Surveillance: Economic Shock With Shilling

Let's just start there because the question that comes up again and again that we filled a lot, the distinction, the difference, the spread between what is happening on Main Street and what is happening on Wall Street right now, Joe, how do you answer that question? Well, it's a good question. Is top of mind with our investors as well. They're

kind of scratching your head what's going on? But I mean you have to kind of part of the divide rest with the Fed Central banks on the world flooding the system with liquidity that's being put to use in

the higher yielding asset class called equities. There is also the speed in quotes from Congress getting that package out of the fiscal package aggressiveness on the part of the e c B. So I think maybe it's misplaced, but I don't think it's misfounded in the sense that the policy response all of this time versus oh eight or nine, much more directed focus Zuokas, and I think I do think that gives a floor beneath equities as we grind higher. Now is it over, No, no, no doubt about it.

We need to have signs that all the stimulus is actually going to help mainstream. That's the next big test test, Joe. I know we've got a lot of unknown unknowns, but what's your unknown unknown on the equity markets in terms of choosing or selecting or allocating where to put the marginal equity dollar? Now, is it large cap, bigger is better? Small cap? International? How do you reset towards May fifteen?

I mean, Tom, we're trying not to be too much of that crowded trade in and around healthcare and technology, but we're sticking with those two sectors. We're putting a little bit, you know, warming up a little bit here to financials because one of our thesis is bigger is better, the banks are well capitalized, are gonna work through this problem and we do like the small cap companies, there could be some opportunities in and around biotechnology, biosecurity. So

it's very selective, it's very difficult. We don't like to be stock pickers. Were not, but you've got to have to kind of step back, be careful though, where the valuations are today in certain sectors where they're not, and how you play that out. So biosecurity, biotech, healthcare, and financials look for us some opportunities. What about international? I mean, John, help me, you're John. Remind me we had one quarter or quarter and a half of decent international performance? Is

that right, John? One quarter of being kind? I think we've had a couple of days in the context of a massive decade long rally in the Joy It's John's correct, as usual, with seven days, we're international performed. Joe, When do I get on board international? I mean, come on, it's in the it's it's it's tanked, it's take time, and I would just I would do it on a sector by sector basis. So technology Northeast Asia, so that's South Korea, that's gonna be Taiwan, that's gonna be Japan,

and the e commerce giants of China. We know who they are because we're gonna bifur kate the technological divide here globally. They're gonna have their own system and we're gonna have our own as well, and they'll be Korea and Taiwan stuck in the middle, so to speak. So there's not much to talk about when it comes to Europe technology. But like sciences in Europe, are these a

very good companies, great scientists, human capital histories. If you look at history of the drug company started in Europe, right it's gonna come back to Europe as we solve these problems. So the sector specific as opposed to country system, Joe taking a stepped back, there's a question about the risk on field that we have right now and what it's pricing in. I think that Mike Wilson over at Morgan Stanley put it well, saying that there is a

bearishness still in markets, but it shifted. He said, it's a different kind of barishness, one that accepts the extraordinary policy responses having done its job to stop the decline, but skeptical that it can lead to a sustainable recovery. Do you agree with the first premise that the policy response so far has done its job to stop the decline for the foreseeable future, even as we see an unemployment rate that will likely climb up to or beyond

according to some estimates. Yeah, I mean the short answer is yes, because J. Powell Company moved so quickly to provide the liquidity to all parts of the capital markets that staved off any huge blowout in credit spreads or any type of solvency issues thus far overlaid that with a fiscal response as well. So I do think that policy response, as big in its spast, gives us some some comfort. They're going forward, however, that we have to see Main Street kind of settled down, I think, and

it's gonna come. When I mentioned this earlier in the sense that the healthcare industry, if you look at the GDP numbers, took up beating. But around the country hospitals are now reopening. If you want one sector to reopen, right, it's not necessarily airlines or restaurants, it's the healthcare system, the hospitals, and they're doing just that. And so I think that's gonna alleviate some of the unemployment plane in healthcare services, and that's going to be a surprise on

the upside. But I do think we've got to bottom in. But we have to be realistic about the mexicansolidation phase before we get another significant leg up. I just wanted to run things out with a delicate question just on the psychology of things right now. Was something that had for manager Dan McMurtry alluded to over the weekend. Do you think there's a social stigma attached with being long this market at the moment? So what was there? Stigma? Being a text? It's just a social stigma attached to

being long this market at the moment. I don't think so, not not necessarily a social stigma. I mean being along the market. And if you're in the right let me let me, let me rEFInd a question joke coming on a question like this, how difficult on a program like this, How difficult is it to say that you're long the market when we have this dreadful data in the labor market in the United States and worldwide? Okay, I would I would say, look at history, We're worked through this pandemic.

Look to the other side. When it comes to the leaders, who's gonna be technology, health care, bio security. So it is difficult because we're right in the midst of the trough, right where where this is it. This is the point of maximum pain with the numbers coming in. But the markets and looking forward think of we're gonna be a ballparks, We're gonna be in restaurants. So that's I think we're the equity markets. And you can say they're projecting too

far ahead, too fast. I wouldn't disagree. But when you look out eighteen twenty four months from now, we're having a totally different conversation about probably debt, inflation and other issues. But I do think there's growth on the other side, and there's opportunities now to put money to work. So Quinlin, thank you so much. Always brilliant Bank of America, greatly appreciated. Let's do this, folks, I want to do this for Global Wall Street. We can talk about the VIX. We

can talk about volatility. My amateur take is, you know, bigger number means more fear, lower number means less fear, but it gets a lot more sophisticated. Dean Current joins us now Macros Advisors and Dean I want to go right. So there's a curve, which is the VIX and then there's the guestimate of where the vixes out any number of months, and that curve now is very steep, which I don't understand that. What does it mean, Dean when

you see a steep futures market for volatility? Right? Thanks? Um. So, it actually is quite interesting right now to look at, um, the combination of the level of the VIX, which is of course way down from its incredible peak, but also still relative to history quite high. Um. So to see a high VIX, but also to see, as you noted, an upward sloping curve is actually pretty rare. UM. So let me just give you a quick bit of perspective on that. So the end of two thousand eight, team,

remember we had that big risk off. Powell was tightening in the face of the market. Um, the VIX reached about thirty one on December, but six month volatility was much lower. So that's an inverted vall curve. The VIX is higher than the future volatility, and now you have the opposite. So if I look, for example, at one month implied volatility on the SMP, that's where the VIX comes from. That's about But if I look at six months, it's about so you have that upward slope. How do

I read that? I think it's a function of just the amount of artificiality that is in asset prices right now. I'm not saying it's good or bad. It's just that folks are really struggling to make sense of what to do here. Um, there's been a massive economic sudden stop, a gigantic policy of response from the government and the Fed, and it's just really difficult to know where asset prices

are going to land. And so in some ways we've punted that uncertainty out a couple of months, and that's why I see longer dated volatility out, you know, call it six months, clearing it at higher levels of the fixes. Dean, what you said is really important for this moment, the artificiality of current pricing, And do you have a sense of kind of where that artificiality is coming from. Is it coming from basically what is becoming guild curve controlled

by the Federal Reserve. Is it coming from Washington, d C. Or is it coming from the hopium that we're going to see something more akin to a V shaped recovery at least in markets as we go forward. I think it's really least of the first two rather than the hope. I think that the degree of of support provided by UH Congress, in the White House and a bipartisan fashion so far has been unbelievably strong. UH So one metric that said, on a Q two basis, personal income is

actually gonna be up. Um. So it just shows you how much of the whole that, at least for now, the government is silling in. And then on the second front, of course, the Fed. Wow, what a tremendous amount of you know, both explicit buying, a tremendous amount of forward guidance, you know, waiting into the private UH markets, and it's put a floor in a large way under under asset prices. And it's just listen, the old adage of don't fight the Fed. I don't think it couldn't be you know,

more relevant than right now. It's really difficult to UH to get in front of this UH And to some extent, I think this is the markets in a waiting game. You know, we're trying to gauge the policy response not just now, at the future wherewithal and you're starting to see some breakdown of that in terms of the depth of its gold in Washington. You know, McConnell's starting to um discuss that there are limitations to what we can do UM. So it's it's that that part is challenging.

And then I think the other part that the we're just trying to gauge is that the reopening, the efficacy of reopening, at least so far from my perspective, the scorecard there doesn't look promising. If you look at other countries, it's it's still obviously very early, but there's been a couple of setbacks in South Korea and China, in Germany and Spain UM, And so I think that's where ultimately the market is going to have to find some metrics

to watch UM. But I think the low vix right now points to that it it isn't a little bit of no man's land in terms of figuring out the mark. You know what risk really is adating with that in mind, and you've touched on something quite important. The risk of reopening in a second wave is something likely to sit

on sentiment for quite a while. Do you think that makes it difficult to rotate to the most sickly laritys of the market that have lacked in the rally off the bottom over the last two months, I think, so I was just looking at the just growth versus value.

The divergence this year is on the order of performance growth versus value, and so you know, if if value is is UH embodied insty locality, I do think it's very tricky to to really get you know, behind the notion that one people will be able to come back because the infection rates are clearly coming down, and then too, I think the psychology never is too long, but I think the psychology is pretty important. You know, folks, even if they were given the opportunity to come back, some are,

but many are not. And I you know, just given the leverage inherent and a lot of cyclical businesses, the balance sheet UH considerations and the degree to which they really need you know, whether it's a fully stocked hotel a plane with no seats empty, it's going to be very difficult U And I think, you know, the psychology makes that more challenging. Tom. I think this is the decision at the moment to make it really really simple.

Do you stick with what's worked over the last six weeks or do you rotate to what hasn't and what's worked is Big Tech, the Big five all positive year today the SMP five hundred lower on the year. It's just unreal how much out performance we've had from the

Big five. You know, what's so interesting here is is you but to sit up against this liquidity solvency you ssue John that we've seen over the weekend, and certainly you know with the Columbia Airlines Avianca their bankruptcy, and you know, you look at Liftansa with a full bailout in Germany with potential ownership by the government. It's not only two worlds, it's almost three worlds out there. Yeah, Dean,

I think Tom's brought up something important. Things are still breaking, and you've shared something that that I share with you that when things move fast, they break. Have we seen all the broken parts of this huge move very very quickly in the last few months. Yeah, I think that would be way too optimistic to suggest that even as three VIX is probably not coming back, that the after

shocks are likely not fully appreciated yet. You know, just think about post the financial crisis in two thousand ten, we had the flash crash. Two eleven and twelve is when the Eurozone sovereign crisis began in full earnest, and those were in some ways after shocks of the Great Financial Crisis. UM. I just don't think so UM when you're seeing I know, you guys just covered the you know, uh FED funds futures trading north of a hundred implied rates in the US below um, you know, below zero. UM.

We obviously saw the crude meltdown. It's just in a world where things are moving so fast and the policy response is just so enormous UM, and the deflationary forces upon which the policy responses built are so enormous, it's just really difficult to think that we've got some you know, resolution that's not going to see some you know, some crazy things happen. UM. And I think this is where one of the things, you know, we spent a lot of I'm in hedging at Macro Risk Advisors, but also

on portfolio construction. And I just think that gold deserves an increasing allocation in the portfolio. It's an asset that has negative correlation attributes to the risk complex. UM. And it I'd like to say it's just long paranoia. And I think we are entering into a period of increasing Unfortunately paranoia in the monetary system, as we're gonna come to the market with three trillion dollars of issuance in one quarter. It's just we're kind of in no man's land.

And so I'm just continuing to recommend to folks to really take a hard look at gold. Dain't really really thoughtful stuff didn't kind of the macro risk advisors. We turned to the great stimulus debate in Washington now, and I've said repeatedly over the last few months, I've been really impressed with how while the administration has worked with the Democrats to get significant bills over the line, the question for many people in this market, Tom is long

does that unity lost? Yeah? It goes once twice and then there's a third time. I John, you and I were talking about early May is being the time of the next discussion, and we're nowhere near that. We're past early May, folks, and now staggering into a later May looking for the next fiscal stimulus. It's good to get away from the three zip codes that we look at here in New York and possibly wander out to Indiana.

Trey Hollingsworth is with the ninth District this is the path from Indianapolis on down to Louisville and of course encompassing the University of Indiana as well. Congressmen, wonderful to speak to you today. How far removed are the Republicans of the House and the Republicans of the middle ground from the arch Senate conservatives that are there. It's a great question. Looks there are many Republicans in the House that are concerned about the devas that that are concerned

about total US debt. However, there is a strong push and it continues strong push from Republicans to find a pathway to build economic growth back. I mean, we saw a terrible job report on Friday. People want to ensure that those losses are temporary and not permanent, because the last thing we want to see right now is this exogenous coronavirus shock to the economy become a long term demand crippling shock to the economy. This is so important, Congress,

and I really want to emphasize this. There's a belief out there that the pent unemployment heading to Kevin Hasses is located in the city is it's where the viruses where the President makes clear these are blue regions that he doesn't care about etcetera. How have you seen the job economy in the ninth Congressional District Now? It is not just in the cities, It is not just in blue state. I live in a very red state, and

the job losses are real. I hear from families every single day that say, I thought and I had a long term job. I was seeing my wages grow up until just a month ago, and now I don't have a job and don't have prospects for getting a job anytime soon. And I think this is really challenging getting back businesses open safely while mitigating risk, getting back individuals to being able to purchase things for their families for

their futures. It's hugely important that confidence has to start in Washington, d C. That leadership has to start in Washington DCING represent Representative Hungsworth. You've been a small business owner. We've seen reports that the small business bankruptcies could rise to forty percent of all of the companies in six months if the shutdowns continue. How concerned are you that the program put into place so far has been ineffective.

It's staving off these insolvencies as well as the subsequent layoffs that obviously are just escalating. Well, I think you hit the nail on the head, which is, how do we determine how effective this is? And the reality is the program was just designed to be a short term bridge to opening up the economy again, a short term bridge to enable firms to get back to hiring, get

back to doing business as normal. If we are not able to get the economy open safely, if we're not able to hold down the level of infections and transmissions once we open with the the economy, there isn't enough money in Washington to save businesses in the long term. This has to bring a bridge to empowering the economy to get back to healing itself. That's the only way in the long term we can keep these businesses afloat, going and expanding. Congressman, how do we understand this from the

debt perspective? What is the concern right now about the debt just specifically, what's the big concern? Well, Look, I think the big concern is the large amount of deficits that we're spending this year alone, and what that means from a long term perspective on where rates go back

to once they normalized. Look, it's hard to look at the ten uere today and say, gosh, there's a debt problem in the United States, right, But once interest rates to begin to normally, as we get back to a more normal looking economy, the question is will we be able to hold interest rates at an appropriate level or will interest costs continue to rise in the US, pushing out and crowding at all the other important spending that we think is there right, research and development on future

cures for diseases, A lot of that goes through NIH defense spending. All these things will be crowded out by larger and larger interest payments on our debt. Should interest rates return to their normal levels, you think there could be a problem with debt sustainability in America. Is that something you actually worry about? Well, I do worry about that, and I think the important thing is to worry about

it before it becomes a problem. I think the important question we have to ask ourselves is what are the changes we need to make today? What are the changes we need to make over the next year to ensure that we can put ourselves on the path that this SPS just need to building. This isn't a problem today, as you will are toy. This isn't gonna be a problem tomorrow or next year. But ultimately one goes bankrupt slowly at first, then suddenly the key is to catch

it in the slow phase, not in the sudden phase. Representative, I want to make sure to understand what you're saying. Are you saying that we should not add some sort of effort to pump money into the economy at this point for fear of that future escalation of debt costs? Is that your argument here? So? I think my argument is, we have spent two point nine trillion dollars of Americans

harder at taxpayer dollars. Before we start spending more, we should ensure that the programs are effective, As you will asked earlier, we should ensure that we're solving the right problems. We're ensuring that these are the right programs to be able to get the economy back on its feet so

we can normalize again. But I think in the long term question for Americans, and we were already at a definite of a trillion dollars before coronavirus happened, how can we put ourselves on the path of sustainability even outside of this large acute dip so that we can see a brighter, brighter future for Americans and not hand down a mountain debt to our grandchildren. Congressman, we got a problem Indiana. We thank you for listening in Indiana Day,

Michelle Meyer with us the Bank of America. Michelle, I want to rip up the script and do something completely different than I normally would. I was thunderstruck. And how economists this weekend adjusted the job's report forward aggressively. Usually they can gut estimate it or tweak it. What did Bank of America do to extrapolate out to May into June and even into July. Did you get out well?

Over is a solid forecast UM, so certainly UM, we think the unemployment rate will take up further next month. But we think in terms of the rate of job destruction, in terms of non time perils, last month was the worst. April was by far the worst. So, you know, a

rough estimate. If you look at how claims are trending thus far, which is a really good leading indicator of what we're going to see for total job um jobs lost in a month, we can see somewhere in the order of about you know, six or seven million decline

in May UM. So if we see that and we assume, you know, some kind of trend like labor force participation rate numbers leased off of what we had from last month, the employmentary probably will take up a bit, probably flirting with but I actually don't think we'll get above Michelle.

Do we have a good understanding now of the depth of the downturn to establish forecasts about the shape of the recovery, because over the last month we've seen so many people willing to look through the current data, and what I've grappled with is how can you establish any kind of forecast about the future without a deep understanding of where we are at the moment the depth of

the downturn. Yeah. Absolutely So. The way that I've been thinking about this is that it's very hopeful to to break this into three phases is traject into three phases. The first one is the shutdown. It was extremely painful, but it is largely over that end in the beginning of April UM. The second phase is the transition phase, which is when you start to see some reopening, but to the shock that started in the consumer multiplies more broadly through the economy. In terms of the decline and

investment decline and housing UM. You just see the ramifications of this aggressive amount of job destruction and consumer spending decline. UM. That's the phase that we're in right now, this kind of transition period. And then the third phase is the recovery UM, and that's really the most uncertain and that's where you can have, you know, quite a number of different scenarios, largely dependent on the detectory of the buyers. Michelle, I'm struck by the disparity and who got hit hardest

so far. It is the most vulnerable workers. It is the people with the least education, in the lowest wages, wiping out a lot of the job gains. Uh, you know, both in a substantive as well as a quantitative determination since the beginning of the last crisis. I'm wondering how much that's going to color the recovery. In other words, what are the longer term consequences of the fact that

the most vulnerable populations are getting slammed harder than anybody else. Sure, so, I mean, if you look at the breakdown of job lost between last two months, was in leisure and hospitality and least it to your point, those are workers that tend to earn less, the more considered lower skilled, lower

wage workers. Um. So, with the ramifications, if you assume that leisure and hospitality is going to take a whole lot of time to come back, and it may not ever return to the pre COVID levels given some of these structural changes that were likely to see an economy as people learn from this pandemic experience, UM, we're going to have to do a lot of job retool train, you know, retooling, job training, figuring out how to redeploy this labor and it could end up being that you

have a lot of workers or a portion of a labor force that are somewhat displaced until they can figure out how to get back in with a new skill set. It was somewhat akin to what we had seen during the housing creasis when you had a large portion of construction workers that were displaced for a period of time given the nature of that shock. Um so, yes, well, so people are focusing on this and saying the higher

paid jobs are remaining intact. I'm just wondering how worried are you about a second wave of job cuts that some people are talking about in the higher earning brackets as this goes on. Yeah, I mean, you know, it's interesting. Yes, the pain was driven in the lower end of the of the income spectrum, but it's broad based. When we have this degree of job cuts, it is across every industry. The industry is and the last jobs report saw some

time jobs. Ten per cent of the job last and last two months was in professional and business category, which is a pretty broad category, including many high school jobs. Um So, so I would argue that already is somewhat broad based, just given a nature of of the number of jobs that were lost. But to your point, yes, you know, the initial shot was in the COVID sensitive sectors, lease,

your hospitality, retail. As you know, you see this recession multiply and kind of work its way through the economy and and having to be a function of the income laws, people not spending as much, companies realizing the challenges that lie had. You could see um you know, continued job jobs, jobs cut, and that would be more the typical recessionary response. Right. The first order was the lockdown, the extreme loss. That

second order is more that typical multiplier. What's the first and second order of the price of a home I mean, Michelle, this is your claim to fame. Tell us what you expect in the housing market nationwide and for that matter, in the three zip codes we live in in New York. I mean, do you just assume housing prices decline? So housing, to me is very interesting in this cycle because, um, it is highly unlike what we had seen in the last cycle. So housing this time around is the victim,

it is not the culpriate. UM. Housing will weaken in my view, as a result of the extreme declient and economic activity and the income loss and the job loss UM. But because the housing market enter this cycle without very much excess, mostly that you know, excess in terms of housing stock and excess in terms of leverage UM, it's

not nearly as vulnerable to a correction. UM. And on top of that, you've seen a government response already pretty aggressive in terms of trying to um underpinn the housing market with forbearance plans UM, so that the Fannie Freddy mortgage holders can take forbearance uptil months. That makes um the rate of foreclosures much much lower. UM. So all that being said, I think that housing will soften certainly, home sales falling sharply already housing starts are going to

fall very sharply. You can see those numbers down fifty six from the peak given a sixth UM. But once you start to see some recovery come back, those numbers will come back quickly as well. Um. So it's very much going to follow the broader cycle for home prices nationally. We're looking for, you know, somewhere on two or three to client on a year of your basis with very deep biplications in the market. So if you're in big

urban centers, clearly the outlook looks more problematic. Um. If you're more in the suburbs, let me let me translate that for you. What Michelle saying is at three bedroom four best thing you're looking at over right with the view terrace a gym. I'm sure we don't have that. You know, every time Michelle comes on, she preps for housing because she knows you're going to ask her back every single best. I know you do, I know you

do before we run things out. Can this be the quarter that we stop annuallyzing g D p um No, because then you won't get these these extreme numbers if you I mean, how useful is that to annualize GDP in a moment like this, Look, I think you just have to. I think you continue to annualize it because that's the way we always look historically at GDP, and the reason it starts you would do that is because otherwise you end up getting these very small numbers if

you don't annualize it. So annualizing of the trend obviously today annualizing you get these aggressively large numbers. Um So, to me, it's important to put these numbers into perspective. Let's say we get a thirty percent annualize the clients talk about it in terms of the quote unquote annualize, talk about it just the quote unquote change on annuals. Talk about in terms of the year and your change. Just look at a variety of indicators. In my view,

what are you looking at late in the week. One more question, Michelle not on housing retail sales claims, Which

matters the most, Which is the most valuable? Um So, I would say, you know, claims continue to be really high up on the list in terms of being able to track UM the trajectory for for the labor market UM and we have been seeing a pretty steady deceleration in the rate of claims, which is quite nice that we're looking for two point eight million, obviously aggressively high UM, but you know it is coming down and it's readily coming down front the peak, which shows you that healing

in the economy, although you know amount of stealing only UM. The retail sales numbers obviously very important as well. That would be for the month of April. We already saw a pretty sharp, sharp decline in March. Now is the March numbers were driven just from the left two weeks of March falling dramatically, so the hands off into April is really really poor and that's going to bring retail sales down as well. So expected pretty ugly number there.

Michelle always writes to catch up with you, thanks for jointing us on housing market and the broader economy. Right now, we want to really nail down what everyone's talking about, and that is, of course reflation. The idea of aggressively imputing a new inflation is sore of arbitrary. It's really

not in the economic textbooks. Then there's inflation, which we all know we've all lived, and then there's lesser inflation that's called disinflation d I s and then there's this gloomy thing from Europe and another time pass early Eisenhower outright price declined deflation. No one owns this territory like Gary Shilling. We're thrilled to Dr Shilling could join us right now writing his wonderful newsletter. Gary, you said there's good and bad deflation in the pandemic. Is there good

or bad disinflation and good and bad deflation? Well, good good inflation is like you've had in times of tremendous productivity growth that happened in the latter part of the nineteenth century and again actually in the nineteen twenties when basically supply outruns demand and so prices decline. Bad deflations were out where demand is destroyed, demand goes down more

than supply. And I think now we're more in the ladder, We're more in the bad deflation because we're the supply, particularly in a global basis, has not used that much, but demand certainly has dried up, at least for now. With all the monetary central bank and fiscal action and even more action to come that we've seen. Does that exacerbate these price change moves? Does it make for a greater disinflation. Um, well, I I don't know if it if it if it does that, Tom, but it's it

certainly is disruptive. And you know, I think you have to you have to consider that all this, all this monetary and fiscal stimuli is really not doing that much. I mean, you look back and what happened after the oceanal On nine recession. That said, uh, when into massive quant a cative quantitative ease, and what happened. We had the slowest economic recovery in the post war period. Yeah, the money went into stocked, but it didn't go into spending and investing. And I think you have the same

thing now. We also had massive fiscal stimulus back then. So you know these uh, you're fighting against tremendous forces. I think we're I think we're dealing with the we're the greatest shock to the world's economy since World War Two, and in terms of disruption and the length of time it's going to take to get re oriented. Garry, That's exactly where I wanted to go, especially given your credentials as one of the top ranked economists out there by

a number of places. You wrote in a recent column for Bloomberg opinion that you think that people are getting a little ahead of themselves and that were headed toward something more akin to the market crash in the early nineteen thirties Great depression. Where are so many economists I'm thinking of some houses Morgan Stanley, Goldman Sacks that are looking for a U shape recovery or even a V shaped recovery, saying that we're going to see a big rebound in the latter half of Where are they wrong

in your view? Well, I think they're They're They're likely air is that they are assuming that business and consumer spending revive a lot faster than I think. Uh, if you've had the disruption to supply change, you've had a whole change in the way people behave. Yeah, Okay, people aren't going to stay at home forever, but I think they're going to be a lot less likely to come out. We don't have anything like a vaccine that's going to ensure people that they're not going to get uh COVID

nineteen when they do go out. And and of course, when you look at the disruption of supply change and the realization that we were relying on China for a lot of basic pharmaceuticals and so on. To work all this out and expect a V is unlikely. And also, uh, at least the history is that any time you've had over decline in the stock market, Uh, it's it's never ended in less than six months. Uh, that's history. Doesn't mean it can't be a V this time, but I

think it's highly unlikely. Well, what do you say to the arguments that this time the fiscal and monetary response has been unprecedented, both in its scope and its speed. Does that change the equation? Well, it might, but it I just mentioned we had the same thing in response to the Great Recession, the only seven oh nine decline, your massive that the FED and other central banks not

to race down to zero, then massive quantitative easing. Then we had fiscal stimuli that was the extent of six percent of g d P. Yes, things are bigger this time, but this is a bigger shock. Bear in mind back then, but that was a shock to housing. But people's lives were not disrupted. Now, of course, if you were somebody who was way on the limb with a shut mortgage, who are in trouble, But most people have had a

little in fact, but this, this affects everybody. So to say that you've had much more monitoring postal Sami, Yeah, but you've had a much greater problem. And in my judgment, it still does not simply that things are going to turn around on a dime. Gary showing, Thank you so much,

Gary showing with Gary showing. And of course it is wonderful, uh lengthy, I should say newsletter almost a monograph when he puts it out right here we speak at the Johns Hopkins University there Bloomberg School of Public Health, and of course that is Michael Bloomberg, the founder of Bloomberg LP, this radio and television operation, as well his philanthropy to his alma mater and engineering school at Johns Hopkins. But it goes much further than that. And one of their

assets is Joshua Sharfstein. He is Weisstein, and we caught up with him on the strange thing called this lockdown. The ability to open week health safe depends on more than mass and gloves masks. So really, um, you know, stop cap measure how well they work isn't really as

well known as you might think. So the most important thing is the ability to stay away from each other physically have areas between people, particularly like a cash registers that would prevent goplets from spreading better than a mask or so. I think it's possible in some areas to do that. Um as cages coming are coming down as we have more public health measures and plays as the hospitals is doing better. But it has to be done very carefully, and it's not if you just wear a

mask and gloves. Too good to go, Josh, how does contact tracing work? Is it the most effective tool we have right now? It is a really critical tool. And the idea is we want to stop the virus from steading from person to person without having to tell everyone to go home and stay at home. Until you do. Is you find someone who has the coronavirus, maybe they got to have a test and they're positive. You call

them right away. You find out who they've been in contact with during their infectious period, which is a couple of days before they started symptoms, and then quick you call them. You tell them that they may have been exposed and that they should coins and themselves so that when faith start getting infectious there's nobody for them to give it to. That's the basic idea and it requires a lot of people to do, and in New York

is planning to hire something like the thousand people. But if you can do it, and even if it's not perfect, you can really slow the spread of the virus. Joshua Chefs, you know, the Johns Hopkins at University givings an update and we'll do that through the week as well. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast.

You can always catch us worldwide. I'm Bloomberg Radio.