1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene. Along

2
00:00:09,240 --> 00:00:13,200
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaylie. We bring you

3
00:00:13,320 --> 00:00:18,640
Speaker 1: insight from the best and economics, finance, investment, and international relations.

4
00:00:18,960 --> 00:00:23,840
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,

5
00:00:23,920 --> 00:00:30,840
Speaker 1: and of course on the Bloomberg Terminal. Great guest joining Katie,

6
00:00:30,880 --> 00:00:33,080
Speaker 1: Matt and I now David Cotal, the co founder and

7
00:00:33,120 --> 00:00:36,280
Speaker 1: CEO of Cumberland Advice is David had a perfect guest

8
00:00:36,280 --> 00:00:38,800
Speaker 1: to do what I've been doing with guests through much

9
00:00:38,800 --> 00:00:41,159
Speaker 1: of this week, which is just the lesson of one

10
00:00:41,320 --> 00:00:43,519
Speaker 1: as we approached twenty two before we run away from

11
00:00:43,560 --> 00:00:45,920
Speaker 1: this year, David and get deep into twenty two. What's

12
00:00:45,920 --> 00:00:50,400
Speaker 1: the number one lesson for you? If there's a lesson

13
00:00:50,560 --> 00:00:56,240
Speaker 1: for me, it's the ignoring of the history John of pandemics.

14
00:00:56,760 --> 00:01:00,360
Speaker 1: They are different. You were talking about the head I

15
00:01:00,440 --> 00:01:03,440
Speaker 1: listened to the show this morning in all week, and

16
00:01:04,319 --> 00:01:07,240
Speaker 1: the morning session that you do in the seven o'clock

17
00:01:07,240 --> 00:01:10,000
Speaker 1: hour is the one that's you're putting the status of

18
00:01:10,040 --> 00:01:14,039
Speaker 1: this pandemic. When you hit the history of all pandemics,

19
00:01:14,400 --> 00:01:18,440
Speaker 1: they are a lesson. This is not a business cycle.

20
00:01:18,520 --> 00:01:21,400
Speaker 1: That's typical and that's being missed here. We're too much

21
00:01:21,400 --> 00:01:25,240
Speaker 1: in the weeds, and we have lots of historical evidence

22
00:01:25,840 --> 00:01:30,760
Speaker 1: for to guide us, especially with the Federal Reserve. I

23
00:01:30,840 --> 00:01:33,919
Speaker 1: went back and looked at every pandemic I could find,

24
00:01:34,400 --> 00:01:38,920
Speaker 1: and there's indicators of impacts on wages, on labor forces,

25
00:01:38,959 --> 00:01:42,319
Speaker 1: on prices, on interest rates, all the way back to

26
00:01:42,400 --> 00:01:46,880
Speaker 1: the time of Athens and Sparta. What's missing in the

27
00:01:46,959 --> 00:01:52,160
Speaker 1: conversation now is the impact. I read Milton Freeman's treatise,

28
00:01:52,280 --> 00:01:55,760
Speaker 1: I read Alan Meltzer's treatise. They talk about the FED,

29
00:01:55,840 --> 00:02:01,080
Speaker 1: they don't even mention a pandemic, and that it's a

30
00:02:01,160 --> 00:02:07,000
Speaker 1: whole different characterization of global economics. So the big takeaway

31
00:02:07,080 --> 00:02:10,760
Speaker 1: for the year, as far as I'm concerned, is missing

32
00:02:10,919 --> 00:02:15,440
Speaker 1: the big picture of a pandemic shock. But David, when

33
00:02:15,440 --> 00:02:18,760
Speaker 1: we look at it from a corporate perspective, profits have

34
00:02:18,919 --> 00:02:21,720
Speaker 1: held in there. They've done actually quite well. They've continually

35
00:02:21,760 --> 00:02:23,800
Speaker 1: surprised to the upside. Do you not buy into the

36
00:02:23,840 --> 00:02:26,640
Speaker 1: idea that you can look through the pandemic and the

37
00:02:26,680 --> 00:02:29,320
Speaker 1: economic impact which seems to be waning of each individual wave.

38
00:02:29,400 --> 00:02:31,960
Speaker 1: You can look through the normalization of monetary policy so

39
00:02:32,000 --> 00:02:36,880
Speaker 1: long as earnings growth remains there, Kelly, I agree with

40
00:02:36,919 --> 00:02:40,639
Speaker 1: that earnings growth to spectacular and it will continue. I

41
00:02:40,680 --> 00:02:43,880
Speaker 1: agree with Paulson's estimate. Are you Inny's estimate? Are the

42
00:02:43,960 --> 00:02:48,119
Speaker 1: other ones? Eight ten, twelve? And makes no difference. It's powerful.

43
00:02:48,840 --> 00:02:52,080
Speaker 1: Why do we have the earnings growth? We have a

44
00:02:52,280 --> 00:02:56,280
Speaker 1: shock that's demographic. We have people dead a million more

45
00:02:56,280 --> 00:03:00,920
Speaker 1: in the United States than traditional trajector rate. We have

46
00:03:01,120 --> 00:03:04,760
Speaker 1: people disabled, not able to get to work, and we're

47
00:03:04,800 --> 00:03:08,160
Speaker 1: not finished with this. So what do you get? You

48
00:03:08,280 --> 00:03:12,240
Speaker 1: get a substitution from labor to capital. When you do that,

49
00:03:12,560 --> 00:03:17,520
Speaker 1: you get productivity gains, whether it's a robot or telemedicine,

50
00:03:17,800 --> 00:03:21,520
Speaker 1: and you get something else. You get a fall in

51
00:03:21,560 --> 00:03:26,560
Speaker 1: the real interest rate. Every pandemic in history has a

52
00:03:26,720 --> 00:03:30,560
Speaker 1: fall in the real interest rate and a substitution of

53
00:03:30,680 --> 00:03:35,120
Speaker 1: capital for labor. Those are the macro pieces, by the way,

54
00:03:35,280 --> 00:03:40,120
Speaker 1: j Pal understands this, and I believe the composition of

55
00:03:40,200 --> 00:03:44,800
Speaker 1: the border governors will also reflect it if it's the

56
00:03:44,880 --> 00:03:49,320
Speaker 1: nominees we're seeing being proposed and vetted now in the

57
00:03:49,400 --> 00:03:56,160
Speaker 1: public area. So big picture, pandemic shock, not business cycle,

58
00:03:56,800 --> 00:03:59,760
Speaker 1: earnings will be good. Stock market will go higher interest rates,

59
00:04:00,080 --> 00:04:03,160
Speaker 1: but a little inflation will roll over back to the

60
00:04:03,240 --> 00:04:07,160
Speaker 1: two three level, and it will happen faster than people

61
00:04:07,240 --> 00:04:11,760
Speaker 1: thinks as the shock adjustment rolls out. Well, you mentioned

62
00:04:11,800 --> 00:04:13,880
Speaker 1: the empty seats that are still remaining at the FED,

63
00:04:13,920 --> 00:04:15,960
Speaker 1: and depending on who sits them, do you think we

64
00:04:16,000 --> 00:04:19,680
Speaker 1: could be looking at a different, different trajectory of policy

65
00:04:20,200 --> 00:04:23,599
Speaker 1: moving forward. Well, if we look at the three names

66
00:04:23,600 --> 00:04:27,600
Speaker 1: that are surfaced in the Wall Street Journal yesterday, they

67
00:04:28,120 --> 00:04:33,559
Speaker 1: lean center, but they are accepting of a changed FED

68
00:04:33,720 --> 00:04:39,359
Speaker 1: structure that also looks beyond narrow monetary policy. To our academics,

69
00:04:39,760 --> 00:04:42,760
Speaker 1: we know what they've written and said. They have some experience,

70
00:04:43,080 --> 00:04:47,560
Speaker 1: and Raskin is a known quantity, but they're all confirmable.

71
00:04:47,839 --> 00:04:51,200
Speaker 1: They are all young enough to hold these positions, and

72
00:04:51,240 --> 00:04:55,320
Speaker 1: obviously they've been able to deal with the financial restraint

73
00:04:55,560 --> 00:04:59,000
Speaker 1: because the FED governor doesn't get paid very much compared

74
00:04:59,040 --> 00:05:02,640
Speaker 1: to other positions. So I think policy stays in the middle.

75
00:05:03,000 --> 00:05:06,640
Speaker 1: That's great for markets, great for the investor class, it's

76
00:05:06,680 --> 00:05:09,840
Speaker 1: great for the country. What we don't want is shocks.

77
00:05:10,720 --> 00:05:14,280
Speaker 1: I'm in the camp they should not reduce the balance

78
00:05:14,360 --> 00:05:17,680
Speaker 1: sheet at the same time they raised the interest rate

79
00:05:18,000 --> 00:05:21,200
Speaker 1: It's hard enough for a central bank to do one

80
00:05:21,360 --> 00:05:25,320
Speaker 1: thing at a time in a pandemic. Doing two things

81
00:05:25,800 --> 00:05:29,200
Speaker 1: and trying to get them both right is virtually impossible.

82
00:05:29,600 --> 00:05:33,119
Speaker 1: So my it's good is that one point at a time,

83
00:05:33,200 --> 00:05:35,560
Speaker 1: do one thing at a time and get it right.

84
00:05:37,160 --> 00:05:40,080
Speaker 1: It's a good point. And I also appreciate your point

85
00:05:40,120 --> 00:05:44,240
Speaker 1: that we need eyes that aren't too narrowly focused. I

86
00:05:44,279 --> 00:05:48,000
Speaker 1: think of your very liberal education. I know you studied

87
00:05:48,000 --> 00:05:54,440
Speaker 1: not only economics but also organizational dynamics and philosophy, right,

88
00:05:54,560 --> 00:05:58,520
Speaker 1: probably reading a lot of favor and fuco um. How

89
00:05:59,800 --> 00:06:02,640
Speaker 1: how how confident are you that this FED is really

90
00:06:02,680 --> 00:06:07,120
Speaker 1: in touch with the human effects of the pandemic and

91
00:06:07,240 --> 00:06:11,039
Speaker 1: their policy actions, especially when looking at something like COVID

92
00:06:11,200 --> 00:06:15,440
Speaker 1: and the effects of long COVID. Well, Matt, I think

93
00:06:15,560 --> 00:06:18,840
Speaker 1: j Pal gets it. There's a community system in the FED.

94
00:06:18,920 --> 00:06:23,000
Speaker 1: It's got thirty six members to it. I know one

95
00:06:23,160 --> 00:06:26,719
Speaker 1: they publish their results. They are looking at the entire

96
00:06:26,800 --> 00:06:31,880
Speaker 1: population of three million Americans and looking at the impacts

97
00:06:31,960 --> 00:06:35,840
Speaker 1: of the various component parts. It seems to me the

98
00:06:35,920 --> 00:06:40,000
Speaker 1: point gees who are being vetted now publicly, uh Cook,

99
00:06:40,320 --> 00:06:45,240
Speaker 1: Jefferson and certainly Raskin have the characteristic to look beyond

100
00:06:45,279 --> 00:06:49,400
Speaker 1: the narrow. I hope the FIT looks beyond the narrow.

101
00:06:49,720 --> 00:06:55,159
Speaker 1: If it's strictly money and velocity and multiplier and not

102
00:06:55,360 --> 00:06:59,640
Speaker 1: looking at full impact in the agendas we face in

103
00:06:59,680 --> 00:07:02,600
Speaker 1: the Nited States and the rest of the world, we're

104
00:07:02,640 --> 00:07:06,039
Speaker 1: in trouble. But j Pals seems to get it. I

105
00:07:06,120 --> 00:07:09,960
Speaker 1: applaud what he did as chairman and continues to do so.

106
00:07:10,720 --> 00:07:14,080
Speaker 1: I'm an endorser. Now. If the politicians will leave the

107
00:07:14,120 --> 00:07:17,679
Speaker 1: FED alone and let it do its job, that would

108
00:07:17,680 --> 00:07:21,560
Speaker 1: be much better. Independence of the FIT is always threatened

109
00:07:21,560 --> 00:07:24,480
Speaker 1: by politics. I want to I want to get to

110
00:07:24,680 --> 00:07:27,040
Speaker 1: politics and a sense here kind of rip up the

111
00:07:27,040 --> 00:07:31,800
Speaker 1: script Tom Kean style. Um, David, and I look at

112
00:07:31,800 --> 00:07:35,119
Speaker 1: your resume. UM, as I think about build back better

113
00:07:35,120 --> 00:07:37,240
Speaker 1: and the chances it won't pass, as I think about

114
00:07:37,280 --> 00:07:43,040
Speaker 1: my personal concerns that the salt deduction cap won't be lifted. UM,

115
00:07:43,080 --> 00:07:45,040
Speaker 1: I look at your resume. You were the commissioner of

116
00:07:45,040 --> 00:07:48,360
Speaker 1: the Delaware River Port Authority. You serve on the Treasury

117
00:07:48,400 --> 00:07:51,680
Speaker 1: transition teams for Keen and Whitman. Um. You were a

118
00:07:51,680 --> 00:07:56,160
Speaker 1: board member of the New Jersey Economic Development Authority. I've

119
00:07:56,160 --> 00:07:58,560
Speaker 1: been asking myself a lot lately. Why do these states,

120
00:07:58,640 --> 00:08:01,360
Speaker 1: especially New Jersey and New York, how such high taxes

121
00:08:01,480 --> 00:08:04,920
Speaker 1: compared to other states? You know, it seems to only

122
00:08:05,000 --> 00:08:08,920
Speaker 1: matter the the the UH the salt cap to the

123
00:08:08,960 --> 00:08:12,400
Speaker 1: Tri state area. If if we don't get that, what

124
00:08:12,480 --> 00:08:15,160
Speaker 1: else can be done to lower these tax burdens that

125
00:08:15,200 --> 00:08:19,120
Speaker 1: are incredibly heavy on a lot of working families in

126
00:08:19,160 --> 00:08:24,920
Speaker 1: those in those states. Well, it takes a shock, and

127
00:08:24,960 --> 00:08:28,800
Speaker 1: it hasn't happened yet, And I totally agree with. Our

128
00:08:28,880 --> 00:08:31,920
Speaker 1: company used to be headquartered in New Jersey where now

129
00:08:31,960 --> 00:08:37,520
Speaker 1: in Florida. So we've got it. Change not the only

130
00:08:37,760 --> 00:08:41,080
Speaker 1: driver of the reason to make the change. We were

131
00:08:41,120 --> 00:08:44,000
Speaker 1: on airplanes flying to Florida because of the migration of

132
00:08:44,040 --> 00:08:47,000
Speaker 1: wealth here. Now, I will tell you during a pandemic,

133
00:08:47,400 --> 00:08:51,760
Speaker 1: Florida is not such an easy place because we don't

134
00:08:51,760 --> 00:08:57,000
Speaker 1: have mitigation. Should we have a Florida which is playing

135
00:08:57,080 --> 00:09:01,880
Speaker 1: this differently? And two in maya opinion that there is

136
00:09:01,920 --> 00:09:06,120
Speaker 1: a detriment to that. My office is now extending it's

137
00:09:06,200 --> 00:09:10,440
Speaker 1: closing to February and doing a rolling month. We've had

138
00:09:10,559 --> 00:09:15,520
Speaker 1: COVID cases in our staff among our clients, so we

139
00:09:15,720 --> 00:09:20,559
Speaker 1: see a direct negative business impact when there is no mitigation.

140
00:09:20,840 --> 00:09:25,960
Speaker 1: That's not an advocacy for a lockdown, it's an advocacy

141
00:09:26,080 --> 00:09:30,800
Speaker 1: for thoughtful policy. M David got to leave it there, buddy,

142
00:09:30,840 --> 00:09:33,439
Speaker 1: But we appreciate your friendship, your partnership with this program

143
00:09:33,480 --> 00:09:34,800
Speaker 1: through the year, and we look forward to doing the

144
00:09:34,840 --> 00:09:37,400
Speaker 1: same through twenty two. Thank you, David. Co talk there

145
00:09:37,400 --> 00:09:45,560
Speaker 1: of couble of advises with us now in place to say,

146
00:09:45,600 --> 00:09:48,640
Speaker 1: as Jim Pulson, chief investment officer at the Loophole Group, Jim,

147
00:09:48,679 --> 00:09:50,800
Speaker 1: you've got a year end price target on the SMP

148
00:09:50,880 --> 00:09:52,800
Speaker 1: of five thousand. I'm trying to work out if that's

149
00:09:52,800 --> 00:09:58,000
Speaker 1: this week or next year, which one, Jim, it's it's

150
00:09:58,080 --> 00:10:02,000
Speaker 1: next year. I really think, Jonathan, we're gonna have a

151
00:10:02,120 --> 00:10:04,240
Speaker 1: very violatile year ahead of us, and I think we're

152
00:10:04,240 --> 00:10:07,760
Speaker 1: gonna end up, you know, margly, not not near as

153
00:10:07,840 --> 00:10:09,800
Speaker 1: much as we've been used to have late, but I

154
00:10:10,000 --> 00:10:13,200
Speaker 1: would argue that, um, it's probably gonna be the best

155
00:10:13,240 --> 00:10:15,160
Speaker 1: in the first half of the year. I I know

156
00:10:15,240 --> 00:10:17,600
Speaker 1: we're up here. A lot of people think we might

157
00:10:17,640 --> 00:10:20,040
Speaker 1: give some of this back as we enter the new year.

158
00:10:20,320 --> 00:10:23,000
Speaker 1: That could happen, but I think we're gonna maybe go

159
00:10:23,040 --> 00:10:25,440
Speaker 1: above five thousand during the first half of the year,

160
00:10:26,080 --> 00:10:32,760
Speaker 1: on excitement that finally maybe moving the COVID from pandemic

161
00:10:32,800 --> 00:10:36,559
Speaker 1: to an epidemic, and on the realization I think increasingly

162
00:10:36,640 --> 00:10:40,200
Speaker 1: that inflation is moderating. But then I think in the

163
00:10:40,240 --> 00:10:43,640
Speaker 1: last half, I think we're gonna see bond yields come up,

164
00:10:43,720 --> 00:10:48,600
Speaker 1: and and the FED tapering tapering, and maybe and raising

165
00:10:48,720 --> 00:10:51,440
Speaker 1: rates more aggressively. I think we could have a bit

166
00:10:51,480 --> 00:10:53,000
Speaker 1: of a struggle in the latter half of the year.

167
00:10:53,040 --> 00:10:55,120
Speaker 1: That's why I think we'll end up around five thousand

168
00:10:55,360 --> 00:10:59,120
Speaker 1: for the SMP. But I think the broader market outside

169
00:10:59,120 --> 00:11:02,000
Speaker 1: of the SMP five it does better this coming year

170
00:11:02,320 --> 00:11:05,480
Speaker 1: than the SP overall. Well, let's talk about the bond

171
00:11:05,520 --> 00:11:07,360
Speaker 1: yields going up, because I know you see the tenure

172
00:11:07,400 --> 00:11:10,280
Speaker 1: at a year end next year, obviously we're about seventy

173
00:11:10,280 --> 00:11:12,640
Speaker 1: five basis points south of that at the moment. Does

174
00:11:12,679 --> 00:11:16,120
Speaker 1: it matter the ultimate rate, how high the rates ultimately go,

175
00:11:16,440 --> 00:11:18,480
Speaker 1: or the speed at which they get there. Do you

176
00:11:18,520 --> 00:11:20,480
Speaker 1: think that is a move that will happen quickly and

177
00:11:20,480 --> 00:11:22,720
Speaker 1: that that is actually what will be upsetting to the

178
00:11:22,720 --> 00:11:26,520
Speaker 1: equity market. Uh, it's a great question, Killy. You know,

179
00:11:26,600 --> 00:11:29,240
Speaker 1: one of the things that I've looked at recently, looked

180
00:11:29,280 --> 00:11:33,400
Speaker 1: back and looked at all the months that we've been

181
00:11:33,520 --> 00:11:36,760
Speaker 1: under a three percent ten year yield, And I got

182
00:11:36,880 --> 00:11:40,080
Speaker 1: to tell you, when you're under three percent ten year historically,

183
00:11:40,120 --> 00:11:42,720
Speaker 1: we've only been there about twenty percent of the time.

184
00:11:43,200 --> 00:11:48,040
Speaker 1: It is a gift to equity investors because the stock market,

185
00:11:48,040 --> 00:11:53,480
Speaker 1: what it does is almost annualized UH annualized monthly returns

186
00:11:53,840 --> 00:11:57,240
Speaker 1: and it and it has negative monthly returns a third

187
00:11:57,320 --> 00:12:01,000
Speaker 1: of the time, third less compared to when above three percent.

188
00:12:01,320 --> 00:12:03,720
Speaker 1: The return when you're above three percent is ten percent,

189
00:12:03,800 --> 00:12:06,719
Speaker 1: but it's one below. So one of the things I

190
00:12:06,800 --> 00:12:09,440
Speaker 1: think it is important for investors to focus on is

191
00:12:09,679 --> 00:12:12,000
Speaker 1: rates are going to go up, but boy tell you,

192
00:12:12,679 --> 00:12:15,440
Speaker 1: until you get back above a three percent level. The

193
00:12:15,559 --> 00:12:20,280
Speaker 1: history on the stock market is awful, encouraging for stock investors. Um.

194
00:12:20,320 --> 00:12:24,679
Speaker 1: That doesn't mean, um that a rate rise of seventy

195
00:12:24,720 --> 00:12:27,080
Speaker 1: five or hundred basis points over a short period time

196
00:12:27,080 --> 00:12:29,560
Speaker 1: won't bring a correction, and I think we might we

197
00:12:29,600 --> 00:12:33,480
Speaker 1: will get that later this later next year. But I

198
00:12:33,520 --> 00:12:36,200
Speaker 1: think it's important to realize not to totally run away

199
00:12:36,240 --> 00:12:40,120
Speaker 1: from stocks, at least until we get back above three percent. Tenure. Well,

200
00:12:40,240 --> 00:12:42,520
Speaker 1: is there no alternative, Jim, I mean, is that part

201
00:12:42,559 --> 00:12:46,000
Speaker 1: of the thesis or uh do you see other places

202
00:12:46,040 --> 00:12:51,640
Speaker 1: to go, especially to hide from inflation? Um? You know, Matt,

203
00:12:51,679 --> 00:12:54,640
Speaker 1: I I UM, I could be wrong, but I really

204
00:12:54,679 --> 00:12:58,280
Speaker 1: think inflation is going to moderate. I think there's already

205
00:12:58,320 --> 00:13:01,560
Speaker 1: some favorable science. Commodity prices have kind of flattened out

206
00:13:01,600 --> 00:13:05,040
Speaker 1: since May break even rates have flattened out since May.

207
00:13:05,280 --> 00:13:08,599
Speaker 1: And I think what I'm most encouraged by is that policy,

208
00:13:08,920 --> 00:13:13,480
Speaker 1: both monetary and fiscal, have been tightening really since March.

209
00:13:14,120 --> 00:13:17,520
Speaker 1: The h M TOO money growth annual growth was twenty

210
00:13:17,600 --> 00:13:20,119
Speaker 1: seven percent year on year in March, it's now thirteen.

211
00:13:20,520 --> 00:13:23,280
Speaker 1: FEDS balance sheet was growing at eight percent in March

212
00:13:23,520 --> 00:13:26,520
Speaker 1: year on year, and it's now under So there's been

213
00:13:26,559 --> 00:13:30,800
Speaker 1: a good degree of monetary at least less stimulus, if

214
00:13:30,840 --> 00:13:34,720
Speaker 1: you will. Uh, fiscal deficit was nineteen percent of GDP

215
00:13:35,000 --> 00:13:38,760
Speaker 1: earlier this year. It's now under twelve percent. So there's

216
00:13:38,800 --> 00:13:42,000
Speaker 1: also been fiscal tightening, if you will. And I think

217
00:13:42,000 --> 00:13:46,800
Speaker 1: that policy leads inflation historically anywhere from twelve to eighteen months.

218
00:13:47,280 --> 00:13:50,520
Speaker 1: And UH that those tightening moves since since really the

219
00:13:50,600 --> 00:13:53,200
Speaker 1: end of the first quarter I think come into play

220
00:13:53,280 --> 00:13:57,800
Speaker 1: next year in moderating inflationary. Fourth, so with the commodity prices,

221
00:13:57,840 --> 00:14:00,880
Speaker 1: which are the leading edge of inflation pre sure already

222
00:14:00,920 --> 00:14:05,520
Speaker 1: showing a roll over, and policy behind that now moderating,

223
00:14:05,640 --> 00:14:08,080
Speaker 1: I think we're gonna be uh. I think it's gonna

224
00:14:08,120 --> 00:14:10,520
Speaker 1: be a good outcome for inflation. And I don't think

225
00:14:10,520 --> 00:14:13,400
Speaker 1: it's going to return to our two percent and FED target.

226
00:14:13,679 --> 00:14:16,600
Speaker 1: In fact, I think it's gonna stay elevated around three

227
00:14:16,640 --> 00:14:19,200
Speaker 1: percent and the balance of this recovery. But I do

228
00:14:19,280 --> 00:14:22,400
Speaker 1: think it's gonna moderate next year, and that's gonna calm

229
00:14:22,480 --> 00:14:25,560
Speaker 1: fears of runaway inflation. Jimmy just said something really really interesting.

230
00:14:25,560 --> 00:14:28,400
Speaker 1: You use the word timing, but then you said that

231
00:14:28,800 --> 00:14:31,080
Speaker 1: the equity market wouldn't get hit until ten your year.

232
00:14:31,120 --> 00:14:33,640
Speaker 1: It's got to say now, I'm trying to work through

233
00:14:33,640 --> 00:14:35,720
Speaker 1: this with you now, jim So bear with me a second.

234
00:14:36,040 --> 00:14:38,600
Speaker 1: Are you saying that we can get inflation down with

235
00:14:38,600 --> 00:14:41,080
Speaker 1: the Federal Reserve doing what it's doing without actually seeing

236
00:14:41,240 --> 00:14:47,840
Speaker 1: tight to financial conditions. I expect bond yields will will

237
00:14:47,880 --> 00:14:50,240
Speaker 1: move up, as I said, to two and a quarter

238
00:14:50,280 --> 00:14:53,320
Speaker 1: percent next year, primarily because I think economic growth is

239
00:14:53,320 --> 00:14:57,160
Speaker 1: going to continue to be to be strong. UM. I

240
00:14:57,720 --> 00:15:00,720
Speaker 1: also think a realization is going to hit us next

241
00:15:00,760 --> 00:15:04,160
Speaker 1: year Jonathan, that we're not returning to the FEDS two

242
00:15:04,160 --> 00:15:08,160
Speaker 1: percent inflation target. I think the Fed may even adopt

243
00:15:08,360 --> 00:15:12,640
Speaker 1: the three is okay uh as an inflation target. They'll

244
00:15:13,080 --> 00:15:15,040
Speaker 1: you know, move their inflation target up and I think

245
00:15:15,040 --> 00:15:16,760
Speaker 1: the bond market is going to respond to that as

246
00:15:16,800 --> 00:15:19,640
Speaker 1: the year progresses. And also expect the Fed to raise

247
00:15:19,720 --> 00:15:22,720
Speaker 1: the FED funder rate over there. And I do think

248
00:15:22,760 --> 00:15:25,920
Speaker 1: that will bring a correction, but a correction that's viable

249
00:15:25,960 --> 00:15:28,400
Speaker 1: in my view because I think the market will recover

250
00:15:28,480 --> 00:15:31,240
Speaker 1: from it and move on to new highs. And I

251
00:15:31,360 --> 00:15:34,600
Speaker 1: really think that the earnings and fundamentals of the economy

252
00:15:34,600 --> 00:15:37,160
Speaker 1: are going to remain very, very strong and that is

253
00:15:37,160 --> 00:15:39,720
Speaker 1: going to continue to drive this equity market. Jim, thank you,

254
00:15:39,760 --> 00:15:42,320
Speaker 1: buddy for everything for today, in for the year so fine.

255
00:15:42,400 --> 00:15:45,680
Speaker 1: Looking forward to looking forward to two to cover that

256
00:15:45,720 --> 00:15:47,400
Speaker 1: with you as well. Thank you, Jim. Jim posting there

257
00:15:47,440 --> 00:15:54,800
Speaker 1: the little good. Sarah House, senior economist, d Wells Fargo

258
00:15:54,840 --> 00:15:56,720
Speaker 1: Securities joining us now. Sarah, I know you think we

259
00:15:56,720 --> 00:16:00,200
Speaker 1: can see a seven handle on inflation early in see

260
00:16:00,240 --> 00:16:03,360
Speaker 1: five percent for the full year. Does the O Macron

261
00:16:03,480 --> 00:16:07,640
Speaker 1: variant provide upside or downside risk to that inflation outlook?

262
00:16:08,800 --> 00:16:12,640
Speaker 1: So I think for inflation O Macron does provides perhaps

263
00:16:12,640 --> 00:16:15,440
Speaker 1: from overall upside when you think of the ongoing pressure

264
00:16:15,520 --> 00:16:18,400
Speaker 1: on goods prices, I think you might get some offset

265
00:16:18,400 --> 00:16:20,920
Speaker 1: in the near term on things like travel related prices.

266
00:16:20,960 --> 00:16:23,600
Speaker 1: So we saw that weekend temporarily with the delta wave

267
00:16:23,640 --> 00:16:26,280
Speaker 1: improved a little bit in November, so I think the

268
00:16:26,640 --> 00:16:29,600
Speaker 1: recovery and travel related prices probably gets pushed back a

269
00:16:29,600 --> 00:16:32,680
Speaker 1: little bit further further to the spring. So there are

270
00:16:32,720 --> 00:16:35,320
Speaker 1: there are some offsets that I think overall, just given

271
00:16:35,720 --> 00:16:38,040
Speaker 1: the pressure we're seeing on supply chains and what that's

272
00:16:38,120 --> 00:16:41,440
Speaker 1: doing two goods inflation, I think O Macron probably does

273
00:16:41,600 --> 00:16:43,760
Speaker 1: does pose a little bit of upside risk to that

274
00:16:43,800 --> 00:16:47,360
Speaker 1: inflation call. And is the upside risk to inflation larger

275
00:16:47,400 --> 00:16:52,960
Speaker 1: than the downside potential impact to growth. So I'd say

276
00:16:53,360 --> 00:16:56,360
Speaker 1: it's it's probably fairly balanced. So I think we've seen

277
00:16:56,560 --> 00:16:59,360
Speaker 1: some give back in terms of activity if you look

278
00:16:59,400 --> 00:17:02,560
Speaker 1: at some of the things like UM restaurant reservation, so

279
00:17:02,640 --> 00:17:05,399
Speaker 1: I think you've seen some some moderate pullback that I

280
00:17:05,440 --> 00:17:09,560
Speaker 1: think overall the the effects of each new wave has

281
00:17:09,680 --> 00:17:13,320
Speaker 1: has had diminishing impacts on both growth and UM to

282
00:17:13,400 --> 00:17:17,479
Speaker 1: some extent, and inflation as well as people are tired

283
00:17:17,600 --> 00:17:19,600
Speaker 1: of of the pandemic, and so I think we have

284
00:17:19,640 --> 00:17:22,159
Speaker 1: seen a great deal of COVID fatigue. People aren't changing

285
00:17:22,160 --> 00:17:25,480
Speaker 1: travel plans UM around the holidays, even in the face

286
00:17:25,560 --> 00:17:29,199
Speaker 1: of this very contagious variant, and so I think with

287
00:17:29,359 --> 00:17:32,560
Speaker 1: that we we are seeing the overall effects on the economy,

288
00:17:32,560 --> 00:17:36,400
Speaker 1: whether it's growth UM and even to some extent defending

289
00:17:36,440 --> 00:17:40,520
Speaker 1: patterns UM is diminishing. When do you see that playing

290
00:17:40,520 --> 00:17:44,040
Speaker 1: out in the data, Sarah, So, I think we will

291
00:17:44,080 --> 00:17:46,439
Speaker 1: probably see some of it in in the December data.

292
00:17:46,600 --> 00:17:48,760
Speaker 1: So I think again see some of that. And when

293
00:17:48,800 --> 00:17:50,679
Speaker 1: you we look at the inflation numbers, I think some

294
00:17:50,760 --> 00:17:54,399
Speaker 1: weakness in areas like UM, like travel services picking picking

295
00:17:54,480 --> 00:17:57,920
Speaker 1: up again UM. I think you'll also see in terms

296
00:17:58,280 --> 00:18:01,640
Speaker 1: of of perhaps in the higher numbers some renewed weakness

297
00:18:01,680 --> 00:18:05,280
Speaker 1: and things like leisure and hospitality, as as perhaps employers

298
00:18:05,320 --> 00:18:07,639
Speaker 1: are or maybe bracing for a little bit of a

299
00:18:07,680 --> 00:18:10,080
Speaker 1: gift back there. But I think it's probably really going

300
00:18:10,119 --> 00:18:12,919
Speaker 1: to be more more present in some of the January

301
00:18:12,960 --> 00:18:15,880
Speaker 1: and perhaps even even February data, So we won't get

302
00:18:15,960 --> 00:18:19,640
Speaker 1: a full sense of the dent from Omicron until probably

303
00:18:20,240 --> 00:18:23,280
Speaker 1: early in the first quarter, but it will likely be

304
00:18:23,560 --> 00:18:27,840
Speaker 1: a dent rather than a major crash, right because I

305
00:18:27,920 --> 00:18:31,640
Speaker 1: look at crude oil for example, still hovering around one

306
00:18:31,640 --> 00:18:35,159
Speaker 1: month hie, it doesn't look like mr Market expects a

307
00:18:35,200 --> 00:18:39,400
Speaker 1: real um ding in demand. Right. And again, I think

308
00:18:39,400 --> 00:18:42,240
Speaker 1: we've seen that this this idea of fatigue and people

309
00:18:42,520 --> 00:18:45,080
Speaker 1: have they feel like the tools to to carry on

310
00:18:45,160 --> 00:18:47,960
Speaker 1: more with their lives than we did this time last year.

311
00:18:48,040 --> 00:18:50,240
Speaker 1: I think suggests that we're not seeing that same degree

312
00:18:50,280 --> 00:18:53,399
Speaker 1: of impact on on activity and to some extent that

313
00:18:53,480 --> 00:18:56,560
Speaker 1: this wave is has the potential to be relatively short lived,

314
00:18:56,560 --> 00:18:59,080
Speaker 1: given how contagiously seems to be a potential for it

315
00:18:59,119 --> 00:19:02,080
Speaker 1: to burn through pretty pretty quickly. And so I think

316
00:19:02,119 --> 00:19:05,200
Speaker 1: our our overall outlook for two is still very much

317
00:19:05,320 --> 00:19:07,919
Speaker 1: on on track in terms of another year of above

318
00:19:08,280 --> 00:19:10,919
Speaker 1: trend growth, even if we get off to a weaker

319
00:19:11,000 --> 00:19:13,720
Speaker 1: start than than maybe envisioned only a month or so ago.

320
00:19:14,040 --> 00:19:16,200
Speaker 1: But while we're talking about the kind of demand side

321
00:19:16,200 --> 00:19:19,360
Speaker 1: and the consumer, obviously you don't necessarily see any risk

322
00:19:19,400 --> 00:19:22,000
Speaker 1: to demand from Amicron. But on the inflation side of

323
00:19:22,040 --> 00:19:24,639
Speaker 1: things as well. When we saw those personal income and

324
00:19:24,680 --> 00:19:27,359
Speaker 1: spending numbers, this data come out last week, real spending

325
00:19:27,400 --> 00:19:29,960
Speaker 1: when you adjust for inflation, was flat. Are we going

326
00:19:30,000 --> 00:19:32,600
Speaker 1: to see a consumer moving forward that is less tolerant

327
00:19:32,920 --> 00:19:36,400
Speaker 1: of higher prices and consumption going to start winding down

328
00:19:36,400 --> 00:19:39,480
Speaker 1: as a result. So I think we are going to

329
00:19:39,480 --> 00:19:42,760
Speaker 1: see greater pushback in terms of the inflation picture in

330
00:19:42,880 --> 00:19:48,840
Speaker 1: the year ahead. So we've seen that over over consumers.

331
00:19:49,040 --> 00:19:51,720
Speaker 1: You know, many businesses just largely price taker seement with

332
00:19:51,800 --> 00:19:54,879
Speaker 1: that and see seemingly insatiable in the end. But I

333
00:19:54,920 --> 00:19:58,000
Speaker 1: think that we are seeing demand. We're expecting demand growth

334
00:19:58,040 --> 00:20:01,160
Speaker 1: to to moderate over the coming year, so still very strong.

335
00:20:01,560 --> 00:20:04,920
Speaker 1: That you don't have as much fiscal support um at

336
00:20:05,600 --> 00:20:07,720
Speaker 1: the backs of consumers, and so I think that does

337
00:20:07,840 --> 00:20:11,280
Speaker 1: lead to more to more moderate growth. And again we've

338
00:20:11,280 --> 00:20:13,600
Speaker 1: just seen these eye popping and inflation rates. I think

339
00:20:13,600 --> 00:20:17,800
Speaker 1: people are um considering thinking twice about about certain purchases.

340
00:20:17,840 --> 00:20:20,200
Speaker 1: And I think the businesses maybe won't quite have the

341
00:20:20,560 --> 00:20:23,960
Speaker 1: same the same degree of pricing power, but I think

342
00:20:24,000 --> 00:20:27,240
Speaker 1: they still have quite a bit. So uh underappreciated in

343
00:20:27,359 --> 00:20:30,520
Speaker 1: all this the spending picture and the inflation picture is

344
00:20:30,560 --> 00:20:33,680
Speaker 1: just how strong demand growth has been. So we're going

345
00:20:33,720 --> 00:20:37,159
Speaker 1: to see that moderate but um but still very strong.

346
00:20:38,359 --> 00:20:40,960
Speaker 1: I almost forgot that I was super excited about the

347
00:20:41,040 --> 00:20:46,480
Speaker 1: Richmond Fed Manufacturing survey, because I I really am. I'm

348
00:20:46,560 --> 00:20:50,280
Speaker 1: looking so excited you forgot. I'm looking at sarah UM,

349
00:20:50,400 --> 00:20:52,840
Speaker 1: the supply chain. I'm trying to figure out when this

350
00:20:53,000 --> 00:20:55,720
Speaker 1: is going to get rolling again, when UM companies are

351
00:20:55,760 --> 00:21:00,560
Speaker 1: gonna start putting inventory back into stores back on dealer

352
00:21:00,680 --> 00:21:03,840
Speaker 1: lot um. And the Richmond Fed survey was good at

353
00:21:03,840 --> 00:21:07,840
Speaker 1: came at the headline number sixteen compared to twelve last month. Economists,

354
00:21:07,840 --> 00:21:10,400
Speaker 1: we survey, we're only looking for thirteen shipments went from

355
00:21:10,480 --> 00:21:15,360
Speaker 1: zero to twelve in a month. UM finished goods inventories

356
00:21:15,440 --> 00:21:18,600
Speaker 1: went back up still to negative seven, but from negative

357
00:21:18,600 --> 00:21:21,920
Speaker 1: twenty three. Does it look to you like these wheels

358
00:21:21,920 --> 00:21:25,600
Speaker 1: are starting to turn again. It's a start, but we

359
00:21:25,680 --> 00:21:27,520
Speaker 1: have a long way to go when we look at

360
00:21:27,520 --> 00:21:30,680
Speaker 1: the inventory picture. So we have seen some positive signs

361
00:21:31,040 --> 00:21:35,000
Speaker 1: UM coming from the Manufacturing Service uh in manufacturing surveys

362
00:21:35,000 --> 00:21:38,320
Speaker 1: of the I s M in addition to the Richmond index.

363
00:21:38,600 --> 00:21:41,080
Speaker 1: But if you look at the retail numbers, so go

364
00:21:41,200 --> 00:21:44,520
Speaker 1: further down the pipeline, the retail inventory to sales numbers

365
00:21:44,560 --> 00:21:47,480
Speaker 1: have have still just really made no headway from the

366
00:21:47,560 --> 00:21:50,080
Speaker 1: outright collapse that we've seen over the past year. And

367
00:21:50,119 --> 00:21:52,200
Speaker 1: so this is this is the start, but I think

368
00:21:52,200 --> 00:21:54,360
Speaker 1: we're still going to be dealing with these supply issues

369
00:21:54,400 --> 00:21:57,200
Speaker 1: for the better part of the upcoming years. There's there's

370
00:21:57,240 --> 00:22:00,200
Speaker 1: a long way way to go in terms of rebuilding

371
00:22:00,240 --> 00:22:03,240
Speaker 1: those inventories. And again, you still have pretty strong demand

372
00:22:03,400 --> 00:22:05,639
Speaker 1: into your head, if not quite as rippling as what

373
00:22:05,720 --> 00:22:08,800
Speaker 1: we saw well, and of course we know that the

374
00:22:08,800 --> 00:22:11,840
Speaker 1: FED can't necessarily do anything about those supply side issues, Sarah,

375
00:22:11,880 --> 00:22:13,680
Speaker 1: but the FED is going to try to do something

376
00:22:13,680 --> 00:22:16,359
Speaker 1: eventually to rein in inflation. Why do you think the

377
00:22:16,400 --> 00:22:20,280
Speaker 1: move isn't going to come until the second half. So

378
00:22:20,400 --> 00:22:23,000
Speaker 1: in our last published forecast that was before we got

379
00:22:23,040 --> 00:22:25,920
Speaker 1: the before we had the December FED meeting, I think

380
00:22:25,920 --> 00:22:28,040
Speaker 1: what we learned from the December FED meeting is that

381
00:22:28,080 --> 00:22:31,000
Speaker 1: their reaction functions maybe a little bit more aggressive than

382
00:22:31,040 --> 00:22:33,560
Speaker 1: what we had anticipated. So I'd say the risks to

383
00:22:33,640 --> 00:22:38,040
Speaker 1: our call are perhaps pulled forward um from UM where

384
00:22:38,080 --> 00:22:40,960
Speaker 1: it might we might see a move perhaps as early

385
00:22:41,040 --> 00:22:44,119
Speaker 1: as as the second quarter. But I think overall, um,

386
00:22:44,160 --> 00:22:46,560
Speaker 1: you know to your point that there is some limitations

387
00:22:46,600 --> 00:22:49,439
Speaker 1: and really where what the FED can do given the

388
00:22:50,280 --> 00:22:53,720
Speaker 1: where a lot of these these inflation pressures are coming from.

389
00:22:53,720 --> 00:22:56,960
Speaker 1: But they certainly can signal that they are attuned to

390
00:22:57,000 --> 00:23:00,000
Speaker 1: these inflation risks, that they are in a better position

391
00:23:00,240 --> 00:23:02,800
Speaker 1: to to tackle them if they should persist through the

392
00:23:02,840 --> 00:23:05,480
Speaker 1: second half of the year, which we think they certainly will,

393
00:23:05,800 --> 00:23:08,440
Speaker 1: and so that should get the FED moving more aggressively

394
00:23:08,880 --> 00:23:11,680
Speaker 1: in the second half of the year two. It helps

395
00:23:11,760 --> 00:23:14,320
Speaker 1: them that and signal that they are on top of

396
00:23:14,359 --> 00:23:18,199
Speaker 1: this inflation quandary that's facing the economy. Sarah, this was

397
00:23:18,240 --> 00:23:20,359
Speaker 1: too serious. The found a question from me, when is

398
00:23:20,359 --> 00:23:24,800
Speaker 1: the Christmas tree come down? When? Yes day? You go

399
00:23:24,880 --> 00:23:27,320
Speaker 1: on New Ys Day? Key? When do you? Yeah, maybe

400
00:23:27,520 --> 00:23:29,720
Speaker 1: maybe a day or two after, given that it's it's

401
00:23:29,720 --> 00:23:32,800
Speaker 1: on a that will have actually say, how can you

402
00:23:32,840 --> 00:23:35,359
Speaker 1: do anything on New Year's Day except for sitting in

403
00:23:35,440 --> 00:23:38,040
Speaker 1: bed with an ice pack on your head watching a movie?

404
00:23:38,600 --> 00:23:41,360
Speaker 1: You have to some day? I wish you children don't

405
00:23:41,400 --> 00:23:44,200
Speaker 1: allow after New Year's After New Year's probably the day

406
00:23:44,240 --> 00:23:51,200
Speaker 1: after New Year's Day coverage. Um no, not really didn't,

407
00:23:51,560 --> 00:23:55,159
Speaker 1: but We're constantly moving from country to country, so we

408
00:23:55,200 --> 00:23:57,200
Speaker 1: don't have any place to really put a tree right now.

409
00:23:57,240 --> 00:23:59,920
Speaker 1: Try Sarah House, thank you, last fungo securities. You want

410
00:23:59,920 --> 00:24:02,000
Speaker 1: to us on the economy and on Christmas trees. I

411
00:24:02,000 --> 00:24:04,879
Speaker 1: believe the actual date, Kley is January six, when the

412
00:24:04,920 --> 00:24:13,960
Speaker 1: Three Kings arrived. Very place to say that joining us

413
00:24:13,960 --> 00:24:17,280
Speaker 1: now is Dr Batti Hansarti, Associate Professor of Emergency Medicine

414
00:24:17,520 --> 00:24:19,719
Speaker 1: at Johns Hopkins. Dodger, I want to talk about your

415
00:24:19,760 --> 00:24:21,800
Speaker 1: experience in just a moment, because you've been need deep

416
00:24:22,040 --> 00:24:24,480
Speaker 1: in this pandemic, particularly over the last couple of weeks.

417
00:24:24,800 --> 00:24:26,920
Speaker 1: The decision that was made this week by the CDC

418
00:24:27,200 --> 00:24:29,520
Speaker 1: to cut the isolation time down from ten days to

419
00:24:29,640 --> 00:24:31,920
Speaker 1: five days, there was a group of people that said

420
00:24:31,960 --> 00:24:35,960
Speaker 1: this was not a scientific decision. This was a business decision,

421
00:24:36,400 --> 00:24:40,560
Speaker 1: a decision about business and happen this economy, get better work, Dodgor.

422
00:24:40,600 --> 00:24:43,520
Speaker 1: What was it for you? I felt like a kick

423
00:24:43,600 --> 00:24:45,879
Speaker 1: in the gut, to be honest, right. I mean the

424
00:24:46,080 --> 00:24:48,960
Speaker 1: problem was that the CDC media release I was released

425
00:24:49,000 --> 00:24:53,159
Speaker 1: to sabate win third was targeted towards healthcare workers and

426
00:24:53,240 --> 00:24:55,840
Speaker 1: they would be fine from a science perspective, right, because

427
00:24:55,840 --> 00:24:59,520
Speaker 1: we think the incubation period and the viarrel application cyclist lower.

428
00:25:00,359 --> 00:25:03,320
Speaker 1: But this idea that you know, because your healthcare working,

429
00:25:03,320 --> 00:25:06,840
Speaker 1: you're needed to support the response, We're going to decrease

430
00:25:07,040 --> 00:25:11,639
Speaker 1: your isolation time UM was released challenging The fact is

431
00:25:11,680 --> 00:25:14,000
Speaker 1: I may be a healthcare worker, but I'm also a mom,

432
00:25:14,200 --> 00:25:16,800
Speaker 1: a daughter. I have other people who are likely in

433
00:25:16,840 --> 00:25:18,600
Speaker 1: my household are going to be sick with COVID that

434
00:25:18,640 --> 00:25:21,240
Speaker 1: I need to look after. Also when I don't feel

435
00:25:21,320 --> 00:25:24,400
Speaker 1: good and I've been through COVID which is extremely terrifying.

436
00:25:25,000 --> 00:25:28,119
Speaker 1: UM and varies and how it responds to individuals, I

437
00:25:28,280 --> 00:25:30,359
Speaker 1: may not be ready to come to work. And I

438
00:25:30,480 --> 00:25:34,320
Speaker 1: think healthcare workers are also humans, so you know, as

439
00:25:34,359 --> 00:25:36,400
Speaker 1: you can talk and the meets me Internet, that healthcare

440
00:25:36,440 --> 00:25:39,760
Speaker 1: workforce did not respond well to that press release UM.

441
00:25:40,280 --> 00:25:42,880
Speaker 1: Based on a scientific perspective, I think we're still trying

442
00:25:42,880 --> 00:25:46,399
Speaker 1: to work out viral replication UM. We need more data UM,

443
00:25:46,600 --> 00:25:49,040
Speaker 1: but it seems that individuals are more likely to be

444
00:25:49,119 --> 00:25:52,800
Speaker 1: asymptomatic and the incubation period is smaller. Don't do you

445
00:25:53,119 --> 00:25:54,960
Speaker 1: do you think the data backs it ups or not?

446
00:25:56,280 --> 00:25:58,879
Speaker 1: I think the data does back it up. Okay, so

447
00:25:58,960 --> 00:26:00,720
Speaker 1: that's a good step forward. How close a way to

448
00:26:00,800 --> 00:26:04,119
Speaker 1: treating this as if it's any normal seasonal virus. Do

449
00:26:04,160 --> 00:26:06,960
Speaker 1: you think we are taking a step towards that. That

450
00:26:07,160 --> 00:26:09,920
Speaker 1: is a million dollar question. I don't think we're that yet.

451
00:26:10,359 --> 00:26:14,479
Speaker 1: When you talk about this thing, Oh, this virus is endemic, right,

452
00:26:14,760 --> 00:26:17,960
Speaker 1: that means it's predictable, the impact on the health system

453
00:26:18,160 --> 00:26:22,000
Speaker 1: is manageable, and that the replication for every person infected,

454
00:26:22,400 --> 00:26:25,959
Speaker 1: one other person is transmitted to We're not there yet, right.

455
00:26:26,000 --> 00:26:29,520
Speaker 1: The virus is evolving. People are still being hospitalized, people

456
00:26:29,520 --> 00:26:33,119
Speaker 1: are still dying from covid um. I also worried that

457
00:26:33,240 --> 00:26:35,280
Speaker 1: when we think of us as a c small virus

458
00:26:35,640 --> 00:26:38,640
Speaker 1: or rub it off as mild, then we'll become complacent.

459
00:26:39,000 --> 00:26:42,480
Speaker 1: And I don't think we have ruled that. You know,

460
00:26:42,800 --> 00:26:49,240
Speaker 1: I can understand perfectly, doctor, you're your emotional response to

461
00:26:49,680 --> 00:26:53,520
Speaker 1: the reduction in um the suggested days. It depends on

462
00:26:53,800 --> 00:26:56,919
Speaker 1: whether you're looking at this as an economist who wants,

463
00:26:57,400 --> 00:27:00,040
Speaker 1: you know, the wheels to start turning in business to

464
00:27:00,119 --> 00:27:02,280
Speaker 1: get back to normal, then you're like, oh, great, five

465
00:27:02,359 --> 00:27:04,240
Speaker 1: days is better. But if you're looking at it as

466
00:27:04,320 --> 00:27:09,280
Speaker 1: a human who is experiencing disease UM, and it's taking

467
00:27:09,320 --> 00:27:12,760
Speaker 1: an emotional toll. You don't necessarily want to go directly

468
00:27:12,840 --> 00:27:15,960
Speaker 1: back to work in five days, regardless of what your

469
00:27:16,040 --> 00:27:19,200
Speaker 1: job is, right, UM. So I just want to say

470
00:27:19,240 --> 00:27:25,800
Speaker 1: I feel you on that. UM. In terms of the hospitalizations,

471
00:27:25,880 --> 00:27:27,680
Speaker 1: I know a lot of people are showing up in

472
00:27:27,760 --> 00:27:30,640
Speaker 1: emergency rooms and hospitals who don't need to be there,

473
00:27:31,080 --> 00:27:34,240
Speaker 1: and that we can say should be discouraged on here

474
00:27:34,280 --> 00:27:38,239
Speaker 1: on internationally broadcast television. But it doesn't seem like, oh,

475
00:27:38,320 --> 00:27:43,320
Speaker 1: Macron is sending people who are severe enough back to

476
00:27:43,440 --> 00:27:46,200
Speaker 1: the hospital as much as Delta or Alpha have. Is

477
00:27:46,240 --> 00:27:51,119
Speaker 1: that the case? So there's two questions here, right is

478
00:27:51,240 --> 00:27:56,119
Speaker 1: a Macron independently less virulent than its predecessors Alpha and Delta?

479
00:27:56,720 --> 00:28:00,119
Speaker 1: And the challenge in really answering that question clearly is

480
00:28:00,200 --> 00:28:03,240
Speaker 1: that the population right now is different to the population

481
00:28:03,400 --> 00:28:06,040
Speaker 1: that was INFLAYD with a Delta. People that are getting

482
00:28:06,040 --> 00:28:09,040
Speaker 1: sick or a younger less liked to have cobidities, and

483
00:28:09,119 --> 00:28:11,879
Speaker 1: there's a higher propulsion of individuals who are vaccinated who

484
00:28:11,920 --> 00:28:16,600
Speaker 1: are getting a secondary affection. However, yes, when you look

485
00:28:16,640 --> 00:28:20,119
Speaker 1: at the actual number of hospitalizations right now, UM, for

486
00:28:20,200 --> 00:28:22,359
Speaker 1: a hundred thousand. That is way lower than when we

487
00:28:22,400 --> 00:28:27,160
Speaker 1: saw a delta, and the number of deaths assimilarly as low. Well,

488
00:28:27,440 --> 00:28:30,280
Speaker 1: but obviously if more people are getting infected, then that

489
00:28:30,400 --> 00:28:33,680
Speaker 1: will bring the numbers higher just by pure math. Doctor,

490
00:28:33,800 --> 00:28:36,919
Speaker 1: how how quickly do you think that this could spread

491
00:28:37,080 --> 00:28:43,280
Speaker 1: through enough of the population that hospitals can become entirely overrun. Well,

492
00:28:43,440 --> 00:28:46,920
Speaker 1: right now I'm sitting here in the best Maryland. I

493
00:28:47,040 --> 00:28:49,720
Speaker 1: work in Johns Hopkins Hospital in Baltimore, and we are

494
00:28:49,960 --> 00:28:53,880
Speaker 1: entirely overrun. UM. Several hospitals in the d n B

495
00:28:54,000 --> 00:28:59,560
Speaker 1: area have just declared a disaster um declaration, which means

496
00:28:59,640 --> 00:29:03,640
Speaker 1: that we man we had to suspend regular operations. UM

497
00:29:03,840 --> 00:29:07,400
Speaker 1: I was telling you know, folks, yesterday I worked a

498
00:29:07,480 --> 00:29:10,160
Speaker 1: clinical shift. UM. I was not meant to be working.

499
00:29:10,280 --> 00:29:12,520
Speaker 1: Was meant tomorrow one day off with my kiddos, and

500
00:29:12,800 --> 00:29:16,040
Speaker 1: I was called in because we were so overwhelmed with

501
00:29:16,080 --> 00:29:18,400
Speaker 1: a number of patients in our waiting room that we

502
00:29:18,480 --> 00:29:21,120
Speaker 1: need extra staff to come in and try and sort

503
00:29:21,200 --> 00:29:23,440
Speaker 1: out those who are sick opposed to those who can

504
00:29:23,480 --> 00:29:26,000
Speaker 1: go home and wait with their test results. Dontor can

505
00:29:26,040 --> 00:29:27,880
Speaker 1: I just say thank you for everything you do? You've

506
00:29:27,920 --> 00:29:29,720
Speaker 1: just been absolutely brilliant this year, and thank you for

507
00:29:29,800 --> 00:29:32,240
Speaker 1: working with us so closely over the last twelve months.

508
00:29:32,280 --> 00:29:33,840
Speaker 1: Looking forward to doing more of the same through next

509
00:29:33,920 --> 00:29:36,080
Speaker 1: year and hopefully we get some better news. Dr Barti

510
00:29:36,120 --> 00:29:43,600
Speaker 1: Han Santi There of Johns Hopkins, Dan Ives of web

511
00:29:43,640 --> 00:29:47,560
Speaker 1: Bush has a four hundred price target right now ten

512
00:29:48,160 --> 00:29:51,160
Speaker 1: ninety eight. Dan, great to catch up with you, buddy.

513
00:29:51,320 --> 00:29:53,800
Speaker 1: You say Tesla is in a clear position of strength

514
00:29:54,320 --> 00:29:57,000
Speaker 1: China for you at the epicenter of that. Let's start there, Dan,

515
00:29:57,120 --> 00:30:00,760
Speaker 1: Why well, I mean it's about the man. If you

516
00:30:00,800 --> 00:30:03,880
Speaker 1: look at demand in China you started off earlier this year,

517
00:30:03,920 --> 00:30:06,800
Speaker 1: it was rocky. Now going two thousand twenty two, it

518
00:30:06,800 --> 00:30:10,120
Speaker 1: would be about fifty thousand per month run rate. I

519
00:30:10,200 --> 00:30:13,760
Speaker 1: think that could be deliveries for Tesla going into next year,

520
00:30:13,800 --> 00:30:16,560
Speaker 1: and that's a winch pin to the both thesis. Plus

521
00:30:16,680 --> 00:30:20,000
Speaker 1: the supply piece is really key because they're also the

522
00:30:20,080 --> 00:30:24,280
Speaker 1: profitability for cars they sell in China incrementally higher than

523
00:30:24,360 --> 00:30:26,200
Speaker 1: those that they sell in the US and Europe. And

524
00:30:26,320 --> 00:30:29,440
Speaker 1: that is why in our opinion, this is doctor continues

525
00:30:29,520 --> 00:30:31,880
Speaker 1: to move higher in the China story account. The US

526
00:30:31,920 --> 00:30:33,600
Speaker 1: plans disrupt the game. I mean, that's the part of

527
00:30:33,680 --> 00:30:36,280
Speaker 1: this story. I'm excited about. Down the likes that GM ford.

528
00:30:36,360 --> 00:30:38,280
Speaker 1: Let's see what they can do in the next couple

529
00:30:38,320 --> 00:30:41,000
Speaker 1: of years. GM is under a comface. Now walk us

530
00:30:41,040 --> 00:30:44,360
Speaker 1: through that down how GM becomes that disrupted after being

531
00:30:44,400 --> 00:30:47,960
Speaker 1: disrupted over the last several years. Yeah, and it's a

532
00:30:48,000 --> 00:30:50,360
Speaker 1: great point. Look, we don't be this is Zeroor some game.

533
00:30:50,480 --> 00:30:53,360
Speaker 1: It's not Tesla or And there's one winner that was

534
00:30:53,440 --> 00:30:55,800
Speaker 1: really the last few years. Now you look at the

535
00:30:55,920 --> 00:30:59,280
Speaker 1: star Wars and Detroit for GM, I think there's a

536
00:30:59,360 --> 00:31:02,520
Speaker 1: massive rent of sounds of growth and I think these stocks, specifically,

537
00:31:02,640 --> 00:31:05,520
Speaker 1: GM is going to get re rated on the the

538
00:31:05,680 --> 00:31:09,760
Speaker 1: initiatives and if you get conversion of ten in the

539
00:31:09,840 --> 00:31:12,320
Speaker 1: base over the next three to four years, this is

540
00:31:12,360 --> 00:31:15,800
Speaker 1: a stock. And then you look at forward what Farley

541
00:31:15,880 --> 00:31:18,920
Speaker 1: has done. I think that's another story that continues to

542
00:31:18,960 --> 00:31:21,400
Speaker 1: get readed because as me and you've talked about many times,

543
00:31:21,440 --> 00:31:23,880
Speaker 1: I never viewed Tessa as an automotive company. Have you

544
00:31:23,960 --> 00:31:27,200
Speaker 1: as disruptive technology player. I think you're gonna start to

545
00:31:27,240 --> 00:31:29,720
Speaker 1: see those multiples and I think, b W you put

546
00:31:29,800 --> 00:31:33,520
Speaker 1: them in that same bucket. How much does the supply

547
00:31:33,720 --> 00:31:36,800
Speaker 1: chain snap who um that we've seen over last year

548
00:31:36,920 --> 00:31:40,520
Speaker 1: push things back, Dan because I'm pumped to see Farley's

549
00:31:40,880 --> 00:31:44,440
Speaker 1: ethel and fifty Lightning. I can't wait to see Mary

550
00:31:44,560 --> 00:31:47,840
Speaker 1: barras Hummer. But I feel like it's gonna take a

551
00:31:47,960 --> 00:31:50,520
Speaker 1: few years before these things are actually rolling on the

552
00:31:50,560 --> 00:31:52,360
Speaker 1: streets looking at how long it took them to get

553
00:31:52,400 --> 00:31:56,080
Speaker 1: the Bronco out there. Yeah, look, I think it's a

554
00:31:56,240 --> 00:31:58,920
Speaker 1: great point. I do think this is different in terms

555
00:31:58,960 --> 00:32:01,640
Speaker 1: of what we've seen on VS. We're starting to see

556
00:32:01,680 --> 00:32:05,760
Speaker 1: from an engineering perspective, battery perspect I mean, these companies

557
00:32:05,800 --> 00:32:08,000
Speaker 1: are really doving to deep end to the poor and evs.

558
00:32:08,520 --> 00:32:10,800
Speaker 1: So I think for GM, as opposed to the Snap

559
00:32:10,840 --> 00:32:12,680
Speaker 1: Foods over the last few years, I don't think we

560
00:32:12,840 --> 00:32:15,920
Speaker 1: see that over the coming years. And you know what

561
00:32:16,040 --> 00:32:18,880
Speaker 1: everything Mary and the team are doing, That's why I

562
00:32:18,920 --> 00:32:21,680
Speaker 1: think GM will be that rerating on the thirty models

563
00:32:21,760 --> 00:32:24,280
Speaker 1: coming out over the six seven years and you could

564
00:32:24,320 --> 00:32:27,720
Speaker 1: forward I mean f one fifty In terms on the

565
00:32:28,080 --> 00:32:30,600
Speaker 1: the electric side, I mean that's really going to revolutionize

566
00:32:30,640 --> 00:32:33,200
Speaker 1: the category along with Ribby in and we kind of

567
00:32:33,280 --> 00:32:36,120
Speaker 1: view that pickup truck market overall as a trillion dollar

568
00:32:36,280 --> 00:32:39,960
Speaker 1: market over the next decade for ev S. I'm so

569
00:32:40,120 --> 00:32:44,240
Speaker 1: excited for it. Dan is the market though, big enough

570
00:32:44,480 --> 00:32:46,480
Speaker 1: for all the players. I know it's not a zero

571
00:32:46,640 --> 00:32:50,800
Speaker 1: sum game, but there's so many names out there, Tesla

572
00:32:50,920 --> 00:32:54,520
Speaker 1: and Rivan just um. Rivan is one of the newcomers.

573
00:32:54,600 --> 00:32:58,520
Speaker 1: Lucid is another one. You've got the kind of stranger Lords,

574
00:32:58,560 --> 00:33:01,080
Speaker 1: Town Motors. I don't think they've actually made anything. Nicola

575
00:33:01,200 --> 00:33:05,040
Speaker 1: apparently they're gonna production. You've got Bowlinger playing in the

576
00:33:05,120 --> 00:33:09,640
Speaker 1: pickup truck space, plus all the old school gm Ford Folkswagen.

577
00:33:09,920 --> 00:33:12,480
Speaker 1: Is this market going to be big enough for all

578
00:33:12,560 --> 00:33:17,080
Speaker 1: of them? And by for example, Well, like in any market,

579
00:33:17,160 --> 00:33:19,240
Speaker 1: you're gonna have winners and you don't have losers that

580
00:33:19,360 --> 00:33:21,640
Speaker 1: go by the wayside. That's why I think it's an investor.

581
00:33:22,040 --> 00:33:24,680
Speaker 1: You gotta have a basket way to play it. Test

582
00:33:24,720 --> 00:33:26,320
Speaker 1: To continues to be our favorite. But you look at

583
00:33:26,400 --> 00:33:28,760
Speaker 1: names like Ribbean in terms of what they're doing on

584
00:33:28,880 --> 00:33:32,280
Speaker 1: pick up and ultimately as sort of a vertical integration.

585
00:33:32,840 --> 00:33:34,640
Speaker 1: And then you want to play Europe, you want to

586
00:33:34,640 --> 00:33:36,640
Speaker 1: play China, you want to play Neo x Ping and

587
00:33:36,760 --> 00:33:39,400
Speaker 1: some of those. But you know, I think it's a

588
00:33:39,440 --> 00:33:41,560
Speaker 1: FOURK in the root situation as we in two thousand

589
00:33:41,640 --> 00:33:44,800
Speaker 1: twenty two, because like you said, it's about execution. Any

590
00:33:44,880 --> 00:33:48,240
Speaker 1: of these startups miss execute or have any sort of headwinds.

591
00:33:48,640 --> 00:33:51,240
Speaker 1: I mean, stocks could get the natural split down fifties

592
00:33:51,280 --> 00:33:53,920
Speaker 1: sixty many throwing the white towel. So then you have

593
00:33:54,000 --> 00:33:56,560
Speaker 1: to almost separate in terms of who's going to be

594
00:33:56,640 --> 00:33:58,880
Speaker 1: the winners. And also there's gonna be a lot of

595
00:33:58,920 --> 00:34:02,600
Speaker 1: supply chain players names like life Cycle, charge Point and

596
00:34:02,680 --> 00:34:05,600
Speaker 1: some others. In terms of the infrastructure side, when we

597
00:34:05,680 --> 00:34:08,400
Speaker 1: talk about EVS, Dan Matt was bringing this up earlier,

598
00:34:08,760 --> 00:34:12,000
Speaker 1: how is there a limit to demand growth given that

599
00:34:12,120 --> 00:34:16,600
Speaker 1: the infrastructure isn't necessarily as robust as can support you know,

600
00:34:16,719 --> 00:34:20,680
Speaker 1: every single American having an electric vehicle. I mean today

601
00:34:20,719 --> 00:34:23,920
Speaker 1: it's only three. So if you look globally, three automotive

602
00:34:23,960 --> 00:34:27,080
Speaker 1: is EVS. We think that goes toeptember cent by two

603
00:34:27,120 --> 00:34:32,080
Speaker 1: thousand twenty five. Now, the infrastructure today could support getting

604
00:34:32,200 --> 00:34:37,040
Speaker 1: up to about of autos being evs. Ultimately you're gonna

605
00:34:37,040 --> 00:34:39,440
Speaker 1: have to get charging stations up to about five thousand

606
00:34:39,520 --> 00:34:41,440
Speaker 1: by the end of the decade. But I mean, if

607
00:34:41,440 --> 00:34:43,480
Speaker 1: you look at the growth potential, that's why we view

608
00:34:43,520 --> 00:34:46,440
Speaker 1: it it's a five trillion dollar green tidal wave. In

609
00:34:46,600 --> 00:34:49,440
Speaker 1: terms of the amount of spent over the next decade,

610
00:34:49,719 --> 00:34:52,640
Speaker 1: I think you start to hit some issues in terms

611
00:34:52,680 --> 00:34:56,200
Speaker 1: of from an infrastructure perspective, if we don't see any movement,

612
00:34:56,320 --> 00:34:59,520
Speaker 1: especially in the US in terms of charging stations the

613
00:34:59,680 --> 00:35:02,400
Speaker 1: green it needs upgrades and some things like that, but

614
00:35:02,560 --> 00:35:05,520
Speaker 1: that won't happen till two thousand, two thousand twenty six.

615
00:35:05,600 --> 00:35:08,560
Speaker 1: Between now and then, we see a very very clear

616
00:35:08,680 --> 00:35:12,200
Speaker 1: path the massive growth and of course Europe, you know

617
00:35:12,400 --> 00:35:14,560
Speaker 1: I I think we're really starting to seeing acceleration there,

618
00:35:14,600 --> 00:35:18,719
Speaker 1: which is why they give Berlin factor is so important. Yeah,

619
00:35:19,000 --> 00:35:23,279
Speaker 1: does any but does any other manufacturer do it? Uh

620
00:35:23,640 --> 00:35:26,680
Speaker 1: as big as Tesla. I mean, They're supercharger network is huge.

621
00:35:26,760 --> 00:35:28,920
Speaker 1: But I haven't seen any of the competitors go out

622
00:35:28,960 --> 00:35:30,360
Speaker 1: and do it on their own. They're all waiting for

623
00:35:30,440 --> 00:35:33,839
Speaker 1: the government to come and step in. Well, that's why

624
00:35:33,840 --> 00:35:37,160
Speaker 1: in the EV market it's Tesla's world and everyone's paying

625
00:35:37,200 --> 00:35:40,720
Speaker 1: rent as of now because of the super charger network

626
00:35:40,760 --> 00:35:43,560
Speaker 1: and because of that capacity. And when you look at Berlin,

627
00:35:43,760 --> 00:35:47,600
Speaker 1: Austin and China combined along with Freemaman, they'll have capacity

628
00:35:47,600 --> 00:35:50,279
Speaker 1: about two million units. So just like you're talking about

629
00:35:50,280 --> 00:35:52,360
Speaker 1: Matt with like some of these comings of ad stumbles,

630
00:35:52,400 --> 00:35:55,200
Speaker 1: can they actually get the cars out? That's why Tesla

631
00:35:55,280 --> 00:35:57,920
Speaker 1: continues to sort of own the market, but that's not

632
00:35:58,000 --> 00:36:00,080
Speaker 1: necessarily going to be the keys over the next call it.

633
00:36:00,280 --> 00:36:04,200
Speaker 1: You know, one to two year you have other players Ford, GM,

634
00:36:04,600 --> 00:36:07,279
Speaker 1: Riddy and Lewson and some others really start to you know,

635
00:36:07,320 --> 00:36:11,560
Speaker 1: I think the major beneficiaries v W. Obviously we're very

636
00:36:11,600 --> 00:36:14,320
Speaker 1: bullish on terms of what they're doing Europe. Dan, you

637
00:36:14,480 --> 00:36:16,680
Speaker 1: rowe somebody and I scared a catch up. It's been

638
00:36:16,760 --> 00:36:18,719
Speaker 1: so long. Great to be here. Dan, I stank, you

639
00:36:18,800 --> 00:36:22,800
Speaker 1: said of wet Bush. This is the Bloomberg Surveillance Podcast.

640
00:36:23,120 --> 00:36:26,440
Speaker 1: Thanks for listening. Join us live weekdays from seven to

641
00:36:26,560 --> 00:36:30,600
Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television

642
00:36:31,000 --> 00:36:34,960
Speaker 1: each day from six to nine am for insight from

643
00:36:35,000 --> 00:36:39,520
Speaker 1: the best in economics, finance, investment, and international relations. And

644
00:36:39,680 --> 00:36:44,800
Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg

645
00:36:44,840 --> 00:36:48,160
Speaker 1: dot com, and of course on the terminal. I'm Tom

646
00:36:48,280 --> 00:36:50,600
Speaker 1: Keene and this is Bloomberg