Markets moved to the downside, Morgan Stanley at the Economic Team out with a note in the last few hours, talking about some of the risks. Markets as youhe start to see this payrolls turned back negative. What that means for the Downside Risk for the market at valuations that are by some measures full at this point. Romaine lets bring jim polson back. Upay, you see the nasdaq 100 0. 8 . Snp down half a percent. Down 2 on the day. Smaller, midcap cyclical names, that has kind of disappeared. That some of these names could come back anytime soon . Jim i think that whenever we have jitters about the virus reemerging, that creating a slowdown in economic reopenings , we will get the kind of today we got today where the market itself, great leadership by what is perceived as defensive investments, which is the new communications, consumer discretionary, that has growth outside of reliance solely on the economy. But i think we are in a new economic recovery and new bull market. Ultimately, i think the economy is going to improve. If it does come i think you will see those Broader Market areas. This thing shaping up a lot like 2000 where it is just being led by a small handful of new era stocks. I dont think that is true. Archlook from the low on 23rd, 2000, the s p 500 is up around 40 . But the equally weighted s p 500 is up a little more than that and the russell 2000 is up 40 . Rally,r the pull of this we have had much broader leadership in what people give it credit for. The market has pulled back since he june 8 high, generated more fear, and led to more defensive outperformance. Broaderwe will see parts of this pick back up and take leadership again. Caroline we got a glimpse of that with labor data today with the jobless claims wending a little bit that are than expected. We wish we had you for longer. That does it for the closing bell. Whatd you miss . Is next, where we will be speaking with kim seymour about our company is tackling diversity. This is bloomberg. Taylor from bloomberg World Headquarters in new york, i am taylor riggs. Caroline i am caroline hyde. Romaine i am Romaine Bostick. This is whatd you miss . Caroline once again, technology in charge. Nasdaq up 0. 5 . Lowerp 500 dragged to once again by energy, by materials. Concerns about covid front and center. Tactical, trumps victory on the tax returns. Blocks Asupreme Court courts bid for access to records but also blocking a house bid for release. Still, it is a Bleak Outlook for banks. Jobless claims fell by the most in a month but they are still double the highest level during the last recession. Bankruptcies and planned layoffs. All of that and more coming up taylor, you can paint a picture of how much we are seeing yet further bankruptcies. Many announced after the bell. Taylor it is the charts and data that pain is picture the most. Corporate and cropsey tracker rising the highest since 2016. These are companies with reported liabilities of 100 million or more. At distresseding levels. It really is the universe of distressed bonds and the volume traded, the lowest since the march 23 peak but still generally on an uptrend. Ed, i have to say that i have a certain appreciation for the calculation of that z score because i had to do it to pass level two of the cfa. It is always great to have you on the program and get your thoughts particular around this market. What are some of the signals and calculations showing you about the levels of distress in the market . Ed the actual model that you are referring to, and i am sorry it give you nightmares when you are studying for the cfa. But that model is based on data from a few months ago. Beforeack to 2019, even covid became a crisis here, there were storm clouds on the horizon shown by the incredible increase in corporate it at that level. High ath stock prices that point, it was pointing toward a potential crisis situation, should there be a catalyst like covid19. Indeed, i dont know if you have one ofide i sent, but them does show that when that corporate level gets to a peak level, if it is followed by a recession, regardless of what the catalyst is, you will have a huge uptick in bankruptcies and defaults. That is what has happened in 2020, of course exacerbated by covid19. Romaine there has been some sense, as you start to look at the moving averages, does that provide comfort or does that provide concern given that moving average . Think it is some comfort that this is not only covid19 causing this crisis among large numbers of large firms in the United States which, by the way, the stock market is completely ignoring. I understand some of the reasons, and you have been talking about it on your shows, i am sure, on a continuous basis. But the fundamentals of some of the companies are really body crisis level. This will become clearer when the corporate earnings come out at the end of the Second Quarter for a large number of big companies. The increase in bankruptcies so us the feelinges that we are going to break all records for billiondollar bankruptcies by the end of this year. I can elaborate on those numbers. Caroline please do. What sort of level are we saying . What are you expecting . Now probably are billiondollar bankruptcies so far this year. If that continues at a similar rate the rest of the year, you are talking about around 65 or so by year end. The previous highest of these mega