WEBVTT - Vaccine Will Migrate Into Pre-Filled Syringes: BD CEO 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.599 at Bloomberg dot com slash podcast. Yeah. I'm excited to 0:00:22.600 --> 0:00:25.200 be joined by Sarah ponzac here, cross asset reporter. As 0:00:25.239 --> 0:00:28.680 we get into dig into the markets, I want to 0:00:28.720 --> 0:00:32.239 get over to the CEO of Beckton Dickinson joining us 0:00:32.560 --> 0:00:39.120 to talk about the global medical technology companies strides in 0:00:39.240 --> 0:00:42.960 helping to fight the pandemic that is COVID. Nineteen. Tom 0:00:43.000 --> 0:00:47.000 Poland joins us right now, and Tom really appreciate your time. 0:00:47.040 --> 0:00:50.680 I know this must have been an incredibly busy uh 0:00:51.159 --> 0:00:54.320 year and now year and a half for you. Um 0:00:54.360 --> 0:00:57.080 where do you stand right now in the fight against COVID. 0:00:58.080 --> 0:01:00.920 Thank you Madden and Sarah for for having me. So 0:01:01.560 --> 0:01:06.639 Bedias has a very broad um roll in in combating COVID, 0:01:06.680 --> 0:01:09.080 and we we have been busy from the start, not 0:01:09.160 --> 0:01:12.320 only working closely when we're a global company, and so 0:01:12.400 --> 0:01:14.720 I had a role whether or not the outbreaks in 0:01:14.840 --> 0:01:17.080 China through Europe to the US. We've been on the 0:01:17.080 --> 0:01:21.480 front lines right from the start. Today we are a 0:01:21.520 --> 0:01:25.800 major provider of solutions for rapid diagnosis of COVID with 0:01:25.920 --> 0:01:28.759 fifteen minute point of care tests as well as molecular 0:01:28.840 --> 0:01:33.080 tests which we've enabled u of any patient who ends 0:01:33.120 --> 0:01:35.840 up in an ICU with COVID will be touched by 0:01:35.840 --> 0:01:38.080 one of our devices, and so we have a major 0:01:38.200 --> 0:01:41.679 role there. And today we're very, very actively focused on 0:01:41.800 --> 0:01:44.920 ramping up production of syringes. As the world leader in 0:01:45.040 --> 0:01:48.600 syringes for delivering vaccines. We've committed to make an incremental 0:01:49.160 --> 0:01:54.160 one billion syringes this year specifically for providing COVID doses 0:01:54.680 --> 0:01:58.760 to COVID vaccine doses around the world. So this is 0:01:58.760 --> 0:02:00.880 how we're so lucky to have you today, because not 0:02:01.000 --> 0:02:04.360 only do you manufacture medical tools, you guys have been 0:02:04.400 --> 0:02:10.240 at the forefront of creating COVID nineteen testing diagnostics as well. So, 0:02:10.280 --> 0:02:13.320 with that said, seeing the production ramp up, where do 0:02:13.400 --> 0:02:16.520 we stand now and not just the fight against COVID nineteen, 0:02:16.560 --> 0:02:20.080 but also when it comes to COVID nineteen testing diagnostics. 0:02:20.080 --> 0:02:22.640 Clearly we have come a very very far away in 0:02:22.639 --> 0:02:25.720 the matter of matter of a year. Absolutely mean, we 0:02:25.760 --> 0:02:28.919 went from not having any tests really to diagnosed covid 0:02:29.000 --> 0:02:33.919 given it it really wasn't relevant before two we for example, 0:02:34.040 --> 0:02:37.560 we normally take it takes about three years to develop 0:02:37.600 --> 0:02:40.120 a new diagnostic test, and we were able to do 0:02:40.200 --> 0:02:44.400 so in three months and ramp up production. We're a 0:02:44.480 --> 0:02:47.920 leader in rapid testing for flu testing traditionally and have 0:02:48.040 --> 0:02:50.280 been so for for over ten years. And let's say 0:02:50.280 --> 0:02:54.000 in a normal year of flu, we may make ten 0:02:54.320 --> 0:02:58.080 ten million tests in a very severe flu season, maybe 0:02:58.120 --> 0:03:01.040 eight million tests in a normal flu year. We quickly 0:03:01.120 --> 0:03:05.280 ramped up to make ten million tests a month um 0:03:05.440 --> 0:03:10.519 for COVID testing, so very significant increases. And I think today, um, 0:03:10.600 --> 0:03:15.400 what's very positive is is that testing capacity exists right 0:03:15.440 --> 0:03:19.080 that we've passed the point where testing capacity is an issue. 0:03:19.080 --> 0:03:22.720 There's more capacity than there is requirements today and I 0:03:22.760 --> 0:03:25.480 think that's that's obviously a great thing. We're seeing really 0:03:25.480 --> 0:03:29.360 good success with the vaccine deployment as well, and I 0:03:29.360 --> 0:03:31.840 think we'll continue to see progress there um. And of 0:03:31.880 --> 0:03:35.240 course today testing is beginning to shift a bit from 0:03:35.400 --> 0:03:39.280 the focus on testing symptomatic patients to beginning to focus 0:03:39.320 --> 0:03:43.240 on testing to help reopen the economy and schools and 0:03:43.280 --> 0:03:47.840 businesses and the like. So in terms of the company, 0:03:48.400 --> 0:03:53.600 what do you need to do? Two um, impress investors 0:03:53.720 --> 0:03:56.520 a little bit more. Tom, I look at the chart 0:03:56.600 --> 0:04:01.000 of Beckon Dickinson stock versus the SMP and versus the 0:04:01.000 --> 0:04:05.600 health care sector, and you've underperformed from the beginning of why. 0:04:05.640 --> 0:04:09.119 Why do you think that is? Yeah, it's it's a matter. 0:04:09.120 --> 0:04:11.360 It's good question. I think in fairness, there was a 0:04:11.480 --> 0:04:14.520 we had a quality issue when we when I first 0:04:14.600 --> 0:04:17.160 took over in the first week that we were addressing 0:04:17.920 --> 0:04:21.280 and that that has been overhanging the stock. As we 0:04:21.320 --> 0:04:25.320 look at being able to get that submitted and resolved, 0:04:25.320 --> 0:04:29.159 which is forthcoming here UM in the in the next 0:04:29.880 --> 0:04:34.360 quarter or two. We've communicated very clearly, I think that 0:04:34.360 --> 0:04:36.680 that will be a very positive factor for the stock. 0:04:36.760 --> 0:04:39.159 And then as we think going forward, we continue to 0:04:39.200 --> 0:04:43.960 execute on our strategy around driving new innovations into the 0:04:43.960 --> 0:04:47.240 marketplace for growth. Of course, we're driving a lot of 0:04:47.279 --> 0:04:52.600 new solutions to help address the COVID pandemic and that 0:04:52.600 --> 0:04:54.440 that will take care of itself. This is obviously our 0:04:54.480 --> 0:04:57.320 aim strategy and to be very fair to you, Tom, 0:04:57.360 --> 0:04:59.720 you took over the CEO roll at a pretty difficult time. 0:04:59.720 --> 0:05:02.080 You cond say, I mean right when COVID nineteen was 0:05:02.120 --> 0:05:05.720 really beginning. Would you say that you have a philosophy 0:05:05.920 --> 0:05:08.799 or a theme as to how you're approaching the chief 0:05:08.800 --> 0:05:11.440 executive officer role at b D and has that changed 0:05:11.440 --> 0:05:13.440 over the past year as we have had to deal 0:05:13.440 --> 0:05:16.960 with the pandemic. But I think for us, we're gonna 0:05:17.000 --> 0:05:20.760 come out stronger at the after the pandemic in terms 0:05:20.760 --> 0:05:24.680 of how we've used the challenge to be able to 0:05:24.720 --> 0:05:28.479 accelerate how we think about growth in our culture and 0:05:28.560 --> 0:05:31.760 our company. The example of being able to develop an 0:05:31.839 --> 0:05:34.400 essay in three months that normally takes three years, being 0:05:34.440 --> 0:05:37.920 able to scale production of products like i V sets 0:05:37.920 --> 0:05:42.599 and syringes at unprecedented rates and levels um shows really 0:05:42.680 --> 0:05:46.520 unleashes and demonstrates the agility that we have as a 0:05:46.600 --> 0:05:49.960 large company. And what we're very focused on is maintaining 0:05:50.000 --> 0:05:54.240 that momentum in as the world gets control of COVID, 0:05:54.560 --> 0:05:56.800 and we can see a lot of momentum um that 0:05:56.880 --> 0:06:01.080 we've built over that period time, whether or not it's 0:06:01.320 --> 0:06:06.760 very much larger installation footprints of our point of care 0:06:06.839 --> 0:06:09.919 devices because of COVID that now we're adding additional menu 0:06:10.000 --> 0:06:14.040 to same thing on our molecular footprint side, or how 0:06:14.040 --> 0:06:19.159 we're for example, expanding our pharmaceutical systems business and being 0:06:19.160 --> 0:06:23.719 able to create new injection device capacity as ultimately COVID 0:06:23.800 --> 0:06:28.320 vaccines will migrate into pre filled syringes, will create opportunities 0:06:28.320 --> 0:06:30.640 for us to help the world on a long term 0:06:30.680 --> 0:06:34.920 basis there as well. So, UM, we definitely see COVID 0:06:34.920 --> 0:06:37.720 has properly has given I think the world in many 0:06:37.760 --> 0:06:42.880 businesses an opportunity to to think differently about growth and 0:06:42.920 --> 0:06:45.920 accelerate growth over the long term. All right, Tom, thanks 0:06:45.920 --> 0:06:48.520 so much for joining us. Appreciate your time here. Tom 0:06:48.520 --> 0:06:52.640 Poland is the president CEO of the global medical technology 0:06:52.640 --> 0:06:58.520 company b D. Beckon, Dickinson and Company. Sara Pontze are 0:06:58.680 --> 0:07:02.599 cross Asset Report. Her is joining me today is UM. 0:07:02.880 --> 0:07:05.479 We wish Paul a very happy Paul Sweeney out on 0:07:05.839 --> 0:07:09.520 very well deserved KA day. We have seen Sarah some 0:07:09.600 --> 0:07:12.400 amazing moves in the oil market today and we want 0:07:12.440 --> 0:07:14.920 to bring in Ellen Wall to talk about that. She 0:07:15.040 --> 0:07:19.840 is president of Transversal Consulting. She's also a Bloomberg Opinion contributor, 0:07:20.320 --> 0:07:26.040 and I guess Allen Transversal is uh sort of the 0:07:26.080 --> 0:07:31.840 intersection between geopolitics and energy policy? Is that? Is that fair? Yeah, 0:07:31.880 --> 0:07:35.400 that's exactly right. We're a boutique consulting firm that does 0:07:35.480 --> 0:07:40.000 work in the energy policy and geopolitics and energy markets sphere. 0:07:41.080 --> 0:07:44.880 So what do you make of today's OPEC meeting? They 0:07:44.880 --> 0:07:48.400 agreed to keep output unchanged in April, but we have 0:07:48.480 --> 0:07:55.440 a jump of five or more on the underlying crude contracts. Yeah. Wow, 0:07:55.480 --> 0:07:58.200 this was This was a surprise, I think to most 0:07:59.000 --> 0:08:02.400 to most people going into this meeting because we saw 0:08:02.440 --> 0:08:05.080 a lot of headlines seeing that OPEQ was poised to 0:08:05.200 --> 0:08:07.720 kind of cool off an oil market that looks like 0:08:07.760 --> 0:08:10.720 it was about to overheat in prices, and instead, Uh, 0:08:10.720 --> 0:08:14.040 they're basically seem like they're about to fan the flames. Uh. 0:08:14.120 --> 0:08:17.360 It does look like Russia is going to get some 0:08:17.440 --> 0:08:21.000 kind of special permission to increase production about a hundred 0:08:21.000 --> 0:08:23.760 thousand barrels a day. Uh. They say they need this 0:08:23.960 --> 0:08:28.360 for domestic consumption, but when you look at the overall 0:08:28.400 --> 0:08:31.040 oil market, that's not all that much. Plus, so you've 0:08:31.040 --> 0:08:33.800 got that one million barrels a day that Saudi Arabia 0:08:33.960 --> 0:08:36.760 is holding off the market and they haven't heard for 0:08:36.800 --> 0:08:39.280 sure about that. And uh we know that the Saudi 0:08:39.320 --> 0:08:42.920 oil minister likes to uh make a splash and uh 0:08:43.240 --> 0:08:46.240 have a surprise at the press conference. Uh there is 0:08:46.400 --> 0:08:50.120 talk that the saudiast could actually decide to hold that 0:08:50.240 --> 0:08:53.320 oil off the market for April as well. And what 0:08:53.400 --> 0:08:56.360 a long strange trip it has been for oil prices. 0:08:56.400 --> 0:08:58.400 I mean, less than a year ago in April, we 0:08:58.480 --> 0:09:02.400 are talking about negative oil prices after another OPEC surprise. 0:09:02.480 --> 0:09:04.480 Today we get a surprise to the upside. And I'm 0:09:04.480 --> 0:09:06.880 looking at w t I crude oil now trading at 0:09:06.880 --> 0:09:10.920 the highest level since April. Like you said, they want 0:09:11.000 --> 0:09:14.880 the opposite way, possibly fanning the flames of overheating. What 0:09:15.000 --> 0:09:18.480 comes next after this, well, I think now we need 0:09:18.520 --> 0:09:20.640 to we need to start talking about the fact that 0:09:20.840 --> 0:09:24.040 UM gas prices in the United States could um we 0:09:24.040 --> 0:09:27.280 could be seeing average prices in the US hitting three 0:09:27.320 --> 0:09:31.280 dollars a gallon, which is a significant amount of money 0:09:31.280 --> 0:09:33.800 for people who aren't used to paying that much. Plus 0:09:33.880 --> 0:09:36.320 we've got that on top of by the way, I laugh, 0:09:36.480 --> 0:09:40.160 ha ha, I laugh from here in Berlin. Three dollars 0:09:40.160 --> 0:09:42.680 a gallon. What I wouldn't do for three dollar a 0:09:42.679 --> 0:09:47.480 gallon gasoline? Yeah, well, well in Florida where I am, 0:09:47.559 --> 0:09:51.240 I think it's about to sixty right now, so um 0:09:51.440 --> 0:09:53.199 so yeah, it's it's it's a big deal. I think 0:09:53.240 --> 0:09:55.200 for a lot of people that are still very much 0:09:55.520 --> 0:09:59.960 hurting from uh from the economic consequences of the pandemic 0:10:00.280 --> 0:10:04.120 and UH, that could really pose some some hardship to people, 0:10:04.160 --> 0:10:08.120 particularly this summer when gasoline prices generally rise. Of course, 0:10:08.120 --> 0:10:11.760 you have to look at US production. Typically when when 0:10:11.840 --> 0:10:15.640 oil prices rise like this, we see US production uh 0:10:15.720 --> 0:10:20.000 increasing and kicking into here. But we've really had oil 0:10:20.080 --> 0:10:23.840 basically holding study in the US about eleven million barrels today. 0:10:23.880 --> 0:10:26.800 A lot of the big producers are saying that they 0:10:26.840 --> 0:10:29.640 are not planning any increases. But you know, with w 0:10:29.840 --> 0:10:32.640 T I uh, you know, up at sixty four dollars 0:10:32.640 --> 0:10:36.040 a barrel, I really don't see how how they can 0:10:36.160 --> 0:10:39.839 maintain this discipline. How you know, anyone with with with 0:10:40.040 --> 0:10:42.880 some money, can you hire a hire a crew and 0:10:43.080 --> 0:10:45.920 get something going down in Texas if there's money to 0:10:46.040 --> 0:10:49.480 be made. So I wouldn't be surprised if, um, if 0:10:49.480 --> 0:10:52.560 we do see production kicking up somewhat in the US 0:10:52.760 --> 0:10:55.679 in response to these higher prices. At the same time, 0:10:55.720 --> 0:10:58.720 you've also got to look at India and China, which 0:10:58.880 --> 0:11:02.480 India is really a most taking OPAC to increase production 0:11:02.559 --> 0:11:06.920 because of rising prices there, and you have to really say, well, 0:11:06.960 --> 0:11:09.320 what is that going to do to their economies and 0:11:09.360 --> 0:11:16.280 to their economic recovery. I'm paying about seven fifty seven 0:11:16.920 --> 0:11:21.440 I think in dollars a gallon, and my truck uses 0:11:21.480 --> 0:11:25.040 about uh well, I'm so used to thinking about in 0:11:25.040 --> 0:11:30.720 European ways, so you know, like sometimes thirty leaders for 0:11:30.800 --> 0:11:33.760 a hundred kilometers, but I guess it's about ten miles 0:11:33.760 --> 0:11:35.959 per gallon is what I get in my truck. So 0:11:36.160 --> 0:11:40.680 and nonetheless, um, ellen, I will be driving as much 0:11:40.720 --> 0:11:44.040 as I can when this lockdown is done. You know, 0:11:45.000 --> 0:11:47.560 a huge carbon footprint because I need to get out. 0:11:47.679 --> 0:11:49.800 I've been cooped up for so long. Is that you 0:11:49.840 --> 0:11:52.960 think the same for everybody else? Well, I think in 0:11:53.000 --> 0:11:55.280 the US, and maybe a little different because some places 0:11:55.320 --> 0:11:57.440 have been open for a long time. But I do 0:11:57.559 --> 0:11:59.679 think that we are going to see a third. Um, 0:11:59.679 --> 0:12:02.880 We're still looking at a deficit in jet fuel demand 0:12:02.920 --> 0:12:06.560 because air travel is not picking up the same way 0:12:07.080 --> 0:12:11.280 road travel will be. And I think that given continuing restrictions, 0:12:11.320 --> 0:12:14.520 that we're still going to see jet fuel not really 0:12:14.559 --> 0:12:20.280 recovering two pre pandemic levels anytime soon. But so the 0:12:20.360 --> 0:12:22.760 question is can can gasoline demand make up for that? 0:12:23.120 --> 0:12:26.120 And in some in some respects it definitely can make 0:12:26.200 --> 0:12:28.760 up for some of that UH deficit. But what we're 0:12:28.800 --> 0:12:32.400 really looking at is actually plastics, and we've seen an 0:12:32.400 --> 0:12:35.920 increase in production in the United States in terms of 0:12:35.600 --> 0:12:40.480 of plastic, single use plastics especially, and that's actually um 0:12:40.520 --> 0:12:43.720 taking up some of that UH deficit in jet field demand. 0:12:44.600 --> 0:12:46.840 I will say that, although I have a large carbon footprint, 0:12:46.840 --> 0:12:49.920 I'm very much against plastics, so I try and balance out, 0:12:49.960 --> 0:12:53.240 you know, my eco activism in that sense. Allan, thanks 0:12:53.280 --> 0:12:57.479 so much, Ellen Warred. They're joining us from transversal consulting. 0:12:57.559 --> 0:13:00.760 She's also a Bloomberg opinion columnist. Sarah Ponzak. I'm so 0:13:00.840 --> 0:13:04.320 proud that you used a grateful dead reference. I had 0:13:04.360 --> 0:13:06.959 a feeling that you might you might like that. You 0:13:07.040 --> 0:13:11.920 must just about five when Jerry died, but I appreciate it. Nonetheless, 0:13:11.960 --> 0:13:19.760 oil trading up five percent at sixty even Matt Miller 0:13:19.920 --> 0:13:23.880 here in Berlin alongside Sarah Ponzak in New York. We 0:13:23.960 --> 0:13:27.280 are joined by former portfolio manager and head of research 0:13:27.320 --> 0:13:32.320 at Rubicon Fund Management, who uh has written, Richard Cookson, 0:13:32.320 --> 0:13:36.640 who has written a pretty amazing column i'd say for 0:13:36.640 --> 0:13:40.520 Bloomberg Opinion. Richard, I am, you know, as a professional journalist, 0:13:40.559 --> 0:13:45.240 a sensationalist. I love alarmism and if you if you 0:13:45.320 --> 0:13:49.800 say black Monday is coming, that just gets me going. 0:13:50.080 --> 0:13:53.800 So why do you think we're headed for possibly a 0:13:53.880 --> 0:13:59.600 crash the likes of which we haven't seen since n Well, 0:13:59.640 --> 0:14:02.280 I didn't quite what it. The tong is? Does that 0:14:02.440 --> 0:14:05.280 the actually what I said, the mechanism is quite similar. 0:14:05.840 --> 0:14:08.040 And I did go back to night in seven. Do 0:14:08.120 --> 0:14:10.600 you have as many gray hairs as I have? Um? 0:14:10.720 --> 0:14:15.160 What was the big driving factor in October seven was 0:14:15.200 --> 0:14:18.520 something called portfolio insurance where these guys called Layland and 0:14:18.600 --> 0:14:21.520 Brown and Rubinstein decided he didn't need to buy options. 0:14:21.520 --> 0:14:23.720 You could go and replicate them and they told you 0:14:23.760 --> 0:14:26.720 how much you needed to sell. And basically what happened 0:14:26.840 --> 0:14:29.200 was that you've got this force selling into markets, the 0:14:29.240 --> 0:14:33.440 mechanistic selling. Now. I say that because actually if you 0:14:33.520 --> 0:14:38.600 look at every single bank and large institutions risk management. 0:14:38.600 --> 0:14:41.640 There's something called value at risk, and very simply, what 0:14:41.840 --> 0:14:43.920 this does is it looks at the last year that 0:14:44.040 --> 0:14:46.880 you can use longer and it says, okay, what's the 0:14:46.960 --> 0:14:49.400 volatility over that time period, and what's the correlation of 0:14:49.440 --> 0:14:51.680 that time period, and you whagged all that in the 0:14:51.720 --> 0:14:56.440 transiard and number. Now, if those volatilities start to start 0:14:56.440 --> 0:15:00.280 to go up, and if correlations starts to shift, then 0:15:00.360 --> 0:15:03.960 mechanistically you're going to get some selling. You can put 0:15:03.960 --> 0:15:06.440 more capital in, but actually, guess what, when you're losing money, 0:15:06.600 --> 0:15:09.040 you tend just to sell. So it's the same sort 0:15:09.040 --> 0:15:15.360 of mechanistic process. In other words, particularly if those correlations flipped. 0:15:15.480 --> 0:15:18.360 So what you've seen is equity markets falling at the 0:15:18.400 --> 0:15:23.880 same time as long dated treasury bonds falling. That is 0:15:23.880 --> 0:15:26.800 a real problem because they assume that most of the time, 0:15:26.840 --> 0:15:30.480 and most I mean of the time, that's not going 0:15:30.520 --> 0:15:32.400 to happen. So you're assuming that it it happens only on 0:15:32.440 --> 0:15:35.920 five percentifications it's happening more than five percent. So you're 0:15:35.960 --> 0:15:40.640 starting to see forced selling in both markets now the 0:15:40.800 --> 0:15:45.200 longer term typically because typically um investors see at least 0:15:45.280 --> 0:15:48.880 in my young lifetime, I'm not even I'm not even 0:15:48.880 --> 0:15:52.960 fifty yet. Investors see bonds as a safe haven for 0:15:53.000 --> 0:15:56.680 when stocks are coming down. So um, you buy bonds 0:15:56.800 --> 0:16:00.000 when you're worried about selling stocks, and you can get 0:16:00.040 --> 0:16:02.120 read of your bonds when you want to buy equities. 0:16:02.440 --> 0:16:04.840 You're saying that, and that that has kind of looked 0:16:04.840 --> 0:16:08.560 like it's changing over the last couple of weeks. Well, again, 0:16:08.640 --> 0:16:12.040 it's a very interesting question that that that negative correlation 0:16:12.080 --> 0:16:16.120 between the two, because before about that was positive. In 0:16:16.160 --> 0:16:21.600 other words, for decades. Previously, it tended to to tend 0:16:21.680 --> 0:16:24.480 to go in tandem. In other words, trojury bonds sold 0:16:24.520 --> 0:16:27.440 off at the same time as equities and vice versa. 0:16:28.040 --> 0:16:32.200 Now that changed. The best evidence suggests that it changed 0:16:32.280 --> 0:16:36.240 because you had disinflacetory pressures, and I think you've got 0:16:36.280 --> 0:16:39.360 far more inflationary pressures coming through at a time when 0:16:40.600 --> 0:16:43.720 both equities and bonds are very expensive. So you're relying 0:16:43.800 --> 0:16:47.560 upon a correlation that has actually only been um there 0:16:47.600 --> 0:16:51.440 for the last twenty years or so to protect yourself. Now, 0:16:51.640 --> 0:16:55.280 all I'm saying is that if you have those correlations 0:16:55.280 --> 0:16:58.320 flipping the other way around, from a risk management point 0:16:58.360 --> 0:17:01.120 of view, you're going to be able to less of 0:17:01.160 --> 0:17:04.800 both because they're not losses in one is not going 0:17:04.840 --> 0:17:06.840 to be able to offset again to the other and 0:17:06.920 --> 0:17:09.440 vice versa. I can see. And what's interesting, it's such 0:17:09.480 --> 0:17:12.160 an interesting we could have this conversation for an hour, 0:17:12.320 --> 0:17:16.119 right because it's so weird that disinflation worries happened in 0:17:16.320 --> 0:17:19.360 like after Paul Walker, all of a sudden, woot disinflation. 0:17:19.440 --> 0:17:23.520 It was the opposite of what he's famous for. So, Sarah, 0:17:24.040 --> 0:17:27.120 what do you think watching Paul Worker was the early Yeah, 0:17:27.160 --> 0:17:30.679 Paul Worker was remember the early eighties. It was really 0:17:30.680 --> 0:17:34.919 when China came along um and added surface capacity to 0:17:35.000 --> 0:17:38.080 the to the world economy, got these disinflationary pressures coming through. 0:17:38.720 --> 0:17:42.840 And if you look over the last twenty years, what 0:17:43.200 --> 0:17:46.480 changed for America has been you've got this persistent disinflation 0:17:46.560 --> 0:17:49.760 coming through from importants. So all I'm saying is that 0:17:49.800 --> 0:17:52.280 actually you're starting to get some inflationy pressures coming through, 0:17:52.480 --> 0:17:55.680 both because of the supply side shocks from the pandemic, 0:17:55.720 --> 0:18:00.920 but also you've got central banks um pretty money on 0:18:01.080 --> 0:18:04.280 a fairly unprecedented scale. Add at the same time telling 0:18:04.320 --> 0:18:07.240 we're not going to work, which is either them being 0:18:07.280 --> 0:18:11.000 stupid or mendacious possible combination, and we do see five 0:18:11.040 --> 0:18:13.520 year break even inflation expectations now at the highest level 0:18:13.560 --> 0:18:16.000 since two thousand and eight. Just last week, speaking of 0:18:16.040 --> 0:18:19.400 that flipping correlations, we actually saw real yields and US 0:18:19.440 --> 0:18:22.359 equities the correlation between the two dropping to the most 0:18:22.400 --> 0:18:24.200 negative level in five years. And I would love to 0:18:24.240 --> 0:18:27.040 read a really quick excerpt from your opinion piece, Richard, 0:18:27.440 --> 0:18:30.280 where you say the bigger point, however, is this this disinflation. 0:18:30.440 --> 0:18:34.120 Disinflationary forces that help propel assets higher are turning into 0:18:34.119 --> 0:18:36.520 inflationary ones. And if that leads to a shift in 0:18:36.560 --> 0:18:40.600 bond equity correlations that seems to be happening, institutions big 0:18:40.640 --> 0:18:43.080 and small will have to stump up more capital or 0:18:43.080 --> 0:18:45.840 reduce risk across the board. But my question to that is, 0:18:46.240 --> 0:18:48.119 if you need to reduce risk, but you can't go 0:18:48.160 --> 0:18:50.439 to bonds because all of a sudden, bonds and stocks 0:18:50.480 --> 0:18:52.840 are moving in tandem, how do you actually go about 0:18:52.880 --> 0:18:56.679 reducing risk? Right? You just have to be basically, and again, 0:18:57.000 --> 0:19:00.639 it's not just bonds and equities, it's bombs and risk. 0:19:01.280 --> 0:19:03.760 So if you look at you know, credit, or you 0:19:03.800 --> 0:19:06.800 look at junk bombs, you'll find that actually there's a 0:19:06.920 --> 0:19:10.280 very very strong relationship between the performance aspectory markets and 0:19:10.320 --> 0:19:13.359 performance of credit. So actually what you need to do 0:19:13.400 --> 0:19:15.240 in those sorts of situations is just to hold much 0:19:15.280 --> 0:19:18.760 more cash and all by a lot of volatility. So 0:19:18.800 --> 0:19:21.480 if you've noticed, even though you've seen a tear in 0:19:21.520 --> 0:19:25.600 equity mark, volatility and equity marks between persistently bit and 0:19:25.720 --> 0:19:29.000 that's what happens when you can't head with bombs. It's 0:19:29.119 --> 0:19:31.440 I mean by holding much more cash isn't something you 0:19:31.480 --> 0:19:34.520 want to do if you're truly worried about inflation, which 0:19:34.600 --> 0:19:37.360 is driving this. I have to say at the at 0:19:37.359 --> 0:19:41.800 the offset which are apologizing for dramaticizing your column, because 0:19:42.080 --> 0:19:45.360 I didn't even have to. I think it's an incredibly 0:19:46.359 --> 0:19:49.120 well thought out and well written peace and I really 0:19:49.119 --> 0:19:52.720 appreciate you joining us, and I will recommend to all 0:19:52.760 --> 0:19:55.280 of our listeners just check out if you have a 0:19:55.320 --> 0:19:57.639 Bloomberg terminal in front of you O P I N 0:19:57.800 --> 0:20:01.439 go to check out Richard's calum It's honestly, it's one 0:20:01.480 --> 0:20:03.480 of the most interesting columns I've read on the opinion 0:20:03.520 --> 0:20:07.320 page in uh In in a long time, and I 0:20:07.359 --> 0:20:10.840 read opinion columns. Um you know regularly. It's probably my 0:20:10.880 --> 0:20:14.960 favorite section on the Bloomberg terminal. So this value at risk. Uh, 0:20:15.000 --> 0:20:18.960 you know that we lay people became familiar with. I 0:20:19.000 --> 0:20:21.720 think during the h and Coldman Sachs was called up 0:20:22.000 --> 0:20:24.680 on Capitol Hill in front of Senator Carl Levin. UM. 0:20:24.680 --> 0:20:26.720 I haven't really thought about it since then, and it's 0:20:26.800 --> 0:20:30.399 really great to see UM and also a little bit scary, 0:20:30.440 --> 0:20:33.399 honestly to see this because Sarah's question is good one. 0:20:33.440 --> 0:20:36.120 What do you go to if you're worried about um 0:20:36.680 --> 0:20:41.800 of our shock and cash is terrifying? Volatility is a 0:20:41.880 --> 0:20:43.679 very interesting answer, and that's one I'm going to continue 0:20:43.680 --> 0:20:47.840 to delve into with our guests UM throughout. Richard Cookson there. 0:20:47.840 --> 0:20:50.480 He's a former portfolio manager and head of research at 0:20:50.520 --> 0:20:55.439 Rubicon Fund Management and a Bloomberg opinion columnist for US. 0:20:55.440 --> 0:20:58.359 Now check it out, O, P, I N go. This 0:20:59.240 --> 0:21:04.760 is Bloomberg. All right, let's get over right now to 0:21:05.119 --> 0:21:08.280 someone who might advise my parents if they had a 0:21:08.359 --> 0:21:12.240 lot more money. Michael Sonnfeld joins US chairman of Tiger 0:21:12.320 --> 0:21:16.479 twenty one on how the ultra wealthy are investing. And Michael, 0:21:16.840 --> 0:21:20.159 it's especially interesting to ask you what you think of 0:21:20.200 --> 0:21:24.600 the Elizabeth Warren tax plan. There are some very wealthy 0:21:24.600 --> 0:21:28.200 people that are for a wealth tax um, but probably 0:21:28.240 --> 0:21:32.119 more who think it's pretty Unamerican. What's your take? Thanks 0:21:32.119 --> 0:21:35.479 for having me. Most of our members are entrepreneurs who 0:21:35.600 --> 0:21:40.520 spent twenty thirty years creating businesses from scratch, their first 0:21:40.560 --> 0:21:45.560 generation wealth creators, and the wealth tax would be in 0:21:45.600 --> 0:21:49.320 their mind antithetical. Most of our members are willing to 0:21:49.359 --> 0:21:53.359 pay taxes, even progressive taxes, so the more money you 0:21:53.400 --> 0:21:56.359 make on income, the more you pay. But a wealth 0:21:56.400 --> 0:21:59.400 tax creates a real problem for people who own businesses. 0:21:59.440 --> 0:22:01.560 If you if you have everything tied up in a 0:22:01.600 --> 0:22:03.520 business and they give you a wealth tax, you can't 0:22:03.560 --> 0:22:06.240 sell two percent of a business or five percent of 0:22:06.280 --> 0:22:09.399 a business. Uh. And if you look at yields on 0:22:09.480 --> 0:22:11.680 a bond, if you have a wealth tax on top 0:22:11.720 --> 0:22:14.760 of an income tax, you can't even break even on it. 0:22:14.880 --> 0:22:17.840 So there's a lot of negatives and I don't think 0:22:17.880 --> 0:22:20.760 it would improve the economy particularly right Well, clearly we 0:22:20.800 --> 0:22:23.320 have a new presidential administration, and it will be interesting 0:22:23.359 --> 0:22:25.200 down the line to see what the Biden tax plan 0:22:25.280 --> 0:22:29.000 in actuality actually looks like and what the policies and 0:22:29.080 --> 0:22:32.800 encompasses actually hold. I want to get to how many 0:22:32.840 --> 0:22:35.320 of your members over at Tiger twenty one are actually 0:22:35.359 --> 0:22:38.439 looking at markets and thinking about markets these days, you 0:22:38.520 --> 0:22:42.120 release information on how your members are positioned, and something 0:22:42.160 --> 0:22:45.600 that really jumped out at me was that only three 0:22:45.640 --> 0:22:48.920 percent allocation to hedge funds, which is a historical low. 0:22:49.000 --> 0:22:50.680 And I was hoping you could give us some color 0:22:51.119 --> 0:22:54.760 on really what's driving this, what's behind this? Sure, this 0:22:54.840 --> 0:22:58.080 is a this is a ten year low. Hedge funds 0:22:58.119 --> 0:23:01.919 were more than twice as much as a proportion. But 0:23:02.160 --> 0:23:06.440 hedge funds typically, although there are many strategies, in general 0:23:06.760 --> 0:23:10.200 relate to the risk free or government rate, and when 0:23:10.240 --> 0:23:13.520 you have very low rates, it's very hard for hedge 0:23:13.560 --> 0:23:17.120 funds to produce the kind of historic returns that made 0:23:17.160 --> 0:23:20.520 them stars. And then you have the compounding effect that 0:23:20.640 --> 0:23:24.680 hedge funds generally have very high fees, which are acceptable 0:23:24.680 --> 0:23:28.520 when they're delivering ten and fifteen and returns, but in 0:23:28.560 --> 0:23:32.080 this very low interest rate environment, hedge funds just can't 0:23:32.119 --> 0:23:34.880 produce there. They can't squeeze the juice enough to make 0:23:34.920 --> 0:23:38.600