Speaking to him later on in the hour, as well as Bracken Darrell. Lets get back to that leaderboard. U. S. Equities shaking off whatever tensions we do see within china. You have some positive news about the u. S. Buying some of its vaccine. You could see it tested as early as the end of the year. I do want to highlight the euro. Bid, very much soft. A bit here in the 10 year, but the 10 year real yield hit its lowest level since 2012. That means gold is also popping. We are going to break down that later on as well. Overarching story is the conflict between the u. S. And china recently heating up. The u. S. Ordering the closure of the consulate in houston. Eijing vowed to retaliate for more we are joined by state Department Reporter nick. What actually happened and what do we look for Going Forward . Big is that the u. S. Shut down chinas consulate in houston. It is unclear whether they believe specifically there was a great deal of espionage and intellectual property theft connected specifically to this consulate, but what is clear is the u. S. Wants to send a message to china that it is no longer going to tolerate what it says is a Systematic Campaign of intellectual property theft. Billions of u. S. Dollars in trade secrets, costing americans thousands of jobs. This is a big priority for mike pompeo. We are going to be looking out for what china does next. The assumption is that will close down a u. S. Consulate. That we are going to see tensions continue to get worse. , what happens if the u. S. If china closes down a u. S. Consulate, is that it . Does it escalate further and will other countries be dragged into this . It is a great question, because there have been so many back and forth i punch you in the nose, he punched me in the nose between you u. S. And china. We keep waiting for the bottom, but it doesnt feel like there is one coming anytime soon. A consulate closure is a really extreme message. This is something the u. S. To to russia several years ago in 2017 when relations were at a very low point. When you see the worlds two biggest economies doing this, this is a relationship that essentially is a key engine to double economic growth. When the titans clash like this it causes a lot of anxiety. So far the Trump Administration has indicated no leanness to stop no willingness to stop and china is matching it punch for punch. Alix really appreciate that perspective. Joining us now is steve chiavarone, a portfolio manager. What i was struck by was, European Equity market took this on the chin, but the u. S. Equity market. You heard layout what is significant deal this was. What is up with the markets . Steve i think youve got to take a longer term view and denies this really is the continuation of what you saw manifest itself in the trade war. We said time and time again, the economy is changing. We are going through a digital revolution and that digital revolution, based on intellectual capital, things the United States has depositions us to be a longterm winner. China needs that intellectual capital in order to leapfrog us. In a lot of cases, very aggressively. You are seeing the United States a no, were not going to do that. The raw implications in terms of trade and economic growth, but there are also implications for protecting that intellectual property advantage, which the United States is doing more aggressively. Perspective,erm while these tensions are unnerving, seeing u. S. Companies and the government protect intellectual capital is better for u. S. Growth in the long run. I dont know if the market is sniffing that out. That may be more about, hey, you know what . It looks like we are seeing a little bit of easing in the coronavirus served surge. I think those are more immediate reasons the market is up today. I think weve got to rethink the narrative of the u. S. China tensions a little bit more. Alix what conch francine what concretely does that mean for the markets . Weve had intellectual property theft with china. Of go hard now in the middle the pandemic when already the economy is not doing great . Steve there is a couple of things. Very interestingly, you have seen both the u. S. And china take this battle off of the tariff front. Were not talking about using tariffs as a tool. The phase one trade deal so far has been kept off the table with continued purchases. I think you are seeing these countries fight this battle in a different way. Rather than fight it through the trade policy, which was having a very acute shortterm impact, they are doing in other ways that are less directly impact full of markets. If thee long run, separation of these countries in terms of their economic relationship occurs gradually it is something that can be absorbed. You can move supply chains, you can find new customers, although i think it is difficult for china find a replacement. It is when it is abrupt and happening in terms of the tariff war that it has that impact on the market. It is something to watch, because at the end of the day your reporter was right. The two young largest economies are throwing blows at each other. It is less clear now than it was being quantified in the tariff number. Alix i feel like we might be seeing it in the bond market. Real yields in particular. Havent seennts, that since 2012. The conversation is now when we get