WEBVTT - Surveillance: Golub Lifts S&P 500 Target 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jayleie. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.880 and of course on the Bloomberg terminal way important that 0:00:31.000 --> 0:00:33.760 we talked to John Gollub than Jerome Paul I agree 0:00:33.800 --> 0:00:36.519 this morning. That is the story Credit Sweets. We were 0:00:36.560 --> 0:00:39.680 just having a nice casual Friday morning, Lisa night, Tom 0:00:39.760 --> 0:00:42.760 was away. It was very relaxing, I have to say, Tom. 0:00:42.840 --> 0:00:44.919 And then the email came through from the team at 0:00:44.920 --> 0:00:49.360 Credit Sweets SMP five hundred to forty six hundred on 0:00:49.520 --> 0:00:52.640 Stronger Learning. So let's bring in Jonathan Gollob right now, John, 0:00:52.640 --> 0:00:55.440 why the change? Let's start there. Well, I mean, more 0:00:55.440 --> 0:00:58.480 than anything else, this is an earning story that our 0:00:58.520 --> 0:01:01.240 earning's estimate, which we put it out at a hundred 0:01:01.240 --> 0:01:03.720 and eighty five dollars and earnings for the SMP was 0:01:03.760 --> 0:01:07.360 the highest on Wall Street and it's just too low. 0:01:07.440 --> 0:01:10.360 The the the the numbers are coming in just too strong, 0:01:10.640 --> 0:01:13.120 and it's not in one group. Banks are beating by 0:01:13.240 --> 0:01:17.480 thirty five percent. Um tech is beating by almost thirty percent. 0:01:17.640 --> 0:01:24.080 Industrials discretionary companies are up fifty on average. And you know, 0:01:24.160 --> 0:01:28.520 ultimately we needed to know increase the earnings outlook. That 0:01:28.600 --> 0:01:30.919 was with drove it and then we as we see 0:01:30.959 --> 0:01:33.880 that the the overall stock market price was right on 0:01:33.920 --> 0:01:36.800 our tails, and so we moved our numbers up. John, 0:01:36.920 --> 0:01:39.440 you know, I gotta congratulate you folks. You're looking at 0:01:39.480 --> 0:01:42.560 the guy who came out in January and said if 0:01:42.600 --> 0:01:44.959 you sell tech and go to everything else, you're gonna 0:01:44.959 --> 0:01:47.360 be out of your minds. In hindsight, John, you look 0:01:47.440 --> 0:01:50.160 like a genius. What do I do with tech? Is 0:01:50.240 --> 0:01:53.600 Lisa mentioned they didn't move on earnings? No surprise there? 0:01:53.800 --> 0:01:58.160 Are they part of your lift to five thousand? Yes? 0:01:58.160 --> 0:02:01.680 And no, Tom, I mean we actually think that boring 0:02:01.800 --> 0:02:04.320 old economies that listen. I've been a growth guy, a 0:02:04.440 --> 0:02:07.160 tech guy for a very long time, and every kind 0:02:07.160 --> 0:02:10.280 of stock has its moment in the sun. I don't 0:02:10.360 --> 0:02:12.400 know if this is the moment in the sun for tech. 0:02:12.480 --> 0:02:15.440 I think this is the time for old economy stocks 0:02:15.480 --> 0:02:19.280 because these are companies with big fixed overhead. With that 0:02:19.440 --> 0:02:22.200 the tend to respond war to the kind of stimulus 0:02:22.240 --> 0:02:25.120 that we're seeing proposed by the Biden administration and generally 0:02:25.120 --> 0:02:27.520 the kind of overheating we're seeing the general economy. Can 0:02:27.520 --> 0:02:30.440 we see earnings like this continue and the four four 0:02:30.480 --> 0:02:33.160 six thousand, four six d excuse me for six thousand 0:02:33.200 --> 0:02:36.480 maybe next year for the S and P without a 0:02:36.520 --> 0:02:40.560 commensurate rise in yields, without a commensurate read through to 0:02:40.720 --> 0:02:43.040 the bond market. And how much is there a feedback 0:02:43.080 --> 0:02:47.920 loop here? Well, first of all, Uh, my expectation is 0:02:47.960 --> 0:02:50.400 that we're going to see interest rates rise a little 0:02:50.400 --> 0:02:52.000 bit from here. And if you actually look at how 0:02:52.360 --> 0:02:56.240 stocks respond, they want higher interest rates. And that's because 0:02:56.560 --> 0:02:58.880 what we're seeing right now with with the tenure bond 0:02:58.960 --> 0:03:01.720 yield at one point six and we fed funds at zero, 0:03:02.200 --> 0:03:05.000 it's a sign that the economy is not yet on 0:03:05.200 --> 0:03:08.960 stable footing, and so the market wants to see the 0:03:09.040 --> 0:03:11.640 demand for capital strong as a sign that things are 0:03:11.760 --> 0:03:14.840 are healthier. So if we had interest rates, you know, 0:03:15.120 --> 0:03:17.200 closer to two percent by the end of the year, 0:03:17.480 --> 0:03:21.880 the stock market is higher, not lower. Aps to fifteen, 0:03:22.200 --> 0:03:24.640 that's an upgrade too. And John, the interesting thing about 0:03:24.680 --> 0:03:27.720 this note is that it includes a tax handcut as well. 0:03:27.840 --> 0:03:31.200 Can you set the states for twenty two already? John, Well, 0:03:31.240 --> 0:03:33.000 you know this was you know, this was actually a 0:03:33.040 --> 0:03:36.680 big discussion point. What the convention is on Wall Street 0:03:36.800 --> 0:03:40.400 is until the tax changes happened, you ignore them. But 0:03:40.480 --> 0:03:42.560 the reality is the markets not ignoreing it. So we 0:03:42.680 --> 0:03:45.840 basically said, we know that this tax thing is likely 0:03:45.880 --> 0:03:49.000 to happen. Um. The consensus view is that that that 0:03:49.040 --> 0:03:51.440 that Biden doesn't get is twenty eight percent, but that 0:03:51.560 --> 0:03:56.120 the tax rate goes to that's about a four percent 0:03:56.280 --> 0:03:59.120 hit to earnings. Now four percent hits earnings is a 0:03:59.120 --> 0:04:02.480 big deal, but the earnings this season are beating by 0:04:03.480 --> 0:04:06.960 so um. We moved our number from to ten to 0:04:07.040 --> 0:04:10.280 two fifteen. But if you compare me to other strategists 0:04:10.280 --> 0:04:12.600 on Wall Street who haven't done that, I'd be a 0:04:12.640 --> 0:04:15.600 two five if you if you ignore the taxes, so 0:04:15.680 --> 0:04:19.440 big numbers. Did you move on a revenue gross up 0:04:19.600 --> 0:04:25.400 or was it margin resiliency or both? You know? In general, Tom, 0:04:25.520 --> 0:04:28.400 first of all we're seeing is is that both revenues 0:04:28.480 --> 0:04:32.120 and margins are seeing a lot of flexibility. But the 0:04:32.440 --> 0:04:37.039 whenever you see an economy reopening after recession, it's always 0:04:37.120 --> 0:04:40.479 the margin line, which is where all of that incremental 0:04:40.600 --> 0:04:43.920 upside is going to be. And the one mistake that 0:04:44.040 --> 0:04:48.880 analysts and investors portfolio managers doesn't matter, they always underestimate 0:04:49.000 --> 0:04:52.919 is operating leverage. How much a small change in economic 0:04:52.960 --> 0:04:57.280 growth creates huge change in profit margins. And that's that 0:04:57.360 --> 0:04:59.719 was really the big deal here. Before you go, I 0:04:59.800 --> 0:05:02.680 just a gage sentiment. When you hit send to clients 0:05:02.720 --> 0:05:05.560 on Friday. How I received was this? What was the response? Like, 0:05:06.440 --> 0:05:08.160 I'll tell you that. You know you're gonna laugh at 0:05:08.200 --> 0:05:11.360 The single biggest um comment we got back to people's 0:05:11.400 --> 0:05:13.200 come on, you don't think we can get to five down. 0:05:15.160 --> 0:05:18.000 I'm not saying we're gonna go there, but we're eventually 0:05:18.000 --> 0:05:22.880 gonna get there. But okay, quote that eventually we'll get 0:05:22.920 --> 0:05:27.120 there without the time forecast. Just pick one. John is 0:05:27.120 --> 0:05:31.080 gonna catch up, as always, Jonathan, It's gonna catch up. 0:05:36.720 --> 0:05:39.360 I'm just gonna turn to pros like Bruce Kasman. Let's 0:05:39.360 --> 0:05:41.920 bring in Bruce Kasman right now. JP Morgan, chief Economists 0:05:41.960 --> 0:05:45.200 ahead of Global Economic Research. Bruce, let's start there. How 0:05:45.240 --> 0:05:47.960 difficult it is to forecast in this environment? For you? 0:05:48.080 --> 0:05:51.480 Right now? Well, I think it's difficult to tie down 0:05:51.520 --> 0:05:53.880 exactly how strong the economy is doing, but I think 0:05:53.920 --> 0:05:56.599 it's pretty simple to recognize that we're in the midst 0:05:56.600 --> 0:05:58.640 of a boom here in the US. And you know 0:05:58.680 --> 0:06:01.240 what I also want to emphasize is, partly off the 0:06:01.279 --> 0:06:04.440 conversation you just had is Europe's about to join us. 0:06:04.480 --> 0:06:08.240 So there's gonna be fairly broad based strength in the 0:06:08.279 --> 0:06:12.240 global economy for the next six months or so. Bruce Kevin, 0:06:12.240 --> 0:06:14.320 Good morning, Tom Keenan in York. I want to go 0:06:14.360 --> 0:06:17.960 to Cassan Economics, which is your twenty six page must 0:06:17.960 --> 0:06:21.160 read Friday evening. The world stops. Everybody sneaking looks at 0:06:21.200 --> 0:06:24.840 it as they pretend they're doing social work, and bruth 0:06:24.960 --> 0:06:27.599 the first chart is always the most important. You have 0:06:27.680 --> 0:06:31.640 a spectacular US chart of the partition of inflation of 0:06:31.760 --> 0:06:37.719 goods and services. When does service inflation catch up? Um, well, 0:06:37.760 --> 0:06:40.560 it's not gonna fully catch up, partly because, as you've 0:06:40.600 --> 0:06:43.520 been noting, there's supply shortages and goods prices are going 0:06:43.600 --> 0:06:46.359 to continue to rise rapidly. But I think March was 0:06:46.400 --> 0:06:49.359 the first month where we started to see service price 0:06:49.360 --> 0:06:51.680 inflation pick up, and I think it's gonna be the 0:06:51.680 --> 0:06:54.440 big event in the next few months that overall inflation 0:06:54.520 --> 0:06:57.440 is going to be lifted both by service prices normalizing 0:06:57.640 --> 0:07:00.279 and goods pricing staying strong. John, I think this is 0:07:00.279 --> 0:07:03.000 the absolute key metric with that job report that we're 0:07:03.000 --> 0:07:06.359 gonna see Friday as the path of service inflation. There 0:07:06.400 --> 0:07:09.560 is a real mystery tour and wages the compositional story, 0:07:09.680 --> 0:07:11.920 Bruce picking up again. We've got to talk about wages 0:07:11.960 --> 0:07:15.200 and whether wages will be useful for the next several months. 0:07:15.360 --> 0:07:17.000 How much longer will we have to look at a 0:07:17.080 --> 0:07:19.360 labor market that is distorted by the events of the 0:07:19.400 --> 0:07:22.640 last twelve months. Well, I think when you look at 0:07:22.640 --> 0:07:26.160 the big gains and jobs, you're also seeing I think 0:07:26.240 --> 0:07:29.560 the rotation back towards the depressed service sector, and I 0:07:29.600 --> 0:07:32.040 think in terms of wage inflation, that's actually gonna be 0:07:32.120 --> 0:07:35.720 a depressing effect. I do want to emphasize, especially if 0:07:35.760 --> 0:07:39.240 we're talking about inflation. There's two very different stories here. 0:07:39.280 --> 0:07:41.920 One is how much pressure we getting as we get 0:07:41.920 --> 0:07:44.480 this booming growth and we normalize, and we think we're 0:07:44.480 --> 0:07:46.960 gonna get a fair amount of inflation pressure in the 0:07:46.960 --> 0:07:49.120 near term off of that. But I think if you 0:07:49.160 --> 0:07:51.520 look at what's happening in the wage measures that are 0:07:51.520 --> 0:07:53.920 not distorted. If you look at where levels of service 0:07:53.920 --> 0:07:56.800 price inflation are, we're still pretty low. So I think, 0:07:56.920 --> 0:07:59.160 as the FED has been doing, you want to look 0:07:59.200 --> 0:08:01.360 through some of the near term dynamic, which I think 0:08:01.440 --> 0:08:03.840 is going to be powerful, and recognize we still got 0:08:03.840 --> 0:08:06.640 a way to go before we normalize inflation. And I 0:08:06.720 --> 0:08:09.720 hear that although near term dynamic is difficult to say 0:08:09.760 --> 0:08:12.240 when you talk about the Intel CEO coming out over 0:08:12.240 --> 0:08:14.600 the weekend and saying that the chip shortages are going 0:08:14.640 --> 0:08:18.560 to continue for years, he doesn't see it easing very 0:08:18.640 --> 0:08:21.480 much at all. How do we decide this is transitory? 0:08:21.520 --> 0:08:23.760 At what point in the year can we say, Okay, 0:08:23.800 --> 0:08:28.320 now we have a true assessment of the post pandemic economy. Well, 0:08:28.360 --> 0:08:30.960 I don't think it's going to be easy, um and 0:08:31.040 --> 0:08:33.320 quite frankly, I think what we're gonna see in the 0:08:33.360 --> 0:08:35.760 next few months is not going to be very very 0:08:35.760 --> 0:08:40.000 indicative of the trend. However, I do think if we're right, 0:08:40.480 --> 0:08:43.240 that we can carry strong growth into next year, given 0:08:43.400 --> 0:08:47.280 where the labor market is, given what the FED is 0:08:47.320 --> 0:08:50.080 trying to do, I'm a big buyer the fact that 0:08:50.080 --> 0:08:52.600 we're going to have a trajectory of higher inflation. I 0:08:52.640 --> 0:08:55.080 just think this year's move is not going to be 0:08:55.080 --> 0:08:59.240 particularly indicative of the magnitude of that acceleration, but it's happening. 0:08:59.240 --> 0:09:01.480 I think this is not what we've been living through 0:09:01.520 --> 0:09:04.880 for the last twenty years on the underlying dynamics. Just 0:09:04.960 --> 0:09:08.400 don't buy how strongly the near term is gonna be 0:09:08.559 --> 0:09:11.840 sending a signal. We've stopped talking about a K shaped 0:09:11.840 --> 0:09:14.240 recovery a bit, Bruce, and I'm wondering how much the 0:09:14.320 --> 0:09:17.920 K shape recovery not only has persisted, but will hamper 0:09:18.240 --> 0:09:20.840 some of the full employment metrics that we see later 0:09:20.880 --> 0:09:24.080 in the year. Well, we do have an economy in 0:09:24.120 --> 0:09:26.960 which there still are some sectors that have really badly 0:09:27.040 --> 0:09:30.000 hurt that haven't recovered. And even with what we're looking 0:09:30.040 --> 0:09:32.840 at over the next three six months, we're still not 0:09:32.880 --> 0:09:36.160 expecting jobs to get back to where they were before 0:09:36.240 --> 0:09:39.640 the pandemic, at least till sometime early next year. So 0:09:39.679 --> 0:09:42.120 there's still a lot of damage they're scarring. I think 0:09:42.160 --> 0:09:45.320 the important point about scarring is a macro economist is 0:09:45.360 --> 0:09:48.240 this is scarring that is going to be very painful 0:09:48.480 --> 0:09:50.720 in some parts of the economy, but it's not hitting 0:09:50.800 --> 0:09:54.560 the financial sector. It's not reflecting an overhang of housing 0:09:54.760 --> 0:09:58.440 or capex. Uh, it's not hitting major e M economies. 0:09:58.679 --> 0:10:01.440 This is not gonna hurt the macro economy the way 0:10:01.720 --> 0:10:05.319 the scarring after the Global financial crisis did so. Recognized starring, 0:10:05.520 --> 0:10:08.040 but recognized it's not the same kind of macro driver 0:10:08.720 --> 0:10:11.560 either growth or inflation going forward. Bruce, I know you 0:10:11.600 --> 0:10:14.560 took your call from James Diamond yesterday afternoon. He was 0:10:14.600 --> 0:10:17.480 sort of thinking about two thousand and twenty one and Ford. 0:10:17.800 --> 0:10:20.800 Let me ask the same question, Jamie Diamond, ask you 0:10:21.440 --> 0:10:25.520 do the wealthy escape higher taxes? Do you just assume 0:10:25.559 --> 0:10:28.880 if we get the tax policy we're talking about, that 0:10:28.960 --> 0:10:34.720 the fancy people somehow ex escape the tax burden. Well, 0:10:34.760 --> 0:10:37.200 I think taxes need to go up if we're gonna 0:10:37.240 --> 0:10:41.000 be financing this infrastructure built and and other things, and 0:10:41.040 --> 0:10:43.600 it's built into our forecast that there is an increase 0:10:44.160 --> 0:10:48.120 um in taxes. I do think we should understand that 0:10:48.600 --> 0:10:51.280 against the backdrop of what we're seeing in terms of 0:10:51.320 --> 0:10:54.000 wealth gains, against the backdrop of what we're seeing in 0:10:54.080 --> 0:10:56.800 terms of the economy overall, that's not going to be 0:10:56.880 --> 0:10:58.840 a near term drag on the economy. We can have 0:10:58.840 --> 0:11:01.920 a long debate about or the optimal level of taxation is. 0:11:02.360 --> 0:11:04.600 But I don't think either on the capex side from 0:11:04.679 --> 0:11:09.000 higher corporate taxes or on the household side, that tax 0:11:09.040 --> 0:11:10.719 increases in the next year or two are going to 0:11:10.760 --> 0:11:13.200 be a drag for this economy. I probably's always gonna 0:11:13.200 --> 0:11:17.120 catch up, gonna catch up this Monday morning, Jap Morgan. 0:11:21.920 --> 0:11:24.920 Right now, we talked to Conference Board. Going back to 0:11:25.040 --> 0:11:30.080 before World War One, Conference Board was absolutely definitive in 0:11:30.160 --> 0:11:34.280 corporate America addressing the labor arrest of this nation across 0:11:34.640 --> 0:11:38.600 a hundred years plus. Dana Peterson is their chief economist. Dana, 0:11:38.679 --> 0:11:41.600 you just did a definitive study of the great divide 0:11:41.600 --> 0:11:44.480 in America that only the Conference Board can do, and 0:11:44.559 --> 0:11:47.880 that is I have a job, things are great. I'm 0:11:47.880 --> 0:11:50.880 out of a job, things are really bad. Has that 0:11:51.000 --> 0:11:56.360 divide been ever greater. I'm sure they're other times it's 0:11:56.360 --> 0:11:59.079 been greater, but certainly we have been talking about the 0:11:59.160 --> 0:12:01.640 case shape to call to me here where you had 0:12:01.679 --> 0:12:04.760 people who never lost their jobs, they received stimulus checks, 0:12:04.800 --> 0:12:07.200 and they were able to save and pay down debt 0:12:07.280 --> 0:12:10.600 and even spend on goods. Meanwhile, you had many people 0:12:10.640 --> 0:12:14.120 who did loose jobs and they were on unemployment and 0:12:14.320 --> 0:12:16.680 certainly are still. We still have eight and a half 0:12:16.760 --> 0:12:19.880 million people who are still unemployed in America. If we 0:12:19.920 --> 0:12:23.080 do eight and a half months of one million job 0:12:23.200 --> 0:12:27.040 formation and we get back to that point, then we 0:12:27.080 --> 0:12:29.280 have to grow from there. Do you see an economy 0:12:29.320 --> 0:12:33.920 that can grow jobs once we get back to February, Well, 0:12:33.960 --> 0:12:36.480 I've seen a comedy economy where we can grow jobs. 0:12:36.600 --> 0:12:42.880 Right now, we're seeing labor shortages amongst certain industry, certainly trucking, manufacturing, construction, 0:12:43.200 --> 0:12:45.840 and even when you look at services, gyms are reopening, 0:12:45.960 --> 0:12:49.160 restaurants are reopening, and they just can't find people. Um. 0:12:49.320 --> 0:12:51.680 Some of that's a function of people still being afraid 0:12:51.720 --> 0:12:55.439 to go out, uh for fear of getting sick, um, 0:12:55.480 --> 0:12:59.120 but also because of skill shortages, and also it's just 0:12:59.280 --> 0:13:01.880 it's just really of a wild market here. Danna. Do 0:13:01.880 --> 0:13:05.520 you think that services inflation, that the that the actual 0:13:05.679 --> 0:13:09.800 job increases maybe more persistent, longer lasting than people are 0:13:09.840 --> 0:13:14.880 currently accounting for. Well, that's certainly something that Chair Powell 0:13:15.160 --> 0:13:18.680 talked about. There could be some wage pressures here, certainly 0:13:18.720 --> 0:13:21.800 as we get into later on in the year where 0:13:21.800 --> 0:13:24.959 more people are more willing to go out. Businesses in 0:13:25.400 --> 0:13:29.480 person services are reopening, and we could see prices go 0:13:29.600 --> 0:13:32.920 up there. And also in terms of inflation, Um, we're 0:13:32.960 --> 0:13:37.360 already seeing uh hearing rather that corporations are thinking about 0:13:37.440 --> 0:13:40.080 raising prices due to the fact that you have the 0:13:40.160 --> 0:13:43.920 supply chain bottlenecks. You also have commodity prices rising, especially 0:13:43.960 --> 0:13:46.360 for energy, and they're looking to pass all that on 0:13:46.440 --> 0:13:50.840 to customers. So we're potentially going to see faster prices 0:13:50.880 --> 0:13:54.520 both in consumer prices and wages. Jenny Ellen seemed to 0:13:54.559 --> 0:13:57.480 weigh in siding with the FEDS line so far, saying 0:13:57.559 --> 0:13:59.760 that this is all transitory, that we're gonna return to 0:13:59.800 --> 0:14:04.120 a lower inflation standpoint, and that Joe Biden's spending plan 0:14:04.280 --> 0:14:08.480 won't materially juice inflation going forward because it will be 0:14:08.520 --> 0:14:13.480 spread out over a decade. Do you buy that argument, Well, 0:14:13.520 --> 0:14:17.120 there are two parts of that argument. One is transitory factors. 0:14:17.160 --> 0:14:19.440 And indeed, we do think that some of the inflation 0:14:19.480 --> 0:14:22.240 pressors were going to see in the second quarter and 0:14:22.280 --> 0:14:24.120 over the course of this year and maybe a little 0:14:24.120 --> 0:14:28.480 bit next year are transitory. They related to the pandemic. Uh. Certainly, 0:14:28.520 --> 0:14:32.000 they're also related to supply chain UH disruptions, which are 0:14:32.040 --> 0:14:34.480 also related to the pandemic, and those things are probably 0:14:34.480 --> 0:14:38.080 going to fade. But other types of inflation, especially with 0:14:38.120 --> 0:14:41.840 respect to UH inflation around building homes is probably here 0:14:41.880 --> 0:14:44.880 to stay. People are working remotely, people looking for more space, 0:14:45.360 --> 0:14:49.040 and we don't have enough homes. Meanwhile, the chip shortage, 0:14:49.200 --> 0:14:51.920 semiconductor chip shortage, that's not going to be solved overnight. 0:14:51.960 --> 0:14:54.640 You can't build a chip plant overnight. And so some 0:14:54.720 --> 0:14:57.040 of these types of inflation that we're seeing are going 0:14:57.120 --> 0:15:02.560 to be more persistent. When we're looking at the administration's plans. Well, certainly, 0:15:02.560 --> 0:15:05.920 if you have much faster growth, you're probably going to 0:15:05.920 --> 0:15:09.440 see some inflation pressures UM, and that's more or less 0:15:09.440 --> 0:15:12.840 what we're expecting. What do you hear from the clients 0:15:13.080 --> 0:15:16.480 the corporations of the conference board, Dana, there's so many 0:15:16.520 --> 0:15:18.840 walls of worry you just beautifully laid out. Some of 0:15:18.880 --> 0:15:25.720 those the worries now are comical within this boom economy. 0:15:25.760 --> 0:15:30.960 What do you actually hear from business people? Well, we're 0:15:31.000 --> 0:15:33.600 hearing that they think this year is going to be 0:15:33.640 --> 0:15:36.680 great in terms of growth. Our own forecast is six 0:15:36.760 --> 0:15:41.520 percent growth. Other people, but for next year, UH we're 0:15:41.600 --> 0:15:44.920 hearing that they're very much concerned about inflation pressures. They're 0:15:44.960 --> 0:15:48.440 also concerned about trade just given the fact that the 0:15:48.560 --> 0:15:52.600 US and China are still uh having somewhat frosty relations 0:15:52.640 --> 0:15:56.280 around trade and intellectual property matters, that this is going 0:15:56.360 --> 0:15:58.440 to spill over into next year and that we're going 0:15:58.480 --> 0:16:03.880 to see potential slow and growth material slowing. Tom, that's 0:16:03.920 --> 0:16:06.280 what happens when you cut off the guests. They stopped talking. 0:16:09.640 --> 0:16:13.920 I mean, you know, this is really really important. Respective 0:16:14.040 --> 0:16:16.680 is really really important, tomm Ethan Harrison, Bank America just 0:16:16.680 --> 0:16:18.320 publishing it, was just going through the note quickly, so 0:16:18.360 --> 0:16:20.280 let's bring it to our audience. Unfortunately, there is a 0:16:20.320 --> 0:16:23.320 trade off between the speed of the recovery and its length. 0:16:23.520 --> 0:16:25.840 Then it goes for a number of bullet points. Ironically, 0:16:25.840 --> 0:16:29.360 the much faster US recovery likely means a shorter expansion 0:16:29.600 --> 0:16:31.920 than in other countries and other cycles. And of course, 0:16:32.000 --> 0:16:35.480 reflecting on the very very exceptionally long cycle that we 0:16:35.520 --> 0:16:37.960 had long cycle we had in the previous one. Then 0:16:38.120 --> 0:16:39.560 I want to bring you in on this because Morgan 0:16:39.600 --> 0:16:44.280 Stanley have pushed this idea to shorter, hotter this time around. Denna, 0:16:44.320 --> 0:16:47.160 what's your view on that, Well, I think that makes 0:16:47.200 --> 0:16:50.160 sense just given the fact that this was a recession 0:16:50.240 --> 0:16:52.800 unlike any other. We essentially just kind of cut the 0:16:52.880 --> 0:16:55.720 piggots off right and then we're turning them back on. 0:16:56.280 --> 0:16:58.360 And it wasn't the case that we had some asset 0:16:58.440 --> 0:17:03.960 price blow up or something really major underlying a structural 0:17:04.080 --> 0:17:06.840 factors that cause the recession. It was a pandemic and 0:17:06.880 --> 0:17:10.240 basically government said, well, this is dangerous, so let's shut 0:17:10.280 --> 0:17:13.120 off half of the economy, the services sector. Now we're 0:17:13.119 --> 0:17:15.359 turning things back on. So, yes, things are gonna be 0:17:15.400 --> 0:17:18.400 hotter for a shorter period of time, but most likely 0:17:18.440 --> 0:17:21.240 we're probably going to get back to pre pandemic levels 0:17:21.280 --> 0:17:24.920 of activity and then probably settle in at a lower 0:17:24.960 --> 0:17:27.800 growth rate, a growth rate that's probably more consistent with 0:17:27.800 --> 0:17:31.040 where the economy was just before the pandemic. So the 0:17:31.119 --> 0:17:33.320 destination is not a bust. You don't subscribe to the 0:17:33.320 --> 0:17:37.040 boom bust argument. It's a return to trend. Yes, Indeed, 0:17:37.520 --> 0:17:40.479 Danna Patterson always gonna catch up. Danna, thank you, Conference 0:17:40.520 --> 0:17:42.159 Point chief Economist, and Danny, you know how it was 0:17:42.160 --> 0:17:50.600 when Tom Spakes just kept talking right now in the pandemic, 0:17:51.119 --> 0:17:54.480 Howard Foreman joins us. He is a radiologist, but far 0:17:54.560 --> 0:17:57.439 more than that is the builder of public health and 0:17:57.520 --> 0:18:02.120 public service studies at Yale Universe City Professor of Radiology, Economics, 0:18:02.359 --> 0:18:05.320 and Public Health were thrilled the Dr Foreman could join 0:18:05.400 --> 0:18:08.960 us this morning, Hawd Foreman, there is a pandemic. But 0:18:09.040 --> 0:18:12.639 what's so different now is in this modern America and 0:18:12.680 --> 0:18:18.040 our modernity, we use technology. We have a technocratic solution 0:18:18.119 --> 0:18:22.480 to everything. How does the technocracy of America try to 0:18:22.600 --> 0:18:26.720 come out of a pandemic? Well, it's not easy because 0:18:26.760 --> 0:18:29.440 we have you know, we have different classes of people now, 0:18:29.480 --> 0:18:31.879 people that were able to work very well from home, 0:18:32.359 --> 0:18:36.400 who had very low exposure and infection rates to the 0:18:36.640 --> 0:18:40.360 to the virus, but nonetheless had their lives turned upside down. 0:18:40.400 --> 0:18:42.359 And then you had a lot of people that we 0:18:42.760 --> 0:18:46.080 refer to as essential workers, and probably more than that 0:18:46.160 --> 0:18:49.120 are essential workers. But they had to run the buses, 0:18:49.119 --> 0:18:51.600 they had to run the trains, they had to sort 0:18:51.640 --> 0:18:54.760 of move the food and other goods back and forth 0:18:54.840 --> 0:18:58.119 between people, and their infection rates were much higher. And 0:18:58.160 --> 0:19:02.280 we decimated large population throughout this country. And so we're 0:19:02.280 --> 0:19:05.960 gonna have to rationalize that over time, but recognize that 0:19:06.359 --> 0:19:09.800 we do suffer almost as a country from post traumatic 0:19:09.800 --> 0:19:12.920 express disorder of a type. We've been through a trauma, 0:19:13.560 --> 0:19:16.840 We're continuing to feel the reverberations and the anxiety that 0:19:16.920 --> 0:19:20.440 exists even after the trauma is starting to wane. There's 0:19:20.480 --> 0:19:22.159 so much work still to do. To doctor, I just 0:19:22.160 --> 0:19:24.600 wander from your perspective whether you think we have an 0:19:24.640 --> 0:19:28.000 irrational fear of COVID nineteen of this country as we 0:19:28.040 --> 0:19:30.879 are here today. I think we do now, and I 0:19:30.960 --> 0:19:33.679 certainly have not said that before. I think we're getting 0:19:33.680 --> 0:19:36.359 to a point now where what we are seeing and 0:19:36.440 --> 0:19:40.160 experiencing is much closer to a bad flu than it 0:19:40.240 --> 0:19:43.399 is to what we experienced earlier or what places like 0:19:43.480 --> 0:19:46.679 India are experiencing right now, and we should start to 0:19:46.760 --> 0:19:49.600 think about how we manage a bad flu as opposed 0:19:49.680 --> 0:19:53.320 to how we manage the pandemic that wiped off about 0:19:53.359 --> 0:19:56.480 six hundred thousand people and maybe more if you really 0:19:56.480 --> 0:19:58.760 look at the numbers from the United States dr They 0:19:58.800 --> 0:20:01.399 are really strong words to come from someone like yourself, 0:20:01.440 --> 0:20:03.520 As you say, this is not something you've said before 0:20:03.760 --> 0:20:06.560 on a program like this. What would you suggest undepends 0:20:06.600 --> 0:20:09.760 the reluctance of health officials to say what you just said. 0:20:12.880 --> 0:20:14.720 You know, we've made a lot of mistakes over the 0:20:14.760 --> 0:20:17.720 last fourteen months, and nobody wants to full prey to 0:20:17.840 --> 0:20:20.720 hubrists that. You know. You look at at Moody in 0:20:20.720 --> 0:20:23.600 India saying in March that this is now over. I 0:20:23.640 --> 0:20:25.840 don't think anyone wants to full prey to that. And 0:20:25.840 --> 0:20:28.800 it's a lot easier for me to opine and and 0:20:28.880 --> 0:20:32.600 know that I have ninety or likelihood or higher of 0:20:32.760 --> 0:20:37.080 being correct than it is for a public official who, um, 0:20:37.240 --> 0:20:42.000 you know, really holds that very very strong responsibility to 0:20:42.080 --> 0:20:45.680 the entire public in their hands. Um. So I don't 0:20:45.720 --> 0:20:49.160 really dismiss their difficulty in moving faster in that way. 0:20:49.320 --> 0:20:51.919 I do think that what we've learned is that the 0:20:52.040 --> 0:20:54.760 f d A as an as an entity within government 0:20:54.800 --> 0:20:58.320 can move very quickly. The CDC seems to be much 0:20:58.359 --> 0:21:01.879 more deliberate, and maybe given the fact that this is 0:21:02.280 --> 0:21:04.960 a pandemic, this is a crisis, we need to hold 0:21:05.000 --> 0:21:08.840 them accountable to being a little bit quicker and analyzing 0:21:08.920 --> 0:21:14.199 data in a manner that befits the fast moving nature 0:21:14.280 --> 0:21:18.359 of this pandemic. Dr Foreman, you say that there is 0:21:18.680 --> 0:21:20.800 basically you know, what wants to say it's over and 0:21:20.840 --> 0:21:23.119 be the person out there saying that. But there is 0:21:23.160 --> 0:21:26.359 a difference between saying it's over and saying this is 0:21:26.400 --> 0:21:28.400 something we're going to have to live with and we're 0:21:28.400 --> 0:21:31.440 going to have to exist with the coronavirus being here 0:21:31.680 --> 0:21:35.120 in a perpetual fashion. And how much do you say 0:21:35.200 --> 0:21:37.840 that at this point because we've gotten to a place 0:21:37.840 --> 0:21:39.600 where the most at risk people are not going to 0:21:39.680 --> 0:21:42.480 be necessarily at the biggest risk for dying because they've 0:21:42.480 --> 0:21:45.800 been inoculated, and that the risks of continuing with social 0:21:45.840 --> 0:21:49.920 distancing and not having kids in school is greater. Yeah. No, 0:21:50.000 --> 0:21:52.359 and I think we are moving that way. I think 0:21:52.400 --> 0:21:58.600 that the people that we're equivocating about school three six, 0:21:58.720 --> 0:22:02.280 nine months ago, which included me early in the pandemic, 0:22:02.320 --> 0:22:05.520 are those that now feel that we must be back 0:22:05.560 --> 0:22:09.800 to school. UM. Yale University, my employer, is going to 0:22:09.880 --> 0:22:13.000 be back to a very close to normal function by 0:22:13.000 --> 0:22:15.800 the end of August and probably mostly over the summer 0:22:15.840 --> 0:22:18.199 as well. I think that we're gonna see them and 0:22:18.200 --> 0:22:21.280 we're gonna have to watch the way private actors respond 0:22:21.760 --> 0:22:25.400