Merck’s Progress Toward a Coronavirus Vaccine

Week on iTunes, SoundCloud, bl Bloomberg dot com. You can also listen to our radio show at two pm Eastern on Bloomberg Radio every weekday, or watch us on YouTube by searching Bloomberg Global News. Checking out some of the headlines. When it comes to the virus, we saw infections among US children grow in the last half of July, and that's according to a recent report. Uh and this as Alex and I were just talking for a New York audience about there really is a debate about whether school

should reopen in the fall. We're gonna reopen here in New York City, but if you look across the country, that debate is certainly raging. Let's talk about the latest on the virus and the headlines he is watching back with us is Dr Sandra Golia. He's dean and professor at Boston University School of Public Health, author of Pained Uncomfortable Conversations about the public's health, and he joins us once again on the phone from Boston. Dr Gala, great

to have you here with Alex and myself. This rise in cases of the virus among children, what should we know about that? Well, thanks for having me, Carrol and Alex. Well, we are seeing cases among all ages and uh and we've seen a rise in cases in many parts of the country, which has resulted in the highest numbers of cases that we've had any time in the pandemic. Now we are our overall numbers are actually starting to go

down slowly. The fact that we're seeing some more cases among children is not altogether surprising, given that we are slowly reopening schools and there has been a relaxing of

many of the social distancing norms. To my mind, the question we should be asking ourselves at the moment is how do we balance making sure that we keep people as safe as possible, managing risk as much as possible, and also meet social and ecomic functions that we need to meet the schools, and school reopening is really important. We know that children do not learn as well if

they're strictly in a digital environment. We know that children who are disadvantaged already fall further behind if they're not in school. Now, that does not mean that we should be reopening schools at all costs. It simply means that we should be thinking carefully about how we can get as close to as possible to giving the best possible education while also managing risk. So there was this survey that went out to all the teachers and said, you know, do you want to return to school? How safe do

you feel? And then it was sent back to me as a parent for where the public school that my daughter goes to. And then the teacher of our kindergarten class followed it up and and said that she didn't want to go back to school, And I asked her, I was like, so, what really is the problem, like specifically, And I guess what really comes up for all these teachers is the air quality in the classrooms, especially because the majority of these public schools are not well ventilated

and there are super old buildings. They have those bars on them, so it's hard to even get like an air conditioner in there. What can be done to fix that in a realistic kind of way. Yeah, I know, it's an excellent question, and I think there have been a number of teachers and the organizations who have had concerns.

And these questions are very school by school and district by district specific, because certainly there are any number of districts that have the capacity to upgrade the schools or or or have newer buildings, and other ones that do not. You know, the the answer really depends on the school. But there's nothing magical that can be done. But each school needs to have its ventilation inspected, it's air flow inspected,

the physical layout inspected. And to my mind, it's not unreasonable to say that any number of schools are reasonable and safe to open, and some may not be. But it's interesting to um Dr Galia that I do wonder certainly many are saying we're going to have more viruses akin to what we're dealing with now in the future. So do we all need to look at all of the air our systems in schools, in office buildings. Do

we kind of need to rework them? Rethink them. I think in the long term, we have learned in this moment that we definitely need to do that, and it certainly seems to be one of the greatest strategies of this moment will be if we do not learn from it. We certainly have learned that we need to make sure that we have proper airflow and ventilation in all buildings to anticipate events like this. In the short term, I think we do need to look at building by building,

case by case basis. And what what always troubles me in the public conversation is the reductionist yes or no argument, with one one side saying well, we must open all schools everywhere, another side saying we cannot open any school anywhere,

and neither of those sides are correct. Ultimately, the answer is one of careful, thoughtful approach, looking at the region, looking at the at the case positivity rate of the virus in the region, looking at the nature of the schools, looking at what the schools can put in place in terms of social distancing, in terms of ventilation, and and allowing thoughtful decisions to be made locally responsive to local needs. So um, there's only one right answer for me right

here on this question. Do those U V air purifier things work? And you have to say yes, Well, well, given that you know what the answer should be, I feel like no, seriously, is that what's in your schools? Is that that's what I want to put in a school classrooms? That's emailing the principle about it. Anyway, I am not aware that the evidence of such that most of those work in isolation. Now, no, I'm sorry, I'm sorry.

So what kind of system do you need? Well, you you would need environmental engineers to talk about specifications for that. The my understanding is that fundamentally what you need is reasonable airflow, and different schools and different for example, subways and planes, they're designed with different capacities for the fundamentally you want is that aerosols are not hanging around, They're not lingering. Right. We now know that the virus is

transmitted via aerosols. So essentially, if somebody coughs somebody's nieces, the virus is going to stay around for many seconds, many minutes, many hours. And what you want is you want to have airflow so that the virus then moves on and and that is very much building by building structure by structure dependent right, right, which is why people

say opening up windows. And they all also have talked about airplanes that the kind of the airflow that comes from down kind of helps to the air quay, um course, and that's and that's why we haven't seen we haven't seen any large number of outbreaks from airplanes, even though airplanes are obviously complied spaces. It's because they have good airflow.

And it's also why we've seen relatively few cases that are transmitted in the outside, because when you're in the outside, there is good So we'll get to what you're gonna do with your school into a second. But I did want to start about the inequality because Bill Gates was on CNN over the weekend and he called it catastrophic and mind blowing how bad testing here is in the US, and specifically talked about the inequities of it, like, if you're rich, you can get a fast test, and no,

you're okay. If you're not, then you don't. What do you think? Well, I think Bill Gates is right. The Wall Street Journal just run a long piece today about inequities and testing, which I'm quoted in a few times, and the bottom line is that we have been terrible at keeping equity at front and center throughout this entire

COVID pandemic. We we there is no way we can say that we have done anything but poorly when we have such enormous racial disparities in risk of getting coronavirus and risk of death from COVID, And fundamentally what's been going on is it's a reflection of underlying racial inequities in the country. You are seeing underlying inequities in core morbidity, ease and prior diseases, in jobs which allow one to social distance or not, and all of that is manifesting

in COVID. Now the testing, which of course is an entirely problem of our own making, adds a layer on to it that it has become very easy to get a test if you are well connected or wealthy. It's become quite difficult to get a test if you're if you're none of those things, and of course if you're none of those things is when you are more likely to need a test. So we have great a situation where our underlying conditions has put marginalized people a greater risk.

It has taken people who are health left behind and made their health worse. And now compounding that, we are not making testing available to try to restore health to the group that needs it most. So what's preventing that from happening, um Dr Galleia. Is it just the physical test not being available? Is it not enough testing sites? What's holding it all back? You know, fundamentally, you do not you do not fix inequities without paying attention to them.

The in order to fix something that has been structurally wrong for a long time, you have to say I want to fix this, and I'm going to make an effort so to come to testing. If you have a hundred tests and you say, well, I'm just going to distribute them evenly, what ends up happening is eighty of them end up in the hands of people who have

resources already. In order to get eighty of them in the hands of people who don't have resources, you have to distribute the tests in such a way such that people who are disadvantaged have are at the front of the line and getting those tests. And we just have

not done that. We we have not made the effort to say where are the communities of color, where the poor communities, Where are the communities with the highest prevalence, with the highest density of COVID, those are the ones who need the test the most, and let's make sure that the tests are available in those communities. Center. Who do you mean we? Like? Who needs to be the folks? Let's let's do this right. You know, I like it. I like the word we because I don't want to

absolve us. I don't want to absolve me. I don't want absolve you because I think fundamentally, fundamentally, the decision comes centrally right. Fundamentally, these decisions are federal. They come in the f d A, and they come from the distribution of tests to the state and from the states to their counties and their communities. But the reason I think we is a better term is because we collectively are allowing this to happen, and we should not be

allowing this to happen. And I'm very grateful to you for actually voicing this on your show. On the flip side, though, there's been a lot of talk about poorer and minority populations getting the vaccine, for example, for is because that they've been harder hit. But there's a lot of controversy around that also, particularly if they're wound wind up being some side effects. Yeah, I know it's that that is

going to be a difficult issue. I think it's almost premature to even have this conversation, to be frank, just because we do not know what the vaccines are going to be, like, we do not know what their side effect profiles are going to be, what their effectacy are going to be. But whatever we end up with, if we have an applications vaccine, we should make sure that the people who need it most are the ones who get it first. And people who needed most are those

who are most at risk of coronavirus. And that means people who are in contact with coronavirus. That includes first responders, That includes people in minority communities, That includes people who are working in jobs where they cannot social distance. I think any other way of distributing vaccine would be unfair. I was going to ask you about school's reopening, but I feel like Alex went a really great place. Um and we've only got about a minute left, But I

