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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg on

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Speaker 1: the Markets. Joining us now is Gampria Santos, JP MULGANASID

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Speaker 1: Management Global market strategist Gappy. Let's just start their cash

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Speaker 1: and the debate on the old cliche cash on the sidelines,

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Speaker 1: what's left to allocay? There's actually still quite a lot left. John. Actually, um,

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Speaker 1: if we look at assets and money market funds, they

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Speaker 1: had an increase um after the pandemic hit of about

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Speaker 1: one point two trillion dollars. Now really since the middle

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Speaker 1: of the year that started to get deployed slowly, but

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Speaker 1: you still have seven hundred billion dollars extra on the

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Speaker 1: sidelines waiting to get deployed. So I think that means

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Speaker 1: that any sort of pullbacks that we have in the market,

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Speaker 1: when you see days with more bad news, it gets

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Speaker 1: absorbed by this cash being deployed. And it's especially your

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Speaker 1: hardest hit sectors. You're more cyclically economically oriented sectors and

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Speaker 1: regions that are going to see the biggest bump from

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Speaker 1: this cash being deployed. And on the fixed income side,

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Speaker 1: your higher risk credit things like high yield an emerging

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Speaker 1: market dat as well, and that's generally where we're tilting

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Speaker 1: as well. Gabriella back to two thousand seven, thirteen years ago,

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Speaker 1: I believe the math is the e M index c

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Speaker 1: M s c I e M index really hasn't broken out.

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Speaker 1: Is now the time? I think there are so many

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Speaker 1: stars aligning here for emerging markets. First, you do have

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Speaker 1: this visibility of a cyclical upturn forming next year and

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Speaker 1: beyond with these vaccine news, emerging markets are still cyclically

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Speaker 1: oriented over fift and that is cyclical sectors. Number two,

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Speaker 1: you have the result of the US election in which

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Speaker 1: we have a president elect Biden. That to US and

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Speaker 1: two investors represents a return to more orthodox, clear foreign policy.

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Speaker 1: That's huge for your very trade oriented em And then

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Speaker 1: number three, you have central banks whose reaction functions have

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Speaker 1: changed so much so in which case you can have

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Speaker 1: good news and interest rates still stays well low. That's

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Speaker 1: great set up for emerging markets, not just the ones

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Speaker 1: that have led this year, which is North Asia and technology,

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Speaker 1: but a broader set of emerging markets. And we're extremely

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Speaker 1: bullish on the UM equities, on the M debt, and

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Speaker 1: on fact Gabriella, we take a step back. The optimism

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Speaker 1: that you have as you talk about this is increasingly consensus.

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Speaker 1: You've got Bank of America's Fund manager survey coming out

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Speaker 1: and saying we're getting close to full bull here with

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Speaker 1: respect to cash holdings and the outlook on equities. And

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Speaker 1: you've got Howard Marks of oak Tree Capital yesterday coming

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Speaker 1: out with this quote in an interview with Bloomberg News.

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Speaker 1: When the level of optimism is high, there is usually

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Speaker 1: more room for disappointment. Can you square those two narratives,

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Speaker 1: the optimism with the reality on the ground of a

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Speaker 1: pandemic that's only getting worse right now. So I do

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Speaker 1: think in the very short term we're very much due

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Speaker 1: for a tough time. We see cases rising significantly across

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Speaker 1: the United States, very higher cases in Europe. That is

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Speaker 1: going to restrain the recovery here in the fourth quarter

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Speaker 1: and the first quarter. But I think the vaccine news

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Speaker 1: is good news because it gives investors the freedom to

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Speaker 1: think less month to month and more twelve months out

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Speaker 1: and beyond, which is what we should be doing. We

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Speaker 1: shouldn't be thinking about the here and now so much.

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Speaker 1: We should be investing for the future. And that's why

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Speaker 1: I think you can have a difference where cases do

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Speaker 1: pick up than uses that in the short term. But

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Speaker 1: the market is able to absorb a it better looking

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Speaker 1: out into the future now. It doesn't mean there will

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Speaker 1: be pulled back right um, And as you mentioned, there

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Speaker 1: is more bullish outlook now, but a much more normal

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Speaker 1: pullback of five to ten percent instead of the bear

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Speaker 1: market we had last time cases were rising. Thomas Lisa

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Speaker 1: being rude to our guest, calling our guest consensus. Hold on, No,

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Speaker 1: I'm not being I'm not being rude. Hold on a second, Gabriella.

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Speaker 1: I'm sorry to ring up the script. Gabriella. Was that rude?

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Speaker 1: I think John is starting to start stuff. I don't

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Speaker 1: think it was really What do you think of that?

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Speaker 1: Maybe that is what John? Maybe that is what John

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Speaker 1: is doing this morning. I want to turn to the

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Speaker 1: ex market China. That's really good. It looks better than

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Speaker 1: I grew up at this. I've lifted before. I'm used

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Speaker 1: to it. Women unhappy with me. There's nothing new about

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Speaker 1: dollar China. Can I go there and you're in the

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Speaker 1: middle of the year, Gabby, what's left to squeeze? So

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Speaker 1: we're actually we think the Chinese land has plenty of

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Speaker 1: room actually to appreciate over the next few years. Um.

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Speaker 1: That's due to cyclical factors, as you get an upturn

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Speaker 1: in the global economy, as you have uh this more

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Speaker 1: friendly outlook of the U S election. But beyond that,

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Speaker 1: you have the Chinese one getting more and more added

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Speaker 1: into investors portfolios. You have a lot more investors also

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Speaker 1: wanting to invest directly in Chinese equities and bombs. So

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Speaker 1: that's also a structural support for the Chinese one to

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Speaker 1: be one of the currencies that appreciates the most over

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Speaker 1: the next decade. This is one of your best things

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Speaker 1: and you can work off Farolean Kasmin. Here let's talk

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Speaker 1: about the Brazilian scream, and that's not you angry at Pharaoh.

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Speaker 1: The Brazilian scream is when you get strong Brazilian real,

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Speaker 1: strong Taiwanese dollar and they start screaming about week. US

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Speaker 1: dollar is a general tendency. Are we closer to that

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Speaker 1: or do we have patients out to two thousand twenty

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Speaker 1: two on US dollar? So I think from the Brazilian perspective,

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Speaker 1: it's the second worst performing currency this year. UM, it's

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Speaker 1: depreciate it close to There's actually a much more concern

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Speaker 1: about the depreciation than there is for any sort of

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Speaker 1: nascent appreciation. Right. There's still the concern about the weakness

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Speaker 1: of the currency feeding into higher goods prices, higher inflation,

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Speaker 1: and a vicious cycle with higher interest rates. So I

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Speaker 1: think there's plenty of room for the reality to appreciate

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Speaker 1: a little bit further. UM. And Brazil, of course is

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Speaker 1: a very cyclical currency, very cyclical market. UM. So it

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Speaker 1: is part and parcel of the cyclical recovery that we're

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Speaker 1: seeing in global markets. And so in that sense, it's

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Speaker 1: very much welcome. Gotta be great to catch up, appreciate

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Speaker 1: your time as always. Gabrella stances there from JP Morgan

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Speaker 1: Asset Management on this market and a little bit more.

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Speaker 1: Michael kush muf brings prodigious academic chops to Morgan Stanley

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Speaker 1: where he is Global fixed income. Uh see, I oh, Michael,

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Speaker 1: thrilled to have you on. You know, I think of

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Speaker 1: the multidisciplinary economics of your Columbia University is maybe a

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Speaker 1: good place to start. I want to start with the

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Speaker 1: monetary mystery of December in January, is it just simply

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Speaker 1: Chairman Powell to the rescue. I think that's a lot

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Speaker 1: of it. I think the FED has been clear about

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Speaker 1: its intentions to support, provide accommodation, more combination if necessary,

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Speaker 1: to get us to a stronger economy down the road.

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Speaker 1: And they obviously can't put money directly in people's pockets,

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Speaker 1: but they can do every possible measure to ensure the

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Speaker 1: cost of putting money in people's pockets through borrowing is

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Speaker 1: at very low levels, whether it's the household of corporate

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Speaker 1: sector or the US government. I think Michael of Rick

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Speaker 1: Michigan at Columbia and of course has has melding of

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Speaker 1: policy into economics. Right now, what is the most efficacious

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Speaker 1: policy to get us out to where these VEC scenes

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Speaker 1: click in of this balance of fiscal, monetary, budgetary and

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Speaker 1: just outright policy, what's the best mix forward? Well, the

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Speaker 1: best mixes A is a combination. Again, the FED cannot

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Speaker 1: provide direct income support for individuals. The federal government can

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Speaker 1: provide that direct support, and the FED can help them

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Speaker 1: along the way by buying the debt that the US

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Speaker 1: government produces In order to put money into people's pockets

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Speaker 1: along the way. So it is a joint effort, combined effort,

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Speaker 1: and it could it could flounder or temporarily go sideways

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Speaker 1: when one of the three elements is also healthcare policy

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Speaker 1: of force on the side as well. One of the

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Speaker 1: three areas, you know, flounder or stop making progress along

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Speaker 1: the way. So the FED has been quite clear that

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Speaker 1: they expect the federal government to hopefully provide more income

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Speaker 1: support to the to the economy as a whole during

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Speaker 1: this transition period to a vaccine. So I'm wondering, Michael,

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Speaker 1: given the fact that there is incredible FED support, there

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Speaker 1: aren't a lot of bargains out there, given how high

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Speaker 1: asset prices are, what do you do. It's it's it's

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Speaker 1: you have to think longer term. So it's it's like

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Speaker 1: a growth stock or something which is discounting a lot

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Speaker 1: of good news into the future. There's no doubt a

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Speaker 1: lot of good news into the future. People can start

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Speaker 1: seeing the endgame assuming these vaccines are able to be

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Speaker 1: distributed in a widespread manner. In the next call, it's

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Speaker 1: called six to nine months in a in a very

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Speaker 1: widespread manner. So in terms of the opportunities. You really

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Speaker 1: have to think, where are we gonna be twelve months

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Speaker 1: from now, six to twelve months from now if we

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Speaker 1: think we will be on a stronger economic trajectory. There's

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Speaker 1: no doubt, given the monitory and fiscal support being provided

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Speaker 1: and unlikely to withdrawn through two thousand twenty two, that

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Speaker 1: interest rates credit spreads, interest rates should be um at

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Speaker 1: very low levels. You know, high yield bonds should be expensive,

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Speaker 1: investment grade bonds should be expensive. Equity should probably be

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Speaker 1: high because of low interest rates are around the world

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Speaker 1: and particularly in the United States. So again you look

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Speaker 1: farther out. It's not that bonds are a fair value

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Speaker 1: and that doesn't make them attractive. Is that should they

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Speaker 1: us to be at fair value or should be again

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Speaker 1: in the future be well below historical fair value. If

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Speaker 1: you look at into investment grade credit spreads, even high

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Speaker 1: yield spreads, they don't spend a lot of time around average.

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Speaker 1: These either above average or below average. Because fundamentals are good,

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Speaker 1: fundamentals are bad relative to average. There's cycling, and we

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Speaker 1: think that saying it's the business cycle will improve dramatically

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Speaker 1: next year, and that will cause spreads to be below

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Speaker 1: average by the end of next year or by some

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Speaker 1: time between the set middle of next year and the

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Speaker 1: end of next year. Michael, that's credit. How difficult will

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Speaker 1: it be to push that view through the yield curve

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Speaker 1: and looking for a steeper one at that I understand

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Speaker 1: we've had a one way move since the end of

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Speaker 1: February when we were down by ten eleven basis points,

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Speaker 1: were steeping down aggressively over the last seven eight months.

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Speaker 1: But just over the last week we had some game

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Speaker 1: changing news. Seventy basis points, two s tens all around

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Speaker 1: again round trip Michael. Why. I think there's there's two

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Speaker 1: two elements. One insert is technical. This idea of a

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Speaker 1: steeping yelker has been in place for a while. A

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Speaker 1: lot of investors around the world have been putting on

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Speaker 1: so called steepening trade and selling long data bonds buying

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Speaker 1: short of data bonds. It worked, now it's stopped to work.

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Speaker 1: The rise of the pandemic, the rise of infection rates,

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Speaker 1: I think is unnerved on people. In terms of the

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Speaker 1: near term FED actions. It could be easily true that

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Speaker 1: in in December, the FED announces an adjustment to their

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Speaker 1: quantitative you know easy program that they actually tilt buying

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Speaker 1: to long long under the yelkurve. So there's some issues

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Speaker 1: in the short term. Into the end of this year,

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Speaker 1: the FED will adjust their policies because one fiscal policy

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Speaker 1: is now inactive. Secondly, the pandemic has gotten worse. They

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Speaker 1: may feel compelled to do something, and what they're likely

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Speaker 1: to do is increased bonding of long term bonds, which

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Speaker 1: again reduces the pressure for steepening in the short term. Michael,

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Speaker 1: this conversation belongs in the future. Many parts of this

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Speaker 1: market living in the future. One. I want to turn

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Speaker 1: to the here and now and cross sidever to Berlin, Germany.

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Speaker 1: What we started to see more restrictions in Europe. What

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Speaker 1: we noticed this time around was pushed back, more pushed

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Speaker 1: back and more resilience and Tom that's what you see

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Speaker 1: on the streets of Berlin today. Back in spring, it

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Speaker 1: was widely accepted to go through a lockdown, to go

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Speaker 1: through restrictions to ultimately at some point we ended up

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Speaker 1: wearing masks. What we've noticed across Europe and many other

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Speaker 1: places around the world as well this time when the

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Speaker 1: government has tried to lock things down, the pushback has

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Speaker 1: been so much greater than what we saw six months ago.

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Speaker 1: And that's what's difficult about living too far in the

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Speaker 1: future and ignoring where we are right now in Berlin, Germany,

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Speaker 1: where there are protests on the streets and a German

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Speaker 1: police a firing of water cannon at the demonstrators tom

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Speaker 1: because they will not adhere to social distancing, they do

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Speaker 1: not want to wear masks, and they do not want

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Speaker 1: to be locked down. How do you live in a

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Speaker 1: better future in one if we're still grappling with a difficulty,

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Speaker 1: not just in Europe but in the United States as well.

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Speaker 1: In the here and now. It's called a pandemic, and

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Speaker 1: they're all the same every time. When back, you know,

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Speaker 1: I think about John Elliott Gardner's one volume on Joan

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Speaker 1: Sebastian Bach and the plague that was across Germany. You know,

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Speaker 1: I'm gonna guess six thirty if my brain that reminds

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Speaker 1: me and John, I'm just gonna say, it's simple. You

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Speaker 1: read Camu and the Plague and we're on about chapter

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Speaker 1: eighteen of the plague. I mean, it's that simple. Where

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Speaker 1: there is societal protests norther way to put it here,

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Speaker 1: we have water cannons being used moments ago in Berlin.

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Speaker 1: It's a little bit more testy, John than it was

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Speaker 1: two hours ago. Place a right get on the straits

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Speaker 1: of Europe, trying to deal with these demonstrators, and Michael,

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Speaker 1: I just wonder, as we go through this moment around

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Speaker 1: the world, a difficult moment through the back end of

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Speaker 1: this year, how much the market can live in the

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Speaker 1: back end of one given the difficulty this playing down

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Speaker 1: right in front of us. It's a good, good question.

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Speaker 1: I think it's all about the length of period of time.

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Speaker 1: So if you think about evaluating a longer data asset,

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Speaker 1: whether it's an equity or fixed income security, we're talking

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Speaker 1: about five, ten, twenty years of cash flows. If cash

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Speaker 1: flows are damaged for a short period of time and

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Speaker 1: not too disastrously, then you look through it. It's not

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Speaker 1: that big a deal. And we see all the time

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Speaker 1: with corporations make announcements of restructurings and big big losses

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Speaker 1: and big losses and book value and the stock price

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Speaker 1: goes up. Well, the same thing is happening happening now.

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Speaker 1: If you have a company or a situation where this

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Speaker 1: is not that bad, they can get through this and

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Speaker 1: the longer term prospects are bright you look through it.

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Speaker 1: The longer this last, the more damaging it does to

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Speaker 1: the economy, which is clearly what the FED is concerned with.

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Speaker 1: The longer damage, which mean the worst cash flows are hammered,

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Speaker 1: that has a bigger impact on the long terminal present

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Speaker 1: value of these assets. And that is that is the challenge,

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Speaker 1: is getting people remaining confident, keeping the economy running at

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Speaker 1: a reasonable pace, keeping money in people's pockets so that

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Speaker 1: even if they're not spending it today, when the gates

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Speaker 1: are lifted, when the lockdowns are lifted, there is money

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Speaker 1: in people's pockets. Where it's the corporate sector of the

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Speaker 1: household sector, they can go out and bend. And that

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Speaker 1: was what's you have a very strong pop down the

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Speaker 1: road and compensates in theory at least for the weakness

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Speaker 1: we're seeing now. Michael Grant to catch out with you, sir.

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Speaker 1: We appreciate its time. Thank you, Michael Investment Management. Right now,

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Speaker 1: it's good to speak to the current of macro risk advisors.

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Speaker 1: We do that because boy has he been right with

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Speaker 1: a vix of forty one and down we come with

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Speaker 1: better stock markets, but currently pointing out the election uncertainty,

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Speaker 1: and that would clear, and we see that at twenty

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Speaker 1: one point nine eight right now on the VIX Dan,

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Speaker 1: have we cleared all of the election uncertainty? Well, for

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Speaker 1: the most part, I think you still got that jan

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Speaker 1: fifth date. And if you stare at um the SMP

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Speaker 1: option prices by expiration, you can actually see something pretty granular.

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Speaker 1: You can look at December thirty one as an expert,

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Speaker 1: so right at the end of the year, and that's

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Speaker 1: typically a very quiet week right between Christmas and New

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Speaker 1: Year's so that implies fall autilities pretty low. But you

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Speaker 1: can go out to January eight and you see there's

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Speaker 1: actually a bump up. So that date between those two expirations,

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Speaker 1: January FI, that Georgia runoff date actually does have some

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Speaker 1: consequence at least in terms of how ball markets are pricing.

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Speaker 1: So Jean to we just zoom out a little bit.

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Speaker 1: We've been talking about full bull is John highlighted from

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Speaker 1: the Bank of America survey that came out yesterday. We're

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Speaker 1: hearing about how people are expecting some sort of disturbances

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Speaker 1: over the next couple of weeks and months as people

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Speaker 1: calibrate themselves and their outlooks to the near term reality

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Speaker 1: of a pandemic that's worsening. What do you foresee based

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Speaker 1: on the bullish trends in the markets that you track,

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Speaker 1: the technical factors, how much of a pullback could we get? Well,

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Speaker 1: it's anyone's guests. I think, um, you know, really it

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Speaker 1: comes down to the response from the government. I think

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Speaker 1: that the thing we have to worry about is whether

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Speaker 1: the you know, the Congress pulls off pulls off a

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Speaker 1: stimulus are not. I think that's really you know, the

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Speaker 1: weak spot for the market is is the politics of

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Speaker 1: it dean current with us right now, John, fer I

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Speaker 1: do want to point out housing statistics out and they

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Speaker 1: are a better the halves of the economy, certainly repositioning

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Speaker 1: h in a housing let me get that up right

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Speaker 1: now with a constructive revision as well. And housing I'm

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Speaker 1: not gonna give you too much of the data than

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Speaker 1: the same month over month, it's a very strong be

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Speaker 1: down housing starts and critically the previous the previous month

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Speaker 1: was a huge revision upward as well. Not so much

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Speaker 1: moving the bond market, John, But again they're two part

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Speaker 1: America and America struggling and also a booming housing economy.

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Speaker 1: It's a really good upside surprise four point nine percent

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Speaker 1: month on month, the median estimate three points say. The

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Speaker 1: revision tell me talk of a revision the previous month

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Speaker 1: one point nine percent, the upward revision six point three.

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Speaker 1: That's housing staffs. And this has been a really really

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Speaker 1: solid part of this economy, Dean. The housing sector that's

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Speaker 1: just done terrifically well, low rates, people bending on their houses.

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Speaker 1: I'm deepo to the moon. That's been a really great

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Speaker 1: story day the small caps. Let's talk about the story

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Speaker 1: that hasn't worked and is starting to work, the cyclical

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Speaker 1: positis market the small caps. Can you walk me through

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Speaker 1: the trend there and whether that is durable. That's been

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Speaker 1: a big debate over the last week. How durable some

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Speaker 1: of these catch up moves have been. I think that's

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Speaker 1: that's obviously on people's minds, and certainly a question that

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Speaker 1: we fielded um you know quite frequently last week was

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Speaker 1: just this epic move in the fact the rotations right.

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Speaker 1: People are calling it a fifteen standardy viation move from

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Speaker 1: um you know, from growth to value and people are asking,

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Speaker 1: is that just an indication of how crowded the space

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Speaker 1: you know has been in terms of positioning and things

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Speaker 1: like growth and the under positioning and value. I think

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Speaker 1: there's something to that. I think the other part is, look,

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Speaker 1: we you know, we've got pricing in the market that

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Speaker 1: reflects the truly unusual and unprecedented consequence. We sort of

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Speaker 1: knew in this vaccine announcement all and only came we

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Speaker 1: were going to have this, you know, this big rotation.

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Speaker 1: I think, Um, you know, the question around value and

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Speaker 1: just the sort of more old economy type of stocks,

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Speaker 1: I think an important one. Um. Look, I think we

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Speaker 1: have a permanently changed economy in a lot of ways,

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Speaker 1: but we are slowly coming back. And when I step

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Speaker 1: back and I just look at the broad picture of risk,

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Speaker 1: I see option prices that you know, Tom was saying

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Speaker 1: we were expecting normalization post the election, But I still

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Speaker 1: see them as something you can utilize in your portfolio,

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Speaker 1: and more on the short side than on the long side.

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Speaker 1: So these option premiums are sort of the last war

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Speaker 1: for the FED to push lower. UM. You know, they

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Speaker 1: they crushed fx ball, they crushed rate ball. UM. You

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Speaker 1: know that that is was a major part of how

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Speaker 1: they had to restore market functioning back in in in

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Speaker 1: the March lows. But you still have very high option

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Speaker 1: prices as we start, and I just think you can

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Speaker 1: use them as an income generating part of your portfolio.

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Speaker 1: You well, then I want to pick up on that

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Speaker 1: word you used. Normal pretty pandemic. There was nothing really

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Speaker 1: normal about the low folatility regime we were in for

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Speaker 1: so many years with a vixed down towards ten. Right now,

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Speaker 1: one stath of twenty two, Just Dane, what is normal

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Speaker 1: and what do you think is the normal that we

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Speaker 1: need to get used to? You know, I'm thinking a

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Speaker 1: lot about the post crisis period that the GFC and

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Speaker 1: you know, we had the aftershocks of the flash crash,

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Speaker 1: then we had the Eurozone crisis eleven, and then we

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Speaker 1: had this long, long period where the economy was clearly normalizing,

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Speaker 1: but um behind the push towards trying to you know,

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Speaker 1: get the labor market back on its seat. Said policy

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Speaker 1: stood in town, stayed in town much longer than you

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Speaker 1: would have thought, and that normalization in the vix from

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Speaker 1: call it twenty twelve to you had an average VIX

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Speaker 1: of about fifteen for that period. And I think that's

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Speaker 1: just my playbook is that you have a crisis, you

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Speaker 1: have an ascid price shock, you have a massive policy response.

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Speaker 1: Each time it gets bigger and bigger. And then even

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Speaker 1: as people argue, well, maybe we don't need as much FED,

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Speaker 1: you know, of the FED guardrails as we have, as

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Speaker 1: we had during the crisis, the guardrails stay up. And

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Speaker 1: ultimately those guardrails they work a little bit on the

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Speaker 1: real economy, but really what they impact is asset prices,

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Speaker 1: and I think they've they've impacted f X volve, They've

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Speaker 1: taken interest rate volatility to the lows, and it's just

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Speaker 1: this equity volatility that I think still stands out as

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Speaker 1: something that's you know, it's got some normalization into I've

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Speaker 1: been struck by the recent volatility and how it upended

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Speaker 1: a lot of quant funds in particular that have posted

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Speaker 1: some pretty stark returns based on the fact that you

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Speaker 1: cannot plan for a vaccine, you cannot plan for some

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Speaker 1: sort of fiscal bill that is or isn't past, and

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Speaker 1: you can't necessarily plan for a FED response based on

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Speaker 1: that news. Has the old model just been completely upended?

401
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Speaker 1: I think you could make that argument that the the

402
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Speaker 1: notion of the carry trade is a very difficult one

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Speaker 1: to um, you know, to keep pursuing in the sense

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Speaker 1: that we know there's risk premium in markets. There are

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Speaker 1: these sources of return that some of the quant funds

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Speaker 1: and some of the more volatility oriented strategies have targeted.

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Speaker 1: But when you get these very unusual factors, UM. You

408
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Speaker 1: know this again this year being so unusual, it just

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Speaker 1: makes the sharp ratio of a lot of these strategies, UM,

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Speaker 1: compromise and all those equal less attractive. Very quickly, images

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Speaker 1: from Berlin of water cannons. I mean this started out

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Speaker 1: peaceful with Francline Liquire earlier this morning, and with that

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Speaker 1: image there. You don't see it on Bloomberg Radio right now.

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Speaker 1: It's just crowds assembled in autumnal Berlin, and moments ago

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Speaker 1: there was substantial use of water cannons. We don't see

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Speaker 1: that right now, but there it is. I'm gonna call

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Speaker 1: it a more distressing situation. Didn't current your world seem

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Speaker 1: so removed from pandemic agony? Are you surprised by that?

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Speaker 1: I think that you know, this is a very UM

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Speaker 1: I think is going to be challenging in the sense

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Speaker 1: that the social aspects of you know, this pandemic are

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Speaker 1: unrelenting and they're so significant. UM. You know, the policy

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Speaker 1: response in some ways creates additional UM dislocations in terms

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Speaker 1: of um, you know, the haves and have nots um.

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Speaker 1: So it's going to be very tricky, especially as we

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Speaker 1: transition to a new administration and one that wants to

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Speaker 1: re embrace globalism. Um, there's a lot of those uncertainties

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Speaker 1: you know out there. I think geopolitics have been typically

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Speaker 1: more barked than bite. But we always have to just

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Speaker 1: keep an eye on the types of things that markets

431
00:23:47,280 --> 00:23:50,399
Speaker 1: tend to forget over time. You know, we cross different

432
00:23:50,440 --> 00:23:54,359
Speaker 1: things off our worry list, but um, you know, oftentimes

433
00:23:54,400 --> 00:23:56,679
Speaker 1: there's just things that we can't predict. So you know,

434
00:23:56,760 --> 00:24:00,199
Speaker 1: even as we say use volatility, use options on the

435
00:24:00,240 --> 00:24:03,919
Speaker 1: short side to try to generate some premium, we have

436
00:24:04,040 --> 00:24:06,879
Speaker 1: to be on guard for the types of things that

437
00:24:07,000 --> 00:24:09,639
Speaker 1: can go wrong. And then what do we learn. We

438
00:24:09,760 --> 00:24:12,600
Speaker 1: learned that over time, during especially during the good times,

439
00:24:12,600 --> 00:24:16,480
Speaker 1: we underestimate to jump to the liquid conditions right the

440
00:24:16,520 --> 00:24:19,960
Speaker 1: speed with which markets can turn very liquid very quickly.

441
00:24:20,640 --> 00:24:23,639
Speaker 1: I think that's a key lesson from and something that

442
00:24:23,840 --> 00:24:27,320
Speaker 1: as we talked to our clients at the back end

443
00:24:27,320 --> 00:24:30,359
Speaker 1: of an incredible year. In so many ways, it's just

444
00:24:30,560 --> 00:24:34,480
Speaker 1: to be prepared, you know, for the unexpected, a record

445
00:24:34,560 --> 00:24:37,439
Speaker 1: high to stop market in February, a month before we

446
00:24:37,520 --> 00:24:39,800
Speaker 1: locked things down in America, and a record high in

447
00:24:39,800 --> 00:24:42,159
Speaker 1: the stock market as things are locking down again, not

448
00:24:42,200 --> 00:24:44,400
Speaker 1: in the same way, but it's similar to ding writes

449
00:24:44,440 --> 00:24:47,040
Speaker 1: to catch up. So as always think on a macro risk,

450
00:24:47,040 --> 00:24:55,960
Speaker 1: advised the CEO. Right now, I'm temperature because of physics,

451
00:24:56,600 --> 00:25:02,240
Speaker 1: the thermodynamics of all this vaccine talk is about temperature,

452
00:25:02,840 --> 00:25:07,359
Speaker 1: keeping vaccines safe for transport, making them efficacious up to

453
00:25:07,359 --> 00:25:11,040
Speaker 1: the point of an injection. Friends were hostjoins us right

454
00:25:11,040 --> 00:25:16,800
Speaker 1: now with CURVAC of Germany to talk of this temperature fronts.

455
00:25:17,119 --> 00:25:20,359
Speaker 1: How do you, Fronds Warner, how do you react to

456
00:25:20,560 --> 00:25:26,520
Speaker 1: one vaccine in an unimaginable ninety degrees fahrenheit and another

457
00:25:26,560 --> 00:25:32,960
Speaker 1: one being refrigerated. How does that occur? Well, it depends

458
00:25:33,040 --> 00:25:38,240
Speaker 1: most probably on how you're working with the mRNA, how

459
00:25:38,280 --> 00:25:42,200
Speaker 1: you're stabilizing the RNA, and how you're manufacturing the RNA.

460
00:25:43,040 --> 00:25:46,320
Speaker 1: Um This is more or less the the the only

461
00:25:46,440 --> 00:25:51,320
Speaker 1: points where it really could make a difference. And as

462
00:25:51,560 --> 00:25:56,240
Speaker 1: we are holding on the RNA for all our vaccines,

463
00:25:56,280 --> 00:25:59,919
Speaker 1: we have got a Rabius vaccine which is already in

464
00:26:00,040 --> 00:26:03,320
Speaker 1: the clinics for a while that we have seen that

465
00:26:03,400 --> 00:26:06,680
Speaker 1: the property is that you can have ourn a Brittish

466
00:26:06,680 --> 00:26:09,800
Speaker 1: stable and then certainly on the product by product or

467
00:26:09,800 --> 00:26:13,399
Speaker 1: target by target, you have to reevaluate again. And with

468
00:26:13,480 --> 00:26:16,639
Speaker 1: the COVID nineteen vaccine candidate, we have gotten the clinic.

469
00:26:16,720 --> 00:26:20,120
Speaker 1: We see the three months, well you see it within

470
00:26:20,200 --> 00:26:22,439
Speaker 1: three months. But the mystery, I think to all of

471
00:26:22,480 --> 00:26:26,280
Speaker 1: our viewers and listeners is almost back to the nineteen

472
00:26:26,400 --> 00:26:29,640
Speaker 1: fifties and I remember the liquid nitrogen and doctor's offices

473
00:26:29,680 --> 00:26:32,159
Speaker 1: as well. Is that what we're heading back to is

474
00:26:32,160 --> 00:26:34,840
Speaker 1: we're going to have those metal containers with the smoke

475
00:26:34,920 --> 00:26:37,960
Speaker 1: coming out of them when I was a kid. No,

476
00:26:38,160 --> 00:26:41,520
Speaker 1: I don't think so. As we have got a stability

477
00:26:41,600 --> 00:26:44,879
Speaker 1: of the COVID nineteen vaccine Canada already at three months,

478
00:26:44,880 --> 00:26:49,240
Speaker 1: and this is up to three months minimums, so it

479
00:26:49,280 --> 00:26:51,840
Speaker 1: will be extended because all what we do is real

480
00:26:51,960 --> 00:26:54,879
Speaker 1: time and you have to see that now the RNA

481
00:26:55,040 --> 00:26:57,280
Speaker 1: vaccines not only in our hands but also in the

482
00:26:57,359 --> 00:27:00,439
Speaker 1: hands of the others. This is brand you. We can

483
00:27:00,480 --> 00:27:03,119
Speaker 1: make it different and then certainly the development of the

484
00:27:03,240 --> 00:27:07,760
Speaker 1: stability will increase as well and will will get better

485
00:27:07,800 --> 00:27:10,120
Speaker 1: and better over time. This is what we see and

486
00:27:10,320 --> 00:27:12,000
Speaker 1: you know, this is really something we have to work

487
00:27:12,040 --> 00:27:13,800
Speaker 1: on and we will. So given the fact that you're

488
00:27:13,800 --> 00:27:17,879
Speaker 1: on the front line, so there's actually manufacturing potential vaccines,

489
00:27:18,200 --> 00:27:20,520
Speaker 1: can you give us a sense of your timeline of

490
00:27:20,600 --> 00:27:23,520
Speaker 1: how quickly you think that manufacturing could get ramped up

491
00:27:23,840 --> 00:27:27,160
Speaker 1: and distribution channels could get solidified so that we get

492
00:27:27,200 --> 00:27:32,359
Speaker 1: a critical mass of people immunized against the virus. Well,

493
00:27:33,080 --> 00:27:37,040
Speaker 1: you know, we are MR and A manufacturers, not only

494
00:27:37,040 --> 00:27:39,639
Speaker 1: developers on the one side for the molecule, but to

495
00:27:39,760 --> 00:27:42,159
Speaker 1: have it as products, but also manufacturing, because this is

496
00:27:42,200 --> 00:27:44,639
Speaker 1: what you need since two thousand and six, and it

497
00:27:44,760 --> 00:27:47,720
Speaker 1: is certainly the scale up you always do according to

498
00:27:47,760 --> 00:27:49,640
Speaker 1: what you've got in the pipeline. What is the need

499
00:27:49,720 --> 00:27:53,040
Speaker 1: you really to to have the capacity for When we

500
00:27:53,080 --> 00:27:57,200
Speaker 1: started two years ago with our fourth product line, which

501
00:27:57,240 --> 00:28:00,800
Speaker 1: is an industrial scale, and nobody really us believing in

502
00:28:01,200 --> 00:28:03,840
Speaker 1: that you need this big scale. Certainly nobody knew at

503
00:28:03,880 --> 00:28:07,000
Speaker 1: the time that we're talking about COVID nineteen. But since

504
00:28:07,040 --> 00:28:10,320
Speaker 1: the beginning of this year, all this capacity which is

505
00:28:10,320 --> 00:28:13,080
Speaker 1: going to be built up, and as we are actually

506
00:28:13,119 --> 00:28:16,080
Speaker 1: building this up, not only we are at CREVAC also others.

507
00:28:16,920 --> 00:28:21,600
Speaker 1: This is m rn A capacity which stays even beyond

508
00:28:21,640 --> 00:28:24,400
Speaker 1: COVID nineteen. It will be a part of the preparedness

509
00:28:26,000 --> 00:28:29,520
Speaker 1: thought because there will be other viruses coming and RNA

510
00:28:29,640 --> 00:28:32,520
Speaker 1: can make a difference obviously, and and for that the

511
00:28:32,520 --> 00:28:35,439
Speaker 1: capacity is there. But you can't get from zero to

512
00:28:35,520 --> 00:28:38,800
Speaker 1: a hundred within a minute. But all what is at

513
00:28:38,800 --> 00:28:42,280
Speaker 1: the moment what we see as scaled up worldwide globally

514
00:28:43,160 --> 00:28:46,960
Speaker 1: beyond KUVAC even there will be enough capacity to really

515
00:28:47,160 --> 00:28:50,000
Speaker 1: vaccinate the world, well, let's say until the end of

516
00:28:50,120 --> 00:28:53,000
Speaker 1: next year, so fronts order. When you talk about m

517
00:28:53,080 --> 00:28:57,160
Speaker 1: R and A and the potential differences in between the vaccines,

518
00:28:57,480 --> 00:29:00,280
Speaker 1: Tom Keene's ears light up. Are his eyes it up

519
00:29:00,280 --> 00:29:03,320
Speaker 1: and his ears perk up as he tries to imagine

520
00:29:03,600 --> 00:29:07,360
Speaker 1: the sequencing here. Most people's eyes blaze over. They don't

521
00:29:07,400 --> 00:29:09,960
Speaker 1: know the difference from one vaccine to another. People talk

522
00:29:10,000 --> 00:29:12,760
Speaker 1: about how it's important to have multiple vaccines, but does

523
00:29:12,800 --> 00:29:15,360
Speaker 1: it complicate the issue? I mean, who gets what and

524
00:29:15,360 --> 00:29:20,360
Speaker 1: why is that important? What we will see as as

525
00:29:20,400 --> 00:29:22,400
Speaker 1: this is what we are doing, is all in real time.

526
00:29:22,440 --> 00:29:26,560
Speaker 1: If you compare it with other vaccine developing UH strategy

527
00:29:27,040 --> 00:29:31,000
Speaker 1: in the past or whatever was the real world in

528
00:29:31,040 --> 00:29:34,920
Speaker 1: the past. This really has been accelerated without doing any

529
00:29:34,960 --> 00:29:38,520
Speaker 1: concession to the safety and tolerability of the vaccine. But

530
00:29:38,720 --> 00:29:40,760
Speaker 1: you have to see it target by target, and this

531
00:29:40,880 --> 00:29:45,280
Speaker 1: is COVID nineteen and what it does to the immune system,

532
00:29:45,320 --> 00:29:48,720
Speaker 1: how long the protection will be, this is all to

533
00:29:48,840 --> 00:29:52,040
Speaker 1: be seen. At the moment. There are you know, had

534
00:29:52,600 --> 00:29:56,920
Speaker 1: runners not only m RNA but also on protein based

535
00:29:56,960 --> 00:30:00,680
Speaker 1: on viral vector based technologies, and we will have to

536
00:30:00,760 --> 00:30:05,080
Speaker 1: see how long is really the protection level, the memory

537
00:30:05,120 --> 00:30:08,920
Speaker 1: effect and what does it do to the different immune

538
00:30:08,920 --> 00:30:14,640
Speaker 1: systems of people with indications, respiratory indications, elderly people, And

539
00:30:14,720 --> 00:30:16,880
Speaker 1: this is all what we will find out. What we

540
00:30:16,920 --> 00:30:20,760
Speaker 1: see is that most probably most of the vaccines differently

541
00:30:20,800 --> 00:30:24,120
Speaker 1: have different properties and then certainly for the different needs,

542
00:30:24,400 --> 00:30:26,560
Speaker 1: and therefore it is good to have more than just

543
00:30:26,720 --> 00:30:29,120
Speaker 1: one vaccine in order to see this later what is

544
00:30:29,200 --> 00:30:33,800
Speaker 1: most appropriate for which kind of target population. So thank

545
00:30:33,800 --> 00:30:35,880
Speaker 1: you so much for joining us today. Friends, owner host

546
00:30:36,000 --> 00:30:41,280
Speaker 1: with CREVAC of Germany greatly greatly appreciate that. Thanks for

547
00:30:41,360 --> 00:30:45,760
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

548
00:30:45,920 --> 00:30:51,640
Speaker 1: interviews on Apple podcasts, SoundCloud, or whichever podcast platform you prefer.

549
00:30:52,200 --> 00:30:55,560
Speaker 1: I'm on Twitter at Tom Keane Before the podcast. You

550
00:30:55,560 --> 00:31:03,920
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio