WEBVTT - Surveillance: New Fed Framework With Sahm 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.760 and of course, on the Bloomberg terminal. Claudia sam is 0:00:30.800 --> 0:00:33.720 a jewel. She's out on Twitter creating a firestorm each 0:00:33.800 --> 0:00:37.160 and every day. A Bloomberg opinion columnist, she is fearless 0:00:37.360 --> 0:00:40.360 about what's in the textbooks and what we're doing right 0:00:40.360 --> 0:00:43.680 now that is not in the textbooks. Claudia, the question 0:00:43.760 --> 0:00:47.440 the Twitter verse wants to know, are we practicing monetary 0:00:47.440 --> 0:00:51.760 a modern monetary theory. That's not the way that I 0:00:51.800 --> 0:00:55.320 would describe it. I think, honestly, as you put it, 0:00:55.400 --> 0:00:58.520 the textbooks haven't been written. I mean, we really are 0:00:58.720 --> 0:01:01.680 are trying to figure this out. We are living both 0:01:01.720 --> 0:01:04.920 a sea change in monetary policy. We have a new 0:01:04.959 --> 0:01:08.880 federal reserve framework that is frankly being tested as we speak, 0:01:09.319 --> 0:01:13.560 and we've seen fiscal policy in fits and starts really 0:01:13.680 --> 0:01:17.240 shift in terms of putting support into the economy. You 0:01:17.360 --> 0:01:20.600 put those two things together, this is not a constellation 0:01:21.200 --> 0:01:23.800 that we've seen before, and the ink is not dry 0:01:23.880 --> 0:01:26.440 on it either, So this is a very fluid moment. 0:01:27.040 --> 0:01:28.880 There's a lot to be proud of with this. I mean, 0:01:28.920 --> 0:01:32.000 we have a recovery that is just so much better 0:01:32.080 --> 0:01:35.000 and faster than last time. Help me were the word 0:01:35.080 --> 0:01:38.080 measured and maybe a Bank of England that was many measured. 0:01:38.240 --> 0:01:40.720 Arthur Burns used to make big moves. When he made 0:01:40.720 --> 0:01:43.639 a move, he's smoking the pipe and the pipe smoke 0:01:43.720 --> 0:01:46.759 coming up and everybody interpreting what the spipe smoke Man 0:01:46.920 --> 0:01:51.560 Greenspan invented measured? Are we measured now in our movements 0:01:51.680 --> 0:01:55.360 or potential movements? I think the big change for the 0:01:55.400 --> 0:01:59.600 Federal Reserve right now is that their communication policy has 0:01:59.640 --> 0:02:02.360 become so much stronger. Given the interest rates are a 0:02:02.440 --> 0:02:05.200 lot lower than they were in either of those two 0:02:05.280 --> 0:02:10.919 past uh FED FED times, so they have I don't 0:02:10.919 --> 0:02:13.560 think the word measured is what they're thinking of. Is 0:02:13.600 --> 0:02:17.120 that no surprise, right? We have watched them do so 0:02:17.200 --> 0:02:21.600 much messaging and that you don't want to do big 0:02:21.639 --> 0:02:25.400 moves unless you have to. We know from March the 0:02:25.480 --> 0:02:27.800 Fed is more than willing to just move when it 0:02:27.840 --> 0:02:31.000 needs to. But at a moment like this, they want 0:02:31.040 --> 0:02:33.760 to bring everybody along. J p How spends a lot 0:02:33.800 --> 0:02:36.080 of time trying to explain to us what they're thinking 0:02:36.120 --> 0:02:38.920 and where their head is. Claudia, how much are you 0:02:38.960 --> 0:02:41.160 taking a signal from the pact that J. Powell is 0:02:41.200 --> 0:02:45.119 reiterating some of the economists who are decrying the inflationary 0:02:45.160 --> 0:02:47.560 push that we're seeing is something that you have to address, 0:02:47.960 --> 0:02:51.919 versus the bond market, which is saying it's not a problem. Well, 0:02:52.040 --> 0:02:55.440 this also goes very much to the communication we need 0:02:55.639 --> 0:02:58.120 and we need to believe that we have a FED 0:02:58.200 --> 0:03:01.200 that is awake at the wheel, and they absolutely are. 0:03:01.600 --> 0:03:05.280 But it is important that they address some of those 0:03:05.280 --> 0:03:08.520 individuals and say, hey, like we are watching this, we 0:03:08.639 --> 0:03:11.280 see it, and we are deeply concerned. I worked at 0:03:11.280 --> 0:03:13.600 the FED for over a decade. They are always deeply 0:03:13.639 --> 0:03:17.239 concerned about inflation. That's what the central Bank is there 0:03:17.240 --> 0:03:19.639 in part to do. I think they've just been so 0:03:19.760 --> 0:03:22.839 much more explicit and trying to help the outside world 0:03:22.960 --> 0:03:25.560 understand the risk and the risk have been shifting, right. 0:03:25.600 --> 0:03:28.560 It is absolutely appropriate how their communication and what they're 0:03:28.600 --> 0:03:31.480 telling us has moved over time. The world is moving, 0:03:31.520 --> 0:03:34.760 but Claudia how much is this a shift in perception 0:03:34.880 --> 0:03:37.200 and a shift in ideas at the Federal Reserve? How 0:03:37.280 --> 0:03:39.880 much is this something more political? There have been some 0:03:39.960 --> 0:03:43.080 massive pivots done by FED Chair J. Powell, the fact 0:03:43.080 --> 0:03:45.080 that he thought that it was appropriate to keep the 0:03:45.120 --> 0:03:48.320 bond purchases where they were, that the tapering where was 0:03:48.320 --> 0:03:50.320 where it was, and suddenly we're doubling it and talking 0:03:50.360 --> 0:03:53.040 about how everything looks very hot the labor market. We 0:03:53.080 --> 0:03:55.160 want to get to full participation. We want to see 0:03:55.200 --> 0:03:58.400 the labor market participation rate go up. Now we don't 0:03:58.400 --> 0:03:59.880 even know what that means. It's not going to be 0:03:59.920 --> 0:04:02.720 the same economy. This is a vastly different FED Chair J. 0:04:02.880 --> 0:04:05.240 Powell to what we heard. Do you read something different 0:04:05.240 --> 0:04:08.400 into this? Right? So? I think this question is interesting 0:04:08.400 --> 0:04:11.160 about the politics. I actually wrote my sub stack post 0:04:11.320 --> 0:04:13.960 right before the meeting on this question because I was 0:04:14.080 --> 0:04:17.080 I found it interesting that this has some creeds in 0:04:17.080 --> 0:04:21.360 in some circles. The FED is is a politically independent 0:04:21.480 --> 0:04:25.000 in its policy decisions. It's in Washington, d C. Politics 0:04:25.040 --> 0:04:28.479 are there, and it it has gotten pulled into some 0:04:28.560 --> 0:04:34.000 of these very complicated issues about especially in labor markets, 0:04:34.040 --> 0:04:36.840 like how inclusive and the diversity, and it's tough. But 0:04:36.920 --> 0:04:39.640 the thing is, and I really do believe that the 0:04:39.680 --> 0:04:42.880 decisions they are making are being driven by what's happening 0:04:42.960 --> 0:04:46.000 in the economy, and unfortunately, the FED is setting up 0:04:46.560 --> 0:04:50.000 for this tough trade off between inflation is staying high, 0:04:50.240 --> 0:04:52.520 we need to get that back down and we want 0:04:52.560 --> 0:04:55.960 to get every worker back to work, so they are 0:04:56.000 --> 0:04:58.159 going to face this trade off. Frankly, they haven't done 0:04:58.160 --> 0:05:01.080 a great job of explain and how that works in 0:05:01.120 --> 0:05:05.120 the new framework. But I don't they're pushed around by politics. 0:05:05.160 --> 0:05:07.640 Politics plays them as I'm sure we'll see what the 0:05:07.680 --> 0:05:10.880 next set of the appointments, but I don't think that's 0:05:10.920 --> 0:05:14.720 what's driving what Jay is doing in the FED. Talk 0:05:14.800 --> 0:05:17.320 to us clowly and quickly about where the importance of 0:05:17.320 --> 0:05:20.600 an inclusive labor market dominates for the next month or so. 0:05:20.760 --> 0:05:22.840 Because for now we seem to not worry the black 0:05:22.920 --> 0:05:26.040 unemployment is still at seven percent, whereas general unemployment is 0:05:26.080 --> 0:05:28.359 at about four We put more of a focus on 0:05:28.520 --> 0:05:31.880 price stability, helping particularly the lower income parts of the 0:05:32.040 --> 0:05:35.560 industry and indeed of the labor market. Right, I think 0:05:35.560 --> 0:05:37.880 it's right to be focused on next year, but it's 0:05:37.880 --> 0:05:40.560 important we step back, look at what the inflation numbers 