Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Ley. We bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance, an Apple podcast, SoundCloud, Bloomberg
Speaker 1: dot Com and of course on the Bloomberg terminal. Let's
Speaker 1: get to an investor, Homward wars Seat I OT of
Speaker 1: Growth Eanquities at Capelly Funds. How would I start right here?
Speaker 1: From what you've heard? And that can change? But what
Speaker 1: you've heard so far? Is this a game changing for you? A? Right? Jonathan? Um? Well,
Speaker 1: I'll tell you yesterday, Um, I was very optimistic because
Speaker 1: the message that I was getting yesterday was that the
Speaker 1: existing existing vaccines would be fairly efficacious against the new
Speaker 1: variant um and the data that we do have, which
Speaker 1: is at of the country fact of those people over
Speaker 1: the age of twelve, and we're administering about one point
Speaker 1: eight million doses a day, So we have made tremendous progress,
Speaker 1: unfortunately not enough as we should have made, but we
Speaker 1: are on that We're on that path, and so I
Speaker 1: was optimistic. Obviously, the comments out of the Maderna CEO.
Speaker 1: Uh in the ft this morning are alarming, but again, um,
Speaker 1: there is nothing new data wise. It's going to take
Speaker 1: a couple of weeks, I think for them to have
Speaker 1: a good handle on just how good the existing vaccines
Speaker 1: are and how long it will take to develop one
Speaker 1: that's more focused on the omicron variant. Howard Warden, I
Speaker 1: don't think it's I don't think there's enough data to
Speaker 1: support this being a game changer a yet. Howard. You
Speaker 1: know what it means is we have to stay invested
Speaker 1: as well. Do we shift investment and do we shift
Speaker 1: our new investment the marginal dollar we're gonna place here
Speaker 1: with this uncertainty? Does that change? Tom? I don't think so.
Speaker 1: And and uh, of course, you know I started to investor.
Speaker 1: I started working on Wall Street in the nineteen seventies,
Speaker 1: and so I've seen this economy and the stock market,
Speaker 1: whether all kinds of tournaments over the years, and essentially
Speaker 1: every material downturn in the market was a good buying opportunity,
Speaker 1: and I suspect this will be just the same, a
Speaker 1: good buying opportunity for those investors that have the willingness
Speaker 1: and patients to invest for a period of years, and so, uh,
Speaker 1: you know, the focusing on what's going to happen this
Speaker 1: week or next week, it does consume us more than
Speaker 1: it should all too often, and that's hard. It's hard
Speaker 1: to avoid that. But we really do try to focus
Speaker 1: on the long term and really a lot of good
Speaker 1: news that this this economy is very viber and it's
Speaker 1: a technology driven global economy, and there's just so much
Speaker 1: good about that. This is not the nineteen seventies where
Speaker 1: we had you know, percent inflation, uh stagulation, uh sixteen
Speaker 1: percent five year treasuries, thirty year treasuries inflation went from
Speaker 1: five percent to fiftcent a couple of years. That's not
Speaker 1: this economy, and so we've been spoiled and uh, you know,
Speaker 1: so circumstances will change, but this is still an extremely
Speaker 1: vibrat positive economy growing this year and going for the
Speaker 1: next couple of years as far as we can see, well,
Speaker 1: the economy may be vibrant, but you're not seeing that
Speaker 1: reflected in rates. The tenure yield of south of one
Speaker 1: forty three this morning. Do yields have to stay in
Speaker 1: this lower range in order for equities to continue doing
Speaker 1: well in it for a continue to be dips that
Speaker 1: you want to buy. Well, that's a good question, because
Speaker 1: we would anticipate some upward pressure on rates, I think,
Speaker 1: as everyone has been anticipating, given the fact that the
Speaker 1: economy is rebounding strongly from two percent growth last quarter
Speaker 1: to five six seven percent growth this quarter onto a
Speaker 1: probably something with a four percent growth handle next year. Uh.
Speaker 1: And with the Fed beginning to remove the monetary stimulus
Speaker 1: that's been so important stocks and to rate lower rates.
Speaker 1: So yeah, rates should drift higher. Um. If rates go
Speaker 1: back to where they were pre COVID, we're back to
Speaker 1: one or two on a ten year, so up fifties
Speaker 1: sixty basis points. And I think that would be my
Speaker 1: base case scenario over the next three to six months. UM.
Speaker 1: And that's okay, and that that might create some indigestion
Speaker 1: four stocks, but very weather Well, we can certainly deal
Speaker 1: with that. If we're completely wrong on the transitory nation
Speaker 1: nature of this inflation and it becomes more persistent, uh,
Speaker 1: and rates spiked materially higher, you know, three or four
Speaker 1: percent kinds of handles on a note, then uh, yeah,
Speaker 1: that's gonna be a problem for multiple for stocks to
Speaker 1: tak what's the grint for this tree this on with
Speaker 1: something like swell for those of you on radio. I
Speaker 1: mean Farrell took the Howard Ward playbook and it's got
Speaker 1: the cute white lights and the things like what seven
Speaker 1: ft tall? How big is that thing? Howard? Right? You
Speaker 1: know what? I think it looks bigger than it is.
Speaker 1: It's nine Really, if you made in the USA our
Speaker 1: next year. I mean, Mario's got the ugly colored lights going.
Speaker 1: You gotta go with the ugly colored lights like me.
Speaker 1: But it's good to catch that's got a lovely tree.
Speaker 1: Bays Howard Ward of Confetti Funds, Thank you. We got
Speaker 1: the advantage. Now we go to Houston, Texas. Victoria Fernandez
Speaker 1: has the advantage. She gets to work with Robert dolf,
Speaker 1: which is always a wonderful thing. Chief market strategist across
Speaker 1: Mark Global Investments. Victoria, if we get a JP Morgan
Speaker 1: eighty or a hundred or a hundred and ten whatever
Speaker 1: dollars of barrel, you're hardwired to this in Texas. What
Speaker 1: does it mean for America if we get a sustained
Speaker 1: higher oil price? Well, I think you have two fold here, Tom.
Speaker 1: I mean, obviously for the energy companies, they've been looking
Speaker 1: for these prices to go higher. They need that revenue
Speaker 1: to go ahead and put that capex in that you
Speaker 1: guys were just talking about. But we're talking so much
Speaker 1: about inflation and the effects that it's having on the
Speaker 1: consumer and what that's going to mean. Obviously, that is
Speaker 1: where a consumer feels it first and foremost is when
Speaker 1: it comes to oil. I think we have a lot
Speaker 1: of concerns here as to what OPEC plus is going
Speaker 1: to do. We're going to hear from them later this week,
Speaker 1: so we'll see what plays into that along with releasing
Speaker 1: from the reserves. So I think there's a lot of
Speaker 1: balls in the air when it comes to energy right now.
Speaker 1: And just like we're talking about the variant, we have
Speaker 1: to wait and see. Same thing is going to happen
Speaker 1: with energy. Your clientele is a great cross section of
Speaker 1: people out there working at it every day. They've made
Speaker 1: up pot of money whatever, and they go see cross mark,
Speaker 1: I get that. How scared of they of Omicron? How
Speaker 1: scared of they of two thousand twenty two. You know,
Speaker 1: it's interesting. I think this morning, and obviously I haven't
Speaker 1: talked to clients yet this morning, but I think we
Speaker 1: might hear a little bit of a different tone. You
Speaker 1: hear Powell coming out and using that word uncertainty. We
Speaker 1: know the markets don't like that word, so that's gonna
Speaker 1: add some volatility. You have the Maderna CEO coming out
Speaker 1: and saying that things are not going to be good.
Speaker 1: That's going to feed into the psyche of the consumer.
Speaker 1: We've talked many times about how we think the consumer
Speaker 1: is leading this economy right now, and that strength of
Speaker 1: the consumer we need to rely on. So I think
Speaker 1: there's gonna be maybe a little bit more concern from
Speaker 1: an investor perspective. But I think that's where my job
Speaker 1: comes into play, where I need to tell people take
Speaker 1: a step back. As you guys have said all morning,
Speaker 1: we don't have the data yet. Let's not change our
Speaker 1: outlook and our strategy until we know more. Victor, I
Speaker 1: just want to pick up on something the chairman said
Speaker 1: in that pre prepared statement out of his testimony later
Speaker 1: and you picked up on that word uncertainty. The recent
Speaker 1: rise and here's the quote in COVID nineteen cases and
Speaker 1: the emergence of the omicron varium post downside risk to
Speaker 1: employment and economic activity. That's well understood. Then he said
Speaker 1: this and increased uncertainty for inflation. What do you think
Speaker 1: that actually means? Increased uncertainty for inflation? Does that mean
Speaker 1: upside risk to inflation? Does it mean downside risk too?
Speaker 1: What does it mean? I think it's actually an upside
Speaker 1: risk at first, because it's adding to that whole and
Speaker 1: I know we hate to use the word, but it's
Speaker 1: adding to that transitory component. If supply chains do not improve.
Speaker 1: You know, we talked a couple of weeks ago and
Speaker 1: we were saying we think we might be at peak
Speaker 1: supply chain issues. We started to see shipping costs come down,
Speaker 1: We started to see a little bit of um pressure
Speaker 1: being relieved at the ports. If the variant now causes
Speaker 1: people not to go to work, it causes restrictions and shutdowns,
Speaker 1: all of that's going to ramp up again. And that's
Speaker 1: going to lead back into how much of this is transitory?
Speaker 1: What are we looking at for inflation? So I think
Speaker 1: it's an upside concern um in the short term. Longer term,
Speaker 1: I think we're still looking at inflation coming down next
Speaker 1: year to a round three. So how do you position
Speaker 1: then for the medium and longer term Victoria? Yeah? So, Kaylee,
Speaker 1: what we told our clients before last week, and what
Speaker 1: we're going to continue to tell them for now is
Speaker 1: that we need to have that balanced portfolio. We like
Speaker 1: those growth, those tech names that are in there, and
Speaker 1: we don't want to get rid of them, but we
Speaker 1: could trim those and build a little bit more on
Speaker 1: the cyclical component of our portfolio. Some of those consumer
Speaker 1: facing names that here in the fourth quarter would traditionally
Speaker 1: do well, and we think they will once we get
Speaker 1: past the initial reaction of this variant. So names we've
Speaker 1: added like a CBS um, a Walgreens Boots, We've added
Speaker 1: Lulu Women, even a name like pro Logists, which is
Speaker 1: a real um in regards to logistics for shipping. So
Speaker 1: I think you can start looking at some more of
Speaker 1: those cyclical names to balance out your portfolio, especially when
Speaker 1: you see the credit market still holding pretty strong. That's
Speaker 1: a bullish signal for us. Victoria great to catch up
Speaker 1: as always is going to see a Victoria Fernandez, the
Speaker 1: of col smile on this small kid. Yesterday. It was
Speaker 1: a magical day for us within the stress of Amicron
Speaker 1: to speak to Peter Hotez and the good people at
Speaker 1: Johns Hopkins as well, and what it's about is the
Speaker 1: dispersion of our intellectual capital with hotels going from Rockefeller
Speaker 1: University down to Baylor College over the years, or Laurence
Speaker 1: sour of Johns Hopkins going up to Nebraska to the
Speaker 1: first rate program at the University of Nebraska Medical Center.
Speaker 1: And this is really serious adult stuff about special pathogens
Speaker 1: like think ebola as well. Lauren, you are looking at
Speaker 1: an unvaccinated population. My working number is thirteen times greater death.
Speaker 1: Is A Macron a special pathogen that will get this
Speaker 1: nation vaccinated. When we think about special pathogens, we think
Speaker 1: about the tools in our tool kit that allow us
Speaker 1: to treat, to manage, to to save live of the
Speaker 1: patients who get the special pathogens. And I think right
Speaker 1: now we're still waiting to see what's going to happen
Speaker 1: with the vaccines around O. Macron. We know some of
Speaker 1: our tools work, our tests still work, we know masks
Speaker 1: still work, a lot of our treatments will still work
Speaker 1: on O. Macron, and we may need boosters to improve
Speaker 1: our ability to protect people against this new variant. But
Speaker 1: I think right now we can say that getting your
Speaker 1: vaccine is still critically important. An unfair question, but do
Speaker 1: you within all your resources, including back at Johns Hopkins.
Speaker 1: Do you have a timeline of when we'll get these answers?
Speaker 1: I would guess we'll see updates on the vaccine in
Speaker 1: the next couple of weeks. Science updates understanding how the
Speaker 1: vaccine will affect UM, the how how the variant will
Speaker 1: affect the vaccine efficacy UM, and then I would say
Speaker 1: we could see new approvals for a vaccine if it
Speaker 1: has to be updated in the next few months. So
Speaker 1: I would say somewhere between two and four months we'll
Speaker 1: see updates to the vaccine. Science is working around the clock,
Speaker 1: and it's really incredible how fast these changes are happening.
Speaker 1: To manage UM the changes to the virus that we're
Speaker 1: seeing well, and Lauren, we've seen the virus change before.
Speaker 1: We have been here in a similar moment before. We
Speaker 1: maybe are still in it with delta in many places.
Speaker 1: What stops the cycle of this happening again and again? UM,
Speaker 1: Just like Dr Hota said yesterday, getting that vaccine rate high, high,
Speaker 1: high UM, as many people vaccinated as possible is critical
Speaker 1: to stopping and slowing down these UM these new variants.
Speaker 1: So the variants moved through on vaccinated populations easier and UM,
Speaker 1: when we start to see them appear in in populations
Speaker 1: with lower vaccines they can get they can also move
Speaker 1: out of those populations quicker. So getting as many people
Speaker 1: vaccinated as possible as huge. I agree with him. I'd
Speaker 1: love to see here in the US. Not only does
Speaker 1: it protect against the variants, but it also protects against
Speaker 1: the already circulating strains UM and reduces the likelihood of
Speaker 1: severe disease and death. UM. We are seeing unnecessary death.
Speaker 1: We're seeing unnecessary strain on our hospitals and healthcare systems,
Speaker 1: and on our healthcare workers in particular well or And
Speaker 1: it's not just about vaccinations as well, it's also about
Speaker 1: the treatment of people who do end up testing positive
Speaker 1: and getting sick. Do we know anything about the effectiveness
Speaker 1: of treatments. We know that vaccine efficacy can change depending
Speaker 1: on the variant does treatment as well. As of right now,
Speaker 1: it's looking like our treatments will still be useful and
Speaker 1: we still have incredible supportive care here in the United
Speaker 1: States to to treat and take care of patients who
Speaker 1: make their way into the hospital because of covid um
Speaker 1: and the newly developed treatments look like they will continue
Speaker 1: to work against mccran, which is great to hear. It's
Speaker 1: great news. But we are still seeing the development of
Speaker 1: new therapeutics coming down the pike, and UM, those will continue,
Speaker 1: those developments will continue to happen even as new variants
Speaker 1: pop up. For now, those tools still work for us
Speaker 1: and the and the hope is that will keep people
Speaker 1: out of the hospital. UM as the vaccines evolve and develop. Lauren,
Speaker 1: your observation migrating from the East coast out to Nebraska
Speaker 1: with a one point nine percent unemployment rate, what is
Speaker 1: your observation on Olmaha, Lincoln and the rest of it
Speaker 1: out to Cozad and beyond. I love Omaha. I mean,
Speaker 1: I'm so happy whenever I'm there. It's a fantastic city.
Speaker 1: And I think that one of the things that we're
Speaker 1: seeing is that the hospital and healthcare utilization of people
Speaker 1: getting COVID is still really high. So we would like
Speaker 1: to see higher vaccination rates in Nebraska as well. UM.
Speaker 1: And and it is a different it's a different environment
Speaker 1: obviously in Baltimore. UM. I still live in Baltimore, so UM,
Speaker 1: you know, I get, I get a flavor of both.
Speaker 1: But we'd love to see increased vaccination rates in in
Speaker 1: the more rural areas in Nebraska, UM in the city
Speaker 1: and UM through the support of U and MC, there's
Speaker 1: big pushes to get more people vaccinated every single day. Lauren,
Speaker 1: it's been too long. It's always going to catch up
Speaker 1: with you. Lauris sad there at the University of Nebraska
Speaker 1: Medical Center. Thank you very much. This is a joy
Speaker 1: in studio where it's Ian Shepherdson, chief economist and Pantheon
Speaker 1: macro Economics, And what's so important about his focus on
Speaker 1: the United States is also the Pantheon macro Economics expertise
Speaker 1: on China. Craig Bottom doing that this morning in China.
Speaker 1: His morning note talks about the infrastructure push of China,
Speaker 1: and you clearly see a better China than the gloom
Speaker 1: that's out there. Well, yeah, some of the gloom was
Speaker 1: quite extreme. China's got some really big problems, but it's
Speaker 1: it's not, you know, the end of the world. The
Speaker 1: loss of the real estate driven model for growth that
Speaker 1: they've had for so long requires a shift into other areas,
Speaker 1: and infrastructure is clearly going to be one of them.
Speaker 1: So it's very early days, and obviously the real estate
Speaker 1: problems continue to roll on. This is going to be
Speaker 1: with us for a very long time. But China does
Speaker 1: have to find a different growth model to carry it
Speaker 1: through now that it's lost that impetus from from real estate.
Speaker 1: With your wonderful perspective, I think of only Leland Miller
Speaker 1: of China Beije book who really has that dynamic going
Speaker 1: back and forth across the Pacific. How does the Chinese
Speaker 1: dynamics domestically affect your watch of the American economy. It's
Speaker 1: a problem for us in the US because of the
Speaker 1: disruptions that are caused by china zero COVID policies, so
Speaker 1: disrupt the manufacturing, disrupt their logistic chains, disrupt their ports,
Speaker 1: and of course with omicron, potentially they'll clamp down even more.
Speaker 1: China doesn't show any signs of stepping away from that
Speaker 1: zero COVID approach, and that means endless supply disruptions and
Speaker 1: supply chain problems for US manufacturers and businesses seeking to
Speaker 1: import components or finish goods from China. So I don't
Speaker 1: see this going away. It's a primarily a problem of
Speaker 1: the manufacturing sector. It's not the whole U S economy,
Speaker 1: which is enthralled to the problems in China, but it's
Speaker 1: certainly not helpful at the margin, and the omicron I
Speaker 1: would makes things even more difficult to see ahead. And
Speaker 1: that word endless is very different to the word that's
Speaker 1: been used all year transit three. So I just wonder
Speaker 1: a simple question, does the chairman have the time to wait,
Speaker 1: to sit this out and wait? I think it does
Speaker 1: if he gets ahead of what's coming over the next
Speaker 1: few months and preps and markets for what's likely to
Speaker 1: be some really horrible inflation figures for November, December, January,
Speaker 1: then things start to get better. But at the moment,
Speaker 1: the FED kind of seems reactive to these numbers, rather
Speaker 1: than getting out front and saying to markets, hey, it's
Speaker 1: it's going to be bad, it's going to be worse.
Speaker 1: We might even see core inflation, I don't know, six
Speaker 1: and a half percent potentially in February. Then it drops
Speaker 1: very sharply. But it's a question of whether the FED
Speaker 1: is prepared to dig in its heels and say we're
Speaker 1: going to wait for the turn because we know it's coming,
Speaker 1: or whether they feel that they have to respond, maybe
Speaker 1: to take out something that they would call an insurance
Speaker 1: policy against transitory becoming more embedded. That certainly seems to
Speaker 1: be the way that they've gone with the taper, And
Speaker 1: if it weren't for my chron, I'm sure they would
Speaker 1: be doubling the pace at the taper at the December meeting.
Speaker 1: Now now that someone certainly over that, do you think
Speaker 1: they need to do that and to retain that ftionality
Speaker 1: on rate? Do you think they need to go quicker?
Speaker 1: I don't think they. I don't think they have to
Speaker 1: because I'm really quite bullish about inflation in the medium term.
Speaker 1: I very much by the idea that by the end
Speaker 1: of next year we're going to be looking back and saying,
Speaker 1: you know, really, what was all the fuss about, especially
Speaker 1: in the good sector, where I think we'll see a
Speaker 1: really dramatic turnaround. But the FED can't necessarily assume that
Speaker 1: that's guaranteed to happen. And that's where this question of
Speaker 1: taking out an insurance policy, giving yourself some more room
Speaker 1: for maneuver just in case you're wrong, becomes a more
Speaker 1: pressing question. And if it weren't Phar Macron, yeah, they
Speaker 1: taper sooner, and that would open the door to a
Speaker 1: rate I at some point in the second quarter, maybe
Speaker 1: as soon as March that that will that would surprise me.
Speaker 1: I do think that there's still a substantial body of
Speaker 1: opinion within the FED that thinks that they need to
Speaker 1: give it some more time. That they're pretty confident that
Speaker 1: the lobor market is going to fix itself with with
Speaker 1: rising participation over the next few months and ease some
Speaker 1: of that wage pressure, But of course it might not.
Speaker 1: And if it doesn't, then you're looking back saying, well,
Speaker 1: you know, we should have been a bit more aggressive.
Speaker 1: So there's a real balancing act to be made there.
Speaker 1: And you know, right now markets have a pretty firm
Speaker 1: view of the way the FED needs to go, but
Speaker 1: I'm not sure it's quite so clear cut yet. Ian
Speaker 1: does maximum employment that part of the doormandate not need
Speaker 1: to be redefined for a pandemic era economy? Well, this
Speaker 1: is a tricky one because what you know, they've never
Speaker 1: defined maximum employment in very explicit terms. So do they
Speaker 1: mean that the unemployment rate getting back to three and
Speaker 1: a half like it was before COVID. Did they mean
Speaker 1: the employment population ratio returned to where it was before COVID?
Speaker 1: Did they mean the participation rate going back to where
Speaker 1: it was before COVID. They've they've never really said, you know,
Speaker 1: but I think that it's important to appreciate that chap
Speaker 1: Power has been very keen for for a long time
Speaker 1: now about reminding people how good the labor market was
Speaker 1: before COVID and how much he wants to get back
Speaker 1: to something that looks a lot like that before he
Speaker 1: would consider the full employment mandate to have been reached,
Speaker 1: whereas some of his colleagues I think are a bit
Speaker 1: more gung ho, probably because they're more nervous about the
Speaker 1: inflation outlook than the Mr Powell is. And there's a
Speaker 1: very split opinion on the FED. And of course we've
Speaker 1: got empty seats that need to be filled over the
Speaker 1: next few months, so we may well see the balance
Speaker 1: of power shift thing I think in favor of the
Speaker 1: DOES in Washington and maybe away from some of the
Speaker 1: more hawkish regional people. Well, if you game this out
Speaker 1: and take what people have said the potential implications of
Speaker 1: the macron varying, Again, there's things that we don't know,
Speaker 1: but if you have an exacerbating supply side challenges feeding
Speaker 1: into those inflation area dynamics at the same time, it
Speaker 1: may be discourages people from re entering the labor market.
Speaker 1: Will the FED end up in a situation where it's
Speaker 1: forced to react to inflation even if the labor market
Speaker 1: is not where it wants to be. Yeah, this is
Speaker 1: this is now a real risk that that if mccron
Speaker 1: keeps people out of the labor force, who would otherwise
Speaker 1: have come back in easing this supply demand in balance
Speaker 1: that we've got right now with very very high wage growth.
Speaker 1: If if if a macron stops out and balance being
Speaker 1: shifted in favor of more supply, then the wage numbers
Speaker 1: won't slow down in the way that the FED needs
Speaker 1: them to be, and they'll they'll be pushed into being
Speaker 1: more aggressive. But at the moment, you know, this is
Speaker 1: very premature. We don't know. We may find out over
Speaker 1: the next couple of weeks that this is a great
Speaker 1: deal of us about not very much, in which case
Speaker 1: we're back on the on the previous track. We're all
Speaker 1: speculating right now. And the message coming out of the
Speaker 1: OXFID vaccine people is different to the message from the
Speaker 1: madernav accinge people. So nobody, nobody really knows. And I
Speaker 1: do think that the FED has maybe a bit more
Speaker 1: time to deal with this than some people in markets think.
Speaker 1: I don't think the US is on the verge of
Speaker 1: some sort of sustained inflation explosion that I think patients
Speaker 1: is a virtue in central banking most of the time.
Speaker 1: The patients there is a key question in Ian Sheperdson.
Speaker 1: What it comes down to is excellentity exposed. And the
Speaker 1: Latin is they're going to wait for the data. They're
Speaker 1: just gonna wait and wait. How how much does the
Speaker 1: street right now, you know, just as a general statement,
Speaker 1: underestimate their ability to go ex post and wait. Well
Speaker 1: a lot. To me, it's a lot. Yeah, Massive markets
Speaker 1: are markets are very gung home markets. Markets always want
Speaker 1: things to change because volatility is where they make the
Speaker 1: money or lose their money exactly. And the Fed, however,
Speaker 1: you know, is not conducting policy on the basis of
Speaker 1: what might make people more money in markets. It's conducting
Speaker 1: policy on the basis of what's in the national interest.
Speaker 1: And I think that's a strong case to be made
Speaker 1: for way things. See how the labor market pans out
Speaker 1: over the next few months. Most of the structural impediments
Speaker 1: to rising participation have diminished. Now, schools are reopened, childcares reopened,
Speaker 1: the extended benefits are all over. A COVID fear until
Speaker 1: on Acron maybe was fading away. So it's very reasonable
Speaker 1: to think that we're going to see a big rush
Speaker 1: of people back into the labor force and ease some
Speaker 1: of those pressures. And if the FED, you know, it
Speaker 1: turns out to be wrong and those pressures don't ease, well,
Speaker 1: there's maybe lost three or four months, which which I
Speaker 1: very much doubt would be a medium term game changer.
Speaker 1: And I think it's also important to people remember that
Speaker 1: using monaschy policy to deal with something which is driven
Speaker 1: by a shock, the COVID shock, is the wrong response
Speaker 1: because policy works with a twelve to eighteen month lag
Speaker 1: that's far longer than the time frame that I think
Speaker 1: is reasonable to expect some of these COVID shocks to diminish.
Speaker 1: So you end up doing something which which which proves
Speaker 1: to be a mistake, unless, of course you're wrong and
Speaker 1: those labor market pressures don't go away. But at the moment,
Speaker 1: it's too early to make that judgment, and I think
Speaker 1: they have more time than markets want to believe. I
Speaker 1: do wint to drown in semantics here, I do think
Speaker 1: the following is important, and isn't there an argument that
Speaker 1: actually now they're more forecast dependent than they are data dependent,
Speaker 1: that if you think about it, what they are relying
Speaker 1: on is their own forecast. The data itself, the incoming
Speaker 1: economic data, is already telling them that they're wrong and
Speaker 1: they have been wrong. Well, certainly the current inflation rate
Speaker 1: and the inflation right over the next few months is
Speaker 1: going to generate a lot more horrible headlines, and no
Speaker 1: question about that. But of course it's it's not the
Speaker 1: job of monetary policy to try and fix today's headlines
Speaker 1: or tomorrow's headlines. It's a job of monetary policy to
Speaker 1: fix the headlines in twelve to eighteen months time. Sometimes
Speaker 1: today's headlines carry a lot of information about what they're
Speaker 1: going to look like in twelve to eighty months time.
Speaker 1: But if you've got a shock rather than an economic
Speaker 1: cycle that is generating the inflation numbers, then it's different.
Speaker 1: And it may well be that today's headlines are a
Speaker 1: terrible guide toward inflation will look like in twelve to
Speaker 1: eighteen months time, and therefore you shouldn't use them to
Speaker 1: drive policy. But the problem, of course is that if
Speaker 1: you're wrong, then you find yourself in a much worse
Speaker 1: position in twelve to eighteen months. I mean you have
Speaker 1: to scramble the catch up to do what maybe you
Speaker 1: should have done much earlier. But we don't have perfect foresight.
Speaker 1: We have a great deal of uncertainty. I think they
Speaker 1: can afford to wait a little bit longer. Are you
Speaker 1: talking about newcast? I'm trying not to talk about every
Speaker 1: time you said a shocking and I was thinking Newcastle
Speaker 1: thirteen games, not a single win, facing relegation, a new owner,
Speaker 1: they want to spend in a couple of months, can
Speaker 1: they can they get this done? Can they stay up?
Speaker 1: I think it's it's fifty fifty. I mean there's been
Speaker 1: a different improvement under the new manager, but he's only
Speaker 1: had two games, so I think we have to give
Speaker 1: him bit of a chance to do. You two guys,
Speaker 1: and we could go all day on this. But to
Speaker 1: the two of you, is this another like men you
Speaker 1: waiting to happen where a gazillion dollars is going to
Speaker 1: come in and completely change what you want. If I
Speaker 1: pick up the phone and say here's a gazillion dollars,
Speaker 1: do you want to play for Manchester United. A lot
Speaker 1: of people might say, sure, Tom, I'll join you. If
Speaker 1: I pick up the phone and you say, here's a
Speaker 1: gazillion dollarge. You've got to spend one year potentially in
Speaker 1: the league below the Premier League next year because we
Speaker 1: might get relegated Ian that's a different proposition. You've got
Speaker 1: two massive gains coming up in Owich and Burnley. That's
Speaker 1: a relegation fight. Think about January and when they want
Speaker 1: to spend that money. You want to rebuild this business,
Speaker 1: this football club. How easy is it going to be
Speaker 1: to attract the talent in January? If we lose the
Speaker 1: next two games, it's going to be extremely difficult because
Speaker 1: we'll be really, really adrift and we'll be looking very
Speaker 1: doomed and and you know, no big star is going
Speaker 1: to come and want to play, you know, in Stoke
Speaker 1: on a Wednesday night in January, that's for sure. I
Speaker 1: have no idea what that means. Are you are you?
Speaker 1: Are you the only one who actually cries watching deadlers?
Speaker 1: So are you the only one watching a new Customers
Speaker 1: has been a source of misery in my life for
Speaker 1: the last forty years, another couple of years. I mean,
Speaker 1: what differences. It's like is a red Sax fan from
Speaker 1: the sixties, and it's good to see it in person too.
Speaker 1: From Pantheon macro Economics and brought up that line from
Speaker 1: Oxford University. Tom. No evidence that omicron defeats vaccines, of course,
Speaker 1: no evidence that the opp cities true life. It's home,
Speaker 1: so we need to waite for the evidence in the day. Sell.
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join
Speaker 1: us live weekdays from seven to ten am Eastern on
Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six
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Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on
Speaker 1: the terminal. I'm Tom Keene and this is Bloomberg