Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course, on the Bloomberg Terminal. Michelle Meyer joins
Speaker 1: us this morning. Michelle, a nine and a half percent
Speaker 1: GDP statistic. I want you to frame right now the
Speaker 1: Bank of America guestimate of the path from a boom
Speaker 1: economy to a normal economy. How does that process look sure?
Speaker 1: And I think that's actually the big question. It's trying
Speaker 1: People are trying to figure out what the moderation and
Speaker 1: growth will look like because we know that nine percent growth,
Speaker 1: which is what we're tracking in Q two, is not sustainable.
Speaker 1: So there will be a slow down, and the data
Speaker 1: is already indicating that um but it's slowly, you know,
Speaker 1: in a in a fairly manageable way, all things considered.
Speaker 1: So when you look ahead to the next few quarters,
Speaker 1: we very much believe the economy will be still growing
Speaker 1: well above trend trend being close to two so you'll
Speaker 1: see somewhere in the order of five maybe six percent
Speaker 1: g peak growth on average of the next few quarters.
Speaker 1: It's half the piece that we had in the second quarter.
Speaker 1: But we can't imagine the economy will continue to grow
Speaker 1: with that type of piece, given in the capacity in
Speaker 1: the economy. Dovetailed Bank of America sellside research, your securities
Speaker 1: research into what you and Ethan are doing in economics.
Speaker 1: What is the corporate response to the economy? You imagine, well,
Speaker 1: I mean businesses are investing. Businesses are seeing consumers go
Speaker 1: out and spend. They have cash on hand, and they
Speaker 1: were actively spending on all things good up until recently
Speaker 1: where there's been some slowing and now they're really embracing
Speaker 1: the services side of the economy. But without a doubt,
Speaker 1: the consumers out there participating in the economy, and when
Speaker 1: you see that as the company, you want to go
Speaker 1: out and invest and meet that demand. Um and that's
Speaker 1: very much still what we're seeing in the data flow.
Speaker 1: That seems to be what Morgan Stanley's and I was
Speaker 1: saying also over the weekend when he says that he
Speaker 1: expects a red hot capex cycle to sustain global GDP
Speaker 1: growth above pre COVID levels. Why is that not necessarily
Speaker 1: the case as sort of portrayed by the bond market,
Speaker 1: or in other words, how inconsistent is the bond market
Speaker 1: with some of these projections. Look, I mean, I know
Speaker 1: the last few weeks has been all this debate around
Speaker 1: fundamental and technical factors driving the bond market, But I
Speaker 1: think beyond that, you know, there seems to be this
Speaker 1: storyline or sentiment in the market that, yeah, we can
Speaker 1: have really strong growth and next few quarters by and
Speaker 1: that's still part of the payback from this incredibly artificial
Speaker 1: time in the economy around COVID and the and n's
Speaker 1: doing stimulus. But what's the underlying trend? What's the structural trend?
Speaker 1: Has that changed? Are we going to return to this
Speaker 1: environment of slow under outlying growth. We're gonna return to
Speaker 1: an environment where demographics are still quite negative and depressing,
Speaker 1: where they're still disinflationary in psychology, and I think that
Speaker 1: that's starting to kind of spook the marketing. You can
Speaker 1: see in the longer end of the curve, and that's
Speaker 1: what the FEDS. Tom Barkin was talking about in Wall
Speaker 1: Street Journal article that came out this morning. He really
Speaker 1: pointed to the employment of population ratio, this sort of
Speaker 1: participation rate is still being too low to justify tapering.
Speaker 1: How much, however, can the FED overwhelm some of these
Speaker 1: actual economic inputs with their stimulus. In other words, we
Speaker 1: even have to look at the fundamentals or the fundamentals
Speaker 1: entirely the amount of liquidity pumped in by the Federal Reserve. Yeah, so,
Speaker 1: I mean that is the balance, right Is that the
Speaker 1: FED is you know, a heavy hands in the markets.
Speaker 1: And what the FED is doing today in terms of
Speaker 1: buying and what they are communicating for their future in
Speaker 1: terms of forward guidance and huge right. So, and it's
Speaker 1: not just a FED, it's a whole the central banks
Speaker 1: that are creating these types of challenges for getting a
Speaker 1: clear signal of what's happening in the bond market. Um.
Speaker 1: But going back to your comments around what um Barkin said,
Speaker 1: I think that is super important when you consider where
Speaker 1: the underlying growth rate is in the economy. It's a
Speaker 1: supply side. How much capacity is there for the economy
Speaker 1: to continue to grow? And for that we rely on
Speaker 1: labor force participation people going out and working, and we
Speaker 1: rely on productivity, um, And those two factors I think
Speaker 1: are super important to keep an eye on when you're
Speaker 1: thinking about the long run potential for the economy. Michelle,
Speaker 1: looking at you, like this research on chairman pals testimiar,
Speaker 1: you said the following, we look for him to sound
Speaker 1: relatively more davish than he did during the tune press.
Speaker 1: So why is that, Michelle? You know in the press conference,
Speaker 1: remember he's talking about having the committee and we know
Speaker 1: from the STP, but there are seven of them. The
Speaker 1: officials are looking for a hike next year. So there
Speaker 1: are a lot of voices out there that we're growing
Speaker 1: kind of anxious about what they're seeing on the inflation front.
Speaker 1: And why did you get started with the normalization of policy?
Speaker 1: But we don't think Powell is in that camp of AI,
Speaker 1: and in the testimony to Congress, we think we'll get
Speaker 1: a little more of a sense than that. And we
Speaker 1: also think in the testimony he's really going to reinforce
Speaker 1: how the fair thinks about maximum employment, which remember is
Speaker 1: were broad based um labor market recovery, one where the
Speaker 1: inequalities that we had seen over the last several decades
Speaker 1: could be resolved to some extent that is still really
Speaker 1: poor to I think what's your power is trying to
Speaker 1: accomplish with this new framework. Well, let's get into that.
Speaker 1: I read the Monechy policy report that came out on Friday,
Speaker 1: which will service the basis for this testimony length to
Speaker 1: this week case. The line that jumped down to a
Speaker 1: lot of people, the post pandemic labor market and the
Speaker 1: characteristics characteristics of maximum employment may well be different from
Speaker 1: those of early What do you think againting at there,
Speaker 1: I think the idea they have, you know, changed the
Speaker 1: definition of maximum employment. It's not just getting the U
Speaker 1: three unemployment rate down to call it four to four
Speaker 1: and a half percent. It's about getting an environment where
Speaker 1: that unemployment rate is down across the economy, um, where
Speaker 1: the employment of population ratio for prime working and individuals
Speaker 1: is back up as well across the time. You know,
Speaker 1: it's not gonna be perfect, right, and there's gonna be
Speaker 1: a lot of challenges. At some point you're gonna really
Speaker 1: get this tension between the tightness and parts of the
Speaker 1: labor market versus the age, inflation or underlying price pressures.
Speaker 1: I know, I know what Jackson hole you've pushed then aside,
Speaker 1: You're gonna be out there, Michelle, probably under the white
Speaker 1: tent and the lawn chairs for the Saturday speech. Are
Speaker 1: you telling me we have a central bank committing social
Speaker 1: policy now with monetary tools. Look, it's not social policy,
Speaker 1: and the fact would be very clear that they're not
Speaker 1: trying to you know, uh, move one part of the
Speaker 1: economy versus the other. Right, that's fiscal policy. Well, the
Speaker 1: fet is saying is in order to have a complete recovery,
Speaker 1: and one that we think we'll be able to, you know,
Speaker 1: can hinue because you have broad based wage growth, because
Speaker 1: you have the ability to seek broad based price pressures
Speaker 1: in the economy. It needs to be a complete recovery.
Speaker 1: And that was the lesson that I think they learned,
Speaker 1: one of many in the last cycle that came out
Speaker 1: of the FED listens events is that if you don't
Speaker 1: have the economy, you know, increasing across the spectrum, it
Speaker 1: may end up not lasting or you end up damaging
Speaker 1: your long run potential even more. I look at this, Michelle,
Speaker 1: I got it, you know, Michelle, I'm just sort of
Speaker 1: dazzled by all the theory that's getting out. Can we
Speaker 1: go back to core values, core knowledge? How some house
Speaker 1: the housing market? Michelle, I mean this is how you
Speaker 1: became famous. Do you believe in this housing rally or
Speaker 1: the suburbanistic outside New York. If I was by chance
Speaker 1: north and Westchester and if by chance I loaded the
Speaker 1: boat right now on one point seven five million, am
Speaker 1: I going to enjoy that at one point three million
Speaker 1: when this natural disaster is over, just by chance, just
Speaker 1: because by chance? Um? Right? Yeah? So for anybody moving
Speaker 1: to Westchester? Um No, So I think, um, I think
Speaker 1: there's been a lot of movement. Clearly, there's been a
Speaker 1: lot of turn in the housing market. We've seen that
Speaker 1: in terms of the volumes um and part of that
Speaker 1: is because after the pandemic, people thought differently about where
Speaker 1: they want to live. It was very clear in the surveys.
Speaker 1: Part of it was because people had cash just spend
Speaker 1: if they weren't going out traveling, et cetera, so they
Speaker 1: went and bought goods. Housing is one of them. So
Speaker 1: there was definitely a distortion in the timing of the
Speaker 1: housing market. And we're still picking up the pieces from that,
Speaker 1: because you can see that the supply side was not
Speaker 1: already to accommodate this big increase in demand. Quite the contrary,
Speaker 1: builders kind of froze when the pandemic hit naturally, so
Speaker 1: inventory was very low and demand just greatly exceeded expectations
Speaker 1: in that create this big price increase. It's not sustainable,
Speaker 1: we will see and we are already seeing demand pulling
Speaker 1: from the highs at the end of last year. We
Speaker 1: are seeing now construction start to pick up, inventory levels
Speaker 1: start to pick up that and take some of the
Speaker 1: pressure off of home price appreciation. Are we going to
Speaker 1: see housing crash? No? Are we going to see uh
Speaker 1: further slow down? Yeah? I think so, And that makes sense.
Speaker 1: Home price appreciation should come off of these crazy high
Speaker 1: levels that just don't add up with what you're seeing
Speaker 1: in the broader economy. Michelle love to catch up Michelle,
Speaker 1: Bank America looking ahead to a ky week with inflation
Speaker 1: TOTA tomorrow and of course Cham and Paus testimate a
Speaker 1: little bit later in the week. Right now, we start
Speaker 1: strong with a gentleman looking not only making the relative
Speaker 1: move in the market, but the absolute move as well.
Speaker 1: Skybridge Capital has been steeped in moving money to hedge funds,
Speaker 1: trying to get big return this year. That's sport. Troy
Speaker 1: Gayski joins us right now, whether Italy or England, what
Speaker 1: is it for hedge funds? Right now given the confusion
Speaker 1: that we see out there, is it an up yere
Speaker 1: or down here? Yea, so far it's been a reasonable year.
Speaker 1: I think the most important point that we make to
Speaker 1: our clients is, just like broader markets, it's the first,
Speaker 1: shelby last, and the last shall be first. What that
Speaker 1: means is that managers that outperformed last year mainly because
Speaker 1: they were long growth and secular growth stories have underperformed
Speaker 1: because you had about a four month under performance period there,
Speaker 1: and managers more focused on cyclical strategies like structure credit
Speaker 1: or distress credit of outperformed as economic strength has been
Speaker 1: very pronounced. So you know, more broadly going forward, the
Speaker 1: market or the industry is still overweight secular growth, but
Speaker 1: a lot of these value places still we think have legs.
Speaker 1: Do you think the conviction around cyclical growth stories Troy
Speaker 1: how French down? Do you think that is if it exists?
Speaker 1: And so given what we've say now that the the last
Speaker 1: week cold it takes the move into bond market and
Speaker 1: it just completely upsets any confidence people have about where
Speaker 1: they are in the equity market. Yeah, well again, sector
Speaker 1: rotation this year has been more critical than it has
Speaker 1: in the past, So first five months you had significant
Speaker 1: underperformance of growth versus value and cyclicals, and so no
Speaker 1: surprise obviously sicklically focused managers in which there are very
Speaker 1: few left by the way, because of the years of underperformance. UM,
Speaker 1: they they had very strong starts. Last month, however you
Speaker 1: started see secular growth reassert itself and so you do
Speaker 1: have a very fragile dynamic between those factor rotations, and
Speaker 1: that continues to keep hedge funds up at night. Do
Speaker 1: they have the right balance? Are they two over their
Speaker 1: skis and one factor or the other? So let's talk
Speaker 1: about active management. Why do I need active management when
Speaker 1: the smpages seems to be doing old the hand work
Speaker 1: for me. Yeah, I'll tell you the FED keeps pumping
Speaker 1: in liquidity. We have plus annualized growth rates. Obviously, you
Speaker 1: guys have been discussing where bond yields are. Um. You know,
Speaker 1: at the end of the day, active management, it's why
Speaker 1: do you have it? Part of it is the non correlation.
Speaker 1: So you have either stocks or you have bonds. Obviously
Speaker 1: bonds look even more so now like return free risk. Obviously,
Speaker 1: when yields get up to one point six one point seven,
Speaker 1: you had some upside or extremely low real return rates.
Speaker 1: Now UM, so if hedge funds are act the managers
Speaker 1: can out perform fixed income and high yield and provide
Speaker 1: some correlation benefit to equities. That's still the value proposition.
Speaker 1: It should be easier to outperform bonds going forward and
Speaker 1: equities at twenty two times two earnings. You know how
Speaker 1: much more multiple expansions left there, Troy. One of the
Speaker 1: active decisions has been to go into bitcoite, and I
Speaker 1: know that you have been a pretty big proponent of that,
Speaker 1: and we've seen the bitcoins price basically have since the
Speaker 1: peak that we saw over in April. What did you
Speaker 1: do during this period of time? Yes, So for us,
Speaker 1: basically what we did is we trimmed the position in
Speaker 1: order to keep it from growing further. UM. In our
Speaker 1: portfolios at then of the March is we had more
Speaker 1: outflows than inflows UM, and since then we've rotated a
Speaker 1: small amount of the capital into ethereum. We view the
Speaker 1: market pretty straightforward, is you know, bitcoin will be the
Speaker 1: market leader in terms of store value and ethereum at
Speaker 1: least so far as the market leader in terms of
Speaker 1: transaction transaction use. So we wanted a little bit of
Speaker 1: diversification there. All in all, we have a nine percent
Speaker 1: position size, and when we look right now the on
Speaker 1: chain data, what is basically telling you is a lot
Speaker 1: of the strongholders are reasserting themselves and accumulating from those
Speaker 1: that got into the market late last year, and that
Speaker 1: is setting itself up for some type of supply shock
Speaker 1: very similar to what we had last October November. Um,
Speaker 1: so it's going to be a volatile asset, but it
Speaker 1: continues to be very non correlated, and we think the
Speaker 1: risk reward is now skewed again to the upside. So Troy,
Speaker 1: perhaps there will be future gains. But when it comes
Speaker 1: to justifying active management to clients, how do you discuss
Speaker 1: your investment in bitcoin when it is volatile and sort
Speaker 1: of argue that this is a reason to go into
Speaker 1: the fund even though it is an unproven asset class,
Speaker 1: that it does have all of the ups and downs
Speaker 1: that can be rather unpredictable. Oh yeah, look, I mean
Speaker 1: part of active management again is trying to identify Nassan
Speaker 1: asset classes that have asymmetric risk return and again we're
Speaker 1: in the non correlation business, or trying to generate returns
Speaker 1: that are differentiated from equities and fixed income. So so
Speaker 1: that's what drew us to bitcoin initially. And then of
Speaker 1: course if you look at the broader macro environment of
Speaker 1: incredible money supply growth still record low, you know, ten
Speaker 1: year yields for instance, the adoption cycle that continues, we
Speaker 1: think that small part of our portfolio can provide non
Speaker 1: correlation and asymmetric upside. And then of course over time
Speaker 1: we have to manage that relative to other positions as
Speaker 1: we evolve. Tell me about earning season and the long
Speaker 1: short structure. Right now, tech has researched. Yes, our hedge
Speaker 1: phones exposed to Apple and Amazon. Are they an afterthought
Speaker 1: from another time? And no? So you know we've talked
Speaker 1: about this in the past. Facebook and Google are more
Speaker 1: heavily owned, more visible. Yes, so those are those of
Speaker 1: the of the fangs or or the large cat make interesting. Yeah,
Speaker 1: the most heavily owned. And you know, the view there
Speaker 1: is that a lot of the antitrust action when it
Speaker 1: come to pass that. You know, if you look at
Speaker 1: cash flow growth as well as earnings growth over time,
Speaker 1: you get a very reasonable multiple. Um. You know, Amazon
Speaker 1: is probably the third in the list. There hasn't been
Speaker 1: really heavy ownership of Apple um and you know, I
Speaker 1: keep pointing out the act if you look at a
Speaker 1: guy like Seth Klarman, who's one of the greatest value
Speaker 1: investors that I think any of us have ever seen.
Speaker 1: You know, two of his largest ten equity names are
Speaker 1: Facebook and Google, which says a lot, right, and that
Speaker 1: it's very rare that you can have megacat tech stocks
Speaker 1: be viewed as value, which is sort of a reverse
Speaker 1: of the whole mindset of the market. You're an m
Speaker 1: I T engineer. Were you dazzled by our calculus earlier
Speaker 1: on the Carmen line and the difference between Brandson and Bezos.
Speaker 1: I'll tell you, honestly, I haven't focused on that in
Speaker 1: so long. It was like it was like a breath
Speaker 1: of fresh air. I'm trying to memorize the equation. So
Speaker 1: I'll tell you guys a funny story. My first engineering
Speaker 1: class I ever took it un I T was actually
Speaker 1: fluid mechanics, and it really blew my mind. You went
Speaker 1: from you know, math calculus to real engineering and it
Speaker 1: was like, oh my goodness, this is really really hard.
Speaker 1: So that that was the was your textbook, Serisan Zamanski Uh,
Speaker 1: it was not. I don't remember exactly who the authors were,
Speaker 1: but it was just tears. I won't even tell you
Speaker 1: what I got on my first test score because I'll
Speaker 1: never have you back on air again. But let me
Speaker 1: let me just tell you it wasn't an A. But
Speaker 1: I didn't finish you in the class, so I been
Speaker 1: white lone. It's good at you back in Troy. What
Speaker 1: we did in Alto Bumps look over here. Yeah, no,
Speaker 1: it's it's really great to be back here, and thanks
Speaker 1: for having me on. It's always chin a commercial break.
Speaker 1: Vincent Reinhardt joins us. He is Melan Investment Management, chief
Speaker 1: economist and macro strategist, but far more is encyclopedic on
Speaker 1: the research paths plural that we have taken over the
Speaker 1: many decades leading the research effort at the FED a
Speaker 1: number of years ago, Professor Reinert, thank you so much
Speaker 1: for joining us, vincent Reinhart. When you look at the
Speaker 1: Leaguard Powell Nexus, how are they attached right now? They
Speaker 1: share a love of ambiguity and of talking a lot. Uh,
Speaker 1: They'll take every platform they can, and right now they're
Speaker 1: both in the position of wanting to reassure markets that
Speaker 1: they are they know what they're doing. They have a
Speaker 1: new framework and they're putting that framework in place. For
Speaker 1: President le guard it's only a week old and that's
Speaker 1: why you see her UH and and pretty much all
Speaker 1: the ECB leadership have been been out and force over
Speaker 1: the weekend through this morning evince. The framework that they're
Speaker 1: putting in place will be tested by data. Does the
Speaker 1: framework collapse when the data moves against these central banks? Uh?
Speaker 1: It will be a test of whether they're willing to
Speaker 1: follow through with what they've said they have UH. The
Speaker 1: features the similarities between the AT in the e c
Speaker 1: B or two fold. Number One is they interpret their
Speaker 1: two percent inflation goal is symmetric. That's news for the ECB.
Speaker 1: And second, it's outcome based, not outlook based, i e.
Speaker 1: Wait until we actually see it happen before responding. Key difference.
Speaker 1: ECB hasn't gone fed like in saying the goal is
Speaker 1: an average inflation UH unspecified average. Two. And the one
Speaker 1: thing where they're most similar is their unspecific. Central bankers
Speaker 1: like to pitch a really big tent because that's how
Speaker 1: they can get their governing committees together, the FMC and
Speaker 1: the Government Council, and so they use ambiguous words. They
Speaker 1: don't they'll tolerate and overshoot. But how long an overshoot,
Speaker 1: how big an overshoot, we don't know. Well within the
Speaker 1: language is unambiguous. Concern about housing prices, the idea that
Speaker 1: we've seen a huge move in that on both sides
Speaker 1: of the Atlantic. We've seen this the Federal Reserve as
Speaker 1: well as from the e CPS. Christine Laguard, What do
Speaker 1: you expect, What measures do you expect from central bankers
Speaker 1: to try to tame housing prices or will they just
Speaker 1: say this is a necessary consequence to a policy that
Speaker 1: otherwise helps the economy. Well, here's an irony. The c
Speaker 1: B wants to add uh owner's equivalent rent into their
Speaker 1: price index because it makes it go up up higher,
Speaker 1: So they're actually welcoming that little extra kick to inflation
Speaker 1: to get closer to their goal. What can they do, Um,
Speaker 1: there's monetary policy and regulatory policy in the same building.
Speaker 1: Expect to see them to tighten up where they can
Speaker 1: in terms of supervisory restraint. If it's a it's a problem,
Speaker 1: it's a problem they would prefer to address from that
Speaker 1: side of the building right now, Um, They're overwhelming concern
Speaker 1: is a macro one the level of employment. UH, and
Speaker 1: therefore they're not going to adjust the setting a rate
Speaker 1: nor their balance sheet UH to worry about housing. Fed's
Speaker 1: got an opportunity when it does start the taper, though,
Speaker 1: because it could slow purchases of mortgage backed securities by
Speaker 1: by a quicker pace than it could do treasury securities.
Speaker 1: That would be a way to send the signal. And
Speaker 1: that's something that I know a number of FED officials
Speaker 1: have actually discussed, and people are wondering whether that will
Speaker 1: be where they start. I want to dig into one
Speaker 1: thing that you said, which is they know that they're
Speaker 1: pretty far away from their employment targets. And Tom asked
Speaker 1: the question earlier. Is the Federal Reserve trying to set
Speaker 1: social policy in some ways with its targets given the
Speaker 1: fact that it has such a multifaceted kind of definition
Speaker 1: of full employment. So I think that the reality is
Speaker 1: we're putting new new labels on old bottles. That's true
Speaker 1: both at the ECB and and in FED Reserved. ECB
Speaker 1: is going to adjust its and direct its policy toward
Speaker 1: climate change. Exactly tell me how you do that? UM?
Speaker 1: I think in this environment, share pal has actually been
Speaker 1: at the forefront of explaining what the central Bank has
Speaker 1: always done in a way to to reach more people.
Speaker 1: And the way you reach more people is you talk
Speaker 1: about their economic circumstance. You don't focus on on aggregates.
Speaker 1: Economists can be can can can get apart from the
Speaker 1: real world by focusing on concepts and numbers rather than
Speaker 1: people's plight and share Pal has done a good job
Speaker 1: of reorienting the focus, but it doesn't change what they're doing.
Speaker 1: It's this is brilliant and they're going to be tested.
Speaker 1: If we look at John Taylor at Stanford, if we
Speaker 1: look at Paul Krugman, it's it's cute wherever he's got
Speaker 1: a shingle out today. The Venn diagram of Taylor and
Speaker 1: Krugman does have a lot of overlap, but that overlap
Speaker 1: isn't an overt social policy. How do we have a
Speaker 1: social bank given the heritage from mc chesney Martin. So
Speaker 1: I think you're right there, Tom, and it is a
Speaker 1: fundamental problem in the design of organizations. The FETE is
Speaker 1: incredibly opaque. Right if you give it a lot of goals,
Speaker 1: it doesn't have many tools to hit all those goals.
Speaker 1: And so how will you be able to govern the
Speaker 1: trade offs unelected officials are are making. Um, do you
Speaker 1: really want the interest rate to be somewhat different because
Speaker 1: j Pal feels it's better for climate change this month,
Speaker 1: or rather, when you give them more narrow focus, you
Speaker 1: can monitor them better on how well they're actually doing
Speaker 1: their jobs. That's right. Now. What does Chairman Powell not
Speaker 1: want to say this week? To me? This is so
Speaker 1: much what not to say. He doesn't want to make news.
Speaker 1: He doesn't want to make your next show interesting, because
Speaker 1: if he makes news, then is he said something different?
Speaker 1: He said something that was surprising. He wants to say
Speaker 1: everything's on course, that they are worried about the pandemic.
Speaker 1: Of course they've sat there pleased with unfolding economic data.
Speaker 1: But there's a long way to go. Yeah, and he's
Speaker 1: got it. But he's also got to reassure you they
Speaker 1: got the tools and fool kit. They'll do whatever it takes.
Speaker 1: So he's got a walk of fine line, Vince one
Speaker 1: thing that he keeps harping on. A number of other
Speaker 1: Fed officials as well, including Tom Barkin of Richmond, have
Speaker 1: talked about the participation rate and how low it has
Speaker 1: remained despite the economic recovery that we have. How do
Speaker 1: you expect the Fed to explain that the frictions that
Speaker 1: seem to be taking a longer than expected time to resolve. Yeah,
Speaker 1: they usuld just the semi annual Monetary Report what Friday night,
Speaker 1: it did a good job of talking about those problems
Speaker 1: in labor market matching and Charepal talked about at the
Speaker 1: press conference too. Basically, we did the easy stuff last
Speaker 1: year where people who had positions went back to work
Speaker 1: when when market activity resumed. Now we're in the much
Speaker 1: harder process of labor market clearing, where people have to
Speaker 1: find new positions, new jobs. The unemployed people now are
Speaker 1: job less. Uh. Some of the unemployed employed people last
Speaker 1: year had jobs. The businesses were just temporarily closed. And
Speaker 1: so now the matching takes time, and people frustrated by
Speaker 1: the match leave the labor force, People who retired don't
Speaker 1: come back, people go to off you know, um uh
Speaker 1: black market activities too, uh and and people get frustrated
Speaker 1: and and that's why it takes a while for this
Speaker 1: part of the labor mark. Uh. This this part of
Speaker 1: labor market clearing, and that's why the Federal Reserve is
Speaker 1: going to keep policy accommodated for a long time. I
Speaker 1: at least through gonna catch you have to get that perspective,
Speaker 1: that framework for thinking about things right now, Vince Ryan
Speaker 1: Hot there they met an investment management chief economist and
Speaker 1: macroish strategists right now with an update, joshra Sharpstein, Johns Hopkins,
Speaker 1: and Professor Sharpstein. I just really wanted to go to
Speaker 1: what came up, not once, not twice, but three times
Speaker 1: this weekend. Fauci says, there's a schism in America. It's
Speaker 1: a division to split, a rift, a breach, a rupture,
Speaker 1: a break of separation. What do you do on the
Speaker 1: delta viron variant if you're in a part of America
Speaker 1: that's seventy vaccinated, Well, there are parts of America that
Speaker 1: are vaccinated percent backaccinated, and those are the parts which
Speaker 1: are now seeing not only in increase in cases, but
Speaker 1: an increase in hospitalizations due to the delta variants. So
Speaker 1: you know, it's like here we go again in those places,
Speaker 1: and you know it's really important to be vaccinated there.
Speaker 1: But more generally, it reflects um a big problem that
Speaker 1: that we're having having you know, having people ready for them.
Speaker 1: I get that, but what do we do in the
Speaker 1: parts of the country that are sixty seventy or even
Speaker 1: more percent vaccinated. Do we just go on with our
Speaker 1: lives or do we have to amend our lives because
Speaker 1: another part of America's down at thirty eight percent. Well,
Speaker 1: as long as there are places that are thirty eight percent,
Speaker 1: the places that are at you know, seventy or eighty
Speaker 1: are going to be at risk. Now that people who
Speaker 1: are vaccinated right now are pretty protected, but what about
Speaker 1: people who have conditions that you know, the vaccine doesn't
Speaker 1: work so well for them, their immunocompromise for example, or children,
Speaker 1: or um, you know, some particularly older adults, to people
Speaker 1: even if they're vaccinated in some cases. I apologize to interrupt,
Speaker 1: but this is a really crucial point that I really
Speaker 1: haven't heard before. The vaccine does not work for certain individuals.
Speaker 1: How many people are we talking about, Well, they're probably uh,
Speaker 1: you know, hundreds of thousands of not maybe a little
Speaker 1: bit more than a million something like that. Who have
Speaker 1: you know, such significant medical conditions that they're just not
Speaker 1: going to react to the vaccine. It may even be
Speaker 1: more as you consider people and immun suppressive drugs. We
Speaker 1: don't know exactly how much risk they're at, but it
Speaker 1: looks like they're not responding to the vaccine as well,
Speaker 1: and some people may not be responding at all, so
Speaker 1: they have to worry that they're going to come in
Speaker 1: contact with somebody who is infectious. Now, if you're in
Speaker 1: an area without you know, very many cases, that risk
Speaker 1: is low. But as long as the virus is really
Speaker 1: spreading in parts of the country, you know that risk
Speaker 1: is going to be there. Dr sharfs Sceine. I think
Speaker 1: the confusion also stems from the uncertainty around what the
Speaker 1: threshold is to return to normal life, and our the
Speaker 1: United Kingdom is struggling with this as well. Does it become,
Speaker 1: as John has talked about, a public health issue when
Speaker 1: we have individuals who might suffer, but as a whole,
Speaker 1: the health care system is not going to be torpedoed
Speaker 1: by a flood of cases. Well, I think it it
Speaker 1: matters that you know the health care system is going
Speaker 1: to be stable. I think that does allow for um,
Speaker 1: you know a lot of things to return to normal, um,
Speaker 1: but it still makes it unfortunate for people who have
Speaker 1: to take extra protections if they're doing that, because you
Speaker 1: know other people haven't decided to be vaccinated. It's even
Speaker 1: worse for the people who haven't decided to be vaccinated
Speaker 1: because their at risk for getting very sick or dying.
Speaker 1: How close are we to an under twelve vaccine? UM?
Speaker 1: You know, I think you have to wait for the
Speaker 1: studies to be done right now. The companies are looking
Speaker 1: for the right dose UM, to make sure that you know,
Speaker 1: they have a dose that is both able to create
Speaker 1: the protection but without you know, uh side effects UM.
Speaker 1: And so until we know, until we see the data,
Speaker 1: it's hard to say. The studies are going on, and
Speaker 1: I think we'll have probably the early readouts in the
Speaker 1: next couple of months, don't do I still haven't got
Speaker 1: a clear read on this. Why are we vaccinating children? Well,
Speaker 1: we're vaccinating right now. We're vaccinating adolescents because they can
Speaker 1: get COVID, many of them have. They can get severe
Speaker 1: cases of COVID, they can pass it on to people
Speaker 1: in their peer group and and who are older. So
Speaker 1: you know, the COVID is as bad or worse, UM,
Speaker 1: you know, depending on the prevalence compared to a bad
Speaker 1: flue season. And we vaccine kids against flu, you know, UM,
Speaker 1: it's a horrible disease when kids get it severely and
Speaker 1: they can have long COVID just like adults can. But
Speaker 1: if that points out, we don't shut things down for
Speaker 1: the flu, do we? But we are with this and
Speaker 1: if we are at a stage which you just alluded to,
Speaker 1: so and clarify if you want to where we can
Speaker 1: treat in this as flu, why aren't we treating it
Speaker 1: as flow? Well? I think going in to the fall,
Speaker 1: we're basically going to be We're gonna want kids to
Speaker 1: be vaccinated and they should be back in school. That's
Speaker 1: what we do for flu. Dr Charfs And where have
Speaker 1: we gone wrong when we look at the political divide
Speaker 1: that we see Republicans who are more inclined not to
Speaker 1: get vaccinated and Democrats more inclined to get vaccinated. Where
Speaker 1: have we gone wrong when it comes to messaging on
Speaker 1: a public health level just based on the science. Well
Speaker 1: that's a great question because you wouldn't imagine a political
Speaker 1: divide and cancer treatment or political divide and how to
Speaker 1: treat your ear infection. But suddenly we have what appears
Speaker 1: to be a political divide and whether to get a
Speaker 1: safe in a vector vaccine for a horrible and lethal illness. Um.
Speaker 1: You know, I think that the roots to that are
Speaker 1: probably uh, you know, complicated, but I think it's a
Speaker 1: very bad development that the right wing media have sort
Speaker 1: of adopted this as a political called arms that like,
Speaker 1: if you believe in, you know that you don't like
Speaker 1: the Biden administration, then you shouldn't get vaccinated. And that
Speaker 1: message is just horrible thing for public health. It's really irresponsible.
Speaker 1: People should be able to make a decision to protect
Speaker 1: themselves based on the science and the facts. Doctor thank you,
Speaker 1: gotta leave it that doctor Sha shall stain that of
Speaker 1: Johns Hopkins University. This is the Bloomberg Surveillance Podcast. Thanks
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Speaker 1: and of course on the terminal. I'm Tom Keene and
Speaker 1: this is Bloomberg