to 2000. What does that tell you and does that lead you to any sort of an estimate he says thesis . Steve when you think about the bond market and the 10 year treasury, the prime driver there there may be concerns about growth, youve obviously got an incredibly dovish central bank. When you have a bench a fed chair saying we are not thinking of raising rates, that puts an anchor on where rates can go. The surgeon the virus over the past few weeks has caused highfrequency data like restaurant bookings and retail in the, particularly southern and western portions of the country slowdown. The bond market is expressing some concern that that highfrequency data could filter into more traditional Economic Data. Those of the prime drivers. I think those are reasons for concern. I think the question that will have to figure out the answer to his even if that Economic Data does flow, will that happen in the absence of another fiscal support package or will it happen right as we are signing that deal . Without moren progress on the vaccine or will we continue to have more progress . If we have a scenario where Economic Data does slow but we have a new support package and vaccine, progress on a the bears may be frustrated again. Youink this is a market respond to and dont anticipate. There were just too many variables that are noneconomic. Francine what exactly is the Market Pricing in for a vaccine that also recovery . Are we do a correction . Economies can u shape. I think this one is. There is Economic Activity over which we cannot go safely. I think you are starting to see companies not just try to write through this crisis but now start to rethink some of their business models. That can create some shortterm pain. Markets dont really care that much about the shape of the recovery, historically. They just care if there is a recovery. Enteringecession and recovery is generally more powerful for the direction of markets then the shape of calvary. The recovery off of the 2009 crisis was a slow one. You didnt get back to precrisis gdp for two or three years. Unemployment was high for a very long time, but the market sharply off the bottom. I think that is a lesson we are being reminded of. Francine thank you so much. We have some breaking news. Alix this concerns bill ackman. A special purpose Acquisition Vehicle that opened on the Stock Exchange and it is trading at about 2110. 21. 10. They have been around forever. Last year with the year of the oil spat. A lot of oil guys were getting in. They are popular when it comes to the name attached to it. Some of them failed last year. It is all about the person behind that, what happens when you run out of those people . Francine this one is resting on one person, lachman. He is going to go unicorn hunting. If you are a small to mediumsized enterprise, i dont know how you pitch to him, but something we need to keep an eye on. It began trading a short while ago. Alix he will keep you updated on how it is trading. Trading right around that ipo price. This is bloomberg. Of the worsening relations between the u. S. And china. The u. S. Has ordered the chinese consulate in houston to be closed. According to the state department, it is to protect americans intellectual property. China calls the move unprecedented escalation. Houston firefighters went to the consulate after reports that documents were being burned and outside containers. President trump speaks today on what he calls combating violent crime. Agents. Ushed federal it is a policy that appeals to his base. Mayors around the country warned that they will resist. The European Central bank may ask banks to hold off on dividends, at least through the end of the year. Bloomberg has learned that several ecb Board Members do not see enough clarity to justify restarting payouts. The decision is not final. President trump reportedly asked the u. S. Ambassador to britain to help get the british open Golf Tournament late at his course in scotland. The president asked Woody Johnson to see if the British Government could steer the tournament to the trump resort. The ambassador raised the issue, but failed. 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. This is bloomberg. Francine thank you so much. Lets get back to the housings housing sector. Joining us now is sanjiv das im a he has Caliber Home Loans chief executive officer. The largest Mortgage Companies in the u. S. Sanjiv, right to speak to you. I was reading through some of the things you sent over. Loans that people ask, even in a pandemic is increasing. Does that support the fact that we could see a housing recovery . Sanjiv we are seeing a big rebound in people buying homes. I would say that compared to prepandemic levels we are up 25 in the last couple of months. That is a staggering number. Peopleot just refinancing mortgages, it is people buying homes. Understand consumer purchase sentiment quite well. I have to say that the interplay of extremely low Interest Rates and this urbansuburban migration is working in favor of people buying homes. Alix i wonder how long you think that is going to stay, especially when we are headed toward the fiscal cliff at the end of this month when that unemployment benefit runs out. Do you think the boost you are seeing is sustainable . Sanjiv frankly, i dont know. Predictit is hard to whether this is a shortterm phenomenon, mediumterm, or longterm. Frankly, if you had asked me three months ago whether we would see such a massive rebound i would have said no. That said, the cocktail of low Interest Rates and home prices more or less staying in line , i thinkterm trends that is playing out quite well. It is really two Consumer Behavior phenomenon. Consumers are anxious about losing their jobs, others seem confident about keeping their jobs and keep taking advantage of low rates. I expect this phenomenon to last for the next 12 months, but im scared addict anything. This points to the fact that animal spirits in certain parts of the economy are not bad at all. Between a linkage people who feel comfortable because they feel secure in their job, hence the credit worthiness, or is it that people think they can get organs right now . Bargains right now . Sanjiv i think it is a little bit of all of what you said. There is one sector of the economy that is clearly troubled. We are seeing that in the forbearance requests. 10 toage there is about 15 of consumers who are concerned about being able to make their payments. What we have seen is they are mainly applying for forbearances as a form of insurance. What we are seeing on the other hand is consumers who have jobs and are certain about their fica scores, uncertain about their employment checks. They are taking advantage of this market and we are seeing not only a surge in people buying homes in that sector, we are also seeing the average loan balance and fica was higher. People with higher credit are taking advantage. Alix that is interesting. I wonder regionally what you are seeing, rents falling here in new york city. I feel like everyone is going to want to move to the suburbs. , a jamheard anecdotally and business. In business. Sanjiv i can give you a perspective from the loan officers. I have a home in connecticut. Of followed the flattening of the curb curve to decide which city to move to. Real Estate Agents in connecticut are extremely you are seeing this in suburbs outside d. C. And new york. You are seeing an increase in purchase applications. The gaplso seeing between owning and renting moving substantially. Think about it. I had predicted a couple of weeks ago at the year rate would drop below 3 . 2. 97 imagine that. Every 1 change in Interest Rates can drop a payment i about 10,000 a year. 5 ,ur and a half ago it was now it is at 3 . It is really building and in favor of ownership. But i do think that people are buying insurance, both in terms of their payment as Risk Protection against this virus and looking for open spaces and working from home. Alix i called the bottom at 3. 25 , that was not sure. Take you so much. A real pressure pleasure. This is bloomberg. Alix one thing we are watching today is bill ackmans stack now trading right around one dollar more than the ipo price. We will have an interview later on in the day with bill ackman. Youink the question is, if had a 4 billion check, what would you buy . Francine and where and when . I think there will be a lot of iestions on his timeframe and guess a lot of businesses around the world and the u. S. Are getting so much money for the moment from stimulus packages. , iyou are an acquisitive dont know whether he has to do extra checks and Due Diligence. 4 billion unicorn hunt, right . Alix also in terms of the laws of fact, the owners of this still have to wind up approving the deal. They have to answer to someone. We do see what happened to the nicolai investors that was bought up. Nikolai was able to go public. If you try to do a fancy trade where you had a warrant and shorted the stock to buy the stock later, got burned. There are going to be different intricacies here. If you are an early investor, get a warrant. That you get to trade freely that is different in the stock price you can short. Price different than the stock price you can short. Francine there were staying saying that listing reached alltime highs with more than 13. 5 billion races here on u. S. Exchanges. This is significant. A lot of them i dont know whether they compete, that it is private equity firms, a lot of billionaires trying to get in on this action. There was a ton in the oil industry with big names last year and a lot of them went under because the asset could not hold up what the price. All of that fun fodder to talk to bill ackman. On ins coming up later the 1 00 p. M. Hour. In the markets you are looking at a nasdaq Still Holding on to support here despite any kind of headlines. Still up. 4 . The outperform of the day. We will talk about what areas you want to be looking at, to gilly tesla. Particularly tesla. This is bloomberg. Francine we have some breaking news on california, topping new york as a state in the u. S. With the most confirmed covert cases. Just a couple of days ago california had to shut down again after these huge numbers in the number of people infected. Yesterday there were over 11,000 new cases of covid19, bring the total in the state actually, in the u. S. To over 400,000. California topping new york the state with the most confirmed covert cases. This after dr. Anthony fauci saying treatments are likely to come before a vaccine. This is likely given the trials we have seen, but just for the record mr. Vinci is saying the same. Alix all of that points to underlying demand in the states shutting down. We are getting a read on that with oil inventories. Crude up by about 4. 