WEBVTT - Surveillance: Reworking Market Power with Stiglitz 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.400 Bloomberg dot Com, and of course on the Bloomberg. Joining 0:00:27.520 --> 0:00:30.080 us now, someone who had to sit there with student 0:00:30.160 --> 0:00:33.080 yelling and straighten her out, Joseph Stiglers joins us the 0:00:33.120 --> 0:00:37.160 Nobel Laureate from Columbia University. Joe Stiglers, What was Cherry 0:00:37.280 --> 0:00:40.600 Yelling like as a student? She was great. She was 0:00:40.640 --> 0:00:43.879 one of the best students I had. She was one 0:00:43.880 --> 0:00:46.519 of my students in the very beginning of my teaching. 0:00:47.320 --> 0:00:50.879 She looked up to her promise and I'll say the 0:00:50.960 --> 0:00:53.120 least probably she taught you some things while she was 0:00:53.159 --> 0:00:56.720 your student as well. She was that acclaimed without questions 0:00:56.760 --> 0:00:59.959 through all of her work. Joe Stiglets, I wanted dovetail 0:01:00.000 --> 0:01:03.320 in your the political season or the economics at hand. 0:01:03.800 --> 0:01:07.680 Joe Biden is a certain kind of Democrat. If he 0:01:07.880 --> 0:01:13.080 takes the trophy, can the Democratic Party find a middle ground, 0:01:13.680 --> 0:01:18.000 a common voice with the rest of America to actually 0:01:18.160 --> 0:01:25.200 pass legislation and make policy? Oh? Absolutely, I believe actually 0:01:25.240 --> 0:01:29.440 there's a broadnsensus in America on a whole wide range 0:01:29.440 --> 0:01:33.120 of issues, and I think Biden is is in a 0:01:33.160 --> 0:01:37.080 position to create that middle ground, to get that common 0:01:37.160 --> 0:01:43.319 agenda adopted. For instincts. Uh, we're concerned. Everybody is concerned 0:01:43.360 --> 0:01:47.000 about healthcare, at the cost of healthcare, access to healthcare. 0:01:47.920 --> 0:01:52.800 The proposal of public option is a good way of 0:01:52.840 --> 0:01:55.680 getting it to everybody. So you're looking at this with 0:01:55.760 --> 0:02:00.320 your new book, People Power and Profits, Progressive Capitalism for 0:02:00.400 --> 0:02:04.080 an Age of Discontent, Joe, you brought that where you 0:02:04.200 --> 0:02:09.079 brought our Steinbeck over to the American economic mind with discontent. 0:02:09.320 --> 0:02:16.000 This discontent now is absolutely extraordinary. What can a legitimate 0:02:16.040 --> 0:02:21.560 Biden policy accomplish? What's the first order condition? You see, 0:02:22.639 --> 0:02:26.480 the first order is getting the economy going again. And 0:02:26.600 --> 0:02:30.640 Janet was absolutely right. There is right now a need 0:02:30.680 --> 0:02:36.240 for fiscal support, especially at the bottom. You know, people 0:02:36.280 --> 0:02:39.680 talk about a K shaped recovery. It's absolutely true those 0:02:39.720 --> 0:02:43.200 of the bottom are having a very hard time. Uh. 0:02:43.240 --> 0:02:47.960 The unemployment rate among uh certain groups of the population 0:02:48.040 --> 0:02:53.079 are very elevated. Uh So, Uh, that's one thing, But 0:02:53.120 --> 0:02:56.480 there are certain sectors of the economy that are badly 0:02:56.520 --> 0:02:59.919 afflicted and they need assistance brings things. I'm in one 0:03:00.000 --> 0:03:05.160 of those, the education sector, research sector, and those are 0:03:05.240 --> 0:03:07.920 sectors that are going to be vital to the country's future. 0:03:08.360 --> 0:03:11.840 If we let those uh weekend, we're not going to 0:03:12.040 --> 0:03:14.880 have uh We're gonna have a weak economy now, but 0:03:14.919 --> 0:03:17.160 we're gonna have an even weaker economy in the future. 0:03:17.960 --> 0:03:20.120 One thing we've been talking a lot about Professor Siglat's 0:03:20.200 --> 0:03:22.079 in the past few months has been g d P 0:03:22.520 --> 0:03:24.880 and how it's going to go down dramatically on the 0:03:24.880 --> 0:03:27.600 heels of the pandemic. And you were recently quoted in 0:03:27.639 --> 0:03:30.720 a Bloomberg article about how this is not a great 0:03:30.800 --> 0:03:34.160 measure of people's well being. You also said high prices 0:03:34.160 --> 0:03:36.920 in the stock market are an even worse indicator of 0:03:36.960 --> 0:03:39.839 societal well being. Focusing on the wrong things can lead 0:03:39.960 --> 0:03:43.920 to taking the wrong actions. What wrong actions have we 0:03:44.040 --> 0:03:49.280 been taking up till now. Well, the focus on the 0:03:49.320 --> 0:03:53.840 stock market really is perverse because we know underlying the 0:03:53.880 --> 0:03:58.720 growth in the stock market are a few companies Silicon Valley, 0:03:58.840 --> 0:04:02.560 the digital giants doing very well, UH as a result 0:04:02.600 --> 0:04:06.840 of their monopoly power. UH. People going the stock market 0:04:06.880 --> 0:04:10.320 because interest rates are so low returns, the bonds are 0:04:10.360 --> 0:04:13.680 so low that they're piling into the stock market, and 0:04:13.760 --> 0:04:16.680 wages are not doing very well, and that helps the 0:04:16.680 --> 0:04:20.159 stock market. But all those are things that are weakening 0:04:20.240 --> 0:04:24.600 our economy, so it's almost perverse. The strong stock market 0:04:25.880 --> 0:04:29.400 is almost assigned that things are not going well in 0:04:29.440 --> 0:04:32.760 other parts of the economy. So precisely, we need to 0:04:32.839 --> 0:04:36.120 focus on the role of market power in our economy. 0:04:36.640 --> 0:04:40.839 The low wages, the fact that at the bottom wages 0:04:40.880 --> 0:04:43.920 are the same as they work sixty five years ago, 0:04:44.040 --> 0:04:49.200 adjusted for inflation. Uh, And most importantly, we need the 0:04:49.279 --> 0:04:53.919 aggregate demand going up so that the economy so that 0:04:54.000 --> 0:04:58.920 their jobs are there for uh, for all Americans, and 0:04:59.080 --> 0:05:01.800 that won't happen been uh if we don't have that 0:05:01.880 --> 0:05:06.320 fiscal stock stimulus that Janet was talking about yesterday. This 0:05:06.360 --> 0:05:10.359 is an incredibly important point, the idea that the prices 0:05:10.400 --> 0:05:14.359 on stocks could actually be evidence of something counter to 0:05:14.440 --> 0:05:17.200 what may be the healthiest for the underlying economy. Do 0:05:17.279 --> 0:05:19.719 you think that the response from the Federal Reserve, the 0:05:19.760 --> 0:05:23.960 US Treasure Department in Congress has actually increased the disparity 0:05:23.960 --> 0:05:27.360 and access to funding for small and larger companies at 0:05:27.360 --> 0:05:34.600 a time when we see unprecedented bankruptcies among smaller businesses. Well, actually, actually, uh, 0:05:34.920 --> 0:05:38.360 very many aspects of what you just raised. Um. There 0:05:38.440 --> 0:05:41.159 was a program created at the very beginning called p 0:05:41.279 --> 0:05:46.200 PP that was intended to get money to small businesses, 0:05:46.720 --> 0:05:51.080 but it was very badly administered. Uh, and it did work. 0:05:51.120 --> 0:05:53.799 It got money to the richest of the small businesses, 0:05:54.160 --> 0:05:58.159 many of whom were owned by very very rich people. Uh. 0:05:58.200 --> 0:06:02.400 So the intent was perhaps good, but the way it 0:06:02.480 --> 0:06:06.919 was executed by the Trump administration and by the banks, 0:06:07.000 --> 0:06:13.160 quite frankly, uh, was a disaster. Joe. Broadly, the monetary 0:06:13.200 --> 0:06:17.200 policies that we've conducted since the Great Financial Crisis two 0:06:17.240 --> 0:06:22.279 thousand and eight of keeping interest rates very low has 0:06:22.600 --> 0:06:26.640 stimulated the growth and the value of equities. And the 0:06:26.760 --> 0:06:30.919 equities are overwhelmingly owned by the people in the top 0:06:30.920 --> 0:06:34.320 ten percent to one percent, top one tenth of one percent. 0:06:34.839 --> 0:06:40.680 And it's absolutely unambiguous that that monetary policy has increased 0:06:40.680 --> 0:06:44.120 wealth inequalities. Joe Stick, let's us talking with our Sally 0:06:44.200 --> 0:06:47.239 bag Will, who's really really looking at the great divide 0:06:47.240 --> 0:06:49.400 that we see on the streets of New York or frankly, 0:06:49.440 --> 0:06:52.719 I think across any of this nation of small business 0:06:52.800 --> 0:06:57.600 flat on their back. We have financialized the world, there's 0:06:57.600 --> 0:07:00.160 no question we've done that for the benefits it of 0:07:00.240 --> 0:07:03.400 the upper x per cent or others. How do we 0:07:03.520 --> 0:07:08.839 get back to it? How do we escape and definancialize 0:07:09.000 --> 0:07:14.280 in a constructive way? Well, I think first of all, 0:07:14.680 --> 0:07:19.160 we have to uh do two things, uh three things. 0:07:20.000 --> 0:07:23.120 We have to rewrite the rules of the market economy. 0:07:23.160 --> 0:07:26.400 There's too much market power at the top. We talked 0:07:26.440 --> 0:07:29.320 about it in terms of the silk on valley giants, 0:07:29.360 --> 0:07:33.120 but there's a lot more throughout the economy. We've weakened 0:07:33.120 --> 0:07:36.560 the market power bargaining power workers, and that has contributed 0:07:36.720 --> 0:07:40.680 to inequality. We have rules that have led to the 0:07:40.720 --> 0:07:46.880 excessive financialization that you talked about before. Secondly, we have 0:07:46.960 --> 0:07:50.880 a tax system where those are the very top actually 0:07:50.880 --> 0:07:54.840 pay a smaller percentage of their income than those down below. 0:07:55.080 --> 0:07:58.800 You know, Warren Buffett actually complained about it, saying, you know, 0:07:58.840 --> 0:08:01.360 it was wrong that he was paying a lower tax 0:08:01.480 --> 0:08:05.640 rate than his secretary. You're a lot of wealthy people 0:08:05.640 --> 0:08:09.280 who recognize that this is actually back for our economy 0:08:09.440 --> 0:08:12.520 and more. Yeah, Joe, I mean, if you sum up 0:08:12.560 --> 0:08:14.760 the taxes that the rich guys are paying. It's a 0:08:14.760 --> 0:08:17.440 pretty high marginal bracket. It may not be you know, 0:08:17.560 --> 0:08:21.400 Rockefeller s and all that. But if we some if 0:08:21.400 --> 0:08:24.120 we sell every tax up, it's there. How do we 0:08:24.600 --> 0:08:32.480 defense the financialize and deploy capital. Two people starving for capital? 0:08:32.760 --> 0:08:36.880 Apple computer is not starving for capital. They can get 0:08:36.880 --> 0:08:41.199 any billions they want. What about the small businessperson on 0:08:41.320 --> 0:08:46.520 a corner in Tulsa, Oklahoma. Well, that's where we we 0:08:46.640 --> 0:08:51.720 have to refocus our banking system. You know, banks were 0:08:51.760 --> 0:08:57.719 always at the center of providing capital small medium sized businesses. 0:08:58.080 --> 0:09:01.720 You know, if you're a small business, you go raise 0:09:01.880 --> 0:09:05.640 money on the capital market. Uh, you go to your bank. 0:09:06.320 --> 0:09:09.480 And the problem is that the banks over the last 0:09:09.600 --> 0:09:13.280 thirty years have focused their attention on things like issuing 0:09:13.360 --> 0:09:21.880 derivatives CDSS UH, trading UH, commodities UH. They found a 0:09:21.960 --> 0:09:25.480 lot more lucrative ways of making money. Some of it 0:09:25.720 --> 0:09:30.160 actually market manipulation. So if we stop some of their 0:09:30.200 --> 0:09:36.320 bad activities market manipulate manipulation, predatory lending, and encourage them 0:09:36.360 --> 0:09:39.000 to do what their mandate is, which is lending to 0:09:39.080 --> 0:09:43.920 small businesses, I think it would actually create much more opportunities. 0:09:43.960 --> 0:09:45.880 I mean, Lisa, this is the heart of the matter. 0:09:45.960 --> 0:09:49.000 I'm just old enough, unlike the ancient Stiglets who really 0:09:49.000 --> 0:09:52.480 really remembers us out of Gary, Indiana. But Lisa, there 0:09:52.640 --> 0:09:56.000 actually was a time where you did business with your 0:09:56.040 --> 0:09:59.719 local bank or maybe the regional bank. And it's a 0:10:00.040 --> 0:10:03.960 paraded and actually the regional banks anecdotally have been pulling 0:10:03.960 --> 0:10:06.720 back on credit. Professor Siglets, I'm not going to refer 0:10:06.800 --> 0:10:09.960 to your tenure or you know, in terms of teaching 0:10:10.080 --> 0:10:13.079 or anything that Tom was talking about in terms of 0:10:13.120 --> 0:10:16.400 ancient history. I will say, though, going forward, how does 0:10:16.400 --> 0:10:19.440 the economic profession, how do you, as a Nobel laureate, 0:10:19.840 --> 0:10:22.120 get your voice heard to the degree that it needs 0:10:22.120 --> 0:10:25.640 to be heard by policymakers who say economists have gotten 0:10:25.679 --> 0:10:29.240 it wrong numerous times? Why should we follow a theory 0:10:29.600 --> 0:10:32.920 when free market economics has led to the power of 0:10:32.960 --> 0:10:37.480 the United States over the long term, What actually hasn't 0:10:37.520 --> 0:10:41.200 been free market economics has led to the success If 0:10:41.280 --> 0:10:44.679 you look at all the innovations that have been the 0:10:44.760 --> 0:10:50.119 basis of us success, all those innovations have been supported 0:10:50.160 --> 0:10:54.840 by the government. Uh, you know the Internet, Uh, the 0:10:54.920 --> 0:10:59.439 advances in medicine that we're all looking for. Who did 0:10:59.480 --> 0:11:02.160 the research that led to d NA who did the 0:11:02.240 --> 0:11:05.959 research that led to all the major advances in biology. 0:11:06.240 --> 0:11:09.400 Thanks the government. So one of the things I called 0:11:09.440 --> 0:11:13.079 for in my book People Power and Profits is recognized 0:11:13.559 --> 0:11:17.040 recognizing the success of the United States has in the 0:11:17.120 --> 0:11:21.520 past been based on a balance between the market, the government, 0:11:21.520 --> 0:11:25.880 and civil society. We lost that balance beginning with Reagan. 0:11:26.640 --> 0:11:29.760 Uh that said the government was the problem. We now 0:11:29.840 --> 0:11:33.559 in this pandemic have seen that an ill prepared government 0:11:34.360 --> 0:11:38.200 is not there when we need it. And I think 0:11:38.400 --> 0:11:43.000 the strongest argument for UH, what I called for in 0:11:43.040 --> 0:11:45.920 my book People Power and Profits, for a new social 0:11:45.960 --> 0:11:50.040 contract with a new balance, has been precisely the failures 0:11:50.080 --> 0:11:53.439 that we've just seen in this pandemic. Just because you've 0:11:53.440 --> 0:11:55.079 got to leave it there, Thank you so much, and 0:11:55.200 --> 0:11:58.360 particularly thank you for your comments on chariol and early 0:11:58.520 --> 0:12:01.160 in this good discussion, the lawyer from Columbia out with 0:12:01.160 --> 0:12:09.120 a new book on people Power and Profits. Julius Now 0:12:09.120 --> 0:12:12.880 Amy were Silverman obviously capital markets equity derivative strategist. Amy, 0:12:12.920 --> 0:12:15.720 fantastic to get you with us on the program two 0:12:15.720 --> 0:12:19.000 weeks away from an election. It's your world. Volatility was 0:12:19.080 --> 0:12:21.880 so elevated a number of weeks ago. Then people faded it. 0:12:21.920 --> 0:12:23.960 Then we came back a little bit more. What's the 0:12:23.960 --> 0:12:28.960 approach now, I met, Yeah, it's It's been fascinating to 0:12:29.040 --> 0:12:31.320 watch because, as you said, I think the last time 0:12:31.360 --> 0:12:35.920 we spoke, uh, the options market was clearly pricing a 0:12:36.000 --> 0:12:40.520 contested and protracted election with uncertainty very high in December. 0:12:40.960 --> 0:12:44.360 That's completely gone away now. And and to be quite honest, 0:12:44.679 --> 0:12:48.360 the options market is pricing a fairly boring term structure, 0:12:48.360 --> 0:12:51.080 which always makes me a little bit nervous with you know, 0:12:51.160 --> 0:12:55.040 two weeks ago until a pretty major event happening. Uh. 0:12:55.240 --> 0:12:57.560 If I do say, I think at this point we're 0:12:57.600 --> 0:13:02.000 probably under pricing the likelihood that you get that protracted, 0:13:02.040 --> 0:13:05.000 contested election, and we're also pricing a tail of it, 0:13:05.120 --> 0:13:08.600 which is that Trump actually wins the election. Obviously the 0:13:08.640 --> 0:13:12.440 poles say that those are less likely. Um, but remember 0:13:12.520 --> 0:13:16.120 those tales have become fatter in than I would say 0:13:16.160 --> 0:13:19.559 in other years. Any some of the measurements here. Christopher 0:13:19.559 --> 0:13:22.120 own was on the Great Technician the other day was 0:13:22.160 --> 0:13:24.440 trtigous and he was really talking about the breadth of 0:13:24.440 --> 0:13:27.680 this market improving. Do you see that on a fundamental basis? 0:13:29.400 --> 0:13:32.360 I do, And you know, I think There's two things 0:13:32.400 --> 0:13:36.000 that sort of happened. In August. We had unbelievably narrow 0:13:36.040 --> 0:13:39.320 breadth that was really just all tech. Um. You know, 0:13:39.400 --> 0:13:42.640 two things changed coming. The first is people started putting 0:13:42.640 --> 0:13:45.720 on more macro hedges, just simply because we have a U. 0:13:45.760 --> 0:13:48.160 S election, but also just because we're coming into your end. 0:13:48.200 --> 0:13:51.120 So most people who are doing well in their portfolios 0:13:51.120 --> 0:13:54.200 are putting on overall market hedges. And the second is, 0:13:54.480 --> 0:13:56.880 you know, as we head into earning season, people are 0:13:56.920 --> 0:14:01.400 playing names other than obviously they're still paying of playing Facebook, Amazon, 0:14:01.600 --> 0:14:04.440 what have you, but they're also playing other names. So 0:14:04.480 --> 0:14:07.640 we do have improvement in breadth, which obviously helps with 0:14:07.679 --> 0:14:10.840 some of the correlations we're seeing on the index levels. 0:14:11.080 --> 0:14:12.800 I want to build on something that you said to Amy. 0:14:12.840 --> 0:14:15.760 You said that we are currently probably under pricing the 0:14:15.880 --> 0:14:19.880 risk of a contested election. Just how contested does that 0:14:19.920 --> 0:14:22.560 election have to be before it royals the market? And 0:14:22.600 --> 0:14:27.880 how significant could the hell off be? Yeah, two great questions. 0:14:27.960 --> 0:14:32.119 So the time frame that the options market was obsessed 0:14:32.160 --> 0:14:36.080 with was call it November twenty through December eighteenth. So 0:14:36.120 --> 0:14:39.520 that's the period of time between the two options experts. 0:14:40.000 --> 0:14:43.640 We saw that you know, three to four volatibility points, 0:14:43.720 --> 0:14:47.720 fully elevated relative to everything else, and now that's completely 0:14:47.720 --> 0:14:51.520 come down to the point where it's actually under November UM. 0:14:51.600 --> 0:14:54.120 So you know, that tells us that people are not 0:14:54.240 --> 0:14:57.280 focused on that December fourteenth state where the state electors 0:14:57.320 --> 0:15:01.000 are supposed to submit their ballots. That's the time frame originally, Lisa, 0:15:01.080 --> 0:15:03.560 that people were very, very worried about. So call it, 0:15:03.600 --> 0:15:07.240 you know, after election by you know, four weeks UM. 0:15:07.320 --> 0:15:09.280 And then look in terms of the downside that the 0:15:09.360 --> 0:15:12.800 bets we are seeing place has the market down you know, 0:15:12.880 --> 0:15:15.120 at least five percent, but more down to ten percent. 0:15:15.200 --> 0:15:17.320 So those are the hedges. Those are the strikes of 0:15:17.400 --> 0:15:19.680 the hedges that we're seeing places in the market right now. 0:15:20.800 --> 0:15:22.720 So let's talk about how you invest around the Samy. 0:15:22.800 --> 0:15:24.560 I think for a lot of people outside of Wall Street, 0:15:24.600 --> 0:15:27.520 whenever the Amy wi Silverman's, the Julian Emmanuel is the 0:15:27.520 --> 0:15:30.520 Mandy Zoo's come on, people get confused by the language 0:15:30.560 --> 0:15:33.320 the jargon you guys use about this market volatility, you 0:15:33.360 --> 0:15:35.960 know the story. Can you advise people outside of that 0:15:36.000 --> 0:15:38.200 world what on earth they're meant to do going into 0:15:38.240 --> 0:15:41.800 the back end of this year? Sure, you know, I 0:15:41.840 --> 0:15:43.720 think it's just to think of this way. The first 0:15:43.960 --> 0:15:46.640 is I would just think if it is there is 0:15:47.320 --> 0:15:50.680 there is downside concern that that is building, and we 0:15:50.760 --> 0:15:54.080 see that in hedges being placed, but not nearly to 0:15:54.160 --> 0:15:58.200 the extent that we would expect given this environment and 0:15:58.240 --> 0:16:01.720 given this event. So basically the market is not as 0:16:01.760 --> 0:16:04.440 well prepared as it normally is for these kind of 0:16:04.440 --> 0:16:08.240 downside events. And the second is, obviously, if you're looking 0:16:08.280 --> 0:16:11.960 to place a bet to the downside yourself buying put 0:16:11.960 --> 0:16:15.760 options something straightforward where you're protecting against that downside. It's 0:16:15.760 --> 0:16:20.000 still relatively inexpensive because the option market prices for that 0:16:20.120 --> 0:16:22.560 type of protection has declined in the last few weeks 0:16:22.560 --> 0:16:25.000 and has made it cheaper to do that. If I 0:16:25.040 --> 0:16:27.880 look at soap, Proctor and Gamble is a proxy for 0:16:28.000 --> 0:16:32.320 boring within blue chip multinationals. It's a wonderful log linear 0:16:32.400 --> 0:16:36.040 trend for ten years and then like a moonshot P 0:16:36.200 --> 0:16:38.680 and G goes straight up. They've got a three to 0:16:38.800 --> 0:16:42.280 at best four percent dividend growth, yet they're trading at 0:16:42.280 --> 0:16:49.520 a twenty seven multiple. Is that in the textbooks you studied? Yeah, 0:16:49.720 --> 0:16:52.320 you know, look the look a lot of things that 0:16:52.360 --> 0:16:54.480 have happened in this market I have learned are not 0:16:54.600 --> 0:16:57.000 in the textbooks I studies. One of my professors was 0:16:57.120 --> 0:17:00.520 Burton Malkiel, who wrote A random walk. There's pretty good 0:17:00.560 --> 0:17:03.960 and you know he's really good, but you know, he 0:17:04.119 --> 0:17:06.919 taught us about the efficient market hypothesis at for incident 0:17:06.960 --> 0:17:08.720 and then I got into Wall Street and I said, 0:17:09.160 --> 0:17:13.440 works aren't that efficient unfortunately, So yeah, I mean, John, 0:17:13.480 --> 0:17:16.520 this is a really important observation by miss Silverman. You're 0:17:16.560 --> 0:17:20.480 the idea, the idea. We forget John about where these 0:17:20.560 --> 0:17:23.760 valuations are. And yes, some have maximum revenue growth or 0:17:23.800 --> 0:17:27.639 maybe apple profitability, but you know, boring stuff, John, whether 0:17:27.680 --> 0:17:30.400 in London or in America, is just priced the perfection. 0:17:30.400 --> 0:17:33.600 Now that we've never seen this, well, there's a reason 0:17:33.640 --> 0:17:35.199 for that with some of these brands. And later or 0:17:35.200 --> 0:17:37.639 now you can speak to this. It was always about 0:17:37.680 --> 0:17:41.000 the brands that you recognize and everyone just rants towards them. 0:17:41.160 --> 0:17:42.879 In the pandemic. I caught it with PepsiCo and the 0:17:42.880 --> 0:17:44.679 CFO about this a number of months ago, and that 0:17:44.760 --> 0:17:48.199 was really the story brand recognition and a gravitation of 0:17:48.200 --> 0:17:50.920 the consumers towards the brands they recognize at a time 0:17:50.920 --> 0:17:54.040 of stress. How sticky that demand is I think we're 0:17:54.040 --> 0:17:56.440 about to find out. Lisa, Yeah, And I really find 0:17:56.440 --> 0:17:59.440 it fascinating a social study in terms of how people 0:17:59.480 --> 0:18:03.600 respond to a pandemic. Lisole sales absolutely on fire, and 0:18:03.640 --> 0:18:06.719 the company that makes them Banks Bank is sir. It's 0:18:06.720 --> 0:18:09.119 sort of a similar story to what we saw with 0:18:09.200 --> 0:18:12.760 Procter and gamble up. More people want clean homes, and 0:18:12.760 --> 0:18:15.639 they're going to be obsessive about it. I mean with 0:18:15.720 --> 0:18:18.240 Silverman of obviously grand to catch up. I mean, thanks 0:18:18.240 --> 0:18:19.879 for being with us a couple of weeks away from 0:18:19.880 --> 0:18:25.280 an election. There's any number of ways to go with 0:18:25.359 --> 0:18:29.480 Isaac Boltanski's a compass point, rights acute, cute notes on 0:18:29.600 --> 0:18:32.320 what's going on. I do want to focus Isaac on 0:18:32.440 --> 0:18:36.600 something that's in every interview, which is the outcome of 0:18:36.760 --> 0:18:41.120 a blue president but a continued red Senate. What will 0:18:41.240 --> 0:18:47.280 Gridlock look like under a Biden presidency? So I think 0:18:47.400 --> 0:18:50.919 there are two main points to make it. That Number 0:18:50.920 --> 0:18:55.040 one is you would be far more difficult for President 0:18:55.119 --> 0:18:59.240 Biden in that scenario to actually get his nominees through 0:18:59.520 --> 0:19:02.679 a republic the concentate, and so a lot of the 0:19:02.720 --> 0:19:06.640 regulatory agenda that my clients have focused on, whether that's energy, 0:19:06.760 --> 0:19:11.040 the environment, healthcare, financial services. A lot of their fears 0:19:11.080 --> 0:19:14.080 around that would not materialize simply because it would be 0:19:14.080 --> 0:19:17.560 difficult to get those personnel in the second point is 0:19:17.600 --> 0:19:20.320 really about what we've all been focused on this morning, 0:19:20.359 --> 0:19:24.359 which is taxes and stimulus, And in that scenario with 0:19:24.640 --> 0:19:28.520 a Biden White House and a Republican Senate, investors should 0:19:28.520 --> 0:19:32.240 expect any stimulus to be smaller than the base case 0:19:32.359 --> 0:19:36.240 right now, and for the tax increases that the former 0:19:36.320 --> 0:19:41.360 Vice president has proposed to not come to pass. So 0:19:41.680 --> 0:19:45.000 aside from the taxes, there's also this regulatory overhang that 0:19:45.080 --> 0:19:48.840 was sort of highlighted this morning with this headline that 0:19:49.000 --> 0:19:52.120 the antitrust suit against Google will go forward, a long 0:19:52.160 --> 0:19:56.200 anticipated one. Isaac, how much political will is there among 0:19:56.280 --> 0:19:59.399 Democrats if there is a blue wave to engage in 0:19:59.520 --> 0:20:03.919 true regulatory scrutiny of big tech that could affect their earnings. 0:20:05.680 --> 0:20:08.919 I gotta tell you, the big tech narrative reminds me 0:20:08.960 --> 0:20:12.639 of infrastructure and that everyone in d C agrees that 0:20:12.840 --> 0:20:16.160 something should be done, but once you start to drill down, 0:20:16.320 --> 0:20:19.560 there's very little agreement in what should actually be done. 0:20:19.920 --> 0:20:23.000 So in big tech, just look at the different issue sets. 0:20:23.359 --> 0:20:28.720 Are we focusing on content, competition, data, privacy, the numerous 0:20:28.760 --> 0:20:31.240 different avenues to follow, and then you've got to add 0:20:31.240 --> 0:20:33.600 on top there are just too many cooks in the kitchen, 0:20:34.040 --> 0:20:36.480 is at the d J, the FTC, the state, A 0:20:36.640 --> 0:20:40.160 g S, Congress in a blue wave scenario. So look, 0:20:40.160 --> 0:20:43.240 there will be continued headline pressure, but when you actually 0:20:43.320 --> 0:20:46.720 drill down and you use the benefit of history, whether 0:20:46.760 --> 0:20:50.840 it's Microsoft, the Bells, or IBM, you see that there 0:20:50.840 --> 0:20:53.800 really aren't that many tools at the moment to quote 0:20:53.880 --> 0:20:57.320 unquote break up these companies. So the headlines will persist, 0:20:57.800 --> 0:21:00.800 but in terms of practical impact, I think very limited, 0:21:02.119 --> 0:21:04.240 and in the end, the market addresses the issue. We 0:21:04.280 --> 0:21:08.159 saw that with Microsoft, Democrats talking about anti trust, Republicans 0:21:08.200 --> 0:21:11.199 talking about censorship. Let me just talk about the Senate 0:21:11.200 --> 0:21:14.240 and the composition of ISAAC if it does turn democrats, 0:21:14.280 --> 0:21:17.200 just how moderate will that Senate be and how much 0:21:17.200 --> 0:21:19.560 of a radical progressive agenda if it was to go 0:21:19.640 --> 0:21:22.720 through the House, could actually pass in a democratic lets Senate. 0:21:24.440 --> 0:21:27.240 So this is something that I've been highlighting the clients. 0:21:27.280 --> 0:21:31.720 About fifty or so of Biden supporters say they support 0:21:32.160 --> 0:21:35.480 Biden because he's not Trump and to me, that suggests 0:21:35.480 --> 0:21:39.199 that the Democratic Coalition could have some fractures if they 0:21:39.280 --> 0:21:41.080 end up winning, and we will have a far more 0:21:41.119 --> 0:21:43.960 progressive House in terms of policy then we will have 0:21:44.040 --> 0:21:46.440 in the Senate. And this is important because there are 0:21:46.480 --> 0:21:51.199 going to be at least three, possibly even five centrist 0:21:51.520 --> 0:21:55.159 red state Democrats in the Senate from states like Montana, 0:21:55.359 --> 0:22:00.000 West Virginia, Arizona, and I think that contingent will push 0:22:00.119 --> 0:22:04.600 back on the most aggressive and progressive policies that come 0:22:04.600 --> 0:22:08.199 out of the House. And so that's what informs some 0:22:08.359 --> 0:22:10.120 of my views when it comes to a blue wave 0:22:10.240 --> 0:22:12.480 in Texas. You mean is I think I happen to 0:22:12.480 --> 0:22:14.919 think you're you're absolutely dead on here about the power 0:22:14.960 --> 0:22:18.320 of the centrist Democrats greatly underrated. And it goes back 0:22:18.320 --> 0:22:21.639 to Hubert Humphrey and Scoop Jackson from another time and place. 0:22:21.800 --> 0:22:23.840 How does that set up for two thousand twenty two? 0:22:24.200 --> 0:22:27.359 Because the race for two thousand twenty two begins that 0:22:27.480 --> 0:22:31.880 Wednesday in November, doesn't it. In some ways, we're we're 0:22:31.920 --> 0:22:34.760 gearing up for it right now. And so look to 0:22:34.840 --> 0:22:36.680 your point, it's not just going to be the ones 0:22:36.760 --> 0:22:39.560 that are there, it's also going to be in the 0:22:39.600 --> 0:22:43.000 fact that their ranks will be bolstered by some of 0:22:43.080 --> 0:22:46.720 these more purple states, whether that's North Carolina or South 0:22:46.720 --> 0:22:50.200 Carolina or made so their ranks will grow furthermore when 0:22:50.200 --> 0:22:53.320 we look out too, they're going to be some open 0:22:53.480 --> 0:22:58.359 seat races in again purple states like Pennsylvania and like 0:22:58.480 --> 0:23:02.320 North Carolina, and I think that will inform Schumer's thinking 0:23:02.320 --> 0:23:04.760 in terms of policy making and trying to attack more 0:23:04.840 --> 0:23:08.960 towards the center. It just quickly in the time we 0:23:09.000 --> 0:23:12.240 have left. Does the debate happen on Thursday? Given the 0:23:12.280 --> 0:23:15.960 noise around it, still you assume it still happens. Well, 0:23:16.040 --> 0:23:17.800 I think we're going to have a debate. I think 0:23:17.840 --> 0:23:21.679 that the two minute muting function will be interesting, But 0:23:22.200 --> 0:23:25.360 the remainder of those fifteen minute segments, beyond those two 0:23:25.440 --> 0:23:31.800 two minute mute periods, it's still going to be the messy, convoluted, 0:23:32.480 --> 0:23:35.600 just deeply concerning mess that we saw the first time. 0:23:35.640 --> 0:23:38.080 So yes, I think it happens. Yes, I think it'll 0:23:38.119 --> 0:23:40.440 be messy, And no, I don't think it's really going 0:23:40.480 --> 0:23:43.640 to impact the election because most voters have already made 0:23:43.680 --> 0:23:47.320 up their minds. And isn't that the point? Isaac Boltanski 0:23:47.520 --> 0:23:50.879 Compass Point Research, Managing director for Policy Research, Isaac right 0:23:50.920 --> 0:23:58.720 to catch up, sir, right owver this John Gull and 0:23:58.840 --> 0:24:01.879 what's wonderful about and galub Is if you were to 0:24:01.920 --> 0:24:06.040 see his notes in Credit suitees, there's great, great sector specificity. 0:24:06.080 --> 0:24:08.080 We haven't done that in a while with all the 0:24:08.119 --> 0:24:10.560 distractions that we have. Let's go there right now, Jonathan 0:24:10.960 --> 0:24:14.760 Credit Swee, chief US equity strategists. What is the sector 0:24:14.840 --> 0:24:19.640 distinction right now? John? What is the research topic of 0:24:19.640 --> 0:24:25.040 those fancy xcel spreadsheets? You do? Well? If I if 0:24:25.040 --> 0:24:27.119 I kind of summarize it into four what I like 0:24:27.160 --> 0:24:31.240 to call super sexuality radio companies. The company is the 0:24:31.359 --> 0:24:35.679 big the broadly defined tech universe, which would include you know, 0:24:35.800 --> 0:24:38.399 Google and Facebook, which are really officially part of the 0:24:38.400 --> 0:24:41.639 communications sector. But if you include all that together, the 0:24:41.720 --> 0:24:45.000 real key is that they are delivering better earnings in 0:24:46.320 --> 0:24:51.040