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 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,280 Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 5 00:00:23,360 --> 00:00:31,000 Speaker 1: dot com, and of course on the Bloomberg terminal US. 6 00:00:31,040 --> 00:00:35,559 Speaker 1: Now from Pimcoe, the author of the Strategic Bond invest Attorney. 7 00:00:35,840 --> 00:00:37,960 Speaker 1: Let's start here the shape of this cycle, how fast 8 00:00:37,960 --> 00:00:39,280 Speaker 1: it's going to move, and how easy it is to 9 00:00:39,360 --> 00:00:41,199 Speaker 1: keep up or run the how difficult it is. Can 10 00:00:41,240 --> 00:00:44,720 Speaker 1: you run me through that? Nat Tony, I'll think of 11 00:00:44,800 --> 00:00:47,440 Speaker 1: last Well, first of all, thanks for having me here today. Um, 12 00:00:48,040 --> 00:00:49,720 Speaker 1: think of the unemployment rate at least Friday in the 13 00:00:49,800 --> 00:00:52,840 Speaker 1: United States four point two percent. What is full employment? 14 00:00:53,040 --> 00:00:55,440 Speaker 1: It's there's a question mark about that. The Federal Reserve 15 00:00:55,480 --> 00:00:58,680 Speaker 1: and it's summary of economic projections in September said the 16 00:00:58,760 --> 00:01:02,800 Speaker 1: longer run full employment rate is four So it seems 17 00:01:02,800 --> 00:01:05,559 Speaker 1: around the cost of reaching full environment. Perhaps we're there 18 00:01:05,640 --> 00:01:09,480 Speaker 1: because of a large outflow of people are retiring, and 19 00:01:09,520 --> 00:01:12,800 Speaker 1: this brings about a so called late cycle dynamic, which 20 00:01:12,840 --> 00:01:15,640 Speaker 1: is what we're all talking about. Which is an acceleration 21 00:01:15,640 --> 00:01:20,400 Speaker 1: and inflation of reduction in monetary accommodation through reduction in 22 00:01:21,040 --> 00:01:24,320 Speaker 1: on purchases and of course potential for rate increases. This 23 00:01:24,360 --> 00:01:27,040 Speaker 1: is what you get in the late cycle part of 24 00:01:27,080 --> 00:01:30,280 Speaker 1: the cycle, the late portion of the cycle, and something 25 00:01:30,280 --> 00:01:32,520 Speaker 1: that investors have a think about. Two. The final comment 26 00:01:32,640 --> 00:01:35,400 Speaker 1: is that the job was rate. Next year most project 27 00:01:35,480 --> 00:01:37,480 Speaker 1: will be somewhere in the threes, probably three and a 28 00:01:37,520 --> 00:01:41,040 Speaker 1: half percent, matching the low pre prodemic, and so that's 29 00:01:41,080 --> 00:01:44,120 Speaker 1: a different type of investment scenario. Tony, you're one of 30 00:01:44,160 --> 00:01:47,240 Speaker 1: the most qualified people in the world for this question. 31 00:01:47,400 --> 00:01:53,240 Speaker 1: Do you perceive smooth functions, smooth movements of yield, movements 32 00:01:53,240 --> 00:01:59,840 Speaker 1: of price, or should we genuinely fear jump conditions? You 33 00:02:00,040 --> 00:02:02,840 Speaker 1: probably should not fear jump conditions, in partly because the 34 00:02:02,920 --> 00:02:06,200 Speaker 1: fettlers are over full years. Is built up an enormous 35 00:02:06,280 --> 00:02:09,920 Speaker 1: amount of respect for its ability to reign in inflation. 36 00:02:10,919 --> 00:02:14,799 Speaker 1: That hard one credibility is something it is not likely 37 00:02:14,880 --> 00:02:17,919 Speaker 1: to give up, and it can use its words. Ben 38 00:02:17,960 --> 00:02:23,200 Speaker 1: Bonanki famously said that monetary policies two percent action communication 39 00:02:23,280 --> 00:02:25,480 Speaker 1: with a few words, and think of Mario Dravi in 40 00:02:25,520 --> 00:02:27,760 Speaker 1: two thousand twelve with its so called butterfly speech, when 41 00:02:27,800 --> 00:02:31,120 Speaker 1: he said whatever it takes that that set Europe off 42 00:02:31,160 --> 00:02:33,320 Speaker 1: to the races, so to speak. It turned it around 43 00:02:33,720 --> 00:02:36,200 Speaker 1: so with a few words, because of built up credibility, 44 00:02:36,240 --> 00:02:40,400 Speaker 1: the idea of jump risks with worries about inflation is low, 45 00:02:40,560 --> 00:02:44,720 Speaker 1: and we see finally, final comment is that inflation expectations 46 00:02:44,960 --> 00:02:50,000 Speaker 1: broadly look for detame And final final comment is isn't 47 00:02:50,040 --> 00:02:53,320 Speaker 1: this what the Federals are sought after the global financial 48 00:02:53,360 --> 00:02:58,760 Speaker 1: prices to get rid of that disinflation deflationary mindset. It's 49 00:02:58,800 --> 00:03:03,040 Speaker 1: a huge success, hasn't gone too far? Probably not, because 50 00:03:03,080 --> 00:03:06,320 Speaker 1: again it has forty years of success to build on. Tony. 51 00:03:06,360 --> 00:03:10,360 Speaker 1: There's a jump condition, indicated by rhetoric from the Federal Reserve. 52 00:03:10,360 --> 00:03:12,920 Speaker 1: There's also a jump condition from liquidity, especially as if 53 00:03:12,919 --> 00:03:15,120 Speaker 1: FED stopped soaking up as much of the off the 54 00:03:15,200 --> 00:03:16,919 Speaker 1: run Treasury is not to get all geeky, but a 55 00:03:16,919 --> 00:03:19,080 Speaker 1: lot of people have pointed to a lack of liquidity 56 00:03:19,120 --> 00:03:21,320 Speaker 1: and some of the distortions that we're seeing. How much 57 00:03:21,520 --> 00:03:23,840 Speaker 1: can we get a clear read on the yield curve, 58 00:03:23,880 --> 00:03:26,000 Speaker 1: on some of the dynamics in a bond market beset 59 00:03:26,040 --> 00:03:29,600 Speaker 1: by all of these liquidity issues. It's a great question, Lisa, 60 00:03:29,639 --> 00:03:32,200 Speaker 1: and it's important question to be thinking about this decade 61 00:03:32,240 --> 00:03:34,840 Speaker 1: because it's a lot different than other decades. The so 62 00:03:34,920 --> 00:03:38,680 Speaker 1: called principal agent model is broken, which is to say 63 00:03:38,680 --> 00:03:42,520 Speaker 1: that it's difficult in the bond markets finded into mediary 64 00:03:42,640 --> 00:03:46,160 Speaker 1: to transfer risk, whether that be to to gain it 65 00:03:46,240 --> 00:03:48,440 Speaker 1: or to to lose it. Here's one quick