1 00:00:02,640 --> 00:00:13,040 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,400 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg John 5 00:00:27,520 --> 00:00:32,440 Speaker 1: nominal yield versus a rising five year five year break 6 00:00:32,520 --> 00:00:36,920 Speaker 1: even gives you a substantial real yield at negative point nine. 7 00:00:37,920 --> 00:00:40,519 Speaker 1: Even with that lift penomenal yields, we've still got a 8 00:00:40,560 --> 00:00:45,400 Speaker 1: substantial negative real yield. Let's continue the conversation with Mona 9 00:00:45,720 --> 00:00:50,040 Speaker 1: John Alliance Global Investors US investment strategist. She joins us. Now, Monor, 10 00:00:50,080 --> 00:00:52,000 Speaker 1: if you disappeared from the market for the last ten 11 00:00:52,080 --> 00:00:53,920 Speaker 1: years and heard us talk about a breakout in tray 12 00:00:53,920 --> 00:00:56,760 Speaker 1: sury yields of eighty basis points, I think you'd wonder 13 00:00:56,800 --> 00:01:00,680 Speaker 1: what planet you've just landed on? Minority basis poicte. When 14 00:01:00,680 --> 00:01:04,880 Speaker 1: can we get a real move on? You know, interestingly, 15 00:01:04,880 --> 00:01:07,600 Speaker 1: from a percentage perspective, this was a pretty real move. 16 00:01:07,640 --> 00:01:10,240 Speaker 1: You know, we're now off the lows of forty six 17 00:01:10,360 --> 00:01:13,480 Speaker 1: basis points from this crisis back up to eighty. What 18 00:01:13,560 --> 00:01:16,399 Speaker 1: we're seeing the markets is pretty consistent here we talked 19 00:01:16,400 --> 00:01:20,600 Speaker 1: about weaker dollar, higher treasury yields, higher gold crisis. This 20 00:01:20,680 --> 00:01:23,360 Speaker 1: is a market that's thinking at some point stimulus is 21 00:01:23,400 --> 00:01:26,600 Speaker 1: going to happen, and also perhaps starting to price in 22 00:01:26,920 --> 00:01:31,360 Speaker 1: over the last few weeks this democratic sweep idea, where 23 00:01:31,360 --> 00:01:34,440 Speaker 1: where in that scenario you do also get more stimulus 24 00:01:34,440 --> 00:01:36,920 Speaker 1: but also more spending. So it does feel like we're 25 00:01:36,920 --> 00:01:40,080 Speaker 1: on a trajectory. To Lisa's point earlier, how high can 26 00:01:40,120 --> 00:01:42,959 Speaker 1: it go? We may not get much more movement from 27 00:01:43,000 --> 00:01:46,440 Speaker 1: these levels until we see actual As Efen says, eyes 28 00:01:46,480 --> 00:01:49,960 Speaker 1: of inflation MONA. Part of this is the glide path 29 00:01:50,040 --> 00:01:53,720 Speaker 1: involved with your computer science background. It's real simple. At 30 00:01:53,840 --> 00:01:56,280 Speaker 1: some point there's a kink, at some point, there's a 31 00:01:56,360 --> 00:01:59,360 Speaker 1: jump condition. Where is that on a ten year yield? 32 00:01:59,480 --> 00:02:04,120 Speaker 1: Is it near year or is it surprisingly much higher? Yeah, 33 00:02:04,160 --> 00:02:06,960 Speaker 1: you know, we think over time, if if inflation is 34 00:02:07,240 --> 00:02:09,600 Speaker 1: in the one and a half to two percent range, uh, 35 00:02:09,880 --> 00:02:12,560 Speaker 1: real GDP growth in the US also probably at some 36 00:02:12,639 --> 00:02:15,880 Speaker 1: point one and a half two percent, as the actual 37 00:02:16,240 --> 00:02:19,800 Speaker 1: GDP growth yields should also at some point be in 38 00:02:19,840 --> 00:02:21,920 Speaker 1: that one and a half to two percent range. Now, 39 00:02:21,960 --> 00:02:25,880 Speaker 1: of course, we're now emerging from a very deep crisis. Uh, 40 00:02:26,200 --> 00:02:28,560 Speaker 1: we don't think that type of level happens in the 41 00:02:28,560 --> 00:02:31,400 Speaker 1: next twelve months or so. But recording the ingredients together 42 00:02:31,560 --> 00:02:33,959 Speaker 1: certainly for an inflationary environment, or at least for pick 43 00:02:34,000 --> 00:02:37,680 Speaker 1: up in inflation expectations. We're keeping rates low, We're adding 44 00:02:37,720 --> 00:02:41,480 Speaker 1: Huey to the system. Growth may be accelerating next year, 45 00:02:42,080 --> 00:02:44,760 Speaker 1: especially if we get those vaccines, especially if we continue 46 00:02:44,760 --> 00:02:47,440 Speaker 1: to get stimulus and investment into the economy, and so 47 00:02:47,480 --> 00:02:50,400 Speaker 1: we are certainly setting up for that pick up in inflation, 48 00:02:50,480 --> 00:02:53,200 Speaker 1: which would lead to a pickup in those yields back 49 00:02:53,240 --> 00:02:56,280 Speaker 1: to more normal levels. Okay, so pick up in those yields. 50 00:02:56,280 --> 00:02:58,120 Speaker 1: In the meantime, there are a lot of people saying 51 00:02:58,400 --> 00:03:01,120 Speaker 1: the reason why yields are rising is because of supply, 52 00:03:01,480 --> 00:03:03,880 Speaker 1: because of the stimulus, because the US will have to 53 00:03:03,919 --> 00:03:07,120 Speaker 1: sell trillions and trillions of additional treasuries. Is that the 54 00:03:07,160 --> 00:03:10,520 Speaker 1: real story here? I'm looking at the total value of 55 00:03:10,639 --> 00:03:13,040 Speaker 1: negative yielding debt globally. It is close to the all 56 00:03:13,080 --> 00:03:16,680 Speaker 1: time high of seventeen trillion dollars. Where else are investors 57 00:03:16,720 --> 00:03:20,160 Speaker 1: going to go for yield other than the United States? Yeah, 58 00:03:20,200 --> 00:03:22,560 Speaker 1: I mean absolutely that that's part of the story. As well. 59 00:03:22,600 --> 00:03:24,760 Speaker 1: And you know, keep in mind, our yield even here 60 00:03:24,760 --> 00:03:28,680 Speaker 1: at eight basis points compared to Europe, Japan, across the globe, 61 00:03:29,120 --> 00:03:32,600 Speaker 1: still relatively fairly attractive. And of course this year in particular, 62 00:03:32,800 --> 00:03:35,680 Speaker 1: treasury bonds have been one of the best performing asset classes, 63 00:03:36,160 --> 00:03:38,280 Speaker 1: not only within fixed income but really across the board, 64 00:03:38,360 --> 00:03:41,880 Speaker 1: especially since that March twenty three low. So clearly there 65 00:03:42,000 --> 00:03:45,080 Speaker 1: is this light to safety, but also this hunt for income. 