Surveillance: Virus Messaging With Dr. Quick

can solidate. Why is that, Tony? Well, John, I think ultimately there's two phrases that we've all come to know, and that's don't fight the FED and don't fight the tape. The FED is extraordinary here you have a FED that is literally looked into a television camera and said, we're just printing the money and don't worry about that. Now is not the time to worry about that. And we're

gonna issue unlimited support for the credit markets. And the phrase that really, I think has has hurt so many portfolio managers and myself frankly, over time is it's not it's different this time. That's the phrase we all love to talk about. I think the real phrase that really hurts performances. This will end badly because of course it's going to add badly. You cannot fix exponential debt with infinity debt. However, in the current framework, the FET is

very driven to obtain their to um. There's only two mandates full employment, which clearly even with a game we're not going to get on over any over the near term, and stable core inflation, which they want to be at two percent so recently last week at one. They're a long way off. So this FET is going to be sending the money in and I don't want to fight that. I mean, so this is really really important because you've been very clear that you're modeling a caution in a

bear market even off of a recession. Well we got an m v e R recession, but you're putting a big asterisk next to it, right, Well, there's so we downgraded the market on January because we just we wanted to take some risk off the table and it's just gotten way too excessive. Then of course I didn't expect a thirty you know that. I was glad we took some risk down. We added risk when we came out of what actually when FED chair Powell Tom said into the camera on sixty Miss CBS is sixty minutes that

we're just printing the money. I never thought you and I have been doing this a long time. Did you ever think that the FED would actually not even use great terms like q E or buying trade. They're just saying they literally were printing the money. So at that point you know that they're going to try to um increase economic activity, not stop until they do, Tony, don't fight the FED is certainly one theme that we've had

this year. The other theme is don't fight the big tech rally, but that's getting three reatened by the Facebook advertising boycott is really raising questions in general about the advertising budgets of big companies. How much could that influence the rally going forward? Well, I think that that could create a little bit. So once we have created the market,

you've got this incredible runoff of that trading range. So on June five, we thought that the market would go into a period consolidation because these stocks has seen extraordinary moves right there. It's just even the economically sense of stocks. You had a two week rally in the banks of thirty and it was time to take a little bit of that. That is an extraordinary thing that's never happened. So it's time to take a little bit. It was time to take a little bit of money off the table.

So actually, the market has been consolidating since early June. So if you look at the percentage of stocks above the ten day, it's dropped uh SMP components above their ten day moving average, it's all the way back to only if you look at the percentage of stocks above their fifty day in the SMP just two and a half weeks ago, that reading was over. It was it's now so you've dropped, or so you you're already internally

consolidating the market. Now it's catching up at the indices because some of those big mega caps stay at home stocks are starting to get hit, Tony A. We're redefining what a defensive asset actually is. Is a groat stock of software stock with an anovated multiple of thirty times forward earnings is not a defensive asset right now, buddy, I I'll tell you time you meet. At least all of us have been doing this a while. The NASDAC mega cap stocks are considered the defensive stocks, which I

just that is unique to this cycle. Um, So when you put those stocks, if you're making an offensive bet, you've got to be believing that there's going to be a reopening of economic activity. And again, our our target is a story. It's not you know, in the next fifteen minutes, we're off to the races. I think what you want to do is use periods of liquidity on the downside to add exposure. Okay, but Tony, where are you putting new money? You got new money, you're putting

it to work? Where are you putting it to work? So we're we've been thinking if you're gonna put money into the market, it's got to be on this economic reopening or an offensive sector allocation, which would be in the beleaguered banks, which got absolutely smoked on Friday on the Fed decision. Um. What was interesting about Friday though, even though the market was pretty pretty weak, as you know,

the industrials and materials actually significantly outperformed the SMP. So we're looking to go into those areas time that benefit from an economic reopening and not a stay at home forever. But again, this is something we're looking at over the

next twelve eighteen months, not the twelve next twelve eighteen minutes. John, I've struck by Tony's comments and frankly the comments that we get from a lot of investment managers, this idea that we could have more upside and stocks even though the economy faces a lot of uncertainty and downside surprise.