example of 66 00:03:48,800 --> 00:03:52,200 Speaker 1: the primary dealers, those that are the in goo between 67 00:03:52,200 --> 00:03:56,440 Speaker 1: the intermediaries, large investment firms. They held three billion of 68 00:03:56,480 --> 00:03:59,760 Speaker 1: corporate bonds at two seven. Today they hold less than 69 00:04:00,120 --> 00:04:03,560 Speaker 1: ten billion, despite that that corporate bondom market doubling in size. 70 00:04:03,560 --> 00:04:07,080 Speaker 1: In other words, uh, the intermediaries aren't willing or able 71 00:04:07,120 --> 00:04:10,280 Speaker 1: to hold inventories like a game of hot potato every day. 72 00:04:10,920 --> 00:04:13,000 Speaker 1: And during periods of stress, it's even worse. And so 73 00:04:13,040 --> 00:04:16,839 Speaker 1: this is an issue that that the Federal Reserve and 74 00:04:16,880 --> 00:04:21,600 Speaker 1: others that that that constructs the architecture of the bondom 75 00:04:21,600 --> 00:04:24,599 Speaker 1: market probably wants to think about should think about, because 76 00:04:24,600 --> 00:04:28,680 Speaker 1: it's it makes things difficult again, especially in times of stress. 77 00:04:28,760 --> 00:04:31,600 Speaker 1: It's any love catching on with you said this morning 78 00:04:31,600 --> 00:04:40,920 Speaker 1: to thank you. We begin equity covers today with that 79 00:04:41,080 --> 00:04:43,680 Speaker 1: yard Danny joining in a bit Lizien Saunders now with 80 00:04:43,760 --> 00:04:46,080 Speaker 1: Charles Schwab. She's had the courage to be in the 81 00:04:46,120 --> 00:04:48,720 Speaker 1: market and informs all of us every morning with her 82 00:04:48,760 --> 00:04:53,279 Speaker 1: team with absolutely brilliant charts sometimes Bloomberg charts out on 83 00:04:53,320 --> 00:04:56,400 Speaker 1: Twitter as well. Listen buy on the DIP. I guess 84 00:04:56,400 --> 00:05:00,479 Speaker 1: it's once more in order. The cliche of Tina. What's 85 00:05:00,560 --> 00:05:05,200 Speaker 1: the most dangerous cliche right now? I don't know if 86 00:05:05,240 --> 00:05:07,840 Speaker 1: it's a cliche, but I think the notion that the 87 00:05:07,880 --> 00:05:11,159 Speaker 1: market has been so resilient throughout the year and the 88 00:05:11,200 --> 00:05:13,360 Speaker 1: face of all the risks that are very well known 89 00:05:14,240 --> 00:05:17,800 Speaker 1: um simply suggests that you're not even peeling the first 90 00:05:17,839 --> 00:05:20,719 Speaker 1: layer of the onion back on. You know. One of 91 00:05:20,760 --> 00:05:23,960 Speaker 1: these off posted charts on on Twitter that I put 92 00:05:24,000 --> 00:05:28,120 Speaker 1: as the draw down table looking at the index level declines, 93 00:05:28,200 --> 00:05:30,960 Speaker 1: which whether it's the SMP, Nastac or Russell have been 94 00:05:31,000 --> 00:05:33,200 Speaker 1: somewhat limited five percent in the case of the SMP, 95 00:05:33,320 --> 00:05:35,800 Speaker 1: only ten percent in the case of the other two. 96 00:05:35,880 --> 00:05:39,479 Speaker 1: But the average maximum draw down at some point this 97 00:05:39,600 --> 00:05:42,800 Speaker 1: year across all stocks in the SMP is minus nineteen. 98 00:05:42,880 --> 00:05:45,360 Speaker 1: It's minus forty two in the case of the Nazdac. 99 00:05:45,800 --> 00:05:47,760 Speaker 1: Now that's a pretty benign way to go through a 100 00:05:47,800 --> 00:05:50,360 Speaker 1: corrective phase via the process of rotation. I think we'd 101 00:05:50,360 --> 00:05:53,520 Speaker 1: all prefer that over the bottom falling out all at once, 102 00:05:53,680 --> 00:05:56,920 Speaker 1: but it does make for a more treacherous environment trying 103 00:05:56,960 --> 00:06:01,440 Speaker 1: to trade around those rotational core actions. Luziens John Farrell 104 00:06:01,480 --> 00:06:04,760 Speaker 1: hasn't treatment a coffee table book called draw Down Meditation, 105 00:06:04,920 --> 00:06:07,800 Speaker 1: which is about the sleepiness of the market. Are we 106 00:06:07,920 --> 00:06:12,400 Speaker 1: guilty right now, liz Enne Saunders of draw down Meditation, 107 00:06:12,640 --> 00:06:16,680 Speaker 1: or we've just become benumbed by this great bull market? Well, 108 00:06:16,839 --> 00:06:20,640 Speaker 1: I think there had been and notice emphasis on had 109 00:06:20,720 --> 00:06:24,040 Speaker 1: a tremendous amount of complacency. We were seeing speculative fraud 110 00:06:24,480 --> 00:06:26,839 Speaker 1: kicked back in even in some of the lower quality 111 00:06:26,920 --> 00:06:30,240 Speaker 1: areas that had dominated trading in the early part of 112 00:06:30,279 --> 00:06:35,000 Speaker 1: this year. But the volatility that started on you know, 113 00:06:35,080 --> 00:06:40,160 Speaker 1: Bleak Friday with the Amicron news really brought a shift 114 00:06:40,400 --> 00:06:45,039 Speaker 1: in behavioral measures of sentiment, and I think that has 115 00:06:45,160 --> 00:06:48,400 Speaker 1: been a factor in why the market is finding a lift, 116 00:06:48,520 --> 00:06:52,960 Speaker 1: because that complacency, that speculative fraud got rung out pretty quickly, 117 00:06:53,680 --> 00:06:57,200 Speaker 1: both in attitudinal measures survey based out like AII, but 118 00:06:57,279 --> 00:07:01,440 Speaker 1: also positioning with a Pook call ratio or other metrics 119 00:07:01,480 --> 00:07:04,920 Speaker 1: that actually look at what certain cohorts of shorter term 120 00:07:04,960 --> 00:07:08,320 Speaker 1: traders are doing, so that's not a bad set up. 121 00:07:08,720 --> 00:07:12,640 Speaker 1: More recently, is that quick reversal in sentiment conditions, Lausanna, 122 00:07:12,960 --> 00:07:15,920 Speaker 1: This is not a time for complacency, as you said, however, 123 00:07:15,960 --> 00:07:19,400 Speaker 1: a very difficult time to hedge given the inflationary expectations 124 00:07:19,680 --> 00:07:23,120 Speaker 1: given the FED. What's your top hedge for potential volatility 125 00:07:23,120 --> 00:07:25,560 Speaker 1: at this point? I don't know that I would call 126 00:07:25,600 --> 00:07:28,400 Speaker 1: it a hedge. I know that term often gets you 127 00:07:28,600 --> 00:07:34,480 Speaker 1: somewhat generically, even when applied to disciplines