1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:13,960 --> 00:00:17,560 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,320 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg With 5 00:00:27,440 --> 00:00:30,200 Speaker 1: the phrase financial repression, that is a good secuite year 6 00:00:30,320 --> 00:00:33,320 Speaker 1: into William Gross the world would stop when he worked 7 00:00:33,320 --> 00:00:37,239 Speaker 1: at PIMCO for a monthly newsletter. He has been in 8 00:00:37,280 --> 00:00:40,760 Speaker 1: a kind retirement where his golf game has uh. I 9 00:00:40,880 --> 00:00:44,159 Speaker 1: believe reports have it has improved. But we're thrilled that 10 00:00:44,240 --> 00:00:47,760 Speaker 1: Bill Gross would join us today. And here is why 11 00:00:48,320 --> 00:00:50,360 Speaker 1: the New Normal is one of the great calls of 12 00:00:50,360 --> 00:00:53,680 Speaker 1: the decade. There's Steve Major at HSBC, Gary Shilling with 13 00:00:53,800 --> 00:00:56,960 Speaker 1: his call on deflation and disinflation, and then there was 14 00:00:57,040 --> 00:01:00,360 Speaker 1: Gross in ll area in the New Normal. Bill, if 15 00:01:00,360 --> 00:01:04,080 Speaker 1: you look back over ten years to the advent of 16 00:01:04,080 --> 00:01:08,200 Speaker 1: the New normal, now you've got a pandemic overlay. Do 17 00:01:08,319 --> 00:01:14,800 Speaker 1: we escape your new normal at any point? Oh? I 18 00:01:15,680 --> 00:01:20,600 Speaker 1: think we began to escape it um and and and 19 00:01:20,640 --> 00:01:23,920 Speaker 1: perhaps we will continue to do so. You know, the 20 00:01:23,959 --> 00:01:27,440 Speaker 1: new normal was was based on a slower economy, lower 21 00:01:27,480 --> 00:01:34,280 Speaker 1: influence in incorporated globalization to some extent, demographics. I think 22 00:01:34,360 --> 00:01:40,680 Speaker 1: that demographic influence continues. Globalization has actually turned into deglobalization, 23 00:01:40,840 --> 00:01:46,200 Speaker 1: which is not deflationary but inflationary. So that's been a 24 00:01:46,280 --> 00:01:49,400 Speaker 1: change outside the pandemic. And of course the pandemic is 25 00:01:49,440 --> 00:01:56,720 Speaker 1: not um has not helped globalization. It's actually accelerated deglobalization, 26 00:01:56,880 --> 00:02:02,320 Speaker 1: so too to some extent, Yes, the virus is changing 27 00:02:02,400 --> 00:02:05,640 Speaker 1: things rather bill any number of things to talk about, 28 00:02:05,640 --> 00:02:07,760 Speaker 1: But I've got to go to your memo today where 29 00:02:07,760 --> 00:02:11,520 Speaker 1: you talk about a six trillion dollar deficit. We've heard 30 00:02:11,560 --> 00:02:15,560 Speaker 1: this from other sources. The great economist Claudiasm has made 31 00:02:15,560 --> 00:02:20,120 Speaker 1: clear we need much much more deficit coverage. What does 32 00:02:20,200 --> 00:02:23,919 Speaker 1: your world do? What does the bond world do if 33 00:02:23,919 --> 00:02:27,639 Speaker 1: we get out to three, four, five, and six trillion 34 00:02:27,680 --> 00:02:32,680 Speaker 1: dollar deficits? Well, the bond world at the moment, uh, 35 00:02:33,240 --> 00:02:36,920 Speaker 1: you know, it is a melding of of the Fed 36 00:02:37,040 --> 00:02:39,919 Speaker 1: and the Treasury. Uh you know. To my way of thinking, 37 00:02:40,000 --> 00:02:44,280 Speaker 1: this this sounds rather derogatory, but the you know, the 38 00:02:44,280 --> 00:02:47,920 Speaker 1: Fed is and the Treasury is wagging it. And to 39 00:02:48,000 --> 00:02:51,160 Speaker 1: a certain extent, if if the Treasury wants money, if 40 00:02:51,160 --> 00:02:54,680 Speaker 1: they want four or five six trillion, and the FED 41 00:02:54,720 --> 00:02:59,920 Speaker 1: will provide it through uh MMT and through uh through purchases, 42 00:03:00,080 --> 00:03:03,640 Speaker 1: which they've done. Now do I endorse that? Know? Is 43 00:03:03,680 --> 00:03:07,919 Speaker 1: that a constructive thing down the road? Probably not? Does 44 00:03:07,960 --> 00:03:12,360 Speaker 1: it inflationary? Probably yes, we'll have to see, but it 45 00:03:12,400 --> 00:03:15,400 Speaker 1: hasn't been in Japan. But I think that we've melded 46 00:03:15,440 --> 00:03:19,919 Speaker 1: fiscal and monetary, and I think rather permanently. Now. Um, Yeah, 47 00:03:20,240 --> 00:03:23,720 Speaker 1: deficits can increase, but gosh, Tom, we're at pent of 48 00:03:23,760 --> 00:03:29,519 Speaker 1: GDP already and it goes to at some point, as 49 00:03:29,560 --> 00:03:33,400 Speaker 1: others point out, if the if the FEDS stays out 50 00:03:33,440 --> 00:03:38,680 Speaker 1: of it or or their influence, then inflation is gonna 51 00:03:38,960 --> 00:03:42,440 Speaker 1: come back. In any case, we've had inflation with financial 52 00:03:42,480 --> 00:03:44,960 Speaker 1: assets and with commodities, and so let's just come back 53 00:03:44,960 --> 00:03:47,440 Speaker 1: in another form. Bill. I remember the day where you 54 00:03:47,440 --> 00:03:50,120 Speaker 1: recommended the Procter and Gamble dividend in the bond world 55 00:03:50,160 --> 00:03:53,960 Speaker 1: fell off its collective chair. Now we have permanence of 56 00:03:54,080 --> 00:03:57,760 Speaker 1: gross financial repression. I'm gonna give you great credit for 57 00:03:57,840 --> 00:04:01,000 Speaker 1: coming up with that concept. Do we have an asset 58 00:04:01,120 --> 00:04:08,120 Speaker 1: bubble or bubbles plural? Because we have your financial repression? Oh? 59 00:04:08,160 --> 00:04:11,160 Speaker 1: I think so? Um, And we have an asset bubble 60 00:04:11,200 --> 00:04:14,440 Speaker 1: because interest rates are near zero and negative and uh, 61 00:04:14,840 --> 00:04:18,120 Speaker 1: many parts of the world and that at least to 62 00:04:18,200 --> 00:04:21,680 Speaker 1: my way of thinking, you know, through even in discount 63 00:04:21,680 --> 00:04:25,480 Speaker 1: models and so on, have inflated growth stocks and anything 64 00:04:25,520 --> 00:04:29,520 Speaker 1: that you know have profits far in the future, better 65 00:04:29,560 --> 00:04:35,160 Speaker 1: growing fast. So um. So yeah. But financial repression, if 66 00:04:35,200 --> 00:04:38,320 Speaker 1: we want to speak to that, is something that's always 67 00:04:38,360 --> 00:04:41,040 Speaker 1: been swept under the rug by, not only by Powell 68 00:04:41,080 --> 00:04:44,600 Speaker 1: but by Yelling and Bernankey, etcetera. It's something that can 69 00:04:44,640 --> 00:04:48,120 Speaker 1: be fixed at a later point because you know, prior 70 00:04:48,240 --> 00:04:54,479 Speaker 1: fed share persons have either focused on inflation or focused 71 00:04:54,480 --> 00:04:58,640 Speaker 1: on you know, revigorating the economy and to the extent 72 00:04:58,800 --> 00:05:03,320 Speaker 1: that the retirees and to the extent of pension funds 73 00:05:03,480 --> 00:05:06,600 Speaker 1: and savers so to speak, or being hurt. Well, that 74 00:05:06,680 --> 00:05:10,120 Speaker 1: can just wait. But at some point it can't. And 75 00:05:10,200 --> 00:05:12,279 Speaker 1: I think we're beginning to see that. I mean, we 76 00:05:12,320 --> 00:05:17,360 Speaker 1: don't have to talk about prudential or insurance companies or banks. Uh, 77 00:05:17,279 --> 00:05:19,919 Speaker 1: we can talk about mom pop on main Street in 78 00:05:20,000 --> 00:05:23,480 Speaker 1: des Moine, Iowa, where um, they have no more savings 79 00:05:23,600 --> 00:05:27,520 Speaker 1: and they're not able to earn money on whatever they 80 00:05:27,560 --> 00:05:32,680 Speaker 1: have left, and uh, you know, the problem year by year, uh, 81 00:05:33,120 --> 00:05:37,120 Speaker 1: just getting increasingly greater, and I think ultimately that becomes 82 00:05:37,200 --> 00:05:41,239 Speaker 1: the the real chink in the armor of this entire 83 00:05:41,400 --> 00:05:46,240 Speaker 1: financial complex. Bill Jonathan Hare always enjoy your right thing, 84 00:05:46,440 --> 00:05:48,760 Speaker 1: and you've never hit in your personality when you do right. 85 00:05:49,279 --> 00:05:52,200 Speaker 1: I do think however, today, when people read this investment outlook, 86 00:05:52,839 --> 00:05:55,200 Speaker 1: the investment calls within, it aren't the things that are 87 00:05:55,200 --> 00:05:57,279 Speaker 1: going to jump out at them. It's the things you 88 00:05:57,320 --> 00:05:59,800 Speaker 1: write about your family. And I ask you this question, Bill, 89 00:05:59,800 --> 00:06:02,679 Speaker 1: with the deep amount of respect for your career, what's 90 00:06:02,760 --> 00:06:08,200 Speaker 1: behind that this morning as you put this out. Well, 91 00:06:08,240 --> 00:06:12,080 Speaker 1: I've always wanted to let people know who I am, um, 92 00:06:13,080 --> 00:06:15,240 Speaker 1: and to the extent that they know who you are, 93 00:06:15,279 --> 00:06:20,200 Speaker 1: and there's a certain amount of honesty in talking about 94 00:06:20,240 --> 00:06:22,680 Speaker 1: yourself and your life. Then, you know, to my way 95 00:06:22,680 --> 00:06:26,799 Speaker 1: of thinking, it always translated into a an equal amount 96 00:06:26,839 --> 00:06:32,520 Speaker 1: of honesty in terms of the investment world. And yeah, 97 00:06:31,200 --> 00:06:36,479 Speaker 1: I think it's always been an autobiographical type of thing. 98 00:06:36,880 --> 00:06:38,799 Speaker 1: I didn't want to write a book about my life, 99 00:06:38,800 --> 00:06:42,360 Speaker 1: but to a certain extent, these outlooks, um, you know, 100 00:06:42,520 --> 00:06:45,160 Speaker 1: outline my life as as I've moved along in the 101 00:06:45,520 --> 00:06:49,479 Speaker 1: current one where I talk about my son's tattoos. Um, 102 00:06:49,520 --> 00:06:52,440 Speaker 1: you know, I think it's pretty interesting. That's a topical, 103 00:06:52,640 --> 00:06:56,960 Speaker 1: uh piece of information, not only for my family, but 104 00:06:57,040 --> 00:07:01,119 Speaker 1: for society. And uh, you know, uh to the extent 105 00:07:01,160 --> 00:07:03,000 Speaker 1: the readers like it. Find if they don't like it, 106 00:07:03,120 --> 00:07:06,720 Speaker 1: then some don't, then that's fine too. Well. Bill, you 107 00:07:06,760 --> 00:07:09,560 Speaker 1: know that many people are interested in your life. And 108 00:07:09,600 --> 00:07:11,360 Speaker 1: once again, with a deep amount of respect for the 109 00:07:11,400 --> 00:07:13,600 Speaker 1: family members that might read this and be terribly upset, 110 00:07:13,640 --> 00:07:16,720 Speaker 1: you do refer to your son as a disappointment. And 111 00:07:16,760 --> 00:07:18,600 Speaker 1: I'm trying to understand from you look happy right now 112 00:07:18,600 --> 00:07:21,480 Speaker 1: as we talk, hugely successful, and when people read this, 113 00:07:21,520 --> 00:07:25,360 Speaker 1: they might just be thinking, Bill, sounds really bitter and unhappy. 114 00:07:25,480 --> 00:07:28,920 Speaker 1: What would you respond to them if they asked you that? Well, 115 00:07:28,960 --> 00:07:31,560 Speaker 1: I you know, I talked about tattoo as I said, 116 00:07:31,560 --> 00:07:35,920 Speaker 1: he was a disappointment in terms of tattoos, and that, um, 117 00:07:37,120 --> 00:07:40,000 Speaker 1: you know, that doesn't mean he necessarily a disappointment as 118 00:07:40,000 --> 00:07:43,320 Speaker 1: a son. Didn't have enough room and space for that. 119 00:07:43,400 --> 00:07:45,880 Speaker 1: But you know, I talked about my early two kids 120 00:07:45,880 --> 00:07:53,280 Speaker 1: as well, relatively tattooed free and uh, something funny to 121 00:07:53,400 --> 00:07:56,560 Speaker 1: talk about, especially the tattoo on the inside of my 122 00:07:56,640 --> 00:08:00,480 Speaker 1: Son's lip. Who you know at least is here is 123 00:08:00,480 --> 00:08:03,680 Speaker 1: the sun didn't get a forty niners tattoo. That's the 124 00:08:03,760 --> 00:08:06,000 Speaker 1: real issue, and you're gonna go get a tots tattoo. 125 00:08:06,040 --> 00:08:07,920 Speaker 1: I do want to say, just going back to the 126 00:08:07,920 --> 00:08:10,760 Speaker 1: investment thesis bill and the idea that you're making an 127 00:08:10,760 --> 00:08:13,600 Speaker 1: analogy of the tattoo on the global economy that can't 128 00:08:13,600 --> 00:08:16,280 Speaker 1: be removed for a very long time. And you talk 129 00:08:16,360 --> 00:08:19,400 Speaker 1: about how you expect the bulk of stimulus have already 130 00:08:19,400 --> 00:08:22,320 Speaker 1: occurred and that it's time to get more defensive. What 131 00:08:22,360 --> 00:08:24,960 Speaker 1: does it mean to get defensive with yields so low 132 00:08:25,080 --> 00:08:29,520 Speaker 1: right now? Well, a number of things, and yes that 133 00:08:29,680 --> 00:08:34,680 Speaker 1: I think the tattoo, uh, you know it's applicable to 134 00:08:34,760 --> 00:08:38,240 Speaker 1: the global economy. Tattoo is a discoloring of the skin. 135 00:08:38,400 --> 00:08:43,520 Speaker 1: And and certainly the global economy has been discolored by UH, 136 00:08:43,679 --> 00:08:46,240 Speaker 1: by the virus, and things have changed in many ways 137 00:08:45,920 --> 00:08:49,240 Speaker 1: as you've spoken to you know, certainly in the past 138 00:08:49,240 --> 00:08:52,640 Speaker 1: half hour. What does it mean, uh, in terms of 139 00:08:52,640 --> 00:08:57,360 Speaker 1: investments and defensive yield types of investments. I'm always amazed, 140 00:08:57,360 --> 00:09:02,679 Speaker 1: and I don't discount the phenomen gonna gross stocks and 141 00:09:02,679 --> 00:09:05,800 Speaker 1: and the fangs and the Big five as I call them, 142 00:09:06,080 --> 00:09:09,800 Speaker 1: UM and others. Because you know, as real interest rates 143 00:09:09,800 --> 00:09:14,560 Speaker 1: have declined in the US to amazing in the five 144 00:09:14,679 --> 00:09:17,000 Speaker 1: years to a minus a hundred and thirty basis points, 145 00:09:17,080 --> 00:09:19,760 Speaker 1: much more than other countries, then you know this diving 146 00:09:19,800 --> 00:09:22,640 Speaker 1: a discount models would account for that and make gross 147 00:09:22,640 --> 00:09:25,480 Speaker 1: stocks too much better than certainly other investments in the 148 00:09:25,559 --> 00:09:29,400 Speaker 1: US and and and and globally. Um. But in terms 149 00:09:29,400 --> 00:09:32,560 Speaker 1: of dividends, I'm always amazed that others don't recognize it. 150 00:09:32,600 --> 00:09:35,600 Speaker 1: If you can borrow money at U zero and one percent, 151 00:09:35,720 --> 00:09:38,679 Speaker 1: and investors can probably borrow it at two percent on margin, 152 00:09:39,120 --> 00:09:43,600 Speaker 1: then a relatively stable seven to eight percent investment, call 153 00:09:43,679 --> 00:09:47,600 Speaker 1: it the tobacco stock. Are you know where I gravitated 154 00:09:47,760 --> 00:09:53,959 Speaker 1: to some natural gas pipeline stocks with relatively firm dividends 155 00:09:54,720 --> 00:09:58,400 Speaker 1: This perform US and and if you compound that uh 156 00:09:58,440 --> 00:10:00,920 Speaker 1: six or seven percent a year relative to your bar 157 00:10:01,080 --> 00:10:03,600 Speaker 1: and right, well that's uh, it's almost as good as 158 00:10:03,640 --> 00:10:06,360 Speaker 1: a gross stock. Not as good as an Amazon, but 159 00:10:07,000 --> 00:10:10,360 Speaker 1: pretty good a stable investor bill. Just real quick, here 160 00:10:10,400 --> 00:10:12,839 Speaker 1: are you saying that leverage is good in this kind 161 00:10:12,840 --> 00:10:15,880 Speaker 1: of environment given how low rates are? Oh? For sure, 162 00:10:16,640 --> 00:10:18,880 Speaker 1: you know, you've got a lever and to the extent 163 00:10:19,000 --> 00:10:22,040 Speaker 1: that leverage comes back and snaps you, it does that 164 00:10:22,120 --> 00:10:26,360 Speaker 1: one Central Banks raised rates and of course, uh, you know, 165 00:10:26,440 --> 00:10:29,400 Speaker 1: I don't think and O there's and most don't think 166 00:10:29,440 --> 00:10:31,800 Speaker 1: that rates will be raised for a long long time. So, yes, 167 00:10:32,320 --> 00:10:33,960 Speaker 1: you've got to be able to borrow money. You can 168 00:10:34,000 --> 00:10:36,199 Speaker 1: do that with closed and funds that lever you can 169 00:10:36,240 --> 00:10:39,880 Speaker 1: do that with you know, margin at your own account. Uh. 170 00:10:40,000 --> 00:10:42,600 Speaker 1: Whenever you lever, however, you want to do it safely 171 00:10:42,720 --> 00:10:50,080 Speaker 1: because as we know, ultimately leverage is destructive and the 172 00:10:50,080 --> 00:10:51,640 Speaker 1: fore runner of a bear market as opposed to a 173 00:10:51,640 --> 00:10:56,960 Speaker 1: bull market. Bill always appreciate transparency and you're always generous 174 00:10:56,960 --> 00:10:58,280 Speaker 1: with the time. Thanks for you wanting to us today. 175 00:10:58,280 --> 00:11:01,360 Speaker 1: Bill gross that honest and an outlook that he released 176 00:11:01,360 --> 00:11:08,520 Speaker 1: earlier this morning. Let's use every second we have with 177 00:11:08,640 --> 00:11:11,360 Speaker 1: Dana eyes here and with wet Bush securities. I'm sure 178 00:11:11,400 --> 00:11:13,480 Speaker 1: most of our audience on radio and television no of 179 00:11:13,600 --> 00:11:16,719 Speaker 1: his enthusiasm for technology. Dan, we want to talk to 180 00:11:16,760 --> 00:11:20,400 Speaker 1: you about China, America and technology, and yes, talk tick 181 00:11:20,480 --> 00:11:23,319 Speaker 1: and all that, but Dana, I've just reaffirmed for is 182 00:11:23,400 --> 00:11:26,760 Speaker 1: your bullishness on these belieguered texts. Right now, is this 183 00:11:26,840 --> 00:11:29,920 Speaker 1: the mother of all by the dip opportunities in Apple, 184 00:11:30,040 --> 00:11:33,560 Speaker 1: in Amazon and the others. Yeah, Look, I do it 185 00:11:33,559 --> 00:11:37,560 Speaker 1: as a golden buying opportunity because in my opinion, we're 186 00:11:37,559 --> 00:11:40,559 Speaker 1: still in the sixth inning of a rerating in tech 187 00:11:41,120 --> 00:11:43,120 Speaker 1: and this is just a healthy pull back. I still 188 00:11:43,200 --> 00:11:47,360 Speaker 1: view twenty percent higher for text stocks and sign names 189 00:11:47,360 --> 00:11:50,760 Speaker 1: over the next six nine months. And when you say 190 00:11:50,800 --> 00:11:53,720 Speaker 1: that to clients in a zoom meeting whatever it is 191 00:11:53,800 --> 00:11:58,320 Speaker 1: these days, higher, what did they say back? Right now? 192 00:11:59,640 --> 00:12:03,239 Speaker 1: M most of the questions are which are the names? 193 00:12:03,240 --> 00:12:06,520 Speaker 1: Who in software do you own? Where the text teams? 194 00:12:06,960 --> 00:12:09,679 Speaker 1: Because John, what I would tell you is it's it's 195 00:12:09,760 --> 00:12:13,480 Speaker 1: to the one ratio investors were going to do the 196 00:12:13,600 --> 00:12:16,599 Speaker 1: work on who the winners are rad and hit the 197 00:12:16,679 --> 00:12:20,360 Speaker 1: panic button and sound that's in twenty plus years covering 198 00:12:20,480 --> 00:12:24,280 Speaker 1: tech in terms of just from a scale white knuckles 199 00:12:25,080 --> 00:12:28,120 Speaker 1: from my perscus. I think that your band cast this 200 00:12:28,280 --> 00:12:30,000 Speaker 1: question the last week or so down. So let me 201 00:12:30,000 --> 00:12:32,559 Speaker 1: ask him of you the distinction between the tech revolution 202 00:12:33,120 --> 00:12:37,599 Speaker 1: and a bubble. A bubble which I you know I was. 203 00:12:38,040 --> 00:12:40,599 Speaker 1: I was an analyst through nine and two thousands. It 204 00:12:40,760 --> 00:12:44,120 Speaker 1: was all about secular themes that might happen in the 205 00:12:44,200 --> 00:12:48,319 Speaker 1: stocks were massively over and play with no profitable business models. Now, 206 00:12:48,480 --> 00:12:50,520 Speaker 1: the secular themes you here to say, in my opinion, 207 00:12:50,800 --> 00:12:54,040 Speaker 1: the most transformational tech teams that I've seen in twenty 208 00:12:54,080 --> 00:12:59,040 Speaker 1: plus years terms of Cloud, five G, cybersecurity and others. 209 00:12:59,760 --> 00:13:03,360 Speaker 1: And these numbers now are starting reflected. That's the difference. 210 00:13:03,960 --> 00:13:07,720 Speaker 1: The secular themes are here and they're on the horizon. 211 00:13:07,880 --> 00:13:10,679 Speaker 1: It's not on the common a hoop. And I think 212 00:13:10,760 --> 00:13:13,719 Speaker 1: that's the difference, and that's why this continues to be 213 00:13:13,800 --> 00:13:16,920 Speaker 1: a powerdigm change in terms of valuations or tech doctor. 214 00:13:17,160 --> 00:13:19,559 Speaker 1: And I don't view these last week or two is 215 00:13:19,600 --> 00:13:22,120 Speaker 1: the end or some sort of sign about bubble. And 216 00:13:22,240 --> 00:13:23,559 Speaker 1: there are a lot of people who would agree with you. 217 00:13:23,720 --> 00:13:26,120 Speaker 1: They would say that the tops page on top tic, 218 00:13:26,360 --> 00:13:28,679 Speaker 1: as Tom might put it, would do really well and 219 00:13:28,760 --> 00:13:32,200 Speaker 1: could drive revenue. But what multiples makes sense? I mean, 220 00:13:32,280 --> 00:13:35,480 Speaker 1: how high can we go at this point? Yeah? I 221 00:13:35,559 --> 00:13:37,600 Speaker 1: think that that's where I think a lot of these 222 00:13:37,679 --> 00:13:40,679 Speaker 1: names chapter you. It is some of the parts as 223 00:13:40,760 --> 00:13:43,760 Speaker 1: well as ultimately what numbers look like in a normalized 224 00:13:43,800 --> 00:13:46,160 Speaker 1: state when we look out over next twelve d eight months, 225 00:13:46,480 --> 00:13:49,160 Speaker 1: and a lot of these growth stories they've been accelerated 226 00:13:49,280 --> 00:13:52,120 Speaker 1: by one to two years, sometimes two to three years, 227 00:13:52,840 --> 00:13:55,720 Speaker 1: so that these are still a digestion process. And somebody's 228 00:13:55,760 --> 00:13:58,679 Speaker 1: work from home names a zoom a document sign and 229 00:13:58,800 --> 00:14:01,679 Speaker 1: the scale or some the core cybersecurity. And when you 230 00:14:01,720 --> 00:14:04,640 Speaker 1: look at large top path, I mean the stronger getting stronger, 231 00:14:04,640 --> 00:14:06,439 Speaker 1: and I think we go into earnings in terms of 232 00:14:06,520 --> 00:14:09,920 Speaker 1: three Q that's gonna be another Pattle's higher in my opinion, 233 00:14:10,000 --> 00:14:11,720 Speaker 1: And Dan, I want to rip the script right now. 234 00:14:11,800 --> 00:14:14,520 Speaker 1: This is really important. Cisco and Oracle are you know, 235 00:14:14,720 --> 00:14:17,360 Speaker 1: to amateurs like me, are tech companies, but they're really not. 236 00:14:17,559 --> 00:14:21,440 Speaker 1: Their hardware companies up nine nine percent per year for 237 00:14:21,480 --> 00:14:24,120 Speaker 1: the last decade, which is MOULDI compared to the group 238 00:14:24,240 --> 00:14:27,720 Speaker 1: you following. How bad do you perceive Lawrence Ellison wants 239 00:14:27,760 --> 00:14:30,880 Speaker 1: to be like the other guys? Well, I mean that's 240 00:14:30,920 --> 00:14:34,040 Speaker 1: the TikTok deal. It's on the outside looking in and 241 00:14:34,200 --> 00:14:36,800 Speaker 1: for for Allison Oracle that was once there. I mean, 242 00:14:37,040 --> 00:14:40,560 Speaker 1: this is an opportunity for them from a TikTok perspective, 243 00:14:40,640 --> 00:14:43,800 Speaker 1: to topsy partner and get in the game and getting 244 00:14:43,840 --> 00:14:47,520 Speaker 1: that conversation. But but I continue to view this as 245 00:14:47,600 --> 00:14:50,840 Speaker 1: a massive head scratcher in terms of Oracle looking at 246 00:14:50,840 --> 00:14:54,040 Speaker 1: the deal and obviously a partnership which is totally different 247 00:14:54,080 --> 00:14:56,880 Speaker 1: than outright said, which continues to be the issue Dan 248 00:14:57,120 --> 00:14:59,800 Speaker 1: a head scratcher, and yet Oracle shares uh in pre 249 00:15:00,000 --> 00:15:02,960 Speaker 1: are con trading up more than nine percent. Isn't this 250 00:15:03,160 --> 00:15:05,360 Speaker 1: the kind of activity that would point at some of 251 00:15:05,400 --> 00:15:08,240 Speaker 1: the frost that you're rejecting basically the idea. People don't 252 00:15:08,320 --> 00:15:10,160 Speaker 1: understand it. They don't even understand how real it is. 253 00:15:10,200 --> 00:15:11,920 Speaker 1: They don't even understand what kind of deal this is. 254 00:15:12,360 --> 00:15:16,320 Speaker 1: And yet Bio Oracle, well, no, I think that that's 255 00:15:16,360 --> 00:15:18,560 Speaker 1: why I don't have to distinguish between is your car 256 00:15:18,680 --> 00:15:21,720 Speaker 1: frad and fundamental drivers. And I think this is an 257 00:15:21,760 --> 00:15:25,000 Speaker 1: example of it's it's a head scratch and some theorical 258 00:15:25,040 --> 00:15:27,680 Speaker 1: partnership and alter in what that even means and if 259 00:15:27,720 --> 00:15:30,560 Speaker 1: it ultimately gets approved by the White House. And this 260 00:15:30,720 --> 00:15:33,200 Speaker 1: is nachas all noise because it's not a salid investiture. 261 00:15:33,520 --> 00:15:35,960 Speaker 1: But that's why it's an investor. I think you gotta see, 262 00:15:36,280 --> 00:15:37,840 Speaker 1: you've got to go through the noise and look at 263 00:15:37,880 --> 00:15:40,280 Speaker 1: the fundamental drivers like you loo can name like Apple 264 00:15:40,720 --> 00:15:42,760 Speaker 1: to five you supercycle. I think it's a once in 265 00:15:42,840 --> 00:15:46,240 Speaker 1: a decade cycle. That's why you own that mean others 266 00:15:46,600 --> 00:15:48,680 Speaker 1: might have throught. We saw that with Slack over the 267 00:15:48,760 --> 00:15:51,280 Speaker 1: last week or two, so I think you have to 268 00:15:51,320 --> 00:15:54,040 Speaker 1: look at the individual stories. It's not just a rising 269 00:15:54,080 --> 00:15:57,320 Speaker 1: tide to with tall boats. Then you mentioned Apple. We 270 00:15:57,360 --> 00:15:59,200 Speaker 1: don't do this often, but let's do it now. Can 271 00:15:59,240 --> 00:16:01,240 Speaker 1: you just talk to me about the middle of March 272 00:16:01,840 --> 00:16:04,120 Speaker 1: when you dropped your price target but you maintained that 273 00:16:04,200 --> 00:16:07,160 Speaker 1: outperform rating. I just want to give you a victory 274 00:16:07,240 --> 00:16:09,480 Speaker 1: lap for that down because when we were in those 275 00:16:09,520 --> 00:16:13,280 Speaker 1: depths of March, people just decided that was it. This 276 00:16:13,480 --> 00:16:17,320 Speaker 1: bullmarket was over, and Dan, you just stuck with it 277 00:16:17,680 --> 00:16:19,720 Speaker 1: with the big tech names. What was the lesson from 278 00:16:19,760 --> 00:16:23,680 Speaker 1: that moment, No, I appreciate. Look, the lesson from that 279 00:16:23,840 --> 00:16:27,800 Speaker 1: moment is it was all about the installed base and 280 00:16:28,040 --> 00:16:32,280 Speaker 1: seeing the forest of the trees and understanding that this 281 00:16:32,520 --> 00:16:35,800 Speaker 1: was a panic sell off and if you just sort 282 00:16:35,840 --> 00:16:38,640 Speaker 1: of stuck to those fundamental drivers, the stock was going 283 00:16:38,680 --> 00:16:41,640 Speaker 1: to reread further up and and and that's why I 284 00:16:41,840 --> 00:16:44,120 Speaker 1: view when you look at Apple, and obviously we've talked 285 00:16:44,160 --> 00:16:47,400 Speaker 1: about many times over the last five six years many 286 00:16:47,480 --> 00:16:50,440 Speaker 1: times that they were dead from a growth perspective, but 287 00:16:50,560 --> 00:16:52,440 Speaker 1: you had to come back. Look, and that's why the 288 00:16:52,520 --> 00:16:55,240 Speaker 1: heaters will heat. But it just creates the opportunity. In 289 00:16:55,280 --> 00:17:02,000 Speaker 1: my opinion, I think still think one basks up on 290 00:17:02,080 --> 00:17:04,320 Speaker 1: the down fantastic to catch up with you as a 291 00:17:04,359 --> 00:17:10,080 Speaker 1: white down if stet of wet Bush joining. So Francis 292 00:17:10,160 --> 00:17:14,280 Speaker 1: Donald with manual life asset management doing wonderful work across 293 00:17:14,359 --> 00:17:18,879 Speaker 1: the entire equation of economics. Francis Donald, are the airlines 294 00:17:18,960 --> 00:17:23,639 Speaker 1: and outlier or can you actually see US economic growth 295 00:17:23,800 --> 00:17:27,960 Speaker 1: slowing into the end of the year. Oh, certainly the 296 00:17:28,119 --> 00:17:32,000 Speaker 1: momentum constall are you a first deriva ever second revative 297 00:17:32,040 --> 00:17:35,040 Speaker 1: type of guide? Tom, Really, this is an incredibly interesting 298 00:17:35,080 --> 00:17:37,240 Speaker 1: recovery because you can take a sector and make a 299 00:17:37,400 --> 00:17:39,960 Speaker 1: story out of it, or you can also pick strect 300 00:17:40,000 --> 00:17:42,760 Speaker 1: sectors that are doing very well. Anything in the manufacturing 301 00:17:42,880 --> 00:17:45,680 Speaker 1: space we're gonna end up with and I hate to 302 00:17:45,800 --> 00:17:48,440 Speaker 1: use the letter shape recovery, it seems pretty simplific, but 303 00:17:48,520 --> 00:17:50,600 Speaker 1: we're going to end up with a K shape recovery here, 304 00:17:50,640 --> 00:17:53,919 Speaker 1: which is that segments of the economy like airlines are 305 00:17:53,960 --> 00:17:56,240 Speaker 1: going to do really poorly and you're also going to 306 00:17:56,359 --> 00:17:59,080 Speaker 1: have areas like in inductrial manufacturers going to do well. 307 00:17:59,160 --> 00:18:01,320 Speaker 1: So you can have any analysts on they'll take a 308 00:18:01,359 --> 00:18:03,760 Speaker 1: sector they can make a story out of it, really 309 00:18:03,800 --> 00:18:07,560 Speaker 1: careful about disaggregating what's the happening, and at least so 310 00:18:07,640 --> 00:18:09,560 Speaker 1: there's a new alphabet out there now, it's a K 311 00:18:09,760 --> 00:18:12,600 Speaker 1: shaped recovery. According to Msdonald, I know because of your 312 00:18:12,640 --> 00:18:15,040 Speaker 1: support of Arsenal, it's going to be an A shaped 313 00:18:15,119 --> 00:18:18,320 Speaker 1: recovery here in about twelve weeks. Absolutely are G shaped 314 00:18:18,600 --> 00:18:21,200 Speaker 1: recovery for the gunners, I will say Francis, though, you know, 315 00:18:21,280 --> 00:18:24,080 Speaker 1: talking about the airlines is emblematic. One thing that has 316 00:18:24,119 --> 00:18:27,760 Speaker 1: been constant has been airlines layoffs of employees, and they're 317 00:18:27,760 --> 00:18:30,600 Speaker 1: planning to do another round of possibly tens hundreds of 318 00:18:30,720 --> 00:18:34,119 Speaker 1: thousands of layoffs once they're aid from the government and 319 00:18:34,160 --> 00:18:37,080 Speaker 1: the federal government wears out. And and to Tom's point, 320 00:18:37,160 --> 00:18:39,040 Speaker 1: this is probably why they don't want to get a bailout. 321 00:18:39,080 --> 00:18:41,040 Speaker 1: They don't want the strings attached. They don't have the 322 00:18:41,080 --> 00:18:44,359 Speaker 1: strings attached from the capital markets. How much is that 323 00:18:44,480 --> 00:18:47,480 Speaker 1: being factored into some of the projections for the economy, 324 00:18:47,520 --> 00:18:50,040 Speaker 1: The fact that some of these big employers still have 325 00:18:50,240 --> 00:18:53,600 Speaker 1: layoffs to make that haven't necessarily been even announced. Yet. 326 00:18:55,320 --> 00:18:58,520 Speaker 1: Once again, we're using one sector to really paint an 327 00:18:58,560 --> 00:19:01,359 Speaker 1: excellent example for what's happened underlying the surface, and that 328 00:19:01,480 --> 00:19:04,160 Speaker 1: is we really have to employment shocks in the US 329 00:19:04,240 --> 00:19:07,120 Speaker 1: and global economy. We had those eight percent of those 330 00:19:07,160 --> 00:19:10,560 Speaker 1: who were initially laid off forward towards your job losses temporary, 331 00:19:10,920 --> 00:19:13,040 Speaker 1: and now that number is falling quickly. We have, you know, 332 00:19:13,160 --> 00:19:15,959 Speaker 1: eight hundred thousands of a million Americans a week who 333 00:19:16,000 --> 00:19:19,040 Speaker 1: are filing for unemployment insurance. Those job losses are not 334 00:19:19,200 --> 00:19:21,720 Speaker 1: going to be temporary. Those are more like two thousand 335 00:19:21,840 --> 00:19:24,560 Speaker 1: one or two thousand eight style recessions. So even those 336 00:19:24,600 --> 00:19:26,639 Speaker 1: who were told their job loss would be temporary may 337 00:19:26,680 --> 00:19:29,520 Speaker 1: become permanent. My suspicion is actually, even though we have 338 00:19:29,720 --> 00:19:32,800 Speaker 1: fewer people are unemployed now, the composition of the labor 339 00:19:32,840 --> 00:19:36,040 Speaker 1: market is actually much less healthy now in August September 340 00:19:36,280 --> 00:19:38,840 Speaker 1: than it was in April. So we really have to 341 00:19:39,000 --> 00:19:41,359 Speaker 1: move away from that headline figure pay attention to the 342 00:19:41,480 --> 00:19:44,840 Speaker 1: quality underlying the surface. Well, Francis, let's build on that 343 00:19:44,960 --> 00:19:46,880 Speaker 1: just a little bit more. The composition of this economy 344 00:19:46,920 --> 00:19:49,040 Speaker 1: going forward, capital economics in the last twenty four hours. 345 00:19:49,080 --> 00:19:50,760 Speaker 1: That a nice little job on this. It's not about 346 00:19:50,800 --> 00:19:53,400 Speaker 1: the recovery for the next six or twelve months. It's 347 00:19:53,400 --> 00:19:56,159 Speaker 1: about the permanent changes of this economy and the sector 348 00:19:56,240 --> 00:19:59,120 Speaker 1: makeup of it, and the shifts the permanent shifts were witnessing. 349 00:19:59,320 --> 00:20:02,800 Speaker 1: Can you speak to the Francis. Yes, it's a huge 350 00:20:02,920 --> 00:20:05,440 Speaker 1: challenge if you're an asset manager, because you know there's 351 00:20:05,480 --> 00:20:08,320 Speaker 1: another five to COVID and we don't know when it is, 352 00:20:08,440 --> 00:20:10,120 Speaker 1: and we don't even know what unlocks it. I would 353 00:20:10,160 --> 00:20:12,200 Speaker 1: argue it's not even a vaccine, it's just you know, 354 00:20:12,280 --> 00:20:14,920 Speaker 1: reduction in the fatality rate. So what do you do. 355 00:20:15,080 --> 00:20:18,000 Speaker 1: You have to trade tactical portfolios, but ultimately focus on 356 00:20:18,040 --> 00:20:20,239 Speaker 1: the long term trend. Now there will be those who 357 00:20:20,280 --> 00:20:22,800 Speaker 1: are going to focus on behavioral changes or composition of 358 00:20:22,840 --> 00:20:26,000 Speaker 1: the economy changes. My view is a macroeconomist is to 359 00:20:26,040 --> 00:20:29,080 Speaker 1: say what's fundamentally changed here, And what's fundamentally changed is 360 00:20:29,119 --> 00:20:31,359 Speaker 1: that we're going to have base bottom interest rates for 361 00:20:31,520 --> 00:20:34,600 Speaker 1: at least five years and possibly longer. We're going to 362 00:20:34,680 --> 00:20:39,080 Speaker 1: have extraordinarily large government deficits and debt to GDP, and 363 00:20:39,520 --> 00:20:42,480 Speaker 1: we've entered this new paradigm, particularly in North America, where 364 00:20:42,520 --> 00:20:44,840 Speaker 1: a government issues a bond and a central bank buys it. 365 00:20:45,000 --> 00:20:46,960 Speaker 1: So we can call that all types of different things. 366 00:20:47,080 --> 00:20:49,440 Speaker 1: But I'm a little bit like debt monetization to me. 367 00:20:49,600 --> 00:20:52,480 Speaker 1: So these are the structural trends that have really affected 368 00:20:52,480 --> 00:20:54,840 Speaker 1: our financial system. And sure you can be excited about 369 00:20:55,040 --> 00:20:57,919 Speaker 1: digilization of the economy or or the end of malls, 370 00:20:58,080 --> 00:21:00,960 Speaker 1: but what really starts seeing are addressing. The way that 371 00:21:01,000 --> 00:21:03,399 Speaker 1: I'm thinking about my portfolio is what do we do 372 00:21:03,560 --> 00:21:05,760 Speaker 1: when government bonds are doing us a negative return and 373 00:21:05,800 --> 00:21:09,040 Speaker 1: we have to make are you predicting it? Are you 374 00:21:09,119 --> 00:21:13,719 Speaker 1: predicting negative interest rates just because of the structural challenges, well, 375 00:21:13,840 --> 00:21:16,119 Speaker 1: not predicting negative interest rates in the United States, So 376 00:21:16,240 --> 00:21:19,119 Speaker 1: I suspect they're The probability is signed by the market 377 00:21:19,200 --> 00:21:22,159 Speaker 1: is still probably too low. But we have of the 378 00:21:22,200 --> 00:21:25,240 Speaker 1: global government bond universe that's negative yielding. So if you're 379 00:21:25,240 --> 00:21:27,480 Speaker 1: an asset manager and you have to allocate the global 380 00:21:27,520 --> 00:21:30,040 Speaker 1: government bonds, this is an asset class that has lost 381 00:21:30,119 --> 00:21:32,520 Speaker 1: a huge amount of appeal, So you have to rotate 382 00:21:32,600 --> 00:21:35,120 Speaker 1: into another asset class. You have to generate your six 383 00:21:35,200 --> 00:21:37,239 Speaker 1: to seven percent. It means We're going to see big 384 00:21:37,320 --> 00:21:40,760 Speaker 1: flows into under own asset classes, more flows in international 385 00:21:41,000 --> 00:21:43,960 Speaker 1: and more flows into emerging market debt high yield. This 386 00:21:44,119 --> 00:21:46,440 Speaker 1: is why these sectors are doing fundamentally well, because we 387 00:21:46,520 --> 00:21:48,639 Speaker 1: have to put the money somewhere doesn't exist in the 388 00:21:48,680 --> 00:21:52,040 Speaker 1: traditional global government bond asset class anymore. So, Francis, you're 389 00:21:52,080 --> 00:21:55,040 Speaker 1: talking about how the labor market looks less healthy now, 390 00:21:55,160 --> 00:21:58,040 Speaker 1: and you're talking about places to allocate your money based 391 00:21:58,119 --> 00:22:01,200 Speaker 1: on low yielding the yield low yielding regime that we're in, 392 00:22:01,640 --> 00:22:06,639 Speaker 1: when real fundamentals matter anymore anymore or again? Um I 393 00:22:06,840 --> 00:22:09,160 Speaker 1: I hope soon because I like my job as someone 394 00:22:09,200 --> 00:22:11,879 Speaker 1: who does fundamental analysis. But I will say, you know, 395 00:22:12,000 --> 00:22:14,879 Speaker 1: we talk about this disconnect between the economy and the 396 00:22:14,920 --> 00:22:18,600 Speaker 1: stock market. I'm not so convinced the disconnected as large 397 00:22:18,640 --> 00:22:21,040 Speaker 1: as people believe. It is the reason that I, you know, 398 00:22:21,280 --> 00:22:23,000 Speaker 1: really give in to this idea that we do have 399 00:22:23,040 --> 00:22:25,320 Speaker 1: a K shape recovery is because it's a simplific way 400 00:22:25,359 --> 00:22:29,320 Speaker 1: to highlight manufacturing is really doing quite fine. We press 401 00:22:29,440 --> 00:22:31,600 Speaker 1: a button, our conveyor belts come back on. They do 402 00:22:31,720 --> 00:22:34,680 Speaker 1: not have to operate with social distancing in effect. That's 403 00:22:34,760 --> 00:22:37,760 Speaker 1: critical because manufacturing is only ten percent of the economy, 404 00:22:37,800 --> 00:22:40,159 Speaker 1: but its forty to fift of earnings the market cap 405 00:22:40,280 --> 00:22:42,800 Speaker 1: in the SMP. So the segment of the economy that's 406 00:22:42,800 --> 00:22:45,320 Speaker 1: actually doing really well and is V shaped is the 407 00:22:45,359 --> 00:22:48,919 Speaker 1: one that's most tied to the stock market. Job services 408 00:22:49,000 --> 00:22:51,520 Speaker 1: are less in the stock market, So this K shape 409 00:22:51,560 --> 00:22:55,000 Speaker 1: recovery actually becomes a fundamental investment thesis, and it helps 410 00:22:55,040 --> 00:22:59,199 Speaker 1: to explain some, not all, of this disconnect. You see, Francis, 411 00:22:59,280 --> 00:23:01,560 Speaker 1: this is some and Pool. It's not about whether fundamentals 412 00:23:01,640 --> 00:23:04,119 Speaker 1: matter or not. It's about how they matter going forward 413 00:23:04,160 --> 00:23:06,000 Speaker 1: from here, and how they matter for central banks as 414 00:23:06,040 --> 00:23:08,440 Speaker 1: well twenty years ago, for the last I don't know, 415 00:23:08,480 --> 00:23:10,520 Speaker 1: a hundred years, for the Federal Reserve, the story has 416 00:23:10,520 --> 00:23:12,680 Speaker 1: always been when things get bad, you cut rights, and 417 00:23:12,680 --> 00:23:14,880 Speaker 1: when things get better, you hike them. The new story 418 00:23:14,880 --> 00:23:16,560 Speaker 1: at the Federal Reserve is when things get bad, you 419 00:23:16,640 --> 00:23:18,480 Speaker 1: cut rights and throw everything at it, and when things 420 00:23:18,560 --> 00:23:21,960 Speaker 1: get better, maybe you do nothing. And Francis, that's something 421 00:23:22,000 --> 00:23:24,720 Speaker 1: we've still got to get our hands around, possibly for 422 00:23:24,800 --> 00:23:26,960 Speaker 1: the next decade or so. How are you thinking about 423 00:23:27,000 --> 00:23:31,680 Speaker 1: this shift at the Fed? Well, effectively, with that translates too, 424 00:23:31,760 --> 00:23:33,800 Speaker 1: is I spend an awful lot more time thinking about 425 00:23:33,920 --> 00:23:37,280 Speaker 1: fiscal policy than I do monetary policy. It also means, 426 00:23:37,359 --> 00:23:40,640 Speaker 1: for example, when I'm generating five year forecasts, I actually 427 00:23:40,720 --> 00:23:43,359 Speaker 1: have some moderate inflationary pressures in my forecast, but I 428 00:23:43,440 --> 00:23:46,280 Speaker 1: don't have higher policy rates and I don't have materially 429 00:23:46,359 --> 00:23:49,520 Speaker 1: higher rates in the market between your tenure. Why is 430 00:23:49,600 --> 00:23:51,920 Speaker 1: that Because we have this disconnect, now we can allow 431 00:23:52,000 --> 00:23:54,879 Speaker 1: for higher inflation and not necessarily mean that that the 432 00:23:55,080 --> 00:23:57,520 Speaker 1: entire interest rates. And this is a paradigm shift in 433 00:23:57,600 --> 00:23:59,720 Speaker 1: the way that we see those two factors playing together. 434 00:24:00,080 --> 00:24:01,879 Speaker 1: But ultimately what it means is is known for a 435 00:24:01,960 --> 00:24:05,240 Speaker 1: long time, monetary policy is a very blunt instrument. It's 436 00:24:05,320 --> 00:24:08,320 Speaker 1: one tool across the full economy. The shift here, and 437 00:24:08,560 --> 00:24:10,320 Speaker 1: you know, I mean my career off of commenting on 438 00:24:10,400 --> 00:24:13,040 Speaker 1: central bank that is kind of the old world. The 439 00:24:13,119 --> 00:24:15,639 Speaker 1: new world is how is siscal policy going to target 440 00:24:15,680 --> 00:24:18,719 Speaker 1: specific sectors that need help? And how will pascal policy 441 00:24:18,800 --> 00:24:21,000 Speaker 1: and issuance affect the shape of the curve? What are 442 00:24:21,040 --> 00:24:25,320 Speaker 1: wages gonna do here in the Donald new world? Amazon 443 00:24:25,440 --> 00:24:28,080 Speaker 1: with a hundred thousand jobs today as a round number, 444 00:24:28,119 --> 00:24:31,480 Speaker 1: it's eleven of the workforce. It's probably a greater percent 445 00:24:31,600 --> 00:24:35,199 Speaker 1: of the cardboard box force is well fifteen bucks an 446 00:24:35,240 --> 00:24:37,800 Speaker 1: hour with benefits? Does that get it done? I mean, Francis, 447 00:24:38,080 --> 00:24:40,280 Speaker 1: what does what do wages do? In your new world? 448 00:24:41,880 --> 00:24:44,440 Speaker 1: So wages is the one component of the election that 449 00:24:44,560 --> 00:24:48,399 Speaker 1: I think matters more than even say tax types or 450 00:24:48,520 --> 00:24:51,080 Speaker 1: tax cuts for example. So if we do get this 451 00:24:51,160 --> 00:24:53,240 Speaker 1: new composition of government, then we're going to be talking 452 00:24:53,320 --> 00:24:56,000 Speaker 1: differently about healthcare. I use the benefits that you're alluding to. 453 00:24:56,119 --> 00:24:58,720 Speaker 1: Are we getting a minimum wages fifteen dollars? In this 454 00:24:58,840 --> 00:25:01,159 Speaker 1: new paradigm? We're going to see two courses. We're going 455 00:25:01,200 --> 00:25:03,960 Speaker 1: to see higher corporate concentration, which means they're going to 456 00:25:04,040 --> 00:25:06,800 Speaker 1: have more pricing power but also more abilities to price 457 00:25:06,840 --> 00:25:08,960 Speaker 1: their own labor. But we're also going to have a 458 00:25:09,040 --> 00:25:12,800 Speaker 1: focus on redistributive policies demands for higher wages, but they're 459 00:25:12,840 --> 00:25:15,639 Speaker 1: probably going to be fighting against each other. Ultimately. I 460 00:25:15,720 --> 00:25:18,600 Speaker 1: am in a moderate inflation camp. I do think wages 461 00:25:18,600 --> 00:25:21,800 Speaker 1: are going to move up moderately through this period, but 462 00:25:21,920 --> 00:25:23,719 Speaker 1: we probably need to think about how they get there 463 00:25:23,760 --> 00:25:26,080 Speaker 1: in a different way than we have historically, which was 464 00:25:26,160 --> 00:25:29,080 Speaker 1: all Philip's curve and you know output gaps. No, the 465 00:25:29,200 --> 00:25:31,159 Speaker 1: new world is one where we're probably going to be 466 00:25:31,280 --> 00:25:33,359 Speaker 1: making sort of sort of more manual changes to the 467 00:25:33,400 --> 00:25:36,520 Speaker 1: way we look at insplation, like Francis grib to catch 468 00:25:36,640 --> 00:25:39,760 Speaker 1: up as always, fransics Donald the of manual Life Asset Management. 469 00:25:44,359 --> 00:25:46,159 Speaker 1: Right now, Lisa brand Wins and I really want to 470 00:25:46,200 --> 00:25:48,600 Speaker 1: get to something that's very visceral for both of us, 471 00:25:48,640 --> 00:25:52,399 Speaker 1: and that is the transportation challenges that we see across 472 00:25:52,880 --> 00:25:56,520 Speaker 1: New York. That is a Metropolitan Transit authority. You can 473 00:25:56,600 --> 00:25:58,520 Speaker 1: do that with pet Foy and you can do all 474 00:25:58,560 --> 00:26:01,480 Speaker 1: the suit and type stuff, or you can read Jennifer 475 00:26:01,600 --> 00:26:07,320 Speaker 1: Gunnerman's fantabulous article in the New Yorker magazine on driving 476 00:26:07,640 --> 00:26:11,320 Speaker 1: the bus across Central Park North through this pandemic. It 477 00:26:11,480 --> 00:26:15,639 Speaker 1: is extraordinary journalism. And Petfoy, I know you saw that 478 00:26:15,960 --> 00:26:19,280 Speaker 1: article about one of your bus drivers, Terence Lane as well. 479 00:26:19,359 --> 00:26:22,119 Speaker 1: I love deep in the article where they say, and 480 00:26:22,160 --> 00:26:26,280 Speaker 1: I'm gonna paraphrase Fosts, the policeman seeing when you're needed, 481 00:26:26,400 --> 00:26:29,200 Speaker 1: the fireman see you when you're needed. But the bus 482 00:26:29,320 --> 00:26:32,440 Speaker 1: driver and all of your mt A, you guys see 483 00:26:32,520 --> 00:26:38,359 Speaker 1: us each and every day. That's Tom h n t 484 00:26:38,520 --> 00:26:43,879 Speaker 1: A employees UH performed heroically during the pandemic, as they 485 00:26:43,960 --> 00:26:47,960 Speaker 1: did after nine eleven, as they did after Superstorm Sandy. Obviously, 486 00:26:48,200 --> 00:26:52,199 Speaker 1: the coronavirus exactive or an incredible pull across across New 487 00:26:52,280 --> 00:26:55,479 Speaker 1: York UH and at the mt AT one of our 488 00:26:55,560 --> 00:26:59,159 Speaker 1: colleagues passed away from the virus. New York was the epicenter. 489 00:26:59,720 --> 00:27:03,639 Speaker 1: But a heroic work of men and women working on 490 00:27:03,800 --> 00:27:07,080 Speaker 1: subways and buses and Metro North and Long Island railroad 491 00:27:07,200 --> 00:27:11,240 Speaker 1: and accessor ride and bridges and tunnels is extraordinary. And 492 00:27:11,480 --> 00:27:14,320 Speaker 1: each of those men and women played an incredible role 493 00:27:14,640 --> 00:27:17,760 Speaker 1: in supporting New York and moving first responders and essential 494 00:27:17,800 --> 00:27:23,080 Speaker 1: employees during the pandemic, which I'll remind your viewers is continuing. 495 00:27:23,720 --> 00:27:26,879 Speaker 1: What's so important here is with the funding shortfall, and 496 00:27:26,960 --> 00:27:30,240 Speaker 1: if you do not get aid from various larger governments, 497 00:27:30,760 --> 00:27:36,359 Speaker 1: how many layoffs do you perceive? But we are asking 498 00:27:36,440 --> 00:27:40,520 Speaker 1: the federal government for an additional twelve billion dollars, which 499 00:27:40,600 --> 00:27:42,639 Speaker 1: is the amount of loss we will have in the 500 00:27:42,760 --> 00:27:49,439 Speaker 1: remainder of and into ridership is down. It's down, actually subways, buses, 501 00:27:49,480 --> 00:27:53,359 Speaker 1: Mentro North and Long Island significantly greater than during the 502 00:27:53,440 --> 00:27:57,720 Speaker 1: Great Depression, which which is which is extraordinary. If we 503 00:27:57,880 --> 00:28:00,320 Speaker 1: don't get federal aid, and that's really in come in 504 00:28:00,480 --> 00:28:04,680 Speaker 1: upon the Republican Senate leadership UH to to move that, 505 00:28:05,080 --> 00:28:07,760 Speaker 1: to move that bill and move that funding. UH. We 506 00:28:07,920 --> 00:28:09,960 Speaker 1: may have to cut subway and bus service up the 507 00:28:10,080 --> 00:28:15,000 Speaker 1: seventy and Way off about seventy employees, and up to 508 00:28:15,119 --> 00:28:18,639 Speaker 1: fifty service reduction on Metro North on Long Island Railroad. 509 00:28:19,000 --> 00:28:23,040 Speaker 1: Those cuts would be devastating and frankly, the the m 510 00:28:23,119 --> 00:28:25,960 Speaker 1: t A is really the circulatory system of the New 511 00:28:26,040 --> 00:28:30,360 Speaker 1: York City regional economy, and jobs will not be created, 512 00:28:30,440 --> 00:28:33,160 Speaker 1: the recovery will be stunted and thwarted if we don't 513 00:28:33,200 --> 00:28:35,560 Speaker 1: get that level of funding. I also just want to 514 00:28:35,600 --> 00:28:39,160 Speaker 1: point out the following. The Chicago Transit Authority, important and 515 00:28:39,240 --> 00:28:43,040 Speaker 1: well run agency pre pandemic, carried on an average day 516 00:28:43,080 --> 00:28:46,560 Speaker 1: about two point five million customers last week in the 517 00:28:46,680 --> 00:28:49,080 Speaker 1: in the in the throes of the pandemic, we carry 518 00:28:49,160 --> 00:28:53,040 Speaker 1: two point six million. UH. So that's a pre pandemic 519 00:28:53,240 --> 00:28:56,040 Speaker 1: UH comparison on on the in the case of Chicago 520 00:28:56,520 --> 00:28:58,640 Speaker 1: and during the pandemic in the case of the n 521 00:28:58,720 --> 00:29:00,720 Speaker 1: t A, And it just demonstrates how important the m 522 00:29:00,800 --> 00:29:03,200 Speaker 1: t A is. UH. If If we don't get that 523 00:29:03,320 --> 00:29:05,440 Speaker 1: funding and have to make those cuts, it will have 524 00:29:05,640 --> 00:29:08,440 Speaker 1: a significant drastic effect on the New York economy. Top 525 00:29:08,840 --> 00:29:11,560 Speaker 1: somebody Pad who grew up in New York City riding 526 00:29:11,600 --> 00:29:13,920 Speaker 1: the subway system and who has seen it through this 527 00:29:14,200 --> 00:29:17,000 Speaker 1: through the eighties through the nineties. There is a fear 528 00:29:17,120 --> 00:29:20,320 Speaker 1: that we're heading back to another era with the subway system. 529 00:29:20,720 --> 00:29:22,840 Speaker 1: How realistic is it that we are going to make 530 00:29:22,920 --> 00:29:24,480 Speaker 1: those cuts. I mean, a lot of people hear what 531 00:29:24,560 --> 00:29:26,760 Speaker 1: you're saying and just sort of chalk it up as 532 00:29:26,760 --> 00:29:29,800 Speaker 1: a negotiating tactic. Are we on the brink of heading 533 00:29:29,840 --> 00:29:32,560 Speaker 1: back to the eighties and the nineties for the subway system? 534 00:29:34,000 --> 00:29:38,600 Speaker 1: It's not a negotiating attact, Lisa. We've been downgraded again. 535 00:29:39,480 --> 00:29:43,520 Speaker 1: The rating agencies are not not political figures. They're calling 536 00:29:43,560 --> 00:29:46,400 Speaker 1: it as as we see it. UH. Going into the 537 00:29:46,480 --> 00:29:50,320 Speaker 1: into we expected an eighty million dollars surplus. We expected 538 00:29:50,360 --> 00:29:52,440 Speaker 1: to take hundreds of millions of dollars out of the 539 00:29:52,520 --> 00:29:55,000 Speaker 1: expense space of the m t A UH. We we've 540 00:29:55,080 --> 00:29:57,640 Speaker 1: done that. We expect to take an additional billion out 541 00:29:58,200 --> 00:30:01,680 Speaker 1: in h one. But this is not a negotiating uh 542 00:30:02,200 --> 00:30:05,920 Speaker 1: MET measure. We have a twelve billion dollar deficit. We've 543 00:30:05,960 --> 00:30:08,560 Speaker 1: got to face. The only level of government that can 544 00:30:08,880 --> 00:30:12,400 Speaker 1: fund that is the federal government. Uh, every state and 545 00:30:12,440 --> 00:30:14,640 Speaker 1: every city has broke, including the State of New York, 546 00:30:14,680 --> 00:30:16,160 Speaker 1: in the City of New York. And it's only the 547 00:30:16,240 --> 00:30:19,080 Speaker 1: federal government. This is a national crisis that requires a 548 00:30:19,160 --> 00:30:23,040 Speaker 1: national solution. Pat Given that financial backdrop, how do you 549 00:30:23,160 --> 00:30:26,720 Speaker 1: plan on deploying the resources to enforce the new mandate 550 00:30:27,000 --> 00:30:30,320 Speaker 1: to wear masks on the subways and buses or face 551 00:30:30,360 --> 00:30:34,280 Speaker 1: a fifty dollar fine? So it's it's it's a great question. 552 00:30:34,440 --> 00:30:38,880 Speaker 1: So the mask fine provision went into effect this morning. 553 00:30:39,320 --> 00:30:45,320 Speaker 1: We've been serving our customers physically, counting mass compliance before 554 00:30:45,400 --> 00:30:50,960 Speaker 1: today was about on buses, on subways, well over ninety 555 00:30:51,000 --> 00:30:53,640 Speaker 1: on Metro North and Long Island Railroad. I spent the 556 00:30:53,720 --> 00:30:56,960 Speaker 1: morning this morning with the m T a masked task Force. 557 00:30:57,560 --> 00:31:01,440 Speaker 1: I wrote the e UH in Queens from Jamaica that 558 00:31:01,560 --> 00:31:03,440 Speaker 1: got of if it's seventy four Street and Roosevelt Dave 559 00:31:03,480 --> 00:31:05,400 Speaker 1: and you took the seven, then got on the UH 560 00:31:06,160 --> 00:31:08,800 Speaker 1: the four of the five from a Grand Central down 561 00:31:08,880 --> 00:31:11,640 Speaker 1: to what the Bowling Green, which is where the NBA's 562 00:31:11,720 --> 00:31:14,560 Speaker 1: office is. I will tell you that of the thousands 563 00:31:14,600 --> 00:31:17,880 Speaker 1: of people we saw this morning, there was only one 564 00:31:17,960 --> 00:31:21,720 Speaker 1: without a mask. My colleagues and I handed out probably 565 00:31:21,840 --> 00:31:24,600 Speaker 1: a couple of hundred masks to people so who already 566 00:31:24,640 --> 00:31:27,120 Speaker 1: had them so they'd have them for tomorrow. Masker and 567 00:31:27,840 --> 00:31:30,800 Speaker 1: are available from station agents. They are also being distributed 568 00:31:30,840 --> 00:31:33,800 Speaker 1: by Long Island Railroad and metro work. Our goal is 569 00:31:33,840 --> 00:31:36,800 Speaker 1: not to find anybody. This is not a revenue matter. UH. 570 00:31:36,920 --> 00:31:39,000 Speaker 1: It's in the it's in the interest of public health, 571 00:31:39,080 --> 00:31:42,720 Speaker 1: protecting our customers UH and our employees. Wearing a mask 572 00:31:42,960 --> 00:31:44,720 Speaker 1: is the most important thing to do that we don't know. 573 00:31:44,920 --> 00:31:46,920 Speaker 1: We were not looking to issue a lot of fines 574 00:31:47,120 --> 00:31:49,680 Speaker 1: that we're out of time, but we say congratulations to 575 00:31:49,760 --> 00:31:52,480 Speaker 1: you and all the essential workers of your mt A. 576 00:31:52,720 --> 00:31:56,800 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 577 00:31:56,960 --> 00:32:01,520 Speaker 1: listen to interviews on Apple Podcasts, so Cloud, or whichever 578 00:32:01,760 --> 00:32:05,720 Speaker 1: podcast platform you prefer. I'm on Twitter at Tom Keene 579 00:32:06,240 --> 00:32:09,880 Speaker 1: before the podcast. You can always catch us worldwide. I'm 580 00:32:09,920 --> 00:32:10,800 Speaker 1: Bloomberg Radio.