1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Ley. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,280 Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg 5 00:00:23,360 --> 00:00:30,280 Speaker 1: dot com, and of course on the Bloomberg Termament. All 6 00:00:30,320 --> 00:00:31,840 Speaker 1: of those things that we're supposed to be the story 7 00:00:31,880 --> 00:00:34,360 Speaker 1: this year, we're not. The question is do those actual 8 00:00:34,560 --> 00:00:36,960 Speaker 1: rotations start to take hold in the your head. Let's 9 00:00:36,960 --> 00:00:40,159 Speaker 1: stop that conversation now with Patrick Comstrong, chief investment officer 10 00:00:40,479 --> 00:00:42,839 Speaker 1: at bloo REMI well, Patrick, got to catch up with you, sir. 11 00:00:43,360 --> 00:00:45,239 Speaker 1: The things that are set to come under pressure into 12 00:00:45,320 --> 00:00:49,760 Speaker 1: twenty two Patriot. What pockets to this market are you avoiding? Um? 13 00:00:49,800 --> 00:00:52,000 Speaker 1: I think it's not going to be here where you 14 00:00:52,000 --> 00:00:53,800 Speaker 1: want to try to get rich. I think for the 15 00:00:53,840 --> 00:00:56,440 Speaker 1: last three years we've had massive liquidity in the system. 16 00:00:56,440 --> 00:00:59,520 Speaker 1: We've had central banks buying bonds, trillions of bonds, and 17 00:00:59,640 --> 00:01:03,040 Speaker 1: it's going to be an environment where liquidity is slowly 18 00:01:03,080 --> 00:01:06,640 Speaker 1: taken out of the system. And I think the meme stocks, 19 00:01:06,680 --> 00:01:10,160 Speaker 1: the high growth no earning stocks, those types of story stocks, 20 00:01:10,200 --> 00:01:12,960 Speaker 1: they They've come under pressus in November, and I think 21 00:01:13,000 --> 00:01:15,280 Speaker 1: that's going to continue. I think if you're making an 22 00:01:15,319 --> 00:01:19,759 Speaker 1: investment for two you want to have a valuation thesis. 23 00:01:19,800 --> 00:01:23,039 Speaker 1: At least you have to understand that this company is generating, casual, 24 00:01:23,160 --> 00:01:26,399 Speaker 1: generating earnings. And it's not ruling out all tech companies. 25 00:01:26,800 --> 00:01:28,880 Speaker 1: But I think the companies that are at the most 26 00:01:28,920 --> 00:01:32,080 Speaker 1: extreme multiples that they're going to be category killers. But 27 00:01:32,160 --> 00:01:34,880 Speaker 1: that's five years out. I think those are going to 28 00:01:34,880 --> 00:01:38,240 Speaker 1: come under pressure as liquidity gets removed from the system. 29 00:01:38,640 --> 00:01:40,640 Speaker 1: But what about the other tech companies that some may 30 00:01:40,640 --> 00:01:43,680 Speaker 1: put in the kind of quality basket Patrick, the likes 31 00:01:43,720 --> 00:01:46,240 Speaker 1: of Apple, which is approaching three trillion dollars in valuation, 32 00:01:46,319 --> 00:01:50,160 Speaker 1: that are consistently strong earnings growers to bet against the 33 00:01:50,240 --> 00:01:52,040 Speaker 1: U S. And I know you're underweight the US. Are 34 00:01:52,040 --> 00:01:54,840 Speaker 1: you also saying that you expect some of those large 35 00:01:54,840 --> 00:01:58,520 Speaker 1: heavyweights to start lagging. Where I've got my U S 36 00:01:58,560 --> 00:02:01,360 Speaker 1: exposure is those large heavy wait, so I'm very comfortable 37 00:02:01,400 --> 00:02:03,680 Speaker 1: with Apple. We actually sold Apple earlier in the year 38 00:02:03,680 --> 00:02:06,320 Speaker 1: in February, which has looked like good timing. We did 39 00:02:06,320 --> 00:02:08,359 Speaker 1: it just before their earnings, but we bought it again 40 00:02:08,400 --> 00:02:10,520 Speaker 1: about a month ago, So I'm back into Apple. I 41 00:02:10,560 --> 00:02:15,000 Speaker 1: own Meta, I own alphabet Um, so my US exposures 42 00:02:15,080 --> 00:02:17,920 Speaker 1: underweight versus the MSCI worldwide. But I'm taking it with 43 00:02:18,000 --> 00:02:20,640 Speaker 1: the big cap tech companies because just the cash flow 44 00:02:20,680 --> 00:02:24,639 Speaker 1: is enormous. Their multiples aren't cheap, but totally defendable or 45 00:02:24,680 --> 00:02:27,520 Speaker 1: thirty times multiple or thirty times earnings for the kind 46 00:02:27,520 --> 00:02:30,959 Speaker 1: of growth and profit margin they generate, I totally can justify, 47 00:02:31,080 --> 00:02:33,519 Speaker 1: so I feel comfortable to own them. But there's many 48 00:02:33,560 --> 00:02:37,160 Speaker 1: industries where like for like um stocks just trade at 49 00:02:37,240 --> 00:02:41,280 Speaker 1: thirty premium if they're listed in the United States versus 50 00:02:41,320 --> 00:02:43,519 Speaker 1: if they're listed in Japan or if they are listed 51 00:02:43,520 --> 00:02:46,120 Speaker 1: in Europe. So the other more traditional sectors that aren't 52 00:02:46,120 --> 00:02:49,720 Speaker 1: tech orientated is where I'm overweight to other countries. Yeah, 53 00:02:49,760 --> 00:02:52,320 Speaker 1: I was just gonna ask. I mean, I'm sure you're 54 00:02:52,360 --> 00:02:56,280 Speaker 1: not betting against the United States, but really on other 55 00:02:56,320 --> 00:03:00,440 Speaker 1: countries where you see undervalued assets, where is that? Well, 56 00:03:01,280 --> 00:03:03,040 Speaker 1: I've been talking about it for a year and the 57 00:03:03,080 --> 00:03:05,720 Speaker 1: companies have performed incredibly well. And I think every time 58 00:03:05,720 --> 00:03:07,679 Speaker 1: I've been on your show for the last fifteen months 59 00:03:07,760 --> 00:03:10,400 Speaker 1: or so, I talked about Muller Mares capeg Lloyd, and 60 00:03:10,639 --> 00:03:13,320 Speaker 1: I don't get my head around they're trading at four 61 00:03:13,360 --> 00:03:16,280 Speaker 1: times earnings. How negative do things have to get for 62 00:03:16,320 --> 00:03:19,519 Speaker 1: shipping rates to really make it be a four times 63 00:03:19,560 --> 00:03:22,040 Speaker 1: earnings on Muller Mares. So it's probably up sixty percent 64 00:03:22,160 --> 00:03:24,480 Speaker 1: this year, but earnings are growing as fast as the 65 00:03:24,520 --> 00:03:27,400 Speaker 1: share price is growing, and it's just incredibly cheap our 66 00:03:27,440 --> 00:03:30,360 Speaker 1: Salur mattel Um. I do think infrastructure spend is going 67 00:03:30,400 --> 00:03:32,600 Speaker 1: to happen in the United States. I think Europe school 68 00:03:32,760 --> 00:03:35,640 Speaker 1: to get around to infrastructure spend. Japan's doing it as well. 69 00:03:35,960 --> 00:03:38,600 Speaker 1: I think steel is very cheap. Company like this is 70 00:03:38,600 --> 00:03:41,400 Speaker 1: trading at six times earnings. So there's companies that are 71 00:03:41,400 --> 00:03:45,240 Speaker 1: domiciled in Europe, their global companies benefiting from the global recovery, 72 00:03:45,480 --> 00:03:48,640 Speaker 1: but they're just trading at very low multiples and they 73 00:03:48,680 --> 00:03:51,600 Speaker 1: actually have very high earnings growth potential in my opinion, Patrick, 74 00:03:51,720 --> 00:03:54,000 Speaker 1: of those companies, the Likes and Modern Masque, some of 75 00:03:54,040 --> 00:03:55,920 Speaker 1: the minors, some of the energy players would have seen 76 00:03:56,080 --> 00:03:59,240 Speaker 1: huge amount for their goods and the underlying product or 77 00:03:59,280 --> 00:04:03,120 Speaker 1: services a great gain in price. Have you seen the 78 00:04:03,240 --> 00:04:06,720 Speaker 1: corresponding discipline when it comes to building out capacity, Patrick, 79 00:04:06,760 --> 00:04:08,400 Speaker 1: because that's been the worry of what's happening in the 80 00:04:08,400 --> 00:04:11,360 Speaker 1: shipping industry in a previous few decades, what's happened in 81 00:04:11,400 --> 00:04:13,520 Speaker 1: mining and energy in the previous few decades as well. 82 00:04:13,640 --> 00:04:16,080 Speaker 1: Is that what's different this time around, Patrick, into twenty two, 83 00:04:16,279 --> 00:04:18,679 Speaker 1: that they haven't made those big coals, those big investments 84 00:04:18,720 --> 00:04:21,080 Speaker 1: into capacity that could haunt them in years to count. 85 00:04:21,560 --> 00:04:24,560 Speaker 1: They haven't. They're producing tons of cash flow, so it's 86 00:04:24,560 --> 00:04:26,920 Speaker 1: always a risk when the CEO has got so much 87 00:04:26,960 --> 00:04:29,440 Speaker 1: cash doesn't know what to do with it, expanding investing 88 00:04:29,600 --> 00:04:32,920 Speaker 1: assuming that these profits and the freight rates will stay 89 00:04:32,920 --> 00:04:35,920 Speaker 1: where they are. None of the CEOs are talking like that. 90 00:04:35,920 --> 00:04:38,400 Speaker 1: There's another who brie about this is going to last forever. 91 00:04:38,520 --> 00:04:42,440 Speaker 1: They know this is a cyclical windfall that they're really monetizing. 92 00:04:42,720 --> 00:04:44,800 Speaker 1: I think it will probably lead to some consolidation in 93 00:04:44,839 --> 00:04:48,120 Speaker 1: the industry, which may streamline capacity. It will give more 94 00:04:48,160 --> 00:04:51,640 Speaker 1: pricing power, and I think those kind of expenditures make sense. 95 00:04:51,680 --> 00:04:54,839 Speaker 1: You can preserve your profit margins with that. I don't 96 00:04:54,839 --> 00:04:57,640 Speaker 1: think a big, massive build out is what any CEO 97 00:04:57,800 --> 00:05:01,240 Speaker 1: is talking about of new shipping U So they're being built, 98 00:05:01,400 --> 00:05:04,760 Speaker 1: but these take years of lead time as well. Patrick, 99 00:05:04,800 --> 00:05:06,560 Speaker 1: I noticed as well. You say you want to own 100 00:05:06,839 --> 00:05:11,479 Speaker 1: volatility in the year ahead, Why and how specifically well 101 00:05:12,000 --> 00:05:15,400 Speaker 1: queie what it does, It's unclear. No one knows unequivocally 102 00:05:15,440 --> 00:05:17,800 Speaker 1: what QUEI does for the economy. It probably gives it 103 00:05:17,839 --> 00:05:20,799 Speaker 1: a boost to give some confidence when times are very scary. 104 00:05:20,880 --> 00:05:24,800 Speaker 1: QUEI basically brings out some animal spirits and provoke some investment. 105 00:05:24,880 --> 00:05:28,760 Speaker 1: But what it does is it suppresses volatility, and as 106 00:05:28,839 --> 00:05:32,880 Speaker 1: QUEI gets removed, the market forces will just be allowed 107 00:05:32,960 --> 00:05:36,400 Speaker 1: to react to scary things that happen when something happens. 108 00:05:36,400 --> 00:05:38,240 Speaker 1: In the past, used to get a sell off, it 109 00:05:38,240 --> 00:05:41,240 Speaker 1: would be a buying opportunity. Over the last few years, 110 00:05:41,279 --> 00:05:44,800 Speaker 1: buying opportunities last in the spans of days rather than months. 111 00:05:44,839 --> 00:05:47,000 Speaker 1: So I do think there'll be some sell offs that 112 00:05:47,080 --> 00:05:49,080 Speaker 1: maybe will last a few months, where you get an 113 00:05:49,400 --> 00:05:52,520 Speaker 1: official correction and some things then get too cheap and 114 00:05:52,560 --> 00:05:55,320 Speaker 1: that provokes some buyers, but there won't be the wall 115 00:05:55,480 --> 00:05:58,400 Speaker 1: wall of money chasing every single sell off. And I 116 00:05:58,440 --> 00:06:02,280 Speaker 1: think when you can have dips, that's the definition of volatility, 117 00:06:02,279 --> 00:06:04,559 Speaker 1: and I don't think those will be suppressed as much 118 00:06:04,920 --> 00:06:07,760 Speaker 1: as QUI gets removed in the first quarter of next year. 119 00:06:07,839 --> 00:06:09,240 Speaker 1: Patrick I just want to build on what you think 120 00:06:09,240 --> 00:06:12,160 Speaker 1: will spark the disruption. What we saw in the previous psycho. 121 00:06:12,920 --> 00:06:15,960 Speaker 1: What we saw was ultimately no real disruption until real 122 00:06:16,040 --> 00:06:18,920 Speaker 1: rates got through positive one percent, and so we actually 123 00:06:18,920 --> 00:06:21,080 Speaker 1: started to see some balance sheet reduction and not just 124 00:06:21,120 --> 00:06:23,920 Speaker 1: the unwind of KWEI and NETT purchases. Patrick, you send 125 00:06:23,920 --> 00:06:25,600 Speaker 1: that could happen this time around before we get to 126 00:06:25,640 --> 00:06:28,520 Speaker 1: those kind of points. Well, they're bound to be before 127 00:06:28,520 --> 00:06:30,920 Speaker 1: we get to this kind of point. But the thing 128 00:06:31,000 --> 00:06:33,359 Speaker 1: that's kept me in equities it's there's three pillars, and 129 00:06:33,400 --> 00:06:36,520 Speaker 1: thank god I look at them because I worry about 130 00:06:36,600 --> 00:06:39,240 Speaker 1: valuations and the S and P five hundreds at three 131 00:06:39,440 --> 00:06:41,839 Speaker 1: point five times sales, it's never been higher than it 132 00:06:41,920 --> 00:06:45,760 Speaker 1: is today. But massive liquidity, negative real yields and earning 133 00:06:45,760 --> 00:06:47,920 Speaker 1: his growth. While those pillars remain in place, I think 134 00:06:47,920 --> 00:06:50,840 Speaker 1: equities do move higher. Um. I don't think we need 135 00:06:50,880 --> 00:06:53,120 Speaker 1: real yields at one percent to provoke a correction. But 136 00:06:53,120 --> 00:06:55,120 Speaker 1: if we get down to less than half a percent 137 00:06:55,200 --> 00:06:58,680 Speaker 1: negative real yields, where the outlook for treasuries is moving higher, 138 00:06:59,120 --> 00:07:01,640 Speaker 1: I think that will prove some multiple contractions, and I 139 00:07:01,680 --> 00:07:04,960 Speaker 1: do think it will be the highest growth companies. Um 140 00:07:04,960 --> 00:07:07,640 Speaker 1: with the most extreme multiples that are impacted the most 141 00:07:07,720 --> 00:07:09,960 Speaker 1: out companies that are trading at thirty times earning is 142 00:07:10,080 --> 00:07:13,000 Speaker 1: very expensive. But you can see how those big tech, 143 00:07:13,440 --> 00:07:15,960 Speaker 1: big cap tech companies grow their way into those multiples. 144 00:07:15,960 --> 00:07:18,520 Speaker 1: So offsetting a multiple contraction with the earnlish growth and 145 00:07:18,560 --> 00:07:20,480 Speaker 1: Patria before you run, just let me squeeze this one. 146 00:07:20,480 --> 00:07:22,200 Speaker 1: And you brought up a p moder mask A company 147 00:07:22,280 --> 00:07:24,600 Speaker 1: used to follow really closely when I was doing some 148 00:07:24,640 --> 00:07:27,200 Speaker 1: work out of London. Of course, that company out of Denmark, 149 00:07:27,360 --> 00:07:29,000 Speaker 1: Guy Johnson and I used to talk about this all 150 00:07:29,000 --> 00:07:30,760 Speaker 1: the time. I'm not a big fan of stock splits, 151 00:07:30,800 --> 00:07:33,040 Speaker 1: but of all the names, Patrick, in Europe, does that 152 00:07:33,120 --> 00:07:37,560 Speaker 1: company need one? Give? What is credit out right? Now? Um? Yeah, 153 00:07:37,680 --> 00:07:40,720 Speaker 1: it's precludes retail investing. Europe isn't as much of a 154 00:07:40,800 --> 00:07:43,680 Speaker 1: retail investor market anyway as in America, so I don't 155 00:07:43,720 --> 00:07:47,440 Speaker 1: know if it would incrementally create demand, but yes, definitely 156 00:07:47,480 --> 00:07:51,360 Speaker 1: that must open up the shareholder or the potential shareholder base. Patrick, 157 00:07:51,400 --> 00:07:53,680 Speaker 1: Thank you sir. Going to catch up, Patrick Hampstrong there, 158 00:07:53,720 --> 00:08:02,440 Speaker 1: Fleur remake. Let's bring a doctor Amadota now the city 159 00:08:02,440 --> 00:08:05,840 Speaker 1: of Scola. The Johns Hopkins censor for house security doctor. 160 00:08:05,960 --> 00:08:07,720 Speaker 1: Let's stop right here, and I think this is so 161 00:08:07,720 --> 00:08:10,600 Speaker 1: so important. Have we just taken a big step towards 162 00:08:11,000 --> 00:08:13,720 Speaker 1: normalizing how we treat this virus, towards getting that to 163 00:08:13,800 --> 00:08:18,000 Speaker 1: normal I do think that the CDC revised guidance, which 164 00:08:18,080 --> 00:08:20,320 Speaker 1: was based on science, based on what we've learned about 165 00:08:20,360 --> 00:08:23,440 Speaker 1: this virus, does give us some sense of normalcy, because 166 00:08:23,440 --> 00:08:26,080 Speaker 1: what you're seeing is that this is a less disruptive 167 00:08:26,080 --> 00:08:28,600 Speaker 1: event to get COVID nineteen when it's mild, when the 168 00:08:28,640 --> 00:08:32,160 Speaker 1: symptoms have abated, and we're making that isolation period something 169 00:08:32,160 --> 00:08:35,480 Speaker 1: that people can more easily cope with within their lives, 170 00:08:35,559 --> 00:08:37,480 Speaker 1: and we're doing in a safe manner. It's important to 171 00:08:37,480 --> 00:08:40,200 Speaker 1: remember that this one size fits all ten days that 172 00:08:40,200 --> 00:08:42,439 Speaker 1: have been in place for so long didn't really apply 173 00:08:42,480 --> 00:08:46,400 Speaker 1: to everybody because many people were becoming not contagious earlier 174 00:08:46,440 --> 00:08:48,240 Speaker 1: in that time period. So I think this is more 175 00:08:48,240 --> 00:08:51,080 Speaker 1: precision guided. I think it's going to be something that 176 00:08:51,120 --> 00:08:53,679 Speaker 1: people are finding will find much easier to cope with 177 00:08:54,120 --> 00:08:56,360 Speaker 1: when they do get these mild breakthrough infections that are 178 00:08:56,360 --> 00:09:00,240 Speaker 1: going to become ubiquitous. Well. Dr ADAGEA obviously to even 179 00:09:00,320 --> 00:09:03,000 Speaker 1: understand that you have a positive case and need to isolate, 180 00:09:03,040 --> 00:09:04,880 Speaker 1: you need to have a test, and in some cases 181 00:09:04,920 --> 00:09:06,760 Speaker 1: you need to have a test to stop isolation and 182 00:09:06,800 --> 00:09:09,960 Speaker 1: return to your office, for example. Yet testing just doesn't 183 00:09:09,960 --> 00:09:14,040 Speaker 1: seem to be easily accessible. How does that problem get solved. 184 00:09:15,400 --> 00:09:18,160 Speaker 1: This is going to take a full concerted effort by 185 00:09:18,160 --> 00:09:20,839 Speaker 1: the federal government to incentivize companies to make tests, to 186 00:09:20,880 --> 00:09:22,800 Speaker 1: make it easier to get these tests on the market. 187 00:09:22,840 --> 00:09:24,880 Speaker 1: We know we only have a handful that it passed 188 00:09:24,920 --> 00:09:28,960 Speaker 1: through an ownerous FDA regulation process, and I think we 189 00:09:29,040 --> 00:09:31,760 Speaker 1: have to make these cheaper because twenty five for two 190 00:09:31,760 --> 00:09:34,680 Speaker 1: tests out of most people's reach. And this is all 191 00:09:34,679 --> 00:09:37,320 Speaker 1: a result of the fact that tests have always been undervalued, 192 00:09:37,360 --> 00:09:40,120 Speaker 1: that we really never had a robust home testing program 193 00:09:40,120 --> 00:09:42,680 Speaker 1: in place during the Trump administration. It started during the 194 00:09:42,679 --> 00:09:45,880 Speaker 1: Biden administration, but it's been very stulted and flawed and 195 00:09:46,400 --> 00:09:49,560 Speaker 1: not really optimized. So this is going to be the 196 00:09:49,640 --> 00:09:51,760 Speaker 1: key part of how we move through this pandemic, as 197 00:09:51,800 --> 00:09:54,480 Speaker 1: we normalize this, As people want to be able to 198 00:09:54,559 --> 00:09:57,440 Speaker 1: navigate a life with COVID nineteen as as being an 199 00:09:57,440 --> 00:09:59,520 Speaker 1: ever present issue that they have to deal with, they 200 00:09:59,520 --> 00:10:01,760 Speaker 1: need these us and I think we can't wait until 201 00:10:01,960 --> 00:10:04,720 Speaker 1: the fower government solves this problem over time. It has 202 00:10:04,760 --> 00:10:06,880 Speaker 1: to be done now. And I think that this is 203 00:10:06,920 --> 00:10:09,440 Speaker 1: something that Europe has done very well, but in the 204 00:10:09,520 --> 00:10:12,000 Speaker 1: U S has just not been something that prioritize because 205 00:10:12,000 --> 00:10:14,520 Speaker 1: everybody assumed more people will be vaccinated than that just 206 00:10:14,559 --> 00:10:17,160 Speaker 1: didn't happen, and we're still stuck in this limbo. Have 207 00:10:17,280 --> 00:10:20,240 Speaker 1: we learned now that we can't vaccinate our way out 208 00:10:20,240 --> 00:10:22,400 Speaker 1: of this, that you need more more than one weapon 209 00:10:22,440 --> 00:10:25,040 Speaker 1: in this war is? Or are we just still putting 210 00:10:25,040 --> 00:10:28,679 Speaker 1: too much epsis on that. In particular, the vaccines are 211 00:10:28,720 --> 00:10:30,679 Speaker 1: the best tool that we have by far because they 212 00:10:30,679 --> 00:10:33,800 Speaker 1: remove the ability of the virus to cause serious disease, hospitalization, 213 00:10:33,800 --> 00:10:36,000 Speaker 1: and death. So that has to be the key component 214 00:10:36,000 --> 00:10:38,800 Speaker 1: of our response. But not everybody is going to get vaccinated, 215 00:10:38,840 --> 00:10:42,000 Speaker 1: as we've seen, and tests are one way, especially with 216 00:10:42,040 --> 00:10:44,960 Speaker 1: a contagious variant like omicron that can get around vaccine 217 00:10:45,000 --> 00:10:47,760 Speaker 1: and duce protection and cost. Mild infections. Tests are going 218 00:10:47,840 --> 00:10:51,120 Speaker 1: to be almost equally important because people need to know 219 00:10:51,200 --> 00:10:54,800 Speaker 1: their status. Many organizations want don't want to have any 220 00:10:54,840 --> 00:10:58,280 Speaker 1: tolerance of cases in their inside their workplace, for example, 221 00:10:58,360 --> 00:11:00,800 Speaker 1: or at their event so this is something that needs 222 00:11:00,840 --> 00:11:02,679 Speaker 1: to be done in order for the country to kind 223 00:11:02,720 --> 00:11:05,360 Speaker 1: of move forward. Even if all of these cases are mild, 224 00:11:05,520 --> 00:11:08,559 Speaker 1: there's still not a risk tolerance to have these mild cases, 225 00:11:08,800 --> 00:11:11,960 Speaker 1: and you still have hospitals that are under stress from 226 00:11:12,080 --> 00:11:15,480 Speaker 1: Delta patients and now some omicron patients. That's going to 227 00:11:15,600 --> 00:11:18,280 Speaker 1: be the key thing. So until we get to that point, 228 00:11:18,480 --> 00:11:21,640 Speaker 1: this is treated completely like another respiratory virus. Tests are 229 00:11:21,640 --> 00:11:24,079 Speaker 1: going to be something that people want to do very frequently, 230 00:11:24,480 --> 00:11:28,160 Speaker 1: and it's and it's it's still a major mess. How 231 00:11:28,200 --> 00:11:31,559 Speaker 1: soon do we get their amish because, um, you mentioned 232 00:11:31,600 --> 00:11:34,560 Speaker 1: that you expect this to become these breakthrough mild cases 233 00:11:34,559 --> 00:11:39,360 Speaker 1: have become ubiquitous, meaning pretty much everyone is gonna get it, 234 00:11:39,520 --> 00:11:41,880 Speaker 1: and it seems like, you know, with one point four 235 00:11:41,920 --> 00:11:46,040 Speaker 1: million new cases yesterday, that's gonna be fairly soon. We're 236 00:11:46,080 --> 00:11:49,320 Speaker 1: not fighting the Spanish flu anymore, even though we still 237 00:11:49,360 --> 00:11:53,600 Speaker 1: get the Spanish flu and it's one of the biggest killers. Um, 238 00:11:53,640 --> 00:11:55,840 Speaker 1: it's just so common. Is that what this is going 239 00:11:55,920 --> 00:11:59,160 Speaker 1: to become. Yes, this is going to go the way 240 00:11:59,160 --> 00:12:03,079 Speaker 1: of the other four ronaviruses that cause about our common colds. 241 00:12:03,080 --> 00:12:05,680 Speaker 1: So this is going to be something that everybody gets 242 00:12:05,840 --> 00:12:08,200 Speaker 1: it probably will probably get it multiple times. But it's 243 00:12:08,200 --> 00:12:10,400 Speaker 1: going to be a tame reversion because our immune systems 244 00:12:10,400 --> 00:12:12,600 Speaker 1: are going to be trained to respond through vaccines and 245 00:12:12,600 --> 00:12:16,280 Speaker 1: prior infections. We're gonna have tools like anti virals, monoclone, 246 00:12:16,360 --> 00:12:19,120 Speaker 1: land of bodies, and rapid tests so people can know 247 00:12:19,440 --> 00:12:21,480 Speaker 1: what their status is and they don't infect other people. 248 00:12:21,480 --> 00:12:24,680 Speaker 1: So yes, we probably will get away from these these 249 00:12:24,679 --> 00:12:27,199 Speaker 1: public health record with these public health regulations and more 250 00:12:27,280 --> 00:12:30,520 Speaker 1: towards an individual based way of of dealing with this. 251 00:12:30,800 --> 00:12:33,280 Speaker 1: The problem is we still have hospitals in the United 252 00:12:33,320 --> 00:12:35,600 Speaker 1: States and around the world where there are still issues 253 00:12:35,640 --> 00:12:39,000 Speaker 1: with the capacity. And that's the key pivot point for me, 254 00:12:39,360 --> 00:12:42,240 Speaker 1: is when we remove the ability of COVID nineteen to 255 00:12:42,320 --> 00:12:45,200 Speaker 1: cause hospital capacity concerns, and that is the case in 256 00:12:45,240 --> 00:12:47,680 Speaker 1: many parts of the country, but there are still areas 257 00:12:47,920 --> 00:12:50,679 Speaker 1: in the country, specific regions with low vaccination rates where 258 00:12:50,679 --> 00:12:54,240 Speaker 1: they're still at risk for too many people with conditions 259 00:12:54,280 --> 00:12:56,640 Speaker 1: that put them in the need for hospitalization that are 260 00:12:56,720 --> 00:12:59,840 Speaker 1: unvaccinated that can crush the hospital. That's the point where 261 00:12:59,840 --> 00:13:01,840 Speaker 1: we kind of move fully to endemicities when we're not 262 00:13:01,880 --> 00:13:06,240 Speaker 1: seeing hospitals report over bet capacity I see you from 263 00:13:06,280 --> 00:13:09,480 Speaker 1: multiple days for example, because so when do we get there? 264 00:13:09,520 --> 00:13:11,080 Speaker 1: I mean we have we had that in the past 265 00:13:11,160 --> 00:13:14,599 Speaker 1: with flu seasons that were really bad. Um, some hospitals 266 00:13:14,640 --> 00:13:18,240 Speaker 1: get overcrowded. Do we do we end up next Christmas 267 00:13:18,280 --> 00:13:21,200 Speaker 1: in a situation um the likes of which we would 268 00:13:21,240 --> 00:13:23,959 Speaker 1: have seen in bad flu seasons ten years ago to 269 00:13:24,000 --> 00:13:28,200 Speaker 1: twenty years ago. Hopefully that will be the case. Right now, 270 00:13:28,240 --> 00:13:30,920 Speaker 1: it's it's still worse than influenza seasons, even the worst 271 00:13:30,920 --> 00:13:33,480 Speaker 1: of our influenza seasons in many parts of the country. 272 00:13:33,920 --> 00:13:37,160 Speaker 1: That has to be what what what? What changes? So 273 00:13:37,360 --> 00:13:40,360 Speaker 1: probably by the end by next winter a year from now, 274 00:13:40,520 --> 00:13:42,240 Speaker 1: we should be at that phase in the United States 275 00:13:42,280 --> 00:13:44,559 Speaker 1: and many of the developed countries uh that that this 276 00:13:44,720 --> 00:13:47,079 Speaker 1: becomes handled more like influenza. But I still think it's 277 00:13:47,080 --> 00:13:49,360 Speaker 1: going to have a bigger burthen influenza for some time 278 00:13:49,600 --> 00:13:51,840 Speaker 1: because of the attack. Great how many people get infected, 279 00:13:51,960 --> 00:13:53,880 Speaker 1: And it seems on a pound for pound basis to 280 00:13:53,920 --> 00:13:57,680 Speaker 1: be worse than seasonal influenza when it comes to mortality. 281 00:13:57,880 --> 00:14:01,160 Speaker 1: But that will all adapt over time, and obviously new 282 00:14:01,240 --> 00:14:03,559 Speaker 1: variants can come and change that prediction might be faster 283 00:14:03,720 --> 00:14:06,360 Speaker 1: or slower but I think we're still looking at next 284 00:14:06,520 --> 00:14:09,560 Speaker 1: flu season, in the next fluid respiratory virus season, being 285 00:14:09,880 --> 00:14:12,640 Speaker 1: probably closer to our baseline, but still probably a little 286 00:14:12,640 --> 00:14:16,559 Speaker 1: bit more intense than usual, but hopefully manageable. Amish, thank 287 00:14:16,600 --> 00:14:18,160 Speaker 1: you for all that you do. I know you're busy 288 00:14:18,160 --> 00:14:20,440 Speaker 1: on it a Christmas weekend as well. We appreciate it's 289 00:14:20,480 --> 00:14:22,400 Speaker 1: for everything you've done and for us this year as well. 290 00:14:22,720 --> 00:14:24,560 Speaker 1: We'll catch up soon, thought to Amish it down to 291 00:14:24,600 --> 00:14:33,240 Speaker 1: the Matt you said that that CDC decision for some 292 00:14:33,280 --> 00:14:35,360 Speaker 1: paper at least including you, and for me to some 293 00:14:35,440 --> 00:14:41,400 Speaker 1: degree a bullish co Yeah. Absolutely. Because of the problems 294 00:14:41,480 --> 00:14:44,800 Speaker 1: businesses that have had with employees being out for a 295 00:14:44,840 --> 00:14:48,160 Speaker 1: full ten days at least ten days after testing positive, 296 00:14:48,360 --> 00:14:51,080 Speaker 1: they've had to shut down services. Some companies have had 297 00:14:51,120 --> 00:14:55,560 Speaker 1: to shut down production, some companies have shut down retail outlets. 298 00:14:55,800 --> 00:14:58,040 Speaker 1: If they can reduce that to five days, and the 299 00:14:58,040 --> 00:15:00,440 Speaker 1: CDC now says that you can as long as you're 300 00:15:00,480 --> 00:15:04,240 Speaker 1: asymptomatic um. That obviously opens up a chance for them 301 00:15:04,280 --> 00:15:07,440 Speaker 1: to do more business and raise revenue profit as well, 302 00:15:07,600 --> 00:15:09,880 Speaker 1: and maybe to some extent, makes it easier to forecast 303 00:15:09,880 --> 00:15:12,240 Speaker 1: this economy into twenty two. Let's do that right now 304 00:15:12,240 --> 00:15:15,320 Speaker 1: with John Riding, the Chief Economic Advisor, a bree Capital 305 00:15:15,360 --> 00:15:17,000 Speaker 1: and a good friend of this program for a long 306 00:15:17,000 --> 00:15:19,920 Speaker 1: long time. John, It's good to see you buddy. As always, 307 00:15:20,000 --> 00:15:21,720 Speaker 1: let's start with a call for next year, John, what 308 00:15:21,720 --> 00:15:25,520 Speaker 1: are you focused on? Well? I think the main focus 309 00:15:25,600 --> 00:15:27,920 Speaker 1: is the inflation story. And this was a story that 310 00:15:28,360 --> 00:15:31,160 Speaker 1: as early as April of last year, we warned that 311 00:15:31,720 --> 00:15:34,360 Speaker 1: we were going to have an inflation event, not a 312 00:15:34,400 --> 00:15:39,320 Speaker 1: disinflation or deflation event, because it would negatively it been 313 00:15:39,320 --> 00:15:43,680 Speaker 1: the the virus and the government mesh lockdown measures would 314 00:15:44,440 --> 00:15:47,440 Speaker 1: negatively hit the supply side. Now the supply chains have 315 00:15:47,520 --> 00:15:52,280 Speaker 1: been hit harder, more prolonged than I think that we imagine. 316 00:15:52,760 --> 00:15:55,160 Speaker 1: And on the other side, we're going to get massive 317 00:15:55,160 --> 00:15:59,120 Speaker 1: demand stimulus that was monetary financed, and we've certainly had 318 00:15:59,160 --> 00:16:03,080 Speaker 1: that and UH As a result, the combination has been 319 00:16:03,120 --> 00:16:08,480 Speaker 1: a far more elevated inflation rate than anyone expected. Almost 320 00:16:08,520 --> 00:16:11,680 Speaker 1: seven percent, may well be seven percent when the December 321 00:16:11,760 --> 00:16:14,600 Speaker 1: data come in. And so the question is how much 322 00:16:14,600 --> 00:16:18,040 Speaker 1: does that inflation rate moderate and what is the policy response, 323 00:16:18,080 --> 00:16:21,000 Speaker 1: because I just don't believe that that inflation is going 324 00:16:21,080 --> 00:16:24,840 Speaker 1: to wind itself down to two percent without little action 325 00:16:25,840 --> 00:16:29,120 Speaker 1: from the FED. I think inflation expectations are getting embedded. 326 00:16:29,600 --> 00:16:32,560 Speaker 1: Your previous guests talking about all those pressures on the 327 00:16:32,600 --> 00:16:38,240 Speaker 1: airline industry was just an example of the cost pressures 328 00:16:38,280 --> 00:16:41,600 Speaker 1: that companies are able to pass along in this environment. 329 00:16:41,600 --> 00:16:43,880 Speaker 1: So I think the inflation story is the first. I 330 00:16:43,880 --> 00:16:45,520 Speaker 1: think the inflation rate is going to be close to 331 00:16:45,560 --> 00:16:48,400 Speaker 1: four and the Fed is going to end up taking 332 00:16:48,800 --> 00:16:52,920 Speaker 1: more steps, as its signaled at the last meeting with 333 00:16:53,080 --> 00:16:57,480 Speaker 1: its dot plot, than people have been expecting. A couple 334 00:16:57,520 --> 00:17:00,200 Speaker 1: of things that John, then the scale of deceleration on 335 00:17:00,280 --> 00:17:02,760 Speaker 1: headline inflation. You're looking for seven potential to close out 336 00:17:02,760 --> 00:17:05,119 Speaker 1: of the year into next year, and the policy response 337 00:17:05,160 --> 00:17:07,840 Speaker 1: that would shake that move lower. John, let's build on that. 338 00:17:08,240 --> 00:17:10,760 Speaker 1: The expectation now for many people is three hikes next year. 339 00:17:11,240 --> 00:17:15,000 Speaker 1: Does that do anything? John? Does that achieve anything? Well? 340 00:17:15,040 --> 00:17:18,159 Speaker 1: I think it starts off as a signal, and I 341 00:17:18,160 --> 00:17:20,520 Speaker 1: think the key thing was for the FED to recognize 342 00:17:20,560 --> 00:17:22,520 Speaker 1: the problem. I don't think the FED fully recognized the 343 00:17:22,560 --> 00:17:26,720 Speaker 1: problem at Chair Powell's last press conference, but I think 344 00:17:26,760 --> 00:17:30,200 Speaker 1: it went some way to recognizing the problem by getting 345 00:17:30,280 --> 00:17:33,600 Speaker 1: rid of the transitor language, putting again three hikes that 346 00:17:33,800 --> 00:17:38,880 Speaker 1: were supported by thirteen members of the committee as opposed 347 00:17:38,920 --> 00:17:42,399 Speaker 1: to the one hike that was at the in the 348 00:17:42,520 --> 00:17:46,480 Speaker 1: last dot plot back in September, which was basically a 349 00:17:46,520 --> 00:17:49,440 Speaker 1: split decision with as many people looking for one hikers 350 00:17:49,640 --> 00:17:51,639 Speaker 1: looking for no move at all. So it is an 351 00:17:51,680 --> 00:17:54,240 Speaker 1: important signal, and I think the really good thing would 352 00:17:54,240 --> 00:17:57,800 Speaker 1: be if that move came in March. The asset wind 353 00:17:57,800 --> 00:18:01,520 Speaker 1: down at the asset purchases ends mid March. The next 354 00:18:01,520 --> 00:18:04,320 Speaker 1: decision day, I think is March sixte So if the 355 00:18:04,359 --> 00:18:07,880 Speaker 1: FED were to raise rates on March sixteenth, it would 356 00:18:07,960 --> 00:18:10,399 Speaker 1: be a signal. And then the next signal will be 357 00:18:10,840 --> 00:18:13,400 Speaker 1: start letting the balance sheet run off and perhaps do 358 00:18:13,440 --> 00:18:16,200 Speaker 1: that as soon as June of next year. Will that 359 00:18:16,240 --> 00:18:19,760 Speaker 1: be enough? Probably not, But it is important that we 360 00:18:20,119 --> 00:18:23,480 Speaker 1: the FED recognizes the problem and starts to take steps. 361 00:18:23,560 --> 00:18:28,200 Speaker 1: And then that makes companies begin to think should price increases, 362 00:18:28,240 --> 00:18:31,879 Speaker 1: which I fear is becoming the case, uh not be 363 00:18:32,080 --> 00:18:36,600 Speaker 1: part of our process for making profits because we're in 364 00:18:36,640 --> 00:18:39,800 Speaker 1: an environment right now. We we've got cost pressures, but 365 00:18:40,560 --> 00:18:43,399 Speaker 1: companies are raising prices by even more than the costs 366 00:18:43,440 --> 00:18:45,840 Speaker 1: are going to go, perhaps using the cover of costs 367 00:18:45,880 --> 00:18:50,119 Speaker 1: and widening profit margins, and that's relatively unusual, necessarily different 368 00:18:50,160 --> 00:18:52,920 Speaker 1: from the profit from the inflation environment that we had 369 00:18:52,920 --> 00:18:55,760 Speaker 1: in the nine seventies. So I think those signals are 370 00:18:55,880 --> 00:19:00,560 Speaker 1: very important to start reframing the decision making Pross. But no, 371 00:19:01,119 --> 00:19:03,080 Speaker 1: by itself, I think there's going to be more rate 372 00:19:03,160 --> 00:19:08,600 Speaker 1: hikes into three more I think, you know, being signaled 373 00:19:08,640 --> 00:19:11,840 Speaker 1: by the dot plot um. But on the other side, 374 00:19:12,080 --> 00:19:14,720 Speaker 1: the economy is still going to be rolling along because 375 00:19:14,720 --> 00:19:17,080 Speaker 1: there's so many supply constraints, so higher rates are not 376 00:19:17,160 --> 00:19:19,680 Speaker 1: going to hurt the economy. We've got so much access 377 00:19:19,720 --> 00:19:22,920 Speaker 1: demand in the system. Taking some demand out isn't going 378 00:19:22,960 --> 00:19:26,119 Speaker 1: to slow growth. It isn't going to create any slack 379 00:19:26,160 --> 00:19:28,920 Speaker 1: in the labor market. There's just simply plenty of jobs 380 00:19:29,000 --> 00:19:32,560 Speaker 1: out there, and all of this COVID protocols are making 381 00:19:32,600 --> 00:19:36,399 Speaker 1: it harder and harder to fulfill those positions. So is 382 00:19:36,400 --> 00:19:38,560 Speaker 1: what you're saying, essentially, John, that the FED is likely 383 00:19:38,560 --> 00:19:40,800 Speaker 1: going to have to move more aggressively, but it's not 384 00:19:40,840 --> 00:19:44,640 Speaker 1: going to amount to a policy mistake of some kind. Um. 385 00:19:44,920 --> 00:19:47,240 Speaker 1: The policy mistake has been made, and the policy mistate 386 00:19:47,359 --> 00:19:51,080 Speaker 1: was keeping the emergency measures in place for too long. 387 00:19:51,400 --> 00:19:54,520 Speaker 1: There was no need to have continued purchasing at a 388 00:19:54,600 --> 00:19:58,119 Speaker 1: hundred and twenty billion dollars a month almost through to 389 00:19:58,200 --> 00:20:01,399 Speaker 1: the end of this year. They they only started that 390 00:20:01,480 --> 00:20:05,360 Speaker 1: to wind down adjustment in November. So that was one 391 00:20:05,400 --> 00:20:08,520 Speaker 1: policy and state there was the Fed could have signaled 392 00:20:09,080 --> 00:20:12,560 Speaker 1: that inflation wasn't going to be transford. They weren't going 393 00:20:12,600 --> 00:20:17,760 Speaker 1: to let it be anything other than transitory by by 394 00:20:17,840 --> 00:20:21,480 Speaker 1: recognizing the problem. But I think there was some mischaracterization 395 00:20:21,520 --> 00:20:23,800 Speaker 1: the inflation from a lot of focus on really a 396 00:20:23,840 --> 00:20:26,840 Speaker 1: lot of focus on a handful of items, even as 397 00:20:26,880 --> 00:20:29,639 Speaker 1: all the data showed that it was broadening out and 398 00:20:29,680 --> 00:20:32,880 Speaker 1: the inflation precius of broadened out. And you can't talk 399 00:20:32,920 --> 00:20:36,280 Speaker 1: down this inflation problem. You know, a credible FED has 400 00:20:36,320 --> 00:20:40,159 Speaker 1: to talk against the inflation problem, take action against the 401 00:20:40,160 --> 00:20:43,200 Speaker 1: inflation problem. Well, John Matt brought up the great point 402 00:20:43,240 --> 00:20:46,800 Speaker 1: earlier around the timing of Powell changing his message and messaging, 403 00:20:46,800 --> 00:20:50,520 Speaker 1: retiring the word transitory, and the President renominating him for 404 00:20:50,560 --> 00:20:52,880 Speaker 1: a second term at the Federal Reserve. The President still, though, 405 00:20:53,119 --> 00:20:55,680 Speaker 1: has several more nominations to make seats that need to 406 00:20:55,680 --> 00:20:57,840 Speaker 1: be filled. Do you think who sits in them could 407 00:20:57,840 --> 00:21:01,959 Speaker 1: shift the balance of policy going forward. It could, and 408 00:21:02,040 --> 00:21:07,560 Speaker 1: it could shift the balance to the detriment of the outlook, 409 00:21:07,800 --> 00:21:09,800 Speaker 1: and it could shift the balance to the detriment of 410 00:21:09,840 --> 00:21:13,960 Speaker 1: this administration. This is false belief that somehow having dabish 411 00:21:15,000 --> 00:21:18,680 Speaker 1: members of the committee by Davish, I mean less inclined 412 00:21:18,760 --> 00:21:21,680 Speaker 1: to raise interest rates or to be more focused on 413 00:21:22,040 --> 00:21:26,399 Speaker 1: things other than inflation. Uh, somehow helps the administration. And 414 00:21:26,920 --> 00:21:31,320 Speaker 1: that's just a falise choice. What we need are people 415 00:21:31,400 --> 00:21:37,520 Speaker 1: who have some experience with inflation, some strong academic background 416 00:21:38,200 --> 00:21:44,000 Speaker 1: on the inflation frontum. We need strong people on financial 417 00:21:44,040 --> 00:21:46,679 Speaker 1: regulation because the other problem is going to be with 418 00:21:46,880 --> 00:21:50,919 Speaker 1: especially the chair of the Vice Chair for Financial Supervision 419 00:21:50,920 --> 00:21:53,639 Speaker 1: open is going to be the potential impact on the 420 00:21:53,680 --> 00:21:57,240 Speaker 1: markets of unwinding all this accommodation which has been in 421 00:21:57,280 --> 00:22:00,840 Speaker 1: place too long. So yes, good choices could certainly helped 422 00:22:00,880 --> 00:22:03,720 Speaker 1: this and push the federal Bad choices could make the 423 00:22:03,720 --> 00:22:07,080 Speaker 1: inflation problem worse, and that will hurt the administration. It 424 00:22:07,119 --> 00:22:09,639 Speaker 1: will not help the administration, nor will it help the 425 00:22:09,680 --> 00:22:12,719 Speaker 1: economic outlook. I think you know, you bring up an 426 00:22:12,720 --> 00:22:17,879 Speaker 1: interesting point, an important point, John with her guards to experience, 427 00:22:18,040 --> 00:22:21,760 Speaker 1: and you're obviously a sprightly young man on the football pitch. 428 00:22:22,080 --> 00:22:25,680 Speaker 1: But you were around during the nies when we saw 429 00:22:25,680 --> 00:22:28,639 Speaker 1: a real inflation. You were advising the Bank of England, 430 00:22:28,640 --> 00:22:32,280 Speaker 1: you were advising UM, the Federal Reserve Bank of New York. 431 00:22:33,200 --> 00:22:36,800 Speaker 1: What can the FED do other than simply raise rates 432 00:22:36,880 --> 00:22:42,520 Speaker 1: in order to fight inflation. It's about signally and it's 433 00:22:42,560 --> 00:22:47,119 Speaker 1: about saying what your priorities are as well as taking action. 434 00:22:47,440 --> 00:22:51,600 Speaker 1: And an important signal will be starting to wind down 435 00:22:51,600 --> 00:22:55,760 Speaker 1: this balance sheet. Now, my preferred outcome, which is not 436 00:22:55,800 --> 00:22:58,119 Speaker 1: going to happen, is the Fed actually starts selling assets. 437 00:22:58,160 --> 00:22:59,920 Speaker 1: The FET's not going to do that, but they could 438 00:23:00,119 --> 00:23:03,840 Speaker 1: wind down somewhere between a trilling and a trillion and 439 00:23:03,880 --> 00:23:09,240 Speaker 1: a half dollars simply by stopping reinvesting and putting relatively 440 00:23:10,000 --> 00:23:14,320 Speaker 1: high caps to that runoff each month, and that would 441 00:23:14,320 --> 00:23:17,480 Speaker 1: be an important signal. But it really is about It 442 00:23:17,520 --> 00:23:22,320 Speaker 1: really is about a signaling and to back up the 443 00:23:22,440 --> 00:23:25,080 Speaker 1: rate actions so that all the we've heard, what are 444 00:23:25,080 --> 00:23:29,159 Speaker 1: the instruments of policy. The FED has asset purchases, rates, 445 00:23:29,720 --> 00:23:36,400 Speaker 1: and forward guidance. So put all of those into action. 446 00:23:36,520 --> 00:23:39,000 Speaker 1: And if the Fed were to talk about assets sales 447 00:23:39,200 --> 00:23:42,080 Speaker 1: as opposed to asset runoff, that would be a real 448 00:23:42,119 --> 00:23:45,480 Speaker 1: tighty move. But I think taking action on the balance 449 00:23:45,520 --> 00:23:49,239 Speaker 1: sheet in June, which I think could happen would be 450 00:23:49,400 --> 00:23:53,919 Speaker 1: would be a strong signal. But it's once the inflation 451 00:23:54,000 --> 00:23:56,440 Speaker 1: gene is out of the bottle and it's getting out 452 00:23:56,480 --> 00:24:01,080 Speaker 1: of the bottle, it just doesn't easily go back in again. 453 00:24:01,160 --> 00:24:05,240 Speaker 1: To for those of you, John who in Christmas pantomimes 454 00:24:05,240 --> 00:24:07,240 Speaker 1: when you're a kid, that the you know, the the 455 00:24:08,400 --> 00:24:11,320 Speaker 1: getting the genie back in the bottle, very very difficult trick. 456 00:24:11,520 --> 00:24:14,080 Speaker 1: I used to hate them, John, he's behind you. That 457 00:24:14,200 --> 00:24:17,040 Speaker 1: reference is lost on everyone in America. John, just quickly 458 00:24:17,080 --> 00:24:19,440 Speaker 1: you said something. They're so important, and I think we 459 00:24:19,480 --> 00:24:21,280 Speaker 1: can sort of think about this without the noise of 460 00:24:21,320 --> 00:24:22,840 Speaker 1: the market on a week like this. You said they 461 00:24:22,840 --> 00:24:25,880 Speaker 1: should sell assets. Can you imagine, John, what would happen 462 00:24:25,880 --> 00:24:28,160 Speaker 1: if they sold assets? John, what do you think would 463 00:24:28,160 --> 00:24:31,040 Speaker 1: happen in financial markets if they said we're not just 464 00:24:31,080 --> 00:24:36,080 Speaker 1: gonna when reinvestment, we're going to sell. Well, I think 465 00:24:36,119 --> 00:24:39,080 Speaker 1: that especially if they were to say, let's sell the 466 00:24:39,240 --> 00:24:42,440 Speaker 1: mortkeage assets because we really want a treasury only portfolio, 467 00:24:42,800 --> 00:24:45,520 Speaker 1: or sell them partially reinvest in treasures, that would be 468 00:24:45,560 --> 00:24:48,000 Speaker 1: like more like a capital market decision. But I think 469 00:24:48,000 --> 00:24:52,719 Speaker 1: the key thing is telling the markets in advanced guiding 470 00:24:52,760 --> 00:24:56,400 Speaker 1: the markets to that. But what what would happen? Would 471 00:24:56,400 --> 00:24:59,160 Speaker 1: tighten financial conditions and effects trying to sort of pull 472 00:24:59,200 --> 00:25:06,480 Speaker 1: off this impossible scenario of tighten policy without tightening financial conditions, 473 00:25:07,040 --> 00:25:09,600 Speaker 1: and that's not possible. It's like trying to make an 474 00:25:09,640 --> 00:25:13,159 Speaker 1: omelet without breaking eggs to use them. To use the 475 00:25:13,200 --> 00:25:17,760 Speaker 1: well worn analogy, financial conditions will have to be tightened, 476 00:25:18,040 --> 00:25:21,640 Speaker 1: and selling would tighten them a lot more. But look, 477 00:25:21,800 --> 00:25:24,040 Speaker 1: it's not going to happen. I think one thing we 478 00:25:24,040 --> 00:25:25,480 Speaker 1: can count on the Fed's not going to do. The 479 00:25:25,520 --> 00:25:28,800 Speaker 1: best we can hope for is an early end to reinvestments. 480 00:25:28,800 --> 00:25:31,360 Speaker 1: Since the FED were to hike rates in March and 481 00:25:31,400 --> 00:25:33,560 Speaker 1: to allow a lessets to start to run off in 482 00:25:33,640 --> 00:25:36,720 Speaker 1: May or June, as I think some on the F 483 00:25:36,840 --> 00:25:40,320 Speaker 1: one c want to do so, or Governor Waller has 484 00:25:40,359 --> 00:25:44,720 Speaker 1: been very clear on wanting to allow assets to run 485 00:25:44,760 --> 00:25:48,240 Speaker 1: off fairly quickly after the FED starts hiking rates. I 486 00:25:48,280 --> 00:25:51,240 Speaker 1: think that would be um a good step in the 487 00:25:51,320 --> 00:25:53,960 Speaker 1: right direction to tackling inflation problem. But let's be clear, 488 00:25:54,520 --> 00:25:57,840 Speaker 1: even under the best policy from fighting inflation, we're still 489 00:25:57,880 --> 00:26:01,000 Speaker 1: going to have an elevated inflation rate in twenty three 490 00:26:01,240 --> 00:26:06,199 Speaker 1: and possibly even into John just quickly. Tom Keane rides in, 491 00:26:07,160 --> 00:26:11,280 Speaker 1: asked John on Preston, North End and Stoke on January three, 492 00:26:11,720 --> 00:26:14,280 Speaker 1: and I think we should have to Let's let's hope 493 00:26:14,320 --> 00:26:18,080 Speaker 1: the game goes ahead. The king be all the games 494 00:26:18,119 --> 00:26:20,879 Speaker 1: that I've cared about were counseled on watching, which is 495 00:26:20,960 --> 00:26:23,719 Speaker 1: a sam Win six. And those of you, late Donald, 496 00:26:23,760 --> 00:26:27,840 Speaker 1: hight not happen, your beloved Preston, John riding and Merry 497 00:26:27,920 --> 00:26:30,400 Speaker 1: Christmas to you, sir. It's gonna catch up John running 498 00:26:30,440 --> 00:26:38,080 Speaker 1: there of bring capital with an echovy market at all 499 00:26:38,119 --> 00:26:39,440 Speaker 1: time high. It's and a bit of trouble down in 500 00:26:39,520 --> 00:26:41,800 Speaker 1: d C. For the President at the United States Johning 501 00:26:41,880 --> 00:26:44,520 Speaker 1: us now on that is Wendy Schiller of Brown University. 502 00:26:44,520 --> 00:26:46,320 Speaker 1: When do you let's just start there? The President in 503 00:26:46,320 --> 00:26:48,359 Speaker 1: the last twenty four hours saying there is no federal 504 00:26:48,400 --> 00:26:50,760 Speaker 1: solution in many ways, that states the obvious when it 505 00:26:50,800 --> 00:26:53,640 Speaker 1: comes to COVID nineteen and coronavirus. But do you think 506 00:26:53,680 --> 00:26:56,080 Speaker 1: he's lost control of the messaging in a way that 507 00:26:56,119 --> 00:26:58,320 Speaker 1: he thought he would have control over it when he 508 00:26:58,400 --> 00:27:02,040 Speaker 1: ran to become president of the United States. Yeah, Jonathan, 509 00:27:02,040 --> 00:27:04,000 Speaker 1: in some ways, he's just right back where he started 510 00:27:04,040 --> 00:27:06,920 Speaker 1: when he first was inaugurated, right dealing with a lot 511 00:27:06,960 --> 00:27:10,440 Speaker 1: of holiday surging on COVID UH and the vast majority 512 00:27:10,440 --> 00:27:13,640 Speaker 1: of Americans were not yet vaccinated, and they were told, look, 513 00:27:13,680 --> 00:27:15,800 Speaker 1: go get vaccinated and things will get back to normal, 514 00:27:15,920 --> 00:27:18,000 Speaker 1: or at least as close to normal as possible. And 515 00:27:18,320 --> 00:27:21,840 Speaker 1: the vast majority of Americans did get vaccinated, many many 516 00:27:21,880 --> 00:27:23,680 Speaker 1: millions have not yet done it, which is part of 517 00:27:23,720 --> 00:27:26,879 Speaker 1: the problem. But nonetheless, mother nature is a very powerful force. 518 00:27:27,160 --> 00:27:29,040 Speaker 1: And though here we are a year later and it 519 00:27:29,119 --> 00:27:31,600 Speaker 1: just feels like deja vu. And I think that's just 520 00:27:31,680 --> 00:27:34,879 Speaker 1: a really big problem for the Biden administration, which has 521 00:27:34,880 --> 00:27:37,479 Speaker 1: been doing a lot of things successfully. Actually they just 522 00:27:37,480 --> 00:27:40,080 Speaker 1: stomped on their own messaging with the failure of build 523 00:27:40,080 --> 00:27:42,960 Speaker 1: back better and then build back better is about more government. 524 00:27:43,280 --> 00:27:45,640 Speaker 1: And when voters look at government now, they think, well, 525 00:27:45,680 --> 00:27:48,159 Speaker 1: you're failing us. You're failing us in COVID, you're failing 526 00:27:48,200 --> 00:27:51,000 Speaker 1: us on testing, you're failing us on care. You know, 527 00:27:51,040 --> 00:27:53,359 Speaker 1: why would we give you an opportunity to do more 528 00:27:53,760 --> 00:27:55,560 Speaker 1: when it looks to us like you can't do what 529 00:27:55,560 --> 00:27:58,400 Speaker 1: you're supposed to do now. Well, Wendy, the President yesterday 530 00:27:58,400 --> 00:28:01,000 Speaker 1: said there is no federal solution, US gets stalled at 531 00:28:01,000 --> 00:28:03,800 Speaker 1: a state level. Is that the president trying to shock 532 00:28:03,880 --> 00:28:06,840 Speaker 1: some of the political blame away from himself or is 533 00:28:06,880 --> 00:28:10,520 Speaker 1: this a president who's just not adequately adequately responding to 534 00:28:10,560 --> 00:28:13,640 Speaker 1: a national challenge. Well, I think when we're in crisis, 535 00:28:13,680 --> 00:28:16,080 Speaker 1: voters don't want to hear blame it on somebody else, 536 00:28:16,160 --> 00:28:18,919 Speaker 1: even if there are realities where you have governors like 537 00:28:19,040 --> 00:28:23,000 Speaker 1: the governor of Florida who's actively trying to prevent mass mandates, 538 00:28:23,080 --> 00:28:28,280 Speaker 1: prevent vaccine requirements, and private businesses uh penalized people for 539 00:28:28,400 --> 00:28:31,560 Speaker 1: trying to take safety measures. You know, he's very popular 540 00:28:31,560 --> 00:28:35,120 Speaker 1: in Florida, but that doesn't help. The problem is that 541 00:28:35,200 --> 00:28:37,360 Speaker 1: you know that's not just the only one state out 542 00:28:37,359 --> 00:28:40,240 Speaker 1: of fifty and then you know, blaming the voter or 543 00:28:40,320 --> 00:28:44,120 Speaker 1: blaming the person who's not getting vaccinated, that just causes 544 00:28:44,120 --> 00:28:47,120 Speaker 1: more division. I think it makes communication and messaging to 545 00:28:47,160 --> 00:28:50,320 Speaker 1: those people harder. I think the issue will be public health. 546 00:28:50,640 --> 00:28:52,600 Speaker 1: Does the government have the right to do what it 547 00:28:52,640 --> 00:28:54,560 Speaker 1: has to do, as you're seeing in New York City 548 00:28:54,560 --> 00:28:57,120 Speaker 1: with the Mayor of New York City or President Biden 549 00:28:57,320 --> 00:29:00,560 Speaker 1: to mandate vaccines and the idea of man date being 550 00:29:00,560 --> 00:29:02,680 Speaker 1: a sort of unattractive thing to a lot of Americans. 551 00:29:02,840 --> 00:29:06,080 Speaker 1: Were about to find out the court allows the government 552 00:29:06,120 --> 00:29:09,120 Speaker 1: to tell larger businesses what to do. This is gonna 553 00:29:09,160 --> 00:29:10,360 Speaker 1: be a big issue, and this is gonna be a 554 00:29:10,360 --> 00:29:12,840 Speaker 1: turning point in the twenty one century for all of America. 555 00:29:13,200 --> 00:29:15,719 Speaker 1: You know, will we make these sacrifices, will we allow 556 00:29:16,080 --> 00:29:19,320 Speaker 1: the government to issue these mandates? And just not clear 557 00:29:19,360 --> 00:29:22,040 Speaker 1: that's gonna happen yet. Yeah, we'll see how those arguments 558 00:29:22,080 --> 00:29:23,760 Speaker 1: go when the Supreme Court hears them in less than 559 00:29:23,760 --> 00:29:26,240 Speaker 1: two weeks time. Wendy, do you think that COVID nineteen 560 00:29:26,280 --> 00:29:28,880 Speaker 1: is the president's biggest political headache right now? Or is 561 00:29:28,920 --> 00:29:32,680 Speaker 1: it something else? No? I mean, I think it's it's twofold. 562 00:29:32,680 --> 00:29:36,360 Speaker 1: It's COVID nineteen. It's obviously existing politization and division in 563 00:29:36,360 --> 00:29:40,080 Speaker 1: the country that he inherited essentially, and it's also still 564 00:29:40,120 --> 00:29:42,160 Speaker 1: the fractures in his own party. You know, if he 565 00:29:42,160 --> 00:29:44,120 Speaker 1: could come out of the gate now, he's not gonna 566 00:29:44,160 --> 00:29:45,560 Speaker 1: have you know, for the state of the Union will 567 00:29:45,560 --> 00:29:47,640 Speaker 1: be about COVID. It won't be about what can we 568 00:29:47,680 --> 00:29:50,320 Speaker 1: do next? He's got to line up the Democrats. You know, 569 00:29:50,360 --> 00:29:53,880 Speaker 1: at least twenty three I believe now announced that they're retiring, 570 00:29:54,000 --> 00:29:56,800 Speaker 1: So he's looking at a pretty lost majority, probably for 571 00:29:57,560 --> 00:29:59,920 Speaker 1: two and beyond. After the election, he's got to think 572 00:30:00,000 --> 00:30:02,120 Speaker 1: about a simple thing that he wants that he can 573 00:30:02,160 --> 00:30:05,040 Speaker 1: get from his own majority party, and they've got to 574 00:30:05,080 --> 00:30:08,360 Speaker 1: figure that out too. That's another headache. But things like 575 00:30:08,520 --> 00:30:11,720 Speaker 1: making life easier for people who struggle during COVID, like 576 00:30:11,960 --> 00:30:15,680 Speaker 1: childcare for example, that is likely to be popular among 577 00:30:15,760 --> 00:30:18,800 Speaker 1: voters who are coming out of a very difficult economic 578 00:30:18,840 --> 00:30:22,560 Speaker 1: situation and a stressful situation with the pandemic. Think small, 579 00:30:22,800 --> 00:30:25,720 Speaker 1: Think targeted, Think what you can accomplish and get that done. 580 00:30:26,680 --> 00:30:29,200 Speaker 1: You know. We talked to Mohammed Units yesterday from Gallop 581 00:30:29,240 --> 00:30:32,360 Speaker 1: and he pointed out that the president's approval ratings have 582 00:30:32,600 --> 00:30:36,800 Speaker 1: been low since the fall of Kabul and and haven't 583 00:30:36,880 --> 00:30:39,520 Speaker 1: changed much since then. But in the meantime we've seen 584 00:30:39,560 --> 00:30:43,400 Speaker 1: inflation really ramp up, and of course his critics blame 585 00:30:43,520 --> 00:30:49,040 Speaker 1: that on President Biden. How important is the resurgence of 586 00:30:49,040 --> 00:30:52,640 Speaker 1: inflation and what can the president do about it? Well, 587 00:30:52,640 --> 00:30:55,200 Speaker 1: it all goes to the same sort of sense of 588 00:30:56,080 --> 00:30:58,640 Speaker 1: misery on the part of the average citizen. You go 589 00:30:58,680 --> 00:31:01,040 Speaker 1: to the shelves, you can't find things that you need 590 00:31:01,120 --> 00:31:03,160 Speaker 1: that you normally can it. It's hard to get a 591 00:31:03,160 --> 00:31:05,280 Speaker 1: new card, it's hard to get a used car, it's 592 00:31:05,320 --> 00:31:07,640 Speaker 1: hard to get a dishwasher, it's hard to get things 593 00:31:07,640 --> 00:31:10,440 Speaker 1: that Americans are used to getting relatively easily. And now 594 00:31:10,480 --> 00:31:13,360 Speaker 1: of course that's transferred to home testing for COVID. So 595 00:31:13,400 --> 00:31:15,920 Speaker 1: it's all about we can't even live the laws we 596 00:31:16,040 --> 00:31:19,000 Speaker 1: want to live. An inflation is part of that, but 597 00:31:19,080 --> 00:31:21,160 Speaker 1: it's all going to the fact that it seems as 598 00:31:21,160 --> 00:31:23,520 Speaker 1: though things are out of control and that the government 599 00:31:23,520 --> 00:31:26,000 Speaker 1: can't get them back in control, and inflation has become 600 00:31:26,320 --> 00:31:30,960 Speaker 1: one of another thing that's really fueling this sense of frustration. 601 00:31:31,920 --> 00:31:33,480 Speaker 1: If this is delicate, and I want to finish here 602 00:31:33,560 --> 00:31:35,120 Speaker 1: with you because I think you're the perfect guest to 603 00:31:35,120 --> 00:31:38,320 Speaker 1: cover it with me, there's something about the attitude sometimes 604 00:31:38,320 --> 00:31:40,920 Speaker 1: an administration where they kind of missed the moment. I 605 00:31:40,960 --> 00:31:43,400 Speaker 1: remember when the Press Secretary Jen Sanky was asked about 606 00:31:43,440 --> 00:31:47,120 Speaker 1: home testing and basically, why haven't we got home testing? 607 00:31:47,120 --> 00:31:49,040 Speaker 1: Why can't we do what the UK does, which is 608 00:31:49,120 --> 00:31:51,640 Speaker 1: basically send a message and you get some the following morning, 609 00:31:51,840 --> 00:31:53,160 Speaker 1: and she turned around and said, what would you like 610 00:31:53,280 --> 00:31:54,960 Speaker 1: us to do? Send one to every American And that's 611 00:31:54,960 --> 00:31:56,880 Speaker 1: exactly what they're going to try and do. Now, do 612 00:31:56,920 --> 00:31:58,920 Speaker 1: you think they need to adjust a little bit, just 613 00:31:59,240 --> 00:32:03,600 Speaker 1: less of the snow, less of the attitude, actually start listening. Well, 614 00:32:03,680 --> 00:32:06,120 Speaker 1: I think at least they have to appear to be listening. Uh, 615 00:32:06,160 --> 00:32:07,840 Speaker 1: And I know we're a little bit sure on time. 616 00:32:07,880 --> 00:32:10,360 Speaker 1: I can go a long time on the political malpractice 617 00:32:10,360 --> 00:32:12,960 Speaker 1: of very experienced politicians who are in the White House. Now, 618 00:32:13,120 --> 00:32:15,360 Speaker 1: President's gonna have to shake your staff up. That's what 619 00:32:15,400 --> 00:32:18,680 Speaker 1: Clinton had to do many years ago. Biden did, I'm sorry, 620 00:32:18,680 --> 00:32:20,640 Speaker 1: Obama did it a little bit later into his term. 621 00:32:20,800 --> 00:32:22,720 Speaker 1: You gotta shake it up. If the staff that you 622 00:32:22,760 --> 00:32:25,120 Speaker 1: have now are not serving you well, and you're having 623 00:32:25,120 --> 00:32:28,080 Speaker 1: messaging issues, you're having government competence issues, at least the 624 00:32:28,120 --> 00:32:30,280 Speaker 1: appearance of them, you've gotta make a change. You've got 625 00:32:30,280 --> 00:32:32,280 Speaker 1: to get people in who are are better attuned to 626 00:32:32,320 --> 00:32:35,320 Speaker 1: this and who can pivot not only that people under 627 00:32:35,320 --> 00:32:37,960 Speaker 1: the president, but the president himself to learn how to 628 00:32:38,000 --> 00:32:40,280 Speaker 1: really focus on the things that people are caring about 629 00:32:40,920 --> 00:32:43,720 Speaker 1: in their daily lives. And it's policy or it's COVID, 630 00:32:44,000 --> 00:32:46,840 Speaker 1: and make that the only message you are conveying for 631 00:32:46,880 --> 00:32:49,920 Speaker 1: the next three to six months. Wendy, thank you as always, 632 00:32:49,920 --> 00:32:52,280 Speaker 1: Wendy Ship of the Brand University, looking forward to catching 633 00:32:52,320 --> 00:32:56,080 Speaker 1: up against Sue. This is the Bloomberg Surveillance Podcast. Thanks 634 00:32:56,080 --> 00:32:59,400 Speaker 1: for listening. Join us live weekdays from seven to ten 635 00:32:59,440 --> 00:33:03,280 Speaker 1: a m. Eastern on Bloomberg Radio and on Bloomberg Television 636 00:33:03,640 --> 00:33:07,680 Speaker 1: each day from six to nine am for insight from 637 00:33:07,680 --> 00:33:12,240 Speaker 1: the best in economics, finance, investment, and international relations. And 638 00:33:12,360 --> 00:33:17,520 Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg 639 00:33:17,520 --> 00:33:20,840 Speaker 1: dot com, and of course on the terminal. I'm Tom 640 00:33:20,960 --> 00:33:23,320 Speaker 1: Keene and this is Bloomberg