like diversification. I mean, 128 00:07:34,520 --> 00:07:37,200 Speaker 1: I think true hedging, a lot of that might be 129 00:07:37,240 --> 00:07:39,920 Speaker 1: able to be done in the bixed futures market or 130 00:07:39,920 --> 00:07:42,640 Speaker 1: the options market, but there's no blanket recommendation because it 131 00:07:42,640 --> 00:07:45,880 Speaker 1: depends on what it is you're trying to hedge in 132 00:07:46,000 --> 00:07:49,160 Speaker 1: terms of just trying to protect some downside. In addition 133 00:07:49,200 --> 00:07:52,880 Speaker 1: to the disciplines of diversification, I think one of the 134 00:07:52,920 --> 00:07:58,840 Speaker 1: strategies to consider employing, taking into consideration the increased turnover 135 00:07:59,160 --> 00:08:03,640 Speaker 1: and thing like text implications, is maybe more periodic rebalancing, 136 00:08:03,760 --> 00:08:06,400 Speaker 1: especially for investors that might have taken just a calendar 137 00:08:06,440 --> 00:08:09,120 Speaker 1: based rebalancing approach. They might do it at you're in, 138 00:08:09,240 --> 00:08:12,280 Speaker 1: they might do it at quarter end. Instead, take advantage 139 00:08:12,320 --> 00:08:15,520 Speaker 1: of the swift rotations and maybe up the pace of 140 00:08:15,560 --> 00:08:20,400 Speaker 1: rebalancing so you're more frequently trimming into strength taking profits 141 00:08:20,440 --> 00:08:23,440 Speaker 1: where profits are given to you in some cases very 142 00:08:23,480 --> 00:08:26,600 Speaker 1: significant profits and very condensed period of times, and dealing 143 00:08:26,600 --> 00:08:29,920 Speaker 1: with that flip clop. You're also adding into positions maybe 144 00:08:29,960 --> 00:08:33,000 Speaker 1: that have had short term underperformance. So that's probably the 145 00:08:33,040 --> 00:08:36,240 Speaker 1: best strategy to approach a much more volatile period like now. 146 00:08:36,320 --> 00:08:38,280 Speaker 1: What's interesting to me, Lausanne, is that you don't talk 147 00:08:38,400 --> 00:08:42,040 Speaker 1: about compositional shifts on sort of a broader scale, whether 148 00:08:42,200 --> 00:08:45,959 Speaker 1: it's increasing two bonds or increasing the duration or necessarily 149 00:08:46,040 --> 00:08:49,000 Speaker 1: anything that's a typical hedge. And I wonder if that's 150 00:08:49,040 --> 00:08:51,559 Speaker 1: new for you or if this has always been your recommendation. Basically, 151 00:08:51,600 --> 00:08:54,720 Speaker 1: the idea that if inflation really is the main threat 152 00:08:55,080 --> 00:08:57,319 Speaker 1: that's going to be a problem for a sixty portfolio, 153 00:08:57,600 --> 00:09:00,960 Speaker 1: that's going to be a problem for traditional balancing. Well, 154 00:09:01,000 --> 00:09:03,680 Speaker 1: the key there in terms of things like the sixty 155 00:09:04,080 --> 00:09:08,360 Speaker 1: portfolio is watching the correlation between bond yields and stock prices. 156 00:09:08,440 --> 00:09:11,400 Speaker 1: We went for about thirty years from the mid sixties 157 00:09:11,840 --> 00:09:16,640 Speaker 1: until the late nineties where that correlation was pretty persistently negative, 158 00:09:16,679 --> 00:09:19,920 Speaker 1: and that's really when a sixty type strategy struggled a 159 00:09:19,960 --> 00:09:22,960 Speaker 1: bit more. It was also an environment that had many 160 00:09:23,000 --> 00:09:25,840 Speaker 1: more supply shocks. Then fast forward to the twenty years 161 00:09:25,880 --> 00:09:29,800 Speaker 1: up until this year, it has been almost exclusively a 162 00:09:29,840 --> 00:09:33,600 Speaker 1: positive correlation environment and an environment where inflation was quite 163 00:09:33,640 --> 00:09:36,400 Speaker 1: low and we were more subjected to demand shocks and 164 00:09:36,480 --> 00:09:39,440 Speaker 1: we were supply shocks. When we first saw the eruption 165 00:09:39,520 --> 00:09:42,240 Speaker 1: inflation in the middle part of this year, that correlation 166 00:09:42,320 --> 00:09:45,680 Speaker 1: dipped back into negative territory popped back out. But to me, 167 00:09:45,880 --> 00:09:49,200 Speaker 1: that is a key to watch heading into two is 168 00:09:49,240 --> 00:09:52,760 Speaker 1: if we move back into negative correlation on a sustained basis, 169 00:09:53,120 --> 00:09:56,319 Speaker 1: I think that suggests we're shifting into a more secular 170 00:09:56,920 --> 00:10:00,640 Speaker 1: inflationary backdrop. That doesn't mean perpetually rising in plation doesn't 171 00:10:00,640 --> 00:10:03,800 Speaker 1: necessarily need stagflation, but to your point, leads a very 172 00:10:03,800 --> 00:10:08,240 Speaker 1: different environment in terms of how to add that diversification 173 00:10:08,840 --> 00:10:12,200 Speaker 1: and what to do on the fixed income side of portfolios, 174 00:10:12,240 --> 00:10:14,400 Speaker 1: which of course is your friend and my friend and 175 00:10:14,520 --> 00:10:18,600 Speaker 1: colleague Kathy Jones is Baileywick. I wonder though, at what 176 00:10:18,720 --> 00:10:20,600 Speaker 1: point people take a look at the behavior of the 177 00:10:20,600 --> 00:10:22,959 Speaker 1: bottom market over the past couple of weeks, they say, 178 00:10:22,960 --> 00:10:25,319 Speaker 1: look at the tenure way back down one point for 179 00:10:25,520 --> 00:10:29,080 Speaker 1: three percent, and that sell off, that negative correlation just 180 00:10:29,200 --> 00:10:31,480 Speaker 1: isn't going to happen, because any kind of turmoil is 181 00:10:31,480 --> 00:10:33,960 Speaker 1: going to lead people back into the long end of 182 00:10:34,000 --> 00:10:37,120 Speaker 1: the treasury curve. Can we make that assumption or is 183 00:10:37,160 --> 00:10:40,760 Speaker 1: it too premature? I think it's premature. We also know 184 00:10:41,040 --> 00:10:43,480 Speaker 1: that throughout the course of the past year, both when 185 00:10:43,480 --> 00:10:45,640 Speaker 1: we saw that ten years spike up too close to 186 00:10:45,679 --> 00:10:49,720 Speaker 1: one in March and then they equally swift retreat back 187 00:10:49,760 --> 00:10:52,360 Speaker 1: down into the one, A lot of that was was 188 00:10:52,480 --> 00:10:56,080 Speaker 1: positioning and short covering, and I think you have to 189 00:10:56,120 --> 00:10:57,960 Speaker 1: sort of take with a grain of salt to some 190 00:10:58,080 --> 00:11:01,200 Speaker 1: degree the messaging back to the what the market in 191 00:11:01,280 --> 00:11:04,679 Speaker 1: areas like that, that doesn't mean disregard what's happening in 192 00:11:04,720 --> 00:11:08,599 Speaker 1: the tenure. I think really key will be elsewhere in 193 00:11:08,640 --> 00:11:11,400 Speaker 1: the credit markets what we see happen out the risk 194 00:11:11,520 --> 00:11:14,480 Speaker 1: spectrum in terms of spreads. I think that's going to 195 00:11:14,520 --> 00:11:17,880 Speaker 1: be a more important tell if and when we ever 196 00:11:17,920 --> 00:11:20,480 Speaker 1: get to a point where we're spreads are signaling a 197 00:11:20,520 --> 00:11:23,640 Speaker 1: more dire message. I think that is the message for 198 00:11:23,800 --> 00:11:26,959 Speaker 1: sure that equity investors want to heat. But I think 199 00:11:27,000 --> 00:11:29,959 Speaker 1: you have to take that short term positioning into consideration 200 00:11:30,000 --> 00:11:34,640 Speaker 1: when looking at moves really across the treasury curve all 201 00:11:34,679 --> 00:11:36,600 Speaker 1: the way out to the long end. Just an awesome 202 00:11:36,679 --> 00:11:40,000 Speaker 1: saying I've schwab Kathy Jones over unfixed income, Liz An 203 00:11:40,040 --> 00:11:42,319 Speaker 1: Saunders on equities Liz, and thank you for being with 204 00:11:42,400 --> 00:11:50,640 Speaker 1: us today, list and Saunders that swab. I've got eight 205 00:11:50,679 --> 00:11:52,880 Speaker 1: ways to go here, John. We had did this earlier 206 00:11:52,880 --> 00:11:55,240 Speaker 1: with Liz and Saunders of Charles Schwab, and we're now 207 00:11:55,280 --> 00:11:58,200 Speaker 1: thrilled to extend the conversation to give you global Wall 208 00:11:58,200 --> 00:12:01,839 Speaker 1: Street perspective with wear Your Denny. He's founder and chief 209 00:12:01,840 --> 00:12:05,720 Speaker 1: investment strategists at Your Denny Research. Long ago high above 210 00:12:05,800 --> 00:12:09,320 Speaker 1: Cayuga's waters, he knew double digit inflation and then on 211 00:12:09,400 --> 00:12:13,080 Speaker 1: department at Yale University, and I thought, there we go. 212 00:12:13,240 --> 00:12:17,240 Speaker 1: Thank you, good morning Cornell on radio. And I want 213 00:12:17,240 --> 00:12:21,840 Speaker 1: to go to the Krugman essay last week where he 214 00:12:21,960 --> 00:12:25,640 Speaker 1: destroyed monitorism and said simply it was a theory, then 215 00:12:25,840 --> 00:12:30,120 Speaker 1: it's not. Now what should we do with our collective 216 00:12:30,200 --> 00:12:34,200 Speaker 1: memory of the ghosts of the seventies the theories of 217 00:12:34,280 --> 00:12:38,600 Speaker 1: Milton Friedman. Well, I think he was right. Up until 218 00:12:38,600 --> 00:12:42,720 Speaker 1: the pandemic. We did see a tremendous amount of quantitative easing, 219 00:12:43,679 --> 00:12:48,400 Speaker 1: zero interest rates, central banks provided a tremendous amount of liquidity, 220 00:12:48,480 --> 00:12:50,960 Speaker 1: and yet there were some very powerful forces that kept 221 00:12:50,960 --> 00:12:54,920 Speaker 1: inflation down. This inflation was the law of the land 222 00:12:55,000 --> 00:12:58,560 Speaker 1: for many, many years following the Great Inflation of the 223 00:12:58,640 --> 00:13:05,440 Speaker 1: nineteen seventies. UM it was things like globalization and technological innovation, aging, demography, 224 00:13:05,480 --> 00:13:09,080 Speaker 1: and too much debt that all were fundamentally disinflationary. But 225 00:13:09,120 --> 00:13:12,719 Speaker 1: the pandemic changed all that because it really put monitorism 226 00:13:12,760 --> 00:13:16,640 Speaker 1: on steroids and speed in the form of modern monetary theory. 227 00:13:16,720 --> 00:13:22,239 Speaker 1: We just had this unprecedented increase in government debt deficits, 228 00:13:22,480 --> 00:13:25,480 Speaker 1: and all of that was to a lot extent financed 229 00:13:25,520 --> 00:13:28,440 Speaker 1: by the central banks. Help us with the distance here 230 00:13:28,520 --> 00:13:32,199 Speaker 1: from Dartmouth College and David Blanche Flower Hanover, New Hampshire 231 00:13:32,760 --> 00:13:36,559 Speaker 1: in the University of Cambridge and Dr l Arian they 232 00:13:36,559 --> 00:13:40,560 Speaker 1: are power opposites on the inflation Guess where do you 233 00:13:40,640 --> 00:13:45,440 Speaker 1: stand on that? Well? I think inflation is persistent obviously 234 00:13:45,480 --> 00:13:49,760 Speaker 1: the word transitory is no longer allowed in our conversation. 235 00:13:49,800 --> 00:13:53,400 Speaker 1: According to J. Powell, so persistent. I think it's going 236 00:13:53,440 --> 00:13:56,239 Speaker 1: to be four to five percent for the consumption deflator 237 00:13:56,640 --> 00:13:59,560 Speaker 1: until the middle of next year, and then I think 238 00:13:59,559 --> 00:14:02,920 Speaker 1: it does he's back down to three to four percent. 239 00:14:03,360 --> 00:14:04,920 Speaker 1: I don't think it's going to go back to two 240 00:14:04,920 --> 00:14:08,480 Speaker 1: percent anytime soon, and I will not be surprised at 241 00:14:08,480 --> 00:14:12,839 Speaker 1: the Fed deals with that by raising the Fed funds 242 00:14:12,920 --> 00:14:15,600 Speaker 1: rate by maybe two maybe three times. But I think 243 00:14:15,640 --> 00:14:19,680 Speaker 1: they might also seriously consider raising the inflation target, moving 244 00:14:19,760 --> 00:14:23,360 Speaker 1: the goal from two percent to three percent. And a 245 00:14:23,440 --> 00:14:25,560 Speaker 1: lot of people are looking at a federal reserve that 246 00:14:25,760 --> 00:14:29,040 Speaker 1: is so responsive to market turmoil that basically, if they 247 00:14:29,080 --> 00:14:31,400 Speaker 1: do signal that they're going to raise rates next year 248 00:14:31,440 --> 00:14:34,120 Speaker 1: and there is some sort of tantrum, they'll step in 249 00:14:34,320 --> 00:14:37,360 Speaker 1: and ease some of the conditions. How much is that 250 00:14:37,440 --> 00:14:41,720 Speaker 1: anachronism at this point, given that there's a very different paradigm. 251 00:14:41,960 --> 00:14:44,560 Speaker 1: I think it is. You're absolutely right, it's a different paradigm. 252 00:14:44,640 --> 00:14:50,280 Speaker 1: And we've had four taper tantrums since two thousand and thirteen. 253 00:14:50,720 --> 00:14:52,840 Speaker 1: We had one in May two thousand thirteen, and then 254 00:14:52,840 --> 00:14:55,920 Speaker 1: we had another one in early two thousand sixteen one, 255 00:14:55,960 --> 00:14:59,160 Speaker 1: and right before Christmas on two thousand and eighteen, and 256 00:14:59,200 --> 00:15:01,680 Speaker 1: then this one. This one is a work in progress. 257 00:15:01,760 --> 00:15:04,280 Speaker 1: It's it's not clear just how it's gonna play out. 258 00:15:04,960 --> 00:15:07,720 Speaker 1: But I think that the big difference is this time around, 259 00:15:07,720 --> 00:15:10,560 Speaker 1: the FED can't give the market what it wants, which 260 00:15:10,560 --> 00:15:13,200 Speaker 1: would be okay, back off, back off, don't, don't, don't 261 00:15:13,240 --> 00:15:16,680 Speaker 1: taper so much, uh, simply because the inflation problem is 262 00:15:16,760 --> 00:15:19,280 Speaker 1: real and the FED has made it very clear that 263 00:15:19,640 --> 00:15:22,040 Speaker 1: they are now concerned about it, so it's going to 264 00:15:22,120 --> 00:15:24,600 Speaker 1: be pretty hard for them to back off. Although I 265 00:15:24,640 --> 00:15:27,640 Speaker 1: do notice in the data there's been a real shift 266 00:15:27,680 --> 00:15:30,240 Speaker 1: over the past few weeks that people are bringing down 267 00:15:30,320 --> 00:15:33,840 Speaker 1: their longer term expectations once again for inflation. It seems 268 00:15:33,840 --> 00:15:36,960 Speaker 1: as if people are convinced that a federal reserve hiking 269 00:15:37,080 --> 00:15:39,720 Speaker 1: rates in the near term will allow growth to revert 270 00:15:39,880 --> 00:15:42,720 Speaker 1: something similar to what we've seen in the past, albeit 271 00:15:43,000 --> 00:15:45,960 Speaker 1: possibly even lower based on the demographics you're talking about. 272 00:15:46,280 --> 00:15:48,400 Speaker 1: Is that a reality in your perspective? Does this give 273 00:15:48,440 --> 00:15:50,720 Speaker 1: them leeway to hike a couple of times, let it 274 00:15:50,760 --> 00:15:53,960 Speaker 1: go and actually have a smooth exit. I hope so. 275 00:15:54,040 --> 00:15:57,000 Speaker 1: I think that's the consensus view. Maybe it's wishful thinking. 276 00:15:57,080 --> 00:16:00,840 Speaker 1: Maybe you know, the pessimism about the near term is 277 00:16:00,880 --> 00:16:04,840 Speaker 1: being upset by the perception that the pain now will 278 00:16:04,880 --> 00:16:08,160 Speaker 1: lead to gain later. Uh. Look, first and foremost, I 279 00:16:08,200 --> 00:16:09,600 Speaker 1: don't think this is gonna wind up to be like 280 00:16:09,600 --> 00:16:12,480 Speaker 1: the nineteen seventies. There's some aspects of that going on 281 00:16:12,600 --> 00:16:15,400 Speaker 1: right now, like a wage price firal, which is of concern, 282 00:16:15,800 --> 00:16:18,520 Speaker 1: and we're already seeing some cost of living adjustments being 283 00:16:18,520 --> 00:16:22,080 Speaker 1: put into contracts. But I'm a big believer that productivity 284 00:16:22,120 --> 00:16:24,720 Speaker 1: is making a huge comeback. And the reason for that 285 00:16:24,840 --> 00:16:26,880 Speaker 1: is one of the huge differences between now and the 286 00:16:26,920 --> 00:16:29,600 Speaker 1: seventies is there's no growth in the labor force, so 287 00:16:29,720 --> 00:16:32,960 Speaker 1: that's related to demography, and the companies are just going 288 00:16:33,000 --> 00:16:35,760 Speaker 1: to have to increase productivity to upset the fact that 289 00:16:35,840 --> 00:16:39,960 Speaker 1: the labor shortages are not temporary, their chronic and your journy. 290 00:16:40,000 --> 00:16:41,560 Speaker 1: I want to go to your book and I want 291 00:16:41,600 --> 00:16:43,960 Speaker 1: to say it is a triumph to megan decide the 292 00:16:43,960 --> 00:16:47,480 Speaker 1: London School of Economics where ed Yard Danny Folks writes 293 00:16:47,560 --> 00:16:49,840 Speaker 1: in Praise of Profits, and you begin with a great 294 00:16:49,920 --> 00:16:54,520 Speaker 1: David Ricardo who changed how we think and this underestimation 295 00:16:54,560 --> 00:16:58,560 Speaker 1: of profits. Is the profits now for technology different than 296 00:16:58,600 --> 00:17:03,480 Speaker 1: the profits of just December of two thousand, absolutely, I 297 00:17:03,480 --> 00:17:08,280 Speaker 1: mean in in in two thousand, a lot of the 298 00:17:08,359 --> 00:17:12,680 Speaker 1: profits and technology were based on dot com companies who 299 00:17:12,720 --> 00:17:17,119 Speaker 1: had really no serious business plan, ordering technology and paying 300 00:17:17,160 --> 00:17:22,600 Speaker 1: for it with credit. The big situation back then was 301 00:17:22,640 --> 00:17:27,000 Speaker 1: that you had telecom companies seller financing their their customers. 302 00:17:27,040 --> 00:17:30,520 Speaker 1: So those profits were kind of phony and uh, it 303 00:17:30,640 --> 00:17:33,160 Speaker 1: was a period where there was a lot of manipulation 304 00:17:33,160 --> 00:17:36,120 Speaker 1: of profits. This time around, these are very real profits. 305 00:17:36,119 --> 00:17:39,840 Speaker 1: They're based on very real businesses. And I think technology is, 306 00:17:40,119 --> 00:17:43,480 Speaker 1: uh is the way of the future. It's it always is, 307 00:17:43,520 --> 00:17:45,919 Speaker 1: but it's more so than ever. How do you respond 308 00:17:46,160 --> 00:17:49,600 Speaker 1: to the cry of fifteen years that the profits are 309 00:17:49,640 --> 00:17:53,520 Speaker 1: all going to a few? Well, there there is this 310 00:17:53,640 --> 00:17:57,359 Speaker 1: kind of Marxist view out there that, uh, if if 311 00:17:57,400 --> 00:18:00,359 Speaker 1: a company is profitable, it might must be exploiting somebuddy, 312 00:18:00,680 --> 00:18:04,200 Speaker 1: and it's probably exploiting workers and maybe exploiting consumers by 313 00:18:04,200 --> 00:18:06,600 Speaker 1: not giving them the very best. But I make a 314 00:18:06,640 --> 00:18:09,480 Speaker 1: distinction between two kinds of capitalism and my book, and 315 00:18:09,480 --> 00:18:13,720 Speaker 1: that's entrepreneurial capitalism and chrony capitalism. I actually am and 316 00:18:13,800 --> 00:18:17,040 Speaker 1: in the same camp as a progressive socialists. When I 317 00:18:17,080 --> 00:18:21,159 Speaker 1: when I say that I'm against chrony capitalism, chrony capitalism 318 00:18:21,200 --> 00:18:24,439 Speaker 1: isn't capitalism. It's all about using the political system to 319 00:18:24,480 --> 00:18:27,800 Speaker 1: gain the system. I'm I'm an entrepreneur myself, and I 320 00:18:28,359 --> 00:18:31,480 Speaker 1: can't afford lobbyists. So I think that's really the definite 321 00:18:31,680 --> 00:18:35,119 Speaker 1: distinction between an entrepreneur and a chrony is whether you 322 00:18:35,119 --> 00:18:37,720 Speaker 1: can afford lobbyists or not. I can't, and I've got 323 00:18:37,720 --> 00:18:40,639 Speaker 1: to compete. I've got to get customers the very best. 324 00:18:40,640 --> 00:18:43,240 Speaker 1: So in my book, I also argue that Adam Smith 325 00:18:43,280 --> 00:18:47,600 Speaker 1: did a terrible job of marketing capitalism by telling us 326 00:18:47,640 --> 00:18:51,560 Speaker 1: that it's all about selfishness. It's not selfishness, it's insecurity. 327 00:18:51,680 --> 00:18:53,680 Speaker 1: I'm going to go out of business if I don't 328 00:18:53,720 --> 00:18:55,720 Speaker 1: give my customers the very best of what I have. 329 00:18:56,440 --> 00:18:58,960 Speaker 1: I'm sure that that's a harder sell that capitalism. Go 330 00:18:59,040 --> 00:19:01,680 Speaker 1: for it, because it's based but insecurity. I do wonder though, 331 00:19:02,160 --> 00:19:04,600 Speaker 1: just going into the realm of trading, going into the 332 00:19:04,600 --> 00:19:07,640 Speaker 1: realm of how you position in such a tenuous period, 333 00:19:07,680 --> 00:19:11,760 Speaker 1: given that you do feel overly overall optimistic about productivity 334 00:19:11,800 --> 00:19:14,280 Speaker 1: but a little bit concerned about the FED and how 335 00:19:14,320 --> 00:19:17,760 Speaker 1: that all shakes out. Have we already priced in the 336 00:19:17,880 --> 00:19:21,639 Speaker 1: dynamism and technology the productivity gains that you're expecting, or 337 00:19:21,680 --> 00:19:24,639 Speaker 1: do you think that that will fuel further gains in 338 00:19:24,680 --> 00:19:27,800 Speaker 1: the headline indexes next year? Well, look, I think the 339 00:19:27,840 --> 00:19:30,960 Speaker 1: best is yet to come for us in terms of prosperity, 340 00:19:31,040 --> 00:19:34,320 Speaker 1: in terms of standard of living. I think technology is 341 00:19:34,320 --> 00:19:36,080 Speaker 1: going to solve a lot of our problems. It is 342 00:19:36,080 --> 00:19:39,280 Speaker 1: solving a lot of our problems. But yeah, I mean 343 00:19:39,359 --> 00:19:43,800 Speaker 1: it's We're not going to get double digit increases in 344 00:19:43,840 --> 00:19:47,000 Speaker 1: the stock market anytime soon. Earnings peaked on a year 345 00:19:47,040 --> 00:19:49,760 Speaker 1: over your basis in the second quarter, and that that 346 00:19:49,800 --> 00:19:51,560 Speaker 1: doesn't mean they go down, they just grow at a 347 00:19:51,640 --> 00:19:54,880 Speaker 1: slower pace. So I'm predicting that we go from forty 348 00:19:54,920 --> 00:19:58,639 Speaker 1: eight hundred by year end, So I'm I'm We're getting close, 349 00:19:58,680 --> 00:20:02,480 Speaker 1: but no cigar, just it and then something like dred 350 00:20:02,920 --> 00:20:05,800 Speaker 1: by the end of next year and by the end 351 00:20:05,840 --> 00:20:09,080 Speaker 1: of two thousand and thirty. And those are not spectacular increases, 352 00:20:09,359 --> 00:20:13,040 Speaker 1: their single digits, consistent with single digit increases and earnings 353 00:20:13,760 --> 00:20:15,560 Speaker 1: at looking forward to giving the book and read it's 354 00:20:15,560 --> 00:20:17,359 Speaker 1: on my desk. Thanks for paying with us this morning, buddy. 355 00:20:17,359 --> 00:20:20,800 Speaker 1: I appreciate it. At Johnny of any Research and author 356 00:20:21,240 --> 00:20:29,320 Speaker 1: of the Praise of Profit. He's out of Notre Dame 357 00:20:29,320 --> 00:20:32,080 Speaker 1: in Michigan, and you know, it's a typical structure that 358 00:20:32,119 --> 00:20:35,480 Speaker 1: you would see for an airline executive in the modern era. 359 00:20:35,600 --> 00:20:38,000 Speaker 1: Can we talk about customer service? Tump in the sky 360 00:20:38,160 --> 00:20:42,480 Speaker 1: right now? That relationship has just broken down between the 361 00:20:42,520 --> 00:20:44,080 Speaker 1: people that work for the allies and the people to 362 00:20:44,160 --> 00:20:47,280 Speaker 1: fly right now. It is broken. Our personal soap opera 363 00:20:47,320 --> 00:20:48,959 Speaker 1: here that Lisa and I are living as well as 364 00:20:48,960 --> 00:20:51,440 Speaker 1: we're catching up with John Farrell. John, you've been living 365 00:20:51,480 --> 00:20:54,679 Speaker 1: this for eighteen months, I'll say, and I've got a 366 00:20:54,720 --> 00:20:58,240 Speaker 1: renewed respect for what you and many others flying on 367 00:20:58,359 --> 00:21:00,080 Speaker 1: a heath throw of had to put up with this 368 00:21:00,200 --> 00:21:02,560 Speaker 1: attention right now between the people who work for the 369 00:21:02,560 --> 00:21:06,240 Speaker 1: airlines and the people who fly on the airlines. Obviously 370 00:21:06,240 --> 00:21:09,760 Speaker 1: away from the extreme stories which are absolutely ridiculous where 371 00:21:09,760 --> 00:21:12,960 Speaker 1: there's been violence on the planes and the absolutely zero 372 00:21:13,040 --> 00:21:15,960 Speaker 1: support from anyone for any of that, but anyone flying 373 00:21:16,040 --> 00:21:18,840 Speaker 1: right now, Tom has fount that tension between the people 374 00:21:18,840 --> 00:21:21,560 Speaker 1: who work on the airlines and with me personally, have 375 00:21:21,560 --> 00:21:24,800 Speaker 1: found it too over the Mastertop very very aggressive over 376 00:21:24,840 --> 00:21:27,480 Speaker 1: themasking and they've been putting a very unfortunate position where 377 00:21:27,480 --> 00:21:30,480 Speaker 1: clearly they feel at risk on the airline themselves, and 378 00:21:30,520 --> 00:21:33,600 Speaker 1: they feel like they also have to enforce these policies too, 379 00:21:33,600 --> 00:21:37,120 Speaker 1: and it just creates this natural tension. Tom fit is there. 380 00:21:37,160 --> 00:21:38,840 Speaker 1: It's kind of the elephant in the room when you 381 00:21:38,880 --> 00:21:41,480 Speaker 1: fly right now. It's just how delicate things seem to 382 00:21:41,520 --> 00:21:44,680 Speaker 1: be between the passenger and the airline stuff the pandemic. 383 00:21:44,720 --> 00:21:46,440 Speaker 1: But I'm going to say, John, this is a real 384 00:21:46,560 --> 00:21:50,760 Speaker 1: leadership exercise, and everybody's got their own anecdotes. I'll give 385 00:21:50,800 --> 00:21:53,800 Speaker 1: a plus plus the delta that happens to be my experience. 386 00:21:53,840 --> 00:21:57,280 Speaker 1: But we were talking about jet Blue earlier, you know, John, 387 00:21:57,280 --> 00:21:59,639 Speaker 1: you and I got in at at least it was 388 00:21:59,640 --> 00:22:01,960 Speaker 1: already cock ob jet Blue because she was in a 389 00:22:02,040 --> 00:22:04,080 Speaker 1: three am. Well, i'll tell you the biggest misconception about 390 00:22:04,119 --> 00:22:06,119 Speaker 1: Jet Blue when he decided the Atlantic and as they 391 00:22:06,119 --> 00:22:08,800 Speaker 1: started that new entry into that corridor, Tom over the 392 00:22:08,840 --> 00:22:11,439 Speaker 1: last few months, the misconception that they aren't like the 393 00:22:11,560 --> 00:22:15,640 Speaker 1: ryanair of American airlines. And I don't think that's Ryan. 394 00:22:15,680 --> 00:22:18,280 Speaker 1: I think that misconception also exists to some degree in 395 00:22:18,320 --> 00:22:20,600 Speaker 1: the United States. Tom, I don't see them as a 396 00:22:20,640 --> 00:22:23,040 Speaker 1: bunch of airline per se. I think they're mint offering 397 00:22:23,040 --> 00:22:26,280 Speaker 1: the mint camping. It's been absolutely fantastic value off of 398 00:22:26,280 --> 00:22:28,880 Speaker 1: Bloomberg surveillance. Hoolene Becker with us a few days ago 399 00:22:28,960 --> 00:22:33,520 Speaker 1: from Cowen with a real great interest in United airlines. 400 00:22:33,520 --> 00:22:36,440 Speaker 1: We are united in the value and I'm a Sodalgio 401 00:22:36,480 --> 00:22:39,240 Speaker 1: has given us. He senior scholar JOHNS. Hopkins and truly 402 00:22:39,240 --> 00:22:42,480 Speaker 1: in the trenches on this pandemic. Ms I began the 403 00:22:42,560 --> 00:22:46,080 Speaker 1: show by suggesting that the lift in the market two 404 00:22:46,119 --> 00:22:48,680 Speaker 1: days in a row, there's this, this, this, this, this, this, 405 00:22:49,119 --> 00:22:52,480 Speaker 1: and it's one single news article that says, I'm acron 406 00:22:52,640 --> 00:22:56,399 Speaker 1: tilts towards being a cold. What say you about the 407 00:22:56,440 --> 00:23:00,239 Speaker 1: present research on a macron? It would be great if 408 00:23:00,280 --> 00:23:02,200 Speaker 1: it tilts towards being a cold, But I don't think 409 00:23:02,200 --> 00:23:04,400 Speaker 1: we can say that with certainty yet. I think there's 410 00:23:04,400 --> 00:23:06,560 Speaker 1: a possibility that that may be the case, based on 411 00:23:06,800 --> 00:23:08,919 Speaker 1: some of the early case series that are coming from 412 00:23:08,960 --> 00:23:11,760 Speaker 1: South Africa, that we're not seeing as many people being 413 00:23:11,760 --> 00:23:14,800 Speaker 1: hospitalized as not many people, not as many people needing 414 00:23:14,920 --> 00:23:17,280 Speaker 1: ICU beds or needing oxygen, and a lot of people 415 00:23:17,320 --> 00:23:19,960 Speaker 1: getting picked up incidentally when they're in the hospital for 416 00:23:20,000 --> 00:23:22,760 Speaker 1: other reasons. That's all reassuring, but we need more data 417 00:23:22,800 --> 00:23:24,520 Speaker 1: to be able to say that with certainty. And we 418 00:23:24,560 --> 00:23:27,240 Speaker 1: also need to see what happens when we extrapolate South 419 00:23:27,280 --> 00:23:30,280 Speaker 1: Africa's experience two countries that are older like the US. 420 00:23:30,760 --> 00:23:32,840 Speaker 1: And it's also the case that the US has more vaccination, 421 00:23:33,040 --> 00:23:34,960 Speaker 1: so this would be a great thing. I think all 422 00:23:35,000 --> 00:23:38,760 Speaker 1: of us are cautiously optimistic it would be. It's interesting 423 00:23:38,760 --> 00:23:41,280 Speaker 1: because it's all seems to be converging upon this consensus, 424 00:23:41,680 --> 00:23:43,840 Speaker 1: and that's a good thing because we're not seeing outliers 425 00:23:43,840 --> 00:23:47,040 Speaker 1: of severe disease yet. I suspect we will, but hopefully 426 00:23:47,080 --> 00:23:48,600 Speaker 1: this is that this is kind of the step that 427 00:23:48,640 --> 00:23:51,400 Speaker 1: the virus takes to become something that we deal with 428 00:23:51,440 --> 00:23:54,359 Speaker 1: more frequently on an annual basis that has the ability 429 00:23:54,400 --> 00:23:56,840 Speaker 1: to get around our immunity but not make us too sick. 430 00:23:56,920 --> 00:23:58,879 Speaker 1: But I think we still have to wait for a 431 00:23:59,040 --> 00:24:02,679 Speaker 1: more time. Is you're waiting to the calendar, to the 432 00:24:02,720 --> 00:24:05,760 Speaker 1: fact that there are waves to the autumn and in 433 00:24:05,880 --> 00:24:08,440 Speaker 1: the winter, whether it's a cold, the flu that we 434 00:24:08,480 --> 00:24:11,280 Speaker 1: would amateurs would call it, what's the waiting of the 435 00:24:11,359 --> 00:24:15,520 Speaker 1: seasonality versus all our other fears. Well, I do think 436 00:24:15,520 --> 00:24:18,560 Speaker 1: that coronaviruses are going to ultimately end up becoming seasonal 437 00:24:19,359 --> 00:24:21,000 Speaker 1: because all of the other ones do. This one just 438 00:24:21,040 --> 00:24:23,000 Speaker 1: takes some time to get to seasonality because there's not 439 00:24:23,119 --> 00:24:25,359 Speaker 1: enough immunity in the population. But I do think we 440 00:24:25,400 --> 00:24:28,240 Speaker 1: will see intensification of spread when it gets colder, when 441 00:24:28,280 --> 00:24:30,639 Speaker 1: people move indoors, and when spread of the virus is 442 00:24:30,680 --> 00:24:32,760 Speaker 1: more efficient. It's just going to take some time to 443 00:24:32,760 --> 00:24:36,119 Speaker 1: see complete that that complete stark seasonality. Right now, we 444 00:24:36,160 --> 00:24:38,560 Speaker 1: do see some seasonality, but there's still transmission going on 445 00:24:38,600 --> 00:24:40,960 Speaker 1: in the summer because there's too much to too many 446 00:24:40,960 --> 00:24:43,400 Speaker 1: people that were not immune. Given what we know about 447 00:24:43,440 --> 00:24:46,800 Speaker 1: omicron and what it can do getting around certain immunizations, 448 00:24:46,840 --> 00:24:51,439 Speaker 1: whether it's vaccinated individuals or people have been previously infected, 449 00:24:51,680 --> 00:24:54,159 Speaker 1: what does it mean to be fully vaccinated? Does it 450 00:24:54,200 --> 00:24:57,000 Speaker 1: mean a booster shot as well? Well? I think you 451 00:24:57,040 --> 00:24:58,960 Speaker 1: have to remember the vaccines are not all are all 452 00:24:59,040 --> 00:25:00,840 Speaker 1: or nothing. It's not an an off switch. There's a 453 00:25:00,840 --> 00:25:03,800 Speaker 1: spectrum of protection that they provide. And even if O 454 00:25:03,880 --> 00:25:06,360 Speaker 1: macron is able to get around some of the immunity, 455 00:25:06,400 --> 00:25:08,600 Speaker 1: which is what likely the case. It's not able to 456 00:25:08,600 --> 00:25:12,359 Speaker 1: get around what matters protection against serious disease, hospitalization, and death. 457 00:25:12,600 --> 00:25:14,600 Speaker 1: And when you think about boosters, to me, the threshold 458 00:25:14,640 --> 00:25:17,760 Speaker 1: has always been preventing serious illness, hospitalization, and death. And 459 00:25:17,800 --> 00:25:20,359 Speaker 1: that's why I'm somebody who thinks boosters belong to people 460 00:25:20,359 --> 00:25:22,600 Speaker 1: that are above the age of sixty five, high risk conditions, 461 00:25:22,600 --> 00:25:24,520 Speaker 1: those who got the J and J vaccine. For the 462 00:25:24,520 --> 00:25:27,840 Speaker 1: healthy population, it's a little bit unclear whether they're needed 463 00:25:27,920 --> 00:25:30,320 Speaker 1: or not, even though the CDC updated their recommendations and 464 00:25:30,359 --> 00:25:32,480 Speaker 1: there is some controversy in the field. There may be 465 00:25:32,600 --> 00:25:35,679 Speaker 1: a need with omicron to make an omicron specific booster, 466 00:25:35,720 --> 00:25:37,640 Speaker 1: and then that's a little bit different. But these first 467 00:25:37,680 --> 00:25:40,320 Speaker 1: generation boosters, I think in a healthy population you're just 468 00:25:40,359 --> 00:25:43,480 Speaker 1: really pushing off a breakthrough infection sometime in the future. 469 00:25:43,520 --> 00:25:46,280 Speaker 1: You're not really giving a great amount of protection in 470 00:25:46,359 --> 00:25:48,199 Speaker 1: terms of what it actually gives you. But if you're 471 00:25:48,240 --> 00:25:50,800 Speaker 1: older or have a high risk condition, yes, it's definitely clear, 472 00:25:51,000 --> 00:25:53,600 Speaker 1: clear thing, clear benefits there, Doctor ADLTA. Before we let 473 00:25:53,600 --> 00:25:55,639 Speaker 1: you go, i'd love you to weigh in on the 474 00:25:55,680 --> 00:25:58,359 Speaker 1: mandate in New York City now that all private sector 475 00:25:58,400 --> 00:26:01,800 Speaker 1: employees get vaccinated. Is this the course of travel that 476 00:26:01,880 --> 00:26:04,040 Speaker 1: you expect not only in New York City but around 477 00:26:04,040 --> 00:26:06,760 Speaker 1: the country and around the world. I think it's going 478 00:26:06,800 --> 00:26:08,840 Speaker 1: to be certain cities that try and do this. It's 479 00:26:08,960 --> 00:26:10,960 Speaker 1: it's interesting because New York City already has one of 480 00:26:11,000 --> 00:26:13,359 Speaker 1: the highest vaccination rates in the country. It would be 481 00:26:13,359 --> 00:26:15,639 Speaker 1: great if that was going on in parts of the 482 00:26:15,640 --> 00:26:18,080 Speaker 1: South where the vaccination rates are low. But what we'll 483 00:26:18,080 --> 00:26:21,000 Speaker 1: find probably is some states that aren't already highly vaccinated 484 00:26:21,160 --> 00:26:23,720 Speaker 1: are going to become more boosted and more highly vaccinated, 485 00:26:23,800 --> 00:26:25,440 Speaker 1: while the rest of the country kind of language is 486 00:26:25,480 --> 00:26:29,560 Speaker 1: at that lower rate of vaccination, like West Virginia fully vaccinated. 487 00:26:29,800 --> 00:26:31,479 Speaker 1: So I think we're kind of still in that two 488 00:26:31,560 --> 00:26:34,560 Speaker 1: track pandemic. But I think that because the Ocean mandate 489 00:26:34,760 --> 00:26:36,800 Speaker 1: predictably got tied up in courts, you're going to see 490 00:26:36,840 --> 00:26:40,720 Speaker 1: local municipalities and states try the same thing. Thank you, Suh. 491 00:26:40,960 --> 00:26:42,680 Speaker 1: Always enjoy catching I'm and even find me love it 492 00:26:42,960 --> 00:26:46,080 Speaker 1: as downy of Jones Help Kids. This is the Bloomberg 493 00:26:46,119 --> 00:26:50,480 Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from 494 00:26:50,480 --> 00:26:53,879 Speaker 1: seven to ten AMI Eastern. I'm Bloomberg Radio and on 495 00:26:53,960 --> 00:26:58,240 Speaker 1: Bloomberg Television. Each day from six to nine am for 496 00:26:58,480 --> 00:27:03,399 Speaker 1: insight from the best and economics, finance, investment, and international relations. 497 00:27:03,880 --> 00:27:08,520 Speaker 1: And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, 498 00:27:08,720 --> 00:27:12,280 Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm 499 00:27:12,320 --> 00:27:15,000 Speaker 1: Tom keene In. This is Bloomberg.