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Speaker 1: Welcome to the Bloomberg Surveillance podcast. I'm Tom Keane. Daily

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

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot com, and of course, on the Bloomberg Down.

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Speaker 1: The Equity Market. An exceptionally important interview A conversation with

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Speaker 1: Big from Chata of Deutsche Bank. His notes are absolutely

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Speaker 1: definitive on the details of the equity market, the correlations

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Speaker 1: and particularly what flows of money are doing. Bankie Chata,

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Speaker 1: thrilled to have you with us. I read and reread

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Speaker 1: your paragraph and something I lecture about, which is positioning

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Speaker 1: is everything. Tell me the positioning or lack thereof of

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Speaker 1: this bullmarket run. So what I would say, tell me

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Speaker 1: is that you know, the story of basically the huge

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Speaker 1: bounce that we've had since March twenty three in the

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Speaker 1: SMP is really, you know, a positioning story. So what

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Speaker 1: we had is a very very unusual shock in the

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Speaker 1: sense that you know, it reached us all basically in

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Speaker 1: terms of the news at the same time, so you

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Speaker 1: have a very synchronized negative impact the market, as you

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Speaker 1: know at the time was you know, max overweight across

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Speaker 1: basically every spectrum of equity investors, and so we all

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Speaker 1: got the news at the same time, clearly very negative shocks.

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Speaker 1: So everyone went basically max negative. And since then it's

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Speaker 1: been largely basically a story of what I would call,

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Speaker 1: you know, a really classic short squeeze. I think the

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Speaker 1: actors relative to you know, the historical textbook that you

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Speaker 1: may have been lecturing about, is a little bit different.

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Speaker 1: I think systematic strategies are much much more important. Uh.

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Speaker 1: And so you know, if you passed forward to tape

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Speaker 1: basically this week as earnings beginning, I would basically say,

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Speaker 1: you know, the squeeze is basically on again. I think

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Speaker 1: that there is a fundamental catalyst for that, and that is,

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Speaker 1: you know, we think learnings are basically set up to beat.

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Speaker 1: And I'm gonna talk about that. But in the context

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Speaker 1: of underweight positioning, especially in the ciplicals, as we go

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Speaker 1: to reporting the banks, you know, squeeze is basically continuing,

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Speaker 1: how is your world change by such substantial negative real rates?

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Speaker 1: How does your equity world change given what fixed income

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Speaker 1: is given you? So I would say that low rates,

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Speaker 1: especially negative rates, uh, you know, are really bad in

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Speaker 1: terms of you know, made life very very difficult for

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Speaker 1: active equity fund managers. And that is because you know,

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Speaker 1: rates are clearly a factor. I mean, if you think

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Speaker 1: about equities, you can take sector, you can take the market,

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Speaker 1: you can sort of line them up on one side

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Speaker 1: as alike and at the other end as most equity like.

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Speaker 1: So so rates matter. And when rates are far away

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Speaker 1: relative to sort of you know, the economic recovery or

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Speaker 1: the cycle, uh, that is basically going to cause some

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Speaker 1: major issues. And you know has basically as the major issues.

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Speaker 1: So I would argue low rates are negative for the

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Speaker 1: cygnical trade, uh, is the bottom line, And so we

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Speaker 1: really do need rates to start going up to have

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Speaker 1: the cyclicals perform. And uh, you know asn't when the

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Speaker 1: recovery happens, you would expect the cyclicals to perform. But

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Speaker 1: if rates don't go up or artificially compressed, that's not

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Speaker 1: going to be very easy. I want to be clear.

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Speaker 1: Banky then about your view this idea that positioning favors

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Speaker 1: US equities to go higher, and yet unless yield really

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Speaker 1: yields go up, it's not going to be favorable for cyclicals.

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Speaker 1: Are you saying that the technicals are favorable for big

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Speaker 1: tech right now, even though I'm not sure who's shorting that.

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Speaker 1: I mean, is somebody actually out there aggressively shorting Amazon, An,

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Speaker 1: Apple and Facebook right now? No, I wouldn't say that.

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Speaker 1: What I would basically say is that, you know, I

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Speaker 1: was speaking about positioning basically at the SMP five, the

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Speaker 1: index level. You know, one of the things that we

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Speaker 1: emphasize is that there's really been sort of a tale

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Speaker 1: of two equity markets. We have the megacap growth stocks

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Speaker 1: on the one side of the ten stocks and basically

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Speaker 1: you know, fell by less and basically been trending up,

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Speaker 1: and they are well basically now above where we were

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Speaker 1: at the peak prior to uh, the break out of

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Speaker 1: the pandemic. Everybody else is you know, weigh lower. So

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Speaker 1: positioning at the index level I would differentiate from, you know,

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Speaker 1: within the equity market. I would argue, you know, basically

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Speaker 1: that where everybody is underweight is everywhere else. And you know,

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Speaker 1: our call is basically that you know, it's nothing wrong

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Speaker 1: with the megacap road stocks and tech just argue that

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Speaker 1: it's basically run very far, but they do much faster,

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Speaker 1: so you don't really want to be underraight you want

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Speaker 1: to be neutral, but you really want to overweight the cyclicals.

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Speaker 1: I would argue, you know, tactically, especially for the next

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Speaker 1: two to three weeks. Absolutely, I would argue earning, especially

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Speaker 1: when the signicals are set up for a beat. Uh.

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Speaker 1: If you take a look at the bottom up consensus,

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Speaker 1: you know, the ALMO fell massively as a shock hit

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Speaker 1: in March and April, but basically by mid May, the

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Speaker 1: bottom up consensus had stopped falling, so the downgrades had

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Speaker 1: stopped um and and and you know history would tell

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Speaker 1: you that basically, uh, once downgrades stop, depending on what

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Speaker 1: happens to the macro data, you know, you're gonna get

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Speaker 1: upgrades or downgrades and and and what we've got basically

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Speaker 1: is massive positive surprises on the macro data. But we

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Speaker 1: also got uh and so the consensus would have started

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Speaker 1: to move up basically with a lag. But what we

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Speaker 1: also got is a resurgence of the virus. So those

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Speaker 1: upgrades basically never happened. Uh And And if you think

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Speaker 1: about the resurgence of the virus in terms of the timing,

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Speaker 1: you know it was really later, and the economic impact

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Speaker 1: us later. If you look at our you know, macroactivity

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Speaker 1: pulse indact. So when you look at the at city

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Speaker 1: groups s easy, you know, you will see that the

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Speaker 1: data surprises have basically gone to a place they've never

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Speaker 1: been before. I mean they're running at twice any kind

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Speaker 1: of prior peak and that should have basically seen upgrades.

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Speaker 1: We didn't get those. Um, So there's a lot of

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Speaker 1: moving parts. But on net I would basically say that,

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Speaker 1: you know, the running season is likely to beat positioning,

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Speaker 1: especially in the sitning holes, is very low. And the

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Speaker 1: combination of those, you know, explains why the signing goals

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Speaker 1: and the financials are doing very well on Friday, and

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Speaker 1: why the pressure on the market is basically to move up.

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Speaker 1: But there is still a fair number of you know, unknowns,

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Speaker 1: and so it should be um. You know, I'm not

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Speaker 1: saying it's clear and straightforward, but the case is still up.

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Speaker 1: Let's build on that, shall we the allocation to sit

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Speaker 1: the calls. I've had many people come on this program

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Speaker 1: and others as well, so you want to maintain that

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Speaker 1: addication to us growth. But if you want to take

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Speaker 1: cychnical risk, take a level play and take that play

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Speaker 1: through Europe. What's your response to that, bancake. It's very

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Speaker 1: simple and very short. It's absolutely I would be overweight Europe,

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Speaker 1: but would be overweight in Japan. Um and and that's

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Speaker 1: really the same call as basically being overweight the sychnicals

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Speaker 1: in the US. U take the US equity market and

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Speaker 1: divided into the megacab road stocks and everybody else, and

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Speaker 1: I'll just call them x m c G if you

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Speaker 1: want to. You know, you basically see that they bounced

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Speaker 1: from the bottom, but essentially go on sideways, you know,

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Speaker 1: for the last few months. UM. If you then overlay

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Speaker 1: the regional other regional laquary markets, you'll see that they

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Speaker 1: all clustered basically around x M c G. So I

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Speaker 1: think for the US it's very important to divide up

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Speaker 1: the two in terms of thinking about sector or stock

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Speaker 1: calls um and and and and you know, if the

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Speaker 1: growth happens, and clearly it's not going to happen in

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Speaker 1: a straight line, but we've had a pretty big bounce

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Speaker 1: on what I'm saying is in the data so far.

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Speaker 1: And what I'm saying is that that's just really not

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Speaker 1: priced in thinking I'm struggling to find people who aren't

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Speaker 1: I a white europe right now. How vulnerable is that

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Speaker 1: called at least from your perspective on a fiscal hiccup

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Speaker 1: this coming weekend. I think, you know, relatively modestly. So

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Speaker 1: I think if if you look at European performance and

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Speaker 1: relative to the US, and especially if you do it,

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Speaker 1: you know, X M C G, you're gonna see that,

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Speaker 1: you know, the two are basically moving together, and Europe

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Speaker 1: actually you know, exhibits a sort of more resilience UM

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Speaker 1: and all the policy front. You know. I think that

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Speaker 1: it's important to think about the fact that, you know,

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Speaker 1: if it doesn't happen now, it will happen later. If

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Speaker 1: you don't get at all, we will get some I mean,

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Speaker 1: and you know, it's it's it's it's always it's slightly

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Speaker 1: motion pictures, so it would this miss it. So uh,

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Speaker 1: you know, yes, they can be a negative outcome, but

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Speaker 1: the negative outcome, you know, can change too, So it's

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Speaker 1: it's not indefinitive negatives. It's very unlikely. Binky. I've been

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Speaker 1: waiting for a long long time and everyone says the

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Speaker 1: same thing. It will happen eventually, bink. It great to

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Speaker 1: catch up. The binky chanut of there of Deutsche Bank

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Speaker 1: for the broader market has been a massive conversation about

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Speaker 1: tilting away from the United States and tilting towards Europe.

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Speaker 1: We can start that conversation this morning with my power

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Speaker 1: black Rock Global Chief investment strategist, might fantastic to catch

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Speaker 1: up with you. Say why the revision lower to US

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Speaker 1: equities and the tilt the more constructive you towards Europe. Sure, so,

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Speaker 1: you know, I think first thing is to say it

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Speaker 1: isn't especially negative you on the US. I mean, the

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Speaker 1: US boat year to date as well as our multi

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Speaker 1: year basis, has had a tremendous round for round and outperformance.

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Speaker 1: We just think over the next six to twelve months

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Speaker 1: there's set of risk coming in the focus that means

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Speaker 1: the US is going to perform a little more in

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Speaker 1: line with the rest of global equities rather than continuing

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Speaker 1: that streak about performance. Whether it's the challenges we're facing

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Speaker 1: on the public health start public health side, around the restart,

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Speaker 1: whether it's some risks around fiscal policy and the upcoming elections.

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Speaker 1: Maybe we just think the headwinds are stiffening a bit,

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Speaker 1: and when we look to Europe, we see a very

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Speaker 1: robust public health response, it's allowing a very strong restart

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Speaker 1: of economic activity there, and we're still quite constructive in

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Speaker 1: what we're seeing on the policy side. So it's so

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Speaker 1: important here Mike Piles, life goes on. I mean, we're

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Speaker 1: celebrating back here where they're simulcast in the office here

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Speaker 1: at election in Again thanks to all of our team

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Speaker 1: for helping Mike Pile. We're also celebrating mergers and acquisitions,

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Speaker 1: the combinations of Berkshire Hathaway, the combinations of analog devices.

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Speaker 1: Can they be supportive for equity markets? So I think

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Speaker 1: on balance we're less focused on the the m and

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Speaker 1: a story which which agree with you does have have

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Speaker 1: some legs that I think, in particular, when we look

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Speaker 1: at the U S market, we like two things. You know,

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Speaker 1: we like credit over equity. These we see the policies

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Speaker 1: that are in place, especially from the FED looking ahead

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Speaker 1: continue to be a really strong and resilient source of

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Speaker 1: credit support. And we continue to light the up and

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Speaker 1: quality equity marketplace text pharma, those up and quality names,

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Speaker 1: the strong business models and financial metrics. We think those

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Speaker 1: are the types of themes that are going to continue

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Speaker 1: to be rewarded in the US, even as we see

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Speaker 1: those increased headwinds from the for the equity market overall,

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Speaker 1: my people agree with you with respect to credit. When

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Speaker 1: we see money piling into at least investment grade US

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Speaker 1: corporate debt, and yet the FED is actually pairing back

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Speaker 1: some of its purchases of corporate debt, they're balance it

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Speaker 1: is actually shrunk, and we're heading into a slew of

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Speaker 1: expected bankruptcies. Why go along credit now? So I would say,

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Speaker 1: you know, we continue to see the fedback stops as

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Speaker 1: extraordinarily credible on the on the credit market side. You know,

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Speaker 1: I think one of the things that's been striking is

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Speaker 1: just you know, how little to data set has had

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Speaker 1: to do to hear points. But because of the credibility

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Speaker 1: and the size of those back stops, which we see

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Speaker 1: is ongoing, we think that the market's gonna be able

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Speaker 1: to continue to digest that that that that issue, and

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Speaker 1: and moreover, when we look at perhaps some of the

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Speaker 1: choppiness moving ahead around the economic restart, because of some

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Speaker 1: of the challenges seeing on the public health side, we

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Speaker 1: just think that that backstop is going to be very

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Speaker 1: resilient even the face of more challenging fundamental circumstances. Mica,

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Speaker 1: I wonder where that leaves your view on US tech

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Speaker 1: right now More upgrades a morning coming out upgrading its

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Speaker 1: price target on Amazon to a street high thirty seven hundred.

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Speaker 1: Big Tech reporting over the next couple of weeks. What's

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Speaker 1: the view on that now for black Rock? Yeah, so

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Speaker 1: we're overweight quality exposures on a global basis, including in

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Speaker 1: the United States. I mean so, though we're cautious on

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Speaker 1: the US equity market. Overall, the parts of the equity

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Speaker 1: markets that are closer to the real economy and the

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Speaker 1: real economy challenges, closer to some of these risks we

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Speaker 1: see on the fiscal side. Often quality exposures around tech

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Speaker 1: continue to us to appear resilient, you know, kind of

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Speaker 1: regardless of the state of the world we see moving ahead.

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Speaker 1: So we like that part, Mike, This is a US

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Speaker 1: centric conversation. As the week grows older, the focus will

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Speaker 1: be a whole lot more on Europe and the continent

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Speaker 1: going into the weekend. Granting your view on that, Mike,

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Speaker 1: it's a change for black Rock. Caught up with Rick

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Speaker 1: Rider of black Rock, your friend and colleague, I'm sure

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Speaker 1: over the last few months, and he's changed his view

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Speaker 1: on Europe as well. What's behind that, Mike, Well, I

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Speaker 1: think we're seeing two big things at work. I would

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Speaker 1: say one is the really strong public health response we're

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Speaker 1: seeing across the continent, allowing a much stronger restart of

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Speaker 1: economic activity. We think that those fundamentals matter, and they're

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Speaker 1: gonna matter and flow through to UH to both economic

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Speaker 1: data and financial markets. And secondly, we do have increased

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Speaker 1: confidence in the overall policy framework there. Obviously, we're gonna

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Speaker 1: get some news leader this week around the USE summit

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Speaker 1: and how they land the seven and fifty billion rescue package.

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Speaker 1: We think that's gonna largely stay as it's been proposed.

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Speaker 1: But looking at national fiscal authorities and steps forwards from

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Speaker 1: the ECB, both of those pieces are coming together in

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Speaker 1: ways to look at us. Pretty constructive it I. I

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Speaker 1: look at this, folks, Mike Pile joining us from black Rock.

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Speaker 1: We welcome all of you on Bloomberg Radio and Bloomberg Television.

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Speaker 1: And this morning, Mike something I'm really unclear on his

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Speaker 1: healthcare ballooned like the tech stocks or his healthcare behind UH. So,

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Speaker 1: I would say, you know, we sort of see healthcare,

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Speaker 1: particularly the pharma space in the US as having and

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Speaker 1: in Europe as having some legs behind it. You know,

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Speaker 1: those are really sort of strong business models. I think

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Speaker 1: in this moment there's a lot of focus on what

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Speaker 1: UH that part of the what that part of the

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Speaker 1: healthcare world is bringing UH to society, bringing to the market,

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Speaker 1: And I think that's the space where we see, you know,

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Speaker 1: quite a bit of upside alongside tap Mike, you talked

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Speaker 1: about how in Europe they've got the virus a bit

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Speaker 1: more under control, or at least that's what appears from

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Speaker 1: the number, certainly from the United States, which is seeing

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Speaker 1: record numbers of people diagnosed with COVID nineteen, and yet

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Speaker 1: the market doesn't seem to care. And this is something

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Speaker 1: that a lot of people have talked about, that the

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Speaker 1: market goes up even as we get these record tallies.

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Speaker 1: What are the main risks if not that to market

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Speaker 1: levels right now in the United States? I mean, is

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Speaker 1: it the election? Is it something else that perhaps people

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Speaker 1: aren't factoring it enough. So I think it's kind of

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Speaker 1: all of the above. So I think, you know, you

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Speaker 1: point correctly to an ongoing set of challenges on the

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Speaker 1: public health side. We think that's going to weigh on

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Speaker 1: the restart ultimately weigh on some of the parts of

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Speaker 1: the US economy and US financial markets that aren't as

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Speaker 1: tech centric or pharmatic centric, is what we've been describing.

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Speaker 1: I think we see a set of fiscal policy risks

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Speaker 1: both later this month as well as between now and

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Speaker 1: the end of the year, potentially opposing some risks around

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Speaker 1: retrenching policy support on the fiscal side too soon. And

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Speaker 1: then I think when we look ahead of the election,

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Speaker 1: I think there's just a good degree of uncertainty both

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Speaker 1: in the lead up to the election itself look could

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Speaker 1: be a very voluable environment as all. On the back

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Speaker 1: side of that, A highlighted Virgin UH that it's set

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Speaker 1: a policy platforms that UH that the voters are going

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Speaker 1: to be choosing from and the investors are going to

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Speaker 1: have to confront when we look past November. Mike overwhilmably,

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Speaker 1: the consensus view is the Democratic suite would be negative

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Speaker 1: for this market. Is that your take? So, I think

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Speaker 1: it's more complicated than that. I mean, I think on

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Speaker 1: one side, it is clearly right that investors are focused

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Speaker 1: on a set of potential changes on corporate taxes, a

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Speaker 1: significant repeal of what the Trump administration and Congress passed

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Speaker 1: in that will certainly have some flow through the bottom line.

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Speaker 1: But I think the flip side of that coin is

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Speaker 1: I think relative to other outcomes, is probably a more

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Speaker 1: constructive one for ongoing fiscal stimulus through the coronavirus shock. Uh.

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Speaker 1: Much more positive around maybe getting something done at infrastructure

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Speaker 1: and R and D investment. Probably more positive in terms

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Speaker 1: of a greater uh sort of stability and predictability to

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Speaker 1: U S. China relations, immigration policy, what have you. So,

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Speaker 1: I guess I think what we're saying is, you know,

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Speaker 1: the bottom line risk but investors are focused on are real,

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Speaker 1: but they're potentially a set of top line opportunities that

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Speaker 1: maya's a much more balanced picture. Mike's a conversation you

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Speaker 1: and I will continue with the rest of the team.

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Speaker 1: Sometimes say my pole that of black crop right now,

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Speaker 1: what we're doing on a Monday as rury setting. And

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Speaker 1: you can do that with the chief US economists for

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Speaker 1: numerous securities, Lewis Alexander. He writes exceptionally thoughtful. Uh No,

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Speaker 1: it's all of this with his backdrop of public service

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Speaker 1: to the nation as well. Dr Alexander, thank you so

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Speaker 1: much for joining us today. I want to go to

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Speaker 1: a single sentence buried in your report, which is a

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Speaker 1: brilliant summary on the uncertainties of China. Now we've just

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Speaker 1: seen the virus news out of Hong Kong. But away

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Speaker 1: from that is your exceptionally tepid call on the second

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Speaker 1: half for China. Can that derail global recovery? Look, I

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Speaker 1: think the concern about China is it's actually quite vulnerable

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Speaker 1: to what's going on in the rest of the world.

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Speaker 1: And in some ways they were relatively successful at dealing

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Speaker 1: with COVID Night teen, and the problem is their recovery

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Speaker 1: at this point is constrained by what's going on in

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Speaker 1: the rest of the world. So in some ways I

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Speaker 1: would draw at the other direction, Um, China can't do

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Speaker 1: more unless the rest of the world recovers an export

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Speaker 1: demand picks up, and at that point that's the real

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Speaker 1: constraint on China. Tell us about export demand. Bloomberg has

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Speaker 1: a wonderful summed world trade chart, which is, you know,

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Speaker 1: over the last decade is just flat out grim ebbing.

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Speaker 1: We're going away from what we knew in our childhoods.

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Speaker 1: Give us an update on the state of the volumes

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Speaker 1: of world trade. Well, look, we had a kind of

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Speaker 1: twenty five year period when trade was growing much more

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Speaker 1: rapidly than global GDP that actually stopped a while ago,

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Speaker 1: and to a certain extent, we've been in a period

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Speaker 1: where globalization has not been the same kind of impetus

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Speaker 1: to growth. Now obviously with COVID nineteen, everything has collapsed,

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Speaker 1: and that's just a general function of activity around the world.

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Speaker 1: And the problem is the parts of the world that

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Speaker 1: are dependent, more dependent on trade than any others. In

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Speaker 1: China is the head of it has been in some

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Speaker 1: senses constrained by where we're going to go going forward.

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Speaker 1: I think one of the big questions after the US

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Speaker 1: election is what's going to happen with trade. You heard

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Speaker 1: Vice President Biden last week talk about this Buy America program.

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Speaker 1: He didn't talk about trade policy and great detail last week,

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Speaker 1: but if you look kind of across what he's saying,

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Speaker 1: I don't think we should expect some big change, some

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Speaker 1: big movement back towards uh a commitment to free trade

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Speaker 1: that you saw under previous democratic administrations. And so while

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Speaker 1: I'm hopeful that we'll get a cyclical recovery as we

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Speaker 1: all recovered from COVID nineteen over the next couple of

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Speaker 1: years with vaccines and all of that, like, we're not

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Speaker 1: going back to that period when globalization is really driving

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Speaker 1: the global economy. Yeah, well, Loup. Ahead of the election,

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Speaker 1: we're also going to be getting a lot of unemployment figures.

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Speaker 1: You're expecting the unemployment rate to fall back down near

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Speaker 1: ten percent by the end of this year, and yet

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Speaker 1: some of the soft data, the high frequency data that

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Speaker 1: people are looking at, show and increasing weakening in any

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Speaker 1: potential bounce back. How much does that play into a

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Speaker 1: potentially higher unemployment rate in your view at the end

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Speaker 1: of the year this year, um, So, look, I think

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Speaker 1: there's certainly the risk of that UM And I would

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Speaker 1: totally agree that the high frequency data is pointing towards

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Speaker 1: a moderation and potentially even a decline um over the

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Speaker 1: next coming weeks and months. But I would note that

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Speaker 1: the potential for lockdowns is regional, it's not national. It's

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Speaker 1: very different from what we saw in March and April,

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Speaker 1: and we think there will be a continued recovery. We

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Speaker 1: exp to get a phase for a fiscal deal within

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Speaker 1: the next two weeks and that will be important to

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Speaker 1: sort of continue this on. So I would note the

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Speaker 1: fact that continuing claims for unemployment have continued to come

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Speaker 1: down even in an environment where initial claims remain very high.

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Speaker 1: There is an awful lot of reallocation going on at

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Speaker 1: this point, um, and look, there's a huge amount of

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Speaker 1: uncertainty about where the economy is going to be. I

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Speaker 1: would note that even at ten percent, that's still the

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Speaker 1: peak of where the unemployment rate was a decade ago.

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Speaker 1: And so while that is recovery from where we are now,

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Speaker 1: that's still a very adverse outcome. You said that you

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Speaker 1: expect a one and a half trillion dollar fiscal add

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Speaker 1: on at some point in the next couple of months.

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Speaker 1: I want to talk about the composition because a lot

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Speaker 1: of people saying the enhanced unemployment benefits had the most

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Speaker 1: direct effect on economic spending, on just the consumer outlook

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Speaker 1: in general. How important is the composition of that one

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Speaker 1: and a half trillion dollar package that you're expecting for

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Speaker 1: your outlook to be correct? Um, it is important. I

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Speaker 1: mean there there are different pieces to it. Obviously, you

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Speaker 1: have to do something to make up for the unemployment

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Speaker 1: benefits that are going to come off at the end

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Speaker 1: of July. I think it's unlikely that they will be

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Speaker 1: extended in exactly the same form that they are now,

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Speaker 1: but you need something that replaces that that's one thing. Second,

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Speaker 1: you do need more support for small businesses, essentially some

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Speaker 1: sort of additional resources that go to support support businesses directly.

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Speaker 1: You need also money for state and local governments because

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Speaker 1: all of the talk of potential layoffs and businesses, If

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Speaker 1: we don't get more support for state and locals, you're

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Speaker 1: going to see the same thing on state and local governments.

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Speaker 1: I think those three pieces all have to be there

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Speaker 1: for this to work. Um. Now, there's also been discussion

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Speaker 1: of another round of tax rebates, to the extent that

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Speaker 1: that's general support. It's not a bad thing to do that,

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Speaker 1: but in some sense, I think you've got to have

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Speaker 1: that then extend the unemployment benefits more helpful business, but

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Speaker 1: also state and local government. You've gone through a series

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Speaker 1: of issues there to some degree. You need to read

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Speaker 1: the political tea leaves to answer the following question. But

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Speaker 1: I wonder on what particular issue you think this effort

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Speaker 1: might come unstock. Um. I think there are some questions

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Speaker 1: about how you define the unemployment benefits and the support

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Speaker 1: for business. There has been uh some criticism of the

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Speaker 1: very high replacement rates for the unemployment benefits. The Republicans

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Speaker 1: want to change the structure of that. If they really

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Speaker 1: impress that issue, that could become a stumbling block. Um.

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Speaker 1: I think there's also a question of what businesses are

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Speaker 1: going to have access to the support. There's obviously been

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00:23:42,760 --> 00:23:46,119
Speaker 1: some criticism of the p p P program. There's some

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00:23:46,240 --> 00:23:49,080
Speaker 1: restrictions that the Democrats want to put on that. There's

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Speaker 1: also this liability issue that's been important to McConnell, depending

435
00:23:53,760 --> 00:23:58,320
Speaker 1: on about giving businesses essentially liability protection if if workers

436
00:23:58,400 --> 00:24:02,320
Speaker 1: get COVID for coming back to work. Um, how you

437
00:24:02,520 --> 00:24:07,639
Speaker 1: define that? Those are all issues that if strong advocates

438
00:24:07,680 --> 00:24:09,880
Speaker 1: on one side or the other of those really want

439
00:24:09,880 --> 00:24:13,760
Speaker 1: to press the issue, they can delay things. Um. I'm

440
00:24:13,880 --> 00:24:17,840
Speaker 1: hopeful that everybody recognizes how important this is that this

441
00:24:17,960 --> 00:24:21,399
Speaker 1: will get done and it will get done quickly before

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00:24:21,480 --> 00:24:24,679
Speaker 1: the end of this month. That's our expectation. But if

443
00:24:24,680 --> 00:24:27,720
Speaker 1: we're wrong about that, that will be a big deal. Alexander.

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00:24:27,800 --> 00:24:31,160
Speaker 1: To go back to James Tobin, the giant of Yale University,

445
00:24:31,520 --> 00:24:34,359
Speaker 1: there was a book years ago. It always comes in

446
00:24:34,480 --> 00:24:39,440
Speaker 1: in a slowdown. Is gross obsolete? Away from the selected

447
00:24:39,560 --> 00:24:46,800
Speaker 1: tech names is gross obsolete? I think very much. Not Um. Look,

448
00:24:47,200 --> 00:24:51,959
Speaker 1: there's um another old economist who's important. Here Aret Oakland,

449
00:24:52,000 --> 00:24:56,320
Speaker 1: who stressed the importance of the gap between actual employment

450
00:24:56,400 --> 00:25:00,359
Speaker 1: and actual output and potential output as being a essentially

451
00:25:00,400 --> 00:25:03,320
Speaker 1: at this social loss. I think this is one of

452
00:25:03,359 --> 00:25:06,479
Speaker 1: those times when that's very, very important. We've got an

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00:25:06,520 --> 00:25:09,480
Speaker 1: economy that is underproducing. We've got an awful lot of

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00:25:09,520 --> 00:25:13,320
Speaker 1: people who are unemployed. Um, that's a huge cost, and

455
00:25:13,640 --> 00:25:16,280
Speaker 1: any things we can do to diminish that over time

456
00:25:16,720 --> 00:25:20,240
Speaker 1: are very important. Um, that's another way of thinking about

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00:25:20,320 --> 00:25:24,280
Speaker 1: that growth question. So look, this is one of those

458
00:25:24,359 --> 00:25:26,880
Speaker 1: moments when all of those things are are very important

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00:25:26,920 --> 00:25:29,840
Speaker 1: for us to address. I always perspective, and it's on

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00:25:30,000 --> 00:25:32,000
Speaker 1: this program. I appreciate it's on this morning. Got best

461
00:25:32,040 --> 00:25:33,240
Speaker 1: to you yours on a whole of the same in

462
00:25:33,320 --> 00:25:40,240
Speaker 1: Amura Lewis Alexander that right now in a interview that

463
00:25:40,400 --> 00:25:43,959
Speaker 1: was to be important but is now ever more important

464
00:25:44,119 --> 00:25:46,760
Speaker 1: with what we're seeing going back and forth between the

465
00:25:46,840 --> 00:25:50,480
Speaker 1: scientists like Peter Hotez at Baylor and the President of

466
00:25:50,520 --> 00:25:54,399
Speaker 1: the United States joining us now Marjoriska from Duke Margot

467
00:25:54,520 --> 00:25:57,240
Speaker 1: listens with her public service, thrilled that she could be

468
00:25:57,320 --> 00:26:00,600
Speaker 1: with us today. This linkage of economics of our policy

469
00:26:00,680 --> 00:26:04,320
Speaker 1: and statistics into our medicine as well. Again the Duke

470
00:26:04,400 --> 00:26:09,800
Speaker 1: Margolos Center for Health Policy and the deputy director UH there, professor,

471
00:26:09,960 --> 00:26:12,720
Speaker 1: thank you so much for being with us today. We

472
00:26:12,840 --> 00:26:17,959
Speaker 1: now have a president going after the science within this pandemic.

473
00:26:18,440 --> 00:26:22,960
Speaker 1: How do the scientists defend themselves? And I think what

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00:26:23,080 --> 00:26:25,800
Speaker 1: the scientists do is what they always do is put

475
00:26:25,840 --> 00:26:28,920
Speaker 1: out the facts and talk about what needs to be

476
00:26:29,040 --> 00:26:34,199
Speaker 1: done to UH to get us out and have us

477
00:26:34,359 --> 00:26:38,480
Speaker 1: get through this pandemic. All right, well, Dr bucn Scott,

478
00:26:38,640 --> 00:26:40,720
Speaker 1: what are the facts when it comes to getting kids

479
00:26:40,800 --> 00:26:43,880
Speaker 1: back to school? One of the pivotal issues President Trump

480
00:26:44,000 --> 00:26:46,879
Speaker 1: saying it is time, and his Health secretary saying that

481
00:26:47,000 --> 00:26:51,479
Speaker 1: the risks are overstated? Are they The risks aren't overstated? Um,

482
00:26:51,800 --> 00:26:54,359
Speaker 1: But I do agree that it's really important for the

483
00:26:54,480 --> 00:26:57,000
Speaker 1: kids to get back to school. The question is not

484
00:26:57,760 --> 00:27:00,520
Speaker 1: necessarily if they should be going back to school, but

485
00:27:00,600 --> 00:27:02,960
Speaker 1: how to do it safely? And I would draw a

486
00:27:03,040 --> 00:27:06,240
Speaker 1: parallel to how we reopened. There are ways of reopening

487
00:27:06,320 --> 00:27:09,320
Speaker 1: safely in some states have shown that it can be done,

488
00:27:09,520 --> 00:27:12,560
Speaker 1: and there are ways of reopening not so safely. And

489
00:27:12,640 --> 00:27:14,880
Speaker 1: it's the same thing with schools. There are certain parts

490
00:27:14,920 --> 00:27:19,760
Speaker 1: of the country where I think in UH, in a person,

491
00:27:20,080 --> 00:27:25,320
Speaker 1: UM education could very much happen. UM think about New

492
00:27:25,440 --> 00:27:30,720
Speaker 1: York and New Jersey, m Delaware, UM and Connecticut. On

493
00:27:30,840 --> 00:27:35,320
Speaker 1: the other hand, I cannot imagine UM schools reopening in

494
00:27:35,480 --> 00:27:41,520
Speaker 1: person in Florida, Texas or Arizona. Or perhaps they could reopened,

495
00:27:41,520 --> 00:27:43,760
Speaker 1: but they would shut down very quickly because there's so

496
00:27:43,880 --> 00:27:47,879
Speaker 1: much viral spread in the community that you would have

497
00:27:48,280 --> 00:27:53,960
Speaker 1: students and staff getting sick pretty quickly. Dr. Bushsco. I'm

498
00:27:54,000 --> 00:27:56,480
Speaker 1: struck by this sort of certainty. You're saying that we

499
00:27:56,720 --> 00:27:59,480
Speaker 1: know how to prevent the spread of the virus, and

500
00:27:59,560 --> 00:28:02,399
Speaker 1: yet when I look into how the virus is spread,

501
00:28:02,480 --> 00:28:04,800
Speaker 1: there still seems to be a lot of uncertainty whether

502
00:28:04,880 --> 00:28:07,840
Speaker 1: it is airborne or not, and the who's the whose

503
00:28:08,080 --> 00:28:12,480
Speaker 1: conflicting guidance there the question of whether non symptomatic individuals

504
00:28:12,560 --> 00:28:15,200
Speaker 1: transmit the virus. Where are we on some of those

505
00:28:15,320 --> 00:28:19,480
Speaker 1: basic ideas. When it comes to the science, we definitely

506
00:28:19,720 --> 00:28:24,399
Speaker 1: do know that asymptomatic transmission is really critical, and this

507
00:28:24,600 --> 00:28:28,720
Speaker 1: is really what makes this virus UM so deadly, because

508
00:28:28,800 --> 00:28:32,200
Speaker 1: people are making decisions that really don't account for the

509
00:28:32,359 --> 00:28:36,440
Speaker 1: fact that they might be spreading the virus, and yes,

510
00:28:36,760 --> 00:28:39,200
Speaker 1: I do agree that there is a disagreement at this

511
00:28:39,320 --> 00:28:42,960
Speaker 1: point as to whether it is airborne. But if we

512
00:28:43,160 --> 00:28:48,320
Speaker 1: were to pursue UM, we we do know that being

513
00:28:48,480 --> 00:28:52,800
Speaker 1: endorsed really increases the risk for circulation does matter. We

514
00:28:53,000 --> 00:28:57,800
Speaker 1: know that social distancing, physical distancing does matter as well

515
00:28:58,200 --> 00:29:01,280
Speaker 1: that it works. We do know that masks are also

516
00:29:01,440 --> 00:29:06,040
Speaker 1: very helpful if you cannot properly distance UH from other people.

517
00:29:06,520 --> 00:29:09,520
Speaker 1: And again, because it's so much of this spread is

518
00:29:09,600 --> 00:29:15,680
Speaker 1: asymptomatic or pretty symptomatic, meaning before people have UM symptoms UM,

519
00:29:16,120 --> 00:29:21,200
Speaker 1: these kinds of measures really can make tremendous have a

520
00:29:21,240 --> 00:29:25,880
Speaker 1: tremendous impact. Professor. One thing I find fascinating here is

521
00:29:25,960 --> 00:29:28,479
Speaker 1: one day this will be over. Do you think there

522
00:29:28,480 --> 00:29:32,120
Speaker 1: will be a permanent to our change of health policy

523
00:29:32,600 --> 00:29:34,040
Speaker 1: or do we just go back to what we were

524
00:29:34,080 --> 00:29:38,160
Speaker 1: doing before. So I would say that I don't know

525
00:29:38,400 --> 00:29:42,160
Speaker 1: that this will be over, that I think there's going

526
00:29:42,280 --> 00:29:45,480
Speaker 1: to always be a new normal. I do think that

527
00:29:45,680 --> 00:29:52,360
Speaker 1: this might become an endemic UM, an endemic condition UH disease.

528
00:29:52,800 --> 00:29:55,800
Speaker 1: We might end up having to live with it. Obviously

529
00:29:55,960 --> 00:29:57,960
Speaker 1: not at the level that we live with it now,

530
00:29:59,040 --> 00:30:01,680
Speaker 1: but it is possible well, that it might be something

531
00:30:01,840 --> 00:30:05,160
Speaker 1: that we might need to get vaccinated for every year.

532
00:30:05,600 --> 00:30:08,960
Speaker 1: The vaccine might not be UM a hundred percent effective.

533
00:30:09,000 --> 00:30:11,520
Speaker 1: We might not have a vaccine UM like what we

534
00:30:11,600 --> 00:30:16,760
Speaker 1: have with measles with a very strong protective effect. So

535
00:30:16,960 --> 00:30:19,720
Speaker 1: I think I think our old normal, which is I

536
00:30:19,800 --> 00:30:23,560
Speaker 1: think what was the mistake in reopening and how people

537
00:30:23,640 --> 00:30:26,320
Speaker 1: thought about what it would look like, we might never

538
00:30:26,480 --> 00:30:29,840
Speaker 1: have the old normal UM again. Even if we have

539
00:30:30,200 --> 00:30:34,360
Speaker 1: vaccine and people are broadly vaccinated, those our health policy

540
00:30:34,520 --> 00:30:38,440
Speaker 1: become more European like. That's hard to say, but I

541
00:30:38,960 --> 00:30:43,120
Speaker 1: will say that with the level of unemployment that we're

542
00:30:43,160 --> 00:30:46,480
Speaker 1: seeing UM, I think there are going to be questions

543
00:30:46,640 --> 00:30:53,120
Speaker 1: asked about the employer based insurance system where this will go.

544
00:30:53,520 --> 00:30:57,720
Speaker 1: It's hard to say, UM, but there are going to

545
00:30:57,840 --> 00:31:00,600
Speaker 1: be changes UM. Also, I think in how we might pay,

546
00:31:00,720 --> 00:31:04,920
Speaker 1: even within our existing system, how we might UM pay

547
00:31:05,400 --> 00:31:09,760
Speaker 1: a fee for service has not worked particularly well during

548
00:31:09,800 --> 00:31:15,360
Speaker 1: this pandemic because visits have really dropped, elective surgeries have dropped.

549
00:31:15,800 --> 00:31:20,080
Speaker 1: The providers that have been part of these newer models

550
00:31:20,240 --> 00:31:25,280
Speaker 1: a CEO UM type models have done significantly better and

551
00:31:25,400 --> 00:31:28,840
Speaker 1: they've been in a much better position to withstand this shock,

552
00:31:29,280 --> 00:31:32,960
Speaker 1: so we're hopeful that this will also be a change

553
00:31:33,080 --> 00:31:36,280
Speaker 1: that that will happen. Martin Phisco, thank you so much.

554
00:31:36,320 --> 00:31:39,520
Speaker 1: With Duke Margo is greatly appreciated this morning on health policy.

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00:31:39,600 --> 00:31:41,960
Speaker 1: As we come out of this pandemicra I should say,

556
00:31:41,960 --> 00:31:44,480
Speaker 1: as we try to come out of this pandemic. Thanks

557
00:31:44,560 --> 00:31:48,760
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

558
00:31:49,040 --> 00:31:54,360
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

559
00:31:54,480 --> 00:31:58,720
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.

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Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio