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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferroll and Lisa Brownwitz Jailey. We bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com,

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Speaker 1: and of course, on the Bloomberg Terminal. Emmy Joseph Cohen

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Speaker 1: has been a partner since Goldben Sachs. Since I think

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Speaker 1: it was two thousand eight, I can't remember. It's back

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Speaker 1: a few years. She is their advisory director and senior

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Speaker 1: investment strategists and arguably no one has ordered America to

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Speaker 1: participate in the equity markets like Abby Joseph Cohen. We're

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Speaker 1: thrilled she could join us this morning. Abby reaffirmed this

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Speaker 1: morning why we need to participate in the stock market

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Speaker 1: given the sum of all our fears. Tom Will, good

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Speaker 1: morning to you, um, and thank you for inviting me

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Speaker 1: to to be here today. UM. You know, what we

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Speaker 1: know about the stock market over a long period of

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Speaker 1: time is that if you have confidence in the economic outlook,

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Speaker 1: equities are usually the best place to be UM, and

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Speaker 1: clearly that has been the case now for an extended

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Speaker 1: period and I think that one of the important things

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Speaker 1: for investors to think about now is valuation. UM. You

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Speaker 1: you want to participate in equities, but you want to

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Speaker 1: make sure that you're doing it at the right price. UM.

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Speaker 1: And one of the things that you and your colleagues

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Speaker 1: have spoken about very clearly already this morning is that

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Speaker 1: interest rates UM maybe becoming less friendly uh than they

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Speaker 1: have been towards valuation. When we look at the valuation

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Speaker 1: models that are used by so many investors and so

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Speaker 1: many analysts, including those at Goldman Sacks, there's this general

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Speaker 1: sense that the market is roughly at fair value, and

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Speaker 1: that sounds like, you know, not bad um, if you

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Speaker 1: believe that this will in fact be a protracted economic

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Speaker 1: recovery and then expansion. Uh, not a bad thing. However,

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Speaker 1: we're sort of on a knife s edge. Um. The

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Speaker 1: valuation becomes less appealing um if interest rates rise. Uh.

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Speaker 1: My colleague David Costin, who does this specific forecast, has

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Speaker 1: been saying for a while now that he thinks that

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Speaker 1: fair value off with the S and P five hundred

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Speaker 1: this year is fort which is pretty much where we are.

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Speaker 1: One more point, and that is, when you're at fair value,

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Speaker 1: there's no margin for error. Um. If there are disappointments, UM,

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Speaker 1: be it on interest rates, the disappointment on OPEQ, for example,

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Speaker 1: over the last few days. That's where you start to

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Speaker 1: see a big increase in volatility within the market itself.

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Speaker 1: So many would so many would say, Abby Joseph Cohen,

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Speaker 1: that none of what we're living right now was in

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Speaker 1: your economic textbooks at Cornell a few years ago, for example.

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Speaker 1: And I do this for my colleague John Farrell. How

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Speaker 1: do you respond to the confidence to invest given this

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Speaker 1: colossally odd negative real yield? Um? Great question that we're

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Speaker 1: asking ourselves as well, uh, Tom, And and the answer

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Speaker 1: is carefully, very carefully. UM. We are in an unprecedented

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Speaker 1: period both with regard to an extended length of time

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Speaker 1: for these negative real yields. By the way, they've been

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Speaker 1: negative real yields in Europe now for quite a period

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Speaker 1: of time. UM. And we are also in an unusual

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Speaker 1: period with regard to nominal interest rates. So when we

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Speaker 1: run our models, we're looking at both those nominal and

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Speaker 1: real yields and recognize that we truly are in uncharted territory. UM.

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Speaker 1: So let me say one more thing, as somebody who

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Speaker 1: used to be a quantitative anialist. UM. I to say

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Speaker 1: I'm a reformed quant um. I use these models as

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Speaker 1: a starting point. UM. I don't use them um as gospel.

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Speaker 1: I use them to give me some direction. Are we undervalued,

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Speaker 1: fairly valued, overvalued? And then once we have that general

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Speaker 1: sense of direction, what could go wrong and what could

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Speaker 1: go right? Um? And as we take a look at

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Speaker 1: things now, the things that could go wrong include, UH,

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Speaker 1: commodity prices. We've seen what OPEC has done. This, by

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Speaker 1: the way, it could be more of a problem for

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Speaker 1: markets outside the United States. In the US, commodity prices

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Speaker 1: are actually a fairly small component of our total cost.

