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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferroll and Lisa Brownwitz Jaily, we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg Terminal. Right now, with

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Speaker 1: foreign Exchange, the global litmus paper for the system, Mark

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Speaker 1: Chandler joins us with Bannockburg in the chief market strategist. Mark,

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Speaker 1: thank you so much for joining us. What does strong

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Speaker 1: dollars signal for the equity market and for the fixed

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Speaker 1: income market? Yeah, it's been some ways, Tom, I think

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Speaker 1: that they both are all reflecting the same kind of thing.

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Speaker 1: And that is as Lisa was saying, is this incredible

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Speaker 1: divergence between what's happening in the United States and what's

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Speaker 1: happening in the other major in Dutch life countries and

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Speaker 1: in emerging markets. And I think nobody, no other country

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Speaker 1: has the political will or the wherewithal to use to

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Speaker 1: do what the US is doing fiscally, and the Federal

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Speaker 1: Reserve is more aggressive than other central banks and continue

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Speaker 1: to buy US bonds. Mark Chandler's diversions tradeable. I mean,

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Speaker 1: do you want convergence or divergence to get alpha? Well,

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Speaker 1: I think that in the short run, and we're still

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Speaker 1: in that short run is divergence is still the theme.

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Speaker 1: And we're gonna see this play out when we get

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Speaker 1: the final p m I readings from Europe starting later

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Speaker 1: this week. But the whole host of data, including that

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Speaker 1: Friday's US jobs data, I think that the key thing

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Speaker 1: here that that so far I haven't heard you at

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Speaker 1: least to speak about, and that is that even that

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Speaker 1: the bottom line here is a market is pushing back

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Speaker 1: against Fed ideas that they're not going to raise rates

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Speaker 1: until twenty until after after that jobs data before the weekend.

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Speaker 1: The euro dollar future is looking at the December is

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Speaker 1: already tried to get at least one hike, and you

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Speaker 1: can see this as well in the FED funds futures.

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Speaker 1: So I think this is an important thing, the market

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Speaker 1: pushing back against the feds more doubash views, and this

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Speaker 1: is what I think helping pick the dollar higher. And

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Speaker 1: this whole idea about UH stronger US growth continue to

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Speaker 1: be revised up, I think is really the key to

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Speaker 1: the US equity market. Well, do you get on this trademark.

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Speaker 1: Do you say that, yes, the Fed's gonna have to

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Speaker 1: capitulate to the market's view, or do you say, don't

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Speaker 1: fight the Fed and perhaps bet against this stronger, taller trade. Well,

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Speaker 1: I think it's a bit a little bit early to

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Speaker 1: bet against the dollar trade. But here's where I think

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Speaker 1: is gonna happen. I think that the Fed has given

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Speaker 1: us a uh sort of the bar for when they're

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Speaker 1: gonna begin tapering, and they say when there's significant progress

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Speaker 1: towards its goals. We had almost a one million jobs

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Speaker 1: being created last month. The early call for the April report,

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Speaker 1: which we don't get until early next month, is for

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Speaker 1: another million jobs. So that means by the time the

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Speaker 1: Federal Reserve meets in June, the US economy would have

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Speaker 1: created something on the magnitude of two to two and

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Speaker 1: a half million jobs. I think that could meet the

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Speaker 1: fence UH litmus test. And by that time we're gonna

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Speaker 1: get inflation above two percent as the base effect from

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Speaker 1: last year's deflation drops out of the year over year comparisons. Wait,

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Speaker 1: so you're saying that you do think that the federal

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Speaker 1: actually have to high grates before when they say they

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Speaker 1: are going to high grates for the first time and

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Speaker 1: they're gonna start tapering, which raises a question, how disruptive

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Speaker 1: is this for the rest of the world. How much

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Speaker 1: does this create outflows from particularly the developing world. Well,

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Speaker 1: on one hand, you're right that that that the US

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Speaker 1: bond yield increase in stort of dragging other interest rates higher.

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Speaker 1: On the other hand, the strength of the US economy.

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Speaker 1: We're gonna see this in the I M S forecast tomorrow,

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Speaker 1: like the O E C D S forecast, They're gonna

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Speaker 1: advise up world growth primarily because of what's happening in

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Speaker 1: the US. Secondly, what's happening in China. Stronger US growth,

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Speaker 1: it's gonna it's going to help fuel growth in the

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Speaker 1: US trading partners like Canada, Mexico, and well as countries

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Speaker 1: in East Asia, with the US imports a lot of

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Speaker 1: consumer goods from so I want to break down down

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Speaker 1: emerging markets. And while rising yields hurts the and the

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Speaker 1: shorter dollar hurts, the strength of the US economy overrides that.

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Speaker 1: In the short term. News breaking right now widely expected

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Speaker 1: game stop. And of course this is with the chewy

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Speaker 1: management really driving forward the theme they're gonna offer three

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Speaker 1: point five millions shares. The stock was down nine point

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Speaker 1: one percentage, which would be what you'd expect with the

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Speaker 1: share announcement, maybe down three, down four percent. Uh. This

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Speaker 1: is an at the market equity offering program, and Mark Chandler,

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Speaker 1: I want to fold that in to the great underestimation

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Speaker 1: using foreign exchanges a litmus paper. Is it corporations adjust?

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Speaker 1: How will corporations? How will American corporations adjust to the

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Speaker 1: superior divergence the excellence of the American economic experiment. Well,

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Speaker 1: in the short one, I think it's obviously positive. But

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Speaker 1: in the medium to longer term, this divergence is not

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Speaker 1: gonna last forever. We're not talking really about about canceling

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Speaker 1: recovery in Europe or recovery in parts of Asia. We're

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Speaker 1: really talking about postponing, delaying that until maybe the second half.

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Speaker 1: And so I think that this divergence will more morph

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Speaker 1: into convergence, but where maybe three months away from that mark.

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Speaker 1: Just to wrap everything up, I want to bring some news.

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Speaker 1: Berkshire Hathaway borrowing money in the Japanese bond market for

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Speaker 1: the third year in a row. As they say that

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Speaker 1: they're going to be making investments in Japanese companies? Is

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Speaker 1: this smart? Do you see other investment firms doing this,

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Speaker 1: basically levering up basically free costs based on where barring

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Speaker 1: rates are in Japan and then investing in companies there. Well,

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Speaker 1: I think that this isn't really about a currency view

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Speaker 1: as much as it's really about matching your assets and liabilities.

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Speaker 1: So oftentimes when a corporation is buying a foreign asset,

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Speaker 1: they can they can acquire that currency by buying the couragency,

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Speaker 1: or if you're large enough, like Berkshire hath the way

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Speaker 1: they can borrow that currency and thereby not taking having

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Speaker 1: a currency mismatch. So I think this is really just

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Speaker 1: about running a balanced book and avoiding misalignments between your

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Speaker 1: revenues and your expenditures. Mark Chandler, we have to leave

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Speaker 1: it there. On a Monday morning, March Chandler with prospective

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Speaker 1: from Bannockburn, their chief market strategists. Anahan joins us she's

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Speaker 1: with Wells Fargo equity strategist. But that barely describes her mathematics,

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Speaker 1: acuity and addressing the stock market. And I want to

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Speaker 1: go to nerd alert right now. What is the mathematically

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Speaker 1: or dynamically distinctive feature of this bull market. Well, what's

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Speaker 1: interesting in this bull market is what was leading the

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Speaker 1: market a year ago is not necessarily the momented trade

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Speaker 1: that's happening right now. And I think that's been a

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Speaker 1: big change. And that's not to say that the market

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Speaker 1: overall can't go higher. But when the leaders start to change,

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Speaker 1: you also start seeing certain styles play out differently, like

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Speaker 1: the value, like the cyclical trade now against growth. Do

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Speaker 1: you sell those fancy stocks from a year ago or

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Speaker 1: do you hold them and just take additional cash into

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Speaker 1: these new stocks well right now rather than sell them.

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Speaker 1: It's a question of what goes up faster, what goes

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Speaker 1: up higher? Where can you get that bang for your book?

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Speaker 1: And that's that value and cyclical trade you're seeing. But

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Speaker 1: you know, frankly, the real early cyclical place have run

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Speaker 1: pretty hot, and Tom, you know, it's hard for me

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Speaker 1: to sit here and tell you to get into that

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Speaker 1: game now, um, but you know we like the more

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Speaker 1: mid cycle place. So that's why we're up on that

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Speaker 1: consumer services industry. Now that the economy is starting to reopen,

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Speaker 1: people have the cash to spend. It's the things that

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Speaker 1: they can spend on when they can go on that

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Speaker 1: travel they haven't been able to do now as vaccines

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Speaker 1: get rolled out, nearly forty of US adults are vaccinated.

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Speaker 1: I'm going to be eligible next week, you know. I

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Speaker 1: know I'm ready and excited to travel. So these are

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Speaker 1: the kind of things we're thinking about, and those are

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Speaker 1: the places that we think really are worth playing right now.

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Speaker 1: And good luck. We wish you the best in your vaccination.

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Speaker 1: And there's a question about game Stop, which came out

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Speaker 1: this morning and said it's offering three and a half

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Speaker 1: up to three and a half million dollars of a

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Speaker 1: million shares about a billion dollars maximum of shares, a

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Speaker 1: sort of add on equity offering that we've been expecting

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Speaker 1: for a long time, given how much their share prices

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Speaker 1: have run up. Is it too late for a game

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Speaker 1: Stop as retail investors start to bow out of the market.

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Speaker 1: I wouldn't say it's too late. In fact, what it

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Speaker 1: looks like these kind of companies who have seen their

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Speaker 1: valuation search, whether it's because a retail flow came into it,

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Speaker 1: or you know, perhaps because of their cyclical nature that

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Speaker 1: they were able to run hot. They're taking advantage of

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Speaker 1: that by doing issuance, and the issuance for them is

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Speaker 1: an opportunistic moment and for us, the way we see

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Speaker 1: it is, okay, do that issue once and right now.

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Speaker 1: It's not so concerning where we think it's going to

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Speaker 1: stress the credit markets, but it does come into question.

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Speaker 1: You know, as you see these opportunities play out, it's

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Speaker 1: because the backdrop is improving. It's because there's risk appetite

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Speaker 1: as the economy improves. All right. The reason why I

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Speaker 1: ask is because Tom was planning to get in on this,

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Speaker 1: and he's been really aggressive on game stop and bit

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Speaker 1: dog as he calls it, and all the aspects of

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Speaker 1: the market these days. There's a question though about the

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Speaker 1: retail investor, the marginal buyer, and there have been a

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Speaker 1: number of stories about how there's been a pullback there.

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Speaker 1: How much does that affect the meme stock? How much

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Speaker 1: does this affect some of the momentum names that have

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Speaker 1: gotten a boost from people who are stuck at home

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Speaker 1: trading stocks. But when you see momentum names, it's interesting

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Speaker 1: is you are seeing that the retail flow has ability

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Speaker 1: to affect the momentum and play a momentum trade. But

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Speaker 1: largely speaking, the momentum trade is really more focused on

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Speaker 1: the institutional funds um. You know, we have growth be

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Speaker 1: the momentum trade coming into the year in and now

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Speaker 1: you look at it, the moment in trade is transforming

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Speaker 1: into this value nature, you know, economically sensitive thing that's

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Speaker 1: a little different from the momentum trade that retail traders play,

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Speaker 1: where it's really just price appreciation and a little more

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Speaker 1: i would say, short term looking than you say, look

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Speaker 1: on in twelvemonth or nine months framework that US institutional

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Speaker 1: players are used to looking at. And I'm looking for

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Speaker 1: Catharsis here and I don't see it would be if

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Speaker 1: you're negative on the market, you need some Catharsis up

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Speaker 1: to go the other way. Give us the dynamics now

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Speaker 1: of this bull market, whether it's SPX or I'll let

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Speaker 1: you pick whichever index you want to look at. But

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Speaker 1: where's the gamma? Where's the convexity? Now? Where's that momentum

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Speaker 1: bet that gets people in trouble? Well, when you talk

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Speaker 1: about convexity, it's sort of like you're asking what's acceleration

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Speaker 1: towards the upside that we could or maybe won't see.

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Speaker 1: What do we need to get it? To get that

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Speaker 1: next umph up and for us it becomes expectations. You know,

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Speaker 1: you've heard me see this before, Tom. Earnings expectations go

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Speaker 1: higher as things get better, and the higher that bar goes,

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Speaker 1: you really got to do more than the same one trick,

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Speaker 1: pony uh to to really impressed towards the upside, and

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Speaker 1: that gets harder and harder. So for now, look that

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Speaker 1: economic backdrop of GDP growth looking above six percent, unemployment

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Speaker 1: dropping below five percent this year. These are the things

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Speaker 1: pushing the market higher. But to really get that acceleration upward,

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Speaker 1: we need to see earnings show up, alright, So that

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Speaker 1: earnings show up to to justify expectations. How about a

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Speaker 1: place where the expectations have already been diminished like Europe.

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Speaker 1: Are getting on that train saying that there can only

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Speaker 1: be out performance in a place where the expectations have

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Speaker 1: been pushed down to such a degree as in the Eurozone. Well,

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Speaker 1: I won't say that there's only upside because when you

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Speaker 1: have that uncertainty brewing, you know it can spiral downwards. Now,

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Speaker 1: so far, it looks like, you know, the path forward

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Speaker 1: is you know, sunnier, and it looks like it's going

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Speaker 1: to get better as vaccine distribution gets a little more familiar,

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Speaker 1: and as always, every day you know a little more

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Speaker 1: about the situation. But for now, that's why we're keeping

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Speaker 1: our money in the States. That's why we like the

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Speaker 1: US equity play because we're seeing less certain to hear

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Speaker 1: domestically and we're more comfortable the opportunities here. And thank

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Speaker 1: you so much, greatly appreciated today with well as Fargo

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Speaker 1: Securities and Equity strategist here within a great grade bullmarket.

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Speaker 1: Terry Haynes joins US which with Pangea. Right now, Terry,

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Speaker 1: this is where political rhetoric runs up again, blunt reality.

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Speaker 1: I mean, all this talk about infrastructure and fiscal policy

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Speaker 1: runs up against the political emotions of the constituencies. How

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Speaker 1: does Ireland? How does Ireland adjust to a call for

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Speaker 1: global corporate minimum tax? Oh? How they how they respond

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Speaker 1: to it? Tom is uh giving at the back of

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Speaker 1: their hand or inviting you into the pub for a drink.

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Speaker 1: And meanwhile, very soon you'll be talking about something anything

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Speaker 1: other than that. You're quite right that yuh that it's

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Speaker 1: firstly and secondly, you know Yellen's uh. Yellan's not an

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Speaker 1: independent chair of the FED here, she's the Secretary of

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Speaker 1: the Treasury, so a general in the Biden Army trying

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Speaker 1: to figure out some way to provide additional money for

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Speaker 1: additional stimulus and infrastructure spending isn't exactly news, but that's

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Speaker 1: not gonna get it done. How do we pay for

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Speaker 1: infrastructure if there's a genuine pushback to individual taxes and

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Speaker 1: shock corporate taxes as well, well, that's gonna The short

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Speaker 1: answer is, I don't know, but it's gonna be. It's

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Speaker 1: gonna be a negotiation between between the Congress, particularly the

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Speaker 1: Senate uh and the White House, and they're gonna have

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Speaker 1: to get both sides are gonna have to get serious.

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Speaker 1: I mean, one thing we're gonna have We're gonna find

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Speaker 1: out pretty soon is whether the President is serious about

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Speaker 1: wanting to do actual infrastructure improvements or whether this is

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Speaker 1: whether this is mostly for show. Uh if if if

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Speaker 1: the President wants to do that, there are a lot

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Speaker 1: of Republicans out there, not just Roy Blunt on the

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Speaker 1: Sunday shows, but Shelley Moore, Capital of West Virginia, and

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Speaker 1: many others saying, look, we have a history here of

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Speaker 1: doing bipartisan and coming up in the last couple of

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Speaker 1: years with bipartisan solutions on infrastructure, water, all kinds of

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Speaker 1: other things. If the President wants to involve in existing

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Speaker 1: Senate discussions already, Uh, they can do that, but in

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Speaker 1: order to do that, they're gonna have to stop identifying

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Speaker 1: everything is infrastructure and get down to what you know,

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Speaker 1: the general usage actually is Rhodes Bridges, water and that

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Speaker 1: sort of thing, Terry, based on what you've actually seen

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Speaker 1: so far, which is Joe Biden saying we want bipartisan support. Realistically,

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Speaker 1: we're willing to go it alone. What do you see

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Speaker 1: as the likely price tag, the likely timeline of something

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Speaker 1: that could actually get done at this point. Well, at

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Speaker 1: first I'd cautioned the markets that it's going to take

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Speaker 1: months and months to do this. Lisa, I I bogie

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Speaker 1: did at a at a at a fourth quarter calendar

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Speaker 1: year twenty one. I think it takes a long time

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Speaker 1: to do that. Just negotiating the politics of the Democratic

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Speaker 1: Party between centrists who would be happy to go with

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Speaker 1: kind of the meat and potatoes approach and progressives who

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Speaker 1: think this is far too little money. Uh. The Biden

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Speaker 1: people have already essentially made a decision. They're gonna let

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Speaker 1: the progressives try to figure that out on their own

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Speaker 1: without involving the White House too much. But I'd look

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Speaker 1: at it much more as a one and a half

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Speaker 1: trillion to two trillion number. Uh, And I think the

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Speaker 1: White House can probably get something like that, but over

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Speaker 1: ten years, but it's gonna take quite a while. There

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Speaker 1: might be a little bit uh, a little bit of

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Speaker 1: corporate tax in there, there might be a bunch of

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Speaker 1: other solutions. UH. So that's number one. Number two, much

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Speaker 1: much smaller point. You'll know if the administrations can't get

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Speaker 1: it serious, if they are willing to accept ideas on

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Speaker 1: how to ramp up UH and and make more effective

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Speaker 1: infrastructure decisions. If this is about fixing Pennsylvania's roads quickly

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Speaker 1: and well of the general public will be in Pennsylvania,

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Speaker 1: for example, will be enthusiastic about that. But if this

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Speaker 1: is simply shoveling more money to the state agency that

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Speaker 1: has given Pennsylvania UH, Pennsylvanians the joke for generations that

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Speaker 1: what's going on here is UH is putting together more

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Speaker 1: orange cones, which is the joke is that that's the

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Speaker 1: state flower. UM. If you know, if that's all this

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Speaker 1: is about, it's not going to be received very enthusiastically

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Speaker 1: at all. So the administration is going to have to

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Speaker 1: make qualitative and quantitative decisions about what they want. I

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Speaker 1: assume that they want something terry. This is a really

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Speaker 1: important point the process of getting this done, not just

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Speaker 1: the headline number, not just the goals, but the process

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Speaker 1: of who does it and how they do it to

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Speaker 1: prevent sort of a d m V type situation from emerging.

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Speaker 1: What processes would you like to see the Biden administration

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Speaker 1: implement alongside a plan like this to make sure the

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Speaker 1: efficiency of this use of cash. Well, what they're gonna

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Speaker 1: have to what they're gonna have to do is UH

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Speaker 1: is essentially put a lot of strings on it. UH.

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Speaker 1: They're gonna have to incent state governments to prioritize projects.

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Speaker 1: They're gonna have to send them to get it done quickly.

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Speaker 1: And one thing Republicans will want to see is they'll

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Speaker 1: want to see at the very least timelines. And you know,

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Speaker 1: it's been potentially even some waivers of of environmental restrictions.

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Speaker 1: And I don't mean getting rid of the environmental restrictions,

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Speaker 1: I mean just the idea that environmental decisions can't take

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Speaker 1: a decade to process, uh, which tends to happen a lot. Uh,

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Speaker 1: if they're willing to streamline a process and make sure

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Speaker 1: that the states are actually doing something rather aggressively to

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Speaker 1: to implement infrastructure of all kinds, whether it be Rhodes bridges,

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Speaker 1: broadband whatever. Uh. You know, there you'll see some more

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Speaker 1: bipartisan receptivity. But if not, if this is all, if

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Speaker 1: this is really all about same old, same old, then

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Speaker 1: I think things will fall apart. Terry, thank you so much,

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Speaker 1: Terry Hannes with Pengia with us today right now. This

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Speaker 1: is a really really important conversation because not just Dana Peterson,

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Speaker 1: but the Conference Board is where she is employed the

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Speaker 1: Conference Board as their chief economists. Of Conference Board has

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Speaker 1: thousands and thousands thousands of corporations is their clients, and

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Speaker 1: it is a pulse and understanding of what corporate America

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Speaker 1: and corporate globally is doing. Dana Peterson, how are corporations

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Speaker 1: doing and what are their expectations? Well, um, CEOs are

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Speaker 1: actually pretty happy. Our latest reading on CEO confidence is

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Speaker 1: at a seventeen year high, and certainly when we talk

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Speaker 1: to many of our members, they are actually quite excited

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Speaker 1: about what's going on. However, they are very concerned about

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Speaker 1: inflationary pressures. Um. You see that there are issues in

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Speaker 1: terms of supply chain backlogs. Um. It's certainly uh. Energy

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Speaker 1: prices are rising, so that's really a concern for members.

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Speaker 1: What about fighting the last inflation war? I mean, there's

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Speaker 1: anyone we can go back to the War of the sixties,

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Speaker 1: the War the seventies, or the inflation East as failures

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Speaker 1: over the last fifteen years. What's the war look like

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Speaker 1: right now on inflation? Well, when you look at the

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Speaker 1: core PC deflator, it looks like we've killed inflation. I mean,

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Speaker 1: we're not seeing any inflationary pressures on the consumer side overall. However,

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Speaker 1: there are definitely pockets of inflation. Um Our own measure

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Speaker 1: of one year inflation expectations has been ticking up in

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Speaker 1: line with gasoline prices. But when you look at other

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Speaker 1: measures of longer term inflation expectations, they still appear to

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Speaker 1: be pretty well anchored, all right, Which has to do

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Speaker 1: with wages and this idea that until wages really start

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Speaker 1: to increase, you're not going to see inflation rise in

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Speaker 1: the way that the Federal Reserve would like to see it.

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Speaker 1: We are seeing more of a push from the Biden

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Speaker 1: administration for unionization or for some sort of minimum wage.

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Speaker 1: You know that that vote for the Amazon workers will

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Speaker 1: be coming out in terms of the results this week.

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Speaker 1: Do you think that those efforts will lead to wage

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Speaker 1: inflation beyond what people are currently expecting? Well, certainly, not

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Speaker 1: only at the federal government level, but lots of state

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Speaker 1: and local governments have been raising minimum wages. And certainly

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Speaker 1: you will see some inflationary pressures for certain industries. For example,

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Speaker 1: hotels and restaurants nearly six of their workers are actually

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Speaker 1: minimum wage workers. And certainly some states, especially in the South,

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Speaker 1: will see some inflationary pressures. Um. But upsetting that could

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Speaker 1: be the rise and remote work, where many businesses can

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Speaker 1: hire workers that are in lower cost jurisdictions or even

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Speaker 1: from abroad. Um. So you're gonna see some push and

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Speaker 1: pull there in terms of those different pressures that with

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Speaker 1: respect to inflation, Dana, how long will it take to

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Speaker 1: determine the sea change under way of working from home

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Speaker 1: and the shifts in the locations of some of these jobs.

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Speaker 1: Have we already started to see that in the data? Well,

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Speaker 1: I mean it's it's a little tough to see, certainly.

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Speaker 1: I mean, we do have surveys where we've asked businesses

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Speaker 1: about out our remote work, and many businesses are saying, hey,

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Speaker 1: there's going to be a hybrid model going forward where uh,

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Speaker 1: some workers are going to be working remotely permanently, some

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Speaker 1: are going to be in the office, and some we're

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Speaker 1: going to be going back and forth between remote work

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Speaker 1: and in uh in person work. And so this is

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Speaker 1: something that is not going to change. We're going to

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Speaker 1: continue to see this and certainly there are going to

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Speaker 1: be implications in terms of productivity as well as with

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Speaker 1: respect to inflation data. I want to focus on I've

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Speaker 1: really never done this with you, Dana, but I really

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Speaker 1: think the dynamics and the history of the Conference Board,

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Speaker 1: going back to the Triangle disaster in New York City

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Speaker 1: in about nineteen fifteen, nineteen sixteen, this relationship of unions

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Speaker 1: CEOs and a president who's extremely comfortable with the union movement.

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Speaker 1: What is the labor and I don't want you to

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Speaker 1: speak for the Conference Board and two thousand executives, but

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Speaker 1: what do you see as the dynamic forward within labor

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Speaker 1: unions and the CEO s or is it just noise? Well?

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Speaker 1: I think the thing is that it depends on what

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Speaker 1: labor unions are looking for. Certainly, when it comes to

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Speaker 1: higher wages, we already see many large companies UM, certainly

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Speaker 1: some of our own members that are already raising wages.

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Speaker 1: They're already trying to address the concerns of of their

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Speaker 1: laborers in terms of wages, benefits, making sure that there's

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Speaker 1: training an adequate number of hours. So I think that

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Speaker 1: there's certainly a middle ground that can be reached here, well,

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Speaker 1: the middle ground that can be released. That's great, but

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Speaker 1: does bring it back to your macroeconomics. Do you fold

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Speaker 1: in wage inflation for this year or not? UM, I

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Speaker 1: think there can be some wage inflation. In fact, overall,

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Speaker 1: we think there's going to be consumer price inflation as well,

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Speaker 1: certainly as as as consumers continue to desire certain types

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Speaker 1: of goods UM, and then once people start engaging in

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Speaker 1: person services, UM, that's going to be inflationary as well. All.

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Speaker 1: But I think the key thing is how much inflation

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Speaker 1: and for how long? And we think that you know,

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Speaker 1: even with wage inflation and and prices uh gasoline price

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Speaker 1: inflation which is kind of overall, but also inflation for

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Speaker 1: certain types of services rising, that we're probably not going

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Speaker 1: to see runaway inflation allah of the seventies, and that

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Speaker 1: the feed is probably going to remain patient and still

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Speaker 1: allow some measure of inflation before it starts releasing our

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Speaker 1: removing some accommodation. Maybe not the nineteen seventies all over again, however,

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Speaker 1: we are seeing prices increase, particularly we talk about the

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Speaker 1: hard goods, and we talk about supply chains. They have

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Speaker 1: gotten disrupted. And Tom has been asking all morning and rightly,

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Speaker 1: so what are companies going to do with all of

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Speaker 1: this cash that they're bringing in. How much is gonna

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Speaker 1: go to fortifying their supply chains and preventing some of

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Speaker 1: these disruptions from happening. Again, are you seeing those types

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Speaker 1: of investments? Well, indeed, our own survey of C suite members,

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00:23:56,119 --> 00:24:00,199
Speaker 1: especially CEOs, indicates that, uh, for the longer term, not

430
00:24:00,320 --> 00:24:02,360
Speaker 1: just now, there is going to be a focus on

431
00:24:02,440 --> 00:24:04,800
Speaker 1: making sure that there's resilience and supply chain. So there

432
00:24:04,880 --> 00:24:06,880
Speaker 1: is going to be investment to make sure that there's

433
00:24:06,920 --> 00:24:10,640
Speaker 1: diversification um uh, and also that you don't have these

434
00:24:10,640 --> 00:24:13,440
Speaker 1: disruptions and supply chains that we've seen over the last year.

435
00:24:13,840 --> 00:24:16,200
Speaker 1: But indeed, some of it is just kind of unavoidable

436
00:24:16,200 --> 00:24:19,920
Speaker 1: even before the pandemic. We had a shortage in UH

437
00:24:19,960 --> 00:24:22,960
Speaker 1: container ships, um, sorry, the containers that you actually put

438
00:24:22,960 --> 00:24:26,640
Speaker 1: on ships, and so the pandemic just kind of exacerbated

439
00:24:26,640 --> 00:24:28,840
Speaker 1: these things. We've also had a number of disasters and

440
00:24:28,920 --> 00:24:31,600
Speaker 1: fires and all sorts of things that are piling onto

441
00:24:31,600 --> 00:24:34,640
Speaker 1: the strong demand for goods. But I would imagine that certainly,

442
00:24:34,680 --> 00:24:38,439
Speaker 1: as as consumers around the world are getting vaccinated and

443
00:24:38,560 --> 00:24:42,040
Speaker 1: businesses are reopening and governments are allowing mobility, that the

444
00:24:42,080 --> 00:24:44,240
Speaker 1: strong demand for goods is probably going to EBB and

445
00:24:44,240 --> 00:24:47,760
Speaker 1: that we're going to shift towards UH consumption of services,

446
00:24:47,760 --> 00:24:50,720
Speaker 1: many of which are domestically produced. All right, So then

447
00:24:50,760 --> 00:24:53,440
Speaker 1: in services, do you expect service side inflation to pick

448
00:24:53,520 --> 00:24:55,159
Speaker 1: up by the end of the year. Are we so

449
00:24:55,280 --> 00:24:58,639
Speaker 1: far behind that because of the lag time, because of

450
00:24:58,680 --> 00:25:00,360
Speaker 1: all the people that have to be brought back into

451
00:25:00,359 --> 00:25:05,040
Speaker 1: the market and the slack currently in the labor world. Well,

452
00:25:05,160 --> 00:25:07,160
Speaker 1: our thoughts are that, yes, we are going to see

453
00:25:07,160 --> 00:25:10,439
Speaker 1: services in person services prices rise towards the end of

454
00:25:10,440 --> 00:25:12,680
Speaker 1: the year. When we look at the US, actually, we're

455
00:25:12,720 --> 00:25:16,000
Speaker 1: actually quite fortunate to have our own vaccines that were

456
00:25:16,040 --> 00:25:19,040
Speaker 1: producing and access to those vaccines, and it's broadening across

457
00:25:19,119 --> 00:25:22,800
Speaker 1: many states, and indeed many businesses are starting to reopen

458
00:25:22,840 --> 00:25:25,320
Speaker 1: governments or lifting restrictions. I mean, we saw that in

459
00:25:25,760 --> 00:25:28,880
Speaker 1: the labor market data on Friday, where uh you saw

460
00:25:28,880 --> 00:25:33,080
Speaker 1: on leisure and hospitality, especially food and services, businesses reopening.

461
00:25:33,160 --> 00:25:36,000
Speaker 1: Restaurants are opening up, bars are opening up. And so

462
00:25:36,040 --> 00:25:38,680
Speaker 1: if we continue at this pace, then hopefully by the

463
00:25:38,760 --> 00:25:41,280
Speaker 1: middle of this year, most people will have access to

464
00:25:41,320 --> 00:25:43,760
Speaker 1: a vaccine, many people who have taken it, and many

465
00:25:43,800 --> 00:25:47,120
Speaker 1: of the restrictions that are keeping the economy of under

466
00:25:47,119 --> 00:25:51,520
Speaker 1: wraps will be lifted and we'll see further gains and employment. Dana,

467
00:25:51,560 --> 00:25:53,439
Speaker 1: Thank you so much, Dana Peterson, where this for the

468
00:25:53,440 --> 00:25:55,879
Speaker 1: conference board is hugely valuable there in some of the

469
00:25:55,960 --> 00:26:05,080
Speaker 1: dynamics of the American labor economy. Robert Murphy of Northwestern

470
00:26:05,440 --> 00:26:09,639
Speaker 1: but truly expert in the history and the dynamics of

471
00:26:09,720 --> 00:26:13,880
Speaker 1: infectious diseases and Dr Murphy joins us. This morning. Both

472
00:26:13,920 --> 00:26:17,000
Speaker 1: you and I Dr Murphy were focused on Michigan and

473
00:26:17,000 --> 00:26:19,439
Speaker 1: I want you to go over this strange v word

474
00:26:20,119 --> 00:26:23,679
Speaker 1: vir lens and what we know about the waves coming

475
00:26:23,760 --> 00:26:29,080
Speaker 1: viru lens is not discussed. Lead with that right now, Yeah, virulence,

476
00:26:29,240 --> 00:26:32,480
Speaker 1: just how how nasty it is, how how effective it

477
00:26:32,560 --> 00:26:37,000
Speaker 1: is in actually killing the host that it's infecting. And uh,

478
00:26:37,200 --> 00:26:40,600
Speaker 1: this is increased with this variant, and also the P

479
00:26:40,760 --> 00:26:45,040
Speaker 1: one variant in Brazil. Uh, that variant actually somehow got

480
00:26:45,320 --> 00:26:48,720
Speaker 1: up in Whistler, Canada and British Columbia on the ski

481
00:26:49,119 --> 00:26:52,119
Speaker 1: resort there and they had to shut it down because

482
00:26:52,119 --> 00:26:55,000
Speaker 1: of that. Very difficult to deal with. As you can

483
00:26:55,080 --> 00:26:57,600
Speaker 1: see what's going on in Brazil right now, which is

484
00:26:57,640 --> 00:27:01,880
Speaker 1: a catastrophe. How does the dynamic uruleans, whether it's India,

485
00:27:01,960 --> 00:27:08,880
Speaker 1: Michigan or Brazil, fold into the wave analysis that's happening worldwide. Yeah, well,

486
00:27:09,080 --> 00:27:13,440
Speaker 1: it's probably the reason why we're having this wave. It's

487
00:27:13,440 --> 00:27:16,120
Speaker 1: probably it's one of the main reasons why we're having

488
00:27:16,119 --> 00:27:21,320
Speaker 1: the wave. And that when we've had these uh troughs

489
00:27:21,320 --> 00:27:24,960
Speaker 1: where the case the numbers have gone down, they have

490
00:27:25,119 --> 00:27:29,040
Speaker 1: always plateaued and there's always been plenty of virus replicating

491
00:27:29,640 --> 00:27:33,000
Speaker 1: before we have the next peak. We've never been able

492
00:27:33,080 --> 00:27:36,520
Speaker 1: to get in Europe or the North America the case

493
00:27:36,680 --> 00:27:39,479
Speaker 1: is really down to rock bottom like they do in

494
00:27:39,560 --> 00:27:43,000
Speaker 1: Asia and also in Australia and New Zealand where they

495
00:27:43,000 --> 00:27:46,040
Speaker 1: get the numbers down into like the dozens. Are we

496
00:27:46,080 --> 00:27:48,760
Speaker 1: going to Are we going to see the US get

497
00:27:48,760 --> 00:27:51,880
Speaker 1: there pretty soon, given how quickly we're ramping up vaccinations

498
00:27:51,880 --> 00:27:54,280
Speaker 1: in the United States, Or do you see that as

499
00:27:54,320 --> 00:27:58,080
Speaker 1: becoming further and further away because of the predominance of

500
00:27:58,119 --> 00:28:00,000
Speaker 1: the B one one seven strain of some of these

501
00:28:00,080 --> 00:28:03,040
Speaker 1: variants that are more contagious and more virulent. Yeah, no,

502
00:28:03,160 --> 00:28:07,639
Speaker 1: it's you hit the nail on the head there. The

503
00:28:09,640 --> 00:28:12,320
Speaker 1: rate right now is to get these vaccines out so

504
00:28:12,359 --> 00:28:16,520
Speaker 1: that we stop we uh stop the transmission or at

505
00:28:16,600 --> 00:28:20,760
Speaker 1: least reduce the transmission significantly so that the whole numbers

506
00:28:20,800 --> 00:28:25,240
Speaker 1: start to go down. Uh. The m RNA vaccines, the

507
00:28:25,320 --> 00:28:28,680
Speaker 1: MODERNA and the fiser worked fairly well against the B

508
00:28:28,840 --> 00:28:32,320
Speaker 1: one one seven, The other ones less so, but they

509
00:28:32,320 --> 00:28:35,120
Speaker 1: all work a little bit. And all the companies now

510
00:28:35,160 --> 00:28:39,080
Speaker 1: are working on a booster shot that will actually impact

511
00:28:39,120 --> 00:28:42,240
Speaker 1: the variants better. So you know you're gonna see this

512
00:28:42,480 --> 00:28:45,400
Speaker 1: uh go on in the next few months as the

513
00:28:46,480 --> 00:28:49,680
Speaker 1: variants take over, You're gonna have a new booster shot

514
00:28:50,440 --> 00:28:55,200
Speaker 1: that's going to protect you from these variants. Dr Murphy,

515
00:28:55,320 --> 00:28:58,240
Speaker 1: there's a real challenge here for health professionals and politicians

516
00:28:58,320 --> 00:29:00,800
Speaker 1: because on one hand, if we all just stayed home

517
00:29:00,840 --> 00:29:03,600
Speaker 1: and stayed away from other people for a couple of weeks,

518
00:29:03,600 --> 00:29:06,320
Speaker 1: everybody in the whole world, it could potentially bring down

519
00:29:06,320 --> 00:29:09,280
Speaker 1: the cases dramatically. On the other hand, people are lonely,

520
00:29:09,360 --> 00:29:12,240
Speaker 1: people are depressed, children that need to get educated. This

521
00:29:12,280 --> 00:29:14,000
Speaker 1: has been going on for more than a year, and

522
00:29:14,040 --> 00:29:16,360
Speaker 1: people are sick of it. How do you pair the

523
00:29:16,440 --> 00:29:20,080
Speaker 1: reality of the need for more caution with the optimism

524
00:29:20,120 --> 00:29:22,480
Speaker 1: which is also just as needed for people who are

525
00:29:22,560 --> 00:29:27,040
Speaker 1: really battered after more than a year of this social isolation. Well,

526
00:29:27,080 --> 00:29:29,520
Speaker 1: how can they do it in Australia, New Zealand and

527
00:29:29,560 --> 00:29:31,760
Speaker 1: in many other Asian countries? And how come we can't

528
00:29:31,760 --> 00:29:35,800
Speaker 1: do it? Uh? You know, that's the question that I

529
00:29:35,840 --> 00:29:39,040
Speaker 1: asked myself. How hard is it to wear a mask

530
00:29:39,080 --> 00:29:42,000
Speaker 1: every day? How hard is it to stay three to

531
00:29:42,080 --> 00:29:45,880
Speaker 1: six feet away from other people? How hard is it

532
00:29:45,920 --> 00:29:49,680
Speaker 1: to limit medium and large sized groups but keep keep

533
00:29:49,800 --> 00:29:54,400
Speaker 1: meeting with smaller groups. It's just not that hard, but

534
00:29:54,560 --> 00:29:58,800
Speaker 1: it does take a group effort, uh. And everybody's got

535
00:29:58,840 --> 00:30:01,560
Speaker 1: to be on the same page. And the enemy is

536
00:30:01,600 --> 00:30:03,920
Speaker 1: the virus. The enemy is not other people or I

537
00:30:03,960 --> 00:30:06,760
Speaker 1: don't believe in this or the state is that it.

538
00:30:07,240 --> 00:30:10,480
Speaker 1: We gotta get all on the same page together and

539
00:30:10,520 --> 00:30:14,240
Speaker 1: the vaccines will help, and that's gonna really take us.

540
00:30:14,840 --> 00:30:18,200
Speaker 1: It's gonna be the driver here, especially in the United States.

541
00:30:18,480 --> 00:30:21,040
Speaker 1: Dr Murphy, how do you respond then, to the Texas

542
00:30:21,200 --> 00:30:24,800
Speaker 1: Rangers really pushing to get people in the stands. They're

543
00:30:24,800 --> 00:30:28,280
Speaker 1: not there yet full disclosure, but they're trying. Or even

544
00:30:28,400 --> 00:30:32,320
Speaker 1: yesterday with the Pirates Cubs ten thousand, three forty three

545
00:30:32,600 --> 00:30:36,560
Speaker 1: at Wrigley Field, I mean, do you support everybody's effort

546
00:30:36,600 --> 00:30:38,880
Speaker 1: to try to get back within the good news in

547
00:30:38,920 --> 00:30:42,160
Speaker 1: America or not? Well, you know, I mean we all

548
00:30:42,200 --> 00:30:44,880
Speaker 1: want to go to the Cubs game, all right? Uh?

549
00:30:44,920 --> 00:30:48,360
Speaker 1: And uh you know, you know ten thousand is a

550
00:30:48,400 --> 00:30:52,040
Speaker 1: fraction of what that stadium holds. Uh. And you know,

551
00:30:52,120 --> 00:30:54,960
Speaker 1: if people are wearing masks, they supposedly what we're wearing masks,

552
00:30:55,320 --> 00:31:00,160
Speaker 1: and they're spread out through the stadium and it's outside. Uh.

553
00:31:00,320 --> 00:31:04,120
Speaker 1: You know, some of these situations, you know, are tenable.

554
00:31:04,480 --> 00:31:08,239
Speaker 1: We can do them. If this peak continues, that's all

555
00:31:08,240 --> 00:31:11,719
Speaker 1: going to end. Well, they're already talking about banning indoor

556
00:31:11,760 --> 00:31:15,160
Speaker 1: dining again here in the Chicago area, and you know,

557
00:31:15,200 --> 00:31:17,440
Speaker 1: all the venues all shut down again if if we

558
00:31:17,480 --> 00:31:19,640
Speaker 1: don't get ahold of this thing. So Dr Murphy, I

559
00:31:19,640 --> 00:31:21,040
Speaker 1: just want to dress one thing you were saying. You're

560
00:31:21,040 --> 00:31:23,560
Speaker 1: saying it's not that hard to all wear masks. Perhaps

561
00:31:24,000 --> 00:31:26,200
Speaker 1: it's not that hard to remain three to six feet

562
00:31:26,240 --> 00:31:28,960
Speaker 1: away from one another. That gets more difficult for people

563
00:31:29,000 --> 00:31:30,719
Speaker 1: who have to get back to work and have children

564
00:31:30,760 --> 00:31:33,280
Speaker 1: at home and need to figure out what childcare situations

565
00:31:33,320 --> 00:31:35,520
Speaker 1: are going to have, or if they need to have

566
00:31:35,560 --> 00:31:37,880
Speaker 1: a job where they need to engage with somebody else.

567
00:31:38,480 --> 00:31:41,080
Speaker 1: What's okay and what's not okay in the list of

568
00:31:41,120 --> 00:31:44,840
Speaker 1: things that are getting reopened right now. Well, it's the

569
00:31:44,880 --> 00:31:48,719
Speaker 1: same thing, though. It's wearing the masks and socially distancing

570
00:31:48,880 --> 00:31:51,720
Speaker 1: and taking the vaccine. We've got to get these vaccines

571
00:31:51,720 --> 00:31:53,680
Speaker 1: out there, because that is gonna that will slow the

572
00:31:53,720 --> 00:31:56,560
Speaker 1: whole thing down. You know, they're not a but it's

573
00:31:56,560 --> 00:32:00,320
Speaker 1: going to be you know better, you know. So you

574
00:32:00,360 --> 00:32:03,920
Speaker 1: know that's a huge number. Uh. And you know that

575
00:32:03,920 --> 00:32:06,200
Speaker 1: that's all we have to do. We don't have much

576
00:32:06,240 --> 00:32:08,840
Speaker 1: more than that. Uh. And I don't think it's really

577
00:32:08,880 --> 00:32:10,600
Speaker 1: too much to ask, but we all got to be

578
00:32:10,640 --> 00:32:13,360
Speaker 1: on the same page. Robert Murphy Thank you so much.

579
00:32:13,440 --> 00:32:18,520
Speaker 1: Dr Murphy with Northwestern University and Infectious Diseases. This is

580
00:32:18,520 --> 00:32:22,520
Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live

581
00:32:22,680 --> 00:32:26,040
Speaker 1: weekdays from seven to ten a m. Eastern on Bloomberg

582
00:32:26,160 --> 00:32:29,960
Speaker 1: Radio and on Bloomberg Television each day from six to

583
00:32:30,120 --> 00:32:34,760
Speaker 1: nine am for insight from the best in economics, finance, investment,

584
00:32:34,880 --> 00:32:39,920
Speaker 1: and international relations. And subscribe to the Surveillance podcast on

585
00:32:40,000 --> 00:32:43,800
Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on

586
00:32:43,920 --> 00:32:48,080
Speaker 1: the terminal. I'm Tom Keene and this is Bloomberg