Surveillance: Fed's Virus Response With Kaplan & Bostic

Global Chief Economist. Katherine. This is about speed. Now, how quickly can this bill get to the President's desk and how quickly can that bill turn into real capital that gets injected into this economy. Are you hopeful we can do a lot of that quickly. Well, I think we can get the bills to the desk and so forth, and it can get sign But it is really about getting the financing out to the part of the economy

that is desperate in need of it. Um. You know, there's fifty of the economy that does not UM doesn't borrow through bonds or through equities, and of the economy both the businesses and the workers. Those are the parts that I really worry about because it's much more difficult to get money to them. And if and if they are if businesses go bankrupt, if the workers become unemployed, then it's going to be very difficult to get to a rebound that a lot of people are forecasting to

the economy in the second half. You cannot get to a strong rebound. Uh, that's gonna pull the economy out of procession unless you can keep those the lights on. At the of the economy book, the businesses and the workers, neither one of them have cash buffers. NATH is really really difficult. Le's get a read on the second half of this year. And I totally agree with you, and I'm sure many people listening to this program due to So let's try and assess the damage we're doing to

the globe economy, the U S economy. Right now, we had a really ugly jobless claim sprint yesterday. Are you saying it could get a whole lot worse from hire but for it gets better? Thus, the general view is that it will get worse before it gets better. And the point is that we would that we would like to not have it get as bad as it could.

I mean, in some sense, Uh, they're the numbers could be much much higher because the services component of the economy much more labor intensive, much more smaller business intensive. And so you know, saving the big corporate obviously that that's relevant for the stock market. That's that is a component of the of the fiscal plan. It's a very

big component of the federal reserve program as well. But you know the rest of the economy, the half of the economy that is not in that category, the businesses and the workers, those are the essential ones that we have to have maintained in business ready to go when the when the virus finally dissipates. Catherine dr Fauci talks about the aspirations of the president to get back to work.

I'm not going to ask a game Easter April twelve, but when do you suggest America as any sense of normal g d P. Let's just say a zero percent value. I mean, is it a two thousand twenty event or do you have to be grimmer than that and go out further? So the the our our U S economist does have the year over year at growth rate in at negative point five U. But the trajectory moves UH the U S economy back into positive territory um by

the end of the year. So so if if in fact, we can keep going uh keep the lights on at the economy and keep those people uh the workers balance sheets uh sane and that, then that's what the OA some of these programs are is to keep the households from going into the deep, deep pole that they went in the global financial crisis. But you're going to tell me the consumer. I don't know what the income shares in the United States, but it's a huge number. To

John's point, is this just a starting point? I mean, are we talking about twelve and fourteen trillion dollars of stimulus to get us out to the city group trajectory months and months away. I don't you know. It's it's it's about to make to my view, it's it's the

money matters, of course, but it's also the speed. The point is is if if if we can't keep the businesses in business and the worker balance sheets uh sane uh stable, then the recession gives is deeper, and once the recession gets deeper, it's much more expensive and hard

to get out. So the reason we need to go move fast to get the money out to the to the businesses and the workers is because if they if they go bankrupt, if the workers go on un employment conversation, UH, if their balance sheets get messed up because you know they don't they don't have enough money to to pay the rent, to feed the family, then then the recession is deeper. And once you're into the hole, then it's

much more expensive to get out. And you know, your death sustainability, there are people out there who worry about such things. Uh, your death sustainability is also at risk. So do it now, do it fast, do it big, do it fast and big well, do it fast is sort of anathema to Congress. And we're seeing that we're seeing the move at lightning speed, and yet they still

haven't gotten it passed. And once they get it past, it's unclear when they can get the checks in the mail and when they can actually get the SBA up and running and giving those loans. Is a fact going to be doing the heavy lifting here. So I think one thing is it said that there's uh, there's uh. Part of the discussion is on UM getting the financial institutions directly into connection with firms and and and UH bypassing the s p A UH the SBA has got

a different timetable usually for what they do. And so the objective is to to have the financial institutions go directly, have firms come directly to the financial institutions, uh, and not have to go through the SBA process because the feed is of the essence. As I say, most of those businesses they have a cash flow buffer of maybe a month, maybe less than a month. We're already two or three weeks into this, so uh, you know when they say I have to let you go, I have

to close my business. But by the way, I've been told to close my business, and and you know you have you have a payroll, You can't you don't have any cash buffer. So we have to yeah, keep those companies going. Well. I guess the reason why I say, is the FED taking the focus here because they're supporting the financial markets because that is the transmission of credit that's much more efficient than trying to go through some of the governmental agencies that from from a number of

reports have been understaffed. Even I'm just wondering what that means for the Fed's power going forward. I mean, they already have taken some unprecedented measures, how much more are they going to do in taking the front role here, So you're right there. The you know, the financial system is the mechanism through which you get credit, but the Federal Reserve is also taking on this role of Um. You know, it's a policy put on every part of your portfolio. You know, you got some funds, you know,

you've got treasuries. Uh, you know, and you get the only very little bit that the Fed is it is going to go out there and buy. So you know, as I say, it used to be a policy put on the treasuries. Now it's the entire entire portfolio. So there's some I think going, You've got to do that now I know that. But if I think that, uh, it reduces the power of the Fed going in the longer term because it ties its hands, because you end up with a problem of how do you do monetary

policy normalization when you've got everything on your balance sheet? Um, it makes it very difficult to to to be the arbiter of monetary policy normalization. We're thinking about this way out in the future. It's not something we should think about now. But but you know, in the back of your mind you're gonna say, you know, I'm all in here, Um, how do I get out? Catherine Man, great you Thos this morning special thanks to you in the same over a city city global chief economists, A policy put on

every part of your portfolio. It felt that way for much of this weight. We'll talk about it a little bit later on this program. We would like to welcome Propert Capitlan to Bloomberg Television and Radio worldwide. Thank you for joining us this morning. Obviously only one time to be here. Everybody's minds. The House expected to pass the fiscal stimulus bill this morning, and then I guess you'll be in business. But what business is that going to be?

The Treasury could give you as much as four billion dollars from this bill, which could leverage up to four point five trillion dollars. Even for an old Golden Sacks guy like you. That seems like a lot of money. Yeah,

I mean. The key, the key to uh, the proposal from the Fed point of view is there's a number of special purpose vehicles that are being created to implement these programs to buy assets from commercial paper to asset backed securities, to corporate bonds to municipal commercial paper, and so each of these special purpose vehicles requires approximate ten billion dollars to seed, and so UH the money from from the bill will be used to see these various

programs that we've already announced. The bill also suggests to new lending programs from the FED, one for companies and one for the small business or the main street lending program that you guys talked about. What's the difference between the two. What is the main street program? Well, it's

the details is still being worked out. That The long and the short of it is, UH, we would help lend to small businesses, but we would do it through most likely through commercial banks, but we will provide credit support to those banks so that they can h they can step forward and make loans that that that are that are appropriate, but they can do it with confidence that they have credit support. That program is still being developed and we're still working on the details of that

well still being developed. The need is immediate. How soon do you think you can start getting cash to companies? I we I would think very quickly. UH. I've been careful to avoid setting exact timetable, but you can be sure that we're working furiously here at the FED to UH to put the team to have the teams in place and work out the details and get those programs ready, and you can have confidence that we will do that. You're also going to have the ability to lend to

states and cities. Give me an idea of how that would work. Well, primarily, Uh, we we've already announced UH that we will be buying through another special purpose vehicle, the commercial paper of cities and states municipalities, and that program is already a well underway in terms of being formed. UH. And it's going to be primarily through the purchase of the commercial paper that's issuance that's issued. Some of this lending seems to put monetary policy squarely in the fiscal camp.

