WEBVTT - Surveillance: Powerful Recovery Underway, Spence Says 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com 0:00:23.920 --> 0:00:30.200 and of course on the Bloomberg terminal. Right now on 0:00:30.240 --> 0:00:32.840 an odd Monday, as we look at sport around there. 0:00:32.880 --> 0:00:35.400 The sport of economics is led by Michael Spence, the 0:00:35.479 --> 0:00:39.479 laureate and founder of Education Quality at Stanford University and 0:00:39.520 --> 0:00:43.519 of course General Atlantic Senior Adviser, Professor Spence thrilled to 0:00:43.520 --> 0:00:46.040 have you with us this morning. Michael Spence, we see 0:00:46.040 --> 0:00:49.280 a white house looking at wages. We see a white 0:00:49.280 --> 0:00:52.840 house looking for wage lift. And one of the great thinkings, 0:00:52.880 --> 0:00:56.680 including what we saw from Jamie Diamond's letter, was the 0:00:56.720 --> 0:01:00.280 ability to get wage growth in America. How do you 0:01:00.320 --> 0:01:04.200 get wage growth given technology and how do you get 0:01:04.360 --> 0:01:09.360 wage growth given the concentration of wages like Amazon and 0:01:09.400 --> 0:01:15.560 like others which you guys call monopsony. Right, Well, it's 0:01:15.600 --> 0:01:19.840 a complicated, uh challenge, but I think you know there 0:01:19.840 --> 0:01:23.560 are a number of things that are important. You have 0:01:23.600 --> 0:01:28.479 the tax system, which isn't directly wages but effect incomes. Second, Um, 0:01:28.560 --> 0:01:33.520 you need to strengthen the UH, the institutions that you 0:01:33.560 --> 0:01:37.280 know support unions UH and and and and change the 0:01:37.319 --> 0:01:41.039 bargaining power um. And that's especially important when you have 0:01:41.120 --> 0:01:46.320 big monopsony sort of buying power. And and and Third, 0:01:46.400 --> 0:01:48.720 you have to deal with this skills challenge that we 0:01:48.960 --> 0:01:51.640 that we face. I mean, you know, wages are going 0:01:51.720 --> 0:01:55.720 to reflect the you know, the the value of various 0:01:55.800 --> 0:01:58.920 kinds of labor in the marketplace, regardless of these changes 0:01:59.000 --> 0:02:02.800 in sort of bargaining power. And and we know that 0:02:02.840 --> 0:02:06.320 as our economy transforms digitally that we need a new 0:02:06.360 --> 0:02:09.800 set of skills and we need institutions public and private 0:02:09.840 --> 0:02:13.000 that get that help us get that done. Professor, off 0:02:13.040 --> 0:02:16.000 of your wonderful book, The next convergence of a decade ago, 0:02:16.639 --> 0:02:21.079 what is the next labor convergence? Do you perceive globally 0:02:21.120 --> 0:02:23.679 as you write with Stiglets and others about a K 0:02:23.880 --> 0:02:27.880 shaped economy, do you see any power for labor to 0:02:28.000 --> 0:02:34.760 reaffirm what we see in our nostalgia? Yes, I do. Actually, 0:02:34.880 --> 0:02:37.440 you know, I think we're in for you know a 0:02:37.480 --> 0:02:41.080 couple of things. One is a very powerful recovery that's 0:02:41.360 --> 0:02:43.640 underway in America and I think will come with a 0:02:43.680 --> 0:02:48.400 slight lag here in Europe. Second, we have you know, um, 0:02:48.600 --> 0:02:53.440 productivity enhancing technology that's ready for prime time. UM. And Third, 0:02:53.480 --> 0:02:57.360 we have governments that have decided that that they need 0:02:57.360 --> 0:03:00.560 to use their fiscal power to make sure that the 0:03:00.600 --> 0:03:03.760 demand side of the market, and particularly the employment side, 0:03:03.880 --> 0:03:06.960 is good. So UM, if we convince you know, a 0:03:07.000 --> 0:03:11.240 sufficiently large part of the economy to engage in in 0:03:11.400 --> 0:03:14.600 this process of innovation, I think we could have an 0:03:14.600 --> 0:03:18.600 employment and productivity boom and a real change in the 0:03:18.720 --> 0:03:22.560 dynamics that we've been seeing for the last couple of decades. Michael, 0:03:22.800 --> 0:03:25.519 do a minimum But does a minimum wage gap or 0:03:25.560 --> 0:03:27.800 the idea here of some sort of minimum