1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:13,960 --> 00:00:17,560 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,760 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Right 5 00:00:27,760 --> 00:00:30,520 Speaker 1: now to give us perspective, Michael Holland, Holland and Company. 6 00:00:30,840 --> 00:00:34,479 Speaker 1: Always the Holland tradition to join John Farrell, Nentr Falgo 7 00:00:34,560 --> 00:00:38,000 Speaker 1: scare that tree from Norway after World War Two. They 8 00:00:38,080 --> 00:00:41,479 Speaker 1: put it up every year. Holland is not in London 9 00:00:41,520 --> 00:00:45,919 Speaker 1: with Pharaoh. He's stuck here in the United States. Michael Holland, 10 00:00:46,200 --> 00:00:50,440 Speaker 1: how to corporations adapt to the reality of no travel, 11 00:00:50,600 --> 00:00:56,080 Speaker 1: no globalization and the constraints of this pandemic UH travel. 12 00:00:56,600 --> 00:00:59,120 Speaker 1: It's very well, is is the quick answer to the 13 00:00:59,560 --> 00:01:05,400 Speaker 1: question UM. Throughout throughout the myriad of ZOOM meetings I've 14 00:01:05,440 --> 00:01:08,440 Speaker 1: attended and others have attended over the past nine ten months, 15 00:01:08,959 --> 00:01:14,319 Speaker 1: the words seamless has come up with with boring frequency. 16 00:01:14,840 --> 00:01:19,600 Speaker 1: UH companies are adapting extremely well. And if you look 17 00:01:19,600 --> 00:01:22,920 Speaker 1: at look at UH the the C suite, I think 18 00:01:23,440 --> 00:01:25,720 Speaker 1: there are a lot of quiet smiles there with respect 19 00:01:25,760 --> 00:01:28,679 Speaker 1: to that. The answer to that question, well, forgive me 20 00:01:28,720 --> 00:01:30,440 Speaker 1: for cherry picking the data point, but there was a 21 00:01:30,520 --> 00:01:33,759 Speaker 1: huge smile and scratch into the head and confusion over 22 00:01:33,840 --> 00:01:35,759 Speaker 1: adored ash and airp and be in the last couple 23 00:01:35,760 --> 00:01:38,880 Speaker 1: of days, Michael, you've seen it all. You'll take place 24 00:01:39,120 --> 00:01:41,920 Speaker 1: on the I P I S this week. Human nature 25 00:01:42,000 --> 00:01:46,000 Speaker 1: repeats itself, Jonathan. Uh, century after century, we've had these 26 00:01:46,120 --> 00:01:51,160 Speaker 1: uh what you can broadly called blind pools, uh, the spects. 27 00:01:51,200 --> 00:01:54,560 Speaker 1: So we've now got eighty billion dollars way huge record 28 00:01:55,160 --> 00:01:58,240 Speaker 1: in spects, which are which are little slips of paper 29 00:01:58,320 --> 00:02:01,160 Speaker 1: coming out. People get to do all kinds of promote 30 00:02:01,200 --> 00:02:04,000 Speaker 1: in the front end, as they've done for centuries, make 31 00:02:04,360 --> 00:02:07,200 Speaker 1: tons of money, uh, dribble it out to the public, 32 00:02:07,240 --> 00:02:10,640 Speaker 1: and screw the public. Michael Hall and I frame this 33 00:02:10,760 --> 00:02:13,840 Speaker 1: earlier in the week and as actually a Michael Holland question, 34 00:02:14,360 --> 00:02:17,600 Speaker 1: which is sp X up double digit this year, now, 35 00:02:18,360 --> 00:02:21,959 Speaker 1: sp X up over the decade, double digit sp X 36 00:02:22,000 --> 00:02:24,679 Speaker 1: back to the early nineteen fifties when you were an intern, 37 00:02:25,000 --> 00:02:28,480 Speaker 1: double digit. Why don't we keep talking about single digit 38 00:02:28,520 --> 00:02:35,880 Speaker 1: stock returns? Because institutional uh mindsets have a way of 39 00:02:36,120 --> 00:02:39,720 Speaker 1: trying to protect their jobs, not looking silly saying things 40 00:02:39,720 --> 00:02:43,680 Speaker 1: that scare their bosses. Uh, there's no there's no way 41 00:02:43,720 --> 00:02:47,600 Speaker 1: to uh look at the craziness of the capital markets 42 00:02:47,639 --> 00:02:52,079 Speaker 1: today where we have of the of the European market 43 00:02:52,120 --> 00:02:55,960 Speaker 1: owned bond market owned by the central banks. So your 44 00:02:56,040 --> 00:02:59,560 Speaker 1: risk free rates of return by which you you judge 45 00:03:00,480 --> 00:03:03,440 Speaker 1: value is thrown out the window. You you guys were 46 00:03:03,480 --> 00:03:07,920 Speaker 1: talking earlier about throwing away the textbooks. Uh, you simply 47 00:03:07,960 --> 00:03:10,280 Speaker 1: have to say, here's what we're dealt in terms of 48 00:03:10,320 --> 00:03:14,440 Speaker 1: cards today, and there's nothing other than equities that one 49 00:03:14,480 --> 00:03:16,960 Speaker 1: can look at if you have if you're a serious investor, 50 00:03:17,040 --> 00:03:19,959 Speaker 1: meaning your own four one K I mean, Michael, H 51 00:03:20,120 --> 00:03:22,680 Speaker 1: and John. This is so so important about the idea 52 00:03:22,680 --> 00:03:25,960 Speaker 1: of talking your book and recalibrating. Michael, we have to 53 00:03:26,040 --> 00:03:31,280 Speaker 1: recalibrate to a measured ownership of Tesla. Everybody's under owned 54 00:03:31,280 --> 00:03:36,120 Speaker 1: on Apple, etcetera, etcetera. What is the institutional adjustment a 55 00:03:36,320 --> 00:03:40,200 Speaker 1: year end that you would expect to see? Oh, I 56 00:03:40,600 --> 00:03:43,960 Speaker 1: think that that a lot of people who are heads 57 00:03:43,960 --> 00:03:48,400 Speaker 1: of investment committees and institutional investment programs are are going 58 00:03:48,440 --> 00:03:51,480 Speaker 1: to look to to try to protect their hights because 59 00:03:52,120 --> 00:03:56,280 Speaker 1: the majority will have underperformed yet once again continuing triumph 60 00:03:56,320 --> 00:03:59,600 Speaker 1: of hope over experience, as they say, and when you 61 00:04:00,000 --> 00:04:03,680 Speaker 1: and you have so, you do a little bit more 62 00:04:03,920 --> 00:04:06,560 Speaker 1: on the edges, which means that you probably get a 63 00:04:06,640 --> 00:04:10,960 Speaker 1: little bit more buying in terms of allocation, because bonds 64 00:04:11,040 --> 00:04:14,920 Speaker 1: make no sense in this Lewis Carroll Alice in Wonderland world. 65 00:04:15,240 --> 00:04:18,279 Speaker 1: When you're talking about the craziness of the the negative 66 00:04:18,360 --> 00:04:20,800 Speaker 1: rates abroad and where where we may be going here 67 00:04:20,839 --> 00:04:24,080 Speaker 1: with maybe going in the other direction and inflation, how 68 00:04:24,080 --> 00:04:27,320 Speaker 1: how can you how can you justify buying a great 69 00:04:27,360 --> 00:04:31,320 Speaker 1: deal of fixed income? You can't. Well, let's talk about 70 00:04:31,320 --> 00:04:33,280 Speaker 1: it a little bit more. I think this is so important, Michael. 71 00:04:33,320 --> 00:04:36,640 Speaker 1: You mentioned something about valuations. Valuations are unning important to 72 00:04:36,640 --> 00:04:40,479 Speaker 1: analyze if you benchmark them to something in isolation. What 73 00:04:40,480 --> 00:04:43,040 Speaker 1: does it mean going back to the late nineties early 74 00:04:43,080 --> 00:04:45,200 Speaker 1: two thousands. Let's look at the US two year the 75 00:04:45,200 --> 00:04:49,040 Speaker 1: two year yield and early two thousand was almost seven percent. Michael. 76 00:04:49,600 --> 00:04:51,560 Speaker 1: Now many people are looking at the price action of 77 00:04:51,560 --> 00:04:53,200 Speaker 1: the last couple of days, the I p o s 78 00:04:53,240 --> 00:04:55,240 Speaker 1: and benchmarking it back to the crazy times of the 79 00:04:55,320 --> 00:04:58,120 Speaker 1: late nineties and the early two thousands. Let's talk about 80 00:04:58,160 --> 00:05:01,280 Speaker 1: where fixed income is right now compared then, Michael, this 81 00:05:01,360 --> 00:05:06,880 Speaker 1: is another world, isn't it. It is truly and well described. Jonathan, 82 00:05:06,920 --> 00:05:09,840 Speaker 1: It's it's another world. And Lewis Carroll and Alice in 83 00:05:09,839 --> 00:05:13,880 Speaker 1: Wonderland keep keep popping through through uh my mind when 84 00:05:13,920 --> 00:05:18,039 Speaker 1: I'm thinking about these kinds of crazy upside down numbers. Uh, 85 00:05:18,240 --> 00:05:20,960 Speaker 1: you simply have if if we are going to get 86 00:05:20,960 --> 00:05:24,920 Speaker 1: as I've heard on Bloomberg over the last few days 87 00:05:25,160 --> 00:05:28,159 Speaker 1: from some people, two percent inflation is going to be 88 00:05:28,160 --> 00:05:30,480 Speaker 1: in the rear view mirror. Maybe it's three percent. And 89 00:05:30,520 --> 00:05:33,960 Speaker 1: then and then you have, uh, the thirty thirty year 90 00:05:34,040 --> 00:05:37,280 Speaker 1: treasury at under two percent, you have a chance to 91 00:05:37,360 --> 00:05:41,839 Speaker 1: lose an incredible amount of money in fixed income when 92 00:05:42,160 --> 00:05:45,400 Speaker 1: the duration spicy go against you. It's it's really quite incredible. 93 00:05:45,800 --> 00:05:49,560 Speaker 1: Michael Holland, we lost a great one. Robert Stovol tell 94 00:05:49,640 --> 00:05:54,760 Speaker 1: Us about Bob Stovoll Uh. He had this stentorian voice, 95 00:05:55,120 --> 00:05:58,560 Speaker 1: wonderful voice. His son Sam had Lucia on your show 96 00:05:58,880 --> 00:06:01,720 Speaker 1: periodically had as some of it. But he was one 97 00:06:01,720 --> 00:06:04,760 Speaker 1: of the kind. He was one of the great technical. 98 00:06:05,120 --> 00:06:07,880 Speaker 1: If I had at Great Wall Street lore, he would 99 00:06:07,880 --> 00:06:11,240 Speaker 1: be laughing at as I do at the the lack 100 00:06:11,279 --> 00:06:14,200 Speaker 1: of guidance from the markets as to how you're supposed 101 00:06:14,200 --> 00:06:17,440 Speaker 1: to comport yourself in terms of saving people from losing 102 00:06:17,480 --> 00:06:20,720 Speaker 1: money in the markets. And today I think, uh, I 103 00:06:20,760 --> 00:06:23,200 Speaker 1: think we we don't have enough of those kinds of 104 00:06:23,200 --> 00:06:27,240 Speaker 1: people have some some kind of uh detachment from the 105 00:06:27,279 --> 00:06:30,000 Speaker 1: craziness around us. I mean, Michael Holland you look at 106 00:06:30,000 --> 00:06:32,320 Speaker 1: Martin's wage and what he did and telling us to 107 00:06:32,400 --> 00:06:35,960 Speaker 1: follow the fed to me. Bob stove All literally taught 108 00:06:36,040 --> 00:06:39,400 Speaker 1: us how to speak about the markets with that voice 109 00:06:39,440 --> 00:06:42,480 Speaker 1: on the floor of the exchange. And you know there 110 00:06:42,480 --> 00:06:44,800 Speaker 1: were times on Wall Street Week where you guys just 111 00:06:44,960 --> 00:06:48,120 Speaker 1: lit it up over the courage to be in the market. 112 00:06:48,440 --> 00:06:52,279 Speaker 1: How do you stay in the market right now? Well, 113 00:06:52,320 --> 00:06:58,120 Speaker 1: because there there's uh a serious business which is everyone's 114 00:06:58,200 --> 00:07:02,160 Speaker 1: own personal accounts and and how people or its foundations 115 00:07:02,240 --> 00:07:05,920 Speaker 1: or charities who rely on. So you you first do 116 00:07:06,000 --> 00:07:08,680 Speaker 1: no harm. And when first you know harm means you 117 00:07:09,160 --> 00:07:12,200 Speaker 1: you avoid things like we were talking about, for uh, 118 00:07:12,480 --> 00:07:16,760 Speaker 1: door Dash and and Tesla and and Airbnb, and the 119 00:07:16,800 --> 00:07:20,560 Speaker 1: craziness of the markets, the SPACs. You identify those for 120 00:07:20,640 --> 00:07:23,600 Speaker 1: people and then you say, go to real businesses, their 121 00:07:23,680 --> 00:07:27,720 Speaker 1: businesses that actually are going to pay dividends as a dividends. 122 00:07:27,720 --> 00:07:32,200 Speaker 1: Can you imagine that JP Morgan yielding nearly three when 123 00:07:32,280 --> 00:07:34,920 Speaker 1: when the ten year treasury is yielding two thirds of 124 00:07:35,000 --> 00:07:39,400 Speaker 1: that or less. And I think that you simply have 125 00:07:39,480 --> 00:07:42,840 Speaker 1: to use common sense and and and stepped in and 126 00:07:42,880 --> 00:07:46,000 Speaker 1: say we're not going to participate in this this craziness. 127 00:07:46,320 --> 00:07:49,160 Speaker 1: And when Johnathan was asking earlier about people at the 128 00:07:49,200 --> 00:07:50,920 Speaker 1: end of the year, what what what do they do? 129 00:07:51,360 --> 00:07:54,600 Speaker 1: I think that avoiding the craziness so you don't lose 130 00:07:54,600 --> 00:07:56,559 Speaker 1: people with a ton of money in the coming couple 131 00:07:56,560 --> 00:07:58,680 Speaker 1: of years, which which you may well do if you 132 00:07:58,720 --> 00:08:01,600 Speaker 1: step in the wrong direction. We'll try. And Michael, you'll 133 00:08:01,640 --> 00:08:03,840 Speaker 1: want to the kind And it's great to catch out Visa. 134 00:08:04,000 --> 00:08:06,200 Speaker 1: And it's great to hear your sounding so well. Michael 135 00:08:06,200 --> 00:08:14,920 Speaker 1: Holland of hollyandand Company. Thank you. We need to get 136 00:08:14,920 --> 00:08:17,560 Speaker 1: back to first principles and there's no one better on that. 137 00:08:17,920 --> 00:08:21,720 Speaker 1: And Francis Donald and Dangerous Excel spreadsheets at Manual Life, 138 00:08:21,880 --> 00:08:25,280 Speaker 1: their global chief economists and a head of keeping up 139 00:08:25,280 --> 00:08:29,240 Speaker 1: with data strategy. Francis give us the update on the 140 00:08:29,280 --> 00:08:34,160 Speaker 1: American economy this Q four Q one and into the 141 00:08:34,200 --> 00:08:38,920 Speaker 1: fourth of July next year. It's not great. We are 142 00:08:39,000 --> 00:08:42,880 Speaker 1: heading into a very soft patch, something that looks like 143 00:08:42,920 --> 00:08:46,160 Speaker 1: a double dip on the services component of the economy. 144 00:08:46,559 --> 00:08:49,600 Speaker 1: I agree with Bloomberg Economics. There is a better than 145 00:08:49,720 --> 00:08:52,440 Speaker 1: like the chance that we see negative print on the 146 00:08:52,480 --> 00:08:55,400 Speaker 1: December payroll. And what we're trying to figure out here 147 00:08:55,480 --> 00:08:58,680 Speaker 1: is how do markets trade that It's very possible the 148 00:08:58,679 --> 00:09:01,199 Speaker 1: equity market looks right through. Maybe they have a little 149 00:09:01,240 --> 00:09:03,680 Speaker 1: bit of a step back here as they focus on 150 00:09:03,720 --> 00:09:06,400 Speaker 1: the longer term. But this is not a rates market 151 00:09:06,440 --> 00:09:08,640 Speaker 1: that I think is going to shrug off a lot 152 00:09:08,679 --> 00:09:11,600 Speaker 1: of the challenges that we see. And most importantly, this 153 00:09:11,679 --> 00:09:14,760 Speaker 1: is not a federal reserve or any global central bank 154 00:09:14,800 --> 00:09:16,960 Speaker 1: that is going to shrug off the damage that's going 155 00:09:17,000 --> 00:09:19,120 Speaker 1: to be created in the economy in the next two 156 00:09:19,120 --> 00:09:21,920 Speaker 1: to three months. This is not a period to look through. 157 00:09:22,280 --> 00:09:26,120 Speaker 1: This is a period that carries higher potential for credit events, 158 00:09:26,160 --> 00:09:28,640 Speaker 1: for long term scarring, for fuller drops in the labor 159 00:09:28,679 --> 00:09:32,439 Speaker 1: force participation rate. Forget about Fabosi and all the fancy 160 00:09:32,480 --> 00:09:35,640 Speaker 1: mathematics you know so well. Francis Donald, talk about the 161 00:09:35,720 --> 00:09:40,000 Speaker 1: emotion in the behavior. If we get yields to break down, 162 00:09:40,040 --> 00:09:43,280 Speaker 1: if the tenure yield actually comes in back again to 163 00:09:43,360 --> 00:09:46,680 Speaker 1: new low yields, maybe even talk of a negative tenure yield. 164 00:09:46,720 --> 00:09:49,679 Speaker 1: Who knows. I know where HSBC is on this. What's 165 00:09:49,720 --> 00:09:55,600 Speaker 1: the societal impact of ever lower in new yields. I'm 166 00:09:55,600 --> 00:09:58,520 Speaker 1: more concerned about the societal impact if we were to 167 00:09:58,520 --> 00:10:02,120 Speaker 1: see a breakaway higher. This is everything I hear every day. Oh, 168 00:10:02,240 --> 00:10:05,040 Speaker 1: rates are moving higher. There's too much inflation in the system. 169 00:10:05,360 --> 00:10:09,439 Speaker 1: We should be more afraid of stagflation and painful inflation 170 00:10:09,520 --> 00:10:12,920 Speaker 1: coming through and the FED losing control of this field 171 00:10:13,000 --> 00:10:16,120 Speaker 1: curve than we should about low rates, which are necessary 172 00:10:16,280 --> 00:10:18,840 Speaker 1: and more linked to fundamentals right now than a break 173 00:10:18,960 --> 00:10:21,400 Speaker 1: right in the tenure. And John, this is so important 174 00:10:21,440 --> 00:10:24,640 Speaker 1: is Francis always lays out so well, how wildly asymmetric 175 00:10:24,679 --> 00:10:27,640 Speaker 1: the behavior is right now, John Farrell, everybody's in a 176 00:10:27,720 --> 00:10:31,240 Speaker 1: panic about higher yield and yet we observe on the 177 00:10:31,280 --> 00:10:35,880 Speaker 1: Bloomberg new tests of lower rates, which makes the question, 178 00:10:36,160 --> 00:10:40,800 Speaker 1: Francis weather expectation for higher inflation actually comes from giving 179 00:10:40,880 --> 00:10:43,319 Speaker 1: your analysis of the economy and how it's going to 180 00:10:43,440 --> 00:10:46,880 Speaker 1: materialize in the next twolf to white seen months. Well, 181 00:10:46,920 --> 00:10:50,880 Speaker 1: in some ways higher inflation is justified and certainly heading 182 00:10:50,880 --> 00:10:54,080 Speaker 1: into April one, this is so important. We are going 183 00:10:54,120 --> 00:10:56,920 Speaker 1: to hit inflation that perhaps comes as close as three 184 00:10:57,640 --> 00:11:01,199 Speaker 1: with upside. A lot of that is app and base effects. 185 00:11:01,240 --> 00:11:04,559 Speaker 1: It's the disruption in the goods based economy. It's at 186 00:11:04,600 --> 00:11:08,320 Speaker 1: week usc but that is not permanently higher inflation. And 187 00:11:08,360 --> 00:11:11,000 Speaker 1: this is what we're missing right now. If inflation is 188 00:11:11,040 --> 00:11:13,560 Speaker 1: not permanently three percent, that bond market is not going 189 00:11:13,600 --> 00:11:16,439 Speaker 1: to price in three percent inflation. We then come back 190 00:11:16,480 --> 00:11:19,320 Speaker 1: to a period after that where inflation probably is around 191 00:11:19,360 --> 00:11:23,200 Speaker 1: that boring old two percent. But most importantly, we are 192 00:11:23,200 --> 00:11:25,720 Speaker 1: going to have areas of the economy that are experiencing 193 00:11:25,760 --> 00:11:29,240 Speaker 1: painful high inflation good sector, and we're going to have 194 00:11:29,280 --> 00:11:32,440 Speaker 1: other areas that are in painful deflation. This is not 195 00:11:32,559 --> 00:11:36,240 Speaker 1: your father's inflation. This is huge asymmetry within price action, 196 00:11:36,480 --> 00:11:38,360 Speaker 1: and we have to be really mindful of that. This 197 00:11:38,440 --> 00:11:41,600 Speaker 1: is not boring two percent everything a two percent. This 198 00:11:41,679 --> 00:11:46,000 Speaker 1: is huge, huge dichotomies, and what's happening in the price space. Well, 199 00:11:46,000 --> 00:11:48,840 Speaker 1: this clearly isn't your grandfather's bond market either. So Francis, 200 00:11:48,960 --> 00:11:52,160 Speaker 1: let's talk about that. Given everything you've just said, do 201 00:11:52,200 --> 00:11:55,040 Speaker 1: we just need to recognize now. The position that central 202 00:11:55,040 --> 00:11:57,920 Speaker 1: banks in are in right now will be the position 203 00:11:58,000 --> 00:12:01,079 Speaker 1: central banks will be in for the foreseeable future. And 204 00:12:01,080 --> 00:12:03,560 Speaker 1: I'm not just talking about the twenty two the Christine 205 00:12:03,600 --> 00:12:06,000 Speaker 1: the god UCP president is talking about yesterday. I'm thinking 206 00:12:07,400 --> 00:12:12,199 Speaker 1: five six seven absolutely. I mean, my my call is 207 00:12:12,240 --> 00:12:15,760 Speaker 1: at interstrates have to stay extraordinarily low. And even if 208 00:12:15,800 --> 00:12:19,000 Speaker 1: we do see a type of normalization, we're talking about 209 00:12:19,040 --> 00:12:22,319 Speaker 1: fifty basis points, maybe a hundred basis points, we are 210 00:12:22,360 --> 00:12:25,640 Speaker 1: not going back to even pre COVID levels of interest rates, 211 00:12:25,679 --> 00:12:28,640 Speaker 1: even as inflation moves higher. Because even though I spend 212 00:12:28,640 --> 00:12:30,920 Speaker 1: the bulk of my time looking at the feds primary 213 00:12:31,040 --> 00:12:34,439 Speaker 1: mandate inflation and employment, listen to what the FED is 214 00:12:34,480 --> 00:12:38,480 Speaker 1: talking about on the sidelines all global central banks, housing affordability. 215 00:12:38,559 --> 00:12:41,240 Speaker 1: From the New Zealand Central Bank, we're talking about things 216 00:12:41,320 --> 00:12:44,120 Speaker 1: like climate change. At the Bank of Canada, we're talking 217 00:12:44,120 --> 00:12:46,839 Speaker 1: about Powell talking more and more, as he should, about 218 00:12:46,920 --> 00:12:49,680 Speaker 1: racial and income in equalities. These are central banks that 219 00:12:49,679 --> 00:12:53,040 Speaker 1: are shifting their perspective to a broader mandate than just 220 00:12:53,200 --> 00:12:56,000 Speaker 1: inflation two percent, and they're going to be very happy 221 00:12:56,040 --> 00:12:59,680 Speaker 1: to allow short term overshoots and keep this uppontly running hot. 222 00:13:00,000 --> 00:13:01,960 Speaker 1: So Francis, let's go over to Secretary of Yellow and 223 00:13:02,000 --> 00:13:05,520 Speaker 1: in the future of our stimulus in America, take all 224 00:13:05,559 --> 00:13:09,400 Speaker 1: that you said and frame it into the amount of 225 00:13:09,520 --> 00:13:13,000 Speaker 1: stimulus through this pandemic. Are you looking at it is 226 00:13:13,040 --> 00:13:16,920 Speaker 1: five billion? Eight billion? Is okay? Are you looking at 227 00:13:16,920 --> 00:13:20,439 Speaker 1: there will be tranches of trillion dollars of stimulus or 228 00:13:20,559 --> 00:13:24,400 Speaker 1: like liberal economies, are you suggesting four or five or 229 00:13:24,520 --> 00:13:29,559 Speaker 1: six trillion dollars of stimulus will be required. I am 230 00:13:29,640 --> 00:13:34,480 Speaker 1: expecting persistent, continuous stimulus that does not have an end 231 00:13:34,559 --> 00:13:37,600 Speaker 1: date or an end number. We are seeing a shift 232 00:13:37,640 --> 00:13:41,240 Speaker 1: towards demanding a larger size of government. We're demanding that 233 00:13:41,280 --> 00:13:44,439 Speaker 1: our government take over the reins of central banking to 234 00:13:44,600 --> 00:13:48,360 Speaker 1: address very large inequalities, to address the need to ship 235 00:13:48,400 --> 00:13:52,000 Speaker 1: towards a greener economy. We are moving towards a government 236 00:13:52,000 --> 00:13:54,560 Speaker 1: that will become a larger segment of the economy. And 237 00:13:54,600 --> 00:13:57,880 Speaker 1: for the market, it's incredibly important because you have monetary 238 00:13:57,920 --> 00:14:00,600 Speaker 1: policy that says I will I will on that front 239 00:14:00,720 --> 00:14:03,839 Speaker 1: end for a long time, and government policy that is 240 00:14:03,880 --> 00:14:07,200 Speaker 1: probably primed for massive issuance. We're looking at a pretty 241 00:14:07,200 --> 00:14:10,240 Speaker 1: sizable steepener here. And we look for post COVID, and 242 00:14:10,280 --> 00:14:13,600 Speaker 1: that shift from monetary policy is the main tinker of 243 00:14:13,600 --> 00:14:18,000 Speaker 1: our economy to government is the really biggest, largest implication 244 00:14:18,080 --> 00:14:21,200 Speaker 1: of what COVID did. Then bring it over to the 245 00:14:21,280 --> 00:14:24,320 Speaker 1: chapter I don't know, chapter twenty three of your entry textbook, 246 00:14:24,360 --> 00:14:27,520 Speaker 1: Francis Donald, years ago in economics. I believe it was 247 00:14:27,600 --> 00:14:32,080 Speaker 1: on the equity markets. Fold again. What you said over now, 248 00:14:32,120 --> 00:14:35,880 Speaker 1: how corporations will adapt to this into the ultimate word, 249 00:14:35,960 --> 00:14:40,960 Speaker 1: the profitability of our business environment. Well, I suspect we're 250 00:14:40,960 --> 00:14:43,480 Speaker 1: gonna be rewriting a lot of those textbooks. But let 251 00:14:43,480 --> 00:14:45,240 Speaker 1: me let me put it from you. From the investment 252 00:14:45,280 --> 00:14:48,440 Speaker 1: side of the picture. You have extraordinarily low rates for 253 00:14:48,520 --> 00:14:52,000 Speaker 1: a very long time, very cheap money. You're going to 254 00:14:52,000 --> 00:14:55,600 Speaker 1: see larger and larger allocations towards equities. That doesn't mean 255 00:14:55,640 --> 00:14:58,280 Speaker 1: it's a straight line higher right now. For example, sentiment 256 00:14:58,360 --> 00:15:01,600 Speaker 1: extremely extended, pre totally prime. For a bit of a pullback, 257 00:15:01,640 --> 00:15:04,160 Speaker 1: that's gonna happen. But more and more money into that 258 00:15:04,240 --> 00:15:06,640 Speaker 1: equity market is what I suspect over that five year. 259 00:15:06,880 --> 00:15:09,080 Speaker 1: That's why even though I sound like that i'm barrish, 260 00:15:09,120 --> 00:15:11,640 Speaker 1: I sound like I'm concerned. It's really hard not to 261 00:15:11,640 --> 00:15:13,920 Speaker 1: have a bias towards risk assets over that five to 262 00:15:14,040 --> 00:15:17,760 Speaker 1: ten horizon. There's just really no other choice. Well, that's 263 00:15:17,800 --> 00:15:21,440 Speaker 1: why it's been torture on the psychological front for an investor, Francis, 264 00:15:21,600 --> 00:15:25,520 Speaker 1: and we've repeatedly said this on this program. Your feelings 265 00:15:25,560 --> 00:15:28,080 Speaker 1: about the world, about the world around you in the 266 00:15:28,120 --> 00:15:31,080 Speaker 1: here and now, you have to park them and put 267 00:15:31,120 --> 00:15:34,040 Speaker 1: them to one side. And I think Francis still people 268 00:15:34,080 --> 00:15:38,280 Speaker 1: find that really, really difficult. They're looking at their moral 269 00:15:38,320 --> 00:15:40,640 Speaker 1: compass and they seem to think that markets should align 270 00:15:40,680 --> 00:15:43,760 Speaker 1: with it. And Francis, I think still now, even after 271 00:15:43,800 --> 00:15:47,040 Speaker 1: the lesson the conditioning we've had through, I think it's 272 00:15:47,040 --> 00:15:49,200 Speaker 1: still difficult for many people. Can you walk me through 273 00:15:49,600 --> 00:15:52,520 Speaker 1: the conversations you have with clients around those issues, Francis 274 00:15:52,520 --> 00:15:56,960 Speaker 1: and the lessons of twenty into twenty one and beyond. Well, John, 275 00:15:56,960 --> 00:15:59,760 Speaker 1: I actually have two titles. I'm a chief economist and 276 00:15:59,800 --> 00:16:01,960 Speaker 1: I'm head of Strategy. And in the past that was 277 00:16:02,080 --> 00:16:04,560 Speaker 1: the same job. If you thought inflation was going higher, 278 00:16:04,600 --> 00:16:06,680 Speaker 1: you thought rates were going higher, if you were bullish 279 00:16:06,680 --> 00:16:09,040 Speaker 1: on the economy, we were bullish on equities. What's been 280 00:16:09,080 --> 00:16:11,480 Speaker 1: so challenging for people who have rules like mine. The 281 00:16:11,520 --> 00:16:13,600 Speaker 1: past year is that we haven't just had to set 282 00:16:13,640 --> 00:16:17,640 Speaker 1: aside our moral compass, where our heart is watching lines 283 00:16:17,680 --> 00:16:20,200 Speaker 1: to food banks that go around the block three times 284 00:16:20,200 --> 00:16:22,600 Speaker 1: and say that's not the trade. We've also had to 285 00:16:22,640 --> 00:16:26,320 Speaker 1: set aside fundamentals and our economics analysis when we say 286 00:16:26,320 --> 00:16:29,480 Speaker 1: things like a negative print on December non farm pay 287 00:16:29,560 --> 00:16:32,600 Speaker 1: rolls that should be so bearished, and yet we have 288 00:16:32,680 --> 00:16:35,200 Speaker 1: to think, you know what that means, means lower interest 289 00:16:35,280 --> 00:16:38,080 Speaker 1: rates and large asset managers, pension funds have to shift 290 00:16:38,120 --> 00:16:41,120 Speaker 1: more into equities. Those are the connections that we're coming to. 291 00:16:41,320 --> 00:16:44,760 Speaker 1: So this is no longer a situation where fundamentals are 292 00:16:44,800 --> 00:16:48,320 Speaker 1: the primary driver. Does that come back, maybe, but we 293 00:16:48,440 --> 00:16:50,840 Speaker 1: really have to break out those correlations between a lot 294 00:16:50,920 --> 00:16:54,160 Speaker 1: of the economic factors and the market. That's very uncomfortable, 295 00:16:54,200 --> 00:16:56,120 Speaker 1: and like I said, we're gonna probably have to rewrite 296 00:16:56,120 --> 00:16:59,200 Speaker 1: some at least chapters in those textbooks. I think we've 297 00:16:59,200 --> 00:17:02,040 Speaker 1: gotta get rid of the Francis Grant to catch up. 298 00:17:02,160 --> 00:17:05,120 Speaker 1: As always, we appreciate your time, Francis Donald of Mony 299 00:17:05,160 --> 00:17:12,280 Speaker 1: Life Investment Management. One of the things that John Farren 300 00:17:12,280 --> 00:17:15,080 Speaker 1: and I agreed on long Agoing Far Away think March 301 00:17:15,640 --> 00:17:18,480 Speaker 1: was who would speak to experts That includes Sam Facility 302 00:17:18,480 --> 00:17:22,520 Speaker 1: of Bloomberg Intelligence expert on pharmacology, the good work of 303 00:17:22,560 --> 00:17:26,640 Speaker 1: Imperial College, Washington State, what University of Washington I should 304 00:17:26,680 --> 00:17:29,800 Speaker 1: say in their microbiology. And then there's the math of 305 00:17:29,840 --> 00:17:33,160 Speaker 1: it all. And right now the math really really matters. 306 00:17:33,680 --> 00:17:37,960 Speaker 1: She's out of the acclaimed Kansas math program and biostatistics 307 00:17:37,960 --> 00:17:42,160 Speaker 1: at Michigan. Leslie McClure joins us now from Drexel, truly 308 00:17:42,440 --> 00:17:46,360 Speaker 1: expert on the mathliness of all of us. Over the weekend, 309 00:17:46,400 --> 00:17:49,920 Speaker 1: you're gonna get nailed, Dr McClure on this. What's the 310 00:17:50,000 --> 00:17:54,040 Speaker 1: key mathematics of the vaccine that our audience needs to know? 311 00:17:55,240 --> 00:17:58,960 Speaker 1: Oh that's a great question. So mathematically, what's important about 312 00:17:58,960 --> 00:18:01,479 Speaker 1: the vaccine right now is the number of people and 313 00:18:01,520 --> 00:18:05,199 Speaker 1: the number of doses of the vaccine. Okay, that's the 314 00:18:05,280 --> 00:18:07,520 Speaker 1: size of the vaccine, and we're going to impute it 315 00:18:07,600 --> 00:18:10,879 Speaker 1: onto society. What is the effect of what it seems 316 00:18:10,920 --> 00:18:14,240 Speaker 1: to be maybe a statistically large body that says I'm 317 00:18:14,280 --> 00:18:18,040 Speaker 1: not going to take the vaccine? What is there impact? 318 00:18:18,440 --> 00:18:22,480 Speaker 1: And those brave enough like Pharaoh to get in line, Well, 319 00:18:22,520 --> 00:18:24,840 Speaker 1: I'll tell you I'm in line. I'm and I'm putting 320 00:18:24,840 --> 00:18:27,480 Speaker 1: my parents in line before me. I think it's really 321 00:18:27,480 --> 00:18:30,520 Speaker 1: important we all get in line. I think that as 322 00:18:30,520 --> 00:18:33,159 Speaker 1: a public health professional, it's it's contingent on us to 323 00:18:33,520 --> 00:18:36,360 Speaker 1: get the messaging out to tell people how important it is, 324 00:18:37,000 --> 00:18:40,879 Speaker 1: and and to really educate the public about the vaccine 325 00:18:40,920 --> 00:18:46,399 Speaker 1: and the benefits of it it's and how we harvest 326 00:18:46,400 --> 00:18:49,719 Speaker 1: those benefits going forward. The question that we've asked so 327 00:18:49,760 --> 00:18:54,040 Speaker 1: many times now is what size, what number of people, 328 00:18:54,320 --> 00:18:56,600 Speaker 1: what percentage to the population do we need to reach 329 00:18:56,640 --> 00:18:59,720 Speaker 1: before we can scale that restrictions. I've asked this question 330 00:18:59,760 --> 00:19:01,240 Speaker 1: to pay it to me and I get different answers, 331 00:19:01,240 --> 00:19:03,440 Speaker 1: And I wonder what yours would be, Professor. Do we 332 00:19:03,480 --> 00:19:06,080 Speaker 1: need to just vaccinate the most at risk in society 333 00:19:06,119 --> 00:19:09,240 Speaker 1: before we remove all of the restrictions around social distancing, 334 00:19:09,640 --> 00:19:12,920 Speaker 1: et cetera. Or do you need to achieve herd immunity 335 00:19:13,240 --> 00:19:16,320 Speaker 1: to go forth and do that. That's a really difficult 336 00:19:16,400 --> 00:19:19,920 Speaker 1: question because the assumptions you make to answer that differ 337 00:19:20,040 --> 00:19:22,800 Speaker 1: depending on the day of the week. So, but my 338 00:19:22,800 --> 00:19:25,240 Speaker 1: my sort of stock answer is we can't remove those 339 00:19:25,280 --> 00:19:28,200 Speaker 1: restrictions and we have to continue to be cautious even 340 00:19:28,280 --> 00:19:31,640 Speaker 1: after we vaccinate a large proportion of the population as 341 00:19:31,680 --> 00:19:34,880 Speaker 1: we learn more and more about the long term safety 342 00:19:34,880 --> 00:19:38,760 Speaker 1: and efficacy of the vaccine. Just in terms of who 343 00:19:38,840 --> 00:19:41,480 Speaker 1: needs to be vaccinated, we know the most at risk 344 00:19:41,520 --> 00:19:44,720 Speaker 1: in society. Are we aware of the people who have 345 00:19:44,760 --> 00:19:48,440 Speaker 1: already had COVID nineteen whether they need to be vaccinated. 346 00:19:49,680 --> 00:19:53,680 Speaker 1: So my understanding is that the the the advice about 347 00:19:53,720 --> 00:19:58,040 Speaker 1: that is mixed. That there's some saying that that that 348 00:19:58,119 --> 00:20:00,919 Speaker 1: those who have already had COVID nineteen perhaps don't need 349 00:20:00,960 --> 00:20:04,040 Speaker 1: to be vaccinated. But the recommendations I believe are that 350 00:20:04,080 --> 00:20:06,520 Speaker 1: they should be vaccinated and that it will it will 351 00:20:06,520 --> 00:20:10,920 Speaker 1: infer additional protection on them. Right, Leslie. Where we want 352 00:20:10,960 --> 00:20:13,120 Speaker 1: to get here, and you know this cold coming out 353 00:20:13,119 --> 00:20:17,879 Speaker 1: of Michigan's prestigious program is where Thomas Francis was in 354 00:20:18,040 --> 00:20:22,080 Speaker 1: nineteen fifty five. He's the guy that stood up and 355 00:20:22,119 --> 00:20:25,720 Speaker 1: said polio will work. Take the vaccine. Where we got 356 00:20:27,280 --> 00:20:31,280 Speaker 1: on the polio vaccination program. How long is it going 357 00:20:31,320 --> 00:20:33,800 Speaker 1: to get us to take to get to April of 358 00:20:33,920 --> 00:20:40,879 Speaker 1: nineteen fifty Well, we need to build a time machine, 359 00:20:40,960 --> 00:20:42,480 Speaker 1: right and be able to go back in time to 360 00:20:42,560 --> 00:20:46,000 Speaker 1: a time when people trusted science more, and my hope 361 00:20:46,040 --> 00:20:47,960 Speaker 1: is that we can get there. I don't know how 362 00:20:47,960 --> 00:20:49,840 Speaker 1: long it will take. I frankly, I don't know how 363 00:20:49,840 --> 00:20:52,320 Speaker 1: long it will be until we have the capacity to 364 00:20:52,520 --> 00:20:56,760 Speaker 1: vaccinate that larger proportion of the population. So, again, going 365 00:20:56,760 --> 00:20:58,879 Speaker 1: back to the numbers game, we need to know, we 366 00:20:58,920 --> 00:21:02,439 Speaker 1: need more information about the timeline for wide distribution of 367 00:21:02,480 --> 00:21:05,280 Speaker 1: the vaccine. My hope is that by the time we 368 00:21:05,359 --> 00:21:08,040 Speaker 1: are in wide distribution, that the public will be more 369 00:21:08,080 --> 00:21:10,760 Speaker 1: trusting and that more people will be willing to take 370 00:21:10,800 --> 00:21:12,640 Speaker 1: the vaccine. Because You're right, we do need to get 371 00:21:12,680 --> 00:21:14,639 Speaker 1: back there. I mean, we've got to get back to 372 00:21:14,760 --> 00:21:17,080 Speaker 1: But when are we comfortable again? Just in your head, 373 00:21:17,119 --> 00:21:20,240 Speaker 1: and I'm asking this as a complete amateur, When does 374 00:21:20,359 --> 00:21:24,760 Speaker 1: Dr McClure think we will be comfortable again in society 375 00:21:24,800 --> 00:21:27,480 Speaker 1: at the end of this pandemic, when the Kansas City 376 00:21:27,560 --> 00:21:30,600 Speaker 1: chiefs can go out on the field comfortable that nobody's 377 00:21:30,640 --> 00:21:35,399 Speaker 1: going to get the virus? When is it? So? My 378 00:21:35,520 --> 00:21:38,520 Speaker 1: personal opinion is that it will be at least another 379 00:21:38,680 --> 00:21:43,240 Speaker 1: year before I feel that comfort. I hope I'm wrong. 380 00:21:43,320 --> 00:21:46,919 Speaker 1: I hope I'm wrong. I hope that the Super Bowl 381 00:21:46,960 --> 00:21:51,360 Speaker 1: in February with no issues at all. But I don't 382 00:21:51,359 --> 00:21:54,639 Speaker 1: think we're so lucky to catch up with you today. 383 00:21:54,680 --> 00:21:57,320 Speaker 1: Please come back. Even if that wasn't depressed again to 384 00:21:57,400 --> 00:22:05,240 Speaker 1: this conversation, Professor Leslie mclaud that after actual university John 385 00:22:05,280 --> 00:22:09,400 Speaker 1: there is s to thirteen that is a fancy room 386 00:22:09,440 --> 00:22:12,720 Speaker 1: at the Capitol. It's a reception room, big and fancy 387 00:22:12,800 --> 00:22:16,119 Speaker 1: things happened there. Edward Mills has spent a lot of 388 00:22:16,160 --> 00:22:19,439 Speaker 1: time and s to thirteen with Raymond James in a 389 00:22:19,480 --> 00:22:24,560 Speaker 1: wonderful Washington policy analyst with true experience on the white 390 00:22:24,600 --> 00:22:28,080 Speaker 1: marble of Capitol Hills at Mills, what's going on right 391 00:22:28,119 --> 00:22:32,080 Speaker 1: now in s to thirteen and in those hallways around it? 392 00:22:32,400 --> 00:22:36,040 Speaker 1: Forget about the media bladder. What's the back story of 393 00:22:36,080 --> 00:22:42,000 Speaker 1: negotiations on Capitol Hill? Well, I think politics continue to 394 00:22:42,040 --> 00:22:44,920 Speaker 1: get in the way tom of what we saw before 395 00:22:44,960 --> 00:22:48,040 Speaker 1: the election. I think, um, everyone that I talked to 396 00:22:48,280 --> 00:22:51,320 Speaker 1: was saying that they were not sure if Nancy Pelosi 397 00:22:51,560 --> 00:22:54,160 Speaker 1: wanted to get a deal. UH certainly did not want 398 00:22:54,240 --> 00:22:57,640 Speaker 1: to give President Trump a victory before the election. Now 399 00:22:57,680 --> 00:23:01,240 Speaker 1: that the election um is behind us, Um, we still 400 00:23:01,240 --> 00:23:04,840 Speaker 1: have two races in Georgia and most of the conversations 401 00:23:04,880 --> 00:23:07,480 Speaker 1: I have is that Mitch McConnell now is the person 402 00:23:07,800 --> 00:23:10,680 Speaker 1: who does not want to get a deal. And so 403 00:23:10,720 --> 00:23:14,560 Speaker 1: we have a bipartisan group of senators trying to advance 404 00:23:14,600 --> 00:23:19,240 Speaker 1: a nine hundred billion dollar package. We have a government 405 00:23:19,280 --> 00:23:22,359 Speaker 1: funding deadline tonight, and we have an annual defense bill 406 00:23:22,400 --> 00:23:25,840 Speaker 1: that's been passed every year since World War Two that 407 00:23:25,920 --> 00:23:30,200 Speaker 1: needs to get done before we can. You can line 408 00:23:30,280 --> 00:23:33,399 Speaker 1: up all the sentate majority leaders, Republican and Democrat have 409 00:23:33,480 --> 00:23:35,639 Speaker 1: past and the fact that we need to pay for 410 00:23:35,680 --> 00:23:38,240 Speaker 1: the Pentagon, we need to get a defense bill done, 411 00:23:38,240 --> 00:23:41,440 Speaker 1: and on and on and on. What's original about Mitch 412 00:23:41,560 --> 00:23:46,240 Speaker 1: McConnell speak to Republicans, speak to Democrats? How and why 413 00:23:46,440 --> 00:23:51,000 Speaker 1: is this guy different? Well, I mean to his core 414 00:23:51,520 --> 00:23:55,320 Speaker 1: UM people look at miss McConnell and say, his motivation 415 00:23:55,640 --> 00:23:59,400 Speaker 1: is his desire to win above all else UM, and 416 00:24:00,080 --> 00:24:03,600 Speaker 1: he certainly UM wants to make sure that he wins 417 00:24:03,600 --> 00:24:08,040 Speaker 1: these two races in Georgia to maintain his majority UM 418 00:24:08,080 --> 00:24:10,520 Speaker 1: and is looking to see if he can set up 419 00:24:10,520 --> 00:24:15,199 Speaker 1: a situation where a no deal on fiscal stimulus is 420 00:24:15,600 --> 00:24:20,879 Speaker 1: blamed on Democrats. UM. He is currently pushing hardest for 421 00:24:21,200 --> 00:24:24,520 Speaker 1: liability releases UM. A cynic would say that he is 422 00:24:24,680 --> 00:24:28,040 Speaker 1: uh doing the bidding of his donors. UM. But I 423 00:24:28,080 --> 00:24:32,360 Speaker 1: think it is more about seeing a line in UM 424 00:24:32,359 --> 00:24:35,760 Speaker 1: Georgia that if there is no bill, UM, that that 425 00:24:35,800 --> 00:24:39,800 Speaker 1: would be more negative to Democrats who now will control 426 00:24:39,840 --> 00:24:43,320 Speaker 1: the presidency. And we're kind of the focus of negotiations 427 00:24:44,000 --> 00:24:47,159 Speaker 1: on fiscal release. He has not been very involved in 428 00:24:47,160 --> 00:24:50,160 Speaker 1: a lot of these fiscal relief negotiations. UM. That has 429 00:24:50,200 --> 00:24:52,760 Speaker 1: been what has been surprising to folks. He needs to 430 00:24:52,760 --> 00:24:55,920 Speaker 1: be much more involved in these conversations before we can 431 00:24:55,960 --> 00:24:59,520 Speaker 1: truly be optimistic about the prospect of getting the next 432 00:24:59,600 --> 00:25:03,159 Speaker 1: round of fiscal support for the autonomy. So at your 433 00:25:03,200 --> 00:25:05,639 Speaker 1: base case right now, given everything you've just said, no 434 00:25:05,800 --> 00:25:10,280 Speaker 1: deal until after January five, UM. You know, my my 435 00:25:10,359 --> 00:25:12,920 Speaker 1: base cas is UH. You know that it's not a 436 00:25:13,040 --> 00:25:15,040 Speaker 1: question of if. It's still a question of win and 437 00:25:15,119 --> 00:25:18,520 Speaker 1: how much UM. And I get a sense that UM 438 00:25:18,760 --> 00:25:23,879 Speaker 1: Congress does not want to adjourn UH this year until 439 00:25:24,000 --> 00:25:27,440 Speaker 1: something happens. But you know, it's it's hard to see 440 00:25:28,280 --> 00:25:32,119 Speaker 1: how something kind of immediately comes together. Unless people start 441 00:25:32,560 --> 00:25:36,120 Speaker 1: taking hostage of the defense bill, of the government funding bill, 442 00:25:36,320 --> 00:25:39,560 Speaker 1: we could have a brief government shutdown. Come midnight tonight 443 00:25:40,200 --> 00:25:43,520 Speaker 1: because we just don't have agreement there will. You know, 444 00:25:43,600 --> 00:25:47,960 Speaker 1: there wasn't a sense that anyone wanted to hold hostage 445 00:25:48,520 --> 00:25:51,480 Speaker 1: any of these must pass bills before the election. Now 446 00:25:51,520 --> 00:25:55,080 Speaker 1: that we're passed, everything is on the table. And is 447 00:25:55,080 --> 00:25:58,639 Speaker 1: there a sense of embarrassment the prospect of the government 448 00:25:58,720 --> 00:26:02,919 Speaker 1: shutting down tonight? Is there a sense of embarrassment of 449 00:26:02,920 --> 00:26:05,199 Speaker 1: the fact that they just can't get anything done? Do 450 00:26:05,240 --> 00:26:07,520 Speaker 1: you feel that you sense that? And they say at 451 00:26:07,560 --> 00:26:10,880 Speaker 1: the moment, I don't think there is embarrassment. I think 452 00:26:10,920 --> 00:26:15,160 Speaker 1: that there is UM an acknowledgement that there are some 453 00:26:15,240 --> 00:26:19,159 Speaker 1: really high stakes negotiations going on in each side is 454 00:26:19,240 --> 00:26:23,640 Speaker 1: looking to find some leverage UM. And you know, DC 455 00:26:24,000 --> 00:26:27,480 Speaker 1: usually only responds when there is a crisis, when there 456 00:26:27,560 --> 00:26:30,879 Speaker 1: is a deadline. All of these fiscal relief packages have 457 00:26:31,320 --> 00:26:36,000 Speaker 1: moved through other deadlines, have moved through other crises without 458 00:26:36,000 --> 00:26:40,560 Speaker 1: getting done UM. And there is finally the sense that, UM, 459 00:26:40,600 --> 00:26:44,760 Speaker 1: something has to happen, and people are ramping up and 460 00:26:44,840 --> 00:26:48,960 Speaker 1: it's more of a political street fight than embarrassment at 461 00:26:48,960 --> 00:26:53,800 Speaker 1: this point. Who applies pressure then on the senator from Kentucky? 462 00:26:53,960 --> 00:26:58,439 Speaker 1: What power party moves Mr McConnell to do with so 463 00:26:58,480 --> 00:27:03,879 Speaker 1: many Americans desire. I think it's a combination of UM 464 00:27:04,359 --> 00:27:09,359 Speaker 1: kind of political shame coming from UM, any kind of 465 00:27:09,440 --> 00:27:15,280 Speaker 1: media coverage, or getting pushed by his individual members. Having 466 00:27:15,320 --> 00:27:19,040 Speaker 1: the bipartisan group is putting more pressure on him. Last night, 467 00:27:19,200 --> 00:27:22,680 Speaker 1: you was an interesting situation where you have Bernie Sanders, 468 00:27:22,720 --> 00:27:26,359 Speaker 1: one of the most liberal Democrats Josh Holley one of 469 00:27:26,359 --> 00:27:30,600 Speaker 1: the most conservative Republicans on the floor together pushing for 470 00:27:30,640 --> 00:27:34,840 Speaker 1: another round of fiscal support CHECKSUM because they see their 471 00:27:34,880 --> 00:27:38,959 Speaker 1: constituents suffering at this point. UH. Those type of events 472 00:27:39,000 --> 00:27:42,320 Speaker 1: where it's not viewed as a one party situation, but 473 00:27:42,359 --> 00:27:47,680 Speaker 1: there is a bipartisan, very strange ideological mix pushing for 474 00:27:47,880 --> 00:27:51,640 Speaker 1: things in the past on these fights that seem intractable. 475 00:27:51,920 --> 00:27:54,719 Speaker 1: The only thing that works, in my mind has been 476 00:27:54,800 --> 00:27:57,840 Speaker 1: shame at Mills GRD to catch up this joinas from 477 00:27:57,920 --> 00:28:05,160 Speaker 1: Raymond James on a situation down in day, say, Bob 478 00:28:05,280 --> 00:28:09,800 Speaker 1: Dylan was someone who reinvented time and space two, three, 479 00:28:09,920 --> 00:28:13,000 Speaker 1: four or five six times And just to give you 480 00:28:13,080 --> 00:28:16,160 Speaker 1: one vignette with all of his claim in the Newport 481 00:28:16,240 --> 00:28:19,800 Speaker 1: Folk Festival and that he wandered on and then was 482 00:28:19,960 --> 00:28:25,359 Speaker 1: dragged down to Nashville to record a set of albums. 483 00:28:25,400 --> 00:28:29,760 Speaker 1: The engineer was a guy named Neil Wilburn. Bob Johnston produced, 484 00:28:30,280 --> 00:28:34,320 Speaker 1: produced it, and what was extraordinary was one of his 485 00:28:34,480 --> 00:28:42,400 Speaker 1: biggest hits off Nashville Skyline, Let's listen, Lady Lane lay 486 00:28:42,440 --> 00:28:54,360 Speaker 1: a great. So there is Bob Dylan with one of 487 00:28:54,400 --> 00:28:56,920 Speaker 1: the chameleon moments of his life where it was like, 488 00:28:57,000 --> 00:29:00,200 Speaker 1: that's not Bob Dylan, but it was. I literally earned 489 00:29:00,200 --> 00:29:02,360 Speaker 1: a bar cord off that song, which I think a 490 00:29:02,360 --> 00:29:05,400 Speaker 1: few other people did as well. Alex Webb joins us 491 00:29:05,400 --> 00:29:08,600 Speaker 1: now from Bloomberg and this sale for the wonderful Mr 492 00:29:08,680 --> 00:29:14,480 Speaker 1: Dillon a three million of his songwriting and publishing it rights. Alex, 493 00:29:14,560 --> 00:29:19,600 Speaker 1: how do you approach this? Did someone overpay? Does someone underpay? 494 00:29:19,640 --> 00:29:24,080 Speaker 1: What's the journalistic thing you looked at? There are two 495 00:29:24,080 --> 00:29:26,800 Speaker 1: sides of this. There's Dylan himself and then there's a buyer, 496 00:29:26,920 --> 00:29:29,560 Speaker 1: which is Universal Music. And on the Dylan side the 497 00:29:29,720 --> 00:29:32,120 Speaker 1: risk of sounding a little bit for all but you 498 00:29:32,120 --> 00:29:35,680 Speaker 1: know he's pushing. Is he going to be around long 499 00:29:35,800 --> 00:29:39,040 Speaker 1: enough to make three million in royalties? Seems hard to believe. 500 00:29:39,800 --> 00:29:42,120 Speaker 1: So for him it seems a non brainer that no 501 00:29:42,240 --> 00:29:44,640 Speaker 1: brainers sell it for that money. If your Universal music, 502 00:29:44,680 --> 00:29:47,320 Speaker 1: you could make the argument they've overpaid. You're forgetting that 503 00:29:47,520 --> 00:29:50,120 Speaker 1: next this time next year or sometime next year. They're 504 00:29:50,160 --> 00:29:54,600 Speaker 1: expected to I p O. And if you're company, you 505 00:29:54,680 --> 00:29:58,080 Speaker 1: want to be able to demonstrate you've got recurring income, 506 00:29:58,240 --> 00:30:01,560 Speaker 1: predictable recurring income. Um. If this is a good side 507 00:30:01,640 --> 00:30:04,520 Speaker 1: on your I p O deck, then if I add 508 00:30:04,640 --> 00:30:07,960 Speaker 1: you know, centage point to your value income listing, then 509 00:30:08,320 --> 00:30:10,160 Speaker 1: a million is money well space And of course David 510 00:30:10,160 --> 00:30:12,720 Speaker 1: Bowie a pathbreaker here, folks, And you know we went 511 00:30:12,760 --> 00:30:15,200 Speaker 1: onto doing all sorts of things. And what's so important 512 00:30:15,280 --> 00:30:18,960 Speaker 1: is some of these transactions go cash on cash positive 513 00:30:19,160 --> 00:30:24,480 Speaker 1: shockingly early given hit success in that. When I saw 514 00:30:24,560 --> 00:30:27,720 Speaker 1: this deal, Alex, I said to myself, they're just gonna 515 00:30:27,800 --> 00:30:32,160 Speaker 1: spin off minority interests in Mr Dylan's songs to every 516 00:30:32,240 --> 00:30:35,160 Speaker 1: sovereign wealth fund and hedge fund out there. Do they do? 517 00:30:35,280 --> 00:30:38,200 Speaker 1: They line up at Universal and tranched this thing off 518 00:30:38,600 --> 00:30:42,200 Speaker 1: to all sorts of people to take the risk away. No. 519 00:30:42,360 --> 00:30:44,360 Speaker 1: I think what they do is say, I mean, Universal 520 00:30:44,560 --> 00:30:48,200 Speaker 1: is kind of very healthy cash position, I think, and um, 521 00:30:48,520 --> 00:30:50,720 Speaker 1: I think what they try to do is they get 522 00:30:50,760 --> 00:30:53,959 Speaker 1: their huge roster of artist everyone from you know Taylor 523 00:30:54,080 --> 00:30:59,160 Speaker 1: Swift to um, you know Coldplay to to do covers? Right? Okay? 524 00:30:59,160 --> 00:31:01,840 Speaker 1: Can I rick getting paid twice? Par Can I rip 525 00:31:01,920 --> 00:31:04,360 Speaker 1: up the script and the road? Okay? Come on, Alex, 526 00:31:04,520 --> 00:31:08,320 Speaker 1: you know we're two hipsters. Jack happening Off is killing 527 00:31:08,360 --> 00:31:11,800 Speaker 1: it this year with Taylor Swift recording a bunch of 528 00:31:11,840 --> 00:31:15,760 Speaker 1: songs sitting around a pandemic living room over the digital 529 00:31:16,200 --> 00:31:18,760 Speaker 1: Is your world of records in the industry? I mean, 530 00:31:18,920 --> 00:31:23,280 Speaker 1: is is Abbey Road or the recording studios in l A. 531 00:31:23,280 --> 00:31:26,480 Speaker 1: Are they all blowing up because of what Taylor Swift 532 00:31:26,480 --> 00:31:30,720 Speaker 1: and Jack Antonof are doing. There's always place for those 533 00:31:30,760 --> 00:31:32,920 Speaker 1: because you know, you do record stuff with orchestras and 534 00:31:33,080 --> 00:31:35,240 Speaker 1: there is something about the creativity because you're doing this 535 00:31:35,320 --> 00:31:37,640 Speaker 1: spaceis so I think, is you know, underneable and also 536 00:31:37,720 --> 00:31:40,520 Speaker 1: don't forget you know, not all recording artists are rational. 537 00:31:40,640 --> 00:31:43,360 Speaker 1: They want to be in this relate which has done 538 00:31:43,400 --> 00:31:47,320 Speaker 1: so much and you know, of course the it is 539 00:31:47,360 --> 00:31:50,160 Speaker 1: owned by Universal Music, Abbey Road Studios. It's a it's 540 00:31:50,160 --> 00:31:52,840 Speaker 1: a kind of trophy asset for them. Um. You know, 541 00:31:53,000 --> 00:31:56,880 Speaker 1: they are pretty canny on their side, and I think 542 00:31:57,040 --> 00:31:59,480 Speaker 1: quite strategic and what they is owned by Vivendi of 543 00:31:59,520 --> 00:32:03,440 Speaker 1: course and French media conglomerate. They would not be you know, 544 00:32:03,480 --> 00:32:05,160 Speaker 1: holding onto these assets that they thought they can make 545 00:32:05,160 --> 00:32:07,600 Speaker 1: money elf. Where So, Alex, we have a little bit 546 00:32:07,600 --> 00:32:10,520 Speaker 1: of a trend here. We've got Stevie Nicks. She sold 547 00:32:10,560 --> 00:32:12,840 Speaker 1: a majority of her catalog for I think a hundred 548 00:32:12,840 --> 00:32:15,840 Speaker 1: million dollars something along those lines. And I followed David 549 00:32:15,880 --> 00:32:19,560 Speaker 1: Crosby on Twitter. He's talking about doing it. What's driving 550 00:32:20,200 --> 00:32:22,560 Speaker 1: these artists and some of these you know, you know, 551 00:32:22,720 --> 00:32:28,040 Speaker 1: established artists with big catalogs from going this route. It's streaming, 552 00:32:28,120 --> 00:32:31,280 Speaker 1: you know, it's Spotify, Apple Music, Amazon Music, all those things. 553 00:32:31,920 --> 00:32:34,240 Speaker 1: They have given a new lease of life to trap 554 00:32:34,400 --> 00:32:38,400 Speaker 1: that otherwise, you know, ultimately from a from sales to 555 00:32:38,480 --> 00:32:43,280 Speaker 1: perfectives still making royalties from radio plays, but from sales perspective, 556 00:32:43,360 --> 00:32:46,360 Speaker 1: they probably thought that the money had all been made already. 557 00:32:46,400 --> 00:32:48,360 Speaker 1: You know, they sold albums twenty years ago, thirty years ago, 558 00:32:48,360 --> 00:32:50,800 Speaker 1: fourty years ago. Extreaming. He's given them a new lease 559 00:32:50,840 --> 00:32:54,280 Speaker 1: of life, is given them, as I said, dependable recurring 560 00:32:54,320 --> 00:32:58,239 Speaker 1: revenue stream And so firstly you have that factor. Then 561 00:32:58,280 --> 00:33:00,640 Speaker 1: there's also a few funds that have I'm up that 562 00:33:00,760 --> 00:33:03,000 Speaker 1: are buying these assets up. There's one in the UK 563 00:33:03,120 --> 00:33:07,240 Speaker 1: called hYP Gnosis. They own recently half of them all 564 00:33:07,240 --> 00:33:10,160 Speaker 1: I Wanted Christmas for instance, and right Carey Song and 565 00:33:10,480 --> 00:33:14,200 Speaker 1: thousands of other tunes. Um. They think that they're going 566 00:33:14,240 --> 00:33:16,360 Speaker 1: to be able to turn that into a sort of 567 00:33:16,360 --> 00:33:20,640 Speaker 1: predictable annuity for investors by by owning vast tracts of 568 00:33:20,760 --> 00:33:23,960 Speaker 1: the kind of the great global song books. I look, 569 00:33:24,240 --> 00:33:25,800 Speaker 1: it's just one more comment. You know we're going to 570 00:33:25,880 --> 00:33:29,960 Speaker 1: run out of time, is well Bob Dylan's of Fossil 571 00:33:30,000 --> 00:33:32,480 Speaker 1: as you said, he's hitting eighty years old. Leonard Cohen, 572 00:33:32,520 --> 00:33:35,760 Speaker 1: Of course we lost again the same way. Is there 573 00:33:35,760 --> 00:33:38,560 Speaker 1: going to be the publishing frenzy frenzy for the young kids? 574 00:33:38,600 --> 00:33:41,480 Speaker 1: I mean, is Lady Gaga gonna get five and are million? 575 00:33:42,960 --> 00:33:45,720 Speaker 1: I think it's unlikely because those guys they want to be, 576 00:33:45,960 --> 00:33:47,880 Speaker 1: you know, turning money over the rest of their lives. 577 00:33:47,920 --> 00:33:49,719 Speaker 1: Did you see some younger artists doing it? But not 578 00:33:49,760 --> 00:33:52,200 Speaker 1: so many? But it's still getting towards the end of 579 00:33:52,200 --> 00:33:54,920 Speaker 1: your life. You get seventies, I think seventy five years 580 00:33:54,960 --> 00:33:58,160 Speaker 1: from your death, that's when the copyright expires, and so 581 00:33:58,480 --> 00:34:01,320 Speaker 1: you want to probably sell it before you die, because 582 00:34:01,360 --> 00:34:04,280 Speaker 1: then it immediately becomes a depreciating asthlete. As long as 583 00:34:04,280 --> 00:34:06,560 Speaker 1: you're still live, you know that could last a long time, 584 00:34:06,600 --> 00:34:08,960 Speaker 1: forever going to buy it. So there's that kind of 585 00:34:08,960 --> 00:34:11,000 Speaker 1: sweet spot and when you can make a decent amount 586 00:34:11,000 --> 00:34:14,239 Speaker 1: of money or what you're in your sort of and 587 00:34:14,400 --> 00:34:17,839 Speaker 1: inheritance to make maybe a bit less. This has been 588 00:34:17,880 --> 00:34:19,960 Speaker 1: wonderful else Web, Thank you so much. Look forward to 589 00:34:19,960 --> 00:34:23,439 Speaker 1: catching up with you in London when the pandemic is over. 590 00:34:23,600 --> 00:34:27,520 Speaker 1: Mr Webb writing on the music of our times. Thanks 591 00:34:27,560 --> 00:34:31,800 Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen 592 00:34:32,040 --> 00:34:37,360 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform 593 00:34:37,480 --> 00:34:41,759 Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast. 594 00:34:41,840 --> 00:34:45,320 Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio.