Biden Keeps Powell as Fed Chief, Preserves Continuity

Bloomberg Business Weekend iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. Well, it has certainly been top of mind for weeks, really months. Would J Powell get a second term as head of the US Fed? Well,

no more guessing or wondering. We know President Biden preserving continuity at the Fed by selecting J. Powell for that second term as chair and elevating Lalle Brainer to vice chair. As the US Central Bank rapples with the fastest inflation in three decades and really lingering effects of COVID nineteen,

what's going on in Europe? A reminder that we are far from being out of this pandemic let's get to it with Bloomberg News International Economics and Policy correspondent Michael McKey with us in our interactive broker studio here in New York. Bloomberg Economics chief US economist down along on the phone from the nation's capital. Mike, let's kick it off with you. Um, I can't say I'm not surprised. What is the important takeaway of the news from the president today and now who is at the FED? I

think you take away a couple of things. One is that the President has gone back to the old way of nominating FED chairs, keeping somebody in office who is considered to have done a good job, not just by politicians but by Wall Street, even if they're a member of the other party. Back to the non politicization of the FED. Another thing that you can say is a bit of a surprise was Lele brainer not getting the supervisory job. But that leaves open that position for the

President to perhaps appoint someone even stricter on regulation. Make the Elizabeth Warren wing of the Democratic Party happy with that nomination. We should get that in a couple of weeks. Overall, it means continuity. It means that Wall Street knows what the policy will be going into next year. It's not a question of what will be done, it's a question of when it will be done, and that will depend on the data, and so they can start making some

pricing plans as they go forward. Bloomberg Chief US Economist and A. Wong You're a really fabulous piece of the weekend about how a Brainard FED would differ from a pal FED. In the end, it's academic, right, because she's she's the vice chair. But it was interesting she opened her remarks on stage with the words bringing inflation down and is it not academic because she's got a really key role now at the FED. Yeah, a trick question, but but I mean once you're read on her policy

going forward. Right. So in my peace I did talk about how even though Brainards seemed to be more delpish, but she's at the core of who she is is a very data dependent and practical policy maker. Her experience in the past ten years in has been reacting to these fire drills, these these financial crisis, first with the European softeign debt crisis and then the child slow down in two and a paper tantrum. And so I think her what she is is that she's gonna look at

the data and if the data is showing that. And she actually laid out three very clear metrics of when she will get worried about inflation. One it is uh if the rest hole part that she's the's higher rents, that's happening too. If if she sees that inflation is on anchoring, such as if there's this sign of wage price firal, uh, then she'd be alignment. And we don't

see evidence of that happening yet. And we're playing to write a deeper piece about how the set thinks about wage press spiral and um and and it's and just the third if there's a more COVID struckdowns going forward. So so anyway, so um, yeah, we think that you will be data independent. The data depends well, I have to say, and I'm going to jump in because my kids sounds like, wait, I've heard that data depending phrase

a lot. It sounds like in terms of the kinds of conversations that we're gonna have at the FED are no different from what we were having before. Yeah, And that was kind of the point of the nomination today that we know what we're getting with j Powell, we know what we're getting with Leo Brainer and we should add that the vice share almost never votes against the chair, so you can expect them to be not only because

they think alike, but because of the positions. They'll be in lockstep going forward in terms of what to do. But as Anna says, it's a question of, uh, what happens with the pandemic, whether or not the inflation numbers that we get start to roll over, and there's some evidence that some of them are, but we're still a long way from knowing uh. And then it's a question of do they at the December meeting decide to taper more quickly, giving them the tionality of being able to

tighten sooner. I gotta say the thing that jumped out to me, and I'm gonna put this to both Mike and Anna. Anna. Maybe the first is that I felt like the idea of an independent FED was woven through everything, and if we saw anybody be independent, we saw j Powell, who was appointed by President Trump but nonetheless stand up to him during his tenure. Um there is something to

be said by that and the political win with that. Anna, Yes, for sure, I think this is a definitely a win for Biden, at least in the eyes of economic history books for guarding the institutional independence of the said. Right. But you know, sorry, go ahead please okay? Um. You know one point that Mike mentioned about, um, you know, vice to surprise a layout being being appointed as vice chair.

I think that there's also something there because the vice chair pos um, for example, Rich Clarida, how he made of this pro He was basically the architect, the intellectual architect behind this new average inflation targeting framework. Right. And the next policy framework review could be as early as end of three. Right. And perhaps Brainard, who probably is the one who who chose to who preferred the spice

chair post rather than the supervision post. Maybe she's thinking that she wants to leave a legacy up said and in the next policy review she could push for a climate change creates digital currencies and now and we gotta run, Thank you so much. Bloomberg Economics Chief US economist down along along with Bloomberg News International Economics and Policy correspondent Mike McKee. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. Tim Stinovic from Bloomberg Radio back

with us. Dr Ian laws Pader, Clinical Professor of Medicine at n y U Landgown. He's with us on the phone in New York City. Ian, good to have you here. With Ed Ludlow, one of my colleagues here at Bloomberg. What are you seeing when it comes to COVID, Because I think the fear out there, safe to say, is that what's happening in Europe is going to happen here in the United States. I've seen this movie before, Yes, for sure, High Carol and Ed. Hope everyone is safe

and doing well. You know. I think what's happening in Europe with their fourth wave really relates to a number of things. One is relatively low vaccination rate, some countries only sixty or so for one vaccine, other countries Italy higher and Portugal higher, so there's some vaccine hesitancy. There's also breakthrough infection, so people who have had the two as we know, after six months or eight months with the alpha vaccines, Delta is breaking through. In addition, those

who are lucky enough to get the third booster. We really only have data for about thirty days or so after that, and it does seem fairly effective. But we don't know, you know months later how effective it is, and so in part by doing all of these lockdowns, it's really somewhat unproven, right, So you're lacking to people, some of whom have been already infected. It's not as

if you're doing it for the first time. And lastly, open borders, I mean you've got people who who are coming and going and people are not really being tested regularly. So I think there are a number of things that are contributing to what's happening in Europe. And I think in the US are numbers are are stabilizing. I really there may be a little surge after Thanksgiving, but I think we are looking at a few more months. Um, but I don't think much more than that at this point,

assuming no mutations occur. Let me ask you real quickly, because I think you know Jim and I have talked to you about this a lot, but it's on Ed's mind, Like in terms of getting a booster. If you're six months or in uh sooner, if you've gotten a J and J investor invest in vaccine, excuse me, if you haven't gotten your booster, go get it right, Yeah, no question right, six months out all adults are now approved for for MADERNA and viser. Some people are getting some

reactions to it. Certainly very reasonable to do it, and J and J is a shorter interval, and any of the vaccines are fined for J and J as a booster, and that we think can be helpful. The data is fascinating you, right, because in Germany there are fifteen million holdouts right who have not been vaccinated at all, and the country is kind of really ramped up its vaccination program that all the doses that are being given out are boosters. So how do they fix the remainder? What

is the solution here? Is it a mandate making a vaccine compulsory, as they've done in Austria. Really, you know, the approach to any pandemic is prevention with vaccines, testing. People should be tested nasal swabs or spit test, antigen and treatment and we do have some treatment that also can be preventative. In other words, there are monoclonal antibody treatments that are very effective if given within seven to

ten days. They're also monoclonal shy. You know, we've been dealing with this two years and we should have been doing more sensive studies on ways to treat and not just rely on vaccines, because obviously not everyone will get a vaccine, so we do have some options. These are not cheap, of course, the monoclonal antibodies UM and I think you need a multi pronged approach. Just taking one approach like vaccine or lockdown is one sized as now

set all. You know, we really should have several approaches, all right, So I want to know as Ed is in London, he's not normally there, He's normally in San Francisco, so he's doing some traveling. People are traveling. I got an airplane, as you know, for the first time in October, I was at the UBS Arena. We did a live broadcast. There are lots of people, workers, professionals, you name it,

everybody walking around for the most part without masks. What's your advice though, as we continue to move forward when it comes to mask wearing, you know, unfortunately the vaccines are not all perfect, including boosters will help masks in unless they're in ninety are not perfect. If you're flying on a crowded airplane and they're not testing people beforehand, that's all a bit of a risk, stay in shape,

take some botamin D, get your levels up. Um. Certainly get tested if you feel it's sick at all before and certainly after the flight. You know, Fortunately we were most people, not all are, are vaccinated, and I think it's a calculated risk. But I think we have all of this though. This all sounds like common sense stuff if we is the biggest takeaway from this global pandemic just the prize the pandemic. We weren't that hygienic, you know, none of us have been washing our hands properly. Well,

I'm just asking, is this the reality from here on in? No. I wish it was as simple as just washing hands and coughing and masks. I think all of those help. This is what pandemics do. They not everyone is vaccinated at the same time. It spreads around the world. It usually takes three years, if you're going by the Spanish

flu the H one N one. And I think we're a little naive to think that we could have controlled this perfectly unless we had been more aggressive very early on and developed treatment more early on, and got everyone vaccinated early on. So once the cats out of the bag, we're dealing with. Really, what are natural consequences, and I think we like to think, oh, if we lock down, or if we do this, or the mask is the right approach. I think they're all helpful, but it's not

going to solve the problem. I'm afraid, all right, Gonna leave it there. Um Ian, have a wonderful and safe Thanksgiving and so good to check in with you. We'll talk to you next week. Dr Ian last beat our clinical professor of Medicine at n y U lend Going Medical Center. On the phone in New York City. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. So this week's

special double issue of Bloomberg Business Week magazine. It's out on newsstands, online at Bloomberg dot com, bus this Week dot com, and of course on the Bloomberg terminal. It's an inflation takeover. Several stories looking at the ugly green monster from several different angles, including whether FED Chief J. Powell need to take a page from the playbook of one iconic fedhead and the tough decision that he had

to make. So let's get to this story. The person who wrote it is Bloomberg News Markets editor Joe wisn't all. He's in our Bloomberg Interactive Broker studio joining Ed Ludlow and me. Hey, Joe, I love this story. Thank you. I love the whole inflation takeover because it's like inflation is back. But do we need to be so freaked out about it? Tell us about Paul Vulker and what

he had to do back to his tenure. So the fan has for a long time had this dual mandate of you know, stable prices and full employment, and inflation in the late seventies early eighties was perceived to be getting to out of control, and Volkers remembered essentially for having the uh temerity to induce a recession and millions

of people got out of work. But that broke the back of inflation, and he raised rates very aggressively until it meaning until it induced a recession, and in the dou show that you know, that kind of put an end to inflation, and then we had this sort of multi decade period of pretty stable prices since then, the question, you know, now we're coming off of like ten years

of underemployment of the Great Financial Crisis, chronic underemployment. We're still five million UH at least maybe six or seven million underemployed. And so the idea in my piece was like maybe to pull a Vulcar and is to ignore the inflation side of the mandate for now, the opposite of what Vulker did, and make the commitment on jobs, which polosed on multiple times, and make the bet that inflation is transitory, as the Fed more or less still

believed the time is interesting. They're right because pal Is stressed a commitment to maximum employment not just for weeks but for months, and then you've got that really hot CPI print for October. You know, I wasn't around in the seventies. I wasn't around either inflation right exactly. But I mean, did that inflation print change things for j Pound the Fed? It was? I mean, it definitely changed the political conversation about inflation. And I think that, you know,

there were a lot of people. That number rattled the White House clearly, and since then we've seen Biden talking more about inflation and even trying to pitch some of his fiscal plans is inflation fighting. I'm not so sure. I think most people don't really buy that completely regardless. That's how much a jarred the politics. I got a lot of people to say the transitory is a myth, etcetera.

And so it's certainly if nothing else ratches up the heat, um powl, It's like, all right, do you really have the like, how how convinced are you Jay still that inflation is transitory? And I think the heat has now been turned on the feed of hotter. So Joe, what's the economic like? I'm thinking, Okay, I'm bringing up my economic books and trying to understand. So if he continues to keep rates low, is that going to then encourage more people to come back to the workforce because the

economic momentum will continue. I think the way to think about it perhaps is not that low rates will encourage people to come back per se, because look, people point out, it's like you cover rates is zero, That doesn't suddenly make economic growth happen. What I think you can say is the opposite, that for rate hikes to have an effect on inflation, you really wouldn't need to go hard.

That if you just hike rates twenty five basis points fifty basis points, you're not doing too much, and so I think the argument is more that, Okay, you want the FED to take care of inflation. This is what it's gotta be. We're not it's gotta be a real series of hard hikes. And is that something you want to do with a five million employment hole? Do you really want to go down that road of slowing demand?

And there's so many people still who want to come back into the workforce once there's you know, pandemic and other just live destructions come to an end. We're still in the middle of a pandemic. Joe. It's an unfair question, but it'd be remissing me not to ask about the new duo, you know, a brain Odd Pal Combo. Yeah, how would that have changed how you've gone about writing that page? You know? I think, to be honest, I don't think there was as much daylight on monetary policy

as some people like to imagine. I mean, there was this perception of like BRAINERD having been more duvish. I don't really think that's. Yeah. I don't really think that's basin all that much. I think more or less of you look at their track records, Uh, they're probably more in line. I suspect that BRAINERD believes a little bit more, and perhaps some of the FED supervisory roles perhaps believe that the FED could take on more climate responsibilities, although

German police talked about that recently too. But you know, from the perspective of the markets, from the perspective of like gauging, with the policy path of rate hikes, I would be surprised if either one had a sort of like materially uh different vision in mind about the existing trajectory.

One thing I wonder too, is that if I think about the economy as you as you kicked it off with Joe, is the idea that you know, rates were so low for so long like this was you know, we've got a generation easily at people investors in Wall Street who have never seen a high rate environment. So was that the true picture or is it all of a sudden the bump that we're seeing kind of a catch up from all of those years of low inflation, Like what's the what's the true picture? I guess is

my question? You know, I would say two things. I mean, one is, you know, we did have nine hikes uh started in and the market absorbed them a lot better than I think a lot of people would guess, because I remember a lot of people like, oh, this market is going to be dependent on ZERP forever, and that didn't turn out to be the case. It turned out that started with Yelling and then into Powell there were

a series of rate hikes. Then of course, you know, we had the slowdown in so they got reversed in then of course the pandemic and that erased everything. But the market then showed an ability to withstand rate hikes. Look, I think that from a macro perspective, and Biden said this today. He's like, you know, we should pursue it an economy where and I don't know the exact words, but he said, we're in lawyers are fighting over workers

rather than workers fighting for jobs. And if that were to be sustained, I mean we kind of see it these days, but if that were to be sustained for any like period of time, that would be a very different regime from what any of us are used to in recent decades. It's a really good point. Very different economy, very different. I mean, this is just ignorance in my path. But is there a policy path where they can meet

the Jewel mandate? Surely one as based on. This has to to suffer the expense of the other for the short term. Yeah, I mean right and right now you would say, uh, you know, if you just looked into isolation, you'd say unemployment rate at four and a half percent and inflation six point two. They're missing on the inflation side. The counter argument is that, look, some of the big some big drivers of inflation really do seem to be

IDIOSYNCREDI or transitory. We know that used cars is still a really big factor even after all this time, and then there's good reason to think that raising rates doesn't solve that. And are they hitting on the b ployment side? Not clear of that either, because although unemployment is low, numerous measures are still a long way to go. It's easy to imagine though, close to full employment in nine months and are an inflation starting to turn the corner

and the dual mandate maybe ahead. So listen. The drop off in the economy then the big bounce back so quickly has reminded you how quickly things can change depending on what's going on. UM Joe wisn'tal it's a must read, Thank you so much. He is Digital News executive editor here at Bloomberg News. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.

We want to talk about the Bloomberg New Economy Form, which hosted its annual form in person in Singapore last week. The event is, you know, uh, from the many interviews and stories that we highlighted on air last week, is all about illuminating the challenges facing the new economy and really getting to the solutions and the voices who are

in that journey. Here with a look back at the week some of the major themes and newsmakers is Bloomberg New Economy Editorial Director Andy Brown joins us in our Bloomberg Interactive Broker Studio. First of all, congratulations you pulled it off in person in Singapore. Tell us about kind of the mood of the event. Well, thanks, Carol, It

was an incredible event. We We got three hundred delegates, many of them CEOs, government ministers, entrepreneurs, scientists, to fly halfway around the world to Singapore to start working on big problems relating to climate and pandemic control and trade. It just felt like this was the first really big

gathering of its kind since the start of COVID. And what gave it this added urgency was that it was a few days after the end of COP twenties six in Glasgow, and so you know, the CEO s and Mike Bloomberg of course, was there ready to think about the business end of climate that we we had all these high level commitments pledges in Glasgow. Okay, how do we turn those now into real opportunities? How do we deploy the trillions of dollars that's necessary to reinvent our

energy systems and transport systems. And so we had CEOs, bankers, financiers, government ministers sitting in workshops talking about just that. Where people frustrated after COP I wanted to ask that it was almost a sort of follow on event because they happened in quick succession. Did they just pick up the discussion from Glasgow and bring it to Singapore or was there a change of thing? Well, Asia was the place to be because as you know, Asia is where you

know the climate agenda is going to be made or broken. Um. China of course is by far the world's biggest emittered, bigger than the next four largest combined, and the fastest growing emissions are from the newly industrializing countries in Asia, so getting climate under control, getting emissions under control in Asia is absolutely critical. And a lot of the conversations that we were having there was around how do we provide, UM, the infrastructure, the energy systems, UM, and how do we

supply supply infrastructure to work on mitigation and adaptation? You know, I mean really basic things like you know, hurricane proof roofs on hospitals. How do we provide the funding to make all that happen well? And what's interesting too? And I feel like right out of the gate though, UM, with the first comments, the first UH speeches, front and center was the relationship between US and China. Yes, UM,

that was the big one. And as always UM, Henry Kissinger is a sort of has why wise counsel on that to two years ago in two thousand nineteen, when we held the New Economy Forum in Beijing, he warned that we were in the foothills of a new Cold war. That was a year after then President Donald Trump had

launched his tariff war on China last year. UM. It was a virtual event, and he was asked by John Michael Thwaite, our editor in chief whether we had progressed through the footholds of the foothills and whether we were in in the mountains. He said, yes, we're in the high the high mounting passes. This was last year. This year John was talking to him again, interviewing him on stage and said, well, where are we now? And he said, well, you know, we're we're through the passes and we're at

the edge of a precipice. And I think there was a real sense among a lot of the delegates that we're in a very very dangerous place now between the US and China. What specifically, and I wonder if it's there weren't concerned about some kind of military acts at this point involving with Taiwan. What is it specifically that they see or is it trade? Is it business? Well, I think it's first of all, there there is no dialogue. I mean, you know, all of the platforms in which

officials from the two sides would get together. There was a strategic economic dialogue that Hank Poulson had helped set up, UM had set up, and all all all kinds of of interactions academics, journalistic and so on. I mean, well, all this, all this is now stalling out, so there's no real communication between the two sides. I mean, Henry Kissinger had talked about the Cold War, but in some ways this is much more dangerous than the Cold War. I mean, in the Cold War, there were rules of

the road. What would happen if you have an accident at sea or in the air. There is nothing now and and you know this is why Joe Biden goes into his meeting with with President Jim Being said, we've got to put guard rails around. Did anybody think that was significant, that virtual meeting? Yes? Um? And I think

Kissinger saw this as being significant that um. I mean, he had talked about being at the Precipice, and I think the sense was that he felt that that meeting had started to take the two sides back from from the Precipice. I mean, the hope is not that you know that the two sides are going to make up or anything remotely like that, but that we've reached a

sort of a rock bottom. I mean, there was there were very low expectations coming out of it, but we've seen small, but I think relative reasonably significant improvements and concrete results coming out of it. For instance, restoring jentless visas. Um. That was that was That's that's important, UM. More important and agreement for the two militaries to start talking. That's important. I mean, China has is in the throes of rapid nuclear expansion. Um. You know over the summer stunned the

Pentagon with this hypersonic nuclear capable missile. A lot happening on the military front. Just got about twenty five seconds. You have a favorite conversation and I'm not able to even ask you that just quickly. Yeah, the last day was really interesting. We were talking about great power competition and how small a country is are going to line up this and the sense in Asian countries as we

really don't want to choose. Yes, your our friend, United States, your ally, but you know what, China is our biggest trading partner bottom line. UM. Great conversations, Andy, and I know we scratched the surface, um, but thank you so much for breaking it down. Andy Brown, Editorial director of Bloomberg New Economy. You could sign up for the New Economy daily newsletter at bloomberg dot com slash New hyphen Economy, and you can also go to Bloomberg and search on

New economy. To listen to those conversations. You're listening to Bloomberg Radio. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio talk about a possible Monster combination. We're talking about that of Monster Beverage. I know I had to do it, don't judge me. I know, well, Monster, but Beverage we know them as of course the maker of energy drinks, perhaps mixing it up in the beverage role by joining

forces with Corona Brewer Constellation brands. Monster to be exploring such a combination between the two, according to those familiar with the matter. So let's get into it. Monster. By the way, that stock is up about one and a half percent, And let me pull up Constellation if I may, and just get a quick check on what that stocks doing in today's trade. It is down about four tens

of a percent. Ken Schay is tracking this. He's Bloomberg Intelligence Senior analyst for Global Beverages to bacco On Cannabis. He's with us on the phone in New Jersey. Hey, Ken, good to have you here with Ed and myself. So is this likely? Hi? Caroline Hey and it um. You know, it doesn't make uh, it doesn't. It doesn't surprise me that these firms will be chatting. You know. They all have different needs in terms of growth platforms. Constellation is

looking for more diversification from its beer strength. It wants to get into soft drinks, low alcohol refreshers as I see it um, and it also wants to getting to non US markets. It's it's by and large a US company. Monster is very narrowly focused on the energy market, which is becoming more and more competitive. Yet it had a great growth run, but the markets going forward are going

to get tougher. PepsiCo is you know, really setting its sights on this market, and others are, and then Coole is sitting in the background with a nineteen percent stake a Monster it could be a player here too, so and it has needs also to diversify from soft drinks. So all these guys need something to grow, and I think they can get assistance from another. It's the devil's in the details, though. We don't know where this is

going to go and how they're going to figure it out. Well, we all need something, whether it's a high caffeine caffeine beverage or an alcoholic beverage at the end of the day. But you think about the mix of those two. The regulators what I was trying to say about this, won't they The regulators have really pushed back hard on smaller players who try to mix alcohol and caffeine, and that's kind of a no no in many markets. And so I don't think you know that's and Ed's thinking, yeah,

it's kind of a no note to mix anyway. Yeah, I mean, but but I think beyond that though, this is really I mean, it could make sense as a joint venture between Monster and Constellation. As I mentioned, they can both help each other out. Constellation has try and hard to get into the hard celterer market. Uh, and it hasn't really worked out well for them. Monster has a strength perhaps there um Monster would like to consider it. It's set in the past, it was consider CBD beverages. Well,

Constellations got a big steak in canopy growth. So there's some things they could they could do for each other. What about I mean, there's some interesting relationships. Uh. And you pointed out and or Ed Hammond points it out, Uh, in our story that's on the Bloomberg about Monster having

a relationship with Coca Cola that could be tricky. And then you've also got any transaction with Constellation were required the support of the Sands family, which has built the company into that global beverages player that it is today. How does that complicate those two aspects. Well, that's certainly going to be a roadblock in terms of you know,

UM needing their okay to do anything. UM. Having said that, the Constellation, to their credit, has been pretty pretty risk has been a risk taker over the last few years. I mean, just think about the cannabis investment alone, canopy growth. UM that they've been kind of a lone wolf there in that approach hasn't worked out for them yet, but

I think over time it very well could. Cocacola with a twenty with a nineteen percent stake uh in in Monster, it's probably kicking itself that it just didn't buy it years ago. It's kind of ran from it. But now it's massive though, right like this would be this would be a mega deal, Ken, is what I was saying. You know, these are both forty billion dollar plus companies and I wonder, like how much of this is the experience of one supply chain disruption, the ability to maneuver

around that. These guys just looking for scale. You know, it's a good question. I'm not really sure. I think this is what it sounds to me like a more strategic venture into what they call white space meeting markets that they're under serving as opposed to UM, you know, riding through some cyclical pressure like uh, you know, supply chain UM. You know, that's kind of a cost of

doing business. But but I think that UM they really are looking for creating new products together UM and and Coke is going to be more than happy to have an indirect exposure to whether whatever monster and consolation you know, conjure up uh, Coke will only benefit again given a sequity staken monster. Well, hey, you know what I'm thinking Ken too for the investors that are listening in the Bloomberg audience that's out there on radio and on YouTube

right now. So when it comes to the beverage industry, I mean, Coke has been phenomenal and kind of you know, creating partnerships and going after lots of different brands. I mean, what will be the model going forward will will be an M and A one an acquisition one or will it be a joint venture or partnership one? And just got about thirty seconds. I think it's going to end up a joint venture. I don't see these two companies merging. There's just too many dissimilar elements. I don't see a

lot of synergies from a cost point of view. But I think they can certainly help each other from a joint venture point of view, and I think Coca Cola can participate to a limited extent also helping them both. All right, got a beverage of choice coming ahead of Thanksgiving? Mr Shay, Oh, I love my beer guy. Yeah, oh yeah, that was easy. That was easy. And got a beverage of choice ahead of Thanksgiving? Yeah, well, flats room temperature

English beer. That's what I'm enjoying this. All right, we're gonna leave it there. Can say thank you so much. Senior analysts for Global Beverages, tobacco and Cannabis at Bloomberg Intelligence. As I mentioned, shares of Monster beverage up there about one and a half percent, and we're not seeing too much movement when it comes to constellation. You're listening to Bloomberg Radio. Yeah, but you let me drive. Oh, no, no, no, no, this is not a choint honey pleading gravels. I want

to drive. Good question is the ride to the clothes on Bluebird Radio right just about just about ten minutes left in today historrating session. Watching the markets, certainly the equity markets moving around here. We're taking a leg down on those major equity averages still in the green though uh significantly or at least more definitively for the Dow Jones Industrial average, call it flat on the S and

P five hundred. You heard Doug talk about this nastack though down by a hundred and thirty six points, but it really does feel like it's a day where the treasury curve was something we were all focused on, especially as you show saw the shorter end, but both the two and the five really along the yield curve, those

yields moving up. Let's get to it with David Deet's managing principal and senior portfolio strategist over at Pepack Private Wealth Management, ten billion dollars in assets under management, and David's back with us on the phone from Summit, New Jersey. David, good to have you here with myself and Ed Ludlow, on this Monday. First and foremost the FED meeting and the FED to sit not FED meeting, the President deciding on a second term for j Powell, but Leo Brannard

also having a very significant position on the Federal Reserve. Yeah, obviously it was a very difficult decision for President Biden. He delayed it far longer than it would expect it. I think at the end of the day, this is a real positive for the markets in the economy. And here's why. Although they're both very strong economists and uh FED representatives, the fact of matter is, UH you apolsible of a proven quality. He's been running the FED since

two thousand and eighteen. He had a magnificencent job back stopping the economy during the worst pandemic in a hundred years. UM. He's a proven quantity UM. So I think the markets are curing his renomin nation to another four year term. The other thing, of course, the cheering that's going on. What are you seeing in the cheering? What what aspect

of the financial markets in the trade today show you cheering? Well, I think that the particularly with the movement into doo UM that's being driven by strength in reopening stocks cyclicles and particularly financials, and so there of course, if there was a difference between BRAINERD and POAL is power is perceived to be a slightly lighter touch on regulation of banks. And you're seeing very strong movement in the banks today. Uh you know, of course you've got Travelers Goldman, Sachs, JP,

Morgan into Dow which is helping lead it. And uh so the feeling is that there will be a little less risk of owners regulation um by POAL going forward than we might have seen underbrainer David, I think I'm right in saying that you're a firm believer that markets set rates and not the Fed. Where do we go from here given these appointments, Well, you know, at the end of the day, I think interest rates are likely

to add higher. Why is that? I think I think that the key drivers here are of course, ultimately I think a year from now, COVID nineteen is going to be less of a problem. Sure, there's a lot of scary scenes and headlines coming out of Europe, with the fact of the matter, when you look back a year, we've got so many more tools and to deal with COVID nineteen. You get three vaccines, you've got the UH,

the anti virals UH. Now just about every all adults will bill to get a booster shot here, so we're likely to win this war. I think that is going to continue to spur the economy. And of course, as economy strength and people have more confidence, I think you're going to have more spending that's gonna add to inflation. The more inflation you have, interest rates to go up, and I think there's gonna increase confidence in the business

sector to borrow more money. Both of those things I think are going to start to push the intertrace up. And remember we're trying to get back to normal. As recently as two thousand nineteen we saw two point nine and at ten your treasury were nowhere close to that. Now, Well, does that then hearken a FED and a J. Powell Fed being much more aggressive when it comes to raising rates.

If you sound pretty optimistic, safety say very bullish. And so having said that, does the FED need to be even more aggressive when it comes to raising rates at this point? David Well, I think, um, if I'm right at the economy strengthens and Covid waynes, I think you're gonna see more inflationary pressures offsetting that of course will be some um de bottlenecking as it were, of the ports and so forth, as more people can get back

to work and help unload the ships and so forth. Um, But I do think you're going to see more inflation. What we saw just recently six point two totally unacceptable. I think some of that's temperary, but some of us built in and ultimately lenders ruled demand more. I mean, what we're seeing now. One of the reasons that the strength of the market is you've got a ten your treasure at one point six, but inflations at two point six.

This negative real interstrates makes no sense that So I think interest rates will uh move up and there will be pressure on the Federal Reserve to keep taking away that punch bowl to offset those inflationary pressures and normalized interest rates. In the meantime, talk to me about the Tina trade. There is no alternative for global listeners who are wondering what Tina is. You know, where are the

pockets of opportunity? Then to your mind, yeah, absolutely so if if we're right that the things look good for the economy going forward, that people will start to engage in even greater numbers in the economy. Then it seems to to us that more cyclical stocks UH could get a tail wind here, while some of our pandemic favorites, you know, the zooms and the Pelotons of the world that catered to people locked down, will be a little bit less in favor. So, you know, so we see

dividend paying stocks, energy stocks, material stocks, financials. If interest rates do go up, their net interests margins will expand that could be UH an excellent place in when you start looking valuations, smaller stocks, indeed, anything other than those top ten megacaps look a little bit more attractively valued. Is it weird and counterintuitive that we see rates moving up and yet we still had the SMP headed toward another record today? Um, well, it's barely a record. Of course,

we saw the name. It's probably not gonna end that way. But and and so what I do think is, you know, the SNP is that mix between those megacap texts and the smaller main street midcaps and smaller caps. And so I think on balance, the news has been good and has pushed the SMP up, but of course it has been weighed down by some of those NASDAC names that we're seeing today because of course their profits are much further out, and if intertrates to go up, the present

value of those deteriorates a little bit. I think that's what we're seeing. All Right, We're gonna run, Hey, David, have a good Thanksgiving. David deets he's managing principal, senior portfolio strategist over Pepack Private Wealth Management. Thanks for lou need a Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News