Vaccine Cliff Looms As Numbers Begin To Drop

at Bloomberg dot com slash podcast. Well, Matt, I consider us very fortunate that every week we get to speak with Lauren Sour the Johns Hopkins University, because there's so much news that just breaks on a daily basis about um, you know, the pandemic, therapeutics as well as vaccines. So again today we're joined by Lauren Sauer, Social Professor of

Emergency Medicine from the Johns Hopkins University. And I should know that the Bloomberg School of Public Health is supported by Michael Larre Bloomberg found their Bloomberg LP, Bloomberg Philanthropies and this radio and TV operation. Dr Soer, thanks so much for joining us. I'd love to go to the issue which I think is beginning to develop and we kind of knew it was gonna come, which is we're

gonna have more supply this vaccine than demand. Is it now time for a big pr campaign to kind of get out the you know, the vote, if you will, to get people to get vaccinated. Yeah, absolutely, I think it is. I mean I think, um, those access issues that we've talked about, you know, several times on this show, uh, and that we've heard a lot about are still remaining

for certain populations. But I think the push right now has to be convincing those people who have decided not to or haven't decided to get vaccinated that now is the time, um, and the vaccines available, you can get it in many different places. And if we facilitate the ability for people to get vaccine, um, that we can start to get those numbers up again. Well well, I mean in terms of access, President Biden said yesterday that every American is going to be at least five miles

from a vaccine side. Is he off with those figures or people get Yeah? I think that he is. Not where necessarily the vaccine sites are, but how you access them. So I think now is the time where we can start to see creative options for getting vaccine into communities rather than asking communities to go to vaccine. Because even if it's only five miles away. That may mean that someone has to take some time off work, has to get childcare, may have to borrow a car or take

public transportation, UM, and all those things. When you add barriers to someone who isn't sure if they're going to get a vaccine, UM, that that creates, you know, something that weighs on the side of I just won't get it right now. He also he also said that he wants UM employers to guarantee that workers are able to get out and get the vaccine with paid with paid time, and also are able to recover from anything paid. One

thing that's a concern, I guess is the hesitancy. Right. Um, we know that America has a big crop of anti vax ER's UM and I saw a tweet from Joe Wisenthal today that maybe what will help PR and the other their direction. He says Lauren, I'll quote Joe wasn't all directly. So I actually feel like a kind of weird high after my second fiser, like I just took

some coding or tramadal or something. Um. It makes me excited to get out there and get my shots because he has something to make it feel better, right, but is this something that Paul didn't really feel it. He

got his second shot and said, yes, no signs. So is there anything that people are reporting that they, you know, feel in the positive sense after these um there were here hearing a lot of reports of that sort of euphoria of just like, oh my gosh, I can take a breath, like it feels good and it was exciting, and we've made an incredible amount of progress to get here, and it does feel like, you know, you can see the light at the end of the tunnel. And I

think that is not to be discounted. I mean, I know when I got my vaccine, I felt I also felt a sense of before you like, holy moly, the weight has been lifted off a little bit. I'm I'm headed towards protection. We're headed, you know, towards the other side of this, and and it's exciting, um and it's incredible, and the work that went to get us there is unbelievable and shouldn't be discounted. And I think if people are going out and feeling that, that's amazing and they

deserve that. Lauren, what do you expect to hear? I guess we're waiting here today about that Johnson and Johnson vaccine. What do you think is we're going to hear? I have about feeling what we're going to hear is UM that it'll be you know, made available again, and there might be some caveats to who can get it, UM, so they may slightly restrict the population. I think we're all sort of waiting, just like you too, to hear what they decide. They look through a ton of data,

they've done all of their due diligence. I think it's great to see that this system, um, this adverse event system reporting is working and reporting is happening, and so I think we will probably see it, you know, available again, um, but with a modified allowance for who gets it. Hopefully men in their authorities with a solid dad get the first shot at it, because I think I saw that

in the preliminary material. I'm definitely excited if, if, and when that's cleared again, I'm headed back to New York to get my shot and then we can all play bridge together sans mask. That would be fantastic. Lauren, thanks

