Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240713

Find a bid. We wait for more gloomy Economic Data at 8 30. Time now for our market moving news from our new york team. We are going to start with oil. The iea says the outlook for oil demand has improved somewhat, yet it sees crude production on track for historic decline this month, at the lowest level in nine months. Annmarie hordern joined me now for more. Annmarie this report is still bleak, but slowly but surely improving. They had to say is that outlook for the oil markets are improving somewhat. Amanda little stronger than what they were expecting, but really, the big take away from this report demand a little bit stronger than what they were expecting, but really, the big take away is that this month is on track for historic decline, the most in nine years. This week alone, we saw the kingdom, the uae, and kuwait deepen cuts for june. The same time, the iea is looking at producers outside the group like the united eights that are just being forced due to supply and demand the United States that are just being forced due to supply and demand to scale back. Nearly all operators, they say, have shut in for unprofitable production. Irol wasth, fatih b talking about black april for the oil prices. He said the outlook is still very bleak, that the worst is behind us, but huge uncertainties remain. One of those uncertainties, whether economies can reopen without causing flareups of the virus, and how opec will implement the promised cuts. This fits to what matters at the june meeting coming up. Alix great analysis. Thank you so much. Lets turn to the broader economy, particularly in the u. S. The economy facing unprecedented risk from coronavirus if fiscal policy makers dont rise to the challenge. Fed chair jay powell pushed back on negative rates. Chair powell it is an unsettled area, i would call it. We know there are fans of the policy, but for now, it is not something that we are considering. We think we have a good toolkit, and that is what we will be using. Alix bloombergs Michael Mckee, International Economics and policy correspondent, joins us now. What was your take away here . Michael it seems if the fed chief speaks, people in the forex markets and the fixed income markets dont listen, because we so have the feds funds futures pricing and negative rates next year, but it is not just jay powell who is suffering. The bank of englands Andrew Bailey said they are not considering negative rates, but negative rates are priced into the forwards market in the startingngdom as well, in march of next year. It looks like the markets are fixing aid to are fixated on it and central bankers or not. What we dont know is what is going to happen next. He took a shot at trying to lay ,ut what could happen especially if congress and the Federal Reserve dont step up. He is more worried about congress. A long list of things that could go wrong, including household and business bankruptcies, longer unemployment. You lose small business, that limits the recovery. Basically, the long period of low productivity growth would mean low incomes ahead. While that was his worst case scenario, markets went with it, and weve got a threeday losing streak now. Stanck and miller druck and miller stan they see r saying now. U. S. , if it reopens carefully and slowly, could get back to the great economy it had before. I suspect that what we really got is something in the middle. If we open carefully, we may get back to growth, not greatness at this point. Best case, slow and steady ahead. Before we get there, we do have bad news. Ough the another thursday, another day of dismal releases. We are certainly down from the peaks of what we are seeing. The pain in the market continues, though. What we dont know, just how many have lost their jobs and how many are getting through backups in their systems. It is going to be a month of bad news, and maybe then things back off. Just how bad will be no doubt the question we are talking about in the next hour and a half. Thank you so much. Talking about news, Norwegian Cruise Line is out. Their stock is up by 3. 5 in premarket. They say adjusted loss per share from where itdown was about a year ago, to be expected. They see a net loss for the quarter, as well as the whole year. They are at reductions reductions. Apex the cash burn is also pretty 120, averaging between Million Dollars and 160 million per month. Up over 3 . Uck here is one other trend we are watching as countries like the u. S. And europe start reopening. So far, it is happening at a really slow pace. When people do go out, it is not actually to buy anything. Google mobility data shows the biggest pickup is in park visits. So lockup fatigue isnt leading to increased business activity. In mile, companies are still keeping employees at home meanwhile, companies are still keeping employees at home. Over theen consistent past several weeks, according to barclays. Anecdotally, i went into the Office Yesterday and there were, like, 10, 15 people. That was the max. Coming up, much more on your morning news, trade and analysis of the markets todays first take. This is bloomberg. Alix time now for bloomberg first take. Going to me from our inhouse team of wall street veterans and insiders, bloombergs Michael Mckee and Damian Sassower. Start with you on this headline we got from foxbusiness. President trump giving an interview with maria bartiromo, saying he is looking at Chinese Companies that trade on the Nasdaq Exchange is, but do not follow u. S. Accounting rules. What do you think . Damian continued deterioration of the china u. S. Relationship. We are seeing that reflected in chinas yield curve. We are seeing chinas yields rise at a pretty aggressive pace. Markets were expecting a lot of stimulus, and havent really seen it. Just the fact that trump has blocked a 15 billion investment into the msci all country index, which includes china, he constantly tweets out about the poor handling of the pandemic, really starting to resonate with investors. I think youre seeing that in Dollar Strength today. Some of the other safe havens getting bid up here. Alix it is a good point. How do you think the fed is thinking about this now . Michael i dont think they are paying a whole lot of attention to it. In general, it is going to be a problem for global trade, for the u. S. Economy, and the chinese economy, but it is hard to parse out individual things he is talking about. Mentioned blocking investment from the thrift fund into the msci all world. It does include china, about 8 is not aighting, so it huge amount of money. It is more symbolic. What i found more interesting about his interview this morning is when he said he is pleased the u. S. Has a strong dollar, and that he wants to harp on the fact that the u. S. Has a strong dollar because of course, for years he has been tweeting about how the dollar is too strong, and that it hurts the u. S. Economy, and that the fed should be lowering Interest Rates, and things like that. So it appears he has surrendered reality, maybe, and is trying to make a virtue out of what he erly saw as a vice. Alix damian, what did you make about that comment . Damian trump has always said a weaker dollar would trade well abroad, but with equities collapsing, he is going to basically harped on the strong dollar theme. I think hes going to point to that as the election approaches and use that is something he can wave in the sky. When all else fails, the dollar is still the king. Whether or not that changes the calculus for investors who had basically been hoping for a rebound in global trade and all of this kind of stuff, they might find themselves wanting that much more, so definitely think that is a notable sound bit out of some of his tweets overnight, for sure. Alix at the same time go ahead michael i just want to add, i think one of the problems the president has and a lot of people have is the fact that we weak forword strong and the dollar. Strong is good, weak is terrible. Nobody once to be weak, right . That is not really what the impact is. People get confused by that. A strong dollar isnt always the best thing, and a weak dollar isnt always the worst thing, as you know from dealing with oil prices. So i think terminology matters here. Alix also, strong against what is also a question. Strong against everything . We need to make that distinction, too. That is critical for em. Damian thats exactly right. The fact of the matter is trump, as we get closer and closer to the end of this year and the election is going to become more of a focus for policysetting both here in the u. S. And abroad, just look at where equity valuations are. We have seen a lot of heavyweights overnight talking about how u. S. Equities are the most overvalued since 1999. Hoarding cash and shorting commercial real estate. I mean, a lot of people are pointing to the fact that 12 months forward pe on the s p is the highest since 2001, so i think people are justified thinking that we have gone a little too fast on the bear market rebound. Alix what is interesting is that overnight, i really thought it was fascinating, south korea is going to try to create more than 1. 5 million jobs in the Public Sector as early as this month from things like protecting intellectual Property Rights to helping organizations organize documents, as far as the jobs program. It is not the only thing ive heard. Ive heard a lot of conversation anecdotally say and come doesnt the government just watching just government just launch a huge work program to fix everything . Michael not a huge jobs program, but some sort of Infrastructure Program that comes up over the course of this year, and may be if we get a new administration they can work something out, the idea of putting people back to work with Government Spending is the keynesian answer to a recession or depression. The problem is, it costs a lot of money, takes a long time to set up, and has a slow impact. Right now, everyone is looking for a quick impact on the markets. But if you can remember from 10 years ago, youve got to have shovel ready projects. It takes a while to get all of that ramped up. So it is not immediate stimulus, but if you do hire people, it is the same thing as essentially sending the projects sending people checks, and we may get to that point as well. Alix thats a good point. Didnt elon musk just go finish digging his las vegas loop . That was shovel ready. I kid. What do you make of . Will it help with the pandemic, etc. . Damian hiring and hours worked are obviously two different things. He saw south koreas Unemployment Rate rise to 4. 1 percent. I thing we see australia rise to 6. 2 overnight as well. For me, it is about capital. Hadley capacity utilization, i dont see that bouncing back anytime soon. Going to be very difficult, even though these jobs may be created. Just how much work is being done . How many hours are they being worked . I dont see it coming back online as analysts predict it. I think that is what powell was referring to yesterday during the press conference. Alix i did love the organizing documents. I dont really know how productive that its going to wind up being for some people. Lets get back to powells press conference. He talked about negative rates and the risk of going from liquidity into insolvency. What is the general reaction . It was surprising to the me that the markets still started pricing negative rates further out for 2021, despite what powell says. Michael this is a discussion among analysts over the last 24 hours, since jay powell said this. There used to be a feeling that you cant trust the fed on this because the fed, back in the temper tantrum days, said they were going to do one thing, the markets priced in another, and the fed backed down. You had jay powell over the last year or so, remember when jay powell was an idiot who couldnt communicate in december of 2018, 2019, and the fed had to back down from its plans to continue 2019 . Thetes into market seems to have the view that if we say it, they will do it eventually. At some point, the fed has to say no and withdraw this idea. This may be the hill on which the fed is going to die because they really dont like the idea of negative rates. And a lot of people in the markets dont like the idea, but if you are trading that, youre going to try to push the fed as far as you can go and see if it happens. Alix can we play it out for a second . Say we go 10 bips. Jp morgan says in the short term, that could do some good stuff. What does that mean . What do you think . Damian negative rates are clearly bad for banks in the u. S. , but i have to say, and a market like this, i, quite frankly, think investors should pay for the privilege of housing their cash with viable institutions. Liquidity issues are going to turn to solvency issues. You should pay for the privilege of housing your cash and your bank. At a aaarated personally, i think the fed appears to be fighting gravity. I think negative yields are just yes, dont get me started on this whole thing. I could go down the wormhole as far as you need me to go. But i think it is very difficult for the fed to defend the line in the sand, and the markets are going to continue to press the button is hard as they can to see if anything snaps. That to me is a real risk. Is a past toere emerge from it, i think that is what the markets are really delving between. Is this going to be a shortterm hedging number . That all remains to be seen. But the closer we get to the zero lower bound, the closer it becomes to reality. Aix can we talk pros for second . Michael that is the debate. As jay powell said yesterday, the research is really mixed on this. Have we seen any significant additional growth in europe or japan since they went negative . The bank of japan went negative, and then went positive, saying they hadnt seen a whole lot of development from it. In an environment without demand, pushing people to spend money instead of save doesnt really work, so they dont think they will get much out of it. The other thing, jamie dimon can survive negative rates. It is the money market funds. The funding over the overnight or weekly commercial paper markets, things like that, if the money markets cant make any money, if they have to pay for the privilege, they are not going to do that. Then you have a real breakdown in the financial system. So the fed is not going to do this unless they were under extreme pressure, maybe depression like pressure. They will try qe first, and they will do and they can do unlimited amount of that. Yield curve control, that kind of thing. One thing is at the next meeting, we are seeing the Interest Rate on excess reserves trade really, the effective fed funds rate, trade below the excess reserve rate. They may change that rate a bit to pull it off the floor. Alwaysaising that ioer, have to talk about that as we head into these meetings. Really appreciate the conversation. Any charts we use throughout the two hours, go to vtb go go to gtv. This is bloomberg. Ritika this is bloomberg daybreak. France says it is an acceptable that sanofi would give the u. S. Priority if it developed the coronavirus vaccine. Toldrench companys ceo bloomberg the u. S. Will likely be first in line because the country was the first to fund the research. Sanofi is partnering with gsk over the vaccine. Filed for bankruptcy protection to raise cash needed to prepare its spectrum for a u. S. Government auction. Collectt may be able to 5 billion for giving up control of airways that could be used for the new 5g mobile services. Airbus is preparing for permanent job cuts. It has warned labor unions in germany, france and spain that it needs to rein in production. The number of jobs to be cut has not been decided. The coronavirus outbreak has killed demand for new planes. That is your Bloomberg Business flash. Alix thanks so much. If you took a look at other companies resizing its business, one really stood out, the Parent Company of the 1 trillion nuveen fund. It is offering to buy out 75 of u. S. Employees. Said they are offering between 41 to 95 weeks of salary and 100 of last years bonus. The situation bears close monitoring for investors because of the chance for experienced fund managers, like the older generation, to actually leave. Coming up, volatility has come too far, too fast. That is the word from Amy Wu Silverman of rbc. What do you do with it . How do you hedge . We will break all of it down. This is bloomberg. Alix welcome to bloomberg daybreak. Im alix steel. We have seen the worst threeday selloff since the end of april, and that is spreading today. We tried to get a risk bid earlier, but that didnt work. If you take a look at the twoyear u. K. Gilt yield, they are negative now for three consecutive trading days. You did see the boe governor Andrew Bailey say we are not looking at negative Interest Rates, but still looking at increasing bond buying program. That yield still in negative territory. Here in the u. S. , some safety buying in the long end. You see yields moving lower, and oil trying to stabilize as we eke out any kind of supply reduction, but demand is still the overwhelming issue. Overall, the stock market has held up incredibly well since the end of march. That is having some big investors sounding the alarm. Says riskerenmiller reward is the worse he seen hidden his career, and the list worst he has seen in his career, and the list goes on. Joining us is Amy Wu Silverman, rbc capital markets. Is the Options Market pricing in any of that jitter . Morning, first of all. It hasnt, and the fears were very high. That is actually common, and that has actually come in pretty quickly, and in my opinion, probably to quickly. What has been interesting the whole time to me is that all i am talking about is the front end, but the long end of the Options Market, how uncertainty looks in the future, has actually been very sticky. Thiske away from this is longterm nervousness is still there. We are going to be looking towards the end of may to get the full data on remdesivir. I think that is an important catalyst. How retail earnings do now because they are a very high yielding portion of the earnings market, that is going to be a big deal. But throughout the whole thing, the Options Market has remained pretty nervous in the nine to 12 month bucket. Shortterm, how and when does that rerate . Is it going to take retail earnings for the short end to move . Amy amy i would be watching those, and i think this is a Good Opportunity because option prices on the front end, just to give you two stats, from april 1 two now, the front end has dropped 30 volatility points. So that front end has come in very quickly. Now we have two key catalysts to , so if you are owning volatility now, i would say that shortterm one, especially ahead of retail earnings, could be a really interesting place to place shortterm hedges. Alix on a sector basis, where are the cheapest places to buy protection . Are you seeing on a sector basis any difference . Is anotherow, this point that i think is interesting. I am just using the sector etfs, but the parts that have come in the most are actually , and thene financials s p. If you think about that, most of the underperformance has been there. Then spy,me in, and and then qs. So all of your tech has dramatically outperformed because of faang, but the place where volatility has come in the most has been in that smallcap and value bucket. However, that is probably where your beta is still going to lie rather than the new covid utilities, which is faang. Alix talking abouts and for a second talking about faang for a second, obviously, we can understand why they be more covid proof, but they still need to sell their services to companies, and those companies are getting hurt as they provide services for consumers, and consumers obviously cant do anything. Is it time to look at protection from that perspective, or not . Amy i think the answer is yes. Gets drawn out, the more you are going to start to feel that despite the powell put that placed into the market, one thing that we saw the last few weeks going into all of the faang earnings that i thought was really interesting is this overwhelming call exuberance. Normally in the Options Market, call options are lower than put options in terms of their volatility because most people are long stocks they are hedging. I would say five out of the seven faang names, that wasnt true. So you actually had called implied volatility levels bid over put volatility levels, which shows you how much call exuberance there is. The only other stock i ever see that for his tesla. It just tells you that they almost reached this cultlike flight to safety, this is where people go when they have no idea what to do. Advantage ofking that. You can sell that at a greater level to fund put protection then you could at any point in history. Amazon, for the First Time Ever during the covid crisis, its implied volatility levels went under the s p, the first time it happened in its history. Alix interesting. Those are some really interesting comparisons. I guess also what helps to insulate tech is it is unrelated to what Central Banks are doing, which leads me to what Central Banks are doing. You dont fight the fed. That has been the mantra for years. Now they are buying Corporate Bond etfs. I wonder how that is playing out in the Options Market. Amy that is something we have looked at very closely. Tuesday, the fed basically started its secondary facility to purchase etf. Just the fact that these words are coming out of my mouth is kind of crazy to think about. You know what i thought was interesting . . Hyg, if you about read the fine print, the fed basically put in the highyield portion almost as an afterthought. It basically said, look, we are supporting ig bonds. We are supporting the specific ig bonds that have fallen to fallen angel status, but only in the time period, and we might buy highyield as well. If you look at the rally that happened after the fed announced that, hyg had the biggest rally it had had this month. Now the facility has started, beginning on tuesday, and you have seen three days of hyg selloff, and the Options Market has become extremely bid. So the very low delta puts have got very steep. We have actually been pitching put spreads, so essentially saying, look, of course, dont fight the fed, but if this doesnt work or isnt seeming like it is working and goes pearshaped quickly, you are getting very good payoff on the downside now. Alix really interesting. Wrapping up with one more part, the dividend and by backstory. Buybacks,e buying for that is in question. Talking about more dividend cuts. How does that play into your overall thesis on the market . Person, onelatility thing i have been looking at what isefully is just fair value on the vix and the vix curve now. I think volatility is a mean reverting asset. That is what all the textbooks say. Isone nervousness about that we are looking at the past 12 years of a bull market where a record rate of buybacks has dampened volatility because when theres buybacks in stocks, it dampens downside by offering an artificial level of support. I think 80 of companies during the last earnings have essentially said we are suspending buybacks and capex, and dividends are next. The people are trying to defend their dividends, but if they cant, chop the retail leg off the markets. Amy, good to see you. My last question, how much my little pony have you watched now . Amy oh, we have moved on. [laughter] alix amy and i both have fiveyearold girls, so we have a deep appreciation for disney cartoons. Amy, good to catch up with you. Amy wu silverman of rbc capital markets. Onwant to give you an update headlines outside the business world. Heres ritika gupta. Ritika President Trump again exposing his unhappiness with china. This time it has to do with Chinese Companies. He tells foxbusiness he is looking at chinese firms listed on the u. S. Stock exchange on the New York Stock Exchange or nasdaq that dont follow accounting rules. The fbi has reportedly seized the mobile phone of the chairman of the Senate Intelligence committee, richard burr, according to the los angeles times. Burr and other senators sold holdings this year after a closeddoor briefing on threats from the coronavirus. The International Energy agency sees the oil market improving. The iea says demand is a little strongerthanexpected. Meanwhile, supply has been reined in by a brutal price crash. 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 ritika gupta. This is bloomberg. Alix thanks so much. Coming up, how the pandemic is affecting middlemarket companies, and particular, retail. We will speak to the ceo of a private equity firm specializing in those businesses, so a good read on the sector. Elias sabo of Compass Group diversify holdings is coming up. For anything you missed. Scroll through, check out directly. , message us tv. This is bloomberg. Berg. Alix no doubt one of the hardest hit areas during this global lockdown is apparel. According to Analytics Firm global data, the Apparel Market could see a decline of as much as 297 billion. For more insight, joining me is elias sabo, Compass Group diversify holdings ceo, codi. Wise known as elias, good to see you. For earnings, you are looking at a really rough second quarter, but see a bounce in the third quarter. What kind of recovery does that need to get to your goal . Elias thanks for having me on, and good morning. In the first quarter, and guided for second corder expectations, with most of the country shut down, it was expected to be a really tough quarter. We have five Consumer Product businesses, including one that is an on the channel retailer, so there were some muted expectations coming into the second quarter. By and large, the portfolio has held up better than anticipated, including on our 511 asset, our omnichannel business. You said apparel was expected to fall quite dramatically. In this case, the company has an orientation toward readiness, which i think is really helping. It is a First Responder brand, which is doing considerably better than the overall market during this period. For us, what our expectations are, we think q2 will likely be the worst, and as the country starts to reopen, seeing it now and states that a reopening, we think q3 has a pretty considerable balance, and from thereon, it should be a more steady progression forward. Alix you do a lot of specialty retailers musso it is not a broad thing like jcpenney or macys. So when people actually have money and they can return to work and go buy stuff, are they really going to buy Something Special . How do you look at that . Elias you are right, we do not like broad line retailers. Specific,ghly specialty retailers. If you look throughout our portfolio, all of our brands are generally enthusiast brands. We think those hold up much better, especially in downturns like this, and will be poised to come out. I think three of our businesses in the consumer side are more of a readiness positioning, like liberty safe and 511. Those companies we think will do really well because of the positioning that they have. But in terms of whether retail demand is down, we do think it is. We think there is a major shift occurring right now. We see a huge shift toward online. Obviously there has been a macro wherefor many years, retail has been moving from in stores to online, and now we see the integration between online and instore being more powerful than ever. I will give you one specific data point, just to illustrate this. I keep coming back to our 511 brand. , moste roughly 60 stores of which were unlimited hours, only serving First Responders, and we have ecommerce as part of our direct to consumer channel. In april, we said to the market on our q1 Earnings Call that our ecommerce business was running up north of 100 euro or year of 100 yearoveryear. So i think retailers that are navigating and integrating technology and have more seamless interfaces between both ecomm andboth their instore are going to succeed more than those that are just instore, that are going to really struggle. We think you do have to have some type of strong brand positioning in order to attract those consumer dollars in what is going to be a relatively tight retail market. Alix and we can see that with jcpenney. We are inching closer to bankruptcy. You recently raised some cash in equity, about 88 million in common stock and about 202 million in bonds. Part of that is to strengthen your Balance Sheet, but also look for strategic opportunities. How quickly do you deploy the cash . Where do you deploy it . Elias thank you for bringing that up. Last week, we were really happy to raise 290 million. Without the pricing was really favorable. On the bond raise, we actually raised it at higher than where we have raised our initial bond two years ago. So market reception was really strong. I would say this is where our model really shines, in that, compared to traditional private equity, we think a lot of m a activity, the time when you want to be a buyer is when prices are declining, as they are right now. ,or traditional private equity it is contracting right now. For us as a publicprivate equity vehicle, our access to capital has remained relatively consistent, and we were able to access the markets. So we have incredible amounts of capital, especially relative to our market cap. We have about 1 billion availability today. Our market cap is about 1 billion. Just to give perspective about how much we have that we are that weput to wor are able to put to work come our Balance Sheet has never been stronger. We feel really advantaged in this marketplace. That being said, risk is really high, and understanding nings profile now and Going Forward in a post covid world is really a challenge we are all dealing with. So i think it is probably going to take a little bit longer. The m a markets are mostly frozen right now. They will start to open backup. I think companies that have liquidity issues are likely going to come to market sooner than those that are healthy. But as companies are coming to market, we can assess that these companies are built for a post covid world. We think over the next 12 months , there should be some great opportunities to money to work for our shareholders. Alix last question here, if you can give me some insight, your openings of Stores Friday and next week. What are you doing . How have you had to revamp your workforce . What is the number one thing you are doing . Elias the good news for 511 is that we were able to keep all of our stores, virtually all of our stores, open through this entire time. Our business was deemed essential because we are selling to First Responders, so police and fire and Emergency Responders just broadly are in need of the products we are selling. So we restricted access in our stores only to First Responders. We had a limited number of hours, and we really reduced what our Staffing Levels were. We installed a lot of safety procedures, plexi grass procedures. Registers,round cash practicing social distancing. There are a number of protocols and guidelines that we have started to implement, and we have had a running start here because we were operating during the pandemic. So as we reopen, it will be reinforcing a lot of the same rules. What is most important to us, and i am sure every other ceo will say the same thing, the health and safety of our workers comes first. The safety of our workers is of paramount importance, so it will be a process. We think for most stores, we will be operating significantly below what our capacity levels are in order to have more social distancing. Elias, thanks for the perspective. I appreciate it. From pe, we are going to within the next hour. Coming up, the global pool of negative yielding debt once again on the rise. We will talk about it in todays traders take. This is bloomberg. This is bloomberg. Alix time now for traders take. Damian sassower is joining me. Negative yielding debt, thats what youve got. Damian did negative yielding debt is once again on the rise, and pulling down the yields investors can expect from global bond funds. Obviously, the u. S. Is roughly 40 of the Bloomberg Barclays global ag. The pool of negative yielding debt is now up to 20 of that. It reached a high in august of 2019. This is indicative of what we were talking about earlier. I think we are at alltime lows on the 5, 2, and 10 years. You will see this rise because the u. S. Is such a big component of investable bonds globally. That is what we are focused on here today. Alix as my daughter likes to say when she doesnt want to hug me, social distance, mom. Sin kind of deal. Amy and sass hour of Bloomberg Intelligence Damian Sassower of Bloomberg Intelligence, thank you for joining us. This is bloomberg. Staying connected your way is easier than ever. Youre just a tap away from personalized support on xfinity. Com. Get faster internet speeds with a click. Order xfi pods to your home in a snap. Or change your Xfinity Services with just a touch. All in one place. Youre only seconds away from all of that on xfinity. Com. Faster than a call. Easy as a tap. Now thats simple, easy, awesome. Alix welcome to bloomberg daybreak on this thursday, may 14. Im alix steel. Lets take it right from the top. The International Energy agency says Oil Production is collapsing as global supplies are set to plummet by 12 Million Barrels of oil a day, or 12 this month. Still bleak, but slowly but surely improving. That was the message from the iea. You can see that reflected in the oil market this morning. Wti and brent are up more than 4 . Alix demand for the year is still set for a 9 decline. For the market, the question is can Oil Production fall has to than demand is falling . Opec says excess inventories will begin june. Will peak in june. Pres. Trump our country has got to get back as soon as possible, and i dont consider our country back if schools are closed. Alix meanwhile, wall street heavyweights sound the alarm on valuations in the economy. Some analysts agree. How long is it going to take for the level of the economy to get back to where we were before the virus . The markets say that aint no v, baby. Alix this comes as officials are still trying to pave the way forward for reopening as the world still waits for a vaccine and reliable test. Roches test is now cleared by authorities, and sanofi says it would give the u. S. A priority on a vaccine, drawing heat from the french government. Chair powell we think we have a good toolkit, and that is the one we will be using. Alix fed chair jay powell pushes back on negative rates again. Powell says it will take some time together momentum, and warns that the passage of time can turn the quiddity problems into solvency problems turn liquidity problems into solvency problems. Michael it seems that if the fed chief speaks, people in the markets in the forex dont listen because we still have negative rates priced in the fed funds futures market. And unemployment is likely to reach or exceed 20 . In the markets, heres where we are at. It is definitely a risk off tone, much more pronounced in europe than in the u. S. , but you did have a couple of ugly closes for the u. S. Equity market. You have equities down by the most since the end of april. In other asset classes, i want to highlight what is happening with the dollar. It is stronger, echoing comments we heard from President Trump on foxbusiness, where he says he likes a strong dollar, and it is a great time to have a strong dollar. Very different from what he has said in the past. He also talked a lot about ramping up conflict more with china, saying he wondered what would happen if he cut ties with the country. You are seeing a selloff in the bond market in europe, but more of a bid in the u. S. Lets talk about whether or not we are going to look at a v, a u, w, or l. Morgan stanleys chief u. S. Equity strategist mike wilson wrote, we remain firmly in the unicorn,cause, like a ushaped recoveries coming out of a recession dont exist. Mike joins me now. I have to say, my daughter wasnt thrilled about the unicorns dont exist comment. Putting that aside, walk me through your rationale for a vshaped when it is hard to find anyone that can substantiate that from the data. Mike part of this is just the simple math of it. Clearly when you have the kind of decline we are seeing, the rate of change is going to appear to be a v, even if we have a relapse later. Lets talk about the alphabet soup we are in right now. L we think an l is off the table because of the stimulus we are seeing up amended. Theres not going to be a flat recovery and depression outcome, so that is off the table, we think. That leaves you with a v, a u, and a w. Firstall, av and a first ofand a u a u a w looks like a v and until you get the relapse. Alix i wonder, when you are looking at the data, is it the rate of change or the level that you are paying closer attention to . Mike it is both. For now, it is rate of change because youre starting from such a low level, and that is what the market is focused on. That is why the rally has been so steep. Now we are getting into the tougher part of the equation, which is, great, we are having a recovery. We know that. How far can the recovery actually go . Can it be sustainable . We dont know the answer to that. Nobody does. But history would suggest we have probably at least 12 to 18 months of runway before we have to worry about that relapse. Even if theg that levels are still low, the rate of change will actually stop being so dramatic, and therefore that is a more positive indicator of vshaped . Mike well, the reality is because we are starting from such a low level, you have a long way to go before you have to worry about getting back to where we were. So we think we can get the economy in the u. S. Back to where we were by the Fourth Quarter of 2021. That is a lot faster than what happened during the great financial crisis, but it is still a long way away. We have a huge hole to fill from this recession for the next six quarters before we even get back to where we wear. That process is what the market is trying to digest now, and trying to figure out how fast does it take us to get there, and what does it look like from that point . Right now, because the rate of change is so steep, the market is looking forward and betting on revisions bottoming and estimates are going to have to start coming up again in the back half of this year. Alix how do you play it from along the mediumterm to shortterm basis . Weve heard from a lot of earlierghts i mentioned just the idea that we are so overvalued, they are much more pessimistic on the economy. If you dont bet on civil close now come if what you say is right and we dont bet on cyclicals now, you will miss the opportunity. Mike i think it is a little ironic to say the market is so overvalued today, but wasnt overvalued in december or january. We didnt hear a lot of folks talking about that. We were at the time saying that without the market was overvalued. The difference is obviously we are in a recession now. Back then, we were not. We also have 4 trillion of fiscal stimulus staring at us. I think the chance of us getting that back in december and january was zero. Obviously we didnt have recession, but also, politically it would be difficult to imagine. Because this is a health crisis, because there is no governor of what we can do from a fiscal or monetary standpoint, we have more growth impetus in front of us for the next 12 to 18 months because of the stimulus. That makes the market look a little bit cheaper today from our standpoint then it did back in december and january. The way we measure that, rates are lower. The stimulus is enormous. The risk premium youre getting paid is higher than it was at that time. I can argue the market is cheaper today than it was in december and january, but that is not consensus. That is not the consensus view. Alix lets separate to sectors lets separate two sectors, the faangs and tech. You can argue that they sell the stuff to the players that are hit, and they sell to consumers, so that is one. Second, banks have really gotten hit. Reservesy need to have so they can lend more. How do you think about those two . Mike from our standpoint, as we exited last year, we thought the barbell that made sense was to be long quality and defensive securities in the equity market. That is a classic late cycle playbook. Now all we are seeing is quality is always a good place to be. Quality stocks tend to work. Now what we want to do is shy away from those defensive areas and move more towards cyclicals. Because we are in a recession, that is what youre supposed to do. The recession we are in now, the last expansion, the excesses for concentrated more in the corporate sector, and Corporate Credit in particular. The Consumer Sector remain under levered, so we think that they rebound will be more centered on the consumer as opposed to the beneficiaries. That would include some of the hardest hit areas. Banks are unusual, and it is an interesting part of that as well. Clearly rates are low, and that is what is weighing on bank stocks right now. We think the curve will steepen. The question is, how much can it steepen if the fed is buying they are buying. Could the yield curve start to deepen more as we look out to 2021 nc real gdp resurgence from the rebound that we are getting . That is when the bank stops could start to work, and that could happen over the next the bank stocks could start to work, and that is what we see happening over the next three to six months. Thank you solson, much for joining us. Coming up, we will speak to alan patricof, greycroft cofounder. Hes been in business for about half a century. Is coming up next. This is bloomberg. Alix time now for our what comes next series, where we see what economies and industry voices see how the pandemic will forever change things. Joining me now is alan patricof, greycroft cofounder and chairman emeritus. He helped build and Grow Companies like apple and office depot. It is a sincere pleasure to talk to you. The biggest question for you, what are you doing differently today in the vc landscape that six months ago, you were doing very differently . Alan first of all, i am operating from home. That is a big difference. Second, i spend probably 3 4 of my day on zoom calls like i am with you. But what hit me with a hammer in early march was, for the first time, we are going to be looking have noties that we met facetoface, and this is a very personal type business. This is not like you are in the stock market, where you buy and sell stocks and change your mind. Once you have made an investment in a Venture Capital company, you are a partner essentially. I look at the future and say we are going to become partners of companies in terms of new investments that we will not have met facetoface. We will not kick the tires and visit their facility. They are going to have to depend to a much greater extent on the kind of Due Diligence work we have, and that depends on being able to find other people wherever they may be located that will be able to give us some credibility about a company or the product. I would say it is going to put a greater emphasis on the kind of people we will be backing, how much their team has worked together before, how they have melded, what their backgrounds have been. So theres going to be a different depth that some point, whether in june or july or august or next fall, we are actually going to be doing for the first time. So i think it is harder. On the other hand, theres a lot of buying in the venturecapital pools, and investing is not stopping. Ofyou read the sources venturecapital information, every week there are new deals being done. , closed a deal just this week my fifth investment in the podcast area. I virtually dont know the founders. Alix that brings up a good question of what kind of deal are you doing in terms of what is different. You mentioned things like if the founders have worked together before, that becomes maybe more important. Im assuming maybe their Balance Sheet or revenue model or how they are structuring might become more important since you cant meet facetoface. How does the type of deal you are buying how is the type of deal you are buying right now different . Alan honestly, i dont think they are that much different. I think the way you make the invest effort i think there will be a much greater emphasis on artistic Portfolio Companies because it will be a lot easier to make those kind of investments. You will have had some Empirical Data to deal with. They have probably further advanced their growth, and you have that. You have experience and something about them, so if they come back to market and they b round, yound or can certainly feel more comfortable and invest with less concern of not having that personal interaction. But i think that in terms of the kinds of deals, i dont see any change. We have been very active in the insurancein technology companies, in the Real Estate Technology area, that is kind of a new area had been developing over the last year or two. I think those are areas that, particularly insurance in general, Health Insurance and Life Insurance particularly, will do well in this world of financing. I have spent a lot of time in podcasting. , started two years ago gradually meeting various companies. We have a full portfolio in that area today. Podcasting is doing quite well in spite of the fact that people arent traveling as much. They are still listening in addition to viewing. Alix no doubt. What about valuations, when you talked about having to put more funding into companies or looking for opportunities . You can understand it, but it is strange in this environment. It is hard to become number because every day, the market is up 400 or down 500 or worth on thousand down 500 or 1000 or whatever. But if an entrepreneur is out raising money, they are out for at least a couple of months. It does not happen overnight. Lets assume a Company Started raising money in the early part of this year, january, february, and early march. And they got hit with the aftereffect of the pandemic. They had a certain idea of what the valuation was going to be, and you can still have a conversation with them and say, look, the market is down 35 . The valuation you thought you had at that time, your comparables are down. The market is down. You have to adjust your thinking. Say it had they will nothing to do with me. This is the price i am looking for. It is taking them a longer period for that new mindset to take hold. Holds up at a cliff, and then it will drop because the reality of the market will take place. I think the smart entrepreneur doesnt get hung up on what old pricing was, and is realistic about what new valuations should be. So in general, i would think valuations should be coming down for early stage to reflect the market, the copper market. At the end of the day, private companies have to sell on a couple basis on a comparable basis to the market. Alix how do you value but a when you worth literally dont know what the world will look like in six months . Alan you ask a very good question. First of all, i think you want to be investing now in companies that you think can survive with enough money to get through this period, as long as it may last. That means if you are raising for an 18 month raising for a 12 month period, you should now be raising for 18 months or two years. Secondly, one of the things coming out of this is people are staying more at home. That is why you are seeing enormous excitement around zoom and peloton and slack. They are all names that they are very familiar with, and they bid them up perhaps to unsubstantiated values, so they know the names. I think companies that are designed for people at home working in place are companies that are going to get funded here because people are going to relate to the potential that now exists for those type of activities, things that are in and around the home. Exercise activities around the home. Theres no question that after this, and who knows when it is going to be true, our lifestyles are going to be changing. I dont think theres any question that people are going to be spending some of the work ,e got home, if it is possible for day workers, hourly workers, people on assembly lines. But it is going to effect enormous what skyscrapers are going to have to do in terms of prices they are going to have to charge for rent and what the. Omposition is going to be i think retail is going to have to change. Obviously, we are seeing an enormous wave of ecommerce, and anyone some of and anyone involved in the supply chain is going to do quite well because of an even greater emphasis on remote buying. Alix we only have about a minute left, but i was curious to talk about how we are changing. Are there companies that were getting a ton of money before that you feel like wont anymore . , fort imagine uber example, raising the kind of money it did before in this environment if they were a startup. Alan you are exactly right. If you are involved with anything to do with travel, anything to do with resorts, airlines, hotels, resort adations, i just heard an the other morning when i was driving around my home for some company that buys or helps you get yourself out of a timeshare commitment that youve been in, because how are you going to use her timeshares . You are certainly not going to use than the next several months. So those companies are not going to be able to raise money. But there will always be investments. We are open to buying every day as an industry, and entrepreneurs see what the markets are. I have been very interested in the subject of aging are you now it is aging in place. But the whole products, allices, experiences, activities related to aging are going to have enormous opportunities. It is a great growth area coming up in the next 10, 20, 30 years, so i am going to be looking more in that area. I think there always seems to be something new on the horizon, theVenture Capitalists are first ones that see it. Alix really great to get your perspective on the world and how you see it. Greycroftcof, cofounder and chairman emeritus. This is bloomberg. Alix almost 600,000 workers have lost their jobs since the outbreak began in clean energy, more than double the number of positions created since 2017. Nearly 18 of the industrys workforce has filed for on and plummet benefits in march and april alone. Two of the for Unemployment Benefits in march and april alone. Two of the hardest hit states, california and texas. That leads us to initial jobless claims out in a few minutes. Ceo of speak to the nonstick coatings. This is bloomberg. Alix this is bloomberg daybreak. Initial jobless claims coming in and 30 seconds. A risk off day developing. In the u. S. We are rolling over. S p down 22 points. A stronger dollar story. The outlier is the oil price, which is up on the iea report. Not enough supply upset demand, but that is a different story. After twoequity feel rough days to the s p. Looking at import prices, they are coming out and reaffirming what we already knew. But disinflationary trend within the market. Import prices down 6. 8 . The export prices off 7 . We are still waiting for initial jobless claims. The expectation was for 2. 5 million. That would be less bad. At 2. 8 9 million. Worse than estimated but still down sequentially as we try to suss out, have we reached the worst part of the unemployment picture. Typically we wind up schlepping off all bad data. S p futures are off 22 points. We will see how the market digests this. Me to breake with down the data. Your reaction to the numbers . Michael this is not particularly good news because the number is significantly higher than we anticipated. It may mean states are catching up on backlogs of jobless claims, or may be more people are filing jobless claims. It is hard to disentangle the two. I am looking at the continuing claims number. That did not rise as much as we thought it would. It was 22,647,000. Tot was revised lower 22,377,000. All of that means there are not as many people getting checks right now as we would anticipate. If you add up all of the jobless claims, the initial claims, you are over 36 million. There is a missing component. People who have not gotten checks or people who have possibly gone back to work because of the Paycheck Protection Program has allow them to be rehired. It will take a long time for us to sort all this out. In the meantime, all we can do is look at this and say things are still bad. While we have come down, we are still experiencing the results of a terrible recession. Alix they are still bad, maybe just not worse. We can look at that way. S p futures off 23 points. I also wonder if you have the risk off field, how much the rhetoric over china and the u. S. , President Trumps interview this morning also played into the market, trading heavy when we seem to be digesting economic bad news relatively well. There is a lot going on. Got investors that say the market may be overvalued. A lot for investors to think about. You may wonder wonder the china thing starts weighing in on markets. The president with a lot of commentary on how the relationship with china and his own personal relationship with xi jinping has gotten worse, and yet just yesterday he was talking about how the chinese are starting to buy the things they said they would buy. To they respond to the rhetoric the reality, and does the reality continue . All of that is something the market has to factor in. Alix thanks for breaking it down of me. Bloombergs Michael Mckee. Joining me with the big review of the jobs market is ravin gandhi, nonstick coating founder and ceo. The Company Provides coders for the world against makers of pots, pans, and bakeware. Let me start with the job picture. For your company, what have you done, have you hired, have you furloughed, have you fired, can you give me an insight . Ravin i am proud of the fact that we have not furloughed anybody or fired anybody because we have a large operation in china. We were the canary in the coal mine. We started to see this virus would be a bigger story than people realized so we put a furlough on hiring at that point across our various locations. At the moment we are expecting to not do any hiring until the end of q2. At that point, like other businesses, we will reassess the economy and then see if we will change our policy. Alix something ive been concerned about is a second wave. Companies reopening and bringing back workers they have furloughed, and then they realize the business is not there and have to do a round of firings. What kind of economic forecasts do you see that puts you in that level or avoids it . Ravin year to date we are down about 30 yearoveryear. That is ironic because we have my Company Makes pots and pans, people are historically staying home and cooking. On the margin we are seeing decent demand. That is being more than outweighed negatively with conservative with our multibilliondollar clients not wanting to build inventory. It still put us down 30 . I am hoping we can claw up from that with q3 and q4. There is so much capacity with what will happen in this postcorona world. The other thing, and my industry specifically, with anyone who produces in china or asia, Global Supply chains have taken body blows because in terms of and then this virus new what was remaining this virus nuked what was remaining. We had a factory that was shipping, and a plant in india which is completely closed by law. I hope in the long run this does come out, and if so we definitely will be hiring again. Alix a flip question. If we do reopen and things are is 100 ts say demand tomorrow, can you meet the demand . How quickly will it take you to ramp up . Ravin we have a decent amount of working capital. We would be able to do that. We specialize in speed. I think we would be able to beat that scenario. That is a problem people would want to have. I am sounding gloomy, but in the aboutun i am optimistic the american consumer. If you look at things like amazon, it is at an alltime high. Americans like their stuff. The stock market is divorced from the underlying economy. I think that is a shortterm basis. I hope that in a short time the virus will seem like it was a long time ago and people will travel and go to restaurants. America has been through worse stuff. In that weis unique have never had this kind of pandemic before. Now there are more rumblings about china and the u. S. In terms of the issues and harsher words from President Trump. Do we see a resurgence . Are you keying into that more . How do you see it . Hown i have spoken about the tough rhetoric over the last 12 to 18 months has led a lot of people like my american clients to move out of china to places like indonesia and vietnam. That normalized when the president said we had this phase i deal. I have not seen anything on the margin to give you a reaction to anything in last few days about if his rhetoric had changed. Januaryfrom thinking in if we were ever going to open our chinese facility, and by midmarch we were up and shipping. , myself like so many other people would like the series of zoom and video calls. We do a lot of calls with american buyers, with 10 or 20 people from china on the line, and really the virus is not even discussed for the last few weeks. People are talking about projects and meeting demand and shipping. In that sense it is good because it starts to feel more normal as opposed to a lot of these huge fears we had about china. Alix in terms of any cash flow issues, how you look at the stimulus we have seen out of d. C. , the payroll protection program, are you participating in any of that . Ravin we are not able to participate in ppp because we are too large at my company was acquired by a large multibilliondollar corporation a couple of years ago. We are not specifically taking it. Tech startup investor, so my admin three or four deals were Tech Companies have raised figures from ppp. It is an amazing program. I hope that along with what the fed is doing is enough to get the pump primed. Alix really appreciate the clarity. Thank you very much for joining us. Ravin gandhi of g. M. And nonstick coating. We will see how the pandemic is changing the ways Eric Schmidts interview with David Rubenstein is coming up at 4 00 p. M. In new york. Coming up, funding corporate america. Leveraged loan prices falling to their biggest level in more than a decade in march. What it means for the clo market. More next with oliver wriedt. That is coming up in todays bottom line. Bloomberg users interact with the charts shown using gtv. Browse the features, check them out. Gtv. This is bloomberg. Alix initial jobless claims coming into. 90 8 million. Worse than estimated. Attinuing claims coming in 22. 8 million. For the market, digesting bad news is something they do often, however the s p is down. The dow jones is off about 300 points. Take a look at the bond market. Youre looking at a bit into the treasury market. The dollar gaining some steam as well. President trump in an interview talking about how he likes a strong dollar now. That playing into the market as well. Time for bottom line, where we take a look at companies in sectors worth watching. Today we will focus on leveraged loans and clos. Oliver wriedt, dfg Investment Advisors ceo and partner. The company is a credit firm with 6. 6 billion in assets under management. All of her, it is great to talk to you. Clos were hit really hard. They have recovered from their bottom. Leveraged loans, a similar story, but did it left out in the cold by the fed. Where you see the market now and where will it go . Oliver good morning and thank you for having me on your show. The market has gotten interesting. The Federal Reserve has addressed problems of liquidity. Problems of solvency remain. We are looking at a market that trillion since. 3 the great financial crisis. These lows represent more than half of that, and none of these structures were built for the types of downgrades weve been getting from both moodys and standard poors. We are looking for the next couple of months to give us better insight into how this market will ultimately absorb the title wave of downgrades. Give you anill indication of how the market is doing that and dealing with the downgrades . Oliver the downgrades are at an unprecedented pace. We have seen over 850 tranches being downgraded for review by moodys. Over 400 downgrade negative watch announcements from s p. Structurally, what that means is many clos will be unable to distribute cash flows to their equity or their mezzanine securities. Those cash flows will be used to buy additional loans or to pay down the senior notes that are financing these structures. We have seen this all before. During the great financial crisis, at the peak, 72 of all structures were nonpaying to their equity, and ultimately recovered. The big question is how long will this recovery take . That if aidea is structure cuts off cash flow, that will hurt, but then they can turn it back on. What will it take for the cash flow to turn back on and help an investment profile . Oliver it will hurt the investors in the most risky part by effectivelye having to wait on those cash flows. Those cash flows will resume once the economy comes out of recession. Recession,we are in and we believe the vshaped recovery is extremely unlikely at this point, just from the job losses we have seen. We are looking for structures that are going to be able to continue to stay current and pay their interest, and to the extent we are looking for higheryielding opportunities, will believe there will be many structures we believe there will be many structures that can withstand the downturn, and as the economy recovers and the rating agencies see reason to upgrade companies, we will enjoy the resumption of cash flows on those tranches. Alix are you deploying that capital in that purpose right now, or do you wait comment if you are waiting, where are you deploying the capital . Oliver we have been primarily active in the Investment Grade part of the capital stack. That has enjoyed a nice rally, largely fueled by the actions of the fed to approve liquidity in the markets. We have seen a resurgence across Investment Grade and nonInvestment Grade, and with some lag, the clo market has also benefited from that at the Investment Grade level. We are much more cautious when looking at nonInvestment Grade and Equity Investments within our market, and believe we will have much better visibility on how things will play out on the july payment date. , youre the meantime talking about Investment Grade. Are we seeing a lot of forced selling you will be taking a part of . How do you see that unfolding . Oliver there has been some forced selling. To the extent you can be the provider of liquidity, you can create fantastic entry prices and we have been successful at doing that periodically during the course of the last six weeks. We believe overall that the fundamentals are going to become more important than current market technicals. It be interesting to see whether there are weaker hands that will be unable to hold tranches that have been downgraded, tranches that are no longer current pay. We are expecting a much more interesting summer than the market we have been able to partake in so far. , which ist gets worse what you feel like you are saying, do you feel like the fed does step in . We will allow clos to hold a broader range of leverage loans to be used as collateral. Do we see more of this . Oliver we think the Federal Reserve and the treasury has been very effective at providing liquidity to the broader market. Of the minde fear of the leverage loan market is likely to be left out in the cold. The governments actions have supported the highyield market, they have supported fallen up program has some clo eligibility. Those represent less than 1 of the overall market. We are not expecting the start the support programs to meaningfully include the loan market or the clo market. We are underwriting all of our investments on the basis that we will have to work this out ourselves. Alix clos and leveraged loans have come under a lot of heat, saying they will make the recession work, a lot of these companies are over levered, the structure is not good. I am guessing you do not agree from the clo sector, but you think we have a backlash where we have more oversight and more control into the clo market . Clos are providers of capital to the loan market. It is hard to make clos responsible for some of the excesses we may have seen in the overall nonInvestment Grade market. Leverage is comparable to what we saw leading into the great financial crisis. There was some regulation that prevented banks from being aggressive lenders to our markets. You might argue to some extent the shadow banking market has stepped in. That is obviously unregulated. The clo market has done its share. Overall, the clo structure has been tried and tested during the Great Recession. Performance coming out of the Great Recession was fantastic. We believe the structures will hold up during this pandemic as well good it is a question of what do you by. No two bonds are the same. We are looking at a market that has grown to over 700 billion. There are 1200 clos to choose from. It is a credit pickers market. We are excited about being able to pick winners and avoid losers in a market where that skill would be richly rewarded. Alix thanks very much. It was good to catch up with you. Oliver wriedt of dfg Investment Advisors. The s p 500 jury is still out. We will look at some of the numbers next in todays technically speaking. This is bloomberg. Alix time for technically speaking. We are joined by Bloomberg Intelligence mike mcglone, who does commodity research. If youre looking at gold, on a weekly basis, as an indicator for where we are on risk on risk off. Mike yes. The market is a coiled spring. This is the fourth week in a row markets trade in a narrowing range. You can see in our chart we have the apex just ready to play cap. It looks like it will do it today ready to breakout. The 52 Day Moving Average has moved higher. The markets had one test in march. It bounced back. That is the son of a strong bull market. Alix what does that mean for the equity market. They are trading pretty heavy as a risk off day starts to develop. What are the charts they . It feels like every last few days we have on ugly closes. What do you see . Mike it is almost the exact opposite. The market has gone down below the moving average, if you look at the s p 500, it is a bear market, it needs to prove otherwise. At these levels, buying insurance and taking precaution make a lot of sense. The last time we got to these levels it took a long time to break through. Even it is bullish, this is not a level where we can get bullish. Alix great to catch up with you. Mike mcglone of Bloomberg Intelligence. That does it for me. Coming up on the open palm coat with jonathan ferro, Chuck Robbins coming up on the open with jonathan ferro, Chuck Robbins joins in. Initial jobless claims came in worse than estimated for the last week see you can imagine what the safe haven bid it is. Liar oil is the outlier. Yields in the u. S. Three to four basis points. Steamnd market picks up as we headed to the u. S. Open. This is bloomberg. Happy thursday, everybody. Jonathan from new york city for audience worldwide, good morning, good morning. The countdown to the open starts right now. 30 minutes away from the opening bell in new york city after two tough days on wall street. Could we have a third . Equity futures lower, near session lows, down 27 points. 1 . A classic risk off set up this morning with yields lower. Down on tens by four. We declined seven basis points. On foreign exchange, it is a stronger dollar story. There is the price action. Lets start with the big issue. We have a problem. Filing foron people initial jobless claims and just eight weeks and two of the most important policymakers in the United States of america cannot agree on what comes next. In many ways i call him my mip