WEBVTT - Surveillance: Market Opportunities With Wilson 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa brown Witz. Daily we bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:30.000 dot Com, and of course on the Bloomberg Tournament right now. 0:00:30.000 --> 0:00:32.159 A joy to have Michael Wilson with this. Mike Wilson 0:00:32.200 --> 0:00:35.440 with Midwest Academics out of Michigan and Northwestern legendary of 0:00:35.520 --> 0:00:39.080 Morgan Stanley, and he joins us now for an update. 0:00:39.159 --> 0:00:41.839 I love what you say, Mike Wilson about the alpha 0:00:41.960 --> 0:00:45.519 in the beta. This is not options dynamics, folks, delta, gamma, 0:00:45.800 --> 0:00:48.760 all the other Greek malarchy we talked about, Mike Wilson. 0:00:48.880 --> 0:00:56.360 It's about relative performance versus absolute performance. Parts that yeah, well, 0:00:56.400 --> 0:00:58.640 thanks Tom. I mean, look, I think that's what this 0:00:58.720 --> 0:01:01.120 year is going to be about. Last year, you know, 0:01:01.160 --> 0:01:04.760 we're obviously in the midst of the pandemic, the lockdown, 0:01:04.880 --> 0:01:08.280 that the economy was falling apart, and of course stocks 0:01:08.400 --> 0:01:11.679 discounted the recovery and it was really a beta trade, 0:01:11.720 --> 0:01:14.960 meaning everything kind of went up together because everything had 0:01:14.959 --> 0:01:18.040 got crushed at the same time. Now it's about, okay, well, 0:01:18.040 --> 0:01:20.720 where can I find the sort of needles in the haystack? 0:01:20.880 --> 0:01:23.080 The stocks that are there, are companies are gonna really 0:01:23.080 --> 0:01:26.240 outperform as we reopen. And oh, by the way, there's 0:01:26.240 --> 0:01:28.880 gonna be some losers as that happens to right, There's 0:01:28.880 --> 0:01:30.560 gonna be a wall of share shift as we go 0:01:30.600 --> 0:01:32.960 back to normal. There's gonna be cost pressures. You were 0:01:32.959 --> 0:01:35.200 just talking about the inflation trade, something we've been on 0:01:35.319 --> 0:01:37.199 for quite a while. That's going to create some cost 0:01:37.200 --> 0:01:39.480 pressures for many businesses. So so we want to take 0:01:39.480 --> 0:01:41.120 advantage of that. We want to take advantage of the 0:01:41.160 --> 0:01:43.800 companies that can benefit from that environment and then try 0:01:43.840 --> 0:01:45.720 to avoid those that are gonna be going to be 0:01:45.720 --> 0:01:49.280 punished by that. And then it's just it's individual stocks 0:01:49.280 --> 0:01:52.320 with the Morgan Stanley research combine. You say the haystack, 0:01:52.680 --> 0:01:56.200 what are the sectors in the haystack? You know, we 0:01:56.280 --> 0:01:58.000 were just talking about when it's the banks, right, So 0:01:58.040 --> 0:01:59.920 we've we've been on the rate trade for a while, 0:02:00.160 --> 0:02:02.040 we've been on the reslation trade for a while, and 0:02:02.080 --> 0:02:04.120 we think, look, let's let's take advantage of that. I mean, 0:02:04.120 --> 0:02:05.880 there are going to be companies that benefits from higher 0:02:05.960 --> 0:02:10.760 rates and higher commodity prices, so materials, metals and mining, obviously, 0:02:10.800 --> 0:02:13.760 the banks, um clearly some of the cehtical parts of 0:02:13.800 --> 0:02:17.560 technology that you know have benefit the benefit front reopening 0:02:17.560 --> 0:02:20.960 of an economy. Maybe the industrial sectors we get an 0:02:21.000 --> 0:02:24.280 infrastructure buill those are gonna be areas from a sector standpoint, 0:02:24.280 --> 0:02:26.760 they could do quite well. Let's just build on the 0:02:26.800 --> 0:02:29.000 year and coal thirty nine hundred. I imagine you filled 0:02:29.040 --> 0:02:30.359 a lot of calls and they say to you, Mike, 0:02:30.440 --> 0:02:32.760 thirty nine hundred, why haven't you lifted to your price target? 0:02:33.080 --> 0:02:35.120 Is this just down to the member waitings, the sector 0:02:35.160 --> 0:02:37.760 wait things, just the mechanics of the makeup of an 0:02:37.760 --> 0:02:41.040 index like the SMP five D. Yeah, I mean, let' 0:02:41.080 --> 0:02:43.040 let's talk about the SMP itself. That it's really a 0:02:43.080 --> 0:02:45.480 large kind of growth index, John, as you know, and 0:02:45.720 --> 0:02:48.320 I mean, those tonics have done terrifically well over the 0:02:48.440 --> 0:02:51.200 last decade, and part of that story has been the 0:02:51.200 --> 0:02:53.959 fact that rates have come down. Right, they're they're great businesses, 0:02:54.000 --> 0:02:56.919 but they've looked they've been over valued because rates are 0:02:57.240 --> 0:03:00.640 been repressed and that's changing now. Well, then their multiples 0:03:00.680 --> 0:03:03.160 are going to come down, probably more perhaps than what 0:03:03.240 --> 0:03:06.840 the earnings can offset. So good, I'm still feel really 0:03:06.880 --> 0:03:08.960 good about that target. A year end. We have a 0:03:08.960 --> 0:03:11.560 bowl case of where do you want fifty? Okay, fine, um, 0:03:11.560 --> 0:03:13.560 but that's not the story. The story is what's going 0:03:13.560 --> 0:03:16.000 on underneath the surface. I mean you mentioned it earlier. 0:03:16.080 --> 0:03:17.560 Some of the medals of mounting stacks, some of the 0:03:17.560 --> 0:03:19.680 bank stacks that are really doing well. These are the 0:03:19.680 --> 0:03:22.200 these are the opportunities for portfolio managed to find what 0:03:22.280 --> 0:03:23.959 I've really enjoyed in the last couple of ways. Catching 0:03:24.000 --> 0:03:25.640 up with you guys, and Morgan Stanley is just putting 0:03:25.639 --> 0:03:27.920 all the pieces together. Allen setting the last week of 0:03:27.960 --> 0:03:31.040 Morgan Stanley talking up five percent GDP growth next year, 0:03:31.160 --> 0:03:33.320 six and a half percent this year. I imagine a 0:03:33.360 --> 0:03:35.640 Matt hornback high yields call is in there as well. Mike. 0:03:35.680 --> 0:03:37.160 Can you just put it all together for us, join 0:03:37.200 --> 0:03:39.480 the dots between the different calls coming from the bank 0:03:39.480 --> 0:03:42.480 at the moment. Yeah, I mean, the macro team has 0:03:42.480 --> 0:03:44.840 really been in sync over the last twelve months. I mean, 0:03:44.880 --> 0:03:47.600 because the pieces have come together, and you know, Ellen's 0:03:47.640 --> 0:03:50.560 calling the economy, mets calling rates are call on kind 0:03:50.560 --> 0:03:53.920 of the sector dispersion and rotation that's been going on. 0:03:54.080 --> 0:03:56.360 It's all part of the same narrative, and it goes 0:03:56.360 --> 0:03:58.760 back to almost a year ago. Now it seems it 0:03:58.800 --> 0:04:01.480 seems like it was yesterday, but a year ago, you know, 0:04:01.560 --> 0:04:04.200 we're talking about this regime shift as we move from 0:04:04.280 --> 0:04:08.520 a monetary policy dominant regime to a fiscal policy dominant regime. 0:04:08.640 --> 0:04:10.640 And it's clear now that that's what's happening. What does 0:04:10.680 --> 0:04:13.760 that mean. It needs to higher velocity economy, it means 0:04:14.040 --> 0:04:17.360 higher nominal GDP, it means inflation, and those are things 0:04:17.360 --> 0:04:20.360 that are going to change what works going forward. So 0:04:20.440 --> 0:04:22.520 within the churn, the churn can be nice and it 0:04:22.560 --> 0:04:25.080 can be uh, for example, a hot tub, or it 0:04:25.120 --> 0:04:27.200 can be the ocean where you're getting smashed against the 0:04:27.240 --> 0:04:29.280 shore and there's a question about how much leverage there 0:04:29.360 --> 0:04:31.479 is beneath the surface. It's going to lead to some 0:04:31.520 --> 0:04:34.000 pretty violent moves. Mike, what's your sense of how much 0:04:34.080 --> 0:04:36.520 leverage has been pushed out of the system or how 0:04:36.600 --> 0:04:40.160 much has been built up in preparation for a relatively 0:04:40.400 --> 0:04:43.800 violent churn over the next few months. Well, that's right. 0:04:43.839 --> 0:04:45.320 I mean, I think one of the one of the 0:04:45.360 --> 0:04:47.719 things that we're not that comfortable with at the moment. 0:04:47.800 --> 0:04:50.919 To be honest, it's been a really a one way 0:04:51.160 --> 0:04:53.840 risk market. Okay, there hasn't been a lot two way risk. 0:04:53.920 --> 0:04:57.040 We had that little you know, snaphoo in January, some 0:04:57.200 --> 0:04:59.360 shortcovering and some de leveraging that went on. But we're 0:04:59.440 --> 0:05:02.320 right back to those high leverage areas. When I say 0:05:02.400 --> 0:05:05.520 high leverage, I mean across both the institutional world and 0:05:05.760 --> 0:05:09.039 the retail world. We've rarely seen leverage as high and 0:05:09.120 --> 0:05:11.960 that can't bite both ways. And so the wild cards 0:05:12.000 --> 0:05:14.599 and me is, let's send that we go into the 0:05:14.640 --> 0:05:17.560 reopening phase, which it looks like it's gonna be sooner 0:05:17.640 --> 0:05:20.240 rather than later. Some of these cost pressures arise. We 0:05:20.360 --> 0:05:22.760 do have supply chain issues. You know, this event in 0:05:22.800 --> 0:05:24.920 Texas with the weather is not helping that, by the way, 0:05:25.200 --> 0:05:27.919 so we could have margin pressure, we could have rates 0:05:27.960 --> 0:05:30.520 go up more quickly than people are anticipating in evaluations. 0:05:30.600 --> 0:05:33.600 So so I think that leverage will will create more 0:05:33.720 --> 0:05:37.200 two way risk, will create some more volatility in the marketplace, 0:05:37.279 --> 0:05:39.000 and by the way, we'll create some opportunities in the 0:05:39.040 --> 0:05:40.800 areas that we do like That's exactly what I was 0:05:40.800 --> 0:05:42.279 going to say, how do you use that? How are 0:05:42.320 --> 0:05:44.880 you preparing to jump on that with respect to specific 0:05:44.960 --> 0:05:48.679 market calls. Well, we're advising clients right now to probably 0:05:48.680 --> 0:05:51.119 take their leverage down. And we think people have leverage 0:05:51.400 --> 0:05:53.680 that's too high that it looks things are. And even then, 0:05:53.680 --> 0:05:55.200 the things that we like right now there are a 0:05:55.240 --> 0:05:57.679 bit of ahead of themselves. And we wouldn't be surprised 0:05:57.720 --> 0:06:00.320 if we had another surprise over the court the next 0:06:00.320 --> 0:06:03.280 thirty five days and we get a bigger correction, and 0:06:03.279 --> 0:06:05.400 and so it's like run lower risk right now. That's 0:06:05.520 --> 0:06:07.760 that's and and then let's take advantage of the drawdown 0:06:07.839 --> 0:06:09.839 like we got in January, or like some of the 0:06:09.880 --> 0:06:14.080 drawing after got last year. Mike fantasticic catchups, great work 0:06:14.120 --> 0:06:17.279 as always, Matt Wilson, that Morgus, Downey Cio and Chafe 0:06:17.360 --> 0:06:26.280 us equity strategists. Megan Green joins us right now. Harvard 0:06:26.279 --> 0:06:30.600 County School Senior Fellow. Megan. There's all this debate about economics, 0:06:30.960 --> 0:06:35.120 and we all toss around ratios like productivity three ratio 0:06:35.360 --> 0:06:38.560 six unit idea, and then there's a strange thing, the 0:06:38.760 --> 0:06:42.520 output gap. Do we really have knowledge of where these 0:06:42.560 --> 0:06:48.000 relationships are these ratios. Given the pandemic we look, we 0:06:48.160 --> 0:06:50.840 never really know where the output gap is because it's 0:06:50.880 --> 0:06:55.000 predicated on this idea of potential growth, and measuring potential 0:06:55.040 --> 0:06:57.400 growth is much more of an art than a science 0:06:57.440 --> 0:07:00.000 at the best of times, let alone in a crisis 0:07:00.040 --> 0:07:03.440 is But I would also argue that this idea of 0:07:03.480 --> 0:07:07.279 potential growth, this equilibrium that the economy is naturally going 0:07:07.320 --> 0:07:11.400 to come back to, might be a bit and antiquate. Antiquated. 0:07:11.440 --> 0:07:15.640 I mean, in economics we believe in equilibria. Um usually 0:07:15.680 --> 0:07:18.240 there's just one. But we've all spent the past year 0:07:18.360 --> 0:07:23.760 looking at eideline epidemiological models. And the hard scientists don't 0:07:23.840 --> 0:07:26.320 view the world this way. They look at the world 0:07:26.400 --> 0:07:28.800 very differently, thinking, you know what, there is no actual 0:07:28.960 --> 0:07:32.240 equilibrium that we know about at the beginning. Instead, we're 0:07:32.240 --> 0:07:36.360 gonna look at actors, use agent based models to see 0:07:36.360 --> 0:07:39.320 how they respond to things, use machine learning to build 0:07:39.360 --> 0:07:42.320 models around that, and figure out what the outcome is. 0:07:42.360 --> 0:07:45.080 And so I think this debate about the output gap 0:07:45.200 --> 0:07:49.880 based on some kind of equilibrium is probably missing the point. 0:07:50.560 --> 0:07:53.640 And you know, we economists, we we assume that they 0:07:53.680 --> 0:07:57.160 are very intelligent actors in a very simple world, and 0:07:57.200 --> 0:07:59.400 I think scientists have have a very different view of 0:07:59.440 --> 0:08:01.680 the world. They assume they're very simple people in a 0:08:01.800 --> 0:08:04.239 complex world, and there's a lot that we could probably 0:08:04.320 --> 0:08:07.240 learn from them. Economics. Okay, well, what's the timeline here? 0:08:07.480 --> 0:08:10.080 What are we getting wrong right now about the X axis? 0:08:10.400 --> 0:08:13.560 We're talking about this across the simulcast all morning, the 0:08:13.680 --> 0:08:17.160 guestimates out to June, the guestimates out to September. Do 0:08:17.200 --> 0:08:19.240 you have a belief in the X axis right now 0:08:19.280 --> 0:08:23.000 or is that a mystery as well? Look, I think 0:08:23.040 --> 0:08:25.200 everything is a mystery at the moment. This isn't a 0:08:25.280 --> 0:08:28.560 typical kind of downturn and it won't be a typical 0:08:28.680 --> 0:08:31.880 kind of recovery at all. And as I've been saying 0:08:31.920 --> 0:08:34.040 since the beginning of this virus, the virus is going 0:08:34.080 --> 0:08:38.280 to dictate everything and we'll be determining prices and quantities 0:08:38.320 --> 0:08:42.320 and so uh, you know, it's it's actually the epidemiological 0:08:43.040 --> 0:08:45.680 data that's much more important than the economic data at 0:08:45.720 --> 0:08:48.480 the moment. So make a reason people were gravitating towards 0:08:48.520 --> 0:08:50.520 the output gap that we're trying to assess how big 0:08:50.559 --> 0:08:53.200 this package was down in day say, and perhaps whether 0:08:53.240 --> 0:08:54.680 it was too big. So what's the best way of 0:08:54.720 --> 0:08:58.760 assessing that size too big, too small? So I don't 0:08:58.760 --> 0:09:00.800 think we should think of this package as a stimulus 0:09:00.800 --> 0:09:04.040 at all. It's it's unfortunately been deemed that, but I 0:09:04.040 --> 0:09:06.760 think we should think of it as cataxtrophe mitigation. And 0:09:06.880 --> 0:09:09.400 so the point isn't to figure out the size of 0:09:09.440 --> 0:09:12.320 the whole, to measure how big it is and how 0:09:12.400 --> 0:09:14.640 much dirt we need to fill it in. The point 0:09:14.720 --> 0:09:18.160 is to get dirt out to those most vulnerable um 0:09:18.280 --> 0:09:20.360 so that we can protect them, and then in the 0:09:20.400 --> 0:09:24.040 next stage think about trying to provide a stimulus so 0:09:24.080 --> 0:09:26.040 that we can get on our way to recovery. And 0:09:26.480 --> 0:09:29.320 in this sense, I think the next package is almost 0:09:29.400 --> 0:09:31.440 the more important one. If you want to think about 0:09:31.559 --> 0:09:33.760 potential growth, or if you want to consider there might 0:09:33.760 --> 0:09:37.680 be multiple equilibria and we're trying to end up on 0:09:37.720 --> 0:09:41.160 a better one. The next package, the build back better package, 0:09:41.200 --> 0:09:42.920 is the one that's going to do that. So what 0:09:43.000 --> 0:09:45.480 do you think that package specifically mag and should look like. 0:09:47.000 --> 0:09:49.199 I think it should be full of public investments. I mean, 0:09:49.240 --> 0:09:52.079 it doesn't matter if you believe in secular stagnation or not. 0:09:52.400 --> 0:09:55.199 If you think that we've had low growth, low inflation, 0:09:55.280 --> 0:09:58.240 low rates for so long because of supply side issues 0:09:58.360 --> 0:10:01.120 or demand side issues. The is one thing that fixes 0:10:01.200 --> 0:10:04.680 both of those issues, and that's public investment. So, you know, 0:10:04.720 --> 0:10:08.920 a massive infrastructure spending program that's green in nature, I 0:10:08.920 --> 0:10:11.240 think is an absolute no brainer, and a lot of 0:10:11.280 --> 0:10:14.199 money should be behind that before we get there. Megan, 0:10:14.320 --> 0:10:17.360 i'd love your assessment of the efficiency of this one 0:10:17.400 --> 0:10:20.400 point nine trillion dollar package. Greg Valier was talking about 0:10:20.640 --> 0:10:23.240 that Wall Street Journal op ed talking about the pork 0:10:23.600 --> 0:10:26.200 built into this plan. Do you have a sense of 0:10:26.240 --> 0:10:28.720 whether that's actually the case or whether there is a 0:10:28.760 --> 0:10:31.480 sort of sense behind each dollar and sort of a 0:10:31.559 --> 0:10:36.040 firepower behind it. So I think there is firepower behind 0:10:36.600 --> 0:10:40.440 you know, purely based on the size. Is every dollar 0:10:40.720 --> 0:10:44.040 perfectly allocated? Absolutely not. But we've already learned in this 0:10:44.160 --> 0:10:47.360 crisis and the previous crisis that we don't have great 0:10:47.400 --> 0:10:50.880 tools for ferreting out exactly who needs how much money 0:10:50.880 --> 0:10:53.400 and getting it to them, And so the idea is 0:10:53.440 --> 0:10:56.840 you just get out a lot quickly. It's not particularly targeted. 0:10:56.880 --> 0:11:00.120 It could be more targeted, certainly, and it doesn't includ 0:11:00.000 --> 0:11:03.680 of things like automatic stabilizers, which I wish it did, 0:11:03.800 --> 0:11:06.240 so that you took the politics out of this process 0:11:06.280 --> 0:11:08.160 a little bit, and it was all based on what's 0:11:08.200 --> 0:11:11.439 actually happening in the economy. Um. But the idea isn't 0:11:11.480 --> 0:11:14.439 to fill in the hole perfectly, We're we're clearly over 0:11:15.080 --> 0:11:17.640 doing it on filling in the hole. But that's okay, 0:11:17.720 --> 0:11:19.640 because the point is just to get money to the 0:11:19.760 --> 0:11:22.840 most vulnerable businesses and individuals. But Megan, what about people 0:11:22.840 --> 0:11:24.600 who look at the savings rate the fact that it's 0:11:24.640 --> 0:11:29.080 climbed so incredibly high. Yes, this gives people firepower arguably 0:11:29.080 --> 0:11:32.400 when the economy does reopen. But does this indicate to 0:11:32.480 --> 0:11:35.160 you that people are not going to necessarily get this 0:11:35.200 --> 0:11:37.319 money out into the economy right away, and then it's 0:11:37.360 --> 0:11:39.640 not as efficient and that perhaps the people who are 0:11:39.640 --> 0:11:41.400 getting it aren't the people who need it the most. 0:11:43.240 --> 0:11:45.679 So that that's where I think this might be targeted 0:11:45.720 --> 0:11:49.559 a little better towards those with lower incomes or no incomes, certainly, 0:11:49.679 --> 0:11:53.800 rather than a check going to everyone, which I wouldn't advise. 0:11:53.920 --> 0:11:56.400 But that being said, I think that the savings rate 0:11:56.480 --> 0:11:59.400 is a little bit misleading because it doesn't consider all 0:11:59.400 --> 0:12:02.280 the forebearing that we have um at the moment, and 0:12:02.320 --> 0:12:06.160 so the savings three has skyrocketed, so has household debt actually, 0:12:06.600 --> 0:12:09.679 and you have to consider that what bills finally come do, 0:12:09.960 --> 0:12:13.120 which many of them aren't because the forbearance, a lot 0:12:13.160 --> 0:12:14.840 of the savings are going to have to be plowed 0:12:14.840 --> 0:12:19.199 into that. Megan, part of your charm is folding politics 0:12:19.320 --> 0:12:22.800 into your economics. Mit Rochelle was on Friday from Florida, 0:12:23.120 --> 0:12:26.680 where houses are being sold in twelve minutes. I mean, 0:12:26.880 --> 0:12:31.600 clearly the benefits are being skewed across different income levels. 0:12:31.880 --> 0:12:35.560 Do you have any confidence at all that Washington has 0:12:35.600 --> 0:12:38.840 a political will to actually get money to those that 0:12:38.920 --> 0:12:43.199 really need it? So I think, you know, from a 0:12:43.280 --> 0:12:46.480 macro sence, absolutely, If you just look at who the 0:12:46.520 --> 0:12:49.959 administration has hired on the on the domestic side, it's 0:12:49.960 --> 0:12:52.360 a load of labor economists, and that's because there is 0:12:52.400 --> 0:12:55.920 a real concern about income and wealth inequality in the US. 0:12:56.040 --> 0:12:59.240 So I do think in a big sense the Biden 0:12:59.280 --> 0:13:02.440 administration and does want to do something about this. But 0:13:02.520 --> 0:13:05.640 as I said, you know, we don't have great tools 0:13:05.760 --> 0:13:09.120 for figuring out how to get money specifically to those 0:13:09.160 --> 0:13:12.440 who needed the most. Um and what you mentioned in 0:13:12.480 --> 0:13:15.160 the housing market, I mean that's clearly a result of 0:13:15.720 --> 0:13:20.200 central bank policy, and that's the fed UH mortgages cars. 0:13:20.360 --> 0:13:22.560 Those markets have been on fire because RS are so 0:13:22.640 --> 0:13:24.760 incredibly low, and you know, I think they will be 0:13:24.880 --> 0:13:26.760 for a very long time, but I think we can 0:13:27.120 --> 0:13:30.760 can continue to see those markets do well. Mag and 0:13:30.800 --> 0:13:32.400 good to hey from you. Thanks for joining us this 0:13:32.440 --> 0:13:34.720 Monday morning, make and green that at the Hobbit Kennedy 0:13:34.760 --> 0:13:43.680 school Sania Fellow right now in the change landscape of 0:13:43.760 --> 0:13:47.079 this virus, this pandemic and all the good news we're 0:13:47.080 --> 0:13:50.760 observing when we look at hospitalizations and the improved statistics 0:13:50.760 --> 0:13:54.560 of death. Is Joshua Sharfstein's with Johns Hopkins Bloomberg School 0:13:54.800 --> 0:13:57.800 of Public Health. Mr Bloomberg, of course a philanthropist, is 0:13:58.200 --> 0:14:01.800 engineering school at John's Hopkins and all of j h 0:14:01.920 --> 0:14:04.160 U and of course founder of Bloomberg LP in this 0:14:04.280 --> 0:14:08.760 radio and TV property as well, Joshra Sharfstein, I get 0:14:08.880 --> 0:14:12.319 upset when I hear the media talk about her herd 0:14:12.320 --> 0:14:16.000 immunity and simplistic phrases. You and I know it's some 0:14:16.200 --> 0:14:22.840 really interesting differential equations. Explain how prose like you take 0:14:22.880 --> 0:14:26.320 the fancy math of diff e Q and get us 0:14:26.360 --> 0:14:30.520 to where her immunity clicks in. Well, I think they're 0:14:30.600 --> 0:14:33.200 models of her immunity, and then there's the reality of 0:14:33.240 --> 0:14:36.640 her immunity, and so people can estimate when we think 0:14:36.760 --> 0:14:39.840 her immunity might kick in and what that means for people, 0:14:40.200 --> 0:14:42.440 But then we really have to see it because those 0:14:42.480 --> 0:14:45.680 models are generally based on assumptions. I think one of 0:14:45.680 --> 0:14:48.360 the key important points to remember about her immunity is 0:14:48.400 --> 0:14:52.240 that you can have generally herd immunity, meaning that cases 0:14:52.320 --> 0:14:56.040 really don't have a good opportunity to keep spreading. But 0:14:56.160 --> 0:14:59.200 then you have communities where there's a lot of vulnerability. 0:14:59.280 --> 0:15:01.680 People have an been vaccinated and a few people have 0:15:01.760 --> 0:15:05.240 gotten infected that could wind up with pretty serious outbreaks 0:15:05.280 --> 0:15:08.880 as well as hospitalizations and deaths. So general herd immunity 0:15:08.920 --> 0:15:11.840 can leave some serious pockets. And then the second question 0:15:11.920 --> 0:15:14.200 is you know what will it really take and that 0:15:14.400 --> 0:15:17.480 may depend on how these variants behave and other factors 0:15:17.480 --> 0:15:19.560 we don't know about. And one of the factors is 0:15:19.600 --> 0:15:23.400 the virulence of whatever you're talking about. Have you changed 0:15:23.480 --> 0:15:27.760 your perception of how virulent this vaccine is, this this 0:15:27.920 --> 0:15:32.200 virus is rather given the new variants that are out there, well, 0:15:32.240 --> 0:15:35.000 there is certainly some evidence that some of the new 0:15:35.080 --> 0:15:38.600 variants may be more lethal, but it doesn't appear to be, 0:15:38.760 --> 0:15:43.360 you know, fundamentally changing the epidemiology of the of the 0:15:43.480 --> 0:15:46.400 virus so far in the United States. So right now 0:15:46.600 --> 0:15:50.160 the cases are coming down, hospitalizations are coming down, deaths 0:15:50.160 --> 0:15:53.360 are coming down. But we know with five hundred thousand 0:15:53.440 --> 0:15:56.800 people who have died, just how serious this pandemic is, 0:15:57.120 --> 0:15:59.320 and we can't let up. We have to keep pushing 0:15:59.320 --> 0:16:02.120 it down, um, so that we can really minimize the 0:16:02.200 --> 0:16:04.440 chance we get in trouble with variants or any other 0:16:04.520 --> 0:16:06.880 kind of problem. Professor, do you think we are understanding 0:16:06.920 --> 0:16:10.920 the vaccine at all? I think the vaccine is pretty 0:16:10.920 --> 0:16:13.520 awesome really. I mean, if you think about it, that 0:16:13.640 --> 0:16:19.200 within a year we have um incredibly effective vaccines with 0:16:19.560 --> 0:16:22.800 very strong safety records, and you see now the data 0:16:22.840 --> 0:16:26.600 from Israel's showing staggering declines and risk for people who 0:16:26.680 --> 0:16:29.840 have been vaccinated. I think that there's no reason to 0:16:29.880 --> 0:16:33.640 undersell the vaccine. But we shouldn't think that. You know, 0:16:33.920 --> 0:16:36.640 in a week after you know that everything is going 0:16:36.680 --> 0:16:39.280 to be fine, there are a lot of risks out there. UM. 0:16:39.680 --> 0:16:41.880 The way I'm telling people, as you know that list 0:16:41.920 --> 0:16:43.800 of things that you want to do when this is 0:16:43.840 --> 0:16:46.840 all over. You can't do them all today, you know. 0:16:46.960 --> 0:16:50.080 But if you've been vaccinated and you're you're through that period, 0:16:50.360 --> 0:16:52.160 there's probably some things on that list you may be 0:16:52.240 --> 0:16:53.920 able to do. Well. Don't you think it would be 0:16:54.800 --> 0:16:57.440 more optimal so to speak, to tell people who have 0:16:57.480 --> 0:16:59.440 had the vaccine that they can do the things on 0:16:59.480 --> 0:17:01.640 the list. Wouldn't that be a better way of selling 0:17:01.640 --> 0:17:04.000 this vaccine, So actually encourage people to go and get 0:17:04.000 --> 0:17:05.680 it by saying to them that you can't start to 0:17:05.680 --> 0:17:08.880 return to normal once you've had it. Well, I think 0:17:08.920 --> 0:17:11.399 you you can say you can start to return to normal. 0:17:11.520 --> 0:17:13.440 I think that some people are really itching to be 0:17:13.480 --> 0:17:15.520 able to say it's all done. You know, you're done, 0:17:15.560 --> 0:17:19.159 and that's not really a great message for for for 0:17:19.240 --> 0:17:21.920 everyone right now. But you, I think can say, for example, 0:17:21.960 --> 0:17:24.760 that people have been vaccine, you can get together for dinner. 0:17:24.920 --> 0:17:28.040 You know, you can go see your grandkids. You know, 0:17:29.560 --> 0:17:33.080 perhaps depending on the situation, with a few modifications, but 0:17:33.160 --> 0:17:35.520 a lot closer than you were before. So you know, 0:17:35.520 --> 0:17:38.000 I'm fielding these questions every day from people and they're 0:17:38.000 --> 0:17:40.320 just amaze when I start to tell them yes, after 0:17:40.440 --> 0:17:43.399 a year of telling them now it has a psychological impact. 0:17:43.480 --> 0:17:47.160 I would say everyone, particularly younger kids, who have seen 0:17:47.200 --> 0:17:50.120 this as the majority or a significant portion of their 0:17:50.200 --> 0:17:53.200 life going forward. What's the time frame that you see 0:17:53.240 --> 0:17:56.720 at this point, given the vaccinations available, where you expect 0:17:56.800 --> 0:17:58.680 anybody to be able to go to their local drug 0:17:58.800 --> 0:18:03.080 store or say a stadium and get vaccinated. You know, 0:18:03.119 --> 0:18:05.680 I would I defer to the estimates of the federal government. 0:18:05.720 --> 0:18:08.200 I think they're they're talking about the summer for adults 0:18:08.440 --> 0:18:11.439 more or less for that. Obviously, it's going to take 0:18:11.480 --> 0:18:13.480 longer for kids because the studies have to be done. 0:18:13.560 --> 0:18:17.040 But um, I think we're going to see that this 0:18:17.119 --> 0:18:20.920 is going to turn from an excess demand situation pretty quickly. 0:18:21.160 --> 0:18:23.480 I mean in in you know, in a matter of 0:18:23.520 --> 0:18:26.520 weeks or a couple of months, to a vaccine acceptance 0:18:26.560 --> 0:18:29.720 situation where we really are going to be waiting for 0:18:29.760 --> 0:18:32.760 people to get ready for vaccination. And we need to 0:18:32.800 --> 0:18:37.720 start that process now, offering vaccines, answering questions, doing mobile teams. 0:18:38.119 --> 0:18:41.560 You know, there's there's vast inequity in access to vaccination 0:18:41.680 --> 0:18:43.840 right now, and we should be fixing that because that's 0:18:43.840 --> 0:18:47.119 going to turn in to the most important endgame for 0:18:47.160 --> 0:18:50.320 this virus. Conversations like this are important, Joshua. We appreciate 0:18:50.359 --> 0:18:52.320 it's on this morning. Thank you so, Joshua Shastain that 0:18:52.680 --> 0:19:02.320 of Jones Help Kids, dianel over the jpmorganist management where 0:19:02.320 --> 0:19:06.880 the real focus on emerging markets joins us UH this morning, Diana, 0:19:07.200 --> 0:19:09.439 I want to look in your research notes at the 0:19:09.480 --> 0:19:13.160 distinctions involved. You can't buy em blind. You can't buy 0:19:13.240 --> 0:19:17.640 big developed countries blind either. What are the distinctions right 0:19:17.680 --> 0:19:22.760 now of placing capital in emerging markets? So right now, 0:19:22.840 --> 0:19:25.200 the big driver and they're seeing that playing out as 0:19:25.200 --> 0:19:29.560 well in developed markets is actually growth. UM. The vaccine 0:19:29.600 --> 0:19:32.120 rollout has been a very big focus on the markets, 0:19:32.160 --> 0:19:34.879 and I think there is growing confidence now as the 0:19:34.880 --> 0:19:38.960 pace accelerates and you have more vaccine candidates coming into play, 0:19:39.000 --> 0:19:41.400 that this is going to be done in a sustained 0:19:41.440 --> 0:19:44.440 manner and in some cases we might even see the 0:19:44.720 --> 0:19:48.680 openings of the economies as early as Q two, full 0:19:48.680 --> 0:19:52.560 reopenings in places like the US, the UK, markets like 0:19:52.680 --> 0:19:55.560 Israel where they're fire runs to the curve. So in 0:19:55.600 --> 0:19:59.600 emerging markets, very similar stories are playing out. UM. The 0:19:59.640 --> 0:20:03.200 focus has very much been on focusing on those economies 0:20:03.480 --> 0:20:06.359 where a rollout of vaccine has been credible and it's 0:20:06.400 --> 0:20:09.520 actually well ankered. Um So you look at somewhere like Chile, 0:20:10.000 --> 0:20:13.359 Chile stands out amongst the latter and actually amongst broader 0:20:13.359 --> 0:20:16.399 E margin markets as being one that's really ahead of 0:20:16.440 --> 0:20:19.720 the curve rolling out vaccines and that's actually traded well. 0:20:19.960 --> 0:20:22.480 Bringing a story with Turkey, so Joan, I know you're 0:20:22.480 --> 0:20:25.520 a great student. That's what's so important here is a maturity, 0:20:25.560 --> 0:20:30.040 the maturation rather of emerging market bonds, the size of 0:20:30.160 --> 0:20:34.280 scope to scale to the commodity e M nations have 0:20:34.400 --> 0:20:40.040 a greater, more sophisticated bond pool to play with. Um So, 0:20:40.119 --> 0:20:43.720 by and large commodity exporters tend to have more issuance. 0:20:43.960 --> 0:20:47.920 Um they're larger economies, so that's not unexpected. But then 0:20:48.160 --> 0:20:50.960 um so those two those that side of things is 0:20:51.000 --> 0:20:53.560 actually a positive for them in that liquidity is not 0:20:53.760 --> 0:20:57.840 necessarily an issue. But actually where we're seeing interesting opportunities 0:20:57.920 --> 0:21:01.159