Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm
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Speaker 1: search Bloomberg Global News. Well, it has certainly been top
Speaker 1: of mind for weeks, really months. Would J Powell get
Speaker 1: a second term as head of the US Fed? Well,
Speaker 1: no more guessing or wondering. We know President Biden preserving
Speaker 1: continuity at the Fed by selecting J. Powell for that
Speaker 1: second term as chair and elevating Lalle Brainer to vice chair.
Speaker 1: As the US Central Bank rapples with the fastest inflation
Speaker 1: in three decades and really lingering effects of COVID nineteen,
Speaker 1: what's going on in Europe? A reminder that we are
Speaker 1: far from being out of this pandemic let's get to
Speaker 1: it with Bloomberg News International Economics and Policy correspondent Michael
Speaker 1: McKey with us in our interactive broker studio here in
Speaker 1: New York. Bloomberg Economics chief US economist down along on
Speaker 1: the phone from the nation's capital. Mike, let's kick it
Speaker 1: off with you. Um, I can't say I'm not surprised.
Speaker 1: What is the important takeaway of the news from the
Speaker 1: president today and now who is at the FED? I
Speaker 1: think you take away a couple of things. One is
Speaker 1: that the President has gone back to the old way
Speaker 1: of nominating FED chairs, keeping somebody in office who is
Speaker 1: considered to have done a good job, not just by
Speaker 1: politicians but by Wall Street, even if they're a member
Speaker 1: of the other party. Back to the non politicization of
Speaker 1: the FED. Another thing that you can say is a
Speaker 1: bit of a surprise was Lele brainer not getting the
Speaker 1: supervisory job. But that leaves open that position for the
Speaker 1: President to perhaps appoint someone even stricter on regulation. Make
Speaker 1: the Elizabeth Warren wing of the Democratic Party happy with
Speaker 1: that nomination. We should get that in a couple of weeks. Overall,
Speaker 1: it means continuity. It means that Wall Street knows what
Speaker 1: the policy will be going into next year. It's not
Speaker 1: a question of what will be done, it's a question
Speaker 1: of when it will be done, and that will depend
Speaker 1: on the data, and so they can start making some
Speaker 1: pricing plans as they go forward. Bloomberg Chief US Economist
Speaker 1: and A. Wong You're a really fabulous piece of the
Speaker 1: weekend about how a Brainard FED would differ from a
Speaker 1: pal FED. In the end, it's academic, right, because she's
Speaker 1: she's the vice chair. But it was interesting she opened
Speaker 1: her remarks on stage with the words bringing inflation down
Speaker 1: and is it not academic because she's got a really
Speaker 1: key role now at the FED. Yeah, a trick question,
Speaker 1: but but I mean once you're read on her policy
Speaker 1: going forward. Right. So in my peace I did talk
Speaker 1: about how even though Brainards seemed to be more delpish,
Speaker 1: but she's at the core of who she is is
Speaker 1: a very data dependent and practical policy maker. Her experience
Speaker 1: in the past ten years in has been reacting to
Speaker 1: these fire drills, these these financial crisis, first with the
Speaker 1: European softeign debt crisis and then the child slow down
Speaker 1: in two and a paper tantrum. And so I think
Speaker 1: her what she is is that she's gonna look at
Speaker 1: the data and if the data is showing that. And
Speaker 1: she actually laid out three very clear metrics of when
Speaker 1: she will get worried about inflation. One it is uh
Speaker 1: if the rest hole part that she's the's higher rents,
Speaker 1: that's happening too. If if she sees that inflation is
Speaker 1: on anchoring, such as if there's this sign of wage
Speaker 1: price firal, uh, then she'd be alignment. And we don't
Speaker 1: see evidence of that happening yet. And we're playing to
Speaker 1: write a deeper piece about how the set thinks about
Speaker 1: wage press spiral and um and and it's and just
Speaker 1: the third if there's a more COVID struckdowns going forward.
Speaker 1: So so anyway, so um, yeah, we think that you
Speaker 1: will be data independent. The data depends well, I have
Speaker 1: to say, and I'm going to jump in because my
Speaker 1: kids sounds like, wait, I've heard that data depending phrase
Speaker 1: a lot. It sounds like in terms of the kinds
Speaker 1: of conversations that we're gonna have at the FED are
Speaker 1: no different from what we were having before. Yeah, And
Speaker 1: that was kind of the point of the nomination today
Speaker 1: that we know what we're getting with j Powell, we
Speaker 1: know what we're getting with Leo Brainer and we should
Speaker 1: add that the vice share almost never votes against the chair,
Speaker 1: so you can expect them to be not only because
Speaker 1: they think alike, but because of the positions. They'll be
Speaker 1: in lockstep going forward in terms of what to do.
Speaker 1: But as Anna says, it's a question of, uh, what
Speaker 1: happens with the pandemic, whether or not the inflation numbers
Speaker 1: that we get start to roll over, and there's some
Speaker 1: evidence that some of them are, but we're still a
Speaker 1: long way from knowing uh. And then it's a question
Speaker 1: of do they at the December meeting decide to taper
Speaker 1: more quickly, giving them the tionality of being able to
Speaker 1: tighten sooner. I gotta say the thing that jumped out
Speaker 1: to me, and I'm gonna put this to both Mike
Speaker 1: and Anna. Anna. Maybe the first is that I felt
Speaker 1: like the idea of an independent FED was woven through everything,
Speaker 1: and if we saw anybody be independent, we saw j Powell,
Speaker 1: who was appointed by President Trump but nonetheless stand up
Speaker 1: to him during his tenure. Um there is something to
Speaker 1: be said by that and the political win with that. Anna, Yes,
Speaker 1: for sure, I think this is a definitely a win
Speaker 1: for Biden, at least in the eyes of economic history
Speaker 1: books for guarding the institutional independence of the said. Right.
Speaker 1: But you know, sorry, go ahead please okay? Um. You
Speaker 1: know one point that Mike mentioned about, um, you know,
Speaker 1: vice to surprise a layout being being appointed as vice chair.
Speaker 1: I think that there's also something there because the vice
Speaker 1: chair pos um, for example, Rich Clarida, how he made
Speaker 1: of this pro He was basically the architect, the intellectual
Speaker 1: architect behind this new average inflation targeting framework. Right. And
Speaker 1: the next policy framework review could be as early as
Speaker 1: end of three. Right. And perhaps Brainard, who probably is
Speaker 1: the one who who chose to who preferred the spice
Speaker 1: chair post rather than the supervision post. Maybe she's thinking
Speaker 1: that she wants to leave a legacy up said and
Speaker 1: in the next policy review she could push for a
Speaker 1: climate change creates digital currencies and now and we gotta run,
Speaker 1: Thank you so much. Bloomberg Economics Chief US economist down
Speaker 1: along along with Bloomberg News International Economics and Policy correspondent
Speaker 1: Mike McKee. This is Bloomberg Business Week with Carol Masser
Speaker 1: and Bloomberg Quick Takes. Tim Stinovic from Bloomberg Radio back
Speaker 1: with us. Dr Ian laws Pader, Clinical Professor of Medicine
Speaker 1: at n y U Landgown. He's with us on the
Speaker 1: phone in New York City. Ian, good to have you here.
Speaker 1: With Ed Ludlow, one of my colleagues here at Bloomberg.
Speaker 1: What are you seeing when it comes to COVID, Because
Speaker 1: I think the fear out there, safe to say, is
Speaker 1: that what's happening in Europe is going to happen here
Speaker 1: in the United States. I've seen this movie before, Yes,
Speaker 1: for sure, High Carol and Ed. Hope everyone is safe
Speaker 1: and doing well. You know. I think what's happening in
Speaker 1: Europe with their fourth wave really relates to a number
Speaker 1: of things. One is relatively low vaccination rate, some countries
Speaker 1: only sixty or so for one vaccine, other countries Italy
Speaker 1: higher and Portugal higher, so there's some vaccine hesitancy. There's
Speaker 1: also breakthrough infection, so people who have had the two
Speaker 1: as we know, after six months or eight months with
Speaker 1: the alpha vaccines, Delta is breaking through. In addition, those
Speaker 1: who are lucky enough to get the third booster. We
Speaker 1: really only have data for about thirty days or so
Speaker 1: after that, and it does seem fairly effective. But we
Speaker 1: don't know, you know months later how effective it is,
Speaker 1: and so in part by doing all of these lockdowns,
Speaker 1: it's really somewhat unproven, right, So you're lacking to people,
Speaker 1: some of whom have been already infected. It's not as
Speaker 1: if you're doing it for the first time. And lastly,
Speaker 1: open borders, I mean you've got people who who are
Speaker 1: coming and going and people are not really being tested regularly.
Speaker 1: So I think there are a number of things that
Speaker 1: are contributing to what's happening in Europe. And I think
Speaker 1: in the US are numbers are are stabilizing. I really
Speaker 1: there may be a little surge after Thanksgiving, but I
Speaker 1: think we are looking at a few more months. Um,
Speaker 1: but I don't think much more than that at this point,
Speaker 1: assuming no mutations occur. Let me ask you real quickly,
Speaker 1: because I think you know Jim and I have talked
Speaker 1: to you about this a lot, but it's on Ed's mind,
Speaker 1: Like in terms of getting a booster. If you're six
Speaker 1: months or in uh sooner, if you've gotten a J
Speaker 1: and J investor invest in vaccine, excuse me, if you
Speaker 1: haven't gotten your booster, go get it right, Yeah, no
Speaker 1: question right, six months out all adults are now approved
Speaker 1: for for MADERNA and viser. Some people are getting some
Speaker 1: reactions to it. Certainly very reasonable to do it, and
Speaker 1: J and J is a shorter interval, and any of
Speaker 1: the vaccines are fined for J and J as a booster,
Speaker 1: and that we think can be helpful. The data is
Speaker 1: fascinating you, right, because in Germany there are fifteen million
Speaker 1: holdouts right who have not been vaccinated at all, and
Speaker 1: the country is kind of really ramped up its vaccination
Speaker 1: program that all the doses that are being given out
Speaker 1: are boosters. So how do they fix the remainder? What
Speaker 1: is the solution here? Is it a mandate making a
Speaker 1: vaccine compulsory, as they've done in Austria. Really, you know,
Speaker 1: the approach to any pandemic is prevention with vaccines, testing.
Speaker 1: People should be tested nasal swabs or spit test, antigen
Speaker 1: and treatment and we do have some treatment that also
Speaker 1: can be preventative. In other words, there are monoclonal antibody
Speaker 1: treatments that are very effective if given within seven to
Speaker 1: ten days. They're also monoclonal shy. You know, we've been
Speaker 1: dealing with this two years and we should have been
Speaker 1: doing more sensive studies on ways to treat and not
Speaker 1: just rely on vaccines, because obviously not everyone will get
Speaker 1: a vaccine, so we do have some options. These are
Speaker 1: not cheap, of course, the monoclonal antibodies UM and I
Speaker 1: think you need a multi pronged approach. Just taking one
Speaker 1: approach like vaccine or lockdown is one sized as now
Speaker 1: set all. You know, we really should have several approaches,
Speaker 1: all right, So I want to know as Ed is
Speaker 1: in London, he's not normally there, He's normally in San Francisco,
Speaker 1: so he's doing some traveling. People are traveling. I got
Speaker 1: an airplane, as you know, for the first time in October,
Speaker 1: I was at the UBS Arena. We did a live broadcast.
Speaker 1: There are lots of people, workers, professionals, you name it,
Speaker 1: everybody walking around for the most part without masks. What's
Speaker 1: your advice though, as we continue to move forward when
Speaker 1: it comes to mask wearing, you know, unfortunately the vaccines
Speaker 1: are not all perfect, including boosters will help masks in
Speaker 1: unless they're in ninety are not perfect. If you're flying
Speaker 1: on a crowded airplane and they're not testing people beforehand,
Speaker 1: that's all a bit of a risk, stay in shape,
Speaker 1: take some botamin D, get your levels up. Um. Certainly
Speaker 1: get tested if you feel it's sick at all before
Speaker 1: and certainly after the flight. You know, Fortunately we were
Speaker 1: most people, not all are, are vaccinated, and I think
Speaker 1: it's a calculated risk. But I think we have all
Speaker 1: of this though. This all sounds like common sense stuff
Speaker 1: if we is the biggest takeaway from this global pandemic
Speaker 1: just the prize the pandemic. We weren't that hygienic, you know,
Speaker 1: none of us have been washing our hands properly. Well,
Speaker 1: I'm just asking, is this the reality from here on in? No.
Speaker 1: I wish it was as simple as just washing hands
Speaker 1: and coughing and masks. I think all of those help.
Speaker 1: This is what pandemics do. They not everyone is vaccinated
Speaker 1: at the same time. It spreads around the world. It
Speaker 1: usually takes three years, if you're going by the Spanish
Speaker 1: flu the H one N one. And I think we're
Speaker 1: a little naive to think that we could have controlled
Speaker 1: this perfectly unless we had been more aggressive very early
Speaker 1: on and developed treatment more early on, and got everyone
Speaker 1: vaccinated early on. So once the cats out of the bag,
Speaker 1: we're dealing with. Really, what are natural consequences, and I
Speaker 1: think we like to think, oh, if we lock down,
Speaker 1: or if we do this, or the mask is the
Speaker 1: right approach. I think they're all helpful, but it's not
Speaker 1: going to solve the problem. I'm afraid, all right, Gonna
Speaker 1: leave it there. Um Ian, have a wonderful and safe
Speaker 1: Thanksgiving and so good to check in with you. We'll
Speaker 1: talk to you next week. Dr Ian last beat our
Speaker 1: clinical professor of Medicine at n y U lend Going
Speaker 1: Medical Center. On the phone in New York City. You're
Speaker 1: listening to Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. So this week's
Speaker 1: special double issue of Bloomberg Business Week magazine. It's out
Speaker 1: on newsstands, online at Bloomberg dot com, bus this Week
Speaker 1: dot com, and of course on the Bloomberg terminal. It's
Speaker 1: an inflation takeover. Several stories looking at the ugly green
Speaker 1: monster from several different angles, including whether FED Chief J.
Speaker 1: Powell need to take a page from the playbook of
Speaker 1: one iconic fedhead and the tough decision that he had
Speaker 1: to make. So let's get to this story. The person
Speaker 1: who wrote it is Bloomberg News Markets editor Joe wisn't all.
Speaker 1: He's in our Bloomberg Interactive Broker studio joining Ed Ludlow
Speaker 1: and me. Hey, Joe, I love this story. Thank you.
Speaker 1: I love the whole inflation takeover because it's like inflation
Speaker 1: is back. But do we need to be so freaked
Speaker 1: out about it? Tell us about Paul Vulker and what
Speaker 1: he had to do back to his tenure. So the
Speaker 1: fan has for a long time had this dual mandate
Speaker 1: of you know, stable prices and full employment, and inflation
Speaker 1: in the late seventies early eighties was perceived to be
Speaker 1: getting to out of control, and Volkers remembered essentially for
Speaker 1: having the uh temerity to induce a recession and millions
Speaker 1: of people got out of work. But that broke the
Speaker 1: back of inflation, and he raised rates very aggressively until
Speaker 1: it meaning until it induced a recession, and in the
Speaker 1: dou show that you know, that kind of put an
Speaker 1: end to inflation, and then we had this sort of
Speaker 1: multi decade period of pretty stable prices since then, the question,
Speaker 1: you know, now we're coming off of like ten years
Speaker 1: of underemployment of the Great Financial Crisis, chronic underemployment. We're
Speaker 1: still five million UH at least maybe six or seven
Speaker 1: million underemployed. And so the idea in my piece was
Speaker 1: like maybe to pull a Vulcar and is to ignore
Speaker 1: the inflation side of the mandate for now, the opposite
Speaker 1: of what Vulker did, and make the commitment on jobs,
Speaker 1: which polosed on multiple times, and make the bet that
Speaker 1: inflation is transitory, as the Fed more or less still
Speaker 1: believed the time is interesting. They're right because pal Is
Speaker 1: stressed a commitment to maximum employment not just for weeks
Speaker 1: but for months, and then you've got that really hot
Speaker 1: CPI print for October. You know, I wasn't around in
Speaker 1: the seventies. I wasn't around either inflation right exactly. But
Speaker 1: I mean, did that inflation print change things for j
Speaker 1: Pound the Fed? It was? I mean, it definitely changed
Speaker 1: the political conversation about inflation. And I think that, you know,
Speaker 1: there were a lot of people. That number rattled the
Speaker 1: White House clearly, and since then we've seen Biden talking
Speaker 1: more about inflation and even trying to pitch some of
Speaker 1: his fiscal plans is inflation fighting. I'm not so sure.
Speaker 1: I think most people don't really buy that completely regardless.
Speaker 1: That's how much a jarred the politics. I got a
Speaker 1: lot of people to say the transitory is a myth, etcetera.
Speaker 1: And so it's certainly if nothing else ratches up the heat,
Speaker 1: um powl, It's like, all right, do you really have
Speaker 1: the like, how how convinced are you Jay still that
Speaker 1: inflation is transitory? And I think the heat has now
Speaker 1: been turned on the feed of hotter. So Joe, what's
Speaker 1: the economic like? I'm thinking, Okay, I'm bringing up my
Speaker 1: economic books and trying to understand. So if he continues
Speaker 1: to keep rates low, is that going to then encourage
Speaker 1: more people to come back to the workforce because the
Speaker 1: economic momentum will continue. I think the way to think
Speaker 1: about it perhaps is not that low rates will encourage
Speaker 1: people to come back per se, because look, people point out,
Speaker 1: it's like you cover rates is zero, That doesn't suddenly
Speaker 1: make economic growth happen. What I think you can say
Speaker 1: is the opposite, that for rate hikes to have an
Speaker 1: effect on inflation, you really wouldn't need to go hard.
Speaker 1: That if you just hike rates twenty five basis points
Speaker 1: fifty basis points, you're not doing too much, and so
Speaker 1: I think the argument is more that, Okay, you want
Speaker 1: the FED to take care of inflation. This is what
Speaker 1: it's gotta be. We're not it's gotta be a real
Speaker 1: series of hard hikes. And is that something you want
Speaker 1: to do with a five million employment hole? Do you
Speaker 1: really want to go down that road of slowing demand?
Speaker 1: And there's so many people still who want to come
Speaker 1: back into the workforce once there's you know, pandemic and
Speaker 1: other just live destructions come to an end. We're still
Speaker 1: in the middle of a pandemic. Joe. It's an unfair question,
Speaker 1: but it'd be remissing me not to ask about the
Speaker 1: new duo, you know, a brain Odd Pal Combo. Yeah,
Speaker 1: how would that have changed how you've gone about writing
Speaker 1: that page? You know? I think, to be honest, I
Speaker 1: don't think there was as much daylight on monetary policy
Speaker 1: as some people like to imagine. I mean, there was
Speaker 1: this perception of like BRAINERD having been more duvish. I
Speaker 1: don't really think that's. Yeah. I don't really think that's
Speaker 1: basin all that much. I think more or less of
Speaker 1: you look at their track records, Uh, they're probably more
Speaker 1: in line. I suspect that BRAINERD believes a little bit more,
Speaker 1: and perhaps some of the FED supervisory roles perhaps believe
Speaker 1: that the FED could take on more climate responsibilities, although
Speaker 1: German police talked about that recently too. But you know,
Speaker 1: from the perspective of the markets, from the perspective of
Speaker 1: like gauging, with the policy path of rate hikes, I
Speaker 1: would be surprised if either one had a sort of
Speaker 1: like materially uh different vision in mind about the existing trajectory.
Speaker 1: One thing I wonder too, is that if I think
Speaker 1: about the economy as you as you kicked it off
Speaker 1: with Joe, is the idea that you know, rates were
Speaker 1: so low for so long like this was you know,
Speaker 1: we've got a generation easily at people investors in Wall
Speaker 1: Street who have never seen a high rate environment. So
Speaker 1: was that the true picture or is it all of
Speaker 1: a sudden the bump that we're seeing kind of a
Speaker 1: catch up from all of those years of low inflation,
Speaker 1: Like what's the what's the true picture? I guess is
Speaker 1: my question? You know, I would say two things. I mean,
Speaker 1: one is, you know, we did have nine hikes uh
Speaker 1: started in and the market absorbed them a lot better
Speaker 1: than I think a lot of people would guess, because
Speaker 1: I remember a lot of people like, oh, this market
Speaker 1: is going to be dependent on ZERP forever, and that
Speaker 1: didn't turn out to be the case. It turned out
Speaker 1: that started with Yelling and then into Powell there were
Speaker 1: a series of rate hikes. Then of course, you know,
Speaker 1: we had the slowdown in so they got reversed in
Speaker 1: then of course the pandemic and that erased everything. But
Speaker 1: the market then showed an ability to withstand rate hikes. Look,
Speaker 1: I think that from a macro perspective, and Biden said
Speaker 1: this today. He's like, you know, we should pursue it
Speaker 1: an economy where and I don't know the exact words,
Speaker 1: but he said, we're in lawyers are fighting over workers
Speaker 1: rather than workers fighting for jobs. And if that were
Speaker 1: to be sustained, I mean we kind of see it
Speaker 1: these days, but if that were to be sustained for
Speaker 1: any like period of time, that would be a very
Speaker 1: different regime from what any of us are used to
Speaker 1: in recent decades. It's a really good point. Very different economy,
Speaker 1: very different. I mean, this is just ignorance in my path.
Speaker 1: But is there a policy path where they can meet
Speaker 1: the Jewel mandate? Surely one as based on. This has
Speaker 1: to to suffer the expense of the other for the
Speaker 1: short term. Yeah, I mean right and right now you
Speaker 1: would say, uh, you know, if you just looked into isolation,
Speaker 1: you'd say unemployment rate at four and a half percent
Speaker 1: and inflation six point two. They're missing on the inflation side.
Speaker 1: The counter argument is that, look, some of the big
Speaker 1: some big drivers of inflation really do seem to be
Speaker 1: IDIOSYNCREDI or transitory. We know that used cars is still
Speaker 1: a really big factor even after all this time, and
Speaker 1: then there's good reason to think that raising rates doesn't
Speaker 1: solve that. And are they hitting on the b ployment side?
Speaker 1: Not clear of that either, because although unemployment is low,
Speaker 1: numerous measures are still a long way to go. It's
Speaker 1: easy to imagine though, close to full employment in nine
Speaker 1: months and are an inflation starting to turn the corner
Speaker 1: and the dual mandate maybe ahead. So listen. The drop
Speaker 1: off in the economy then the big bounce back so
Speaker 1: quickly has reminded you how quickly things can change depending
Speaker 1: on what's going on. UM Joe wisn'tal it's a must read,
Speaker 1: Thank you so much. He is Digital News executive editor
Speaker 1: here at Bloomberg News. This is Bloomberg Business Week with
Speaker 1: Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.
Speaker 1: We want to talk about the Bloomberg New Economy Form,
Speaker 1: which hosted its annual form in person in Singapore last week.
Speaker 1: The event is, you know, uh, from the many interviews
Speaker 1: and stories that we highlighted on air last week, is
Speaker 1: all about illuminating the challenges facing the new economy and
Speaker 1: really getting to the solutions and the voices who are
Speaker 1: in that journey. Here with a look back at the
Speaker 1: week some of the major themes and newsmakers is Bloomberg
Speaker 1: New Economy Editorial Director Andy Brown joins us in our
Speaker 1: Bloomberg Interactive Broker Studio. First of all, congratulations you pulled
Speaker 1: it off in person in Singapore. Tell us about kind
Speaker 1: of the mood of the event. Well, thanks, Carol, It
Speaker 1: was an incredible event. We We got three hundred delegates,
Speaker 1: many of them CEOs, government ministers, entrepreneurs, scientists, to fly
Speaker 1: halfway around the world to Singapore to start working on
Speaker 1: big problems relating to climate and pandemic control and trade.
Speaker 1: It just felt like this was the first really big
Speaker 1: gathering of its kind since the start of COVID. And
Speaker 1: what gave it this added urgency was that it was
Speaker 1: a few days after the end of COP twenties six
Speaker 1: in Glasgow, and so you know, the CEO s and
Speaker 1: Mike Bloomberg of course, was there ready to think about
Speaker 1: the business end of climate that we we had all
Speaker 1: these high level commitments pledges in Glasgow. Okay, how do
Speaker 1: we turn those now into real opportunities? How do we
Speaker 1: deploy the trillions of dollars that's necessary to reinvent our
Speaker 1: energy systems and transport systems. And so we had CEOs, bankers, financiers,
Speaker 1: government ministers sitting in workshops talking about just that. Where
Speaker 1: people frustrated after COP I wanted to ask that it
Speaker 1: was almost a sort of follow on event because they
Speaker 1: happened in quick succession. Did they just pick up the
Speaker 1: discussion from Glasgow and bring it to Singapore or was
Speaker 1: there a change of thing? Well, Asia was the place
Speaker 1: to be because as you know, Asia is where you
Speaker 1: know the climate agenda is going to be made or broken. Um.
Speaker 1: China of course is by far the world's biggest emittered,
Speaker 1: bigger than the next four largest combined, and the fastest
Speaker 1: growing emissions are from the newly industrializing countries in Asia,
Speaker 1: so getting climate under control, getting emissions under control in
Speaker 1: Asia is absolutely critical. And a lot of the conversations
Speaker 1: that we were having there was around how do we provide, UM,
Speaker 1: the infrastructure, the energy systems, UM, and how do we
Speaker 1: supply supply infrastructure to work on mitigation and adaptation? You know,
Speaker 1: I mean really basic things like you know, hurricane proof
Speaker 1: roofs on hospitals. How do we provide the funding to
Speaker 1: make all that happen well? And what's interesting too? And
Speaker 1: I feel like right out of the gate though, UM,
Speaker 1: with the first comments, the first UH speeches, front and
Speaker 1: center was the relationship between US and China. Yes, UM,
Speaker 1: that was the big one. And as always UM, Henry
Speaker 1: Kissinger is a sort of has why wise counsel on
Speaker 1: that to two years ago in two thousand nineteen, when
Speaker 1: we held the New Economy Forum in Beijing, he warned
Speaker 1: that we were in the foothills of a new Cold war.
Speaker 1: That was a year after then President Donald Trump had
Speaker 1: launched his tariff war on China last year. UM. It
Speaker 1: was a virtual event, and he was asked by John
Speaker 1: Michael Thwaite, our editor in chief whether we had progressed
Speaker 1: through the footholds of the foothills and whether we were
Speaker 1: in in the mountains. He said, yes, we're in the
Speaker 1: high the high mounting passes. This was last year. This
Speaker 1: year John was talking to him again, interviewing him on
Speaker 1: stage and said, well, where are we now? And he said, well,
Speaker 1: you know, we're we're through the passes and we're at
Speaker 1: the edge of a precipice. And I think there was
Speaker 1: a real sense among a lot of the delegates that
Speaker 1: we're in a very very dangerous place now between the
Speaker 1: US and China. What specifically, and I wonder if it's
Speaker 1: there weren't concerned about some kind of military acts at
Speaker 1: this point involving with Taiwan. What is it specifically that
Speaker 1: they see or is it trade? Is it business? Well,
Speaker 1: I think it's first of all, there there is no dialogue.
Speaker 1: I mean, you know, all of the platforms in which
Speaker 1: officials from the two sides would get together. There was
Speaker 1: a strategic economic dialogue that Hank Poulson had helped set up,
Speaker 1: UM had set up, and all all all kinds of
Speaker 1: of interactions academics, journalistic and so on. I mean, well,
Speaker 1: all this, all this is now stalling out, so there's
Speaker 1: no real communication between the two sides. I mean, Henry
Speaker 1: Kissinger had talked about the Cold War, but in some
Speaker 1: ways this is much more dangerous than the Cold War.
Speaker 1: I mean, in the Cold War, there were rules of
Speaker 1: the road. What would happen if you have an accident
Speaker 1: at sea or in the air. There is nothing now
Speaker 1: and and you know this is why Joe Biden goes
Speaker 1: into his meeting with with President Jim Being said, we've
Speaker 1: got to put guard rails around. Did anybody think that
Speaker 1: was significant, that virtual meeting? Yes? Um? And I think
Speaker 1: Kissinger saw this as being significant that um. I mean,
Speaker 1: he had talked about being at the Precipice, and I
Speaker 1: think the sense was that he felt that that meeting
Speaker 1: had started to take the two sides back from from
Speaker 1: the Precipice. I mean, the hope is not that you
Speaker 1: know that the two sides are going to make up
Speaker 1: or anything remotely like that, but that we've reached a
Speaker 1: sort of a rock bottom. I mean, there was there
Speaker 1: were very low expectations coming out of it, but we've
Speaker 1: seen small, but I think relative reasonably significant improvements and
Speaker 1: concrete results coming out of it. For instance, restoring jentless visas. Um.
Speaker 1: That was that was That's that's important, UM. More important
Speaker 1: and agreement for the two militaries to start talking. That's important.
Speaker 1: I mean, China has is in the throes of rapid
Speaker 1: nuclear expansion. Um. You know over the summer stunned the
Speaker 1: Pentagon with this hypersonic nuclear capable missile. A lot happening
Speaker 1: on the military front. Just got about twenty five seconds.
Speaker 1: You have a favorite conversation and I'm not able to
Speaker 1: even ask you that just quickly. Yeah, the last day
Speaker 1: was really interesting. We were talking about great power competition
Speaker 1: and how small a country is are going to line
Speaker 1: up this and the sense in Asian countries as we
Speaker 1: really don't want to choose. Yes, your our friend, United States,
Speaker 1: your ally, but you know what, China is our biggest
Speaker 1: trading partner bottom line. UM. Great conversations, Andy, and I
Speaker 1: know we scratched the surface, um, but thank you so
Speaker 1: much for breaking it down. Andy Brown, Editorial director of
Speaker 1: Bloomberg New Economy. You could sign up for the New
Speaker 1: Economy daily newsletter at bloomberg dot com slash New hyphen Economy,
Speaker 1: and you can also go to Bloomberg and search on
Speaker 1: New economy. To listen to those conversations. You're listening to
Speaker 1: Bloomberg Radio. You're listening to Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio
Speaker 1: talk about a possible Monster combination. We're talking about that
Speaker 1: of Monster Beverage. I know I had to do it,
Speaker 1: don't judge me. I know, well, Monster, but Beverage we
Speaker 1: know them as of course the maker of energy drinks,
Speaker 1: perhaps mixing it up in the beverage role by joining
Speaker 1: forces with Corona Brewer Constellation brands. Monster to be exploring
Speaker 1: such a combination between the two, according to those familiar
Speaker 1: with the matter. So let's get into it. Monster. By
Speaker 1: the way, that stock is up about one and a
Speaker 1: half percent, And let me pull up Constellation if I may,
Speaker 1: and just get a quick check on what that stocks
Speaker 1: doing in today's trade. It is down about four tens
Speaker 1: of a percent. Ken Schay is tracking this. He's Bloomberg
Speaker 1: Intelligence Senior analyst for Global Beverages to bacco On Cannabis.
Speaker 1: He's with us on the phone in New Jersey. Hey, Ken,
Speaker 1: good to have you here with Ed and myself. So
Speaker 1: is this likely? Hi? Caroline Hey and it um. You know,
Speaker 1: it doesn't make uh, it doesn't. It doesn't surprise me
Speaker 1: that these firms will be chatting. You know. They all
Speaker 1: have different needs in terms of growth platforms. Constellation is
Speaker 1: looking for more diversification from its beer strength. It wants
Speaker 1: to get into soft drinks, low alcohol refreshers as I
Speaker 1: see it um, and it also wants to getting to
Speaker 1: non US markets. It's it's by and large a US company.
Speaker 1: Monster is very narrowly focused on the energy market, which
Speaker 1: is becoming more and more competitive. Yet it had a
Speaker 1: great growth run, but the markets going forward are going
Speaker 1: to get tougher. PepsiCo is you know, really setting its
Speaker 1: sights on this market, and others are, and then Coole
Speaker 1: is sitting in the background with a nineteen percent stake
Speaker 1: a Monster it could be a player here too, so
Speaker 1: and it has needs also to diversify from soft drinks.
Speaker 1: So all these guys need something to grow, and I
Speaker 1: think they can get assistance from another. It's the devil's
Speaker 1: in the details, though. We don't know where this is
Speaker 1: going to go and how they're going to figure it out. Well,
Speaker 1: we all need something, whether it's a high caffeine caffeine
Speaker 1: beverage or an alcoholic beverage at the end of the day.
Speaker 1: But you think about the mix of those two. The
Speaker 1: regulators what I was trying to say about this, won't
Speaker 1: they The regulators have really pushed back hard on smaller
Speaker 1: players who try to mix alcohol and caffeine, and that's
Speaker 1: kind of a no no in many markets. And so
Speaker 1: I don't think you know that's and Ed's thinking, yeah,
Speaker 1: it's kind of a no note to mix anyway. Yeah,
Speaker 1: I mean, but but I think beyond that though, this
Speaker 1: is really I mean, it could make sense as a
Speaker 1: joint venture between Monster and Constellation. As I mentioned, they
Speaker 1: can both help each other out. Constellation has try and
Speaker 1: hard to get into the hard celterer market. Uh, and
Speaker 1: it hasn't really worked out well for them. Monster has
Speaker 1: a strength perhaps there um Monster would like to consider it.
Speaker 1: It's set in the past, it was consider CBD beverages. Well,
Speaker 1: Constellations got a big steak in canopy growth. So there's
Speaker 1: some things they could they could do for each other.
Speaker 1: What about I mean, there's some interesting relationships. Uh. And
Speaker 1: you pointed out and or Ed Hammond points it out, Uh,
Speaker 1: in our story that's on the Bloomberg about Monster having
Speaker 1: a relationship with Coca Cola that could be tricky. And
Speaker 1: then you've also got any transaction with Constellation were required
Speaker 1: the support of the Sands family, which has built the
Speaker 1: company into that global beverages player that it is today.
Speaker 1: How does that complicate those two aspects. Well, that's certainly
Speaker 1: going to be a roadblock in terms of you know,
Speaker 1: UM needing their okay to do anything. UM. Having said that,
Speaker 1: the Constellation, to their credit, has been pretty pretty risk
Speaker 1: has been a risk taker over the last few years.
Speaker 1: I mean, just think about the cannabis investment alone, canopy growth.
Speaker 1: UM that they've been kind of a lone wolf there
Speaker 1: in that approach hasn't worked out for them yet, but
Speaker 1: I think over time it very well could. Cocacola with
Speaker 1: a twenty with a nineteen percent stake uh in in Monster,
Speaker 1: it's probably kicking itself that it just didn't buy it
Speaker 1: years ago. It's kind of ran from it. But now
Speaker 1: it's massive though, right like this would be this would
Speaker 1: be a mega deal, Ken, is what I was saying.
Speaker 1: You know, these are both forty billion dollar plus companies
Speaker 1: and I wonder, like how much of this is the
Speaker 1: experience of one supply chain disruption, the ability to maneuver
Speaker 1: around that. These guys just looking for scale. You know,
Speaker 1: it's a good question. I'm not really sure. I think
Speaker 1: this is what it sounds to me like a more
Speaker 1: strategic venture into what they call white space meeting markets
Speaker 1: that they're under serving as opposed to UM, you know,
Speaker 1: riding through some cyclical pressure like uh, you know, supply
Speaker 1: chain UM. You know, that's kind of a cost of
Speaker 1: doing business. But but I think that UM they really
Speaker 1: are looking for creating new products together UM and and
Speaker 1: Coke is going to be more than happy to have
Speaker 1: an indirect exposure to whether whatever monster and consolation you know,
Speaker 1: conjure up uh, Coke will only benefit again given a
Speaker 1: sequity staken monster. Well, hey, you know what I'm thinking
Speaker 1: Ken too for the investors that are listening in the
Speaker 1: Bloomberg audience that's out there on radio and on YouTube
Speaker 1: right now. So when it comes to the beverage industry,
Speaker 1: I mean, Coke has been phenomenal and kind of you know,
Speaker 1: creating partnerships and going after lots of different brands. I mean,
Speaker 1: what will be the model going forward will will be
Speaker 1: an M and A one an acquisition one or will
Speaker 1: it be a joint venture or partnership one? And just
Speaker 1: got about thirty seconds. I think it's going to end
Speaker 1: up a joint venture. I don't see these two companies merging.
Speaker 1: There's just too many dissimilar elements. I don't see a
Speaker 1: lot of synergies from a cost point of view. But
Speaker 1: I think they can certainly help each other from a
Speaker 1: joint venture point of view, and I think Coca Cola
Speaker 1: can participate to a limited extent also helping them both.
Speaker 1: All right, got a beverage of choice coming ahead of Thanksgiving?
Speaker 1: Mr Shay, Oh, I love my beer guy. Yeah, oh yeah,
Speaker 1: that was easy. That was easy. And got a beverage
Speaker 1: of choice ahead of Thanksgiving? Yeah, well, flats room temperature
Speaker 1: English beer. That's what I'm enjoying this. All right, we're
Speaker 1: gonna leave it there. Can say thank you so much.
Speaker 1: Senior analysts for Global Beverages, tobacco and Cannabis at Bloomberg Intelligence.
Speaker 1: As I mentioned, shares of Monster beverage up there about
Speaker 1: one and a half percent, and we're not seeing too
Speaker 1: much movement when it comes to constellation. You're listening to
Speaker 1: Bloomberg Radio. Yeah, but you let me drive. Oh, no, no, no, no,
Speaker 1: this is not a choint honey pleading gravels. I want
Speaker 1: to drive. Good question is the ride to the clothes
Speaker 1: on Bluebird Radio right just about just about ten minutes
Speaker 1: left in today historrating session. Watching the markets, certainly the
Speaker 1: equity markets moving around here. We're taking a leg down
Speaker 1: on those major equity averages still in the green though
Speaker 1: uh significantly or at least more definitively for the Dow
Speaker 1: Jones Industrial average, call it flat on the S and
Speaker 1: P five hundred. You heard Doug talk about this nastack
Speaker 1: though down by a hundred and thirty six points, but
Speaker 1: it really does feel like it's a day where the
Speaker 1: treasury curve was something we were all focused on, especially
Speaker 1: as you show saw the shorter end, but both the
Speaker 1: two and the five really along the yield curve, those
Speaker 1: yields moving up. Let's get to it with David Deet's
Speaker 1: managing principal and senior portfolio strategist over at Pepack Private
Speaker 1: Wealth Management, ten billion dollars in assets under management, and
Speaker 1: David's back with us on the phone from Summit, New Jersey. David,
Speaker 1: good to have you here with myself and Ed Ludlow,
Speaker 1: on this Monday. First and foremost the FED meeting and
Speaker 1: the FED to sit not FED meeting, the President deciding
Speaker 1: on a second term for j Powell, but Leo Brannard
Speaker 1: also having a very significant position on the Federal Reserve. Yeah,
Speaker 1: obviously it was a very difficult decision for President Biden.
Speaker 1: He delayed it far longer than it would expect it.
Speaker 1: I think at the end of the day, this is
Speaker 1: a real positive for the markets in the economy. And
Speaker 1: here's why. Although they're both very strong economists and uh
Speaker 1: FED representatives, the fact of matter is, UH you apolsible
Speaker 1: of a proven quality. He's been running the FED since
Speaker 1: two thousand and eighteen. He had a magnificencent job back
Speaker 1: stopping the economy during the worst pandemic in a hundred years. UM.
Speaker 1: He's a proven quantity UM. So I think the markets
Speaker 1: are curing his renomin nation to another four year term.
Speaker 1: The other thing, of course, the cheering that's going on.
Speaker 1: What are you seeing in the cheering? What what aspect
Speaker 1: of the financial markets in the trade today show you cheering? Well,
Speaker 1: I think that the particularly with the movement into doo
Speaker 1: UM that's being driven by strength in reopening stocks cyclicles
Speaker 1: and particularly financials, and so there of course, if there
Speaker 1: was a difference between BRAINERD and POAL is power is
Speaker 1: perceived to be a slightly lighter touch on regulation of banks.
Speaker 1: And you're seeing very strong movement in the banks today.
Speaker 1: Uh you know, of course you've got Travelers Goldman, Sachs, JP,
Speaker 1: Morgan into Dow which is helping lead it. And uh
Speaker 1: so the feeling is that there will be a little
Speaker 1: less risk of owners regulation um by POAL going forward
Speaker 1: than we might have seen underbrainer David, I think I'm
Speaker 1: right in saying that you're a firm believer that markets
Speaker 1: set rates and not the Fed. Where do we go
Speaker 1: from here given these appointments, Well, you know, at the
Speaker 1: end of the day, I think interest rates are likely
Speaker 1: to add higher. Why is that? I think I think
Speaker 1: that the key drivers here are of course, ultimately I
Speaker 1: think a year from now, COVID nineteen is going to
Speaker 1: be less of a problem. Sure, there's a lot of
Speaker 1: scary scenes and headlines coming out of Europe, with the
Speaker 1: fact of the matter, when you look back a year,
Speaker 1: we've got so many more tools and to deal with
Speaker 1: COVID nineteen. You get three vaccines, you've got the UH,
Speaker 1: the anti virals UH. Now just about every all adults
Speaker 1: will bill to get a booster shot here, so we're
Speaker 1: likely to win this war. I think that is going
Speaker 1: to continue to spur the economy. And of course, as
Speaker 1: economy strength and people have more confidence, I think you're
Speaker 1: going to have more spending that's gonna add to inflation.
Speaker 1: The more inflation you have, interest rates to go up,
Speaker 1: and I think there's gonna increase confidence in the business
Speaker 1: sector to borrow more money. Both of those things I
Speaker 1: think are going to start to push the intertrace up.
Speaker 1: And remember we're trying to get back to normal. As
Speaker 1: recently as two thousand nineteen we saw two point nine
Speaker 1: and at ten your treasury were nowhere close to that. Now, Well,
Speaker 1: does that then hearken a FED and a J. Powell
Speaker 1: Fed being much more aggressive when it comes to raising rates.
Speaker 1: If you sound pretty optimistic, safety say very bullish. And
Speaker 1: so having said that, does the FED need to be
Speaker 1: even more aggressive when it comes to raising rates at
Speaker 1: this point? David Well, I think, um, if I'm right
Speaker 1: at the economy strengthens and Covid waynes, I think you're
Speaker 1: gonna see more inflationary pressures offsetting that of course will
Speaker 1: be some um de bottlenecking as it were, of the
Speaker 1: ports and so forth, as more people can get back
Speaker 1: to work and help unload the ships and so forth. Um,
Speaker 1: But I do think you're going to see more inflation.
Speaker 1: What we saw just recently six point two totally unacceptable.
Speaker 1: I think some of that's temperary, but some of us
Speaker 1: built in and ultimately lenders ruled demand more. I mean,
Speaker 1: what we're seeing now. One of the reasons that the
Speaker 1: strength of the market is you've got a ten your
Speaker 1: treasure at one point six, but inflations at two point six.
Speaker 1: This negative real interstrates makes no sense that So I
Speaker 1: think interest rates will uh move up and there will
Speaker 1: be pressure on the Federal Reserve to keep taking away
Speaker 1: that punch bowl to offset those inflationary pressures and normalized
Speaker 1: interest rates. In the meantime, talk to me about the
Speaker 1: Tina trade. There is no alternative for global listeners who
Speaker 1: are wondering what Tina is. You know, where are the
Speaker 1: pockets of opportunity? Then to your mind, yeah, absolutely so
Speaker 1: if if we're right that the things look good for
Speaker 1: the economy going forward, that people will start to engage
Speaker 1: in even greater numbers in the economy. Then it seems
Speaker 1: to to us that more cyclical stocks UH could get
Speaker 1: a tail wind here, while some of our pandemic favorites,
Speaker 1: you know, the zooms and the Pelotons of the world
Speaker 1: that catered to people locked down, will be a little
Speaker 1: bit less in favor. So, you know, so we see
Speaker 1: dividend paying stocks, energy stocks, material stocks, financials. If interest
Speaker 1: rates do go up, their net interests margins will expand
Speaker 1: that could be UH an excellent place in when you
Speaker 1: start looking valuations, smaller stocks, indeed, anything other than those
Speaker 1: top ten megacaps look a little bit more attractively valued.
Speaker 1: Is it weird and counterintuitive that we see rates moving
Speaker 1: up and yet we still had the SMP headed toward
Speaker 1: another record today? Um, well, it's barely a record. Of course,
Speaker 1: we saw the name. It's probably not gonna end that way.
Speaker 1: But and and so what I do think is, you know,
Speaker 1: the SNP is that mix between those megacap texts and
Speaker 1: the smaller main street midcaps and smaller caps. And so
Speaker 1: I think on balance, the news has been good and
Speaker 1: has pushed the SMP up, but of course it has
Speaker 1: been weighed down by some of those NASDAC names that
Speaker 1: we're seeing today because of course their profits are much
Speaker 1: further out, and if intertrates to go up, the present
Speaker 1: value of those deteriorates a little bit. I think that's
Speaker 1: what we're seeing. All Right, We're gonna run, Hey, David,
Speaker 1: have a good Thanksgiving. David deets he's managing principal, senior
Speaker 1: portfolio strategist over Pepack Private Wealth Management. Thanks for lou
Speaker 1: need a Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
Speaker 1: or Bloomberg dot com, and you can also listen to
Speaker 1: our radio show at two pm Eastern on Bloomberg Radio
Speaker 1: or watch us on YouTube search Bloomberg Global News