WEBVTT - Surveillance: Optimistic Outlook With Kostin 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.280 Bloomberg dot Com, and of course on the Bloomberg Right now, 0:00:27.440 --> 0:00:30.840 the immediacy that we're getting from hospital professionals, including the 0:00:30.920 --> 0:00:34.120 leadership at monts Snay in New York and today at 0:00:34.120 --> 0:00:38.199 Beth Israel Deaconess Lady up in Boston, we welcome all 0:00:38.240 --> 0:00:41.159 of you on radio and television. To people in the trenches, 0:00:41.200 --> 0:00:43.560 that would be the Lieutenant Governor of the Empire State, 0:00:43.920 --> 0:00:46.920 Kathy Hukel joins us this morning. Kathy, if you read 0:00:46.960 --> 0:00:50.680 the Buffalo News, it's writing your face. It's right in 0:00:50.680 --> 0:00:55.040 our face nationwide. What is the best practice now for 0:00:55.200 --> 0:01:02.000 politicians to contain the great hospitalization we're seeing? Well, we 0:01:02.080 --> 0:01:04.080 have a strategy, Tom, and thank you everyone for having 0:01:04.200 --> 0:01:06.920 back on this once again Western New York where I 0:01:06.959 --> 0:01:10.399 live Erie County, Buffalo. We now have a nine point 0:01:10.520 --> 0:01:13.920 four percent infection rate, and then from just two and 0:01:13.920 --> 0:01:16.640 a half three percent of a month ago. So I 0:01:16.680 --> 0:01:18.399 want to just point out first of all these numbers 0:01:18.400 --> 0:01:21.559 can viral out of controls very quickly, and what that does, 0:01:21.720 --> 0:01:24.280 it's an infection rate that leads to an increased number 0:01:24.280 --> 0:01:27.960 of hospitalizations. And that is our greatest fear. Governor Culma 0:01:28.000 --> 0:01:29.760 and I have said this from the beginning. Our fear 0:01:29.880 --> 0:01:33.400 is overwhelming the hospital system. So what we're doing is 0:01:33.480 --> 0:01:37.080 first of all calling back retired nurses and doctors, asking 0:01:37.120 --> 0:01:39.480 them to enlist again and help us in this battle, 0:01:39.880 --> 0:01:43.720 but also asking every single hospital to ensure that they 0:01:43.760 --> 0:01:47.800 have surge capacity. We had to do this in the spring. 0:01:47.880 --> 0:01:50.240 We know how it's done, and we can do this 0:01:50.320 --> 0:01:53.160 once again. Thirdly, we also want to make sure they 0:01:53.160 --> 0:01:56.640 have enough protective equipment. Remember how frightening it was back 0:01:56.720 --> 0:01:59.440 when March and April we were scouring the planet in 0:01:59.480 --> 0:02:01.760 search of something as simple as a mask. We couldn't 0:02:01.800 --> 0:02:04.280 get them from anywhere. So we're making sure they have 0:02:04.400 --> 0:02:07.720 those supplies. But what something we can't control, which is 0:02:07.840 --> 0:02:12.280 very frightening, the staffing. The staffing. Now, these are individuals 0:02:12.320 --> 0:02:14.640 who have been in this battle and the front minds 0:02:14.680 --> 0:02:18.000 of the terrific war for month. They're exhausted, many of 0:02:18.040 --> 0:02:20.520 them are sick themselves. May them don't want to expose 0:02:20.560 --> 0:02:23.280 their family members any longer, and that is where we're 0:02:23.280 --> 0:02:26.000 having a real crisis point. And early on we were 0:02:26.000 --> 0:02:28.960 able to enlist thirty thousand people from across the country 0:02:28.960 --> 0:02:32.200 who volunteered their time to come to the epicenter of 0:02:32.240 --> 0:02:35.120 the pandemic, New York City. Those people are now needed 0:02:35.160 --> 0:02:37.960 in their homes in North Dakota, doth Dakota, and Oklahoma, 0:02:38.120 --> 0:02:40.600 places where it's surging there as well. So that's what 0:02:40.639 --> 0:02:43.400 we're concerned about. We can create enough beds, we can 0:02:43.440 --> 0:02:45.840 put up field hospitals if we have to, but we 0:02:45.880 --> 0:02:48.440 have to make sure that they're properly staffed. That's the 0:02:48.480 --> 0:02:51.040 incredible stress on the health care system that we're seeing 0:02:51.040 --> 0:02:54.399 across the nation and increasingly yet again in New York. 0:02:54.440 --> 0:02:57.440 From the financial perspective, there is a question of how 0:02:57.560 --> 0:02:59.760 much money is needed, how soon. And I know you've 0:02:59.760 --> 0:03:01.880 come the show quite a bit and talked about the 0:03:01.919 --> 0:03:05.520 needs financially for New York State. Mitch McConnell currently putting 0:03:05.520 --> 0:03:07.720 out a bill, a skinny bill to get done before 0:03:07.720 --> 0:03:09.760 the end of the year that would not include funding 0:03:10.120 --> 0:03:12.840 for our for your government in New York State or 0:03:12.919 --> 0:03:16.720 other local governments. My question is how eminently do you 0:03:16.800 --> 0:03:19.680 need that money. If you do not get it before 0:03:19.720 --> 0:03:23.560 the end of the year, what gets cut first. We 0:03:23.600 --> 0:03:26.240 needed this money yesterday. And I don't still do not 0:03:26.360 --> 0:03:29.440 understand the life of me how Mitch McConnell and the 0:03:29.520 --> 0:03:32.960 Center Republicans can be so stinny. This is a once 0:03:33.000 --> 0:03:36.880 in a year event. It is global pandemic. And I 0:03:36.880 --> 0:03:38.520 don't even know how they think we're going to get 0:03:38.520 --> 0:03:40.920 the vaccination. About how they're going to get the vaccine 0:03:41.000 --> 0:03:43.280 is the stupid If they don't give us money, they're 0:03:43.360 --> 0:03:46.840 they're being The governor is governor Promo is head of 0:03:46.880 --> 0:03:51.760 the National Governor's Associations, a bipartisan group. Yesterday they sent 0:03:51.880 --> 0:03:54.600 a letter thing to the Settle government. We need money 0:03:54.680 --> 0:03:56.640 to be able to distribute. You're not going to do 0:03:56.680 --> 0:03:59.760 it nationwide. Okay, fine, you didn't help us with the testing. 0:04:00.120 --> 0:04:02.720 You left us on our own throughout this entire pandemic. 0:04:03.160 --> 0:04:05.480 You have to give us money to make up for 0:04:05.520 --> 0:04:07.800 the loss in revenues and the way we've been having 0:04:07.800 --> 0:04:10.680 extraordinary expenses. So, Lisa, I don't I'm not going to 0:04:10.840 --> 0:04:13.200 stay here. What has to be cut. All I know 0:04:13.320 --> 0:04:16.000 is it's not acceptable and everyone should be railing to 0:04:16.080 --> 0:04:19.880 convince the Republicans and bitch mcconnells do this for this country. 0:04:19.960 --> 0:04:23.040 If we don't get this crisis under control, our economy 0:04:23.160 --> 0:04:26.000 is going to implode. Conversely, if we can wrap our 0:04:26.080 --> 0:04:28.760 arms around this, get enough money to the states like 0:04:28.839 --> 0:04:31.599 New York so we can have mass vaccination as soon 0:04:31.600 --> 0:04:35.000 as it's humanly possible, we can super charge our economy 0:04:35.040 --> 0:04:38.520 once again, and that's what everyone wants. Lustening government. A 0:04:38.560 --> 0:04:41.800 couple of things to unpack here. One are you saying 0:04:42.200 --> 0:04:45.960 that without state aid from the federal level, you can't 0:04:45.960 --> 0:04:49.880 distribute this vaccine. No, I didn't say that. I'm just 0:04:49.920 --> 0:04:53.120 saying that we definitely need money to have a robust, 0:04:53.360 --> 0:04:55.760 aggressive plan. We will do it. This is New York, 0:04:56.160 --> 0:04:58.040 we'll figure it out. We are left on our own 0:04:58.400 --> 0:05:03.040 throughout this entire pandemic. Is unfortunate and it never should 0:05:03.080 --> 0:05:04.640 have been that way. We should have had a national 0:05:04.720 --> 0:05:07.320 response to this crisis, but we didn't. Failure of the 0:05:07.360 --> 0:05:10.800 battle government, failure of the Trump administration. So we're the 0:05:10.800 --> 0:05:13.120 governor and I've been working on this. We're ready for this. 0:05:13.200 --> 0:05:15.719 We can handle this, but it's going to be very 0:05:15.760 --> 0:05:19.800 expensive to get this vaccination out to student, to literally 0:05:19.880 --> 0:05:23.440 twenty million people, not once, but twice. And that's the 0:05:23.520 --> 0:05:26.000 challenge that we're facing. So the reality is, if you 0:05:26.080 --> 0:05:27.919 want to keep funding we want to keep paying for 0:05:27.960 --> 0:05:29.960 health care workers and people who do that, we need 0:05:30.000 --> 0:05:33.000 money from the Settle government. We need their help. I 0:05:33.080 --> 0:05:35.320 understand you waging lead the McConnell to come to the table. 0:05:35.680 --> 0:05:38.160 Have you urged speaking belows you to do the same thing, 0:05:38.279 --> 0:05:40.839 who for many people is perhaps aiming a little bit 0:05:40.880 --> 0:05:43.120 too high, particularly over the last couple of months going 0:05:43.200 --> 0:05:47.360 into the election. I don't know what is too high 0:05:47.480 --> 0:05:50.840 during a global pandemic. These are extraordinary costs. We're not 0:05:50.920 --> 0:05:54.200 asking them to help us balance our annual budget. We've 0:05:54.240 --> 0:05:56.400 had to incur costs that no one ever could have 0:05:56.440 --> 0:05:58.840 foreseen when they did their budgeting. And now it's not 0:05:58.960 --> 0:06:01.880 just the Blue states. Never Mitch McConnell said, why will 0:06:01.960 --> 0:06:05.760 we bail out the Blue states meaning New York, California, Connecticut, 0:06:05.800 --> 0:06:09.280 New Jersey. Now it is a national phenomenon and we 0:06:09.320 --> 0:06:12.560 need them to assist every state because this is going 0:06:12.600 --> 0:06:14.599 to hold back our economy. And one of the problems 0:06:14.600 --> 0:06:17.800 we have is that small businesses in particular, and I 0:06:17.880 --> 0:06:20.680 toured the southern tier west of New York yesterday to 0:06:20.800 --> 0:06:24.400 visit small businesses. They are barely clinging on for life, 0:06:24.839 --> 0:06:28.520 and the programs that helped them before, the unemployment program 0:06:28.600 --> 0:06:31.480 from the Settle government that assisted businesses as well business 0:06:31.480 --> 0:06:34.280 owners as well as for their employees. That's all going 0:06:34.320 --> 0:06:37.920 to expire in another within weeks. When that money's gone. 0:06:38.279 --> 0:06:39.760 Who do you think is going to be doing the 0:06:39.760 --> 0:06:42.760 consumer consumer purchasing. We need to keep our economy going. 0:06:42.800 --> 0:06:45.200 It's going to all dry up. Cathey, we always appreciate 0:06:45.240 --> 0:06:48.080 you dropping by. We appreciate it. Thank you time this morning, Cathee. 0:06:48.080 --> 0:06:54.560 How cool that New York's lieutenant governor We're not. Julie 0:06:54.560 --> 0:06:57.760 Norman joins us. She's a U cell in London, expert 0:06:57.839 --> 0:07:01.120 on all sorts of issues of distress in politics, and 0:07:01.160 --> 0:07:03.360 one of that is one of those, I should say, 0:07:03.440 --> 0:07:07.479 is their study of activism. Professor no Norman, thank you 0:07:07.520 --> 0:07:11.840 for joining us on the president elect. Liberals. I guess 0:07:11.840 --> 0:07:15.320 they're called progressives now, but I like the word liberals better. 0:07:15.960 --> 0:07:20.040 And then this idea of activism, what is the activism 0:07:20.160 --> 0:07:23.640 this president will face? We so m I think that's 0:07:23.640 --> 0:07:26.760 a really good question. I think that will see different 0:07:26.880 --> 0:07:30.880 kinds of pressures on Biden from both the left and 0:07:31.080 --> 0:07:34.320 the right. We know that there will be, um, you know, 0:07:34.320 --> 0:07:37.840 pressure on Biden to move forward on campaign promises that 0:07:37.920 --> 0:07:43.480 he made regarding racial justice and addressing entrenched inequalities. And 0:07:43.600 --> 0:07:45.440 I think a lot of that will take the form 0:07:45.720 --> 0:07:49.720 of more positive activism the sense of like political pressure. 0:07:50.080 --> 0:07:52.520 But we'll certainly get some other kinds of pressure from 0:07:52.560 --> 0:07:54.520 the left as well, which we've already seen in some 0:07:54.640 --> 0:07:58.600 comments in response to his nominees so far. But I 0:07:58.640 --> 0:08:01.720 do think he has a very pragmatic team and place. 0:08:02.360 --> 0:08:05.400 Um He's putting in a lot of people who resonate 0:08:05.480 --> 0:08:08.440 with UM an individual kind of across the spectrum. So 0:08:08.520 --> 0:08:11.240 we'll see what kind of mode that takes. There's a 0:08:11.440 --> 0:08:16.640 Washington word pragmatic in one way, Will moderate Democrats be 0:08:16.800 --> 0:08:24.320 pragmatic pragmatic with their more boisterous brethren. Yeah, Well, I 0:08:24.360 --> 0:08:27.120 think it's just going to be what actually what the 0:08:27.120 --> 0:08:31.000 Biden administration is actually able to do. We know that 0:08:31.120 --> 0:08:34.600 they will most likely be somewhat constrained to a more 0:08:34.720 --> 0:08:38.160 moderate agenda, as it is with with looking like a 0:08:38.240 --> 0:08:42.640 most most like Republican Congress. UM. If they are, however, 0:08:42.760 --> 0:08:45.920 able to give some nods to some issues on the 0:08:45.960 --> 0:08:48.960 progressive agenda. I think one area will they'll have the 0:08:49.120 --> 0:08:52.880 most ability to do that is with climate change. We've 0:08:52.880 --> 0:08:55.880 already saw the seen Biden a point John Terry is 0:08:55.920 --> 0:08:58.920 a new climates are um. He will most likely use 0:08:59.000 --> 0:09:03.520 executive action to unwind some of the regulations that Trump 0:09:03.559 --> 0:09:05.800 put a stop in regards to the environment. So I 0:09:05.840 --> 0:09:08.400 think so do it he can in some areas that 0:09:08.800 --> 0:09:11.720 really are important to the progressives in the party, but 0:09:11.960 --> 0:09:14.160 it's also clear that he probably won't move as far 0:09:14.200 --> 0:09:16.800 in other areas that someone the left would want, and 0:09:16.840 --> 0:09:20.160 perhaps that includes China, although this has been a pipe 0:09:20.240 --> 0:09:23.080 artisan issue. We saw the New York Times interview with 0:09:23.160 --> 0:09:27.240 Thomas Friedman with President elect Joe Biden talking about he 0:09:27.280 --> 0:09:30.400 does not plan to roll back the tariffs on China 0:09:30.440 --> 0:09:32.880 in short order. His first order of affairs will be 0:09:32.960 --> 0:09:36.240 to re establish the ties with allies. What would the 0:09:36.320 --> 0:09:40.200 United Front look like when it comes to tackling the 0:09:40.280 --> 0:09:43.920 China issue as they define it? Yeah, wells, I think 0:09:43.960 --> 0:09:46.600 this is the area where we won't see as much 0:09:46.640 --> 0:09:49.720 of their real substantive policy shift as much as just 0:09:49.840 --> 0:09:53.760 the shift in style. The Bien administration will most likely 0:09:53.840 --> 0:09:58.600 maintain a somewhat tough on China approach, especially in regards 0:09:58.640 --> 0:10:02.600 to issues like secure city and technology, but they will 0:10:02.679 --> 0:10:05.880 be some room open for engagement again on issues like 0:10:05.920 --> 0:10:09.400 climate change, again on issues like trade, and also doing 0:10:09.440 --> 0:10:12.800 so in a way that's much more cooperative with allies, 0:10:12.880 --> 0:10:17.520 especially European allies, rather than just an American first approach 0:10:17.640 --> 0:10:20.240 or a bullying or strong arm not strong arming of 0:10:20.240 --> 0:10:23.880 other countries. Professor, we're talking about policy in the future. Obviously, 0:10:24.000 --> 0:10:27.360 the President elect is putting together his candidate, putting together 0:10:27.400 --> 0:10:29.840 his cabinet, and I think we're all happy to see 0:10:29.840 --> 0:10:33.840 a smooth transition starting to form going into one. But 0:10:33.920 --> 0:10:36.839 when the president elect starts talking about policy in the 0:10:36.960 --> 0:10:40.760 here and now set by officials in the Lane duck session, 0:10:40.800 --> 0:10:44.200 do you think, Professor, that helps the formulation of policy 0:10:44.280 --> 0:10:47.319 or hinders it. Well, I think this is a challenge 0:10:47.400 --> 0:10:50.640 right now for Biden. He obviously wants to weigh in 0:10:50.800 --> 0:10:54.479 on the big crisis facing Americans right now, the economic 0:10:54.520 --> 0:10:57.840 crisis and the pandemic, of course, but he has to 0:10:57.880 --> 0:11:00.640 do so in a way that not only me non 0:11:00.760 --> 0:11:03.880 pinging too far in the current administration, but also on 0:11:04.120 --> 0:11:08.160 his own democratic colleagues in Congress. Um, you know we 0:11:08.160 --> 0:11:12.400 saw yesterday even the bipartisan framework that was put forward, 0:11:12.920 --> 0:11:16.240 there was some pushback to that from both Republicans and 0:11:16.280 --> 0:11:19.440 Democrats in other areas of leadership in Congress. But that 0:11:19.559 --> 0:11:22.760 was kind of stepping on toads negotiations. But I think 0:11:22.800 --> 0:11:25.199 the bottom line is that for Biden and for others 0:11:25.200 --> 0:11:27.679 who just want to see some real changes on these issues, 0:11:28.000 --> 0:11:30.920 they don't mind that pressure going forward, and they don't 0:11:30.960 --> 0:11:33.920 mind kind of having a stronger vote in that, even 0:11:33.920 --> 0:11:35.640 if it's a little bit um, even if it's seen 0:11:35.679 --> 0:11:38.240 as pressure by other on their own parties. Professor, appreciate 0:11:38.280 --> 0:11:41.719 your perspective, Jillie Norman that University of College London, professor. 0:11:45.960 --> 0:11:49.560 What's great about David Constant is not the Brown University acuity. 0:11:49.920 --> 0:11:53.240 What's great about him as he writes precise research notes 0:11:53.559 --> 0:11:57.120 that actually, as an adult used to do looks out 0:11:57.200 --> 0:12:00.200 one two in three years, you know you're is what 0:12:00.240 --> 0:12:02.720 you need to know. Blended in one to three years 0:12:02.720 --> 0:12:06.880 out is a constant twenty six percent lift to this market. 0:12:07.080 --> 0:12:09.800 He is a golden sex David, good morning. I love 0:12:09.840 --> 0:12:12.320 how you go out to two thousand, twenty two and 0:12:12.360 --> 0:12:14.280 you get us out. I think it's sp X forty. 0:12:15.200 --> 0:12:17.760 How do we get there? Well, I get there a 0:12:17.760 --> 0:12:19.880 couple of ways. You get there to around thirty seven 0:12:19.960 --> 0:12:22.280 hundred at the end of this year. Uh, you get 0:12:22.280 --> 0:12:25.520 there are forty three hundred at the end of twenty one, 0:12:25.679 --> 0:12:27.559 and then you get to forty six hundred at the 0:12:27.640 --> 0:12:31.040 end of two. So that's the path and sort of 0:12:31.040 --> 0:12:33.520 what are the building blocks behind it? Well, basically, you've 0:12:33.520 --> 0:12:36.840 got an economy that's getting better, you have earnings that 0:12:36.880 --> 0:12:39.960 are growing, and you have the rates that they are 0:12:39.960 --> 0:12:42.720 staying super low. I mean, those are the three building box. 0:12:42.760 --> 0:12:46.360 It's not so so brilliant. And it's also the tina trade. 0:12:46.440 --> 0:12:48.800 What is the alternative? What are the all what else 0:12:48.880 --> 0:12:51.520 is there that that that's out there? And equities becomes 0:12:51.520 --> 0:12:54.400 the defaults opportunity. So I want to think about the 0:12:54.440 --> 0:12:58.760 following way, Uh, Tom, break the market into two pieces. 0:12:59.320 --> 0:13:02.679 Let's take the five big stocks that are almost a 0:13:02.760 --> 0:13:06.320 quarter of the market, and let's take together sevent the market. 0:13:06.720 --> 0:13:11.120 Those big five stocks, their sales we're up eighteen percent 0:13:11.200 --> 0:13:14.720 this year, sales for everything else down five percent. So 0:13:14.760 --> 0:13:17.760 it explains why these stocks were up around fifty percent 0:13:17.880 --> 0:13:19.880 year today, So they had a great year. We understand 0:13:19.920 --> 0:13:22.960 that we're looking forward. What's the what's the path forward. 0:13:23.000 --> 0:13:25.960 These companies are expected to have revenue growth each of 0:13:25.960 --> 0:13:28.839 the next couple of years of around fifteen percent, So 0:13:28.880 --> 0:13:31.800 that's kind of part of your leg going forward, Tom. 0:13:31.920 --> 0:13:33.800 And the second part, if you think of the other 0:13:34.160 --> 0:13:38.079 four hundred and stocks, they're expected to have around six 0:13:38.120 --> 0:13:41.880 percent revenue growth top line sales growth of each of 0:13:41.920 --> 0:13:44.320 the next couple of years. So that's basically the story 0:13:44.920 --> 0:13:47.200 is about an economy that's getting better, coming off the 0:13:47.240 --> 0:13:50.800 pandemic of crisis low and generally getting better. The fed 0:13:50.880 --> 0:13:56.520 on hold that is our our general assumptions, the vaccination 0:13:56.559 --> 0:14:00.679 of half HERD immunity by May of next year. All 0:14:00.760 --> 0:14:02.760 that is to the positive, and I think the market 0:14:02.840 --> 0:14:08.120 is recognizing that and we'll continue to do so. It 0:14:08.200 --> 0:14:10.360 just sounds like a multiple story. But when I taught 0:14:10.400 --> 0:14:11.960 you and when I read your research, it's not just 0:14:12.000 --> 0:14:14.400 about the multiple story. It's about better earnings that you're 0:14:14.400 --> 0:14:17.600 looking for and above consensus earnings. To David, we walk 0:14:17.640 --> 0:14:19.680 me through why why you're a little bit more constructive 0:14:19.720 --> 0:14:22.520 than maybe the consensus is at the moment on earning specifically, 0:14:23.080 --> 0:14:25.560 So if we look at the earnings, uh, Jonathan, it's 0:14:25.560 --> 0:14:28.400 a good's a good question. So the consensus expectation it's 0:14:28.440 --> 0:14:32.360 around one hundred sixty five dollars of SMP five hundred 0:14:32.400 --> 0:14:35.880 earnings next year one, and we're at a hundred and 0:14:35.920 --> 0:14:38.600 seventy five dollars. You know what explains that, Well, part 0:14:38.600 --> 0:14:41.920 of it is a better economic backdrop. We've got GDP 0:14:42.040 --> 0:14:46.800 growth something around five the consensus expectations of forty nine 0:14:46.920 --> 0:14:50.480 economists and the Blueship forecast around three point eight percent, 0:14:50.600 --> 0:14:53.760 so that's a higher level of activity. There's not much 0:14:53.800 --> 0:14:57.080 inflation out there, inflation under control, so that's basically allowing 0:14:57.120 --> 0:15:01.280 companies to have that broader level of of earnings growth 0:15:01.760 --> 0:15:04.400 with not a lot of a lot of pressure on 0:15:04.560 --> 0:15:07.320 input costs. So that's your basic Your margins are basically 0:15:07.520 --> 0:15:09.680 part of that's recovery. And so those your two you 0:15:09.880 --> 0:15:12.240 your billion box as we see it in our models, 0:15:12.360 --> 0:15:14.840 and the Fed has made it very clear in our 0:15:14.920 --> 0:15:17.760 view that they're on hold for next three years at least, 0:15:17.960 --> 0:15:21.320 perhaps as long as five years based on the economics forecast, 0:15:21.400 --> 0:15:24.440 and so that's a pretty benign backdrop. It's a good 0:15:24.440 --> 0:15:27.080 backdrop for the equity market. And when you think about 0:15:27.080 --> 0:15:30.960 the asset allocators, the portfolio managers out there, around fifty 0:15:31.080 --> 0:15:35.320 percent of the assets are allocated to equities, about twenty little, 0:15:35.520 --> 0:15:38.280 little little less than twenty to bonds. So what's the 0:15:38.320 --> 0:15:42.600 alternative cash is offering zero and so that's a still 0:15:42.640 --> 0:15:46.600 an attractive place for for the equity market. Jompan, that's 0:15:46.640 --> 0:15:50.400 the index story beautifully, I doubt going out to let's 0:15:50.400 --> 0:15:52.800 talk about a second level story now the other whites 0:15:52.840 --> 0:15:55.280 and a mix for Goldman. Industrious Material has had a 0:15:55.280 --> 0:15:57.760 lot about that. The cyclical trade of the last month, 0:15:57.760 --> 0:16:00.240 that's played out wonderfully for so many people who had 0:16:00.240 --> 0:16:04.760 it on You stand avoid information technology, why divid Jonathan, 0:16:04.800 --> 0:16:06.240 I wanted you to think about it three ways. I 0:16:06.240 --> 0:16:08.440 want to think about growth, I want to think about value, 0:16:08.440 --> 0:16:10.720 and you want to think about cyclicals. The growth story 0:16:10.960 --> 0:16:14.760 is basically duration equity duration, those longer term cash flows 0:16:14.880 --> 0:16:20.200 at the zero lower bound. Those growth in mostly technology 0:16:20.240 --> 0:16:23.560 is prized, that's worth a lot and they're likely outperformed. 0:16:23.800 --> 0:16:27.240 You have value. The best value absolutely is in healthcare. 0:16:27.480 --> 0:16:31.400 They are the cheapest relative to the market in forty years. 0:16:31.600 --> 0:16:34.960 You got to go back to when when early uh 0:16:35.200 --> 0:16:38.320 Clinton administration, when they were trying to restructure part of healthcare, 0:16:38.720 --> 0:16:41.560 look at the Obamacare period of time and ten years ago. 0:16:41.720 --> 0:16:44.720 Those are the only times that were similar. And actually 0:16:44.760 --> 0:16:47.440 the valuation of healthcare is even more attractive than either 0:16:47.480 --> 0:16:49.840 of those two times. So that's your value trade and 0:16:49.840 --> 0:16:52.920 your value opportunity. And then the cyclical recovery, of course, 0:16:53.120 --> 0:16:57.080 is the pandemic relief coming from the vaccinations that we 0:16:57.120 --> 0:16:59.960 are assuming and some of the industrial companies likely to benefit. 0:17:00.040 --> 0:17:02.600 So I think that's your three pronged approach to kind 0:17:02.600 --> 0:17:04.760 of attacking the market. I think the other areas the 0:17:04.800 --> 0:17:07.719 market likely to do less well, financials, challenge of the 0:17:07.840 --> 0:17:13.119 flat yokur, energy still under a lot of pressure, consumer staples, utilities, 0:17:13.119 --> 0:17:15.200 some of those other areas will be challenge. But those 0:17:15.240 --> 0:17:17.399 are the ways that I would break that down. So 0:17:17.640 --> 0:17:20.359 what I'm hearing from you, David is potentially adding on 0:17:20.400 --> 0:17:22.800 to what Andrew Slimmon's and Morgan Stanley said earlier, which 0:17:22.800 --> 0:17:25.520 is perhaps the rally in some of the highest beta 0:17:25.560 --> 0:17:29.520 cyclical stocks, the travel sectors, the financials areas that have 0:17:29.560 --> 0:17:34.600 gotten beaten up disproportionately during the pandemic that that perhaps 0:17:34.680 --> 0:17:37.080 has gotten a little ahead of itself. Is that accurate? 0:17:38.560 --> 0:17:41.119 I would say certainly on the on the way you 0:17:41.240 --> 0:17:43.159 just I would I would sort of break apart your 0:17:43.200 --> 0:17:45.480 question there at leasta, And since the financials I think 0:17:45.480 --> 0:17:49.639 have a challenging headwinds in terms of the very flat 0:17:49.760 --> 0:17:53.440 YO curve, the fact that there's big reserves that need 0:17:53.480 --> 0:17:59.080 to be taken for the uncertainty on potential defaults from 0:17:59.080 --> 0:18:02.399 the consumer as well commercial side, the Federal Reserve has 0:18:02.400 --> 0:18:06.760 made regulations difficult to actually raise dividends. They're basically one 0:18:06.800 --> 0:18:09.520 of the most of the banks limited to prohibited from 0:18:09.560 --> 0:18:11.639 buying back stock at this juncture. So those are some 0:18:11.680 --> 0:18:15.200 of the key drivers historically that have been benefiting financials 0:18:15.200 --> 0:18:16.919 when the when those are in play, and they're not 0:18:16.960 --> 0:18:20.440 there right now. On the industrial side, UH, the idea 0:18:20.560 --> 0:18:24.240 of vaccination, you know, does offer some better opportunity for 0:18:24.320 --> 0:18:27.119 some of the travel sector and some of those industrial categories. 0:18:27.280 --> 0:18:30.159 I might point to some of the UH, some of 0:18:30.160 --> 0:18:33.120 the aerospace defense companies as well. I think the way 0:18:33.160 --> 0:18:36.679 to think about value opportunities is to look at the 0:18:37.720 --> 0:18:44.000 one and two level of profits and compare those with 0:18:44.119 --> 0:18:47.080 the pre pandemic level of profits in two thousand nineteen 0:18:47.280 --> 0:18:49.760 to kind of make that comparison, and for the overall 0:18:49.840 --> 0:18:52.959 market you'll be a little bit higher. Maybe you're about 0:18:53.040 --> 0:18:56.560 seven percent higher. That's our estimates, seven percent higher between 0:18:56.560 --> 0:18:58.760 two thousand nineteen and kind of go out to two 0:18:58.800 --> 0:19:01.480 thousand twenty one. But you've got other areas. Some areas 0:19:01.520 --> 0:19:05.480 we've got really depressed level of profits. Maybe they're fifty 0:19:05.920 --> 0:19:08.800 six as much as you had two years ago. I 0:19:08.800 --> 0:19:12.400 think that's the opportunity for a normalization. So that's where 0:19:12.440 --> 0:19:14.560 the value look at. We look at there and see 0:19:14.600 --> 0:19:17.600 some of the travel and the hospitality area, you know 0:19:17.640 --> 0:19:20.080 they would fall into that into that category. Last, I 0:19:20.080 --> 0:19:22.080 want to pick up on one thing you said earlier. 0:19:22.119 --> 0:19:25.240 You were mentioning about credit and kind of what's happening 0:19:25.359 --> 0:19:29.280 on the The equity market is telling a slightly uh 0:19:29.440 --> 0:19:33.280 different story from the credit market, because if you look 0:19:33.359 --> 0:19:37.440 at the strongest balance sheet companies, they're up twenty six 0:19:37.560 --> 0:19:41.560 percent year to date a portfolio of those, you compare 0:19:41.600 --> 0:19:45.439 that with a weak Balanti portfolio they're down one percent 0:19:45.720 --> 0:19:48.000 and that sector neutral. So that's not gonna e skew 0:19:48.080 --> 0:19:50.960 towards any one particular area. Yes, you're paying thirty five 0:19:51.000 --> 0:19:53.960 times for a strong boundary and you're paying thirteen times 0:19:54.000 --> 0:19:57.040 for a weaker balunty portfolio. But that's telling us that 0:19:57.080 --> 0:20:00.960 portfolio managers are not totally embracing the idea that the 0:20:01.000 --> 0:20:03.719 economy is solely recovering. And then we're sort of in 0:20:03.760 --> 0:20:06.960 the clear, and so you're seeing pockets of opportunity. And 0:20:07.000 --> 0:20:09.119 I would say, if you have a view that the 0:20:09.480 --> 0:20:11.840 you know, there's a path towards normalization, some of the 0:20:11.880 --> 0:20:15.000 weaker balancie companies would be attractive at this juncture. And 0:20:15.040 --> 0:20:17.480 they tend to be a cluster around some of the 0:20:17.560 --> 0:20:20.480 pandemic you know, companies that hurt most in the pandemic. 0:20:21.440 --> 0:20:23.880 And David, you always make it sounds so easy the past. 0:20:24.840 --> 0:20:26.720 It's great to catch up. So as always they have 0:20:26.800 --> 0:20:32.560 a custom that of government sacks, thank you right now 0:20:32.600 --> 0:20:35.639 on the domestic economy, and John mentions a DP today, 0:20:35.680 --> 0:20:38.280 claims tomorrow then on to job today and Friday will 0:20:38.280 --> 0:20:41.560 go beneath the headline numbers here on radio and television. 0:20:41.800 --> 0:20:45.280 At a thirty, Michael Faroli joins with JP Morgan, who 0:20:45.320 --> 0:20:47.879 was definitive a number of years ago, and calculating a 0:20:48.000 --> 0:20:52.119 shocking statistic for our potential g d P. Michael, before 0:20:52.160 --> 0:20:55.760 a job's discussion, do you have to reset your analysis 0:20:55.840 --> 0:21:01.880 of potential GDP after a pandemic? So, I think that's 0:21:01.880 --> 0:21:05.359 a difficult question. There are certainly aspects of the recent 0:21:05.400 --> 0:21:09.160 economic environment that would cause one to think that potential 0:21:09.200 --> 0:21:12.480 GDP growth may be slower. That said, we've seen a 0:21:12.560 --> 0:21:16.639 nice recovery in capital spending, so capital formation maybe holding 0:21:16.680 --> 0:21:19.520 in pretty well here. But I think in the long run, 0:21:20.000 --> 0:21:23.119 just given the demographic trends, potential is probably gonna be 0:21:23.119 --> 0:21:25.359 inching down in a little bit every couple of years, 0:21:25.440 --> 0:21:28.600 just given slower growth in the labor force. And that's 0:21:28.800 --> 0:21:32.440 just due to long run demographics, not necessarily short run 0:21:32.800 --> 0:21:34.440 up and downs that we've seen over the course of 0:21:34.520 --> 0:21:36.520 this year. So what's the run rate on non farm 0:21:36.600 --> 0:21:39.800 payrolls of Great shock? Pre pandemic was to see such 0:21:39.840 --> 0:21:43.440 good non farm payrolls over time? What's your new run 0:21:43.560 --> 0:21:47.760 rate on NFP? So, uh, when we get back to 0:21:47.800 --> 0:21:50.000 a normalized state of the world, which could be many 0:21:50.080 --> 0:21:53.399 years from now, we think it should be under one thousand, 0:21:53.840 --> 0:21:56.520