1 00:00:05,120 --> 00:00:09,320 Speaker 1: Welcome to the Bloombergs Surveillance Podcast Hometown Keene. Along with 2 00:00:09,440 --> 00:00:13,200 Speaker 1: Jonathan Ferrill and Lisa are Brownwitz Jaylie, we bring you 3 00:00:13,320 --> 00:00:17,960 Speaker 1: insight from the best an economics, finance, investment and international 4 00:00:18,000 --> 00:00:23,560 Speaker 1: relations Fine Bloomberg Surveillance and Apple podcast SoundCloud, Bloomberg dot 5 00:00:23,560 --> 00:00:30,240 Speaker 1: Com and of course on the Bloomberg termament, it's crystal 6 00:00:30,280 --> 00:00:34,080 Speaker 1: ball time. It's your outlook for on the SMP five hundred, 7 00:00:34,240 --> 00:00:37,600 Speaker 1: will do bottom three, top three, bottom three, most bearish, 8 00:00:37,760 --> 00:00:41,040 Speaker 1: less constructive, Morgan Stanley at forty four hundred, be about 9 00:00:41,080 --> 00:00:45,400 Speaker 1: forty six, Barclays at top three, Credit Swat at fifty two, 10 00:00:45,640 --> 00:00:48,400 Speaker 1: we've got Deutsche Bank of fifty two fifty, and then 11 00:00:48,440 --> 00:00:52,839 Speaker 1: you've got Bemo Bemo at fifty three hundred, and then 12 00:00:52,920 --> 00:00:56,120 Speaker 1: rounding it out, just shaking up the whole table, going 13 00:00:56,200 --> 00:00:58,600 Speaker 1: number one, a new entry in the last twenty four hours. 14 00:00:58,680 --> 00:01:02,080 Speaker 1: John Stolfus goes to three thirty. He joined us now 15 00:01:02,200 --> 00:01:05,560 Speaker 1: the chief investment strategist at Oppenheimer. John, let's start here, 16 00:01:05,560 --> 00:01:07,720 Speaker 1: where did the extra thirty points come from? And what 17 00:01:07,760 --> 00:01:10,240 Speaker 1: did Brian Baski do to you to upset you? Well? 18 00:01:10,440 --> 00:01:12,840 Speaker 1: Belsky and our own pals from way back. Even though 19 00:01:12,840 --> 00:01:15,280 Speaker 1: we haven't talked with each other for about a year, 20 00:01:15,440 --> 00:01:18,160 Speaker 1: just pre pandemic, we ran into each other outside of 21 00:01:18,200 --> 00:01:20,839 Speaker 1: the exchange. He was coming out, I was going into 22 00:01:20,840 --> 00:01:24,200 Speaker 1: the exchange. But we haven't spoken. But when I looked 23 00:01:24,200 --> 00:01:26,640 Speaker 1: at it, I just looked at the numbers. We were 24 00:01:26,640 --> 00:01:29,440 Speaker 1: looking at the momentum that we've been seeing in these rallies, 25 00:01:30,160 --> 00:01:33,800 Speaker 1: the broadening of interest in equities and the propensity of 26 00:01:33,840 --> 00:01:37,760 Speaker 1: the indexes to essentially self correct in the course of 27 00:01:37,920 --> 00:01:41,720 Speaker 1: rotations and rebalancing. That can cabin day to day, not 28 00:01:41,880 --> 00:01:44,760 Speaker 1: waiting for weeks to week or month to month. So 29 00:01:44,840 --> 00:01:48,120 Speaker 1: a healthy market, the economy coming back, we just wanted 30 00:01:48,160 --> 00:01:49,960 Speaker 1: to edge it up a little bit. John, what you 31 00:01:50,000 --> 00:01:52,040 Speaker 1: had to say about the Fed got my attention. We 32 00:01:52,080 --> 00:01:54,040 Speaker 1: did not expect the FED to slam on the brakes, 33 00:01:54,040 --> 00:01:56,440 Speaker 1: but rather we look for the central bank to pump 34 00:01:56,480 --> 00:01:59,800 Speaker 1: the brakes as lightly as it can. John, What separates 35 00:02:00,160 --> 00:02:01,760 Speaker 1: you and us? Why do you see it as a 36 00:02:01,760 --> 00:02:04,279 Speaker 1: central bank that's gonna step on the break just pumped 37 00:02:04,320 --> 00:02:06,840 Speaker 1: them as a loutly as they can, Jonathan. I think 38 00:02:06,840 --> 00:02:09,000 Speaker 1: it's the context that we bring to it. You know, 39 00:02:09,080 --> 00:02:13,040 Speaker 1: this is a thirty eight years on Wall Street. So 40 00:02:13,120 --> 00:02:16,280 Speaker 1: I remember the Alan greenspan era gas, I even remember 41 00:02:16,440 --> 00:02:19,760 Speaker 1: Walter uh and, so you know, this is a this 42 00:02:19,840 --> 00:02:24,799 Speaker 1: is the Bernankee legacy of Federal Reserve. It's highly sensitive 43 00:02:24,840 --> 00:02:28,200 Speaker 1: when it when it addresses it's it's mandate of full 44 00:02:28,280 --> 00:02:33,520 Speaker 1: employment uh and uh and and a stable economy to 45 00:02:33,520 --> 00:02:36,000 Speaker 1: to achieve that. And so we think they're going to 46 00:02:36,040 --> 00:02:38,960 Speaker 1: be very careful. But the irony though of all of 47 00:02:39,000 --> 00:02:41,440 Speaker 1: this is the market is freaking out because the Fed 48 00:02:41,520 --> 00:02:45,440 Speaker 1: is getting really uh considering, you know, tapering at the 49 00:02:45,520 --> 00:02:49,440 Speaker 1: more aggressive pace. The market has been dying for the 50 00:02:49,440 --> 00:02:52,840 Speaker 1: Fed to taper. It says that if the Feds behind 51 00:02:52,880 --> 00:02:55,360 Speaker 1: the curve, give it a break and let it taper, 52 00:02:55,720 --> 00:03:02,360 Speaker 1: and it'll get to actually probably tweet the the benchmark 53 00:03:02,520 --> 00:03:07,200 Speaker 1: right the Fed funds right probably later next years and 54 00:03:07,360 --> 00:03:10,160 Speaker 1: six months to maybe nine months on from where we 55 00:03:10,200 --> 00:03:12,080 Speaker 1: are now, you're touching on one of the biggest debates 56 00:03:12,160 --> 00:03:14,760 Speaker 1: on Wall Street right now, does a faster taper mean 57 00:03:14,840 --> 00:03:17,280 Speaker 1: a sooner rate hike? And a lot of people seem 58 00:03:17,360 --> 00:03:19,200 Speaker 1: to think that the answer is yes. And can they 59 00:03:19,240 --> 00:03:22,880 Speaker 1: potentially separate those two a little bit more at tomorrow's 60 00:03:22,919 --> 00:03:25,960 Speaker 1: press conference is a key question My issue though, given 61 00:03:25,960 --> 00:03:29,240 Speaker 1: this call, is that you're looking for twelve percent earnings 62 00:03:29,280 --> 00:03:33,280 Speaker 1: growth for the SMP five hundred, a real robust consumer throughout, 63 00:03:34,560 --> 00:03:37,200 Speaker 1: and yet a FED that remains patient and has the 64 00:03:37,240 --> 00:03:40,760 Speaker 1: confidence to do so despite this robust data. Can you 65 00:03:40,800 --> 00:03:44,760 Speaker 1: explain sort of dovetail those ideas well? We we think 66 00:03:44,800 --> 00:03:49,600 Speaker 1: that the right now, you know, we think people are overspending. 67 00:03:49,680 --> 00:03:52,400 Speaker 1: We think the the the what you called the the 68 00:03:52,440 --> 00:03:56,760 Speaker 1: stingy checks, uh, the the amount of people saved when 69 00:03:56,800 --> 00:03:59,760 Speaker 1: they weren't commuting to work, what what have you. People 70 00:03:59,800 --> 00:04:03,160 Speaker 1: have more money on a relative basis, depending upon or 71 00:04:03,200 --> 00:04:06,680 Speaker 1: where they fall in the income strata. Uh, and they're 72 00:04:06,720 --> 00:04:08,840 Speaker 1: spending it, you know, right now at a certain pace. 73 00:04:09,000 --> 00:04:13,920 Speaker 1: But the effects of gas, the gasoline pump prices going up, 74 00:04:14,080 --> 00:04:18,200 Speaker 1: the effects of the prices of neat poultry and or etcetera. 