wage that's 0:03:27.880 --> 0:03:30.680 higher than where it is now lead to higher wages, 0:03:30.960 --> 0:03:36.040 fewer jobs or both. Well, I mean this is controversial 0:03:36.080 --> 0:03:39.600 within the economics profession, so um, and you'll get views 0:03:39.640 --> 0:03:43.800 on all sides, sometimes politically motivated and sometimes just because 0:03:43.800 --> 0:03:47.760 people reach different conclusions, Lisa, But I mean bottom line 0:03:47.840 --> 0:03:51.760 is minimum wages probably don't cost us much employment. They 0:03:51.800 --> 0:03:54.280 affect the incomes at the lower end of the income 0:03:54.320 --> 0:03:57.640 spectrum UM, but they don't actually have much of an 0:03:57.640 --> 0:04:01.480 effect on, you know, the this challenge we face and 0:04:01.600 --> 0:04:05.040 sort of raising middle income incomes relative to the sort 0:04:05.080 --> 0:04:09.680 of the top um. So it's an important tool. I 0:04:09.720 --> 0:04:12.360 think we should use it to the extent our political 0:04:12.400 --> 0:04:15.680 system allows us. But it's only part of the solution. 0:04:15.880 --> 0:04:17.919 And I asked, because you know, Tom asked the right 0:04:18.000 --> 0:04:20.160 question to start this out with, which is the technical 0:04:20.360 --> 0:04:23.200 technological innovation. It's going to leave a lot of people 0:04:23.560 --> 0:04:26.640 without the skills, without perhaps a role in a labor 0:04:26.680 --> 0:04:28.320 market the way that they once did, and certainly if 0:04:28.360 --> 0:04:29.640 they have a role, it will be at a much 0:04:29.680 --> 0:04:33.240 lower rate. What do we do with those people? I'm 0:04:33.240 --> 0:04:35.159 not saying it's sort of it's a lot of people. 0:04:35.320 --> 0:04:38.279 We all have people in our circles who belong there 0:04:38.279 --> 0:04:40.839 and their question is do you do your training? Do 0:04:40.880 --> 0:04:44.599 you have some sort of universal U income? What's your view? 0:04:46.320 --> 0:04:50.440 I think he used all available weapons, Lisa um. So 0:04:50.680 --> 0:04:54.080 you know, I'm not sure which version of a universal 0:04:54.120 --> 0:04:57.880 basic income you know, will finally emerge. But I think 0:04:57.920 --> 0:05:01.200 we have to put a floor and just on tolerated 0:05:01.279 --> 0:05:03.839 situation in which we have poor people. But but I 0:05:03.880 --> 0:05:06.920 think we need an all hands on deck I led 0:05:07.000 --> 0:05:10.160 by government, but with engagement from business and education to 0:05:10.279 --> 0:05:14.320 tackle to tackle the skills transitions that we need as well. 0:05:14.440 --> 0:05:20.080 So I'm I'm this. This challenge is so important um 0:05:20.120 --> 0:05:23.000 to the kind of cohesiveness of our society that I 0:05:23.040 --> 0:05:25.320 think it's an all hands on deck. You use all 0:05:25.360 --> 0:05:28.680 the instruments you've got to try to deal with it. 0:05:28.839 --> 0:05:31.920 But we have to reverse these trends. Michael Spence. In 0:05:31.960 --> 0:05:34.120 the time that we've got left with you, I think 0:05:34.160 --> 0:05:36.800 we must turn to your focus over the last decade 0:05:36.880 --> 0:05:39.760 on China. There's a lot of fears out there. I'm 0:05:39.760 --> 0:05:42.800 gonna say there's some misinformation, but what I mostly note 0:05:43.279 --> 0:05:47.440 is a careful considered study of the access between Beijing 0:05:47.520 --> 0:05:53.480 and Washington. How much power does Beijing have? Well, they 0:05:53.480 --> 0:05:55.919 have tom They have a lot of power now because 0:05:56.000 --> 0:06:02.200 they have a big, thriving economy. It's recovering quickly. It's technologically, 0:06:02.200 --> 0:06:05.880 in in other ways dynamic. I mean, you know in 0:06:05.960 --> 0:06:08.520 every country, including China. You know, if they make some 0:06:08.600 --> 0:06:11.800 big policy mistakes, um, they could screw it up. But 0:06:12.200 --> 0:06:14.640 on balanced, they have an enormous amount of power that 0:06:14.720 --> 0:06:19.680 stems from primarily their big domestic market which people want 0:06:19.680 --> 0:06:23.400 to have access to as investors and as in terms 0:06:23.440 --> 0:06:26.719 of trade. So they're powerful and we have to deal 0:06:26.800 --> 0:06:33.640 with them as a powerful potential trading and investment partner 0:06:34.000 --> 0:06:41.640 and and and competitor. I look, I look Michael at China, 0:06:42.400 --> 0:06:45.440 and I look at Hong Kong and how it's changed. 0:06:45.839 --> 0:06:48.800 What would you recommend if you were consulting to the 0:06:48.920 --> 0:06:53.440 major Western banks on Hong Kong. Should they sustain in 0:06:53.560 --> 0:06:59.480 Hong Kong or take a different strategy? No, I think 0:06:59.480 --> 0:07:02.400 that you know they will. They will. I would recommend 0:07:02.440 --> 0:07:05.320 that they try to hang in there and comply with 0:07:05.360 --> 0:07:08.520 the laws. But I mean Bill wrench Uh made some 0:07:08.680 --> 0:07:11.680 very interesting remarks I think in reporting the Congress. He 0:07:11.800 --> 0:07:16.160 basically said, you know, we're we're approaching you know, kind 0:07:16.160 --> 0:07:19.600 of slow motion train wreck in which the major multi nationals, 0:07:19.600 --> 0:07:22.840 including the banks, are going to find themselves, you know, 0:07:22.920 --> 0:07:26.400 straddling borders and and and one way or another, you know, 0:07:26.560 --> 0:07:30.200 not in compliance with the laws and regulations of where 0:07:30.240 --> 0:07:34.480 they sit. Uh, either way they go. So I think 0:07:34.560 --> 0:07:36.480 they need to be aware of that and the risks 0:07:36.480 --> 0:07:40.640 are associated with that. But I wouldn't recommend a precipitous 0:07:40.680 --> 0:07:43.600 withdrawal at this point, Michael, stay close. I just want 0:07:43.600 --> 0:07:45.480 to summarize the pace coming out of the White House 0:07:45.640 --> 0:07:48.000 right now about the labor market and average whites. Told 0:07:48.040 --> 0:07:49.960 me you you might find this interesting. A couple of weeks ago, 0:07:50.000 --> 0:07:52.040 we had your Bernstein put out a pace on the 0:07:52.040 --> 0:07:55.200 base effects ahead of the inflation report and Cecity arounds. 0:07:55.280 --> 0:07:57.240 The chaman of the Council that we can convise this 0:07:57.320 --> 0:07:58.720 out for the White House is put out a pace 0:07:58.960 --> 0:08:01.880 just on average whites. Really really intuitive, I think easy 0:08:01.920 --> 0:08:04.920 to understand for people with an economics background, perhaps counterintuitive 0:08:04.920 --> 0:08:07.360 for other people looking at what happened last year April, 0:08:08.120 --> 0:08:10.920 because of compositional effects and the labor market, we had 0:08:10.960 --> 0:08:12.600 a lot of the low earners drop out of the 0:08:12.640 --> 0:08:15.400 labor force and wages actually searched at a time of 0:08:15.440 --> 0:08:17.760 immense weakness in the economy. And I think what they're 0:08:17.760 --> 0:08:20.600 preparing people for tom is just to indicate when that 0:08:20.720 --> 0:08:23.600 labor composition shifts the other way, you could get negative 0:08:23.640 --> 0:08:26.360 wage growth in the United States of America and essentially 0:08:26.360 --> 0:08:28.720 concluding it's nothing to worry about. So we've had a 0:08:28.760 --> 0:08:31.280 Jared Bernstein piece a couple of weeks ago ahead of 0:08:31.320 --> 0:08:34.160 an inflation print, preparing everyone to say this is just 0:08:34.200 --> 0:08:37.120 base effects. And now we have a secili rouse piece 0:08:37.160 --> 0:08:39.600 coming out from the White House in a blog basically 0:08:39.600 --> 0:08:43.360 preparing people for weaker wages because of compositional effects. Michael, 0:08:43.360 --> 0:08:45.520 if I can bring you back in just quickly, the 0:08:45.559 --> 0:08:48.160 economy is going to be pretty complex and nuanced in 0:08:49.080 --> 0:08:50.880 one This seems to be a big effort from the 0:08:50.880 --> 0:08:54.360 White House to help everybody understand the signaling that we 0:08:54.400 --> 0:08:57.079 should take or maybe shouldn't take from economic data. How 0:08:57.120 --> 0:08:59.200 important do you think that is for this year, just 0:08:59.240 --> 0:09:02.240 in terms of how we response react on Main Street 0:09:02.480 --> 0:09:08.960 to things like headline inflation economic disa every single month. Well, 0:09:09.000 --> 0:09:12.000 I think it's very important. I mean, the narrative really matters. 0:09:12.080 --> 0:09:15.480 And and they're right. You know, if we get a major, 0:09:15.559 --> 0:09:19.720 major recovery in the shutdown sectors you know that we've 0:09:19.720 --> 0:09:23.400 talked about many times before, which tend to employ the 0:09:23.400 --> 0:09:26.800 lower end of the wage spectrum folks, if they come 0:09:26.840 --> 0:09:30.040 back into the labor market or just re employed, um, 0:09:30.160 --> 0:09:33.120 then you could get something that looks like a bad 0:09:33.280 --> 0:09:36.560 signal in you know, from the point of view an 0:09:36.559 --> 0:09:40.319 administration that's that is essentially said one of their high 0:09:40.400 --> 0:09:44.960 priorities is dealing with a employment and be you know, 0:09:45.080 --> 0:09:47.400 a fairer set of outcomes in terms of so they 0:09:47.440 --> 0:09:51.280 want they want the recovery, but they don't want people 0:09:51.320 --> 0:09:54.360 to misinterpret the signals that are coming out of the 0:09:54.400 --> 0:09:57.680 prices in the labor market or elsewhere in the economy. 0:09:57.720 --> 0:10:00.320 So I think it's really important Michael's good to match up, 0:10:00.400 --> 0:10:01.920 especially to get a final thought on that, because not 0:10:01.960 --> 0:10:04.320 cogree with you. I think it's important to Michael Spence 0:10:04.440 --> 0:10:06.599 that on the latest in this economy worldwide and the 0:10:06.640 --> 0:10:16.000 domestic story in America. Say right now, not only the 0:10:16.080 --> 0:10:19.800 conversation of the day for us on vaccination and COVID, 0:10:19.920 --> 0:10:23.520 but this is the most serious conversation. Is all of 0:10:23.640 --> 0:10:27.160 us attend the end of a pandemic? Or for Levy 0:10:27.280 --> 0:10:31.880 is with Boston's Children Hospital. That barely describes his assertive 0:10:31.920 --> 0:10:38.840 work in pediatrics and in vaccinations and precision vaccinations for children. 0:10:38.960 --> 0:10:42.440 He is an FDA Advisory Panel member as well. Dr Levy, 0:10:42.520 --> 0:10:45.439 thank you so much for joining us. Now is it 0:10:45.600 --> 0:10:47.920 safe now for an eight year old to get the 0:10:48.040 --> 0:10:54.160 first shot and then the second shot? Thank you for that. Um, Look, 0:10:54.640 --> 0:10:57.040 we are blessed here in the United States to have 0:10:58.200 --> 0:11:01.319 three vaccines under emergency you so authorization. The J and 0:11:01.400 --> 0:11:05.360 J is on pause. Um. However, the youngest age group 0:11:05.440 --> 0:11:08.640 that can currently receive any of these vaccines are sixteen 0:11:08.720 --> 0:11:12.600 year old for the Fiser product. At the moment, nobody 0:11:12.840 --> 0:11:16.079 under the age of sixteen years is eligible to receive 0:11:16.120 --> 0:11:20.840 a vaccine. There are ongoing clinical trials to assess safety 0:11:21.320 --> 0:11:25.800 and efficacy of the coronavirus vaccines in those younger than 0:11:25.880 --> 0:11:29.079 sixteen years of age, and to my view as a pediatrician, 0:11:29.559 --> 0:11:34.160 that's very important my time of say Leninger biochem and 0:11:34.200 --> 0:11:36.640 all that. It comes up to this medical phrase tighter 0:11:36.800 --> 0:11:39.559 t I T E R. Or maybe it's simply the 0:11:39.679 --> 0:11:43.319 dosage allowed. Do we just assume it's the same vaccine 0:11:43.400 --> 0:11:47.959 for children, just a smaller dosage for little people. No, 0:11:48.720 --> 0:11:52.400 kids are not just little adults. Uh. You know, from 0:11:52.440 --> 0:11:55.480 the day we're born to the day we die, the 0:11:55.600 --> 0:11:59.240 only constant thing in life is change, and our immune 0:11:59.280 --> 0:12:02.000 system is no different when you look at a baby 0:12:02.160 --> 0:12:04.920 all the way through an elderly individual. The immune system 0:12:05.040 --> 0:12:09.079 keeps evolving. So we cannot assume that a vaccine that's 0:12:09.080 --> 0:12:11.480 safe and effective in one age group is safe and 0:12:11.559 --> 0:12:15.400 effective in another age group, and often dose may be different, 0:12:15.800 --> 0:12:20.040 and immunogenicity the ability of a vaccine tosspect if anybodies 0:12:20.040 --> 0:12:22.280 could be different, Well, how much higher is the bar 0:12:22.400 --> 0:12:25.000 in terms of side effects for children given the fact 0:12:25.320 --> 0:12:27.880 that they don't present with the same degree of illness 0:12:28.040 --> 0:12:32.240 on average? Thank you for that. We we view it 0:12:32.520 --> 0:12:36.319 as very important to remember the future our children when 0:12:36.360 --> 0:12:40.480 considering this pandemic. And there are multiple reasons to want 0:12:40.559 --> 0:12:44.600 to have vaccines against COVID for kids. Although it's uncommon, 0:12:44.679 --> 0:12:47.120 severe COVID does occur in children in the form of 0:12:47.160 --> 0:12:50.839 a multi system inflammatory syndrome, and children are mis c 0:12:51.800 --> 0:12:54.360 Children do become infected and they excrete the virus, and 0:12:54.400 --> 0:12:57.800 they could infect parents or teachers or other children. And 0:12:58.240 --> 0:13:02.960 because childhood infection is often symptomatic, other precautions won't suffice. 0:13:03.360 --> 0:13:06.360 And you know, the majority of vaccines in the world 0:13:06.400 --> 0:13:09.240 are given to kids. The majority of the global vaccine 0:13:09.280 --> 0:13:12.480 market is a pediatric market, and the infrastructure to deliver 0:13:12.640 --> 0:13:16.199 vaccines across the world is by and larger a pediatric infrastructure. 0:13:16.240 --> 0:13:18.240 So if you want to get a high percentage of 0:13:18.280 --> 0:13:22.800 a population immunized around the globe for any infection. Pediatric 0:13:22.840 --> 0:13:26.559 immunization is often the path um and and so we 0:13:26.720 --> 0:13:29.880 view this as a very important component of the fight 0:13:29.920 --> 0:13:32.600 against this pandemic. Well, I want to dovetail this conversation 0:13:32.679 --> 0:13:34.280 with a J and J issue, and this is a 0:13:34.400 --> 0:13:37.439 delicate topic, but the idea that the J and J 0:13:37.600 --> 0:13:41.720 vaccine was paused and its distribution because of six known 0:13:41.880 --> 0:13:46.920 cases of this rare thrombosis out of seven million inoculations given, 0:13:47.520 --> 0:13:50.840 is the bar that much higher for unusual developments, even 0:13:50.880 --> 0:13:53.360 if they are marginal and very rare, when you're inoculating 0:13:53.640 --> 0:13:56.160 a population that is not as at risk. And I'm 0:13:56.200 --> 0:13:58.640 thinking about a possible recommendation by the f d A 0:13:59.160 --> 0:14:01.960 by Friday that perhaps the J and J vaccine can 0:14:02.000 --> 0:14:03.920 go to people who are older than the age of fifty, 0:14:04.160 --> 0:14:08.599 but not younger. Well, you know, vaccines are something that 0:14:08.679 --> 0:14:11.400 you give to healthy people, so they've got to be safe, 0:14:11.800 --> 0:14:14.160 and so there there is a very big emphasis on 0:14:14.280 --> 0:14:18.360 safety and that continues even after an authorization. Even after 0:14:18.400 --> 0:14:20.840 an authorization and you scale the vaccine and you're pushing 0:14:20.880 --> 0:14:23.760 it out to the population, there are passive and active 0:14:23.840 --> 0:14:27.760 systems to to monitor, to surveillance for safety. And if 0:14:27.800 --> 0:14:29.720 there is a signal, even if it's a small and 0:14:29.880 --> 0:14:32.240 rare signal was as was the case with A J 0:14:32.440 --> 0:14:34.800 and J, it needs to be pursued. So although the 0:14:34.920 --> 0:14:37.640 pause is awkward in my view, it's the right decision 0:14:38.000 --> 0:14:40.880 and in the long run that will lead to confidence 0:14:40.920 --> 0:14:44.480 in the public. Federal authorities are taking safety seriously, and 0:14:44.560 --> 0:14:47.240 of course, when you're developing a vaccine product for kids, 0:14:47.640 --> 0:14:50.960 safety will come first, and that's why there are rigorous 0:14:51.000 --> 0:14:54.920 clinical trials now that are double blinded, placebo controlled prospective 0:14:54.960 --> 0:14:58.800 studies to assess safety and efficacy. And when the sponsors 0:14:58.840 --> 0:15:01.320 such as Fiser leave, they have the right data to 0:15:01.520 --> 0:15:04.040 indicate that they will submit to f d A and 0:15:04.160 --> 0:15:07.560 FDA may convene the Advisory Committee to look at those data. 0:15:07.800 --> 0:15:10.040 And as you know, those briefing documents are made publicly 0:15:10.080 --> 0:15:12.280 available to any Americans, so we have a very good 0:15:12.320 --> 0:15:15.280 and transparent process. Dr Lovey, thank you so much, Joe 0:15:15.360 --> 0:15:17.160 for Levy where it's too short of visit. We look 0:15:17.240 --> 0:15:20.800 forward to another conversation soon. He's at Boston's Children Hospital, 0:15:21.320 --> 0:15:30.960 the Precision Vaccine program, Michael Kushner said the show. Right now, 0:15:31.040 --> 0:15:33.280 he's with Margain Sale and their chief investment officer and 0:15:33.440 --> 0:15:37.720 radio and television someone with perspective, Michael. Over the weekend, 0:15:37.880 --> 0:15:42.080 I saw a massive rerationalization of worry. There's no other 0:15:42.160 --> 0:15:45.200 way to put it. What is the outcome when you 0:15:45.320 --> 0:15:50.000 see so many people worrying about our collective set of worries. 0:15:51.600 --> 0:15:54.440 It's quite quite interesting. But if you look at global 0:15:54.520 --> 0:15:58.840 aiman number of positivity cases arising. India's got problems on 0:15:58.880 --> 0:16:01.760 the several countries are on the world. Turkey, UM has 0:16:01.920 --> 0:16:04.960 has issues. UH. The United States has had the largest 0:16:05.040 --> 0:16:07.720 vaccine rollout out of side of a few small countries 0:16:08.120 --> 0:16:10.280 and UM. I think that's one reason why UM. The 0:16:10.360 --> 0:16:12.720 US is doing a little better right now. Things look 0:16:12.760 --> 0:16:15.320 a little up and up on the US, except for bonds, 0:16:15.360 --> 0:16:17.080 which are looking a little bit on the down and down. 0:16:18.120 --> 0:16:20.320 I mean, I looked Michael at what to do here, 0:16:20.400 --> 0:16:22.760 and I guess equity markets is one of our focuses. 0:16:22.840 --> 0:16:25.720 But you're working in fixed term as if fixed income. 0:16:25.960 --> 0:16:30.320 We've seen this yield lower, move price up, yield down. 0:16:30.960 --> 0:16:35.400 Is it tradeable, it's it's it's very difficult. We still 0:16:35.440 --> 0:16:38.680 think longer term the trending yields is higher. I'm not 0:16:38.800 --> 0:16:41.560 sure how much higher. We were talking about two percent 0:16:41.760 --> 0:16:44.840 kind of a longer term term rate for ten year 0:16:44.920 --> 0:16:47.080 ten year treasuries. But in the short term we had 0:16:47.080 --> 0:16:49.560 a lot, a lot of positive news on the economy, 0:16:49.560 --> 0:16:52.680 a surge of of of of positivity in terms of 0:16:52.840 --> 0:16:55.520 the data in in March, and the market got ahead 0:16:55.520 --> 0:16:58.000 of itself in terms of predicting when the Fed was 0:16:58.120 --> 0:17:00.440 going to move. Put at one point in March, you're 0:17:00.480 --> 0:17:02.960 predicting a rate hike in two thousand twenty two. And 0:17:03.040 --> 0:17:06.840 the FETE has successfully, i think, pushed against that logic 0:17:07.000 --> 0:17:09.680 and that narrative such that now it's being pushed back 0:17:09.760 --> 0:17:14.320 out again. If the market is continues to trade short 0:17:14.760 --> 0:17:17.240 and the and the fight continues to double down on 0:17:17.359 --> 0:17:20.520 it's no no rate hikes sol mid two thousand twenty 0:17:20.560 --> 0:17:23.960 three or late even later than that, then the treasury 0:17:24.000 --> 0:17:26.600 market has room to stay, you know, stay stay firm, 0:17:26.960 --> 0:17:29.080 I mean yield staying on the low side. Michael, can 0:17:29.080 --> 0:17:31.320 you talk about the relationship between the U S treasury 0:17:31.359 --> 0:17:33.399 market in Europe right now? We've had some really interesting 0:17:33.440 --> 0:17:36.680 kills the Bloomberg team over in London putting them together BMP, 0:17:36.760 --> 0:17:39.680 Parabound Manual Life looking for tenure yields in Germany, to 0:17:39.840 --> 0:17:42.960 maybe turn positive by year end then get back towards zero. 0:17:43.040 --> 0:17:45.880 What would that mean for the treasury market, Michael as 0:17:46.000 --> 0:17:48.640 a very good point. One another reason why I think 0:17:48.680 --> 0:17:51.040 treasuries have done so well in the last several weeks 0:17:51.119 --> 0:17:54.200 is that yields are exceptionally high in the US relative 0:17:54.240 --> 0:17:56.639 to the rest of the world. And with the vaccines 0:17:56.760 --> 0:18:00.800 roll out accelerating in Europe and getting better lockdowns presumably 0:18:00.960 --> 0:18:03.359 ending at some point in the in the late spring, 0:18:03.760 --> 0:18:06.760 that Europe will catch up. So one constraint I think 0:18:06.840 --> 0:18:09.640 that's been on the for the rise of tenure treasures 0:18:09.720 --> 0:18:12.160 has been the low level of yields outside the US. 0:18:12.240 --> 0:18:14.800 So and if that narrative is some merit to it, 0:18:15.200 --> 0:18:17.680 then in order to get US heels higher, European deals 0:18:17.760 --> 0:18:20.280 have to go higher first in order to catch up 0:18:20.320 --> 0:18:22.520 a bit with the U S. So. Yes, I think 0:18:22.600 --> 0:18:24.720 if you if you're looking for higher U S yields, 0:18:24.720 --> 0:18:27.800 you probably have to look for higher European heels um first. 0:18:28.119 --> 0:18:30.520 What if I'm looking for income right now, Michael, where 0:18:30.560 --> 0:18:34.159 am I going right now? That the place to go 0:18:34.520 --> 0:18:36.639 is in is in credit markets, whether it's an in 0:18:36.760 --> 0:18:41.040 structured credit like mortgage backed securities and or um investment 0:18:41.119 --> 0:18:43.760 grade credit, corporate credit, or high yield credit. In a 0:18:43.880 --> 0:18:48.040 world of stability, are we entering a kind of goldilocks 0:18:48.119 --> 0:18:51.000 period where things are slowing down? Remember the Chinese economy 0:18:51.400 --> 0:18:54.200 is slowing down. It's very likely on an annual basis, 0:18:54.240 --> 0:18:56.120 will be growing slower than the US in the first 0:18:56.160 --> 0:18:59.000 half of this year. That's good news for the global economy. 0:18:59.080 --> 0:19:01.200 We don't want to to the boom being too strong 0:19:01.520 --> 0:19:04.520 such that central banks actually need to push higher rates 0:19:04.600 --> 0:19:07.160 higher sooner than otherwise. So a slow down and China 0:19:07.280 --> 0:19:09.560 relative to the rest of the world emerging markets not 0:19:09.680 --> 0:19:12.720 doing that well in the short run relative developed markets 0:19:13.040 --> 0:19:16.639 also softens the surgeon and seeing an impact of the 0:19:16.680 --> 0:19:19.720 surgeon spending in the United States, which lengthens the business cycle, 0:19:19.760 --> 0:19:23.680 which lengthens the probability that credit spreads will stay stay low. 0:19:23.960 --> 0:19:25.920 I have to ask this, Michael, because we are seeing 0:19:26.080 --> 0:19:29.600 a post credit crisis tights on spreads basically the extra 0:19:29.680 --> 0:19:34.040 yield that investors earned to own credit over rates. Is 0:19:34.080 --> 0:19:37.040 there any sign of froth? Are there any pockets or 0:19:37.160 --> 0:19:39.720 is this all making sense to you based on where 0:19:39.760 --> 0:19:43.040 we are. It makes sense to me if you look 0:19:43.080 --> 0:19:46.040 at the history of credit spreads. They are the tight 0:19:46.200 --> 0:19:47.920 end of the range. In many cases they are in 0:19:47.960 --> 0:19:51.920 depending upon the security company and rating they are near. 0:19:52.040 --> 0:19:54.719 They're all time loads, which we saw in the very 0:19:54.760 --> 0:19:57.760 early two thousands or in the mid nineties. However, we 0:19:57.880 --> 0:20:01.720 are in a relatively unique economic situation. Historically, when do 0:20:01.800 --> 0:20:04.800 you see credits for his widening and see significant underperformance, 0:20:04.840 --> 0:20:07.000 whether it's high yield er i g. Is when we're 0:20:07.040 --> 0:20:08.920 nearing the end of the business cycle and the feed 0:20:09.040 --> 0:20:12.520 is raising rates. You look historically that's what you see, 0:20:12.640 --> 0:20:14.800 and right now it looks pretty clear to me that 0:20:14.880 --> 0:20:17.160 the feed is not raising rates till at least probably 0:20:17.160 --> 0:20:21.320 the end of two twenty three. Michael is going to 0:20:21.400 --> 0:20:23.679 see you, as always good to hear from you. Michaelkushmer 0:20:23.760 --> 0:20:26.920 markin Stanley ce IO of global fixed income yields in 0:20:27.080 --> 0:20:29.440 last week by seven or sub basis points on a 0:20:29.520 --> 0:20:32.439 tenure this morning, unchanged tom at a one fifty eight 0:20:32.480 --> 0:20:35.680 on tens on thirties, you'll yield. You know, if the 0:20:35.680 --> 0:20:37.560 gloom of the weekend John to really yield from a 0:20:37.640 --> 0:20:40.760 negative point eight one to a negative point seven nine. 0:20:40.800 --> 0:20:42.360 I guess that's a little bit of a movi here 0:20:42.359 --> 0:20:44.960 in a recalibration as well. To me, it's what you 0:20:45.080 --> 0:20:48.359 see with Coca Cola and also with Harley Davidson. I mean, 0:20:48.440 --> 0:20:52.760 it's a discreet, smaller story unique to motorcycles, John, around 0:20:52.800 --> 0:20:55.440 the world and across America. But I'm sorry when you 0:20:55.480 --> 0:20:59.600 shift your revenue guestimate any responsible manager from twenty two 0:20:59.600 --> 0:21:04.560 and a half up ten four points to that vector, 0:21:04.680 --> 0:21:07.359 that dynamic gets your get your attention at leasta raising 0:21:07.359 --> 0:21:09.920 the outlook on about one how many times we've seen that. 0:21:10.640 --> 0:21:13.600 I'm struggling right now because i know you're gonna make 0:21:13.640 --> 0:21:15.240 fun of me for being a Debbie downer, But I'm 0:21:15.280 --> 0:21:19.439 just trying to understand the consequences of the moral hazard 0:21:19.560 --> 0:21:23.240 of allowing companies to pile on debt at very low costs. 0:21:23.359 --> 0:21:25.680 It keeps them alive for longer. What does it do 0:21:25.840 --> 0:21:29.200 down the line? Have we forever prolonged a credit default cycle? 0:21:29.400 --> 0:21:31.320 Or is this going to be something that we will 0:21:31.400 --> 0:21:33.600 feel at a later date? And there is a question 0:21:33.680 --> 0:21:35.719 of the president that the FETE has set. Are they 0:21:35.920 --> 0:21:38.480 part of the fundamentals as you've asked before, John, in 0:21:38.640 --> 0:21:41.320 terms of swooping in and saving credit markets if everything 0:21:41.359 --> 0:21:43.480 goes south, well, every dollar to a debt is not equal. 0:21:43.560 --> 0:21:45.119 So let's think about where the dollar of debt has 0:21:45.160 --> 0:21:47.320 gone so far, and we mentioned last week on this 0:21:47.400 --> 0:21:50.520 show the amount of that's gone to refinancing. Yet today 0:21:50.640 --> 0:21:53.320 for high yield so sent according to Barkleys, more than 0:21:53.359 --> 0:21:56.120 seventy percent of high yield issuance has gone to refinancing. 0:21:56.480 --> 0:22:06.040 So these are we are thrilled and Michael should joins 0:22:06.119 --> 0:22:09.000 us right now with market field asset management of course 0:22:09.080 --> 0:22:11.879 has great affection for one of those super League teams, 0:22:12.240 --> 0:22:15.520 Manchester United. Michael, I want you to bring this into 0:22:15.640 --> 0:22:19.440 the arc of this asset boom that we're in. Is 0:22:19.560 --> 0:22:24.560 the super leaguing of English football, of European football just 0:22:24.760 --> 0:22:30.960 another symbol of the global financialization of these times. I 0:22:31.000 --> 0:22:33.560 mean the short answer is yes. I mean, you know, 0:22:33.640 --> 0:22:37.440 the commercialization of sports, you know, has has has accelerated 0:22:37.720 --> 0:22:41.159 over over the last over the last twenty years. Uh 0:22:41.280 --> 0:22:44.320