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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Try

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Speaker 1: Ask joining us now Skybridge Capital Coucy I Troy, big

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Speaker 1: news out of Europe, a second wife, potentially a second

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Speaker 1: dip looking at the restrictions coming out of the continent

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Speaker 1: as well. How are you processing the news this morning, Troy? Yeah, well,

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Speaker 1: clearly it's bad. I mean from a standpoint of the

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Speaker 1: pandemic you know, resurging over Europe, which as you guys

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Speaker 1: remember back in March led the u S resurgence at

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Speaker 1: the time, and and remember the big left tail risk

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Speaker 1: for markets for quite some time now has been a

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Speaker 1: significant resurgence above expectations, coupled with the potential for a

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Speaker 1: more stimulus right. And so you know, up until today,

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Speaker 1: most of the selling we've seen from the two kind

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Speaker 1: of tops we had in late August in mid September

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Speaker 1: have been tied to the fact that fiscal stimulus was

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Speaker 1: being priced out of the markets, and one day was

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Speaker 1: the day where it was effectively priced out completely prior

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Speaker 1: to the election, and now with a combination and resurgence

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Speaker 1: and any of I mentioned this, equities are only off

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Speaker 1: six from the recent high. We were about twenty three

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Speaker 1: times earnings. You know, there could be more downside as

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Speaker 1: we closed the month into early next month UM, prior

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Speaker 1: to the election UM, and then hopefully post election will

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Speaker 1: get more clarity on the stimulus side and the pandemic

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Speaker 1: will be at somewhat under control at that point, Troy,

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Speaker 1: your charm is to know what people are doing with

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Speaker 1: their money. What are alternative investors doing right now with

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Speaker 1: their money? Are they loading up on growthiness, are they

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Speaker 1: making rotations? And is anybody making alpha? Well? I think

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Speaker 1: I think in general right prior to the past two months,

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Speaker 1: risk on was very much the mantra of the day

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Speaker 1: for hedge funds. There was quite a bit of risk

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Speaker 1: being taken in tech in particular, but not only they

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Speaker 1: are broader beta and as we've moved closer to the election,

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Speaker 1: managers of de risk modestly they've taken down their growth

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Speaker 1: in their net exposures. But directly to your point, Um,

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Speaker 1: the biggest concern arguably for the industry right now is

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Speaker 1: how crowded techniques have been because that's been such a

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Speaker 1: significant profit driver. But the problem there is that no

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Speaker 1: one really knows when that reversal will come. Will be

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Speaker 1: driven by higher interest rates which look unlikely, will be

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Speaker 1: driven by a more significant reopening of the economy hard

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Speaker 1: to say so. In the meanwhile, growth still favored over value,

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Speaker 1: although that's starting to change a little bit. And then

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Speaker 1: within regard to alpha, you know, it depends on the strategy.

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Speaker 1: Right In general, the hedgeman industry has had the best

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Speaker 1: alpha year really since two thousand thirteen, if not before

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Speaker 1: the crisis, because you've had so much dispersion in the

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Speaker 1: equity market in particular, which is still a very heavy focus,

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Speaker 1: and you have had big sector winners and big sector losers.

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Speaker 1: And then on top of that, many of the credit

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Speaker 1: managers that got hit back in March have really made

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Speaker 1: a significant portion of their losses back and the outlook

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Speaker 1: there looks good. So it has been a fairly strong

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Speaker 1: healtha year for the hedge fund industry. Troy David Ironhorne

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Speaker 1: of green Light Capital yesterday at the conference has been

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Speaker 1: going on the Robin Hood Conference, said that tech was

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Speaker 1: in a bubble, that it probably already peaked in September,

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Speaker 1: and that he is shorting a certain overpriced I p

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Speaker 1: o s as he sees them as well as other

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Speaker 1: more peripheral tech companies. Are you getting on that train? Well, look,

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Speaker 1: we don't have a lot of growth or tech exposure

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Speaker 1: right now. Um, we do have it through some long

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Speaker 1: short multi strategy exposures. The problem is is really not

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Speaker 1: in a bubble per se. It's nothing like the late

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Speaker 1: nineties where you had these weak, dramatically overvalued companies, many

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Speaker 1: of the case, in many cases had no business case.