9 million barrels. We are looking for a draw. This is a bearish surprise. Something else, refinery utilization is down 5. 2 . Refinerieshat the are not utilizing the oil because there is no one to sell their product to. That is something to watch as well. There is a distillate inventory built, although a gasoline draw. Taking a look at exports. The pads are the areas were going to see buildups. If you are not exporting anything, it is going to sit there. We are seeing a little bit of a Lower Oil Price here. 1. 5 , right almost around the lows of the session. All of that is going to put more pressure on the Energy Sector. The pace of bankruptcies in that sector has been picking up. 27 Energy Companies with liabilities over 50 million file for bankruptcy through july 20. That is more than the previous downturn in 2016. For more we are joined by jim millstein, Guggenheim Securities cochairman. Always good to catch up with you. I guess i want to know for the Energy Sector, have we seen the peak or are we looking at six to nine months when things are going to get really bad . Alix jim it depends on the lockdowns and how we control the virus. The Energy Sector is hit both a supply shock, given the price wars between the saudis and the russians on the one hand, and on the other hand the demand shock from having shut the economy down in the Second Quarter. If that continues, i think you will see a continuing wave of bankruptcies in the sector. What about contagion here . It looks like we saw a lot of energy, a lot of retail, now we are seeing related industries start to get hit. Is this the tip of the iceberg . Again, i think it goes to how well we control the virus. If we can bring this thing under control and put people back to work and open up the economy, i think some of that contagion effect will be contained. Now, i think we are seeing delinquencies rise. In all Consumer Loan categories. In the hospitality and retail commercial real estate industry, youre starting to see the impact of the shut downs on the ability of landlords to pay their mortgage. Escalate if we dont get the virus under control. What do you think the best Case Scenario is . Are we going to be in lockdown in and out . What is worst Case Scenario for bankruptcies and best case . Are 15 of Companies Going to be taken out if we cant get a handle on the virus . Jim look, he saw the Largest Record number of downgrades in the Corporate Credit sector in the Second Quarter. Fully 35 of the Leveraged Loan Market downgraded. Of leveragedt 35 loans with a Credit Rating of b minus or worse. That wave of downgrades leads to defaults. A couple of quarters later. So, past is prologue. We could see a big wave of bankruptcies in the third and fourth quarter. Is we have a national market. It is one of the great strengths of the United States. A diversified economy across the 50 states of the union. But we have taken a statebystate approach to trying to control the virus. And that has all sorts of disruptive impact. As one state opens another closes, if we go back and forth the economic damage of not having a National Policy could be very great. I know you have a lot of thoughts on the fiscal stimulus, and i want to talk about the monetary. Im wondering how long you think this fed put the last. Jim the Corporate Credit facilities, the most novel aspect of the emergency interventions in this round, the fed has not in the direct lender to the corporate sector using its Balance Sheet to provide credit. Is quite novel. Programs, sayhose that their availability of the open until the end of september. Obviously they can change that. Those facilities have barely been touched. The fact that the fed is standing by with potentially 2. 1 trillion of capacity is obviously lifted animal spirits and the credit and equity markets. There has been very little credit extended under those facilities as you have had record amounts of investmentgrade and highyield debt issued during the Second Quarter. The salutary effect of that fed put is that it has sparked the animal spirits, and as a result those facilities have not yet really been tapped. Up till now, even troubled companies had a lot of ease in raising money. Does that and at some point . Jim yeah. Listen, i think in the highyield sector, notwithstanding the fact that spreads have been pulled in, at this point that is not a cure to the lack of revenue. That,t some companies notwithstanding the fact that they are highly levered and have in the past had access to cheap financing over the last 10 years , you know, the credit analysis is not completely repealed. Those companies that are struggling with the lack of revenue and cash flow. Of theouve got 20 corporate borrowers, socalled zombie companies. Their cash flow is insufficient to cover their debt service. You can borrow to supplement the lack of revenue and cash flow only up to a point. I think we are reaching that point if we do not get the virus under control. How many of the companies that will go bankrupt our Healthy Companies and how many are companies that should have gone bankrupt and the first place . Jim its a casebycase thing. Shock to theusual system. Youve had perfectly Healthy Companies, for example the , the pandemic has aviously hit travel in completely unanticipated way and it changes the financial fortunes of all of those companies. They have had access to Capital Markets as well as the government. The loan program under the cares act, they have extended their equity runway rate there liquidity runway. As the runway long enough to get them back to where their cash is flowing . Alix that runway, to get your thoughts, i know its a big question. In theory, what is the number one thing the government can do right now . Jim i think we want to prevent the contagion effect across the Consumer Loan sector. Credit cards, auto loans, housing. The most important thing to do is extend the unemployment effects and may be do another one time payment directly to families earning less than 75,000. Weve got unemployment and an Economic Contraction greater than we have had since the great depression. People whomillion have applied for unemployment or are getting unemployment. That is about 20 of the workforce. Folks do notthose have continuing support we are going to see a spike in delinquencies. Some contagion effect across the Banking System of across the variety Financial Institutions who supplied that credit. Francine thank you so much for joining us. Jim millstein there. Will have more on bankruptcies. The work from home tech boom. More on whether our habits will change. We will be speaking to Bracken Darrell on how the pandemic help boost the companys firstquarter sales. This is bloomberg. Lets check in on bloomberg first word news. One of the biggest of blows to diplomatic ties between the u. S. And china and decades. Beijing is bowing retaliation after the u. S. Ordered its consulate in houston closed. U. S. Says it is safeguarding u. S. Intellectual property. Houston firefighters alive arrived at the consulate. They had been called after reports documents were being burned. Governments support the idea of stimulus checks. They are expressing doubts about president trumps call for a payroll tax cut. The differences between republicans and senators republican senators and the white house. The Democratic Party platform is sticking close to joe bidens line on diplomacy. According to a draft of a document, the policy will call the universal for universal for universal health care and remaking the justice system. Nike says that job cuts will cost up to 250 million. The Worlds Largest athletic brand is focusing on selling directly to consumers. Nike is not saying how many positions will be eliminated. Ecommerce sales are a bright spot last quarter. They grew at a time and overall revenue plunged. 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 rich peer group. , this is bloomberg. Rich care group logitech is amongst the names they got a boost. It raised its forecast for the year and the stock is up over 50 . Joining us to talk about earnings and the picture ahead is enderle. He is logitech chief executive officer. When you look at how many people bought mouses, headset, webcams, how many of those people are you expecting to replace them once we get rid of the pandemic . How well our work from home change . Of all, thanks for having me. All i am right now, i think of those people working from home are finding on the downside it is not perfect because you dont have that social interaction. On the upside, there are so many advantages. ,ven after the pandemic is over i think most people are going to continue to work from home at least some of the time. That is an increasingly installed base we serve him means people will be upgrading to create a better experience, a more ergonomic experience. We are optimistic for the long term after this. For your full year Outlook Revenue growth, analysts thought that was conservative because of the thesis doubt. Thesis you lined out. Are you purposely trying to be conservative . Bracken we are looking at our first half and saying, we grew 25 and we expect Second Quarter to be good. In the back half it is hard to see. None of us know what a holiday. , inich our Third Quarter this pandemic it is hard to see what holiday looks like. Our feeling is that there will be a slowdown of some kind of the tif to a year ago in our Third Quarter some kind of a slow down relative to a year ago in our Third Quarter. Francine what are your regions driving sales . Bracken regionally it has been well distributed. We have 20 21 growth in europe. Is growth in asia, which obviously Largest Company country in asia, china. That bodes well for the future because they are on the others of this pandemic. In terms of products, we had doubledigit growth across the board. Our webcams were probably the strongest. Webcams and microphones as people wanted to do streams and play music. We had very strong growth across the board. Gaming was good, our videoconferencing was good. People are already preparing their offices for what its going to be like when they get back. It was very broadbased. Alix you mentioned asia. Obviously over the last few months, but definitely overnight we have seen an escalation of tensions. When you read those kind of headlines and see those pictures, how does that affect you leading logitech as a company . Do you rethink strategy do you do different Due Diligence . Bracken we have a big business in