Reviving Immigration Is Key To U.S. Turnaround: Kotok

NASDAC twelve thousand, that's just extraordinary. They're big numbers. What do they mean? Let's try to put some of that into context. Nobody better to do that with. Then, David Ko Talk, Chairman and chief investment officer of Cumberland Advisors. They have over three billion dollars in assets under management, located in beautiful Sarasota, Florida. David, thanks much for joining us again. Okay, some big round numbers. A lot of people say, I don't worry about it, They're just numbers,

but boy, what do you make of them? Well, it's extraordinary, Paul, thank you very much for having me on. Um. You know, I thought that to the book DAL thirty thousand when it was written and we were all a few weeks younger then, and and people thought it was a statement of madness at the time. Look where we are, so it's a streny. The markets, as we see it, are looking beyond next spring. Um, it's the classics six or nine months uhum forward looking post vaccine recovery. And you

see some forecasts of the rory twenties. I read a piece I hadyard Any about that he's using that mantra. So maybe we have the explosion of spending of what has been a year of accumulated savings um in this release of cabin fever. After we inoculate people and after we overcome what is a terrible shock. Right now, markets are looking beyond the shock. Those of us who are living day to day lives are still living with the shock.

And unfortunately a lot of folks are letting their guard down and they're getting sick, and when they do so, it's a tragedy. With healthcare workers, nurses. I saw a note Cleveland clinic as a thousand staff furloughed, not furload, but on medical leave because they're sick. So we're we're in the midst of the forest fire right now. And that's a sad tragedy for America and the world. Yeah, exactly, David.

Are we going to see something catlest some catalysts arrive that sort of brings this market back to reality or is it just assuming that Joe Biden takes office and that you know, there's stimulus, that all those millions of people don't get a picked in January, that the unemployment it starts coming down quickly next year, and that you know, by the end of next year all as well in

the world again. Well, I don't know they'll all be well in the world again, Vanny, but we certainly see markets looking to Biden calm, less disruption, more season professional government governance, and finally we are going to have a transition and all of this disruption of our electoral process looks like it's going to come to an end. And I think markets are celebrating the lack of disruption and chaos that we have seen. So it's a relief on top of what would be a v shape recovery outlook

for next year and the year after. That's how it looks to me and David. It also is it relates to your outlook, or it appears that we have a very clear rotation trade. You know, out of some of those growthy names that have been really the stalwarts for this equity market really since financial crisis, whether it's an Apple or an Amazon, into more cyclical type of groups, whether it's banks or even even energy has had a great month. Um. Do you believe that's the play right here?

And how long you think it could last? Well are two questions. So we use a little joke in the company. We say, Fang went to the dentist, and now we're going to have a broadening market. And I guess there's something to that. We see it in the small caps and we see it in the Russell two thousand um in our shop. We have uh good positions in the Russell two thousand in through the et F structure and in mid caps and small caps. So we've been enjoying

the rally and we continue to do so. We we took advantage j of the sell off a few weeks ago, and we have been nearly fully invested to this surge. I admit that this is very fast, very robust, and every day we get up and look at it and we're terrified, and we don't sell anything in the next day. We say we're glad we waited. That's uh, that's where

we are today in Thanksgiving week. Will you continue to stay in this market as that out help David Well, I I will for at least the next seven minutes, Vanny. But but after that, I'm not sure. Yeah, I think so, because when you put the robust recovery and the productivity games on top of this v shaped powerful uh fiscal stimulus, monetary stimulus you projected into two, you get an upward trajectory in earnings and it can be supplies in surprisingly robust.

And I think there's a second kicker here, and that is the Biden administration lifts the lid on DOCTA. That's nine thou people who begin to flourish instead of hide behind the front door because they make it decordered. We change the immigration structure, and so we include, we increase the workforce, the labor force by allowing it to flourish. We bring back into the United States people. We need nurses. There's a there's a demand for million nursing care people.

They would like to come to American work. I think they would like to still come to America. They used to want to do that. So If you add productivity games, which we're getting in huge amounts, to increase in working population, you accelerate the growth rate. I think we could hit growth rates above three percent, maybe even to four percent for a couple of years in g d P. If we get population and productivity, and we release the economy from chaos and from COVID, it could be an extraordinary

couple of years. And the markets are saying that. Markets are saying those companies are going to reflect that in their earnings. And I believe that's not only possible, but I think it's becoming more and more likely as efficacious vaccines get into distribution. That's remarkable science being applied. Remarkable. David, how many milestones have we seen together in this market? There's not the reely rhetorical question because there's no time

to answer it. But I can tell a listener is that me and David and Paul have seen very, very many milestones. That's David Kotalk, their chairman and chief investment officer at Cumberland Advisors, joining us from Sarazota, Florida. Well, we're certainly on a doll thirty thousand. Watch your three

or seventy points here nine thousand, nine sixty two. Clearly equity investors are certainly willing to look past the dire pandemic numbers were experiencing right now, look to the other side of this in a world with a multiple vaccine. To get a sense of kind of where we should be looking in the market, we welcome Nicholas Co, founder of Data Trek Research based in New York City. Nick,

thanks so much for joining us again here. What do you make of this equity market and are you surprised at all about the ability of this market to really look well towards the other side of this pandemic. You're right, it is absolutely impressive. I'm not all that surprised, only because you know, as a cyclicals oriented analysts, this very much fits the playbook of every recovery back to when I started looking at cycles in the early nineties covering

the auto industry. So it's certainly a compressed version of thout cyclical recoveries, but it does fit the basic paradigm as much as any other one does. Small cap rallying industrials, rallying, financial's, rallying tech under performing, you know, against the backdrop of recovery.

It makes all makes sense, What, then, Nick, should we expect next Well, I mean, obviously we've got a real head of steam on this market, and so you know, the next couple of particularly days is going to be a further continuation of the rally, particularly into light volume. But I do think there's going to have to be some kinds of reset back to some you know, more real form of reality, if you will, as we get into December and into the first part of next year.

Because cyclical rallies always kind of blast off on hope, and that's what we're seeing right now. Then there's a real reality check when you start to see the numbers come through. And while earnings are definitely going to show leverage next year, you know, you don't never want to be around for when a company just meets expectations after a recession, they've got to keep beating them by a wide margin. So the new term setup is fine further

out first half of next year much offer. So Nick, we see some more positive data points, I guess just on the geopolitical front, we're having president like Biden begin his transition, starting to fill out his cabinet, janet, yelling treasury pick, what are your thoughts very helpful for markets for I think probably all the obvious reasons, mostly, you know, having somebody who can coordinate treasury policy federal reserve policy and not necessarily emerge those two functions, but make them

work as smoothly as possible, and we definitely need to help in they have fiscal and monetary policy work hand in glove. Also obviously an experienced set of hands for the economy. Somebody who is well known on Capitol Hill, somebody who can easily be be confirmed by the Senate. You know, just a huge thumbs up. It was a great choice. Who else would you like to see on board, Nick, in terms of regulation, in terms of everything else from the SEC too, you know, anybody lee thing with the banks.

It's a wonderful question. Um, you know, without naming any specific names, I think what the market wants to see. You know, what Biden seems very much in the channel to do is just picked non controversial, easy to confirm, widely acceptable choices and really get the you know, get Washington back into the mainstream of governing the way it did, you know, for the last fifty years instead of the last four. So Nick, how about as it relates to

the Federal Reserve chairman. Do you expect Pal to stay or do you think the market would prefer perhaps someone new Well, I mean, you know, Governor Brainers is obviously the one that people call out is the most likely

potential next FED chare in two. I think the market would like that only in terms of her usually dovish bias Um and I think between you know, yelling and whoever comes in the next at the FED, the market is beginning to feel that incremental, really large bank regulation isn't coming down the road, and so you're seeing you know, names like well as Fargo really work today, the financials work today. That's really been a beaten up group, not just for rates being so low, because of the threat

of more regulation. And as long as that doesn't that doesn't come down the road, whoever is the next bed share, you know, should the market should welcome. So we just had you know, retail sales reports that were pretty much okay, Nick, and yeah, we're seeing a little bit of a dent and consumer conferdence this month, but nothing you know massive. We're seeing housing, at least in suburban areas across the country holding up even more than that. It's on fire.

How is this economy doing? Yes, okay, So on retail sales, very interesting point. I mean, we think we're going to see very strong November retail sales versus last year. NRF was out yesterday with a pretty positive forecast on retail sales.

And just think about how much money is not being spent on holiday travel for example, that money is and I spent get spent on holiday and recamplers have been super aggressive on getting their specials out the door early, whether it be online or in store, and so we think November is going to be a very good month of retail sales, and that will fit with the data

that we're seeing on home sales and home prices. We're a little more circumspect about December, however, because we think there's gonna be a lot of holiday demand pulled forward to November and won't be there in December. So I think the near term news is fine. We'll have to wait and see how December plays out and then refasts. Nick, just what is your forecast for when the Dow actually tops thirty? Oh, I don't know. I'm checking my watch.

It's more along those lines um than anything else. I mean, it's a You know, it's that those people at discount these big round numbers as something that really doesn't matter to markets. I do think it matters to markets. If you look to see how many retail investors google Dow Jones versus S and P it's Dow Jones by like one, they'll know when the deal gets to thirty and it is a confidence lift, right, there is something to be

said for it, right, Yeah, yeah, I think so. I mean, it's a nice it's certainly nice for financial journalists to talk about. But I think Nick, you're right. I mean, people do view it as a plateau to be to be achieved, so it can be important from that. Yeah, I mean, I think when you hit a round number, at least what at least what becomes very obvious is the direction, and if it's higher, well that's usually just the green light end of its lower world. Probably didn't

see that one coming, Nick, Thank you so much. Nick Cholos is co founder of Data Track Research, always full of fascinating market insights daily, so we thank him for that. Well, if you want to travel internationally, you better get used to a new concept called a COVID passport. That's a new word I think is entering our minacular right now. Let's get some more details. We bring on Charlotte Ryan, aviation reporter for bloombergsh is based in London. Charlotte, what

is a COVID passport? And do I need one? If I want to travel internationally? At some point? Good afternoon. So the COVID pass for it is an idea that we've seen a few organizations starting to explore, the most recent of those being AYATA, the International Air Transport Association. And basically what it is is UM, an online effective health status that would show your most recent COVID test results and whether you've had a vaccine when indeed a

vaccine is available. And the idea is to link this UM with your travel documents so that when passengers travel, the airline or government that is accepting the passenger can immediately see their health status. Who would be the regulator for this? So that's a really good question, and it's still, in a sense a bit of an open question. We've got a few a few initiatives that are underway at the moment, and such a health path for its actually being trialed on routes in Asia, but it's not clear

to what extend. Governments would have to be involved in this. Obviously, as we known from the travel disruption we've seen so far with the virus is up to the individual governments to decide under what conditions they want to let people in. UM. So that is very much something that still has to be resolved with these health path worts. So Charlotte, what's what's the position of airlines? Generally speaking, I would think they would be in favor of anything that would get

people back in their seats. Yeah, exactly. So I mean we with this latest effor if I have, they're going to trial this with i D, one of the bigger airlines UM and they say that they're hoping to launch with other airlines as well. We've also had Quantis saying this week that once a vaccine is in place, they would not allow international passengers to travel unless they have been vaccinated. So there certainly is a willingness I think to get people back in the air and also to

be as sure of passengers. But it is safe to fly, so I don't fully understand because many of them are not enforcing rules like mask wearing or you know, six ft apart separation in the planes. But suddenly they'd want you to prove that you've had a vaccine at some point. Yeah. So on the six ft rule, we did have a couple of US airlines that were putting not quite six feet, but putting a gap in between each cassenger. So I guess my point is that, you know, this doesn't seem

to be right now. They don't seem to be worried about but too worried about, you know, enforcing certain rules that might help people not get COVID. But when there is a vaccine, suddenly they will be just explained that to me sure, So I think in terms of mass wearing at least, Um, you know, what we know from the airlines is they all they all say that they do enforced this currently. I know there have been cases of individual flights where people's say that that's not what's happened. Um,

And I think, yeah. With the vaccine, I mean, I guess the advantage from the airline point of view is that it's this very clear indication if you get on a flight where everybody has been vaccinated, you know that

you're you're pretty much safe. Whereas I think from the airline side of things, they have suggested that things like putting a seat in between passengers aren't necessarily that effective as something was spread anyway, Yeah, exactly, just real quickly, don't there any data that shows that people do get the virus from air traffic? I haven't seen many stories about that. Yeah, so this is still again a bit of an open question since what extent this virus in

particular can spreads on aircraft. But we have had cases. I asked to think they've been around four fifty cases, which sounds like a lot, but it's worth highly in. A good chunk of those were on a couple of flights before the requirements where masks was brought in, and but certainly there have been cases where where the virus

has spreads on the aircraft. It does seem that this has something to do with the fact that just today I had as predicting carriers will lose a combined one fifty seven billion dollars this year and next year, which is more than a forecast in June. So it also was getting things wrong. Charlotte. Wonderful story, Charlotte, Ryan, they're joining us well. I think for most people it appears that this work from home situation is working out fairly well.

Now some companies are certainly think about what their staffing plans will be post pandemic. UH. Deutsche back coming out today and saying maybe they're considering on a permanent basis having their workers work two days a week at home on a permanent basis. Steve Aaron's is a German banks reporter for Bloomberg News. He joins us from Frankfurt. Steve, thanks so much for joining us here. So talk to

us about the news today about Deutsche Bank. What are there their plans here post pandemic so UM, as with many other banks, Glergi Bank obviously has been thinking about its future once the pandemic is over. And it's been in the kind of work from home mode since the pandemic broke out in in earlier this year and and in February March, people have been working from the home. UH.

They've been surprised as how well it's been working. And now they're coming to the conclusion that this can help UH lower costs and of course adapt to new circumstances, and therefore there now approaching a new policy where they will probably allow people are work from home to day

the week. So is it though, that you can work home any two days you choose, because we know from chat with hedge fund managers and various people who talk to us about how their offices are staff that right now Friday is not a very popular day for people to come in, and neither is Monday. So are we going to have of deute buying stuff in on Tuesday, Wednesday,

Thursday and the rest, you know, not in Monday Friday. Yeah, I'm not entirely sure how Dodge Bank will handle it, but you're right, obviously that would be probably a very heavy focus on Friday and Monday to work from home. I'm pretty sure they will have policies in place that won't permit that, though I don't have really insight knowledge and that, but yeah, I think a lot of companies

are trying to figure out. I mean, most likely scenario, in my opinion, is to have you know, binding agreement in place for certain days of the week and then they will ensure it's sort of even it evens out, and then if you don't get Friday on Monday, and I guess you're locked out. So, Steve, do you have any sense or do Stuorte Bank have any sense at this point as to what types of people would be

given this work from home opportunity. I would think they would want their traders in, maybe their investment bankers in every day. So it's just more of a back office type thing. Yeah, I guess that's another important consideration, right, Traitors, for compliance reasons and many other reasons, need to be at their death in the office a lot of the time, so it's likely that they may have only one day

or no days. Um, that's certainly something that is still working on UM and uh in the same goes for UM client facing people who travel a lot UM. So yeah, I think we're mostly talking about the back office you're aware of. Working from home is much less of an issue.

And then for the other stuff, so you know, not that money companies have put out formal blueprints because nobody knows who, nobody knows how long the pandemic is going to last one, vaccines are going to be available, at what point their workers are going to be able to access vaccines and so on. Why do dot de bank decide to do this now? Well, it's not it's not a formal announcement, right, we booked the news. It's people familiar U However, there are banks European banks who have

made sort of preliminary announcements. What they're planning is um and they're ranging from twenty to fifty on Dutch banks and said they will allow fifty percent of staff to work from home. So I just think it's you know, we've had a trial line of working from home since the beginning of this year. They realize it's working well, and now you know, you have to consider if you

want this to impact your policies. You have nieces in place, if you want to reduce office space, you have to start doing this now because it will play out over a very long period of time. Also, you need to talk to regulators about install on. If you don't make a decision at some point, um, it's gonna just you're gonna delay the whole implementation for a long time. So, Steve, I wonder how much of this is really a cost

cutting move here. I mean, you know better than anybody the difficulty that German banks have been dealing with four years, especially now with this low and negative interest rate environment. How much do you think that's playing into a cost cutting costs on a long term basis. Yeah, you're absolutely right. European banks and specifically German banks and Deutsche Bank have a huge cost problem and I'm we want to prevent

sure that this is a very big consideration. But if you know, they sort of for them, it's a win win situation if it really does make staff happy. You know, if you'll give your staff the opportunity to work from home and they're happier about it and you can cut costs at the same time, why not, right, I mean,

it works, it works. Well. What when there's a vaccine that everybody can get access to and everybody is vaccinated that wants to be vaccinated, and we've decided that this pandemic is not a yearly thing that mutates, will we really? I mean, does anybody really think we'll see any capitalist country continuing with this idea for you know, the next five and fifteen years and permanently. M that's yeah, I mean, that's a crystal ball question. But I do think so.

I mean, all the banks are saying this has been a sea chain for them. They now think work from home is the new normal. They also say officers will always be a place in important place for them. They will never abandon their officers entirely. But I do think there will be a mixed model. Uh. And now that people have been working at home and their managers a line managers real life people don't flack off at home and productivity stays at the same level, then why not? Yeah?

Do you think it will stay? So, Steve? Is this when do you think we're gonna see some more news out of maybe Deutsche Bank or some other banks. As to announcements, I think I think there will be every now and then there will be banks making announcement announcements on this as they come to a conclusion what they really want to have for set up. I'm not sure. We don't know when Dutche Bank will make a formally adopt out plan. It may still be a few months.

But yeah, I mean, you're some European bankers Upstad have made that formal announcement, and I'm pretty sure others will follow suit. Stephen Aaron's joining us there with a wonderful story on Deutsche banks moving to a reduced workforce from in house areas at least, and Stephen, of course covering all of the woes of European banks over the last several years. It doesn't seem to be getting all that much better, but at least they've got something else to

think about for the moment. Stephen Aaron's they're joining us from Frankfurt, Germany. Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn. And Paul Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio