WEBVTT - Surveillance: Biden's Tax Plan With Ramamurti 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferroll and Lisa Brownwitz Jaily. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, sun Cloud, Bloomberg dot com, 0:00:23.920 --> 0:00:29.960 and of course on the Bloomberg terminal. Some of the 0:00:30.040 --> 0:00:32.280 dynamics that we see right now in well time to 0:00:32.320 --> 0:00:36.479 speak with Burrot Marmorti nationally got on a Council Deputy director. 0:00:36.520 --> 0:00:39.680 And what it's so important here is it is experience 0:00:39.720 --> 0:00:42.800 for the democratic politics of this nation and working with 0:00:42.880 --> 0:00:45.120 committees as well. Broad I've got to go right to 0:00:45.120 --> 0:00:48.160 your work with Senator Warren years ago and the tax 0:00:48.680 --> 0:00:52.159 the tax frenzy the media has right now and the 0:00:52.280 --> 0:00:57.240 reality of the committee process. How will the Biden administration 0:00:57.760 --> 0:01:01.600 work with the committees in this modern politics? Sure so 0:01:01.640 --> 0:01:04.280 that the President has laid out of tax agenda during 0:01:04.319 --> 0:01:09.720 the campaign. It involved higher taxes on big corporations, multinational corporations, 0:01:10.520 --> 0:01:12.960 taxes that tax changes that were intended to drive more 0:01:13.000 --> 0:01:16.520 investment into the United States rather than abroad. Uh and 0:01:16.680 --> 0:01:20.280 higher taxes on extremely wealthy individuals, those people making more 0:01:20.280 --> 0:01:23.240 than four hundred thousand dollars a year, and so UH 0:01:23.360 --> 0:01:27.520 we we hope to work with Congress to accomplish those goals. UH. 0:01:27.720 --> 0:01:30.920 The President's tax plan is intended to make sure that 0:01:30.959 --> 0:01:34.880 middle class families are are not paying more than their 0:01:35.000 --> 0:01:37.360 fair share, and that the wealthiest folks who buy in 0:01:37.440 --> 0:01:39.960 large have done quite well over the last several years, 0:01:40.000 --> 0:01:42.520 including during the last year, are paying a little bit more. 0:01:43.120 --> 0:01:47.440 Part of our social fabric is the single versus married split. 0:01:48.040 --> 0:01:51.400 Are you gonna play with the social construct of our 0:01:51.480 --> 0:01:56.840 tax system and particularly joint had a household and single dynamics. Now, 0:01:56.920 --> 0:01:58.600 I don't believe that there's any plans for that as 0:01:58.640 --> 0:02:02.960 you as you know, the tax recognizes that, you know, 0:02:03.000 --> 0:02:06.520 different UH thresholds are wererant it depending on whether you're 0:02:06.520 --> 0:02:09.800 filing as a single person or married. I don't think 0:02:09.840 --> 0:02:12.600 that there's any plans to fundamentally change any of that. 0:02:13.320 --> 0:02:16.400 But as I said, the key here is that the 0:02:16.440 --> 0:02:20.600 President believes strongly that the biggest corporations and those folks 0:02:20.639 --> 0:02:23.400 who have done extremely well over the last several decades 0:02:24.080 --> 0:02:27.960 should pay a bit more to finance to support investments 0:02:28.440 --> 0:02:31.200 UH in in the U. S and country. I help 0:02:31.240 --> 0:02:33.639 me understand this, because something really important is happening down 0:02:33.639 --> 0:02:36.000 in Washington. You've just called anyone earning over four d 0:02:36.320 --> 0:02:39.079 extremely wealthy. At the same time, down in Washington, we've 0:02:39.080 --> 0:02:41.640 decided that a family earning a hundred and fifty thousand 0:02:42.160 --> 0:02:44.800 is deserving of a relief check as well. Are we 0:02:45.040 --> 0:02:47.840 defining something important here? Are these just numbers plugged out 0:02:47.840 --> 0:02:51.280 a thin air? Is there a message underlying these numbers? Sure? 0:02:51.280 --> 0:02:53.360 I mean, the president's view is that you know a 0:02:53.440 --> 0:02:57.120 teacher and a nurse who collectively make you know, a 0:02:57.200 --> 0:03:01.600 hundred and ten thousand dollars UH her relief And what 0:03:01.639 --> 0:03:03.720 we've seen in the data is that families with that 0:03:03.800 --> 0:03:06.640 kind of profile have suffered. I mean, it's important to 0:03:06.639 --> 0:03:10.280 remember that, according to the latest data, one and seven 0:03:10.320 --> 0:03:14.840 American families reported going hungary during the pandemic. There's a 0:03:14.840 --> 0:03:17.440 lot of need. That it's very widespread need. And remember, 0:03:17.560 --> 0:03:20.680 in addition to the fact that the unemployment rate is elevated, 0:03:20.720 --> 0:03:23.560 there's also evidence that folks have had to cut back 0:03:23.560 --> 0:03:26.520 on hours, had to take wage cuts in order to 0:03:26.520 --> 0:03:29.320 make it through the pandemic. So there's widespread need and 0:03:29.040 --> 0:03:33.320 the economic impact payments the checks reflecting although there is 0:03:33.320 --> 0:03:36.400 a difference between a hundred and fifty and twenty, there's 0:03:36.400 --> 0:03:38.920 a difference between a hundred and fifty and no income. 0:03:39.160 --> 0:03:41.400 And this raises a question of whether this is trying 0:03:41.440 --> 0:03:44.400 to simulate spending and ignite some sort of economic growth 0:03:44.680 --> 0:03:47.600 versus plugging a gap and evening out the playing field. 0:03:47.600 --> 0:03:51.080 Which is it. Well, I think that the American Rescue Plan, 0:03:51.160 --> 0:03:55.440 which recently passed, targets money towards those lower income and 0:03:55.440 --> 0:03:58.560 middle income families. Remember, it's not just the checks. There's 0:03:58.560 --> 0:04:00.680 an expansion of the child Pax, which is going to 0:04:00.720 --> 0:04:05.880 provide parents with children additional support. Obviously, there's an extension 0:04:05.920 --> 0:04:09.160 of unemployment insurance, which is obviously targeted at folks who 0:04:09.160 --> 0:04:10.960 have lost their jobs. You no fault of their own. 0:04:11.040 --> 0:04:13.000 So collectively, what you what you've seen, and what the 0:04:13.000 --> 0:04:17.920 objective independent analysis and analyses have shown, is that this 0:04:17.960 --> 0:04:21.040 approach is going to drive a tremendous amount of support 0:04:21.160 --> 0:04:24.320 to lowering from folks, especially lowering from folks with children. 0:04:24.360 --> 0:04:27.640 And we think that that's appropriate. Remember, uh, this plan 0:04:27.920 --> 0:04:29.880 is going to cut child poverty in the United States 0:04:29.960 --> 0:04:32.640 in half, and we think that that's one of the 0:04:32.960 --> 0:04:35.560 main benefits of it. Is it a goal to make 0:04:35.600 --> 0:04:40.880 the child tax credit permanent? The President said that he's 0:04:40.880 --> 0:04:42.920 interested in looking at that. Obviously we're not quite bit 0:04:42.920 --> 0:04:44.520 at that point yet. You want to make sure that 0:04:44.560 --> 0:04:47.800 in the short term all of the good relief provisions 0:04:47.839 --> 0:04:50.479 in the American Rescue Plan actually end up in the 0:04:50.480 --> 0:04:53.240 pockets of the American people. And so this week and 0:04:53.320 --> 0:04:56.719 next week, what you're seeing is the administration traveling the 0:04:56.720 --> 0:04:59.760 country trying to explain to people how they get actually 0:04:59.760 --> 0:05:02.080 acts us the relief that they're entitled to under this bill. 0:05:02.120 --> 0:05:05.040 That's really important. Rot This is an important question. It's 0:05:05.040 --> 0:05:08.560 a curiosity for our global Wall Street audience day to day. 0:05:08.640 --> 0:05:10.479 What do you observe in the White House is to 0:05:10.560 --> 0:05:14.120 how the President takes in his economic advice. What does 0:05:14.200 --> 0:05:17.919 the Biden method of taking in your wisdom and for 0:05:18.000 --> 0:05:21.080 that matter, Secretary Yellin's wisdom. Yeah. So, look, this is 0:05:21.120 --> 0:05:25.920 a very data driven, empirically based approach, and you've seen 0:05:25.960 --> 0:05:28.000 it in the arguments that the President has been making 0:05:28.000 --> 0:05:31.600 over the last several months about the need to go 0:05:31.680 --> 0:05:34.720 big in response to this crisis, and the point that 0:05:35.240 --> 0:05:38.240 the cost of doing too