WEBVTT - Surveillance: U.S. Retail Sales Surprise

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along

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<v Speaker 1>with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you

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<v Speaker 1>insight from the best and economics, finance, investment, and international relations.

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<v Speaker 1>Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com,

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<v Speaker 1>and of course on the Bloomberg Terminal. Let's get to

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<v Speaker 1>russ Coastrick now Blanctrol Global Allocation, Fund Portfolio manage you Rust.

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<v Speaker 1>Let's start right here. You've trimmed directly exposure just a

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<v Speaker 1>little bit, walk me through the thinking gun into your

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<v Speaker 1>end Well good more and Jonathan, so you know it's

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<v Speaker 1>not it's not that complicated. I think our view is

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<v Speaker 1>the stock market is gonna end your higher than it's today.

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<v Speaker 1>But we are in a period where I think risk

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<v Speaker 1>is a little high. End. One reason seasonality. I think

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<v Speaker 1>people are well aware this is seasonally the toughest part

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<v Speaker 1>of the year. Uh. Second, the uncertainty around the delta variant.

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<v Speaker 1>And find something that that both you and least have

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<v Speaker 1>been mentioning supply chain disruptions. Uh, this is this is

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<v Speaker 1>a big issue. It's affecting the pace of growth, it's

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<v Speaker 1>affecting prices. Uh, And it's something we're not used to.

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<v Speaker 1>We're always used to talking about demand in the post

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<v Speaker 1>GFC world, but at least in the near term, this

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<v Speaker 1>is another factor the market's going to be dealing with.

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<v Speaker 1>Having said all that, we think these are temporary issues

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<v Speaker 1>and looking at six nine month stocks are higher than

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<v Speaker 1>they are today. So where are you trimming rusts? We've

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<v Speaker 1>been trimming a little bit of our cyclical exposure. One

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<v Speaker 1>place we have been trimming are the financials. We were

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<v Speaker 1>overweight financials earlier in the year. We've actually brought that

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<v Speaker 1>down and part of that is the evolutionary thinking about

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<v Speaker 1>rates up. Ourselves include have been surprised about how tame

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<v Speaker 1>the long end of the US curve has been and

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<v Speaker 1>what we do think we're gonna see some normalization yields,

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<v Speaker 1>particularly in real yields. We're not likely to see the

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<v Speaker 1>melt up that people were worried about earlier in the year.

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<v Speaker 1>You know, if you look at bond market volut reality,

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<v Speaker 1>it's been coming down and down and down. So here's

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<v Speaker 1>what I'm struggling with. A lot of people are talking

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<v Speaker 1>about this correction, the supposed correction that's supposed to happen

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<v Speaker 1>that everybody wants to buy, and yet it seems like

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<v Speaker 1>we've had trigger after trigger when it comes to disappointing

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<v Speaker 1>data or signs that perhaps delta is slowing at the

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<v Speaker 1>economic recovery in a meaningful way for more than just

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<v Speaker 1>one quarter. What's the trigger at this point, given all

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<v Speaker 1>of that is very well known, I think there are

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<v Speaker 1>a couple of things, you know, one of which we

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<v Speaker 1>haven't spoken about yet is Washington. Now. I don't think

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<v Speaker 1>there's anything there that represents a long term issue. We're

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<v Speaker 1>still getting fiscal support. We're getting obviously a lot of

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<v Speaker 1>monetary support, but we are likely to get some headline

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<v Speaker 1>risk as we get later into the month, as we

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<v Speaker 1>get into October and Congress wrestles with not only that

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<v Speaker 1>the budget package and the reconciliation package, but also in

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<v Speaker 1>the dead ceiling. Now. Again, to be clear, this will

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<v Speaker 1>ultimately get resolved, but we are likely to see more

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<v Speaker 1>headline risk than we've been used to in recent years.

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<v Speaker 1>Russ I look at where we are now on the

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<v Speaker 1>optionality forward is you know, everybody's with their narratives. You've

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<v Speaker 1>got a narrative. I know, it's radically different than Jeff

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<v Speaker 1>Rosenberg's narrative narrative narrative narrative as well? How do you

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<v Speaker 1>manage in the multiple sets of narratives that are out

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<v Speaker 1>there right now? And Tom, I think this is the

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<v Speaker 1>ultimate question. You know, you have to start with the baseline.

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<v Speaker 1>What is what is it you expect to the market.

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<v Speaker 1>Our baseline, I think it's pretty straightforward. Yes, the economy

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<v Speaker 1>is decelerating, but we expect better than trend m G

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<v Speaker 1>d P. We do expect inflation is going to be transitory,

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<v Speaker 1>contain yields in that environment with tremendous cash flow generation.

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<v Speaker 1>We are still very long equities, even though we have

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<v Speaker 1>been trimming. We want some cyclical exposure. We want to

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<v Speaker 1>pair that with the secular growth areas that we expect

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<v Speaker 1>to work for year after year. We're less enamored with

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<v Speaker 1>duration as a hedge, and instead we look at other strategies,

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<v Speaker 1>whether that's been long the dollar, whether it's using volatilities

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<v Speaker 1>and asset class and then you manage from there. You

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<v Speaker 1>manage his unexpected events change narrative. But that's our baseline

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<v Speaker 1>right now. How do you manage maybe it so if

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<v Speaker 1>you're remit, I don't think so. How do you manage commodities,

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<v Speaker 1>John Ferroll mentioning Francisco Blant at Bank of America with

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<v Speaker 1>a hundred dollar oil, how do you manage commodities out

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<v Speaker 1>one year out, two years out, four years to win well?

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<v Speaker 1>I think it depends on the commodity. We actually do

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<v Speaker 1>think that oil prices are going to remain firm and

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<v Speaker 1>in their term, and we've been having some tactical positions

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<v Speaker 1>to take advantage of that. In the equity market, other

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<v Speaker 1>commodities were less sanguent on. You know one place where

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<v Speaker 1>there has been a big change in our portfolio as gold. Uh,

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<v Speaker 1>fourteen months ago, we had a fairly significant position in gold.

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<v Speaker 1>Today we've reduced it to almost zero. Why is that Well,

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<v Speaker 1>because we primarily think of gold as a hedge against

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<v Speaker 1>equity risk, and that works when you've got an environment

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<v Speaker 1>when real rates are flatter declining. If part of our

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<v Speaker 1>view is at real rates normalize a bit, that particular

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<v Speaker 1>commodity is unlikely to work as well as it did

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<v Speaker 1>in the middle of two thousand and twenty. That's really interesting.

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<v Speaker 1>A hedge against equity risk but not inflation. Pers say,

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<v Speaker 1>why is that Russ. Yeah, I think this is a

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<v Speaker 1>very important point. Your gold is often spoken about as

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<v Speaker 1>an inflation hedge. I don't think that's wrong, but you

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<v Speaker 1>have to look at very long horizons measured in decades,

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<v Speaker 1>you know, well beyond the investment horizon, and most fund managers,

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<v Speaker 1>if you're thinking about the near term, there are probably

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<v Speaker 1>better hedges against inflation of the equity market. And rather

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<v Speaker 1>than all own an asset that doesn't produce any cash flow,

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<v Speaker 1>we would rather hedge some of the near term upside

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<v Speaker 1>and inflation with stocks that have pricing power in the

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<v Speaker 1>material sector, in the industrial sector, in the consumer sector,

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<v Speaker 1>companies that can raise prices as input costs also rise.

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<v Speaker 1>Russ really good final point. Fantastic to get your thoughts

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<v Speaker 1>on your portfolio right now. Russ Coastrick that blank Rock

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<v Speaker 1>Global Allocation Fund portfolio manager. Seriously, up the Mississippi River,

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<v Speaker 1>up the Ohio River. And this isn't the romance of

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<v Speaker 1>Near America. This is the next part of this pandemic.

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<v Speaker 1>Jennifer Neuso joins from Johns Hopkins Center for Health Security.