so much for joining us. Laurence sour there from the Johns Hopkins UH School of Medicine, The Bloomberg School of Public Health, of course, is supported by Michael R. Bloomberg, and you may have guess he's the founder as well of Bloomberg LP and Bloomberg Philanthropies, and he runs the TV and radio stations as well. All right, j T, thanks very much for that. Now you brought us the new home sales data at the top of this program, Um destroying the survey numbers. We saw one point zero

to one million. We were looking for eighty five thousand new home sales month over month, a gain of twenty point seven percent compared to the survey estimated fourteen point two percent. So really strong numbers. And our next guest says, UM, the that's the new home sales. The existing home sales market is the un healthiest housing market in ten years. We'll find out why from logan motto Shami. He is a housing data analyst, UM also lead analysts for Housing

Wire out of Irvine, California. Logan, let's talk first about the new home sales numbers. Amazing jumps. What what sales report? Yea best new home sales reported over ten years. I mean you had the trispector, you had headline numbers, which can be wild month to month. I think people get confused sometimes where you have these really big months and big declines, but headline was great, But the key is revisions.

We had positive revisions, and monthly supply is below four point three months on the headline and on a three month average. You've got to keep it simple with a new home sales market because we we focus so much on lumber prices. But as long as monthly supply for new holmes is under four point three months, something that never happened from two thousand to two nine, the builders

are happy. No matter what they complain about in any surveys or anything, that is all they care about because that means they could sell product and that will lead to higher housing starts. So as long as that continues, and I was I was just gonna ask Logan, does that mean they're gonna go out and keep building more? Is everybody who knows how to build a house going to go and do it right now? Yes? And as

long as that supplies that low, we're okay. Now, this sector gets hit harder than the existing home sales market when rates go higher. So the backdrop of higher mortgage rates would be problematic because then you've ben the lumber prices really kicking. But for now things are good. Your home sales fine, excellent print, best print in ten years. Revision is good, monthly supply good great, great way to

get into the weekend. Alright, logan. But on the existing home sales, you know, I just in the in the town where I live. As soon as anything goes on the market, it's snapped up it and there's just not that much apply, I guess. So give us a sense of existing snapped up at a price much higher than then you saw in the ad, right, because I know people have been looking for homes around that area and they just can't get anything because it jumps right away.

This is the most unhealthiest market in the last ten years. Where the new home sales market has a has a has a different economic backdrop. We just do not have a lot of homes. And that's the main issue. Mortgage purchase application demand. If when you do some COVID nineteen adjustments, it's not up that much year over year, but total inventory has been falling since as purchase application data has

been rising. And now we have you know, we have the best housing demographics ever recorded history, and we have the lowest mortgage rates ever recorded history. So when you put that many people into this marketplace, which is always my biggest concern in this period, Uh, you're gonna get you need to fear about price escalation. But the but the problem is in the past, higher mortgage rates tend

to balance this out. COVID nineteen has kept mortgage rates artificial love has kept the bond market artificially low with compared to our economic data, Like our economic data warrants a ten year yield north of two point But so we have we just have a very unhealthy marketplace because literally people are not losing their bids by one or two people, They're losing their bids by eleven and fifteen people. That is extremely unhealthy. And we're getting these home price

growth without a credit expansion. And this is what concerns me about this period of time, is that price growth is really going up, but demand is not really falling

through with it. And and that's what that's gonna be a problem down the line again when mortgage rates eventually rise and I'm not talking about like six or seven percent, I'm just talking about well, so logan, I mean, I'm looking I'm hoping to move back to the Tristiate area looking for a nice colonial on a couple of acres in Westchester County built I'm hoping the way I envision

it built in the seventeen eighties, seventeen nineties. Um, what you're saying is I should just trash that idea and just buy a couple of acres and and build it myself. If you could find the lumber, then yeah, that'll be a good thing. You can do it. But yeah, it's just it's just an extremely unhealthy market. I mean, that's just we just and there's no there's nothing that could really solve this in a short term unless mortgage rates go higher, and COVID is impacting the world economy is

much harder than ours. Our economic data it's much better, but it's keeping rates low, and it's just it's really frustrating for buyers. I mean, you're just you're not getting outbid by one or two people, You're just getting outbid by many. I mean, some homes are getting thirty or forty offers, and some of the price finals selling prices are is insane. Well exactly because even if you do get the house, then you move in and you're going to bed knowing that you bought in at the top

of the market. Well, here, here's here's here's one thing about that. The difference between now and then, let's say two thousand two to two thousand and five, that was more of a speculative credit bubble where these those weren't really homeowners. There a lot of our investors here. Anybody who buys this home is legit. And the concern is it's not about a housing crash or home prices peeking out. It's that these people all going to stay in their homes.

They're not gonna lose their jobs or anything anytime soon. They're gonna stay here for a long time. It keeps housing stuck. Being stuck is the worst problem because there's no real there's no velocity quick fix to this. So uh And if you look at our home prices are real home prices, there's so much lower than what Canada, Australia, New Zealand, France, the UK has, Their real home price

growth has been much stronger. So again, my fear for me as always that prices escalates out of control because these are all legit buyers, but sales really aren't growing that much and that's that's being stuck. That's the frustrating part. That's why I say this is a very unhealthy housing market. However, higher rates should cool this down right because there is no credit bubble this time. There's limits to housing. You're

still bounded are the rules of numbers. So hopefully, and especially now that I think supplies some more supply come under market, it just cools this market, John, because guess what the demographic passion they're not going anywhere. They need shelter, they need somewhere to leven. Hey, look, thanks so much for joining us. Love getting your perspective on all things real estate. Logan Multi Shammi housing data analysts also lead

analysts for Housing Wire based in Irvine, California. Matt House the housing market in Berlin, and I have to say, as he was saying that the actual prices aren't higher than they are in Canada the UK, um, the prices here are extremely high. I mean, if you want a nice house in the suburbs in the Summit or the Greenwich or the Bronxville of Berlin, you have to be prepared to pay um, you know, starting at two million and probably and probably higher. Frankly for what you could

get in the US. It's incomparable. But what I was thinking is, Paul, if your kids are now going to college, you have empty bedrooms, maybe me and my wife could just move in with you. Yeah, a little, a little Airbnb action. We'll talk about that off the air man. That could be a good transaction. We all know the bull call on this equity market. It's driven by the Federal Reserve accommodative money, it's driven by a fiscal stimulus,

the reopening trade. Lots of bullish underpinnings to this market, but a lot of investors are questioning is that all priced into the markets. Let's get a sense of what traders are really thinking about that. We to do that, we check in with Randy Frederick. He's vice president of Trading and Derivatives for the Schwab Center for Financial Research. Randy, thanks so much for joining us here. I know you guys have your Trader Pulse survey. We really you know,

talk to traders and ask traders what they're thinking. What are the thoughts here of these markets as we are hitting kind of you know, kind of all time highs almost on a daily basis. Well, let's go back to what you mentioned right off the bat, which is that. Um. You know, many of our traders told us that they thought that the easy games, if you will, in the market may have already been built in, not too surprising with the SMP five eighty six percent since it bottom

back in March of last year. But they also still have a fairly optimistic views. So in other words, while we may not see another eight percent over the next twelve months, they still think there's upside available. So when are we gonna know that it's time to sell? Well, I don't think we ever really know when it's time to sell UM, And we don't think selling in the broad sense of like get out of everything, is ever a good idea. UM. What we often tell our clients

to do is to take advantage of market volatility. When you have little of down dips um, as we were kind of in until to day, we're getting a little bit of a bounce back. UM, those may be opportunities to pick up a few extra shares. And when you have markets hitting all time highs like they did just last Friday, maybe you take a little bit of profit off the table. But wholesale selling is just never a

really good idea. So nobody rings the bell at the top, as they say, all right, Randy, just give us a sense of kind of when you again survey the traders, UM, what are their thoughts towards volatility here? We've seen the VIX pull back pretty significantly here to the seventeen eighteen

dollar seventeen eighteen range. Here, what did they think about volatility? Well, what they think about volatility is that they think volatility might actually be a little bit worse in Q two than in Q one, which is kind of interesting because, um, it's actually been a lot lower. Q one volatility was quite a bit higher UM than what we've seen. In fact, we've seen the VIX hit twelve month lows here just

