Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240713

Shrinks, but it doesnt set the u. K. Up for a good spot Going Forward. We are seeing the relationship between fiscal and Monetary Policy really evolve the u. K. We will break that down over the next few hours. You are seeing bond markets bid across the board, as we are koff develop. We want to kick it off with Michael Mckee. Theld central bank mike,entral banks if i say mmt, am i wrong . Anyway. Yeah, [laughter] its confusing, though, what is going on with the economic philosophy called mmt. Yes, it is unlimited cash in unlimited amounts for unlimited periods of time until we get through this. Youre still going to work your tail off today before we get to 4 00 p. M. Lets start in london come over the bank of england is going to finance Government Spending for the time being by lending money directly to the treasury. It is called the ways and means facility, a shortterm credit the last used during great financial crisis. Government and the bank say any borrowing will be repaid by the end of the year. We will see. It all depends on how this is going to end up. The bank of korea held its policy rate, but warned the economy is going to take a bigger hit from the coronavirus pandemic then originally thought. The bank of korea did announce further measures to channel liquidity to the economy, expand the range of bonds eligible for open market operations. They also are suggesting they may by government bonds erected. And this might be ordinarily the lead of the day, fed chair jay powell going on a webinar at 10 00 a. M. To talk about what the fed sees in the u. S. Economy. He will also take questions. Have, the questions we will the fed announce its main Street Lending facility and the plan to buy muni bonds . Those details should be coming. A lot of anticipation for them possibly coming today. Why not do it before the fed chair speaks . We shall see. It is also possible that we will get some sort of decision, we hope, from e. U. Finance ministers meeting today to once again try to figure out a way to bailout the union and come up with a way to bridge differences on a fiscal aid package. The biggest issues, the terms that would be applied to any credit line from the euro area bailout facility, the esm, and how they would finance a plane in the long run. Ecb president Christine Lagarde repeating her call for a strong fiscal response. She said it is a great idea when asked about the french plan for a European Union recovery fund. We will see if they get anywhere on that. The first 250. , billion that Senate Republicans want to add to the Small Business lending program. They would like a vote today by unanimous consent. Democrats say that may not be possible because some members, including republicans, would object. They want more money for hospitals, more money in the package for almost bankrupt states and cities spending everything theyve got on this program. They say weve got a 350 billion program now. 100 billion of it has been committed, but none of it has gone out the door, so weve got time. We can negotiate. We shall see. Finally, jobless claims, 8 30 this morning. Going to be another staggering number. The consensus, 5. 5 million. But the high is over 7 million, in part because of some of the biggest states have had relatively small claims as a percentage of their labor force, suggesting weve had processing difficulties. All of those should get the pipeline should get through the pipeline at some point. You normas amount to watch today if you are sitting on a trading desk. Enormous amount to watch today if you are sitting on a trading desk. Alix stay on your toes. Weve got a lot going on. The other thing to turn to his oil. The Worlds Largest Oil Producers getting closer to a deal to curb output. President trump, a longtime critic of opec, and i wants the coalition to agree on cuts. Pres. Trump you want to know the truth . I hated it because it was a fix. But somewhere along the line, that broke down and went the opposite way. We have a tremendously powerful Energy Industry in this country now, when number one in the world. I dont want that being lost. Alix 20 me now is annmarie hordern. Any deal that can actually be reached today . What could it be . Does it have any impact . Annmarie it is interesting hearing President Trump. He dedicated a chapter of his book in 2011 about the cartel and their unfair oil prices, and now he is pushing them to cut. Men we know about possible possible momentum for this deal. This, theyw about want u. S. Contributions. They are saying these economically driven declines are not enough. Cuts not real client real cuts. Vladimir putin might also be seeking sanction relief from the u. S. They cant export through their likelihood ishe the momentum is building for this deal. The question remains what baseline are the opecplus countries cutting from, and how long will these last . To your point about whether this is enough or not, everyone says it is too little, too late. Normally we are using someone hundred Million Barrels of oil a day. Traders now believe we are down 65 million. Some 70 emand plunging in april. The demand destruction is so weak that many say the 10 Million Barrels a day is just going to be a drop in the bucket. Alix totally, especially if you dont really feel it until may. Thanks a lot, bloombergs annmarie hordern. One other story we are watching right now, switzerlands two biggest banks pushing back their dividend payments. They want to bay half of the 2019 dividend and distribute the rest fall. This is despite the surprise jump in profits. Is embedding a recovery in the late part of this quarter, or normalization, i should say, and then recovery in the second part of the year. There is, and my point of view, Downside Risk to that scenario. I would be concerned about getting too much stake in equities at this stage. Alix across europe, banks see the crisis has an opportunity to demand that regulators back off some of the rules. They say it is going to make it easier to channel money into the economy. Banks and the u. K. Also want to reduce their capital cushion as well. We saw the fed reducing the supplementary leverage ratio for banks as well. Coming up, much more of your morning news, trade and analysis on the markets in todays first take. This is bloomberg. Alix time now for bloomberg first take. Going they from our inhouse team of wall street veterans and insiders, Damian Sassower, Bloomberg Intelligence chief emergingmarket credit strategist, and Michael Mckee, International Economics and policy correspondent. There is so much happening, it is hard to pick out the real themes that are going to dictate trading into the long weekend. What are you most concerned about . What are you most interested in . Damian damian it seems theres going to be in oil deal, the damian latlining, it seems like theres going to be in oil deal, the virus is flatlining, everything is ok in the world. Week. We have a bunch next i expect more rate cuts. I expect a lot of domestic economies to do whatever they can to stimulate. But it is going to get tough. As we shift the fundamentals, the concept of prioritizing domestic growth over protecting Currency Exchange rates is going to be that much more of a problem. Im expecting things to get considerably more difficult for capital control. Alix wow, that is going to be tough. We have a great map that shows the amount of global easing we are seeing across Central Banks. At some point, we are going to run out of ability to do anything, and therefore you get more,. Tomore tom alt more mulch was more tummult. Michael the question is, to other countries have to follow the United Kingdom and have their Central Banks by debt directly from the government because they are spending so much, the markets cant absorb it . We had interesting auctions this week. Theyve all gone relatively well. It is not just the u. S. Every country is going to be putting out more paper. Is there an appetite for this stuff, especially at the low rates they are going to have to offer at two of zorba torything . To offer absorb everything . One of the things that caught my eye this morning was that we are seeing a resurgence in cases in places like singapore, and in south korea, they said people who had the virus and got better are getting again. If that is the case, weve got a. Ot of problems ahead of problems a lot ahead that the rate in the virus is disguising. Alix last night, my mother was asking me about the imf and how they are going to Fund Emerging markets, so i feel like this is definitely coming more into the zeitgeist. That seems to me that if you wrap in all of this conversation, it was way too early to take on any kind of risk. Are we still in a defensive kind of mode now . Are, bute certainly playing defense doesnt mean sitting on your hands. I would be whipping out the more aggressive playbook on the defensive side. There were somebody big dislocations there were some pretty big dislocations that were there. Liborois areor probably still too tight. See that in cross currency basis, in funding spreads. We seen the cross currency basis start to widen again, more of a premium paid for dollars. Narroween those spreads considerably, especially across the g3. A lot of that has to do with, as you mentioned, liborois conditions easing relative to the euro zone and the u. K. Dollarsl again prevent from finding their way offshore in a timely fashion. That is definitely something that is now in the cards. Are we going to see conditions easy in the u. S. , making life more difficult abroad . Alix also fair. We are also seeing funding conditions with the euro tightening as well, so euros are getting scarce. Banks are just trying to get money to throw at a company. Michael theres an awful lot of demand for cash right now, and that is only going to get in you until there is some visibility on what is going on. E. U. Finance ministers better come up with some kind of deal or it is going to scare a lot of people who have invested in the idea of a European Union if the union starts to spin apart. That is the ultimate doomsday scenario. Markets exist basically to exploit inefficiencies and arbitrage is the name of the game. Theres a lot of that going on right now because we dont know going. Ll of this is i dont know what damian thinks, but we are trading on hope that things will get back in 2021, or a definition of normal, because of Central Banks. This is a sort of central bank fueled recovery. Fiscal authorities are putting on a lot of money as well. No one can really trade fundamentals because we have no idea what those are going to be. So you just say the Central Banks in the government have our back, and we can go ahead and exploit inefficiencies, and spend the money they are going to give us. Alix talk about trading hope. We will get to that in just a second. Thanks, guys. Any charts we use throughout the show, go to gtv on your terminal and browse all the features. Coming up, oil really trading on hope of some kind of deal. Some say that is already well priced in. We are going to speak to amrita aspects chief oil analyst. This is bloomberg. Viviana this is bloomberg daybreak. Sales at costco soared last month, but not by as much as expected. The retail thing limit it but on hours took a store hit. Says the coronavirus derailed a significant amount of new business. It is the first major warning signal of a broader slow down for the Business Software industry. Sap says in the latest quarter, Software License revenue fell 31 . Struggling Occidental Petroleum is starting a Grassroots Movement to get help for the oil industry. The ceo encouraging employees to write to congress to ask for relief. A draft letter asks the government to help in the oil price war. That is your Bloomberg Business flash. Alix thanks so much. Lets just take a moment ending about how nuts that is, that a ceo is going to ask employees to write letters to the congressman about the oil price war. Rest of the market goes a little bit risk off area in crude prices in the u. S. Are up by almost 8 to 27 a barrel, yet all analysts want up saying that no matter what cut anyone is going to agree on, you are not going to see any material reduction until may, which means april still sees a risk for a shortage of areas to store the oil, and the weaker that gets, the weaker oil price gets. We run out of storage, we run out of places to put it, oil prices go lower. Still seeing some downside issues with that across from all analysts. In terms of what brings that to the table, an interesting dynamic playing out here. On the one hand, youre looking at potentially russia angling to get sanction relief from the u. S. , and may be some direct investment from saudi arabia. Saudi arabia looking to strengthen its own relationship with the u. S. If you heard President Trump speak yesterday, it feels like his interpretation is very much that russia and saudi arabia need a deal, which implies potentially, he think they are going to come to a deal without the u. S. It raises the question of how much the u. S. Is going to give up in any negotiation if they wind up thinking potentially that russia and saudi need it more than anybody else. Also, the next question in the market, how quickly do you turn off the taps . In russia and saudi arabia, you could do it fairly quickly. In the u. S. , you have to figure out what to cut. Have oldschool wells. Why not shut those down . But then you are never really going to get them back up again. You have the newer wells that produce a lot of oil quickly. Why would you close them down because you actually want to sell the oil, and theres a lot of oil coming out . A lot at play that we will help break down for you. Again, crude up by 7 , 8 . Amrita sen of Energy Aspects is now with me. I just did a lay of the land of what is at stake here. Can we just pretend that everyone comes to a deal in the next 48 hours . What happens to the oil price . Amrita i think the market is already pricing in a deal. If we pretend all of them are coming together, the price action does suggest 10 million, 12 Million Barrels a day in cuts. 15 is even being floated. Shorts to cover. Downsidey, the demand will still lead to a supply shortfall. Alix what do you see . Amrita i think in terms of the , lets sayines theres 10 Million Barrels a day of cuts. That would depend partially on how much the u. S. Cuts. Started to see some production shutting, but we will not see millions of barrels a day, and that will not happen until year end. Alix right. It also raises the question i brought up earlier. Who can shut down as fast as they can . U. S. Producers, can they really flip a switch, or is it a lot more complicated . Saudi arabia and russia can really start paring back production. Amrita 100 right. The u. S. Cant that quickly. However, i think this market will force producers around the world to do it. We are going to run out of Storage Space either by the end of this month or middle of next month because the demand declines are so steep. Out of re logistically, you cant move the oil, you absolutely have to shut. So how effective will anything actually be . Is effective this is the laneness really in of what to cut . Saudis and russians have decided not to support the market, so in that sense, it is effective. But in terms of really sorting the overall supply, it reduces the extent of the overall supply, but potentially doesnt even prevent tank tops. Goingrliest the deal is to come through his early may, so you cant prevent that. We are going to have to shut millions of barrels a day of production first before the deal kicks in. So this is much more for the second half of the year. Q2 is a write off. Its about the second half as demand recovers, also maintaining a little but of discipline so the market can recover a little bit quicker. Alix right, and you really have to look at the curve for that. Great to chat with you. Emery to send of Energy Aspects, good to see you amrita sen of Energy Aspects, good to see you. Coming up, Steve Chiavarone helps us break it down. 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 welcome to bloomberg daybreak. Im alix steel. Friday. Are closed here is where we stack up. Stay on your toes. It feels like that advice might be pretty good. On the one hand, you have u. S. Equities rolling over a little bit. I did want to hit on european banks, as ubs and the like are saying they are going to split their dividend into two parts, so they will be more circumspect and how they hand out Cash Payments to shareholders. Crude is losing all of its gains. It was up 8 , now barely up 2 in the u. S. The bond market seeing a pretty strong bid. I want to focus on gilts because it looks like you are having coordinated policy action between fiscal and monetary authorities, basically so they wont have to go into the gilt market anymore and issue. Theres going to be an easier relationship, and unlimited relationship between funding for the government as they get through this virus, so watching that as well. Joining me now is steve portfolio, federated manager. How are you handling the market right now . What we call in hold the line mode. Our original expectation was that you were going to see a double bottom. You were going to see a retest of the march 23 lows. That was predicated on the idea that the virus really would peak in the next couple of weeks. I will say that the last few days of data out of the u. S. In terms of new infections, hospital rates, icu rates raise the possibility that we have peaked already, but we dont trust it just yet. It is tentative. Ouve got European Data our view here is hold the line. If you came in fully invested, stay there. If youve got some money to put to work and you want to think about averaging it slowly, sure. But if we do retest, we move quite a bit off the bottom. Alix i guess the question is where would you want to allocate. Typically, if you see a bull to bear market, you see a factor rotation. We still havent. It is still basically large cap tech. Even though you have small caps enable market, theyve also gotten decimated. How do you know where to allocate . Steve i think what is interesting about this episode, i think it is going to accelerate the trends that have been existing for a while. For example, i think it is a pretty safe idea that most companies are going to ask themselves, did they have the Technology Solutions that they really needed for a crisis like this . Did they have the cloudbased computing, the telecommuting . Doesnt make sense to upgrade to the better or best solutions . Tech, which has been more defensive here, has been more defensive because their cash flow is better, their Balance Sheets better, and they are tied to secular trends. Same with health care. We are going to be stockpiling at the end of this medical devices and pharmaceuticals. So we think the growth part of the market is the best position here. We think trends towards tech, health care spending, less brickandmortar retail, companies coming back into the of the United States production, those will accelerate in the coming months and years. Alix so how do you factor in all of the global easing we are seeing from Central Banks around the world, from developed markets to emerging markets, as well as the seeming coordination in the u. K. Government with monetary officials . How do you do that . Usually it is dont fight the fed, but now it is dont fight all Central Banks . How do you fit that into your thesis . Steve i think that is a critical point. When the crisis is first happening, you are trying to , first and foremost, am i dealing with a financial crisis . Left to its own devices, there were all of the ingredients to create one, but the central bank and federal governments around of world, with the amount financing and support, have really taken that off the table. So now, what youre left with is do i have a vshaped recovery or a ushaped recovery . What you do not have are the ingredients for a financial crisis, and that is critical. I hope that when this whole thing is over, we can all agree to never ask the question again, is the fed going to run out of bullets . I dont think any of us feel better if the fed has 50 or 75 more basis points, yet we were hammering a year ago overfed cuts. They will continue to support things and change the rules if they need to in order to avoid the most dire circumstances. So i think it is critically important that it take the tail risk off. Know wherew do you to allocate globally . If everyone is doing the same thing, and by that i mean cutting rates, turning to some kind of limited qe, every government pumping some kind of fiscal stimulus into their economy, it seems like you have to know which economy is going to recover the best. How do you look at that . Steve i am going to say some thing that sounds crazy. You actually look at underlying fundamentals. Not necessarily the fundamentals in terms of the Economic Data or the next few weeks, you look at longterm fundamentals and what was occurring before the crisis. When you look at europe, japan, and china, they are the only economies really in the history of the world that have had peacetime population declines. That is not good for longterm growth. Ouve got aging populations they are struggling to have a centralized federal response, which makes the recovery difficult, and then you have seen them really take the ask to return of capital take the return of capital and away we have not seen in the United States. We still have population growth. We are the center of innovation. We came into this incredibly. Trong perspective, we think the u. S. Sits at the top of that list. They really need the u. S. To open again in order to have a place to sell their goods. The developed xus in terms of most attractive and least attractive. Nothing is going to change on that front. Alix really great to get your perspective. Thanks so much. Some breaking news for you, we are getting the ecb account of their latest meeting, and i want to bring you some of the other readouts. They said that they broadly supported flux ability and purchases, and the large majority did support pandemic bond buying proposals, the idea that you will have joint issuance vol of the eu members specifically to provide relief for individual companies. Very different story when it comes to the fiscal authorities. Some had reservations about the new bond buying program, but they did all agree that a forceful response was needed. An interesting response from the ecb accounts, waiting for any announcement after two days of negotiations. We want to give you an update on headlines outside the business world. Viviana hurtado is here with first word news. Viviana u. K. Prime minister Boris Johnson spent a third night in intensive care. Condition is his improving. Record24 hour period, a 239 people died of coronavirus. It is likely a nationwide lockdown will be extended for weeks. In the United States, President Trumps health team coming up with medical criteria for reopening the u. S. Economy. Political and economic advisers were kept out of the meeting on tuesday night, and that is seen as a sign the white house is giving priority to Health Considerations over economic ones. Rent payments are cascading across the u. S. Real estate industry. Just 69 of renters paying the rent by april 5, compared with 81 who paid by march 5. Companies such as Subway Restaurants and Mattress Firm informing landlords that they may not be able to make rent payments in full. 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. Itll on that virus fallout, is like subtracting japans economy from the rest of the planet. The coronavirus pandemic is set to rob the Global Economy of more than 5 trillion of growth in the next two years. That is more than japans output. Heres what cumulative losses would look like by the end of next year. The u. S. Will be the biggest loser. Gdp is unlikely to return to its previous trend until at least 2022. Also want to quickly update you on that ecb account. Apparently, some members preferred using qe or omt instead of any kind of new plan. That is interesting. Some wanted to focus on qe or outright monetary transitions. Coming up, the latest on the distressed debt market with thomas wagoner, the knighthead capital cofounder. If you miss anything from our program, correct your terminal. Tv on your terminal. This is bloomberg. Erik you are watching bloomberg daybreak americas. Asset foristressed the global pandemic. I am talking about pg e. Finally close to exiting bankruptcy. Tom wagged her tom wagoner is with us. Can you hear me . I can. Thank you very much. I hope you and your family are well. Erik i hope the same applies to you. You have made so much progress as one of the lead investors in pg es restructuring. I wonder, could it all unravel because of the coronavirus pandemic and the impact it is having on credit markets . Question, but thankfully, the company worked hard to secure all of its financing going back over the course of the last number of months. But from banks, as well as the supportive group of bondholders that were willing to lock in financing for the company so that it would have that portion of the bankruptcy really secured. That, coupled with an equity backstop from a group of shareholders and other interested parties, has allowed the company to have the onceinty to achieve exit two remaining pieces of the case are resolved. First, the approval of the Company Restructuring plan and its Going Forward operational plan, as well as the vote from the victims saying they approve their treatment in the plan. These are the two last pieces of the puzzle. Both appear to be well on track. Erik i definitely want to get to that question about the wildfire victims, but before i do, it was my understanding that some of the financing still needs to be put in place, and there are some deadlines for that in august, september, and of the end of the year. Tom the deadlines you are referring to i believe relate to finalizing the company exit in order to satisfy the Victims Trust by august. They have a right, but not an away from to walk their deal if we do not secure by late august. The financing that needs to be secured is really converting bridge financing for a small portion of the companys capital structure from the banks into more permanent financing, but certainly the company could exit. Looking at the sector writ large, that portion of our , if we look back to when a lot of these deals were cut has last fall, the s p declined rather precipitously, but the utility index over that time is only down about 7 , if we look from november 1 forward. We have seen a great deal of recovery in that sector in the financing markets, certainly open for Investment Grade rated bonds as we have seen recently. You alluded to the bad blood between the company, the investors, and the victims of the wildfire. And are getting pg e stock, they are concerned that knighthead and other firms that own stock are going to dump their shares as soon as they can. That would depress the value of the shares that the victims hold , and potentially reduce their recovery over time. Is there anything you are other investors are prepared to do to soothe those concerns . Is thee number one thing value at which the victims are receiving their stock is at a substantial discount to where utilities trade in the u. S. All of the after turbulence in the market. The value is still about 20 discount where the utility index on a comparable index trades. Pg e has a much faster growth rate than most utilities. If you compare it to most large utilities, pg e has the fastest Earnings Growth rate among those comparable. From a fair value perspective, the stock is being granted a substantial discount. The stock in pg e trades every day. You have new buyers and sellers emerging on a regular basis. So the idea that everybody will suddenly turn around and sell all of their stock at the same time is inconsistent with how these investors approach the situation over a long period of time, and inconsistent with selling something below fair value. Erik we could talk about pg e forever. It is a fascinating case. I do want to ask you about credit markets and how it applies to you and your firm. How much money have you put to work since the beginning of march . Tom we came into this with roughly 1 billion in dry powder. We have put a little more than half of that to work over the course of the last number of weeks. I think we are taking a modestly aggressive approach in looking at how the markets have evolved, which is typical for these types of situations, when you have severe shocks in the marketplace. The initial investments we were making were in very safe Investment Grade rated credit or in very high rated nonInvestment Grade rated credit, companies that would not need to restructure. That will of course migrate over time into more typically distressed situations, as we take advantage of a broader distressed market we see emerging. The probability of a recordsetting number of defaults over the course of the next 12 to 24 months is very high, given what is occurring in the real economy, which is obviously not something any of us cheer for, but is going to create some rather interesting opportunities across a wide swath of sectors in the market place. Erik what industries or Companies Look attractive to you , and what types of returns do you think it could generate . Tom this is the thing that is kind of interesting. When you look at where some of ,hese relatively low coupon highquality quality bonds are trading in the market, and many cases they are trading between . 65 and . 80 on the dollar. Over the course of the next 12 to 24 months, those securities will normalize and return to trading in the vicinity of 100 cents on the dollar. When you look at the appreciation of your Purchase Price back to a more normal state of the world, particularly given how much lower risk free rates are right now, youre looking at compound returns well north of 20 , in some cases much higher than that. These are in industries that i think are somewhat affected by what is going on right now, but are not likely to see permanent impairment. Whether that is a pipeline business that is temporarily impacted as a result of reduced product flows, or a Consumer Products company or food company that sees nearterm disruption to their business, but not a permanent impact on their business. Those are really interesting opportunities in the kind of things we are focused upon right now. As i said a moment to go, that focus of ours is likely to shift from those types of companies into businesses that will need to go through some more significant operation or financial restructuring over time. So mucherik thank you for joining us. Tom is the cofounder of knighthead capital management, talking about pg e and this historic opportunity. Alix appreciate it. Heres one quick story i want to share with everybody. On the streets of wales, and the parking lot, and cows strolling through the street in france. Those are just a few of the. Pecies that have emerged toeadly pandemic is no way restore threatened ecosystems, but it is a reminder of how quickly the Natural World responds when humans pick a step back. Coming up, we will take a look at todays traders take. This is bloomberg. Alix time now for traders take. Running me now is Damian Sassower of Bloomberg Intelligence joining me now is Damian Sassower of Bloomberg Intelligence. Letsets damian remember that requirements at doddfrank really helped facilitate liquidity in the secondary market. What youre seeing here is a comparison of em dollar debt highyield and investmentgrade 2008thousand eight in and march of last month. What you see is that bid offer spreads jumped. They nearly doubled for highyield. They have yet to come down. What we need to see is that are price discovery in the secondary market for em risktakers to return. Alix is that even feasible . [laughter] damian we may consolidate at higher ranges, but you are right. Is it feasible . I dont know. We are seeing primary activity recover. We are seeing that ad nausea him. But we really need to see the heredary market normalize for marginal risktakers to return to the market to really show their true hand, and i think for speculators to really feel comfortable putting positions to work and longterm capital to work. That is what we are focused on. This is a Market Driven by technicals, not fundamentals. Alix totally right. I just really wonder what the repercussions are going to be from all of this in terms of regulation and what people can and cannot hold. Really appreciate it, Damian Sassower of Bloomberg Intelligence. Enjoy that threeday weekend. Coming up, what stocks you can buy and what stocks you cannot. We will talk to kim forrest, Bokeh Capital Partners founder and cio. S p futures are now down by about 15, so theres lots to watch. Keep your eyes out there, as oil rose over a bit. This is as oil rolls over a bit. This is bloomberg. Because you cant get to the theater, were bringing the theater home to you, with xfinity movie premiere. Theres a world full of other trolls. How different can they be . Our brandnew service that lets you watch all the latest movie releases from the comfort of home. Trolls world tour april 10th. I will protect you no matter what, pinky promise. Just say xfinity movie premiere into your voice remote to bring the theater to you. To help you stay informed just say coronavirus into your xfinity voice remote to access Important Information and special reports from around the world. And to keep your kids learning at home, say education to discover learning collections for all ages from our partners at common sense media, curiosity stream, history vault, reading corner and many others. For more information on how you can stay connected, visit xfinity. Com prepare. Alix crude optimism. Prices rally in hopes of a historic production deal between russia, saudi arabia, and the u. S. Investors brace for the latest read on u. S. Jobs and look ahead to fed chair jay powells webinar at 10 00 a. M. And we look ahead to Bank Earnings with betsy graseck, Morgan Stanley global head of banks and diversified finance Research Later in the hour. Welcome to bloomberg daybreak on this thursday, april 9. Im alix steel. You cant really find your footing in europe. In terms of the u. S. , equities on the lower end. A minor risk off theme developing. You are seeing a move into bonds in the u. S. , as well as in europe. The mover is the cable rate. The reason why you are seeing the cable rate potentially move so much is because you have coordinated basic action now between the bank of england, now directly financing the spending needs on a temporary now going to be unlimited. It prevents the government from having to issue a lot more gilts to fund virus relief. That is what we are paying attention to. And of course, oil. We are having the gains we saw earlier in the session. Linning me now is bloomberg International Economics reporter Michael Mckee joining me now is bloomberg International Economics reporter Michael Mckee. I want to pick up on this bank of england thing. U. K. Is like the actually delivering what weve all been talking about for the last six to 12 months. Michael they are delivering as best they can, and the issue is they are doing it in a coordinated fashion. The fiscal and monetary authorities are working together in a way we havent seen in a long time. It became very fashionable over the last 50 years to separate fiscal and monetary. The u. S. Federal reserve has been independent since basically the beginning of the korean war. The bank of england only for a much lesser time. Now, both sides are getting closer to the fiscal authorities again, and in england, they are basically just saying we are o ahead and finance Government Debt as they try to spend their way out of the Economic Issues they face because of the coronavirus. The idea in theory is to keep markets from being overwhelmed by the amount of gilts and sterling bonds that go into the market, but it also indicates that the government can spend more because they have the bank of england to back them up. It is a very interesting to filament, and it is going to be interesting to see if others follow. That and we are waiting on from day to of meetings now from eu finance ministers. Do we have any read on what is actually going to be happening . Michael no read yet. We are hoping they find a way to come up with a plan to provide fiscal support for the European Union and for the euro zone members. The problem is the northern states and the Southern States, as we saw during the european financial crisis, are divided again. The Southern States want more help from the richer northern states, is basically what it comes down to. They think the entire euro zone tradition going bonds, and there should be a rescue funds without conditions because this isnt their fault, whereas the northern states are still saying youve got to make sure your economies are Strong Enough to withstand this kind of thing, and we dont really want to issue debt with you because your bad Credit Ratings are going to bring down our Credit Rating and cost us more money to issue bonds. A big divide there that they have to find a way around. Alix thank you so much. I really appreciate that. Some breaking news for you, nmc health is not going to oppose administration sought by banks in the u. K. A court now ruling they can go into administration to protect their assets. This is the middle easts Largest Health care provider, and it is trying to find a future here. The creditor says there were concerns the group was unable to pay employees, and they were just going to collapse, but now it seems like they will be able to go into administration. It all plays out with what is happening in the Health Care Crisis in the u. K. As we all deal with the virus. The imf is going to release its World Economic outlook next week. The imf managing director says the Current Crisis will have an impact on their research. We are still faced with extraordinary uncertainty about the depth and duration of this crisis. It is already clear, however, that Global Growth will turn sharply negative in 2020, as you will see in our World Economic outlook next week. In fact, we anticipate the worst economic fallout since the great depression. Just three months ago, we expected positive per capita Income Growth in over 160 remember countries in 2020. Today that number has been turned on its head. We now project that over 170 countries will experience negative per capita Income Growth this year, just as the Health Crisis its Vulnerable People hardest. The crisis is expected to hit Vulnerable Countries hardest. Emerging markets and low income nations across africa, latin america, and much of asia are at high risk, with weaker Health Systems to begin with. Many face the dreadful challenge of fighting the virus in ensley in denselyes populated cities where social distancing is hardly an option. See needs for developing countries to be in the trillions of dollars, and they can cover , leavingrtion of that residual gaps in the hundreds of billions of dollars. They urgently need help. There is no question that 2020 will be exceptionally difficult. If the pandemic fades in the , that islf of the year allowing a gradual proceeding of containment measures and reopening of the economy. Our baseline assumption is for a partial recovery in 2021. But again, i stress there is tremendous uncertainty around the outlook. It could get worse, depending on many variable factors, including the duration of the pandemic. , everything depends on the policy actions we take now. So what needs to be done. My next point is to focus on building a bridge to recovery. Four priorities for that. First, continue with essential containment measures and support for Health Systems. Defeating the virus and defending Peoples Health are necessary for economic recovery. So the message is clear. Forritize Health Spending testing and medical equipment, pay doctors and nurses, make sure hospitals and makeshift clinics can function. And we must minimize disruptions reframey chains and controls on exports of medical supplies and so forth. Firms witheld largely targeted fiscal and Financial Sector measures. Lifelines for households and mustesses are absolutely a. We need to prevent liquidity pressures from turning into anvency problems and avoid economy that would make the recovery so much more difficult. Third, reduce stress to the Financial System and avoid contagion. Our upcoming Global Financial stability report will analyze the range of vulnerabilities in the Financial Sector. Monetary stimulus and liquidity facilities play an indispensable , enhancing liquidity for a broader range of emerging economies would provide further relief to the World Economy as a whole. Importantly, it would also lift confidence. Fourth, even as we move through this containment phase, we must plan for recovery. Again, we must minimize the potential scarring effects of the crisis through policy actions taken now. This requires careful consideration of when to gradually ease restrictions based on clear evidence that the epidemic is retreating. As measures to stabilize the economy take hold and business starts to normalize, we would need to move quickly to boost demand. Coordinated fiscal stimulus at. His point will be essential where inflation remains slow and well anchored, Monetary Policy should remain accommodative. Those with greater resources and policy space will need to do more. Others with limited resources will need more support. This leads me to the role of the imf. We are working 24 7 to support our member countries with policy advice, with technical assistance, with financial resources. Trillion in lending capacity, and we are placing it at the service of their membership. We are responding to an unprecedented number of calls for emergency financing from over 90 countries so far. We are exploring ways to provide additional liquidity support, including through a new shortterm liquidity line, and we seek ways to help countries meet their financial needs via other options, including the use of and where we might be enabled to lend because it countrys debt is be unable to lend because a countrys debt is unsustainable, we will look at other opportunities to lend. Thereby creating space for spending on Urgent Health needs rather than debt repayment. Together with the world bank, we on calling for a standstill service to financial creditors for the worlds poorest countries. I am proud of the staff of the imf for stepping up in this crisis, and i look forward to the discussions during the spring meetings next week on what more we can do. Was managing director of the imf with a very stark warning, saying she sees the worst world recession since the great depression, and that the board wants to double emergency about 100 billion dollars. She says she sees about 100 billion of gap for these countries. So much more coming up on that in just a moment. What is coming up next . Bad, bad, bad. That is what our next guest season all of this Economic Data we are getting soon. Kim forrest, Bokeh Capital Partners founder and cio. This is bloomberg. Alix we are waiting on a slew of Economic Data coming out later today, the latest read on how bad the virus is hurting the u. S. Economy. Kim forrest, Bokeh Capital Partners founder and cio, joins us now. I am looking at the s p come of the top five stocks over the past five days. Apache, capri, royal caribbean. Oil, some retail, cruise lines. Is this really the time to be bottom fishing . Kim i dont think so. To the know those names last degree, but knowing their indebtedness or guessing at their indebtedness, i would say i would probably pass on those. But i think it is a great time to go shopping. What we are doing is looking for highquality names that weve always wanted to net own, but probably trade at too high valuations for us. Now is a time for that, rather than keeping your fingers crossed and buying royal caribbean. Alix so what are those names you feel like are deeply on sale . Kim theres a lot in the technology sector, and as you know, i really Love Technology because it is the future. Theres going to be more semiconductors next year than this year. We can make a pretty good guess on that. Names like intel, when it was down. Now its recovered a lot, but in the last months, it had gotten really beaten up. One that isother kind of a good guess. We are going to use more of their products this year than last year, and the pricing has gotten better. In more retail, we went back into urban outfitters, again because it had been beaten down, but also because they are not a store that has a lot of debt. That is their first debt in forever that i can remember. Highvalue companies and companies you expect are going to grow in the next three to five years. Alix usually when we talk to investors, we like the quality growers, and this company has some dividend, awesome. It feels like that conversation is dead in the water. Is it only works if there going to be some kind of catalyst for growth in that name. God knows, we all know that toilet paper story. Thats been done to death. But unless kimberlyclark has plans to be able to grow its may. Ct lines and they i dont really look at it. But they are a steady dividend payer. Till of these are another area people have loved because of utilities are another area people have loved because of that. But it is not a growth story. Even value stocks need to show some growth, and i dont think we will see growth in utilities and in staples. Alix when you look at the names you do want to buy on the discount, is your model for a ushaped, vshaped, or lshaped recovery . Or are you not taking about what the shape of the recovery looks like because you are investing in these for five years . Kim i am a longterm investor, so i am going to own these things for three to five years. I know we are going to have a recovery. I dont know how long it is going to take. That i am deploying capital based on price, and not buying a full position. I am buying a little bit. I think that should serve my investors well. Alix are you selling at the same time . Kim not right now, but i would if i was overweight in any of the positions. But that is why. It is not to get rid of anything necessarily. Alix fair. Are you building up a cash position also, or would you be . Are there any other safe assets . Vol playthe low definitely did not help in the last few weeks. Kim no, i kind of stay away from those plays just because of their lack of growth. Rates have growth in specific areas, but theres a lot of damage that is going to come there arebecause customers not paying them. If you are an apartment, you have risk there. Apartment center, you are in a risk there. I think that area has tons of risk, and that is more about cash flow because there could be a pitch about people paying the rent. Alix 100 . When you are fielding calls from clients right now, what are the top questions they ask you . Do they feel relieved . What is their response to it . Kim i think people are not really thinking about their money right now. They are thinking about their health, and when the economy is going to come back. Think those are the greatest fears. I think any time a client calls, but they are really trying to ask is are things going to be ok. I dont care what the question is, that is the subtext. The world seems to have a handle. It feels like there is coordination. Your lead story at the top of the sour was the imf at the top of this hour was the imf. That is just one more example of a Global Organization trying to help out the economy, the people of the world, to make it through this temporary issue and trying not to make it into a longer Term Depression that goes on forever. That, and ipe from beingake hope from people very good at figuring out problems. The question is when. I dont know, and no one knows. Alix and that is a really fair answer. I feel like people that say they do know, we have to question that, too. When we have earnings season kicking off, which is going to have really bad numbers and rough visibility, how do you take all of that in . Kim well, lets talk about the Economic Data first. That, and my notes this morning, i said it is all going to be bad. Do we really care if it is going to be 1 million over or under . Theres a lot of people unemployed right now, and these numbers are going to keep rolling back in. Thisouldnt care because is something that the sponsor to covid19 has generated. It is not a mean reversion sort of scenario that you can say, oh, this many people are unemployed, it is going to take them this long. We dont know. Theres all of this uncertainty. All of the Economic Data and some of the company data is irrelevant. What is relevant is can the company survive, is the company doing well now, and are its assets, which are the client gathering assets if you are some sort of services company, or a product making asset, are those still performing, and are they interesting in the future . Those are the kind of questions you should be listening for and getting answers to on the earnings calls because the Earnings Releases are just going to have bad news about numbers. Alix it is going to just be bad. Thanks for that, kim forrest of bokeh capital. Always good to chat with you. Those numbers coming up. We will break it down. This is bloomberg. Alix oil giving up some gains as we potentially get a deal between russia, saudi arabia, and the u. S. And reordering has more. Annmarie hordern has more. Annmarie what we know is there is a structural deal in place. It always comes down to the details. One of the things they are negotiating is the baseline. Saudi arabia wants to use their april baseline, when the price were started, while russia favors a First Quarter average. That would be 9. 8 Million Barrels a day. We know that russians are willing to cut someone. 6 Million Barrels a day, but the 1. 6lin to cut some Million Barrels a day, but the criminal and really wants the u. S. To do more. We will find out friday at the g20. Alix thank you very much. Coming up, initial jobless claims. Mark cabana, bank of America Securities head of u. S. Rates strategy. This is bloomberg. Alix welcome to bloomberg daybreak. Im alix steel. A few seconds away from the initial jobless claims. S p futures lower. A bit of a risk off developing in the market. Weekend, long holiday how much risk do you want to take on. The cable rate is the outperform in the fx space, although off the highs. Coordinated action between monetary and fiscal policy. Bonds get a bid. We have initial jobless and fed news. It looks like they are taking steps to provide up to 2. 3 trillion dollars in loans. Bloombergs Michael Mckee is more. Before we get to the data, can you break down what we know from the fed . Michael 6. 6 million jobless claims, that is a big number. The fed is doing what they are doing. They are going ahead with 2. 3 trillion in lending facilities. This is a detailed list of new fed actions. Some of going to buy those ppp loans, the paycheck Protection Plan loans from banks, enabling banks to make additional loans. Iny will buy 600 million small and mediumsized enterprise loans backed by 75 billion from the treasury. This is the main street borrowing facility. Talk more about that in a moment. They will increase their Corporate Bond buying to 850 billion backed by another 85 billion from the treasury. They are also setting up the possibility of taking junk onto by marchance sheet if 22, which was the original Corporate Bond deadline, they had bought or you are offering Investment Grade rated paper that was then downgraded. They will take bbs in that case. They will lend 500 billion to states and municipalities backed by another 35 billion from the treasury, and in addition to their Corporate Bond buying they rateddd buying of aaa commercial backed Mortgage Securities and loans. They are buying clos as well. Lets talk about the main street facilities. They will make four year loans to companies who employ up to 10,000 workers or have revenues of less than 2. 5 billion. 500 employees up to 10,000. Ppe goes to people with 500 less. The principal and Interest Payments will be deferred for one year. Banks will make the loans and keep 5 of the loan and sell 95 to a special Purpose Vehicle the fed is creating. Banks and the fit will take equal risk. Banks will have to assume some risk in making these loans. Borrowers must make what the fed says are reasonable efforts to retain their employees and they have to follow the same rules as the other lending programs. , oruybacks, dividends compensation increases for officers. Lets talk about the missable loan facility. Millionl buy up to 500 in shortterm notes directly from state, counties with a population of at least 2 billion, and cities with a population of at least one million. States may borrow from the fed and lend that to smaller cities and counties. An enormous amount from the fed. 2. 3 trillion is there estimate for the additional lending facilities. They can lend to small and Mediumsized Enterprises with up to 10,000 employees. They can lend money to municipalities, cities, states, and counties. They can take on additional corporate debt and collateralized Loan Obligations and commercial backed mortgages. A lot of additional assistance for the economy from the federal reserve. Question before we get more analysis on this. What are they not buying right now . Michael they are not buying junk rated bonds. There is a possibility to take some on if you are offering securities as of the start date for the program that have since been downgrading one notch. They could take those on, but theyre not buying junk. That is one of the issues, one of the things democrats have been urging them to do. Under the law, the fed cannot lose money. Also if they took on securities, it would cost them more because the Interest Rates are much higher on junk and that would mean they would have less firepower from the treasury than 450 billion that would have to go into the junk market and less available for other lending. That is still out there as something they are not doing. These programs could always be scaled up and expanded. Itll be interesting to see how fast they get online and how soon money gets out the door. Alix no kidding. You are talking about the ecodata. Let me break that down for you. Initial jobless claims coming at 6. 6 million. That means we have almost 17 Million People within the last three weeks now unemployed. Levelinflation on a ppi and a final demand coming in a bit stronger than estimated. Inflation not going anywhere. It is initial jobless claims and all that the fed is now doing. Unbelievable expansion from the fed. Also joining mike and i is mark cabana, bank of America Securities head of u. S. Rates strategys. Thenow moving into down the s p erasing gains. Yields coming off. What is your reaction to what we have heard . Mark the fed is continuing to do whatever they need to do to support the economy. The fed has been very swift and everything they rolled out. It seems like they are being increasingly flexible and doing whatever they tend to provide support the markets and the real economy. Alix do you feel this is all enough now that weve got more details about the main Street Program . Do you feel like this is enough . Care of theakes last remaining programs that we were expecting to see. We had thought there would be eight muni program, we knew there would be details about the main Street Lending program. The expansion of some of the collateral and also the upsizing of the secondary Corporate Credit Purchase Program are all things we were anticipating. This takes care of that majority of things outstanding that we were expecting the fed to do. There are still additional tweaks we think could be coming. We think the rates could be try toin particular to support a rapid drop in libor and provide or direct stimulus to liborbased borrowers. That is the only remaining thing we are looking for at this point in time. It shows the fed is willing to do whatever they can to try and support the markets and that should improve the flow of credit into the real economy. Alix in terms of what theyre offering with the banks, mike was saying the fed is asking banks to take on some risk with the fed taking on 95 and the banks taking on 5 , do you think that will be good enough for the banks to feel ok about lending to small and mediumsized businesses . Mark i would assume that is right. Asking the banks to hold and retain a 5 piece of these main Street Lending Program Loans theyre offering. I do not think it is unreasonable. If the banks are the primary conduit the fed needs in order to deliver the stimulus more directly into the real economy, given that these loans are nocturne teed or do not have the backing are not guaranteed or do not have the backing like the ppp loans do or the Small Business Administration Like other loans do, i think it is reasonable to ask banks to retain a little on their balance sheet. I would think the fed will offer relatively favorable terms in order for banks to make these loans. Banksd expect that the should be willing to go along with this. I think it is encouraging what the fed is doing with these paycheck protection Program Loans. This seems like a Popular Program that has been introduced and does not have particularly onerous conditions for the businesses that get those loans. To fed is essentially going be taking those loans off of the Balance Sheets of the banks that originate them and allowing the banks to originate more credit and make more loans to the real economy. I would think what theyre doing with the main Street Program as well as the pp preprogram the ppp program should help get credit and lending going again and provide additional stimulus as long as the economy continues to be affected by the virus. Throughn you walk me what holes there might be left that the fed needs to plug . Michael this takes care a lot of it as the fed is concerned. Pricing will always be a question. Can you lower the price . We have not had a chance to go through all of the prices. For most of this it is market price. There are some fees. The other issue is what to they do about the highyield market. I just noticed something i had missed earlier in that secondary market facility. We had earlier had the fed , whose primary focus was Investment Grade bonds. Now they are expanding that. Part of their purchases will be etfs whose primary investment objective is exposure to highyield Corporate Bonds. They are tipping a toe into the highyield market. That is thewhether camels nose under the tent. Municipal lending issue will be interesting to see how much takeup there is on that now much might be taken up by the fiscal authorities. The vet always wanted congress to get involved. The democrats proposal yesterday included 150 billion for states and cities. We will see how that shakes out as we go along. Cabana, should the fed be buying highyield etfs . Fed has two objectives. One is to deliver as much stimulus as they can to the real economy. The second is also to ensure they are protecting the taxpayer. Remember, they are utilizing funding from the treasury that has been given to them by congress, which is essentially taxpayer dollars. The fed has to ensure they maintain a certain amount of credit protection. Mentioning, i think they are dipping their toe into the highyield market. I do not see the fed embracing theyyield just because have to have some credit standard somewhere. By agreeing to purchase entities that have been downgraded, i think that is reasonable at the smaller size. We have seen that with the other money market programs the fed has laid out. I do not think they will necessarily be embracing this knowt just because they they have to have some type of credit protection to the taxpayer. Fair, and obviously buying a Distressed Energy company debt not the same as buying a fallen angel in the last few weeks. We are obviously dealing with buying dollar funding. As far aswe with that going up to june versus where we are now versus where the u. S. Is compared to europe . How tight are we . Mark we have seen liquidity improve in dollar funding market , but we still see libor is high. Particularly threemonth libor and sixmonth libor are high. What we are seeing, at least what i am observing is there are a lot of money market mutual , he investors in the dollar funding market, they are reluctant to buy paper they are unable to put to the fed or unwilling to buy rates below rates they know they can sell to the fed and some of the other dollar funding programs we have seen. That is why one of the last things the fed will end up doing is lowering the rate on some of these money market facilities in order to drop libor more aggressively. Libor this morning was around 1. 22 or so. Fed funds essentially at five basis points or zero. You have about 117 basis points spread in between where fed funds is and where libor is. That suggest there is a wide gap in terms of where credit is being able to be borrowed off of libor versus what the fed is setting its main policy rate. They need to lower the level on these facilities, and particularly on the money market facilities they have outstanding now. I think we will ultimately see that. In essence, the fed is sitting libor by keeping these facility rates so high and i do not think theres a lot of benefit they are providing by keeping the rate so high. In order to provide or direct stimulus to borrowers, the need to lower those rates. Alix great point. I could talk to you guys for hours about this. I wanted to also wrap in a longer term effect when it has to do with the treasury market. Thatsure you saw the piece came out this week about what happened in the treasury market in march. I am wondering how you look at everything we have learned so far about this crisis and the Crisis Response and what the results will be Going Forward. Are we going to see regulation on how much leverage a hedge fund can take on and how they use treasuries . What will be the outcome as we recover from this . Mark what we saw in march is something i will be studied for years by the regulatory committee. I think we will see changes. We will probably see more limitations on the extent of leverage that high beta entities can take in the treasury market. Youll probably see regulations that allow for a little bit more flexibility in terms of dealers and their marketmaking capacity , at least in the treasury market. We have already seen some regulatory tweaks the fed has been making with regards to things like the leverage ratio to that effect. One of the other interesting ideas that was floated that we have been discussing on our team it should there be a dealer of last resort. Should there be some type of official entity that can step in and help intermediate margins in times of significant stress beyond the primary dealer or the large dealer community. That is a question that will be discussed. Fair to haveely the official sector consider playing a more significant role in that space. Dealer,is serving as a but they are buying, they are not selling. Having an entity that can step in and provide more flexibility in ways the dealers cannot do to regulatory limitations, i do think that should be a part of the discussion. There will absolutely be changes down the line in quarters and years to pump. Marchk what we saw in will have a longlasting impact in terms of what the official sector and regulatory backdrop is in the years ahead. Alix great perspective. Always great to talk to you. Mark cabana of bank of america. Ge is saying they are withdrawing their guidance for this year citing the coronavirus. Theiree cash flow near guidance of 2 billion. Morgan stanley Ceo James Gorman says he has recovered from the coronavirus. He tested positive last month and now he tells the staff he has fully recovered. Coming up, more with the banks. We speak to Betsy Grayson of Morgan Stanley. Any charts we used throughout the show, check them out at gtv. This is bloomberg. Alix this is bloomberg daybreak. Im alix steel. Youre looking at the principal room. Coming up later, tom finke. Earnings. Wing its watch out for that stock. The bed throwing more kitchen sinks the fed throwing more kitchen sinks, 2. 3 trillion lending facility. They will continue buying some junk bonds for those companies that have recently been downgraded to junk and they will be dipping their toe in buying etf. There also protecting their paycheck Protection Plan. Betsy grayson covers betsy k covers betsy grasec banks for Morgan Stanley. It seems like banks will be taking on 5 of the wrist and the fed 95 . You think that is enough for banks to be willing to lend in this crisis . Betsy we would step back and morning, nice to talk to you on the phone. As it relates to the banks, they have been lending significantly over the past several months. There isshows Something Like a 400 billion increase in commercial Real Estate Lending that has happened since december. That folds in the commercial real estate and, the commercial and industrial loan categories. We have seen a lot of back lines getting drawn down, both from Public Companies as well as private companies. I do expect banks will continue to lend in this crisis. Alix how does that wind up playing in to how the banks wind up making money . On the one hand you have volatility, super good for trading. Then you are making all of these loans to Dangerous Companies for no margins. Betsy i would phrase it differently in the sense that it is not all endangered companies and it is not for no margins. I understand the question you are asking, which is in a crisis environment, do you think you will get paid back on all of this lending . As jamie dimon put it in his shareholder letter a couple of days ago, yes, some of this lending will be turning into risk. Some of it is helping companies shore up Balance Sheets, and there will be a mix. There is margin. The loan is not free. The question you are asking is what will happen too earnings as we move through the cycle and some of the line drawdowns being done will be paid back. Capital markets have been opening up on the ig in particular. I would expect to see the h y market open up as well. As we move through the cycle, there will be more loan losses which we have embedded in our forecast. Seconds, top stock pick in banks . Today theoutlined next cycle. Citigroup is trading at half book and we anticipate we should be able to generate a 10 rtc as we get through the cycle. You need more efficiency coming need to ramp up esg, european needs to put consolidation on the table, and the share shift is moving towards the u. S. Alix we will get you back, i promise. Of Morgan Stanley, thank you so much. This is bloomberg. Alix that does it for me at bloomberg daybreak americas. Mohamedp on the open elerian will be joining. Happy thursday. This is bloomberg. Tom good morning to Bloomberg Radio and Bloomberg Television worldwide. A special moment in this pandemic. Horrific news flow. A grim jobless claims number. Chairman powell be speaking in an hour. Critical meetings today from , and president ia trump looking at oil policy as well. , there mays pandemic be a struggle for the world bank and the International Monetary messagespeak, to find a to assist so many of the countries that are out there. The imf, 189 countries. It is not a spring meeting. The spring meetings are canceled. Nevertheless as imf moves forward, the messaging of what they will do to assist so many troubled countries in this crisis. We speak this morning for bloomberg with kristalina georgieva