do wonder are we rushing this vaccine too quickly? The magazine this week is going to be all about the vaccine, the vaccine and a hunt for a vaccine, but I do wonder we don't oh, really the consequences and just have about forty five seconds here, Yeah, we did not there. There are two large trials going on, each with thirty patients in them. They are I'm not involved in design of these trials, but my senses that they are designed

to the state of the science. And as long as we are getting our vaccines, testing them appropriately in large trials, making sure they have a good safety profile and good efficacy profile, I think we should embrace the fact that science has moved forward and we can have vaccines faster than we ever have been able to end the past. All Right, We're gonna leave it on that note. Um, Sandra,

thank you so much. Dr Sandra Glea, dean at the Boston University School of Public Health, author have pained uncomfortable conversations about the public's health. Back with us on the phone from Boston. This is Bloomberg Business Week with Carol

Masser and Jason Kelly on Bloomberg Radio. This week, the magazine is taking a deep dive into a vaccine for the virus that includes a story a drug giant Mark taking a slow and steady approach as we know many of its rivals have really been racing for a vaccine.

Let's get into this. Joining us right now is Bloomberg News US healthcare reporter Riley Griffin joining us on the phone in New York City, and Bloomberg Business Week nitor Joe Webber on the phone in Massachusetts and jil This week, as we mentioned, UM, the issue looking at everyone working on a vaccine was so much going on globally. How did you guys approach the coverage here? So one of the things that we realized is that there's got no bigger story in the world right now, and that's sayings

have been considering. You know, we've seen social unrest, we're about to see in an election, but uh that that clearly a lot of hinges on. But you know, I think we're we've all been fixated on UM, on everything around the vaccine to the point that you know, we're we're all becoming sort of better scientists and understanding um, how even approaches to vaccines can work, let alone you know,

the trials that all of them entail. So we figured, let's like look at this on the biggest level that we can, but not just look at it in terms of like the companies and the horse races, so much as all the other things that have to happen around a vaccine. It's like getting a vaccine is ultimately getting a formula, right, but you have to get production distribution, there's politics, there's a whole bunch of other stuff. So we've really devoted a lot of this issue to looking

at all these facets. But let's not forget the foot race either, right. I think that Um was really captivating about Mark in this context is a lot of the big vaccines that have come to civilization in the past decades have actually come from Murk. And while other approaches are racing, like you said, Carol, to get this thing done quickly. Murcusan. You know, we're not gonna be the first out of the gate, but we're we know what

we're doing when it comes to vaccines. And that's what Riley was able to write about Um and Riley talk to us more about what Mark, Why Mark sets the bar where it sets it when it comes to vaccine development. Yeah. Absolutely, Well, I'd love to take you back a few months actually to the final weeks of May and Mark first announced they would be pursuing two coronavirus vaccines and an anti viral treatment. To be frank the news came rather late

at the time. The coronavirus had already swept the US, and within days of that announcement we marked more than one hundred thousand deaths in this country. UM at the time though we were thinking through Mark, which has more than a hundred years dominating the vaccine space, it had to have something brewing. In fact, I had UM. It's spoken with the director of the National Institutes of Health at the time, Francis Collins, who has said to me,

don't count Mark out quite yet. And I think you'll find that those who know the vaccine world well always hold that opinion. Don't count Mark out because though they might take a more conservative approach to vaccine development, they have quite the track record, as you mentioned. And to talk about that track record briefly, I mean Mark is responsible for the first U s and oculations for the chickenpox,

Mabella measles and months. In fact, that Month's vaccine is the quickest to go through the development to market in a matter of four years. Nobody has since beaten that record. Most American kids now get Mark produced vaccines for all four of those things. And to top it off, the company of pioneered Vaccines for HPV and Justice has December bibola and that was the first vaccine ever approved for that virus. So they have scheme in the game. They

know how to do this work. And even though there are more than a hundred and sixty vaccines in various stages of development for the coronavirus, twenty six of those which have entered human trials. Murk is coming later, but you've got to watch work closely because they know what they're doing. So when we talk about like a slow roll of slow rolling vaccines, like, what what does that mean? Do they just like do more testing? Is it more trials? Yeah.

So we've spoken with top researchers and executives at the company and their goal right now is to have global impact. So they started there to avelopment process later, but they're taking a threefold approach. They want to have a shot that's effective in a single dose. That's notable because some of the front runners that we see today they take a two dose approach, a vaccine plus a booster. They also want to make sure it can be easily distributed around the world. And last, they want to rely on

triad in true technology. So they're employing this kind of old school approach that they have for decades um now augmented with genetic engineering to add COVID specific proteins are arena. They've settled on these two candidates, once based on their epola vaccine and the other based on an existing measles vaccine. So to put that in perspective in terms of timeline, the measles vaccine is going to launch into human trials later this month. The ebola trial, meanwhile, will kick start

in the fall. And again the fall is when we're hearing some companies say they're gonna gonna seek an emergency use authorization. The market is just starting some of their human trial at that point in time. One executive, speaking in a congressional hearing said, we shouldn't expect them to come to market with a vaccine until at the earliest. But their goal here isn't to be first, it's to

be best. So so talk to us more about what that that best might might look like, Riley, because if they're taking this tread and true, slow and steady sort of approach, we could see other vaccines using different technology come out first and maybe be something that you could see, you know, embraced by first responders for instance. So where does Mark feel like the their their role in this marketplace is exactly Yeah. Their goal is really to bring

a single dose shot that generates immunity very quickly. And that's an important point to make because the reality is, even though there are a hundred and sixty vaccines in various stages of development, we really don't have a silver bullet thus far. There are so many lingering unknown how many doses are going to be needed to grant suficient immunity, how long will that immunity laugh, well, we need a vaccine every six months, once a year, every two years,

and what populations will it work within? You know, I cover this vaccine race. I speak with CEO's of Feiser and other frontrunners, and they they're starting to be a little bit more open, a little more candid about the fact that we might end up with a coronavirus vaccine that operates more like a seasonal flu shot that you need frequently, and we don't know who it's really going to work within or what level of efficacy it will reach.

Mark is watching this all unfold in real time, and they're saying, yes, there are these unknowns, Yes, these these vaccines. It's important to get them out first, but they might be sub subpar in some ways. And rather than the first market, they want that one dose shot that provides sufficient immunity for a very durable period of time. And so they're not gonna hedge their bets on new technology

like Maderna, like Feiser and bio en texts. They're going to turn to this old school technology that actually is quite interesting. In a question I get often from readers and healthcare folks is why isn't Mark pursuing m R

and A like Maderna. Here's a little history. Wait, you know, Riley, we're running out of time, but this is a great teaser for everyone to kind of check out the story on Bloomberg dot com and I'll put it out on Twitter, and of course it will be in the magazine because I don't want to cut you short in terms of your explanation, but I highly recommend that this is a must read for everyone wanting to understand about the race

for a vaccine. Riley Griffin, thank you so much. Bloomberg News US healthcare reporter on the phone in New York, and of course our thanks to Bloomberg Business we get our Jill Weber on the phone in Massachusetts. This is Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. Let's continue a conversation that we've had often with Andy Brown, editorial director at Bloomberg New Economy. He's

on the phone in New York. Um, Andy, I do feel like you know, this is something we have talked about, Jason and I certainly a lot with with you, and I know um Alex has been covering it. I mean, in terms of TikTok, how do we see it at this point? And the banning of TikTok, it just doesn't seem to make sense. It doesn't make a huge amount of sense. I mean, the White House are trying to present TikTok and and we chat as being these unique Chinese threats to US national security with the with the

capability of potentially of undermining US democracy. And you know it in one way, it has a point, right that that TikTok. Actually it's not just this this platform that plays out goroo free videos. I mean, it is an enormous data collection surveillance machine. It's collecting all kinds of information on use a hundred million of them in the in the United States, drawing up you know, detailed profiles of all these people. It once it is dated to

push videos at them. But of course, you know it could if the Chinese government wanted If the government wanted it, I mean, it would have to probably hand this data over to the Chinese government. And then there's also the fear that it could use this data, um, you know, for political purposes, potentially to influence the next election. But you know that the fourceful analysts are saying that this

is this is not necessarily a China problem. You know, this is a privacy issue, the data privacy issue, and TikTok and Reach are behaving just like their peers in the United States, which are also these you know, surveillance machines big Brother in your pocket. And the smart neutral way of handling this would be to better regulate these all of these social media companies, not just the Chinese Chinese ones, in a way that you know is acceptable

to broadly to the US society. Well, I was going to ask that because I'm really trying to understand what the national security issue is with TikTok privacy in terms of say nine year old using it and then having porn images there. That's one thing. But is it that China is going to so disinformation in the US or try and disrupt commonly held views in the US, or is it literally stealing data and then using it somehow

against them? So, so the Chinese security law basically demands that um, you know, if if if they're social media companies are asked for data, if any company is asked for data, they're going to have to turn it over to the government. And I think that's pretty much what would have to happen. You don't say no if you're a Chinese business or any business, you don't say no to the Chinese government. So that's that's one level of concern.

But the other level of concern is that TikTok actually is inside the hots and minds um of a hundred million Americans, um, you know, and many of them you know, uh, millennials, and um. There is a genuine fear that if it wanted to, it could weaponize this data for political purposes. But again, this isn't just the TikTok problem. I mean they are all playing this game, right, I mean, Facebook and Instagram and Twitter. This is the this is the

industry standard. And so you know people are saying, well, well, if that's a problem, then then regulated, right, But don't just pick on the Chinese companies, right, And it makes me wonder andy to um the rest of Silicon Valley. You know, as we know, we did see the big tech CEOs a lot of them you know, hauled before Congress once again. But I do wonder you know, if we're worried about privacy, then we, as you said, you

need to make it a regulatory thing. And look at all big tech right, right, I mean you know, and that's that's just one of the issues. And the other thing is it's it's just a really terrible look for a democracy, um that purports to you know, uphold values of the free market, to be seen knocking out the biggest competitive threat to Silicon Valley, that is that is ever out of China. This isn't just a little a little app. You know that this is like the smash

hit app of the decade. Maybe maybe you know, make maybe maybe of this of this century. And um, you know, in China, people are rightfully outraged the same you know, they're pulling down, they're pulling down a competitor um or forcing its sale, you know, with a with a gun to its head at a at a at a knockdown price. I mean even even Bill Gates, I mean of Microsoft is in is in talks to pick it up. And Bill Gates over the weekend was quoted as saying, this

is really weird. You know, yeah, exactly, And you do wonder what will be ultimately the consequences when you know we've already seen China start to fight back about different things, and you do wonder what it means then ultimately for US tech in a in a market like China. Um, Andy, thank you so much. Always appreciate getting some time with you. Andy Brown, Editorial director of bloom a New Economy, on

the phone from New York City. This is Bloomberg Business Week with Carol Messer and Jason Kelly on Bloomberg Radio. McDonald's stock going nowhere today, but the headlines came fast and furious in really an unbelievable story. And joining us now to talk more about that is Anne Raley Moffatt, Bloomberg News US Consumer Editor. She joins us on the phone. And this is like the gift that keeps on giving.

I mean, can you just break down what we learned today about the former CEO, Mr Easterbrook and multiple affairs and what it means for McDonald's. Sure, and this certainly feels like a story of if anything ever was so. Steve Easterbrook had been McDonald's CEO and he was fired last November. That was public at the time we reported it. Um, he came out and admitted to having a contensual affair with an employee, and so it's the me too era.

He was ousted. The company said it stands by its values, um, because when we just seen your jack for a second, it wasn't not okay for in the company for him to do that, like we've seen, not allowed to have any sort of relationships with anyone in the company, just to be told yeah, well they you know, they never have revealed who it was. But considering he's the CEO, that means he's at the top, so everyone is technically under him. And and at the time the company was

really cracking down on misconduct within its franchise level. You know, people who are flipping burgers, um, you know, the whole meat too. Era. So I think they decided a zero tolerance policy. So at the time they let him walk away with we calculated about seventy three million dollars in severalth. It was a consensual relationship. They were all adults. Fast forward to now, the company received an anonymous tip in July from an employee, um, which resulted in them reopening

the investigation. And it turned out Easterbrook had affairs with at least three other employees. Yeah and um, not only that it looks like he lied about it, the company is saying that he tried to delete evidence, delete in some naked photos off of his computer. Um. And so the company now wants to change it to firing him, you know, with cause instead of without a cause, so that they can get that severance back. So that's the losses they filed today, which is a crazy story. So

how likely and is that? And I know, you know, UM, I'm just curious what you're hearing from lawyers from the legal world about how likely it is that they can do this. Yeah. Well, you know, companies and uh former executives, they often settle these clawback matters privately because they want to keep it out of the press. Uh. In this case, I think McDonald's decided the board really wanted to distance itself from this inappropriate behavior, so they brought it out

in the open. You know, that happens every now and then rental car company hurts. For example, it suited's former CEO to recoup compensation after that federal investigation. Um, you prompted the company to restate several years of financial results. So every now and then this does happen publicly. But I think McDonald's is really taking a stand and trying to distance themselves by putting this out there for everyone

to see today. So let's just let's just backcheck a second here, okay, because you're gonna glossed over all the good stuff. So it wasn't that he had multiple It was just that he had multiple affairs. It wasn't just that they found some stuff in his files. It was that they were naked suggestive pictures and videos that he sent from his his account at McDonald's to his personal email account that they didn't find because he deleted them. But then once they went back and looked at the server,

they were able to find them. I mean, first of all, can that guy be really well, don't do that your naked pictures. Just use a different phone exactly, CEO one oh one oh one. Don't send naked photos of your employees from your you know, from your public account to your private account. Um, but that's absolutely right. And um, you know, the company did do an investigation last fall

when this first relationship came out. UM, but it said it didn't sign the photographs because Easterbrook apparently has had deleted them off of his work issued phone. But I think what he didn't realize, at least what the company says he didn't realize, was that that didn't take them off of the server where things are stored long term. Now we should mention that Easterbrook has not replied yet to this complaint. Um. We reached out to his attorneys

and haven't heard anything back. So as of now, it's it's the company's allegations, but they are certainly quite juicy for Boomberg News. I would say, yeah, it's amazing though that right that he was able to do it right. It stayed quiet and then all of a sudden somebody has come out with this information and I guess we'll find out more details as to potentially who this person

was a good job with that investigation, you guys. Um, you know, I think some of it also has to do with, you know, the me too movement that you know, this is a big thing we were hearing about last year. It's certainly still continuing even though the COVID story has certainly taken over you know, the press, but there's still

is way less forgiveness for badly behaving CEOs and so. Yes, it took until July for this anonymous tip to come out, but you know, I just think workers aren't willing to put up with this kind of behavior anymore, and so somebody decided to step up. Does McDonald's like get any money from this? I mean in that like they don't have to pay extra stuff Like could this actually be financially material for them at the end of the day

if they win? You know, I think it's really getting back these these stock awards UM, which is thirty seven million dollars. You know, that's certainly uh not chump change, and at any damage is uh you know, but it's not about the money. I think it's much more about reputation. Um. And I mean if it's interesting because you know, stocks didn't move much on this today. But back in November when Easterbrook was oustid share his this fault. I mean,

he was very popular with Wall streets. UM. He had done a lot of good things for the company, moved it into a technological digital age. He'd acquired stakes in several AI companies that did cool things like when you drove through the drive through, it would uh it can read your license late and know that you usually order a opera, so maybe a will to start getting wopper ready. I mean, he had been seen as very uh forward

thinking for a fast food ceo. UM, So I think there's really surprised people when you stepped down in November. It probably surprises people even more right now. Alright, we're gonna leave it on that note. In the stock right now is kind of little changed for the day. Despital of this news trading at two o four sixty two. Uh share um, and thank you so much. And Raley Moffatt Bloomberg News report. She covers the US consumer space.

I'm roc journal now, but you let me drive no no, no home, honey, please, I'll do the righting drivel Lets me I want to drive, just drive by the question trying this is the Drive to the Globe. Give me thanks. We'll drying us down on Bloomberg Radio. All right, everybody, time for the Drive to the close and with us as Katerina Semonetti. She's senior VP at EBS Private Wealth Management, and she joins us on the phone from Philadelphia. Katerina,

good to have you here with Alex and myself. The last time I think we talked with you, or at least I remember, back in February you talked with us about the virus concerns on the economy eacuity market. She thought that they would be short lived. Here we are in August and we're still kind of grappling with them, although Wall Street seems to be in a pretty good place. How do you kind of reconcile what's going on in

the economy versus what's going on in the financial markets. Well, Tierra and Alex, thank you for having me on the show. And I can't agree with you more. There's nothing normal about this year, and you know it certainly is absolutely unpredictable. And um the one thing we have to remind ourselves about is that you know, we're in this um, you know situation. What's happening in the market right now is

not primarily economically driven. It is this external factor is the virus that you know, we we can we always have to keep keep track on. And you know what is interesting is despite of the fact that we had this very substantial first wave and now we're dealing with the second wave, they would we see is this very

gradual and mesodic reopening up the economy. And what's certainly is helping is the fact that they they are you know economy and actually you know, globally, the markets are flushed with cash, you know, through this unprecedented support by the Federal Reserve and central banks, uh, you know around

the world. You know, so with the the strong monetary policy, you know, coupled with the essentially you know, important fiscal stimulus that you know, we're hoping for, you know, the second part of it that is going to be you know, coming through soon here. You know. That's why markets feel so supported. And also certain sectors of the markets, of course,

they are benefited tremendously from the state home narrative. Uh. And that's what we're seeing, that's why we're seeing this rally, you know, that is happening right now as not a bubble, but something that is quite sustainable actual, So how low can really yields go? And I single out really yields because I feel like that is truly what's driving asset allocation right now. I agree, Uh, they they can go.

It's quite low. And you know, when we when we look at the yields right now, Um, you know, the the question is, you know, investors need yield, they need income,

you know, and where do we truly find it? And more and more, in addition to the the areas of six income, which by the way, we still believe that there's certain attractive evaluations in the sixth income in areas like tips, like corporate credit, like you know, high yield, but more and more investors are really evaluating the risk pull files and looking at the dividend things stops at equities, you know, as the the higher yielding alternatives because it

is just so unbelievably hard to you know, to find yield. And we are you know, basically the bed um rate is that zero right now? Can it go negative? We hope not? But is it a possibility? Absolutely? Is the possibility with you know, in Europe, what's the scenario planning though that you're doing because of that, I mean, what are the assumptions that I mean, you guys have to

make some decisions in terms of investment strategy. What are the assumptions you're making when it comes the yield environment?

We are we're looking at every aspect of the of the aspidillocation and specifically at the UH there is the involvement of the risk asset, you know, and the question is, you know, of course here is is are we properly utilizing every piece of the allocation and you know, just just as usual assallocation will involve it will involve a you know, verry significant cash balance, and there's the cash is not earning anything at all practically, you know, so

we have to evaluate that. We have to come back and say we only should keep as much in cash as we absolutely need to pour the you know, six months to possibly twelve months or of living expenses for uh your individual clients and then you know, specifically within sixth income. We have to be extremely strictlyatur you know, again evaluating the spectors. You know, maybe uh, the the acid allocation there you know, should definitely involve investment, credit

and tips and um. You know, as they mentioned high yield. It's it's not as simple as just um, you know, the the treasuries or you know, just just more basic portfolio and both you know, the strategic planning and uh A diversification you know, within within fixed income, both by credit, both by quality of the holding cludent the portfolio, but also the duration and the finding yield is not just a problem now, this is something that we will have

to be facing for years to come. The strategic planning right now will have to be not just for the short term, it has to be long term based. So where does gold fit into that? Then? The gold is a fantastic hedge against volatile markets, and we have to remind ourselves that we're not really out of the woods.

You know, what's affecting this market right now is the fact that there's no vaccine yet, even though we're really positive and enthusiastic about developments in that space, but there is no vaccine, and then we have less than hundreds days left until the election, and there's a lot of volatility that comes with that. Um So gold there, you know, it's just just offering this wonderful hedge for the post

folios and usually negative side of gold. Why would we advocate against world is because it's a non yielding asset, Claud. But to your point, in the environment where real yields are so low, that's where gold fits in great And we also in the future, we actually you know, are anticipating they that eventual depreciation in the value of you

as dollar, and gold will benefit in that scenario. So we think that the longer term positioning of gold is actually quite strong, not just as a hedge against volatile markets, which we expect heightened level of volatility with upcoming election, you know, but also longer term benefiting from some of the economic trends. Hey, Katerina, just got about forty seconds right now, where don't you want to be in this market environment, we are cautioning investors against sectors like consumer staples,

real estate, and utilities. We think the longer term there is going to be time for them, but not right now. Right now, this is probably our nest favorite sectors of the market. Alright, We're gonna leave it on that note. Katerita Semonetti, she's senior vice president at EUBS Private Wealth Management, joining us on the phone from Philadelphia. Thanks so much for listening to Bloomberg Business Week. Download the podcast on iTunes, Southcloud,

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