Bloomberg Wall Street Week: Lamont, Rattner & Summers

with David Weston from Bloomberg Radio. A cold dose of reality from the experts and equities appear to pay attention. This is Bloomberg Wall Street Week. I'm David Weston. Welcome back. Let's turn to the state of Connecticut. Now it has had more than thirty thousand COVID cases so far and

very sadly were the three thousand deaths. But at the same time, hospitalizations are coming down as it looks toward a possible deadline for maybe some relief from some of the restrictions coming up on May twenty were welcome now an exclusive interview the governor of the state of Connecticut. He is ned Lamont and Mr Governor, thank you so much for joining said giving a sense, your sense of where the disease is in your state and what do you need to see between now and May twenty to

relieve at least some of those restrictions. Well, Connecticut got pretty hard. We were right next to a New York city which was many ways the wuhan province of the pandemic here in the United States. And but now it's uh you know, six weeks later, all those curves are bending in the right direction. We have extra hospitalization capacity there,

which was a key metric. We're finally getting the PP We delivered it ourselves, brought it from China, complicated process, I might say, we got track and trace and testing ready to go, and these are the key metrics we needed to give people confidence we could begin to reopen on May. Governor, can you give us any sense of the distribution across the state, And I mean, I guess both socio economic but also geographic. We see some differences in some states. In fact, of course New York is

a larger geographic state. There's gonna be differences in the reopening. Is that going to apply in Connecticut? Well, first, of all, UM, we were hit in different ways in different regions. You know, Fairfield County, which is closest to New York City, was hit the hardest, hit the earliest, went right down Metro North and up through a Bridgeport New Haven, Hartford. That was the area that probably got hit the hardest because

of the proximity to New York. And now we've got eastern Connecticut, which is the New London area, and maybe a little bit of Boston is coming down that way as well. But we're a pretty small states. So our anticipation is we're gonna open on a statewide basis, uh, on a very thoughtful way, and on some things, we want to do it in the association with our neighboring governors. It doesn't do me any good to UM close down bars and restaurants if Andrew Cuomo opens them up in

Westchester County, So we're doing some things in conjunction. Yeah, govern As you mentioned, there's so much integration between Connecticut and particularly New York City and the New York City area. What about those commuter trains, well, that posed a particularly challenge for you because we have a lot of people going back and forth between Connecticut and New York every single on those trains. Uh there were a lot of people going back and forth, and we thought about that,

but within a few weeks ridership was down. So I think people have voted with their feet, so to speak. They started staying at home and they started telecommuting, or they drove if they had to, which was a good thing. So um governor call and I thought about what we should do with sayt Metro North the rail system decided it was probably first responders and people that really had no other way to get to work. So we did

keep it open on a limited basis. But as you reopen, as as we reopened, will we'll be looking at certain curtailment, for example, a capacity of the seating arrangement, things like that. In the commuter trains, we're certainly going to be very strict about um uh de sanitizing and making sure everything is clean on a real basis, probably gonna discourage people from going in the train for the near term, Probably gonna strongly recommended everybody used mass in the train for

the near term. But I think even bigger, I think you're gonna find that um the old idea of the commuter going into New York City five days a week. Maybe an idea of this behind us. I think we found at the end of this COVID session UM that we're realizing the telecommunity in many cases work. So maybe you have a great job that seems to be a geographically located New York City you can do with two thirds of the time from you're a home in Stanford.

As you look towards possible reopening, Uh, what is your situation this stick to testing sort of tracing and hospital capacity. You said you have the hospital capacity you need right now, but in case there's a flare up, how much capacity do you have to deal with it? Well, we have capacity now, and I think that's a pretty good benchmark. If there's a flare up, I would rethink things if we got the eighty or nine capacity. Obviously we have

capacity now. In fact, they're going back and doing some of the so called electors, many of which were important operations that were put off and should be taking place now. The testing, UM, we've ramped that up. We're doubled it from last week. We'll double it again next week. So we'll be doing about forty two thousand tests a week starting next week. Governor. You mentioned that PPE, that personal protective equipment that you bought from China, a fair amount

of it. Now, have you had any issues with the quality of that, because there have been some other places around the world and even around the country who bought things from China and it turns out it didn't work so well. Whether it's testing kits or whether it's PPE. We had to be very careful and how you vet this,

that's that's a good question. And let's face it, you know, a month or so ago when people were really scrambling the globe, but everybody had a friend who had a cousin in Ukraine who did some work with Rhody Giuliani, and you didn't know where you were getting this stuff from. We didn't do any of that, but we found this. We vetted it very carefully, working closely with the government of China, working with some strong relationships we had here

with the business people in Connecticut. So I have it on high confidence this is the right stuff going forward. And you've been coordinating with Governor Cuomo, Governor Murphy down in New Jersey and things like that. Do you envision a world in which those three states and maybe more really get together in the manufacturing and purchasing a ppe and stockpiling. Yeah, I think that makes all the sense

in the world. You know, we've got a buying consortium now, so it's not little Connecticut going all the way to China to buy this product. But even more importantly, we ought to figure out who is good at manufacturing what. We've got a facility here in this state that makes vents. Gina Romando up in Rhode Island has a growth that's making a mass in a significant way. Phil Murphy. They've got some of the best pharma in the country and are doing the saliva tests. So I think there are

a lot of ways we can mix and match. That was Connecticut Governor Ned Lamont coming up looking for green shoots. Could the auto industry point the way toward a rebound? We talked with Wall Street veteran and architect of the auto industry recovery, Steve Rattner. That's next on Wall Street Week on Bloombergo. This is Bloomberg Wall Street Week with David weston bloom Bird Radio. Whether driven by electricity or internal combustion engines, autobiles have long been an important indicator

of the overall economy. And they may be showing some slight signs of a rebound. Steve Ratner is a veteran of Wall Street who also headed up Prisoner Obama's efforts to save the auto industry, and we asked him whether he could see some indications of a rebound overall economy from what we're seeing from autobiles. David, I think we have to be careful not to be misled by early signs of what may seem like spring we are going

to see. And there's already a little bit of a tiny little bit of evidence of a pick up in car sales from obviously an abysmally low level in the month of a month of April. But this is this is all going to be relatively small potatoes compared to the distance we have to go to get back to where we were before all this started. And I am pretty pessimistic about our ability to get back to that

point at any time in the immediate or imaginable future. Well, we heard some of the pessismism, or at least realism perhaps from the Fed chair J. Powey and his remarks where he really warned about things like mass bankruptcy and unemployment. If we don't do even more in the financial financial, the fiscal and the monetary side. Is there more that Cannon should be done to try to bring that recovery sooner? Yes, absolutely, I I am completely in agreement with Chairman Powell, not

that he needs my support for his for his thoughts. Look, as I said, I think I think the notion that we are facing a V shaped recovery where it's all going to bounce back. Car sales are gonna go back to seventeen million, people are going to travel and spend and go to Disney World and all those kinds of things is frankly a fantasy. Uh. This has been an enormous shock to the economic system. There's been much permanent

job loss. Factories that are never going to reopen, restaurants that are never going to reopen, companies that are never going to rehire back or at least not in the foreseeable future, all the people that they have laid off. And so we do need to do more. But I think it needs to be not just providing income support to Americans who have lost their jobs and businesses that are in danger of failing, but also we need to really rebuild America. We need to finally do something on infrastructure.

We need to do something about retraining and finding jobs for the people who are not going back to their old jobs, because this whole economy is going to shift into a somewhat different focus. And so yeah, there's an enormous amount of Congress can do. The question is whether they have the will to do it. In the meantime, we have a big investors trying to decide what to do.

We heard Stanley Duckomer and on temperate thing. They're very concerned with the equity markets, being overallly optimistic about the future. As an investor, what do you do in that environment where equities actually a bounced back a long way from the trial frankly, and they may not be justified by the economic data. I think many of us have been scratching our heads about the resurgence of the equity market,

and we can debate the reasons for it. Uh. I think the most important reason is probably all the liquidity the FED has pumped into the system. But nonetheless, I think what Stanley Druck and Miller and David Tepper and others have been saying makes a lot of sense in terms of being concerned about the level of the equity market. How do you hedge it? Well, the simplest thing to do is simply sell. Uh. There are then if you if you for whatever reason want something more esoteric, you

can do things with options. You can do things with tail risk. There are more sophisticated ways. But at the bottom line is either if you don't have a positive view about the equity market, you simply need to reduce your exposure to the equity market, give up the possible upside, and protect yourself again against the downside. We still are in a world of quite efficient markets and are no silver bullets or magic ways to take out the downside

but keep the upside. So I guess it was Margaret Thatchrick to talk about Tina that there is no alternative. Is there an alternative? I mean you have to put your money somewhere. Is it better off under the mattress or there are other asset classes that offer at least some solace. I don't think there are any. Again, there's

no magic bullets or simple solutions. Part of again, why the equity markets have been so robust is because people look around and see relatively interest rates relatively near zero and decide that's not a particularly attractive place to put their money. And you can make two or three percent just on the dividend yield on the S and T, so that seems pretty interesting. But then you're taking all

this risk on your actual capital value. UM. So no, there are no there are again, there are unfortunately no

secret places you can put your money. I don't think any of us feel that corporate credit, corporate bonds, things like that are particularly attractive at these levels either, and so I think the best advice I would give would be a mix of some equity exposure so that if in fact it turns out these levels of the stock market makes some sense, you can participate in it with good companies, combined with maintaining a very low leverage level of leverage if any at all, and a high on

a high amount of a cash balance on which you should not expect to earn any interest, but you're not gonna lose any money. And what about cross border exposure. There's a lot of talk now that the supply chains may never be the same. Certainly there's a lot of focus on China right now, with the President really certainly rattling a saber about China. Does that indicate that you're better off with more domestic exposure and not as exposed

to globalization. We have to see how that unfolds. There's certainly a lot of talk by the President, but frankly, with the president is mostly talked. There's some talk among c e O s and that we should pay close attention to. I think we've all learned a lesson here about long supply chains. But as we look around the world as investors, we find Europe exceedingly uninteresting. UH. They

have huge structural problems. Their companies are not the companies that are most likely to do well, and in post COVID environment, a lot of old economy industrial companies. China has done and is continuing to do amazingly well, both in terms of keeping the virus under troll but in getting people back to work and in UH and in

getting their economy going again. And the biggest risk in China is the one that you identified, which is essentially will they have customers either because the economies elsewhere not in great shape or because the supply lines are too long. We'll have to see how that infolds. But we have been before all this and continue to be as an economic matter, not as a political matter, not as a any other matter of that sort, but as a purely economic matter. We continue to find China very interesting as

investors and are disproportionately invested. There is the big issue right now for the United States and maybe for the globe demand. I mean we hear about things like demand destruction or or a doom loop. Is that what you believe Sherman Power was talking about and he said there could be really long term, maybe even permanent damage the economy. Are we in danger of permanently destroying demand? I think we have a problem on both the supply and the

demand side. We clearly have a problem on the demand side when you have what is effectively when you make the right adjustments and things, probably of Americans out of work getting their unemployment insurance but not their their real wages, and with huge uncertainty since the unemployment insurance does expire the extra six dollars after eight weeks, obviously people are going to spend less. And of course when they're essentially

trapped in their houses, they're going to spend less. And you see that in the consumer spending data that was Steve Rattner, Chairman and CEO of Will and Advisers, which invests the private and filmthropic funds of Michael R. Bloomberg, the founder of our parent company, Coming Up. Oil has added to the concern over the economy overall. We talk with Dan Boreyette, Secretary of the Department of Energy, about the prospects for oil. That's next on Wall Street Week

on Bloomberg. This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. Oil has been one of the darkest corners a gloomy economic picture, but with Saudi Arabia this week announcing unilateral production cuts, things may be looking up. That's what Secretary of Energy Dan Briette says, anything that applies to both the supply and the demand side. Yes, it is starting to look really good. Has the President

has been saying for quite some time now. We're on the verge of a transition to greatness and we're starting to see it. We now have states that are opening, there are local economies that represents roughly the gasoline demand in the United States. We're starting to see oil prices stabilize.

I think it's very important to note that, um, you know, this increase is good for consumers in the sense of jobs are protected all across the economy, and we see no dramatic impact on gasoline prices across the country, which I think is very important as well. So Mr Secretary, take us behind the scenes a little bit, if you can.

We know the President Trump has a very good relationship with the Crown Princess Saudi Arabia, Mohammad ben Sell Mine was that cut at all something that the President helped encourage or even arrange. The Presidents have been personally engaged in this conversation for the last few weeks. Um. You know, as we talked about in the past, OPEC began its conversations around the March time frame, early March time frame, and Saudi Arabia and Russia got themselves into a bit

of a dispute over their production numbers. And when the Saudi's decided to take some actions right at the beginning of this pandemic that led to both increased production and a reduction in the pricing of oil across the world. That impacted the U S producers very dramatically. And the President saw that early. He engaged with the head of state in both countries, both Russia. He's talked to President Putin several times, and he's also engaged personally with the

King of Saudi Arabia. The point of those conversations is to bring stability to the marketplace and stability to the producing community, and that's really our goal here. Is there any risk that actually the US Prussian may come back too far, too fast? I mean, I just read there's energy transfer LP came out and said that at least in the premium basin that actually shales coming about quite fast. US that went down about eight percent, and now a

full quarter that is back online. Are you at all concerned that that might undermine some of the efforts here to stabilize the price. No, I don't think so, David. I think what we're gonna see here very shortly, If if you're familiar with our Energy Information Administration what we referred to as e i A. They just put out a report. It talks about the economic boom that I think we're just on the verge of seeing. So the third and fourth quarters in twenty and certainly into twenty

one are going to be very very robust. So the production will come back online as this economy begins to take off. And if you look at those numbers, I think you'll see that that that what the President has referred to as a V shaped recovery looks very clear in the charts right now, so you'll see the production tend to match that V shaped curve. So Mr. Sextually, it wasn't that long ago we were talking about what

kinds of accommodations you need to make. The President designated you, along with Secretary Manution, to really help out the US oil industry, and you're talking about certain things like lending facilities. We also have the Fed now doing that well, changing their rules. Do we need that support anymore? Is that taken care of pretty much? Well, too loorally to tell,

and it various company by company. But what the Secretary directed both Secretary Manuchin and myself to do was to evaluate the programs that were passed by the Congress and ensure but there is access for these energy industries to those programs. And that's what we've done. Secretary Manuchin worked very closely with the Federal Reserve. We adjusted the program, the main Street lending program, and made that program available

to what we refer to as MidCap sized companies. You know, there are companies in America that are investment grade, Um, they perhaps do not need the same level of economic help that others do in the marketplace, and they have access to capital and access to liquidity perhaps others don't have. But there are many companies out there that simply didn't

have that option. So making available this program that was passed by Converse was very, very important, and I applaud Secretary Manuchi in the Federal Reserve and others from moving so aggressively to do exactly that. So, Mr Secretary, when you implement a program like that, how do you deal with what a lot of people call moral hazard? As you said, the investigrade companies don't really need it so much.

Others do because they're not nearly as good shape. But sometimes that's because they, let's be frank, borrowed too much. This tends to be a bit of a boom and bust business as I understand it in the oil patch. How do you make sure that we're not encouraging almost reckless behavior when it comes to financing. That's absolutely corrective. I mean, there's no question that moral hazard exists. That

exists in every form of the banking industry. So you know, when we apply these types of UM you know, or we create these types of programs, we apply very strict lending standards to them. And what Secretary Manichul and I did was to identify those companies that really were impacted by COVID, I mean, but for the COVID pandemic, they would be strong ongoing concerns, and we looked at those

companies for potentially UM making loans available to them. We you know, we're very very clear and very strict about this. There are some companies that were on the verge of insolvency and they were highly leveraged, and we're perhaps not going to make it under any circumstance. Those companies are going to be excluded from these types of programs, and I think rightfully so. That was Secretary of Energy Dan Briet coming up. We wrap up the week with our

special contributor Larry Summers. This is Wall Street Week on Bloomber. Social distancing slows the spread of coronavirus, So stay a minimum of six ft away from others and stay home if you can. More info at Coronavirus dot gov. Let's all do our part because we're all hashtag alone together. Brought to you by the ad Council. This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. The experts spoke this week, and for once, investors seemed to

take heed. Dr Anthony Fauci warned that opening the economy who soon could lead not only to illness and even death, but also it could do more harm than good for the economy. And President Trump he would have none of it. Luck he wants to play all sides of the equation. I think we're going to have a tremendous fourth quarter. And then FED Chair J. Powell warned of potential mass

bankruptcies and unemployment. He said that we may need more fiscal and monetary stimulus, and once again, President Trump, he disagreed. I disagree with him on one thing now, and that's negative rates. But Wall Street heavyweights like Stan drucken Miller and David Tepper sided with the experts, saying the talk of a V shaped recovery was really just a fantasy and the equities are more overvalued than in any time since.

It was a week of cheer leading from the administration, even as those on the front lines, from governors to investors, talked of caution and of worry. And one of those who has been expressing ashton and even war has been our very on Wall Street Week contributor Larry Summers. From the very beginning, he's been talking about some of the problems we have in store. This is someone what he

said in the past on this program. The first plank in that UH right economic strategy is an aggressive health strategy. I think the market's reflecting a sense that there's a wall of money okay, and we're delighted to have with us now Wall Street were contributor from Harvard Form Prijory Treasury Secretary Lauren Summers. So, Larry, give us a sense why is it so difficult for us as a people to really follow the science, follow the facts, because it seems like the more we see it, the less we

pay attention. I wish I knew, and I wish I fully understood. We're not getting presidential leadership. That's emphasizing what the scientific community UH mostly believes. We all want to believe that problems aren't there and that we can go out uh with uh equanimity. So there's always a desire to grab onto UH good news, and we're not being given a solid plan beyond grabbing at flailing attempts that

could possibly UH work. The reality is that viruses like this UH go into remission just like cases of cancer do, but there's always a very great risk that they'll come back, and you have to manage that risk very aggressively if you want to succeed. And my great threat fear is

that we're not managing that risk aggressively. We're letting everything back into the open before any of the criteria that at Spurts have laid out have been fully uh met, and we may not pay for it, but I think the best guess has to be that whether it's soon in the next couple of months or whether it's deferred towards fall and winter, we will pay a price for that in more cases, more fear and apprehension, ultimately less

economy UM, more job loss, more reductions in income. So I'm not very comfortable with the path UH that we're on, which seems to me to be translating hope UH into a strategy. I could conceive it we turned out to be wrong, but it's not a prudent bet UH that we're making. It's not a prudent bet that so many people are not wearing masks. It's not a prudent bet that we're engaged in so little testing and so little

contact tracing. It's not a prudent bet that we haven't made more substantial efforts to separate and target aging and vulnerable UH populations. Our strategy seems to be we're just tired of this and we're gonna let it all go. And it might work, but it's not something I think we can count on. Well. Where as you say you may be wrong, and we hope you're wrong, but thus far you've been pretty close to right in all of

your caution. Look Out now over the next month or two months, what might be maybe on the radar stream but not in the center of it, that you think may well end up in the center of it. I think there's a risk that they're going to be big increases in the number of cases in at least some of the places that have opened up, and that we're going to have more hotspots that may not be as bad as New York, but are going to be in the direction of what happened in New York, and that

that's going to freak people out. I think there's a risk UH that the law is gonna let up, but people are going to realize that they're actually pretty scared to go to stores, and they're pretty scared to sit in restaurants, and people are going to realize that life is going to be more or less like this until we have a vaccine, and that that's gonna be a while, and that that's gonna lead to some reassessment that there's more uncertainty and lower incomes ahead and that that's hardly

going to be a positive factor UH for UH for markets. I think there's a risk that we're gonna understand that there's much more financial strain ahead as people can start running out of the short cash reserves they had and not paying rent, not making UH mortgage payments, not making credit card payments, and I think there's an associated risk that landing is going to decline and that that's going to create something of an adverse uh financial uh spiral.

I think there's a risk and Larry, Larry, if I could just interrupt on that point, and that specifically we've heard from I'm sorry for we heard from fetch heare j Pal this week saying if this goes on very long as be trouble and then at the very end of the week, the ft itself came out and ward about potentially significant asset price declines if in fact, this pandemic lasts too much longer, if this crisis last went

too much longer. At the same time, we have a debate between the Democrats and Republicans by and large in Congress about how fast we need to have the next reflief package. How much time do we have. Every week we delay committee to supporting the incomes of unemployed Americans, supporting new investments, in testing, in contact tracing, in addressing

this virus. Every week we delay supporting state and local governments is a week that we are weakening the foundation of the economy, prolonging UH the downturn, reducing the speed of UH the upturn. We should be making the necessary commitment to keep supporting UH the economy within the next two weeks, and it looks less likely now that we're going to do it. Does Nancy Pelosi have exactly the

right formula? I think she's got many of the right elements health investments, state and local government, unemployment insurance UH in particular. But we need to be getting UH somewhere, and UH I hope that we can find in the face of this most extraordinary of emergencies, some capacity for bipartisan cooperation. Is the best way to help the workers directly to the workers, or is it go through the

states through block grants or to the companies. I think we I think we need to have generous unemployment insurance and we need it needs to be there for gig workers. It needs to be there, whether your job ends, it needs to be there, whether you're on temporary, I owe, whatever. Exactly the circumstances that people have lost their ability to work, we need to be supporting their incomes and those are their families. We've got municipalities who do vital work. They

fight the fires, they keep the streets UH safe. They will have to educate the children, perhaps in uh new ways UH given uh this challenge. This is no time for them to be cutting their budgets because of balanced budget amendments and reduced tax collections. This is no time for hospitals to be closing. This is no time for doctors and nurses to be furloughed. And if we're going to avoid that, we need to be supporting state and local governments and we need to get off of defense.

We need to start playing offense and start using a moment when commodities are cheap, when there's all kinds of unemployed people to do the work, whether it's renewing the country's infrastructure, whether it's building a caring economy, to do the work that's always been essential um for us as

a UH country. Yeah, yeah, it's it's fascinating. A lot of work to be done, not to speak of infrastructure, which is something you've talked about more than one occasional renew the infrastructure, and that's what we need to be moved forward with, not debating about having a state bankruptcy code, which is the proposal that McConnell put forth some time ago. Okay, thank you so much, Larry. It's always a great treat

to have you with us. As in Larry Summer's former treasures are great now at harbor and he also is, by the way, I'm an important contribute to Wall Street Week. This has been another edition of Wall Street Week, See you next week. To protect her home and family in a disaster, Karen was willing to wade through water, mud, and insurance paperwork. Yeah, I can do this. You go, Karen By simply understanding and updating what her insurance covers

and doesn't cover. Now she'll be better prepared no matter when disaster strikes. Learn other simple ways to protect your home and family before a natural disaster at ready dot gov. That's ready dot gov. A mess. It's from Female and the ad Council.