bankruptcies was 2009, when it was 49. So we will easily break that record. Thisis partially due to huge increase in highyield bonds, leverage loans of companies that are very large. And we have seen some very clear numbers about this and very wellknown companies, the most recent being brooks brothers. And a saw Neiman Marcus whole slew of energy companies. The 100 million or more bankruptcies, which are still large, but not as much, we will probably come in second place to 2009 with that number by the end of the year. I believe we would have had a large number, even without covid19, simply because of the huge debt levels and the fact that possible recession was out there, even though the likelihood of it happening was relatively low by year end 2019. But that is because we did not know what the catalyst would be. Covid19 is a huge catalyst. It could have been other things that caused some of these but certainly covid19 has increased it a lot. Taylor you know more than anyone that there is a difference between default rates and recovery rates, given rising defaults. What does that mean for recovery rates in the event of a bankruptcy . Edward so far, the numbers for corporate vons and the recovery rate and i am talking about the prices of these bonds just after default, around . 32 on the dollar. Historically, they average around . 46 on the dollar. This is for all types of maturities put together. Leverage loans, the recovery rates are higher, generally 6070 cents on the dollar. Now down also. Hugeeason is, with these amounts of new bankruptcies and defaults Company Supply and manned for securities as shifted much more towards a buyers market. That is why investors are somewhat pleased about what is going on, because they have been waiting for this delusion of new bankruptcies. And defaults. And what that means in terms of not only the recovery rates to the existing investors, creditors, but also what they have to pay to purchase these companies, many of which will be restructured well in chapter 11. Single now signaling a market for the distressed market and money is flowing into these funds at a fairly high rate at this point. Romaine we have had some of those distressed investors on. I wish you had more time. It is such a pleasure to get you on and get your thoughts here. Mosttman, one of the influential people in finance. Course, the inventor of that z score for tracking bankruptcies. Caroline always nice to remind us of taylors cfa. Romaine she never lets us forget. Caroline keeping us smart. Coming up, double downturns. Is the country ready for a fight against two recessions at the same time . This is bloomberg. In some ways, the program has been very successful. It has saved a lot of Small Businesses that otherwise would have failed. From a lot of that impact, it gets an a. From a fraud perspective, from the perspective of taxpayer money only being used in the way that the framers of this law originally intended, it is probably closer to a d. You have the likes of food cart vendors, carnegie hall, the guggenheim, libertarian groups, the church of scientology all applying to the same program. Should they all be given equal status . It is tricky. There were certain criteria for the program. Certain types of industries that were not supposed to receive funds. Hedge funds, lobbyist. Listoks at least from the they put out, that some of these companies that at least looked to be ineligible got funds. So that is a problem. But it also was supposed to go that companies that needed the money. Some of the recipients, we dont know their internal finances. It really seems unlikely that a law firm that pays its partners on the average of 2 million 3 million, 4 million for partner really needed these funds, and nonetheless took it. It looks as if it was not as evenly played as it shouldve been. Isif the spirit of the law to keep people employed, what is the problem with these companies and organizations taking money alongside food cart vendors and very Small Business owners who only higher one or two . If they dont qualify for the program, they violated the law by taking these funds. But number two, i think there is an ethical component to this. If a law firm or a Company Knows that they do not meet these funds. Our firm did not take any government money, we have not been laying people off, in part because we know that, we dont necessarily from an ethical perspective need the money. There is an ethical component. Then there is the ipod chrissy. These antigovernment antiquote unquote handout organizations, nonprofits, who go on and on about how people the government outelping people, finding that they are first in line with a tin cup out to take free money, it is pretty disgraceful. We did have several highprofile libertarian type organizations like the americans the institute, from santa ana, california, taking money. They did keep people employed. But, their reasoning was, the government shut us down, therefore this is reparations. Tell us why that is problematic. The federal government really did not shut down anything, did it . You hear that, it sounds like a bunch of malarkey. Does this mean that they are now supporting the idea that if the government takes away business, that they are always in favor of taking money. Theset shows you that nonprofits, what is the price to sell their soul and their beliefs . Toarently it is about 150 300,000. It is just greed and hypocrisy. Again, does it violate the program rule . No. But it really does call into question. Caroline keeping it real. Neil barofsky. Two economic downturns at the same time. One caused by fear of the coronavirus, then a longerterm slump that looks more like a traditional recession. Bloomberg opinion columnist noah smith, who has a very widely read report out on the bloomberg today, saying how we are battling two recessions, and talk to us initially about what the jobs report today paints for you . What we see is that unemployment is really going down quickly. When we adjust unemployment so we include people who are receiving a paycheck but not going into work, it is falling even more quickly. This suggests there have been a lot of employers that have workers either getting a paycheck or not getting a paycheck but intending to call them back as soon as they could. In some areas, the northeast and northwest, the virus is receding, workers are being called back into work. The south is currently in this giant new wave of coronavirus. When that goes away, we can expect a similar thing come or people who are temporarily laid off will be called back. That is the good news. The bad news is that Permanent Employment is still rising. Only atill maybe like few Percentage Points higher than it was before the crisis. But it is steadily rising. Businessn is because is closing and aggregate demand is tanking. There is this other recession gaining steam, sort of rising up to meet us even as the pandemicinduced temporary layoffs go away, others are coming to get us. Romaine i am curious about the permanency of some of this. As i walk around my own neighborhood, there several businesses that have shuttered for good. We were just plain footage of people working out in a gym. I wonder if Industries Like that, jims, concert venues, movie theaters, do they have the capacity to really bounce back to a level where they can operate profitably anytime soon . Not anytime soon. Whether it will ever happen, the answer is that we dont know. This pandemic has prompted a lot of people to figure out ways to do things at home or at a distance. That may stick. People are watching netflix on their tvs instead of going to movie theaters. They are working out at home instead of going to the gym the question is, once this is all done, will people say, it is really not worth the money to go back to the jims or the movie theaters. Shiftse kind of demand are reasons why we can expect the economic pain to be prolonged because those expect other businesses to close, others to open. In the meantime, Unemployed People are not buying things or contribute to aggregate demand. Taylor what is your analysis tell you about further stimulus that may be needed . Noah we absolutely will need more relief bill of the kind we have had to get us through this new wave of coronavirus. In the south, big southern and southwestern states, the virus is exploding. This will go on for at least a couple of months. Theill need a relief past july 31 expiration date. Beyond that, we will be facing a more traditional recession and we will need traditional remedies. Stimulus,des fiscal spending a bunch on science, bailing out the states. Those are kind of our biggest ticket items in addition to just your Standard Food stamps and whatnot so you dont have people rioting in the streets. Caroline Bloomberg Opinion columnist noah smith. Latestquick check of the is this flash headlines. Big job cuts on the way at wells fargo. Tens of thousands of positions may ultimately be eliminated. That theysts predict bank may post the first quarterly loss in a decade next week. Another firm is sounding doubts about apples prospects in the near term. Says wall street is being optimistic with the assumption of 20 sent year on year growth in the fourth quarter. Google has scrapped a key part of security growth. They say its subjected lack and latino workers to bias. Google encouraged staff to check in some staffers complained workersck and latinx had their badges checked more than other employees. Coming up, while Companies Across the globe voiced their support in the fight against racism, but more action is needed by corporate america. This is bloomberg. Its pretty inspiring the way families redefined the word school this year. Its why, at xfinity, were committed to helping kids keep learning through the summer. And help College Students studying at home stay connected through our university program. Were providing affordable Internet Access to low income families through our internet essentials program. And this summer, xfinity is creating a Virtual Summer camp for kids at home all on xfinity x1. Were committed to helping all families stay connected. Learn more at xfinity. Com education. Because now you can expewatch all your favorite hulu shows and movies on xfinity. Youre only a voice command away from Award Winning shows like the handmaids tale, to new hits like little fires everywhere. And fx originals you can only watch on hulu. Thats just the beginning of what you can experience with hulu on xfinity. Tv made simple, easy, awesome. Beentail investors have growing as a more significant part of the market for a number of years. Selfdirected individual investors and a lot of the empowerment that has happened has been a trend for a while. We also saw functions over the last few months. Retail,aid, in 2019, estimations r and we have a pretty good sense of how much retail comprises of the market, it was about an percent. Toward the end of last year, with the zero commission changes that started getting introduced, we did see the increase to about 15 . If you fastforward to this year, with a lot of the covid related volatility that we saw, we have definitely seen the increase more toward this 20 or on peak days closer to 25 . Some of that is obviously triggered by structural changes. Some of that triggered by some of the situations we have, so how much remains is still to be seen. Certainly we continue to see Retail Investors becoming a significant liquidity source in the marketplace. Is the lockdown trader still engaged with the market or have they gone elsewhere . It is still a little bit of both. We definitely continue to see engagement by retail. We will need more time to make a determination of how much of that is driven by current Market Conditions versus the more structural changes. But we have not seen a significant decline at this point. There is a perception in the market that retail traders are the dumb money chasing the smart money . Do you think that is antiquated . I think that has always been a little bit of a misnomer. Retail investors have a different investment horizon and different profile to their orders. Retail is clearly a significant force. But they are not going to be the ones that are solely able to drive valuation or market levels. You make money as spreads widen out and volumes go up. We saw those things happen a couple of months back. Were looking at markets and trying to work out where the next catalyst comes from. I am wondering whether you guys are anticipating that we do see another bout of volatility. Do you think we are done with the current situation, or do you think we go back to that kind of choppy market we saw a couple of. Onths ago my earliero back to comments, the theory around markets, pricing in current information, clearly the markets have been normalizing and taking a bit of a view that the outlook is positive. That said, i do think that to the extent that any new information comes out, whether positive or negative, anything on known at this point, then certainly we could see heightened volatility. At this point, i think we are just waiting to see how things evolve as a marketplace. Volatility over the year has really benefited the market to the upside. But when things get choppy or to the downside, will it dramatically affect how Retail Investors see this market . Our role is really making sure that clients and Retail Investors in particular are able to buy and sell when they want. Maker are as a market there to philly other side of their orders. Our role is making sure that they have a very smooth experience. It is really impressive, when you look back at some of the volume levels we saw earlier this year. In 2019, the highest volume level we saw was around 2 billion shares. Our average in march alone was 3. 3 billion shares. I think a lot of people take for granted how well the markets work in times when not only our markets going up, but going down. A lot of our focus and value add in the marketplace is making sure that whatever direction markets go, we are there and filling our role as a liquidity provider and making sure investors have a smooth an experience as possible. ,aroline that was joe mecane head of Execution Services at citadel. Mark the u. S. Supreme court says a new york grand jury can get president trumps tax returns and financial records, but for now it has blocked how subpoenas for those documents. That is likely to prevent their public release before the november election. Tested president trumps claim to protection from criminal investigations while in office. Speaker nancy pelosi had this reaction. Here we are. The Supreme Court, including the president s appointees have declared that he is not above the law. The path that the Supreme Court has laid out is one that is clearly achievable by us in the lower court, and we will continue to go down that path. The president responded in a tweet. This is ali political product this is all a political prosecution. Joe biden said that Small Businesses have ended up with the short end of the stick under donald trump. He distanced himself with the administration, saying the president is focused on the stock market and not on working people. California continues to see a spike in coronavirus cases and deaths. Died inalifornia have the past when he four hours with the biggest oneday increase. Of the more than double daily increase over the past week. Los angeles is the hardest hit area. Almost 13 of u. S. Renters have no confidence that they will be able to pay next months rent. Another 20 only have slight confidence in their ability to pay. Federal and local authorities have imposed curbs on evictions but those measures are expiring. New yorkers led by mayor bill de blasio and his wife painted a black lives matter bureau in front of trump tower on fifth avenue. The president called the mural a symbol of hate. Mayor de blasio said, we are not denigrating anything. We are liberating fifth avenue. He said, when we say black lives matter, there is no more american statement, no more patriotic statement, because there is no america without black america. Global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im a Mark Crumpton this is bloomberg. Caroline we are going to pick straight up from where you left. Black lives matter has been reigniting calls for equality. Many companies are pledging to take steps to increase diversity. Is one of the only black ceos at the head of a fortune 500 company. He spoke yesterday on how little progress has been made. If you had gone back 25 years, the most pessimistic observer would have thought we ofld have more than four out 500. We have not gotten to where we need to get, particularly with africanamericans at levels below the Senior Management level. We have a challenge. Targetsn to establish and you managed to those targets in the best way you can consistent with how you have to run your company. Caroline lets get more. Joining us to discuss the steps or company is taking to change, ww chief people officer kim seymour. I am looking at your board. You not only have opera, of course one of the most famous africanamerican women in america on your board, but also tracy brown. Is there more still to do . And how have you got to the place you already are . Absolutely. One of those people on our board said, you dont get what you want, you get what you intend. We do intend to do better and be better. We want it to be sustainable. Is beinge got there very intentional in what we planned to make an impact in. We asked our black employees first of all, how are you feeling. But we quickly moved from that to, where would you like us to make an impact . They were quick to tell us, social justice, mental health, closing the gap. And they wanted change in currently. Whatld say that beyond Many Companies are saying externally, they have to be committed to impact internally. Companies solve complex business problems every day. This is a complex business problem. So you look at your metrics. What did they tell you . Most companies are not where they need to be, that is ok, but then you get in an channel, you put in the work. Set goals on where you want to be, design a strategy, identify partners who can help you get there, measure your progress, then you execute. This does not take Rocket Science level thinking it level thinking. It takes courage to put in the work. Romaine part of the reason at least that you hear from some executives at other companies of may be why they did not move on this or move as fast, is concerned about the reaction or perception from customers and clients. You have a company that is sort of built on relationships, more personal relationships with your customers, your clients. How has the reception and from those customers of yours to these types of initiatives . Did it factor into the types of decisions you made on the board . Our manifesto has been very clear, that someone can inspire Healthy Habits for reallife for everyone. We expect our employees, and we know that our members feel the same way. Reception to what we have said has been overwhelmingly positive. But i will tell you, it is not that you disregard what your Customer Base would say, but i think you have to start with what you stand for internally. A corporation after all is a collection of people. What did those people believe and who do you want to be . When we decided that, the rest of it was a very easy decision. We knew that our members would come along with us. Oflor we heard from the ceo merck, that he needs to work on, really talking about the need in general to work on increasing the diversity of the talent pool. How are you increasingly talent pool and diversity of that talent pool at some of the entry and middle level jobs . Kim i share his mystification with this notion that Diverse Talent is hardtofind. No it is not. Again, it is being intentional. Who are the partners who can help you identify the types of talent that you typically hire . There are platforms available right now, if you want a digital solution, that specialize in Diverse Talent pools. There are companies and firms that can help you with your intern base, like job well, will only cater to the Diverse Talent pool. You can partner with for an organizations who can give you a talent pool, a ready talent pool of Diverse Talent that you can ring into your organization. You can partner with hbcus or predominately white institutions who have black organizations on their campus. It is not hard. Time, morere intention, but it is not hard. That is something we have been talking about a lot at ww. Who are those Recruitment Partners who specialize in placing Diverse Talent, find them, partner with them, then hire them . The way that you increase your diversity is you hire diverse people. You get intentional about the people who can help you do that. Caroline what is hardest that all of this is being done at the time of a global pandemic. Itself has come on the firing line with how it has to reorientate the business, particularly after using zoom to lay people off. Have you been able to keep morale strong through not only a time of social change and social unrest, but a time of a pandemic, and making sure you keep employees where they need to be from a morale perspective . Kim certainly, covid has presented an extraordinary time that has had an extraordinary effect on our studio business. But we have rallied around what is at the core of ww, community. Something we have had to dial up a lot. Something all companies have come of vulnerability. That has increased trust, not just with employees and field organizations but with entire companies globally. We are leaning into that. That is allowing us to move on with some great plans that are allowing us to meet the needs of our ww community. They are telling us they need us now more than ever. So rallying that community has been one of the greatest parts of everything coming out of the covid era. Romaine great to get your thoughts. Glad you can provide some answers here for some of the questions we have. Kim seymour, the chief people officer for ww. Breaking news, the new york city mayor saying that there will not be any largescale events approved for the city of new york at least through september 30. There are exemptions for protests, religious events, and press conferences. But things like concerts, parades, and the like, will not be given city permits at least through september 30. This is bloomberg. Saysine the Supreme Court they new york grand jury can see president trumps tax returns and financial records. But for now, the house of representatives cant. Basically, was this a win for trump or not . It was a win for him in an immediate political sense and that we will probably not see his tax returns before the election. For that to have happened, the court would have had to side with the house. But if you want to look at it from a Bigger Picture perspective, trump very much lost than he won today. The Supreme Court pretty much completely rejected his arguments in the grand jury case and premuch split the difference in the congressional case. Ofaine there was this issue sweeping immunity from the president. Did this ruling address that specifically . , which isnd jury case what i think you are talking about, he went in there arguing, look, as long as i am in the white house, i dont have to be bothered with a criminal investigation. People do not have to subpoena my personal records. That has to wait until i am out of office. All nine justices said, that is way too broad. Justices said we are not even going to give you any special argument or categorical rule where the grand jury has to show it really needs that information. For the most part, the president is like any other citizen that objects to a grand jury subpoena. Caroline can we read into who is voting where on the Supreme Court . How it came down, the majority was clear on each decision. But it was unsurprising as far as you are concerned . 72hey are basically decisions with justices thomas and alito saying they would have done more to protect the president in each case. They would have completely thrown out the house subpoenas rather than kicking that case back to the lower court. Justice kavanaugh wrote separately to basically say that he did not think the opinions were that sweeping. In general, it was kind of an ideological divide. The liberal justices just joined the majority opinion by john roberts. Our supremet is court reporter, greg stohr. This is bloomberg. Romaine welcome back. I am Romaine Bostick alongside caroline hyde. Now is the time we bring in Joe Weisenthal in austin, texas, always keeping an eye on the market and economy. We got those numbers today and i guess it was an improvement but they are still high. News, ever since the peak, where we got around 9 million claims come every week since then has been an improvement subsequent. We have this streak of lower and lower claims. Really high. It is last week, 1. 4 2 million claims. This week, 1. 31, better than expected. It is still really high. Caroline still really high and does not bode well if you get headlines like we have with texas reporting record coronavirus desk coronavirus deaths for a Third Straight day. How much does this all play into how backward looking some of the states are in how indeed we might start to see a pullback . Joe i think there is a pretty widespread view that the pullback is here. There was fresh spending data that jp morgan put out today of their cardholders. They said something really interesting, that not only are they seeing a pullback, it is not confined to the hotspot states. Even in states where we are not seeing these records the well off the highs, already seeing some turn because maybe people dont want to become another hotspot. It is happening unfortunately and it speaks to the deadline because in a few weeks, a lot of the expansion comedy fiscal stimulus runs out. Romaine you are a twitter superuser. Can you explain the relationship between flavor flav and treasury secretary Steve Mnuchin . Joe i saw that photo. I could not tell if it was current or an old one. They had their arms around each others shoulders so that could not have been too recent. Romaine we will investigate. Caroline a very awkward look on mnuchins face. Joe weisenthal, thanks so much for your insights. We now have a special extended market coverage for you with david westin speaking to new jersey governor phil murphy. This is bloomberg. Welcome back to our special edition of bloomberg markets. We are getting to an exclusive interview. We will have filmed our feet in a few minutes. A lot of the talk right now is about all of the cases we are seeking in texas. And in california. And in the south. There is concerned that you cannot contain this by state. In the northeast, cases were halved from the first wave. Now there is concern about