And again, I'm just struck by this dissonance between stocks not necessarily representing the underlying economy where the bottom fifth of all earners in America are currently about below employment level seen in February. I'm just wondering how this is going to filter into equities if ever, Well, least you've said it a million times, the equity market is not the economy, and Tony with just five big names making up about a quarter of the SMP five hundred, it's

something we've just got to accept, isn't it. Some people are really struggling with this still, that the equity market somehow has to be a reflection of where this economy is and where it's going. Well. Which equity market though, um so, and again I think that's the most important phrase. Would I would I chase some of those megacap stocks that have had such an extraordinary move. I wouldn't have. For example, Facebook on Friday gave back all the games

that had had in the prior month and change. So what what you have is elevated risk. When you have parabolic moves higher or such focused move higher, I want to I want to invest in America or or um economic activity in a reopening of the economy. I don't want to. I don't want to be chasing the stay at home work theme forever. Clearly that has been working and that has been such a driver of the equity

market thus far. But again, if you look at the well at the performance of the Russell one thousand growth versus the Russell one thousand value, you're seeing not just an absolute uh test of what happened in the dot com era, but even on a ten week rade of change, you saw a peak and it is now kind of pulling back a little bit. So I think the move is, to Tom's question, is value over growth and it's not played. It's not been the great theme coming off the low,

but coming out of a recession. Going to Lisa's point, coming out of a recession, typically your your outperformers are finance anchials, industrials, materials, and consumer discretionarya Those are the areas if you believe that the economy is ultimately going to recover, the global economy is ultimately going to recover, those are the sectors that you want to buy into the weakness that we've been expecting and could see a

little bit more. The two main problems that everybody had for the market was what about the second wave and what about if the Democrats do some kind of sweep. Well, the polling is pulling forward the political side, and the expansion of the COVID nineteen cases in the South is clearly telling us what the second wave could look like.

So that's this consolidation period. Instead of happening in the fall, it's happening now, and I think that creates the opportunity for investing in those reopening areas over the next few months. Cound of coach Intimacy Tony always fantastic to catch up with. You appreciate the transparency the honest state joining us from Duke Downs. Jonathan Quick, and what is so important about Dr Quick is not only his exceptionally Prussian book The End of Epidemics, but also it's a commitment over multiple

decades to looking at the epidemic turned to pandemic. Dr Quick, What everyone wants to know is what is your solution for the political chaos that we're in right now? It's not much different than an Albert Camus the plague. How do you extricate yourself from the political chaos to end with a better medical outcome? Well, I I think the first thing is that we need to keep persisting in getting the getting the public, everybody to see the reality

in front of us, and to do what works. Um, We're sitting here in the US seeing explosive increases, UH, with at least thirty of the states seeing increases. Yet we look around the world and we see what works. Um. I think we've had the worst of a pandemic communication in the sense that we have our leaders, um, you know, not on a on a common message. And that's that's

part of it. And UM, I think right now we're based on the Rockefeller Foundations, we're working to build an alliance of public organizations to get a consistent message out to the public about the viruses here. And so if the leaders aren't coming together, I think society has to come together. But keep pushing the leaders with facing the reality we've got this pandemic. We know it will be with us for a while and we know what to

do to to slow it down. Your work included six years of the World Health Organization, and you are a good filter of all the literature that is out there. If we see the case count explode in Florida to Arizona, do you just correlate correlate that over to a rising death count in the coming weeks. Well, yes, with with the recognition that the shift early in the outbreak, it was really a lot of at risk, all the people

we weren't protecting the most vulnerable. Um, so we're seeing now cases rise, but the death account at the point, at the present time is is holding steady. So um, we will see more deaths, we will see proportionally fewer because more of the cases are younger people who don't don't die is often. But yes, indeed we will see rises in death count as as the increase now mostly in the in the youth gets filters up to the middle age and older. So yeah, I expect we will

see the death count coming back up dr quick. This distinction is so important, This idea that you're seeing the case count rise exponentially in some areas, but the death count not expected to rise as much and not rising

significantly at this point. Could this be interpreted as perhaps these flare ups not being as dangerous as the initial ones and being just another sign of reopening economy, young people getting back into the workforce and managing through the virus to get some sort of herd immunity without necessarily a vaccine on the on the horizon for the next couple of months. Well, I mean, honestly, I think that's UH.

I think that's a wishful thinking in the sense that um UH is a bigger outbreak, even if proportionally more of it is in the youth, it's still gonna claim lives. The virus hasn't changed changed, And I think one reality is it's not UM saving lives of saving the economy. That's a false choice. We can do both, But our biggest failure has been not to really reinforce those basic personal protective behaviors which we know work distancing face mailk handwashing,

avoid large gatherings. UM. I think there's an in between where we I mean, staying indoors for three months didn't change the virus. It's still just as contagious. And whether you whether you start with a youth epidemic because they're not following enough that these personal protective behaviors um it will eventually continue um and and affect the whole population.

So we we we do have to reopen, but we have to we have to do it in a way which really applies the lessons of what has worked in other countries to plateau at least the virus and and minimize UH and reduce the desks and and all of the knock on effects. Dr Quick, how long do you think it will be until we have a vaccine? Well, I have to say I'm encouraged by the vaccine work that's going on now because we have UH we have at least nearly twenty vaccines and human trials and that's exciting.

And we've got a couple that are going into the Astrozenic University of Oxford one and the MODERNA one. Both of those are going into to the last phase of human trials where we really go on a large scale to test the safety and efficacy. UM So I'm encouraged.

That said, the whole process of scaling up production and all I think we'll start seeing some coming out in the spring is for so hope, but I don't see large scale vaccine availability that changes things fundamentally until until the uh, you know latter half of as as folks have been saying since the beginning, I think that hasn't changed.

But I do think the speed has been historic and um and the companies are really looking at how to maximize production quick of the Rockefeller Foundation Dot Defense has to catch up with you say, you've got to come back on soon. This is a really interesting interview because he's a very interesting guy. His father basically made modern Miami Beach. Seymour Gelbert was the mayor of Miami Beach forever, lived at the lofty age of years old, and his

son Dan has carried the torch forward. Steeped in Florida politics, he's one of the most interesting Democratic voices across the Sun Belt, and he is the the mayor of Miami Beach. Mayor Gilbert, thank you so much for joining us. If I went down to the Vetsy Hotel this morning, could I have a beverage of my choice on that wonderful veranda looking out across Miami Beach. Well, if it we're open, you could, because it's a restaurant, not a bar. Bars have been closed in our city since we we sheltered

in place. We're the first city in Florida to do so. So we don't have bars right now anywhere, but we do allow restaurants with limited capacity. At this point, what is the capacity you need from your state government, including your Republican governor, and what do you need from Washington right now? Well, first of all, from Washington, we need people to start sending out a message that you need to do the things that we're asking people to do.

You know, I always describe you know, mayors in South Florida know about hurricanes. They happen all the time, or at least they seem to, uh, you know, be be coming towards our way generally during hurricane season. So we all prepare and there's never any discussion about whose fault it is, or whether it's what party it is, or everybody just does what they need to do, and they

tend to help everybody else. They tend to listen to the direction of their political and health management leaders, and they tend to sort of get in line and help people. They don't even know this. For whatever reason, the messaging from Washington has not been help everybody else, help yourself. It's been don't wear a mask, or stand up against this,

or stand up against that. It's so unhelpful. Right now, the biggest concern we have is getting people to simply do what every health expert tells them they should do, which is to wear a mask. Wear a mask when you're near somebody, wear a master, protect your parents, wear a master, protect yourself. And they're not complying. And young

people are especially not complying. And since my city is in the middle of this, because we get so many guests, so many visitors, so many uh you know, hospitality workers, all in this little interchange that happens in this little island, we see it in a big way and it has to We need direction, and we need leadership. As you look to leadership, there is a question about some of the hard decisions that you have to make as a

leader of your city and as a parent. I know the conversation very much among my friends is a question about when summer camps can get back up and running, when we can get schools back up and running. I know that summer camps have been open in your region. At what point will you shut them down and keep schools closed come the fall. Well, you know, we have tried very hard to follow very directly the advice of

the health care professionals. So CDC allows for summer camps if all of these other visions are taken care of. And I think the Pediatric Association today really wants people to strive to open up schools in some way because they're worried about the impact of not having schools open and the failure to socialize and all those issues. So we're going to try to, you know, to do what we can within the confines and constraints of all of what the healthcare professionals say. This is a healthcare issue

and it should be treated that way. That said, you know, a lot of it is what parents are going to permit. We opened up virtual and regular summer camps with with lots of restrictions, and we got a good number of people interested, but many obviously didn't. Um The reason we opened up summer camps and the reason why schools are trying to open up is obviously people can't work if their kids are at home, especially their younger children, and and so it's part of not just the kids development,

but the economy. So We're trying very hard to navigate. But right now, given the spikes that we've the enormous spikes we've seen in the in the county, in the state, uh, you know, we're not sure what we're going to be doing, because if we can't get a handle on this, then

obviously the health care concerns will override everything else. Mayor not an easy decision in tom I'm really struck, especially in what the mayor was talking about in terms of the economic concerns people not getting back to work if their kids are not in school, and the idea of what could happen if we have children congregating they don't social distance, and what happens with respect to all the

little victors of disease who go home to their families. So, yeah, it's interesting here, Mayor gil Well, go ahead, please, Mayor Gilbert, go ahead. But what's interesting here too, euro up, What I was gonna say, excuse the delay, Mayor Gilbert. What I was gonna say is your father basically invented the idea of moving from New York down to Miami Beach. You took advantage of that out of Tufts and all that. How do you do the winter season in Miami Beach

this year. How do you convince those Northerners to get down there when it gets chilly? Well, the first question is how we're going to tolerate crowds. I mean, my little city and I'm just a small part of the county has four thousand New York addresses people, you know, four thousand units are owned by New Yorkers, So we we have already a pretty natural influx of either people visiting or people living part of the year here, sometimes

six months in a day for tax reasons. Um. But the tip of the matter is the market is going to determine some things because some people will simply not travel. So much of our hospitality economy is tethered two planes and boats, and the ships that are not gonna you know, the cruise line seem to be moored for quite some time. Right now. People are traveling by planes as much as they do, so we're seeing probably a little bit more regional tourism. But I don't know, I mean a lot

of I mean we're worried. Obviously, we have huge events every year. Uh down here, we just had a Super Bowl, We've got the n C Double A championships obviously aren't bossil in December. We have lots of things that we rely on and that we enjoy. I mean, look, we are a community that is built to not socially distance ourselves. We are a community built for all the other gatherings that we want. Mr Matt, we gotta leave you that I appreciate your time this morning. Mac Alba that on

a situation on Miami Beach and across Florida. Tiffany Wilding of PIMCOA, she does very careful economic work that their portfolio managers bounce off of. Tiffany, what is your calling off? I want an update from you on how V the V is. How's the V shaped recovery going? Well, I think it's gonna look like a V. First first, thanks for having me. I think it's going to look like

a V in the first several months of this recovery. Now, what one thing that I would say is, I think it's very important to note so we think we came out of recession in May UM and as we came out of that recession is not only the deepest recession UM, but it's also the shortest recession. So we clearly saw growth in the payroll figures as well as retail sales and things like that in May. So we probably came

out of recession in May. And I think what's going to happen is this these next couple of months are going to look very much like a v shape recovery as we get this spurt of activity, as people you know, start to get back to work, um and and start to reopen the economy. Um. But after that, we think

the recovery is going to be much slower. And I think you're you know, you're starting to see some of the effects of reopening the economy with um, you know, some of the rising cases within the Sung Belt within the United States of of the COVID virus. You know. So after that kind of initial spurt of activity, things are going to be much more slow going. We think, okay, well, you know a lot of the reports over the weekend, Tiffany have this down you go, and there's sort of

this you know, nudging up in business activity. We spent a lot of time on a consumer with a pandemic. What does PIMCO observe about business spirit across this nation? Well, look for businesses are actually a little bit more cautious. I would say they're getting going a little bit more slowly of than the consumer sector. You know, so I mentioned retail sales, you know, clearly with a bounce back in a pretty dramatic bounce back in and sort of

durable goods types of things. It looks like consumers are they're still standing of the spending data that that we look at, and durable goods actually looks like it might be similar to where it was pre COVID. So services are down a lot still bit, but consumers are still spending their shifting some of their they're spending over On the other side of that, you know, busises look a

little bit more tentative of UM. The business survey, we do think that is m this week does bounce back to fifty, which means that the business or the manufacturing sector is expanding. But keep in mind, it doesn't tell you how much it's expanding. Those isn't manufacturing industry, and it just tells you that about fifty percent of firms are So, you know, I think I think that they will be a little bit more slow going. Still a

lot of uncertainty out there. You make sure there's a lot of uncertainty about what the virus path will be. You know, I just don't see businesses really investing in in UM the things that will project that will could take five years to get going. If you're pretty uncertain about about how the you know, how things are going to be tyfity right now, this is the main issue for investors because of the fragility in the reopening process

across some states across America right now. Just how instructive will the aggregate day to be in the common weeks and months, How instructor will it be? UM, How instructive will it be the economy and how it's going UM. You know, I think I think data Tiffany, let me let me clarify and make it super clear for our

for our lists and viewers as well. If the Advocate data continues to show an improvement because of the mechanical reopening of say a state like New York, does it master the fragility in places like Florida, Texas, California, which is struggling with the reopening process. I do, yeah, so yeah, I think you absolutely have to go from more of a kind of national um analysis to a very regional analysis.

And that's certainly been the case, you know, with the you know, the hospitalization than the the COVID virus new cases itself. On a national level, you know, actually looks like the new cases daily to case talents are coming downs and you're looking great. But if you if you dispect the data, you know, there there's a very concerning

trend um evening after controlling for testing. So we're doing more testing, which is great news, but even after controlling for testing, a lot of these COVID cases, new COVID cases and hospitalization in some of the Southern states are doing very poorly. So we're actually watching, um, you know, some of our high freak and see data on credit card sales for example, to see if our consumers actually reacting to those increases in cases or increased outbreaks in

those areas. And we're monitoring this pretty closely. So far, we haven't really seen that big of a drop off in sales, for example, in those regions. But I think it's just going to be more like a light switch, if you will. So people are going to continue, i think, to try to get on with our lives until one day, you know, things are maybe going to get that enough where you know, they kind of stopped consuming um and and that's the kind of thing that we're waiting for,

not a maniar process. That's something that has to be monitored on a regional basis at this point. And Tiffany, that's one reason why a lot of people are saying that there could be a series of downside surprises on the economic data front going forward in the next couple

of months. At the same time, so I'm including yourself, seemed to believe that there may be an upside surprise when it comes to the policy response, which sort of sums comes as a surprise to me because it feels as if the market is baking in a re upping of the enhancement employment benefits. What is the market pricing in and what do you see as likely when it

comes to fiscal stimulus. Well, I mean, I think that the markets grappling with right now is that we are going to have a ciscal cliff, if you will, um, kind of in the neighborhood of July, if Congress doesn't do more so, as you mentioned, the unemployment insurance benefits a sixty six hundred a week, they will expire. You also have that delay in the April fifteenth tax deadline that people have to pay their taxes. Now in July fifteens, that sort of expires, you know, the PPP, which is

a paycheck protection something goes away. There's also a lot going on in the state and local level. If state and locals because they have to have balanced budgets and because their fiscal year end it's ending in June, they're gonna have to start slashing UH spending and that means really cutting jobs and services. So there's a really big potential fiscal cliffs that we could see in July. I think markets are weighing that with you know, will will

federal government federal lawmakers get together and do something. Ultimately we think that they will, um, you know, because at this point the economy is still quite fragile. I think the reason why we're seeing this re suit recovering in the first couple of months is precisely because we've gotten the large amount of fiscal stimulus that we've gotten, you know, So those household rebate checks and things like that, they

are being spitched and the economy. We can see that in the retail sales do that, you know, so it would be I think very bad for the economy if the center of the federal government, uh, you know, sort of pulled back on spending now when the economy so fragile.

So ultimately we think that it does happen because it's in needs to and we think we could get another trillion dollar fiscal stimulus plan you know, kind of in the neighborhood of July that basically thwart this fiscal cliff that's coming tyfically, let's talk about the composition of that plan where the fiscal effort should be directed. What is the optimal composition of the next fiscal effort in the

next thirty days. Well, so that I think, I think you have to be I think the maskers should be a little bit careful because what we are starting to see is that this this crisis, like others will have, you know, because we call basting scars, you know. So one of those things is and I kind of alluded to this before, is that consumers are changing their behavior and we think that they'll probably change, you know, they'll kind of be permanently changed. So some of the things

that we're seeing is it's kind of interesting. You know, people are you know for the summer, you know, they're buying more camping gear for example, as opposed to you know, taking you in a flight or going to a hotel. Uh, they're they're buying a sporting equipment instead of going out and going to the workout studios that they used to

go to and things like that. So we think, because consumers are sort of buying these durable goods to substitute for what we're services, this is going to be a bit more of than ingrained behavioral change because they're investing in these things, like our views are camping equipment. Um, you know, that's kind of on a micro basis, but I think it does really speak to this idea that you're gonna have to have shifting economic resources from stuff

industries into other industries. And I think government, regular government stimulas needs to understand that that's going to happen, allow it to happen, you know, and not slow it down, but at the same time sort of pad pad the

economy while that transition is happening. I think the best way to do that is to basically focus on unemployment and sharing for example, maybe carefully calibrated so you don't just incentivize people to work, but focus on things that will help the household really gap that income loss while um you know, they're looking for new jobs and new industries. Finally tuning the policy effort. A huge, huge decision to make in the next thirty days. Tiffinitely fantasticic cash show

with you. My best to you and the team of pimcow. Tiffitely Wilding there the chief economists of a pimcow in the United States. 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 Key before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.