Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240713

Points. Brent really rolling over by about 5 , much worse than wti. It is now a pure demand issue. You see equities taking it on the chin, as well as commodities. Time for todays top market moving news from new york and our london team. We want to begin in the u. S. Come over Senate Democrats blocked Mitch Mcconnells attempt to advance the coronavirus economic rescue package. Minneapolis fed president neel bloomberg the fed can do more to support the economy. We are being more aggressive. Is there more we can do . Yes. Is there more we may end up doing . Yes, but i feel we are being very aggressive. Alix joining me for more is Michael Mckee. Walk us through what he said, what more they can do, and what is going on in d. C. Michael jim bullard is the one who really scared the markets by saying a 30 Unemployment Rate and perhaps a 50 annualized decline in gdp during the Second Quarter. Morgan stanleys is the closest to that 30 , so he thinks things can be much worse. They still say the fed has a lot of tools. They point to the phrase at least in their announcement that 700 billiony worth of treasuries and mortgage bonds in a new round of qe. They can go way over that, they say, and they probably will. There are also additional acronym programs they could bring back in, targeted lending two sectors of the Financial System. Perhaps the first is the term access Loan Facility that would allow banks to package access act mortgages and other such securities, and sell them eventually to the fed, but buy bonds of all kinds, including debt of americas largest corporations that could become fallen angels, and commercial backed mortgages, things like that are trying to sell what other they can and finding very few buyers. Thomas barrack saying yesterday that the u. S. Mortgage market is on the brink of collapse, and predicted a domino effect of catastrophic economic somehownces if banks in if banks and the fed dont step in somehow. Middle of an the dispute as well. Democrats want more money for hospitals, social programs, unemployment insurance, and they dont caper vision and the bill that would give 425 billion to the fed through the Treasury Department to bailout american corporations because theres apparently very little oversight over it, and you wouldnt know who was getting the money or why they were getting it for some months. There is some question about when they get that negotiation done. Mnuchin secretary steve was meeting with democratic leader Chuck Schumer last night at midnight, and as he entered the negotiations, mnuchin said we are this close, so perhaps they could get it today before they left the floor. The Senate Republican leader Mitch Mcconnell quite upset, saying it is democrats fault that the markets crashed, and said he might bring everybody back at 9 45 this morning to vote, just after the market opens. Instead, they decided to wait until noon. Alix that also leads us to the potential stimulus in europe as well. Merkel is self i collating is self isolating. We saw the potential money they will be putting into the market. Michael they are talking about lots of fiscal stimulus for those countries, and more stringent efforts to quarantine people and keep them away. Not only is Angela Merkel staying inside, but they have banned gatherings of more than , andeople in germany u. K. S Boris Johnson is threatening at this time tougher measures unless the british people stop ignoring calls to avoid social gatherings. The spanish Prime Minister extending the state of emergency in his country, and officials in rome clearing a halt rome declaring a halt to almost all domestic travel. Alix thank you very much. Now we want to turn to the markets. Global stocks dropping along with u. S. Futures. Going to me is bloombergs dani burger. It seems like we have a lockdown, then you have a repercussion in the equity market. Dani when liquidity is already thin, this is a theme we continue to see. This is the ninth time in 10 days at s p futures have 55 limit up or down. They have somewhat eased lower have hit the 5 limit up or down. They have somewhat eased lower sense. Arernments around the world pouring money into fiscal support, but in the u. S. , they are still contending with political squabbles that michael was talking about. What you have here is another brick in that wall of worry. Without any support, especially corporates are starting to feel the pain. That is perhaps why we are getting some of this classic risk off where you get a slight bid in the treasuries today as well. We have heard from various companies saying that they are completely suspending their dividend. Macys has cut their outlook. Shall cutting their outlook as hell cutting their outlook as well. Said dividends were sacrosanct, so them cutting their dividends is pretty big. Shell,es from macys to so really across in terms of industry we are seeing the outlook starting to get slashed. Alix talk to me about what is happening with the funds. Theres been a lot of reports that they had to step up the funds as well. Talk me through why that matters and what we are seeing. Dani we are starting to see the stress in the credit market spread from just Corporate Credit to really all of these corners of the fixed income space. You mentioned bny mellon, Goldman Sachs backstopping some of their funds. Specifically, money market funds here. Specifically prime funds. These are funds that invest in shortterm debt, corporate debt, and investors have been yanking funds from these. Instead, they are moving into funds that invest in shortterm government debt, which is essentially a cash proxy. The theme here, cash is king. When you see all of these redemptions coming from these funds, youre having Parent Companies of these affiliate in and move to step some of that debt onto their own Balance Sheet to help alleviate some of the stress. It is not just these money market funds. It is also mortgagebacked securities. Michael mckee mentioned that really interesting quote from tom barrack, saying that the u. S. Commercial Mortgage Market is on the brink of collapse. Not yesterday rare is saw yesterday a rare if not unprecedented sale of Mortgage Backed securities. Billion backt 1. 2 into the market. That is an industry which has seen really breathtaking numbers of redemptions for funds, so these are scrambling to meet that investor desire for cash, and again, under pressure is not just Corporate Credit. Alix thank you. Good to see you. Coming up in the next hour, we will have a live interview with thomas barrack, Colony Capital ceo and founder. One other story catching my eye this morning, softbank, and their dramatic attempts to reassure investors about the stability of their empire. The Company Plans to raise 41 billion to raise stock and slash debt in unspecified assets. They have taken stakes in companies ranging from alibaba to uber. Hedge funds placed short bets against softbanks funds, down more than 40 this year. Coming up, more of your morning news, trade and analysis of the markets in todays first take. This is bloomberg. Alix time now for bloomberg first take. Joining me from our inhouse team of wall street veterans and insiders, mike mckee, Bloomberg International economics and policy correspondent, damian sassower, and mike mcglone. I feel like it was just yesterday that we talked on tv. What was the right question for viewers to be asking and wanting the answer to this morning . Could talk about indicators all we want, but i think what really needs to be addressed is the fact that we have seen a relentless widening in credit spreads. It is just the fact that the market hasnt kept up to the fact that fundamentally, there has been a huge shift in the way borrows have to be viewed by the broader market. It is more than just resetting risk premiums. Ed is about repapering covenants and protections for creditors and investors. The fact that shareholders and management teams may no longer be aligned as they once were. When you have this type of spread move, you just see broad seize, and that is what we are seeing. Mike the bottom line will be when we can define a base building in the stock market because everything will trickle up from there. I dont see it yet. The problem is you look at the nasdaq, and it should come out the best because it is tech, but it hasnt taken out that low from 2018. Right now on a yearoveryear basis, it is only down 10 . In the last two corrections, it was down over 50 . Definitely dont sell markets on the whole, but be prepared for greater markets. When these sharp losses look to be responsive when we look to get these sharp losses, be responsive. This is going to define Investment Decisions for generations. Realize itgoing to shouldnt be overweight in the stock market, and things like buybacks should never happen again, stuff like that. To me, this is the bottom line. Thats all thats going to matter. Michael i think one of the major issues is that Financial Markets are a sideshow to what is going on, but they are also not a sideshow because if they seize up, then the problem is so much worse then we can even imagine. The question that the markets face is that discounting mechanisms are looking forward to when this might be over, and then what is the price of an asset . But we dont have any idea of when this is over. As long as it continues to go on, you will have that issue and it will keep the fed buying more qe. Jim bullard was very straightforward about that. But does that stop the seligman this circumstance . We dont really know. The key is on capitol hill, to get a bill through their that will support these small and mediumsize companies. Alix that brings us to the point that it almost in some ways is irrelevant if they pass a bill because we dont know what the loss of gdp is. We need a stimulus measure that is going to surpass the loss to gdp, which we dont know yet. Damian when we talk about the dysfunction in markets, i will give you an example. For the entire month of march, all of the tools, the Risk Mitigation mechanisms used by Institutional Investors in order to offset this risk, they dont even have pricing on the screens anymore. Everything is being voice brokered now. What is happening here is theres just no pricing. Theres complete dysfunction of markets. The economy is shut, so how can you expect the Financial Markets to reflect the reality of the economy in the economy is closed for business . Alix when they are buying off the books for money market funds, so they are in that area now, they may get the goahead to go ahead and buy Corporate Bonds. Isnt that going to alleviate that stress, or no . Damian it is. The swap lines we just put in place with places like brazil, korea, norway, it is looking. Rallyingollar is still in the midst of it because of the fear and the uncertainty going on broadly about the Financial Markets. It is a twoway street. Again, if you just look come up with six trading days left in the month, the horrific performance by the Largest Fund Managers in a distance in existence, we need that to be the offset to the Dealer Community in terms of liquidity for the broader marketplace. If they are down because the markets arent functioning properly, they are going to see redemptions that are going to spill over into the summer. This is going to be october 2008 all over again. It is very concerning to me. Michael also, six trading days left in the quarter. We have seen a lot of backups in recent months when we got to the quarter end. Are we going to be able to get through this . Question,s a good and that is why i really worry when i see gold dropped in this environment. We know that is what happened in 2008, and it turned out to be a massive buying opportunity. But that is a good indication. When people are selling that type of asset that is fundamentally positive, you know that is a bad sign of the stresses. The gold to silver ratio has jumped to the highest level ever. That is usually an indication of very bad things to come for overall commodities and the market. At least indications from commodities, from that standpoint, are still bad. On the other hand, crude oil still looks like it is basing around 20. Alix that is a really grim number. Say to wrap it up, lets your scenario plays out and we see a lot of turbulence with these big Fund Managers on huge at the end of the quarter and the month. Then what happens . From now and then into the summer, what is the order of events . Damian what happens is you basically hide out for now, swap your dollars into japanese yen and carry to the bestperforming riskadjusted trade through the midst of this crisis, but if you look at the dysfunction, look at merger spreads, at allegan, tiffany, lvmh. All of these spreads have blown out considerably. That was a stable source of income for a lot of these Fund Managers that has now been removed. It is going to be a challenge. I dont have an answer for you this morning, but we are going to be watching for you closely. Mckee, damian sassower, mike mcglone, thank you. Any charts we use throughout the show, go to gtv on your terminal and check them out. This is bloomberg. Viviana this is bloomberg daybreak. Airbus is withdrawing its Earnings Guidance and proposed dividend payout. This is the latest sign the coronavirus pandemic is ripping through the aviation industry. Airbus actions are a measure to increase liquidity. The largest longhaul carrier emirates is suspending passenger flights to most areas as pain deepens for the worlds biggest airlines. Singapore Airlines Cutting through able to 96 through april up to 96 of its capacity. David coston of Goldman Sachs again. His estimate for the third time in a month, he is also cutting estimates for s p earnings, forecasting a 33 drop to 110. He is also anticipating a vshaped recovery in 2021, earnings soaring 55 . That is your Bloomberg Business flash. Alix thanks so much. For more on the markets, joining me now is greg boutle, bnp paribas equity and derivatives strategist. What are the signs for you that we are near some kind of bottom . Im not sure that we are there yet. What we need is some sort of come brands of agreement on fiscal measures Going Forward from the government. Us thing that would give more of a bottom is more guidance coming through from corporates and to get more confidence in the outlook for the labor market. Alix in terms of corporates, we have been seeing a lot of drawing on the Credit Facility, slashing the dividends or buybacks to store up cash. Where does that fit in your analysis of a market bottom . Greg clearly, that is something pointing to us still being in the earlier stages of a drawdown , where corporates are doing all that they can to be defensive, try and hunker down and weathered the storm, which i think absolutely makes sense. But we are not at the stage yet where corporates are saying things are going to be ok, we can see a path out of this. At the moment, there is still huge amount of uncertainty, what that does to the u. S. Liver market, but that does u. S. Labor market, what the does to demand in the economy. Corporatessible for to give guidance on what shape that recovery will be. Alix how do you hedge here . How do you protect yourself . What do you do . Greg i think it is incredibly difficult to put on hedging strategies now. Look at Something Like the options market. Has absolutely exploded. Potentially, it might start to read straight dashed to start to retrace a little bit. I think the best way to try and be risk a portfolio and derisk a portfolio is to look at quality, look at those that do have an abundance of Balance Sheet and cash, and have secular growth stories. Those are the corporates that will be much better positioned to weather the storm. Be tempting to go bottom fishing and some loose names that have sold off the most. Those are the corporates that are potentially in the most trouble. Alix can you give me perspective as to have someone like you look set issues with money market funds, and big funds losing money on things like basis strategy . Greg one of the things we do is try to look across breadth of Asset Classes to look for different points of stretch, whether that is from the money markets, the rates fx, equities, try and see what those trigger points are. At the moment, we are keeping an eye out for signs of stress which are everywhere, but also signs of capitulation. I am not sure we are at that point yet. Alix greg boutle of bnp paribas, you are going to be sticking with me. Coming up, we are going to speak with dr. Raj shah, Rockefeller Foundation president , who has made a commitment to better track and manage the pandemic. We will break down his assessment in just a moment. In the markets, it looks like another brutal day opening up here. Friday, we did see some of the defensive trades underperforming , so that is one potential story within the market. Still a strong bid in the treasury market, and brent rolling over 6 , getting a lot worse before it gets better. This is bloomberg. Awesome internet. Its more than just fast. It keeps all your devices running smoothly. With builtin security that protects your kids. No matter what theyre up to. It protects your info. And gives you 24 7 peace of mind. That if its connected, its protected. Even that that petcamera thingy. [ whines ] can your internet do that . Xfinity xfi can because its. Simple, easy, awesome. [ barking ] alix this is bloomberg daybreak. Im alix steel. In the markets, set up for another rough trading session on s p. We are now down by 2 to 3 , which seems in line with what we are seeing in European Markets as well. Lots of questions in the market still about liquidity within the Corporate Bond market, and what is the feedthrough into money market funds. How long will it last . This is the last week before the end of the First Quarter and the end of the month must what the end of the month, so expect a lot more drama to play out. The rise of the dollar continues. We were around the lows of the session after that eightday rally. It took a break friday, and now we are pretty much flat on the dollar index. Same for bonds in europe. The vix elevated now. We were in the 50s friday, now back on a seven handle. Brent off by a whopping 6 . You may want to blame texas, russia, and saudi arabia, but really, this is demand destruction. You have india shutting down, that filtering through to the product market. Coronavirus cases continue to rise, topping 340,000 globally. Deaths now are over 14,000. Joining me for more is dr. Raj shah, Rockefeller Foundation president , former u. S. Ambassador under barack obama. He now has a 20 million committed to better tracking and Management System for covid19. It is good to get your perspective on this. It is going to be very difficult to stabilize until we understand the path of the disease. Do you have any insight into that for us . Dr. Shah the Rockefeller Foundation is very committed to using data and evidence to accelerate a domestic and global response. In this case, i think we need to toe from panic and posturing a data driven approach to driving this Public Health response to what is a Global Health crisis. We have seen cases go up now to 350 thousand confirmed cases globally. Nearly 15,000 deaths. Need the United States political leaders, governors, mayors, the president more focused on the specific metrics that are going to define whether we get over this successfully. How long does it take for everyone who needs a test to get a test . What is the Hospital Capacity for people who need treatment . Alix are you saying then that it is going to be testing and hospital beds as the two data points you need to focus on . Dr. Shah testing and hospital beds are critical. It is not just that. With strongncing Community Health and Public Health engagement. In fact, the Rockefeller Foundation supports institutions around the worlds, but will also support institutions in the u. S. To expand that kind of Public Health approach in communities. We have seen it work in parts of china. We have seen it work in parts of south korea. We should be mobilizing thousands of Public Health people in our Community Care workforce, and having them out there keeping us safe by spreading. Writing by spreading purell, making sure people are social distancing, all of the things we know will flatten the curve. It will require real treatments and a real vaccine that works. Alix lets hypothesize on a w shape here because we are seeing reinfection rates in hong kong pick up as foreigners come in. Say we get through this initial surge in the u. S. And then we have a reinfection rate that picks up later. What do we need to do right away . What is the global lesson we need to learn once we see reinfection rates pick up . Dr. Shah i think the global lesson is quickly being able to turn on social distancing in an effective manner, being able to make sure that absolutely everybody who has symptoms and is suspected of having coronavirus is able to get a test, and the cycle time of taking a test to getting a result is down two minutes or hours, not days. Also making sure that we are doing this in a global context because it is not going to work if it is just a couple of cities or a couple of states taking this seriously. It has to be all of the United States, and together with the world. That is what we learned in our global effort to fight and beat ebola in 2014, which we did. We needed nearly every country on the planet working together in a coordinated way. America always leads those types of coalitions. It is our resources, our expertise, our technical capacity, and are standing in the world that allows us to do that. I fear that is not happening today. Alix what is happening now versus what was happening with ebola . What is going to be missing that somebody or the government or private foundations can provide . Dr. Shah the big missing thing right now is Realtime Data that comes from testing and laboratory capacity. If we knew within minutes to hours of every single susceptible case that becomes a confirmed positive, and governors, mayors, the president could you look at those cases in their communities, it immediately helps the Health System respond and helps local people and families doing what families across this country are doing, staying home, not going into stores, avoiding social contact. Knowing when you have to do that in a very precise, data driven manner is critical not just for Public Health leaders, but for every family in this country to be able to respond effectively now, and frankly, over the next 12 to 18 months, which will likely be the cycle time for being vigilant on this crisis. Alix that is a very staggering statistic. So if i am a Small Business in brooklyn, what am i looking at . Mi not reopening for 12 to 18 months . How should i be singing about this virus . Dr. Shah you should be thinking of this virus as having real economic consequences over at time, and period of frankly, the spread will increase over time because of a host of technical and global coordination reasons. The reality is this is a massive shock to the american economy, as you were just mentioning. During the ebola crisis, we saw 1 3 of gdp collapse in west african countries that were hard hit, we stepped in and made sure there were lifelines. We make sure people were being recruited to be part of an 11,000 Community Health workforce in just three small west african countries. We could be doing so much more today to take the labor that now exist, the excess labor, and turn them into a massive blood Global Health and pandemic protection workforce to keep people safe. Train care workers across this country that are effectively on the frontlines of this crisis. We need to do a lot more to make sure these big stimulus bills pass come about with an understanding that 40 of havecan households dont 400 to handle emergencies, and this is a critical emergency. We know how to support them through these types of crises. We need to let the evidence follow. We need to make as it and spaced decisions we need to make evidencebased decisions, not political expedient ones. Alix thank you for that. With us still is greg boutle of bnp paribas. We have heard very dismal forecasts for the Second Quarter in the u. S. Morgan stanley the latest, glued seeing a gdp decline of 30 . What are you outlining . Greg clearly there will be longterm effects, but the extent of the current slowdown and how long it lasts is really going to be key in terms of what type of recovery we can expect. I think with new art iced i think when we were in the early weres of this come up hoping for a vshaped recovery. If you have a weak quarter, a weak couple of quarters that you expect to come out of that intact, people are happy to look through that. The issue here, which is why we are very cautious about corporates with stretched Balance Sheets and low margins is that these are going to struggle to weather that kind of storm. If we have a case where this social distancing and economic malaise stretches out longer than people are expecting, it is going to take its toll on a lot of Small Businesses, which becomes quite a negative self fulfilling loop. Alix can you help me distinguish when a recession becomes a depression . Beg really, its going to the longevity of that and the depth of that. One of the things we have seen increasingly is that people expect this to be a very deep pullback, so really, it comes to the question of longevity and how quickly this virus does or doesnt dissipate, and how quickly we can come back to normality. If we end up with just a single quarter or couple of quarters where growth gets hit extremely hard, that is going to be a recession. If this is likely to be more measured in years than quarters, that is going to be much or problematic. Alix when you take a look at different groups, when you were saying there are ones that may be more immune, what groups can rebound the most as we start to recover . Greg immediately, you could have a kneejerk reaction if the economy recovers, and some of those names that have been beaten up the most. Really, i think we look at the names that havent sold off as much, so tech is a pretty interesting sector. Typically, people look at that is a very cyclical sector. Somehas displayed interesting attributes. We have seen a lot of Tech Companies with very strong cash flow, robust Balance Sheets, secular Balance Sheets with strong margins. They are quite wellpositioned to weather the storm. Those types of businesses are likely to come out of this with a growth story still intact. Think if people are looking at dipping their toes in the market, looking for some of the indices and stocks that have performed better and have more robust Balance Sheets, we would much prefer Something Like the nasdaq to the russell. We would prefer Something Like tech to the Consumer Discretionary or industrial sectors. Alix greg, really appreciate that perspective. Good to talk to you. An update now on what is making headlines outside the business world. Viviana hurtado is here with first word news. Viviana u. S. Senate democrats blocked the giant coronavirus economic rescue package. Leaders disagreeing on how to spend almost 2 trillion. Senate republican leader Mitch Mcconnell is calling for a vote today 15 minutes after markets open in the u. S. Senate democratic leader Chuck Schumer calling the bill a large Corporate Bailout with not enough oversight. Morgan stanley protecting u. S. Gdp will plunge 30 in the Second Quarter. This is the warning the coronavirus will be a lot worse for the u. S. Economy than previously expected. Morgan stanley economists seeing unemployment averaging 12. 8 . British Prime Minister Boris Johnson warning a full lockdown could be next. Stopis leading or calls to public gatherings. Mr. Johnson will Ask Parliament to grant sweeping powers to combat the outbreak. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. This is bloomberg. Alix thanks so much. Some breaking news, the German Government signs off on measures totaling 700 50 billion euros to help those affected by the virus. According to reports, this details the supplementary budget will be about 156 billion euros in new debt. Raking that fiscal deficit ceiling that they tend to have, they are going to break that emergency debt measure on wednesday. They are going to grant relief to that in order to issue more debt and pump more stimulus into the system. New debt looking at 156 billion euros. As indicated over the weekend, that could add another 200 billion euros to that as well. Total, we are looking at 750 billion euro stimulus package there. Yields moving on the 10 year, up about four basis points in germany. Navigate this to low oil price environment. Paul murphy, Cadence Bancorp ceo and chairman, is next. If you have a bloomberg terminal, check out tv. Watch us online, check on our charts and graphics. Check it out. This is bloomberg. Viviana this is bloomberg daybreak. Coming up in the next hour, an exclusive with tom barrack, telling the capital tom ceo and Colony Capital founder. You are watching bloomberg daybreak. Amazon extending delivery delays for nonessential goods in u. S. And europe. That has led to panic among online merchants that rely on amazon for business. Theres confusion on how the company identifies essential products. Airbnb trying to figure out what to do while caught in the current financial crisis. The home rental startup is considered very a number of options. A number considering a number of options. None putting a price tag on airbnb, but the company is unlikely to keep their 31 billion valuation it had during the bull market. One of the Worlds Largest hedge funds now opening its doors to new capital. This is the first time in seven years. De shaw raising 2 billion in commitments. It turned away additional investor interest. Im viviana hurtado. That is your Bloomberg Business flash. Alix oil dropping towards his lowest levels since 2003. Investors bracing for some drawdowns. Joining me now is paul murphy, Cadence Bancorp ceo. Really great to talk to you. Ive known you for a while. In 2015, a lot back 2016. What is the difference in the Oil Price Collapse then versus now when it comes to banks . With you. Be in first off, it is very stressful, and certainly more stressful now. Barrel, took 100 a 26. Over the last several years, i think banks have done an admirable job of being more conservative with their portfolios in advance rates, etc. Twice a year, you get new engineering, a new price tag, and you see what the value of the properties are. Typically, banks advance 60 of that. They will haircut some of the reserves, etc. So its been a pretty good way to earn money, but definitely stressful right now. Alix no doubt. Can you help give me perspective on where the loans are at big banks versus regionals like yours, versus shadow banks and off the book banks . About 50hink theres to 75 banks that have come down, including international banks. Morgan chase, wells fargo are active in the space. The regional banks, it does then out. Not everyone has the expertise, the energy lenders who really understand it. In our case, it is about 3 of our overall portfolio. The big banks, i think it is something along those lines in terms of percentage. It seems to be a Diverse Group of lenders. Another part of your question is the impact on the banks with this stress level. I was suggesting that also looks to be manageable from my viewpoint. Certainly, we see some increased levels of nonperformers and some charges outside that would be reasonable to expect. Given the underwriting and the diversity of the portfolios, i think both banks will find it to be a manageable part of their portfolio. Alix it is a good point. I want to get a read on whether it is upstream, downstream, or midstream. Certain areas will feel stress more than others. Can you give us an idea of where that sits for yourself and regional banks overall . Paul i think the e p portfolio is the most stressed at these low prices. As was mentioned, there is hedging so many of these companies have protection. The Current Oil Price volatility is a challenge, but it depends on how long that lasts. An arab case, we had a great experience with our midstream port in our own case, we have had a great experience with our midstream portfolio. Then the Oilfield Service sectors, the part that is drilling sensitive, will hurt retail stress right now. That is a very small part of our book. Only one client is currently sensitive in our portfolio. The midstream is moving products from point a to b. Product may be dehydrated or processed along the way. Business isof the where we have a little but heavier rate. Alix can you give me some perspective on how it all works if i have a loan and i cant pay it . Where in the capital structure do you get my land . How does that an up working out . How does that end up working out . Paul paul we like to work with our borrowers and try to anticipate any defaults in advance, and find solutions by raising capital or other alternatives. Maybe in some cases sell some midstream assets to provide some additional liquidity. The Energy Industry is populated with a lot of very capable men and women who have been in this business for a long time. They are smart engineers, hardworking, and i expect to have some volatility in the product over a long time. They run their business to and despite that for the most part. As a banker, you want to be there to help and support them and work through it, and fortunately, they are in a situation where theres just not a good solution, and then you want to put the properties at some point, either in bankruptcy or reorganization, or some cases out of that. But people in hard times, they are smart and resourceful, and maybe some of the assets can reposition to be part of the solution. Alix it is so great to get your perspective as the oil price continues to base around the floor there. Paul murphy of cadence bank, thank you. We want to update you on headlines out of germany. Finance minister olaf scholz has a press conference right now, saying the supplementary budget eurose about 156 billion in terms of debt to be able to finance any fallout from the coronavirus. If you look at the bond market, youre seeing buying continue in germany, but in italy in the peripherals, as well as france, you are seeing some selling. A little but a pressure upward on yields, in particular thomas payne. That country continues to shut down. Causing in particular pain. That country continues to shut down. Niceny still getting a safe haven bid. Coming up, stocks are Collateral Damage in the oil price war. We will talk about that in the next traders take. Plus, if you are jumping into your car, tune into Bloomberg Radio across the u. S. On sirius xm channel 119 and on the bloomberg app. This is bloomberg. Alix time now for traders take. Joining bloombergs vincent cignarella. You are back, and looking at equities as well as oil. What have you got today . Vincent what i want to do point out was this tight correlation between crude futures and equity futures. We are still in that situation where we are having a big oversupply of crude, where contango in brent and the short delivery data, shipments six months from now, suggests we are in a situation of lower commodity prices, and most likely continued low equity prices. Until we see a pickup in demand, i think this is the canary in the coal mine. When people keep saying where is the bottom, i would look at crude as where to find it. Alix when we see the percentage of oil equities within the s p, below 3 is nothing versus 10 years ago. How does that jive with what youre saying . Vincent it is a supply and demand dynamic of what is going on in the economy. Until we see some demand in the economy, i dont think we are going to see any real good forwardlooking earnings from corporates. Alix vincent cignarella, so great to get you back on the show. Coming up on the program, Rick Bensignor, bensignor Investment Strategies president , will be joining us on how you find a bottom, what that looks like. We will break that down. Still seeing equity futures slide. We did a limit down about six last night, now down 3 and change. This is bloomberg. Shouldnt you pay less when you use less data . Now you can. Because Xfinity Mobile gives you more flexible data. You can choose to share data between lines, mix with unlimited, or switch it up at any time. All on the most reliable wireless network. Which means you can save money without compromising on coverage. Get more flexible data, the most reliable network, and more savings. Plus, get 300 off when you buy a new Samsung Galaxy s20 ultra. Thats simple. Easy. Awesome. Call, click or visit a store today. [ one morwoo me b[ laughing ]] woo play pop music no way dude, play rock music yeah woah no matter what music you like, stream it now on pandora with xfinity. And dont forget to catch trolls world tour. Lets party people one more time alix what welcome to bloomberg daybreak on this monday, march 23. Im alix steel. We hit limit down for s p futures, now down about 3 . The dollar still climbing. Still seeing a safe haven bid into the bond market. Brent off by 5 , although off the lows of the session. We have breaking news from the fed, announcing extensive new measures to support the economy. They are going to do an open ended treasury mortgagebacked uying in amounts as needed. Bloombergs Michael Mckee is here with me. This is what we were looking for. They are going to buy as much as much as they can whenever they want . Michael this is more than anybody was looking for. They are going to buy anything youve got set equities, basically. Heres what the fed is doing. They are doing what amounts to limited qed, adding commercial back Mortgages Limited qe, adding commercial back mortgages to this. A huge amount of buying today. Second, a primary market Credit Facility. They are setting up a special Purpose Vehicle to buy corporate funds directly from companies. A secondary market credit an spv to buy bonds in the corporate market. They will lend to holders of aaa business andof consumer loans. They are expanding the mutual fund to include a wider range of securities, including municipal variable demand notes and Bank Certificates of deposit. They are expanding the commercial people commercial paper funding facility. They are also reducing the price on that. They also say without describing it that they are going to start a main street Business Lending Program. We will be waiting for details on that. The fed says it will buy qed in the amounts needed to support smooth market functioning and effective transmission of Monetary Policy to broad financial conditions and the economy. For theing facilities primary and secondary markets are going to be backed by 30 billion from the treasury in Exchange Stabilization funds. The fed is basically going all in into the markets. Any program you thought they might develop, they are putting out there now. They are addressing what, over the weekend, we heard was a real backup and a lot of markets, particularly in the Mortgage Market. They are going to buy those security through a special Purpose Vehicle. Towill take a little while get up and running. The commercial paper facility they announced last week is not up and running, but they hoped that the announcement effect will be strong for the markets. Alix heres the market reaction. S p futures spiking on that, down about 1. 75 . Also a huge bid in the bond market, now double that in terms of yields. 10year is the out performer. Those yields down by about nine basis points now. The dollar also moving higher. Gold actually stabilizing now, moving a bit higher. And inbilizing as well, slightly positive territory. Now . If things get worse, what more can actually do . Michael the most important thing is probably going to be the main street Business Lending Program. We will have to see what that is and how that fits in with what is going on on capitol hill. There was talk as part of a bill that they were going to have the fed be the executor of lending programs to businesses. Democrats didnt particularly like the way that was set up, how that plays in with what they are talking about because the main street is in the biggest trouble. The Corporate Bond market and the Mortgage Market, especially commercial mortgages, seem to be addressed here. We will see if they are enough to help unclog that market. Is maybeimited qe what we can call it now. I want to bring in some market reaction. Gorge was not, wells fargo George Rusnak, wells fargo, and Rick Bensignor, bensignor Investment Strategies present, thank you for joining me. Is this convincing . Rick it is convincing to see the fed doing anything they can. To me, the question has continually been, what is it going to take change the psyche of the market . You are dealing much more with fear now than anything rational. If you thought about the market in a rational way and what the fed is doing with all of the money they have injected, you would at least have some and perhaps not any dumps in price. It is good to see the futures have come back. I would really like to see the s p hold around 2400 by the end of the month. We are not that far away in the way the market moves down. In 10 minutes, you could be there. Here. L there is so much i am still working my way through it. The fed in its commercial bond , song will go down to bbb they are going right to the edge of junk to be able to take some of these Corporate Bonds off of peoples hands. In the secondary market Corporate Credit facility, they are going to be able to buy u. S. Listed etfs, whose investment ejected is to provide broad exposure to the market for u. S. Investment grade Corporate Bonds, so they can buy bond etfs as well as bonds. Alix wow. Corporate bond etfs. George, weigh in on this. This is a lot from the fed. What is your initial reaction . George i agree with your initial quote of wow. The fed is obviously trying to keep up with this market. It is going so speedy and in some any Different Directions right now, but the good news is that the fed is stepping into shore up liquidity wherever the challenges are. Youve heard about challenges in the bbb market, commercial back market, even mutual funds. The fed keeps stepping in time and time again. The old adage of dont fight the fed, that is a good thing. It is good for them to be backstopping this market, to be stepping in. Right now, everybodys conviction level is being tested at this point. The feds conviction of providing liquidity, obviously they step up dramatically. Also, policymakers conviction to provide a shortterm bridge loan, that is yet to be found. And also, investors conviction is yet to be found in the marketplace. People are not acting rationally right now. We have to be acting with a little bit longer term view in mind. Alix it is a great point. In some ways, no matter what the fed does, until the virus cases decrease in we get over the curve in all countries, it doesnt really matter in terms of markets because youre still going to have the panic and the fear. Would you agree with that, or can we actually stem it . Ack i think we can stem it little, but the overall dimension is dealing with the fear. When you think about the value of stocks, if a company cant operate, how is it going to create any earnings . The market is quickly discounting this and continually sells off until there is some sense of relief, and the relief probably doesnt come a lot from the central banks, but more from the statistical numbers of how i know this week, we have twice as many cases globally than there were just a week ago. At ans still growing astronomical rate. Until the public gets some sense of a little bit of security here , where the odds stay at home, you are going to be able to avoid this, i think there is still generally going to be some panic here. Panic plusat kind of what the fed did, how do you way that against how do you against the fact we dont have the stimulus package from congress . George youre talking about a supply shock, then an event shock, before you even get to the revenue and growth shock that people are trying to discount into the marketplace. We think this is q2 and likely q3. But the good news is you have the fed stepping in. Youre going to come out of this with extremely low interest rates, hopefully with some physical stimulation as well, and he will be set with good Growth Opportunities in the long run. I think the interesting thing is theres a lot of liquidity concerns around the marketplace right now. Theres also some opportunities that come and present themselves from that. A lot of investors were coming theconcerned about not just lack of liquidity, but being able to step in with dry powder. This is the opportunity to start looking into those markets as opportunities. Specifically will likely Municipal Market right now, not so much highyield. There will be opportunity for investors keeping that longterm view. Alix hang tight with me. Theres a lot to digest. You guys are sticking with me. Senate democrats voted to reject majority leader Mitch Mcconnells stimulus legislation. They disagree with republicans on how to spend nearly 2 trillion in stimulus. Joining me is the man who can stimulusidge between and what the fed is doing. He was the chief economic and 2008 f john mccains Economic Advisor of john mccains 2008 president ial campaign. Can i get your reaction to this unlimited buying from the fed . I think this is a tremendous by the bed. The core problem is in the mainstream economy, where there is a lack of revenue, lack of liquidity that is going to snowball and lead to layoffs of enormous proportions. Setting up a mainstream learning facility mainstream Lending Facility would be a direct attempt to address that problem. The reflection of that is in the Financial Markets, which are primed could which are primed to continuously price the bad news. By aligned those markets to continue to function, the fed has minimized the damage of the fallout. I think they are doing a tremendous job. Congress is not doing such a good job. In that failed piece of legislation was an important effort to provide that same sort of bridge financing to small and large companies. That has become a Sticking Point on capitol hill. , sos an economic necessity we need to get the politics squared away and get that money out there or we will be picking up the pieces instead of getting ahead of this. Into give me some insight how the government works. Lets say we get something passed in the next few weeks. Lets assume that that is. How quickly does get into someones bank account . How quickly can they pay their bills . Can you walk me through the wood logistics and mechanisms . Douglas there are three different mechanisms, and they differ. One is passing of the bill. Theres form to 25 billion of able billion available to the treasury that they could give is backstop against the losses, and the fed could start taking bridge financing loans for main street companies. They could do that very quickly. They move fast. Theres also help for people who are already out of work and on insurance. Those systems are up and running. It would extend the benefits. Onger but the federal government has offered to pay the full bill for any state that waves the one week waiting period. Then theres the checks you heard so much about, cash rebates, checks to families. That will take six weeks to get in order. Of the things that are in plan on capitol hill, that is the least consequential in the end. Alix when you have these measures coming into the market, a lot of what the fed doing is helping plumbing, as well as to backstop certain industries. How does the government know what to do when we cant model the Economic Impact . The only way it is going to work is if the stimulus is more than the economic loss. I think this is the key to going at this problem from the source. In these firms who are otherwise perfectly sound, but have seen revenue go away, if you can give them bridge financing until we can get past the pandemic and the consequent is, what can they do . At that price, they are required to keep their employees on payroll. Now you have a mechanism which is going to continuously give people money that they otherwise would not have, and that is exactly the right thing to do. It is what they have been living on, and it will last as long as the pandemic lasts. If you start trying to do things cks, that is much harder. So using the mechanisms in place , the payroll systems of the u. S. Business sector is a much better way to go. Alix what else needs to get done, and how quickly . What is the outstanding thing that either congress is not addressing come of the white house is not addressing, and the fed is not addressing . Douglas the number one issue is the Public Health mission, and it is not going nearly as well as it needs to. There are the testing failures come of the lack of protective gear for the hospital sector, and the lack of what appears to be a National Strategy on dealing with the spread of the iris. What really is needed is for the white house to step up and say, ok, heres the plan. We are not going to leave this to different governors and mayors and have different timelines and shut down as california did come of the sixth largest economy in the world, with no apparent wording. Maybe a coherent plan on the health front so you can plan for the economic fallout come about at the moment, it is hurting us. Alix once we get past this, what are the structural changes we are going to have to start living with on an economic basis . Douglas i think this is a lot like the post 9 11 period i live throughout the white house. You had a threat to the citizens of the United States, and you have to deal with the threat, but you also have to somehow insulate the economy from that threat. Post 9 11, that meant we had to start inspecting every container that came into the United States we. United states. We spent a lot of the dollars on the security mission. We are going to see the same thing here. Post pandemic, they are going to have to have measures to not. Ave this happen again i expect us to have a fairly long tail and not a vshaped recovery. Alix really great perspective. I really appreciate it, douglas holtzeakin. With me still are George Rusnak of wells fargo and Rick Bensignor of bensignor Investment Strategies. How do you revalue how you model earnings, how you model growth . It depends on what your timeframe is. I think a lot of people are looking at this as the shortterm impact. Youve got to start looking at the longerterm impact. Right now, we just lowered our gdp forecast by roughly 1 . Tell thelly tough to true impacts from a revenue and growth shock perspective. We know it is going to be deep, and right now the market is really focused on those deep losses that are going to be happening in the short term. Shortterm is to make that an opportunity for the longterm investing plan that you have. Alix from the shortterm versus mediumterm, how do you then think about structuring portfolios in that environment . Rick one of the biggest robbins right now is liquidity. Ive been in the futures markets for 40 years. If you look at even with the s p futures typically have is a bit haveor spread, usually anywhere from 200 500 on the bedside and the offer side. I was looking a minute go. You have six by 10 right now. Theres no liquidity in any market. So when youre talking about restructuring a portfolio, you have to think about the potential slippage involved to get anything done the institutional size. In between the time you and i spoke a few minutes ago, sb moved 15 s p futures to the upside. That probably wasnt on a heck of a lot of size, either. So you are going to have to deal as you restructure portfolios, youre going to have to realize that doing so is going to cost a lot of money compared to what you had to do in the past, were you do it for no cost because of the liquidity. So just another factor to consider as you try to think about what to do Going Forward. Theres just very little in the market out there. Alix George Rusnak and Rick Bensignor, stick with me. We want to update you on all the news we got from the fed. It is tremendous headlines coming here, really historic. The fed is announcing very extensive measures to support the economy. They are doing openended treasury mortgagebacked security buying and anything else that is needed. They are extending the money market Lending Facility. To be buyingg secondary Corporate Credit. They are also going to be launching a main street facility a lending main street facility to help the main street businesses. Atm for offering the that. It is a lot. Willthis week alone, we have 600 billion of qed coming just this week alone. It is the kitchen sink times infinity. S p futures were down by about 3 going into this news. We are now up i almost 3 . You are also seeing monster buying in the bond market, yields down by 14 basis points. 102. E just under volatility coming down. Turn inton seeing wti positive territory. It is really the long end of the Treasury Curve seeing yields come down the most as the fed just brings everything it has into this facility and a Corporate Bond market, and the money market fund, and into main street as well. Colony capital ceo tom barrack protected a domino effect of catastrophic consequences if banks dont take action to keep from defaulting due to the virus dimmick virus epidemic. Erik schatzker joins us with thomas barrack. Us ingood of you to join the public like our the west coast. You say that the commercial Mortgage Market is on the brink of collapse. Telus, what exactly is happening . Tell us, what exactly is happening . The fed is doing exactly what they need to do. This is an issue that really relates to plumbing and logistics. It is a liquidity crisis, not a credit crisis. We have this invisible enemy. On the health side, america is doing everything they can do. But it is a little bit like general patton declaring war and recruiting his civilians, and saying we need you there, but we dont have label but we dont have a logistical supply chain. What we have right now is a liquidity crisis. 1989, fromrent from the longterm credit crisis, from 2008. It is a temporary impairment imposed by an intervening, unexpected event. What the fed is doing this buy Investment Grade securities is help main street clear the plumbing. Erik i just want to ask, weve seen quite a bit of detail ready ,rom what the fed plans to buy credit instruments with ratings as low as bbb and maturities of four years or less. So far as i can tell, it only identifies Agency Commercial back Mortgage Securities as being eligible for fed purchase. Is that enough to relieve the liquidity crisis you just described in the commercial Mortgage Market . The i dont think so, but good news is we have veterans at the helm. Secretary mnuchin has been through this two times. You have jerome powell. Jay clayton. They have all been through this process. It is a matter of bringing together this regulatory complexity, which is the difficulty. You have so many agencies involved in every aspect of the commercial paper and Bank Regulatory complex. Lift marketd is to to market. In every instance such as the one we are dealing with. Alix just to be clear, erik just to be clear, what youre talking about now, a waiver of requirements and some of the other things like suspension of loan modification rules, that is not at all contemplated in what the fed announced. That needs to come from the regulatory bodies, and some of the money you are looking for needs to come from congress, right . Tom exactly. More or less what the fed is saying they are going to do without congressional action. I understand they are doing what they need to do, but you have to keep people employed. You have to support the employer. The biggest part of employer expense is rent. When commerce stops and they cant pay rent or the interest on the debt, and that the banks are supporting the investors, it all collapses. Erik give us an idea based on what you know, your experience, if the banks dont think action, if congress and regulators dont happens . On, what tom we have defaults across the board on residential and commercial. That money needs to keep recycling to keep people moving, and the employers in their buildings so they can hire employees. If that stops, margin calls at the banks to all the intermediaries that after ,oddfrank, were instituted would not stops, everything stops. When the margin calls start, which is what is happening now, which is what happened in 2008, in 1997, in longterm credit, it is a momentary timeout. It is not a permanent impairment to value. Everybody needs is just a timeout. It all comes, let out together. Tag all of that interest onto the end. If we dont solve the problem in 90 to 100 days, we have a different set of problems. The fed is the letter of last resort. We always say dont fight the fed, so them buying everything they can buy, open up that window to commercial paper, to they, to more categories, can do that. The Regulatory Framework, jay powell at the sec, they understand what to do jay powell and the sec, they understand what they need to do. Erik what about the president . You are a longtime friend of President Trumps, and you know secretary mnuchin well. Have you spoken to them about this personally . If so, do they understand what you are describing . What are they from your to do about it . Tom one of the greatest things we have is incredible leadership. I think President Trump is doing everything he can do. Es armed his generals Steven Mnuchin is probably the best sectarian of treasure weve moment ed for this the best secretary of treasury weve had prepared for this moment. He is doing everything he can do to lay this map for congress, which is complicated. It is the Regulatory Framework within the law that needs to be done. Yes, they are all over it. What needs to happen now is the democrats and republicans have to put politics aside and say, look, we have the health war and the financial war. Roll out all of the tanks. Roll out all of the machinery. I mounted to the market and you will never have to use it. The market just says no, liquidity is not going to stop. It is not a credit crisis. Erik at the risk of sounding a little crass, you are highly selfinterested in this matter. I know you care deeply about the future of the country and the economy, but the real estate and Real Estate Credit is what colony does. If the steps you are calling for or some other relief, isnt pursued, what do you stand to lose . Tom the good news is colony is in a great position. We have almost 3 billion of cash. Its not what i am worried about. What i am worried about is how does the cafe employee, the restaurant employee, the drivers, the people in warehouses survive . They cant do it if the employers are gone. Weve been to this radio before. This is not selfinterest. It is simple. Inis what happened in 1998, 1989, and 2008. You have veterans who have been there. Mcwilliams. Ell, the problem is they dont have a playbook from congress. They will get it done, and if it doesnt happen, the evaporation at the employee level, people cant pay their rent. When people cant pay their rent, owners cant pay interest. If owners cant pay interest, the system collapses. Alix there are a few people out there erik there are a few people out there, ive heard from a few of them on twitter, who, in some respects, couldnt care less. They say i know what happened the last time the Financial System was bailed out. Asset price reflation just made the rich richer. Isnt that going to happen again . Tom not at all. The crony capitalism issue i think is one that, on the precipice of it, if you talk to neel kashkari, the minneapolis fed, he was the front line. Criticism in the past was the only bailed out a few, but that is not really true. In the end, it ended up making money for the u. S. But to have one person making a decision in such a complicated momentat happened in the was necessary because the regulatory complexity of what is here is massive. You need to have Plenary Authority on top of it. It doesnt bailout only the ony capitalists. If it gets caught up, the person who suffers are the little people, not the big people. The big people can survive to the other end. This is the difficulty in explaining these complex issues. Thank goodness we have secretary mnuchin at the helm of all of this trying to explain in a very politically charged environment, whichthis is america. We need to dig in and use everything we have got. On a regulatory basis, the same thing. I think we are on the precipice of solving it. Erik we all hope some solution is afoot. I want to thank you for joining us this morning. Foundertom barrack, the and ceo of Colony Capital. Alix thank you very much, erik schatzker. Appreciate you bringing up that interview. Lets get a check on the markets. S p futures up a 50 points, 2 . After the fed action, now we are up two. Europe pairing some of its losses but cannot seem to flip and the territory. In other Asset Classes, it is the 10 and the sevenyear outperforming. If you could switch up the board, also a look at the dollar index. We were at the lows of the session and then moved higher, now we are lower, down. 8 . Lower is how we roll. Volatility coming down. Brent paring some of its losses. We were down 6 . Wti flipping into positive territory. We want to get more to the breaking news from the fed. There was a lot to go through in terms of what they are doing, what it means. Have half an, you hour, now you have to know everything. Can you walk me through what they are buying and the ramifications . Michael as near as i can figure out, the biggest thing is an unlimited qe. They basically say they will buy it to ensure smooth market functioning. They are adding mortgagebacked assurances to what they will buy with the qe program. Qey said 600 billion in this week alone. They are establishing a primary market Credit Facility to buy Corporate Bonds directly. It will not be on the fed Balance Sheet. You can put your securities to the spv and they will be funded by the fed. The Treasury Department is also taking a stake in that. The secondary market corporate buyit facility and to Corporate Bonds in the secondary market, and as you mentioned, etfs to buy government bonds, going all the way down to bbb minus in terms of credit ratings. They will take stuff a lot of people may not want. They establish a term Asset Backed Securities Loan Facility, which means they will lend the holders of aaa rated assetbacked securities. Other consumer and Small Business loans. They are expanding the money market mutual funds they announced last week to include her wider range of securities and taking something called municipal burial demand notes. I know what cds are, im not sure with the others are. We will find taylor riggs and ask her. Immersion paper Fund Facility up and running. Highquality taxexempt marshall paper and they cut the price in half to 110 basis points plus the current fed funds rate which is 40 basis point. They had announced 200 last week. Markets said this was punitive and high and apparently they heard them. The intriguing thing is this main street Business Lending Program which would lend to Small Businesses on main street, no details on that and no information on when that would start up. An awful lot, basically the kitchen sink. Somebody said of last week was a bazooka, what we have left . We are out of metaphors. Alix you need to make up words. Who does this help . Michael anybody who has something to sell they cannot get rid of. The biggest problem is a lot of people were overleveraged, they were getting margin calls and they have to sell stuff to raise cash. Theyre getting margin calls or redemption requests. They have not been able to sell it because everyone is trying to find the door at the same time. There securities that there is nothing wrong with. You have jumped it will be hard to sell, illiquid stuff will be hard to sell, but treasuries have been hard to sell because the payment stream is lower so the bid aspect has been wide. It has been hard to get people to buy those. Corporate bonds, we have talked about how many has been in the bbb space. Companies getting downgraded because they do not have any cash flow. Now the fed will find a way to take those off the market as well. They are basically trying to and put of the holes their fingers in the hole. Michael you do not know where all of the leaks are in a system like we have here. The shadow Financial System is so opaque we do not know what is out there. In terms of everything you could think of for the moment, that is what they are doing. Hopefully this will continue to support the equity market even though they are not buying equities because it takes risk off the table in many places. Alix we will put that aside. Michael mckee, thanks a lot. Rustic of Wells Fargo Private Bank is still with me. Rick, does this make you want to take on more risk . Rick i think you probably couldve given how much the market has come back. It has been a long time. Im just trying i am to think over my long career if we have ever seen a limit down day go to a limit update. If there is going to be a day to do that, today is probably the day. I would put on risk today. Alix how much of that is a shortterm reaction versus i think i can say we have faith in some kind of bottom . Rick a little of both. If you do any transactions, you have to think in terms of shortterm and longterm. If the s p has rallied a couple hundred points in three days, i would probably take some out, because i do not think all of the mess is gone in any sense. But being able to buy the s p in the 2300 handle, i would probably hold some. George, same question, you will probably have a different outlook. Does this make you want to take on more risk . Need to take risk where there is opportunity. Right now we see fixed income. We do believe in the up and quality mode and there is still terminus opportunity in quality mode. Tremendous opportunity in quality mode. That is the opportunity you do not need to take a lot of risk on, but putting some in the market makes a lot of think makes a lot of sense. Even in fixed income we have seen opportunities. Muni market, shortterm is yielding 200 you do not have to go down and credit, you still can stay up in credit and get good opportunities. Point, we were talking about the little dutch boy plugging all of the holes. Are there any holes left you know of . George i do not see any immediate holes. They address the mortgagebacked situation, they address the mutual fund situation, they are addressing it. The fed is in a tough position. They are trying to cover the great receiver for the super bowl kansas city chiefs. They cannot compete with this beat, they cannot compete with the direction change, but they do not need to intercept. They just need to knock the ball down. They are responding quickly to the market. So far, so good. They are providing the plumbing, the liquidity in the market, and the conviction the market needs to keep moving on. It would be great if we could get support on top of that. Then you start seeing all in on monetary and fiscal policy to get us to bridge through that shortterm challenge we are facing. Alix george, sport references . Come on. Rick, where you not take on risk . Rick good question. What would i stay away from . I think commodities could bounce a little bit, but in the bigger term it is too early to call any bottom there. Whatever reaction you see today is because of what the fed did now. The dollar has had a tremendous two week up move. It is falling back today. It is potentially on a more significant breakout with the dollar index targeting something besides 112 from the current 101 a share. Gold i like. What i do not like these are shortterm trades. Is still credit market too confusing and the bounces you get will be shortterm. Im not sure they are out of the woods on the credit side. Alix i appreciate it. It is a fast and furious new cycle this morning. Rick bensonk and ignor. Coming up we will have more with adam posen. Zucca does not encompass what the fed did today. Any charts we had on the show today, check them out at gtv. This is bloomberg. Viviana i am viviana hurtado. Coming up later, an exclusive interview with democratic senator chris coons from delaware. Alix it is green on your screen and part of the reason is the fed throwing everything at the market to help get liquidity throat liquidity flowing from buying Corporate Bonds to buying assetbacked securities and highlighted areas like student debt and autos. A main street facility, we are waiting on details. Unlimited qe. Joining me on the phone is adam posen, Peterson Institute president. Your reaction to what the fed did today . Adam i think it is good. As we have been seeing so far, it is about putting a floor under things and making sure the credit market does not lock up, that panic does not place. The failure of the senate to agree on a Senate Package on a stimulus package made us more important. It is not a stimulus package, it is about bridge loans. Rolloverlooking at a for the economy. Enough . Alix is it much maxes ittty out for the fed. There are people there and there other things they can do and i think this is as a highimpact as they can get. They are saying they will finance rollovers of every asset class. I have told it includes munis, which cash which was the keep glass not getting enough attention. It will keep the credit markets functioning to the degree you are not dealing with micro businesses, they will get to refinance at zero cost. As was noted, the fed will come with some proposal to deal with the smaller businesses as well. Alix you sound pretty measured. You are usually a lot more animated. I wonder if you are underwhelmed by what happened or more concerned about stimulus . Adam sorry to be less entertaining. I guess not being on camera reduces my the bullions. Ebulliance. More seriously, i am less excited for two reasons. The fed is doing its job and doing it well. This is pretty much maxing out what they can do. They will come up with other stuff, but this is maxing it out. What really matters is the republicans in the senate stop blocking the bill. It is them who are blocking it because they not including the right things and they are the wrong things. Michael alix we have a headline that says trump is weighing easing stay at in order to curb the economic route. I feel like the conversation is how much of an economic crisis do you want to get into to protect individuals health . How do you think of Something Like that . Adam you have no choice. We as citizens and voters have no choice but to think of those terms. There is no question in my mind that the right move is to bottle up the economy as much as possible. The alternative is not only more stop, but deaths that perpetuate throughout the economy. You will overwhelm the Health Care System and other conditions with other conditions, there are doctors that will die, it is a fundamentally destabilizing factor. Putting the economy in deep freeze or whatever people want to call it for somewhere between one and three months is certainly survivable, even though it is costly. Plague. Playing with the it is irresponsible for the administration to make that tradeoff. If they do pass stimulus, we can get back. There is no getting back from letting the disease get out of hand. Alix if we have to get back to it, the stimulus will have to outweigh the hit to gdp, which means we have to understand and model the hit to gdp. Have you then think about the kind of stimulus we need . Adam the stimulus does not have to outweigh the hit to gdp, it just has to be sustained enough to pick up once the medical emergency is lifted. Trying to scale it up to fully offset the shop to gdp within one quarter or a few months is not realistic. It is realistic to think about replacing the hit to gdp over multiple quarters. Your right to ask how do you model it . There are a lot of technically gifted people trying to do this, but in the end i do not think trying to get into the precision of the numbers, i think you need to be talking about 5 to 10 of gdp stimulus, this complete rollover of loans from the Federal Reserve side, additional efforts, it is about preventing human pain and suffering in this economic period, not about offsetting. You have to make it up in due course. Alix what do we need . What would you be advocating for . Are theat we need fundamental things in the house version of the bill, not that it is perfect, but also some of the things secretary mnuchin is talking about. Massive expansion of unemployment. Subsidies designed in ways to allow people to stay in their and or shift unemployment get back to their jobs. Layups layoff structure. You need for the hardest hit industries, entertainment, nail salons, gyms. You need an expansion at the state level of backing for snap, backing for medicaid. You need a safety net because it is not only about compassion, it is about growth. People do not have that safety net are more likely to not get treated, not get tested, transmit the virus. It is blunt it is in anyones interest to stop the downward spiral on that. Those are the key elements along with direct cash disbursements to individual households. You put all of that together with the vet refinancing and the economy has a decent shot no matter how bad it gets. I am not dismissing that. Unless President Trump screws up. Sorry. Alix had to get that in there. Appreciate you jumping on the phone with us. Adam posen, Peterson Institute president. Now we want to turn our focus to setting you up for your trades of the day. We are joined by tom to mark, he is the market technician you want to hear from. . Hen you start buying always a pleasure to talk to you. This segment will revolve around other selloffs we have seen, 1929g the dow from 1989, and where we are now. About where we are now . Om the comparisons and the last week is that the market is close to what occurred in 1987 and 1929. At the top, when we were breaking down in our work, we market would the decline something comparable to 1987. That is what we are experiencing right now. Periods in intermediate in which most people are overlooking. That is 2011, when the market declined. People define a bear market as 20 . 38. 2 . 7 decline was half of the 38 . It is a derivative of what occurred in 1987. If you look at the chart, which we have right now, you can see the market from august 1987 into the low, which was recorded october 3, the market declined 38. 2 . When we were following the market in 1987, there was something called the hypothetical dow. That was calculated based upon each of the components in the at thatage high particular time and low at that particular time. They were added together and this number was included. In 1987, the exact low was 38. 2 . We are using that same model because the market obviously declined 20 , which most people are accustomed to seeing and the last six or seven years. Something we use in addition to a price projection is timing. We use a model called sequential and at the 1987 low, there was a 13 combo and subsequently a 13 sequential in which it occurred in september. We have been on a path through ais entire decline to record wecombo at the low, which think will still occur tomorrow. That is a possibility for the dow jones average. 18,183ected a downside is our projection. The s p average projection downside was 2097 and we are moving there. I know we did get a rally this morning. Overnight we were moving oneforone with our projection until we got a rally today with the fed news. We are a Firm Believer that markets bottom not because of smart buying, but because of a lack of selling, figuratively speaking, and markets pop not because of smart sellers, just an absence of buying. When markets make lows, it is not caused by good news. Good news merely sets up a vacuum after a water two day rally such as we are seeing today. Then there is a vacuum on the downside because of short covering. This marketexpect to continue to rally. Tomorrow toth record the low. That would be something that is consistent with most other averages. The European Market that will do the same as they get undercut. We do have something out of alignment, and that is the s p. We do not have the possibility of a 13 bottom tomorrow. It was only be attend today and possibly 11 tomorrow. It is telling us we will come back and revisit the slope this low whenever we recorded tomorrow. We will record something which we refer to as a sequential bottom. That is typically what happens. It happened in 1974, and then the december low with a lower close. It happened in 1980 with the bunker cant decline. 2001 with the october low. We have secondary test. We saw in 2007 and 2008. We have had it in recent lows as well so we will see a bottom but we will see a rally. It could be sharp, maybe 11 . We will move sideways for a time. I cannot see the market breaking much lower than the levels we have given, not this time. It will take a while. Obviously it will take a while for the fundamentals to catch up as well. Alix we only have about 45 seconds, but as a market participant, how do you handle that when you know you will see more declines but you will see rallies in between . Tom the risk will be after we reach those levels, the risk will be to the upside. It will be a trading range. It does sound complicated when i share today, but we do have for the bloomberg users a secondary Service Called symbolic and we are also offering into to retail people. It is the explanation. We are seeing other things and theith the vix three times vix. We will see new highs in the vix as well as the three times vix, but only one or two days. We know we will see lows below what we recorded friday and today. Alix it is great to catch up with you and very helpful for our viewers to see how you are looking at the technical side of the market. Demark analytics founder and ceo. That lab set up for me. Coming up the open with jonathan ferro. You are finally seeing green on the screen. The bid continuing into the bot market. The dollar retracing some of its earlier gains. This is bloomberg. Happy monday, everybody. Jonathan from new york city for our audience worldwide. Im jonathan ferro. The countdown to the open starts right now. Jonathan with 30 minutes until the opening bell, good morning, good morning. Here is your monday morning price action. Equity futures positive 53 points on the s p 500. A big turnaround. Up to. 3 . In the bond market, yields down five basis points. Eurodollar up. 8 . Eurodollar 1. 0 780. The big issue, the fed announcing unlimited qe as lawmakers butt heads ever massive stimulus bill. Thats bring in Michael Mckee, kailey leinz, and kevin cirilli. Michael one hour ago, it is the big one. There is something called optimal control in economic circumstances, which means if you have a crisis go big in early. That is what the fed is doing. Announ