Tuesday, Carol Masser, And it's only Tuesday, Lemon, It's only Tuesday, Lemon. What a week? Uh, fast and furious. Let's get back down to Washington quickly to Anna Edgerton, deputy team leader, looking after Congress. She's looking after everything these days because the center of the world is in Washington, at least

is when it comes to fiscal stamulus. We've heard a lot, Uh Anna, help us understand what we just heard from the Treasury secretary. Well, it seems like the price of this package just continuous to grow. You know. This morning, Minusian had asked lawmakers to put together a package shows about eight hundred and fifty billion dollars of aid three different industries, cash payments for directly to American adults, and you also a payroll tax cut. Now that total is

topping one trillion dollars. So right now, the Senate has a measure those passed by the House last week, that they're going to try to pass quickly and then move onto this other gigantic fiscal stimulus that will try to dull the impact of this coronavirus. How quickly can all of this stuff go through? So the Senate could act very quickly on the House though, as long as there's no objections that will force different procedural measures. It depends

on really how this package comes together. It seems like all you know, that's the last of the fiscal hawks to put away their concerns about how much this would cost, and you realize that this is really the time to step in in a big, bold way for the economy. Well, and what I what's interesting is that Mitch McConnell I guess the headline crossing additional bill of much larger scale

is needed. I think we're all realizing, certainly when you hear New York City mayor build a Lazio speak about how this is impacting just about everybody, and we hear this from airs and governors across the country, certainly those in the hardest hit regions. Um is politics being put aside, anna uh and Republicans and Democrats um coming together and

understanding about what the mission is here? Increasingly so, I mean we're still seeing some kind of snarky comments at the sides, you know, policy saying that this needs to be evidence in science based, suggesting that not everything the

administration does is you know, is science base. But you know, for the most part, there is an understanding that this is a really unprecedented challenge that lawmakers need to respond to and really need to put the best of the American people first and make sure that they're putting not only the health measures forward, but also economic measures that

it is going to dull the impacts of this. And I have to say, uh, Secretary Manuchin has really become the go to guy for a lot of these negotiations with the Hill notable. It feels like, yeah, absolutely, And you know, there's kind of two ways or Democrats, especially how Speaker Nancy Pelosi to engage with the administration. One is, you know, the confrontration of of impeachment and kind of pushing back on this very unpopular president. The other one is to get down to the nitty gritty with his

Treasury secretary, with Stephen Manution. And we saw this in the de limit discussion last summer. We're seeing this now and he really has become an effective negotiator. One challenge that Manusian has, though, is that he doesn't have a very deep bench at the Treasury, so he doesn't have kind of the brain trust that um you know, that they had responding to the two thousand and eight two thousand nine crisis. He's kind of doing this all by himself.

All right, Anna Edgerton, thank you so much. Great update, A fast movie. Storry. As you say, we are moving in increments of hundreds of billions of dollars as the day goes on in terms of this fiscal stimulus. You're listening to Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. Let's move to Andy Brown, editorial director for Boomberg New Economy, joining us on the phone

from New Hampshire. And Andy, I want you to pick up right where Doug was talking about this coordinated effort or lack thereof. We're starting to see some coordination from Europe, but this has not been coordinated overall. But first I gotta ask you your well, your family as well as everybody doing Hey. Thanks Jason. Yeah, I'm well. I'm in New Hampshire where something. I have a place in New Hampshire where social distancing isn't a temporary expedient, It's almost

a way of life there. Aren't that many people up here where I am, And so what are you seeing? You know, from your perch there is you look across the world. You're in the business of the new economy, and it seems like part of the new economy is every man for himself. Yeah, you know, this is the way it panned out. I mean, you know that the one of the first and biggest casualties of the coronavirus has been global cooperation, international cross border collaboration, you know.

And this is in such stock contrast to what happened back in two thousand and eight, where governments all over the world pulled together to prevent a global recession from becoming a global depression. And what you're seeing now is piecemeal policy formulated with little or no cross border consultation

and often in the end working at cross purposes. Yeah, I mean that's what's fascinating, right, Like you know we talk about I mean, we know this is a global crisis, h and everybody's facing it together, and yet when it comes to dealing with it, um, we're not seeing that kind of coordination. We're watching headlines come out of the EU. We're yep, they're figuring out things. Um, it looks like finally together, the US is you know, charting its own course.

