JACK FARLEY: As the coronavirus sends the globe into lockdown, we hear at Real Vision are making an effort to get our members the best information as quickly as possible. And to accomplish this goal, we're speaking with our experts remotely. Kicking things off, we have Real Vision CEO Raoul Pal interviewing Giovanni Pozzi, managing director at a family office in Italy, which has more COVID-19 cases than any other country in the world besides China.
Giovanni is witnessing firsthand the impact of the coronavirus in Italy. He is currently under self-quarantine, and he shares with Raoul what he's experiencing on the ground from the epicenter of a global pandemic. Giovanni sheds light on COVID-19's economic impact and the Italian government's response, which has been to basically shut down the entire economy. Giovanni and Raoul then break down the global knock-on effects of the virus and what we can expect in the coming months.
With this global pandemic, the news is changing rapidly. And as we bring you the information that matters most when it matters most, please bear with us as we adjust our coverage and tweak the process. Enjoy.
RAOUL PAL: Giovanni, good to speak to you. You're in isolation in Italy. I'm in isolation in Little Cayman. So, tell people a little bit about yourself, and then we'll dig into what the hell's going on.
GIOVANNI POZZI: Myself generally, not in isolation, you mean, I guess.
RAOUL PAL: Not in isolation. You, the normal.
GIOVANNI POZZI: The normal Giovanni. I run a family office here in Italy, so constantly on the financial markets. I'm home. Family's well. My colleagues and I have been smart working since the 20th of February now. It's not so disruptive for our type of job. Right? We're used to Bloomberg and all the information providers and the video conference calls, so not such a big deal.
I cannot take your advice of going running into the woods because I live in the city, although it's not a megacity. But we don't have close woods. But it's OK. Staying at home feels good, feels safe.
RAOUL PAL: So, talk me through how this unfolded in Italy and the national psyche. Just talk us through that, because it's a story that we don't get to hear firsthand, and you've been living it firsthand. So, when you first saw it in China, what did you think?
GIOVANNI POZZI: Well, I think it's pretty natural for the human being. When we first heard from China, we were quite relaxed. You don't think this is going to come to you. Right? And it did come.
Where are now in Italy, just to update the numbers? Roughly 15,000 official recognized cases, about 1,000 deaths, about 1,300 healed. And the exponential growth continues, both in terms of new cases, of critical cases, of deaths, and of healings, luckily.
We haven't really had the chance to learn from the Chinese experience. You might have seen the picture, the chart that's been going around that shows how the curves of the Hubei province in China and of Italy overlap precisely with, I think, a 38 days delay. And by the way, Hubei and Italy have about the same population-- 55 million Hubei, 60 million Italy. Now there's another chart going around these days that shows the beginning of the same overlap between Italy and the rest of Europe, which is 10 days behind.
So, I was saying we didn't have a chance to really learn from the Chinese experience. It was certainly a mistake on us as people and on the government. But it wasn't easy, because despite the strong trade and business relationship between China and Italy, there's the distance, both geographically and culturally. And we were the first ones in the Western world, so it wasn't that easy.
Now, I'm only today hearing France, Germany, the rest of Europe taking serious action. The last few days from here, the sentiment was, why are these guys waiting? They're just repeating our mistakes. But this mistake is not acceptable, in my opinion. So, I'm glad that they are moving, and I urge-- if I could speak to them, I would urge them to move again.
There is a great chart by a guy called Tomas Pueyo on "Medium" that shows how much impact one day of delay in implementing what they call social distancing policies or measures can make in the number of cases, and it's amazing. So, that alone should convince everybody to take a more prudent approach.
RAOUL PAL: So, what is the situation now in Italy in terms of what's shut down, what businesses are open? What's going on economically and socially now?
GIOVANNI POZZI: So, the only open businesses for commercial activity on the streets are pharmacies and food. All the rest is closed. But offices and companies can be open and operate as far as they respect policies and implement policies that allow people to stay distant on one from the other. And it's pretty personal. Every manager had to choose their own way to implement this. So, it's not a total business shutdown.
RAOUL PAL: And what about the--
GIOVANNI POZZI: Before going--
RAOUL PAL: What about--
GIOVANNI POZZI: Before going into-- yeah. Sorry, go ahead.
RAOUL PAL: What about factories? The industrial heartland of Europe is north Italy, right? How does that affect the industrial output of the country?
GIOVANNI POZZI: It will be affected, but factories are not shut down. They are continuing to run.
RAOUL PAL: Wow.
GIOVANNI POZZI: Of course, they've slowed down, because if you need to have, for example, the simpler thing is half of the workforce home and half at the office or at the factory and in and out, alternating 50/50. So, that clearly reduces your workforce. But on the other hand, consumption is clearly reduced much, much more than that. So, it should stay quite in balance. The economical impact is certainly there.
Well, let me-- before going into the economical impact, a few words on one thing. It doesn't matter how late you come to it, but this thing really gets into people's minds. So, it's a priority to be calm, to take care of yourselves, to eat well, and to be strong. It's the first time, in a way, that our generation is faced with such a chance to prove our resilience. I don't want to compare it with war. We're under a roof, we're healthy, we're warm, we've got food, we've got internet.
We've even got applications that allow us to do video calls socially. A couple of days ago, we celebrated my daddy's birthday-- 85-- with a video called app. So, come on. This is not a war. We're not being bombed, building and the houses. But in our generation, which is probably weaker than that of our grandparents and great grandparents, it's the first time off such a proof. So, it's important to understand is and be very, and stay very strong.
The other thing, it's clear that the health care system is heavily stressed. There is a picture that became very famous in Italy of Francesca, this nurse, falling asleep on her desk after-- I don't know-- 10, 12 hours uninterrupted work. And around Francesca and the nurses and the doctors, there's an amazing number of people doing an excellent job, and the resources are pretty stretched.
This morning, the first call I had was with my friend Diego, who runs the logistics for a big hospital in Bologna. He takes 45 minutes to work typically. But because they've stopped, suspended most of the high speed trains to avoid people going around and gathering together and because of the extended hours they need to work, He takes them now-- well, he's left with very few hours of sleep and of rest. And his first task this morning was to find a forklift to move one of those huge emergency tents to accommodate more beds.
And my second call this morning was when another friend, Paolo, that runs a hospitality business. He was calling all of the landlords he manages the short-term rent of the apartments for to convince them to give out for free the apartments to the doctors and the people working in the hospitals that-- like, Diego cannot commute every day, because it's too far. Otherwise, he'll sleep one hour instead of three.
One evidence I had-- the doctors were the first ones at two, three, four weeks ago to take this thing seriously, while everybody else was pretty relaxed. It's quite clear that they know how to do their job. And a positive signal, if you want, these days-- yesterday for the first time, I heard a doctor publicly-- the general manager of a big hospital here in Lombardy-- saying we have the resources. They've come. We've been provided with what we need. So, you guys just do your job. Stay home, and we'll fix this.
Your question was on the economy.
RAOUL PAL: No, it's all right. Let's go back a little bit to this. So, the health care system overloading-- and we're hearing stories in Italy that's in some places, it's basically a choice of who lives and who dies when you're under a stretched resources situation. What stories are you hearing on this stretch of resources that's going on? Because this is a lot of things that people don't understand. They say the death rate is not that high. Well actually, in Italy, it's been quite high because of the aging population. And also, not everything's being measured.
But it's the impact on the medical system that people don't really understand. So, any more light you've got on that would be really enlightening for people.
GIOVANNI POZZI: It was very difficult, and it is very difficult, to understand what is the reality and to reply to this question. We went through those days when on WhatsApp there was a number of recordings going around from people working within the hospitals and telling people-- alarming people-- and telling them, look, the beds are over, the ventilation systems are over. From tomorrow, we need to choose who we want to save.
The next days, the messages that arrived were calming. And in the last couple of days, the official messages, which I believe, were, don't worry. Now, the resources are available. So, it's not anymore a choice of who we're going to save and we will have to let go.
So, it's a mix. I think for the first few days, the system was a little unprepared. So, it was probably true that at some point, some doctor somewhere in Lombardy had to make a decision-- to take a decision. In general, I'm sure think now after a few days have improved a lot.
RAOUL PAL: And so what is it like for you and your parents having to go through the panic and the disbelief and then the despair? Talk us through that personal journey. Because again for your parents, or even you thinking about your parents, it's very unsettling. And your friends must be going through the same thing. Talk a little bit about that.
GIOVANNI POZZI: It's very personal. We are managing to be calm. We're safe. We're pretty strong. So, far, I didn't have any zero degree of separation cases close to me. That may be also the reason why we managed to stay calm. We took it seriously from the beginning. We were lucky or smart enough to do that. But of course, you're worried.
No, I think in general, the population is giving the proof of a lot of stability, very united. We're experiencing for the first time an upside down Italy. Well, as you said, Lombardy is by far the most productive region and industrialized region in Italy, and maybe in Europe. And it was interesting to see the Southern people staring at the North and interviewed on TV and saying, we would like to help, but we don't know what to do. Nobody knows what to do. You can just stay home and learn from the learning curve and use the learning curve to learn from the other people's experience.
RAOUL PAL: Yeah. I really, sincerely hope. Looking at what's going on in Spain and France and Germany-- Spain was slow again. And they've just hit over 4,000 cases this morning at midday. They'll probably get to, maybe, 5,000 by the end of the day. It's exploding in Spain. They've allowed too much travel. Your plea at the beginning of our conversation for people to hurry up and understand what's going on doesn't yet seem to be being taken on board. They're slowly making steps but just haven't gone big and gone early, which seems to be the only answer here, like South Korea did.
GIOVANNI POZZI: Yeah, that's exactly correct. That's exactly the feeling we have. And we feel-- as the South towards the North, we feel we should do more to tell people. I've shared a lot of messages on this topic with my friends around Europe and the US. And we should all do the same. Just be calm, but take it seriously. It will help slowing it down.
RAOUL PAL: And the two economies that stand out to me that are potentially being irresponsible are the UK and the US, that have been extremely slow in doing things. Yes, the UK has made noises, but they've also said, well, we just want to see if it can burn itself out. But I think the human behavior aspect means that it can't. And the US seems to have made a huge policy error. What's your thoughts from being in Italy and looking at the US and how they're dealing with it?
GIOVANNI POZZI: It's similar to my thought on how France, Spain, Germany were dealing with it-- too slowly. Hopefully, that will not prove to be a mistake. In the US specifically, you mentioned demography before. The US are a much younger country, so that probably will help to have a lower mortality rate, which is important. But that's not enough reason to be more relaxed.
RAOUL PAL: No, because it's not about the mortality rate. They've had the virus for 48 days now in the US without really taking major actions, and that's the longest lag I've seen of any of the countries. And we saw the exponential curve that Italy went through. And you've just got to think the US and Italy are overlapping in their exponential curves, and it looks like the US has got a hell of a problem ahead of it.
GIOVANNI POZZI: Yeah, that's certainly so. Talking about our government, it was highly criticized in the first few days of the emergency. And I'm sure they made some mistakes. But I wouldn't want to be in their shoes in that moment to treat such an emergency. It's like when the people, we're all trainers of the national football team. I think it's a little stupid to criticize without understanding how tough job that is.
Plus honestly, I believe I'm not particularly a fan or an opponent of our prime minister, Giuseppe Conte, but I think the body language and communication style was pretty good-- surprisingly good. He speaks very clearly, very simply, not too formally with a language that gets very easily to all the groups of population in terms of social, age, education.
And even a few days ago, our finance minister, Gualtieri, said that no one is going to lose a job because of the coronavirus. That's an incredibly strong statement. I'm not sure I would have made that statement. And I'm not even sure I believe that statement. But who knows? That might be the right statement to make when your priority is to keep the population calm, safe, and healthy, even if it's a small lie. So, it's very difficult to criticize. We shouldn't do it. They're doing a good job over here.
And the on the economical role, of course talking about Italy means talking about Europe and talking about the world. But there's a lot of talking about Europe itself. Right? So, Europe is less prepared to deal with supporting the economy because it has less ammunition on the monetary policy side and on the fiscal policy side. Fiscal policy side because of the cultural clash historically between the German-led austerity and the Italian-led approach, or Latin-style approach, to the rules, if you want.
Now, there's a few points I would like to make here. First, organically, let's not forget that the welfare system in Europe is better suited for these crises. We've already seen this in the past in the global financial crisis. Now, this is, of course, the flip side of the coin of then having a continent that grows more slowly. But in this moment in time, it's the downside that matters more.
So, take, for example, the social tools available as safety nets. In Italy, we have the [indiscernible], which is like a wage guaranty fund managed by the INPS, the National Institute of Social Insurance, that pays 80% of the salary for about a year. It kicks in very, very quickly. And it did kick in very, very quickly for small companies these days. And that helps a lot in avoiding layoffs, moving the costs from the private to the public. Again, that might come at a slower growth in the future, but who cares today? So, that's one thing that people should not forget when comparing Europe to the other continents.
RAOUL PAL: You're trading social benefit for growth, which some people don't understand. But Europeans took that, and in many respects, it helps cushion the worst outcomes. As you say, it gives you a bit of downside protection for the average person. But it gives upside issues for sovereign debt.
GIOVANNI POZZI: Correct. Now, back to the monetary and fiscal policies. So, monetary policy-- for sure, the rates are well below zero. We know that. So, there's not much room to decrease those. But does it really matter? Are lower interest rates what matter in this moment in time? If a small company's cash flow is negative, they need money. They would pay 10% rate. They don't care whether the rates are at zero, or one, or two, or three. So, I don't think that matters much, and that's something that we could expand on talking about the Federal Reserve move. But it doesn't do any harm, but that's not the pure solution.
On monetary policy, we know there are many unconventional tools that, by now, are conventional. And the ECB started using some of those yesterday. Despite the communication error of Mrs. Lagarde, some of those tools are already active. Banks are being helped, and banks are giving out credit more quickly to the small companies. They're calling the companies, telling them, we have the tools to help you a little bit, to improve your overdraft limit, and so on. This is happening. Talking to people on the ground, we have evidence of this happening.
Now, on the fiscal policy side, it's a more cultural question. I think that before the coronavirus started, we were already in a very different situation. So, we've all heard the political pressure on Germany, also from internally from the bottom up-- call it black zero, call it Green New Deal. So, we have to admit we are in a different situation. I don't think Europe will let Italy go. We have had