Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferroll and Lisa Brownwitz Jaily, we bring you
Speaker 1: insight from the best and economics, finance, investment, and international
Speaker 1: relations to find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg
Speaker 1: dot com, and of course on the Bloomberg terminal right
Speaker 1: now as a special moment not only for Bloomberg Surveillance
Speaker 1: for all of New York City, but indeed it is
Speaker 1: a national story. Eric Adams is the Democratic nominee for
Speaker 1: New York City mayor. This is two other candidates did
Speaker 1: not go for a recount and conceded in the last
Speaker 1: oh twelve even eighteen hours. Joining me now for a
Speaker 1: conversation with the Democratic nominee is of course Romain Bostic
Speaker 1: and for Lisa brown Witz. And we're absolutely thrilled af
Speaker 1: Shelley Banjo, whether she has driven our coverage here at
Speaker 1: Bloomberg just started out as yeah, another race, and then
Speaker 1: it became something different. Eric Adams, thank you so much
Speaker 1: for joining us this morning. I'm gonna let Shelley talk
Speaker 1: about ear piercings and all that that we've seen in
Speaker 1: the last twenty four hours. I want to talk about
Speaker 1: your first meeting as mayor with the New York Police Department.
Speaker 1: How do you envision that will go. Well, first, it
Speaker 1: started already and it's not with the department, it's with
Speaker 1: the union heads. I had a conversation with Pat Lynch,
Speaker 1: conversation with Ed Mullins Uh, conversation with the president of
Speaker 1: the d d A is about going behind closed doors
Speaker 1: and say let's turn a new page. I said this
Speaker 1: over and over again, the prerequisite to prosperity in the
Speaker 1: city's public safety and reform, and they are eager to
Speaker 1: sit down with me and say how do we move
Speaker 1: policing into the twenty century deeper into the century. But
Speaker 1: we re established the relationship between police east in community
Speaker 1: because I'll see this will be controlled by the good guys.
Speaker 1: Are the bad guys right now all across America, the
Speaker 1: bad guys are winning. I'm going to stop that immediately.
Speaker 1: Are you gonna do that with Dermott Mcha at the
Speaker 1: Helm Although I'm not. I've made it clear that my
Speaker 1: police commissioner is going to be a woman. We're going
Speaker 1: to finally bring of the entire city the largest police
Speaker 1: department in the country Uh, into the twenty century of
Speaker 1: women leadership and law enforcement. And look at three of
Speaker 1: the candidates that I've been communicated with. And I'm sure
Speaker 1: you know obviously being a veteran of that force, that's
Speaker 1: not gonna come easy. Eric. We've seen the fraud relationship
Speaker 1: between the police, the rank and file, the unions. Uh,
Speaker 1: and of course the mayors of the past here you've
Speaker 1: also had a relatively complicated relationship despite being a veteran
Speaker 1: of that department here, how do you bridge that? Eric?
Speaker 1: How are you going to do that in a way
Speaker 1: where the police, which are a mighty force in this city. Eric,
Speaker 1: some would say even mightier than the mayor himself. Well,
Speaker 1: first of all, it is easy, and those who stay
Speaker 1: it's not going to be easy. Uh, they don't know me.
Speaker 1: I had difficult challenges in my life, being be arrested
Speaker 1: by police officers, assaulted, went into the police department for
Speaker 1: for reform, moved up through the ranks of captain of
Speaker 1: aim and state senator, now bar president, reverse diabetes by
Speaker 1: changing my diet, and so difficult challenges. It's not something
Speaker 1: that I run away from. I run towards. What we
Speaker 1: must do is stop talking at each other around reform
Speaker 1: and safety and start talking with each other. And you're
Speaker 1: going to see an approach year a complete change in
Speaker 1: the atmosphere of public safety and how police officers respond.
Speaker 1: We're gonna rend the bad cops, We're going to back
Speaker 1: our good cops, and we're going to re establish the
Speaker 1: relationships in our communities. And it's going to be done
Speaker 1: in year one. I promise you back the three women
Speaker 1: that you're currently in conversation with. Are they within the
Speaker 1: New York Police Department? Are you looking outside? Um? What
Speaker 1: what I don't want to do is say is it
Speaker 1: bigger than the red box or smaller than the house?
Speaker 1: Because that limits a number of potential candidates, and many
Speaker 1: of them are working right now, and I don't want
Speaker 1: to any way jeopard dies what they're doing. I'll reveal
Speaker 1: those numbers immediately after I win the general election in
Speaker 1: in November. I revealed the individual I decided fair enough,
Speaker 1: fair enough. And another big force to be reckoned with
Speaker 1: is obviously Governor Andrew Cuomo in albany Um. You have had,
Speaker 1: you know, a checkered past to speak with him, but
Speaker 1: you know, you guys have run in the same political
Speaker 1: circles for almost your entire adult lives. Did he call
Speaker 1: you to congratulate you? And what's the first thing You're
Speaker 1: going to try to work with him in albany On?
Speaker 1: And we don't have a check you pass um. Clearly
Speaker 1: we are both strong and what we believe, we know
Speaker 1: how to sit down and communicate. We operated together when
Speaker 1: I was in Obany and I'm looking forward to having
Speaker 1: him as a partner as we do with number one
Speaker 1: public safety. I cannot really emphasize this enough. We're not
Speaker 1: going to deal with major parts of our economy tourism.
Speaker 1: If we have shootings in Times Square, no one's going
Speaker 1: to get on the subway system that we could the
Speaker 1: violence there. And so we're going to first deal with
Speaker 1: making our city safe, and then we're going to use
Speaker 1: the dollars that are coming from the federal government to
Speaker 1: go after the theaters of crime and the featers that
Speaker 1: prevent people from finally leaving institutional poverty year after year.
Speaker 1: And I believe that having in Orbany, we could accomplish
Speaker 1: this task together. Eric Adams. They're gonna study your candidacy,
Speaker 1: the path of this UH mayoral race for you in
Speaker 1: Brooklyn and Bronx. They're also gonna study it in Boston
Speaker 1: and also in Boise, Idaho. You're gonna have a national
Speaker 1: ramification for all Democrats. What is your victory say about
Speaker 1: the certitude of the left in the Democratic Party. Well,
Speaker 1: you know, if you are a d s A candidate
Speaker 1: or if you are a Republican candidate, Uh, you don't
Speaker 1: want to be posted to train or slash three. So
Speaker 1: I think that what you're going to see on the
Speaker 1: face of the Democratic Party. I keep saying this over
Speaker 1: and over again. I want four burrows in the city
Speaker 1: of New York. The only borough I did not win
Speaker 1: is Manhattan. My message resonated with everyday working people, and
Speaker 1: it didn't matter with your ethnicity, your gender, and worship.
Speaker 1: And I think that you're going to see this message
Speaker 1: resident across this entire country. And it's an opportunity for
Speaker 1: us to understand that we don't have to talk at
Speaker 1: each other. We are in this together, and I'm going
Speaker 1: to bring a closer together so that we can overcome
Speaker 1: not only the pandemic, but also the pandemic of unemployment,
Speaker 1: of violence, and inequality very quickly. Eric, we are in television,
Speaker 1: you know, we are on radio and a number of
Speaker 1: radio listeners have emailed in and said, what's the piercing
Speaker 1: look like? Where's the piercing this morning, Mayor Adams, Look
Speaker 1: at this. It's a it's a gold aery of my
Speaker 1: son and I. We attended a meeting with a group
Speaker 1: of young people during the campaign and they said that
Speaker 1: we were both with you if you commit and promise
Speaker 1: to get your if you become a when the primary
Speaker 1: and a promise made is a promise cap and I
Speaker 1: didn't guess. I can assure you the hundred nights Mayor
Speaker 1: of New York did not go through this torture. Eric Adams,
Speaker 1: thank you so much. We look forward to speaking to
Speaker 1: you again. Let's be cleared the Democratic nominee for New
Speaker 1: York City mayor is a calm time for our Secretary
Speaker 1: of Transportation, Mr Buddhajudge. Of course we all know from
Speaker 1: South Bend, Indiana sterling acade dmics including something that we
Speaker 1: all did as a kid. Could we write an essay
Speaker 1: off John F. Kennedy's profiles and courage and the Secretary
Speaker 1: delivered the goods as a young uh a kid. We
Speaker 1: want to talk about transportation, We want to talk about
Speaker 1: international travel. But yes, right now in infrastructure. Mr Secretary,
Speaker 1: thank you so much for joining Bloomberg this morning. I
Speaker 1: lived the last infrastructure disaster, which as you drove out
Speaker 1: Indiana west and there was a point where I a
Speaker 1: d died and you had a two lane highway west.
Speaker 1: We're going back to that on the condition of our infrastructure,
Speaker 1: and we're doing it because we cannot figure out how
Speaker 1: to do a gas tax. Can't you do a gas
Speaker 1: tax that will pay for the roads, rebuild America and
Speaker 1: also be politically acceptable for Democrats. Well, it turns out
Speaker 1: you don't have to. And what's so great about the
Speaker 1: bipartisan infrastructure framework that the President led that a set
Speaker 1: of Democratic senators and Republican consenators have come together on,
Speaker 1: is that it will deliver the biggest investment in American
Speaker 1: infrastructure in more than a generation, the biggest investment in
Speaker 1: our roads and bridges since Eisenhower, the biggest investment in
Speaker 1: passenger rail since Amtrak, the biggest investment in public transit ever,
Speaker 1: without having to ask Americans to pay any more in
Speaker 1: taxes any American who makes less than four hundred thousand
Speaker 1: dollars a year. This is a promise that the President
Speaker 1: made when he was running for president, he plans to
Speaker 1: keep that promise, and so he was very firm on that.
Speaker 1: But what's clear is that it is absolutely possible to
Speaker 1: make these kinds of investments by looking to other funding
Speaker 1: sources that don't ask that of ordinary Americans. And we're
Speaker 1: thrilled that this critical mass of Republican and Democratic senators agree.
Speaker 1: We think it's one of the reasons why so many
Speaker 1: Americans agree that this is the right thing to do. Now,
Speaker 1: we need Congress to move it forward, get it to
Speaker 1: the President's desk so that we can get those dollars working,
Speaker 1: whether it's on our highways and bridges, are our airports
Speaker 1: and ports, or on some of the things that are
Speaker 1: newer to the infrastructure picture, like our digital infrastructure and
Speaker 1: getting everybody online. You mentioned Dwight David Eisenhower. I remember
Speaker 1: going off the infrastructure road of Kansas onto the two
Speaker 1: lane highway to his museum. All wonderful. Dwight Eisenhower. I
Speaker 1: had to fight his Republicans to get the vision of
Speaker 1: the interstate highway system done. How can you bring over
Speaker 1: Republicans to get a majority vote to rebuild America? You know, uh,
Speaker 1: I found that people don't agree on much here in Washington,
Speaker 1: across party lines, but they agree on the needs, as
Speaker 1: you've been describing, and as every American sees. You know,
Speaker 1: when I'm talking to two householdce Senate members, Republican or Democrat,
Speaker 1: what what I noticed that they all have in commas.
Speaker 1: They're all from somewhere. They're all home right now, actually
Speaker 1: this week, during this July four recess, they're all home
Speaker 1: talking to constituents saying, when are we going to get
Speaker 1: this bridge fixed? Why is our airport looking the way
Speaker 1: it's looking. How how are we this far behind on
Speaker 1: on on transit or whatever it is in their district?
Speaker 1: And so, yes, I do believe that that that we
Speaker 1: have finally reached this point of if not consensus, then overlap.
Speaker 1: And I think that's why you had this remarkable site
Speaker 1: of the President walking out of the West Wing a
Speaker 1: few days ago, flanked by Democratic and Republican senators saying
Speaker 1: we have a deal. Now we have a deal is
Speaker 1: not the same thing as we have a bill. That's
Speaker 1: what's happening right now, turning it into legislative text, moving
Speaker 1: it through these processes, UH committees that have jurisdiction over this.
Speaker 1: There's a lot of machinery, especially this month of July
Speaker 1: that is going through its motions here in Washington. But
Speaker 1: it's it's resulting. I believe in in the opportunity for
Speaker 1: something that that we have needed for really the better
Speaker 1: part of my lifetime as we've watched these uh, these
Speaker 1: investments degrade, as we've coasted off of decisions that were
Speaker 1: made generations ago. You know, last time I was in
Speaker 1: New York was to look at the Hudson River Tunnels,
Speaker 1: the finest infrastructure technology of nineteen ten, and we're still
Speaker 1: depending on. Look at the john Look at the shade
Speaker 1: the Secretary gives to New York City. Missed the Secretary.
Speaker 1: There are some things that are easy to get down
Speaker 1: and haven't been done. Infrastructure, it's one of them, my guests.
Speaker 1: Another is international travel restrictions. We want to work out
Speaker 1: when we get an update from your administration, when it's
Speaker 1: not going to happen, so it unfortunately it can't be
Speaker 1: based on an arbitrary date. It has to be based
Speaker 1: on conditions. But I can tell you as as a
Speaker 1: Transportation secretary, of course, I am as impatient as anybody
Speaker 1: uh to see us move as as quickly as we
Speaker 1: responsibly can toward more forms of reopening right now. What's
Speaker 1: going on is a set of working group processes, so
Speaker 1: we've can been working groups with our international partners. Is
Speaker 1: one for the UK, one for the EU, one for Canada,
Speaker 1: one for Mexico to determine the right pathway forward. A
Speaker 1: lot of this is based on what's going on with
Speaker 1: progress on the vaccines. Obviously we see good news and
Speaker 1: bad news out there. In terms of the variants, one
Speaker 1: moment you're reading about a variant happening across the world.
Speaker 1: The next you know it's becoming the dominant strain here
Speaker 1: in the US, and it is, sir, and if you
Speaker 1: allow me to jump in, because we pushed for time,
Speaker 1: the data variant has become the dominant strain here in
Speaker 1: the United States for America recording to the CDC, and
Speaker 1: very quickly so too. From my position personally, forgive me
Speaker 1: for saying this, but you didn't have to watch your
Speaker 1: father's funeral down the screen of an iPhone on Tuesday.
Speaker 1: I did because of your policies. Now, I expected you
Speaker 1: to bring up the science and I expected the quote
Speaker 1: that came from you to be used because you used
Speaker 1: it a month ago, two months ago, here in the
Speaker 1: policies for our audience so they understand them. Currently, if
Speaker 1: you're a citizen of the United States for America, or
Speaker 1: if you have a Green Card, you can travel to
Speaker 1: the UK and you can fly directly back. If you
Speaker 1: have an H one B visa or an NOW one,
Speaker 1: you can fly to the UK. But to come back
Speaker 1: to America you need to go to Mexico City and
Speaker 1: spend two weeks there in a third country to get
Speaker 1: back to New York. Sir, forgive me, but I've spoken
Speaker 1: to scientists about this, and there is no scientific rationale
Speaker 1: for that policy. So for me and thousands of others
Speaker 1: who haven't got to be with their loved ones through
Speaker 1: a critical time because of your policies, sir, there will
Speaker 1: be thousands more if you carry on repeating the same
Speaker 1: line and don't just look at this and change it.
Speaker 1: Why are you not changing the policy when we have
Speaker 1: scientists day after day say there's no scientific rationale for
Speaker 1: maintaining it. Well, first of all, let me say I'm
Speaker 1: sorry to hear about your father, And let me also
Speaker 1: say that I am among those who are impatient to
Speaker 1: see loved ones who live across the Atlantic. Let me
Speaker 1: also say that the US is going to be conservative.
Speaker 1: For give me for jump again to jump against keep.
Speaker 1: You keep going back to this, and there is no
Speaker 1: scientific rationale to distraw a distinction between someone who has
Speaker 1: a green card and H one b vis or an
Speaker 1: now one. You know that. I know that. Regardless of
Speaker 1: anything you say for the next couple of minutes, it's
Speaker 1: not going to justify it. What I need to understand
Speaker 1: from you as a policy maker is why thousands of
Speaker 1: people who live in this country legally and pay taxes
Speaker 1: cannot go home to see loved ones and return directly.
Speaker 1: And why you still repeat the same line again and
Speaker 1: again and again. It doesn't make it true. You do
Speaker 1: not have a scientific rational for this. You cannot back
Speaker 1: it up with science. Why you're not going go away
Speaker 1: with policy makers and doing something so our tools are imperfect, right,
Speaker 1: we are dealing with a country based framework for assessing risk,
Speaker 1: when in a perfect world we would know all the
Speaker 1: information we needed to have for a traveler based framework.
Speaker 1: We can move in that direction somewhat. That's more refined
Speaker 1: and ultimately more accurate from a risk assessment perspective, but
Speaker 1: we don't have the toolkit to do that. In a
Speaker 1: way that would be as smooth as as we would want.
Speaker 1: So we're going to continue to have a strategy led
Speaker 1: by public health authorities, guided by Homeland Security c d C,
Speaker 1: my department at the table to reopen travel as quickly
Speaker 1: as we responsibly can. I'm not talking about a broad
Speaker 1: based reopening. Forget me for jumping in. Just just allow
Speaker 1: me to get this thought. And because it's important to
Speaker 1: what you're about to say, I need you to understand
Speaker 1: that I'm talking about working people in this country who
Speaker 1: are working here legally. With the stroke of a pen,
Speaker 1: you can enable thousands of people in this country who
Speaker 1: work illegally and pay taxes to return home to loved ones.
Speaker 1: And you can do that by making an equal treatment
Speaker 1: for people with an H one B and our one
Speaker 1: a green card at a resident of this country. You
Speaker 1: know that's not difficult. That's not a large change. That's
Speaker 1: allowing people who work in this country to get back
Speaker 1: and see loved ones like they want to. And so
Speaker 1: I'm not going to lay on this this on any
Speaker 1: thicker than I already have. You didn't have to watch
Speaker 1: your mom stand by your father's casket in a few
Speaker 1: old two days ago because you won't do what I'm describing.
Speaker 1: It's easy, and us together in this conversation, I hope
Speaker 1: you go away and make the changes so that thousands
Speaker 1: of other people don't have to go through when I've
Speaker 1: gone through in the last month. Can we make that happen, sir? So,
Speaker 1: these are exactly the kinds of things that we're reviewing
Speaker 1: on a daily basis. I'm the Transportation Secretary. My entire
Speaker 1: job is to do everything I can to safely get
Speaker 1: people to where they need to be and where they
Speaker 1: want to be, whether it's to be with loved ones,
Speaker 1: whether it's to do business. But it's literally what I'm
Speaker 1: here in Washington to do. Nothing about this, respectfully, Nothing
Speaker 1: about this is easy. We're dealing with a phenomenon that
Speaker 1: has led to the debts of six hundred thousand Americans.
Speaker 1: We're dealing with imperfect information, complex policies, legacy policies. Nothing
Speaker 1: about this is easy. But what I will tell you
Speaker 1: is we're doing everything we can as quickly as we
Speaker 1: responsibly can to get back up and running. Mr Secretary,
Speaker 1: Would you support a passport equivalent? I have a passport.
Speaker 1: I happen to study microbiology. A few years ago why
Speaker 1: can't I get a passport, a federal passport that says
Speaker 1: I've been vaccinated. Well, there are a lot of privacy
Speaker 1: and technology issues, but I do think it's worth noting.
Speaker 1: You know, you may have had this experience too. I
Speaker 1: had it when I was younger traveling internationally of carrying
Speaker 1: a yellow uh CDC passport that reflected the vaccinations UH,
Speaker 1: that that I needed to demonstrate that I had to
Speaker 1: travel to parts of Southeast Asia and Africa. We we
Speaker 1: have forms of this that are frankly very low tech
Speaker 1: and out of take. How to balance that with the
Speaker 1: privacy issues is a challenge, and we've decided that it's
Speaker 1: not the federal government's job to establish these kinds of requirements,
Speaker 1: but it is important to make sure that there are
Speaker 1: ways for people who want to demonstrate that they are
Speaker 1: vaccinated to to to prove it. And UH We've seen
Speaker 1: a lot out of third party and private sector ways
Speaker 1: to do this, and I think that's going to continue
Speaker 1: to develop and needs to have continued support at the
Speaker 1: policy level too. What's your biggest headache right now and
Speaker 1: getting this infrastructure plans through? I know you're managing a
Speaker 1: message every day and certainly We've seen that with President Biden.
Speaker 1: This is a big emotional piece of American legislation. How
Speaker 1: do you get it through with a fractious Senate? I
Speaker 1: think the biggest thing is not to let the politics
Speaker 1: get in the way with people are impatient for this
Speaker 1: to happen. But it's been infrastructure Week for a good
Speaker 1: decade or so, and we need to demonstrate that it's
Speaker 1: actually going to get done this time. Look, the policy
Speaker 1: framework is clear, the pathway forward is clear. We need
Speaker 1: these roads and bridges, we need better airports. There's a
Speaker 1: there are listings of airports, were not one of the
Speaker 1: top twenty five is actually in the United States. That's
Speaker 1: unacceptable to the president. I think it's unacceptable to most Americans.
Speaker 1: We want to get this done. UH. The biggest thing
Speaker 1: we have to do is actually move it through Congress
Speaker 1: and make sure that as this turns into the very
Speaker 1: specific mechanical legislative text, that we're tearing down any obstacles
Speaker 1: to getting into the President's desk. But I feel an
Speaker 1: enormous amount of momentum for this on both sides of
Speaker 1: the aisle UH, and our job is to make sure
Speaker 1: that that moment momentum gets us all the way across
Speaker 1: the finish line. Mr Sextrae, I appreciate it's on this morning,
Speaker 1: and thank you very much for hearing questions and from
Speaker 1: responding to them to Puddh Judge, the U S Secretary
Speaker 1: of Transportation right now, and we've been just thrilled what
Speaker 1: our booking team has done to bring in equity voices.
Speaker 1: Liz Ande Saunders with us at Yar Danny yesterday Abbey,
Speaker 1: Joseph Cohen, and now we continue with Jonathan Gollub of
Speaker 1: Credit Sweets. His calls early in the year were distinct
Speaker 1: and they were different. We get an update this morning,
Speaker 1: John Gallub, can you give me SMP five thousand this morning?
Speaker 1: I gotta make some news. I don't know if I
Speaker 1: can give SP five thousand. But the things that have
Speaker 1: made me optimistic about the more get are still in place,
Speaker 1: UM the and more than anything else, it's earnings. We're
Speaker 1: gonna start to hear UM. I think it's next Tuesday.
Speaker 1: From JP Morgan in the Big Banks, the consensus view
Speaker 1: is that we'll have sixty one upside and earnings versus
Speaker 1: a year ago. Our read is that that number is
Speaker 1: gonna be sev and if we're wrong, We're too long. Okay,
Speaker 1: so this is really important, folks. We're gonna stop the
Speaker 1: show right now because this is critical. We're gonna get
Speaker 1: to that earnings call. We all know consensus is different
Speaker 1: now that it's ever been. John gottub, can you make
Speaker 1: a shift to secular growth based off those earnings or
Speaker 1: you gotta hide in the hole because the world's gonna
Speaker 1: come to an end eighteen months later? No, I mean
Speaker 1: I I don't think that this story is has changed
Speaker 1: as much as the headlines are. I think there's two battles.
Speaker 1: The fundamentals are unbelievably strong. This is gonna be the
Speaker 1: strongest GDP corder we've seen. The economic data is generally
Speaker 1: very good and continues to improve. Value is cheaper than
Speaker 1: growth cyclical old economy. Boring companies are delivering stronger growth.
Speaker 1: These are companies like mining companies, things like that. Now,
Speaker 1: if you look at what happens, however, when interest rates fall,
Speaker 1: the market favors growth stocks in a falling interest rate environment,
Speaker 1: this is all of the market is great. The question is,
Speaker 1: just as you guys have mentioned, where's the leadership what
Speaker 1: wins within the market, Because the market still wants to
Speaker 1: go up into the right John, Why can't I just
Speaker 1: buy the market by the SMP. Why do I have
Speaker 1: to get into the detail. Why is it all about
Speaker 1: active management this year when quite clearly you're doing okay
Speaker 1: just holding the SMP five hundred, John, I don't think
Speaker 1: that that's a I don't think that's a terrible call.
Speaker 1: If if you are a hedge fund that's watching this show,
Speaker 1: you don't have that option. You have to you have
Speaker 1: to try to figure out how you're gonna outsmart the market.
Speaker 1: And for them, I think the story is between now
Speaker 1: and the end of the year, value wins, cyclicals win,
Speaker 1: and that there will be a time for growth. But
Speaker 1: it's not right now. If you're a long term investor,
Speaker 1: whether you buy the broad market or whether you buy
Speaker 1: these tech themes that that you see, you know that
Speaker 1: you that Romaine Highland we're selling off a long term
Speaker 1: it's a growth story. Um. So if you're an individual,
Speaker 1: you could ride the wave that way. If you're a
Speaker 1: hedge fund, you've gotta play this more tactively. Let's put
Speaker 1: a bell on it. Then let's make the big point.
Speaker 1: What's more important here the earnings, So where the tenure
Speaker 1: yield is because John, I've asked that question repeatedly in
Speaker 1: the last twenty four hours, and the latter not the former.
Speaker 1: I can sense that you think it's very much about
Speaker 1: the former. It's about where the earnings go. Listen, if
Speaker 1: you're if you're looking at the overall market, the whole
Speaker 1: thing is an earning story. It's a matter of fact
Speaker 1: for all those that are talking about how expensive the
Speaker 1: market is, because you know, because stock prices are up, um,
Speaker 1: there's been no increase in valuations and PETE multiples in
Speaker 1: a year. The stock market is moving only with the
Speaker 1: earning story. If you're looking at this in terms of
Speaker 1: within the market growth versus value, tech versus financials, then
Speaker 1: it's about interest rate, but the market it's an earning
Speaker 1: story full stop. But put into perspective here, Jonathan, how
Speaker 1: resilient the earnings picture has been. I mean, there's been
Speaker 1: obviously a lot of disruptions. There's been a lot of
Speaker 1: talk about supply chains, there's been a lot of talk
Speaker 1: about wage growth. H The idea here that all these
Speaker 1: sort of various factors would somehow up end the earnings
Speaker 1: picture for some of these companies and overall at least
Speaker 1: on an aggregate basis, it's held up pretty well. Yeah,
Speaker 1: you know, Roman, you make a good point here. First
Speaker 1: of all, Um, the smartest question I I recently got
Speaker 1: was not what is this year's earnings versus last year?
Speaker 1: Because we know last year was a beaten up number.
Speaker 1: What does it look like compared to two years ago?
Speaker 1: Are we are we above prior peaks? Um? The expectations
Speaker 1: consensus is that will be about nine above where we
Speaker 1: were two years ago. Our estimate is that will be
Speaker 1: nine percent above. But it's all the reports are in
Speaker 1: for this quarter, so um, that's really amazing. We still
Speaker 1: have all this disruption. We can't get the things that
Speaker 1: we want delivered at all. Um. The unemployment rate is high,
Speaker 1: and yet we're talking by the end of this quarter
Speaker 1: we'll probably have stronger earnings growth that we did before
Speaker 1: the pandemic started. I mean, Romaine Gollub talks about the
Speaker 1: smart question he got four years ago. There No, the
Speaker 1: best question Gollub got, Romaine was John Ferrell's question a
Speaker 1: moment ago, are we supposed to be worried about earnings
Speaker 1: or the ten year yield? That's the money question? Yeah,
Speaker 1: I mean, that is the money question. And look, I mean, obviously, Jonathan,
Speaker 1: you know, people are gonna obsess over this. They're gonna
Speaker 1: obsess over or whatever we are now. They're gonna obsess
Speaker 1: over whether we're headed towards one percent or whether we're
Speaker 1: headed back up towards two percent. Here, I mean, provide
Speaker 1: some sort of soothing advice here. What what do you
Speaker 1: tell people who are maybe staying up late at night
Speaker 1: staring at their screens away John and Tom do on
Speaker 1: this tenure deal. Yeah, well, you know, first of all,
Speaker 1: if you take a look, I made this comment, um,
Speaker 1: I guess probably about eight weeks ago when we were
Speaker 1: about one fifty, which means that we were an equal
Speaker 1: chance that we would get one on the tenure, equal
Speaker 1: chance we would get to one percent or two percent.
Speaker 1: And I was really vocal that if you end the
Speaker 1: year closer to one, the market is gonna be weaker
Speaker 1: than if you end the year closer to two. The
Speaker 1: market likes higher rates, and people just don't want to
Speaker 1: buy into that idea. Higher rates are an indication that
Speaker 1: demand for capital is rising. It's a sign that the
Speaker 1: economy is strong. The reason the market is selling off
Speaker 1: today is because people ask a question, what the heck
Speaker 1: is wrong that interest rates are falling when this economy
Speaker 1: is supposed to be so good, so you know we
Speaker 1: want higher interest rates. I would argue that if the
Speaker 1: interest rates to continue to move towards one, that my optimism, well,
Speaker 1: I still think the market will be higher. That I'll
Speaker 1: be proven to be too optimistic. If interest rates back
Speaker 1: up towards one and a half one seven five, the
Speaker 1: market is on fire to we get to move down
Speaker 1: to one, and that forty six hundred priced target of
Speaker 1: yours is in question. I think that the likelihood of
Speaker 1: me hitting that number is lower. And on the other hand,
Speaker 1: if we get towards one, seven five or two percent,
Speaker 1: I may be too light of my number. You're you
Speaker 1: are right. There's no question. The sentiment of the market
Speaker 1: right now is all tied to what's been going on
Speaker 1: with the with the tenure and if if last starting
Speaker 1: season is right, it's similar to this one. Um, the
Speaker 1: market is gonna care if infestrates continue to fall apart
Speaker 1: the market as there's a chance he just ignores the earnings.
Speaker 1: I don't think that would be the case, though, Jonathan
Speaker 1: Gollob credits Chief Ectuty strategist John did you give us
Speaker 1: a five thousand target. He didn't. He didn't. He said
Speaker 1: that if you to a higher he might re evaluate higher.
Speaker 1: He said, if he came lower, he might move. There
Speaker 1: is no chance of hitting that forty hundred. I think
Speaker 1: I think you're being a little bit kind Tom about
Speaker 1: whether there was a move that we're thrilled that robbed
Speaker 1: Cornell will join us this morning. John, with your expertise
Speaker 1: in the e c B, why don't you bring in
Speaker 1: Mr Cornel? Rob, Let's start with that. The price mandate
Speaker 1: over at the e CP. You know what it used
Speaker 1: to be still is, in fact it is below but
Speaker 1: close to two percent that's set to change the day
Speaker 1: reportedly to two percent with a tolerance for an overshoot.
Speaker 1: Does that change anything whatsoever for this central bank in Frankfurt, Rob,
Speaker 1: But what it does is get rid of something that
Speaker 1: I think most of us have hated for years. I mean,
Speaker 1: we never really knew what it meant below but close
Speaker 1: to was at one point nine, was at one point eight,
Speaker 1: was one point seven? Close enough? So for a start,
Speaker 1: as it gets rid of that horrible you know, lack
Speaker 1: of certainty over what the actual mandate was. But you
Speaker 1: replace something which was close to to below with effectively too,
Speaker 1: and you can perhaps go over for a bit. And
Speaker 1: really what we're doing is we're doing what the Bank
Speaker 1: of Japan did many years ago when it moved from
Speaker 1: one to two. You take a target, you shift it,
Speaker 1: you've got no more tools, you going to miss it
Speaker 1: by a bigger margin. So it's all about credibility. And
Speaker 1: I don't necessarily think this is going to change an
Speaker 1: awful lot. We'll rob. Their own forecast captured the credibility
Speaker 1: issue over the e CB on CPI one point nine
Speaker 1: for this year, one point five for next, one point
Speaker 1: four for the year after, even with any interpretation of
Speaker 1: their mandate, even with that, even if it adapts, even
Speaker 1: if it changes in twenty five minutes time, whatever it is, rob,
Speaker 1: they're still forecasting deceleration through CPI at to one point
Speaker 1: four and while below this target. So it's their policy
Speaker 1: starts wrong, or they just have zero credibility now to
Speaker 1: achieve it. Well, I think you have to wonder whether
Speaker 1: these these targets are actually sensible. Why too, why not
Speaker 1: one and a half? Why why have we chosen to
Speaker 1: We don't seem to be able to achieve it um
Speaker 1: this year? Of course, we have all the benefits of
Speaker 1: looking back at last year's terrible price level and a
Speaker 1: nice comparison. It just lifts everything. It makes it so
Speaker 1: much easier. But that won't last. We all know that
Speaker 1: we've got a little bit of help from supply bottlenecks
Speaker 1: that's pushing things along as well a little bit. And
Speaker 1: we've had up until now a little bit of a
Speaker 1: us coming from OPEC class at least giving us the
Speaker 1: sense that possibly they might do something with with supply.
Speaker 1: But that's that's clearly not going to happen anymore. So
Speaker 1: oil is probably headed back down again. Um yeah, I mean,
Speaker 1: credibility is a tough one. But you know why why
Speaker 1: your colors to a particular number, It doesn't make sense.
Speaker 1: Rob Cornel frame for us a German response to what
Speaker 1: we're going to hear from Madame le Guard today. The
Speaker 1: idea of moving from ArtMark is seeing to Axel Weber
Speaker 1: and and dividemin. Is this a different Germanic response or
Speaker 1: is it going to be the same old, same old.
Speaker 1: I think the German response has been mellowing over the years.
Speaker 1: I mean they've been the very very much been Bunder's
Speaker 1: bank over the years, which has been very anti a
Speaker 1: lot of the stuff that the E is doing from
Speaker 1: quantity of easy into you know, pretty much anything at
Speaker 1: the moment, But that that has changed in Videnmin seems
Speaker 1: to be mellowing as well a little bit. I mean,
Speaker 1: he'll he'll retain a sort of Germanic hawkishness with throughout
Speaker 1: all of this, but I think they can see that
Speaker 1: there's some merits to pragmatism within this give that that
Speaker 1: the previous policies just simply haven't worked. John Ferrell gives
Speaker 1: a set off into some Germanic carcassianess. We've noticed that
Speaker 1: is well, rab I'm going to steal from the good
Speaker 1: people over at rabble Bank this morning. They make fun
Speaker 1: of the acronyms. It's like the military rabble Bank on
Speaker 1: the E C B. Is it f I T? Is
Speaker 1: it f A T? Is it f l A T?
Speaker 1: Or is it f l O P? How big a
Speaker 1: flapper is this going to be? Old wise one? Well,
Speaker 1: what they can always do is this, they can wrap
Speaker 1: this up in all sorts of other things as well.
Speaker 1: There's plenty of other stuff as well as the target
Speaker 1: that they'll be talking about. They'll be talking about whether
Speaker 1: or not they can bring in sort of more environmental targets.
Speaker 1: They can even talk about whether they should be thinking
Speaker 1: about a different type of inflation measure, you know, perhaps
Speaker 1: bringing in house prices into this, which they haven't done
Speaker 1: particularly well. Um and talking about you know, do they
Speaker 1: need to think about headline rates as they've always done
Speaker 1: in the past. But we know that these are flipped
Speaker 1: around by all sorts of supply measures that they have
Speaker 1: absolutely no control over whatsoever. So you know, there are
Speaker 1: there are other things that they can do to try
Speaker 1: and minimize the focus on the fact that what doing
Speaker 1: is tinkering around the edges of something which is fairly marginal.
Speaker 1: Rob What about the other components of this review, the
Speaker 1: employment component as well as this focus on climate change.
Speaker 1: How does that fold in to the inflation outlook as well. Yeah,
Speaker 1: that's a very interesting question, this whole employment theme, because
Speaker 1: I think one of the things we noted pre pandemic
Speaker 1: was that there was next to no relationship between the
Speaker 1: unemployment rate and what was happening to wages growth. Now
Speaker 1: we are seeing something now, I mean, the US is
Speaker 1: giving us the rest of the world an interesting lesson
Speaker 1: in what's going on there that there can actually be
Speaker 1: a relationship again. But we still don't know whether this
Speaker 1: is you know, for keeps or whether this is simply
Speaker 1: a one off price level adjustment as we adjust to
Speaker 1: the new norms of a post pandemic world. So it's
Speaker 1: entirely possible that in two years time we still have
Speaker 1: a point where the economy is running okay, unemployment rates
Speaker 1: rock bottom, and you still have no wages growth. Then
Speaker 1: what do you do? So I think, you know, complete
Speaker 1: change of viewing unemployment as a particularly causal factor could
Speaker 1: be helpful, But then what do you replace it with?
Speaker 1: There doesn't seem to be anything else to to bring
Speaker 1: in to take its place. When you look at sort
Speaker 1: of the lessons that we can learn from the shift
Speaker 1: that Japan made, into a certain extent, the shift in
Speaker 1: tone that we saw out of the FED here, how
Speaker 1: does the EU, and more importantly, how does excuse me,
Speaker 1: that does the e c B And more importantly, how
Speaker 1: does this sort of collection of countries all that to
Speaker 1: a certain extent have different goals and to a certain
Speaker 1: extent different economies. How does the reaction, How does the
Speaker 1: outcome of this, if at all, end up different than
Speaker 1: what we're seeing in Japan? And the US. Um, well,
Speaker 1: it might not. I think the one thing that we're
Speaker 1: doing at the moment as we just all focus a
Speaker 1: bit more on fiscal policy. I think if you accept
Speaker 1: a lot of monetary policy around the world has run
Speaker 1: out of pet that it's you know, pushing on a string.
Speaker 1: It's been doing that for many years, then you have
Speaker 1: to look at something else, and fiscal policy it's the
Speaker 1: it's you know, it's the story we hear about from
Speaker 1: Washington in the US all the time. Um it's the
Speaker 1: story that we begun to hear about finally from from
Speaker 1: Europe as well. Japan's already run that race and sort
Speaker 1: of spend everything. Um So I think that's that's where
Speaker 1: we head back to. That's what can push things along.
Speaker 1: But the money has to be spent, Sen sence. We
Speaker 1: can't just print it and chuck it around in a
Speaker 1: sort of really newly fashion. It has to be put
Speaker 1: to useful, productive uses. Rob. It's been way too long.
Speaker 1: It's going to catch up, Rob car now that I
Speaker 1: MG a specific head of research in chief economists Katarina
Speaker 1: Simonettias with us in private that well, there we rarely
Speaker 1: talk to people in the trenches and we do so today.
Speaker 1: What's your biggest headache right now, Katerina, With people that
Speaker 1: say I need to make money like it's in the market,
Speaker 1: but I don't want to take risk, what do you
Speaker 1: tell them? Well, Tom, it's thank you for having me
Speaker 1: on the show. And uh, it is such a weird
Speaker 1: environment that we're in because on one side, our yomic
Speaker 1: forecast remains to be positive. On the other side, for
Speaker 1: a while now, we have been calling for a correction
Speaker 1: of pullback of some sort, you know, anywhere from potentially
Speaker 1: maybe tend to to twent uh and we are saying
Speaker 1: this in the context of the ball market, but we're
Speaker 1: preparing our clients for the fact that this economic cycle
Speaker 1: seems to be happening a little bit too quickly in
Speaker 1: some type of a pullback. Here it just seems natural
Speaker 1: and normal. And this is not the reason to exit
Speaker 1: the market, but certainly a good trigger to reposition the portfolios,
Speaker 1: to go to safety, to take some profits of the
Speaker 1: table cats in your colleagues, particularly the investment bank, the
Speaker 1: likes of Allen setting that, Chad and Ia, I'm thinking
Speaker 1: of Andrew Sheets as well. I'm thinking of Mike Wilson.
Speaker 1: They've been focused on this cycle as well, and where
Speaker 1: we are in this cycle, and a lot of people
Speaker 1: are struggling with that as a framework, because the team
Speaker 1: at Morgan Standing believe are already experiencing a mid to
Speaker 1: like cycle dynamic, a mid cycle dynamic particularly, really to
Speaker 1: explain that to our audience why we're already there so quickly. Well, generally,
Speaker 1: you know, these things stayed time and boommarkets last for
Speaker 1: a while. But because of so much stimulus and because
Speaker 1: of this whole you know, economic reopening that that we're
Speaker 1: going through, everything is happening quickly, and we seem to
Speaker 1: be going into this mid cycle area of the market
Speaker 1: owned four volatility, which is known for corrections and fee bags.
Speaker 1: So because everything is happening quickly and economy is so stimulated,
Speaker 1: and there's some developments and concerns that we're having right
Speaker 1: now dealing with inflation, with labor shortages, with higher cost
Speaker 1: of materials. You on one side, we have this growth
Speaker 1: of recovery. On the other side, we have the volatility.
Speaker 1: So we think that the pullback and the correction at
Speaker 1: this stage in the recovery, in this mid cycle transition
Speaker 1: that we believe that we find ourselves in it's only
Speaker 1: natural here, only natural, And this is a pretty broad
Speaker 1: based pullback, at least for today, I mean pretty much
Speaker 1: thing of significance higher here, at least in the pre
Speaker 1: market Kindarry, Now, I want to go back to, uh,
Speaker 1: the economic data that we've been getting, which has been mixed,
Speaker 1: and it's been mixed pretty much for the whole year,
Speaker 1: despite the fact that most people have taken much more
Speaker 1: of a glass half full approach to it. There are
Speaker 1: a lot of surprises out of that data, a lot
Speaker 1: of upside surprises, and that seemed to fuel a big
Speaker 1: part of this bull run that we had over the
Speaker 1: first few months of the year. Those surprises have sort
Speaker 1: of flattened out, and I'm wondering if you read into
Speaker 1: that any sense here that even if the economy continues
Speaker 1: to chug along and chug along higher, the idea here
Speaker 1: that will be pleasantly surprised in any meaningful way is
Speaker 1: past us remain I think that one of the key
Speaker 1: factors here is that there seems to be a bit
Speaker 1: of a disconect with the way Federal Reserve sees the
Speaker 1: inflation in the way that that investors and consumers see
Speaker 1: the inflation in every single day of their life and
Speaker 1: naturally their concerns. And so what we tell investors to
Speaker 1: do is to focus on earnings, to focus on quality,
Speaker 1: to focus on fundamentals, because I do believe that we
Speaker 1: are going to speed the positive surprises, but we have
Speaker 1: to be very careful with our portfolio selection. We have
Speaker 1: to be very careful with our security selection. When we
Speaker 1: look at quality, we look at earnings, We'll look at
Speaker 1: the long term opportunity, you know, for the stocks to
Speaker 1: make sure that the valuations that we're seeing are actually
Speaker 1: supported by earnings. Because we sow so much run up
Speaker 1: in some of the sectors of this economy, in some
Speaker 1: of the individual equity, that the question is is this sustainable?
Speaker 1: So if there is ever a time to go to
Speaker 1: quality to increase the overall quality of investment portfolios, this
Speaker 1: is the time, Catarina, We've gotta leave it there. It's
Speaker 1: always got to catch up. Thanks for you, and it's
Speaker 1: kind of ready. Siminarity, the Morgan Stanley Private Wealth Management
Speaker 1: Sania Vice President. This is the Bloomberg Surveillance Podcast. Thanks
Speaker 1: for listening. Join us live weekdays from seven to ten
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Speaker 1: and of course, on the terminal. I'm Tom Keene, and
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