little UH is greater than 0:05:38.240 --> 0:05:41.160 the cost of doing too much in the situation, UM. 0:05:41.200 --> 0:05:42.640 And you also see it in the fact that the 0:05:42.680 --> 0:05:46.039 President has said, UM that it's totally reasonable and the 0:05:46.120 --> 0:05:50.320 right thing to do economically, UH to deficit finance this 0:05:50.440 --> 0:05:54.159 relief plan, because in the long term, the cost of 0:05:54.240 --> 0:05:57.560 not providing this relief and letting the economy stagnate for 0:05:57.640 --> 0:06:00.760 longer is also quite severe. All Right, it's great to 0:06:00.760 --> 0:06:02.800 catch up and we appreciate time. So come back soon 0:06:02.800 --> 0:06:07.760 one year rama the National Economic Council with Deputy Director. 0:06:13.920 --> 0:06:16.200 This is a joy and this is what it's all about. 0:06:16.279 --> 0:06:19.080 It's what Jonathan Pharaoh, Lisa Bramwints and I agree on 0:06:19.800 --> 0:06:23.360 stop and talk to smart people. Patricia Moser is one 0:06:23.400 --> 0:06:26.440 of the most wonderful economists we have at Columbia. Yes, 0:06:26.920 --> 0:06:30.120 a former New York FED official, yes, but her heritage 0:06:30.120 --> 0:06:33.120 from Carl Case at Wellesley on to M. I. T. 0:06:33.320 --> 0:06:36.839 And Blanchard and Fisher and onto her first rate economics 0:06:36.839 --> 0:06:40.880 sets her up. Is truly someone with perspective on Jerome 0:06:40.960 --> 0:06:43.960 Powell and this Fed. Professor Moser, thank you so much 0:06:44.160 --> 0:06:48.160 for joining us today. I want to go to M I. T. Economics, 0:06:48.160 --> 0:06:51.719 which is the X axis and the time continuum. What 0:06:51.880 --> 0:06:55.640 in God's name, does transitory mean to someone that's studied 0:06:55.680 --> 0:07:00.080 under Fisher and Blanchard. Well, I was listening to a 0:07:00.080 --> 0:07:02.159 banker for a lot longer than I studied with stand 0:07:02.200 --> 0:07:04.239 Fisher and Olivia black Shards. So I'm going to answer 0:07:04.240 --> 0:07:08.359 that a little of both. UH. Transitory depends on the 0:07:08.400 --> 0:07:13.560 market and the circumstances. Macro Economic transitory is a few quarters. UH. 0:07:13.840 --> 0:07:16.720 Financial market transitory is if you're lucky, it's a couple 0:07:16.760 --> 0:07:20.280 of minutes, but you know, maybe a day or two tops. 0:07:20.320 --> 0:07:24.480 So UM, I think it depends on the it depends 0:07:24.480 --> 0:07:28.520 on the circumstances. UM. From a monetary policy standpoint, if 0:07:28.520 --> 0:07:32.200 we're gonna talk about the FED, I think that it's uh. 0:07:33.680 --> 0:07:35.960 It's transitory is something that they're looking at from a 0:07:36.000 --> 0:07:39.800 matho perspective usually unless they're explicitly talking about markets, and 0:07:39.880 --> 0:07:42.160 that means a quarter or two. And to the comment 0:07:42.240 --> 0:07:44.240 that that was made a couple of minutes ago about 0:07:44.240 --> 0:07:49.160 looking through this, I think that's basically a simple bankers 0:07:49.200 --> 0:07:51.720 interpretation of what's happened in the last few months. Is 0:07:51.720 --> 0:07:55.280 the reason that um uh nearly everybody I know and 0:07:55.280 --> 0:07:58.120 I certainly agree with this. I think that this is 0:07:58.200 --> 0:08:02.520 good news toole point is to get the economy growing faster, 0:08:02.680 --> 0:08:07.120 real interest rates up, inflation expectations up. And both of 0:08:07.160 --> 0:08:10.640 those things have happened. Uh. Now it's at the cost 0:08:10.680 --> 0:08:12.280 that you know, it's not good news for if you're 0:08:12.280 --> 0:08:16.560 fixed income investor. Uh. But but otherwise it's actually very 0:08:16.600 --> 0:08:20.520 incommicy news from a map. Stan Fishers stopped the Economic 0:08:20.560 --> 0:08:22.480 Club of New York a couple of years ago with 0:08:22.520 --> 0:08:27.520 the discussion of the percentage move from low yields. Are 0:08:27.520 --> 0:08:30.840 you taken aback by the abruptness of the move and 0:08:30.920 --> 0:08:33.559 low yields to a higher point or even up to 0:08:33.640 --> 0:08:40.079 focus Landau's two point to five predicted this morning. So, um, 0:08:40.120 --> 0:08:42.480 it was speedier than things that we've seen the last 0:08:42.480 --> 0:08:45.040 ten years, ten twelve years or so. But let me 0:08:45.120 --> 0:08:49.160 be blunt. Anybody who has uh thinks about what I 0:08:49.240 --> 0:08:54.280 call normal monetary policy, which is kind of four eight. Um, 0:08:54.400 --> 0:08:59.760 this is not ridiculously abrupt. It's actually kind of stereotypical behavior. 0:09:00.400 --> 0:09:04.640 Toward the second half of the recession. Your kirk gets steeper, 0:09:04.800 --> 0:09:09.680 the long end reads, the short end out, inflation expectations rise, 0:09:09.720 --> 0:09:13.640 real rates rise, and by the way, risk premia at 0:09:13.640 --> 0:09:15.440 the same time, this iss gone has been going on, 0:09:15.600 --> 0:09:18.720 have actually gone down. I think how you'ld how you'ld 0:09:18.760 --> 0:09:22.120 spreads upon like forty basis on into this period. So 0:09:22.480 --> 0:09:25.120 this is not a sign of like tight credit and 0:09:25.160 --> 0:09:27.319 things going wrong. This is a sign of things going 0:09:27.520 --> 0:09:30.240 right right. But Patricia, there is a concern about whether 0:09:30.280 --> 0:09:32.520 we could see as some sort of additional tantrum, I 0:09:32.559 --> 0:09:35.480 mean against nord Vaga. Exante was just on and he 0:09:35.559 --> 0:09:38.400 was saying, really it will hinge this week, and whether 0:09:38.440 --> 0:09:41.040 the Fed gives guidance on how far they're willing to 0:09:41.120 --> 0:09:44.480 overshoot with inflation before they start to get nervous and 0:09:44.480 --> 0:09:46.640 start to talk about rate rises, and he said, it's 0:09:46.640 --> 0:09:49.240 a big difference if it's two point one percent inflation 0:09:49.440 --> 0:09:51.920 or if it's two point five percent. Do you expect 0:09:51.920 --> 0:09:53.760 the Fed to give guidance and what do you think 0:09:53.760 --> 0:09:57.040 the reaction could be? Yeah, I doubt if they're going 0:09:57.080 --> 0:10:01.120 to give that explicit guidance um right now. Will they 0:10:01.120 --> 0:10:03.760 eventually have to do that? I think it's entirely possible 0:10:03.760 --> 0:10:05.480 that they're going to have to And perhaps the way 0:10:05.520 --> 0:10:07.680 they'll give that guidance is through a series of speeches 0:10:07.840 --> 0:10:11.520 rather than through a formal agreement. Because based on history, 0:10:11.559 --> 0:10:13.599 and my guess is that there's not complete agreement on 0:10:13.640 --> 0:10:17.319 the E and C about how far amongst this particular 0:10:17.360 --> 0:10:20.920 set of members about exactly how far above two they 0:10:20.920 --> 0:10:25.160 would go. You know, transitory, if it's truly transitory for 0:10:25.200 --> 0:10:28.560 a few quarters. This is what we're um the word 0:10:28.559 --> 0:10:31.640 of the word of the morning. Um. Uh. Then I 0:10:31.640 --> 0:10:34.600 think I'd almost all agree that having transitory inflation at 0:10:34.640 --> 0:10:36.719 two and a half percent for a while, if their 0:10:36.800 --> 0:10:40.199 forecasts and their excellent economic reasons to believe that's not 0:10:40.240 --> 0:10:43.760 going to last, um, like the reversal of supply shocks 0:10:43.760 --> 0:10:46.600 from a year ago, for example. UM, then I don't 0:10:46.600 --> 0:10:48.120 think you're going to have a problem with the vast 0:10:48.120 --> 0:10:49.880 majority of the the F one s TEA members. They're gonna 0:10:49.880 --> 0:10:53.360 say that's fine, particularly if it gets us from under 0:10:53.400 --> 0:10:55.480 one and a half to closer to two percent on 0:10:55.480 --> 0:10:59.120 a long run basis. That's that's what they're after. Um, 0:10:59.280 --> 0:11:01.600 and more of all utility, a little bit more, a 0:11:01.640 --> 0:11:04.960 little bit more volatility and inflation is exactly what they're 0:11:04.960 --> 0:11:08.080 aiming for. I think that the question about whether there 0:11:08.080 --> 0:11:11.760 will be another tantrum is slightly different though. Um, It's 0:11:11.800 --> 0:11:15.880 not that the Treasury market is completely immune from supply effects. 0:11:15.920 --> 0:11:19.959 And there's gonna be a lot of supply of treasury obviously, Um, 0:11:20.000 --> 0:11:22.000 there was going to be anyway, but with the fiscal 0:11:22.000 --> 0:11:24.640 stimula package, there's going to be a lot and very 0:11:24.640 --> 0:11:28.680 occasionally rarely. Um. It's one reason I get so much attention. Uh, 0:11:28.800 --> 0:11:31.160 you can get real supply effects in the treasury market. 0:11:31.320 --> 0:11:34.640 I called the pig in the python problem. Um. And 0:11:35.440 --> 0:11:41.000 of course dealers are a lot healthier financial institutions than 0:11:41.040 --> 0:11:43.800 they were twelve years ago, but their balancutes are also 0:11:43.840 --> 0:11:46.560 a bit less flexible and as a as a result 0:11:46.600 --> 0:11:49.280 of the changes, and so I think they're regulatory changes. 0:11:49.760 --> 0:11:54.320 And so given that the odds of this of having 0:11:54.720 --> 0:11:56.760 a few bumps along the way and a little more 0:11:56.840 --> 0:12:00.200 volatility than we've had, I think I think it's hot. 0:12:00.200 --> 0:12:03.360 But honestly, there's been no voluntarity for twelve years since 0:12:03.400 --> 0:12:07.040 it's partly what everybody's expectations are how fixed income markets 0:12:07.040 --> 0:12:09.920 should behave. UM. Sorry to be a little bit you know, 0:12:09.960 --> 0:12:13.120 old school about this, but um, well but Patricia or 0:12:13.200 --> 0:12:17.520 worried about too much supply, like more than investors want. 0:12:17.679 --> 0:12:20.920 That's a very rare thing to happen in treasury markets. 0:12:20.960 --> 0:12:25.720 It hasn't happened since the eighties. Um Um, I don't 0:12:25.720 --> 0:12:28.600 think it's very likely, but it's always a risk. And 0:12:28.600 --> 0:12:30.720 that's why I thought what Secretary Yelling said the other 0:12:30.800 --> 0:12:34.800 day about eventually doing something when the economy is in 0:12:34.840 --> 0:12:38.360 debt or shape, about about the fistal deficity is important. Well, 0:12:38.360 --> 0:12:41.720 but no worries. I mean, these are all really important points. 0:12:41.720 --> 0:12:43.280 And it brings me to the Fed's balance sheet, the 0:12:43.280 --> 0:12:45.480 idea that we have the seven point six trillion dollar 0:12:45.520 --> 0:12:47.200 balance sheet, and there's a question of how much the 0:12:47.200 --> 0:12:50.480 Fed will operate as an absorbed, as an absorption tool 0:12:50.559 --> 0:12:52.480 basically for all of this supply. At what point will 0:12:52.480 --> 0:12:55.120 they essentially monetize the debt buying the dead of the 0:12:55.200 --> 0:12:57.400 United States And basically it's a wash if they don't 0:12:57.400 --> 0:12:59.400 ever shrink their balance sheet. Do you think that they'll 0:12:59.400 --> 0:13:02.480 give guiding about how much the actimist capacity and continue 0:13:02.520 --> 0:13:05.840 to expand their balance seat despite the incredibly easy monetary 0:13:05.880 --> 0:13:09.240 conditions that we've seen. So um, I don't think they're 0:13:09.280 --> 0:13:11.240 in a rush to get out of it. Because one 0:13:11.320 --> 0:13:14.840 of the things I think that's very interesting is how 0:13:15.000 --> 0:13:17.960 uncertain everybody sort of things, Okay, this is good news 0:13:17.960 --> 0:13:21.000 about inflation, but the uncertainty about medium term inflation is 0:13:21.160 --> 0:13:26.040 very high right now. Honestly, COVID is a completely different 0:13:26.120 --> 0:13:29.520 kind of shock going to they have, and so understanding 0:13:29.559 --> 0:13:31.640 what the implications are going to be for prices and 0:13:31.679 --> 0:13:35.240 wages two years out now is incredibly difficult to do. 0:13:35.600 --> 0:13:37.800 And so I that's one reason that I think they're 0:13:37.840 --> 0:13:40.280 going to be hesitant to give too much guidance because 0:13:40.280 --> 0:13:42.880 they don't want to give the impression they're gonna right now, 0:13:43.080 --> 0:13:45.760 this very minute. They don't want to give the impression 0:13:45.760 --> 0:13:47.880 they're going to pull back too soon. But they will 0:13:47.920 --> 0:13:50.520 give guidance. They they did a pretty decent job of 0:13:50.559 --> 0:13:55.439 it when they not the paper tantrum in but after 0:13:55.480 --> 0:13:58.360 that they learned, uh, and they did a pretty decent job. 0:13:58.440 --> 0:14:00.720 And they're gonna do this way ahead at time. And 0:14:00.800 --> 0:14:02.679 I don't think they're there yet because I don't think 0:14:02.679 --> 0:14:04.840 the economy is strong enough and inflation is on where 0:14:04.840 --> 0:14:08.000 they wanted to be. Um Uh. The one thing that 0:14:08.080 --> 0:14:14.280 I will say, um though about um the the the 0:14:14.280 --> 0:14:18.199 Fed's balance sheet is that from a dealer capacity standpoint, 0:14:19.440 --> 0:14:22.200 the Fed buying treasuries and creating reserves doesn't really help, 0:14:22.240 --> 0:14:24.600 but just sort of trades one kind of state Bassett 0:14:24.640 --> 0:14:26.560 for a different kind of state Bassett on the bank's 0:14:26.600 --> 0:14:29.760 balance sheets. Um, and it doesn't sort of solve the 0:14:29.800 --> 0:14:35.600 capacity problem, the flexibility problem per se. Actually, I think 0:14:35.600 --> 0:14:38.520 what the bank regulators decided to do about the supplementary 0:14:38.600 --> 0:14:41.040 leverage ration of this month, I think that's decided before 0:14:41.040 --> 0:14:43.040 the end of them up. Maybe more important there something 0:14:43.040 --> 0:14:45.240 we'll focus on a little bit more in the days ahead. Professor, 0:14:45.320 --> 0:14:47.400 thanks for time this morning, because most of that of 0:14:47.480 --> 0:14:56.080 Columbia University. An hour ago we beat to duth Ian 0:14:56.160 --> 0:15:00.560 lingon a BEMO Capital Markets. Abramowitz and Ferrell absolutely killed 0:15:00.560 --> 0:15:03.440 the translation of its notes. He has had of US 0:15:03.560 --> 0:15:06.680 rates at BEMO Capital Markets. And Mr Lincoln joins us 0:15:06.720 --> 0:15:09.160 this morning and I make jokes about it, but it's 0:15:09.200 --> 0:15:12.720 not funny. It is a record issuance of debt. What 0:15:12.880 --> 0:15:17.000 is the distinction of this record issuance of debt? Well, 0:15:17.040 --> 0:15:21.440 I think that the real defining characteristic of what we're 0:15:21.440 --> 0:15:25.160 seeing at this moment in terms of new Treasury issuances. 0:15:26.000 --> 0:15:28.480 It's not going to all be in the front into 0:15:28.520 --> 0:15:32.720 the curve. The Treasury Secretary wants to turn it out 0:15:32.880 --> 0:15:37.040 so we're seeing more thirties, more twenties, more tens, and 0:15:37.120 --> 0:15:40.800 it's coming at a moment where the FED is content 0:15:40.880 --> 0:15:43.720 to characterize the back up and yields as a positive 0:15:43.760 --> 0:15:49.080 sign because it reflects in improving economic outlook and inflation expectations. 0:15:49.400 --> 0:15:51.880 There will be a point in which we look back 0:15:52.000 --> 0:15:55.200 at the higher rates we're seeing and say, wow, that 0:15:55.280 --> 0:15:58.240 was a great buying opportunity. The question, in my mind 0:15:58.360 --> 0:16:01.400 is is that one sex deten ye yields or is 0:16:01.440 --> 0:16:03.800 it one seventy five? And we'll get there in and 0:16:03.840 --> 0:16:05.440 I want to elaborate a little bit about how to 0:16:05.520 --> 0:16:07.600 know and what to even gauge out. But there's a 0:16:07.680 --> 0:16:09.840 question we talk about all this supply. How much is 0:16:09.880 --> 0:16:12.400 the FED buying? I mean, they've sucked up a substantial 0:16:12.440 --> 0:16:15.800 portion of this. Will they continue to absorb the us 0:16:15.960 --> 0:16:19.440 IS ample and record debt sales, Well, they won't be 0:16:19.640 --> 0:16:23.640 buying the entirety of net issuance. In fact, we're projecting 0:16:24.000 --> 0:16:28.040 somewhere around one point eight trillion dollars off net new 0:16:28.080 --> 0:16:32.000 issuants out find of what's going into SOMA or at 0:16:32.040 --> 0:16:35.880 the FED. So they we will really need underwriters from 0:16:35.960 --> 0:16:38.720 different parts of the economy and different parts of the 0:16:38.720 --> 0:16:41.760 market in different parts of the world to actually get 0:16:41.800 --> 0:16:44.760 the US bet. So, why do you think that treasure 0:16:44.800 --> 0:16:46.760 yields are capped at one seventy five or that it 0:16:46.800 --> 0:16:49.520 becomes a buying opportunity there? Why not two percent to 0:16:49.640 --> 0:16:51.800 and a quarter percent, which is what some houses are saying. 0:16:52.600 --> 0:16:55.640 I think at one seventy five, we start to look 0:16:55.640 --> 0:16:58.400 at what's going on in the US in terms of 0:16:58.440 --> 0:17:01.920 the treasury market, versus what's going on in Europe, what's 0:17:01.960 --> 0:17:06.040 going on in Japan, and on a comparative On a 0:17:06.040 --> 0:17:11.280 comparative basis, we're already starting to book attractive another fifteen 0:17:11.400 --> 0:17:14.200 twenty basis points I suspect will be the point where 0:17:14.200 --> 0:17:17.480 we start to see wobbles and risk assets and bring 0:17:17.480 --> 0:17:21.280 in those sideline buyers. But to be fair, I could 0:17:21.280 --> 0:17:25.080 certainly envision a situation where the Fed gives the green 0:17:25.200 --> 0:17:29.359 might to the very steepening tomorrow and we take a 0:17:29.480 --> 0:17:32.040 shot at a two handle tins and that would be 0:17:32.080 --> 0:17:33.560 a I think that would be a shock to the 0:17:33.600 --> 0:17:35.360 equity market. And can you give us a game plan 0:17:35.400 --> 0:17:37.840 for the twenty year issue? Who actually buys the twenty 0:17:37.920 --> 0:17:39.760 year and how much of a read across can you 0:17:39.800 --> 0:17:41.679 take from the twenty year issue today just for the 0:17:41.680 --> 0:17:45.720 broadest treasury market? So the twenty year issue, obviously it's 0:17:45.760 --> 0:17:50.680 a recent reintroduction to the benchmark. It has a set 0:17:50.720 --> 0:17:54.880 of natural buyers because it's the CTD for the classic 0:17:54.920 --> 0:17:59.920 bond contract and so there has been a solid bid. 0:18:00.440 --> 0:18:04.800 Auctions tend to tail slightly, but it's not a big 0:18:04.880 --> 0:18:10.159 foreign issue unlike tins for example, so it's a It 0:18:10.280 --> 0:18:13.080 does have structural buyers, but as a read for what 0:18:13.160 --> 0:18:15.520 it means for the rest of the market. The only 0:18:15.640 --> 0:18:19.359 way that the twenty year auction matters this afternoon is 0:18:19.400 --> 0:18:21.360 if we get a repeat of what we saw at 0:18:21.400 --> 0:18:26.359 February seven sevens, which was a significant tale despite a 0:18:26.400 --> 0:18:28.879 reasonable concession. Do you think that should be ignored that 0:18:28.920 --> 0:18:34.080 way in at this stage. I think that there's plenty 0:18:34.080 --> 0:18:38.080 of underwriting demand. At some stage, if we continue to 0:18:38.080 --> 0:18:42.919 see supply indigestion comparable to the sevens consistent tail versus 0:18:43.000 --> 0:18:46.800 the one pm win issue rate, that's going to merit 0:18:46.800 --> 0:18:49.639 a more significant repricing. That would be one of my 0:18:49.720 --> 0:18:54.280 biggest concerns in terms of how supply could truly reshape 0:18:54.320 --> 0:18:57.239 the curve in Lincoln year the bank amount you all, 0:18:57.280 --> 0:18:59.000 and I know when this pandemic is over, they're going 0:18:59.040 --> 0:19:00.920 to drag you up to my After all, you're gonna 0:19:00.920 --> 0:19:03.080 go with the big shots to see the Canadians beat 0:19:03.119 --> 0:19:05.480 the leaves. And someone's going to turn to you between 0:19:05.480 --> 0:19:08.520 the second and third period and say, look, my biggest 0:19:08.560 --> 0:19:11.359 fear as the foreigners don't show up. How do you 0:19:11.520 --> 0:19:15.119 answer the age old question that the foreigners will not 0:19:15.240 --> 0:19:18.280 show up to buy the United States full faith and 0:19:18.280 --> 0:19:23.199 credit paper. I think that the classic bond market adage 0:19:23.400 --> 0:19:26.120 that there's no such thing as a bad bond, just 0:19:26.200 --> 0:19:30.159 a bad price, is particularly apt in this context. People 0:19:30.240 --> 0:19:33.320 will show up to buy US treasuries. The question is 0:19:33.680 --> 0:19:37.520 at what yield will they need to be enticed in 0:19:37.600 --> 0:19:41.000 from the sidelines. And that's what we're seeing defined as 0:19:41.040 --> 0:19:46.680 the outpost. One outlook continues to brighten this Lisa's ice 0:19:46.680 --> 0:19:49.240 hockey games. Is that what you're implying to the Lisa 0:19:49.280 --> 0:19:50.880 shows up to an ice hockey game and I'll see 0:19:50.880 --> 0:19:57.600 and yeah, really it depends where you are. If you're 0:19:57.600 --> 0:20:02.080 in North Dakota, pretty exciting, it's always exciting. Actually, Rangers 0:20:02.119 --> 0:20:03.600 game is pretty exciting. To do you really want to 0:20:03.600 --> 0:20:10.200 have this conversation John, it's she holds in the boxes 0:20:10.280 --> 0:20:13.879 at Madison Square Garden. You can hear a pin drop 0:20:13.920 --> 0:20:23.000 when she starts terrible. If we get a briefing now, 0:20:23.040 --> 0:20:26.080 which has become extremely anticipated for all of our viewers 0:20:26.080 --> 0:20:29.199 and listeners, I'm Adalgia is a John Hopkins Center for 0:20:29.280 --> 0:20:34.680 Health Security and has provided just immense, immense value to us. 0:20:34.560 --> 0:20:38.560 All in the media love the charts of cases. They're dramatic, 0:20:38.640 --> 0:20:43.040 they're emotional, they're the easily accountable. The pros look at 0:20:43.119 --> 0:20:47.440 deaths and hospitalizations. When would you assume the public will 0:20:47.520 --> 0:20:53.360 finally shift onto your territory of death and the hospitalization dynamics. 0:20:54.119 --> 0:20:56.560 I think they're already starting to as they see that 0:20:56.600 --> 0:20:59.199 people get there, are getting vaccinated, as they don't hear 0:20:59.240 --> 0:21:02.720 about hospital pacity problems anymore, As they realize that nursing 0:21:02.720 --> 0:21:05.560 homes have been vaccinated, I think they're starting to understand 0:21:05.600 --> 0:21:07.920 that the concept really is not to get to COVID zero, 0:21:07.960 --> 0:21:10.040 but detain the virus to defend it so that it 0:21:10.080 --> 0:21:13.200 doesn't have the ability to cause serious disease, hospitalization and death. 0:21:13.240 --> 0:21:15.440 And I think they're going to get there because eventually 0:21:15.480 --> 0:21:18.320 that's all everybody is going to be looking at because 0:21:18.680 --> 0:21:21.240 that this is what this is what flatting the curve 0:21:21.240 --> 0:21:23.800 has always been about, as being below hospital capacity. And 0:21:23.840 --> 0:21:26.200 if you're in that position, we're dealing with a very 0:21:26.240 --> 0:21:28.960 different virus than we were a year ago. And I 0:21:28.960 --> 0:21:30.960 think that it's gonna take some time and the media 0:21:31.040 --> 0:21:32.919 is going to have to report more on on that 0:21:33.000 --> 0:21:34.600 than they are on on cases, and it's going to 0:21:34.640 --> 0:21:36.920 be a shift, but I think it is going to occur, 0:21:37.040 --> 0:21:39.120 and it is starting to occur, so it's more attentionally 0:21:39.200 --> 0:21:41.400 drawn to that. People will ask whether we can aggressively 0:21:41.600 --> 0:21:45.040 wide and broaden the eligibility full vaccinations. Do you think 0:21:45.040 --> 0:21:47.720 we're at that point right now? I do think we're 0:21:47.720 --> 0:21:50.200 starting to see states get broader. We've we've heard about 0:21:50.400 --> 0:21:52.600 We've heard about Alaska broadening. There's other states that are 0:21:52.600 --> 0:21:56.640 now broadening eligibility. It's just a question of being supplied 0:21:56.640 --> 0:21:59.120 constrained right now, and the supply is going to get 0:21:59.160 --> 0:22:01.439 better each day gets a little bit better as as 0:22:01.480 --> 0:22:04.120 we get closer and closer to delivery dates for Fiser Maderna, 0:22:04.200 --> 0:22:07.320 for Johnson and Johnson for bigger amounts of this vaccine. 0:22:07.440 --> 0:22:09.040 So I do think it's going to be a point 0:22:09.040 --> 0:22:12.320 than we're just vaccinating in anybody that wants to be vaccinated. 0:22:12.320 --> 0:22:14.760 As the President said, I can make an appointment in May, 0:22:14.760 --> 0:22:17.000 and I think we're looking at at summer, hopefully a 0:22:17.000 --> 0:22:19.199