Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot
Speaker 1: Com and of course on the Bloomberg terminal. We are
Speaker 1: thrilled to bring you someone with a lot of experience
Speaker 1: and looking at by the way yield moves and price moves.
Speaker 1: Gregory Staples joins us to stays with DWS barely described
Speaker 1: his career out of Columbia Economics with Mutual of New
Speaker 1: York and also with Deutsche Bank with a tenure of
Speaker 1: duty there as well. Greg honored to have you on
Speaker 1: with us today. Buried in your note is the shock
Speaker 1: of shocks. This is something John Farrell's provided leadership on
Speaker 1: within the media, and that is the German yield and
Speaker 1: the id yeah that we may finally get a positive
Speaker 1: ten year German yield back to the normality of early
Speaker 1: two thousand nineteen. What will that signal to Europe? What
Speaker 1: will that signal to the fixed income markets? You know, Tom,
Speaker 1: thanks for the comments. It's gonna be pretty tricky. What's
Speaker 1: interesting today, of course, is that the global sell off
Speaker 1: and rates that started in the U S seems to
Speaker 1: be spreading globally. And yes, indeed the tenure boot was
Speaker 1: last trading positive I think in April of two thousand
Speaker 1: and nineteen, more within a stone throw of that right now,
Speaker 1: and we think it truly gets there, you know, until
Speaker 1: the the u c B actually starts to move away
Speaker 1: from their p E p P program and their A
Speaker 1: p P program they're actively doing quantitative using. It's gonna
Speaker 1: be hard for European fixed income rates to go much
Speaker 1: higher than that. My money is going to flow into
Speaker 1: the higher yielding US. But I do think that there's
Speaker 1: a potential for a basis between US ten ures and
Speaker 1: tenure boots to go. Is why does two dred basis
Speaker 1: points you know right now where maybe at one and
Speaker 1: certainly they're much north of that. It's going to be
Speaker 1: hard because of the flows come out of Europe into
Speaker 1: the United States. This is so so so important, folks.
Speaker 1: It's not as simplistic the dynamics here, not the static analysis,
Speaker 1: the dynamic analysis. What is the behavior greg as we
Speaker 1: move to a higher yield regime describe those flows in
Speaker 1: the decision tree that people make when they step into
Speaker 1: the market given higher yield. Well from a global perspective,
Speaker 1: of course, there with the question is do they want
Speaker 1: to take currency risk? And the currency hedging component of
Speaker 1: is is very significant. You're not gonna go naked currency
Speaker 1: if you feel like you're going to give up on
Speaker 1: the currency trade, which you get on yield suffer has
Speaker 1: actually been pretty positive. You're able to still invest in
Speaker 1: US dollar and head your currency risk and come up
Speaker 1: with something that's considerably above what you're getting from global rates.
Speaker 1: So I think as long as that holds, it's going
Speaker 1: to suppress the U S rates from going too high
Speaker 1: too quickly. I think what's interesting over in Europe is
Speaker 1: they're not just facing higher inflation, but obviously underneath that
Speaker 1: support for the Italian government deficits. It's not as if
Speaker 1: the ECB can immediately step away from their programs because
Speaker 1: if they do, they potentially put Italian BTPs into some
Speaker 1: risk as to who it's going to take that debt
Speaker 1: down as well. So the flow is where do you
Speaker 1: get the highest deeld globally and our currency hedged basis
Speaker 1: right now, that's the United States, Greg, can you walk
Speaker 1: me through your expectations for the e CP, say against
Speaker 1: the Federal Reserve. This FEN looks like it's ready to
Speaker 1: go in March. Does that make it harder easier for
Speaker 1: the CCP to wait? I think it makes it very
Speaker 1: much harder. I mean, I think inflation is still rising
Speaker 1: over in in Germany. We saw some prints today that
Speaker 1: make you think the economy there is is coming out
Speaker 1: pretty pretty strongly. So the code for the the CP
Speaker 1: for so long has been continue to support the markets
Speaker 1: with open market purchases, continue to have a negative policy rate.
Speaker 1: They're going to be under some considerable pressure in two
Speaker 1: to lift the p E p P. I think that's
Speaker 1: going to happen in March. And then the question is
Speaker 1: to what degree did they taper down the open market
Speaker 1: purchases going forward under the APP program. I think they've
Speaker 1: got to consider accelerating and given what Defen has been
Speaker 1: doing full basis points away from that zero level on
Speaker 1: a German ten year As you know, Greg, just the
Speaker 1: experience of US all over the last ten years looking
Speaker 1: at European debt markets. It's what happens in Italy that
Speaker 1: counts here now in America we're talking about the prospect
Speaker 1: of time of financial conditions and the ability or inability
Speaker 1: of the Federal Reserve to step back. Does the ECB
Speaker 1: have any capacity to maintain easy financing conditions for places
Speaker 1: like Italy, and do they move away and ultimately does
Speaker 1: this European bond market trade like a sovereign or a
Speaker 1: credit greg which one within the Europe that's a very
Speaker 1: very good question. To what degree can they pull back
Speaker 1: and not destabilize the periphery Italy in particular, And it's
Speaker 1: going to be difficult, difficult, difficult to do. I think
Speaker 1: it's gonna be next to the two. Obviously, there's the
Speaker 1: sovereigns in the northern countries. It's the sovereigns as they
Speaker 1: try and nationalize the DAD and some of those programs
Speaker 1: that they instituted after the COVID spread through their last year.
Speaker 1: But they're still concerned about what Italy is going to
Speaker 1: be able to do if indeed the CCP pulls back
Speaker 1: from their purchases, that part of the market becomes a credit.
Speaker 1: Just want to watch for a close line. Greg gonna
Speaker 1: catch ups the grows staples there of DWS Group joining
Speaker 1: us now to discuss Sema Sha, chief vlobal market strategist
Speaker 1: of Principal Global Investors. Seema, it's one day. It's one
Speaker 1: day of a pretty violent move lower on the nav
Speaker 1: stack and in particular pocket to this market off the
Speaker 1: back of what we saw in the FED minutes. Is
Speaker 1: that one day a flavor of what we can expect
Speaker 1: in two. I think it gives us an insight into
Speaker 1: the kind of volatility that we should anticipate going into two.
Speaker 1: You know, we have, of course, we have inflation still
Speaker 1: very much elevated, so that's putting through some of the
Speaker 1: concerns that we had in one right into two. And
Speaker 1: then on top of that, of course we have all
Speaker 1: of the FED moves. You're getting tapering, you're getting rate
Speaker 1: high because potentially balancily runoff all in one year. So
Speaker 1: of course this is going to be a volatile year,
Speaker 1: and I think investors have to be really prepared for
Speaker 1: the kind of movies that we have to we might
Speaker 1: be soon, Sema, within your very thought, all note, there's
Speaker 1: not the idea of a surprise of two thousand and
Speaker 1: twenty two, which would be a more resilient higher inflation.
Speaker 1: Are we changing our probabilities right now? And do we
Speaker 1: need to game in with a nominal rate move a
Speaker 1: more resilient higher inflation. Yeah. It's interesting with the inflation story.
Speaker 1: You know, we do see inflation coming down from the
Speaker 1: levels that we've become accustomed to in the last two
Speaker 1: or three months. But at the same time, although it's
Speaker 1: coming down, we're still likely to see inflation settling at
Speaker 1: a level which is higher than what we've seen over
Speaker 1: the last ten years. Right. So this is a kind
Speaker 1: of the above the two percent target, and it's something
Speaker 1: that the Fed inevitably has got to respond to. Um.
Speaker 1: And when we think about inflation, I think from an
Speaker 1: investment perspective, the key story here is, as you were
Speaker 1: saying before, it's about real rates. You know, what has
Speaker 1: happened to that. One of the debates that we have
Speaker 1: on our team time and time again is will we ever,
Speaker 1: you know, will the Fed really permit real yields to
Speaker 1: get back into positive territory and how the markets respond
Speaker 1: We go through this time and time again. Um. And
Speaker 1: you know, of course recently with this jump up in
Speaker 1: real yields, is it's a question which is maybe getting
Speaker 1: a little bit closer. Okay, but let's take it to
Speaker 1: principal global in your institutional client, Tell if we get
Speaker 1: some form of final movement and real yields even to
Speaker 1: a lesser negative for even excuse me, the plague a
Speaker 1: positive statistic sema. If we get that move what does
Speaker 1: it mean for earnings in the animal spirits or corporations?
Speaker 1: Don't they do pretty well in a higher nominal yield environment?
Speaker 1: You know this, It's such I'm glad you said this point,
Speaker 1: because look, when we think about ectily is are going
Speaker 1: to think about rates, but we're also going to think
Speaker 1: about earnings. And the outlook that we have for two
Speaker 1: is still a very solid recovery. It's still a very
Speaker 1: strong economic environment. We can look at the labor market performance,
Speaker 1: we look at the demand, the continuous demold, and actually
Speaker 1: we do see supply constraints easing through the years of
Speaker 1: manufacturing should hopefully get a bit of a boost come
Speaker 1: into the second half of the year. So with all
Speaker 1: of that in mind, actually earnings growth stays positive. It's
Speaker 1: not as strong as one certainly, but it's still quite positive.
Speaker 1: And against that backdrop, you may not see exuties doing
Speaker 1: extremely well, but we do continue to see positive returns
Speaker 1: based of that still solid and its recovery CMA. This
Speaker 1: is the reason why so many people are hiding out
Speaker 1: in the reflationary stocks, in particular the banks and other
Speaker 1: some consumer discressionaries as well. When do you lean against
Speaker 1: the mood right now and catch the falling knife that
Speaker 1: is big tech, especially after hedge funds just had the
Speaker 1: most violent pout of selling for the past four sessions
Speaker 1: going back more than ten years in Golbyn Sack's data. Yeah,
Speaker 1: you know, so we have continued to hold um some
Speaker 1: of our overweight positions to big tech. We have been
Speaker 1: really in favor of making cut tech for a while.
Speaker 1: We continue to hold onto that even us conditions for
Speaker 1: tech become more challenging and we have to we have
Speaker 1: to recognize the look bond deals are biased higher. We
Speaker 1: don't think they're going to move significantly higher. And this
Speaker 1: is key because we do see inflation coming down through
Speaker 1: this year to a two and a half or several level.
Speaker 1: We're definitely not see it. They're kind of five continuing
Speaker 1: throughout this year. Um, So we we have that forecast.
Speaker 1: Now as we're thinking through big tech, we have to
Speaker 1: at the cyclical environment as well. You know that the
Speaker 1: work from home that kind of thing it's gone. So
Speaker 1: actually the cyclical environment is not in favor of big tech.
Speaker 1: But from an investment perspective, we also have to think
Speaker 1: about the long term and you want to be looking
Speaker 1: at companies which have got those big balan sheets and
Speaker 1: can continue to deliver earnings. So we actually still think
Speaker 1: it makes sense to have an allocation to big tech
Speaker 1: somethin not as big as we've had in recent years,
Speaker 1: but we still think it's an air of defense within
Speaker 1: the portfolio, which makes sense in a year which continues
Speaker 1: to be challenging. But at the same time, look mega cap,
Speaker 1: whether it's growth, whether it's value. I think that's what's
Speaker 1: key um and with rising heels and maybe that actually
Speaker 1: mega very large banks is probably the area that we
Speaker 1: could see some rotation towards this. Yeah, seem can we
Speaker 1: finish on a tricky one? What would you buy and
Speaker 1: hold through the rest of this year? The FOOTS one
Speaker 1: D or the SMP five hundred Sea of principal Global Investors?
Speaker 1: Thank you. Tom Pauselli joins us now the chief US
Speaker 1: economist at RBC Capital Markets. Tom, I just want you
Speaker 1: to spend a moment to describe how strange this moment
Speaker 1: is for this Federal Reserve a conversation about accelerating balance
Speaker 1: sheet reduction just as they're still building up the balance
Speaker 1: sheet and buying bonds through March. Tom makes sense of
Speaker 1: it all for us. Yeah, well, first of all, good morning,
Speaker 1: good to see you all. Um. You know, look, I
Speaker 1: would say that it is it strange. I mean, you know,
Speaker 1: I think I think we all need to keep in
Speaker 1: mind something we have a sample of one, right, I mean,
Speaker 1: we write, you know, the words, they did this one
Speaker 1: other time. It's not like we have a rich history
Speaker 1: of Hey, this is how it's happened in the past.
Speaker 1: I mean, they didn't one other time. And that one
Speaker 1: other time I think was wildly different in terms of
Speaker 1: the economic backdrop than than what we're enduring right now.
Speaker 1: And I think that's the that's the difference. So it
Speaker 1: may seem like stark contrast um their approach, but so
Speaker 1: is the economic backdrop. So I I don't I don't
Speaker 1: know that we should be so over overly surprised by this. Well,
Speaker 1: we should be looking at the data, that's what they say,
Speaker 1: although it's unclear what data they have been looking at
Speaker 1: for the past six months that suddenly liked their pivot recently,
Speaker 1: and as we march toward that job's figure tomorrow, I mean,
Speaker 1: as we marched toward the jobs figure tomorrow, I do
Speaker 1: wonder if there is a threshold at which, if the
Speaker 1: participation rate does not increase, or the job's number is
Speaker 1: a very big one, if that could actually force the
Speaker 1: Fed's hand earlier, or if it's not necessarily going to
Speaker 1: be that impactful. Yeah, I mean, look, I yeah, it's
Speaker 1: a it's a great question, and Lissa, I think, um,
Speaker 1: you know, the way you framed it, I think is perfect. Um,
Speaker 1: the way you set up this question is perfect. Look,
Speaker 1: you know the I think we all sort of appreciator,
Speaker 1: hopefully we will appreciate that the pair will report has
Speaker 1: been plagued by a seasonal adjustment issues or sampling issues,
Speaker 1: whatever the issue might be. I think we all recognize
Speaker 1: that there's some, um uh, you know, a bit of
Speaker 1: an additional quirkiness to what was already a pretty quirky report.
Speaker 1: What we do know is that a DP just printed
Speaker 1: eight hundred thousand jobs, right, Um, you know, the an
Speaker 1: assortment of different labor market metrics, including the claims data
Speaker 1: that just came out, continue to drive home. But the
Speaker 1: labor market is tight. I mean there's you know, there's
Speaker 1: really no way to get the sort of the meaningfully
Speaker 1: higher wage profile that we have in place than to
Speaker 1: have a really tight labor market. So with older respected
Speaker 1: tomorrow's report, I don't know that it really makes a
Speaker 1: difference in the world. UM. I think what we know
Speaker 1: is that the preponderance of data UM from the labor
Speaker 1: market perspective really drives home. Tight labor markets are here,
Speaker 1: wage pressures will continue, UM, And I think that's the
Speaker 1: thing that will keep the Fed engaged in part what
Speaker 1: you just said is important. Do you think that markets
Speaker 1: are under appreciating how much wages you think will rise
Speaker 1: later this year? Yeah? Look, you know one of the
Speaker 1: things that that that we've said, and we just wrote
Speaker 1: this in our Year Ahead, is you know what what
Speaker 1: some of the pressure that we're seeing from a wage
Speaker 1: perspective will actually ease. Now, I want to be clear
Speaker 1: on what that means, right, and a nuanced idea we're
Speaker 1: running right now. If you just there's countless measures of wages.
Speaker 1: One of them is averagarily learnings. I happen to hate
Speaker 1: that measure, but everyone seems to know it. So let's
Speaker 1: talk about that that right now is running around a
Speaker 1: six percent page. What we think happens as the year progresses,
Speaker 1: as you know, as sort of you know, look, it's
Speaker 1: gonna be a slower growth year. UM. It's still gonna
Speaker 1: be a really good year, but it's gonna be slower
Speaker 1: growth verst last year. UM. And so what we expect
Speaker 1: is going to happen is that some of the heat
Speaker 1: will come out of um a job opening space, which
Speaker 1: will take something heat out of wages. Wages will still
Speaker 1: remain elevated, and I want to be very very clear
Speaker 1: on that. But they're not gonna be running at a
Speaker 1: six percent page. We think that they'll probably be running
Speaker 1: closer to a four or five percent page. Again, I
Speaker 1: think that that's a very important nuanced idea that needs
Speaker 1: to be sort of understood. You're still looking at a
Speaker 1: really good labor backdrop, labor that's gonna tighten over the
Speaker 1: coming um a year relative to where we are now.
Speaker 1: But think about this pair overport right, This is again
Speaker 1: another great example we have been printing one on Assuming
Speaker 1: you know, the number comes in close to what we're
Speaker 1: predicting for tomorrow. We averaged what five and fifty thousand
Speaker 1: jobs per month in one, which is a staggering number. Obviously,
Speaker 1: given you know what has happened, it's not that surprising.
Speaker 1: But as we look at twenty two, you're not gonna
Speaker 1: average fifty jobs. You're probably gonna average half of that
Speaker 1: um per month over the over the years. So I
Speaker 1: think that's again another important way of thinking about where
Speaker 1: we are from the labor market perspective time. Your initial
Speaker 1: acclaim was on analysis of the wage growth in the
Speaker 1: many wage growth of America. What's the character of our
Speaker 1: wage growth this time around when you look at labor
Speaker 1: ability to negotiate a higher wage, the almost social aspects,
Speaker 1: so that what's the character of our two thousand twenty
Speaker 1: five wage growth? Yeah, so you know, one of the
Speaker 1: things that you know, as as I look at two
Speaker 1: is a little too far far from me in the forecast,
Speaker 1: but but in the current, in the in the sort
Speaker 1: of the current context and over the course of the year,
Speaker 1: and I think you've been into next year. I think
Speaker 1: it's very fair. You know. One of the things that's
Speaker 1: been very interesting is if you look at the sort
Speaker 1: of the wage pressures that are in different segments of
Speaker 1: the labor backdrop, and there's again, countless ways of capturing
Speaker 1: the essence of that. I think one way of looking
Speaker 1: at that is to look at job leavers first, job
Speaker 1: stairs UM, and I think this sort of doves tails
Speaker 1: dovetails with the conversation you all were having a little earlier.
Speaker 1: You know, it's been it's interesting to see, right, it's
Speaker 1: you know, do people have um the ability to sort
Speaker 1: of demand more from a wage perspective. I mean, on
Speaker 1: the face of it, they do, because if you look
Speaker 1: at what job leavers, people that leave a job to
Speaker 1: take another job, if you look at their their wage
Speaker 1: rate UM in percentage terms relative to job stayers. So
Speaker 1: people who stay um, the levers are are their wage
Speaker 1: rate is running a full percentage point more. UM. So
Speaker 1: I do. I do think that there's real scope for
Speaker 1: wage pressures to remain fairly elevated. In the context of
Speaker 1: again everything that we're talking about, you do, you are
Speaker 1: going to have a tight little type. It's not like
Speaker 1: we're waiting for tight labor market. It's it's already here.
Speaker 1: And I would argue it's been here. There's something we've
Speaker 1: been talking about for for for quite a number of
Speaker 1: months now. I mean, we we've put out quite a
Speaker 1: number of metrics that show some internal metrics that really
Speaker 1: show that labor market is tight, and we expect that
Speaker 1: that will remain that way over the balance of the year.
Speaker 1: So I think there's real scope for wage pressures to
Speaker 1: remain incredibly bulliant, even if some of the heat comes
Speaker 1: off a bit relative to where we are now. Tell
Speaker 1: me you produce some of our favorite research on the
Speaker 1: economy here in America. Thank you, SURF a band with
Speaker 1: US tempo selling of MBC capital markets coming into that
Speaker 1: Prince Tomorrow. We've been trying to find excellence in medical
Speaker 1: voices and we do that now with Christian Brier. He's
Speaker 1: with Johns Hopkins University, truly expert on Thailand and expert
Speaker 1: on the epidemiology of frontier economies. Dr Bryer, honor that
Speaker 1: you could attend with us today. There is a point,
Speaker 1: Dr Brier, where there is a divide, and I would
Speaker 1: say the divide was a textbook Morrison and Boyd in
Speaker 1: organic chemistry, and there was a modest book in biochemistry
Speaker 1: called Lenninger's bio chim. Rachel will Lynsky picked up Lenninger's
Speaker 1: bio chim at Washington University long ago and is at
Speaker 1: a sterling career in vaccination. Let me cut to the chase.
Speaker 1: Is the head of the CDC. Is her job in
Speaker 1: jeopardy this morning because of the communication that we've seen. Well,
Speaker 1: I can't really comment on her job in jeopardy with
Speaker 1: the administration. I do think that they really need to
Speaker 1: do more coordination and across the government, across the administration,
Speaker 1: and the CDC leader has important roles to play in that,
Speaker 1: but isn't and shouldn't be the chief voice of the
Speaker 1: policy decision. She needs really to be the scientific surveillance,
Speaker 1: data driven voice. Uh and uh. And I think that
Speaker 1: that as we all know, we've been living through an
Speaker 1: enormous surge with a very infectious virus. The guidance has changed,
Speaker 1: it needs to change. But the communications from the administration
Speaker 1: as a whole in challenging this is critical because the
Speaker 1: United Kingdom has provided leadership by Jettison as a general statement, PCR,
Speaker 1: are you suggesting in the coming hours or may I
Speaker 1: say days, that well, you'll see the US follow suit
Speaker 1: in Jettison PCR certitude. Well, uh that I I don't
Speaker 1: know for sure that that is going to happen. I
Speaker 1: think that there is some evidence that's emerging about some
Speaker 1: of the tests not picking up O macron, And we
Speaker 1: have to remember that the way that O macron was
Speaker 1: first really detected in South Africa was because of its
Speaker 1: variants on PCR testing there. It's just such a very
Speaker 1: variant virus um. The early studies that are suggesting the
Speaker 1: rapid tests may not pick it up as efficiently are
Speaker 1: not yet peer reviewed and they're relatively small, but that's
Speaker 1: something we're really paying close attention to because of course,
Speaker 1: people are relying on rapid testing at home to make
Speaker 1: all kinds of decisions. Dr Byro, how close are we
Speaker 1: from your estimations of getting more rapid tests and making
Speaker 1: them available since this does seem to be the key
Speaker 1: aspect kind of uh locking the hands of the CDC
Speaker 1: to recommend that everybody get these before they emerge from isolation. Yeah. Yeah,
Speaker 1: we were concerned a couple of weeks ago that the
Speaker 1: increase in testing and the availability and the administration's planned
Speaker 1: to make them free and more widely available was not
Speaker 1: going to happen in time to deal with the holiday
Speaker 1: is and the post holiday curves that we're seeing. And
Speaker 1: unfortunately that's exactly what's happened. So, uh, the estimate is
Speaker 1: roughly that by the third or fourth week of January
Speaker 1: we should be coming out of this testing shortage, but
Speaker 1: that again is not going to be in time to
Speaker 1: deal with the post holiday waves of infection that we're seeing.
Speaker 1: So we're going to have about two weeks where people
Speaker 1: are still going to be frustrated, we won't have enough tests,
Speaker 1: are going to be critical if you give me, if
Speaker 1: you jumping in, So because we have a couple of
Speaker 1: minutes left, you've touched on I think the heart of
Speaker 1: the problem for a lot of people when they listen
Speaker 1: to the CDC, am I listening to the science? Or
Speaker 1: am I listening to some version, some convoluted version of
Speaker 1: behavioral psychology. At the very start of this pandemic, we
Speaker 1: were told the mass weren't that useful because we didn't
Speaker 1: have that many masks, And now we're being told we
Speaker 1: don't need to test out of isolation and learn. Behold,
Speaker 1: we don't have many tests. And I'm trying to work
Speaker 1: out whether the policy is shaped by scarce resources or science.
Speaker 1: Which one is it? Doctor? Is this policy dictated by
Speaker 1: scarce resources or science? Well, I'm afraid you're quite right,
Speaker 1: that it's a mixed picture. Um, and that that I
Speaker 1: think is part of the challenge with the communications. You
Speaker 1: want it to be driven by science, but they're also
Speaker 1: has been as kind of try to balance. The administration
Speaker 1: has been trying to balance what the American people will tolerate. Uh.
Speaker 1: And Uh. You know a great example of this is
Speaker 1: that Tom alluded earlier to our lower testing rates than
Speaker 1: other countries. That is really true. We're still only at
Speaker 1: about sixty two sixty fully vaccinated. So what do we
Speaker 1: do about mandating which many people would say the science supports,
Speaker 1: but the politics of mandating vaccines in this country are
Speaker 1: very challenging. Uh. And so that balance is what you
Speaker 1: expect an administration of government to do. But what we
Speaker 1: want to see from the c d C, of course,
Speaker 1: is not that they are taking those political calculations, but
Speaker 1: rather that they are really looking at what what is
Speaker 1: the best evidence, and tracking that evidence as it changes
Speaker 1: and communicating that indeed, Uh, there are going to be changes.
Speaker 1: Like we've seen with amaricron. It is way more infectious,
Speaker 1: probably twice as infectious as delta, but it does appear
Speaker 1: to be producing less serious disease. The hospitals are jammed.
Speaker 1: We are back on emergency standing here in Maryland and
Speaker 1: in Baltimore, but the I c u s are not
Speaker 1: as crowded and the people in intensive care are unvaccinated.
Speaker 1: That hasn't changed. That's still the science. Doctor. Thank you
Speaker 1: said you'll feel one. This is always vie until we
Speaker 1: appreciate your time and of course the hot work that
Speaker 1: you do every single day, Doctor Chris byre that of
Speaker 1: John's helpkins Leland Miller. I've got fancy questions on the
Speaker 1: electrical rate of China, of country of cities, and this
Speaker 1: and that. Forget about it. All we care about is
Speaker 1: in counting twenty nine days. There's an Olympics in Beijing.
Speaker 1: As you look at the Beijing Olympics, what's the key
Speaker 1: thing you are launching for politically for the Chinese elite, Well,
Speaker 1: it always comes down to whether she is embarrassed or not.
Speaker 1: And no one wants to embarrass sheet because it's bad
Speaker 1: for their health. So they are going to be uh
Speaker 1: putting in restrictions that don't you know, on a level
Speaker 1: no one's ever seen before. They don't want any bad news.
Speaker 1: They're expecting some outbreaks. But I guess that means grabbing
Speaker 1: someone and throwing them in a room and for the
Speaker 1: next fourteen days afterwards. You know, they don't want bad news.
Speaker 1: The news coming out of the Olympics has to be
Speaker 1: the Chinese Communist Party ran a tight ship and there
Speaker 1: were no disasters and and so that's that's what they're expecting,
Speaker 1: and that's what they better see. What does the backdrop
Speaker 1: of the Beijing economy, and for that matter, the larger
Speaker 1: Beijing economy is we have these Olympics is a thumb
Speaker 1: up or thumbdown on the animal spirit of the region. Well,
Speaker 1: it's interesting you term your question that way, because you know,
Speaker 1: the Beijing economy is looking a little bit different than
Speaker 1: the Chinese economy really large right now. You know, usually
Speaker 1: you see when we look at this from a regional perspective,
Speaker 1: you see the coasts having one type of performance and
Speaker 1: the peripheries having another type of performance. It's very rare
Speaker 1: that we see coastal provinces diverge dramatically. But but that's
Speaker 1: what we're seeing right now. You know, the closer you
Speaker 1: are to Beijing, the closer you are to you should pin,
Speaker 1: the worse the performances. The more the COVID crackdowns are
Speaker 1: and it's it's it's really really tight. You know, Guangdong
Speaker 1: doing much better, Beijing not doing well at all. So
Speaker 1: I think this is in preparation for the fact that
Speaker 1: everybody is so nervous about the Olympics. Well, and when
Speaker 1: you talk about the COVID zero policy, how does China
Speaker 1: ever realistically open its borders if they maintain it, And
Speaker 1: what's going to press its hand to finally give up? Well, Look,
Speaker 1: I think either you know, COVID gets brought under control
Speaker 1: on a global, global basis, and the pill works the
Speaker 1: you know, some vaccine just cures COVID for the most part,
Speaker 1: it turns into a seasonal flu or you know, the
Speaker 1: government gets past the Olympics, gets past the party Congress
Speaker 1: at the end of the year, when when she will
Speaker 1: get you know, re coordinated for yet another term or
Speaker 1: or or life term. Uh, and then they have less
Speaker 1: to worry about. So maybe they open up a bit
Speaker 1: because they value the economic issues more than they do
Speaker 1: the you know, the COVID, the COVID one policy, zero
Speaker 1: COVID policy. So a lot of things can happen, but
Speaker 1: it's gonna be very difficult to change course in the
Speaker 1: coming months. Considering how important the end of the year is.
Speaker 1: One of the reasons why I always love speaking with you,
Speaker 1: Leland is you have the on the ground facts about
Speaker 1: the different economic policies that we hear from Chinese officials.
Speaker 1: We've heard that they are talking about easing policy. We've
Speaker 1: heard that they want to expand lending a little bit
Speaker 1: to support the development the housing development UH sector. As
Speaker 1: we see all of the turmoil there, you're saying, it's
Speaker 1: not actually happening. Can you give us a sense of
Speaker 1: what is happening in terms of tightness of their policy.
Speaker 1: Everyone's getting ahead of themselves because you know, one was
Speaker 1: an extremely tight year. Two is a politically sensitive year.
Speaker 1: You have the Olympics, you have particularly the Party Congress,
Speaker 1: so everyone sort of knows the policy isn't gonna get
Speaker 1: eased one way or another, maybe modeling or not. And
Speaker 1: they're getting ahead of themselves. They want to be the
Speaker 1: first one to announce, whether it's a media publication or
Speaker 1: a self side pamphlet on Wall Street saying, look, easing
Speaker 1: is happening. Look at easy. It's not happening yet, Now
Speaker 1: do we expect it? Sure, they're gonna have to boost
Speaker 1: sentiment sometime in two if they don't like the data,
Speaker 1: things are gonna have to get better. But right now
Speaker 1: we're looking at borrowing numbers which are similar to the
Speaker 1: lows of We're seeing pent up demand numbers which are
Speaker 1: similar to the lows of one, which are the lowest
Speaker 1: levels we've ever seen in the history of the China
Speaker 1: based book survey. So the idea property too. We saw
Speaker 1: a little bit of easy in November and they reversed
Speaker 1: in December. So this idea that people can say, look,
Speaker 1: there's easy going on because we expect easy, it's not
Speaker 1: happening yet. Leela Miller, I want to go back to
Speaker 1: your work at Oxford, were the wonderful Steve Saying is
Speaker 1: truly expert in the culture of the fabric of Hong Kong.
Speaker 1: If you were to advise our listeners and viewers who
Speaker 1: are Western banks, what would you say them about where
Speaker 1: Hong Kong will be in five years and how they
Speaker 1: need to adapt. Well, all the problems with Hong Kong,
Speaker 1: basically that it's being taken over by mainland China and
Speaker 1: becoming just to their Chinese colony, have been exacerbated by
Speaker 1: COVID with with these quarantines and so you know, you
Speaker 1: can't talk to someone who's going unless you're Jamie Diamond.
Speaker 1: You can't talk to anyone who goes in and out
Speaker 1: of Hong Kong and isn't being driven crazy with these
Speaker 1: quarantine rules. Uh, it's it's not a way to do business.
Speaker 1: So the the island has a has a historically important
Speaker 1: position geographically, it's important. But there's no way that Hong
Speaker 1: Kong is gonna be disimportant in five years. It's it's
Speaker 1: it's it's declining every year. You know. It's it's it's
Speaker 1: becoming two Chinese. It's becoming too closed, it's too hard
Speaker 1: to travel to. Uh. It's it's a sad said story.
Speaker 1: L La Milla. Thank you, sir as always just fantastic
Speaker 1: in science of what's happening in the world. Second launched
Speaker 1: Economy the China Basebook, Lie La Milla. This is the
Speaker 1: Bloomberg Surveying on podcast. Thanks for listening. Join us live
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