1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene. 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 --> 00:00:22,440 Speaker 1: international relations. To find Bloomberg Surveillance on Apple Podcast, Suncloud, 5 00:00:22,840 --> 00:00:26,280 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg terminal. 6 00:00:29,440 --> 00:00:32,960 Speaker 1: He is the offspring of Greek immigrants. He went to 7 00:00:33,000 --> 00:00:37,320 Speaker 1: Tufts University and he wrote an essay on Shearson Way 8 00:00:37,360 --> 00:00:40,920 Speaker 1: before it was Shearson Lehman. The essay was so impressive 9 00:00:40,960 --> 00:00:43,640 Speaker 1: a guy named Wile hired him and thus began the 10 00:00:43,640 --> 00:00:47,680 Speaker 1: banking career of one James Diamond, of course, of JP Morgan, 11 00:00:47,760 --> 00:00:51,199 Speaker 1: their chairman and their chief executive officer, A Baker scholar 12 00:00:51,240 --> 00:00:54,000 Speaker 1: at Harvard. Jamie Diamond went from bank one out in 13 00:00:54,040 --> 00:00:58,920 Speaker 1: the Midwest to Commanding Fortress Diamond at JP Morgan. Harry 14 00:00:59,000 --> 00:01:02,280 Speaker 1: is on COVID with there Ed Hammond. Getting through COVID 15 00:01:02,360 --> 00:01:04,720 Speaker 1: is absolutely critical and we're still in it though God 16 00:01:04,720 --> 00:01:06,000 Speaker 1: knows what looks like. There's light at the end of 17 00:01:06,000 --> 00:01:08,280 Speaker 1: the tunnel, you know, by the beginning of summer or 18 00:01:08,319 --> 00:01:11,680 Speaker 1: something like that. But it's not a binary subject. I 19 00:01:11,720 --> 00:01:14,680 Speaker 1: think you know, Democrats Republicans are like ships passing the night. 20 00:01:15,160 --> 00:01:17,959 Speaker 1: There are legitimate complaints about stuff from this bill. Has 21 00:01:18,000 --> 00:01:20,280 Speaker 1: nothing to do with COVID. There are a lot of 22 00:01:20,280 --> 00:01:23,000 Speaker 1: people suffering. You need help. Both are true. So if 23 00:01:23,000 --> 00:01:24,479 Speaker 1: you want to go through, you go through all the detail. 24 00:01:24,800 --> 00:01:28,320 Speaker 1: Unemployed they definitely need help. Small businesses they definitely need help. 25 00:01:28,560 --> 00:01:30,880 Speaker 1: People at the lower end, they definitely need help. Women 26 00:01:30,880 --> 00:01:32,959 Speaker 1: who had to go home, who basically stopped working. Is 27 00:01:33,000 --> 00:01:34,679 Speaker 1: that it go take care or something like that. They 28 00:01:34,720 --> 00:01:37,480 Speaker 1: definitely need help. You know, does every I don't know 29 00:01:37,480 --> 00:01:39,640 Speaker 1: if you know this, but like half the states revenues 30 00:01:39,680 --> 00:01:42,000 Speaker 1: went up, they needn't go down. Do they need help? 31 00:01:42,360 --> 00:01:44,160 Speaker 1: You know? And we're just throwing money at people at 32 00:01:44,160 --> 00:01:46,200 Speaker 1: one point, so and there will be another side to 33 00:01:46,240 --> 00:01:48,559 Speaker 1: that mountain. So they should be cautious about overdoing it. 34 00:01:48,680 --> 00:01:51,320 Speaker 1: Get us through the problem, get the country growing, but 35 00:01:51,440 --> 00:01:53,160 Speaker 1: you know, don't try not to overdo it too much. 36 00:01:53,320 --> 00:01:56,560 Speaker 1: But isn't the risk exactly that if you have places 37 00:01:56,600 --> 00:01:58,720 Speaker 1: and states people that don't need help and getting to 38 00:01:58,760 --> 00:02:01,160 Speaker 1: help you out of the cyst to you do create 39 00:02:01,200 --> 00:02:03,520 Speaker 1: this huge risk of inflation. And the system already has 40 00:02:03,520 --> 00:02:04,680 Speaker 1: a little bit of that so if you look at 41 00:02:04,720 --> 00:02:06,840 Speaker 1: which in the system that looks to us like there's 42 00:02:06,840 --> 00:02:10,239 Speaker 1: a trillion dollars a trillion is unspent. That's before there's 43 00:02:10,240 --> 00:02:13,560 Speaker 1: billion nine trillion nine, So there will be money. Like 44 00:02:13,639 --> 00:02:15,040 Speaker 1: you know, there's a very good chance you're gonna have 45 00:02:15,120 --> 00:02:17,720 Speaker 1: a game buster economy for the rest of this year 46 00:02:17,880 --> 00:02:21,239 Speaker 1: and you know, easily into two. And the question is 47 00:02:21,280 --> 00:02:23,400 Speaker 1: does that overheat everything? And we just don't know yet. 48 00:02:23,520 --> 00:02:25,639 Speaker 1: But I would put that on the things to worry 49 00:02:25,680 --> 00:02:28,520 Speaker 1: about now. I wouldn't worry too much about it. I 50 00:02:28,480 --> 00:02:30,799 Speaker 1: would worry more about COVID and nuclear war that I'd 51 00:02:30,800 --> 00:02:33,079 Speaker 1: worry about that, but I would. I would suspect there's 52 00:02:33,080 --> 00:02:34,840 Speaker 1: a pretty good chance you're gonna see why he's going up, 53 00:02:34,880 --> 00:02:37,040 Speaker 1: and you know, people starting to worry about that at 54 00:02:37,040 --> 00:02:39,600 Speaker 1: one point. Let's talk about COVID for a second. I've 55 00:02:39,600 --> 00:02:41,840 Speaker 1: been very clear I would not buy ten year treasuries, 56 00:02:42,520 --> 00:02:46,600 Speaker 1: just so you know. Um On on COVID. We are 57 00:02:46,600 --> 00:02:48,840 Speaker 1: obviously doing a interview in person, which is fantastic with 58 00:02:48,919 --> 00:02:51,160 Speaker 1: doing it in your offices here in New York, but 59 00:02:51,320 --> 00:02:53,960 Speaker 1: still largely empty as of my officers, as probably are 60 00:02:54,000 --> 00:02:56,400 Speaker 1: a lot of people's offices. How important is it to 61 00:02:56,440 --> 00:02:59,040 Speaker 1: a business like Jeplegan to actually have people physically coming 62 00:02:59,040 --> 00:03:01,359 Speaker 1: back to work. It's very important. I mean, I look, 63 00:03:01,400 --> 00:03:03,240 Speaker 1: I do think would be part of the world where 64 00:03:03,280 --> 00:03:06,720 Speaker 1: a certain amount of people work from home permanently, certain sales, 65 00:03:06,760 --> 00:03:10,080 Speaker 1: certain opts, so you can track the productivity, etcetera. I 66 00:03:10,080 --> 00:03:12,480 Speaker 1: think there'll be a large portion who permanently work in 67 00:03:12,520 --> 00:03:16,320 Speaker 1: the office. Think of our branches, cash management, probably most 68 00:03:16,360 --> 00:03:19,400 Speaker 1: the trading floors, etcetera. And there'll be some hybrids where 69 00:03:19,440 --> 00:03:21,160 Speaker 1: you spent two days two weeks at home and two 70 00:03:21,160 --> 00:03:22,480 Speaker 1: weeks in the officer of three weeks at home a 71 00:03:22,480 --> 00:03:24,560 Speaker 1: week in the office, or three days and two days 72 00:03:24,560 --> 00:03:26,560 Speaker 1: and two days three days. But so I think it 73 00:03:26,600 --> 00:03:29,000 Speaker 1: will reduce the need for commercial real estate. But they 74 00:03:29,040 --> 00:03:31,800 Speaker 1: are huge weaknesses to the zoom world. I mean, most 75 00:03:31,800 --> 00:03:34,400 Speaker 1: of us learned by an apprenticeship system by you know, 76 00:03:34,440 --> 00:03:37,320 Speaker 1: seeing mistakes, going to trips. How do you handle a client, 77 00:03:37,320 --> 00:03:39,640 Speaker 1: how do you handle the problem. So it's hard to 78 00:03:39,680 --> 00:03:43,320 Speaker 1: inculcate culture and character and all those things. When you 79 00:03:43,480 --> 00:03:47,920 Speaker 1: have the Zoom world spontaneous combustion, it goes away hard 80 00:03:47,960 --> 00:03:49,920 Speaker 1: to manage, you know, it's hard to be very critically 81 00:03:49,960 --> 00:03:52,800 Speaker 1: got fifteen people on the screen. So before it was 82 00:03:52,840 --> 00:03:56,320 Speaker 1: like a deep dive question, now looks a little bit rude. 83 00:03:56,520 --> 00:03:58,120 Speaker 1: And I took a trip to California and met a 84 00:03:58,200 --> 00:04:01,120 Speaker 1: hundred people all outside, all one breakfast, lunch, and dinner. 85 00:04:01,400 --> 00:04:03,320 Speaker 1: It's amazing how much you want about your own business, 86 00:04:03,480 --> 00:04:07,080 Speaker 1: your own bankers, your own clients, your own products. And 87 00:04:07,320 --> 00:04:09,720 Speaker 1: you know, I met with Snowflake and Marcatta. What you 88 00:04:09,800 --> 00:04:12,600 Speaker 1: learn about technology and systems, you're not going to do 89 00:04:12,640 --> 00:04:16,240 Speaker 1: that in the zoom world. And you know, so bankers relationships. 90 00:04:16,279 --> 00:04:18,680 Speaker 1: I think it's very hard to build and develop a 91 00:04:18,720 --> 00:04:21,200 Speaker 1: deeper relationship on the zoom world. So you still, you 92 00:04:21,240 --> 00:04:23,559 Speaker 1: know there'll be more zooming people like me will travel 93 00:04:23,640 --> 00:04:25,440 Speaker 1: just as much as I did in the past. As 94 00:04:25,440 --> 00:04:28,160 Speaker 1: a win, the vaccine does become available, feel workforce, Will 95 00:04:28,160 --> 00:04:29,640 Speaker 1: you make it mand a treat for people to take 96 00:04:29,640 --> 00:04:31,360 Speaker 1: it if they do one of the time. It's hard 97 00:04:31,400 --> 00:04:34,599 Speaker 1: to make it mandatory, and their laws about that. I 98 00:04:34,600 --> 00:04:35,919 Speaker 1: think what we'd like to do is kind of have 99 00:04:35,960 --> 00:04:38,160 Speaker 1: cacharroacts and sticks. We want people to take it. Think 100 00:04:38,160 --> 00:04:40,800 Speaker 1: it's a far better thing. You certainly can't make it 101 00:04:40,839 --> 00:04:43,960 Speaker 1: mandatory before it's fully accessible, so that question can even 102 00:04:43,960 --> 00:04:47,400 Speaker 1: be answered until June UM. But but I do think 103 00:04:47,400 --> 00:04:49,040 Speaker 1: you may see some companies do it. I mean I 104 00:04:49,040 --> 00:04:51,000 Speaker 1: can see an airline doing it, or a hotel company 105 00:04:51,080 --> 00:04:53,320 Speaker 1: doing it. I can see some people saying if the 106 00:04:53,360 --> 00:04:55,880 Speaker 1: folks in our branches aren't vaccinated and not going in 107 00:04:55,960 --> 00:05:00,400 Speaker 1: so there will be pressure. Uh. And I would say 108 00:05:00,440 --> 00:05:05,120 Speaker 1: Charroton sticks not in mandatory, Jamie Diamond, JP Morgan Chairman, 109 00:05:05,120 --> 00:05:13,920 Speaker 1: and see how speaking with Bloomberg's at Hammond, Let's get 110 00:05:13,920 --> 00:05:17,320 Speaker 1: to Abraham rach Bary, City, Global head of Effex Analysis. Abraham, 111 00:05:17,400 --> 00:05:20,559 Speaker 1: let's start with this question, who leads the global cycle? Here? 112 00:05:20,680 --> 00:05:22,520 Speaker 1: Is it the United States with all its stimulus, so 113 00:05:22,600 --> 00:05:26,120 Speaker 1: the prudent approach from China, So we think there is 114 00:05:26,279 --> 00:05:29,039 Speaker 1: clearly a bit of a handover going on where China 115 00:05:29,200 --> 00:05:32,839 Speaker 1: was essential and early in staging the global recovery. But 116 00:05:33,480 --> 00:05:36,240 Speaker 1: right now I think the weight is clearly shifting towards 117 00:05:36,480 --> 00:05:38,520 Speaker 1: the US, and the types of growth numbers that we 118 00:05:38,600 --> 00:05:41,960 Speaker 1: are expecting alongside many others in the US should give 119 00:05:42,040 --> 00:05:45,040 Speaker 1: us some hope that even some slowing of momentum in 120 00:05:45,120 --> 00:05:48,320 Speaker 1: China will allow the global recovery to power ahead pretty 121 00:05:48,400 --> 00:05:52,560 Speaker 1: vigorously on on the back of and on the shoulders 122 00:05:52,600 --> 00:05:56,039 Speaker 1: of the U s. Recup, Abraham, your Edward Moore so wonderful. 123 00:05:56,120 --> 00:05:59,039 Speaker 1: Edward Mores published this morning on oil, reaffirming a range 124 00:05:59,040 --> 00:06:01,920 Speaker 1: bound area, and he's below the eighty dollar hysteria we're 125 00:06:01,920 --> 00:06:05,280 Speaker 1: seeing right now. I get the same temperament from you 126 00:06:05,800 --> 00:06:09,239 Speaker 1: and even killed what you see in the foreign exchange market. 127 00:06:09,600 --> 00:06:12,760 Speaker 1: Does your world now correlate with the rest of the 128 00:06:12,800 --> 00:06:15,800 Speaker 1: markets or is it separate and distinct? So they are 129 00:06:15,839 --> 00:06:19,360 Speaker 1: important linkages between broader markets and the economy and foreign 130 00:06:19,400 --> 00:06:22,719 Speaker 1: exchange markets, but it has effects has also been playing 131 00:06:22,720 --> 00:06:25,280 Speaker 1: to its own two. So we have seen in particular 132 00:06:25,279 --> 00:06:28,280 Speaker 1: dollar trends correlate with the global recovery that all that 133 00:06:28,320 --> 00:06:32,279 Speaker 1: has generally speaking been on the back foot. But of late, 134 00:06:32,320 --> 00:06:36,000 Speaker 1: for instance, we have seen that when US interest rates 135 00:06:36,040 --> 00:06:39,719 Speaker 1: rose quite quickly, the dollar wolves effectively pretty range bound 136 00:06:39,760 --> 00:06:42,320 Speaker 1: in G ten. And that's in part because interest rates 137 00:06:42,400 --> 00:06:45,240 Speaker 1: rose elsewhere in the world almost as much as they 138 00:06:45,279 --> 00:06:50,480 Speaker 1: did in the US, and because we have seen the 139 00:06:50,520 --> 00:06:54,560 Speaker 1: behavior of investors focus more on equity markets and commodity 140 00:06:54,600 --> 00:06:57,920 Speaker 1: markets as a primary expressional. That's called them reflation trades. 141 00:06:58,600 --> 00:07:02,560 Speaker 1: Then in foreign ex aim Abraham if the weight is 142 00:07:02,560 --> 00:07:05,680 Speaker 1: shifting toward the United States and the strength in the 143 00:07:05,760 --> 00:07:08,440 Speaker 1: US has led people to go further into the dollar 144 00:07:08,520 --> 00:07:11,880 Speaker 1: more than perhaps I'm expected at the end of can 145 00:07:11,960 --> 00:07:15,280 Speaker 1: we see the dollar materially weaken from here with the 146 00:07:15,400 --> 00:07:19,080 Speaker 1: US also leading the global economic recovery. Yes, that's a 147 00:07:19,200 --> 00:07:22,000 Speaker 1: very good question and one that we've dealt with intensively, 148 00:07:22,040 --> 00:07:25,400 Speaker 1: and our answer is yes it can, but we need 149 00:07:25,440 --> 00:07:28,640 Speaker 1: two conditions to hold for that to play out. And 150 00:07:28,760 --> 00:07:31,520 Speaker 1: condition number one and most important is we do need 151 00:07:31,640 --> 00:07:34,640 Speaker 1: still a vigorous global recovery. So even if the US 152 00:07:34,640 --> 00:07:38,160 Speaker 1: outperformed but the global economy it does okay, then the 153 00:07:38,200 --> 00:07:40,560 Speaker 1: dollar can sell off, just as it did after the 154 00:07:40,640 --> 00:07:43,800 Speaker 1: previous two global recessions. And the second is we do 155 00:07:43,880 --> 00:07:47,200 Speaker 1: need US real yields and particularly US front end real 156 00:07:47,280 --> 00:07:50,360 Speaker 1: yields to stay pretty low. And for that it is 157 00:07:50,400 --> 00:07:53,960 Speaker 1: important that we see a fairly forceful, dubbish message from 158 00:07:54,000 --> 00:07:56,840 Speaker 1: the Fed on an ongoing basis. Do you expect that 159 00:07:56,880 --> 00:08:00,600 Speaker 1: from Chairman Powell on Thursday? Abraham we afect the pretty 160 00:08:00,680 --> 00:08:02,680 Speaker 1: nuanced message, so I think he will trade a fine 161 00:08:02,720 --> 00:08:07,000 Speaker 1: line where he will reinforce his policy intentions. No consideration 162 00:08:07,040 --> 00:08:10,880 Speaker 1: for tapering anytime soon. No intention to change hiking plans 163 00:08:11,040 --> 00:08:13,560 Speaker 1: based on the recent development, but equally that he will 164 00:08:13,560 --> 00:08:16,040 Speaker 1: continue to endorse the good news and that the good 165 00:08:16,040 --> 00:08:19,920 Speaker 1: news are expressed in in bond deals as well. So 166 00:08:20,200 --> 00:08:22,040 Speaker 1: it's gonna be nuanced. It's not going to be a 167 00:08:22,080 --> 00:08:25,440 Speaker 1: major pushback in our expectation to product the commodity market. 168 00:08:25,480 --> 00:08:28,080 Speaker 1: So let's finish their Abraham and get to the commodity 169 00:08:28,120 --> 00:08:31,280 Speaker 1: currencies in the fex market. At the moment, given what's 170 00:08:31,280 --> 00:08:34,280 Speaker 1: happening in China, how comfortable are you with a conversation 171 00:08:34,320 --> 00:08:37,760 Speaker 1: around another commodity supercycle getting along the commodity currency states 172 00:08:37,760 --> 00:08:41,360 Speaker 1: for that reason over a long time morison. So we 173 00:08:41,440 --> 00:08:43,880 Speaker 1: think that the commodity currencies still have upside, and in 174 00:08:43,920 --> 00:08:46,600 Speaker 1: G ten that's for us, the Australian dollar, the Norwegian 175 00:08:46,720 --> 00:08:49,760 Speaker 1: corona keep dollar, and and and and and and can't 176 00:08:49,760 --> 00:08:52,559 Speaker 1: as well. We wouldn't talk of the supercycle per se, 177 00:08:52,600 --> 00:08:56,520 Speaker 1: but we do think they'll be vigorous demand for all 178 00:08:56,600 --> 00:09:01,479 Speaker 1: kinds of commodities, for oil, on the reopening store, for industrials, 179 00:09:01,480 --> 00:09:07,040 Speaker 1: on restocking and infrastructure. Even with some slowing in in 180 00:09:07,160 --> 00:09:09,680 Speaker 1: Chinese demand, we won't have the supercycle like in the 181 00:09:09,720 --> 00:09:12,600 Speaker 1: two thousand's, but we think that bolts well for a 182 00:09:12,679 --> 00:09:15,840 Speaker 1: further pickup in quality prices after a bit of froth 183 00:09:16,480 --> 00:09:19,560 Speaker 1: comes out in in the last couple of weeks, and 184 00:09:19,559 --> 00:09:22,280 Speaker 1: maybe that has a little bit further Remember I'm amazed 185 00:09:22,280 --> 00:09:24,280 Speaker 1: at how when the euro comes down and comes down, 186 00:09:24,360 --> 00:09:26,160 Speaker 1: granted it's within range. We had a little bit of 187 00:09:26,160 --> 00:09:29,240 Speaker 1: a one nine team print here earlier this morning. What 188 00:09:29,400 --> 00:09:33,200 Speaker 1: is your twelve month call on euro? Is it tradeable 189 00:09:33,400 --> 00:09:37,000 Speaker 1: or is it a mystery m hm. So we still 190 00:09:37,200 --> 00:09:39,559 Speaker 1: have upside in our euro dollar forecast, and we think 191 00:09:39,559 --> 00:09:43,080 Speaker 1: it will pick out nearer to one thirty sometime this year. 192 00:09:43,400 --> 00:09:45,880 Speaker 1: That being said in the short term. That being said, 193 00:09:45,920 --> 00:09:48,120 Speaker 1: in the shorter we think that the euro will lad 194 00:09:48,280 --> 00:09:51,199 Speaker 1: and that's for two reasons. One is because European rates 195 00:09:51,280 --> 00:09:54,480 Speaker 1: have lack and will lack global rates, and two because 196 00:09:54,520 --> 00:09:56,959 Speaker 1: the CD has actually pushed back against the rising rates 197 00:09:56,960 --> 00:10:00,120 Speaker 1: more forcefully than in particular the Fed has. And it's 198 00:10:00,120 --> 00:10:03,040 Speaker 1: a very opportune moment for the e c D because 199 00:10:03,040 --> 00:10:05,600 Speaker 1: it can actually do something. It can buy more bonds, 200 00:10:05,880 --> 00:10:07,920 Speaker 1: So it's a good moment for it to show to 201 00:10:08,000 --> 00:10:10,120 Speaker 1: the market that is not out of ammunition. So we 202 00:10:10,200 --> 00:10:13,720 Speaker 1: think the euro goes lower first, but then higher. It's Abraham, 203 00:10:13,800 --> 00:10:15,840 Speaker 1: great to see, is always good to catch up, Abraham 204 00:10:15,920 --> 00:10:24,240 Speaker 1: rock Barry, their City global head of Effects Analysis. Let's 205 00:10:24,240 --> 00:10:27,480 Speaker 1: bring in David Costa now goalmus Saxis chief US security strategist, 206 00:10:27,520 --> 00:10:30,800 Speaker 1: David Aligned from your research, cyclicals with negative earnings and 207 00:10:30,800 --> 00:10:35,920 Speaker 1: falling sound in have returned year today. Do you stick 208 00:10:35,960 --> 00:10:39,560 Speaker 1: with it? The answer, Jonathan is yes, you have to 209 00:10:39,559 --> 00:10:42,640 Speaker 1: be from a tactical point of view. The companies that 210 00:10:42,760 --> 00:10:46,400 Speaker 1: lost money last year but are actually recovering UH this year. 211 00:10:46,600 --> 00:10:49,480 Speaker 1: That is the benefit of a tail wind from better 212 00:10:49,559 --> 00:10:53,040 Speaker 1: economic activity, the vaccine you just mentioned, fiscal stimulus that 213 00:10:53,080 --> 00:10:57,400 Speaker 1: we anticipate we'll get past relatively soon. All that benefits 214 00:10:57,440 --> 00:11:00,240 Speaker 1: some of the cyclicals. Now that's not to say the 215 00:11:00,880 --> 00:11:04,120 Speaker 1: some of the tech heavy secular growth companies will not 216 00:11:04,200 --> 00:11:07,400 Speaker 1: perform well, but just from a relative near term perspective, 217 00:11:07,559 --> 00:11:10,400 Speaker 1: probably the cyclicals UH will will will lead the market. 218 00:11:10,480 --> 00:11:12,240 Speaker 1: It takes a strike to the mechanics of the benchmark, 219 00:11:12,280 --> 00:11:15,800 Speaker 1: doesn't it. The SMP five hundred, the overweight waiting of 220 00:11:16,040 --> 00:11:19,319 Speaker 1: information technology and growth stalks. David, And if that's why 221 00:11:19,360 --> 00:11:21,400 Speaker 1: you should be, how do you get to forty three 222 00:11:21,520 --> 00:11:24,480 Speaker 1: hundred on a headline index. Well, I think you think 223 00:11:24,480 --> 00:11:28,119 Speaker 1: of it what I think about as a Barbell strategy. 224 00:11:28,280 --> 00:11:32,640 Speaker 1: So of the index SMP five hundred is technology, is 225 00:11:32,679 --> 00:11:34,959 Speaker 1: he just indicated? And so that has certainly got to 226 00:11:34,960 --> 00:11:37,240 Speaker 1: be a core part of the portfolio. You're getting very 227 00:11:37,240 --> 00:11:41,360 Speaker 1: strong revenue growth, uh from the a lot of these companies, 228 00:11:41,400 --> 00:11:46,199 Speaker 1: and you think about it relative to pre pandemic profits, 229 00:11:46,320 --> 00:11:50,520 Speaker 1: pre pandemic sales and profits. The the overall market is 230 00:11:50,559 --> 00:11:53,560 Speaker 1: actually higher than it was at this time last year. 231 00:11:54,080 --> 00:11:57,600 Speaker 1: That's an important statement. The economy nominal and real basis 232 00:11:57,679 --> 00:12:01,040 Speaker 1: is still a little bit smaller, but hills and earnings 233 00:12:01,080 --> 00:12:03,240 Speaker 1: are back to where it was before and back the 234 00:12:03,360 --> 00:12:06,760 Speaker 1: equity market now about fifty and sixtcent higher than it 235 00:12:06,840 --> 00:12:10,359 Speaker 1: was twelve months ago. So looking forward, as you just indicated, 236 00:12:10,520 --> 00:12:13,199 Speaker 1: where's that growth likely to come? Still likely to come 237 00:12:13,240 --> 00:12:16,880 Speaker 1: in aggregate from technology, but tactically likely to be some 238 00:12:16,920 --> 00:12:20,840 Speaker 1: of the re reopening of America. So, my colleagues in 239 00:12:20,880 --> 00:12:24,160 Speaker 1: the equity research we have an index, uh, the Reopening 240 00:12:24,160 --> 00:12:27,480 Speaker 1: of America Index Tom you'll like that title, and basically 241 00:12:27,480 --> 00:12:30,280 Speaker 1: it's at four. It's been stuck at four. So the 242 00:12:30,400 --> 00:12:34,280 Speaker 1: upside is as people get vaccinated. As the economy continues 243 00:12:34,360 --> 00:12:37,800 Speaker 1: to recovery, which is part of our forecast, well, that 244 00:12:37,880 --> 00:12:40,839 Speaker 1: means you're getting more of these companies. Company level data 245 00:12:41,040 --> 00:12:45,040 Speaker 1: will be reopening, and that's where the positive earnings revisions 246 00:12:45,120 --> 00:12:48,079 Speaker 1: is coming from. Last month, last three months, you've had 247 00:12:48,120 --> 00:12:52,240 Speaker 1: ten of the eleven sectors have had positive earnest revisions. 248 00:12:52,240 --> 00:12:54,959 Speaker 1: And that my view with what's leading the market higher. 249 00:12:55,080 --> 00:12:58,400 Speaker 1: Our forecast a D eighty one earnings for this year, 250 00:12:58,640 --> 00:13:02,360 Speaker 1: that's about seven percent higher than consensus. We think there's 251 00:13:02,440 --> 00:13:05,400 Speaker 1: room for upward earnest revisions. That that's what's taking us higher. 252 00:13:05,720 --> 00:13:08,440 Speaker 1: I'm looking for the reopening of America E t F, 253 00:13:08,520 --> 00:13:12,120 Speaker 1: which I'm sure is coming somewhere to a store near you. David. 254 00:13:12,200 --> 00:13:15,160 Speaker 1: I am curious though. Underpinning a lot of the optimism 255 00:13:15,200 --> 00:13:17,559 Speaker 1: in equity performance is this idea that we're going to 256 00:13:17,600 --> 00:13:22,200 Speaker 1: get gangbusters growth in tandem with relatively low benchmark borrowing 257 00:13:22,240 --> 00:13:25,920 Speaker 1: costs for the United States. At what point do higher 258 00:13:26,000 --> 00:13:29,839 Speaker 1: rates pose a problem to your thesis? They say, that's 259 00:13:29,840 --> 00:13:32,040 Speaker 1: a great question. The number one question we get from 260 00:13:32,080 --> 00:13:35,800 Speaker 1: every client, which is about the relationship between rates and equities. 261 00:13:35,960 --> 00:13:37,720 Speaker 1: So I think you want to think about it two ways, 262 00:13:37,960 --> 00:13:43,120 Speaker 1: both level and speed. And level not concerned about that. 263 00:13:43,240 --> 00:13:45,640 Speaker 1: Right now we've had a fifty basis point backup and 264 00:13:45,760 --> 00:13:48,360 Speaker 1: nominal rates led by a backup and really yields as 265 00:13:48,400 --> 00:13:54,640 Speaker 1: you know, and so that still leaves equities under valued 266 00:13:54,960 --> 00:13:57,880 Speaker 1: in the context of very low absolute level of rates. 267 00:13:57,880 --> 00:14:01,560 Speaker 1: So one and round numbers, you can go to two percent, 268 00:14:02,240 --> 00:14:05,440 Speaker 1: two percent and a tenure treasury yield, say multiple today 269 00:14:05,600 --> 00:14:08,079 Speaker 1: at least, so you'd only be back at the long 270 00:14:08,200 --> 00:14:12,520 Speaker 1: term average relative valuation of equities versus bonds. That's if 271 00:14:12,520 --> 00:14:15,080 Speaker 1: you went to two percent, not our forecast, but that 272 00:14:15,160 --> 00:14:18,040 Speaker 1: gives you a sense of the if you will, the 273 00:14:18,080 --> 00:14:21,240 Speaker 1: flexibility or the capacity of rates to continue to go 274 00:14:21,360 --> 00:14:24,840 Speaker 1: higher and equity prices still to be in a good position. 275 00:14:24,920 --> 00:14:27,280 Speaker 1: On the other hand, the speed of the backup is 276 00:14:27,280 --> 00:14:29,480 Speaker 1: something we are a little concerned about. And you saw 277 00:14:29,520 --> 00:14:32,320 Speaker 1: in the last month bind yields go up by a 278 00:14:32,400 --> 00:14:35,600 Speaker 1: very significant amount, more than two standard deviation move. But 279 00:14:35,760 --> 00:14:38,160 Speaker 1: that you know, in context very unusual in terms of 280 00:14:38,200 --> 00:14:41,000 Speaker 1: the swiftness and the magnitude of the backup, and so 281 00:14:41,080 --> 00:14:44,480 Speaker 1: that usually is associated with some headwind to the equity performance. 282 00:14:44,480 --> 00:14:47,640 Speaker 1: And I think that's why duration is the way to 283 00:14:47,680 --> 00:14:52,000 Speaker 1: think about it. You want to have shorter duration equities. 284 00:14:52,080 --> 00:14:54,720 Speaker 1: This goes back to Jonathan's question a minute ago, which 285 00:14:54,760 --> 00:14:57,440 Speaker 1: is how does that cyclicals do better they have shorter 286 00:14:57,560 --> 00:15:00,040 Speaker 1: duration in terms of their cash flows than the on 287 00:15:00,120 --> 00:15:02,640 Speaker 1: the duration technology stocks. I think that's the way to 288 00:15:02,720 --> 00:15:05,720 Speaker 1: approach equities to the lens of fixed income. So I'm 289 00:15:05,720 --> 00:15:07,880 Speaker 1: going to rip up the scripture David Coston and go 290 00:15:08,000 --> 00:15:10,280 Speaker 1: and thank you for the two standard deviation view on 291 00:15:10,360 --> 00:15:13,880 Speaker 1: fixed income. We certainly lived out, including last Thursday. If 292 00:15:13,920 --> 00:15:17,400 Speaker 1: short duration as cyclicals, does that mean Apple and Amazon 293 00:15:17,440 --> 00:15:20,560 Speaker 1: and the rest of them are long duration and to 294 00:15:20,680 --> 00:15:25,240 Speaker 1: be avoided. Well, they're longer duration, is no question about that. 295 00:15:25,520 --> 00:15:28,680 Speaker 1: In terms of expectations and the faster growth, Uh, they 296 00:15:28,680 --> 00:15:30,720 Speaker 1: don't shouldn't be avoided. I would think of it as 297 00:15:30,760 --> 00:15:33,440 Speaker 1: the Barbell strategy. So they're quite part of the portfolio. 298 00:15:33,720 --> 00:15:36,760 Speaker 1: The tech and the tech sector in particular is a 299 00:15:36,840 --> 00:15:42,440 Speaker 1: key driver. The semiconductors are expected to have uh twenty 300 00:15:42,520 --> 00:15:47,080 Speaker 1: eight percent higher level of profits in twenty David. Look 301 00:15:47,240 --> 00:15:49,840 Speaker 1: just because the times, David, I don't mean to interrupt it, 302 00:15:49,880 --> 00:15:52,280 Speaker 1: just because of time. This is so so so important. 303 00:15:52,640 --> 00:15:55,320 Speaker 1: If they have that cash level and we get a 304 00:15:55,400 --> 00:15:59,120 Speaker 1: six percent, seven percent whatever g DP bubble is, it 305 00:15:59,320 --> 00:16:01,760 Speaker 1: just gonna be one big share buy bic like we 306 00:16:01,800 --> 00:16:05,480 Speaker 1: saw from Intel over the decade, we're gonna see we're 307 00:16:05,520 --> 00:16:07,560 Speaker 1: already seen this year. We're two months into the year. 308 00:16:07,600 --> 00:16:10,720 Speaker 1: We've had near record levels of authorizations by boards to 309 00:16:11,320 --> 00:16:14,200 Speaker 1: a proven an authorized share re purchases for this year. 310 00:16:14,240 --> 00:16:17,680 Speaker 1: And so that's a reflection of management looking at their 311 00:16:17,680 --> 00:16:21,480 Speaker 1: business for this year. Better cash flows, more flexibilion and 312 00:16:21,560 --> 00:16:25,520 Speaker 1: how to spend money. That's one use of that cash 313 00:16:25,600 --> 00:16:27,480 Speaker 1: is the is the biobax chairs. That will be a 314 00:16:27,560 --> 00:16:31,000 Speaker 1: supporting mechanism in my opinion. But the biggest source of 315 00:16:31,040 --> 00:16:34,600 Speaker 1: cash is individuals. Tom, You've had about a five hundred 316 00:16:34,600 --> 00:16:40,840 Speaker 1: billion dollar diminution reduction in money market mutual fund assets. Uh. 317 00:16:40,880 --> 00:16:42,840 Speaker 1: You know in the last several months. A lot of 318 00:16:42,840 --> 00:16:46,240 Speaker 1: that money at a zero rates is going into equities, 319 00:16:46,280 --> 00:16:47,520 Speaker 1: and of course a lot of it's going into the 320 00:16:47,560 --> 00:16:50,200 Speaker 1: spack market. You've had a hundred and seventy five SPACs 321 00:16:50,480 --> 00:16:54,360 Speaker 1: this year alone, fifty six billion dollars. We're on pace 322 00:16:54,640 --> 00:16:58,200 Speaker 1: to exceed last year's record level by the end of 323 00:16:58,200 --> 00:17:00,440 Speaker 1: this month. Are you are you gonna do us back 324 00:17:00,480 --> 00:17:02,400 Speaker 1: with you and hot us. Is that what we're looking 325 00:17:02,440 --> 00:17:05,399 Speaker 1: forward to. I'll have to Uh, I have to, I 326 00:17:05,520 --> 00:17:08,320 Speaker 1: have to go ask him about that. They missed the Sullivan. 327 00:17:08,359 --> 00:17:11,560 Speaker 1: I have other ideas. They're going to see it type 328 00:17:11,760 --> 00:17:22,439 Speaker 1: custing government sacks chief US equity strategists. Let's get some 329 00:17:22,480 --> 00:17:24,960 Speaker 1: stability on the American economy, Sarah House where us with 330 00:17:25,000 --> 00:17:27,920 Speaker 1: Wells Fargo and their senior economy since Sarah, I love, 331 00:17:27,920 --> 00:17:30,960 Speaker 1: I mean target just out with comp sales coming in 332 00:17:31,119 --> 00:17:34,160 Speaker 1: higher than all the geniuses saw, looking for a huge 333 00:17:35,080 --> 00:17:39,280 Speaker 1: statistic to come in rounded up. You say we're flushed 334 00:17:39,320 --> 00:17:42,439 Speaker 1: with cash. John just mentioned that with the stimulus, and 335 00:17:42,480 --> 00:17:46,400 Speaker 1: you're gonna migrate from six point two percent higher higher? 336 00:17:46,600 --> 00:17:48,680 Speaker 1: How much up are you gonna lift? I mean you're 337 00:17:48,680 --> 00:17:52,359 Speaker 1: you're framing six to seven percent g d P or 338 00:17:52,359 --> 00:17:56,679 Speaker 1: are we gonna shift from six percent to China like GDP? Well, 339 00:17:56,720 --> 00:17:59,200 Speaker 1: we're looking for a six percent GDP this year. And 340 00:17:59,680 --> 00:18:02,920 Speaker 1: math of pickup really comes second and third quarter led 341 00:18:02,960 --> 00:18:06,200 Speaker 1: by the consumer with all this fiscal stimulus flowing through 342 00:18:06,680 --> 00:18:10,760 Speaker 1: and the excess savings beginning to to get sent I 343 00:18:10,760 --> 00:18:13,639 Speaker 1: think when we look ahead and in terms of where 344 00:18:13,640 --> 00:18:16,639 Speaker 1: the risks that forecast live Potentially they could be to 345 00:18:16,720 --> 00:18:20,199 Speaker 1: the upside, just given again how much excess saving there is, 346 00:18:20,320 --> 00:18:23,800 Speaker 1: and that has the potential to even get spent further 347 00:18:23,920 --> 00:18:28,440 Speaker 1: into and really still propelled growth quite strongly. In two. 348 00:18:28,520 --> 00:18:31,199 Speaker 1: This is more than just a summer reopening story. Well, 349 00:18:31,240 --> 00:18:34,280 Speaker 1: what's so important here is the idea of six and beyond. 350 00:18:34,560 --> 00:18:37,199 Speaker 1: I mean, you are going through those calculations, as is 351 00:18:37,240 --> 00:18:41,320 Speaker 1: every other house right now. Are those calculations out tents 352 00:18:41,440 --> 00:18:45,879 Speaker 1: of a percent or are they out big figures? So 353 00:18:45,960 --> 00:18:50,639 Speaker 1: we're looking at in terms of the overall the spending picture. 354 00:18:50,640 --> 00:18:52,920 Speaker 1: I mean, I think you can see some some pretty 355 00:18:53,000 --> 00:18:55,760 Speaker 1: big figures just when you look at what's what's driving this, 356 00:18:55,920 --> 00:18:58,239 Speaker 1: you know. So we've seen big figures in terms of 357 00:18:58,440 --> 00:19:02,000 Speaker 1: case count declines recently, we're seen in some ways. I 358 00:19:02,000 --> 00:19:05,480 Speaker 1: think the relief package that's working its way through Congress 359 00:19:05,520 --> 00:19:08,760 Speaker 1: now is even bigger than Democrats may be expected they 360 00:19:08,800 --> 00:19:10,919 Speaker 1: would get. And so I think you are still looking 361 00:19:11,000 --> 00:19:13,959 Speaker 1: at some some pretty substantial numbers when we look at 362 00:19:13,960 --> 00:19:16,879 Speaker 1: the outlook for for not just the middle of this 363 00:19:17,000 --> 00:19:19,960 Speaker 1: year but on into the latter end. When you talk 364 00:19:20,000 --> 00:19:22,880 Speaker 1: about spending, it kind of speaks to John's point, who 365 00:19:23,000 --> 00:19:25,520 Speaker 1: leads the next end of the cycle. The idea of 366 00:19:25,800 --> 00:19:29,040 Speaker 1: you know, if we don't have China leading the dynamism 367 00:19:29,119 --> 00:19:32,040 Speaker 1: and global growth, can an infrastructure spending plan in the 368 00:19:32,119 --> 00:19:35,960 Speaker 1: United States, Can more spending to make energy more green 369 00:19:36,240 --> 00:19:40,560 Speaker 1: throughout the world end up supercharging some kind of cycle 370 00:19:40,600 --> 00:19:44,040 Speaker 1: and commodities and global growth that perhaps is not driven 371 00:19:44,080 --> 00:19:47,560 Speaker 1: from China, It can certainly help. I don't know if 372 00:19:47,640 --> 00:19:50,880 Speaker 1: you can get a full another commodity supercycle. I think 373 00:19:50,880 --> 00:19:53,679 Speaker 1: in many ways that the bounce we've seen is driven 374 00:19:53,760 --> 00:19:56,960 Speaker 1: so much by this this pickup in demand. But you know, 375 00:19:57,000 --> 00:19:59,600 Speaker 1: when we look at just what's happening with just you know, 376 00:19:59,720 --> 00:20:02,960 Speaker 1: real supposable income in the household sector, and even when 377 00:20:03,000 --> 00:20:05,760 Speaker 1: you layer on top of that a possible infrastructure deal, 378 00:20:06,040 --> 00:20:09,439 Speaker 1: you know, these are are are one time boost. And 379 00:20:09,520 --> 00:20:12,520 Speaker 1: so you whether we're we're going to continue to see 380 00:20:12,600 --> 00:20:14,960 Speaker 1: that that pick up and spending I think is a 381 00:20:14,960 --> 00:20:20,000 Speaker 1: harder question. And so that could could could impede really 382 00:20:20,160 --> 00:20:23,960 Speaker 1: the durability of that commodities commodities boost. But I mean, 383 00:20:24,040 --> 00:20:26,600 Speaker 1: right now it's certainly filtering through into some of the 384 00:20:26,600 --> 00:20:29,879 Speaker 1: inflation numbers and pointing to a sharp pick up there. Okay, 385 00:20:29,920 --> 00:20:32,600 Speaker 1: so a one time boost. Let's say that the infrastructure 386 00:20:32,600 --> 00:20:35,119 Speaker 1: spending or the fiscal stimulus that we get pasted in 387 00:20:35,160 --> 00:20:38,199 Speaker 1: March on March fifteen, as the Democrats expect, is a 388 00:20:38,200 --> 00:20:42,680 Speaker 1: one time affair. Does that lead to longer, longer term 389 00:20:42,720 --> 00:20:46,479 Speaker 1: inflation that's higher than people are currently pricing in So 390 00:20:46,520 --> 00:20:49,680 Speaker 1: I think we will see inflation settle at a notably 391 00:20:49,760 --> 00:20:53,040 Speaker 1: faster pace than what we saw over over the last cycle. 392 00:20:53,119 --> 00:20:55,000 Speaker 1: So we'll get a pop here in the second quarter, 393 00:20:55,400 --> 00:20:58,080 Speaker 1: But when we look out further, we're looking for core 394 00:20:58,160 --> 00:21:01,520 Speaker 1: pc inflation to run at all over two percents, maybe 395 00:21:01,560 --> 00:21:04,280 Speaker 1: roughly roughly two and a quarter over over the next 396 00:21:04,359 --> 00:21:06,880 Speaker 1: year and and a half or so. So I think 397 00:21:06,920 --> 00:21:09,600 Speaker 1: that is a meaningful lift, particularly when you just think 398 00:21:09,680 --> 00:21:12,640 Speaker 1: of how much the Fed has struggled with inflation over 399 00:21:12,880 --> 00:21:16,200 Speaker 1: over the past decade. But it remains me seen if 400 00:21:16,280 --> 00:21:18,960 Speaker 1: it if it stays persistently high, and I think to 401 00:21:19,040 --> 00:21:21,399 Speaker 1: look at that, you're going to need to focus heavily 402 00:21:21,400 --> 00:21:25,800 Speaker 1: on inflation expectations. So does this become self reinforcing? Have 403 00:21:25,880 --> 00:21:29,159 Speaker 1: you actually broken that mentality of low inflation that has 404 00:21:29,200 --> 00:21:32,560 Speaker 1: been so pervasive over the past decade where businesses feel 405 00:21:32,600 --> 00:21:36,320 Speaker 1: like they can actually price higher past higher costs on 406 00:21:36,480 --> 00:21:40,040 Speaker 1: two consumers. Prices paid. I'm talking about the I s 407 00:21:40,160 --> 00:21:42,639 Speaker 1: M in the last Sarah, and it was phenomenal. A 408 00:21:42,760 --> 00:21:45,520 Speaker 1: sixty handle on manufacturing, that's what we want to say. 409 00:21:45,680 --> 00:21:47,320 Speaker 1: Then you get into prices paid, and this has been 410 00:21:47,320 --> 00:21:49,439 Speaker 1: a trend for a while now. People were looking for 411 00:21:49,480 --> 00:21:51,920 Speaker 1: eight we've got eight T six. Can you just frame 412 00:21:52,000 --> 00:21:56,400 Speaker 1: that for us, how important that is and what explains it? Well, 413 00:21:56,440 --> 00:21:59,720 Speaker 1: I think it's it's hugely important, especially when you consider 414 00:21:59,800 --> 00:22:01,920 Speaker 1: that last time it was that high, I was back 415 00:22:01,920 --> 00:22:05,000 Speaker 1: in two thousand eight when you did have a big 416 00:22:05,080 --> 00:22:07,920 Speaker 1: up chicken in commodities, but at the same time demand 417 00:22:07,960 --> 00:22:11,600 Speaker 1: was absolutely taking Here this is a very different scenario, 418 00:22:11,760 --> 00:22:15,520 Speaker 1: so you actually have demand ramping up markedly, and so 419 00:22:15,680 --> 00:22:19,080 Speaker 1: it does suggest that again we are perhaps shifting into 420 00:22:19,400 --> 00:22:22,719 Speaker 1: a higher inflation environment. Now. Of course, most of that 421 00:22:22,800 --> 00:22:24,879 Speaker 1: comes on the good side when we look at inflation 422 00:22:25,000 --> 00:22:28,240 Speaker 1: in its entirety. You know, goods only account for roughly 423 00:22:28,280 --> 00:22:30,840 Speaker 1: a third of of consumer spending, so we need to 424 00:22:30,920 --> 00:22:33,840 Speaker 1: keep a close eye on what's happening in services. But 425 00:22:33,920 --> 00:22:38,160 Speaker 1: basically we've taken away a major source of disinflationary pressure 426 00:22:38,480 --> 00:22:41,320 Speaker 1: over the past decade, and we're that was really evident 427 00:22:41,320 --> 00:22:44,040 Speaker 1: in yesterday's I s M Prices paid components. So Seba 428 00:22:44,119 --> 00:22:46,199 Speaker 1: for you, this is a demand story. It's not a 429 00:22:46,240 --> 00:22:49,160 Speaker 1: supply side story, supply constraints all those kind of things. 430 00:22:50,040 --> 00:22:52,840 Speaker 1: It's actually both. So I think immediately we are seeing 431 00:22:53,400 --> 00:22:56,200 Speaker 1: we're certainly still seeing some supply constraints. I mean, you 432 00:22:56,200 --> 00:22:58,479 Speaker 1: you mentioned the prices paid index, but look at what 433 00:22:58,520 --> 00:23:01,640 Speaker 1: happened with the supplier to livery so that remains elevated, 434 00:23:01,680 --> 00:23:03,639 Speaker 1: not quite as high as what we saw in in 435 00:23:03,680 --> 00:23:07,240 Speaker 1: the midst of the lockdowns, but still substantially elevated. As 436 00:23:07,480 --> 00:23:11,960 Speaker 1: we have issues with transportation networks, issues with manufacturers getting 437 00:23:11,960 --> 00:23:15,320 Speaker 1: their their staff in with COVID and keeping those assembly 438 00:23:15,359 --> 00:23:18,080 Speaker 1: lines running to the to the full extent, and so 439 00:23:18,119 --> 00:23:19,879 Speaker 1: it's a little bit of both. So we expect those 440 00:23:19,880 --> 00:23:22,840 Speaker 1: supply disruptions to ease um at least when it comes 441 00:23:22,840 --> 00:23:25,280 Speaker 1: to some of the labor challenges over over the year. 442 00:23:25,440 --> 00:23:27,720 Speaker 1: But but I think you're still going to have some 443 00:23:27,760 --> 00:23:31,040 Speaker 1: bottlenecks just given how strong the goods and orders picture 444 00:23:31,080 --> 00:23:34,359 Speaker 1: have been um over in recent months, It's going to 445 00:23:34,440 --> 00:23:36,920 Speaker 1: take some time for those backlogs to get filled. Sara, 446 00:23:37,000 --> 00:23:38,520 Speaker 1: not to what numbers in your mouth, But if we 447 00:23:38,600 --> 00:23:41,920 Speaker 1: move from six point two percent to seven or dare 448 00:23:41,960 --> 00:23:44,600 Speaker 1: I say ninety days of eight percent g d P, 449 00:23:45,280 --> 00:23:47,760 Speaker 1: how does that change the eye part of the equation. 450 00:23:48,119 --> 00:23:51,359 Speaker 1: Do you guys have any understanding coast to coast of 451 00:23:51,640 --> 00:23:56,160 Speaker 1: how corporations will invest in this boom or do they 452 00:23:56,200 --> 00:24:00,199 Speaker 1: just do what they've always done, which is buy back chairs. Well, 453 00:24:00,240 --> 00:24:03,359 Speaker 1: I think it's certainly supportive for the investment environment. When 454 00:24:03,520 --> 00:24:06,359 Speaker 1: again you talk about some of these supply constraints, um 455 00:24:06,440 --> 00:24:09,000 Speaker 1: not just from the staff. Do you see evidence of it? 456 00:24:09,200 --> 00:24:13,639 Speaker 1: Is there evidence that they will invest? Well, we've already 457 00:24:13,680 --> 00:24:16,919 Speaker 1: seen very strong in investment and it's maintained stronger. So 458 00:24:17,200 --> 00:24:19,720 Speaker 1: instead of hitting you know, perhaps an air pocket as 459 00:24:20,160 --> 00:24:24,560 Speaker 1: you had investment pulled forward for things like information processing equipment, 460 00:24:24,600 --> 00:24:27,359 Speaker 1: it's remained incredibly strong. We saw it with a durable 461 00:24:27,359 --> 00:24:30,159 Speaker 1: goods report last week, the core shipments of three and 462 00:24:30,160 --> 00:24:32,439 Speaker 1: a half percent, and so it seems like you are 463 00:24:32,480 --> 00:24:37,040 Speaker 1: getting continued momentum where businesses are arising to meet that 464 00:24:37,119 --> 00:24:39,840 Speaker 1: challenge and meet that demand and that support of investment. 465 00:24:39,840 --> 00:24:42,800 Speaker 1: This isn't just necessarily going to be the consumer propelling 466 00:24:42,840 --> 00:24:45,720 Speaker 1: growth war in the year. Ad It's just been fantastic 467 00:24:45,960 --> 00:24:48,200 Speaker 1: in the last particularly, thank you very much the A 468 00:24:48,240 --> 00:24:56,720 Speaker 1: House Welst Fargo security economist. He needs a cup of 469 00:24:56,760 --> 00:24:59,720 Speaker 1: coffee because what we do is we talked to pros 470 00:24:59,760 --> 00:25:03,280 Speaker 1: in the horrific pandemic who are doing and not talking. 471 00:25:03,800 --> 00:25:06,200 Speaker 1: I'm str Dolga has spent the evening and I see 472 00:25:06,240 --> 00:25:09,160 Speaker 1: you at his hospital and he joins us. Now after 473 00:25:09,280 --> 00:25:12,440 Speaker 1: a long shift. How is I see you different, Dr 474 00:25:12,560 --> 00:25:18,360 Speaker 1: Adulgon now versus ten months ago? It's right now. It's 475 00:25:18,400 --> 00:25:22,000 Speaker 1: about the lowest that I've seen with COVID in several months. 476 00:25:22,040 --> 00:25:25,520 Speaker 1: I think ten months ago we were looking at um. 477 00:25:25,560 --> 00:25:27,480 Speaker 1: It was actually the middle of kind of the of 478 00:25:27,560 --> 00:25:30,280 Speaker 1: the summer, the summer surge. Around that time, we're starting 479 00:25:30,280 --> 00:25:33,400 Speaker 1: to see the spring surgeon kind of a lot more patients, 480 00:25:33,440 --> 00:25:36,040 Speaker 1: a lot more nursing home patients getting infected, a lot 481 00:25:36,080 --> 00:25:37,920 Speaker 1: of them showing up in in in the i c 482 00:25:38,119 --> 00:25:39,920 Speaker 1: u s. Right now, I would say there was only 483 00:25:40,280 --> 00:25:42,879 Speaker 1: one coronavirus patient in an I see you, which is 484 00:25:42,920 --> 00:25:45,199 Speaker 1: a is a good change. I think the high of 485 00:25:45,200 --> 00:25:47,960 Speaker 1: it here. I clinically work in Pittsburgh, although I have 486 00:25:48,000 --> 00:25:51,720 Speaker 1: a Hopkins affiliation was around the wintertime when it was 487 00:25:51,800 --> 00:25:55,040 Speaker 1: really inundated. Uh that during that winter surge, and that 488 00:25:55,040 --> 00:25:57,280 Speaker 1: seems to have dissipated. And I think that's evidence that 489 00:25:57,480 --> 00:26:00,480 Speaker 1: our vaccine is getting to those vulnerable populations and they're 490 00:26:00,480 --> 00:26:02,840 Speaker 1: getting protected. And we've seen it in the national data 491 00:26:02,880 --> 00:26:05,440 Speaker 1: when you look at nursing home deaths, nursing home cases, 492 00:26:05,600 --> 00:26:07,359 Speaker 1: and I think that's going to give our hospitals a 493 00:26:07,400 --> 00:26:09,720 Speaker 1: lot of rest. But in terms of capacity concern, which 494 00:26:09,720 --> 00:26:14,359 Speaker 1: gives governor's possibility the nursing home success is the eighty 495 00:26:14,440 --> 00:26:19,000 Speaker 1: year old cohort, maybe the seventy year old cohort. How 496 00:26:19,119 --> 00:26:21,960 Speaker 1: what is your timeline to get down to the sixty 497 00:26:22,040 --> 00:26:25,040 Speaker 1: year old and to begin to benefit those forty nine 498 00:26:25,040 --> 00:26:28,439 Speaker 1: and older. It's likely it's going to be different depending 499 00:26:28,480 --> 00:26:30,280 Speaker 1: upon the states. So there are some states that are 500 00:26:30,320 --> 00:26:33,080 Speaker 1: already moving into high risk individuals that are less than 501 00:26:33,080 --> 00:26:35,880 Speaker 1: the age of sixty five. In my state of Pennsylvania, 502 00:26:36,119 --> 00:26:38,240 Speaker 1: they haven't done that yet. They're still really sticking to 503 00:26:38,280 --> 00:26:41,800 Speaker 1: the six and up cohort. So it's gonna take some time. 504 00:26:41,840 --> 00:26:44,359 Speaker 1: It all depends on vaccine supply. The Johnson and Johnson 505 00:26:44,400 --> 00:26:46,439 Speaker 1: approval is going to help, But in the short term, 506 00:26:46,480 --> 00:26:48,560 Speaker 1: we're only getting about four million doses, so it's going 507 00:26:48,600 --> 00:26:50,239 Speaker 1: to take some time to trickle out. But we are 508 00:26:50,280 --> 00:26:53,080 Speaker 1: getting better, we are moving faster. So I do think 509 00:26:53,080 --> 00:26:56,080 Speaker 1: that that as we get into spring mid spring, we 510 00:26:56,119 --> 00:26:58,480 Speaker 1: will have most of our people that are at high 511 00:26:58,560 --> 00:27:01,119 Speaker 1: risk that live in the community aaccinated or have access 512 00:27:01,160 --> 00:27:03,800 Speaker 1: to the vaccine. And I think even before we cross 513 00:27:03,840 --> 00:27:05,879 Speaker 1: that HERD immunity threshold will be in a very different 514 00:27:05,880 --> 00:27:08,480 Speaker 1: place because we won't be worrying about hospital capacity or 515 00:27:08,560 --> 00:27:11,920 Speaker 1: personal protective equipment or ventilators or any of that anymore. 516 00:27:11,920 --> 00:27:14,000 Speaker 1: And I think that's really what drove a lot of 517 00:27:14,040 --> 00:27:17,040 Speaker 1: the public health intervention, because we were always worried about 518 00:27:17,119 --> 00:27:21,000 Speaker 1: the about keeping the curve below hospital capacity dr A delta. 519 00:27:21,160 --> 00:27:24,919 Speaker 1: How concerned are you about the New York variant are I? 520 00:27:25,600 --> 00:27:27,520 Speaker 1: It's hard to know exactly how to be concerned about 521 00:27:27,520 --> 00:27:28,879 Speaker 1: all of these variants. There are many of them that 522 00:27:28,920 --> 00:27:30,399 Speaker 1: are kind of floating around, and there's many that we 523 00:27:30,440 --> 00:27:33,000 Speaker 1: don't even have characterizts because we don't do much sequencing. 524 00:27:33,320 --> 00:27:34,840 Speaker 1: I think the New York variant is something kind of 525 00:27:34,840 --> 00:27:37,800 Speaker 1: in the intermediate range that we worry about it being 526 00:27:37,800 --> 00:27:41,040 Speaker 1: more contagious our vaccines are likely to still prevent what 527 00:27:41,119 --> 00:27:43,560 Speaker 1: matters when it comes to these these variants or any 528 00:27:43,640 --> 00:27:47,000 Speaker 1: of the original version of the virus serious disease, hospitalization, 529 00:27:47,040 --> 00:27:49,520 Speaker 1: and death. So I think the existence of these various 530 00:27:49,560 --> 00:27:52,440 Speaker 1: just underscores the need to accelerate vaccination to the fastest 531 00:27:52,440 --> 00:27:56,720 Speaker 1: pace possible. Are we winning the race. I think we're 532 00:27:56,800 --> 00:27:58,960 Speaker 1: We're kind of keeping pace with it. But we'll see 533 00:27:58,960 --> 00:28:01,200 Speaker 1: what happens to the overall number of cases right now. 534 00:28:01,600 --> 00:28:03,360 Speaker 1: They have in the last ten days or so, there's 535 00:28:03,400 --> 00:28:05,159 Speaker 1: been an increase of a couple percent. We don't know 536 00:28:05,200 --> 00:28:07,120 Speaker 1: if that's actually a trend or if that's an aberration 537 00:28:07,160 --> 00:28:09,840 Speaker 1: in the data. But as long as our cases are 538 00:28:09,880 --> 00:28:12,480 Speaker 1: flatter going down, I think we're at least at least 539 00:28:12,520 --> 00:28:15,639 Speaker 1: treading water and nothing and nothing serious is going to 540 00:28:16,400 --> 00:28:19,040 Speaker 1: It's not gonna undercut that. But if we just go 541 00:28:19,160 --> 00:28:21,879 Speaker 1: up again, if we see, for example, the UK variant 542 00:28:22,000 --> 00:28:25,240 Speaker 1: continue to increase, then I think we really need to 543 00:28:25,840 --> 00:28:27,800 Speaker 1: step on the gas when it comes to vaccination. And 544 00:28:27,800 --> 00:28:30,320 Speaker 1: I think we're getting better. Over two million is getting better. 545 00:28:30,359 --> 00:28:32,200 Speaker 1: I think there should be no speed limit. However, when 546 00:28:32,200 --> 00:28:35,000 Speaker 1: we're talking about vaccines, is a trend and better data 547 00:28:35,080 --> 00:28:39,440 Speaker 1: on hospitalizations and deaths linked somehow to quarantine or do 548 00:28:39,480 --> 00:28:42,200 Speaker 1: you just simply have to wait way down the road 549 00:28:42,280 --> 00:28:46,200 Speaker 1: to begin to EBB quarantines country to country. I think 550 00:28:46,280 --> 00:28:48,240 Speaker 1: you're gonna have to do a lot to disentangle what 551 00:28:48,320 --> 00:28:51,440 Speaker 1: goes on. And we know that social interaction spreads the virus, 552 00:28:51,480 --> 00:28:54,080 Speaker 1: or the less social interaction you have, the less likely 553 00:28:54,080 --> 00:28:57,280 Speaker 1: you are to have cases. But what does each added 554 00:28:57,280 --> 00:29:00,320 Speaker 1: step do? That takes a while to control for, because 555 00:29:00,560 --> 00:29:04,320 Speaker 1: people will voluntarily start to quarantine, people start wearing face 556 00:29:04,360 --> 00:29:07,680 Speaker 1: coverings at the same time, people start to wash their hands. 557 00:29:07,720 --> 00:29:11,160 Speaker 1: A lot, mass gatherings get get canceled. All of that 558 00:29:11,240 --> 00:29:13,080 Speaker 1: has a role. So you have to kind of piece 559 00:29:13,120 --> 00:29:15,320 Speaker 1: apart things and try and control for all the different 560 00:29:15,360 --> 00:29:17,760 Speaker 1: variables that were happening happening at the same time to 561 00:29:17,800 --> 00:29:20,040 Speaker 1: know exactly what each public health intervention has and it's 562 00:29:20,080 --> 00:29:22,800 Speaker 1: a hard job to know exactly what worked. Dr Dolgia. 563 00:29:22,960 --> 00:29:25,640 Speaker 1: How much of a stumbling block is it the children 564 00:29:25,720 --> 00:29:28,120 Speaker 1: cannot get vaccinated and probably won't be able to get 565 00:29:28,160 --> 00:29:31,960 Speaker 1: vaccinated until potentially early next year. I don't think it's 566 00:29:32,000 --> 00:29:34,600 Speaker 1: really assembling block. If you look at the epidemiology we 567 00:29:34,640 --> 00:29:37,880 Speaker 1: know that children are usually and greatly spared from the 568 00:29:37,920 --> 00:29:40,880 Speaker 1: severe consequence of disease. There there are some exceptions, but 569 00:29:40,960 --> 00:29:43,400 Speaker 1: in general they're not Some they're not at high risk, 570 00:29:43,480 --> 00:29:46,000 Speaker 1: and they're not accelerators of the of the virus in 571 00:29:46,040 --> 00:29:49,680 Speaker 1: the community. So with influenza, they really drive a community 572 00:29:49,760 --> 00:29:53,000 Speaker 1: transmission of influenza. They don't do this with coronavirus. So 573 00:29:53,000 --> 00:29:54,560 Speaker 1: what we were trying to do with the vaccine is 574 00:29:54,600 --> 00:29:56,880 Speaker 1: reduced the harm that the virus was causing, and that 575 00:29:56,920 --> 00:29:59,480 Speaker 1: men going after the vulnerable populations first. So I don't 576 00:29:59,480 --> 00:30:01,640 Speaker 1: think it's an obstacle. And remember there's a different risk 577 00:30:01,680 --> 00:30:04,560 Speaker 1: benefit calculation when you're talking about vaccineing a nine year 578 00:30:04,560 --> 00:30:06,680 Speaker 1: old versus a nine year old, and you have to 579 00:30:06,680 --> 00:30:09,240 Speaker 1: really think, you know, is the vaccine but this vaccine? 580 00:30:09,240 --> 00:30:11,360 Speaker 1: Are these current vaccines the best vaccine for his child 581 00:30:11,480 --> 00:30:13,680 Speaker 1: or will it be some second generation vaccine down the 582 00:30:13,760 --> 00:30:15,680 Speaker 1: road that might have a less less of a side 583 00:30:15,680 --> 00:30:17,920 Speaker 1: effect profile. So I think we need to do the studies. 584 00:30:17,960 --> 00:30:19,640 Speaker 1: I think children will get vaccinating, but I don't think 585 00:30:19,640 --> 00:30:21,840 Speaker 1: it's an obstacle to anything right now, do I know 586 00:30:21,880 --> 00:30:23,160 Speaker 1: you're at the end of you arrive and night shift, 587 00:30:23,160 --> 00:30:25,160 Speaker 1: So we'll let you run. Thank you Hot Works. We 588 00:30:25,240 --> 00:30:27,360 Speaker 1: appreciate it. Thank you. I miss it down to that 589 00:30:27,640 --> 00:30:31,200 Speaker 1: of Jon's health kids. This is the Bloomberg Surveillance Podcast. 590 00:30:31,480 --> 00:30:34,840 Speaker 1: Thanks for listening. Join us live weekdays from seven to 591 00:30:34,920 --> 00:30:39,000 Speaker 1: ten am Eastern. I'm Bloomberg Radio and on Bloomberg Television 592 00:30:39,320 --> 00:30:43,320 Speaker 1: each day from six to nine am for insight from 593 00:30:43,360 --> 00:30:47,920 Speaker 1: the best in economics, finance, investment, and international relations. And 594 00:30:48,040 --> 00:30:53,200 Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg 595 00:30:53,240 --> 00:30:56,520 Speaker 1: dot com, and of course on the terminal. I'm Tom 596 00:30:56,640 --> 00:30:58,960 Speaker 1: Keene and this is Bloomberg