WEBVTT - U.S. May Need France-Like Lockdowns to Beat Covid 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonny Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.520 along with essential market moving news. Kind the Bloomberg Market 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.440 and on Bloomberg dot com. Our columnist today, right this, 0:00:21.800 --> 0:00:24.439 hospitalization rates haven't yet reached the levels we saw in 0:00:24.480 --> 0:00:26.599 the spring in the United States, but the danger of 0:00:26.640 --> 0:00:29.960 an acute health crisis maybe even greater. He knows what 0:00:29.960 --> 0:00:33.120 he's talking about. Some Felias, senior pharmaceuticals analyst for Bloomberg 0:00:33.120 --> 0:00:36.960 Intelligence and director of research for e A. Some what 0:00:37.000 --> 0:00:41.080 do you mean by an acute health crisis? Yeah, Hi, Bonny. 0:00:41.280 --> 0:00:44.360 So Um, You know, nobody likes to write these things 0:00:44.400 --> 0:00:47.479 because it depresses me just as well as anybody else 0:00:47.479 --> 0:00:49.920 who reads it. But when I look at the detail 0:00:50.000 --> 0:00:52.199 that's coming through, and when I see what's going on 0:00:52.240 --> 0:00:55.160 here in Europe, UM, there are a few signals that 0:00:55.160 --> 0:00:57.920 that really worry me. So clearly everybody can see that 0:00:58.040 --> 0:01:02.760 that UM positive cases are rising rapidly. But then when 0:01:02.760 --> 0:01:04.840 you look at the data and a lot of you know, 0:01:04.880 --> 0:01:07.520 people to look at their hospitalizations, they go, well, that 0:01:07.600 --> 0:01:10.560 doesn't seem to happen as much, and deaths appeared to 0:01:10.600 --> 0:01:14.119 be a bit lower now, which are absolutely true. What 0:01:14.120 --> 0:01:16.840 I'm worried about is that that that that there is 0:01:16.880 --> 0:01:19.200 that that gives us a full sense of security in 0:01:19.240 --> 0:01:23.200 that you the reason hospitalizations are lower is that there's 0:01:23.240 --> 0:01:25.640 a lot more people who are catching it, who are younger, 0:01:25.760 --> 0:01:28.240 who tend to get not sick, but then don't forget 0:01:28.280 --> 0:01:30.039 they go and then pass it on to their elders, 0:01:30.680 --> 0:01:34.200 which takes time. Then we've also got a lot more 0:01:34.680 --> 0:01:38.200 stringent about who we hospitalize, so that means that whatever 0:01:38.319 --> 0:01:42.880 hospitalization you see is probably pretty severe patients. So you 0:01:42.920 --> 0:01:45.479 have to take account of that, and then of course 0:01:45.520 --> 0:01:48.400 we can't treat them better, but but we haven't necessarily 0:01:48.400 --> 0:01:51.000 increased the number of beds available. And then on top 0:01:51.040 --> 0:01:53.880 of that, the virus is going into a trajectory that's 0:01:53.960 --> 0:01:56.600 that's likely to be many times higher than it was 0:01:57.000 --> 0:02:01.720 in the spring summer months. In this eventually is likely 0:02:01.760 --> 0:02:05.360 to be just like other common cold, a seasonal virus. 0:02:05.400 --> 0:02:08.359 So although the cases were that high in the summer, 0:02:08.560 --> 0:02:11.079 they're going to be much higher now, So that's what 0:02:11.080 --> 0:02:14.959 worries me. A combination of all this together. Sam, You're 0:02:15.000 --> 0:02:17.400 based in France right now and you've got a lot 0:02:17.400 --> 0:02:21.120 of experience around the continent. Um, what do you think 0:02:21.120 --> 0:02:25.000 has been the key driver in the resurgence of the 0:02:25.080 --> 0:02:29.240 cases in Europe? Has it simply been the seasonality or 0:02:29.440 --> 0:02:32.799 is it just fatigue? What? What are you seeing there? 0:02:33.840 --> 0:02:36.760 I wouldn't be surprised Paul if if it's a combination 0:02:36.800 --> 0:02:39.720 of all that. But certainly in the colder environments we 0:02:39.760 --> 0:02:43.120 do two things happen to us. One is, at least 0:02:43.160 --> 0:02:44.960 two things happen. One is that we tend to be 0:02:45.000 --> 0:02:47.720 more indoors, which is where the virus has a great 0:02:47.760 --> 0:02:50.560 time of passing from person to person. And secondly, our 0:02:50.639 --> 0:02:55.639 lungs reduced their ability to be able to clear stuff out. 0:02:56.040 --> 0:02:58.799 So you'm sure you've heard of viral load. If you've 0:02:58.800 --> 0:03:01.000 got ten viral party as ni lung and it was 0:03:01.160 --> 0:03:03.040 very good at getting rid of it quickly in the 0:03:03.080 --> 0:03:06.880 summer where humidity is a bit higher, that's great. But 0:03:06.919 --> 0:03:08.720 if that think can go in and you don't get 0:03:08.800 --> 0:03:10.880 rid of it as much, that's essentially equivalent to having 0:03:10.880 --> 0:03:13.720 a higher viral load giving you a risk of worth disease. 0:03:14.320 --> 0:03:16.480 So that's what the risk in the winter is. And 0:03:16.560 --> 0:03:18.880 of course if you start off at a higher base 0:03:18.960 --> 0:03:22.080 already in terms of the virus circulating in people who 0:03:22.080 --> 0:03:25.120 are infected, then you're setting yourself up for a pretty 0:03:25.200 --> 0:03:28.880 tragic exponential growth, which is what I think has surprised 0:03:29.360 --> 0:03:33.720 the UK, the French and the German authorities. That's an 0:03:33.720 --> 0:03:36.640 excellent explanation of what happens. I hadn't heard it really 0:03:36.680 --> 0:03:40.160 explained that plainly before, but it definitely would cause you 0:03:40.200 --> 0:03:42.600 to be a lot more careful having heard that, And 0:03:42.640 --> 0:03:44.720 that's just what I was going to ask Angela Merkel 0:03:44.960 --> 0:03:47.640 saying that in Germany they don't know where seventy five 0:03:47.680 --> 0:03:51.000 percent of the infections are coming from. I mean, where 0:03:51.040 --> 0:03:54.560 are they coming from? Remember the money there. A lot 0:03:54.600 --> 0:03:57.440 of people get this disease, especially the young again who 0:03:57.480 --> 0:04:00.560 ray symptomatic. And if you listen to some of the 0:04:00.600 --> 0:04:03.840 topic epidemiologists in the world, you have to think about 0:04:03.840 --> 0:04:08.000 this virus. It's most infectious in terms of it passing 0:04:08.040 --> 0:04:11.440 on to others during the pre symptomatic and the early 0:04:12.600 --> 0:04:17.000 infection in me whether symptomatic or not symptomatic. So that's 0:04:17.040 --> 0:04:19.280 when it's so few days and then and then we 0:04:19.400 --> 0:04:21.040 look at all the data that's coming out of all 0:04:21.040 --> 0:04:24.320 these antibody trials. The viral load, the amount of viral 0:04:24.680 --> 0:04:26.480 virus in your body back up your throats and all 0:04:26.480 --> 0:04:30.240 that declines really quickly by day ten, ten eleven, day eleven, 0:04:30.680 --> 0:04:34.360 we get test results four or five days after we've 0:04:34.400 --> 0:04:37.360 been tested. What are those people doing in that time? 0:04:37.400 --> 0:04:41.200 Are they as careful as they should be? So, Sam, 0:04:41.440 --> 0:04:44.159 in your day job, you are one of the top 0:04:44.200 --> 0:04:46.839 farmer analysts in the city of London. What are the 0:04:46.880 --> 0:04:50.760 companies that you talked to, and you've talked to for decades? 0:04:50.839 --> 0:04:53.479 What are they tell you about therapeutics, not vaccines, but 0:04:53.560 --> 0:04:56.560 just the ability to treat this better as we go 0:04:56.600 --> 0:04:59.360 into a second or here in the United States maybe 0:04:59.360 --> 0:05:03.320 in a third way. Yeah, so there's a lot of 0:05:03.360 --> 0:05:06.919 activity going on unfortunately clinical development. Drug development is a 0:05:06.920 --> 0:05:09.359 little bit of a game of snakes and ladders. You 0:05:09.440 --> 0:05:11.039 go up, you seem to be doing really well, and 0:05:11.040 --> 0:05:14.520 you just fallen a ladder or a snake hunter image 0:05:14.520 --> 0:05:16.800 wry because I think it's the snakes, and you go 0:05:16.880 --> 0:05:18.840 all the way back to square one. So you know, 0:05:19.040 --> 0:05:21.080 just today we had a bit of news from Regenera 0:05:21.160 --> 0:05:24.320 on saying that their antibody didn't seem to work in 0:05:24.520 --> 0:05:27.800 very severe patients in hospitals. So these folks are all 0:05:27.839 --> 0:05:30.599 doing what they can with what science tells them is 0:05:30.640 --> 0:05:32.880 likely to work, and then testing it out in a 0:05:32.960 --> 0:05:35.960 virus and a medical condition that we're learning on the 0:05:36.000 --> 0:05:40.039 hoof about. So we are getting progress, but it's a 0:05:40.040 --> 0:05:43.280 little bit like two steps forward, one step back, um. 0:05:43.800 --> 0:05:46.320 And and you know that we're getting progressed because the 0:05:46.839 --> 0:05:51.839 the the death rates are lower, the mortality rate is lower. Unfortunately, 0:05:51.880 --> 0:05:54.400 we're learning more about how awful the viruses and people 0:05:54.440 --> 0:05:57.080 who catch it in terms of long COVID and and 0:05:57.120 --> 0:06:00.200 who knows what long term issues we're cooking up with 0:06:00.240 --> 0:06:04.120 this virus once we've been infected some you know, it's 0:06:04.160 --> 0:06:08.400 it's a tough, tough conversation, but the companies sort of 0:06:08.400 --> 0:06:10.760 want their employees to come back to work in the 0:06:10.800 --> 0:06:13.520 office space. I mean not all of them, and there's 0:06:13.640 --> 0:06:18.200 extraordinary leniency when it comes to that, but some employees 0:06:18.240 --> 0:06:21.640 do want to go back. I mean, what's the advice 0:06:21.720 --> 0:06:25.800 for those employees? Yeah, I mean, look in in France, 0:06:26.080 --> 0:06:29.000 we just had our lockdown and last night or two 0:06:29.080 --> 0:06:32.440 nights ago. Yeah, it was two nights ago. Um um 0:06:32.800 --> 0:06:36.200 as of midnight last night. So basically, people who can 0:06:36.240 --> 0:06:38.520 work from home have to work from home. It's not 0:06:38.560 --> 0:06:43.200 a choice anymore. Um. They're taking their time to figure 0:06:43.200 --> 0:06:45.360 out what to actually tell people in terms of guidance. 0:06:46.000 --> 0:06:49.080 I if the UK trajector continues the way it is 0:06:49.120 --> 0:06:51.640 with all the various tier one, tier two, tier three, 0:06:52.240 --> 0:06:54.440 if they don't work out, Remember frant tried the same thing. 0:06:54.480 --> 0:06:59.120 They tried curfews and and early closure of restaurants andthing. 0:06:59.200 --> 0:07:03.800 It just didn't help. Um. So this is why I'm 0:07:03.839 --> 0:07:06.159 what I'm saying and what I wrote. Maybe the only 0:07:06.160 --> 0:07:08.120 solution a little bit like when you have a wildfire, 0:07:08.160 --> 0:07:10.200 the only way to manage it is to cut the 0:07:10.240 --> 0:07:12.560 whole bunch of forest out so that the fire can 0:07:12.680 --> 0:07:15.160 jump over to the next side. And maybe that's the 0:07:15.200 --> 0:07:17.200 only way. It's a horrible thing to say, and I 0:07:17.240 --> 0:07:20.280 really wish I didn't feel that this could be the 0:07:20.320 --> 0:07:23.840 only way, but it seems like that's the only way. Sam. 0:07:23.960 --> 0:07:26.760 Just our schools open are closed. There in France, schools 0:07:26.760 --> 0:07:29.400 are open. Schools are open, but they've become a lot 0:07:29.440 --> 0:07:31.960 more clever about him to manage the groups of students 0:07:32.000 --> 0:07:34.600 and all that. And also the data appears to suggest 0:07:34.640 --> 0:07:38.320 that there's less transmission among school children and then bringing 0:07:38.320 --> 0:07:40.400 it home than there is at universities. So the short 0:07:40.480 --> 0:07:42.920 university is right interesting. Hey, Sam, thanks so much for 0:07:43.040 --> 0:07:46.280 joining us. Sam Fazeli, he's a senior pharmaceutical analysts and 0:07:46.320 --> 0:07:49.720 he also runs the European research business for Bloomberg Intelligence, 0:07:49.760 --> 0:07:52.640 one of the leaders of that great business for Bloomberg 0:07:52.800 --> 0:07:55.440 and UH he's also writing for Bloomberg Opinion right now 0:07:55.440 --> 0:07:58.920 sharing some of his expertise on the healthcare business. He 0:07:59.000 --> 0:08:02.560 joins us on the phone from UH France, where again, UH, 0:08:02.840 --> 0:08:06.160 the lockdowns are beginning, And the question, Vonnie is you know, 0:08:06.160 --> 0:08:07.640 I guess for the folks in the UK is that 0:08:07.720 --> 0:08:11.040 kind of the next step for the UK is lockdowns? 0:08:11.040 --> 0:08:13.560 And again here that doesn't seem to be much appetite 0:08:13.560 --> 0:08:15.760 for that in the States, but we will monitor closely. 0:08:18.240 --> 0:08:20.320 We had a bunch of the big tech and tech 0:08:20.440 --> 0:08:23.560 media names reporting last night, let's break it all down. 0:08:23.640 --> 0:08:26.760 There was absolutely nobody better to do that with, UH 0:08:26.760 --> 0:08:29.240 than Lauren Martin. Lauren Martin, she's a senior media analysts 0:08:29.280 --> 0:08:31.480 that need him in company because her research coverage it's 0:08:31.520 --> 0:08:34.800 really a convergence of where the media and technology spaces. 0:08:34.800 --> 0:08:38.360 She covers the big tech names like Ammal, Apple, Amazon, Google, 0:08:38.440 --> 0:08:42.280 the traditional media names like Discovery and This and Disney 0:08:42.280 --> 0:08:43.640 and those types of things, and even some of the 0:08:43.640 --> 0:08:46.960 technical players, the rokus of the world, the uh and 0:08:47.040 --> 0:08:50.240 the snaps. Brings it all together with a really good 0:08:50.360 --> 0:08:52.679 overview look of the space. Lard, thanks so much for 0:08:52.760 --> 0:08:55.400 joining us here. Let's start off with Apple stocks trading 0:08:55.400 --> 0:08:57.800 off about five percent. I thought the numbers were good. 0:08:58.040 --> 0:09:00.439 This is just a stock price to perfect giving a 0:09:00.480 --> 0:09:03.920 little bit back, you know, maybe I think it's a 0:09:03.960 --> 0:09:07.320 regularly over emphasis on iPhones. iPhone sales were week and 0:09:07.480 --> 0:09:11.320 China was down yere every year in the quarter. You know, 0:09:11.440 --> 0:09:13.800 we would say we would sort of counter that by 0:09:13.800 --> 0:09:16.400 saying what we liked the most about Apple's earnings was 0:09:16.440 --> 0:09:18.800 they hit an all time high installed base of active 0:09:18.840 --> 0:09:24.280 devices with um iPad and Max sales up forty and 0:09:24.400 --> 0:09:28.880 thirty percent, respectively, so they're installed bases growing seconds. They 0:09:28.920 --> 0:09:33.000 added thirty five million subscribers in the last ninety days, 0:09:33.000 --> 0:09:36.040 so they're out five hundred and eighty five UH million 0:09:36.040 --> 0:09:39.040 paid subscribers, which is an annuity stream type of revenue, 0:09:39.080 --> 0:09:42.320 which is fantastic. And then services hit a record almost 0:09:42.320 --> 0:09:45.360 fifteen billion dollars at a gross margin of sixty seven percent, 0:09:45.520 --> 0:09:48.480 So they're there. I was quickly approaching the growth mosic 0:09:48.559 --> 0:09:51.640 contribution of the entire hardware sector of Apple, even though 0:09:51.679 --> 0:09:54.480 hardware apples known as a hardware company. So all of 0:09:54.520 --> 0:09:57.360 those things are really positive to us. Laura, how concern 0:09:57.440 --> 0:10:00.559 to be about the drop of in China? Is it 0:10:00.640 --> 0:10:03.239 a one time thing? Is it due to added competition? 0:10:03.320 --> 0:10:07.280 And willis impact Apple going in the future. So I 0:10:07.320 --> 0:10:10.640 think China is predominantly a new phone market and that 0:10:10.760 --> 0:10:14.040 you might recall that they're um. They actually announced the 0:10:14.120 --> 0:10:17.920 new iPhones UM three weeks later this year, so they're 0:10:17.920 --> 0:10:21.080 in a different quarter than last year. So last year 0:10:21.160 --> 0:10:24.360 you had two weeks of the new iPhones UM, and 0:10:24.400 --> 0:10:26.720 so the Chinese are very active in that. We expect 0:10:26.720 --> 0:10:29.440 the new iPhone twelves and there's four different models of those, 0:10:29.920 --> 0:10:32.640 which started two weeks into the October quarter to be 0:10:32.679 --> 0:10:34.920 a major seller in China. That we would expect China 0:10:34.960 --> 0:10:38.480 to rebound in this quarter and going forward. Hey Loo, 0:10:38.559 --> 0:10:41.360 how about the services business for Apple, I know speaking 0:10:41.400 --> 0:10:43.680 to you in the past, that's really a growing part 0:10:43.679 --> 0:10:45.720 of their business. Is a business that investors are really 0:10:45.960 --> 0:10:51.000 focused on. How's that progressing? Um really fantastic. So one 0:10:51.040 --> 0:10:53.440 of the things they're doing is very clever, and in fact, 0:10:53.440 --> 0:10:55.480 I think they're getting sued by one of their competitors 0:10:55.480 --> 0:10:58.160 for this is there bundling things. So rather than just 0:10:58.320 --> 0:11:02.360 paying for music separately for Apple TV, separate from Apple Fitness, 0:11:02.440 --> 0:11:05.400 Apple from Apple News, they're introducing I think on Monday, 0:11:05.440 --> 0:11:08.480 actually a really big bundle where you're you know, you 0:11:08.520 --> 0:11:11.200 can subscribe for twenty dollars a monthly your whole family 0:11:11.280 --> 0:11:13.560 to like nearly every service they have, and if you 0:11:13.600 --> 0:11:16.480 really really want everything they offer, including like Arcade the 0:11:16.600 --> 0:11:19.559 video game streaming space, you can pay thirty dollars for 0:11:19.679 --> 0:11:22.240 your entire family. So I don't know about you, but 0:11:22.280 --> 0:11:24.280 I'm paying like ten dollars for Cloud, or my kids 0:11:24.280 --> 0:11:26.800 paying ten dollars or something. You know, if we wrap 0:11:26.800 --> 0:11:28.480 it all up, we can have like twice as many 0:11:28.520 --> 0:11:31.319 services for half the money. I think that's really smart 0:11:31.320 --> 0:11:34.680 because that should at drive services growth higher, which is 0:11:34.679 --> 0:11:38.439 fantastic for margins. Yeah, I mean, I can definitely see 0:11:38.720 --> 0:11:44.120 many many households paying that pretty genius, Laura, what should 0:11:44.160 --> 0:11:47.520 we when we consider Amazon, what should we be concentrating 0:11:47.559 --> 0:11:52.840 on because obviously it grew its revenue by some again though, 0:11:52.880 --> 0:11:56.480 I mean, you can annoy people if you don't deliver, 0:11:57.000 --> 0:11:59.400 And for example, Amazon Prime hasn't been able to be 0:12:00.360 --> 0:12:02.240 as quick as it used to be because there's so 0:12:02.240 --> 0:12:05.120 many people on the system. You know, there are things 0:12:05.160 --> 0:12:07.319 that are sold out and so on. Kind of Amazon 0:12:07.440 --> 0:12:11.760 hold onto the market share that it's gained. So um, 0:12:11.880 --> 0:12:15.320 I really think Amazon is the best physician stock sort 0:12:15.320 --> 0:12:18.000 of regardless of whether COVID is short or long. I 0:12:18.000 --> 0:12:20.319 think it's the most hedged because if we're going to 0:12:20.400 --> 0:12:23.080 go into lockdowns again, that means e commerce is going 0:12:23.120 --> 0:12:26.000 to be you know, more in demand, especially for the 0:12:26.040 --> 0:12:28.360 holiday season. And I think one of the things that 0:12:28.400 --> 0:12:30.840 people are saying is that the holiday season may really 0:12:30.960 --> 0:12:35.120 tax the logistics capabilities. Well, Amazon sort of got trial 0:12:35.200 --> 0:12:37.560 by fire at the early days of the pandemic and 0:12:37.559 --> 0:12:39.520 then on Prime Day when the Prime Day was up 0:12:39.520 --> 0:12:44.360 sixty year over year, So it keeps testing it's logistics change. 0:12:44.400 --> 0:12:48.200 So I expect it's actually ability to deliver during holidays 0:12:48.240 --> 0:12:51.120 to be better than anybody else's about getting things to 0:12:51.200 --> 0:12:53.760 you on time in a in a you know, um 0:12:53.760 --> 0:12:57.680 safe manner. So I actually really like Amazon for either 0:12:57.760 --> 0:13:01.720 the of the economy opening or COVID lockdowns going longer. 0:13:02.080 --> 0:13:04.760 I think Amazon is the best most hedge, best positioned 0:13:04.840 --> 0:13:08.120 in that they win either way. Hey, Lauren, how about 0:13:07.840 --> 0:13:11.200 the cloud business for Amazon? That's been such a great 0:13:11.280 --> 0:13:14.079 story there and really a profit story, you know, relative 0:13:14.160 --> 0:13:18.200 to the core e commerce business. Um, it's getting more competitive, 0:13:18.280 --> 0:13:21.440 the Microsoft's making big gains, alphabets making big big gains. 0:13:21.559 --> 0:13:26.240 How do you view the Amazon web services business? Yeah, 0:13:26.360 --> 0:13:29.320 really excellent. Like we just got from Google last night 0:13:29.360 --> 0:13:31.840 that they're going to start breaking out their cloud businesses 0:13:31.880 --> 0:13:34.360 because these are such great profitable businesses. So yeah, And 0:13:34.480 --> 0:13:37.760 the quarter Amazon reported three and a half billion dollars 0:13:37.800 --> 0:13:41.360 of profit on eleven billion dollars of revenue in their 0:13:41.400 --> 0:13:43.920 cloud business. I would expect it to be equally as 0:13:43.920 --> 0:13:47.920 profitable for Microsoft and for Google. Um. And I do 0:13:47.960 --> 0:13:50.280 think they're making inroads. But I also think Paul that 0:13:50.640 --> 0:13:54.520 this whole this this has been accelerated, that COVID has 0:13:54.559 --> 0:13:57.760 accelerated the move to the cloud by all businesses. So 0:13:57.840 --> 0:14:00.360 I think the pie just got bigger by the brought 0:14:00.400 --> 0:14:03.840 forward for two years because of COVID. Everybody's moving to 0:14:03.880 --> 0:14:06.520 the cloud faster businesses, So there's just sort of a 0:14:06.520 --> 0:14:10.760 bigger pie for everybody. And Apple is the dominant provider, 0:14:10.840 --> 0:14:13.240 but if there's room for other people now thanks to 0:14:13.320 --> 0:14:16.200 COVID to also, like Google was talking, they do a 0:14:16.200 --> 0:14:18.520 lot of states. They do this state of Virginia, they 0:14:18.559 --> 0:14:22.240 do countries. They're doing more sales like government contracts for 0:14:22.240 --> 0:14:25.240 their cloud business. And Amazon, as you know, really specializes 0:14:25.280 --> 0:14:28.320 in small businesses moving to the cloud. Laura, we're nearly 0:14:28.360 --> 0:14:31.040 out of time, but how do you feel the executives 0:14:31.080 --> 0:14:36.200 did this week in front of Congress. I'm sorry, executives 0:14:36.200 --> 0:14:41.320 are in front of talk about Google, Facebook, and Twitter. Um. 0:14:41.400 --> 0:14:44.120 Lots of criticism about Twitter, but I'll stand aside there 0:14:44.120 --> 0:14:46.280 because I don't cover Twitter. You know, I think there's 0:14:46.280 --> 0:14:48.760 a because I am very worried about Facebook. I think 0:14:48.760 --> 0:14:52.600 it has the highest regulatory risks in because I think 0:14:52.800 --> 0:14:56.440 both sides of the aisle think that Facebook has become 0:14:56.480 --> 0:14:59.680 a referee for news and it basically as a gate 0:14:59.760 --> 0:15:03.800 keep information that scares conservative and more. But really even 0:15:03.840 --> 0:15:07.440 Democrats feel that they're actually livelihood is at risk with 0:15:07.560 --> 0:15:10.640 Facebook actually making the prioritizations of what people see in 0:15:10.640 --> 0:15:13.840 their news feed. So I sort of feel like Facebook 0:15:13.920 --> 0:15:16.480 is as the highest risk of getting fined or broken 0:15:16.560 --> 0:15:20.440 up or having some kind of negative regulatory consequence in 0:15:21.280 --> 0:15:24.800 one both by EU and by the US. So I'm 0:15:24.840 --> 0:15:27.560 scared about that for Facebook. Let's so for Google and 0:15:27.600 --> 0:15:31.640 Apple and Amazon. Alright, Laura, we have to leave it there, 0:15:31.760 --> 0:15:34.640 but very much appreciate your time, so fun speaking with you. 0:15:34.640 --> 0:15:38.440 You cover some of the really companies that we just 0:15:38.520 --> 0:15:41.760 are talking about daily at this point. That is Laura 0:15:41.840 --> 0:15:45.600 need him joining us there on Google and Facebook. Uh sorry, 0:15:45.640 --> 0:15:48.640 Laura Martin from need him always say that Laura Martin 0:15:49.000 --> 0:15:52.440 need him analysts and talking to us about Apple, Amazon, Facebook, 0:15:52.480 --> 0:15:55.800 and Google. So Paul, we'll do it all again next week. 0:15:55.840 --> 0:15:57.960 It should be an interesting week next week. I think 0:15:57.960 --> 0:16:00.360 there's a little event maybe on Tuesday, but two day 0:16:00.400 --> 0:16:02.000 and so the build up and then the days after 0:16:02.160 --> 0:16:06.520 are gonna be very interesting. We're just going in Dominic Nolan, 0:16:06.560 --> 0:16:11.280 Senior looking director at Pacific Assets and Management. Dominic, You've 0:16:11.360 --> 0:16:15.120 got various scenarios laid out and what would happen to 0:16:15.160 --> 0:16:18.400 the bond market say, for example, in the event of 0:16:18.400 --> 0:16:23.360 a change of presidency and a vaccine success. Let's start there, 0:16:23.520 --> 0:16:28.600 what happens to bonds if that happens, I can hear me, okay, Bunny, 0:16:29.160 --> 0:16:33.480 Sure I can, Okay, great. I think it really depends 0:16:33.600 --> 0:16:37.160 on which way the Senate goes. Assuming the potust goes 0:16:37.240 --> 0:16:40.800 to Biden in that particular, and let's assume the House 0:16:40.840 --> 0:16:44.640 stays blue, then you have in theory it would be 0:16:44.640 --> 0:16:47.640 a blue waves that the Senate also goes blue. You 0:16:47.720 --> 0:16:50.680 most likely have extreme stimulus in there, and that will 0:16:50.680 --> 0:16:53.040 be some extent offset which is good for the economy, 0:16:53.080 --> 0:16:56.200 probably offset a little bit by increase in taxes. But 0:16:56.840 --> 0:17:00.400 as it relates to rates, I would expect rates probably 0:17:00.680 --> 0:17:02.880 start to move up a little bit. I mean we've 0:17:02.880 --> 0:17:05.960 been we've been had a huge pressure on rates from 0:17:05.960 --> 0:17:09.320 a downward side. If you have a thought of massive stimulus, 0:17:09.760 --> 0:17:11.520 then you have the inflation longer start to end of 0:17:11.560 --> 0:17:13.880 the market, and I would expect a bit of a 0:17:13.880 --> 0:17:16.119 a steepener on here, so the long end starts to 0:17:16.160 --> 0:17:20.720 move up with the expectations of massive, massive fiscal spending. If, however, 0:17:21.520 --> 0:17:24.720 the Senate stays red, they will probably be a block 0:17:25.359 --> 0:17:29.720 two extreme stimulus. I think if Biden wins in the 0:17:29.920 --> 0:17:31.760 Senate says red, they'll be a blocked anything he wants 0:17:31.760 --> 0:17:36.520 to do. So I would envision a scenario where horse 0:17:36.560 --> 0:17:39.120 training takes place, where you want stimulus to come into 0:17:39.119 --> 0:17:42.359 the system at the same time, you know, the Senate 0:17:42.400 --> 0:17:44.359 would be blocking, trying to block that or mute that, 0:17:44.680 --> 0:17:48.800 or in exchange, we want lower taxes and that particularly, 0:17:48.840 --> 0:17:51.639 that's it's much more uncertain. And that's the combo that 0:17:52.520 --> 0:17:55.320 I think. Um, yeah, it would be uncertain. And I 0:17:55.320 --> 0:17:57.520 would say if they couldn't get stimulus passed in a 0:17:57.600 --> 0:18:00.760 time where the COVID space, the COVID cases are spiking 0:18:00.800 --> 0:18:03.360 like they are, you might have a situation where rates 0:18:03.359 --> 0:18:05.920 continue to drop with the expectation there's not enough stimulus 0:18:05.960 --> 0:18:09.160 to support the economy. So those are the It really 0:18:09.240 --> 0:18:12.720 depends to me on which way the Senate goes dominic. 0:18:12.920 --> 0:18:17.280 You know, obviously we do have those electoral uncertainties, but 0:18:17.400 --> 0:18:20.199 if you listen to central bankers around the world, um, 0:18:20.320 --> 0:18:22.880 and it just feels like an environment where rates are 0:18:22.920 --> 0:18:26.399 lower for longer in general. So how do you know 0:18:26.520 --> 0:18:30.000 fixed income investors like you good folks, a specific asset management? 0:18:30.200 --> 0:18:32.760 How do you think about, you know, the kind of 0:18:32.760 --> 0:18:35.240 the one to two to three year pull here, where 0:18:35.280 --> 0:18:39.320 do you make money? It's a great question. I think 0:18:39.359 --> 0:18:44.040 from the standpoint of return, profiles are going to be duted. Honestly, 0:18:44.040 --> 0:18:47.359 you're sitting in an environment where most most of the 0:18:47.359 --> 0:18:49.280 short term paper is or a lot of it's yielding 0:18:49.280 --> 0:18:53.080 below one. So if you can somehow return one two 0:18:53.520 --> 0:18:57.320 in that range, I think that's actually pretty attractive given 0:18:57.720 --> 0:19:00.639 the status of short term rates across the glow. And 0:19:00.720 --> 0:19:03.479 when we look at it, the central banks are a 0:19:03.520 --> 0:19:06.520 massive support for the system for liquidity, So we do 0:19:06.600 --> 0:19:10.520 feel that you're downside is is backstopped to a large 0:19:10.520 --> 0:19:13.160 extent by what people have called the FED put. And 0:19:13.400 --> 0:19:15.159 you go in, you know, and there's there's room for 0:19:15.240 --> 0:19:18.520 total from probably some spread products, certainly a little bit 0:19:18.560 --> 0:19:20.520 of compression on the corporate side. You probably have some 0:19:20.840 --> 0:19:26.040 elements in structure products. We're not mortgage folks, but I 0:19:26.080 --> 0:19:30.360 think the global the global demand for yield will continue 0:19:30.400 --> 0:19:34.680 to grind spreads tighter. That's our that's our medium term view, 0:19:35.760 --> 0:19:40.200 given the central bank support. So if you can get 0:19:40.280 --> 0:19:45.159 basis points of of spread on top of clipping a 0:19:45.160 --> 0:19:47.879 coupon that's how you get to your one and a 0:19:47.920 --> 0:19:50.120 half to two percent yield for short duration for one 0:19:50.119 --> 0:19:52.520 to three part of the curve. That's what I adventure. 0:19:53.400 --> 0:19:57.280 What happens to the higher yield elements of the market, 0:19:57.400 --> 0:19:59.920 and even the junk bond market, I mean how tied 0:20:00.040 --> 0:20:05.200 and those spreads go. We talked about that a lot 0:20:05.200 --> 0:20:08.400 on the floor and US high yield sitting with a 0:20:08.480 --> 0:20:11.240 with a five handle on it, and I feel is 0:20:11.280 --> 0:20:14.600 that you cannot go much lower until you look across it. 0:20:15.359 --> 0:20:17.400 You know, European high yield, which is sitting at two 0:20:17.440 --> 0:20:21.679 and a half. So on one hand, I'd say, from 0:20:21.680 --> 0:20:24.760 from a compensation for wrisk standpoint, I feel as though 0:20:25.359 --> 0:20:28.040 HILD shouldn't even be at this level. But I think 0:20:28.080 --> 0:20:31.320 I'm just living in a world that is dated, in 0:20:31.400 --> 0:20:36.600 a new central bank monetary our quey world. It can 0:20:36.640 --> 0:20:41.200 certainly go tighter. And you think about again, Europe European 0:20:41.240 --> 0:20:43.000 hi yield at two and a half, that's an economy. 0:20:43.560 --> 0:20:46.440 It's not growing as fast as the United States. Investors 0:20:46.440 --> 0:20:49.960 are willing to take sub three on leverage finance over there, 0:20:50.000 --> 0:20:52.080 So there is certainly an argument in the United States. 0:20:52.200 --> 0:20:56.240 You could grind inside a thought so Dominic, just real quick, 0:20:56.240 --> 0:20:58.639 thirty seconds, give me a sense of credit quality that 0:20:58.640 --> 0:21:04.040 you're seeing in your portfolio right here. It's a bit bifurcated. 0:21:04.080 --> 0:21:08.320 I think our approach we've taken more you know, tilt 0:21:08.359 --> 0:21:12.960 to the more performing companies and being very very selective 0:21:13.160 --> 0:21:15.240 as it relates to what we call the COVID sectors 0:21:15.840 --> 0:21:21.360 and our COVID sectors, the class, your hospitality, your gaming, travel, entertainment. 0:21:22.160 --> 0:21:24.720 Those are areas where if we go through another wave, 0:21:25.280 --> 0:21:27.399 there are many of these leverage finance structures that just 0:21:27.720 --> 0:21:30.800 won't make it and you'll see another wave of bankruptcy. 0:21:30.880 --> 0:21:34.160 So from our side, we're tilting certainly the more liquid 0:21:34.200 --> 0:21:37.920 side of the market, better better credits. But it's really about, 0:21:38.680 --> 0:21:41.119