Um Andy, And you know, if ever, we need more cooperation on this than ever before. Oh my goodness. I mean you know, I have to tell you that if we're going to eat back this coronavirus, if we're going to prevent a global recession from turning into global depression, we have to have I mean, this is this is not optional. You have to have global collaboration. And particularly

between the US and China. You think about this, What really should be happening right now between the US and China is that they should be agreeing to accelerate the search for a vaccine against coronavirus. They have the largest pools of scientists and researchers in the world. They are

the world's to data giants, you know. And not just and not just the search for a vaccine, right, I mean for the manufacturer and the distribution of all kinds of emergency medical equipment, you know, whether you're talking about face masks or respirators or ventilators. You know, these two countries need to be working right now together to combat this. And what are we seeing with the two the two of them are basically shooting poison bobs at each at

each other. We heard it today what no, Donald Trump is tweeting about the Chinese virus right, and just a few minutes ago, a few hours ago, we hear from the from Beijing that you know that they're going to be booting out all the American journalists from the from the New York Times, Washington Post and the and the Wall Street Journal I mean, the exact opposite of pulling together that we need to see from the world's too

largest economy. And I have to say, I keep thinking about because we don't know enough about this particular virus. And that's what we keep hearing um from the medical experts and the health community, and what happens if cases start to pick up again, whether it's in a few months or later this year, Like there needs to be global tracking of it at this point, so that we can make sure countries can get ahead of it and countries can share what seems to be the most effective

policies in dealing with it. Well, that's exactly right, and we're and and and to your point, this is what we're seeing, right, So, Singapore, Taiwan, Hong Kong, South Korea. That really seemed that like they and they did have the coronavirus under control. And how you're starting to see the numbers ticking up again as infected travelers arrived in these places from Europe, from the United States. So it's you know, it's it's a global problem. It's gonna be

with it. It's gonna be with us, you know, for for for for for potentially another couple of years, you know. I mean, it's we shouldn't be surprised, okay, I mean, this is this is the product of years of populists coming into power in government country after country around the world, you know, And and they have been at odds with the with an international agenda, with globalization. They've torn down international institutions. You take yesterday, we had a meeting of

the G seven. The G seven agreed that one of the best ways of keeping the global economy going is to maintain open trade. Well, guess what. The Trump administration has just paralyzed the workings of the World Trade Organization, which polices global trade. You know, so you have you know, and you talk about global collaboration. Donald Trump has spent the last four years picking trade battles and all the battles with China, with the Yampion Union and so on.

And this is a big difference between now and two thousand and eight. Two thousand and eight. Who has to leadership? Right? You know? Aria different and the US is is I'm afraid when it comes to all aspects of this problem, really is you know, is not in position anymore to leave? All right, Andy Brown, We're gonna leave it. They're always good to catch up with you, Uh, Managing editor for our Bloomberg New Economy the Group joining us on the

phone from New Hampshire. Brother, colonel, Now, but you let me drive? Oh no, no, no, no home, honey, please, I'll do the writing, revel let me. I want to try. Just drive, baby, It's good question. This is the drive to the globe community. Thanks, we'll try us Bloomberg Radio. This indeed, it is time for the drive to the clothes Back with us is Henley Smith, senior relationship manager at New York based stone Castle Cash stone Castle Cash Management. Uh.

And he dug us on the phone from Connecticut. So Henley, nice to have you here. First of all, tell us a little bit us about your situation. I'm assuming you're working from home. Tell us a little bit about kind of how your world has changed. Well, yes, working from home. Nice to be with you. I thought I would be studio, but we're here up in lovely Connecticut doing all doing our part to help out, you know, the nation. So, yes,

we're working from Connecticut. I'm remote usually, but yeah, for the most part, it's it's been a it's been an easy switch over. And so what are you hearing? Henley? First of all, glad to hear you're you're safe and sound, doing your part for social distancing. I'm doing my part from sleepy Hello, not too far from you. Um, what are you hearing? In terms of your clients? I mean, this is a worrisome market, to say the least, this

sort of volatility. I was talking to an executive earlier today and she said she was traveling a few weeks ago, she was at a big private equity conference and just got the vibe. She called her money manager and said, we gotta go half cash here. Uh did you get a lot of those calls over the past couple of months. Well, you know that's our expertise, is cash is something we've talked about for for a while. And uh, you know this is uh you know again when uh we're there

for our clients. I think, you know again, cash is something that you just don't go to cash and you're safe.

There's a lot of lunses to it. Um. The product that we offer is, you know fully in short through the fdi C. The questions that we're getting primarily are from uh institutional clients that use prime money market funds where there might be some commercial paper exposure, uh, there might be some foreign bank exposure, uh that we're getting calls from those that actually use treasury and government money market funds as well. We saw a lot of off

the run treasuries. The bit ast spread widen out the last couple of days, which is an expression of their liquidity to a certain degree, and of course something that started back in September as we all know, when the repo markets kind of went wacky again. They're people that have exposure and counterparty risk as well. So I have clients that have a full complement of money market and cash vehicles, and it seems to me they're they're taking that back down even more to make sure that there's

no counterparty risk or no credit risk. And of course they want to make sure that they have liquidity, and that would mean, you know, having not as much term or longer maturities. They want to make sure that they're overnight or or a couple of days maturity. And that's so they're really pulling back pretty hard. So okay, I mean, how do you quantify qualify this? I mean in terms of someone who has seen other shocks to the financial markets.

And this is obviously we keep saying it's not a financial market crisis, but it's a health crisis that's creating certainly a lot of stress and strain in the financial markets. So does this remind you of another time? I know, we keep think talking about either Dina eleven or we keep talking about certainly, um, you know, the financial crisis. How does it remind you? What does it want to do?

We're dealing with the unknown. We're dealing with the uncertainty that creates market adjit, if you will it immediately go back twelve years ago to the O eight Again, it's different there. There we were dealing with derivative on derivative on derivative that no one could get any price discovery

on and couldn't really quantify the risk. Here again, I think where we've been since that point where you know, trust testing with the banks, uh, you know, the vocal rule, all those things that we put in ACE I think are working very nicely now. So this isn't a banking crisis. This is you know where we as we've talked about it is a health crisis. That's something that will pass. Um. You know, I think that doing what this should be doing. But if I can, helly, but at what at what

damage will this pass? I do wonder? Yeah, I mean I think that that's a concern obviously. Um, I don't think. Again, when I was thinking about it just a couple of days ago, again, it wasn't like there's valuations going into a black hole of nothing, which is what two thousand eight felt like. Here Again, it's you know, deferred wages,

something that we can make up. Yeah, there's gonna be some real uh pain involved, but it's something that I think that we'll all come back from in terms of again, we'll get those wages back, we'll get those revenues back, And I think that's to me, I can feel real comfort in that. And I think the government is doing what it should be doing to back stuff people. So the pain isn't as much as we've worked through this period. Well, let me ask you about that just in the minute.

So we have left Henley, which is we have seen especially the FED be incredibly active over the past forty eight hours. Really, as we think back across it, UH the initial monetary UH cut or the rate cut that we saw Sunday night, that emergency cut didn't thrill people. Some of the fiscal stimulus is come in from other parts of the government also, some of the FED action has made people feel better. What was the right thing

that they did? In your read? Well, again, I'm looking at the markets right now and as you probably see, the tenure treasury is back over one percent. That's a big lot of comfort right now. I mean, if if I think if the crisis was still unfolding, which it is medically, but if it was still unfolding financially, and again we're gonna be probably dealing with this the fallout

for the next couple of months. But if that was the case, you would see that treasury, that tenure treasury probably where it was a couple of weeks ago, low, you know, below half a percent. That's back over one percent. It seems like it's moving in the right direction. That gives me comfort. Also again, uh, you know, the treasury yield curve is very positive right now, it's not negative, so that gives me comfort as well that you know, things are starting to find the right level. You know,

of course everything went wacky. We we tried to find exactly where we were at. We're still dealing with that, but I think financially we're starting to starting to get our legs again. All right, Henley Smith, We're gonna leave it there. Really appreciate you, senior relationship manager at Stonecastle Cash Management, joining us on the phone from Connecticut. Thanks for listening to Bloomberg Business Week. You can subscribe to

the podcast on iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show every weekday at two pm Eastern only on Bloomberg Radio