WEBVTT - Surveillance: Lasry Optimistic About 2021 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.440 Bloomberg dot Com, and of course on the Bloomberg. This 0:00:27.480 --> 0:00:29.640 is a joy. Mark Lass rejoins us, and yeah, we 0:00:29.680 --> 0:00:32.320 can talk Milwaukee basketball and all that, but far more. 0:00:32.440 --> 0:00:36.760 This is a story of West Hartford, Connecticut, wandering over 0:00:36.800 --> 0:00:40.520 to Clark University, the land of rocketry and Mr Goddard 0:00:40.520 --> 0:00:45.000 where he rocketed through distressed investment to the success of 0:00:45.080 --> 0:00:49.040 his Avenue Capitol group. Mr Last rejoins us this morning 0:00:49.080 --> 0:00:52.239 to look at this pandemic, the partition of America, the 0:00:52.320 --> 0:00:55.080 distress that is out there in the view forward for 0:00:55.160 --> 0:00:59.320 his industry, Mark, are you optimistic about opportunity in two 0:00:59.360 --> 0:01:03.400 thousand any one? Um? Well, first of all, thank you 0:01:03.520 --> 0:01:07.680 for that introduction. I love that very few times to 0:01:07.720 --> 0:01:11.120 people talking about Clark, But um, yeah, I am actually, 0:01:11.840 --> 0:01:15.520 um pretty optimistic. I think for us, Um, what you 0:01:15.600 --> 0:01:18.160 are seeing is it's a little bit of what you 0:01:18.240 --> 0:01:21.640 just talked about your You're seeing that there are problems 0:01:22.120 --> 0:01:25.400 and a number of places, but there's also growth. So 0:01:25.520 --> 0:01:29.360 for us, really, what we're finding is opportunities where we 0:01:29.400 --> 0:01:32.880 can invest in situations where people need capital. Uh, and 0:01:32.920 --> 0:01:36.640 we're providing that capital, but we're doing a pretty steep price. 0:01:36.880 --> 0:01:39.840 When you clear a balance sheet out, you are now 0:01:40.000 --> 0:01:43.840 clearing within the reality of a FED at the zero bound. 0:01:44.440 --> 0:01:48.160 Is the FED distorted? You're part of the hedge fund world. 0:01:49.280 --> 0:01:53.520 It actually has UM. What's ended up happening is it's 0:01:53.600 --> 0:01:58.400 made UM it easier for companies to borrow money. UM. 0:01:58.480 --> 0:02:01.520 So anybody who can borrow is doing so. But then 0:02:01.560 --> 0:02:04.960 what it's done is the reverse. If you can't borrow UM, 0:02:05.080 --> 0:02:07.560 then you've got to you've got to deal with folks 0:02:07.640 --> 0:02:10.400 like me. And if you're doing that, UM, we're able 0:02:10.400 --> 0:02:13.840 to charge twelve. So it's kind of odd a zero 0:02:13.919 --> 0:02:17.600 rate environment, yet we're still charging twelve to fifteen. I 0:02:17.680 --> 0:02:20.080 love that you say, otherwise you've got to deal with me, 0:02:20.160 --> 0:02:22.040 and you don't want to deal with me. Mark. I 0:02:22.080 --> 0:02:24.720 do wonder when you look at distress invest in going forward, 0:02:24.800 --> 0:02:27.560 how much of this is simply who knows bankruptcy law best? 0:02:27.600 --> 0:02:29.799 And I ask this of you knowing that you did 0:02:29.880 --> 0:02:32.480 clerk for a bankruptcy judge in the Southern District of 0:02:32.480 --> 0:02:36.440 New York. So is that really what this game has become? Um, 0:02:36.480 --> 0:02:40.040 I think you've got to understand bankruptcy law because what 0:02:40.160 --> 0:02:42.919 ends up happening now is, um, you're gonna have a 0:02:43.000 --> 0:02:45.200 number of restructurings. But I would tell you the most 0:02:45.280 --> 0:02:49.239 important part today is really understanding the balance sheet of 0:02:49.280 --> 0:02:52.040 a company. Um that if we're gonna lend, are we, 0:02:52.760 --> 0:02:55.680 you know, super secured? Are we senior? Where are we 0:02:55.720 --> 0:02:59.160 in the capital structure? Because things can change on a 0:02:59.240 --> 0:03:01.160 dime and you want to make sure that your cover. 0:03:01.680 --> 0:03:03.640 So I would tell you that capital structure is gonna 0:03:03.639 --> 0:03:05.720 be a little bit more important, but you better have 0:03:05.840 --> 0:03:09.160 that legal background well Embedded in this is the assumption 0:03:09.240 --> 0:03:12.880 that perhaps, or my presumption that recoveries are not going 0:03:12.880 --> 0:03:15.919 to be as robust this time around, given how much 0:03:15.960 --> 0:03:18.640 debt has been incurred and given some of the erosion 0:03:18.720 --> 0:03:21.680 with some of the Covenant light loans that we have seen. 0:03:22.080 --> 0:03:25.400 How much lower will recoveries be and how much fiarcer 0:03:25.400 --> 0:03:28.839 will the battle be over who gets what? I think 0:03:28.840 --> 0:03:31.560 recoveries will definitely be lower, and I think the fights 0:03:32.240 --> 0:03:36.680 are going to be absolutely insane because everybody is going 0:03:36.720 --> 0:03:40.720 to be fighting over a smaller pie. So that that's 0:03:40.720 --> 0:03:42.840 why the focus is really where are you in the 0:03:42.880 --> 0:03:46.760 capital structure? But you're going to have lower recoveries. It's 0:03:46.520 --> 0:03:49.200 it's it's hard for you not to mainly because of 0:03:49.200 --> 0:03:51.280 what you said, which is that people have taken on 0:03:51.400 --> 0:03:55.560 more debt um and there's less equity value there. Mark, 0:03:55.640 --> 0:03:58.600 I want to talk about market draw down, sharp ratios 0:03:58.600 --> 0:04:01.200 and the ability to make two twenty, but that's gonna 0:04:01.200 --> 0:04:03.520 have to pass. I've got a horde of people that 0:04:03.600 --> 0:04:05.560 want to know if you can bring the glory of 0:04:05.600 --> 0:04:09.760 Elsinder and Oscar Robertson and the Milwaukee Bucks back, what 0:04:09.920 --> 0:04:13.800 does the plan forward after signing this gentleman for a 0:04:13.960 --> 0:04:17.599 jillion million dollars? What is the Bucks plan into two 0:04:17.640 --> 0:04:23.600 thousand twenty one in the NBA bubble? Um? I the 0:04:23.680 --> 0:04:27.279 plan is simple, to try to win a championship. The 0:04:27.360 --> 0:04:32.320 execution of that plan is going to be kind of hard. Um. Look, 0:04:32.320 --> 0:04:35.239 we're gonna do everything we can, and I think we've 0:04:35.360 --> 0:04:40.159 got probably you know, our Big three, which is I 0:04:40.200 --> 0:04:44.040 think second to none at least in the East. Um, 0:04:44.160 --> 0:04:47.520 So I think we'll have a pretty good shot. Um. 0:04:47.560 --> 0:04:49.960 I think everybody's pretty excited. I think the hard part 0:04:50.080 --> 0:04:53.280 was really resigning Janice, and the fact that we were 0:04:53.320 --> 0:04:56.680 able to do that is actually great for Milwaukee. It's 0:04:56.720 --> 0:04:59.840 great for small market teams, um. But more important, it's 0:04:59.839 --> 0:05:03.159 great for our team. Mark, your leadership was there in 0:05:03.200 --> 0:05:06.159 a time for this nation where Milwaukee was a center 0:05:06.200 --> 0:05:09.680 and the soul of protest in this nation. What do 0:05:09.720 --> 0:05:13.039 you want to see from Milwaukee this year? What is 0:05:13.040 --> 0:05:17.039 the goal to get to a more peaceful America? Look, 0:05:17.040 --> 0:05:18.400 I think at the end of the day, I think 0:05:18.440 --> 0:05:22.479 it's listening, it's trying to bring about change. But I 0:05:22.520 --> 0:05:25.440 think what we've tried to do is be at the 0:05:25.480 --> 0:05:29.080 forefront of that um with our players, um, I think, 0:05:29.120 --> 0:05:32.640 with everyone. So we're trying to bring about that change, 0:05:33.000 --> 0:05:37.039 but we're doing it by seeing how and what people need. 0:05:37.560 --> 0:05:40.440 So I think we're you know, it's Look, it's gonna 0:05:40.480 --> 0:05:44.400 be difficult, it's gonna take time, but hopefully if people 0:05:44.400 --> 0:05:46.800 have patience, we'll be able to do it. Mark Lass, 0:05:46.839 --> 0:05:48.800 we thank you so much. With the basketball team in 0:05:48.880 --> 0:05:58.400 Milwaukee and also Avenue Capital as well. Europe has received 0:05:58.440 --> 0:06:02.080 the attention of Nathan she It's an esteemed career is 0:06:02.160 --> 0:06:06.320 under Secretary of Treasury, he provided provided leadership on international 0:06:06.360 --> 0:06:10.599 affairs with the International Monetary Fund. He did terrific work 0:06:10.680 --> 0:06:13.880 and then leading the charge on international economics for Villain 0:06:13.960 --> 0:06:16.880 Powder at City Group. He is now at PEJAM and 0:06:16.920 --> 0:06:22.440 has that a terrific year melding economics into their global 0:06:22.560 --> 0:06:25.960 call on fixed income. Nathan, let me go back here 0:06:26.040 --> 0:06:28.719 just a bit. How is two thousand twenty for you 0:06:29.320 --> 0:06:35.320 and melding economics into the animals? Like Greg Peters, Well, uh, 0:06:35.839 --> 0:06:39.400 that's a great question, and uh that is uh that 0:06:39.720 --> 0:06:43.920 is my challenge. But uh, I think that the task 0:06:44.040 --> 0:06:49.960 at hand is very much articulating and economic narrative. And 0:06:50.040 --> 0:06:53.920 the narrative for has been quite clear. It's been about 0:06:55.360 --> 0:07:00.240 viruses and lockdowns and then bounce backs. Adds that uh 0:07:00.600 --> 0:07:03.240 as that lockdown is ease and come back in again. 0:07:03.640 --> 0:07:06.600 And I think our investors pay a lot of attention 0:07:06.839 --> 0:07:09.760 to what's going on in the backro so also then 0:07:09.960 --> 0:07:14.240 bring with it the micro market narrative. Someone that can 0:07:14.240 --> 0:07:16.800 do that is Janet Yellen. It will be the great 0:07:16.840 --> 0:07:20.280 transition from Fed to Treasury. You of course no chair 0:07:20.400 --> 0:07:24.000 yelling quite well, what will yelling be like a secretary 0:07:24.000 --> 0:07:27.160 of the Treasury, What will be her challenge and that 0:07:27.320 --> 0:07:32.480 political shift. So I think the appointment of Janney Yelling 0:07:32.960 --> 0:07:37.400 UH to uh be Secretary of the Treasury is is 0:07:37.400 --> 0:07:43.520 a splendid appointment. She comes with platinum plated credibility. When 0:07:43.560 --> 0:07:49.320 she speaks, others will listen to her across the political spectrum. 0:07:50.160 --> 0:07:53.720 The Treasury is a different building than the Federal Reserve, 0:07:54.200 --> 0:07:58.720 but I think that Janet Yelling's insights into the labor 0:07:58.800 --> 0:08:01.680 market are going to be radical and helping to get 0:08:01.720 --> 0:08:06.880 the economy back on normal footing. I think it will 0:08:06.920 --> 0:08:11.440 be very helpful their issues like financial regulation, managing the dollar, 0:08:12.080 --> 0:08:15.360 China relationship, these are all things that she's thought about 0:08:15.440 --> 0:08:19.000 and and dealt with at the fedough Reserve and as 0:08:19.040 --> 0:08:21.960 an academic for for many years. I think that she 0:08:22.040 --> 0:08:25.440 will have a very successful and constructive tenure. What do 0:08:25.480 --> 0:08:27.880 you think will be her view or her push when 0:08:27.920 --> 0:08:30.679 it comes to the dollar. There's been some concern about 0:08:30.720 --> 0:08:33.320 whether she'll continue the sort of strong dollar being a 0:08:33.360 --> 0:08:37.120 good thing narrative or whether she'll piggyback with what President 0:08:37.160 --> 0:08:38.800 Trump was saying and frankly with what a lot of 0:08:38.800 --> 0:08:41.360 economists say, which is that a weaker dollar will give 0:08:41.360 --> 0:08:44.640 a tail into the U S economy. Well, I think 0:08:44.679 --> 0:08:47.480 this is one of the key issues on the international 0:08:47.640 --> 0:08:51.920 side of the Treasury that on the one hand, I 0:08:51.960 --> 0:08:55.360 think there might be a case that the strong dollar 0:08:55.600 --> 0:08:59.560 policy has been around for a long time, can we 0:08:59.679 --> 0:09:02.840 still say that a strong dollar is in the US 0:09:02.960 --> 0:09:07.800 interests and particularly in the interests of US workers. I 0:09:07.840 --> 0:09:11.960 think for some time that organized labor has challenged that. 0:09:12.559 --> 0:09:15.160 On the other hand, the strong dollar did a lot 0:09:15.240 --> 0:09:20.680 of positive and constructive things that policy in the international road, 0:09:20.800 --> 0:09:25.000 where it gave the United States moral standing and moral legitimacy. 0:09:25.520 --> 0:09:28.280 Essentially said We'll played by the rules, and we expect 0:09:28.280 --> 0:09:31.160 others to play by the rules as well. And what 0:09:31.240 --> 0:09:34.040 would if if they want to deviate from it, what 0:09:34.080 --> 0:09:37.880 would another structure look like, and would it carry those 0:09:38.000 --> 0:09:42.559 those positive benefits of allowing the United States to uh 0:09:43.240 --> 0:09:46.360 influence the policies of other countries in the same way. 0:09:46.840 --> 0:09:48.800 I think this is something they're gonna be struggling with. 0:09:49.120 --> 0:09:51.760 We're speaking with Nathan Sheets of p JIM and just 0:09:51.880 --> 0:09:55.280 the backdrop today is of vaccines that are gaining steam 0:09:55.640 --> 0:09:58.320 of a nine billion dollar stimulus bill that was passed 0:09:58.320 --> 0:10:02.120 in Congress and just now crossing the Bloomberg right now 0:10:02.160 --> 0:10:04.160 that Alex Asar, the head of a J j S, 0:10:04.200 --> 0:10:09.679 is saying that expect late February early March general vaccine programs. 0:10:09.760 --> 0:10:13.160 Given what we got overnight from Congress and given the 0:10:13.200 --> 0:10:17.480 expectations for the time frame vaccinations, is the fiscal support 0:10:17.559 --> 0:10:20.600 already on the table enough to carry the economy through. 0:10:21.640 --> 0:10:24.960 So my feeling is the goal was to build a bridge, 0:10:25.200 --> 0:10:30.240 and this nillion dollars stimulus package certainly does that. Over 0:10:30.280 --> 0:10:34.360 the next few months, will be putting UH four percent 0:10:34.640 --> 0:10:40.560 of GDP into the economy seventeen percent at an annual rate. 0:10:41.360 --> 0:10:45.800 I think it protects the economy from downside risks and 0:10:45.920 --> 0:10:51.439 importantly protects the most vulnerable parts of the household distribution 0:10:51.520 --> 0:10:54.960 as well as small firms and maybe UH at risk. 0:10:55.080 --> 0:10:58.240 So I I think it does very effectively build that 0:10:58.320 --> 0:11:02.120 bridge UH in to the vaccine, and then I think 0:11:02.200 --> 0:11:06.160 once the vaccine arrives, you put on your seatbelt. I 0:11:06.200 --> 0:11:10.600 think this economy could really rep Nathan Sheets. I want 0:11:10.600 --> 0:11:14.800 to go to your wheelhouse, which is international economic dynamics. 0:11:14.920 --> 0:11:18.319 The idea of the movable parts out there. Does a 0:11:18.440 --> 0:11:21.880 dollar move in two thousand twenty one with it a 0:11:21.960 --> 0:11:26.240 traditional framework or things so distorted that we need a 0:11:26.280 --> 0:11:29.400 different prism to look at dollars six months or a 0:11:29.480 --> 0:11:33.120 year from now. Well, I think this is this is 0:11:33.160 --> 0:11:40.120 a fantastic question. Typically a weaker dollar is associated with 0:11:40.280 --> 0:11:43.880 a stronger euro, and then as the Euro moves, that 0:11:44.040 --> 0:11:48.360 then escalates and moves into the emerging market space. But 0:11:48.440 --> 0:11:50.320 I think we're at a place where, on the one hand, 0:11:50.360 --> 0:11:53.600 the dollar is likely to weaken. On the other hand, 0:11:53.720 --> 0:11:57.400 I'm not sure the euro area is well placed given 0:11:57.400 --> 0:12:00.760 the economic challenges that they're facing with that with the 0:12:00.840 --> 0:12:05.360 virus to be able to absorb also can happen in 0:12:05.360 --> 0:12:07.440 the young space. I don't mean to interrupt, Nathan, but 0:12:07.480 --> 0:12:10.880 your true world class on this. There's a doom and 0:12:10.920 --> 0:12:15.120 gloom fear out there of Plaza Louver re ducts, of 0:12:15.200 --> 0:12:20.880 Reuben dollar reducts. Aren't we in a largely floating exchange 0:12:21.000 --> 0:12:24.280 rate economy where we've done away with so many of 0:12:24.360 --> 0:12:29.839 the rigidities of those older systems. So when we go 0:12:29.920 --> 0:12:33.960 back and look at some of those past accords where 0:12:33.960 --> 0:12:39.160 there were more odd agreements with respect to currency, the 0:12:39.240 --> 0:12:44.240 misvaluations and misalignments were much larger. And I think in addition, 0:12:44.280 --> 0:12:47.760 as you're pointing out Tom the official sector relative the 0:12:47.880 --> 0:12:51.800 private sector was much larger. So on the one hand, 0:12:52.280 --> 0:12:56.040 I don't see those same misalignments, so I wouldn't expect 0:12:56.160 --> 0:13:01.160 some broad based UH agreement. And on the other hand, 0:13:01.200 --> 0:13:04.040 it is a lot harder for the public sector to 0:13:04.320 --> 0:13:08.920 enforce its will on on the f X market. UH. 0:13:09.040 --> 0:13:10.840 So I think it really is at the end of 0:13:10.840 --> 0:13:13.959 the day, about these macro fundamentals, and I think they 0:13:14.040 --> 0:13:18.040 point to somewhat weaker dollar UH, and UH may not 0:13:18.240 --> 0:13:21.199 point to a much stronger euro from here, Nathan, how 0:13:21.280 --> 0:13:24.000 much is higher inflation part of that weaker dollar call? 0:13:26.480 --> 0:13:31.960 So my feeling is that inflation over the medium term 0:13:32.160 --> 0:13:36.680 is going to stay relatively muted as it was before 0:13:36.720 --> 0:13:41.240 the pandemic. Now as we're coming out of out of 0:13:41.280 --> 0:13:44.240 the situation and as the vaccines a lot, could we 0:13:44.280 --> 0:13:47.360 have a temporary boost in inflation where there were some 0:13:47.440 --> 0:13:52.000 bottlenecks and shortages. Yes, So I think that in general 0:13:52.040 --> 0:13:55.280 will continue to be a low inflation environment. And so 0:13:55.440 --> 0:13:58.079 my view of a weaker dollar is not so much 0:13:58.120 --> 0:14:01.520 predicated on an inflation call. So the reason why I 0:14:01.520 --> 0:14:04.120 asked that is because earlier you were saying that mid 0:14:04.200 --> 0:14:06.320 next year you can start to see the economy, to 0:14:06.440 --> 0:14:09.800 use your high level economic speak, really rip, And so 0:14:09.920 --> 0:14:12.800 I'm wondering what the consequences will be if that isn't 0:14:12.840 --> 0:14:16.320 necessarily on inflation, Whether we continue with this goldilocks scenario 0:14:16.360 --> 0:14:18.480 where we can see growth and we can see job 0:14:18.760 --> 0:14:22.200 jobless rates go down and yet inflation stay muted. Can 0:14:22.240 --> 0:14:27.040 you walk us through that whole narrative. So my feeling 0:14:27.200 --> 0:14:30.120 is that during the second half of next year, as 0:14:30.160 --> 0:14:36.040 the economy is booming, that we are likely to see 0:14:36.080 --> 0:14:41.200 some shortages and bottlenecks manifest themselves and a temporary period 0:14:41.240 --> 0:14:44.920 of somewhat elevated inflation to some extent. We saw that 0:14:45.680 --> 0:14:48.080 in the third quarder of this past year as we 0:14:48.160 --> 0:14:52.000 came out of the spring lockdowns. But that as we 0:14:52.080 --> 0:14:57.640 move into two and beyond that these deep structural factors 0:14:57.640 --> 0:15:04.160 like demographics to leveraging, automation and uh and and inflation 0:15:04.280 --> 0:15:08.560 expectations being well anchored on the downside will reassert themselves 0:15:08.800 --> 0:15:13.120 and it will continue to be a low inflation world, 0:15:13.240 --> 0:15:16.960 with perhaps even further disinflation as we continue to age. 0:15:17.160 --> 0:15:19.880 Nathan Sheets, thank you for wisdom across this two thousand 0:15:19.880 --> 0:15:22.040 and twenty look forward. To speaking you to you into 0:15:22.040 --> 0:15:28.800 the new year with Pijam. Nathan Sheets joins us, we've 0:15:28.800 --> 0:15:32.400 tried all across Bloomberg surveillance really from February to give 0:15:32.440 --> 0:15:34.480 you the pros on this. Someone that's helped us so 0:15:34.600 --> 0:15:37.400 much out of Hope College, Kalamazoo and of course the 0:15:37.480 --> 0:15:41.040 combine at uh Wisconsin Madison and now Holding Court in 0:15:41.080 --> 0:15:46.200 Washington and they were claimed microbiology program. Deborah Fuller joins us. 0:15:46.440 --> 0:15:48.960 Right now, Debra, you and I were talking to break 0:15:49.000 --> 0:15:51.040 about the need to get back in the lab and 0:15:51.160 --> 0:15:54.400 solve the mysteries. What's the great mystery we need to 0:15:54.480 --> 0:16:00.240 solve with this fear of mutation, this fear of variant. Well, 0:16:00.240 --> 0:16:02.880 there are two mysteries we need to solve. The first 0:16:03.000 --> 0:16:06.880 is whether it truly is more transmissible and the second 0:16:07.080 --> 0:16:11.280 is is this going to impact the efficacy of our vaccine? So, uh, 0:16:11.360 --> 0:16:13.360 you know, if you if you break that down just 0:16:13.440 --> 0:16:15.600 a little bit, that this is a new variant that 0:16:15.640 --> 0:16:19.040 has about twenty nu muications and it does appear to 0:16:19.040 --> 0:16:21.200 be taking over as a dominant strain in the UK 0:16:21.920 --> 0:16:24.240 based on you know, there's a substantial increase in the 0:16:24.280 --> 0:16:29.040 frequency in detecting the strain in in the population. Uh. 0:16:29.080 --> 0:16:32.320 But what we don't know yet is whether that is 0:16:32.360 --> 0:16:35.120 truly an increase in transmission. We're going to need additional 0:16:35.240 --> 0:16:38.800 tests to really validate that, such as does it outcompete 0:16:38.800 --> 0:16:41.840 other viral strains in in a cell culture study in 0:16:41.880 --> 0:16:46.320 the lab? Does that result in higher amounts of viral shedding? Uh? 0:16:46.360 --> 0:16:49.160 And animals infected with it? This usually does translate to 0:16:49.240 --> 0:16:51.960 higher transmission, So those those particularly experiments need to be 0:16:52.000 --> 0:16:55.680 done too to confirm that. What doesn't mean for vaccines, 0:16:55.720 --> 0:16:58.800 we don't really know yet. Uh. There is no evidence 0:16:58.880 --> 0:17:02.080 yet that these new mutations are going to impact they 0:17:02.160 --> 0:17:05.919 of vaccines. Uh. There's some confidence among the manufacturers that 0:17:05.960 --> 0:17:09.479 it won't. Uh, they still need to test that. You know, 0:17:09.480 --> 0:17:12.840 in microbiology, it's about the nucleus, societoplasm and all the 0:17:12.920 --> 0:17:16.119 drama at the cellular wall. The drama here are the 0:17:16.240 --> 0:17:19.720 fearsome spikes that we see on this virus. Do we 0:17:19.800 --> 0:17:23.560 have an understanding of the physiology of those spikes and 0:17:23.640 --> 0:17:28.000 what we can do about it? The spike protein on 0:17:28.040 --> 0:17:32.280 the virus means yes, yeah. The spike protein the virus 0:17:32.400 --> 0:17:34.840 is absolutely cential for the virus to be able to 0:17:34.960 --> 0:17:37.480 enter the cell and that's why we've designed vaccines to 0:17:37.720 --> 0:17:40.720 target that particular spike protein. It is going to be 0:17:41.080 --> 0:17:44.280 the area the virus is likely going to mutate the most, 0:17:44.400 --> 0:17:49.600 because mutations are often driven by the virus wanting to 0:17:49.640 --> 0:17:52.879 improve its own fitness, its own replication, and the spike 0:17:52.880 --> 0:17:55.960 protein would be an obvious target for that. What we've 0:17:55.960 --> 0:17:58.119 done with the vaccines though, is that we've targeted a 0:17:58.160 --> 0:18:01.399 particular area on the spike protein that is absolutely essential 0:18:01.440 --> 0:18:03.440 for the virus to be able to enter into the cell. 0:18:03.640 --> 0:18:06.960 So if it mutates that particular area, there's a good 0:18:07.080 --> 0:18:10.600 chance that it actually is going to aboard itself. So 0:18:10.680 --> 0:18:14.000 that's probably why we haven't seen of many mutations have 0:18:14.160 --> 0:18:16.600 risen in this in this virus, many of them in 0:18:16.600 --> 0:18:20.359 the spike proteins have an impact yet on the vaccine. 0:18:20.359 --> 0:18:22.679 With that said, uh I have I had a mentor 0:18:22.760 --> 0:18:24.760 once told me that if if if a virus can, 0:18:24.760 --> 0:18:28.399 it will and viruses can eventually potentially figure out a 0:18:28.440 --> 0:18:31.000 way to a vaccine immunity, and that's why it's so 0:18:31.000 --> 0:18:33.920 important every time one new one emerges it like this one, 0:18:33.960 --> 0:18:37.200 we have to look at our vaccines and see whether 0:18:37.320 --> 0:18:41.399 or not these new mutations, UH could result in resistance. 0:18:41.560 --> 0:18:45.639 I'll leave the cellular biology to Tom Keane. But Deborah, 0:18:45.840 --> 0:18:48.360 I've got a much simpler question, which is one, will 0:18:48.440 --> 0:18:50.760 kids be able to be vaccinated given the lack of 0:18:50.840 --> 0:18:55.480 information in studies so far to the state. So what 0:18:55.520 --> 0:18:59.400 they're doing right now is they are initiating UH clinical 0:18:59.440 --> 0:19:04.240 trials will include younger children, and unlike what was required 0:19:04.280 --> 0:19:07.080 for for adults, where we had to go all the 0:19:07.119 --> 0:19:10.720 way to an efficacy study comparing with CIBO versus versus 0:19:10.720 --> 0:19:13.080 those who are taking the vaccine, what we can do 0:19:13.080 --> 0:19:15.800 is study those who have already see the vaccine and 0:19:15.840 --> 0:19:18.000 we know that they're protected. We can look at the 0:19:18.640 --> 0:19:22.359 levels of immunity they have and then use that information say, 0:19:22.440 --> 0:19:24.919 are hey, are these kids who are getting UH in 0:19:24.960 --> 0:19:28.919 our clinical trials developing antibodies or immune responses comparable to 0:19:29.000 --> 0:19:31.960 what we see and protected adults. And if they are, 0:19:32.040 --> 0:19:35.439 then I think they could probably get more extend the 0:19:35.480 --> 0:19:38.760 authorization to to include children. Of course, that that really 0:19:38.800 --> 0:19:42.679 depends on assuring that these vaccines are also safe in children. So, 0:19:42.720 --> 0:19:45.720 based on the rollout so far, deb what's your best 0:19:45.920 --> 0:19:48.320 estimate for a time frame of when we'll reach some 0:19:48.400 --> 0:19:50.159 sort of I hate to say this because I know 0:19:50.240 --> 0:19:54.240 Tom has a lot of issues of herd immunity. Yes, 0:19:54.359 --> 0:19:57.640 herd immunity being defined as when we get sufficient amounts 0:19:57.640 --> 0:20:00.240 of vaccine induced immunity and the population so that the 0:20:00.320 --> 0:20:03.440 virus is not able to transmit as well anymore. So 0:20:03.720 --> 0:20:05.840 it really depends on how many many people we can 0:20:05.840 --> 0:20:09.199 get to come forward to to get vaccinated. If we 0:20:09.280 --> 0:20:12.800 can get over sixt of people vaccinated number one and 0:20:12.960 --> 0:20:16.360 number two, if the distribution of the role happens in 0:20:16.359 --> 0:20:19.439 in the schedule that they're predicting, let's say April the 0:20:19.480 --> 0:20:22.000 most everybody will have an opportunity to get a vaccine, 0:20:22.240 --> 0:20:24.399 and we can get six people to to take a 0:20:24.480 --> 0:20:28.320 vaccine and the manufacturer number to produce that much vaccine, 0:20:28.840 --> 0:20:32.880 then we could probably see her community sometime in late 0:20:32.920 --> 0:20:35.879 spring early summer. That is the money question. Deborah Fuller, 0:20:36.000 --> 0:20:37.840 thank you so much for the money answer. Where the 0:20:37.960 --> 0:20:47.400 university was Washington, I should say School of madisone president elect. 0:20:47.440 --> 0:20:50.360 There's an inauguration it'll be I don't know, the third 0:20:50.359 --> 0:20:52.840 week of January or something like that. The second most 0:20:52.840 --> 0:20:55.720 famous person to ever graduate from the University of Delaware. 0:20:56.080 --> 0:20:58.600 We now welcome the most famous person to ever graduate 0:20:58.640 --> 0:21:02.200 from the University of Delaware. Liziane Saunders joins us from 0:21:02.680 --> 0:21:07.119 Charles Schwab was just a lot of good years of perspective. Listen, 0:21:07.160 --> 0:21:09.040 I've got to go to the money question, which you're 0:21:09.080 --> 0:21:13.240 always so good at, which is not the bladder the 0:21:13.359 --> 0:21:17.040 pundit try, but what are we actually doing with our money? 0:21:17.080 --> 0:21:22.399 What does Schwabs see that people are actually doing well? 0:21:22.720 --> 0:21:25.600 From a fund flows perspective which goes beyond to Schwab, 0:21:25.680 --> 0:21:29.200 but broader fund flows inclusive of both mutual funds and 0:21:29.480 --> 0:21:32.760 e t F you really started to see a significant 0:21:32.800 --> 0:21:36.320 move back into US equities starting at the beginning of November. 0:21:37.119 --> 0:21:39.359 Much at the same time you've got the initial Fiser 0:21:39.440 --> 0:21:44.800 vaccine news. That led to another stage of the rotation, 0:21:44.960 --> 0:21:47.560 which was not so much into cyclical areas but into 0:21:47.640 --> 0:21:50.280 all right, what hasn't worked yet, hence the big move 0:21:50.320 --> 0:21:56.679 into energy and financials um. Interestingly, though, the larger speculators 0:21:56.880 --> 0:21:59.119 are basically moving to the other side of the trade, 0:21:59.520 --> 0:22:03.679 so they been upping their speculative short positions on the 0:22:03.840 --> 0:22:07.000 s and it's a bit of a divergence, which I'm 0:22:07.040 --> 0:22:09.959 a bit worried about the sentiment environment because fund flows 0:22:10.040 --> 0:22:14.720 was sort of the last thing to fall since sentiment 0:22:14.800 --> 0:22:17.800 got a bit fraughty in early September. It was mostly 0:22:18.000 --> 0:22:21.280 by the new limited day traders in the options market, 0:22:21.640 --> 0:22:25.320 and then it became more pervasive in attitudinal measures of 0:22:25.400 --> 0:22:29.800 sentiment into fund flows since early November. And the success 0:22:29.800 --> 0:22:32.720 of the market I think has bread a risk, which 0:22:32.800 --> 0:22:35.880 is that we're looking at fairly froughty sentiment. We don't 0:22:35.880 --> 0:22:38.240 go through the math this close to the holidays, but 0:22:38.680 --> 0:22:41.720 the bottom line is, if somebody is short and they cover, 0:22:42.640 --> 0:22:47.360 it develops a convexity or acceleration of buying. Are we 0:22:47.400 --> 0:22:50.639 setting ourselves up for a big short cover if we 0:22:50.760 --> 0:22:55.080 get good news on the vaccine. I think there could 0:22:55.080 --> 0:22:59.480 be a set up for shortcovering on a number of factors. 0:22:59.560 --> 0:23:03.640 Yesked news on the vaccine, maybe less weak economic data 0:23:03.800 --> 0:23:07.880 driven by the current state of the virus um. We've 0:23:07.920 --> 0:23:09.960 already gotten some of the good news on the vaccine 0:23:10.040 --> 0:23:13.400 specific to the amount of shots that can be administered 0:23:13.560 --> 0:23:18.040 from each vial, but of course there's also the possibility 0:23:18.080 --> 0:23:21.400 of negative news. You know. Dr Gottlieb said, I think 0:23:21.480 --> 0:23:25.680 yesterday that the stream that was seen in the UK, 0:23:25.800 --> 0:23:28.959 this new stream is probably already in the United States, 0:23:28.960 --> 0:23:31.480 and we don't know the details of whether it's it 0:23:31.480 --> 0:23:34.600 can be combated by the same vaccine. So I think 0:23:34.600 --> 0:23:37.479 there are there are risks on on both sides. If 0:23:37.520 --> 0:23:41.359 we take a generalization Lizzian Saunders that we go seven 0:23:41.440 --> 0:23:44.359 eight nine years of quiet and value and then we 0:23:44.400 --> 0:23:47.280 get a value lift which pretty much makes up for it. 0:23:47.640 --> 0:23:52.960 Have we moved away from growthiness towards that value pop 0:23:53.119 --> 0:23:56.080 people have been waiting for or do you not see 0:23:56.119 --> 0:23:59.400 the determinants that make that happen yet? Well, I think 0:23:59.480 --> 0:24:02.919 we have to distinguished between the fundamentals of value and 0:24:02.960 --> 0:24:06.879 the index components of value. This this so called move 0:24:07.000 --> 0:24:10.840 to value, has been more driven by the surge in 0:24:10.960 --> 0:24:15.000 financials and energy, which are much more heavily weighted in 0:24:15.040 --> 0:24:19.240 the value indexes and even within the value indexes. Financials 0:24:19.359 --> 0:24:23.600 is a huge play. Russell one thousand Value has seventeen 0:24:23.680 --> 0:24:27.439 or eighteen percent financials, Russell two thousand Value has twenty 0:24:27.440 --> 0:24:31.840 eight percent financial and financial movement financials. You have to 0:24:31.880 --> 0:24:35.280