1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa A. Brawnowitz Jaily. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:22,440 Speaker 1: international relations. To find Bloomberg Surveillance on Apple podcast, Suncloud, 5 00:00:22,840 --> 00:00:26,280 Speaker 1: Bloomberg dot Com and of course on the Bloomberg Terminal. 6 00:00:29,600 --> 00:00:32,400 Speaker 1: And two thousand twenty one for William Dudley has really 7 00:00:32,440 --> 00:00:35,080 Speaker 1: done something in former New York Fed President, and we 8 00:00:35,159 --> 00:00:37,839 Speaker 1: are honored that he's been writing and writing a series 9 00:00:38,240 --> 00:00:43,600 Speaker 1: of intelligent essays, controversial essays for Bloomberg Opinion. Bill Dudley. 10 00:00:43,640 --> 00:00:45,640 Speaker 1: It it's not my chart of the year, but if 11 00:00:45,680 --> 00:00:50,200 Speaker 1: I take log tenure yield and Stan Fisher has always 12 00:00:50,240 --> 00:00:55,200 Speaker 1: been great about the percentage change moving yield, if we 13 00:00:55,360 --> 00:01:00,440 Speaker 1: get the Dudley yield moves, these are huge percentage change 14 00:01:00,480 --> 00:01:06,360 Speaker 1: shocks of this low base. Is that important? I would 15 00:01:06,440 --> 00:01:08,360 Speaker 1: argue that the presented change obviously is going to be 16 00:01:08,400 --> 00:01:11,120 Speaker 1: more elevated when you're very close to zero. So I 17 00:01:11,120 --> 00:01:13,520 Speaker 1: think it's really the magnitude of the move rather than 18 00:01:13,560 --> 00:01:16,240 Speaker 1: the percentage change that's really important. If the Fed boot 19 00:01:16,319 --> 00:01:18,040 Speaker 1: raises short term rates to one and a half or 20 00:01:18,040 --> 00:01:20,520 Speaker 1: two and al percent, that's still very low and environment 21 00:01:20,560 --> 00:01:24,760 Speaker 1: where inflation is running above. Bill, help us ound with 22 00:01:24,840 --> 00:01:27,640 Speaker 1: the playbook for next week. The extra surprise, the additional surprise, 23 00:01:27,680 --> 00:01:30,520 Speaker 1: the essence of your pace this morning. Do you expect 24 00:01:30,520 --> 00:01:32,760 Speaker 1: to see in the summary of economic projections beyond the 25 00:01:32,760 --> 00:01:36,840 Speaker 1: forecast into the dot plow? What are you looking for? Bill? Well, 26 00:01:36,840 --> 00:01:38,880 Speaker 1: the Fed is obviously changing their view on what's the 27 00:01:38,920 --> 00:01:42,800 Speaker 1: appropriate monetary policy. I mean, this is a pretty remarkable meeting. 28 00:01:42,840 --> 00:01:45,560 Speaker 1: After announcing the taper, they're going to accelerate the taper. 29 00:01:45,920 --> 00:01:48,240 Speaker 1: So that's an admission that the Fed Reserve was wrong 30 00:01:48,720 --> 00:01:50,840 Speaker 1: and as a as as part of that process, they're 31 00:01:50,840 --> 00:01:53,640 Speaker 1: gonna have to revise their economic forecast, and I'll be 32 00:01:53,920 --> 00:01:57,080 Speaker 1: summarizing the summary of economic projections. I think you're going 33 00:01:57,160 --> 00:02:01,840 Speaker 1: to see is higher inflation, for a tighter labor market, 34 00:02:02,160 --> 00:02:05,720 Speaker 1: and most importantly, much more tightening from the Fed in 35 00:02:06,040 --> 00:02:12,280 Speaker 1: the forecast rising, which extends from last time the Fed 36 00:02:12,680 --> 00:02:17,280 Speaker 1: meeting forecast for federal fundrate was one cent. That's below 37 00:02:17,320 --> 00:02:20,040 Speaker 1: what the Fed fuses neutral. This time, I think they're 38 00:02:20,080 --> 00:02:21,600 Speaker 1: gonna at least get to neutral by the end of 39 00:02:23,000 --> 00:02:25,000 Speaker 1: So you're gonna get earlier rate hikes and more rate 40 00:02:25,080 --> 00:02:27,680 Speaker 1: hikes within their forecast. What's the significance of that, just 41 00:02:27,720 --> 00:02:30,000 Speaker 1: in terms of how quick this cycle will be bill 42 00:02:30,280 --> 00:02:32,880 Speaker 1: how short it might be. Well, I think it really 43 00:02:32,919 --> 00:02:35,560 Speaker 1: all depends on how financial markets react to that. I mean, right, 44 00:02:35,680 --> 00:02:38,000 Speaker 1: so far, people have been very comfortable with the Fed 45 00:02:38,360 --> 00:02:41,400 Speaker 1: beginning to remove mon entary policy accommodation. You see a 46 00:02:41,480 --> 00:02:43,960 Speaker 1: tenure treasury yields are still a very local and one 47 00:02:43,960 --> 00:02:46,200 Speaker 1: and a half percent. You see the stock market within 48 00:02:46,280 --> 00:02:48,600 Speaker 1: a you know, a whisker of its all time high. 49 00:02:48,919 --> 00:02:51,280 Speaker 1: So it really depends on how financial markets react to 50 00:02:51,400 --> 00:02:54,040 Speaker 1: the FIT tightening. I think there is a prospect for 51 00:02:54,400 --> 00:02:57,040 Speaker 1: a bit of a surprise, a bit of discomfort by market. 52 00:02:57,200 --> 00:02:58,679 Speaker 1: I think the feder reserve is going to do more 53 00:02:59,240 --> 00:03:01,760 Speaker 1: than what's currently priced in. You look at you're at 54 00:03:01,880 --> 00:03:04,440 Speaker 1: the futures market, people are saying that the peak and 55 00:03:04,480 --> 00:03:06,680 Speaker 1: the Federal fundrate and the cycle is only going about 56 00:03:06,680 --> 00:03:09,760 Speaker 1: me about one and a half cent. That's well below 57 00:03:09,800 --> 00:03:12,560 Speaker 1: what the Fed and selves deem as neutral and well 58 00:03:12,600 --> 00:03:15,600 Speaker 1: below what the FIT is likely to write down next week. 59 00:03:15,840 --> 00:03:18,480 Speaker 1: But when you talk about the financial markets reaction, I 60 00:03:18,520 --> 00:03:20,720 Speaker 1: think of the yield curve and how it's been flattening 61 00:03:20,800 --> 00:03:24,120 Speaker 1: some people saying that it indicates a market expectation for 62 00:03:24,160 --> 00:03:27,480 Speaker 1: a policy error. Should the Fed high rates as much 63 00:03:27,480 --> 00:03:30,040 Speaker 1: as three times next year, which you think probably should 64 00:03:30,040 --> 00:03:32,440 Speaker 1: be a base case scenario. What's your read on the 65 00:03:32,560 --> 00:03:35,920 Speaker 1: leield curve. Well, I'm not really sure why the yield 66 00:03:35,960 --> 00:03:38,400 Speaker 1: curs are doing what it's doing. I mean, one possibility 67 00:03:38,480 --> 00:03:40,840 Speaker 1: is that the quantitative easy in the fifth purchases of 68 00:03:40,880 --> 00:03:43,480 Speaker 1: assets are just pushing down long term yields if people 69 00:03:43,520 --> 00:03:46,480 Speaker 1: don't want to hold deposits of commercial banks in their 70 00:03:46,520 --> 00:03:49,360 Speaker 1: searching searching out higher yielding assets. So we may have 71 00:03:49,400 --> 00:03:53,360 Speaker 1: a bit of a bond bubble just caused by quantitative easing. Obviously, 72 00:03:53,400 --> 00:03:56,360 Speaker 1: as the quantity of easing process is run down, and 73 00:03:56,360 --> 00:03:59,240 Speaker 1: I would imagine bonnyels will will retreat to a more 74 00:03:59,280 --> 00:04:02,240 Speaker 1: normal I do think the tenure treasure yield at one 75 00:04:02,480 --> 00:04:05,800 Speaker 1: percent environment where inflation is running five or six percent 76 00:04:06,000 --> 00:04:09,680 Speaker 1: is very hard to explain in the current circumstances, Bill, 77 00:04:09,720 --> 00:04:13,360 Speaker 1: can you elaborate a bond bubble from quantitative easing? What 78 00:04:13,560 --> 00:04:16,800 Speaker 1: that means in terms of the threshold of when people 79 00:04:17,000 --> 00:04:20,400 Speaker 1: reap price bond yields. According to the Fed backing away 80 00:04:20,440 --> 00:04:24,000 Speaker 1: from some of their purchases. Well, I think the you 81 00:04:24,000 --> 00:04:25,800 Speaker 1: know it's gonna it could take a wild for this 82 00:04:25,880 --> 00:04:28,000 Speaker 1: to playoff, because remember, the Fed is still adding to 83 00:04:28,080 --> 00:04:30,120 Speaker 1: his balance sheet even as we speak, and the taper 84 00:04:30,240 --> 00:04:32,880 Speaker 1: it won't be finished until the March flone C meeting, 85 00:04:33,240 --> 00:04:34,760 Speaker 1: and even after that will be quite a bit of 86 00:04:34,800 --> 00:04:37,400 Speaker 1: time before the Fed Reserve begins to shrink their balance sheet. 87 00:04:37,440 --> 00:04:40,160 Speaker 1: Only after they've lifted off and raised short term interest 88 00:04:40,240 --> 00:04:42,719 Speaker 1: rates to say one to two percent, will start to 89 00:04:42,720 --> 00:04:45,360 Speaker 1: shrink or balance sheet. So the effects of quantitative easy 90 00:04:45,360 --> 00:04:47,840 Speaker 1: and could linger for quite some time. I do think 91 00:04:47,839 --> 00:04:51,320 Speaker 1: the bond market is going to be uh disturbed by 92 00:04:51,360 --> 00:04:53,320 Speaker 1: the fact that the peak and the Federal funds raise 93 00:04:53,400 --> 00:04:55,200 Speaker 1: is likely to be quite a bit higher than was priced, 94 00:04:55,200 --> 00:04:57,960 Speaker 1: and that in a self a way, I think I'm bondus, 95 00:04:58,600 --> 00:05:00,800 Speaker 1: but I want to get all stuff in open on you. 96 00:05:01,120 --> 00:05:06,200 Speaker 1: Are we practicing monetary theory? Are we practicing modern monetary theory? 97 00:05:06,240 --> 00:05:08,240 Speaker 1: I need to get you in trouble this morning. Help 98 00:05:08,279 --> 00:05:11,320 Speaker 1: me here are we doing it? I don't think. I 99 00:05:11,320 --> 00:05:13,320 Speaker 1: don't think so in the sense that I don't think 100 00:05:13,320 --> 00:05:15,240 Speaker 1: the Center Reserve is just saying whatever you want to 101 00:05:15,279 --> 00:05:17,640 Speaker 1: do on the cystal side, We're going to monetize that debt. 102 00:05:18,360 --> 00:05:20,120 Speaker 1: It feels like that a little bit because of the 103 00:05:20,200 --> 00:05:23,280 Speaker 1: quantitative easing program. But remember the quantitative easing program was 104 00:05:23,360 --> 00:05:26,479 Speaker 1: undertaken because short term interest rates were at zero and 105 00:05:26,520 --> 00:05:29,200 Speaker 1: that the said wanted to add monetary accommodation. The only 106 00:05:29,200 --> 00:05:31,360 Speaker 1: way they could do it was by this these other means. 107 00:05:31,760 --> 00:05:34,679 Speaker 1: So I think we're you know, it's more resembling monitor 108 00:05:34,800 --> 00:05:36,520 Speaker 1: monetary theory than what we've done in the past, But 109 00:05:36,520 --> 00:05:38,240 Speaker 1: I don't think we're quite there yet. They were lucky 110 00:05:38,240 --> 00:05:40,279 Speaker 1: to have you with us this morning. Just fantastic, and 111 00:05:40,320 --> 00:05:43,000 Speaker 1: so far this year you've been right in more ways 112 00:05:43,040 --> 00:05:45,479 Speaker 1: than one. Built Downtly there be former New York Fed 113 00:05:45,480 --> 00:05:55,000 Speaker 1: president and Bloomberg opinion columnist. Let's talk about this market 114 00:05:55,000 --> 00:05:58,719 Speaker 1: with Ding kind of founder and CEO of Macro Risk Advices, Dan, 115 00:05:58,960 --> 00:06:03,279 Speaker 1: your words, risk free asset, the bedrock of financial markets 116 00:06:03,760 --> 00:06:07,360 Speaker 1: looks unwell, Dean, what do you mean by that? I 117 00:06:07,400 --> 00:06:11,719 Speaker 1: would actually say it's um displaying signs of chaos. Um. 118 00:06:11,800 --> 00:06:14,080 Speaker 1: You know, if you look at we all studied the VIX, 119 00:06:14,080 --> 00:06:18,440 Speaker 1: and the VIX was on the move up down, traveled 120 00:06:18,480 --> 00:06:21,640 Speaker 1: quite a bit this last week. UM, but so many, 121 00:06:22,200 --> 00:06:24,480 Speaker 1: so much of this whole risk equation, it's priced off 122 00:06:24,560 --> 00:06:28,520 Speaker 1: the risk free asset class. And I would just argue that, um, 123 00:06:28,560 --> 00:06:30,960 Speaker 1: it's really not risk free. It might be from a 124 00:06:31,000 --> 00:06:34,640 Speaker 1: regulatory standpoint or for how pension funds allocate to risk, 125 00:06:35,080 --> 00:06:38,040 Speaker 1: how they think about their portfolios. But here's an asset 126 00:06:38,040 --> 00:06:40,880 Speaker 1: class that number one is moving around, it's on, it's 127 00:06:40,880 --> 00:06:44,160 Speaker 1: displaying a lot of volatility UM, and it's fundamentals are 128 00:06:44,200 --> 00:06:47,760 Speaker 1: going through a regime shift that is deteriorating. UM. You know, 129 00:06:47,800 --> 00:06:51,359 Speaker 1: if we think about a default in the typical sense 130 00:06:51,400 --> 00:06:56,159 Speaker 1: of a credit bearing bond, uh inflation is effectively a 131 00:06:56,200 --> 00:06:59,800 Speaker 1: default of creeping default for a risk free security. And 132 00:06:59,800 --> 00:07:03,760 Speaker 1: that really what we're seeing, right that the bedrock of 133 00:07:03,800 --> 00:07:07,479 Speaker 1: everything is rooting in terms of its fundamental outlook. And 134 00:07:07,600 --> 00:07:09,800 Speaker 1: you know, when I step back and I look at this, 135 00:07:09,960 --> 00:07:12,640 Speaker 1: this shot heard around the world the last week, the 136 00:07:12,960 --> 00:07:15,880 Speaker 1: four percent draw down, which was in a lot of 137 00:07:15,880 --> 00:07:21,040 Speaker 1: ways so meaningful because it encapsulated so many asset classes. Crude, yeah, 138 00:07:21,920 --> 00:07:25,440 Speaker 1: cryptocurrency so much. You know, underneath the surface of it 139 00:07:25,520 --> 00:07:29,080 Speaker 1: is a risk free market that's displaying a lot of fertility. 140 00:07:29,120 --> 00:07:31,080 Speaker 1: And I just think it's something we have to pay 141 00:07:31,080 --> 00:07:32,960 Speaker 1: a lot of attention to. We've seen the Vix come 142 00:07:33,000 --> 00:07:38,480 Speaker 1: in UH dean constructively come in thirteen big figures. Most 143 00:07:38,520 --> 00:07:41,640 Speaker 1: of us have a collective memory of nirvana of the 144 00:07:41,720 --> 00:07:46,360 Speaker 1: Vix of A twelve, thirteen, A fourteen. Where's the new 145 00:07:46,440 --> 00:07:50,920 Speaker 1: nirvana right now for the Vix? Is it a twenty level? Well? 146 00:07:50,960 --> 00:07:54,600 Speaker 1: I think that you can argue that the floor has 147 00:07:54,640 --> 00:07:56,760 Speaker 1: gone up a little bit. Um, you know, I like 148 00:07:56,800 --> 00:08:00,400 Speaker 1: to say, especially these days markets and especially Volatila with 149 00:08:00,400 --> 00:08:02,720 Speaker 1: with beam stocks and so forth, it's a never say 150 00:08:02,800 --> 00:08:05,760 Speaker 1: never business. What you thought was achievable, both to the 151 00:08:05,840 --> 00:08:08,800 Speaker 1: high side and the low side, um, just don't count 152 00:08:08,800 --> 00:08:11,600 Speaker 1: on it. But that I would say that the floor 153 00:08:11,680 --> 00:08:15,560 Speaker 1: has probably moved up from perhaps sixteen to eighteen. I 154 00:08:15,600 --> 00:08:20,239 Speaker 1: think this last UH spasm in markets was was pretty meaningful, 155 00:08:20,360 --> 00:08:24,840 Speaker 1: especially relative to the slight the modest degree of draw down. 156 00:08:25,280 --> 00:08:27,240 Speaker 1: There was a lot of trepidation, and I think the 157 00:08:27,240 --> 00:08:31,040 Speaker 1: trepidation comes from the sense that we almost got hit 158 00:08:31,080 --> 00:08:34,320 Speaker 1: on two fronts at once. One the growth shock, which 159 00:08:34,320 --> 00:08:37,080 Speaker 1: I think the markets working its way past perhaps omicrons 160 00:08:37,120 --> 00:08:40,080 Speaker 1: not what we thought it was going to be. But second, 161 00:08:40,120 --> 00:08:42,320 Speaker 1: and you guys alluded to it. We we get this 162 00:08:42,360 --> 00:08:46,920 Speaker 1: inflation data on Friday. This is an ongoing, UH source 163 00:08:46,960 --> 00:08:51,280 Speaker 1: of uncertainty for markets, and you know, it's potentially very disruptive. Again, 164 00:08:51,320 --> 00:08:55,040 Speaker 1: the FED fighting inflation from above is just worlds apart 165 00:08:55,080 --> 00:08:58,360 Speaker 1: from the FED fighting inflation from below, which it's really 166 00:08:58,400 --> 00:09:01,559 Speaker 1: done for the entirety of the the post crisis period. Dean, 167 00:09:01,600 --> 00:09:04,480 Speaker 1: There's a consensus emerging in markets that the more inflation 168 00:09:04,720 --> 00:09:07,280 Speaker 1: data runs hot now and the more near term inflation 169 00:09:07,320 --> 00:09:10,880 Speaker 1: expectations rise, the lower they go over the long term. 170 00:09:10,920 --> 00:09:12,680 Speaker 1: And this is the flattening yield curve, and this is 171 00:09:12,679 --> 00:09:16,120 Speaker 1: in the inflation expectations. Do you think that that is wrong? 172 00:09:16,280 --> 00:09:18,560 Speaker 1: Do you think that anything in the near term data 173 00:09:18,600 --> 00:09:23,360 Speaker 1: could shake that consensus. That's a really great and open question. 174 00:09:23,480 --> 00:09:25,000 Speaker 1: And you know, as we look at the yold curve 175 00:09:25,040 --> 00:09:29,280 Speaker 1: flattening this year, UH, it's very different from let's say, 176 00:09:29,320 --> 00:09:33,280 Speaker 1: the flattening in two thousand seventeen, which was extremely low 177 00:09:33,360 --> 00:09:36,680 Speaker 1: VIX environment a nine or ten VIS and a move 178 00:09:36,720 --> 00:09:40,240 Speaker 1: index the rate volatility VIX that hovered an all time 179 00:09:40,280 --> 00:09:42,800 Speaker 1: lows as well. This is much different. This is this 180 00:09:42,880 --> 00:09:45,520 Speaker 1: is tightening because you have to versus twenty seven team, 181 00:09:45,520 --> 00:09:48,360 Speaker 1: which is tightening because you can to the curve and 182 00:09:48,480 --> 00:09:51,560 Speaker 1: especially the back end. Well, I'm just not convinced that 183 00:09:51,600 --> 00:09:54,720 Speaker 1: as we tighten and if the FED gets off zero, 184 00:09:54,800 --> 00:09:58,520 Speaker 1: it completes the taper and starts to initiate urns of tightening. 185 00:09:59,040 --> 00:10:00,960 Speaker 1: I'm not even sure that packing goes up. And I 186 00:10:01,000 --> 00:10:04,040 Speaker 1: think this will ultimately scare the FED quite a bit 187 00:10:04,440 --> 00:10:07,120 Speaker 1: um as it did in late eighteen early nineteen, and 188 00:10:07,160 --> 00:10:09,199 Speaker 1: so you just have to wonder how far we're going 189 00:10:09,200 --> 00:10:12,440 Speaker 1: to get in the tightening cycle. Um, I just don't 190 00:10:12,480 --> 00:10:15,480 Speaker 1: see it ultimately impounding itself into the long end of 191 00:10:15,480 --> 00:10:19,319 Speaker 1: the curve. Being ready thoughtful stuff as always, brilliant. Love 192 00:10:19,360 --> 00:10:26,959 Speaker 1: catching up with Dinka at Macro Risk Advices, joining us 193 00:10:27,000 --> 00:10:30,640 Speaker 1: now by chance. Gig Gronville, Senior Scholar, JOHNS. Hopkins Center 194 00:10:30,679 --> 00:10:33,800 Speaker 1: for Health Security, g G. One of the important points 195 00:10:33,800 --> 00:10:37,760 Speaker 1: in the now beginning three year ordeal of your profession 196 00:10:38,080 --> 00:10:43,800 Speaker 1: this pandemic. What is the significance of the FISER announcement. Yeah, 197 00:10:43,840 --> 00:10:46,400 Speaker 1: this is based on one study and there are going 198 00:10:46,440 --> 00:10:49,440 Speaker 1: to be many more over the coming weeks. That shows 199 00:10:49,480 --> 00:10:53,880 Speaker 1: that even though there is a significant degradation of vaccine um, 200 00:10:54,040 --> 00:10:59,520 Speaker 1: potential vaccine efficacy from in response to Amicon that there 201 00:10:59,720 --> 00:11:02,520 Speaker 1: is for some protection. It's not a complete escape, and 202 00:11:02,559 --> 00:11:06,840 Speaker 1: so it's going to likely be boosted by having a booster, 203 00:11:06,960 --> 00:11:09,520 Speaker 1: by having a third dose. The Prime Minister will be 204 00:11:09,520 --> 00:11:11,680 Speaker 1: grilled this morning in one part of that in the 205 00:11:11,760 --> 00:11:14,400 Speaker 1: United Kingdom, and I would auditorialize it. It seems to 206 00:11:14,400 --> 00:11:16,920 Speaker 1: be a lot more chaotic over here than even the 207 00:11:17,040 --> 00:11:21,320 Speaker 1: gentle chaos of America is. On vaccine passports, in the 208 00:11:21,400 --> 00:11:25,840 Speaker 1: vaccine restrictions of the unvaccinated, I should say in Germany, 209 00:11:26,080 --> 00:11:31,120 Speaker 1: does that work? The vaccine passports work? I think they 210 00:11:31,320 --> 00:11:35,760 Speaker 1: anything that can boost vaccine uptake get people vaccinated. We 211 00:11:35,800 --> 00:11:38,240 Speaker 1: still don't know whether to doses is going to be 212 00:11:38,400 --> 00:11:42,199 Speaker 1: enough to prevent severe disease um keep people out of 213 00:11:42,200 --> 00:11:44,680 Speaker 1: the hospital. Maybe it will be enough to prevent even 214 00:11:45,080 --> 00:11:47,480 Speaker 1: less severe disease. We just don't know yet. We were 215 00:11:47,480 --> 00:11:50,040 Speaker 1: going to have to see for what real world data 216 00:11:50,160 --> 00:11:53,000 Speaker 1: is like. But yes, I mean anything that can get 217 00:11:53,000 --> 00:11:56,600 Speaker 1: people to h to get vaccinated, I'm for as honest. 218 00:11:56,679 --> 00:11:59,560 Speaker 1: They have a choice to not get vaccinated, even if 219 00:11:59,600 --> 00:12:04,559 Speaker 1: it's eight inconvenient. This Fighter and BioNTech News really highlights 220 00:12:04,720 --> 00:12:08,200 Speaker 1: the sort of controversy around boosters and the possible need 221 00:12:08,280 --> 00:12:11,800 Speaker 1: to continue distributing them. A lot of disagreement even among 222 00:12:11,840 --> 00:12:15,959 Speaker 1: medical professionals about the importance for healthy individuals to get boosters. 223 00:12:16,200 --> 00:12:18,920 Speaker 1: Do you think that data like this actually edifies the 224 00:12:19,000 --> 00:12:22,760 Speaker 1: case for requiring this as yet another course in the 225 00:12:22,840 --> 00:12:26,480 Speaker 1: normal course of action with vaccines? Yeah, I mean, we'll 226 00:12:26,480 --> 00:12:28,160 Speaker 1: have to see what there's going to be more data 227 00:12:28,200 --> 00:12:31,760 Speaker 1: that's coming, But it does indicate that getting that third 228 00:12:31,800 --> 00:12:34,720 Speaker 1: dose might be much more important than just a nice 229 00:12:34,760 --> 00:12:37,640 Speaker 1: to have. It might be quite necessary for certain groups 230 00:12:37,640 --> 00:12:41,240 Speaker 1: in particular, UM, people who are more vulnerable to covid 231 00:12:41,559 --> 00:12:44,640 Speaker 1: um even before you know, older people, people who are 232 00:12:44,960 --> 00:12:48,120 Speaker 1: compromised UM. So it might be, uh, it might be 233 00:12:48,160 --> 00:12:51,800 Speaker 1: something that is becomes part of the vaccine. It's just 234 00:12:51,880 --> 00:12:54,760 Speaker 1: a three dose vaccine. Dr Runville. Do you expect a 235 00:12:54,840 --> 00:12:57,120 Speaker 1: time when we're always just getting shot up with different 236 00:12:57,240 --> 00:12:59,920 Speaker 1: vaccines to try to adjust to the different variants The 237 00:13:00,000 --> 00:13:03,000 Speaker 1: idea that we're going to be getting vaccinated as frequently 238 00:13:03,080 --> 00:13:04,920 Speaker 1: as we have been over the past couple of years. 239 00:13:06,600 --> 00:13:08,560 Speaker 1: We will have to see. I mean, in general, there 240 00:13:08,679 --> 00:13:11,560 Speaker 1: is no disease that's good to get UM. So I 241 00:13:11,600 --> 00:13:13,840 Speaker 1: think it would be nice to have more vaccines for 242 00:13:14,000 --> 00:13:17,200 Speaker 1: other things that we suffer from. But um, but we'll 243 00:13:17,240 --> 00:13:20,360 Speaker 1: have to see. I hope that we can vaccinate more 244 00:13:20,400 --> 00:13:22,520 Speaker 1: people in the world and we can stop this, uh, 245 00:13:22,760 --> 00:13:27,240 Speaker 1: this this variant sequence. And John with Amadanzo yesterday is 246 00:13:27,280 --> 00:13:30,080 Speaker 1: he reviewed It was a wonderful professional review of the 247 00:13:30,120 --> 00:13:33,599 Speaker 1: efficacy of the booster. You wonder if that changes with 248 00:13:33,720 --> 00:13:35,800 Speaker 1: this announcement. Yeah, it's worth pointing out though, Tom, what 249 00:13:35,840 --> 00:13:39,160 Speaker 1: we're talking about almost exclusively its vaccine escape and jj 250 00:13:39,280 --> 00:13:42,000 Speaker 1: that was only one question of three questions that we 251 00:13:42,040 --> 00:13:44,719 Speaker 1: want to answer it. How contagious was this variant? How 252 00:13:44,760 --> 00:13:47,719 Speaker 1: severe was this variant? Aside from whether it escapes the 253 00:13:47,800 --> 00:13:49,599 Speaker 1: vaccines or not. What have we learned about that? J 254 00:13:49,760 --> 00:13:54,120 Speaker 1: j UM. There are some indications that are positive that 255 00:13:54,200 --> 00:13:57,079 Speaker 1: it might be less severe. But I think we really 256 00:13:57,120 --> 00:13:59,800 Speaker 1: need to hold off and see, Um, we have a 257 00:14:00,040 --> 00:14:04,079 Speaker 1: from population that has a different vaccination coverage in this 258 00:14:04,200 --> 00:14:07,240 Speaker 1: in this country, we have a different spread of delta 259 00:14:07,320 --> 00:14:10,960 Speaker 1: in this country. I think it's best to wait for 260 00:14:11,000 --> 00:14:14,200 Speaker 1: some more data before saying, oh, it's a mild a 261 00:14:14,240 --> 00:14:16,960 Speaker 1: mild variant, because I think some people are saying that 262 00:14:17,320 --> 00:14:19,720 Speaker 1: and we just don't have enough information to say that 263 00:14:19,800 --> 00:14:23,200 Speaker 1: yet don't do. We appreciate your insight as always. What timely? 264 00:14:23,440 --> 00:14:26,080 Speaker 1: What a timely conversation as well? G. G. Gronville. There 265 00:14:26,320 --> 00:14:35,880 Speaker 1: of Johns Hopkins, the most well known west Ham supporter 266 00:14:36,040 --> 00:14:38,000 Speaker 1: in the city of London, now with Hong Kong and 267 00:14:38,080 --> 00:14:40,720 Speaker 1: now in the city of London. Briefly Steve Major, Global 268 00:14:40,800 --> 00:14:44,000 Speaker 1: head of Fixed Income Research at HSBC. Steve, as part 269 00:14:44,040 --> 00:14:45,720 Speaker 1: of the exchange to get you to talk about bonds, 270 00:14:45,720 --> 00:14:47,280 Speaker 1: I promised we'll talk about west Ham. Do you want 271 00:14:47,280 --> 00:14:51,080 Speaker 1: to start there? What a performance this season? All that 272 00:14:51,160 --> 00:14:54,360 Speaker 1: matters is that we're above Arsenal and Tottenham. Hopefully it'll 273 00:14:54,400 --> 00:14:57,880 Speaker 1: be Chelsea as well soon beat and Chausa. Over the weekend, Steve, 274 00:14:57,880 --> 00:14:59,760 Speaker 1: where's this coming from? How much money if that to 275 00:14:59,760 --> 00:15:01,160 Speaker 1: spend to do this? I was trying to explain it 276 00:15:01,200 --> 00:15:03,960 Speaker 1: to Tom over the weekend that this is a West 277 00:15:04,120 --> 00:15:07,120 Speaker 1: London club Chausea with a ton of money going up 278 00:15:07,120 --> 00:15:10,280 Speaker 1: against an East London club west Ham with less money. 279 00:15:10,320 --> 00:15:15,120 Speaker 1: How are they getting this done? There's hard work, good organization, 280 00:15:15,440 --> 00:15:18,960 Speaker 1: They've they've signed some good players. Um, it's not just 281 00:15:19,040 --> 00:15:21,520 Speaker 1: about buying the best players in the world, because as 282 00:15:21,560 --> 00:15:23,880 Speaker 1: you can see at PS g and at Man United. 283 00:15:23,920 --> 00:15:26,280 Speaker 1: It doesn't work. You have to have a structure and 284 00:15:26,360 --> 00:15:30,400 Speaker 1: a method of framework, like forecasting bonds. Well, it's forecast 285 00:15:30,400 --> 00:15:32,960 Speaker 1: bonds right now on tens year and that's the call 286 00:15:33,120 --> 00:15:35,200 Speaker 1: one fifty year and next year, then this move, this 287 00:15:35,360 --> 00:15:38,040 Speaker 1: quired pass towards one percent, the bit of a tweak 288 00:15:38,120 --> 00:15:41,080 Speaker 1: in the last week or so. Just run us through it. Yeah. 289 00:15:41,080 --> 00:15:44,800 Speaker 1: The thing about the forecast, John, And as you know, 290 00:15:44,840 --> 00:15:47,240 Speaker 1: it's a it's a point testament. It's a thankless task. 291 00:15:47,800 --> 00:15:52,640 Speaker 1: I mean successful forecasting. It's like the Kinzie and Beauty contest. 292 00:15:53,000 --> 00:15:55,680 Speaker 1: You're actually trying to forecast what everybody else is thinking. 293 00:15:56,120 --> 00:15:58,760 Speaker 1: So what I think personally doesn't matter that much. Is 294 00:15:58,800 --> 00:16:02,240 Speaker 1: it's whether I can correctly estimate what everybody else is 295 00:16:02,240 --> 00:16:05,560 Speaker 1: thinking at that point in time. And we've only got 296 00:16:05,600 --> 00:16:08,480 Speaker 1: one number to play with. So so for us, one 297 00:16:08,640 --> 00:16:12,800 Speaker 1: fifty for the ten year treasury is reasonable going into 298 00:16:12,920 --> 00:16:15,600 Speaker 1: next year because that there's now a floor for rates, 299 00:16:15,680 --> 00:16:18,720 Speaker 1: because the Fed has this hawk ish bias, and that 300 00:16:19,120 --> 00:16:22,680 Speaker 1: it's possible that they're going to hike. We've got forecasts 301 00:16:22,720 --> 00:16:25,720 Speaker 1: for rate hikes. I'll believe each hike when I see it, 302 00:16:25,840 --> 00:16:30,440 Speaker 1: and that's been my view through throughout this UM. So 303 00:16:30,520 --> 00:16:32,880 Speaker 1: the one percent call, we've pushed it into two thousand 304 00:16:32,920 --> 00:16:37,080 Speaker 1: and twenty three because we think that if and when 305 00:16:37,120 --> 00:16:40,240 Speaker 1: they start to hike, they won't get very far. And 306 00:16:40,480 --> 00:16:43,320 Speaker 1: we're not in the business of forecasting policy errors. If 307 00:16:43,360 --> 00:16:46,000 Speaker 1: it's so obvious that rates would be hiked and then 308 00:16:46,040 --> 00:16:49,000 Speaker 1: cut afterwards, the central brank will presumably just not do 309 00:16:49,200 --> 00:16:53,320 Speaker 1: very much. So so so to me, it's it's really 310 00:16:53,360 --> 00:16:55,800 Speaker 1: really difficult to believe that rates are going to get 311 00:16:55,840 --> 00:16:59,720 Speaker 1: anywhere near the levels reached in the last cycle. And 312 00:17:00,160 --> 00:17:02,960 Speaker 1: when you look at the terminal rate like that, it's 313 00:17:03,000 --> 00:17:06,040 Speaker 1: probably going to have a one handle. And that's why 314 00:17:06,280 --> 00:17:09,480 Speaker 1: one in the longer run is more like the fair 315 00:17:09,560 --> 00:17:12,960 Speaker 1: value your treasurers. I would love to have dinner Steve 316 00:17:13,119 --> 00:17:15,800 Speaker 1: with you and Bill Dudley, a former FED president of 317 00:17:15,840 --> 00:17:18,760 Speaker 1: the New York Office of the Federal Reserve. He has 318 00:17:18,800 --> 00:17:22,040 Speaker 1: been talking about how the end rate for the FED 319 00:17:22,119 --> 00:17:24,840 Speaker 1: could be three or four percent based on how hot 320 00:17:24,880 --> 00:17:28,400 Speaker 1: the economy is, based on how high inflation has been 321 00:17:28,520 --> 00:17:32,600 Speaker 1: and will likely be. What would you say to him, Well, 322 00:17:32,600 --> 00:17:35,360 Speaker 1: I get very few invitations, Lisa, so thanks very much. 323 00:17:36,040 --> 00:17:40,119 Speaker 1: Next week or the week after that, it would be 324 00:17:40,160 --> 00:17:43,720 Speaker 1: interesting to know the basis of that. And look, we 325 00:17:43,760 --> 00:17:46,520 Speaker 1: have to respect his opinion, but that it would be 326 00:17:46,520 --> 00:17:49,280 Speaker 1: interesting to see how we get to three or four 327 00:17:49,880 --> 00:17:54,960 Speaker 1: And has this calculation included the sensitivity of the economy 328 00:17:55,000 --> 00:17:58,560 Speaker 1: to the amount of debt, and has it included global 329 00:17:58,640 --> 00:18:02,840 Speaker 1: factors about the to see direction in China or Europe 330 00:18:02,920 --> 00:18:05,720 Speaker 1: and Japan. I mean, does anybody watching this at the 331 00:18:05,760 --> 00:18:08,639 Speaker 1: moment think that China is going to height rates or 332 00:18:08,840 --> 00:18:13,120 Speaker 1: or the ECB or Bank of Japan. So so presumably 333 00:18:13,520 --> 00:18:17,879 Speaker 1: we need to incorporate the longer term structural variables like 334 00:18:18,040 --> 00:18:22,439 Speaker 1: the debt overhangs, demographics, distribution of wealth, technology, and we 335 00:18:22,480 --> 00:18:25,440 Speaker 1: need to think globally and once we've done that, and 336 00:18:25,480 --> 00:18:27,280 Speaker 1: I'd like to hear how it's possible to get to 337 00:18:27,359 --> 00:18:30,720 Speaker 1: three or four percent, because on our reckoning, that's going 338 00:18:30,800 --> 00:18:33,080 Speaker 1: to be very difficult. Some people say this time is 339 00:18:33,119 --> 00:18:36,200 Speaker 1: slightly different, stive because of the money that was basically 340 00:18:36,240 --> 00:18:38,960 Speaker 1: printed by so many economies by the fact that people 341 00:18:39,000 --> 00:18:42,120 Speaker 1: got checks directly they are spending those checks, and you're 342 00:18:42,160 --> 00:18:45,680 Speaker 1: seeing the consumer spending component of the economy absolutely surged, 343 00:18:45,720 --> 00:18:48,600 Speaker 1: certainly in the United States. Why is that not enough 344 00:18:48,960 --> 00:18:51,320 Speaker 1: given where inflation is given the read that we're expected 345 00:18:51,320 --> 00:18:54,320 Speaker 1: on Friday, given wages to get us over the hump 346 00:18:54,440 --> 00:18:58,360 Speaker 1: of the demographics that you speak. Yeah, So, first of all, 347 00:18:58,359 --> 00:19:01,480 Speaker 1: I think there's some double counting on these money supply estimates. 348 00:19:02,200 --> 00:19:04,400 Speaker 1: A lot of the money that has been created through 349 00:19:04,440 --> 00:19:08,399 Speaker 1: the que is anyway stuck in banks. It exists as reserves, 350 00:19:08,640 --> 00:19:10,560 Speaker 1: So it depends on your definition of money supply. I 351 00:19:10,560 --> 00:19:12,520 Speaker 1: don't think it's gone up. Actually depends on how you 352 00:19:12,520 --> 00:19:15,040 Speaker 1: measure it. The other thing is the fiscal impulse of 353 00:19:15,040 --> 00:19:17,360 Speaker 1: two thousand and twenty one goes into reverse in two 354 00:19:17,400 --> 00:19:21,200 Speaker 1: thousand and twenty two. So a rational expectations view of 355 00:19:21,240 --> 00:19:23,920 Speaker 1: all of this would say, let's be careful. This isn't 356 00:19:23,960 --> 00:19:27,320 Speaker 1: free money. Someone has to pay for it. The the 357 00:19:27,320 --> 00:19:30,960 Speaker 1: the U. S Government has has effectively borrowed from the 358 00:19:31,080 --> 00:19:35,440 Speaker 1: children to pay their parents. And if anyone thinks that's clever, 359 00:19:35,560 --> 00:19:39,600 Speaker 1: then then fine. But I don't get it. Um it 360 00:19:39,680 --> 00:19:44,080 Speaker 1: was a huge bridge to tomorrow, but it doesn't look 361 00:19:44,200 --> 00:19:46,840 Speaker 1: very stimulant. It's not gonna be stimulative when we get 362 00:19:46,840 --> 00:19:50,200 Speaker 1: into two thousand two. Steve Major Deutsche Bank frames out 363 00:19:50,240 --> 00:19:53,000 Speaker 1: through George Sarah Ellis and their FX desk not a 364 00:19:53,080 --> 00:19:56,439 Speaker 1: curve in version, but a possibility of one. Do you 365 00:19:56,440 --> 00:19:59,560 Speaker 1: have a scenario call where two year goes out and 366 00:19:59,600 --> 00:20:03,800 Speaker 1: goes a above the one fifty level on your tenure call. Yeah. 367 00:20:03,920 --> 00:20:06,639 Speaker 1: Part of the reason for our recent forecast was because 368 00:20:06,720 --> 00:20:10,520 Speaker 1: the two year treasury one year forward was trading at 369 00:20:10,560 --> 00:20:13,200 Speaker 1: one twenty at the end of last week, and so 370 00:20:13,400 --> 00:20:15,440 Speaker 1: the forwards have got a lot of cover for those 371 00:20:15,480 --> 00:20:18,480 Speaker 1: great hikes. And in fact, in the forwards there is 372 00:20:18,480 --> 00:20:21,680 Speaker 1: an inversion already if you go out to ten year plus. 373 00:20:21,680 --> 00:20:24,120 Speaker 1: If you go one year two year forward for the 374 00:20:24,240 --> 00:20:27,040 Speaker 1: tense thirties you get you can see an inversion if 375 00:20:27,040 --> 00:20:28,560 Speaker 1: you if you look at a chart for the last 376 00:20:28,600 --> 00:20:31,600 Speaker 1: thirty or forty years, inversions only happened two or three times, 377 00:20:32,119 --> 00:20:35,800 Speaker 1: so so so to me, I'd be fading that move. 378 00:20:36,359 --> 00:20:39,159 Speaker 1: And what we've been doing is looking at steepeners in 379 00:20:39,240 --> 00:20:42,320 Speaker 1: the ultralong segment and you get paid in terms of 380 00:20:42,359 --> 00:20:45,440 Speaker 1: carry and roll, and that they have they haven't gone 381 00:20:45,440 --> 00:20:47,359 Speaker 1: wrong in the last few weeks, so that they've actually 382 00:20:47,359 --> 00:20:51,920 Speaker 1: been holding steady. So so I think fading the inversion 383 00:20:51,960 --> 00:20:55,280 Speaker 1: is important, um. And we have to look at the forwards. 384 00:20:55,520 --> 00:20:57,879 Speaker 1: As I say that two year rate is already pretty 385 00:20:57,920 --> 00:21:01,199 Speaker 1: high in the forwards, and we had hawkish surprise in 386 00:21:01,280 --> 00:21:05,959 Speaker 1: June followed by by a big hawkish surprise in September, 387 00:21:06,560 --> 00:21:09,720 Speaker 1: and next week some people are calling for an even 388 00:21:09,760 --> 00:21:15,240 Speaker 1: bigger hawkish surprise. I say, once bitten twice shy okay. 389 00:21:15,240 --> 00:21:18,720 Speaker 1: So this is really important, Steve Major, as we go 390 00:21:18,760 --> 00:21:21,240 Speaker 1: into the sophistication of your market, which is to look 391 00:21:21,280 --> 00:21:23,479 Speaker 1: to the future. If you were having a cup of 392 00:21:23,480 --> 00:21:27,240 Speaker 1: coffee this morning with Jerome Powell, how do you explain 393 00:21:27,280 --> 00:21:33,400 Speaker 1: the forwards to him to frame his press conference December? Well, 394 00:21:33,440 --> 00:21:37,320 Speaker 1: he gets it, and I guess um he also gets 395 00:21:37,520 --> 00:21:40,840 Speaker 1: the Maradonna effect, so he could he could talk to 396 00:21:40,960 --> 00:21:43,600 Speaker 1: the Bank of England governor, the current one and the 397 00:21:43,640 --> 00:21:46,960 Speaker 1: previous ones to talk about that. The Maradonna effect to 398 00:21:47,200 --> 00:21:53,440 Speaker 1: non football fans is using your credibility to drive the expectations, 399 00:21:53,800 --> 00:21:57,119 Speaker 1: maybe maybe getting a hawkish just when inflation is about 400 00:21:57,119 --> 00:22:00,000 Speaker 1: to crash around there is is a way of tightening 401 00:22:00,080 --> 00:22:03,119 Speaker 1: policy and meaning they haven't got to hype very much. John, 402 00:22:03,119 --> 00:22:07,320 Speaker 1: who's Maradonna? Oh? Tom, No, No, I can't even pretend 403 00:22:07,359 --> 00:22:12,200 Speaker 1: you mean that you're not serious? Will come on, diego Maradonna. 404 00:22:13,119 --> 00:22:16,480 Speaker 1: Jason is one of the best football players in history. Tom, 405 00:22:16,520 --> 00:22:18,399 Speaker 1: come on, and what Steve means by that is Diego 406 00:22:18,440 --> 00:22:21,439 Speaker 1: Maradonna would faint left, faint right, drop the shoulder left, 407 00:22:21,480 --> 00:22:23,080 Speaker 1: dropped the shoulder right. Tom, look like he's going to 408 00:22:23,160 --> 00:22:24,560 Speaker 1: go one way, look like he's going to go the other, 409 00:22:24,560 --> 00:22:27,040 Speaker 1: but ultimately just go straightforward, which is when we talk 410 00:22:27,080 --> 00:22:29,160 Speaker 1: about Bank of England the Maradonna effect, it's the Bank 411 00:22:29,160 --> 00:22:31,679 Speaker 1: of Engness suggesting they might do one thing or the 412 00:22:31,680 --> 00:22:35,479 Speaker 1: other then ultimately do nothing. Steve, good luck at the weekend. 413 00:22:35,480 --> 00:22:37,919 Speaker 1: Fantastic to have you back in town. London's I just 414 00:22:37,960 --> 00:22:43,360 Speaker 1: love it, Steve. Thank you, sir. HSPC to you, sir, 415 00:22:43,480 --> 00:22:52,359 Speaker 1: thank you very much. It is not all gloom. We 416 00:22:52,440 --> 00:22:54,880 Speaker 1: saw that from JP Morgan today with the forty five 417 00:22:54,920 --> 00:23:00,600 Speaker 1: page outlook. Adamant about recovery, adamant about a normal lozation, 418 00:23:01,200 --> 00:23:04,240 Speaker 1: someone that understands this. As a president and chief executive 419 00:23:04,280 --> 00:23:09,280 Speaker 1: officer of Hilton Chris n. Seta on the recovery, I 420 00:23:09,359 --> 00:23:11,679 Speaker 1: have no real worries. I mean, every time, you know, 421 00:23:11,720 --> 00:23:14,160 Speaker 1: we've sort of as we've been recovering. If you look 422 00:23:14,200 --> 00:23:17,960 Speaker 1: at you know, the minute people start to feel like 423 00:23:18,000 --> 00:23:21,560 Speaker 1: we're through the crisis. The demand for meetings and events, 424 00:23:21,560 --> 00:23:25,000 Speaker 1: which is the longest lead, skyrockets. People are, people are 425 00:23:25,119 --> 00:23:28,240 Speaker 1: dying to get out. Christian has set out of the 426 00:23:28,400 --> 00:23:31,000 Speaker 1: uv A combine. They're talking, of course, peer to peer 427 00:23:31,040 --> 00:23:36,240 Speaker 1: with David Rubinstein and an operating officer within this pandemic, David, 428 00:23:36,280 --> 00:23:38,920 Speaker 1: I think about a moment I had with Jonathan Tish 429 00:23:39,000 --> 00:23:44,560 Speaker 1: of Lowe's earlier this year of maintaining optimism in travel 430 00:23:44,960 --> 00:23:47,560 Speaker 1: in a hotel. What did you learn about the trench 431 00:23:47,640 --> 00:23:53,040 Speaker 1: warfare of this pandemic from Mr Minnesota. Well, obviously the 432 00:23:53,080 --> 00:23:57,800 Speaker 1: hotel industry suffered enormously, as did the entire lodging industry 433 00:23:57,880 --> 00:24:01,160 Speaker 1: and the travel industry, the cruise industry, but they're coming back. 434 00:24:01,640 --> 00:24:05,679 Speaker 1: What's coming back more rapidly is is recreational kind of 435 00:24:06,119 --> 00:24:09,640 Speaker 1: or vacation related travel. Business travel is not coming back 436 00:24:09,640 --> 00:24:12,240 Speaker 1: as quickly, in part because business people have learned they 437 00:24:12,280 --> 00:24:14,600 Speaker 1: can do a lot on zoom, so they're hopeful that 438 00:24:14,720 --> 00:24:16,480 Speaker 1: will come back, but hasn't yet come back to the 439 00:24:16,520 --> 00:24:19,520 Speaker 1: same extent that vacation of leisure travel has come back. 440 00:24:19,760 --> 00:24:22,720 Speaker 1: Are you suggesting within the grind and the many many 441 00:24:22,800 --> 00:24:26,680 Speaker 1: people under you at Carlisle, David Rubinstein is going to 442 00:24:26,840 --> 00:24:33,000 Speaker 1: do your acclaim transactions by Zoom. Well, there's no doubt 443 00:24:33,040 --> 00:24:35,160 Speaker 1: that the private equity world has done a lot through 444 00:24:35,240 --> 00:24:37,840 Speaker 1: Zoom over the past year and a half. Clearly a 445 00:24:37,840 --> 00:24:40,919 Speaker 1: lot of people are beginning to travel again. I've traveled 446 00:24:40,960 --> 00:24:44,159 Speaker 1: a fair bit in recent uh weeks or so, but 447 00:24:44,400 --> 00:24:46,800 Speaker 1: clearly it's just not coming back at the level that 448 00:24:47,040 --> 00:24:49,760 Speaker 1: it was before, and it'll take some time. But the 449 00:24:49,920 --> 00:24:53,200 Speaker 1: lodging industry has done reasonably well in terms of its 450 00:24:53,200 --> 00:24:56,760 Speaker 1: stock performance. The stock performance at the height of the pandemic, 451 00:24:57,600 --> 00:25:00,159 Speaker 1: we're all time lows for the travel industry and the 452 00:25:00,200 --> 00:25:02,840 Speaker 1: lodging industry. Now they've come back to near record highs 453 00:25:02,840 --> 00:25:05,359 Speaker 1: in terms of their stock. So the market is anticipating 454 00:25:05,560 --> 00:25:08,080 Speaker 1: that they will see travel coming back. How much is 455 00:25:08,160 --> 00:25:11,359 Speaker 1: Christmas said of the Hilton president CEO anticipating the business 456 00:25:11,359 --> 00:25:13,639 Speaker 1: travel will resume in the same kind of way and 457 00:25:13,680 --> 00:25:16,560 Speaker 1: putting money behind it by making acquisitions and some of 458 00:25:16,600 --> 00:25:22,360 Speaker 1: the more beaten up areas in larger cities, in convention centers. Well, 459 00:25:22,400 --> 00:25:25,040 Speaker 1: what they do is remember the way Hilton. Hilton is 460 00:25:25,040 --> 00:25:27,800 Speaker 1: the second biggest hotel operator, married is the biggest. They 461 00:25:27,800 --> 00:25:32,280 Speaker 1: have thousands of hotels mostly they operate them um for 462 00:25:32,359 --> 00:25:34,000 Speaker 1: other people that are owners, and a lot of it 463 00:25:34,040 --> 00:25:37,200 Speaker 1: is franchise operations. They take a fee or some kind 464 00:25:37,240 --> 00:25:40,280 Speaker 1: of royalty on on the name Hilton. But it's coming 465 00:25:40,320 --> 00:25:44,359 Speaker 1: back reasonably well. They are making some investments to get 466 00:25:44,359 --> 00:25:47,160 Speaker 1: hotels back, but the biggest problem they have right now 467 00:25:47,440 --> 00:25:49,600 Speaker 1: is getting a labor to come back. Remember, a lot 468 00:25:49,640 --> 00:25:52,119 Speaker 1: of people lost their jobs, a lot of people were 469 00:25:52,200 --> 00:25:54,640 Speaker 1: laid off, and now they have to get these people back. 470 00:25:54,640 --> 00:25:56,680 Speaker 1: As hotels are coming back, more people, more and more 471 00:25:56,680 --> 00:25:58,840 Speaker 1: people coming back to stay at the hotels, you have 472 00:25:58,880 --> 00:26:00,720 Speaker 1: to get workers. And a lot of workers are not 473 00:26:00,840 --> 00:26:03,159 Speaker 1: coming back. They don't like those jobs, or are they are. 474 00:26:03,160 --> 00:26:05,200 Speaker 1: They're taking other times of jobs. So it's a real 475 00:26:05,280 --> 00:26:07,880 Speaker 1: labor problem. And to some extent, the prices are going 476 00:26:07,960 --> 00:26:09,800 Speaker 1: up in hotels because you've got to pay for higher 477 00:26:09,840 --> 00:26:12,000 Speaker 1: price labor than you did before. In hotels are trying 478 00:26:12,000 --> 00:26:14,440 Speaker 1: to figure out what they can cut, whether it's perhaps 479 00:26:14,440 --> 00:26:16,760 Speaker 1: not changing the towels, is for as many nights or 480 00:26:16,800 --> 00:26:20,160 Speaker 1: other areas that they can basically reduce costs in order 481 00:26:20,200 --> 00:26:24,400 Speaker 1: to have fewer employees and to keep costs lower for consumers. 482 00:26:24,640 --> 00:26:27,040 Speaker 1: Where are some of the areas that are costs are 483 00:26:27,040 --> 00:26:30,080 Speaker 1: getting streamlined that you talked about with the president with 484 00:26:30,160 --> 00:26:34,760 Speaker 1: the head of Hilton, Well, if you're staying at a 485 00:26:34,840 --> 00:26:37,000 Speaker 1: top line hotel, one of their Wall Door for Story 486 00:26:37,000 --> 00:26:39,960 Speaker 1: of hotels, or one of their their real um more 487 00:26:40,160 --> 00:26:43,240 Speaker 1: luxurious hotels, you're gonna get all the services you had before, 488 00:26:43,240 --> 00:26:45,399 Speaker 1: because people are paying very high prices for that. But 489 00:26:45,440 --> 00:26:47,720 Speaker 1: if you're staying at their lower grade hotels, the ones 490 00:26:47,760 --> 00:26:50,920 Speaker 1: where you can get by and maybe a hundred fifty 491 00:26:50,920 --> 00:26:54,360 Speaker 1: dollars a night, you may not get daily towel service, 492 00:26:54,640 --> 00:26:57,520 Speaker 1: you may not get the free breakfast that you've had before, 493 00:26:57,840 --> 00:26:59,840 Speaker 1: and room service has probably been cut back of not 494 00:26:59,880 --> 00:27:02,400 Speaker 1: a liminated in some of those hotels. So it's it's 495 00:27:02,440 --> 00:27:04,960 Speaker 1: really the lower grade you're not getting the services back yet. 496 00:27:05,080 --> 00:27:07,720 Speaker 1: That will come back in time, but they're experimenting maybe 497 00:27:07,760 --> 00:27:11,280 Speaker 1: people don't really need hotel uh services they had before. 498 00:27:11,280 --> 00:27:13,600 Speaker 1: Maybe the things will be different, But right now the 499 00:27:13,600 --> 00:27:16,760 Speaker 1: hotel in issue is coming back. It's stock performance is 500 00:27:16,800 --> 00:27:19,040 Speaker 1: in really really good shape, but the bottom line is 501 00:27:19,080 --> 00:27:22,520 Speaker 1: still i would say below where it was at the 502 00:27:22,560 --> 00:27:25,520 Speaker 1: peak before the pandemic. David, one more question, and of 503 00:27:25,520 --> 00:27:27,800 Speaker 1: course this is perhaps my last question. Do you have 504 00:27:27,880 --> 00:27:29,680 Speaker 1: two thousand twenty one. I want you to look in 505 00:27:29,760 --> 00:27:32,639 Speaker 1: the next year and as you look at the D 506 00:27:33,320 --> 00:27:37,679 Speaker 1: conglomeration for different reasons of General Electric, of Toshiba, UH 507 00:27:37,800 --> 00:27:40,600 Speaker 1: and a few others out there as well. What is 508 00:27:40,640 --> 00:27:46,000 Speaker 1: your tone on combinations or D combinations for two thousand 509 00:27:46,080 --> 00:27:49,439 Speaker 1: twenty two. Well, I think you're going to see a 510 00:27:49,440 --> 00:27:53,080 Speaker 1: lot of acquisitions, but I think conglomerate type acquisitions are 511 00:27:53,119 --> 00:27:56,119 Speaker 1: probably not going to be in favor. The many large 512 00:27:56,119 --> 00:27:58,880 Speaker 1: companies are de conglomerating, as you know, and people are 513 00:27:58,880 --> 00:28:01,600 Speaker 1: trying therefore to how companies focus on one or two 514 00:28:01,600 --> 00:28:04,360 Speaker 1: areas of expertise. But I do think that interest rates 515 00:28:04,400 --> 00:28:06,480 Speaker 1: will be a little bit higher next year, but not 516 00:28:06,560 --> 00:28:09,639 Speaker 1: so high that to deter people from making acquisitions. The 517 00:28:09,680 --> 00:28:13,639 Speaker 1: acquisitions industry is still pretty strong right now. David Rubinstein, 518 00:28:13,760 --> 00:28:15,640 Speaker 1: thank you so much for joining us. Peer to peer 519 00:28:15,720 --> 00:28:18,440 Speaker 1: just very, very strong this year. Look for Peer to 520 00:28:18,520 --> 00:28:21,879 Speaker 1: Peer with David Rubinstein nine pm in New York with 521 00:28:21,960 --> 00:28:26,200 Speaker 1: the chief executive Officer of Hilton. This is the Bloomberg 522 00:28:26,280 --> 00:28:30,640 Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from 523 00:28:30,680 --> 00:28:34,040 Speaker 1: seven to ten am Eastern on Bloomberg Radio and on 524 00:28:34,119 --> 00:28:38,400 Speaker 1: Bloomberg Television each day from six to nine am for 525 00:28:38,640 --> 00:28:43,600 Speaker 1: insight from the best in economics, finance, investment, and international relations. 526 00:28:44,040 --> 00:28:48,720 Speaker 1: And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, 527 00:28:48,880 --> 00:28:52,480 Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm 528 00:28:52,520 --> 00:29:02,840 Speaker 1: Tom Keene, and this is Bloomberg One.