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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course, on the Bloomberg Terminal. Michelle Meyer joins

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Speaker 1: us this morning. Michelle, a nine and a half percent

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Speaker 1: GDP statistic. I want you to frame right now the

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Speaker 1: Bank of America guestimate of the path from a boom

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Speaker 1: economy to a normal economy. How does that process look sure?

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Speaker 1: And I think that's actually the big question. It's trying

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Speaker 1: People are trying to figure out what the moderation and

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Speaker 1: growth will look like because we know that nine percent growth,

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Speaker 1: which is what we're tracking in Q two, is not sustainable.

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Speaker 1: So there will be a slow down, and the data

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Speaker 1: is already indicating that um but it's slowly, you know,

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Speaker 1: in a in a fairly manageable way, all things considered.

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Speaker 1: So when you look ahead to the next few quarters,

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Speaker 1: we very much believe the economy will be still growing

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Speaker 1: well above trend trend being close to two so you'll

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Speaker 1: see somewhere in the order of five maybe six percent

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Speaker 1: g peak growth on average of the next few quarters.

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Speaker 1: It's half the piece that we had in the second quarter.

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Speaker 1: But we can't imagine the economy will continue to grow

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Speaker 1: with that type of piece, given in the capacity in

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Speaker 1: the economy. Dovetailed Bank of America sellside research, your securities

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Speaker 1: research into what you and Ethan are doing in economics.

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Speaker 1: What is the corporate response to the economy? You imagine, well,

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Speaker 1: I mean businesses are investing. Businesses are seeing consumers go

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Speaker 1: out and spend. They have cash on hand, and they

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Speaker 1: were actively spending on all things good up until recently

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Speaker 1: where there's been some slowing and now they're really embracing

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Speaker 1: the services side of the economy. But without a doubt,

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Speaker 1: the consumers out there participating in the economy, and when

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Speaker 1: you see that as the company, you want to go

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Speaker 1: out and invest and meet that demand. Um and that's

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Speaker 1: very much still what we're seeing in the data flow.

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Speaker 1: That seems to be what Morgan Stanley's and I was

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Speaker 1: saying also over the weekend when he says that he

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Speaker 1: expects a red hot capex cycle to sustain global GDP

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Speaker 1: growth above pre COVID levels. Why is that not necessarily

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Speaker 1: the case as sort of portrayed by the bond market,

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Speaker 1: or in other words, how inconsistent is the bond market

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Speaker 1: with some of these projections. Look, I mean, I know

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Speaker 1: the last few weeks has been all this debate around

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Speaker 1: fundamental and technical factors driving the bond market, But I

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Speaker 1: think beyond that, you know, there seems to be this

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Speaker 1: storyline or sentiment in the market that, yeah, we can

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Speaker 1: have really strong growth and next few quarters by and

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Speaker 1: that's still part of the payback from this incredibly artificial

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Speaker 1: time in the economy around COVID and the and n's

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Speaker 1: doing stimulus. But what's the underlying trend? What's the structural trend?

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Speaker 1: Has that changed? Are we going to return to this

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Speaker 1: environment of slow under outlying growth. We're gonna return to

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Speaker 1: an environment where demographics are still quite negative and depressing,

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Speaker 1: where they're still disinflationary in psychology, and I think that

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Speaker 1: that's starting to kind of spook the marketing. You can

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Speaker 1: see in the longer end of the curve, and that's

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Speaker 1: what the FEDS. Tom Barkin was talking about in Wall

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Speaker 1: Street Journal article that came out this morning. He really

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Speaker 1: pointed to the employment of population ratio, this sort of

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Speaker 1: participation rate is still being too low to justify tapering.

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Speaker 1: How much, however, can the FED overwhelm some of these

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Speaker 1: actual economic inputs with their stimulus. In other words, we

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Speaker 1: even have to look at the fundamentals or the fundamentals

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Speaker 1: entirely the amount of liquidity pumped in by the Federal Reserve. Yeah, so,

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Speaker 1: I mean that is the balance, right Is that the

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Speaker 1: FED is you know, a heavy hands in the markets.

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Speaker 1: And what the FED is doing today in terms of

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Speaker 1: buying and what they are communicating for their future in

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Speaker 1: terms of forward guidance and huge right. So, and it's

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Speaker 1: not just a FED, it's a whole the central banks

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Speaker 1: that are creating these types of challenges for getting a

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Speaker 1: clear signal of what's happening in the bond market. Um.

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Speaker 1: But going back to your comments around what um Barkin said,

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Speaker 1: I think that is super important when you consider where

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Speaker 1: the underlying growth rate is in the economy. It's a

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Speaker 1: supply side. How much capacity is there for the economy

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Speaker 1: to continue to grow? And for that we rely on

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Speaker 1: labor force participation people going out and working, and we

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Speaker 1: rely on productivity, um, And those two factors I think

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Speaker 1: are super important to keep an eye on when you're

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Speaker 1: thinking about the long run potential for the economy. Michelle,

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Speaker 1: looking at you, like this research on chairman pals testimiar,

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Speaker 1: you said the following, we look for him to sound

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Speaker 1: relatively more davish than he did during the tune press.

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Speaker 1: So why is that, Michelle? You know in the press conference,

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Speaker 1: remember he's talking about having the committee and we know

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Speaker 1: from the STP, but there are seven of them. The

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Speaker 1: officials are looking for a hike next year. So there

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Speaker 1: are a lot of voices out there that we're growing

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Speaker 1: kind of anxious about what they're seeing on the inflation front.

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Speaker 1: And why did you get started with the normalization of policy?

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Speaker 1: But we don't think Powell is in that camp of AI,

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Speaker 1: and in the testimony to Congress, we think we'll get

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Speaker 1: a little more of a sense than that. And we

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Speaker 1: also think in the testimony he's really going to reinforce

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Speaker 1: how the fair thinks about maximum employment, which remember is

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Speaker 1: were broad based um labor market recovery, one where the

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Speaker 1: inequalities that we had seen over the last several decades

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Speaker 1: could be resolved to some extent that is still really

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Speaker 1: poor to I think what's your power is trying to

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Speaker 1: accomplish with this new framework. Well, let's get into that.

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Speaker 1: I read the Monechy policy report that came out on Friday,

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Speaker 1: which will service the basis for this testimony length to

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Speaker 1: this week case. The line that jumped down to a

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Speaker 1: lot of people, the post pandemic labor market and the

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Speaker 1: characteristics characteristics of maximum employment may well be different from

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Speaker 1: those of early What do you think againting at there,

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Speaker 1: I think the idea they have, you know, changed the

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Speaker 1: definition of maximum employment. It's not just getting the U

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Speaker 1: three unemployment rate down to call it four to four

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Speaker 1: and a half percent. It's about getting an environment where

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Speaker 1: that unemployment rate is down across the economy, um, where

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Speaker 1: the employment of population ratio for prime working and individuals

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Speaker 1: is back up as well across the time. You know,

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Speaker 1: it's not gonna be perfect, right, and there's gonna be

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Speaker 1: a lot of challenges. At some point you're gonna really

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Speaker 1: get this tension between the tightness and parts of the

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Speaker 1: labor market versus the age, inflation or underlying price pressures.

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Speaker 1: I know, I know what Jackson hole you've pushed then aside,

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Speaker 1: You're gonna be out there, Michelle, probably under the white

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Speaker 1: tent and the lawn chairs for the Saturday speech. Are

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Speaker 1: you telling me we have a central bank committing social

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Speaker 1: policy now with monetary tools. Look, it's not social policy,

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Speaker 1: and the fact would be very clear that they're not

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Speaker 1: trying to you know, uh, move one part of the

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Speaker 1: economy versus the other. Right, that's fiscal policy. Well, the

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Speaker 1: fet is saying is in order to have a complete recovery,

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Speaker 1: and one that we think we'll be able to, you know,

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Speaker 1: can hinue because you have broad based wage growth, because

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Speaker 1: you have the ability to seek broad based price pressures

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Speaker 1: in the economy. It needs to be a complete recovery.

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Speaker 1: And that was the lesson that I think they learned,

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Speaker 1: one of many in the last cycle that came out

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Speaker 1: of the FED listens events is that if you don't

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Speaker 1: have the economy, you know, increasing across the spectrum, it

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Speaker 1: may end up not lasting or you end up damaging

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Speaker 1: your long run potential even more. I look at this, Michelle,

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Speaker 1: I got it, you know, Michelle, I'm just sort of

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Speaker 1: dazzled by all the theory that's getting out. Can we

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Speaker 1: go back to core values, core knowledge? How some house

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Speaker 1: the housing market? Michelle, I mean this is how you

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Speaker 1: became famous. Do you believe in this housing rally or

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Speaker 1: the suburbanistic outside New York. If I was by chance

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Speaker 1: north and Westchester and if by chance I loaded the

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Speaker 1: boat right now on one point seven five million, am

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Speaker 1: I going to enjoy that at one point three million

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Speaker 1: when this natural disaster is over, just by chance, just

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Speaker 1: because by chance? Um? Right? Yeah? So for anybody moving

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Speaker 1: to Westchester? Um No, So I think, um, I think

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Speaker 1: there's been a lot of movement. Clearly, there's been a

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Speaker 1: lot of turn in the housing market. We've seen that

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Speaker 1: in terms of the volumes um and part of that

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Speaker 1: is because after the pandemic, people thought differently about where

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Speaker 1: they want to live. It was very clear in the surveys.

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Speaker 1: Part of it was because people had cash just spend

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Speaker 1: if they weren't going out traveling, et cetera, so they

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Speaker 1: went and bought goods. Housing is one of them. So

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Speaker 1: there was definitely a distortion in the timing of the

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Speaker 1: housing market. And we're still picking up the pieces from that,

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Speaker 1: because you can see that the supply side was not

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Speaker 1: already to accommodate this big increase in demand. Quite the contrary,

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Speaker 1: builders kind of froze when the pandemic hit naturally, so

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Speaker 1: inventory was very low and demand just greatly exceeded expectations

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Speaker 1: in that create this big price increase. It's not sustainable,

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Speaker 1: we will see and we are already seeing demand pulling

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Speaker 1: from the highs at the end of last year. We

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Speaker 1: are seeing now construction start to pick up, inventory levels

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Speaker 1: start to pick up that and take some of the

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Speaker 1: pressure off of home price appreciation. Are we going to

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Speaker 1: see housing crash? No? Are we going to see uh

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Speaker 1: further slow down? Yeah? I think so, And that makes sense.

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Speaker 1: Home price appreciation should come off of these crazy high

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Speaker 1: levels that just don't add up with what you're seeing

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Speaker 1: in the broader economy. Michelle love to catch up Michelle,

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Speaker 1: Bank America looking ahead to a ky week with inflation

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Speaker 1: TOTA tomorrow and of course Cham and Paus testimate a

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Speaker 1: little bit later in the week. Right now, we start

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Speaker 1: strong with a gentleman looking not only making the relative

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Speaker 1: move in the market, but the absolute move as well.

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Speaker 1: Skybridge Capital has been steeped in moving money to hedge funds,

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Speaker 1: trying to get big return this year. That's sport. Troy

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Speaker 1: Gayski joins us right now, whether Italy or England, what

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Speaker 1: is it for hedge funds? Right now given the confusion

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Speaker 1: that we see out there, is it an up yere

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Speaker 1: or down here? Yea, so far it's been a reasonable year.

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Speaker 1: I think the most important point that we make to

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Speaker 1: our clients is, just like broader markets, it's the first,

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Speaker 1: shelby last, and the last shall be first. What that

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Speaker 1: means is that managers that outperformed last year mainly because

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Speaker 1: they were long growth and secular growth stories have underperformed

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Speaker 1: because you had about a four month under performance period there,

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Speaker 1: and managers more focused on cyclical strategies like structure credit

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Speaker 1: or distress credit of outperformed as economic strength has been

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Speaker 1: very pronounced. So you know, more broadly going forward, the

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Speaker 1: market or the industry is still overweight secular growth, but

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Speaker 1: a lot of these value places still we think have legs.

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Speaker 1: Do you think the conviction around cyclical growth stories Troy

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Speaker 1: how French down? Do you think that is if it exists?

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Speaker 1: And so given what we've say now that the the last

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Speaker 1: week cold it takes the move into bond market and

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Speaker 1: it just completely upsets any confidence people have about where

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Speaker 1: they are in the equity market. Yeah, well again, sector

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Speaker 1: rotation this year has been more critical than it has

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Speaker 1: in the past, So first five months you had significant

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Speaker 1: underperformance of growth versus value and cyclicals, and so no

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Speaker 1: surprise obviously sicklically focused managers in which there are very

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Speaker 1: few left by the way, because of the years of underperformance. UM,

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Speaker 1: they they had very strong starts. Last month, however you

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Speaker 1: started see secular growth reassert itself and so you do

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Speaker 1: have a very fragile dynamic between those factor rotations, and

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Speaker 1: that continues to keep hedge funds up at night. Do

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Speaker 1: they have the right balance? Are they two over their

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Speaker 1: skis and one factor or the other? So let's talk

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Speaker 1: about active management. Why do I need active management when

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Speaker 1: the smpages seems to be doing old the hand work

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Speaker 1: for me. Yeah, I'll tell you the FED keeps pumping

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Speaker 1: in liquidity. We have plus annualized growth rates. Obviously, you

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Speaker 1: guys have been discussing where bond yields are. Um. You know,

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Speaker 1: at the end of the day, active management, it's why

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Speaker 1: do you have it? Part of it is the non correlation.

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Speaker 1: So you have either stocks or you have bonds. Obviously

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Speaker 1: bonds look even more so now like return free risk. Obviously,

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Speaker 1: when yields get up to one point six one point seven,

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Speaker 1: you had some upside or extremely low real return rates.

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Speaker 1: Now UM, so if hedge funds are act the managers

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Speaker 1: can out perform fixed income and high yield and provide

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Speaker 1: some correlation benefit to equities. That's still the value proposition.

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Speaker 1: It should be easier to outperform bonds going forward and

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Speaker 1: equities at twenty two times two earnings. You know how

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Speaker 1: much more multiple expansions left there, Troy. One of the

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Speaker 1: active decisions has been to go into bitcoite, and I

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Speaker 1: know that you have been a pretty big proponent of that,

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Speaker 1: and we've seen the bitcoins price basically have since the

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Speaker 1: peak that we saw over in April. What did you

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Speaker 1: do during this period of time? Yes, So for us,

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Speaker 1: basically what we did is we trimmed the position in

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Speaker 1: order to keep it from growing further. UM. In our

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Speaker 1: portfolios at then of the March is we had more

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Speaker 1: outflows than inflows UM, and since then we've rotated a

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Speaker 1: small amount of the capital into ethereum. We view the

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Speaker 1: market pretty straightforward, is you know, bitcoin will be the

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Speaker 1: market leader in terms of store value and ethereum at

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Speaker 1: least so far as the market leader in terms of

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Speaker 1: transaction transaction use. So we wanted a little bit of

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Speaker 1: diversification there. All in all, we have a nine percent

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Speaker 1: position size, and when we look right now the on

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Speaker 1: chain data, what is basically telling you is a lot

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Speaker 1: of the strongholders are reasserting themselves and accumulating from those

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Speaker 1: that got into the market late last year, and that

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Speaker 1: is setting itself up for some type of supply shock

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Speaker 1: very similar to what we had last October November. Um,

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Speaker 1: so it's going to be a volatile asset, but it

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Speaker 1: continues to be very non correlated, and we think the

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Speaker 1: risk reward is now skewed again to the upside. So Troy,

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Speaker 1: perhaps there will be future gains. But when it comes

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Speaker 1: to justifying active management to clients, how do you discuss

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Speaker 1: your investment in bitcoin when it is volatile and sort

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Speaker 1: of argue that this is a reason to go into

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Speaker 1: the fund even though it is an unproven asset class,

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Speaker 1: that it does have all of the ups and downs

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Speaker 1: that can be rather unpredictable. Oh yeah, look, I mean

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Speaker 1: part of active management again is trying to identify Nassan

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Speaker 1: asset classes that have asymmetric risk return and again we're

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Speaker 1: in the non correlation business, or trying to generate returns

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Speaker 1: that are differentiated from equities and fixed income. So so

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Speaker 1: that's what drew us to bitcoin initially. And then of

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Speaker 1: course if you look at the broader macro environment of

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Speaker 1: incredible money supply growth still record low, you know, ten

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Speaker 1: year yields for instance, the adoption cycle that continues, we

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Speaker 1: think that small part of our portfolio can provide non

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Speaker 1: correlation and asymmetric upside. And then of course over time

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Speaker 1: we have to manage that relative to other positions as

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Speaker 1: we evolve. Tell me about earning season and the long

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Speaker 1: short structure. Right now, tech has researched. Yes, our hedge

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Speaker 1: phones exposed to Apple and Amazon. Are they an afterthought

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Speaker 1: from another time? And no? So you know we've talked

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Speaker 1: about this in the past. Facebook and Google are more

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Speaker 1: heavily owned, more visible. Yes, so those are those of

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Speaker 1: the of the fangs or or the large cat make interesting. Yeah,

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Speaker 1: the most heavily owned. And you know, the view there

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Speaker 1: is that a lot of the antitrust action when it

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Speaker 1: come to pass that. You know, if you look at

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Speaker 1: cash flow growth as well as earnings growth over time,

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Speaker 1: you get a very reasonable multiple. Um. You know, Amazon

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Speaker 1: is probably the third in the list. There hasn't been

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Speaker 1: really heavy ownership of Apple um and you know, I

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Speaker 1: keep pointing out the act if you look at a

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Speaker 1: guy like Seth Klarman, who's one of the greatest value

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Speaker 1: investors that I think any of us have ever seen.

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Speaker 1: You know, two of his largest ten equity names are

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Speaker 1: Facebook and Google, which says a lot, right, and that

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Speaker 1: it's very rare that you can have megacat tech stocks

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Speaker 1: be viewed as value, which is sort of a reverse

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Speaker 1: of the whole mindset of the market. You're an m

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Speaker 1: I T engineer. Were you dazzled by our calculus earlier

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Speaker 1: on the Carmen line and the difference between Brandson and Bezos.

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Speaker 1: I'll tell you, honestly, I haven't focused on that in

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Speaker 1: so long. It was like it was like a breath

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Speaker 1: of fresh air. I'm trying to memorize the equation. So

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Speaker 1: I'll tell you guys a funny story. My first engineering

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Speaker 1: class I ever took it un I T was actually

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Speaker 1: fluid mechanics, and it really blew my mind. You went

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Speaker 1: from you know, math calculus to real engineering and it

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Speaker 1: was like, oh my goodness, this is really really hard.

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Speaker 1: So that that was the was your textbook, Serisan Zamanski Uh,

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Speaker 1: it was not. I don't remember exactly who the authors were,

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Speaker 1: but it was just tears. I won't even tell you

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Speaker 1: what I got on my first test score because I'll

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Speaker 1: never have you back on air again. But let me

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Speaker 1: let me just tell you it wasn't an A. But

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Speaker 1: I didn't finish you in the class, so I been

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Speaker 1: white lone. It's good at you back in Troy. What

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Speaker 1: we did in Alto Bumps look over here. Yeah, no,

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Speaker 1: it's it's really great to be back here, and thanks

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Speaker 1: for having me on. It's always chin a commercial break.

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Speaker 1: Vincent Reinhardt joins us. He is Melan Investment Management, chief

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Speaker 1: economist and macro strategist, but far more is encyclopedic on

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Speaker 1: the research paths plural that we have taken over the

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Speaker 1: many decades leading the research effort at the FED a

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Speaker 1: number of years ago, Professor Reinert, thank you so much

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Speaker 1: for joining us, vincent Reinhart. When you look at the

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Speaker 1: Leaguard Powell Nexus, how are they attached right now? They

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Speaker 1: share a love of ambiguity and of talking a lot. Uh,

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Speaker 1: They'll take every platform they can, and right now they're

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Speaker 1: both in the position of wanting to reassure markets that

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Speaker 1: they are they know what they're doing. They have a

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Speaker 1: new framework and they're putting that framework in place. For

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Speaker 1: President le guard it's only a week old and that's

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Speaker 1: why you see her UH and and pretty much all

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Speaker 1: the ECB leadership have been been out and force over

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Speaker 1: the weekend through this morning evince. The framework that they're

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Speaker 1: putting in place will be tested by data. Does the

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Speaker 1: framework collapse when the data moves against these central banks? Uh?

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Speaker 1: It will be a test of whether they're willing to

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Speaker 1: follow through with what they've said they have UH. The

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Speaker 1: features the similarities between the AT in the e c

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Speaker 1: B or two fold. Number One is they interpret their

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Speaker 1: two percent inflation goal is symmetric. That's news for the ECB.

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Speaker 1: And second, it's outcome based, not outlook based, i e.

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Speaker 1: Wait until we actually see it happen before responding. Key difference.

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Speaker 1: ECB hasn't gone fed like in saying the goal is

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Speaker 1: an average inflation UH unspecified average. Two. And the one

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Speaker 1: thing where they're most similar is their unspecific. Central bankers

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Speaker 1: like to pitch a really big tent because that's how

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Speaker 1: they can get their governing committees together, the FMC and

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Speaker 1: the Government Council, and so they use ambiguous words. They

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Speaker 1: don't they'll tolerate and overshoot. But how long an overshoot,

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Speaker 1: how big an overshoot, we don't know. Well within the

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Speaker 1: language is unambiguous. Concern about housing prices, the idea that

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Speaker 1: we've seen a huge move in that on both sides

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Speaker 1: of the Atlantic. We've seen this the Federal Reserve as

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Speaker 1: well as from the e CPS. Christine Laguard, What do

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Speaker 1: you expect, What measures do you expect from central bankers

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Speaker 1: to try to tame housing prices or will they just

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Speaker 1: say this is a necessary consequence to a policy that

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Speaker 1: otherwise helps the economy. Well, here's an irony. The c

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Speaker 1: B wants to add uh owner's equivalent rent into their

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Speaker 1: price index because it makes it go up up higher,

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Speaker 1: So they're actually welcoming that little extra kick to inflation

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Speaker 1: to get closer to their goal. What can they do, Um,

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Speaker 1: there's monetary policy and regulatory policy in the same building.

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Speaker 1: Expect to see them to tighten up where they can

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Speaker 1: in terms of supervisory restraint. If it's a it's a problem,

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Speaker 1: it's a problem they would prefer to address from that

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Speaker 1: side of the building right now, Um, They're overwhelming concern

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Speaker 1: is a macro one the level of employment. UH, and

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Speaker 1: therefore they're not going to adjust the setting a rate

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Speaker 1: nor their balance sheet UH to worry about housing. Fed's

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Speaker 1: got an opportunity when it does start the taper, though,

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Speaker 1: because it could slow purchases of mortgage backed securities by

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Speaker 1: by a quicker pace than it could do treasury securities.

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Speaker 1: That would be a way to send the signal. And

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Speaker 1: that's something that I know a number of FED officials

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Speaker 1: have actually discussed, and people are wondering whether that will

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Speaker 1: be where they start. I want to dig into one

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Speaker 1: thing that you said, which is they know that they're

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Speaker 1: pretty far away from their employment targets. And Tom asked

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Speaker 1: the question earlier. Is the Federal Reserve trying to set

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Speaker 1: social policy in some ways with its targets given the

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Speaker 1: fact that it has such a multifaceted kind of definition

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Speaker 1: of full employment. So I think that the reality is

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Speaker 1: we're putting new new labels on old bottles. That's true

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Speaker 1: both at the ECB and and in FED Reserved. ECB

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Speaker 1: is going to adjust its and direct its policy toward

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Speaker 1: climate change. Exactly tell me how you do that? UM?

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Speaker 1: I think in this environment, share pal has actually been

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Speaker 1: at the forefront of explaining what the central Bank has

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Speaker 1: always done in a way to to reach more people.

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Speaker 1: And the way you reach more people is you talk

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Speaker 1: about their economic circumstance. You don't focus on on aggregates.

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Speaker 1: Economists can be can can can get apart from the

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Speaker 1: real world by focusing on concepts and numbers rather than

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Speaker 1: people's plight and share Pal has done a good job

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Speaker 1: of reorienting the focus, but it doesn't change what they're doing.

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Speaker 1: It's this is brilliant and they're going to be tested.

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Speaker 1: If we look at John Taylor at Stanford, if we

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Speaker 1: look at Paul Krugman, it's it's cute wherever he's got

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Speaker 1: a shingle out today. The Venn diagram of Taylor and

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Speaker 1: Krugman does have a lot of overlap, but that overlap

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Speaker 1: isn't an overt social policy. How do we have a

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Speaker 1: social bank given the heritage from mc chesney Martin. So

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Speaker 1: I think you're right there, Tom, and it is a

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Speaker 1: fundamental problem in the design of organizations. The FETE is

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Speaker 1: incredibly opaque. Right if you give it a lot of goals,

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Speaker 1: it doesn't have many tools to hit all those goals.

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Speaker 1: And so how will you be able to govern the

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Speaker 1: trade offs unelected officials are are making. Um, do you

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Speaker 1: really want the interest rate to be somewhat different because

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Speaker 1: j Pal feels it's better for climate change this month,

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Speaker 1: or rather, when you give them more narrow focus, you

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Speaker 1: can monitor them better on how well they're actually doing

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Speaker 1: their jobs. That's right. Now. What does Chairman Powell not

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Speaker 1: want to say this week? To me? This is so

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Speaker 1: much what not to say. He doesn't want to make news.

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Speaker 1: He doesn't want to make your next show interesting, because

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Speaker 1: if he makes news, then is he said something different?

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Speaker 1: He said something that was surprising. He wants to say

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Speaker 1: everything's on course, that they are worried about the pandemic.

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Speaker 1: Of course they've sat there pleased with unfolding economic data.

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Speaker 1: But there's a long way to go. Yeah, and he's

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Speaker 1: got it. But he's also got to reassure you they

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Speaker 1: got the tools and fool kit. They'll do whatever it takes.

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Speaker 1: So he's got a walk of fine line, Vince one

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Speaker 1: thing that he keeps harping on. A number of other

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Speaker 1: Fed officials as well, including Tom Barkin of Richmond, have

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Speaker 1: talked about the participation rate and how low it has

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Speaker 1: remained despite the economic recovery that we have. How do

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Speaker 1: you expect the Fed to explain that the frictions that

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Speaker 1: seem to be taking a longer than expected time to resolve. Yeah,

431
00:23:55,200 --> 00:23:59,720
Speaker 1: they usuld just the semi annual Monetary Report what Friday night,

432
00:24:00,040 --> 00:24:02,960
Speaker 1: it did a good job of talking about those problems

433
00:24:02,960 --> 00:24:06,080
Speaker 1: in labor market matching and Charepal talked about at the

434
00:24:06,080 --> 00:24:11,520
Speaker 1: press conference too. Basically, we did the easy stuff last

435
00:24:11,600 --> 00:24:15,720
Speaker 1: year where people who had positions went back to work

436
00:24:16,560 --> 00:24:20,480
Speaker 1: when when market activity resumed. Now we're in the much

437
00:24:20,640 --> 00:24:24,399
Speaker 1: harder process of labor market clearing, where people have to

438
00:24:24,440 --> 00:24:28,560
Speaker 1: find new positions, new jobs. The unemployed people now are

439
00:24:28,720 --> 00:24:33,080
Speaker 1: job less. Uh. Some of the unemployed employed people last

440
00:24:33,160 --> 00:24:37,560
Speaker 1: year had jobs. The businesses were just temporarily closed. And

441
00:24:37,600 --> 00:24:41,360
Speaker 1: so now the matching takes time, and people frustrated by

442
00:24:41,359 --> 00:24:45,280
Speaker 1: the match leave the labor force, People who retired don't

443
00:24:45,280 --> 00:24:50,040
Speaker 1: come back, people go to off you know, um uh

444
00:24:50,280 --> 00:24:54,800
Speaker 1: black market activities too, uh and and people get frustrated

445
00:24:55,480 --> 00:24:58,800
Speaker 1: and and that's why it takes a while for this

446
00:24:58,920 --> 00:25:03,119
Speaker 1: part of the labor mark. Uh. This this part of

447
00:25:03,200 --> 00:25:06,080
Speaker 1: labor market clearing, and that's why the Federal Reserve is

448
00:25:06,080 --> 00:25:08,800
Speaker 1: going to keep policy accommodated for a long time. I

449
00:25:09,400 --> 00:25:13,240
Speaker 1: at least through gonna catch you have to get that perspective,

450
00:25:13,280 --> 00:25:15,400
Speaker 1: that framework for thinking about things right now, Vince Ryan

451
00:25:15,440 --> 00:25:18,040
Speaker 1: Hot there they met an investment management chief economist and

452
00:25:18,040 --> 00:25:27,359
Speaker 1: macroish strategists right now with an update, joshra Sharpstein, Johns Hopkins,

453
00:25:27,359 --> 00:25:30,680
Speaker 1: and Professor Sharpstein. I just really wanted to go to

454
00:25:30,800 --> 00:25:34,520
Speaker 1: what came up, not once, not twice, but three times

455
00:25:34,520 --> 00:25:40,320
Speaker 1: this weekend. Fauci says, there's a schism in America. It's

456
00:25:40,359 --> 00:25:43,040
Speaker 1: a division to split, a rift, a breach, a rupture,

457
00:25:43,119 --> 00:25:46,239
Speaker 1: a break of separation. What do you do on the

458
00:25:46,280 --> 00:25:50,760
Speaker 1: delta viron variant if you're in a part of America

459
00:25:50,960 --> 00:25:56,879
Speaker 1: that's seventy vaccinated, Well, there are parts of America that

460
00:25:56,960 --> 00:26:01,680
Speaker 1: are vaccinated percent backaccinated, and those are the parts which

461
00:26:01,720 --> 00:26:04,359
Speaker 1: are now seeing not only in increase in cases, but

462
00:26:04,440 --> 00:26:07,680
Speaker 1: an increase in hospitalizations due to the delta variants. So

463
00:26:08,119 --> 00:26:11,240
Speaker 1: you know, it's like here we go again in those places,

464
00:26:11,320 --> 00:26:14,080
Speaker 1: and you know it's really important to be vaccinated there.

465
00:26:14,119 --> 00:26:17,800
Speaker 1: But more generally, it reflects um a big problem that

466
00:26:17,800 --> 00:26:21,200
Speaker 1: that we're having having you know, having people ready for them.

467
00:26:21,280 --> 00:26:23,239
Speaker 1: I get that, but what do we do in the

468
00:26:23,280 --> 00:26:26,000
Speaker 1: parts of the country that are sixty seventy or even

469
00:26:26,040 --> 00:26:29,120
Speaker 1: more percent vaccinated. Do we just go on with our

470
00:26:29,160 --> 00:26:31,720
Speaker 1: lives or do we have to amend our lives because

471
00:26:31,720 --> 00:26:35,960
Speaker 1: another part of America's down at thirty eight percent. Well,

472
00:26:36,000 --> 00:26:39,080
Speaker 1: as long as there are places that are thirty eight percent,

473
00:26:39,200 --> 00:26:42,000
Speaker 1: the places that are at you know, seventy or eighty

474
00:26:42,040 --> 00:26:44,120
Speaker 1: are going to be at risk. Now that people who

475
00:26:44,119 --> 00:26:47,560
Speaker 1: are vaccinated right now are pretty protected, but what about

476
00:26:47,560 --> 00:26:51,080
Speaker 1: people who have conditions that you know, the vaccine doesn't

477
00:26:51,080 --> 00:26:54,640
Speaker 1: work so well for them, their immunocompromise for example, or children,

478
00:26:54,920 --> 00:27:00,280
Speaker 1: or um, you know, some particularly older adults, to people

479
00:27:00,320 --> 00:27:03,840
Speaker 1: even if they're vaccinated in some cases. I apologize to interrupt,

480
00:27:03,880 --> 00:27:05,560
Speaker 1: but this is a really crucial point that I really

481
00:27:05,560 --> 00:27:09,600
Speaker 1: haven't heard before. The vaccine does not work for certain individuals.

482
00:27:09,600 --> 00:27:14,080
Speaker 1: How many people are we talking about, Well, they're probably uh,

483
00:27:14,119 --> 00:27:16,960
Speaker 1: you know, hundreds of thousands of not maybe a little

484
00:27:16,960 --> 00:27:19,639
Speaker 1: bit more than a million something like that. Who have

485
00:27:20,359 --> 00:27:23,919
Speaker 1: you know, such significant medical conditions that they're just not

486
00:27:23,960 --> 00:27:26,159
Speaker 1: going to react to the vaccine. It may even be

487
00:27:26,200 --> 00:27:29,199
Speaker 1: more as you consider people and immun suppressive drugs. We

488
00:27:29,240 --> 00:27:32,320
Speaker 1: don't know exactly how much risk they're at, but it

489
00:27:32,359 --> 00:27:34,800
Speaker 1: looks like they're not responding to the vaccine as well,

490
00:27:34,840 --> 00:27:37,760
Speaker 1: and some people may not be responding at all, so

491
00:27:37,800 --> 00:27:39,879
Speaker 1: they have to worry that they're going to come in

492
00:27:39,920 --> 00:27:42,560
Speaker 1: contact with somebody who is infectious. Now, if you're in

493
00:27:42,600 --> 00:27:45,560
Speaker 1: an area without you know, very many cases, that risk

494
00:27:45,680 --> 00:27:48,760
Speaker 1: is low. But as long as the virus is really

495
00:27:48,800 --> 00:27:51,080
Speaker 1: spreading in parts of the country, you know that risk

496
00:27:51,200 --> 00:27:53,000
Speaker 1: is going to be there. Dr sharfs Sceine. I think

497
00:27:53,000 --> 00:27:56,359
Speaker 1: the confusion also stems from the uncertainty around what the

498
00:27:56,400 --> 00:27:58,840
Speaker 1: threshold is to return to normal life, and our the

499
00:27:58,880 --> 00:28:02,119
Speaker 1: United Kingdom is struggling with this as well. Does it become,

500
00:28:02,160 --> 00:28:05,080
Speaker 1: as John has talked about, a public health issue when

501
00:28:05,119 --> 00:28:08,160
Speaker 1: we have individuals who might suffer, but as a whole,

502
00:28:08,520 --> 00:28:10,800
Speaker 1: the health care system is not going to be torpedoed

503
00:28:10,960 --> 00:28:15,480
Speaker 1: by a flood of cases. Well, I think it it

504
00:28:15,720 --> 00:28:18,239
Speaker 1: matters that you know the health care system is going

505
00:28:18,280 --> 00:28:21,399
Speaker 1: to be stable. I think that does allow for um,

506
00:28:21,440 --> 00:28:24,040
Speaker 1: you know a lot of things to return to normal, um,

507
00:28:24,160 --> 00:28:27,159
Speaker 1: but it still makes it unfortunate for people who have

508
00:28:27,200 --> 00:28:30,840
Speaker 1: to take extra protections if they're doing that, because you

509
00:28:30,840 --> 00:28:34,400
Speaker 1: know other people haven't decided to be vaccinated. It's even

510
00:28:34,440 --> 00:28:36,560
Speaker 1: worse for the people who haven't decided to be vaccinated

511
00:28:36,560 --> 00:28:39,160
Speaker 1: because their at risk for getting very sick or dying.

512
00:28:39,560 --> 00:28:44,480
Speaker 1: How close are we to an under twelve vaccine? UM?

513
00:28:44,520 --> 00:28:46,880
Speaker 1: You know, I think you have to wait for the

514
00:28:47,400 --> 00:28:50,080
Speaker 1: studies to be done right now. The companies are looking

515
00:28:50,160 --> 00:28:53,360
Speaker 1: for the right dose UM, to make sure that you know,

516
00:28:53,400 --> 00:28:56,320
Speaker 1: they have a dose that is both able to create

517
00:28:57,040 --> 00:29:01,080
Speaker 1: the protection but without you know, uh side effects UM.

518
00:29:01,120 --> 00:29:03,920
Speaker 1: And so until we know, until we see the data,

519
00:29:04,240 --> 00:29:06,240
Speaker 1: it's hard to say. The studies are going on, and

520
00:29:06,280 --> 00:29:09,880
Speaker 1: I think we'll have probably the early readouts in the

521
00:29:09,920 --> 00:29:11,840
Speaker 1: next couple of months, don't do I still haven't got

522
00:29:11,880 --> 00:29:16,880
Speaker 1: a clear read on this. Why are we vaccinating children? Well,

523
00:29:16,880 --> 00:29:20,440
Speaker 1: we're vaccinating right now. We're vaccinating adolescents because they can

524
00:29:20,480 --> 00:29:23,479
Speaker 1: get COVID, many of them have. They can get severe

525
00:29:23,520 --> 00:29:25,960
Speaker 1: cases of COVID, they can pass it on to people

526
00:29:26,640 --> 00:29:29,240
Speaker 1: in their peer group and and who are older. So

527
00:29:29,600 --> 00:29:33,360
Speaker 1: you know, the COVID is as bad or worse, UM,

528
00:29:33,400 --> 00:29:37,120
Speaker 1: you know, depending on the prevalence compared to a bad

529
00:29:37,160 --> 00:29:40,760
Speaker 1: flue season. And we vaccine kids against flu, you know, UM,

530
00:29:40,800 --> 00:29:43,560
Speaker 1: it's a horrible disease when kids get it severely and

531
00:29:43,600 --> 00:29:45,800
Speaker 1: they can have long COVID just like adults can. But

532
00:29:45,800 --> 00:29:47,920
Speaker 1: if that points out, we don't shut things down for

533
00:29:47,960 --> 00:29:50,400
Speaker 1: the flu, do we? But we are with this and

534
00:29:50,440 --> 00:29:52,640
Speaker 1: if we are at a stage which you just alluded to,

535
00:29:52,680 --> 00:29:54,719
Speaker 1: so and clarify if you want to where we can

536
00:29:54,760 --> 00:29:57,120
Speaker 1: treat in this as flu, why aren't we treating it

537
00:29:57,160 --> 00:30:00,360
Speaker 1: as flow? Well? I think going in to the fall,

538
00:30:00,440 --> 00:30:02,440
Speaker 1: we're basically going to be We're gonna want kids to

539
00:30:02,480 --> 00:30:04,800
Speaker 1: be vaccinated and they should be back in school. That's

540
00:30:04,840 --> 00:30:07,280
Speaker 1: what we do for flu. Dr Charfs And where have

541
00:30:07,320 --> 00:30:09,800
Speaker 1: we gone wrong when we look at the political divide

542
00:30:09,800 --> 00:30:12,040
Speaker 1: that we see Republicans who are more inclined not to

543
00:30:12,040 --> 00:30:15,720
Speaker 1: get vaccinated and Democrats more inclined to get vaccinated. Where

544
00:30:15,720 --> 00:30:18,200
Speaker 1: have we gone wrong when it comes to messaging on

545
00:30:18,240 --> 00:30:21,680
Speaker 1: a public health level just based on the science. Well

546
00:30:21,800 --> 00:30:24,200
Speaker 1: that's a great question because you wouldn't imagine a political

547
00:30:24,240 --> 00:30:27,480
Speaker 1: divide and cancer treatment or political divide and how to

548
00:30:27,560 --> 00:30:30,600
Speaker 1: treat your ear infection. But suddenly we have what appears

549
00:30:30,600 --> 00:30:32,320
Speaker 1: to be a political divide and whether to get a

550
00:30:32,360 --> 00:30:36,400
Speaker 1: safe in a vector vaccine for a horrible and lethal illness. Um.

551
00:30:36,440 --> 00:30:40,360
Speaker 1: You know, I think that the roots to that are

552
00:30:40,400 --> 00:30:45,560
Speaker 1: probably uh, you know, complicated, but I think it's a

553
00:30:45,680 --> 00:30:49,160
Speaker 1: very bad development that the right wing media have sort

554
00:30:49,200 --> 00:30:52,520
Speaker 1: of adopted this as a political called arms that like,

555
00:30:52,560 --> 00:30:56,120
Speaker 1: if you believe in, you know that you don't like

556
00:30:56,160 --> 00:30:58,719
Speaker 1: the Biden administration, then you shouldn't get vaccinated. And that

557
00:30:58,800 --> 00:31:02,480
Speaker 1: message is just horrible thing for public health. It's really irresponsible.

558
00:31:02,720 --> 00:31:04,760
Speaker 1: People should be able to make a decision to protect

559
00:31:04,840 --> 00:31:07,960
Speaker 1: themselves based on the science and the facts. Doctor thank you,

560
00:31:07,960 --> 00:31:10,240
Speaker 1: gotta leave it that doctor Sha shall stain that of

561
00:31:10,360 --> 00:31:14,880
Speaker 1: Johns Hopkins University. This is the Bloomberg Surveillance Podcast. Thanks

562
00:31:14,880 --> 00:31:18,200
Speaker 1: for listening. Join us live weekdays from seven to ten

563
00:31:18,280 --> 00:31:22,760
Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each

564
00:31:22,840 --> 00:31:26,560
Speaker 1: day from six to nine am for insight from the

565
00:31:26,600 --> 00:31:31,800
Speaker 1: best in economics, finance, investment, and international relations. And subscribe

566
00:31:31,840 --> 00:31:36,800
Speaker 1: to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com,

567
00:31:36,840 --> 00:31:40,080
Speaker 1: and of course on the terminal. I'm Tom Keene and

568
00:31:40,240 --> 00:31:42,120
Speaker 1: this is Bloomberg