How We Can Defeat the Next Pandemic

You can also listen to our radio show at two pm Eastern Time on the Bloomberg Radio or watch us on YouTube search Bloomberg Clovel News. Alright, uh fed Wednesday, no doubt about it. We've also got a new edition of Bloomberg Business Week magazine coming out online on the Bloomberg and on newstands tomorrow officially sooner than you think.

Issue and one of the stories gets into the one million Americans tims still without high speed internet access and how now may be their best shot in a generation at getting it. Yeah. Austin Cars a technology reporter for Bloomberg News. He joins us on the phone from l A. Austin It's I was actually traveling to a rural air of h well, it's not even that rural. The Cat Skills over the weekend, uh, and my friends who live up there just got broadband internet access for the first

time in the last couple of years. And this is an area that many people go to and many people rely on because certainly people rely on broadband if they're doing remote work, if they need to apply to jobs. And it's still just mind boggling that so many Americans do not have access to broadband. Take us into your story and what Washington is doing to get these million Americans who do not have high speed internet access access.

So yeah, that's what Tim. What you witnesses in the Cat Skills is exactly what I witnessed reporting in rural Arkansas, which is it's just a different world than uh, the

Internet have have experienced versus the Internet have not. You where I went to in the Arkansas Delta, which is about you know, a couple hours outside of Little Rock, very remote, very rural parts, high poverty rates, low density population, and you know, only recently one of the internet providers I talked with had just turned off their dial up internet which they had been you know, charging fifty cents

per hour. It's just a different world. You don't realize that they can't stream Netflix there, they can't do Zoom, they can't book a COVID appointment if they don't have

internet access. And so what I want to show with the story is what it looks like on the ground as Washington considers tackling this digital divide with the infrastructure or spending bill, which is making its way through through Congress right now, is through the House as well, and they're considering spending tens of billions of dollars on broadband deployment subsidies and giving us potentially the best shot in

many years that a really narrowing the gap. And the big debate is how do we actually do that, what technologies do we invest in? Uh, what's the best bang for our buck? And the story shows what it's like, what the reality is like in places like World Arkansas, and what you saw in the cat Skills of how much it takes to actually close that divide with a structure on the ground, Well, how much does it take?

Because in order for my friends and I'd actually spent a lot of time Saturday night talking to them about this because this is the first time I had visited them in the seven years that they've lived up there that they had high speed internet. Every other time they've relied on a satellite to actually get them internet access, and they were capped at fifteen gigs a month, which is really nothing. I mean, people use fifteen gigs a month, uh in a day if they're streaming something high definition,

or in a couple of days. Uh. And and I wonder about the way that technology has changed because they actually got cable laid down, which is very expensive. But you see companies like Starlink Elon Musk's satellite company being able to offer potentially lower cost solutions. So what's the

technology needed here and how much has it cost? So in the Arkansas Delta that the big debate is how much do you spend on fiber, which is the gold standard, that's what you have with every high speed internet pretty much and every your wealthier urban part of America at this point, or do you invest in sort of a riskier technology like Elon Musk's Starling satellites which orbit uh lower part over the Earth and zap coverage from space.

There's five G home Internet, which is sort of a home based version of what you get from say T Mobile or a T n T or Verizon UM or their fixed wireless tools, which like citizens Broadband Radio service, which is actually what a bunch of the local Internet

providers in Arkansas are using these days. UH. It's a wireless spectrum historically used by the U. S. Navy to to sort of beam radar transmissions, and the STEC has repurposed that spectrum for commercial youth, allowing local players to sort of beam Internet coverage using radio antennas, which sounds kind of old school, but it works for up to six miles. It's not as fast or reliable as fiber, but it gives decent speeds and costs a fraction of

physically wiring up every home in America. And so that that's really comes down to this cost benefit analysis of in rural In rural Arkansas, I'm told it can cost fifty thou or more to get a fiber optic cable uh laid into the ground, and that's not including trenching

costs or construction, etcetera. UM, And so how much are you willing to invest than that versus the far cheaper but maybe less reliable technology that might not be relevant ten years that might need to be eventually replaced in fiber, but will help get more people online tomorrow instead of ten years from now. It is still striking how many Americans are without high speed internet access because we take

it for granted, certainly here on the East Coast. So the infrastructure build, does that provide enough money to really move the needle here? And what specifically, uh you're getting into some of the technologies, I mean, what do what needs to be the first couple of steps to move towards uh, hooking up those twenty million Americans. Yeah, the biggest hold back is actually the SEC's data. It's historically

been incredibly inaccurate because it's based on census blocks. And this is something the SEC is acknowledged, just based on census block rather than sort of address by address breakdown

of the Internet access in America. So the SEC estimates roughly between fourteen and eighteen million people don't have broadband access, whereas outside um analyzes from from different research group estimate the number is as much as forty two million Americans without broadband access, or as many as a hundred and twenty million if you're just talking about people who don't have Internet at broadband speeds like like that that what

you need to stream Netflix. So so the biggest first step here is actually just figuring out where to close the gap, because you can't narrow the digital divide if you don't know where it is. And then the next step is just figuring out how much money can we afford uh to sort of break down this problem. And I think the issue is a lot of critics have said that the broadband subsidies aren't likely going to be big enough to do a fiber only network across of

all of America. The Senate bill right now includes about forty two billion dollars for broadband deployments, whereas you know, some some estimates say it would cost as much as two hundred and forty billion at least just to do a five or old need network across America. So if we're trying to wire up everyone, we're not going to be able to afford it. So the question is what

are these other technologies? Do we use more satellites than fixed wireless to wire up the country or do we just try to build a much fiber as possible with that spending in this spill he Austin, what's the what's the other side of this coin here, the the economic cost of not having these more than one million Americans connected with broadband internet. What is I mean? Yeah, it's

a it's a tragic cost. I'm not sure if it's it must be difficult to quantify, but it's something that The reason there's been more emphasis on this subject is because the COVID nineteen pandemic um. You know, prior to the pandemic um, you know a lot of folks that it said that any infrastructure bill that came up, it was always about investing in roads or bridges or railroads. And when I talked to the Rural Broadband Association, they just kept saying, Hey, it's also in addition to roads

and bridges, it's also broadband. It's also broadband. It's also broadband. And that didn't change the Congress's perspective on that didn't really change until the COVID pandemic, when suddenly they realized employers couldn't have people working from home because they couldn't access zoom, or kids couldn't work from home and do

their homework because they didn't have uh Internet access. When I was an orchand saw, I learned that a handful of kids were working outside at a local park center, a state run park center, because it had public WiFi, and they were working outside in ninety degree heat, and that the park ranger brought out fans to cool them off. So that that's the real tragic costs that you're seeing

on the ground. I don't know if I have a quantified number for you, but that that's why this is, this debate is really uh coming to the forefront right now in the Infrastructure Bill of trying to solve that digital divide, because man, we saw that during the pandemic that the US is just not prepared for a remote society. Well, a good story, Austin Carr, thank you so much. This

is Bloomberg. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. And we've got some breaking news crossing the Bloomberg terminal, a Bloomberg exclusive. Facebook's chief technology officer, Mike Chauffeur stecing down the CTEO changes posted internally by CEO Mark Zuckerberg. So let's get to it and get some clarification on the is again a Bloomberg exclusive with us is Bloomberg

News Corporate Influence reporter Naomi Nick. She's in our interactive broker studio. You are here. What's going on? Yes, So Mike Schrepfer will be stepping down next year. He's currently UM the chief Technology officer for Facebook, so he handles UM a lot of the areas that are actually pretty critical to Facebook's growth, like augmented reality, blockchain, virtual reality, and UM. So this is a significant departure for Facebook, significant departure and also a familiar name to people who've

been watching Facebook for years. Stepping up bos Facebook's hardware boss Bosworth to become CTO next year. Uh, tell us about bos In his history at the company and what he's going to and what it signals that he's becoming CTO. Well, this is you know, it's an interesting move for him given how much Facebook has been emphasizing it's push into hardware, so it has an ocuous unit. UM. It's also you know,

just recently released a SMA art glasses. Facebook really sees its growth area in in creating hardware devices to be kind of the next cell phone. I gotta ask you, because Facebook has been in the news a lot. We should remind everybody to the stock I think hit a four month low in today's session. We've seen some pressure here UM the New York Times as reporting that Facebook promoted positive stories about itself on users news feeds. We know they've come under a lot of criticism in terms

of blocking misinformation on their platform. Is this that all connected? My understanding is his group, UH, is the group that UM I think was very much involved in removing content that violates its policies like nudity, hate speech, and graphic violence. Yes, I mean he does oversee the technology that's central to

those efforts for Facebook. And yeah, I mean it is at a time where the company's really under siege, UM from multiple investigations from multiple news organizations spanning you know, the fact that UM there might be a legal sales of of call, you know, illegal car with stings on its Facebook marketplace, to how it handles human trafficking UM and so, uh you know it's it's so is he a fall guy? And I said New York Times reporting Wall Street Journal has done a lot of reporting right

and others on all of this. Is he a fall guy? Here? I wouldn't go that far, but I would say, Um, it's at a time where Facebook has seen a number of departures for veteran so like Fiji Samomo, who was also at Facebook recently left to become CEO of Instacart. Carolyn Everson, who oversaw Facebook's businesses with advertisers, she also recently departed, and they were both people who were at

the company for more than a decade. And so this is another one of those types of departures I do, I go ahead, I just gonna say Facebook down about six times of a percent in the after I was

It was down four percent in the regular trade. Now, I mean wondering just about again back to Bobs because for for people who've been watching Facebook, Andrew Bosworth closely for years a familiar name and internally too, and in this coming from an internal posting the company recruiting from inside the company, keeping people who've been at the company a long time and elevating them even though they got

they've seen these departures from long time executives very recently. Yeah, it's actually an interesting, um, you know move for Facebook in particular because the company has gotten criticism that it's too insular, and it's thinking that it drinks its own kool aid and doesn't accept the perspectives of outsiders enough. And so you know, this is one of those moves that could invite that kind of scrutiny, you know, in

the future. And so the question is if they continue to recruit within, will they change and be able to address the criticisms they're facing. Is their net take away from all of this, And I know we're gonna be covering this into the Thursday trade, Um, I'm just curious. I would say it means that Facebook's leadership is shuffling, and the question is will there be more departures, will there be more reshuffling at the top, and how to

that effect the direction of the company? Yeah, a day word, Facebook closed down four percent to Naomi over those challenges that the company is having with Apple's new UH privacy settings as well. Naomi Nicks is social media and corporate governance reporter. She joins US Live with the Bloomberg Exclusive. You're listening to Bloomberg Business Week with Carol Messer and

Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, our next guest has been one of the constant and consistent go to voices throughout the COVID nineteen pandemic, having a front root seat to the health crisis. Former commissioner of the f d A of the United States, He's on the boards of a Lumina, Tempest Visor, and more. He's a resident fellow at the conservative think tank American Enterprise Institute. His new book is Uncontrolled Spread, Why COVID nineteen crushed

Us and How we can defeat the next pandemic. Great to welcome here to Bloomberg Business Week from our FDA Commissioner, Dr Scott Gottlieb on the phone from Westport, Connecticut. Dr Gottlieb, Great to have you here with him and myself. UM, so much to ask you and congratulations on the book. One thing we wanted to know if the nation had shut down early on in the pandemic, let's say, for three months, really shut down, federal mandatory shutdown, would we

be in a better position today? And I'm just talking about the US for a moment. Yeah, I don't know that. Um, if we had implemented the stay at home order a lot earlier would have made an appreciable difference, and I don't think it would have been warranted, certainly once we knew that there was very dense spread in cities like New York, we should have implemented the mitigation they stay at home recommendations earlier than we did, so we were a week or too late doing that in cities like

New York. But the bigger problem was that we didn't have the ability to actually diagnose the inspection. We didn't have a diagnostic test employed at scale. It was it was something we could have done if we had proper planning um And because we didn't have a diagnostic test, not only did we not know how much spread was underway, so we were lying to the scope of the spread, and we didn't know the true nature of the threat

and that's partly why we shut down own late. But we didn't know where the virus wasn't there were parts of the country where COVID wasn't spreading yet, where we didn't have to implement the population wide mitigation, where we could still use testing and tracing if we had a test employed to try to contain the spread rather than telling everyone they had to stay in their homes. Um So that the lack of the ability to actually figure out where the virus was but also where it wasn't

led to the wrong policy decisions. Who made the right policy decisions at the time, What countries led the way, what countries are still leading the way. What's a good example of what we should have done. Yeah, at the time, South Korea, I think UM had probably the best initial response. I mean, every country has gone through waves of infection and made mistakes along the way. UM. The US has been disproportionately impacted by this. This has been an asymmetric

risk of the United States. I think We've made a lot of a lot of mistakes along the way. But South Korea, early on when the virus was first identified in China, got together their private industry, their their diagnostic manufacturers and promised them in a very efficient process if they got into the market, started to manufacture diagnos two kids at scale. They promised that they would be purchased by the government UH and they also stood up testing sites.

They started to lay the foundations testing sites, and they actually pioneered the use of drive through testing sites. The first dry through testing sites were in South Korea, and because they were able to deploy diagnostic testing at a massive scale, they were able to identify their early infections get people isolated, get people in quarantine, uh, and keep the country from becoming epidemic. The the epidemic really never

took off in South Korea. I mean they had subsequent waves of perfection one D and one seven, and eventually a delta variant started to spread later on. But South Korea was on a similar trajectory of Italy and was able to contain it. Dr Gotli, Why didn't we treat the warnings of a global pandemic that have been out there for years, so much so that there was a pandemic playbook conceived of during the Bush administration. Why wasn't

that already in place. You've been on the inside, You've been involved in government on and off, I think since roughly two thousand three. Why didn't we have the follow through? And I'm curious the conversations that you had about this. Look, we had a pandemic playbook, and you're right, we had prepped um a pandemic contingency. In fact, the government had run a stimulation called Crimson Contagion just before COVID struck, which was a simulated pandemic. The problem is we had

always prepped for a pandemic involving a flu. We never envisioned that a pandemic could be caused, certainly by a coronavirus.

We never envisioned anything but influenta And the playbook that we had written for flu wasn't fully applicable to a coronaus coronavirus or many things that were different about this virus and about any coronavirus that don't make the kinds of continguencies that you developed for flu um widely applicable for so for example, flu has a short incubation period, meaning that when you're exposed to it, you get sick from it pretty quickly, and typically you're not compagious until

you develop symptoms. So trying to diagnose people who are asymptomatic carriers of the flu isn't as efficient. First of all, they're gonna, once they're exposed, are gonna become sick very quickly, and you're gonna be all identify them because they're gonna have symptoms when they're contagious. They have symptoms with a coronavirus. With a on the incubation period, there's more of an opportunity to guess someone diagnosed before they go on to

spread the virus. And we also know that there's a lot of asymptomatic transmission with with the coronavirus with COVID, so it's more important to have a diagnostic test deployed. We're screening the population. So a lot of the things that we thought about that we planned for flu weren't applicable. We also tried to stockpile certain materials like respirators and mass um, which didn't which we found out the stockpiles weren't well maintained, so we didn't have the equipment that

we needed. But I do want to push you a little bit, Dr Gottlieb about what were the internal conversations you were having at your time uh in in the government when it comes to hey, folks, we gotta do something more serious. We gotta make sure we've got the right things in place. Yeah, at the time that I was in government, we really didn't have our eye on anything but influenza. So how did we miss it? How

did we miss it? Especially that since there's a lot of vaccine hunters that are out there that we've talked to a bunch here at Bloomberg, they've been looking at this and seeing things are out there that could be a significant problems. Yeah, certainly, back in two thousand and five when the pandemic planning first began, that's when I was involved with it. We were really worried about a bird from each five M one. At that point, coronavirus

has really hadn't emerged. But after Stars and mirrors both emerged, we should have had the awareness of the coronaviruses were on the march, they were becoming more pathogenic, they were starting to threaten humans, and that a more contagious variation of stars could come along and threaten the entire globe. Really, what we should have been focused on is a broad

category of viruses. Viruses that replicate through RNA, because the virus that replicates through RNA means that it can undergo rapid mutation, and viruses that could spread through respiratory droplets or aerosols. So those two features, viruses that replicate through OURNA and spread through aerosols or what make of give

a virus the qualities that could create global contagion. And if you're looking at it through that lens, you're looking at that broad category that includes inuenda for sure, but it also includes coronaviruses include nippavirus. It broadens the universe of the potential threats that could be the next pandemic. Still with us is Dr Scott, former FDA Commissioner, resident fellow at the American Enterprise Institute, viser, and Alumina board member.

He is also a special partner with the venture capital from New Enterprise Associates. And let's not forget the reason he's here. He's got an interesting and comprehensive new book. It's called Uncontrolled Spread. Why COVID nineteen crushed us and how we can defeat the next pandemic. I already, Tim are thinking about the next pandemic. Yeah, and so is Dr Gottlieb. Dr Gotlieb, you dedicate this book to your three daughters. Uh, you're a dad, and I think that

a lot of parents listening right now. I want to know about risk tolerance and about the way that you are behaving and the way that you want your family to behave during a pandemic when perhaps some of kids are not vaccinated and some kids are old enough to be vaccinated. Uh, what is what are you doing with your family right now? What is safe to you? What's

not safe to you? Yeah? Look, my kids are not vaccinated yet, they're not old enough to be vaccinated run the age of eleven, they will be vaccinated one they

may turn twelve and they're eligible. I think a lot of the residual anxiety that people feel people who are vaccinated feel right now around COVID is the risk that they're going to bring in an asymptomatical, modely symtomatic infection back into the home, put their children at risk, or an elderly um parent at risk, someone that they might be caring for who is a more significant risk of

having a bad outcome from COVID. I think once the vaccine can be extended to children, a lot of people who are vaccinated themselves and don't feel personally at risk and COVID, that they feel reasonably confident that they were to get infected, that they're going to be protected from a severe outcome. I think they feel more confident about going out and about, and that's why I think a lot of people are still cautious. People who are vaccinated

probably overestimate their risk. In some cases, they're probably more protected than what they perceived. People who are unvaccinated, quite frankly, I think are underestimating their risk. They're probably a much more risk and COVID than they perceive. But I think a lot of the residual anxiety that people feel around the virus is around kids, and hopefully we'll have a vaccine for children very soon. Fingers crossed your As we mentioned, I f as our board member, do you hair whether

your kids get a viser booster or vaccine? Excuse me, whether it's maderna, whether it's J and J, do you have any preferences. I think all three of these vaccines are safe and effective. All three of them have demonstrated really robust protection, including the Jane J vaccine, and J and J is going to be able to produce much more vaccine in the months ahead. UM, and that the data on that vaccine looks very encouraging when we see long term data and the durability of response. And so

I'm impartial to what vaccine my children received. Probably they're going to get the Fiser vaccine because it's successful to me, UM, but I'm impartial to what they received. I think all three of these vaccines are outstanding, and I have to be quite honest with you, Tim and I talked about this every day with doctors uh, and the medical community. I think there is a feeling like I got the Visor vaccine, I got the Madura vaccine, Like there is

a feeling that one is better than another. You've got a huge audience right now, a global audience. I mean, what do you say to them, how do we understand especially as we continue to see studies out there, officials, regulations you know, come in about these uh, these vaccines. Yes,

it's not what the data shows. When you can pull any one study and try to make a claim that one vaccine might be slightly more beneficial than another vaccine in terms of its long term efficacy or the absolute potency of what of the effect and it says delivering. But the totality of the data really shows that these vaccines are interchangeable and and all of providing durable protection and they're all doing their job. They're fulfilling the original premise.

Remember the original premise of these vaccines with that they would protect you against severe disease and hospitalization. And all three vaccines are proving very effective at that. I think something really frustrating to a lot of people right now. Dr Gotlieb is uh, there's still you know, you write about the lack of real time testing and available testing.

Even almost two years into when we first discovered this, I still walk into a drug store and I cannot get a binance test right one of those from Elliott Labs, and I can't order them online. This the availability is still not there. So you write about it in your book How to Prepare for the Next Pandemic. We're still not getting through through this one right now. We're still not learning the lessons that we should have learned almost

two years ago. Now. The problem is that we didn't We didn't scale the production of the tests that consumers prefer. What consumers want are at home tests that they can deploy themselves that are easy to use, where they can get a readable result right in the privacy of their home.

A lot of the tests that are available in the market that aren't selling out are the ones that either require you to send a swab off overnight so you don't get an discontinuous result, or you have to upload some data that the test reads out to get a result on your iPhone and therefore you're reporting the results to an authority. People want to be able to test themselves within the privacy of their own home and make

a determination what they do with that result. And those are the binets now tests, to your point, which is selling out the Loomera tests which isn't available. So the test that consumers want are the ones that aren't available. I think companies probably miscalculated and didn't fully appreciate what consumer preferences would be. But the reality is that this

is a completely new category. The whole idea of making at home tests available to diagnosed patients for infectious diseases, that's a new category that's been created in the setting of COVID. Before COVID, FDA winn authorize those tests. Do we need a division in the government, Dr Gottlieb that is just devoted to pandemics because right now it's a lot of hands in the pot. Yeah. I think what

we need is a reformed CDC. There was an expectation that CDC had the operational capacity really to mount a national level response to a public health crisis of its magnitude surface real time information to inform policymakers do do real time analytics to inform consumers on how to reduce their individual risk scale the production of a diagnostic test. They didn't have the capability to do any of those things.

It's a very retrospective mindset and new organization. It's a high science organization that does deep analytical work but takes months to render conclusions. We need a much different mindset and capability. But I think we should keep it within CDC. To take it out of CDC and just create a new agency is going to be too politically difficult. Hey, Dr golib, I gotta ask you about f DA because, as I was reminded in an NPR article this morning, the f d A has been without a permanent leader

for eight months. Is did you see that as former FDA commissioner, do you see that as being an issue during the pandemic. I don't think it's an issue during the pandemic. The agency has got a very good commission in Joanna Woodcock, who I work with around the Drug Center. And the reality is I think that Janet has been able to function very effectively that organization because she knows

the organization. If you had brought up politically appointed commissioners in the outside who wasn't familiar with FDA, they might not have been as effective day one in that organization. In the setting of a public health crisis. So having an experienced leader I think has actually been a good thing. Hey, listen, just got about forty fifty seconds left. Dr Scott Gottlieb tell us who you hope reads this book? Well, I

certainly hope policymakers read it on Capitol Hill. I think we need to start having the discussion in earnest about how we prepare better in the next pandemic and how we make the country more resilient and look at public health preparedness through the lent of national security. So I'm hoping that this gets picked up in Washington and people start to think about how we should engage in better

planning for the future. Well, there's a lot of information for everyone to read about and figure out the next playbook so that we are prepared. Dr Scott Gottleib, thank you so much. Much appreciation from Tim and myself. Uncontrolled spread, why COVID nineteen crushed us and how we can defeat the next pandemic. Of course, from the former head of the f d A, I'm ro macro journal now, but you let me drive no, no, no, drive home, honey, please,

I'll do the right drivel exprest me. I want to drive, destrive, good questions trying. This is the drive to the globe. Give me thanks. We'll drying us down on Bloomberg Radio. All right, So great coverage by our surveillance team there. TV radio simulcast of the FED meeting largely what we expected all the out Tim great to say, Carl Master, Tim stead of a here on Bloomberg Business Week on this Fed Wednesday. It also happens to be I believe

the first name of no Faul is the first happy fall. Yeah, first day of fall. Uh. And we did get some clarity when it comes to what the FED might do next and when we did it interestingly enough, but we're not seeing a significant market reaction either when it comes to fixed income markets or when it comes to the equity market. And I think it's fair to say that

that's a win for the FED. Means that they have been transparent, that they've been feeding that information right, absolutely, Yeah, exactly. So let's see what our guest has to say. We'll continue talking about the FED. Let's do a little bit more with Megan Hornament. She's director of portfolio strategy at the wealth advisory and multi family office firm Verdon's Capital advisor.

She is with us on the phone from Hunt Valley, Maryland, who by the way, if you check out our bio, if she was not a financial advisor, she would be a coach for the Special Olympics or the Invictus Game. So I'm delighted to have you here, Megan. How are you? I'm great, How are you good? Good? Good? I do wonder if this was an Olympic sport watching the FED, what might it be. Yeah, that's a very interesting question. Um, I guess it would. You'd have to pick one of

the Olympic sports that's very slow and steady. Um. That is something that they are are definitely articulating to us. UM. They don't want to surprise us in any way. UM. They're going to be very methodical about how they go about, you know, tapering bomb purchases, how they unwind some of this non traditional policy, and as you mentioned before, they're being very transparent about it. So that's not really surprising

the markets right now. If if it were figure skating or perhaps gymnastics, and judges were holding up numbers and giving graides, what grade would you give FED Chair Powell at the end of that press conference, I think yeah, one to ten, and I he did very well. The reason why I think he did very well it is

because he didn't surprise anybody. I think that there that anybody could have expected he was going to come out, UM kind of tow the line on both sides where he would say, you know, they were acknowledging the fact inflations running a little bit hot. They did increase their inflation expectations for this year and a little bit for next year. But at the same time, the economy is not quite ready for them to raise rates, So they're

able to really satisfy both sides of defense. They can um satisfy those people that think that inflation is running too hot and they have to do something, and then also satisfy those that think it's transitory and there's more risk to the economic environment going forward. Hey make it as somebody else to determine portfolio strategy at your firm. So based on what the Fed does, are you thinking about new strategies maybe going into the new year or

even the remaining months of this year. Um, you know, for the remaining months of this year, we're still being very patient because I think there's a lot of risks still that need to be addressed obviously defended. So what does be patient mean? What's your what's your like allocations or where do you want to be exposed to? Right? So when I say atient is we're being patient with

some of the overweight cash position that we have. We have a modestly slight overweight to cash and that's because we think you really need to have dry powder in this type of an environment. Even though we've seen volatility over the past couple of weeks, you're still looking at valuations that look stretched across a lot of areas, specifically even here in the US markets. So we're being patient to allocate some of that cash the areas that we like.

Did you allocate on Monday or Tuesday when we saw the pull back, No, because if you if you look at it from top to bottom, it was only it's still about four percent. So we still haven't gotten that five percent pullback in the sec um this entire calendar year, and that's rare. So I think that some of the

risks that we are are still monitoring. Obviously seasonality. You know, there are a lot of people will mention that we are closing down September, but there have been some instance, in September and October can be a little bit choppy. The other thing is the political situation is very uncertain right now, and it seems like while it's taking a back sea to some some other news there is um it looks like it's kind of there's a lot of falling apart there and some of these different deals that

are supposed to be struck. Especially we have the dead selling at the end of this month, and you're hearing yelling pics get a bit louder as far as trying to get them to come to some form of an agreement. And then even if they do punt some of this down the road, we're still going to have more in fighting and a political standpoint before the end of this year.

So I think the political standpoint, while we don't trade around you short term political events, it is something that I think could spook the markets and you could get some other buying opportunities. The other thing is just from a buying opportunity, a buying opportunity of what a five percent decline, a ten percent pullback, what do you consider a buying opportunity of Monday wasn't enough, right, So I mean, if you look at just some text and some technicals.

You're still looking at least another seven to ten percent from here to to fall out to the two day moving average on the S and P five hundred. Uh, there was we did bounce off that fifty day moving average, so that held a little bit of support there. But from um, you know technicals, we'd like to look at that two day moving averages. It's kind of been a long term support. I think that that would be another opportunity.

And then I also think that we have to get a little bit more clarity from the corporate tax perspective, because to be able to look at a value stocks and look from a pe multiple perspective, I don't think that the earnings estimates are truly pricing in the chance for corporate tax hikes. So I think there could be some some downward revisions to earnings depending on what magnitude of corporate tax kes we get. Even if the corporate tax hike is something in the range of me is

it's really gonna be a problem for companies. She was on Quick Take Stock earlier today and she she actually said, so fewer by backs, few er, what aren't the big You know, Carol, you always say this, the big companies find a way to get around it. They do, come on, Megan, right, yes they do, and you'r you mentioned the buybacks and other things. But there it's going to depend off from

an international what they do with the international revenues there. Yeah, like that's that's because that's some of our bigger companies that make up a lot of the earnings in the S and p FI hunt it. So there's a lot of moving parts here. Um. At the end of the day, the one thing that would benefit I think even if we do get the corporate tax side, let's say it's

become more aggressive than than or they get everything. Biden gets everything that he originally wanted from the corporate tax perspective. Some of the things that it will do is is pushed forward cap expending because they haven't really made any changes from the depreciation um the part of the Trump tax cut. So I think you would get more cap expending from companies, especially if they're going to be taxed on, whether it's by backs or um, you know, did it

end go up. I think you'll see more cap expending and that's positive for the economy. Megan, I want to ask you because from I think I know the answer. I think going into this meeting you were constructive and liked the financial area. We did see the KBW Bank

index move up following the vent decision. Yeah, if look over the past few months, some of the things that have been constraining the financials and and the value there's eiqlical types of sectors has been the fact that, um, you know, we have the delta variant, which has got the people concerned a little bit about that reopening trade.

But interest rates have stayed low. So every time we keep interest rates blow, you tend to see these expensive growth type of sectors, your technology, communication services, they tend to rally. But what did you see today? You sell along end of the curve back up a bit, and that's beneficial for financials. We like financials because we think that interest rates right now are just there's no justifiable

reason why they should be this low. Um, when the FED does start to taper at some point, they've got to go a little bit higher. When would think, right, yes, yes, I think that they're they're gonna they're set to go higher over the next twelve months, and in that environment should be good for financials. That's the question. I mean no, it's you know, we definitely saw a play out here where don't you want to be just got about thirty seconds forty seconds um six income is long term fricks

income at the short term fixed income. And then also I would be very careful around the expensive growth large cap areas. I'd rather be looking at most and are you sure you want to take that trade because every time everybody takes it, we just see more money go into it. Yeah, that's true, but then you also see days where you see all that money running for the doors. So I'd rather not be one trying to squeeze out the door. All right, good stuff, Hey listen, thank you,

Thank you a pleasure. I hope you'll come back real soon. Megan Horneman, she's director of portfolio strategy at the wealth advisory and multi family office firm Verden's Capital. She's joining us from Unt Valley, Maryland. What is speaking of fixed income? I did think it was funny and kind of notable when Jara Powell was talking about trading activity by FED officials and you mentioned that he had munis and traditionally it's not something that for a long time. He said

that portfolio right, it's going to happen right there. Especially, you know, these are guys who have lots of money, and I've been putting it to work for some time. Uh, and so you do wonder about overlaps, specially when it comes to policy. 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 pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News