Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Ley, we bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg
Speaker 1: dot com, and of course, on the Bloomberg terminal. Let's
Speaker 1: do more on all Things markets with Richard Bernstein, CEO
Speaker 1: and ce IO of r B Advisors. Richard, when you're
Speaker 1: looking ahead to two now that there's a question about
Speaker 1: the fiscal agenda here in the States and a question
Speaker 1: as to how much of a growth impact we could
Speaker 1: see from the omicron variant, do you think differently this
Speaker 1: morning than you did a week ago? Well, Kaylee, I
Speaker 1: think that the markets right now were caught between a
Speaker 1: rock and a hard place. Right in the short term,
Speaker 1: we've got this slew of bad news, whether it's builback
Speaker 1: better that you just mentioned, or whether it's COVID, or
Speaker 1: whether it's the FED from last week deciding they're gonna
Speaker 1: be tighter. You know, in the short term, you don't
Speaker 1: have a lot of good news. However, that short term
Speaker 1: news could cause the better longer term outlook as we
Speaker 1: go through three. So I think the short term here
Speaker 1: could be a little rocky. But I think to try
Speaker 1: and trade that maybe a full scheme. So what do
Speaker 1: you do? You just sit on your hands, Richard, Wait
Speaker 1: what see what happens into the new year. Is that
Speaker 1: the right strategy here? I think, to some extent that's
Speaker 1: absolutely right. I mean, it's always cute to say we
Speaker 1: should trade and trade out, trade and trade out, but
Speaker 1: very few people can actually do that successfully. So so
Speaker 1: saying one thing and doing is is another. So I think, look,
Speaker 1: it's pretty clear that inflation is probably going to be
Speaker 1: higher than people think in two I think that is
Speaker 1: the most important thing that portfolio should be structured for
Speaker 1: right now. Now that's not gonna look that way in
Speaker 1: the next two weeks perhaps, But remember, if we do
Speaker 1: shut down, let's say COVID is a lot worse than
Speaker 1: anybody things, and we do shut down, the supply disruption
Speaker 1: problems that we've already had just get worse. They don't
Speaker 1: get better, and so the whole notion of the of
Speaker 1: inflation and of us being a price taker just gets worse. Richard.
Speaker 1: I'm gonna dig a little bit into that inflation call.
Speaker 1: When you're thinking about inflation into two, are you thinking
Speaker 1: we see some more deeply embedded wage based inflation start
Speaker 1: to emerge? I think many much of the inflation excuses
Speaker 1: are the inflation sort of narrative around it being transitory
Speaker 1: has suggested that it's it's all due to the supply
Speaker 1: chain constraints. But how much of this has demand and
Speaker 1: how much of it becomes deeply embedded as we look
Speaker 1: into three? Right, So, so, Gina, one thing you said,
Speaker 1: I think it's very important that the word transitory. So
Speaker 1: I think it's important to understand the supply disruptions have
Speaker 1: already lasted an awful lot longer than the seventy seventy
Speaker 1: four oil embargo right now was a supply disruption. It
Speaker 1: was a political supply disruption, and but it was a
Speaker 1: supply disruption and that changed the way people thought about
Speaker 1: inflation for basically the next ten years. And it wasn't
Speaker 1: the beginning of inflation, but it changed the way people
Speaker 1: thought about it. So our supply disruption is are already
Speaker 1: much bigger, much broader, and longer than what we saw.
Speaker 1: But to get to your question explicitly, yes, we're having
Speaker 1: a perfect storm in the labor market right now. There's
Speaker 1: no one issue that's causing the labor market to be type.
Speaker 1: But you can think of you know, whether it's baby
Speaker 1: boomers retiring, whether it's COVID restrictions, whether it's immigration restrictions,
Speaker 1: whether it's the rise of unions. I mean, all these
Speaker 1: you could argue are good or bad. Not my day job,
Speaker 1: but you're getting a perfect storm that is tightening the
Speaker 1: labor market. And I think that's a substantial change that's
Speaker 1: not going to go away. Well, you talk about all
Speaker 1: these supply side issues, supply side issues or not something
Speaker 1: that monetary policy is equipped to address. What the FED
Speaker 1: can do is tamped down on demand. So and the
Speaker 1: fence policy operates with a lag when we think about
Speaker 1: monetary polic See so, how does the inflation conversation actually
Speaker 1: get solved? In your view? So that's kind of my
Speaker 1: point is, and I'm not sure it does get solved,
Speaker 1: so to speak. That's why I think one should have
Speaker 1: been on higher inflation. I'm not talking the ninety seventies
Speaker 1: type inflation, but think of it as an over under bed.
Speaker 1: I think right now you should get the over on
Speaker 1: inflation as we looked at three, because you're right, you know,
Speaker 1: all monetary policy can do is to sign me demand,
Speaker 1: and that's politically unacceptable, especially as we head towards the
Speaker 1: mid terms in two would be a lot for the Fed,
Speaker 1: really tu intervening, Richard, Is that actually the case because
Speaker 1: my impression, certainly, and listening to the narrative coming out
Speaker 1: of DC at the moment, the Democrats in particular, and
Speaker 1: the President is focused very much on this idea that
Speaker 1: he needs to tamp down inflation. It was interesting to
Speaker 1: see the pivot that we got from j Pal posts
Speaker 1: he was his reappointments the Democrats and I agree, we've
Speaker 1: never really seen this before, the politics stick that that
Speaker 1: they once inflation brought down. So what we owe in
Speaker 1: a different difference kind of picture here relative to previous
Speaker 1: cycles where we've seen inflation coming through. So I'll use
Speaker 1: my analogy again, rock in a hard place. I think
Speaker 1: the Biden administration is caught in a rock in a
Speaker 1: hard place on inflation. Why because they reappointed j Pal. Right,
Speaker 1: we made the argument many months ago that if he
Speaker 1: reappointed j Pal, he owned inflation. If he didn't, then
Speaker 1: it was the previous administration that would own inflation. Because j.
Speaker 1: Powe was appointed by the previous administration. So by not
Speaker 1: reappointing Powell, he would say we have a clean slate
Speaker 1: where we have to fight inflation. But now he owns it,
Speaker 1: and and so again I think the rock in the
Speaker 1: hard place is the right way to think about it.
Speaker 1: Richard talked to us a little bit about your investment strategy.
Speaker 1: If we're going to have a more deeply embedded inflation,
Speaker 1: if we're going to have faster inflation, but maybe not
Speaker 1: seventies inflation, what do you do with your asset allocation,
Speaker 1: and specifically within the equity market, it's your mix. Yeah,
Speaker 1: So I think, um Gina the you know, obviously you
Speaker 1: want to have pro inflation assets in in the portfolio.
Speaker 1: And I think you know, most investors, whether the institutions,
Speaker 1: individuals makes a difference. Most investors are are very underweight
Speaker 1: pro inflation assets. But at the same time, getting to
Speaker 1: some of the other questions we were just talking about,
Speaker 1: one has to remember that inflation really pops up in
Speaker 1: a late cycle environment, doesn't really happen in early cycle
Speaker 1: Environment's more of a late cycle environment. So I think
Speaker 1: you want to have spare tires in the portfolio so
Speaker 1: we are overweight energy and industrials and and some emerging markets,
Speaker 1: you know, all the traditional pro inflation type assets on
Speaker 1: the equity sign. But at the same time, our more
Speaker 1: recent editions have been things like consumer staples that we
Speaker 1: started to add spare tires to the portfolio. All right, Richard,
Speaker 1: Before we let you go, Tom and John aren't here,
Speaker 1: and that means that we haven't talked about football yet,
Speaker 1: or at least European football. I when I think football,
Speaker 1: I think a very different kind of football. I'm not
Speaker 1: educated on this subject, but I know you like the Spurs, or,
Speaker 1: as Tom Keene would call them, the Tots. Do you
Speaker 1: have any thoughts you would like to share with our
Speaker 1: television and radio audience this morning. Um? Well, as I've
Speaker 1: said many times, any Spurs fan out there will will
Speaker 1: know that being a Spurs fan is like being sisyphus.
Speaker 1: We get to the top of the hill and then
Speaker 1: we seem to roll back down and um it's um.
Speaker 1: You know if if New Yorkers think it's hard being
Speaker 1: a Met fan, uh, Spurs are are probably the biggest
Speaker 1: challenge to one's personal psyche. But they're great team. I
Speaker 1: had to say, Richard, Richard to two against Liverpool. I
Speaker 1: thought it was a much better game. I appreciate it.
Speaker 1: It was a fairly controversial game, Harry Kane what he
Speaker 1: did over the weekend. But never this feels like a
Speaker 1: team that could be on the turn at the moment,
Speaker 1: so appreciate the content. Is a very good manage. Yeah,
Speaker 1: and we'll see what happens. Yeah, yeah, yeah, there's but
Speaker 1: you see, that's that's the story is. There's always hope,
Speaker 1: there's always a sun rising, and um, we'll see what happens,
Speaker 1: all right, Richard Bernstein leaving us with a little bit
Speaker 1: of optimism, at least for the sports world this morning
Speaker 1: of our v advisors, thank you so much for joining
Speaker 1: us in Happy holiday is to you and yours. Let's
Speaker 1: continue our conversation on the fiscal part of this equation.
Speaker 1: Henrietta Trades, director of economic policy research at Beta Partners,
Speaker 1: joins us. Now, So, Henrietta, it doesn't seem like this
Speaker 1: is entirely a done deal. Chuck Schumer wants to put
Speaker 1: Bill back better to a vote in January, really calling
Speaker 1: out Mansion on his bluff. Do you agree with Goldman
Speaker 1: that if he is a though if it doesn't pass
Speaker 1: we're going to see a real read through into growth
Speaker 1: here in the US. I think that's a perfectly valid
Speaker 1: argument and good economic policy and thinking um the child
Speaker 1: tax credit alone, I think one of the biggest components
Speaker 1: that changes when that benefit lapses at the end of
Speaker 1: this year is it moves from a monthly payout to
Speaker 1: an annual payout. Never mind the drop from thirty six
Speaker 1: dollars a year to two thousand dollars, it's that an
Speaker 1: that monthly pay out that so many families used to
Speaker 1: spend on food. Um that I think is going to
Speaker 1: have a material impact if you disposal income, which is
Speaker 1: you would call it for that income threshold. I think
Speaker 1: that's going to be a major driver. And then you have,
Speaker 1: of course, the near term impacts of incredible amounts of
Speaker 1: investment across all kinds of energy sectors, the health care space.
Speaker 1: It's hard not to see what this touches. UM. So,
Speaker 1: I think it's very appropriate to have a downward revision
Speaker 1: to economic forecast for two in the back of this
Speaker 1: bill not becoming law. And may so were you surprised
Speaker 1: how strong the language was from the White House over
Speaker 1: the weekend post a Fox interview. It feels like bridges
Speaker 1: are being burnt here. If they are, is there a
Speaker 1: way back? How do they reconnect the White House and
Speaker 1: Joe Mansion after this? That's exactly right. I spoke with
Speaker 1: a number of Democrats in the immediate hours after Senator
Speaker 1: Mansion's commentary on Fox News No Less, and I think
Speaker 1: the White House felt very stabbed in the back that
Speaker 1: they had had meetings and conversations with Senator Mansion. Even
Speaker 1: President Biden personally at his home in Delaware. Hearing the
Speaker 1: news second hand from a TV screen as opposed to
Speaker 1: getting a heads up from the senator from West Virginia
Speaker 1: was a huge blow. Obviously, the tensions have been fraud
Speaker 1: and Senator mentioned has an election coming up, and I
Speaker 1: think it makes sense for him to cross the rubicon
Speaker 1: into being an independent who caucuses with Democrats as opposed
Speaker 1: to being a Democrat Democrats. So I think that's the
Speaker 1: direction that he's painting right now, the path that he's
Speaker 1: drawing for himself, and it makes political sense for him.
Speaker 1: But absolutely burns bridges at the White House. You can
Speaker 1: see that from the Press Secretary's response and from majority
Speaker 1: of Leader Schumer's response as well. I don't think there's
Speaker 1: a fear that he'll affect and become a Republican. But
Speaker 1: the scenario where he becomes an independent the coxes of
Speaker 1: Democrats makes a lot of sense to me. Okay, if
Speaker 1: that is the case, that he is going to be
Speaker 1: largely and independent, how should we think about what the
Speaker 1: president can do next? Um, I've read a lot over
Speaker 1: the weekend talking about the fact that maybe what should
Speaker 1: be the focus here is fewer programs that are smaller
Speaker 1: but they last longer. Kind of what's what can be
Speaker 1: we formulated here to make to make it work that
Speaker 1: is actually going to provide some benefit to the American people. Well,
Speaker 1: I think you have a really big problem that's beyond policy.
Speaker 1: The Senator Mansion voiced yesterday at about the ten minute
Speaker 1: mark in his program on Fox News when he said
Speaker 1: he doesn't support the current strategy in the process of reconciliation,
Speaker 1: when he said we should move to the original committee process.
Speaker 1: What you're talking about there is abandoning a Democrat only
Speaker 1: package and going in a scenario where you need at
Speaker 1: least three or four or maybe even ten Republicans to
Speaker 1: get on board before Senator Mansion will support anything. That's
Speaker 1: a huge hurdle and we'll have more material implications than
Speaker 1: just the policy. On the policy front, I think you're
Speaker 1: not going to be in a situation where you get
Speaker 1: a permanent child tax credit increase. That bill alone would
Speaker 1: be one point six trillion dollars. So the truncated period
Speaker 1: of time where you get you know, one to three
Speaker 1: years worth of policy is half of the course. It's
Speaker 1: very normal in Washington. It was part of the two
Speaker 1: thousand seventeen tax bill and basically every other big piece
Speaker 1: of legislation I've ever seen. So to anticipate that this
Speaker 1: will all be short term makes sense. I think that
Speaker 1: Senator Mansion has an issue with the overall sack the bill,
Speaker 1: and so what I see is the power from here
Speaker 1: is you take inspiring the sender's package, which currently has
Speaker 1: a host of the provisions in clean energy retrofitting for
Speaker 1: your home, for example, UM and also the business expense
Speaker 1: deduction that expires from the two thousand seventeen tax bill.
Speaker 1: Cobble those together, get a portion of the child tax
Speaker 1: credit that maybe is means tested and less beneficial for families,
Speaker 1: strip out the self deduction, and try to put that
Speaker 1: bill on the floor, maybe with a top bound of
Speaker 1: about seven billion and see where that gets you. So, Henrietta,
Speaker 1: where then is the dollar figure? If we're going to
Speaker 1: have this cobble together bill that is substantially smaller, has
Speaker 1: less provisions within it, what's the total dollar figures for
Speaker 1: spending from the fiscal government? Coming in somewhere between three
Speaker 1: hundred billion and seven hundred billion is my new range.
Speaker 1: That's down from one point four to one point six trillion,
Speaker 1: which was my range when we were going a Democrat
Speaker 1: only strategy. Now that we're going to need potentially Republican
Speaker 1: votes and we need to make this bill smaller, my
Speaker 1: main fear is that seven hundred billion is probably the
Speaker 1: top line and three hundred billion is the small end um.
Speaker 1: One thing I'd encourage investors to keep an eye on
Speaker 1: is an emergency supplemental out of the tornadoes that hit UH.
Speaker 1: It's like Kentucky and nearby. That's must pass. That's legislation
Speaker 1: that you can get Republican votes for. So it's not
Speaker 1: outside the bounds of UH. You know, conventional thought to
Speaker 1: see a bill passing with sixty votes in the first
Speaker 1: quarter next year, and if you can tack on the
Speaker 1: CTC and a host of the other components that have
Speaker 1: bi partisan support. Um, I think you can get that
Speaker 1: bill done by like February eighteenth, alright, just with a
Speaker 1: smaller price tag. Thank you so much to Henrietta Trace
Speaker 1: for joining us this morning. In the central banks are
Speaker 1: instead of tightening, it is loosening policy. But tightening is
Speaker 1: the name of the game and so many parts of
Speaker 1: the world, and increasingly so here in the US. Is
Speaker 1: the FED looks potentially to raise interest rates three times
Speaker 1: next year? How are is the omicron variant? Maybe change
Speaker 1: that calculus? Laura Ray In, chief US economist at FS
Speaker 1: Investment Investments, joins us. Now, So, Laura, given how rapidly
Speaker 1: this variant in particular seems to be swept spreading, and
Speaker 1: given now the likelihood that the build back Better agenda,
Speaker 1: at least in its holistic current form, may not be
Speaker 1: passed on the fiscal side, does the FED have to
Speaker 1: think differently than it did just a week ago on Wednesday?
Speaker 1: You know, I think the FED is well aware that
Speaker 1: the pandemic that variants are going to continue to be
Speaker 1: a challenge, and these are gonna come fast, and they
Speaker 1: could also these waves could pass us by also fairly quickly.
Speaker 1: I think what they're really focused on right now is inflation,
Speaker 1: and of course step one is this really rapid tabor.
Speaker 1: They want to get that out of the way to
Speaker 1: give themselves the flexibility, so, you know, give it. Getting
Speaker 1: the taper out of the way and March puts March
Speaker 1: on the table as a rate hike option. I think
Speaker 1: that's where we start to get more specific with timing
Speaker 1: and thinking about the variants where the economy is doing.
Speaker 1: How resilient we've been in the face of these challenges,
Speaker 1: because as rapidly as the virus continues to evolve, our
Speaker 1: ability to work around it also continues to improve. Okay,
Speaker 1: so we're getting better at handling the virus side of things,
Speaker 1: but we also have had monetary and fiscal stimulus at
Speaker 1: our backs for most of this pandemic. Now the monetary
Speaker 1: side and theory is going to start to wane, and
Speaker 1: the fiscal side remains a question. In Goldman Sachs downgraded
Speaker 1: its views on US growth for not just the first quarter,
Speaker 1: not just the second quarter, already out to the third
Speaker 1: quarter on the basis and build back better, not getting past.
Speaker 1: Do you agree with that thesis? You know, I think
Speaker 1: it's strong to pencil in the build Back Better plan
Speaker 1: is adding one percent to GDP, and each of the
Speaker 1: those orders, um, they were probably higher than my forecast
Speaker 1: for next year, which was for four percent growth in
Speaker 1: the first half and then two and a half percent
Speaker 1: growth in the second half. And that really reflects the
Speaker 1: fact that I think our economy, while still growing at
Speaker 1: a healthy clip, is just going to be decelerating back
Speaker 1: towards sort of our long run potential. That's a combination
Speaker 1: of the lower labor force participation and to your point,
Speaker 1: the fact that these myriad tail winds are dissipating, and
Speaker 1: you know, you look at the fed rate heights cycle
Speaker 1: that is going to be a head to into our economy.
Speaker 1: Maybe not next year specifically, certainly towards the end of
Speaker 1: next year that could materialize, but that impacts things with
Speaker 1: the lag. I do think they were on a trajectory
Speaker 1: for slower growth, which you know is going to feel
Speaker 1: weird after six quarters of just really extraordinarily supercharged exponential growth.
Speaker 1: Laura and the interest of trying to get a sense
Speaker 1: for how much build back Better contributed to up tomism
Speaker 1: in the in the asset markets and contributed to forecast optimism.
Speaker 1: How much are you talking to clients about build back
Speaker 1: Better specifically, and and from your perspective, how much optimism
Speaker 1: was um sort of tied to this package getting past.
Speaker 1: I think the optimism has slowly been fading. I think
Speaker 1: for economists, you know, we've just been hammering that we
Speaker 1: need infrastructure spending um and it's good not only for
Speaker 1: just the economy in the near term, but for long
Speaker 1: run productivity growth. I think for markets, there's been a
Speaker 1: real focus on real assets and that's been happening partly
Speaker 1: because of inflation, because it's an underappreciated sector that we
Speaker 1: just haven't really needed to focus on, and I think
Speaker 1: build back Better has was part of that optimism. I
Speaker 1: think the inflation narrative is still very strongly in play there,
Speaker 1: and real assets is a place that we see a
Speaker 1: lot of interest in focus from clients. But I think
Speaker 1: at the end of the day, UM, you know, people
Speaker 1: are have been seeing this bill struggle along for the
Speaker 1: better part of a year now, and the reality is
Speaker 1: that optimism I think had faded some time ago. It's
Speaker 1: really just sort of tempered, cautious hope that something will
Speaker 1: get done right. And when you're talking to those clients
Speaker 1: about the biggest upside and downside risk to the economy
Speaker 1: going into two. What are you talking most about? You know, inflation? Inflation.
Speaker 1: Inflation is the topic, and I actually am trying to
Speaker 1: get them to move away from just focusing on inflation
Speaker 1: to how you manage that in investing, because what we
Speaker 1: actually see is that inflation is one of the uh
Speaker 1: in a in a high and rising inflation environment is
Speaker 1: one of the most detrimental to equities, and it's a
Speaker 1: place where investors and typically underestimate the impact of inflation
Speaker 1: on forward valuations. And so for that reason, you really
Speaker 1: need to rotate out of just these big traditional um
Speaker 1: index funds and into something that's more active and really
Speaker 1: captures the fact that equity markets for a long time
Speaker 1: now have seen this huge dispersion underneath, right, we have
Speaker 1: a small number of super charged large cap equities pulling
Speaker 1: the whole thing higher, and underneath there are a lot
Speaker 1: of equities which are not which you're struggling at this point,
Speaker 1: and annual returns are not looking as good. So from
Speaker 1: that perspective that, of course fixed income is really I
Speaker 1: think going to struggle next year and a higher inflation
Speaker 1: and fund right, and I'm Glad you brought up the
Speaker 1: divergence going on within the equity market, because the really
Speaker 1: clear divergence has emerged between small cups and large caps
Speaker 1: as well. When you're thinking about capitalization and the small
Speaker 1: caps versus large gaps going into two and then follow
Speaker 1: that on with style, how would you recommend crafting that
Speaker 1: allocation going into your head? So for us, we're really again,
Speaker 1: you know, focused on the inflation protection, so focused on
Speaker 1: real assets, and I think focused on energy, which uh,
Speaker 1: you know has come a long way, but I think
Speaker 1: it's still relatively undervalue, and it's a place where, given
Speaker 1: that things are starting to feel really late cycle, I
Speaker 1: think the economy is going to be able to handle
Speaker 1: rate hikes. I'm just not sure the market is going
Speaker 1: to be able to handle it. We need to just
Speaker 1: brace for that volatility. So I think for us, it's
Speaker 1: a it's a twofold story because we really want to
Speaker 1: keep investors rounded in opportunistic credit, in lower duration credit options,
Speaker 1: and we want to maintain the help on the equity
Speaker 1: side when it comes to the inflation challenge. Lord, good morning,
Speaker 1: it's a guy. Can I just take you back to
Speaker 1: the tape? How much flexibility do you think the FED
Speaker 1: currently has in the way that it's thinking about that type.
Speaker 1: It has accelerated it. We've obviously learned that over the
Speaker 1: last few days. But if we do see overcrown taking
Speaker 1: off in January February, how much flexibility is there still
Speaker 1: in the process. Could the Fed manage it's maybe backlow,
Speaker 1: did a little bit more, maybe actually deliver a little
Speaker 1: bit more on the monetary front up front if we
Speaker 1: have to deal with that January February and then really
Speaker 1: push hard into the end of that type and then
Speaker 1: ultimately where where they were and where they announced a
Speaker 1: few days back. If I were at the FED, I
Speaker 1: would be kicking myself for not having initiated the taper
Speaker 1: significantly earlier. I think right now they just need to
Speaker 1: get out of the way. They feel like if they
Speaker 1: want to really pivot towards the levels that they can
Speaker 1: pull that will actually do something to the underlying economy
Speaker 1: that the taper and the quantity of easing is really
Speaker 1: more a financial market help. So at this point I
Speaker 1: think they really need to address the inflation and be
Speaker 1: able to give themselves the flexibility to manage that. You know,
Speaker 1: I've heard several of your guests talking about how the
Speaker 1: FED is in a rock and a hard place, and
Speaker 1: I think you know, this is the moment where they
Speaker 1: need to really give us clarity on how they are
Speaker 1: going to manage what is absolutely going to be monitor
Speaker 1: um financial market volatility, how they are going to manage
Speaker 1: through that, because it's not a question of if it's
Speaker 1: going to happen, it's just a question of when. During
Speaker 1: their rate high process, if they are going to be
Speaker 1: focused on inflation, they need to prepare markets for that
Speaker 1: so that they don't just blink in the face of
Speaker 1: volatility as they have as we've seen uh in the
Speaker 1: last in the last expansion, Does the FED put live
Speaker 1: on or will it be dead forever? Thank you so
Speaker 1: much to Laura Ram of f FS Investments for your
Speaker 1: insight this morning. How close are we to the end
Speaker 1: of the pandemic? That was g Gronval Johns Hopkins Center
Speaker 1: of Health Security Senior scholar trying to help us understand
Speaker 1: the threat posed by the omicron variants, and we will
Speaker 1: get more insight now. How lucky we are to be
Speaker 1: joined by Dr Peter Hotes, Dean of the National School
Speaker 1: of Tropical Medicine at Baylor College of medicine. Doctor Hope
Speaker 1: has has done a lot of work with tropical diseases
Speaker 1: and vaccine development. Dr great to speak with you. From
Speaker 1: your view, Are we overestimating or underestimating the threat of
Speaker 1: the omicron variant right now? Well, I think it's not
Speaker 1: so much sure we're either underestimating or overestimating. I think
Speaker 1: the problem is we're missing the weak link in our
Speaker 1: response to this pandemic. We're missing that third rail, and
Speaker 1: and that's where our vulnerability is. So let me explain
Speaker 1: the further. The first the first rail is the delta
Speaker 1: variant that's still with us, that's still surging. Now you've
Speaker 1: got O macron, which is so highly transmissible, superimposed on that,
Speaker 1: and how you're starting to see a lot of people
Speaker 1: getting infected in some extraordinary numbers put out there by
Speaker 1: the NIH Director over the weekend in terms of number
Speaker 1: of new cases on a daily basis. But here's the
Speaker 1: third piece that I think was our greatest vulnerability, and
Speaker 1: that is our healthcare workers. We're getting symptomatic COVID, not
Speaker 1: necessarily sick enough to be hospitalized, but sick enough to
Speaker 1: be knocked out of the workforce for a period of time.
Speaker 1: So they can't come into work. And that's happening on
Speaker 1: an already depleted health system infrastructure where some we've lost UM.
Speaker 1: Some say maybe it's of the workforce already. And now
Speaker 1: if you have all these healthcare workers at home, UM
Speaker 1: sick with breakthrough COVID because the immunity even against the
Speaker 1: third immunization wanes pretty quickly after a couple of months,
Speaker 1: according to new data coming out of Imperial College, that's
Speaker 1: the weak link. We're not going to have the healthcare
Speaker 1: personnel to take care of all the sick. Dr let's talk.
Speaker 1: Let's dig into that week link of a little bit,
Speaker 1: because I have two questions that naturally result from your commentary.
Speaker 1: The first is, where is the length the weakest nationally?
Speaker 1: Are there areas of extraordinary weakness in this country that
Speaker 1: we need to be concerned about, either regionally or you know,
Speaker 1: suburban versus urban? And then secondly, at some point does
Speaker 1: that weak link necessitate ultimate shutdowns? And I say this
Speaker 1: because it does seem to me that risk assets are
Speaker 1: sort of generally assuming that the U. S. Economy will
Speaker 1: not have to shut down again, we will not be
Speaker 1: forced into isolation. But I just wonder if our our
Speaker 1: links are weak enough. If we ultimately have to protect
Speaker 1: the healthcare workers, is the mechanism of shutdown the only
Speaker 1: way to do so well. The searches are happening both
Speaker 1: in rural and urban areas. So here in Texas and
Speaker 1: the Panhandle of Texas, we're already seeing pretty bad surges
Speaker 1: on on hospitals and places like Amarillo. For instance. Here
Speaker 1: in our in Houston are Texas Medical Center, which is
Speaker 1: the world's largest medical center. There's a lot of heftier
Speaker 1: so it's it's it's probably gonna happen here in Houston
Speaker 1: last in terms of because we have so much potential capacity,
Speaker 1: but there are vulnerabilities. But even in New York and
Speaker 1: New Jersey now where you're seeing um very high rates
Speaker 1: of O macron accounting for the variants, I'm really worried
Speaker 1: about that. You know. The problem is the country has
Speaker 1: no appetite for shutdowns, and I think that's why you're
Speaker 1: seeing Tony Faucci um sort of hold back on and
Speaker 1: even talking about that. It just there's just too much
Speaker 1: political pushback right now and on doing that. So I
Speaker 1: put out an article in the l A Times over
Speaker 1: the weekend to see if there's some out of the
Speaker 1: box things you can do to keep our work for
Speaker 1: healthcare workforce in the workforce, and and one of them
Speaker 1: which nobody has really commented on so far, is is
Speaker 1: should we consider a fourth immunization a second boost? Because
Speaker 1: we are seeing that very dramatic drop off from data
Speaker 1: from the UK and Germany after the after the fies
Speaker 1: are boost, it's a it's good for a couple of
Speaker 1: months and then against omicronic drops off very quickly. So
Speaker 1: what a second boost sort of keep everybody in the
Speaker 1: healthcare workforce for that period of time, knowing that it
Speaker 1: may only last a couple of months, but better than
Speaker 1: better than nothing, and keep people on the job. In
Speaker 1: terms of the infrastructure to deliver that is it in play?
Speaker 1: How easy would that be to manage? I think I
Speaker 1: think it wouldn't be that hard to manage. I think
Speaker 1: the problem is the public perception, because you're hearing from
Speaker 1: Dr Fauci, from Dr Collins others, and from the CDC
Speaker 1: director over the weekend how hard it is to even
Speaker 1: encourage Americans to get a third immunization to get that boost,
Speaker 1: or only about thirty of those have gotten two doses,
Speaker 1: have gotten three doses and I think they'll be there'll
Speaker 1: be a lot of hesitation to make that recommendation because
Speaker 1: it will just add to the confusion and maybe turn
Speaker 1: people off forgetting that third immunization. So the so a
Speaker 1: lot of this is optics and how you communicate that
Speaker 1: to the American people and the healthcare workforce. Dr Hotels,
Speaker 1: you mentioned the situation here where I sit in New
Speaker 1: York and New Jersey, and I have been walking down
Speaker 1: the street seeing lines wrapped around the block for COVID
Speaker 1: testing and I know anecdotally of friends who are waiting
Speaker 1: like a week to get a PCR test back. As
Speaker 1: we face this threat of a more rapidly spreading variant,
Speaker 1: do we have the testing capacity to respond to it appropriately,
Speaker 1: for people to be notified that they're positive so they
Speaker 1: can take the proper steps to isolate themselves. I think
Speaker 1: you answered your own question just by telling me that
Speaker 1: people are going around the block, and the answer is
Speaker 1: obviously not. You know, we've never figured out testing. I
Speaker 1: don't understand why, I mean, why you can't walk into
Speaker 1: CVS or write Aid or Dwayne Read or wherever the
Speaker 1: major pharmacy chain wherever you live, lay a couple of
Speaker 1: bucks on the counter and say give me a home
Speaker 1: testing kit that will ask me a dozen doses, you know,
Speaker 1: I mean it's not without a doctor's prescription. I mean
Speaker 1: it was. It was never rocket science to know what
Speaker 1: we needed to do. I just don't know why we
Speaker 1: can never organize ourselves as a nation to do so
Speaker 1: many things about this COVID response to other countries. Have
Speaker 1: all right, Dr Peter Hotest, thank you so much for
Speaker 1: your extremely valuable insight. This morning, he of course joining
Speaker 1: us from the Baylor College of Medicine. This is the
Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live week
Speaker 1: days some him to ten a m. Eastern on Bloomberg
Speaker 1: Radio and on Bloomberg Television each day from six to
Speaker 1: nine am for insight from the best in economics, finance, investment,
Speaker 1: and international relations. And subscribe to the Surveillance podcast on
Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on
Speaker 1: the terminal. I'm Tom keene In. This is Bloomberg