WEBVTT - This Is the Macro Picture Going Into 2021 0:00:10.520 --> 0:00:14.360 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.400 --> 0:00:19.759 I'm Joe, wi Isn't Thal, and I'm Tracy Allaway. Tracy, So, obviously, 0:00:20.040 --> 0:00:23.320 UM markets continuing to have an extraordinary year at least 0:00:23.400 --> 0:00:28.160 risk assets. For the most part, stocks continue to power 0:00:28.240 --> 0:00:31.800 to new all time highs all around the world, optimism 0:00:31.800 --> 0:00:36.400 breaking out. But I'd say like the nature of the 0:00:36.440 --> 0:00:38.760 stock market rail or the nature of the market rally 0:00:38.800 --> 0:00:42.440 in general, is sort of taken on a different complexion lately. 0:00:42.760 --> 0:00:46.920 I think people have been nervous about valuations for some time, 0:00:47.000 --> 0:00:50.199 and the idea that even though we've had the biggest 0:00:50.200 --> 0:00:53.160 pandemic in over a hundred years, which is really eaten 0:00:53.200 --> 0:00:56.920 into economic activity, we still have stocks at a record 0:00:57.280 --> 0:01:00.520 people sort of naturally feel a little bit nervous about up. 0:01:00.600 --> 0:01:04.080 And then recently we had the sell off in U. S. 0:01:04.120 --> 0:01:06.560 Treasuries as well, and a little bit of a pickup 0:01:06.600 --> 0:01:11.360 in inflation expectations, which might be the beginning of UM Well, 0:01:11.480 --> 0:01:13.600 some people are talking about it being the beginning of 0:01:13.640 --> 0:01:18.080 a bigger change for the market, and this would be 0:01:18.080 --> 0:01:20.480 a good time actually to mention that we were recording 0:01:20.600 --> 0:01:27.080 this on Thursday, December three. Caveat yeah, that the whole 0:01:27.080 --> 0:01:30.360 world may have changed by the time anyone actually listens 0:01:30.400 --> 0:01:33.120 to this episode. But yeah, we have seen a little 0:01:33.160 --> 0:01:37.600 bit of an uptick in treasury yields, market based measures 0:01:37.640 --> 0:01:42.280 of inflation actually higher than they were pre crisis, some 0:01:42.360 --> 0:01:47.960 measures back to levels not seen since. And also if 0:01:48.000 --> 0:01:50.040 you look at some of the really hot stocks lately, 0:01:50.160 --> 0:01:52.480 it's some of the real like sort of back to normal, 0:01:52.680 --> 0:01:57.240 unsexy stuff out there. So it's like airlines and physical 0:01:57.320 --> 0:02:02.000 retail I think like shares of Macy's are up in November. 0:02:02.800 --> 0:02:07.800 US steel uh Steel Company, absolutely wild chart. If you 0:02:07.840 --> 0:02:09.680 take a look at that sore is it in the 0:02:09.720 --> 0:02:13.079 beginning of this rally, and it you know, thinking back 0:02:13.080 --> 0:02:14.840 to the spring, it was very much like tech and 0:02:14.919 --> 0:02:17.840 the stay at home trade we're starting to see broadened 0:02:17.840 --> 0:02:22.080 out and so people like buying energy. Another area oil 0:02:22.160 --> 0:02:25.040 doing very well. So these areas that did not participate 0:02:25.080 --> 0:02:27.000 in the first part of the recovery or for several 0:02:27.040 --> 0:02:30.239 months into this have been getting a lot of excitement 0:02:30.320 --> 0:02:33.160 later enthusiasm. Yeah, that's right. And of course we have 0:02:33.240 --> 0:02:38.240 talked about you know, another sort of great rotation coming up. Yeah, right, 0:02:38.280 --> 0:02:40.720 And of course every time we talk about these rotations, 0:02:40.760 --> 0:02:42.800 there's the question is like is this another head fake 0:02:43.240 --> 0:02:45.160 so we just get is everyone just gonna go back 0:02:45.200 --> 0:02:48.440 to buying Fang and Microsoft and you know, of course 0:02:48.520 --> 0:02:52.280 treasuries in a couple of weeks or is this something new? 0:02:52.400 --> 0:02:57.200 So lots to think about as we close out from 0:02:57.200 --> 0:03:00.280 a macro perspective, all kinds of different moving part going 0:03:00.280 --> 0:03:05.080 into Yeah, and I think, you know, there's clearly a 0:03:05.080 --> 0:03:08.639 lot going on. But UM is going to be an 0:03:08.680 --> 0:03:11.120 interesting year, right, Like if you just look at the 0:03:11.160 --> 0:03:14.200 market currently at all time highs, you have that broadening 0:03:14.320 --> 0:03:16.320 of the rally. The big question is whether or not 0:03:16.400 --> 0:03:18.720 it's going to keep going, and then you have all 0:03:18.720 --> 0:03:23.240 these idiosyncratic events like what happens with the vaccine and 0:03:23.280 --> 0:03:27.359 of course how do central banks respond to that. If 0:03:27.400 --> 0:03:30.680 we get a vaccine and the economy really starts to recover, 0:03:31.160 --> 0:03:35.120 then could you finally finally get inflation, which you know 0:03:35.960 --> 0:03:38.280 could unsettle the market in one way or another. So 0:03:38.600 --> 0:03:42.080 I think you're right, like there are these turning points 0:03:42.120 --> 0:03:44.320 that you can sort of see on the horizon, but 0:03:44.440 --> 0:03:47.040 the big question is whether or not, um, you know, 0:03:47.160 --> 0:03:50.119 we're just gonna be talking about them or actually experiencing them, 0:03:50.320 --> 0:03:54.120 whether or not it's another head fake. Yes, yeah, no, Yeah, 0:03:54.200 --> 0:03:56.320 it's gonna be a really interesting year. Let's hopefully it's 0:03:56.360 --> 0:04:00.360 not as interesting as but you know, for our sakes 0:04:00.480 --> 0:04:02.600 from a stuff to talk about the standpoint, we hope 0:04:02.640 --> 0:04:06.200 it's at least somewhat interesting anyway macro. So yeah, to 0:04:06.280 --> 0:04:09.760 talk about the outlook, I thought we'd bring on two 0:04:09.800 --> 0:04:14.320 of the smartest, uh people who know who discussed macro 0:04:14.440 --> 0:04:17.800 from both of pure econ perspective and the market's perspective. 0:04:18.160 --> 0:04:21.280 Both have previously been on the show. I wanna bring 0:04:21.360 --> 0:04:26.080 on Novel Sinala, he's a macro strategist and portfolio manager 0:04:26.240 --> 0:04:31.240 at e i A All Weather Alpha Partners. And John Turk. 0:04:31.240 --> 0:04:34.120 He's the author of the Cheap Convexity blog, which has 0:04:34.120 --> 0:04:37.440 been a must read all year for people in the 0:04:37.520 --> 0:04:41.560 know on macro and market, sort of tying together both 0:04:41.600 --> 0:04:45.920 the price action and the bigger economic themes of the year. 0:04:46.040 --> 0:04:49.480 So Novel and John, thank you so much for joining us. 0:04:49.960 --> 0:04:53.440 Thanks for having me, Yeah, thanks for having me absolutely, 0:04:53.440 --> 0:04:56.200 thanks for coming back. So sort of started off broad 0:04:56.480 --> 0:04:59.600 and uh, either one of you could pick up, but 0:04:59.760 --> 0:05:03.400 sort like, what's the number one thing on your mind 0:05:03.560 --> 0:05:05.800 right now in terms of this sort of the big 0:05:05.920 --> 0:05:09.080 questions are the big the big things to get right 0:05:09.400 --> 0:05:14.479 when you're thinking about the outlook for market. I think 0:05:14.760 --> 0:05:17.320 we would probably both agree that the dollars, you know, 0:05:17.600 --> 0:05:21.640 kind of at the focal point of our analyses. Um, 0:05:21.680 --> 0:05:24.760 you know, we we we are in a very new 0:05:24.839 --> 0:05:27.440 interesting regime with the FED. And if the FED is 0:05:27.520 --> 0:05:30.719 to follow through on this um you know, new regime 0:05:30.920 --> 0:05:34.520 and framework, then what that would suggest is that, um, 0:05:34.560 --> 0:05:37.800 you know, as we get positive outcomes in the macar economy, 0:05:38.200 --> 0:05:42.479 it should actually lead to feedback loops via a lower dollar. 0:05:42.839 --> 0:05:44.960 And so that's why we've been, you know, here at 0:05:45.360 --> 0:05:47.880 we've been really focused on expressing a lot of our 0:05:47.920 --> 0:05:52.800 bullish trades through short dollar expressions. UM So, I think, 0:05:52.839 --> 0:05:55.360 I think getting the dollar right, getting the FED right, 0:05:55.440 --> 0:05:59.840 and then fit figuring out the similarities and differences between 0:06:00.360 --> 0:06:03.240 what what is a vaccine type of reflation and what 0:06:03.400 --> 0:06:07.080 is a you know, typical stimulus type of reflation. And 0:06:07.080 --> 0:06:09.280 and John's written about all these things, um and and 0:06:09.320 --> 0:06:11.480 a lot of detail and and that some great frameworks. 0:06:11.480 --> 0:06:14.960 I'll let him jump in a little bit too. Yeah. No, 0:06:15.160 --> 0:06:17.919 I think I think as has been the case, you know, 0:06:17.960 --> 0:06:19.840 in the last few weeks. I think the dollar will 0:06:19.880 --> 0:06:22.640 probably continue to be like the folk grim instrument for 0:06:23.080 --> 0:06:25.839 kind of how the market digests and prices going forward 0:06:25.839 --> 0:06:29.880 to this recovery. UM, I think what's kind of interesting 0:06:30.040 --> 0:06:33.440 is and as not fools suggesting with the with the 0:06:33.440 --> 0:06:36.760 new FED reaction function, is that the FED has moved 0:06:37.400 --> 0:06:42.320 from like their primary objective of being able to cut 0:06:42.360 --> 0:06:44.880 off left tails right to suggest that, Okay, something's bad 0:06:44.880 --> 0:06:47.279 has happened. How do we respond, either through you know, 0:06:47.360 --> 0:06:51.440 financial markets or whatever. And now as there's a train 0:06:51.520 --> 0:06:54.839 in motion, the Fed's best move in terms of kind 0:06:54.880 --> 0:06:59.599 of accommodating this recovery will basically be pushing whatever the 0:06:59.640 --> 0:07:02.000 train is and giving it another nudge. So in the 0:07:02.160 --> 0:07:04.360 QT end of Q three, we thought this train was 0:07:04.400 --> 0:07:06.920 probably going to be fiscal, and in August we were 0:07:07.000 --> 0:07:10.800 kind of pricing this more MMT type world, and then 0:07:10.840 --> 0:07:13.880 fiscal negotiations kind of fell apart. We had an election 0:07:13.880 --> 0:07:16.120 where we're likely gonna have a divided government, so the 0:07:16.160 --> 0:07:19.240 market scope for fiscal kind of came down. And now 0:07:19.920 --> 0:07:23.080 post the vaccine news, we kind of begin to entertain 0:07:23.400 --> 0:07:26.320 a market that is like goes from a fiscal lead 0:07:26.360 --> 0:07:30.520 recovery to a private sector lead recovery and UM, and 0:07:30.560 --> 0:07:32.800 that maybe change the channel, but it still gets the 0:07:32.840 --> 0:07:34.800 train in motion. And now the FED can jump on 0:07:34.880 --> 0:07:38.000 and say okay, like there was you know, an awful 0:07:38.280 --> 0:07:41.200 pandemic last year and now we're in one with a 0:07:41.280 --> 0:07:44.520 vaccine and that doesn't really change anything for policy. And 0:07:44.560 --> 0:07:48.760 that's a really powerful, i think macro tool for them 0:07:48.800 --> 0:07:54.600 to basically push push forward this recovery. Now you mentioned 0:07:55.080 --> 0:07:57.960 the idea of a week or dollar and feedback loops, 0:07:58.040 --> 0:08:01.880 could you maybe go into some more detail about how 0:08:01.880 --> 0:08:05.040 exactly you see that working. Yeah, So with respect to 0:08:05.080 --> 0:08:08.640 the dollar more structurally, you know, if you if you 0:08:08.680 --> 0:08:14.440 think about the regime from say the financial crisis until COVID, UM, 0:08:14.480 --> 0:08:17.000 you know, the dollar was like the only game in 0:08:17.040 --> 0:08:20.920 town in terms of collecting yield and having positive growth 0:08:20.960 --> 0:08:25.360 prospects in the major economies and the major accessible markets. UM. 0:08:25.480 --> 0:08:28.840 COVID's really changed that dynamic. As you know, the FEDS 0:08:29.360 --> 0:08:31.880 uh kind of caught down to like Europe and Japan 0:08:32.000 --> 0:08:35.120 interest rates wise, as well as has changed its reaction 0:08:35.160 --> 0:08:38.839 function to be far more devish and far more accommodative 0:08:38.960 --> 0:08:42.800 to positive outcomes. At the same time, China has kind 0:08:42.800 --> 0:08:47.000 of taken the rule of you know, the yield premium 0:08:47.400 --> 0:08:50.080 uh and and they've made some changes to their to 0:08:50.120 --> 0:08:54.439 their markets. UM. You know, since especially since when they 0:08:54.440 --> 0:08:56.880 when they had their FX policy shift, and you know, 0:08:57.000 --> 0:09:00.320 the the Chinese government bond market has has really turned 0:09:00.360 --> 0:09:03.080 into this UM. You know. I think the way John 0:09:03.080 --> 0:09:05.240 put it once is just you know, it's like one 0:09:05.240 --> 0:09:08.680 big sucking sound of capital, just really big one way flows. 0:09:09.000 --> 0:09:11.040 And so what that what that kind of means to 0:09:11.120 --> 0:09:15.280 me is that um, you know, there's a structural, structural 0:09:15.280 --> 0:09:19.360 headwinds to the US dollar and those those um will 0:09:19.400 --> 0:09:23.840 not only be reflecting positive outcomes and reflationary outcomes, but 0:09:23.880 --> 0:09:26.920 will also likely be driving them UM in a feedback 0:09:26.960 --> 0:09:29.880 loop as well, UM through a variety of channels, both 0:09:30.160 --> 0:09:33.080 through you know what that means, UM to to create 0:09:33.120 --> 0:09:36.520 accounts as well as you know, just general credit creation. 0:09:37.160 --> 0:09:40.920 I'm curious about this idea, and John, You've talked about 0:09:40.960 --> 0:09:44.280 a lot, both of you, but the idea of there 0:09:44.320 --> 0:09:49.520 being a meaningful difference between a fiscal stimulus lead reflation 0:09:49.880 --> 0:09:54.400 and a vaccine lead reflation. So it's funny because you know, 0:09:54.520 --> 0:09:58.199 it's you discuss John, it's like going into uh Q 0:09:58.400 --> 0:10:00.400 three and beginna give Q four. That thought was like, Okay, 0:10:00.400 --> 0:10:03.560 maybe we're gonna get a fiscal deal, or maybe Biden 0:10:03.679 --> 0:10:06.040 is going to win with and get a Democratic Senate 0:10:06.080 --> 0:10:09.440 and then they're going to pass a massive bill next year. 0:10:10.040 --> 0:10:12.760 But then that didn't happen. We didn't get the unified government. 0:10:12.800 --> 0:10:16.680 There's no fiscal deal as if yet. And yet like 0:10:16.720 --> 0:10:18.360 a couple of days after the election, we got the 0:10:18.400 --> 0:10:21.480 really good news about from Fiser about their vaccine, and 0:10:21.520 --> 0:10:25.080 suddenly people realize that a vaccine is likely coming and 0:10:25.080 --> 0:10:29.120 it's going to be effective, and the renormalization of economic 0:10:29.200 --> 0:10:33.000 activity might truly begin in earnest sometime in the beginning 0:10:33.040 --> 0:10:38.000 of So from a sort of market standpoint, what are 0:10:38.040 --> 0:10:43.280 the meaningful distinctions between that recovery led by a vaccine 0:10:43.280 --> 0:10:46.080 and a return to normal verse or recovery led by 0:10:46.280 --> 0:10:49.400 a sort of Cares Act two point right? I think 0:10:49.400 --> 0:10:51.720 it's I think it's that it's such a key point, honestly, 0:10:51.760 --> 0:10:53.680 and it has been a big theme for the last 0:10:53.760 --> 0:10:56.880 few weeks. And I think it works through two channels. 0:10:56.920 --> 0:11:01.280 I think one is the fundamental economic channel, which is 0:11:01.320 --> 0:11:04.360 to say that a fiscal deal that has a very 0:11:04.400 --> 0:11:08.080 heavy composition towards transfer payments, has a much more immediate 0:11:08.120 --> 0:11:11.319 nominal impact, right, because it goes into people's pockets, people 0:11:11.360 --> 0:11:14.360 can spend. There's a consumption element, and it's it's much 0:11:14.400 --> 0:11:17.720 more nominal because it's not followed by there's no new productivity, 0:11:17.760 --> 0:11:20.600 there's no new investments that are it's very consumption focused, 0:11:21.200 --> 0:11:24.440 and that kind of that is you know, trickles out 0:11:24.480 --> 0:11:27.240 through the trade deficit. It's a weaker dollar, but it's 0:11:27.240 --> 0:11:29.160 you know, it's consumption lead, so it has a much 0:11:29.200 --> 0:11:32.640 more nominal impact. The vaccine, on the other hand, is 0:11:32.679 --> 0:11:36.080 different in the sense that it's much more on the 0:11:36.120 --> 0:11:39.760 corporate side in the sense that it gives business is 0:11:39.920 --> 0:11:44.400 kind of more clarity in terms of capex, inventory, restocking, 0:11:45.040 --> 0:11:48.800 more you know, business related decisions, and that has more 0:11:48.840 --> 0:11:52.200 of a real impact um in terms of, you know, 0:11:52.960 --> 0:11:57.040 leading to potentially like higher levels of real growth UM 0:11:57.080 --> 0:11:59.680 in the coming year. And I think basically what the 0:11:59.720 --> 0:12:03.000 mark it kind of did with this transition from a 0:12:03.000 --> 0:12:07.040 fiscal regime to e vac's regime, is it traded scope 0:12:07.080 --> 0:12:11.000 for certainty, right, the potential of like more of an 0:12:11.080 --> 0:12:14.000 mm T type fiscal approach was kind of like, oh, 0:12:14.040 --> 0:12:16.400 we could have like high levels of nominal GDP and 0:12:16.440 --> 0:12:20.960 that could be pretty cool. But what the vaccine regime 0:12:21.040 --> 0:12:23.160 brings is like we kind of know what the world's 0:12:23.160 --> 0:12:26.960 gonna look like end of Q two on next year, 0:12:27.240 --> 0:12:31.000 and that has a massive reduction in risk premium, and 0:12:31.120 --> 0:12:34.440 the market can levitate off that. And if I could 0:12:34.440 --> 0:12:37.200 add a little bit to that as well, you know, um, 0:12:37.280 --> 0:12:40.480 and you know, you definitely have seen this what what 0:12:40.559 --> 0:12:42.920 John's mentioning, You've definitely seen it in the markets, whether 0:12:42.960 --> 0:12:45.760 it's you know, some of the beating down cyclicles, um, 0:12:45.760 --> 0:12:48.880 whether it's you know, the trade sensitive places like you know, 0:12:48.880 --> 0:12:51.120 the kneek has been one of our our long stuff 0:12:51.160 --> 0:12:54.080 to play, this vaccine trade um, and even you know, 0:12:54.640 --> 0:12:57.720 these these dislocations between gold prices and real yields. I 0:12:57.760 --> 0:13:00.000 think all three of those things reflect exactly what John 0:13:00.040 --> 0:13:02.600 saying with respect to the reduction of risk premium. But 0:13:02.720 --> 0:13:05.480 in addition as well, I think one other distinction between 0:13:05.800 --> 0:13:08.880 the two types of you know, two types of reflation 0:13:09.080 --> 0:13:13.040 are that the consumption basket mixed should likely shift towards 0:13:13.040 --> 0:13:16.319 services as um. You know that we get this normalization 0:13:16.440 --> 0:13:19.200 type of dynamic, and that should be really interesting to 0:13:19.280 --> 0:13:23.120 me because for two reasons. One one tail wind to 0:13:23.200 --> 0:13:25.520 the short dollar and and and long room and b 0:13:25.640 --> 0:13:29.160 type of dynamic has been so far has been how 0:13:29.240 --> 0:13:32.880 much um, you know, the consumption basket mix has has 0:13:32.880 --> 0:13:36.720 flattered you know, the the goods exporters like China, um 0:13:36.840 --> 0:13:40.800 and and so it's you know, we may see some hiccups, 0:13:40.920 --> 0:13:44.240 UM you know, also retracements or this or that, uh 0:13:44.320 --> 0:13:47.320 sometimes you know early next year, but especially if you 0:13:47.320 --> 0:13:50.000 know the trends able to persist and and you know 0:13:50.120 --> 0:13:54.160 ultimately get through those, you know, those types of transitions 0:13:54.200 --> 0:13:57.080 that would really reinforce UM the case that this is 0:13:57.080 --> 0:13:59.559 a structural shift and has you know a lot of 0:13:59.640 --> 0:14:03.200 likes to go. And the second point with respect to this, uh, 0:14:03.200 --> 0:14:06.760 you know, the consumption basket mixed shifts to services is 0:14:06.800 --> 0:14:09.720 one thing I'm really interested on and to see is 0:14:09.920 --> 0:14:13.840 um if there's been if COVID ends up being a 0:14:13.920 --> 0:14:18.400 permanent downward truck to the labor intensity of services output 0:14:19.000 --> 0:14:22.920 as in, you know, the services output and services demand rebounds, 0:14:22.960 --> 0:14:27.320 but does the employment side of it under underperform the 0:14:27.320 --> 0:14:30.200 output side of it? Um And and that would be 0:14:30.240 --> 0:14:33.160 that be really interesting. You know, the idea of being 0:14:33.200 --> 0:14:35.200 you know what the w t O and and the 0:14:35.280 --> 0:14:37.760 Chinese entrance of w t O what it was too 0:14:38.000 --> 0:14:41.120 goods and and the labor intensity of goods. We could 0:14:41.120 --> 0:14:44.440 see a smaller version of that materialize and services. Um. 0:14:44.520 --> 0:14:47.280 I don't have a strong view yet about this. I 0:14:47.320 --> 0:14:49.440 think it's really gonna be just something to keep in 0:14:49.480 --> 0:14:51.280 the back of our minds and and see how it 0:14:51.360 --> 0:14:54.160 unfolds in real time. But if that were to materialize, 0:14:54.520 --> 0:14:57.400 that would um just give that much more of a 0:14:57.520 --> 0:14:59.960 of a tail wind for the FET to remain at 0:15:00.000 --> 0:15:03.040 commendative because you know, the the employment would not be 0:15:03.120 --> 0:15:06.560 the employment picture wouldn't be recovering, um, you know, necessarily 0:15:06.720 --> 0:15:09.640 as as as swiftly as expected on the services side. 0:15:10.480 --> 0:15:12.680 So just on that note, I mean, we are starting 0:15:12.720 --> 0:15:17.120 to see some commentators, including some former All Thoughts guests, 0:15:17.160 --> 0:15:20.400 but you know, people like Tim Dewey at the University 0:15:20.440 --> 0:15:24.240 of Oregon talking about the potential to have a supercharged 0:15:24.480 --> 0:15:29.800 economy next year, where um, you know, everything looks pretty good, 0:15:29.880 --> 0:15:34.320 you get a vaccination, people go back to spending, unemployment 0:15:34.720 --> 0:15:38.320 rebounds and isn't actually you know, as bad as maybe 0:15:38.360 --> 0:15:41.440 the FED was expecting, and perhaps it sparks a little 0:15:41.440 --> 0:15:45.880 bit of inflation that puts the FED in an awkward position. 0:15:46.680 --> 0:15:50.040 Is that a risk that you see for next year 0:15:50.280 --> 0:15:52.880 or do you think the structural changes that you just 0:15:52.960 --> 0:15:55.680 described you're going to be enough to avoid that scenario? 0:15:56.400 --> 0:15:59.280 I leave at me personally, I think the FED will 0:15:59.320 --> 0:16:02.760 likely an accommodative. What should be interesting is, you know, 0:16:03.080 --> 0:16:05.440 to the extent that we see these dynamics start to 0:16:05.680 --> 0:16:08.840 emerge in the conversations, it's it's likely to be reflected 0:16:09.000 --> 0:16:13.040 in internal divisions within the f OMC. And so what 0:16:13.200 --> 0:16:15.200 I'll be really interested to see is how chair Power 0:16:15.400 --> 0:16:18.640 kind of navigates those decisions, those divisions and you know, 0:16:18.800 --> 0:16:20.960 kind of put on a bit of like look at 0:16:21.000 --> 0:16:22.760 some of the statements to do more of a political 0:16:22.840 --> 0:16:26.760 lens along those lines. Um. But yeah, I I think that, Um, 0:16:26.800 --> 0:16:29.280 there's a there's a pretty high chance that we have 0:16:29.320 --> 0:16:32.160 a very strong economy next year. UM. You know, some 0:16:32.160 --> 0:16:34.600 some of these south side forecasts may actually be you know, 0:16:34.680 --> 0:16:37.040 a little bit lower than you know, what I would expect. 0:16:37.400 --> 0:16:40.600 And you know, we'll we'll we'll know more, um, you 0:16:40.640 --> 0:16:43.520 know later this month, but especially around the March f 0:16:43.560 --> 0:16:46.960 OMC meeting. Um. But the side so far suggests to 0:16:47.000 --> 0:16:49.400 me that, um, you know, this is a new regime 0:16:49.440 --> 0:16:52.440 shift and we were not really gonna, uh, they're not 0:16:52.480 --> 0:16:54.240 really going to get ahead of it. And and just 0:16:54.320 --> 0:16:56.280 to be clear with respect to what I was mentioning 0:16:56.720 --> 0:17:00.480 with with the labor intensity of output of services, that 0:17:00.560 --> 0:17:03.000 would be more of a question about on the back end, 0:17:03.120 --> 0:17:06.119 like not necessarily in the next few months, um, but 0:17:06.200 --> 0:17:09.520 more so about you know, what's the what's the long 0:17:09.640 --> 0:17:12.240 term run rate of you know, employment growth in the 0:17:12.280 --> 0:17:15.040 service aside um, and what does that mean for you know, 0:17:15.080 --> 0:17:18.119 fat forecasts where where are they're likely to have to 0:17:18.200 --> 0:17:21.040 mark up and down you know, the longer term forecast. 0:17:21.160 --> 0:17:23.960 But I know this is another question that I'm sure 0:17:24.040 --> 0:17:27.360 John has some some great thoughts about two, so I'll 0:17:27.400 --> 0:17:31.640 let him jump in. Yeah, no, I I think it's 0:17:31.640 --> 0:17:35.440 it's it's really interesting in the sense that the recovery 0:17:35.960 --> 0:17:39.879 next year is going to look very different than ones 0:17:39.960 --> 0:17:42.159 of at least the most recent past in terms of 0:17:42.240 --> 0:17:44.679 output shocks, in the sense that balance sheets are in 0:17:44.680 --> 0:17:47.400 a much better position, as people like you know, Tim 0:17:47.440 --> 0:17:50.000 doy have said that there's you know, there's this element 0:17:50.000 --> 0:17:52.399 of excess savings and that's kind of come from this 0:17:52.440 --> 0:17:56.760 combination of the cares act kind of having this huge multiplier, 0:17:57.080 --> 0:17:59.560 but also having the you know, with the virus, having 0:17:59.560 --> 0:18:02.840 these con strains in terms of people's ability to spend it. Um. 0:18:02.920 --> 0:18:04.640 And I think the other thing is we actually went 0:18:04.720 --> 0:18:08.200 into the crisis um with you know, household balance sheets 0:18:08.240 --> 0:18:11.760 in relatively good shape. Um, So coming out of it, 0:18:11.760 --> 0:18:14.520 it's not that Usually in a recession you kind of 0:18:14.560 --> 0:18:18.320 have this lethargic hystory sis kind of as people have 0:18:18.480 --> 0:18:21.720 to repair balance sheets and that's that's why it takes 0:18:21.760 --> 0:18:24.439 time for recoveries to get off the ground. Um. And 0:18:24.440 --> 0:18:26.600 I think that could be very different this time, given 0:18:26.640 --> 0:18:29.320 that it's just we had a we had a recession 0:18:29.320 --> 0:18:33.159 where disposable income went up, so um it could you know, 0:18:33.280 --> 0:18:35.600 very much change the scope of the recovery. And as 0:18:35.640 --> 0:18:38.960 it relates to the FED, I think and I think, um, 0:18:39.000 --> 0:18:42.480 this is this is something I'm fairly confident, I think, 0:18:42.480 --> 0:18:45.600 and people are underestimating. Is I don't think the FED 0:18:46.359 --> 0:18:50.720 reaction function or response so far is cyclical. I think 0:18:50.760 --> 0:18:53.639 it's structural. And what I mean by that is I 0:18:53.680 --> 0:18:56.840 think the FED is kind of is not saying like 0:18:56.920 --> 0:19:00.560 this was the right reaction to a COVID shot in 0:19:00.600 --> 0:19:04.080 the sense of their forward guidance, Balancie policy and there 0:19:04.200 --> 0:19:07.320 and and and etcetera. I think what they're saying is 0:19:07.440 --> 0:19:10.520 is like, we got things wrong a few years ago 0:19:10.880 --> 0:19:14.160 and that's not going to happen again. And the manifestation 0:19:14.200 --> 0:19:16.560 of that will be that, yes, things are going to 0:19:16.600 --> 0:19:18.520 be quote unquote back to normal in the middle of 0:19:18.600 --> 0:19:21.080 next year, but the FED won't because it's not a 0:19:21.080 --> 0:19:24.560 cyclical response, it's a structural response. So I I think 0:19:24.560 --> 0:19:26.960 the FED will be much more dubbish than I think 0:19:27.000 --> 0:19:31.720 a lot of people think. The recaliboration of their approach, 0:19:31.960 --> 0:19:35.680 especially with respect to the Phelps curve, pre Dace COVID. Right, 0:19:35.960 --> 0:19:38.280 So what what John saying makes a lot of sense 0:19:38.320 --> 0:19:40.639 to me, and conversations with John have actually kind of 0:19:40.640 --> 0:19:43.000 influenced my view here. One last point I'd like to 0:19:43.040 --> 0:19:45.639 add there is, you know, I think that one of 0:19:45.680 --> 0:19:48.520 the biggest things that um, you know, I had to 0:19:48.640 --> 0:19:50.920 adapt to in real time and it kind of change 0:19:50.960 --> 0:19:54.119 my mind on is exactly that Tim Dewey hypothesis of 0:19:54.160 --> 0:19:56.840 excess savings. And you know, John and I have talked 0:19:56.840 --> 0:19:58.480 a little bit about, you know, what would be cool 0:19:58.520 --> 0:20:02.560 ways to maybe think about the distributional aspects of this 0:20:02.640 --> 0:20:04.680 and if if the data you know exists for that, 0:20:04.880 --> 0:20:06.800 and that could be a key question to really gauge 0:20:07.280 --> 0:20:10.000 how far it can take us through next year. But 0:20:10.960 --> 0:20:13.760 it is really interesting, you know, the the initial conditions 0:20:14.080 --> 0:20:17.600 really do matter in terms of macro economic thinking, and 0:20:17.600 --> 0:20:21.000 the initial conditions the balantie wise on the household side especially, 0:20:21.400 --> 0:20:24.560 don't really suggest that we have to have very elevated 0:20:24.560 --> 0:20:27.520 savings rates for a long time, as as balanties have 0:20:27.560 --> 0:20:29.960 to have to get repaired and to the extent that 0:20:30.880 --> 0:20:33.920 we would need elevated the savings rates in response to 0:20:33.960 --> 0:20:36.680 the you know, virus uncertainty. It's kind of similar to 0:20:36.760 --> 0:20:38.879 what John was saying with respect of the risk premium 0:20:38.880 --> 0:20:41.600 compression on the back of the vaccine news. You trade 0:20:41.680 --> 0:20:44.399 scope for certainty, and that certainty ends up being a 0:20:44.440 --> 0:20:48.800 pretty big headwind. Tom, you know how high personal savings 0:20:48.920 --> 0:21:08.480 rates you know, end up being next year. So one 0:21:08.480 --> 0:21:10.240 of the questions that I think the off all I've 0:21:10.240 --> 0:21:13.560 asked you this before, but it's something I've been curious 0:21:13.560 --> 0:21:17.040 about a lot. Like or we talked about regime shift 0:21:17.119 --> 0:21:20.399 and the FEDS regime shift is fairly clear and you 0:21:20.480 --> 0:21:23.359 believe it. And they're going to be uh much less 0:21:23.440 --> 0:21:26.960 aggressive they claim in um hiking raids. They're not going 0:21:27.000 --> 0:21:30.520 to be trying to get ahead of inflation in the 0:21:30.600 --> 0:21:36.200 same way. And so that's potentially quite significant. Obviously, the 0:21:36.240 --> 0:21:39.720 post COVID economy could look different than the pre COVID 0:21:39.760 --> 0:21:42.720 economy in ways, and we'll talk about that more. But 0:21:42.800 --> 0:21:46.280 what does that mean for then sort of like normalized markets? 0:21:46.359 --> 0:21:48.960 And obviously right now, as we said in the intro 0:21:49.080 --> 0:21:52.080 or in this era or this not era, or in 0:21:52.119 --> 0:21:55.960 this like moment where people are buying like Macy's and 0:21:56.040 --> 0:21:59.920 airlines and steel companies, companies that were not sexy at 0:22:00.040 --> 0:22:03.840 all pre crisis um suddenly getting some sort of back 0:22:03.840 --> 0:22:08.200 to normal appeal. But in as we normalize and maybe 0:22:08.200 --> 0:22:10.320 in just sort of like Q three of next year, 0:22:10.400 --> 0:22:14.240 things start to look genuinely normal. Do uh, do people 0:22:14.320 --> 0:22:19.240 just go back to buying Microsoft and Netflix and Tesla 0:22:19.440 --> 0:22:23.320 as their leaders or do something fundamentally changed where like 0:22:23.440 --> 0:22:28.440 new winners can emerge on a more sustainable basis. That's 0:22:28.440 --> 0:22:31.040 a great question, UM. I wish I had a great 0:22:31.080 --> 0:22:34.520 answer to that. Um. You know, on one thing that 0:22:34.520 --> 0:22:38.200 should be interesting along these lines is Um, the results 0:22:38.240 --> 0:22:41.440 of the of the Georgia elections likely give some signal 0:22:41.560 --> 0:22:44.040 with respect to what we can expect on the fiscal 0:22:44.080 --> 0:22:48.040 front until the next batch of mid terms two and 0:22:48.080 --> 0:22:49.840 that should be kind of interesting to keep in the 0:22:49.880 --> 0:22:52.520 back back of our minds. But but yeah, you know, 0:22:52.760 --> 0:22:56.720 I think that at some point next year, I wouldn't 0:22:56.720 --> 0:22:58.960 be surprised if, you know, we kind of pivot back 0:22:59.000 --> 0:23:02.359 to you people are long and long the long end 0:23:02.400 --> 0:23:05.359 of the botto market and long you know, NAZAC and 0:23:05.359 --> 0:23:08.840 and and China tech um and And it's it's interesting 0:23:08.880 --> 0:23:12.880 actually seeing how we've already kind of we we despite 0:23:12.920 --> 0:23:16.159 the fact that we've had this huge cyclicles m rally. 0:23:16.560 --> 0:23:19.160 You know, the NAZZAC actually did kind of catch catch 0:23:19.280 --> 0:23:21.960 up a little bit in in in recent sessions. So 0:23:22.000 --> 0:23:24.360 I think there's still gonna likely be a structural demand 0:23:24.840 --> 0:23:28.879 for that type of stuff. UM. And you know, I 0:23:29.080 --> 0:23:32.080 would say though that like I'm I'm actually more interested 0:23:32.160 --> 0:23:36.040 in like in terms of normalization trades that have durability. 0:23:36.240 --> 0:23:39.560 I'm more interested in um, looking at things in the 0:23:39.560 --> 0:23:43.399 emerging markets and looking at stuff that's sensitive to global 0:23:43.400 --> 0:23:47.240 trade growth like th nik UM as opposed to you know, 0:23:48.160 --> 0:23:52.119 just buying you know, US energy stocks and and you 0:23:52.160 --> 0:23:55.480 know retail operators. I think, I think, I think, I 0:23:55.480 --> 0:23:58.480 think it's right. And I think one maybe of the 0:23:58.520 --> 0:24:05.040 more interesting transitions to come in, you know two could 0:24:05.080 --> 0:24:07.639 be in terms of like these narratives of like a 0:24:07.640 --> 0:24:11.719 fiscal reflation to a vaxx reflation, is that the vax 0:24:11.840 --> 0:24:15.800 reflation kind of morphs into this broadening of a risk 0:24:15.880 --> 0:24:20.720 premium compression. And I think like one of the I 0:24:20.760 --> 0:24:24.440 think a lot of the market action post the vaccine 0:24:24.800 --> 0:24:27.000 kind of felt like like the market was exhaling a 0:24:27.040 --> 0:24:29.120 little bit, right, Like it had all this built up 0:24:29.640 --> 0:24:32.399 risk premiums and like all these cyclicals had no idea 0:24:33.080 --> 0:24:35.840 um and you saw like across asset classes in terms 0:24:35.920 --> 0:24:39.920 of like trade sensitive currencies, etcetera. E. M. Bond markets 0:24:40.160 --> 0:24:43.840 where there's just this very high level of risk premium. 0:24:43.920 --> 0:24:47.119 And I think this kind of really dated back dates 0:24:47.160 --> 0:24:50.200 back a while. And why I think this could be 0:24:50.440 --> 0:24:53.720 maybe a bigger theme is that it's it could be 0:24:53.880 --> 0:24:56.760 another one of these regime shifts, because what we had 0:24:56.800 --> 0:24:59.879 in two thousand ten to two thousand twenty was basically 0:25:00.040 --> 0:25:04.560 post financial crisis was basically exhausion, a shock after exhaus 0:25:04.680 --> 0:25:07.240 A shock, and we had we went from the euro 0:25:07.359 --> 0:25:11.840 crisis to China devel concerns, to Brexit, to trade war 0:25:12.280 --> 0:25:15.359 and finally the mother of all shocks in terms of 0:25:15.400 --> 0:25:18.920 COVID and unfortunately passed away this year. But Emmanuel Farhi 0:25:19.000 --> 0:25:21.200 had Harvard actually did a lot of work on kind 0:25:21.200 --> 0:25:25.120 of why the market price so much risk premium when 0:25:25.200 --> 0:25:29.200 discount rates were so love and I think it has 0:25:29.400 --> 0:25:31.560 something to do with this, and it led to things like, 0:25:31.840 --> 0:25:35.640 you know, we'd have like the you know, swissy currency 0:25:36.200 --> 0:25:39.359 on a on a effective exchanger evaluation metric, be it 0:25:39.520 --> 0:25:41.280 like you know, just going a straight line from two 0:25:41.320 --> 0:25:44.040 thousand ten to two thousand twenty, when things that were 0:25:44.080 --> 0:25:47.119 like cyclically driven like the Swedish chrona or the AUSI 0:25:47.200 --> 0:25:49.520 doll or things like that would kind of just be 0:25:49.560 --> 0:25:52.679 in a decline lower. It was basically the market just 0:25:52.720 --> 0:25:55.720 saying I want safety at all costs, and I don't 0:25:55.760 --> 0:25:57.960 want I don't want anything to do with cyclicals. I 0:25:58.000 --> 0:26:00.600 don't need that. There's this embedded it is premium, and 0:26:00.600 --> 0:26:03.000 I think it's right for it to be there. And 0:26:03.040 --> 0:26:06.560 I wonder if kind of the vaccine and the combination 0:26:06.600 --> 0:26:09.480 of all these left tail measures we've taken with fiscal 0:26:09.560 --> 0:26:12.919 filling in for deflation with the European um with the 0:26:12.920 --> 0:26:17.520 European Deal, and and and things like that. UM, I 0:26:17.560 --> 0:26:20.760 wonder if the combination of of left tail changes and 0:26:20.920 --> 0:26:24.199 this catalyst to reduce risk premium kind of you know, 0:26:24.280 --> 0:26:27.520 can have a higher trajectory than people think. You know, 0:26:27.920 --> 0:26:31.200 I'm looking right down on the Bloomberg terminal of the 0:26:31.400 --> 0:26:37.320 IMANXI have the Emerging Market Index and on a large 0:26:37.400 --> 0:26:40.560 term scale, and so interesting because you know, we haven't 0:26:40.600 --> 0:26:43.480 gone anywhere since two thousand and seven. Um. You know, 0:26:43.560 --> 0:26:46.440 it's just been a bunch of zigs and zags along 0:26:46.480 --> 0:26:49.000 the way. So you know, a lot of altility long 0:26:49.040 --> 0:26:52.040 the way, but we're basically you know, haven't made any 0:26:52.359 --> 0:26:55.880 upward progress. UM. I think this is before carry albeit. 0:26:56.280 --> 0:26:59.320 But you know, if if if the framing that John 0:26:59.320 --> 0:27:01.600 and I are presents, especially with respects to the dollar, 0:27:02.119 --> 0:27:04.840 if those end up being right, then I wouldn't be surprised. 0:27:04.880 --> 0:27:08.880 If you know, some of these emerging markets are are 0:27:08.960 --> 0:27:12.240 really kind of coiled and and and could could be 0:27:12.560 --> 0:27:16.680 a really interesting and more durable trade. And as we 0:27:16.880 --> 0:27:19.560 as we kind of handoff, like like John said, from 0:27:19.640 --> 0:27:24.359 just a pure vaccine excellation to a broader based you know, 0:27:24.480 --> 0:27:27.520 reduction risk premia, and I would I would expect, you know, 0:27:27.600 --> 0:27:30.600 the emerging markets trade to probably have more durability along 0:27:30.640 --> 0:27:35.760 those lines than just you know, the US cyclicals and 0:27:35.920 --> 0:27:40.360 US small value. So this was actually going to beat 0:27:40.440 --> 0:27:43.359 into my next question. But we started this whole conversation 0:27:43.560 --> 0:27:45.560 talking about how the dollar is going to be really 0:27:45.640 --> 0:27:50.720 important to one and the more you talk about sort 0:27:50.760 --> 0:27:54.159 of your specific ideas, I can see why you're so 0:27:54.280 --> 0:27:56.879 focused on the dollar. So clearly, if you're long emerging markets, 0:27:56.960 --> 0:27:59.960 that matters quite a lot. Do you think, well, first 0:28:00.040 --> 0:28:03.000 of all, what would it take to get a higher 0:28:03.119 --> 0:28:08.280 dollar in this environment? And secondly, is the suggestion here 0:28:08.920 --> 0:28:13.119 that the Federal Reserve has sort of become comfortable with 0:28:13.280 --> 0:28:16.800 this idea that it's the world central bank and that 0:28:17.119 --> 0:28:22.119 it's actively looking at financial conditions and actively caring about 0:28:22.480 --> 0:28:25.000 a stronger US dollar and what it does to the 0:28:25.119 --> 0:28:27.960 rest of the world economy with respect to what it 0:28:28.000 --> 0:28:31.000 would take for a higher dollar. I mean, one one 0:28:31.040 --> 0:28:33.440 thing that I would obviously do that is if the 0:28:33.520 --> 0:28:37.440 Fed ended up being less debbish or less you know, authentic, 0:28:37.560 --> 0:28:40.320 and its reaction function shift than then we might be 0:28:40.400 --> 0:28:44.280 thinking in this conversation UM and and more more tactically 0:28:44.360 --> 0:28:46.800 in terms of like shorter term trading. I think that 0:28:47.120 --> 0:28:51.120 like I mentioned earlier, you know, the combination of of 0:28:51.880 --> 0:28:55.840 the consumption basket and make shifting towards services at the 0:28:55.920 --> 0:28:58.240 same time as potential for you know, maybe a little 0:28:58.240 --> 0:29:01.200 bit of uh comp of the of the yield spread 0:29:01.280 --> 0:29:04.480 between US and China. UM that could doubt that could 0:29:04.520 --> 0:29:07.200 give some pickups along the way, UM, although I think 0:29:07.240 --> 0:29:09.959 they would be opportunities to add or enter into these 0:29:10.000 --> 0:29:13.200 types of trades UM. And with respect to the FED, UM, 0:29:13.280 --> 0:29:15.560 I do think that you know, they've become more comfortable 0:29:15.640 --> 0:29:17.920 with this, this notion of being in the World Central Bank, 0:29:18.120 --> 0:29:21.160 you know, BRAINER has been really influential along the lines 0:29:21.200 --> 0:29:25.040 of how how the international conditions kind of UM, you know, 0:29:25.200 --> 0:29:28.320 are part of the analysis to f OMC has to make. 0:29:28.680 --> 0:29:30.880 But I think more generally, UM, you know, and even 0:29:30.920 --> 0:29:34.560 before COVID, it was just this notion that why were 0:29:34.600 --> 0:29:36.320 we hiking in the first place, Like why were we 0:29:36.400 --> 0:29:40.400 short circuiting these recoveries when you know, our Phillips curve 0:29:40.600 --> 0:29:44.760 kind of based models UM never really showed like UM 0:29:45.200 --> 0:29:48.880 and never materialized, the inflation never came, and um, you 0:29:48.960 --> 0:29:52.640 know what what are what are the costs benefit trade offs? Um? 0:29:52.760 --> 0:29:54.560 And I think they have come to the conclusion that 0:29:55.280 --> 0:29:58.320 it's time to letter rip. But again, you know, you know, 0:29:58.440 --> 0:30:00.040 I think John is a little bit more confident and 0:30:00.040 --> 0:30:02.240 I am about this, although you know, I wouldn't be 0:30:02.280 --> 0:30:04.920 surprised if I kind of converged to his views. But um, 0:30:05.360 --> 0:30:07.320 you know, the question there, I think is going to 0:30:07.400 --> 0:30:10.840 be about how how does Chair Powell navigate what are 0:30:10.960 --> 0:30:14.360 likely to be kind of emerging internal divisions, even if 0:30:14.400 --> 0:30:18.440 they're not super strong. Um. You know, as as these 0:30:18.640 --> 0:30:20.640 uh you know, as members of that form, you start 0:30:20.720 --> 0:30:24.720 thinking about the back end of of of this recovery 0:30:24.920 --> 0:30:27.320 more so than just to hear and now, um, that 0:30:27.400 --> 0:30:31.520 should probably become more more in play as a debate, 0:30:32.000 --> 0:30:34.640 and um, you know, it should be interesting to see 0:30:34.680 --> 0:30:37.240 how he navigates that. And I'll let I'll let John 0:30:37.280 --> 0:30:40.800 hoppin about about both questions as well. Yeah, I mean 0:30:41.680 --> 0:30:44.440 I think on the on the FED. On the FED part, 0:30:44.560 --> 0:30:47.520 I think it's I think the FED really nailed And 0:30:47.600 --> 0:30:50.320 there's a brain Arde speech in July that kind of 0:30:50.480 --> 0:30:53.800 really crystallized this when she talked about kind of stabilization 0:30:53.920 --> 0:30:58.560 to accommodation, and and I think that the FED is 0:30:59.280 --> 0:31:02.800 very now comfortable in the idea that a lot of 0:31:02.880 --> 0:31:05.560 their policy effects kind of happened in the second derivative. 0:31:06.160 --> 0:31:09.200 And it's not like the traditional Michael Woodford, Oh, we 0:31:09.280 --> 0:31:12.200 do que real interest rates, ball term premiere compresses and 0:31:12.280 --> 0:31:15.560 aggregate demand goes bonkers. It's not like that anymore. It's 0:31:15.880 --> 0:31:19.360 how do we, through financial markets, through financial conditions kind 0:31:19.400 --> 0:31:22.640 of create these feedback loops that basically allows our policy 0:31:22.760 --> 0:31:25.959 posture to expand for us. And it's actually much more 0:31:26.080 --> 0:31:28.960 durable because they because their feedback loops, they play off 0:31:28.960 --> 0:31:31.880 each other. Right, so the FED can say that Okay, 0:31:31.960 --> 0:31:34.920 things are going well, that changes nothing for us. That 0:31:35.080 --> 0:31:37.120 has an effect on the dollar, which has an effect 0:31:37.160 --> 0:31:39.120 on real yields, which has an effect on the dollar. 0:31:39.560 --> 0:31:43.520 So kind of setting these things in motion, um I think, well, 0:31:43.760 --> 0:31:46.360 kind of I will add power to the FEDS very 0:31:46.440 --> 0:31:50.960 procyclical ability to ease and in terms of the dollar, 0:31:51.120 --> 0:31:54.080 in in the sense of what could possibly be potential 0:31:54.160 --> 0:31:57.960 positive catalysts, I mean, I think number one is I 0:31:58.080 --> 0:32:02.160 think probably positioning um as like we kind of get 0:32:02.240 --> 0:32:06.200 into January and it becomes a very consensus view. Um, 0:32:06.400 --> 0:32:09.720 there's always these Q one shakeouts. Um, it seems in 0:32:09.880 --> 0:32:13.320 terms of the popular trades. Um. But I think what 0:32:13.600 --> 0:32:16.240 maybe actually kind of may be able to offset that 0:32:16.960 --> 0:32:19.560 is that a lot of people, I think want to 0:32:19.640 --> 0:32:23.400 play um, these trades in a catch up stence. Right, 0:32:23.520 --> 0:32:26.480 So you see these things like oh, copper gold ratio 0:32:26.560 --> 0:32:31.120 has gone vertical, and and and Russell versus SMP, etcetera. 0:32:31.600 --> 0:32:34.840 And the tenure bondild has done pretty much. I mean 0:32:34.880 --> 0:32:38.200 it's you know, marginally higher, but it's not really done anything. 0:32:38.800 --> 0:32:40.680 And I think a lot of macro is still kind 0:32:40.760 --> 0:32:43.400 of looking at like, Okay, how do I pay rates 0:32:43.480 --> 0:32:45.240 to play this catchup or how do I do? And 0:32:45.320 --> 0:32:47.680 I think that's really missing the point because the reason 0:32:47.800 --> 0:32:50.480 these things can go vertical is because they keep looking 0:32:50.520 --> 0:32:53.080 over there. Russell luson P ratio keeps looking over its 0:32:53.080 --> 0:32:55.800 shoulder at the bomb market and seeing nothing. So that's 0:32:55.840 --> 0:32:58.160 what allows it to go nuts. And saying with a 0:32:58.200 --> 0:33:01.760 lot of the cyclical data. And so I think that 0:33:01.920 --> 0:33:05.200 a lot of these things, Um, yes, there will be 0:33:05.360 --> 0:33:08.000 probably hiccups in terms of you know, in terms of 0:33:08.040 --> 0:33:10.920 the recovery, in terms of the vaccine rollout, etcetera. But 0:33:11.160 --> 0:33:14.120 in in bigger picture terms, I think the trades that 0:33:14.160 --> 0:33:33.480 are working now are still the bigger trades going. I 0:33:33.560 --> 0:33:36.040 want to actually, like, really have you spell out that 0:33:36.160 --> 0:33:40.120 last point, because it sounds pretty important. People look at 0:33:40.200 --> 0:33:45.560 the rebound and small caps value commodities copper to the commodity, 0:33:46.080 --> 0:33:47.800 and they're like, all right, but when are yields going 0:33:47.880 --> 0:33:51.040 to catch up? But it's not like that. There's no 0:33:51.160 --> 0:33:54.640 inherent with this new FED regime. There's no inherent reason 0:33:54.960 --> 0:33:58.240 for yields to catch up. And if anything, it's this 0:33:58.400 --> 0:34:00.880 ongoing compression of the long end of a curve that 0:34:01.040 --> 0:34:04.160 further accelerates the gap between the two. Just sort of 0:34:04.280 --> 0:34:07.120 explained that, or if if I'm if I'm summarizing your 0:34:07.160 --> 0:34:11.239 view correctly, and how much longer that that dynamic could 0:34:11.239 --> 0:34:14.440 potentially run. Yeah, I know, I think you actually summed 0:34:14.440 --> 0:34:18.120 it up perfectly. I think that it can run further 0:34:18.520 --> 0:34:21.120 in the sense that there will be these times when 0:34:21.160 --> 0:34:23.400 people are like, oh, maybe we can like price in 0:34:23.560 --> 0:34:27.480 hikes three And you've seen this recently a little bit 0:34:27.560 --> 0:34:30.800 on the backs on the back of the backs reflation narrative, 0:34:30.840 --> 0:34:33.200 where within the bond market, if you look at like 0:34:33.840 --> 0:34:36.000 a butterfly, you'll see that the belly is kind of 0:34:36.200 --> 0:34:38.000 cheapening at the same rate and the long end is 0:34:38.040 --> 0:34:40.719 and that's kind of saying like, okay, like maybe they'll 0:34:40.760 --> 0:34:43.600 be you know, because usually when the belly leads, like 0:34:43.719 --> 0:34:46.239 the belly lead the bond market lower, so that's like 0:34:46.320 --> 0:34:49.879 five seven tens, and when that happens, you kind of say, like, Okay, 0:34:49.920 --> 0:34:52.920 this could be a policy changes coming. But I think 0:34:53.400 --> 0:34:57.000 bigger picture is that all this stuff is kind of there. 0:34:57.080 --> 0:34:59.399 There used to be these cut off mechanisms to these moves, 0:34:59.640 --> 0:35:02.320 right as in cyclicals would get off the map, the 0:35:02.400 --> 0:35:05.279 dollar would start going lower, and then we'd say, oh, 0:35:05.440 --> 0:35:07.319 and to this means in two years that the FED 0:35:07.440 --> 0:35:12.120 can remove accommodation. And now we're saying that in two 0:35:12.200 --> 0:35:14.360 years the Fed's accommodation level is going to look really 0:35:14.400 --> 0:35:16.560 similar to what it is now. And I think that's 0:35:16.560 --> 0:35:19.440 a very powerful point going forward. You know, before we 0:35:19.960 --> 0:35:22.719 wrap up novel, i'd love to go back to your 0:35:22.880 --> 0:35:29.600 point about could the COVID nineteen crisis b two services 0:35:29.840 --> 0:35:34.400 productivity as China's entry into the w t O and 0:35:34.480 --> 0:35:38.279 two thousand was too uh goods productivity and the sort 0:35:38.320 --> 0:35:40.560 of deflation or disinflation that we start for the next 0:35:40.600 --> 0:35:43.960 couple of decades in goods. Walk through your thinking there. 0:35:44.000 --> 0:35:46.240 What do you see happening out in the real world, 0:35:46.680 --> 0:35:49.040 out in the economy that you think could cause this 0:35:49.160 --> 0:35:52.560 where we return to services pre crisis levels of services 0:35:52.600 --> 0:35:56.560 consumption but not pre crisis levels of services employment, and 0:35:56.640 --> 0:35:59.000 sort of a why do you think that's a possibility, 0:35:59.040 --> 0:36:00.279 And what do you see as some of the not 0:36:00.360 --> 0:36:04.279 gund effective that well, the you know, first of all, 0:36:04.360 --> 0:36:06.759 this is very speculative of a view. It's something that 0:36:06.880 --> 0:36:08.880 I'm just kind of you know, I just want to 0:36:08.880 --> 0:36:10.799 see how it materialized is more of a question than 0:36:10.880 --> 0:36:14.360 a view. But this this was a huge shock, and 0:36:14.440 --> 0:36:17.640 it was very very concentrated in the services sector. And 0:36:17.719 --> 0:36:20.440 so there's there's always this kind of you know, necessity 0:36:20.880 --> 0:36:23.480 is the mother of invention type of thing, type of dynamic. 0:36:23.640 --> 0:36:25.759 So that that's one thing I think that you know, 0:36:26.040 --> 0:36:30.759 service services oriented businesses have been likely focused a lot 0:36:30.880 --> 0:36:34.239 on the technological side um in terms of how they 0:36:34.719 --> 0:36:38.759 kind of restart um their businesses. And and secondly, you know, 0:36:39.040 --> 0:36:43.360 the COVID, the COVID shock kind of just digitize everything 0:36:43.640 --> 0:36:45.920 and um pulled forward a lot of this kind of 0:36:46.200 --> 0:36:49.879 technological um you know, implementation of a lot of things, 0:36:50.239 --> 0:36:52.120 and so you know, I wouldn't be I wouldn't be 0:36:52.160 --> 0:36:55.239 surprised if if, if that's how it materialized, what it 0:36:55.480 --> 0:36:57.399 would look like in terms of, like on the ground 0:36:57.440 --> 0:36:59.520 the real economy. It's a good question. I don't I 0:36:59.520 --> 0:37:01.239 don't know if I have a great answer, But in 0:37:01.400 --> 0:37:03.279 terms of knock on effects, what it would mean is 0:37:03.360 --> 0:37:07.000 that we would have another kind of wave of you know, 0:37:07.120 --> 0:37:09.960 positive output shocks that the FED doesn't necessarily need to 0:37:10.000 --> 0:37:13.160 a short circuit because it's not seeing the same um 0:37:13.320 --> 0:37:17.319 impulse on employment and inflation. And you know that's likely 0:37:17.440 --> 0:37:19.080 you know, if that were to materialize, that would likely 0:37:19.120 --> 0:37:22.759 be you know, another inequality widening dynamic, and you know 0:37:22.960 --> 0:37:25.160 it would it would lead to kind of like a 0:37:25.880 --> 0:37:29.640 Goldilocks type of environment for the markets. UM. So you know, 0:37:29.760 --> 0:37:32.400 that's that's one thing I'm interested to see as we 0:37:32.800 --> 0:37:35.680 restart the services sectors, what are we seeing in terms 0:37:35.719 --> 0:37:39.239 of the output res employment picture, especially like later in 0:37:39.280 --> 0:37:41.400 the year once we're kind of because and you know, 0:37:42.640 --> 0:37:45.799 on the front end of of reopening and we normalization, 0:37:46.239 --> 0:37:49.400 you know, the we should see a very robust hiring 0:37:49.480 --> 0:37:52.800 response in response to you know, a rebound and demand. 0:37:53.320 --> 0:37:56.279 But I'm interested to see if if that kind of 0:37:56.360 --> 0:37:59.319 tapers off a little bit relative to output, and if 0:37:59.360 --> 0:38:02.279 that does happened, that that probably has some implications for 0:38:02.920 --> 0:38:06.440 longer term bond yields until unless, and until we do 0:38:06.600 --> 0:38:10.760 see some sort of more structural um fiscal policy shift, 0:38:11.120 --> 0:38:13.960 because um, you know, I think that that's gonna be necessary, 0:38:14.480 --> 0:38:18.200 uh to offset some of these inequality widening forces. And 0:38:18.400 --> 0:38:20.839 and that's that's kind of when you know, you start 0:38:20.920 --> 0:38:24.080 looking at the two mid terms and stuff like that, 0:38:24.480 --> 0:38:27.640 to an extent, the Georgia elections too. But even with 0:38:27.680 --> 0:38:30.400 the Georgia elections, you know, even if both seats go 0:38:31.000 --> 0:38:35.239 Democrat fifty fifty with a Vice President Harris tiebreaker, the 0:38:35.280 --> 0:38:37.320 folks with the most leverage in that environment would be 0:38:37.360 --> 0:38:39.920 the centrist Democrats. Um, you know that you need Joe 0:38:39.960 --> 0:38:42.560 Banshon on board for a lot of a lot of stuff. Um, 0:38:42.719 --> 0:38:44.440 it's very different than you know, if you have like 0:38:44.480 --> 0:38:47.200 fifty three fifty four seats UM in the Senate, and 0:38:47.520 --> 0:38:49.960 you know, the progressives would have a lot more leverage. 0:38:50.000 --> 0:38:53.040 So that that's kind of a messy wave of me 0:38:53.160 --> 0:38:56.600 trying to lay out how I'm thinking about this. So 0:38:57.000 --> 0:39:01.520 I'm thinking back to the beginning of this year and 0:39:02.120 --> 0:39:04.920 when I think about all the crazy things that happened. 0:39:04.960 --> 0:39:08.600 I mean, just just in January, we had the beginning 0:39:08.680 --> 0:39:13.400 of the COVID outbreak in earnest in Luhan, we had UM, 0:39:14.000 --> 0:39:17.840 you know, the US and and Iran getting pretty close 0:39:17.960 --> 0:39:21.160 to an all out war. UM lots of things happening. 0:39:21.239 --> 0:39:23.719 I mean, Kobe Bryant dying in a helicopter crash like 0:39:24.719 --> 0:39:26.640 that was a big deal as well. I mean, I'm 0:39:26.800 --> 0:39:28.719 thinking about how to phrase this question, but like, what 0:39:28.960 --> 0:39:32.160 what is your tail risk that you're watching out for 0:39:32.760 --> 0:39:36.840 in UM one but not the obvious ones, Like we 0:39:36.880 --> 0:39:38.920 don't get a vaccine that works, what's your sort of 0:39:39.080 --> 0:39:43.839 out there, what's your left field tail risk for? Yeah, 0:39:43.960 --> 0:39:50.080 the the the the unknown unknown. I think that I'll 0:39:50.520 --> 0:39:52.879 I won't I won't try and predict that, but I'll 0:39:52.960 --> 0:39:56.719 go with I think that it will be very interesting 0:39:57.080 --> 0:40:01.640 in a policy sense, not only like kind of gauging 0:40:02.120 --> 0:40:05.120 new reaction functions in fiscal and central banks around the world, 0:40:05.760 --> 0:40:10.560 but kind of gauging UM, when when will when will 0:40:10.600 --> 0:40:14.239 the rate of change matter? In terms of policy easing, right, 0:40:14.280 --> 0:40:17.520 and it's like, will the end of one be kind 0:40:17.560 --> 0:40:21.080 of these rolling cliffs of either central bank accommodation and 0:40:21.200 --> 0:40:25.280 ending and fiscal accommodation ending, because we like to forget 0:40:25.360 --> 0:40:28.120 that even though that, you know, the US has had 0:40:28.160 --> 0:40:31.040 a messy kind of fiscal picture, even though the Cares 0:40:31.040 --> 0:40:33.480 Act was obviously such a success, the rest of the 0:40:33.520 --> 0:40:37.560 world is actually kind of doing it a lot more effectively. 0:40:37.800 --> 0:40:40.239 I mean, Europe has its issues with disbursements of the 0:40:40.640 --> 0:40:44.399 you know, this supernational project, but Germany and France both 0:40:44.480 --> 0:40:47.880 acted when mitigation measures went back into effect. Canada is, 0:40:48.160 --> 0:40:51.560 you know, promising more fiscal next year, Australia, New Zealand 0:40:51.600 --> 0:40:55.040 the same, even Korea surplus. Korea has an expansionary budget 0:40:55.080 --> 0:40:58.720 for next year. Japan's on their third or fourth supplementary budget. 0:40:59.080 --> 0:41:02.200 So a lot of these, you know, these changes in 0:41:02.640 --> 0:41:05.440 what was previously pretty dogmatic behavior from a lot of 0:41:05.480 --> 0:41:08.799 fiscal actors has happened. And the question is, I guess, 0:41:09.400 --> 0:41:11.839 kind of looking at it for more of a tail 0:41:11.920 --> 0:41:14.120 risk scenario is what if a lot of this goes 0:41:14.200 --> 0:41:17.600 off kind of cliffs off at the same time, and 0:41:17.800 --> 0:41:21.920 then the market kind of becomes uncomfortable with this fiscal transition, 0:41:22.320 --> 0:41:24.839 you know, into the private sector, because for the last 0:41:24.880 --> 0:41:28.240 ten years, the private sector hasn't exactly achieved escape philocoity 0:41:28.280 --> 0:41:29.680 on its own, or it doesn't have a good track 0:41:29.719 --> 0:41:32.360 record of it. So I think, in terms of risks, 0:41:32.400 --> 0:41:36.320 I guess that would be my risk. I think that 0:41:36.360 --> 0:41:39.160 makes a lot of sense to you know, um as 0:41:39.280 --> 0:41:42.680 John's mentioned, um a lot about how there's kind of 0:41:42.680 --> 0:41:46.920 a procyclcality element and dynamic with respect to this fat regime. 0:41:47.000 --> 0:41:49.640 So if we do see some rolling cliffs in terms 0:41:49.680 --> 0:41:52.440 of greater change of of of policy accommodation, at the 0:41:52.480 --> 0:41:56.600 same time as kind of the the big normalization boost 0:41:56.719 --> 0:42:00.200 kind of starts to taper off, um that that would 0:42:00.200 --> 0:42:02.840 be kind of a nasty cocktail, especially because you know, 0:42:03.200 --> 0:42:05.640 this is a question I'm really I'm really interested to 0:42:05.680 --> 0:42:08.440 see in the back half of next year. You know, 0:42:08.560 --> 0:42:11.040 what is what is the run rate that we kind 0:42:11.080 --> 0:42:14.319 of converge back to, like, you know, has nothing really 0:42:14.400 --> 0:42:16.839 changed in the underlying picture? You know, once we're past 0:42:16.960 --> 0:42:18.600 you know, the COVID shock and then the real the 0:42:18.680 --> 0:42:22.080 real the normalization shot upward shock, you are we in 0:42:22.160 --> 0:42:25.720 the same kind of nominal growth environment as before, because 0:42:25.760 --> 0:42:28.759 if so, you know, tapering off to that to that 0:42:28.960 --> 0:42:31.640 kind of run rate at the same time as as um, 0:42:31.800 --> 0:42:33.960 you know, if if, if, if we do see some 0:42:34.040 --> 0:42:36.120 sort of cliffs on the policy front, it will be 0:42:36.120 --> 0:42:37.960 approachately could go on the way down as well, the 0:42:38.040 --> 0:42:40.200 same way it's been really effective on the way up. 0:42:40.360 --> 0:42:42.000 And I guess the other other thing I would mention 0:42:42.120 --> 0:42:47.000 would be, you know, just a typical classic macro punter geopolitics, Right, 0:42:47.080 --> 0:42:50.799 anything can happen with respect to geopolitics. I I think 0:42:50.840 --> 0:42:53.880 it'll be interesting to see the approach that Presidental like 0:42:54.000 --> 0:42:57.120 Biden takes with respect of China. I I understand that 0:42:57.840 --> 0:43:00.040 you know that it's it's it's nice to have a 0:43:00.040 --> 0:43:02.840 lot of the uncertainty removed. But um, you know, as I, 0:43:03.000 --> 0:43:06.240 as I mentioned a couple of times on on Bloomberg 0:43:06.320 --> 0:43:09.040 with with You Joe, during the trade war, I I 0:43:09.160 --> 0:43:11.360 always kind of looked at it as it was a 0:43:11.440 --> 0:43:14.759 lot more bark bark than bite. Um. And ultimately, you know, 0:43:14.840 --> 0:43:18.439 the trade deal quote unquote was you know, it didn't 0:43:18.480 --> 0:43:22.920 really change anything structurally and and actually it's cemented financial 0:43:23.000 --> 0:43:26.280 entanglements between um, the the U S and China. President 0:43:26.360 --> 0:43:29.160 Elect Biden's approach may kind of depart from that, and 0:43:29.239 --> 0:43:31.399 so we could see some geopolitical hiccups along the way, 0:43:31.760 --> 0:43:35.480 especially because China is becoming a little bit more aggressive 0:43:35.560 --> 0:43:39.239 with respect to UM what it considers its clients. I'm 0:43:39.280 --> 0:43:42.120 sure that you know we're gonna see Alliance building UM 0:43:42.280 --> 0:43:46.239 start to emerge or Alliance rebuilding start to emerge. But 0:43:46.840 --> 0:43:49.719 you know, the transition has the potential to be a 0:43:49.760 --> 0:43:51.920 little bit messy. And in fact, I think that you know, 0:43:52.040 --> 0:43:54.880 the personnel decisions that the transition team is making is 0:43:55.000 --> 0:43:58.320 interesting because the Under Secretary of the for the for 0:43:58.400 --> 0:44:01.800 the U. S. Treasury of them UM, he actually was 0:44:02.080 --> 0:44:05.920 the lead negotiator for TPP. I think it signals that 0:44:06.840 --> 0:44:09.560 president like Biden wants to take a relatively active stance 0:44:10.000 --> 0:44:12.440 with respect to China. So you know, that's always that's 0:44:12.440 --> 0:44:14.279 always kind of in the cards, and it's probably a 0:44:14.320 --> 0:44:17.040 little bit less top of mind than it was under 0:44:17.080 --> 0:44:19.520 the Trump administration. So that could be something that catches 0:44:19.600 --> 0:44:23.239 us by surprise. Well, John and uh novel, So great 0:44:23.320 --> 0:44:26.040 to talk to both of your real treat tons to 0:44:26.080 --> 0:44:29.000 think about into Maybe we'll do like a mid year 0:44:29.120 --> 0:44:32.480 update like next June or July and sort of take 0:44:32.520 --> 0:44:34.560 stock of how things are going. I think that begin 0:44:35.080 --> 0:44:37.480 absolutely all right, Well, looking forward to it, and I 0:44:37.520 --> 0:44:39.440 appreciate both of you and all of the work you've 0:44:39.480 --> 0:44:42.759 done this year and helping us understand this. Thanks for 0:44:42.840 --> 0:44:44.640 coming out and out love. Thank you, Yeah, thank you, 0:44:45.080 --> 0:45:01.360 Look forwards the next time. Take here you guys. That 0:45:01.520 --> 0:45:03.920 was great. I really think it just in terms of 0:45:04.719 --> 0:45:07.560 understanding this year, I mean throughout following both of them 0:45:07.600 --> 0:45:10.759 on Twitter, following their writings, etcetera. I don't think there's 0:45:10.800 --> 0:45:13.280 any two people that I think have had a clearer 0:45:14.040 --> 0:45:16.759 sense of the moving parts of the macro picture than 0:45:16.840 --> 0:45:19.920 those two. So's uh great to talk to them about 0:45:20.160 --> 0:45:22.680 what they see happening next year. Yeah, it was a 0:45:22.719 --> 0:45:27.640 really nice framing of the big macro trends. Fore, I 0:45:27.680 --> 0:45:30.719 gotta say, you mentioned this idea of coming back and 0:45:30.840 --> 0:45:34.680 doing a midyear update. I really hope, I really hope 0:45:34.719 --> 0:45:40.360 that January is relatively boring and that it's not a 0:45:40.480 --> 0:45:43.640 repeat of what happened in January, and that we don't 0:45:43.640 --> 0:45:45.680 have to have them come back on in February or 0:45:45.760 --> 0:45:49.040 something because the world is following. I really hope that's 0:45:49.080 --> 0:45:51.000 the kind of um. But so like I wanted to be, 0:45:51.160 --> 0:45:52.919 like I said, it was at the beginning, a little 0:45:53.040 --> 0:45:55.120 less interesting, but you know that I don't want to 0:45:55.160 --> 0:45:58.040 boring year, but a little more boring. Well, I think 0:45:58.200 --> 0:46:01.719 even if even we get a vaccine, and even if 0:46:01.800 --> 0:46:05.080 we get a global economic recovery, which might normally be 0:46:05.239 --> 0:46:09.400 considered boring for financial journalists, I think it's still going 0:46:09.480 --> 0:46:11.680 to end up being an interesting year. As John and 0:46:12.000 --> 0:46:16.040 now we're saying, because of the policy implications and and 0:46:16.320 --> 0:46:20.279 this this handoff or the interaction between fiscal inflation and 0:46:20.719 --> 0:46:25.200 vaccine inflation, Like, even if everything goes as they were describing, 0:46:25.239 --> 0:46:27.960 there's still a big question mark over how the FED 0:46:28.440 --> 0:46:35.280 reacts to that combination. You know, the point that John 0:46:35.360 --> 0:46:38.480 made and both of them about the pro cych locality, 0:46:39.400 --> 0:46:42.600 the feedback loop of the current FED posture. I just 0:46:42.680 --> 0:46:47.400 think like cannot be sort of understated. This idea that like, okay, 0:46:47.920 --> 0:46:50.359 the FED has let's say the FED holds rates at 0:46:50.680 --> 0:46:54.680 zero and so um, you know, earlier the year we 0:46:54.800 --> 0:46:59.960 had unemployment at over ten percent, So zero raids unemploye 0:47:00.040 --> 0:47:01.520 and over a ten percent, you know, they have this 0:47:01.560 --> 0:47:04.480 accommodative level. If the FED is still holding rates at 0:47:04.560 --> 0:47:07.920 zero with no intention of hiking anytime soon. When the 0:47:08.040 --> 0:47:11.120 unemployment rate is blow seven percent, then that is implicitly 0:47:11.600 --> 0:47:14.880 more accommodative because the level of the economy has improved, 0:47:15.120 --> 0:47:20.319 but we haven't got any corresponding tightening. So implicitly we've 0:47:20.360 --> 0:47:23.760 been having this ongoing easing ever since the economy started 0:47:23.840 --> 0:47:26.920 rebounding in late March and early April. And I think 0:47:26.960 --> 0:47:30.239 that helped really helps explain some of the extremity of 0:47:30.360 --> 0:47:32.880 these moves. That it's like if you're sort of easing 0:47:33.040 --> 0:47:37.080 further implicitly as the economy recovers, we you know, you 0:47:37.160 --> 0:47:39.480 could see how you know, there's the feedback loop that's 0:47:39.480 --> 0:47:41.279 sort of like, uh, I think I remember someone put 0:47:41.400 --> 0:47:44.319 his like rocket fuel for the market. Yeah, I think 0:47:44.360 --> 0:47:47.319 Knof actually said that. Um no, that's exactly right. It's 0:47:47.640 --> 0:47:50.600 and I think they mentioned that Brainerd's speech about going 0:47:50.680 --> 0:47:56.560 from stabilization to accommodation, like there's a policy shift that 0:47:56.760 --> 0:47:59.480 is taking place. Um And so when you when you 0:48:00.080 --> 0:48:03.680 look at it through that framework, thann u s stocks 0:48:03.840 --> 0:48:06.919 at an all time record, like it doesn't seem as 0:48:08.120 --> 0:48:11.880 divorced from economic reality as as it would be otherwise. 0:48:12.160 --> 0:48:15.080 I do think like that like the big question mark, however, 0:48:15.360 --> 0:48:18.800 is still like in the post crisis landscape, whenever we 0:48:18.880 --> 0:48:21.400 could declare a post crisis, which is probably at some 0:48:21.600 --> 0:48:24.880 point when everyone a lot of people have had the 0:48:24.960 --> 0:48:27.120 vaccine and it's just not a big issue anymore and 0:48:27.160 --> 0:48:29.960 everything is totally reopened. Do we just go back to 0:48:30.080 --> 0:48:33.640 the pre crisis environment of people buying tenure bonds and 0:48:33.719 --> 0:48:37.280 Microsoft and calling it a day, or is their new leadership? 0:48:37.400 --> 0:48:42.600 And like, I'm kind of skeptical that anything meaningfully macro changes, 0:48:42.680 --> 0:48:45.160 And I'm thinking back to our conversation with Paul McCulley. 0:48:45.640 --> 0:48:48.040 It's like, in theory, want to see some new like 0:48:48.239 --> 0:48:52.239 fiscal lead permanent change to how we do macro management, 0:48:52.719 --> 0:48:54.759 and that could produce a shift, but in fact, like 0:48:55.120 --> 0:48:57.840 we can't even like get a minor extension to the 0:48:57.920 --> 0:49:01.359 Carres Act. And if you look at Biden and h nominees, 0:49:01.800 --> 0:49:03.520 you know, like a lot of them is sort of 0:49:03.600 --> 0:49:06.719 like progressive new thinkers, but also a lot of like 0:49:06.840 --> 0:49:11.640 you know, pretty mainstream conventional ideas, which means like it's 0:49:11.680 --> 0:49:14.239 still really hard to see like where the big long 0:49:14.360 --> 0:49:17.960 term macro shift comes from from. Sort of yeah, and 0:49:18.080 --> 0:49:20.040 then when we how do you get a big market 0:49:20.120 --> 0:49:23.680 ship without a big macro policy shift, hard to see 0:49:23.760 --> 0:49:28.160 much changing. Yeah, I think that's fair. That's fair. I 0:49:28.200 --> 0:49:31.439 mean people are so focused on how to get from 0:49:31.760 --> 0:49:35.680 the current situation from right now to this sort of 0:49:36.000 --> 0:49:40.000 endpoint um in one when things go back to normal 0:49:40.160 --> 0:49:41.920 that I think a lot of people like, we're so 0:49:42.080 --> 0:49:45.239 focused on the journey that we're not necessarily considering the 0:49:45.360 --> 0:49:51.000 destination of what that endpoint actually looks like. And I 0:49:51.120 --> 0:49:53.040 think you have a strong argument that maybe it just 0:49:53.200 --> 0:50:00.439 looks like, you know, what the earlier years actually looked like. Yeah. Absolutely, Well, 0:50:00.719 --> 0:50:03.800 I'm gonna be uh an interesting year and plenty of 0:50:03.840 --> 0:50:06.160 talk about and we'll have them back either way. And 0:50:07.480 --> 0:50:10.520 that's that. Should we leave it there? Too interesting? Hopefully? 0:50:10.600 --> 0:50:13.320 As you mentioned, all right, let's leave it there. This 0:50:13.440 --> 0:50:16.279 has been another episode of the All Thoughts Podcast. I'm 0:50:16.320 --> 0:50:19.080 Tracy Alloway. You can follow me on Twitter at Tracy 0:50:19.120 --> 0:50:21.960 Alloway and I'm Joe wi Isn't though. You could follow 0:50:22.040 --> 0:50:25.640 me on Twitter at the Stalwart. Follow our guests on Twitter. 0:50:25.800 --> 0:50:28.760 Novel Sinala. He's locked, but maybe he'll let you follow 0:50:28.840 --> 0:50:33.120 him at novel Sinala. Follow our other guests, John Turrek 0:50:33.200 --> 0:50:37.640 he's at J Turrek eighteen. Follow our producer Laura Carlson. 0:50:37.760 --> 0:50:41.120 She's at Laura M. Carlson. Follow the Bloomberg head of podcast, 0:50:41.200 --> 0:50:45.080 Francesca Levie at Francesca Today, and check out all of 0:50:45.120 --> 0:50:49.279 our podcasts at Bloomberg under the handle at podcast. Thanks 0:50:49.320 --> 0:51:03.560 for listening to