m:to this morning, the bears are fit to be tied as global stocks towardsand repriced valentine's day valuations. inflation beckons. strong yen.usts, three days of grim reports of millions unemployed in america. the president and a trip to arizona says the virus will pass "with or without a vaccine." thep economists suggest virus will disappear in the vicinity of two weeks. oh, do they? i am tom keene in new york, francine lacqua in london. the headlines push us aside of all good conversation, an extraordinary headline out of china. francine: an extraordinary

headline out of china, also a lot of focus on the dismal earnings we have had from certain companies and dismal economic data. china considering dropping the numerical gdp growth target for 2020. this is like a company saying it is difficult to forecast so we will not tell you. it happens in the corporate world and not usually with the country, certainly as big as china. i don't know if this will have implications for renminbi. the chief executive of alianza said we are underestimating the impact this will have on the yuan. tom: a shout out to carl weinberg who aggressively stated a month ago, forecast your economics as possible. it is possible we need first word news in new york city. ritika: president trump is ramping up his push to reopen the country, saying americans

should return to their everyday lives even if that leads to more sickness and death. he spoke in phoenix and may disband the white house tax form stearate -- tax force steering the government response to the outbreak. the e.u. is facing the deepest down term and its history -- downturn needs history. the euro region economy is set to shrink 7.7 percent this year because of the coronavirus. another son of how -- sign of how the coronavirus has brought factories to a halt, factory owners -- germany is a manufacturing powerhouse and has been especially affected by closures, supply chain disruptions, and a lack of demand.

ruth bader ginsburg has been hospitalized with a benign gallbladder condition and will not be released until a day or two. she is 87 and is the oldest justice on court. arguments will take place today by telephone. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. gupta.tika this is bloomberg. tom: thank you so much. turkish lira really begins to expand out, now losing control. that is overstating it, but turkish lira really difficult. the dichotomy of the yen stronger, euro weaker. yen blowing to 1.15. -- 115. futures advance more than nicely. francine: we did have those really difficult economic data.

if you look at europe, it is not going even slightly according to plan. if you look at the euro area survival, it is put at risk because of virus shocks. the euro area economy set to shrink 7.7% and china will consider dropping its numerical growth target for 2020. we are seeing dollar moving on the back of what we heard yesterday from the german know -- german court, and crude oil stabilizing. 31 as well.rude we have a wonderful cross-section of best. -- guests. we get the best and brightest, with sir howard davies and lord robert skidelsky. we speak with david bailin.

i cannot say enough on a holistic view of how to deal with the emotion of investment in times like this. thank you for joining us. if i miss this rally, if i am in cash, how do i get back into the game? feelinghat is the big that all clients are having today who are under invested in the market. to answer your question, you have to have a war portfolio, -- core portfolio, exposure to all the markets you have been talking about and there is no right or wrong time to do it. if you were investing today, it would be a matter of what you put your money in as you enter the market, and there are pockets of good value because these industries do not tell you the whole story. the top 30 stocks in the market have been the dominant driver of the s&p and that is true of all

markets around the world where large companies have done better than small ones. you would add small and mid-cap stocks and focus on those with the strongest balance sheets and strongest exposure to markets that are affected like health care, and emerging markets that have done poorly in addition to your core portfolio over time. so cannot time the market you would get in over the next several months, and build out that portfolio and continue to live with it. tom: you build out the portfolio and live with it. what are repricing for now, with the punditry of strategists looking for a market forward? how far out as the market looking? it is almost a bet not on six months out, but one year, two

years, three years out. david: you are exactly right. it is a bet on one year out. whether it is citi private bank or another institution, we are expecting an extraordinary decline in earnings, probably a 35% decline in earnings for the year. we are talking about getting half of that back in 2021. what the market is looking for is a terrible quarter, a dramatic snapback in quarter three which will look back -- look great but will not be great because it is a snapback. then we will be looking to 2021 to see if we can get back half of what we lost in earnings and the market says if we can get there, these valuations are not easy. i am looking at which countries can deliver these earnings? it is the large players in the lesser affected businesses that

have to deliver stellar earnings, and we have doubts about that. francine: what do you have doubts on, margins? should these companies focus on market share instead of making profit in this time because they will come out stronger ones we see life getting back to a bit more normalcy? there is nod: question to your point, there will be consolidation in industries and the smaller and medium-sized companies will come under pressure that they will be cheap acquisitions. i am referring to an uneven choosing pattern on behalf of individuals coming back, and corporations. there will be supply chain disruptions. what companies actually buy in 2021 and 2022 in terms of capital investments will be

crucial in terms of supplies. they have the opportunity to revisit or they want to put their money. the other thing that will affect demand, companies are taking upon themselves to reconsider their entire human capital platform, so we expect continued goings, not of the size forward, and a rationalization. that will lessen demand and a supply impact in that there will be fewer capital goods than others. we see the possibility for what i would describe as a very uneven recovery that would implicate profits for different industries. francine: what is the consumer doing? the u.s. consumer and consumers around the world held up this economy. what happens to the u.s. consumer in 12 or 16 months because he and she will decide

what earnings and companies to focus on? everyone is focused on the idea that there is sufficient government support for the unemployed, and there is. not last approximately -- that lasts approximately four months and has been generous, paying some people more than they were making. once that support stopped, then people will be presumably reemployed but we only expect about half of them to become reemployed. the other 15 million people will not have the spending power and will potentially be a drag on consumer demand in the united states as we go through christmas. in the event that there is further support for the unemployed, we could have a more robust recovery and our expectation is there will be a further bill to that effect. that is what it looks like a sound the data we have.

people will not purchase as much, even though there will be a rebound, if they are uncertain what their income stream will look like for the rest of 2020. tom: i do want to talk about the markets, but the absolute shock of may and april has been the focus of these 5, 6, 7 tech juggernauts building revenues each with a different profit which are. can -- picture. can you acquire shares of microsoft or apple this morning? david: would one do that? tom: could you? us, when youor look at the leadership of large companies, that is part of the exposed we have, being to these in court portfolios -- core portfolios. there are lesser names that are

much more well valued, industry leaders that have not had a chance to recover yet, things in food supply and other industries that have not had a chance, but yes, we would own those names. tom: something to talk about. david bailin with citi private bank. a shift from fixed income into credit. -- markt be mark faisal -- this is bloomberg. ♪

♪ this is bloomberg

"surveillance," tom and francine from london and new york. when you look at some of the things you were saying, where you see some corporate earnings struggling, the ones you see doing better, what is the one thing that will be the legacy, or how will it change the economy, the way we shop? is it social distancing, the way we travel, that we are not focused on now? you can short stocks or make money. it is finding the legacy and secondary effects that will change forever. david: that is a great question and one thing i enjoy talking about and thinking about because a lot of predictions made out of 2008 and 2009 turned out not to be true. what we are trying to identify in portfolios are accelerators. in e-commerce, we all see our changing habits and how we go

and stock our kitchens, how we cook more now. some of these things will stay in some will not stay. our buying behaviors -- and this will be a time when our habits change because this is going on for so long -- our buying behaviors for retail will change for goods and services. delivery of products across the board will be a clear one that will change. there are things that will not change, the desire for entertainment, travel, experiences will not change, but they will be delayed. we have no idea when they will come back but they will come back online education, you had a guest on talking about the consumption of music and education. those are the types of businesses you can identify with an acceleration that we think is permanent.

recovery trades, you look at things people want to do, and restaurants would be a good example. chainse actual change -- , which will be beneficiaries, and look for the establishment of new chains of restaurants, new stocks to invest in, and build up on those subsequently. look for that sequence. --are trying to avoid faddus like, peoplents will cook more now. francine: when you look at the inequality this could lead to, will we see more populism and protectionism? what is the impact on big companies? david: let me divide that up the fact that the bigger are going to get vigor is a significant -- bigger is a significant issue.

whether it is antitrust in the , that is where. government support has been in terms of major industries and keeping them alive, but it has been accelerated. there has been some support for small and medium-sized companies but not to the same degree. well inequality will clearly -- wealth inequality will clearly lowerelerated because wage earners are impacted and will be impacted permanently for the next two to three years, so inequality will rise. populism is there. since governments have done something extremely right, given the and norma's amount of support to individuals and company -- enormous amount of support to individuals and companies, could that be a catalyst going forward? people are not talking about

that they got something really right they might want to continue from an electoral standpoint. fascinating,ind and i understand it is a natural disaster, there is minimal discussion of pending combinations and transaction to make combinations. do you just assume m&a to the moon? david: we assume a significant amount of m&a activity. you can see it being talked about. m&a and a lot of financial restructurings and recapitalizations of portfolios that have been deeply impacted. the combination of restructurings and refinancings as well as companies going through bankruptcy and acquisitions will be in my mind an extraordinary trend for at least two years, favoring companies with resources to make

those investments and acquisitions. yes, it will be very busy. tom: david bailin, thank you so much. david: glad to see you so well. tom: good to see you. let's get the best in economics and move it forward through the day. we can do that with a laureate, paul krugman joining us. this is bloomberg. ♪

♪ bloombergis is "surveillance." investors in disney got a glimpse of how bad the coronavirus impact will be. $1.4y says the crisis cost billion in lost profit last quarter and this quarter is expected to be worse, but disney did say it's resort in shanghai will reopen. foris lowering its profit this year, saying the fallout from the coronavirus is lasting longer than expected. they expect the second quarter to be worse than the first. their hopesl dashed for subsidies. signed off on a

deal for abbvie to acquire allergan. rightsve astrazeneca the to a treatment for crohn's disease that is being developed. that is the bloomberg business flash. equities, bonds, currencies, commodities, euro weaker and pressing ever weaker this morning. stronger,ie coming in swiss little more. 1.08 on with a nice sub euro. brent crude elevated out over $30 with a 31 handle. let me know when equities decide to go down. francine: i will send you a text and we will talk about it, maybe over whatsapp or zoom conferencing. treasuries lower, stocks edging

higher. i think a lot will depend on the lockdown. we had a headline from china that was significant and bonds across the euro area are extending losses sparked by the german ruling -- court ruling. tom: the economic contraction is tangible. chief executive officer of general motors later on bloomberg. good morning. ♪

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from london and new york. let's focus on reports and hedge funds. when had funds -- hedge fund stars like bill ackman speak, the market listens and the best ideas are not necessarily better than the rest of their portfolio. one of the authors of that report, faryan amir-ghassemi. great to have you on the program. let's debunk the myths in hedge funds. a report spent quite a lot of it, what exactly are you saying? myths that there is one idea for a hedge fund is not how we should look at it? faryan: i think that is a good place to start insofar as there is an excessive extension place -- attention placed on the "best investment" of

bankers. we wanted to look holistically and understand if there is a difference in true risk adjusted and do that as broadly as possible. we looked at 1500 funds through their 13f data, about 20 years of data and tried to capture filed itsger that transparency and characterize ideas." of those "best there is what we would call a homage to ideas, the best ideas that return to that portfolio position that from a practical standpoint means that understanding the aggregate portfolio behavior of a fund manager may be better than just

one or two of their stock picks. this to thew far is part?ive see researchers around 2010 looked at usual funds and -- mutual funds and they have an incentive to gather assets because they are paid as a percentage of assets they manage. if your strategy cannot scale linearly that generates out for, you will be incentivized to fill your portfolio through closet indexing. the study was able to unpack paidhedge funds are through a percentage of assets managed and the process -- profits they can generate. incentivegoal of that

fee is to incentivized the manager or agent to behave more appropriately, and effectively what we are seeing is hedge funds are not incentivized to fill their portfolio with closet spectacular.is tom: i remember a conversation i on what begins to touch you covered in this authoritative report. i want to cut to the chase, and this goes back to the arrogance of the industry when you were at cambridge associates, everyone thinks they can trot out and find the 15% of hedge fund managers delivering by far and away the mass market alpha does your report -- alpha. does your report suggest how i better select those 15% of

managers? david: great question. we spend less time in the reports talking about selection criteria for persistence of skill and spend more time talking about how the median or average has changed over time. , simplyarly 2000s having exposure to the asset class, i.e. if you had an portfolio,ge fund you probably had an outside term that will carry you. it works. -- alpha term that will carry you. it works. the question is -- tom: we don't have time to go into this. i want to make clear, the mathematics of this shifted as we came down to the zero bound and lower interest rates. the heart of the matter, the mathematics of leverage.

what did you learn in your authoritative study about the efficacy of leverage, and appropriate amount of leverage, or the benefits of less leverage? david: great question. our focus was less on understanding the use of leverage by fund managers, which the function as a change in prime business industry as well as the scars of the financial crisis. tom: you focus on the stock picking ability. the stock ticking ability is amazon. abouta joke in the script billions in bitcoin and the reality is they don't have enough amazon. they were under owning amazon as well -- apple as well. how has the glory of these

changed how hedge funds generate alpha? david: there has been speculation around when the indexes are driven by a handful of leaders that gradually get larger. it is harder to differentiate and have an active share in a position like amazon when it is such a large percentage of the index. funds have adapted by becoming more concentrated. we are seeing that across the board. stock boardss 100 folios and more 20 stock totfolios, which allows that amplify -- that also accelerates risk. you better hope you got them correct. francine: given the current environment with covid-19, what does this all mean?

what does this mean for hedge funds in six months and two years? david: i think everyone is waiting going into the crisis for funds to be the white knight to protect institutional portfolios or portfolios that were long passive equity data from a tail risk situation that we had in the most unexpected of ways. what we found was generally speaking, the positioning of fund managers was somewhat disadvantaged going into this crisis insofar as it seems like there was a lot of factor loading in things like weak balance sheets, aggressive balance sheets, and excess leverage at the corporate balance sheet. fund managers were long exposures that were disproportionately as a result of covid. i don't think anyone was envisioning the aerospace or

travel sector would have revenues that would get decimated, or companies that engaged in corporate leverage would be so precariously positioned, but that seems to be the case and has hurt the alpha profile of these case managers. tom: i hope to hear you on the podcast doing a lengthy treatment. i cannot say enough of epsilon asset management's report. it is the real deal. faryan amir-ghassemi is with epsilon. here is ritika gupta. ritika: president is preparing for phase two of the response to the coronavirus and told a crowd in phoenix americans should return to their everyday lives, even if that leads to more sickness and death's and is considering disbanding has coronavirus task force.

house speaker nancy pelosi wants democrats to move first with the next stimulus package, looking for leverage in negotiations. the gop is trying to put the brakes on any new round of expansive aid. for democrats, the priority is money for state and local governments. china is firing back at mike pompeo, saying he has no evidence saying the coronavirus escaped from wu hand. -- wuhan. says the viruso cannot be man-made. u.k. businesses can be up and running after restrictions are lifted. almost two thirds of small companies and have of large ones can be ready in a week. three quarters of red is businesses have placed --

british businesses have placed staff on furloughs in order to benefit from government funds. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. francine: we will have plenty more analysis on your markets and a great conversation on current affairs and the possible trade skirmish. will it turn into a trade war with china and the u.s.? we will speak to ian bremmer at 1:30 p.m. new york, 6:30 p.m. london. this is bloomberg. ♪

>> there are people that are not going to stand for this, and i understand them very well. we are going to put out little embers and little fires and maybe some big fires, but we still have to go back to work. tom: the president of the united states out to arizona and back it has been an extraordinary -- arizona and back. it has been an extraordinary 24 hours. we now speak to our chief statistician in washington, kevin cirilli. the low point for those of us who do math was yesterday, the administration tried to fit the statistics to the president's message. furman of the obama administration went until as he should have, and the president

wants to do away with the medicine. are we going to see coronavirus support at the white house go away? will dr. fauci go away? kevin: what you saw yesterday in the president's interview with abc news is that dr. birx and dr. fauci told him this coronavirus would eventually dissipate and gradually rescind, so he downplayed the advice he got. the presidentnt, making his first trip leaving the east coast since all of this began, to arizona yesterday, visiting honeywell, clearly showing he is going to get moving. the third point with regards to the adjustment of expectations coming from president trump and the raising of the casualties from 70,000 to

now 100000 and whatnot. president has a core constituency that does not wear a mask and they are all from kentucky and that is a stereotype and i do not want to -- what do they think of this approach, no mask, the idea that we don't care about the virus because there will or will not be a vaccine? what do the tangential republicans think? kevin: i have been talking with republicans and lawmakers who represent deeply conservative districts. they arehink that ignoring the science in the sense that as the president said a few weeks ago, they don't want to have the economic impact seem worse than the virus itself.

that balancing act is something the industry should is trying to factor in. this is incredibly important, not every part of the country is an epicenter of this, of covid-19. of, to bel reality honest, central pennsylvania or rural michigan is very different. you can't even compare it to the medical reality of certain parts of new york city, so that has really also -- that is the backdrop to all of the policy conversations we are having as it relates to reopening the economy. francine: is anyone talking about reopening and then possibly going into lockdown again, or once it is reopened, is that it, it stays open?

kevin: i think there is the reality that if there were to be another influx in cases, governors as well as state and local of fishers -- officials, governor gavin newsom for example, they have been transparent in the sense that if there is another spike in the curve, there would have to be another shelter-in-place happen. not just i think it is the united states talking about that, but all around the world. we saw hong kong, what they had to do once foreigners started going back into hong kong as well. very quickly, what are the polls saying? amountay we spent a good of time talking about joe biden.

how is he doing? kevin: when the president went to arizona, the polls have him trailing by four to six percentage points. he has taken a dip in the polls, however the base of the republican party very much behind the president and the handling of how the president handled covid-19 is falling along partisan lines. francine: thank you so much, kevin cirilli, chief washington correspondent looking at the numbers and polls. up next, lauren sauer of johns hopkins. she is coming up next and this is bloomberg. ♪

♪ good morning, everyone, bloomberg "surveillance." she was born eight years after charles dickens. she had her best work at the

same hospital where boris johnson recently fought her life. her name is florence nightingale and this week is the beginning of nurses week like we have never seen before. from johnss us hopkins university emergency medicine. give us an update on the state of the nurses at the johns hopkins university. lauren: i think the primary state of the nurses is exhausted. everyone is working incredibly hard to keep up with the patient load, keep up with the demands of using the ppe, of working overtime to make sure units get turned into covid units and patients are safely cared for. we are incredibly grateful for the work of our nurses. it has been unbelievable. tom: what i notice about emergency medicine is you try to learn every step of the way.

what do you know now about the therapeutics of this virus verses where you were six weeks ago? lauren: we just conducted the first phase of the act trial which is the nih adaptive trial ivir and we are starting to see some positive data, which is exciting. we are hearing about hydroxychloroquine, chloroquine. we are learning a lot about crowning of patients so there are a lot of studies underway throughout the hospital. talk to: lauren sauer, me about how first responders are feeling about the president and the administration saying they want to reopen the economy, even if it means more rise in deaths and infections. how many percent of the population do we think has had

covid? understanding of what phase we are inexact they? -- exactly? lauren: the first word that comes to mind is scared when you are in the hospital every day and see these patients come in quite sick. you know so many of the population are not affected yet and may be as states and locations start to reopen. we get really nervous. we are starting to see an easing in the number of cases in maryland and we approach with cautious optimism because as you know when we start to reopen, you will see a spike in cases. opened,tes that have their cases are on rapid increase. where they have started to ease

restrictions, their cases are on the rise so we are all in the health care setting nervous that these restrictions will be eased too quickly and we will see a spike in the number of cases. francine: do we have more drugs now and how close are we to a vaccine? lauren: we are still a ways away from a vaccine. everyone is working overtime on the development of a vaccine, and there was a summit earlier last week pacifically focused on racing to get a vaccine up and running. force ofrue tour de corona -- of efforts to develop a coronavirus vaccine. on the therapeutic side, we have remdesivir.

ofsaw the first phase clinical trials and it is definitely looking promising, the data are looking promising, drughat is an iv infusion so people have to be given that in the hospital. people are working on drugs that can be administered orally or in the outpatient setting, so we have long -- a long ways to go. francine: lauren sauer of johns hopkins university. this is bloomberg. ♪

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the european commission says the economy will shrink almost 8% this year. we will speak exclusively with the european commission executive vice president later in the show. and reopen at all costs. president trump pushes the u.s. to reopen the economy even if it means some americans will die. and the non-magical world of disney. the crisis cost $1 billion in the last quarter. gm set to report. welcome to "bloomberg daybreak" on this wednesday, may 6. i'm alix steel. building on the rally we saw yesterday. s&p futures trending higher. the euro moving lower. you have a selloff in the bond market in europe. not a huge one, but the european commission has some dire forecasts on what happens to the euro zone if they can't get it together for this crisis, really weighing on the currency. oil treading around, trying to get some kind of bid to support