WEBVTT - Surveillance: Vaccine Optimism With Hornbach 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 --> 0:00:27.640 Bloomberg dot Com and of course on the Bloomberg Right 0:00:27.640 --> 0:00:30.520 Now on fixed income and really framing in a global 0:00:30.600 --> 0:00:34.239 macro strategy. At Morgan Stanley is Matthew Hornback, and he 0:00:34.320 --> 0:00:37.080 joins us on this day of election results, this day 0:00:37.120 --> 0:00:40.080 of plans for COVID, and this day of a jump 0:00:40.120 --> 0:00:43.200 condition in the market. Matt, let's go back to Vasser 0:00:43.320 --> 0:00:46.320 economics where you had to define a jump condition. Is 0:00:46.360 --> 0:00:50.279 this a jump condition? Tom, Thanks for having me on. 0:00:51.280 --> 0:00:55.240 This is clearly an important day for the world. Um, 0:00:55.280 --> 0:00:57.720 you know, it's we still have some way to job right. 0:00:57.760 --> 0:01:01.520 I mean, we still have to get the vaccine further tested. 0:01:01.760 --> 0:01:05.200 It has to be distributed around the world. Uh, And 0:01:05.280 --> 0:01:08.000 so it's that we're still not out of the woods yet, 0:01:08.080 --> 0:01:10.680 but certainly a bright day for the globe. And I 0:01:10.680 --> 0:01:13.080 think you can see this playing out very clearly in 0:01:13.160 --> 0:01:16.479 markets that you've just discussed. So, um, you know, we 0:01:16.720 --> 0:01:20.440 think that there is also an important underlying backdrop to 0:01:20.480 --> 0:01:22.959 all of this time, which is the amount of central 0:01:22.959 --> 0:01:26.080 bank liquidity that is being pumped into the system on 0:01:26.120 --> 0:01:29.679 a monthly basis, and we expect to continue throughout the 0:01:29.840 --> 0:01:33.440 entirety of next year. So a tremendous day for the world, 0:01:33.560 --> 0:01:35.600 and I think next year looks looks to be a 0:01:35.600 --> 0:01:38.640 bright one. Matt. What does a bond market look like 0:01:38.840 --> 0:01:40.759 with a vaccine? Are we looking at a one percent 0:01:40.840 --> 0:01:45.600 tenure more? Lisa? We you know, we do think that 0:01:45.600 --> 0:01:48.200 that yields are going to be angled higher over the 0:01:48.200 --> 0:01:50.760 course of the coming year. Uh. You know, we have 0:01:50.960 --> 0:01:54.880 recently been very barished on the treasury market. It's a rare, 0:01:55.080 --> 0:01:57.520 rare day for me to be barished on the treasury market, 0:01:57.560 --> 0:02:00.080 but we have been barished up until this point. You 0:02:00.120 --> 0:02:03.000 do think that there is good scope for the curve 0:02:03.080 --> 0:02:06.040 to steep in further, and clearly today as a day 0:02:06.040 --> 0:02:10.400 in which you'll see the treasury curve continue to move steeper. So, um, 0:02:10.440 --> 0:02:14.160 we think a treasury market with a vaccine is one 0:02:14.240 --> 0:02:17.120 where the Fed is going to slow play it for sure. 0:02:17.639 --> 0:02:21.200 That's going to prevent intermediate yields from rising too much. 0:02:21.680 --> 0:02:23.600 But the back end of the yield curve should be 0:02:23.600 --> 0:02:30.040 lifted higher, especially as great even inflation rates continue to expand. So, Matt, 0:02:30.040 --> 0:02:31.519 here's the story for me. We know what the world 0:02:31.600 --> 0:02:33.440 looks like with a vaccine because we know what the 0:02:33.440 --> 0:02:37.160 world looks like without COVID nineteen, and treasury yields didn't 0:02:37.160 --> 0:02:39.280 exactly get away from them south back then either, And 0:02:39.320 --> 0:02:42.160 most people might make the argument this morning, the looking 0:02:42.160 --> 0:02:45.120 gut over the next several years, in with COVID nineteen 0:02:45.200 --> 0:02:49.240 under control, trend growth could while still be lower, inflation 0:02:49.320 --> 0:02:52.480 could while still below, and rates we might not see 0:02:52.480 --> 0:02:56.600 a recovery in Europe once again, that justifies a right hike. 0:02:56.720 --> 0:02:58.400 So Matt, what would your response to that be? Why 0:02:58.440 --> 0:03:01.320 would a cycle recover free with a vaccine be any 0:03:01.360 --> 0:03:03.079 difference to what we saw in the previous ten years 0:03:03.080 --> 0:03:06.640 when we didn't even have COVID night see John. I 0:03:06.680 --> 0:03:10.080 think the answer here ultimately comes down to central bank 0:03:10.240 --> 0:03:14.600 monetary policy strategy, and what we've seen from these central 0:03:14.639 --> 0:03:18.280 banks is that they're willing to keep interest rates much 0:03:18.320 --> 0:03:21.079 lower for longer. I mean, we've been using that phrase 0:03:21.160 --> 0:03:23.360 for over a decade now, so why not continue to 0:03:23.440 --> 0:03:26.200 use it. But we do think that these new monetary 0:03:26.240 --> 0:03:29.840 policy strategies are going to end up weighing on the 0:03:29.919 --> 0:03:33.679 equilibrium level of long term interest rates, the equilibrium level 0:03:33.960 --> 0:03:36.960 of the yield current um. I mean everything is going 0:03:37.040 --> 0:03:40.440 to be lower and flatter for longer. That doesn't mean 0:03:40.680 --> 0:03:43.720 that yields are going to stay low in perpetuity, but 0:03:43.840 --> 0:03:47.720 it does mean that the equilibrium levels are coming down. John, 0:03:49.120 --> 0:03:51.200 do you assume that, Matt, that the previous peake on 0:03:51.240 --> 0:03:53.480 a tenure yield of the previous psycho just won't be 0:03:53.520 --> 0:03:57.120 achieved again. I think it's going to be a long 0:03:57.200 --> 0:03:59.520 time before we see a three and a quarter percent 0:03:59.600 --> 0:04:03.040 tenure deal, which bear in mind, occurred really on the 0:04:03.080 --> 0:04:07.400 back of a communication FOCA, which is in general terms, 0:04:07.440 --> 0:04:09.520 you know, when you ever you see interest rates move 0:04:10.200 --> 0:04:14.760 higher very quickly to really unsustainable levels, it typically occurs 0:04:14.800 --> 0:04:17.600 on the back of a communications or right. We saw 0:04:17.640 --> 0:04:19.560 that in two thousand and thirteen, We saw that at 0:04:19.560 --> 0:04:22.640 the end of two thousand and eighteen. So, you know, 0:04:22.720 --> 0:04:25.279 we think that central bankers have have learned this less 0:04:25.320 --> 0:04:27.279 than time and time again. They may have to learn 0:04:27.320 --> 0:04:29.800 it again, John, but I think for the time being, 0:04:29.880 --> 0:04:33.360 these new monetary policy frameworks are going to really try 0:04:33.360 --> 0:04:37.120 to anchor those rate expectations much lower than ever before. Man, 0:04:37.160 --> 0:04:40.000 I want you to channel one, Michael Wilson. You talk 0:04:40.080 --> 0:04:45.440 about frameworks. Does this equity market frame the forecast or 0:04:45.480 --> 0:04:50.640 the expectation for revenue growth and earnings growth? Well, Tom, 0:04:50.720 --> 0:04:53.400 we we've been long term bowls here on on the 0:04:53.400 --> 0:04:56.000 equity market. Mike Wilson, I'm sure would would be the 0:04:56.040 --> 0:04:58.599 first to admit that, you know, when you come to 0:04:58.760 --> 0:05:03.360 these recent corrections, which he's called absolutely correctly, Um, you know, 0:05:03.520 --> 0:05:06.560 it does suggest that you know, his longer term view, 0:05:06.600 --> 0:05:09.400 which is very bullish, is very very likely going to 0:05:09.440 --> 0:05:13.560 play out, especially in a world where consumer activity is 0:05:13.600 --> 0:05:16.520 going to get back on track, hopefully sooner rather than later. 0:05:17.120 --> 0:05:19.839 That the economic data in the US and around the world, 0:05:19.960 --> 0:05:23.680 safe for Europe of course, has been robust. Uh. And 0:05:23.760 --> 0:05:27.880 so yes, this long term bullishness that Mike Wilson talks about, Uh, 0:05:28.120 --> 0:05:30.240 we we're going to continue to to to aim in 0:05:30.279 --> 0:05:32.440 that direction and we think that we will hit those 0:05:32.480 --> 0:05:34.960 targets next year. Right now, a lot of people are 0:05:34.960 --> 0:05:38.320 looking at credit versus stock, some people saying stocks hold 0:05:38.360 --> 0:05:42.000 the most potential for possible upside. Others I believe Morgan 0:05:42.040 --> 0:05:45.880 Stanley seeing credit is a possible brighter spot going forward. 0:05:46.120 --> 0:05:49.360 What does the vaccine that excuse me? The vaccino news, 0:05:49.440 --> 0:05:51.600 it's so exciting, I can't get my words out. Due 0:05:51.760 --> 0:05:55.640 to the prospect of credit outperforming given the fact that 0:05:55.680 --> 0:05:59.960 the FED will have less impetus to keep rates very low, well, 0:06:00.040 --> 0:06:02.159 I mean, you know, so it's not clear to me 0:06:02.320 --> 0:06:05.520 just yet that the impetus from the FED is going 0:06:05.560 --> 0:06:08.479 to change anytime soon. Right. We just went through the 0:06:08.520 --> 0:06:11.400 November fo MC meeting. We're going to have very shortly 0:06:11.760 --> 0:06:14.680 the December FOMC, meaning the FED is going to update 0:06:14.680 --> 0:06:17.800 its DOT. POD's going to include a couple of more 0:06:17.920 --> 0:06:22.000 charts in its in its materials. UM. I highly doubt 0:06:22.240 --> 0:06:25.240 that the media in two thousand and twenty three DOT 0:06:25.400 --> 0:06:27.400 is going to move up. The Fed is going to 0:06:27.560 --> 0:06:32.240 keep policy at zero four probably the entirety of the 0:06:32.400 --> 0:06:35.880 SEP DOT pot at least an expectation. UM. And so 0:06:35.960 --> 0:06:39.280 I don't really think that there's less impetus necessarily, which 0:06:39.360 --> 0:06:43.160 is why the vaccine has the power to really drive 0:06:43.640 --> 0:06:47.920 risk assets higher, credit spreads tighter, the equity market higher, 0:06:47.960 --> 0:06:51.320 emerging market currencies stronger. This is one of our key 0:06:51.360 --> 0:06:54.279 calls right now is that we do think that emerging 0:06:54.360 --> 0:06:57.520 market currencies are going to perform extremely well against the dollar. 0:06:57.920 --> 0:07:00.520 We've beenmbarished on the dollar a yel year and we 0:07:00.600 --> 0:07:04.080 continue to be barished on the dollar. We think this 0:07:04.200 --> 0:07:07.640 liquidity has to find a home in higher yielding assets. 0:07:07.920 --> 0:07:10.000 US corporate credit is obviously going to be one of 0:07:10.040 --> 0:07:12.320 those thesis. So when you talk about emerging markets credit, 0:07:12.440 --> 0:07:14.640 let's go there emerging markets in general, because they are 0:07:14.680 --> 0:07:19.600 flying with stocks and currencies at near record highs, currencies 0:07:19.640 --> 0:07:23.760 at the strongest versus the dollar. Since how much of 0:07:23.800 --> 0:07:26.440 this story is China and how much of this story 0:07:26.680 --> 0:07:30.240 is commodity producing nations Latin America that have been really 0:07:30.280 --> 0:07:33.800 beaten up and underperforming up until now, well, you know, 0:07:33.920 --> 0:07:36.240 we we think we think that this uh you know, 0:07:36.520 --> 0:07:40.480 change in leadership in the United States has the potential 0:07:40.600 --> 0:07:44.440 to help a wide variety of of emerging markets Mexico 0:07:44.600 --> 0:07:48.600 for example, Russia, um and we're also looking at China. 0:07:48.720 --> 0:07:51.760 We we do think that the currency there has further 0:07:51.920 --> 0:07:57.720 scope for appreciation. We like to pare the yuan against 0:07:57.720 --> 0:08:00.880 the Japanese gyain. We think high are you on against 0:08:00.880 --> 0:08:02.440 the end is really the way to play it. But 0:08:02.960 --> 0:08:05.640 in general, we see this loquidity going to a wide 0:08:05.680 --> 0:08:08.680 variety of emerging markets, both in Latin as well as 0:08:08.720 --> 0:08:12.280 in Asia. Uh and and again you know this uh, 0:08:12.560 --> 0:08:15.480 this environment that we're going into hopefully next year with 0:08:15.520 --> 0:08:18.960 the vaccine as soon as is practically in safely possible, 0:08:19.480 --> 0:08:22.440 that's going to have I think a really positive impact 0:08:22.440 --> 0:08:27.040 on a variety of emerging market currencies, credits and rates. 0:08:27.520 --> 0:08:29.480 Matt grant to catch up as otherwise, what am wanting 0:08:29.480 --> 0:08:33.640 for mars at it? Say, Matt home back of Morgan Stanni, 0:08:33.720 --> 0:08:40.800 thank you, sir. Part of it is math. The math 0:08:40.880 --> 0:08:45.560 of medicine. The statistics of medicine is profound. Mercedes Carnathon 0:08:45.679 --> 0:08:49.120 con front of this and the dreaded Stanford statistics program 0:08:49.160 --> 0:08:51.320 a few years ago, and she moved on to an 0:08:51.440 --> 0:08:56.160 esteemed academic career and epidemiology at Northwestern University of Chicago. 0:08:56.880 --> 0:08:59.520 This morning, I should say Evanston, I miss speak. Of course, 0:08:59.559 --> 0:09:03.280 it's not Chicago, it's Evans and professor, wonderful to have 0:09:03.400 --> 0:09:08.200 you with us. If we talk about an efficacy and 0:09:08.360 --> 0:09:10.760 Dr Fauci and others say, hey, if we can only 0:09:10.760 --> 0:09:18.200 get efficacy, is it mission accomplished? You know? Um, I 0:09:18.240 --> 0:09:21.760 am very heartened by the news, particularly since we know 0:09:21.920 --> 0:09:25.560 that these trials were well designed, they were monitored very well, 0:09:25.600 --> 0:09:29.120 and they involved a large number of people. And yes, 0:09:30.240 --> 0:09:35.200 isn't that you'd like to hear. However, that is about 0:09:35.280 --> 0:09:39.120 as effective as any vaccine, and perhaps slightly higher than 0:09:39.160 --> 0:09:42.480 what we see for effectiveness of the flu vaccine, so 0:09:42.600 --> 0:09:47.400 that the majority, the vast majority of cases of people 0:09:47.440 --> 0:09:50.400 who happened to be exposed were reduced when they have 0:09:50.640 --> 0:09:53.760 this vaccine. So I'm I'm feeling very pleased about that. 0:09:53.960 --> 0:09:57.200 So can we fast forward how quickly Dr Carnathon will 0:09:57.240 --> 0:10:00.480 we end up stopping this pandemic base in the data 0:10:00.520 --> 0:10:03.719 that we got today, Well, let's flow our breaks on 0:10:03.880 --> 0:10:06.960 that one. Unfortunately, this isn't going to be a magic 0:10:07.040 --> 0:10:09.800 shot that's going to reverse course from what we need 0:10:09.800 --> 0:10:13.080 to do to slow the spread, because there's going to 0:10:13.160 --> 0:10:17.439 be a phased rollout of this vaccine. It's availability, even 0:10:17.480 --> 0:10:21.520 with the claims of Operation Warp speed and involving the 0:10:21.640 --> 0:10:23.960 army to help distribute it. We have to have a 0:10:24.000 --> 0:10:27.320 priority list of those who are protecting us, those who 0:10:27.320 --> 0:10:30.319 are helping us get along in society, and those who 0:10:30.320 --> 0:10:33.760 are educating us. So those are the essential worker categories 0:10:33.960 --> 0:10:37.560 who need to receive the vaccine first before it goes 0:10:37.600 --> 0:10:42.360 to the broader population, Professor, is the distribution that I'm 0:10:42.400 --> 0:10:45.600 really interested in. Let's assume and let's hope this goes 0:10:45.679 --> 0:10:49.000 forward and it is conclusive. Then let's talk about distribution 0:10:49.320 --> 0:10:52.680 and the transition peered between two governments that is set 0:10:52.720 --> 0:10:55.480 to take place over the next three months. How closely 0:10:55.559 --> 0:10:57.640 will find a have to work with the government to 0:10:57.720 --> 0:11:02.160 make sure the people who need this get this and quickly. Yes, 0:11:02.240 --> 0:11:04.719 you know, I'm very pleased that what I've heard from 0:11:04.760 --> 0:11:07.840 President elect Joe Biden is that he has already appointed 0:11:07.920 --> 0:11:12.439 a coronavirus task Force filled with professionals, with medical experts, 0:11:12.440 --> 0:11:15.320 with public health experts, and so I do believe he 0:11:15.400 --> 0:11:19.080 will be ready to launch this distribution plan. There is 0:11:19.120 --> 0:11:23.520 already a priority list of essential workers, nursing home residents, 0:11:23.640 --> 0:11:28.360 other people in um congregate settings, including prisons, who are 0:11:28.400 --> 0:11:32.000 at the highest risk for capturing this, and so I 0:11:32.040 --> 0:11:34.760 do believe that there is a plan in place. There 0:11:34.760 --> 0:11:37.839 have been national academies who have contributed to this plan, 0:11:38.480 --> 0:11:40.520 and so I do think that the government is going 0:11:40.559 --> 0:11:43.560 to be ready to roll this out right away. Professor. 0:11:43.600 --> 0:11:47.440 When I look at immunological memory. It reminds me of 0:11:47.480 --> 0:11:50.720 the dreaded booster shots of my youth. John and Lisa, 0:11:50.720 --> 0:11:53.320 I have no idea what I'm talking about, But folks, 0:11:53.280 --> 0:11:55.680 you'd have to go back and back and back to 0:11:55.760 --> 0:11:59.880 get booster shots on tetanus, on the Bacterium de theoria. 0:12:00.320 --> 0:12:03.560 But what about on vexi on viruses. Do you just 0:12:03.640 --> 0:12:06.360 assume we're all going to have booster shots until the 0:12:06.360 --> 0:12:11.040 tots win. We may end up we may end up 0:12:11.080 --> 0:12:14.160 needing to have repeated shots. One thing that's not clear, 0:12:14.200 --> 0:12:17.199 because we're so early on in this pandemic, is how 0:12:17.320 --> 0:12:21.680 long one maintains those antibodies that you either get from 0:12:21.720 --> 0:12:25.480 contracting the illness or that you develop from a vaccine. 0:12:25.760 --> 0:12:28.240 We don't know how long those antibodies will last. We 0:12:28.320 --> 0:12:32.160 also don't know whether the coronavirus will adapt itself so 0:12:32.240 --> 0:12:35.200 that it can continue to be inspectious. Now, that's one 0:12:35.240 --> 0:12:37.920 of the reasons why we have a flu vaccine every year, 0:12:38.320 --> 0:12:41.880 because it mutates, it changes year to year. We may 0:12:41.920 --> 0:12:44.320 be in that position, but at least where the strong 0:12:44.480 --> 0:12:47.720 starting point with the great vaccine. For right now, I 0:12:47.800 --> 0:12:50.319 will say Tom, we've learned this morning that you are 0:12:50.440 --> 0:12:53.040 very scared of shots because first you're talking about holding 0:12:53.080 --> 0:12:56.000 your hand and then you're talking about the dredg which 0:12:56.040 --> 0:13:00.240 for the record, we still get Professor carnadon us to 0:13:00.280 --> 0:13:03.080 wrap this up in the near term. Coming in this morning, 0:13:03.120 --> 0:13:06.920 before this COVID vaccine news was announced, the discussion really 0:13:06.920 --> 0:13:10.200 was around the worsening wave of COVID around the world 0:13:10.280 --> 0:13:13.080 and the potential for hundreds of thousands of potential additional 0:13:13.120 --> 0:13:15.480 deaths given where we are, given the fact that the 0:13:15.559 --> 0:13:18.040 vaccine news does not change the near term. As John 0:13:18.040 --> 0:13:21.520 has been talking about, what kind of winter months are 0:13:21.559 --> 0:13:25.000 we looking at right now, we're looking at a winter 0:13:25.160 --> 0:13:28.400 that's going to look very similar to our last spring 0:13:28.520 --> 0:13:32.680 here in America. Worldwide, they had their peaks earlier. I 0:13:32.720 --> 0:13:35.840 think we're gonna see governments meeting to step up and 0:13:35.960 --> 0:13:40.319 have rolling shut down, particularly of those businesses and industries 0:13:40.360 --> 0:13:43.080 where we see rapids spread and it happens to be 0:13:43.559 --> 0:13:46.120 the types of places that you would frequent where you 0:13:46.160 --> 0:13:49.439 can't wear a mask, so when you're inside, eating and drinking, 0:13:49.800 --> 0:13:52.359 and we're going to have to adhere to those policies. 0:13:52.679 --> 0:13:56.679 What I'm hopeful we can maintain this time is availability 0:13:56.880 --> 0:14:01.560 of our hospital systems. I'm hopeful that we won't become overwhelmed. However, 0:14:02.080 --> 0:14:04.559 with the rate that these cases are going up, our 0:14:04.600 --> 0:14:08.880 hospitalizations here in Illinois are matching what they were last spring. 0:14:08.920 --> 0:14:11.960 And that's a very scary prospect because we still have 0:14:12.440 --> 0:14:17.559 cardiovasca to these cancers, respiratory illnesses that we would need 0:14:17.600 --> 0:14:20.240 to still treat. Professor, what a time the interview. Thank 0:14:20.280 --> 0:14:26.080 you Tom this morning, Thank you very much. Right now, 0:14:26.120 --> 0:14:29.000 to sort out some of the policy drive forward, Jared 0:14:29.040 --> 0:14:33.320 Sieberg joins us with Cowen and their acclaimed Washington policy 0:14:33.760 --> 0:14:39.000 and Analysis team. Jared, so many different flows, so many 0:14:39.040 --> 0:14:44.960 different smaller elections, smaller issues as well, sort of the debris. 0:14:44.960 --> 0:14:49.720 Who won the election. Oh, I think this is a 0:14:49.800 --> 0:14:54.000 clear victory for the moderate side of the Democratic Party. Uh. 0:14:54.240 --> 0:14:59.640 You had coalition really get behind Joe Biden. Uh, you know. 0:14:59.840 --> 0:15:01.960 I I think you had losses in the House that 0:15:02.160 --> 0:15:04.960 over time are going to be attributed to some of 0:15:05.000 --> 0:15:08.840 the socialist labeling that's associated with some of the more 0:15:09.000 --> 0:15:12.600 radical members of the Democratic Party. And I think as 0:15:12.680 --> 0:15:15.680 we dissect this election, it's going to show that the 0:15:15.760 --> 0:15:19.400 path to national power is still through the more waterrate 0:15:19.520 --> 0:15:23.040 side of the party. And not through the most progressive side. Jerry, 0:15:23.080 --> 0:15:25.280 You're gonna have a lot of Monday morning quarterbacking for 0:15:25.320 --> 0:15:27.960 a very long time with respect to this race. Right 0:15:27.960 --> 0:15:30.360 now that we are moving forward and looking toward a 0:15:30.400 --> 0:15:33.800 pandemic that is worsening, what will the transition between the 0:15:33.800 --> 0:15:37.280 Trump administration and the Biden administration look like? And will 0:15:37.320 --> 0:15:39.480 it be different than what we have seen in the past. 0:15:41.800 --> 0:15:44.520 Is going to be different because we have a g 0:15:44.840 --> 0:15:48.080 s A, which is an obscure government agency that normally 0:15:48.120 --> 0:15:51.200 nobody ever hears of, but g s A gets to 0:15:51.240 --> 0:15:55.359 officially start the transition. It's run by a Trump appointee, 0:15:55.400 --> 0:15:58.400 and at least as of earlier this morning, they still 0:15:58.440 --> 0:16:01.480 have not signaled that the transition is ready to start, 0:16:01.920 --> 0:16:05.160 and it may very well be until mid December until 0:16:05.200 --> 0:16:08.040 that transition starts. So at a time when we are 0:16:08.120 --> 0:16:11.560 perhaps in the greatest part of the COVID nineteen crisis, 0:16:11.640 --> 0:16:15.520 with with cases spiking each day, sitting in a new record, 0:16:15.800 --> 0:16:19.480 this transition maybe four to five weeks behind where it 0:16:19.480 --> 0:16:23.120 should be. Jo It talked to me about the transition 0:16:23.160 --> 0:16:25.920 in a little bit more detail. Michael lewis a fifth risk. 0:16:26.200 --> 0:16:28.880 He wrote beautifully in that in a very short pace 0:16:28.960 --> 0:16:31.600 about how important it is. Can you can communicate to 0:16:31.680 --> 0:16:34.280 our audience who might not be familiar with how much 0:16:34.320 --> 0:16:37.520 work goes into that transition exactly what happens over the 0:16:37.560 --> 0:16:41.440 next three months. Well, you know what's so interesting is 0:16:42.040 --> 0:16:44.320 when you think about the transition from four years ago, 0:16:44.560 --> 0:16:48.840 there almost was no transition. It wasn't that Obama's people 0:16:48.880 --> 0:16:53.640 were unwilling to engage. It's that Trump didn't embrace the transition, 0:16:53.720 --> 0:16:56.560 and they were very late in getting people in. And 0:16:56.600 --> 0:16:59.240 what you saw was it took almost a full year 0:16:59.680 --> 0:17:03.720 before work Team Trump really got control of the regulatory agencies. 0:17:04.320 --> 0:17:08.119 Biden's people understand that you can't waste a year, and 0:17:08.160 --> 0:17:11.080 they're gonna want to get on this much more quickly. Uh. 0:17:11.160 --> 0:17:14.920 The fact that Gary Gensler, who is a former Goldman 0:17:15.000 --> 0:17:20.160 Park partner but also ironically well respected by the progressive 0:17:20.200 --> 0:17:23.400 side of the Democratic parties. Uh, he looks like he's 0:17:23.400 --> 0:17:26.239 going to lead the financial side of the transition, and 0:17:26.320 --> 0:17:29.520 I think that should be widely embraced. You know, he 0:17:30.200 --> 0:17:33.600 could have been Treasury secretary of Hillary Clinton won. He's 0:17:33.600 --> 0:17:36.480 somebody who understands the markets, and as we always say, 0:17:36.520 --> 0:17:39.879 it's better to have people who understand our business leading 0:17:39.920 --> 0:17:43.120 the charge than people who don't geared. Do you see 0:17:43.119 --> 0:17:47.639 the obligatory Republican cabinet appointing? I think of William Cohen 0:17:47.680 --> 0:17:52.640 of years ago. Do you see something along that line? So, 0:17:52.800 --> 0:17:55.159 you know, I wish I could be that optimistic and 0:17:55.240 --> 0:17:57.560 to say that, you know, Joe Biden is going to 0:17:57.640 --> 0:18:00.480 go back to the way it was where you're initial 0:18:00.600 --> 0:18:05.480 cabinet appointees always included one person from the other party. Uh, 0:18:05.520 --> 0:18:08.720 you know, we're not We're not that hopeful. I think 0:18:08.760 --> 0:18:13.399 there's still so much animosity, uh, that it would be difficult. 0:18:13.800 --> 0:18:16.880 You know. The only are a few names that could 0:18:16.880 --> 0:18:20.680 even come to mind, like a Mitt Romney, and I'm 0:18:20.680 --> 0:18:24.000 not sure he really would want to come inside and administration. 0:18:24.840 --> 0:18:28.159 In addition, you know, there's a lot of Democrats who 0:18:28.119 --> 0:18:31.639 are looking h to come back to Washington, and I 0:18:31.680 --> 0:18:33.560 think they're gonna have a hard time giving up a 0:18:33.640 --> 0:18:38.640 prominent enough job to a Republican. Jack right to catch 0:18:38.720 --> 0:18:50.040 up book The count. Senior policy analyst Daniel Alford is 0:18:50.080 --> 0:18:53.280 someone we can talk to about the American labor economy, 0:18:53.320 --> 0:18:55.639 but we can also talk about his classic book, The 0:18:55.760 --> 0:19:00.359 Age of Oversupply, and dan Alford very simply here it 0:19:00.600 --> 0:19:03.800 is two nations. We learned that on election day an 0:19:03.840 --> 0:19:08.520 election week, but it is one age of oversupply. How 0:19:08.520 --> 0:19:13.639 does the president elect adapt to your age of oversupply? So, 0:19:13.760 --> 0:19:15.800 I think the first thing is that he has to 0:19:15.840 --> 0:19:19.359 recognize he was elected by a shift in what was 0:19:19.400 --> 0:19:24.400 effectively a bipolar group of voters that you know, elected 0:19:24.440 --> 0:19:28.320 Trump UM the first time. Uh, and these are voters 0:19:28.359 --> 0:19:34.240 who have uh future prospects still. Then, job quality has 0:19:34.280 --> 0:19:37.479 come down again during the Trump administration in terms of 0:19:37.600 --> 0:19:40.119 and I'm talking about prior to COVID, in terms of 0:19:40.160 --> 0:19:42.280 the number of low wage, low hour jobs compared to 0:19:42.359 --> 0:19:46.000 higher wage jobs or higher income jobs. The the up 0:19:46.000 --> 0:19:48.639 shot there, of course, is that families still are looking 0:19:48.800 --> 0:19:53.639 for stable financial futures, for the ability to save for retirement, 0:19:53.720 --> 0:19:56.240 to do all of the things that are that are needed. 0:19:56.240 --> 0:19:59.600 In those voters, some of some more of them voted 0:19:59.600 --> 0:20:02.320 for by then Trump this time. But they're on both sides. 0:20:02.400 --> 0:20:06.399 They're both Republicans and Democratic were breaking news along with FISER. 0:20:06.480 --> 0:20:10.240 Now add another vaccine to it, novavax, and their COVID 0:20:10.320 --> 0:20:15.119 vaccine candidate. It gets f D a fast track designation. 0:20:15.520 --> 0:20:17.720 It seems to be a different stream of headlines and 0:20:17.800 --> 0:20:20.760 what we saw from Fiser. But nevertheless, there it is, 0:20:20.800 --> 0:20:24.040 and we see an immediate lift in the market SPX 0:20:24.119 --> 0:20:26.520 up a hundred and fifty nine points and the dial 0:20:26.600 --> 0:20:29.040 I can now go on thirty thousand, Watch in the 0:20:29.119 --> 0:20:33.760 down thousand, eight forty four. Daniel Upford, you and I 0:20:33.800 --> 0:20:38.760 have lived jump conditions. Is this a jump condition? Well, 0:20:38.920 --> 0:20:41.680 you know, here's a here's an interesting thing, Dow thirty thousand, 0:20:41.720 --> 0:20:44.480 and they wrote a column on it. Um before the crisis, 0:20:44.520 --> 0:20:47.240 well before the crisis is very interesting because right now 0:20:47.359 --> 0:20:50.399 we're seeing industries get to a level of multiples that 0:20:50.440 --> 0:20:54.159 are of course historic, but also um are you know, 0:20:54.520 --> 0:20:58.640 really only forecast on a restoration of the status quo? Right? 0:20:58.680 --> 0:21:01.880 So the question is, let's going to happen after we 0:21:02.080 --> 0:21:05.200 recognize the fact that this crisis has pushed us off trend? 0:21:06.000 --> 0:21:09.200 Uh And you know that will and in and of itself, 0:21:09.280 --> 0:21:12.040 be a big question mark for the equity markets going forward. 0:21:12.440 --> 0:21:15.960 There's also a question, Dan, of how the CFOs, the 0:21:16.000 --> 0:21:19.240 CEOs of the world plan their strategy around the world. 0:21:19.400 --> 0:21:21.840 That is influx. I mean that the number of headlines 0:21:21.880 --> 0:21:24.639 this morning, we can't over emphasize we came in thinking 0:21:24.640 --> 0:21:26.800 it was the election, and now it's very much the 0:21:26.880 --> 0:21:29.760 vaccine and possibly early next year we're gonna be talking 0:21:29.800 --> 0:21:33.399 about fiscal support and maybe higher taxes for corporations. What's 0:21:33.440 --> 0:21:37.040 the main narrative you would tell corporate executives to pay 0:21:37.080 --> 0:21:39.600 attention to in terms of how to plan their strategy 0:21:39.880 --> 0:21:44.480 come the beginning of Yeah, aggregate demand. Aggregate demand. That's 0:21:44.520 --> 0:21:46.840 really the bottom line here. And you know, the jobs 0:21:46.880 --> 0:21:50.240 picture last week was very interesting what was announced on Friday. 0:21:50.680 --> 0:21:54.679 We picked up nine hundred thousand private sector jobs, but 0:21:54.880 --> 0:21:57.879 six hundred thousand of those were low wage, lower jobs 0:21:57.920 --> 0:22:01.280 who people were being restored for their work um and 0:22:01.320 --> 0:22:05.480 then off remaining better quality. We lost a hundred thirty 0:22:05.520 --> 0:22:08.960 thousand state local jobs and of course all those census workers. 0:22:09.000 --> 0:22:12.200 So the question is how does that translate into demanding 0:22:12.240 --> 0:22:15.000 the economy it You know, keep in mind that a 0:22:15.000 --> 0:22:17.640 lot of those workers returning to their low wage, low 0:22:17.680 --> 0:22:20.159 hour jobs are actually making less than they were on 0:22:20.240 --> 0:22:24.840 the federal unemployment benefit supplement um, and so that actually 0:22:24.880 --> 0:22:28.000 translate you have to actually look forward and calculate what 0:22:28.160 --> 0:22:31.680 this means in terms of restoration of aggregate demand. Because 0:22:31.680 --> 0:22:34.639 that's what drives the business. And against that you have 0:22:34.720 --> 0:22:37.119 to look at the seven hundred fifty or eight hundred 0:22:37.160 --> 0:22:41.879 thousand weekly unemployment claims. There must be massive rotation going 0:22:41.920 --> 0:22:45.480 on of employer employees in and out of work in 0:22:45.560 --> 0:22:49.000 this economy. We won't know for several more weeks or months, 0:22:49.040 --> 0:22:52.600 but the at the end of the day, the only 0:22:52.640 --> 0:22:55.479 thing that's important is how much demand there is, how 0:22:55.560 --> 0:22:59.560 much consumption there is in this economy. Well, when I 0:23:00.000 --> 0:23:03.639 a suite individual, the CEO, the CFO, the CEO will 0:23:03.640 --> 0:23:06.199 get around the table and talk about the labor market. 0:23:06.280 --> 0:23:09.760 The outlook for twenty one, demand, which you describe quite rightly, 0:23:10.200 --> 0:23:12.800 is the crucial issue here. As they anticipate demand. Do 0:23:12.840 --> 0:23:15.479 you think the vaccine news of this morning makes them 0:23:15.480 --> 0:23:18.240 a little bit more constructive about twenty one and maybe 0:23:18.359 --> 0:23:21.600 pushes them to hold off on additional firing and maybe 0:23:21.680 --> 0:23:24.520 encourages them to do a little bit high ring. I 0:23:24.520 --> 0:23:28.080