1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa Brownowitz Jay Lee, we bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,280 Speaker 1: international relations. Find Bloomberg Surveillance, an Apple podcast, SoundCloud, Bloomberg 5 00:00:23,360 --> 00:00:29,680 Speaker 1: dot Com and of course on the Bloomberg Terminal. Let's 6 00:00:29,680 --> 00:00:33,400 Speaker 1: bringing Eric Friedman us Band Cassett Management, Chief Investment Officer. Eric. 7 00:00:33,680 --> 00:00:36,080 Speaker 1: Let's start right here and not with Ted Lasso. I'll 8 00:00:36,080 --> 00:00:39,360 Speaker 1: save you. Don't worry. You've asked the important question. Is 9 00:00:39,440 --> 00:00:41,960 Speaker 1: this just a little correction or is this a transition 10 00:00:41,960 --> 00:00:45,760 Speaker 1: into something bigger? Which one is it? Jonathan, We think 11 00:00:45,800 --> 00:00:48,400 Speaker 1: it is a just a pause as opposed to a 12 00:00:48,440 --> 00:00:51,920 Speaker 1: phase transition. Really two reasons behind that. Number one is 13 00:00:51,960 --> 00:00:55,520 Speaker 1: we think there's this portcoll between or we're calling Horizon 14 00:00:55,600 --> 00:00:58,600 Speaker 1: one and Horizon to Horizon one is the reopening investment 15 00:00:58,720 --> 00:01:02,720 Speaker 1: Horizon the gra usual mobility increases, more flights and and 16 00:01:02,880 --> 00:01:06,240 Speaker 1: more mobility across cities. Horizon too, is what happens once 17 00:01:06,240 --> 00:01:09,560 Speaker 1: we're already there, once that reopening occurred. And so we 18 00:01:09,640 --> 00:01:11,800 Speaker 1: do think that the fits and starts that we're seeing 19 00:01:11,800 --> 00:01:15,480 Speaker 1: in Horizon one will have corrections like this, And we 20 00:01:15,560 --> 00:01:17,399 Speaker 1: also think that probably a little nuance here is the 21 00:01:17,400 --> 00:01:20,280 Speaker 1: bond market is likely already pricing in horizon to the 22 00:01:20,280 --> 00:01:24,160 Speaker 1: eternal value of FED funds likely lower, as well as 23 00:01:24,400 --> 00:01:28,759 Speaker 1: general productivity and demographics weaker. So we think this this 24 00:01:28,800 --> 00:01:31,639 Speaker 1: push pull continue, but we're still bullish. We're still sticking 25 00:01:31,680 --> 00:01:34,399 Speaker 1: with that that that growth mentality. Eric, you're write an 26 00:01:34,400 --> 00:01:38,560 Speaker 1: extremely sober adult note. We don't see enough of those. 27 00:01:38,600 --> 00:01:41,560 Speaker 1: It's from a button down banker with belt and suspenders. 28 00:01:41,600 --> 00:01:45,800 Speaker 1: I get it. When there's a phase transition, how do 29 00:01:45,880 --> 00:01:49,640 Speaker 1: you know when to make that transition to a different 30 00:01:49,720 --> 00:01:54,840 Speaker 1: portfolio allocation. The biggest thing that we're focused on early 31 00:01:54,880 --> 00:01:57,520 Speaker 1: three variables. Number one is the dollar, and what we're 32 00:01:57,520 --> 00:01:59,559 Speaker 1: looking at the dollar is a is a rise above 33 00:01:59,640 --> 00:02:01,560 Speaker 1: ninety for ninety four and a half the d X 34 00:02:01,720 --> 00:02:04,400 Speaker 1: Y or one twelve in the trade WAD Dollar Index. 35 00:02:04,560 --> 00:02:07,360 Speaker 1: Number two would be the tenure. We think a test 36 00:02:07,440 --> 00:02:09,680 Speaker 1: of let's call it one tin down to one percent, 37 00:02:10,280 --> 00:02:12,880 Speaker 1: that would signify that the bond market is pricing and 38 00:02:13,080 --> 00:02:16,000 Speaker 1: really worse rising to by our parlance. And I think 39 00:02:16,000 --> 00:02:18,400 Speaker 1: the final is going to be our viewpoint, and earnings 40 00:02:18,480 --> 00:02:20,520 Speaker 1: is mentioned earlier, and Toto does a great job of 41 00:02:20,560 --> 00:02:23,280 Speaker 1: this talking about rate of change. We are in a 42 00:02:23,400 --> 00:02:26,120 Speaker 1: very delicate position right now with in terms of both 43 00:02:26,480 --> 00:02:29,960 Speaker 1: revenue forecasts as well as earnings forecast. If we see 44 00:02:30,000 --> 00:02:32,840 Speaker 1: some deterioration there as we get deeper into this recording season, 45 00:02:33,280 --> 00:02:34,920 Speaker 1: that was signified to us that we need to come 46 00:02:34,960 --> 00:02:38,440 Speaker 1: off that growth mindset, that that pro risk mindset in 47 00:02:38,520 --> 00:02:40,800 Speaker 1: the more of a of a neutral position. That's where 48 00:02:40,720 --> 00:02:43,560 Speaker 1: our biases right now. Eric, you have bond guys like 49 00:02:43,639 --> 00:02:46,520 Speaker 1: Jeff Gunlock of Double Line saying that stocks are attractive 50 00:02:46,520 --> 00:02:49,400 Speaker 1: on a relative basis because a one on the tenure 51 00:02:49,520 --> 00:02:54,680 Speaker 1: doesn't make sense. How are you thinking about relative value? Yeah, 52 00:02:54,720 --> 00:02:57,520 Speaker 1: it's a great question, Taylor. Basically two things we're looking at. 53 00:02:57,600 --> 00:02:59,880 Speaker 1: Number one is if you look at the risk premium, 54 00:03:00,040 --> 00:03:02,520 Speaker 1: so wonkish term and basically shore there's a difference between 55 00:03:02,680 --> 00:03:06,280 Speaker 1: you know, the dividend yield of global equities versus UH 56 00:03:06,440 --> 00:03:10,600 Speaker 1: tenure or even global global rates. It's really attractive. Stocks 57 00:03:10,600 --> 00:03:13,680 Speaker 1: look very attractive versus fixed income versus their own history. 58 00:03:13,720 --> 00:03:17,120 Speaker 1: Stocks are is certainly in the top quartile of expensive, 59 00:03:17,280 --> 00:03:20,320 Speaker 1: So we think fair value for the tenure, Taylor is 60 00:03:20,360 --> 00:03:23,320 Speaker 1: likely around one sixty one. Doesn't mean we have to 61 00:03:23,360 --> 00:03:28,000 Speaker 1: get there immediately, but our viewpoint is a gradual re retracing, 62 00:03:28,000 --> 00:03:31,080 Speaker 1: if you will. Upward in bondyls suggest that that stocks 63 00:03:31,120 --> 00:03:33,280 Speaker 1: probably had a little more value here, but you have 64 00:03:33,320 --> 00:03:35,760 Speaker 1: to look at them on both an absolute basis, from 65 00:03:35,800 --> 00:03:39,040 Speaker 1: a relative value standpoint, on a risk premium basis as 66 00:03:39,080 --> 00:03:42,000 Speaker 1: well versus their own history. So relative values certainly favors 67 00:03:42,360 --> 00:03:44,520 Speaker 1: equities that were fixed incoming. Eric, what on earth is 68 00:03:44,560 --> 00:03:46,960 Speaker 1: fair value in a bond market with a huge monster 69 00:03:47,080 --> 00:03:49,920 Speaker 1: sized and sensitive by a price in sensitive buy? What's 70 00:03:49,920 --> 00:03:52,280 Speaker 1: fair value in the treasury market these days? How do 71 00:03:52,320 --> 00:03:55,360 Speaker 1: we even come up with that? They're almost are three 72 00:03:55,360 --> 00:03:58,600 Speaker 1: waves of buyers, Jonathan. You have you have the general 73 00:03:58,640 --> 00:04:01,360 Speaker 1: speculations of people making making bets on where ten years ago. 74 00:04:01,440 --> 00:04:04,680 Speaker 1: You have hedgers in terms of mortgage as well as 75 00:04:04,720 --> 00:04:07,640 Speaker 1: as pension pension bars, and you have i'd say, just 76 00:04:07,680 --> 00:04:11,960 Speaker 1: a steady drumbeat of FED participation. So tough to have 77 00:04:12,040 --> 00:04:15,360 Speaker 1: an edge on speculators. But if you look at what's 78 00:04:15,360 --> 00:04:17,479 Speaker 1: happening in the mortgage market, if you know what's happening 79 00:04:18,080 --> 00:04:21,320 Speaker 1: with with respect to pension funds, those liabilities are getting 80 00:04:21,320 --> 00:04:24,279 Speaker 1: more expensive, So that's almost like that that short gamma 81 00:04:24,360 --> 00:04:27,440 Speaker 1: position continues to grow. That means people are stepping back 82 00:04:27,480 --> 00:04:29,760 Speaker 1: into the bond market. So again we think that position 83 00:04:29,800 --> 00:04:32,400 Speaker 1: gets cleaned up and a gradual retracement up to that 84 00:04:32,440 --> 00:04:34,960 Speaker 1: one sixty level is more likely. But again it will 85 00:04:35,000 --> 00:04:37,680 Speaker 1: happen on a on a very phased, very gradual basis. 86 00:04:37,680 --> 00:04:39,440 Speaker 1: All Right, we've gotta naven that it's gonna catch up 87 00:04:39,480 --> 00:04:45,880 Speaker 1: set right now in the pandemic. It has been a 88 00:04:45,960 --> 00:04:48,880 Speaker 1: joy to speak to Buck then Sadi with Johns Hopkins 89 00:04:48,960 --> 00:04:51,240 Speaker 1: or expertise and emergency medicine. I want to go there 90 00:04:51,240 --> 00:04:54,040 Speaker 1: today back the instead of the geography that you are 91 00:04:54,200 --> 00:04:58,560 Speaker 1: expert at in emergency rooms at the Johns Hopkins Hospital, 92 00:04:59,240 --> 00:05:03,280 Speaker 1: there's gotta be a certain percentage of people working there 93 00:05:03,320 --> 00:05:06,680 Speaker 1: who are unvaccinated. There's got to be a certain percentage 94 00:05:06,720 --> 00:05:11,280 Speaker 1: of people coming into the emergency room unvaccinated. What do 95 00:05:11,360 --> 00:05:17,000 Speaker 1: you do the regarding employees of John's Hopkins Hospital. We 96 00:05:17,080 --> 00:05:21,440 Speaker 1: are vaccinated. We all do show our vaccine status um 97 00:05:21,480 --> 00:05:25,760 Speaker 1: that is now documented and recorded regarding unvaccinated patients, that 98 00:05:25,800 --> 00:05:28,200 Speaker 1: we have that knowledge on who's vaccinated and who's not. 99 00:05:28,800 --> 00:05:32,360 Speaker 1: My practice is to gown up and be ready if 100 00:05:32,400 --> 00:05:35,880 Speaker 1: I'm unsure of their vaccine status or their COVID status. Doctor. 101 00:05:35,920 --> 00:05:38,200 Speaker 1: I was very surprised to read the following state in 102 00:05:38,240 --> 00:05:41,240 Speaker 1: the New York Times that around six workers in the 103 00:05:41,279 --> 00:05:44,159 Speaker 1: city's public hospital system of vaccinated. Given what's happened in 104 00:05:44,160 --> 00:05:46,360 Speaker 1: the last year, I would have expected that number to 105 00:05:46,360 --> 00:05:49,880 Speaker 1: be far, far higher. Where is that resistance coming from, doctor, 106 00:05:51,160 --> 00:05:53,279 Speaker 1: So we feel like a lot of that resistance is 107 00:05:53,320 --> 00:05:57,880 Speaker 1: coming from our ancillary services. UM. There are still individuals who, 108 00:05:57,920 --> 00:06:02,400 Speaker 1: despite working in public health hospitals UM, have misconceptions or 109 00:06:02,400 --> 00:06:07,880 Speaker 1: concerns around But the medical systems have vaccine hesitancy, have UM, 110 00:06:07,920 --> 00:06:12,360 Speaker 1: you know, victims of misinformation, and so it is really 111 00:06:12,400 --> 00:06:15,279 Speaker 1: difficult to prove a counter factual. And that is something 112 00:06:15,279 --> 00:06:18,400 Speaker 1: we're still struggling with in all sectors of society, not 113 00:06:18,440 --> 00:06:21,040 Speaker 1: just public health hospitals. Don't to many people are characterizing 114 00:06:21,040 --> 00:06:24,000 Speaker 1: this is a political party issue. Do you think that's helpful? 115 00:06:25,279 --> 00:06:27,839 Speaker 1: It is not. This is not a political party issue. 116 00:06:27,880 --> 00:06:29,960 Speaker 1: This is not a national issue. This is a global 117 00:06:30,000 --> 00:06:33,159 Speaker 1: issue that affects every single one of us. Until we 118 00:06:33,200 --> 00:06:36,360 Speaker 1: reduce the amount of circulating virus and we get vaccinated, 119 00:06:36,839 --> 00:06:38,880 Speaker 1: we don't get to return back to normal. And it's 120 00:06:38,920 --> 00:06:44,360 Speaker 1: as simple as that, doctor. Are the vaccines effective against delta? 121 00:06:45,960 --> 00:06:49,799 Speaker 1: Vaccines are effectivigates delta. It is very common to see 122 00:06:50,160 --> 00:06:54,039 Speaker 1: individuals who still get sick despite having vaccines. We see 123 00:06:54,040 --> 00:06:57,359 Speaker 1: this every year with the flu um the fator vaccines 124 00:06:57,400 --> 00:07:00,839 Speaker 1: that they show a scent effectiveness two we after getting 125 00:07:00,839 --> 00:07:04,360 Speaker 1: your second dose. But that does mean that twelve out 126 00:07:04,360 --> 00:07:07,640 Speaker 1: of a hundred people will potentially still get the illness. 127 00:07:08,240 --> 00:07:11,120 Speaker 1: But we know that it's the disease faring vaccines. They're 128 00:07:11,200 --> 00:07:14,080 Speaker 1: less likely to be sivilial, less likely tendive, and the 129 00:07:14,120 --> 00:07:16,600 Speaker 1: I see, less likely to die. What do you think 130 00:07:16,600 --> 00:07:20,000 Speaker 1: it's going to take to see if schools can reopen 131 00:07:20,080 --> 00:07:22,160 Speaker 1: or not. In the fall, we were having a conversation 132 00:07:22,200 --> 00:07:25,480 Speaker 1: here that the markets perhaps might actually believe that something 133 00:07:25,600 --> 00:07:28,720 Speaker 1: is wrong if schools don't reopen. If that is the catalyst, 134 00:07:29,000 --> 00:07:30,840 Speaker 1: what do you think it takes for us to get there? 135 00:07:32,040 --> 00:07:33,720 Speaker 1: You know, I think we've learned a lot about how 136 00:07:33,760 --> 00:07:36,960 Speaker 1: to reopen school safety. In the spring of this year, 137 00:07:37,080 --> 00:07:42,080 Speaker 1: my daughter's school open. They used pods that they you know, 138 00:07:42,240 --> 00:07:46,800 Speaker 1: stegreg They created pods of play um classrooms didn't interact 139 00:07:47,160 --> 00:07:50,520 Speaker 1: those temperature checks yes, you know, it's a bit strange 140 00:07:50,560 --> 00:07:53,000 Speaker 1: taking your child into a temperature check every morning. But 141 00:07:53,040 --> 00:07:55,559 Speaker 1: I felt perfectly safe that my child was in school 142 00:07:55,560 --> 00:07:58,520 Speaker 1: with the precautions that were put in place. But I 143 00:07:58,520 --> 00:08:00,600 Speaker 1: want to talk to you about the too alogy and 144 00:08:00,680 --> 00:08:03,240 Speaker 1: microbiology because I just don't buy this for a minute. 145 00:08:03,800 --> 00:08:09,080 Speaker 1: We cured ourselves from the horrific child killer diphtheria. I 146 00:08:09,120 --> 00:08:11,600 Speaker 1: was on the back end of polio, Taylor, I believe 147 00:08:11,600 --> 00:08:16,600 Speaker 1: her amery mentioned earlier Senator McConnell's battle personally with polio. 148 00:08:17,400 --> 00:08:19,640 Speaker 1: I don't buy it for a minute that we haven't 149 00:08:19,680 --> 00:08:25,440 Speaker 1: done this before from bacteria. We got vaccinated. From VERA viruses, 150 00:08:25,600 --> 00:08:31,480 Speaker 1: we got vaccinated. What's different this time on? There's nothing different. 151 00:08:31,800 --> 00:08:34,880 Speaker 1: Vaccine innovations of it ahead of the curve um. Luckily, 152 00:08:34,960 --> 00:08:38,120 Speaker 1: we had the mr and A vaccine studies that we're 153 00:08:38,160 --> 00:08:41,000 Speaker 1: done for cancer drugs, which allowed us to find a 154 00:08:41,160 --> 00:08:45,480 Speaker 1: suitable vector um for all the vaccine and implement it rapidly. 155 00:08:46,040 --> 00:08:48,120 Speaker 1: We also do have viral back to vaccines as well, 156 00:08:48,120 --> 00:08:51,320 Speaker 1: which are extremely innovative UM, so nothing is different. We 157 00:08:51,360 --> 00:08:53,559 Speaker 1: have actually used all of our lessons learned and applied 158 00:08:53,559 --> 00:08:58,040 Speaker 1: them to the COVID N pandemic the challenges therapeutics. So 159 00:08:58,280 --> 00:09:02,440 Speaker 1: with bacteria, we have to biotics that affects the ability 160 00:09:02,480 --> 00:09:06,440 Speaker 1: of the bacteria to reproduce and stop infection. Viruses have 161 00:09:06,760 --> 00:09:09,360 Speaker 1: always been more trippy, tricky due to the way that 162 00:09:09,400 --> 00:09:12,959 Speaker 1: they replicate. How do we incentivize these people? I mean 163 00:09:13,000 --> 00:09:15,840 Speaker 1: people are saying, give them money, do this, do this, 164 00:09:15,960 --> 00:09:18,640 Speaker 1: do this. How do we get this fixed in a 165 00:09:18,760 --> 00:09:23,719 Speaker 1: Joe Biden speed? So there is two groups. There is 166 00:09:23,760 --> 00:09:28,960 Speaker 1: the hardcore conspiracy theories vaccines. They're you cannot change right, 167 00:09:29,000 --> 00:09:31,120 Speaker 1: I got it, I got it. But the majority of 168 00:09:31,160 --> 00:09:35,479 Speaker 1: the people are people that have a underestimated their vulnerability 169 00:09:35,559 --> 00:09:40,360 Speaker 1: to getting sick, second, overestimated the side effects of the vaccine, 170 00:09:40,640 --> 00:09:42,880 Speaker 1: and because they're kind of just lost, they have just 171 00:09:43,240 --> 00:09:45,520 Speaker 1: do nothing. Now that is a group that we target. 172 00:09:45,600 --> 00:09:48,880 Speaker 1: We to promote positive messaging around the vaccine. We need 173 00:09:48,920 --> 00:09:53,439 Speaker 1: to educate people with clear, concise facts about the true 174 00:09:53,520 --> 00:09:58,240 Speaker 1: risks of vaccination and stop over inflating the few side 175 00:09:58,240 --> 00:10:00,760 Speaker 1: effects that have been seen all the ice later cases 176 00:10:00,920 --> 00:10:04,079 Speaker 1: in social media. Do you think full authorization would have 177 00:10:04,240 --> 00:10:07,040 Speaker 1: pushed this issue forward and move away from just emergency 178 00:10:07,040 --> 00:10:12,120 Speaker 1: youth authorization of these vaccines. Unfortunately, yes, right. So I 179 00:10:12,160 --> 00:10:16,200 Speaker 1: think for the lay public, the difference between full authorization 180 00:10:16,280 --> 00:10:19,520 Speaker 1: and emergency youth authorization is one of the big sticking 181 00:10:19,600 --> 00:10:23,040 Speaker 1: points in their vaccine confidence. The truth of the matter 182 00:10:23,120 --> 00:10:27,040 Speaker 1: is the way that these studies were conducted was rigorous, 183 00:10:27,080 --> 00:10:29,680 Speaker 1: just as we would have conducted any other new drug 184 00:10:29,840 --> 00:10:34,360 Speaker 1: intervention study. UM. Due to the national reporting software, the 185 00:10:34,559 --> 00:10:38,360 Speaker 1: v A R EER software from CDC, we have national 186 00:10:38,400 --> 00:10:42,200 Speaker 1: reporting on vaccine side effects, which is phenomenal, and the 187 00:10:42,440 --> 00:10:46,520 Speaker 1: use case here is in the millions. And so I 188 00:10:46,640 --> 00:10:49,120 Speaker 1: think that having that sticky label that says this is 189 00:10:49,120 --> 00:10:52,959 Speaker 1: fully authorized, I think will improve people's confidence, although scientifically 190 00:10:53,040 --> 00:10:55,840 Speaker 1: it is unnecessary. Don't We appreciate your effort, that's for sure. 191 00:10:56,000 --> 00:10:57,640 Speaker 1: Thank you very much for being with us this morning. 192 00:10:57,720 --> 00:11:00,560 Speaker 1: Dr Bacti, Han Sarti. There, John's Hopkins Universe, the Associate 193 00:11:00,600 --> 00:11:03,400 Speaker 1: Professor of Emergency Medicine, on some of the issues time, 194 00:11:03,480 --> 00:11:06,439 Speaker 1: and those issues are always far more complex than some 195 00:11:06,480 --> 00:11:14,760 Speaker 1: people might want to debate. Right now, we go to 196 00:11:14,840 --> 00:11:18,960 Speaker 1: your content where content is king Michael Nathanson with Craig Moffatt. 197 00:11:18,960 --> 00:11:23,559 Speaker 1: Moffatt Nathanson has just been spectacular on all of this 198 00:11:23,720 --> 00:11:25,559 Speaker 1: stuff that we watch at home. And is there really 199 00:11:25,600 --> 00:11:29,280 Speaker 1: an opportunity to make money at it? Michael Nathanson, where's 200 00:11:29,280 --> 00:11:33,120 Speaker 1: the profit? Magnan Decide ellsse E says, it's all about profit. 201 00:11:33,200 --> 00:11:36,040 Speaker 1: It's all about getting out there and making money. Is 202 00:11:36,040 --> 00:11:41,200 Speaker 1: there an identifiable profit in the streaming business at this point? 203 00:11:41,320 --> 00:11:43,599 Speaker 1: There isn't how the profit is going back to the 204 00:11:43,880 --> 00:11:46,640 Speaker 1: consumer given all the discount it's being done. The consumer 205 00:11:46,760 --> 00:11:50,400 Speaker 1: is grabbing the profit and companies to subsidize from consumers 206 00:11:50,440 --> 00:11:53,920 Speaker 1: content habits. At this point, Comcast was able to make 207 00:11:53,960 --> 00:11:56,840 Speaker 1: that shift in cable TV to get the real profit 208 00:11:57,120 --> 00:12:00,240 Speaker 1: to real cash flow. Do you model an equivalency year 209 00:12:00,520 --> 00:12:04,160 Speaker 1: to what comcasted in cable TV or is this time different? 210 00:12:05,280 --> 00:12:08,760 Speaker 1: This time is different, Tom, We Netflix a goiling company. 211 00:12:09,000 --> 00:12:10,640 Speaker 1: The next three or four years, every people will make 212 00:12:11,000 --> 00:12:14,080 Speaker 1: money money to define this free cash flow, we just 213 00:12:14,160 --> 00:12:17,080 Speaker 1: see big black holes everywhere, right, And that's why you 214 00:12:17,160 --> 00:12:21,240 Speaker 1: had Discovery Warners Merge. That's why Comcast by comes rumored 215 00:12:21,280 --> 00:12:24,599 Speaker 1: to get together. These businesses are really capital intensive. I 216 00:12:24,600 --> 00:12:27,520 Speaker 1: don't think that's the same dynamics as the linear businesses 217 00:12:27,520 --> 00:12:33,199 Speaker 1: that we all do pring years. And Michael, this seems 218 00:12:33,240 --> 00:12:38,000 Speaker 1: to be abroad sectical and That's what gets my attention here. 219 00:12:38,000 --> 00:12:41,440 Speaker 1: This is neutral Netflix, neutral Weald Disney Company, neutral road coude. 220 00:12:41,840 --> 00:12:46,120 Speaker 1: You see this across the board, head, Jonathan. The problem is, 221 00:12:46,160 --> 00:12:48,120 Speaker 1: and I think it's to your previous guest stuff the 222 00:12:48,200 --> 00:12:51,040 Speaker 1: cost of money. You've got to look out five ten 223 00:12:51,200 --> 00:12:55,480 Speaker 1: years to see evaluation here be supportive to me. It's 224 00:12:55,520 --> 00:12:58,600 Speaker 1: just a long way to go, and everyone's so confident 225 00:12:58,600 --> 00:13:01,880 Speaker 1: about their data points that I just think the other 226 00:13:01,920 --> 00:13:04,280 Speaker 1: side of this trade, right, I mean, we know streaming 227 00:13:04,320 --> 00:13:07,559 Speaker 1: is the future, but the market has overpriced these assets 228 00:13:07,960 --> 00:13:09,600 Speaker 1: and I'm just gonna wait for a better entry points 229 00:13:09,600 --> 00:13:11,960 Speaker 1: at this point in time. Let's talk about that. What 230 00:13:12,000 --> 00:13:14,160 Speaker 1: would it take for you to say I'm wrong? Always 231 00:13:14,160 --> 00:13:16,280 Speaker 1: a good exercise, Michael. What would it take in the 232 00:13:16,320 --> 00:13:19,079 Speaker 1: coming year? Is there anything? Well? I would say a 233 00:13:19,080 --> 00:13:21,440 Speaker 1: couple of things. One is our view is that the 234 00:13:21,480 --> 00:13:25,080 Speaker 1: US is a very competitive market and it's hard to 235 00:13:25,080 --> 00:13:27,760 Speaker 1: eat profits out in the U s streaming business. I 236 00:13:27,800 --> 00:13:30,720 Speaker 1: think you need to see more people move into the sidelines, right. 237 00:13:30,760 --> 00:13:33,920 Speaker 1: You would see more consolidation. You would see Apple on Amazon, 238 00:13:34,440 --> 00:13:36,560 Speaker 1: you know, kind of step back and you would start 239 00:13:36,600 --> 00:13:39,559 Speaker 1: to see you need Netflix to start growing more quickly 240 00:13:39,559 --> 00:13:42,720 Speaker 1: in the US, which would point to a higher upside 241 00:13:42,800 --> 00:13:45,800 Speaker 1: you know, penetration case, right, So I think here you 242 00:13:45,840 --> 00:13:49,480 Speaker 1: need competition to lessen and you need um you know, 243 00:13:49,600 --> 00:13:54,040 Speaker 1: growth actually starts re accelerating against That's one. And then secondly, 244 00:13:54,080 --> 00:13:57,160 Speaker 1: I think internationally, you really need to see some of 245 00:13:57,360 --> 00:14:01,440 Speaker 1: the developing markets where there's very low were pricing really 246 00:14:01,440 --> 00:14:04,120 Speaker 1: start to show science of pricing power. So those are 247 00:14:04,200 --> 00:14:07,199 Speaker 1: to me the two things. Because you know, the profits 248 00:14:07,240 --> 00:14:10,440 Speaker 1: right now are in the US potentially, and the growth 249 00:14:10,480 --> 00:14:13,920 Speaker 1: is coming from low market places like India, low price 250 00:14:13,960 --> 00:14:17,640 Speaker 1: pricing markets, they just don't have great returns on invested capital. 251 00:14:17,960 --> 00:14:20,560 Speaker 1: And Michael, I've heard this a lot. The US customer 252 00:14:20,760 --> 00:14:24,080 Speaker 1: is more profitable than an international customer. How do we 253 00:14:24,120 --> 00:14:27,760 Speaker 1: get them to be even? How long does that take? Well, 254 00:14:28,000 --> 00:14:30,720 Speaker 1: it goes to you know, a big part of the 255 00:14:30,840 --> 00:14:33,520 Speaker 1: chaction story is developing markets, right, So you have Latin 256 00:14:33,520 --> 00:14:37,040 Speaker 1: America and age specific as the drivers of growth. But 257 00:14:37,160 --> 00:14:40,040 Speaker 1: those price points are really low, right. The rest of 258 00:14:40,040 --> 00:14:43,040 Speaker 1: the world price point outside Europe could be one half 259 00:14:43,040 --> 00:14:45,800 Speaker 1: to one third price of American customers. So it's just 260 00:14:45,800 --> 00:14:49,200 Speaker 1: can get a long time tailor for pricing to start elevating, right, 261 00:14:49,240 --> 00:14:52,520 Speaker 1: that's and before the pricing can elevate, you need to 262 00:14:52,560 --> 00:14:56,320 Speaker 1: give consumers a ton of content to make the product sticky, right, 263 00:14:56,320 --> 00:14:57,720 Speaker 1: So you need to an invest and this is the 264 00:14:57,720 --> 00:15:01,400 Speaker 1: biggest challenge. You to invest tons of dollions of dollars, 265 00:15:01,440 --> 00:15:05,320 Speaker 1: billions of dollars to make the content except you sticky 266 00:15:05,400 --> 00:15:08,400 Speaker 1: enough so hold on to customers and then too drive 267 00:15:08,440 --> 00:15:11,560 Speaker 1: pricing right, So it takes years investment to get to 268 00:15:11,680 --> 00:15:14,800 Speaker 1: that place which you start raising pricing again. The other 269 00:15:15,480 --> 00:15:19,040 Speaker 1: point that you made pretty well is about consolidation. I 270 00:15:19,120 --> 00:15:23,160 Speaker 1: was reading another of your colleagues notes talking about Amazon 271 00:15:23,240 --> 00:15:26,840 Speaker 1: purchasing MGM for about eight and a half billion dollars. 272 00:15:26,880 --> 00:15:30,200 Speaker 1: Why is it Netflix making more purchases should they be 273 00:15:30,400 --> 00:15:34,960 Speaker 1: What does consolidation in the industry look like to you? Yeah, 274 00:15:35,040 --> 00:15:37,560 Speaker 1: there's not a lot they can do. I mean, the biggest, 275 00:15:38,040 --> 00:15:41,160 Speaker 1: the biggest reason why you make a better on MGM 276 00:15:41,280 --> 00:15:45,080 Speaker 1: is for franchises. Right. The speed of which Disney built 277 00:15:45,120 --> 00:15:49,720 Speaker 1: out the director consumer business is due to the speed 278 00:15:49,920 --> 00:15:53,240 Speaker 1: tied to their ability to really lift Marble Pixar, Star 279 00:15:53,280 --> 00:15:57,120 Speaker 1: Wars Universe in streaming. So but there's just not a 280 00:15:57,120 --> 00:15:59,800 Speaker 1: lot of franchises like that still available MGM has a 281 00:15:59,840 --> 00:16:03,760 Speaker 1: few you Netflix w are going to do this? Uh, 282 00:16:04,080 --> 00:16:06,320 Speaker 1: MGM is really not a lot that that I see. 283 00:16:06,520 --> 00:16:10,200 Speaker 1: Now what's we bought? Um? I worry, you know, as 284 00:16:10,280 --> 00:16:12,920 Speaker 1: the analysts covering the industry, that you're gonna see Apple 285 00:16:12,920 --> 00:16:16,200 Speaker 1: on Amazon for even more money to work in streaming 286 00:16:16,240 --> 00:16:18,880 Speaker 1: because you know they have other reasons to do it 287 00:16:18,920 --> 00:16:21,440 Speaker 1: besides trying to make a profit. Michael, just a bit 288 00:16:21,440 --> 00:16:23,000 Speaker 1: of a tricky line this morning, so we're gonna have 289 00:16:23,000 --> 00:16:24,440 Speaker 1: to cut it short. But you know, we always enjoy 290 00:16:24,560 --> 00:16:26,800 Speaker 1: catching up with the sir, and we enjoy your work too. 291 00:16:26,920 --> 00:16:29,200 Speaker 1: Send up regards to the team that was Michael Nathans 292 00:16:29,280 --> 00:16:37,080 Speaker 1: and Muffin Nathans and senior research analysts. This is a 293 00:16:37,200 --> 00:16:40,880 Speaker 1: joy because he has done public service for America across 294 00:16:40,920 --> 00:16:45,000 Speaker 1: so many areas, including ambassadors to Japan and now Senator 295 00:16:45,120 --> 00:16:48,800 Speaker 1: from his very much his Tennessee, Bill Haggerty joins us 296 00:16:48,800 --> 00:16:52,640 Speaker 1: the Republican from Tennessee. This morning, Senator Haggerty, I have 297 00:16:52,760 --> 00:16:57,040 Speaker 1: to go to the stunning Washington Post analysis this morning 298 00:16:57,200 --> 00:17:02,160 Speaker 1: of the unvaccinated. You are eating spokesman on this. How 299 00:17:02,160 --> 00:17:06,159 Speaker 1: are you going to convince the unvaccinated of your Tennessee 300 00:17:06,640 --> 00:17:10,880 Speaker 1: to get it together and get vaccinated. I think we're 301 00:17:10,920 --> 00:17:15,080 Speaker 1: off to incredibly a good start thanks to Operation Warp Speed. 302 00:17:15,080 --> 00:17:17,720 Speaker 1: I don't think there's enough credit given to the progress 303 00:17:17,760 --> 00:17:20,080 Speaker 1: that we made here at an imprecedented level here in America. 304 00:17:20,400 --> 00:17:23,280 Speaker 1: In Tennessee. I've been very clear. I've taken the vaccine. 305 00:17:23,920 --> 00:17:26,680 Speaker 1: My mother, who is eighty nine years old, is taking 306 00:17:26,680 --> 00:17:30,359 Speaker 1: the vaccine. I lead by example. Uh. We continue to 307 00:17:30,560 --> 00:17:33,439 Speaker 1: encourage people to make its personal choice for folks, of course, 308 00:17:33,880 --> 00:17:36,760 Speaker 1: but I've certainly been clear that I've looked at the data, 309 00:17:36,960 --> 00:17:38,879 Speaker 1: and I think the right decision, certainly for me and 310 00:17:38,880 --> 00:17:41,560 Speaker 1: my family was to do just that. How do you sell? 311 00:17:41,640 --> 00:17:43,960 Speaker 1: And we talked to french Hill a little rock the 312 00:17:44,000 --> 00:17:47,320 Speaker 1: other day with the same challenges. I would suggest Arkansas 313 00:17:47,760 --> 00:17:51,520 Speaker 1: frankly a grimmer story than any Tennessee. But what's the 314 00:17:51,560 --> 00:17:55,720 Speaker 1: prescription you have with your knowledge of Nashville media and 315 00:17:55,840 --> 00:18:00,000 Speaker 1: Tennessee business, what's the prescription. What's the plan to jump 316 00:18:00,119 --> 00:18:04,440 Speaker 1: start this? As we hear from President Biden, I think 317 00:18:04,480 --> 00:18:07,359 Speaker 1: that you know, as we look at where we're headed 318 00:18:07,440 --> 00:18:12,639 Speaker 1: right now, Uh, the numbers continue to look much better spitality, 319 00:18:13,280 --> 00:18:15,719 Speaker 1: and we just need to continue to talk about that 320 00:18:15,800 --> 00:18:19,240 Speaker 1: positive outcome, that positive result, and encourage people to continue 321 00:18:19,280 --> 00:18:22,000 Speaker 1: to get behind it. As school reopens, things get back 322 00:18:22,040 --> 00:18:24,120 Speaker 1: into the swing of things, will probably see another pick 323 00:18:24,200 --> 00:18:26,960 Speaker 1: up in inoculation. One final question on the Senator, because 324 00:18:26,960 --> 00:18:29,840 Speaker 1: I know Taylor Riggs has some important questions as well. 325 00:18:29,920 --> 00:18:32,960 Speaker 1: Senator Haggerty, what do you need from former President Trump 326 00:18:33,320 --> 00:18:39,040 Speaker 1: to send a message to the unvaccinated? President Trump is 327 00:18:39,040 --> 00:18:41,879 Speaker 1: having a hard time sending any messages thanks to the 328 00:18:41,920 --> 00:18:45,200 Speaker 1: censorship of a big tech His normal means of communication 329 00:18:45,240 --> 00:18:48,720 Speaker 1: has been incredibly stifled. I think that's incredibly troubling. Um 330 00:18:48,960 --> 00:18:52,320 Speaker 1: in terms of his message to people, he was no 331 00:18:52,359 --> 00:18:55,200 Speaker 1: one worked harder than President Trump to put a vaccine 332 00:18:55,200 --> 00:18:57,440 Speaker 1: in place. I think people know that. I think he 333 00:18:57,480 --> 00:18:59,639 Speaker 1: can convey that, but he put it from innocent amount 334 00:18:59,680 --> 00:19:02,240 Speaker 1: of work in place, with operation work speed to make 335 00:19:02,240 --> 00:19:04,480 Speaker 1: this fact seem possible, not only for America but for 336 00:19:04,480 --> 00:19:07,359 Speaker 1: the rest of the world. I think that's an incredible example. 337 00:19:07,359 --> 00:19:10,240 Speaker 1: He should talk about that when he can. Senator A 338 00:19:10,280 --> 00:19:13,199 Speaker 1: pivot with me, if you will please to infrastructure. What 339 00:19:13,280 --> 00:19:15,560 Speaker 1: is the past to a bipartisan five hundred and seventy 340 00:19:15,600 --> 00:19:19,840 Speaker 1: nine billion dollar infrastructure deal? Very hard to say, uh, 341 00:19:20,200 --> 00:19:22,320 Speaker 1: you know, Chuck Schumer today is planning to put a 342 00:19:22,320 --> 00:19:25,360 Speaker 1: procedural vote in place to start the process on this. 343 00:19:25,880 --> 00:19:28,760 Speaker 1: Yet we haven't seen any text. We don't know the 344 00:19:28,800 --> 00:19:31,760 Speaker 1: content of it. I haven't seen anything. You know, this 345 00:19:31,800 --> 00:19:35,520 Speaker 1: sounds remarkably similar to something that we've all seen before. 346 00:19:35,560 --> 00:19:37,320 Speaker 1: You remember, you have to pass the bill before you 347 00:19:37,359 --> 00:19:39,919 Speaker 1: can see what's in it. Obamacare two point oh, that 348 00:19:39,920 --> 00:19:43,160 Speaker 1: didn't work out well for America. So we have a lot, 349 00:19:43,880 --> 00:19:45,280 Speaker 1: a lot to see in a lot more work that 350 00:19:45,359 --> 00:19:47,879 Speaker 1: needs to be done before I can comment on exactly 351 00:19:48,240 --> 00:19:50,080 Speaker 1: you know what's in the bill and how we should 352 00:19:50,080 --> 00:19:53,600 Speaker 1: proceed on it. Is this two path approach still the 353 00:19:53,680 --> 00:19:56,919 Speaker 1: right way to go? Well, certainly not the path that 354 00:19:56,960 --> 00:19:59,280 Speaker 1: I would take. You know, I'm a businessman my entire career. 355 00:19:59,640 --> 00:20:01,440 Speaker 1: You know, I step back and look at this and say, 356 00:20:01,760 --> 00:20:05,200 Speaker 1: what's happening here. You've got a two path process, one 357 00:20:05,280 --> 00:20:07,480 Speaker 1: that you know, a lot of effort has gone into play. 358 00:20:07,520 --> 00:20:10,000 Speaker 1: I think I respect my colleagues who have worked hard 359 00:20:10,040 --> 00:20:12,800 Speaker 1: to put a bipartisan plan in place. But as you know, 360 00:20:12,920 --> 00:20:15,760 Speaker 1: when you negotiate a deal, often what's even more important 361 00:20:15,800 --> 00:20:18,440 Speaker 1: is what you negotiate out of a deal. Yet, we've 362 00:20:18,440 --> 00:20:21,040 Speaker 1: got the Biden administration, We've got Nancy Pelosi and Chuck 363 00:20:21,080 --> 00:20:24,119 Speaker 1: Schumer talking about pushing everything that was negotiated out of 364 00:20:24,160 --> 00:20:27,159 Speaker 1: the deal right alongside. In fact, Nancy Pelosia said that 365 00:20:27,200 --> 00:20:29,200 Speaker 1: she's not going to even look at the bipartisan deal 366 00:20:29,560 --> 00:20:33,879 Speaker 1: unless the not, you know, completely partisan reconciliation package is 367 00:20:33,880 --> 00:20:36,679 Speaker 1: put forward to I wouldn't call it a reconciliation package. 368 00:20:36,760 --> 00:20:39,600 Speaker 1: Is just another reckless tax and spending program that they're 369 00:20:39,600 --> 00:20:41,960 Speaker 1: trying to show through a massive program, something that we've 370 00:20:42,000 --> 00:20:43,879 Speaker 1: never seen before, and I think it's going to have 371 00:20:43,880 --> 00:20:46,840 Speaker 1: devastating effects in the economy. So I'm very concerned about 372 00:20:46,960 --> 00:20:50,240 Speaker 1: enabling this partisan package to go through. Under the guise 373 00:20:50,280 --> 00:20:55,080 Speaker 1: of a partisan infrastructure package, it's far smaller. Senator Hackety, 374 00:20:55,119 --> 00:20:59,439 Speaker 1: I am fascinated what your prescription is for your Republican party. 375 00:20:59,560 --> 00:21:02,800 Speaker 1: So many of the interviews we have with Republicans and 376 00:21:02,840 --> 00:21:07,200 Speaker 1: with Democrats, is a liberal trunch of the Democratic Party 377 00:21:07,640 --> 00:21:12,960 Speaker 1: really troubling for moderate Democrats. Do the Republicans respond to 378 00:21:13,080 --> 00:21:17,760 Speaker 1: that by being more staunchly conservative or by moving to 379 00:21:17,840 --> 00:21:22,040 Speaker 1: a Lamar Alexander like middle. I think what we need 380 00:21:22,080 --> 00:21:24,880 Speaker 1: to do is continue to convey what's actually happening here. 381 00:21:25,320 --> 00:21:27,280 Speaker 1: We need more business people like me in Washington. I 382 00:21:27,280 --> 00:21:29,600 Speaker 1: think that's the that's the point. We have a hard 383 00:21:29,640 --> 00:21:32,800 Speaker 1: time conveying the essence of what's occurring here, but right 384 00:21:32,840 --> 00:21:35,560 Speaker 1: now what we're doing. Because we've already seen at one 385 00:21:35,600 --> 00:21:38,480 Speaker 1: point nine trillion dollar package moved through a holy partisan 386 00:21:38,520 --> 00:21:40,679 Speaker 1: basis back in March of this year. That's roughly ten 387 00:21:40,720 --> 00:21:45,639 Speaker 1: percent of our GDP. They're talking now about dumping more 388 00:21:45,680 --> 00:21:48,960 Speaker 1: of our GDP into this so called infrastructure package. It's 389 00:21:48,960 --> 00:21:51,359 Speaker 1: going to be massively inflationary. We need to convey that 390 00:21:51,440 --> 00:21:55,200 Speaker 1: when you hear we hear moderate Democrats like Joe Manchin 391 00:21:55,280 --> 00:21:57,640 Speaker 1: say he doesn't want to put something through that isn't 392 00:21:57,640 --> 00:22:00,360 Speaker 1: paid for, he doesn't want to increase the debt. These 393 00:22:00,400 --> 00:22:02,400 Speaker 1: are things that we need to push back on and say, well, 394 00:22:02,640 --> 00:22:04,320 Speaker 1: it's gonna pay for itself. You've got to look at 395 00:22:04,320 --> 00:22:06,320 Speaker 1: how they're talking about paying for it, and they're talking 396 00:22:06,320 --> 00:22:10,440 Speaker 1: about crushing taxes on job creators. They're talking about killing 397 00:22:10,480 --> 00:22:14,080 Speaker 1: capital formation by putting capital gains taxes in place. Those 398 00:22:14,119 --> 00:22:16,680 Speaker 1: types of policies are going to be devastating to our economy. 399 00:22:16,920 --> 00:22:19,280 Speaker 1: The American public is smart enough to understand this. We 400 00:22:19,359 --> 00:22:21,680 Speaker 1: need more business people talking about this in a way 401 00:22:21,680 --> 00:22:24,040 Speaker 1: that's rational and easy to understand. Senator Haggerty, I wasnt 402 00:22:24,040 --> 00:22:27,240 Speaker 1: gonna bring this up, but you mentioned private business in Washington. 403 00:22:27,680 --> 00:22:30,600 Speaker 1: I need you to comment this morning on the jelling 404 00:22:30,760 --> 00:22:34,520 Speaker 1: of the private equity Gentleman from Los Angeles, Tom Barrick, 405 00:22:34,720 --> 00:22:37,960 Speaker 1: what were your thoughts when you've heard of these actions 406 00:22:38,000 --> 00:22:42,200 Speaker 1: by Justice? Well, I've only seen a headline or two, 407 00:22:42,240 --> 00:22:45,600 Speaker 1: so I don't know you know anything about the specifics 408 00:22:45,600 --> 00:22:47,119 Speaker 1: of the content of this case or what it has 409 00:22:47,160 --> 00:22:49,520 Speaker 1: to do with private equity. Well, it doesn't have to 410 00:22:49,520 --> 00:22:52,280 Speaker 1: do with private equity, but certainly it is of note 411 00:22:52,320 --> 00:22:54,679 Speaker 1: here as well. Senator Haggerty, thank you so much for 412 00:22:54,800 --> 00:22:57,720 Speaker 1: joining us today. Bill Haggerty, he is of Tennessee, greatly 413 00:22:57,760 --> 00:23:07,359 Speaker 1: appreciate that. John. I got to Thomas Kostall, go to 414 00:23:07,359 --> 00:23:11,639 Speaker 1: Thomas Costard right out, pick Day to save me as well. Uh, 415 00:23:11,800 --> 00:23:15,320 Speaker 1: Jimmy ealism might your boundaries toime boundaries? Thomas Costard pick 416 00:23:15,400 --> 00:23:18,720 Speaker 1: Day wealth joining us right now and within his within 417 00:23:18,840 --> 00:23:22,639 Speaker 1: his research, I'm gonna are you within his research note 418 00:23:22,800 --> 00:23:27,760 Speaker 1: is a really really important observation on America's savings pile 419 00:23:27,960 --> 00:23:30,760 Speaker 1: he's optimistic we're going to spend a little bit of 420 00:23:30,800 --> 00:23:33,760 Speaker 1: that savings pile over the next year to advance the 421 00:23:33,800 --> 00:23:37,800 Speaker 1: American economy. But Thomas cost is what happens in a 422 00:23:37,840 --> 00:23:44,040 Speaker 1: couple of years to that still massive savings pile. Right 423 00:23:44,160 --> 00:23:46,840 Speaker 1: So the savings pile right now is around two point 424 00:23:46,880 --> 00:23:50,240 Speaker 1: five trillion dollars, and so the question for the economy 425 00:23:50,600 --> 00:23:53,440 Speaker 1: is how much will be spent within the next year 426 00:23:53,440 --> 00:23:56,320 Speaker 1: and within the next few years. Actually, I think, you know, 427 00:23:56,520 --> 00:23:58,399 Speaker 1: a small amount of that will be spent by about 428 00:23:58,400 --> 00:24:01,000 Speaker 1: a small amount, which I think will be around ten 429 00:24:01,080 --> 00:24:04,119 Speaker 1: to with the next year, But ten to pcent of 430 00:24:04,160 --> 00:24:07,320 Speaker 1: a big savings it's still a big amount of consumer 431 00:24:07,359 --> 00:24:10,439 Speaker 1: spending which will be uh, you know, flowing into the 432 00:24:10,480 --> 00:24:12,280 Speaker 1: economy in the next few months. And that's why I'm 433 00:24:12,359 --> 00:24:16,840 Speaker 1: quite cautiously optimistic about the US consumer and therefore US 434 00:24:16,880 --> 00:24:19,560 Speaker 1: GDP in the coming month, even though we're going to 435 00:24:19,560 --> 00:24:22,520 Speaker 1: see it this oleation in growth, that's for sure, but 436 00:24:22,600 --> 00:24:25,440 Speaker 1: I think the US consumer will stay quite quite resilience. 437 00:24:25,520 --> 00:24:28,760 Speaker 1: Do you believe that our savings pile, as you call it, 438 00:24:28,800 --> 00:24:31,720 Speaker 1: has a permanent feature to it, that it's a permanent 439 00:24:31,840 --> 00:24:36,760 Speaker 1: fixture of how we believe and think, well, I do 440 00:24:36,880 --> 00:24:38,879 Speaker 1: think that. Yes, indeed, I think some of that, you know, 441 00:24:39,119 --> 00:24:41,440 Speaker 1: part of the savings went into the equity market, went 442 00:24:41,440 --> 00:24:44,640 Speaker 1: into long term savings and will probably not go back 443 00:24:44,960 --> 00:24:47,879 Speaker 1: into the economy, but I think, you know, part of 444 00:24:47,880 --> 00:24:50,159 Speaker 1: it will be spent point number one. And also I 445 00:24:50,160 --> 00:24:52,720 Speaker 1: do believe in credit card lending. I think credit card 446 00:24:52,800 --> 00:24:57,119 Speaker 1: lending has also some upside potential in the coming weeks 447 00:24:57,119 --> 00:25:00,159 Speaker 1: and months, and that will also support consumer spending. If 448 00:25:00,160 --> 00:25:02,480 Speaker 1: we get you know, say fifty to wander billing more 449 00:25:02,920 --> 00:25:05,960 Speaker 1: in credit card lending, that would be very helpful for growth. 450 00:25:06,040 --> 00:25:08,919 Speaker 1: Because you're right, and we we have, you know, a 451 00:25:08,960 --> 00:25:10,639 Speaker 1: lot of tail winds are going to fade in the 452 00:25:10,680 --> 00:25:14,159 Speaker 1: second half of the year, including the reopening um, the 453 00:25:14,200 --> 00:25:17,239 Speaker 1: fiscal support, so things like that. We also have some 454 00:25:17,280 --> 00:25:20,520 Speaker 1: headwinds from the delta variant, but I think the US 455 00:25:20,600 --> 00:25:23,320 Speaker 1: consumer will be able to be a resilient. It's almost 456 00:25:23,320 --> 00:25:24,720 Speaker 1: to what a great you think you four is going 457 00:25:24,760 --> 00:25:27,040 Speaker 1: to shake the outlook for the whole cycle, not just 458 00:25:27,080 --> 00:25:29,240 Speaker 1: the following year, the year after, but the whole cycle, 459 00:25:31,200 --> 00:25:33,320 Speaker 1: right right. So the thing with the US cycle is 460 00:25:33,359 --> 00:25:36,360 Speaker 1: that we're going back to potential growth, right, So we're 461 00:25:36,400 --> 00:25:39,800 Speaker 1: going back to the trajectory before the pandemic, and that 462 00:25:39,800 --> 00:25:43,480 Speaker 1: that matters because that's usually a signal that we're mid cycle. 463 00:25:43,800 --> 00:25:46,359 Speaker 1: And we know that when we're mid cycle, growth is 464 00:25:46,400 --> 00:25:50,480 Speaker 1: getting harder to get and the situation becomes more fragile, 465 00:25:50,600 --> 00:25:55,240 Speaker 1: more difficult, more you know, they're more risks. So it 466 00:25:55,400 --> 00:25:59,399 Speaker 1: is true that two could see more risks. However, again, 467 00:25:59,520 --> 00:26:02,040 Speaker 1: I think you know, the US consumer can propel growth. 468 00:26:02,080 --> 00:26:05,280 Speaker 1: I also think we could have more lending in the economy, 469 00:26:05,359 --> 00:26:10,520 Speaker 1: very commony, defencial conditions despite the FED, the FED stap ring, 470 00:26:10,880 --> 00:26:13,520 Speaker 1: and so that could help sustain growth going forward, even 471 00:26:13,520 --> 00:26:17,160 Speaker 1: though from a pure metric perspective we're already mid cycle 472 00:26:17,600 --> 00:26:20,080 Speaker 1: and we have more risks. So Thomas, potential, what is 473 00:26:20,119 --> 00:26:22,840 Speaker 1: potential in the US economy? What is it now? Two 474 00:26:22,920 --> 00:26:27,000 Speaker 1: sub too? Yeah, I don't think potential growth has changed 475 00:26:27,040 --> 00:26:30,800 Speaker 1: that much. I think it's still around two percent. The 476 00:26:30,880 --> 00:26:34,480 Speaker 1: problem is again that we have you know, weak demographics. Um. 477 00:26:34,520 --> 00:26:37,520 Speaker 1: You know, birthrate is especially a concern. I think we 478 00:26:37,800 --> 00:26:40,840 Speaker 1: don't have enough babies uh in the US, but also 479 00:26:41,200 --> 00:26:44,080 Speaker 1: I think in Europe as well, and that's definitely an 480 00:26:44,080 --> 00:26:47,640 Speaker 1: impedimental growth. And with regards to innovation. Innovation is there, 481 00:26:47,800 --> 00:26:50,880 Speaker 1: and it's actually even more prevalent in the US than 482 00:26:50,920 --> 00:26:54,440 Speaker 1: in Europe. But still I think innovation is still failing 483 00:26:54,480 --> 00:26:58,480 Speaker 1: to really broaden out and to spread through the economy. 484 00:26:58,480 --> 00:27:01,800 Speaker 1: I think that's that's the problem. So productivity growth may 485 00:27:01,840 --> 00:27:04,359 Speaker 1: pick up, but it won't be a massive pickup going forward. 486 00:27:04,600 --> 00:27:09,640 Speaker 1: Are you confident that peak inflation is also behind us? Right? 487 00:27:09,720 --> 00:27:13,160 Speaker 1: So regarding inflation, it's a bit complicated. Um. Right now 488 00:27:13,200 --> 00:27:16,040 Speaker 1: we have the bottleneck inflation, so we have you know, Scott, 489 00:27:16,160 --> 00:27:18,399 Speaker 1: you have some products. But next year we'll have the 490 00:27:18,480 --> 00:27:23,040 Speaker 1: cyclical inflation because usually inflation comes with a lag, so 491 00:27:23,119 --> 00:27:25,440 Speaker 1: you have the recovering growth and then one year later 492 00:27:25,680 --> 00:27:29,240 Speaker 1: you have the bounds in inflation. And so twenty two 493 00:27:29,240 --> 00:27:33,640 Speaker 1: may still see inflation above two percent for for cyclical reasons. 494 00:27:33,920 --> 00:27:37,440 Speaker 1: The real question is about three and then I think 495 00:27:37,480 --> 00:27:40,440 Speaker 1: that the jury is out. I think some deflationary forces 496 00:27:40,960 --> 00:27:43,679 Speaker 1: still apply, but I keep an open mind because you know, 497 00:27:44,359 --> 00:27:48,720 Speaker 1: two forces them watching our globalization and especially the US 498 00:27:48,840 --> 00:27:51,680 Speaker 1: China tention, which could lead to potentially in erosion in 499 00:27:51,680 --> 00:27:56,200 Speaker 1: globalization and more inflation in the US. And also, um, 500 00:27:56,440 --> 00:28:00,480 Speaker 1: the the share of labor in the economy and whether 501 00:28:00,960 --> 00:28:04,120 Speaker 1: wages are go up more. But I think that's that's 502 00:28:04,119 --> 00:28:06,800 Speaker 1: a topic for another day. I know I'm simplifying this, 503 00:28:07,000 --> 00:28:10,040 Speaker 1: so so bear with me. You've had a few senators 504 00:28:10,080 --> 00:28:12,879 Speaker 1: come out and saying that this inflation is effectively attacks 505 00:28:13,200 --> 00:28:15,520 Speaker 1: so you've taken away all of those wage gains that 506 00:28:15,560 --> 00:28:18,200 Speaker 1: you describe because of that inflation. How do you think 507 00:28:18,200 --> 00:28:22,840 Speaker 1: about that? Right? I don't think wages are a threat 508 00:28:22,920 --> 00:28:26,480 Speaker 1: to inflation until we get to say around five ish 509 00:28:26,600 --> 00:28:29,840 Speaker 1: or or more on on on on wage growth. And 510 00:28:30,040 --> 00:28:31,880 Speaker 1: you know we're not there. We're at three point two 511 00:28:31,880 --> 00:28:35,919 Speaker 1: on the Atlanta Fed medium wage growth numbers, so we're 512 00:28:35,960 --> 00:28:39,480 Speaker 1: still well below levels that could be dangerous for inflation 513 00:28:39,560 --> 00:28:41,400 Speaker 1: in the sense that they will lead to a self 514 00:28:41,440 --> 00:28:44,760 Speaker 1: perpetuation of inflation above two percent. So you know, we're 515 00:28:44,800 --> 00:28:47,440 Speaker 1: not in the danger zone for in terms of wage growth. 516 00:28:47,440 --> 00:28:49,720 Speaker 1: And actually I think wage growth still has room to 517 00:28:49,720 --> 00:28:53,280 Speaker 1: go up without threatening inflation. How is how do you 518 00:28:53,280 --> 00:28:56,440 Speaker 1: get wage You get back to a constructive and positive 519 00:28:56,480 --> 00:29:01,440 Speaker 1: real wage and it does not affect inflation, right. I 520 00:29:01,520 --> 00:29:04,640 Speaker 1: think the correlation between wages and inflation is actually much 521 00:29:04,640 --> 00:29:08,120 Speaker 1: more fragile and much more uh, you know, tenuous and 522 00:29:08,280 --> 00:29:13,920 Speaker 1: slim than widely appreciated. I think the real danger comes 523 00:29:13,960 --> 00:29:16,840 Speaker 1: above five percent on wage growth, and especially in the 524 00:29:16,880 --> 00:29:19,720 Speaker 1: Atlanta Fed medium wage You have to look at medium wages. 525 00:29:19,880 --> 00:29:22,520 Speaker 1: Really it's how you know someone staying in the labor 526 00:29:22,560 --> 00:29:24,960 Speaker 1: force and was staying in the same job, how he 527 00:29:25,120 --> 00:29:28,800 Speaker 1: is or heard wage compares through time. I think that 528 00:29:28,920 --> 00:29:31,680 Speaker 1: that's that that's the key indicator. And so to me, 529 00:29:32,040 --> 00:29:34,760 Speaker 1: the condicator is the Atlanta Fed medium wage growth number, 530 00:29:34,760 --> 00:29:36,880 Speaker 1: and again it's we are at three point two percent 531 00:29:37,000 --> 00:29:39,680 Speaker 1: right now year on year, and it's still very quite soft. 532 00:29:39,720 --> 00:29:42,720 Speaker 1: So I would not wear until we reach say five 533 00:29:42,840 --> 00:29:45,040 Speaker 1: five percent. We're not there yet, and Johnna run right 534 00:29:45,120 --> 00:29:47,680 Speaker 1: on the Atlantic, but I totally agree with Thomas on 535 00:29:47,760 --> 00:29:50,520 Speaker 1: this on the median aspect of wage growth, We're not 536 00:29:50,640 --> 00:29:52,920 Speaker 1: We got to get back to three point six percent, 537 00:29:53,600 --> 00:29:56,200 Speaker 1: John Ferro, to really get there. We're not there yet. 538 00:29:56,240 --> 00:29:59,680 Speaker 1: Sometime I'm smiling because only economists called five percent wage growth, 539 00:29:59,720 --> 00:30:02,440 Speaker 1: thanks us. Will you find anyone else that calls five 540 00:30:02,480 --> 00:30:06,640 Speaker 1: percent dangerous? Thomas? Just let's finish there for a lot 541 00:30:06,680 --> 00:30:08,760 Speaker 1: of people who might have accidentally tuned in this morning 542 00:30:09,040 --> 00:30:11,080 Speaker 1: trying to find something else, maybe some sports. I don't know, 543 00:30:11,280 --> 00:30:14,480 Speaker 1: and stumbled across some economists talking about the labor market. 544 00:30:14,560 --> 00:30:19,920 Speaker 1: What's dangerous about a five wage hike? Right, because then 545 00:30:19,960 --> 00:30:24,880 Speaker 1: it starts to affect inflation expectations and you have also, 546 00:30:25,320 --> 00:30:29,040 Speaker 1: you know, wage gains starting to outpaces productivity. So this 547 00:30:29,160 --> 00:30:31,520 Speaker 1: is based I mean, this reasoning that I have is 548 00:30:31,520 --> 00:30:34,880 Speaker 1: also based on historical relationships. You know, we have to 549 00:30:34,920 --> 00:30:37,960 Speaker 1: go back, you know, in time to see wage growth 550 00:30:38,240 --> 00:30:41,800 Speaker 1: above you know, five percent, I think in the early nineties. Uh, 551 00:30:41,960 --> 00:30:46,160 Speaker 1: and then you had inflation sustainably above two percent, and 552 00:30:46,200 --> 00:30:48,520 Speaker 1: it was a time when actually central banks were struggling 553 00:30:48,600 --> 00:30:50,960 Speaker 1: to bring down inflation. I think right now the problem 554 00:30:51,000 --> 00:30:53,719 Speaker 1: is that they're trying to move it up. Uh. And 555 00:30:53,840 --> 00:30:56,040 Speaker 1: so I think those days of the early ninety nineties 556 00:30:56,360 --> 00:30:59,200 Speaker 1: are probably gone and they're unlikely to go back. But 557 00:30:59,280 --> 00:31:01,680 Speaker 1: I might be wrong, but so far I don't see them. 558 00:31:01,720 --> 00:31:05,560 Speaker 1: It's almost a picked wealth management sing Us economist's Thomas 559 00:31:05,600 --> 00:31:07,960 Speaker 1: got to catch up, said, thank you. This is the 560 00:31:08,000 --> 00:31:12,680 Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays 561 00:31:12,680 --> 00:31:16,160 Speaker 1: from seven to ten am Eastern on Bloomberg Radio and 562 00:31:16,280 --> 00:31:20,560 Speaker 1: on Bloomberg Television each day from six to nine am 563 00:31:20,600 --> 00:31:24,360 Speaker 1: for insight from the best in economics, finance, investment, and 564 00:31:24,480 --> 00:31:31,000 Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, 565 00:31:31,160 --> 00:31:34,760 Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm 566 00:31:34,800 --> 00:31:37,440 Speaker 1: Tom Keene, and this is Bloomberg.