china, locally, and we do manufacturing in china. Also china is still just a part of our overall mix. It is one country out of so many. From a market standpoint we have business all over the world. From a manufacturing standpoint, our manufacturing is distributed. We are manufacturing throughout southeast asia. We are wellpositioned in a world where we need to make sure we are hedged against anything that could happen. Francine in the last couple of days we have heard about retaliation because of these ip thefts and accusations. Have you ever been worried about ip theft from china . Company,we are a swiss we are a small company. We dont worry much about ip theft. We worry about the things under our control, just bring technologies together and trying to create great product. Cooks,k of ourselves as not farmers. We tend to put together a great ip into a package and create a great experience for users. We are less in the development of way upstream intellectual property. Alix our kids going to go back to school in the fall . Can you give me insight as to what you are hearing in terms of demand and what they are thinking . Bracken i cant tell you exactly. I dont know a lot more than your viewers do. What i can tell you is, our education business, which is built sleep on tablets supporting the ipad is growing fast. Were up 50 t last quarter. We continue cease to see strong orders. That suggests at least schools are hedging their bets and getting ready for a moment where each Student Needs a device so they can be at home. I dont know whats going to happen and i wouldnt try to predict it, what i believe we are going to have a great education business regardless. Francine we heard on the a is notcall that m your top priority. A kind of company are you looking at . What is your thinking on that . Bracken as you can see, with 25 growth last quarter we are organically having a great growth story. We are always looking across lots of different areas, most of them in the businesses we are in but also adjacent. I couldnt disclose more than that except to say we are always looking and i dont have anything on the cusp of being announced. We will see. We have a pipeline that is full. But, we are looking and we will keep looking. Alix fair. When you are looking, without giving too much away, you are pumped about your gaming business. Do you feel like enterprise is somewhere you can growth . Can growth . Bracken im really excited. I said a few years ago, obviously got a lot of mice and keyboards and businesses, we really are not an enterprise company. A few years ago we changed that. As, we foundt ourselves in the lobby of that Company Building and we were shy about it. Actually it felt pretty good. We walked through the lobby, started going up the floor and now we feel at home there. We really filled out. It grew 81 last quarter. The other cool thing about that is, the Enterprise Business is starting to feel more like a consumer business to me. Especially as more of your employees are working at home. That big office tower is now distributed into one million homes. That feels more like us. We are excited about it. Bracken darrell, logitech ceo. Thanks a lot. Remember to tune in for another big interview later today. We are going to hear from bill ackman. Specialpurpose Acquisition Vehicle trading slightly above the ipo price. This is bloomberg. Alix as we are heading the second busiest week for earnings, continue to get numbers of covid here in the u. S. California now surpassing new york as the state with the most confirmed covid cases. Florida as well. You are looking at the cases arising less than they had before. The bad news is, the deaths are taking up slightly. It feels like the u. S. Markets and some ways are going moment to moment by these headlines. Isncine i guess the problem by the time people are infected, then it is difficult to know because there is a couple of weeks. That is why the markets are struggling to price it in. Reported 11,008 hundred new cases yesterday. Today a similar amount, bringing the total to almost 400,000. It is no badge of honor. New york state the worst state hit by covid19. We also had dr. Fauci saying we may have some kind of treatment before we get a vaccine. The timeline also of how long it takes to put a vaccine out there, it makes sense. We will have more on the reescalation of u. S. China tension given what we saw in that houston consulate with george magnus. We are looking forward to having his thoughts on the u. S. China and the retaliation china could do in closing a u. S. Consulate. This is bloomberg. Alix live from new york, im alix steel. Guy johnson is off today. We are counting you down to the european close. The u. S. Taking u. S. China tensions in stride, but the european markets maybe not so much. Euro stocks down. The under performer i performer, i guess down. What is confusing is, you still have a rally across the bond market. Isonder how much of this posteuropean recovery funds . Francine part of it is that. You also have quite a lot of earnings. They are different depending on what Industry Group they are in. The viruses impact also been shooting to sentiment. It is difficult to figure out that there is a vaccine that will lead to something or you look at the number of infected cases. In general, stocks are moving sideways or