People Made Bad Bets, And Now They Need Cash To Cover It

backing stimulus. We're starting to get some movement coming out of the Western Europe. We had, of course, the US Federal Reserve immediately expanded the repo offering this week by one and a half trillion dollars. So starting to get some movement there. To get a sense of what this means, will ask Steve Blitz, chief US economists for T. S. Lombard. He joins us on the phone. Steve, thanks so much for joining us. Give us a sense of kind of how you feel the response has been from the Fed.

We had that emergency rate cut, we had them coming in injecting some liquidity here this week. How do you think the FED is kind of handling this a crisis here? Well, I think they're doing the best they can obviously, um.

I think the hard thing is that I think you have to go back to point one, which is that this is not a financially driven sell off, right, So this was a non financial event, uh that created the sell off, and as such, the Fed doesn't have a misguided policy to walk back right as they did kind I'm sorry about a year ago. So it is, um. So they don't have anything to unwind here that they did wrong. So that puts them a little at sea

in terms of what's the right move. So one habit says, cut the funds right, Cut the funds right, cut the funds right, and that's the habit both of the market as well as the Fed, and they'll cut and will

be basis points after the FOMC meeting on Wednesday. The I think the more interesting thing that's going on was their move yesterday because in this move you would expect treasury yields to go down, which they have a lot, but the selling that's occurred and the widening credit spread that we're seeing basically the old live woory three months,

they'll spread. That's widening out. Tells you that there's stress in the system, which isn't that unusual if you think about this rapid and this much of a drop in the equity market. To create that, people have made bad bets. I mean at the very you know ABC part of it. Uh. And people make bad bets and now they have to they need cash to cover it. Uh. And so there's a scramble for cash, So you sell treasuries, you go to the banks, you try to draw calf from the banks.

And I think that's what that's what's going on right now. Seven. This is a really important point because we have on one hand an economic shock and economic potentially crisis and developing as a result of the slowdown that's been forced on the whole world frankly because of the coronavirus. But then you have the financial shock that you're starting to

see the stresses in this in the system. How much do you think the financial shock in the financial crisis was alleviated or prevented enough to just sort of focus on the economic at this point, Do we have more to go on the economical It's a great question, and I would say, we have more to go, because I think that what we we we can now begin I think looking at China coming back, and I think you can sort of now model out you know, probably in

six weeks the NBA will be back playing. You know, it's just a guess obviously, um and things will come back. So there's this quick economic contraction that will then of that that that that's going to come back. But wait, see you before you continue, I just want to bring you some breaking news. The New York Federal Reserve announcing that today they will be buying treasury security is of up to thirty years a bona fide que four q E five, whatever number you want to put on this.

But after the program that they opened up yesterday, the REPO operations, the expanded ones that they're operating that they're offering, which were really aimed at alleviating funding pressures and systematic issues. This is this is outright qui. It sounds like we will bring you more details as we get them, but carry on. Yeah, okay, so let's just pick up that. Okay, So what's happening here? And this is I've been a very important point to understand. They're not the old QUI was,

Let's flatten the curve. Let's get ten uere yields even lower to stimulate you know, borrowing, you know, mortgages, things like that. What they're doing is they're saying, you know what, this financial pressure, there's a lot of people out there, invite people. I don't necessarily mean individuals, just people's institutions as well, uh, domestic and foreign that need to raise cash. And the thing you sell when you need to raise

cash is treasuries. And what the and what the FETE is saying is we will be on the the other side of that trade to buy the treasuries to alleviate any funding pressures in the repo market. So we'll be there to buy it. So that institutions that need to raise cash because of financial stress from the collapse in equity prices as well as all the other bets that go wrong, credit bets, you know, you name it. You've got people on all the time talking about you know,

hedge funds, trades and things like that. Um, they need to raise cash. And what they're with the FEDS stepping up from doing is saying, I'm here, We're here, We're buying the treasuries from you. You don't have to find private sector buyers will buy them from you to keep the markets functioning. Uh. And that's and that's step one, and that is the step to take, and all the other steps about you they get a steeper curve because