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Speaker 1: The second thing that I'm perhaps even more worried about

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Speaker 1: has to do with public health. UM. You know, we

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Speaker 1: we've had these incredible vaccines, extraordinarily effective, and now we're

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Speaker 1: sort of bumping into problems with regard to distribution. In

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Speaker 1: the United States. We think this will be a re

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Speaker 1: regional issue rather than nationwide. But you take a look

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Speaker 1: at the reopening of places like Europe, this is much

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Speaker 1: more problematic. The distribution in Europe of their mr NA

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Speaker 1: vaccines UM really has been lagging. It's one of the

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Speaker 1: reasons there for GDP expectation in Europe continent is below

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Speaker 1: what we what we look like and John, you've absolutely

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Speaker 1: nailed that. On world travel or the luck thereof, for

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Speaker 1: the airlines have suffered because of that time and a

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Speaker 1: cyclical story of many ways, sector to sector. The airlines

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Speaker 1: have peaked in the minds of some people. They're struggling now.

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Speaker 1: The banks are starting to struggle a little bit as well.

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Speaker 1: Over the last month. Abe, what was interesting in your

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Speaker 1: response to Tom is that you turn to your process

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Speaker 1: and for the following question, I'm less interested in the

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Speaker 1: call and far more interest in the process. The debate

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Speaker 1: right now on the cyclicals is the debate has always

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Speaker 1: been over the last six months. Is it just a

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Speaker 1: short term reopening trade or something more durable, something more sustainable?

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Speaker 1: What is your progress process? Rather to distinguish between the

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Speaker 1: two things, what are the signposts you look for? Well,

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Speaker 1: we're also looking at the idiosyncratic opportunities, because just because

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Speaker 1: a particular company happens to be in a particular sector

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Speaker 1: or industry, according to the SMP definition, doesn't tell us

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Speaker 1: as much as we need to know. So we're really

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Speaker 1: looking at how individual companies have positioned and or repositioned themselves. UM.

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Speaker 1: I happen to believe that there will be a movement

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Speaker 1: ahead in capex. UM. UH, we think there will be

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Speaker 1: an infrastructure bill of some sort UM. Obviously we're not

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Speaker 1: privy to the negotiations now in the Congress. We think

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Speaker 1: there's a desperate need for spending on infrastructure, but there's

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Speaker 1: also a need for private engagement in CAPEX. One of

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Speaker 1: the things that we have seen UM in the last

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Speaker 1: decade or so has been this decline in the use

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Speaker 1: of corporate cash flow for these purposes. UM. We have

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Speaker 1: seen much more of it than usual go into things

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Speaker 1: like UH dividend payment and share repurchases UM. Those dividend

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Speaker 1: payments UM may continue to increase, but if you are

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Speaker 1: a corporate CFO and you look at your current share price,

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Speaker 1: you say, do I really want to be repurchasing at

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Speaker 1: these levels? And that's one thing that, in addition to

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Speaker 1: the need to expand physical capacity, main fact lead to

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Speaker 1: improvements in CAPEX. So the short answer to your question, John, is,

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Speaker 1: we do think that there will be a movement towards

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Speaker 1: some of the industrials. UH. And let's recognize that industrials

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Speaker 1: are all over the lot and we need to look

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Speaker 1: too at the international trade aspects of this. Some of

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Speaker 1: the companies that have repositioned themselves well for the twenty

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Speaker 1: one century needs, including things like renewable energy and more

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Speaker 1: efficient processes, UH, the use of improved metallurgy and so on.

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Speaker 1: Some of these are US companies, some of them are

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Speaker 1: outside the United States but are important suppliers to US companies.

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Speaker 1: Do you think that the impetus so for some of

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Speaker 1: that capex spending and the potential for that UH to

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Speaker 1: finally sort of maybe get back to levels that we

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Speaker 1: saw in previous generations, that that's going to come completely

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Speaker 1: at the behest of these companies, or do you need

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Speaker 1: a little bit more government government involvement to sort of

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Speaker 1: move this along? Abbey, Yeah, Well, let me be careful

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Speaker 1: when when I discussed the numbers here, because I don't

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Speaker 1: think we're going back to where we were twenty years

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Speaker 1: ago as a percentage of the total use of cash flow.

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Speaker 1: Because of the change in the composition of the S

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Speaker 1: and P five, we now have so many more service

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Speaker 1: oriented companies that are not heavy duty industrial spenders. So

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Speaker 1: we need to be looking at things industry by industry.

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Speaker 1: So I do think that there will be a movement

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Speaker 1: back towards more capex UM. The thing that worries me

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Speaker 1: most about government spending has been the significant d emphasis

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Speaker 1: of spending on things by the government that corporations don't

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Speaker 1: usually spend on. And let me be more specific, and

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Speaker 1: that is over the last several decades, in fact, going

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Speaker 1: back to eighteen sixty, the US government has been one

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Speaker 1: of the major investors in long term basic research UM.

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Speaker 1: And what we have seen over the last twenty years

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Speaker 1: has been a decline in basic research spending as a

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Speaker 1: percentage of the federal budget. UM. I think this is

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Speaker 1: a mistake. You know, we have to keep in mind,

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Speaker 1: for example, that those terrific mr NA vaccines that we

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Speaker 1: all are so happy to have now, uh, that initial

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Speaker 1: research was done by spending given by the n I

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Speaker 1: h M ten fifteen years ago. We forget uh you

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Speaker 1: get that cod It's going to be David's David. David's

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Speaker 1: very worried you might make a because David custom right

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Speaker 1: now is forty three three hundred year n t K

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Speaker 1: and we couldn't be bored by that. Right now, tell

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Speaker 1: you that that was my granddaughter calling. What did she say?

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Speaker 1: It's it's her sixth birthday today. Just say hello, so

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Speaker 1: happy birthday. I will call her in just a minute.

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Speaker 1: Because I let you go happy. It's going to catch up.

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Speaker 1: We think this is more important. You want to make

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Speaker 1: a more important point than sound happy birthday. I'm going

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Speaker 1: to sing happy birthday to her, and you don't want

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Speaker 1: to hear everyway. So basically, the federal government has been

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Speaker 1: the basic provider of funds for research but also for infrastructure, UM,

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Speaker 1: and we have seen a notable decline in that overlay

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Speaker 1: twenty years. We just need to get back to where

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Speaker 1: you were, UM and that would be extraordinarily helpful for

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Speaker 1: long term economic growth. Abby, Thank you. It's going to

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Speaker 1: catch up in their government Sacks advisory director, senior investment

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Speaker 1: strategist joining us now. The former governor of the Federal

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Speaker 1: Reserve System, Frederick Michigan is a Columbia University and one

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Speaker 1: thing I know for certain is everything he's ever written

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Speaker 1: has paid great respect to markets as an observer of

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Speaker 1: what our economics does. Rick Michigan, you, Peter Hooper and

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Speaker 1: am your SUFI. A number of years ago to three

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Speaker 1: years ago talked about a monetary policy, a federal reserve

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Speaker 1: of Phillips curve that was hibernating, is our traditional monetary

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Speaker 1: policy hibernating, and someday we'll get back to it, or

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Speaker 1: are we moving on to some form of new paradigm.

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Speaker 1: So I think you're right, we're hibernating that the FED

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Speaker 1: I think very well, maybe behind the curve that they

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Speaker 1: have basically two UH elements here, which is one is

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Speaker 1: that they've gone to this average inflation target, which I

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Speaker 1: actually think is a good thing, but haven't defined it

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Speaker 1: well enough to actually anchor insputations the way they should,

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Speaker 1: so I think that's a alumn But the other is

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Speaker 1: that they basically have said that the Phillips curve UH

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Speaker 1: is not something they're particularly worried about. But on the

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Speaker 1: other hand, I think they will find out that that

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Speaker 1: that it is hibernating and that there is an issue,

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Speaker 1: and I think that the FED will actually end up

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Speaker 1: doing what it has to do, but it may be

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Speaker 1: a little bit late. So I don't think that it's

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Speaker 1: so much that that I think that they're gonna be

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Speaker 1: a month by reality. I think that's what's gonna happen here. Unfortunately,

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Speaker 1: I think that they they maybe a little bit too

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Speaker 1: complacent about the fact that the economy is running very hot,

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Speaker 1: that that inflation I think is gonna be less temporary

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Speaker 1: than they think it is. It's true that there is

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Speaker 1: a supply shock which is temporary, but the real reality

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Speaker 1: here is just demand is really jumped a lot because

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Speaker 1: of of a very expansion and fiscal policy and pent

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Speaker 1: up demand because most Americans are financially much better off

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Speaker 1: than they were before the pandemic, and they have been

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Speaker 1: able to stand rick every time. The point we look

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Speaker 1: at the American economy over the last six months, yet

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Speaker 1: today called it the last seven months since the end

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Speaker 1: of last year, has improved with the exception of the

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Speaker 1: participation rate in the labor market. How complicated do you

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Speaker 1: think that is? Does that complicate things for the FED

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Speaker 1: that this participation rate has just flattened out? Well, I

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Speaker 1: think it's a it's a surprise from what we've what

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Speaker 1: the typically happened before the pandemic. But you know, we

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Speaker 1: have a situation where a lot of people are at

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Speaker 1: basically uh, wondering whether they want to go back to

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Speaker 1: work the same way after the shift in terms of

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Speaker 1: or work at home. Uh, And so it does complicate

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Speaker 1: things in terms of the deciding how tight the labor

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Speaker 1: market is. I think the labor market is a little

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Speaker 1: bit tighter than it used to be. That the three

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Speaker 1: and a half percent unemployment looked like that some of

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Speaker 1: the natural rate of unemployment. It may be somewhat higher

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Speaker 1: in this case. So it is complicating things, but not

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Speaker 1: unaware that they can't figure out. So I think as

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Speaker 1: soon as I think a key issue here is a

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Speaker 1: central bank never should take its eye off the inflation ball,

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Speaker 1: and inflation has been very high, and if it's not

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Speaker 1: as temporary as the FED thinks it's going to be,

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Speaker 1: they need to move and move relatively fast at that point.

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Speaker 1: Are they already too late? Though, Rick, I think there

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Speaker 1: may be a little bit behind the curve. So you know,

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Speaker 1: the issue is that, uh, in some sense there there

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Speaker 1: is a little concern about deja whu all over again

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Speaker 1: in terms of the sixties, where the FED was in

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Speaker 1: a very similar situation, very combinating monetary policy with with

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Speaker 1: very expansionary EPISCO policy. I don't think we're going back

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Speaker 1: to the sixties, but I think that they that they

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Speaker 1: are a little bit behind the curve here, uh, and

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Speaker 1: so that it's going to be more costly for them

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Speaker 1: to get inflation under control. UH. And that's added to

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Speaker 1: the fact that I think they haven't managed their new

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Speaker 1: monetary policy strategy as well as they could. Uh. The

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Speaker 1: results inflation expectations may not be anchored as well as

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Speaker 1: they should be. I want to go back to the

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Speaker 1: mathematics of Rick Michigan, and the mathematics describes folks the

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Speaker 1: path of putting the genie back in the bottle Rick

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Speaker 1: michikin how do we put the fiscal genie back in

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Speaker 1: the bottle? I don't know if we can. Uh. The

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Speaker 1: only thing that's sort of a bipartisans in Congress is

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Speaker 1: UH the unwillingness to worry about budget deficits. UH that

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Speaker 1: that I failed. The Biden bill that was passed was

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Speaker 1: was much too large. It was I think a bad bill. UH.

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Speaker 1: That it had paying a hundred paying a big checks

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Speaker 1: to people who are earning a hundred fifty thousand dollars

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Speaker 1: who were not at all hurt by the pandemic was

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Speaker 1: a bad idea. I think they should have had more

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Speaker 1: contingency in terms of the three hundred dollar payment in

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Speaker 1: terms of undeployment insurance, which I think is creating some

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Speaker 1: problems for them. Uh so. Uh, and then uh, there

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Speaker 1: really is is no one in Congress right now who's

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Speaker 1: really very serious about balancing the budget. The Republicans are

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Speaker 1: perfectly happy to say let's not spend when in fact

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Speaker 1: the Democrats are doing it. But on the other hand,

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Speaker 1: they certainly were not the uh serious about getting fiscal

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Speaker 1: policy under control during the Trump error. So I think

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Speaker 1: we do have a problem here, Rick, Just find a

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Speaker 1: question from me. I'm just talking at the Bloomberg right now.

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Speaker 1: We just had a break a one thirty on tens

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Speaker 1: to four decimal points. You're lower, the session is six

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Speaker 1: for you, You're saf from your perspective, What on earth

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Speaker 1: does this bond market tell you? I told anymore? And

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Speaker 1: at this point with a yield on a tenure of

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Speaker 1: one thirty, yeah, I think I tend to different. I

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Speaker 1: think that there's more potential for problems in terms of

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Speaker 1: inflation in the bond market is things. Uh so, may rather,

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Speaker 1: I should tell you. I hope that the bond markets right,

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Speaker 1: and that is right, the inflation will not be a problem.

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Speaker 1: I think there will be much better for the economy.

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Speaker 1: But I think that the balance of risks here now

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Speaker 1: is one where there's much more danger. So I think

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Speaker 1: complacency one of the things I worry about a little

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Speaker 1: bit of complacency in general in the markets, not just

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Speaker 1: in terms of the bond market, brols, the stock market,

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Speaker 1: and that could could that could be a problem, not

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Speaker 1: to to distant future. Rick, it's gonna cash. You have

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Speaker 1: come back soon. Rich Miskin there of Columbia University, Thank you, sir.

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Speaker 1: Let's take off the morning with Jim Cartamo can Standard

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Speaker 1: investment management fixed income portfolio manager. Jim, Let's go strike

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Speaker 1: the number one question, the ex cyclical trite, the inflation trite?

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Speaker 1: Is they still on? Well, good morning, thanks for having

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Speaker 1: me on your show, and I do think it's still on,

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Speaker 1: but we we have shifted down gears. So so let

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Speaker 1: me just kind of unpack this and go through this

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Speaker 1: little what we what we have to understand is that

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Speaker 1: the delta or the rate of change, is really what

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Speaker 1: matters the most to bond investors. So in the first

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Speaker 1: quarter and even in parts of the second quarter, what

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Speaker 1: we were seeing is rising growth, rising inflation, and an

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Speaker 1: increase in policy easiness. Policy was getting easier. At this point,

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Speaker 1: what the market is sensing is that we're past the peak.

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Speaker 1: Growth is going to decelerate, inflation is likely to decelerate,

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Speaker 1: and policy were past the peak, and policy and we're

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Speaker 1: already starting to talk about ways to take that away. Now,

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Speaker 1: that doesn't mean that the level of growth is bad,

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Speaker 1: that doesn't mean that the level of inflation is too low,

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Speaker 1: or that the level of policy easiness is is that

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Speaker 1: that that policy is too tight. But what it does

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Speaker 1: mean is that we're not going is that we're past

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Speaker 1: the peak. So essentially the reflation trade that we're talking

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Speaker 1: about is still going to be there, it's just going

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Speaker 1: to take a bit longer to actually achieve these goals. So,

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Speaker 1: for example, if we start to think about the more

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Speaker 1: macro elements that make up the reflation trade, right, there

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Speaker 1: are three of those. One is that you got higher

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Speaker 1: tenure yields. Then you've got higher tenure yields or higher

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Speaker 1: long term yields, and a steepening of the curve, which

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Speaker 1: is pretty rare in and of itself, and you also

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Speaker 1: got a weaker dollar. So what happened is when everybody

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Speaker 1: got into the reflation trades, they were underweight treasuries, they

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Speaker 1: had curve s deepeners on, and they were short the dollars,

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Speaker 1: and now that that at the rate of change, of

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Speaker 1: the pace of that move is starting to decline. The

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Speaker 1: second derivative, as they say, people are unwinding their short

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Speaker 1: in the dollar, they're taking off their curve steepeners, and

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Speaker 1: they're buying back they're under in the U. S. Treasuries,

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Speaker 1: and that's what's making this all happen. Okay, Jim brilliantly explained.

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Speaker 1: But I want to go to let's talk some math here, folks.

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Speaker 1: It is math Wednesday here on Bloomberg Surveillance. Okay, you

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Speaker 1: mentioned the delta. If I look at the convexity and

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Speaker 1: is is um Galley? Oh, Steven Galley over it? Nord

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Speaker 1: says today it's a bear squeeze. Okay, fine. The delta

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Speaker 1: is the first derivative. The gamma is the second derivative.

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Speaker 1: Right now, are you observing a convexity trade that overshoots

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Speaker 1: to the all climback on the reflation trade or is

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Speaker 1: there some substance to this lower yield market that we're

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Speaker 1: in now? So so, I do think that there is

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Speaker 1: a convexity component to this to the extent that you

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Speaker 1: can't overshoot lower I do think the tenure Treasury eels

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Speaker 1: can get down to one one point five, but I

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Speaker 1: think Tom, it's going to get hard to really get

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Speaker 1: below that for any real material period of time, at

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Speaker 1: least given what we know right now with the with

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Speaker 1: the expectations for growth, I mean growth this year is

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Speaker 1: supposed to come in somewhere around eight percent in the US.

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Speaker 1: Next year it's somewhere around four or four and a

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Speaker 1: half percent. It's quite hard for ten year yields to

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Speaker 1: stay as low, especially as the FED starts to pull

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Speaker 1: back and taper even a little bit. So I think

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Speaker 1: this is a correction. The reflation trade is still with us,

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Speaker 1: but it's gonna take some time for these positions to

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Speaker 1: get cleaned up. Okay, you know, Romaine, this is where

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Speaker 1: you step in. If Lisa was here, she'd be talking

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Speaker 1: to third derivative, go at it. Okay, all right, I'm

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Speaker 1: gonna stick with the first derivative for right now, and

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Speaker 1: that it remains the Fed. Jim here, and we talk

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Speaker 1: about the messaging coming out of them. It seemed like

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Speaker 1: a few weeks ago there was general consensus, at least

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Speaker 1: the perception that there was consensus at the Fed. Here,

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Speaker 1: it doesn't seem that's the case anymore here, and I'm

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Speaker 1: wondering how you view the messaging coming out of the

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Speaker 1: FED and how the market's interpreting it. So that's a

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Speaker 1: great question remain because for the past couple of weeks,

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Speaker 1: the hawks at the FED have been absolutely winning the

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Speaker 1: narrative in the marketplace, and now I think it's become

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Speaker 1: a lot more dubbish where people are taking the doves

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Speaker 1: a lot more seriously at this point. So look, I mean,

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Speaker 1: what did the FED tell us in in the middle

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Speaker 1: of June at their FOMC meeting. Effectively, they said it's

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Speaker 1: time to start talking about talking about tapering and and

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Speaker 1: and and we need to see further substantial progress. Well, look,

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Speaker 1: the data is good right now. The problem is is

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Speaker 1: that it's not good enough. And I think that's the

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Speaker 1: debate at the FED. It's not whether or not the

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Speaker 1: data is good. It's always about is a good enough

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Speaker 1: to get us to the next level, which is for

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Speaker 1: the FED to enact a policy change. And right now,

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Speaker 1: I would argue that the data is good, but I

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Speaker 1: just don't see how. I just don't see an acceleration

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Speaker 1: in the in the data to the point where we're

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Speaker 1: going to have unanchored inflation, and that's going to cause

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Speaker 1: the FED to actually start to act sooner rather than later.

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Speaker 1: So look the mid two thousand twenty three dot the

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Speaker 1: expectation for the FED to high grades in mid two

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Speaker 1: thousand twenty three. I think that's valid. The problem is

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Speaker 1: that the markets had started to push that in already

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Speaker 1: to the end of two for the first rate hikes.

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Speaker 1: Some had even earlier than that. So I think that's

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Speaker 1: all going away, and as people push back their expectations

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Speaker 1: for FED rate hikes, probably into that mid to late area,

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Speaker 1: bond yields are going to fall on that. Jim the

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Speaker 1: economic te to Cantani you so much, how the market

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Speaker 1: responds to it, Cantani a little more sometimes what you'll

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Speaker 1: read on that over the last couple of weeks, Yeah,

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Speaker 1: I mean, I mean, the markets are telling you that

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Speaker 1: we're going into a period where we've you know, where

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Speaker 1: we're past the peak, and that even if we look

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Speaker 1: at the OPEC and the oil discussions right now, some

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Speaker 1: people are talking about now more stable to lower levels

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Speaker 1: in in in in oil. That's gonna weigh on inflation.

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Speaker 1: The jobs data is is not as strong as we helped.

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Speaker 1: It's strong, it's it's still very very good. So what

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Speaker 1: the price action is effectively telling us is that they're

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Speaker 1: chopping off that right tail where things are going to

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Speaker 1: be great, but things just might be good going forward.

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Speaker 1: And we recogn eyes that it took a lot of

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Speaker 1: policy stimulus, It took a lot of fiscal stimulus, It

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Speaker 1: took a lot of work to get us to these levels.

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Speaker 1: Now that that now a lot of that stimulus is

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Speaker 1: starting to go away, or it's already well known and

417
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Speaker 1: priced into the markets, we need another catalyst to bring

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Speaker 1: us back towards higher yields. Now that catalyst needs to

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Speaker 1: be there is after everybody's cleaned up some of their positions,

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Speaker 1: and I think the underweights in the dollar, the underweights

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Speaker 1: and U S treasuries, this is still in the process

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Speaker 1: of being cleaned up. I don't think the trend towards

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Speaker 1: higher yield is over. I think that it's just gonna

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Speaker 1: be a lot slower, and it's going to be more

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Speaker 1: of a grind, and we're gonna have to see changes

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Speaker 1: in the data relative to your point, relative in the

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Speaker 1: actual positioning in the market. And it's been paying folks

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Speaker 1: commit to that right over the last coupital of ways,

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Speaker 1: Jim is gonna catch up, said Jim Karen and Mokan

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Speaker 1: Stanley Investment Management right now on your fear of delta

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Speaker 1: of a variant that came from India, And can you

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Speaker 1: imagine if there were variants from Afghanistan, Bangladesh, Ecuador, Guatemala, India, Ghana, Kenya,

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Speaker 1: Mozambique in Ethiopia and that would lead to the expertise

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Speaker 1: of bacti and Saudi of Johns Hopkins to say she's

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Speaker 1: Associate Professor of Emergency Medicine, doesn't describe it all her

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00:24:18,200 --> 00:24:23,919
Speaker 1: international epidemic study. Doctor, do we underestimate the delta variant?

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Speaker 1: If we're in Missouri, or for that matter, if we're

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Speaker 1: in Manhattan. Should we be afraid of these foreign variants? So,

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00:24:34,480 --> 00:24:37,240
Speaker 1: I think it's so much challenging to call them foreign

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00:24:37,320 --> 00:24:42,239
Speaker 1: variants variants of variants. It's just when they were first discovered, right,

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00:24:42,920 --> 00:24:47,240
Speaker 1: and variants are emerging everywhere. Should we be concerned about variants? Yes,

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00:24:47,680 --> 00:24:50,120
Speaker 1: And there is a higher likely of various emerging from

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00:24:50,400 --> 00:24:54,000
Speaker 1: countries that have lower vaccination rates or lower access to

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00:24:54,080 --> 00:24:57,720
Speaker 1: resources because they have a higher amount of virus um

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00:24:58,000 --> 00:25:01,280
Speaker 1: in circulation. And so should be worried. Until we have

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00:25:01,359 --> 00:25:04,920
Speaker 1: a global pandemic control, we will get new emerging variants

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00:25:05,640 --> 00:25:07,639
Speaker 1: here and abroad. Is that something the U should be

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00:25:07,640 --> 00:25:13,720
Speaker 1: concerned about given the vaccination levels we've already achieved. Yes, completely,

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00:25:13,840 --> 00:25:16,160
Speaker 1: So we have to look at our sister country across

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00:25:16,280 --> 00:25:19,879
Speaker 1: the pond, the United Kingdom. United Kingdom had similar vaccination

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00:25:20,000 --> 00:25:25,359
Speaker 1: rates to US around six sixty seven. Vaccination is extremely impressive.

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00:25:25,880 --> 00:25:29,440
Speaker 1: But despite that, we have seen consistently rising cases over

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Speaker 1: the last six weeks in the United Kingdom, cases almost

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00:25:32,720 --> 00:25:35,520
Speaker 1: doubling every single week I think right now, and not

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00:25:35,640 --> 00:25:37,879
Speaker 1: seeing that in the UK US, but there is a

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00:25:37,960 --> 00:25:40,639
Speaker 1: tipping point. Cases are on the up, so we should

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00:25:40,640 --> 00:25:43,080
Speaker 1: be wary. Cases are on the up. Let's use the

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Speaker 1: UK as a case study. Is there anything to worry

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00:25:45,440 --> 00:25:50,920
Speaker 1: about as far as hospitalizations and deaths are concerned? So

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00:25:51,000 --> 00:25:53,320
Speaker 1: what we have found is that countries that have higher

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00:25:53,400 --> 00:25:57,480
Speaker 1: vaccination rates and hospitalizations are lower because even though vaccinated

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00:25:57,520 --> 00:26:00,800
Speaker 1: people can get the delta variant, and the delta variant

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00:26:01,119 --> 00:26:05,200
Speaker 1: has been reported to be more dangerous, if you're vaccinated,

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00:26:05,480 --> 00:26:08,680
Speaker 1: your disease is likely to be less severe. Also, many

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00:26:08,760 --> 00:26:13,080
Speaker 1: countries have successfully vaccinated the elderly those are immune to compromise,

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Speaker 1: transplant patients, cancer patients, those are the highest risk of

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Speaker 1: severe complications and death, dr anxiety. This isn't totally unexpected.

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00:26:21,960 --> 00:26:25,080
Speaker 1: Even when we started down this path of vaccinations, there

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00:26:25,119 --> 00:26:27,720
Speaker 1: was a lot of talk about UH new variants popping

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00:26:27,800 --> 00:26:30,439
Speaker 1: up and the need potentially to reformulate some of these

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00:26:30,520 --> 00:26:33,480
Speaker 1: vaccines down the road. Here, what do we know about

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00:26:33,520 --> 00:26:38,719
Speaker 1: the process for doing that? So the vaccines are currently

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00:26:38,760 --> 00:26:43,200
Speaker 1: being constantly being evaluated. They're constantly trying to identify through

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00:26:43,240 --> 00:26:47,560
Speaker 1: genomic sequencing the mutations are making the vaccine more valiant

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00:26:47,960 --> 00:26:53,560
Speaker 1: and making sure that the vaccine m RNA matches those mutations. Um,

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00:26:53,680 --> 00:26:56,280
Speaker 1: it's an iterative process, but we know how to do

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00:26:56,400 --> 00:26:59,040
Speaker 1: this right. We do it every single year with the fluid,

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00:26:59,040 --> 00:27:02,440
Speaker 1: and every year we are prepared with a new flu vaccine.

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00:27:02,720 --> 00:27:05,320
Speaker 1: So it's not beyond the realms of our capabilities as

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00:27:05,320 --> 00:27:08,160
Speaker 1: a country. And are we at a stage now where

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00:27:08,240 --> 00:27:11,440
Speaker 1: we have to start thinking about uh these covid variants

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00:27:11,520 --> 00:27:14,280
Speaker 1: as sort of an annual shot that folks will need,

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00:27:14,400 --> 00:27:18,320
Speaker 1: presuming how they're willing to take them. I think it's

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00:27:18,440 --> 00:27:21,040
Speaker 1: likely to be honest, I think it's very likely that

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00:27:21,240 --> 00:27:23,240
Speaker 1: this is going to be something like the flu that

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00:27:23,359 --> 00:27:28,600
Speaker 1: sticks with us UM and that regular repetitive vaccinations are

487
00:27:28,640 --> 00:27:31,320
Speaker 1: going to be needed. Now flu is seasonal, which is

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00:27:31,359 --> 00:27:34,439
Speaker 1: where we have this whole annual shot um with COVID.

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00:27:34,520 --> 00:27:37,280
Speaker 1: I think it's uncertain wouldn't be an annual shot or

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00:27:37,400 --> 00:27:41,840
Speaker 1: just a booster shot as new variants emerged to your anxiety.

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00:27:41,920 --> 00:27:44,920
Speaker 1: If you were to parachute into Tokyo today and give

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00:27:45,040 --> 00:27:49,960
Speaker 1: counsel to a Beliyard government trying to do this ginormous event, Okay,

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00:27:50,000 --> 00:27:52,840
Speaker 1: there're gonna be no fans, let's say. But even with that,

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00:27:52,960 --> 00:27:56,560
Speaker 1: you've got many sports with multiple people involved, basketball, whatever,

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00:27:57,400 --> 00:28:00,879
Speaker 1: How do they do this given COVID? How do they

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Speaker 1: do this given the fears of variants like we're seeing

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00:28:04,080 --> 00:28:09,800
Speaker 1: now in Spain, Portugal and other places. So I think

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Speaker 1: if I was flying in personally, I'd be saying, why

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00:28:12,840 --> 00:28:15,960
Speaker 1: are we doing this? Right when your vaccination rates a

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00:28:16,080 --> 00:28:20,679
Speaker 1: less than You're putting your populace at risk by inviting

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00:28:20,960 --> 00:28:24,000
Speaker 1: individuals who maybe carrying the Delta B, which we've already

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00:28:24,000 --> 00:28:28,520
Speaker 1: seen in Tokyo UM with the Ugandan team, Why are

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00:28:28,560 --> 00:28:30,920
Speaker 1: we doing this? Why? Why is it important to have

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00:28:31,040 --> 00:28:34,080
Speaker 1: the Olympics. If you're going to have the Olympics, I

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00:28:34,280 --> 00:28:37,920
Speaker 1: think you would have to do universal mass mandates. I

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00:28:38,000 --> 00:28:41,280
Speaker 1: think you're going to have to restrict unvaccinated individuals from

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00:28:41,480 --> 00:28:44,600
Speaker 1: entering gaming arenas. I think you're going to have to

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00:28:44,800 --> 00:28:50,080
Speaker 1: have on site facilities for media isolation, quarantine if someone

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00:28:50,320 --> 00:28:54,600
Speaker 1: has symptoms or symptomatic, and then rapid quickly available testing

510
00:28:55,000 --> 00:28:57,960
Speaker 1: to be able to identify individuals who are symptomatic quickly

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Speaker 1: so they could self isolate. Doctor, get a catch shop.

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Speaker 1: Good to see you come back. St. Dr Bati The

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Speaker 1: Jones Helkins, Associate Professor Emergency Medicine. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from

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00:29:13,040 --> 00:29:16,440
Speaker 1: seven to ten am Eastern on Bloomberg Radio and on

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00:29:16,480 --> 00:29:20,760
Speaker 1: Bloomberg Television each day from six to nine am for

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00:29:21,040 --> 00:29:25,920
Speaker 1: insight from the best in economics, finance, investment, and international relations.

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00:29:26,440 --> 00:29:31,040
Speaker 1: And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

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00:29:31,240 --> 00:29:34,800
Speaker 1: Bloomberg dot com, and of course on the terminal. I'm

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00:29:34,880 --> 00:29:37,520
Speaker 1: Tom Keene and this is Bloomberg