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Speaker 1: We're at a period where the strong techniques are very

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Speaker 1: good businesses and continue to grow margins for the most part.

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Speaker 1: But but you do have very elevated valuations, right and

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Speaker 1: so when the SUPs at twenty three times four earnings

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Speaker 1: in the NASTACS five seven multiple points higher, that just

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Speaker 1: set yourself up for for near term weakness. But in

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Speaker 1: terms of having some significant bear market over the short term,

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Speaker 1: we think is unlikely. So with all due respect to

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Speaker 1: Mr Iron Moore, and we could be in for you know,

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Speaker 1: a prolonged correction, but we're in for nothing like we

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Speaker 1: had you know, two thousand o two, which was you know,

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Speaker 1: fifty down Beau the trot for the SNP with the

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Speaker 1: NASDAC down to eighty. We just think that's very unlikely.

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Speaker 1: But you have to be very careful if you're over

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Speaker 1: your skis in terms of tech exposure. You know, the

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Speaker 1: next two three months can be pretty painful. But I

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Speaker 1: think the point that on Hones, Mike and Osa you

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Speaker 1: bring up the nineties, that the ninet nineties shouldn't be

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Speaker 1: the bench amount for whether we're in a bubble or

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Speaker 1: not because it was sub Cristy thirty years ago. Troy.

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Speaker 1: The question is asking is whether we are moving just

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Speaker 1: in terms of sentiment from great towards complacency. You look

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Speaker 1: at across fixed income and the universe right now, can

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Speaker 1: you identify I that shift from great to complacen? Say,

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Speaker 1: what would that look like? Well, look, in terms of

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Speaker 1: fixed income, I think you're starting to see prices adjust

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Speaker 1: for worst growth, lower probability of stimulus, and that's why

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Speaker 1: you're seeing the curve flat and combined with the pandemic complacency.

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Speaker 1: I mean, I would say the term would be more

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Speaker 1: exuberance like we had in August. I mean August was

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Speaker 1: a month where you had very frothy behavior in markets.

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Speaker 1: You had many parable behavior, not only in broader indices,

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Speaker 1: but also in some of the larger cap tech names

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Speaker 1: in particular, many of them type of the pandemic. So

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Speaker 1: that was arguably the peak froth, and then you started

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Speaker 1: to build it back up a little bit last week,

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Speaker 1: and now you're seeing some of the froth come out.

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Speaker 1: We just don't see complacency in terms of you know,

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Speaker 1: managers being very comfortable with their risk and not factoring

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Speaker 1: in all the various risks that are coming about. You know, again,

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Speaker 1: people have been de risking modestly going into the election.

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Speaker 1: So I don't think it's necessarily complacency. Um, it's just

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Speaker 1: that the froth that was built up in August has

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Speaker 1: not quite come out, and we might need to have

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Speaker 1: three to five percent more downside and SMP to kind

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Speaker 1: of clear out some of that excess. Getting about half

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Speaker 1: of that right now, Troy right to catch up, so

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Speaker 1: get to see its capital. Thank you, Troy. I appreciate it,

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Speaker 1: said like, do you want to mention gold hammered down

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Speaker 1: one eight oil cannot find a bit. Daniel Morris has

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Speaker 1: seen this before with BMP, Perry Bond. We notice service

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Speaker 1: to t I A craft over the years. The chief

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Speaker 1: market strategies for BMP, Perry bout Daniel. I like what

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Speaker 1: you're say in your note about the Transatlantic partition. The

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Speaker 1: p m I numbers are different. Is Europe in recession? Well,

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Speaker 1: certainly the risk of that happening in the fourth quarter

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Speaker 1: has gone up, is going up. You know, we had

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Speaker 1: talked about the different shapes of the recovery several months ago,

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Speaker 1: and it does look more and more likely that you

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Speaker 1: may well see a W in Europe, if not necessarily

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Speaker 1: in the US. If we do get that W, that

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Speaker 1: W double dip down, what does that mean for your

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Speaker 1: allocation to Europe in the next few quarters. Well, currently

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Speaker 1: we're we're overweight US and emerging markets as opposed to

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Speaker 1: Europe in our multass or portfolios. I think that you know,

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Speaker 1: simply reflects that risk that you see in Europe. Uh

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Speaker 1: And in addition to that, the relative lack of tools

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Speaker 1: options in Europe to compensate for that being monetary stimuluspit

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Speaker 1: fysical similar cities don't have as many lovers as you

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Speaker 1: see in China or in the US for that matter.

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Speaker 1: The fear that I think a lot of people have

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Speaker 1: this morning, Dan, And I'm not saying what the probability

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Speaker 1: of it happening is you can talk to me about that,

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Speaker 1: is that Europe's present right now is in America's near

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Speaker 1: term future. Does it have to be that way? Dan,

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Speaker 1: I think there's two things we really need to keep

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Speaker 1: in mind. When there's just the evolution of the pandemic itself,

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Speaker 1: number of infections, number of deaths and so on. Uh.

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Speaker 1: And from that point of view, I think it is

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Speaker 1: certainly a possibility that Europe is just ahead of the

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Speaker 1: curve in this and so this is what we're going

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Speaker 1: to see in the US. But what's really going to

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Speaker 1: matter more for the markets is a reaction to and

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Speaker 1: that's really been the story all along. It's the restrictions

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Speaker 1: that are driving the reaction in the market today. We've

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Speaker 1: had the increase in infections, frankly in France since August,

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Speaker 1: but the markets are relatively blase about that because the

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Speaker 1: assumption had been no more lockdown has been there done

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Speaker 1: that they just can't go back to nationwide lockdowns is

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Speaker 1: too costly, except what we're seeing now in the face

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Speaker 1: of these just very high numbers in terms of daily

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Speaker 1: infections that governments are kind of stepwise moving in that direction. Now,

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Speaker 1: of course they still want to avoid that, but the

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Speaker 1: pressure is building and the markets are pricing, and now

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Speaker 1: that that's the ultimate endpoint that we reach, maybe not

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Speaker 1: full nationwide lockdowns, with something a lot closer to that

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Speaker 1: than they would have thought a month ago. Janue, is

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Speaker 1: this a buying opportunity then if there's more of a

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Speaker 1: pullback in the in the face of restrictions and lockdowns,

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Speaker 1: given the fact that people are still expecting some sort

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Speaker 1: of fiscal support bill next year, well we're not allocated

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Speaker 1: that way currently. We have a modest overweight to aquities

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Speaker 1: in general. You know, I think you're always waiting for

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Speaker 1: a goodbye the day opportunity. Our medium term outlook is

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Speaker 1: constructed partly based on the anticipation of some sort of

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Speaker 1: fiscal stimulus, certainly in the US UH anticipating that you

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Speaker 1: know in Europe even you know, there will be a

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Speaker 1: point where stocks just look so attractive and you want

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Speaker 1: to move in. But we'd probably say it's premature to

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Speaker 1: be making that type of change right now. What do

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Speaker 1: you make of the fact that earnings have been coming

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Speaker 1: in broadly better than expected, and yet people have just

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Speaker 1: been punishing anyone who's underperformed, and even those like Microsoft

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Speaker 1: that have outperformed but not crossed the high enough bar. Well,

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Speaker 1: I think it's you know, the refrain, what have you've

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Speaker 1: done for me lately? Partly, and I think the fact

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Speaker 1: that you've had such a swing and sentiment over the

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Speaker 1: last month, you know, over the last week or so, frankly, uh.

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Speaker 1: And you know, inevitably, earning seasons are backward backward looking. Uh,

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Speaker 1: and we're going to say, well, gosh, that was really

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Speaker 1: great for the third quarter, but it isn't telling me

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Speaker 1: as much as I would like about the fourth quarter.

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Speaker 1: So even though the surprises are are quite good, that's

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Speaker 1: not necessar ssarily helping, you know, as you point out

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Speaker 1: that said, if we do look at the guidance of

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Speaker 1: forward guidance, it has been you know, very very positive.

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Speaker 1: Two thirds of the companies that have given guidance so far,

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Speaker 1: it's been upwards. Now, of course, there's always that qualifier

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Speaker 1: that we know fewer companies are offering guidance and in

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Speaker 1: the past, and it's still relatively early in the earning season.

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Speaker 1: But if there is something that people are investors want

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Speaker 1: to focus on to justify more positive meetings her outlook.

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Speaker 1: I think it is that guidance that companies are giving

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Speaker 1: Daniel Morris across all of b MP Perry Boss Securities research.

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Speaker 1: Do you see what I'm gonna call an elasticity of

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Speaker 1: CEO s? I mean Boeing right now, horrific numbers. They're

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Speaker 1: being elastic. John Farrell mentions they go to a hundred

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Speaker 1: and thirty thousand jobs. Do they have a lot of

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Speaker 1: room to cut costs to John loves this phrase to

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Speaker 1: right size? Do they have a lot of room to

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Speaker 1: globally right size? Given this pandemic, I think it's going

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Speaker 1: to be extremely challenging for those industry these like airlines,

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Speaker 1: for example, where you appreciate that you know, it's not

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Speaker 1: just the short term effect from the lockdowns, it's a

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Speaker 1: longer term ramifications of what's changed thanks to the pandemic.

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Speaker 1: It's a change of mentality. People realizing they don't need

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Speaker 1: to fly around the world for a couple of hour

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Speaker 1: meeting anymore, or do they even need to commute into

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Speaker 1: the office every day the way we've done in the past.

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Speaker 1: So those are arguably permanent changes that's going to hit

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Speaker 1: some industries quite significantly, and there's gonna be much bigger

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Speaker 1: restructuring is necessary than anyone would have anticipated. So I

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Speaker 1: think there's without questions, certain parts of the economy UH

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Speaker 1: that are going to go through a pretty wrenching change

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Speaker 1: and inevitable is probably never going to be fast enough.

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Speaker 1: But at the same time, then we also need to

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Speaker 1: be thinking about, Okay, where is that demand going to go?

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Speaker 1: I mean, you would still believe that agg demand is

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Speaker 1: going to continue to rise, It's just going to be

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Speaker 1: spent in different ways, and we need to really focus

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Speaker 1: on where those opportunities are as well. Down I just

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Speaker 1: want to finish on the market at the headline level

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Speaker 1: and just think about the following concept. I wonder how

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Speaker 1: much support is beneath this market on a daylight today,

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Speaker 1: and the concept of the vaccine put down, how important

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Speaker 1: is that vaccine put just this idea that people want

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Speaker 1: to stay allocated to risk because they believe at some

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Speaker 1: point in the next few weeks, the next few months,

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Speaker 1: we could get that key announcement. Well, certainly the timing

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Speaker 1: is crucial beneven if it is and in the next

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Speaker 1: few weeks, and it is more the months that you

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Speaker 1: that you mentioned, you know, if we think a year

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Speaker 1: out and you know, if you are an equity investor,

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Speaker 1: you are buying hopefully a stream of ouriens that goes

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Speaker 1: a bit further out than the next quarter of the

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Speaker 1: next six months. Absolutely that's going to be important. I

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Speaker 1: think the other thing we we can't put aside is

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Speaker 1: it is the week before the U S election. There's

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Speaker 1: still then inevitable uncertainty about the outcome and the implications

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Speaker 1: of that. So you've got kind of these two negative

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Speaker 1: factors weighing on the market. Increase in infections and certainty

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Speaker 1: head of the election. You know, one of those will

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Speaker 1: hopefully be resolved by this time next week, though maybe not,

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Speaker 1: and then the second as we all hope sooner resident later.

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Speaker 1: I don't great to catch up. As always, Dan Morris

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Speaker 1: of BNP PO Asset Management, thank you sir. It is

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Speaker 1: very difficult, and again, as Lisa mentioned earlier, the spread narrowing,

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Speaker 1: the difference in yield between that big negative tenure and

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Speaker 1: in every larger negative two year yield really coming down

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Speaker 1: and squeezing down to a flat or flatter negative based

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Speaker 1: yield curve. In Germany, Jane Foley knows as well with

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Speaker 1: Robbo Bank senior foreign exchange strategist, but she understands that

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Speaker 1: foreign exchange not linked to the equity markets, who cares,

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Speaker 1: but linked to the bond market, No question about that,

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Speaker 1: Jane Foley. It's real simple. There's something going on in

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Speaker 1: Germany is signaled by those greater negative yields. What is it, Well,

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Speaker 1: of course, it's sort of flight to equality. It's fear

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Speaker 1: tom And we do have the CPI dated for hero

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Speaker 1: don't Happeople the end of the week, and that is

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Speaker 1: going to highlight that more disflation. Now, we did have

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Speaker 1: import process for Germany this morning a little bit better,

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Speaker 1: but it leaves that TPR number later in the week.

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Speaker 1: That's again going to worry investors. It's going to be

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Speaker 1: quite interesting because we have that EP data for Q

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Speaker 1: three that's gonna look really quite good at and nearly temperacent.

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Speaker 1: Bounced back Q and Q and in Q three. But

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Speaker 1: of course the market is already going to disregard that

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Speaker 1: because even though it's not been released yet, it's already

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Speaker 1: all news we all know now about the new lockdowns

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Speaker 1: up throughout the region, and that of course means it's

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Speaker 1: going to be bad news economically for the full quarter.

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Speaker 1: So it doesn't look good from the European perspective right now,

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Speaker 1: export import dynamics, importantly in the United States advanced goods

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Speaker 1: trade balance, it's a secondary statistic, I'm going to call it.

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Speaker 1: It's a pretty grim negative number, not to where it

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Speaker 1: was supposed to be on survey. But nevertheless, another key

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Speaker 1: data point there is well Jane Foley. Then when I

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Speaker 1: look at this and John has mentioned the resiliency of

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Speaker 1: the euro, of the euro, how does euro get a

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Speaker 1: bid here? Well, I mean it doesn't if you're looking

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Speaker 1: at against the end certainly. I mean that definitely is pushing,

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Speaker 1: is pushing lower and even against the the US dollar

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Speaker 1: one sevent you, I mean, it wasn't too long ago

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Speaker 1: and we were above one eighteen. So the euro is

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Speaker 1: looking at like it's on the back foot. There is

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Speaker 1: some anxiety going into the ECB meeting tomorrow and it

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Speaker 1: could they potentially pull the trigger on policy measures tomorrow. Well,

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Speaker 1: I mean our central view is December, and I think

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Speaker 1: that's probably closer to consensus. But there is some rumblings

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Speaker 1: that given the worsening in the backdrop this week, given

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Speaker 1: the fear about further lockdowns nationally in France, and maybe

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Speaker 1: more restrictions in Germany and elsewhere that maybe the the

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Speaker 1: guard the UCB president could pull the trigger. So I

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Speaker 1: think a little bit of anxiety and that's pushing the

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Speaker 1: the Euro on the back foot today. I've been really

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Speaker 1: surprised by how resilient it's been up until the last

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Speaker 1: twenty four hours, given the direction of travel the continent

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Speaker 1: was on. It's been pretty obvious for the last four weeks.

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Speaker 1: But here's the break this morning with a broader dollar bid. Jane.

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Speaker 1: We've been looking at the Italian bond market and I

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Speaker 1: think we can all agree the jury is still out

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Speaker 1: as to whether this is really transformed from behaving like

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Speaker 1: a credit to a self in the lower Today Italian

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Speaker 1: bonds are softer, yields are hired by five six basis points.

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Speaker 1: It's not dramatic, but the move is there, and I

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Speaker 1: think a lot of people are focused on it, whether

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Speaker 1: we can break that positive correlation between the single currency

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Speaker 1: and the periphery. Jane. If I'd ask that question a

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Speaker 1: couple of weeks ago, I think people would have had

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Speaker 1: confidence and said yes. I think the move that's starting

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Speaker 1: to emerge this morning, just slowly as this session grows

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Speaker 1: older might be making some people nervous. Jane, what's your take.

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Speaker 1: I think there were doubts really emerging. I mean, for instance,

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Speaker 1: we did have headlines suggesting that there were protests in

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Speaker 1: Rome about the restrictions. But I think more than that,

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Speaker 1: if we if we look back over the spring and

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Speaker 1: the summer about what really drove the euro higher. There

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Speaker 1: was a lot of confidence about the shop policy, certainly,

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Speaker 1: but also about the recovery fund. And as we go

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Speaker 1: into this the second dip of this, of the second

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Speaker 1: wave and the and the double dip of this, this recession,

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Speaker 1: you know we would have asked about the recovery fund

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Speaker 1: a is it big enough? Well, it's it's not that

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Speaker 1: big as a percentage of GDP for the whole week.

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Speaker 1: But there's also concerns, there's biggering going on about the timing.

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Speaker 1: When are they going to get the funds out? Can

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Speaker 1: itally given its its history of not being able to

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Speaker 1: invest productively that can it actually use the loans that

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Speaker 1: it will get and turn them into in a productive

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Speaker 1: capacity rather than just more debts. So I think there

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Speaker 1: are doubts beginning to emerge, and certainly, if those restrictions

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Speaker 1: really do take a toll on the economy throughout Europe

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Speaker 1: and certainly in Italy. I think those doubts can only

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Speaker 1: get bigger in Q four. Well, Jen, that's the question.

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Speaker 1: Where is that recovery fund? That recovery fund hasn't been

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Speaker 1: ratified yet, and you've talked about the political difficulties. We've

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Speaker 1: been really keen to draw a distinction between a European

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Speaker 1: economy that's struggling and redenomination risk. Jane, do you think

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Speaker 1: before year end? And I'm not saying that we start

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Speaker 1: to think about the breakup of Europe, just that people

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Speaker 1: start to conflate the two issues. Where the periphery starts

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Speaker 1: to trade significantly weaker, it feeds back into the banks again.

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Speaker 1: Can you see that scenario developing before your rise? Now?

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Speaker 1: I can see Niggoline certainly arising. I mean we're starting

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Speaker 1: off from a very strong position. If you look at

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Speaker 1: the euro if you look at the amount of long

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Speaker 1: positions built in the euro over the spring in the summer,

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Speaker 1: really extensive. Now to put it, to put it in perspective,

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Speaker 1: if we got back to sev seventeen, was I think

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Speaker 1: a will go deluxe that year for the Eurozone. We

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Speaker 1: had really strong growth from the outset or stronger than

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Speaker 1: expected growth from the outset, and we had better political outcomes.

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Speaker 1: That was the year. Remember that the market was fearful

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Speaker 1: of the far right and the French presidential election in

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Speaker 1: the Dutch election that didn't happen, So we had better outcomes.

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Speaker 1: We had a really good year for the Euro. Long

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Speaker 1: positions building and this year, this spring and summer, the

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Speaker 1: markets become even more optimistic about the Europe. So I

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Speaker 1: think that there is the perceptive that the risk that

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Speaker 1: we could get some sort of more reality emerging and

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Speaker 1: people lowering those long positions in the Euro. At what point, Jane,

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Speaker 1: will central bank policy not have that bigger effect to

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Speaker 1: uncurrency differentials? And it really all comes down to the economy,

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Speaker 1: And it seems like perhaps that's what we're seeing today

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Speaker 1: involved given the ongoing restrictions that we're hearing about in Europe. Well,

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Speaker 1: certainly confidence is a lot of it um, you know,

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Speaker 1: and and and certainly today we've seen confidence really taken

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Speaker 1: not by those headlines, but in terms of such about policy.

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Speaker 1: I think what the ECB did back in May and

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Speaker 1: and really pushing hard against talk of fragmentation by you know,

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Speaker 1: stepping up the types of bonds that it was going

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Speaker 1: to buy. By by really making that message very clear,

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Speaker 1: it really did help with the whole confidence in the

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Speaker 1: notion of the Euro moving forward. And of course, at

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Speaker 1: the same time was that recovery fund that the whole

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Speaker 1: notion that perhaps they had taken a step forward to

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Speaker 1: more of a fiscal comprehensiveness within the region. Now again,

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Speaker 1: I think that during you for just the background of

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Speaker 1: the economy, the worst union conditions is going to poke

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Speaker 1: some holes in that confidence. And I think that's why

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Speaker 1: perhaps the Euro is looking a little bit more vulnerable

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Speaker 1: right now. And of course that is independent of course

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Speaker 1: of the possibility that the dollar will see a bit

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Speaker 1: more of a safe haven bid going into Quey for

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Speaker 1: with the similar sorts of concerns about COVID nineteen and

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Speaker 1: the double dip recession Gina. Based on positioning the sense

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Speaker 1: that you're you're giving now that there could be dollar strengthening,

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Speaker 1: How violent could that be given how many short positions

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Speaker 1: have been put on on the dollar. Well, I don't

400
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Speaker 1: think it could be as violent as anything like that

401
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Speaker 1: we saw in March, and the reason for that is

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Speaker 1: just the huge amounts of liquidity provisions at the FED

403
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Speaker 1: is put in place. But I think we could see

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Speaker 1: some sharp movements certainly now. I think the movement that

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Speaker 1: we've seen in neuro dollar today is reasonably sharp and

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Speaker 1: and and certainly if we're looking for in exchange um

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Speaker 1: you know, and we've seen some quite sharp movements in

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Speaker 1: in well certainly Turkey, but also some of the other

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Speaker 1: emerging market classes as well. So I think we could

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Speaker 1: certainly have sharp movements. I don't think we're going to

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Speaker 1: see anything like what we saw back in March and

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Speaker 1: all Jenna, I look at all this and I guess

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Speaker 1: at some point here, with futures negative fift AID deteriorating

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Speaker 1: on a session i'm watching, yen was some resiliency even

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Speaker 1: with dollar stronger. At some point, I want to be

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Speaker 1: opportunistic within this calamity, this natural disaster. What's your trade

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Speaker 1: right now? I don't say that lightly, what's your trade

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Speaker 1: right now to create gain in this pain? Well, to

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Speaker 1: be honest right now, you know, I would probably be

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Speaker 1: a sort of several of the emerging markets. I would like,

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Speaker 1: you know, the dollar against many of those UM, EU, A, Yen.

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Speaker 1: I think that's a very interesting one. Although we've come

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Speaker 1: back very sharply. Today We're still very elevated compared with

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Speaker 1: where we were in EU an earlier on in the year,

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Speaker 1: even in the summer months. So I think we've got

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Speaker 1: a movement there. And also I think if fear of

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Speaker 1: certain I think we could see the Aussie pushing down

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Speaker 1: as well of there perhaps a little bit of a

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Speaker 1: lift there, because there is this perception that Asia and

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Speaker 1: China are perhaps faring better in terms of recovery from

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Speaker 1: into Barris and we are in Europe and in the

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Speaker 1: US as well. Jane, always fantastic to catch up with

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Speaker 1: you and take you in the morning light this morning

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Speaker 1: in Europe. Thank you, Jane Thardi that of Ramba Bank,

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Speaker 1: Alex Scorsky, Captain Gorsky of Johnson and Johnson out of

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Speaker 1: West Point, someone with a really really interesting executive career

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Speaker 1: and of course in the cross heres of this pandemic

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Speaker 1: right now. Of course, a good conversation peer to peer

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Speaker 1: conversations with David Rubinstein. I'm Bloomberg Television and the gentleman

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Speaker 1: from Carlisle Group joins us this morning. What if I'm

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Speaker 1: fascinating here, David by besides the predictable discussion of the

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Speaker 1: pandemic is this is a guy who was at J

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Speaker 1: and J in left and then he came back to

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Speaker 1: Johnson and Johnson. That's an interesting move, isn't it. You

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Speaker 1: don't see that often, do you. Well, you certainly don't

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Speaker 1: see it where they rise up to be the CEO

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Speaker 1: very often, and so that's unusual. I remember he's also

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00:23:01,920 --> 00:23:04,760
Speaker 1: started out a relatively low level marketing job in a

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Speaker 1: subsidiary of Johnson and Johnson, did that for a while,

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Speaker 1: then left, then came back and rose up to the

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Speaker 1: CEO position, which he's had now for about eight years.

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Speaker 1: I think it is, and it's done an incredible job.

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Speaker 1: Their market capitalization now is about the tenth playas in

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Speaker 1: the United States of any company the United States, about

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Speaker 1: a hud billion dollars. There was a lethargy. You've seen

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Speaker 1: this across all market capitalizations of Carlisle Group. There was

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Speaker 1: a J and J lethargy. And then something changed under Gorsky.

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Speaker 1: What was that, Well, he diversified a fair bit um.

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Speaker 1: You know, some people would say, well Johnson Johnson that

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Speaker 1: they make band aids or don't they make Q tips,

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Speaker 1: But they're gigantic and so many different areas of healthcare.

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Speaker 1: In fact, many people didn't realize that they were in

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Speaker 1: the vaccine business, and now they're producing what maybe one

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Speaker 1: of the best vaccines that's coming out for the COVID virus. David,

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Speaker 1: one thing that this pandemic has thrown into cold relief

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Speaker 1: is there's a conundrum for pharmaceutical companies whether to focus

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Speaker 1: on simply developing the high costs, high return cancer drugs,

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Speaker 1: other types of drugs that perhaps might not have the

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Speaker 1: same sort of global benefit as a vaccine. Did he

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Speaker 1: address a shift in that mentality and how to compensate

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Speaker 1: pharmaceutical companies going forward to focus in a different way. Yes,

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Speaker 1: vaccines are not the most profitable part of the pharmaceutical

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Speaker 1: business because typically you take them once a year and

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Speaker 1: it's not going to repeat business where you take it

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Speaker 1: once a month or once a week or something like that. However,

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Speaker 1: um there are a limited number of companies that do

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Speaker 1: specialize in it, but it's not the main thing that

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Speaker 1: they do. Johnson and Johnson does do vaccines, but it's

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Speaker 1: not their main business for sure. However, in this case,

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Speaker 1: the US government is subsidizing so many companies that they're

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Speaker 1: not going to lose money on it that will do

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Speaker 1: okay on it, But it's really I think the public

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Speaker 1: relations benefit of coming up with a vaccine that will

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Speaker 1: be so helpful to all these companies. And then there's

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Speaker 1: also question of actually getting the vaccine manufactured and distributed

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Speaker 1: in some sort of timely manner. What did he say

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Speaker 1: about supply chain issues? How to manufacture us in the

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Speaker 1: most expeditious way possible? While the US government has done

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Speaker 1: something that no one had ever done before. Typically of

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Speaker 1: vaccine takes, I would say somewhere around seven years to develop.

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Speaker 1: The fasts have historically been four years, let's say for Ebola.

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Speaker 1: This is being done in one year. Now. It's being

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Speaker 1: done because so many companies are getting so much money

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Speaker 1: from the federal government, but also they are manufacturing the

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Speaker 1: vaccine before they know whether the FDA will approve it.

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Speaker 1: That has never been done before. And so once the

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Speaker 1: FDA approves one of the vaccines or more than than

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Speaker 1: one of the vaccines, they're ready to be distributed. The

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Speaker 1: issue is who's going to get them, and then whether

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Speaker 1: people will take them. A lot of people are nervous

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Speaker 1: about taking them because they think they're not either safe

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Speaker 1: or they've been politically Uh fine tune to make them available,

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Speaker 1: maybe before they should be. So there's gonna be a

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Speaker 1: while before people really take these, and most experts would

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Speaker 1: say not until the third or fourth quarter up next year.

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Speaker 1: Are you going to see people really fully vaccinated? David,

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Speaker 1: you told us the last time we've visited that you

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Speaker 1: certainly weren't taking sides in this presidential campaign, and you're

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Speaker 1: trying young to stay removed. What do you expect to

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Speaker 1: see in the next six days. Will this be a

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Speaker 1: traditional dash to Tuesday or will it be something different? Well,

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Speaker 1: traditionally people vote on election day, and now we will

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Speaker 1: see that maybe sev the people have already voted before

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Speaker 1: election day. That's a big difference. Secondly, elections tend to

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Speaker 1: tighten towards the end. People tend to come home, and

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Speaker 1: as we know, the country is relatively split evenly between

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Speaker 1: Democrats and Republicans. Obviously not completely evenly, but I do

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Speaker 1: think that you're gonna you're gonna see some people come

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Speaker 1: home to their base, and therefore I suspect it will

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Speaker 1: tighten up, which is what you normally see right before

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Speaker 1: the election. David Rubinstein, thank you so much for joining

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Speaker 1: us today at a conversation with a gentleman from Johnson

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Speaker 1: and Johnson UH their chairman and CEO, Alex Gorski. Look

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Speaker 1: for that tonight nine pm. Peer to peer conversations with

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Speaker 1: Mr Rubinstein. Thanks for listening to the Bloomberg Surveillance podcast.

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Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

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00:26:57,359 --> 00:27:01,680
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

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Speaker 1: Keane before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio