WEBVTT - Surveillance: Fixed Income With Holland 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.760 Bloomberg dot Com, and of course on the Bloomberg Right 0:00:27.760 --> 0:00:30.520 now to give us perspective, Michael Holland, Holland and Company. 0:00:30.840 --> 0:00:34.479 Always the Holland tradition to join John Farrell, Nentr Falgo 0:00:34.560 --> 0:00:38.000 scare that tree from Norway after World War Two. They 0:00:38.080 --> 0:00:41.479 put it up every year. Holland is not in London 0:00:41.520 --> 0:00:45.919 with Pharaoh. He's stuck here in the United States. Michael Holland, 0:00:46.200 --> 0:00:50.440 how to corporations adapt to the reality of no travel, 0:00:50.600 --> 0:00:56.080 no globalization and the constraints of this pandemic UH travel. 0:00:56.600 --> 0:00:59.120 It's very well, is is the quick answer to the 0:00:59.560 --> 0:01:05.400 question UM. Throughout throughout the myriad of ZOOM meetings I've 0:01:05.440 --> 0:01:08.440 attended and others have attended over the past nine ten months, 0:01:08.959 --> 0:01:14.319 the words seamless has come up with with boring frequency. 0:01:14.840 --> 0:01:19.600 UH companies are adapting extremely well. And if you look 0:01:19.600 --> 0:01:22.920 at look at UH the the C suite, I think 0:01:23.440 --> 0:01:25.720 there are a lot of quiet smiles there with respect 0:01:25.760 --> 0:01:28.679 to that. The answer to that question, well, forgive me 0:01:28.720 --> 0:01:30.440 for cherry picking the data point, but there was a 0:01:30.520 --> 0:01:33.759 huge smile and scratch into the head and confusion over 0:01:33.840 --> 0:01:35.759 adored ash and airp and be in the last couple 0:01:35.760 --> 0:01:38.880 of days, Michael, you've seen it all. You'll take place 0:01:39.120 --> 0:01:41.920 on the I P I S this week. Human nature 0:01:42.000 --> 0:01:46.000 repeats itself, Jonathan. Uh, century after century, we've had these 0:01:46.120 --> 0:01:51.160 uh what you can broadly called blind pools, uh, the spects. 0:01:51.200 --> 0:01:54.560 So we've now got eighty billion dollars way huge record 0:01:55.160 --> 0:01:58.240 in spects, which are which are little slips of paper 0:01:58.320 --> 0:02:01.160 coming out. People get to do all kinds of promote 0:02:01.200 --> 0:02:04.000 in the front end, as they've done for centuries, make 0:02:04.360 --> 0:02:07.200 tons of money, uh, dribble it out to the public, 0:02:07.240 --> 0:02:10.640 and screw the public. Michael Hall and I frame this 0:02:10.760 --> 0:02:13.840 earlier in the week and as actually a Michael Holland question, 0:02:14.360 --> 0:02:17.600 which is sp X up double digit this year, now, 0:02:18.360 --> 0:02:21.959 sp X up over the decade, double digit sp X 0:02:22.000 --> 0:02:24.679 back to the early nineteen fifties when you were an intern, 0:02:25.000 --> 0:02:28.480 double digit. Why don't we keep talking about single digit 0:02:28.520 --> 0:02:35.880 stock returns? Because institutional uh mindsets have a way of 0:02:36.120 --> 0:02:39.720 trying to protect their jobs, not looking silly saying things 0:02:39.720 --> 0:02:43.680 that scare their bosses. Uh, there's no there's no way 0:02:43.720 --> 0:02:47.600 to uh look at the craziness of the capital markets 0:02:47.639 --> 0:02:52.079 today where we have of the of the European market 0:02:52.120 --> 0:02:55.960 owned bond market owned by the central banks. So your 0:02:56.040 --> 0:02:59.560 risk free rates of return by which you you judge 0:03:00.480 --> 0:03:03.440 value is thrown out the window. You you guys were 0:03:03.480 --> 0:03:07.920 talking earlier about throwing away the textbooks. Uh, you simply 0:03:07.960 --> 0:03:10.280 have to say, here's what we're dealt in terms of 0:03:10.320 --> 0:03:14.440 cards today, and there's nothing other than equities that one 0:03:14.480 --> 0:03:16.960 can look at if you have if you're a serious investor, 0:03:17.040 --> 0:03:19.959 meaning your own four one K I mean, Michael, H 0:03:20.120 --> 0:03:22.680 and John. This is so so important about the idea 0:03:22.680 --> 0:03:25.960 of talking your book and recalibrating. Michael, we have to 0:03:26.040 --> 0:03:31.280 recalibrate to a measured ownership of Tesla. Everybody's under owned 0:03:31.280 --> 0:03:36.120 on Apple, etcetera, etcetera. What is the institutional adjustment a 0:03:36.320 --> 0:03:40.200 year end that you would expect to see? Oh, I 0:03:40.600 --> 0:03:43.960 think that that a lot of people who are heads 0:03:43.960 --> 0:03:48.400 of investment committees and institutional investment programs are are going 0:03:48.440 --> 0:03:51.480 to look to to try to protect their hights because 0:03:52.120 --> 0:03:56.280 the majority will have underperformed yet once again continuing triumph 0:03:56.320 --> 0:03:59.600 of hope over experience, as they say, and when you 0:04:00.000 --> 0:04:03.680 and you have so, you do a little bit more 0:04:03.920 --> 0:04:06.560 on the edges, which means that you probably get a 0:04:06.640 --> 0:04:10.960 little bit more buying in terms of allocation, because bonds 0:04:11.040 --> 0:04:14.920 make no sense in this Lewis Carroll Alice in Wonderland world. 0:04:15.240 --> 0:04:18.279 When you're talking about the craziness of the the negative 0:04:18.360 --> 0:04:20.800 rates abroad and where where we may be going here 0:04:20.839 --> 0:04:24.080 with maybe going in the other direction and inflation, how 0:04:24.080 --> 0:04:27.320 how can you how can you justify buying a great 0:04:27.360 --> 0:04:31.320 deal of fixed income? You can't. Well, let's talk about 0:04:31.320 --> 0:04:33.280 it a little bit more. I think this is so important, Michael. 0:04:33.320 --> 0:04:36.640 You mentioned something about valuations. Valuations are unning important to 0:04:36.640 --> 0:04:40.479 analyze if you benchmark them to something in isolation. What 0:04:40.480 --> 0:04:43.040 does it mean going back to the late nineties early 0:04:43.080 --> 0:04:45.200 two thousands. Let's look at the US two year the 0:04:45.200 --> 0:04:49.040 two year yield and early two thousand was almost seven percent. Michael. 0:04:49.600 --> 0:04:51.560 Now many people are looking at the price action of 0:04:51.560 --> 0:04:53.200 the last couple of days, the I p o s 0:04:53.240 --> 0:04:55.240 and benchmarking it back to the crazy times of the 0:04:55.320 --> 0:04:58.120 late nineties and the early two thousands. Let's talk about 0:04:58.160 --> 0:05:01.280 where fixed income is right now compared then, Michael, this 0:05:01.360 --> 0:05:06.880 is another world, isn't it. It is truly and well described. Jonathan, 0:05:06.920 --> 0:05:09.840 It's it's another world. And Lewis Carroll and Alice in 0:05:09.839 --> 0:05:13.880 Wonderland keep keep popping through through uh my mind when 0:05:13.920 --> 0:05:18.039 I'm thinking about these kinds of crazy upside down numbers. Uh, 0:05:18.240 --> 0:05:20.960 you simply have if if we are going to get 0:05:20.960 --> 0:05:24.920 as I've heard on Bloomberg over the last few days 0:05:25.160 --> 0:05:28.159 from some people, two percent inflation is going to be 0:05:28.160 --> 0:05:30.480 in the rear view mirror. Maybe it's three percent. And 0:05:30.520 --> 0:05:33.960 then and then you have, uh, the thirty thirty year 0:05:34.040 --> 0:05:37.280 treasury at under two percent, you have a chance to 0:05:37.360 --> 0:05:41.839 lose an incredible amount of money in fixed income when 0:05:42.160 --> 0:05:45.400 the duration spicy go against you. It's it's really quite incredible. 0:05:45.800 --> 0:05:49.560 Michael Holland, we lost a great one. Robert Stovol tell 0:05:49.640 --> 0:05:54.760 Us about Bob Stovoll Uh. He had this stentorian voice, 0:05:55.120 --> 0:05:58.560 wonderful voice. His son Sam had Lucia on your show 0:05:58.880 --> 0:06:01.720 periodically had as some of it. But he was one 0:06:01.720 --> 0:06:04.760 of the kind. He was one of the great technical. 