75 00:04:18,640 --> 00:04:21,359 Speaker 1: All of this adds up. The consumer will bring it 76 00:04:21,400 --> 00:04:23,400 Speaker 1: in a little bit, but the consumer is not going 77 00:04:23,440 --> 00:04:27,520 Speaker 1: to stop spending. My big thing has always been don't 78 00:04:27,960 --> 00:04:31,280 Speaker 1: don't bet against the American consumer, as well as don't 79 00:04:31,320 --> 00:04:33,760 Speaker 1: think that technology is gonna end. And we're going back 80 00:04:33,760 --> 00:04:38,200 Speaker 1: to the abacus of the slide rule. Don't bet against 81 00:04:38,200 --> 00:04:40,360 Speaker 1: the consumer. Don't bet against them. In some ways the 82 00:04:40,400 --> 00:04:42,920 Speaker 1: supply chain that's been affecting the consumer as well. John, 83 00:04:42,960 --> 00:04:46,280 Speaker 1: I'm interested in whether you see any risk to your 84 00:04:46,320 --> 00:04:49,440 Speaker 1: overall focus from omicron from any way or indeed the 85 00:04:49,480 --> 00:04:52,760 Speaker 1: way in which the consumer reacts to that. I've gotta 86 00:04:52,839 --> 00:04:58,400 Speaker 1: say the omicron risk is significant. Uh. In some ways, 87 00:04:58,480 --> 00:05:02,440 Speaker 1: it's just as to how is uh it is uh 88 00:05:02,839 --> 00:05:07,520 Speaker 1: looked at from afar by people who are not epidemologists. Uh, 89 00:05:07,839 --> 00:05:10,919 Speaker 1: by the risk and and the the the element that 90 00:05:11,000 --> 00:05:14,599 Speaker 1: can cause over over concerned. I say, let's leave it 91 00:05:14,640 --> 00:05:17,560 Speaker 1: to science. So far, science has done an incredible job. 92 00:05:17,839 --> 00:05:20,640 Speaker 1: If we look back to when people thought it was 93 00:05:20,640 --> 00:05:23,400 Speaker 1: gonna take two years, four years, or who knows when 94 00:05:23,400 --> 00:05:27,000 Speaker 1: for a vaccine of efficacy, we've come a long way. Uh. 95 00:05:27,120 --> 00:05:30,440 Speaker 1: Technology boosting that and UH. And then I'm sorry I 96 00:05:30,839 --> 00:05:33,279 Speaker 1: missed the next part of the question. Oh, the consumer 97 00:05:34,160 --> 00:05:36,719 Speaker 1: is that? Yeah? The consumer has shown you know, the 98 00:05:36,760 --> 00:05:39,720 Speaker 1: consumer has shown a great desire to shop, whether they 99 00:05:39,760 --> 00:05:42,480 Speaker 1: do it online or bricks and mortar, or a mix 100 00:05:42,480 --> 00:05:45,320 Speaker 1: of both. H. The consumer wants to get back to 101 00:05:45,400 --> 00:05:48,159 Speaker 1: the next new normal, or get to the next new normal, 102 00:05:48,360 --> 00:05:50,919 Speaker 1: because I don't think we're going back to what the 103 00:05:50,960 --> 00:05:54,360 Speaker 1: normal was on the memory of this pandemic for quite 104 00:05:54,360 --> 00:05:56,960 Speaker 1: a few years before people forget it. So are you 105 00:05:56,960 --> 00:05:58,880 Speaker 1: gonna call for Apple to be a four trillion dollar 106 00:05:58,920 --> 00:06:01,719 Speaker 1: company by the end of twenty twenty two? Well get 107 00:06:01,920 --> 00:06:04,400 Speaker 1: you know, the firm doesn't like me to comment on 108 00:06:04,600 --> 00:06:09,760 Speaker 1: specific names. But but but needless is it related to technology? 109 00:06:09,800 --> 00:06:14,800 Speaker 1: We think technology continues to be something that the investors 110 00:06:14,839 --> 00:06:17,880 Speaker 1: want to have exposure to. You have to you have 111 00:06:18,000 --> 00:06:19,960 Speaker 1: to break up when you're looking at We like more 112 00:06:20,120 --> 00:06:23,520 Speaker 1: established companies. We think the newer wins. It's it's terrific 113 00:06:23,600 --> 00:06:26,400 Speaker 1: for risk and volatility. But if that's what you want, 114 00:06:26,800 --> 00:06:29,440 Speaker 1: know that you're not going to get those steady earning, 115 00:06:29,520 --> 00:06:34,839 Speaker 1: steady cash flow process of innovation and a uh within 116 00:06:34,920 --> 00:06:38,120 Speaker 1: a culture without a corporation that's established and a certain 117 00:06:38,160 --> 00:06:43,520 Speaker 1: relationship with shareholders that gives you less volatility. Generally speaking, John, 118 00:06:43,520 --> 00:06:45,520 Speaker 1: you squeezed down the extra thirty points. You are the 119 00:06:45,600 --> 00:06:48,279 Speaker 1: most bullish on the street. Gun. It's the next year, John, 120 00:06:48,279 --> 00:06:50,719 Speaker 1: It's great a catch up, sir, as always John Stelfas 121 00:06:50,760 --> 00:07:00,200 Speaker 1: there of Oppenheimer. Thank you, John, Thank you, sir. We're 122 00:07:00,200 --> 00:07:01,600 Speaker 1: gonna talk to the biggest bill on the Street. A 123 00:07:01,600 --> 00:07:03,360 Speaker 1: little bit later, we have to talk to the biggest 124 00:07:03,360 --> 00:07:06,480 Speaker 1: bear on the street as well, Price Target over more 125 00:07:06,520 --> 00:07:08,279 Speaker 1: than Stanley, and we can catch show with Dwann Scaley, 126 00:07:08,279 --> 00:07:10,600 Speaker 1: the head of market research and strategy at Morgan Stanley 127 00:07:10,640 --> 00:07:13,320 Speaker 1: Wealth Management. Different side of the business down, but you 128 00:07:13,360 --> 00:07:16,440 Speaker 1: work very closely with Mike Wilson, who straddles both sides 129 00:07:16,600 --> 00:07:18,240 Speaker 1: at a business. So let's talk about the call for 130 00:07:18,240 --> 00:07:21,040 Speaker 1: a lower equity market. What I hear from you guys 131 00:07:21,040 --> 00:07:23,840 Speaker 1: going through the research, it's not a less constructive view 132 00:07:23,840 --> 00:07:26,480 Speaker 1: per se on earnings, but it's about the multiple down. 133 00:07:26,640 --> 00:07:28,600 Speaker 1: What's going to bring that multiple down down? What is 134 00:07:28,600 --> 00:07:30,480 Speaker 1: it about the multiple that you're focused on at the moment. 135 00:07:31,760 --> 00:07:34,360 Speaker 1: That's exactly right, Jonathan, Good morning and good to see you. 136 00:07:34,360 --> 00:07:36,880 Speaker 1: Happy holidays to you and the team. So look, as 137 00:07:36,920 --> 00:07:39,840 Speaker 1: we've been saying for the last several months, we think 138 00:07:39,880 --> 00:07:42,280 Speaker 1: there's more room to go on multiple contraction. And that 139 00:07:42,360 --> 00:07:45,880 Speaker 1: has historically been the cage Jonathan, as we've worked through 140 00:07:45,960 --> 00:07:49,200 Speaker 1: mid cycle transitions. We think it is basically the same 141 00:07:49,240 --> 00:07:52,520 Speaker 1: scenario this time around. Okay, even though we've had extraordinary 142 00:07:52,560 --> 00:07:58,120 Speaker 1: circumstances in this particular cycle, given COVID, given lockdowns and reopenings, etcetera. 143 00:07:58,400 --> 00:08:02,280 Speaker 1: We think things are somewhat tracking to a normal historical context, 144 00:08:02,560 --> 00:08:05,560 Speaker 1: which has seen the multiple come down anywhere between ten 145 00:08:05,640 --> 00:08:09,520 Speaker 1: to fifteen percent as mid cycle transitions culminated in the past. 146 00:08:09,520 --> 00:08:11,920 Speaker 1: So we do think there's more room to go on valuation. 147 00:08:12,200 --> 00:08:14,800 Speaker 1: And as to this point, you said, we recently haved 148 00:08:14,840 --> 00:08:18,800 Speaker 1: our exposure to the equity like asset classes. Can you 149 00:08:18,840 --> 00:08:21,200 Speaker 1: give us a sense of where you put the money 150 00:08:21,320 --> 00:08:25,360 Speaker 1: as you took down your exposure? Sure, yeah, absolutely so, 151 00:08:25,360 --> 00:08:28,240 Speaker 1: so we put some money into alternatives. We've also put 152 00:08:28,320 --> 00:08:31,600 Speaker 1: some money into a shorter duration credit as well, some 153 00:08:31,680 --> 00:08:35,880 Speaker 1: high quality credit and look, valuations and spreads aren't exceedingly 154 00:08:36,280 --> 00:08:39,120 Speaker 1: undemanding there either, but we do think that could offer 155 00:08:39,240 --> 00:08:42,240 Speaker 1: some ballast in portfolios as we go into a little 156 00:08:42,240 --> 00:08:44,760 Speaker 1: bit more volatile period. You know, as you well know, 157 00:08:44,840 --> 00:08:48,679 Speaker 1: we've been through this anomalous uh smooth sale upwards over 158 00:08:48,720 --> 00:08:51,480 Speaker 1: the last call it, sixteen to eighteen months where we 159 00:08:51,520 --> 00:08:54,720 Speaker 1: really haven't had your typical ten percent correction in the 160 00:08:54,760 --> 00:08:56,880 Speaker 1: in the SMP, and we don't think that's going to 161 00:08:56,960 --> 00:09:02,360 Speaker 1: continue through the winter months. Okay, brace for a ten correction? 162 00:09:02,679 --> 00:09:05,160 Speaker 1: What gets us there? What's the snap element that suddenly 163 00:09:05,240 --> 00:09:07,640 Speaker 1: drives us lower, is there? I mean we get PPI 164 00:09:07,760 --> 00:09:09,920 Speaker 1: data a little bit later today. I know inflation has 165 00:09:09,960 --> 00:09:13,640 Speaker 1: been a key area of risk. You're looking at, correct, Caroline, 166 00:09:13,640 --> 00:09:16,320 Speaker 1: And so we do see a bit of a gradual 167 00:09:16,480 --> 00:09:20,600 Speaker 1: online here, and positioning has already started to move that way, 168 00:09:20,600 --> 00:09:22,800 Speaker 1: particularly when you look at some of the faster moving 169 00:09:22,840 --> 00:09:26,600 Speaker 1: institutional funds out there. Positioning as started to lighten up 170 00:09:26,640 --> 00:09:30,120 Speaker 1: more recently. But we think it's simply the market acknowledging 171 00:09:30,120 --> 00:09:32,400 Speaker 1: that the Fed is about to announce this week the 172 00:09:32,400 --> 00:09:35,240 Speaker 1: big event, of course, about to announce a much faster 173 00:09:35,760 --> 00:09:39,840 Speaker 1: taper schedule that will conclude in March. That's gonna obviously 174 00:09:39,880 --> 00:09:43,400 Speaker 1: remove the maximum accommodative stance that we've had. And even 175 00:09:43,400 --> 00:09:46,240 Speaker 1: though folks have known about this, they've been preparing for it. 176 00:09:46,480 --> 00:09:48,880 Speaker 1: I think there's a difference in terms of the actual 177 00:09:48,880 --> 00:09:51,600 Speaker 1: effect and markets over the next several months down when 178 00:09:51,640 --> 00:09:53,960 Speaker 1: they secuity market do you like? I know there's going 179 00:09:54,000 --> 00:09:55,800 Speaker 1: to be much more emphasis from you and the team 180 00:09:56,040 --> 00:10:01,160 Speaker 1: at individual names, individual sectors. What do you like right now, Jonathan, 181 00:10:01,200 --> 00:10:05,600 Speaker 1: and this type of backdrop. We favored defensive, high quality names. Okay, 182 00:10:05,640 --> 00:10:09,200 Speaker 1: so from a sector's perspective. Think healthcare, which is shaded 183 00:10:09,280 --> 00:10:13,760 Speaker 1: trading extremely cheap after underperforming this year, but has all 184 00:10:13,800 --> 00:10:16,840 Speaker 1: the benefits of innovation and growth, but it's not priced 185 00:10:16,880 --> 00:10:20,680 Speaker 1: like many of the growth sectors. Think areas like consumer staples. 186 00:10:20,679 --> 00:10:24,240 Speaker 1: I know pricing uh power was just mentioned earlier. You 187 00:10:24,280 --> 00:10:27,880 Speaker 1: have to be selective. Not every global consumer franchise has pricing, 188 00:10:28,080 --> 00:10:29,960 Speaker 1: so you have to do the bottom up work. And 189 00:10:30,000 --> 00:10:32,079 Speaker 1: then Jonathan on the other end of the barbel we're 190 00:10:32,080 --> 00:10:35,400 Speaker 1: actually not shying away from growth names either, except here's 191 00:10:35,440 --> 00:10:37,959 Speaker 1: the nuance. We want to focus very much so at 192 00:10:38,000 --> 00:10:40,720 Speaker 1: growth at a reasonable price. We're looking at actually names 193 00:10:40,760 --> 00:10:44,760 Speaker 1: we've added to our team's portfolios recently, names like MasterCard, 194 00:10:45,120 --> 00:10:48,480 Speaker 1: names like Team Mobile. These are actually structural growers that 195 00:10:48,520 --> 00:10:51,400 Speaker 1: are significantly off their fifty two week haus and if 196 00:10:51,440 --> 00:10:53,920 Speaker 1: we do get into an environment where rates finally start 197 00:10:53,960 --> 00:10:57,199 Speaker 1: to back up into two, they won't be as acutely 198 00:10:57,320 --> 00:11:00,199 Speaker 1: sensitive to higher rates as some of the really high 199 00:11:00,280 --> 00:11:03,360 Speaker 1: multiple growth stops that work this year. Dan, you and 200 00:11:03,400 --> 00:11:06,600 Speaker 1: others have been talking about a ten to fifteen percent correction, 201 00:11:06,640 --> 00:11:09,199 Speaker 1: which is overdue. For a while a lot of people 202 00:11:09,200 --> 00:11:11,080 Speaker 1: have been saying things have been flying a little, too 203 00:11:11,160 --> 00:11:13,520 Speaker 1: high for too long to be really justified in any 204 00:11:13,520 --> 00:11:16,400 Speaker 1: fundamental level. And yet every dip has been viable, and 205 00:11:16,440 --> 00:11:18,600 Speaker 1: that dip doesn't matter how small it is, it is 206 00:11:18,600 --> 00:11:22,160 Speaker 1: a viable dip. Has that made you rethink your thesis 207 00:11:22,200 --> 00:11:24,760 Speaker 1: based on the fact that you're seeing cash piles increase 208 00:11:24,800 --> 00:11:26,880 Speaker 1: in the at least according to the fund manager survey 209 00:11:26,920 --> 00:11:29,040 Speaker 1: coming out of Bank of America, and a sense of 210 00:11:29,080 --> 00:11:32,839 Speaker 1: caution among some of your peers. Uh, you know, it's 211 00:11:32,840 --> 00:11:35,200 Speaker 1: a it's a fair point least. One thing I would 212 00:11:35,240 --> 00:11:38,480 Speaker 1: say is that particular dynamic innovo of itself has not 213 00:11:38,640 --> 00:11:41,720 Speaker 1: made us back away from the call or change the call. 214 00:11:42,040 --> 00:11:45,520 Speaker 1: We do acknowledge that the individual investor, in particular, given 215 00:11:45,559 --> 00:11:48,880 Speaker 1: the amount of in particular millennial wealth coming in and 216 00:11:48,920 --> 00:11:52,440 Speaker 1: the new investors coming into access this market via technology 217 00:11:52,440 --> 00:11:55,679 Speaker 1: and absence so forth, that has been a particularly strong 218 00:11:55,760 --> 00:11:59,079 Speaker 1: force and frankly higher than we would have presumed coming 219 00:11:59,120 --> 00:12:02,080 Speaker 1: into this year, But nonetheless that hasn't made us change 220 00:12:02,080 --> 00:12:04,200 Speaker 1: the call. What would help us change the call, make 221 00:12:04,280 --> 00:12:07,040 Speaker 1: us adjust the call would be Number one, we're wrong 222 00:12:07,040 --> 00:12:09,560 Speaker 1: on rates, right, So instead of getting to two percent 223 00:12:09,640 --> 00:12:12,560 Speaker 1: or two point one percent, which is Matt Hornback's call, 224 00:12:13,000 --> 00:12:15,480 Speaker 1: we we hang out around these levels and equity risk 225 00:12:15,520 --> 00:12:18,559 Speaker 1: premium for the SMP aren't his challenge. And number two, 226 00:12:18,679 --> 00:12:21,360 Speaker 1: we've been calling for a bit of a pushback or 227 00:12:21,400 --> 00:12:24,200 Speaker 1: a slowdown. And the consumer, the consumer is eaten through 228 00:12:24,559 --> 00:12:27,400 Speaker 1: a tremendous amount of the savings that you just reference, 229 00:12:27,840 --> 00:12:31,200 Speaker 1: and so they've also been pulling forward tremendous demand for 230 00:12:31,320 --> 00:12:34,240 Speaker 1: particularly durable goods. Given we've been all at home for 231 00:12:34,240 --> 00:12:36,680 Speaker 1: for so so long, we don't see some of those 232 00:12:36,679 --> 00:12:39,320 Speaker 1: trends continuing as well, and that's part of our more 233 00:12:40,280 --> 00:12:43,560 Speaker 1: near term caution. That being said, if we're wrong about rates, 234 00:12:43,600 --> 00:12:45,520 Speaker 1: if we're wrong about the consumer, those would be some 235 00:12:45,559 --> 00:12:47,600 Speaker 1: of the aspects that would change our call. And can 236 00:12:47,600 --> 00:12:49,240 Speaker 1: I just like thank you You've been a good friend 237 00:12:49,240 --> 00:12:51,400 Speaker 1: of this show, what aful partner over the last year. 238 00:12:51,480 --> 00:12:53,760 Speaker 1: Send up best to to Mike, to Ellen, to Matt 239 00:12:53,800 --> 00:12:56,040 Speaker 1: two leaks of Shallott just fantastic down as alwise and 240 00:12:56,080 --> 00:12:58,320 Speaker 1: good to hit from you my pleasure. That's Kelly, thank you, 241 00:12:58,480 --> 00:13:00,319 Speaker 1: enjoy the holidays and send out best to the scene. 242 00:13:06,760 --> 00:13:09,040 Speaker 1: Let's begin with liftoff Mike McKee. We can do that 243 00:13:09,240 --> 00:13:11,840 Speaker 1: right now with Mike Gap and the Chief US economist 244 00:13:11,920 --> 00:13:14,280 Speaker 1: at Barclay's Mike Gap And I said, you were at 245 00:13:14,320 --> 00:13:17,199 Speaker 1: May threatening to move to March. You've already done it. 246 00:13:17,240 --> 00:13:19,680 Speaker 1: Marches the care now for liftoff, Mike, what separates you 247 00:13:19,720 --> 00:13:22,560 Speaker 1: in the pack? You're at March, the packs in the summer. 248 00:13:22,640 --> 00:13:26,240 Speaker 1: June out, two September. Good morning, Jonathan and Lisa, thank 249 00:13:26,240 --> 00:13:28,120 Speaker 1: you for having me on. I think we would say 250 00:13:28,160 --> 00:13:31,160 Speaker 1: it's it's exactly what has been just mentioned, the concern 251 00:13:31,200 --> 00:13:34,720 Speaker 1: about inflation, where inflation is coming in, and I'd say 252 00:13:34,840 --> 00:13:38,400 Speaker 1: it's a twofold argument for for us. One is the 253 00:13:38,760 --> 00:13:42,200 Speaker 1: November Minutes say risk management is now the guiding principle 254 00:13:42,320 --> 00:13:45,760 Speaker 1: of monetary policy, and in the extreme that means you 255 00:13:45,800 --> 00:13:49,280 Speaker 1: don't necessarily need to meet all your liftoff criterion to 256 00:13:49,400 --> 00:13:52,000 Speaker 1: move rates higher. You can just be worried about the 257 00:13:52,120 --> 00:13:55,720 Speaker 1: risk of higher inflation. So that's one argument. The second 258 00:13:55,760 --> 00:13:59,000 Speaker 1: would be that employment report that we received last week, 259 00:13:59,480 --> 00:14:02,280 Speaker 1: very solid, a decline in the unemployment rate, a one 260 00:14:02,320 --> 00:14:05,680 Speaker 1: percentage point declined in the unemployment rates since August. And 261 00:14:05,760 --> 00:14:08,120 Speaker 1: we think other members will think, hey, we're probably a 262 00:14:08,120 --> 00:14:11,880 Speaker 1: lot closer to maximum employment than we thought before. The 263 00:14:11,920 --> 00:14:15,400 Speaker 1: economy is accelerating fairly rapidly in the in the fourth quarter, 264 00:14:15,480 --> 00:14:19,200 Speaker 1: so o Macron concerns aside, which are certainly valid. There's 265 00:14:19,200 --> 00:14:22,120 Speaker 1: a lot of momentum. Labor market progress has been healthy. 266 00:14:22,280 --> 00:14:25,000 Speaker 1: If you're concerned about inflation, we think that puts March 267 00:14:25,040 --> 00:14:27,200 Speaker 1: on the table. So that would be our argument. Michael. 268 00:14:27,200 --> 00:14:29,680 Speaker 1: We were just hearing from Jonathan Stole's first overt Abenheimer, 269 00:14:29,680 --> 00:14:32,160 Speaker 1: and he was saying he thinks it's different to accelerate 270 00:14:32,200 --> 00:14:34,840 Speaker 1: the taper from saying that we're going to raise rates 271 00:14:34,840 --> 00:14:37,960 Speaker 1: sooner at the Federal Reserve. What do you say in 272 00:14:38,080 --> 00:14:41,240 Speaker 1: contrast to that, with your call going very much against that, 273 00:14:41,680 --> 00:14:44,120 Speaker 1: given the fact that the Fed has basically been saying 274 00:14:44,200 --> 00:14:46,640 Speaker 1: something of that nature until a sharp pivot in the 275 00:14:46,680 --> 00:14:50,200 Speaker 1: past couple of weeks, right, So prior to this very 276 00:14:50,240 --> 00:14:52,480 Speaker 1: sharp pivot, I would say that that was That was 277 00:14:52,520 --> 00:14:56,040 Speaker 1: our view too, that you could do risk management to 278 00:14:56,080 --> 00:14:59,640 Speaker 1: start taper to create optionality, but then you'd kind of 279 00:14:59,680 --> 00:15:02,680 Speaker 1: watch the data under your feet as it came in 280 00:15:02,680 --> 00:15:04,800 Speaker 1: in terms of deciding when to lift off. So risk 281 00:15:04,840 --> 00:15:08,120 Speaker 1: management was about the beginning of taper, not necessarily about 282 00:15:08,200 --> 00:15:11,560 Speaker 1: rate hikes. But if risk management is now the guiding 283 00:15:11,600 --> 00:15:16,720 Speaker 1: principle in the conduct of monetary policy. Then tapering, the 284 00:15:16,760 --> 00:15:19,800 Speaker 1: pace of taper, the start of hikes, the pace of hikes, 285 00:15:19,840 --> 00:15:22,560 Speaker 1: all that can be done for risk management purposes. Again, 286 00:15:22,600 --> 00:15:25,440 Speaker 1: it's about the risk of higher inflation, not necessarily where 287 00:15:25,520 --> 00:15:28,840 Speaker 1: current inflation is. So you could argue that a decision 288 00:15:28,880 --> 00:15:31,920 Speaker 1: to taper and taper more quickly does send a signal 289 00:15:31,960 --> 00:15:34,120 Speaker 1: about your willingness to hike rates. So I think would 290 00:15:34,120 --> 00:15:36,200 Speaker 1: be my response to that would be, it's about you know, 291 00:15:36,240 --> 00:15:39,040 Speaker 1: how much you think risk management is the umbrella over 292 00:15:39,120 --> 00:15:42,160 Speaker 1: all policy choices at this point in time. How significant 293 00:15:42,240 --> 00:15:44,440 Speaker 1: is it from your perspective, Mike, that we have seen 294 00:15:44,880 --> 00:15:49,320 Speaker 1: such aggressive rhetoric from former FETE officials, including former uber 295 00:15:49,400 --> 00:15:52,800 Speaker 1: doves like a former Minneapolis FED president Coachur of Lakota 296 00:15:52,880 --> 00:15:55,040 Speaker 1: coming out this morning and basically saying the FETE is 297 00:15:55,120 --> 00:15:59,400 Speaker 1: risking a five type scenario where inflation looks containable and 298 00:15:59,520 --> 00:16:03,240 Speaker 1: ends up not being. So I think they're there. It's 299 00:16:03,280 --> 00:16:06,320 Speaker 1: a reflection of the pressure that they're getting across the board. 300 00:16:06,400 --> 00:16:09,240 Speaker 1: So you saw the comments from from Congress, both sides 301 00:16:09,280 --> 00:16:13,000 Speaker 1: of the aisle stating concerns about inflation for for different 302 00:16:13,000 --> 00:16:16,080 Speaker 1: reasons wanting the FED to respond to it. So it's 303 00:16:16,120 --> 00:16:18,800 Speaker 1: this isn't you know, necessary what i'd say, a partisan issue. 304 00:16:18,880 --> 00:16:22,840 Speaker 1: It's coming from your kind of you know, your traditional economists, 305 00:16:22,880 --> 00:16:26,359 Speaker 1: your non orthodox economists. It's coming from Republicans and Democrats 306 00:16:26,360 --> 00:16:29,360 Speaker 1: in Congress. There is a chorus of calls for the 307 00:16:29,400 --> 00:16:32,640 Speaker 1: FED to respond to this. I personally think, or we think, 308 00:16:33,160 --> 00:16:36,600 Speaker 1: the risk of a sixties or seventies style inflation story 309 00:16:37,080 --> 00:16:40,200 Speaker 1: is overblown. But that doesn't mean the FED shouldn't be 310 00:16:40,240 --> 00:16:43,359 Speaker 1: responding to what they see are our risks to inflation 311 00:16:43,600 --> 00:16:46,600 Speaker 1: in the near term. We think inflation ultimately will come 312 00:16:46,640 --> 00:16:50,720 Speaker 1: down and and the FED will be will have its 313 00:16:50,720 --> 00:16:54,280 Speaker 1: credibility maintained in terms of achieving two percent outcomes over 314 00:16:54,440 --> 00:16:56,680 Speaker 1: over the long term. I just think the risks of 315 00:16:56,840 --> 00:16:59,440 Speaker 1: a wage price spiral are overblown, and the quicker the 316 00:16:59,480 --> 00:17:02,680 Speaker 1: FED move of the less likely that that it's to 317 00:17:03,160 --> 00:17:07,040 Speaker 1: come to play. Mike Caroline in London here, and I'm 318 00:17:07,080 --> 00:17:09,760 Speaker 1: interested in how much the other side of the Fed's 319 00:17:09,800 --> 00:17:14,280 Speaker 1: mandate was of course inclusive jobs market overall, and that's 320 00:17:14,280 --> 00:17:16,280 Speaker 1: had to be to certain extent put on the backbone 321 00:17:16,320 --> 00:17:20,119 Speaker 1: because inflation perhaps peaches into inequality even further. But how 322 00:17:20,200 --> 00:17:24,120 Speaker 1: much do you think that becomes a focus point once more? Caroline, 323 00:17:24,200 --> 00:17:27,679 Speaker 1: that's it's a great point because risk management again, just 324 00:17:27,720 --> 00:17:29,720 Speaker 1: to come back to this, means you may very well 325 00:17:29,760 --> 00:17:32,320 Speaker 1: be lifting off even though you might not think you're 326 00:17:32,359 --> 00:17:35,560 Speaker 1: at maximum employment. And the committees hasn't really gone to 327 00:17:35,680 --> 00:17:38,480 Speaker 1: great lengths to clarify to you what broad based and 328 00:17:38,560 --> 00:17:42,320 Speaker 1: inclusive means. It doesn't really even define what full employment 329 00:17:42,400 --> 00:17:44,840 Speaker 1: is and its statement of longer run policy goals. It's 330 00:17:44,840 --> 00:17:47,159 Speaker 1: more of a we'll know it when when we see it. 331 00:17:47,280 --> 00:17:50,920 Speaker 1: So optically it could look, you know, difficult for them 332 00:17:50,920 --> 00:17:53,840 Speaker 1: where they're raising rates, but still several million workers are 333 00:17:53,880 --> 00:17:57,159 Speaker 1: are out of the workforce and participation is subdued, so 334 00:17:57,400 --> 00:17:59,359 Speaker 1: it's not a great position for them to be in, 335 00:17:59,720 --> 00:18:01,960 Speaker 1: but it is the one where where they're in currently. 336 00:18:02,200 --> 00:18:04,520 Speaker 1: What I would say is if inflation does start coming 337 00:18:04,560 --> 00:18:08,120 Speaker 1: down rapidly over the course of two then maybe they 338 00:18:08,160 --> 00:18:11,320 Speaker 1: pause any rate hike cycle that they've started and and 339 00:18:11,400 --> 00:18:14,160 Speaker 1: kind of shift back in the direction of saying, well, 340 00:18:14,160 --> 00:18:16,119 Speaker 1: now it will be a little bit easier for us 341 00:18:16,160 --> 00:18:19,000 Speaker 1: to ride out an expansion and improve labor market outcome. 342 00:18:19,080 --> 00:18:21,520 Speaker 1: So right now it's about heading off risks of inflation, 343 00:18:21,960 --> 00:18:24,080 Speaker 1: but there are worlds in which they could shift back 344 00:18:24,119 --> 00:18:27,920 Speaker 1: to to promote full employment. How much could the strengthen 345 00:18:27,920 --> 00:18:31,400 Speaker 1: the dollar be the thing that eats away at inflation 346 00:18:31,560 --> 00:18:35,359 Speaker 1: at that rapid rate. So that's a great question, because 347 00:18:35,359 --> 00:18:37,720 Speaker 1: in the last cycle, of course, any kind of movement 348 00:18:37,760 --> 00:18:41,879 Speaker 1: to high rates came with with a lot of dollar appreciation, 349 00:18:41,960 --> 00:18:45,440 Speaker 1: which fed back into lower growth and lower inflation outcomes. 350 00:18:46,000 --> 00:18:48,440 Speaker 1: Um at least the FEDS shift in kind of our 351 00:18:48,560 --> 00:18:51,520 Speaker 1: change and call brings, brings our rhetoric and the FEDS 352 00:18:51,560 --> 00:18:55,200 Speaker 1: communication in line with where markets are. So we're not 353 00:18:55,240 --> 00:18:58,879 Speaker 1: necessarily thinking a pivot at this point or rate hikes 354 00:18:58,880 --> 00:19:03,119 Speaker 1: in two may bring about a much stronger dollar. H 355 00:19:03,240 --> 00:19:04,919 Speaker 1: So I think you'd have to You'd have to have 356 00:19:04,960 --> 00:19:08,119 Speaker 1: the FED maybe moving more rapidly than the market is expecting. 357 00:19:08,160 --> 00:19:10,119 Speaker 1: I don't think that that we're there yet, so I 358 00:19:10,160 --> 00:19:13,520 Speaker 1: think it's less likely, but certainly it's something that we're 359 00:19:13,560 --> 00:19:16,360 Speaker 1: watching out for. I would say over the long term, 360 00:19:16,400 --> 00:19:18,440 Speaker 1: it's part of the reason why the market things the 361 00:19:18,560 --> 00:19:21,560 Speaker 1: terminal rate is lower, that that the FED will be 362 00:19:21,680 --> 00:19:25,000 Speaker 1: raising rates more than other developed economies, which would likely 363 00:19:25,280 --> 00:19:28,000 Speaker 1: keep the dollar buoyant over time, So I think it 364 00:19:28,080 --> 00:19:30,080 Speaker 1: is part of the story on the terminal rate, but 365 00:19:30,160 --> 00:19:32,520 Speaker 1: maybe not in the near term performance of the economy. 366 00:19:32,800 --> 00:19:35,560 Speaker 1: Michael cape and worked with me here year over at 367 00:19:35,600 --> 00:19:38,960 Speaker 1: three thirty tomorrow. Yeah, send the team home. That we've 368 00:19:38,960 --> 00:19:43,520 Speaker 1: done for the year pretty much. Yeah. Wait seriously, of course, Mike, 369 00:19:43,640 --> 00:19:46,040 Speaker 1: come on, what happens if something happens at ECB or 370 00:19:46,080 --> 00:19:53,600 Speaker 1: Bank of ang are you? I'm the U S economist. 371 00:19:58,160 --> 00:20:01,560 Speaker 1: Cathy Jones joined us now chief Fixed and come strategistic Chap. Kathy, 372 00:20:01,840 --> 00:20:04,360 Speaker 1: We've got to talk about this bawn market. We went 373 00:20:04,359 --> 00:20:08,080 Speaker 1: through it with Lisa. When we were at these levels, 374 00:20:08,119 --> 00:20:10,600 Speaker 1: we were talking about a global recession. What are we 375 00:20:10,640 --> 00:20:15,359 Speaker 1: doing now? Yeah, it's really a conundrum, I think for 376 00:20:15,400 --> 00:20:18,560 Speaker 1: the FAT because as they try to signal that their 377 00:20:18,600 --> 00:20:21,240 Speaker 1: tightening policy, all we get is a flatter yield curve 378 00:20:21,280 --> 00:20:24,080 Speaker 1: and lower long term rates. And I think that that 379 00:20:24,200 --> 00:20:28,520 Speaker 1: tells you that the market's view is that inflation isn't 380 00:20:28,520 --> 00:20:31,680 Speaker 1: going to last a long time and the growth will 381 00:20:31,880 --> 00:20:36,080 Speaker 1: decelerate next year, and that we have enough demand at 382 00:20:36,119 --> 00:20:38,280 Speaker 1: the long end of the curve to prevent yields from 383 00:20:38,359 --> 00:20:42,240 Speaker 1: rising very much. So it places a lot of pressure 384 00:20:42,280 --> 00:20:44,440 Speaker 1: on the fat. How high can they go in terms 385 00:20:44,440 --> 00:20:48,200 Speaker 1: of rate hikes and not invert the yield curve? And 386 00:20:48,320 --> 00:20:51,080 Speaker 1: that's going to be probably the biggest problem they face 387 00:20:51,160 --> 00:20:54,320 Speaker 1: over the next twelve months. Kathy, what would you say 388 00:20:54,680 --> 00:20:57,080 Speaker 1: to the argument that the bond market, I don't want 389 00:20:57,080 --> 00:21:00,280 Speaker 1: to say is wrong, but it's distorted by quantitative e sing, 390 00:21:00,320 --> 00:21:04,680 Speaker 1: by the savings glut, by what's going on overseas. You know, 391 00:21:04,760 --> 00:21:08,640 Speaker 1: I don't think it's distorted, but those are certainly factual. UM, 392 00:21:08,680 --> 00:21:12,800 Speaker 1: that's actual evidence for that can contribute to low bond yields. 393 00:21:12,840 --> 00:21:15,720 Speaker 1: And clearly, if there's one surprise that the Fed could 394 00:21:15,800 --> 00:21:19,360 Speaker 1: pull off, it would be quantitative typing. Right. If they 395 00:21:19,359 --> 00:21:21,600 Speaker 1: really wanted to see long term rates move up, they 396 00:21:21,600 --> 00:21:24,879 Speaker 1: could start selling bonds and reducing the size of the 397 00:21:24,880 --> 00:21:27,480 Speaker 1: balance sheet. I don't think that's going to happen anytime soon, 398 00:21:27,600 --> 00:21:29,560 Speaker 1: but that would certainly be one way to do it. 399 00:21:29,840 --> 00:21:32,560 Speaker 1: But I think the collective wisdom of the market here 400 00:21:32,680 --> 00:21:34,560 Speaker 1: is that, yeah, we have a lot of factors holding 401 00:21:34,560 --> 00:21:38,360 Speaker 1: down long term rates. The global um savings glut isn't 402 00:21:38,400 --> 00:21:41,600 Speaker 1: going to go away tomorrow, aging populations aren't going to 403 00:21:41,720 --> 00:21:46,280 Speaker 1: disappear tomorrow, and UM that continues to make demand at 404 00:21:46,320 --> 00:21:48,439 Speaker 1: the long end of the curve. For you know, twenty 405 00:21:48,480 --> 00:21:51,720 Speaker 1: thirty year paper very very strong, and that's the reality, 406 00:21:52,400 --> 00:21:54,760 Speaker 1: uh in the bond market. I think that's reflective in 407 00:21:54,800 --> 00:21:58,280 Speaker 1: this flattening curve, and that's why you cool a terminal 408 00:21:58,359 --> 00:22:01,040 Speaker 1: right at one point seven pc. Cathe talked to us 409 00:22:01,080 --> 00:22:04,479 Speaker 1: therefore about looking out further along the risk spectrum. How 410 00:22:04,600 --> 00:22:06,240 Speaker 1: much are we going to see in our performance of 411 00:22:06,240 --> 00:22:08,520 Speaker 1: potentially high yield if you are going to see such 412 00:22:08,600 --> 00:22:12,520 Speaker 1: tamed long end in government? Yeah, you know, high yield 413 00:22:12,920 --> 00:22:16,919 Speaker 1: um and and investment grade have been doing great um. Again, 414 00:22:17,000 --> 00:22:20,879 Speaker 1: credit has good, strong fundamentals here. The problem is of 415 00:22:21,000 --> 00:22:24,160 Speaker 1: worth the yield, right, So you're not getting much spread 416 00:22:24,280 --> 00:22:28,640 Speaker 1: over treasuries to take that risk um. But it's hard 417 00:22:28,680 --> 00:22:31,240 Speaker 1: to see in this environment that credit won't continue to 418 00:22:31,359 --> 00:22:36,199 Speaker 1: outperform treasuries in two. It's really just a question of 419 00:22:36,280 --> 00:22:38,159 Speaker 1: how much risk you want to take in terms of 420 00:22:38,200 --> 00:22:40,960 Speaker 1: moving into the lower credits for the event that we 421 00:22:41,040 --> 00:22:43,199 Speaker 1: get some sort of an accident in the market, or 422 00:22:43,520 --> 00:22:45,600 Speaker 1: certainly if we were to get an inverted yield curve, 423 00:22:45,640 --> 00:22:48,280 Speaker 1: that would be a negative signal. So it's all good 424 00:22:48,280 --> 00:22:50,919 Speaker 1: except the yield in the credit world, but I do 425 00:22:51,000 --> 00:22:54,000 Speaker 1: think it will outperform in two Kathy, just finally something 426 00:22:54,080 --> 00:22:56,600 Speaker 1: later and I talked about in the last hour, what 427 00:22:56,600 --> 00:22:59,720 Speaker 1: would hawk Is surprise look like Tomorrow the Federal Reserve 428 00:22:59,760 --> 00:23:01,359 Speaker 1: can just give us a little bit more detail on 429 00:23:01,400 --> 00:23:06,160 Speaker 1: that on how they could surprise hawkishly the FMC. Yeah, 430 00:23:06,280 --> 00:23:09,000 Speaker 1: I think you know, they could raise that terminal rate. 431 00:23:09,160 --> 00:23:12,440 Speaker 1: I'm not sure that the result would be a sell 432 00:23:12,480 --> 00:23:15,320 Speaker 1: off at the long end. It might actually be a 433 00:23:15,440 --> 00:23:17,200 Speaker 1: rally at the long end if they did that. But 434 00:23:17,280 --> 00:23:20,600 Speaker 1: they could move up that terminal rate um or again 435 00:23:20,680 --> 00:23:24,720 Speaker 1: quantitative tightening. They could start announcing a roll off sooner 436 00:23:24,800 --> 00:23:27,199 Speaker 1: rather than later, and I think that that would be 437 00:23:27,240 --> 00:23:30,560 Speaker 1: a surprise to the market. Kathy, A ton of people 438 00:23:30,560 --> 00:23:32,560 Speaker 1: write again, do you know what they miss they missed 439 00:23:32,600 --> 00:23:37,080 Speaker 1: the most. She knows the piano. They missed, the piano 440 00:23:38,240 --> 00:23:41,760 Speaker 1: contro not let the piano win too. The office that 441 00:23:41,880 --> 00:23:45,040 Speaker 1: might be have you left open a window? We'll sort 442 00:23:45,080 --> 00:23:47,200 Speaker 1: the crane out for next time. Kathy Jones and Kathy, 443 00:23:47,560 --> 00:23:50,119 Speaker 1: thank you for everything this year. Just absolutely wonderful on 444 00:23:50,119 --> 00:23:52,320 Speaker 1: this show and others. Just a wonderful partner as we 445 00:23:52,320 --> 00:24:01,200 Speaker 1: worked through some really, really complex issues. Viser releasing two 446 00:24:01,200 --> 00:24:04,600 Speaker 1: separate studies of the COVID nineteen pill. They talked about 447 00:24:04,680 --> 00:24:08,480 Speaker 1: how they do seem to reduce hospitalizations and they prevent 448 00:24:09,720 --> 00:24:13,919 Speaker 1: of hospitalizations and unvaccinated individuals. However, they do not reduce 449 00:24:13,960 --> 00:24:18,280 Speaker 1: symptoms and healthier individuals. Uh. Talking about this is the 450 00:24:18,280 --> 00:24:21,000 Speaker 1: main key. How much do we start to pay attention 451 00:24:21,000 --> 00:24:24,639 Speaker 1: to hospitalizations and not infections? When do we cross that 452 00:24:24,760 --> 00:24:28,240 Speaker 1: threshold into treating this like the common cold rather than 453 00:24:28,320 --> 00:24:30,280 Speaker 1: something that must be stopped at all costs. It's not 454 00:24:30,400 --> 00:24:32,479 Speaker 1: a conversation right there with doctor Amish of down Chair, 455 00:24:32,520 --> 00:24:35,440 Speaker 1: the senior scholar at Jones helpkin sense of a house security. 456 00:24:35,640 --> 00:24:38,040 Speaker 1: Don't always go to cash out with you, said Telsa's question. 457 00:24:38,320 --> 00:24:40,960 Speaker 1: How much closer are we to the ultimate objective treating 458 00:24:40,960 --> 00:24:44,600 Speaker 1: this like the common code. Every time we get a 459 00:24:44,640 --> 00:24:46,760 Speaker 1: new tool to use to treat people to keep them 460 00:24:46,760 --> 00:24:49,040 Speaker 1: out of the hospital, we get closer to that goal. 461 00:24:49,080 --> 00:24:51,439 Speaker 1: And I think that the anti viral proviser is one 462 00:24:51,480 --> 00:24:54,040 Speaker 1: of those tools because it has a tremendous ability to 463 00:24:54,080 --> 00:24:57,359 Speaker 1: prevent people from becoming hospitalized. And that is what this 464 00:24:57,440 --> 00:24:59,480 Speaker 1: is all about. That's what flattening the curb was about 465 00:24:59,600 --> 00:25:03,280 Speaker 1: because rving hospital capacity, So I do think we're getting there. Obviously, 466 00:25:03,280 --> 00:25:05,000 Speaker 1: the vaccine is the best way to get there, and 467 00:25:05,040 --> 00:25:08,679 Speaker 1: we still have about the population that's not vaccinated, including 468 00:25:08,720 --> 00:25:11,880 Speaker 1: sixty million people eligible to be vaccinated. That's the biggest thing. 469 00:25:11,880 --> 00:25:13,600 Speaker 1: But I think the anti viral does bring us a 470 00:25:13,600 --> 00:25:16,040 Speaker 1: lot closer to that. We are looking also at the 471 00:25:16,040 --> 00:25:19,600 Speaker 1: omicron variant and anecdotal data out of South Africa showing 472 00:25:19,640 --> 00:25:22,600 Speaker 1: that perhaps it is less virulent. How much are we 473 00:25:22,720 --> 00:25:25,320 Speaker 1: looking at that being a breaking point to the upside 474 00:25:25,320 --> 00:25:27,360 Speaker 1: and getting us out of the pandemic. Have you got 475 00:25:27,440 --> 00:25:30,840 Speaker 1: enough data to get a sense of that yet? The 476 00:25:30,880 --> 00:25:33,560 Speaker 1: fact that all we're hearing about are mostly milder cases, 477 00:25:33,840 --> 00:25:36,440 Speaker 1: not completely mound. There are people being hospitalized, but less 478 00:25:36,480 --> 00:25:38,920 Speaker 1: I see you use less oxygen used. I think that's 479 00:25:38,960 --> 00:25:42,000 Speaker 1: reassuring because we haven't heard anything different. We know that 480 00:25:42,040 --> 00:25:43,840 Speaker 1: in the US, I think only one of our cases 481 00:25:44,040 --> 00:25:46,919 Speaker 1: have been hospitalized. It's a little bit difficult though, to 482 00:25:46,960 --> 00:25:49,200 Speaker 1: completely extrapolate that to the rest of the world, or 483 00:25:49,240 --> 00:25:51,320 Speaker 1: even to this country, because South Africa is a country 484 00:25:51,320 --> 00:25:54,159 Speaker 1: that's a little bit younger, has different comorbid conditions. We 485 00:25:54,200 --> 00:25:57,480 Speaker 1: want more data on unvaccinated people especially high risk, But 486 00:25:57,600 --> 00:26:00,360 Speaker 1: it does seem that for the unvaccinated, it's all might 487 00:26:00,400 --> 00:26:01,879 Speaker 1: be just the same as delta, and we may be 488 00:26:01,960 --> 00:26:05,120 Speaker 1: trading Delta for O macron. But if it's if it's 489 00:26:05,160 --> 00:26:08,760 Speaker 1: more transmissible, but even just just a little bit less virulent, 490 00:26:08,760 --> 00:26:10,879 Speaker 1: and may end up being a wash overall from what 491 00:26:10,880 --> 00:26:12,600 Speaker 1: we're dealing with. So it all depends on how this 492 00:26:12,640 --> 00:26:15,280 Speaker 1: all plays out in the US. We've been talking about 493 00:26:15,320 --> 00:26:19,280 Speaker 1: how the two course dose of either the Fizer BioNTech 494 00:26:19,560 --> 00:26:22,640 Speaker 1: or the moderna A vaccine does seem to have some 495 00:26:22,760 --> 00:26:25,840 Speaker 1: preventative aspect against O macron in terms of how ill 496 00:26:25,920 --> 00:26:28,600 Speaker 1: you get, but not necessarily infectionate. It seems a lot 497 00:26:28,680 --> 00:26:32,160 Speaker 1: less efficacious. People are saying that the booster is really important. 498 00:26:32,240 --> 00:26:34,120 Speaker 1: I know you said you did not get a booster. 499 00:26:34,240 --> 00:26:36,560 Speaker 1: Have you changed your mind based on some of the 500 00:26:36,560 --> 00:26:40,920 Speaker 1: incoming data. No, I haven't because I'm forty six years old, 501 00:26:40,920 --> 00:26:42,760 Speaker 1: I don't have any come morbid conditions, and I think 502 00:26:42,760 --> 00:26:46,639 Speaker 1: that a booster will just inevitably just kick a breakthrough 503 00:26:46,680 --> 00:26:49,640 Speaker 1: infection down the road. With these first generation vaccines. If 504 00:26:49,640 --> 00:26:51,560 Speaker 1: you're somebody that's above the age of sixty five, have 505 00:26:51,600 --> 00:26:53,960 Speaker 1: a high risk condition, got the J and J vaccine. 506 00:26:54,119 --> 00:26:57,040 Speaker 1: Those people absolutely should be getting boosted today before I 507 00:26:57,040 --> 00:26:58,880 Speaker 1: help you people. I think that's not going to change 508 00:26:58,880 --> 00:27:01,240 Speaker 1: the trajectory of omicron. It's not going to prevent omicron 509 00:27:01,440 --> 00:27:04,200 Speaker 1: from hitting our hospitals. What's going to prevent omicron from 510 00:27:04,200 --> 00:27:06,960 Speaker 1: causing a problem our first and second doses. And as 511 00:27:06,960 --> 00:27:09,800 Speaker 1: you said, the Fiser data shows that people are protected 512 00:27:09,960 --> 00:27:13,159 Speaker 1: against what matters severe disease with a two dose regiment 513 00:27:13,280 --> 00:27:15,000 Speaker 1: if you're healthy. And I think that's what we need 514 00:27:15,040 --> 00:27:17,200 Speaker 1: to be emphasizing, because if we continue to boost to 515 00:27:17,240 --> 00:27:20,160 Speaker 1: prevent mild illness, I don't think that this ever really ends. 516 00:27:20,200 --> 00:27:22,359 Speaker 1: And I think we really have to focus on severe disease. 517 00:27:22,560 --> 00:27:25,320 Speaker 1: And maybe there'll be a second generation vaccine that gives 518 00:27:25,359 --> 00:27:28,240 Speaker 1: us different types of protection than our first generation vaccines 519 00:27:28,280 --> 00:27:30,440 Speaker 1: and and and that that will change the equation. But 520 00:27:30,600 --> 00:27:32,359 Speaker 1: right now, I haven't seen anything that changes what I 521 00:27:32,400 --> 00:27:35,280 Speaker 1: would say for healthy, healthy people. I might be in 522 00:27:35,320 --> 00:27:37,160 Speaker 1: the minority, but there there are a few of us 523 00:27:37,160 --> 00:27:39,480 Speaker 1: that that really are focused on hospitalizations and not so 524 00:27:39,560 --> 00:27:43,679 Speaker 1: much preventing mild disease with these vaccines. Okay, so Dr Adlger, 525 00:27:43,720 --> 00:27:45,719 Speaker 1: as I sit here in the United Kingdom, and I 526 00:27:45,760 --> 00:27:49,439 Speaker 1: see the absolute focus on booster shots, perhaps over and 527 00:27:49,480 --> 00:27:53,600 Speaker 1: above getting the unvaccinated with the first realm of injections. 528 00:27:54,119 --> 00:27:56,400 Speaker 1: How does that pan out in the UK? Because we're 529 00:27:56,400 --> 00:27:58,640 Speaker 1: talking to Robert Read a little bit earlier, who's one 530 00:27:58,640 --> 00:28:00,399 Speaker 1: of the advisors to the government, and is saying that 531 00:28:00,400 --> 00:28:02,880 Speaker 1: the reason is to stop the transmissibility, to prevent people 532 00:28:02,880 --> 00:28:04,800 Speaker 1: getting and being able to spread if you help with 533 00:28:04,840 --> 00:28:07,040 Speaker 1: the boosters. But does that not work from your minds on, 534 00:28:08,240 --> 00:28:10,000 Speaker 1: it's not going to be the most significant way to 535 00:28:10,000 --> 00:28:13,000 Speaker 1: stop spread. The best way to stop spread is going 536 00:28:13,040 --> 00:28:16,359 Speaker 1: to still be to get the unvaccinated vaccinated. Because if 537 00:28:16,359 --> 00:28:18,880 Speaker 1: you look, it's not a surprise that this variant arose 538 00:28:18,960 --> 00:28:21,880 Speaker 1: likely in Southern Africa where vaccination rates are very low. 539 00:28:22,119 --> 00:28:24,840 Speaker 1: So if everybody in the UK that was eligible for 540 00:28:24,840 --> 00:28:27,119 Speaker 1: a booster got boosted today, you would still have an 541 00:28:27,119 --> 00:28:29,280 Speaker 1: omicron problem. And the same is true in the United 542 00:28:29,280 --> 00:28:31,920 Speaker 1: States of everybody that's eligible to get boosted, we still 543 00:28:31,920 --> 00:28:34,639 Speaker 1: would have hospitals busting at the seams in many rural 544 00:28:34,800 --> 00:28:39,080 Speaker 1: up counties. This is this is really about reaching the unvaccinated, 545 00:28:39,120 --> 00:28:41,880 Speaker 1: and many policymakers have given up, so they continue to 546 00:28:41,920 --> 00:28:44,040 Speaker 1: boost the people that are already vaccinated, but that's of 547 00:28:44,200 --> 00:28:47,080 Speaker 1: much less value than getting first and second doses into people. 548 00:28:47,120 --> 00:28:49,720 Speaker 1: And I think that we they've recalibrated to focus on 549 00:28:49,760 --> 00:28:51,960 Speaker 1: cases because they've given up on the unvaccinated. And I 550 00:28:51,960 --> 00:28:54,120 Speaker 1: think we can't give up on the unvaccinated because I 551 00:28:54,160 --> 00:28:55,840 Speaker 1: have to work in the hospital and that's all I 552 00:28:55,880 --> 00:28:58,000 Speaker 1: deal with. I don't deal with boosted people coming into 553 00:28:58,040 --> 00:29:00,760 Speaker 1: the hospital or fully vaccinated people come being into the hospital. 554 00:29:01,000 --> 00:29:03,200 Speaker 1: I deal with people who lack first and second doses. 555 00:29:03,400 --> 00:29:05,479 Speaker 1: And if we want to end this pandemic, we have 556 00:29:05,520 --> 00:29:07,520 Speaker 1: to get first and second doses into people in the US, 557 00:29:07,560 --> 00:29:11,400 Speaker 1: the UK, and all around the world. DCOR, what have 558 00:29:11,520 --> 00:29:14,720 Speaker 1: been the most effective ways of doing that bar making 559 00:29:14,760 --> 00:29:17,520 Speaker 1: it illegal not to? From your perspective, what are the 560 00:29:17,880 --> 00:29:21,680 Speaker 1: ways you convince your patients who are still thinking and 561 00:29:21,720 --> 00:29:24,200 Speaker 1: on the on the fence about it a certain degree? 562 00:29:25,600 --> 00:29:27,360 Speaker 1: The only thing you can do is talk to them 563 00:29:27,400 --> 00:29:29,320 Speaker 1: one on one and try and figure out what bit 564 00:29:29,360 --> 00:29:32,960 Speaker 1: of misinformation they swallowed, Offer them alternatives, look at their concerns. 565 00:29:32,960 --> 00:29:34,640 Speaker 1: Maybe they don't want an m R and A vaccine, 566 00:29:34,640 --> 00:29:36,520 Speaker 1: so you can you can direct them towards the J 567 00:29:36,640 --> 00:29:38,920 Speaker 1: and J vaccine. Or vice versa. Get them to get 568 00:29:38,960 --> 00:29:40,720 Speaker 1: at least one dose and then maybe wait a little 569 00:29:40,720 --> 00:29:42,800 Speaker 1: bit longer to get the second dose. There's ways to 570 00:29:42,840 --> 00:29:44,720 Speaker 1: work with people, but you have to actually sit down 571 00:29:44,720 --> 00:29:46,880 Speaker 1: and do it. It's not me on television that gets 572 00:29:46,920 --> 00:29:49,640 Speaker 1: people vaccinated. It's actually when I'm sitting in a room saying, 573 00:29:49,640 --> 00:29:51,680 Speaker 1: what are your concerns and let me let's go through 574 00:29:51,720 --> 00:29:53,720 Speaker 1: the ingredient. Let's let's go through this. That's how it 575 00:29:53,760 --> 00:29:56,200 Speaker 1: really works on a on a detailing basis, just like 576 00:29:56,240 --> 00:29:57,960 Speaker 1: if someone is making up a purchase that you have 577 00:29:58,080 --> 00:30:00,680 Speaker 1: to go through all their questions and then you I 578 00:30:00,720 --> 00:30:03,800 Speaker 1: think you do nudge them appropriately. But we didn't do that, 579 00:30:03,880 --> 00:30:07,040 Speaker 1: and we did a lot of pontificating and talking on 580 00:30:07,120 --> 00:30:08,960 Speaker 1: high and I don't think that really moved that group 581 00:30:09,040 --> 00:30:12,000 Speaker 1: of people who were vaccine hesitant. Doctor, appreciate you at 582 00:30:12,000 --> 00:30:15,520 Speaker 1: times and always your perspectable mos Hammnig inside the room. 583 00:30:15,640 --> 00:30:18,280 Speaker 1: Don't amish it down to that of John's Holkins. This 584 00:30:18,320 --> 00:30:22,120 Speaker 1: is the Bloomberg Surveillance Podcast. Thanks for listening. Join us 585 00:30:22,160 --> 00:30:25,320 Speaker 1: live weekdays from seven to ten a m. Eastern on 586 00:30:25,440 --> 00:30:29,680 Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six 587 00:30:29,760 --> 00:30:34,640 Speaker 1: to nine am for insight from the best in economics, finance, investment, 588 00:30:34,760 --> 00:30:39,800 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 589 00:30:39,880 --> 00:30:43,680 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course, on 590 00:30:43,800 --> 00:30:47,960 Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg.