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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along

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Speaker 1: with Jonathan Ferroll and Lisa Brown Witz Jay Leye. We

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Speaker 1: bring you insight from the best and economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance and Apple Podcast, Suncloud,

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Speaker 1: Bloomberg dot com and of course on the Bloomberg terminal. Secondly, Wolves,

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Speaker 1: joining us now on the labor market report we got

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Speaker 1: a little bit earlier this morning, Dan in Washington, d C. Secondly,

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Speaker 1: what is great to have you with us on the program, Sir.

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Speaker 1: I just wanted to start right here with the wage story.

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Speaker 1: We heard from the President of United States in the

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Speaker 1: past week on this just listening with me about what

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Speaker 1: he had to say. Take a listen. The wages have

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Speaker 1: gone up higher faster than inflation. Uh, and we have

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Speaker 1: generated real economic growth. It doesn't mean these dislocations aren't real.

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Speaker 1: They do affect people's lives. Secondly, Wolf, she said, wages

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Speaker 1: have gone up higher faster than inflation. What data is

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Speaker 1: the president looking at? Sir No, I think I think

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Speaker 1: what the president one that was really talking about is

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Speaker 1: inflation is reflecting our economy reviving, uh, and was seeing

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Speaker 1: this a worldwide issue. I mean, certainly, Uh, we've seen

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Speaker 1: over the last couple of months, wages increasing. We've seen

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Speaker 1: that that number catching up to inflation. Not quite there yet,

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Speaker 1: but it's heading towards that number. Again, I can't predict

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Speaker 1: what's going to happen over the course of the next

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Speaker 1: six eight months, but there's obviously a hope. All I

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Speaker 1: can say is that the President laid out a plan

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Speaker 1: in January for an economic recovery. UH. Since that time,

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Speaker 1: five point six million people have gone back to the workforce.

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Speaker 1: This month's report, there's a lot of positives in it

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Speaker 1: because it's it's a diversified group of businesses that have

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Speaker 1: seen increases in their in their job market, in manufacturing

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Speaker 1: and business related issues. Uh, in a whole bunch of

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Speaker 1: different sectors, in healthcare, it's not just in hospitality. So

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Speaker 1: you know, I still think that that we're moving forward.

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Speaker 1: I didn't hear the president's whole speech there, so I'm

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Speaker 1: assuming there was some context before and after what he said. Well,

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Speaker 1: I don't think the context is already benefit when you

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Speaker 1: have the statement there for all to hear, for all

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Speaker 1: to see, we listen to the whole news conference ourselves.

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Speaker 1: He said in his words, the wages are growing faster

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Speaker 1: than inflation, and so I don't see that in the data.

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Speaker 1: IF had some uncomfortable moments in the past with the

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Speaker 1: previous administration when they used to say things that weren't accurate.

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Speaker 1: It's not accurate to say, is it, Secretary Walsh, that

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Speaker 1: wages are rising faster than inflation in America right now? Well,

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Speaker 1: certainly in the in the last couple of months. And

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Speaker 1: I asked that question this morning when I when I

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Speaker 1: sat down with our economous team and I was asked

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Speaker 1: him about wages growth and inflation. And clearly, in the

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Speaker 1: first part of this year we saw some wages some

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Speaker 1: inflation going higher than wage growth. In the last couple

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Speaker 1: of months, we've seen some of that changing. So hopefully

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Speaker 1: that train continues. Let's sorry, I don't know if that's

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Speaker 1: what the President was referring to. The president's statement is

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Speaker 1: the president's statement, it's not backed up by the dates.

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Speaker 1: From my screen, I've got inflation with a five handle

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Speaker 1: and wage growth year over year, I've got growth of

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Speaker 1: four point nine percent. Secretly, well, so I want to

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Speaker 1: talk about the vaccine mandate as well. You've put that

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Speaker 1: out there in a US today place earlier this week.

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Speaker 1: The participation right is not recovering in America. I want

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Speaker 1: I want to stand from your perspective, how you think

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Speaker 1: that mandate is going to win pack potentially vantakes a point. Well,

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Speaker 1: this report today shows that about three point eight million

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Speaker 1: Americans and directly not coming back to work because of

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Speaker 1: the pandemic. That's that's the reason for not coming back. Uh.

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Speaker 1: And what we put out yesterday in the Emerging Temporary

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Speaker 1: Standard wasn't a mandate. It was a companies over a

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Speaker 1: hundred people either testing, exsuming vaccine or testing. And that's

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Speaker 1: there's an option here, and that's what we're pushing for

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Speaker 1: here hopefully to see uh. And hopefully when when this

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Speaker 1: gets put into effect and it goes into full effect

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Speaker 1: by January, we will start to see hopefully some of

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Speaker 1: those three point eight million people who right now are

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Speaker 1: saying they're not coming back because of it, because of

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Speaker 1: the pandemic, will start to see those folks feel safe

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Speaker 1: enough to come back into the workplace. So it's a

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Speaker 1: it's a it's a it's a vaccine. If you don't

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Speaker 1: get vaccinated, you get tested, and then in the workplace

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Speaker 1: you have to wear a mask. Uh, and in your

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Speaker 1: own area, it's at the mascot. But it is about

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Speaker 1: protecting the health and safety of workers. I'll avoid the

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Speaker 1: semantics and I want to focus on a Goldmen Sax

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Speaker 1: piece you referenced in the US Today USA Today piece. Secondly, Welsh,

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Speaker 1: when you reference Goldmen Snax, can you want me through

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Speaker 1: the conclusion of that piece that you referenced in that

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Speaker 1: outped pace early this week, can you say that one

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Speaker 1: more time? I'm sorry you referenced the Goldman Sax piece

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Speaker 1: of research on what would happen with some of the

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Speaker 1: policies if they were introduced for labor supply. Can you

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Speaker 1: want me through the conclusion of that piece. Well, what

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Speaker 1: we're seeing. What we're seeing as companies that have put

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Speaker 1: put in place vaccine mandates and this isn't the minute,

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Speaker 1: but they put him in We've seen eight participation rate

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Speaker 1: of people getting vaccinated, and we're seeing people go back

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Speaker 1: to work. I mean, it's happened all across this country

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Speaker 1: in those cases. And again, this is about making sure

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Speaker 1: that we wanted to do and what that BED was

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Speaker 1: all about was really trying to explain to people that

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Speaker 1: we want to create safe working environments so people feel

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Speaker 1: safe about going back in Uh. You know, I would

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Speaker 1: rather be talking about something else today and in in

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Speaker 1: this period of time in history. But unfortunately, you know,

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Speaker 1: we're still living in the midst of a pand American

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Speaker 1: and I think that we can't overlook the fact that

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Speaker 1: people are afraid to go back to work. That's one

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Speaker 1: of the reasons. There's other reasons, childcare and other reasons.

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Speaker 1: But I think today's report is positive and we just

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Speaker 1: have to continue to build up the momentum, AMK of

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Speaker 1: this report. I want to read out the conclusion of

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Speaker 1: that government SAX piece that you referenced in this piece

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Speaker 1: earlier this week, the research from Nhatsas and his team.

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Speaker 1: Here's the conclusion. We are therefore not adjusting our employment forecast,

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Speaker 1: but we see some downside risk to employment at the

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Speaker 1: end of twenty one an upside risk by the end

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Speaker 1: of twenty two as a result of the mandate. Now,

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Speaker 1: I want to understand from your perspective, sept to be Welsh,

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Speaker 1: do you accept that that as you introduce these policies

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Speaker 1: for supply in the labor market, there is some near

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Speaker 1: term downside risk, but ultimately potentially further down the road

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Speaker 1: some upside potential. And I don't think this is any

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Speaker 1: upside risk. I mean I think that this is this

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Speaker 1: is clearly all a positive that we're doing here. I mean,

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Speaker 1: what we're doing is we're asking companies with a hundred

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Speaker 1: and more people to have their employees vaccinated or if

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Speaker 1: they're not vaccinated tested, uh. And I think that we

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Speaker 1: we can't forget that a year ago this time, we

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Speaker 1: had people dying in this country at high numbers. We

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Speaker 1: had high infection rate and high numbers. Since this pandemic began,

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Speaker 1: seven and fifty thousand Americans have died. Five million people

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Speaker 1: in this in this world have died because of a pandemic.

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Speaker 1: And I think that you know, by by by putting

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Speaker 1: an emergency temporary standard in place, isn't going to impact

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Speaker 1: our economy negative manner. If anything's gonna have a very

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Speaker 1: positive impact on it. It's so just to be clear,

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Speaker 1: are we cherry picking the bits we like of the

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Speaker 1: government Saxon research and not the conclusion I just want

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Speaker 1: to finish that, Secretary Wolf, is that what we're doing here? No,

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Speaker 1: I wouldn't necessarily cherry picking anything. I think I'm just

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Speaker 1: stating a fact about about I think people are cherry

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Speaker 1: picking what we did with the t S and I

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Speaker 1: don't think that we have to look at the whole

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Speaker 1: plan here. It's just like me coming on here today

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Speaker 1: and talking about five one thousand jobs is a good report.

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Speaker 1: Last month I was on it was a hundred three

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Speaker 1: thousand report. If I only focus on the good reports

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Speaker 1: and didn't focus on the bad reports, that's cherry picking.

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Speaker 1: I don't cherry pick. I come straight at it. Hopefully

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Speaker 1: we get more of the same. Thank you for joining

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Speaker 1: us today. Secondly, wolfh, thank you the Labor Secretary. Thank you,

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Speaker 1: sir as always creed positive w C I of nine

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Speaker 1: cents if one PC on w C, I tell Brent

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Speaker 1: w C, I ya today up six. Well you got

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Speaker 1: a one dollar thirty cent delta between West Texas and

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Speaker 1: media Brent crude. And this is an oil you know,

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Speaker 1: I'm gonna use a word from Generations Ago, John, it's

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Speaker 1: an oil market boxed up where there's a lot of

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Speaker 1: mystery out there, different meaning up in the UK. Maybe, well,

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Speaker 1: you know, we'll just comment on that now he canry

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Speaker 1: on to see. What we're gonna do right now is

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Speaker 1: speak to the general Lady from from the state of Michigan.

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Speaker 1: She is the Energy Secretary of the United States and

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Speaker 1: has been enjoying the fair climbs of Glasgow, England. I

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Speaker 1: always say, Governor Grant Homes, Secretary Grand Home, welcome to Bloomberg.

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Speaker 1: We're thrilled to speak with you this morning. Let me

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Speaker 1: cut to it if I may, and Sturgis, Michigan. It

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Speaker 1: is two dollars eighty nine cents a gallon. I guess

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Speaker 1: that's better than in California. What is the grand Home

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Speaker 1: plan to increase oil production in America? Oh? That is hilarious.

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Speaker 1: Would that I had the magic wand on this. As

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Speaker 1: you know, of course, oil is a global market. It

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Speaker 1: is controlled by a cartel. That cartel is called OPEC,

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Speaker 1: and they made a decision yesterday that they were not

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Speaker 1: going to increase beyond what they were already planning. So

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Speaker 1: you know, the interesting thing is, you know, the Department

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Speaker 1: of Energy has an Energy Information Agency, and that agency

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Speaker 1: does the forecasting of what oil and gas prices are

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Speaker 1: going to be as of As of right now, their

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Speaker 1: forecast for the beginning of December is that on average

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Speaker 1: gas prices, gasoline prices will be about three dollars and

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Speaker 1: five cents at the beginning of December. They will do

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Speaker 1: an adjustment to that forecast in the next week or so,

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Speaker 1: so we'll see if that holds. But clearly the Biden

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Speaker 1: administration is very concerned about the price at the pump

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Speaker 1: and certainly the price in people's wallets for natural gas

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Speaker 1: as well for this winter, including I would say propane

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Speaker 1: and heating oil, particularly in the northeast. What is the

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Speaker 1: American solution If they're the bad guys, Russian and OPEC

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Speaker 1: at the global price of the market, we all understand

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Speaker 1: the economics. What is the Biden plan to jump start

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Speaker 1: energy production across America? Well, here's the Biden plan. I'm

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Speaker 1: here at Glasgow. The Biden plan is to diversify and

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Speaker 1: to make sure that we move in a direction of

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Speaker 1: clean energy where we're not reliant upon cartels and we're

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Speaker 1: not reliant upon geopolitical adversaries who may be um creating

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Speaker 1: choke points for our ability and our people to be

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Speaker 1: able to access energy. So that's obviously a longer term

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Speaker 1: strategy and we will continue. This is why this is

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Speaker 1: called a transition. But if a d plus dollars a

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Speaker 1: barrel doesn't incentivize oil companies to get off the sidelines.

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Speaker 1: I'm not sure what well. For those of you on

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Speaker 1: radio today and John Ferroll, I must note that the

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Speaker 1: former governor of Michigan is wearing East Lansing green today.

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Speaker 1: That's what the color re And are we on opaque? Plus?

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Speaker 1: I do wonder and I don't think it's funny. Said

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Speaker 1: an imagine had this to say early this week. Let's

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Speaker 1: take a listen. I say that we can basically do

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Speaker 1: more for ourselves. We've been energy independent for the first

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Speaker 1: time in sixty seven years. Why can't we do more?

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Speaker 1: Why can't we produce more? We've got plenty of natural gas.

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Speaker 1: My state, beautiful Stata West Virginia, has an ocean of

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Speaker 1: natural gas under it. If they just let us build

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Speaker 1: a pipeline, we can get the product to market. And

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Speaker 1: why don't we do more drilling? And why don't we

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Speaker 1: do more basically production in the United States. I'm not

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Speaker 1: depending on OPEC. I'm not depending on other countries for

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Speaker 1: my energy anymore. We know how to do it, we

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Speaker 1: have the technology. We should be relying on ourselves. The

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Speaker 1: words of the Senator, the Democrat, Mr. Mansion, that these

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Speaker 1: as the words of the Pioneer CEO. Madam Secretary, let's

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Speaker 1: pick up with the words of the Pioneer CEO. The

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Speaker 1: president's efforts to restrict drilling on federal land and offshore

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Speaker 1: have been stunning. To backfast some his quote, he's got

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Speaker 1: to back off his rhetoric on federal leases going forward.

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Speaker 1: Do you think it's true that we are reliant on

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Speaker 1: opeque plus in the United States of America. We are

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Speaker 1: reliant on a global gas market. I mean the global

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Speaker 1: gas market. We can't just produce oil for the United States.

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Speaker 1: It is on a global market. And let me just

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Speaker 1: say the President has not banned oil and gas leases.

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Speaker 1: There are twenty three million acres of public lands that

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Speaker 1: includes offshore and onshore where there are leases that have

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Speaker 1: that are not being used right now by oil and

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Speaker 1: gas companies. Over seven thousand leases have been issued and

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Speaker 1: the oil and gas companies are not using them. They're

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Speaker 1: sitting on them, their stockpiling these leases. Why is that

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Speaker 1: so we need? You know, if the production issue is

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Speaker 1: not at the foot of the president, there is not

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Speaker 1: a band on oil and gas leases unfederal lands. Amount

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Speaker 1: of Secretary, you know, I'm careful with my words. I

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Speaker 1: didn't sight band I said restrict And in addition to that,

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Speaker 1: you're talking about why they won't invest. We know why

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Speaker 1: they won't invest. They won't invest because this administration is

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Speaker 1: speaking so highly of this big energy transition that you're

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Speaker 1: actively supporting. So I think it's misleading to say that

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Speaker 1: we are in the United States America increasingly dependent on

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Speaker 1: opaque plus when we've seen all production in this country

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Speaker 1: increase over than last several decades. Now, there are some

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Speaker 1: options out there for you, as you know, with the SPR,

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Speaker 1: with the options on the table, to address the situation

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Speaker 1: we're in. At the moment, the United States of America

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Speaker 1: is in control of its own destiny here. I do

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Speaker 1: wonder if the SPR is an option for you to

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Speaker 1: address what's happening in the commodity market. The SPR is

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Speaker 1: certainly on the table as an option, and the President

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Speaker 1: will have more to say about that. But let us

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Speaker 1: be clear. I mean, just to go back to your

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Speaker 1: other point, I mean these the oil and gas companies

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Speaker 1: have leases that there is no slow down, There is

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Speaker 1: no whatever the words were that you use, there's no restriction,

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Speaker 1: no ever on their ability to use those leases, over

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Speaker 1: seven thousand of them on public lands. Right now, So

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Speaker 1: I just don't want to let that stand. It is

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Speaker 1: not the President's doing that is causing the oil and

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Speaker 1: gas companies right now to decide to slow down. Actually

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Speaker 1: they were slowed down because of COVID, and we're seeing

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Speaker 1: some movement of oil rigs getting back online. But it's

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Speaker 1: it is curious about why they are not incentivized more

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Speaker 1: at eighty dollars a barrel. Let me just say, and

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Speaker 1: you're right about us moving to clean energy. That is

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Speaker 1: the future, and that is the long term strategy, and

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Speaker 1: we must do that so that we're not reliant upon

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Speaker 1: fuels that pollute the air that we see that are

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Speaker 1: accelerating climate change. To that point, Secretary Grant Home, some

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Speaker 1: people say that the best cure to get to a

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Speaker 1: greener future faster is to allow gas prices to go higher.

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Speaker 1: They are much higher in places like United Kingdom. Why

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Speaker 1: isn't there a school of thoughts saying this is just fine.

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Speaker 1: Perhaps people will reduce their reliance on fossil fuels and

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Speaker 1: diversify more quickly because real people use fossil fuels, and

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Speaker 1: real people's wallets, uh livelihoods are at stake. The President

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Speaker 1: does not want to see the price of fuel hurt

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Speaker 1: and pinch real people. Poor communities have about third up

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Speaker 1: to thirty of their monthly income is based upon fuels.

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Speaker 1: It's not right to raise the price of fuels. That

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Speaker 1: would actually hurt real people. That is not in the

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Speaker 1: President's plan, and he doesn't want to see that amount

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Speaker 1: of sextuary. When can we expect a decision with the

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Speaker 1: spr Is that something you're thinking about imminently? Um. I

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Speaker 1: know that the President is looking at it and he'll

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Speaker 1: have more to say about it. Okay, thank you very

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Speaker 1: much for joining us this morning. Monam. Secretary Jennifer Granhume

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Speaker 1: on this oil market, the importance of this. Pharmaceutical companies

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Speaker 1: are coming up with a pill of various means and

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Speaker 1: types and styles, and in the case of Merk, they're

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Speaker 1: allowing it to go genera immediately. That is the urgency

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Speaker 1: here on COVID nineteen. And of course the news today

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Speaker 1: and the key numbers Feiser with a pill that they

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Speaker 1: say has efficacy in a clinical trial. To translate. Andrew

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Speaker 1: Pekos of jenn Hopkins University, Andrew, is this pill like aspirin? Well,

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Speaker 1: it's a lot better than aspirin. It seems to be

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Speaker 1: incredibly effective at reducing that disease severity linked with covid

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Speaker 1: UH infection. And the population they tested had to have

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Speaker 1: at least one pre existing condition that pre exposed them

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Speaker 1: to severe covid so they were targeting a population that

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Speaker 1: was more likely to have severe disease and it worked

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Speaker 1: that amazing percentages in that population. What's the chemistry? Is

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Speaker 1: it m R n A in a pill form like

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Speaker 1: in the syringe that hurt me so much? I mean,

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Speaker 1: is it the same medicine. No, it's a it's a

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Speaker 1: very very different approach. This drug targets um, one of

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Speaker 1: the enzymes of the virus that the virus needs to

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Speaker 1: make its proteins replicate its genome, you know, so, so

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Speaker 1: it targets replicating virus and it really does stop that

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Speaker 1: virus from replicating relatively quickly. And because we're talking about chemistry,

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Speaker 1: will turn it over to well, that's a I was

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Speaker 1: going to talk about the efficacy of this chemistry because

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Speaker 1: we talked about efficacy rates of when we first started

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Speaker 1: talking about the vaccines, the MR and A vaccines. Is

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Speaker 1: this going to be a similar story we're talking now,

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Speaker 1: But there's asterisk asterisk and we might see a less

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Speaker 1: rosy future for such for such remedies. Well, here, here's

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Speaker 1: the big problem with antiviral treatments is they have to

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Speaker 1: be given early after symptom onset. And in this study,

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Speaker 1: everybody got the drug within five days of symptoms, and

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Speaker 1: there were even better results if you if you started

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Speaker 1: taking the drug within three days of symptoms. Translate that

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Speaker 1: to the real world and it becomes a bit more problematic.

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Speaker 1: You have to come up with symptoms, you have to

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Speaker 1: go get a COVID nineteen test, you have to get

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Speaker 1: the results from those tests, and then go get a prescription.

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Speaker 1: So the implementation of this in the population is going

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Speaker 1: to be a challenge. Um if we continue to have

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Speaker 1: delays in terms of getting test results back going forward,

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Speaker 1: how much the game changer is this. It's a tremendous

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Speaker 1: game changer because right now we have vaccines which give

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Speaker 1: you your first line of protection. And now even if

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Speaker 1: you're if you come up with symptoms after vaccination, you'll

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Speaker 1: have this additional pill to take, and we also have

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Speaker 1: marks pill that's also going to become available soon too

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Speaker 1: that gives you that extra layer of protection from disease severity.

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Speaker 1: So we really have the tools in place that, if

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Speaker 1: used effectively, you can really eliminate severe disease from providaccio.

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Speaker 1: How do you envision the distribution? And this is it

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Speaker 1: going to be a bottle of bear rafts forrin it?

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Speaker 1: You know, do Ane read the local pharmacy? Is it

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Speaker 1: going to be by prescription? I mean, how how are we? Oh,

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Speaker 1: I feel bad today, I need a COVID nineteen pecos

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Speaker 1: Still what do you do? So right now, it's really

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Speaker 1: going to be limited to individuals who are probably in

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Speaker 1: a high risk group and who all have COVID nineteen

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Speaker 1: positive test. That's what the clinical trials tested, So that's

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Speaker 1: probably what's going to be first approved. But you know,

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Speaker 1: Fiser itself was talking about using these UH pills as

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Speaker 1: a prophylaxis, meaning if Tom gets sick, um, Tom's family

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Speaker 1: can maybe get the pill before they used to show

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Speaker 1: any symptoms to prevent infection. And I think that's where

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Speaker 1: some of these antiviral drugs will really be even greater

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Speaker 1: game changers if they can be shown to work in

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Speaker 1: those levels. Can these dr packos? Can these anti virals

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Speaker 1: bring us back to a time that feels more familiar

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Speaker 1: pre where it's not that big of a deal to

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Speaker 1: get covid um. It will bring us back to a

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Speaker 1: time where we can manage this disease. UM. It will

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Speaker 1: probably never come back to zero um. It will probably

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Speaker 1: be a disease that we deal with like influenza, which

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Speaker 1: can cause severe disease but is controlled because of vaccines

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Speaker 1: and anti virals. And we now have that last piece

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Speaker 1: of the puzzle that's needed to control let covid nineteen

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Speaker 1: and that's the effective antivirals and more than one of them.

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Speaker 1: Andrew Peckers, thank you so much. We're just exciting news.

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Speaker 1: Just greatly appreciate it. With JOHNS. Hopkins this morning, this

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Speaker 1: is a really important conversation. Part of what a list

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Speaker 1: and I invented with John Farrell is a bit of

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Speaker 1: laughter and that you've got to keep this going about economics, finance,

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Speaker 1: investment with laughter and with lightness and for thousands and

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Speaker 1: millions of American retirees. And we say good morning to

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Speaker 1: all of you around the world as well. This isn't funny.

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Speaker 1: There are negative real yields. And if I look at

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Speaker 1: Jerome Schneider's track record it in short term paper at

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Speaker 1: PIMCO or he is world class five year percentile eight percentile,

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Speaker 1: which is all you need to know. The numbers have

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Speaker 1: gone down. Jerome Schneider joins us now to speak to

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Speaker 1: retire these worldwide. Jerome, this is grim. Is there a

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Speaker 1: social urgency to push rates higher and push short term

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Speaker 1: rates like c d s higher? Good morning to both. Uh.

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Speaker 1: There probably is some pressure building, and I think really

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Speaker 1: what you think about is the punishing of sects of

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Speaker 1: the zero yields we've seen here in the United States

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Speaker 1: of the past year plus, combined with the growing inflationary expectations,

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Speaker 1: it has been a giant erosion of purchasing power. And

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Speaker 1: I think that's become front and center in some in

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Speaker 1: terms of the dialogue of not only how corporate treasurers

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Speaker 1: think about it, i e. How they spend their capital

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Speaker 1: and on capex and manufacturing goods and things like that,

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Speaker 1: but also what the savers ultimately are going to be doing,

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Speaker 1: which is saving now for you know, purchasing power later,

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Speaker 1: and that has been obviously eroded. What I think is

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Speaker 1: important also that is to put it in context. And

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Speaker 1: I think that the context here is important. Everybody gets

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Speaker 1: really focused on the big data, the big headlines of

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Speaker 1: where inflation is going. CPI has clearly been higher, and

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Speaker 1: that's been mostly done because of supply supply constraints in

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Speaker 1: the intrap But in the medium term and longer term,

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Speaker 1: what we really need to be focused on is are

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Speaker 1: those inflationary expectations. Are those higher inflationary expectations going to

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Speaker 1: be embedded in the psychology And it's too early to tell,

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Speaker 1: but that's really what is going to be moving and

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Speaker 1: citing said to move into action to a larger degree

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Speaker 1: rather than to a lesser degree. So undoubtedly you're going

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Speaker 1: to see rates move higher over the course of perhaps

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Speaker 1: late two thousand two and into two thousand twenty three.

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Speaker 1: But that's gonna be good for savers. But how far

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Speaker 1: they go is really the question at hand. At least

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Speaker 1: wants to dive in here because this is your wheelhouse.

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Speaker 1: But I want to ask one more selfish question, and

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Speaker 1: that is from your purview, and trust me, folks, drum

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Speaker 1: Schneider's on a ginormous aircraft carriers see with billions in

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Speaker 1: short term paper, are you seeing yield hoggishness right now

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Speaker 1: from where you sit looking out duration? Are there yield hogs? Well?

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Speaker 1: I think that there's people who really get scared about

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Speaker 1: how the effects of having too much cash sitting at

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Speaker 1: zero for a while, and so people became very agnostic

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Speaker 1: in terms of the risks at hand. And and unfortunately

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Speaker 1: we saw that come into play over the past two

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Speaker 1: weeks a short term industrates moved unabashedly higher, really as

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Speaker 1: markets became more concerned with hawkish rehetoric, et cetera, and

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Speaker 1: initially in manating for the Bank of England as you know,

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Speaker 1: and then Australia than Canada, and obviously in the US

430
00:22:39,280 --> 00:22:42,080
Speaker 1: is more tempered. But I would say that that is

431
00:22:42,359 --> 00:22:45,879
Speaker 1: a situation whereby people have been probably less vigilant in

432
00:22:46,000 --> 00:22:48,159
Speaker 1: terms of how they're thinking about risk, both credit and

433
00:22:48,200 --> 00:22:51,600
Speaker 1: interest rate risk, specifically in the short end. And more importantly,

434
00:22:51,720 --> 00:22:54,040
Speaker 1: the focus on the need to adapt to how to

435
00:22:54,080 --> 00:22:57,440
Speaker 1: think about the gradual trend toward higher rates, and and

436
00:22:57,480 --> 00:22:59,600
Speaker 1: that's and that's really the focus. That's how to play

437
00:22:59,640 --> 00:23:01,199
Speaker 1: a little more defense, how to be a little bit

438
00:23:01,240 --> 00:23:04,080
Speaker 1: more conservative, perhaps give up a few basis points today

439
00:23:04,359 --> 00:23:06,520
Speaker 1: for the benefit of having a little bit more upside

440
00:23:06,600 --> 00:23:09,440
Speaker 1: in terms of how your cash performs tomorrow and over

441
00:23:09,480 --> 00:23:11,399
Speaker 1: the course of the next two years. That's really what

442
00:23:11,480 --> 00:23:14,040
Speaker 1: it's about. And so from the short term market perspective,

443
00:23:14,240 --> 00:23:17,960
Speaker 1: people were taking a rather blinded view in terms of

444
00:23:18,000 --> 00:23:20,040
Speaker 1: whether the risks were and I think the past two

445
00:23:20,080 --> 00:23:22,600
Speaker 1: weeks have really opened their eyes to that drome. It's

446
00:23:22,640 --> 00:23:24,879
Speaker 1: wonderful to have you for many reasons. You have a

447
00:23:24,920 --> 00:23:27,640
Speaker 1: bird's eye view on the institutional side of things, managing

448
00:23:27,680 --> 00:23:30,960
Speaker 1: money for retirees trying to support themselves on a negative

449
00:23:31,040 --> 00:23:33,600
Speaker 1: yielding world at least on a real basis. And then

450
00:23:33,600 --> 00:23:35,800
Speaker 1: on the flip side, you see people parking their money

451
00:23:35,800 --> 00:23:39,600
Speaker 1: and savings trying to find safety to then take that

452
00:23:39,680 --> 00:23:42,320
Speaker 1: money and use it for something. When we return to

453
00:23:42,480 --> 00:23:45,120
Speaker 1: some kind of normal what do you see in terms

454
00:23:45,119 --> 00:23:48,280
Speaker 1: of people taking that money out of short term funds

455
00:23:48,600 --> 00:23:51,040
Speaker 1: and putting it back into the economy the way that

456
00:23:51,080 --> 00:23:55,520
Speaker 1: we expected to happen with a savings glut beginning to normalize.

457
00:23:55,920 --> 00:23:57,719
Speaker 1: Quite honestly, it's going to be a bit of a

458
00:23:57,720 --> 00:24:01,359
Speaker 1: longer road. You have. Obviously, the the Federal Reserve and

459
00:24:01,440 --> 00:24:03,600
Speaker 1: other central banks have created these giant tidal ways of

460
00:24:03,640 --> 00:24:07,280
Speaker 1: liquidity to you know, really really drenched parched soils from

461
00:24:07,359 --> 00:24:09,960
Speaker 1: last year or so. And I think, really what that

462
00:24:10,040 --> 00:24:12,520
Speaker 1: does that creates effects, and that one of the effects

463
00:24:12,520 --> 00:24:14,680
Speaker 1: that we have to be mindful of is that there

464
00:24:14,680 --> 00:24:18,560
Speaker 1: will be sort of this this tempest of volatility similarly

465
00:24:18,640 --> 00:24:20,280
Speaker 1: similar to what we saw over the past week or

466
00:24:20,320 --> 00:24:22,600
Speaker 1: two um and we don't want to downplay that it

467
00:24:22,640 --> 00:24:24,840
Speaker 1: was actually pretty substantive, even though it was very confined

468
00:24:24,880 --> 00:24:28,040
Speaker 1: to short term interest rates. But that will result in

469
00:24:28,119 --> 00:24:31,120
Speaker 1: temperamental tinkering from these central banks. Ultimately, what it means

470
00:24:31,200 --> 00:24:33,760
Speaker 1: is that investors are going to move from a psychology

471
00:24:33,800 --> 00:24:36,959
Speaker 1: of playing you know, playing defense from from situations by

472
00:24:37,000 --> 00:24:40,080
Speaker 1: the macro economy to more one about thinking about liquidity

473
00:24:40,119 --> 00:24:42,520
Speaker 1: management in a proactive sense, because there is going to

474
00:24:42,560 --> 00:24:44,919
Speaker 1: be more volatility in the market. And this isn't just

475
00:24:44,960 --> 00:24:47,840
Speaker 1: a situation over the next few weeks or months as

476
00:24:47,880 --> 00:24:49,960
Speaker 1: the Fed gets more clarity in terms of how that

477
00:24:50,040 --> 00:24:53,240
Speaker 1: reaction function goes, but it's actually something more structural that's

478
00:24:53,280 --> 00:24:56,800
Speaker 1: going to be more embedded into the psychology of investors

479
00:24:56,800 --> 00:24:59,640
Speaker 1: over the course of the next three, five, seven, ten years.

480
00:24:59,680 --> 00:25:02,720
Speaker 1: That a lot of the a lot of the volatility

481
00:25:02,720 --> 00:25:04,600
Speaker 1: it was removed to the market from the responses from

482
00:25:04,640 --> 00:25:08,120
Speaker 1: the global financial crisis are actually now going the other way.

483
00:25:08,240 --> 00:25:10,240
Speaker 1: And so as we get into this more new neutral

484
00:25:10,240 --> 00:25:13,879
Speaker 1: based economy. It's an age of transformation where we specifically

485
00:25:14,119 --> 00:25:16,760
Speaker 1: have to think about how to manage that volatility. This

486
00:25:16,840 --> 00:25:19,360
Speaker 1: is actually the time when the short term strategies come

487
00:25:19,359 --> 00:25:22,480
Speaker 1: more into play, not necessarily as a cash management mechanism,

488
00:25:22,520 --> 00:25:25,080
Speaker 1: but to embrace the higher yields that we're going to

489
00:25:25,119 --> 00:25:26,960
Speaker 1: see over a longer period of time. Number one and

490
00:25:27,000 --> 00:25:29,439
Speaker 1: number two is a volatility management to ELSA, and I

491
00:25:29,440 --> 00:25:32,200
Speaker 1: think that's really what becomes part of the dialogue and

492
00:25:32,320 --> 00:25:35,960
Speaker 1: psychology for investors, specifically those savers sitting on the sideline.

493
00:25:36,040 --> 00:25:38,560
Speaker 1: This is huge because when you talk about temporary tinkering,

494
00:25:38,560 --> 00:25:41,520
Speaker 1: we talk about the temper tantrum uh that that that

495
00:25:41,600 --> 00:25:45,080
Speaker 1: we saw certainly in the short end of world rates.

496
00:25:45,160 --> 00:25:46,520
Speaker 1: I mean that we saw this and then from a

497
00:25:46,560 --> 00:25:48,920
Speaker 1: Bank of England, we saw this, from the e c

498
00:25:49,080 --> 00:25:52,719
Speaker 1: B and the the U S rates followed. How do

499
00:25:52,760 --> 00:25:56,120
Speaker 1: you then actively manage this to capture the benefit? How

500
00:25:56,119 --> 00:25:59,880
Speaker 1: do you work around this as an active manager? Well,

501
00:26:00,160 --> 00:26:02,359
Speaker 1: number one, you have to have degrees of freedom simply

502
00:26:02,400 --> 00:26:05,680
Speaker 1: going and buying certificates of deposit and commercial paper. That's

503
00:26:05,720 --> 00:26:08,000
Speaker 1: one avenue and it's been sort of about there for

504
00:26:08,080 --> 00:26:11,800
Speaker 1: obviously about five decades specifically when money market funds came however,

505
00:26:12,200 --> 00:26:15,080
Speaker 1: it's it's it's grossly mispriced, and frankly, one of the

506
00:26:15,119 --> 00:26:18,520
Speaker 1: things we've learned in numerous crisis but specifically highlighted with COVID,

507
00:26:18,560 --> 00:26:21,440
Speaker 1: is that some of those markets actually become increasingly ill liquid,

508
00:26:21,960 --> 00:26:24,480
Speaker 1: as we've seen, and regulatory responses are going to be

509
00:26:25,160 --> 00:26:27,439
Speaker 1: to cover that. But I think the more important thing

510
00:26:27,520 --> 00:26:29,560
Speaker 1: here is having degrees of freedom, having the ability who

511
00:26:29,600 --> 00:26:32,320
Speaker 1: have flexibility, and I think when you get into those

512
00:26:32,359 --> 00:26:35,639
Speaker 1: situations is not simply about defense, it's a it's about

513
00:26:35,720 --> 00:26:38,119
Speaker 1: more about having albums. Okay, I got to ask the

514
00:26:38,200 --> 00:26:40,720
Speaker 1: question that your general counsel doesn't want me to ask,

515
00:26:40,760 --> 00:26:45,120
Speaker 1: but here we go. Do we risk price down, yields up,

516
00:26:45,359 --> 00:26:48,560
Speaker 1: or break the buck on money market funds? No? And

517
00:26:49,000 --> 00:26:50,439
Speaker 1: in fact, I think that's one of the things that

518
00:26:50,480 --> 00:26:53,160
Speaker 1: we've been pretty vocal here at PIMCO A bounces. Money

519
00:26:53,200 --> 00:26:56,000
Speaker 1: market funds need to be fairly bifurcated with government money

520
00:26:56,000 --> 00:26:58,480
Speaker 1: market funds, those that invest in US trudguries, those are

521
00:26:58,720 --> 00:27:01,199
Speaker 1: those are remains step Ashton fine, and we actually think

522
00:27:01,240 --> 00:27:03,280
Speaker 1: that's a foundation of the economy. That's how we manage

523
00:27:03,320 --> 00:27:06,320
Speaker 1: our liquidity. And cash here at PIMCO as a foundation

524
00:27:06,480 --> 00:27:09,520
Speaker 1: using US treasuries and US Treasury back to repo. But

525
00:27:09,560 --> 00:27:11,359
Speaker 1: I think when you get into other areas that are

526
00:27:11,400 --> 00:27:13,840
Speaker 1: more credit sensitives, such as prime money market funds, you

527
00:27:13,880 --> 00:27:15,800
Speaker 1: should be going to those with a wide open eye

528
00:27:15,880 --> 00:27:19,880
Speaker 1: with regard to the focal points of they're highly concentrated

529
00:27:19,960 --> 00:27:22,960
Speaker 1: financial risk, etcetera. And so that is where we sort

530
00:27:23,000 --> 00:27:26,439
Speaker 1: of preach diversification. Prime miney market funds don't necessarily provide

531
00:27:26,440 --> 00:27:29,040
Speaker 1: that diversely, so we just want to be more proactive

532
00:27:29,040 --> 00:27:32,280
Speaker 1: in that regard. Jerome sent me a note once. He said, Tom,

533
00:27:32,320 --> 00:27:34,960
Speaker 1: you're an idiot to go into the triple ever still

534
00:27:35,080 --> 00:27:38,480
Speaker 1: cash fun He said, you are just an absolute check

535
00:27:38,560 --> 00:27:40,320
Speaker 1: And what did you say? I said, come on, we'll

536
00:27:40,320 --> 00:27:43,399
Speaker 1: have you on the show. Jon Snyders, thank you so

537
00:27:43,480 --> 00:27:48,600
Speaker 1: much with Pimco. This is the Bloomberg Surveillance Podcast. Thanks

538
00:27:48,600 --> 00:27:51,920
Speaker 1: for listening. Join us live weekdays from seven to ten

539
00:27:51,960 --> 00:27:55,800
Speaker 1: a m Eastern. I'm Bloomberg Radio and I'm Bloomberg Television

540
00:27:56,160 --> 00:28:00,199
Speaker 1: each day from six to nine am for insight from

541
00:28:00,240 --> 00:28:04,760
Speaker 1: the best in economics, finance, investment, and international relations. And

542
00:28:04,840 --> 00:28:10,040
Speaker 1: subscribe to the Surveillance podcast, on Apple Podcast, SoundCloud, Bloomberg

543
00:28:10,040 --> 00:28:13,720
Speaker 1: dot com, and of course, on the terminal. I'm Tom Keane,

544
00:28:13,760 --> 00:28:15,800
Speaker 1: and this is Bloomberg