0:05:40.600 --> 0:05:42.760 are not right now, and the FED funds rate is 0:05:42.800 --> 0:05:45.400 still at zero. Like, this is a FED that is 0:05:45.600 --> 0:05:50.080 incredibly focused on both sides of their dual mandate in 0:05:50.080 --> 0:05:52.080 a way that we would not have seen even a 0:05:52.080 --> 0:05:55.680 few years ago. So what does that mean in terms 0:05:55.720 --> 0:05:58.560 of being inclusive and the broad based. I think this 0:05:58.680 --> 0:06:01.000 is a big discussion, and it came up on Wednesday, 0:06:01.279 --> 0:06:04.000 is of the people who left the labor force, who 0:06:04.160 --> 0:06:07.719 is coming back and how quickly can they come back? Right? 0:06:07.760 --> 0:06:09.640 And I that's going to I think be the big 0:06:09.640 --> 0:06:13.320 debate going into next year. Claudia, I'm depressed when it 0:06:13.440 --> 0:06:17.040 came out thirty two years ago. I read every word 0:06:17.120 --> 0:06:20.839 of Heile Broner and Bernstein The Debt and the Deficit. 0:06:20.960 --> 0:06:24.200 I must have sold Peter Bernstein thirty copies of that book, 0:06:24.400 --> 0:06:26.480 where I just said to people, shut up and read 0:06:26.520 --> 0:06:30.200 this so we don't panic. Douglas cast a wonderful trade 0:06:30.240 --> 0:06:34.880 of this morning, and investor asked you about modern fiscal 0:06:35.040 --> 0:06:40.760 theory from your monetary view, back to the classic book 0:06:40.800 --> 0:06:49.120 by Hile Bronner and Bernstein. What is our modern fiscal theory? Yeah, 0:06:49.160 --> 0:06:52.440 well so I wish I had that answer for you. 0:06:52.880 --> 0:06:58.080 I think right now it's it's the we're I mean, 0:06:58.080 --> 0:07:00.120 we're gonna talk so much about the FED, but when 0:07:00.160 --> 0:07:03.520 we look out years to come, what's happening in Congress 0:07:03.640 --> 0:07:07.560 right now is where the debate should be. And I 0:07:07.720 --> 0:07:11.240 worry that when we get like there's the models and 0:07:11.280 --> 0:07:13.400 exactly how much dead and what can we spend, it 0:07:13.440 --> 0:07:15.960 gets past the we move past the well what are 0:07:16.000 --> 0:07:18.480 we trying to accomplish? What types of investments are we 0:07:18.520 --> 0:07:21.360 trying to make in our infrastructure and our people in 0:07:21.400 --> 0:07:25.160 our planet, and that in the end of the day, 0:07:25.160 --> 0:07:27.960 those discussions are going to loose so much larger, and 0:07:28.480 --> 0:07:30.880 I worried that that theory is going to be written 0:07:30.880 --> 0:07:33.680 after the fact. Claudius brilliant, Thank you so much with 0:07:33.720 --> 0:07:43.640 the Jane Family Institute on the equity markets and on 0:07:43.840 --> 0:07:46.960 joins us now from Wells Fargo, always wonderful, particularly on 0:07:47.040 --> 0:07:51.160 the dynamics that she observes within the markets. You've got 0:07:51.200 --> 0:07:53.559 a single sense and I'm not going to mince words 0:07:53.600 --> 0:07:56.000 about it. You say high quality is where to be. 0:07:56.480 --> 0:07:59.000 We're hearing that from Wells Fargo. We're hearing that from 0:07:59.040 --> 0:08:04.320 Goldman Sachs others disagree. What is the risk of acquiring 0:08:04.680 --> 0:08:09.200 low quality shares? Well? As we get more lane into 0:08:09.200 --> 0:08:13.480 the cycle that textbook fundamentals. As you see credit liquidity decrease, 0:08:13.640 --> 0:08:17.200 you see monetary accommodation decrease. This was pressure on the 0:08:17.240 --> 0:08:20.600 funding markets. And we've seen time and again that equity 0:08:20.640 --> 0:08:24.160 volatility is tied to credit and rate volatility. So as 0:08:24.200 --> 0:08:27.840 you see credit spreads winding, we expect more equity volatility. 0:08:27.920 --> 0:08:30.360 And those are the kind of situations where we're not 0:08:30.440 --> 0:08:34.160 particularly fully risked off here, but we need a little 0:08:34.160 --> 0:08:36.319 more protection and we like it in the form of 0:08:36.400 --> 0:08:39.800 high quality. So we would reduce our exposure to the 0:08:39.920 --> 0:08:43.640 very high leveled companies look for a little wider profit margins, 0:08:43.679 --> 0:08:46.000 a little harder higher r o s in that kind 0:08:46.000 --> 0:08:47.720 of scenario. So Anna, does that just mean to go 0:08:47.760 --> 0:08:52.199 into big tech? Actually, I would shy a little away 0:08:52.240 --> 0:08:55.080 from certain parts of the tech market there, but we 0:08:55.360 --> 0:09:00.319 are still a proponent of Here is cyclicality, and right now, 0:09:00.400 --> 0:09:03.360 as you get with yields rising, you get monetary comedies 0:09:03.440 --> 0:09:06.600 coming off. We've seen what happens to the very high 0:09:06.679 --> 0:09:10.240 flyer growth at any price kind of sectors. They're in 0:09:10.240 --> 0:09:12.199 a little bit in trouble, and we think that kind 0:09:12.200 --> 0:09:15.000 of volatility or that could back isn't over yet. So 0:09:15.400 --> 0:09:17.640 rather than just pour into tech as a whole, I 0:09:17.720 --> 0:09:20.800 think you look market across, look broadly, and look for 0:09:20.840 --> 0:09:23.040 somewhere where we can get high quality but at the 0:09:23.120 --> 0:09:25.720 right price. This is important, especially because a lot of 0:09:25.720 --> 0:09:29.079 people cheered after the Fed's hawkish tills and the market's response, 0:09:29.120 --> 0:09:32.400 which was it's all good copasetic keep on partying. And 0:09:32.480 --> 0:09:35.199 then yesterday we saw the NASAC in particular and big 0:09:35.280 --> 0:09:38.800 tech stocks tumble. Is that more of what's to come? 0:09:38.920 --> 0:09:41.439 Is that a signal of what we can expect in 0:09:41.679 --> 0:09:46.440 terms of an even potential correction in big tech? Well, 0:09:46.480 --> 0:09:48.319 I think none of us really want to leave the 0:09:48.400 --> 0:09:50.959 party too soon. We don't want to miss out. But 0:09:50.960 --> 0:09:53.760 at the same time, we are realizing that some parts 0:09:53.800 --> 0:09:56.760 of tech how run very hot. And in that scenario, 0:09:57.000 --> 0:09:59.400 as you start thinking about what's going to happen next 0:09:59.520 --> 0:10:03.360 year as potential for us, we're projecting multiple multiple compression. 0:10:03.920 --> 0:10:06.120 You want to look at what really has run hot 0:10:06.280 --> 0:10:09.079 and maybe take them off the table here. So you 0:10:09.160 --> 0:10:11.760 may be seeing a little bout those dynamics. And again, 0:10:12.480 --> 0:10:15.360 even though we're coming from a place of very liquid 0:10:15.480 --> 0:10:19.160 markets and a lot of accommodation. The directional change and 0:10:19.280 --> 0:10:22.480 the pull forward in the taper schedule and the potential 0:10:22.640 --> 0:10:26.480 rate HeiG schedule. This is a velocity change here we're seeing, 0:10:26.600 --> 0:10:30.280 and that's really what the market is digesting. And I 0:10:30.360 --> 0:10:32.960 don't want to put strategists versus strategists, but I'm reading 0:10:33.080 --> 0:10:35.560 the note of course, and Bank of America's chief invessel strategist, 0:10:35.559 --> 0:10:39.160 Michael Horton, that's saying he still is remaining bearish until 0:10:39.200 --> 0:10:42.560 we get full blown capitulation in the market. Here's risk 0:10:42.640 --> 0:10:44.640 of us. And I'm interested in your perspective as to 0:10:45.080 --> 0:10:47.760 what makes you feel that market should still go into 0:10:47.800 --> 0:10:49.959 equities at this point. Where is market sentiment, where is 0:10:49.960 --> 0:10:54.280 positioning out From your perspective, Well, it's interesting we have 0:10:54.440 --> 0:10:57.760 actually seen capitulation in some parts of the equity market. 0:10:58.320 --> 0:11:02.240 Earlier this year. You saw that investors reduced China exposure. 0:11:02.320 --> 0:11:04.199 That was two women sh of a painful thing for 0:11:04.280 --> 0:11:07.719 portfolio managers throughout the year, and that was reduced. You 0:11:07.840 --> 0:11:09.920 also saw that there was a lot of crowding of 0:11:10.040 --> 0:11:12.439 some of the tech favorites, and some of that is 0:11:12.520 --> 0:11:15.240 being washed out here one of the reasons why we've 0:11:15.240 --> 0:11:17.840 seen so much pressure on the tech parts of the market. 0:11:18.280 --> 0:11:21.120 But going forward, we don't think it's time to give 0:11:21.200 --> 0:11:24.080 up on equities as a whole, because we still think 0:11:24.160 --> 0:11:26.800 that there is a game to be played in cyclical 0:11:26.920 --> 0:11:30.119 parts of the market. But that's why we're actually barbelling 0:11:30.200 --> 0:11:33.480 that with quality here. We're not saying risk on, but 0:11:33.600 --> 0:11:35.800 we're not heading for the hills either. How do you 0:11:35.880 --> 0:11:39.800 find I'm sorry, Caroline, excuse me, I'm sorry, Caroline, go ahead. 0:11:40.640 --> 0:11:43.240 Oh no, thank you, Tom, such a gentleman. I'm interested in. 0:11:43.880 --> 0:11:46.000 I know your perspective on does the US remain the 0:11:46.040 --> 0:11:48.640 only game in town? Do you still see US equities 0:11:48.679 --> 0:11:50.439 outfull in the likes of Europe? The Europe has a 0:11:50.480 --> 0:11:54.600 little bit more value to it. Well, in the near term, 0:11:54.760 --> 0:11:56.760 we like the US because we have a little more 0:11:56.840 --> 0:11:59.880 clarity on it. But will be very important next year 0:12:00.320 --> 0:12:04.160 is where different nations are in their tightening cycle, because 0:12:04.240 --> 0:12:06.600 as you start to see sort of divergence or different 0:12:06.720 --> 0:12:10.760 timing on when people are hiking versus when that accommodation 0:12:10.960 --> 0:12:13.040 is coming off, that's going to also have a big 0:12:13.160 --> 0:12:16.400 impact not just on equities, but really the Underlyer here, 0:12:16.400 --> 0:12:18.800 which is the currency markets. So these are the kind 0:12:18.840 --> 0:12:21.120 of things we need to consider going into next year. 0:12:21.480 --> 0:12:24.360 And there may be more opportunities that open up later 0:12:24.520 --> 0:12:28.199 in the back half of depending where we are in 0:12:28.280 --> 0:12:32.079 our tightening cycle. Anna, thank you so much, Anahan with 0:12:32.200 --> 0:12:39.679 a start today with Wells Fargo. Greatly appreciate that. Right 0:12:39.720 --> 0:12:41.760 now if you get a three hour discussion with Andrew 0:12:41.800 --> 0:12:46.480 Peckha she's professor in viiologists at Johns Hopkins with professor Breyer, 0:12:46.920 --> 0:12:49.160 and we got eight ways to go here Andrew, But 0:12:49.240 --> 0:12:51.240 I want to go to the cold heart reality that 0:12:51.360 --> 0:12:53.959 the President of the United States knows and that the 0:12:54.120 --> 0:12:58.520 United States has a vaccination rate published out at and 0:12:58.600 --> 0:13:02.520 a nation is beleaguered as Italy has a vaccination rate 0:13:02.600 --> 0:13:06.800 out at. How far behind is the look that we 0:13:06.920 --> 0:13:11.839 seem to be very far behind? Well, you know, we 0:13:12.160 --> 0:13:14.160 we were one of the first countries to roll out 0:13:14.280 --> 0:13:18.960 vaccines UH in mass and it seems like ever since 0:13:19.000 --> 0:13:21.120 we started to row out the vaccines, we've fallen behind 0:13:21.200 --> 0:13:24.040 other countries that are able to not only more effectively 0:13:24.120 --> 0:13:27.280 do it, but also convinced their population about the benefits 0:13:27.320 --> 0:13:30.800 of vaccination um in many different ways. And I think 0:13:30.880 --> 0:13:33.199 that as we moved through these variants, we saw this 0:13:33.360 --> 0:13:36.440 with Alpha, we're now we saw with Delta, and now 0:13:36.559 --> 0:13:38.880 we're seeing all of the signs with all macron of 0:13:38.920 --> 0:13:41.640 the same thing, which is, these viruses are moving through 0:13:41.679 --> 0:13:45.920 the population. Vaccines are protecting us from severe disease, but 0:13:46.000 --> 0:13:49.120 it's the unvaccinated population that's really going to be the 0:13:49.200 --> 0:13:52.199 population that's going to put us stress onto our healthcare 0:13:52.320 --> 0:13:57.240 system because these viruses are spreading incredibly efficiently and they're 0:13:57.240 --> 0:14:00.640 gonna find unvaccinated people in the disease and unvac stated people. 0:14:01.160 --> 0:14:03.800 Is yet to be really determined how virulent this virus is. 0:14:04.000 --> 0:14:06.079 Dr package the uptick in cases that we're seeing in 0:14:06.120 --> 0:14:08.040 New York City in particular, or is that the O 0:14:08.160 --> 0:14:13.840 Macron wave actually happening here? Really difficult to differentiate between 0:14:14.240 --> 0:14:17.680 what's happening with the Delta surge, which certainly was going 0:14:17.760 --> 0:14:21.120 on across many parts of the US just after Thanksgiving, 0:14:21.520 --> 0:14:24.720 and what A macron is doing. Are sequencing efforts here 0:14:24.720 --> 0:14:27.360 in the US lag behind a little bit the efforts 0:14:27.400 --> 0:14:29.600 that are going on in the UK and South Africa, 0:14:29.960 --> 0:14:32.280 So we're not hearing about the O Macron cases as 0:14:32.400 --> 0:14:35.800 quickly as we should. It's quite possible that um the 0:14:36.000 --> 0:14:39.560 surges that we're seeing now are contributed to buy all Macron, 0:14:39.680 --> 0:14:42.320 because the data coming out of Europe is showing this 0:14:42.520 --> 0:14:45.440 virus is at least as good as Delta, if not 0:14:45.720 --> 0:14:49.560 better than Delta at transmissent transmitting in populations that have 0:14:49.720 --> 0:14:53.160 some immunity. Even how important DR package is a psychological 0:14:53.280 --> 0:14:55.960 impact of a lot of people who got vaccinated. They 0:14:56.000 --> 0:14:58.280 did exactly what they thought that they should do, and 0:14:58.360 --> 0:15:01.520 they're still getting sick. Everybody know somebody like that. As 0:15:01.600 --> 0:15:04.480 this O Macron variant starts to spread, how much does 0:15:04.520 --> 0:15:08.360 that discourage people from both getting vaccinated and from listening 0:15:08.440 --> 0:15:10.960 to health officials by saying you'll be protected if you 0:15:11.040 --> 0:15:15.080 just take these measures. Yeah, it's important to get the 0:15:15.200 --> 0:15:19.800 message of primarily protection from severe disease is what we're 0:15:19.800 --> 0:15:23.080 seeing these vaccines doing quite well, and that is actually 0:15:23.200 --> 0:15:27.000 held true even with Alpha, even with Delta, and now 0:15:27.160 --> 0:15:29.800 with O Macron as well too. So I think the 0:15:29.920 --> 0:15:34.400 realistic expectation for people is that COVID ncteen is looking 0:15:34.480 --> 0:15:37.360 more and more like seasonal influenza. The vaccines are going 0:15:37.400 --> 0:15:40.240 to prevent some level of infection, but not all, but 0:15:40.280 --> 0:15:43.200 they're going to make a really big dent in terms 0:15:43.240 --> 0:15:47.080 of the severe disease and that is probably where six 0:15:47.200 --> 0:15:48.880 months a year from now we're going to really be 0:15:48.920 --> 0:15:52.120 settling in in terms of managing this disease. Vaccines will 0:15:52.200 --> 0:15:56.200 limit cases and disease severity, will have treatments like anti 0:15:56.320 --> 0:15:59.120 virals that also will limit to base disease severity, and 0:15:59.200 --> 0:16:02.640 we'll be dealing with this as a virus similar to influenza. 0:16:02.840 --> 0:16:04.880 We're not at that place yet, but that's where we 0:16:04.960 --> 0:16:08.680 will be in a few months. And there is an 0:16:08.720 --> 0:16:10.760 element though, in the here and the now that we've 0:16:10.800 --> 0:16:13.400 heard from Chris Witty, the Chief Medical Officer of England, 0:16:13.920 --> 0:16:17.400 about the worry that eventually hospitalizations might well run much 0:16:17.440 --> 0:16:20.040 higher than they have done previously because we're about to 0:16:20.080 --> 0:16:23.200 come together as families, because once again we're exhausted from 0:16:23.240 --> 0:16:25.240 the mental strain of all of this. We want to 0:16:25.280 --> 0:16:28.360 be together. We're going to put the most vulnerable at risk. Meanwhile, 0:16:28.400 --> 0:16:30.520 the US very much standing might stance and they want 0:16:30.560 --> 0:16:33.880 to see families together for the festive period. What do 0:16:33.960 --> 0:16:37.920 you make of that risk at the moment, Well, there 0:16:38.040 --> 0:16:41.480 is a way to manage this risk. It does take engagement, 0:16:41.560 --> 0:16:44.720 and it does take effort. Testing is an important part 0:16:44.800 --> 0:16:48.560 of this. The rapid testing and some and other forms 0:16:48.560 --> 0:16:51.680 of testing like saliva testing are really good methods to 0:16:51.800 --> 0:16:55.960 make to keep monitoring for infections. UM making sure that 0:16:56.440 --> 0:16:59.680 that you understand your gatherings and your workplaces and maintain 0:16:59.800 --> 0:17:02.800 some level of social distancing there is also important. There 0:17:02.840 --> 0:17:06.840 are ways to manage the risks of transmission right now. 0:17:07.400 --> 0:17:11.720 But what's important to note is more cases will equal 0:17:11.800 --> 0:17:14.600 more hospitalizations, and so we have to really make an 0:17:14.640 --> 0:17:19.040 effort to limit cases because irrespective of whether O macron 0:17:19.200 --> 0:17:22.040 is more or less virulent than delta, if it causes 0:17:22.080 --> 0:17:24.879 more cases than delta, it will cause more severe cases 0:17:24.920 --> 0:17:29.439 than delta. Talk to me quickly about why I can 0:17:29.520 --> 0:17:32.800 walk into a library, into a pharmacy anywhere in the 0:17:32.920 --> 0:17:35.120 UK and get a lateral flow test and in fact 0:17:35.359 --> 0:17:37.400 have many ahead of the Christmas period to be able 0:17:37.400 --> 0:17:39.959 to ensure that we're remaining safe. But is it right 0:17:40.000 --> 0:17:41.399 that it feels much harder to do that in the 0:17:41.520 --> 0:17:44.400 United States? And what reason is that it is most 0:17:44.440 --> 0:17:46.760 definitely harder to do that in the United States. I 0:17:46.880 --> 0:17:51.120 think there wasn't an emphasis early on about using these 0:17:51.440 --> 0:17:54.520 at home tests, and it wasn't a real understanding of 0:17:54.640 --> 0:17:58.240 how to use these at home tests effectively. UM other 0:17:58.280 --> 0:18:00.480 countries have moved forward with that and are able to 0:18:00.640 --> 0:18:03.640 use these tests effectively. I think we're starting to learn 0:18:03.720 --> 0:18:06.880 that here in the US. But now it's becomes basically 0:18:06.920 --> 0:18:10.440 a supply and demand a problem. Now people are trying 0:18:10.520 --> 0:18:13.280 to get these these tests here, but we simply don't 0:18:13.359 --> 0:18:15.919 have the supply to meet the demand that's here right now. 0:18:16.320 --> 0:18:19.120 I assume that will change with some of the pandemic 0:18:19.200 --> 0:18:23.040 plans at President Biden's administrators is putting forward, but for 0:18:23.119 --> 0:18:25.960 the short term, people are really desperate for these tests 0:18:26.000 --> 0:18:27.520 and not being able to get them in many parts 0:18:27.560 --> 0:18:29.760 of the United States. Dr Pickoff, thank you so much. 0:18:29.800 --> 0:18:31.200 If I don't speak to you before the end of 0:18:31.240 --> 0:18:33.640 the year. Thank you for your support and your education 0:18:33.760 --> 0:18:36.520 of all of us on radio and television worldwide. Here 0:18:36.600 --> 0:18:45.920 is with JOHNS. Hopkins at University hallne Becker once again 0:18:46.000 --> 0:18:49.560 our senior research channelists at Cowen working with Chivan Rumor, 0:18:49.800 --> 0:18:54.720 the airline franchise. AC Cowen has been globally respected for decades. 0:18:54.960 --> 0:18:57.600 We're thrilled that Ms Becker could join us this morning. 0:18:57.760 --> 0:19:00.320 Helena I want to get away from the store aries 0:19:00.359 --> 0:19:02.800 and the Yanks to the moment and do sell side 0:19:02.880 --> 0:19:06.280 one oh one. Your single best buy right now is 0:19:06.440 --> 0:19:10.800 United Airlines. They are down nineteen percent a years since 0:19:10.960 --> 0:19:15.000 Valentine's Day of two thousand and twenty. Why when the 0:19:15.119 --> 0:19:18.159 airlines get off the mat, is United going to be 0:19:18.320 --> 0:19:21.600 the winner? Yeah, that's a good question. Thanks, and thanks 0:19:21.680 --> 0:19:25.080 for having me, tom So. Our view on United is 0:19:25.359 --> 0:19:28.400 that they're leveraged to international and their leverage to corporate. 0:19:28.520 --> 0:19:32.240 About half their revenue comes from international roots and the 0:19:32.320 --> 0:19:35.560 other half from domestic um. And what we're seeing two 0:19:35.640 --> 0:19:38.159 things and and actually Delta seeing this too, and and 0:19:38.480 --> 0:19:40.920 we could easily have gone with Delta although they're less 0:19:41.480 --> 0:19:45.040 less exposed to international um. The key element is that 0:19:45.720 --> 0:19:50.160 UH consumers are buying up into premium economy or into 0:19:50.240 --> 0:19:54.760 premium seats because the price points between the two have narrowed, 0:19:55.000 --> 0:19:58.840 and people find that they like having that little extra 0:19:58.960 --> 0:20:01.840 room or a little extra comfort in the front of 0:20:01.880 --> 0:20:05.359 the cabin. They get extra miles um with the more 0:20:05.440 --> 0:20:10.000 expensive tickets, and they which I think is important to 0:20:10.119 --> 0:20:13.560 people right because they work towards free tickets and upgrades 0:20:13.640 --> 0:20:16.879 faster UM. But with United. They're adding a lot of 0:20:17.000 --> 0:20:23.320 service this summer, especially into leisure international destinations, places that 0:20:23.400 --> 0:20:27.679 have never really had UM international NonStop service from from 0:20:27.720 --> 0:20:32.280 the US, like Palma, New yorka Bergen in Norway. Let 0:20:32.359 --> 0:20:35.200 me ask you a points guy question, because the points guy, 0:20:35.320 --> 0:20:38.679 Brian Kelly worships at the altar of Elaine Becker. Are 0:20:38.800 --> 0:20:44.400 miles gonna matter? Are miles gonna matter after the pandemic? Yes, 0:20:44.560 --> 0:20:46.640 I think so, I think, And I think that's why 0:20:46.760 --> 0:20:51.040 you seek hard usage increasing and card acquisition increasing. One 0:20:51.080 --> 0:20:53.360 of the things that United said on their last confidence 0:20:53.400 --> 0:20:56.119 called on Delta said yesterday on Investor Day, was that 0:20:56.280 --> 0:20:58.879 they're seeing increases in the number of cards that are 0:20:58.920 --> 0:21:01.679 being issued. And I think it's a combination of millennials, 0:21:02.320 --> 0:21:04.880 UM who weren't supposed to own anything and now own 0:21:04.960 --> 0:21:07.200 stuff and and have kind of bought all the things 0:21:07.240 --> 0:21:09.359 that they need to buy. So we're probably going to 0:21:09.440 --> 0:21:12.960 see an increase in service spend UM once the pandemic 0:21:13.080 --> 0:21:16.000 becomes endemic, which we also think is going to happen, 0:21:16.240 --> 0:21:18.359 you know, sometime in the first or second quarter of 0:21:18.480 --> 0:21:21.200 next year, UM or at least people will realize it, 0:21:21.400 --> 0:21:24.520 and then I think we're gonna see more people travel. 0:21:24.680 --> 0:21:28.040 And of course, if you spend on the card um 0:21:28.240 --> 0:21:30.680 to buy your things, right, if you're buying clothing to 0:21:30.800 --> 0:21:33.840 go back to the office, or you're buying washing machines 0:21:33.960 --> 0:21:37.960 or dryers to you know, replace broken ones, or just 0:21:38.640 --> 0:21:41.720 or to get out your house, um, then I think 0:21:41.800 --> 0:21:43.720 you you are going to want those miles so that 0:21:43.840 --> 0:21:46.840 you can earn free trips quicker. In the meantime, Helene, 0:21:46.840 --> 0:21:48.840 we still are dealing with O Macron, which a lot 0:21:48.880 --> 0:21:50.960 of people are saying has not fully been priced in. 0:21:51.359 --> 0:21:53.360 What's your view when you take a look at United 0:21:53.600 --> 0:21:56.720 and Delta h and an American air that have lost 0:21:57.000 --> 0:21:59.440 more than twenty percent of their value since the beginning 0:21:59.560 --> 0:22:02.639 or the middle of November. Yeah, so it's priced in. 0:22:02.960 --> 0:22:05.760 I think I think investors you think it's not priced 0:22:05.840 --> 0:22:09.200