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

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Speaker 1: We bring you insight from the best in economics, finance,

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Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com and of course on the Bloomberg Now.

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Speaker 1: The coronavirus crisis will shrink London's economy by forty four

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Speaker 1: billion pounds and if a rebound could take until summer two.

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Speaker 1: Now that's a warning. Today in a new report by

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Speaker 1: g l a economics unit at City Hall, with culture, leisure,

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Speaker 1: retail and hospitality all hard hit by lockdowns and social

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Speaker 1: distancing measures. The report also says one could see a

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Speaker 1: four and a half percent drop in the number of

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Speaker 1: jobs in the capitol. Well, I'm very pleased to be

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Speaker 1: joining joined by the Mayor of London citycon who joins

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Speaker 1: us from the historic cutting sark in Granwich. The world's

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Speaker 1: only survivor been tea Clipper Mayor, and I think built

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Speaker 1: in and I don't know whether it goes to the

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Speaker 1: kind of deals that you think London and the UK

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Speaker 1: should try and have post brexit. But how damaging would

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Speaker 1: a no deal Brexit be for the city of London

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Speaker 1: and good morning, good morning, it's great to join you. Okay, Look,

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Speaker 1: we as a country of our economy is in the

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Speaker 1: professional services, were world leaders in finance and in law,

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Speaker 1: in tech, in creative industries, and unfortunately the current deal

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Speaker 1: be negotiated by the government that fails to address the

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Speaker 1: concerns that these industries have in relation to continue to

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Speaker 1: business with our biggest trading partner, partner of the European

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Speaker 1: Union as it is, it appears even the flimsy deal

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Speaker 1: the government's negotiating may not get over the line. So

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Speaker 1: we are very concerned about the possibility of a no

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Speaker 1: deal brexit that means not having a deal with our

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Speaker 1: biggest trading partner, or a deal that doesn't reflect our economy.

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Speaker 1: And the irony, of course is is the USA now

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Speaker 1: has a president who's put in the USA back on

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Speaker 1: the world stage, and we the UK may become a

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Speaker 1: very lonely country in the future. So what's the best

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Speaker 1: hope for financial services in this very late stage and

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Speaker 1: Brexit talk. Well, at the moment it appears that a

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Speaker 1: number of our sectors they were hoping for a good

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Speaker 1: deal with the EU aren't included. And so even if

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Speaker 1: the deal is reached with the European Union this week,

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Speaker 1: and we hope one is the problem is for our

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Speaker 1: professional services, finance, legal, tech, creative industries. They will have

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Speaker 1: less favorable access to the Single Market than they had

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Speaker 1: as members of the EU or during this transition period.

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Speaker 1: And that's why it's really important that the UK government

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Speaker 1: understands the importance of issues like equivalence, financial passport in

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Speaker 1: this issue of attracting talent to London and the fact

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Speaker 1: that our ecosystem relies upon people as well as capsule

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Speaker 1: and services moving from London to the parts of the

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Speaker 1: European Union. If we go back into a lockdown that

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Speaker 1: looks more like a Tier three in London, and if

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Speaker 1: we have no deal brexit, would that be the perfect store.

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Speaker 1: What would job glasses actually look like in that scenario. Well,

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Speaker 1: London is very similar to other global cities around the world,

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Speaker 1: like New Yorker. We've suffered hugely because of the reduction

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Speaker 1: in footfall caused by the pandemic. Think of industries and

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Speaker 1: sectors that rely upon footfall retail, hospitality, culture, ledger and

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Speaker 1: so there's those sectors which normally contribute hugely to our

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Speaker 1: countries coffers, wealth and prosperity have really struggled, and the

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Speaker 1: concern is the combination of a continuation of this pandemic. Yes,

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Speaker 1: there is great news with the vaccine, but a combination

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Speaker 1: of COVID plus a Brexit with no deal or a

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Speaker 1: poor deal would be really severe for London and our country.

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Speaker 1: As you said, it is a perfect storm, a double Yaman.

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Speaker 1: And that's why it's so important that our government wakes

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Speaker 1: up and realizes what we're heading tours, rather than sleepwalking

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Speaker 1: into a potentially really deep recession. What's the right way

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Speaker 1: of doing it? Is it more funds given to London

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Speaker 1: and how much of these shifts will actually be permanent?

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Speaker 1: How much will the hospitality business suffer longer term? I

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Speaker 1: think what the government's got to realize is many of

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Speaker 1: these sectors are on life support and they need to

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Speaker 1: stay on life support because we can't afford is for

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Speaker 1: these businesses to go bust. It's far far easier to

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Speaker 1: keep a business fiable with the financial support from the

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Speaker 1: government then allowing a business to go bust and hoping

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Speaker 1: that people restart businesses. Similarly, it's far easier to keep

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Speaker 1: people in work with financial support from the central government

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Speaker 1: rather than losing their jobs. Our current estimate is of

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Speaker 1: the currnment continues the government continues down this line, we

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Speaker 1: could see levels of job losses, levels of businesses going bust.

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Speaker 1: We've not seen as a country or city since the

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Speaker 1: nineteen eighties. Nobody wants that, and that's why we're lobbying

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Speaker 1: the government to do much more, in particular to help

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Speaker 1: those sectors like retail, hospitality and culture that have really

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Speaker 1: suffered at normally in good times contribute hugely towards our

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Speaker 1: wealth and prosperity. When you look at the world famous

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Speaker 1: theater industry in London, will it ever come back to

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Speaker 1: normally If we have a vaccine and that goes to

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Speaker 1: plan and if government support stays at these levels, when

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Speaker 1: are you expecting tourism to come back? Yeah? Well, the

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Speaker 1: good us and that the light at the end of

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Speaker 1: the tunnel is the vaccine. This week Londoners and people

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Speaker 1: across our country will start receiving the vaccine and the

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Speaker 1: government has done the right thing and ordered vaccines from

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Speaker 1: a number of different companies. The combination of the vaccine

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Speaker 1: but also we're our starting mass testing of those who

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Speaker 1: are asymptomatic leads us have hope towards the new year,

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Speaker 1: and that's why it's really important the government gives the support.

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Speaker 1: Most businesses are planning next year not to be as good,

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Speaker 1: but they want to stay open and viable. We're hoping

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Speaker 1: to see tourists return to our city next summer. It's

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Speaker 1: really important they do so and safely. And that's why

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Speaker 1: it's really important that the government continues to make progress

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Speaker 1: on the vaccine, on mass testing, but also we need

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Speaker 1: to really get on top of the test trace isolate system.

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Speaker 1: It's really important if somebody has the virus, particularly if

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Speaker 1: they're asymptomatic, that they know they've got the virus. They

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Speaker 1: can isolate the virus being passed. And we've learned a

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Speaker 1: lot over the last eight nine months. We've got to

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Speaker 1: use those lessons going forward to make sure we can

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Speaker 1: have a swift recovery, which is really important for our

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Speaker 1: country's well being. How much of it is a risk

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Speaker 1: that actually London goes to Tier three and this is

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Speaker 1: a tiering system that you know all living in the

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Speaker 1: UK will be familiar with, but will you fight to

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Speaker 1: keep it in Tier two which is a medium lockdown. Well,

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Speaker 1: the tiriert system isn't perfectly across our country. For those

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Speaker 1: of you youers outside of the UK, we have three tiers.

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Speaker 1: Tier one is a with the least restrictions and Tier

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Speaker 1: three is with the most restrictions. London currently is in

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Speaker 1: Tier two. We are concerned that there could be an

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Speaker 1: increase in the spread of the virus, a surge because

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Speaker 1: of a relaxation of the rules during Christmas. And that's

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Speaker 1: why it's really important to anybody who is in London

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Speaker 1: or visits London follows our rules. When you're using public transport,

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Speaker 1: you're in a shop where a face mask, when you're

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Speaker 1: in a place where you can't keep you social distance

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Speaker 1: where a face mask, you know, it's really important to

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Speaker 1: carry hand sanitized, to wash your hands regularly and thoroughly

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Speaker 1: follow the rules that would avoid a London going into

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Speaker 1: Tier three, because Tier three, because of the additional restrictions,

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Speaker 1: would mean that a lot of the progress we've made

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Speaker 1: with our businesses like here in the Cutty Sark would

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Speaker 1: be undone. That's why it's really important that people follow

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Speaker 1: the rules to avoid us either entering Tier three, or

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Speaker 1: even worse, our country potentially entering a third national lockdown.

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Speaker 1: So they can't thank you so much for your time today.

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Speaker 1: Of course, that is the Mayor of London from the

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Speaker 1: world famous Cutty Stark, Steve Schevara enjoyed us now federated

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Speaker 1: him as portfolio manager State seven or five Eastern time

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Speaker 1: has become like therapy for investors in our audience after

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Speaker 1: rattling through all the negative news. And I think that's

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Speaker 1: been a job at the investor for the market participants

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Speaker 1: to almost receive that therapy all this stuff going on

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Speaker 1: around us which is absolutely dreadful, and thinking about about

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Speaker 1: one you have the therapy state. Yeah, I think I do.

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Speaker 1: I mean, I think I think we've been pretty calm

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Speaker 1: through the last few months. Look, I mean what you've

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Speaker 1: seen in terms of recovery is shocking. I mean, in

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Speaker 1: terms of the number of people that have gone back

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Speaker 1: to work, in terms of the rebound and retail sales, manufacturing, housing,

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Speaker 1: you really do have in a lot of sectors of

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Speaker 1: the economy of v shaped recovery with a lot of

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Speaker 1: stimulus coming, not just the fiscal stimulus, not just probably

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Speaker 1: a little bit more from the Fed in terms of

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Speaker 1: extending duration and things of that nature, but the vaccine

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Speaker 1: itself represents an enormous stimulus over the course of next

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Speaker 1: year as we gradually get acton normal, and I think

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Speaker 1: that's what the market is looking through now. That doesn't

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Speaker 1: mean we don't need support for certain parts of the

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Speaker 1: economy that are really in for it right now with

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Speaker 1: these increased restrictions, but that's really about doing the right

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Speaker 1: thing for sectors of the economy. The market as a whole,

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Speaker 1: I think is in a much healthier place than certain

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Speaker 1: sectors are. Steve, I get this argument that we're pricing

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Speaker 1: in one and that we're looking toward a period past

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Speaker 1: the pandemic. Yet if we've already priced that in, what

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Speaker 1: more can we price in to drive a market higher? Well, well,

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Speaker 1: at least I don't think we are just pricing in one,

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Speaker 1: and I think it's a longer term runway of growth. Remember,

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Speaker 1: outside there are no real examples of double dip processions

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Speaker 1: since the Great Depression. When you're looking at recoveries and expansions,

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Speaker 1: these last three, four or five, six years, sometimes as

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Speaker 1: many as ten years. And we just had a recession.

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Speaker 1: We've cleared the deck. We're in early cycles. So yes,

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Speaker 1: the market's immediate focus is on the recovery in one,

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Speaker 1: but in reality, you have to start pricing in the

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Speaker 1: idea that we've got a number of years of first

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Speaker 1: recovery then expansion, and markets are going to respond well

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Speaker 1: to that. Lisa, Tom and I have been going through

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Speaker 1: the same story stave over the last several weeks, and

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Speaker 1: I've sat here frustrated sometimes board at the outlook because

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Speaker 1: it's very say me, and I'm wondering whether the group

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Speaker 1: think has actually become group action. Are you worried about

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Speaker 1: actual crowding or as far as your concern, the money

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Speaker 1: hasn't actually been put to work. This is just talk. Still, Look,

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Speaker 1: I think this is this is what the scary part

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Speaker 1: about the early part of the cycle, because you'll see

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Speaker 1: big percentage moves and thinks that you've missed the whole thing.

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Speaker 1: But let's put it in a perspective. Right, small caps

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Speaker 1: have outperformed large by let's call it, you know, ten

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Speaker 1: of fift since September, but they've underperformed for the last

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Speaker 1: five years. They were flat for the last two years.

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Speaker 1: Um even if you look at value versus growth, the

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Speaker 1: ten and fifteen percent performance you've seen there, value underperformed

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Speaker 1: by fifty percent in the first half of this year.

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Speaker 1: And so we think it's really those uncomfortable trades around value,

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Speaker 1: around small caps, around international which has started to show

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Speaker 1: signs of life, and around dividend players that are really

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Speaker 1: going to continue over the course of the next year.

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Speaker 1: We think that there's still relatively early in their in

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Speaker 1: their days. And we think, again, while the market has

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Speaker 1: priced in a better twenty one, we don't think that

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Speaker 1: the market is priced in, you know, a longer term

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Speaker 1: growth trajectory. Steve. This idea of being early earlier a

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Speaker 1: word we hear so many times, and this idea of

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Speaker 1: it being uncomfortable, and it being uncomfortable to get in

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Speaker 1: in the early part of a bull market. And I

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Speaker 1: think April was uncomfortable right now? Can you call it

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Speaker 1: early when we've got a record high the Russell, a

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Speaker 1: record high s and P five hundred and a record

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Speaker 1: high the Nastac I mean, just looking at recoveries. You're

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Speaker 1: a student of market history much more than I am, Steve.

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Speaker 1: You know, when we start an early stage recovery, do

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Speaker 1: we start a record highs. We don't get there this quickly, um,

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Speaker 1: but you can. For example, if you think about the

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Speaker 1: decline in seven, you were back to all time highs

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Speaker 1: within about a year of that thirty decline, and I

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Speaker 1: can assure you you didn't want to sell in because

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Speaker 1: you still had a market bull run until two thousand almost. Um, yes,

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Speaker 1: this can happen. Even if you look back at the

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Speaker 1: last recession that we went through, right, you got back

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Speaker 1: to the all time high, and again, it would have

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Speaker 1: been very easy to say, Okay, we're back to the

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Speaker 1: all time high, we're long in the two yet another

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Speaker 1: get another six years after that. So no, I don't

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Speaker 1: think it means that we're late just because we're at

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Speaker 1: all time highs. I think it's it's just the nature

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Speaker 1: of this recovery and the amount of stimulus that we

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Speaker 1: got that allowed us to get back to the highest

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Speaker 1: so quickly. I was reading Morgan Stanley's look Ahead yesterday

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Speaker 1: Andrew Sheets came out and he said that one reason

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Speaker 1: for their bullish outlook is that they expect fiscal and

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Speaker 1: monetary policy to work together. Yet they still expect the

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Speaker 1: ten year yield to get up to one point four

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Speaker 1: or five percent by year end. How high can that

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Speaker 1: yield go before to rail as the equity rally look,

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Speaker 1: I think it's I think it's a function of what

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Speaker 1: the economic context is. Right. So, if you're still in

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Speaker 1: an economic malaise or you have slowing economic data and

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Speaker 1: you get a surgeon yields because there's expectations that the

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Speaker 1: FED won't be as dubblished, then obviously that that's something

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Speaker 1: that's bad. Um. If on the other hand, you know,

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Speaker 1: we're getting higher yields on the back of stronger and

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Speaker 1: stronger economic data, more and more people going back to work,

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Speaker 1: more normal levels of activity, I think that's that's fine. Um.

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Speaker 1: Right now, both the yield and the spreads are so

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Speaker 1: low and so tight that it suggested equity multiples could

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Speaker 1: be in the mid to high twenties. We don't need

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Speaker 1: them to stay that high. So there is some room,

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Speaker 1: I think, within a healthy economic recovery for yields to

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Speaker 1: rise and the market to be okay with that. Stafe

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Speaker 1: writes to catch up. Is it too addy to say

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Speaker 1: Happy Christmas? Just in case? No, enjoy the holiday this year?

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Speaker 1: Take the opportunity, my friend, enjoy the holidays. Christmas tea

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Speaker 1: chefron Federated irmis thank you, sir. Let's get to this

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Speaker 1: brutal pandemic sweeping across the United States of America, joining Ustan.

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Speaker 1: Please to say is Mercedes Carnathon, Norwestern University Department of

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Speaker 1: Preventative Medicine Vice Chair, Mercedes Professor. Fantastic to get you

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Speaker 1: back on the program with us. Thank you for joining us.

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Speaker 1: Secretary are over the weekend saying that perhaps by Q

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Speaker 1: two all Americans that would like the vaccine would have

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Speaker 1: access to the vaccine. Is this the timeline that you're

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Speaker 1: putting into your models you're thinking about increasingly as well?

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Speaker 1: You know, that is what I have heard as well,

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Speaker 1: that hopefully by April, availability of the vaccine will be

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Speaker 1: such in production of the vaccine will be such that

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Speaker 1: everybody who wants it will start to be introduced to

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Speaker 1: the opportunity to get it. Because you have to keep

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Speaker 1: in mind, it's two factors. It's how many doses of

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Speaker 1: the vaccine vaccine do we have available? And how can

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Speaker 1: we get it out to the people rapidly? So let's

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Speaker 1: talk about the process of getting it out. We know

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Speaker 1: that for responders, people in nursing homes, those are some

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Speaker 1: of the first recipients, are like the recipients of the vaccine.

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Speaker 1: Where do we go from there? You know, I think

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Speaker 1: it's really important to remember that those two populations are

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Speaker 1: coming first. So what that really means into one is

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Speaker 1: that our behaviors can't change. If you think about it,

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Speaker 1: those are not the individuals with the highest likelihood of

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Speaker 1: circulating the virus and the population or spreading it. Nursing

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Speaker 1: home residents are in nursing homes, They're not out there.

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Speaker 1: It's the twenty thirty nine year olds who are not

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Speaker 1: being vaccinated early on who are spreading it. So what

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Speaker 1: it means is that for the long game, we're looking

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Speaker 1: pretty good once we can get this world out, but

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Speaker 1: for right now, our behaviors can't change. So mercedies, this

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Speaker 1: is the question, right, I mean, how should it be

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Speaker 1: rolled out in order to prevent the deaths that are inevitable,

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Speaker 1: that are climbing that we're seeing record hospitalizations currently. How

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Speaker 1: do we best distribute in order to prevent the rampants

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Speaker 1: spread as many people are predicting. You know what I'd

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Speaker 1: like to see. I've heard some discussion about essential workers

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Speaker 1: who are delivery drivers, who are thrusts facing people in stores,

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Speaker 1: being eligible early on for the vaccine, and that would

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Speaker 1: solve two problems for for a large proportion of those workers.

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Speaker 1: Those individuals um their income isn't as high. They aren't

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Speaker 1: able to socially isolate themselves, they don't have vast homes

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Speaker 1: to be able to spread out, and those populations are

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Speaker 1: often at highest risk for the most severe outcomes and hospitalizations.

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Speaker 1: So it would be ideal to see that population in

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Speaker 1: the next round. The good news, Professors, We've had months

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Speaker 1: to think about this, how to roll it out. What

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Speaker 1: I still don't know, Maybe you can help me, is

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Speaker 1: how long does this last before we have to go

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Speaker 1: back again and get another shot, get another vaccination? So

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Speaker 1: as I understand it with fires, so you get one

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Speaker 1: shot twenty one days later or so you get another shot.

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Speaker 1: What is your immediately like after that? How long the antibodies? Therefore, professor,

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Speaker 1: do we know the answers to that? If I had

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Speaker 1: the answered of that, I would be making a lot

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Speaker 1: of money. I think right now we still are in

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Speaker 1: the position where we know what we know and we

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Speaker 1: don't know what we don't know, and so I am

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Speaker 1: not sure about that answer. How long one will remain immune?

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Speaker 1: I think you know that information stands to come out

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Speaker 1: at the time when they actually publish their trial results.

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Speaker 1: Right now, they're getting emergency use authorization we haven't seen

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Speaker 1: the final reports, and hopefully there'll be some hints in there.

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Speaker 1: Are you a little worried about the duration that it

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Speaker 1: might be? Do you have a range in mind? Professor?

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Speaker 1: I apologize of putting you on the spot, because there

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Speaker 1: is a belief at the moment, and we all share

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Speaker 1: this hope that by the middle of the next year

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Speaker 1: in places across the world around the planet, we've got

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Speaker 1: society to a position where we can roll back many

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Speaker 1: of these restrictions. But I think a big worry for

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Speaker 1: people would be if we had to go and do

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Speaker 1: this all over again, quarter after quarter to make sure

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Speaker 1: this last. That would be a much bigger effort. Do

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Speaker 1: you have a time range in mind? That would be

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Speaker 1: a much bigger effort. Um, you know. I think what

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Speaker 1: I remain hopeful is that this particular vaccine which I hear,

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Speaker 1: is a unique approach to vaccination and how it's targeting

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Speaker 1: the virus, that it will not be like the flu

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Speaker 1: vaccine that wrap so the flu the flu virus um

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Speaker 1: mutates quickly. The coronavirus doesn't mutate quite as well I

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Speaker 1: think as the flu virus. However, and the way that

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Speaker 1: these vaccines have been developed there's something that is targeting

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Speaker 1: something a little more central to the virus, so that

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Speaker 1: ideally this will last longer than one year. However, I

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Speaker 1: haven't seen the final report yet, Mercedes. I just want

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Speaker 1: to wrap up with where we are in the pandemic.

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Speaker 1: Right now, we are seeing record numbers of cases in

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Speaker 1: the United States or seeing hospitalizations we're seeing I see

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Speaker 1: you units at capacity. How concerned are you about the

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Speaker 1: next month in terms of the worst aspect of this pandemic?

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Speaker 1: You know, the worst aspect of this is, you know,

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Speaker 1: you can always build field hospitals, but how are you

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Speaker 1: going to staff them? As we are filling up the

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Speaker 1: hospitals and I see us and using up the life

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Speaker 1: saving equipment. We need people to run that equipment, and

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Speaker 1: that's where we're actually running short right now. So that

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Speaker 1: concerns me a great deal. Our healthcare providers are burnt out,

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Speaker 1: they are exhausted. This is emotionally and physically very draining.

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Speaker 1: So it's very concerning and the only the best thing

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Speaker 1: that we can do is to adhere to mask wearing

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Speaker 1: and social distancing so that we can try to tamp

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Speaker 1: this down. Professor. We appreciate your hard work and your

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Speaker 1: contribution to this program. Thank you, Mersides Knathan of Northwestern University.

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Speaker 1: Do you and I folk said the same thing. We

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Speaker 1: make the mistake of calling it stimulus. What this really

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Speaker 1: is is eight it's an aid package to get us

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Speaker 1: to the end of Q two. The stimulus, that's something

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Speaker 1: you've got to think about after that. I'm really curious

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Speaker 1: to see the details of the plan. We're gonna be

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Speaker 1: getting it today, but I'm curious to see whether they're

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Speaker 1: going to be any direct payments to individuals. The word

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Speaker 1: is there won't be. How they get that aid out

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Speaker 1: to small businesses. The details matter, John, especially as the

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Speaker 1: pandemic is getting worse, and will we get that one

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Speaker 1: hundred and sixty billion dollars in state and locally. Tina

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Speaker 1: Fordham joins us now even hest head of global political strategy. Tina,

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Speaker 1: let's just start with your read on negotiations down on

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Speaker 1: Capitol here. It certainly sounds a lot more constructive over

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Speaker 1: the last week or so. What's your take, Tina, um Well,

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Speaker 1: I always get worried when it starts to sound constructive

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Speaker 1: because part of that, you know, signal that talks are

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Speaker 1: going well is in itself just uh reflects the political

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Speaker 1: imperative for both sides to be seen to be working

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Speaker 1: in the country's best interest during this time of crisis.

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Speaker 1: You know, everyone uses the same expression the devil in

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Speaker 1: the details. I think, um, the observation about this being

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Speaker 1: aid rather than stimulus is a very astute one because

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Speaker 1: we forget how toxic um the term physical stimulus can

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Speaker 1: be in the US context. So I am less optimistic

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Speaker 1: actually now than I was the last time, but then

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Speaker 1: I was wrong. So um, I think that it's in

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Speaker 1: the it's going to be in Republican interests to be

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Speaker 1: seen to be driving a very hard bargain, especially as

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Speaker 1: we have this signpost of January five, the Georgia runoffs coming.

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Speaker 1: So what's the main opposition here? Is it's still the

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Speaker 1: state and local funding. Is that going to be the

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Speaker 1: main sticking point? I think that there is room for

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Speaker 1: for compromise, but that Republicans will be wanting to be

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Speaker 1: seen to be driving the harder bargain. And one of

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Speaker 1: the new twists that we've uh, you know, we've experienced

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Speaker 1: since the presidential elections is Republicans finding religion again on

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Speaker 1: on deficit spending. Right, So this or the size of

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Speaker 1: the deficit, so um, they are not going to be

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Speaker 1: wont to be giving into Democrats. And that's why I

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Speaker 1: worry that markets are getting ahead of the politics on

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Speaker 1: this one, because we haven't had a Lane duck session

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Speaker 1: quite as contentious as this one is likely to be.

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Speaker 1: And I'm worried that the scorched earth tendencies um that

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Speaker 1: we've seen thus far might actually bleed into the stimulus discussions.

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Speaker 1: I'm struggling to see where you the deficit hawks are

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Speaker 1: coming back into play here. I mean, even Mitch McConnell,

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Speaker 1: he did propose a skinny bill. He did, there was

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Speaker 1: talk about him signing onto the bipartisan agreement once the

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Speaker 1: details were hashed out. President Trump seems amenable, open to

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Speaker 1: the idea of signing off. Who are the deficit hawks, listen.

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Speaker 1: I think that we've seen a different tone in Congress.

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Speaker 1: I'm here in London talking to you about global macro um.

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Speaker 1: I think that the political imperative to get a stimulus

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Speaker 1: deal done was there, um, you know, before the elections,

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Speaker 1: and was calling it for them. I'm worried that a

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Speaker 1: contentious um, particularly contentious and polarized mood, where we even

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Speaker 1: haven't even got people willing to recognize the results of

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Speaker 1: the presidential elections in the House gives a lot of

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Speaker 1: wiggle room to to say that, you know, we want

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Speaker 1: to do the right thing for the country, but we

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Speaker 1: just can't get there. Tina, You've mentioned the importance of

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Speaker 1: language that it's aid, not stimulus, because that word is

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Speaker 1: toxic in parts of the country and parts of the

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Speaker 1: politics of the United States of America. When you start

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Speaker 1: to hear the words state aid to another person, that's

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Speaker 1: just a bailout of poorly rand states. And we've heard

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Speaker 1: that so many times from the administration. I heard it

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Speaker 1: from them directly on Friday A. Tina, I'm wondering, from

432
00:23:31,440 --> 00:23:34,119
Speaker 1: your perspective, is there any way that they can offer

433
00:23:34,160 --> 00:23:39,040
Speaker 1: ad to states without that being considered a state bailout

434
00:23:39,080 --> 00:23:42,080
Speaker 1: of what many Republicans and the electorate might consider to

435
00:23:42,119 --> 00:23:46,840
Speaker 1: be poorly run states. Well, to me, this is all code.

436
00:23:46,880 --> 00:23:49,480
Speaker 1: You know, I'm an American who's been living outside my

437
00:23:49,600 --> 00:23:52,679
Speaker 1: country for over twenty years. There didn't used to be

438
00:23:52,760 --> 00:23:56,600
Speaker 1: this debate about which states were run well by, you know,

439
00:23:56,680 --> 00:24:00,520
Speaker 1: by governors of which side. So I'm really a worried

440
00:24:00,560 --> 00:24:05,160
Speaker 1: that we're even normalizing this discussion. This is the biggest

441
00:24:05,320 --> 00:24:09,040
Speaker 1: crisis in decades in terms of its impact on lives

442
00:24:09,119 --> 00:24:12,800
Speaker 1: and livelihoods. And to suggest that it's in any way

443
00:24:13,320 --> 00:24:17,159
Speaker 1: rational or reasonable to do anything other than passive stimulus

444
00:24:17,240 --> 00:24:20,159
Speaker 1: right now, I think doesn't put the you know, the

445
00:24:20,200 --> 00:24:23,440
Speaker 1: economic interests of the country at heart, Which is why

446
00:24:23,440 --> 00:24:27,159
Speaker 1: I was saying what I did about the return of

447
00:24:27,200 --> 00:24:31,760
Speaker 1: fiscal discipline and frankly finding pretext to avoid doing what

448
00:24:31,880 --> 00:24:35,480
Speaker 1: needs to be done. The United States in a crisis

449
00:24:35,480 --> 00:24:38,520
Speaker 1: where people are losing their lives shouldn't be differentiated between

450
00:24:38,600 --> 00:24:41,159
Speaker 1: poorly run states and well run states that just happened

451
00:24:41,160 --> 00:24:44,880
Speaker 1: to be led by a leader of a particular political stribe.

452
00:24:44,920 --> 00:24:48,399
Speaker 1: So to me, this is a pretext to not do

453
00:24:48,520 --> 00:24:52,480
Speaker 1: what needs to be done, what every economist, central bankers

454
00:24:52,920 --> 00:24:55,440
Speaker 1: you know have all agreed upon. This is getting held

455
00:24:55,520 --> 00:24:59,760
Speaker 1: up in Congress. Well, I think ta one step further.

456
00:24:59,800 --> 00:25:02,560
Speaker 1: I think what totally exposes the intellectual inconsistency and the

457
00:25:02,600 --> 00:25:05,200
Speaker 1: dishonest state in some parts of the debate is that

458
00:25:05,200 --> 00:25:08,000
Speaker 1: those very same people who are unwilling to offer aid

459
00:25:08,000 --> 00:25:10,320
Speaker 1: to what they consider to be poorly run states are

460
00:25:10,359 --> 00:25:14,560
Speaker 1: also considering offering aid to airlines, which many people on

461
00:25:14,600 --> 00:25:17,800
Speaker 1: Wall Street would consider to be poorly run airlines in

462
00:25:17,800 --> 00:25:20,040
Speaker 1: the context that they have no cash when it hit

463
00:25:20,080 --> 00:25:24,959
Speaker 1: the fact, yes, poorly run enterprises, shanking, shrinking enterprises, even

464
00:25:25,359 --> 00:25:29,800
Speaker 1: dying enterprises. Absolutely, So, I guess I think you kind

465
00:25:29,800 --> 00:25:32,760
Speaker 1: of struck a nerve. I'm just not willing to use

466
00:25:32,840 --> 00:25:36,480
Speaker 1: the current terms to to have this debate. This stimulus

467
00:25:36,520 --> 00:25:41,520
Speaker 1: should be passed um. In Europe where I am, governments

468
00:25:41,600 --> 00:25:46,840
Speaker 1: composed of many political parties are are are finding common

469
00:25:46,880 --> 00:25:49,760
Speaker 1: cause and we're seeing these things past so that people

470
00:25:49,800 --> 00:25:52,760
Speaker 1: can move on with their lives. And we have a

471
00:25:52,800 --> 00:25:55,119
Speaker 1: few more months to go. Now. What really worries me

472
00:25:55,200 --> 00:25:57,560
Speaker 1: about what's happening in the United States is we have

473
00:25:58,000 --> 00:25:59,920
Speaker 1: in some ways the worst of all worlds. We have

474
00:26:00,000 --> 00:26:03,720
Speaker 1: haven't even had, you know, kind of fully fledged lockdowns.

475
00:26:03,760 --> 00:26:07,679
Speaker 1: They've been partial, and they've been late. Of vaccine um,

476
00:26:07,720 --> 00:26:11,120
Speaker 1: you know, miraculously or rather thanks to the hard work

477
00:26:11,160 --> 00:26:15,160
Speaker 1: of scientists and epidemiologists, is coming, but we have many

478
00:26:15,240 --> 00:26:18,240
Speaker 1: months to go before that rollout. And markets are very

479
00:26:18,240 --> 00:26:21,960
Speaker 1: buoyant um on the you know, the amazing news that

480
00:26:22,119 --> 00:26:25,560
Speaker 1: vaccine is coming, but we could have many months delay,

481
00:26:25,640 --> 00:26:28,119
Speaker 1: which is why I worry about what I call vacs

482
00:26:28,160 --> 00:26:34,120
Speaker 1: popular risk. The combination of weak state capacity as in country,

483
00:26:34,200 --> 00:26:38,119
Speaker 1: not individual US states, but weak state capacity combined with

484
00:26:38,200 --> 00:26:42,000
Speaker 1: anti vac sentiment um and you know, compounded by these

485
00:26:42,080 --> 00:26:45,240
Speaker 1: kinds of delays in the stimulus that's necessary, could really

486
00:26:45,280 --> 00:26:49,120
Speaker 1: make things pretty problematic in the coming months. Some challenges

487
00:26:49,160 --> 00:26:51,160
Speaker 1: still to come in the net term, that's for sure. Tina,

488
00:26:51,200 --> 00:26:53,080
Speaker 1: thank you, thank you for your time this morning. Tina

489
00:26:53,119 --> 00:27:00,800
Speaker 1: fordom there of even heard when sense of normal? What

490
00:27:00,880 --> 00:27:02,720
Speaker 1: is normally? Then? Look like, let's bring it down on

491
00:27:02,920 --> 00:27:06,680
Speaker 1: BMP Parabaut Chief US Economists ahead of mac cris strategy down.

492
00:27:06,720 --> 00:27:09,399
Speaker 1: We keep hearing that vaccinations coming back half of twenty one,

493
00:27:09,400 --> 00:27:12,720
Speaker 1: it's about the return to normal. What's normal? In the

494
00:27:12,760 --> 00:27:14,960
Speaker 1: conversations that you have, what is normal sound like in

495
00:27:14,960 --> 00:27:19,080
Speaker 1: the back half of twenty one? Yeah? Normal? Uh, thanks

496
00:27:19,119 --> 00:27:24,399
Speaker 1: for the question. Normal probably means a growth range quote,

497
00:27:24,440 --> 00:27:28,280
Speaker 1: a lot closer to to Launder potential in the you know,

498
00:27:28,359 --> 00:27:31,200
Speaker 1: two to two and a half, maybe well one and

499
00:27:31,280 --> 00:27:36,119
Speaker 1: half range, but not the eye poppingly large double digit

500
00:27:36,200 --> 00:27:39,720
Speaker 1: annualized you know, thirty plus and thirty minus, a type

501
00:27:39,720 --> 00:27:43,040
Speaker 1: of growth that we've seen before. But I think, you know,

502
00:27:43,440 --> 00:27:46,160
Speaker 1: beyond just the simple numbers, though it's a real question

503
00:27:46,400 --> 00:27:50,760
Speaker 1: as to uh, not so much. What happens to to demand? UM?

504
00:27:50,840 --> 00:27:53,840
Speaker 1: You know, we think that UM, a lot of demand

505
00:27:53,880 --> 00:27:58,199
Speaker 1: will will try and renormalize UM. But where are the

506
00:27:58,240 --> 00:28:00,960
Speaker 1: areas where UM were Our supply is going to have

507
00:28:01,000 --> 00:28:03,760
Speaker 1: to adjust to a new reality that demand is never

508
00:28:03,800 --> 00:28:06,000
Speaker 1: going to come back. And we were just hearing about

509
00:28:06,760 --> 00:28:12,560
Speaker 1: about people's uh locational preferences. UM. Does this mean that

510
00:28:13,200 --> 00:28:16,719
Speaker 1: demand for high end luxury condos in Manhattan is going

511
00:28:16,760 --> 00:28:19,879
Speaker 1: to change? Does this mean that people's business travel is

512
00:28:19,880 --> 00:28:23,240
Speaker 1: going to change? Does this mean not just avolving demand,

513
00:28:23,240 --> 00:28:26,360
Speaker 1: but does this mean that demand for digital services UM

514
00:28:26,480 --> 00:28:28,760
Speaker 1: is going to be at a new permanent high UM.

515
00:28:29,320 --> 00:28:31,119
Speaker 1: A lot of companies are going to have to adjust

516
00:28:31,160 --> 00:28:34,320
Speaker 1: to this and UM. While this is opportunities for some

517
00:28:34,400 --> 00:28:36,280
Speaker 1: of these are challenges for a lot of others. And

518
00:28:36,280 --> 00:28:38,640
Speaker 1: it raises a question about inflation. How do you measure

519
00:28:38,680 --> 00:28:42,960
Speaker 1: inflation and fundamentally changing economy into one that is more

520
00:28:43,000 --> 00:28:46,160
Speaker 1: dominant dominated by tech. What do you see in terms

521
00:28:46,240 --> 00:28:50,520
Speaker 1: of inflation picking up? And how should we be measuring it? Yeah? Well,

522
00:28:51,000 --> 00:28:54,280
Speaker 1: the classic ways to try and assess where inflation is

523
00:28:54,320 --> 00:28:58,160
Speaker 1: going This, of course, so looking at the measurement of

524
00:28:58,280 --> 00:29:02,200
Speaker 1: outputs lack in the economy, and we actually just released

525
00:29:02,400 --> 00:29:07,560
Speaker 1: our latest global outlook UM where we see UH technical

526
00:29:07,600 --> 00:29:11,800
Speaker 1: measures of slack in the economy UM close by the

527
00:29:12,000 --> 00:29:16,920
Speaker 1: end of two UM. So we do actually UM see

528
00:29:17,520 --> 00:29:22,560
Speaker 1: a bit higher inflation coming UM, putting aside denomination effects

529
00:29:22,600 --> 00:29:28,720
Speaker 1: starting in UH late early three UM. But really, how

530
00:29:29,360 --> 00:29:31,600
Speaker 1: widespread is this gonna be? Is this going to be

531
00:29:31,640 --> 00:29:36,280
Speaker 1: a general move hiring inflation across the overall economy? Are

532
00:29:36,320 --> 00:29:39,200
Speaker 1: we going to see parts of the economy still in

533
00:29:39,240 --> 00:29:43,560
Speaker 1: the doldrums while others are red hot due to you know,

534
00:29:43,640 --> 00:29:47,120
Speaker 1: more more demand. I think that's gonna be UM. And

535
00:29:47,120 --> 00:29:50,560
Speaker 1: And is that going to translate into higher weight pressure

536
00:29:50,920 --> 00:29:54,440
Speaker 1: more generally or again just in a few segments of

537
00:29:54,520 --> 00:29:57,560
Speaker 1: the labor market UM. I think that's a big question

538
00:29:57,600 --> 00:30:00,160
Speaker 1: that actually the new administration will be asking themselves. And

539
00:30:00,200 --> 00:30:02,600
Speaker 1: it's also really hard to even imagine if you think

540
00:30:02,600 --> 00:30:05,040
Speaker 1: about some of the fiscal support plans and the checks

541
00:30:05,080 --> 00:30:07,520
Speaker 1: that if it's set out to individuals, I mean, if

542
00:30:07,560 --> 00:30:10,560
Speaker 1: the government were to engage in another round of helicopter money,

543
00:30:10,640 --> 00:30:14,240
Speaker 1: essentially with that change fundamentally change your view on inflation.

544
00:30:14,280 --> 00:30:18,040
Speaker 1: The United States. Now, I don't think it will fundamentally

545
00:30:18,120 --> 00:30:22,000
Speaker 1: change it, but I do think it will certainly ward

546
00:30:22,040 --> 00:30:25,800
Speaker 1: off some of the risk that we could fall into

547
00:30:25,920 --> 00:30:30,320
Speaker 1: a deflationary trap. I think inflationary expectations, at least as

548
00:30:30,360 --> 00:30:34,000
Speaker 1: you measure them by by market break evens, that they're

549
00:30:34,040 --> 00:30:39,520
Speaker 1: kind of tettering on the edge of potentially moving lower.

550
00:30:39,920 --> 00:30:42,800
Speaker 1: Um if um, this does look like there's going to

551
00:30:42,840 --> 00:30:45,480
Speaker 1: be lasting scars in the economy, and so the you know,

552
00:30:45,520 --> 00:30:47,640
Speaker 1: the big recovery and break evens that we've seen in

553
00:30:47,640 --> 00:30:50,200
Speaker 1: the last couple of months is I think out of

554
00:30:50,600 --> 00:30:53,880
Speaker 1: hope that the scars will be less damaging as the

555
00:30:53,920 --> 00:30:57,640
Speaker 1: vaccine is around the corner. Um. But the question is, uh,

556
00:30:58,160 --> 00:31:01,600
Speaker 1: can there be enough fiscal ports to tide us through

557
00:31:01,640 --> 00:31:05,719
Speaker 1: this transition until the vaccine arrives in a way that

558
00:31:05,760 --> 00:31:09,959
Speaker 1: will continue to support inflationary explications in the future. UM. So,

559
00:31:10,000 --> 00:31:13,560
Speaker 1: I think that's probably the most important way in which

560
00:31:14,400 --> 00:31:18,880
Speaker 1: just this immediate physical support can nevertheless have long term

561
00:31:18,880 --> 00:31:22,200
Speaker 1: impacts of part of the economy. Well, Dan, let's make

562
00:31:22,200 --> 00:31:24,400
Speaker 1: it really simple and just wrap up with this. And

563
00:31:24,440 --> 00:31:27,160
Speaker 1: I think this is why the two thousand that kind

564
00:31:27,160 --> 00:31:29,320
Speaker 1: of number in payrolls like we've got last week is

565
00:31:29,360 --> 00:31:33,120
Speaker 1: so important. How many jobs do we need to actually

566
00:31:33,600 --> 00:31:37,400
Speaker 1: generate to actually fill the gap of the last nine

567
00:31:37,400 --> 00:31:39,280
Speaker 1: months down? And how long would it take it a

568
00:31:39,360 --> 00:31:42,840
Speaker 1: right two fifty k to get it done. Yeah, we're

569
00:31:42,840 --> 00:31:48,720
Speaker 1: talking about uh millions of jobs are still displaced. Now.

570
00:31:48,720 --> 00:31:51,400
Speaker 1: It's a big open question how much of those are

571
00:31:51,440 --> 00:31:54,160
Speaker 1: going to be perfectly lost and how much of them,

572
00:31:54,240 --> 00:31:57,160
Speaker 1: you know, should be prominently lost. I think that's gonna

573
00:31:57,200 --> 00:32:00,560
Speaker 1: be the real sticking point here. Uh uh. You know,

574
00:32:00,560 --> 00:32:03,719
Speaker 1: there's no question that some kinds of jobs are going

575
00:32:03,760 --> 00:32:07,280
Speaker 1: to have to go away. Um, the more the new normal,

576
00:32:07,400 --> 00:32:09,840
Speaker 1: as you said, or the post pandemic normal looks different

577
00:32:10,000 --> 00:32:14,680
Speaker 1: from the pre pandemic norma. But are those necessarily have

578
00:32:14,800 --> 00:32:18,120
Speaker 1: to go away because the new US supply adjust to

579
00:32:18,160 --> 00:32:23,200
Speaker 1: the new reality, or are they unnecessarily caused um uh,

580
00:32:23,240 --> 00:32:27,560
Speaker 1: you know, because of bankruptcies or liquidity is advents or

581
00:32:27,600 --> 00:32:31,520
Speaker 1: things like that. Um. That's uh uh, I'm sure going

582
00:32:31,560 --> 00:32:34,360
Speaker 1: to be in the minds of UM, not just again

583
00:32:34,400 --> 00:32:38,160
Speaker 1: administration officials, but also a Congress UM as they consider

584
00:32:38,480 --> 00:32:43,000
Speaker 1: UM debating this this new stimulus package. Dann writes cash

585
00:32:43,080 --> 00:32:45,200
Speaker 1: ups as always my best to you and at saying Donna.

586
00:32:46,640 --> 00:32:50,800
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

587
00:32:50,880 --> 00:32:56,200
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

588
00:32:56,240 --> 00:33:00,480
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before

589
00:33:00,520 --> 00:33:04,320
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

590
00:33:04,440 --> 00:33:04,720
Speaker 1: Radio