66 00:03:45,840 --> 00:03:48,560 Speaker 1: But to your other, you know, other point of your question, 67 00:03:48,680 --> 00:03:50,840 Speaker 1: where do people go, Well, they're also looking beyond the 68 00:03:50,840 --> 00:03:53,960 Speaker 1: fixed income market. Clearly there there's been this push for 69 00:03:54,040 --> 00:03:56,760 Speaker 1: investors to to go out the risk spectrum. We're seeing 70 00:03:56,760 --> 00:03:59,440 Speaker 1: that clearly in the US equity markets now more a 71 00:03:59,440 --> 00:04:02,880 Speaker 1: little bit global em but also in parts of higher 72 00:04:03,680 --> 00:04:07,120 Speaker 1: higher risk fixed income as well credit markets UH in 73 00:04:07,480 --> 00:04:11,080 Speaker 1: high yield as well as parts of investment grade. This 74 00:04:11,160 --> 00:04:13,880 Speaker 1: is a familiar conversation for money. The reflation story that 75 00:04:13,920 --> 00:04:17,080 Speaker 1: you described just moments ago, folt that into the equity market, 76 00:04:17,200 --> 00:04:20,040 Speaker 1: and the much talked about rotation that has really alluded 77 00:04:20,080 --> 00:04:22,880 Speaker 1: us over the last couple of months. Yeah, you know, 78 00:04:23,040 --> 00:04:25,960 Speaker 1: that's really the key question here. Will we get over 79 00:04:26,000 --> 00:04:30,000 Speaker 1: the next twelve month period. This much anticipated and much 80 00:04:30,000 --> 00:04:32,480 Speaker 1: alluded over the last ten years rotation into this value 81 00:04:32,480 --> 00:04:36,200 Speaker 1: cyclical trade. Um clearly, and when we looked historically over 82 00:04:36,240 --> 00:04:39,440 Speaker 1: the last ten years, there have been approximately four instances 83 00:04:39,720 --> 00:04:42,719 Speaker 1: where value cyclicals have led in a more sustained way, 84 00:04:42,760 --> 00:04:45,279 Speaker 1: and in that time period usually they're leading for six 85 00:04:45,279 --> 00:04:48,640 Speaker 1: to twelve month period. Over that those four instances, UM, 86 00:04:48,800 --> 00:04:50,760 Speaker 1: we think we could be set up over the next 87 00:04:50,760 --> 00:04:54,240 Speaker 1: twelve month period for another leadership in value cyclicals. And 88 00:04:54,279 --> 00:04:58,080 Speaker 1: of course, um that would be in the scenario where 89 00:04:58,120 --> 00:05:01,839 Speaker 1: we get the vaccines in the latter half of this year. 90 00:05:01,920 --> 00:05:04,200 Speaker 1: Of course, it takes some time to manufacture and distribute, 91 00:05:04,360 --> 00:05:07,360 Speaker 1: but markets will start pricing that in sooner. Of course, 92 00:05:07,400 --> 00:05:10,160 Speaker 1: we'll get that re acceleration hopefully in growth not only 93 00:05:10,160 --> 00:05:13,159 Speaker 1: in the US but globally, and so in that backdrop, 94 00:05:13,279 --> 00:05:17,599 Speaker 1: combined with ongoing low rates and ongoing stimulus, we do 95 00:05:17,680 --> 00:05:20,600 Speaker 1: see a potential for that value cyclogal trade to re emerge, 96 00:05:20,600 --> 00:05:22,880 Speaker 1: and so we think investors should layer that in over 97 00:05:22,920 --> 00:05:24,760 Speaker 1: the next you know, when they get the opportunity over 98 00:05:24,760 --> 00:05:27,360 Speaker 1: the next few weeks. There all these t las out here. 99 00:05:27,520 --> 00:05:29,760 Speaker 1: There was Proctor and Gamble the other day and right 100 00:05:29,800 --> 00:05:34,200 Speaker 1: now there's Nestle coming out and once again organic revenue growth. 101 00:05:34,240 --> 00:05:35,960 Speaker 1: You know, it's not a big deal, but it's just 102 00:05:36,080 --> 00:05:39,640 Speaker 1: simply better than the gloom that's out there. Is that 103 00:05:39,720 --> 00:05:42,640 Speaker 1: the major call for the next two or three years 104 00:05:43,120 --> 00:05:45,240 Speaker 1: that were you know, with the shock of the pandemic 105 00:05:45,279 --> 00:05:49,560 Speaker 1: and the agony of the pandemic. Manchester shutdown is just 106 00:05:49,640 --> 00:05:54,080 Speaker 1: one example. Are we completely misjudging the ability of these 107 00:05:54,120 --> 00:05:58,400 Speaker 1: companies to adjust and to adapt. Yeah, you know, it's interesting. 108 00:05:58,440 --> 00:06:01,400 Speaker 1: I think, uh, last quarter, our second quarter, we certainly 109 00:06:01,520 --> 00:06:04,039 Speaker 1: got a lot of that as well. You know, the 110 00:06:04,120 --> 00:06:07,240 Speaker 1: expectation was, you know, something for a negative decline and 111 00:06:07,279 --> 00:06:10,960 Speaker 1: we came out you know, negative or so, so there 112 00:06:11,040 --> 00:06:14,600 Speaker 1: was a huge lowering of the bar in terms of expectations, 113 00:06:14,600 --> 00:06:17,760 Speaker 1: and there was a nice beat. You know, historically companies 114 00:06:17,800 --> 00:06:19,560 Speaker 1: aren't known to do that keep the bar low, but 115 00:06:19,600 --> 00:06:22,400 Speaker 1: that the percentage of beat was much more substantial than 116 00:06:22,440 --> 00:06:24,920 Speaker 1: we've seen in the past. That could be the trend 117 00:06:25,000 --> 00:06:27,960 Speaker 1: over the next couple of quarters, although we will say, 118 00:06:28,080 --> 00:06:30,320 Speaker 1: you know, over time that probably goes back to more 119 00:06:30,520 --> 00:06:33,400 Speaker 1: historic averages where it's a three to five percent beat 120 00:06:33,440 --> 00:06:36,560 Speaker 1: on average. But to your point, I do think that 121 00:06:36,560 --> 00:06:40,599 Speaker 1: that in many cases. You know, companies have performed much 122 00:06:40,640 --> 00:06:42,880 Speaker 1: better in this crisis than we've seen in the past, 123 00:06:42,960 --> 00:06:46,080 Speaker 1: and partly that's because we've become a more digital, more 124 00:06:46,120 --> 00:06:49,960 Speaker 1: online economy. You know, this acceleration to a more stay 125 00:06:50,000 --> 00:06:53,440 Speaker 1: at home world has really benefited certain companies and really 126 00:06:53,440 --> 00:06:55,440 Speaker 1: has helped a lot of companies across the board. And 127 00:06:55,480 --> 00:06:58,560 Speaker 1: so I do think, uh, the ability for consumers to 128 00:06:58,720 --> 00:07:01,240 Speaker 1: buy online and to to show demand in that way 129 00:07:01,600 --> 00:07:03,920 Speaker 1: has helped. And so we do think this quarter will 130 00:07:03,920 --> 00:07:06,240 Speaker 1: certainly see a nice feed as well, and over time 131 00:07:06,240 --> 00:07:08,440 Speaker 1: it will be more normalized, but we see the ability 132 00:07:08,480 --> 00:07:12,400 Speaker 1: for companies to rebound nicely over the next twelve months. Mana, 133 00:07:12,440 --> 00:07:15,800 Speaker 1: thank you. Always great to catch you up. Thank you 134 00:07:15,920 --> 00:07:22,680 Speaker 1: very much, thank you. This is the interview of the day. 135 00:07:22,760 --> 00:07:26,120 Speaker 1: Unfixed Income. Kevin get Us is with Raymond James and 136 00:07:26,160 --> 00:07:30,680 Speaker 1: critically important. He comes off a trading platform where he 137 00:07:30,800 --> 00:07:35,440 Speaker 1: understands suddenly the bid slips away in fixed income, Kevin 138 00:07:35,480 --> 00:07:38,520 Speaker 1: get Us is the bids slipping away on price in 139 00:07:38,600 --> 00:07:42,800 Speaker 1: full faith and credit. Well, you know, Tom, we're finally 140 00:07:42,840 --> 00:07:45,040 Speaker 1: starting to see this. I you know, a week ago 141 00:07:45,080 --> 00:07:47,680 Speaker 1: I would have said probably not, but we are starting 142 00:07:47,720 --> 00:07:51,720 Speaker 1: to see this period, uh, closer and closer to the election, 143 00:07:52,320 --> 00:07:55,360 Speaker 1: especially if we get this blue way where I talked about, 144 00:07:55,440 --> 00:07:59,120 Speaker 1: because you know, I have these kind of nightmarish feelings 145 00:07:59,120 --> 00:08:01,720 Speaker 1: of two thousands team after the elections. If you're a 146 00:08:01,760 --> 00:08:04,560 Speaker 1: bond guy, you did not expect the outcome and you 147 00:08:04,600 --> 00:08:07,320 Speaker 1: did not expect the price action after the election. So 148 00:08:07,680 --> 00:08:09,680 Speaker 1: I think the bond market and the treasury market in 149 00:08:09,680 --> 00:08:12,760 Speaker 1: particular is underestimating the fact that if you got this 150 00:08:12,840 --> 00:08:16,120 Speaker 1: blue wave or a complete suite, what might occur after 151 00:08:16,160 --> 00:08:19,240 Speaker 1: that and why interest rates are are likely to go 152 00:08:19,360 --> 00:08:23,080 Speaker 1: higher not lower should that occur. So you know, higher spending, 153 00:08:23,160 --> 00:08:27,560 Speaker 1: more taxes, um, increased growth, and growth tends to have 154 00:08:27,600 --> 00:08:30,600 Speaker 1: a friend. Uh it's called inflation. And if all of 155 00:08:30,600 --> 00:08:33,800 Speaker 1: those hit the mark, then yes, rate moves would be 156 00:08:33,800 --> 00:08:36,880 Speaker 1: fairly significant, especially in the ten year and thirty year 157 00:08:36,920 --> 00:08:39,520 Speaker 1: out for the balance of the year. So at one 158 00:08:39,559 --> 00:08:42,320 Speaker 1: pm today, Tom Keene is going to be closely watching 159 00:08:42,360 --> 00:08:45,800 Speaker 1: the twenty year auction of treasuries. I know he watches 160 00:08:45,880 --> 00:08:49,960 Speaker 1: every auction very carefully. Is this a supplies story in 161 00:08:50,080 --> 00:08:52,760 Speaker 1: terms of higher yields going forward or is it, as 162 00:08:52,760 --> 00:08:56,559 Speaker 1: you said, a growth and inflation story. Well, I think 163 00:08:56,559 --> 00:08:59,000 Speaker 1: from a rate movie would be a growth and inflation story. 164 00:08:59,240 --> 00:09:01,760 Speaker 1: We really have a had a problem selling our debt, 165 00:09:01,800 --> 00:09:03,880 Speaker 1: and you guys have mentioned it earlier in the show 166 00:09:03,920 --> 00:09:07,280 Speaker 1: about negative yields in particular, and you look across the globe, 167 00:09:07,280 --> 00:09:10,800 Speaker 1: where are the opportunities. There still is a great opportunity 168 00:09:10,800 --> 00:09:13,240 Speaker 1: and treasuries, especially in the long end of the market, 169 00:09:13,559 --> 00:09:15,360 Speaker 1: but that the door is starting to close. And the 170 00:09:15,360 --> 00:09:17,199 Speaker 1: only way it does close is if we get a 171 00:09:17,200 --> 00:09:19,880 Speaker 1: blue wave, if we get whatever they call it blue 172 00:09:19,880 --> 00:09:21,600 Speaker 1: tied or whatever you want to call where you still 173 00:09:21,880 --> 00:09:24,320 Speaker 1: Republicans control the Senate, and even if you got a 174 00:09:24,320 --> 00:09:26,720 Speaker 1: Democrat or a Republican in the White House, the rates 175 00:09:26,720 --> 00:09:28,760 Speaker 1: aren't going to move that much. I think we're gonna 176 00:09:28,760 --> 00:09:30,800 Speaker 1: be you know, we know what red luck looks like. 177 00:09:31,240 --> 00:09:34,079 Speaker 1: But if you get a kind of a clean suite um, 178 00:09:34,280 --> 00:09:36,400 Speaker 1: I think the treasury market would have to catch up fast, 179 00:09:36,440 --> 00:09:39,000 Speaker 1: which was you know, higher rates across the board. But 180 00:09:39,040 --> 00:09:43,280 Speaker 1: I don't think it hurts financing right now, Kevin, you 181 00:09:43,320 --> 00:09:46,959 Speaker 1: mentioned and it wasn't just the political event that was 182 00:09:47,040 --> 00:09:49,880 Speaker 1: unexpected for money. It was the outcome of that political event. 183 00:09:50,200 --> 00:09:53,960 Speaker 1: The people missed what the red wave would mean for markets, 184 00:09:54,080 --> 00:09:56,360 Speaker 1: what do you think people are missing right now? Kevin 185 00:09:56,360 --> 00:09:59,920 Speaker 1: be specific. We know the consensus people think of blue wave. Increasingly, 186 00:10:00,000 --> 00:10:02,559 Speaker 1: the probability is lifted over the last couple of months. 187 00:10:02,600 --> 00:10:04,760 Speaker 1: What is the I think people are missing about what 188 00:10:04,800 --> 00:10:08,960 Speaker 1: that means. Yeah, the part that they're missing is the 189 00:10:09,000 --> 00:10:12,480 Speaker 1: inflation part of the occurrence um two thousand and sixteen. 190 00:10:12,520 --> 00:10:14,520 Speaker 1: If you remember, we went from a one eight ten 191 00:10:14,640 --> 00:10:16,599 Speaker 1: year the day before the election to it almost a 192 00:10:16,640 --> 00:10:18,640 Speaker 1: two fifty by the end of the year on the 193 00:10:18,640 --> 00:10:22,719 Speaker 1: expectation of deregulation and tax cuts and growth, and that 194 00:10:22,840 --> 00:10:26,720 Speaker 1: what was anticipated was that inflation component that really never came. 195 00:10:26,760 --> 00:10:29,600 Speaker 1: We did see it when the when the GDP peaked 196 00:10:29,880 --> 00:10:32,560 Speaker 1: in the first quarter of two thousand and eighteen, and 197 00:10:32,600 --> 00:10:35,520 Speaker 1: then inflation reach its highest point in May of two 198 00:10:35,520 --> 00:10:39,080 Speaker 1: thousand and eighteen. The point of this is now is 199 00:10:39,320 --> 00:10:41,880 Speaker 1: they're not thinking about it in the ways that you 200 00:10:41,920 --> 00:10:44,920 Speaker 1: would normally think about it. Is that growth will bring 201 00:10:45,000 --> 00:10:47,240 Speaker 1: that inflation at some point in time. It may not 202 00:10:47,320 --> 00:10:49,360 Speaker 1: be in the next few months, but the bond market 203 00:10:49,360 --> 00:10:52,000 Speaker 1: tends to try to get out in front of any uncertainty, 204 00:10:52,040 --> 00:10:53,439 Speaker 1: and I think we're starting to see that now. I 205 00:10:53,440 --> 00:10:55,520 Speaker 1: think we'll see it for the next few months through 206 00:10:55,559 --> 00:10:58,480 Speaker 1: the election. So, Kevin, how would you push this view? 207 00:10:58,679 --> 00:11:00,920 Speaker 1: Three fixed income? Right now? What's the miss price? Do 208 00:11:00,920 --> 00:11:04,600 Speaker 1: you want to take advantage of it? You know, Johnathon, 209 00:11:04,679 --> 00:11:07,240 Speaker 1: it's really still hard to find. But one of the 210 00:11:07,240 --> 00:11:10,480 Speaker 1: things that are really good in either way this goes 211 00:11:11,000 --> 00:11:13,960 Speaker 1: the at tax free mini market is likely going to 212 00:11:14,040 --> 00:11:16,720 Speaker 1: gain if if the prospect of higher taxes is going 213 00:11:16,760 --> 00:11:20,400 Speaker 1: to support that market. Uh an uncertain or continued environment 214 00:11:20,480 --> 00:11:23,040 Speaker 1: is probably gonna support that market. We're still at a 215 00:11:23,080 --> 00:11:26,719 Speaker 1: hundred uh a tax free yields to the ten year 216 00:11:26,880 --> 00:11:30,640 Speaker 1: versus where we were at seventy in the pre crisis period. 217 00:11:30,640 --> 00:11:33,439 Speaker 1: So I still think um that even though a lot 218 00:11:33,480 --> 00:11:36,560 Speaker 1: of state county Missibal credits are coming to market now, 219 00:11:36,800 --> 00:11:39,559 Speaker 1: there is value in the mini market now, no matter 220 00:11:39,600 --> 00:11:43,480 Speaker 1: who takes the White House and who actually owns the Congress. Kevin, 221 00:11:43,800 --> 00:11:46,360 Speaker 1: long agoing far away, we had a Monroe trader where 222 00:11:46,400 --> 00:11:49,120 Speaker 1: we could enjoy price declines. You and I have hallways 223 00:11:49,160 --> 00:11:51,960 Speaker 1: of people that say the bond market never has a 224 00:11:51,960 --> 00:11:55,000 Speaker 1: bear market. Can you model out a bear market to 225 00:11:55,080 --> 00:11:58,280 Speaker 1: come price down and yield up off of my Monroe 226 00:11:58,320 --> 00:12:03,160 Speaker 1: trader calculations? I always said that when my Monroe trader 227 00:12:03,240 --> 00:12:05,600 Speaker 1: stopped working. It was the end of my career, so 228 00:12:05,920 --> 00:12:08,400 Speaker 1: I still have a couple of around Kevin, that's when 229 00:12:08,440 --> 00:12:10,720 Speaker 1: you bought a Bloomberg Thank you and Mike, thank you. 230 00:12:10,800 --> 00:12:13,680 Speaker 1: This morning. Are we uping for a bear market in bonds? 231 00:12:15,120 --> 00:12:17,600 Speaker 1: So we have a potential for it, tom But really 232 00:12:17,640 --> 00:12:19,840 Speaker 1: the only way we're going to see a bear market 233 00:12:19,880 --> 00:12:23,080 Speaker 1: in bonds is if we see this big blue wave 234 00:12:23,800 --> 00:12:26,400 Speaker 1: occur at election time. In my opinion, and the rest 235 00:12:26,400 --> 00:12:30,120 Speaker 1: of it looks like um, we will get increased stimulus 236 00:12:30,200 --> 00:12:32,760 Speaker 1: at some point in time. We we think that maybe 237 00:12:32,760 --> 00:12:35,839 Speaker 1: inflationary somewhere down the road. We're still making up a 238 00:12:35,880 --> 00:12:37,880 Speaker 1: lot of ground from what's happened during the pandemic, and 239 00:12:37,920 --> 00:12:39,880 Speaker 1: we still have the pandemic to deal with. So I 240 00:12:40,160 --> 00:12:43,800 Speaker 1: don't think it's extremely bearish unless we get this scenario 241 00:12:43,920 --> 00:12:47,080 Speaker 1: play out in a blue wave after the election. So 242 00:12:47,160 --> 00:12:49,920 Speaker 1: the reflation trade that you're talking about, this idea of 243 00:12:50,000 --> 00:12:52,079 Speaker 1: higher growth has lit a lot of people to feel 244 00:12:52,120 --> 00:12:55,600 Speaker 1: safe or safer going into the riskiest bonds. And this 245 00:12:55,679 --> 00:12:58,319 Speaker 1: morning I was looking at the spreads, the extra yields 246 00:12:58,320 --> 00:13:01,600 Speaker 1: that investors demand to own the riskiest junk bonds over 247 00:13:01,679 --> 00:13:04,960 Speaker 1: benchmark rates. It is contracted back to February levels. We 248 00:13:05,000 --> 00:13:07,120 Speaker 1: are treating about the average of last year. It is 249 00:13:07,120 --> 00:13:10,640 Speaker 1: as if the pandemic did not happen. Is this market 250 00:13:10,720 --> 00:13:12,760 Speaker 1: right that we are not going to necessarily get an 251 00:13:12,880 --> 00:13:15,360 Speaker 1: escalating default cycle? Is that what this market is saying 252 00:13:15,640 --> 00:13:18,440 Speaker 1: or is it saying something else? Well, at least it's 253 00:13:18,480 --> 00:13:21,959 Speaker 1: saying that, but I'm not sure it fully realizes that 254 00:13:21,960 --> 00:13:24,720 Speaker 1: that may not occur. So I think, as you point out, 255 00:13:24,760 --> 00:13:26,719 Speaker 1: I mean, we are almost to the to the pre 256 00:13:26,800 --> 00:13:30,599 Speaker 1: crisis spread levels, and certainly high grade in I G 257 00:13:31,120 --> 00:13:35,559 Speaker 1: corporate debt, and almost there again on high yield in particular, 258 00:13:35,640 --> 00:13:38,079 Speaker 1: and that's a sector I would be very very careful 259 00:13:38,120 --> 00:13:42,080 Speaker 1: with right now, because you know, to over the tens 260 00:13:42,160 --> 00:13:45,199 Speaker 1: for high yield is not enough of a cushion for 261 00:13:45,360 --> 00:13:48,400 Speaker 1: me based on where I think we're headed. So I think, 262 00:13:48,720 --> 00:13:52,120 Speaker 1: even even so, let's say nothing happens or nothing changes, 263 00:13:52,440 --> 00:13:55,280 Speaker 1: you know, less than three hundred for high yield is 264 00:13:55,760 --> 00:13:59,520 Speaker 1: expensive purchase for a portfolio. From me, I still would 265 00:13:59,520 --> 00:14:03,920 Speaker 1: favor uh I G debt, but realize you're gonna get 266 00:14:03,920 --> 00:14:05,880 Speaker 1: it at less than a hundred basis points. You have 267 00:14:05,960 --> 00:14:08,160 Speaker 1: to be happy with that. So even if we get 268 00:14:08,240 --> 00:14:11,000 Speaker 1: higher yields, spreads would tend to contract even further, but 269 00:14:11,080 --> 00:14:13,840 Speaker 1: you would get paid to high yield versus uh where 270 00:14:13,840 --> 00:14:16,120 Speaker 1: the treasury is now. So I just think that that 271 00:14:16,280 --> 00:14:19,560 Speaker 1: it's an expensive opportunity to take on that additional risk 272 00:14:19,600 --> 00:14:22,720 Speaker 1: and fixed income. Kevin, you live and break this world. 273 00:14:22,800 --> 00:14:25,000 Speaker 1: I just wanted from the conversations you've been having over 274 00:14:25,040 --> 00:14:27,320 Speaker 1: the last few months, the senses a little bit too 275 00:14:27,360 --> 00:14:32,640 Speaker 1: much confidence in credit because of the fedback stop. Yeah, 276 00:14:32,680 --> 00:14:35,080 Speaker 1: there it really is. John. I think that there's a 277 00:14:35,160 --> 00:14:38,000 Speaker 1: point here where, um, we're gonna see a lot more 278 00:14:38,080 --> 00:14:42,200 Speaker 1: bankruptcies because they just have to occur. If especially if 279 00:14:42,240 --> 00:14:46,520 Speaker 1: you don't get stimulus within this calendar year. Uh, that 280 00:14:46,680 --> 00:14:49,680 Speaker 1: is going to have an effect on credits themselves. But 281 00:14:49,720 --> 00:14:52,760 Speaker 1: the offsetting opportunity, and you're seeing this a lot, even 282 00:14:52,840 --> 00:14:55,200 Speaker 1: high yield companies, even the state of Illinois are coming 283 00:14:55,240 --> 00:14:58,160 Speaker 1: in and refinancing. They're debt at much lower yields, building 284 00:14:58,280 --> 00:15:01,400 Speaker 1: cash positions, and they may you this, uh, they may 285 00:15:01,440 --> 00:15:03,480 Speaker 1: be able to ride the storm out without seeing as 286 00:15:03,480 --> 00:15:07,200 Speaker 1: many bankruptcy somewhere expecting. On Bloomberg Radio, on Bloomberg Television, 287 00:15:07,280 --> 00:15:08,880 Speaker 1: Kevin get us with us, and for those of you 288 00:15:08,920 --> 00:15:10,880 Speaker 1: on radio, one of the cool things that Kevin get 289 00:15:10,960 --> 00:15:16,200 Speaker 1: us is the Cincinnati Reds memorabilia behind him, its shape 290 00:15:16,320 --> 00:15:19,400 Speaker 1: get us, Kevin get us. We just lost Joe Morgan. 291 00:15:20,080 --> 00:15:23,840 Speaker 1: Bill James says Joe Morrigan was better than the giant 292 00:15:24,040 --> 00:15:30,240 Speaker 1: Rogers hornsby what did Joe Morrigan mean to your Cincinnati Reds? Well, 293 00:15:30,280 --> 00:15:32,480 Speaker 1: if you remember, and it goes way back, we got him, 294 00:15:32,600 --> 00:15:35,440 Speaker 1: got him from the Houston Astros at that time, and 295 00:15:35,480 --> 00:15:38,840 Speaker 1: it really filled the void, especially hit on second base 296 00:15:39,280 --> 00:15:41,240 Speaker 1: um for the Reds and the big Red machinet at 297 00:15:41,280 --> 00:15:44,320 Speaker 1: that time. So the impact that Joe Morgan had on 298 00:15:44,360 --> 00:15:48,520 Speaker 1: both the organization and afterwards was long lasting. And we 299 00:15:48,520 --> 00:15:52,120 Speaker 1: we were fortunate that he associates to himself or he 300 00:15:52,200 --> 00:15:56,440 Speaker 1: did associate himself with the Reds versus the Astros. Kevin, 301 00:15:56,480 --> 00:15:58,560 Speaker 1: just the final question from me, just to end on 302 00:15:58,600 --> 00:16:00,960 Speaker 1: a more positive note, can you give us a review 303 00:16:00,960 --> 00:16:03,200 Speaker 1: of what you would think of apply like Mookie Batts 304 00:16:03,200 --> 00:16:05,720 Speaker 1: and why a team like the Red Sox would would 305 00:16:05,800 --> 00:16:11,880 Speaker 1: let him go. He's killing me, Kevin Well, I would 306 00:16:11,920 --> 00:16:15,640 Speaker 1: become by default a bigger Dodgers fan that I would admit. 307 00:16:15,760 --> 00:16:18,880 Speaker 1: And I'm just happy that they have Mooky Betts, like 308 00:16:19,120 --> 00:16:21,840 Speaker 1: cut this guy back before the Reds won a title 309 00:16:22,120 --> 00:16:25,200 Speaker 1: in ninety. The Dodgers haven't won one since eight, so 310 00:16:25,200 --> 00:16:27,000 Speaker 1: they've actually been suffering along with us, even though so 311 00:16:27,360 --> 00:16:29,680 Speaker 1: you're telling me, Mookie Bets, is that Joe Morgan of 312 00:16:29,720 --> 00:16:33,040 Speaker 1: the Dodgers. That's what you're saying. Kevin, well for a 313 00:16:33,120 --> 00:16:34,960 Speaker 1: very short period of time. It will let that play 314 00:16:35,000 --> 00:16:38,960 Speaker 1: out over a number of years. Oh, we will thank you, Kevin. 315 00:16:38,960 --> 00:16:47,640 Speaker 1: Get us the Ryman Jacks. Beautiful. This is a joy, 316 00:16:47,760 --> 00:16:51,360 Speaker 1: particularly thirteen days out in the middle of this historic election. 317 00:16:51,720 --> 00:16:54,840 Speaker 1: Wendy Schiller is at Brown University, and it's too modest 318 00:16:55,200 --> 00:16:57,840 Speaker 1: to mention that she is part of the new fifth 319 00:16:58,000 --> 00:17:01,920 Speaker 1: edition of the Great Definitive of Gateways to Democracy. It 320 00:17:02,040 --> 00:17:05,879 Speaker 1: is without question the one volume seven under page thrown 321 00:17:05,920 --> 00:17:08,159 Speaker 1: at the kids and say shut up and read a 322 00:17:08,240 --> 00:17:11,960 Speaker 1: textbook on this American politics. And we're thrilled she could 323 00:17:12,040 --> 00:17:15,480 Speaker 1: join us today from Brown in the fifth edition, Wendy, 324 00:17:15,600 --> 00:17:18,280 Speaker 1: or maybe in the sixth edition to come. You have 325 00:17:18,359 --> 00:17:22,720 Speaker 1: to write about mail in voting. What will you say? Well, 326 00:17:22,720 --> 00:17:26,800 Speaker 1: the world changed for American elections, right, we have close 327 00:17:26,880 --> 00:17:29,720 Speaker 1: to eighty three million people have asked for mail in ballots. 328 00:17:29,800 --> 00:17:32,280 Speaker 1: It's about, you know, at least one third more than 329 00:17:32,359 --> 00:17:35,560 Speaker 1: in previous elections. And they're returning them. And guess what 330 00:17:35,760 --> 00:17:38,800 Speaker 1: they're getting to the boards of elections. They're getting registered, 331 00:17:38,800 --> 00:17:41,640 Speaker 1: they're getting verified, and they're getting counted. So the big 332 00:17:41,680 --> 00:17:44,639 Speaker 1: crisis of that has not yet emerged in what we're seeing. 333 00:17:44,960 --> 00:17:47,720 Speaker 1: And at least thirty seven million of those votes have 334 00:17:47,760 --> 00:17:50,400 Speaker 1: already been cast at both in person and by mail. 335 00:17:50,720 --> 00:17:53,720 Speaker 1: This changes everything about how we vote. It will probably 336 00:17:53,800 --> 00:17:56,119 Speaker 1: lead to a higher vote turnout this year and in 337 00:17:56,160 --> 00:17:59,359 Speaker 1: subsequent years, and it makes for a more engaged public. 338 00:17:59,800 --> 00:18:03,040 Speaker 1: From a business educational political standpoint, you want people to 339 00:18:03,119 --> 00:18:05,399 Speaker 1: be engaged. If you don't want your tax dollars wasted. 340 00:18:05,560 --> 00:18:07,800 Speaker 1: You want people to be engaged. If they can vote 341 00:18:07,800 --> 00:18:10,520 Speaker 1: more easily, they'll be more engaged. So I think this 342 00:18:10,600 --> 00:18:13,159 Speaker 1: is a big factor coming out of One of the 343 00:18:13,200 --> 00:18:15,880 Speaker 1: problems is you had a Brown PhD student a couple 344 00:18:15,880 --> 00:18:18,280 Speaker 1: of years ago who wrote four hundred pages on Mayor 345 00:18:18,400 --> 00:18:23,760 Speaker 1: Daily JFK stealing the election. How do we get away 346 00:18:23,800 --> 00:18:27,359 Speaker 1: from that thinking? Well, I mean the thinking that people 347 00:18:27,400 --> 00:18:29,919 Speaker 1: will steal it. I think that's a hard thing, right, 348 00:18:29,960 --> 00:18:32,239 Speaker 1: That's been ingrained, as you well know, because you know 349 00:18:32,320 --> 00:18:35,280 Speaker 1: your history. Ever since we basically started with these sort 350 00:18:35,280 --> 00:18:38,320 Speaker 1: of protected elections called the Australian ballot in about the 351 00:18:38,320 --> 00:18:41,680 Speaker 1: eighteen eighties, everybody's been worried about that. But so far 352 00:18:41,920 --> 00:18:44,760 Speaker 1: you have a lot of county boards, both Republican Democrat 353 00:18:44,840 --> 00:18:47,600 Speaker 1: areas of the country that aren't counting votes and aren't 354 00:18:47,640 --> 00:18:49,960 Speaker 1: losing them yet. So we have to go through that now. 355 00:18:50,000 --> 00:18:52,919 Speaker 1: Whether you reject about because the signature isn't right or 356 00:18:53,000 --> 00:18:56,520 Speaker 1: something's wrong with it, that's really locally controlled and that 357 00:18:56,560 --> 00:18:58,680 Speaker 1: will be the point of contention if this turns out 358 00:18:58,680 --> 00:19:01,159 Speaker 1: to be a close race, Wendy, given the success of 359 00:19:01,240 --> 00:19:04,399 Speaker 1: mail in ballots, is there any talk about shifting to 360 00:19:05,080 --> 00:19:08,159 Speaker 1: I don't know, an electronic method of voting. Considering that 361 00:19:08,200 --> 00:19:11,920 Speaker 1: we are in and the world is digital, we said, 362 00:19:11,920 --> 00:19:14,520 Speaker 1: that's a great question. But I think there's still some 363 00:19:14,600 --> 00:19:18,640 Speaker 1: big distrust about hacking, particularly since that's made a big 364 00:19:18,680 --> 00:19:21,679 Speaker 1: focal point in terms of the Russian hacking, the Chinese hacking, 365 00:19:21,720 --> 00:19:25,240 Speaker 1: American hacking. You know, thinking about hacking and machines, people 366 00:19:25,240 --> 00:19:27,320 Speaker 1: are still worried about that. I don't know if American 367 00:19:27,400 --> 00:19:30,640 Speaker 1: voters are are interested in trusting that to the point 368 00:19:30,680 --> 00:19:33,480 Speaker 1: of giving up this sort of ritual of filling out 369 00:19:33,480 --> 00:19:36,600 Speaker 1: a ballot and and handing in and signing it and 370 00:19:36,600 --> 00:19:39,680 Speaker 1: showing identification. I'm not sure anyone's willing to move there, 371 00:19:40,280 --> 00:19:42,960 Speaker 1: you know, in the next decade. But I think that 372 00:19:43,200 --> 00:19:46,159 Speaker 1: just the fact that we we get more engaged, just 373 00:19:46,240 --> 00:19:49,040 Speaker 1: the fact that we realize it should be easy to vote, 374 00:19:49,480 --> 00:19:52,120 Speaker 1: that's a huge difference. And I think that comes out 375 00:19:52,160 --> 00:19:54,600 Speaker 1: of a lot of discontent with the system on all 376 00:19:54,640 --> 00:19:57,480 Speaker 1: sides of the political spectrum. You just want to run 377 00:19:57,480 --> 00:19:59,520 Speaker 1: through these headlines coming from White House Chief of Staff 378 00:19:59,560 --> 00:20:01,560 Speaker 1: moth Met, speaking of Fox News in the last couple 379 00:20:01,560 --> 00:20:04,399 Speaker 1: of minutes, plans to talk to the Senate Republicans and 380 00:20:04,440 --> 00:20:08,000 Speaker 1: Pelosi staff members on relief talk. Still a number of 381 00:20:08,040 --> 00:20:11,120 Speaker 1: issues to work on, and the main issue, the biggest 382 00:20:11,160 --> 00:20:15,600 Speaker 1: issue remains still state, local and government aid and Tom 383 00:20:15,680 --> 00:20:17,720 Speaker 1: that has paen the issue. Yeah, that's your I think 384 00:20:17,760 --> 00:20:20,560 Speaker 1: the last three hunts totally agree on John. I think 385 00:20:20,840 --> 00:20:24,360 Speaker 1: Mr meadows Is is dead on Wendy Schiller. There it is, 386 00:20:24,440 --> 00:20:28,280 Speaker 1: but it's just not Democrats, cities and government is a 387 00:20:28,359 --> 00:20:31,159 Speaker 1: president of others paying it. Isn't it true that there 388 00:20:31,200 --> 00:20:36,040 Speaker 1: are so called Republicans states and cities and towns that 389 00:20:36,119 --> 00:20:39,480 Speaker 1: will be effective if they don't act. Of course, places 390 00:20:39,520 --> 00:20:44,560 Speaker 1: like Ohio, Michigan, Pennsylvania, North Carolina, everybody's experienced in search. 391 00:20:44,680 --> 00:20:47,199 Speaker 1: Everybody's had to spend a lot more money. Even educational 392 00:20:47,240 --> 00:20:50,880 Speaker 1: systems have spend more money to reconfigure their classrooms. There's 393 00:20:50,880 --> 00:20:53,520 Speaker 1: a tremendous amount of need across the country. But the 394 00:20:53,600 --> 00:20:57,480 Speaker 1: cynical view in me says that McConnell's looking at he's 395 00:20:57,560 --> 00:20:59,920 Speaker 1: looking at his people, has got a good year look 396 00:21:00,000 --> 00:21:02,720 Speaker 1: at two for the Republicans. If they lose the Senate 397 00:21:02,760 --> 00:21:05,200 Speaker 1: this year barely, they'll get it back, or they'll try 398 00:21:05,200 --> 00:21:08,560 Speaker 1: to in two. If you add two more trillion dollars 399 00:21:08,560 --> 00:21:10,879 Speaker 1: to the deficit, then you've got Republicans running on a 400 00:21:10,880 --> 00:21:13,560 Speaker 1: four trillion dollar deficit, which isn't a good look for them. 401 00:21:13,840 --> 00:21:16,560 Speaker 1: So I suspect he feels like he can forego this 402 00:21:16,880 --> 00:21:19,520 Speaker 1: and start looking at two pretty much the day after 403 00:21:19,600 --> 00:21:22,400 Speaker 1: election day. And that's to me why he's holding out. 404 00:21:22,400 --> 00:21:23,760 Speaker 1: It's not just that he can't get the votes. I 405 00:21:23,760 --> 00:21:25,840 Speaker 1: think he could. I think they think this is something 406 00:21:25,880 --> 00:21:28,119 Speaker 1: they don't want to have to defend going into another 407 00:21:28,119 --> 00:21:31,119 Speaker 1: election cycle where they could do well in Wendy. If 408 00:21:31,119 --> 00:21:33,080 Speaker 1: they were to pass a fiscal support bill ahead of 409 00:21:33,119 --> 00:21:36,440 Speaker 1: the election, would that make President Trump look good? Of course, 410 00:21:36,440 --> 00:21:38,680 Speaker 1: the only president look goodly, So that's a really good point. 411 00:21:38,720 --> 00:21:40,800 Speaker 1: It also makes us Pelosi look good and make Man 412 00:21:40,840 --> 00:21:43,359 Speaker 1: you can look good, and McConnell if he if he relents, 413 00:21:43,400 --> 00:21:46,000 Speaker 1: looks good. But to me, the checks don't go out 414 00:21:46,040 --> 00:21:48,159 Speaker 1: with Trump's name on it, quote unquote a lot of 415 00:21:48,200 --> 00:21:51,240 Speaker 1: its direct deposit. But that's a metaphor so getting credit 416 00:21:51,280 --> 00:21:53,440 Speaker 1: for it. When now, by the end of the weekend, 417 00:21:53,680 --> 00:21:56,719 Speaker 1: fifty to sixty million votes have already been cast, the 418 00:21:56,760 --> 00:22:00,200 Speaker 1: marginal utility of this bill to Trump shrinks every that 419 00:22:00,240 --> 00:22:03,320 Speaker 1: they wait, which is why Pelosi kind of fanaggled and 420 00:22:03,400 --> 00:22:06,600 Speaker 1: sat on it installed knowing that so many votes will 421 00:22:06,640 --> 00:22:09,160 Speaker 1: already been cast. I think she realizes he may get 422 00:22:09,160 --> 00:22:10,639 Speaker 1: a bomb, but it's not gonna be as big as 423 00:22:10,720 --> 00:22:13,480 Speaker 1: they got this bill done a month ago, when he 424 00:22:13,600 --> 00:22:15,919 Speaker 1: just quickly and finally on the Senate. You said everybody 425 00:22:15,960 --> 00:22:19,280 Speaker 1: would look good. Are there any candidates in the Senate 426 00:22:19,440 --> 00:22:22,280 Speaker 1: that are worried about passing this bill because being a 427 00:22:22,359 --> 00:22:25,119 Speaker 1: fiscal hawk is still attractive to a certain part of 428 00:22:25,119 --> 00:22:27,879 Speaker 1: this electorate. Yeah, I think the bulk of the Republican 429 00:22:27,960 --> 00:22:30,680 Speaker 1: goop Senate caucus, all of them, they don't want to 430 00:22:30,680 --> 00:22:33,119 Speaker 1: get primary. They're always worried about primary. Even if the 431 00:22:33,119 --> 00:22:36,480 Speaker 1: Trump factor goes away, if he loses, there's still going 432 00:22:36,520 --> 00:22:38,679 Speaker 1: to be a primary because people realize you can upbend 433 00:22:38,720 --> 00:22:41,120 Speaker 1: incumbents and primaries. We've been seeing that for about four 434 00:22:41,160 --> 00:22:43,720 Speaker 1: to six years now in an active way. They're worried 435 00:22:43,720 --> 00:22:47,520 Speaker 1: about getting primary on deficit spending. And so if McConnell's 436 00:22:47,520 --> 00:22:49,879 Speaker 1: looking ahead, this is what he's most concerned about. This 437 00:22:49,920 --> 00:22:51,959 Speaker 1: is why he's taking the gamble that it won't pay 438 00:22:52,000 --> 00:22:53,800 Speaker 1: off for them. Now. The ones that are gonna lose 439 00:22:53,800 --> 00:22:58,200 Speaker 1: are already gonna lose. Let's look forward too, when Sheila, 440 00:22:58,280 --> 00:23:05,719 Speaker 1: thank you. Brown University Chair of Political Science, John McKay 441 00:23:05,960 --> 00:23:09,480 Speaker 1: is just understood. Yes, Soul Wholefoods to Mr Bezos for 442 00:23:09,560 --> 00:23:13,200 Speaker 1: more than a jillion dollars. But what he really did 443 00:23:13,320 --> 00:23:18,720 Speaker 1: was completely invent a culture from safer way a zillion 444 00:23:18,800 --> 00:23:22,159 Speaker 1: years ago, literally a vegan co op and I believe 445 00:23:22,160 --> 00:23:25,720 Speaker 1: it was Austin off of ut He built it into 446 00:23:25,760 --> 00:23:31,359 Speaker 1: a juggernaut that changed everything in food in America, David 447 00:23:31,400 --> 00:23:35,560 Speaker 1: Rubinstein Peer to Peer Conversations Fourth Carlisle Group had the 448 00:23:35,600 --> 00:23:39,879 Speaker 1: privilege of talking to this truly original executive. David, What 449 00:23:39,920 --> 00:23:43,680 Speaker 1: did you learn original from John McKay. Well, he's a 450 00:23:43,800 --> 00:23:46,840 Speaker 1: very contented person. Um, he is not as wealthy as 451 00:23:46,840 --> 00:23:49,080 Speaker 1: somebody might think he would be from having started this 452 00:23:49,200 --> 00:23:52,120 Speaker 1: incredible company. But he's wealthy by any normal human standards. 453 00:23:52,359 --> 00:23:54,720 Speaker 1: But he doesn't care about money. Pretty really, Uh, this 454 00:23:54,880 --> 00:23:57,200 Speaker 1: is his life. He he he doesn't He's married, but no children, 455 00:23:57,480 --> 00:24:00,440 Speaker 1: and this company is a child And he likes to 456 00:24:00,480 --> 00:24:03,320 Speaker 1: say he sewed off his daughter to the wealthiest man 457 00:24:03,359 --> 00:24:06,200 Speaker 1: in the world. Well, he sold him off to Amazon. 458 00:24:06,280 --> 00:24:08,040 Speaker 1: And you know, we all see the changes those of 459 00:24:08,119 --> 00:24:11,320 Speaker 1: us that darkened uh doors of whole paycheck. But David, 460 00:24:11,359 --> 00:24:15,280 Speaker 1: what is so important here are the processes he put 461 00:24:15,720 --> 00:24:20,439 Speaker 1: in place around a core strategic belief. How did he 462 00:24:20,560 --> 00:24:24,320 Speaker 1: do that? Well, he's a person who really believed in 463 00:24:24,359 --> 00:24:27,359 Speaker 1: the value of organic and healthy foods, and so it 464 00:24:27,440 --> 00:24:30,280 Speaker 1: was easy for him to promote that because he really 465 00:24:30,280 --> 00:24:32,800 Speaker 1: truly believed it, and ultimately it turned out a lot 466 00:24:32,800 --> 00:24:36,120 Speaker 1: of other Americans did as well. What he's done with Amazon, though, 467 00:24:36,240 --> 00:24:39,439 Speaker 1: is Amazon has improved the technology dramatically that he would admit. 468 00:24:39,680 --> 00:24:42,919 Speaker 1: And also during the COVID period, online sales have been 469 00:24:42,960 --> 00:24:45,400 Speaker 1: much higher than they would have otherwise been. Um. He 470 00:24:45,440 --> 00:24:47,200 Speaker 1: has said he's going to do this for a couple 471 00:24:47,240 --> 00:24:49,760 Speaker 1: more years, but he doesn't know how much longer. He's 472 00:24:49,760 --> 00:24:52,440 Speaker 1: a content person. Uh, you know, sometimes you get CEOs 473 00:24:52,440 --> 00:24:54,919 Speaker 1: and founders are still not happy with their life and 474 00:24:54,960 --> 00:24:57,040 Speaker 1: so forth. He's a very happy person. I think he 475 00:24:57,080 --> 00:24:58,600 Speaker 1: spoke for all of us though, and he said that 476 00:24:59,760 --> 00:25:02,000 Speaker 1: is the weirdest year of my life. Why did he 477 00:25:02,040 --> 00:25:06,800 Speaker 1: say that, Well, because he's had to retool the entire company. 478 00:25:07,160 --> 00:25:09,520 Speaker 1: It used to be that people came in for the 479 00:25:09,560 --> 00:25:12,399 Speaker 1: shopping experience and walked in the aisles, and now they 480 00:25:12,440 --> 00:25:14,760 Speaker 1: have to focus more on getting people to have pick 481 00:25:14,800 --> 00:25:16,760 Speaker 1: up there because people don't want to walk in the 482 00:25:16,760 --> 00:25:18,840 Speaker 1: aisle so much because of COVID. So he had to 483 00:25:18,880 --> 00:25:21,720 Speaker 1: reinvent a bit the business. But still and he has 484 00:25:21,760 --> 00:25:24,480 Speaker 1: more competition he used to have when he had virtually 485 00:25:24,520 --> 00:25:26,640 Speaker 1: no competition. He said for the first twenty five years. 486 00:25:26,760 --> 00:25:29,719 Speaker 1: He's been the CEO for forty two years, and for 487 00:25:29,800 --> 00:25:32,200 Speaker 1: twenty five of those there wasn't that much competition. Now 488 00:25:32,440 --> 00:25:35,399 Speaker 1: the major supermarkets are all having whole food kind of 489 00:25:35,880 --> 00:25:38,919 Speaker 1: aisles and other kinds of organic food displays, and he 490 00:25:38,960 --> 00:25:42,440 Speaker 1: has more competition than he ever had. There's a question 491 00:25:42,800 --> 00:25:46,639 Speaker 1: about his contentedness with the sale to Amazon, especially in 492 00:25:46,720 --> 00:25:51,440 Speaker 1: light of the increasing scrutiny around big tech and monopolies consolidation. 493 00:25:52,040 --> 00:25:54,960 Speaker 1: Did he give an alternate view that was believable to 494 00:25:55,040 --> 00:25:58,760 Speaker 1: you of the possible benefits to consolidation at a time 495 00:25:58,800 --> 00:26:02,600 Speaker 1: when people are to pomoneing the concentration of wealth and 496 00:26:02,680 --> 00:26:06,520 Speaker 1: market share among the biggest companies in America. Look, when 497 00:26:06,520 --> 00:26:08,960 Speaker 1: you marry off, your daughter always saying is this person 498 00:26:09,080 --> 00:26:10,639 Speaker 1: going to be good enough for your daughter? And so 499 00:26:10,680 --> 00:26:13,040 Speaker 1: he's always saying, well, did I make the right decision? 500 00:26:13,320 --> 00:26:15,280 Speaker 1: But in the end, I think he's content with it 501 00:26:15,280 --> 00:26:17,760 Speaker 1: because Amazon has helped him in many ways. On the 502 00:26:17,760 --> 00:26:20,600 Speaker 1: other hand, they've imposed some constraints that he might not 503 00:26:20,680 --> 00:26:23,000 Speaker 1: be completely happy with. He would say he's ninety eight 504 00:26:23,040 --> 00:26:28,160 Speaker 1: percent happy, David. David, It's widely understood that the panels 505 00:26:28,200 --> 00:26:30,400 Speaker 1: you and I have done in Davos, you've always wanted 506 00:26:30,400 --> 00:26:32,800 Speaker 1: a mute button to shut me up. We're gonna have 507 00:26:32,840 --> 00:26:37,159 Speaker 1: a debate tomorrow night with some mute buttons. What is 508 00:26:37,200 --> 00:26:41,800 Speaker 1: your prescription for your candidate, Vice President Biden to survive 509 00:26:42,040 --> 00:26:45,520 Speaker 1: Thursday to get to the election. I don't have a candidate. 510 00:26:45,720 --> 00:26:48,680 Speaker 1: I'm an independent, and I don't give money to either candidate, 511 00:26:48,760 --> 00:26:50,600 Speaker 1: just to be clear. But on the other hand, I 512 00:26:50,640 --> 00:26:54,680 Speaker 1: would say, um, I don't think the debate can change 513 00:26:54,680 --> 00:26:57,000 Speaker 1: that many votes at this point. I'd be very surprised. 514 00:26:57,040 --> 00:26:59,000 Speaker 1: I've been involved in debates over the years and they 515 00:26:59,040 --> 00:27:03,120 Speaker 1: have marginal impact act and so unless somebody does something outrageous, 516 00:27:03,359 --> 00:27:05,600 Speaker 1: I don't think it will have a big impact. So 517 00:27:05,920 --> 00:27:07,639 Speaker 1: the main thing I think Biden has to do is 518 00:27:07,680 --> 00:27:09,840 Speaker 1: just not make a mistake. And the thing that Trump 519 00:27:09,880 --> 00:27:11,359 Speaker 1: has to do is not do the kind of things 520 00:27:11,359 --> 00:27:13,280 Speaker 1: he did before. Whether you can do that or not, 521 00:27:13,320 --> 00:27:15,280 Speaker 1: I don't know. The mute button will have some impact. 522 00:27:15,320 --> 00:27:17,480 Speaker 1: But you know, you can talk over a mute button too, 523 00:27:20,040 --> 00:27:22,480 Speaker 1: Go ahead, that's news to you. You can talk over 524 00:27:22,480 --> 00:27:25,159 Speaker 1: the mutant button. That will be helpful. Go on. You know. 525 00:27:25,240 --> 00:27:28,240 Speaker 1: I look, David, at this moment that we're in in 526 00:27:28,320 --> 00:27:31,280 Speaker 1: a country moving forward, and part of it for so 527 00:27:31,320 --> 00:27:37,080 Speaker 1: many people is the inefficiencies or harm of capitalism. Defend 528 00:27:37,080 --> 00:27:41,600 Speaker 1: the system. Well, capitalism is the as Churchill would have said, 529 00:27:41,600 --> 00:27:44,159 Speaker 1: in effect, the worst system of all except for all 530 00:27:44,160 --> 00:27:47,320 Speaker 1: the others. So capitalism has a lot of income inequality 531 00:27:47,359 --> 00:27:49,560 Speaker 1: that's built into it because the people the bottom don't 532 00:27:49,560 --> 00:27:51,640 Speaker 1: do as well. On the other hand, it's created more 533 00:27:51,720 --> 00:27:54,120 Speaker 1: wealth for more people around the world than any other 534 00:27:54,160 --> 00:27:57,480 Speaker 1: economic system, so very few people are rushing to leave 535 00:27:57,560 --> 00:28:01,440 Speaker 1: capitalist systems to go to communist systems social systems. The 536 00:28:01,440 --> 00:28:03,840 Speaker 1: immigration in the United States is pretty heavy, the immigration 537 00:28:03,960 --> 00:28:07,200 Speaker 1: is very modest. How the outcome of this election affect 538 00:28:07,240 --> 00:28:11,760 Speaker 1: your investments, if at all we make a long term investment, 539 00:28:11,840 --> 00:28:14,080 Speaker 1: So it's hard to say. In the end, I suspect 540 00:28:14,080 --> 00:28:17,040 Speaker 1: that the economy will probably have some uh slow down 541 00:28:17,080 --> 00:28:18,480 Speaker 1: period of time in the next year or two. It 542 00:28:18,480 --> 00:28:20,600 Speaker 1: it's probably due for that. In the end, I don't 543 00:28:20,600 --> 00:28:23,119 Speaker 1: think the tax policies are going to change all that 544 00:28:23,240 --> 00:28:25,760 Speaker 1: much no matter who's president, because Congress is probably not 545 00:28:25,800 --> 00:28:28,280 Speaker 1: going to move dramatically on things. I do think the 546 00:28:28,320 --> 00:28:31,000 Speaker 1: most important factor right now over the next six months 547 00:28:31,200 --> 00:28:34,080 Speaker 1: is having an economic stimulus package. Because it's clear that 548 00:28:34,080 --> 00:28:36,480 Speaker 1: the last stimulus package is wearing off. We don't have 549 00:28:36,520 --> 00:28:38,240 Speaker 1: a stimulus package the next couple of months. I think 550 00:28:38,240 --> 00:28:41,400 Speaker 1: you'll see much higher unemployment rates and much lower growth rates. 551 00:28:41,720 --> 00:28:44,960 Speaker 1: David Reubintson, thank you so much. Greatly appreciated an interview 552 00:28:45,080 --> 00:28:48,960 Speaker 1: with John Mackie, the founder inventor of what we call 553 00:28:49,040 --> 00:28:53,320 Speaker 1: whole housing in the organic as well. Thanks for listening 554 00:28:53,400 --> 00:28:57,920 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 555 00:28:57,960 --> 00:29:03,200 Speaker 1: on Apple Podcasts, Soundclouds, or whichever podcast platform you prefer. 556 00:29:03,760 --> 00:29:07,120 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 557 00:29:07,120 --> 00:29:10,520 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio