my administration is recommending that all americans, including the young and healthy, work to engage in school and work from home, i possible. down,global cities shut upending the way of life. airports request tens of millions of dollars -- airlines request tens of millions of dollars to stay alive. u.s. equities leading to outside swings in markets. welcome to "bloomberg daybreak" on this tuesday, march 17. i'm alix steel. let's take a look at where we stand right now. s&p futures up by about 61 points. at one point, we had the rally. then we saw decline. now we are back by almost 3%. we were limit up early in the morning come up officially see and more stimulus coming from d.c., promising it hundred $50

billion. that is the rumor -- promising $850 billion. that is the rumor from secretary of the treasury steven mnuchin. crude also recovering. we still have a two handle, all after the vix hit a record monday. time now for global exchange. we are going to bring you today's market moving news from all around the world. from new york to brussels, washington, and berlin, our bloomberg voices are on the ground with this morning's top stories. futures trimming early gains this morning, then rallying. here was more in new york is bloomberg's annmarie hordern. walk us through some of the action so far. annmarie: as you said, we hit limit up on those futures. we then went lower into negative territory, but now back in positive territory. it does look like the bears are

in control of this market. the biggest plunge on markets since 1987. in europe, similar story. we were seeing a lot of gains, then went negative. right now on the stoxx 600, we are about flat. we are seeing some massive gains on the losers, and the gainers losing double digits. we are seeing treasuries and the yen, classic safe havens, selling off of it. everyone talking about this idea need to liquidate to put money towards cash. i want to look at commodities right now. gold is having a rough morning, down 2.5%. just a week and a half ago, we were at $1700 announce. brent this morning dipping below $30 a barrel. goldman sachs saying it is going to be $20 a barrel, possibly. they are saying oil use is down

8 million barrels a day. alix: thank you very much. now let's go to europe. governments tightening curbs on free movement to curb this to him the virus. joining me with more is maria tadeo. focus through what the g7 call will be like and what steps governments are taking. maria: we have seen a real escalation in the tone after that g7 call. european leaders saying this is a very serious situation. we are going to see very serious economic repercussions. the language from emmanuel macron pretty stunning, now saying we are at war. the enemy is invisible, but we are anymore. some of the government's bringing out heavy artillery. the french government saying it will provide huge credit lines for french companies so no one goes bankrupt. we are also hearing from the government that they considered nationalizing companies. europe has made it clear they want companies to stay protected and also sovereign.

we once again expect eu leaders to meet in a conference, where we are very likely going to get a travel ban for everyone coming into europe. they will not be able to do that for the next 30 days. the goal is to contain the virus and really try to seal the borders of europe because the reality is the numbers did not look good, and we are seeing cases climb pretty much daily. alix: thank you very much. in washington, president trump shifting his tone on the coronavirus, warning now it may last months. pres. trump: if do a really good job, we will not only hold the deaths down to a level that is much lower than the other way had we not done a good job, but people are talking about july, august, something like that. alix: joining me now's emily wilkins, bloomberg government congressional reporter. a definite difference in the town, but what is on the docket? when is the senate going to pass

this relief bill? bill? -- emily: we are looking at the phase two bill that includes some expansion of insurance. that one past the house last week, repast to the house with clarifications yesterday, and now moves to the senate. senators yesterday were urged by the white house to make sure they are moving this package quickly. also today, treasury secretary steve mnuchin will be on the $850 billion an third phase package for the coronavirus. what is going to be in that remains to be seen. obviously there are lots of different potential things that could be in it. democrats are going to be putting out their own proposals. we are going to be watching to see how that exactly shapes up

and what more is needed beyond that because we are starting to see industries come forward like the airline industry and say we are going to need some sort of boost from the government. alix: thanks very much, emily wilkins of bloomberg government. president trump also vowing to help industries hit by the virus, signaling out airlines. overall, earnings forecasts for carriers are collapsing as trouble curbs dent demand. joining us is bloomberg's benedikt kammel. walk us through what steps governments have so far taken to support the industry. ikt: airlines are coming to the government, asking for help. we've heard from smaller carriers, discount carriers, asking for help. if this continues in the way it has for the next couple of weeks, we will see mass bankruptcies roll through the industry. already, i'll italia, which has been a weaker -- already

alitalia, which has been a -- weakerlong airline. aig says they don't want government aid at the moment. they want to keep some room to maneuver and see how this plays out. maybe they want to keep that independence and pick up weaker companies after the storm has blown over. really, the camp is very much divided into two right now, those who desperately need help, and those who think they have the strength to see it through. we are also seeing it ripple through to the manufacturers, boeing needing some aid, and airbus halting production at facilities. alix: thanks very much. here in the u.s., retail sales for february out at 8:30. michael mckee has more. walk us through the data and

what the funding market is all about. how are we doing? michael: the retail sales numbers out at 8:30 might capture a little bit of the virus. this is february data, and we are kind of in the shoulder season. late numbers might influence the data, but i am not going to bet on it. but if anything, it is going to show in grocery stores, obviously. if you have been in a grocery store lately, you know grocery sales have been good. everything else has been down. before the virus, oil prices were going down anyway. gasoline prices were going down. we measure retail sales in dollars, so that could see a slump overall, even before the virus began. interestingly enough, even though jay powell says things were strong going into this, we have been seeing a slump. we also get industrial production numbers today. obviously, that was in a slump, although people had thought we might be recovering on the china trade deal.

we will see if there was any truth to that in february. finally, the jolt numbers we are going to get today, it is two months old, but the last time it came out, it was a huge slump. the question is, are we going to see that reverse? is there going to be some sort of explanation, or are we beginning to see the first signs of labor market tracks -- labor market cracks? alix: thanks for that. credit markets keep slumping, a troubling sign foglobal policymakers trying to prevent a surging corporate failures. check this outcome of the spread between junk and investment grade debt. it is now it the highest in about four years, and turmoil is hidden lower rated companies the most. many had binged on cheap money in recent years, and many of them are energy companies, which are in dire straits, figuring

out how to pay that debt and restructure quickly. coming up, more on your morning news and your analysis on the markets in today's first take. this is bloomberg. ♪ ♪

alix: some breaking news for you. the lme is planning a temporary close of the ring from march 23. this also comes on the heels of sri lanka in the philippines shutting down their stock exchanges. tore is a conversation as you need to shut down exchanges. many say no, that liquidity is important, but nonetheless, they are trying to crimp the big volatility and the lack of liquidity we have seen in the markets. let's get to the bloomberg first

take, where we give you the news and you get the trade and analysis of the markets. michael mckee is with me on set, damian sassower, and mike mcglone joining us remotely. mike mcglone, i've got to start with you because it has been a safe haven today, but yesterday --was -- it's been a dumb it's been a dump safe haven day, but yesterday it was a safe heaven rally. mike: people are getting bids in anything they can. as far as all the commodities on the planet, it is down 3%. me, when gold goes down in an environment like this, watch out for other assets. that's why i am still very concerned about the primary asset, the stock market, the s&p 500. potential to close markets,

please don't do that. we have enough uncertainty. they did that at the onset of world war i, and it turned out to be a big mistake. alix: if we pivot to gold for a second, does that speak to the lack of liquidity in the bond market? it seems like maybe the fed has helped stabilize that, but now it is in the equity market in a big way. yeah, good morning. the moves last night were nothing short of spectacular. we saw euro-u.s. go to an all-time wide. same for the yen, same for the pound. there's a relentless demand for dollars offshore, and now this morning, there were only two currencies up across the whole of developing and emerging markets, the brand and indian rupee. maybe the hong kong dollar is flat. but as we discussed yesterday, what that does is it is almost a

tax. it reduces every amount of stimulus being injected across the world by local economies. michael: i'm got a chart of exactly what damien is talking about. alix: of course you do. [laughter] michael: but take a look at what is happening here. , and the spread has gotten wider as more demand for dollars has come in. look at what happened today. it has just loan out -- just blown out. the question is, and maybe damian has a better view on this, where is the strain coming from? the fed did establish the swaps were lower, but that is only with five major banks, so i am guessing we are seeing demand from leases like south korea and emerging markets that don't have the swap lines with the fed. damian: i think that's exactly right. emergingened is markets borrow from other developing markets, specifically

japan, where it really all originates. esty have the cheap funding cost excluding the dollar globally. it is really being drawn from the periphery, from the emerging markets, for sure. alix: so how do we fix this? michael: i am just going to keep doing charts all day here. [laughter] alix: that's all mike does, everybody. michael: this is commercial paper, and the spreads have blown out on that. people are saying you've got to go to the fed. the fed has to set up some sort of facility for commercial paper. we will see if that comes true. there are suggestions they were working out some thing like that, and could expand the swap lines as well. when you are looking at the functions of the market, you are still talking about the central banks and whether the fed can do anything. we talk about congress and the administration. they are going to be on the fiscal side, but the plumbing, you've got to call roto-rooter

down at the federal reserve. alix: for sure, and all of that weighed on what we are seeing in volatility. we are at 79 on the vix. did you ever think you would see that kind of vix again? mike: the problem i have with we are in the vix is a major issue of potential volatility mean reversion. it is just starting to recover. 2018 was the lowest level ever. , 2007e precedent for this and 2008. that is my major fear. to me, that is the bottom line driver, and that is why a lot of meane are looking at this reversion as indicated by the vix and the stock markets at 50% retracement.

on a 52 week basis, that is kind of normal. typically we drop 40%, 50% during a recession. right now, we are only down 14%. michael: that is the question, what are the odds of recession? they seem to be growing. the longer we are shut down and the more we are shut down, and you look in san francisco, where no one is, in theory, allowed to feel fore can't get a how long the recession might go on. normally, you have recession because excess builds up in some areas like inventories or something. in this case, there is no roadmap. alix: wrap all this in for me, have the funding markets dresses -- the funding market stresses that have not been solved all. damian: with all the funding

stresses, we could really use some help with the fed to window today. the vix above 30 is high. above 50 is uninvestable. really0, this is a painful market. i think today, it is going to be more safe haven buying, but the choppiness in equities overnight , we were limit up, limit down. i am definitely keeping one ear to the ground for some sort of stimulus. mnuchin mentioned the possibility of an $850 billion payroll cut. we are going to be that for sure to avert recession. but i think it is at this point unavoidable. i think the u.s. is teetering on the brink and is most likely going to plunge into recession. this is the base case for most wall street banks this morning. alix: guys, thanks a lot. really appreciate the round up. damian sassower in my book loan -- and mike mcglone joining us from home, and michael mckee joining the onset.

canou have a terminal, you browse the features and save the charts. gtv . this is bloomberg. ♪ s bloomberg. ♪

viviana: you are watching "bloomberg daybreak." we begin with amazon. the e-commerce giant hiring 100,000 people because it is overwhelmed by demand triggered by the coronavirus outbreak. plus, u.s. workers will get a t wo dollar an hour raise. banks with eight big u.s. planning to tap the federal reserve discount window, a move aimed at ending the long-standing stigma of using it. the window is meant to provide emergency liquidity to banks that otherwise have healthy balance sheets. banks have been reluctant to use the facility because of the reaction it can provoke among investors. that is your bloomberg business flash. alix: thanks so much. for more on banks, joining me is

marty mosby. yesterday, financials in the s&p the second worst sector. why did they get so hard in relation to other sectors? inwe had this happen 2016 and 2018 be. investors still look at banks as uninvestable going into recession. whenever there is fear or probability that we are going to enter into that phase, every investor tries to get out of banks. that is the knee-jerk reaction we go through. regardless of the stability of capital that has been built over the last decade, the last memory of recession was pretty bad, and investors don't want to be exposed to that going into the next recession. alix: i am guessing you don't necessarily think of that is the right thing to do.

do you look at this as a buying opportunity? marty: because it is the first sector to go down, it is the last sector to come back. we don't have to be guessing when we come in. we will have stability. we will have other sectors coming off the bottom because investors were opaque -- investors rotate back to them late in the game. once we have this opportunity, we will be able to see it and take advantage of it without much risk. alix: can you give me the breakdown in the regionals versus the big banks? they are going to focus on lending, tap the discount window to show that it is ok to tap the discount window. marty: when you look at this, there's two things that hurt banks. in the next recession, first thing is low interest rates, which you've already gotten. we are down to zero again. that is really what hurts earnings. it is manageable, but it is an

earnings impact. we were already seeing the impact of low interest rates before this last 150 basis points. that was driving earnings down 5% on average for the bigger banks. look at what's happened now we are back to zero, that is probably another 10% hit to earnings. we are probably somewhere 10% to 15%, depending on how the assets of the bank is. that's what really hurts the super regional banks. the other piece is going to be credit. where are we going to see the credit cost start to rise precipitously? there has to be some impact to that, and especially given the accounting change we just had, that will affect a lot of these bigger national overall money center banks. they are going to have to have of these international exposures. they are going to be singing about what does their loan portfolio look like -- going to be thinking about what does their loan portfolio look like. alix: once we level out, is

there one stock that needs to be on your shopping list that can whether those issues a little better than others? one of the ones you can really jump into that we talked about, and it does well when we have some of these rebounds on the positive side, is morgan stanley. they have less lending exposure. they have some income exposure. it is really the one you can pick out as, ok, if i want to get in financials because they are so cheap, from a price sustainable value, it is the best bet off the bat. alix: thanks a lot. really appreciate it. coming up on the program, volatility rains as the vix spikes to -- volatility reigns as the vix spikes to levels never seen before. this is bloomberg. ♪

alix: this is "bloomberg daybreak." let's get a check in on the markets. it was a really rough day yesterday. you saw the biggest loss in u.s. equities since 1987.

today, it's been some very with the action -- some very whippy action. the river now is we might be looking at $850 billion stimulus in phase three from the government, helping to lift equities. not so much helping in europe. european stocks still off. the dax off by a full 1%. btp's are over 2%. step are a lot of calls to in and helped stabilize the bond market in italy. switch of the board, and you can see where we are seeing the movements here. stronger dollar, that's the name of the game today in the g10 currencies space, contribute into a deeper curve. the vix, i mean, 80. anydo you invest in asset class when volatility has picked up so much?

president trump took a more cautious tone on the virus stoppedy morning, but just short of saying it will plunge the u.s. into recession. pres. trump: it may be. we are not thinking in terms of recession. we are thinking in terms of recession. i think there is tremendous pent-up demand, both in terms of the stock market and the economy. once this goes away, once we are done with it, i think you are going to see a tremendous surge. alix: morgan stanley, on the other hand, says global recession is now their base case. "while the policy response will provide protection, the underlying them at from both covid-19 and tighter financial conditions will deliver a material shock to the global economy." joining me was a closer look is mike mckee, bloomberg international economics and policy correspondent. michael: it is a grim kind of picture. treasury secretary steven mnuchin said he didn't think we were going into recession either.

wall street's collective reaction to that was, are you kidding me? look at the probability for recession now, and i did you percent -- recession now, 92%. it is almost the baked in assumption now on wall street. the question is how long and how severe it is. one person said to me, it is really going to depend how many companies go out of business during the time they are shut down. we don't have any data on that, and that is the hard part now. normally in a recession, you can say there were signs. the only sign we have had so far, the entire manufacturing index, and he reported on this yesterday, i giant slump. the biggest one-month drop ever for the empire index. it is sort of a preview of where we are going with this. so what do we do now? we watch the other data that will take a little while to come in. the national journal of economics is the one that declares whether or not we had a recession. it is more sophisticated.

they will be looking at these things. gdp, which we haven't gotten for the latest quarter. personal income, payrolls. they were good going into this. industrial production. we get a never today. wholesale sales. that is something to look at. we were in a strong position going into this virus, but watch these numbers as the months go on, and we will see if they slump. the mbr says there's a good chance they could call recession by the end of the year. the like to take time to see the numbers come but they are expecting the numbers as well to look bad very soon. alix: michael mckee, thank you very much. going me now, mark connors, credit suisse global head of risk advisory. do using the markets are appropriately priced for some kind of recession, credit crunch, etc.? mark: good morning. --is definitely getting back

definitely getting there. markets were not pricing this in at the start. interest rates, as we said, have been the canary in the coal mine. the stepwise function, as one of our analysts said, that we saw in late february into march really set the stage for equities all year. it was sending a signal that there was a new regime coming in. what we are seeing now is no longer in the markets that we normally look at equities and rates. it is all about funding markets now. it is how assets are clearing. to take a page from what our economist james sweeney said, when you want to look at michael mckee just said is the duration or scope of this, you have to look at china and what happened in the economy. there was a supply chain shock. a supply chain is a payments chain in reverse, so that means

there's dollar issues. it is it the complex issue, but it is a supply-side issue, so it is less to do with financing. alix: that is a really interesting point because that means what the fed then did, which they basically are helping relieve stress swap lines, that is not going to fix that problem. the supply issue is in emerging markets. we arene thing definitely doing is making sure everyone stays in their lane. james' domain a little bit. it was a not necessarily sufficient action. not everyone has access to those lines. but it definitely was a crucial part of policy, which is really going to be driving markets going forward. alix: let's stay more in your lane, talking about liquidity.

is there sufficient liquidity in the market? jp morgan the latest saying that the crash in the critique leads to outside price impact, a strong driver of market volatility, and the speed of the plunge over the last couple of weeks. liquidity has played a role, especially towards the close. in the last couple of years, anywhere from 22 to 28% of volumes happen in just the last half hour. when there's a scramble, sometimes singling liquidity will have outside moves. definitely the case. alix: how does one invest in an outside environment? mark: there's not a lot of information you're getting from single name equities right now. they are being bounced abound by liquidity and technicals.

have then't information, you stay low to ground. alix: do you just need to step aside? mark: that goes back to what michael said about the duration scope. i am going to step back and look -- whatjonathan got up jonathan is saying. i don't think he is saying get out, get your portfolio out of the way. it has to do with really shock and the duration of what we are seeing with the slow down mandated by governments. alix: when you put it all together, what are the hedge funds doing? how are they looking at all this? what is interesting is, for a lot of them, their portfolios have worked. secular,een long the

thatology driven names some would say -- [no audio] mark: -- and some have made money. have cut the decline in equity markets quite well. but on balance, most hedge funds are down, but outperforming the market here. alix: that is a good distinction. just because you are down doesn't mean you are underperforming. from here, is the theme put money to work, or wait? what is the overwhelming thought? that all leads to how do we find a bottom. it feels like rates were leaving now have but rates

higher lows. mark: we are looking for rates to hit a baseline. i think you and i spoke about this a few weeks ago. when we find that stabilization, if you are in the mindset, and i think there's a lot of evidence to support that we will be in a low rate regime for a while, equities will do quite well. but we have to base, and we are clearly not there with the down 12% yesterday. commodities have not based yet, given what is going on in some of the pressures. there is still some deleveraging going on there. there's a self-correcting mechanism in the market. when we have these moves, exchange margins increase, more deleveraging may happen. when that happens, then equities will find a home. alix: i am going to show a chart i will describe to you, the vix curve on the terminal. there's an orange line here that shows how the whole curve has

jumped and re-rated in just one week. the blue line is just a week ago. it is not only the front end where we have seen the jump to 80, but also all the way out to june, we have seen an increase to 40 from about one week ago. when you look at something like that, what do you learn? mark: it is about expectations. the vix is a good indicator. i sent lower curves can move pretty quickly. specialist who's been on your show talk about it. i think if you look four days ago, people were not expecting these kinds of moves. i will say this on st. patrick's day, that this was the day within the last two days that people realized this was not going to be a one-week movement. i think the curve shows that people are pricing in that shock and expectation out to june. i think that is what i take from

it. not that it will be bad through june, but it is more about the experience today. alix: that is a great distinction, mark. really appreciate it. art connors of credit suisse, thank you very much -- mark connors of credit suisse, think you very much. we want to get an update on headlines. here is viviana hurtado. led statehe president and local leaders to take the initiative in the nation's response. now it is up to the u.s. senate. today, the republican controlled chamber will take up a u.s. house bill that alleviates some of the economic consequences of the coronavirus outbreak. it includes paid sick leave. emmanuel macron told the french people, "we are at war." the french president making the case for shared sacrifice in the fight against the coronavirus. hotels and taxis will be repositioned for health workers.

this puts macron's policies on pension reform on hold. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: thanks so much. coming up, ray dalio thinks european stocks will continue to sink. he's betting on that in a big way. more coming up next in today's wall street beat. if you have a bloomberg terminal, check out tv . click ononline, our charts and graphics, check out anything you may have missed. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, bill

dudley, former new york fed president. ♪ viviana: this is "bloomberg daybreak." elon musk signaling tesla's auto plant in fremont, california will stay open despite a san francisco bay area wide lockdown. he is telling employees to come to work only if they are comfortable doing so. mr. musk says he will be there. now to exxon mobil. the company is likely to cut spending significantly. the coronavirus outbreak and the crash in oil prices hitting the company. the ceo calling it an unprecedented environment. for the first time since 2016, s&p lowered exxon's credit grade. two of the largest american

largest american theater chains will close for -- will close. mc will be shut down for six weeks. alix: dalio betting against europe. the world's largest hedge fund has built a $14 million bet. then, jp morgan's trading system fails again. the firm's institutional stock trading platform broke down as orders flooded during last week's historic market rout. and you've got 30 u.s. energy companies looking for ways to raise new financing as virus concerns grow. joining me is bloomberg's sonali basak. let's start with ray dalio. horrible month so far, but this could be an interesting bet. sonali: remember back in

-- that he told cash is trash. be a bunchappened to of coronavirus will en route countries -- coronavirus riddled countries where they are talking about nationalizing these complete. he may be hedging some positions, but we've seen him do this before, back in 2018, where he took big bets against individual german companies. alix: europe was already struggling to grow anyway, so that is a double whammy for them. let's get to the second story -- i forgot -- jp morgan. [laughter] systemp morgan trading was the third, second? sonali: the second. the first time around was involving both clients. this time, institutional clients. very interesting to see at jp morgan,with a are -- jp

where they are edging to beatty biggest. trading -- to be the biggest stock trading firm in the world. the value we saw and a lot of the trading days last week was what caused this issue. alix: and not alone. we talked about robin hood, but that was at the lower end. but this is jp morgan. our other banks having these kind of issues? sonali: that is to be seen. , they didn't have the same kind of demand. jp morgan spent a lot of money on technology, so it is a little ironic to see this happening back. alix: let's get to energy company trying to figure out what they are going to do for cash. there's a bit of distinction to be made. duke energy is a utility. they have a lot of funding needs. chesapeake is a penny stock.

energy berkshire is one of them, along with duke energy. people have a real difference in the way they look at energy companies versus, say, airlines. energy industry, they believe, will have a much longer pain threshold. then you have other companies, private equity backed, that may be on the road to bankruptcy here. alix: that is going to be pretty brutal. i guess the question is, what is the exposure for banks? what is the risk? what is the opportunity? sonali: the bankers immediately are turning to what they think is a really big issue here, which is the airlines and the retailers, and the other things issuese more tied to the with saudi arabia and russia, and the fact is, they don't

really know when oil will really come back, not to mention there's a bunch of sustainability issues. alix: in terms of a duke energy, which doesn't have any oil exposure, they are just a plain old utility. they just need a lot of money to fund operations. if that market gets disrupted, that has a lot of other issues, regardless of what happens on a macrolevel. sonali: i am definitely talking to the restructuring efforts more than i am talking to the traditional bankers, unfortunately. on top of that, where is the private capital? they really got burned last time around, so the distressed players are really being turns to at this point in the road. alix: we are talking to one later. bloomberg's sonali basak, thank you very much. and we are going to take a look at hand sanitizer storage. the parent company behind g chy will- behind given

now make hand sanitizer. hydro alcohol gel will be given to french health authorities for free. meanwhile, facilities in the u.s. on the u.k. are also getting in on the act. there will be hand sanitizer that smells like piña colada or margarita. out, tune heading into bloomberg radio across the u.s. on sirius xm channel 119 and on the bloomberg business at. this is bloomberg. ♪

alix: time for trader's take. joining me as damian sassower were of bloomberg intelligence, taking a look at some credit spreads. damian: we were talking about this yesterday, looking at the market value of negative yielding debt in the bloomberg i graded index -- bloomberg aggregate index. you are actually seeing the market value decline simply because of the relentless move in investment grade credit spreads globally. again, nothing short of spectacular. what you are looking at here is the bloomberg barclays ig index on that having blown out to 242 basis points. let's be clear, that was below 100 basis points back in january, and that is up 19 out of the last 20 days. you have seen spreads widening in ig corporates. persistent, relentless, all of

the above. -- doesis is provided this provide any dislocation? damian: this is becoming a balance sheet story for banks who don't want to intermediate in markets. while you get a bit of primary connectivity yesterday, if you just look at one of the largest we's covering u.s. corps, broke 500,000 contracts largely so markets are, resetting probabilities across the whole of ig credit. alix: where is it worse? what about asia and developed markets? damian: from a sector perspective, the bleeding is worse in energy, and banks as well, but really, it is universal. withinill he say haven ig credit right now. alix: really appreciate it. damian sassower with his trader's take for the day.

coming up, bill dudley, former new york fed president, will be joining us. within the markets, with -- within the markets, whippyt action -- within the markets, whippy is all i can say. you can see where the safe havens are jamming out here. you have the dollar index over 1%, by far the outperforming the g10 space. spread, 30 basis points. the vix still around record highs, 81. how do you invest in the market? this is bloomberg. ♪ when you move homes, you move more than just yourself.

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daybreak" on this tuesday, march 17. i'm alix steel. let's take a break from the top. pres. trump: avoid discretionary travel and avoid eating and tricking in bars, restaurants, and public food courts. pm johnson: we are asking to do something that is difficult and disruptive of their lives. >> we are asking for all other countries and regions, we will be issuing the traveler. >> the enemy is there, invisible and moving forward, and that will affect our day-to-day life. alix: world leaders clamp down to tempt on the virus. pres. trump: my administration is asking all americans to engage in schooling from home when possible, avoid gathering in groups of more than 10 people. alix: stark reversal for president trump, who as late as sunday, was calling for calm.

pres. trump: if we do a good job, we will not only hold the deaths down to a level that is much lower than the other way had we not done a good job, but people are talking about july, august, something like that. alix: thing san francisco bay area -- the san francisco bay area is requiring people to stay home. >> we will announce additional legal orders that apply to all seven jurisdictions, covering silicon valley in the core of the bay area region. alix: this leaves governments on the hook to do help to distressed -- to help distressed industries. airports, airlines, and boeing requesting tens of billions of dollars in aid, while italy is weighing a potential takeover of alitalia. >> we are hearing that if this continues the way it has for the next couple of weeks, we will see mass bankruptcies roll through the industry. already, alitalia, which has

historically been a weaker airline, they are going to get nationalized by the italian government. alix: world leaders try to work together to fight the economic impact of the virus. >> the real escalation in the tone after that g7 call, european leaders now saying this -- now saying this is a very serious situation. alix: companies try to wait out the slump. >> china shows that the crisis can diminish. it is tough, but it can be managed. alix: volkswagen dropping 40% in just over two months, just one stock pummeled in the global selloff. >> it does look like the bears are in control of this market, especially considering what we are coming off from yesterday, the biggest plunge on wall street since 1987. in europe, a similar story. we are seeing a lot of gains, and then we went negative. alix: sri lanka and the philippines shut local financial

markets, while other countries been shortselling in stocks. uninvestable is what some are calling the market right now. how do you invest when you have a vix over 80? action, whippy particularly into the close. we are flat on the day. the dollar outperforming in the g10 space, a stronger dollar despite the swap lines trying to alleviate some of that pressure. a little bit of selling in the back end of the treasury market come of it not as we so just an hour ago. andds up six basis points, handleat $28, the two coming in strong for oil. print is now seem to follow level of $20 and the second quarter. $1.14 trillion. that is the amount of dollar stimulus measures taken around the globe. in europe, france and germany taking action as well through hundreds of billions of dollars worth of stimulus. putting me now is nathan sheets,

pgim chief economist. sorry you can't be here with us on set. what you've heard so far from governments in terms of what they are delivering, is it enough to push off a global recession? nathan: the central banks certainly come to the table with the big ammunition. i think that is very much in the spirit of 2008. but as you say, we need to see a lot more on the fiscal front. the $1.1 trillion or so that has 1% ofnnounced his maybe a global gdp, and i think we are going to see that scale up maybe by an order of magnitude. then i think that needs to be coupled with a very vigorous public health response. once you put all of that together over time, and i would

add was a little bit of luck, that might be enough. alix: morgan stanley came out with a new today talking about the policy response. "the underlying damage from the covid-19 impact and tighter financial initial's will deliver materials shock to the global economy. mark connors of credit suisse said, "we are dealing with a supply shock, which is just a stock."payment how can any stimulus or central-bank action solve for that? nathan: i think that is exactly the problem, and that is why it is not going to be sufficient on its own. the fiscal can help put money in people said -- a money in people's pockets and allow them get spending to break this dynamic of the spread of the virus.

are right andists the epidemiologists are correct, hit 60%ng is going to or 70% of the world's. the economics of that are going to be absolutely devastating. what we need is for this virus to respond to warmer temperatures. when i look around at the incidents of this around the world, it does seem like there are fewer cases in the southern hemisphere. so maybe it will, and that will give us a break. or we need to find a way to get a vaccine. if this is really going to , apagate, and in fact sizable faction of the earth's population policies are going to be helpful, but the economic consequences for it are going to be severe. i hate to be so bleak. alix: no, it is really helpful.

you have been in the market for a long time, and you have seen disruptions, whether 9/11 or the recession or tech bubble. i want to point out the libor, with the biggest jump since 2008. it is up over 16 basis points. how do we deal with that? regardless of the stimulus, regardless of what the disease is actually doing, the cross currency basis is continuing to blow out. three month libor spiking up at a 12 year high. how do we fix that? nathan: during the global financial crisis, it was massive central bank liquidity billionss, including and billions, hundreds of billions being distributed under the feds swap lines. i think we will see the outstandings under those swap lines accelerate over the next few weeks. i think underneath this tension we are seeing in the funding

markets is a concern about what is going on in the credit markets. paper, asset-backed securities, even planes and corporate bonds are fueling the pinch. it is much harder for the fed to operate in those markets under the constraints of the federal reserve act. during the global financial rolled up --ed said if you keep making losses on this, we will make you hold. i think those kinds of facilities are what is needed now, but it is an issue to what extent the fed will be willing and able to take credit risk onto its balance sheet. alix: indeed, and that is the bigger, broader question. when you are a market participant, do you need to continue to de-risk and/or move into saver assets?

what is the right strategy with all of this in the backdrop? nathan: the challenge is that on the one hand, i think many investors look at the curve twice as well depending on what fundamentals are likely to be on the other side. so there's some attractive opportunities for the market. but then you've got the second layer, which is the liquidity issue. -- one, people who want to, are they going to be able to buy liquidity? those who do are very reluctant to part with it because they may face reductions, or they may need it down the road for some other reason. coupling of the uncertainty about the fundamentals on one hand, which maybe looks ok at these prices, maybe not, but it is liquidity issues that make this so hard to invest.

question manya market participants say absolutely not to yet. do we need to shut down trading, shut down the exchange? we've already seen short trading limits in france and spain. sri lanka and philippines are shutting their exchanges. would that do anything for us? nathan: i think there is a mounting case for a national and for theobal quarantine next several weeks. include the closure of financial markets. i think that might be the best eradicate this virus in a aggressive way. for thishe worst case psychology of the public around the world, certainly the worst case for the markets, is for this to drag on like it is now

they after day for an extended period of time. so i am increasingly convinced that those kinds of dramatic, radical actions are justified, at least that serious policy proposal. alix: thank you for your perspective. most people would say we will never do it, so it is good to get that deeper insight. if governments were to start cutting checks to people, does that help any of this sort of demand/supply shock and keep the engine moving? or are we way past that point. if the government moves down that path, at the end of the day, how quickly can we get the money out? in some previous episodes, it took a couple of months. i fear that may be too long in this instance. maybe giving people an immediate tax rebate, maybe that would

happen faster. but timeliness is absolutely crucial. secondly, i think that putting money in people's pockets can be helpful in responding to the demand shock that the economy is facing. if people have more money i even through a quarantine, they may find ways to spend it. online, for example. but spending and production are going to be weak for a while. a lot of the stimulus we are protect theking to of the u.s.tructure and global economy when this passes. production can resume. we may see a sharper recovery on the other side. alix: such an interesting

conversation. nathan sheets of pgim will be sticking with me. coming up, a deeper look into what the fed can actually do. we will be joined by former new york fed president bill dudley, who said it is the government's turn to do its part. this is bloomberg. ♪

♪ alix: former new york fed president bill dudley out with a piece today on bloomberg opinion saying the fed's aggressive move may not be enough. was a lot of firepower, and market response was negative. this has caused some to argue the fed has blown it by wasting its precious and limited ammunition." bill dudley joins us now on the phone. what you're saying is you don't

agree with that, that the fed didn't blow it. william: that is correct, i don't see it that way. the fed is doing what it can to support liquidity to homes and businesses. markets become impaired, and that reduces the availability of credit, to where that makes the downturn worse. the fed can't do anything about the initial demand shock caused by the coronavirus. that's why this is very different then the financial crisis. all you can do is make sure the cost of credit is low, but basically to bolster demand what we need is fiscal policy. alix: if you look at some of the signs, the ability for the marketing function is just not working. we are seeing a huge dollar crunch. three-month-libor spiking to the highest levels since 2008. what is the fed do with that? william: i think the fed is going to be looking closely at

what happens in terms of the money markets and how they are functioning. they will certainly to focus on the commercial paper market come on what is happening in the interbank funding market. if that situation continues to deteriorate, i think we will see the kind of special emergency interventions we saw in 2008. alix: does that mean we would see a treasury backed stock with the fed buying commercial paper, for example? william: that is certainly possible if the markets don't work properly. the key for the fed is they need -- or from the u.s. government, the fed can't engage in a liquidity facility exposed to loss. if the fed were to do that, people would accuse the fed of embarking on fiscal policy. the fed needs government support for these emergency facilities like they got during 2008. alix: you feel like the conversation between -- do you feel the conversation between

jay powell and secretary mnuchin can be done the way it was in 2008? william: everyone says they have a good working relationship, so i don't see problems there. alix: congress is saying things like let's just cut some checks and send them out to people. what needs to be done today to help? william: i think that is actually a good approach. what is going to happen to people who can't work is their incomes are going to fall pretty sharply, and people have things they have to say current on. i think you should send checks to household and keep those flowing until coronavirus moderates and we actually have economic recovery. alix: is there anything they can do to avoid recession in the u.s.? william: it is going to be pretty difficult at this point. the rest of the world is also highly affected. it seems to me that it is certainly going to be a very sharp downturn in the second quarter. whether it goes on quite long enough to be recession, i think it probably will be a recession,

all said and done. alix: does it go longer than we think? ,re we looking at protracted deflationary world? william: i think the coronavirus will eventually be contained, so we don't know a lot of things. we don't know how it will respond if the weather warms up, if the infection rate is going to subside significantly. i think it is definitely a problem for the next three or four months, and after that we will have to see. i would be very surprised if we are worried about this a year or a year and a half from now. i think this is going to be a one-year problem, not a five-year problem. so i'm not thinking about deflation in a persistent way as the right way to look at this. alix: is there anything the fed can do in their communication to help with that?

is there some way they can communicate to help the markets feel that they have their back if they can't go ahead and deliver some kind of lending facility? nathan: i think they've already basically said that. they said they will keep rates to zero until they see extended economic recovery. short rates aren't raising for quite a while. alix: what about other central banks on a broader look? the ecb comes in, they do targeted lending, on the market says christine lagarde blewett. you are looking at two-year btp's of the highest level since 2018, up 23 basis points. italy can't sustain something like that. what are other central banks to do? nathan: at the end of the day, this requires this. miller's -- this requires fiscal stimulus because banks can't create income. they can't support income flows when there's a big demand shock like this.

you need to use the right tool for the problem you are actually facing. alix: so why are we getting coordinated action? the g7 is talking. why can't we get it done? nathan: the clinical process --william: the clinical process sometimes doesn't work as well as we think it should. alix: so how do we fix that? what kind of conversations would you want to be having with the government right now to help offset that? william: at the end of the day, if the government doesn't respond in a forcible way, things will get worse. eventually, that will force an appropriate government response. is responding earlier obviously better than responding late. alix: fair. in some ways, this feels very socialistic. you have a piece on what the government really needs to do that said the government should be the buyer of last resort if demand drops were a company 80%. the company should go and buy

80% of what the company sells. what do using about policy being talked about in that kind of extreme? nathan: that seems a little difficult to explain. are you going to have people with empty seats as planes are not playing? i think it is about providing support to limit bankruptcies, but most important, it is mostly about individual households, especially low and moderate income households. people have obligations. i think those houses are what we need to see supported. alix: really appreciate you getting on the phone with me. thank you so much for joining us. bill dudley, former federal reserve bank of new york president. do you have any big take away from that? nathan: i think bill dudley is exactly right. this is going to be a very sharp

contraction in the u.s. economy, particularly during the second quarter. the question of whether or not we are formally in recession, even if it is not, it is going low for a while, at least. people need an actual paycheck in order to pay some bills. the rest is heavily indebted countries -- heavily indebted companies. which is more systemic, and how would you go about tackling that? nathan: i believe that the workers come of folks that are laid off, are really the key pressure point. if those folks are able to continue to beat their obligations, i think that is going to help, and again, spending is going to be weaker, but if they have money in their pockets, people outweigh the

risk of spending it. secondly, i am worried about the small businesses. the problem with that is it is not clear how you find them, and you get the resources to them. but that is something that congress ought to be thinking hard about. thirdly, the big industries, we want to protect them come our u.s. airlines, for example, or whoating -- for example, were operating efficiently before this shock, and we want to make sure they can continue to operate efficiently. finally, if there is some kind of a credit enhancement for the ineral reserve to operate some of these asset-backed securities and other credit markets, that is going to be very helpful to many firms, and even individuals who are consumers of indebtedness. all of thetake an

above strategy, and it needs to be big fiscal, timely fiscal, and targeted at these key pressure points we just discussed. alix: nathan, quite insightful. if a market participant is waiting for that to happen, and either once to be risk more or go into a safe -- wants to de-re haven, or go to a safe what do they do? nathan: to me, it feels like it is u.s. treasuries, both because -- behind you, but that is also where the federal reserve can be vigorous and direct in providing liquidity. the fed is going to do everything it can to prevent that market from locking up, and it has the tools. it doesn't have tools to operate in the credit markets right now.

able tools operate in the bigsury markets with their announcement sunday evening. alix: stick with me. nathan sheets of pgim will stick with me a little bit longer. we will be speaking with david shane of kennedy lewis investment management, looking at distressed opportunities in retail, as well as energy. you are looking at a market here that is pretty brutal, with oil down into the twos. no signs of stoppage between saudi arabia and russia, and a big spike in yields in italy to a headline catcher. this is bloomberg. ♪ good morning!

oh no, here comes the neighbor probably to brag about how amazing his xfinity customer service is. i'm mike, i'm so busy. good thing xfinity has two-hour appointment windows. they have night and weekend appointments too. he's here. bill? karolyn? nope! no, just a couple of rocks.

download the my account app to manage your appointments making today's xfinity customer service simple, easy, awesome. i'll pass. alix: this is bloomberg "daybreak," moments away from u.s. retail sales for february. s&p futures up 1%. we were limit up, then down,

than flat, and now we are up. if you are confused, welcome to the world of trading and coronavirus. european stocks still down 1%. still a rush into safe havens in terms of the dollar. you are seeing selling in the treasury market. yields not at the highest of the session. the vix elevated. many saying it will be hard to invest with the vix so elevated. a lot of people talking about margin calls. if you have to pay more to trade, you have to do other stuff to raise that money. the dow is moving slowly. retail sales, if we backed out autos and gas, down 0.2% for february. if you just back out autos, down 0.4%. straight up retail sales on a month-to-month basis down to -0.5%. it does not feel very good, considering it does encompass a tiny bit of the coronavirus on the margins. we are going to be waiting for more details and data coming out

slowly. sheath mckee and nathan still with me. i know you are literally pulling up the website to get more data. headline numbers? william: the headline numbers are not telling us why retail sales were down. you look at the autos and gasoline down 0.2 percent, but we know gasoline prices have fallen and this is all based on dollar value of sales. it could be an energy story here, but we could have picked up a little bit of the end -- at the end of the month of groceries and things like that. in that case, you would expect totals to maybe go up a little. so hard to tell, until we get the details out. the government is operating the same way everybody else's, i think,- else is, i people at home. so they are putting us on the internet instead of getting the details out ahead of time. alix: group retail sales coming out at zero.

you said january was revised up 0.4%, but the expectation was a mess. while mike is pulling up some of the data -- i'm going to give him a minute. nathan, if the consumer cannot hold up, or phases out, or triples up here, what we depend on in the economy to keep us up? say, consumption has got to be the key for the u.s. economy. my sense of these numbers as i flat-ishm is basically in february. the consumer was hanging in there, notwithstanding the uncertainty. the big question is going to be where this thing goes in march, and how steep that drop is. of if the consumer engine expansion slows down, then that

will be another key contributor to a weaker performance over the next few months. alix: mike, do you have more details? michael: we are still looking. we know retail sales were down. i just got the statistical summary, so now i can take a quick look here and see. point, ilike, at this am looking for -- food and beverages were flat overall. the big declines in eating and drinking places, so that may reflect a little bit of what is going on. declines across the board. motor vehicles down 0.9%. nestling stations down 2.8%. i'm going to say it is gas and cars affecting this. building materials were down one .3%, electronics down 1.4%. furniture down 0.4%. it will be hard to parse this out, and i will tell you why.

he would expect all those categories to fall after the holiday season. you would also expect them to fall if you are spending all your money in the grocery store instead of going shopping. the retail sales report is gathered through the month but it is really the first part of the month and the beginning of this one, it is why you get big revisions in the second half. it is hard to say at this point whether or not this is really reflecting the coronavirus. the second to get reading on it before we get an idea of when this actually hit. alix: it does not encapsulate the wine sale stores that mike and i will be frequenting. michael: all right. let's see here. alix: i'm going to let you continue to look at that. i headline -- the u.k. is advising citizens against nonessential travel globally. it looks like the u.k. is instituting a global travel ban, advising citizens against nonessential travel globally.

let's stay with some sectors that are in a distressed spot. high-yield bonds, record-setting losses, causing more insurers to fall into distressed category. joining me now is david mcshane. david, we see distressed. do you see opportunity? david: we see tremendous opportunity here. it is clear. you look at retail sales numbers that were just released. it is hard to extrapolate anything there. the only thing you can extrapolate from recent retail sales data is the chinese data that came out. it was shockingly bad. i think that is a good data point for what europe looks like and the u.s. ultimately looks like in the near term. across the board, i think what that does is create opportunities in what we call the covert sector -- in autos, housing,, various sectors that are going to be weaker, hospitality. we are focused on high quality. when you look at the request and

-- regression we do at kennedy lewis around double be -- around bb's, we have never lost money if you bought bb's in a spread wide of 300. over.re trading at 650 we think that implies a 14% to 15% return over the next two years, compounded. we are focused on higher-quality situations and high-yield. alix: how do you do your due diligence and know you will have the money to pay off stuff? david: great question. we stress test the balance sheets aggressively. look at ford, for example. it could get downgraded. a company that has $37 billion the quiddity, $22 billion in cash, versus $14 billion in total debt. you look at the near term maturities in ford. .t is only about $5.5 billion relative to a stress test scenario where we take a 50%

haircut to sales for the next six months, what does that do to their cash flow? net-net-net -- think it reduces cash. the company is still going to be levered. if you look at the finance group individuals that run ford, they never filed during the crisis. that is how they think about stress testing their business. those bombs are now in the mid to low 70's and provide probably a 30% total return on a yield basis where you are getting at least 8% current yield. that is a structure we like, similar to what you have seen, whether it be treasuries or aaa tranches of securitization structures. split rated ig participants have sold high quality and more liquid structures to access cash and liquidity. the cap structure is down because of that. we like that now. there are a few other names we like.

it is more the technical that gives us the opportunity to pull the capital. alix: what about energy? that is the distressed place and high yields. what bets are you making there? david: we have an energy company. we have been fortunate that we restructured to get a strong balance sheet. we put cash on the balance sheet. one of the things that is interesting about energy, if you take a step back and think about smaller energy companies around the u.s., there are hundreds of them that have exposure to various spaces. banks also have exposure to these smaller companies. have regional banks that are outright cutting risk across energy portfolios. what we have been doing at kennedy lewis, and have had some success at this -- buying the creditl revolving base facility. in 2015 and 2016, everybody was trying to buy that stuff at a discount. it is top of the capital structure, secured on all assets, in some cases secured by

all the hedge portfolios. right now, you are seeing banks sell that at a discount. we have been aggressive about trying to buy those. effectively, we are doing a small rollup strategy, with smaller liquidating well portfolios that are synergistic to our platform, with the management team we have in place. we are playing it more on the private side. we think the small end of the market, where the drilling has been done -- we are not drilling here with the supply issues and now the demand issues all at once. to pick assible particular entry point in debt and inequities. we have been buying things on a private basis from some of the banks and some of the private equity companies that need a solution for their portfolios. alix: last word to you on this particular part. what kind of default rates are we going to see? where are we going to see opportunities versus risk in the credit market? i think the biggest risks

are with some of these shale producers. shale has been a revolution for the u.s. economy, but it is also a very volatile industry. are goingny of those to get an oil glut. if you couple that with awareness, i think the future is very uncertain. more toward the consumer sector, the consumer is going to get ahead in the short-term, but will be back. some of the more highly rated bb consumer firms is where i think the greater values will likely be over the medium term. alix: gentlemen, thank you so much. david chene of kennedy lewis and nathan sheets. always wonderful to see you. thank you for joining us. i want to recap the retail sales announced moments ago. michael mckee with me once more. what have you noticed? michael: this does not appear to

have anything to do with the virus. you look at what happened during the month, and here is my chart. grocery stores out -- groceries are the white line, and they fell during the month. we know. all you have to do is walk into a grocery store and know that is not the story today. we also saw a big drop in gasoline stations, 2.8%. auto sales were down. it was cars and gas for the most part, except there was weakness across the board. the total number is the overall sales number, which is the blue line on there. you can see that retail sales were weakening, and that has been a trend. that started in the fourth quarter. it was not great in january. it appears not great in february. the consumers were already falling back. the question is, why? was the economy starting to weaken? there were talks of recession. we know it is going to weaken significantly. this is the last data we will have that looks like this. the chart is going to look very

different next month. alix: it is not going to look pretty. michael: i looked at liquor stores, and the problem is, they are delayed. there is not enough data in the initial report, so i have to wait until next month to get the results of your shopping. alix: i moved from bloomingdale's to the liquor store. thank you so much. coming, cruise control. the cruise industry has enough liquidity to sustain itself. bloomberg users can go and interact with the charts. browse the features. check them out. this is bloomberg. ♪

viviana: i am viviana hurtado. coming up later today on "balance of power," an exclusive interview with a former fema administrator.

♪ ♪ viviana: you are watching bloomberg "daybreak." people,iring 100,000 because it is overwhelmed by demand triggered by the coronavirus outbreak. plus, each person will get a two dollar an hour raise. amazon warned customers that demand is outstripped by delivery capacity. now, to federal regulators, who reportedly will make it easier for traders, workers, and other parties to work from home. the cftc will let them skip some requirements for record-keeping until june 30. regulators are inspected to extend a number of filing deadlines. we end with eight big u.s. banks aiming to tap the federal reserve's discount window. it is a move aimed at ending the long-standing stigma of using

it. the window is meant to provide emergency liquidity to banks that otherwise have healthy balance sheets. they have been extremely reluctant to use the facility because of the reaction it has provoked among investors. i am viviana hurtado, and that is your bloomberg business flash. alix: time for bottom line, three companies worth watching. joining me now is a bloomberg columnist. i am watching airlines. you are watching boeing. but they are part of the same problem. frome news yesterday bloomberg was that boeing is going to be seeking some type of aid from the white house and congressional officials. this is interesting for me, if you think back to president trump's speech yesterday about how the coronavirus crisis was not the airlines' fault. i don't know if you can say the same thing about boeing, when you think that one reason why its cash position is so depleted is because of the 737 max crisis. the blame for that does not lie with the coronavirus, but with

boeing itself. it will be interesting to see how this plays out. it is hard to imagine giving boeing a big chunk of cash without requiring the company to make changes to its development process with international regulators. i think the american public would want to see that, even the situation at boeing. alix: that is different from the airlines. you make the argument that our airlines were in pretty good shape. maybe they could have cut capacity, but still, a $58 billion bailout on the airport, the supplier, the airlines -- that's a little different. brooke: the one ironic thing is that because of the boeing max crisis, the airlines are in a better position to weather this than they would have been otherwise. they have so much less capacity now than they would have had if the max was being delivered as normal. they have also gotten very good at adjusting their schedules on the fly. of course, what they are facing now is worse than anybody could have indicated, but it is better than it might've been. airlines aret the

-- they spent quite a bit of their cash flow on buybacks in the last couple of years. alix: as most companies have. in terms of boeing, specifically, even without this health crisis, would they have had to have this happen anyway? would they need the funding regardless? brooke: i think they could have made it. they were obviously in the market, trying to raise money. they drew up terms before the coronavirus crisis really became as substantial as it is now. fulldid not draw down the amount of that. they are limiting overtime pay and deferring some hiring decisions. but i do think they could have had this under control, if the max was on schedule to return to service in june 2020. this is putting a significant crimp in their plans. we had a downgrade yesterday, two notches. they are still investment grade. but this is a cash flow crisis made worse by the coronavirus crisis. alix: really appreciate that. the third sector we are watching

is the cruise line industries, companies down as much as 80% year to date. they have suspended operations to help contain the spread of the coronavirus. u.k. is telling all citizens not to travel anywhere in the world for 30 days. according to nomura, cruise lines have enough to survive. harry curtis is the senior equity analyst at number company. why do you think the coronavirus cruise lines are going to be ok? harry: first of all, good morning. second, they have drawn down their bank lines. ability to cut their operating costs fairly significantly. think they two, i have got roughly at least a year's worth of cushion. alix: are there some that are going to be better set to whether this than others that either have had a better balance sheet, or historically can rebound fast enough? harry: it is a good question,

and i think that on the margin perhaps norwegian is somewhat better positioned than carnival. the image going into this crisis has been that carnival had the better balance sheet, although that is a little bit of a fallacy because i think coming out of this, carnival is going to have to invest fairly significantly in their fleet. alix: how long can this last before you have to revise what you are thinking? you mentioned a year. if we have a travel ban that lasts how many months, you rethink? harry: i think six to nine months is the right timeframe. our view is that there will be partial resumption of operations when ports reopen, beginning in roughly two or three months. alix: what kind of pricing power do you think they are actually going to have when that happens? let's say it is more of a

u-shaped recovery. the balance sheets are going to be ok. what is pricing going to look like? harry: as far as pricing, our belief is that it is really more occupancy. sailally, cruise lines full. forave to assume that and, example, the third quarter, rather than full, they sale at theyo 60% occupancy, and go from there, so that overall their revenues when they recover in 2021 might be 50% to 60% of what we thought they would be in 2020. if that is the case, these stocks, particularly norwegian and royal, have considerable upside. alix: who does not have enough liquidity to make it? harry: i think that they all make it, really, because they will get government loan guarantees to keep them going. alix: harry, i appreciate it.

a good perspective and great timing. harry curtis, thank you very much. coming up, the vix spiking to never before seen levels. this volatility mean reverting? we break that down. if you are jumping into your car, tune in to bloomberg radio on sirius xm channel 119. ♪

alix: breaking news. airline group iata says the industry bailout will cost $200 billion. that estimate up to $200 billion. we were talking about how airlines in the u.s. are asking for $58 billion for airports and supply chains as well as the airlines. time for "technically speaking." joining me on the phone is mike malone, a bloomberg intelligence commodity strategy. you were talking about mean reverting.

what does that look like? mike: that was a lesson i learned from the trading pits in chicago in the 1980's. someone from the new york desk said that volatility always means reverting. that's what i want to focus on. it is the vix just before this move was so low, people have to be reminded that is how complacent the market was. how complacent was it? that is what is happening at the moment. it moved up to an all-time high. at some point, this will move back. it will look at a 200 date average. alix: what do you look at, where we are going? mike: technically what shows up in the s&p 500 is this correction seems harsh. it was from such an extreme high -- i.e., 1920 nine. if you look at the 52 week change, how far the markets moved in one year, it is only down 14%. historically, in an environment like this, it should be done closer to 30% to 40%.

the financial crisis, it was down 50%. that is what i worry about. everything leads to a level of about 3000 in the s&p 500, good support levels where people should look to buy dips from. alix: thank you so much, mike mcglone. good perspective. that does it for me. coming up, jon ferro, lisa shalit, morgan stanley wealth management ceo. the markets seeing whitby action. we were up and down and flat. the latest headline, the industry bailout for airlines costing as much as $200 billion, a huge amount. this is bloomberg. ♪ hi! we're glad you came in, what's on your mind?

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jon: coming up, brutal market volatility. president trump pledges support for battered industries. central banks fail to put a lid on rising credit risk. 30 minutes until the opening bell. good morning. here is your tuesday morning price action. in brutal the last couple of days. overnight, futures up now one point 4%. a massive bid for the u.s. dollar. the yen weaker against the greenback. a move of 1.8%. in the bond market, yields up eight basis points, 20.8%. volatility surging to a -- to 0 .8%. high,lity surging to a with monumental swings of the s&p. thursday, the biggest drop since 1987, followed