1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferroll and Lisa Brownwitz Jaily, we bring you 3 00:00:13,320 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:32,240 Speaker 1: and of course, on the Bloomberg Terminal. Gary, Indiana, fanciest 6 00:00:32,280 --> 00:00:35,080 Speaker 1: city in the world for economics, the home of Joe 7 00:00:35,080 --> 00:00:39,400 Speaker 1: Stiglets and Paul Samuelson. Gary, Indiana went from a pandemic 8 00:00:39,600 --> 00:00:46,239 Speaker 1: nine unemployment down to seven percent unemployment. That indicates the 9 00:00:46,360 --> 00:00:51,760 Speaker 1: inequalities of a strange, strange economy. How great is the 10 00:00:51,840 --> 00:00:58,720 Speaker 1: inequality in this two thousand twenty one Well, the the 11 00:00:58,800 --> 00:01:05,920 Speaker 1: pandemic both exposed and exacerbated UH the inequalities. UH we 12 00:01:05,920 --> 00:01:10,480 Speaker 1: were slated for a very K shaped recovery, with those 13 00:01:10,520 --> 00:01:13,680 Speaker 1: at the top who had done well doing even better 14 00:01:13,760 --> 00:01:17,080 Speaker 1: and those of the bottom doing more poorly. The kind 15 00:01:17,120 --> 00:01:21,560 Speaker 1: of numbers that you cited suggests that that the kind 16 00:01:21,640 --> 00:01:28,839 Speaker 1: of very strong economic Recovery Act that UH was passed 17 00:01:29,200 --> 00:01:32,040 Speaker 1: at one point nine trillion dollars is beginning to have 18 00:01:32,200 --> 00:01:36,520 Speaker 1: some effect and mitigating at least UH some of that 19 00:01:37,000 --> 00:01:40,920 Speaker 1: fear of this very K shaped recovery. It's still there. 20 00:01:41,080 --> 00:01:45,080 Speaker 1: It's still very clear that in terms of wealth, uh, 21 00:01:45,120 --> 00:01:48,440 Speaker 1: those at the top have done very well and those 22 00:01:48,480 --> 00:01:54,320 Speaker 1: of the bottom are more in debt as not only 23 00:01:54,360 --> 00:01:58,080 Speaker 1: the visible debt, but the invisible debt that many of 24 00:01:58,080 --> 00:02:00,280 Speaker 1: them have not been able to pay their rent for year. 25 00:02:00,480 --> 00:02:04,440 Speaker 1: Professor Stiglets, I quote you often and the acclaimed Stiglets 26 00:02:04,520 --> 00:02:08,080 Speaker 1: essays of long ago on the little G that what 27 00:02:08,200 --> 00:02:11,240 Speaker 1: matters is the growth rate. You're acclaimed at this within 28 00:02:11,240 --> 00:02:15,440 Speaker 1: your teaching in many different spheres. Great, can we grow 29 00:02:15,520 --> 00:02:18,200 Speaker 1: our way out of these debts and deficits? Should we 30 00:02:18,240 --> 00:02:22,160 Speaker 1: have confidence and rely on the Stiglets little g to 31 00:02:22,320 --> 00:02:26,280 Speaker 1: help us get out of this fiscal mess? Yes, I 32 00:02:26,320 --> 00:02:28,600 Speaker 1: mean one way of looking at it is just a 33 00:02:28,600 --> 00:02:31,480 Speaker 1: little bit of history. At the end of World War Two, 34 00:02:31,880 --> 00:02:37,320 Speaker 1: our debt GDP ratio and then there was a bipartisan 35 00:02:37,360 --> 00:02:41,760 Speaker 1: consensus led by President Eisenhower Republican, that we ought to 36 00:02:42,639 --> 00:02:47,600 Speaker 1: spend heavily on infrastructure, education, R and D and low 37 00:02:47,639 --> 00:02:51,639 Speaker 1: and behold, in a couple of decades our debt GDP 38 00:02:51,840 --> 00:02:56,239 Speaker 1: ratio was down to under fifty So, yes, you can 39 00:02:56,320 --> 00:03:00,840 Speaker 1: grow out of the high uh levels of depth that 40 00:03:00,880 --> 00:03:04,440 Speaker 1: we have, and you know right now we're expecting to 41 00:03:04,560 --> 00:03:08,919 Speaker 1: have very strong growth for this year. We're actually uh 42 00:03:09,600 --> 00:03:12,560 Speaker 1: most forecasts suggest that at the end of this year 43 00:03:12,960 --> 00:03:16,440 Speaker 1: we will be better than we were projected to be 44 00:03:16,440 --> 00:03:19,240 Speaker 1: before the pandemic. Yep, And Professor, we're talking about the U. 45 00:03:19,280 --> 00:03:21,480 Speaker 1: S economy, of course, we're not talking about other parts 46 00:03:21,480 --> 00:03:25,120 Speaker 1: of the world like India, like Brazil. You've advocated for 47 00:03:25,360 --> 00:03:28,520 Speaker 1: the i P waiver that this administration is pushing through 48 00:03:28,880 --> 00:03:30,920 Speaker 1: at the moment of at least trying to achieve with 49 00:03:30,960 --> 00:03:33,160 Speaker 1: partners over the w t O. Why do you think 50 00:03:33,200 --> 00:03:38,880 Speaker 1: that's the right approach? Oh, well, we this is a pandemic. 51 00:03:38,880 --> 00:03:42,000 Speaker 1: The definition of a pandemic is that it's global, and 52 00:03:42,440 --> 00:03:49,880 Speaker 1: this particular pandemic is a kind of uh uh danger 53 00:03:50,320 --> 00:03:55,160 Speaker 1: because it keeps mutating and we don't want that those 54 00:03:55,200 --> 00:03:59,800 Speaker 1: more a fertile few field for those mutations. Say in India, 55 00:04:00,360 --> 00:04:05,000 Speaker 1: we want this disease to be put under control. We're 56 00:04:05,080 --> 00:04:08,920 Speaker 1: not nowhere is going to be safe until everywhere is safe. 57 00:04:09,360 --> 00:04:12,760 Speaker 1: And that's why, uh, it's really important to get the 58 00:04:12,840 --> 00:04:16,600 Speaker 1: vaccine out there as quickly as possible. Now, a major 59 00:04:16,680 --> 00:04:21,160 Speaker 1: impediment is access to the intellectual property. A whole variety 60 00:04:21,160 --> 00:04:28,200 Speaker 1: of of UH access is needed. The principle has been 61 00:04:28,279 --> 00:04:32,479 Speaker 1: long established. It was established almost two decades ago in 62 00:04:32,520 --> 00:04:36,840 Speaker 1: the midst of the HIV AIDS epidemic. UH. The question 63 00:04:37,000 --> 00:04:40,400 Speaker 1: is how to facilitate it. There's an urgency here and 64 00:04:40,520 --> 00:04:43,799 Speaker 1: that's the waiver is about. It's not changing the basic framework. 65 00:04:44,040 --> 00:04:47,039 Speaker 1: There was always the right to compose three licenses since 66 00:04:47,080 --> 00:04:50,039 Speaker 1: that h A I v as. The question is how 67 00:04:50,040 --> 00:04:53,120 Speaker 1: to happen make it happen quickly, and that's what the 68 00:04:53,800 --> 00:04:58,400 Speaker 1: temporary IP waiver is all about. Doctor Fanci has doubts 69 00:04:58,400 --> 00:05:01,320 Speaker 1: about that. He thinks that this could be an unwarranted, 70 00:05:01,360 --> 00:05:03,920 Speaker 1: unwelcome distraction, that it could take until the end of 71 00:05:03,960 --> 00:05:06,800 Speaker 1: twenty two early twenty three to transfer the technology, and 72 00:05:06,800 --> 00:05:09,039 Speaker 1: then Professor, we'd have to talk about expertise as well. 73 00:05:09,320 --> 00:05:11,920 Speaker 1: The starting position of this debate, everybody agrees with what 74 00:05:11,960 --> 00:05:14,440 Speaker 1: you said. We need to help the rest of the world, 75 00:05:14,680 --> 00:05:16,839 Speaker 1: and even the most selfish individual has to acknowledge there 76 00:05:16,880 --> 00:05:21,440 Speaker 1: is positive externalities associated with that. So before we even 77 00:05:21,480 --> 00:05:23,719 Speaker 1: have this debate, it's done. That's done. We need to 78 00:05:23,760 --> 00:05:25,920 Speaker 1: help the rest of the world. But Professor it's how 79 00:05:25,960 --> 00:05:28,960 Speaker 1: we help them more quickly. Do you acknowledge there are 80 00:05:29,000 --> 00:05:31,200 Speaker 1: other issues that need to be tackled and that this 81 00:05:31,240 --> 00:05:35,240 Speaker 1: could become an unwelcome distraction for the other nations that 82 00:05:35,279 --> 00:05:37,599 Speaker 1: we could could be doing more to loosen up the 83 00:05:37,600 --> 00:05:41,719 Speaker 1: strings our swear. Well, UH, there's something like the talking 84 00:05:41,760 --> 00:05:44,880 Speaker 1: points from their drug companies. But the point is that 85 00:05:45,040 --> 00:05:49,080 Speaker 1: the drug companies in the developing countries emerging markets do 86 00:05:49,200 --> 00:05:54,240 Speaker 1: have a capacity. UH. A barrier to their expanding their 87 00:05:54,279 --> 00:05:58,800 Speaker 1: comp capacity is the concern about intellectual property. You know, 88 00:05:59,320 --> 00:06:02,800 Speaker 1: as several companies in South Africa and in India are 89 00:06:02,800 --> 00:06:07,440 Speaker 1: already producing even the more advanced UH kinds of vaccines, 90 00:06:07,560 --> 00:06:11,080 Speaker 1: let alone the simpler kinds of vaccines, And it is 91 00:06:11,160 --> 00:06:14,600 Speaker 1: really intellectual property that is one of the barriers. Now, 92 00:06:14,760 --> 00:06:18,160 Speaker 1: another barrier that is related to the UH w t 93 00:06:18,320 --> 00:06:23,440 Speaker 1: A waiver is allowing it UH companies to more easily 94 00:06:23,600 --> 00:06:28,560 Speaker 1: export UH their their products. Under the standard w t 95 00:06:28,760 --> 00:06:33,680 Speaker 1: O framework, you can get a composory license that allows 96 00:06:33,680 --> 00:06:37,760 Speaker 1: you to manufacture for domestic use, but it makes it 97 00:06:38,000 --> 00:06:43,120 Speaker 1: more difficult to export. But in today's world of global 98 00:06:43,160 --> 00:06:47,440 Speaker 1: supply chains, where even the ingredients in a vaccine may 99 00:06:47,440 --> 00:06:53,280 Speaker 1: be made in several countries. The barriers to export are 100 00:06:53,320 --> 00:06:57,640 Speaker 1: a major barrier to expand in the world's globe supply. 101 00:06:58,240 --> 00:07:01,799 Speaker 1: So that's why it's imperative to have a temporary waiver 102 00:07:02,600 --> 00:07:05,440 Speaker 1: all these Professor, There is a question though about the 103 00:07:05,440 --> 00:07:08,320 Speaker 1: economic incentive for companies, and yes, there is this concern 104 00:07:08,360 --> 00:07:11,680 Speaker 1: by pharmaceutical companies that this removes the economic incentive. However, 105 00:07:12,000 --> 00:07:14,000 Speaker 1: there are some who argue this could pull them back 106 00:07:14,200 --> 00:07:17,520 Speaker 1: from innovating, from working harder to come up with new 107 00:07:17,560 --> 00:07:21,680 Speaker 1: drugs to combat whatever new disease comes our way. What's 108 00:07:21,680 --> 00:07:25,120 Speaker 1: your response to this, that the economic incentive is that 109 00:07:25,200 --> 00:07:29,320 Speaker 1: much lower for the pharmaceutical companies. That's absolutely nonsense. I mean, 110 00:07:29,320 --> 00:07:32,400 Speaker 1: first of all, let's let's be clear the basic research 111 00:07:32,680 --> 00:07:37,560 Speaker 1: on which UH these vaccines is based was financed by 112 00:07:37,560 --> 00:07:43,520 Speaker 1: the governments around the world. Secondly, the expansion of the 113 00:07:43,600 --> 00:07:49,960 Speaker 1: production and the development of these particular vaccines received enormous 114 00:07:50,520 --> 00:07:53,160 Speaker 1: government support, not only from the United States but from 115 00:07:53,200 --> 00:07:57,040 Speaker 1: other countries. The amounts of money that the drug companies 116 00:07:57,040 --> 00:07:59,560 Speaker 1: are going to get on these vaccines are going to 117 00:07:59,600 --> 00:08:05,040 Speaker 1: be you know, uh enormous returns uh well in excess 118 00:08:05,120 --> 00:08:09,000 Speaker 1: of any normal return. What we're talking about here is 119 00:08:09,040 --> 00:08:13,840 Speaker 1: whether they'll get say, percent return on their investments, uh 120 00:08:14,040 --> 00:08:17,640 Speaker 1: or a thousand percent return. Uh. You know, a thousand 121 00:08:17,640 --> 00:08:21,400 Speaker 1: percent return is enough incentive to make them undertook that research. 122 00:08:21,480 --> 00:08:24,080 Speaker 1: I don't worry about that. Well, there's also a question 123 00:08:24,120 --> 00:08:27,280 Speaker 1: that dovetails into the larger infrastructure spending that Joe Biden 124 00:08:27,320 --> 00:08:29,720 Speaker 1: has proposed. And just quickly, here are you in the 125 00:08:29,760 --> 00:08:33,719 Speaker 1: camp of Janet Yellen that taxes should be raised substantially 126 00:08:33,800 --> 00:08:37,040 Speaker 1: on companies And if so, why is it not just 127 00:08:37,120 --> 00:08:39,520 Speaker 1: sufficient to do deficit spending, which does not seem to 128 00:08:39,520 --> 00:08:43,679 Speaker 1: have had a problem for this country. Well, I do 129 00:08:43,760 --> 00:08:50,760 Speaker 1: agree that eventually we need to correct our distorted tax system, which, 130 00:08:51,520 --> 00:08:55,400 Speaker 1: in terms of the percentage of GDP that is raised 131 00:08:55,400 --> 00:09:00,320 Speaker 1: in taxes, is insufficient to finance uh a century economy 132 00:09:00,320 --> 00:09:04,200 Speaker 1: where you need infrastructure, research, education, a whole host of 133 00:09:05,080 --> 00:09:09,920 Speaker 1: public needs to make a well functioning economic society. Uh. 134 00:09:10,080 --> 00:09:12,839 Speaker 1: We also have a distorted tax system which is less 135 00:09:12,840 --> 00:09:17,600 Speaker 1: progressive than other countries, less progressive than than it should be, 136 00:09:17,640 --> 00:09:21,760 Speaker 1: particularly given the enormous increase in equality over the last 137 00:09:21,760 --> 00:09:28,240 Speaker 1: four decades. UM. So the question is really when of timing, uh, 138 00:09:28,320 --> 00:09:32,360 Speaker 1: you know, basic uh law of economics is uh scarcity 139 00:09:32,360 --> 00:09:37,320 Speaker 1: of resources. Uh and uh we've have we've not we've 140 00:09:37,480 --> 00:09:44,040 Speaker 1: we've underutilized our resources. We have some capacity to expand production, 141 00:09:44,440 --> 00:09:49,920 Speaker 1: but eventually we will reach capacity constraints and then we 142 00:09:50,000 --> 00:09:54,160 Speaker 1: will have to decide how our resources get allocated. And 143 00:09:54,320 --> 00:09:58,000 Speaker 1: that's when the issues of taxes becomes your Maine. I 144 00:09:58,040 --> 00:10:01,120 Speaker 1: won't get about the efficient allocation of resources with a 145 00:10:01,160 --> 00:10:07,280 Speaker 1: Nova laureate, so we'll leave it there, Professor, Columbia Business School, University. 146 00:10:07,280 --> 00:10:10,360 Speaker 1: Professor used the arrogance in the past term, but I'm 147 00:10:10,360 --> 00:10:18,480 Speaker 1: not gonna take it that far. This morning, Okay, we 148 00:10:18,679 --> 00:10:22,080 Speaker 1: halt here on our economics financial investment and try to 149 00:10:22,160 --> 00:10:25,160 Speaker 1: figure out what this vaccination program means. We've gone out 150 00:10:25,200 --> 00:10:28,240 Speaker 1: and found a token grandfather who will actually see his 151 00:10:28,360 --> 00:10:31,800 Speaker 1: grandchildren for the first time since time began. David Blanche 152 00:10:31,840 --> 00:10:35,920 Speaker 1: Flower joins us grandfather hanover, New Hampshire. This morning, Danny, 153 00:10:35,960 --> 00:10:39,280 Speaker 1: the kids show up here in the coming days, absolutely 154 00:10:39,360 --> 00:10:42,440 Speaker 1: first time in fifteen months. There, My grandkids are coming today. 155 00:10:42,520 --> 00:10:45,560 Speaker 1: So you know, things are starting to get back to normal. 156 00:10:45,679 --> 00:10:48,640 Speaker 1: And that's the story we're hearing on the economy, of course, 157 00:10:48,679 --> 00:10:51,199 Speaker 1: but it's you know, but it's slow progress. I mean, 158 00:10:51,200 --> 00:10:54,160 Speaker 1: we've seen fast recovery, but never back to where we 159 00:10:54,160 --> 00:10:57,640 Speaker 1: were before this awful pandemic. Hid I want to go 160 00:10:57,720 --> 00:11:00,120 Speaker 1: back to the distinction of your book, The Wage of 161 00:11:00,120 --> 00:11:03,080 Speaker 1: a Million years Ago, David blanche Flower very simply here 162 00:11:03,360 --> 00:11:06,800 Speaker 1: there's a mystery here to what wage dynamics will do 163 00:11:07,240 --> 00:11:11,880 Speaker 1: as we bring on millions of service sector lower wage employees. 164 00:11:12,240 --> 00:11:17,800 Speaker 1: Are you worried about why rising wages and benefits? Um? No, 165 00:11:18,760 --> 00:11:21,480 Speaker 1: I've been. I've been worried about the lack of rise 166 00:11:21,679 --> 00:11:25,120 Speaker 1: of wages and benefits over the last fifteen years or so. 167 00:11:25,800 --> 00:11:28,520 Speaker 1: And obviously the big puzzle in the data is that 168 00:11:29,000 --> 00:11:32,680 Speaker 1: we've actually seen wage growth which is so strong it 169 00:11:32,800 --> 00:11:35,160 Speaker 1: just makes no sense. So when we saw the unemployment 170 00:11:35,240 --> 00:11:38,400 Speaker 1: rate in the US go from four to fifteen, we 171 00:11:38,440 --> 00:11:41,640 Speaker 1: saw wage growth go from three to eight. And the 172 00:11:41,679 --> 00:11:44,840 Speaker 1: reason for that has been obviously the dropout at the 173 00:11:44,880 --> 00:11:47,760 Speaker 1: low end of the wage distribution. So folks like me 174 00:11:47,840 --> 00:11:51,880 Speaker 1: trying to understand what's happening to wages, it's pretty complicated. 175 00:11:51,920 --> 00:11:53,720 Speaker 1: I was looking at the same data for the UK 176 00:11:53,880 --> 00:11:56,240 Speaker 1: today that the Bank having are going to look at, 177 00:11:56,360 --> 00:11:59,280 Speaker 1: and it's just this confusing. There there's an election going 178 00:11:59,280 --> 00:12:01,720 Speaker 1: on in Scottland. And if you look in Scotland today, 179 00:12:01,760 --> 00:12:05,280 Speaker 1: the unemployer rates Scotland is lower than it was in March, 180 00:12:06,679 --> 00:12:08,760 Speaker 1: and so that the data in the labor market are 181 00:12:08,800 --> 00:12:11,200 Speaker 1: pretty puzzling, and a lot of it has to do 182 00:12:11,280 --> 00:12:15,760 Speaker 1: with furloughed workers bottom of the wage distribution dropping out, 183 00:12:16,240 --> 00:12:19,600 Speaker 1: and in a sense that certainly the argument that I'm 184 00:12:19,600 --> 00:12:24,400 Speaker 1: gonna worry about wages really picking up seems most unlikely 185 00:12:24,480 --> 00:12:27,840 Speaker 1: to me. People talk about shortages, but there's plenty of 186 00:12:27,920 --> 00:12:31,360 Speaker 1: labor out there. There's many firms that haven't recovered and 187 00:12:31,480 --> 00:12:34,120 Speaker 1: probably going to close. So I think adjustment is going 188 00:12:34,160 --> 00:12:36,400 Speaker 1: to be complicated. But the last thing in the world 189 00:12:36,400 --> 00:12:39,480 Speaker 1: I really care about is that wages are going to explode. 190 00:12:39,640 --> 00:12:42,440 Speaker 1: They are not Danny for regulatory reasons. Let's avoid the 191 00:12:42,480 --> 00:12:45,320 Speaker 1: domestic politics talk over in the UK and focus on 192 00:12:45,360 --> 00:12:47,280 Speaker 1: the labor market here in the United States if we can. 193 00:12:47,600 --> 00:12:50,840 Speaker 1: The world has come to you every single Payrolls Friday 194 00:12:51,080 --> 00:12:52,880 Speaker 1: used to come on Bloomberg Radio with Tom and I 195 00:12:52,920 --> 00:12:55,400 Speaker 1: and we talk about the labor market. And you were 196 00:12:55,400 --> 00:12:57,040 Speaker 1: the class clown. You were the guy that came out 197 00:12:57,080 --> 00:12:59,560 Speaker 1: and said, look, you're wrong, You're all wrong, and everyone said, Oh, 198 00:12:59,600 --> 00:13:02,520 Speaker 1: here goes Danny. Danny going at it again. The labor 199 00:13:02,559 --> 00:13:05,000 Speaker 1: market's not tight. Look at where unemployment is. The guy's 200 00:13:05,000 --> 00:13:07,599 Speaker 1: an idiot, Danny. Everyone agrees with you. Now, So I 201 00:13:07,640 --> 00:13:09,600 Speaker 1: want to ask you, when you look at the labor 202 00:13:09,640 --> 00:13:12,120 Speaker 1: market and months and quarters to come, what's the data 203 00:13:12,160 --> 00:13:13,880 Speaker 1: point you'll actually be looking at. If it's not the 204 00:13:13,960 --> 00:13:17,880 Speaker 1: unemployment rate, what is it? Well? Yeah, well, I've certainly 205 00:13:17,920 --> 00:13:20,480 Speaker 1: looked at other measures of labor market slack. So I 206 00:13:20,559 --> 00:13:24,800 Speaker 1: like the employment rate, unlike the under employment rate, but 207 00:13:24,880 --> 00:13:27,880 Speaker 1: particularly parts on for economic reasons. But I think the 208 00:13:27,960 --> 00:13:32,000 Speaker 1: adjustment of wages are really the big story. I mean 209 00:13:33,080 --> 00:13:35,439 Speaker 1: that Shocked just talked about the curd in the US. 210 00:13:35,840 --> 00:13:37,679 Speaker 1: It's a it's a big puzzle. And I think if 211 00:13:37,679 --> 00:13:40,480 Speaker 1: you look back, if you look back at what happened 212 00:13:40,480 --> 00:13:42,800 Speaker 1: in the US between two thousand and fifteen and eighteen 213 00:13:42,800 --> 00:13:45,760 Speaker 1: and what the Fed did in essence, they didn't listen 214 00:13:45,800 --> 00:13:48,599 Speaker 1: to what I said. They said, oh we're going to 215 00:13:48,720 --> 00:13:51,719 Speaker 1: raise rates, there's a full employment coming, wage growth is 216 00:13:51,760 --> 00:13:55,319 Speaker 1: about to come. That didn't happen. J Power has sort 217 00:13:55,360 --> 00:13:57,560 Speaker 1: of given them mere culprat. But I think what we 218 00:13:57,600 --> 00:14:00,520 Speaker 1: have to watch is what happens to wage growth? What 219 00:14:00,679 --> 00:14:04,880 Speaker 1: measures really are there suggesting that the labor market is 220 00:14:04,960 --> 00:14:06,800 Speaker 1: very tight. And I think the story I've said to 221 00:14:06,800 --> 00:14:09,800 Speaker 1: you many times or along period, which other people disagree with, 222 00:14:09,960 --> 00:14:13,880 Speaker 1: was the unemployment can surprise on the low side, and 223 00:14:13,960 --> 00:14:17,320 Speaker 1: basically we should sit and wait and I'll allow the 224 00:14:17,360 --> 00:14:20,000 Speaker 1: economy to adjust. And I think that's where we go. 225 00:14:20,080 --> 00:14:22,120 Speaker 1: So I'm going to really watch wage birth. I got 226 00:14:22,160 --> 00:14:24,680 Speaker 1: to see how it progresses, but I'm gonna watch it 227 00:14:24,720 --> 00:14:27,480 Speaker 1: come down as people come out of furlough, as they 228 00:14:27,480 --> 00:14:30,920 Speaker 1: come out of lockdowns that they've been in, and and 229 00:14:31,000 --> 00:14:33,960 Speaker 1: see and see what recovery comes. But but I think 230 00:14:33,960 --> 00:14:36,240 Speaker 1: we just sit and wait and watch, and that's the 231 00:14:36,360 --> 00:14:38,400 Speaker 1: right strategy of the FED. I listened to j Cal 232 00:14:38,680 --> 00:14:41,680 Speaker 1: I thought he was fantastic, absolutely got it. But if 233 00:14:41,680 --> 00:14:44,080 Speaker 1: you like he's just been saved what I've said over 234 00:14:44,080 --> 00:14:47,200 Speaker 1: the last five years, which people disagree with but essentially 235 00:14:47,240 --> 00:14:49,480 Speaker 1: turned out to be right. You need to understand what's 236 00:14:49,480 --> 00:14:52,880 Speaker 1: happened in the labor market, and that's where the adjustment is. 237 00:14:52,880 --> 00:14:55,120 Speaker 1: But you want to look at multiple indicate and remember 238 00:14:55,120 --> 00:14:58,480 Speaker 1: that the employment rate never has got back to where 239 00:14:58,480 --> 00:15:01,920 Speaker 1: it was in two thousand and eight never did, and 240 00:15:01,920 --> 00:15:04,160 Speaker 1: I think that was a mistake. Most people made it. 241 00:15:04,320 --> 00:15:06,720 Speaker 1: Lots of commentators on Bloomberg I spoke to him anytimes, 242 00:15:06,880 --> 00:15:09,480 Speaker 1: just got it wrong. Well, Danny, There's also a question 243 00:15:09,520 --> 00:15:13,320 Speaker 1: about what policies could materially increase wages going forward, and 244 00:15:13,360 --> 00:15:16,440 Speaker 1: we hear this increasingly from the Biden administration with the 245 00:15:16,480 --> 00:15:19,480 Speaker 1: taxes that he's proposed, as well as the support of unions. 246 00:15:19,600 --> 00:15:24,600 Speaker 1: What policies traditionally in your economic research have effectively raised wages, 247 00:15:24,720 --> 00:15:30,440 Speaker 1: increased productivity, made a fairer labor market goal a tough 248 00:15:30,560 --> 00:15:34,080 Speaker 1: I mean, the first answer is you move towards full employment, 249 00:15:34,520 --> 00:15:38,160 Speaker 1: but also you give incentives for firms to hire people. 250 00:15:38,480 --> 00:15:40,680 Speaker 1: I mean, one of the stories about capital and labor 251 00:15:40,800 --> 00:15:44,080 Speaker 1: is why firms invest in capital is because it's relative 252 00:15:44,200 --> 00:15:48,920 Speaker 1: prices lower, so you try and make the labor price lower. Um. 253 00:15:49,040 --> 00:15:51,360 Speaker 1: I mean the story about unions. I mean, unions are 254 00:15:51,360 --> 00:15:54,840 Speaker 1: fine if you can generate raises in productivity. So I 255 00:15:54,920 --> 00:15:58,760 Speaker 1: think helped to make workers more productive. Help share in 256 00:15:59,480 --> 00:16:01,840 Speaker 1: profits are available, And I think one of the stories 257 00:16:01,880 --> 00:16:03,720 Speaker 1: we have to think about is for a very long 258 00:16:03,800 --> 00:16:07,880 Speaker 1: time firms were able to pay higher wages and chose 259 00:16:07,960 --> 00:16:10,840 Speaker 1: not to and the question is why not they paid 260 00:16:10,880 --> 00:16:14,320 Speaker 1: salaries to executives as on, so you can encourage firms 261 00:16:14,320 --> 00:16:17,240 Speaker 1: to hire people. You've given tax incentives to people, and 262 00:16:17,360 --> 00:16:20,200 Speaker 1: one of the big stories is you can give wage 263 00:16:20,240 --> 00:16:24,200 Speaker 1: incentives to people, earned income tax credits, the kind of thing. 264 00:16:24,440 --> 00:16:27,800 Speaker 1: But essentially you you start to say it's very important 265 00:16:27,800 --> 00:16:30,920 Speaker 1: to have a ship from labor to capital. Perhaps because 266 00:16:30,960 --> 00:16:33,800 Speaker 1: the balance moved to far in one direction, but I 267 00:16:33,840 --> 00:16:38,200 Speaker 1: like the idea moved towards form point and perhaps the 268 00:16:38,200 --> 00:16:40,880 Speaker 1: balance between labor and capital has to adjust. And I 269 00:16:41,000 --> 00:16:45,920 Speaker 1: certainly think the levels of inequality you sound like administration 270 00:16:45,960 --> 00:16:48,440 Speaker 1: is doing. With my friends Janet and CC. You sound 271 00:16:48,520 --> 00:16:51,240 Speaker 1: like a professor from Dartmouth. Danny. Let's cut to the chase, 272 00:16:51,280 --> 00:16:53,280 Speaker 1: and we don't have enough time to get into a 273 00:16:53,360 --> 00:16:55,720 Speaker 1: lecture you want. I earn a classroom up in Hanover, 274 00:16:55,760 --> 00:16:59,640 Speaker 1: New Hampshire, and we're talking about the unique politics of 275 00:16:59,680 --> 00:17:03,840 Speaker 1: the Eiden Democratic Party. How alone is Joe Biden and 276 00:17:04,000 --> 00:17:07,719 Speaker 1: wanting to get back to a labor vision from another time. 277 00:17:08,200 --> 00:17:10,840 Speaker 1: Is it a one off that evaporates when he's gone, 278 00:17:11,359 --> 00:17:13,800 Speaker 1: or is there a real new substance here for a 279 00:17:13,840 --> 00:17:17,680 Speaker 1: new labor vision in Centrist America. Yeah, I mean, I mean, 280 00:17:18,119 --> 00:17:20,359 Speaker 1: I think that's a really good question. I mean, I 281 00:17:20,400 --> 00:17:23,000 Speaker 1: think in a sense that I always thought the last 282 00:17:23,080 --> 00:17:26,520 Speaker 1: decade was the decade of the Central Banker. Maybe what 283 00:17:26,560 --> 00:17:29,280 Speaker 1: we've seen now is a new decade coming of the 284 00:17:29,359 --> 00:17:32,680 Speaker 1: labor commist. Well why do I mean that? Well, Janet 285 00:17:32,720 --> 00:17:37,720 Speaker 1: Yellen labor economists at Central Banker. But basically in her 286 00:17:38,119 --> 00:17:41,119 Speaker 1: in her acceptance speech, talked about the importance of, you know, 287 00:17:41,160 --> 00:17:44,879 Speaker 1: improving the labor monk, improving wages, improving jobs. C. C 288 00:17:45,080 --> 00:17:49,320 Speaker 1: rouse Um, chairman of the Council of Advised, another labor commist, 289 00:17:49,600 --> 00:17:54,520 Speaker 1: members of the Council of Economic obviously labor colms. And 290 00:17:54,560 --> 00:17:57,919 Speaker 1: the recognition is you've got to do something about the 291 00:17:58,040 --> 00:18:02,120 Speaker 1: labor market, not least those people who have been essentially 292 00:18:02,200 --> 00:18:05,600 Speaker 1: left behind. You've got to do something about real wages 293 00:18:05,640 --> 00:18:09,720 Speaker 1: in America, and especially do things about people with high 294 00:18:09,720 --> 00:18:13,040 Speaker 1: school education and high school proper, something about those folks. 295 00:18:13,080 --> 00:18:16,199 Speaker 1: So I think there's a recognition politically, a recognition, but 296 00:18:16,240 --> 00:18:18,560 Speaker 1: in terms of the labor market, we have to do 297 00:18:18,680 --> 00:18:21,679 Speaker 1: something about those people who have not who have not 298 00:18:21,720 --> 00:18:24,520 Speaker 1: benefited from the American dream. And I think the Biden 299 00:18:24,640 --> 00:18:28,200 Speaker 1: administration has recognized that. Look at who they have appointed. 300 00:18:28,520 --> 00:18:31,080 Speaker 1: So my I think Janet's talked a lot about that. 301 00:18:31,200 --> 00:18:33,760 Speaker 1: So I think the new recognition has to be we 302 00:18:34,240 --> 00:18:37,119 Speaker 1: really messed up what happened in the labor market. And 303 00:18:37,160 --> 00:18:40,040 Speaker 1: I think Biden's right, and he's moving in that direction 304 00:18:40,680 --> 00:18:43,840 Speaker 1: and looks like quite a lot of public support for it. Danny, 305 00:18:43,960 --> 00:18:46,080 Speaker 1: the world came to you on the labor market. It's 306 00:18:46,119 --> 00:18:49,199 Speaker 1: great to catch up, Danny Blanche flat downmouth professor of 307 00:18:49,280 --> 00:18:57,800 Speaker 1: economic right now in the dynamics of the market, the 308 00:18:57,840 --> 00:19:02,280 Speaker 1: correlations of the markets, Alanker joins us with Janice. Really 309 00:19:02,440 --> 00:19:04,879 Speaker 1: just a perfect time to talk to him. As you 310 00:19:04,920 --> 00:19:08,439 Speaker 1: know the mathematics of correlation, I would suggest the media 311 00:19:08,520 --> 00:19:14,080 Speaker 1: is pretty naive about its complexities. Discussed the complexities of 312 00:19:14,160 --> 00:19:19,560 Speaker 1: the odd correlation now between yield and equity. Yeah, um, 313 00:19:20,000 --> 00:19:23,040 Speaker 1: that that is. I think you've summed it up in 314 00:19:23,400 --> 00:19:27,439 Speaker 1: my opinion, that that correlation is the largest riff that 315 00:19:27,520 --> 00:19:30,760 Speaker 1: we believe investors face. And why I say that is 316 00:19:31,320 --> 00:19:34,960 Speaker 1: if you think about why these balanced portfolio, say these 317 00:19:34,960 --> 00:19:39,879 Speaker 1: strategic fifty fifty portfolio, the strategic sixty portfolio has done 318 00:19:39,920 --> 00:19:44,320 Speaker 1: so incredibly well over the last forty years. Has everything 319 00:19:44,320 --> 00:19:49,240 Speaker 1: to do about correlation. Um. Every single time equities over 320 00:19:49,320 --> 00:19:53,200 Speaker 1: the last thirty years has suffered a significant loss, bonds 321 00:19:53,200 --> 00:19:56,040 Speaker 1: have stepped up to help offset that loss. So that 322 00:19:56,160 --> 00:19:59,040 Speaker 1: correlation in recent times and thirty years is in a 323 00:19:59,080 --> 00:20:02,359 Speaker 1: long period of dabt uh um. That correlation in recent 324 00:20:02,440 --> 00:20:06,960 Speaker 1: times has been extremely negative. And the correlation I'm talking 325 00:20:06,960 --> 00:20:12,159 Speaker 1: about is the downside correlation. Now is it an equilibrium 326 00:20:12,280 --> 00:20:15,080 Speaker 1: or is it too good to be true for bonds 327 00:20:15,240 --> 00:20:20,160 Speaker 1: a to always hedge or ensure against equity risk and 328 00:20:20,240 --> 00:20:24,000 Speaker 1: be at the same time for bonds to yield tremendous 329 00:20:24,080 --> 00:20:26,960 Speaker 1: positive carry. Most would say that's too good to be 330 00:20:27,000 --> 00:20:31,080 Speaker 1: true because we all know insurance costs money. Insurance doesn't 331 00:20:31,119 --> 00:20:33,719 Speaker 1: come for free. So the past thirty years was an 332 00:20:33,720 --> 00:20:38,119 Speaker 1: abnomen Was it an anomaly? Um? If you look going 333 00:20:38,200 --> 00:20:41,440 Speaker 1: all the way back to the eighteen fifties, eight six, 334 00:20:42,040 --> 00:20:47,520 Speaker 1: that yeah, Unfortunately a lot of it, well unfortunately a 335 00:20:47,520 --> 00:20:49,399 Speaker 1: lot of us. I mean, it's a good point. A 336 00:20:49,440 --> 00:20:52,560 Speaker 1: lot of us don't remember periods of time where the 337 00:20:52,600 --> 00:20:56,680 Speaker 1: correlation between bonds and equities was not negative, where bonds 338 00:20:56,800 --> 00:21:00,560 Speaker 1: failed to diversify equities. But that was the norm, right, 339 00:21:00,720 --> 00:21:04,400 Speaker 1: And this is having ishe, And I mean, it's so 340 00:21:04,560 --> 00:21:08,879 Speaker 1: important to get away from the assumed exactly. And then 341 00:21:08,960 --> 00:21:12,359 Speaker 1: that's that's the complexity when it comes to correlations. And 342 00:21:12,440 --> 00:21:16,040 Speaker 1: just a quick empirical point which I think you might 343 00:21:16,080 --> 00:21:19,919 Speaker 1: find fascinating a lot of listeners might find fascinating. Ignoring 344 00:21:20,480 --> 00:21:23,760 Speaker 1: the period from night from the two thousand's to now, 345 00:21:24,760 --> 00:21:29,560 Speaker 1: the average returned to fixed income when equity suffered a 346 00:21:29,680 --> 00:21:34,200 Speaker 1: monthly return worse than three percent, So worse than minus 347 00:21:34,240 --> 00:21:38,840 Speaker 1: three percent was actually minus one percent, so that tail 348 00:21:38,920 --> 00:21:43,600 Speaker 1: correlation between bonds and equities was actually positive. Bonds did 349 00:21:43,680 --> 00:21:47,760 Speaker 1: not diversify equity draw down risk. And that makes perfect 350 00:21:47,800 --> 00:21:51,960 Speaker 1: sense if you're collecting yield and gaining risk premium by 351 00:21:52,040 --> 00:21:56,600 Speaker 1: holding bonds. Bonds shouldn't act as a hedge against equities 352 00:21:56,600 --> 00:21:59,960 Speaker 1: each and every time, um and and so going forward, 353 00:22:00,000 --> 00:22:04,720 Speaker 1: the resiliency of these balanced portfolios, of these strategic portfolios 354 00:22:04,760 --> 00:22:07,760 Speaker 1: has to be questioned, um which brings us to to 355 00:22:07,840 --> 00:22:11,439 Speaker 1: a very difficult period of time for acid owners. What 356 00:22:11,520 --> 00:22:15,080 Speaker 1: do you do, all right? Ask, so, now that the 357 00:22:15,119 --> 00:22:17,400 Speaker 1: winter skiing season is coming to an end, your portfolio 358 00:22:17,400 --> 00:22:19,959 Speaker 1: managers are actually coming back to the office, is what 359 00:22:20,000 --> 00:22:23,240 Speaker 1: are you telling them to do right here and now. 360 00:22:23,280 --> 00:22:26,680 Speaker 1: As we look at markets that are rich by many measures, 361 00:22:26,840 --> 00:22:29,000 Speaker 1: that have had a great run off the bottom, what 362 00:22:29,080 --> 00:22:33,280 Speaker 1: are you suggesting they think about in their portfolios? Great question. 363 00:22:33,359 --> 00:22:35,840 Speaker 1: So what we believe is the biggest risk out there 364 00:22:36,440 --> 00:22:39,240 Speaker 1: is what may unfold in the sixt income markets. UM. 365 00:22:39,240 --> 00:22:42,959 Speaker 1: We're big fans of using forecasted risk implied by option 366 00:22:43,080 --> 00:22:46,800 Speaker 1: prices to give us a picture into what may unfold. UM. 367 00:22:46,800 --> 00:22:50,160 Speaker 1: We use the option market estimates of both future upside 368 00:22:50,200 --> 00:22:54,640 Speaker 1: volatility and downside volatility as our crystal ball. UM said 369 00:22:54,640 --> 00:22:57,800 Speaker 1: crystal ball based on the collective wisdom of the markets, 370 00:22:57,840 --> 00:23:00,639 Speaker 1: and what this crystal ball is telling us, UM, and 371 00:23:00,680 --> 00:23:03,640 Speaker 1: it's the most single, most interesting observation that we see 372 00:23:03,680 --> 00:23:09,320 Speaker 1: today that there's great inflationary pressures, that there's great pressures 373 00:23:09,400 --> 00:23:13,679 Speaker 1: to increases and interest rates going forward. UM. Given that 374 00:23:14,720 --> 00:23:19,080 Speaker 1: we are telling clients and potential clients asset owners, you 375 00:23:19,160 --> 00:23:22,359 Speaker 1: really need to rethink the role that bonds play in 376 00:23:22,440 --> 00:23:28,000 Speaker 1: your portfolios. Bonds may no longer a hedge equity risks, 377 00:23:28,040 --> 00:23:32,280 Speaker 1: so you lose that diversification and be bonds given the 378 00:23:32,400 --> 00:23:35,960 Speaker 1: environment of low yields, given the environment that the central 379 00:23:36,000 --> 00:23:39,399 Speaker 1: banks have sucked out risk premium from bonds. Given the 380 00:23:39,520 --> 00:23:43,520 Speaker 1: richness you see in bonds, to carry on bonds maybe 381 00:23:43,520 --> 00:23:48,080 Speaker 1: non existent. UM. So one obvious way and direct way 382 00:23:48,119 --> 00:23:53,560 Speaker 1: to hedge that risk is to lighten up your bond exposure. UM. 383 00:23:53,680 --> 00:23:56,520 Speaker 1: There's ways you can lighten up your bond exposure but 384 00:23:56,560 --> 00:24:00,640 Speaker 1: at the same time keep the risk of your portfolio 385 00:24:00,760 --> 00:24:05,920 Speaker 1: more at moderate levels. Our research shows one great substitute 386 00:24:05,960 --> 00:24:09,800 Speaker 1: for holding bonds UM and say a fifty fifty portfolio 387 00:24:10,240 --> 00:24:14,199 Speaker 1: is simply to hold the portfolio, which is equities. So 388 00:24:14,240 --> 00:24:17,000 Speaker 1: you're earning and you're exposed to an asset which is 389 00:24:17,040 --> 00:24:20,840 Speaker 1: delivering positive risk premium, which is compensating you for the 390 00:24:20,920 --> 00:24:25,639 Speaker 1: risk that you're bearing. But by equity put options to 391 00:24:25,760 --> 00:24:29,560 Speaker 1: reduce that downside risk to a level more consistent with 392 00:24:29,720 --> 00:24:32,480 Speaker 1: say a fifty fifty portfolio, and in many ways you 393 00:24:32,520 --> 00:24:35,639 Speaker 1: then get get the best of both worlds. You're holding 394 00:24:35,680 --> 00:24:39,159 Speaker 1: assets where the risk premium exists, i e. Equities, and 395 00:24:39,200 --> 00:24:42,160 Speaker 1: you're buying protection to limit those losses so that downside 396 00:24:42,240 --> 00:24:45,199 Speaker 1: risk is more in line would say a sixty UM 397 00:24:45,359 --> 00:24:48,840 Speaker 1: A great alternative. Today where rates are low, bond risk 398 00:24:48,880 --> 00:24:51,840 Speaker 1: premium has disappeared, and in many ways the enemy of 399 00:24:51,880 --> 00:24:56,119 Speaker 1: inflations at the gates. So the enemy of bonds dividend growth, 400 00:24:56,240 --> 00:24:58,840 Speaker 1: I mean, is what we're talking about here is you know, 401 00:24:59,080 --> 00:25:01,760 Speaker 1: take your terminal, you out twelve months or sixty months 402 00:25:01,800 --> 00:25:04,359 Speaker 1: for that matter, and just lock in dividend growth and 403 00:25:04,400 --> 00:25:08,760 Speaker 1: say thank you. Yeah. Um, dividends are a great alternative 404 00:25:09,160 --> 00:25:13,280 Speaker 1: um to holding bonds, to getting that yield um anything 405 00:25:13,480 --> 00:25:17,800 Speaker 1: which is offering nice positive carry um in in a 406 00:25:17,960 --> 00:25:21,360 Speaker 1: period where you get inflation, you want to have that 407 00:25:21,400 --> 00:25:25,520 Speaker 1: money sooner rather than later. Hence you're seeing this great 408 00:25:25,680 --> 00:25:32,160 Speaker 1: rotation which really started uh September. There's great rotation away 409 00:25:32,240 --> 00:25:37,160 Speaker 1: from higher duration equities towards lower duration equities. Um. You're 410 00:25:37,200 --> 00:25:41,200 Speaker 1: seeing these mega cap tech names struggle. Why the rotation 411 00:25:41,240 --> 00:25:45,439 Speaker 1: into cyclicals and value names high dividend yielding names. Small 412 00:25:45,520 --> 00:25:50,000 Speaker 1: cap names are doing much much better. Um. So there's 413 00:25:50,040 --> 00:25:53,320 Speaker 1: just simple rules of economics you can follow to help 414 00:25:53,440 --> 00:25:56,960 Speaker 1: hedge inflation risk in a really simple way. You don't 415 00:25:56,960 --> 00:26:00,320 Speaker 1: have to go out and buy break even inflation swaps, 416 00:26:00,480 --> 00:26:02,560 Speaker 1: which are very difficult for anyone to buy, and you 417 00:26:02,560 --> 00:26:05,600 Speaker 1: can do simple things just like you articulated, Tom. Okay, 418 00:26:05,600 --> 00:26:07,080 Speaker 1: we're gonna have to leave it there, Ash, Thank you, 419 00:26:07,119 --> 00:26:13,520 Speaker 1: so much. Ash. I think her there. If you look 420 00:26:13,520 --> 00:26:15,840 Speaker 1: at the equity market price action, I've been pretty confused 421 00:26:15,840 --> 00:26:18,360 Speaker 1: by it. If you break down a sector price action yesterday, 422 00:26:18,440 --> 00:26:21,720 Speaker 1: Tom top of the pile, energy, financials, bottom of the pile. 423 00:26:21,840 --> 00:26:24,000 Speaker 1: You had second a mix, you had utilities in the mix. 424 00:26:24,160 --> 00:26:26,920 Speaker 1: If I showed you that equity snapshot, you would think 425 00:26:26,960 --> 00:26:30,360 Speaker 1: that real yields were inflecting higher. And that's not what's happening. Yeah, 426 00:26:30,359 --> 00:26:32,560 Speaker 1: I totally agree. You and I have gone back and 427 00:26:32,600 --> 00:26:34,000 Speaker 1: forth on this, and I think there's a lot of 428 00:26:34,000 --> 00:26:36,280 Speaker 1: good work out there on it. I would say there's 429 00:26:36,320 --> 00:26:39,000 Speaker 1: basically a hysteria of gloom out there. John. When I 430 00:26:39,000 --> 00:26:41,639 Speaker 1: look at standard of course five under coming from the 431 00:26:41,680 --> 00:26:45,520 Speaker 1: trend of two thousand seven, we exactly kissed up two 432 00:26:45,560 --> 00:26:48,760 Speaker 1: standard deviations and we've pulled back a little bit to 433 00:26:48,880 --> 00:26:52,000 Speaker 1: our extended one and a half standard deviations. That's not 434 00:26:52,080 --> 00:26:55,360 Speaker 1: a correction. It's not a bear market. It's stasis at 435 00:26:55,400 --> 00:26:57,800 Speaker 1: new high levels. I want to bring in challenge Canser 436 00:26:57,880 --> 00:27:00,359 Speaker 1: now of new Berger Berman on this topic. Else, Can 437 00:27:00,359 --> 00:27:01,919 Speaker 1: we just start there your thoughts and what's happening at 438 00:27:01,960 --> 00:27:04,600 Speaker 1: the botom market and what you can reconcile it with 439 00:27:04,640 --> 00:27:08,000 Speaker 1: what's happening at the equity market more recently. Look, I 440 00:27:08,000 --> 00:27:11,320 Speaker 1: think I think the equity market is is the volatility 441 00:27:11,440 --> 00:27:15,360 Speaker 1: driving the equity market is been driven by by ready speedbactors. 442 00:27:15,400 --> 00:27:20,080 Speaker 1: I think one is just overall speculation with retailing of 443 00:27:20,119 --> 00:27:22,119 Speaker 1: the market. I think it's more and more folks to 444 00:27:22,119 --> 00:27:25,159 Speaker 1: go back to work the retail thing or decline. And 445 00:27:25,160 --> 00:27:27,879 Speaker 1: then you have you have inflation fronts and center, where 446 00:27:28,280 --> 00:27:31,679 Speaker 1: where as you discussed, you have this debate around is 447 00:27:31,720 --> 00:27:35,520 Speaker 1: inflation contentory or is it more likely permanent? And and 448 00:27:35,600 --> 00:27:38,600 Speaker 1: for now, you know, a ten uere yields starting with 449 00:27:38,680 --> 00:27:41,800 Speaker 1: a one handle. I think the bone markut remains reasonably 450 00:27:41,880 --> 00:27:45,640 Speaker 1: calm that the inflation debate is more contentory. I will 451 00:27:45,800 --> 00:27:49,679 Speaker 1: question that over time. I think I think the bottom 452 00:27:49,680 --> 00:27:52,160 Speaker 1: market is going to move well before the Fed moves. 453 00:27:52,320 --> 00:27:55,359 Speaker 1: And then you have, you know, the volatility driven by 454 00:27:55,359 --> 00:27:58,800 Speaker 1: the factors and and it's small versus large value versus 455 00:27:58,840 --> 00:28:02,320 Speaker 1: growth and on a day to day basis, it's it's 456 00:28:02,440 --> 00:28:06,119 Speaker 1: those are the factors robing the volatility. I think over time, 457 00:28:06,560 --> 00:28:11,359 Speaker 1: as we've discussed before, it's just been an awesome earning 458 00:28:11,400 --> 00:28:14,480 Speaker 1: season where we're company over nine of the companies have 459 00:28:15,680 --> 00:28:19,159 Speaker 1: come to the beaten expectations, and as earnings goes, so 460 00:28:19,280 --> 00:28:22,359 Speaker 1: goes the market. And that continues to be through this year. Charles, 461 00:28:22,440 --> 00:28:24,440 Speaker 1: Good morning time Keenan, New York. You know, Charles, I 462 00:28:24,600 --> 00:28:26,760 Speaker 1: I look at where we are off a two thousand 463 00:28:26,840 --> 00:28:30,680 Speaker 1: nine log chart on standard ports, and we exactly went 464 00:28:30,760 --> 00:28:34,800 Speaker 1: up and kissed two standard deviations. Extended. Okay, the markets 465 00:28:34,880 --> 00:28:37,840 Speaker 1: a little bit extended now. But when you know and 466 00:28:37,840 --> 00:28:43,280 Speaker 1: Newberger Berman monitor corporate revenues corporate earnings, can you suggest 467 00:28:43,400 --> 00:28:47,440 Speaker 1: we're extended out one year, two years, three years, or 468 00:28:47,480 --> 00:28:50,800 Speaker 1: are we building an underpinning of cash flow that will 469 00:28:50,840 --> 00:28:56,120 Speaker 1: sustain this market? What will sustain the market is earnings 470 00:28:56,200 --> 00:29:00,920 Speaker 1: driven by by economic growth. And we should all recognize 471 00:29:01,000 --> 00:29:05,280 Speaker 1: that that the economy right now is experiencing a demand 472 00:29:05,360 --> 00:29:08,480 Speaker 1: shark the likes of which we haven't seen since World 473 00:29:08,480 --> 00:29:12,080 Speaker 1: War Two, and it's been driven by we have three 474 00:29:12,120 --> 00:29:15,640 Speaker 1: factors in the economy all pedal to the medal at 475 00:29:15,640 --> 00:29:20,120 Speaker 1: the same time. The consumer, the corporation, and both fiscal 476 00:29:20,120 --> 00:29:23,440 Speaker 1: and monetary policy are all in it together at the 477 00:29:23,600 --> 00:29:27,160 Speaker 1: same time. And it's slowly going to be coordinated globally 478 00:29:27,280 --> 00:29:30,360 Speaker 1: and and and as those factors continue to play through, 479 00:29:30,840 --> 00:29:32,680 Speaker 1: you're going to get more and more earning. So we 480 00:29:32,760 --> 00:29:35,160 Speaker 1: started this yet a hundred and eighty five, we're close 481 00:29:35,240 --> 00:29:39,080 Speaker 1: to two hundred down SMP earnings. Next year, after adjusting 482 00:29:39,120 --> 00:29:42,840 Speaker 1: for higher taxes, you probably get another ten percent growth. 483 00:29:42,840 --> 00:29:45,640 Speaker 1: So I think, I think follow the earnings. I think 484 00:29:45,680 --> 00:29:50,040 Speaker 1: we underwrite businesses hard to underwrite price volatility day to day. 485 00:29:50,520 --> 00:29:52,720 Speaker 1: But I think the demand shark is going to play 486 00:29:52,720 --> 00:29:55,880 Speaker 1: out for far longer than people expect, as as as 487 00:29:56,160 --> 00:29:59,920 Speaker 1: as corporations, consumers, and governments continue to behave in the 488 00:30:00,040 --> 00:30:03,600 Speaker 1: way they behaved over the recent past. Charles, just real 489 00:30:03,720 --> 00:30:07,280 Speaker 1: quick here. Leon Cooperman yesterday described himself as a fully 490 00:30:07,360 --> 00:30:12,360 Speaker 1: invested bear. Are you on the same page. You've got 491 00:30:12,360 --> 00:30:15,640 Speaker 1: to believe in innovation, prosperity and growth over time, and 492 00:30:15,640 --> 00:30:18,400 Speaker 1: and and so guessing market direction is is not my 493 00:30:18,480 --> 00:30:21,000 Speaker 1: true north. I'm trying to be an authentic long term 494 00:30:21,000 --> 00:30:24,680 Speaker 1: investor focused on businesses that compound. And what I do 495 00:30:24,800 --> 00:30:26,480 Speaker 1: know is that when business if you can find a 496 00:30:26,520 --> 00:30:29,320 Speaker 1: business that can grow fifteen percent here for three years, 497 00:30:29,840 --> 00:30:33,080 Speaker 1: you have fifty more earning three years from today. That 498 00:30:33,160 --> 00:30:36,800 Speaker 1: builds in an awful lot of protection on any price volatility. 499 00:30:37,080 --> 00:30:40,080 Speaker 1: So I tend to be a reasonable optimist. I feel 500 00:30:40,240 --> 00:30:44,200 Speaker 1: emboldened by what transpired last year by innovation and governments 501 00:30:44,240 --> 00:30:48,080 Speaker 1: and companies coming together to solve to solve something just 502 00:30:48,280 --> 00:30:52,400 Speaker 1: awful and and and being optimistic has has always paid 503 00:30:52,440 --> 00:30:55,640 Speaker 1: off long term. And there's nothing about risk assets today 504 00:30:55,760 --> 00:30:59,680 Speaker 1: that suggests to me in total that that that that 505 00:31:00,080 --> 00:31:01,760 Speaker 1: of that you know. Of course the parts of the 506 00:31:01,840 --> 00:31:06,440 Speaker 1: market with speculation is rampant um and with stories are 507 00:31:06,480 --> 00:31:10,280 Speaker 1: so great that can't be validated nor refuted. But but 508 00:31:10,440 --> 00:31:14,120 Speaker 1: focused on businesses with that aire solving real problems that 509 00:31:14,200 --> 00:31:16,959 Speaker 1: have long term modes. And and I think investors are 510 00:31:16,960 --> 00:31:19,280 Speaker 1: going to be just great. It's gonna see you and 511 00:31:19,280 --> 00:31:21,200 Speaker 1: it's going to catch you up. Chiles Cancer that new 512 00:31:21,240 --> 00:31:30,040 Speaker 1: Berger Berman Long short fund senior portfolio manager right now 513 00:31:30,040 --> 00:31:33,040 Speaker 1: on this pharmacy upward, we get lucky. Jennifer Noozle joins us. 514 00:31:33,080 --> 00:31:35,800 Speaker 1: She's been with us before with JOHNS. Tompkins Center for 515 00:31:35,840 --> 00:31:38,400 Speaker 1: Health Security. And Jennifer, I want to go to that 516 00:31:38,600 --> 00:31:43,160 Speaker 1: moment in organic chemistry where you realized that Rutgers an 517 00:31:43,280 --> 00:31:52,800 Speaker 1: environmental organic chemistry. Oh, this my recurring nightmare question. It's hard. 518 00:31:53,040 --> 00:31:56,440 Speaker 1: I mean method lethal keytone in organic was easy. And 519 00:31:56,480 --> 00:31:59,200 Speaker 1: then I opened Morrison emboyed up and I said, these 520 00:31:59,200 --> 00:32:03,440 Speaker 1: people are freaking geniuses. Let's go back. Yeah, you know 521 00:32:03,600 --> 00:32:06,840 Speaker 1: it all back, Let's go to the gross underestimation here 522 00:32:07,400 --> 00:32:12,480 Speaker 1: of the geniuses actually manufacturing m r n A. They 523 00:32:12,560 --> 00:32:17,040 Speaker 1: passed Morrison, and boy didn't they They did, they did, 524 00:32:17,040 --> 00:32:19,920 Speaker 1: and thank goodness for it, because these vaccines are lifesavers literally, 525 00:32:20,680 --> 00:32:23,760 Speaker 1: well their lifesavers literally. But I think there's an underestimation 526 00:32:23,800 --> 00:32:27,960 Speaker 1: here of those intellectual rights of those drug companies. How 527 00:32:28,000 --> 00:32:31,280 Speaker 1: do we move from intellectual rights to the crying need 528 00:32:31,360 --> 00:32:35,480 Speaker 1: to vaccinate India? Yeah, that's exactly the question. I mean, 529 00:32:35,800 --> 00:32:39,080 Speaker 1: we completely understandable. Um, you know, I think in the 530 00:32:39,080 --> 00:32:41,400 Speaker 1: case of Maderna that the good news is that you know, 531 00:32:41,440 --> 00:32:45,120 Speaker 1: the US government, um, you know developed the vaccine. The 532 00:32:45,400 --> 00:32:47,560 Speaker 1: I p on that, but it is it is an 533 00:32:47,640 --> 00:32:51,040 Speaker 1: urgent situation for us to address because we do have 534 00:32:51,080 --> 00:32:52,840 Speaker 1: a crying need and it's not just an India. I mean, 535 00:32:52,840 --> 00:32:56,000 Speaker 1: the situation in India is just staggering. Yesterday they broke 536 00:32:56,040 --> 00:32:58,520 Speaker 1: get another record of you know, more than a four 537 00:32:58,560 --> 00:33:01,200 Speaker 1: into thousand cases. We know that's probably a gross under 538 00:33:01,320 --> 00:33:04,239 Speaker 1: estimate of the number of infections that are occurring um 539 00:33:04,280 --> 00:33:07,280 Speaker 1: nearly four thousand deaths you know, in a single day, um. 540 00:33:07,280 --> 00:33:11,760 Speaker 1: But we're also seeing staggeringly high case accounts in case acceleration, 541 00:33:11,800 --> 00:33:15,000 Speaker 1: and a number of other countries um that are you know, 542 00:33:15,480 --> 00:33:18,360 Speaker 1: ill equipped to handle it themselves as well. So we 543 00:33:18,440 --> 00:33:20,600 Speaker 1: have to figure this out. There is an urgent need 544 00:33:20,640 --> 00:33:22,920 Speaker 1: for vaccines across the globe, and we just simply don't 545 00:33:22,920 --> 00:33:24,560 Speaker 1: have enough. We need to make more. So we need 546 00:33:24,600 --> 00:33:27,320 Speaker 1: to figure out whatever path is possible to making more 547 00:33:27,400 --> 00:33:29,880 Speaker 1: vaccines as soon as possible. That's the only way we're 548 00:33:29,880 --> 00:33:32,480 Speaker 1: all going to feel normal about this situation. Even as 549 00:33:32,480 --> 00:33:34,680 Speaker 1: we roll out vaccines here in the US, We've got 550 00:33:34,720 --> 00:33:37,080 Speaker 1: to make more. That's the conclusion, without a doubt. That's 551 00:33:37,120 --> 00:33:39,000 Speaker 1: his stonic position. So doctor, let's try and ask the 552 00:33:39,080 --> 00:33:41,920 Speaker 1: right questions. At least that's my job. What do you 553 00:33:41,960 --> 00:33:44,200 Speaker 1: think is holding that vaccine supply? And do you think 554 00:33:44,200 --> 00:33:47,960 Speaker 1: IP protection is the biggest obstacle to that? You know, 555 00:33:47,960 --> 00:33:49,800 Speaker 1: I don't think there's any one big obstacle. I think 556 00:33:49,800 --> 00:33:53,000 Speaker 1: there's a series of small lots of small obstacles. Um. 557 00:33:53,040 --> 00:33:56,080 Speaker 1: You know, it appears that IP protection maybe one of 558 00:33:56,080 --> 00:33:58,360 Speaker 1: the issues I think we really need to have a 559 00:33:58,480 --> 00:34:01,680 Speaker 1: detailed analysis of what the issues are. We also know 560 00:34:01,840 --> 00:34:04,920 Speaker 1: that shortages of raw materials are an issue. We we 561 00:34:05,240 --> 00:34:07,800 Speaker 1: urgently need a situation where we can track this at 562 00:34:07,840 --> 00:34:10,239 Speaker 1: the global level to understand where the raw materials are 563 00:34:10,320 --> 00:34:13,440 Speaker 1: to get countries to stop hoarding whatever they have. I 564 00:34:13,440 --> 00:34:16,160 Speaker 1: think actually more transparency in the global supply chain would 565 00:34:16,160 --> 00:34:18,719 Speaker 1: help some of those hoarding tendencies. Um, but we need 566 00:34:18,760 --> 00:34:20,279 Speaker 1: to do this in a concerted way. I mean this 567 00:34:20,320 --> 00:34:23,360 Speaker 1: whole like each country go it's on its own in 568 00:34:23,440 --> 00:34:26,520 Speaker 1: order to vaccinate its own population. It's really not sufficient 569 00:34:26,520 --> 00:34:28,719 Speaker 1: in the global pandemic because what we have now is 570 00:34:28,760 --> 00:34:31,239 Speaker 1: a few countries that have more than enough vaccines for 571 00:34:31,320 --> 00:34:34,479 Speaker 1: its highest risk population and most countries having not even 572 00:34:34,520 --> 00:34:38,000 Speaker 1: close to enough to vaccinate even the you know, even 573 00:34:38,040 --> 00:34:40,520 Speaker 1: its health care workers who are putting their lives on 574 00:34:40,520 --> 00:34:42,480 Speaker 1: the line every day. So we need to figure out 575 00:34:42,520 --> 00:34:46,000 Speaker 1: something and just the current amount of vaccine we have 576 00:34:46,160 --> 00:34:50,680 Speaker 1: is not sufficient to address the most pressing needs dr news. 577 00:34:50,680 --> 00:34:53,439 Speaker 1: So let's try to strip out the political noise here. 578 00:34:53,520 --> 00:34:56,560 Speaker 1: How much is the I P issue a distraction based 579 00:34:56,560 --> 00:34:58,279 Speaker 1: on the length of time it will take to get 580 00:34:58,320 --> 00:35:01,200 Speaker 1: through and actually affect the pandemic as we know it 581 00:35:01,320 --> 00:35:04,719 Speaker 1: right now, versus looking at the stockpiles that places like 582 00:35:04,760 --> 00:35:07,479 Speaker 1: the United States has and deciding how much the US 583 00:35:07,520 --> 00:35:09,840 Speaker 1: ought to be shipping out. Will also making sure that 584 00:35:09,880 --> 00:35:13,000 Speaker 1: its population is covered. Yeah, so we need to do 585 00:35:13,040 --> 00:35:14,920 Speaker 1: all of it is really the thing. I mean, we 586 00:35:15,000 --> 00:35:17,239 Speaker 1: need to make more. But making more, even you know 587 00:35:17,400 --> 00:35:20,080 Speaker 1: I P issues or not UM is going to take time. 588 00:35:20,120 --> 00:35:21,600 Speaker 1: So we have to think about how we're going to 589 00:35:21,760 --> 00:35:24,319 Speaker 1: use the vaccines that we have. And you know, I 590 00:35:24,360 --> 00:35:27,200 Speaker 1: think it is great that we've made so much progress 591 00:35:27,239 --> 00:35:29,800 Speaker 1: in vaccinating adults here in the US. UM. This is 592 00:35:29,840 --> 00:35:31,799 Speaker 1: bringing down our case numbers and I expect we will 593 00:35:31,840 --> 00:35:35,800 Speaker 1: continue to continue to see case declines over the coming months. 594 00:35:36,280 --> 00:35:39,160 Speaker 1: Israel in the UK, they're their case members are way down, 595 00:35:39,160 --> 00:35:41,360 Speaker 1: and I expect that we will We will get there. UM. 596 00:35:41,440 --> 00:35:42,880 Speaker 1: But the question is what do we do with the 597 00:35:42,880 --> 00:35:44,960 Speaker 1: other vaccines? Do you know, do we keep it for ourselves? 598 00:35:44,960 --> 00:35:46,440 Speaker 1: Do we start using it in our kids? These are 599 00:35:46,480 --> 00:35:50,240 Speaker 1: tough questions when we have such urgent needs m across 600 00:35:50,280 --> 00:35:52,680 Speaker 1: the world. Maybe now is not the time for us 601 00:35:52,719 --> 00:35:55,240 Speaker 1: to be vaccinating low RESK populations. Maybe we can share 602 00:35:55,280 --> 00:35:57,239 Speaker 1: some and then and come back and do that. We 603 00:35:57,280 --> 00:35:59,040 Speaker 1: need to figure this out. I don't have all the answers, 604 00:35:59,040 --> 00:36:01,440 Speaker 1: but I do think that our failure to answer these 605 00:36:01,520 --> 00:36:04,880 Speaker 1: questions is what's not ending this pandemic. Jennifer got one 606 00:36:04,920 --> 00:36:07,759 Speaker 1: final question. I just figured out that Morrison Avoid sixth 607 00:36:07,880 --> 00:36:10,920 Speaker 1: edition costs two y eight dollars, which is enough to 608 00:36:10,960 --> 00:36:15,320 Speaker 1: start drinking early. Look, look, Jennifer, what's so important here? Seriously? 609 00:36:15,800 --> 00:36:18,960 Speaker 1: How do we move an m R and a vaccine 610 00:36:18,960 --> 00:36:23,080 Speaker 1: with cold storage over to Mumbai or rural India? To me, 611 00:36:23,200 --> 00:36:26,560 Speaker 1: that's a fiction. Um, it's actually not. And the reason 612 00:36:26,560 --> 00:36:28,839 Speaker 1: why I can say that is that we have used 613 00:36:29,000 --> 00:36:34,800 Speaker 1: vaccines that require ultracold chain conditions UM in low resource 614 00:36:34,840 --> 00:36:38,200 Speaker 1: settings like UM, the Democratic Republic of Congo use a 615 00:36:38,760 --> 00:36:42,480 Speaker 1: UM A vaccine that requires cold storage. UM. You know, 616 00:36:42,640 --> 00:36:45,160 Speaker 1: to to address the c balla problem. So UM, it 617 00:36:45,280 --> 00:36:48,319 Speaker 1: is not It is not not a challenge, but it 618 00:36:48,400 --> 00:36:51,200 Speaker 1: is one that has been worked on before. John, this 619 00:36:51,280 --> 00:36:53,560 Speaker 1: is a problem. Every time Dr news os On, I 620 00:36:53,640 --> 00:36:57,040 Speaker 1: learned something every single sign. I'll try harder next time 621 00:36:57,080 --> 00:37:00,000 Speaker 1: not to do that. Before you run we go to town. 622 00:37:00,000 --> 00:37:02,440 Speaker 1: Got an important domestic issue as well. Two point one 623 00:37:02,480 --> 00:37:04,960 Speaker 1: three million vaccines per day. That's the average over the 624 00:37:05,040 --> 00:37:07,360 Speaker 1: last seven days. When are they going to shove a 625 00:37:07,400 --> 00:37:09,879 Speaker 1: little bit of confidence about what vaccinated people can do? 626 00:37:11,080 --> 00:37:12,920 Speaker 1: Let's do it now. I mean, I'm, you know, I 627 00:37:13,000 --> 00:37:16,000 Speaker 1: was saying just before I came on, I'm fully immunized 628 00:37:16,040 --> 00:37:17,960 Speaker 1: as a Friday, and I'm, you know, planned to take 629 00:37:18,000 --> 00:37:19,759 Speaker 1: advantage of that and you know, go out and do 630 00:37:19,800 --> 00:37:21,560 Speaker 1: more things that I have done for the last year. 631 00:37:21,880 --> 00:37:24,080 Speaker 1: I think we have to talk fairly about vaccines, that 632 00:37:24,120 --> 00:37:27,759 Speaker 1: there are pathway back to freedom for sure, and reclaiming 633 00:37:27,800 --> 00:37:30,719 Speaker 1: those freedoms seems to be the big objective. Doctor. It's 634 00:37:30,719 --> 00:37:34,279 Speaker 1: gonna catch up, Jennifer News There, John's helped CONSENSI a 635 00:37:34,360 --> 00:37:38,520 Speaker 1: house security Senia Scala. This is the Bloomberg Surveillance Podcast. 636 00:37:38,800 --> 00:37:42,120 Speaker 1: Thanks for listening. Join us live weekdays from seven to 637 00:37:42,239 --> 00:37:46,280 Speaker 1: ten am Eastern. I'm Bloomberg Radio and on Bloomberg Television 638 00:37:46,680 --> 00:37:50,640 Speaker 1: each day from six to nine am for insight from 639 00:37:50,680 --> 00:37:55,200 Speaker 1: the best in economics, finance, investment, and international relations. And 640 00:37:55,360 --> 00:38:00,480 Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg 641 00:38:00,560 --> 00:38:03,839 Speaker 1: dot com, and of course on the terminal. I'm Tom 642 00:38:03,960 --> 00:38:06,239 Speaker 1: keene In. This is Bloomberg