SEC to Demand More Transparency From China

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YouTube search Bloomberg Global News. We continue to be reminded by many headlines that we are still in a health crisis, a health pandemic, and among the headlines that we're really watching out for and monitoring today, as we had Israel lowering the minimum age for boosters to thirty from forty, German Chancellor Angela Merkel coming out saying measures currently in place to curb the virus remained sufficient, even as infection numbers tied to the spread of the Delta varritor on

the rise and the number of UK workers going to the office that's increasing. We're tracking that really closely, and then traffic on China's typically busy streets that has shown some signs of recovery after the country quashed a resurgence in COVID cases. And there's also a study out saying India may face an unprecedented six hundred thousand new infections a day if the nation fails to boost the pace

of shots. So that's some of the key headlines. I also want to point out that Dr Anthony Faucci, of course, one of the voices that we've turned to increasingly, of course, over the course of the pandemic is White House COVID advisor Dr Anthony Faucci. He had some comments on MSNBC earlier today on what a third vaccine may mean. Listen up. So we may not have to get a variant specific boost. We're preparing for it, we're doing clinical trials with it.

But the data that we've seen right now indicate that we may be able to get a good response that covers the boosts by the original VEXX, that covers the variance excuse me, by the by the original vaccine that we got. I believe it's entirely conceivable that this third dose superimposed upon the two doses of MODERNA and FISA very well may allow for a rather prolonged period of protection. And that, of course is Dr Anthony Fauci, White House

COVID Advisor, speaking earlier on MSNBC. And what's interesting is there have been many from the medical community thinking that we might need to get a COVID booster shot every year, just like many of us get a flu shot. So that comment from Dr faucing that observation could maybe change things going forward. All of this happening when we've got cases topping two hundred twelve point seven million deaths passing

four point four million. These are global numbers. And as for the vaccine, more than four point nine billion doses have been administered so far. Alright, So a lot going on, and we know it's not a straight line when it comes to moving beyond this crisis. Back with us as Dr Vino Pali, He's founder and CEO of My Doctor, Urgent k are also the chief COVID vaccine officer at My Doctor with us once again on the phone in New York City. Dr Paley, good to have you back

here on Bloomberg Radio. How are you and give us an update on the COVID cases that you are seeing currently. Hi Carol, great to be a view, Yes, doing great. Uh, definitely, COVID case of been going up with the Delta variant. We're in New York City, will be a very diverse population. Although we have very good vaccination numbers in New York City, we still have a certain percentage of people who are

not vaccinated. So we are seeing these cases both in the y are in in the claim the origin care is anything different from the first or second or third way that we've seen of COVID cases as a result of the variant. The Delta variant is something different. So Delta VATAN definitely presents a little bit different presence with more flue license and school license and um. And of course it's highly contagious as we know. Unlike the first

two of the Alpha variant. Maybe you saw a loss of smell and taste, you don't see as much with the Delta variant. But definitely it's a little bit different presentation and it affects more severely and unvaccinated folks. How do you well, First of all, I want to ask you demographics. I know some of the things that we've seen it's been younger individuals. I'm curious if you're seeing

some of that as well. I also read something I think it was yesterday about pregnant women in some areas because they haven't gotten the vaccine UM leading to some really serious outcomes. Right, So, so, so we do know that, uh for first, let me talk about the pregnant folks. We do know that COVID affects pregnant people differently that at the higher risk of severe illness, hospitalizations, going on a ventilator, or even UH directors for death. UM. You

know that from initial data. We also know that COVID causes pe term UH, pe term labor um and other adverse events. So vaccinating pregnant women is definitely helpful and there is no safety issues that we have seen from the data that we have so far. So currently CDC is recommending pregnant folks get vaccinated and even UM mothers of our best meeting their infant should get vaccinated. Let's

