Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanibek. We're here every day bringing
Speaker 1: you the latest news from the world of business and finance,
Speaker 1: plus technology, politics, economics, all furnising the power of Business
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Speaker 1: You can also listen to our radio show at two
Speaker 1: pm Eastern Time on Bloomberg Radio, or watch us on
Speaker 1: YouTube search Bloomberg Global News. Well, Anthony Faucci, President Biden's
Speaker 1: chief medical advisers suggesting that the U S may soon
Speaker 1: as you guidance, easing public health protocols where people are
Speaker 1: fully vaccinated. US definitely stepping up at S effort to
Speaker 1: track virus variants with genetic sequencing. Tim There is so
Speaker 1: much going on right now. Yeah, we're watching this play
Speaker 1: out in real time right now, and we have Robert Thompson,
Speaker 1: chief executive Officer of Clinical Reference Laboratory, joining us on
Speaker 1: the phone from Lennox to Kansas. UM, thanks so much
Speaker 1: for joining us. On this Bob, how you do and
Speaker 1: very well, thanks for having me. Good Um, what do
Speaker 1: you make of where we are right now when it
Speaker 1: comes to COVID, Because we've gotten some really good news
Speaker 1: in recent days, as we've seen number of new cases
Speaker 1: and hospitalizations down. But at the same time, when we
Speaker 1: think about this in the context of where we were
Speaker 1: a few months ago. You know, where we are now
Speaker 1: is where we were in October and November and things
Speaker 1: weren't so great then. So our cases the nationwide have
Speaker 1: dropped from the peak, which was only seven weeks ago. UM,
Speaker 1: and the positive rate has dropped from to last week.
Speaker 1: I think we were at four point eight percent, So indeed,
Speaker 1: that is really good news. UM. I think everyone's watching
Speaker 1: to see if the variance, particularly the UK variant, is
Speaker 1: going to have an impact on the numbers. It's not
Speaker 1: visible yet. I mean, even if you look at Florida
Speaker 1: in isolation, which has the greatest number of the UK
Speaker 1: variant cases, they're still dropping pretty fast. So UM, I
Speaker 1: really feel like, you know, we are an inflection point, UM,
Speaker 1: and I think we're going to continue to see cases
Speaker 1: decline in the positive rates decline, largely as a result
Speaker 1: of the natural immunity and that we've built up over time.
Speaker 1: I mean, there's twenty seven million diagnosed positive cases. Most
Speaker 1: of the estimates say that it's really three times that
Speaker 1: many that have actually been exposed. So that gets you to,
Speaker 1: you know, somewhere around eighty million people that have been
Speaker 1: exposed and have natural immunity, and you throw in forty
Speaker 1: million that have had the vaccine, then you get to
Speaker 1: a third of the US population. And I think that's
Speaker 1: really what we're seeing here in these numbers declining this quickly.
Speaker 1: So we've you know, obviously this has been kind of
Speaker 1: a path that we've all been on, dealing with the virus,
Speaker 1: understanding the virus, getting a vaccine, getting a vaccine out,
Speaker 1: a lot of testing along the way. Um, that's what
Speaker 1: you guys are right, you're involved in testing, and you've
Speaker 1: got a new saliva test out of COVID nineteen saliva test,
Speaker 1: rapid response test. Tell us about that and um, how
Speaker 1: it works, what it costs, and what you think this
Speaker 1: role or these kinds of tests will have the role
Speaker 1: in terms of us getting COVID under control. So our
Speaker 1: our test is the saliva based test, which is much
Speaker 1: easier to collect and more accurate than other at home
Speaker 1: nasal swap tests. UM. It's not technique depend on anybody
Speaker 1: can spit in a tube. So UM, I've done it,
Speaker 1: done it well. So you know, we're really uh trying
Speaker 1: to take that test and expand access to it. So
Speaker 1: we've been dealing with universities and employers UM and today
Speaker 1: we launched a program with Walgreens where if you go
Speaker 1: to the Walgreens Finecare app, where one of the options
Speaker 1: for COVID based testing UM and it's a hundred nineteen dollars.
Speaker 1: It's the gold standard testing methodology, the rt PCR tests
Speaker 1: UM and you know, we're really excited about it. I
Speaker 1: think in this next phase of of the testing market
Speaker 1: is going to be less of these mass you know,
Speaker 1: five people drive through sites and I think much more
Speaker 1: of sort of near patient physician office or at home
Speaker 1: testing as we migrate to the next phase of managing
Speaker 1: this pandemic. What's the cost of it? So do you
Speaker 1: see this as in terms of the reopening here, Let's
Speaker 1: say we do get the majority of people vaccinated here
Speaker 1: in the United States this summer, do you still see
Speaker 1: a need for a testing product such as this? If
Speaker 1: why if people are vaccinated on a widespread basis. Yes,
Speaker 1: and let me explain why. So to begin with, we're
Speaker 1: already seeing test drop. We're we're down in this country
Speaker 1: from the peak, and that's just less symptomatic people showing
Speaker 1: up for testing. I believe that trend is going to continue,
Speaker 1: so we're gonna see less and less of sort of
Speaker 1: mass screening, but we're still going to have that thirty
Speaker 1: whatever the current estimates are about of the population that
Speaker 1: is not a muni that is declined to take the
Speaker 1: vaccine vaccine, and you're going to have all the under
Speaker 1: eighteen year olds who right now are not authorized to
Speaker 1: take the vaccine. So we're still going to have a
Speaker 1: pretty big chunk of the population that does not have immunity.
Speaker 1: And as a result of that, I think we're going
Speaker 1: to on a much smaller scale, have to continue to
Speaker 1: test again near patient testing. Um, you know, well into
Speaker 1: into next year. Hey, Robert, I am curious the variants
Speaker 1: will be able to pick up variants. So our test
Speaker 1: targets a piece of the of the viral RNA that's
Speaker 1: very stable. So every week we look at the new
Speaker 1: variants and we see where the mutations have occurred. None
Speaker 1: of them have occurred at our target piece of the RNA,
Speaker 1: so we pick up all of the variants to South African,
Speaker 1: the Brazilian, and the UK variants. Very briefly, how long
Speaker 1: do you envision COVID stays with us? I mean from
Speaker 1: a business perspective, how long are you planning on this
Speaker 1: test being a product? Um? I think we're gonna see,
Speaker 1: you know, it'll continue into next year, but just on
Speaker 1: a smaller scale. So we've we've done an enormous number
Speaker 1: of tests, five thousand plus so far, and you know,
Speaker 1: a lot of those were for universities, a lot of
Speaker 1: those were for state and local health departments. I think
Speaker 1: that piece of the business is going to gradually UM
Speaker 1: fade or maybe not so gradually fade UM. And what
Speaker 1: will happen is place is is this kind of testing
Speaker 1: Walgreen's CVS that sort of thing. Hey, gonna re leave
Speaker 1: it there, Hey, Bob, thank you so much. Bob Thompson,
Speaker 1: he's chief executive officer at Clinical Reference Laboratory. On the
Speaker 1: phone from Lenexa, Kansas. This is Bloomberg Business Week with
Speaker 1: Carol Masser and Bloomberg Quick Eggs. Tim Stinovich from Bloomberg
Speaker 1: Radio but Tessa down more than since the January high
Speaker 1: after a seven four year percent gain back in We know, tim,
Speaker 1: it was one of the high flyers last year and
Speaker 1: it was doing really well and then we've seen it
Speaker 1: pulled back this year. Yeah, it's been doing really well.
Speaker 1: As a Day is equity markets reporter at Bloomberg News,
Speaker 1: and she joins us on the phone from New York City.
Speaker 1: The big question is why has it been doing so
Speaker 1: well over the last couple of weeks, um, why why
Speaker 1: are we seeing this pullback in Tesla? And I should
Speaker 1: say it's now down only about four percent, so really
Speaker 1: off those loads from earlier today, Hi, and thanks for
Speaker 1: having me so yes, that's a great question. And flashes
Speaker 1: have you know, recovered somewhat since all year today, But
Speaker 1: they did dive pretty sharply today, extending their losses from yesterday.
Speaker 1: And that was mainly triggered by a tweet from Elon
Speaker 1: Musk over the weekend saying the price of cryptocurrencies bitcoin
Speaker 1: anitarium seemed to be high. So given Tesla itself announced
Speaker 1: a one point five billion dollar investment in which coin
Speaker 1: earlier this month, Masks comments may have heard Tesla's own
Speaker 1: investment all right, So it's a word part but but
Speaker 1: and that you know, it's interesting it's a one and
Speaker 1: a half billion dollar investment in bitcoin, but I mean
Speaker 1: this is a massive company, a six hundred fifty seven
Speaker 1: and six hundred fifty eight billion dollar market cap. So
Speaker 1: put in perspective the bitcoin exposure versus the Tesla business,
Speaker 1: that's a great question. Um. You know, as you said,
Speaker 1: it's a you know, one point five billion dollars sounds
Speaker 1: like a significant amount of money, but in the grand
Speaker 1: scheme of things, especially when it's Tesla, it's really small
Speaker 1: change for the company. I mean, this is a company
Speaker 1: that ended twenty twenty with almost nineteen billion dollars in cash,
Speaker 1: had an annual adjust and I didn't come off around
Speaker 1: two and a half billion dollars. So when I speak
Speaker 1: to Bord Street analysts, they say that, you know, rather
Speaker 1: than seeing it as an investment, we should rather see
Speaker 1: this as a signal from Tesla that it is willing
Speaker 1: to push new boundaries and you know, try out you
Speaker 1: and brave things as it tries to transform the vey
Speaker 1: cars are bottom so and given that exposure is so
Speaker 1: small relative to the company's side, they are not really
Speaker 1: worried about the short term Volati literates. But that said, uh,
Speaker 1: you know, it still has that investor sentiment attached to
Speaker 1: it and kind of given muskets. Uh, you know, has
Speaker 1: its really big cult following that is definitely playing into
Speaker 1: the weakness today. Our analysts on Wall Street thinking about
Speaker 1: Tesla right now, are they still saying that in general,
Speaker 1: that it's a by or are they saying, hey, wait
Speaker 1: a second, this thing went really high, really quickly. We're
Speaker 1: taking a step back here. Well, Um, Testa is an
Speaker 1: unusual company, and that I think it's reflected in the
Speaker 1: fact that Walsted and this just cannot seem to agree on,
Speaker 1: you know, whether this company is majorly overvalued or still
Speaker 1: significantly undervalued whilst it is and at this point pretty
Speaker 1: much split on whether it's a buy or a cell.
Speaker 1: Some say, you know, it's a cell. It's they overvalued.
Speaker 1: The stock has run up too soon, too fast. Um,
Speaker 1: And you know at this point there are better opportunities
Speaker 1: elsewhere in the eavy slate. Um. But that said, there
Speaker 1: are some who also say that Tesla has only has
Speaker 1: gotten started the ev transformation that we think will take
Speaker 1: hold of the auto industry over the next decade or
Speaker 1: so has only gotten started, and the stock has very
Speaker 1: hired to go well. And that's what I wanted to
Speaker 1: ask you, Esha, because if I look, if I got
Speaker 1: pull up the f A function on Tesla on the
Speaker 1: Bloomberg and take a look. I mean, as I mentioned,
Speaker 1: it's a six hundred almost six hundred fifty eight billion
Speaker 1: dollar market cap company. Revenues are expected to be in
Speaker 1: this one year about forty eight billion, and that's up
Speaker 1: fifty four percent year over year. I mean, earnings growth
Speaker 1: is expected to be up fourty four percent. It's still
Speaker 1: this massive growth story growth company. Are these expectations realistic
Speaker 1: for this company? UM? I would say that the overall
Speaker 1: walls it consensus expectations UM do not seem out of
Speaker 1: the place at this point. Yes, you know, no, it's possible.
Speaker 1: I know other auto company has done something like this before,
Speaker 1: but but Tesla is a very different kind of auto company.
Speaker 1: That's its main play of you know, you know on
Speaker 1: Mascas also said that, you know, even if the growth
Speaker 1: comes a little slow, when it really takes off, it's
Speaker 1: expected to write in an in an exponential fashion. UM.
Speaker 1: Tesla is expanding in different geographies China, as we know,
Speaker 1: is a huge market. No one has had expected the
Speaker 1: easy space to explode the way it has exploded over
Speaker 1: the past couple of years. So um, from from what
Speaker 1: we understand, you know, these are unusual numbers, but Tesla
Speaker 1: has delivered orles whatever promised so far. Right, Yeah, it
Speaker 1: comes down to those fundamentals. Esha, thank you so much.
Speaker 1: Day Equity Markets reporter at Bloomberg News. Tesla shares they
Speaker 1: have erased their game for the year, though as a
Speaker 1: result of some of the pullback, it's now down three
Speaker 1: percent year to date. This is Bloomberg Business Week with
Speaker 1: Carol Messer and Bloomberg Quick Takes. Tim Stinovich from Bloomberg Radio.
Speaker 1: Well in the magazine this week and excerpt from a
Speaker 1: new book out on the secretive world of commodity traders
Speaker 1: and how they link consumers and investors to global hotspots.
Speaker 1: And maybe it's a bit of a surprise to those
Speaker 1: investors to say the least, Tim, Yeah, to say the least,
Speaker 1: especially for a group of teachers in Pennsylvania exactly. This
Speaker 1: is the subject of a new book. It's called The
Speaker 1: World for Sale, Money, Power and the traders who barter
Speaker 1: the Earth's resources. It's written by Javier Blass and Jack Farchie.
Speaker 1: It's out in the UK, now out in the US
Speaker 1: come March. Javier is Bloomberg News Chief Energy correspondent, joining
Speaker 1: us on the phone from London, along with Bloomberg Business
Speaker 1: Week editor Joe Weber on the access line in brook Again,
Speaker 1: this is going straight to Netflix. I'm just saying, Joel, Yeah, well,
Speaker 1: we we try, and I'm sure Javier would be very
Speaker 1: pleased with that outcome, as as our colleague Will Kennedy
Speaker 1: said yesterday to me, he said, just in case you
Speaker 1: didn't know um and don't follow Javier on on Twitter,
Speaker 1: he's a book for sale and it's literally called for sale,
Speaker 1: and so we were we were really pleased that we
Speaker 1: got to excerpt it. And it is sort of an
Speaker 1: example of of, you know, like I think with the
Speaker 1: book will accomplish is we pull back the curtain in
Speaker 1: many ways on on many markets that you just don't
Speaker 1: don't even know about. And Javier tell us more about
Speaker 1: um UM pensioners who found that they had a little
Speaker 1: something something in their portfolios that they may not have expected. Well,
Speaker 1: you know that pension funds are very, very conservative. They
Speaker 1: usually buy the kind of US speciery that are not
Speaker 1: yielding a lot, but you know that you you will
Speaker 1: never lose money. You do not expect to see US
Speaker 1: pension funds like teachers in Pennsylvania, or police offices in
Speaker 1: South Carolina, or firefighters in West Virginia investing in something
Speaker 1: that will go via the Kaiman Island into doubling the
Speaker 1: capital of Ireland, into a community trader in Switzerland, and
Speaker 1: from there into northern Iraq. And that's exactly what they
Speaker 1: were putting their money, because they were financing glenn or
Speaker 1: the world's largest commodity trader, and what they were financing
Speaker 1: in particular was a deal to buy oil in Kurdistan
Speaker 1: in northern Iraq and to ship that crew into the
Speaker 1: global market. When I was reading this, however, I kept
Speaker 1: thinking to myself over and over again, E. S G.
Speaker 1: S G. S G, Like, what about all these pension
Speaker 1: funds who are saying, we're not making investments that that
Speaker 1: violate you know, the terms of how we're thinking about E.
Speaker 1: S G. So, So how do his investments get made
Speaker 1: in these large pensions. Well, usually they get hold it
Speaker 1: into an outside manager in this case was frankin Talventone,
Speaker 1: and they usually get folded into emerging market debt. I
Speaker 1: mean in many of the prospectuses of of UM de
Speaker 1: pensions fans that will review, this was disclosed as an
Speaker 1: oil note linked to Iraq. It didn't even say that
Speaker 1: it was not actually the government, the central government in
Speaker 1: Iraqi in back back, but just an autonomous province in
Speaker 1: the north of the country. UM. I just simply think
Speaker 1: that sometimes there are a small investment. This was only
Speaker 1: a five or only quote unquote only five hundred million dollars,
Speaker 1: and I think that sometimes they just flow under the
Speaker 1: rather just bundle into American market debt. So have your
Speaker 1: Glencore obviously plays an important role in here and and
Speaker 1: also elsewhere in the book. What did you learn about
Speaker 1: Glencore in reporting this that you didn't already know? Well,
Speaker 1: I mean, it's interesting because we need these Commority traders
Speaker 1: everything that we buy coins from natural resources, and you
Speaker 1: need the commoity traders to buy and and and tell
Speaker 1: to you. What you learn when you get very close
Speaker 1: to these companies is that it's a very strange combination
Speaker 1: that they are incredibly hard working and willing to go
Speaker 1: to no one else goes um and at the same
Speaker 1: time they have that kind of profit minded only mixed
Speaker 1: with a bit of all old fashioned commercial banking, probably
Speaker 1: a hundred years ago of of my worries, my bone
Speaker 1: and handshakes. And I'm personal personally busy in every client
Speaker 1: every year and be on the road or on the
Speaker 1: air for two hundred and fifty or three hundred days
Speaker 1: a year. But what it's more amazing is that they
Speaker 1: are willing to go literally everywhere. I mean, you look
Speaker 1: at the list of countries that the State Department will
Speaker 1: tell everyone, do not go there. The commoity traders go there.
Speaker 1: And and they also play big roles in politics that
Speaker 1: sometimes we do not realize because for many of these countries,
Speaker 1: think about the Middle East or some countries in Africa,
Speaker 1: well that word resources, morning and power go together. How
Speaker 1: do you what do you think is that the most
Speaker 1: striking this whole idea that commodity traders can influence history
Speaker 1: or and or I guess I should say that you've
Speaker 1: got these what are thought to be pretty safe investors
Speaker 1: are hoping that they're safe investors, and conservative investors pension
Speaker 1: investors that they don't exactly understand maybe what they're investing in.
Speaker 1: I think that both are very important. I mean, one
Speaker 1: thing that Jack and I were writing the book we
Speaker 1: were goying to achieve. We think that the commoity traders
Speaker 1: played a big role in the global economy. They play
Speaker 1: a big role in politics, and because on institutional investors
Speaker 1: be pension funds or other kinds of institutional investors are
Speaker 1: investing than providing funds with them. They are also very
Speaker 1: important to all of us. But prices Jack and me
Speaker 1: writing this and researching it is that very few people
Speaker 1: know anything about the commodity traders. There are hardly any
Speaker 1: books about them. Their accounts on most cases are secret
Speaker 1: because they have probably owned companies. And also they are
Speaker 1: controlled by a very few people. I mean most promotive
Speaker 1: traders are controlled by the staff or or a family
Speaker 1: that owns them. So any money that they make, any
Speaker 1: profit that they may go in the pockets of a
Speaker 1: few selected the individuals. Like I said, I think it
Speaker 1: has good to a Netflix so or something, because it's
Speaker 1: just really explaining how these markets work and peeling back
Speaker 1: some of the layers. Um great stuff. Thank you so much.
Speaker 1: Have your blast. Chief Energy correspondent Bloomberg News from London.
Speaker 1: Check out his new book The World for Sale. Money
Speaker 1: power and the traders who barter the Earth's resources in
Speaker 1: the UK and coming to us in March. And of
Speaker 1: course our thanks to the editor Bloomberg Business Week, Joel Webber.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. The economy is
Speaker 1: a long way from our employment and inflation goals, and
Speaker 1: it is likely to take some time for substantial further
Speaker 1: progress to be achieved. We will continue to clearly communicate
Speaker 1: our assessment of progress toward our goals well in advance
Speaker 1: of any change in the case of purchases. A nice
Speaker 1: double dose Federal Reserve Chairman J Powell Charlie Pellet, of course,
Speaker 1: some highlights from his testimony earlier today. J Powell's testimony
Speaker 1: of course, in that semi annual testimony that he does
Speaker 1: before Congress on the state of the US economy, and
Speaker 1: Tim really giving some you know, reminder that he thinks
Speaker 1: there's progress being made, but we still have a long
Speaker 1: way to go until we get to kind of a
Speaker 1: pre pandemic economy. Akka, we're not raising rates anytime. Be patient, everyone, relax, relax.
Speaker 1: Joining us with more on J. Powell and FED policy
Speaker 1: really the overall US economy. Danny blanche Flower, professor of
Speaker 1: economics at Dartmouth College, former Bank of England Monetary Policy
Speaker 1: Committee member. He joins us on the phone from Florida. Danny,
Speaker 1: how are you. I'm great, Always good to talk to
Speaker 1: you guys on a very interesting day. Well interesting, how
Speaker 1: was saying very sensible things? I mean, this is the
Speaker 1: reality that we're in. It's the right thing to do.
Speaker 1: We'll talk to us about that. Tell us what was
Speaker 1: what struck you as being very very sensible from J. Powell? Well,
Speaker 1: I think I think the uncertainty is is very high here. Um,
Speaker 1: we're seeing the economy recover, but there's clearly, clearly the
Speaker 1: number of people that are claiming benefits remembers slack in
Speaker 1: the economy, and of course the uncertainty going forward about
Speaker 1: how quickly the vaccinations are going to go, how effective
Speaker 1: they're going to be, how how firms bounds back. And
Speaker 1: I think the other one is what kind of long
Speaker 1: run changes in behavior are they going to beat? Are
Speaker 1: people going to commute the same as they did, are
Speaker 1: they going to go back to cruise ship? All of that,
Speaker 1: but particularly are they going to save more. And I
Speaker 1: thought what was interesting because you have a sort of
Speaker 1: conservative message which has often not happened between the Central
Speaker 1: Bank and the Treasury, which perhaps not a surprise, and
Speaker 1: also from the thing from the Council of Economic Advice
Speaker 1: from cc ROUS. So you're having a thirsted views and
Speaker 1: a consistent view across all the parts and so often
Speaker 1: in the past we've seen working against each other. So
Speaker 1: now what we're seeing are the two branches, if you like,
Speaker 1: a monetary and fiscal policy essentially saying the same thing,
Speaker 1: a bit different than in the UK, where we're actually
Speaker 1: on the NPC members are actually disagreeing with each other
Speaker 1: about whether they should go to negative breaks and we
Speaker 1: haven't really heard that in the US, but that's a
Speaker 1: clear thing that's going on in Britain. How do you
Speaker 1: think that the FED and particularly FED share Powell is
Speaker 1: or should be paying attention to the sharp increase in
Speaker 1: bond yields that we've seen in recent weeks. Well, I mean,
Speaker 1: obviously that's that relevant and to think about it, but
Speaker 1: the scale of that rise, I don't think it's that significant.
Speaker 1: But what else should they do? What other alternatives do
Speaker 1: they have other than trying to get America back to
Speaker 1: work and try to kind of overcome the difficulties that
Speaker 1: have been caused by this this this terrible pandemic. So
Speaker 1: I think the answer is, you know, you can't do everything,
Speaker 1: you do what you can do. I mean, think about
Speaker 1: the story of Easy If we could talk about what's
Speaker 1: the impact of what the FED has done to inequality?
Speaker 1: And Janet Yellen talked about that much he was the chair.
Speaker 1: But their answer was, you can't do much about it.
Speaker 1: You've probably got to go ahead with this worry about
Speaker 1: what's going ahead in the future. If you have to
Speaker 1: do something, then you change and you adapt. The same
Speaker 1: thing with inflation. If you see inflation starting to in
Speaker 1: deal with it when you get there. But at the moment,
Speaker 1: you keep doing what they're saying. And I think that's right.
Speaker 1: And we've learned from the past. We learned from the
Speaker 1: past that actually everybody was too are too optimistic about
Speaker 1: what was coming, too worried about inflation, too optimistic about
Speaker 1: the growth parts of the economy, And they don't want
Speaker 1: to make that error again. Danny, does it feel like
Speaker 1: the bond market is playing a little bit of catch
Speaker 1: up from what the equity markets were seeing a few
Speaker 1: months ago when we bounce back, you know, from our
Speaker 1: lows because of the health crisis. Well, well maybe, I
Speaker 1: mean I'm a I'm a believer. That's basically what we're
Speaker 1: seeing in these markets is just um being everything being
Speaker 1: pushed by what the central banks are doing. When I
Speaker 1: voted from hundreds of billions of dollars of quantity bay
Speaker 1: and in my head, I have I have sentially thoughts
Speaker 1: to myself, I'm doing this to raise assets, right, So
Speaker 1: what we have a market following what the Fed is doing.
Speaker 1: They obviously listen carefully to Powel's you about you know,
Speaker 1: our rate is going to go to negative, but really,
Speaker 1: are we going to do more? QUEI are we going
Speaker 1: to push those markets up? And I think the answer
Speaker 1: is for now that the story is keep on keeping on.
Speaker 1: But we just don't really know. I mean, the best
Speaker 1: answer to what coming is it depends, right, So maybe
Speaker 1: maybe the bond markets are are getting bit a bit nervous,
Speaker 1: But you know, I think the course is said, I mean,
Speaker 1: the course is absolutely the course he's gonna follow. Well,
Speaker 1: you know, it's going to have to understand that there's
Speaker 1: a headline that just crossed the Bloomberg, the SMPI of racing.
Speaker 1: It's one drop to trade, little change. I mean, we're
Speaker 1: now at our highs of the day, and I feel
Speaker 1: like Danny, we have seen this trade over and over
Speaker 1: and over again the last decade, where we get a
Speaker 1: bit of a pullback sytimes, we get an official close
Speaker 1: to tempers and correction or an official tempers and correction,
Speaker 1: and then everybody comes back in. Um, who's right though
Speaker 1: in terms of our market players. Are equity investors right
Speaker 1: to continue to purse this market higher? Well? I think, well,
Speaker 1: I think consist of what I've just said. I think
Speaker 1: equity markets are right in the sense that the sn't
Speaker 1: think if I'm right, which I think I am, the
Speaker 1: central banking is queuing is what's driving the equity market.
Speaker 1: Then you say, well, how good is the economy? How
Speaker 1: much time is there going to be a risphistical package
Speaker 1: it will take time to come in? Is the FED
Speaker 1: going to go negative? Probably not? Well what else can
Speaker 1: you do? The only thing you can do is start
Speaker 1: is back to queueing again, and then they're not going
Speaker 1: to take But they're not gonna They're not going to
Speaker 1: start pulling out monkeyst in with this. So every time
Speaker 1: that story comes, the equity markets say okay, I'm with that,
Speaker 1: and that's when you see the surge again. So I
Speaker 1: think for now the story continues, and you know it's
Speaker 1: good to be bullish on equalities for the reason we've
Speaker 1: just said for how long though? That's the question? Yeah,
Speaker 1: of course. I mean I don't know the answer to that,
Speaker 1: so I don't think anybody else does. But you know,
Speaker 1: to this point, we're now you know, we're not We're
Speaker 1: a long way in and I think, but I don't
Speaker 1: see anything in the in the short medium term that's
Speaker 1: going to be persuade us from that message, because we
Speaker 1: have so many people out there who are claiming benefits
Speaker 1: and are on short time work. And you know that
Speaker 1: that the the economy move needs to move to small
Speaker 1: input And I've argued for a very long time, but
Speaker 1: we were nowhere near full employments in two thousand fifteen
Speaker 1: to two thousand and eighteens at the room to maneuvers hard.
Speaker 1: So I just want to ask you again, sing, you're
Speaker 1: not worried at all about inflation? No, I not, not
Speaker 1: one bit. I mean I think I was while we
Speaker 1: were while we were on break, I actually went and
Speaker 1: looked at a number that I liked, which is the
Speaker 1: employment rate, which today is now back to the level
Speaker 1: that it was in the first quarter century since the
Speaker 1: Second World War. We're at fifty seven. We were at
Speaker 1: sixty four point seven and two thousand and the US
Speaker 1: had the worst, the only advanced countries between two thousand
Speaker 1: and two thousand twenty, but the only country that had
Speaker 1: a declining employment rate. So we're so far essentially, we're
Speaker 1: so start and full employment forget, and I'm plowing its
Speaker 1: focused on this. So the potential slack in the economy
Speaker 1: is in men so inflation arises when when there's when
Speaker 1: the economy is tight, there's no sign of that. Obviously,
Speaker 1: people might say that this is about what's coming, is
Speaker 1: about structural things, but all the other of economies in
Speaker 1: the world have been faced by the same structural things
Speaker 1: that technology and globalization and so on, so they've all
Speaker 1: done much better. So I think the potential for the
Speaker 1: UK at US to grow in a non inflationary environment
Speaker 1: is is strong, and in many senses that's what power
Speaker 1: has been reflecting. And he reflected back to two thousand,
Speaker 1: fifteen to eighteen, when the FED had a wrong view
Speaker 1: of the economy saying that capacity was less than that
Speaker 1: and raised rates and shouldn't have done and killed growth
Speaker 1: off that they've now it says, come to the position
Speaker 1: that I've that I've put forward. The unemployment rate doesn't
Speaker 1: tell us much of what's going on. The employment rate
Speaker 1: looks terrible fifty five, fifty four and fifty seven point
Speaker 1: five and overestimated because all these weirdnesses in the labor
Speaker 1: market about people wrongly being classified. But that's a disastrous numbers.
Speaker 1: There's huge amounts of black Inflation doesn't rise. And I've
Speaker 1: probably been on Blumber fifty times over the last decade
Speaker 1: when people say to me inflation is coming, isn't it?
Speaker 1: And I've always said, no, it isn't, and it's you're
Speaker 1: not coming from wage inflation. But even though the weirdness
Speaker 1: is in the data, does it does it come from
Speaker 1: a one point nine trillion dollar spending package that could
Speaker 1: could be deployed very soon. Well, the answer to the
Speaker 1: answer is that we clearly all the stimulus that we
Speaker 1: thought and the and the cutting in rates and the
Speaker 1: doing of the quee was meant to create inflation. But
Speaker 1: it was meant to create inflation against the deflationary shock.
Speaker 1: So if you end up yes, the answer is that
Speaker 1: the potential deflationary shock that we're seeing pulls prices into
Speaker 1: negative territories, so this simply restores it. Of course, there's
Speaker 1: a point that's the point of the stimulus. But the
Speaker 1: issue is two percent teams a goal that's very much
Speaker 1: way off. And the story actually is we know very
Speaker 1: well what to do if inflation rises in a significant way,
Speaker 1: but it hasn't. But the point of is to create inflation.
Speaker 1: But the question is to what extent do we have
Speaker 1: a major deflation shot going on in the answer is
Speaker 1: we do. Hey, Danny, let me just go back to
Speaker 1: what you talked about the labor market. You talked about
Speaker 1: all the slack in the labor market, right, and I
Speaker 1: think they've fed and certainly j Pal has been very
Speaker 1: clear about you know, we've got to improve those numbers,
Speaker 1: get people back to work. Will we need all of
Speaker 1: those workers? And I just think about the increased and
Speaker 1: ramped up digitization of our society, and I just wonder
Speaker 1: will all of those workers ultimately be needed in our
Speaker 1: post pandemic economy. Well, a couple of things. The first
Speaker 1: thing is both joanet. Helen and Ross talked about the
Speaker 1: imports of jobs, and we know that capital, We know
Speaker 1: that capital intensive industries and technological change can actually be
Speaker 1: labor enhancing. Think of all the the people who now
Speaker 1: sell iPhones and laptops and involved in that kind of technology.
Speaker 1: So that's the first thing. The second thing is that
Speaker 1: we can actually and Janet's maybe clere that she's interested
Speaker 1: in that, you can actually think of femilists where you
Speaker 1: try and encourage jobs. And so the issue is what's
Speaker 1: the I mean for people in Plumberg to think about.
Speaker 1: What you basically are going to always think about is
Speaker 1: what's the relative price of labor compared to the relative
Speaker 1: price of capital? And if in a Biden administration, and
Speaker 1: Janet's made it clear they're interested in giving a subsidy
Speaker 1: to encourage the use of people of workers and make
Speaker 1: the relative price of workers low. And now obviously you
Speaker 1: could debate about the minimum wage, and it's of it.
Speaker 1: There's an issue about can you encourage people to be
Speaker 1: more productive all of that sort of stuff. So I
Speaker 1: think the answer is that, um, we can make capital
Speaker 1: labor enhancing as well. UM and if and in a
Speaker 1: way I like to sort of pose this question in
Speaker 1: two thousand, then you ask me this question, where are
Speaker 1: the new jobs going to come from? Don't think I
Speaker 1: would have had a possible clue of saying it. But
Speaker 1: if you look where of most many of those jobs
Speaker 1: come from, they've come from technologically advanced places as Tesla
Speaker 1: and as electric cars and I and all of uh. So,
Speaker 1: I think the answer is the digital age made well
Speaker 1: and the green jobs. You can make green jobs very
Speaker 1: labor intensive. You can have people going out insulating houses.
Speaker 1: So the answer is, with a bit of thought and
Speaker 1: interesting care, you can actually make the future labor in
Speaker 1: Hampsting not laborhood. Right. It's something that I've talked about
Speaker 1: that with the president of the Rockefeller Foundation. We've got
Speaker 1: all these you know, countries spending so much on COVID
Speaker 1: relief and pumping a lot of money into economies. We
Speaker 1: could do that and create green jobs at the same
Speaker 1: time and deal with two massive problems. Um good stuff.
Speaker 1: Danny B. Well Danny Blanche Flower, professor of economics at Dartmouth,
Speaker 1: former Bank of England Monetary Policy Committee member, joining us
Speaker 1: from Florida. I'm assuming it was warm there. I don't know. Yeah,
Speaker 1: I mean yesterday we learned it was seventy degrees there
Speaker 1: in the afternoon from one of our guests. But hey,
Speaker 1: that's better than New Hampshire, right mac a journal now,
Speaker 1: but you let me drive? Oh no, no, no no, no,
Speaker 1: rug home an night please, I'll do vel. I want
Speaker 1: to drive, just drive. The question trying. This is the
Speaker 1: drive to the globe. Thanks, we'll try us down on
Speaker 1: Bloomberg Radio. All right, you are listening to Bloomberg Business Week.
Speaker 1: Just about eleven minutes left in today's trading session, Carol Master,
Speaker 1: Tim Stanovic, and as Charlie mentioned, the snp U S
Speaker 1: stocks in general roaring back after J. Powell of the
Speaker 1: Federal Reserve basically saying, listen, folks, slow down, slow down.
Speaker 1: I'm not too worried. I'm not going to take, you know,
Speaker 1: my foot off the gas. Things are gonna do. It's
Speaker 1: all good, it's all It's gonna still take a little
Speaker 1: while to get back to normal. So stocks are pretty
Speaker 1: much just off their best levels of the session. We
Speaker 1: have seen quite move back. Yeah, we really have. Ryan
Speaker 1: Dietrich is chief market strategist at LPL Financial. He joins
Speaker 1: us on the phone right now from Charlotte, North Carolina.
Speaker 1: LPL Financial has just about billion dollars under management. M Ryan,
Speaker 1: what do you make of today's trade? Yeah, Tim, how
Speaker 1: about that reversal? Right? As back down nearly four percent
Speaker 1: at the lows, and it has a shot of being
Speaker 1: green and we can say goodbye to the five day
Speaker 1: losing streak on the SMP five Right, what got us
Speaker 1: when you looked at that five day losing streak, we're
Speaker 1: in the midst of stocks are only down about one
Speaker 1: and a half percent during those five days. There's a
Speaker 1: relatively modest five day losing streak. For instance, last year
Speaker 1: five separate days saw a worst drop of one and
Speaker 1: a half percent um. So it's just kind of all
Speaker 1: about context, right, And again, what did J Pal say?
Speaker 1: I don't think anything that we didn't expect. He's still
Speaker 1: quite dubbish. Low rates are here to stay, and that's
Speaker 1: what the market wanted to hear. And now the losing
Speaker 1: streak come, like I said on the SMP, looks like
Speaker 1: it's over. Was it all J Powell in your view?
Speaker 1: Or was it people all of a sudden saying oh wow,
Speaker 1: that stuck that I've been interested in is now a
Speaker 1: few percentage points cheaper or you know, in the case
Speaker 1: of some of those high flyers, a lot cheaper and
Speaker 1: that was a buying opportunity. Yeah, you're right, Carol, I
Speaker 1: mean I think it was with j Pal kind of
Speaker 1: sparked it. Right. You think about a beach ball. You
Speaker 1: put it under the water. Once you let go, it
Speaker 1: gets moving. Once it gets moving, it really pops up.
Speaker 1: And that's you know, j Pal kind of released the
Speaker 1: beach ball effects, so to speak. But at the same time,
Speaker 1: what have we been seeing, right, I mean, just continued
Speaker 1: strong manufacturing numbers, services numbers. We just had a really
Speaker 1: strong earning season that's wrapping up and all. By the way,
Speaker 1: now j Pal said that, you know, monetary policy is
Speaker 1: still here, and we all know there's probably another fiscal
Speaker 1: plan coming in March of at least one and a
Speaker 1: half trillion dollars. So all those things combined kind of
Speaker 1: said that, you know, hey, stocks just don't feel like
Speaker 1: going down, and it's something that we should not ignore. Okay,
Speaker 1: But but there are signs of froth in the market
Speaker 1: right from a technical from a technical perspective, what are
Speaker 1: those signs? Where are you seeing them? Yeah, well, you know,
Speaker 1: when you look at market technicals, they're honestly pretty strong,
Speaker 1: Tim But I kind of say a cousin the technicals
Speaker 1: is sentiment, right, that's kind of in the price and
Speaker 1: and we've seen just huge flows coming into equity funds.
Speaker 1: We've seen very historically low put to call ratios. You know,
Speaker 1: there are clearly some signs that there's a little too
Speaker 1: much excitement that's out there, and that's okay, right, I mean,
Speaker 1: after seventy six percent rally, given where we were this
Speaker 1: time about a year ago, I think it makes sense
Speaker 1: people a little excited, but it makes sense to us
Speaker 1: also if you've just overlay this bull market that started
Speaker 1: last March with the one that started in two thousand nine.
Speaker 1: They almost trekk perfectly with each other, but that one
Speaker 1: in early two thousand ten you had a ten per
Speaker 1: cent correction, some sideways consolidation for good part of the
Speaker 1: middle of two thousand ten. We think that could play
Speaker 1: out once again here. So Ryan, how much of the
Speaker 1: trade that we're seeing and the comeback, how much of
Speaker 1: that is banking on what we see in the second
Speaker 1: half of this year. Yeah, Well, if you look at
Speaker 1: who's been leading, I think you have to say a
Speaker 1: lot it's those cyclicals. Right. Look at today, I mean
Speaker 1: energy stocks once again are doing well. The cyclical value
Speaker 1: your energy financials is the yield curve keeps deepening. What's
Speaker 1: the ten you're doing ten years up a little bit today,
Speaker 1: but the yield curve to tin keeps the opening. Those
Speaker 1: are all telling us that, hey, the market is betting
Speaker 1: on a very significant reopening and that's why the cyclical value.
Speaker 1: But coming on with you guys for a couple of
Speaker 1: months saying, you know, last year we liked growth a
Speaker 1: lot of lpill research. This year we've kind of changed
Speaker 1: our tune a little bit, saying, listen, cyclical value makes
Speaker 1: sense finally to maybe get some strength, and that is
Speaker 1: exactly what's happened. But before everyone gets way excited about financials,
Speaker 1: for instance, Carol, they've got nowhere for fourteen years. Okay,
Speaker 1: they're where they were in two thousand seven, so let's
Speaker 1: not get too excited here. But that's bolish from a
Speaker 1: longer term point of view, because hey, they haven't gone
Speaker 1: awhere for fourteen years. We know text up a ton,
Speaker 1: and we don't have a problem with technology, but if
Speaker 1: you look for something that's kind of still beating up
Speaker 1: and hadn't gone anywhere. Oh my financial still look pretty
Speaker 1: good to us here. I get the value argument, but
Speaker 1: if the growth is in the growth players or the
Speaker 1: momentum players, why wouldn't you continue to make your bets there. Yeah, well,
Speaker 1: the way we're constructing our portfolios far more than seventeen
Speaker 1: thousand advisors, we are kind of doing a two pronged approach, right.
Speaker 1: We We don't have a problem with technology and communication services.
Speaker 1: They kind of got us to the party. But we're
Speaker 1: much more open to the idea of taking a little
Speaker 1: bit of profits there and adding to your your your
Speaker 1: cyclical value names industrials, materials, and financials. I mean, what materials.
Speaker 1: I come on you guys for a while talking about copper.
Speaker 1: That sounds kind of boring. Coppers up, you know, another
Speaker 1: three percent today, nine year highs. If copper is strong
Speaker 1: like it's been for several months, that tells us a
Speaker 1: few things, mainly the global economies on firm footing and
Speaker 1: likely higher rates, and those the cyclical values should probably
Speaker 1: do well. And coppers just blowing up again today. How
Speaker 1: are you looking at the rise in the tenure? Yeah? Yeah,
Speaker 1: that's that story of the weekend. And everybody's wondering where
Speaker 1: does a tenure go to get too high to knock
Speaker 1: stocks off their rally. We think there's still a ways
Speaker 1: to go. I mean, the bottom line, is this a
Speaker 1: little bit of inflation be okay? I mean the Fed
Speaker 1: share person Pale just said that today, right, a little
Speaker 1: bit of inflation, he's okay. With the tenure yield to
Speaker 1: us is suggesting again a likely stronger economy, more stimulus.
Speaker 1: So we've got a target about one seventy five on
Speaker 1: the tenure by the end of this year, which would
Speaker 1: be a little a little bit higher where forty basis
Speaker 1: points higher than where it is. But we think that'd
Speaker 1: be perfectly normal. And let's not forget it wasn't that
Speaker 1: long ago that in years up around three percent. I know,
Speaker 1: it feels like a lifetime ago in a lot of ways,
Speaker 1: but a little higher trending ten your yield does suggest
Speaker 1: again of probably improving economy in our view. Where don't
Speaker 1: you want to be right now? Yeah? This well, great question.
Speaker 1: They are those defensives, you know, your utilities and your
Speaker 1: reads kind of some of those areas that are that
Speaker 1: are that's as pharmaceuticals that are just more defensive by nature.
Speaker 1: They haven't done quite as well. Um, that's kind of
Speaker 1: where we see. Also, I've been an LPIL for five years.
Speaker 1: We haven't liked Europe for the five years i've been here.
Speaker 1: We're still a little bit underway Europe. We like emerging markets,
Speaker 1: and we like Japan first, little more international flavor, but
Speaker 1: a Europe in an area we still think is probably
Speaker 1: gonna underperform. We did see their travel stocks over in
Speaker 1: the UK as UK economy is opening up, you don't
Speaker 1: see a play there. Yeah, I mean there're always potentially
Speaker 1: could be some type of a play, but the overall
Speaker 1: dynamics as we look at Europe are still slowing. There's
Speaker 1: still some some demographic issues and earning scrowth. I mean,
Speaker 1: we're going at thirty five percent earning growth this year
Speaker 1: in emerging markets, leading the overall global resurgence that we're
Speaker 1: seeing in earning. So we just think e M is
Speaker 1: still probably the better place from a diversified global portfolio
Speaker 1: point of view. All Right, gotta ron, Ryan, think you
Speaker 1: so much? Trying. D Church, chief market strategist at LPL
Speaker 1: Financial with us from Charlotte, North Carolina, and this tim
Speaker 1: on a day when quite a big swing when it
Speaker 1: comes to those major equity averages. Yeah, NAZAC was down
Speaker 1: as much as three point nine percent, down half a
Speaker 1: percentage point. Thanks for listening to Bloomberg Business Week. Download
Speaker 1: the podcast on iTunes, SoundCloud, or Bloomberg dot com, and
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