1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,840 --> 00:00:23,560 Speaker 1: To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot 5 00:00:23,560 --> 00:00:30,360 Speaker 1: Com and of course on the Bloomberg terminal. We are 6 00:00:30,600 --> 00:00:33,440 Speaker 1: thrilled to bring you someone with a lot of experience 7 00:00:33,720 --> 00:00:36,600 Speaker 1: and looking at by the way yield moves and price moves. 8 00:00:36,880 --> 00:00:40,559 Speaker 1: Gregory Staples joins us to stays with DWS barely described 9 00:00:40,600 --> 00:00:43,479 Speaker 1: his career out of Columbia Economics with Mutual of New 10 00:00:43,560 --> 00:00:45,560 Speaker 1: York and also with Deutsche Bank with a tenure of 11 00:00:45,640 --> 00:00:48,080 Speaker 1: duty there as well. Greg honored to have you on 12 00:00:48,159 --> 00:00:51,560 Speaker 1: with us today. Buried in your note is the shock 13 00:00:51,720 --> 00:00:55,400 Speaker 1: of shocks. This is something John Farrell's provided leadership on 14 00:00:55,560 --> 00:00:59,440 Speaker 1: within the media, and that is the German yield and 15 00:00:59,480 --> 00:01:02,400 Speaker 1: the id yeah that we may finally get a positive 16 00:01:02,920 --> 00:01:05,959 Speaker 1: ten year German yield back to the normality of early 17 00:01:06,000 --> 00:01:10,319 Speaker 1: two thousand nineteen. What will that signal to Europe? What 18 00:01:10,440 --> 00:01:14,560 Speaker 1: will that signal to the fixed income markets? You know, Tom, 19 00:01:14,560 --> 00:01:17,160 Speaker 1: thanks for the comments. It's gonna be pretty tricky. What's 20 00:01:17,200 --> 00:01:19,360 Speaker 1: interesting today, of course, is that the global sell off 21 00:01:19,400 --> 00:01:21,000 Speaker 1: and rates that started in the U S seems to 22 00:01:21,040 --> 00:01:24,480 Speaker 1: be spreading globally. And yes, indeed the tenure boot was 23 00:01:24,600 --> 00:01:27,160 Speaker 1: last trading positive I think in April of two thousand 24 00:01:27,200 --> 00:01:30,000 Speaker 1: and nineteen, more within a stone throw of that right now, 25 00:01:30,080 --> 00:01:32,280 Speaker 1: and we think it truly gets there, you know, until 26 00:01:32,360 --> 00:01:34,919 Speaker 1: the the u c B actually starts to move away 27 00:01:34,920 --> 00:01:37,319 Speaker 1: from their p E p P program and their A 28 00:01:37,400 --> 00:01:40,520 Speaker 1: p P program they're actively doing quantitative using. It's gonna 29 00:01:40,520 --> 00:01:44,000 Speaker 1: be hard for European fixed income rates to go much 30 00:01:44,080 --> 00:01:45,759 Speaker 1: higher than that. My money is going to flow into 31 00:01:45,760 --> 00:01:48,000 Speaker 1: the higher yielding US. But I do think that there's 32 00:01:48,000 --> 00:01:50,880 Speaker 1: a potential for a basis between US ten ures and 33 00:01:50,920 --> 00:01:53,080 Speaker 1: tenure boots to go. Is why does two dred basis 34 00:01:53,080 --> 00:01:56,200 Speaker 1: points you know right now where maybe at one and 35 00:01:56,320 --> 00:01:58,800 Speaker 1: certainly they're much north of that. It's going to be 36 00:01:58,840 --> 00:02:01,080 Speaker 1: hard because of the flows come out of Europe into 37 00:02:01,120 --> 00:02:06,440 Speaker 1: the United States. This is so so so important, folks. 38 00:02:06,440 --> 00:02:10,320 Speaker 1: It's not as simplistic the dynamics here, not the static analysis, 39 00:02:10,600 --> 00:02:14,960 Speaker 1: the dynamic analysis. What is the behavior greg as we 40 00:02:15,040 --> 00:02:19,200 Speaker 1: move to a higher yield regime describe those flows in 41 00:02:19,280 --> 00:02:22,760 Speaker 1: the decision tree that people make when they step into 42 00:02:22,840 --> 00:02:26,920 Speaker 1: the market given higher yield. Well from a global perspective, 43 00:02:26,960 --> 00:02:28,720 Speaker 1: of course, there with the question is do they want 44 00:02:28,720 --> 00:02:31,679 Speaker 1: to take currency risk? And the currency hedging component of 45 00:02:31,800 --> 00:02:34,280 Speaker 1: is is very significant. You're not gonna go naked currency 46 00:02:34,320 --> 00:02:35,760 Speaker 1: if you feel like you're going to give up on 47 00:02:35,800 --> 00:02:38,200 Speaker 1: the currency trade, which you get on yield suffer has 48 00:02:38,200 --> 00:02:40,440 Speaker 1: actually been pretty positive. You're able to still invest in 49 00:02:40,560 --> 00:02:43,120 Speaker 1: US dollar and head your currency risk and come up 50 00:02:43,120 --> 00:02:45,720 Speaker 1: with something that's considerably above what you're getting from global rates. 51 00:02:45,919 --> 00:02:47,600 Speaker 1: So I think as long as that holds, it's going 52 00:02:47,639 --> 00:02:50,040 Speaker 1: to suppress the U S rates from going too high 53 00:02:50,120 --> 00:02:52,639 Speaker 1: too quickly. I think what's interesting over in Europe is 54 00:02:52,680 --> 00:02:55,240 Speaker 1: they're not just facing higher inflation, but obviously underneath that 55 00:02:55,680 --> 00:02:58,680 Speaker 1: support for the Italian government deficits. It's not as if 56 00:02:58,720 --> 00:03:01,960 Speaker 1: the ECB can immediately step away from their programs because 57 00:03:02,000 --> 00:03:05,320 Speaker 1: if they do, they potentially put Italian BTPs into some 58 00:03:05,400 --> 00:03:06,839 Speaker 1: risk as to who it's going to take that debt 59 00:03:06,840 --> 00:03:09,280 Speaker 1: down as well. So the flow is where do you 60 00:03:09,400 --> 00:03:12,280 Speaker 1: get the highest deeld globally and our currency hedged basis 61 00:03:12,720 --> 00:03:15,079 Speaker 1: right now, that's the United States, Greg, can you walk 62 00:03:15,120 --> 00:03:18,040 Speaker 1: me through your expectations for the e CP, say against 63 00:03:18,080 --> 00:03:20,400 Speaker 1: the Federal Reserve. This FEN looks like it's ready to 64 00:03:20,400 --> 00:03:23,360 Speaker 1: go in March. Does that make it harder easier for 65 00:03:23,400 --> 00:03:26,480 Speaker 1: the CCP to wait? I think it makes it very 66 00:03:26,520 --> 00:03:29,960 Speaker 1: much harder. I mean, I think inflation is still rising 67 00:03:30,000 --> 00:03:32,679 Speaker 1: over in in Germany. We saw some prints today that 68 00:03:32,720 --> 00:03:34,520 Speaker 1: make you think the economy there is is coming out 69 00:03:34,520 --> 00:03:38,080 Speaker 1: pretty pretty strongly. So the code for the the CP 70 00:03:38,160 --> 00:03:40,760 Speaker 1: for so long has been continue to support the markets 71 00:03:40,760 --> 00:03:44,120 Speaker 1: with open market purchases, continue to have a negative policy rate. 72 00:03:44,200 --> 00:03:46,760 Speaker 1: They're going to be under some considerable