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tv   Bloomberg Surveillance  Bloomberg  July 9, 2020 8:00am-9:00am EDT

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>> the economy is not ready to be taken off of the balance keeper here. otherwise, none of these companies will make it through the 2020 crisis. >> the covid crisis and survival economics has lined up golden functions going on. right now, the biggest tension as the war between china and u.s. for global positioning. lisa: this is "bloomberg tomeillance," with joh keene, lisa abramowicz, and jonathan ferro. tom: good morning. tom keene, jonathan ferro and lisa abramowicz.
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from new york and across this nation today, any number of themes, but there are two front and center. the vice president will speak in scranton, pennsylvania before ending the hour and jobless claims well over one million widely expected. all of that devolving into the layoffs here, the layoffs presumed to come and it sets us off for an american labor economy that must be addressed. with that, the market reaction, as well. jon ferro, the news flow has really been on recently and crescendos this morning into these announcements of job cuts at too many companies. arethan: by any standard we in a labor market crisis. there is a ton of work still to come. what we have seen from the big companies is they are starting to right size the business. we talked about this we talked
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about this week ago on the program. companies are turning around after the shutdown and saying, we have to cut into this new world because we are not returning to normal anytime soon. you highlighted this yesterday, that successful , asear auction at under 1% well. i believe if i have diminished growth and layoffs, that migrates to ever lower yields. pushing borrowing costs lower because united airlines could lay out as many as 36,000 employees and walgreens saying they are going to cut 4000 jobs. these are not going to be jobs saved i lower borrowing costs. they can only be saved by an economy accelerating and people going to stores, buying things, getting on planes, which they are not going to do in the same kind of numbers they had for years. when do we get the real economy
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going again and not just how many money can we -- how much money can we pump into the system? tom: big data check right now, jon will give you a better one in a minute, but all you need to know is that equity markets moving towards 9:30 and the wonderful green screen by them. the 2011 hi, and the big news in fx with that better feeling in china, the renminbi is stronger. welcomew, a joy to a senior strategist. we are thrilled that he could join us from london this morning. year, stimulus there, stimulus everywhere, is it a proven prescription for better economic growth? >> actually, if you look at what is going on in beijing, they are not doing as much, but if retail
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can help with the stock markets, then why not? i think the jury is still out, but looking at sterling today, the market believes it. jonathan: we have heard this argument over the week or so that reopening elsewhere is more efficient and the recovery more dependable and you want to shift away from the dollar and i have lost count on how many people have told me that on this program elsewhere. does it resonate with you, geoff? geoffrey: it does, but probably less of a fundamental and more of an asset allocation story. differencesrack the in the opening performance. markets have been overweight in the u.s., overweight in u.s. equities, and overweight in cash, so that is where the adjustment needs to happen. that alone will undermine the dollar. dataou have the economic to complement it. about wheret's talk
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you pushed that view at the moment. is this story where we will see flows into europe or an appreciation for china again and the mainland? where do you see it going? europe has a positioning story and a valuation story in terms of china. yes, we do see that faction right now. let's remember, in 2014 and 2015, is there an earnings picture or balance of payments picture? i would argue the latter. it is really improving, but we need earnings to follow up. and it is still very fragile right now. it is at zero for the time being. lisa: on one hand you have a liquidity story pushing people further into risk and saying perhaps it is time to go further into europe with emerging markets. on the other hand, you have an increased number of people on
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bubble watch. i want to talk about the chinese stock market, the key sector on bubble watch. you have seen a surge there with people saying, i cannot lose. i will pour all of my money and because it seems like beijing has my back. how much more do you see that rally going? geoffrey: well, it is interesting that they view beijing has their back. all the regulators would argue otherwise that they are not providing liquidity. they are allowing the retail money go unleveraged and flood in, what it is the type of condition, as well. see momentums, i driving the forecast but if earnings growth is there, then you will see higher levels. but the gdp growth, if it gets to four or five, or if it under shoots that, then further gains will become more challenged. lisa: there have got to be people watching this and
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thinking to themselves, since when have earnings mattered? earnings have been falling out of bed. we have a pandemic and earnings slowing down. matter?l fundamentals do you think currently the earnings picture is adequately reflected when people get information about it in stock liu asian's? -- in stock valuations? geoffrey: i think the test will come when we generally see data following through and when we data andabor market the average earnings and cost of the workforce. are we seeing it being channeled into corporate earnings? are we seeing guidance be lifted? right now that is a hard data on the economic side. if there is a disconnect and we thought, ok, unemployment rates are falling and they are spending below 10%, and the low guidance means no earning potential, and that is when the story begins to crack.
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we are not there you. such aoffrey yu, you are student of the london financial experience. you are now with the bank of new york mellon, which is a question of greatest heritage american banking, going back to alexander hamilton in 1784. give us your thoughts on how we come out of this pandemic of global wall street new york and willful wall street london? how -- and global wall street london? how are we going to come out of this? geoffrey: coming out of this, i think we need to reinvent. we are hearing things about how agile working or home working and desert beast efficient -- does it boost efficiency? those financial sectors are always going to be amongst the most productive, but physical presence matters.
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from a physical point of view, you are not going to have a multiplier effect, so it is only 1 wall st or 50 jobs that create two jobs rather than four, and what happens to the other two? that is the role for the government and that is the future, how to create those new jobs. tom: this is a really, really important conversation. if that is the case, lose the multiplier effect and finance, that means diminished aggregate demand. that means disinflationary tendency, as well. does that underpin equities or does it destroy equity valuation? challengeit will equity valuation, but the market is telling you, do not worry, the government will step in. how long will it continue? u.k. ran at 16% this year, the latest estimate.
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can you run that every year? i don't think so. the timeline is how do create the new jobs and manage labor force displacement? that will be the challenge for our generation. jonathan: great to catch up with you, geoffrey yu. fantastic as always. nice to see him in another seat. always appreciate his insight. tom: this is really important. what we have always tried to do at "bloomberg surveillance" and including "the open," and the hugely most "the real yield," is to get people with critical thinking skills. and the gentleman out of london school of economics delivers that. jonathan: he is fantastic. i am looking forward to getting him back on the program soon. 20 minutes away from jobless claims, expected to be out all over again. lisa, it is the second wave of job cuts we have all feared. just subtle hints and it is
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starting to build over the past days. 36,000 potential layoffs from united airlines and then walgreens with alliance announcing another 4000 cuts as you see a slowdown in customer activity. what i find interesting about walgreens is the fact these are staples. they noted a decline in prescription sales because people are not going to the doctor's office as much.this is not necessarily consumer discretionary, which raises a question in my mind, at what point does a slowdown in the economy hamper its growth? and some companies are rewarded for being basic purchases. at a certain point, a slowdown in the economy affects everyone. jonathan: it is about foot traffic. that is what it comes down to. many people said the pandemic will exacerbate and accelerate existing trends, and foot traffic is part of the story. we have seen bankruptcies pileup on main street for some big retailers and well-known names
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in the united states of america. in the united states of america and around 20 minutes, the focal point will be jobless claims. the coverage will continue right here on "bloomberg surveillance." ♪ joe biden will call for a moderate approach to reviving the u.s. economy today. bloomberg learned in a speech at pennsylvania, the democratic residential nominee will stay away from more ambitious proposals. his plan covered several areas, including a push to buy american and incentivize american jobs, cleaner energy, eldercare, and other domestic workers and racial equity. the u.s. at another record for coronavirus cases according to "the new york times." more than 59,000 cases are reported yesterday.california and texas accounted for almost 20,000. the rate of positive tests in california has jumped more than 7%. governor gavin newsom warned it could quickly spike into double
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digits. has sealed andent unlikely partnership with president trump. house,sit to the white he called for more american hailedntegration and president trump for his "kindness and respect." lessdent trump remains than popular south of the border after calling mexicans criminals and rapists during the 2016 campaign. fundding to the firm hedge research, they lost 7.9% on an acid wager basis. none of the four strategies made money. they had the worst performance. postedns boost alliance worse than expected results for the third quarter. as a result, they will cut 4000 jobs and and share buybacks. in march, the pandemic prompted people to prompt up on toilet paper and prescriptions.
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since then, prescription volumes have fallen because of low visits to dr. hosp -- to doctors and hospitals. global news, 24 hours a day, on-air and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am rchter group to -- itika gupta. >> continuing in this knee-jerk risk off field. ♪
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there will be citizens of hong kong who may be looking to move elsewhere to start a new life somewhere else, to take
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their schools, their businesses, and things they have been running under the previous set of rules and arrangements in hong kong and seek their opportunity elsewhere. australia has always been a very welcoming country to business all around the world. thethan: scott morrison, australian prime minister. hong kong becoming a point of tension in china and other countries, including australia. equity futures totally unchanged for the s&p 500. we go nowhere. one hour and 12 minutes away from the cash open in new york this thursday. the bond market yields at a single basis point. and in foreign exchange, the dollar against his weaker, with the euro advancing by .1. from new york city this morning, good morning to all. alongside tom keene and lisa abramowicz, i am jonathan ferro. with that tension in china and
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hong kong has been at the epicenter the last weeks. tom: and changing at light speed. about -- is in about 12 minutes. i have been shocked at the change in the last number of days, and we need to get perspective. feet, far more0 on the fabric of hong kong. enda curran joins us. great work for bloomberg news out of hong kong. i want to go back to the reality of mobile wall street, which is if you end up in hong kong and if you are ever, ever so lucky, your offspring can go to the boys at school or the other 10 or 12 elite schools of hong kong. i do not understand how they move forward under this new regime. how will the education and fabric of the city change? enda: it is clearly going to be a crackdown on the civil liberty
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side of things. we will get more details on that as the matters push through and critics make the point you are making, that it will change the education curriculum, right up to where you can be charged on the street. the business side of it is more ambiguous at the moment. we have had commentary from the pro-government side that say you can come here and do business and you will not get into trouble. that seems to be the modus operandi a lot of people are taking so far. national security law is enforced, we will start to see how it impacts not just civil liberties but the business part, as well. for australia, for example, they are also pitching doing business from hong kong, too. . jonathan: let's talk about australia because i find it fascinating. the chinese communist party has tried to use the commercial leverage it has over many
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economies in the world. australia is very leveraged to the china growth story. yet, this is the political start they continue to take. what do you make of that? enda: most definitely. are australia's biggest trading partner and australia has trying to balance the lines with the u.s. and china story, but they definitely are parting ways of sorts. there is no doubt that it is a provocative move in china's audience from australia. they will quickly accuse australia of interfering in their own business. as i mentioned earlier, scott morrison, the australian prime minister, made clear they are not just trying to take people from hong kong but do business in hong kong. hong kong status as a key gateway for china. it is not just china and australia. we are seeing tensions with china and india, china and u.k., all on an economic metric, but
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in the end, it spans 60 -- it is 60ning 60 yard -- banning odd chinese apps. it is moving at an unpredictable speed. lisa: there is this tension of power and who has it. hong kong once was a big proportion of china -- mainland china's economy, not as much anymore, which raises a question of what kind of power australia and the united states have in order to punish beijing for its insurgents into hong kong autonomy, and the u.s. considering perhaps disrupting the peg dollar the hong kong currency has had since 1983. can you talk about hong kong as a conduit of dollars into mainland china and how that could be a potential weak spot for beijing? enda: it is still far and away a huge source of capital for the mainland. it is a big source for china,
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capital. a big you see that big tech firms coming here, raising equity and they sell bonds. it plays a huge role in terms of a capital gateway in and out. i think hong kong is viewed as something as a nuclear option really. the u.s. could, of course, crimped down on the amount of dollars traded, but a lot of people say that would cause not just problems for hong kong but for the global financial system and u.s. banks and companies. when you have australia and the u.s., and other countries making threats, they can make the threats that it is a question of how far they can go before it rebounds on their own economy, too. tom: and all of this talk is great, but we want to cut to the chase. how is real estate? are you sliding into 3500 square feet up on the hill? enda: i wish.
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it is holding up quite well here. capital is pouring into hong kong under the thinking that it is mostly because chinese governments are doubling down on hong kong at the moment. the stock market has had a big lift here, and the equity market has softened around the margins but nothing like the kind of correction you would expect given the political pressure under the city. that picture may change in the coming months. we will have to see how it plays out. jonathan: i will take a guess and say that i am sure you might like the housing market there to soften up a little bit considering the prices we have seen in the last decade, several decades, for that matter. love catching up with you, enda curran, out of hong kong and on hong kong on the world's response to what is going on. as we count you down to the jobless claims report in five minutes, initial jobless claims made an estimate 1.30 7 million -- one point375 million anne
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meara -- 1.375 million and we are looking for an improvement. tom: we will see. let's get the surveillance dartboard, jon. that will help. jonathan: it feels like that, try and guess what it will look like because the range of estimates on the payrolls report and the magnitude of the upside surprises we've had in the last months, the last two months, it is a goat to gauge where the indicators will come in -- it is difficult to gauge where the indicators will come in. lisa: and then it looks at the numbers matter and in other words, how many people are getting laid off and rehired. these are the blows that are massive. we have never seen such a transformation of the labor market. perhaps a dartboard is the best way to play out how this will shake out. jonathan: a huge amount of turn need the surface. morgan stanley and bank of america talking about that. michael capon will join us -- us next,apen will join
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from barclays. from new york city this morning on this thursday morning, good morning to you all. alongside tom keene and lisa abramowicz, i am jonathan ferro. this is "bloomberg surveillance." ♪ the best tv experience just got better
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bob from -- jonathan: from new york city, this is "bloomberg surveillance." i am jonathan ferro. your claims data is about to drop. by a little more than .1% in the s&p 500. we are waiting for those claims numbers to cross. 1.37 5 million is what the street is looking for for the week, period ending july 4. continuing claims, looking for something around 18.8 million, a drop down from the previous month of 19.20 9 million. so looking for improvement.
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here it is. 4obless claims comes in at 1.31 million. slightly better than the median estimate. a little bit of improvement. continuing claims drops to 18.062 million. still waiting for the revisions. improvement we were looking for on both jobless claims and continuing claims. let's use the phrase less bad. it is less bad, still not great. tom: absolutely. morning,y looked this a chart we look at, the smooth four-week moving average of that single one week jobless claims. you're right. it is a smooth recovery but not enough for politicians,
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including joe biden in scranton, pennsylvania. do you see a market reaction? will come inisions a little bit. it was 19.20 9 million, coming down to 18.76. a little better this week compared to last week. thanks getting a little bit better. but i should stress, continuing claims going back to june 27, the initial jobless claims read goes back to july 4. there is a feeling amongst many people that coming out of june and into july, things have started to fade. we have lost a little bit of momentum. this is as good as we can get for the labor market in real time, but a lot of people looking for high-frequency data elsewhere, restaurant bookings, drawing the conclusion the momentum we had going into june, coming out of it is a little bit different. tom: certainly, you see it within the pandemic. you have the announcement in new jersey from the governor and
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masks and what we see down in texas and very sadly in florida, as well. to give us perspective on the dynamic and particular to get to august, michael gapen runs us from barclays capital. do you have any forecast to judge august? >> not a lot right now. we would give a little more credibility to some of these high-frequency mobility data, restaurant bookings. i watch the dallas fed's mobility and engagement index. the claims numbers do not have as clear of a signal for the reasons you discussed in recent weeks, including backlogs and processing paired we are in a very strengths situation -- strange situation where claims really only tell us about half the story. the other half has been a tremendous pick up in the hiring rate. though we are in this odd period where you can have a high level of claims, extraordinary high level of claims, but still have an improving labor market.
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august i think is probably more about covid cases, a willingness to move around still, not so much about what the labor market is saying today. tom: what is so important in that insight is the idea of claims being a one-sided view? can there be a one or two or withthree-sided view layoffs and furloughs? >> short run, yeah. somewhere in the long run, no. there is a tension in labor markets for the vast majority of people unemployed right now consider themselves temporarily unemployed. but even though the labor market has been improving and the number of unemployed has come down, a greater share of those layoffs or unemployed are now starting to be booked as more permanent unemployment. intois gets prolonged august, september, and october, i think, no, that differences in
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name only and we risk a temporary unemployed worker turning into a long-term unemployed worker. and that is what the federal reserve is trying to avoid. jonathan: we are seeing that in the numbers. net change is positive, but beneath the surface, we're starting to see permanent layoffs build again. so many companies in the last one for hours announcing job cuts and store closures. worries about the second wave of layoffs, are we starting to see evidence of it? >> absolutely. there has been a narrative that says business models under pressure, retail is the most obvious case of this, that if firms were thinking of making major transformations over a two to three-year horizon, that those would be brought forward. covid is accelerating some of those structural changes your it firms now have had several months to assess this data play and are now making plans, so we are getting some word in some releases that those plans include more layoffs. i think those are probably
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layoffs to being brought forward relative to where plans would have stood in january and february. lisa: michael, some analysts and traders would say economists are being chicken little right now, and you are seeing this in the economic surprised index and the u.s. surging to a record high as projections come in too low again and again and again, and certainly today with the jobs report. do you take that as a sign that economists are being too pessimistic and sort of accounting for a greater amount marketanent layoffs the will sustain? or do you view it as how difficult it is to gauge a labor market in such dramatic flux? >> i am 6'9" so have never been described as little. but yes, it is true that we have been surprised to the upside. in my view, it has been mainly on the good side of the economy. the good sector can rebound quickly. it has been the case that that has happened, happened in the
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u.s. and globally. spending by households on goods is only a little bit short of where it was in february. that has rebounded. from here though, it is the rest of the economy that will recover and we're going to get continued upside surprises, if so, it has to come from services. while the good sectors recover about half of the lost jobs we saw in march and april, the service sector has only recovered about a third. what we are seeing is the goods sector rebounding quickly. economists are still thinking a little bit more longer-term about, well, this is a service-oriented economy, roughly 70% to 80% over the economy is going, and there are still a lot of aftereffects of covid that could affect the services sector. so we are thinking a little more longer-term, but we have to accept the fact that near-term bounce has been stronger than we thought. rules of engagement, we insult the economists after the interview, lisa. just save it for a couple
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minutes. [laughter] i have a question about the recovery and when you expect it to flatten out. is it a story we should look for at the back end of august, later this summer? >> i think that is exactly right. it happened about two to three weeks quicker than we thought. given the flows and magnitudes we're discussing, it has meant a lot of outperformance. may, june,i think and july will probably be pretty strong numbers. then as you get into august and september, if we're still dealing with coronavirus outbreaks, increased hospitalizations, and backpedaling unfazed reopenings, you would likely see a sloughing off or at least a moderation in the late of improvement from there. that is why i think we and others are still calling on phase four stimulus if needed to help bridge the economy a little further into the year. if we get the phase four stimulus, think it will help your it certainly we would expect a larger sloughing off in activity if we don't. it is a critical piece of the
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forecast, as well as what is happening underneath in terms of covid and a willingness to rehire. jon, i knewclear, that michael was very tall so i knew he could handle be referred to, in a profession, as chicken little. to be very clear. michael, when you talk about stimulus, can you talk to our earlier conversation with a guest about the most effective stimulus that we have seen thus far coming from the u.s. government? been two-fold.as i am going to include some fed policy here as stimulus because it is just emergency liquidity provision, but i think the combination of the ppp, it came late and needed to be re-modified and needed to be up sized, but i think we saw in may and june that it likely helped. i think the ppp at the end of the day has been fairly successful. juste other site of it,
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tax rebate payments or rebate payments to households, plus the unemployment benefits. this is not traditional stimulus in the sense of households have a lot of income and we are trying to add some thing on top of that that was not expected. this is about income replacement. so i think -- i would say number one has been the income replacement on household balance sheet's. and number two has been getting some wage and salary supports to small and medium business through the ppp. those two have been the most important. jonathan: michael, always great to catch up with you, sir. michael gapen. u.s. equities up .2%. positive six points on the s&p 500. datathe latest week's better than the previous week's. of to see claim still north one million every single week, tom, when we got so used to claims coming in in and around 200,000 every single week not so
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long ago, i think it speaks to how far we are from normal. tom: i am going to use my hand here, and for bloomberg radio, we will have to use the visual hand trick, which only works on "surveillance tempo exclusive. unemployment rate high. jobless claims high. really has not come in all that nicely. i say 800,000, maybe that is where you start smiling on claims. we are nowhere there -- near that yet. and joe biden's great and will know that this morning. jonathan: for listeners on radio, i share their pain because i have no return monitor. i cannot see what on earth you're doing with your hands either. i want to know. tom keene lisa abramowicz with jonathan ferro. this is bloomberg surveillance. up six points for the s&p 500. up .2%. later, the former vice president joe biden addressing scranton,
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pennsylvania, groep -- addressing the nation on why he thinks he is the best person to lead this country through the economic recovery which could last well beyond 2021. much more to come right here on bloomberg. ♪ the number of coronavirus infections worldwide is now over 12 million. a fourth of those have been in the u.s. the u.s. set another record for new cases yesterday with more than 59,000. texas and california accounted for almost 40% of them. the supreme court is expected to vote today on president trump's tax records, the issue whether congress and the manhattan district attorney can seek extra trance and other financial documents the president has fought to keep quiet. the president has lost at every step, but the records have not been turned pending a final court ruling. china top democrat blasted u.s. policy towards patient, accusing the trump administration of being driven by a mccarthy style
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paranoia appeared he proposed a blueprint forgetting relations between the two biggest economies on track. he also called for cooperation on the coronavirus. elon musk predicts that tesla may crack the autonomy puzzle this year. but the electric carmakers close to developing self driving vehicles. tesla is in a race with alphabet, general motors, and others to develop a100 percent driverless car. and dropping down from world's richest, eights place on the bloomberg billionaires list, the lowest warren buffett has been since the index started in 2012. you can blame his generosity and part, giving way almost $3 billion in berkshire hathaway stocks this week. he has also been passed on the rich list by check billionaires. 24 hours a day, on-air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in
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over 120 countries. i'm ritika gupta. this is bloomberg. ♪
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economic recovery clearly bottomed. some good news in our view is that we bottomed a little bit
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less down in the united states in terms of the economy. it did not dip quite as much as we were fearing. but the real bidding process, it is not clear to us at all how this is going to go -- they reopening process. jonathan: it has been really difficult to understand the magnitude of the balance, and many people have underestimated it. still in the monster come, people think that recovery will flatten out -- in the months to come, people think a recovery will find out. mike wilson of morgan stanley, looking forward to catching up with him on bloomberg tv in about 42 minutes. that is coming up later. tom: for all of you on global wall street, i cannot say enough the importance of this subject o,om mr. wilson with jon ferr cannot say enough about the timeliness of the futures pretty much flat. you wonder, do futures come on today? then the market opens, does the market come on today with tech moving upward? right now, without question, with a backdrop of brooks
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another yesterday and today and who knows what tomorrow, bankruptcy is front and center. there is a lot of hot air about it. ubs has cleared the hot air. matthew mission with a terrific -- matthew mish with a terrific essay analyzing bankruptcy and credit default dynamics as we move into q3 and q4. we are thrilled that mike mish can join us this morning from chicago. matthew, congratulations on a really adult report on this dynamic. i want to go to the revenue dynamic. do companies get in trouble because of a lesser profit or do they get in trouble because their revenue drips away? which is it? cfof you look at the new survey, richmond fed survey, the latest data point very clearly shows revenue is the number one concern. revenue, the shape of the
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recovery in the economy. third is, interestingly, cash flow and liquidity. that is the answer we would give. revenue is critical. for some companies on average, downre seeing 15% to 20% for this year for a small sliver of companies, about 10%, they expect revenues to be down as much as 50% this year. there is only so much you can do with margins. on the bottom line, when you see those kind of numbers at the top line -- those kind of declines of the top line purely certainly we have seen that with retail bankruptcies reaching a record high in the first half. i'll sing a big degree of bankruptcies in the health care sector, as most consumer discretionary. there is a tension in markets with narratives about free money, the federal reserve pumping liquidity into the system to lower borrowing costs. then a lack of revenue leading an increasing number of companies into bankruptcy. quiddity staved
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off bankruptcy permanently? and stalled out the cycle and bankruptcies? >> it certainly has helped. i do not think it has fully solved the issue. you are alluding to is the liquidity versus solvency debate, probably one of the biggest debates we have with clients. if you look at our model, there are three key inputs, and they are diverging. first is liquidity, which is measured by basically cp and short-term funding rates, and the fed has gone to great lengths to try to collapse those rates and increase funding and the banking sector. the second is lending standards, and what you have seen is the fed, despite the fed loan programs not really having significant uptake, as we talked about previously, they have been able to provide confidence to the market and have allowed investors to rebalance portfolios and provide liquidity companies.ng to
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the piece that is going the other direction is leverage, obviously a function about topline line revenue weakness. at the end of the day, the increase in leverage is driven by lower earnings. we were at record levels of leverage going into the covid-19 crisis. now that those neighbors are going to clearly push up in q2, as we will see in a few weeks, and q3, the big debate is, which is going to win? from our side, the short answer is, it is mixed. the fed has helped, but that cannot solve all ills. some of the bankruptcies you have alluded to recently, and brooks brothers is a good example, obviously, retail pre-covid was under structural pressure, and then the introduction of work from home puts a significant hurt on business models like that. the other underlying story here is what you have seen from fed speakers recently, which is the concern and the default and bankruptcy side around the size of firms, with small firms, sme's, being much more of an area of concern because it is
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harder to get liquidity into the system and get into the cracks and help small businesses the way you can help large mega cap companies. lisa: one thing that is so great about your research as you do these surveys were you talk to cfo's across the spectrum of companies. what have you learned in terms of where we are in the bankruptcy cycle? where do you weigh in on that debate in terms of how many more bankruptcies we are going to see over the remaining six month of the year? four month, five months -- where are we, july, that is right. >> let me be clear, we have trailing u.s. speculative corporate default rates 3.5%, and we see that rising to about 9% close to year-end. we have not moved that target in the last month or two. the debate is increasingly on with the curvature of the default outlook looks like for 2021. we have rates that are moderating early next year through the first half toward 7%. we essentially think the market is pricing in about 5.5% to 6%
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default rate. so we are above the market. we think -- it is not night and day. from the survey side, i will give you the most interesting data point in the most recent cfo survey. the fed is working to improve lending standards. thefiscal programs like prior speaker spoke about, the ppp loan programs, main street lending facilities, those are a step in the right direction to provide companies with liquidity, a bridge essentially to a recovery. you see that in the underlying data. having said that, even though companies feel like there is a lot of support from the government with loan programs and lending standards are not tightening nearly as much as we feared, we have 18% and 25% of firms that noted they were very or somewhat likely to miss a loan payment over the next 12 months. i think the bottom line is liquidity is helping at the merchant, but solvency concerns are still front and center -- liquidity is helping at the
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margin. in the next few weeks, what we are really watching is really the leverage loan firms, those smaller firms and middle-market firms, because that is where we have seen initial indications that there is stress that is not being relieved by the fed. that is where we think default rates could pick up aggressively. if we are wrong and not negative enough, that is the area of the market we are looking at in terms of the upcoming reports. thank youew mish, so much. ubs to get go to this important report by matthew mish and his team. jobless claims, yeah, little bit better, but it is really fractional. i see a little bit of a bid equities across spx, particularly nasdaq 100, the tech index, up again, another stunning .6%. i would watch bonds and particularly watch our coverage
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across bloomberg radio and bloomberg television today and the speech of joe biden in scranton, pennsylvania. please stay with us through the day. this is bloomberg. ♪
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♪ jonathan: from new york city for
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audience worldwide, good morning, good morning. "the countdown to the open" starts right now. we begin with the big issue and we begin with jobless claims in america. for unemployment benefits in america falling last week by more than projected. another positive upside surprise. this after several large states reported a pickup in coronavirus cases and it raises a huge question. it still speaks to labor market pain and the question ahead of november, who is best placed to lead the country out of an economic call -- out of an economic hole? voters still seeing donald trump as best handle the economy. give today joe biden will an economic address from scranton, pennsylvania. a top aide saying this will be the largest mobili

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