Not Confident on the U.S. Recovery or Dollar: BBH's Thin

or near that level. Since over the last several months, pulled back to get a sense of where currencies are headed going forward. We love to chat with Dr Win Thin, global head currency strategy for Blown Brothers Harriman, based in New York City. Uh. Dr Thin, thanks so much for

joining us here. Give us your sense of kind of the green back here versus some of the major trading currencies here as we think about lower interest rates for longer, the pandemic impact slower economic growth, How are you kind of positioning currencies right here? Sure? Well, first of all, thank you very much for having me if it's always a pleasure. Um, so, you know, if you do a uh look at the chart, weekly chart going back to about two thousand and fifteen, you'll see the dollars pretty

much within those ranges. UM, you know, just as recently as uh, you know, March April, we're at you know, pretty much at the top of that range. So the speed of its decline has been has been noteworthy. UM. To me, it reflects two things. One is the aggressive FED easing zero rates and incredibly um fast expansion of balance year date, the balance she has expanded, uh, and now we've got some worries about reopening UM here in two three with the virus numbers still so bad. So

those two things have really worked against dollar. To me, though, and I think I've mentioned this on on UM several times before, I still view this as a cyclical downturn, that is, UM, you know, between the monetary policy cycle and economic cycle. The cycle, the cyclical factors are against the dollar. And of course you have a lot of experts out there saying that that little decline, but I think it's way too only to say that right now.

I I like, UM, I think the dollar will weaken into going into two four, but we quick bottom and two fourth the virus numbers start to get better. Well, I was just gonna say, what does that mean for the other currencies? Is there going to be debasement around the globe or you know what happens? Well, a couple of things. I think, Um, you know, you can't have everyone have a weaker currency, right so on the other step side of the coin with your dollar needs strong

currency elsewhere. Now right now it's being expressed a lot in the currencies in Europe, Sterling in the euro as well as emerging markets. So at this point, um, the officials in Europe aren't really complaining about the strong currency. At this point, Um, they're seeing you know, they're remember there are there are a couple months ahead of us. They've been able to reopen albeit it uh, you know, it's body and they know having reverse from time to time.

But they're a little bit further along in the economic cycles, so I think they can have a bit of a stronger currency. So you know, long run the dollar, weaker dollar could help the the U s econmy But really what I've been focusing on is with the loss of fiscal stillness. You know, I've seen studies that say that you know, the the enhanced the employment benefits was pumping somewhere anywhere between two and fifty billion to a trillion dollars where the steam was in the economy, and that's

being a fell off a cliff. Um. The sooner we get that started, the better. But that's why I'm a bit negative on the dollar in the US economy. Two three, we have massive headwinds really between the virus and the loss of fiscal stimulus. So are you not particularly optimistic that Congress will deliver a fourth round of stimulus? Well, okay, I was confident a couple of weeks going on because I thought, okay, look, we don election coming out. Who wants to play these games? But both sides of dug

in much longer I expected. So at this point, Um, I think we'll know more with the weekend. I'm not sure if you've following it, but the House was called back for emergency stat sessions to vote on postal UH service aid and protections. And I know that some of the in some of the people in um speaker closest caucus been pushing her to use this opportunity to restart the talks. So you know, it's it's a fluid situation, but you know that's feeling that they'll eventually get something past,

probably something watered down. Um, so again another reason to be a little bit cautious about the U. S. Economy. But um, you know this is not the time we're playing politics right now. When I've been curious for several weeks now about something slightly you know, it's definitely not

completely dull or related. And you used to cover emergin markets and frontier markets and so on, so I know you know all about currencies in for example, the Middle East, where we already had a bit of a diary situation before the very route explosion. I'm curious, how are all these countries managing given that there is things to do with each one that's making life more difficult, and coronavirus

acause all of them. Yes, so it's funny you used to I just part out a piece yesterday basically pointing out that look, with zero rates everywhere, you know, no

one has any cover. You know, I used to have no If you know, Brazili had rates around towel percent that would give you a litit of cover, you know, say, okay, well I'm not crazy what's going on in Brazil, but I get twelve percent yield That I'll go Now, we're almost all at zero or near zero rates, so we could go back to the square one where we're all

focusing on the fundamentals. Um. And so I think when he continued differentiation across e m uh, you know, Brazil, South Africa, Turkey though, those are all the high heels that used to sort of benefit and risk on and they just have it. Um. So my advice to emergent market investors is just due to homework. Um. You know, I think we're we're past the worst, but you know we're not. We're past the stage where everyone's buying em Willy NAILI right, it's very differentiated, and I think that's

virgency can continue. But if you don't mind, though, just commenting on how these countries will survive this. So, yes, the opportunities for investors maybe, but what are these countries all going to sort of experience founding an extreme poverty at this point? Well that yeah, that's the big question. Um. You know, I think that the obviously the more developed economies are are will be okay. You know, I'm not worried about what's going on in Eastern Europe. Obviously Asia

much more, much better position. But yes, South, you know, I think Africa and parts of um, you know, parts of South America are are are really struggling. I think that's why the I m F and World Bank of have really been much open up the floodgates. So look, forget about you know, conditionality, forget about you know, reformers. We're just giving you money to to sort of get through this. Um. You know, for a lot of these countries, you know, especially the Middle least higher oil crisis would

be a big plus. UM and you know, they stabilized. But you know, I think there's still some concerns about the global economy. You know, I think China's doing okay, but um, you know, there's still it's it's pretty clear that this is not gonna be that the Class D shape of cover. We you you know, we're gonna take like sort of it's more like two steps forward, one step back. UM. And that's that's that's gonna be tough. And I think, uh, you know, the weaker links in the E M are

certainly gonna stuffer. Dr Win real quick thirty skins Japan, how do you feel about the end right here? Well, Japan economy wises it's been one of the LAGOD that's it's actually even underploying the US that's been very, very disappointing. In two three you have to reimpos some lockdown, but even before that the recovery has been very spotty. So I look for another umlug of stimulus. You know, obvious popular areas has been plummeting, so I think we've got

another slug of fiscal stimus. Banks Japan hold given this um sort of you know, risk on, risk off, and I think Doligans having trouble really breaking about one those six, So it's gonna be pi stetins one or four, one or six rangs for a while. Dr Winton, thank you so much for joining us. Dr Winton, global head of Currency Strategy at Brown Brothers Harriman UH based in New York City, which appreciate on getting his thoughts on currency. Chris Lou served as Deputy Secretary of Labor during the

Alhama administration. He was a delegate to this week's Democratic Convention. He is now Senior Fellow at the University of Virginia Miller Center. Chris, thanks for joining. So it was a very emotive speech. It was a very calm and I guess an effort being uplifting type of speech. But what about policy? When do we hear what Joe Biden's policies are on everything from healthcare to schools to coronavirus. Well, I think you heard a lot last night about how

he would deal with a coronavirus pandemic. And I think over the last a couple of weeks he's been doing a series of policy addresses, not just on healthcare, but I saw the economy as well. You know, last night speech, in my mind, was last about policy than about values. Uh, you know, his goal was the vice president's goal was to convey a positive message, a unifying message. You know.

I thought he did a nice job of weaving in his own biography and how his biography shapes the way that he looks at the country and he looks at government. So I do think you'll see more of those policy rollouts. But I candidly, you know, I don't know that this election is really going to turn on policy one way

or another. All right, Chris, So if it's not necessarily going to turn on policy, what message do you think or what strate did you expect the Democrats not just for the presidency but up and down ticket to really focus on this election season. Well, look, I mean, and this is not surprising when you've got an incumbent on the ballot. It really is a referendum on Donald Trump.

And where Democrats are aiming is using the coronavirus crisis as an example of the failed leadership of this administration. And you know, obviously there's a lot of other things they can point to, both domestically and h and overseas, but that that's sort of what they're holding up as the prime example. You know. Look, they will obviously have opportunities to contrast on things like healthcare, where Democrats have a big political advantage, particularly with the Supreme Court considering

the fate of the Affordable Care Act. But really they're pointing the straight up Donald Trump and asking voters do you want four more years of him? How do you think that he did last night in the sense of appearing fully with those young vital you know, on somebody that you could debate. You know, I look, I I've known the Vice President for over ten years. I worked closely with him in the White House, and I've seen him give a lot of speeches. You know, this was

hands down the best speech I've seen him give. Um, it was a different Joe Biden than I think people remember from ten years ago. Uh, he's more mature, he's more calm, he's more of a statesman. Like you know, earlier in his tenure, the Vice President did have a you know, a tendency to kind of go off track a little bit. Obviously, you know, in a prepared speech like this, Um, it's easier to sort of stay focused. But Yeah, obviously a huge challenge is going to be

in the debates coming up starting in September. Hey, how about christ As we think about down tickets, think about the Senate. What's the expectation, um about the Senate? Can the Democrats? They did? The Democrats feel that they can really take back the Senate. You know, I think they really do. And I think that was one of the overum writing themes of the convention is to have really kind of a big ticket, a big tent, which is why you saw everyone from you know, John Kasik to

Bernie Sanders and everyone in between coming together. And I think when you look at the kind of races that are being run in places like Colorado, Arizona, North Carolina, UM, they're really kind of focused on the bread and butter issues and not just healthcare, but you know the economy

as well. And again so I think, you know, having this big ticket approach at the top, I think helps a lot of these um down ticket races, especially when you start to get into places like Iowa, potentially Georgia, Montana, which are reddish states. And I think having that big tent approach is going to be helpful to those Democratic candidates that said Ms McConnell will do everything in his power and I mean everything and his power to have that not happen. Will he be able to stop, as

you know, using any kind of stratagy? Do you do you think, Chris Well, look, I mean we all should be concerned about what's happening with the Post Office right now and their hearings going on today and Monday. To look at what all of that means. You know, people need to come up with the strategy of how they're going to vote. Think broadly in terms of where MITTI

connell is. Yeah, I obviously he will try to do anything as well Democrats, but ultimately these kind of elections tend to kind of go in waves and and ultimately it's where the president's approval rating is and what people's perceptions of him are that I think will not only affect his race, but also the battle for that Senate and House as well. So, Chris Kamala Harris, what's your take on the selection of the senator from California. Well,

I think, first of all, she's supremely qualified. She has held you know, not only sederal, state and local offices. But I think it's importantly the bidens. You provide jolt of enthusiasm, and you've seen that of the past ten days with the Democratic base. Now, probably it doesn't ultimately translate into anywhere votes for the Biden Harris ticket, but what it does do is get people were like, you know what, I'll vote for Buyden, but I may not

you know, write a check. I may not go out and uh um and help, you know, phone bank or text bank. And I think it will get a lot of people more energized. And I think that's the one area demographically where you saw Biden's UH numbers kind of lagging. It's among people of colors and younger voters. I think

that her selection really helps them on both of those fronts. Chris, Right now, the president is obviously lagging in the polls, but as I mean, as soon as we start to hear Biden speaking a lot again, you know, do you imagine that that gap will stay as wide? You know, it's hard to say. Um, you know, I don't think this is going to be a traditional campaign season. I mean, I think what we've seen over the last couple of months I think is what we're going to see over

the next couple of months. And I think that, certainly, you know, makes it challenging for both of us to get their message out. I also think we're operating and I'm such a polarized electorate right now. They're really aren't that many undecided voters, and you know, look at the margins. You know, what happens to the Republican Convention, probably what happens in the debates will have some difference. But people forget,

voting really starts pretty soon. You know. I live in the state of Virginia, and our voting starts on September eighteenth, and so a lot of these late developing um UM issues or or or events may not have an effect on a lot of people. Chris Leu, thanks so much for joining us. We always appreciate getting your thoughts in perspective. Chris lu Senior fellow at the University of Virginia Miller Center, also a former member of former Deputy Secretary of Labor

during the Obama administration as well. It was also a delegate to this week's Democratic conventioned so obviously has just really deep knowledge there of what's going on within the Democratic Party Vanni. But I think most Democrats feel like they did a pretty good job this week. Absolutely, and it'll be interesting to see the r n Z next week after the virtual extravaganza that we saw this week,

and it was really pretty well done. I mean, I think after a couple of small hiccups on Monday night, Tuesday, Wednesday and Thursday, when pretty smoothly, and it must have been a huge technical exercise. Yeah, and it's I was kind of amazing, you know, having you know how it went off so well from a technical perspective. So give them credit to the text traders. What keeps them up

at night? What keeps them wondering about this market? Well, let's ask somebody who studies them and is able to tell us with absolute scientific accuracy what exactly it is that motivates traders day by day these days. Randy Frederick is VP of Trading and Derivatives at the Schwab Center for Financial Research, more than twenty five years experienced in equity markets. But also there's there's a Trader Pulse survey that the Center puts out, and I'm very curious, Randy,

what is it saying these days? The markets keep going up and yet you know, everything is crumbling all around us. Well, the most recent survey data, which we just got back a couple of days ago, follows the survey we do it back in in March, and turns out that people have become more bullish, which to some extent isn't terribly surprising. I mean, the SPS rebounded since it bottomed on March then,

ASDEX is obviously doing even better than that. So what we find is that momentum in the market oftentimes does make people feel a little bit better, even though there may be a better buying opportunity when it's at the bottom. No one really knows that we're at the bottom until

we're already past it. So, Randy, one of the things that you know, investors are asking themselves these days, and we hear a lot from fund managers, is you know, for the remainder of this year, perhaps going into if you can kind of figure on some kind of the other side of this pandemic is how to play it. Do I stick with the growth stocks that have worked for me, or do I maybe rotate into value? What's

your survey suggest Well, sometimes people do that. I mean, the thing that's important to keep in mind is that we don't really know when or if we're going to get fully out of this. We we open, we have plenty of reason to believe that will probably have a vaccine at some point, maybe not until the beginning of next year. UM, and if that happens, of course, what has been the leader in the last bull market, which lasted over eleven years, as you know, UM will likely

continue to be the leaders going forward. The one sector that is difficult are the one area that I think people need to be a little cautious about if they're trying to position themselves for when we come out of the virus is those stocks that have benefited primarily because of it. UM. Obviously, most people are staying at home,

many people are working at home. Our leisure activities have been curtailed dramatically, if not completely eliminated, and there are a number of stocks that have been benefited from that particular trend. While I do think that more people will probably work at home after the virus than they ever did previous to that, it's going to be nowhere near

what we see right now. So some of those that have benefited greatly are likely to find a little bit of softness, But the ones that have been the leaders all along throughout the cyclical periods will likely continue to be the leaders going forward once we get out of this. What sectors will be the most volatile, do traders think? Well? Traders have told us that they believe the volatility is likely UM to get to be the most, probably in financials,

which is interesting and part of the reason I think. Obviously, financials have been UM the second worse performer year to date, and part of the reason for that is the fact that UH interest rates are at zero, and as you recall, j Palell said, not only UM are we not raising rates, we're not even thinking about thinking about raising rates, And of course that means not only are rates going to be zero by the end of this year, they're likely to be zero by the end of next year and

perhaps even time after that. Financials, for the most part, make a large portion of their revenue from the interest rate spread, and as the spread as the race go down and stay at or near zero, that spread between what they pay on balances and what they charge on loans gets compressed, and so it is just simply not the opportunity there. On the positive side, though, for financials, when markets are volatile, trade volumes tend to go up,

and we have seen that here and recently so. But the interest rate spreads a bigger piece of it, and it affects a larger number of them. So that's the one they're most concerned about. In the second one, um is health care. Health Care has been a has been the third best performer year to date, but healthcare always has uncertainty when we have an election. You saw a similar trend in healthcare prior to the two thousand and

sixteen election. There's a lot of discussion on both sides, both from both candidates about how they would like to change health care, and so it creates a level of uncertainty. It's not so much that they're sure it's going to go down. It's that they're not sure what's going to happen, and that is actually the exact definition of volatility. We know it's going to move, we just don't know which direction. So, Randy, from your survey work, what's the economic backdrop that most

traders are kind of thinking about right now? Well, I mean, we ask traders what they think the shape the recovery will be. But sometimes that one's a little difficult to decipher. And the reason I say that is that people have a tendency to to equate the market with the economy, and the two aren't the exact same thing. Even people at the high levels of government do that on a

regular basis. I often remind people that the economy tends to run about six to eighteen months behind the markets, and you can see that regularly when you think about back on March, most of the economic data was terrible. In fact, much of it hasn't even hadn't even bottomed yet, and yet the market had turned around and began to move higher, and we're up, like I said, more than you can go back to two thousand and nine, and it was the same thing in March of two thousand

and nine. The market began to rebound. By the end of the year, it was up, but the economic data didn't recover until many months later, some of it even a couple of years later. We didn't see a bottom in the housing market until two thousand and eleven. So it's a similar thing. So oftentimes, when you ask people what they think about the economy, they actually give you

their response of what they think about the markets. And that's partly because I can look at a chart of the sp see a very distinctive v bottom on March twenty three, but I can't see that in economic data. I can see it in an individual economic report, but there's so many of them. Right, But think about the housing market, think about the labor market. We know the labor market on on a weekly basis has bottomed, but it's nowhere near where it was prior to the virus.

And the unemployment rates, on the other hand, which are very lagging indicators, we won't see a bottom on those for at least another month. Right. Hey, Randy, thanks so much for joinings. We always appreciate getting this information. Randy Frederick, vice president of Trading and Derivatives for the Schwab Center for Financial Research, calling in from Austin, Texas. With that survey work on what traders are looking for both in terms of the economic outlook and markets. It is time

for Bloomberg Opinion. We welcome Timothy O'Brien, senior columnists for Bloomberg Opinion. Tim, you're out with a fantastic come this morning, which I read it first thing this morning. To any three questions for the Postmaster General, I'd love for you to kind of share with us kind of the real important ones that you think need to be asked at

some point today. Uh. Well, I mean, I think the most crucial thing to voters right now is is did anyone in the federal government direct the Postmaster General Louis de Joy to take steps that would have slowed down mail delivery? Um? By intent? Um? Now. DeJoy has said already in his testimony this morning that um, nothing he did was designed to slow down mail delivery. It was just part of his efforts to streamline the post office, which he is said all along. But there's been a

lot of contradictory statements. Also in his testimony he said that, um, you know, he promised midweek that he would roll back some of these changes. Um. Uh. One of the most significant is the removal or dismantling of big mail sorting machines. But then he said in his testimony this morning that he had no intention of putting those back, and yet later his testimony he said he actually had no idea how maintenance operations and those machines work anyways. It's handled regionally.

So um, you know, there's a House hearing today, are Senate hearing today and a House hearing on Monday. I would hope members of Congress in the House will take some cues from the proceedings today to sharpen their questions on Monday. Yes, you write him, the legitimacy of mail and voting and the outcome of the presidential election hang

in the balance. The thing is, you have this man, this Postmaster General, a generous political donor, not just a president rum but also to other Republicans like Mitch McConnell, for example. How motivated will Republicans in the Senate Committee and the House Oversight Committee b to actually figuring out what the truth is? Well, I mean that's always the

question in the hearing. Vanny, you know it's a Senate led committee today, I mean, rather a Republican led Senate Committee today, and they agreed to have the hearings, and it's a bipartisan hearing and and there are robots questions being asked. Um. But the main problem with these hearings is sometimes legislators would rather grandstand than just actually prosecute a case and ask a rapid fire round of yes or no questions. I think for our business listeners, you know,

for our listeners who care about the vote. I mentioned that asking about mail and bounting is an important question. I think for our business listeners. Uh. There's been another issue hanging over the Postal Service since the spring, is to whether or not Trump is attacking the Post Office and what it charges for package deliveries, specifically to target companies like Amazon and other e commerce companies that rely

on the Postal Service to deliver packages. Um. There is no proof that that package delill be the money loser for the USPS. In fact, it's one of their bright spots. It's a revenue builder and uh and and and it's profitable.

So they should just ask to Joy about that and put that issue to rest because the wrong issues are being put into play about what needs to be done to fix the Post Office and tim there's probably I'm not sure if it's a misperception, but a belief that the postal service is a kind of similar to a company a corporation, that it should in fact generate a profit. But like other government services, the military, for example, it doesn't necessarily generate a profit, nor is it necessarily supposed to.

How do we how should we think about that? Well? I suggested that, um, the legislators ask the Postmaster General, Louis de joy um if it also is problematic that the military, public schools, police and fired apartment, fire departments, and the White House itself aren't profitable. Because it gets

to some of the absurdity of this. We have institutions in our society that exists to provide a service that we support with taxpayer dollars, and in fact, the post Office isn't even supported by taxpayer dollars itself, sustaining through the post postage charges it it levies. It's running a deficit,

a massive one in that needs to be fixed. But um, you know, we we have these things considered common goods that we all share in, and it's a service that we all benefit from, including the postal service and holding the operations of the military or the Postal Service, you know, to the same accounting standards as a private entity is is can be very absurd. So Tim, you know, you

mentioned how package deliveries are actually profitable. It looks like although we don't really have, I suppose a full idea of the accounts, but people like Treasury secretari Student Milution, I mean, they must have a better idea than anybody. What's going on at the Postal Service. Do you think they're in contact with the Postmaster General? Well, I mean that's a real issue because the body, because the Postal

Service is supposed to be independent. It exists within the executive branch, but it is overseen by a board of bipartisan board of governors, and it's meant to be independent from political influence, very much in the same way as the Federal Reserve operates, and Minutution shouldn't be in touch with them. But we're in a moment right now. Manuchan

controls the purse springs. The Cares Act allocated um uh ten billion dollars in the spring for the Postal Service that Manuchan and Trump have refused release to the Postal Service to shore up its operations in the midst of the damage from the pandemic that many institutions are facing, and so Manutian and Trump have leverage over this institution financially right now in an unusual way. And the argument is then, is that they're they're using it to play politics.

That's an argument I happen to agree with. All right, we will follow the hearing today. Nathan Hager is listening to it as we speak, and of course we'll be back on top of it on Monday as well. But this isn't over for sure. Tim O'Brien, thanks for joining us. Would love to have got your thoughts on the DNC this week, the RNC next week and so on, but

we have more time to do that. That That is timbo the O'Brien, senior columnist for Bloomberg Opinion and once again the Postmaster General, appearing before I send it Homeland Security Committee hearing today. You'll say, or has said already, that Congress is at bold for the agency's dire financial situation because lawmakers hadn't enacted changes that would allow the agency to get on a sustainable path. But of course that's just really the beginning of what's going to be spoken of.

Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio