WEBVTT - Surveillance: 2023 Market Outlook 0:00:03.240 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownowitz Jaily. We bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.799 Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:30.040 and of course, on the Bloomberg terminal. Let's see if 0:00:30.040 --> 0:00:32.440 Matt mainly of Miller Tayback is going to Fish. He 0:00:32.520 --> 0:00:34.680 is the chief market strategist over there and is joining 0:00:34.760 --> 0:00:38.240 us on this Tuesday morning. Matt, thank you so much 0:00:38.280 --> 0:00:41.520 for being here. First things first, fish fan, yes, no, uh, 0:00:41.720 --> 0:00:43.640 fish fan, but I will I will not be attending 0:00:43.800 --> 0:00:45.880 any of the concerts here this year. I'm afraid I 0:00:46.040 --> 0:00:47.960 won't be able to make it down. Let's say, okay, well, 0:00:47.960 --> 0:00:51.120 the attendance that matters is your attendance here on Surveillance 0:00:51.120 --> 0:00:53.840 this morning. So let's get to the actual pertinent market 0:00:54.120 --> 0:00:57.319 conversation we talked about. Matt was talking about how four 0:00:57.400 --> 0:01:00.279 thousand became the consensus. We may or may not actually 0:01:00.320 --> 0:01:02.480 reached that level this year, but obviously that was after 0:01:02.560 --> 0:01:05.880 expectations had to be dramatically reduced from what they were 0:01:05.920 --> 0:01:09.400 at the start of two what we expected this year 0:01:09.440 --> 0:01:12.600 would bring. Does that mean that expectations for three are 0:01:12.640 --> 0:01:17.199 also perhaps overly optimistic. Well, I mean, it's funny because 0:01:17.240 --> 0:01:18.880 one of the things is that that we have heard 0:01:18.880 --> 0:01:21.160 a lot of bearishness around the street in the last 0:01:21.400 --> 0:01:23.880 last couple of weeks, which is uh uh, you know, 0:01:23.920 --> 0:01:28.120 the sentiments She's changed dramatically. But you're right, even though 0:01:28.160 --> 0:01:30.679 people have become much more bearished, they're talking about things 0:01:30.720 --> 0:01:32.880 dipping further. They think, well, don't worry, by the end 0:01:32.920 --> 0:01:35.920 of the year, it'll be fine. Um, I'm a little 0:01:35.920 --> 0:01:37.959 concerned about that. I mean, I do think the worst, 0:01:38.000 --> 0:01:39.600 I mean, what won't happen by the end of the year. 0:01:39.600 --> 0:01:41.520 I have somewhere in the middle of the year. But 0:01:41.640 --> 0:01:44.360 the biggest problem I think that we face is that 0:01:44.440 --> 0:01:47.800 when whenever the market gets to an extremely overvalued level, 0:01:48.120 --> 0:01:49.800 like it did at the end of two thousand twenty 0:01:49.800 --> 0:01:53.240 one this time last year, the uh, the bear market 0:01:53.240 --> 0:01:55.480 always lasts longer than just a year or so. It's 0:01:55.560 --> 0:01:58.080 usually last eighteen months or even a little bit longer. 0:01:58.480 --> 0:02:02.640 That's number one. Number two is that the the evaluation levels. 0:02:02.840 --> 0:02:05.200 I mean again, when you get to extreme valuation levels, 0:02:05.240 --> 0:02:07.760 that we what we have. It takes a lot bigger 0:02:07.800 --> 0:02:10.799 decline for the market to get back in line with 0:02:10.800 --> 0:02:13.880 what what what would be a natural level of evaluations? Okay, 0:02:13.880 --> 0:02:17.200 and so much to reach the bottom. But I don't 0:02:17.200 --> 0:02:19.000 think that's the case. Yet. Give us a number, what 0:02:19.160 --> 0:02:21.560 is fair value in a world of now four and 0:02:21.560 --> 0:02:24.639 a half percent interest rates instead of zero? Well, that's 0:02:24.680 --> 0:02:27.440 the thing. I mean, we have, uh, well to give 0:02:27.480 --> 0:02:29.799 you a number at least thirty five d And that's 0:02:29.800 --> 0:02:31.600 a suming we don't have a recession. That's a suthing 0:02:31.639 --> 0:02:34.160 we don't get a decline uh and and and earnings 0:02:34.160 --> 0:02:36.960 in two thousand twenty two, and every bear markets and 0:02:37.040 --> 0:02:41.839 every recession since World War two has has given I'm sorry, 0:02:41.880 --> 0:02:44.600 every recession, not every bear market, but every recession since 0:02:44.639 --> 0:02:47.200 World War two has given a decline in earning. So 0:02:47.240 --> 0:02:49.359 if we have a decline in earnings that next year, 0:02:49.800 --> 0:02:53.800 that takes us again something below thirty I mean, people 0:02:53.840 --> 0:02:56.480 have to forget that. People have to remember I'm sorry 0:02:56.680 --> 0:02:59.800 that you that when you don't have zero interest rates 0:03:00.080 --> 0:03:03.520 and you don't have qu e uh, you don't have 0:03:03.680 --> 0:03:05.960 eighteen to twenty times forward earnings, you have something more 0:03:06.000 --> 0:03:09.079 like fifteen and sixteen times four durnings. That's the fair value. 0:03:09.560 --> 0:03:12.840 So do we need then to come down? I'm interested 0:03:12.880 --> 0:03:16.480 really in the in the uh, the pees, the valuations, 0:03:16.520 --> 0:03:19.560 because it's something I actually understand. So, um, you look 0:03:19.600 --> 0:03:23.639 at forward pees right and we're trading at seventeen three 0:03:23.840 --> 0:03:27.080 right now? Do we need to come down to fifteen 0:03:27.160 --> 0:03:30.160 before this bear market can end? Is that also something 0:03:30.200 --> 0:03:34.079 we've seen in every bear market exactly every single bear 0:03:34.200 --> 0:03:37.280 market since since basically since World War Two. It certainly 0:03:37.280 --> 0:03:40.640 over the last forty years you've seen at least fifteen 0:03:40.680 --> 0:03:43.360 times forward earnings, if not lower. I mean, but that's 0:03:43.400 --> 0:03:45.880 the very best we've note as fifteen times earnings. And 0:03:46.120 --> 0:03:49.040 again the the the But when you get to all 0:03:49.280 --> 0:03:52.280 these all time valuation levels, we certainly had it, uh 0:03:52.320 --> 0:03:54.880 you know, stream valuations in two thousand seven and in 0:03:55.000 --> 0:03:57.720 two thousand at the very beginning of two thousand. The 0:03:57.760 --> 0:04:00.240 problem is you get all this addition of level reach 0:04:00.720 --> 0:04:02.960 and so when the de risking process and the de 0:04:03.120 --> 0:04:06.320 leveraging process takes longer than just one year, and people 0:04:06.320 --> 0:04:09.120 like well Jesus come down so much, that's enough. It's like, actually, 0:04:09.120 --> 0:04:12.560 not until we get those valuation levels, because the the 0:04:12.560 --> 0:04:15.520 the the leverage gets so far to one side, it 0:04:15.520 --> 0:04:18.360 has to swing to the other one as people de leverage, 0:04:18.400 --> 0:04:19.920 and they have to I hate to say it, but 0:04:19.960 --> 0:04:22.520 they get forced selling. They sell even though they've reached 0:04:22.520 --> 0:04:24.800 fairly value. They sell because even when they don't have to, 0:04:24.880 --> 0:04:27.479 because they're getting margin calls and such. And that's why 0:04:27.520 --> 0:04:29.479 the market swings to the other action. It's not just 0:04:29.560 --> 0:04:32.480 a thing. There's a ra actual reason why we get 0:04:33.080 --> 0:04:35.400 a swing to the other extreme. And so we'll probably 0:04:35.400 --> 0:04:38.040 get something below fifteen times there before we actually bottom. 0:04:38.120 --> 0:04:39.839 So how long will it take? I always think of 0:04:39.839 --> 0:04:42.200 the age of de leveraging by Gary Shilling, which was 0:04:42.240 --> 0:04:45.640 a financial crisis thing right, took us a decade to 0:04:45.680 --> 0:04:48.760 get through that. Um, are we looking at that kind 0:04:48.800 --> 0:04:51.320 of leverage again or is it not nearly as serious? 0:04:51.320 --> 0:04:53.680 So we could be done with it in three the 0:04:53.760 --> 0:04:56.920 de leveraging that is well, I mean, it certainly could 0:04:56.920 --> 0:04:59.240 happen a bottom out in two twenty three, but I 0:04:59.279 --> 0:05:01.000 just think it happens at a lower level. I mean, 0:05:01.000 --> 0:05:03.839 what I guess the question is how much does does 0:05:03.960 --> 0:05:06.160 does the FED willing to to to let it the 0:05:06.480 --> 0:05:09.159 leveraging take place? I mean, when I always put back 0:05:09.480 --> 0:05:11.800 point back to its two thousand and eighteen you know, 0:05:11.839 --> 0:05:14.600 everybody says, well Jesus, stock markets started to crumble so 0:05:14.600 --> 0:05:17.000 bad that the FED was forced to pivot, But wasn't 0:05:17.000 --> 0:05:19.200 the stock market. They actually in the middle of December 0:05:19.279 --> 0:05:20.960 that year, right in the middle, they said, hey, the 0:05:20.960 --> 0:05:23.600 markets get down a lot, We don't care. We're gonna 0:05:23.680 --> 0:05:27.520 keep keep tightening. Then two to three weeks later, the 0:05:27.680 --> 0:05:31.320 fixed income market, the jump farm market, just imploded, and 0:05:31.400 --> 0:05:34.800 that's when they pivoted. So they're much more concerned that 0:05:34.920 --> 0:05:37.120 what's what's going on in the fixed income market. And 0:05:37.200 --> 0:05:39.640 right now, even though it's down quite a bit, it's 0:05:39.640 --> 0:05:42.800 still running fine. So we may get a pivot later 0:05:42.839 --> 0:05:44.840 on this year from the from the from the from 0:05:44.839 --> 0:05:47.400 the Federal Reserve where they actually start cutting rates. But 0:05:47.480 --> 0:05:50.200 that's gonna be happened when something, when the situation is 0:05:50.240 --> 0:05:52.280 gonna become much more dire than it is now. If 0:05:52.320 --> 0:05:55.880 we just have this slow grind lower, the Fed's gonna 0:05:55.920 --> 0:05:58.680 keep interest rates at high levels, even if they stopped 0:05:58.680 --> 0:06:01.880 cutting i'm sorry, stopped races in any kind of any 0:06:01.920 --> 0:06:04.720 kind of way. Not finally, well, none of us probably 0:06:04.760 --> 0:06:07.360 could have seen what the FED did this year coming 0:06:07.480 --> 0:06:08.800 at the start of it, we couldn't have seen the 0:06:08.839 --> 0:06:10.760 war in Ukraine, so many things. I think also many 0:06:10.800 --> 0:06:13.800 of us weren't anticipating that in two we would see 0:06:13.839 --> 0:06:17.159 essentially the full reopening of the Chinese economy. Many of 0:06:17.200 --> 0:06:18.599 us thought it was just something that was going to 0:06:18.680 --> 0:06:22.160 take much longer. If you have unleashing of commodity demand 0:06:22.240 --> 0:06:25.880 from China, how does that fuel back into those prices, 0:06:25.880 --> 0:06:28.599 and frankly the energy sector, which has already run so 0:06:28.680 --> 0:06:32.880 far this year, how much more upside could there be? Well? 0:06:32.920 --> 0:06:35.560 I think that can it can be more upside. I mean, 0:06:35.600 --> 0:06:37.680 as you say, with what China reopen, you see the 0:06:37.760 --> 0:06:42.240 commodities bouncing back, and that could continue, especially if the 0:06:42.360 --> 0:06:45.200 dollar continues to move lower. If there's one thing that 0:06:45.560 --> 0:06:48.720 we've been a good uh correlation or inverse correlation has 0:06:48.760 --> 0:06:51.279 been the dollar and over time has been the dollar 0:06:51.760 --> 0:06:55.000 and commodity prices, especially with oil and gold for that matter. 0:06:55.240 --> 0:06:58.280 But the thing is, though, is that you know, if 0:06:58.320 --> 0:07:00.799 you look at the way the valuations are are trading 0:07:01.040 --> 0:07:03.960 for the energy sector, it's still trading for for oil, 0:07:04.000 --> 0:07:07.040 trading out like sixties sixty five dollars UH, and it 0:07:07.080 --> 0:07:09.040 seems like, oh, pick wants to keep it at seventy 0:07:09.040 --> 0:07:11.440 dollars are higher, and now with the reopening of China, 0:07:11.800 --> 0:07:13.400 you know we could get you know, pushed back towards 0:07:13.600 --> 0:07:16.240 the hundred dollar level. That's gonna be bullish for these equities. 0:07:16.240 --> 0:07:17.920 They still have, believe it or not, they still have 0:07:18.040 --> 0:07:20.040 ways to go to play catch up to the price 0:07:20.080 --> 0:07:22.440 of oil, even though it's rallied, even though they've rallied 0:07:22.480 --> 0:07:24.720 so much this year. So I still I still remain 0:07:24.760 --> 0:07:27.880 bullish on the energy sector throughout most most of this year. 0:07:28.080 --> 0:07:30.080 All Right, Matt, thanks so much for joining us. Matt 0:07:30.080 --> 0:07:32.120 Mailli there of Miller tay Back, he has been bullish 0:07:32.120 --> 0:07:34.600 on the energy detector. And if you ever decide to 0:07:34.880 --> 0:07:37.080 cash out of some of those deals, we can buy 0:07:37.080 --> 0:07:40.080 some nosebleed seats at Madison Square Gardens and will stub 0:07:40.200 --> 0:07:43.360 down to the floor for the fifth show this New 0:07:43.440 --> 0:07:56.400 Year's even Let's get over to Julia Coronado. She is 0:07:56.480 --> 0:08:00.000 president at Macro Policy Perspectives, joining us from a very 0:08:00.160 --> 0:08:03.680 chili Austin, Texas this morning. Juliet, great to see you. 0:08:03.960 --> 0:08:06.600 We were speaking with Steve Sasnake of Interactive Brokers at 0:08:06.600 --> 0:08:08.400 the top of the hour and he was talking about 0:08:08.480 --> 0:08:12.480 markets now that are still fighting the Fed. How hard 0:08:12.560 --> 0:08:14.720 is the Fed going to have to fight back in 0:08:14.760 --> 0:08:18.920 the new year. Well, the Fed has sort of shifted 0:08:19.000 --> 0:08:23.760 its strategy. It's sort of signaled both hawkish stance at 0:08:23.760 --> 0:08:27.200 the December meeting in the sense that the consensus on 0:08:27.200 --> 0:08:30.480 the committee is higher race than the market is currently pricing. 0:08:30.760 --> 0:08:33.520 But they also sort of signaled a down shift in 0:08:33.600 --> 0:08:37.560 the pace, another down shift to twenty five basis points 0:08:37.559 --> 0:08:41.120 per meeting, and that allows them, i think, to both 0:08:41.200 --> 0:08:43.760 proceed with caution and feel their way to what is 0:08:43.840 --> 0:08:47.720 the right sort of restrictive degree of restriction to put 0:08:47.760 --> 0:08:51.600 in place, and also hold the threat of rate hikes 0:08:51.720 --> 0:08:55.360 over the market for longer. Share Powell has been frustrated 0:08:55.400 --> 0:08:58.880 by some of these rallies in the market, these undesirable 0:08:58.960 --> 0:09:02.319 rallies that ease financial conditions, when they're trying to slow 0:09:02.360 --> 0:09:06.880 the economy down by by holding a longer string of 0:09:06.960 --> 0:09:09.760 rate hikes over the market. I think that they hope 0:09:09.800 --> 0:09:13.360 to kind of prevent that relief rally that you're sort 0:09:13.360 --> 0:09:17.400 of alluding to, Uh, that that they can hold markets 0:09:17.440 --> 0:09:19.960 in check for a little bit longer and make sure 0:09:20.080 --> 0:09:23.680 that the economy really does cool down enough to cool 0:09:23.679 --> 0:09:27.320 those underlying inflation pressures. Well, on that note, Julie, if 0:09:27.320 --> 0:09:29.000 it really all is going to come down to the 0:09:29.040 --> 0:09:31.280 trajectory of inflation. I love the way that our team 0:09:31.280 --> 0:09:33.720 at Bloombrick Economics put it when they release their inflation 0:09:33.720 --> 0:09:36.760 outlook for three uh this morning, saying, the story of 0:09:36.800 --> 0:09:41.079 two was how fast inflation rose. The story of three 0:09:41.120 --> 0:09:44.640 will be how fast it falls. What is your expectation 0:09:44.760 --> 0:09:48.520 on that speed? Yeah, so I think it's going to 0:09:48.640 --> 0:09:51.160 really gather steam in the latter part of the year, 0:09:51.160 --> 0:09:53.720 and we sort of all know that there's these leading 0:09:53.760 --> 0:09:59.400 indicators of housing of rental inflation that have really rolled over, 0:09:59.440 --> 0:10:01.480 but we know it's a lag from the time that 0:10:01.600 --> 0:10:04.640 happens to when it feeds into the official inflation metrics 0:10:04.640 --> 0:10:08.320 that the FED is targeting, and that leg should should 0:10:08.320 --> 0:10:11.720 be kicking in sort of towards the latter part of three. 0:10:12.160 --> 0:10:14.040 In the first half of the year, they're going to 0:10:14.160 --> 0:10:18.640 be dealing with stickiness, those second round effects from higher 0:10:18.679 --> 0:10:22.040 wages and higher prices and the pipeline that sometimes ripple 0:10:22.120 --> 0:10:25.199 through into services. So they've kind of broken inflation into 0:10:25.240 --> 0:10:29.319 three buckets. The goods inflation that was disrupted by the pandemic. 0:10:29.920 --> 0:10:34.440 Rental housing inflation the single biggest component of core inflation, 0:10:34.840 --> 0:10:38.040 and then sort of all other services inflation. And that's 0:10:38.040 --> 0:10:42.000 really where they're taking the temperature of the labor market, 0:10:42.360 --> 0:10:47.080 of consumer price sensitivity. Uh, that really hasn't it's sort 0:10:47.080 --> 0:10:50.600 of stabilized at a high rate. Uh. They'd like to 0:10:50.640 --> 0:10:53.320 see that come down, and that that probably is going 0:10:53.360 --> 0:10:56.400 to take some time. Isn't the third bucket the hardest, Julie. 0:10:56.440 --> 0:11:00.440 I mean, from my understanding, services is the hardest uh, 0:11:00.840 --> 0:11:04.920 piece of inflation for the FED to effect because you know, 0:11:05.160 --> 0:11:09.240 with goods um certainly with something like you know, car 0:11:09.320 --> 0:11:12.760 sales or home sales, they can easily raise rates and 0:11:12.840 --> 0:11:15.439 limit the number of buyers who can afford to come in. 0:11:15.440 --> 0:11:18.080 In terms of services, do they have to just cause 0:11:18.240 --> 0:11:21.240 real economic pain to bring those prices down? Do they 0:11:21.280 --> 0:11:23.760 have to you know, knock mom and dad out of 0:11:23.800 --> 0:11:26.360 work today to put people on the unemployment line in 0:11:26.440 --> 0:11:30.240 order to get services inflation down? You know that there 0:11:30.400 --> 0:11:34.560 that's one possible outcome. We don't really know for sure, 0:11:34.640 --> 0:11:38.480 but I will say this, the pandemic disrupted services inflation 0:11:38.520 --> 0:11:42.760 as well as goods inflation. Think about hotel rates, airfares. 0:11:43.080 --> 0:11:46.520 They've done a lot of busting and booming through the 0:11:46.640 --> 0:11:51.439 various opening closing waves um and we've seen that. Actually, 0:11:51.960 --> 0:11:55.120 one of the key tests here is that when will 0:11:55.200 --> 0:11:59.920 consumers become more price sensitive like they were before the pandemic. 0:12:00.120 --> 0:12:03.160 For the pandemic, it was notorious that there was no 0:12:03.280 --> 0:12:07.160 pricing power. Consumers were budget conscious, they wanted deals, and 0:12:07.200 --> 0:12:09.439 then that all went away when all they could buy 0:12:09.600 --> 0:12:12.760 was good in the in the lockdowns during the pandemic. 0:12:13.200 --> 0:12:15.880 Now and then reopening, there was this sort of revenge 0:12:15.960 --> 0:12:19.760 travel idea. Uh, now we're sort of settling into a 0:12:19.800 --> 0:12:23.400 more normal consumer. I think we saw that this holiday season. 0:12:23.720 --> 0:12:27.800 Consumers do want deals. They are aware of the limitations 0:12:27.880 --> 0:12:30.720 of this boom that we've been in in the last 0:12:30.800 --> 0:12:33.719 year and a half. They're more aware that there are 0:12:33.760 --> 0:12:37.880 clouds on the economic horizon, and they're responding accordingly with 0:12:38.000 --> 0:12:41.760 being price sensitive. And that's really key to cooling inflation 0:12:41.960 --> 0:12:46.480 without a deep recession, is that consumers start demanding deals 0:12:46.520 --> 0:12:49.840 again and that companies are going to have to you know, 0:12:50.160 --> 0:12:53.200 meet them in the middle. But they haven't had to 0:12:53.320 --> 0:12:56.000 think about these passed through of of of car costs 0:12:56.000 --> 0:13:00.679 that you just mentioned unimaginable a couple of years that 0:13:00.760 --> 0:13:04.280 consumers would simply accept a fifty percent increase and used 0:13:04.320 --> 0:13:07.680 car prices. Uh So. But consumers now they've got a 0:13:07.720 --> 0:13:10.800 broader basket of goods and services they can spend on. 0:13:11.160 --> 0:13:14.120 We saw that with air affairs, Matt. We saw that 0:13:14.280 --> 0:13:18.320 somewhere around the fall, consumers started canceling trips if they 0:13:18.320 --> 0:13:21.560 couldn't find the right airfairs. They were deal hunting, uh 0:13:21.600 --> 0:13:24.280 and airlines had to respond accordingly. So I think we're 0:13:24.320 --> 0:13:29.000 getting back into a more normal zone of consumer price sensitivity, 0:13:29.040 --> 0:13:32.560 and that's that's really key because that would allow the 0:13:32.600 --> 0:13:37.280 Fed to cool that services inflation without a very deep recession. 0:13:37.520 --> 0:13:40.079 What about people waiting because consumers go back to their 0:13:40.120 --> 0:13:43.440 old bargain hunting ways, Julia, You know a lot of 0:13:43.440 --> 0:13:47.679 people in the housing market currently are on the sidelines 0:13:47.760 --> 0:13:52.520 because they're looking at six seven percent, eight percent mortgages. 0:13:52.600 --> 0:13:54.360 Maybe a lot of people, you know, I want to 0:13:54.400 --> 0:13:57.040 buy um this year. Next year, I want to buy 0:13:57.120 --> 0:14:01.360 the last Dodge Challenger Hellcat. They'll never make one again, 0:14:02.559 --> 0:14:06.520 I think the fifteenth year then building that gigantic muscle 0:14:06.559 --> 0:14:09.640 car and they'll never build one again. But Chrysler right 0:14:09.679 --> 0:14:12.600 now is offering me seven point to nine percent. I'm 0:14:12.600 --> 0:14:15.040 not going to finance at that rate if I wait 0:14:15.160 --> 0:14:18.040 till the end of three. Are those borrowing costs gonna 0:14:18.080 --> 0:14:20.840 come back down by the end of twenty three? But 0:14:20.880 --> 0:14:25.560 remember we have to go through the soft pat or 0:14:25.720 --> 0:14:30.040 recession first before we get to that relief. The rates 0:14:30.040 --> 0:14:33.920 are high right now to cause the pain that you're describing, 0:14:33.960 --> 0:14:36.280 to cause the reaction of you know what, I'm not 0:14:36.320 --> 0:14:38.640 going to buy this car because rates are too high. 0:14:38.640 --> 0:14:41.800 I'm not going to buy this house because rates are 0:14:41.880 --> 0:14:44.560 too high. That is the demand cooling the FED is 0:14:44.680 --> 0:14:48.000 looking for, and we are seeing it. We have seen, 0:14:48.080 --> 0:14:53.160 despite better production of new cars, more better availability, car 0:14:53.240 --> 0:14:56.440 sales have been kind of languishing still because the right 0:14:56.760 --> 0:15:00.400 rates of financing a car loan have shot up oh much. 0:15:00.440 --> 0:15:04.120 Consumers are looking at a big jump in payments uh 0:15:04.160 --> 0:15:07.720 for for a new car or or any car, and 0:15:07.800 --> 0:15:12.320 so they're responding accordingly. We're seeing used car prices fall 0:15:12.480 --> 0:15:16.320 pretty consistently in the last few months after soaring in 0:15:16.360 --> 0:15:19.200 the last couple of years, and we first saw some 0:15:19.360 --> 0:15:23.880 softness in new car pricing in the last inflation report. 0:15:24.000 --> 0:15:26.440 We would expect that to follow through into the first 0:15:26.440 --> 0:15:29.800 half of the year. Some actual discounts on M S 0:15:29.920 --> 0:15:33.480 R P imagine that if you will, all right, Julia 0:15:33.480 --> 0:15:36.880 Coronado of Macro Policy Perspectives, thank you so much for 0:15:37.040 --> 0:15:44.000 joining us. Let's bring in Dr Bakti Hansatti. She's Associate 0:15:44.040 --> 0:15:47.480 professor of Emergency Medicine at Johns Hopkins. Great to see you. 0:15:47.480 --> 0:15:50.440 It has been a while since we've spoken. If we 0:15:50.480 --> 0:15:53.120 could just think about China in particular in terms of 0:15:53.160 --> 0:15:56.640 the remaining COVID story, What is your expectation for what 0:15:56.840 --> 0:15:59.520 is going to happen there given the vaccination rates that 0:15:59.560 --> 0:16:01.880 they have, even now that there's been practically an entire 0:16:01.960 --> 0:16:06.600 removal of restrictions, When could China reach a peak in cases? 0:16:08.080 --> 0:16:10.440 I think it's really hard to say onto your question 0:16:10.480 --> 0:16:12.320 when can they reach a peak? Because we just don't 0:16:12.360 --> 0:16:15.840 have accurate reporting data from the National Health Commission UM 0:16:15.880 --> 0:16:19.160 side is trying to stop reporting cases. We're relied on 0:16:19.200 --> 0:16:23.240 the China CDC, who traditionally does monthly reporting um and 0:16:23.280 --> 0:16:25.800 we have not seen numbers coming out of China. So 0:16:26.080 --> 0:16:29.160 when can they heat get a peak? I honestly don't know, 0:16:29.360 --> 0:16:31.800 but what we're seeing is that it's been a rapid 0:16:31.800 --> 0:16:35.400 surge similar to the delta and the omicron waves in 0:16:35.480 --> 0:16:37.600 most countries. When we went through delta and omicron, we 0:16:37.680 --> 0:16:40.320 sort of peak at six weeks. So I'm praying for 0:16:40.360 --> 0:16:43.960 them that this is fast and rapid and resolve soon. 0:16:44.760 --> 0:16:47.400 We also do know that China has high vaccination rates, 0:16:47.440 --> 0:16:51.240 so over ninety two of individuals fully vaccinated, and we 0:16:51.280 --> 0:16:54.160 have also heard that Chinese have access to all anti 0:16:54.200 --> 0:16:58.280 virals that will decrease hospitalizations and depths. So you know, 0:16:58.320 --> 0:17:00.880 they are similar to the US in that there is 0:17:01.240 --> 0:17:05.639 innate immune protection available to individuals, and that we know 0:17:05.720 --> 0:17:09.280 that they're likely sick with the newer variants which have 0:17:09.400 --> 0:17:12.680 a much much more much more transmissible and so much 0:17:12.680 --> 0:17:15.560 more likely to peak early. So this newer variant, it's 0:17:15.560 --> 0:17:17.439 not delta, it's not O macron. Do we have a 0:17:17.440 --> 0:17:20.199 new name for it? And what else do we know 0:17:20.240 --> 0:17:24.480 about it? Besides the transmissibility. We have lumbas and lettas, 0:17:24.560 --> 0:17:26.600 so we have moved away from names. We have be 0:17:26.760 --> 0:17:30.200 A one point one, B A five b A five 0:17:30.240 --> 0:17:33.600 point one is cute, so we know in trans and transmissive, 0:17:33.720 --> 0:17:36.240 I know, right, but we run out of names A 0:17:36.240 --> 0:17:39.920 long time ago. So we know that in terms of transmissibility, 0:17:40.040 --> 0:17:42.720 within two to three days of individuals come in contact 0:17:42.800 --> 0:17:45.280 on this COVID positive that they'll be symptomatic. We know 0:17:45.400 --> 0:17:49.240 that at five days, individuals will get sicker, requiring hospitalization 0:17:49.640 --> 0:17:52.919 and needing therapeutic treatment. We know that as quickly as 0:17:52.960 --> 0:17:55.520 it comes on, it goes off, So individuals are most 0:17:55.520 --> 0:17:59.480 likely to be symptom free within ten days. I don't 0:17:59.480 --> 0:18:01.040 want to wear a mask. Do we have to wear 0:18:01.119 --> 0:18:04.560 masks again? I don't think I'm going to. It defends 0:18:04.600 --> 0:18:07.159 who you are, right, I don't know you. But if 0:18:07.200 --> 0:18:10.040 I did know you, and I knew you were immun compromise, 0:18:10.520 --> 0:18:14.840 Oh you had a disease that made you vulnerable to 0:18:14.920 --> 0:18:17.600 getting really really sick from COVID, or you're an individual 0:18:17.680 --> 0:18:21.920 in whom the oral anti virals were unavailable, I would 0:18:21.920 --> 0:18:25.200 say where a mosque um. I will say, though wearing 0:18:25.200 --> 0:18:28.119 a mosque is tough, we are exhausted as a nation. 0:18:28.880 --> 0:18:31.240 M that you need to assess your own risk, and 0:18:31.320 --> 0:18:35.520 every American has agency to make those decisions. I was 0:18:35.800 --> 0:18:38.080 speaking with Matt earlier about how so many people I 0:18:38.119 --> 0:18:40.960 know are sick right now. Some of them are COVID positive. 0:18:40.960 --> 0:18:43.199 It seems like I know more COVID positive people than 0:18:43.240 --> 0:18:45.680 I have in probably a year. But there are also 0:18:45.720 --> 0:18:48.680 a number of people who are just ill, whether that's 0:18:48.720 --> 0:18:51.840 the flu or sinus infections. I myself feel like I 0:18:51.880 --> 0:18:54.360 have been getting sick way more often than I ever 0:18:54.480 --> 0:18:58.960 did pre pandemic. I'm just wondering, like long term health ramifications, 0:18:59.560 --> 0:19:01.840 if people are getting more sick, whether because that we've 0:19:01.840 --> 0:19:04.760 suppressed our immune systems by wearing masks and not interacting 0:19:04.760 --> 0:19:07.679 with people and we're getting just are we going to 0:19:07.720 --> 0:19:10.200 be more sick more often, especially now that COVID is 0:19:10.240 --> 0:19:12.920 probably going to be circulating in the population some time 0:19:12.960 --> 0:19:14.760 to come as a seasonal virus. Maybe Doc, you can 0:19:14.800 --> 0:19:17.359 solve something that an argument that we have at the 0:19:17.400 --> 0:19:21.720 Miller household. My wife wears masks all the time and constantly, 0:19:22.520 --> 0:19:25.800 uh what do you call this? No? Not what She's 0:19:25.880 --> 0:19:31.679 using hand sanitizer all the time right, like it's an addiction. 0:19:32.240 --> 0:19:35.800 I never use it and don't wear masks. I never 0:19:35.840 --> 0:19:39.760 get sick, and she constantly does. Have have people who 0:19:39.760 --> 0:19:44.040 are overprotective of their immune systems allowed them to weaken 0:19:44.359 --> 0:19:46.040 so that they get sick so much? Or is this 0:19:46.160 --> 0:19:51.240 just coincidence and coincidence in my anecdotal um home life. 0:19:52.320 --> 0:19:55.800 So again the easy clounces here and I in my house, 0:19:55.840 --> 0:19:59.000 so we joke I've had more viruses and pumpkin spice lattees. 0:19:59.080 --> 0:20:01.040 But I'm the mom with young kids. I have a 0:20:01.080 --> 0:20:02.840 five year old and a two year old, right, and 0:20:02.840 --> 0:20:06.359 they're bringing stuff from home. So I think what's really 0:20:06.359 --> 0:20:09.120 going on here is, yes, we have not been as 0:20:09.160 --> 0:20:12.600 exposed in the last two years um as we should 0:20:12.600 --> 0:20:17.640 have been to common household colds two different entraviruses, coronaviruses 0:20:17.680 --> 0:20:21.480 and colds. Also, however, if you look at the current 0:20:21.560 --> 0:20:24.959 strains of RSP and flu, they are more virulent than 0:20:25.000 --> 0:20:28.200 they have been previously. This happens with the flu. Every 0:20:28.240 --> 0:20:30.760 five to seven years, you get a flu variant that 0:20:30.960 --> 0:20:34.359 is more aggressive than previous. So I think it's a 0:20:34.400 --> 0:20:37.399 combination of two. Right, last year we weren't exposed. We 0:20:37.480 --> 0:20:40.320 don't have any animate community. On top of that, we 0:20:40.359 --> 0:20:43.399 have a flu in an RSB season that is also 0:20:43.480 --> 0:20:46.520 hitting us really hard. Are we about to become a 0:20:46.600 --> 0:20:50.080 nation that's constantly sick? I don't think so. Um, does 0:20:50.119 --> 0:20:52.600 your wife of a week immune system compared to you 0:20:53.160 --> 0:20:56.320 probably not. She's probably just exposed. Maybe she's at home 0:20:56.359 --> 0:20:59.439 looking after kids. Maybe she's out there doing things in 0:20:59.440 --> 0:21:02.719 the community, see going grocery shopping. Um, and you are 0:21:02.720 --> 0:21:05.399 in the studio and you're more protected. I think it 0:21:05.480 --> 0:21:07.639 all depends on what our lives look like and what 0:21:07.680 --> 0:21:11.040 our exposures are and thus what we are likely to 0:21:11.080 --> 0:21:14.399 be inflicted with. All right, Doc, thanks so much for 0:21:14.520 --> 0:21:17.840 joining us. Pleasure talking to you again, although hopefully it's 0:21:17.840 --> 0:21:21.120 not too often, right because um, when we're all healthier, 0:21:21.240 --> 0:21:24.760 we see we see you less often. Dr Vaki Hans 0:21:24.760 --> 0:21:27.399 Hottie there of Johns Hopkins talking to us about this 0:21:27.440 --> 0:21:31.480 wave that we're seeing, and it's I don't think it's anecdotal, right, 0:21:31.520 --> 0:21:33.800 We have the data to backup that we really do 0:21:33.920 --> 0:21:36.440 see it coming back in a pretty serious way, and 0:21:36.480 --> 0:21:41.600