WEBVTT - Surveillance: Pricing Power With Hyman 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailely, we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:31.319 and of course on the Bloomberg terminal. He is extraordinary man. 0:00:31.400 --> 0:00:34.640 He would say that Edward Himan invented market economics with 0:00:34.720 --> 0:00:38.040 honor and grace to Alan Greenspan as well. Evercors I 0:00:38.240 --> 0:00:40.520 s I chairman, and we're thrilled that Adeiman could brief 0:00:40.560 --> 0:00:43.560 us here into August, into Q three and into Q 0:00:43.800 --> 0:00:47.519 four of this tumultuous two thousand twenty one. And I 0:00:47.560 --> 0:00:50.200 want to cut to the chase. You've seen this out 0:00:50.200 --> 0:00:52.879 of your engineering at M. I t an ear of 0:00:52.960 --> 0:00:56.720 pricing power, It can't happen. Another ear of pricing power, 0:00:56.840 --> 0:01:00.320 it can't happen. And this time around you say there 0:01:00.480 --> 0:01:04.040 is pricing power, and corporations can to adapt to the 0:01:04.080 --> 0:01:08.400 new inflation. How do they do it? So when we 0:01:08.640 --> 0:01:12.880 UH survey retailers in particular, they tell us that pricing 0:01:12.959 --> 0:01:18.760 power is the most Ever. We also UH survey manufacturing 0:01:18.760 --> 0:01:22.120 companies that they say the same thing and so cost 0:01:22.120 --> 0:01:25.000 her up. But independent of that, liber cost her up also. 0:01:25.080 --> 0:01:29.039 But in an independent of that, uh, companies are able 0:01:29.040 --> 0:01:32.680 to pass it along. Uh because I guess because the 0:01:32.720 --> 0:01:36.679 economy is good, people are getting pay increases. Uh. But 0:01:36.800 --> 0:01:39.600 it also is important because it allows earnings to go up. 0:01:39.600 --> 0:01:43.080 And earnings are in a second quarter that were explosive, 0:01:43.760 --> 0:01:47.240 but I guess more important they'll be a strongly the 0:01:47.240 --> 0:01:49.880 third quarter as well. What do you see for Q four, 0:01:49.920 --> 0:01:53.560 I mean the idea year of inventing market economics into 0:01:53.880 --> 0:01:58.919 market analysis. Many would say, you did that chart paragraph, chart, paragraph? 0:01:59.320 --> 0:02:02.600 What are the chart say now about the fourth quarter? 0:02:04.400 --> 0:02:08.720 So in terms of economic growth, we have it slowing 0:02:08.760 --> 0:02:14.600 down to about six from roughly ten percent in the 0:02:14.680 --> 0:02:19.760 second and third quarters. Uh. And but because I'm really 0:02:19.800 --> 0:02:23.200 focused on the stock market, uh, I think earnings will 0:02:23.400 --> 0:02:26.639 increase again. We have earnings in the second quarter to 0:02:26.800 --> 0:02:30.959 twenty which is probably twenty dollars ahead of the constensus, 0:02:31.400 --> 0:02:36.239 and then maybe thirty and maybe two forty in the 0:02:36.480 --> 0:02:40.240 third and fourth quarters. And that was the pe you know, 0:02:40.320 --> 0:02:46.320 something like nineteen times with Bonnils, you know, below two percent, 0:02:46.600 --> 0:02:51.920 and the dead ballance sheet increasing ADDI, uh, every single month. 0:02:53.280 --> 0:02:56.359 As you mentioned high prices, you alluded to what you thought, 0:02:56.440 --> 0:02:58.200 but I just want to get you to emphasize it's 0:02:58.200 --> 0:03:00.720 just a little bit more higher prices in the foundation 0:03:00.760 --> 0:03:03.480 for higher prices that virtuous cycle that seems to be 0:03:03.520 --> 0:03:06.160 taking place at the moment. Is that a virtuous cycle 0:03:06.240 --> 0:03:09.160 you think overwhelms the Federal Reserve? Or is this the 0:03:09.280 --> 0:03:14.920 right kind of price growth? Um? Well, I think inflation 0:03:14.960 --> 0:03:18.040 is going to be more than expected. Uh. You know, 0:03:18.280 --> 0:03:20.280 we do a lot of work on rents and they 0:03:20.280 --> 0:03:25.880 are surging, and that's of the core CP. I Uh, 0:03:27.000 --> 0:03:29.920 the core PC, and so real is gonna be running 0:03:29.919 --> 0:03:33.840 around six. You can do the math on what that does. Uh. 0:03:33.880 --> 0:03:37.240 And then wages have been going up, and like we 0:03:37.360 --> 0:03:40.280 discussed a second ago, priceting power is going up. So 0:03:41.440 --> 0:03:46.440 inflation is likely to to run ahead of expectations. But 0:03:46.560 --> 0:03:53.280 I think it'll settle out around and say twenty three, 0:03:54.800 --> 0:03:56.640 so it won't get out of hand, but it's gonna 0:03:57.760 --> 0:03:59.480 be higher than that it has been in the past. 0:03:59.760 --> 0:04:01.240 And how does that shape your view some what the 0:04:01.240 --> 0:04:03.880 Federal Reserve is going to do in that kind of environment. 0:04:04.160 --> 0:04:06.440 Three cleep below where we are right now, but that 0:04:06.560 --> 0:04:08.280 high rate to change if you think that's gonna stick. 0:04:09.720 --> 0:04:11.280 I just wanted how to shape your views of money 0:04:11.320 --> 0:04:13.800 to you policy. Well, you know, I hate to stay 0:04:13.880 --> 0:04:16.960 the obvious with a thrill of discovery. But you know 0:04:17.000 --> 0:04:20.280 they're gonna they're gonna move, and they're already indicated they're 0:04:20.279 --> 0:04:24.200 gonna move. Uh. So they'll start the taper. It'll tak 0:04:24.200 --> 0:04:26.839 you about a year uh to you know, get down 0:04:26.839 --> 0:04:30.280 to zero, and then they'll start to raise rates. Uh. 0:04:30.760 --> 0:04:33.960 And neither of those are tightening, they're just you know, 0:04:34.040 --> 0:04:37.400 less generative. And then if they keep raising rates, which 0:04:37.440 --> 0:04:39.400 will be down the road but a bit, they'll finally 0:04:39.480 --> 0:04:44.479 get a tightening position. So I feel I think the 0:04:44.520 --> 0:04:48.479 faith right now is probably behind what I see. But 0:04:48.920 --> 0:04:52.080 you know, they're they're they're moving, and so they'll keep moving. 0:04:52.120 --> 0:04:58.440 And uh, whether they start to taper in December or January, uh, 0:04:58.520 --> 0:05:01.720 which is for the discuss and at the moment, doesn't 0:05:01.720 --> 0:05:04.240 make a big difference. I think in the big picture, 0:05:05.440 --> 0:05:10.680 do you see a taper tantrum or has that already happened? Uh? 0:05:11.040 --> 0:05:14.480 You know they Bernanke gave us a good way to 0:05:14.520 --> 0:05:18.559 avoid it, you know. Uh, he's told you what can happen. 0:05:18.560 --> 0:05:22.279 And so they've been very careful and uh trying to 0:05:22.279 --> 0:05:26.080 avoid a taper tantrum, and I think they've been largely successful. 0:05:26.800 --> 0:05:31.080 Um now everybody is on the same page that they'll 0:05:32.000 --> 0:05:35.080 uh you know, discuss it, uh inn upcoming meetings, the 0:05:35.200 --> 0:05:38.159 Lee story in the journal today and uh and then 0:05:38.720 --> 0:05:43.680 probably by January they'll start to uh cut the balance 0:05:43.680 --> 0:05:52.080 sheet expansion by ten billions will be then you get 0:05:52.120 --> 0:05:56.719 to zero in twelve months. The hallmark of what you 0:05:56.839 --> 0:06:00.159 invented is your granularity. Folks, we used to weigh with 0:06:00.240 --> 0:06:03.200 bated breath. Ed would sleep in and we'd be lucky 0:06:03.200 --> 0:06:05.880 if we got the report by ten am, and there'll 0:06:05.920 --> 0:06:08.520 be this big, ugly black marker on it where Hyman 0:06:08.560 --> 0:06:11.760 would say, shut up and listen to this. This is C. J. Lawrence. 0:06:11.760 --> 0:06:14.200 And then onto I s I and now ever core 0:06:14.320 --> 0:06:17.800 I s I. How does your granularity, your study of 0:06:17.839 --> 0:06:22.880 American business respond to business people that say they can't 0:06:23.000 --> 0:06:26.479 find workers? Do you just say to yourself, Ed, raise 0:06:26.560 --> 0:06:30.040 a damn wage? I mean, how do you respond to that? Well? 0:06:30.040 --> 0:06:33.200 Pretty pretty pretty much. We'll see if there's uh an 0:06:33.240 --> 0:06:40.360 increasing wages, increasing workers when the enhanced benefits roll off 0:06:40.400 --> 0:06:44.760 in September. Uh. But you know, I agree with the 0:06:44.760 --> 0:06:47.400 way you implied. Uh, and that's what I see is 0:06:47.440 --> 0:06:51.560 t happening. Companies will simply raise pain and for what 0:06:51.680 --> 0:06:58.880 I can tell, uh, you know, at an hour wage, Uh, 0:06:58.920 --> 0:07:02.280 if you do two or three dollars, you could get 0:07:02.279 --> 0:07:06.159 a significant change and a number of people applying. You know, 0:07:06.320 --> 0:07:09.760 that seems to be enough. And so I think that 0:07:09.880 --> 0:07:13.960 you're gonna see, you know, pretty big popping wages. Uh. 0:07:14.120 --> 0:07:17.160 Could be transitory as well, but you'll see a pretty 0:07:17.200 --> 0:07:20.600 big popping wagers. And but it's also moving up to 0:07:20.680 --> 0:07:23.480 change he set work. Black Rock is giving an eight 0:07:23.520 --> 0:07:27.760 percent across the board pay increase and uh, you know 0:07:27.840 --> 0:07:33.120 for bankers or up to a hundred thousands an hour, Yessuh. 0:07:33.880 --> 0:07:38.280 And so you know it's not just workers and im 0:07:38.400 --> 0:07:41.400 is it Jerome Powell continuing his services to the Federal 0:07:41.440 --> 0:07:46.520 Reserve system in America? We'll find out it's not. It's 0:07:46.520 --> 0:07:50.480 not a it's not a done deal in my opinion. Uh. 0:07:50.720 --> 0:07:54.720 But I'm sure you know Bideness considering the options and 0:07:55.880 --> 0:08:00.040 considering whether or not he needs to work on it, 0:08:01.160 --> 0:08:06.440 you have having a broader uh footprint. I mean, Joe, 0:08:06.600 --> 0:08:09.280 I could see. I don't think it makes a difference 0:08:09.360 --> 0:08:12.960 if he's replaced. Um first that replaces it will probably be, 0:08:13.400 --> 0:08:15.280 you know, a little bit more beveraged than he is. 0:08:15.320 --> 0:08:19.360 And I think he's he's done. If anything, he's too delish. 0:08:19.600 --> 0:08:24.840 But you know, I think John, what we've got to 0:08:24.920 --> 0:08:27.480 come to the conclusion is Chairman Himan would look awfully 0:08:27.480 --> 0:08:29.640 good at the eucles. Oh, there we go. I don't 0:08:29.640 --> 0:08:33.280 think it wants to respond to the don't don't listen 0:08:33.280 --> 0:08:35.120 to that guy. I'm not going to go there and 0:08:35.240 --> 0:08:38.640 don't worry beyond this though for you, for the chairman 0:08:38.679 --> 0:08:41.480 for the f O m C looking down to Washington 0:08:41.520 --> 0:08:43.160 at the moment, I think it's so difficult for a 0:08:43.200 --> 0:08:45.760 lot of people just getting the direction right. Earlier this 0:08:45.840 --> 0:08:49.000 year was somewhat straightforward. You knew that Washington d C 0:08:49.160 --> 0:08:52.720 would be a tail wind for your GDP forecasts. Everyone 0:08:52.840 --> 0:08:56.520 was revising GDP revisions higher. It was a positive growth shark. 0:08:57.000 --> 0:08:59.080 Can you look down to d C now and characterize 0:08:59.120 --> 0:09:01.760 things for us just on the fiscal side, the range 0:09:01.760 --> 0:09:03.839 a outcomes and how white they offer you is you 0:09:03.920 --> 0:09:10.520 try and generate a decent outlook with some confidence. So first, uh, 0:09:10.760 --> 0:09:14.680 let's not leave the monetary apart behind because it's still 0:09:15.160 --> 0:09:18.600 I think a huge tail wind, and monetary policy leads 0:09:18.600 --> 0:09:23.080 by one and two years. But on the fiscal side, uh, 0:09:23.160 --> 0:09:27.760 you know, my team in Washington, uh comes to about 0:09:27.880 --> 0:09:34.040 two trillion dollars when the dust all settles. Uh. And 0:09:34.360 --> 0:09:36.680 it's not the three or a half traying that they're 0:09:36.679 --> 0:09:40.600 looking for, but it's not one trier either, and so 0:09:40.679 --> 0:09:43.240 I think you'll get uh, you know, more stimulus. Now 0:09:43.320 --> 0:09:47.160 that's over say a decade, so it's a couple of 0:09:47.200 --> 0:09:51.480 hundred billion a year. I say a couple hundred billions 0:09:53.600 --> 0:09:56.640 changed that till they'll win the world's changed. There was 0:09:56.640 --> 0:09:59.160 a time when a couple of hundred billions was something big. 0:09:59.200 --> 0:10:01.599 And now and I think under a trillion, you're a 0:10:01.640 --> 0:10:05.320 fiscal hulk. Chairman, ed Hyman. It's gonna catch up. If 0:10:05.360 --> 0:10:08.280 a call and it's going to see you. Thank you 0:10:08.320 --> 0:10:16.040 so much that you want to guess right now, our 0:10:16.160 --> 0:10:19.680 great honor, to get some clarity on where we are 0:10:19.800 --> 0:10:23.160 in this pandemic. We do this with Peter Hotez, who 0:10:23.160 --> 0:10:27.679 has become nationally known many media appearances, speaking in English 0:10:28.040 --> 0:10:32.080 and also as a pinata for the anti vaccination Crow 0:10:32.120 --> 0:10:34.439 were thrilled that Dr Hotels could join us. Yes, from 0:10:34.480 --> 0:10:39.040 Baylor College of Medicine, but far more you need to know. 0:10:39.480 --> 0:10:43.440 He is co director of Parasites Without Borders with an 0:10:43.480 --> 0:10:47.959 incredible focus on the children of this world. He's Texas 0:10:48.000 --> 0:10:53.040 Children's Hospital and dowed share in tropical pediatrics. Peter Hotez, 0:10:53.280 --> 0:10:57.640 you deal seven in children. What is the risk to 0:10:57.760 --> 0:11:02.400 our children of the delta variant? Tom? I think what's 0:11:02.400 --> 0:11:06.240 happening is it's not that this virus is selectively targeting children. 0:11:06.280 --> 0:11:09.960 I think what's happening is this is so highly transmissible. 0:11:09.960 --> 0:11:13.880 It's twice as transmissible as the previous lineage, earliest lineages 0:11:13.960 --> 0:11:17.040 that we had. So pretty much anyone who has not 0:11:17.600 --> 0:11:21.480 been vaccinated or previously infected and recoverty is getting swept 0:11:21.559 --> 0:11:25.680 up in this along with kids, and particularly in areas 0:11:25.720 --> 0:11:29.560 where they haven't vaccinated. Well, you know, people forget that 0:11:29.600 --> 0:11:32.520 you're not getting vaccinated only to keep yourself out of 0:11:32.520 --> 0:11:35.320 the hospital your loved ones, but also if enough people 0:11:35.360 --> 0:11:39.240 get vaccinated in the community, then it slows or halts transmission, 0:11:39.320 --> 0:11:42.040 so the kids who are not eligible to get vaccinated 0:11:42.640 --> 0:11:45.480 are protected. And that's what's happening in the Northeast, but 0:11:45.600 --> 0:11:48.080 unfortunately it's not happening down here in the South, where 0:11:48.120 --> 0:11:51.720 the vaccination rates are just so abysmal. Peter, how sick 0:11:51.800 --> 0:11:54.800 do children get? Is that part of it? The unvaccinated 0:11:54.840 --> 0:11:58.960 would say, it's one big So what is it? So what? Yeah? 0:11:59.000 --> 0:12:02.120 And so what you know of the misinformation to the 0:12:02.200 --> 0:12:05.760 disinformation out there is, you know, they quote death rates 0:12:05.800 --> 0:12:08.240 and they only point to older Americans or those with 0:12:08.360 --> 0:12:13.000 provound underlying disabilities. That that are those who get not 0:12:13.040 --> 0:12:17.200 even disabilities, but co morbid conditions who lose their life. 0:12:17.240 --> 0:12:21.200 And the problem is we have a lot of young adults, adolescents, 0:12:21.200 --> 0:12:24.120 and even kids who are one getting sit very sick, 0:12:24.200 --> 0:12:28.160 requiring hospitalization. Now we're starting to see UH intensive care 0:12:28.200 --> 0:12:31.560 pediatric intensive care units for adolescens and some of the 0:12:31.600 --> 0:12:36.000 younger kids start to fill up. And and we don't 0:12:36.040 --> 0:12:39.160 know the full extent of long COVID this this more 0:12:39.400 --> 0:12:44.680 long term UH condition where which includes neurologic injury, and 0:12:44.720 --> 0:12:47.320 we don't know how long lasting that is. So it's 0:12:47.320 --> 0:12:49.240 all hands on deck to try to keep the kids 0:12:49.240 --> 0:12:54.160 from getting infected. Should schools be fully reopened? Look, I 0:12:54.160 --> 0:12:56.440 think it really depends on where the transmission is. And 0:12:56.480 --> 0:12:58.720 by the way, you know, whether I think it, whether 0:12:58.800 --> 0:13:01.800 I think they should be fully opened or not, doesn't 0:13:01.800 --> 0:13:04.120 really matter. That ship has sailed and pretty much and 0:13:04.320 --> 0:13:07.800 pretty much in person classes for a lot of the country. 0:13:07.840 --> 0:13:10.840 I think the key is trying to get the adults 0:13:10.920 --> 0:13:13.880 and adolescents fully vaccinated. But you know, like if you 0:13:13.880 --> 0:13:18.000 look in Louisiana, Mississippi, fifteen six of the adolescents are 0:13:18.080 --> 0:13:21.840 vaccinated who are eligible, maybe thirty of the young adults. 0:13:21.840 --> 0:13:24.480 It's ridiculous. So that and you have a lot of 0:13:24.520 --> 0:13:27.520 some of the red state governors refusing any mask mandates, 0:13:27.559 --> 0:13:30.640 and you have the delta variant. You know, I say, well, 0:13:30.920 --> 0:13:33.040 you know what could possibly go wrong? Right? I mean, 0:13:33.520 --> 0:13:35.680 so it's we're I think we're asking for trouble the 0:13:35.679 --> 0:13:39.080 way we're managing this. We've got to jack up vaccination 0:13:39.160 --> 0:13:40.920 rates in the South that we're going to do well 0:13:41.040 --> 0:13:44.000 in the school year. So let's talk about the mask mandates. 0:13:44.000 --> 0:13:46.520 I go home to the home state of California, and 0:13:46.559 --> 0:13:50.240 it's l a county that is mandating masks indoors and 0:13:50.280 --> 0:13:57.440 outdoors for vaccinated, fully vaccinated individuals. Should that be a requirement? Yeah, 0:13:57.520 --> 0:14:01.240 I mean, certainly for indoors as deltics elerates, and and 0:14:01.320 --> 0:14:04.480 the reason and certainly for unvaccinated individuals who are at 0:14:04.559 --> 0:14:07.400 high risk, but even the vaccinated ones and and it 0:14:07.440 --> 0:14:09.360 takes a little bit of time to explain, but we 0:14:09.480 --> 0:14:12.160 think what's happening based on some preliminary studies out of 0:14:12.240 --> 0:14:16.679 China and Guangdom province that this virus is multiplying at 0:14:16.760 --> 0:14:19.080 much higher rates in the nose and mouth a thousand 0:14:19.160 --> 0:14:22.000 times more, so you're shedding a lot more virus. So 0:14:22.080 --> 0:14:25.760 even if you're vaccinated and you get asymptomatic infection, in 0:14:25.840 --> 0:14:29.120 the past, with previous lineages, the vaccine was really good 0:14:29.160 --> 0:14:33.239 at not only stopping symptomatic illness, but even asymptomatic transmission. 0:14:33.600 --> 0:14:36.480 What's less clear now is with this delta variant. Certainly 0:14:36.520 --> 0:14:39.880 the first parameters holding that it keeps you from getting 0:14:39.920 --> 0:14:43.560 seriously ill or even uh symptomatic illness at very high rates, 0:14:43.560 --> 0:14:46.840 so that's great, But people who are vaccinated may still 0:14:46.880 --> 0:14:49.760 be shedding a fair bit of virus if they gave 0:14:49.880 --> 0:14:53.880 us asymptomatic infection. And that's the reason for for remasking. 0:14:53.960 --> 0:14:56.200 Even if you're vaccinated. The CDC has not come out 0:14:56.240 --> 0:15:00.880 with that recommendation. But that's where possibly things good ahead. Peter. 0:15:01.040 --> 0:15:03.720 Six months ago you had the courage to publish an 0:15:04.080 --> 0:15:09.800 article linking Soviet theory with American anti science. You said 0:15:09.920 --> 0:15:15.400 anti science kills. Elaborate on that. Now was six months 0:15:15.440 --> 0:15:19.200 more knowledge of this pandemic. Well, we just have to 0:15:19.200 --> 0:15:21.800 look at the numbers, tom right. I mean, there's the 0:15:21.840 --> 0:15:24.560 reason why six hundred thousand or more Americans have lost 0:15:24.640 --> 0:15:27.880 our lives from COVID nineteen is partly due to the 0:15:27.920 --> 0:15:31.720 stars to coronavirus, but in my opinion and equal measure 0:15:31.800 --> 0:15:35.160 was due to defiance, defiance olver masks and social distancing, 0:15:35.200 --> 0:15:39.360 not defiance over vaccines. And it's all a consequence of 0:15:39.400 --> 0:15:43.960 a massive what I call disinformation empire um, which you know, 0:15:44.080 --> 0:15:45.720 we heard a little bit about it last week and 0:15:45.760 --> 0:15:48.520 this week from the White House around Facebook. But you know, 0:15:48.560 --> 0:15:51.280 I point out that's that's it's you know, this is 0:15:51.320 --> 0:15:54.160 so much more than Facebook. This is you know, this 0:15:54.640 --> 0:15:57.920 anti science aggression coming out of US members of Congress, 0:15:57.920 --> 0:16:00.880 out of the sum of the conservative cable news networks. 0:16:01.240 --> 0:16:03.760 We're seeing it now. It's been well reported another Russian 0:16:03.800 --> 0:16:07.360 government is trying to destabilize our democracy through what's called 0:16:07.400 --> 0:16:11.200 weaponized health communication using anti science as a wedge issue. 0:16:11.520 --> 0:16:15.760 And then we have the non governmental organizations in at 0:16:15.840 --> 0:16:18.480 least a dozen of them identified by the Center for 0:16:18.520 --> 0:16:20.640 Contering Digital Hate. It's amazing we have to have an 0:16:20.680 --> 0:16:23.560 organization called the Center for Conquering Digital Hate that s 0:16:23.640 --> 0:16:26.720 m sixty million followers. So this is a well oiled 0:16:26.760 --> 0:16:30.240 machine or empire. And and I make the point is, look, 0:16:30.280 --> 0:16:32.320 you know we make US government puts a lot of 0:16:32.360 --> 0:16:36.160 effort into putting an infrastructure to come back global terrorism, 0:16:36.240 --> 0:16:40.560 to combat nuclear proliferation, to combat um cyber attacks. But 0:16:40.640 --> 0:16:43.000 you know what, this anti science thing is killing more 0:16:43.000 --> 0:16:46.160 Americans and all those others combined, and we need to 0:16:46.240 --> 0:16:49.600 recognize that in so far the Biden administration is just 0:16:49.680 --> 0:16:52.280 kind of skirting around the edges, you know, throwing a 0:16:52.320 --> 0:16:54.800 few darts at Facebook. This, This won't do it. We'll 0:16:54.800 --> 0:16:57.600 continue this conversation. Dr Hotez, thank you so much for 0:16:57.640 --> 0:16:59.840 briefing us this morning with the Baylor College and that 0:17:00.000 --> 0:17:11.119 School of Tropical Medicine. Peter oh Tis, let's head to 0:17:11.119 --> 0:17:14.080 Tokyo and start the conversation by talking about the Olympics 0:17:14.119 --> 0:17:15.840 and then ton we can move on from there Okay, 0:17:16.000 --> 0:17:19.800 John Making, my management chief global strategist, joins us. Right now, John, 0:17:19.800 --> 0:17:21.560 can you talk to me about the degree of excitement 0:17:21.840 --> 0:17:25.720 in the city you're in right now? Well, to be honest, 0:17:26.040 --> 0:17:29.199 the mood is pretty grumpy here because of the lockdown 0:17:29.320 --> 0:17:33.520 and all the trouble that's been affiliated with the Olympics, 0:17:33.520 --> 0:17:36.320 the two and throwing from various edicts that have been 0:17:36.440 --> 0:17:39.800 put out. But essentially a good number of people are 0:17:39.880 --> 0:17:42.600 quite happy it's happening, and of course the athletes are 0:17:42.720 --> 0:17:46.840 very happy it's happening. And thank goodness that Japan was 0:17:46.880 --> 0:17:50.439 able to uh have the Olympics here. I don't think 0:17:50.480 --> 0:17:52.679 anyone else really could have done it, to be honest, 0:17:52.720 --> 0:17:55.840 at this stage, um, so it will be quite safe 0:17:55.880 --> 0:17:59.240 and secure. All the Olympics activities are happening in a 0:17:59.320 --> 0:18:01.840 bubble here, and a lot of people will be happy 0:18:01.840 --> 0:18:04.200 when it's over. To be honest, here, and I think 0:18:04.200 --> 0:18:06.200 you might be one of them. I've got to site 0:18:06.200 --> 0:18:08.840 tell that John Foud doesn't sound thrilled about what's about 0:18:08.960 --> 0:18:12.280 type place in his city, and that is the mood here, 0:18:12.400 --> 0:18:16.240 to be honest. Uh, if you're watching on TV, it's fun, um, 0:18:16.280 --> 0:18:20.399 but there is a sense of of skepticism about the 0:18:20.440 --> 0:18:22.840 whole thing. Here has been a sort of a burden 0:18:23.000 --> 0:18:27.320 for Japan and it's caused a lot of bad feelings 0:18:27.480 --> 0:18:30.439 to a nation. John Vale, were symbolism is everything. Is 0:18:30.480 --> 0:18:34.439 the Emperor engaged with the Olympics. Is the Prime Minister 0:18:34.680 --> 0:18:39.320 engaged with the Olympics. Yes, they are. They will be 0:18:39.359 --> 0:18:41.919 at the opening ceremonies, although a lot of people have 0:18:42.080 --> 0:18:44.399 dropped out, to be honest, like former Prime Minister All 0:18:44.440 --> 0:18:46.800 they dropped out, and I think that there's only about 0:18:47.119 --> 0:18:49.960 close to two hundred people from Japan who will be 0:18:50.000 --> 0:18:52.920 attending the opening ceremony, so it's very pared down. I 0:18:52.960 --> 0:18:56.040 think there's about six hundred or seven hundred foreigners who 0:18:56.080 --> 0:18:59.560 will be at it, so very pared That's amazing, John Farrell, 0:18:59.600 --> 0:19:02.680 I'm so are your entourage just two people? That's incredible. 0:19:02.720 --> 0:19:05.159 We couldn't go to the Olympics this year. I'm afraid 0:19:05.200 --> 0:19:07.120 till we couldn't make it. Do you want to talk 0:19:07.160 --> 0:19:09.160 about markets, John's we do that right now. Let's take 0:19:09.160 --> 0:19:12.679 a bit hard away from something that's clearly upset. This 0:19:12.840 --> 0:19:16.199 is no good security. Tom Equity features up twenty on 0:19:16.200 --> 0:19:18.560 the SMP We're advancing a half of one percent, John, 0:19:18.760 --> 0:19:21.800 it just feels really difficult to push back against this market. 0:19:21.840 --> 0:19:23.920 Even with the bond market doing what it's done this week, 0:19:24.160 --> 0:19:27.440 equities were still doing okay. The drawdown was what two 0:19:27.560 --> 0:19:30.280 three four percentage points on the SMP. What is the 0:19:30.280 --> 0:19:34.919 bear case now through this year? Well, I guess you 0:19:35.000 --> 0:19:36.840 had to look at what Tom was saying earlier. There 0:19:36.880 --> 0:19:38.840 might be a surprise out of the third It seems 0:19:38.880 --> 0:19:42.119 like there are some very uh hawkish members who might 0:19:42.160 --> 0:19:45.359 descend at the next meeting. Um. There's also the question 0:19:45.400 --> 0:19:48.320 about who's going to be chairman going forward, and that's 0:19:48.400 --> 0:19:51.560 much more important than when the FED starts tapering. And 0:19:51.560 --> 0:19:54.000 of course Powell has the job if he wants to. 0:19:54.280 --> 0:19:56.440 But if he wants it, I think, but I think 0:19:56.440 --> 0:19:58.360 there's a chance that he might say, well, I've I've 0:19:58.400 --> 0:20:03.399 done enough and retired before things get any harrier. So 0:20:03.440 --> 0:20:05.440 that could cause them uncertainty. But it certainly doesn't seem 0:20:05.440 --> 0:20:07.760 like it's gonna be earnings, doesn't. I mean, because I'm 0:20:07.800 --> 0:20:09.600 glad I'm not an analyst in the States. I mean, 0:20:09.600 --> 0:20:13.200 it's just embarrassing how how how much these companies are 0:20:13.440 --> 0:20:16.760 overshooting analysts estimates, isn't it? John? The backdrop, of course 0:20:16.800 --> 0:20:18.320 of all of this is a ten year at one 0:20:18.840 --> 0:20:21.600 nine and it was Nico Lami and PIMCO last hour 0:20:21.680 --> 0:20:23.600 saying half of it is some of the positioning and 0:20:23.600 --> 0:20:26.280 the technicals, but some of it really is fundamental, is 0:20:26.359 --> 0:20:30.959 slowing down concerns about the delta. What do you think, Well, 0:20:30.960 --> 0:20:32.880 I think it is a combination of a lot of things. 0:20:32.920 --> 0:20:34.800 I think there's a lot of foreign buying too, maybe 0:20:34.960 --> 0:20:37.840 especially from Japan. The data showed a lot of buying 0:20:37.880 --> 0:20:40.359 by Japanese banks, and I believe it was in June, 0:20:41.040 --> 0:20:44.159 and so there's certainly a lot of different factors going on. 0:20:44.200 --> 0:20:47.720 And people are really believed the Fed when they say 0:20:47.800 --> 0:20:51.320 that the CPI is going to be coming down. There's 0:20:51.320 --> 0:20:54.919 a boatload of money out there that needs some place 0:20:54.960 --> 0:20:57.560 to to be, and so they like to They like 0:20:57.680 --> 0:21:01.119 to be in treasuries. They were almost regardless of the price. 0:21:01.200 --> 0:21:04.919 It seems it's certainly better than European yields in Japanese yields. 0:21:05.160 --> 0:21:07.040 Jon Vale, in the Western world, you're one of the 0:21:07.080 --> 0:21:12.679 great japan watchers. When you hear the word Japanification, the 0:21:12.760 --> 0:21:18.040 Japanification of Europe, the Japanification of the United States, is 0:21:18.080 --> 0:21:22.480 that a genuine concept for you. I go back and 0:21:22.560 --> 0:21:27.200 forth on that, to be honest a little bit. Uh. Japanification, Um, 0:21:27.240 --> 0:21:29.800 certainly in terms of the economy is not happening to 0:21:29.840 --> 0:21:32.800 the US economy. I mean, the Japan's economy has been 0:21:32.880 --> 0:21:34.959 quite dull for quite some time. The U. S economy 0:21:35.040 --> 0:21:39.200 is bounced back strongly and inflation is back strong. Uh. 0:21:39.280 --> 0:21:42.840 You know, Japan has been suffering from deflation or no inflation, 0:21:42.920 --> 0:21:46.080 as I called for for decades now, and that's not 0:21:46.520 --> 0:21:50.040 happening in the States. So there's some aspects that certainly 0:21:50.280 --> 0:21:53.440 can happen. Certainly, the debt burden that's going up in 0:21:53.200 --> 0:21:56.960 in the States is a former Japanification. And perhaps some 0:21:57.040 --> 0:22:03.359 of the the the attitudes about how society works is 0:22:03.400 --> 0:22:05.919 moving a little bit more Japan's way, a little bit 0:22:05.920 --> 0:22:09.639 more of the polite of version of society is opposed 0:22:09.640 --> 0:22:13.760 to the aggressive side. So there are aspects. Um. Certainly, 0:22:13.840 --> 0:22:16.280 Japan has led the way in terms of monterary policy 0:22:16.400 --> 0:22:20.480 and started QUEI started negative rights, all these things. So uh, 0:22:20.600 --> 0:22:24.679 certainly Japan has some examples to uh to show the 0:22:24.720 --> 0:22:27.199 rest of the world, for better for worse. Sometimes I'm 0:22:27.240 --> 0:22:29.040 stuck down there, stuck down there for a long time. 0:22:29.119 --> 0:22:31.760 John is gonna catch up. Good luck for the following month, 0:22:31.960 --> 0:22:34.639 John fail then Nick as a management chief global strategist. 0:22:41.400 --> 0:22:47.439 Right now a really important conversation and an appropriate conversation 0:22:48.000 --> 0:22:51.760 for summer long ago and far away. Carl Brunner and 0:22:51.880 --> 0:22:55.880 Alan Meltzer set up summer conferences. I will be direct. 0:22:56.119 --> 0:23:00.520 They invented the economic summer conferences, and the truths of 0:23:00.520 --> 0:23:03.280 that has been the shadow Open Market Committee of which 0:23:03.320 --> 0:23:06.280 Mickey Levy has been a member for near forty years. 0:23:06.640 --> 0:23:09.800 He of Bank of America now at Barrenberg Capital Markets 0:23:10.080 --> 0:23:13.200 is their chief economists. We are thrilled that Dr Levy 0:23:13.240 --> 0:23:16.520 could join us this morning. Mickey. There has to be 0:23:16.600 --> 0:23:21.040 a fear, a singular fear of the many shadows of 0:23:21.040 --> 0:23:26.520 our debt and our deficit. Except life seems great. How 0:23:26.640 --> 0:23:34.000 is that? It's it's really quite striking how the public, 0:23:34.480 --> 0:23:39.720 the financial media, and financial markets seem to be ignoring 0:23:40.280 --> 0:23:45.159 the dramatic increases in the debt and not really questioning 0:23:45.600 --> 0:23:49.520 what its consequences are. Particularly Tom, it's not just the 0:23:49.600 --> 0:23:53.199 piling up of the debt, but but it's also what 0:23:53.240 --> 0:23:56.960 are we deficit spending for? Are we allocating resources in 0:23:57.000 --> 0:24:01.159 a way that's adding to UM, you know, productive capacity 0:24:01.320 --> 0:24:06.400 and UM, you know, I think let's let's be get 0:24:06.440 --> 0:24:10.520 down to basics. One way or another, we in future 0:24:10.560 --> 0:24:13.200 generations are going to pay for it. Um. We used 0:24:13.240 --> 0:24:16.399 to think it was all going to generate higher inflation 0:24:16.600 --> 0:24:20.520 and higher interest rates. It hasn't. That doesn't mean it's good. 0:24:20.560 --> 0:24:22.679