1 00:00:09,880 --> 00:00:12,960 Speaker 1: Welcome to the Bloomberg Surveillance podcast and I'm Tom Keane. 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Daily 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 --> 00:00:27,600 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Has 5 00:00:27,640 --> 00:00:30,200 Speaker 1: the rally been justified? Ivan find set joining us now 6 00:00:30,280 --> 00:00:34,360 Speaker 1: Tigers Financial Partner's Chief investment Officer. Ivan. Has the rally 7 00:00:34,400 --> 00:00:38,479 Speaker 1: been justified by fundamentals? Well, I mean there's two issues, 8 00:00:38,520 --> 00:00:40,720 Speaker 1: and the main issue is there's no place else to 9 00:00:40,760 --> 00:00:44,040 Speaker 1: put your money, and it's the powerful results have been 10 00:00:44,120 --> 00:00:48,360 Speaker 1: driven by the incredible efforts of FED Chairman Pal. I 11 00:00:48,400 --> 00:00:51,239 Speaker 1: think FED Chairman Pal single handedly saved the world. I 12 00:00:51,240 --> 00:00:56,160 Speaker 1: mean he acted swiftly and decisively in March, pumping tremendous 13 00:00:56,200 --> 00:00:59,520 Speaker 1: amounts of liquidity into the financial markets, which in turn 14 00:00:59,600 --> 00:01:02,640 Speaker 1: caused other central bankers around the world to do the same. 15 00:01:03,240 --> 00:01:06,360 Speaker 1: And I think that's been the powerful driver of the 16 00:01:06,400 --> 00:01:09,520 Speaker 1: recovery and the fact that, look, I believe in the 17 00:01:09,560 --> 00:01:14,000 Speaker 1: resiliency and the of the and the detestinal fortitude of 18 00:01:14,000 --> 00:01:16,200 Speaker 1: the human spirit that we will come back. We've come 19 00:01:16,200 --> 00:01:22,120 Speaker 1: back from many bad situations, and innovation has led this recovery, 20 00:01:22,160 --> 00:01:24,080 Speaker 1: and it's been led by the tech stocks which have 21 00:01:24,720 --> 00:01:28,760 Speaker 1: empowered the ability to make this shift to support a 22 00:01:28,800 --> 00:01:32,960 Speaker 1: remote and dispersed workforce as an example. Okay, I get 23 00:01:33,000 --> 00:01:36,000 Speaker 1: that UM and it all makes sense. That narrative makes sense. 24 00:01:36,280 --> 00:01:39,039 Speaker 1: And then you see things like Tesla where they do 25 00:01:39,080 --> 00:01:42,280 Speaker 1: a stock split and their shares go infinitely higher. They 26 00:01:42,319 --> 00:01:45,160 Speaker 1: go up by twelve even though you're basically just changing 27 00:01:45,160 --> 00:01:48,240 Speaker 1: a five dollar bill into five ones, which shouldn't, all 28 00:01:48,360 --> 00:01:51,520 Speaker 1: things being equal, make a stock more valuable. You see 29 00:01:51,520 --> 00:01:54,600 Speaker 1: a similar type of move in Apple. What gives I 30 00:01:54,600 --> 00:01:58,560 Speaker 1: mean are these signs of froth? Well, I mean there's 31 00:01:58,560 --> 00:02:02,320 Speaker 1: always pockets of unique focus if you will, I think 32 00:02:02,360 --> 00:02:05,800 Speaker 1: Apple deserves its valuation. I mean, we have a tremendous 33 00:02:05,800 --> 00:02:07,880 Speaker 1: catalyst coming up in the launch of the five G 34 00:02:08,040 --> 00:02:12,960 Speaker 1: enabled iPhone twelves. That will kick off a tremendous supercycle 35 00:02:13,320 --> 00:02:15,799 Speaker 1: because many have been waiting to upgrade to the high 36 00:02:15,840 --> 00:02:19,400 Speaker 1: speed five G enabled phones and there's going to be 37 00:02:19,440 --> 00:02:22,240 Speaker 1: a huge pent up demand as the average iPhone in 38 00:02:22,360 --> 00:02:26,239 Speaker 1: service today is over five years old. So that will 39 00:02:26,320 --> 00:02:31,640 Speaker 1: drive a um a new upgrade cycle in Apple phones. 40 00:02:32,080 --> 00:02:36,560 Speaker 1: Along with their Apple's focus on increasing their services revenue 41 00:02:36,560 --> 00:02:41,040 Speaker 1: and offering more and more services entertainment, gaming, payment, shopping, 42 00:02:41,680 --> 00:02:45,119 Speaker 1: UM that will enable them to further monetize this over 43 00:02:45,400 --> 00:02:50,400 Speaker 1: one and a half billion installed iPhone user base. All right, 44 00:02:50,440 --> 00:02:52,080 Speaker 1: So Ivan, you know, when I was in business school, 45 00:02:52,080 --> 00:02:54,200 Speaker 1: when we were talking about and learning about markets, one 46 00:02:54,200 --> 00:02:56,359 Speaker 1: of the things I learned was you need to have breath. 47 00:02:56,680 --> 00:02:58,320 Speaker 1: You need if you want to have a healthy market, 48 00:02:58,360 --> 00:03:00,920 Speaker 1: you need to have a breath across a wide swath 49 00:03:01,040 --> 00:03:04,840 Speaker 1: of stocks and sectors. We are absolutely, absolutely not seeing 50 00:03:04,840 --> 00:03:07,720 Speaker 1: that in this market. How concerned are you about that 51 00:03:07,800 --> 00:03:11,320 Speaker 1: in terms of the lack of breath in this market? Well, 52 00:03:11,360 --> 00:03:13,840 Speaker 1: that is correct. I mean it has been a very 53 00:03:13,960 --> 00:03:19,440 Speaker 1: narrowly driven rally, primarily by tech stocks. But um technology 54 00:03:19,560 --> 00:03:22,959 Speaker 1: drives our economy forward. I mean, so it's not unusual 55 00:03:23,040 --> 00:03:26,480 Speaker 1: that they have been leading the market and increasingly becoming 56 00:03:26,520 --> 00:03:29,920 Speaker 1: a dominant part of the economy. So two things are 57 00:03:29,960 --> 00:03:32,160 Speaker 1: going to happen. I mean, the market is forward looking, 58 00:03:32,240 --> 00:03:34,920 Speaker 1: and it is predicting that we will see this broadening out, 59 00:03:34,960 --> 00:03:38,760 Speaker 1: that it will will see um improvements in the industrial sector, 60 00:03:38,760 --> 00:03:42,040 Speaker 1: in the consumer sector, which we are seeing. There is 61 00:03:42,080 --> 00:03:45,960 Speaker 1: a positive cadence of economic data that shows the manufacturing 62 00:03:46,480 --> 00:03:50,680 Speaker 1: sector is improving. There's gradual improvement in consumer sentiments, so 63 00:03:50,840 --> 00:03:55,760 Speaker 1: the consumer's outlook is improving. Retail is improving, restaurants where 64 00:03:55,760 --> 00:03:58,440 Speaker 1: they can. So you saw huge jumps in retail sales 65 00:03:58,760 --> 00:04:02,000 Speaker 1: when stores opened. You saw a huge jump and people 66 00:04:02,000 --> 00:04:04,680 Speaker 1: going to restaurants when they could when westaurants started to 67 00:04:05,080 --> 00:04:07,880 Speaker 1: open with outdoor dining. So there is pent up demand 68 00:04:08,160 --> 00:04:10,560 Speaker 1: and I will I think you will see this broadening out. 69 00:04:11,040 --> 00:04:13,960 Speaker 1: The other thing driving the market is optimism that we 70 00:04:14,000 --> 00:04:18,560 Speaker 1: will get a vaccine, hopefully at least available by the 71 00:04:18,640 --> 00:04:21,279 Speaker 1: end of the year. We have three companies scheduled to 72 00:04:21,320 --> 00:04:25,240 Speaker 1: go into three partnerships scheduled to go into trials sometime 73 00:04:25,360 --> 00:04:29,720 Speaker 1: in October. So that is the one thing, the one 74 00:04:29,800 --> 00:04:32,840 Speaker 1: thing that will get us over the pandemic is a vaccine. 75 00:04:33,360 --> 00:04:36,320 Speaker 1: And if we can get UH some type of approval 76 00:04:36,360 --> 00:04:38,480 Speaker 1: by the end of the year and ramp up production 77 00:04:38,640 --> 00:04:41,000 Speaker 1: in the beginning of the next year, we will see 78 00:04:41,040 --> 00:04:45,120 Speaker 1: a tremendous recovery and the market will have correctly predicted 79 00:04:45,279 --> 00:04:47,599 Speaker 1: the turnaround. All right, So I have an outside of 80 00:04:47,640 --> 00:04:50,440 Speaker 1: the fang plus stocks, the six seven names that have 81 00:04:50,560 --> 00:04:52,680 Speaker 1: really been driving this market. Where do you see some 82 00:04:52,760 --> 00:04:56,279 Speaker 1: opportunity here if we're able to look towards the other side, 83 00:04:56,520 --> 00:05:00,839 Speaker 1: perhaps some time I've and you will see a bounce 84 00:05:00,880 --> 00:05:03,800 Speaker 1: back in the auto stocks. And looking at Tesla and 85 00:05:03,880 --> 00:05:07,080 Speaker 1: the optimism over the electric car, General Motors is a 86 00:05:07,160 --> 00:05:10,200 Speaker 1: tremendous play. Mary Barrett says she wants to have twenty 87 00:05:10,279 --> 00:05:13,960 Speaker 1: electric vehicles on the market by three not that far off. 88 00:05:14,640 --> 00:05:17,920 Speaker 1: Also the valuation I mean there. She even was asked 89 00:05:17,920 --> 00:05:22,320 Speaker 1: the question, would you spin off this electric vehicle division 90 00:05:22,360 --> 00:05:25,039 Speaker 1: at some point unlock value? She said, nothing's off the table. 91 00:05:25,120 --> 00:05:31,720 Speaker 1: So General Motors will become a incredible electric vehicle play. Um. 92 00:05:31,760 --> 00:05:33,919 Speaker 1: I think some of the depressed retailers, some of the 93 00:05:33,960 --> 00:05:38,280 Speaker 1: depressed restaurants, and the cruise industry. I mean these stocks 94 00:05:38,320 --> 00:05:41,320 Speaker 1: were decimated by no fault of their own. The cruise 95 00:05:41,360 --> 00:05:46,440 Speaker 1: industry in January was looking at a record year and 96 00:05:46,640 --> 00:05:49,960 Speaker 1: was decimated. And they are doing everything possible to put 97 00:05:49,960 --> 00:05:53,320 Speaker 1: in place the ability to safely sail when they get 98 00:05:53,360 --> 00:05:56,640 Speaker 1: the opportunity when they are allowed to start to sail again. 99 00:05:56,839 --> 00:05:59,600 Speaker 1: I mean a company like Norwegian, which is my number 100 00:05:59,600 --> 00:06:01,599 Speaker 1: one pick in the cruise industry. So there are a 101 00:06:01,640 --> 00:06:04,160 Speaker 1: lot of depressed box So I still like a lot 102 00:06:04,160 --> 00:06:06,600 Speaker 1: of the tech s docs, including a video with their 103 00:06:06,600 --> 00:06:10,760 Speaker 1: announcement yesterday of their new high speed graphic cards. Other 104 00:06:10,880 --> 00:06:15,520 Speaker 1: favorite chip players in the five G rollout are Quelcom 105 00:06:15,560 --> 00:06:19,279 Speaker 1: and Skywork Solutions and Corvo Skyworks in Corvera, both Apple 106 00:06:19,560 --> 00:06:23,560 Speaker 1: Key Apple suppliers. So the five G rollout is a 107 00:06:23,560 --> 00:06:27,880 Speaker 1: powerful investing theme. The recovery of the consumer sector will 108 00:06:27,920 --> 00:06:30,760 Speaker 1: be a powerful investing theme, and I believe it will 109 00:06:30,800 --> 00:06:35,800 Speaker 1: recover and recover very strongly. Just really twenty seconds, how 110 00:06:35,920 --> 00:06:39,440 Speaker 1: high the valuation of Amazon get It's now one point 111 00:06:39,560 --> 00:06:43,240 Speaker 1: seven five trillion dollars. What's the peak in your view? Well, 112 00:06:43,360 --> 00:06:46,960 Speaker 1: I have been recommending Amazon for sometime. It's on our 113 00:06:47,000 --> 00:06:49,920 Speaker 1: focus list in our focus Opportunity portfolio. I don't really 114 00:06:50,000 --> 00:06:53,560 Speaker 1: use price targets, but Amazon, I mean, they're just incredibly 115 00:06:54,040 --> 00:06:59,240 Speaker 1: efficient in their delivery and fulfillment and logistics processes that 116 00:06:59,320 --> 00:07:02,440 Speaker 1: they do support a lot of retail. They continue they 117 00:07:02,480 --> 00:07:07,080 Speaker 1: are the biggest cloud infrastructure supplier, which service provider, which 118 00:07:07,120 --> 00:07:12,000 Speaker 1: has enabled the remote workforce and the distributed workforce. They're 119 00:07:12,000 --> 00:07:16,440 Speaker 1: getting into healthcare. They just announced. There wasn't twenty seconds Ivan, 120 00:07:16,680 --> 00:07:19,000 Speaker 1: We'll have you back. We'll talk about Amazon. I will 121 00:07:19,000 --> 00:07:21,560 Speaker 1: tell you this. It is something that you're not alone 122 00:07:21,600 --> 00:07:23,320 Speaker 1: with a lot of people saying they can see a 123 00:07:23,400 --> 00:07:26,480 Speaker 1: path lower, but they're not willing to sell their Amazon shares. 124 00:07:26,520 --> 00:07:28,360 Speaker 1: Ivan find Set, Thanks for retting a good sport and 125 00:07:28,360 --> 00:07:33,640 Speaker 1: thanks for being with us. Really appreciate it. This is 126 00:07:33,680 --> 00:07:37,640 Speaker 1: the story of the day, by risk, period, full stop. 127 00:07:37,680 --> 00:07:40,080 Speaker 1: The Fed has your back. Maybe Washington d C Will 128 00:07:40,120 --> 00:07:42,440 Speaker 1: get your back as well. We will find out, and 129 00:07:42,560 --> 00:07:45,960 Speaker 1: right now, let's find out with Steve Chivron, Federated Herme's 130 00:07:46,080 --> 00:07:49,600 Speaker 1: portfolio manager. Steve. We have heard from person after person 131 00:07:49,600 --> 00:07:52,520 Speaker 1: who has come on this show and said, by risk, 132 00:07:52,680 --> 00:07:55,480 Speaker 1: that is the result right now from the Federal Reserve 133 00:07:55,520 --> 00:07:57,960 Speaker 1: that has your back from the idea that we probably 134 00:07:57,960 --> 00:08:02,400 Speaker 1: are entering a growth phase after the absolute decimation of 135 00:08:02,560 --> 00:08:06,080 Speaker 1: the labor market earlier this year. Do you agree? Yeah. Look, 136 00:08:06,080 --> 00:08:08,280 Speaker 1: I think the story behind the markets is sent a 137 00:08:08,440 --> 00:08:12,200 Speaker 1: simple I think we've exited recession and we're entering the 138 00:08:12,240 --> 00:08:15,120 Speaker 1: next recovery, which will lead to the next expansion um. 139 00:08:15,160 --> 00:08:17,320 Speaker 1: And I think the reason why we've been able to 140 00:08:17,320 --> 00:08:20,880 Speaker 1: get to hide so quickly is because there's three stats 141 00:08:20,920 --> 00:08:24,040 Speaker 1: I think that explain it. Incomes her up seven and 142 00:08:24,040 --> 00:08:28,200 Speaker 1: a half percent versus last year. Mortgage foreclosures are down 143 00:08:28,320 --> 00:08:30,520 Speaker 1: from three quarters of a percent to two thirds of it. 144 00:08:31,880 --> 00:08:34,160 Speaker 1: And while we did have two hundred bankruptcies in the 145 00:08:34,200 --> 00:08:36,760 Speaker 1: second quarter, that's roughly one fourth of what we were 146 00:08:36,800 --> 00:08:39,760 Speaker 1: doing on a quarterly basis in the Great Financial Crisis. 147 00:08:39,800 --> 00:08:43,640 Speaker 1: So both Congress and the Federal Reserve have protected capital. 148 00:08:43,760 --> 00:08:47,720 Speaker 1: They protected capital in this in this kind of downturn, 149 00:08:47,920 --> 00:08:51,720 Speaker 1: and the consumer and businesses are better positioned then you 150 00:08:51,720 --> 00:08:53,760 Speaker 1: would expect them to be, given the severity of the 151 00:08:53,800 --> 00:08:56,560 Speaker 1: economic contraction that we had. Steve, what won't you buy 152 00:08:56,640 --> 00:08:59,600 Speaker 1: right now? What won't I buy? Well? Look, I think 153 00:08:59,640 --> 00:09:01,959 Speaker 1: you know piling into a treasury bond right here is 154 00:09:02,240 --> 00:09:04,640 Speaker 1: probably not the smartest thing you know between fifty and 155 00:09:04,640 --> 00:09:09,120 Speaker 1: seventy basis points. I think you know more importantly, and 156 00:09:09,280 --> 00:09:11,040 Speaker 1: I am talking a little bit my own book here, 157 00:09:11,040 --> 00:09:13,280 Speaker 1: but I wouldn't buy a whole bunch of ETFs. I 158 00:09:13,320 --> 00:09:15,920 Speaker 1: don't want to own everything right now. I think that 159 00:09:16,000 --> 00:09:17,960 Speaker 1: there are a lot of companies that are not going 160 00:09:18,000 --> 00:09:20,160 Speaker 1: to do well coming out of this, and it's incumbent 161 00:09:20,240 --> 00:09:23,680 Speaker 1: upon investors to be able to sort through industries and 162 00:09:23,720 --> 00:09:26,439 Speaker 1: pick the winners and avoid the losers. I think that 163 00:09:26,440 --> 00:09:29,560 Speaker 1: that's the key theme here. All right, Well, Steve, you know, 164 00:09:29,600 --> 00:09:31,200 Speaker 1: one of the issues you talked about some of the 165 00:09:31,200 --> 00:09:34,040 Speaker 1: positive economic developments, But the fact is a lot of 166 00:09:34,080 --> 00:09:36,960 Speaker 1: that was driven by the fiscal stimulus, putting money into 167 00:09:37,360 --> 00:09:41,600 Speaker 1: people's hands, into consumers hands, into small and midsized businesses hands. Uh. 168 00:09:41,600 --> 00:09:43,560 Speaker 1: And of course the FETE is there with the backstop 169 00:09:44,200 --> 00:09:47,320 Speaker 1: the fet You know, this stimulus is starting to wear out. 170 00:09:47,800 --> 00:09:51,000 Speaker 1: How critical is it that we get new stimulus to 171 00:09:51,080 --> 00:09:55,080 Speaker 1: continue to support the economy. Yeah, I think it's important. 172 00:09:55,120 --> 00:09:57,320 Speaker 1: I don't know, I don't I wouldn't say it's critical. Um. 173 00:09:57,760 --> 00:09:59,960 Speaker 1: I think, look, when you've done such a good job 174 00:10:00,040 --> 00:10:03,840 Speaker 1: of supporting the economy thus far, it's kind of dumb 175 00:10:03,840 --> 00:10:05,880 Speaker 1: to fumble the ball in the red zone here, right. 176 00:10:05,880 --> 00:10:09,800 Speaker 1: I mean, you're probably one fiscal package away from getting 177 00:10:09,800 --> 00:10:11,920 Speaker 1: yourself to towards a vaccine. But if you looked at 178 00:10:11,960 --> 00:10:14,320 Speaker 1: the personal income number that came out earlier this week, 179 00:10:14,360 --> 00:10:17,480 Speaker 1: what you saw was that while the impact of stimulus 180 00:10:17,559 --> 00:10:19,599 Speaker 1: has has waned a little bit, you have seen a 181 00:10:19,679 --> 00:10:22,880 Speaker 1: pick up in compensation from from from work, and so 182 00:10:23,240 --> 00:10:26,280 Speaker 1: I think, look, the economy is healing, it's getting better. 183 00:10:26,360 --> 00:10:31,000 Speaker 1: It's starting to become self sustaining. But there's enough uncertainty 184 00:10:31,040 --> 00:10:33,640 Speaker 1: that anything one more bill probably makes sense. So it'd 185 00:10:33,640 --> 00:10:36,240 Speaker 1: be nice to see Congress, you know, get their acting 186 00:10:36,320 --> 00:10:39,320 Speaker 1: gear here and and get something done, all right, Steve. So, 187 00:10:39,520 --> 00:10:42,079 Speaker 1: as we think about the equity markets, the theme obviously 188 00:10:42,120 --> 00:10:44,400 Speaker 1: has been the you know that the handful of tech 189 00:10:44,440 --> 00:10:46,720 Speaker 1: stocks to fang plus docks and driving in the market. 190 00:10:47,120 --> 00:10:50,760 Speaker 1: When does value get its uh time in the limelight? 191 00:10:50,840 --> 00:10:55,400 Speaker 1: If ever? Yeah, I think people are maybe misreading the 192 00:10:55,480 --> 00:10:58,360 Speaker 1: narrow breath of the market. Narrow breath in the market 193 00:10:58,400 --> 00:11:00,600 Speaker 1: at the end of the cycle is very rasome. Right. 194 00:11:00,880 --> 00:11:03,240 Speaker 1: If every company's hit their fifty two week high and 195 00:11:03,240 --> 00:11:04,960 Speaker 1: there's only two or three that are left that are 196 00:11:04,960 --> 00:11:08,320 Speaker 1: pushing you higher, that is a sign of exhaustion. What 197 00:11:08,440 --> 00:11:10,960 Speaker 1: we have here, though, is the companies that did the 198 00:11:11,000 --> 00:11:14,320 Speaker 1: best during the recession have led us out and the 199 00:11:14,360 --> 00:11:17,360 Speaker 1: other companies haven't participated yet. And we think that's really 200 00:11:17,360 --> 00:11:20,400 Speaker 1: a sign of dry powder. And so as this recovery 201 00:11:20,440 --> 00:11:22,880 Speaker 1: continues to take hold, as we do get closer to 202 00:11:22,920 --> 00:11:25,880 Speaker 1: some kind of treatment vaccine type protocol, and we think 203 00:11:25,880 --> 00:11:28,080 Speaker 1: that you're going to see other companies, some of which 204 00:11:28,080 --> 00:11:30,640 Speaker 1: your value are going to start to participate in a 205 00:11:30,720 --> 00:11:34,680 Speaker 1: much bigger way as the economic recovery intensifies here, and 206 00:11:34,720 --> 00:11:36,520 Speaker 1: so we think that we're on the verge of that. 207 00:11:36,960 --> 00:11:38,760 Speaker 1: We think you can play it in the value space. 208 00:11:38,840 --> 00:11:40,640 Speaker 1: We also think you can play a similar theme in 209 00:11:40,679 --> 00:11:43,200 Speaker 1: small caps, and we think you really don't want to 210 00:11:43,200 --> 00:11:47,000 Speaker 1: be massively underweight international because those international industries have so 211 00:11:47,120 --> 00:11:49,360 Speaker 1: much more value than than than the US do in 212 00:11:49,480 --> 00:11:53,840 Speaker 1: terms of the sector composition. For NAZAC stocks are up 213 00:11:53,880 --> 00:11:58,760 Speaker 1: more than two hundred and twenty percent so far this year. Yesterday, 214 00:11:58,960 --> 00:12:03,559 Speaker 1: Zoom Video community patians rose more than forty one day. 215 00:12:03,640 --> 00:12:06,839 Speaker 1: That was the rally. Some people saying that the justification 216 00:12:06,920 --> 00:12:09,440 Speaker 1: for this is that the low yields make everything cheap. 217 00:12:09,840 --> 00:12:12,800 Speaker 1: Is that the story? I think that's part of it. Look, 218 00:12:12,840 --> 00:12:16,520 Speaker 1: I mean, you know, equity market multiples are are related 219 00:12:16,559 --> 00:12:19,160 Speaker 1: to bond yields, and particularly corporate bond yields, and if 220 00:12:19,160 --> 00:12:21,120 Speaker 1: you look at where the corporate bond yield is to 221 00:12:21,200 --> 00:12:24,040 Speaker 1: be double a, it would suggest that the SMP could 222 00:12:24,040 --> 00:12:27,400 Speaker 1: trade upwards of a high twenties or even low thirties multiple, 223 00:12:27,480 --> 00:12:29,920 Speaker 1: which has never been the case before. I think that's 224 00:12:29,960 --> 00:12:31,720 Speaker 1: part of it. But I think the bigger story here 225 00:12:31,720 --> 00:12:33,600 Speaker 1: as well is that we're in the middle of a 226 00:12:33,600 --> 00:12:38,880 Speaker 1: digital revolution, and what this pandemic has not slowed that revolution, 227 00:12:38,920 --> 00:12:41,640 Speaker 1: it's accelerated it. You saw it in the Salesforce earnings. 228 00:12:41,679 --> 00:12:45,720 Speaker 1: Company after company are looking to upgrade their tech, understanding 229 00:12:45,760 --> 00:12:47,040 Speaker 1: that that's going to be a bigger part of the 230 00:12:47,040 --> 00:12:49,240 Speaker 1: way that they do business. And so I think you've 231 00:12:49,240 --> 00:12:53,439 Speaker 1: got this very interesting combination of this digital industrial revolution 232 00:12:53,920 --> 00:12:56,199 Speaker 1: occurring at a time when you know, bond yields are 233 00:12:56,240 --> 00:12:59,960 Speaker 1: so low um and the world has a scarcity of growth, 234 00:13:00,040 --> 00:13:02,280 Speaker 1: and it exists in the US. It exists in US 235 00:13:02,440 --> 00:13:05,480 Speaker 1: tech stocks, and so if you want access to that growth, 236 00:13:06,120 --> 00:13:08,319 Speaker 1: there's a high price for it. So Steve are Robin 237 00:13:08,320 --> 00:13:10,720 Speaker 1: Hood is right? I mean, are they on the right paths? 238 00:13:10,760 --> 00:13:13,440 Speaker 1: Just buy everything that they say, Look, a stock splits 239 00:13:13,480 --> 00:13:15,480 Speaker 1: as good of a reason as any to buy a stock. 240 00:13:16,360 --> 00:13:19,960 Speaker 1: They're winning. Look, I think when you think about Robin Hood, 241 00:13:19,960 --> 00:13:21,880 Speaker 1: the first thing we have to remember, especially those of 242 00:13:21,960 --> 00:13:25,160 Speaker 1: us that are quote unquote professional investors, is everyone deserves 243 00:13:25,160 --> 00:13:28,240 Speaker 1: the right to have access to the market. Um, there 244 00:13:28,280 --> 00:13:30,240 Speaker 1: are gonna be folks there that maybe don't have as 245 00:13:30,320 --> 00:13:33,480 Speaker 1: much history and experience with the market. That's why you know, 246 00:13:33,679 --> 00:13:37,600 Speaker 1: media like yours exist help them understand that. I think ultimately, 247 00:13:37,800 --> 00:13:40,120 Speaker 1: what companies are realizing is that if there is a 248 00:13:40,200 --> 00:13:43,239 Speaker 1: retail demand, if they can make their shares more attractive 249 00:13:43,400 --> 00:13:46,360 Speaker 1: or more accessible to those retail investors, they're gonna get 250 00:13:46,360 --> 00:13:49,160 Speaker 1: rewarded because those retail investors want access to some of 251 00:13:49,200 --> 00:13:52,599 Speaker 1: these companies. There will be some names that end in 252 00:13:52,679 --> 00:13:54,960 Speaker 1: tears for folks because there's gonna be some hype trades. 253 00:13:54,960 --> 00:13:57,520 Speaker 1: But at the end of the day, I think anytime 254 00:13:57,520 --> 00:13:59,920 Speaker 1: there's more interest in the public markets and the com 255 00:14:00,040 --> 00:14:03,440 Speaker 1: pounding returns, that's a good thing. It's our job as 256 00:14:03,440 --> 00:14:05,800 Speaker 1: an investment industry to help make sure that those people 257 00:14:05,880 --> 00:14:08,400 Speaker 1: have the tools and information to make the best decisions 258 00:14:08,400 --> 00:14:10,360 Speaker 1: that they can. All Right, Steve, If I'm brave enough 259 00:14:10,360 --> 00:14:12,160 Speaker 1: to look to the other side of this pandemic and 260 00:14:12,160 --> 00:14:15,079 Speaker 1: I see an economic recovery in the next twelve months 261 00:14:15,080 --> 00:14:18,319 Speaker 1: really accelerating, what are some of the beaten down sectors 262 00:14:18,320 --> 00:14:19,840 Speaker 1: actually be looking at. Am I brave enough to go 263 00:14:19,880 --> 00:14:23,400 Speaker 1: into financials for example? Yeah? Look, I think if you 264 00:14:23,480 --> 00:14:25,400 Speaker 1: think that economic growth is going to improve, then you 265 00:14:25,400 --> 00:14:27,520 Speaker 1: should expect, you know, long bonds to move up a 266 00:14:27,520 --> 00:14:30,920 Speaker 1: little bit, not not anything you know that would be scary, 267 00:14:30,960 --> 00:14:33,560 Speaker 1: and that would be beneficial to banks. Again, we come 268 00:14:33,560 --> 00:14:36,040 Speaker 1: back to small caps, and we think small caps were 269 00:14:36,080 --> 00:14:38,960 Speaker 1: three reasons their cyclical So as you get a cyclical 270 00:14:38,960 --> 00:14:41,360 Speaker 1: improvement in the economy, they're gonna they're gonna benefit from that, 271 00:14:41,480 --> 00:14:44,680 Speaker 1: much like value stocks. But in addition, fifty of their 272 00:14:44,720 --> 00:14:47,440 Speaker 1: debt is variable rate bank debt, so low rates forever 273 00:14:47,720 --> 00:14:50,160 Speaker 1: are really going to benefit them. And then finally in 274 00:14:50,400 --> 00:14:52,920 Speaker 1: a year, in the first year following a recession bottom 275 00:14:52,960 --> 00:14:56,960 Speaker 1: small caps tend to outperform large by about We think 276 00:14:57,040 --> 00:14:59,960 Speaker 1: that's gonna be your your kind of play on octane 277 00:15:00,040 --> 00:15:02,560 Speaker 1: here in terms of a cyclical recovery plan on oct 278 00:15:02,640 --> 00:15:05,040 Speaker 1: and I like that. Steve Chevron and from Federated Hervey's 279 00:15:05,240 --> 00:15:12,480 Speaker 1: thank you so much, because everyone who talks about the 280 00:15:12,520 --> 00:15:16,240 Speaker 1: economic recovery says it will hinge on the trajectory of 281 00:15:16,280 --> 00:15:19,360 Speaker 1: the virus. The trajectory of the virus is unclear. It 282 00:15:19,480 --> 00:15:22,240 Speaker 1: is unsuspecting. It can pop up when you least suspected, 283 00:15:22,280 --> 00:15:24,200 Speaker 1: even in places like New Zealand, which seemed to have 284 00:15:24,240 --> 00:15:27,000 Speaker 1: gotten it under control. Doctor Deborah Fuller joining us now 285 00:15:27,080 --> 00:15:32,160 Speaker 1: University of Washington School of Medicine, Microbiology Professor Dr Fuller. 286 00:15:32,160 --> 00:15:34,680 Speaker 1: Where are we in this? Some people talk about going 287 00:15:34,720 --> 00:15:36,840 Speaker 1: back to school, that it's going to be a disaster. 288 00:15:36,960 --> 00:15:40,720 Speaker 1: Other people say it's fine. Kids are not vectors of 289 00:15:40,920 --> 00:15:45,520 Speaker 1: this particular virus. What's your take. Yeah, so we're a 290 00:15:45,680 --> 00:15:49,560 Speaker 1: you know, a phase where you know, we're we understand 291 00:15:49,640 --> 00:15:54,000 Speaker 1: how to you know, potentially reduced transmission through you know, 292 00:15:54,080 --> 00:15:58,400 Speaker 1: wearing a mask and practicing um, you know, hand washing 293 00:15:58,680 --> 00:16:02,200 Speaker 1: and and the like. UM. But I'm not so sure 294 00:16:02,400 --> 00:16:05,320 Speaker 1: that you know, the public is actually you know following 295 00:16:05,400 --> 00:16:08,280 Speaker 1: through um correctly in all those practices. And I think 296 00:16:08,280 --> 00:16:11,320 Speaker 1: that's where you know, sometimes you're seeing some schools opening 297 00:16:11,400 --> 00:16:14,880 Speaker 1: up and saying, hey, we've implement all these practices, and 298 00:16:14,920 --> 00:16:19,160 Speaker 1: then they see you know, high spike uh in induction rate. Uh. 299 00:16:19,200 --> 00:16:22,160 Speaker 1: You know, unless you know people are hundred percent compliant 300 00:16:22,360 --> 00:16:25,760 Speaker 1: with all of the you know, the rules, UM, that 301 00:16:25,960 --> 00:16:29,520 Speaker 1: virus is going to take an opportunity and transmit. So 302 00:16:29,520 --> 00:16:31,840 Speaker 1: so I think it's very difficult, uh, you know, in 303 00:16:31,880 --> 00:16:37,080 Speaker 1: the absence of a vaccine, uh, to get everybody to collectively, um, 304 00:16:37,120 --> 00:16:40,640 Speaker 1: you know, work as a team together, wear their masks, 305 00:16:40,880 --> 00:16:44,400 Speaker 1: wash your hands, you know, uh, and uh, you know, 306 00:16:44,440 --> 00:16:47,840 Speaker 1: follow the safe distancing practices that have been recommended. If 307 00:16:47,840 --> 00:16:51,240 Speaker 1: they do that, we could probably safely open schools. And 308 00:16:51,400 --> 00:16:54,280 Speaker 1: that's just you know, get people to cooperate. Dr Fuller, 309 00:16:54,360 --> 00:16:56,600 Speaker 1: There's so many unknowns, at least from my vantage point. 310 00:16:56,600 --> 00:16:59,640 Speaker 1: You see a compliant Can people pack in a subway 311 00:16:59,680 --> 00:17:02,840 Speaker 1: cars if they have masks on? Can people go to 312 00:17:02,880 --> 00:17:05,800 Speaker 1: outdoor dining and sit not exactly six feet away from 313 00:17:05,800 --> 00:17:08,280 Speaker 1: each other but take their masks off to eat as 314 00:17:08,320 --> 00:17:11,000 Speaker 1: long as they are outside? Are these things all safe? 315 00:17:11,359 --> 00:17:14,640 Speaker 1: Or are we already engaging in practices that will necessarily 316 00:17:14,680 --> 00:17:18,399 Speaker 1: spread the virus as we start to become less socially 317 00:17:18,440 --> 00:17:21,440 Speaker 1: distant and try to get back to normal. Yeah, there's 318 00:17:21,480 --> 00:17:24,879 Speaker 1: no guarantee you know that all these practices will you know, 319 00:17:24,920 --> 00:17:27,280 Speaker 1: if you implement them together. And we're talking about you know, 320 00:17:27,359 --> 00:17:30,560 Speaker 1: both the six feet distancing and the wearing of the 321 00:17:30,640 --> 00:17:34,320 Speaker 1: mask and the hand washing. Um. But there is you know, 322 00:17:34,920 --> 00:17:38,480 Speaker 1: evidence out there that it can reduce transmissions significantly. So 323 00:17:38,520 --> 00:17:41,359 Speaker 1: it doesn't mean that, say, some virus still won't transmit. 324 00:17:41,440 --> 00:17:44,440 Speaker 1: But the you know, the way viruses work is they uh, 325 00:17:44,480 --> 00:17:48,320 Speaker 1: you know, the more people that get infected. Then that 326 00:17:48,560 --> 00:17:51,480 Speaker 1: makes more people that can infect others. So if you 327 00:17:51,480 --> 00:17:55,480 Speaker 1: can reduce the number of transmission events to very low levels, 328 00:17:55,520 --> 00:18:00,000 Speaker 1: then yeah, people can go about their business much, um, 329 00:18:00,000 --> 00:18:03,000 Speaker 1: you know, more effectively, and you can start to see, uh, 330 00:18:03,200 --> 00:18:06,960 Speaker 1: the incidences of transmission decline. That's what you saw in 331 00:18:07,080 --> 00:18:10,120 Speaker 1: some of the other countries like uh New Zealand where 332 00:18:10,119 --> 00:18:14,280 Speaker 1: they just implemented these safe practices and you quickly saw uh, 333 00:18:14,440 --> 00:18:17,720 Speaker 1: the you know, the that sort of you know, rate 334 00:18:17,720 --> 00:18:20,560 Speaker 1: of transmission rate go down to almost zero. So it 335 00:18:20,680 --> 00:18:25,040 Speaker 1: is possible. It's just uh it's and it's not guarantee, 336 00:18:25,119 --> 00:18:27,440 Speaker 1: but it's you know, better than what we have right now. 337 00:18:27,760 --> 00:18:29,560 Speaker 1: All right, professor, let's switch gears a little bit to 338 00:18:29,840 --> 00:18:33,040 Speaker 1: the vaccine. That's a discussion I think everybody wants to have. 339 00:18:33,160 --> 00:18:36,479 Speaker 1: Everybody's looking forward towards a vaccine. We know that there 340 00:18:36,480 --> 00:18:40,119 Speaker 1: are approximately a dozen entities out there that are working 341 00:18:40,160 --> 00:18:44,000 Speaker 1: aggressively on a vaccine or various stages. Give us your 342 00:18:44,160 --> 00:18:45,919 Speaker 1: read of the landscape. I feel like I need a 343 00:18:45,960 --> 00:18:49,239 Speaker 1: scorecard to keep track of all these entities out there, 344 00:18:49,240 --> 00:18:53,600 Speaker 1: whether their universities or pharmaceutical companies, are biotech companies, companies. 345 00:18:53,640 --> 00:18:55,800 Speaker 1: Give us your sense of where we are and maybe 346 00:18:55,840 --> 00:18:59,360 Speaker 1: a sense of timing. Yeah, so this is actually we're 347 00:18:59,359 --> 00:19:02,800 Speaker 1: enchering a very siding phase for vaccine development. Right now. 348 00:19:02,840 --> 00:19:06,159 Speaker 1: There are I think about seven candidate vaccines that have 349 00:19:06,480 --> 00:19:10,200 Speaker 1: entered into phase three clinical trials, and that's a stage 350 00:19:10,200 --> 00:19:13,359 Speaker 1: where we're actually testing efficacy of the vaccine as well 351 00:19:13,400 --> 00:19:16,719 Speaker 1: as continuing to test its safety. Is going in tens 352 00:19:16,760 --> 00:19:19,240 Speaker 1: of thousands of people where some people will get up 353 00:19:19,240 --> 00:19:22,640 Speaker 1: placebo and other people get the vaccine, and then it's 354 00:19:22,720 --> 00:19:25,879 Speaker 1: just really a waiting time game where it really the 355 00:19:25,960 --> 00:19:29,199 Speaker 1: viruses control of the timeline right now. What they're going 356 00:19:29,240 --> 00:19:31,080 Speaker 1: to do is wait and see, you know, until a 357 00:19:31,080 --> 00:19:34,920 Speaker 1: certain number of people become infected, and uh then they 358 00:19:34,960 --> 00:19:38,240 Speaker 1: take uh, you know, they open up, take the blinders off, 359 00:19:38,240 --> 00:19:41,200 Speaker 1: because they're blinded to you know, who belongs to what group, 360 00:19:41,480 --> 00:19:43,600 Speaker 1: and they're going to determine are all the people who 361 00:19:43,760 --> 00:19:47,040 Speaker 1: became infector of the majority of them in the placebo 362 00:19:47,080 --> 00:19:49,640 Speaker 1: group and none of them in the vaccine group. And 363 00:19:49,840 --> 00:19:52,240 Speaker 1: if that's the case, then they can then go to 364 00:19:52,359 --> 00:19:56,360 Speaker 1: licensure and start to manufacture and distribute the saccine. For you. So, 365 00:19:56,680 --> 00:19:59,120 Speaker 1: the fact that we have seven of them is very promising. 366 00:19:59,119 --> 00:20:02,760 Speaker 1: That means that these vaccines have passed you know, high 367 00:20:03,119 --> 00:20:08,160 Speaker 1: marks high uh uh marks for safety as well as 368 00:20:08,200 --> 00:20:10,600 Speaker 1: demonstrating the kind of ImmunoGen a season that you're going 369 00:20:10,680 --> 00:20:14,640 Speaker 1: to meet in an effective vaccine. So this is exciting. Uh. 370 00:20:14,680 --> 00:20:17,600 Speaker 1: And so we're at in a sense, the final phase 371 00:20:17,640 --> 00:20:20,800 Speaker 1: and we're perhaps maybe only months away from seeing the 372 00:20:20,840 --> 00:20:26,640 Speaker 1: first vaccine license for for human use. Professor Health, how 373 00:20:26,680 --> 00:20:30,080 Speaker 1: sure can we be about the safety of these um 374 00:20:30,440 --> 00:20:33,240 Speaker 1: vaccines because you know it usually it takes years and 375 00:20:33,320 --> 00:20:35,320 Speaker 1: years of testing, and it seems like we're going to 376 00:20:35,359 --> 00:20:38,000 Speaker 1: get a potentially a vaccine within a year year and 377 00:20:38,040 --> 00:20:40,159 Speaker 1: a half from the beginning of all this, and that 378 00:20:40,200 --> 00:20:43,600 Speaker 1: calls into question safety. How do you think about that? Yeah, 379 00:20:43,640 --> 00:20:45,639 Speaker 1: I mean the the years and years has to do 380 00:20:45,720 --> 00:20:49,720 Speaker 1: with how the process has changed, you know, in the 381 00:20:49,760 --> 00:20:52,960 Speaker 1: events of this pandemic. And the years is because the 382 00:20:53,040 --> 00:20:57,520 Speaker 1: phase one, two, and three are done sequentially normally with 383 00:20:57,600 --> 00:21:00,119 Speaker 1: a pandemic, they are being done in an old were 384 00:21:00,200 --> 00:21:03,639 Speaker 1: laughing fashion, So all of the safety tests are still 385 00:21:03,680 --> 00:21:07,000 Speaker 1: being done. Uh, nothing is being skipped. So by the 386 00:21:07,040 --> 00:21:11,720 Speaker 1: time we have a vaccine that complete Space three successfully 387 00:21:11,840 --> 00:21:15,400 Speaker 1: and shown to be effective and safe, we can be 388 00:21:15,560 --> 00:21:18,439 Speaker 1: confident that it has gone through all of the checkmarks 389 00:21:18,440 --> 00:21:22,120 Speaker 1: that are absolutely required, um, you know, right now to 390 00:21:22,320 --> 00:21:25,159 Speaker 1: license a vaccine for public use. So Dr Fuller, you 391 00:21:25,160 --> 00:21:27,719 Speaker 1: would be fine getting one of the first vaccines if 392 00:21:27,720 --> 00:21:30,879 Speaker 1: it came out. Yeah, I wish I could, you know, 393 00:21:30,920 --> 00:21:32,919 Speaker 1: but I you know, what you have to be aware 394 00:21:32,920 --> 00:21:35,640 Speaker 1: of is that when these vaccines start coming out, they're 395 00:21:35,640 --> 00:21:38,240 Speaker 1: not going to be billions of doses suddenly available for 396 00:21:38,320 --> 00:21:41,480 Speaker 1: anybody to take. It's likely going to have to go 397 00:21:41,600 --> 00:21:44,840 Speaker 1: into first responders and health care workers and the like. 398 00:21:45,480 --> 00:21:47,400 Speaker 1: Uh and so it could be for some of us 399 00:21:47,480 --> 00:21:52,160 Speaker 1: months even after the vaccines have been released for public use, 400 00:21:52,240 --> 00:21:55,439 Speaker 1: before we're eligible to start to you know, show up 401 00:21:55,440 --> 00:21:58,200 Speaker 1: in line to actually receive them. You know that said 402 00:21:58,320 --> 00:22:00,480 Speaker 1: is I've I've said many times I think that it's 403 00:22:00,480 --> 00:22:04,000 Speaker 1: going to take multiple vaccines to really be able to 404 00:22:04,720 --> 00:22:07,600 Speaker 1: tamp down this pandemic. And you're gonna see we have 405 00:22:07,720 --> 00:22:10,720 Speaker 1: seven in phase three. You're gonna see hopefully at least 406 00:22:11,320 --> 00:22:13,720 Speaker 1: half a dozen, maybe five or six over the course 407 00:22:13,800 --> 00:22:16,840 Speaker 1: of the next six months. You know, it's my hope 408 00:22:16,880 --> 00:22:19,639 Speaker 1: that they get license for human use. Deborah Fuller, University 409 00:22:19,680 --> 00:22:23,119 Speaker 1: of Washington School of Medicine microbiology professor, Thank you so 410 00:22:23,200 --> 00:22:26,600 Speaker 1: much for bringing us the facts here as we try 411 00:22:26,680 --> 00:22:32,560 Speaker 1: to look for some sort of vaccine. The economy has 412 00:22:32,600 --> 00:22:35,200 Speaker 1: been the housing market, which has really struck me at 413 00:22:35,200 --> 00:22:37,840 Speaker 1: a time of so much job loss and so much 414 00:22:37,840 --> 00:22:39,960 Speaker 1: pain that we talk about in the consumer sector, the 415 00:22:40,000 --> 00:22:42,840 Speaker 1: idea that you've seen incredible resilience and bidding wars and 416 00:22:42,920 --> 00:22:47,280 Speaker 1: suburban areas for houses, lumber prices tripling in just a 417 00:22:47,280 --> 00:22:50,080 Speaker 1: few months. Joining us, Andrew Holland Horst City Group Global 418 00:22:50,119 --> 00:22:52,159 Speaker 1: Markets chief you as economist, Andrew, what do you make 419 00:22:52,200 --> 00:22:57,240 Speaker 1: of the housing rally? It's just incredible what's happened in housing. 420 00:22:57,240 --> 00:22:59,480 Speaker 1: I mean, I think we've had a more optimistic outlook 421 00:22:59,520 --> 00:23:02,960 Speaker 1: on what the reopening, recovery rebound was going to look like, 422 00:23:03,080 --> 00:23:05,520 Speaker 1: and the data keeps coming in for housing and it 423 00:23:05,600 --> 00:23:08,720 Speaker 1: just keeps being stronger than expected. We saw it earlier 424 00:23:08,760 --> 00:23:12,320 Speaker 1: with mortgage applications that have moved to multi year highs 425 00:23:12,320 --> 00:23:14,120 Speaker 1: and really stayed there. But now you're starting to see 426 00:23:14,119 --> 00:23:16,919 Speaker 1: that come through in sales and starts really just across 427 00:23:16,960 --> 00:23:20,480 Speaker 1: the board. So so an incredible surgeon housing activity, Andrew, 428 00:23:20,520 --> 00:23:23,119 Speaker 1: yesterday are Bloomberg colleagues put out a story saying that 429 00:23:23,119 --> 00:23:26,920 Speaker 1: the Federal Reserve had bought nearly a trillion dollars of 430 00:23:26,960 --> 00:23:29,800 Speaker 1: mortgage bonds over the past couple of months, that they've 431 00:23:29,840 --> 00:23:33,479 Speaker 1: been one of the hugest buyers of this sector, pushing 432 00:23:33,520 --> 00:23:39,000 Speaker 1: down rates, solidifying this market. How much has the housing gains? 433 00:23:39,040 --> 00:23:42,120 Speaker 1: How much have the housing gains really resulted directly from 434 00:23:42,200 --> 00:23:45,960 Speaker 1: FED intervention here? Some FED policy is so important. And 435 00:23:46,000 --> 00:23:47,480 Speaker 1: when we look at the U S economy, of the 436 00:23:47,480 --> 00:23:51,760 Speaker 1: sector that's probably most immediately sensitive to the FED and 437 00:23:51,760 --> 00:23:54,679 Speaker 1: two interest rates is the housing sector. Um, so I 438 00:23:54,680 --> 00:23:57,760 Speaker 1: think it's really mostly about rates coming down. You've got 439 00:23:57,880 --> 00:24:01,840 Speaker 1: lower tenure yields that led mortgage rates to move lower. Um. Yes, 440 00:24:01,840 --> 00:24:04,800 Speaker 1: they're purchasing mortgage fac securities as well, which is keeping 441 00:24:04,840 --> 00:24:09,119 Speaker 1: those spreads compressed. So Um. You can't understate the importance 442 00:24:09,160 --> 00:24:11,119 Speaker 1: of the of the FT or you can't overstate the 443 00:24:11,119 --> 00:24:13,000 Speaker 1: importance of the FED in the housing market right now. 444 00:24:13,440 --> 00:24:17,080 Speaker 1: All right, Andrew, we had some ADP employment numbers out today, Uh, 445 00:24:17,160 --> 00:24:19,679 Speaker 1: you know, weaker than expected. Here. We are seeing some 446 00:24:19,720 --> 00:24:22,440 Speaker 1: approven in the labor market, but maybe losing a little 447 00:24:22,440 --> 00:24:25,159 Speaker 1: bit of steam here, and that's so critical for the 448 00:24:25,280 --> 00:24:29,000 Speaker 1: U S. Economy overall, what's your view of the labor market? So, 449 00:24:29,160 --> 00:24:32,040 Speaker 1: I think again it's another area where we've been continuously 450 00:24:32,080 --> 00:24:34,680 Speaker 1: surprised to the upside with jobs reports. And I'd be 451 00:24:34,680 --> 00:24:37,000 Speaker 1: a little bit careful with the ADP number on the 452 00:24:37,040 --> 00:24:39,720 Speaker 1: economy is just moving so quickly that it's been difficult 453 00:24:39,840 --> 00:24:42,160 Speaker 1: for ADP to kind of keep up with what we're 454 00:24:42,160 --> 00:24:45,439 Speaker 1: seeing in the official statistics that will get out on Friday. UM. 455 00:24:45,440 --> 00:24:47,280 Speaker 1: So we still think that that that number can look 456 00:24:47,320 --> 00:24:50,600 Speaker 1: more positive, UM. But but really important to see this 457 00:24:50,800 --> 00:24:56,840 Speaker 1: re hiring continue, UM. That's been supporting incomes UM, even 458 00:24:56,960 --> 00:24:59,720 Speaker 1: with a very high unemployment rate. So, you know, we'd 459 00:24:59,720 --> 00:25:02,000 Speaker 1: like to get back closer to normal. It's obviously a 460 00:25:02,000 --> 00:25:04,399 Speaker 1: long road, but but so far, the you know, the 461 00:25:04,800 --> 00:25:06,959 Speaker 1: last few months have been a positive story, all right, 462 00:25:07,040 --> 00:25:10,760 Speaker 1: So how critical is it that Congress follows through with 463 00:25:10,840 --> 00:25:14,320 Speaker 1: another round of what I'm gonna call a significant piece 464 00:25:14,440 --> 00:25:17,600 Speaker 1: of fiscal stimulus. The first, the last round, the third round, 465 00:25:17,640 --> 00:25:19,720 Speaker 1: if you will. The three trillion dollars was done on 466 00:25:19,800 --> 00:25:22,879 Speaker 1: generally a bipartisan basis, but it looks like politics is 467 00:25:23,160 --> 00:25:26,520 Speaker 1: creeping back into this round. Yeah, So I think everybody 468 00:25:26,560 --> 00:25:28,320 Speaker 1: thinks it would be a good idea to have more 469 00:25:28,359 --> 00:25:31,040 Speaker 1: fiscal stimulus here. I think that's on both sides of 470 00:25:31,040 --> 00:25:34,439 Speaker 1: the aisle. I think most economists agree. The FED clearly agrees. 471 00:25:34,480 --> 00:25:36,959 Speaker 1: We've heard that from a number of FED speakers. UM. 472 00:25:37,200 --> 00:25:38,879 Speaker 1: You do want to put it in context, though, that 473 00:25:39,080 --> 00:25:42,919 Speaker 1: we've had a very significant fiscal stimulus already. UM. And 474 00:25:42,960 --> 00:25:45,640 Speaker 1: if you look at what's happened with the income support 475 00:25:45,680 --> 00:25:48,840 Speaker 1: that you've had, really the government coming in and substituting 476 00:25:48,880 --> 00:25:52,560 Speaker 1: for incomes that were lost um due to the results 477 00:25:52,560 --> 00:25:56,080 Speaker 1: of the pandemic. UM. You see that incomes have been supported. 478 00:25:56,119 --> 00:25:58,520 Speaker 1: Consumption of course was lower because a lot of avenues 479 00:25:58,520 --> 00:26:01,000 Speaker 1: for consumption were just closed down. And so it means 480 00:26:01,000 --> 00:26:03,439 Speaker 1: that the economy came through this period of four savings. 481 00:26:04,160 --> 00:26:08,440 Speaker 1: Individual households have saved about a trillion above what they 482 00:26:08,480 --> 00:26:11,240 Speaker 1: normally would have saved. UM. So now you have things 483 00:26:11,240 --> 00:26:14,439 Speaker 1: like unemployment benefits that are expiring. That's certainly not a 484 00:26:14,480 --> 00:26:18,439 Speaker 1: good thing for the economy. We'd like to see those restored. Um. 485 00:26:18,480 --> 00:26:20,439 Speaker 1: But even if they're not, I think you do have 486 00:26:20,480 --> 00:26:23,080 Speaker 1: a lot of savings coming before it. So, so certainly 487 00:26:23,080 --> 00:26:24,960 Speaker 1: a better story if we can get that next leg 488 00:26:24,960 --> 00:26:27,800 Speaker 1: of fiscal policy Um, But you know, can this, you know, 489 00:26:27,880 --> 00:26:31,520 Speaker 1: consumption rebound continue even if you don't get the next 490 00:26:31,600 --> 00:26:33,480 Speaker 1: leg of fiscal stimulus. I think, at least for the 491 00:26:33,520 --> 00:26:36,919 Speaker 1: next few months, that story probably still stays intact. I 492 00:26:36,920 --> 00:26:39,120 Speaker 1: get more concerned as I look out to Q four 493 00:26:39,200 --> 00:26:42,199 Speaker 1: into one. I'm going back to the labor market. This 494 00:26:42,240 --> 00:26:44,480 Speaker 1: is still a deeply depressed labor market that still needs 495 00:26:44,480 --> 00:26:47,840 Speaker 1: more help. Andrew All and Horst of City Group speaking 496 00:26:47,840 --> 00:26:50,440 Speaker 1: with us. Andrew, I'm a little uncomfortable as we talk 497 00:26:50,480 --> 00:26:53,480 Speaker 1: about this for a variety of reasons. We're talking about 498 00:26:53,560 --> 00:26:56,480 Speaker 1: the incredible boom and housing, We're talking about the incredible 499 00:26:56,480 --> 00:26:59,639 Speaker 1: boom and equities. We're talking about an unemployment rate above 500 00:26:59,680 --> 00:27:03,840 Speaker 1: ten percent with some permanent losses coming in, job losses, 501 00:27:03,920 --> 00:27:07,440 Speaker 1: job cuts, particularly at the lower income level. This all 502 00:27:07,520 --> 00:27:10,159 Speaker 1: just goes into the story of the widening gap between 503 00:27:10,160 --> 00:27:12,240 Speaker 1: the rich and the poor, the people who can buy houses, 504 00:27:12,280 --> 00:27:14,439 Speaker 1: who can buy stocks, and those who can't and have 505 00:27:14,560 --> 00:27:17,880 Speaker 1: just been laid off. Andrew, what is the structural challenge? 506 00:27:17,920 --> 00:27:22,680 Speaker 1: What is the economic result of this widening divide. Yeah, 507 00:27:22,760 --> 00:27:24,720 Speaker 1: it's a real issue for the U. S economy, and 508 00:27:24,760 --> 00:27:28,840 Speaker 1: certainly those inequalities have been exacerbated by the crisis that 509 00:27:28,920 --> 00:27:32,160 Speaker 1: we've come through, and that's where you know, I'm encouraged 510 00:27:32,200 --> 00:27:35,320 Speaker 1: to see the Federal Reserve, for instance, changing their framework 511 00:27:35,359 --> 00:27:38,439 Speaker 1: talking about pushing the unemployment rate even lower so that 512 00:27:38,520 --> 00:27:40,800 Speaker 1: we can start to bring some of those workers back 513 00:27:40,840 --> 00:27:43,480 Speaker 1: into the economy. Um. I think that's what was happening 514 00:27:43,480 --> 00:27:45,000 Speaker 1: as we got down to a three and a half 515 00:27:45,000 --> 00:27:48,160 Speaker 1: percent unemployment rate. Again, this this is a long road. 516 00:27:48,200 --> 00:27:50,640 Speaker 1: I don't think anyone is saying that, you know, this 517 00:27:50,720 --> 00:27:52,760 Speaker 1: is going to be easy to get back to something 518 00:27:52,800 --> 00:27:54,840 Speaker 1: like a three and a half percent unemployment rate, but 519 00:27:54,840 --> 00:27:56,280 Speaker 1: but you really do want to get back down to 520 00:27:56,320 --> 00:27:58,840 Speaker 1: those very low rates of unemployment to bring a more 521 00:27:58,920 --> 00:28:05,000 Speaker 1: inclusive this into hiring into the labor market. Unfortunately, that's 522 00:28:05,000 --> 00:28:07,280 Speaker 1: where we were, that's not where we are now, and 523 00:28:07,320 --> 00:28:09,359 Speaker 1: I think that's what monetary and fiscal are trying to 524 00:28:09,359 --> 00:28:12,359 Speaker 1: get us back to. Meanwhile, talking about getting back to 525 00:28:12,359 --> 00:28:14,280 Speaker 1: today is back to school, and you see a lot 526 00:28:14,280 --> 00:28:17,600 Speaker 1: of people taking their kids off to their first day, 527 00:28:17,760 --> 00:28:20,960 Speaker 1: first date. Perhaps since March and Andrew, I do wonder 528 00:28:21,040 --> 00:28:23,320 Speaker 1: what the effect is on the younger cohort. I was 529 00:28:23,359 --> 00:28:25,840 Speaker 1: looking at data that showed that the sixteen to twenty 530 00:28:25,880 --> 00:28:29,120 Speaker 1: five year demographic had an unemployment rate of more than 531 00:28:29,240 --> 00:28:32,800 Speaker 1: eighteen percent versus that ten point two percent average. That 532 00:28:32,840 --> 00:28:36,800 Speaker 1: they've been absolutely pummeled. Those entry level jobs have just evaporated. 533 00:28:37,040 --> 00:28:40,960 Speaker 1: What's the longer term economic effect of that? Yeah, So 534 00:28:41,160 --> 00:28:43,400 Speaker 1: that that that's part of why you want to try 535 00:28:43,440 --> 00:28:46,240 Speaker 1: to cure the problems in the labor market as quickly 536 00:28:46,320 --> 00:28:49,080 Speaker 1: as possible. We saw this after two thousand and eight, 537 00:28:49,160 --> 00:28:52,480 Speaker 1: where you had students coming out of high school, students 538 00:28:52,480 --> 00:28:54,760 Speaker 1: coming out of college trying to get that first job 539 00:28:54,800 --> 00:28:57,440 Speaker 1: and finding that that first job just wasn't available. Um. 540 00:28:57,440 --> 00:28:59,960 Speaker 1: And that's probably even more the case with this down 541 00:29:00,120 --> 00:29:03,320 Speaker 1: turn um again because we've seen those entry level jobs 542 00:29:03,360 --> 00:29:07,000 Speaker 1: go away on, those lower wage jobs go away, um. 543 00:29:07,160 --> 00:29:13,240 Speaker 1: And that's a potential avenue for a permanent structural scarring 544 00:29:13,320 --> 00:29:15,880 Speaker 1: on the economy. And that's what you're really trying to avoid. 545 00:29:15,920 --> 00:29:18,560 Speaker 1: I mean, we we all know that the situation um 546 00:29:18,640 --> 00:29:20,760 Speaker 1: is bad in terms of a high unemployment rate right now. 547 00:29:21,040 --> 00:29:24,000 Speaker 1: But what you want to do with policy is try 548 00:29:24,040 --> 00:29:26,239 Speaker 1: to limit the amount of time that we spend at 549 00:29:26,240 --> 00:29:28,880 Speaker 1: these levels um, so that you can get those individuals 550 00:29:28,920 --> 00:29:31,200 Speaker 1: that we were just talking about back into jobs integrated 551 00:29:31,240 --> 00:29:33,200 Speaker 1: back into the labor market, because if you have an 552 00:29:33,240 --> 00:29:36,200 Speaker 1: extended period where you're not in the labor market, that 553 00:29:36,280 --> 00:29:38,760 Speaker 1: means that human capital is not being built. That means 554 00:29:38,760 --> 00:29:41,560 Speaker 1: that that attachment between workers and firms is being lost. 555 00:29:41,800 --> 00:29:44,400 Speaker 1: So really important to try to get that back intact 556 00:29:44,440 --> 00:29:47,560 Speaker 1: as quickly as possible. So, Andrew, what are the good 557 00:29:47,560 --> 00:29:50,480 Speaker 1: folks at City Group thinking about the economy the GDP 558 00:29:50,720 --> 00:29:53,360 Speaker 1: number really through the back half of this year into 559 00:29:53,640 --> 00:29:55,640 Speaker 1: next year. Give us a sense of kind of how 560 00:29:55,720 --> 00:30:00,280 Speaker 1: you think the recovery might look. Yeah, so it's looking 561 00:30:00,400 --> 00:30:04,160 Speaker 1: like every bit as bad as the contraction was in 562 00:30:04,280 --> 00:30:08,520 Speaker 1: Q two, the rebound in Q three, it's not going 563 00:30:08,560 --> 00:30:10,360 Speaker 1: to completely make up for that, but we're going to 564 00:30:10,480 --> 00:30:13,920 Speaker 1: have this kind of very elevated annualized growth number for 565 00:30:13,920 --> 00:30:16,240 Speaker 1: for Q three. And you know, just like in Q two, 566 00:30:16,240 --> 00:30:19,080 Speaker 1: we spent a lot of time talking about this negative 567 00:30:19,160 --> 00:30:22,320 Speaker 1: thirty percent growth is an annualized number, so you're essentially 568 00:30:22,360 --> 00:30:26,880 Speaker 1: multiplying the contraction by four. And also this is some 569 00:30:27,040 --> 00:30:29,440 Speaker 1: things that are transitory. Is there some things that are 570 00:30:29,440 --> 00:30:31,520 Speaker 1: transitory that are going to be reversed and that reverse 571 00:30:31,560 --> 00:30:33,680 Speaker 1: will coming Q three. You should also be careful with 572 00:30:33,720 --> 00:30:35,920 Speaker 1: the Q three number. UM. But now I'll tell you 573 00:30:35,960 --> 00:30:38,680 Speaker 1: that Q three number looks like it's gonna be probably 574 00:30:38,720 --> 00:30:42,320 Speaker 1: closer to thirty percent than twenty percent annualized. And when 575 00:30:42,360 --> 00:30:43,920 Speaker 1: you know, we have first done our forecast, we thought 576 00:30:43,920 --> 00:30:46,360 Speaker 1: maybe it's more like twenty. Again, you're growing from very 577 00:30:46,360 --> 00:30:48,360 Speaker 1: low levels. I want to I want to emphasize that 578 00:30:48,400 --> 00:30:50,000 Speaker 1: this is just trying to get back to kind of 579 00:30:50,200 --> 00:30:52,640 Speaker 1: a more normal level of activity. UM. But it still 580 00:30:52,680 --> 00:30:55,160 Speaker 1: looks like a very powerful growth rate in the third quarter. 581 00:30:55,280 --> 00:30:58,120 Speaker 1: How about twenty one. Is there going to be meaningful 582 00:30:58,160 --> 00:30:59,760 Speaker 1: growth in twenty one? And how much of that growth 583 00:30:59,880 --> 00:31:03,400 Speaker 1: is dependent upon stimulus? Yeah, I think we can continue 584 00:31:03,400 --> 00:31:05,640 Speaker 1: to grow in one. But but that is where you 585 00:31:05,640 --> 00:31:08,080 Speaker 1: start thinking more about stimulus. Like I said, there's a 586 00:31:08,080 --> 00:31:10,400 Speaker 1: lot of kind of stimulus that that was done. We 587 00:31:10,440 --> 00:31:13,520 Speaker 1: had the stimulus checks, we have the enhanced unemployment insurance UM. 588 00:31:13,520 --> 00:31:16,480 Speaker 1: I think that will carry us through probably at least 589 00:31:16,520 --> 00:31:18,200 Speaker 1: Q three, if not the rest of the year. As 590 00:31:18,200 --> 00:31:21,200 Speaker 1: we get into one, UM, that's when you really would 591 00:31:21,200 --> 00:31:23,520 Speaker 1: like to see another leg for for stimulus UM, where 592 00:31:23,520 --> 00:31:25,880 Speaker 1: you'd like to see more help for unemployed workers. You know, 593 00:31:25,920 --> 00:31:28,720 Speaker 1: people who are unemployed through no fault of their own. Um, 594 00:31:28,800 --> 00:31:31,760 Speaker 1: you'd like to see, um, other forms of spending, things 595 00:31:31,800 --> 00:31:34,440 Speaker 1: like infrastructure that have a high multiplier. I mean, those 596 00:31:34,440 --> 00:31:36,920 Speaker 1: are probably things that you can think about after the election. 597 00:31:37,400 --> 00:31:39,480 Speaker 1: Andrew holl And Harst of a city group, thank you 598 00:31:39,520 --> 00:31:50,280 Speaker 1: so much. Whether it's your strength or dollar weakness. So 599 00:31:50,400 --> 00:31:53,080 Speaker 1: let's get that sort of that with Rich. He's a 600 00:31:53,120 --> 00:31:56,200 Speaker 1: former ECB president. He always makes our shows. But are 601 00:31:56,240 --> 00:31:59,920 Speaker 1: who are delighted that Mr Trich joins us this morning? Rich. 602 00:32:00,000 --> 00:32:01,600 Speaker 1: There's a lot of talk about whether the euro is 603 00:32:01,640 --> 00:32:03,240 Speaker 1: just too high. I don't know at what point it 604 00:32:03,240 --> 00:32:06,440 Speaker 1: becomes problematic, but there was a warning start from the 605 00:32:06,560 --> 00:32:09,720 Speaker 1: CB Chief Economists saying like, look, this could mess with 606 00:32:09,760 --> 00:32:14,280 Speaker 1: monetary policy, does it? Yes? I think. I think, of 607 00:32:14,320 --> 00:32:16,920 Speaker 1: course that it is a very very important element to 608 00:32:17,160 --> 00:32:21,920 Speaker 1: consider the U who went up Vitor and many other 609 00:32:22,000 --> 00:32:26,640 Speaker 1: currencies by around twelve percent or go certain period of time, 610 00:32:27,080 --> 00:32:30,360 Speaker 1: and the Europe and New Area does not need that, 611 00:32:30,560 --> 00:32:35,240 Speaker 1: of course, taking into account the difficulty of the present situation, 612 00:32:35,360 --> 00:32:37,960 Speaker 1: the difficulty of the recovery, and also the fact that 613 00:32:38,000 --> 00:32:41,600 Speaker 1: in comparison with the US, we have a growth and 614 00:32:41,640 --> 00:32:45,320 Speaker 1: the catching up process after and in time of pandemic, 615 00:32:45,640 --> 00:32:48,160 Speaker 1: which which takes time, and we are not in the 616 00:32:48,200 --> 00:32:52,360 Speaker 1: best situation possible. So I would say, begger than I 617 00:32:52,480 --> 00:32:56,520 Speaker 1: never policy is never appropriate. And I am a little 618 00:32:56,560 --> 00:33:00,680 Speaker 1: bit hurt. Not by the FED itself because the language 619 00:33:00,680 --> 00:33:04,680 Speaker 1: of the FED is very, very prudent and cautious in 620 00:33:04,800 --> 00:33:07,719 Speaker 1: terms of exchange rate, but from time to time the 621 00:33:07,760 --> 00:33:10,840 Speaker 1: executive branch in the US, he's talking down the door, 622 00:33:11,320 --> 00:33:16,680 Speaker 1: which is absolutely unappropriate. Obviously, there is no place for 623 00:33:16,800 --> 00:33:19,680 Speaker 1: a begger than I never policy in a situation where 624 00:33:19,720 --> 00:33:22,720 Speaker 1: we are, and I hope that they will be as 625 00:33:22,760 --> 00:33:26,960 Speaker 1: responsible as possible. I'm speaking of the executive branch of 626 00:33:27,000 --> 00:33:30,920 Speaker 1: the United States. But Mr, what is the level that 627 00:33:30,960 --> 00:33:35,160 Speaker 1: starts becoming really uncomfortable for euro No, I will not 628 00:33:35,440 --> 00:33:40,880 Speaker 1: pronounce any level, any level, say that plus is a 629 00:33:40,880 --> 00:33:47,480 Speaker 1: big change in my process and myself. We're commenting such move, 630 00:33:47,840 --> 00:33:53,560 Speaker 1: I qualify themselves as modeled myself, I remember, which created 631 00:33:53,680 --> 00:33:56,880 Speaker 1: some emotion, But I really think that what we did 632 00:33:57,200 --> 00:34:04,480 Speaker 1: is can stability and certainly not talking down the main currency, 633 00:34:04,520 --> 00:34:07,920 Speaker 1: which is the dollar, which is not at all appropuli 634 00:34:08,000 --> 00:34:11,719 Speaker 1: that already sent. And you were very clear in your 635 00:34:11,719 --> 00:34:15,040 Speaker 1: comments MS, but you know from here given the FED policy, 636 00:34:15,760 --> 00:34:19,560 Speaker 1: will dollar actually weaken even without that rhetoric from the 637 00:34:19,600 --> 00:34:23,880 Speaker 1: executive that you're talking about, Well, I must confess I 638 00:34:24,000 --> 00:34:28,239 Speaker 1: expect the first to the extent that there is a 639 00:34:28,280 --> 00:34:32,160 Speaker 1: dimension of the exchange rate which is associated with the 640 00:34:32,200 --> 00:34:35,160 Speaker 1: recent decision of the Fed. I think it was totally 641 00:34:35,200 --> 00:34:38,120 Speaker 1: overdone by the market. I mean, the FED only said 642 00:34:38,760 --> 00:34:42,000 Speaker 1: we will if if we do not get out of 643 00:34:42,040 --> 00:34:45,080 Speaker 1: the present situation, will continue to have an accommodating policy. 644 00:34:45,360 --> 00:34:48,880 Speaker 1: But the accommodating policy of the Fed doesn't mean negative 645 00:34:48,920 --> 00:34:51,839 Speaker 1: interest rates, And in yourb you have negative interest rates. 646 00:34:51,880 --> 00:34:56,520 Speaker 1: So the fundamentals are below all the noise that we 647 00:34:56,600 --> 00:34:59,879 Speaker 1: are hearing. In my opinion, there is a very good 648 00:35:00,040 --> 00:35:06,560 Speaker 1: case for certainly not changing the dollar you position based 649 00:35:06,680 --> 00:35:09,560 Speaker 1: on the recent decision of the Fed. I don't think 650 00:35:09,800 --> 00:35:13,320 Speaker 1: there is really a case for that, and I'm sure 651 00:35:13,360 --> 00:35:15,560 Speaker 1: that the market will realize that there is no case 652 00:35:15,600 --> 00:35:18,160 Speaker 1: by that. Well, Mr Trichet, it's Kelly in New York. 653 00:35:18,200 --> 00:35:20,920 Speaker 1: A stronger currency can be a hindrance for inflation, and 654 00:35:20,960 --> 00:35:23,919 Speaker 1: already data show this. Yesterday, consumer prices in the Euro 655 00:35:24,000 --> 00:35:27,080 Speaker 1: Area falling for the first time in four years. How 656 00:35:27,120 --> 00:35:29,040 Speaker 1: big of a problem does that create? For the e 657 00:35:29,120 --> 00:35:35,440 Speaker 1: c B. Well, the problem of the CB is more 658 00:35:35,480 --> 00:35:38,359 Speaker 1: or lit the same as I would say in all 659 00:35:38,680 --> 00:35:41,879 Speaker 1: major supplements. Of course we have inflation, which is much 660 00:35:41,880 --> 00:35:46,480 Speaker 1: to know. That inflation which is much to creates two problems. 661 00:35:46,640 --> 00:35:51,839 Speaker 1: One problem is that we have risk of method realization 662 00:35:52,040 --> 00:35:56,319 Speaker 1: of deflation, and of course this is an ultimate risk 663 00:35:56,520 --> 00:35:59,880 Speaker 1: that we must avoid. And second, of course it go 664 00:36:00,000 --> 00:36:03,439 Speaker 1: alls for very low interest rates, which themselves have their 665 00:36:03,440 --> 00:36:08,080 Speaker 1: own doorbacks, particularly if you are in a in a 666 00:36:08,120 --> 00:36:11,520 Speaker 1: time when you need more accommodating policies. So, all taken 667 00:36:11,560 --> 00:36:16,799 Speaker 1: into account, it is the situation of major sample banks. 668 00:36:17,000 --> 00:36:21,080 Speaker 1: D CD has to cope with that situation, and it 669 00:36:21,120 --> 00:36:24,200 Speaker 1: seems to me that it does it as well as possible. 670 00:36:24,320 --> 00:36:28,520 Speaker 1: I would say, my successor is doing as well as possible, 671 00:36:28,719 --> 00:36:31,840 Speaker 1: and the governing Council is doing as well as possible. 672 00:36:31,960 --> 00:36:34,600 Speaker 1: But the situation is demanding. And then the little why 673 00:36:34,640 --> 00:36:38,880 Speaker 1: precisely we don't need at all change in the overall 674 00:36:38,960 --> 00:36:43,439 Speaker 1: condition that would be conducive to less growth and less 675 00:36:43,480 --> 00:36:47,719 Speaker 1: activity in Europe? Right, Mr Tiha. Given the FEDS move 676 00:36:48,040 --> 00:36:51,080 Speaker 1: last week, this move towards average inflation targeting, does that 677 00:36:51,160 --> 00:36:53,920 Speaker 1: add some pressure for the easy V to follow the 678 00:36:53,920 --> 00:36:58,120 Speaker 1: FEDS blueprint on that front. Well, post of all the 679 00:37:00,040 --> 00:37:04,279 Speaker 1: review I started in January in Europe and it will 680 00:37:04,360 --> 00:37:08,200 Speaker 1: take a little time. I would say that seen from 681 00:37:08,200 --> 00:37:14,080 Speaker 1: the European perspective, the idea of judging on the average inflation, 682 00:37:14,760 --> 00:37:21,080 Speaker 1: the meeting the objective is something which is natural in Europe. Myself, 683 00:37:21,120 --> 00:37:26,120 Speaker 1: I remember going to various capitals, including Berlin for instance. 684 00:37:26,360 --> 00:37:30,279 Speaker 1: In my time, I was claiming that we were up 685 00:37:30,320 --> 00:37:33,839 Speaker 1: to our responsibility when we were delivering more or less 686 00:37:33,960 --> 00:37:38,160 Speaker 1: one average since the setting up of the Euros. So 687 00:37:39,480 --> 00:37:44,319 Speaker 1: it was natural in Europe to reason on an average basis. Uh. 688 00:37:44,960 --> 00:37:49,000 Speaker 1: And I would say that also the fact is in Europe, 689 00:37:49,040 --> 00:37:53,440 Speaker 1: in principle, we consider the headline inflation as the inflation 690 00:37:53,520 --> 00:37:56,440 Speaker 1: that you must looked at because it's the inflation that 691 00:37:56,600 --> 00:38:00,360 Speaker 1: our own fellow citizens are seeing. The code in plation 692 00:38:00,480 --> 00:38:03,680 Speaker 1: is a different concept which is not seen by the 693 00:38:03,719 --> 00:38:08,040 Speaker 1: general public. So of course, if you are following headline inflation, 694 00:38:08,120 --> 00:38:10,759 Speaker 1: it goes up and down, up and down, and you 695 00:38:10,880 --> 00:38:15,520 Speaker 1: have necessarily some kind of averaging to operate. But all 696 00:38:15,600 --> 00:38:18,279 Speaker 1: that being said, we will see what the e c 697 00:38:18,440 --> 00:38:22,840 Speaker 1: B will do. What reassures me in a way in 698 00:38:22,920 --> 00:38:25,440 Speaker 1: what has been decided in the US is that the 699 00:38:25,560 --> 00:38:32,960 Speaker 1: two percent reference was not abandoned. You remember some academics 700 00:38:33,080 --> 00:38:35,719 Speaker 1: were recommending to go down to one percent or even 701 00:38:35,800 --> 00:38:39,359 Speaker 1: zero percent. Others were saying four percent is much better. 702 00:38:39,600 --> 00:38:41,680 Speaker 1: I'm very happy with the two percent, which is, by 703 00:38:41,680 --> 00:38:45,840 Speaker 1: the way, the reference in the US, in Japan, in 704 00:38:45,920 --> 00:38:48,440 Speaker 1: the UK, and in the e c B, which is 705 00:38:48,520 --> 00:38:51,200 Speaker 1: the first, by the way to mention the two percent 706 00:38:51,400 --> 00:38:54,399 Speaker 1: as a very very important reference. So the fact that 707 00:38:54,480 --> 00:38:57,520 Speaker 1: all central banks, including I have to say, in many 708 00:38:57,560 --> 00:39:01,560 Speaker 1: respects Bank of China, have this kind of reference in 709 00:39:01,680 --> 00:39:06,040 Speaker 1: mind is in my opinion, helpful in terms of global 710 00:39:06,480 --> 00:39:12,399 Speaker 1: final fruits stability, global monitory stability. Um, when you look 711 00:39:12,480 --> 00:39:17,560 Speaker 1: at the spectrum of deflation. We started in lockdown looking 712 00:39:17,560 --> 00:39:20,440 Speaker 1: at all this stimulus and thinking it could lead to 713 00:39:20,600 --> 00:39:24,040 Speaker 1: very strong inflation, maybe even rampant inflation is the risk. 714 00:39:24,080 --> 00:39:27,520 Speaker 1: Now you know deflationary holds and actually you're becoming a 715 00:39:27,600 --> 00:39:32,960 Speaker 1: lot more like Japan. Well, again, what we know in 716 00:39:33,080 --> 00:39:37,280 Speaker 1: all advanced economies is that Japan was very much ahead 717 00:39:37,600 --> 00:39:41,399 Speaker 1: of the other major economies. But but we all are 718 00:39:41,520 --> 00:39:44,839 Speaker 1: in that situation which has very well summed up by 719 00:39:44,960 --> 00:39:49,880 Speaker 1: j Power recently namely, first we have a good potential 720 00:39:49,960 --> 00:39:53,600 Speaker 1: which is significantly lower than before. Second, we have a 721 00:39:53,640 --> 00:39:57,839 Speaker 1: really interest with its equivably interest withates that are much 722 00:39:57,920 --> 00:40:03,120 Speaker 1: lower than before. A Third, we have inflation which remains 723 00:40:03,200 --> 00:40:08,160 Speaker 1: extremely low and abnormally low for all reasons, and particularly 724 00:40:08,160 --> 00:40:12,160 Speaker 1: the two reasons I mentioned the materialization of potential, depression 725 00:40:12,200 --> 00:40:16,280 Speaker 1: of a risk, and the two low interest nominal interest 726 00:40:16,360 --> 00:40:21,200 Speaker 1: rates that are I would say engineered by that situation. 727 00:40:21,640 --> 00:40:25,640 Speaker 1: So that is the situation in all advanced economy and 728 00:40:25,800 --> 00:40:28,520 Speaker 1: its calls of cooks for getting out of that situation. 729 00:40:29,280 --> 00:40:32,400 Speaker 1: The supplements are doing all what they can, in my opinion, 730 00:40:32,680 --> 00:40:37,680 Speaker 1: even being much bolder than what was foreseen. And in 731 00:40:37,719 --> 00:40:41,879 Speaker 1: particular the e CP with the pandemic Emergency Purchase Program 732 00:40:41,920 --> 00:40:48,279 Speaker 1: proved the capacity to react to extraorly difficult situation. But 733 00:40:49,080 --> 00:40:51,520 Speaker 1: I mean, the problem is to find the pandemic at 734 00:40:51,520 --> 00:40:55,560 Speaker 1: the present moment. As soon as we have thought successfully 735 00:40:55,560 --> 00:40:58,600 Speaker 1: against the pandemic, we will have the problem that we 736 00:40:58,640 --> 00:41:01,200 Speaker 1: had before the pandemic, and the problem we had before 737 00:41:01,200 --> 00:41:05,439 Speaker 1: the pandemic other problem that we just summed up, so 738 00:41:05,880 --> 00:41:09,840 Speaker 1: we will see exactly how to get out. In my opinion, 739 00:41:10,040 --> 00:41:13,000 Speaker 1: we will get out of that situation, but with the 740 00:41:13,120 --> 00:41:18,480 Speaker 1: help of other partners. The central banks alone cannot change 741 00:41:18,800 --> 00:41:23,120 Speaker 1: the growth potential. They cannot change the heal neutral interest 742 00:41:23,200 --> 00:41:27,200 Speaker 1: rates or equitably interest rates, and that that is the 743 00:41:27,280 --> 00:41:31,480 Speaker 1: responsibility of other partners. And of course we have the 744 00:41:31,560 --> 00:41:35,640 Speaker 1: main problem of the Philips curves, and there I could 745 00:41:35,640 --> 00:41:38,719 Speaker 1: delaborate on that if if we have time. Mrs. We 746 00:41:38,719 --> 00:41:41,360 Speaker 1: were talking about inflation, we talked about of course the 747 00:41:41,440 --> 00:41:44,800 Speaker 1: euro strength, and we started by talking us about the 748 00:41:44,840 --> 00:41:46,360 Speaker 1: Philips curve. I mean, if you look at what the 749 00:41:46,360 --> 00:41:49,560 Speaker 1: Phillips curve has told us so far, this is the 750 00:41:49,920 --> 00:41:54,160 Speaker 1: economic concepts that basically states that inslation and unemployment have 751 00:41:54,160 --> 00:41:58,240 Speaker 1: a stable and inverse relationship. How will that change because 752 00:41:58,239 --> 00:42:05,240 Speaker 1: of the crisis. Looks like it changed dramatically since the crisis, obviously, 753 00:42:05,800 --> 00:42:10,279 Speaker 1: and the turning point is around Liman bothers and and 754 00:42:10,400 --> 00:42:13,239 Speaker 1: a few years after Liman bobbles. So we are now 755 00:42:13,239 --> 00:42:17,759 Speaker 1: in a situation where the philipskirt looks totally flat and 756 00:42:18,800 --> 00:42:24,799 Speaker 1: in major advanced economies, clearly, even with full employment, you 757 00:42:24,880 --> 00:42:29,600 Speaker 1: don't have the inflation pick up that you would normally expect. 758 00:42:29,680 --> 00:42:33,279 Speaker 1: And that of course is a major problem because it 759 00:42:34,560 --> 00:42:39,280 Speaker 1: impacts the full body of the Centle Bank monetary policy. 760 00:42:39,360 --> 00:42:41,920 Speaker 1: Of course, in all those countries, and we were speaking 761 00:42:41,960 --> 00:42:47,640 Speaker 1: of that a moment ago. Of course, it's probably due 762 00:42:47,800 --> 00:42:50,799 Speaker 1: to a number of factors, and academia has worked a 763 00:42:50,840 --> 00:42:56,120 Speaker 1: lot on that. Globalization, new technologies. But I would insist myself, 764 00:42:56,160 --> 00:43:01,280 Speaker 1: I would stress that in most countries, the bargaining power 765 00:43:01,640 --> 00:43:06,239 Speaker 1: of labor has diminished. That's obvious, and that is of 766 00:43:06,280 --> 00:43:11,440 Speaker 1: course mainly economic problem, of course, but also a social 767 00:43:11,520 --> 00:43:15,680 Speaker 1: political problem. And I'm speaking of those countries that have 768 00:43:15,800 --> 00:43:19,440 Speaker 1: full employment. In countries that are not at full employment, 769 00:43:19,680 --> 00:43:23,040 Speaker 1: of course, it's not appropriate it to suggest that we 770 00:43:23,080 --> 00:43:27,160 Speaker 1: should elevate the wages and salaries, because because then then 771 00:43:27,600 --> 00:43:30,000 Speaker 1: it is not in line with the idea to have 772 00:43:30,080 --> 00:43:33,400 Speaker 1: full employment. But in those countries like Japan, like the 773 00:43:33,520 --> 00:43:38,080 Speaker 1: US before the pandemic, like Germany, the Netherlands before the pandemic, 774 00:43:38,200 --> 00:43:43,480 Speaker 1: and other countries Switzerland and so forth, it's abnormally, my opinion, 775 00:43:43,719 --> 00:43:48,360 Speaker 1: is very abnormal that the very weak bargaining power of 776 00:43:48,440 --> 00:43:55,160 Speaker 1: labor calls for uniquely because to augment miserable and calls 777 00:43:55,239 --> 00:43:58,520 Speaker 1: for a nominal evolution of wages and salaries to be 778 00:43:58,960 --> 00:44:03,200 Speaker 1: that flat. And I expect that it will change. It 779 00:44:03,360 --> 00:44:06,960 Speaker 1: must change, It will have to change, because again, it's 780 00:44:06,960 --> 00:44:10,920 Speaker 1: not only an ego problem. It's also a social economic problem, 781 00:44:10,960 --> 00:44:17,520 Speaker 1: and we see that on the social political dimension it 782 00:44:17,680 --> 00:44:21,200 Speaker 1: is more than more a major problem. So I am 783 00:44:21,280 --> 00:44:24,960 Speaker 1: confident that we will solve that problem progressively. But we 784 00:44:25,080 --> 00:44:29,040 Speaker 1: are just in the middle of this problement. Pandemic is 785 00:44:29,200 --> 00:44:34,320 Speaker 1: even a graviating of course, this situation, because it creates 786 00:44:34,360 --> 00:44:41,280 Speaker 1: a new element to privilege. If I may the job 787 00:44:41,840 --> 00:44:45,919 Speaker 1: instead of asking for more, which is accelarists increases great 788 00:44:46,320 --> 00:44:48,560 Speaker 1: Mr trichet coming out of this pandemic. Let's talk about 789 00:44:48,560 --> 00:44:53,280 Speaker 1: other changes. Has the function of monetary policy completely changed? 790 00:44:53,360 --> 00:44:56,000 Speaker 1: All of these exceptional monetary policy is now going to 791 00:44:56,080 --> 00:45:01,080 Speaker 1: have to become semi permanent. Well, it's clear now that 792 00:45:01,239 --> 00:45:04,440 Speaker 1: we have. But it was true before the pandemic, and 793 00:45:04,520 --> 00:45:07,160 Speaker 1: before the pandemic, it was true that the new normal 794 00:45:07,320 --> 00:45:10,560 Speaker 1: was very different from the previous normal. It was true 795 00:45:10,600 --> 00:45:15,520 Speaker 1: that we had certainty to take into account the extraordinary 796 00:45:16,040 --> 00:45:19,840 Speaker 1: capacity of the sample banks to be extraoraly accommodating in 797 00:45:20,080 --> 00:45:24,920 Speaker 1: utilizing a lot of various tools. That's obvious in my opinion. 798 00:45:25,000 --> 00:45:29,920 Speaker 1: My opinion has always been in any case the compass 799 00:45:29,960 --> 00:45:34,799 Speaker 1: that we have is price stability. Price stability as a 800 00:45:34,840 --> 00:45:38,080 Speaker 1: primary mandate, and speaking of what for the rogan santle back. 801 00:45:38,360 --> 00:45:42,960 Speaker 1: But let's not forget. Once you attain price stability, or 802 00:45:43,440 --> 00:45:45,960 Speaker 1: we are in the present situation where the problem is 803 00:45:46,000 --> 00:45:50,520 Speaker 1: to go up to the level of the objective, then 804 00:45:50,800 --> 00:45:55,200 Speaker 1: you can accompany all other policies of the European Union. 805 00:45:55,360 --> 00:45:58,760 Speaker 1: This is the treaty. The treaty says very very clearly 806 00:45:59,640 --> 00:46:04,480 Speaker 1: without placidas to price stability, the ciddled banking system, the 807 00:46:04,560 --> 00:46:08,920 Speaker 1: ECB accompanies all the other policies of the of the 808 00:46:08,920 --> 00:46:11,840 Speaker 1: Opian Union name system on that. Because from time to 809 00:46:11,880 --> 00:46:14,640 Speaker 1: time we are called to say, well, in the US, 810 00:46:14,760 --> 00:46:17,680 Speaker 1: they have two objectives in the in your there is 811 00:46:17,719 --> 00:46:20,520 Speaker 1: only one objective. There is one objective of the game. 812 00:46:20,880 --> 00:46:24,759 Speaker 1: The mention is in the treaty that when this subjective 813 00:46:25,080 --> 00:46:29,000 Speaker 1: is attained to be obtained, then you have to accompany 814 00:46:29,040 --> 00:46:34,319 Speaker 1: the other. I would say, dam of the policies. LEI, 815 00:46:34,520 --> 00:46:36,680 Speaker 1: thank you so much for joining us today as always 816 00:46:36,920 --> 00:46:40,240 Speaker 1: makes us wiser on monetary policy. Janctric they're the former 817 00:46:40,280 --> 00:46:44,000 Speaker 1: easily president. Thanks for listening to the Bloomberg Surveillance Podcast. 818 00:46:44,400 --> 00:46:49,440 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 819 00:46:49,480 --> 00:46:53,800 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 820 00:46:53,880 --> 00:46:57,799 Speaker 1: Keane before the podcast. You can always catch us worldwide. 821 00:46:58,239 --> 00:47:05,560 Speaker 1: I'm Bloomberg Radio