1
00:00:05,120 --> 00:00:09,320
Speaker 1: Welcome to the Bloomberg Surveillance Podcast Hometown Keene. Along with

2
00:00:09,440 --> 00:00:13,200
Speaker 1: Jonathan Ferrell and Lisa are Brownwitz Jayleie, we bring you

3
00:00:13,320 --> 00:00:18,640
Speaker 1: insight from the best an economics, finance, investment and international relations.

4
00:00:18,960 --> 00:00:23,840
Speaker 1: Fine Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,

5
00:00:23,920 --> 00:00:29,920
Speaker 1: and of course on the Bloomberg termament. Let's talk about

6
00:00:29,920 --> 00:00:31,560
Speaker 1: this bond market as well. If you're just tuning in,

7
00:00:31,720 --> 00:00:33,320
Speaker 1: you have got a bond market with your tire on

8
00:00:33,400 --> 00:00:36,199
Speaker 1: tens by four basis points to about one forty eight,

9
00:00:36,240 --> 00:00:38,159
Speaker 1: just short of one fifty. Joining us now to discuss this,

10
00:00:38,240 --> 00:00:41,400
Speaker 1: Marilyn Watson had a global fundamental fixed income strategy at

11
00:00:41,400 --> 00:00:43,839
Speaker 1: black Rock. Marilyn, let's start with Chairman Pale and work

12
00:00:43,840 --> 00:00:46,440
Speaker 1: our way toward into this bond market, treasuries into credit.

13
00:00:47,000 --> 00:00:49,640
Speaker 1: Did you sense a big shift yesterday from the chairman?

14
00:00:51,200 --> 00:00:54,040
Speaker 1: We did censor shift, so I think sickly obviously the

15
00:00:54,080 --> 00:00:56,440
Speaker 1: end of the last week. Um, you know, we saw

16
00:00:56,480 --> 00:00:58,920
Speaker 1: this very much sure, a risk of tone with the

17
00:00:59,000 --> 00:01:01,400
Speaker 1: new variant coming to We're leading to you know, a

18
00:01:01,440 --> 00:01:04,200
Speaker 1: huge amount of uncertainty back in the markets. Um. And

19
00:01:04,240 --> 00:01:06,640
Speaker 1: I think that led to you know, investors being obviously

20
00:01:06,640 --> 00:01:09,080
Speaker 1: a little bit more cautious going into chair Powell and

21
00:01:09,120 --> 00:01:11,280
Speaker 1: his testimony. And I do think it did surprise the

22
00:01:11,319 --> 00:01:13,840
Speaker 1: markets a little bit. And we have been saying for

23
00:01:13,880 --> 00:01:15,880
Speaker 1: some time that we think, you know, the Fed really

24
00:01:16,280 --> 00:01:19,520
Speaker 1: isn't a position now where they can accelerate the taper

25
00:01:19,880 --> 00:01:22,400
Speaker 1: where next year they can start to even um, you know,

26
00:01:22,560 --> 00:01:25,959
Speaker 1: maybe raise rates maybe two or even three times, depending

27
00:01:26,000 --> 00:01:29,560
Speaker 1: on how this new variant shapes out. But I think

28
00:01:29,600 --> 00:01:31,520
Speaker 1: the market was caught a little bit off guard, just

29
00:01:31,600 --> 00:01:33,720
Speaker 1: given the volatility that we've seen over the past few

30
00:01:33,800 --> 00:01:37,360
Speaker 1: days with the negative news you know, around COVID. But

31
00:01:37,800 --> 00:01:40,199
Speaker 1: I think in terms of the overall trajecture of the market,

32
00:01:40,680 --> 00:01:42,320
Speaker 1: that's where it had been heading. I think it was

33
00:01:42,360 --> 00:01:45,440
Speaker 1: just surprising given the context of the past few days.

34
00:01:45,520 --> 00:01:47,960
Speaker 1: The q has been very important for signaling, signaling to

35
00:01:48,480 --> 00:01:51,200
Speaker 1: the broader economy and to financial markets. Were Mary and

36
00:01:51,200 --> 00:01:53,800
Speaker 1: I just wonder what an accelerated QUI taper would actually

37
00:01:53,840 --> 00:01:56,280
Speaker 1: mean for this market. You Rick read above, Miller have

38
00:01:56,320 --> 00:01:58,640
Speaker 1: made the point repeatedly over the last several months that

39
00:01:58,720 --> 00:02:00,200
Speaker 1: a lot of this would be canceled out at the

40
00:02:00,200 --> 00:02:02,960
Speaker 1: taper at the Treasury. But if we accelerate things. Does

41
00:02:03,000 --> 00:02:06,440
Speaker 1: it have a bigger impact, Well, I think on the

42
00:02:06,480 --> 00:02:08,519
Speaker 1: margin it has a small impact. But the fact is

43
00:02:08,560 --> 00:02:12,240
Speaker 1: that when they are still continuing to purchase assets, even

44
00:02:12,280 --> 00:02:14,959
Speaker 1: as they wind down the amount that they hold, then

45
00:02:15,040 --> 00:02:18,640
Speaker 1: you know, they're still actually supporting and they're still providing

46
00:02:18,639 --> 00:02:21,800
Speaker 1: a very very loose accommodative montry policy. They're still continuing

47
00:02:21,840 --> 00:02:25,160
Speaker 1: to buy assets. So even if they sort of accelerate

48
00:02:25,200 --> 00:02:27,280
Speaker 1: this a little bit, we think that the level of

49
00:02:27,280 --> 00:02:29,640
Speaker 1: accommodation at the moment is so high, and particularly I

50
00:02:29,680 --> 00:02:32,280
Speaker 1: think yesterday we did start to hear a lot more

51
00:02:32,320 --> 00:02:36,400
Speaker 1: caution from Chair Powell around just the very high levels

52
00:02:36,440 --> 00:02:39,760
Speaker 1: of inflation that you know, are potentially becoming more persistent.

53
00:02:40,120 --> 00:02:41,680
Speaker 1: And I think that's a factor that the Fed are

54
00:02:41,720 --> 00:02:45,200
Speaker 1: now starting to really include in the forward guidance, and

55
00:02:45,240 --> 00:02:47,239
Speaker 1: I think maybe they just starting to shift the tone

56
00:02:47,240 --> 00:02:49,560
Speaker 1: a little bit as we do go into you know,

57
00:02:49,639 --> 00:02:51,760
Speaker 1: the the FOMC meeting in a couple of weeks time,

58
00:02:51,840 --> 00:02:54,359
Speaker 1: I think it will be key for market participants to

59
00:02:54,400 --> 00:02:59,160
Speaker 1: really see you know, the timing around the que tapering,

60
00:02:59,200 --> 00:03:01,680
Speaker 1: but also the time being around any potential rating increase

61
00:03:01,720 --> 00:03:03,959
Speaker 1: as well. So I think given the high levels of

62
00:03:03,960 --> 00:03:06,640
Speaker 1: inflation that we've talked about a lot. Given the fact

63
00:03:06,639 --> 00:03:08,760
Speaker 1: that the tone has shifted around that it could be

64
00:03:08,800 --> 00:03:11,520
Speaker 1: a bit more persistent than so far we've been hearing

65
00:03:11,520 --> 00:03:13,799
Speaker 1: from the Fed. Um. I do think it's important. One

66
00:03:13,840 --> 00:03:17,000
Speaker 1: reason why perhaps Fredshire Powell feels important is because markets

67
00:03:17,040 --> 00:03:20,040
Speaker 1: are letting him make these moves, to make these signals

68
00:03:20,040 --> 00:03:22,480
Speaker 1: without getting disrupted too much. And I take a look

69
00:03:22,520 --> 00:03:25,040
Speaker 1: at credit nothing like the tape re tantrum going to

70
00:03:25,080 --> 00:03:29,079
Speaker 1: back to but still nonetheless you are seeing money getting

71
00:03:29,200 --> 00:03:32,120
Speaker 1: withdrawn from the high yeald debt market and slowly see

72
00:03:32,200 --> 00:03:35,320
Speaker 1: yield creep higher the worst performance for that debt going

73
00:03:35,360 --> 00:03:38,600
Speaker 1: back to September. Is this a buying opportunity or a

74
00:03:38,640 --> 00:03:42,800
Speaker 1: warning sign for what's to come? Um? I mean I

75
00:03:42,840 --> 00:03:47,400
Speaker 1: think potentially, if you exclude the current uncertainty around the

76
00:03:47,400 --> 00:03:51,280
Speaker 1: new COVID variant, it could be a buying opportunity. When

77
00:03:51,320 --> 00:03:53,560
Speaker 1: you think that, of course, as you expect to see

78
00:03:53,680 --> 00:03:56,320
Speaker 1: you know, Muntro policy normalize a little bit. Um And

79
00:03:56,440 --> 00:03:59,400
Speaker 1: we have seen obviously, um, you know, the yield and

80
00:03:59,440 --> 00:04:02,840
Speaker 1: treasuries and Greece, we've started to see spreads widen. We

81
00:04:02,960 --> 00:04:06,360
Speaker 1: are seeing now better opportunities and better evaluations in higher

82
00:04:06,400 --> 00:04:09,320
Speaker 1: quality credit, so we have seen some investors sort of

83
00:04:09,360 --> 00:04:12,760
Speaker 1: go up the credit quality spectrum. We have also when

84
00:04:12,800 --> 00:04:15,200
Speaker 1: you're talking about how yield, we're continuing to see investors

85
00:04:15,240 --> 00:04:18,119
Speaker 1: as well um still continuing to prefer the loan market

86
00:04:18,160 --> 00:04:21,280
Speaker 1: in many cases given the floating right structure. So I

87
00:04:21,320 --> 00:04:23,440
Speaker 1: think again, as the market is put you know, really

88
00:04:23,440 --> 00:04:26,680
Speaker 1: starting to position itself for a little bit more normalization,

89
00:04:26,720 --> 00:04:30,000
Speaker 1: although we're far from normal um in this environment, and

90
00:04:30,040 --> 00:04:32,200
Speaker 1: as we do see these you know, ongoing levels of

91
00:04:32,320 --> 00:04:35,880
Speaker 1: inflation that are persisting through until next year, then I

92
00:04:35,920 --> 00:04:38,440
Speaker 1: do think we do we are seeing more dispersion also

93
00:04:38,480 --> 00:04:41,839
Speaker 1: in the sectors that are seeing you know, better prices

94
00:04:41,839 --> 00:04:44,440
Speaker 1: but evaluations. So I think it's a buying opportunity, but

95
00:04:44,480 --> 00:04:47,240
Speaker 1: I think also investors are being you know, particularly cautious

96
00:04:47,640 --> 00:04:50,599
Speaker 1: as we're going to year end. Liquidity isn't particularly great

97
00:04:50,600 --> 00:04:52,720
Speaker 1: at the moment, and as we do have this you know,

98
00:04:52,880 --> 00:04:56,200
Speaker 1: higher uncertainty as we're discussing around the new COVID variant,

99
00:04:56,240 --> 00:05:01,520
Speaker 1: around petition, potentially measures to you know, limit restriction on movement, etcetera.

100
00:05:01,640 --> 00:05:03,960
Speaker 1: So there's a lot of unknowns, but there could be

101
00:05:04,000 --> 00:05:06,359
Speaker 1: potentially buying opportunities. What an end of the year, Mounting,

102
00:05:06,440 --> 00:05:08,280
Speaker 1: fantastic to catch up with you send out best to

103
00:05:08,320 --> 00:05:10,720
Speaker 1: the team as always Mountain, what's in there? Black Rock?

104
00:05:16,640 --> 00:05:19,440
Speaker 1: Right now? On fixed income, Bob Michael joins us here

105
00:05:19,520 --> 00:05:22,240
Speaker 1: for a good conversation to says how to global fixed

106
00:05:22,240 --> 00:05:26,360
Speaker 1: income currency commodities of JP. JP Morgan Asset Management barely

107
00:05:26,400 --> 00:05:30,839
Speaker 1: describes the ability here do you buy the dip in bonds?

108
00:05:30,960 --> 00:05:34,679
Speaker 1: I'm totally confused about what to do with full faith

109
00:05:34,680 --> 00:05:38,080
Speaker 1: and credit or just credit right now? Do you clip

110
00:05:38,120 --> 00:05:40,080
Speaker 1: the coupon? Do you buy it? Or do you just

111
00:05:40,279 --> 00:05:43,760
Speaker 1: go to cash? Which is it? You sell government bonds

112
00:05:44,040 --> 00:05:48,479
Speaker 1: and you buy credit. There's been a tremendous repricing, You've

113
00:05:48,480 --> 00:05:51,200
Speaker 1: had a flattening of the Yelk curve. There's a lot

114
00:05:51,240 --> 00:05:54,479
Speaker 1: of concern that the Fed is going to move too

115
00:05:54,560 --> 00:05:58,400
Speaker 1: quickly for the market and will lead to recession. And

116
00:05:58,480 --> 00:06:03,920
Speaker 1: that's ultimately why thev has inverted. That's nonsense. They're miles

117
00:06:03,960 --> 00:06:07,440
Speaker 1: away from anything that looks normal, and I think this

118
00:06:07,520 --> 00:06:10,960
Speaker 1: is an opportunity to get rid of any remaining government

119
00:06:11,000 --> 00:06:14,200
Speaker 1: bonds you have and then go back into the credit markets,

120
00:06:14,240 --> 00:06:17,000
Speaker 1: go back into investment grade and high yield. You can

121
00:06:17,000 --> 00:06:19,400
Speaker 1: do it in US and you can do it in Europe,

122
00:06:19,600 --> 00:06:21,680
Speaker 1: and those are the things that you're buying on sale.

123
00:06:21,760 --> 00:06:25,440
Speaker 1: Well that word normal, What does that word mean anymore? Well,

124
00:06:25,720 --> 00:06:28,520
Speaker 1: for me who's been around for four decades, it means

125
00:06:28,600 --> 00:06:31,920
Speaker 1: getting the central banks out of the market and leaving

126
00:06:31,960 --> 00:06:35,359
Speaker 1: it to people like me to price. And there's a

127
00:06:35,560 --> 00:06:39,000
Speaker 1: very different operating model than what we're used to from

128
00:06:39,160 --> 00:06:42,440
Speaker 1: the central banks. Um, when I started the business, the

129
00:06:42,480 --> 00:06:46,440
Speaker 1: central banks extended credit to the banking system and they

130
00:06:46,440 --> 00:06:49,039
Speaker 1: controlled the cost of funding, and then they relied on

131
00:06:49,120 --> 00:06:53,080
Speaker 1: the banks to extend credit into the economy. Now they're

132
00:06:53,080 --> 00:06:56,240
Speaker 1: controlling the cost of funding across the entire economy. It's

133
00:06:56,279 --> 00:06:59,359
Speaker 1: gone too far. It's got to stop, and participants in

134
00:06:59,400 --> 00:07:02,160
Speaker 1: the market like myself have to get involved again. Well

135
00:07:02,240 --> 00:07:04,240
Speaker 1: that's a design, Is it a full cost? What makes

136
00:07:04,240 --> 00:07:07,640
Speaker 1: it a fuecast? What makes it a forecast is j

137
00:07:07,839 --> 00:07:11,320
Speaker 1: PAL yesterday and j PAL saying it's time for them

138
00:07:11,360 --> 00:07:15,200
Speaker 1: to exit the market, which I think they're going to do.

139
00:07:15,320 --> 00:07:18,720
Speaker 1: They should announce uh that they're going to double the

140
00:07:18,760 --> 00:07:21,840
Speaker 1: pace of of tape ring, so they should be out

141
00:07:21,880 --> 00:07:25,160
Speaker 1: of the market by March, and then we should see

142
00:07:25,360 --> 00:07:28,280
Speaker 1: rate hikes pretty soon after that, So they're going to

143
00:07:28,360 --> 00:07:31,240
Speaker 1: start that journey to normal, and we're going to help

144
00:07:31,240 --> 00:07:33,120
Speaker 1: them on that path. All right, You're gonna help them

145
00:07:33,160 --> 00:07:37,080
Speaker 1: on that path. So so completely egourgeous of you. I

146
00:07:37,120 --> 00:07:39,240
Speaker 1: do wonder that when you say it's a buying opportunity

147
00:07:39,480 --> 00:07:43,400
Speaker 1: for credit, particularly riskier credit, why this is a good

148
00:07:43,560 --> 00:07:45,920
Speaker 1: entry point given the fact that we are still so

149
00:07:46,040 --> 00:07:49,760
Speaker 1: vastly below where we were before the pandemic when it

150
00:07:49,800 --> 00:07:52,600
Speaker 1: comes to yields, why is this an opportunity at four

151
00:07:52,680 --> 00:07:57,600
Speaker 1: point eight percent a coupon on a junk pond. For

152
00:07:57,680 --> 00:08:02,520
Speaker 1: a number of things. For one, corporate profitability still remains

153
00:08:02,800 --> 00:08:06,600
Speaker 1: very high. Companies have a lot of financial flexibility, and

154
00:08:06,640 --> 00:08:10,840
Speaker 1: the companies were talking to don't see any significant drop

155
00:08:10,880 --> 00:08:13,600
Speaker 1: off in aggregate final demands, so their top line is

156
00:08:13,640 --> 00:08:16,880
Speaker 1: going to grow. They do see the input cost pressures

157
00:08:17,160 --> 00:08:19,600
Speaker 1: and they're starting to pass some of those along, and

158
00:08:19,640 --> 00:08:22,720
Speaker 1: by the way they've been raising dividends and buying back shares.

159
00:08:23,000 --> 00:08:25,520
Speaker 1: They can dial that down a bit if they need to.

160
00:08:25,920 --> 00:08:29,080
Speaker 1: But right now we're looking at a consumer that's flesh

161
00:08:29,080 --> 00:08:31,960
Speaker 1: with cash, that's out there spending. Yeah, there may be

162
00:08:32,120 --> 00:08:36,120
Speaker 1: some headwinds from the O Macron variant will see over

163
00:08:36,160 --> 00:08:38,600
Speaker 1: the next couple of weeks and couple of months, But

164
00:08:38,720 --> 00:08:41,400
Speaker 1: for now, corporate profitability looks pretty good. I want to

165
00:08:41,400 --> 00:08:43,040
Speaker 1: be a part of that. Well, but do you really

166
00:08:43,040 --> 00:08:45,680
Speaker 1: think central bankers will ever get out of this market

167
00:08:45,720 --> 00:08:48,040
Speaker 1: and let people like you truly price it or is

168
00:08:48,040 --> 00:08:51,040
Speaker 1: there sort of an implicit put that if things get

169
00:08:51,080 --> 00:08:55,280
Speaker 1: volatile enough, they'll step right back in. Well, that's the debate.

170
00:08:55,520 --> 00:08:58,560
Speaker 1: I start off by saying, I'm I'm used to one model,

171
00:08:58,600 --> 00:09:01,559
Speaker 1: but when I look around our trading floor, um a

172
00:09:01,760 --> 00:09:05,520
Speaker 1: very large percentage of the people only know the current model,

173
00:09:06,080 --> 00:09:08,840
Speaker 1: which has existed since two thousand and nine, where central

174
00:09:08,840 --> 00:09:12,040
Speaker 1: banks do intervene in all sectors of the bond market.

175
00:09:12,160 --> 00:09:14,760
Speaker 1: So now I think it's a tool that they've learned

176
00:09:14,760 --> 00:09:17,920
Speaker 1: to deploy. It's not going to go away anytime soon,

177
00:09:18,240 --> 00:09:21,040
Speaker 1: and they're going to have to gauge that with all

178
00:09:21,080 --> 00:09:25,679
Speaker 1: the other tools that they have. And yes, financial conditions

179
00:09:25,760 --> 00:09:29,360
Speaker 1: indicators are one of the reasons that you buy dips

180
00:09:29,480 --> 00:09:32,520
Speaker 1: in risk assets. As long as they look at those things,

181
00:09:32,840 --> 00:09:36,040
Speaker 1: they're back stopping the markets. Michael with his JP Morgan

182
00:09:36,120 --> 00:09:37,959
Speaker 1: here on radio and television, Bob, I'm not going to

183
00:09:38,040 --> 00:09:40,200
Speaker 1: get you in trouble on China. Somebody else at JP

184
00:09:40,320 --> 00:09:42,880
Speaker 1: Morgan is some challenges this week on China, But I

185
00:09:42,920 --> 00:09:45,240
Speaker 1: am gonna ask you about the Pacific rim and about

186
00:09:45,240 --> 00:09:49,880
Speaker 1: the great miss our David Wilson notices inequities internationals failed.

187
00:09:49,960 --> 00:09:52,280
Speaker 1: What do you do with the international paper right now?

188
00:09:52,440 --> 00:09:54,400
Speaker 1: I don't mean Turkey, but what do you do with

189
00:09:54,440 --> 00:09:59,760
Speaker 1: the JP Morgan opportunity in international fixed income? You go

190
00:10:00,040 --> 00:10:03,400
Speaker 1: for it. And we've had a lot of conversations about

191
00:10:03,760 --> 00:10:08,360
Speaker 1: emerging markets, specifically emerging market equities, and how earnings for

192
00:10:08,480 --> 00:10:12,720
Speaker 1: companies across Asia in particular have come in higher than

193
00:10:12,800 --> 00:10:16,360
Speaker 1: anyone anticipated a year ago. The stocks have gone nowhere,

194
00:10:16,400 --> 00:10:19,680
Speaker 1: They've even drifted down compared to the double digit recurrens

195
00:10:19,960 --> 00:10:23,240
Speaker 1: returns in the developed markets. Next year is probably the

196
00:10:23,360 --> 00:10:27,120
Speaker 1: year that stock prices catch up to earnings, but earnings

197
00:10:27,120 --> 00:10:30,160
Speaker 1: are still going to look pretty good. So yes, we're

198
00:10:30,200 --> 00:10:34,200
Speaker 1: also buying credit across a pack in China and across

199
00:10:34,240 --> 00:10:36,559
Speaker 1: the emerging markets. Is Europe a piece of that as well,

200
00:10:36,640 --> 00:10:41,439
Speaker 1: Bob Um, Yes, and and and in fact Um we

201
00:10:41,440 --> 00:10:44,240
Speaker 1: were looking over the last couple of days of going

202
00:10:44,280 --> 00:10:49,520
Speaker 1: back into the European Bank sector. Uh, particularly UH, the

203
00:10:49,720 --> 00:10:53,920
Speaker 1: alternative the additional tier one securities and the lower tier

204
00:10:53,920 --> 00:10:57,560
Speaker 1: two securities, so the bank hybrid securities. Um. So we

205
00:10:57,640 --> 00:10:59,719
Speaker 1: do see some opportunities there as well. You know, I

206
00:11:00,040 --> 00:11:02,240
Speaker 1: have some speculations. So let me finish with this question.

207
00:11:02,640 --> 00:11:04,320
Speaker 1: What did you think of cham and Pal making that

208
00:11:04,360 --> 00:11:07,520
Speaker 1: move a week after secure and renomination? Bob? Did that

209
00:11:07,559 --> 00:11:10,160
Speaker 1: stand that to you? It's so well, the easiest path

210
00:11:10,480 --> 00:11:13,320
Speaker 1: for him would have been to do nothing and coast

211
00:11:13,400 --> 00:11:19,079
Speaker 1: through the hearings on his reappointment and to suddenly start

212
00:11:19,120 --> 00:11:24,000
Speaker 1: the tapering process disrupt the markets. Um to me is

213
00:11:24,000 --> 00:11:26,440
Speaker 1: is taking some risk. What I want to know is

214
00:11:26,720 --> 00:11:30,400
Speaker 1: what changed from Monday to Tuesday and what's going to

215
00:11:30,480 --> 00:11:34,600
Speaker 1: change today from yesterday? Yeah, I couldn't agree more Tom.

216
00:11:34,640 --> 00:11:37,760
Speaker 1: It's been a month since they announced tape rink and

217
00:11:37,800 --> 00:11:39,880
Speaker 1: now we're having a conversation. What's changed in a month

218
00:11:40,360 --> 00:11:41,960
Speaker 1: for him to say, you know what, maybe we should

219
00:11:41,960 --> 00:11:44,439
Speaker 1: accelerate things. What do you see here is a grizzled

220
00:11:44,480 --> 00:11:47,360
Speaker 1: pro like Bob Michael getting right down to the nitty

221
00:11:47,360 --> 00:11:50,679
Speaker 1: gritty what changed in twenty four hours? And that's the

222
00:11:50,679 --> 00:11:52,880
Speaker 1: whipsofe for people who are not in the game. On

223
00:11:52,920 --> 00:11:55,679
Speaker 1: this John, we're all talking about the market action. We're

224
00:11:55,720 --> 00:11:59,760
Speaker 1: forgetting about the losses earned and made over the last

225
00:12:00,080 --> 00:12:02,960
Speaker 1: forty eight hours. Is I really wonder what the carnage

226
00:12:03,040 --> 00:12:05,440
Speaker 1: is up there? So my final question to Bob Michael

227
00:12:05,440 --> 00:12:09,240
Speaker 1: Thomas usually football related, so we'll keep it consistent in

228
00:12:09,240 --> 00:12:14,040
Speaker 1: remain in Georgia, not Alabama, Georgia this weekend, Bob. Confidence

229
00:12:14,120 --> 00:12:16,240
Speaker 1: level so I want to understand from your perspective tends

230
00:12:16,240 --> 00:12:21,479
Speaker 1: back to two or another championship for Liverpool. Another championship

231
00:12:21,559 --> 00:12:25,760
Speaker 1: for Liverpool to they are a goal scoring machine. Well,

232
00:12:25,840 --> 00:12:28,680
Speaker 1: Michael JP Mark and asset management in the flesh, Bob,

233
00:12:28,679 --> 00:12:35,000
Speaker 1: It's good to see you joining us now, not just

234
00:12:35,040 --> 00:12:37,880
Speaker 1: on the global economy, but on the pandemic. Lauren Spoon,

235
00:12:37,960 --> 00:12:40,400
Speaker 1: the chief economist at the O E C. D AND's

236
00:12:40,440 --> 00:12:43,000
Speaker 1: typically I've come straight to you on a forecast, a

237
00:12:43,080 --> 00:12:45,400
Speaker 1: call for US growth for Europe et center. I want

238
00:12:45,400 --> 00:12:47,440
Speaker 1: to come to you on a number you guys have

239
00:12:47,480 --> 00:12:50,600
Speaker 1: put out this morning. Vaccinations are key for the recovery.

240
00:12:50,640 --> 00:12:54,280
Speaker 1: They would only cost fifty billion dollars. Fifty billion the

241
00:12:54,280 --> 00:12:56,680
Speaker 1: context of how much we've spent over the last eighteen

242
00:12:56,720 --> 00:12:58,679
Speaker 1: months is nothing. How do you get there? How do

243
00:12:58,720 --> 00:13:04,600
Speaker 1: you get to that number? So so the way we've

244
00:13:05,040 --> 00:13:09,080
Speaker 1: getting to that number, sorry about this. Basically, you know,

245
00:13:09,120 --> 00:13:12,240
Speaker 1: the fifty billion is what's been estimating by Covax and

246
00:13:12,360 --> 00:13:16,679
Speaker 1: all the related institution um. The ten trillion is actually

247
00:13:16,720 --> 00:13:20,880
Speaker 1: what the twenty has been providing into fiscal support to

248
00:13:20,920 --> 00:13:24,320
Speaker 1: the economy, two people, to firms, to jobs. So when

249
00:13:24,480 --> 00:13:29,400
Speaker 1: when you balance things out, ten trillion for supporting our

250
00:13:29,480 --> 00:13:33,160
Speaker 1: economy going through the pandemic, you know, compared with the

251
00:13:33,880 --> 00:13:37,880
Speaker 1: fifty tiny fifty billion to bring the vaccine to the

252
00:13:38,160 --> 00:13:43,800
Speaker 1: entire world population, that looks completely disproportionate. Well, right now

253
00:13:43,800 --> 00:13:47,640
Speaker 1: we're dealing with the omicron variant, the idea that Africa

254
00:13:48,040 --> 00:13:51,719
Speaker 1: has an incredibly low vaccination rate. Have you heard from

255
00:13:51,800 --> 00:13:55,120
Speaker 1: member nations that they're accelerating, doubling down some of their

256
00:13:55,120 --> 00:13:58,520
Speaker 1: aid to try to distribute vaccines in Africa and in

257
00:13:58,559 --> 00:14:04,480
Speaker 1: other places that are really underserved. So yeah, with our

258
00:14:04,559 --> 00:14:06,880
Speaker 1: Health Department here A, the O, E, C D, and

259
00:14:07,000 --> 00:14:09,960
Speaker 1: the Trade Department, notice that it's very difficult to bring

260
00:14:09,960 --> 00:14:12,319
Speaker 1: it to Africa, as you say, it's where the rate

261
00:14:12,360 --> 00:14:15,920
Speaker 1: of vaccination is very low. There's a huge logistic questions,

262
00:14:16,080 --> 00:14:20,120
Speaker 1: right bringing not only the vaccine, but being able to

263
00:14:20,240 --> 00:14:22,600
Speaker 1: keep it at the right temperature and then distribute it

264
00:14:22,680 --> 00:14:25,440
Speaker 1: around UM. So that that's where I think a lot

265
00:14:25,480 --> 00:14:28,320
Speaker 1: of the effort now has has to focus on. But

266
00:14:28,360 --> 00:14:30,400
Speaker 1: not only if we go back to the O E

267
00:14:30,480 --> 00:14:33,600
Speaker 1: c D UM and that's what we should this morning.

268
00:14:33,720 --> 00:14:36,600
Speaker 1: Even within O E C D countries and advanced economies,

269
00:14:36,720 --> 00:14:40,440
Speaker 1: some countries have very low vaccination rate and that's an

270
00:14:40,480 --> 00:14:43,000
Speaker 1: issue because as we've seen for example in some of

271
00:14:43,080 --> 00:14:46,840
Speaker 1: the Eastern European countries, UM, they just had led them

272
00:14:46,880 --> 00:14:50,960
Speaker 1: to put in place restrictions to mobility and economic activity. Again,

273
00:14:51,200 --> 00:14:55,080
Speaker 1: so really, you know, expanding vaccination, making sure people get

274
00:14:55,160 --> 00:14:59,400
Speaker 1: double or triple vaxed is key to a sustain recovery.

275
00:14:59,440 --> 00:15:02,240
Speaker 1: In the meant time, Lawrence, there is a problem when

276
00:15:02,280 --> 00:15:04,960
Speaker 1: we talk about the hiking cycle for the Federal Reserve,

277
00:15:05,000 --> 00:15:07,440
Speaker 1: when we talk about the Bank of England going to

278
00:15:07,600 --> 00:15:10,760
Speaker 1: a similar type of mode at the same time that

279
00:15:10,840 --> 00:15:13,480
Speaker 1: you are seeing the potential for additional variants to slow

280
00:15:13,560 --> 00:15:16,440
Speaker 1: the economy. What's the risk that we get a slow

281
00:15:16,480 --> 00:15:19,440
Speaker 1: down in economic growth at the same time as surging

282
00:15:19,480 --> 00:15:27,120
Speaker 1: inflation and central banks being forced to tighten into that UM. So, look,

283
00:15:27,280 --> 00:15:31,080
Speaker 1: there's lots of uncertainty um, and there is no question

284
00:15:31,160 --> 00:15:35,720
Speaker 1: that it's new variant is adding to this uncertainty. Now,

285
00:15:35,800 --> 00:15:38,800
Speaker 1: one of the things we're very clear about is there's

286
00:15:38,840 --> 00:15:42,360
Speaker 1: no one size fit all policy. The inflation in the

287
00:15:42,480 --> 00:15:45,400
Speaker 1: US is very different from the inflation you may see

288
00:15:45,440 --> 00:15:48,440
Speaker 1: in Asia, for example, in China or India. It's again

289
00:15:48,640 --> 00:15:51,120
Speaker 1: very different from the one you see in the continental

290
00:15:51,160 --> 00:15:55,080
Speaker 1: you are or in the UK UM And for that reasons,

291
00:15:55,160 --> 00:15:59,680
Speaker 1: we have a very clear message. If inflation tensions mostly

292
00:16:00,240 --> 00:16:02,920
Speaker 1: from the supply side, then sents for banks who looks

293
00:16:02,920 --> 00:16:06,520
Speaker 1: through when you have a lot of momentum in the recovery,

294
00:16:06,680 --> 00:16:10,080
Speaker 1: excess demand, un employment back where it was, then Yeah,

295
00:16:10,160 --> 00:16:14,880
Speaker 1: normalizing the monitory policy is not something that's extraordinary and

296
00:16:14,920 --> 00:16:17,440
Speaker 1: should be done. Lawrence tim Kin in Good morning to

297
00:16:17,480 --> 00:16:19,720
Speaker 1: you on radio and television, Lawrence Mooonwether. So the O

298
00:16:19,840 --> 00:16:22,840
Speaker 1: E c D as they reassess the global economy will

299
00:16:22,880 --> 00:16:25,800
Speaker 1: do that again with key economic data today, including a

300
00:16:25,960 --> 00:16:29,240
Speaker 1: d P. Lawrence I did a very careful study of

301
00:16:29,360 --> 00:16:33,560
Speaker 1: John Byrne Murdock's magnificent work at the ft on cases

302
00:16:33,600 --> 00:16:38,320
Speaker 1: and particularly deaths from COVID. The vector, the trend called

303
00:16:38,360 --> 00:16:43,720
Speaker 1: the log vector of Germany, Austria and Switzerland is nothing

304
00:16:43,880 --> 00:16:48,640
Speaker 1: short of grim. Can O E. C D extrampolate out

305
00:16:49,280 --> 00:16:53,480
Speaker 1: the trends that we see in death from COVID or

306
00:16:53,520 --> 00:16:59,200
Speaker 1: do you sit back and wait for more data? Look

307
00:16:59,240 --> 00:17:01,960
Speaker 1: at Good morning to you and thanks for the invitation again,

308
00:17:02,240 --> 00:17:06,080
Speaker 1: um Adeo CD. You know, we're economists. So what we

309
00:17:06,160 --> 00:17:10,359
Speaker 1: do is we take into a the uncertainty that has

310
00:17:10,560 --> 00:17:15,080
Speaker 1: increased with the period with the emergence of the new volant.

311
00:17:15,480 --> 00:17:19,359
Speaker 1: We take into a condy uncertainty that has increased because

312
00:17:19,440 --> 00:17:23,560
Speaker 1: the LATA is developing faster in countries where there's less vaccination,

313
00:17:23,960 --> 00:17:26,960
Speaker 1: and we factored that in. But I think that's that's

314
00:17:27,000 --> 00:17:29,879
Speaker 1: the base we can do again. We've warned about the

315
00:17:30,000 --> 00:17:33,680
Speaker 1: uncertainty that was coming from the lack of vaccination. We've

316
00:17:33,760 --> 00:17:39,119
Speaker 1: warned about the threat that this total imbalance between countries

317
00:17:39,200 --> 00:17:42,879
Speaker 1: very vaccinated and those where they are just might be

318
00:17:43,400 --> 00:17:46,480
Speaker 1: or where the vaccines has not gone yet was creating,

319
00:17:46,480 --> 00:17:49,359
Speaker 1: and the risk that's creating this what's happening now is

320
00:17:50,040 --> 00:17:52,399
Speaker 1: it's just a reminder that we need to find this

321
00:17:52,560 --> 00:17:56,080
Speaker 1: fifty billion you know that that that will help us

322
00:17:56,200 --> 00:17:59,560
Speaker 1: and all these imbalances and and there's stress that the

323
00:17:59,640 --> 00:18:02,640
Speaker 1: various is creating on the global economy. Lawrence, always good

324
00:18:02,600 --> 00:18:04,200
Speaker 1: to hear from you. Thanks for being with this morning,

325
00:18:04,240 --> 00:18:13,480
Speaker 1: Lawrence Burning that of the A c D. We're staggering

326
00:18:13,560 --> 00:18:17,320
Speaker 1: here on Bloomberg surveillance and particularly with our aviation coverage

327
00:18:17,800 --> 00:18:22,120
Speaker 1: from story to story. Guy Johnson has led our coverage

328
00:18:22,200 --> 00:18:26,480
Speaker 1: on airlines, on jets, on the Transatlantic, on the global

329
00:18:26,760 --> 00:18:29,679
Speaker 1: and joins us now and Guy, I do understand that

330
00:18:29,760 --> 00:18:33,200
Speaker 1: with our wonderful guests, the key question is the new

331
00:18:33,280 --> 00:18:37,080
Speaker 1: Manchester United and how they'll do with Arsenal this weekend.

332
00:18:37,400 --> 00:18:39,840
Speaker 1: But other than that, it's getting the planes in the air.

333
00:18:40,119 --> 00:18:41,960
Speaker 1: It's a I think that's gonna be a critical question

334
00:18:42,040 --> 00:18:44,280
Speaker 1: for shy Wi. Yeah, let we can. We can start

335
00:18:44,280 --> 00:18:49,000
Speaker 1: on the football I Alsenal match to unite it. That's

336
00:18:49,040 --> 00:18:53,000
Speaker 1: what Tom wants to know about. Are we live Yeah,

337
00:18:53,520 --> 00:18:58,720
Speaker 1: Arsenal of course, Okay, we have an answer. Yes, Okay,

338
00:18:58,800 --> 00:19:00,760
Speaker 1: let's let's talk about what this is going on now

339
00:19:00,760 --> 00:19:05,320
Speaker 1: that we've we've cleared that one up. Um O Macron

340
00:19:05,920 --> 00:19:09,360
Speaker 1: hard to say what impacts is theyre having on the business. Well,

341
00:19:09,400 --> 00:19:11,720
Speaker 1: I'm just reminded that we met twenty three days ago

342
00:19:12,040 --> 00:19:15,280
Speaker 1: outside of Terminal three at Heathrow for historic day of

343
00:19:15,359 --> 00:19:19,000
Speaker 1: opening up the corridor between the UK and the US

344
00:19:19,320 --> 00:19:22,520
Speaker 1: joint synchronized takeoff. And here we are twenty three days

345
00:19:22,560 --> 00:19:25,240
Speaker 1: later and we have a new variant. UM. I think

346
00:19:25,240 --> 00:19:28,880
Speaker 1: it's early days on this one. My intuition tells me

347
00:19:29,160 --> 00:19:33,920
Speaker 1: that it is probably more transmissible, maybe not as severe,

348
00:19:34,080 --> 00:19:36,840
Speaker 1: just based on the patterns. This just didn't emerge for

349
00:19:37,080 --> 00:19:39,720
Speaker 1: five days ago. It probably emerged a few weeks ago,

350
00:19:39,920 --> 00:19:43,880
Speaker 1: possibly in October. UM. We've changed adapted, of course South

351
00:19:43,880 --> 00:19:46,240
Speaker 1: Africa's shut down, although there was a flight right now

352
00:19:46,280 --> 00:19:48,880
Speaker 1: in the air from South Africa back to the UK

353
00:19:49,160 --> 00:19:52,239
Speaker 1: where people needed to quarantine. So we'll we'll deal with it.

354
00:19:52,280 --> 00:19:54,640
Speaker 1: You know, this industry has shown resiliency and so are we.

355
00:19:55,560 --> 00:19:57,960
Speaker 1: The governments have reacted much more quickly in this time.

356
00:19:58,160 --> 00:20:00,879
Speaker 1: He has that surprised you be? Is that the right

357
00:20:00,920 --> 00:20:04,520
Speaker 1: soil wrong thing to do? It hasn't surprised me, and

358
00:20:04,560 --> 00:20:06,720
Speaker 1: I think it's the wrong thing to do in the

359
00:20:06,800 --> 00:20:11,959
Speaker 1: sense that travel is so omnipresent in our lives and

360
00:20:12,000 --> 00:20:16,600
Speaker 1: if you can, you know, kind of put a combination

361
00:20:16,680 --> 00:20:22,520
Speaker 1: of politics and pandemic, airlines is the easy target for

362
00:20:22,760 --> 00:20:26,240
Speaker 1: changing of signals to the public, so I wasn't surprised.

363
00:20:26,400 --> 00:20:30,120
Speaker 1: I think we should evaluate the situation quickly, and what

364
00:20:30,160 --> 00:20:32,840
Speaker 1: I'm telling my team and telling the government in the

365
00:20:32,920 --> 00:20:37,280
Speaker 1: UK is as quickly as you introduced those measures. If

366
00:20:37,320 --> 00:20:40,200
Speaker 1: things turn out that they are not as significant, take

367
00:20:40,280 --> 00:20:44,320
Speaker 1: them back immediately as well testing opening up orders, removal

368
00:20:44,359 --> 00:20:47,280
Speaker 1: of of red less countries. Do laias told that the

369
00:20:47,280 --> 00:20:50,840
Speaker 1: North Atlantic may be shut down again? I am not

370
00:20:51,040 --> 00:20:53,520
Speaker 1: that concerned about that, based on the comments that President

371
00:20:53,560 --> 00:20:55,760
Speaker 1: Biden made a few days ago, which in my mind

372
00:20:55,800 --> 00:20:58,960
Speaker 1: were the most calm of the political leaders out there.

373
00:20:59,240 --> 00:21:01,919
Speaker 1: Let's look at the formation. This should be data driven

374
00:21:02,200 --> 00:21:04,840
Speaker 1: and then we make the calls. And travel is not

375
00:21:05,480 --> 00:21:08,880
Speaker 1: the way to stop a pandemic. This variant is now

376
00:21:08,920 --> 00:21:12,040
Speaker 1: everywhere in the world. Everybody understands that. So shutting borders

377
00:21:12,320 --> 00:21:16,520
Speaker 1: hurts thousands and millions of people, of course over the

378
00:21:16,520 --> 00:21:19,040
Speaker 1: festive period, but businesses and GDP is reliant on it

379
00:21:19,240 --> 00:21:22,399
Speaker 1: and we need every single piece of help that we

380
00:21:22,400 --> 00:21:25,479
Speaker 1: can get, and travel enables that. What has what does

381
00:21:25,520 --> 00:21:29,520
Speaker 1: the North Atlantic look like since November eight um? What

382
00:21:29,640 --> 00:21:32,480
Speaker 1: kind of load facts is if you've been experiencing what

383
00:21:32,560 --> 00:21:35,560
Speaker 1: does pricing look like. What does pricing look like around

384
00:21:35,560 --> 00:21:38,560
Speaker 1: the holidays? Has Business Travels given me a kind of

385
00:21:38,720 --> 00:21:40,960
Speaker 1: a data dump as to kind of what it does

386
00:21:41,040 --> 00:21:42,960
Speaker 1: look like since then? And I will try and be

387
00:21:43,080 --> 00:21:45,919
Speaker 1: organized in my comments on the data dump. UM. So,

388
00:21:46,040 --> 00:21:50,720
Speaker 1: first post the eight tremendous bookings across the Atlantic UM,

389
00:21:50,760 --> 00:21:54,200
Speaker 1: and we've seen load factors building very nicely close in

390
00:21:54,200 --> 00:21:58,160
Speaker 1: in December, and we will probably be still flying anywhere

391
00:21:58,200 --> 00:22:01,920
Speaker 1: between six load factors. On the week post the eight,

392
00:22:02,400 --> 00:22:04,880
Speaker 1: you couldn't get a seat on a Virgin Atlantic from

393
00:22:04,920 --> 00:22:10,560
Speaker 1: London to the US. The variant has changed this a bit,

394
00:22:10,600 --> 00:22:13,160
Speaker 1: but I think we're neutral in the December period, so

395
00:22:13,960 --> 00:22:16,959
Speaker 1: new bookings are offsetting cancelations, and there have been cancelations,

396
00:22:17,000 --> 00:22:19,639
Speaker 1: of course people want to do that. But for Easter

397
00:22:20,000 --> 00:22:24,159
Speaker 1: and UM and the summer, we're still building momentum and

398
00:22:24,240 --> 00:22:27,960
Speaker 1: still building load factors UM and if you look at

399
00:22:28,320 --> 00:22:32,280
Speaker 1: the expected January load factor is trailing quite nicely anywhere

400
00:22:32,280 --> 00:22:37,119
Speaker 1: in the s some flights up to so overall I

401
00:22:37,160 --> 00:22:40,920
Speaker 1: would say very good response to the opening of the borders.

402
00:22:41,480 --> 00:22:46,280
Speaker 1: The Armicron of course a dampening effect, but not enough

403
00:22:46,400 --> 00:22:51,000
Speaker 1: as a long haul carrier focused across the Atlantic neutral

404
00:22:51,080 --> 00:22:54,160
Speaker 1: at this point? What are the states of the finally,

405
00:22:54,200 --> 00:22:55,920
Speaker 1: what are the states? What is the states of your

406
00:22:55,960 --> 00:22:58,480
Speaker 1: finances at the moment? If I can spit that out, Um,

407
00:22:58,520 --> 00:23:00,800
Speaker 1: there is a suggestion that maybe you're in talks again

408
00:23:00,800 --> 00:23:03,760
Speaker 1: with the shareholders to raise some more money. Can you

409
00:23:03,800 --> 00:23:06,479
Speaker 1: confirm will deny that. Are you comfortable in terms of

410
00:23:06,480 --> 00:23:09,000
Speaker 1: where you are with with the balance sheet right now?

411
00:23:09,640 --> 00:23:12,760
Speaker 1: There was talk of an I p O. You haven't come.

412
00:23:12,880 --> 00:23:17,359
Speaker 1: You've never confirmed that to me? Is there're still talk

413
00:23:17,400 --> 00:23:18,919
Speaker 1: of an I p O? Is that a discussion that

414
00:23:19,000 --> 00:23:21,000
Speaker 1: is happening. So first of all, I'll start with the

415
00:23:21,040 --> 00:23:23,600
Speaker 1: important thing. We were trailing ahead of our plans by

416
00:23:23,600 --> 00:23:27,320
Speaker 1: a significant margin leading up to the month of November

417
00:23:27,320 --> 00:23:31,800
Speaker 1: and December, so we have a cushion. Any airline executive

418
00:23:32,280 --> 00:23:35,119
Speaker 1: is thinking about their capital structure and raising capital. We

419
00:23:35,160 --> 00:23:39,040
Speaker 1: are never short of needing more capital. All options remain

420
00:23:39,200 --> 00:23:43,160
Speaker 1: on the table and we are exploring them, um robustly.

421
00:23:43,640 --> 00:23:47,000
Speaker 1: But I am very confident that Virgin Atlantic will have

422
00:23:47,560 --> 00:23:51,600
Speaker 1: a very good balance sheet going into the recovery phase

423
00:23:52,040 --> 00:23:55,639
Speaker 1: that really starts in December and on to the sumber

424
00:23:55,640 --> 00:23:59,840
Speaker 1: of two. Also know by how many versus Matchester here

425
00:23:59,840 --> 00:24:02,160
Speaker 1: and I didn't. I'm going for a win to one,

426
00:24:02,880 --> 00:24:08,080
Speaker 1: surprise win, surprise win to one Arsenal overmatch the United Shy. Wise,

427
00:24:08,440 --> 00:24:11,280
Speaker 1: the CEO of Virgin Atlantic has spoken song. Thank to you,

428
00:24:11,280 --> 00:24:13,280
Speaker 1: Guy Johnson, Thanks so much. Of course, man, you was

429
00:24:13,400 --> 00:24:16,560
Speaker 1: so much change going on right now. This is the

430
00:24:16,560 --> 00:24:21,240
Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays

431
00:24:21,280 --> 00:24:24,760
Speaker 1: from seven to ten am Eastern on Bloomberg Radio and

432
00:24:24,840 --> 00:24:29,119
Speaker 1: on Bloomberg Television each day from six to nine am

433
00:24:29,160 --> 00:24:32,919
Speaker 1: for insight from the best in economics, finance, investment, and

434
00:24:33,040 --> 00:24:39,560
Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

435
00:24:39,720 --> 00:24:43,320
Speaker 1: Bloomberg dot com, and of course on the terminal. I'm

436
00:24:43,359 --> 00:24:46,040
Speaker 1: Tom keene In. This is Bloomberg