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Jeremy Siegel Says Reopening Hinges on More Testing

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Prof. Jeremy Siegel speaks at LINC 2018. (Photo: Lila Photo for TD Ameritrade Institutional)

While all of the initial U.S. stimulus packages, including the fourth one that was near the finish line Monday, have included “excellent support that we need” to get through the ongoing COVID-19 pandemic, the most urgent needs we have right now to help restart the economy are more testing and protective gear, according to Jeremy Siegel, professor of finance at Wharton and WisdomTree senior investment strategy advisor.

Treasury Secretary Steven Mnuchin told host Jake Tapper on CNN’s “State of the Union” on Sunday that he expected the fourth stimulus package would include $300 billion for the Small Business Administration’s Paycheck Protection Program, $50 billion for Economic Injury Disaster Loans, $75 billion for hospitals and $25 billion for testing.

“I haven’t dug into the details of every one of those” proposals for the new package, Siegel said Monday after ThinkAdvisor asked him about it during his weekly conference call on the state of the markets.

However, testing and protective gear are the most important things we need “because if we’re going to get people back to work,” that is what’s required, he said.

“It is unfortunate” that the first $349 billion of PPP loans “got exhausted” so quickly, he said earlier on the call, noting that many businesses would have been better off going to small community banks than the large ones that “were kind of overwhelmed.”

There have been “little glitches” in PPP for businesses hurt by the pandemic that were “unfortunate,” he said, conceding there were “some abuses” of the program.

However, Siegel said he was “impressed how much” the U.S. government “got right’ with the Coronavirus Aid, Relief and Economic Security (CARES) Act, which included the initial $349 billion for PPP.

“That they didn’t close all the loopholes” in PPP and that “they missed some things — it’s understandable,” he said, noting “they can go back and correct those.”

Siegel, meanwhile, predicted “there will be an awful lot of modifications” at U.S, workplaces during what stands to be a “very slow rollout” of businesses reopening across the country.

He also played down the significance of U.S. oil prices falling below zero Monday. “We all know what the headline’s going to be tomorrow: Oil below zero,” he told listeners. The fact that the price tumbled to as low as about -$40 a barrel was “inconceivable,” he said, adding he was “shocked that the traders so misestimated the delivery problems of the May contract.”

However, he said: “We all know it really isn’t that significant.” After all, he noted, the overall energy sector was down more than 3% Monday and “it’s been down much more” than that in the past.

What’s more, “when you have a 30 million barrel decline in the per-day demand for oil it doesn’t almost matter how much Saudi [Arabia] and Russia have cut — there’s a glut of oil,” he added.

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