WEBVTT - The October Consumer Confidence Index 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.560 along with essential market moving news. Kind the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:19.560 and on Bloomberg dot com. Now, let's turn our attention 0:00:19.600 --> 0:00:21.720 to the economic data that came out this morning, because 0:00:21.760 --> 0:00:24.760 consumer confidence is not quite as robust as we might 0:00:24.840 --> 0:00:28.600 have thought. Consumer confidence for October coming in at one 0:00:29.000 --> 0:00:31.560 point nine, so not a terrible reading, but not as 0:00:31.560 --> 0:00:34.760 good as economis are anticipating. On the September number was 0:00:34.800 --> 0:00:38.879 revised lower. Lynn Franco is Director of Economic Indicators at 0:00:38.920 --> 0:00:42.640 the Conference Board. Lynn, should we start getting concerned or 0:00:42.720 --> 0:00:47.000 is this still healthy reading? It's a healthy reading. What 0:00:47.000 --> 0:00:49.000 we're really seeing is that there's been sort of no 0:00:49.120 --> 0:00:53.080 significant traction in consumer confidence. We had sort of a 0:00:53.120 --> 0:00:56.680 sharp rebound, um, you know, sort of post pandemic, but 0:00:56.800 --> 0:01:00.280 then we've sort of been moving a little bit sideways here. 0:01:01.080 --> 0:01:04.040 So Lynn, I mean, I guess it's not surprising that 0:01:04.080 --> 0:01:07.160 we're moving sideways, as you suggest, given where we are 0:01:07.720 --> 0:01:10.680 with the labor market and even some of the metrics 0:01:10.760 --> 0:01:14.720 for the virus on a global scale. Um, what are 0:01:15.400 --> 0:01:17.720 what are the consumers? What's their outlook? I guess for 0:01:17.720 --> 0:01:22.440 the near term, Well, what we're seeing right now is um. 0:01:22.480 --> 0:01:25.240 You know, it's the labor market that grove both the 0:01:25.280 --> 0:01:28.800 improvement in the present Situation Index and also the decline 0:01:28.800 --> 0:01:32.199 and expectations. So while they're telling us that the job 0:01:32.280 --> 0:01:36.000 market has improved, you know, sort of from the lows 0:01:36.120 --> 0:01:39.600 of post pandemic levels, they really don't expect much of 0:01:39.600 --> 0:01:42.959 that momentum to continue through the end of the year 0:01:43.040 --> 0:01:46.440 and into next year. So it's kind of a glass 0:01:46.440 --> 0:01:49.680 half empty, half full, where you know, conditions have not improved, 0:01:49.800 --> 0:01:53.480 but they necessarily haven't gotten much worse either. Yeah. I 0:01:53.520 --> 0:01:56.720 mean the three months moving average has gone to nine 0:01:57.200 --> 0:02:00.080 point two, all the way from one seven point re 0:02:00.280 --> 0:02:04.320 back in March. What's a useful comparison here, Lynn, So 0:02:04.480 --> 0:02:07.040 obviously March probably isn't the best comparison, even though it 0:02:07.080 --> 0:02:12.400 looks quite quite the difference. I think the key here 0:02:12.720 --> 0:02:15.919 is the trend, right, So we've seen your confidence to 0:02:16.040 --> 0:02:18.840 bounce up, they then bounce down and up and down. 0:02:19.200 --> 0:02:21.160 So would really like to see it gain a little 0:02:21.160 --> 0:02:23.720 bit of traction in and upward direction, and that's going 0:02:23.720 --> 0:02:27.240 to be heavily dependent on what happens in the labor market. 0:02:27.400 --> 0:02:30.120 And while you know, unemployment claims have have come down, 0:02:30.160 --> 0:02:33.760 they still remain high. Unemployment is still high, and we 0:02:33.840 --> 0:02:36.640 expect to you know, softening in the labor market. So 0:02:36.720 --> 0:02:39.360 we could continue around these levels through the end of 0:02:39.360 --> 0:02:42.840 the year. And you know, one of the areas of 0:02:42.840 --> 0:02:46.000 the economy that just it surprises me a little bit 0:02:46.040 --> 0:02:48.680 how strong it is is the housing market. How does 0:02:48.680 --> 0:02:52.320 that play into the consumer um given that it can 0:02:52.320 --> 0:02:56.239 be such a big part of the consumer's net worth. Well, 0:02:56.280 --> 0:02:58.120 I guess it's probably having a little bit of a 0:02:58.160 --> 0:03:00.720 positive impact. We did see a slight uptick in the 0:03:00.720 --> 0:03:03.640 percent of consumers which had the intern intended to purchase 0:03:03.760 --> 0:03:06.240 home over the next six months. That has to do 0:03:06.320 --> 0:03:09.640 a lot with low interest rates. But the key is 0:03:09.639 --> 0:03:12.200 going to be the labor market and what happens there 0:03:12.240 --> 0:03:16.680 is really going to determine the direction that consumer competence procedures. 