WEBVTT - Surveillance: Inflation Expectations With Dudley 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:30.520 and of course on the Bloomberg terminal. Here's why the 0:00:30.560 --> 0:00:33.800 game is played a long time, and the great Martin 0:00:33.880 --> 0:00:36.720 Feldstein told me this once you try to write op 0:00:36.880 --> 0:00:40.240 eds and they're really hard to write. They're much harder 0:00:40.280 --> 0:00:43.199 to pull off than any of us think. And if 0:00:43.200 --> 0:00:45.600 you're lucky, one out of five, one out of seven. 0:00:45.720 --> 0:00:48.920 As residents. William Dudley of the New York Fat and 0:00:49.000 --> 0:00:51.120 of course all his work at Golden Sachs over the 0:00:51.159 --> 0:00:53.840 year's full disclosure. He was on my book of Ancient 0:00:53.920 --> 0:00:57.560 Time Ago. Bill Dudley has done that. The essay this 0:00:57.640 --> 0:01:02.320 Morning from Dudley is a required read because he lectures 0:01:02.400 --> 0:01:05.959 us on the dynamics of inflation and now it links 0:01:05.959 --> 0:01:08.280 to the real economy. I'll get that out on Twitter. 0:01:08.640 --> 0:01:11.720 It's the essay to throw at somebody mouthing off with 0:01:11.840 --> 0:01:16.560 certitude about inflation. Bill Dudley, congratulations are clearing the air. 0:01:16.680 --> 0:01:19.000 I want to go back to Hella in the sixties, 0:01:19.280 --> 0:01:22.880 and it's real simple, Bill Dudley. You emphasize demand pull 0:01:23.120 --> 0:01:29.600 inflation over cost push inflation. Why is demand of labor 0:01:29.760 --> 0:01:35.039 so important to jump start our fear of inflation? Well, again, 0:01:35.040 --> 0:01:38.240 an ongoing inflation problem, not just the little bubble that 0:01:38.280 --> 0:01:43.360 we're experiencing right now from reopening and lid disruptions. You 0:01:43.400 --> 0:01:45.840 really need to have pressure on resources, and pressure on 0:01:45.920 --> 0:01:49.400 resources starts with labor. It's probably a premature to expect 0:01:49.440 --> 0:01:51.560 a real inflation problem right now because we still have 0:01:51.560 --> 0:01:54.240 a lot of people out of work because of the pandemic. 0:01:54.560 --> 0:01:57.000 You look at the level of payil employment to right 0:01:57.000 --> 0:01:59.840 now compared to where we were in several before the 0:02:00.040 --> 0:02:03.480 endemic started, were still eight million jobs short. And we're 0:02:03.480 --> 0:02:05.560 also not seeing much in the way of wage pressure. 0:02:05.640 --> 0:02:07.680 While wage pressure in the first quarter was a little 0:02:07.720 --> 0:02:10.600 bit firmer on a your over your basis, So wages 0:02:10.639 --> 0:02:13.120 for a private sector workers are only up two percent, 0:02:13.200 --> 0:02:14.959 it's hard to have much of a weight of inflation 0:02:15.000 --> 0:02:19.679 problem with wages are still quite cressive. Dr Dudley, how 0:02:19.680 --> 0:02:23.800 do you overlay this different American economy? Lisa alluded to 0:02:23.880 --> 0:02:27.640 this earlier, but to me, it's simply an exercise and 0:02:27.720 --> 0:02:33.440 technology and an exercise and concentration of jobs growth almost monopximistic. 0:02:33.800 --> 0:02:38.200 How do you overlay technology onto the American fears of 0:02:38.200 --> 0:02:43.120 inflation in two thousand twenty one. Well, to that technology 0:02:43.200 --> 0:02:45.919 is obviously changing work there, habits in quite a way 0:02:45.960 --> 0:02:48.799 allows people to work remotely. Uh, and so we're going 0:02:48.840 --> 0:02:51.240 to see a wholesale change in how people work. I 0:02:51.280 --> 0:02:54.239 think over the next few years you know whether whether 0:02:54.240 --> 0:02:57.000 we how fluch we go back to the predemn endemic 0:02:57.080 --> 0:02:59.799 motive working I think remains to be seen. I think 0:02:59.840 --> 0:03:01.200 the problem right now is that you have a lot 0:03:01.240 --> 0:03:05.440 of people who are not actively seeking work because you know, 0:03:05.440 --> 0:03:09.200 they have child care problems, Uh, they're worried about getting sick, 0:03:10.400 --> 0:03:13.160 or uh, they just may you know, their their businesses 0:03:13.200 --> 0:03:15.960 may not have been reopened yet. But I think as 0:03:16.000 --> 0:03:19.519 the economy reopens, a lot of these eight million workers 0:03:19.560 --> 0:03:21.160 there are still out of work, will will will become 0:03:21.160 --> 0:03:24.800 available again. Bill, how much control does the FED still 0:03:24.840 --> 0:03:29.840 have over inflation? I think they still have control in 0:03:29.880 --> 0:03:32.200 the large in the sense that they can control how 0:03:32.280 --> 0:03:35.480 fast the economy grows, how tight the labor market becomes 0:03:35.800 --> 0:03:39.000 and that ultimately drives inflation. They can on over in 0:03:39.000 --> 0:03:41.440 the small I mean, obviously the supply disruptions that we're 0:03:41.440 --> 0:03:43.960 seeing right now that can't do very much about that, 0:03:44.280 --> 0:03:46.640 the big spiky soft for example, and use car prices. 0:03:46.760 --> 0:03:49.880 You know, that's a confluence of two things, one chip 0:03:50.000 --> 0:03:54.000 disruptions that are limiting new car production and to demand 0:03:54.000 --> 0:03:56.120 for cars by rental companies who are starting to get 0:03:56.160 --> 0:03:58.280 back in business again. But it raises a question for 0:03:58.320 --> 0:04:00.880 the reaction function of the federals serve, in other words, 0:04:01.080 --> 0:04:04.200 how much they can actually effectuate change or some sort 0:04:04.240 --> 0:04:07.440 of decline in these prices. Should it start to tighten policy. 0:04:07.640 --> 0:04:09.960 It perhaps isn't a first step towards tightening policy, but 0:04:10.000 --> 0:04:12.800 the Fed is going to unwind it's nearly fourteen billion 0:04:12.800 --> 0:04:16.880 dollar uh portfolio of corporate debt and corporate debt ETFs. 0:04:17.080 --> 0:04:19.960 Was this policy a template for how the Fed will 0:04:19.960 --> 0:04:24.560 handle other additional market situations going forward. I think what 0:04:24.600 --> 0:04:28.160 they're doing with the corporate bond portfolio is pretty unrelated 0:04:28.160 --> 0:04:30.680 to the whole notion of montery policy tightening, because it's 0:04:30.680 --> 0:04:34.720 actually very small portfolio in terms of size, and it's 0:04:34.760 --> 0:04:36.880 not something that they typically own as part of their 0:04:37.800 --> 0:04:40.400 portfolio mix. But I think I would not take that 0:04:40.480 --> 0:04:44.160 decision as implying anything about the timing of paper and 0:04:44.200 --> 0:04:48.719 the timing of actually lifting off raising short community bill 0:04:48.760 --> 0:04:51.120 does does? Does The FED, though, actually really want to 0:04:51.160 --> 0:04:53.040 see that target hit because we get a lot of 0:04:53.240 --> 0:04:56.040 talk out of the FED about how this is transitory. 0:04:56.080 --> 0:04:58.279 There seems to be this general sense here right now 0:04:58.320 --> 0:05:01.440 that if expectations of elves don't rise, you basically don't 0:05:01.480 --> 0:05:04.040 get there. You look at market pricing right now, we're 0:05:04.080 --> 0:05:07.000 somewhere around about two point three percent or so on 0:05:07.160 --> 0:05:09.479 five year five year forwards right now. With regards to 0:05:09.680 --> 0:05:12.040 inflation expectations, that's pretty much in line with what we've 0:05:12.040 --> 0:05:15.080 seen or the last ten twenty thirty years as far 0:05:15.080 --> 0:05:18.159 as averages go. Here, expectations at least among the market 0:05:18.240 --> 0:05:21.240 really hasn't risen despite all of the anecdotal evidence we 0:05:21.279 --> 0:05:23.440 have on the ground that inflation is here and it 0:05:23.520 --> 0:05:27.760 is real. DEFEND is actually happy that inflation expectations have 0:05:27.880 --> 0:05:31.000 risen a bit, because they were actually pretty low going 0:05:31.000 --> 0:05:33.960 into the pandemic, and this is one reason why the 0:05:33.960 --> 0:05:37.120 FIT has changed their long term Terrey policy framework to 0:05:37.160 --> 0:05:39.960 target to percent inflation and average rather than to percent 0:05:40.000 --> 0:05:42.640 inflation at any point in time. They want to keep 0:05:42.680 --> 0:05:46.000 inflation expectations better anchored anchored, and this increase that we've 0:05:46.000 --> 0:05:49.280 seen in inflation expectations, which is pretty modest as better 0:05:49.320 --> 0:05:52.279 anchored inflation expectations around two percent there. So they're pretty 0:05:52.279 --> 0:05:54.960 comfortable with what's happening in that respect. They're probably happy 0:05:54.960 --> 0:05:58.000 about that as opposed to unhappy about that. You're absolutely right, 0:05:58.000 --> 0:06:01.120 though inflation expectations are well behaved, it's really hard to 0:06:01.120 --> 0:06:03.600 get an ongoing inflation problem. So my view of it 0:06:03.640 --> 0:06:05.400 is it's really about the labor market tightness and the 0:06:05.440 --> 0:06:08.799 labor market that driving of wages, wages getting into prices, 0:06:09.160 --> 0:06:11.360 and then do the does the increase in prices start 0:06:11.400 --> 0:06:14.120 to affect inflation expectations. I think that that what we're 0:06:14.120 --> 0:06:15.640 seeing now in inflation is going to turn out to 0:06:15.640 --> 0:06:17.880 be transitory. But I think there could be a longer 0:06:18.000 --> 0:06:21.200 term inflation problem just because the FEDS Monterrey policy regime 0:06:21.240 --> 0:06:22.720 is a different one now where they said that it 0:06:22.760 --> 0:06:25.479 could be very very slow to lift off from zero 0:06:25.480 --> 0:06:27.600 in terms of short term interest rate. I'm curious as 0:06:27.640 --> 0:06:30.600 your thoughts on the wage a situation, the wage inflation situation, 0:06:30.640 --> 0:06:33.720 particularly because we actually saw wages at least as far 0:06:33.760 --> 0:06:36.920 as their historical averages hold up pretty well UH during 0:06:36.960 --> 0:06:40.560 the COVID induced recession. Here the idea here that we 0:06:40.560 --> 0:06:43.839 would see some sort of meaningful appreciation above the whatever 0:06:43.839 --> 0:06:47.440 it is three uh plus rate that we've been at. Here, 0:06:48.080 --> 0:06:50.320 is it even possible, given that we're coming off such 0:06:50.560 --> 0:06:53.560 a relatively high floor UH, that we would see a 0:06:53.600 --> 0:06:57.680 meaningful bump up in wage inflation. I mean, it's possible, 0:06:57.680 --> 0:07:00.240 but it's hard to imagine a big wage inflame Asian 0:07:00.320 --> 0:07:02.480 spiral at this point in time, giving that you still 0:07:02.520 --> 0:07:04.719 have eight million or eight million jobs short of where 0:07:04.720 --> 0:07:07.920 you were going into the pandemic, and the unemployment rate itself, 0:07:08.080 --> 0:07:10.360 even though that doesn't suggest the labor market that's that 0:07:10.520 --> 0:07:13.480 type six point one percent unemployment rates still well above 0:07:13.560 --> 0:07:15.720 the three and a half percent rate that we reached 0:07:15.720 --> 0:07:20.080 in February of two thousand and twenty, the labor market slack. 0:07:20.640 --> 0:07:23.320 Before we let you go, Bill, we're talking about AMC today. 0:07:23.480 --> 0:07:27.880 Is the FED responsible for frothy markets? I think the 0:07:27.960 --> 0:07:31.360 FED is responsible for creating a monterrey policy that's very 0:07:31.360 --> 0:07:34.840 conducive to lifting financial asset prices, but you know, the 0:07:34.880 --> 0:07:36.960 AMC phenomenal. I think it's something that I would not 0:07:37.040 --> 0:07:39.559 lay at the feet of the FED. Well, Bill, we'd 0:07:39.560 --> 0:07:41.280 like to get more of a quote from you than 0:07:41.320 --> 0:07:45.840 that on AMC. Right, Bill, do you think regulations got 0:07:45.920 --> 0:07:48.080 to step in here? I mean this is unusual, to 0:07:48.120 --> 0:07:51.280 say the least. Well, I think you know this is 0:07:51.280 --> 0:07:53.320 a question where you know, I think people need to 0:07:53.320 --> 0:07:57.360 think about what's fundamental value? What's the stockbrights relative value? 0:07:58.480 --> 0:08:00.600 You know? So so buyer beware. I guess that's why 0:08:01.600 --> 0:08:04.080 Bill Dudley, with advice to Romaine Bostick, will run their 0:08:04.120 --> 0:08:07.880 tap this afternoon. Budley Bloomberg Opinion comments, I can't say 0:08:07.960 --> 0:08:10.360 enough about his essay today. I'll put it out on 0:08:10.400 --> 0:08:20.640 Twitter here in a bit right now, Glenn Hubbard joins us. 0:08:20.640 --> 0:08:23.720 He is, of course the former dean of Columbia Business School, 0:08:24.080 --> 0:08:27.920 which many of our employees have attended, and I must say, 0:08:27.960 --> 0:08:31.880 with his esteem public service to America, Glenn, we're so 0:08:32.000 --> 0:08:35.000 happy to have you with your bachelor's degree of Florida, 0:08:35.480 --> 0:08:38.439 knowing that Bill Dudley will come along with his bachelor's 0:08:38.480 --> 0:08:41.920 degree of Florida. What's in Florida economics. I think it's 0:08:42.080 --> 0:08:47.520 hugely misunderstood in the northeast of the esteemed history of 0:08:47.600 --> 0:08:51.400 Florida economics talked to us about Central Florida. His Bill 0:08:51.480 --> 0:08:54.920 Dudley would talk about the New College. Well, I had 0:08:54.920 --> 0:08:58.320 a great experience. I was an engineering student and then 0:08:58.360 --> 0:09:01.320 any con student. But I thing but great teachers and 0:09:01.400 --> 0:09:04.240 great experiences and a wonderful part of the country. I 0:09:04.240 --> 0:09:06.800 could really say, folks, you know, in all my experience here, 0:09:06.840 --> 0:09:11.319 Florida economics is a general statement, is way way under rated. 0:09:11.320 --> 0:09:14.160 Glenn Hubbard, you are not in inflation East. I want 0:09:14.200 --> 0:09:18.400 you to describe for our audiences fear of inflation and 0:09:18.440 --> 0:09:23.440 what the true inflation eastas have wrong. Well, it really 0:09:23.440 --> 0:09:26.760 gets back to supply and demand, Tom, and it's a 0:09:26.880 --> 0:09:31.120 race between the two. We know the economy is reopening 0:09:31.120 --> 0:09:34.800 and demand is certainly there from very a comminative fiscal 0:09:34.800 --> 0:09:38.719 and monetary policy. Supply has been slower, with bottlenecks and 0:09:38.840 --> 0:09:42.880 some issues in the labor markets like unemployment insurance benefits 0:09:42.880 --> 0:09:46.320 perhaps being too generous. I think, on balance, it's not 0:09:46.360 --> 0:09:48.840 that I think the FED is necessarily wrong, but they're 0:09:48.880 --> 0:09:52.760 not managing risks. Well, I do think there's more of 0:09:52.800 --> 0:09:56.360 a risk of an upside to inflation, and I think 0:09:56.360 --> 0:09:58.880 the FED would be wise to at least acknowledge that 0:09:59.040 --> 0:10:02.960 risk more and begin it's tapering and discussions of tapering. 0:10:03.480 --> 0:10:06.079 You mentioned Florida. I'm from the South. There's an expression 0:10:06.240 --> 0:10:09.000 fixing to do something. Well, if FED needs to stop 0:10:09.040 --> 0:10:13.000 fixing to do something and actually do something. So can 0:10:13.040 --> 0:10:16.440 you draw the distinction between good inflation and bad inflation 0:10:16.480 --> 0:10:18.560 at a time when food prices are searching the most 0:10:18.600 --> 0:10:21.520 in more than a decade. Well, I don't know that 0:10:21.880 --> 0:10:25.559 anything is really good, but the transitory inflation would be 0:10:25.640 --> 0:10:29.439 simply the bottlenecks occur and we have supply chain disruptions 0:10:29.440 --> 0:10:31.800 related to the pandemic. Takes a little while for that 0:10:31.880 --> 0:10:36.200 to work through. Relative prices can change as people's preferences 0:10:36.320 --> 0:10:41.560 change across goods. The real concern is longer term, persistent inflation. 0:10:42.200 --> 0:10:44.280 And I do get a little weary of hearing the 0:10:44.360 --> 0:10:46.720 FEDS say, well, we have all the tools. Of course, 0:10:46.760 --> 0:10:48.280 they have all the tools, but they had all the 0:10:48.280 --> 0:10:50.839 tools in the nine sixties two and and it got 0:10:50.840 --> 0:10:53.080 out of hands. And I think you you really need 0:10:53.120 --> 0:10:56.560 to watch those pressures a little bit more carefully than 0:10:56.600 --> 0:10:59.520 are being watched right now, Professor Hubbard, we're just getting 0:10:59.600 --> 0:11:02.760 a word from political reporting that Biden wants one trillion 0:11:02.800 --> 0:11:06.360 dollars in new spending in the infrastructure bill, countering some 0:11:06.400 --> 0:11:09.000 of the Republican offers that include less than three billion 0:11:09.000 --> 0:11:13.040 dollars in new spending. Why do you think that this 0:11:13.200 --> 0:11:15.600 is excessive given the fact that we still have a 0:11:15.600 --> 0:11:19.000 lot of people unemployed and wages are still a key concern, 0:11:19.080 --> 0:11:23.640 particularly on the lower wage spectrum. Well, I do think 0:11:23.640 --> 0:11:27.200 it's successive. We don't have output gaps. If I can 0:11:27.320 --> 0:11:30.440 use econ speak for a minute, of the size the 0:11:30.480 --> 0:11:34.400 Biden plans identify. I do think we need a real 0:11:34.440 --> 0:11:37.360 infrastructure package, but a lot of what President Biden is 0:11:37.400 --> 0:11:41.120 proposed is really more social spending than infrastructure. And I 0:11:41.160 --> 0:11:44.440 think the economy does need infrastructure, and even the size 0:11:44.480 --> 0:11:47.320 of that could be open to debate. What worries me 0:11:47.360 --> 0:11:49.560 about his physical plans is that if you add them 0:11:49.600 --> 0:11:52.360 all up, from the rescue plan, the job's Plan, the 0:11:52.480 --> 0:11:57.680 Family's plan, they're very, very large and largely unpaid for, 0:11:58.040 --> 0:12:02.520 despite despite the red and they are indeed a transformation 0:12:02.679 --> 0:12:06.560 and away from work and dynamism towards social spending, and 0:12:06.600 --> 0:12:09.320 both of those things worry me, and I think worry 0:12:09.400 --> 0:12:13.439 me in the public. You know, there was a great 0:12:13.559 --> 0:12:17.760 rap video about ten years ago UM that showed Caines 0:12:18.120 --> 0:12:21.880 versus Hyak in a boxing match. But a decade on 0:12:22.120 --> 0:12:26.439 it seems like Cain's one uh in a knockout Hiak. 0:12:26.760 --> 0:12:30.120 I mean, there aren't any Austrian economists left, it seems, 0:12:30.280 --> 0:12:35.520 and even the Kynesians are have become conservative and traditional. 0:12:35.720 --> 0:12:37.720 M M T is the new way to think is 0:12:37.720 --> 0:12:40.560 there has there really been a sea change here? Well, 0:12:40.559 --> 0:12:42.600 I'm not so. Strike actually use that video of my 0:12:42.679 --> 0:12:46.959 political economy class to talk about the pandemic. So basically 0:12:47.040 --> 0:12:51.000 the Keynsie response was the big aggregate demand stimulus. But 0:12:51.120 --> 0:12:52.920 a lot of what is going to happen in the 0:12:53.000 --> 0:12:56.559 economy and is interesting in the economy is how we're 0:12:56.559 --> 0:13:00.720 going to adapt, as we received from co Good, that's 0:13:00.720 --> 0:13:03.360 a high ache In story. The way to do that 0:13:03.840 --> 0:13:06.600 is on the ground, high X quote, man on the spot, 0:13:06.800 --> 0:13:09.960 person on the spot of really figuring that out. So 0:13:10.000 --> 0:13:12.360 I think we're gonna need a mixture of the Kynsie 0:13:12.480 --> 0:13:15.480 response and the high achie In response. And I don't 0:13:15.480 --> 0:13:19.120 think we want one without the other. We uh, we 0:13:19.240 --> 0:13:22.320 all love the economics lesson. We saw on Ferris Bueller's 0:13:22.360 --> 0:13:27.200 Day Off where he talks about voodoo economics. UM, top 0:13:27.280 --> 0:13:31.040 down stimulus. What we're looking at right now in Matthew 0:13:31.080 --> 0:13:34.160 Bosler's Great Big Take UM from last week you're quoted 0:13:34.200 --> 0:13:37.760 in that story is an attempt to stimulate the economy 0:13:37.760 --> 0:13:40.880 from the bottom up. Is that, UM a smart way 0:13:40.920 --> 0:13:44.760 to do it? Well, I think we do need measures 0:13:44.800 --> 0:13:49.160 that maintaining incomes. I do think we're calling too much stimulus. 0:13:49.240 --> 0:13:52.400 What the economy really needs right now is a way 0:13:52.400 --> 0:13:55.800 to help people adapt and that support for the jobs 0:13:55.840 --> 0:13:58.880 of the future, for the businesses of the future. And 0:13:58.880 --> 0:14:01.760 it's very different then the kinds of plans that President 0:14:01.840 --> 0:14:07.200 Biden is proposing. Unfortunately, the opposition is not proposing much either, 0:14:07.280 --> 0:14:09.640 but it would really be about jobs in the future. 0:14:10.040 --> 0:14:12.560 Greg Glenn, rather, we're short on time. I want to 0:14:12.559 --> 0:14:15.920 be direct as I can. We're getting new pushback in Congress. 0:14:15.960 --> 0:14:20.160 According to Greg Villier on text increases, can we move 0:14:20.360 --> 0:14:24.360 this forward without text increases or do you just assume 0:14:24.360 --> 0:14:27.040 it's got to happen? Well, this is what you mean 0:14:27.080 --> 0:14:31.680 by this? If you mean a modest infrastructure plan. Probably, 0:14:31.840 --> 0:14:34.600 if it's true infrastructure, you can borrow for much of 0:14:34.640 --> 0:14:37.560 that and use user fees. If you mean the very 0:14:37.640 --> 0:14:40.720 large spending bills the President is proposed, you would need 0:14:40.800 --> 0:14:44.640 taxing pieces. Unfortunately, what you would have to have to 0:14:44.680 --> 0:14:46.840 really pay for that would be something like a value 0:14:46.840 --> 0:14:49.720 added tax, and the President hasn't talked about that. The 0:14:49.800 --> 0:14:53.160 tax increases he's proposing are much too small. Glenn Hubard, 0:14:53.160 --> 0:14:56.040 thank you so much, greatly, greatly appreciate it this morning. 0:15:01.440 --> 0:15:03.200 Right now, we are thrilled to bring on the equity 0:15:03.240 --> 0:15:06.880 market someone who's absolutely nailed at Julian Emmanuel B. T 0:15:07.040 --> 0:15:10.480 i D, Chief Equities and derivative strategist. Julian, good morning. 0:15:10.480 --> 0:15:13.560 I'm gonna cut right to the chase. We've had a rotation. 0:15:14.000 --> 0:15:17.680 One camp says a rotation continues. Another camp says, go 0:15:17.720 --> 0:15:21.160 along the big tech. Which is it? We think the 0:15:21.280 --> 0:15:25.280 rotation continues if you look at it, regardless of what 0:15:25.320 --> 0:15:28.280 the Fed does or does not do. Says there doesn't 0:15:28.280 --> 0:15:31.520 say how many thinking about sweet here. The U. S 0:15:31.560 --> 0:15:35.760 economy is going to grow somewhere six seven eight percent 0:15:35.880 --> 0:15:38.880 this year. It's tracking for ten percent this quarter, and 0:15:38.960 --> 0:15:42.280 that to US means value continues to outperform. We're gonna 0:15:42.320 --> 0:15:43.960 do a headline right now and we'll come back to 0:15:44.000 --> 0:15:46.880 it in a moment with Romayne Boston AMC Entertainment. They 0:15:47.000 --> 0:15:50.200 filed to sell up to twelve million shares that's on 0:15:50.280 --> 0:15:53.280 a float right now. A five million, so you can 0:15:53.320 --> 0:15:56.040 take twelve and divided by five and gives you a 0:15:56.040 --> 0:15:58.560 sense of it. We'll get back to that in a moment. 0:15:58.560 --> 0:16:01.720 On the stock that hasn't a rich little story, Julian Emmanuel, 0:16:01.840 --> 0:16:04.520 what's your original store in this market right now as 0:16:04.560 --> 0:16:06.840 you're right up for the weekend after the jobs report, 0:16:06.880 --> 0:16:11.240 what sectors, what part of the market are you looking at? Well? 0:16:11.360 --> 0:16:14.000 So for us, the story has been if you look 0:16:14.080 --> 0:16:17.040 at it, you've got the meme stocks moving, you've got 0:16:17.040 --> 0:16:21.400 this fascination with inflation. But in reality, the SMP five 0:16:21.480 --> 0:16:26.000 hundred index has essentially gone nowhere for the last two months. Now. Normally, 0:16:26.160 --> 0:16:28.920 the wisdom has it you never want to shore a 0:16:29.000 --> 0:16:31.760 dull market. You look at the last three years or so, 0:16:32.120 --> 0:16:35.240 and actually, in fact, when the market gets this quiet, 0:16:36.000 --> 0:16:38.440 basically you know day to day moves in the SMP 0:16:38.600 --> 0:16:41.480 five hundred of three, four or five points on a 0:16:41.560 --> 0:16:45.040 four thousand plus number. Uh, it really says it's time 0:16:45.080 --> 0:16:47.040 to be a little bit more defensive. As I said, 0:16:47.080 --> 0:16:51.160 we like the value stocks. We're tilting more defensively here 0:16:51.160 --> 0:16:55.880 consumer staples with pricing, power, healthcare, and actually reads which 0:16:55.920 --> 0:16:59.520 are going to do well if the environment stays inflationary. Julian, 0:16:59.560 --> 0:17:01.480 are you telling clients to load the boat on AMC. 0:17:03.440 --> 0:17:06.520 That's a much more difficult call, Lisa. I think when 0:17:06.520 --> 0:17:09.399 when you look at it, the options market is telling 0:17:09.400 --> 0:17:12.160 you that the yellow flag is coming out once again. 0:17:12.520 --> 0:17:15.399 We go back to January when you had that first 0:17:15.440 --> 0:17:18.520 top in the meme stocks. We all know the video 0:17:18.600 --> 0:17:23.200 game retailer, their option implied volatility hit a thousand percent. 0:17:23.680 --> 0:17:26.639 That was the top. Worried about six hundred and fifty 0:17:26.720 --> 0:17:32.399 seven percent um in in the movie theater stock today. Uh, 0:17:32.440 --> 0:17:36.360 this is a warning sign. This speculation is intense. Uh. 0:17:36.400 --> 0:17:40.080 And as we set back in January, rocket ships go 0:17:40.200 --> 0:17:43.119 back to their lunch pads. How do you understand the 0:17:43.160 --> 0:17:46.919 trading activity here? Is this Reddit traders sending messages to 0:17:46.960 --> 0:17:49.200 their grandmothers saying load the boat on a m C. 0:17:49.560 --> 0:17:52.600 Or is there another phenomenon happening here that's either more 0:17:52.600 --> 0:17:56.760 tied to the fundamentals or more tied to institutional traders. Well, 0:17:57.320 --> 0:18:01.240 it is a more magnified version again of what happened 0:18:01.240 --> 0:18:06.040 in January. Is that basically, the people gathering on social 0:18:06.080 --> 0:18:10.000 media have plenty money in their accounts, They paid their 0:18:10.040 --> 0:18:13.920 taxes with winnings from last year, and are pushing selected stocks. 0:18:14.160 --> 0:18:17.760 The group is narrowing, um, but it is very much 0:18:17.800 --> 0:18:20.480 a social media phenomenon. But the other thing about it, 0:18:20.520 --> 0:18:24.000 is strangely enough, is that the shorts really haven't learned 0:18:24.000 --> 0:18:26.399 their lessons from January. So if you look at it, 0:18:26.480 --> 0:18:29.800 the short interests continues to rise. It's not what it was, 0:18:30.080 --> 0:18:32.919 but it's still, you know, really too high given the 0:18:32.960 --> 0:18:35.320 price actors dueling quickly here. I don't want to get 0:18:35.359 --> 0:18:37.680 you in trouble with the General Council B T, I G. 0:18:38.160 --> 0:18:41.760 But are you seeking regulation of what we're observing and 0:18:41.920 --> 0:18:47.000 things like AMC. The thing that ties all of this 0:18:47.119 --> 0:18:51.920 together is the fact that margin debt leverage is at 0:18:51.960 --> 0:18:55.440 all time highs. And generally when we see that, obviously 0:18:55.480 --> 0:18:59.959 the indiceason near all time highs. Uh, it's almost inevitable 0:19:00.280 --> 0:19:02.320 that the government will step in at some point. Did 0:19:02.359 --> 0:19:04.520 Julian thank you so much, Julian Emmanuel with b T 0:19:04.680 --> 0:19:14.159 I g less nerdy than me is Jennifer Neusoh at 0:19:14.240 --> 0:19:17.080 John's hop Could Center for Health Security, and she joins 0:19:17.160 --> 0:19:19.720 us right now. Jennifer was talking about this last night 0:19:19.720 --> 0:19:23.399 at the dining room table. We completely have missold the 0:19:23.520 --> 0:19:30.000 triumph of American virology, American microbiology, and our pharmaceutical business. 0:19:30.359 --> 0:19:35.719 It is stunning. As President Biden said, what's occurred. I agree. 0:19:35.880 --> 0:19:39.080 I mean, we are living a much different life now 0:19:39.160 --> 0:19:41.880 than we were a year ago thanks to science, and 0:19:42.080 --> 0:19:44.119 not just thanks to science in the last year, but 0:19:44.200 --> 0:19:46.800 thanks to you more than a decade, several decades where 0:19:46.880 --> 0:19:49.240 the science. This is why we invest, This is why 0:19:49.280 --> 0:19:51.520 we sustain, This is why we do this because one 0:19:51.600 --> 0:19:53.880 day it will be necessary, will be it will be important. 0:19:54.119 --> 0:19:57.919 Dr Nutso, can we codify the scientific advancement in a 0:19:58.080 --> 0:20:02.160 social passport, a vaccine passport that people can use can 0:20:02.200 --> 0:20:05.040 take to go places and say I am not at 0:20:05.119 --> 0:20:08.040 risk of getting COVID or frankly that high risk of 0:20:08.080 --> 0:20:11.600 distributing it either. Yeah, so it's a really tricky question. 0:20:11.640 --> 0:20:14.000 I know people are very eager to do that because 0:20:14.000 --> 0:20:15.639 we're all eager to get back to normal, and for 0:20:15.760 --> 0:20:17.440 those of us who you know, feel like we've done 0:20:17.440 --> 0:20:20.280 our part, We've went out and got vaccinated, we feel 0:20:20.320 --> 0:20:23.840 like we should be entitled UM to gain access to places. 0:20:24.119 --> 0:20:27.000 I fully expect that private businesses are going to require 0:20:27.320 --> 0:20:31.639 UM vaccine proof, provided their governors don't prevent them from 0:20:31.720 --> 0:20:34.120 doing that, but that they will, UM you know, at 0:20:34.119 --> 0:20:37.600 some point start requiring vaccine proof to allow people to 0:20:38.080 --> 0:20:40.639 you know, go to concerts and things like that. But 0:20:40.720 --> 0:20:42.680 it is a bit tricky because there are people out 0:20:42.680 --> 0:20:46.119 there who are hesitant, and their their hesitancy is not 0:20:46.160 --> 0:20:49.159 without reason. There this is a new vaccine UM. You know, 0:20:49.240 --> 0:20:51.480 they maybe don't have the luxury of spending all day 0:20:51.680 --> 0:20:54.040 like I do thinking about these things, and so they 0:20:54.040 --> 0:20:56.640 still need to you know, be convinced of the benefits 0:20:56.680 --> 0:21:00.680 of vaccinations. And you know, I do worry about prematurely 0:21:00.800 --> 0:21:03.399 rolling those things out before we've had really a fair 0:21:03.480 --> 0:21:05.520 chance at winning the hearts and minds of people and 0:21:05.560 --> 0:21:10.520 showing them why these vaccines are so liberating and hopefully 0:21:10.560 --> 0:21:13.040 tools that they will willingly accept wait to be cually 0:21:13.080 --> 0:21:16.000 more in favor of parents than sticks UM, and so 0:21:16.240 --> 0:21:18.040 you know, I expect that will probably be there at 0:21:18.040 --> 0:21:20.520 some point, but I do worry that rolling them out 0:21:20.560 --> 0:21:22.960 too quickly could create a culture war which will entrench 0:21:23.040 --> 0:21:25.560 people in their opposition to it. So are you saying 0:21:25.600 --> 0:21:29.000 that the main reason against the main argument against vaccine 0:21:29.000 --> 0:21:31.959 passports is an emotional one. Is basically that you need 0:21:32.000 --> 0:21:34.119 to cater to the way that people feel about the 0:21:34.200 --> 0:21:38.639 vaccine first and then deal with the mandates later. No, 0:21:38.720 --> 0:21:40.800 I don't think it's an emotional one. I mean, you know, 0:21:40.960 --> 0:21:44.200 first of all, people's hesitancy is not purely about emotion. 0:21:44.400 --> 0:21:47.640 It is also just that, you know, we haven't fully 0:21:47.640 --> 0:21:49.760 approved a number of vaccines. I expect that that's going 0:21:49.800 --> 0:21:51.679 to come soon, but you know, there still needs to 0:21:51.680 --> 0:21:55.359 be an educational component to it. It's more really about pragmatism. Um. That. 0:21:55.440 --> 0:21:58.600 So there's also some access issues, and UM, we know 0:21:58.760 --> 0:22:01.639 that many of the people who haven't yet been vaccinated, 0:22:01.800 --> 0:22:03.359 it's not because they don't want to, it's just that 0:22:03.400 --> 0:22:05.520 they haven't been able to, and in part because it's 0:22:05.680 --> 0:22:07.880 harder for them to get they may not have time 0:22:07.880 --> 0:22:11.080 off from work. That maybe, UM, not as many options 0:22:11.080 --> 0:22:13.679 in all places where people live. And so you know, 0:22:13.720 --> 0:22:16.959 we also have to be worried about what we restrict 0:22:17.040 --> 0:22:20.160