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 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,400 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Now 5 00:00:27,440 --> 00:00:30,960 Speaker 1: a wonderful opportunity to speak to the fifteenth Chairman of 6 00:00:31,000 --> 00:00:34,560 Speaker 1: the Federal Reserve System, Janet Yellen. A FED chairs through 7 00:00:34,640 --> 00:00:38,000 Speaker 1: some of the most difficult years of this nation. Of 8 00:00:38,000 --> 00:00:41,560 Speaker 1: course we mentioned earlier her work on an American labor 9 00:00:41,600 --> 00:00:44,760 Speaker 1: economy to bring it out of that slack of course, 10 00:00:44,880 --> 00:00:48,080 Speaker 1: yelling of Yale of a time of Tobin and Stiglets, 11 00:00:48,320 --> 00:00:51,720 Speaker 1: and now after the FED at the Brookings Institution with 12 00:00:51,800 --> 00:00:54,880 Speaker 1: important work with a group of thirty on climate. I 13 00:00:54,880 --> 00:00:57,480 Speaker 1: want to get to that chair yelling in a moment, 14 00:00:57,520 --> 00:01:01,600 Speaker 1: but I really must ask about the weekend speculation of 15 00:01:01,680 --> 00:01:07,160 Speaker 1: Treasury Secretary Yelling. If we were to get a Biden administration, 16 00:01:07,720 --> 00:01:12,480 Speaker 1: would you be willing to serve for a President Biden? Um. 17 00:01:12,560 --> 00:01:16,000 Speaker 1: I appreciate your asking and the notion that it's a 18 00:01:16,120 --> 00:01:18,960 Speaker 1: job I can do, but I really have no comment 19 00:01:19,120 --> 00:01:21,440 Speaker 1: on that. I'm sorry. Well, that would be good and we, 20 00:01:21,520 --> 00:01:23,840 Speaker 1: of course I knew that would be the gracious answer 21 00:01:23,959 --> 00:01:28,800 Speaker 1: from Janet yelling show Yellen away from the monetary discussion, 22 00:01:28,800 --> 00:01:30,600 Speaker 1: and maybe we'll touch on that a bit. Here. We 23 00:01:30,720 --> 00:01:34,560 Speaker 1: must speak about this important research you are steeped in. 24 00:01:34,600 --> 00:01:39,160 Speaker 1: This long ago and far away. A Nobel laureate introduced 25 00:01:39,280 --> 00:01:44,560 Speaker 1: us to auction theory speaking about Richards Scary and children's 26 00:01:44,640 --> 00:01:48,200 Speaker 1: books at a Nobel Price speech in Stockholm. This is 27 00:01:48,280 --> 00:01:52,560 Speaker 1: long ago and far away. You're very right. That was 28 00:01:52,680 --> 00:01:57,600 Speaker 1: my Spause who won the Nobel prize, and um uh 29 00:01:57,760 --> 00:02:02,240 Speaker 1: discussed the relevance of Richard's area to um his work. 30 00:02:03,120 --> 00:02:06,080 Speaker 1: Mr Acker, last wonderful speech there that really advent with 31 00:02:06,160 --> 00:02:09,560 Speaker 1: stiglets of what we're talking about here. Wilson and Milgram 32 00:02:09,600 --> 00:02:12,880 Speaker 1: there at a small school across the Poncher yelling just 33 00:02:13,080 --> 00:02:17,760 Speaker 1: to just took the trophy as well. Can auction theory 34 00:02:18,040 --> 00:02:23,160 Speaker 1: help us solve climate change by fixing carbon pricing? I 35 00:02:23,200 --> 00:02:26,200 Speaker 1: see no evidence that it can do it. Can we 36 00:02:26,320 --> 00:02:31,919 Speaker 1: actually get to a legitimate, workable auction market for climate 37 00:02:32,000 --> 00:02:37,639 Speaker 1: change through carbon pricing? Well, um let me let me say, 38 00:02:37,680 --> 00:02:41,000 Speaker 1: referring to the group of thirty reports that we just 39 00:02:41,120 --> 00:02:46,639 Speaker 1: put out. Um we urge governments to take the steps 40 00:02:46,680 --> 00:02:50,919 Speaker 1: that are necessary to get a transition to nit zero, 41 00:02:51,520 --> 00:02:56,800 Speaker 1: and carbon pricing is central to that. So we strongly 42 00:02:56,880 --> 00:03:02,520 Speaker 1: believe that every government should price emissions. And uh, well 43 00:03:02,560 --> 00:03:07,079 Speaker 1: that's not the only policy that's necessary. That is a 44 00:03:07,120 --> 00:03:13,920 Speaker 1: critical um tool to create the right incentives for UM 45 00:03:14,160 --> 00:03:18,600 Speaker 1: for a transition to KNIT zero. There are different ways 46 00:03:18,639 --> 00:03:23,440 Speaker 1: of doing it. You said auction theory. So one way 47 00:03:23,520 --> 00:03:31,320 Speaker 1: to do this is to limit emissions by requiring permits 48 00:03:31,480 --> 00:03:38,320 Speaker 1: to amid greenhouse gases and uh, those they would create 49 00:03:38,360 --> 00:03:42,240 Speaker 1: a market in which they would be priced. It's possible 50 00:03:42,360 --> 00:03:46,440 Speaker 1: to auction the permits if the permits are auctions. I'm 51 00:03:46,480 --> 00:03:49,760 Speaker 1: not aware of any country that's doing that now, but 52 00:03:50,400 --> 00:03:54,760 Speaker 1: that would generate revenue that could be used for many 53 00:03:54,840 --> 00:04:00,760 Speaker 1: different purposes, including compensating low income people. But a more 54 00:04:00,840 --> 00:04:05,040 Speaker 1: straightforward way to do this, and it's what I would 55 00:04:05,040 --> 00:04:09,360 Speaker 1: recommend for the United States that hopefully we will in 56 00:04:09,400 --> 00:04:12,960 Speaker 1: the years ahead go in this direction, is simply to 57 00:04:13,040 --> 00:04:18,000 Speaker 1: put in place a carbon tax. UM. A very efficient 58 00:04:18,040 --> 00:04:22,400 Speaker 1: way to price carbon would be uh, to go to 59 00:04:22,560 --> 00:04:28,200 Speaker 1: the mind head, the well um where where energy that 60 00:04:28,360 --> 00:04:34,320 Speaker 1: creates carbon emissions enters the economy and to simply livy attacks. 61 00:04:34,400 --> 00:04:37,760 Speaker 1: So UM, I think that's an easier and more efficient 62 00:04:37,800 --> 00:04:42,000 Speaker 1: way than auctioning permits. But one way or another, UM, 63 00:04:42,400 --> 00:04:45,719 Speaker 1: we think carbon pricing is important. With your report with 64 00:04:45,839 --> 00:04:49,240 Speaker 1: Governor Carney and with all of the efforts Jacob Frankel 65 00:04:49,279 --> 00:04:51,799 Speaker 1: and all of the Group of thirty. If we say 66 00:04:51,800 --> 00:04:55,760 Speaker 1: that auction pricing has failed, where is the evidence that 67 00:04:55,839 --> 00:04:59,880 Speaker 1: these societies will do a carbon tax? Are you optimi 68 00:05:00,040 --> 00:05:06,440 Speaker 1: stick we can get a carbon tax initiated country to country. Well, 69 00:05:06,600 --> 00:05:11,000 Speaker 1: different countries have taken different approaches, and what we're looking 70 00:05:11,080 --> 00:05:15,320 Speaker 1: for is carbon pricing. UH. For the United States that 71 00:05:15,480 --> 00:05:19,280 Speaker 1: doesn't have this in place, I would, and other countries 72 00:05:19,400 --> 00:05:23,080 Speaker 1: that have not started going down this route, I think 73 00:05:23,120 --> 00:05:27,479 Speaker 1: carbon carbon tax is a reasonable way to go. But 74 00:05:28,160 --> 00:05:33,080 Speaker 1: UM auctioning off permits or simply putting in place a 75 00:05:33,200 --> 00:05:37,400 Speaker 1: system where there needs to be a permit to admit. 76 00:05:37,839 --> 00:05:41,839 Speaker 1: That's that's UM an approach that we see in many 77 00:05:41,920 --> 00:05:46,720 Speaker 1: European countries, and we're not criticizing that is an alternative. 78 00:05:47,320 --> 00:05:49,880 Speaker 1: Cherry Elen, As I was reading this report, I was 79 00:05:49,920 --> 00:05:53,039 Speaker 1: struck by the firepower of the people who co authored this. 80 00:05:53,120 --> 00:05:57,039 Speaker 1: It's who's who in Central banking weighing and on important policy, 81 00:05:57,080 --> 00:05:59,400 Speaker 1: and I know you've been called on to weigh in 82 00:05:59,520 --> 00:06:02,120 Speaker 1: on other important policy in the United States. In August, 83 00:06:02,120 --> 00:06:04,680 Speaker 1: it was reported that you've had conversations with the Biden 84 00:06:04,720 --> 00:06:08,200 Speaker 1: Harris camp about how to fix the economy going forward. 85 00:06:08,480 --> 00:06:11,800 Speaker 1: Can you share anything from what you think we should 86 00:06:11,800 --> 00:06:16,280 Speaker 1: do to get the economy back on track from here right? Well, 87 00:06:16,400 --> 00:06:18,680 Speaker 1: let me say that I did meet with Biden and 88 00:06:18,800 --> 00:06:23,080 Speaker 1: Harris and brief them about financial sector issues, but I'm 89 00:06:23,120 --> 00:06:28,280 Speaker 1: not working with the campaign. UM. But you you asked 90 00:06:28,279 --> 00:06:30,400 Speaker 1: me what I think we need to do to get 91 00:06:30,440 --> 00:06:35,560 Speaker 1: the economy back on track. UM, so I would say 92 00:06:35,839 --> 00:06:41,000 Speaker 1: what hits my list is dealing more effectively with the pandemic, 93 00:06:41,400 --> 00:06:46,359 Speaker 1: with the health related issues, getting the infection level under 94 00:06:46,440 --> 00:06:53,640 Speaker 1: control through contact tracing testing, UM, isolation of people who 95 00:06:53,760 --> 00:06:57,560 Speaker 1: have it. I think we need a much more effective 96 00:06:57,640 --> 00:07:02,640 Speaker 1: effort than we've had, and UM, if we have that 97 00:07:02,720 --> 00:07:05,880 Speaker 1: will be good not only for health but for being 98 00:07:05,920 --> 00:07:08,680 Speaker 1: able to open up the economy. And we've seen that 99 00:07:09,080 --> 00:07:14,280 Speaker 1: in countries ranging from Germany to Korea to China that 100 00:07:14,400 --> 00:07:19,240 Speaker 1: have been successful. And then we need UM support for 101 00:07:19,320 --> 00:07:24,720 Speaker 1: the economy, both for monetary and fiscal policy and monetary 102 00:07:24,760 --> 00:07:30,240 Speaker 1: policy has already done a huge amount. Fiscal policy response 103 00:07:30,280 --> 00:07:36,160 Speaker 1: in the United States has been extremely impressive. But UM, 104 00:07:36,200 --> 00:07:40,480 Speaker 1: actually it's it's much larger the fiscal support than what 105 00:07:40,680 --> 00:07:45,160 Speaker 1: was done after the two thousand and eight nine financial crisis. 106 00:07:45,520 --> 00:07:51,200 Speaker 1: But UM the fiscal support has now lapsed and UM 107 00:07:51,320 --> 00:07:57,000 Speaker 1: so far spending has held up UM. Unemployed workers who 108 00:07:57,120 --> 00:08:00,200 Speaker 1: got that extra six hundred dollars a week through the 109 00:08:00,320 --> 00:08:04,080 Speaker 1: end of July UM they use that to stay current 110 00:08:04,200 --> 00:08:08,600 Speaker 1: on their bills to support UM they're spending. They even 111 00:08:08,640 --> 00:08:11,600 Speaker 1: stashed some of it away so that they've been able 112 00:08:11,640 --> 00:08:15,040 Speaker 1: to get through this last couple of months and pay 113 00:08:15,160 --> 00:08:18,320 Speaker 1: their bills. But it's running out, and I think we 114 00:08:18,400 --> 00:08:22,280 Speaker 1: need to do that. And state and local governments also 115 00:08:22,400 --> 00:08:27,679 Speaker 1: face huge budget shortfalls. I'm working on the task force 116 00:08:27,840 --> 00:08:32,199 Speaker 1: with the governor of California to address the pandemic. They 117 00:08:32,240 --> 00:08:37,200 Speaker 1: face a fifty four billion dollars shortfall this year. I 118 00:08:37,240 --> 00:08:40,200 Speaker 1: think that's very important too. So in in the meantime, 119 00:08:40,200 --> 00:08:43,160 Speaker 1: Steve Shoodo of Miszoojo just was on He said that 120 00:08:43,240 --> 00:08:46,360 Speaker 1: if the if Congress were to pass a two trillion 121 00:08:46,400 --> 00:08:50,040 Speaker 1: dollar fiscal support plan, that he expects the Federal Reserved 122 00:08:50,080 --> 00:08:53,120 Speaker 1: potentially buy up all of that in order to help 123 00:08:53,200 --> 00:08:55,920 Speaker 1: things along. Do you think that that's an advisable step? 124 00:08:57,720 --> 00:09:03,760 Speaker 1: So the Federal Reserve's asset purchases, UM, they have not 125 00:09:03,960 --> 00:09:08,360 Speaker 1: made clear their plans going forward, and I'm expecting them 126 00:09:08,400 --> 00:09:12,800 Speaker 1: to offer more guidance. But their objective there is going 127 00:09:12,880 --> 00:09:17,080 Speaker 1: to be to try to keep both long and short 128 00:09:17,360 --> 00:09:22,480 Speaker 1: interest rates at low levels to support in economic recovery. UM. 129 00:09:22,520 --> 00:09:26,920 Speaker 1: It is not their objective ever to directly try to 130 00:09:27,040 --> 00:09:31,920 Speaker 1: help the federal government finance its um budget deficit, and 131 00:09:32,440 --> 00:09:36,760 Speaker 1: that would be a very dangerous kind of support to provide. 132 00:09:37,240 --> 00:09:42,240 Speaker 1: But I do expect I think asset purchases have worked there. 133 00:09:42,280 --> 00:09:46,880 Speaker 1: They're holding down longer term rates, and I expect there 134 00:09:46,880 --> 00:09:52,880 Speaker 1: to be ongoing purchases, but probably not geared to the 135 00:09:53,000 --> 00:09:57,120 Speaker 1: federal deficit. Sure yell. And we are rebuilding our institutions 136 00:09:57,120 --> 00:09:59,400 Speaker 1: out of this natural disaster. I want to go back 137 00:09:59,440 --> 00:10:01,560 Speaker 1: to James Hope and a few years ago, who you 138 00:10:01,600 --> 00:10:05,400 Speaker 1: took your PhD with, where he introduced with Nordhouse, the 139 00:10:05,480 --> 00:10:10,080 Speaker 1: measure of our welfare system, just simply thinking about the 140 00:10:10,120 --> 00:10:14,600 Speaker 1: welfare state within a capitalistic market. We now come up 141 00:10:14,640 --> 00:10:17,640 Speaker 1: to where we are now with this historic election, and 142 00:10:17,679 --> 00:10:20,199 Speaker 1: we've got the Democrats trying to get back to some 143 00:10:20,320 --> 00:10:24,400 Speaker 1: form of social construct and Mr Trump and others with 144 00:10:24,559 --> 00:10:29,040 Speaker 1: a lackey and individualistic nature as well. How do you 145 00:10:29,160 --> 00:10:34,480 Speaker 1: perceive how we move forward with our new capitalism, our 146 00:10:34,559 --> 00:10:39,400 Speaker 1: new welfare state, Given the fiscal deficits, given the trade 147 00:10:39,440 --> 00:10:42,600 Speaker 1: deficit where it is, and given a monetary theory that 148 00:10:42,679 --> 00:10:46,600 Speaker 1: seems to be extended and exhausted. What does the new 149 00:10:46,760 --> 00:10:53,440 Speaker 1: system look like for you and the next few years. So, UM, 150 00:10:53,480 --> 00:10:57,439 Speaker 1: that's a hard that's a very hard and comprehensive question, 151 00:10:57,559 --> 00:11:00,920 Speaker 1: but I would save that I think fiscal policy needs 152 00:11:01,000 --> 00:11:06,240 Speaker 1: to play an active role. UM. Once upon a time, UH, 153 00:11:06,679 --> 00:11:10,120 Speaker 1: starting in the nineteen eighties, UM, there was a view 154 00:11:10,320 --> 00:11:15,200 Speaker 1: that UM, the Fed can handle the job of keeping 155 00:11:15,240 --> 00:11:19,800 Speaker 1: the economy operating at full employment, and fiscal policy should 156 00:11:19,880 --> 00:11:25,600 Speaker 1: focus on allocative issues. And now we're faced with the 157 00:11:25,679 --> 00:11:32,680 Speaker 1: world characterized by secular stagnation. There is a surfeit too 158 00:11:32,760 --> 00:11:37,960 Speaker 1: much saving in the global economy, especially among developed countries, 159 00:11:38,040 --> 00:11:42,040 Speaker 1: and weak investment demand, and it's been pushing down real 160 00:11:42,160 --> 00:11:47,520 Speaker 1: rates of interest and depriving monetary policy of UM a 161 00:11:47,600 --> 00:11:51,600 Speaker 1: lot of the ability it had to address um to 162 00:11:51,720 --> 00:11:56,080 Speaker 1: address economic weakness. And uh, you know, I would never 163 00:11:56,120 --> 00:12:00,480 Speaker 1: have imagined when two thousand and eight crisis hit that 164 00:12:00,840 --> 00:12:03,960 Speaker 1: short rates would stay at zero for seven full years, 165 00:12:04,200 --> 00:12:07,800 Speaker 1: and here we are back again with zero short rates. 166 00:12:08,160 --> 00:12:12,120 Speaker 1: And of course there are unconventional tools as it purchases 167 00:12:12,240 --> 00:12:17,760 Speaker 1: forward guidance that expand what monetary policy can do, but 168 00:12:17,920 --> 00:12:22,479 Speaker 1: there are some limits and it's important for fiscal policy 169 00:12:22,640 --> 00:12:27,640 Speaker 1: to um fill in that gap. And um, you know, 170 00:12:27,760 --> 00:12:32,960 Speaker 1: I believe while the pandemic is still seriously affecting the economy, 171 00:12:33,280 --> 00:12:38,240 Speaker 1: we need to continue extraordinary fiscal support. But even beyond that, 172 00:12:38,360 --> 00:12:41,560 Speaker 1: I think it will be necessary. But a good side 173 00:12:41,559 --> 00:12:44,960 Speaker 1: of low interest rates is that it reduces the interest 174 00:12:45,040 --> 00:12:48,800 Speaker 1: burden of the debt, and I think it makes it possible. 175 00:12:48,840 --> 00:12:52,199 Speaker 1: And it's not a short run phenomenon short rates. It's 176 00:12:52,240 --> 00:12:55,839 Speaker 1: something that's going to probably be with us for many 177 00:12:56,000 --> 00:12:58,920 Speaker 1: years to come, and we can afford to have more 178 00:12:59,000 --> 00:13:02,880 Speaker 1: debt than we used to think was sustainable. Yellen, thank 179 00:13:02,880 --> 00:13:05,439 Speaker 1: you so much, and most generous conversation, of course, and 180 00:13:05,520 --> 00:13:08,600 Speaker 1: celebration of a group of thirty report with Governor Kearney 181 00:13:09,120 --> 00:13:17,439 Speaker 1: on our place forward with climate control. The charge no 182 00:13:17,559 --> 00:13:20,640 Speaker 1: principal Global Investors chief strategies seem were welcome to the 183 00:13:20,640 --> 00:13:23,440 Speaker 1: goat rodeo. I'm sure that's what other people think. This 184 00:13:23,559 --> 00:13:25,640 Speaker 1: is at the moment, seem as fantastic to see you. 185 00:13:26,200 --> 00:13:27,880 Speaker 1: First question to you, I asked at the top of 186 00:13:27,880 --> 00:13:30,800 Speaker 1: the hour, how much hinges on the next two weeks 187 00:13:30,800 --> 00:13:36,439 Speaker 1: as you put togethers not that much? You know, we 188 00:13:36,760 --> 00:13:42,320 Speaker 1: see this time. Sorry I'm discussing them. Yeah, we see 189 00:13:42,360 --> 00:13:43,679 Speaker 1: this time and time again. You know, if you look 190 00:13:43,720 --> 00:13:47,320 Speaker 1: at all the election years through time and actually you 191 00:13:47,360 --> 00:13:51,200 Speaker 1: know the volatility tempt to ever way, the returns typically 192 00:13:51,200 --> 00:13:53,360 Speaker 1: move with fundamentals. So at the end of all of this, 193 00:13:53,960 --> 00:13:56,480 Speaker 1: won't you pass through the noise? The markets just go 194 00:13:56,559 --> 00:13:58,600 Speaker 1: back to what really drive them, which, as we've seen 195 00:13:58,640 --> 00:14:00,600 Speaker 1: this year, is going to be that demic and it's 196 00:14:00,600 --> 00:14:02,480 Speaker 1: going to be central banks and a little bit of 197 00:14:02,520 --> 00:14:04,719 Speaker 1: fiscal stimulats if we can see that. But those are 198 00:14:04,720 --> 00:14:06,760 Speaker 1: the key drivers. It's not really going to be what 199 00:14:06,920 --> 00:14:08,720 Speaker 1: happens in the next two weeks, Throve in the next 200 00:14:08,720 --> 00:14:11,120 Speaker 1: three or four weeks, have long take SMA. We've been 201 00:14:11,120 --> 00:14:13,679 Speaker 1: doing a lot on equity. Tell me what's tradeable and 202 00:14:13,840 --> 00:14:20,440 Speaker 1: fixed income? Where he is a quote unquote opportunity in yield. Yeah, 203 00:14:20,480 --> 00:14:22,680 Speaker 1: it's it's it's a tough question at the moment. You know, 204 00:14:22,760 --> 00:14:25,600 Speaker 1: we we have still liked investment grades, but of course 205 00:14:25,600 --> 00:14:28,240 Speaker 1: we have been reducing some of our allocations. They've given 206 00:14:28,240 --> 00:14:31,200 Speaker 1: then you're not getting too much. We actually like professed securities. 207 00:14:31,280 --> 00:14:33,760 Speaker 1: You get a bit of a pickup um. It's still 208 00:14:33,800 --> 00:14:36,720 Speaker 1: relatively safe area. So so there are some opportunities there, 209 00:14:36,960 --> 00:14:39,400 Speaker 1: and of course we've been high yield. You have to 210 00:14:39,400 --> 00:14:41,760 Speaker 1: be in the better part of that spectrum because you know, 211 00:14:42,520 --> 00:14:45,320 Speaker 1: the economic recovery, it's slow, it's protracted, there are a 212 00:14:45,320 --> 00:14:47,800 Speaker 1: lot of potholes ahead, and it's going to be those 213 00:14:48,640 --> 00:14:50,800 Speaker 1: riskier companies that are going to see that playing out 214 00:14:50,840 --> 00:14:53,600 Speaker 1: in So of course you have to be careful when 215 00:14:53,600 --> 00:14:56,000 Speaker 1: we look at equity, as the story really has been 216 00:14:56,200 --> 00:15:00,720 Speaker 1: do you buy into the rotation trade, the cyclical story 217 00:15:00,960 --> 00:15:03,120 Speaker 1: rather than just big tech? Where do you stand on that? 218 00:15:04,560 --> 00:15:07,320 Speaker 1: So we have maintained a pretty significant positioning to big 219 00:15:07,320 --> 00:15:11,280 Speaker 1: tech through all of this. We still really like that sector. There's, 220 00:15:11,280 --> 00:15:12,600 Speaker 1: you know, so much to be said that as long 221 00:15:12,640 --> 00:15:15,800 Speaker 1: as you've got the ongoing pandemic, there's continued concentration of 222 00:15:15,880 --> 00:15:18,800 Speaker 1: working from home and reliance on technology. It still plays 223 00:15:18,800 --> 00:15:21,440 Speaker 1: out even the macro environment. You know, if you've got 224 00:15:21,520 --> 00:15:23,600 Speaker 1: economic bank drop, which is a little bit risky as 225 00:15:23,600 --> 00:15:27,040 Speaker 1: today is right now, then companies investors just needs companies 226 00:15:27,080 --> 00:15:30,400 Speaker 1: with strong balances balance, it's positive cash flow, you're getting 227 00:15:30,440 --> 00:15:32,400 Speaker 1: that from Big tex and of course with a low 228 00:15:32,440 --> 00:15:34,520 Speaker 1: bond yield environment where we know that central banks are 229 00:15:34,520 --> 00:15:37,360 Speaker 1: not moving any time soon. Um, I think everything plays 230 00:15:37,360 --> 00:15:40,520 Speaker 1: out well now. Having said that, there are um, there 231 00:15:40,560 --> 00:15:43,600 Speaker 1: are hurdles ahead. We have to think about regulations, we 232 00:15:43,680 --> 00:15:45,640 Speaker 1: have to think about even the fact that they have 233 00:15:45,720 --> 00:15:48,920 Speaker 1: to meet really really higher EARNIS expectations. Now, through all 234 00:15:48,920 --> 00:15:50,200 Speaker 1: of that, I don't want to say we haven't got 235 00:15:50,240 --> 00:15:52,720 Speaker 1: any exposure to cyclicals, because I think this is the 236 00:15:52,800 --> 00:15:55,800 Speaker 1: time to start thinking about adding a bit more exposure, 237 00:15:55,800 --> 00:15:59,200 Speaker 1: because if we're looking at a continued recovery, then cyclicals 238 00:15:59,280 --> 00:16:03,600 Speaker 1: should do better next year. Seemen a recovery where as 239 00:16:03,600 --> 00:16:05,840 Speaker 1: soon as you look at things right now momentum in 240 00:16:05,880 --> 00:16:08,160 Speaker 1: the United States, Tom and I were just talking about that, 241 00:16:08,400 --> 00:16:10,800 Speaker 1: a really good recovery. It looks like emerging in China 242 00:16:10,960 --> 00:16:13,720 Speaker 1: and just nothing of the sort in Europe. Where do 243 00:16:13,760 --> 00:16:17,760 Speaker 1: you want that cyclical exposure, so a little bit in 244 00:16:17,800 --> 00:16:19,720 Speaker 1: the US. I mean you look at I agree that 245 00:16:19,800 --> 00:16:22,480 Speaker 1: you know. Europe's just it's a perennial disappointment. Every time 246 00:16:22,480 --> 00:16:25,000 Speaker 1: we think it can come through, something else comes along. 247 00:16:25,040 --> 00:16:27,480 Speaker 1: And I'm sending right now, it's not an error which 248 00:16:27,520 --> 00:16:30,720 Speaker 1: is looking particularly attractive. UM you said it emerging Asia. 249 00:16:30,760 --> 00:16:34,160 Speaker 1: Anything which has got any kind of close relationship with China, 250 00:16:34,800 --> 00:16:38,160 Speaker 1: UM and even the new sectors of technology there really 251 00:16:38,160 --> 00:16:40,480 Speaker 1: should do well. So that's where I think that's cyclically 252 00:16:40,480 --> 00:16:42,840 Speaker 1: exposure can come from, and of course from from a 253 00:16:42,960 --> 00:16:45,120 Speaker 1: kind of a large cap. I think there is an 254 00:16:45,160 --> 00:16:49,760 Speaker 1: opportunity here to raise your exposure to small up smash 255 00:16:49,960 --> 00:16:52,480 Speaker 1: of principal club investor Simoth, thank you great to catch 256 00:16:52,520 --> 00:16:57,960 Speaker 1: help me this morning. I've got a big wall. Your 257 00:16:58,040 --> 00:17:00,640 Speaker 1: focus was forty seven TV networks on it. I got 258 00:17:00,680 --> 00:17:03,400 Speaker 1: TV Mound in Paris, not that I understand a word 259 00:17:03,400 --> 00:17:05,879 Speaker 1: of it, but I've got medals on Fox. I got 260 00:17:06,000 --> 00:17:09,280 Speaker 1: Radcliffe of Intelligence with Marie over on Fox Biz. And 261 00:17:09,320 --> 00:17:11,480 Speaker 1: I guess that's the kind to it for the administration. 262 00:17:11,800 --> 00:17:14,840 Speaker 1: John where Senator McConnell, you see out of doing any 263 00:17:14,840 --> 00:17:18,720 Speaker 1: of these interviews, Lada McConnell was talking about a package 264 00:17:18,720 --> 00:17:20,720 Speaker 1: of skinny deal of something in the region of five 265 00:17:20,880 --> 00:17:24,120 Speaker 1: six hundred billion dollars. I imagine he'll listen. I think 266 00:17:24,119 --> 00:17:25,639 Speaker 1: he said that over the weekend. If they come to 267 00:17:25,680 --> 00:17:28,080 Speaker 1: a bipartisan deal, he'll take a look at it. But 268 00:17:28,119 --> 00:17:30,280 Speaker 1: it's not up to him, isn't it. Lady McConnell has 269 00:17:30,280 --> 00:17:31,639 Speaker 1: got to get it through the Senate, and there's been 270 00:17:31,640 --> 00:17:34,200 Speaker 1: no evidence the last several months that he has the 271 00:17:34,280 --> 00:17:37,800 Speaker 1: votes in his core constituencies in that Senate. Right now, 272 00:17:37,960 --> 00:17:40,959 Speaker 1: Tom to pass a bill of two trillion. We focus 273 00:17:41,160 --> 00:17:43,520 Speaker 1: on the stimulus with Jonathan Lieber. He is with your 274 00:17:43,560 --> 00:17:46,200 Speaker 1: Asia group and thrilled that he could join us this morning. 275 00:17:46,280 --> 00:17:49,520 Speaker 1: Jonathan Lieber, you've written tersely on stimulus as well. Meadows 276 00:17:49,640 --> 00:17:52,720 Speaker 1: Is is pounding the drum. What's the chance anybody's gonna 277 00:17:52,800 --> 00:17:55,720 Speaker 1: listen to the drum and join the band. I think 278 00:17:55,720 --> 00:17:57,199 Speaker 1: it's a little late in the game to get this 279 00:17:57,240 --> 00:18:00,280 Speaker 1: done right now. You had some support for a really 280 00:18:00,400 --> 00:18:03,399 Speaker 1: fairly large stimulus deal earlier in the summer, but with 281 00:18:03,600 --> 00:18:07,000 Speaker 1: Trump's re elections campaign prospects cratering, he just doesn't have 282 00:18:07,040 --> 00:18:09,119 Speaker 1: the stroke he had in July to push something through 283 00:18:09,160 --> 00:18:11,879 Speaker 1: the Senate Republican Conference, so they are a much smaller 284 00:18:12,000 --> 00:18:13,639 Speaker 1: number than he is. I think it's gonna be a 285 00:18:13,720 --> 00:18:15,919 Speaker 1: really heavy lift to get anything close to the kind 286 00:18:15,920 --> 00:18:18,600 Speaker 1: of deal Nuchan is talking about through the Senate right now. 287 00:18:18,680 --> 00:18:21,199 Speaker 1: Are Kevin Surli sees the benefit to the president, he 288 00:18:21,200 --> 00:18:24,880 Speaker 1: sees the benefit to moderate Democrats. Does the stimulus benefit 289 00:18:25,000 --> 00:18:29,119 Speaker 1: Vice President Biden? No? I don't think so. I mean, 290 00:18:29,119 --> 00:18:30,840 Speaker 1: I think that Biden gets it done one way or 291 00:18:30,840 --> 00:18:32,640 Speaker 1: the other, so it's basically neutral for him. But it's 292 00:18:32,640 --> 00:18:35,080 Speaker 1: a risk that this is some kind of bipartisan deal 293 00:18:35,160 --> 00:18:37,600 Speaker 1: President Trump strikes a couple of weeks before the election 294 00:18:37,920 --> 00:18:40,879 Speaker 1: and that helps him. So if you're Biden or your Pelosi, 295 00:18:41,160 --> 00:18:42,639 Speaker 1: do you really want to take that risk? I mean, 296 00:18:42,640 --> 00:18:45,280 Speaker 1: can you imagine being Nancy Pelosi. You cut a deal 297 00:18:45,640 --> 00:18:47,800 Speaker 1: with the president through two weeks before the election, and 298 00:18:47,840 --> 00:18:50,000 Speaker 1: then he wins, You're gonna be the greatest goat in 299 00:18:50,040 --> 00:18:52,600 Speaker 1: democratic political history. So I just don't think that this 300 00:18:52,640 --> 00:18:54,600 Speaker 1: is something Pelosi really wants to do. I think it's 301 00:18:54,640 --> 00:18:58,600 Speaker 1: a real risk for Biden if it happens. I'm sud naive, John. 302 00:18:58,640 --> 00:19:01,280 Speaker 1: I thought that policy was about out pink the country, 303 00:19:01,600 --> 00:19:07,240 Speaker 1: not about just winning the election, dice to go, fifteen 304 00:19:07,359 --> 00:19:11,040 Speaker 1: days to go, John, and last time around, those polls 305 00:19:11,119 --> 00:19:15,600 Speaker 1: narrowed aggressively in the President's favor. In the final two weeks, 306 00:19:15,880 --> 00:19:19,200 Speaker 1: there's doubling down on the existing strategy, get it done. 307 00:19:20,240 --> 00:19:22,000 Speaker 1: You know, there's a lot of differences between now and 308 00:19:23,040 --> 00:19:26,280 Speaker 1: the biggest one being just the size and consistency of 309 00:19:26,320 --> 00:19:29,800 Speaker 1: Biden's national lead. This guy's been between seven and nine 310 00:19:29,840 --> 00:19:32,320 Speaker 1: points since he clinched the nomination. There were times in 311 00:19:32,720 --> 00:19:35,600 Speaker 1: sixteen where Trump was within two of Hillary Clinton, and 312 00:19:35,600 --> 00:19:38,439 Speaker 1: that's not even come close to happening now. What's unique 313 00:19:38,440 --> 00:19:40,680 Speaker 1: about predicting this election is that the swing states are 314 00:19:40,760 --> 00:19:44,280 Speaker 1: all closer than the national polls tell you. But this 315 00:19:44,320 --> 00:19:46,639 Speaker 1: has not really been There's not been much variance in 316 00:19:46,640 --> 00:19:49,040 Speaker 1: this election, so it would be really surprising to see 317 00:19:49,080 --> 00:19:52,520 Speaker 1: it tightened suddenly without a major game change in the narrative, 318 00:19:52,800 --> 00:19:54,600 Speaker 1: like a big screw up at the debates or something 319 00:19:54,640 --> 00:19:58,040 Speaker 1: like that for Joe Biden. John. Let's say you're right. 320 00:19:58,119 --> 00:20:01,720 Speaker 1: Let's say markets are right that president that President Trump 321 00:20:01,760 --> 00:20:05,119 Speaker 1: loses the election, that former Vice President Biden wins, that 322 00:20:05,200 --> 00:20:08,679 Speaker 1: we get some sort of blue wave. Our markets adequately 323 00:20:08,760 --> 00:20:12,960 Speaker 1: pricing in the potential change to taxes and other fiscal 324 00:20:13,000 --> 00:20:17,440 Speaker 1: approaches of a Democratic a majority Senate right now, given 325 00:20:17,440 --> 00:20:20,399 Speaker 1: where people are positioning, are they are they really gaming 326 00:20:20,400 --> 00:20:23,840 Speaker 1: this out correctly? Well? I think that the variable here 327 00:20:23,920 --> 00:20:26,000 Speaker 1: is that most of our clients we talked to are 328 00:20:26,000 --> 00:20:28,359 Speaker 1: expecting there to be a really large stimulus in Q 329 00:20:28,560 --> 00:20:30,960 Speaker 1: one of next year. And that happens, then sure, that's 330 00:20:31,000 --> 00:20:33,560 Speaker 1: positive for the economy. That's a big fiscal stimulus. That's 331 00:20:33,560 --> 00:20:36,159 Speaker 1: probably good for earnings. But once you start looking through that, 332 00:20:36,400 --> 00:20:39,040 Speaker 1: you look out six to twelve eighteen months, that's when 333 00:20:39,080 --> 00:20:41,320 Speaker 1: you start seeing the tax increases and the new levels 334 00:20:41,320 --> 00:20:44,040 Speaker 1: of regulations starting to bite. And I would expect markets 335 00:20:44,040 --> 00:20:46,200 Speaker 1: maybe a little slow to catch up to that, given 336 00:20:46,200 --> 00:20:48,119 Speaker 1: that there's going to be this flood of cash in 337 00:20:48,160 --> 00:20:50,560 Speaker 1: the first half half of next year. So you're uniquely 338 00:20:50,560 --> 00:20:53,040 Speaker 1: positioned to talk about this because you help you helped 339 00:20:53,119 --> 00:20:58,159 Speaker 1: craft tax policy under former President Barack Obama's regime, which 340 00:20:58,200 --> 00:21:01,920 Speaker 1: sectors which types of companies could get hit hardest by 341 00:21:01,960 --> 00:21:04,760 Speaker 1: a new attacks regime such as the like that Joe 342 00:21:04,760 --> 00:21:08,200 Speaker 1: Biden is proposing. Well, the biggest threats that Biden's making 343 00:21:08,240 --> 00:21:10,879 Speaker 1: are to US multinational companies so you're talking about raising 344 00:21:10,880 --> 00:21:13,280 Speaker 1: the corporate tax rate blow where it was during the 345 00:21:13,280 --> 00:21:16,399 Speaker 1: Obama administration, but higher than it is today. But I 346 00:21:16,400 --> 00:21:19,080 Speaker 1: think in some ways more importantly, you're talking about changing 347 00:21:19,080 --> 00:21:21,720 Speaker 1: the way that they tax overseas earnings in the US, 348 00:21:22,000 --> 00:21:24,800 Speaker 1: and that's gonna make US business is less competitive, make 349 00:21:24,840 --> 00:21:27,600 Speaker 1: it harder for them compete in foreign markets. And I 350 00:21:27,640 --> 00:21:29,840 Speaker 1: think that you know, in a year or two from now, 351 00:21:29,880 --> 00:21:31,879 Speaker 1: once we're under this regime, we're gonna be back to 352 00:21:31,880 --> 00:21:34,920 Speaker 1: the battle days of talking about inversions and losing companies 353 00:21:34,960 --> 00:21:38,360 Speaker 1: to foreign UH jurisdictions. There's gonna be rules in place 354 00:21:38,400 --> 00:21:40,440 Speaker 1: to stop that from happening. But I do think that 355 00:21:40,440 --> 00:21:42,840 Speaker 1: that's a bad look for the multinationals in the US. 356 00:21:42,880 --> 00:21:45,679 Speaker 1: I'm gonna ask this question, Jonathan, very quickly here and 357 00:21:45,880 --> 00:21:49,840 Speaker 1: very important on the first Wednesday of November. Whatever the 358 00:21:49,920 --> 00:21:54,400 Speaker 1: results are, everybody's gonna dash to two thousand twenty two. 359 00:21:54,840 --> 00:21:59,000 Speaker 1: What is that gonna look like? Well, I think the Democrats, 360 00:21:59,000 --> 00:22:00,920 Speaker 1: I mean, you know, the Demo Guts are fairly well 361 00:22:00,960 --> 00:22:03,040 Speaker 1: positioned if you look at the Senate. They also have 362 00:22:03,119 --> 00:22:05,879 Speaker 1: the opportunity to redistrict coming out of the census, in 363 00:22:07,320 --> 00:22:10,439 Speaker 1: which should help them in the House. But you know, 364 00:22:10,520 --> 00:22:13,879 Speaker 1: the historical pattern here is that presidents lose seats in 365 00:22:13,880 --> 00:22:16,399 Speaker 1: their first midterm elections because of the backlash. So a 366 00:22:16,400 --> 00:22:18,879 Speaker 1: lot of that question comes on how much overreach you 367 00:22:18,960 --> 00:22:21,159 Speaker 1: see from the first two years of a Biden administration 368 00:22:21,359 --> 00:22:23,359 Speaker 1: and what's so important here, John As I know you 369 00:22:23,440 --> 00:22:26,399 Speaker 1: tried to redistrict me out of Bloomberg surveillance three or 370 00:22:26,400 --> 00:22:28,720 Speaker 1: four years ago. I mean, you know he's talking to 371 00:22:28,800 --> 00:22:35,440 Speaker 1: John Farrell LL. He's absolutely talking to making redistricting down 372 00:22:35,520 --> 00:22:40,000 Speaker 1: White John, I'm working on it. Jerryman, get that one 373 00:22:40,080 --> 00:22:51,520 Speaker 1: day Salem mass Science. You're not directly on the pandemic 374 00:22:51,560 --> 00:22:55,280 Speaker 1: from the JOHNS. Hompkins University. Johnshrew Sharpstein, Well, the first 375 00:22:55,320 --> 00:22:57,000 Speaker 1: of all, I point out that there really, at least 376 00:22:57,359 --> 00:23:00,520 Speaker 1: states aren't lockdowns at the moment. People are not recommending knockdowns, 377 00:23:00,520 --> 00:23:04,680 Speaker 1: They're recommending reasonable steps in vigilance, and you know, not 378 00:23:05,160 --> 00:23:08,320 Speaker 1: pretending that the virus isn't here. And I remind them 379 00:23:08,359 --> 00:23:11,680 Speaker 1: that two fifteen thousand people have already died in the 380 00:23:11,760 --> 00:23:13,879 Speaker 1: United States and it is not hard at all to 381 00:23:13,960 --> 00:23:17,439 Speaker 1: imagine another two d fifteen thousand, and then another two 382 00:23:17,840 --> 00:23:20,680 Speaker 1: fifteen thousand dying if we decide that we're just gonna 383 00:23:20,760 --> 00:23:23,800 Speaker 1: let everybody get the virus um, which seems to be 384 00:23:23,840 --> 00:23:27,000 Speaker 1: some people's strategy, but really is the strategy of giving 385 00:23:27,080 --> 00:23:30,200 Speaker 1: up what we know about the Visor vaccine. It seems 386 00:23:30,240 --> 00:23:32,960 Speaker 1: that they actually would be ready to, you know, start 387 00:23:33,000 --> 00:23:35,960 Speaker 1: for an application in November. November is a couple of weeks, 388 00:23:36,320 --> 00:23:38,960 Speaker 1: you know, a way are the first ones to get 389 00:23:39,000 --> 00:23:42,359 Speaker 1: it right, But we have no idea because they haven't 390 00:23:42,400 --> 00:23:45,399 Speaker 1: reported the studies yet. I think what they're saying is 391 00:23:45,400 --> 00:23:47,880 Speaker 1: that they will have the first read of the studies 392 00:23:48,400 --> 00:23:52,520 Speaker 1: UM with including data on safety, sometime in November, and 393 00:23:52,560 --> 00:23:55,320 Speaker 1: I certainly hope that it's positive, that it looks good, 394 00:23:55,480 --> 00:23:58,920 Speaker 1: and that the FDA will look at it carefully, convene 395 00:23:58,920 --> 00:24:01,399 Speaker 1: an advisory committee, and then we'll all be able to 396 00:24:01,400 --> 00:24:03,760 Speaker 1: look at the data. And if that happens, I think 397 00:24:03,760 --> 00:24:06,639 Speaker 1: we'll at least have a one vaccine, which is great, 398 00:24:07,160 --> 00:24:10,520 Speaker 1: and then there will be other UM studies that will 399 00:24:10,560 --> 00:24:12,160 Speaker 1: read out and we'll have a chance to get more. 400 00:24:12,520 --> 00:24:15,280 Speaker 1: How do you you know, convince citizens that we're not 401 00:24:15,320 --> 00:24:17,960 Speaker 1: doing this too fast, that it's you know, the track 402 00:24:18,040 --> 00:24:21,800 Speaker 1: record of safety that will dictate the timeline. Well, I 403 00:24:21,840 --> 00:24:24,320 Speaker 1: think the stout and Drug Administration has a very important 404 00:24:24,359 --> 00:24:27,200 Speaker 1: role to play, as do all political leaders in saying, well, 405 00:24:27,600 --> 00:24:29,959 Speaker 1: the study is done, let's take it one step at 406 00:24:29,960 --> 00:24:34,040 Speaker 1: a time, and you know, in short order, convene independent experts, 407 00:24:34,080 --> 00:24:36,879 Speaker 1: release upunto the data, allow people to look at it 408 00:24:37,320 --> 00:24:39,480 Speaker 1: and give you a little bit of room for people 409 00:24:39,520 --> 00:24:41,640 Speaker 1: to really take a look and say, wow, this really 410 00:24:41,680 --> 00:24:44,679 Speaker 1: works and it has a very strong safety record. And 411 00:24:44,680 --> 00:24:47,640 Speaker 1: if people do that, I think the medical professional feel confident, 412 00:24:48,000 --> 00:24:50,040 Speaker 1: Many people will feel confident, and it will be the 413 00:24:50,119 --> 00:24:54,440 Speaker 1: science driving the discussion rather than people hopping up and down, 414 00:24:54,640 --> 00:24:56,919 Speaker 1: you know, and just pointing and saying, you know, just 415 00:24:57,040 --> 00:24:59,720 Speaker 1: take the vaccine. That's what we don't want. Why we 416 00:25:00,000 --> 00:25:02,280 Speaker 1: in so many new cases in the US and Europe? 417 00:25:02,520 --> 00:25:05,080 Speaker 1: Is it a second wave or is it seasonal? Or 418 00:25:05,119 --> 00:25:08,440 Speaker 1: is it because some of the restrictions were relaxed too 419 00:25:08,440 --> 00:25:10,439 Speaker 1: soon or by too much? Is there an all of 420 00:25:10,520 --> 00:25:13,120 Speaker 1: the above option? I mean, I think all of those 421 00:25:13,160 --> 00:25:17,160 Speaker 1: things are contributing. Um, you know, clearly there's pandemic fatigue. 422 00:25:17,880 --> 00:25:21,439 Speaker 1: Clearly there were restrictions that were some restrictions were relaxed quickly, 423 00:25:22,119 --> 00:25:25,240 Speaker 1: and I just think in general, the weather is probably 424 00:25:25,240 --> 00:25:28,240 Speaker 1: not helping because describing people indoors and that's why we're 425 00:25:28,240 --> 00:25:30,320 Speaker 1: going to get a wave that that is exactly what's 426 00:25:30,359 --> 00:25:32,720 Speaker 1: happening now. And the question is how big a wave 427 00:25:32,760 --> 00:25:34,520 Speaker 1: are we going to get and can we get control 428 00:25:34,520 --> 00:25:36,920 Speaker 1: of it um And that is really going to depend 429 00:25:37,440 --> 00:25:40,200 Speaker 1: on leadership, and it's going to depend on people's ability 430 00:25:40,320 --> 00:25:43,760 Speaker 1: to really, you know, go back to the basics of 431 00:25:43,800 --> 00:25:47,000 Speaker 1: what kept this under control. Joshua Sure stud the Johns 432 00:25:47,000 --> 00:25:50,200 Speaker 1: Hopkins University on a Monday on a Monday, really changeable 433 00:25:50,240 --> 00:25:52,879 Speaker 1: for the pandemic as well. Thanks for listening to the 434 00:25:52,880 --> 00:25:59,400 Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 435 00:25:59,760 --> 00:26:03,960 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 436 00:26:04,040 --> 00:26:08,280 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 437 00:26:08,720 --> 00:26:09,800 Speaker 1: I'm Bloomberg Radio.