0:06:05.120 --> 0:06:07.880 If I had at Great Wall Street lore, he would 0:06:07.880 --> 0:06:11.240 be laughing at as I do at the the lack 0:06:11.279 --> 0:06:14.200 of guidance from the markets as to how you're supposed 0:06:14.200 --> 0:06:17.440 to comport yourself in terms of saving people from losing 0:06:17.480 --> 0:06:20.720 money in the markets. And today I think, uh, I 0:06:20.760 --> 0:06:23.200 think we we don't have enough of those kinds of 0:06:23.200 --> 0:06:27.240 people have some some kind of uh detachment from the 0:06:27.279 --> 0:06:30.000 craziness around us. I mean, Michael Holland you look at 0:06:30.000 --> 0:06:32.320 Martin's wage and what he did and telling us to 0:06:32.400 --> 0:06:35.960 follow the fed to me. Bob stove All literally taught 0:06:36.040 --> 0:06:39.400 us how to speak about the markets with that voice 0:06:39.440 --> 0:06:42.480 on the floor of the exchange. And you know there 0:06:42.480 --> 0:06:44.800 were times on Wall Street Week where you guys just 0:06:44.960 --> 0:06:48.120 lit it up over the courage to be in the market. 0:06:48.440 --> 0:06:52.279 How do you stay in the market right now? Well, 0:06:52.320 --> 0:06:58.120 because there there's uh a serious business which is everyone's 0:06:58.200 --> 0:07:02.160 own personal accounts and and how people or its foundations 0:07:02.240 --> 0:07:05.920 or charities who rely on. So you you first do 0:07:06.000 --> 0:07:08.680 no harm. And when first you know harm means you 0:07:09.160 --> 0:07:12.200 you avoid things like we were talking about, for uh, 0:07:12.480 --> 0:07:16.760 door Dash and and Tesla and and Airbnb, and the 0:07:16.800 --> 0:07:20.560 craziness of the markets, the SPACs. You identify those for 0:07:20.640 --> 0:07:23.600 people and then you say, go to real businesses, their 0:07:23.680 --> 0:07:27.720 businesses that actually are going to pay dividends as a dividends. 0:07:27.720 --> 0:07:32.200 Can you imagine that JP Morgan yielding nearly three when 0:07:32.280 --> 0:07:34.920 when the ten year treasury is yielding two thirds of 0:07:35.000 --> 0:07:39.400 that or less. And I think that you simply have 0:07:39.480 --> 0:07:42.840 to use common sense and and and stepped in and 0:07:42.880 --> 0:07:46.000 say we're not going to participate in this this craziness. 0:07:46.320 --> 0:07:49.160 And when Johnathan was asking earlier about people at the 0:07:49.200 --> 0:07:50.920 end of the year, what what what do they do? 0:07:51.360 --> 0:07:54.600 I think that avoiding the craziness so you don't lose 0:07:54.600 --> 0:07:56.559 people with a ton of money in the coming couple 0:07:56.560 --> 0:07:58.680 of years, which which you may well do if you 0:07:58.720 --> 0:08:01.600 step in the wrong direction. We'll try. And Michael, you'll 0:08:01.640 --> 0:08:03.840 want to the kind And it's great to catch out Visa. 0:08:04.000 --> 0:08:06.200 And it's great to hear your sounding so well. Michael 0:08:06.200 --> 0:08:14.920 Holland of hollyandand Company. Thank you. We need to get 0:08:14.920 --> 0:08:17.560 back to first principles and there's no one better on that. 0:08:17.920 --> 0:08:21.720 And Francis Donald and Dangerous Excel spreadsheets at Manual Life, 0:08:21.880 --> 0:08:25.280 their global chief economists and a head of keeping up 0:08:25.280 --> 0:08:29.240 with data strategy. Francis give us the update on the 0:08:29.280 --> 0:08:34.160 American economy this Q four Q one and into the 0:08:34.200 --> 0:08:38.920 fourth of July next year. It's not great. We are 0:08:39.000 --> 0:08:42.880 heading into a very soft patch, something that looks like 0:08:42.920 --> 0:08:46.160 a double dip on the services component of the economy. 0:08:46.559 --> 0:08:49.600 I agree with Bloomberg Economics. There is a better than 0:08:49.720 --> 0:08:52.440 like the chance that we see negative print on the 0:08:52.480 --> 0:08:55.400 December payroll. And what we're trying to figure out here 0:08:55.480 --> 0:08:58.680 is how do markets trade that It's very possible the 0:08:58.679 --> 0:09:01.199 equity market looks right through. Maybe they have a little 0:09:01.240 --> 0:09:03.680 bit of a step back here as they focus on 0:09:03.720 --> 0:09:06.400 the longer term. But this is not a rates market 0:09:06.440 --> 0:09:08.640 that I think is going to shrug off a lot 0:09:08.679 --> 0:09:11.600 of the challenges that we see. And most importantly, this 0:09:11.679 --> 0:09:14.760 is not a federal reserve or any global central bank 0:09:14.800 --> 0:09:16.960 that is going to shrug off the damage that's going 0:09:17.000 --> 0:09:19.120 to be created in the economy in the next two 0:09:19.120 --> 0:09:21.920 to three months. This is not a period to look through. 0:09:22.280 --> 0:09:26.120 This is a period that carries higher potential for credit events, 0:09:26.160 --> 0:09:28.640 for long term scarring, for fuller drops in the labor 0:09:28.679 --> 0:09:32.439 force participation rate. Forget about Fabosi and all the fancy 0:09:32.480 --> 0:09:35.640 mathematics you know so well. Francis Donald, talk about the 0:09:35.720 --> 0:09:40.000 emotion in the behavior. If we get yields to break down, 0:09:40.040 --> 0:09:43.280 if the tenure yield actually comes in back again to 0:09:43.360 --> 0:09:46.680 new low yields, maybe even talk of a negative tenure yield. 0:09:46.720 --> 0:09:49.679 Who knows. I know where HSBC is on this. What's 0:09:49.720 --> 0:09:55.600 the societal impact of ever lower in new yields. I'm 0:09:55.600 --> 0:09:58.520 more concerned about the societal impact if we were to 0:09:58.520 --> 0:10:02.120 see a breakaway higher. This is everything I hear every day. Oh, 0:10:02.240 --> 0:10:05.040 rates are moving higher. There's too much inflation in the system. 0:10:05.360 --> 0:10:09.439 We should be more afraid of stagflation and painful inflation 0:10:09.520 --> 0:10:12.920 coming through and the FED losing control of this field 0:10:13.000 --> 0:10:16.120 curve than we should about low rates, which are necessary 0:10:16.280 --> 0:10:18.840 and more linked to fundamentals right now than a break 0:10:18.960 --> 0:10:21.400 right in the tenure. And John, this is so important 0:10:21.440 --> 0:10:24.640 is Francis always lays out so well, how wildly asymmetric 0:10:24.679 --> 0:10:27.640 the behavior is right now, John Farrell, everybody's in a 0:10:27.720 --> 0:10:31.240 panic about higher yield and yet we observe on the 0:10:31.280 --> 0:10:35.880 Bloomberg new tests of lower rates, which makes the question, 0:10:36.160 --> 0:10:40.800 Francis weather expectation for higher inflation actually comes from giving 0:10:40.880 --> 0:10:43.319 your analysis of the economy and how it's going to 0:10:43.440 --> 0:10:46.880 materialize in the next twolf to white seen months. Well, 0:10:46.920 --> 0:10:50.880 in some ways higher inflation is justified and certainly heading 0:10:50.880 --> 0:10:54.080 into April one, this is so important. We are going 0:10:54.120 --> 0:10:56.920 to hit inflation that perhaps comes as close as three 0:10:57.640 --> 0:11:01.199 with upside. A lot of that is app and base effects. 0:11:01.240 --> 0:11:04.559 It's the disruption in the goods based economy. It's at 0:11:04.600 --> 0:11:08.320 week usc but that is not permanently higher inflation. And 0:11:08.360 --> 0:11:11.000 this is what we're missing right now. If inflation is 0:11:11.040 --> 0:11:13.560 not permanently three percent, that bond market is not going 0:11:13.600 --> 0:11:16.439 to price in three percent inflation. We then come back 0:11:16.480 --> 0:11:19.320 to a period after that where inflation probably is around 0:11:19.360 --> 0:11:23.200 that boring old two percent. But most importantly, we are 0:11:23.200 --> 0:11:25.720 going to have areas of the economy that are experiencing 0:11:25.760 --> 0:11:29.240 painful high inflation good sector, and we're going to have 0:11:29.280 --> 0:11:32.440 other areas that are in painful deflation. This is not 0:11:32.559 --> 0:11:36.240 your father's inflation. This is huge asymmetry within price action, 0:11:36.480 --> 0:11:38.360 and we have to be really mindful of that. This 0:11:38.440 --> 0:11:41.600 is not boring two percent everything a two percent. This 0:11:41.679 --> 0:11:46.000 is huge, huge dichotomies, and what's happening in the price space. Well, 0:11:46.000 --> 0:11:48.840 this clearly isn't your grandfather's bond market either. So Francis, 0:11:48.960 --> 0:11:52.160 let's talk about that. Given everything you've just said, do 0:11:52.200 --> 0:11:55.040 we just need to recognize now. The position that central 0:11:55.040 --> 0:11:57.920 banks in are in right now will be the position 0:11:58.000 --> 0:12:01.079 central banks will be in for the foreseeable future. And 0:12:01.080 --> 0:12:03.560 I'm not just talking about the twenty two the Christine 0:12:03.600 --> 0:12:06.000 the god UCP president is talking about yesterday. I'm thinking 0:12:07.400 --> 0:12:12.199 five six seven absolutely. I mean, my my call is 0:12:12.240 --> 0:12:15.760 at interstrates have to stay extraordinarily low. And even if 0:12:15.800 --> 0:12:19.000 we do see a type of normalization, we're talking about 0:12:19.040 --> 0:12:22.319 fifty basis points, maybe a hundred basis points, we are 0:12:22.360 --> 0:12:25.640 not going back to even pre COVID levels of interest rates, 0:12:25.679 --> 0:12:28.640 even as inflation moves higher. Because even though I spend 0:12:28.640 --> 0:12:30.920 the bulk of my time looking at the feds primary 0:12:31.040 --> 0:12:34.439 mandate inflation and employment, listen to what the FED is 0:12:34.480 --> 0:12:38.480 talking about on the sidelines all global central banks, housing affordability. 0:12:38.559 --> 0:12:41.240 From the New Zealand Central Bank, we're talking about things 0:12:41.320 --> 0:12:44.120 like climate change. At the Bank of Canada, we're talking 0:12:44.120 --> 0:12:46.839 about Powell talking more and more, as he should, about 0:12:46.920 --> 0:12:49.680 racial and income in equalities. These are central banks that 0:12:49.679 --> 0:12:53.040 are shifting their perspective to a broader mandate than just 0:12:53.200 --> 0:12:56.000 inflation two percent, and they're going to be very happy 0:12:56.040 --> 0:12:59.680 to allow short term overshoots and keep this uppontly running hot. 0:13:00.000 --> 0:13:01.960 So Francis, let's go over to Secretary of Yellow and 0:13:02.000 --> 0:13:05.520 in the future of our stimulus in America, take all 0:13:05.559 --> 0:13:09.400 that you said and frame it into the amount of 0:13:09.520 --> 0:13:13.000 stimulus through this pandemic. Are you looking at it is 0:13:13.040 --> 0:13:16.920 five billion? Eight billion? Is okay? Are you looking at 0:13:16.920 --> 0:13:20.439 there will be tranches of trillion dollars of stimulus or 0:13:20.559 --> 0:13:24.400 like liberal economies, are you suggesting four or five or 0:13:24.520 --> 0:13:29.559 six trillion dollars of stimulus will be required. I am 0:13:29.640 --> 0:13:34.480 expecting persistent, continuous stimulus that does not have an end 0:13:34.559 --> 0:13:37.600 date or an end number. We are seeing a shift 0:13:37.640 --> 0:13:41.240 towards demanding a larger size of government. We're demanding that 0:13:41.280 --> 0:13:44.439 our government take over the reins of central banking to 0:13:44.600 --> 0:13:48.360 address very large inequalities, to address the need to ship 0:13:48.400 --> 0:13:52.000 towards a greener economy. We are moving towards a government 0:13:52.000 --> 0:13:54.560 that will become a larger segment of the economy. And 0:13:54.600 --> 0:13:57.880 for the market, it's incredibly important because you have monetary 0:13:57.920 --> 0:14:00.600 policy that says I will I will on that front 0:14:00.720 --> 0:14:03.839 end for a long time, and government policy that is 0:14:03.880 --> 0:14:07.200 probably primed for massive issuance. We're looking at a pretty 0:14:07.200 --> 0:14:10.240 sizable steepener here. And we look for post COVID, and 0:14:10.280 --> 0:14:13.600 that shift from monetary policy is the main tinker of 0:14:13.600 --> 0:14:18.000 our economy to government is the really biggest, largest implication 0:14:18.080 --> 0:14:21.200 of what COVID did. Then bring it over to the 0:14:21.280 --> 0:14:24.320 chapter I don't know, chapter twenty three of your entry textbook, 0:14:24.360 --> 0:14:27.520 Francis Donald, years ago in economics. I believe it was 0:14:27.600 --> 0:14:32.080 on the equity markets. Fold again. What you said over now, 0:14:32.120 --> 0:14:35.880 how corporations will adapt to this into the ultimate word, 0:14:35.960 --> 0:14:40.960 the profitability of our business environment. Well, I suspect we're 0:14:40.960 --> 0:14:43.480 gonna be rewriting a lot of those textbooks. But let 0:14:43.480 --> 0:14:45.240 me let me put it from you. From the investment 0:14:45.280 --> 0:14:48.440 side of the picture. You have extraordinarily low rates for 0:14:48.520 --> 0:14:52.000 a very long time, very cheap money. You're going to 0:14:52.000 --> 0:14:55.600 see larger and larger allocations towards equities. That doesn't mean 0:14:55.640 --> 0:14:58.280 it's a straight line higher right now. For example, sentiment 0:14:58.360 --> 0:15:01.600 extremely extended, pre totally prime. For a bit of a pullback, 0:15:01.640 --> 0:15:04.160 that's gonna happen. But more and more money into that 0:15:04.240 --> 0:15:06.640 equity market is what I suspect over that five year. 0:15:06.880 --> 0:15:09.080 That's why even though I sound like that i'm barrish, 0:15:09.120 --> 0:15:11.640 I sound like I'm concerned. It's really hard not to 0:15:11.640 --> 0:15:13.920 have a bias towards risk assets over that five to 0:15:14.040 --> 0:15:17.760 ten horizon. There's just really no other choice. Well, that's 0:15:17.800 --> 0:15:21.440 why it's been torture on the psychological front for an investor, Francis, 0:15:21.600 --> 0:15:25.520 and we've repeatedly said this on this program. Your feelings 0:15:25.560 --> 0:15:28.080 about the world, about the world around you in the 0:15:28.120 --> 0:15:31.080 here and now, you have to park them and put 0:15:31.120 --> 0:15:34.040 them to one side. And I think Francis still people 0:15:34.080 --> 0:15:38.280 find that really, really difficult. They're looking at their moral 0:15:38.320 --> 0:15:40.640 compass and they seem to think that markets should align 0:15:40.680 --> 0:15:43.760 with it. And Francis, I think still now, even after 0:15:43.800 --> 0:15:47.040 the lesson the conditioning we've had through, I think it's 0:15:47.040 --> 0:15:49.200 still difficult for many people. Can you walk me through 0:15:49.600 --> 0:15:52.520 the conversations you have with clients around those issues, Francis 0:15:52.520 --> 0:15:56.960 and the lessons of twenty into twenty one and beyond. Well, John, 0:15:56.960 --> 0:15:59.760 I actually have two titles. I'm a chief economist and 0:15:59.800 --> 0:16:01.960 I'm head of Strategy. And in the past that was 0:16:02.080 --> 0:16:04.560 the same job. If you thought inflation was going higher, 0:16:04.600 --> 0:16:06.680 you thought rates were going higher, if you were bullish 0:16:06.680 --> 0:16:09.040 on the economy, we were bullish on equities. What's been 0:16:09.080 --> 0:16:11.480 so challenging for people who have rules like mine. The 0:16:11.520 --> 0:16:13.600 past year is that we haven't just had to set 0:16:13.640 --> 0:16:17.640 aside our moral compass, where our heart is watching lines 0:16:17.680 --> 0:16:20.200 to food banks that go around the block three times 0:16:20.200 --> 0:16:22.600 and say that's not the trade. We've also had to 0:16:22.640 --> 0:16:26.320 set aside fundamentals and our economics analysis when we say 0:16:26.320 --> 0:16:29.480 things like a negative print on December non farm pay 0:16:29.560 --> 0:16:32.600 rolls that should be so bearished, and yet we have 0:16:32.680 --> 0:16:35.200 to think, you know what that means, means lower interest 0:16:35.280 --> 0:16:38.080 rates and large asset managers, pension funds have to shift 0:16:38.120 --> 0:16:41.120 more into equities. Those are the connections that we're coming to. 0:16:41.320 --> 0:16:44.760 So this is no longer a situation where fundamentals are 0:16:44.800 --> 0:16:48.320 the primary driver. Does that come back, maybe, but we 0:16:48.440 --> 0:16:50.840 really have to break out those correlations between a lot 0:16:50.920 --> 0:16:54.160 of the economic factors and the market. That's very uncomfortable, 0:16:54.200 --> 0:16:56.120 and like I said, we're gonna probably have to rewrite 0:16:56.120 --> 0:16:59.200 some at least chapters in those textbooks. I think we've 0:16:59.200 --> 0:17:02.040 gotta get rid of the Francis Grant to catch up. 0:17:02.160 --> 0:17:05.120 As always, we appreciate your time, Francis Donald of Mony 0:17:05.160 --> 0:17:12.280 Life Investment Management. One of the things that John Farren 0:17:12.280 --> 0:17:15.080 and I agreed on long Agoing Far Away think March 0:17:15.640 --> 0:17:18.480 was who would speak to experts That includes Sam Facility 0:17:18.480 --> 0:17:22.520 of Bloomberg Intelligence expert on pharmacology, the good work of 0:17:22.560 --> 0:17:26.640 Imperial College, Washington State, what University of Washington I should 0:17:26.680 --> 0:17:29.800 say in their microbiology. And then there's the math of 0:17:29.840 --> 0:17:33.160 it all. And right now the math really really matters. 0:17:33.680 --> 0:17:37.960 She's out of the acclaimed Kansas math program and biostatistics 0:17:37.960 --> 0:17:42.160 at Michigan. Leslie McClure joins us now from Drexel, truly 0:17:42.440 --> 0:17:46.360 expert on the mathliness of all of us. Over the weekend, 0:17:46.400 --> 0:17:49.920 you're gonna get nailed, Dr McClure on this. What's the 0:17:50.000 --> 0:17:54.040 key mathematics of the vaccine that our audience needs to know? 0:17:55.240 --> 0:17:58.960 Oh that's a great question. So mathematically, what's important about 0:17:58.960 --> 0:18:01.479 the vaccine right now is the number of people and 0:18:01.520 --> 0:18:05.199 the number of doses of the vaccine. Okay, that's the 0:18:05.280 --> 0:18:07.520 size of the vaccine, and we're going to impute it 0:18:07.600 --> 0:18:10.879 onto society. What is the effect of what it seems 0:18:10.920 --> 0:18:14.240 to be maybe a statistically large body that says I'm 0:18:14.280 --> 0:18:18.040 not going to take the vaccine? What is there impact? 0:18:18.440 --> 0:18:22.480 And those brave enough like Pharaoh to get in line, Well, 0:18:22.520 --> 0:18:24.840 I'll tell you I'm in line. I'm and I'm putting 0:18:24.840 --> 0:18:27.480 my parents in line before me. I think it's really 0:18:27.480 --> 0:18:30.520 important we all get in line. I think that as 0:18:30.520 --> 0:18:33.159 a public health professional, it's it's contingent on us to 0:18:33.520 --> 0:18:36.360 get the messaging out to tell people how important it is, 0:18:37.000 --> 0:18:40.879 and and to really educate the public about the vaccine 0:18:40.920 --> 0:18:46.399 and the benefits of it it's and how we harvest 0:18:46.400 --> 0:18:49.719 those benefits going forward. The question that we've asked so 0:18:49.760 --> 0:18:54.040 many times now is what size, what number of people, 0:18:54.320 --> 0:18:56.600 what percentage to the population do we need to reach 0:18:56.640 --> 0:18:59.720 before we can scale that restrictions. I've asked this question 0:18:59.760 --> 0:19:01.240 to pay it to me and I get different answers, 0:19:01.240 --> 0:19:03.440 And I wonder what yours would be, Professor. Do we 0:19:03.480 --> 0:19:06.080 need to just vaccinate the most at risk in society 0:19:06.119 --> 0:19:09.240 before we remove all of the restrictions around social distancing, 0:19:09.640 --> 0:19:12.920 et cetera. Or do you need to achieve herd immunity 0:19:13.240 --> 0:19:16.320 to go forth and do that. That's a really difficult 0:19:16.400 --> 0:19:19.920 question because the assumptions you make to answer that differ 0:19:20.040 --> 0:19:22.800 depending on the day of the week. So, but my 0:19:22.800 --> 0:19:25.240 my sort of stock answer is we can't remove those 0:19:25.280 --> 0:19:28.200 restrictions and we have to continue to be cautious even 0:19:28.280 --> 0:19:31.640 after we vaccinate a large proportion of the population as 0:19:31.680 --> 0:19:34.880 we learn more and more about the long term safety 0:19:34.880 --> 0:19:38.760 and efficacy of the vaccine. Just in terms of who 0:19:38.840 --> 0:19:41.480 needs to be vaccinated, we know the most at risk 0:19:41.520 --> 0:19:44.720 in society. Are we aware of the people who have 0:19:44.760 --> 0:19:48.440 already had COVID nineteen whether they need to be vaccinated. 0:19:49.680 --> 0:19:53.680 So my understanding is that the the the advice about 0:19:53.720 --> 0:19:58.040 that is mixed. That there's some saying that that that 0:19:58.119 --> 0:20:00.919 those who have already had COVID nineteen perhaps don't need 0:20:00.960 --> 0:20:04.040 to be vaccinated. But the recommendations I believe are that 0:20:04.080 --> 0:20:06.520 they should be vaccinated and that it will it will 0:20:06.520 --> 0:20:10.920 infer additional protection on them. Right, Leslie. Where we want 0:20:10.960 --> 0:20:13.120 to get here, and you know this cold coming out 0:20:13.119 --> 0:20:17.879 of Michigan's prestigious program is where Thomas Francis was in 0:20:18.040 --> 0:20:22.080 nineteen fifty five. He's the guy that stood up and 0:20:22.119 --> 0:20:25.720 said polio will work. Take the vaccine. Where we got 0:20:27.280 --> 0:20:31.280 on the polio vaccination program. How long is it going 0:20:31.320 --> 0:20:33.800 to get us to take to get to April of 0:20:33.920 --> 0:20:40.879 nineteen fifty Well, we need to build a time machine, 0:20:40.960 --> 0:20:42.480 right and be able to go back in time to 0:20:42.560 --> 0:20:46.000 a time when people trusted science more, and my hope 0:20:46.040 --> 0:20:47.960 is that we can get there. I don't know how 0:20:47.960 --> 0:20:49.840 long it will take. I frankly, I don't know how 0:20:49.840 --> 0:20:52.320 long it will be until we have the capacity to 0:20:52.520 --> 0:20:56.760 vaccinate that larger proportion of the population. So, again, going 0:20:56.760 --> 0:20:58.879 back to the numbers game, we need to know, we 0:20:58.920 --> 0:21:02.439 need more information about the timeline for wide distribution of 0:21:02.480 --> 0:21:05.280 the vaccine. My hope is that by the time we 0:21:05.359 --> 0:21:08.040 are in wide distribution, that the public will be more 0:21:08.080 --> 0:21:10.760 trusting and that more people will be willing to take 0:21:10.800 --> 0:21:12.640 the vaccine. Because You're right, we do need to get 0:21:12.680 --> 0:21:14.639 back there. I mean, we've got to get back to 0:21:14.760 --> 0:21:17.080 But when are we comfortable again? Just in your head, 0:21:17.119 --> 0:21:20.240 and I'm asking this as a complete amateur, When does 0:21:20.359 --> 0:21:24.760 Dr McClure think we will be comfortable again in society 0:21:24.800 --> 0:21:27.480 at the end of this pandemic, when the Kansas City 0:21:27.560 --> 0:21:30.600 chiefs can go out on the field comfortable that nobody's 0:21:30.640 --> 0:21:35.399 going to get the virus? When is it? So? My 0:21:35.520 --> 0:21:38.520 personal opinion is that it will be at least another 0:21:38.680 --> 0:21:43.240 year before I feel that comfort. I hope I'm wrong. 0:21:43.320 --> 0:21:46.919 I hope I'm wrong. I hope that the Super Bowl 0:21:46.960 --> 0:21:51.360 in February with no issues at all. But I don't 0:21:51.359 --> 0:21:54.639 think we're so lucky to catch up with you today. 0:21:54.680 --> 0:21:57.320 Please come back. Even if that wasn't depressed again to 0:21:57.400 --> 0:22:05.240 this conversation, Professor Leslie mclaud that after actual university John 0:22:05.280 --> 0:22:09.400 there is s to thirteen that is a fancy room 0:22:09.440 --> 0:22:12.720 at the Capitol. It's a reception room, big and fancy 0:22:12.800 --> 0:22:16.119 things happened there. Edward Mills has spent a lot of 0:22:16.160 --> 0:22:19.439 time and s to thirteen with Raymond James in a 0:22:19.480 --> 0:22:24.560 wonderful Washington policy analyst with true experience on the white 0:22:24.600 --> 0:22:28.080 marble of Capitol Hills at Mills, what's going on right 0:22:28.119 --> 0:22:32.080 now in s to thirteen and in those hallways around it? 0:22:32.400 --> 0:22:36.040 Forget about the media bladder. What's the back story of 0:22:36.080 --> 0:22:42.000 negotiations on Capitol Hill? Well, I think politics continue to 0:22:42.040 --> 0:22:44.920 get in the way tom of what we saw before 0:22:44.960 --> 0:22:48.040 the election. I think, um, everyone that I talked to 0:22:48.280 --> 0:22:51.320 was saying that they were not sure if Nancy Pelosi 0:22:51.560 --> 0:22:54.160 wanted to get a deal. UH certainly did not want 0:22:54.240 --> 0:22:57.640 to give President Trump a victory before the election. Now 0:22:57.680 --> 0:23:01.240 that the election um is behind us, Um, we still 0:23:01.240 --> 0:23:04.840 have two races in Georgia and most of the conversations 0:23:04.880 --> 0:23:07.480