WEBVTT - Surveillance: Speedy Stimulus Needed, Says Bernstein 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 0:00:13.480 --> 0:00:17.560 Daily we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.440 Bloomberg dot Com, and of course on the Bloomberg. Well 0:00:27.520 --> 0:00:29.400 we like to do with surveillance is not talked to 0:00:29.440 --> 0:00:32.760 the fancy people, all the pundans, pund training, more pundits. 0:00:33.080 --> 0:00:35.400 We like to talk to the people that they read 0:00:35.600 --> 0:00:38.360 and they listen to. One of those is Jared Bernstein 0:00:38.360 --> 0:00:41.040 and the steam career at the Center on Budget and 0:00:41.080 --> 0:00:44.520 Policy Priorities, and a senator from Delaware a few years 0:00:44.520 --> 0:00:48.040 ago discovered this and said Dr Bernstein joined the team. 0:00:48.120 --> 0:00:52.840 Jared Bernstein part of the transition team for the President elect. Jared, 0:00:52.960 --> 0:00:54.440 I know we need to break some news here, and 0:00:54.480 --> 0:00:56.600 I do want to know the Secretary Treasury is going 0:00:56.640 --> 0:00:59.600 to be, but I really want to go to transition Minutia. 0:01:00.200 --> 0:01:03.520 You are lined up I think to walk Champ and Major. 0:01:03.640 --> 0:01:07.959 You're gonna be like first dog walker for the Biden administration. 0:01:08.440 --> 0:01:13.640 What is it like being on a transition team. I 0:01:13.680 --> 0:01:16.720 think the most important thing to recognize there is that 0:01:16.800 --> 0:01:20.840 this is such a critical moment for a smooth, normal 0:01:20.880 --> 0:01:24.399 transition process to happen, And what's happening right now is 0:01:24.440 --> 0:01:27.920 anything but normal. Remember I was the chief economist to 0:01:28.000 --> 0:01:31.080 the then Vice president elect back in two thousand and eight, 0:01:31.520 --> 0:01:35.160 and at this point we were actively planning. Remember that 0:01:35.280 --> 0:01:38.240 was the Great Recession. We were actively planning for a 0:01:38.240 --> 0:01:41.679 fiscal relief package that was legislated less than four weeks 0:01:41.760 --> 0:01:45.000 after Obama and Biden took office. That's what should be 0:01:45.080 --> 0:01:48.320 happening now. But this is not normal, my friends, for 0:01:48.440 --> 0:01:51.440 this transition to be thrown off this way, and it's 0:01:51.480 --> 0:01:54.280 coming at great cost in terms of health and in 0:01:54.400 --> 0:01:57.080 terms of the economy. Okay, a delicate question, then you know, 0:01:57.080 --> 0:01:59.600 we make fun of Champion Major the dogs. Returning to 0:01:59.600 --> 0:02:03.000 the White with the President Elec Jared, what's so important 0:02:03.040 --> 0:02:05.880 here is? And what is your action plan if this 0:02:05.960 --> 0:02:11.480 is transition interrupted? Are you planning out a budget process 0:02:11.520 --> 0:02:15.880 without the knowledge of the President White House? Well, certainly 0:02:15.960 --> 0:02:19.520 we are, obviously, and you'll hear the President like talking 0:02:19.520 --> 0:02:23.120 about this, thinking about a fiscal package with great urgency 0:02:23.440 --> 0:02:25.200 one of the things he said. And by the way, 0:02:25.240 --> 0:02:27.840 President elecs, they like to wait till they're in the 0:02:27.919 --> 0:02:30.920 office to start moving legislation. He has said that is 0:02:30.960 --> 0:02:33.360 not the case when it comes to fiscal relief. That 0:02:33.440 --> 0:02:36.680 should happen in the lame Duck. And I couldn't agree more. 0:02:37.120 --> 0:02:41.760 But if you're talking about preparing for uh, the UH 0:02:41.919 --> 0:02:44.680 for for this job that he is UH, that the 0:02:44.720 --> 0:02:47.480 American people have elected him for, you've got to talk 0:02:47.520 --> 0:02:50.400 about virus control and that of course you can see 0:02:50.440 --> 0:02:53.920 the President elect is very active on planning virus control. 0:02:54.000 --> 0:02:57.680 But you know his UH Vivic Murdy, who's the former 0:02:57.720 --> 0:03:01.440 surgeon general on the covid T recently talked about how 0:03:01.480 --> 0:03:05.240 important it is to get that information in transition from 0:03:05.240 --> 0:03:07.840 folks from bunks that are currently in the White House, 0:03:08.040 --> 0:03:11.840 and that's not happening. Again, avoidable suffering to Americans in 0:03:11.919 --> 0:03:16.320 terms of healthcare and economic hardship because this transition is 0:03:16.360 --> 0:03:19.760 not occurring the way it should. Jaredy, We're lucky to 0:03:19.800 --> 0:03:21.080 have a bit of time with you this morning, so 0:03:21.120 --> 0:03:22.720 we can talk about the transition a little bit more. 0:03:22.720 --> 0:03:23.960 In just the moment, I want to talk about a 0:03:23.960 --> 0:03:27.200 fiscal plan just a bit with you. The Republican Senate 0:03:27.320 --> 0:03:29.519 was the obstacle to getting the deal that Pelosi wanted 0:03:29.800 --> 0:03:31.880 was still likely to have a Republican Senate. We have 0:03:31.919 --> 0:03:34.200 one now, will likely have one off the January as well. 0:03:34.639 --> 0:03:36.520 What is it that you think that President elect Biden 0:03:36.520 --> 0:03:41.880 can achieve the Speaker Pelosi couldn't. Well, I think the 0:03:41.880 --> 0:03:44.640 way you teed it up is exactly right. I mean, 0:03:45.400 --> 0:03:48.280 the President elect continues to talk about how people can 0:03:48.320 --> 0:03:51.480 decide to cooperate and now is is the perfect time 0:03:51.480 --> 0:03:55.000 for them to do so. We have heard positive sounds 0:03:55.080 --> 0:03:59.800 about a fiscal package from members of the Republican squad 0:03:59.840 --> 0:04:03.200 and including McConnell himself. What we're not seeing is the 0:04:03.280 --> 0:04:06.200 kinds of negotiations that the President elect has been stressing, 0:04:06.480 --> 0:04:09.080 and that needs to happen as of yesterday. You know, 0:04:09.200 --> 0:04:14.600 we have an unemployment insurance system where over twenty million 0:04:14.640 --> 0:04:18.919 people are making claims and at least twelve million we 0:04:19.000 --> 0:04:23.599 recently learned UH could lose their h support as that's 0:04:24.000 --> 0:04:26.280 as as as it expires at the at the end 0:04:26.320 --> 0:04:28.679 of the year. We have over four hundred thousand small 0:04:28.680 --> 0:04:32.479 business instead of clothes. The long term unemployment is increasing 0:04:32.520 --> 0:04:34.800 at a rate we haven't seen in the history of 0:04:34.800 --> 0:04:39.000 that series. We learned this morning that according to zip recruiter. 0:04:39.279 --> 0:04:42.480 Job growth is slowing, not just in places where the 0:04:42.560 --> 0:04:45.160 virus is surging, but in other places as well. So 0:04:45.240 --> 0:04:48.360 I think the urgency of the economic situation has and 0:04:48.440 --> 0:04:51.800 the health situation, which of course are intimately connected, just 0:04:51.960 --> 0:04:54.839 has to reach legislators. I'm an economist, I'm not a politician. 0:04:54.880 --> 0:04:57.360 I can't tell you the strategy to get them there, 0:04:57.360 --> 0:04:59.960 but I can certainly stress the urgency of this moment 0:05:00.000 --> 0:05:02.800 in that regard, Well, let's talk about the urgency and 0:05:02.839 --> 0:05:04.640 the size, because currently there is a one and a 0:05:04.680 --> 0:05:07.040 half trillion dollar spread between the two sides, and I'm 0:05:07.040 --> 0:05:09.320 not sure how that's closed, that's all, if it has, 0:05:09.360 --> 0:05:12.239 it's all in the last month. What kind of size 0:05:12.279 --> 0:05:14.720 package do you need in a moment like this, Jared, 0:05:16.480 --> 0:05:18.240 I think probably the best way to think about is 0:05:18.279 --> 0:05:21.200 start from the bottom up and start adding up what's necessary. 0:05:21.240 --> 0:05:25.320 State and local budgets are are really hurting. Remember they 0:05:25.360 --> 0:05:28.960 can't run budget deficits. UH. The unemployment insurance system, as 0:05:29.000 --> 0:05:33.159 I mentioned, needs work. Nutritional support has to be on 0:05:33.240 --> 0:05:37.520 the table. There's lots of people facing a potential evictions 0:05:37.560 --> 0:05:41.440 and foreclosures, so we need those programs to continue and 0:05:41.480 --> 0:05:44.800 to be re upped, and of course virus control is 0:05:44.839 --> 0:05:46.479 at the top of the list. Now, if you start 0:05:46.800 --> 0:05:49.800 summing that up, you'll get into the neighborhood of the 0:05:49.800 --> 0:05:53.120 Heroes Act, which is what the President elect was touting 0:05:53.160 --> 0:05:56.479 the other day. Uh and at least the second version 0:05:56.480 --> 0:05:58.840 of that was somewhere in the two to three trillion range. 0:05:58.880 --> 0:06:02.040 But let me say this, I think what matters most 0:06:02.160 --> 0:06:05.640 right now is speed. So there's speed, their size, their composition, 0:06:05.680 --> 0:06:08.520 they're all important, but I would put speed at the 0:06:08.560 --> 0:06:10.440 top of the list because I think this economy is 0:06:10.480 --> 0:06:13.560 at a precarious point. Jared, can you elaborate on that. 0:06:13.600 --> 0:06:17.000 If speed is the biggest issue right now, do you 0:06:17.080 --> 0:06:20.120 think that Democrats should cave to the Republican demand of 0:06:20.160 --> 0:06:23.240 a smaller bill and just get something anything past even 0:06:23.279 --> 0:06:26.240 it's if it's substantially less than what you think is required. 0:06:26.760 --> 0:06:29.520 You know, I just don't think cave is the word 0:06:29.560 --> 0:06:32.479 that anyone should be thinking about up there. It's actually 0:06:32.560 --> 0:06:37.479 cooperation working together to serve both the healthcare and economic 0:06:37.520 --> 0:06:40.640 needs of the American people. And you know, as the 0:06:40.680 --> 0:06:43.159 President elect has stressed, I mean, there are uh, not 0:06:43.440 --> 0:06:47.800 avoidable there are avoidable deaths that could occur if if 0:06:48.160 --> 0:06:50.920 both sides would get together and start cooperating. Now, by 0:06:50.960 --> 0:06:54.720 the way, Ron Klain, incoming chief of staff, someone who 0:06:54.720 --> 0:07:00.440 knows a lot about about about pandemics, keep winting out 0:07:00.440 --> 0:07:02.279 something the other day that I want to stress. He said, 0:07:02.320 --> 0:07:07.120 you know, yes, vaccine, that's important, it's essential. But you know, 0:07:07.279 --> 0:07:11.920 vaccine without vaccination doesn't get you very far. So along 0:07:11.920 --> 0:07:14.920 with all this other transition planning that should be happening now, 0:07:15.160 --> 0:07:19.480 the manufacturer and the distribution of the vaccine is essential 0:07:19.520 --> 0:07:21.760 planning that has to occur. And I don't think anybody 0:07:21.800 --> 0:07:23.840 needs the cave to each other to get to work 0:07:23.880 --> 0:07:26.920 on serving the American people. In that regard, Jared, given 0:07:26.920 --> 0:07:29.400 that there is some sort of bridge right now to 0:07:29.440 --> 0:07:31.600 try to get us through the next very difficult couple 0:07:31.640 --> 0:07:33.960 of months, what do you think is necessary when it 0:07:33.960 --> 0:07:37.440 comes to potential infrastructure spending, which has been something that's 0:07:37.440 --> 0:07:39.440 been sort of touted out there, and how should we 0:07:39.480 --> 0:07:43.040 pay for something like that? Yeah, that's a really uh, 0:07:43.160 --> 0:07:46.120 that's a really good question. I I think that the 0:07:46.120 --> 0:07:49.320 the we we I focus so much on relief and 0:07:49.400 --> 0:07:51.640 this fiscal bridge to the other side of the crisis. 0:07:52.000 --> 0:07:54.560 I don't think we should forget. And certainly the President 0:07:54.560 --> 0:07:58.160 ELECTA has a has an agenda that is extremely I 0:07:58.200 --> 0:08:01.240 think rich and important in this regard that simply getting 0:08:01.280 --> 0:08:03.080 to the other side of the crisis, back to where 0:08:03.080 --> 0:08:06.120 we were, isn't nearly good enough. We have to the 0:08:06.400 --> 0:08:08.760 way he puts it is build back better. That is, 0:08:08.840 --> 0:08:12.280 have a far more resilient economy on the other side 0:08:12.520 --> 0:08:15.920 of the crisis. And resiliency in the case that you're raising, 0:08:16.240 --> 0:08:19.320 has to do with investments in clean energy and infrastructure, 0:08:19.560 --> 0:08:24.080 healthcare infrastructure, safety net infrastructure, an unemployment insurance system that's 0:08:24.120 --> 0:08:27.080 up to the task, a healthcare system that's up to 0:08:27.120 --> 0:08:29.840 the task, and all of those investments I think need 0:08:29.920 --> 0:08:32.080 to be made now. In terms of pay for us, 0:08:32.200 --> 0:08:35.040 that's a discussion that's going to have to happen when 0:08:35.120 --> 0:08:38.920 the President elect becomes the president we start those negotiations. 0:08:38.960 --> 0:08:41.640 I will say that in terms of relief packages right now, 0:08:41.960 --> 0:08:45.080 it is essential to recognize that interest rates are so 0:08:45.280 --> 0:08:47.840 low and locked in at such a low rate, so 0:08:47.920 --> 0:08:51.360 government borrowing given the return on the kinds of investments 0:08:51.400 --> 0:08:54.360 I'm talking about, I mean, we can literally save lives 0:08:54.760 --> 0:08:59.360 at a and extremely uh favorable interest rate, and the 0:08:59.400 --> 0:09:02.200 idea that Congress isn't acting with urgency to do that 0:09:02.320 --> 0:09:06.079 right now, I think it's just a huge mistake. Four 0:09:06.120 --> 0:09:08.240 basis points on a ten yere Jarek right to catch up, 0:09:08.280 --> 0:09:11.319 appreciate time, come back, saying John Bernstein that at the 0:09:11.440 --> 0:09:21.200 Center on Budget and Policy, priorities made come surveillance to 0:09:21.280 --> 0:09:24.600 speak the experts on this pandemic long ago and far away. 0:09:24.760 --> 0:09:29.960 I think March. My first conversation was with an esteemed 0:09:30.080 --> 0:09:34.320 radiologist at Mount Sinai this morning, these many months on 0:09:34.360 --> 0:09:38.680 a conversation with Dr David richie's president of the Mount 0:09:38.720 --> 0:09:43.120 Sinai Hospital, a radiologist of Mount Sinai who long ago 0:09:43.200 --> 0:09:48.720 and far away actually bought radiological images snapshots of the 0:09:48.800 --> 0:09:53.120 lungs of Wuhan. That was our first important interview on 0:09:53.200 --> 0:09:56.559 this pandemic. Today, David rich joins as president of Mount 0:09:56.600 --> 0:10:00.079 Sinai Hospital in Mount Sinai, Queens. David, I looked on 0:10:00.160 --> 0:10:03.760 a hundred first Street and I count the ambulances. It's 0:10:03.840 --> 0:10:06.520 not as bad as it was in April. It's not 0:10:06.640 --> 0:10:09.320 as bad as what is in May, and yet we're 0:10:09.400 --> 0:10:13.160 hearing about increasing troubles. Give us a snapshot of Mount 0:10:13.280 --> 0:10:17.520 Sinai this Friday morning. This Friday morning, and really for 0:10:17.559 --> 0:10:20.920 the past thirty days, Mount Sawei Hospital has about fifty 0:10:20.960 --> 0:10:25.520 patients with active COVID infection UH. That is a significantly 0:10:25.600 --> 0:10:28.040 last At the peak of the crisis, there were seven 0:10:28.120 --> 0:10:32.360 hundred and seventy including patients in the tents across the streets. 0:10:32.440 --> 0:10:36.200 So it is a markedly less severe surge than what 0:10:36.280 --> 0:10:38.920 we saw in the first wave. Then why are we 0:10:38.960 --> 0:10:43.400 closing schools? Why are we seeing hospitals in North Dakota, 0:10:43.880 --> 0:10:47.320 in Utah and Idaho. So challenge is it just a 0:10:47.400 --> 0:10:52.400 new pandemic of geography or is there something different this time? Well, 0:10:52.480 --> 0:10:54.880 this time we see what's coming at US. We have 0:10:55.080 --> 0:10:57.760 testing in the region. It's certainly not as good as 0:10:57.760 --> 0:11:00.160 it needs to be in the in the long term, 0:11:00.200 --> 0:11:03.120 but we can see the positivity rates. And we didn't 0:11:03.160 --> 0:11:06.120 know back in February and March what was coming towards US. 0:11:06.160 --> 0:11:09.840 There was no capacity and then we were overwhelmed. This time, 0:11:09.880 --> 0:11:12.760 we can see the increase coming at US and take 0:11:12.840 --> 0:11:17.360 proactive public health measures in advance of effective vaccines in 0:11:17.440 --> 0:11:20.240 order to control the spread so that we don't see 0:11:20.320 --> 0:11:23.840 the incredible amount of death and excess death outside of 0:11:23.880 --> 0:11:27.600 COVID that we saw during March April and may Dr 0:11:27.679 --> 0:11:31.720 Rich good morning from London. Is it a different type 0:11:31.760 --> 0:11:35.040 of population that's being affected this time? Is this why 0:11:35.240 --> 0:11:37.760 you know fewer people are ending up in hospital or 0:11:37.800 --> 0:11:40.800 is it because of the viral load that we're seeing. Well, 0:11:40.840 --> 0:11:43.320 there there are certain things that are different about this 0:11:43.480 --> 0:11:46.679 second wave of just looking at it from our perspective. 0:11:47.200 --> 0:11:51.360 For impatients, we see that they're slightly younger, implying that 0:11:51.400 --> 0:11:54.640 we're doing a better job of protecting our elders. We 0:11:54.800 --> 0:11:58.800 see a slightly decreased length of stay, and we're very 0:11:58.840 --> 0:12:02.040 happy that the mortality rate came down from in the 0:12:02.080 --> 0:12:05.520 first wave to five point one percent in the second wave. 0:12:05.559 --> 0:12:08.959 While still a very deadly disease, this does give some 0:12:09.080 --> 0:12:12.040 hope that something that we're doing, something in terms of 0:12:12.080 --> 0:12:17.240 therapeutics or better management of oxygen levels is improving the 0:12:17.280 --> 0:12:21.480 outcome of patients. But still not a disease to take 0:12:21.559 --> 0:12:25.800 lightly at all. The World Health Organization has ruled using 0:12:25.840 --> 0:12:29.959 anti vale m desivere as a treatment has ruled against 0:12:30.080 --> 0:12:32.960 using web deservere as a treatment of COVID nineteen. What 0:12:33.040 --> 0:12:36.920 treatments are available right now that you are using well 0:12:37.080 --> 0:12:40.360 remdesse of your it does have some data that are 0:12:40.440 --> 0:12:44.520 are contradictory, but in the early phase of inpatient care, 0:12:45.320 --> 0:12:51.079 remdesivie and inpatients not yet showing their own antibody response 0:12:51.559 --> 0:12:55.960 convalescent plasma are tools that we're using. And then as 0:12:56.000 --> 0:12:59.680 the disease progresses and we see more involvement, the use 0:12:59.720 --> 0:13:03.320 of UH gluba corticoids commonly noticed steroids such as decks 0:13:03.320 --> 0:13:07.360 and methad zone and UH drugs that in the blood 0:13:07.440 --> 0:13:12.000 or prevent clotting have been very effective for us in 0:13:12.120 --> 0:13:14.400 preventing some of the complications that we saw in the 0:13:14.440 --> 0:13:18.120 first wave. Dr Richard, your thirty six years at Mount Sinai, 0:13:18.160 --> 0:13:22.160 in doing the hard work of innesesology, you have seen 0:13:22.400 --> 0:13:25.280 bed to bed. What people do I want you to 0:13:25.320 --> 0:13:29.080 speak to our audience worldwide about the emotion of the 0:13:29.160 --> 0:13:33.400 CDC yesterday basically canceled Thanksgiving or what we're seeing in 0:13:33.440 --> 0:13:37.120 London about cancel Christmas. How does a pro like you 0:13:37.720 --> 0:13:43.240 observe the political maelstrom of this pandemic. Well, it's it's 0:13:43.360 --> 0:13:46.880 very hard for many of us to see that science 0:13:47.000 --> 0:13:50.199 is not being taken in the in the proper regard 0:13:50.320 --> 0:13:54.000 throughout the really throughout the United States. I can't speak 0:13:54.000 --> 0:13:56.640 as much to the rest of the world, but it's 0:13:56.880 --> 0:14:01.840 a problem when we don't have universal acceptance by public 0:14:01.840 --> 0:14:05.920 health officials and by governments that we must mask be 0:14:06.080 --> 0:14:10.360 much socially distanced. That the Thanksgiving holiday is in many 0:14:10.400 --> 0:14:14.400 ways the worst of possible situations for spread of the inspirers, 0:14:14.480 --> 0:14:17.960 because having large groups of people indoors sharing a meal 0:14:18.480 --> 0:14:22.480 is probably the most effective way of spreading. There for 0:14:22.640 --> 0:14:26.200 something we must we must avoid. David rich mount sign 0:14:26.280 --> 0:14:28.760 I throught we could take generous time with us today. 0:14:28.800 --> 0:14:30.560 Of course it's thirty five. I think it's thirty four, 0:14:30.600 --> 0:14:33.480 maybe thirty six, excuse me, thirty six years at Mount 0:14:33.480 --> 0:14:40.560 sin I truly committed to that institution. The market on 0:14:40.640 --> 0:14:44.080 a hand, whilst founder securities equity strategist joins us right now, Anna, 0:14:44.280 --> 0:14:47.239 we started this program by talking about the cross currents 0:14:47.240 --> 0:14:50.320 for financial market participants. How do you react to the 0:14:50.320 --> 0:14:53.880 news this morning? Well, the news this morning is encouraging 0:14:53.920 --> 0:14:56.280 for equities, and like you were talking about earlier, that 0:14:56.320 --> 0:14:59.160 tugger war. It's one of those items that might be 0:14:59.240 --> 0:15:02.200 able to join the market a little bit higher, but 0:15:02.280 --> 0:15:04.640 in the near term you know, we think that equity 0:15:04.640 --> 0:15:08.880 of bolatility and equity uncertainty still remains elevated. So in 0:15:08.920 --> 0:15:12.240 the immediate term, it's it's hard to say what's gonna 0:15:12.280 --> 0:15:15.360 win out the rising COVID cases or is it gonna 0:15:15.400 --> 0:15:19.600 be this vaccine and uh, you know, perhaps rekindle stimulus 0:15:19.680 --> 0:15:23.760 talks on both ends. Maybe that's gonna be the winning factor. 0:15:24.080 --> 0:15:26.720 But you know, six months out, John, we still do 0:15:26.880 --> 0:15:30.360 think equity risk and unsearchain t will decay and equities 0:15:30.360 --> 0:15:33.800 will march higher. And I want to talk really importantly 0:15:33.800 --> 0:15:36.000 here and I want to drive it into a physics discussion. 0:15:36.000 --> 0:15:39.040 And you're you're working Yale. Do we know the coefficients 0:15:39.160 --> 0:15:42.280 right now? In this divisive week of bulls and bears? 0:15:42.400 --> 0:15:46.720 Are you flying blind or within your equation your expectations 0:15:46.720 --> 0:15:49.400 that you see Do you actually feel like you've got 0:15:49.400 --> 0:15:53.960 to handle on how the equations pieced together for us? 0:15:54.040 --> 0:15:57.000 You know, we do think we have some sense, especially 0:15:57.040 --> 0:15:59.840 you see what the rotation has been as the market 0:15:59.840 --> 0:16:02.640 has been pretty flat this week. Like you mentioned, still 0:16:02.760 --> 0:16:06.200 underneath the hood, you're seeing certain groups have a higher 0:16:06.280 --> 0:16:09.760 beta to the more positive COVID news. You're seeing more 0:16:09.840 --> 0:16:13.840 the cyclicals and the value trade out performing, and that 0:16:13.880 --> 0:16:16.480 has been the trend month to date. We think that 0:16:16.560 --> 0:16:18.720 has legs and has much longer to go in the 0:16:18.800 --> 0:16:22.120 longer term outside of six months. Okay, in the longer term. 0:16:22.200 --> 0:16:23.760 In the short term, how much of a hit could 0:16:23.800 --> 0:16:27.880 that cyclical trade take. Well, as you know, the cyclicality, 0:16:27.960 --> 0:16:31.480 it's very sensitive to economic indicators and how the economic 0:16:31.520 --> 0:16:35.520 recovery is going. So far, recovery seems to be chugging along, 0:16:35.800 --> 0:16:38.840 but we know the biggest risk it hasn't has always 0:16:38.880 --> 0:16:43.240 been what happens with the coronavirus cases isn't manageable. You know, 0:16:43.360 --> 0:16:46.160 for example in New York City, you're seeing schools close, 0:16:46.200 --> 0:16:49.320 You're seeing restaurant dining get rolled back an hour short. 0:16:49.840 --> 0:16:52.160 These things are concerning if we get them out of 0:16:52.280 --> 0:16:57.800 nationwide uh spread, the more concerned again of my policy 0:16:57.840 --> 0:17:00.240 mistikens okay, And I think that's why the biggest news 0:17:00.240 --> 0:17:02.920 perhaps of the night around this market was the gap 0:17:03.000 --> 0:17:06.359 that's emerging between the Federal Reserve Chairman Pale and the 0:17:06.400 --> 0:17:09.080 Treasury Secretary Minute in to him. I think for many 0:17:09.119 --> 0:17:11.240 people in this credit market right now, there's a worry 0:17:11.240 --> 0:17:13.399 that if the fedbacks away, you start to see a 0:17:13.400 --> 0:17:15.880 gapping out and it's signing of financial conditions that would 0:17:15.880 --> 0:17:17.439 be my concern this morning. I have to say I 0:17:17.520 --> 0:17:20.119 was surprised that I didn't see if they're moving this market. 0:17:20.119 --> 0:17:21.320 We had a bit of one eye of the night. 0:17:21.560 --> 0:17:24.160 Then we erased it pretty quickly. Oh. I think everybody 0:17:24.200 --> 0:17:27.240 in Washington at least is overwhelmed by the constitutional news. 0:17:27.240 --> 0:17:30.040 But what's so important here, John, to your good point 0:17:30.520 --> 0:17:34.480 is the fiscal stimulus timeline has been adjusted. There's no 0:17:34.600 --> 0:17:37.280 question about that. And I want to go back to beta. 0:17:37.359 --> 0:17:39.480 You mentioned beta, and let's call it sector beta. To 0:17:39.640 --> 0:17:43.160 full disclosure, folks, I don't believe in beta on individual securities. 0:17:43.480 --> 0:17:46.480 And is beta now in the beta change into two 0:17:46.480 --> 0:17:49.960 thousand twenty one? Is it an absolute change or is 0:17:50.000 --> 0:17:54.040 it a relative change? Can I still own tech? You 0:17:54.080 --> 0:17:58.160 can still own tech. But we think, you know, market 0:17:58.200 --> 0:18:01.400 can move higher. But we're thinking more pedestrian growth than 0:18:01.400 --> 0:18:03.560 we've seen in the past two or three years. So 0:18:03.640 --> 0:18:07.200 for us, the game becomes the more relative beta game. 0:18:07.560 --> 0:18:09.520 We want to know if the market is going to 0:18:09.600 --> 0:18:13.439 be more pedestrian returns and growth, well, what about underneath that, 0:18:13.520 --> 0:18:17.199 which sectors are going to have that relative outperformance? That 0:18:17.320 --> 0:18:21.200 relative beta for us, we think it's more that economically 0:18:21.240 --> 0:18:24.760 sensitive names that COVID time names. So that's what we've 0:18:24.760 --> 0:18:27.639 been recommending to investors right now. When you look out 0:18:27.520 --> 0:18:31.760 the financials part of that story on a even with 0:18:31.800 --> 0:18:33.440 the bond market doing what it's done over the last 0:18:33.480 --> 0:18:37.000 couple of weeks, it is it is John, And within 0:18:37.119 --> 0:18:41.080 financial specifically, you know the trodden and beaten down and 0:18:41.240 --> 0:18:44.560 unloved banks. You know, recently we've pounded the table and 0:18:44.640 --> 0:18:48.000 being overweight banks for a longer term trade because you know, 0:18:48.359 --> 0:18:51.440 evaluations look right for the picking and as we've seen 0:18:51.840 --> 0:18:55.639 that book to price factor has performed since March and 0:18:55.720 --> 0:18:57.919 we think it has more to go. That helps that 0:18:58.040 --> 0:19:02.240 banks argument. And you know, eventually with rates staying at zero, 0:19:02.560 --> 0:19:05.840 even if we don't get the biggest physical stimulus package, 0:19:06.119 --> 0:19:08.480 and now that we do have concerns what happens to 0:19:08.560 --> 0:19:12.440 that credit support rules off, but seeing if that maintains 0:19:12.440 --> 0:19:15.960 status quo, that's going to help bas come back, especially 0:19:16.040 --> 0:19:18.720 longer down the road we get a little reflation. We're 0:19:18.720 --> 0:19:21.439 speaking with an a hand of what Wells Fargo securities, 0:19:21.520 --> 0:19:23.200 and I want to go back to something John was 0:19:23.240 --> 0:19:26.080 talking about this rift that's emerging between the Federal Reserve 0:19:26.119 --> 0:19:29.480 and the Treasury Secretary Stephen Manuchin about this extra money 0:19:29.760 --> 0:19:32.360 that was going toward corporate bond purchases, that was going 0:19:32.440 --> 0:19:35.480 towards main street lending facilities, that was going towards musicpal 0:19:35.520 --> 0:19:40.439 bond UH purchases. I'm wondering how much this threatens the 0:19:40.520 --> 0:19:43.240 idea that the Fed can swoop in as a backstop 0:19:43.320 --> 0:19:45.600 to markets. Frankly, this has been one of the biggest 0:19:45.680 --> 0:19:48.879 arguments for equities and valuations where they are. Does this 0:19:49.000 --> 0:19:53.080 threaten that on any level? Based on the sudden inconsistency 0:19:53.200 --> 0:19:57.560 here in messaging Lisa, you know, you're right, it's absolutely 0:19:57.560 --> 0:19:59.959 a bit of a shock to here suddenly treasuring WENUS 0:20:00.040 --> 0:20:03.400 and then the Fed are taking different stances. As you mentioned, 0:20:03.640 --> 0:20:06.520 one of the reasons why we can justify such inflated 0:20:06.600 --> 0:20:10.439 equity multiples, especially on the SMP five compared to history, 0:20:10.840 --> 0:20:15.119 it's this liquidity. We've had, this monetary accommodation, and you know, 0:20:15.200 --> 0:20:18.280 now you have traging volution asking for a refund. That's 0:20:18.359 --> 0:20:21.359 unexpected because one of the one steady things we've had 0:20:21.400 --> 0:20:25.000 through a lot of this turmoil has been monetary support. Now, 0:20:25.480 --> 0:20:28.880 if that is sapped away. If companies lose their access 0:20:28.960 --> 0:20:32.960 to capital, that comes into stress for equities, and equities 0:20:33.000 --> 0:20:35.400 are likely to see a big pullback. But so far 0:20:35.880 --> 0:20:39.439 we've seen credit spreads tight well behaved both in the 0:20:39.480 --> 0:20:42.560 investment grade and the high old markets. So as long 0:20:42.600 --> 0:20:45.840 as that can remain capped, we think equity volatility stays 0:20:45.920 --> 0:20:49.119 muted as well, and you know multiples can continue and 0:20:49.320 --> 0:20:51.280 great to catch up as always, and a hand that 0:20:51.480 --> 0:20:59.240 of one stonger securities person why it works. Gott Kleiman 0:20:59.280 --> 0:21:02.040 and Jim's l or Apollo Management in a week moment 0:21:02.520 --> 0:21:04.800 took one of the best economists in the street and 0:21:04.880 --> 0:21:08.680 drag them over into the dark side of asset management 0:21:08.760 --> 0:21:13.440 economic analysis. They still touristed Slack from Deutsche Bank. Huge 0:21:13.480 --> 0:21:16.040 loss for Peter Hooper in their team, and we're thrilled 0:21:16.080 --> 0:21:18.600 that Mr Slack could join us. And this one touristed 0:21:19.080 --> 0:21:22.720 a global Wall Street question, how's it different being an 0:21:22.720 --> 0:21:27.760 economist for a massive global bank versus being an economist 0:21:28.000 --> 0:21:33.280 for asset managers? Well, the data and then ASIS is 0:21:33.720 --> 0:21:36.879 a really littlely identical. I mean trying to think about 0:21:36.960 --> 0:21:40.240 what markets are doing and where they're going. Then atisis 0:21:40.359 --> 0:21:43.119 ends up being exactly and the same. So and that 0:21:43.200 --> 0:21:46.280 sends uh, the job that we all have of trying 0:21:46.320 --> 0:21:48.159 to think about where is the economy and going, and 0:21:48.160 --> 0:21:50.399 where a financial marker is going is the same for 0:21:50.440 --> 0:21:52.240 all of us. You're at the cross section at a 0:21:52.320 --> 0:21:55.760 very interesting time that we have Dallas FED President Robert 0:21:55.800 --> 0:21:59.120 Kaplan coming out saying that he could expect a contraction 0:21:59.240 --> 0:22:02.680 even in Q for as a result of the worsening pandemic. 0:22:02.960 --> 0:22:04.760 And then you have Jim Paulson of Luthhole who just 0:22:04.800 --> 0:22:07.280 came on and says that he expects a five percent 0:22:07.359 --> 0:22:10.399 expansion in Q four. This sort of bullish attitude in 0:22:10.440 --> 0:22:13.960 markets versus the parishness of economists. Where do you come 0:22:13.960 --> 0:22:17.280 out in this divide that seems to be growing. Yeah, 0:22:17.280 --> 0:22:20.040 what it's very important to watch is the high frequency 0:22:20.119 --> 0:22:23.880 data and Jodan has claims yesterday as you also talked about, 0:22:24.000 --> 0:22:26.800 of course what's going up that means that more people 0:22:26.800 --> 0:22:30.680 are becoming unemployed. This is a yellow light for risky assets. 0:22:30.720 --> 0:22:32.560 I mean, there's something here that's going on in the 0:22:32.560 --> 0:22:35.959 economic data where the nightmare scenario for marguts would be 0:22:36.160 --> 0:22:39.119 if the unemployer rate November will begin to go higher. 0:22:39.520 --> 0:22:42.000 I mean we are still waiting for the vaccine. There 0:22:42.040 --> 0:22:44.199 is still some time before the vaccine comes. We have 0:22:44.240 --> 0:22:47.280 now more conversations about whether we need a second generation 0:22:47.320 --> 0:22:49.200