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<v Speaker 1>I'm looking at the heat map in the New York Times, Jennifer,

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<v Speaker 1>and I'm sorry, this thing is my great and north

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<v Speaker 1>up to Mississippi, up the Ohio. Is it going to

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<v Speaker 1>migrate to the northeast, this new agony of nineteen deaths

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<v Speaker 1>right now a day? Yeah, I mean, I don't think

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<v Speaker 1>anybody should get complacent. And certainly as we had indoors,

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<v Speaker 1>because the weather is getting cooler, that raises the possibility

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<v Speaker 1>that we could see search of cases and places that

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<v Speaker 1>you hadn't seen it in the previous weeks. That said,

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<v Speaker 1>I'm much less worried about the Northeast compared to the southeast,

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<v Speaker 1>which has really been hammered by this virus because of

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<v Speaker 1>the higher vaxination coverage. I'm confused over boosters. John's confused,

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<v Speaker 1>Lise is confused. We're all confused. The only thing I

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<v Speaker 1>know for certain I used to dread going to the

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<v Speaker 1>doctor to get whatever the booster was because it always

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<v Speaker 1>hurt more. Is the booster gonna hurt more? I don't

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<v Speaker 1>think so. My second shot didn't feel like anything. But

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<v Speaker 1>if you're confused, you're not alone. I think a lot

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<v Speaker 1>of America is a part because we haven't had the

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<v Speaker 1>scientific community come together and formally evaluate the That's going

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<v Speaker 1>to happen on Friday UM with the FDA Advisory Committee.

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<v Speaker 1>We'll see what they say, UM, my guess is that

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<v Speaker 1>you know, there's clearly a case for third shots from

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<v Speaker 1>you know, compromise that's already happening. Um, there might be

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<v Speaker 1>some evidence for people over the age of six five. Um,

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<v Speaker 1>but I am not yet convinced that anybody else needs

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<v Speaker 1>it at this time. Dr needs. I love that Tom

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<v Speaker 1>asks the real questions of is it gonna hurt? Do

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<v Speaker 1>I need a lollipop? And that's right the question, Yeah,

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<v Speaker 1>exactly all the uh answering from our kids. So we

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<v Speaker 1>talk about boosters, who do we listen to? Can we

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<v Speaker 1>trust visor that came out yesterday and made this big

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<v Speaker 1>presentation on how important boosters are and how your immunity

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<v Speaker 1>wanes after the initial two doses. I think you can

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<v Speaker 1>trust the FDA Committee and the Advisory Committee Immunization Practices

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<v Speaker 1>will meet next week. Uh. You know, these are scientists

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<v Speaker 1>or beyond reproach. They'll be tearing into the actual data

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<v Speaker 1>and looking at it and making their judgments and whatever

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<v Speaker 1>they recommend. I think, Um, you know, I think it's

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<v Speaker 1>likely to be some some consensus around that. Meanwhile, overnight

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<v Speaker 1>we got some news that China has vaccinated more than

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<v Speaker 1>a billion of its residents of its citizens. How important

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<v Speaker 1>is that given some of the efficacy of that vaccination

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<v Speaker 1>and what we know about that. Yeah, I mean it

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<v Speaker 1>is important. You know, every vaccine in an arm is

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<v Speaker 1>a serious illness um averted. And although um, the vaccines

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<v Speaker 1>being used to China has probably less protections than others. Um,

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<v Speaker 1>you know, it's still fairly good at keeping people out

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<v Speaker 1>of the hospital. And you know that remains my top

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<v Speaker 1>line goal for vaccines. That said, UM, you know, I

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<v Speaker 1>think China and other countries are potentially going to be

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<v Speaker 1>looking um you know, for additional doses in the future. Um,

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<v Speaker 1>but my overarching priority is we need as a globe

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<v Speaker 1>to make sure we get first and second doses into

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<v Speaker 1>arms before we even think about the third doses. Jennifer

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<v Speaker 1>A question off the remit. Peter Hotez is all fired

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<v Speaker 1>up that we've succeeded in mRNA for which rich wealthy nations,

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<v Speaker 1>but we need to figure out a COVID kill or

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<v Speaker 1>for poor nations Africa, India, you name, the rest is Well,

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<v Speaker 1>from where you sit in your research, how are we

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<v Speaker 1>how close are we to a successful non fancy vaccine

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<v Speaker 1>for the rest of the world. Well, I reject that

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<v Speaker 1>our m RNA vaccines are not appropriate for the rest

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<v Speaker 1>of the world. UM. You know, there they are potentially

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<v Speaker 1>being used. I think some people worry about the cold temperatures.

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<v Speaker 1>I think we're learning better about the stability of these

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<v Speaker 1>vaccines at different temperatures. And also, um, you know, Africa

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<v Speaker 1>has proven its ability to um maintain a cold chain. UM.

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<v Speaker 1>So we first of all need to start doing more

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<v Speaker 1>with the vaccines. We have to improve access. That said,

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<v Speaker 1>I think there are other vaccine candidates on the horizon

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<v Speaker 1>that will add to it. I mean, we just simply

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<v Speaker 1>need more vaccines than we have right now, so I'll

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<v Speaker 1>take them all absolutely. I look, Jennifer, where we alre

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<v Speaker 1>And again it's about the booster. When am I going

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<v Speaker 1>to get a booster? Is a booster upon us? Well,

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<v Speaker 1>you know, my guest, and this is just reading. What

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<v Speaker 1>he leaves here is that if the FDA Committee UM

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<v Speaker 1>endorses anything, it maybe boosters over the age of sixty five,

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<v Speaker 1>which clearly isn't you Tom, But you know, I think

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<v Speaker 1>that might be the next that might be the next offering. UM.

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<v Speaker 1>And you know, we'll see. I know the President is

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<v Speaker 1>eager to push these, but really we need to let

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<v Speaker 1>the scientists evaluate the data and again not distract from

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<v Speaker 1>our top line mission, which is to get first and

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<v Speaker 1>second vaccines into arms. Jen thank you got to leave

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<v Speaker 1>you the dr Jennifer now so that John's helping center

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<v Speaker 1>the half security Sitia Scota, this is really important discussion.

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<v Speaker 1>Thomas Costs joined us with pick Day right now pick

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<v Speaker 1>Day wealth Management, and Thomas, you got buried in your

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<v Speaker 1>note a really really, really important sentence. You ignore consumer surveys.

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<v Speaker 1>Why I do? And I think it was the right

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<v Speaker 1>thing to do because we've seen retail sales data that

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<v Speaker 1>actually the U. S consumer is fine, and I actually

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<v Speaker 1>look at credit card data and I see that, you know,

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<v Speaker 1>US consumer is fine, is happy to go and spend

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<v Speaker 1>and take more credits. So I'm a bit yeah, a bit,

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<v Speaker 1>a bit more um, you know, dismissive of recent consumers surveys.

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<v Speaker 1>I think there may be affected by the end of

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<v Speaker 1>the jobless benefits, but otherwise I think the US consumer

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<v Speaker 1>is fine, and I think we have some data today

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<v Speaker 1>showing that, yeah, the U. S consumer is fine and

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<v Speaker 1>can withstand so many headwinds like Delta, like the end

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<v Speaker 1>of of Chewy and so on and so forth. It's

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<v Speaker 1>a tiny number. It's a strong be hesitant to move

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<v Speaker 1>on from retail sales too quickly. But almost just your

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<v Speaker 1>view on the business surveys we get from the regional Feds.

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<v Speaker 1>We have the Empire Manufacturing survey earlier this week that

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<v Speaker 1>was really nice to the Philly fed busines. Sound look

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<v Speaker 1>right now, that's a big upside surprise. This is for September.

0:12:04.320 --> 0:12:08.319
<v Speaker 1>What's the early September day to telling you, Thomas, Well,

0:12:08.360 --> 0:12:09.959
<v Speaker 1>if you look at the n f I B survey,

0:12:10.280 --> 0:12:12.920
<v Speaker 1>the Empire survey, I think they are actually much better

0:12:12.960 --> 0:12:16.320
<v Speaker 1>than expected. So um, you know, the the order books

0:12:16.320 --> 0:12:20.120
<v Speaker 1>are actually looking fine. Um, maybe actually too fine, because

0:12:20.120 --> 0:12:23.160
<v Speaker 1>the risk maybe in two is that we have so

0:12:23.240 --> 0:12:25.960
<v Speaker 1>many orders that actually there's a risk of having some

0:12:26.040 --> 0:12:29.560
<v Speaker 1>fake orders as companies in order too much and maybe

0:12:29.600 --> 0:12:31.880
<v Speaker 1>the cancel orders down the line. But I think so

0:12:31.880 --> 0:12:34.240
<v Speaker 1>far we're still in the early phase of this, you know,

0:12:34.280 --> 0:12:38.640
<v Speaker 1>accelerating business cycle. And yeah, things are fine, they're are.

0:12:38.760 --> 0:12:42.600
<v Speaker 1>There are some bottlenecks, I must say, some bottlenecks affecting cars,

0:12:42.880 --> 0:12:46.640
<v Speaker 1>for instance, but they are very niche products. Otherwise, the U.

0:12:46.679 --> 0:12:50.120
<v Speaker 1>S consumer is fine. US manufacturing chains are okay. More

0:12:50.200 --> 0:12:53.280
<v Speaker 1>or less. You know, you know, given the supply chain bottlenecks,

0:12:53.280 --> 0:12:55.760
<v Speaker 1>but otherwise the order books look fine. So I'm actually

0:12:55.800 --> 0:12:59.359
<v Speaker 1>quite positive on US growth, especially the fourth exam positivity.

0:12:59.400 --> 0:13:01.440
<v Speaker 1>Then and push it over to the twenty two the

0:13:01.480 --> 0:13:06.240
<v Speaker 1>FED decision. How does this so fold in to them? Well,

0:13:06.320 --> 0:13:09.240
<v Speaker 1>so the FED as already well telegraphed that you know,

0:13:09.240 --> 0:13:11.760
<v Speaker 1>they intend to taper before the end of the year.

0:13:12.200 --> 0:13:14.960
<v Speaker 1>I think they won't do it next week because well,

0:13:15.000 --> 0:13:17.560
<v Speaker 1>first of all, I think Gerald Powell does not want

0:13:17.600 --> 0:13:20.520
<v Speaker 1>to to rock the boat. You know, we're seeking renominations,

0:13:20.559 --> 0:13:22.880
<v Speaker 1>so it doesn't want to rock the boat and move

0:13:22.920 --> 0:13:25.840
<v Speaker 1>financial markets too much. Um, so he's going to probably

0:13:25.880 --> 0:13:29.240
<v Speaker 1>wait until November. But otherwise I think, yeah, the pressure

0:13:29.360 --> 0:13:31.680
<v Speaker 1>is there too for them to to taper. We've given this,

0:13:31.960 --> 0:13:35.040
<v Speaker 1>you know, strong data and also ongoing strong inflation. I

0:13:35.120 --> 0:13:38.560
<v Speaker 1>think the regional FED presidents are going to uh, you know,

0:13:38.640 --> 0:13:41.680
<v Speaker 1>to to want to push towards you know, firmers schedule

0:13:42.000 --> 0:13:44.840
<v Speaker 1>on tapering and maybe actually they're going to put hockey

0:13:44.840 --> 0:13:47.640
<v Speaker 1>Is dots in there. Thomas, are you saying that even

0:13:47.720 --> 0:13:50.360
<v Speaker 1>if the data supports the idea of tapering the bond

0:13:50.360 --> 0:13:54.120
<v Speaker 1>purchases earlier that FED chair j Powell would not do

0:13:54.200 --> 0:13:58.920
<v Speaker 1>so in order to curry favor politically. Well, what I'm

0:13:58.920 --> 0:14:00.440
<v Speaker 1>going to say is that the it is like a

0:14:00.480 --> 0:14:05.440
<v Speaker 1>supertanker and you don't change directions so quickly. So, um,

0:14:05.480 --> 0:14:07.240
<v Speaker 1>you know, they have indicated they want to do it

0:14:07.280 --> 0:14:10.080
<v Speaker 1>before year, and I think they are going to stick

0:14:10.120 --> 0:14:12.720
<v Speaker 1>to that view. And I don't see any sign of

0:14:12.800 --> 0:14:16.360
<v Speaker 1>rush coming from Jeral Powell. So yeah, I think he's

0:14:16.400 --> 0:14:18.760
<v Speaker 1>going to indicate that it's coming soon, but I think

0:14:18.760 --> 0:14:21.760
<v Speaker 1>he's they are unlikely to do it, uh next thing,

0:14:21.920 --> 0:14:24.280
<v Speaker 1>as we have some deadlines in DC as well. That's

0:14:24.480 --> 0:14:26.680
<v Speaker 1>that's interesting. It's not the only ones saying it, I know,

0:14:26.720 --> 0:14:28.600
<v Speaker 1>but it's interesting to me. And the whole idea is

0:14:28.640 --> 0:14:31.360
<v Speaker 1>you know, to me frankly, John, you know, is the

0:14:31.400 --> 0:14:33.760
<v Speaker 1>data actually backing a taper that they're not going to

0:14:33.800 --> 0:14:36.480
<v Speaker 1>do because of other motivations. Some some people are asking

0:14:36.480 --> 0:14:38.960
<v Speaker 1>that question. Yeah, there, you know, I think it's out there.

0:14:38.960 --> 0:14:40.320
<v Speaker 1>It's part of the mix of the day and the

0:14:40.400 --> 0:14:43.520
<v Speaker 1>huge variance we see her in opinions. Time constr The

0:14:43.600 --> 0:14:46.360
<v Speaker 1>last time I fell off my seat before today was

0:14:46.360 --> 0:14:48.720
<v Speaker 1>it the Zurich McDonald's When I figured out this is

0:14:48.800 --> 0:14:51.720
<v Speaker 1>right down from Bono Strauss Or pict has their wonderful

0:14:51.800 --> 0:14:55.320
<v Speaker 1>office over the price of you know, cheeseburger and Zurich.

0:14:55.760 --> 0:14:58.360
<v Speaker 1>This morning, I fell off my chair because you're talking

0:14:58.400 --> 0:15:02.800
<v Speaker 1>about a Voker moment. You gotta be kidding me that

0:15:02.920 --> 0:15:05.800
<v Speaker 1>we're gonna see a Voker moment at a three or

0:15:05.840 --> 0:15:10.840
<v Speaker 1>four percent inflation rate. Really well, I'm highlighting this as

0:15:10.880 --> 0:15:13.040
<v Speaker 1>a risk because I think the baseline is that the

0:15:13.120 --> 0:15:16.560
<v Speaker 1>FED will ignore high inflation. And when I say high inflation,

0:15:16.600 --> 0:15:20.080
<v Speaker 1>it's two to three percent inflation. However, the problem may

0:15:20.160 --> 0:15:26.560
<v Speaker 1>come if inflation comes at four percent next year. I mean,

0:15:26.600 --> 0:15:30.280
<v Speaker 1>it's quite unlikely, but it's not impossible, right, Thomas Costa,

0:15:30.400 --> 0:15:33.200
<v Speaker 1>Thank you, sir, from PI Tech Wealth Management senior economists

0:15:33.200 --> 0:15:36.000
<v Speaker 1>down there. We've got some good Xeric stories that I'll

0:15:36.000 --> 0:15:43.920
<v Speaker 1>share one day. This is a joy for Lisa Bramwin

0:15:44.000 --> 0:15:48.720
<v Speaker 1>to myself right now, it's Nudge. The final addition, it

0:15:48.880 --> 0:15:53.040
<v Speaker 1>gets thicker on radio. I'm showing the thickness here on TV.

0:15:53.640 --> 0:15:56.440
<v Speaker 1>Cass Sunstein did not want to do this, but Richard

0:15:56.480 --> 0:15:59.800
<v Speaker 1>Taylor said we gotta do it. Cast cast Sunstein, Richards

0:16:00.000 --> 0:16:02.720
<v Speaker 1>Tailor Nudge. We're thrilled to bring this to you, right

0:16:02.720 --> 0:16:05.640
<v Speaker 1>now with a laureate from Chicago, Richard, I want to

0:16:05.680 --> 0:16:10.000
<v Speaker 1>take nudge and your work over to this crazy baseball season.

0:16:10.080 --> 0:16:14.680
<v Speaker 1>Your Cubs are in total disarray. The San Francisco Giants

0:16:14.920 --> 0:16:19.880
<v Speaker 1>are ascendant now. And the gentleman that has driven forward

0:16:19.920 --> 0:16:24.320
<v Speaker 1>the San Francisco Giants experiment is a Berkeley Saylor. Right,

0:16:24.560 --> 0:16:29.320
<v Speaker 1>tell us how the nudge in the behavioral economics folds

0:16:29.320 --> 0:16:34.320
<v Speaker 1>into the success of the San Francisco Giants. Well, you know,

0:16:34.880 --> 0:16:40.280
<v Speaker 1>Moneyball really is a book about the real economics. And uh,

0:16:40.280 --> 0:16:44.880
<v Speaker 1>when cass and I wrote a review of Moneyball, and

0:16:44.920 --> 0:16:48.200
<v Speaker 1>that's when I first met Michael Lewis, and it was

0:16:48.920 --> 0:16:52.560
<v Speaker 1>an epiphany for him that the stuff he had been

0:16:52.600 --> 0:16:55.640
<v Speaker 1>writing about the Moneyball there with this whole academic field

0:16:55.720 --> 0:17:00.640
<v Speaker 1>about taking advantage of other people's biases. And that's what

0:17:00.800 --> 0:17:04.400
<v Speaker 1>led to Michael's book, The Undoing Project. So, uh, this

0:17:04.480 --> 0:17:08.800
<v Speaker 1>makes total sense. Um and barn could have been a

0:17:08.920 --> 0:17:12.200
<v Speaker 1>very good behavioral economist. Berkeley is one of the top

0:17:12.240 --> 0:17:16.280
<v Speaker 1>two or three departments in that area. And you know

0:17:16.880 --> 0:17:20.040
<v Speaker 1>his mother was disappointed he went into baseball and not

0:17:20.160 --> 0:17:23.080
<v Speaker 1>in the economics, professor saying let's go to the biases

0:17:23.080 --> 0:17:27.480
<v Speaker 1>and blunders of your informative must read book Nudge Great,

0:17:27.720 --> 0:17:33.960
<v Speaker 1>what are the biases and blunders of COVID in your update? Well,

0:17:34.119 --> 0:17:37.360
<v Speaker 1>I must say we don't dwell on COVID. We were

0:17:37.359 --> 0:17:42.000
<v Speaker 1>writing in the midst of COVID and as you as

0:17:42.040 --> 0:17:46.080
<v Speaker 1>we all have learned, it changes every month, so there

0:17:46.080 --> 0:17:49.960
<v Speaker 1>are passing references. The publisher wants said, why don't you

0:17:50.000 --> 0:17:53.760
<v Speaker 1>add a chapter on COVID, And we knew it would

0:17:53.800 --> 0:17:55.960
<v Speaker 1>be out of date the book the minute the book

0:17:56.000 --> 0:18:00.880
<v Speaker 1>came out, so, um, we talked about it off and on.

0:18:01.359 --> 0:18:04.879
<v Speaker 1>I think right now the key thing that we're dealing

0:18:04.920 --> 0:18:10.080
<v Speaker 1>with is how do we get people vaccinated? And is

0:18:10.080 --> 0:18:14.480
<v Speaker 1>is nudging enough? And if not, what else do we need?

0:18:15.400 --> 0:18:20.800
<v Speaker 1>And and my conclusion is that, um, we we've now

0:18:20.920 --> 0:18:24.840
<v Speaker 1>reached the point where there are so many people with

0:18:25.080 --> 0:18:32.159
<v Speaker 1>very strong, ill informed opinions that stronger measures are necessary. Richard,

0:18:32.520 --> 0:18:34.159
<v Speaker 1>I gotta say I thought it was kind of funny

0:18:34.160 --> 0:18:35.800
<v Speaker 1>that you called it the final addition, so you never

0:18:35.840 --> 0:18:38.479
<v Speaker 1>would be tempted to write this or rewrite this again,

0:18:38.600 --> 0:18:40.600
<v Speaker 1>and that you thought, well, it is COVID after all,

0:18:40.640 --> 0:18:42.880
<v Speaker 1>so it's what else you're gonna do? Why not rewrite

0:18:43.119 --> 0:18:48.639
<v Speaker 1>this bestseller? And pre eminent book in the behavioral economics field.

0:18:49.080 --> 0:18:52.359
<v Speaker 1>What though, was the biggest change in how you viewed

0:18:52.400 --> 0:18:55.040
<v Speaker 1>the way we make decisions from the first addition to

0:18:55.119 --> 0:19:00.480
<v Speaker 1>this final addition. Well, a lot of it was just

0:19:01.359 --> 0:19:04.960
<v Speaker 1>getting rid of anachronisms. We had a whole chapter devoted

0:19:04.960 --> 0:19:08.280
<v Speaker 1>to a very clever solution to the same sex marriage

0:19:08.320 --> 0:19:13.560
<v Speaker 1>problem that UM just legalizing it was even better. So

0:19:14.480 --> 0:19:17.439
<v Speaker 1>I think one of the things we stress in the

0:19:17.520 --> 0:19:23.000
<v Speaker 1>new addition, which is probably two thirds new, is that

0:19:23.560 --> 0:19:28.959
<v Speaker 1>exactly this point that sometimes nudging is not enough. And

0:19:29.720 --> 0:19:34.040
<v Speaker 1>there's an entire chapter on climate change where we start

0:19:34.160 --> 0:19:37.679
<v Speaker 1>with saying what we need is a carbon tax or

0:19:37.760 --> 0:19:41.760
<v Speaker 1>cap and trade. I am with every economist in the

0:19:41.800 --> 0:19:44.840
<v Speaker 1>world on this. If we don't get the prices right,

0:19:45.520 --> 0:19:50.000
<v Speaker 1>we're never going to get anywhere. I think it's ridiculous

0:19:50.640 --> 0:19:55.520
<v Speaker 1>that the the bill that's going through Congress now has

0:19:55.560 --> 0:20:01.520
<v Speaker 1>no carbon tax or anything resembling that we're gonna pay

0:20:01.560 --> 0:20:08.199
<v Speaker 1>for trillion dollars and not tax something that UM is

0:20:08.440 --> 0:20:11.760
<v Speaker 1>killing the world. Is shocking to me. Richard, you said

0:20:11.760 --> 0:20:14.760
<v Speaker 1>that sometimes nudging is not enough is the answer, and

0:20:14.840 --> 0:20:19.119
<v Speaker 1>economic one basically causing prices to go up dramatically or

0:20:19.320 --> 0:20:23.960
<v Speaker 1>is it just a legal one. Well, you know, a

0:20:24.040 --> 0:20:29.040
<v Speaker 1>basic principle of economics is that it's more efficient to

0:20:29.200 --> 0:20:33.800
<v Speaker 1>drive behavior through pricing. And this is especially true for

0:20:33.920 --> 0:20:38.200
<v Speaker 1>climate change because so many of the decisions are being

0:20:38.240 --> 0:20:42.720
<v Speaker 1>made at the industrial level. How we generate power, how

0:20:42.760 --> 0:20:47.160
<v Speaker 1>we manufacture what we manufacture, how do we transport things

0:20:47.240 --> 0:20:51.760
<v Speaker 1>around the world. These are all business decisions, and businesses

0:20:51.920 --> 0:20:59.800
<v Speaker 1>react if the price of fuel triples. Well, you know,

0:21:00.720 --> 0:21:03.479
<v Speaker 1>we do. We want our grandchildren to be able to

0:21:03.520 --> 0:21:07.679
<v Speaker 1>live in a comfortable world or not if if we do,

0:21:08.040 --> 0:21:10.840
<v Speaker 1>we're gonna have to suck it up. Sweden has proved

0:21:10.880 --> 0:21:15.280
<v Speaker 1>that it's possible hundred and twenty dollars per ton, and

0:21:15.400 --> 0:21:18.240
<v Speaker 1>their economy is thriving. We can do it. We would

0:21:18.240 --> 0:21:20.920
<v Speaker 1>love to continue this conversation, but we run out of time,

0:21:20.960 --> 0:21:23.240
<v Speaker 1>and I greatly we get that. I've got about another

0:21:23.240 --> 0:21:26.480
<v Speaker 1>hour of questions for Richard Thaylor. He is at Blue School, Chicago,

0:21:27.320 --> 0:21:31.000
<v Speaker 1>the laureate, a Cubs fan. He's in therapy for that

0:21:31.119 --> 0:21:34.040
<v Speaker 1>right now. And also the book with the wonderful cast

0:21:34.080 --> 0:21:38.399
<v Speaker 1>Sunstain Nudge. The final addition, Taylor and Sunstein look for

0:21:38.440 --> 0:21:43.200
<v Speaker 1>that now. This is the Bloomberg Surveillance Podcast. Thanks for listening.

0:21:43.520 --> 0:21:46.880
<v Speaker 1>Join us live weekdays from seven to ten am Eastern

0:21:47.119 --> 0:21:51.160
<v Speaker 1>on Bloomberg Radio and on Bloomberg Television each day from

0:21:51.200 --> 0:21:56.480
<v Speaker 1>six to nine am for insight from the best in economics, finance, investment,

0:21:56.640 --> 0:22:01.639
<v Speaker 1>and international relations. And subscribe to the Surveillance podcast on

0:22:01.720 --> 0:22:05.520
<v Speaker 1>Apple podcast, SoundCloud, Bloomberg dot com, and of course, on

0:22:05.640 --> 0:22:09.800
<v Speaker 1>the terminal. I'm Tom keene In. This is Bloomberg