pressure in two 73 00:03:47,120 --> 00:03:48,640 Speaker 1: to lift the p E p P. I think that's 74 00:03:48,680 --> 00:03:50,680 Speaker 1: going to happen in March. And then the question is 75 00:03:50,680 --> 00:03:52,880 Speaker 1: to what degree did they taper down the open market 76 00:03:52,880 --> 00:03:55,880 Speaker 1: purchases going forward under the APP program. I think they've 77 00:03:55,880 --> 00:03:57,960 Speaker 1: got to consider accelerating and given what Defen has been 78 00:03:57,960 --> 00:04:00,800 Speaker 1: doing full basis points away from that zero level on 79 00:04:00,840 --> 00:04:03,080 Speaker 1: a German ten year As you know, Greg, just the 80 00:04:03,120 --> 00:04:05,160 Speaker 1: experience of US all over the last ten years looking 81 00:04:05,160 --> 00:04:08,160 Speaker 1: at European debt markets. It's what happens in Italy that 82 00:04:08,240 --> 00:04:11,200 Speaker 1: counts here now in America we're talking about the prospect 83 00:04:11,200 --> 00:04:14,320 Speaker 1: of time of financial conditions and the ability or inability 84 00:04:14,360 --> 00:04:17,400 Speaker 1: of the Federal Reserve to step back. Does the ECB 85 00:04:17,920 --> 00:04:23,000 Speaker 1: have any capacity to maintain easy financing conditions for places 86 00:04:23,040 --> 00:04:26,599 Speaker 1: like Italy, and do they move away and ultimately does 87 00:04:26,640 --> 00:04:30,039 Speaker 1: this European bond market trade like a sovereign or a 88 00:04:30,080 --> 00:04:33,640 Speaker 1: credit greg which one within the Europe that's a very 89 00:04:33,720 --> 00:04:35,719 Speaker 1: very good question. To what degree can they pull back 90 00:04:35,720 --> 00:04:38,560 Speaker 1: and not destabilize the periphery Italy in particular, And it's 91 00:04:38,600 --> 00:04:41,760 Speaker 1: going to be difficult, difficult, difficult to do. I think 92 00:04:41,800 --> 00:04:43,760 Speaker 1: it's gonna be next to the two. Obviously, there's the 93 00:04:43,760 --> 00:04:46,200 Speaker 1: sovereigns in the northern countries. It's the sovereigns as they 94 00:04:46,200 --> 00:04:48,160 Speaker 1: try and nationalize the DAD and some of those programs 95 00:04:48,160 --> 00:04:51,839 Speaker 1: that they instituted after the COVID spread through their last year. 96 00:04:52,240 --> 00:04:54,440 Speaker 1: But they're still concerned about what Italy is going to 97 00:04:54,440 --> 00:04:57,280 Speaker 1: be able to do if indeed the CCP pulls back 98 00:04:57,279 --> 00:04:59,839 Speaker 1: from their purchases, that part of the market becomes a credit. 99 00:05:00,200 --> 00:05:02,080 Speaker 1: Just want to watch for a close line. Greg gonna 100 00:05:02,120 --> 00:05:09,559 Speaker 1: catch ups the grows staples there of DWS Group joining 101 00:05:09,600 --> 00:05:12,680 Speaker 1: us now to discuss Sema Sha, chief vlobal market strategist 102 00:05:12,680 --> 00:05:16,000 Speaker 1: of Principal Global Investors. Seema, it's one day. It's one 103 00:05:16,080 --> 00:05:18,480 Speaker 1: day of a pretty violent move lower on the nav 104 00:05:18,520 --> 00:05:20,520 Speaker 1: stack and in particular pocket to this market off the 105 00:05:20,520 --> 00:05:22,320 Speaker 1: back of what we saw in the FED minutes. Is 106 00:05:22,360 --> 00:05:24,720 Speaker 1: that one day a flavor of what we can expect 107 00:05:24,720 --> 00:05:29,159 Speaker 1: in two. I think it gives us an insight into 108 00:05:29,240 --> 00:05:33,200 Speaker 1: the kind of volatility that we should anticipate going into two. 109 00:05:33,560 --> 00:05:36,159 Speaker 1: You know, we have, of course, we have inflation still 110 00:05:36,240 --> 00:05:38,720 Speaker 1: very much elevated, so that's putting through some of the 111 00:05:38,760 --> 00:05:41,680 Speaker 1: concerns that we had in one right into two. And 112 00:05:41,720 --> 00:05:44,039 Speaker 1: then on top of that, of course we have all 113 00:05:44,080 --> 00:05:46,360 Speaker 1: of the FED moves. You're getting tapering, you're getting rate 114 00:05:46,400 --> 00:05:50,200 Speaker 1: high because potentially balancily runoff all in one year. So 115 00:05:50,360 --> 00:05:52,000 Speaker 1: of course this is going to be a volatile year, 116 00:05:52,040 --> 00:05:54,279 Speaker 1: and I think investors have to be really prepared for 117 00:05:54,360 --> 00:05:55,760 Speaker 1: the kind of movies that we have to we might 118 00:05:55,800 --> 00:06:01,240 Speaker 1: be soon, Sema, within your very thought, all note, there's 119 00:06:01,480 --> 00:06:04,440 Speaker 1: not the idea of a surprise of two thousand and 120 00:06:04,480 --> 00:06:09,560 Speaker 1: twenty two, which would be a more resilient higher inflation. 121 00:06:10,440 --> 00:06:13,800 Speaker 1: Are we changing our probabilities right now? And do we 122 00:06:13,839 --> 00:06:16,760 Speaker 1: need to game in with a nominal rate move a 123 00:06:16,920 --> 00:06:22,640 Speaker 1: more resilient higher inflation. Yeah. It's interesting with the inflation story. 124 00:06:22,720 --> 00:06:25,280 Speaker 1: You know, we do see inflation coming down from the 125 00:06:25,360 --> 00:06:27,520 Speaker 1: levels that we've become accustomed to in the last two 126 00:06:27,600 --> 00:06:30,320 Speaker 1: or three months. But at the same time, although it's 127 00:06:30,320 --> 00:06:33,840 Speaker 1: coming down, we're still likely to see inflation settling at 128 00:06:33,880 --> 00:06:35,640 Speaker 1: a level which is higher than what we've seen over 129 00:06:35,640 --> 00:06:37,520 Speaker 1: the last ten years. Right. So this is a kind 130 00:06:37,520 --> 00:06:40,200 Speaker 1: of the above the two percent target, and it's something 131 00:06:40,240 --> 00:06:43,720 Speaker 1: that the Fed inevitably has got to respond to. Um. 132 00:06:43,720 --> 00:06:45,359 Speaker 1: And when we think about inflation, I think from an 133 00:06:45,360 --> 00:06:47,919 Speaker 1: investment perspective, the key story here is, as you were 134 00:06:47,920 --> 00:06:50,040 Speaker 1: saying before, it's about real rates. You know, what has 135 00:06:50,040 --> 00:06:51,640 Speaker 1: happened to that. One of the debates that we have 136 00:06:52,120 --> 00:06:55,200 Speaker 1: on our team time and time again is will we ever, 137 00:06:55,320 --> 00:06:58,359 Speaker 1: you know, will the Fed really permit real yields to 138 00:06:58,360 --> 00:07:01,120 Speaker 1: get back into positive territory and how the markets respond 139 00:07:01,839 --> 00:07:04,440 Speaker 1: We go through this time and time again. Um. And 140 00:07:04,520 --> 00:07:06,440 Speaker 1: you know, of course recently with this jump up in 141 00:07:06,480 --> 00:07:08,679 Speaker 1: real yields, is it's a question which is maybe getting 142 00:07:08,680 --> 00:07:12,480 Speaker 1: a little bit closer. Okay, but let's take it to 143 00:07:12,520 --> 00:07:16,920 Speaker 1: principal global in your institutional client, Tell if we get 144 00:07:17,120 --> 00:07:19,840 Speaker 1: some form of final movement and real yields even to 145 00:07:19,920 --> 00:07:23,680 Speaker 1: a lesser negative for even excuse me, the plague a 146 00:07:23,760 --> 00:07:28,240 Speaker 1: positive statistic sema. If we get that move what does 147 00:07:28,240 --> 00:07:31,880 Speaker 1: it mean for earnings in the animal spirits or corporations? 148 00:07:32,160 --> 00:07:36,320 Speaker 1: Don't they do pretty well in a higher nominal yield environment? 149 00:07:37,280 --> 00:07:39,600 Speaker 1: You know this, It's such I'm glad you said this point, 150 00:07:39,600 --> 00:07:41,800 Speaker 1: because look, when we think about ectily is are going 151 00:07:41,840 --> 00:07:43,360 Speaker 1: to think about rates, but we're also going to think 152 00:07:43,360 --> 00:07:46,880 Speaker 1: about earnings. And the outlook that we have for two 153 00:07:46,920 --> 00:07:48,840 Speaker 1: is still a very solid recovery. It's still a very 154 00:07:48,840 --> 00:07:52,160 Speaker 1: strong economic environment. We can look at the labor market performance, 155 00:07:52,400 --> 00:07:54,559 Speaker 1: we look at the demand, the continuous demold, and actually 156 00:07:54,600 --> 00:07:57,320 Speaker 1: we do see supply constraints easing through the years of 157 00:07:57,400 --> 00:08:00,400 Speaker 1: manufacturing should hopefully get a bit of a boost come 158 00:08:00,440 --> 00:08:02,800 Speaker 1: into the second half of the year. So with all 159 00:08:02,840 --> 00:08:06,320 Speaker 1: of that in mind, actually earnings growth stays positive. It's 160 00:08:06,320 --> 00:08:09,600 Speaker 1: not as strong as one certainly, but it's still quite positive. 161 00:08:09,840 --> 00:08:13,360 Speaker 1: And against that backdrop, you may not see exuties doing 162 00:08:13,400 --> 00:08:17,200 Speaker 1: extremely well, but we do continue to see positive returns 163 00:08:17,200 --> 00:08:21,960 Speaker 1: based of that still solid and its recovery CMA. This 164 00:08:22,000 --> 00:08:23,680 Speaker 1: is the reason why so many people are hiding out 165 00:08:23,680 --> 00:08:26,680 Speaker 1: in the reflationary stocks, in particular the banks and other 166 00:08:26,720 --> 00:08:30,760 Speaker 1: some consumer discressionaries as well. When do you lean against 167 00:08:30,920 --> 00:08:33,319 Speaker 1: the mood right now and catch the falling knife that 168 00:08:33,440 --> 00:08:36,640 Speaker 1: is big tech, especially after hedge funds just had the 169 00:08:36,640 --> 00:08:39,400 Speaker 1: most violent pout of selling for the past four sessions 170 00:08:39,679 --> 00:08:43,559 Speaker 1: going back more than ten years in Golbyn Sack's data. Yeah, 171 00:08:43,679 --> 00:08:46,600 Speaker 1: you know, so we have continued to hold um some 172 00:08:46,679 --> 00:08:48,880 Speaker 1: of our overweight positions to big tech. We have been 173 00:08:49,559 --> 00:08:51,360 Speaker 1: really in favor of making cut tech for a while. 174 00:08:51,360 --> 00:08:54,000 Speaker 1: We continue to hold onto that even us conditions for 175 00:08:54,040 --> 00:08:57,240 Speaker 1: tech become more challenging and we have to we have 176 00:08:57,280 --> 00:09:00,080 Speaker 1: to recognize the look bond deals are biased higher. We 177 00:09:00,080 --> 00:09:02,320 Speaker 1: don't think they're going to move significantly higher. And this 178 00:09:02,400 --> 00:09:05,520 Speaker 1: is key because we do see inflation coming down through 179 00:09:05,600 --> 00:09:07,160 Speaker 1: this year to a two and a half or several level. 180 00:09:07,160 --> 00:09:09,880 Speaker 1: We're definitely not see it. They're kind of five continuing 181 00:09:09,920 --> 00:09:12,800 Speaker 1: throughout this year. Um, So we we have that forecast. 182 00:09:13,200 --> 00:09:16,000 Speaker 1: Now as we're thinking through big tech, we have to 183 00:09:16,120 --> 00:09:18,079 Speaker 1: at the cyclical environment as well. You know that the 184 00:09:18,160 --> 00:09:20,840 Speaker 1: work from home that kind of thing it's gone. So 185 00:09:21,000 --> 00:09:24,000 Speaker 1: actually the cyclical environment is not in favor of big tech. 186 00:09:24,640 --> 00:09:26,640 Speaker 1: But from an investment perspective, we also have to think 187 00:09:26,640 --> 00:09:28,640 Speaker 1: about the long term and you want to be looking 188 00:09:28,640 --> 00:09:30,640 Speaker 1: at companies which have got those big balan sheets and 189 00:09:30,679 --> 00:09:34,360 Speaker 1: can continue to deliver earnings. So we actually still think 190 00:09:34,440 --> 00:09:36,480 Speaker 1: it makes sense to have an allocation to big tech 191 00:09:36,640 --> 00:09:39,120 Speaker 1: somethin not as big as we've had in recent years, 192 00:09:39,360 --> 00:09:41,720 Speaker 1: but we still think it's an air of defense within 193 00:09:41,760 --> 00:09:44,640 Speaker 1: the portfolio, which makes sense in a year which continues 194 00:09:44,679 --> 00:09:48,120 Speaker 1: to be challenging. But at the same time, look mega cap, 195 00:09:48,320 --> 00:09:51,480 Speaker 1: whether it's growth, whether it's value. I think that's what's 196 00:09:51,520 --> 00:09:54,240 Speaker 1: key um and with rising heels and maybe that actually 197 00:09:54,280 --> 00:09:57,760 Speaker 1: mega very large banks is probably the area that we 198 00:09:57,800 --> 00:10:01,200 Speaker 1: could see some rotation towards this. Yeah, seem can we 199 00:10:01,200 --> 00:10:03,760 Speaker 1: finish on a tricky one? What would you buy and 200 00:10:03,800 --> 00:10:06,480 Speaker 1: hold through the rest of this year? The FOOTS one 201 00:10:06,720 --> 00:10:13,360 Speaker 1: D or the SMP five hundred Sea of principal Global Investors? 202 00:10:13,400 --> 00:10:20,160 Speaker 1: Thank you. Tom Pauselli joins us now the chief US 203 00:10:20,200 --> 00:10:23,160 Speaker 1: economist at RBC Capital Markets. Tom, I just want you 204 00:10:23,200 --> 00:10:26,400 Speaker 1: to spend a moment to describe how strange this moment 205 00:10:26,480 --> 00:10:30,560 Speaker 1: is for this Federal Reserve a conversation about accelerating balance 206 00:10:30,559 --> 00:10:33,760 Speaker 1: sheet reduction just as they're still building up the balance 207 00:10:33,840 --> 00:10:37,199 Speaker 1: sheet and buying bonds through March. Tom makes sense of 208 00:10:37,240 --> 00:10:39,840 Speaker 1: it all for us. Yeah, well, first of all, good morning, 209 00:10:39,840 --> 00:10:41,800 Speaker 1: good to see you all. Um. You know, look, I 210 00:10:42,240 --> 00:10:45,520 Speaker 1: would say that it is it strange. I mean, you know, 211 00:10:46,000 --> 00:10:47,319 Speaker 1: I think I think we all need to keep in 212 00:10:47,360 --> 00:10:50,480 Speaker 1: mind something we have a sample of one, right, I mean, 213 00:10:50,800 --> 00:10:52,719 Speaker 1: we write, you know, the words, they did this one 214 00:10:52,760 --> 00:10:54,840 Speaker 1: other time. It's not like we have a rich history 215 00:10:54,920 --> 00:10:56,800 Speaker 1: of Hey, this is how it's happened in the past. 216 00:10:56,840 --> 00:10:59,360 Speaker 1: I mean, they didn't one other time. And that one 217 00:10:59,400 --> 00:11:01,719 Speaker 1: other time I think was wildly different in terms of 218 00:11:01,760 --> 00:11:04,480 Speaker 1: the economic backdrop than than what we're enduring right now. 219 00:11:04,480 --> 00:11:07,040 Speaker 1: And I think that's the that's the difference. So it 220 00:11:07,040 --> 00:11:10,400 Speaker 1: may seem like stark contrast um their approach, but so 221 00:11:10,559 --> 00:11:13,480 Speaker 1: is the economic backdrop. So I I don't I don't 222 00:11:13,520 --> 00:11:18,560 Speaker 1: know that we should be so over overly surprised by this. Well, 223 00:11:18,600 --> 00:11:20,640 Speaker 1: we should be looking at the data, that's what they say, 224 00:11:20,800 --> 00:11:23,480 Speaker 1: although it's unclear what data they have been looking at 225 00:11:23,760 --> 00:11:27,280 Speaker 1: for the past six months that suddenly liked their pivot recently, 226 00:11:27,800 --> 00:11:31,960 Speaker 1: and as we march toward that job's figure tomorrow, I mean, 227 00:11:32,040 --> 00:11:34,320 Speaker 1: as we marched toward the jobs figure tomorrow, I do 228 00:11:34,440 --> 00:11:36,679 Speaker 1: wonder if there is a threshold at which, if the 229 00:11:36,720 --> 00:11:41,240 Speaker 1: participation rate does not increase, or the job's number is 230 00:11:41,280 --> 00:11:43,680 Speaker 1: a very big one, if that could actually force the 231 00:11:43,679 --> 00:11:46,760 Speaker 1: Fed's hand earlier, or if it's not necessarily going to 232 00:11:46,840 --> 00:11:50,079 Speaker 1: be that impactful. Yeah, I mean, look, I yeah, it's 233 00:11:50,080 --> 00:11:52,720 Speaker 1: a it's a great question, and Lissa, I think, um, 234 00:11:52,760 --> 00:11:55,560 Speaker 1: you know, the way you framed it, I think is perfect. Um, 235 00:11:55,960 --> 00:11:57,640 Speaker 1: the way you set up this question is perfect. Look, 236 00:11:58,640 --> 00:12:00,760 Speaker 1: you know the I think we all sort of appreciator, 237 00:12:00,800 --> 00:12:02,960 Speaker 1: hopefully we will appreciate that the pair will report has 238 00:12:03,000 --> 00:12:06,800 Speaker 1: been plagued by a seasonal adjustment issues or sampling issues, 239 00:12:07,080 --> 00:12:10,040 Speaker 1: whatever the issue might be. I think we all recognize 240 00:12:10,080 --> 00:12:13,360 Speaker 1: that there's some, um uh, you know, a bit of 241 00:12:13,400 --> 00:12:17,240 Speaker 1: an additional quirkiness to what was already a pretty quirky report. 242 00:12:17,559 --> 00:12:20,160 Speaker 1: What we do know is that a DP just printed 243 00:12:20,200 --> 00:12:23,679 Speaker 1: eight hundred thousand jobs, right, Um, you know, the an 244 00:12:23,679 --> 00:12:27,080 Speaker 1: assortment of different labor market metrics, including the claims data 245 00:12:27,120 --> 00:12:29,920 Speaker 1: that just came out, continue to drive home. But the 246 00:12:30,000 --> 00:12:33,479 Speaker 1: labor market is tight. I mean there's you know, there's 247 00:12:33,520 --> 00:12:35,760 Speaker 1: really no way to get the sort of the meaningfully 248 00:12:35,840 --> 00:12:39,040 Speaker 1: higher wage profile that we have in place than to 249 00:12:39,120 --> 00:12:42,240 Speaker 1: have a really tight labor market. So with older respected 250 00:12:42,320 --> 00:12:45,240 Speaker 1: tomorrow's report, I don't know that it really makes a 251 00:12:45,240 --> 00:12:47,800 Speaker 1: difference in the world. UM. I think what we know 252 00:12:47,920 --> 00:12:50,320 Speaker 1: is that the preponderance of data UM from the labor 253 00:12:50,360 --> 00:12:53,040 Speaker 1: market perspective really drives home. Tight labor markets are here, 254 00:12:53,040 --> 00:12:55,440 Speaker 1: wage pressures will continue, UM, And I think that's the 255 00:12:55,440 --> 00:12:58,959 Speaker 1: thing that will keep the Fed engaged in part what 256 00:12:59,000 --> 00:13:01,920 Speaker 1: you just said is important. Do you think that markets 257 00:13:01,920 --> 00:13:05,920 Speaker 1: are under appreciating how much wages you think will rise 258 00:13:06,040 --> 00:13:08,840 Speaker 1: later this year? Yeah? Look, you know one of the 259 00:13:08,840 --> 00:13:11,320 Speaker 1: things that that that we've said, and we just wrote 260 00:13:11,320 --> 00:13:13,200 Speaker 1: this in our Year Ahead, is you know what what 261 00:13:13,880 --> 00:13:16,000 Speaker 1: some of the pressure that we're seeing from a wage 262 00:13:16,040 --> 00:13:18,760 Speaker 1: perspective will actually ease. Now, I want to be clear 263 00:13:18,760 --> 00:13:21,440 Speaker 1: on what that means, right, and a nuanced idea we're 264 00:13:21,480 --> 00:13:23,880 Speaker 1: running right now. If you just there's countless measures of wages. 265 00:13:23,880 --> 00:13:25,880 Speaker 1: One of them is averagarily learnings. I happen to hate 266 00:13:25,920 --> 00:13:27,600 Speaker 1: that measure, but everyone seems to know it. So let's 267 00:13:27,600 --> 00:13:30,200 Speaker 1: talk about that that right now is running around a 268 00:13:30,200 --> 00:13:33,480 Speaker 1: six percent page. What we think happens as the year progresses, 269 00:13:33,800 --> 00:13:35,839 Speaker 1: as you know, as sort of you know, look, it's 270 00:13:35,840 --> 00:13:38,320 Speaker 1: gonna be a slower growth year. UM. It's still gonna 271 00:13:38,320 --> 00:13:39,960 Speaker 1: be a really good year, but it's gonna be slower 272 00:13:40,000 --> 00:13:42,560 Speaker 1: growth verst last year. UM. And so what we expect 273 00:13:42,600 --> 00:13:43,880 Speaker 1: is going to happen is that some of the heat 274 00:13:43,920 --> 00:13:47,320 Speaker 1: will come out of um a job opening space, which 275 00:13:47,320 --> 00:13:50,520 Speaker 1: will take something heat out of wages. Wages will still 276 00:13:50,600 --> 00:13:52,440 Speaker 1: remain elevated, and I want to be very very clear 277 00:13:52,440 --> 00:13:54,640 Speaker 1: on that. But they're not gonna be running at a 278 00:13:54,720 --> 00:13:56,880 Speaker 1: six percent page. We think that they'll probably be running 279 00:13:56,880 --> 00:13:59,800 Speaker 1: closer to a four or five percent page. Again, I 280 00:14:00,000 --> 00:14:03,640 Speaker 1: think that that's a very important nuanced idea that needs 281 00:14:03,640 --> 00:14:06,480 Speaker 1: to be sort of understood. You're still looking at a 282 00:14:06,600 --> 00:14:10,040 Speaker 1: really good labor backdrop, labor that's gonna tighten over the 283 00:14:10,080 --> 00:14:13,760 Speaker 1: coming um a year relative to where we are now. 284 00:14:14,080 --> 00:14:16,720 Speaker 1: But think about this pair overport right, This is again 285 00:14:16,800 --> 00:14:20,360 Speaker 1: another great example we have been printing one on Assuming 286 00:14:20,400 --> 00:14:22,080 Speaker 1: you know, the number comes in close to what we're 287 00:14:22,120 --> 00:14:26,160 Speaker 1: predicting for tomorrow. We averaged what five and fifty thousand 288 00:14:26,280 --> 00:14:30,360 Speaker 1: jobs per month in one, which is a staggering number. Obviously, 289 00:14:30,400 --> 00:14:32,640 Speaker 1: given you know what has happened, it's not that surprising. 290 00:14:33,040 --> 00:14:35,160 Speaker 1: But as we look at twenty two, you're not gonna 291 00:14:35,160 --> 00:14:37,840 Speaker 1: average fifty jobs. You're probably gonna average half of that 292 00:14:38,360 --> 00:14:41,880 Speaker 1: um per month over the over the years. So I 293 00:14:41,920 --> 00:14:44,920 Speaker 1: think that's again another important way of thinking about where 294 00:14:44,920 --> 00:14:49,520 Speaker 1: we are from the labor market perspective time. Your initial 295 00:14:49,600 --> 00:14:52,800 Speaker 1: acclaim was on analysis of the wage growth in the 296 00:14:52,840 --> 00:14:57,000 Speaker 1: many wage growth of America. What's the character of our 297 00:14:57,040 --> 00:14:59,920 Speaker 1: wage growth this time around when you look at labor 298 00:15:00,120 --> 00:15:04,360 Speaker 1: ability to negotiate a higher wage, the almost social aspects, 299 00:15:04,400 --> 00:15:07,800 Speaker 1: so that what's the character of our two thousand twenty 300 00:15:07,840 --> 00:15:10,840 Speaker 1: five wage growth? Yeah, so you know, one of the 301 00:15:10,880 --> 00:15:14,320 Speaker 1: things that you know, as as I look at two 302 00:15:15,120 --> 00:15:16,840 Speaker 1: is a little too far far from me in the forecast, 303 00:15:16,880 --> 00:15:18,600 Speaker 1: but but in the current, in the in the sort 304 00:15:18,600 --> 00:15:21,040 Speaker 1: of the current context and over the course of the year, 305 00:15:21,040 --> 00:15:22,640 Speaker 1: and I think you've been into next year. I think 306 00:15:22,640 --> 00:15:24,680 Speaker 1: it's very fair. You know. One of the things that's 307 00:15:24,680 --> 00:15:26,920 Speaker 1: been very interesting is if you look at the sort 308 00:15:26,960 --> 00:15:30,080 Speaker 1: of the wage pressures that are in different segments of 309 00:15:30,160 --> 00:15:32,760 Speaker 1: the labor backdrop, and there's again, countless ways of capturing 310 00:15:32,800 --> 00:15:34,520 Speaker 1: the essence of that. I think one way of looking 311 00:15:34,520 --> 00:15:36,880 Speaker 1: at that is to look at job leavers first, job 312 00:15:36,960 --> 00:15:39,840 Speaker 1: stairs UM, and I think this sort of doves tails 313 00:15:39,920 --> 00:15:42,440 Speaker 1: dovetails with the conversation you all were having a little earlier. 314 00:15:42,720 --> 00:15:45,080 Speaker 1: You know, it's been it's interesting to see, right, it's 315 00:15:45,160 --> 00:15:47,960 Speaker 1: you know, do people have um the ability to sort 316 00:15:48,000 --> 00:15:51,240 Speaker 1: of demand more from a wage perspective. I mean, on 317 00:15:51,280 --> 00:15:54,440 Speaker 1: the face of it, they do, because if you look 318 00:15:54,480 --> 00:15:57,520 Speaker 1: at what job leavers, people that leave a job to 319 00:15:57,520 --> 00:15:59,840 Speaker 1: take another job, if you look at their their wage 320 00:16:00,080 --> 00:16:04,040 Speaker 1: rate UM in percentage terms relative to job stayers. So 321 00:16:04,120 --> 00:16:08,240 Speaker 1: people who stay um, the levers are are their wage 322 00:16:08,320 --> 00:16:10,840 Speaker 1: rate is running a full percentage point more. UM. So 323 00:16:11,120 --> 00:16:14,080 Speaker 1: I do. I do think that there's real scope for 324 00:16:14,360 --> 00:16:18,240 Speaker 1: wage pressures to remain fairly elevated. In the context of 325 00:16:18,360 --> 00:16:21,040 Speaker 1: again everything that we're talking about, you do, you are 326 00:16:21,080 --> 00:16:23,920 Speaker 1: going to have a tight little type. It's not like 327 00:16:24,000 --> 00:16:26,720 Speaker 1: we're waiting for tight labor market. It's it's already here. 328 00:16:26,720 --> 00:16:28,600 Speaker 1: And I would argue it's been here. There's something we've 329 00:16:28,600 --> 00:16:30,320 Speaker 1: been talking about for for for quite a number of 330 00:16:30,360 --> 00:16:32,040 Speaker 1: months now. I mean, we we've put out quite a 331 00:16:32,120 --> 00:16:35,120 Speaker 1: number of metrics that show some internal metrics that really 332 00:16:35,120 --> 00:16:37,200 Speaker 1: show that labor market is tight, and we expect that 333 00:16:37,200 --> 00:16:39,200 Speaker 1: that will remain that way over the balance of the year. 334 00:16:39,320 --> 00:16:42,280 Speaker 1: So I think there's real scope for wage pressures to 335 00:16:42,360 --> 00:16:45,760 Speaker 1: remain incredibly bulliant, even if some of the heat comes 336 00:16:45,760 --> 00:16:47,640 Speaker 1: off a bit relative to where we are now. Tell 337 00:16:47,720 --> 00:16:49,720 Speaker 1: me you produce some of our favorite research on the 338 00:16:49,720 --> 00:16:51,680 Speaker 1: economy here in America. Thank you, SURF a band with 339 00:16:51,760 --> 00:16:54,640 Speaker 1: US tempo selling of MBC capital markets coming into that 340 00:16:54,680 --> 00:17:02,880 Speaker 1: Prince Tomorrow. We've been trying to find excellence in medical 341 00:17:02,960 --> 00:17:05,160 Speaker 1: voices and we do that now with Christian Brier. He's 342 00:17:05,160 --> 00:17:09,760 Speaker 1: with Johns Hopkins University, truly expert on Thailand and expert 343 00:17:09,800 --> 00:17:14,240 Speaker 1: on the epidemiology of frontier economies. Dr Bryer, honor that 344 00:17:14,280 --> 00:17:17,359 Speaker 1: you could attend with us today. There is a point, 345 00:17:17,440 --> 00:17:20,359 Speaker 1: Dr Brier, where there is a divide, and I would 346 00:17:20,359 --> 00:17:23,040 Speaker 1: say the divide was a textbook Morrison and Boyd in 347 00:17:23,200 --> 00:17:27,280 Speaker 1: organic chemistry, and there was a modest book in biochemistry 348 00:17:27,359 --> 00:17:32,960 Speaker 1: called Lenninger's bio chim. Rachel will Lynsky picked up Lenninger's 349 00:17:33,000 --> 00:17:37,320 Speaker 1: bio chim at Washington University long ago and is at 350 00:17:37,359 --> 00:17:41,639 Speaker 1: a sterling career in vaccination. Let me cut to the chase. 351 00:17:42,160 --> 00:17:44,879 Speaker 1: Is the head of the CDC. Is her job in 352 00:17:44,960 --> 00:17:50,639 Speaker 1: jeopardy this morning because of the communication that we've seen. Well, 353 00:17:50,680 --> 00:17:53,760 Speaker 1: I can't really comment on her job in jeopardy with 354 00:17:53,800 --> 00:17:58,240 Speaker 1: the administration. I do think that they really need to 355 00:17:58,400 --> 00:18:03,040 Speaker 1: do more coordination and across the government, across the administration, 356 00:18:03,440 --> 00:18:06,840 Speaker 1: and the CDC leader has important roles to play in that, 357 00:18:07,320 --> 00:18:11,359 Speaker 1: but isn't and shouldn't be the chief voice of the 358 00:18:11,440 --> 00:18:15,320 Speaker 1: policy decision. She needs really to be the scientific surveillance, 359 00:18:15,680 --> 00:18:19,479 Speaker 1: data driven voice. Uh and uh. And I think that 360 00:18:19,480 --> 00:18:22,160 Speaker 1: that as we all know, we've been living through an 361 00:18:22,240 --> 00:18:26,360 Speaker 1: enormous surge with a very infectious virus. The guidance has changed, 362 00:18:26,480 --> 00:18:30,440 Speaker 1: it needs to change. But the communications from the administration 363 00:18:30,480 --> 00:18:35,679 Speaker 1: as a whole in challenging this is critical because the 364 00:18:35,760 --> 00:18:40,440 Speaker 1: United Kingdom has provided leadership by Jettison as a general statement, PCR, 365 00:18:40,840 --> 00:18:43,639 Speaker 1: are you suggesting in the coming hours or may I 366 00:18:43,680 --> 00:18:46,680 Speaker 1: say days, that well, you'll see the US follow suit 367 00:18:46,800 --> 00:18:53,160 Speaker 1: in Jettison PCR certitude. Well, uh that I I don't 368 00:18:53,200 --> 00:18:55,399 Speaker 1: know for sure that that is going to happen. I 369 00:18:55,440 --> 00:18:58,879 Speaker 1: think that there is some evidence that's emerging about some 370 00:18:59,000 --> 00:19:01,399 Speaker 1: of the tests not picking up O macron, And we 371 00:19:01,440 --> 00:19:03,840 Speaker 1: have to remember that the way that O macron was 372 00:19:03,880 --> 00:19:07,160 Speaker 1: first really detected in South Africa was because of its 373 00:19:07,280 --> 00:19:11,560 Speaker 1: variants on PCR testing there. It's just such a very 374 00:19:11,640 --> 00:19:15,560 Speaker 1: variant virus um. The early studies that are suggesting the 375 00:19:15,680 --> 00:19:19,360 Speaker 1: rapid tests may not pick it up as efficiently are 376 00:19:19,440 --> 00:19:22,360 Speaker 1: not yet peer reviewed and they're relatively small, but that's 377 00:19:22,359 --> 00:19:24,800 Speaker 1: something we're really paying close attention to because of course, 378 00:19:24,840 --> 00:19:27,960 Speaker 1: people are relying on rapid testing at home to make 379 00:19:28,040 --> 00:19:32,240 Speaker 1: all kinds of decisions. Dr Byro, how close are we 380 00:19:32,760 --> 00:19:35,680 Speaker 1: from your estimations of getting more rapid tests and making 381 00:19:35,680 --> 00:19:37,800 Speaker 1: them available since this does seem to be the key 382 00:19:37,880 --> 00:19:41,600 Speaker 1: aspect kind of uh locking the hands of the CDC 383 00:19:41,840 --> 00:19:46,760 Speaker 1: to recommend that everybody get these before they emerge from isolation. Yeah. Yeah, 384 00:19:46,840 --> 00:19:50,560 Speaker 1: we were concerned a couple of weeks ago that the 385 00:19:50,640 --> 00:19:54,200 Speaker 1: increase in testing and the availability and the administration's planned 386 00:19:54,240 --> 00:19:57,120 Speaker 1: to make them free and more widely available was not 387 00:19:57,280 --> 00:20:00,159 Speaker 1: going to happen in time to deal with the holiday 388 00:20:00,160 --> 00:20:03,320 Speaker 1: is and the post holiday curves that we're seeing. And 389 00:20:03,400 --> 00:20:08,320 Speaker 1: unfortunately that's exactly what's happened. So, uh, the estimate is 390 00:20:08,400 --> 00:20:11,040 Speaker 1: roughly that by the third or fourth week of January 391 00:20:11,119 --> 00:20:14,080 Speaker 1: we should be coming out of this testing shortage, but 392 00:20:14,200 --> 00:20:16,879 Speaker 1: that again is not going to be in time to 393 00:20:17,040 --> 00:20:20,280 Speaker 1: deal with the post holiday waves of infection that we're seeing. 394 00:20:20,960 --> 00:20:23,120 Speaker 1: So we're going to have about two weeks where people 395 00:20:23,119 --> 00:20:26,680 Speaker 1: are still going to be frustrated, we won't have enough tests, 396 00:20:26,720 --> 00:20:28,040 Speaker 1: are going to be critical if you give me, if 397 00:20:28,040 --> 00:20:29,440 Speaker 1: you jumping in, So because we have a couple of 398 00:20:29,440 --> 00:20:31,199 Speaker 1: minutes left, you've touched on I think the heart of 399 00:20:31,200 --> 00:20:33,280 Speaker 1: the problem for a lot of people when they listen 400 00:20:33,320 --> 00:20:35,760 Speaker 1: to the CDC, am I listening to the science? Or 401 00:20:35,760 --> 00:20:38,520 Speaker 1: am I listening to some version, some convoluted version of 402 00:20:38,560 --> 00:20:41,480 Speaker 1: behavioral psychology. At the very start of this pandemic, we 403 00:20:41,560 --> 00:20:44,080 Speaker 1: were told the mass weren't that useful because we didn't 404 00:20:44,119 --> 00:20:45,760 Speaker 1: have that many masks, And now we're being told we 405 00:20:45,760 --> 00:20:48,359 Speaker 1: don't need to test out of isolation and learn. Behold, 406 00:20:48,400 --> 00:20:49,960 Speaker 1: we don't have many tests. And I'm trying to work 407 00:20:49,960 --> 00:20:53,640 Speaker 1: out whether the policy is shaped by scarce resources or science. 408 00:20:54,080 --> 00:20:56,679 Speaker 1: Which one is it? Doctor? Is this policy dictated by 409 00:20:56,680 --> 00:21:02,520 Speaker 1: scarce resources or science? Well, I'm afraid you're quite right, 410 00:21:02,640 --> 00:21:05,480 Speaker 1: that it's a mixed picture. Um, and that that I 411 00:21:05,480 --> 00:21:07,760 Speaker 1: think is part of the challenge with the communications. You 412 00:21:07,880 --> 00:21:11,879 Speaker 1: want it to be driven by science, but they're also 413 00:21:12,040 --> 00:21:15,760 Speaker 1: has been as kind of try to balance. The administration 414 00:21:15,760 --> 00:21:19,439 Speaker 1: has been trying to balance what the American people will tolerate. Uh. 415 00:21:19,480 --> 00:21:22,000 Speaker 1: And Uh. You know a great example of this is 416 00:21:22,040 --> 00:21:25,280 Speaker 1: that Tom alluded earlier to our lower testing rates than 417 00:21:25,320 --> 00:21:28,199 Speaker 1: other countries. That is really true. We're still only at 418 00:21:28,200 --> 00:21:32,439 Speaker 1: about sixty two sixty fully vaccinated. So what do we 419 00:21:32,520 --> 00:21:36,560 Speaker 1: do about mandating which many people would say the science supports, 420 00:21:36,640 --> 00:21:40,359 Speaker 1: but the politics of mandating vaccines in this country are 421 00:21:41,000 --> 00:21:44,399 Speaker 1: very challenging. Uh. And so that balance is what you 422 00:21:44,480 --> 00:21:48,480 Speaker 1: expect an administration of government to do. But what we 423 00:21:48,560 --> 00:21:50,919 Speaker 1: want to see from the c d C, of course, 424 00:21:51,160 --> 00:21:54,679 Speaker 1: is not that they are taking those political calculations, but 425 00:21:54,880 --> 00:21:58,439 Speaker 1: rather that they are really looking at what what is 426 00:21:58,480 --> 00:22:02,120 Speaker 1: the best evidence, and tracking that evidence as it changes 427 00:22:02,280 --> 00:22:06,399 Speaker 1: and communicating that indeed, Uh, there are going to be changes. 428 00:22:06,560 --> 00:22:09,600 Speaker 1: Like we've seen with amaricron. It is way more infectious, 429 00:22:09,680 --> 00:22:13,359 Speaker 1: probably twice as infectious as delta, but it does appear 430 00:22:13,359 --> 00:22:17,000 Speaker 1: to be producing less serious disease. The hospitals are jammed. 431 00:22:17,200 --> 00:22:20,040 Speaker 1: We are back on emergency standing here in Maryland and 432 00:22:20,080 --> 00:22:22,840 Speaker 1: in Baltimore, but the I c u s are not 433 00:22:22,960 --> 00:22:26,800 Speaker 1: as crowded and the people in intensive care are unvaccinated. 434 00:22:27,080 --> 00:22:30,639 Speaker 1: That hasn't changed. That's still the science. Doctor. Thank you 435 00:22:30,720 --> 00:22:32,480 Speaker 1: said you'll feel one. This is always vie until we 436 00:22:32,520 --> 00:22:34,359 Speaker 1: appreciate your time and of course the hot work that 437 00:22:34,440 --> 00:22:36,600 Speaker 1: you do every single day, Doctor Chris byre that of 438 00:22:36,680 --> 00:22:43,960 Speaker 1: John's helpkins Leland Miller. I've got fancy questions on the 439 00:22:44,000 --> 00:22:47,720 Speaker 1: electrical rate of China, of country of cities, and this 440 00:22:47,840 --> 00:22:50,720 Speaker 1: and that. Forget about it. All we care about is 441 00:22:50,760 --> 00:22:54,119 Speaker 1: in counting twenty nine days. There's an Olympics in Beijing. 442 00:22:55,240 --> 00:22:58,800 Speaker 1: As you look at the Beijing Olympics, what's the key 443 00:22:58,920 --> 00:23:05,760 Speaker 1: thing you are launching for politically for the Chinese elite, Well, 444 00:23:05,800 --> 00:23:08,679 Speaker 1: it always comes down to whether she is embarrassed or not. 445 00:23:08,840 --> 00:23:10,960 Speaker 1: And no one wants to embarrass sheet because it's bad 446 00:23:10,960 --> 00:23:13,639 Speaker 1: for their health. So they are going to be uh 447 00:23:14,040 --> 00:23:16,480 Speaker 1: putting in restrictions that don't you know, on a level 448 00:23:16,480 --> 00:23:19,000 Speaker 1: no one's ever seen before. They don't want any bad news. 449 00:23:19,200 --> 00:23:21,840 Speaker 1: They're expecting some outbreaks. But I guess that means grabbing 450 00:23:21,840 --> 00:23:23,560 Speaker 1: someone and throwing them in a room and for the 451 00:23:23,600 --> 00:23:26,919 Speaker 1: next fourteen days afterwards. You know, they don't want bad news. 452 00:23:27,640 --> 00:23:30,040 Speaker 1: The news coming out of the Olympics has to be 453 00:23:30,320 --> 00:23:32,880 Speaker 1: the Chinese Communist Party ran a tight ship and there 454 00:23:32,880 --> 00:23:36,080 Speaker 1: were no disasters and and so that's that's what they're expecting, 455 00:23:36,080 --> 00:23:40,480 Speaker 1: and that's what they better see. What does the backdrop 456 00:23:40,560 --> 00:23:43,360 Speaker 1: of the Beijing economy, and for that matter, the larger 457 00:23:43,480 --> 00:23:47,160 Speaker 1: Beijing economy is we have these Olympics is a thumb 458 00:23:47,240 --> 00:23:52,320 Speaker 1: up or thumbdown on the animal spirit of the region. Well, 459 00:23:52,480 --> 00:23:55,080 Speaker 1: it's interesting you term your question that way, because you know, 460 00:23:55,119 --> 00:23:57,199 Speaker 1: the Beijing economy is looking a little bit different than 461 00:23:57,200 --> 00:24:00,000 Speaker 1: the Chinese economy really large right now. You know, usually 462 00:24:00,240 --> 00:24:02,680 Speaker 1: you see when we look at this from a regional perspective, 463 00:24:02,720 --> 00:24:05,320 Speaker 1: you see the coasts having one type of performance and 464 00:24:05,359 --> 00:24:08,400 Speaker 1: the peripheries having another type of performance. It's very rare 465 00:24:08,480 --> 00:24:11,640 Speaker 1: that we see coastal provinces diverge dramatically. But but that's 466 00:24:11,640 --> 00:24:13,480 Speaker 1: what we're seeing right now. You know, the closer you 467 00:24:13,480 --> 00:24:15,439 Speaker 1: are to Beijing, the closer you are to you should pin, 468 00:24:15,720 --> 00:24:18,760 Speaker 1: the worse the performances. The more the COVID crackdowns are 469 00:24:18,960 --> 00:24:21,480 Speaker 1: and it's it's it's really really tight. You know, Guangdong 470 00:24:21,560 --> 00:24:23,920 Speaker 1: doing much better, Beijing not doing well at all. So 471 00:24:23,960 --> 00:24:26,199 Speaker 1: I think this is in preparation for the fact that 472 00:24:26,280 --> 00:24:30,760 Speaker 1: everybody is so nervous about the Olympics. Well, and when 473 00:24:30,760 --> 00:24:33,800 Speaker 1: you talk about the COVID zero policy, how does China 474 00:24:33,880 --> 00:24:36,560 Speaker 1: ever realistically open its borders if they maintain it, And 475 00:24:36,600 --> 00:24:41,280 Speaker 1: what's going to press its hand to finally give up? Well, Look, 476 00:24:41,320 --> 00:24:44,560 Speaker 1: I think either you know, COVID gets brought under control 477 00:24:44,560 --> 00:24:48,679 Speaker 1: on a global, global basis, and the pill works the 478 00:24:49,040 --> 00:24:51,960 Speaker 1: you know, some vaccine just cures COVID for the most part, 479 00:24:51,960 --> 00:24:54,600 Speaker 1: it turns into a seasonal flu or you know, the 480 00:24:54,640 --> 00:24:57,880 Speaker 1: government gets past the Olympics, gets past the party Congress 481 00:24:57,880 --> 00:24:59,360 Speaker 1: at the end of the year, when when she will 482 00:24:59,400 --> 00:25:01,920 Speaker 1: get you know, re coordinated for yet another term or 483 00:25:02,240 --> 00:25:04,800 Speaker 1: or or life term. Uh, and then they have less 484 00:25:04,800 --> 00:25:06,600 Speaker 1: to worry about. So maybe they open up a bit 485 00:25:06,640 --> 00:25:09,800 Speaker 1: because they value the economic issues more than they do 486 00:25:09,880 --> 00:25:13,680 Speaker 1: the you know, the COVID, the COVID one policy, zero 487 00:25:13,720 --> 00:25:16,159 Speaker 1: COVID policy. So a lot of things can happen, but 488 00:25:16,200 --> 00:25:18,399 Speaker 1: it's gonna be very difficult to change course in the 489 00:25:18,440 --> 00:25:20,720 Speaker 1: coming months. Considering how important the end of the year is. 490 00:25:22,240 --> 00:25:23,920 Speaker 1: One of the reasons why I always love speaking with you, 491 00:25:24,000 --> 00:25:26,840 Speaker 1: Leland is you have the on the ground facts about 492 00:25:26,880 --> 00:25:30,679 Speaker 1: the different economic policies that we hear from Chinese officials. 493 00:25:30,920 --> 00:25:34,400 Speaker 1: We've heard that they are talking about easing policy. We've 494 00:25:34,440 --> 00:25:36,399 Speaker 1: heard that they want to expand lending a little bit 495 00:25:36,400 --> 00:25:40,760 Speaker 1: to support the development the housing development UH sector. As 496 00:25:40,800 --> 00:25:43,320 Speaker 1: we see all of the turmoil there, you're saying, it's 497 00:25:43,359 --> 00:25:46,359 Speaker 1: not actually happening. Can you give us a sense of 498 00:25:46,400 --> 00:25:50,639 Speaker 1: what is happening in terms of tightness of their policy. 499 00:25:50,840 --> 00:25:53,800 Speaker 1: Everyone's getting ahead of themselves because you know, one was 500 00:25:53,800 --> 00:25:57,640 Speaker 1: an extremely tight year. Two is a politically sensitive year. 501 00:25:57,720 --> 00:26:00,280 Speaker 1: You have the Olympics, you have particularly the Party Congress, 502 00:26:00,600 --> 00:26:02,920 Speaker 1: so everyone sort of knows the policy isn't gonna get 503 00:26:02,920 --> 00:26:05,359 Speaker 1: eased one way or another, maybe modeling or not. And 504 00:26:05,400 --> 00:26:07,119 Speaker 1: they're getting ahead of themselves. They want to be the 505 00:26:07,160 --> 00:26:09,679 Speaker 1: first one to announce, whether it's a media publication or 506 00:26:09,680 --> 00:26:12,879 Speaker 1: a self side pamphlet on Wall Street saying, look, easing 507 00:26:12,960 --> 00:26:15,800 Speaker 1: is happening. Look at easy. It's not happening yet, Now 508 00:26:15,800 --> 00:26:17,919 Speaker 1: do we expect it? Sure, they're gonna have to boost 509 00:26:18,000 --> 00:26:21,399 Speaker 1: sentiment sometime in two if they don't like the data, 510 00:26:22,040 --> 00:26:23,920 Speaker 1: things are gonna have to get better. But right now 511 00:26:23,960 --> 00:26:26,520 Speaker 1: we're looking at borrowing numbers which are similar to the 512 00:26:26,600 --> 00:26:30,239 Speaker 1: lows of We're seeing pent up demand numbers which are 513 00:26:30,280 --> 00:26:32,760 Speaker 1: similar to the lows of one, which are the lowest 514 00:26:32,840 --> 00:26:34,840 Speaker 1: levels we've ever seen in the history of the China 515 00:26:34,880 --> 00:26:38,560 Speaker 1: based book survey. So the idea property too. We saw 516 00:26:38,600 --> 00:26:40,439 Speaker 1: a little bit of easy in November and they reversed 517 00:26:40,480 --> 00:26:43,120 Speaker 1: in December. So this idea that people can say, look, 518 00:26:43,119 --> 00:26:45,760 Speaker 1: there's easy going on because we expect easy, it's not 519 00:26:46,160 --> 00:26:51,040 Speaker 1: happening yet. Leela Miller, I want to go back to 520 00:26:51,040 --> 00:26:53,760 Speaker 1: your work at Oxford, were the wonderful Steve Saying is 521 00:26:53,880 --> 00:26:57,040 Speaker 1: truly expert in the culture of the fabric of Hong Kong. 522 00:26:57,640 --> 00:27:00,520 Speaker 1: If you were to advise our listeners and viewers who 523 00:27:00,560 --> 00:27:04,280 Speaker 1: are Western banks, what would you say them about where 524 00:27:04,320 --> 00:27:07,520 Speaker 1: Hong Kong will be in five years and how they 525 00:27:07,560 --> 00:27:11,879 Speaker 1: need to adapt. Well, all the problems with Hong Kong, 526 00:27:12,200 --> 00:27:14,639 Speaker 1: basically that it's being taken over by mainland China and 527 00:27:14,680 --> 00:27:17,800 Speaker 1: becoming just to their Chinese colony, have been exacerbated by 528 00:27:17,880 --> 00:27:20,879 Speaker 1: COVID with with these quarantines and so you know, you 529 00:27:21,280 --> 00:27:23,960 Speaker 1: can't talk to someone who's going unless you're Jamie Diamond. 530 00:27:24,040 --> 00:27:25,680 Speaker 1: You can't talk to anyone who goes in and out 531 00:27:25,680 --> 00:27:27,879 Speaker 1: of Hong Kong and isn't being driven crazy with these 532 00:27:27,920 --> 00:27:30,880 Speaker 1: quarantine rules. Uh, it's it's not a way to do business. 533 00:27:30,880 --> 00:27:35,040 Speaker 1: So the the island has a has a historically important 534 00:27:35,040 --> 00:27:38,639 Speaker 1: position geographically, it's important. But there's no way that Hong 535 00:27:38,680 --> 00:27:41,720 Speaker 1: Kong is gonna be disimportant in five years. It's it's 536 00:27:41,800 --> 00:27:44,280 Speaker 1: it's it's declining every year. You know. It's it's it's 537 00:27:44,280 --> 00:27:46,840 Speaker 1: becoming two Chinese. It's becoming too closed, it's too hard 538 00:27:46,840 --> 00:27:49,639 Speaker 1: to travel to. Uh. It's it's a sad said story. 539 00:27:50,040 --> 00:27:52,800 Speaker 1: L La Milla. Thank you, sir as always just fantastic 540 00:27:52,840 --> 00:27:55,160 Speaker 1: in science of what's happening in the world. Second launched 541 00:27:55,160 --> 00:27:59,119 Speaker 1: Economy the China Basebook, Lie La Milla. This is the 542 00:27:59,160 --> 00:28:03,040 Speaker 1: Bloomberg Surveying on podcast. Thanks for listening. Join us live 543 00:28:03,240 --> 00:28:07,000 Speaker 1: weekdays from seven to ten am Eastern on Bloomberg Radio 544 00:28:07,200 --> 00:28:10,800 Speaker 1: and on Bloomberg Television each day from six to nine 545 00:28:10,880 --> 00:28:15,280 Speaker 1: am for insight from the best in economics, finance, investment, 546 00:28:15,440 --> 00:28:20,439 Speaker 1: and international relations. And subscribe to the Surveillance podcast, on 547 00:28:20,560 --> 00:28:24,359 Speaker 1: Apple Podcast, SoundCloud, Bloomberg dot com, and of course on 548 00:28:24,480 --> 00:28:28,600 Speaker 1: the Terminal. I'm Tom Keene, and this is Bloomberg.