Carnival CEO Says Vaccinated Can 'Come Aboard'

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. You are listening to Bloomberg Business Week here on Bloomberg Radio, on YouTube and of course around the world. Here what we are going to get into is in the cruise industry, because we are here

with one of the CEOs of the world's lord. We are here with the CEO, i should say, of the world's largest cruise operator, the company by the way, launching its first cruise from a US port. They did that on July three out of Galveston, followed by their first cruise from Port Miami that was on July four. He was there and then Carnival Breeze setting sale today out of Galveston. That's happening at four thirty pm Eastern, So let's get to it with Arnold Donald, Presidency of Carnival. Arnold,

it is great to have you back with us. I feel like you and I have been talking about a restart, things getting back closer to normal for a long time. How does it feel You've been waiting a long time for this, especially to see those ships out of US ports.

You know, Carol, good afternoon, first of all, but it is a phenomenally exciting, fulfilling feeling, not just because we get to welcome guests back on board our ships, but also because there's so many people who are dependent on cruise for their livelihood, you know, port workers, uh, uber drivers, taxi drivers, the destinations around the world all have um so many people depending on the industry and people providing

provisions to the ships and servicing the ships. So it's a very exciting time to have guest operations once again out of the US. How's it going so far with these ships that you have, And I know you've had ships going on over in Europe, so you know you've you have some experience in how things go post pandemic. How about with the U S ship specifically, because I believe off the Galveston ship passengers have already come off. How did it go? Is there any COVID cases where

there are any concerns? You know, it's gone exceedingly well. The ships in Europe, as you pointed out, for our Costa and out brands, have been saving h sailing under different protocols because largely there are people are on vaccinated, so physical distancing, um, universal testing, additional medical screening, et cetera.

So far here in the US, we've been sailing under the Conditional Sale Order issued by the Center for Disease Control, which focuses on having most of the guests vaccinated and that allows for more open cruise, and they've gone very very very well. We just got the net promoter scores back from the guests and it's the highest scores we've had and and quite some time. Unlike a lot of the other folks sailing, we had a lot of people on our ship. We had over twenty six d guests

on one ship over another. We've already into our second week of cruising those ships with even more guests on board and the experience has just been fantastic, and it's it's a very rewarding feeling to finally be get back out s c um exceeding guests expectations and and just developing lifelong memories for people. Arnold, give us an idea about demand right now, because twenty nineteen was a record

year in terms of bookings. Where are you right now, kay, tim, Where we are right now is what we've told you back in June. Between quarters were publicly traded companies, so we can only say so much. But at that time we indicated that our bookings second half of twenty two were well in excess of nineteens kind of record bookings,

same point in time. Uh. And right now, it's hard to talk a lot of about occompascy and whatnot because of all the rules and regulations and restrictions and what have you, and some things we self impose on ourselves, for example in Europe, where we've absolutely reduced the number because of the additional protocols in place for those unvaccinated cruises. But to make a long story short, demand is robust. We have plenty of demand. UM. We're bringing the ships just in UM a few at a time, we have

eighty five ships in total. Today's sailing in the US, we've had three we're about to launch uh new sailing as you mentioned, and a Breeze which will be our fourth one, and then we'll have three ships in Seattle later this month, and then July one Marti Gras Carnival, uh so our newer ship and uh just an unbelievably fabulous ship with the first roller coaster a s first roller coaster at sea. Can you give us an idea

of pricing power that you have right now? Considering demand is so strong and look this, I'm asking this question the context of the inflation data that we got earlier this week. People are getting back out there. Companies are raising prices because demand is so high. What is your pricing power right now? Yeah, well, pricing is strong, there's no question about it. Um. You know, there's far more demand than there are cabins available, especially here in the

US with the sailors we have. So pricing is strong and we expected to continue to be strong, not only because we're the best vacation experience there is, but we're the best vacation value there is, even with strong or pricing compared to equid on land based vacation, and so we're expecting a robust environment and demand, which leads so robust environment for pricing, especially with the staggered introduction of ships coming back in, which is going to happen you

know over time, is destinations begin to open again? Are pricing similar to what we had pre pandemic? Aren't? Are we seeing it similar to that? Or is there a little bit more flexibility? Um? Right now, I would say if again, if you look at bookings. So I can only say what what I've said during the business subding. But the fact is pricing is stronger, is stronger than

what it was. So you know what's interesting too is I have to wonder Arnold, you know, you came in after some crises at the ship, really righted the company. I do wonder how difficult though it is um to kind of assess your outlook for this industry, especially you know, we talk every day about the delta variant and the increases that we're seeing once again. Right, and you have different rules and regulations. We just had a headline Canada to lift the ban on large cruise ships as of

November first. That just crossed a few minutes ago across the Bloomberg. How difficult is it to assess the outlook and get get ahold of the business, especially when once again we have something like the delta variant. Well, I think so several comments. First, everyone should give backs is the best way to protect themselves and those that they love. So everyone should try to get a vaccination less they have a medical reason, are deep religious belief uh to

not other than that they should get vaccinated. Heaven said that there will be other variants. There's a delta varian, will be other variants. And what we have to do is learn as a society overall how to live with this virus and the various variants that can come. And the best way to do that is to take the advanced medical uh knowledge that exists and take advantage of it.

So vaccinations now, later, there's also advanced treatments. If if someone does happen to contract the virus and having challenges with it and so and then the other measures we need to take. If there's a variant that shows up which hasn't happened yet that is threatening to those who are vaccinated, UH, then we'll have to return the protocols of mask wearing and physical distancing and things we've learned until the medicine catch us up, you know, with that

particular variant. So keep in mind we've dealt with viruses

for decades um. The cruise innistrant has had to deal with ebola and zekea and SARS and mers and and the world has had to uh and now on the world is getting a grip on this particular virus and plot us to all the scientists and technologists and all the people, the first responders, everyone that has gotten us to have gotten us to this point, which is a phenomenal thing, from something that we didn't even understand fifteen months ago, to multiple vaccines, advanced treatments, you know, known

protocols to mitigate spread, and if we act responsibly, we can manage this. We are talking with Arnold Donald, of course, the CEO of Carnival Corporation. We do want to welcome all of our viewers on Bloomberg TV. We are live on Bloomberg TV, Bloomberg Radio and on YouTube. Here Arnald, let me push a little bit on the delta variant. I mean, how does the delta variant at all impact your restart, especially here in the United States. As we said,

Carnival Breeze going out UH shortly later this afternoon. Um does it. Are you seeing any impact on bookings or any cancelations as a result of that? I know we have not. We have not seen a major impact. Again, I think the scientists around the world are pretty much aligned around the fact that being vaccinated UH prevents two things. One is possibility of contracting a virus. But then if you do contract it, um probability that you have any

serious effects from it. It also appears, and there's a little more debate around this, but the scientists seemed to agree that it also mitigates the spread of the virus. That if you have it, you have less of a viral load and so your propensity to transmit is a little bit less. So we have not seen a big

impact from it. Obviously, it will impact access to destinations, you know, places where people aren't vaccinated yet are are just not enough of the population is so it can slow down progress that way, and then we're gonna pay close attention. But as we always do, will follow you know, the authorities around the world. We have to be in compliance everywhere, and we'll follow the good Council from the leading medical um UH, scientists and and and personnel that

we work with constantly. Hey, Arnold, you've seen a lot of economic cycles, and I think we're trying to assess in our conversations with everybody here at Bloomberg and on air Uh, what is the economic outlook? You'll hear from one airline ceo says things are gangbusters, Things are going you know, really really strong. We hear from the FED chief.

We're here from FED members uh that you know, the FED Chief reminding us once again that listen, you know, it's gonna take time to get back to where we were pre pandemic, which is why he is still supportive of some of the measures that the FED has taken during the crisis. How do you see it? Um? Is the economy going gangbusters? Getting closer? Is it going to be for a little bit and then calm down? How

would you describe it? You know, I'm not an economist, uh, pronoxticator extraordinary or anything, but my experience right now is the economy is strong, and that there's a lot of pent up demand. People are anxious to travel and to enjoy things again. They've been um, you know, for quite sometime on lockdown or near lockdown, and so there's a lot of excitement and interests. People are having a hard time hiring people for a period of time because of

similar packages and another thing, are you having problems hiring people? Well, we recruit from a hundred and forty five countries around the world, and so for us, that's really not the issue on the short side jobs. As we ramp up, I'm sure we'll face some challenges in in some areas. Hey, Arnold, given that you recruit from a d forty five countries all over the world, how do you ensure that your staff actually have access to vaccines given that the vaccine

rollout across the world has been really uneven. That's a great question to him, and we are very grateful to so many people around the world who have helped us gain access to vaccines for our crew, because the reality is, we can as a commercial in any directly access to vaccines.

So it's the localities like Miami and Galveston and here in the US and other places around the world that have made the vaccines available, and they do be so because they know the economic impact of cruise and so we can get our crew vaccinated that way and have been around the world. So using the United States to vaccinate cruise from around the world. Yes, we're getting vaccines around the world. We're also vaccinating it in the UK

and other ports around the world. And my understanding is arnold that you know, or to get a ship out of a US port, you have I think at least passengers crew vaccinated. Is that is that correct? Is at the minimum that's on the conditional sale order that the Center for Disease Control currently has in place, So you can sail that way, um without a lot of restrictions. You know, the guests don't have the physically distance, they

don't have to wear a mask. We we recommend they wear a mask anyway, but but they don't have to. And so if you want to sail onto those conditions which are the ideal conditions? And I know you guys, and I know we're talking with your team and with you that you guys have been back and forth with the CDC and really you know, trying to get up to date and keep up to date um with the

conditional sale orders and the changing conditions. You know, what is the CDC telling you that this are you at all concerned that they're going to kind of pump the brakes when it comes to the restart here in the United States. We have a few remaining challenges UM to to get through. For example, if you wanted to sail

with less than of the guests vaccinated. UH, some of the protocols that are currently mandated make it almost impossible to sail in a manner that works for the guests, and so we continue to work with them to modify

those for those situations where that would ultimately make sense. UM. But we're optimistic that the CDC, along with UM, the Biden administration, and the various cabinet members and their staff that have responsibility for servicing the public health and and making sure the economy is strong UH, that that collectively, UM, they'll weigh in and make the right decisions, and and we've made some meaningful progress. Our objective would be that we would be treated the same as other sectors in

travel and leisure. What's the message that you have for somebody watching or listening right now who still may be uneasy about getting back on a ship in this environment. I'm sorry to faded out. Could you repeat, just was wondering the message that you would have for somebody who's listening right now, we're watching right now, if they're potentially uneasy about getting back on a ship in this environment.

I'm thinking about our own Charlie Pellett, who has gone on a lot of carnival cruises, loves to go cruising and can't wait to get back out there. What's the message that you would, you know, give to somebody who's looking at the industry, maybe a little hesitant and wanting to get on a ship. What would be the message you would say to them? Oh, the message is simple, come aboard, you know, get vaccinated please. But if you're vaccinated, come aboard and um and enjoy yourself. You're gonna have

a safe cruise and you're gonna have a great time. Hey, you know those recurring cruisers, I know, like a Charlie Pellett who works here at Bloomberg, they give you, guys a great um window into future cruises. Talk to us a little bit about that, because I know there's millions of them out there right that take a cruise come back. I remember being on your ship and sitting in there, you know, in an elevator and people saying it was my fifth cruise, my six cruise. But it gives you, right,

some visibility in terms of where you're going. What are you seeing on that front? Oh, in terms of the future you mean for the industry, yeah, or and for you specifically, Yeah. Yeah. The future for us and for the industry is super bright. Keep in mind, prior to COVID, about a half a billion people a year took holidays or vacations around the world. We were sailing as an industry,

thirty million people a year. We sailed a little with thirteen you know, across our nine world leading cruise line brands, and um, when you think about it that way, you realize what the opportunity is, where the best vacation value there is, with the best vacation experience there is, And so we have nothing but upside. We were on a great role as an industry prior to COVID. We were growing. Things were great, great returns for the shareholders, great experiences

for the guests. And we'll be back to that. You know, we'll we'll have to stagger the ships in but by spring next year or later, assuming the trajectory for the pandemic continues the way it's going, we'll we'll be back to where we were, um, exciting people and then tie you seem more and more people to the great experience that accruises. So I have to say our audience, financial audience, and folks on the terminal sending me message and they're like okay, So ask Arnold. You know we're hearing it.

He's very optimistic. It's positive to see another U S ship or another ship out of a U S port. You did though guide for positive even up by the summer of two, provided the full fleet is up and running right and we're back to those more normal occupancy levels. Um, do those and I know earnings are coming up, so you tell me what you can tell me. Do those assumptions. Though Arnold still hold, I would say that clearly where

we're at now it's maximizing cast generation. We have fourteen trans actions UM during the during the pause, and now a fifteenth as we refinanced one of those, and to raise twenty three point six billion dollars, a lot of it in debt, either senior or secondary. But the bottom line is, UM, we want to accelerate repaying that debt. We want to return to the credit ratings that we had, the strong credit ratings that we had pre COVID, and in doing so will create great value for the shareholders.

And the way for us to do that is to be sailing again generating cash. We have a more efficient fleet. We eliminated nineteen of our least efficient vessels. We have new vessels coming in that are far more efficient, a strong environment with robust demand, and uh, it's just gonna it looks very positive going forward, so positive enough that if you can get back to triple B territory on your debt anytime soon, I think anytime soon. It's gonna take us a few years to get back to the

very high credit ready that that we had before. Um, but but we're gonna we should be able to do that, assuming you know that the trajectory stays with the pandemic and and things continue the role. I'm interested to hear about how you get that next generation of cruisers to be Never I've never been on a cruise. For example, I would be somebody who you would want to reach, right, I have a young family. How do you get us

to become that next generation of cruisers? Well, first of all, you know, we sell a lot of millennials now, so the cruises by definition multigeneration, and so so many people have all ages have cruise. We sell more children, for example, on our Carnival brand than any other line in the orld, and so we we have multigenerational experience already. The second thing is that especially for millennials, Uh, they love experiences. Everybody does, but but they are even more predispision predisposition

for that than others. And so that's what cruises and all of our data shows that crews really resonates with that generation. So for you, tim, we just gotta have you experienced it once and you'll be hooked. Like the young man who told me on this ship the other day that he had two thousand days of cruising with the Corner brand. Talk about recurring, I've been pushing him

out to the water. I'm just gonna tell you, Arnold. Hey, last question, um, the events of the past year, how is it reshaped your long term approach to the company in the industry? I'm sorry, could you repeat, I'm getting a little feedback. My our apologies are, how have the events of the past year kind of reshaped your long term approach to the company and specifically the cruise industry and just kind I think our long term approaches the same.

First of all, our highest responsibility and therefore our top priority always always it's compliance, environ mental protection and the health, safety and well being of our guests, of the people in the communities we touch and serve, and then of our shipboard and short side personnel. So that is our foundation that gives us the freedom to operate, and that is at our core what we have to do exceedingly well to put us in position to see guests expectations

and generate great returns for shareholders. Arnold, thank you so much. Arnold Donald, chief executive officer at Carnival Corporation, joining us from their headquarters in Miami. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. It's about China's favorite fiery liquor. It is getting a millennial makeover. And I gotta just tell you the backstories that we've been having around our table here

in the studio. Yeah, we should have been broadcasting during the break. I'm kind of glad that it for examples. So joining us now is Joel Weber, Editor at Bloomberg Business Week. He's in the Bloomberg Interactive Broker studio as is mlis Assistant Managing editor at Bloomberg A Business Week Joel, what you have had this liquor? Buys you? Buys you? Yeah, how is it? What does it taste like? Um? Well,

I can rewind the clock a little bit. And I was in Beijing for the New Economy Forum a couple of years ago in the Before Times and the we have a great colleague there, John lou who. Um. You know. One interesting thing about going to China is that you know, it's actually kind of difficult to interact and do comrace because you know, I'm I'm a gringo. My cash doesn't work there. I don't have the apps that they use,

so you're sort of locked out. The great joy of that is that your colleagues basically have to take you everywhere and feed you. Um. So we had this great dinner um and John was like, you got a little bit more wind than you and I was like, yeah, I got a little bit. And he was like, I'm gonna get something for you and he and he gave us some buys you and I really don't remember what happened from then on. Out. We're just talking a little bit.

It is it is memorable. It is uh spicy, hot, fiery, uh and it is stuck with me and I never want to have it again. And that was what caught my attention on this story, is laughing because buys you is uh. It is a national liquor, right, and it is interesting around the world. I mean, I guess in America we have Budweiser, but other people have like real things, like you know, Hungary you have Unicom, in Greece you

have Uzu. Like in in China you have buys. I mean, it's one of those things that you know, it's always been used for celebrations and make a lot of Americans. The first exposure they had to it was when, um, you know, when Nixon and Jow and Lye toasted each other with Buyju when they opened up China to the West, and um, you sort of think, well, what is that. Well, it's the most popular liquor in China. It is a huge business. It's much bigger than beer. It's a hundred

and forty seven billion dollar a year business. It is massive. It is something that everyone likes there and has used for celebrations for centuries. The problem is that it's very strong. It's a hundred and ten proof, and for a lot of younger drinkers, they think it's way too strong. Younger drinkers in China are becoming much more like consumers elsewhere.

They like things like um, you know, they're experimenting with wine, to experimenting with cocktails, and the notion of sitting down and basically drinking firewater, you know, which is popular with businessmen who are older, is something that is not working out for them. Millennial, what do you think? No? Thanks? I mean I'm the one who's like talking about non alcoholic beer. I'm like scared. Even my stomach is is fiery thinking about this. So so how are they what

are they trying to do to actually attract millennials. So there's when company in particular that our story focuses on, which I'm gonna attempt to say it, Jim, I think you can say it better than me. Jing Jaobai, right, it's too miss chun king jing jaobai, which is um uh.

It's they're basically trying tind to make buys you something that younger drinkers would like, and what that means is sort of using marketing that aims at the young uh putting um you know, going online looking for ways to you know, you can suggest you know, saying that they'll print on the bottles. They also sell it on team all, which is the massive you know, sort of e commerce site there. They push it to um you know, in things like anime. They've done ways to appeal to a

younger person who typically wouldn't want this. They've also um, you know, trying to find ways to use it as as in flavors. I mean, you don't normally think of this kind of thing mixing as a cocktail, but for younger drinkers and particularly female drinkers, they want something that has a little bit more of a fruity taste and something that doesn't really knock you out. Is it working.

It is working. I mean this is actually growing very fast, and because of that, it's attracted other people who wanted to get into the sort of lighter, um you know, sort of lighter liquor business. There are um you know, it's not just buy jus that have flavors. They're also plumb wines are becoming a big growth business over there. That's not a big business outside of certain markets in Asia,

but it's really working over there. This is the future and um, you know, liquor, especially in a market that large, even having just a sliver of this business, you know, means that you're going to you know, basically have a really really big business. And part of the strategy here, as uh the CEO told us, was they want to be a little bit like the unique clow of you. So you know, you walk into a unique clue shop again in the before times, and and it's it's like

walking into a Skittles bag. Right, It's just like colors everywhere, tons of things for everyone, and yet it's all affordable. It's all very utilitarian. Right. So if you, you know, Jim curious, like what's what's the rest of this? What are they fighting against? Right? Like, what what are the what are they up again? Well, they're up against the you know. First of all, the younger consumers are much more experimental and they are looking for other types of tipples.

I mean, one thing is that, uh, you know, wine is something that's not really a long term thing in Chinese culture, but they really are growing and that's pushing a lot of the sort of Western winemakers just say they want to come in like lvm age to come in and do developed wines just for China. That's a new group that wants to you know, sort of get there. They also are up against um, you know, sort from

a marketing standpoint. You drink by Jo because often it's because of a business connection, this business meeting, you know, like Joe's dinner. Um, But how do you do that because if well, I mean the business meeting is over. They tend to split bottles and that's a different, different approach here. There'll be a large, extremely expensive bottle. Bottles

can be. Bottles can be you know, a bottle might be for a sort of flying berry, might be three eighty dollars for a lot of money, but as well, but no, a fancy buys you could go take you up to almost four thousand dollars, no comment. I can't. I literally could not interact with I was locked out. But has taken a different approach, which is to come with a much less expensive version that and also small bottles that you can use with just you and a friend.

I have a vague reminiscent of it being a small bottle. It was not a big bottle, So I you know. The other thing Jimmy here is like, is there is there an ability for a product like this to really ever find its way out of China at this day and age, or is this just really you're just appealing to, you know, the billions of Chinese. Well, most likely this is something that won't make it here because here in

the US most things are going lighter, not heavier. What I think is just sort of interesting that this is like even something like this that you can just leave. You would think that there's no future in this right and it can cause like upboards of a thousand dollars, and yet you wrap a little bit of a story around it, you put some marketing dollars behind it, reimagine it and like maybe you got a shot. We're already getting some sent here for you. Joel, Well, we know

how that ends. Next time we go to the bar, we'll check it out. Joe Weber and Jim Ellis Bloomberg Business Week. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. Tim Stinovik on Bloomberg Radio. Sorry about flurry, a virus and vaccine headlines. Health officials in southwestern Missouri or Missouri asked the state to set up an emergency hospital to handle a surgeon delta variant cases, Tim,

that threatened to really overwhelm health services there. Yeah, and we're also keeping eye of course on the delta variant and listening to what executives have to say during their earnings calls about how they're monitoring it not just for their business, but as they also at the same try and try to get employees back to the office. Africa, by the way, has seen a million new cases over the past month. Hospitals are at a breaking point with the continent in the grip of its most severe wave

of infections. Uh, there so lots to get to. Let's bring in Talbert Nishua. He is senior Research Associate at Johns Hopkins University Bloomberg School of Public Health. Former Deputy Minister of Health for the Republic of Liberia. He joins us on the phone from Delaware at the Bloomberg School of Public Health, supported by Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies. Talbert, nice to have you

here with Tim and myself. Every day, you know, Tim and I have to go through and look through the headlines to try and really put out there to our audience what really matters, what they need to know about. What do you think first and format most, we have to kind of understand about where we are when it comes to the health pandemic. God damn, thank you for having me. Thank you for having me. It's a polity to beat on. We in a situation where rick communication

and community engagement UH cannot be over emphasized. The fact of the matter is people are the vaccine uptake, the sub octoman and we see a strong correlation between unvascilated and COVID ninety cases, hotspot hospitalization, the VA disease, and unfottendulatives. And these are presentable once you take your shots, so people need to make use of the vaccines. In fact, gave you speccific examples of COVID nineteen hospots right now.

You see stre the missouries of Carolina, Oklahoma, Utah, Nevada, Partkingtons, the States. The vascination rate is stay below for how do you how do you get it above? How if people are going to get a vaccine now, who have access to vaccines for free, who have access to vaccine things that are really convenient. Are they ever going to get a vaccine? Is it time to just move on and and and and send these vaccines out of the

United States to two countries that need them more. It is important to solve the inequitate gap that we have in other countries like in the Global South, in Africa and other areas around the world, and what's happening in the Asia. But it's also good for the United States that have affects and availability to make use of the vaccines. That's the most important part politicizing public health, especially the

current open like the evaccination program. Place people in Hampswere with the data there and we see that not the nine percent of the infection and just are in people on vaccinated. So people should not move on. We need to get to zero cases of this ward or create the hair is unity step the percent of the population get vaccinated and make sure that we do. This is

a patriotic duty every second the vaccines. Hey, Tolbert, let me ask you something because we just had on the Carnival Corporation CEO Arnold Donald, and you know they are starting to set sail here in the US out of US ports specifically, but it is a slow progress and they've been waiting for a long time. And I asked Arnold about the Delta variants specifically the impact it has, and you know, he didn't talk about that. They've dealt with other viruses. They've talked with Zeke, you know, dealt

with Zeka, They've dealt with you know stars. Is there something different though about COVID versus some of those other viruses, the auto viruses. You just talk about what at the level of the pandemic And what makes this difficult is that the entire word with this pandemic and these barrels and the fact that we still don't have treatment for this, and the vaccines are in low supplied, the stratege the supply team is limited for the rest of the world.

It gave the virus the opportunity to mute it. And this is why we've seen the variants. That's for color right now, we've seen four kinds of variants and the parents sorry, and the data bearing is becoming more transmissible as it studies in the UK number area of sheroom sixty percent transmission and even more virulent as as as compared to the rest of the three of uh Laquer and government, parants parents that we've seen. This is this

is the important fact. Were there with the bola. Bola was once I was the infidet manning gurn in West Africa. When were there with the bola, it was continue and localized in pre West African country. Vicar did not go up ask breas right now and so this is a different with over nine things. But the good news is we now have the vaccine, so people should go and take their vaccines. That's very very critical. October, you were Deputy Minister of Health for the Republic of Liberia. We

Carol mentioned the statistics about Africa very concerning. It is not a monolith. Each country is different. But I do wonder what's a realistic way for us to think about the pandemic ending on the continent given the tough access to vaccines that many countries have. Does it just does it? Does it just continue to go unabated? It is right now as we see it, and no country is saved one another part of the world is not making the same progress that countries in the global now that it

is not that in Europe I'm making right now. The trend in Africa is worsening and the reasons are simple.

Number one, health giest systems are within those countries. We be spart in the number of cases our concern right now scientifically, and global health community public health communities does not get Africa to were India is in the part and other countries are right now, and we've seen the trend in Africa to be you know, worsing and alarming, with just less than two percent of the people having vaccines, and vaccines are not available there. Health system witness people

are downplaying the virus. They're not being the number of deaths in other places. Tibert, thank you so much. We really always appreciate when you give us some time. Toilbert Niche, to our senior research associate the Johns Hopkins Bloomberg School of Public Health on the phone from Delaware, the journal now, but you let me drive, no, honey, please, l I want to drive. Question. This is the drive to the globe. M Thanks. We'll drying us to dawn on Bloomberg Radio.

So Tim and I've been watching the trade today. We've been bouncing around, certainly on the equity front. We're off our lows, off our highs the day as well, talking about the importance it feels like when it comes to the bond market, specifically watching that tenure note that you'll below one point three. So let's see what it all means. Let's get to with Annahan, she's vice president Equity strategis at Wells Fargo Securities with us on the phone in New York City and a good to have you here

with Tim and myself. You do watch the equity markets, but you know you watch the financial markets. Do you feel like the equity markets or the bond market tells the true story of what's going on and what we can expect in terms of the economic and market environment

for those publicly held companies. Hi, Carol, I mean I think you've got to look at it together, right, because both parts equity and the fixed income markets are giving you a little bit of a mixed signal when you look get on their own, but when you blend them together, the pictures starts coming together. So we can start with the fixed income markets. You see that yield are dropping the tenure below one thirty. It's got people jittery, worried

about future economic growth here. But you see the pull back there is mostly coming out of real yield. It's not coming out of the inflation expectation portion, so it looks like, okay, it's not necessarily future growth that's really taking it. And then you look over towards the equity side.

What's leading today, you staples, but also financials, right, So it's mixed back where you have part of the market concerned that you know, accommodation is not enough, it's it's got to stay on because uh, you know, inflation is too transitory. But you have the other part of market thinking, hey, growth will continue. So it's a mixed bag today. So so let me go back to the message that the bond market is sending, at least as far as as you're interpreting it, What is it exactly saying to you?

With yields dropping like this? When we yield dropped by this, generally we think about, you know, the belly of the curve or the longer end of the curve as this reflection of the growth of the economy or expected inflation. Right, But in that aspect, you have to realize the nomenal

yield moving has two components to it. You have the actual real yields portion, and then you have the part where then you can back out how much of it means actually the inflation expectation of future growth part, and a lot of the move, especially since the end of March, has come from that real yields portion. I think that part by the end of the year is going to have an inflection point and trend back upwards. Right now,

real yields are in negative territory. I think that the ten years probably around negative ninety basis points, if not more in real yield. I think they'll trim up to probably negative fifty by the end of this still negatively

yield eventually, ye, still negative. It makes it tougher the financial sector as well when you see yields low like that, which is why you say it is fascinating to look at the major industry groups in the S and P five or eleven, utilities and consumer staples, as you say, which would be kind of a more safer play, right, careful play, uh, and then financials in real estate, you know, which would speak to recovery, right it's it's it is

a mixed bag, yep. And something special too that I want to highlight here is that youth staples and reads, they're very traditionally what we like to classify as low volatility sectors. Like you said, Carol's defensive, but not just defensive because you know, economically you think about their sensitivity, but also because as yields retreat in a growth contracting environment, these kind of groups tend to hold up better. They

tend to outperform the market. And low ball is a tactical positioning that we recently recommended for those who you know, need to lighten up on on that sting from the from yields retreating. Hey, you know, we just spoke earlier in this show to Arnold Donald, the President and CEO of Carnival Cruise Corporation. He told us that demand is robust, pricing is strong, and in fact that bookings in two pricing is also stronger than all the way back in

twenty nine. I'm wondering about mid cycle recovery place because I know you've got your eyes on leisure and travel people looking for experiences over things. What do you got your eye on somewhere? Like you said, the cruise industry is a great example, but anything tied to that where people can travel again, hotels, leisure when you're going out somewhere, and really, when you say experiences, it's you know, kind

of a cheesy phrase, but it's true. Think about those parts where lodging, um air fairs, car rental, these kind of things are people what people want to do because we haven't been able to. So that's that mid cycle exposure we like. And we still think it's too early to shift. It's not into the late cycle place. I think that the economic recovery were it is today, we're still going to see some robust growth for a couple of quarters, especially on the earnings front. Might we stay

in this mid cycle world for a while. It's very possible because if you think about one thing that's kind of dampened earnings growth a little bit at least for seeing evidence of that in this earning season is the supply constraints and that labor shortage you've heard of time time and again. But what's also kind of not offsetting it necessarily but also helping to extend the economic cycle

is that corporates themselves they're doing more supply management. And that supply management because they know that they have low inventories. They're not rushing necessarily to restock these inventories, but they're managing their supply chain so that they can extend their corporate growth out. I think that's helping as well, and they going to keep us still in that mid cycle for a little longer. What are you seeing with earnings

right now? I'm just thinking about mid cycle right Wait a minute, Well, it's it's interesting because here we are of the banks. The big banks have all reported, right, so just the beginning of earnings. It is just the beginning of earning season. But this is like what marks the beginning of earning season. It gives us so much inside anna into what these companies are thinking about the economy. And we have gotten a handful of companies as well,

including airlines and PEPSI outside of the big banks. But how would you characterize the results that we've we've heard thus far because investor expectations are really high here I'm talking to the tune of over sixty earnings growth. Yep. You know you hit something very key here is that invest expectations because right now you're seeing that a lot of the corporate over the last two quarters were beating

EPs estimates, but those EPs estimates were cell side. Now the way that this earning season has started, same thing. You're getting a good amount of EPs beats out there, but the reaction to these beats hasn't been so hot. You're not seeing this great one day reward after announcement.

It's because investor expectations are elevated. But something to keep in mind is that what also people look at here is what our corporates saying in those transcripts, and what we've highlighted is there's a lot of focus on margin pressure and input costs for those corporates who are saying that they're able to pass along those elevated input costs and able to maintain those margins because right now demand remains so robust and they can manage those supply chains.

You know, that's that's a pretty good sign. But we also have corporates that are talking about, hey, these margin pressures are are coming at us. We might eat into US and the next couple of quarters. And I think for those companies in particular, investors might be getting a little more uncertain on But it is tricky that I mean, I think Tim and I we in talking with various CEOs and leaders UH and industry watchers. It's not the same when it comes to wage constraints or labor constraints.

We found that with Arno old Donald, they they tap into a global workforce and he seems to be pretty comfortable countries and it's fine hiring, it's massive, and he didn't seem to have any problems. So I just do wonder, how do you how do you figure out is there a narrative here, really a true now when it comes to higher wages and the impact it might have. You know, Carol,

that's our job every day as a macro strategist. You gotta go from the top down, but pay attention to those little details and put together what is the big theme. And so far, I think it helps start when you kind of focus a little more by industry, when you look at kind of more the the industrial sectors. So far, they're saying, hey, we can maintain margin, we can pass

along price. But some other parts of the market you're seeing that these labor constraints are really eating into those margins and they're not so sure how that's going to keep up. But that's the name of the game from maid cycle economic recovery. It's not this easy dumpster diving that we saw early fighting that's right, where you just can kind of go anywhere. No, it's right. It makes

so much sense. Anna, Thanks so much, really great conversation, Annah and vice president equity strategist Wells Fargo Securities joining us on the phone in New York City. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two p m. Eastern on Bloomberg Radio or watch us on YouTube. Search to Bloomberg Global News