0:03:17.200 --> 0:03:19.120 Well in the state of you dive into all sorts 0:03:19.160 --> 0:03:22.480 of things like when consumers might be planning to buy 0:03:22.520 --> 0:03:25.600 a refrigerator or a major appliance when there's a vacation 0:03:25.639 --> 0:03:28.799 intended and it's interesting to see that. Yeah, there's a 0:03:28.880 --> 0:03:32.440 reading of forty four point six for people intending to 0:03:32.520 --> 0:03:35.920 vacation within six months, but almost all of those are 0:03:35.920 --> 0:03:38.440 intending to vacation in the United States, and there's only 0:03:38.520 --> 0:03:42.000 a tiny number that's a seven point two number looking 0:03:42.040 --> 0:03:46.360 to vacation in a foreign country. Absolutely, you know, we 0:03:46.400 --> 0:03:48.400 did have a pretty good rebound in terms of the 0:03:48.480 --> 0:03:52.000 vacation intention to this month, but it's well below fifty 0:03:52.040 --> 0:03:55.240 four nine that we saw, you know, back earlier this year. 0:03:55.800 --> 0:03:58.960 And again we've got a lot of travel restrictions. Um, 0:03:59.000 --> 0:04:03.400 you know, there's also pandemic concerns, so we're seeing that 0:04:03.520 --> 0:04:07.640 people are choosing to vacation locally and the means of 0:04:07.680 --> 0:04:10.280 travel preferred is an auto. We did see a little 0:04:10.280 --> 0:04:12.440 bit of an uptick in terms of those willing to 0:04:12.600 --> 0:04:16.000 sort of you know, fly to destinations, but it's really 0:04:16.000 --> 0:04:19.479 sort of more about local vacation. Hey, Lynn, thanks so 0:04:19.560 --> 0:04:22.000 much for joining us. We appreciate this getting an update 0:04:22.120 --> 0:04:25.880 on the consumer. Lynn Franco, Senior Director of Economic Indicators 0:04:25.880 --> 0:04:28.720 and Surveys at the Conference board. Vannie, would you hop 0:04:28.800 --> 0:04:31.360 on a plane to go on vacation. You know, I 0:04:31.360 --> 0:04:33.920 wouldn't bull Yeah, yeah, but then I'm not even doing 0:04:33.920 --> 0:04:37.960 outdoor dining yet, so not really typical down the middle. 0:04:38.120 --> 0:04:40.000 All right, you're taking a conservative we I'm coming into 0:04:40.279 --> 0:04:42.880 Q So I guess there's a few other things too. Yeah, 0:04:43.120 --> 0:04:45.720 you worry about Yeah, you listen to the airlines of 0:04:45.760 --> 0:04:48.039 an you know, they're just not seeing that pick up 0:04:48.080 --> 0:04:51.480 and demand. And I guess it's probably not surprising given 0:04:51.520 --> 0:04:54.360 that we're seeing a surgeon cases. So you know, consumer 0:04:54.400 --> 0:04:58.200 travel leisure continues to be under pressure. Well, Vannie. When 0:04:58.240 --> 0:05:01.080 I started my career, it was at the Chase Manhattan Bank, 0:05:01.160 --> 0:05:04.640 and we made big corporate loans to big media companies, 0:05:04.640 --> 0:05:08.680 and the way we charged interest was libor plus some 0:05:09.120 --> 0:05:13.239 premium rate, uh, depending upon the credit worthiness of the borrower, 0:05:13.600 --> 0:05:16.040 so live or the limit. I think it's the London 0:05:16.120 --> 0:05:19.160 interbank offer rate effect. Can remember back all the way 0:05:19.279 --> 0:05:21.840 back to my Chase days. Um, that's kind of been 0:05:21.880 --> 0:05:25.000 the basis of borrowing rates. But that's about the change. 0:05:25.040 --> 0:05:27.320 Let's get some color on that with Ira Jersey, chief 0:05:27.480 --> 0:05:31.200 US interest rate strategist for Bloomberg Intelligence. Ira tell us 0:05:31.200 --> 0:05:36.159 about libor and what maybe changing UH with that base rate. Yeah, 0:05:36.200 --> 0:05:40.600 so the base rate is UH basically scheduled to go 0:05:40.640 --> 0:05:43.719 away at the end of UM at least that's what 0:05:43.839 --> 0:05:47.640 the Financial Conduct Authority, which is the regulator of almost 0:05:47.640 --> 0:05:51.400 everything financial in in England. UM. You know, LIBOR was 0:05:51.480 --> 0:05:55.440 much aligned during the Great UH financial Crisis back in 0:05:55.480 --> 0:05:58.200 two thousand seven to two thousand nine, and starting in 0:05:58.240 --> 0:06:01.000 two thousand thirteen, there was a real push by regulators 0:06:01.040 --> 0:06:05.400 to find replacement rates for live war globally and UM 0:06:05.480 --> 0:06:08.320 and a lot of countries have have different rates, and 0:06:08.360 --> 0:06:11.000 many of them found different rates that that they're comfortable using. 0:06:11.480 --> 0:06:14.200 In the US, the primary rate that a lot of 0:06:14.240 --> 0:06:18.760 instruments will UH will basically transfer to is called the 0:06:18.880 --> 0:06:23.160 secured Overnight Financing Rate or SOFA, which is basically UH 0:06:23.240 --> 0:06:27.440 calculated based on repurchase agreements which are loan secured by 0:06:27.480 --> 0:06:30.920 treasuries so UM. So that's why you know that there's 0:06:31.040 --> 0:06:33.520 hundreds of trillions of dollars of these loans outstanding. So 0:06:33.560 --> 0:06:35.159 this is quite a big deal, and I think it 0:06:35.200 --> 0:06:39.120 hasn't gotten attention it really deserves by the broader market. Well, 0:06:39.160 --> 0:06:42.360 and let's just fill in the reasoning why this all happened. 0:06:42.760 --> 0:06:44.599 Lie war was one of the sort of the old 0:06:44.680 --> 0:06:47.800 guards of finance. It was hilarious. The way it was 0:06:47.839 --> 0:06:50.880 calculated daily was you just put out a bunch of 0:06:50.880 --> 0:06:53.960 asks to different banks and you've got a whole bunch 0:06:54.000 --> 0:06:56.800 back and the top three in the bottom three were 0:06:56.839 --> 0:06:59.080 mixed together and you've got some kind of the rate 0:06:59.080 --> 0:07:03.120 and d and then you know this. Well, then it 0:07:03.120 --> 0:07:05.520 turned out that people were actually manipulating it a little 0:07:05.560 --> 0:07:08.520 bit give us some background. Yeah, so so the way 0:07:08.520 --> 0:07:11.240 that that librars calculated it's basically a survey of the 0:07:11.360 --> 0:07:15.040 banks within the panel that are all London based banks 0:07:15.200 --> 0:07:17.920 and they then take a trim mean And what happened 0:07:17.960 --> 0:07:22.240 was during the crisis, um there there were um uh 0:07:22.680 --> 0:07:25.720 banks basically that that put in rates that weren't real 0:07:25.920 --> 0:07:28.040 that that it wasn't really where they could fund because 0:07:28.040 --> 0:07:31.400 they're supposed to be basically honest about what what they 0:07:32.080 --> 0:07:33.880 where they can fund in any given day, and that's 0:07:33.920 --> 0:07:36.000 the rate they're supposed to submit and they didn't do that. 0:07:36.080 --> 0:07:40.560 And what what what regulators found and what even courts 0:07:40.560 --> 0:07:43.200 found because there were court cases based on this is 0:07:43.440 --> 0:07:46.480 as well as just regulatory finds that that were passed 0:07:46.480 --> 0:07:50.120 out in the tunes of hundreds of millions of dollars UM. 0:07:50.520 --> 0:07:54.000 They basically that they found that it was open to manipulation. 0:07:54.320 --> 0:07:56.720 So some banks wanted to pull out of these panels 0:07:56.720 --> 0:08:00.640 to limit their litigation risk um for being part of 0:08:00.640 --> 0:08:03.520 the Liveboard panel. And as as part of them not 0:08:03.600 --> 0:08:06.240 pulling out UM, some of the regulators said, well, let's 0:08:06.280 --> 0:08:09.160 think about getting getting away from live board at some 0:08:09.200 --> 0:08:11.480 point in the future, and that date was tagged at 0:08:11.480 --> 0:08:15.760 the end of So so this whole transition process has 0:08:16.040 --> 0:08:19.240 really started in earnest in two thousand and seventeen, but 0:08:19.280 --> 0:08:21.800 it's really had to pick up steam because we're we're 0:08:21.840 --> 0:08:25.040 only you know, we're only fourteen months away from from 0:08:25.040 --> 0:08:28.040 basically library going away, which like I mentioned and like 0:08:28.040 --> 0:08:30.440 like Paul had mentioned before, it's been ubiquitous for the 0:08:30.520 --> 0:08:33.760 last three generations, right, So, um, this is not an 0:08:33.760 --> 0:08:35.960 easy task and something that everyone has to pay more 0:08:35.960 --> 0:08:40.160 attention to. So if I'm holding a bond and it 0:08:40.240 --> 0:08:42.840 pays me live War plus two and a half percent 0:08:43.280 --> 0:08:48.640 come the end of what's going to happen? So so 0:08:48.679 --> 0:08:51.360 that's a good question. So for most instruments, what will 0:08:51.400 --> 0:08:54.760 happen is live Board will become this secured overnight financing 0:08:54.800 --> 0:08:57.920 rate plus a spread and and we estimate, we actually 0:08:57.960 --> 0:09:01.400 put this out, uh, just a small wing, we estimate 0:09:01.440 --> 0:09:04.160 that that spread will be twenty three basis points at 0:09:04.160 --> 0:09:06.880 the end of So basically you're going to be paid 0:09:07.160 --> 0:09:10.680 twenty three basis points plus plus whatever SOFA is on 0:09:10.720 --> 0:09:16.040 an ongoing basis UM. And so this is a problem 0:09:16.080 --> 0:09:18.840 for some banks because with a fixed spread or with 0:09:19.080 --> 0:09:22.520 using this you know, treasury based secured rate instead of 0:09:22.880 --> 0:09:26.199 a credit based rate like library was supposed to be UM, 0:09:26.480 --> 0:09:28.600 it changes a lot of the calculus in the way 0:09:28.600 --> 0:09:31.040 that UM, in a way that banks fund, and in 0:09:31.080 --> 0:09:33.360 a way that they're going to make loans going forward. 0:09:33.640 --> 0:09:35.400 So if you have a loan, it will still be 0:09:35.400 --> 0:09:37.360 a floating rate, but it will be more interest rate 0:09:37.400 --> 0:09:40.600 based as opposed to the credit spread based, which which 0:09:40.640 --> 0:09:43.040 does have implications for the way that you hedge or 0:09:43.080 --> 0:09:46.679 the way that you you think about your loans going forward. Yeah, 0:09:46.720 --> 0:09:49.160 and just full disposure. Bloomberg had actually put in an 0:09:49.200 --> 0:09:52.680 idea for replacing the librar at the time as well. 0:09:52.679 --> 0:09:55.240 There was a sort of a request out there for 0:09:55.280 --> 0:09:59.920 public commentary, and I believe that Bloomberg had one POTENTI 0:10:00.120 --> 0:10:04.320 chill replacement for a library. So so fur then, I mean, 0:10:04.400 --> 0:10:06.640 is it still going to be you know, London banks 0:10:06.640 --> 0:10:08.600 based or I mean if I'm if I'm paying a 0:10:08.600 --> 0:10:10.880 mortgage in Wisconsin and my credit is not particularly high, 0:10:10.920 --> 0:10:13.040 am I still going to be you know, basing my 0:10:13.240 --> 0:10:15.439 repayments on on what some bankers and London thank you 0:10:15.720 --> 0:10:18.760 so so no, so SOFA is based on an actual market. 0:10:18.840 --> 0:10:21.880 So it's based on the the way that that banks 0:10:21.920 --> 0:10:26.360 and and hedge funds and um and broker dealers basically 0:10:26.400 --> 0:10:29.840 trade and and lend treasury securities to each other within 0:10:29.880 --> 0:10:32.960 the US. So it's it's a very very liquid market. 0:10:33.080 --> 0:10:37.240 There's over nine billion dollars of transactions every day. It's 0:10:37.280 --> 0:10:39.679 one of the most liquid markets in the world. So 0:10:40.040 --> 0:10:43.040 um so so basically you're you're at the whim more 0:10:43.080 --> 0:10:45.960 of dealer balance sheets and bank balance sheets than you 0:10:46.000 --> 0:10:48.560 are worrying about, you know, whether or not you know, 0:10:48.600 --> 0:10:53.560 in London, there's enough dollars for Barclay's Bank to the 0:10:53.600 --> 0:10:56.480 fund themselves, which is what happened during the during the 0:10:56.520 --> 0:10:59.240 financial crisis. So so it's it's a it's a big 0:10:59.280 --> 0:11:02.920 shift and it's a change of mentality because um, you 0:11:02.960 --> 0:11:05.800 won't be paying more if banks find find it hard 0:11:05.840 --> 0:11:09.400 to fund. Um, you'll be paying more if uh um, 0:11:09.400 --> 0:11:11.520 basically if there's too many treasuries out there for the 0:11:11.520 --> 0:11:15.640 amount that people can lend. I thank you so much, 0:11:15.920 --> 0:11:19.240 Ira Jersey of Bloomberg Intelligence. They're a chief interest rate 0:11:19.320 --> 0:11:24.040 strategists explaining everything to do with s O F or sofer. 0:11:25.280 --> 0:11:28.559 Time for Bloomberg Opinion. We're joined by John Author's Bloomberg 0:11:28.600 --> 0:11:31.680 Opinion columnists covering all things on the markets. He joined 0:11:31.720 --> 0:11:34.240 us from our Bloomberg Interactive Broker studio out within a 0:11:34.440 --> 0:11:36.920 very interesting column just about a topic that you and 0:11:36.960 --> 0:11:39.720 I were talking about just recently. Vanni. It seems like, 0:11:40.080 --> 0:11:42.160 you know, the numbers are so bad as it relates 0:11:42.160 --> 0:11:44.080 to the pandemic. Here, some of the numbers, you know, 0:11:44.120 --> 0:11:46.400 as bad as we saw back in March and April. 0:11:46.480 --> 0:11:50.200 Yet the markets generally behaving much much better now than 0:11:50.240 --> 0:11:52.600 they were back in March, and able to get a 0:11:52.600 --> 0:11:54.840 sense of why that might be. We welcome John John, 0:11:54.880 --> 0:11:56.679 thanks so much for joining us here. Let's talk about 0:11:56.720 --> 0:12:01.480 your recent column, Covics nineteen. What are you thinking about? 0:12:02.520 --> 0:12:06.440 I think we're getting to a point where the market 0:12:06.720 --> 0:12:14.360 has to accept that the risks of COVID to economic activity, 0:12:14.400 --> 0:12:18.000 and that's obviously what matters primarily to two markets is 0:12:18.040 --> 0:12:20.480 how much of an effect it has on stuff being 0:12:20.960 --> 0:12:27.120 bought and sold, have risen, have returned, and that does 0:12:27.320 --> 0:12:32.160 need now to be reflected in prices. Now. It's obviously 0:12:32.280 --> 0:12:37.240 very easy to get very much into big, polarized oppositional 0:12:37.800 --> 0:12:45.040 discussions on this. It's obvious that the medical community is 0:12:45.040 --> 0:12:47.800 getting much better at people keeping people alive when they 0:12:47.840 --> 0:12:52.160 catch this, and it's also obvious that we're all learning 0:12:52.240 --> 0:12:55.199 how to keep at least a certain level of activity 0:12:55.760 --> 0:12:59.800 going on, even at points when we're worried about it. Um. So, 0:13:00.840 --> 0:13:03.400 you know, there's no question as far as I can see, 0:13:03.400 --> 0:13:06.240 of needing to go down to the kind of depths 0:13:06.280 --> 0:13:11.000 we saw in March. But if you look at the 0:13:11.040 --> 0:13:15.360 economic activity data, you can see even in Germany, which 0:13:15.400 --> 0:13:18.400 is of the you know, the major Western economy is 0:13:18.400 --> 0:13:20.640 the one that's dealt with the virus best to date, 0:13:21.400 --> 0:13:25.320 you are seeing an unmistakable tick up in hospitalizations and 0:13:25.360 --> 0:13:29.720 you're seeing an unmistakable tick down in economic activity, which, 0:13:29.800 --> 0:13:33.120 unlike in the States, really had just about got back 0:13:33.120 --> 0:13:35.960 to normal for a few weeks at the end of 0:13:35.960 --> 0:13:40.360 the summer, and that's obviously likely to be repeated here 0:13:40.360 --> 0:13:43.920 in the States. It doesn't matter exactly what governors say 0:13:44.000 --> 0:13:47.520 or mandate. If people are worried about the virus, that 0:13:47.720 --> 0:13:49.920 that much less likely to go out. It's not like 0:13:50.040 --> 0:13:52.400 we didn't know this was coming, though, John, I mean, 0:13:52.440 --> 0:13:55.520 we've known for a long time that we were likely 0:13:55.559 --> 0:13:57.959 to not get a vaccine this year, at least for 0:13:57.960 --> 0:14:02.720 for the clubs among us. Sorry, m well, there is that. 0:14:02.960 --> 0:14:07.600 I think the issue that arises there the administration calling 0:14:07.640 --> 0:14:10.959 for me. I think the issue that arises there is 0:14:11.760 --> 0:14:17.760 um that. Uh there was and this wasn't ridiculous. There's 0:14:18.200 --> 0:14:22.360 a widespread belief within the market that the the the 0:14:22.440 --> 0:14:25.840 disease had reached what you could call a choke point 0:14:26.960 --> 0:14:32.040 or even herd immunity either. Once a certain number of 0:14:32.080 --> 0:14:36.480 the people who are the most connected, who of of 0:14:36.680 --> 0:14:39.000 necessity on the day to day lives, are the people 0:14:39.040 --> 0:14:42.440 who come into contact with the most other people once 0:14:42.480 --> 0:14:45.040 they've got it. The theory, and it's not that bad. 0:14:45.160 --> 0:14:48.880 Theory was that it would be much harder for the 0:14:48.960 --> 0:14:52.720 disease to spread again, and so in places like where 0:14:52.760 --> 0:14:56.400 we are here in New York or other cities where 0:14:56.400 --> 0:15:02.040 they have been particularly severe outbreaks. The reasonable belief was 0:15:02.120 --> 0:15:04.680 that it just wasn't going to come back with anything 0:15:04.760 --> 0:15:08.840 like that amount of force. Now, you could still argue 0:15:08.880 --> 0:15:12.720 that in most places around the world, cases are picking 0:15:12.840 --> 0:15:18.160 up worst in areas where they've been least problematic before, 0:15:18.200 --> 0:15:21.280 such as the Upper Midwest here in the States. But 0:15:21.440 --> 0:15:23.880 that's beginning to look ever more tenuous that yeah, there 0:15:23.880 --> 0:15:26.200 there are there is a steady drip of news about 0:15:26.200 --> 0:15:28.880 cases here in New York. There's a number of the 0:15:28.920 --> 0:15:32.200 European places that are having problems had already had quite 0:15:32.240 --> 0:15:37.440 severe outbreaks before. So I think there was a reasonable 0:15:37.560 --> 0:15:43.280 degree of hope, justified or not, that we really weren't 0:15:43.320 --> 0:15:46.600 going to get a sign significant recurrence in the places 0:15:46.640 --> 0:15:50.520 we've had it already. And we're now seeing the markets 0:15:50.520 --> 0:15:54.520 beginning to retreat from that hope. And John, you know, 0:15:54.560 --> 0:15:56.480 I think just looking at Europe there seemed to be 0:15:56.480 --> 0:15:58.680 a little bit of ahead of us again here, and 0:15:58.680 --> 0:16:03.440 we're starting to see some shutdowns in France and Spain 0:16:03.520 --> 0:16:07.440 and other areas and the UK and the UK and 0:16:07.520 --> 0:16:11.280 it's only October, you know, I think it's would it 0:16:11.280 --> 0:16:15.080 be reasonable for people to say this could get materially 0:16:15.200 --> 0:16:20.680 worse as we really get into December, January, February. Yes, 0:16:20.760 --> 0:16:23.840 it would be reasonable to to say that this is 0:16:23.840 --> 0:16:27.720 a time when people are more likely to stay in anyway, 0:16:27.800 --> 0:16:33.520 we have the psychological issue of Christmas coming up. In Britain. 0:16:33.600 --> 0:16:36.560 The rule at the present is is no more than 0:16:36.640 --> 0:16:42.040 six people gathering together in more you know, in indoors, 0:16:42.920 --> 0:16:45.160 even if they're members of the family in the areas 0:16:45.160 --> 0:16:49.200 that are most affected, which basically for most extended families 0:16:49.200 --> 0:16:55.200 means no Christmas dinner, which is a very big families. 0:16:55.240 --> 0:16:57.280 By the way, well there is there there is that 0:16:57.400 --> 0:16:59.840 it might it might actually be bad for the marriage 0:17:00.000 --> 0:17:03.960 its industry, but bad for divorce lawyers. But yet there 0:17:04.040 --> 0:17:07.800 might be slightly at stress there. But but those are 0:17:07.840 --> 0:17:11.480 those are significant issues. And also I nearly missed this 0:17:11.520 --> 0:17:13.920 interview because I was having my flu shot. We are 0:17:14.000 --> 0:17:17.960 now into flu season, uh, and the symptoms of the 0:17:18.040 --> 0:17:22.640 two are quite similar to each other, which gives reasons 0:17:22.720 --> 0:17:25.480 for concern. If you've just had COVID and then you 0:17:25.520 --> 0:17:29.120 get flu, we don't know what that's going to be like, etcetera. Yeah, 0:17:29.119 --> 0:17:31.240 that there are I think there are good reasons to 0:17:31.280 --> 0:17:34.480 believe that this is not going to be as deadly 0:17:34.800 --> 0:17:37.639 per se as it was before, but it could easily 0:17:37.640 --> 0:17:42.199 be very disruptive if Biden wins the presidency, Do the 0:17:42.240 --> 0:17:45.480 markets price out a little bit of the COVID premium 0:17:45.560 --> 0:17:49.000 or the COVID discount in the sense that it's unlikely 0:17:49.200 --> 0:17:53.480 that Biden wouldn't implement some federal sort of orders if 0:17:53.520 --> 0:17:55.359 it came to that, Whereas at the moment we know 0:17:55.400 --> 0:18:00.159 we're not getting those kinds of orders. I I doubt 0:18:00.240 --> 0:18:04.000 partly because he's not getting it. He's not getting in 0:18:04.080 --> 0:18:09.640 until January the earliest um, by which point, even if 0:18:09.640 --> 0:18:12.040 things are terrible, you would if things are at the 0:18:12.160 --> 0:18:16.040 very worst, then the precedent of Spanish flu in nine 0:18:16.280 --> 0:18:18.280 eighteen suggests that by then it would more or lesser 0:18:18.280 --> 0:18:24.600 blown itself out anyway, So I doubt I doubt it 0:18:24.640 --> 0:18:28.600 would have that big There are many other reasons why 0:18:28.640 --> 0:18:32.399 a Biden victory would affect the market. I don't see 0:18:32.400 --> 0:18:37.280 it's having that big of an effect. And at this point, 0:18:37.400 --> 0:18:43.400 masks are so politicized. You could have a federal mask mandate, 0:18:44.280 --> 0:18:48.720 and I'm not sure how big an effect on people's 0:18:48.760 --> 0:18:53.520 behavior that would have a good point here, So I 0:18:53.800 --> 0:18:55.600 it just feels like, you know, you could make an 0:18:55.640 --> 0:18:59.080 argument for uh, you know, some real risk in the 0:18:59.160 --> 0:19:02.560 near term. On yes, I mean, there are plenty of 0:19:02.560 --> 0:19:04.760 other reasons for risk in the very near term as well, 0:19:04.760 --> 0:19:07.919 but people were hoping COVID wasn't one of them, and 0:19:08.119 --> 0:19:10.439 they're giving up on that type. Hi, John, thanks so 0:19:10.480 --> 0:19:13.040 much for joining us, and congratulations on your flu shot. 0:19:13.040 --> 0:19:15.000 Always going to get that out of the way. John Authors, 0:19:15.000 --> 0:19:19.440 Bloomberg Markets Senior editor, giving us his thoughts on potential 0:19:19.440 --> 0:19:21.600 for near term volatile I'm looking at the vix here, 0:19:22.160 --> 0:19:24.680 which is something that Tom Pein loves to call out 0:19:24.720 --> 0:19:26.960 every morning. The vix is above thirty three. That's a 0:19:27.080 --> 0:19:31.520 relatively high level, indicating some risky in the market. Well, 0:19:31.520 --> 0:19:35.840 our next guest has degrees in Russian, Eastern European, and 0:19:35.880 --> 0:19:39.000 Central Asian studies from Harvard University, so the natural place 0:19:39.080 --> 0:19:42.400 for her to end up is leading up Third Bridges 0:19:42.560 --> 0:19:47.400 coverage in therapeutics if you don't mind. Thanks to Jaylan Mamadama, 0:19:47.520 --> 0:19:51.720 who does lead up the healthcare analysis at Third Bridge, 0:19:51.840 --> 0:19:55.080 for joining us. Jollen, you know, I was being a 0:19:55.119 --> 0:19:57.760 little facetious earlier, but it is wonderful to have all 0:19:57.760 --> 0:20:00.119 of that in the background, because we're dealing with a 0:20:00.119 --> 0:20:02.760 global pandemic right here, and we're dealing with global companies 0:20:02.800 --> 0:20:06.080 trying to come up with therapeutics, with vaccines and with cures. 0:20:06.440 --> 0:20:08.920 And I'm curious as to you know, where you think 0:20:09.560 --> 0:20:13.680 the first of the the better vaccines. Let's say we'll 0:20:13.720 --> 0:20:18.000 come out of perfect Thank you so much. Funny and 0:20:18.080 --> 0:20:23.520 justin starting up with earnings from Lily Merchanciser this morning, 0:20:23.520 --> 0:20:26.920 he's really key that you're looking at the second half 0:20:26.920 --> 0:20:28.760 in Q three is to see who's done a better 0:20:28.840 --> 0:20:30.920 job in terms of weathering the storm. And this comes 0:20:30.920 --> 0:20:34.160 down to the vaccine conversation. Um. The media has really 0:20:34.200 --> 0:20:36.320 portrayed us to who's going to come to the market 0:20:36.440 --> 0:20:39.600 first and our experts. Do you really think fisor biontic 0:20:39.720 --> 0:20:42.880 and what that maderna will be making up the first 0:20:42.880 --> 0:20:46.240 generation of vaccines. Now, having said that, we do think 0:20:46.280 --> 0:20:49.560 that the most important mechanism to look after is them 0:20:49.600 --> 0:20:52.399 to be the durability for longevity of the efficacy in 0:20:52.480 --> 0:20:56.960 a mass population, as well as the safety pertaining to 0:20:57.280 --> 0:20:59.680 the durability mechanism. And what I mean by that is 0:20:59.680 --> 0:21:01.520 that there's a window of time where the patient isn't 0:21:01.560 --> 0:21:06.280 client uh to get more infected due to declining antibodies. 0:21:06.320 --> 0:21:09.040 Now as we were pertain to the RNA vaccine, So 0:21:09.119 --> 0:21:11.400 both fives are in Maderna. They have historically shown poured 0:21:11.440 --> 0:21:15.720 your ability and T cell responses, but there are um 0:21:15.800 --> 0:21:18.400 not too many safety concerns, and looking at the ste 0:21:18.560 --> 0:21:23.159 Way guideline not being a strict but efficiency and the 0:21:23.280 --> 0:21:26.440 meeting two months follow up, we essentially see these first 0:21:26.440 --> 0:21:30.080 coming to market, capturing maybe about fifty percent share, and 0:21:30.080 --> 0:21:33.359 then leveling off until we see more durable options come 0:21:33.400 --> 0:21:36.840 out out of the novavaxes, the j and Jason and 0:21:37.119 --> 0:21:41.160 the Marks and especially also both on the preventative vaccines 0:21:41.280 --> 0:21:45.440 and on the prophylactic sides like with the oral antivio 0:21:45.520 --> 0:21:48.960 agents that both fives are working on. So, Jaylen, is 0:21:48.960 --> 0:21:52.800 it the expectation within the health care community that um, 0:21:52.920 --> 0:21:57.360 there will be one kind of go to vaccine or 0:21:57.400 --> 0:22:00.880 will there be kind of a cocktail or uh approach 0:22:00.920 --> 0:22:03.000 where maybe some people will get one or more of 0:22:03.000 --> 0:22:04.840 this vaccine and others will get one or more of 0:22:04.880 --> 0:22:09.760 that vaccine. What's the expectation currently? Yeah, So definitely, although 0:22:09.800 --> 0:22:11.680 I don't like to talk about this in terms of winners, 0:22:11.800 --> 0:22:14.560 there will be three four candidates out there, right, and 0:22:14.960 --> 0:22:18.640 just from the standpoint of of getting the vaccine administrat 0:22:18.680 --> 0:22:21.160 a mass scale, we are going to need a few 0:22:21.200 --> 0:22:24.919 of those players now. In terms of considerations on administration, 0:22:25.320 --> 0:22:28.480 the elderly are the average population and the We saw 0:22:28.480 --> 0:22:31.480 a recent JAMA article noting that you know, living your 0:22:31.560 --> 0:22:35.000 technology platforms like the R and AS, there are safety 0:22:35.040 --> 0:22:39.280 reservations as to the adoption uh in in those you know, 0:22:39.320 --> 0:22:41.840 older populations. For us, when you look at Mark although 0:22:41.960 --> 0:22:45.160 much later entrance in the in the game um they're 0:22:45.280 --> 0:22:48.679 using their established DSc vector platform that has shown amazing 0:22:48.680 --> 0:22:52.200 efvocacy of the bowl of vaccine. Right, it's also going 0:22:52.240 --> 0:22:55.640 to be potentially in single dose and oral formulation, which 0:22:55.640 --> 0:22:58.160