talk about younger, young younger folks that you ask Carold. Definitely, the hospitalization and hospitalizations have gone up, infection grades have gone up in younger folks now, so I think it's a perfect timing to vaccinate children, you know, especially truland over as CDC has recommended, So we need to move forward with vaccinating children as well. A lot of paper parents are hesitancy wanted to look at data now that stas a group of FISER vaccine. I think the parents

should be encouraged to vaccinate their cares well. And how do you see the FDA full approval of the FISER by in tech vaccine. How do you see that may be really helping the situation and encouraging those who may be decided not to get the vaccine as of yet to maybe go out and get it. Are you seeing any signs of it um impacting the number of people

getting that vaccine. I think it's definitely going to persuade people, people who are hesitantly, you know, as we know that thirty of unvaccinated folks in surveys up said that they would get the vaccine. Fau A grouse to vaccines completely, not just emergency authorization, So so I think that should persuade more people to come forward. And in our own

clinics we're seeing people making more appointments to get vaccines. Now, yeah, I feel like it's it's and I know I think Dr Facci made some comments I was reading in earlier today about expectations for the Maderna vaccine to get FDA full approval, and I think the J and J vaccine

as well. Can you, with any uh confidence, look ahead to six months, eight months or something and say it will feel a lot more normal It does already compared to a year ago, obviously, But I just wonder what kind of visibility do you feel like you have when you look out at what we've come through, where we are today, and where we might be going. I think

we'll definitely we're definitely going in the right direction. In adding these appear of food vaccines with more modern engage coming out in a few months or probably end up in September October. I think it's going to boost more confidence and people getting vaccinated. Uh. I think as we increase numbers in terms of vaccination, we should be able to see less number of case and hopefully we'll get

back to some semblance of normalcy. But at the same time, I think we shouldn't forget some of the public health measures, especially in large gatherings schools, where you should still continue to wear masks and protect yourself, and I think combining all these measures with the vaccination is definitely I think we're going to have a pasty outlock. We're talking with Dr Polly, He's founder and CEO at my Doctor Urgent Care with us on the phone in New York City.

Dr Polly, you are on the front line. You're seeing COVID cases, You're seeing treatment, You're seeing the trends as they go up and they go down depending on where we are in this health crisis. You've also gone out to communities to talk to people who are among the unvaccinated. Tell me about some of those experiences and whether or not you're able to to to to, you know, convince

people to to actually get the vaccine. Absolutely. You know, vaccine hesitancy and vaccine lest information has been another epidemic that we're dealing within this pandanic So we do to go out into the community talk to folks. I know, especially in New York City, you have several African American folks, Hispanic folks who are very healthy tom to get vaccine, and we have several examples where we have to continuously

go and educate them about the safety and efficacy. UM So we we've we've definitely seen positive impact of that and people coming to the clinic and making appointments and getting vacant. There's still a small percentage who are on the who are still on the boarder whether to get vaccine or not. And I hope the fd a fluel in a fluing booster shock might help them with their confidence in getting vaccination. Yet yeah, no, And I am curious about you know, when people is it just when

they say this is why I'm not getting it. Is it because the approval or is there something else going on? Uh, in terms of their thinking and they're how they're coming to conclude 's about the vaccine when you have those conversations, some people were waiting for their proval. But there's there's a small fraction of people that you know, don't believe that COVID actually exists, and that's kind of sad. And I think there's so much misinformation about that on social

media that is somewhat difficult to combat. But hopefully tide will turn over and people um will see the truth and and the scientific facts that you're presenting, and hopefully they will also be converted. But I think what we need is the majority of the population to be vaccinated to get to that herd immunity. Uh. And hopefully you know, other countries are able to vaccinate their own people so

we can prevent mutake further mutations of the squireus. Interestingly enough, uh and not surprising, we've seen the debate about masks still playing out, especially among the names school systems, especially at schools start to Some have already reopened, specially in the South, but as they opened here in the Northeast as well, South Carolina's second larger school system, they inserted them their self itself into the center of that debate last week when it voted by a landslide to mandate

face masks, so they defied the state's ban on such measures. As the delta spread continued in the South. What are you anticipating as we are fully back to schools in the fall, especially among many kids who are not yet vaccinated, should we expect to see an uptick in cases? Carol?

I'm going to tellious sciences with us right, masking just based on scientific back So definitely of schools or parents or teachers don't follow these masking mandates or recommendations, well, definitely, do you see uptake in schools and certain communities and certain states like the states who are men sing um um. I think people need to understand vaccination alone is not going to solve the problem. Especially vaccines are not a group for kids below twelve years, so so we really

need to follow other public help measures, especially masking. You know, it's interesting, I'm thinking where I was a year ago and how things were feeling, and you know, we were coming up the summer where things started to feel better, and then we all of a sudden came into the fall in the winter and we knew things got worse again. Are we in a different place twelve months later because of the vaccine? I think we your but will be in a better place probably next year once we get

the majority of people vaccinated. You know, you're right, You're absolutely like Hett when you said you know things were getting better, but also said I think we be a somewhat prematurely. We drew some of the public health measures. Uh. All this mixing up vaccinated and unvaccinated folks and the deltivating is coming in change the entire dynamic. But I think that the good news right now is two things.

The approval of fighter vaccine and the booster vaccine. So I think we will be in a we will definitely be in a better place, um like fun next summer, right next summer. Uh. And I am curious to what you think about You know, we kicked this off earlier.

We mentioned Dr Anthony Faucci, obviously a go to voice throughout this pandemic, and talking about a third vaccine and what it may mean, and that I think we were Dr Paley believing that we would be needing to get a booster perhaps every year, just like we get a flu shot to deal with COVID specifically, and Anthony Fauci, Dr Anthony Fauci now saying maybe we don't need that, maybe that that third booster shot will do enough to

boost our immunity for a longer period of time. What are the conversations that you're having among your medical pers uh, and what you're seeing and reading? How do you how do you think about that? So? So I think so the question is the void is schoosed to do and it's basically dropping off the immunity that we've already gotten from two shots. So it's adding additional layer and probably you know, expanding it to further a few more months or hopefully to uh near completely here. So it all

depends on what this virus is going to do. I think, what conditions are going to present to this virus. If it's mutates into a different variant or more virial and more contagious medium, of course we will need a booster, and we might even need a mutation specific booster. So right now, the current vaccines that we have are very

effective against delta variant. But let's say, for you know, if things are not done right, uh, you know, with all these masking mandates, if you're not calling public health measures, if not enough people are vaccine needed, the virus will have chance to mutate more and become more virulent, and then of course we'll have to then think about actional booster. But time will tell. I don't think we can predict right now if you need it nearly vaccine or not.

Hopefully I hope that's not the case and we should hopefully we'll be done with this thing sooner. But if not, you know, we'll, you know, we'll look at the data, We'll look at science and see if you'll need any more early shots are not. The worst gar scenario would be to have to you know, to to have shots like to you know, every year, probably not as uh, you know, as much needed as possible. Hopefully we can prevent that. But let's see fingers crossed on that one. Hey,

one last question. I think the expectation was that we were going to go through the entire Greek alphabet when it came to variants, is that still to common? And could we still get a variant that's even worse than the delta variant? I think they are still looking at a couple more variants. Uh there was delta delta plus

variant we mentioned, and then the Ganda variant. But I think they are not variants of concern at this point, but they're still they're they're still being looked at by scientists all over the world, and you're looking at from CDC. So I think we won't go through the entire week alphabet, right, Uh, you know, I know, I hope not. But but there are variants that they're looking at, but they're not as new Ryland or as contagious as of now. All right,

kind of leave it on that note. A deep deep dive into the COVID headlines on this Tuesday, August dr you know PAULI, thank you so much. He is founder in chief executive officer of my Doctor Urgent Care, on the phone from New York City. I want to mention one other headline involving COVID. The effectiveness of vaccines among frontline workers declined to sixty six percent after the delta variant became dominant, compared with nine before it a rose.

This is according to report from the CDC, the Centers for Disease Control and Prevention. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. You are listening to Bloomberg Business Well, the headlines continue to come out regarding the crisis in Afghanistan. As we mentioned, we are waiting some comments from President Biden, expected to make them from the White House at any moment. Get that update, will take you there live when it begins.

Many though, many aspects to this story we know that, including how the Afghan war is turning a U. S Military startup into a unicorn. So let's get into that story. It's featured in the new issue of Business Week out later this week, online at business week dot com and on the Bloomberg Terminal. It's also among our most read stories on the Bloomberg Today. So here to tell us more is Bloomberg Business Week Technology editor Joshua Brucetein. He is on the phone in New York City. Hey, Joshua,

good to have you here with us. So who is this company? Thanks Carol. The company is called Field dot Ai UM and it was started by a former Navy seal who served in Afghanistan and elsewhere overseas and was trying to solve a problem that was pretty specific to

those deployments, which was entering buildings and contested areas. UM he built a type of drone, a small drone that they would send into buildings in advance that would map the space and send video to troops outside, flying autonomously in buildings um and that would allow them to enter if you know, if there were no enemy combatants inside. UM. So Shield has, as you said, has become a unicorn.

It's just raised about two million dollars and bought several other technology companies in an attempt to move beyond that specific application and start doing things more relevant to the type of wars America might fight in the future. Specifically, against UM enemies like UM, I should say rivals like China and Russia. So what are those? Because I have to say to be fair and is it sounds so simple, right,

and it makes sense and it sounds so logical, right. Yeah, let's throw drone drones into kind of basically map out the space and check out the security. So where else

can they take this? Yeah? I think the idea here UM for SHIELD is that they could take the UM autonomous software they've been developing for this one application and apply it to other things, maybe trying to have UM communication between semi autonomous fighter jets they are patrolling a coast UM or UM or you know, networks, networks of

vehicles both small and large. It's sort of open ended at this point, I think, UM, and they're really just trying to look at, you know, where the U. S. Military is trying to take artificial intelligence, which is one of the big questions UM, you know for the pentic on itself. Yeah, I was gonna say, how comfortable are

they with this? It's interesting. I think one of the one of the aspects of having these small drones that are surveys that we're serving in a relatively low stakes environment, just you know, sending video from one side of a wolf to another. Is that they slowly started to build up some trust within the military for using these things

in UM in bigger, more complicated and frankly more dangerous situations. UM. But I think that you know, there isn't full trust in these sort of systems is in the military, just like you know, anyone who's looking at relying on artificial intelligence is still questioning like is this stuff really going to work all the time when it matters well? And Joshua, I wonder how much of their success right now is military contracts? Is it all of it? Yeah? Right now,

Shield only does military contracting UM. Interestingly, they said to me that they were interested in potential commercial applications. I think those are mostly around mapping and also maybe working UM on domestic law enforcement, which is an interesting and somewhat controversial spin on pretty much on a lot of military hardware and end systems that you know, maybe police de wartments and states we want to use UM some

of them, some of the surveillance type capabilities that they're building. Obviously, that's probably going to be a big fight in some of the cities where they would be trying to do that. It does sound you know, we had a conversation with the Raytheon CEO, Greg Hayes. He joined us here on Bloomberg Business Week on radio and TV, and we talked about, you know, kind of where things are going, certainly on

the defense side. He talked about things about hypersonic weapons which are super fast, um, but also using AI in different things when it comes to aerospace and and obviously that leads to military a slow problem. You know, maybe it's a slow process, but it does sound like this is a company that, if they are on the cutting edge, could stand to benefit longer term. Yeah. I think that this is the shift that a lot of smaller technology companies that have basically not been able to get any

sort of foothold within in the Pentagon. See. Um, if we're moving towards software systems that aren't the historic competence of the large defense contractors, then maybe there's room for new players, especially as you know the U. S. Military is trying to do things that hasn't done before. Um. But you know, I think it's a sort of wide open space. No, it's interesting and well and I love the stats that you conclude. I mean you say that

this company got about seventeen million in military contracts. Sounds like a pretty decent contract. But as you say, the Pentagon's budget regularly exceeds seven hundred billions, So this is just a fleck of dust, right in terms of their overall spending. Yeah, Like you're not even buying a single fighter jet for that kind of money. So there's a it's a it's a it seems like a lot, but

it's not much. I'm curious, UM, talk to me because you're writ about a little bit about the background of this company too, and I think about juxtaposing that against what's been going on in Afghanistan. Well, the company, UM, the company, as I said, sort of got its start in these wars that the United States has been fighting since nine eleven UM in both Afghanistan and Iraq. Um they've also been their their technology has been used in Syria.

And you know, as the United States has spent the last two decades sending UM people overseas to fight in these situations, they've discovered they've discovered a lot of a lot of new problems and challenges and you know, so they just kind of built a technology that was specifically aimed at those um at those situations, and now we're saying, you know, what else can we do with this right?

And and the individuals who are involved in either founding or co founding the company, or senior executives in the company, I mean, these are people who and individuals who know people who are trying to get out of Afghanistan or hopefully got out by this time. Other Americans. Yeah. Absolutely. I talked to a number of of Shield employees over the last um week or two, and a lot of them were spending a lot of time texting people I knew, calling people they knew, trying to get friends out. I know.

I talked to one of the people I talked to just sent me a textas morning saying that a family that they knew had managed to get out of the country. And I think that looms pretty large for them at the moment. You cover this world, you cover high tech tech overall. I'm going to be catching up with Kathy Would a little bit later on who is all about disruption innovation? And I do wonder and I've got to

maybe put this question to her as well. But for something like the military that has been so entrenched in certain ways, but increasingly uber high tech. I mean, it seems like this is also an area where we'll see and continue to see a lot of innovation, a lot of disruption in terms of how we fight wars. We've already seen it. We talked about kind of how they

are much more akin to playing a video game. Things have changed dramatically, But my gut says, and based on some of the reporting that you do and others, that there's still a lot more to come in terms of disruption of the military. Yeah. I think that this is this is one of the big strate egict priorities of the military. UM. And there's a lot of tension UM that's going to come with those developments. Um. You know, I mean people in defense circles talk about AI is

the next big arms race. You know, China is trying to build things that will combat US capabilities and vice versa. UM. Also, the use of artificial intelligence raises all sorts of ethical questions UM that people are going to have to sort out and get comfortable with, or maybe not get comfortable with and decide not to do some of these things. UM. So I think that we're going to be talking about and debating these issues for years to come. Yeah, that

that absolutely makes sense. Hey this company, okay, you said, I think because of its latest funding round round ten million from investors, including disruptive technology advisors. So that puts the company with a valuation of what in a quarter billion? Is it also very possible that this becomes a takeout play for a military company or other I mean, I guess it's a possibility. Whenever you talk to um, you know, a rising startup that's just raised a lot of money.

You asked me that question, and they tell you that it will never happen, and um, sometimes it happened. Yeah, fair enough, fair enough. Hey listen, it's a great story and certainly relevant to everything that's going on. Joshua Brewsting, He's Technology editor Bloomberg Business Week. On the phone in New York City. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.

You're listening to Bloomberg Business Week on this Tuesday, August. My co Hostim Stenovic is off today. I'm Carol Masser in our Interactive Broker studio. So out on the Bloomberg Bloomberg exclusive. The SEC will demand that the more than two fifty Chinese companies trading in US markets better and form investors about political and regulatory risks. So let's gettle bit more on this story. Or Ben Baine is financial regulations reporter at Bloomberg News. He covers the SEC. He

joins us on the phone from Washington, d CF. We're sitting down for an exclusive interview with SEC Chair Gary Ginstler. Hey, Ben, good to have you here with us. Tell us a little bit about that conversation. Yeah, thanks so much, good afternoon. Yeah, So, as you said, I mean, we we we we really learned a lot about UM Chair Gary Ginstler's plan for dealing with an issue that's really um festered here in

Washington UM for almost two decades. UM part of this goes back to a two thousand two law that required UM companies the publicly trade United States in New York, essentially to allow inspectors from Washington to look at their financial audits and UM China. UM has refused to allow

access to US inspectors. And this has been an issue that has now you know, really gone through several administrations, multiple SEC chairs, and what we saw at the end of the Trump administration was really bipartisan push in Congress even to kind of look at is wonky UM you know issue about financial audits in kind of the broader scope of U. S. China relations, and the law was passed in December that basically put the SEC in charge

of making sure that Chinese companies UM and they're audit firms, are allowing American inspectors to UM, you know, to to review those work papers. The concern is really UM, you know, that some of the financials may not be UM, you know what what they say they are UM. And also there's a lack of disclosure. If you think back to Luck in Coffee. I think that was kind of the

example that a lot of people will point to. There's a separate issue that a SEC chair Gary Gensler, has really been raising over the past five weeks or so, and you really wanted to great detail with us today when we spoke with him, and that is about the structure of these Chinese firms. A lot of of the Chinese companies and Hong Kong based companies that UM are actually listed here in New York are not retually the operating companies that are listing shares, but rather they're shell

companies which are often based in the Cayman Islands. So what the SEC chair essentially is saying is that American investors need to know a lot more about that corporate structure. There's concerns about how the financials um situation really works out, how does money flow back and forth? And are people really aware that they're actually, you know, holding a share of of of a shell company and not actually a company that's that's based in mainland China or or in

Hong Kong. Yeah, I mean, right, clarification, transparency. This law though, or this requirement only as powerful as the punishment given if ignored. What's the punishment if Chinese companies And we're talking about the likes of what Ali Baba Bay do you?

I mean the big Chinese companies who could say tough, we're not going to do it so and and and and thus far, that's exactly what what they've said, um and and and it's not that the companies are themselves saying that, you know, they're they're they're not thumbing their knows, you know, they're basically saying, look, we can't do this because the government in Beijing, UM won't let us do that.

There's national security grounds are often cited as a reason for not um for audit firms not allowing US inspectors to look at the work papers. It's a very good point about what the um, what the consequences are, and what Congress did UM last December when they passed this

new law. Which is why this issue has kind of come to the forefront now, is they basically said that if this isn't, if inspector is not allowed to look at these work papers to essentially review the financial audits, these companies could be delisted from US stock exchanges within three years. UM. When we when we discussed that with char Gensler, UM, you know, he very much indicated to us that you know, he's his agency, the SEC is full speed ahead on on what you know Congress laid

out in in that timeframe. So UM, you know essentially where you know we could see over the next uh let's say three years. UM. You know some pretty some pretty significant repercussions if if things don't change those financial audits that already happens for a d r s of European companies trading here in the US, any other foreign companies.

That's automatic. So what the SEC and and and there's a there's a quasi governmental agency UM known by its acronym as the PC would be here in Washington, which is overseen by the SEC. They essentially oversee the auditors.

And over the course of you know, almost two decades of what they've done is basically go around the world to more than four dozen UM countries and they've reached agreements with these regulators that you know, essentially the American inspectors will be able to look at these work papers. The two holdouts of note are China and Hong Kong.

So when you talk about European countries, yes, there was UM some issues that have recently been resolved with a few of them, but for the most part, yes, I mean in Europe this this happens, uh, you know, companies from elsewhere in the world. American inspectors are able to take a look at these work papers. It's worth kind of going to I mean, this isn't American inspectors essentially going to a company and asking to see all of their financial records. This is one of the big accounting firms,

for example, that does a financial audit. They have work papers, and the law requires that American inspects are able to look at those work papers. It's interesting too though that he said, um that firms could be delisted as soon as four if they failed to comply. I mean, that's a fairly large runway. Just got about forty seconds left. Yeah, it it does, Um, it does. It is. It is a long runway in um, you know, in in kind

of calendar terms. But if you think about the size of some of these companies and the extent that these firms have investors in the US retail investors but but also pension funds, but also very large institutional investors across Wall Street and really, um, you know, across the country, it's not actually that long. Because if one of these companies is delisted and and they do have they do have to you know, American investors do have to pull back.

That's a pretty significant process. Um. So I think, yes, it seems like, you know, hey, three years, that's a long time, But in terms of actually was involved, it's not. You look at something like a bay Do, black Rock, Vanguard, State Street, Tiro. I mean, these are some of the big investors, institutional investors we know in these names. So that's a really good point, Ben Bain, great reporting. Check out Ben's exclusive. It is on the Bloomberg terminal. He

is financial regulations reporter right here at Bloomberg News a journal. Now, bet you let me drive. Oh no, no, no no, non, please, I'll do the run. I want to drive destrib the good question, dry job. This is the drive to the globe. Thanks, We'll try us Dawn on Bloomberg Radio. All right, just about ten a half minutes left in today's trading session.

As Charlie said, we're getting a late day fade. We're definitely off our highs of the session, speaking of highs earlier today, whilst Fargo out saying that thanks to Steller US corporate earnings, the SMP five should rise by another eight percent through the end of the year. That percentage maybe a little bit off at this point because of the fade, meaning we could end up with a maybe close to sup in the benchmark for their target. We've got the SNP at eight seven as we speak back

with us. As managing director and senior portfolio manager over at Wells Fargo Asset Management, she's Margie Patel, six hundred four billion in assets under management. She's with us once again on the phone from Boston, Markie, nice to have you here. Your team at Wells Fargo coming out with a pretty bullish call on the S and P. Five hundred. How do you see the market trade? Well, I think the market is going to continue to go up for

the rest of the year because fundamentals are great. Second quarter, which we just wrapped up, was a very good Uh, no sign of margin pressure anywhere. Good signs to fundamental demand. Consumers in good shape, business has lots of money. Um, So that just says even though we fit highs, there's no reason why we shouldn't continue to even if the FED pulls off the gas pedal. Well, that's a question we should see next week at Jackson Hole. Uh what they say, But really they're they're kind of in a

position that makes it difficult. On the one hand, their primary goal is to get the full employment or some millions off that and on the other hand, um, it doesn't look like inflation is requiring them to start to remove liquidity because they say it's temporary, and here and there there are signs it looks as if the inflation searche is coming coming down. So they may well talk a lot and not do anything for the rest of

the year. I mean, this is basically fundamentals right. What you're saying is that and we expected to bounce back after the lows that we saw a year ago and the impact of the pandemic, we expected companies to bounce back. Is there something more, though significant that says it's not just about the pandemic bounce back at this point, it's more of a sustainable growth play. Yes, it is because

corporations are in great shape. Uh. They have lots of liquidity on their balance sheet that they could buy back stock, race dividends, make acquisitions. They have chosen at this point mostly to keep their powder dry, so they have a lot of flexibility. Consumer savings is also a recordize, and employment keeps improving, and so it's it's very difficult to see much that could go wrong in famous last words, but things will as if corporations should continue to raise

earnings and consumers which continue to have the awarewithal to spend. Uh. Is it getting the overheated I don't think so, because one because the said has it seems of rather permanently anchored rates near zero, So that assures that there's liquidity trading, liquidity planning of liquidity in the banks if they had loan demand. And uh so, no, I don't think it's

a it's overheated. And because corporate profits arising, profit margins are very good, there's no reason why we shouldn't sustain these relatively high um price earnings ratios high compared to this history. But then the quality of corporate earnings are better, so that seems not overheated. What do you mean quality of corporate earnings are better. Well, if you look at the if you look at the companies that are actually producing positive cash flow in their earnings, and the whole

standard pores. It's much harder than it's been at other times market peaks where we've had pe speaking um, particularly in the technology sector UM compared to say the Internet boom, where many companies have no earnings. Now there are most of the companies have sustainable earnings and earnings are growing very rapidly. Uh if one of the main sectors has been leading in the market. All right, So you said positive creation of positive cash flow is higher sustainable earnings

at earnings growth. I mean those are things, especially the cash flow that you can't really kind of play around with right, that's right, that's what at the end of the day, that really what counts. And then what sort of a pe multiple you want to put on that of course, uh, maybe be determined by market sentiment, But until we see a sea change in the FED, which doesn't look very likely, I think it's more the same. Well,

you know, it's interesting market. I love talking with someone like you, and forgive me because I've been watching markets for a long time too. I'm not looking to age you or me or anybody, but we've seen a lot of market cycles. And I kind of smile when people say will make it a comparison to the tech bubble, because this doesn't feel like the tech bubble. I mean, what is truly different about the run up that we have seen in stocks, because we know stocks and go up,

stocks and go down. But it does feel like these cycles happen much more quickly that any of the froth gets out of the market pretty quickly. Well, I think the big differences. We really don't seem to be in

a cyclical market anymore. It seems as if we're in a secular advance because if you think back all the business cycles we've had out have been caused when the FED slams on the brakes, they see something they don't like, they restrict liquidity, we have a recession, interest rates go up, then they flood the system of money again, and then we have a cyclical rebound. We don't have that. We have more secular easing of money, keeping interest rates near zero.

So that really there, I don't see an economic cycle per se driven by what the Fed has done, all right. Having said that, Having said that, the other flip side of this story, and I'd be remiss are Lisa Bronway is writing about this so well in terms of the gaps that are out there that if you're in the equity market, are your in financial markets, you know you have come out pretty well on the other side of this pandemic or as we as things start to improve.

But for many Americans that's not the case. And that to me speaks to general wealth, general wellness of a society, and this is really a global society issue that's got to be a problem at some point already. Is to be fair, yes, and there's a lot of talk about getting the Federal Reserve more involved in creating income equality,

and ironically, by their very actions they have promoted the opposite. Uh, the near zero interest rates have allowed money to flow to those wealthy investors with lots of cash to put into the market, wealthy investors who can make investments in real estate, fine art, commodities, things like that. So ironically, you actually, by having a zero interest rate policy exacerbated the income inequality or wealth inequality by having more flow to those who have a long liquid assets that they

can take advantage. The FED we talked about a little bit again, You're not anticipating anything big out of Jackson Hall. Just talk, just talk. So at this point, I mean, what is the risk to the current trading environment. It sounds like you're all in bullish and it drives with what we heard from the Wells Fargo team about upping the forecast for the spire. Well, I think that for the rest of the year, it looks like growth looks

pretty good. And the only UM question might be as we get into do we see a deceleration and growth UM from the Really the actions of the failed to keeping rates at zero to have sort of UM distorted the the capital returns and could we see the economy slow down from UM? You know, it's four percent to three one and a half percent in two, and then people might say, oh, well, now we need to revaluate the pe ratios. They need to come down even though

we'renings look like they're moderating. So that's that's what I think. But that looks like that's a twenty two potential issue. Alright, So pushing that some a bit. Hey, Margie, thank you so much. Market patal she's managing director senior portfolio manager at Wells Fargo Asset Management, six hundred four billion in assets under management, joining us once again on the phone

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