How do you feel about that? Uh, in this environment, it's necessary in that UM, while it's unusual and a number of these authorities are unprecedented, I think we I think it's critical that we adapt to the reality on the ground and we adapt to the challenge, and that's what we're doing. So I think it's it's in this situation, it's quite appropriate. Can you get out of this when it's all over, Yes, I mean, we'll obviously have to work on how to do that. All that in an

appropriate way. But but yes, I I believe. I believe that we will. Everybody understands our country understands this is an unusual time. And the reason we're implementing these programs is these either municipalities or businesses or other entities don't have cash flow because we've asked them to shut down. Once they're up and running again and they have their own cash flow, UH, it will be able too, I

would think withdraw from some of these programs. But in the void, we want to make sure that these small businesses, big larger businesses, medium sized businesses, and municipalities continue to function. And I think that's critical as we as we do the things we need to do to social distance and quarantine in some cases in order to defeat this virus. A trillion here, a trillion there, to paraphrase Everett Dirks.

And you start to talk about real money, might billion at the time, because when you when you look at that kind of real money going into the economy, do you worry about inflation? Uh so some right now I would call what we're doing into the category of quote unquote relief, meaning, uh, this is intended to keep uh.

All the bills, including the fiscal bills are to keep individuals functioning and being able to pay their bills, small businesses functioning, municipalities functioning, larger businesses functioning, so that when the virus is defeated, we can walk and then we can run, and then we can sprint out of this. UH and so um UH in that regard, I don't know how inflationary it will be, because it's more relief

than stimulus. I think a lot of the forces, unfortunately on the other end, as we come out of this, might in fact be deflationary, and that we're likely to have a spike in the unemployment rate. We will work that down, will have more excess capacity. I think a number of those forces actually will be deflationary. We're speaking with Robert Taplan, the Dallas Fed Bank President, on BLUEBIRG

radio and television. UH. One of your colleagues, speaking of unemployment, says we could see and decline in GDP in the second quarter. What kind of numbers do you see? So our our forecast to the Dallas Fed is is not on that scale, and that UM, we think you'll see a substantial contraction in the second quarter. Our own estimates

is it won't be. Uh, it won't be that big, but it will be, but it could be in the twenties in our view on an and and just to point out on an annualized basis, it will be in the twenties. And we can have some decline also at least in the first part of the third quarter. And our own internal forecast here at the Dallas said, as you could see the unemployment rate peak in the low to mid teens, but we would expect that would quickly,

um be would quickly decline. We would hope to something like seven or eight percent by the end of the year. And then we'ld have to spend working that unemployment right down. Uh, but we'll have an elevated level of unemployment for sure. As as we come out of this, well, do you see a v shaped recovery of you just be a

very long slow recovery. I listen, everything we're doing, uh, and that and and and in addition to fiscal response, is all with the intention that once this virus is defeated, we will move forward as expeditiously and quickly and strongly as possible. The thing that that I don't know and we'll have to see as we go UM is what will be the effect on small businesses? And I've talked I talked to lots of small businesses as well as larger businesses. You know, a lot of small businesses may

come out of this either smaller. Some small businesses may conclude that they don't want to continue to operate out of this UM given their businesses were not as strong even going into this UH and bigger businesses are going to have to assess how much demand do they have, what's the size of their business? UM and and rescale and reconfigure what they're doing and so UM and then the consumer behavior, we're gonna have to learn what consumer

behavior is on the other side of this. I would think consumers and we think of it elas that consumers are liable to be more cautious, may well save more. You can understand why UH and UH and and they're spending habits maybe a little bit different than they were, and they'll have a higher unemployment rate. So I think these are all things that it's a little too soon to gauge, but we're gonna We're gonna climb out of this.

It's just a question of how fast do we go again from walking to running to sprinting and uh, and we're still trying to come to groups with that question, well, what are you seeing in Dallas in the Dallas district?

What are companies telling you they're about their prospects. So we're hearing a lot of things, but I think that we're hearing around the country for small businesses, they're worried about survival UM and and that's probably true of even small and medium sized businesses where they've just never they've they've mapped a lot of areas, but never mapped the scenario where literally they were asked to shut down, a

revenue just stopped. And so there's a lot of great concern, particularly among small businesses about whether they can make it to the other side, even with the loan assistance that

we're talking about. For even bigger businesses, detaining on what industry and they're in, we're also having the same discussion in that UM they're just trying to assess how long, how to how to manage their people, how to protect their people, but also how to manage their business during a period where their revenue is dramatically declined and and great concern and in particular, which is what we're working

on we'll have availability of capital. UM. The big, the big other issue we deal with in Texas that most states are not is energy. We had, in addition to the coronavirus, an unprecedented energy shock that happened about two or three weeks ago with Saudi and UH and Russia. Is so from the coronavirus, we were going to be globally oversupplied on energy to begin with. And the Russia UM saw they dispute UH and and desire to pump

even more makes this oversupply even worse. So we have a dramatic global oversupply issue for oil, which is dramatically hurt the price of oil. And so you're gonna see lots of restructuring, some failures, and lots of challenges in the Permian basin. And we think we think the Permian will actually shrink this year. We thought it would before this happened, we thought it would grow more slowly. Now we actually think the production from the Permian basin is

likely to shrink. And the only reason you won't see it shrinking faster is some of these firms have forward commitments to sell their product. But as those laps, you'll see a shrinkage across the industry. The last question, as everybody looks to the Federal Reserve to sort of pull us out of this, what's your message to people who maybe saw Chairman Powell yesterday say we're probably in recession now, Well, the messages, we knew we were going to be in

a recession. We've it's a self mandated recession. It's a different kind of recession. Normally, recessions are things we want to we we avoid at all costs, or we avoid. This is a recession that we've induced. We needed to do this in order to fight this virus. Having said that, we were strong before we went into this, and we believe we've got a great chance to come out of

this very strong. But everything, the messages, everything the Federal Reserve is doing, and in addition, all the fiscal responses that you're seeing are with the intention of as we as we defeat the virus and we climb out of this situation, we do it as strong as possible and increase the probability that we're going to be uh uh. We'll have a new normal as we come out of this. But we'll come out of this strong and we'll get stronger as we end this year and go into next year.

Dallas Fed President Robert Caplan, thank you so much for joining us this morning. Stay safe down there in Texas. We would like to welcome the Atlanta Fed Bank President Robai Albostic to Bluebrick Television and Radio worldwide. Thank you for joining us this morning. Um. How expected to pass the fiscal Stimulus Bill, then you get lots of money from the treasury according to the bill. Uh, what is the plan the main street lending program that you talked about,

what is that going to be? Well, first of all, good morning, Mike, it's good to be on with you, and good morning to everyone. Oh, just to provide some context, you know, coming out of this crisis or coming into the crisis. But we saw with a lot of financial mortgage really trying to break down in terms of their funding, and so we announced a number of facilities that we're going to be designed to help those markets function more smoothly.

And a lot of the funding and the bill is really oriented towards providing the backstop, so that we can do that in an appropriate way that that meets with our authorities. The main street Lending program is another one of these UM that has been designed to really try to help small businesses is you know, many small businesses don't have an extended buffer to UH to weather weeks of not having revenues, and so they're under a lot

of stress. And so the way the program is conceived conceptually is to provide them with the bridge that allows them to UH to really stay in business, keep their employees on board and UM and get us to the other side of the program UM, the other side of the crisis. This hasn't fully been worked out, and you know, I've been on calls pretty much continuously for the last two days trying to work through all the little details.

There's a there's a lot. As you know, this is quite unprecedented for the FED, a reserved to be trying to do this. So we want to make sure we do this right in a way that doesn't lead to problems down the road, but also in a way that that gets the money out as quickly as possible. Well, how do you do that? Do people line up outside the Atlanta FED with loan applications or how's this going to work? Well, the end of the FED doesn't typically

do direct lending like that. Uh, My expectation is that this will work through the bank institutions that already have relationships with many of the businesses that are going to be needing to support. So, you know, we're already working with small businesses with banks to to address some of

the small business constraints. We're encouraging them to think about modifying some loan terms, differring requirements or principle and interest on those loans, extending those terms as well, all with the idea of trying to douced the current time pressure that these businesses are facing. So so we're going to do more with the banks is my expectation. And uh and I look forward to being able to announce this as as soon as possible. How soon do you think

that is? I mean, the need is immediate. You walk down the street anywhere and you just see the store after store shuttered. Well, you know, there's been a lot of focus on small businesses laying awful lot of of their workers. But you know, we're doing a lot of surveys here in the sixth district in the southeast, and one thing that that has been heartening is that many of these businesses have been saying we're going to try

to hold on as long as we can. We're not going to make any permanent decisions about our staff or our operations until we see the full range of support that's happened. I think the bill that is being going through Congress right now is a good first step to do that. And UH we are going to work with this lending program to make sure that we get this out in time. We fully understand that time as of the essence here, and we're going to do all we

can to make sure that we're not late. With this support, you'll also have the ability to lead more UH to states and cities. How does that work? Is this just the program that you've announced their do you expand that? Well? You know, one thing I would say is we're gonna want wait and see. We're gonna watch how these markets operate and see whether there are segments of the market that are not still working close to where they were

under more normal times. And if we decide and determine that those those those segments are not working well, we'll look to set up other facilities to support them. For now, what we're seeing with the facilities that we've set up, though, is that many of the tensions and stresses that have that we're rocking the market. A couple of weeks ago, seem to be moving in the other direction, which is

quite positive. But we're going to remain diligent to make sure that as time passes, if things do start to MAETERI it again, we are going to be ready to step in and try to provide whatever support we can. You mentioned that some of the businesses in your district are relatively optimistic or at least want to try to be about staying around. But I'm wondering about UH cities

and states. You've got a couple of the poorer states in your district, and there's been a lot of concern about shrinking revenues because they're not collecting any taxes at that at this point, how bad is that situation. Well, we don't know for sure right now, And I would take two things on this. One. I think that we're going to see our coming together in the public sector to make sure that every jurisdiction, UM at the state and at the city level, is able to get through

this crisis and still be functioning at the end. But the second, which is another important thing, is that UM, this is a public health crisis. This is actually quite different than some of the economic disruptions that we've seen in the past, And as a consequence, I think there's the possibility that once the public health crisis has gotten under control and we don't have that issue anymore, the

economy may rebound actually quite robustly. And uh, you know, the Chair said yesterday on the news that the economy started in a good place, and I think that's exactly right, and that's something that we all should keep in mind.

And the goal for almost all of these projects and programs is to try to make sure that when we get on the other side of this, the economy is as close to that place as it as possible, so that when recovery and and and health is not a major concern, the economy can really start kicking back on

all the cylinders and running quite strongly. So my hope is that if we do the responsible things and take care of our public health problem, that the economy can rebound and some of the short falls that you're talking about, uh, wind up not being as as deep as as they could be. Well, how bad do you think the short fall could get? What is the Atlanta fantasy in terms of unemployment in terms of GDP going forward. So, you know,

it's it's interesting. I've talked to my macro forecasters and what they tell me is that, you know, in this environment where we've had basically an induced UH contraction of a sharp contraction, that forecasts are really difficult to do. And so we're definitely expecting GDP for the second quarter

to be close to zero. Are for the first quarter close to zero, second quarter definitely negative, But then the third quarter there's really sort of an open question as to how quickly we get the the public health crisis, this coronavirus spread under control UH. And among my forecasters, you know, there's the beta whether we'll start to see that in early and third quarter, middle of third quarter,

or the fourth quarter. So um, So I think it can be pretty tough for the next month or so, But then a lot of the trajectory will will depend on how we deal with the public health issue. You have a background in housing. There's no money in the stimulus bill for mortgage forgiveness or rent delays or things

like that. How do you think housing plays out here? Well, it will depend, you know, I would say that what we've seen through the Congress is a series of bills trying to address various aspects of the crisis and the economic downturn. The housing market is when we're continuing to have conversations. You know, I've gotten contact from many in the in the property markets and the property industry, and

they're telling me about their challenges. So we are working right now to try to understand those better and make sure that that there isn't collateral damage and housing markets such that either one a bunch of companies go out of business or to a lot of people lose their homes. So we're going to try to make sure that as we get through this, the housing sector, uh is not

a repeat of what happened in the Great Recession. In this stimulus bill, the fiscal stimulus Bill, you're getting a lot more money, a lot more power from Congress, but they're also putting some restrictions on what you do, say you know, in terms of the corporate loan program and what companies are allowed to do. Does it bother you that the line between fiscal and monetary is getting quite blurred? So I don't think so well, person all, it doesn't

bother me. And the thing to remember is that all of these are all of these facilities are being stood up under emergency authorities, and I think the important context to keep in mind here is that we're in an emergency, and when we're an emergency, we should One of the us is that we learned coming out of the Great Recession was UM acts strong act, definitively attack in a very aggressive way those parts of the market that are weak to try to uh limit how deep or how

negative things get. So it doesn't trouble me about this UM. We have these authorities, the Congress has given them to us, and we'll use them in emergency, and I have every confidence that we're going to apply them in a very responsible way. The last question, as you stand up all of these authorities and get deeper into this UM, what unintended consequences do you foresee? What are you worried about down the load road when we come out of this

on the other side. Well, I'll say, in the short run, I'm I'm worried about just my staff we're under We're working incredibly hard to stand these things up and across the entire federal reserve system. Uh So I want to make sure that that we are doing this using all of our resources, and I'm spending a lot of my time right now just trying to keep people, make sure, keep an eye on people, and make sure their fame

of mind is positive. On the back side, I think that UM one thing I'll be looking for is a measure and a gauge of consumer confidence to see how how consumers and households are thinking and feeling about the U S economy UM and their prospects you know, after this, because that will, as you know, play a very important role in shaping people's willingness to consume and spend and

invest in themselves and in their businesses. So I'm going to keep an eye on that UM and hopefully all the things that we're doing today will will give people some confidence, and that confidence will carry through into the recovery period we can't hope. Thank you very much, Atlanta fad Bank President Raphael Bostick for joining us on BLUEBIRG radio and television worldwide. How about what to do with the little pot that you have which has become a

smaller investment portfolio over the recent weeks. Darryl Kronk is with Wells Fargo where he really thinks hard about these kinds of things. Darryl, bonds are stocks right now. I haven't asked that question in weeks. Do do you want to own bonds or stocks at this moment? Well, we'd still be a little bit conservative on stocks here, Tom. I mean, I think if you look um decline in stocks,

um you get a retracement or rebound. Right. But history tells us over and over again, if you look at the thirteen big waterfall decline, since nine of those thirteen have retested or broken the low on an average two months later after that initial decline. So history tells us the deeper the decline, the higher the bounce, which we've got the last three days, and then the deeper the retest. Even on the four instances that didn't set fresh lows after two months later, three of those four at least

retested the lows but didn't break them. The only instance that you can find going back decades and decades is the December eighteen instants where we had a true v bottom and bounce. So point is, I think you need to be a little cautious, a little defensive. You're on stocks below on the SMP, so let it drift back down here and then I think there's gonna be some

phenomenal buying opportunities on the equi side. Alright, So, Daryl, if we do want to look out to the other side of this, what are some of the sectors you're suggesting to your Wells Fargo clients that that maybe they think about to the extent they want to get back into the market or maybe put some new money to work. Yeah,

it's a great question, Paul. So right now, if if we're favoring sectors, what we want to have is information technology, which again is up in quality, has some of the strongest balance sheets, some of the highest level of cash on balance sheet, you know, fortress type balance sheets, um, and probably recovers. We do like calm services, communication services. We also like the consumer discretionary sector, and we think you can actually from a value standpoint and start um

taking away at financials. Here you're getting the banks at you know, really cheap price to book levels. Sorry, so you're just saying Microsoft is a consumer discretionary because they own Minecraft. Right, everybody you know, coast to coast with these shutdowns and the kids home, they're all glued to Minecraft. So I guess Microsoft can be like you know, Procter and Gamble or something like that. Daryl, tell me about the financials. That seems to be the surveillance point of

debate this week. We've got some people saying run, and I believe you're saying, no, you see some value within the banks. Well, obviously, um, it was time to run prior to this, right, I mean the financial or the KBW financial indexes on peak to trough um, but you know, again, strongest they've been in decades from a capital and liquidity standpoint.

You guys know that, you know, if I can buy financials less than one time's tangible book, which many of them today are trading at point six point seven times book, you just don't get those opportunities very frequently, Tom, And when you do, history tells us twelve twenty four months out there exceptional opportunities. So, Sara, we're going to see some really really ugly economic numbers over the next several months. We've got to taste of that with the childless claims

of you know, three point to eight million yesterday. How can any equity portfolio stacked up against what's going to be some rising unemployment just some just incredibly negative to q g DP prints Um, it just seems like the market is really going to be challenged over the next

several months. Is that digests all the data? I think you're right, Paul, and I think that's why we want to be a little bit patient and careful here, because again, if you take that phase one, the initial draft down, Phase two is often this long elongated um consolidation phase of test and retest, volatile up and down, right, so you have plenty of time to put capital to work in the equity markets. It's not going to get away

from you to the upside. And then eventually phase three, when the data improves, you start to see then you break out into the next bowl market. It's interesting if you go back and look historically um economic recessions, you know, again going back to the average market bottoms four months before the recession ends, with an average recession being thirteen months. So if you were just worth you know, thirty days into this recession, UM, I don't know if the if

this one's gonna last thirty months. We actually think it may be shorter than that because of what happened and how we moved into it. But let's just say it's you know, four or five six months out, then you want to look for four months prior to that is when history tells you market from the bottom. This is a really really I'm really glad to bring this up there. Oh, this is an incredibly important point, and I don't think

it's ever said enough, particularly within the business media. The markets always looking out forward and as a discount mechanism of as a general research statement six months. Good morning, mss Amherst, which is in Vanderbilt, which you have a great heritage of researching. This Has that changed in the modern day? Does the market still look out about six months? Yeah, it actually does, and I would actually argue it's it's extended, Tom.

I mean, I think the market is almost trying to look out more like nine eleven, maybe been approaching twelve months. So um, but I just don't think it's realistic to think if we're in a bear market, and we're everybody acknowledges ourselves included, that we're in a recession, we don't know exactly how long and how deep yet that it would be unrealistic to think of bear market last thirty days and a recession last thirty days, or it would

certainly be unprecedented. So Daryl, give us your assessment on kind of what we've seen coming out of Washington. The Fed seems to have been pretty aggressive, pretty out in front. We now looks like we're getting some strong movement with two trillion dollars of stimulus. Uh, how do you think that's going to impact the economy? Well, it will impact the economy. I mean by any means. We've had twelve historic policy actions in the month of March. Each one

unto itself would be a massive story. Uh, Paul and Tom, I mean just you know, you can write about this. It will go down in the annals history. I mean certainly if you take the two trillion dollar package is going to get patted in the House today, that's about ten of GDP, right, And if you were to add in everything to fit either is doing or can do, the total stimulus accounts to close to thirty g d P, which is nothing like we've ever seen before. Tom, are

you brave enough to buy investment grade bonds? Yes? We like investment grade bonds here and again with the Federal Reserve coming in and now beginning through their multiple programs not just buying investment grade bonds, but also buying investment grade bond ets and everything else. There's really good support. You now have what I call the adopted fixed income asset groups. And you listen to you what is that?

What is that? Well, so think about the adopted groups are places where the federal Reserve is actively buying so municipal bond market, commercial paper, investment grade corporate bonds, asset back comcurities. The orphan groups are places where they're not high yield non agency CMBs, rmbs, CLO school tuitions. They're they're not covering that. Okay, Darryl Crack, thank you so much, as well as far ago. That was a great walk through, folks of what to do with portfolio. Just one opinion,

but very very valuable. Paul, I want going to bring on our next guest here as we confront this continuing crisis. We do this on a beautiful Friday, but beneath the beauty of this island of Manhattan and the five bureaus, there's a lot going on. Absolutely, Tom, let's get we want to get down into the weeds here. This virus doctor Critiqua Copolli, infectious disease physician and fellow with John's Hopkins Center for Health security, absolutely, no better place to

go and no better person to chat with here. So, DR, give us a sense of kind of where we are with the virus right now. Is the US doing what it needs to do to slow the growth here because the numbers just aren't showing it yet. Yeah, that's a really great question. And so as you know, yesterday in the US and China with having the greatest sumber of cases with UM over eighty six thousand cases. Uh money and uh you know that was not unpfucted at all given what we were looking at, um, even from a

few months ago. Uh, were the US is right now? Uh? You know, we're still in dire needs. UM. We need diagnostics still, we need to still ramp up testing, we need ppe for our frontline workers. UM. And so there's still a lot of things that we need to have done. So, Dr, you know, there's been some discussion, namely from the President, about trying to balance the get back to work to save the economy versus you know, continuing to shutdown to slow the growth of the virus. How do you think

we should balance that as a country. Yeah, so you know, I think we really need to let the numbers and what's going on dictate what we do in terms of getting back to work and uh reopening things, because what's going to happen is the open things too soon. We're just going to have a resurgence in the number of cases. And while I understand the importance of having our economy up and going again, we won't have a functional economy if we don't have helping people who are alive to

interact in the economy. And so I really do think we need to let our scientists and our modelers look at what's going on and really help advise as to what we do. Critiqua. You are you know the leading here. I I am thinking of the gentleman of the name escase me right now, a gentleman in England who has done so much in Africa and really in the combat warfare against virus Zeboland all the others as well. How do you transfer the lessons learned from the continent of

Africa over to Brooklyn, New York. Yeah, you know, that's That's something I actually have been saying for a couple of weeks now, is that we really need to look at our colleagues in Africa and um other resource limited countries have done as we try and scale up our response here. And I think, you know, these are areas where they have been used to dealing with infectious diseases outbreaks.

They're used to having limited resources, and um, they have been in some cases verycestball to compating these things that we need. This is so so important. I mean, right now, the buzz this morning is some guy with brilliant technology has figured out where the horde of college kids on the beach and Fort Lauderdale, and then they distributed and could follow their cell phones across you know, a half of America or whatever. You know, you've dealt with people

that are in dire straits in controlling the virus. How do we transfer their seriousness and their adult nous over to a bunch of people having a you know, a happy hour on a each in Florida. Yeah, it's really hard. Um Again, I think it's you know, taking people who have the expertise that have worked in places like Africa and other research limited country and working to advise our governments in our administration and the people who are on

the ground right now, rather than reinventing the wheel. And I see a lot of people trying to reinvent the wheel because they haven't dealt with this before, and I think they really need to leverage the experience we have with people who have been on the forefront of these types of outbreaks in the past. Dr Critiqua, thank you so much for joining us a smart discussion, Tom, which

we certainly need here. Dr Capolis infectious disease physician and fellow at Johns Hopkins Center for Health Security, and that seems pretty appropriate right now. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you refer. I'm on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.