this isn't a good steepening of the curve. So a steepening of the curve and all the other things I've talked about about things to try and get the economy going again and borrowing and to keep lending going really takes second place to this. Steeplitz, thank you so much

for being with us. A good luck out there, Stay healthy. Steeplitz, chief US economist at TS Lombard uh joining us on the phone as we all isolate ourselves into our own little pods to prevent us all from giving each other's diseases. It is it is really interesting to see the federers

are coming out with this step. And to Steve's point, which I think is a really important one, it does not the FED does not want to see the price action that it saw this week in treasuries, where yields rose simply because people were selling what they could and they wanted to sell longer dated treasuries because that is a haven asset, and this, to me is going to

put a backstop on that kind of activity. At least, Paul, it is an intended immediate impact on the equity markets at Lisa, we had the doll up close to a thousand points here, so I had routed a couple hundred points here on this news of about four point six. Yeah, and taking a look at thirty year treasury yields, which had been higher on the day now not surprisingly lower on the day at one point for one percent. We got much more coming up, Lisa, Abramwods, Paul Sweeney, this

is bloomberg. One of the things that we've clearly learned with this coronavirus, it is a global pandemic affecting all parts of the globe and that includes UH, the UK, and Western Europe. We have Marion Harkin, she's an independent member of Ireland's parliament joining with us. She's also a former European Union Parliament member representing Ireland. Marian, thanks so

much for joining us. You know, as we deal with the effects here and the growing effects of the coronavirus here in the United States, give us a sense of kind of how it's been in Ireland. I know that Ireland partially shut down schools as a virus outbreak worsensia. Give us a sense of what's happening on the ground in Ireland. Well, good morning, Paul, and it's certainly we woke up to a different world, a different reality today.

And I was in the Irish Parliament yesterday and our Prime Minister Artichia announced the new regulations actually from Washington, and we have completely closed down our schools, our colleges. People are being asked to maintain what they call social distance or social distancing, which is to remain about a meter apart from other people. Hand Washing is strongly encouraged on a very regular basis, and the purpose of an All large events have been canceled, anything over a hundred

in an enclosed area or five hundreds outside. And I have no doubts that maybe even by this evening or tomorrow, that that will be changed again. I mean, if you look across the EU, for example UM, in Norway, UM they have closed all their pubs, and in Belgium there are significant restrictions on opening ours for pubs, for restaurants, etcetera.

So there's a whole raft of measures being taken at a pace, shall we say, And the whole purpose, Paul, is to slow down the transmission of the virus, because we want our health care systems to be able to deal with what happens when somebody catches this virus. And that's the real issue. It's not that we can stop its. We we can't stop transmission of a virus unless we

have immunity, and of course we have none. So it's it's to make sure or to try and make sure that we don't find ourselves in a position that our health care systems are completely overwhelmed, like, for example, as has happened in Italy, Marianne, there's sort of an irony baked into the concept of social distancing right now because we're being told to stay away from each other, and yet there seems to be a greater degree of cooperation among elected officials and central bankers when it comes to

trying to formulate some sort of response. And I'm wondering, as an independent member of Ireland's Parliament, do you get the feeling as people are coming together, regardless of their political event or what country they're from. You do you get a sense of unity or not really. Oh absolutely, there is a real sense we're in it together. You know. It's not actually doctors and medicine, certainly in the short term that that will help us. It's the actions that

we take as individuals. As I said, we we cannot stop the virus spreading. What we can do is slow down the transmission so that healthcare workers number one, don't have to make awful choices about who they treation who they don't, and secondly that they themselves don't get overwhelmed

or come down with the disease. So I think people recognize that the only way we can get through this in any ship is that we must as individuals take responsibility, and then our governments and our health care systems take their responsibilities. But nobody is immune from this. And as I said, have woken up to a new reality. This is important and I think that it is true, and people are taking responsibility and schools are closing around the world.

As a government official, though, there is a responsibility to act on the fiscal side, and we did get out of the European Union. Today a plan to to loosen the budgets of a number of different nations in order to allow them to provide the stimulus needed. German these government came out and said that it was going to provide unlimited credit. It appears to be ready to abandon its balanced budget credo that it's gone by for a long time in Ireland. What are you doing? How much

is it going to cost? Well, at one level, we were lucky we had a certain amount of money put aside to deal with the fallout from breakxfit, and that of course is being completely used up now to start funding some of the measures that we have put in place.

It probably won't be enough, but it's the start. So some of the measures that we will be putting in place and have put in place include next week, for example, we will have a sitting of Parliament where we will put through emergency legislation on those who have to self isolated or who have to leave work, both employed and self comployed, that they will get a certain race of payments that they can continue to live and feed their families.

If you work in the public service, you're entitled to sick pay, but otherwise your employer may not be able to pay you. So we are putting in place those emergency measures that nobody will be outside the loop and that people will take the responsible decision to sell size place without fear of having to say I have no income,

I have no money. And for example, other measures that have already been taken in the last twenty eight hours would include all of our police who are in training at the moment, even those who are only there for a couple of months, have all been given full guard the powers because we need more policemen available. The army is beginning to move in as certain buildings that have been you for other purposes will now be available if

necessary for a medical use. So a lot of action in the last twenty four hours, some of it preparatory and some of us are pretty immediate. And the good news for workers here is that we will backdate any payments to the ninth of March for people who are sick or who have to sell isolates. Marian Harkin, thank you so much for being with us. Marian Harkin, independent member of Ireland's Parliament and former European Union Parliament member representing Ireland, joining us to give us a sense of

what they're doing to grapple with this. In the United States, the focus very much front and center in Washington, d c and what kind of plan is being drafted by Nancy Pelosi and Treasures diectory Stephen Manuchin. They have been discussing all of the details hashing that out. Meanwhile, the Federal Reserve came out and basically announced around of quantitative easing. Basically they're going to be buying treasuries with maturity is

ranging up to thirty years. We are seeing a rally, although it is off earlier highs and Nadack up three point two percent, the SMP three, the Dow two point seven percent. This is Bloomberk. I want to take a look at the medical side of coronavirus, in particular how we track it, how we test for it, and frankly, how close we are to actually crying it or solving it or a merely rating at least the effects. Luckily, we have Maxinis and Bloomberg opinion columnists covering all things

healthcare with us today. Max I want to start with Anthony Fauci, who is the director of the National Institute for Allergy and Infectious Disease. Yesterday, he was testifying in front of Congress and he said he admitted that it was a failing of the U S healthcare system that we did not have sufficient testing at the outset. Can you just walk through why we did not have better testing available right away so that we could try and isolate people immediately. So there you know, any number of

reasons or failures for this, UM. You know, a failure of cooperation between agencies like the CDC and the f D, a failure to bring in private companies and state labs rapidly enough. Decision at the outset. Instead of using w h O developed tests one that's been deployed all over the world, we decided to develop our own, which turned

out to have problems. The introducing those problems obviously created difficulties and and slow the raw and beyond that, UM just an overall decision by the government for UM, you know, not necessarily the best reasons to restrict deliberately the number of tests that were deployed and developed and and like the number of people that were tested, limiting it only to people with the direct travel history to China in spite of the fact that there was you know, already

evidence of spread in other parts of the world, and you know the reality that the earlier, you know better to overtest and under test and we really didn't even get to that that mindset until just a few weeks ago. So failure of leadership, failure of science, failure, um on on many many levels has led to this this point, Max, where are we right now in terms of the number of kids we have in this country, how widely dispersed they are right now? How easy is it for somebody

to get a test? And and just kind of where are we today? Do you think, unfortunately, all that we really have our sort of these ad hoc estimates. Um. I'll point people to former FDA Commissioner Scott Gottlieb, who has been you know, talking to state labs of the CDC, private companies, trying to come up with a reasonable estimate. UM. So we we really don't have a confirmed number unfortunately.

And UM it seems to be the case that you know, your ability to get tested really depends on where you are.

Are you in a state that that took early steps to to you know, develop its own tests to stand up at more capacity than it needed any any given moment um, when we're still not at a point where everyone who needs to be tested can be unfortunately, and probably won't be for a little bit to come, although Anthony Fauci did say today that he expects the number of tests to increase dramatically over the upcoming weeks, and part because the US government is partnering with private companies.

Can you talk a little bit about that. Yeah, absolutely, So this is basically, you know, looking to companies like lab corp and and quest Um, you know, these sort of brand name companies that have labs all over the country and um just basically making sure that they too, are are part of this effort that you know, if if a public lab is overwhelmed, if there isn't one available, send it to these companies and they're finally beginning to to stand up capacity to to get you know, validate

these tests and begin to run them. That will be a huge help because they're they're more dispersed UM and and potentially you know, quite cape bill of running a lot of tests. You know, we're not at the stage where even they are are going to provide all the capacity we need, but they will certainly help a lot. Let's talk about cost, Max, I know you're out with account A really interesting coronavirus crisis makes a case for medicare for all. Talk to us about that does that

actually have some legs? Yeah, so, you know, the it's a uniquely American um phenomenon that in addition to people worrying about getting coronavirus, if they're smart, they will also be worried about the cost of getting coronavirus UM. You know, the first step is obviously testing. There's been an effort from insurers and from individual states and the government to make sure that that that that people won't be faced

with costs. But that's you know, you actually have to take really aggressive steps to make sure that even testing in a pandemic is not going to cost people thousands of dollars. And then you get to the stage of of whether when people actually have a hospital stay UM. You know, a lot of people that don't use their health insurance set off into assume that they're protected from

unexpected bills. But if you end up with an inpatient hospital stay, you're gonna hit your deductible UM, You're gonna potentially face coinsurance, and that will get you to your plans out of pocket maximum, which in many cases is in the thousands of dollars. And that's a financial strain on many companies. And that's the best case scenario, there there are steps the government can take in an emergency to kind of prevent that from happening, to protect people

from costs. Uh still in the works and and unclear whether it will be broad enough to help. I'd argue that you might want a system in this is what I argue might call them where you don't have to take emergency steps to protect people from those costs. Max Nis, and thanks so much for joining us. We always appreciate your perspective on all things healthcare. Max Neison is a biotech farm and healthcare condus for Bloomberg Opinion, joining us

here in a Bloomberg eleven three oh studio. Thank you, Max. I mean, honestly, that's just to me. Highlights a lot of weak spots, and you know, there's there's a question of how much is going to be temporary and how much well this entire episode reshape the way some people think about a variety of different issues. This medicaid from medicare for all. I think it will be back on the table, certainly for the Democrats as they think about, you know, kind of how to position uh, the US

against some of these pandemics. If you're looking to distract yourself by watching basketball game or a football game, or I mean even a golf tournament. Too bad forget about it. You're out of luck. They've all been canceled. American sports has been shut down. Scott Sashnik covering it all. Scott Sashnik is a Bloomberg Sports columnist joining us here in uh in New York. And I'm wondering, Scott, how big of it hits this going to be economically? Well, it

depends on what you're all around. If you're a Madison Square Garden, you have two teams, it's the arena, it's the network, and you're getting hit on every single part of that business. Uh. You have other theaters as well. If you're Live Nation, you've got nothing, great company but no events, you're getting crushed. Um. If you're a e g.

An arena operator, you're you're getting crushed. So, uh, it remains to be seen what the contracts with the networks will look like, what the contracts with the players union will look like, whether they get together and figure out how to help each other out. But they just don't know how long this is gonna last. So let's talk about the media rights. That's just the bread and butter of the economics of professional sports. And I'm thinking about ESPN,

Fox Sports, CBS with you know, the March madness. How bad is it gonna be for these media companies. It's terrible. How bad is it going to be? It's it's terrible, but they have to put something on the air. And ESPN yesterday put out their statement like we're doing it one day at a time. This is what we've got on the air tonight. That's all. That's just I mean, nobody has done this before. So the bread and butter, as you know, why do they pay all these money.

It's two words live right studio shows and what's called shoulder programming. All the things that surround those are just sort of the advertisers to the feast, which is the live event game. That thing that's been driving O T T and driving those rights fees. They're not there. It's

just not there. I'm just thinking back to a Gary Larson cartoon that had a family all around, uh, and it was I'm describing cartoons on radio, the best the best kind of radio, looking at one spot on the wall with nothing there, and it said the world before television, and it sort of raises a sort of exesstential moment for people could do with their time. What do you fill the airwaves with if you don't have this? You know?

The sports? Yeah, I mean well you know if you're Turner, yes, you have a a big portfolio of sport events you do. But Turner can show me myriad other things. It's not an all sports network like ESPN. Turner has a big it's a a t T. Of course, they have a big movie library. You want to show me Shawshank, you want to show me Rudy. People may still tune in for those things, but if you're missing that key component,

that that ardent fan who wants the game, you're in trouble. Me. Just last night I went down the channel guide with my son. We're like just going like, nope, that one, Nope, nope, nope. But it's amazing how many channels are devoted to sports. You think about all the regional sports, all the RSN. Yes, Sinclair is exposed there absolutely what what? What are the transmission fees? What made? And everybody says the same thing. I've talked to all these folks. We don't know, we'll

figure it out. Are the players do they get paid no. Uh. Specifically, the NBA, specifically, after nine eleven, a forced measure clause was inserted into the labor contract with the players that includes things like disasters, but also the word epidemic. I mean that's a specific term. The NHL has a forced maasure clause in the standard player contract, but the word epidemic that particularly does not appear. You know, I'm just struck by how big of a business the athletic leagues

really are. I mean, it's not just the athletes, it's not just the networks, but it's also all of the gig employees who work around broadcasting all of these events. It's all the people who work on setting up the courts. I mean, it's just it's a massive industry. You have seen some owners. Mark Cuban immediately addressed those hourly workers. Josh Harris and David Blitzer have also addressed they will figure out a plan to address compensation for these hourly

workers who who just rely on this income. I don't know if every owner will do that, because I certainly don't have to, but at least it was nice to see Mark thinking about it at the outset that those folks who not are on the front lines. They're not the players, they're not the million dollar assets, but they are integral to putting on the whole thing and on the broader scale of pro sports that people don't think about it. These are real estate investments, their media investments.

These teams are just the centerpiece of all these arms, and a lot of that disappears when the game's not there. So are the leagues? Are you getting a sense? It's seems like most of them are suspending their seasons some I guess, like the n C Double A, we're done with winter and spring sports and things like that. Are they suspending it hoping they can salvage something at some point? I guess, you know, it depends on which league you are, because the yeah, well almost all sports sports league and

you know this better than most. What does everybody ramp up for the playoffs? Right? The NBA and the NHL. You want to see the playoffs, that's what matters most. In fact, the joke around NBA circles is the season doesn't even start until Christmas, so he's just washing a couple of months. Anyway, If big if if four weeks from now, six weeks from now, situation improves to a point where they can stage games with fans or without, because let's not forget the main driver here is always television.

You'll give up the gate. If they can put those teams on the court, on the ice and stage of playoffs, they would be happy to do so. Can you imagine just having everyone wear masks? I don't exactly. I don't think so. But actually there was a picture from the nineteen eighteen World Series where the batter was actually they

were wearing masks in the games. I saw that, So maybe maybe you're onto something that At Lisa's and there was no there was no Scots sports business reporter for Bloomberg News joining us here in our Bloomberg eleven three studio talking about the business of sports. Check out The Business of Sports podcast with Evan Novi, William Scotts, and Michael Barr. A new episode is available now at Bloomberg dot com and at iTunes. Thanks for listening to the

Bloomberg pen L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Boy. It's I'm on Twitter at Lisa A. Bramloit's one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio