WEBVTT - Surveillance: Eli Lilly CEO Says Science Will Win 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.720 Bloomberg dot Com, and of course on the Bloomberg right now. 0:00:27.760 --> 0:00:30.360 And this is the joy as we consider this terrible 0:00:30.400 --> 0:00:33.520 pandemic and all of us at Bloomberg Surveillance have done 0:00:33.600 --> 0:00:36.560 everything we can to bring you experts. David Ricks is 0:00:36.600 --> 0:00:39.120 out of Purdue. He runs a shop called Eli Lily 0:00:39.520 --> 0:00:43.400 in his Indiana and they are dominant in our history 0:00:43.520 --> 0:00:49.200 of finding solutions, whether it's insulin arythemias, and particularly what 0:00:49.320 --> 0:00:55.320 Lily did on polio vaccine in nineteen was absolutely original, 0:00:55.720 --> 0:01:01.720 absolutely historic. The phrase from that time is safe, effective, impotent. 0:01:01.880 --> 0:01:04.800 That is the great hope right now for all of us. 0:01:04.880 --> 0:01:10.720 Dave Ricks, how close are we too? Safe, effective and potent? Well, 0:01:10.720 --> 0:01:13.360 thanks for having me on. It's obviously a time when 0:01:14.000 --> 0:01:17.240 the importance of our scientists work is is at a high. 0:01:17.640 --> 0:01:19.520 Um as you mentioned back to our days with the 0:01:19.560 --> 0:01:21.600 polio vaccine, that's really in our blood here at Lily 0:01:21.640 --> 0:01:24.440 has to respond to these public health crisis is um 0:01:24.480 --> 0:01:27.679 we're working on the medicine side UM and I think 0:01:27.720 --> 0:01:32.319 we are close to understanding that treatment with monoclonal antibodies, 0:01:32.360 --> 0:01:35.800 which we're making and others are early in the disease, 0:01:35.840 --> 0:01:39.000 can make a significant difference. We not STATA earlier in 0:01:39.040 --> 0:01:41.959 October regarding that, and we've got an application at the 0:01:42.040 --> 0:01:46.640 FDA reviewing that that very data which therapy has the 0:01:46.680 --> 0:01:49.920 best outcome where we can say we have a vaccine. 0:01:50.000 --> 0:01:53.800 Peter Hotez at Baylor Medicine is saying simply, we need 0:01:53.880 --> 0:01:57.720 something cheap in old school. John spoke with Nevarties this morning. 0:01:57.720 --> 0:02:01.080 There's modern all the rest of them. Which is the approach, 0:02:01.240 --> 0:02:04.080 Mr Ricks, It seems to be the one that will 0:02:04.160 --> 0:02:07.960 get us to a societal vaccine. Well, I think on 0:02:08.000 --> 0:02:10.680 the vaccine side, the good news is there's lots of 0:02:10.680 --> 0:02:14.320 approaches being tried. You know, in our business, we need data. 0:02:14.600 --> 0:02:17.360 I don't think it makes sense to guess um at 0:02:17.400 --> 0:02:20.840 which would would be the most effective. The good news 0:02:20.960 --> 0:02:23.520 is will know that, and we'll know that pretty soon. 0:02:23.880 --> 0:02:25.760 The early ones, as you pointed out, of the m 0:02:25.840 --> 0:02:28.680 R and a UM a new technology that's never produced 0:02:28.680 --> 0:02:31.679 a human vaccine before, but looks pretty promising in terms 0:02:31.760 --> 0:02:35.400 of the ability to generate our own antibody response, and 0:02:35.480 --> 0:02:38.480 that's a good sign I think for defeating the virus 0:02:38.560 --> 0:02:42.200 or preventing infectious spread. We don't know how long that 0:02:42.240 --> 0:02:46.240 will last. There's other approaches that have produced vaccines, modified 0:02:46.320 --> 0:02:50.480 virus UM, taking different viruses and mounting elements of the 0:02:50.520 --> 0:02:54.639 covid virus on them UM, and those are more proven. 0:02:55.120 --> 0:02:57.960 They are a little harder to scale, but they also 0:02:58.000 --> 0:03:01.760 may produce a good response. Mostly, I'm confident because we 0:03:01.800 --> 0:03:05.600 have so many shots on goal um really an unprecedented 0:03:05.800 --> 0:03:09.079 number so quickly. So I think science will win in 0:03:09.120 --> 0:03:11.440 the end. It's just hard to pick the winner at 0:03:11.440 --> 0:03:13.639 this point in the horse rage, John, that's a hockey 0:03:13.760 --> 0:03:16.320 phrase there. That's not a soccer phrase, because there's so 0:03:16.400 --> 0:03:20.880 few good soccer that's a hockey phraser from this. You 0:03:20.960 --> 0:03:23.280 don't know what Dave meant. I'm just going to interpret 0:03:23.320 --> 0:03:25.840 it as a soccer phrase. It still makes sense. Think 0:03:25.880 --> 0:03:29.320 you mentioned the word scale, scale, and I want to 0:03:29.320 --> 0:03:32.920 return to antibody therapies and please help me understand how 0:03:32.960 --> 0:03:38.360 difficult it is to scale something up quickly in large amounts. 0:03:38.760 --> 0:03:42.120 As soon as you get the green light yeah, it's difficult. 0:03:42.360 --> 0:03:46.120 Because it's so difficult. We actually started commercial manufacturing in 0:03:46.160 --> 0:03:49.480 the first week in July, so we had to basically 0:03:49.640 --> 0:03:52.400 aim at a target that hadn't arrived at its point yet. 0:03:52.440 --> 0:03:54.560 We didn't know the dose, we didn't know whether the 0:03:54.640 --> 0:03:56.600 drug could work, we didn't know in which setting it 0:03:56.640 --> 0:03:59.920 would work. And today or yesterday we announced a study 0:04:00.000 --> 0:04:03.000 we'd been conducting with the NIH We're gonna pause because 0:04:03.000 --> 0:04:05.400 it's in a later stage of the disease where probably 0:04:05.440 --> 0:04:08.200 these antibodies won't be as effective, whereas in early stage 0:04:08.200 --> 0:04:12.120 of disease looks highly effective. So we already started that process. 0:04:12.200 --> 0:04:17.200 It's about four months from beginning to end best case 0:04:17.600 --> 0:04:20.920 to start manufacturing and have output. And then, on top 0:04:20.960 --> 0:04:25.960 of all that, the global um infrastructure to make monoclonal antibodies, 0:04:26.000 --> 0:04:29.080 which are some of the most complicated and expensive type 0:04:29.120 --> 0:04:32.960 of medicines to make, is limited. We've harnessed actually five 0:04:33.080 --> 0:04:36.880 different sites within our network, collaborating with Amgen and working 0:04:36.880 --> 0:04:41.159 with a large contract manufacturer owned by Samsung actually in 0:04:41.240 --> 0:04:45.400 Korea to sequester a significant amount of volume. Even then, 0:04:45.480 --> 0:04:47.200 we know it won't be enough for all the needs 0:04:47.200 --> 0:04:49.520 based on the current infection rates, So we need to 0:04:49.520 --> 0:04:53.839 work on lower doses and then concentrating these important therapies 0:04:53.880 --> 0:04:56.599 where they can make the biggest impact for us right now. 0:04:56.720 --> 0:05:00.480 We think that's high risk patients right as they're diagnosed. Rick. 0:05:00.640 --> 0:05:03.640 There's also Dave, Dave, excuse me, there's also a question 0:05:03.680 --> 0:05:07.600 of profitability. And your latest earnings report, which just came out, 0:05:07.720 --> 0:05:10.200 as said that you expect to spend four hundred million 0:05:10.279 --> 0:05:14.000 dollars on COVID therapy is exploring what could potentially work. 0:05:14.040 --> 0:05:16.680 And there's a natural cap to whatever you can charge 0:05:16.720 --> 0:05:19.440 for these remedies because there is a public health need 0:05:19.839 --> 0:05:23.840 and benefit right now. How profitable can these therapies actually 0:05:23.920 --> 0:05:28.159 be based on the human interest here? Yeah, so today 0:05:28.200 --> 0:05:30.240 we announced journing. It's a good point. It's why I'm 0:05:30.279 --> 0:05:33.280 on which showed another solid quarter. We grew revenue and 0:05:33.279 --> 0:05:36.640 and profit amidst this u pandemic we're in and real 0:05:36.680 --> 0:05:38.400 I think it shows the resilience of a company like 0:05:38.480 --> 0:05:42.960 ours as we think about pricing and access our first 0:05:42.960 --> 0:05:45.560 priorities that patients pay nothing. We know that if there's 0:05:45.560 --> 0:05:49.200 an out of pocket costs, that that economics will start 0:05:49.200 --> 0:05:51.440 to differentiate who gets the drug. And we think that 0:05:51.680 --> 0:05:54.840 health status should be the only factor considered. So we're 0:05:54.839 --> 0:05:57.800 working with governments to procure and sell our medicines and 0:05:57.839 --> 0:06:01.800 distribute within their markets. In terms of pricing, what we're 0:06:01.800 --> 0:06:05.760 thinking about carefully is is to ship create a price 0:06:05.800 --> 0:06:09.839 that immediately creates value not just for us but for 0:06:10.040 --> 0:06:14.560 the system, meaning it saves money direct costs very quickly, 0:06:15.080 --> 0:06:18.640 and we've demonstrated we can reduce hospitalization risk in high 0:06:18.720 --> 0:06:22.240 risk patients between seventy and eight in the U S. 0:06:22.279 --> 0:06:26.000 A hospitalization stay for COVID is about two dollars per person, 0:06:26.320 --> 0:06:29.800 so there's ample room to share that value. Assuming the 0:06:29.880 --> 0:06:33.000 drug is approved. UM. So we're working on the exact price. 0:06:33.240 --> 0:06:35.839 It won't be as profitable as other products. Certainly, we 0:06:35.920 --> 0:06:38.760 expect to have a modest return for shareholders based on 0:06:38.800 --> 0:06:42.480 our modeling today. UM But I think companies like ours 0:06:42.680 --> 0:06:45.400 were built for moments like this. Our job is to 0:06:45.480 --> 0:06:48.520 invest at risk, use our science to solve tough problems. 0:06:48.520 --> 0:06:50.680 And there's a tough problem at hand right now, and 0:06:50.720 --> 0:06:53.479 that's why we're applying ourselves to it. I think I 0:06:53.520 --> 0:06:55.440 speak for still when I say good luck for the 0:06:55.880 --> 0:06:57.880 year a hand, and that's facility I can appreciate the 0:06:57.920 --> 0:07:01.400 time this morning, said thank you Elon, chairman and CEO. 0:07:06.000 --> 0:07:07.960 You know how this works. I introduced the guests from 0:07:07.960 --> 0:07:10.960 Morkan Stanley. They talk about a V shaped recovery. How 0:07:11.000 --> 0:07:13.840 they were right everyone asked was wrong? At least we'll 0:07:13.880 --> 0:07:15.920 ask some questions about what they might be wrong. In 0:07:15.920 --> 0:07:19.680 a month, two months, three, that's the next five minutes. 0:07:19.760 --> 0:07:22.240 Right here on Bloomberg. Andrew slim And joined us right now. 0:07:22.880 --> 0:07:27.640 Stanley Investment Management Senior portfolio manager Andrew wild Daniel smiling. 0:07:28.040 --> 0:07:30.720 I know they shaped recovery stocks up and all that. 0:07:31.040 --> 0:07:33.720 What's the latest call right now, Andrew, how do you 0:07:33.760 --> 0:07:36.000 see the evolution of this call at the House of 0:07:36.040 --> 0:07:38.720 Morgan Stanley that's been pretty spot on for the last 0:07:38.760 --> 0:07:43.160 six months. Well, you know, as a portfolio manager, I 0:07:43.360 --> 0:07:47.040 see the evolution as really the equal wated SMP out 0:07:47.040 --> 0:07:51.000 perform the cap waited, which is namely that, as you know, 0:07:51.560 --> 0:07:57.320 up through September, the cap waited was massively outperforming the 0:07:57.360 --> 0:07:59.560 equal waited. It was massively out for in the small 0:07:59.640 --> 0:08:03.280 cap next and then something happened, and that is that 0:08:03.320 --> 0:08:07.120 we're starting to see more of these economically census stocks 0:08:07.120 --> 0:08:09.640 starting to pick up. So I think the evolution is 0:08:10.120 --> 0:08:12.920 that it's not so much at the market level as 0:08:12.960 --> 0:08:16.520 it pertains the capway to SMP. It's more the unopinions 0:08:16.520 --> 0:08:18.640 of the rest of the stocks in the index that 0:08:18.680 --> 0:08:21.520 I've really allied behind. I think they're starting to price 0:08:22.200 --> 0:08:26.640 some type of reopening. But they did get very overbought 0:08:26.640 --> 0:08:28.960 on a short term basis, so things like yesterday doesn't 0:08:28.960 --> 0:08:32.520 surprise me at all that we had a retrenchment a bit, Andrew, 0:08:32.920 --> 0:08:34.840 the goal here is to have some patients. I want 0:08:34.880 --> 0:08:38.520 you to define a character and color of patients right now. 0:08:38.800 --> 0:08:42.320 How do you counsel patients, say out to January or 0:08:42.360 --> 0:08:48.319 February of next year. Well, I'm counseling patients through next Tuesday, um, 0:08:48.720 --> 0:08:52.560 which is resist the urge to overreact to whatever happens 0:08:52.640 --> 0:08:55.640 in the election that doesn't doesn't fit your you know whatever. 0:08:55.679 --> 0:08:59.200 You're not you, but your political view is because you know, look, 0:08:59.240 --> 0:09:01.280 I got grey hair in this business a long time ago, 0:09:01.440 --> 0:09:05.240 seen so many people. So many people react by doing 0:09:05.280 --> 0:09:08.480 things in their financial portfolio to express their political views 0:09:08.480 --> 0:09:10.520 that never turned out to be right. So I'm trying 0:09:10.520 --> 0:09:12.840 to get people just to you know, look pasty. But 0:09:13.120 --> 0:09:18.160 as it pertains to UM out to next year. UM. 0:09:18.240 --> 0:09:21.920 You know, there's a history of re outbreaks of diseases 0:09:22.200 --> 0:09:25.280 in the fall after the initial outbreaks in you know, 0:09:25.320 --> 0:09:28.880 the winner of spring previous uh, and you don't get 0:09:28.920 --> 0:09:31.040 as much of a pullback in the market because it's 0:09:31.040 --> 0:09:33.640 a known risk. We knew we were going to get 0:09:33.640 --> 0:09:37.200 another re emergence, and so I don't think from a 0:09:37.320 --> 0:09:40.959 financial standpoint it will cause the destruction that we had 0:09:41.000 --> 0:09:43.880 the first go run. And I do think the market 0:09:44.040 --> 0:09:48.200 will begin it's still October, but the market will begin 0:09:48.360 --> 0:09:52.719 to anticipate that we will get through this at some 0:09:52.760 --> 0:09:56.200 point that the comps you know, this is a very 0:09:56.200 --> 0:09:59.720 important point of the comparisons for a lot of companies 0:09:59.720 --> 0:10:02.400 that were shut down this year is going to be 0:10:02.559 --> 0:10:05.760 very very easy next year, and the market won't sit 0:10:05.840 --> 0:10:08.760 around and wait for the reality of that to happen 0:10:08.840 --> 0:10:12.960 next year. It's going to start to anticipate that as 0:10:13.040 --> 0:10:15.680 we get later into this year. So I think we 0:10:15.800 --> 0:10:19.480 get through the election, and it doesn't really matter who's elected, 0:10:19.679 --> 0:10:21.120 that the comparisons are going to be easy for a 0:10:21.160 --> 0:10:23.120 lot of these companies, and I think that's what people 0:10:23.120 --> 0:10:25.760 will focus on. So perhaps ten minutes ago Andrew I 0:10:25.840 --> 0:10:28.280 might have asked you about what happened to the vaccine 0:10:28.320 --> 0:10:31.400 isn't exactly as effective as people think, or the virus 0:10:31.440 --> 0:10:33.840 is spreading up more than expected, But that would make 0:10:33.880 --> 0:10:36.760 me incredibly predictable to Jonathan Farrow, who are already predicted, 0:10:36.760 --> 0:10:38.439 I would ask all of those things. So instead I 0:10:38.480 --> 0:10:41.040 will ask about, theoretically, if someone were in a triple 0:10:41.120 --> 0:10:44.760 leverage cash fund right now and we're looking at and 0:10:44.800 --> 0:10:48.199 we're looking for an entry point, uh, you know what 0:10:48.240 --> 0:10:50.600 they should be buying, how they should be arranging their 0:10:50.640 --> 0:10:55.160 portfolio and equities now for what you're expecting next year. Well, 0:10:55.160 --> 0:10:57.559 if you say now, do you mean at this very moment, look, 0:10:57.600 --> 0:11:01.880 I can tell you that, um, we sold. I trimmed 0:11:01.960 --> 0:11:05.400 yesterday in our portfolio some a couple of financial socks, 0:11:05.720 --> 0:11:08.719 not the big banks, but had gone up a lot, right, 0:11:08.840 --> 0:11:11.480 I trimmed one of our emerging market stocks that have 0:11:11.600 --> 0:11:14.199 gone up a lot. I think you know, there's been 0:11:14.200 --> 0:11:17.920 a lot of risk on since uh you know the 0:11:17.960 --> 0:11:21.360 bottom of this little short term pullback that happened in September, 0:11:21.720 --> 0:11:23.960 and a lot of things to me and looked very overboard. 0:11:24.040 --> 0:11:27.480 Bought on a short term basis, risk looks overbought, so 0:11:27.800 --> 0:11:31.160 it doesn't surprise me. We got a pullback, and I 0:11:31.200 --> 0:11:33.760 think that's kind of a short term play. But I 0:11:33.840 --> 0:11:38.760 still think positioning wise, if we get further pullback anxiety 0:11:38.840 --> 0:11:41.360 into the election, when I would say to you, take 0:11:41.400 --> 0:11:44.720 advantage to get out of that UH, you know, cash position, 0:11:45.160 --> 0:11:48.400 because I think it doesn't really matter who's elected. I 0:11:48.440 --> 0:11:53.000 think the market UH is heading higher into next year. 0:11:53.080 --> 0:11:57.640 But again I'm much more confident in the equated than 0:11:57.679 --> 0:12:01.720 the cap weighted indic it's entering on November four. If 0:12:01.760 --> 0:12:04.960 we get any kind of negative dislocation, we know that 0:12:05.000 --> 0:12:09.800 you're a buyer. Well, again, we knew that COVID was 0:12:10.120 --> 0:12:14.720 re emergence was a known risk. We know that dislocation 0:12:14.800 --> 0:12:19.160 that's code for contested election. That's a known risk. We 0:12:19.200 --> 0:12:23.680 didn't know in two thousand about a contested election. Bush 0:12:23.679 --> 0:12:27.120 score was an unknown risk of contest election. We had 0:12:27.160 --> 0:12:30.880 an eight point six percent Pezza trough down pullback in 0:12:30.960 --> 0:12:33.920 that unknown risk. So I don't think this known risk. 0:12:33.960 --> 0:12:35.680 It doesn't mean we can't have a pullback, but I 0:12:35.760 --> 0:12:37.920 just don't think it's going to be as much because 0:12:37.920 --> 0:12:40.960 we're all talking about it. So the question is, what 0:12:41.000 --> 0:12:44.360 are the unknown risks that we're not talking about. What 0:12:44.440 --> 0:12:47.000 happens to the economic accelerates too fast and the FED 0:12:47.800 --> 0:12:50.240 changes policy. What happens if you know, we have another 0:12:50.240 --> 0:12:52.599 FED share next year. I'm just throwing out things that 0:12:52.640 --> 0:12:55.760 people aren't talking about. That's what the market tends to act. 0:12:55.960 --> 0:12:59.880 React more negatively to Andrew right to catch up, sir, 0:13:00.320 --> 0:13:02.560 Thank you. Wasn't quite as I predicted, but it was 0:13:02.600 --> 0:13:07.560 close from morecan Stanley Investment Management, Thank you very much. 0:13:11.120 --> 0:13:14.400 Brand Nick of Newvie says the lack of fiscal stimulus 0:13:14.480 --> 0:13:18.240 is weighing heavily on the market outlook. Those programs have 0:13:18.280 --> 0:13:20.480 all been expired and there's not really a promise for 0:13:20.520 --> 0:13:23.040 any replacement until perhaps the middle of the first quarter 0:13:23.040 --> 0:13:25.040 of next year. And so what we're seeing, I think 0:13:25.160 --> 0:13:28.240 is at least a pause by markets as they kind 0:13:28.240 --> 0:13:30.079 of evaluate what US is going to mean for earnings 0:13:30.080 --> 0:13:31.839 and for the economy as a whole on the fourth quarter. 0:13:33.200 --> 0:13:35.040 That's the take of Brian Nick used to take a 0:13:35.120 --> 0:13:37.439 Chris Watling a long view economics right in the following 0:13:37.640 --> 0:13:40.120 the update on the monthly US household cash flow model 0:13:40.280 --> 0:13:44.120 and the latest money supply data support the contention that 0:13:44.280 --> 0:13:48.880 further stimulus isn't necessary. What's needed is a vaccine that 0:13:48.880 --> 0:13:51.920 would release the full effects of the stimulus. Tom Keane, 0:13:52.520 --> 0:13:55.760 that is a take that Chris Watling doesn't just hold alone. 0:13:55.760 --> 0:13:58.000 That's a take that many people share with him. There's 0:13:58.000 --> 0:13:59.880 no question about it. It really goes back to really 0:13:59.880 --> 0:14:03.120 the foundation of long view economic side of Kazanov. Chris 0:14:03.120 --> 0:14:07.079 Whitling really talking about old normal. I love that idea, 0:14:07.200 --> 0:14:10.559 Chris Whitling, of pushing against the Pimco religion of new normal. 0:14:10.840 --> 0:14:13.160 What is the Whitling old normal and what does it 0:14:13.200 --> 0:14:18.400 mean forward? Well, I mean the old old normal is 0:14:18.400 --> 0:14:20.400 is I mean, if you like, it's kind of what 0:14:20.520 --> 0:14:23.440 goes around comes around. And the thing the thing I 0:14:23.440 --> 0:14:25.840 like about economic theory is it changes all the time, 0:14:26.080 --> 0:14:28.880 and people get stuck on one theory. But the reality 0:14:28.960 --> 0:14:31.280 is the world changes and you need to you need 0:14:31.360 --> 0:14:34.000 to use a different theory to to sort of address it, 0:14:34.040 --> 0:14:36.400 which is kind of what we're thinking about in the 0:14:36.440 --> 0:14:38.720 old normal, going back to where you were. But I mean, 0:14:38.760 --> 0:14:42.120 what it means here is that it's amazing how much 0:14:42.200 --> 0:14:45.000 cash has a masked on balance sheets, and in some 0:14:45.040 --> 0:14:46.960 ways it's amazing. In some ways it isn't. Of course, 0:14:47.000 --> 0:14:50.360 you've had an enormous cash transfer from the government sector 0:14:50.400 --> 0:14:53.480 to the household sector globally. I mean it's been biggest 0:14:53.520 --> 0:14:55.720 in the States, where of course you've had the extra 0:14:55.760 --> 0:14:58.960 twelve dollar checks to but it has the old normal. 0:14:59.000 --> 0:15:01.480 I mean, we're going back to theory of helicopter money. 0:15:01.520 --> 0:15:04.360 It's it's it's clearly at play, isn't it. And and 0:15:04.440 --> 0:15:07.440 as a result, you've got Americans with over two trillion 0:15:07.480 --> 0:15:10.640 dollars now a sort of extra dash on their balance sheets, 0:15:10.680 --> 0:15:13.400 which is which is really quite something. Well, your research 0:15:13.480 --> 0:15:15.480 now it's extraordinary on that. Whether it goes back and 0:15:15.600 --> 0:15:17.200 you know, you know, M one, M two in the 0:15:17.280 --> 0:15:20.120 series of old or not, we're up to our eyeballs 0:15:20.120 --> 0:15:23.800 in cash. What will be the catalyst for someone to 0:15:23.880 --> 0:15:28.320 find comfort to put that to work. Well, this is 0:15:28.320 --> 0:15:30.760 why I think the biggest stimulus really is the vaccine 0:15:31.000 --> 0:15:33.880 um and the vaccine. Of course, I liken it to 0:15:33.960 --> 0:15:36.760 throwing the match onto the keresine. And the stimulus is 0:15:36.800 --> 0:15:39.160 the kerosine. It's already sitting there, it's waiting for that 0:15:39.480 --> 0:15:42.040 for that match to hit it. And of course you know, 0:15:42.080 --> 0:15:44.400 once you get once you get the vaccine, you begin 0:15:44.440 --> 0:15:48.240 the normalization of spending process, and and all the sort 0:15:48.280 --> 0:15:52.080 of wealthy baby bimits or we're tired or semi we're tired, 0:15:52.160 --> 0:15:54.600 and and and the high income workers who may have 0:15:54.640 --> 0:15:57.960 been sheltering. All these people come out and start spending 0:15:58.000 --> 0:16:01.240 that cash they've been saving, and Chris, get the economy 0:16:01.240 --> 0:16:04.120 going and returning to normal. Chris, A lot of people 0:16:04.120 --> 0:16:06.760 agree with you. I am sitting here listening to you. 0:16:06.800 --> 0:16:09.560 We're all waiting for a vaccine. The question is what 0:16:09.600 --> 0:16:11.880 do you do in the meantime is millions of people 0:16:11.960 --> 0:16:15.000 lose their jobs and don't have any income, and the 0:16:15.000 --> 0:16:17.240 tourism ministry is dead, and you end up with this 0:16:17.360 --> 0:16:20.760 situation where people can't be employed because there are many 0:16:20.800 --> 0:16:23.680 industries simply shut down because there is not a vaccine 0:16:23.720 --> 0:16:26.120 yet and there may not be one in distribution form 0:16:26.160 --> 0:16:28.720 that's effective until the end of next year, even in 0:16:28.840 --> 0:16:31.040 mass So what do you do until then? Do you 0:16:31.080 --> 0:16:33.640 just sort of wait and see how long these cash 0:16:33.640 --> 0:16:37.600 balances can sustain a households? Well, I mean it depends 0:16:37.640 --> 0:16:39.760 on your on your view when the vaccine is coming 0:16:39.800 --> 0:16:42.480 and the judgment on that. It's important if it's I mean, 0:16:42.520 --> 0:16:45.880 if the American administration's plan is truly enacted, and you 0:16:46.000 --> 0:16:48.000 and you get a vaccine next month or two, then 0:16:48.200 --> 0:16:51.280 by April next year, everyone will be vaccinated. So whether 0:16:51.360 --> 0:16:54.240 or not you believe that's important. If you do, then 0:16:54.320 --> 0:16:56.200 maybe you can hold on. If you don't and you 0:16:56.240 --> 0:16:58.520 think it takes longer than sure, you may want to 0:16:58.560 --> 0:17:01.400 bridge that gap. But there's there's a short term versus 0:17:01.440 --> 0:17:03.480 long term playoff here, isn't there. I mean there is, 0:17:04.119 --> 0:17:06.359 there's some real issues. I know people talk about long 0:17:06.440 --> 0:17:09.080 term unemployment and issues there, but I think there's also 0:17:09.200 --> 0:17:11.679 issues of spending in the short term and having some 0:17:11.720 --> 0:17:14.760 fiscal challenges in the in the medium, in medium to 0:17:14.840 --> 0:17:17.200 long term, and I think those need to be considered 0:17:17.200 --> 0:17:20.640 as well in the mix. So personally, I mean, I'm 0:17:20.680 --> 0:17:22.719 an optimist, so I think so much money has been 0:17:22.720 --> 0:17:25.439 thrown at this health problem, there's every chance we're going 0:17:25.440 --> 0:17:27.480 to get a vaccine, and lots of good noises out 0:17:27.520 --> 0:17:31.159 there as well from all sorts of health healthcare CEOs 0:17:31.200 --> 0:17:33.840 and so on, So I you know, I would I 0:17:33.920 --> 0:17:37.679 would think it's almost worth holding on and and pushing 0:17:37.680 --> 0:17:39.639 on through for the next few months. But as a 0:17:39.680 --> 0:17:43.560 political judgment, of course, well, Chris, let's develop this conversation 0:17:43.600 --> 0:17:45.399 just a little bit more. I don't think cash levels 0:17:45.400 --> 0:17:48.000 at the accurate level our reason alone to say we 0:17:48.040 --> 0:17:50.600 don't need a fiscal stimulus plan if you looked at 0:17:50.600 --> 0:17:53.119 the lower income groups that don't have those savings, but 0:17:53.160 --> 0:17:56.520 they do have a higher propensive, higher marginal propensity to spend. 0:17:56.560 --> 0:17:58.840 Let me get my words out, Chris. If we get 0:17:58.840 --> 0:18:01.160 the money into the hands of the lower income groups, 0:18:01.800 --> 0:18:06.040 then you've got some real stimulus, don't you. Yeah, sure, 0:18:06.080 --> 0:18:07.960 I mean that if you look at the low income 0:18:08.040 --> 0:18:10.480 versus the high income, the low income is already basically 0:18:10.560 --> 0:18:13.160 spending back where it was, if you like, if they've 0:18:13.160 --> 0:18:15.520 got the money back where wells from earlier this year. 0:18:15.520 --> 0:18:17.320 Of course, because as you say, they have to spend, 0:18:17.640 --> 0:18:19.520 you know, they have to pay the bills, and it's 0:18:19.560 --> 0:18:23.200 money and money out, so absolutely much higher marginal propensity 0:18:23.280 --> 0:18:25.760 to spend and and and will be helpful in that respect. 0:18:25.800 --> 0:18:28.280 But you know, once it's spent, it's gone, and it's 0:18:28.280 --> 0:18:32.240 on the fiscal it's on the fiscal deficit side and 0:18:31.880 --> 0:18:35.240 the fiscal debt side. So it depends how you want 0:18:35.240 --> 0:18:36.920 to go about things. I mean, the more the more 0:18:36.960 --> 0:18:39.760 you do helicopter money and build up government debton and 0:18:39.880 --> 0:18:42.960 effectively pay for it with nearly created money. The more 0:18:43.000 --> 0:18:46.280 you risk medium term inflation. So there are trade offs, 0:18:46.320 --> 0:18:49.440 and you know, I just think there's not a balanced conversation. 0:18:49.520 --> 0:18:52.000 You need a balanced conversation about all the different trade 0:18:52.040 --> 0:18:57.280 offs that are out there and and a better strategy. Well, 0:18:57.359 --> 0:18:59.320 let's have that now. Let's do that. Now, tend your 0:18:59.359 --> 0:19:01.919 yields right now? Are about any basis points? What's the 0:19:01.960 --> 0:19:06.879 trade off? Well, the tradeoff is, you know, let's let's 0:19:06.960 --> 0:19:10.000 let's take up Dahlio's thesis of the three phases of 0:19:10.040 --> 0:19:12.920 monetary policy in a debt supercycle, and we're into phase three, 0:19:12.960 --> 0:19:16.119 we're into helicopter money. So the tradeoff is, yes, it 0:19:16.200 --> 0:19:18.760 looks cheap at the moment, but I think we're going 0:19:18.800 --> 0:19:21.200 to get the retern of monetary inflation, you know, one 0:19:21.240 --> 0:19:23.439 of the old normals if you like. And it feels 0:19:23.480 --> 0:19:25.960 quite a lot like the late sixties early seventies, not 0:19:26.000 --> 0:19:29.359 that I personally remember it terribly well, um, but you know, 0:19:29.600 --> 0:19:33.840 physical policy to get unemployment down and no no consequences 0:19:33.840 --> 0:19:37.320 and concerns about the monetary growth that's out there, so 0:19:37.680 --> 0:19:39.760 you know, then you get a potential of a repeat 0:19:39.800 --> 0:19:42.840 of the seventies. You get higher above average inflation and 0:19:43.200 --> 0:19:45.200 you get the trade off there in terms of a 0:19:45.320 --> 0:19:49.600 real growth versus inflation and normal GDP, so you know, 0:19:49.680 --> 0:19:52.960 and lower productivity growth as well. So so there's a tradeoff. 0:19:53.080 --> 0:19:55.120 And I don't think Bonnells have pinned here for long. 0:19:55.240 --> 0:19:58.359 I mean, I think Bonnils is probably the great short 0:19:58.440 --> 0:20:00.800 out there. And if you get this accine, I'm pretty 0:20:00.800 --> 0:20:03.000 convinced that's a great way to make money. Where it's 0:20:03.040 --> 0:20:06.640 thirty or ten years or even or even playing pricing 0:20:06.680 --> 0:20:08.160 into a bit of a bit of a great hike 0:20:08.280 --> 0:20:11.440 on the three or four year Fed funds or borneos. 0:20:11.520 --> 0:20:13.120 So you know, I think if we're going to get 0:20:13.280 --> 0:20:16.439 this economic boom next year, which I think is perfectly plausible, 0:20:16.800 --> 0:20:19.359 and you'll get the return of monitory inflation, bonnal a 0:20:19.760 --> 0:20:24.159 one our screaming sell Chris A really bold call right now, 0:20:24.320 --> 0:20:26.760 especially when you have the large houses looking at bonds 0:20:26.800 --> 0:20:28.480 and seeing perhaps they could sell off a little bit, 0:20:28.600 --> 0:20:30.640 yields could rise a bit, but not all that much, 0:20:30.680 --> 0:20:33.040 Which brings me to a question about what you think 0:20:33.080 --> 0:20:36.280 monetary policy will and should be. In other words, will 0:20:36.280 --> 0:20:38.439 the Fed be willing to expand its balance sheet and 0:20:38.480 --> 0:20:41.639 buy more treasuries in order to suppress bond yields going forward, 0:20:41.840 --> 0:20:44.639 in order to prevent that even if inflation increases, you know, 0:20:44.680 --> 0:20:47.760 leading to further negative real yield. Do you think that 0:20:47.760 --> 0:20:51.119 that is an acceptable proposal or a good kind of 0:20:51.160 --> 0:20:55.400 stimulus going forward to help the economic recovery. I suspect 0:20:55.400 --> 0:20:57.960 what we have is the FED um It depends on 0:20:58.000 --> 0:21:00.199 the shape of the growth, and it probably and that 0:21:00.280 --> 0:21:03.160 in part depends on the shape how the vaccine comes 0:21:03.160 --> 0:21:05.120 in the shape of the pandemic, if you like. So, 0:21:05.520 --> 0:21:08.480 if it's my scenario that we expect that strong economic 0:21:08.520 --> 0:21:10.600 growth and a bit of a boom feel to it, 0:21:10.680 --> 0:21:12.720 then I think the FED will be start starting to 0:21:12.760 --> 0:21:16.240 back off and back away from its stimulus, maybe twelve, eighteen, 0:21:16.440 --> 0:21:19.040 twenty four months down the road, but certainly doing that 0:21:19.480 --> 0:21:22.240 rather than engaging in yield curve control because growth will 0:21:22.280 --> 0:21:25.000 look good and healthy and they won't feel they need 0:21:25.080 --> 0:21:27.320 to do that now, and they won't want to sort of, 0:21:28.080 --> 0:21:31.760