WEBVTT - Surveillance: JPM's Kelly Sees Rough Road Ahead 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Term Keene Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.440 Bloomberg dot Com, and of course on the Bloomberg Let's 0:00:27.480 --> 0:00:30.040 bring it. David Kelly Showery, JP Morgan, Asset Management, Chief 0:00:30.080 --> 0:00:33.400 Global Strategists. So, David, help us understand two things. Near 0:00:33.560 --> 0:00:37.640 term outlook darkening, long term out look, medium turn out 0:00:37.640 --> 0:00:40.360 look getting brighter. How do you navigate those two things 0:00:40.400 --> 0:00:43.199 at the moment. One of the advantages of being a 0:00:43.200 --> 0:00:45.479 bear is you can always hybridate. I think a lot 0:00:45.560 --> 0:00:47.040 a lot of people would like to hibernate through the 0:00:47.120 --> 0:00:49.800 next few months because it is going to be pretty rough. Um. 0:00:50.000 --> 0:00:52.040 You know, there's you can look at those case cans. 0:00:52.280 --> 0:00:54.240 You know how this is going to play out. It's 0:00:54.280 --> 0:00:56.000 going to be difficult for the economy, it's gonna be 0:00:56.040 --> 0:00:58.880 very difficult for people's lives, and I could we think 0:00:58.880 --> 0:01:00.560 that growth in the US has to show down to 0:01:00.600 --> 0:01:04.440 about three growth if that, over the next quarter or two. 0:01:05.120 --> 0:01:08.840 But beyond that, you know, the vaccine news is good news, um, 0:01:08.880 --> 0:01:11.200 And we do if we're passed. I think the election, 0:01:11.240 --> 0:01:14.360 uncertainty in reality or whatever, you know, maybe going on 0:01:14.400 --> 0:01:16.640 to Washington right now. Um, And I do think the 0:01:16.720 --> 0:01:18.480 vaccine is going to make a big difference, because the 0:01:18.520 --> 0:01:21.160 difference between a you know, a vaccine that six effective 0:01:21.200 --> 0:01:24.240 and nine percent effective is is it's a big difference 0:01:24.280 --> 0:01:26.040 because a meaning revenge you would be able to squash 0:01:26.120 --> 0:01:28.960 this thing. Um. So we do think the growth will 0:01:29.000 --> 0:01:30.520 pick up a lot in the second half of the 0:01:30.560 --> 0:01:33.559 next year as people get back to normal and people 0:01:33.560 --> 0:01:35.080 start doing all the things they haven't been able to 0:01:35.080 --> 0:01:36.679 do for a year and a half. So we do 0:01:36.760 --> 0:01:38.920 see a certain today, but we do have to go 0:01:38.959 --> 0:01:40.640 through a pretty rough time for the economy and for 0:01:40.720 --> 0:01:43.800 society between now and then. David, David help us with 0:01:43.920 --> 0:01:48.120 the application of when strategies shift and go bullish. We 0:01:48.200 --> 0:01:50.840 saw there some Golden Sex David, you may be familiar 0:01:50.880 --> 0:01:53.720 with them as a small bank downtown. And also JP 0:01:53.880 --> 0:01:57.600 Morgan again shifting to a or more bullish tact as well. 0:01:57.800 --> 0:02:00.640 How does your world change when it's team at JP 0:02:00.800 --> 0:02:06.400 Morgan gets quote unquote more bullish? Likely, sa Bramo wits, well, 0:02:06.600 --> 0:02:09.760 we obviously we're trying to do the research ourselves. We're 0:02:09.800 --> 0:02:12.040 trying not to be influenced by by other teams. But 0:02:12.360 --> 0:02:14.280 there's a there is a logic to this thing. I mean, 0:02:14.600 --> 0:02:17.919 if you know stocks, you know even long term bonds 0:02:17.960 --> 0:02:20.799 are very long term investments. So you've got to look 0:02:20.840 --> 0:02:23.359 past the next six months, and very often the best 0:02:23.360 --> 0:02:25.120 way to make money in the long run is to 0:02:25.919 --> 0:02:28.800 basically to fade whatever emotion is in the market at 0:02:28.800 --> 0:02:31.120 the time. So, yes, we've got this rising case content. 0:02:31.240 --> 0:02:34.480 It's it's dreadful from from many perspectives, but you've just 0:02:34.560 --> 0:02:36.600 got to look beyond that. I think the other thing 0:02:36.639 --> 0:02:39.920 that that's very important for for world markets in general 0:02:40.160 --> 0:02:42.320 is with the new administration, I think you're gonna have 0:02:42.360 --> 0:02:44.920 more certainty on trade. I think that's one of the 0:02:44.919 --> 0:02:48.320 reasons the dollar is going down um. But also a 0:02:48.360 --> 0:02:51.400 folding dollar is advantageous for a lot of reasons. I 0:02:51.400 --> 0:02:53.400 think it will help out emerging markets. I think it 0:02:53.440 --> 0:02:57.720 will help US investors with UM with you foreign investments, 0:02:57.840 --> 0:03:00.520 it will, it should help SMP pipeund that, and then 0:03:00.520 --> 0:03:03.440 a divided government means you don't necessarily get an increase 0:03:03.440 --> 0:03:06.400 in corporate taxes. To put all this together, there's plenty 0:03:06.400 --> 0:03:08.919 of reasons to be optimistic once you can get past 0:03:08.919 --> 0:03:12.680 this pandemic. David, you said fade the emotion in markets, 0:03:12.800 --> 0:03:15.120 A fascinating turn of phrase at a time when the 0:03:15.200 --> 0:03:17.400 motion that we have seen, at least so far this 0:03:17.440 --> 0:03:21.240 week until today has been borderline euphoric. So are you 0:03:21.320 --> 0:03:24.440 fading the hope that they are having next year or 0:03:24.440 --> 0:03:26.880 do you think that we still have some pessimists and 0:03:26.919 --> 0:03:30.239 baked into markets where they are now. I don't. I 0:03:30.240 --> 0:03:32.160 don't mean that. I mean they fade the emotion that 0:03:32.160 --> 0:03:34.560 that's bubbling up in society and will bubble up over 0:03:34.560 --> 0:03:37.160 the next week ahead. I you know, these case cants 0:03:37.160 --> 0:03:41.000 are rising very very rapidly. So you know, if if 0:03:41.080 --> 0:03:43.680 if it keeps on the same trajectory, within a week, 0:03:43.720 --> 0:03:46.160 people are going to be talking about nothing but the 0:03:46.600 --> 0:03:49.120 you know, the misery that COVID is inflicting upon us, 0:03:49.280 --> 0:03:52.720 and talking about shutdowns and lockdowns and businesses in trouble. 0:03:52.800 --> 0:03:55.760 So the I'm not necessarily talking about the emotion of 0:03:55.760 --> 0:03:58.200 the last week and sort of the weirdness after the election. 0:03:58.280 --> 0:04:00.560 I'm talking about what's just ahead of us here. I 0:04:00.600 --> 0:04:03.240 think people should not overplay that. I think they should 0:04:03.240 --> 0:04:05.040 recognize that there is light at the end of the tunnel, 0:04:05.160 --> 0:04:08.600 even though the tunnel itself right now is getting darker. Whatever. 0:04:08.680 --> 0:04:10.440 It keeps coming back to the same question we've asked 0:04:10.480 --> 0:04:12.680 repeatedly in the last couple of days about this how 0:04:12.760 --> 0:04:16.039 much bad news is this market willing to ignore? Just 0:04:16.120 --> 0:04:20.279 how much? Well? The problem? The problem is it's it's 0:04:20.520 --> 0:04:23.120 we've got this, this market which is being supported by 0:04:23.160 --> 0:04:25.920 these very easy central banks. Um, there is nowhere else 0:04:25.960 --> 0:04:27.960 to go. There's a lot of liquidity, and that's really 0:04:27.960 --> 0:04:30.160 what's supporting this market. I think the market can probably 0:04:30.200 --> 0:04:32.640 look through a fair amount of that. I mean, it's 0:04:33.040 --> 0:04:36.240 it's until there's something that's going to pull money away 0:04:36.279 --> 0:04:40.279 from upper income individuals and institutions that can that can 0:04:40.400 --> 0:04:42.120 put this money to work. There's money that needs to 0:04:42.120 --> 0:04:44.280 go to work. Where is it going to go to work? Um? 0:04:44.320 --> 0:04:47.520 I would say that, you know, longer term, as uncertainty fades, 0:04:47.560 --> 0:04:49.960 you want to really look at valuations more than momentum. 0:04:50.120 --> 0:04:52.680 So we've got a lot of momentum and megacap growth stocks. 0:04:52.960 --> 0:04:56.760 That's kind of been the continuing trade of But I 0:04:56.800 --> 0:04:59.080 think as uncertainty diminishes, as you get back to more 0:04:59.120 --> 0:05:01.760 normal economy and particularly if you get a correction at 0:05:01.800 --> 0:05:04.800 some stage, then people are going to focus more on valuations, 0:05:04.960 --> 0:05:07.680 and valuations look a lot better in US value stocks 0:05:07.720 --> 0:05:10.480 and in e M and developed country international stocks than 0:05:10.520 --> 0:05:12.359 they do in the S and P five handed overall, 0:05:12.560 --> 0:05:17.080 and particularly in megacap growth stocks, Mega Camp growth. Right 0:05:17.120 --> 0:05:19.400 now bit NaSTA film at David Grants to catch up 0:05:19.440 --> 0:05:21.960 with you, David Kelly, that of JP Mulgan Asset Management, 0:05:21.960 --> 0:05:29.640 thank you, And right now Albert co of Yale University 0:05:29.680 --> 0:05:33.480 to say he is a professor of epidemiology barely describes 0:05:33.640 --> 0:05:36.240 his focus on the heart of the matter right now, 0:05:36.800 --> 0:05:40.719 which is transmission dynamics. He is world class in this 0:05:40.800 --> 0:05:43.960 and we're thrilled he could join us this morning. Dr Co, 0:05:44.200 --> 0:05:48.039 Are you smarter about the transmission dynamics of this virus 0:05:48.120 --> 0:05:51.680 than you were in April? So so, Tom, thank you 0:05:51.800 --> 0:05:55.040 very much for the invitation. And uh and with respect 0:05:55.080 --> 0:05:57.919 with whether we're smarter, I'm not sure if that's the 0:05:57.960 --> 0:06:01.560 best way to describe it. Were we learned more much 0:06:01.600 --> 0:06:05.680 more about how this virus transmits, who it transmits, and 0:06:05.720 --> 0:06:09.040 where it transmits. I think what we're not necessarily smarter 0:06:09.240 --> 0:06:12.440 is is learning the lessons and translating that that knowledge 0:06:12.440 --> 0:06:16.719 of evidence to policy. Well, okay, in the policy, but 0:06:16.800 --> 0:06:19.680 we have a policy void. Can we wait until January 0:06:20.760 --> 0:06:24.719 or please call it from the urgency of policy right 0:06:24.760 --> 0:06:29.800 now in the final days of the Trump administration. Yeah. So, 0:06:29.800 --> 0:06:33.240 so Tom, we're at a critical moment right now. Uh, 0:06:33.279 --> 0:06:36.760 and we can't wait until the January for effective action. 0:06:37.279 --> 0:06:41.120 We're on the ex meddential curve of growth of cases, 0:06:41.640 --> 0:06:44.679 not only in new places where the viruses has spread 0:06:44.839 --> 0:06:48.160 in the United States, but also old places. For example 0:06:48.240 --> 0:06:51.640 here in the northeast of Connecticut, northeast of the country. 0:06:51.800 --> 0:06:54.839 We were hit hard in the early part of the epidemic, 0:06:54.880 --> 0:06:59.360 and now we're having a resurgence at this moment, I 0:06:59.440 --> 0:07:02.120 felt that to find exponential for us if you can 0:07:02.279 --> 0:07:05.200 with the numbers that you're sink currently, and whether what 0:07:05.240 --> 0:07:07.080 you're saying is once you reach that kind of right 0:07:07.120 --> 0:07:10.240 of change, the inevitably the only way to handle this 0:07:10.280 --> 0:07:12.160 is to lock back down. Again, is that what you're implying. 0:07:13.280 --> 0:07:16.400 So so I'll take the first part and what we 0:07:16.560 --> 0:07:19.320 were doing in by expensional curve. So, this is a 0:07:19.400 --> 0:07:23.240 virus that propagates by person or person in contact. So 0:07:23.280 --> 0:07:26.880 if you have one person in it it um transmits 0:07:26.920 --> 0:07:30.119 to two people, those two people transmit to four people, 0:07:30.200 --> 0:07:34.080 those four people up to sixteen people. And that's that 0:07:34.200 --> 0:07:37.800 what we call the exponential curve. When there's that uncontrolled 0:07:37.800 --> 0:07:43.640 transmission and people are are we're undergoing doubling rates um 0:07:43.720 --> 0:07:47.800 the whether what the response to that is is actually 0:07:47.840 --> 0:07:50.840 to do several things, and we know the evidence and 0:07:50.880 --> 0:07:53.160 we've learned this in the last ten months of this epidemic. 0:07:53.600 --> 0:07:56.640 What is face matchs, you know, what we call barrier 0:07:56.720 --> 0:08:01.200 reduction or barrier interventions to prevent people from from being 0:08:01.240 --> 0:08:03.760 exposed to the virus. The other is to decrease the 0:08:03.840 --> 0:08:09.600 social contact rate. Now that doesn't necessarily need lockdown, but 0:08:09.720 --> 0:08:12.000 when the cats out of the bag or when we 0:08:12.120 --> 0:08:16.360 have a wildfire, this extensional growth lockdown as we've seen 0:08:16.400 --> 0:08:19.320 back in the early stages of the epidemic is a 0:08:19.920 --> 0:08:23.960 is one, you know, one of the effective interventions dr CO. 0:08:24.320 --> 0:08:27.440 When we talk about what types of interventions are necessary, 0:08:27.680 --> 0:08:29.920 I feel like we have to revisit how contagious the 0:08:29.960 --> 0:08:32.880 disease is and the main methods of transmission. There are 0:08:32.920 --> 0:08:35.960 some questions about whether it's effective to close bars and 0:08:36.040 --> 0:08:39.360 restaurants at ten pm whether that actually does anything, whether 0:08:39.400 --> 0:08:43.439 the surface transmission mechanism is a substantial one or not. 0:08:43.920 --> 0:08:46.480 What do we know so far about the main modes 0:08:46.520 --> 0:08:48.559 of transmission other than people looking at each other for 0:08:48.640 --> 0:08:52.120 more than fifteen minutes and speaking and singing at each other. Right, 0:08:52.160 --> 0:08:55.760 so we know that person or person contact is essential 0:08:55.800 --> 0:08:59.000 and it drives this uh, drives transmission. I think you 0:08:59.000 --> 0:09:01.280 can break it down into three parts. One is the 0:09:01.320 --> 0:09:06.040 transmission through respiratory droplets. These are larger droplets that travel 0:09:06.320 --> 0:09:10.680 roughly six ft um uh and and really that type 0:09:10.720 --> 0:09:16.640 of transmissions fueled by close contact physical contact. The second 0:09:16.880 --> 0:09:19.719 is through what we call famites or person coughing or 0:09:19.720 --> 0:09:22.800 sneezing onto our surface. Uh. And then the third is 0:09:22.880 --> 0:09:28.439 the aerosols. Uh. These are smaller droplets that travel much further. 0:09:28.920 --> 0:09:31.520 But but what we know now we don't actually have 0:09:31.559 --> 0:09:34.640 the exact figures, but the large majority of transmission is 0:09:34.640 --> 0:09:39.360 actually fueled by the kind of close contact through through 0:09:39.400 --> 0:09:43.679 respiratory droplets within six ft. And that's good news in 0:09:43.679 --> 0:09:45.520 the sense that we know how to kind of we 0:09:45.600 --> 0:09:48.200 know how to address that. It's use of face masks 0:09:48.600 --> 0:09:53.199 and to maintaining physical physical distance distancing in that scenario. 0:09:54.760 --> 0:09:57.920 Dr Coe solid Or Brazil is a thousand miles or 0:09:58.000 --> 0:10:01.120 so north of Rio. You've had a huge commitment there 0:10:01.200 --> 0:10:05.160 to their medicine, their micro biology. I say this with 0:10:05.240 --> 0:10:08.560 great respect and nothing to demean the Brazilian government. Do 0:10:08.640 --> 0:10:12.480 you trust the statistics out of Brazil, out of South 0:10:12.520 --> 0:10:16.920 America and out of Mexico. Yeah, so, I think you know. 0:10:17.280 --> 0:10:22.240 The key issue with surveillance and the numbers and getting 0:10:22.520 --> 0:10:24.480 reliable numbers. And this is an issue here in the 0:10:24.559 --> 0:10:29.560 United States is round powder round public testing. Being able 0:10:29.600 --> 0:10:32.280 to test people who are symptomatic with the disease and 0:10:32.360 --> 0:10:36.240 to test the vulnerable populations and those UH in those settings. 0:10:36.480 --> 0:10:38.760 This is purely a challenge here in the United States, 0:10:38.920 --> 0:10:42.640 even in our own vulnerable communities, but this is a 0:10:42.720 --> 0:10:47.079 challenge throughout poorer countries and developing countries and even richer 0:10:47.080 --> 0:10:50.640 countries among that group, such as such as Brazil. UH. 0:10:50.720 --> 0:10:53.760 Certainly there are two key issues. One is you know, 0:10:53.880 --> 0:10:57.960 which is key, and is the government uh investment in 0:10:58.040 --> 0:11:00.920 the response. And we've seen the of the foiables and 0:11:00.960 --> 0:11:05.760 the problems that Brazil that had due to political concerns 0:11:06.080 --> 0:11:08.600 in the last uh you know, last ten eight to 0:11:08.679 --> 0:11:11.360 ten months. Uh. The other is is that you know, 0:11:11.400 --> 0:11:14.439 there are places in Brazil which we're doing extensive testing, 0:11:14.720 --> 0:11:17.400 places like some polo in uh In, many of the 0:11:17.440 --> 0:11:21.040 state's buildings, Auch City, or build Auch in the city 0:11:21.040 --> 0:11:23.199 that I work in Salvador. They're doing quite a bit 0:11:23.240 --> 0:11:26.679 of testing. So numbers are going to change based on 0:11:27.080 --> 0:11:30.200 where you are within a country. But the numbers, actually, 0:11:30.400 --> 0:11:32.400 I think what's more important than the absolute number is 0:11:32.440 --> 0:11:34.920 the trends and where they're going through. Many of these 0:11:35.000 --> 0:11:38.160 places are either going up or they're staying the same. 0:11:40.080 --> 0:11:42.000 Don't to appreciate your time this morning, Thanks for being 0:11:42.040 --> 0:11:43.480 with us, Come back soon. Why don't you don't to 0:11:43.520 --> 0:11:49.960 wrap a cord that of university right, albeit a kur 0:11:50.080 --> 0:11:53.840 joints us to Bernstein maybe Bernstein Co. Ahead of investment strategies. 0:11:54.200 --> 0:11:56.240 Do we sort of laid out the present land here? 0:11:56.520 --> 0:11:59.200 How do you write for March of two thousand twenty 0:11:59.240 --> 0:12:05.080 one or investment out all through two thousand twenty one. Well, 0:12:05.480 --> 0:12:08.280 we think about a continuation of the same forces that 0:12:08.320 --> 0:12:11.680 the market has been reckoning with this calendar year, which 0:12:11.760 --> 0:12:14.720 is of course the challenge of COVID, which is ongoing 0:12:14.800 --> 0:12:18.520 and escalating. As you've been discussing. But the offsetting force 0:12:19.200 --> 0:12:23.520 is the fiscal support and monetary support that's providing tremendous 0:12:23.720 --> 0:12:27.080 momentum and liquidity to the market. And I think what 0:12:27.120 --> 0:12:30.000 you've seen over the course of the last week is 0:12:30.040 --> 0:12:33.440 really a recognition that so many people were waiting for 0:12:33.480 --> 0:12:37.800 event risk around the election and have re engaged with 0:12:37.880 --> 0:12:41.280 the market as there is more clarity around that policy. 0:12:41.440 --> 0:12:45.400 So I think we have to wrestle with those two forces, Peter. 0:12:45.480 --> 0:12:47.240 I think a lot of people also thinking about whether 0:12:47.280 --> 0:12:49.720 we would have some regime change on the policy side, 0:12:49.760 --> 0:12:53.440 away from a monthy policy regime towards a fiscal policy regime. 0:12:53.480 --> 0:12:55.760 And understand we've had a mix of both, but I 0:12:55.800 --> 0:12:57.920 do wonder for you WHI you're sitting right now what 0:12:58.000 --> 0:13:00.000 regime are we in at the moment on the policy 0:13:00.160 --> 0:13:04.600 from We're in a regime that's been coordinated, and what 0:13:04.679 --> 0:13:07.720 we saw in the first quarter was an incredible response, 0:13:07.840 --> 0:13:11.360 both in terms of speed and magnitude, and that is 0:13:11.400 --> 0:13:14.560 ultimately what gave markets the comfort to start that steady 0:13:14.640 --> 0:13:17.760 march upward and then over the summer. It's been frustrating 0:13:17.800 --> 0:13:21.480 to not see that second round of fiscal stimulus be passed, 0:13:21.840 --> 0:13:24.640 we really think the economy and ultimately the markets will 0:13:24.679 --> 0:13:28.600 be looking for direction around fiscal stimulus, a much smaller 0:13:28.640 --> 0:13:32.520 stimulus package than what would have occurred under the consensus 0:13:32.640 --> 0:13:36.120 views going into the election of a blue wave. But nonetheless, 0:13:36.520 --> 0:13:39.319 we do think you'll see in the numbers today that 0:13:39.720 --> 0:13:42.720 there's still a tremendous number of people looking for work 0:13:42.960 --> 0:13:46.200 out of work that need help, and especially as COVID 0:13:46.280 --> 0:13:51.520 nineteen ramps up pretty relentlessly, we think that fiscal stimulus 0:13:51.559 --> 0:13:55.080 is going to be critical. While the numbers are ugally 0:13:55.200 --> 0:13:57.600 in the United States and the prospect of they see 0:13:57.720 --> 0:14:00.640 doing more as diminished considerably out of the aus compliments 0:14:00.679 --> 0:14:04.560 as you've described, What are the capital aizication consequences of 0:14:04.679 --> 0:14:06.959 that for you right now as you look into your 0:14:06.960 --> 0:14:11.679 rend Yeah, well, I'm coming to you here from Chicago, Illinois, 0:14:11.720 --> 0:14:13.679 where we're the one state in the Union right now 0:14:13.720 --> 0:14:16.040 that doesn't even allow indoor dining, to give you a 0:14:16.120 --> 0:14:19.920 sense of the escalation and the potential for ongoing shutdowns 0:14:19.920 --> 0:14:23.360 and lockdowns. So we do see the vulnerability of the 0:14:23.440 --> 0:14:28.760 economy to ongoing stress from lockdowns. That being said, we 0:14:28.880 --> 0:14:32.200 are long term bullish, and in fact, we went into 0:14:32.280 --> 0:14:36.440 September and the election, slightly overweight equities. That has been 0:14:36.440 --> 0:14:39.080 the right call, and we have trimmed that back of 0:14:39.120 --> 0:14:43.480 a little bit, but ultimately maintaining that position because we 0:14:43.520 --> 0:14:48.560 see vaccine optimism and earnings recoveries that are substantial in 0:14:48.600 --> 0:14:51.200 two thousand and twenty one, so be able let's build 0:14:51.240 --> 0:14:53.440 on that. Is there an idea then that the virus 0:14:53.520 --> 0:14:56.080 counts and all of the high frequency data that people 0:14:56.120 --> 0:14:58.240 were pouring over earlier this year, but none of that 0:14:58.280 --> 0:15:01.960 matters right now. If you've got a longer term you well, 0:15:02.000 --> 0:15:03.840 we don't think none of it matters. If you think 0:15:03.880 --> 0:15:06.720 about what happened in the spring, the market was really 0:15:06.800 --> 0:15:10.920 focused on a national healthcare crisis and the inability of 0:15:10.960 --> 0:15:14.640 the system to manage the virus. And what we've learned 0:15:14.680 --> 0:15:17.680 today and you've had a prior guests this morning actually 0:15:17.680 --> 0:15:22.480 addressing this is better treatment, ultimately lower fatality rates, and 0:15:22.520 --> 0:15:27.680 more targeted economic impact from more localized shutdowns. And I 0:15:27.720 --> 0:15:31.320 think that's what the market is effectively expecting. But again 0:15:31.360 --> 0:15:33.640 we come back to the fact that we do think 0:15:33.680 --> 0:15:38.200 fiscal stimulus is necessary in some form. The sooner the better, 0:15:38.560 --> 0:15:41.400 but the odds of it happening this year are being 0:15:41.440 --> 0:15:44.040 reduced as we speak. He always fought a lot of 0:15:44.040 --> 0:15:46.840 math into this, and I love your phrase, the mathiness 0:15:46.880 --> 0:15:51.680 of the phrase. The idiosyncretic drivers discussed that what's the 0:15:51.800 --> 0:15:57.880 new idiosyncratic driver. Well, in our opinion, as active investment 0:15:57.920 --> 0:16:00.840 managers for over fifty years, it burns. What it means 0:16:01.000 --> 0:16:04.760 is that being an index investor or simply investing in 0:16:04.840 --> 0:16:07.440 sectors today is not enough. There are a lot of 0:16:07.600 --> 0:16:11.960 underlying company fundamentals that you have to look at very specifically. 0:16:12.400 --> 0:16:15.000 We know that we're in a year where growth has 0:16:15.080 --> 0:16:19.280 led in an extraordinary way, but even within the growth 0:16:19.280 --> 0:16:22.400 style um there's growth at a reasonable price, and then 0:16:22.440 --> 0:16:26.280 there's simply momentum growth. And the valuation differences are huge. 0:16:26.720 --> 0:16:28.960 And you could say the same thing about value in 0:16:29.040 --> 0:16:32.560 terms of cyclicals and financials versus energy. So you have 0:16:32.680 --> 0:16:37.720 to look at the company, it's balance sheet, it's management team. Ultimately, 0:16:37.760 --> 0:16:42.000 we're focused on buying enduring businesses and in the end 0:16:42.240 --> 0:16:47.080 we think that focus on stock selection will prevail. Well, 0:16:47.120 --> 0:16:49.160 let's talk about that and let's finish there. Just give 0:16:49.240 --> 0:16:51.760 us an idea of how you do that. Early this week, 0:16:51.800 --> 0:16:54.280 when the positive news around the vaccine came out the 0:16:54.360 --> 0:16:57.160 likes of AMC get bits up aggressively. I want to 0:16:57.200 --> 0:16:59.520 understand the difference between a company that just places the 0:16:59.520 --> 0:17:01.160 catch up write on a bit of opium on a 0:17:01.240 --> 0:17:04.960 Monday morning into Tuesday, and something more durable through the 0:17:04.960 --> 0:17:09.160 recovery that you anticipate. Well, I leave that hard work 0:17:09.200 --> 0:17:11.920 to our research analysts and our portfolio managers, who are 0:17:11.960 --> 0:17:15.760 responsible for ultimately kicking the tires with the management teams. 0:17:16.040 --> 0:17:17.919 But I can tell you that what our pms have 0:17:18.000 --> 0:17:20.960 been doing over the last couple of weeks is picking 0:17:21.040 --> 0:17:23.879 up a little bit more in the cyclical space. But 0:17:23.960 --> 0:17:27.040 to give you an example, even within technology, for example, 0:17:27.119 --> 0:17:31.200 focused on semiconductors, an area that we think will continue 0:17:31.200 --> 0:17:34.200 to benefit from the stay at home economy, but ultimately 0:17:34.280 --> 0:17:39.239 support that reversal to going back to normal, picking up 0:17:39.240 --> 0:17:42.080 a little bit more in the transportation sector, as well 0:17:42.160 --> 0:17:44.800 as some of the most beaten down names in consumer 0:17:44.880 --> 0:17:49.040 discretionary and travel and leisure. So uh, that is how 0:17:49.080 --> 0:17:52.840 we're thinking about positioning today. A bit of case. Thank 0:17:52.880 --> 0:17:54.760 you always, great to catch up. Thank you very much. 0:17:54.800 --> 0:18:01.720 If I b Bernstein there on this market. I have 0:18:01.760 --> 0:18:05.200 anticipated this interview since I spoke to James Travitas a 0:18:05.320 --> 0:18:08.800 number of days ago. General Mark Kimmitt is the rarest 0:18:08.840 --> 0:18:12.959 of rare, someone with a distinguished military career who's dovetailed 0:18:12.960 --> 0:18:16.600 it was State Department experience. We're thrilled at General Mark 0:18:16.640 --> 0:18:20.120 Kimmitt could join us right now. General Kimmitt, the name 0:18:20.160 --> 0:18:22.600 Bler right now is off the chart. We have a 0:18:22.640 --> 0:18:25.600 general here, We've got a colonel there. We've got a 0:18:25.680 --> 0:18:28.680 list of slot can out of Michigan with their Defense 0:18:28.720 --> 0:18:32.520 Department experience and all of its name in this cacophony 0:18:32.600 --> 0:18:35.960 comes down to one thing. How is the Pentagon doing? 0:18:36.440 --> 0:18:39.000 What is your feeling of how the Pentagon is doing 0:18:39.320 --> 0:18:44.360 in this immediate turmoil. Look, I think the uniform services 0:18:44.400 --> 0:18:48.040 are doing just fine. As Admiral Steverta said, you can 0:18:48.080 --> 0:18:50.520 be sure that Mark Milly has got the rudder in 0:18:50.600 --> 0:18:54.360 the boat, moving them straight, uh and in the right direction. 0:18:55.080 --> 0:18:57.439 I am all concerned about what's going on in my 0:18:57.480 --> 0:19:01.280 old policy shop in the Pentagon and the intel shop 0:19:01.560 --> 0:19:06.679 and the Secretary Defense. Something doesn't click here. What is 0:19:06.720 --> 0:19:10.680 the price or the good or the negative of an 0:19:10.680 --> 0:19:15.720 Afghanistan exit? Clearly the zeitgeist, as the President desires that 0:19:16.240 --> 0:19:19.399 we hear a silence from the military. Give us the 0:19:19.400 --> 0:19:24.800 calculus if we were to exit Afghanistan. Well, on that 0:19:24.840 --> 0:19:29.720 particular itch with Afghanistan, Zal Holizade is doing some great negotiations, 0:19:29.760 --> 0:19:33.719 but he's negotiated with the Taliban. The fact remains, as 0:19:33.760 --> 0:19:36.280 we are coming to an agreement where the Taliban say 0:19:36.560 --> 0:19:39.399 you leave, will take care of al Qaeda. We know 0:19:39.480 --> 0:19:42.200 that's not going to happen in the United States of 0:19:42.280 --> 0:19:44.920 saying if you take care of al Qaeda, will leave, 0:19:45.359 --> 0:19:47.400 and that's not going to happen. I mean, if there 0:19:47.480 --> 0:19:49.960 is an al Qaeda threat or any other isis thread 0:19:49.960 --> 0:19:53.440 inside of Afghanistan, we will come back in. It may 0:19:53.480 --> 0:19:57.280 be from the air, it maybe with like special operations units. 0:19:58.119 --> 0:20:00.280 But the fact remains is we are not going to 0:20:00.320 --> 0:20:04.320 allow Afghanistan to remain and become again a safe haven 0:20:04.320 --> 0:20:08.040 for terrorists. So this kabuki about pulling all the American 0:20:08.080 --> 0:20:11.440 troops out, We'll pull the ones that are sitting around 0:20:11.440 --> 0:20:13.639 the base is not doing much. But the ones that 0:20:13.720 --> 0:20:15.840 we need to have there to work with the Afghan 0:20:15.920 --> 0:20:20.240 national security forces and in counter terrorist operations. I'm not 0:20:20.320 --> 0:20:25.480 worried about that. Under the revolution that was Goldwater Nickels 0:20:25.480 --> 0:20:28.840 really the last act of Senator Goldwater to create a 0:20:28.920 --> 0:20:33.800 real structure and separation of our military. How confident are 0:20:33.840 --> 0:20:37.280 you that the military can operate over the next sixty 0:20:37.320 --> 0:20:42.040 nine days. I'm not the slightest that worried about that. 0:20:42.080 --> 0:20:44.679 I mean, Goldwater Nichols was a result of the clown 0:20:44.800 --> 0:20:48.800 college that we called Grenada, where you had every service 0:20:48.960 --> 0:20:52.399 doing their own thing. Since then, since eighties six and 0:20:52.440 --> 0:20:56.879 Goldwater Nickels, it's a very smooth running military set up, 0:20:57.720 --> 0:21:00.280 going from the President to the Secretary Defense down to 0:21:00.320 --> 0:21:03.800 the combatant commanders. Uh, that's not where I'm worried about 0:21:03.920 --> 0:21:06.920 right now. It's from the combatant commanders through the Secretary 0:21:06.960 --> 0:21:10.239 Defense and up where I have some concerns. All right, 0:21:10.280 --> 0:21:13.840 can you elaborate, General on your concerns with the practical 0:21:13.880 --> 0:21:17.879 implications of some of the turnover. Maybe, well, I'm not 0:21:17.920 --> 0:21:21.800 concerned about the practical implications. I'm concerned about the people. 0:21:22.320 --> 0:21:24.159 I think. You take a look at the record of 0:21:24.680 --> 0:21:30.440 Tony Tayta, Doug McGregor, Ezra Cohen Watkins, Stephen Miller. I 0:21:30.680 --> 0:21:34.560 don't know the Secretary Defense, but these are guys that 0:21:34.840 --> 0:21:38.439 have a great military background, but it seems their greatest 0:21:38.520 --> 0:21:41.919 qualification for joining the policy shop is that they appeared 0:21:41.920 --> 0:21:45.160 on Fox News on a repeated basis, probably echoing back 0:21:45.200 --> 0:21:48.080 to President Trump what he wanted to hear. Does this 0:21:48.160 --> 0:21:52.560 have I media implications or long term implications in terms 0:21:52.720 --> 0:21:57.119 of a greater politicist as its politicization of the entire 0:21:57.200 --> 0:22:01.240 military forces. That's not going to happen. I mean, Mark 0:22:01.320 --> 0:22:04.000 Milly and the team will resign before they have become 0:22:04.200 --> 0:22:07.679 political bozos. What I am concerned is I have and 0:22:07.760 --> 0:22:11.280 this is purely speculative. I've got this sneaking suspicion that 0:22:11.440 --> 0:22:15.960 something's going on here in terms of why these people 0:22:16.000 --> 0:22:17.920 were brought in, and I think it's far more than 0:22:17.960 --> 0:22:21.359 just Afghanistan. These are people with a deep loyalty to 0:22:21.440 --> 0:22:24.440 a president, a president who has sixty days left in 0:22:24.600 --> 0:22:27.840 unfinished business, and I'm just hoping that the Secretary of 0:22:27.880 --> 0:22:30.520 Defense is not going to give actions in orders to 0:22:30.560 --> 0:22:34.200 the military in the next sixty days that are going 0:22:34.240 --> 0:22:36.960 to haunt us for a while. You have a great 0:22:37.000 --> 0:22:40.679 experience with Colonel McGregor. If you mentioned Fox TV, he 0:22:40.720 --> 0:22:43.560