Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Leye.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot com, and of course on the Bloomberg Mike
Speaker 1: Pile joining us now black Rock Investment Institute Global Chief
Speaker 1: Investment Strategist, might fantastic to catch up with you, sir.
Speaker 1: The guide for you does it market participants, stay up
Speaker 1: and watch this debate, trade on it, off the back
Speaker 1: of it, based on who you think one. How do
Speaker 1: you go through this? Mike? What's the process? So one
Speaker 1: of the things we've been saying throughout the election season
Speaker 1: is just how stable the polls have been, even in
Speaker 1: the face of obviously historic events in in the United States.
Speaker 1: And so I think, as it relates to your question,
Speaker 1: you know, yes, you know, insofar as it's one of
Speaker 1: the last big events before the presidential election, it could matter.
Speaker 1: But our basic thesis is that that this race continues
Speaker 1: to look awfly stable on Our advice to investors is,
Speaker 1: you know, look through any volatility that the race itself generates,
Speaker 1: look to the long term, look to the fundamentals and
Speaker 1: add to high conviction positions if you do see that volatility.
Speaker 1: Mike Powel, you were weaned on blanch Flower economics at
Speaker 1: Dartmouth College and just a simple idea of wage dynamics
Speaker 1: and the separation of societies, which which is known and
Speaker 1: not only what Danny Blanche Follower has done, but others
Speaker 1: at Dartmouth economics. How divided is this nation now? And
Speaker 1: what does it mean for investors? So, you know, I'd
Speaker 1: say the nation, you know, does look divided across a
Speaker 1: couple of dimensions. Obviously the political polar polarization as historic highs.
Speaker 1: But I think as well, when we talk about economics,
Speaker 1: when we talk about markets, you know, I know we've
Speaker 1: talked a lot about the k shape nature of the
Speaker 1: recovery and that agree to which you know, even an
Speaker 1: aggregate as the economy is surprised to the upside, that's
Speaker 1: a much different experience for people in different parts of
Speaker 1: this economy. And I think that's why as we look ahead,
Speaker 1: you know, this question is you've raised around fiscal stimulus,
Speaker 1: this question of is the is the recovery going to
Speaker 1: become more sustained? Is going to be an awful big
Speaker 1: part of a market narrative as we go into Micha,
Speaker 1: A lot of people are believing in this yield curve
Speaker 1: steepening story, higher longer term yields based on this idea
Speaker 1: that we will get some sort of fiscal support bill,
Speaker 1: perhaps this year, definitely next year. How high contenure yields
Speaker 1: really rise before the Fed steps in? We think this
Speaker 1: is a huge issue. Uh And I would say, are
Speaker 1: are do you want it as a perhaps a little
Speaker 1: distinct I mean, I think we heard from Governor Brainerd
Speaker 1: yesterday that the Fed intends to act along the entire
Speaker 1: yield curve. We see that as a as a signal
Speaker 1: of of exactly that the Fed is going to be
Speaker 1: pretty closely watching the nominal curve and not allowing a
Speaker 1: tremendous amount of steepening to us. The kind of more
Speaker 1: compelling reflation dynamic is to expect to see the nominal
Speaker 1: curve stay more or less stable to a little higher,
Speaker 1: but but real rates tips to rally even more considerably,
Speaker 1: so real rates even more negative, and that has pretty
Speaker 1: important implications for the dollar risk assets globally. So we
Speaker 1: think that's the really important dynamic here. Well, make that
Speaker 1: makes it profoundly difficult to earn financials, and it makes
Speaker 1: it even easier to stick with what's working right now.
Speaker 1: What do you say back to the people that are
Speaker 1: talking up the rotation in the equity market in America?
Speaker 1: So I'd say two things. And I think we have
Speaker 1: been talking about a type of rotation the market that
Speaker 1: it's been less growth to value and more large too small.
Speaker 1: We do think that the growth dynamics that are reflationary,
Speaker 1: fiscal stimulus type path could put in could bring about
Speaker 1: that type of rotation. But agree with you that you know,
Speaker 1: in a world where we see real rates lower, when
Speaker 1: we see the path of of the dollar potentially lower
Speaker 1: as well, that's also a pretty attractive world for for
Speaker 1: equities outside the United States risk assets outside the United States,
Speaker 1: including places like emerging markets. So I'm looking right now.
Speaker 1: The low of negative real yields for ten year treasuries,
Speaker 1: in other words, amount of money are losing to invest
Speaker 1: in longer term treasuries based on the rate of inflation,
Speaker 1: hit a record negative point one one percent in September.
Speaker 1: How low could this go? I don't want to put
Speaker 1: any precise numbers on it, but I do think the
Speaker 1: important point is if you look at um places that
Speaker 1: have combined kind of significant ongoing monetary accommodation plus fiscal policy,
Speaker 1: that the place where that has really manifested itself as
Speaker 1: in is in real rates. I mean, this is what
Speaker 1: we saw in Japan, this is what we've seen in
Speaker 1: other places that have brought this combination to bear. And
Speaker 1: I think that's where we see the pressure from those
Speaker 1: two forces coming together in policy really manifesting itself and market.
Speaker 1: My pile from black Rock, Mike just fantastic to catch
Speaker 1: up as always joining us from the black Rock Investment Institute.
Speaker 1: Jeffrey h is with v and White Melon. He is
Speaker 1: a senior strategist in is wonderfully eclectic about linking foreign
Speaker 1: exchange dynamics into everything else that's out there. We're thrilly
Speaker 1: could join us right now, Jeff, I want to talk
Speaker 1: about the persistent stronger n men be the Chinese you want.
Speaker 1: Is that managed by Beijing or is that the market
Speaker 1: speaking a bit of both it right now? So Beijing
Speaker 1: is managing it less. I think that that's been clear
Speaker 1: for the market to see. For the market now is
Speaker 1: trying to be okay, You're not managing it Let's see
Speaker 1: how far we can push them then be stronger before
Speaker 1: you actually start to want to manage it a bit
Speaker 1: more because this is getting uncomfortable for China, race is
Speaker 1: still quite high if you look at whether mon curvid.
Speaker 1: I'm sure though there are some no big activities in
Speaker 1: some of the mestic I t O market coming through.
Speaker 1: But at the end of the day, you know, one
Speaker 1: strong spot has been exports, right, but a stronger currency
Speaker 1: that coupee into exports. So the market is going to
Speaker 1: be testing the PDOC tolerance up ahead. How does remembering
Speaker 1: diffused leak if you will, to the other currencies of
Speaker 1: the Pacific RIM and indeed over the US dollar. Well,
Speaker 1: there's two ways this can happen. One positive one paths
Speaker 1: less positive. The positive side is stronger than be stronger
Speaker 1: persons in power for Chinese, you know, the fable Chinese
Speaker 1: consumer that the world desperately needs to come through. Then
Speaker 1: they have more personal power they can spend and lift
Speaker 1: the economy around them. However, you know, if China actually
Speaker 1: starts to get worried about this and start the pushback
Speaker 1: starts to intervene, then career Japan, Taiwan, they're going to
Speaker 1: get nervous as well. We don't want to localized currency war.
Speaker 1: But for the time being, I think they're going to
Speaker 1: be given everyone else a lot of space, especially career.
Speaker 1: You know, that's one where I think the market is
Speaker 1: quite fond of as well. So Jeffrey comes down to tolerance.
Speaker 1: Let's talk about levels dollar China. Right now. We saw
Speaker 1: six sixty four earlier in the session. What kind of
Speaker 1: level do you have in mind? Well, I think when
Speaker 1: we get to say, you six fifty, you know that
Speaker 1: kind of the level of the PDOC may need to
Speaker 1: take a double taper. Let's go back to two thousand
Speaker 1: and fourteen, two thousand and fifty, when did the p
Speaker 1: BOC really start to talk down the room and be well,
Speaker 1: talk about it being quote que valued. You know that
Speaker 1: is the key phrase from kago Is now the governor. There.
Speaker 1: We were heading towards in the six ten. People were
Speaker 1: talking about it breaking six and heading into five. Nowhere
Speaker 1: near there yet. All the PBSC leadership, though they were
Speaker 1: on the wires yesterday, no one uttered a single to
Speaker 1: the what about the rim be So it's telling you
Speaker 1: these levels right now, they're happy with it to continue
Speaker 1: to advance down to six fifty. Then Jeff, let's build
Speaker 1: on this the derivatives of this trade stronger China, stronger currency.
Speaker 1: People have been loading up on copper bit and up
Speaker 1: the copper price out of those trades have been attached
Speaker 1: to that stronger Chinese currency. What do you things vulnerable
Speaker 1: at the moment, Jeff, So from a positioning point, See,
Speaker 1: we've already seen the oddie adjust a bit, right, so
Speaker 1: but for copper, so for Chillian testossie dollar. I actually
Speaker 1: think in particular BOSSI is not that vulnerable. I would
Speaker 1: like it to actually move forward a bit after the
Speaker 1: rb A figures out its policy path. If you are
Speaker 1: an oil related currency, I think that's where you don't
Speaker 1: want to own the China beta because all the comments
Speaker 1: are repond the leadership next year, and then next week
Speaker 1: they announced the next five year fan China wants to
Speaker 1: go green, China wants to move away from fossil fields
Speaker 1: as well, go for early carbon neutrality and then start
Speaker 1: to shrink its carbon footprint. So that isn't really a
Speaker 1: good stories of possile field. So you saw go along
Speaker 1: iron or you go those proxies um for oil and
Speaker 1: energy and the rest. I'm not so sure Okay, So
Speaker 1: the flip side of the strong un of the strong
Speaker 1: carper call is the week dollar a call. What could
Speaker 1: potentially be the catalyst to further the weekend to further
Speaker 1: weaken the dollar from here, well, I think a massive
Speaker 1: reallocation story and we're talking mediums along with irrespective what
Speaker 1: happens to the election, I think that is in place
Speaker 1: in it right now. You look at the underlying it
Speaker 1: for Chinese government bonds, I mean, look at the yields
Speaker 1: right now at three uh a, three fifteen, three twenty
Speaker 1: on a head spaces it's some naturally you know, quite
Speaker 1: solid as well, let alone unheaged flow. So as long
Speaker 1: as China continues to grow and the rest of the
Speaker 1: world and the US underperforms on growth, I think that
Speaker 1: reallocation story into Chinese assets, into Asian assets, which is
Speaker 1: that performing, I think that will undermine the dollar. It's
Speaker 1: not the usual suspect. So markets want to be short
Speaker 1: dollars against that then and be Korean one. They're looking
Speaker 1: at Taiwan dollar and the rest and against the euro
Speaker 1: sterling not so much right now, the kind of in
Speaker 1: the same vote. All right, in the short term though,
Speaker 1: there is the potential for underpricing a contested election, underpricing
Speaker 1: what servis Boras wants to Weinstein called critic chaos that
Speaker 1: he's predicting around the US election. Does the dollar strengthen
Speaker 1: in that type of scenario, um, so, volatility is going
Speaker 1: to speak heither and one of the drivers. But if
Speaker 1: we go back to a March kind of scenario where
Speaker 1: market just scrambles the liquidity, then then probably it will
Speaker 1: be a dollar positive story. But having said that, all
Speaker 1: of the facilities established by the Federal Reserve in March,
Speaker 1: you know, they are still in placeful, they can be
Speaker 1: reactivated very very quickly. Right, so I don't think it's
Speaker 1: going to be as severe as we saw in March.
Speaker 1: And also just be wary of what you want to own.
Speaker 1: A dollar against dollar and downside dollar swift downside people
Speaker 1: might want to own those trades as well as election heades.
Speaker 1: How much is the U n strengthening on the heels
Speaker 1: of a Biden win, of the expectation that's being baked
Speaker 1: into markets. I don't think that is a catholics right now.
Speaker 1: It's more on the China alone, its own economy, its
Speaker 1: own numbers are actually strengthening slow. And also you know,
Speaker 1: with the app allocation, with what's going on in the
Speaker 1: equity market, big text ideas coming up, and further opening
Speaker 1: of the bond market. It's that underlying institutional reallocation to China,
Speaker 1: which has actually been solding for some time now. And
Speaker 1: again I think that's music independently of the poles. Now,
Speaker 1: if the trade relationship there can be let's just say,
Speaker 1: less chaos over next years, that's going to be positive
Speaker 1: for China. But I think they'll be positive for the
Speaker 1: US in the world as well because gobal trade starts
Speaker 1: to normalize somewhat. So I don't see any inconsistencies. Would say,
Speaker 1: good US market and good Chinese market. But for now,
Speaker 1: I think it's a China standalone story. Jeff, find a
Speaker 1: question from me. You've always got a favorite trade, what
Speaker 1: is it right now? So you know right now again,
Speaker 1: I like the China proxies. I want to own Aussie,
Speaker 1: I want to own a Korean one. And on the
Speaker 1: other side, probably Sterling is my favorite funder right now.
Speaker 1: I think the BO he's got it wrong. I think
Speaker 1: they need to do a lot more upp ahead. What's
Speaker 1: not announced today not enough. So I want to add
Speaker 1: to my Sterling Shorts, a salary Sterling buyer of the
Speaker 1: China proxies. Jeff Greater, catch up, sir, Jeff, you of
Speaker 1: b and y melon. Thank you. This is a joy.
Speaker 1: I said to the wonderful staff the other day. Can
Speaker 1: you dread the admiral down? And let's get him in there?
Speaker 1: And you know we found him. He's like, you know,
Speaker 1: he's pandemics. Oh. James Travinis joins us here before an election.
Speaker 1: We should point out that the last time around he
Speaker 1: was discussed as a vice president of vice presidential caliber
Speaker 1: for Secretary Clinton. Were thrilled that he could join. Today.
Speaker 1: I am thunderstruck, Admiral Stravins by the lack of discussion
Speaker 1: of our military in this campaign. What happened We have
Speaker 1: entirely internal focused, Tom and I think we all know
Speaker 1: that the pandemic, the economy, getting our teeth straightened. Everything
Speaker 1: is looking into the economy these days, and as a result,
Speaker 1: events continue to move in the real world China, Russia
Speaker 1: and North Korea, on and on um. They're swimming around
Speaker 1: waiting for the results of this election, and we need
Speaker 1: to be mindful and I think coming out of the election,
Speaker 1: Tom Um, these issues, these international issues are going to
Speaker 1: bubble to the floor. Well those national issues is there
Speaker 1: in Obviously, this election can go one of two ways.
Speaker 1: If I presume a second administration, Trump will be maybe
Speaker 1: like the first administration. Fine, but there is a mystery
Speaker 1: to a Biden administration. What would you presume would be
Speaker 1: his extension to the Pentagon and his extension to state.
Speaker 1: First of all, look for re engagement in the international scene.
Speaker 1: That means working more closely with NATO. That means coming
Speaker 1: back into the Paris climate of courts. That means nailing
Speaker 1: down a strategic arms limitation treaty with Russia. Uh, it
Speaker 1: means putting additional pressure on China in the South China. See,
Speaker 1: that's something I think both administrations will do. And above all,
Speaker 1: it will be a very clear eyed view of Russia
Speaker 1: and the ongoing turbulence that Russia generates in the international system.
Speaker 1: So two different paths, I think. Uh. Lastly, I'll say
Speaker 1: you'll probably see the Biden administration try and cut a
Speaker 1: new deal with Iran, returning to a nuclear arms deal,
Speaker 1: but bringing in some additional elements. Um. So I think
Speaker 1: it'll be more re engagement in the world, more alignment
Speaker 1: with our allies in a bit more focus on Iran,
Speaker 1: North Korea, China, and Russia. Speaking of Iran, yesterday, the
Speaker 1: top U s by chief accused Iran of making direct
Speaker 1: efforts in interfering with the US election. What do you
Speaker 1: make of some of the interference claims so far? And
Speaker 1: in terms of who wants who to win the election?
Speaker 1: Clearly the nations I just mentioned, particularly China, Russia, and
Speaker 1: Iran are involved in attempting to manipulate the election. Iran
Speaker 1: doesn't have a lot of capability, but they would probably
Speaker 1: rather see a Biden administration on the theory that Biden
Speaker 1: administration will go to the negotiating table um China, I
Speaker 1: think it would prefer at this point. They've been back
Speaker 1: and forth, but I think at this point they would
Speaker 1: prefer a Biden administration simply because less turbulence, less back
Speaker 1: and forth. I think Russia clearly would favor a Trump
Speaker 1: administration because not that they have particular love for Donald Trump,
Speaker 1: but they loved the division in the country. With your
Speaker 1: father's service to the nation of the Marine Corps and
Speaker 1: particularly his tour of duty as a Greek American in
Speaker 1: the levant Your comment ad on Turkey and the upset
Speaker 1: of Cypress and the Eastern Mediterranean. Turkey is banking a
Speaker 1: series of bad decisions lately under President ur Lwan. They're
Speaker 1: pushing too hard over oil and gas and they're generating
Speaker 1: real backlash not just from Greece but from Cyprus, Israel, Egypt. Secondly,
Speaker 1: they're backing Azerbai John in this nonsense war between Armenia
Speaker 1: and Azerby John, and thirdly pushing into Olivia. They're on
Speaker 1: the wrong side of almost every issue from a US
Speaker 1: perspective at the moment. There's one way to start a book, folks,
Speaker 1: and there's any number of wonderful books that Stravitus has done.
Speaker 1: I of course mentioned his Leader's Bookshelf is really a
Speaker 1: must mustard. I threw it at least as kids the
Speaker 1: other night and said, just shut up and read. Just
Speaker 1: start with start with Sharman the Civil War, and learn
Speaker 1: about Roberty Lee. There is Admiral a seventeen year old
Speaker 1: out to see and it was in nineteen seventy two.
Speaker 1: You had the courage to come out at Naval Academy
Speaker 1: in nineteen seventy six, and trust me, folks, at that
Speaker 1: time it was not a popular tour of duty and
Speaker 1: then you come over to what we've just witnessed with
Speaker 1: Tom Hanks on Greyhound in the North Atlantic Run. What
Speaker 1: was your thought moving from a seventeen year old kid
Speaker 1: on the Jeweit in nineteen seventy two, doctor Mr Hanks
Speaker 1: nineteen forty one. Um, that film is fabulous, but it's
Speaker 1: based back to books. It's based on an even better
Speaker 1: book called The Good Shepherd by C. S. Forrester. And
Speaker 1: that was a book I read as a teenager about
Speaker 1: those destroyers and those operations. And you know, you can
Speaker 1: drop a plumb line from that young Jim Staverdus to
Speaker 1: being the supreme Allied Commander of NATO. It's all about
Speaker 1: books and reading and the experiences we have in life.
Speaker 1: You put them together, you can do anything. Well. Then
Speaker 1: look at the future of the Navy now, I mean
Speaker 1: take Forrester and all the romance Patrick Patrick O'Brien, folks, Yes,
Speaker 1: I've read all twenty one editions of O'Brien, etcetera, etcetera,
Speaker 1: and the honor of speaking to Gabellian Chronkite about it. Great. Okay,
Speaker 1: the next navy can that seventeen year old kid in
Speaker 1: two thousand twenty one going out of San Diego. Can
Speaker 1: he have the same vision you had? I think so,
Speaker 1: And our Navy will be more technological, certainly more cyber,
Speaker 1: more unmanned vehicles, more integration with special forces, but the
Speaker 1: same fundamentals of going down to the sea and ships
Speaker 1: and sailing where millennia of mariners have gone before. We'll
Speaker 1: still capture young American men and women. I I think
Speaker 1: the Navy will be a huge part of our future,
Speaker 1: and in particular time back to China, the Navy's will
Speaker 1: in the South China Sea, pushing back on Chinese opportunism
Speaker 1: there must videz thank you so much before this election.
Speaker 1: Of course as former work with NATO with Carlyle, and
Speaker 1: of course I really wanted any number of the books,
Speaker 1: but where I took that out of that great opening
Speaker 1: sea power, the history and geopolitics of America and the
Speaker 1: Navy as well. I'm the pandemic, Lisa, and I've been
Speaker 1: following the deaths, the cases, but there's also those in recovery.
Speaker 1: Here's Jason Farley, uh, professor of nursing the Johns Hopkins University.
Speaker 1: We're seeing continued emerging data. There is a recent publication
Speaker 1: in the journal American Medical Association highly respected journal, showing
Speaker 1: that they followed patients after their uniqual long set of
Speaker 1: symptoms for up to two months after they initially became sick,
Speaker 1: and they found that patient fatigue was the most common symptoms,
Speaker 1: but they also had lingering symptoms from the respiratory system,
Speaker 1: so cough and some some difficulty breathing at times. Some patients,
Speaker 1: although a smaller proportion less than still have problems with
Speaker 1: taste and smell. So I think we definitely are seeing
Speaker 1: some subgroups of people who have longer symptoms. Jason, just
Speaker 1: to add to that, what if we let about reinfection. Yeah,
Speaker 1: we continue to see cases of small numbers of cases,
Speaker 1: let's be clear, but small numbers of cases of patients
Speaker 1: who we've identified have recovered from the infection, and I'll
Speaker 1: have a documented negative test in some of the cases
Speaker 1: repeatedly negative and then have subsequently developed coronavirus. Again. Um,
Speaker 1: it was always within the realm of possibility. We talked
Speaker 1: about it on this show and in others um that
Speaker 1: that would possibly occur, and now we're just seeing small
Speaker 1: members of cases where that information is growing. Jason, what's
Speaker 1: the latest on the infectiousness of children Initially there was
Speaker 1: a theory that perhaps they were not infectious. Those of
Speaker 1: us who have children said that can't possibly be, since
Speaker 1: they are vectors of disease. Now the idea is that
Speaker 1: they can spread the virus. How are we looking in
Speaker 1: terms of how they compare with a degree of spreading
Speaker 1: it versus adults. Yeah, so, well there are a couple
Speaker 1: of points there. So so in terms of how how
Speaker 1: good at child is that spreading compared to an adult,
Speaker 1: you know, really they have the as equal a probability
Speaker 1: of transmission depending on their viral load and how much
Speaker 1: virus they have and then how much contact they have.
Speaker 1: So so that's the person. Um we were wrong initially
Speaker 1: about them being less ters. You know, with with certain
Speaker 1: infectious diseases with small kids in particular, like the really
Speaker 1: little ones. Um, their cough is a little weaker, it's
Speaker 1: not as forceful, so you would think of as you
Speaker 1: think of pigpen and a cloud of dust that goes
Speaker 1: around them. You know that that cloud of dust around
Speaker 1: the children is a little smaller than our moments adults.
Speaker 1: So so there's some data to support that they may
Speaker 1: be able to spread aerosols a little less far, but overall,
Speaker 1: they carry a similar amount of virus and therefore are
Speaker 1: as equally infectious as their adults counterparts are. Family Jason
Speaker 1: just around down the interview. Let's try and fit finish
Speaker 1: on a positive note, the improvement in therapeutics. We're looking
Speaker 1: at the case count, we're looking at hospitalizations again, Jason
Speaker 1: walked me through therapeutics. How much has improved over the
Speaker 1: last six months or so. Yeah, so right now we've
Speaker 1: got um you know, definitely a glimmer of hope. So
Speaker 1: the most of the world is now using them dim
Speaker 1: severre with or without tex and mathasone UM so with
Speaker 1: those two agents, and it all depends on whether or
Speaker 1: not you need ventilation or oxygenation. And that's how they're
Speaker 1: recommendations around the world are moving forward. Uh, people who
Speaker 1: need oxygen get dex methodzone or indissevere, and then people
Speaker 1: who need mechanical ventilation likely get both. There was a
Speaker 1: recent study that just came out from the w h
Speaker 1: O that still under peer review that calls to question
Speaker 1: again the mortality benefit the death benefit of ridissevere. But
Speaker 1: we had already had good data that showed that redissevere
Speaker 1: did not reduce death, it reduced symptom burden. So so
Speaker 1: again are another study that seems to be similar to
Speaker 1: what we already know. So what we're seeing is the
Speaker 1: cases of patients having greater access to these treatments, which
Speaker 1: is also going to help us reduce ultimately the mortality
Speaker 1: level as we can scale up these interventions. Someone with
Speaker 1: knowledge that is a good thing. In silence, Professor Farley,
Speaker 1: Encyclopedic on the Care of People. Professor Mercy John's Hopkins University.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keene before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.