1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,240 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Let's 5 00:00:27,280 --> 00:00:29,720 Speaker 1: kick off the conversation this morning with Michael Shall, market 6 00:00:29,720 --> 00:00:34,040 Speaker 1: Field Asset Management CEO and portfolio manager. Good morning to Michael. 7 00:00:34,159 --> 00:00:36,240 Speaker 1: Better news on a vaccine front over the last month 8 00:00:36,280 --> 00:00:39,680 Speaker 1: looking at one. Is there anything between now and year 9 00:00:39,840 --> 00:00:43,599 Speaker 1: end that could derail the optimism around a better outlook? Um, 10 00:00:43,800 --> 00:00:46,400 Speaker 1: I don't think so, if I I hope not. You know, 11 00:00:46,479 --> 00:00:49,320 Speaker 1: Having said that, I will say that markets are quite 12 00:00:49,320 --> 00:00:51,920 Speaker 1: stretched at the end of November. Um, you know, particularly 13 00:00:51,960 --> 00:00:54,200 Speaker 1: you know the cyclical trade, which which we've favored for 14 00:00:54,240 --> 00:00:56,320 Speaker 1: several months. Um, you know, it's had it's had a 15 00:00:56,320 --> 00:00:59,840 Speaker 1: hell of a move. Um. Yeah, I've seen plenty of 16 00:00:59,880 --> 00:01:01,720 Speaker 1: the members which have a tricky couple of weeks in 17 00:01:01,760 --> 00:01:03,320 Speaker 1: the middle of them, and you know that wouldn't be 18 00:01:03,320 --> 00:01:06,840 Speaker 1: a surprise. But you know, I think generally, Um, you 19 00:01:06,880 --> 00:01:09,319 Speaker 1: know what I was personal, as we doable goods economy 20 00:01:09,400 --> 00:01:12,760 Speaker 1: is really following on all cylinders at this point in time. 21 00:01:13,560 --> 00:01:15,679 Speaker 1: I think a vaccine would be helpful to that, but 22 00:01:15,880 --> 00:01:19,039 Speaker 1: I don't even think it's necessary. We've had such a 23 00:01:19,080 --> 00:01:22,560 Speaker 1: massive month through November for international equities, the best month 24 00:01:22,640 --> 00:01:24,600 Speaker 1: ever on a stock six underd I think, the best 25 00:01:24,600 --> 00:01:26,800 Speaker 1: month on an ECO for in Japan since the middle 26 00:01:26,800 --> 00:01:29,360 Speaker 1: of the nineteen nineties. This came from JP Morgan this morning. 27 00:01:29,400 --> 00:01:33,240 Speaker 1: We upgrade Eurozone to overweight, reduce the United States to neutral. 28 00:01:33,319 --> 00:01:36,280 Speaker 1: Relative earnings trends have favored US over Europe for a 29 00:01:36,280 --> 00:01:38,880 Speaker 1: while now, but a potential bass in relative earnings of 30 00:01:38,920 --> 00:01:41,640 Speaker 1: the Eurozone could be on the cards. Michael, that's just 31 00:01:41,680 --> 00:01:44,320 Speaker 1: an echo, a flavor of what we've heard so much 32 00:01:44,360 --> 00:01:47,039 Speaker 1: over the last several weeks around the international stories. It's 33 00:01:47,040 --> 00:01:50,000 Speaker 1: something you buy into. Two Well, you know, I think 34 00:01:50,000 --> 00:01:53,760 Speaker 1: analysis does unfortunately often follow performance, So I think people 35 00:01:53,840 --> 00:01:56,200 Speaker 1: under tremendous persons have changed their views. But you know, 36 00:01:56,240 --> 00:01:58,320 Speaker 1: the point I made a couple of months ago was 37 00:01:58,960 --> 00:02:01,600 Speaker 1: literally so much market cap trapped in the stuff that 38 00:02:01,720 --> 00:02:04,800 Speaker 1: had been working, US technology as a sort of shorthand 39 00:02:04,800 --> 00:02:08,519 Speaker 1: to that, but that any kind of reallocation away from 40 00:02:08,520 --> 00:02:10,960 Speaker 1: that towards almost anything else is going to have an 41 00:02:11,000 --> 00:02:14,920 Speaker 1: explosive impact. You know, we we would favor Japan over 42 00:02:14,960 --> 00:02:17,440 Speaker 1: the ewer zone. You know, I like what's in the 43 00:02:17,520 --> 00:02:19,800 Speaker 1: nick A. I like that part of the world in 44 00:02:19,960 --> 00:02:22,280 Speaker 1: you know, in general. But I you know, but I 45 00:02:22,320 --> 00:02:25,399 Speaker 1: think that that you know, you've had four or five 46 00:02:25,520 --> 00:02:29,000 Speaker 1: years of tremendous out performance by by U S tech 47 00:02:29,040 --> 00:02:32,760 Speaker 1: against global equities. UM, and I think you've unlocked a 48 00:02:32,760 --> 00:02:34,920 Speaker 1: little bit of a rebound now. You know. The tricky 49 00:02:34,960 --> 00:02:37,760 Speaker 1: thing going forward is that if this is a true 50 00:02:37,760 --> 00:02:39,480 Speaker 1: turning point, and the sort of turning point you look 51 00:02:39,520 --> 00:02:42,120 Speaker 1: back in five years time and say, wow, that really 52 00:02:42,240 --> 00:02:45,600 Speaker 1: was something that normally implies a problem in the stuff 53 00:02:45,600 --> 00:02:48,320 Speaker 1: that had been working. UM. You know, certainly that was 54 00:02:48,360 --> 00:02:50,400 Speaker 1: the case at the end of the late nineties, certainly 55 00:02:50,440 --> 00:02:53,680 Speaker 1: the case when he M you know, finished out performing 56 00:02:53,720 --> 00:02:56,440 Speaker 1: in say two thousand and eleven. And so I think 57 00:02:56,440 --> 00:02:59,440 Speaker 1: the tricky thing not not obviously for December twenty twenty, 58 00:02:59,520 --> 00:03:05,080 Speaker 1: but maybe one is you know, if this out performance continues, 59 00:03:05,200 --> 00:03:08,280 Speaker 1: does that involve US tech or the popular portions of 60 00:03:08,320 --> 00:03:11,040 Speaker 1: the US equity market actually going down. There's also a 61 00:03:11,120 --> 00:03:16,040 Speaker 1: question of whether the pandemic still matters, does it? It 62 00:03:16,080 --> 00:03:19,880 Speaker 1: depends what you are that matters tremendously. I think for 63 00:03:19,880 --> 00:03:24,760 Speaker 1: for urban service economies, it doesn't matter a great deal. Um. 64 00:03:24,840 --> 00:03:27,280 Speaker 1: It may even be having a sort of strange beneficial 65 00:03:27,320 --> 00:03:31,920 Speaker 1: effect um for the doable goods economy. Uh. And again 66 00:03:32,080 --> 00:03:35,120 Speaker 1: I think, you know, a slightly different question would be, 67 00:03:35,440 --> 00:03:38,880 Speaker 1: if we do have a successful vaccine and we sort 68 00:03:38,880 --> 00:03:41,800 Speaker 1: of arrived in the summer of one in a in 69 00:03:41,840 --> 00:03:45,160 Speaker 1: a better place medically and socially, thankfully, you know, does 70 00:03:45,240 --> 00:03:47,640 Speaker 1: that come at the expense of the doable goods economy 71 00:03:47,760 --> 00:03:49,440 Speaker 1: or have we just really, you know, have we just 72 00:03:49,680 --> 00:03:53,440 Speaker 1: ignited a self self perpetuating cycle in that part of 73 00:03:53,440 --> 00:03:56,000 Speaker 1: the global economy. At what point do you take a 74 00:03:56,000 --> 00:03:58,840 Speaker 1: message from the bond market that really hasn't participated in 75 00:03:58,880 --> 00:04:01,839 Speaker 1: the rally, the idea the treasury yields have remained so 76 00:04:01,920 --> 00:04:07,560 Speaker 1: suppressed despite the optimism that we've seen everywhere else. You know, 77 00:04:07,560 --> 00:04:09,960 Speaker 1: I think I take a partial message from that, you know, 78 00:04:10,240 --> 00:04:12,800 Speaker 1: I think I do think sped guidance has something to play, 79 00:04:12,800 --> 00:04:15,040 Speaker 1: and I do also think that the fixed income is 80 00:04:15,040 --> 00:04:17,560 Speaker 1: something of a relative value play. But but it's difficult 81 00:04:17,560 --> 00:04:19,440 Speaker 1: for US yields to be much higher than they are 82 00:04:19,480 --> 00:04:22,720 Speaker 1: given where global yields are. But you know, I do 83 00:04:22,839 --> 00:04:27,120 Speaker 1: think that if, if, if these sort of cyclical forces 84 00:04:27,200 --> 00:04:30,720 Speaker 1: do continue, you will have higher U S treasury yields 85 00:04:30,720 --> 00:04:32,800 Speaker 1: to the US tenure will find its way tot once 86 00:04:32,839 --> 00:04:35,200 Speaker 1: fifty or one seventy five at some point next year, 87 00:04:35,600 --> 00:04:38,360 Speaker 1: which you know would hardly be a shocking level. Historically 88 00:04:39,480 --> 00:04:41,599 Speaker 1: wicked dollar started to come through Euro dollar right now. 89 00:04:42,880 --> 00:04:44,360 Speaker 1: Six The line of the stand for so many of 90 00:04:44,400 --> 00:04:46,160 Speaker 1: you at home, I know is one twenty, the high 91 00:04:46,200 --> 00:04:49,800 Speaker 1: after yearn that was the start of September. We know 92 00:04:49,839 --> 00:04:51,240 Speaker 1: that's the line of the stand for the e CP 93 00:04:51,400 --> 00:04:54,320 Speaker 1: because whenever we got to euro dollar one twenty, Mr 94 00:04:54,320 --> 00:04:56,960 Speaker 1: Philip Lane came out and battled it back down again. 95 00:04:56,960 --> 00:04:58,839 Speaker 1: Michael Schaller, let's leave it there, shall we. Just a 96 00:04:58,880 --> 00:05:01,000 Speaker 1: word on the U S order if you can. The 97 00:05:01,040 --> 00:05:03,360 Speaker 1: calls are lining up. It's consensus for you for twenty 98 00:05:03,360 --> 00:05:05,560 Speaker 1: one a week a dollar. Is that the side of 99 00:05:05,560 --> 00:05:09,359 Speaker 1: the trade you're onto? Yeah, I think I think we 100 00:05:09,440 --> 00:05:12,279 Speaker 1: cow against the sixthly sensitive currencies, So I think some 101 00:05:12,360 --> 00:05:14,400 Speaker 1: of the e m courncies can gain a lot against. 102 00:05:14,839 --> 00:05:17,120 Speaker 1: Michael Show of market Field, great to catch how your 103 00:05:17,120 --> 00:05:20,440 Speaker 1: Michael Michael Scharltt Marketfield asked management the CEO and portfolio 104 00:05:20,520 --> 00:05:26,240 Speaker 1: manager listen. So you Ki joined us NOW Banks for 105 00:05:26,240 --> 00:05:29,520 Speaker 1: America Security Senior Hardline to reach out analysts. It's always 106 00:05:29,560 --> 00:05:31,480 Speaker 1: great to get you on the show. Are we shopping 107 00:05:31,560 --> 00:05:34,600 Speaker 1: less or just shopping somewhere else? Liz Well, I think 108 00:05:34,720 --> 00:05:38,000 Speaker 1: where people are shopping has certainly changed. There's been this 109 00:05:38,360 --> 00:05:40,840 Speaker 1: shift to online, and I think some of that has 110 00:05:40,880 --> 00:05:44,080 Speaker 1: been intentional on the part of the retailers. What we've 111 00:05:44,120 --> 00:05:47,920 Speaker 1: seen this holiday season especially is the early start to 112 00:05:48,200 --> 00:05:51,560 Speaker 1: promotional activity, which began, you know, Black Friday sales began. 113 00:05:51,600 --> 00:05:54,160 Speaker 1: It's early, it's November one for a lot of retailers, 114 00:05:54,600 --> 00:05:57,520 Speaker 1: and and the shift has been to promote these you know, 115 00:05:57,600 --> 00:06:00,760 Speaker 1: the online channels, partly for health and safety reasons, to 116 00:06:01,000 --> 00:06:04,040 Speaker 1: you know, to avoid overcrowding in the stores, uh, you know, 117 00:06:04,120 --> 00:06:07,839 Speaker 1: but also because the retailers have been seeing demand moving 118 00:06:07,880 --> 00:06:09,960 Speaker 1: that direction and so they're you know, they're not trying 119 00:06:10,000 --> 00:06:13,080 Speaker 1: to fight against it. So what we've seen a lot 120 00:06:13,160 --> 00:06:16,240 Speaker 1: of this holiday season, in particular, which was relatively new, 121 00:06:16,720 --> 00:06:20,520 Speaker 1: was the move towards um promoting curbside pickup and buy 122 00:06:20,600 --> 00:06:24,080 Speaker 1: online pickup in store, which you know, which which has 123 00:06:24,680 --> 00:06:27,560 Speaker 1: is beneficial to the consumer because they get the products 124 00:06:27,600 --> 00:06:29,520 Speaker 1: sooner than they would if they went for the ship 125 00:06:29,680 --> 00:06:32,679 Speaker 1: to home option. And it's beneficial for the retailer because 126 00:06:32,760 --> 00:06:36,800 Speaker 1: they avoid having to spend the cost of shipping that 127 00:06:36,920 --> 00:06:38,680 Speaker 1: product to the consumer. So it's kind of it's a 128 00:06:38,720 --> 00:06:41,640 Speaker 1: win win situation. But you know, in general, we have 129 00:06:42,320 --> 00:06:45,560 Speaker 1: we've seen a shift in spending also, I mean this 130 00:06:45,720 --> 00:06:50,120 Speaker 1: is broader, longer term, which has been towards home categories, 131 00:06:50,320 --> 00:06:53,159 Speaker 1: away from things like you know, travel and restaurants obviously 132 00:06:53,200 --> 00:06:55,960 Speaker 1: an entertainment and so those dollars have been shifted into 133 00:06:56,000 --> 00:06:58,440 Speaker 1: the home and so we we think that this holiday 134 00:06:58,480 --> 00:07:00,720 Speaker 1: season is really going to be about uh, you know 135 00:07:00,800 --> 00:07:05,200 Speaker 1: these home categories, comfort, yeah, end and and all of that. 136 00:07:06,400 --> 00:07:08,440 Speaker 1: At least that takes us to home Depot, which has 137 00:07:08,480 --> 00:07:13,440 Speaker 1: had a fantastic year through for many people. The vaccine 138 00:07:13,480 --> 00:07:16,360 Speaker 1: is kryptonite for big tech. I wonder what it means 139 00:07:16,440 --> 00:07:19,120 Speaker 1: for the shopping trends that have really been reinforced through 140 00:07:19,200 --> 00:07:21,360 Speaker 1: much of looking ahead to twenty one. What are your 141 00:07:21,400 --> 00:07:24,000 Speaker 1: thoughts on that at the moment? Is sure? I mean 142 00:07:24,080 --> 00:07:26,960 Speaker 1: I think that for for home improvement retailers like like 143 00:07:27,080 --> 00:07:30,280 Speaker 1: home Deboat lows, uh, there has been a big benefit 144 00:07:30,360 --> 00:07:33,000 Speaker 1: this year from people staying at home and investing in 145 00:07:33,080 --> 00:07:36,320 Speaker 1: their homes, making those upgrades, you know, putting doing the 146 00:07:36,360 --> 00:07:38,520 Speaker 1: projects that they had put off for a while. But 147 00:07:38,720 --> 00:07:41,120 Speaker 1: you know, as we look beyond this year and into 148 00:07:41,960 --> 00:07:44,480 Speaker 1: one even post vaccine, you know, one of the big 149 00:07:44,560 --> 00:07:46,559 Speaker 1: factors that we think is going to be a driver 150 00:07:46,800 --> 00:07:48,920 Speaker 1: for next year is the fact that people have moved 151 00:07:49,480 --> 00:07:53,720 Speaker 1: from urban markets into suburban markets. Housing metrics are you know, 152 00:07:53,880 --> 00:07:56,160 Speaker 1: just on fire. And so what that means is there's 153 00:07:56,400 --> 00:08:00,160 Speaker 1: this whole new slew of homeowners that become consumers and 154 00:08:00,240 --> 00:08:03,480 Speaker 1: become home improvement customers for life essentially, So you know, 155 00:08:03,560 --> 00:08:05,560 Speaker 1: for the next few years, that will continue to be 156 00:08:05,640 --> 00:08:08,680 Speaker 1: a benefit. So even though these retailers are up against 157 00:08:08,760 --> 00:08:12,400 Speaker 1: this difficult comparison in one, there are longer term tail 158 00:08:12,440 --> 00:08:14,240 Speaker 1: winds that are still at play here, which are really 159 00:08:14,280 --> 00:08:17,320 Speaker 1: those you know, those housing metrics that continue to trend positively. 160 00:08:17,560 --> 00:08:19,720 Speaker 1: I do have to wonder, though, Liz, a lot of 161 00:08:19,760 --> 00:08:22,760 Speaker 1: people have been home a lot. They can't go on vacation, 162 00:08:23,160 --> 00:08:25,920 Speaker 1: so they're spending their money on the place where they stay. 163 00:08:26,200 --> 00:08:28,760 Speaker 1: When they can go on vacation, when they can leave 164 00:08:28,800 --> 00:08:31,880 Speaker 1: their homes, they will everyone who I've talked to, especially 165 00:08:31,880 --> 00:08:34,439 Speaker 1: if they have small kids, wants to get out. So, 166 00:08:34,520 --> 00:08:37,199 Speaker 1: in other words, how does that challenge the thesis that 167 00:08:37,280 --> 00:08:40,079 Speaker 1: you just presented. Sure, yeah, I mean I think that 168 00:08:40,200 --> 00:08:43,679 Speaker 1: there there will be eventually a return or maybe some 169 00:08:43,840 --> 00:08:46,240 Speaker 1: you know, there's pent up demand for you know, for 170 00:08:46,320 --> 00:08:48,520 Speaker 1: getting out of the house, and so at some point 171 00:08:48,559 --> 00:08:50,360 Speaker 1: people will go back to travel. I think it will 172 00:08:50,440 --> 00:08:53,400 Speaker 1: take time, though, because comfort won't be you know, immediate 173 00:08:53,559 --> 00:08:55,959 Speaker 1: once there's a vaccine. It's going to take uh, you know, 174 00:08:56,120 --> 00:09:00,080 Speaker 1: several months or quarters until people really feel comfortable traveling 175 00:09:00,120 --> 00:09:02,760 Speaker 1: as they normally would. So for you know, for at 176 00:09:02,800 --> 00:09:06,080 Speaker 1: least the next probably the majority of one, there's still 177 00:09:06,120 --> 00:09:10,199 Speaker 1: gonna be this uh you know, this continued time spent 178 00:09:10,320 --> 00:09:12,880 Speaker 1: in the home and focus on the home. But you know, 179 00:09:13,040 --> 00:09:15,839 Speaker 1: after that, yeah, there there is probably going to be 180 00:09:16,040 --> 00:09:19,839 Speaker 1: some period of payback or certainly a deceleration. You know. 181 00:09:19,920 --> 00:09:23,120 Speaker 1: The speed of that deceleration will really be contingent upon 182 00:09:23,280 --> 00:09:26,959 Speaker 1: the speed at which vaccines are distributed widely. Um, you know, 183 00:09:27,040 --> 00:09:30,000 Speaker 1: so I think that there is uh, there's there's risk 184 00:09:30,160 --> 00:09:32,640 Speaker 1: that growth will decelerate. I don't think it's possible for 185 00:09:32,920 --> 00:09:37,120 Speaker 1: improvement spending to continue at this plus thirty percent, you're 186 00:09:37,160 --> 00:09:39,400 Speaker 1: over your growth base. But I also don't think that 187 00:09:39,520 --> 00:09:41,920 Speaker 1: that's what's priced into the stocks. I mean, right now, 188 00:09:42,080 --> 00:09:45,880 Speaker 1: these stocks are trading at pretty modest multiples relative to 189 00:09:45,920 --> 00:09:48,959 Speaker 1: their historical rates, So they're not trading at companies that 190 00:09:49,160 --> 00:09:53,559 Speaker 1: will continue to to put up percent growth. You're year. 191 00:09:54,520 --> 00:09:56,280 Speaker 1: Let's before we let you go. We talked a lot 192 00:09:56,320 --> 00:09:59,720 Speaker 1: about companies retail. Let's pushing people to go to e commas. 193 00:10:00,160 --> 00:10:01,839 Speaker 1: Can you walk me through where the bed, Bath and 194 00:10:01,880 --> 00:10:04,439 Speaker 1: beyond have actually sorted out things in store for when 195 00:10:04,520 --> 00:10:09,400 Speaker 1: things finally reopened properly get a better experience. It's overwhelming 196 00:10:09,520 --> 00:10:13,079 Speaker 1: in there, there's too much stuff. They're doing something about it. 197 00:10:13,640 --> 00:10:16,199 Speaker 1: I agree, yeah, And so they're they're new. The new 198 00:10:16,280 --> 00:10:19,800 Speaker 1: CEO or relatively new CEO is the chief merchant a target, 199 00:10:19,920 --> 00:10:22,439 Speaker 1: and so you know, the experience that he brings to 200 00:10:22,559 --> 00:10:25,920 Speaker 1: that role is certainly what the company needed. And I 201 00:10:26,040 --> 00:10:29,520 Speaker 1: think you're right, like the Florida ceiling stuff your pillows 202 00:10:29,520 --> 00:10:31,959 Speaker 1: that you can't even reach up on the highest possible shelves, 203 00:10:32,040 --> 00:10:34,760 Speaker 1: it's overwhelming, all right. So I think that they're changing 204 00:10:34,800 --> 00:10:37,120 Speaker 1: the merchandizing in a pretty big way. And that's going 205 00:10:37,160 --> 00:10:39,720 Speaker 1: to be a really big part of the turnaround story. 206 00:10:39,840 --> 00:10:41,920 Speaker 1: There Lets it's great to catch up. Good to see 207 00:10:41,920 --> 00:10:48,320 Speaker 1: you listen Oki there a Bank for America Securities makes 208 00:10:48,360 --> 00:10:50,480 Speaker 1: I said that joining us now is John Riding Bring Capital, 209 00:10:50,600 --> 00:10:53,160 Speaker 1: Chief Economic Advisor. John, great to get you back on 210 00:10:53,200 --> 00:10:56,680 Speaker 1: the program sir as always good friend of Bloomberg Surveillance 211 00:10:56,720 --> 00:10:59,559 Speaker 1: over the years. John, the near term risk, I want 212 00:10:59,559 --> 00:11:01,640 Speaker 1: to start. They're a lot of people factor in this 213 00:11:01,720 --> 00:11:05,679 Speaker 1: brighter forward outlook and the emphasizing the near term substantially 214 00:11:05,720 --> 00:11:08,360 Speaker 1: so over the last couple of weeks, John, how much 215 00:11:08,400 --> 00:11:10,679 Speaker 1: gap damage can we do to the outlook over the 216 00:11:10,760 --> 00:11:14,480 Speaker 1: next couple of months, Well, we could do quite a 217 00:11:14,559 --> 00:11:17,800 Speaker 1: bit of damage. The key thing here is that the 218 00:11:17,920 --> 00:11:21,360 Speaker 1: income support for the ten million people are so who 219 00:11:21,440 --> 00:11:27,160 Speaker 1: have lost their jobs since February aventually effectively evaporates mid 220 00:11:27,240 --> 00:11:30,840 Speaker 1: to late December. It's either six months plus the thirteen 221 00:11:30,920 --> 00:11:33,520 Speaker 1: weeks from when they lost their job, or at the 222 00:11:33,920 --> 00:11:37,320 Speaker 1: end of the year, the thirteen week extension program under 223 00:11:37,360 --> 00:11:41,000 Speaker 1: the Cares Act disappears. And that is about thirty billion 224 00:11:41,240 --> 00:11:45,679 Speaker 1: dollars a month of household income and from the macro 225 00:11:45,880 --> 00:11:49,520 Speaker 1: economy perspective, that's not a huge number because of the 226 00:11:49,559 --> 00:11:55,440 Speaker 1: accumulated savings that has gone on through the pandemic period, 227 00:11:55,520 --> 00:11:58,840 Speaker 1: the excess savings, which totals about one point five trillion, 228 00:11:59,160 --> 00:12:01,640 Speaker 1: but those savings are not much of those savings are 229 00:12:01,640 --> 00:12:04,120 Speaker 1: going to be in those distressed households. So those households 230 00:12:04,360 --> 00:12:06,400 Speaker 1: are going to have to cut back on spending. They're 231 00:12:06,440 --> 00:12:09,959 Speaker 1: going to be distressed, and and that is something that 232 00:12:10,120 --> 00:12:13,960 Speaker 1: that could hit demand, not to think to the point 233 00:12:14,000 --> 00:12:17,360 Speaker 1: where we see a negative growth print um, but could 234 00:12:17,400 --> 00:12:20,640 Speaker 1: certainly yes slow growth considerably, which right now we think 235 00:12:20,679 --> 00:12:23,280 Speaker 1: for the fourth quarter at least is looking about six 236 00:12:24,320 --> 00:12:27,760 Speaker 1: real GDP growth. Let me also say, and what's very 237 00:12:27,800 --> 00:12:29,960 Speaker 1: important is when we get a virus and we can 238 00:12:30,040 --> 00:12:33,240 Speaker 1: get the four million people is so in the leisure, hospitality, 239 00:12:33,320 --> 00:12:37,520 Speaker 1: travel industry who really can't return to work, and especially 240 00:12:37,640 --> 00:12:41,040 Speaker 1: with the upswinging the virus infections that we sold through 241 00:12:41,040 --> 00:12:43,160 Speaker 1: in November, those people are going to have to need 242 00:12:43,280 --> 00:12:46,600 Speaker 1: businesses to go back to. So that's another area. How 243 00:12:46,720 --> 00:12:50,880 Speaker 1: much damage can we have to the actual employers, to 244 00:12:50,920 --> 00:12:53,640 Speaker 1: the small businesses that employ many of those people between 245 00:12:53,679 --> 00:12:57,959 Speaker 1: now and then. So there is real hope over the 246 00:12:58,040 --> 00:13:01,679 Speaker 1: horizon six months down road with the vaccines, but the 247 00:13:01,840 --> 00:13:06,240 Speaker 1: next few months are going to be I think quite difficult. John. 248 00:13:06,240 --> 00:13:08,760 Speaker 1: I'm so pleased you started with the disparity beneath the 249 00:13:08,800 --> 00:13:11,480 Speaker 1: aggregate numbers, because the aggregate numbers get talked about way 250 00:13:11,520 --> 00:13:14,800 Speaker 1: too much. A high savings rate. The savings are exactly 251 00:13:14,840 --> 00:13:16,240 Speaker 1: where we don't want them to be there in the 252 00:13:16,280 --> 00:13:18,760 Speaker 1: hands of the people with a lower marginal propensity to spend, 253 00:13:19,280 --> 00:13:21,600 Speaker 1: and the people without the savings, and the people where 254 00:13:21,640 --> 00:13:23,360 Speaker 1: we'd like to see the money as things open up, 255 00:13:23,400 --> 00:13:25,480 Speaker 1: because they're likely the ones to go out there and 256 00:13:25,640 --> 00:13:28,959 Speaker 1: spend it immediately. John. Going forward from here, I think 257 00:13:29,000 --> 00:13:32,160 Speaker 1: if there's any complacency, it's because people have been experienced, 258 00:13:32,200 --> 00:13:34,559 Speaker 1: been conditioned by the experience of the last few months 259 00:13:35,000 --> 00:13:37,480 Speaker 1: where we snap back so quickly, and the recovery in 260 00:13:37,520 --> 00:13:40,920 Speaker 1: America was much much better, bigger and better than I expected, 261 00:13:40,960 --> 00:13:43,240 Speaker 1: and many others to John. And it's a belief that 262 00:13:43,280 --> 00:13:44,960 Speaker 1: if we go into a small down term will come 263 00:13:44,960 --> 00:13:46,959 Speaker 1: out of it the other side just as fast. Is 264 00:13:46,960 --> 00:13:50,520 Speaker 1: there any reasons to believe that wouldn't happen, John, Well, 265 00:13:50,720 --> 00:13:53,839 Speaker 1: as I said, it really matters about either business is 266 00:13:53,920 --> 00:13:56,719 Speaker 1: going to be there to re employ people. So we 267 00:13:56,840 --> 00:13:59,920 Speaker 1: do have a very difficult period markets where we need 268 00:14:00,040 --> 00:14:05,760 Speaker 1: to work things out. For example, commercial rents are what's 269 00:14:05,760 --> 00:14:07,800 Speaker 1: going to happen. There was a report out from the 270 00:14:07,800 --> 00:14:10,480 Speaker 1: New York City Hospitality Alliance a few weeks ago that 271 00:14:10,520 --> 00:14:15,719 Speaker 1: said eight percent of renters commercial renters in New York 272 00:14:15,760 --> 00:14:20,280 Speaker 1: City couldn't make full or whole payment of the rent 273 00:14:21,200 --> 00:14:24,160 Speaker 1: or partial payment of the rent in October. So what's 274 00:14:24,160 --> 00:14:27,280 Speaker 1: going to happen to those businesses is the accumulated rent 275 00:14:27,320 --> 00:14:30,400 Speaker 1: bird and going to be a major obstacle for them reopening. 276 00:14:30,440 --> 00:14:32,560 Speaker 1: Are they're going to throw in the towels sadly when 277 00:14:33,280 --> 00:14:36,920 Speaker 1: the end is very much in sight. We don't know, 278 00:14:37,960 --> 00:14:41,160 Speaker 1: but that's important. It's not just about demand. It's about 279 00:14:41,400 --> 00:14:45,520 Speaker 1: businesses to employ those ten million people who will be 280 00:14:45,680 --> 00:14:48,280 Speaker 1: ready and able to go back to work once the 281 00:14:48,440 --> 00:14:51,680 Speaker 1: vaccine is available. John, As you talk, I think about 282 00:14:51,720 --> 00:14:54,000 Speaker 1: what Katherine Man of City Group was saying last week, 283 00:14:54,080 --> 00:14:58,040 Speaker 1: which is the economy that emerges from COVID will look 284 00:14:58,160 --> 00:15:01,160 Speaker 1: very different, in part because the biggest companies have had 285 00:15:01,200 --> 00:15:03,880 Speaker 1: the best chance of survival. Well, the smaller ones have 286 00:15:03,960 --> 00:15:06,520 Speaker 1: gone out of business at a record pace, And I 287 00:15:06,680 --> 00:15:10,520 Speaker 1: do wonder what is the long term structural economic damage 288 00:15:11,000 --> 00:15:14,240 Speaker 1: of this entire swath of smaller companies that have gotten 289 00:15:14,280 --> 00:15:16,800 Speaker 1: wiped out, given the fact that they account for so 290 00:15:17,040 --> 00:15:19,480 Speaker 1: much of the hiring in the United States and elsewhere. 291 00:15:20,360 --> 00:15:22,920 Speaker 1: But that's an absolutely great point least, because if you 292 00:15:23,000 --> 00:15:27,360 Speaker 1: look at the US labor market, about half of people 293 00:15:27,440 --> 00:15:31,240 Speaker 1: employed work for big businesses and the other half work 294 00:15:31,360 --> 00:15:35,440 Speaker 1: for small businesses. So we can't have enough expansion in 295 00:15:35,640 --> 00:15:40,480 Speaker 1: big business activity to employ those people. Small businesses really 296 00:15:40,560 --> 00:15:44,200 Speaker 1: are a great part of the entrepreneurial side of the 297 00:15:44,320 --> 00:15:47,920 Speaker 1: US economy, and I have no doubt that two, three 298 00:15:48,000 --> 00:15:50,200 Speaker 1: or four years down the road, whatever the damage has 299 00:15:50,240 --> 00:15:53,880 Speaker 1: done over the next few months, entrepreneurial America will come 300 00:15:54,000 --> 00:15:57,240 Speaker 1: back and will come back strongly. But that's a very 301 00:15:57,360 --> 00:16:00,320 Speaker 1: long time frame for someone who has lost their job 302 00:16:00,680 --> 00:16:05,280 Speaker 1: and doesn't have that prospect of getting back to immediate employment. 303 00:16:05,360 --> 00:16:08,240 Speaker 1: So yes, we do have a to use the rather 304 00:16:08,440 --> 00:16:12,800 Speaker 1: overworked term of ideas from Charles Dickens, a tale of 305 00:16:13,080 --> 00:16:18,920 Speaker 1: two economies. We do have the large, big tech, large 306 00:16:19,040 --> 00:16:23,840 Speaker 1: cap economy that's adjusted well through this in terms of 307 00:16:24,000 --> 00:16:26,560 Speaker 1: e commerce and some of the big names of gain business. 308 00:16:26,880 --> 00:16:29,400 Speaker 1: And then on the other hand, you've got the small businesses, 309 00:16:30,040 --> 00:16:33,160 Speaker 1: especially in restaurants, host in the hospitality industry, and some 310 00:16:33,240 --> 00:16:35,760 Speaker 1: of the larger business in that area, like airlines, which 311 00:16:35,800 --> 00:16:39,120 Speaker 1: are really really struggling. And I think that that's got 312 00:16:39,200 --> 00:16:42,360 Speaker 1: to be a major priority. If we don't get something 313 00:16:42,440 --> 00:16:44,840 Speaker 1: done in this lame duck session, and it's a very 314 00:16:44,960 --> 00:16:47,360 Speaker 1: short lame duck session with an awful lot to do 315 00:16:47,520 --> 00:16:50,160 Speaker 1: in it haven't been we would have a government shutdown 316 00:16:50,200 --> 00:16:52,000 Speaker 1: in the midst of all of this. If we don't 317 00:16:52,040 --> 00:16:54,160 Speaker 1: get that done. That has to be the numble one 318 00:16:54,280 --> 00:17:02,080 Speaker 1: focused alongside virus vaccine distribution for the incoming administration. Hi, John, 319 00:17:02,200 --> 00:17:04,359 Speaker 1: great to give you on the program. Stay well, I 320 00:17:04,400 --> 00:17:06,160 Speaker 1: send my best of the family. Won't you jump riding 321 00:17:06,200 --> 00:17:11,920 Speaker 1: the up bring capital? Thank you John, joining us down. 322 00:17:12,040 --> 00:17:14,560 Speaker 1: We really want to take a look at this vaccine distribution, 323 00:17:14,600 --> 00:17:18,480 Speaker 1: the moderna news really accelerating that timeframe, Operation Warp Speed 324 00:17:18,920 --> 00:17:22,480 Speaker 1: taking a little bit more shape. Dr Howard Foreman joining 325 00:17:22,600 --> 00:17:26,639 Speaker 1: Yale University, Professor of Public Health and Economics and Radiology. 326 00:17:26,760 --> 00:17:29,120 Speaker 1: What else. Dr Foreman, thank you so much for being 327 00:17:29,359 --> 00:17:31,680 Speaker 1: with us. I want to start with this Operation Warp 328 00:17:31,800 --> 00:17:35,200 Speaker 1: Speed and where we are based on the application that 329 00:17:35,240 --> 00:17:38,440 Speaker 1: we're expecting from moderna based on what the FDA has signaled. 330 00:17:38,840 --> 00:17:40,960 Speaker 1: When do you think we will start to get a 331 00:17:41,080 --> 00:17:43,439 Speaker 1: trickle turn into a flood where we get a real 332 00:17:43,560 --> 00:17:47,920 Speaker 1: critical mass of people in the United States being inoculated. Look, 333 00:17:48,000 --> 00:17:50,720 Speaker 1: I'm one of the more optimistic people who believe that 334 00:17:50,800 --> 00:17:54,680 Speaker 1: we're going to see tens of millions of doses starting 335 00:17:54,840 --> 00:18:00,240 Speaker 1: to be used in January. February will obviously see something 336 00:18:00,280 --> 00:18:03,760 Speaker 1: at the end of this month, probably at least, you know, 337 00:18:04,480 --> 00:18:07,320 Speaker 1: several million, But we're gonna see tens of millions starting 338 00:18:07,400 --> 00:18:11,040 Speaker 1: off in January. Uh, And it is not inconceivable that 339 00:18:11,200 --> 00:18:15,320 Speaker 1: will have more doses than demand by the time we 340 00:18:15,440 --> 00:18:17,760 Speaker 1: get this summer, and that would be a sort of 341 00:18:17,840 --> 00:18:19,560 Speaker 1: good thing, But then we have to work on the 342 00:18:19,600 --> 00:18:22,600 Speaker 1: whole issue of vaccine hesitancy. All right, let's let's tease 343 00:18:22,640 --> 00:18:25,679 Speaker 1: out some of this aside from the demand side, when 344 00:18:25,760 --> 00:18:28,600 Speaker 1: you talk about the supply coming on. Joshua Sharfstein was 345 00:18:28,760 --> 00:18:31,200 Speaker 1: on earlier this morning, and he was saying he's concerned 346 00:18:31,240 --> 00:18:34,520 Speaker 1: about the number of individuals out there, the infrastructure to 347 00:18:34,600 --> 00:18:38,400 Speaker 1: deliver the inoculations in a timely manner. Is that something 348 00:18:38,440 --> 00:18:41,280 Speaker 1: that concerns you as well, it's you know, we were 349 00:18:41,320 --> 00:18:45,119 Speaker 1: all worried about that, but the first trench of vaccinations 350 00:18:45,320 --> 00:18:47,760 Speaker 1: are sort of easier for us to do because they're 351 00:18:47,800 --> 00:18:50,720 Speaker 1: going to be healthcare workers who work within healthcare systems 352 00:18:51,119 --> 00:18:54,800 Speaker 1: that generally already have an infrastructure and apparatus in place, 353 00:18:55,200 --> 00:18:58,119 Speaker 1: and they're going to hopefully be nursing homes. And for 354 00:18:58,320 --> 00:19:02,000 Speaker 1: vulnerable individuals living in an institutions for which we also 355 00:19:02,160 --> 00:19:05,760 Speaker 1: have an apparatus in place. It's the next step after 356 00:19:05,840 --> 00:19:07,960 Speaker 1: that that we should all be most concerned about. But 357 00:19:07,960 --> 00:19:10,920 Speaker 1: because we really want to get the vulnerable individuals in 358 00:19:10,960 --> 00:19:14,320 Speaker 1: the community have suffered so much, the people of color, 359 00:19:14,800 --> 00:19:17,640 Speaker 1: poor people, people that that have to risk their life 360 00:19:17,720 --> 00:19:21,480 Speaker 1: every day as an essential worker, but not a healthcare worker, 361 00:19:21,560 --> 00:19:23,520 Speaker 1: and how do we reach them. That's where it starts 362 00:19:23,560 --> 00:19:27,080 Speaker 1: getting more challenging. Is the issue that people don't have 363 00:19:27,280 --> 00:19:30,520 Speaker 1: confidence necessarily in a vaccine that's rushed out, or is 364 00:19:30,600 --> 00:19:34,280 Speaker 1: the issue that there isn't the medical infrastructure built into 365 00:19:34,359 --> 00:19:37,399 Speaker 1: some of those areas. This idea of people having a 366 00:19:37,480 --> 00:19:43,200 Speaker 1: primary care physician or somebody that they regularly contact. Look, 367 00:19:43,240 --> 00:19:46,080 Speaker 1: I think urban areas that have well developed public health 368 00:19:46,200 --> 00:19:48,640 Speaker 1: infrastructure are going to be in a much better position 369 00:19:48,720 --> 00:19:50,840 Speaker 1: to do this. And I think the fact that the 370 00:19:50,920 --> 00:19:54,119 Speaker 1: federal government has already contracted with I believe CBS and 371 00:19:54,200 --> 00:19:58,480 Speaker 1: Walgreens as part of the distribution plan abodes well for 372 00:19:58,600 --> 00:20:01,680 Speaker 1: urban areas. I think getting out to rural areas. And then, 373 00:20:01,720 --> 00:20:04,600 Speaker 1: as you point out, this issue of vaccine hesitancy should 374 00:20:04,680 --> 00:20:08,320 Speaker 1: should concern everybody. We have witnessed over the last several months, 375 00:20:08,880 --> 00:20:12,160 Speaker 1: um a schism in this country where some people are 376 00:20:12,280 --> 00:20:16,240 Speaker 1: adherents of of good public health practices and some people 377 00:20:16,320 --> 00:20:20,280 Speaker 1: think that it is a political statement to UM to 378 00:20:20,440 --> 00:20:22,920 Speaker 1: basically give up on all those public health practices. We 379 00:20:23,040 --> 00:20:26,080 Speaker 1: need everybody to want to get this vaccination. Well, how 380 00:20:26,160 --> 00:20:28,360 Speaker 1: do you combat that? I mean, we've had anti vaxxers 381 00:20:28,440 --> 00:20:30,800 Speaker 1: for years. I mean how do you combat that, especially 382 00:20:30,840 --> 00:20:33,040 Speaker 1: at a time when there is the perception that this 383 00:20:33,160 --> 00:20:37,720 Speaker 1: has been rushed through. So I think consistent messaging from 384 00:20:37,840 --> 00:20:41,119 Speaker 1: leadership all the way on down. It has to be bipartisan. 385 00:20:41,560 --> 00:20:43,800 Speaker 1: It has to come from the president, it has to 386 00:20:43,840 --> 00:20:46,159 Speaker 1: come from the vice president, It has to come from 387 00:20:46,200 --> 00:20:48,679 Speaker 1: all public health officials, it has to come from all 388 00:20:48,760 --> 00:20:51,880 Speaker 1: state officials. Right now, we know that if we even 389 00:20:51,960 --> 00:20:55,680 Speaker 1: look among red states, there are some red states where 390 00:20:55,680 --> 00:20:58,520 Speaker 1: the messaging is excellent. There are some red states where 391 00:20:58,520 --> 00:21:01,680 Speaker 1: the messaging is not excellent right now, Um, And so 392 00:21:02,240 --> 00:21:03,880 Speaker 1: we've got to get over that. We've got to get 393 00:21:03,960 --> 00:21:06,720 Speaker 1: past this sort of partisan divide in our country and 394 00:21:06,840 --> 00:21:09,800 Speaker 1: get back to a point where everybody is basically messaging 395 00:21:09,920 --> 00:21:13,600 Speaker 1: consistent evidence and fact and allowing the public to make 396 00:21:13,680 --> 00:21:16,480 Speaker 1: a good decision, which in this case is about a 397 00:21:16,600 --> 00:21:20,240 Speaker 1: vaccine that is highly highly effective and has very very 398 00:21:20,400 --> 00:21:25,480 Speaker 1: low uh react to genicity or side effects. How politically 399 00:21:25,560 --> 00:21:28,760 Speaker 1: fraught is it for big companies to get chunks of 400 00:21:28,880 --> 00:21:32,159 Speaker 1: doses basically to distribute to their workforce that they can 401 00:21:32,200 --> 00:21:34,360 Speaker 1: get back up in business. I'm sure from an economic 402 00:21:34,440 --> 00:21:37,040 Speaker 1: perspective it would help people get back into the office 403 00:21:37,080 --> 00:21:39,520 Speaker 1: and increase productivity. But is that something that could be 404 00:21:39,960 --> 00:21:43,240 Speaker 1: a politically difficult thing to swallow, especially in the initial 405 00:21:43,280 --> 00:21:47,440 Speaker 1: phases of the vaccine distribution. So in the initial phases, certainly, 406 00:21:47,560 --> 00:21:50,359 Speaker 1: But but again I think that really helps the cause 407 00:21:50,600 --> 00:21:55,120 Speaker 1: is if employers are able to facilitate this, if they 408 00:21:55,280 --> 00:21:59,479 Speaker 1: too message this in a nonpartisan manner, if they are 409 00:21:59,520 --> 00:22:02,840 Speaker 1: able to a message to their employees that this is 410 00:22:02,920 --> 00:22:05,119 Speaker 1: something that they're providing to them as a benefit and 411 00:22:05,200 --> 00:22:08,800 Speaker 1: facilitating it. That can be very very helpful. All right, 412 00:22:08,840 --> 00:22:11,280 Speaker 1: going forward, when do you think that we'll reach some 413 00:22:11,440 --> 00:22:13,800 Speaker 1: sort of full herd immunity. Do you think that that 414 00:22:13,960 --> 00:22:16,119 Speaker 1: is a time in the near future where we can 415 00:22:16,160 --> 00:22:18,639 Speaker 1: stop wearing masks and actually get together and hug each other. 416 00:22:19,920 --> 00:22:25,480 Speaker 1: I mean just generally, Look, yeah, right, Um, herd immunity 417 00:22:25,840 --> 00:22:30,800 Speaker 1: is about me being vaccinated, but protecting people who are 418 00:22:30,880 --> 00:22:33,800 Speaker 1: not vaccinated, And unfortunately, I think that's going to be 419 00:22:33,880 --> 00:22:38,000 Speaker 1: a long way off, a lot further off than people realize. 420 00:22:38,040 --> 00:22:40,399 Speaker 1: And let me just point this out. We don't know 421 00:22:40,640 --> 00:22:45,119 Speaker 1: whether the Maderna vaccine nor the Fiser vaccine provides true 422 00:22:45,240 --> 00:22:48,560 Speaker 1: sterilizing immunity, which is what you need for her immunity. 423 00:22:49,200 --> 00:22:52,680 Speaker 1: So her immunity means that I cannot infect you. What 424 00:22:52,880 --> 00:22:55,600 Speaker 1: we know about these two vaccines so far is that 425 00:22:55,800 --> 00:23:00,680 Speaker 1: they definitely protect against moderate and severe infection uh in 426 00:23:00,800 --> 00:23:05,639 Speaker 1: in both cases I think protect against death. Um. That 427 00:23:05,960 --> 00:23:08,640 Speaker 1: is huge for the individual. It doesn't mean that we'll 428 00:23:08,680 --> 00:23:11,560 Speaker 1: achieve her immunity, because it may be the case that 429 00:23:12,119 --> 00:23:16,159 Speaker 1: half the population that gets vaccinated still gets infected, but 430 00:23:16,280 --> 00:23:18,960 Speaker 1: they just have no symptoms and therefore they may still 431 00:23:19,080 --> 00:23:22,600 Speaker 1: be part of the feedstock of continued infection. We need 432 00:23:22,720 --> 00:23:25,800 Speaker 1: those answers and those those may not come for several months. 433 00:23:26,400 --> 00:23:29,000 Speaker 1: Dr Howard Foreman, thank you so much of being with 434 00:23:29,240 --> 00:23:32,400 Speaker 1: us of Yale University. Certainly people are putting their hope 435 00:23:32,800 --> 00:23:36,000 Speaker 1: in the vaccines coming out and putting an end to 436 00:23:36,080 --> 00:23:37,720 Speaker 1: some of the pandemic that we have seen so far 437 00:23:37,840 --> 00:23:40,359 Speaker 1: that seems to be accelerating and worsening throughout the United 438 00:23:40,400 --> 00:23:44,159 Speaker 1: States and around the world. Thanks for listening to the 439 00:23:44,200 --> 00:23:50,680 Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 440 00:23:51,080 --> 00:23:55,280 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 441 00:23:55,359 --> 00:23:59,560 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 442 00:24:00,040 --> 00:24:01,119 Speaker 1: I'm Bloomberg Radio.