Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily
Speaker 1: we bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Right
Speaker 1: now to give us perspective, Michael Holland, Holland and Company.
Speaker 1: Always the Holland tradition to join John Farrell, Nentr Falgo
Speaker 1: scare that tree from Norway after World War Two. They
Speaker 1: put it up every year. Holland is not in London
Speaker 1: with Pharaoh. He's stuck here in the United States. Michael Holland,
Speaker 1: how to corporations adapt to the reality of no travel,
Speaker 1: no globalization and the constraints of this pandemic UH travel.
Speaker 1: It's very well, is is the quick answer to the
Speaker 1: question UM. Throughout throughout the myriad of ZOOM meetings I've
Speaker 1: attended and others have attended over the past nine ten months,
Speaker 1: the words seamless has come up with with boring frequency.
Speaker 1: UH companies are adapting extremely well. And if you look
Speaker 1: at look at UH the the C suite, I think
Speaker 1: there are a lot of quiet smiles there with respect
Speaker 1: to that. The answer to that question, well, forgive me
Speaker 1: for cherry picking the data point, but there was a
Speaker 1: huge smile and scratch into the head and confusion over
Speaker 1: adored ash and airp and be in the last couple
Speaker 1: of days, Michael, you've seen it all. You'll take place
Speaker 1: on the I P I S this week. Human nature
Speaker 1: repeats itself, Jonathan. Uh, century after century, we've had these
Speaker 1: uh what you can broadly called blind pools, uh, the spects.
Speaker 1: So we've now got eighty billion dollars way huge record
Speaker 1: in spects, which are which are little slips of paper
Speaker 1: coming out. People get to do all kinds of promote
Speaker 1: in the front end, as they've done for centuries, make
Speaker 1: tons of money, uh, dribble it out to the public,
Speaker 1: and screw the public. Michael Hall and I frame this
Speaker 1: earlier in the week and as actually a Michael Holland question,
Speaker 1: which is sp X up double digit this year, now,
Speaker 1: sp X up over the decade, double digit sp X
Speaker 1: back to the early nineteen fifties when you were an intern,
Speaker 1: double digit. Why don't we keep talking about single digit
Speaker 1: stock returns? Because institutional uh mindsets have a way of
Speaker 1: trying to protect their jobs, not looking silly saying things
Speaker 1: that scare their bosses. Uh, there's no there's no way
Speaker 1: to uh look at the craziness of the capital markets
Speaker 1: today where we have of the of the European market
Speaker 1: owned bond market owned by the central banks. So your
Speaker 1: risk free rates of return by which you you judge
Speaker 1: value is thrown out the window. You you guys were
Speaker 1: talking earlier about throwing away the textbooks. Uh, you simply
Speaker 1: have to say, here's what we're dealt in terms of
Speaker 1: cards today, and there's nothing other than equities that one
Speaker 1: can look at if you have if you're a serious investor,
Speaker 1: meaning your own four one K I mean, Michael, H
Speaker 1: and John. This is so so important about the idea
Speaker 1: of talking your book and recalibrating. Michael, we have to
Speaker 1: recalibrate to a measured ownership of Tesla. Everybody's under owned
Speaker 1: on Apple, etcetera, etcetera. What is the institutional adjustment a
Speaker 1: year end that you would expect to see? Oh, I
Speaker 1: think that that a lot of people who are heads
Speaker 1: of investment committees and institutional investment programs are are going
Speaker 1: to look to to try to protect their hights because
Speaker 1: the majority will have underperformed yet once again continuing triumph
Speaker 1: of hope over experience, as they say, and when you
Speaker 1: and you have so, you do a little bit more
Speaker 1: on the edges, which means that you probably get a
Speaker 1: little bit more buying in terms of allocation, because bonds
Speaker 1: make no sense in this Lewis Carroll Alice in Wonderland world.
Speaker 1: When you're talking about the craziness of the the negative
Speaker 1: rates abroad and where where we may be going here
Speaker 1: with maybe going in the other direction and inflation, how
Speaker 1: how can you how can you justify buying a great
Speaker 1: deal of fixed income? You can't. Well, let's talk about
Speaker 1: it a little bit more. I think this is so important, Michael.
Speaker 1: You mentioned something about valuations. Valuations are unning important to
Speaker 1: analyze if you benchmark them to something in isolation. What
Speaker 1: does it mean going back to the late nineties early
Speaker 1: two thousands. Let's look at the US two year the
Speaker 1: two year yield and early two thousand was almost seven percent. Michael.
Speaker 1: Now many people are looking at the price action of
Speaker 1: the last couple of days, the I p o s
Speaker 1: and benchmarking it back to the crazy times of the
Speaker 1: late nineties and the early two thousands. Let's talk about
Speaker 1: where fixed income is right now compared then, Michael, this
Speaker 1: is another world, isn't it. It is truly and well described. Jonathan,
Speaker 1: It's it's another world. And Lewis Carroll and Alice in
Speaker 1: Wonderland keep keep popping through through uh my mind when
Speaker 1: I'm thinking about these kinds of crazy upside down numbers. Uh,
Speaker 1: you simply have if if we are going to get
Speaker 1: as I've heard on Bloomberg over the last few days
Speaker 1: from some people, two percent inflation is going to be
Speaker 1: in the rear view mirror. Maybe it's three percent. And
Speaker 1: then and then you have, uh, the thirty thirty year
Speaker 1: treasury at under two percent, you have a chance to
Speaker 1: lose an incredible amount of money in fixed income when
Speaker 1: the duration spicy go against you. It's it's really quite incredible.
Speaker 1: Michael Holland, we lost a great one. Robert Stovol tell
Speaker 1: Us about Bob Stovoll Uh. He had this stentorian voice,
Speaker 1: wonderful voice. His son Sam had Lucia on your show
Speaker 1: periodically had as some of it. But he was one
Speaker 1: of the kind. He was one of the great technical.
Speaker 1: If I had at Great Wall Street lore, he would
Speaker 1: be laughing at as I do at the the lack
Speaker 1: of guidance from the markets as to how you're supposed
Speaker 1: to comport yourself in terms of saving people from losing
Speaker 1: money in the markets. And today I think, uh, I
Speaker 1: think we we don't have enough of those kinds of
Speaker 1: people have some some kind of uh detachment from the
Speaker 1: craziness around us. I mean, Michael Holland you look at
Speaker 1: Martin's wage and what he did and telling us to
Speaker 1: follow the fed to me. Bob stove All literally taught
Speaker 1: us how to speak about the markets with that voice
Speaker 1: on the floor of the exchange. And you know there
Speaker 1: were times on Wall Street Week where you guys just
Speaker 1: lit it up over the courage to be in the market.
Speaker 1: How do you stay in the market right now? Well,
Speaker 1: because there there's uh a serious business which is everyone's
Speaker 1: own personal accounts and and how people or its foundations
Speaker 1: or charities who rely on. So you you first do
Speaker 1: no harm. And when first you know harm means you
Speaker 1: you avoid things like we were talking about, for uh,
Speaker 1: door Dash and and Tesla and and Airbnb, and the
Speaker 1: craziness of the markets, the SPACs. You identify those for
Speaker 1: people and then you say, go to real businesses, their
Speaker 1: businesses that actually are going to pay dividends as a dividends.
Speaker 1: Can you imagine that JP Morgan yielding nearly three when
Speaker 1: when the ten year treasury is yielding two thirds of
Speaker 1: that or less. And I think that you simply have
Speaker 1: to use common sense and and and stepped in and
Speaker 1: say we're not going to participate in this this craziness.
Speaker 1: And when Johnathan was asking earlier about people at the
Speaker 1: end of the year, what what what do they do?
Speaker 1: I think that avoiding the craziness so you don't lose
Speaker 1: people with a ton of money in the coming couple
Speaker 1: of years, which which you may well do if you
Speaker 1: step in the wrong direction. We'll try. And Michael, you'll
Speaker 1: want to the kind And it's great to catch out Visa.
Speaker 1: And it's great to hear your sounding so well. Michael
Speaker 1: Holland of hollyandand Company. Thank you. We need to get
Speaker 1: back to first principles and there's no one better on that.
Speaker 1: And Francis Donald and Dangerous Excel spreadsheets at Manual Life,
Speaker 1: their global chief economists and a head of keeping up
Speaker 1: with data strategy. Francis give us the update on the
Speaker 1: American economy this Q four Q one and into the
Speaker 1: fourth of July next year. It's not great. We are
Speaker 1: heading into a very soft patch, something that looks like
Speaker 1: a double dip on the services component of the economy.
Speaker 1: I agree with Bloomberg Economics. There is a better than
Speaker 1: like the chance that we see negative print on the
Speaker 1: December payroll. And what we're trying to figure out here
Speaker 1: is how do markets trade that It's very possible the
Speaker 1: equity market looks right through. Maybe they have a little
Speaker 1: bit of a step back here as they focus on
Speaker 1: the longer term. But this is not a rates market
Speaker 1: that I think is going to shrug off a lot
Speaker 1: of the challenges that we see. And most importantly, this
Speaker 1: is not a federal reserve or any global central bank
Speaker 1: that is going to shrug off the damage that's going
Speaker 1: to be created in the economy in the next two
Speaker 1: to three months. This is not a period to look through.
Speaker 1: This is a period that carries higher potential for credit events,
Speaker 1: for long term scarring, for fuller drops in the labor
Speaker 1: force participation rate. Forget about Fabosi and all the fancy
Speaker 1: mathematics you know so well. Francis Donald, talk about the
Speaker 1: emotion in the behavior. If we get yields to break down,
Speaker 1: if the tenure yield actually comes in back again to
Speaker 1: new low yields, maybe even talk of a negative tenure yield.
Speaker 1: Who knows. I know where HSBC is on this. What's
Speaker 1: the societal impact of ever lower in new yields. I'm
Speaker 1: more concerned about the societal impact if we were to
Speaker 1: see a breakaway higher. This is everything I hear every day. Oh,
Speaker 1: rates are moving higher. There's too much inflation in the system.
Speaker 1: We should be more afraid of stagflation and painful inflation
Speaker 1: coming through and the FED losing control of this field
Speaker 1: curve than we should about low rates, which are necessary
Speaker 1: and more linked to fundamentals right now than a break
Speaker 1: right in the tenure. And John, this is so important
Speaker 1: is Francis always lays out so well, how wildly asymmetric
Speaker 1: the behavior is right now, John Farrell, everybody's in a
Speaker 1: panic about higher yield and yet we observe on the
Speaker 1: Bloomberg new tests of lower rates, which makes the question,
Speaker 1: Francis weather expectation for higher inflation actually comes from giving
Speaker 1: your analysis of the economy and how it's going to
Speaker 1: materialize in the next twolf to white seen months. Well,
Speaker 1: in some ways higher inflation is justified and certainly heading
Speaker 1: into April one, this is so important. We are going
Speaker 1: to hit inflation that perhaps comes as close as three
Speaker 1: with upside. A lot of that is app and base effects.
Speaker 1: It's the disruption in the goods based economy. It's at
Speaker 1: week usc but that is not permanently higher inflation. And
Speaker 1: this is what we're missing right now. If inflation is
Speaker 1: not permanently three percent, that bond market is not going
Speaker 1: to price in three percent inflation. We then come back
Speaker 1: to a period after that where inflation probably is around
Speaker 1: that boring old two percent. But most importantly, we are
Speaker 1: going to have areas of the economy that are experiencing
Speaker 1: painful high inflation good sector, and we're going to have
Speaker 1: other areas that are in painful deflation. This is not
Speaker 1: your father's inflation. This is huge asymmetry within price action,
Speaker 1: and we have to be really mindful of that. This
Speaker 1: is not boring two percent everything a two percent. This
Speaker 1: is huge, huge dichotomies, and what's happening in the price space. Well,
Speaker 1: this clearly isn't your grandfather's bond market either. So Francis,
Speaker 1: let's talk about that. Given everything you've just said, do
Speaker 1: we just need to recognize now. The position that central
Speaker 1: banks in are in right now will be the position
Speaker 1: central banks will be in for the foreseeable future. And
Speaker 1: I'm not just talking about the twenty two the Christine
Speaker 1: the god UCP president is talking about yesterday. I'm thinking
Speaker 1: five six seven absolutely. I mean, my my call is
Speaker 1: at interstrates have to stay extraordinarily low. And even if
Speaker 1: we do see a type of normalization, we're talking about
Speaker 1: fifty basis points, maybe a hundred basis points, we are
Speaker 1: not going back to even pre COVID levels of interest rates,
Speaker 1: even as inflation moves higher. Because even though I spend
Speaker 1: the bulk of my time looking at the feds primary
Speaker 1: mandate inflation and employment, listen to what the FED is
Speaker 1: talking about on the sidelines all global central banks, housing affordability.
Speaker 1: From the New Zealand Central Bank, we're talking about things
Speaker 1: like climate change. At the Bank of Canada, we're talking
Speaker 1: about Powell talking more and more, as he should, about
Speaker 1: racial and income in equalities. These are central banks that
Speaker 1: are shifting their perspective to a broader mandate than just
Speaker 1: inflation two percent, and they're going to be very happy
Speaker 1: to allow short term overshoots and keep this uppontly running hot.
Speaker 1: So Francis, let's go over to Secretary of Yellow and
Speaker 1: in the future of our stimulus in America, take all
Speaker 1: that you said and frame it into the amount of
Speaker 1: stimulus through this pandemic. Are you looking at it is
Speaker 1: five billion? Eight billion? Is okay? Are you looking at
Speaker 1: there will be tranches of trillion dollars of stimulus or
Speaker 1: like liberal economies, are you suggesting four or five or
Speaker 1: six trillion dollars of stimulus will be required. I am
Speaker 1: expecting persistent, continuous stimulus that does not have an end
Speaker 1: date or an end number. We are seeing a shift
Speaker 1: towards demanding a larger size of government. We're demanding that
Speaker 1: our government take over the reins of central banking to
Speaker 1: address very large inequalities, to address the need to ship
Speaker 1: towards a greener economy. We are moving towards a government
Speaker 1: that will become a larger segment of the economy. And
Speaker 1: for the market, it's incredibly important because you have monetary
Speaker 1: policy that says I will I will on that front
Speaker 1: end for a long time, and government policy that is
Speaker 1: probably primed for massive issuance. We're looking at a pretty
Speaker 1: sizable steepener here. And we look for post COVID, and
Speaker 1: that shift from monetary policy is the main tinker of
Speaker 1: our economy to government is the really biggest, largest implication
Speaker 1: of what COVID did. Then bring it over to the
Speaker 1: chapter I don't know, chapter twenty three of your entry textbook,
Speaker 1: Francis Donald, years ago in economics. I believe it was
Speaker 1: on the equity markets. Fold again. What you said over now,
Speaker 1: how corporations will adapt to this into the ultimate word,
Speaker 1: the profitability of our business environment. Well, I suspect we're
Speaker 1: gonna be rewriting a lot of those textbooks. But let
Speaker 1: me let me put it from you. From the investment
Speaker 1: side of the picture. You have extraordinarily low rates for
Speaker 1: a very long time, very cheap money. You're going to
Speaker 1: see larger and larger allocations towards equities. That doesn't mean
Speaker 1: it's a straight line higher right now. For example, sentiment
Speaker 1: extremely extended, pre totally prime. For a bit of a pullback,
Speaker 1: that's gonna happen. But more and more money into that
Speaker 1: equity market is what I suspect over that five year.
Speaker 1: That's why even though I sound like that i'm barrish,
Speaker 1: I sound like I'm concerned. It's really hard not to
Speaker 1: have a bias towards risk assets over that five to
Speaker 1: ten horizon. There's just really no other choice. Well, that's
Speaker 1: why it's been torture on the psychological front for an investor, Francis,
Speaker 1: and we've repeatedly said this on this program. Your feelings
Speaker 1: about the world, about the world around you in the
Speaker 1: here and now, you have to park them and put
Speaker 1: them to one side. And I think Francis still people
Speaker 1: find that really, really difficult. They're looking at their moral
Speaker 1: compass and they seem to think that markets should align
Speaker 1: with it. And Francis, I think still now, even after
Speaker 1: the lesson the conditioning we've had through, I think it's
Speaker 1: still difficult for many people. Can you walk me through
Speaker 1: the conversations you have with clients around those issues, Francis
Speaker 1: and the lessons of twenty into twenty one and beyond. Well, John,
Speaker 1: I actually have two titles. I'm a chief economist and
Speaker 1: I'm head of Strategy. And in the past that was
Speaker 1: the same job. If you thought inflation was going higher,
Speaker 1: you thought rates were going higher, if you were bullish
Speaker 1: on the economy, we were bullish on equities. What's been
Speaker 1: so challenging for people who have rules like mine. The
Speaker 1: past year is that we haven't just had to set
Speaker 1: aside our moral compass, where our heart is watching lines
Speaker 1: to food banks that go around the block three times
Speaker 1: and say that's not the trade. We've also had to
Speaker 1: set aside fundamentals and our economics analysis when we say
Speaker 1: things like a negative print on December non farm pay
Speaker 1: rolls that should be so bearished, and yet we have
Speaker 1: to think, you know what that means, means lower interest
Speaker 1: rates and large asset managers, pension funds have to shift
Speaker 1: more into equities. Those are the connections that we're coming to.
Speaker 1: So this is no longer a situation where fundamentals are
Speaker 1: the primary driver. Does that come back, maybe, but we
Speaker 1: really have to break out those correlations between a lot
Speaker 1: of the economic factors and the market. That's very uncomfortable,
Speaker 1: and like I said, we're gonna probably have to rewrite
Speaker 1: some at least chapters in those textbooks. I think we've
Speaker 1: gotta get rid of the Francis Grant to catch up.
Speaker 1: As always, we appreciate your time, Francis Donald of Mony
Speaker 1: Life Investment Management. One of the things that John Farren
Speaker 1: and I agreed on long Agoing Far Away think March
Speaker 1: was who would speak to experts That includes Sam Facility
Speaker 1: of Bloomberg Intelligence expert on pharmacology, the good work of
Speaker 1: Imperial College, Washington State, what University of Washington I should
Speaker 1: say in their microbiology. And then there's the math of
Speaker 1: it all. And right now the math really really matters.
Speaker 1: She's out of the acclaimed Kansas math program and biostatistics
Speaker 1: at Michigan. Leslie McClure joins us now from Drexel, truly
Speaker 1: expert on the mathliness of all of us. Over the weekend,
Speaker 1: you're gonna get nailed, Dr McClure on this. What's the
Speaker 1: key mathematics of the vaccine that our audience needs to know?
Speaker 1: Oh that's a great question. So mathematically, what's important about
Speaker 1: the vaccine right now is the number of people and
Speaker 1: the number of doses of the vaccine. Okay, that's the
Speaker 1: size of the vaccine, and we're going to impute it
Speaker 1: onto society. What is the effect of what it seems
Speaker 1: to be maybe a statistically large body that says I'm
Speaker 1: not going to take the vaccine? What is there impact?
Speaker 1: And those brave enough like Pharaoh to get in line, Well,
Speaker 1: I'll tell you I'm in line. I'm and I'm putting
Speaker 1: my parents in line before me. I think it's really
Speaker 1: important we all get in line. I think that as
Speaker 1: a public health professional, it's it's contingent on us to
Speaker 1: get the messaging out to tell people how important it is,
Speaker 1: and and to really educate the public about the vaccine
Speaker 1: and the benefits of it it's and how we harvest
Speaker 1: those benefits going forward. The question that we've asked so
Speaker 1: many times now is what size, what number of people,
Speaker 1: what percentage to the population do we need to reach
Speaker 1: before we can scale that restrictions. I've asked this question
Speaker 1: to pay it to me and I get different answers,
Speaker 1: And I wonder what yours would be, Professor. Do we
Speaker 1: need to just vaccinate the most at risk in society
Speaker 1: before we remove all of the restrictions around social distancing,
Speaker 1: et cetera. Or do you need to achieve herd immunity
Speaker 1: to go forth and do that. That's a really difficult
Speaker 1: question because the assumptions you make to answer that differ
Speaker 1: depending on the day of the week. So, but my
Speaker 1: my sort of stock answer is we can't remove those
Speaker 1: restrictions and we have to continue to be cautious even
Speaker 1: after we vaccinate a large proportion of the population as
Speaker 1: we learn more and more about the long term safety
Speaker 1: and efficacy of the vaccine. Just in terms of who
Speaker 1: needs to be vaccinated, we know the most at risk
Speaker 1: in society. Are we aware of the people who have
Speaker 1: already had COVID nineteen whether they need to be vaccinated.
Speaker 1: So my understanding is that the the the advice about
Speaker 1: that is mixed. That there's some saying that that that
Speaker 1: those who have already had COVID nineteen perhaps don't need
Speaker 1: to be vaccinated. But the recommendations I believe are that
Speaker 1: they should be vaccinated and that it will it will
Speaker 1: infer additional protection on them. Right, Leslie. Where we want
Speaker 1: to get here, and you know this cold coming out
Speaker 1: of Michigan's prestigious program is where Thomas Francis was in
Speaker 1: nineteen fifty five. He's the guy that stood up and
Speaker 1: said polio will work. Take the vaccine. Where we got
Speaker 1: on the polio vaccination program. How long is it going
Speaker 1: to get us to take to get to April of
Speaker 1: nineteen fifty Well, we need to build a time machine,
Speaker 1: right and be able to go back in time to
Speaker 1: a time when people trusted science more, and my hope
Speaker 1: is that we can get there. I don't know how
Speaker 1: long it will take. I frankly, I don't know how
Speaker 1: long it will be until we have the capacity to
Speaker 1: vaccinate that larger proportion of the population. So, again, going
Speaker 1: back to the numbers game, we need to know, we
Speaker 1: need more information about the timeline for wide distribution of
Speaker 1: the vaccine. My hope is that by the time we
Speaker 1: are in wide distribution, that the public will be more
Speaker 1: trusting and that more people will be willing to take
Speaker 1: the vaccine. Because You're right, we do need to get
Speaker 1: back there. I mean, we've got to get back to
Speaker 1: But when are we comfortable again? Just in your head,
Speaker 1: and I'm asking this as a complete amateur, When does
Speaker 1: Dr McClure think we will be comfortable again in society
Speaker 1: at the end of this pandemic, when the Kansas City
Speaker 1: chiefs can go out on the field comfortable that nobody's
Speaker 1: going to get the virus? When is it? So? My
Speaker 1: personal opinion is that it will be at least another
Speaker 1: year before I feel that comfort. I hope I'm wrong.
Speaker 1: I hope I'm wrong. I hope that the Super Bowl
Speaker 1: in February with no issues at all. But I don't
Speaker 1: think we're so lucky to catch up with you today.
Speaker 1: Please come back. Even if that wasn't depressed again to
Speaker 1: this conversation, Professor Leslie mclaud that after actual university John
Speaker 1: there is s to thirteen that is a fancy room
Speaker 1: at the Capitol. It's a reception room, big and fancy
Speaker 1: things happened there. Edward Mills has spent a lot of
Speaker 1: time and s to thirteen with Raymond James in a
Speaker 1: wonderful Washington policy analyst with true experience on the white
Speaker 1: marble of Capitol Hills at Mills, what's going on right
Speaker 1: now in s to thirteen and in those hallways around it?
Speaker 1: Forget about the media bladder. What's the back story of
Speaker 1: negotiations on Capitol Hill? Well, I think politics continue to
Speaker 1: get in the way tom of what we saw before
Speaker 1: the election. I think, um, everyone that I talked to
Speaker 1: was saying that they were not sure if Nancy Pelosi
Speaker 1: wanted to get a deal. UH certainly did not want
Speaker 1: to give President Trump a victory before the election. Now
Speaker 1: that the election um is behind us, Um, we still
Speaker 1: have two races in Georgia and most of the conversations
Speaker 1: I have is that Mitch McConnell now is the person
Speaker 1: who does not want to get a deal. And so
Speaker 1: we have a bipartisan group of senators trying to advance
Speaker 1: a nine hundred billion dollar package. We have a government
Speaker 1: funding deadline tonight, and we have an annual defense bill
Speaker 1: that's been passed every year since World War Two that
Speaker 1: needs to get done before we can. You can line
Speaker 1: up all the sentate majority leaders, Republican and Democrat have
Speaker 1: past and the fact that we need to pay for
Speaker 1: the Pentagon, we need to get a defense bill done,
Speaker 1: and on and on and on. What's original about Mitch
Speaker 1: McConnell speak to Republicans, speak to Democrats? How and why
Speaker 1: is this guy different? Well, I mean to his core
Speaker 1: UM people look at miss McConnell and say, his motivation
Speaker 1: is his desire to win above all else UM, and
Speaker 1: he certainly UM wants to make sure that he wins
Speaker 1: these two races in Georgia to maintain his majority UM
Speaker 1: and is looking to see if he can set up
Speaker 1: a situation where a no deal on fiscal stimulus is
Speaker 1: blamed on Democrats. UM. He is currently pushing hardest for
Speaker 1: liability releases UM. A cynic would say that he is
Speaker 1: uh doing the bidding of his donors. UM. But I
Speaker 1: think it is more about seeing a line in UM
Speaker 1: Georgia that if there is no bill, UM, that that
Speaker 1: would be more negative to Democrats who now will control
Speaker 1: the presidency. And we're kind of the focus of negotiations
Speaker 1: on fiscal release. He has not been very involved in
Speaker 1: a lot of these fiscal relief negotiations. UM. That has
Speaker 1: been what has been surprising to folks. He needs to
Speaker 1: be much more involved in these conversations before we can
Speaker 1: truly be optimistic about the prospect of getting the next
Speaker 1: round of fiscal support for the autonomy. So at your
Speaker 1: base case right now, given everything you've just said, no
Speaker 1: deal until after January five, UM. You know, my my
Speaker 1: base cas is UH. You know that it's not a
Speaker 1: question of if. It's still a question of win and
Speaker 1: how much UM. And I get a sense that UM
Speaker 1: Congress does not want to adjourn UH this year until
Speaker 1: something happens. But you know, it's it's hard to see
Speaker 1: how something kind of immediately comes together. Unless people start
Speaker 1: taking hostage of the defense bill, of the government funding bill,
Speaker 1: we could have a brief government shutdown. Come midnight tonight
Speaker 1: because we just don't have agreement there will. You know,
Speaker 1: there wasn't a sense that anyone wanted to hold hostage
Speaker 1: any of these must pass bills before the election. Now
Speaker 1: that we're passed, everything is on the table. And is
Speaker 1: there a sense of embarrassment the prospect of the government
Speaker 1: shutting down tonight? Is there a sense of embarrassment of
Speaker 1: the fact that they just can't get anything done? Do
Speaker 1: you feel that you sense that? And they say at
Speaker 1: the moment, I don't think there is embarrassment. I think
Speaker 1: that there is UM an acknowledgement that there are some
Speaker 1: really high stakes negotiations going on in each side is
Speaker 1: looking to find some leverage UM. And you know, DC
Speaker 1: usually only responds when there is a crisis, when there
Speaker 1: is a deadline. All of these fiscal relief packages have
Speaker 1: moved through other deadlines, have moved through other crises without
Speaker 1: getting done UM. And there is finally the sense that, UM,
Speaker 1: something has to happen, and people are ramping up and
Speaker 1: it's more of a political street fight than embarrassment at
Speaker 1: this point. Who applies pressure then on the senator from Kentucky?
Speaker 1: What power party moves Mr McConnell to do with so
Speaker 1: many Americans desire. I think it's a combination of UM
Speaker 1: kind of political shame coming from UM, any kind of
Speaker 1: media coverage, or getting pushed by his individual members. Having
Speaker 1: the bipartisan group is putting more pressure on him. Last night,
Speaker 1: you was an interesting situation where you have Bernie Sanders,
Speaker 1: one of the most liberal Democrats Josh Holley one of
Speaker 1: the most conservative Republicans on the floor together pushing for
Speaker 1: another round of fiscal support CHECKSUM because they see their
Speaker 1: constituents suffering at this point. UH. Those type of events
Speaker 1: where it's not viewed as a one party situation, but
Speaker 1: there is a bipartisan, very strange ideological mix pushing for
Speaker 1: things in the past on these fights that seem intractable.
Speaker 1: The only thing that works, in my mind has been
Speaker 1: shame at Mills GRD to catch up this joinas from
Speaker 1: Raymond James on a situation down in day, say, Bob
Speaker 1: Dylan was someone who reinvented time and space two, three,
Speaker 1: four or five six times And just to give you
Speaker 1: one vignette with all of his claim in the Newport
Speaker 1: Folk Festival and that he wandered on and then was
Speaker 1: dragged down to Nashville to record a set of albums.
Speaker 1: The engineer was a guy named Neil Wilburn. Bob Johnston produced,
Speaker 1: produced it, and what was extraordinary was one of his
Speaker 1: biggest hits off Nashville Skyline, Let's listen, Lady Lane lay
Speaker 1: a great. So there is Bob Dylan with one of
Speaker 1: the chameleon moments of his life where it was like,
Speaker 1: that's not Bob Dylan, but it was. I literally earned
Speaker 1: a bar cord off that song, which I think a
Speaker 1: few other people did as well. Alex Webb joins us
Speaker 1: now from Bloomberg and this sale for the wonderful Mr
Speaker 1: Dillon a three million of his songwriting and publishing it rights. Alex,
Speaker 1: how do you approach this? Did someone overpay? Does someone underpay?
Speaker 1: What's the journalistic thing you looked at? There are two
Speaker 1: sides of this. There's Dylan himself and then there's a buyer,
Speaker 1: which is Universal Music. And on the Dylan side the
Speaker 1: risk of sounding a little bit for all but you
Speaker 1: know he's pushing. Is he going to be around long
Speaker 1: enough to make three million in royalties? Seems hard to believe.
Speaker 1: So for him it seems a non brainer that no
Speaker 1: brainers sell it for that money. If your Universal music,
Speaker 1: you could make the argument they've overpaid. You're forgetting that
Speaker 1: next this time next year or sometime next year. They're
Speaker 1: expected to I p O. And if you're company, you
Speaker 1: want to be able to demonstrate you've got recurring income,
Speaker 1: predictable recurring income. Um. If this is a good side
Speaker 1: on your I p O deck, then if I add
Speaker 1: you know, centage point to your value income listing, then
Speaker 1: a million is money well space And of course David
Speaker 1: Bowie a pathbreaker here, folks, And you know we went
Speaker 1: onto doing all sorts of things. And what's so important
Speaker 1: is some of these transactions go cash on cash positive
Speaker 1: shockingly early given hit success in that. When I saw
Speaker 1: this deal, Alex, I said to myself, they're just gonna
Speaker 1: spin off minority interests in Mr Dylan's songs to every
Speaker 1: sovereign wealth fund and hedge fund out there. Do they do?
Speaker 1: They line up at Universal and tranched this thing off
Speaker 1: to all sorts of people to take the risk away. No.
Speaker 1: I think what they do is say, I mean, Universal
Speaker 1: is kind of very healthy cash position, I think, and um,
Speaker 1: I think what they try to do is they get
Speaker 1: their huge roster of artist everyone from you know Taylor
Speaker 1: Swift to um, you know Coldplay to to do covers? Right? Okay?
Speaker 1: Can I rick getting paid twice? Par Can I rip
Speaker 1: up the script and the road? Okay? Come on, Alex,
Speaker 1: you know we're two hipsters. Jack happening Off is killing
Speaker 1: it this year with Taylor Swift recording a bunch of
Speaker 1: songs sitting around a pandemic living room over the digital
Speaker 1: Is your world of records in the industry? I mean,
Speaker 1: is is Abbey Road or the recording studios in l A.
Speaker 1: Are they all blowing up because of what Taylor Swift
Speaker 1: and Jack Antonof are doing. There's always place for those
Speaker 1: because you know, you do record stuff with orchestras and
Speaker 1: there is something about the creativity because you're doing this
Speaker 1: spaceis so I think, is you know, underneable and also
Speaker 1: don't forget you know, not all recording artists are rational.
Speaker 1: They want to be in this relate which has done
Speaker 1: so much and you know, of course the it is
Speaker 1: owned by Universal Music, Abbey Road Studios. It's a it's
Speaker 1: a kind of trophy asset for them. Um. You know,
Speaker 1: they are pretty canny on their side, and I think
Speaker 1: quite strategic and what they is owned by Vivendi of
Speaker 1: course and French media conglomerate. They would not be you know,
Speaker 1: holding onto these assets that they thought they can make
Speaker 1: money elf. Where So, Alex, we have a little bit
Speaker 1: of a trend here. We've got Stevie Nicks. She sold
Speaker 1: a majority of her catalog for I think a hundred
Speaker 1: million dollars something along those lines. And I followed David
Speaker 1: Crosby on Twitter. He's talking about doing it. What's driving
Speaker 1: these artists and some of these you know, you know,
Speaker 1: established artists with big catalogs from going this route. It's streaming,
Speaker 1: you know, it's Spotify, Apple Music, Amazon Music, all those things.
Speaker 1: They have given a new lease of life to trap
Speaker 1: that otherwise, you know, ultimately from a from sales to
Speaker 1: perfectives still making royalties from radio plays, but from sales perspective,
Speaker 1: they probably thought that the money had all been made already.
Speaker 1: You know, they sold albums twenty years ago, thirty years ago,
Speaker 1: fourty years ago. Extreaming. He's given them a new lease
Speaker 1: of life, is given them, as I said, dependable recurring
Speaker 1: revenue stream And so firstly you have that factor. Then
Speaker 1: there's also a few funds that have I'm up that
Speaker 1: are buying these assets up. There's one in the UK
Speaker 1: called hYP Gnosis. They own recently half of them all
Speaker 1: I Wanted Christmas for instance, and right Carey Song and
Speaker 1: thousands of other tunes. Um. They think that they're going
Speaker 1: to be able to turn that into a sort of
Speaker 1: predictable annuity for investors by by owning vast tracts of
Speaker 1: the kind of the great global song books. I look,
Speaker 1: it's just one more comment. You know we're going to
Speaker 1: run out of time, is well Bob Dylan's of Fossil
Speaker 1: as you said, he's hitting eighty years old. Leonard Cohen,
Speaker 1: Of course we lost again the same way. Is there
Speaker 1: going to be the publishing frenzy frenzy for the young kids?
Speaker 1: I mean, is Lady Gaga gonna get five and are million?
Speaker 1: I think it's unlikely because those guys they want to be,
Speaker 1: you know, turning money over the rest of their lives.
Speaker 1: Did you see some younger artists doing it? But not
Speaker 1: so many? But it's still getting towards the end of
Speaker 1: your life. You get seventies, I think seventy five years
Speaker 1: from your death, that's when the copyright expires, and so
Speaker 1: you want to probably sell it before you die, because
Speaker 1: then it immediately becomes a depreciating asthlete. As long as
Speaker 1: you're still live, you know that could last a long time,
Speaker 1: forever going to buy it. So there's that kind of
Speaker 1: sweet spot and when you can make a decent amount
Speaker 1: of money or what you're in your sort of and
Speaker 1: inheritance to make maybe a bit less. This has been
Speaker 1: wonderful else Web, Thank you so much. Look forward to
Speaker 1: catching up with you in London when the pandemic is over.
Speaker 1: Mr Webb writing on the music of our times. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio.