Surveillance: Watch China Loan Demand, Miller Says

of China. No One and I mean no one, folks, does it better than Leland Miller of trying to figure out what rail traffic or what electric utility rates are doing to China and what its signals. So Leland, let me get right to it and your China Beige book. What do you see of in ferior demand dynamics across

Great China. Well, one of the major problems because the the last several months haven't been syncred since the beginning of the year hasn't been synchronized with the Chinese economy shutting down and then most of the rest of the world is shutting down after that, is that firms that have relied on export orders are doing really really poorly right now, which means the coast, so the interior you're seeing.

You're seeing much better numbers right now in the interior simply because they're not and and there are banking on a domestic rebound, which you'll see as the as the Chinese recovery incrementally gets better over this year. So right now, China doesn't want to be relying on its interior provinces. But that's that's where the growth is right now, while

the coast really feel some pain. Let's talk about Beijing Leland really really hard to get a read on what is actually happening on the ground in China at the moment. Some people have told me what's what they do, not what they say. What they say is that they've got a small outbreak of COVID infections. What they're doing is canceling flights and closing schools. Again, what's your done things

at the moment? Well, yeah, if you look at the numbers, it looks like this very micro blip that you see all over the all over the world, particularly United States right now. But the important thing is it's in Beijing, and Beijing has symbolic power for the Chinese Communist Party. So they lose control of that city, then you have a potential political crisis on their hands in addition to

it to economic repercussions. So what the government is doing is very much the opposite of what they were talking about doing a few months ago when they started coming out of the covid UH the COVID shutdown. They forced everyone back to work. It was a very aggressive move back. We're gonna get everyone back and running and you know, dan the consequences. But when it comes to Beijing, they're doing the opposite. They're being extremely careful. They're shutting everything down.

They want to make sure that that Beijing is not the center of the new outbreak for the symbolic for symbolic reasons as well as the fact that it's it's it's it's the major political uh center of power and leland. One major political issue is the jobs picture. And we've heard from George Magnus that while the official rate of joblessness is about five point nine percent, he estimated it more at fifteen to twenty percent. Is that accurate? Is that what your figures are showing as well? Yeah, I

think George as usual is right. You know, The problem here is that when you track employment in China and look the government gate is don't even try to get into it because they don't want to tell the negative story. But even when you do things like China Beige books job job gauges, you have a problem in that firms typically report formal employment and there's this floating migrant population that is in this set of hiatus from from being

paid right now, Some are furloughed. They haven't been laid off technically, but they have. Some haven't been rehired back. When they get rehired back, you sometimes see a bump in the job's number even though they weren't laid off in the first place. So there's a very weird, opaque universe that the Chinese will will never announce because if they came out with the number that said fifteen people, people would lose their minds the same way that they announced,

you know, one percent GDP growth. So these are the types of numbers that you just can't pay attention to. You know, the situation is much worse um, but you don't know what the exact numbers are Behind the scenes. We land one thing that we are seeing is that the PBOC is planning to increase credit in the economy by nearly a fifth this year. This according to an announcement overnight. A lot of people saying this isn't enough.

What's your take, Yeah, it's not enough, But there's a couple of things going on, and it's not just about the supply of credit. So when I look at our credit gauges, I'm shocked by what I'm seeing because you would expect the same type of liquidity rollout that you saw in the United States or in Europe. You're not seeing that in China. And you can understand some restraint because they are worried about nonperforming loans, but the levels are quite shocking, and we're gonna have numbers on those

coming out next week. But you know, it's it's it's looking pretty surprising. But the opposite of that is the demand picture and the fact that a lot of firms aren't asking for loans right now, and when you have this reduced loan demand, and begs the question why during this extremely trying time are firms not more desirous of loans? Is it because and don't like the horo economic horizon that they're worried about piling on loans during an uncertain

economic environment is because of other credit dynamics. So this is really the big picture. Yes, look at supply, but loan demand is going to be the absolute key thing to watch for the next three or four months. Lela Miller of China Basebook International, the CEO of a situation in China right now. Fascinated stuff. Okay, more Blank Rocks, chief equity strategist, another central bankcake doing a whole lot

more and maybe still more to come. Can you tell me whether traditional valuation approaches mats or anymore and it will dominated by monasty policy. Well, let me just say good morning, and then also let you know that I think valuations at this point are really tricky, especially forward

measures of valuations. You know, no one at this point, analysts, companies, strategists, portfolio managers has a great sense for what earnings will be in or I've had people start talking about medium term trend earnings and that may be fair, but I think we're experiencing a lot of dislocations in the economy and consumption patterns and it's pretty difficult to predict. So valuations, uh, you know, in and of themselves are a difficult way

to make investment decisions. But I will say is on a cross asset basis, with all of this QUEUEI, with all of this policy support, with all this repression of yields, you know, equities may look a little bit better. Okay, this is extraordinary. I agree with you. It's completely unusual times. But June thirty, beccons, how will institutional by side money reset for July one. I'm not sure we're going to

have a giant rebalance after the second quarter. I mean, we always get excited about pension rebalances and flows and index rebounces when those times come. Uh, and they never tend to move the market as much as we might fear. I think there's been a consistent rebalancing of institutional portfolios along the way. And you know, people still are trying to figure out what to do with the second half of the year, let alone make big asset allocation shifts

that will affect, you know, multi year horizons. So at this point I would expect people to continue to ride ride the risk wave a little bit, conscious of the fact that in the second half of the year we do have another big set of big risk factors. Um Please to just mentioned the election. I think that's something

we're gonna have to focus very closely on. There's gonna be a lot more news out of d C over the next couple uh months, and you know, a lot of posturing by both the Democrats and the Republicans, and I think that's perhaps gonna gonna shake the market a little bit at some point. Okay, I've been struggling with riding the risk curve at a time when people really are still hiding out and some of the more defensive names. You're seeing this, certainly with the text docs, uh and

you're seeing this in investment grade credit. At what point will investors get conviction? What do they have to see to go further into risk? Well least, I feel like you're sort of asking it, what point do we get a rotation into value into perhaps some of the lower quality stuff. The hiding out has really been in higher quality companies with good balance sheets, strong business models, with management teams that investors have conviction in and confidence in

their ability to execute. And I think that makes sense. I mean, the trouble with what falls into value or what falls into the highly cyclical parts of the of the market at this point is that some of it is structurally impaired. It's a much harder call whether we're talking about, you know, the next couple of weeks or the next couple of years. I think you have to be more selective. One of the ways that we've been talking about it is on my team is to go

into the whimpy cyclicals. These are cyclical companies if you want to make a rotation towards better global growth and better US growth, that also have the balance sheets and decent management teams. They may not be the cheapest in the cyclical bucket, but I think they're the better bet. Okay More always tries to catch with Okay More j wanting us from black Rock on some of the cyclicals out there. Jacker Earlisa Brown with some time Kena. What we know is ed bastion of Delta always at every

moment will listen to Robert Crandell. He's in his eighty fourth year. Mr. Crandell is without question the spirit of the American aviation industry, and he's also someone who has been brutally frank. He is iconic for telling American airlines employees they need to understand that you don't invest in airlines you just have fun working for them, and we're thrilled that Mr. Crandell could join us this morning. Bob Crandell, this has been an exogenous shock that your industry has

never felt before. What is the best practice for the American aviation industry to extract themselves from this pandemic? But Tom, I think the airlines are all of the airlines are die have done pretty well. They're all there's quite by the way, there's quite a nice week gap in this morning's journal about what each individual parity is doing UH

outdown American United, each one of the by one. They're all working hard to try and persuade the public that it is safe to go back, that they won't get sick if they get on the airplane and take a trip, they go see Grand mop, they go see the grandkids, or if they go to a business meeting. UH. The airlines obviously want the public to feel safe flying and they're doing the investigator to make that part of the cleaning the airplanes very assiduously. They are reducing the point

to point contacts within the terminal UH. And they're and they're increasingly and I'm glad to see this. They are becoming increasingly insistent that people wear masks on the airplane, which I think was a very important step and an event. They're all working hard at it, And his ed said a few minutes ago on your show, I think everybody is hoping that by the end of the summer the public will feel a lot safer than they feel have

felt up to this point. And it isn't travel if you but the issue is what they have to do to make the public feel safe, and right now that capping capacity on those planes is SI. I just wonder if you're running an airline again and had to cap capacity at six through year, and what are the heart decisions you'd have to make? How sweat all? Wait, wait, there are a lot of you're gonna have to make elsewhere, including how how do you best reduce costs and conserved care?

After after all, if you are capping modes and if you are not increasing prices dramatically, then obviously your cash poles are going to go way down. And what you've got to do is you you've got to stay in the game. You've got to you've got to conserve enough cash so that you can get through this difficulty to get to the point where we finally have a vaccine and people are finally able to go back to traveling

where they have in the past. That's a very difficult thing to do, and inevitably going involved throws or some people, uh voluntary throwers, perhaps more part time work. Each individual care I think it's going to shape its response the cash conservation according to its own balance sheet and its

own reading of what what public movie is web. There's a question when you talk about business travel resuming, A lot of companies are realizing they don't need to do the same kind of travel that they hadn't the past. I'm thinking in particular of road trips with respect to selling I p O s or even just face to face meetings that now could be done via zoom. How long do you think it will take before business travel gets back up to levels that we saw last year?

Do you ever think it will at least I'm not sure. I think nobody. I don't think anybody is smart enough findal I'm not smart enough to tell you precisely have the business community will respond to the sort of suspension of travel that we've had and the use of alternatives like like the alternative we are using this morning to talk to each other and talk to the public, but not be in the same place. I suspect that that will that will over time reduce the accumulative amount of

business travel somewhat. How much is anybody's get but I think it will be a long time before the aline see as much business travel as they saw in in the pre COVID days of later out of the nineteen early but always fantastic to get your unique insight on an industry that has really really come under a ton of pressure over the last several months. Bob krandled that the former American Alliance CEO what we like to do is have an important conversation now with a gentle lady

from Utah. Vivian ly is with Verily of course the story career in health academics and health medicine. We're thrilled Dr Lea could join us in the long Fix is an important book on healthcare and healthcare lucians in America. Dr Lee, I can't have a normal conversation Utah in the Mountains states down to Arizona having a new epidemic of the pandemic. Give us an update on what Utah

sees with the COVID virus. Great to be with you, Tom and um As you know, a couple of years ago, up until a couple of years ago, I was leading the University of Utah's health care system, and UH now really have been full of admiration for the way in which that state had has been managing the crisis, really had been keeping it um and has been among the

lowest in the country. But as we're seeing now, you know, all across the country, places that we thought we're going to survive, you know, relatively unscathed, they're seeing these upticks in the COVID crisis. And it's just all the more important that we recognize that the guidance that we're hearing from our public health officials, we need much more testing, we need to do the social distancing and masking, those are just ever more imperative. Now no one is immune.

I have to ask the professional question, and that one of the most piercing comments we had was with the chief radiologist at Mount Sinai on the virus. You are a radiologist, What have you learned about the inflammation around the chest cavity in this virus? What do you discern about how we can battle this virus vaccine or no vaccine in terms of the cavity of the body. You know, what is so striking about this virus is the fact that there are so many people who feel pretty good.

They actually are relatively asymptomatic, and even though they walk around they don't necessarily feel a fever, they don't necessarily have a cough, they actually are COVID positive. And we've seen the reports and the literature that they actually have findings on their chest CT scans, they have abnormal findings and their lungs that that virus is affecting them, but they're not manifesting it in symptoms. And and that's really

I think we're hearing. Just just yesterday, the f d A issued a guidance that said, look, you know, none of these tests for COVID are approved for wide scale testing of people who are asymptomatic, but they acknowledged that that is going to be necessary, that we are going to need to test people who are asymptomatic. And they actually provided templates for laboratories and for manufacturers to get that approval to be able to test asymptomatic people for COVID.

And that's going to be a critical component of getting people back to work, getting students back to campuses. We're going to have to have a strategy because we're seeing from from taking the images, as you say, of people who actually feel fine that they are infected, and that means they are also infectious. They can spread that disease to other people, and we need to identify those folks

and be able to quarantine them to protect everyone else. Meanwhile, doctor Lely, we have seen the resurgence in cases in places like Arizona and Texas and Florida with anecdotal accounts of the i C you beds getting filled up, any shortage being highlighted of general practitioners and I see you nurses, what do you see as some of the ways to fill that gap that is so sorely being reflected in this pandemic of general practitioners, of nurses who perhaps haven't

been favored as far as a professional career because they haven't been as well paid, perhaps as some of the more highly compensated specialists. You know, one of the things that the COVID crisis is laying there is the fundamental

shortcomings of our health care system. You know, we were such we are a fee for service health care system, meaning that our healthcare hospitals are designed to focus on things that generate fees, and as soon as those fees start going away, like the primary care clinics, like all of the hospital beds that were not caring for COVID, we had to lay people off. The April data showed we laid almost one and a half million healthcare workers off.

Last month was a little bit better. Three thousand were rehired, but that's still almost one point two million healthcare workers. And you know, the majority our nurses and also dentists as well as physicians. And that's just a tragedy because the people who are being laid off are exactly the folks that we need to care for the most vulnerable. We see that the people were you know, across the country, and they are the ones we need to get back

into work now. Vivianly, I need to be in the time out chair of Dr Lee because we spent no time on your wonderful book, The Long Fix. We will have you back on soon to talk about an important book, folks, on what actually can be done to begin to fix this amazing and a mess the American medical system. Vivian Ly with us this morning. The author of The Long Six, thanks so much. Now, President Trump asked for China's help to win re election. That's the allegation made by John

Bolton in his tell All memoir. The White House is seeking an injunction preventing the former National Security advisor from publishing the book. Now, the president's campaign team dismissed the claim as absurd, But he broke the law very simple. I mean, as much as it's going to be broken. This is highly classified. That's the highest stage. It's highly classified information. That was the President's himself now joining us as Craig Gordon or Bloomberg Washington d C. Very chief, Greg,

Great to have you on Bloomberg surveillance. When you look at what the allegations were, does it actually move the polls as we get closer to the election or do the people that support President Trump not care about these allegations. I mean, look, people who support President Donald Trump are pretty dug in, and I think we're going to see many, many thousands of them this weekend when he does his first rally in a long time. And also Oklahoma. We talked about that in a minute. So yeah, it's going

to take a lot to shake some of them more. Um, the sort of the true believers are, uh, you know, who still think Donald Trump is doing a great job.

I do believe there's a small but important kind of section of people who took a chance on Trump in twos sixteen and perhaps are going a little bit tired of some of the some of what they're seeing, whether it's the tweeting or in the case of what John Bolton is alleging, you know, essentially selling out u S foreign policy to help himself get reelected, which is Bolton's allegations.

So those are serious charges and I think serious minded Americans would would look at them pretty um, you know, as an important piece of evidence as they decide whether vote for Donald Trump. Craig, thank you so much for joining us today and thrilled that you're with us, and folks, I can only say that Craig is in the absolute crosshairs of the micro debates that we have every day on our Washington coverage. You did that by leading over from political a million years ago. We really helped invent

political Craig. I want to ask you up politico type question, which is I understand that the Bolton papers is an inside the Beltway phenomenon. How outside the belt Way is this or is this just something you're gonna talk to twelve people about at that bar in the basement of the hay Adams. Well, if I could get to the bar at the basement of the hay Adams, I would love to have that conversation. But right now I'm in the basement of my home in suburban Washington. So there's that.

There's that to start with. But look, Tom, it's a fair question. I mean, a lot of these things become you know, the sort of the tempest in the teapot here in d C. Beltway insiders using air quotes there, you know, love to love to chew on this stuff. I actually think so one answer to your question is, yeah, there's a lot of truth to that. I actually think Joe Biden has some work to do here. Um, he has to find a way obviously, the Democrat running against

Donald Trump in the fall. He has to find a way to take you know, hundreds of pages of kind of Washington insidery, uh stuff, and and and form it into a very sharply formed charge again the president, which is you know, come up, okay, well said totally well said, we have an allegation, folks, and I'm going to speak in an off hand manner here of the president of the United States telling the leadership of China that concentration camps in western China are in some way appropriate. Whatever

the language was, the niceties don't matter. Are you telling me Vice President Biden can't work with that? Well, we're gonna fight out, aren't we. I mean, I think that you know, criticism a lot of Democrats have have of biding that he's not terribly light on his feet um, and you know, he does have a little bit of trouble sometimes sharpening these attacks we saw during the debates

when he was debating his fellow fellow Democrats. What I personally think these books do is there just another like sort of brick on the pile, Like there's another sense that Donald Trump maybe isn't up to the job of being president according to these allegations, or maybe you know, he is doing some side dealing with foreign leaders that that you know, a president probably shouldn't be dealing would like the g or you know Air Towan there in Turkey.

And I don't know if most Americans could give you the details of this I think most Americans have a sense something is a miss and it's just another thing that's a miss on top of all the other things that they may be questions they have about Trump. And in that way, I do think this kind of breaks through, maybe not in a detailed way, but in a very

general way. That adds to the sense that that you know, you know, the question they might have if Donald trumps up to the job of president Craig did, does you know does the average voter in November actually think about foreign policy? So you're giving us a sense of what they think about the president that may influence or vote. But what will they actually vote on is that the economy? Is that the handling of COVID nineteen and their jobs?

I mean it is true almost every U S presidential election, with you know, maybe a few around the wartime, I would say push and no four after nine eleven. Um, you know, got some got some some of his reelection based on the fact that he you know, he kind of handled that situation. But no American voters are worried about the economy. Kitchen table is whose can I feed my family? Do I have a job as my job stable? Do I have health insurance, all of those things. That's

where elections are won and loss. I think in America, I think for Trump, for Biden, and for Trump, there's an added question around, you know, to be really blunt, the Democrats questions whether Trump is like his fitness for the presidency. And I think that's it's such a cosmic issue that it says, again, it's hard to sort of talk about it or get people to think about in

a really specific way. But I think in these very general ways, you know, should the president be tweeting, Should the president calling people liars and losers and all that stuff. Should he be you know, going on TV and you know, and saying sort of colorful things about his opponents. I think those things are starting to kind of weigh on the president. We see his poll numbers right now, the extent we still believe the polls after sixteen, he's losing

by about eight points to Biden. Nationally. That's gonna narrow that this is a country and it's gonna be a fifty election. I think in the end it's gonna stay pretty close. But there is a sense of sort of fatigue with Trump of you know, people talk about it's sort of wearing on people, the daily drama that constant, you know, sniping the whole thing. I think Joe Biden, for some people might just look like a pleasant break um from from what is essentially a day to day

soap opera that every American voter has to live with. Craig, thanks so much for the briefing. Cred Gordon, there are Bloomberg Washington d Security. 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