in the last couple of weeks. So UM, But I think that's more of a sort of a response to what's going on at the moment that they received the survey UM, and I think it also had a little bit to do with the fact that when this survey went out, we were seeing interest rates UM hitting a high level we haven't seen in quite a while, and the concerns about inflation, I think we're pretty high that has that has come down a bit UM in the

last couple of weeks. As you know, since April began, we've seen the ten uere pull back a bit, the inflation worries of sub sided to some extent. And while it seemed earlier that many people were sort of, um, not necessarily trusting of J. Powell that he didn't plan to raise rates, and I think he's convinced the market. Now, what will the new tax laws if they're put into effect, this new tax plan, if it's put into into law.

Due to the trading environment, well, you know, the sell off we got when this was first announced is not surprising. When you have the market near or at all time highs. We're about one percent below the all time highs, it becomes very sensitive to any sort of news that might be received as negative. Obviously, people believe if their taxes are going to go up that's not a good thing, and so the knee jerk reaction is to sell. But we're seeing a bounce back today, not too surprising. Generally,

the sell officer are overdone. They tend to be a little bit too extreme. What we don't know is a lot of things. First of all, we don't know whether it would be retroactive back to the beginning of or wether it wouldn't kick in until two. We also don't know what the final bill might look like, if or when it ever becomes law. Most of the time, initial proposals are watered down substantially before they finally become law, if they ever do, so, it's really way too early

to speculate how that might play out. The interesting thing is, I mean, it seems to be focused primarily on the top three tenths of one per cent, which is a very small portion of the population, but also a portion who owns an enormous amount of equities in the market. But there seems to be quite a bit of pushback. Um. I think it may be just sort of a launching point for negotiation that there's been a lot of pushback, as you know, about the potential for raising corporate tax rates.

Uh so this is an alternative to that. If they don't like corporate tax rate hike, then maybe we should go at individuals. Um. You know. One thing that's interesting about this is that people always complain about how complex the tax laws are. If you eliminated the twelve months hold for long term capital gains and you taxed interest divin ends, and capital gains all at the same rate. It would greatly simplify taxes. Certainly it would go up for for some of the high earners, but it would

simplify things substantially. So I don't think we know how this plays out. We don't even know if any of it will come into becoming a law, and if it does, it will likely look a lot different. There any thirty seconds left. What are some of the sectors that the

traders in your survey are liking right now? Well, one that I think is really one of the parts I thought was found very interesting was that last year when we did this survey, the top sector that they were optimistic about was financials, which I think turned out to be a very good call, because financials lost four percent last year. They're up seventeen percent year to date. So the two worst sectors last year were financials and energy. Those are the two best ones this year right now.

Our investors that took this survey told us that they're still optimistic about energy. As much as we talk about green energy and battery powered cars and all these other things, that still makes up a very small portion of the overall economy. Old time fossil fuels and and tradition energy is going to be with us for a very long time. It's down like it was last year, but it certainly is not out. And I think this year's rebound is a um indicative of that. There are certain fossil fuel

cars and motorcycles that I intend to keep forever. I'll have to rip them out of my cold day to be around for a while. Randy, thanks so much for joining us. Randy Frederick, their VP of trading at the Schwab Center. All right, now we're gonna focus in on the municipal bond market. Eric Kazaski, senior US Muni Strategies for Bloomberg Intelligence, joins us and Um, we had kind of a bombshell yesterday on uh, the tax side of things. Eric,

how does this affect the muni market in your estimation? Hey, good morning guys. Um. Look, obviously, any time you have higher taxes on the margin, that's going to be good for municipal bonds. Right, people are going to look for ways to lower their tax bill. Um. But I think if you if you sort of up back before we had tax reform in two seventeen, right when we had higher taxes, we didn't see like a huge dupremental retail demand.

I think the real play here is going to be what happens to evaluations in the higher tax states like New York and California, who are already talking about increasing their marginal tax rate in state, and then combined with the higher federal tax rate, you could be up in the fifties um, and we could see valuations on the debt and those states really take off. All right, So Eric, just give us a sense here. We've known for a while.

You certainly since President Biden was elected he won the election that probably going to see some taxes go up. What does the you know, medicimal bond market, if you saw fund flows just take off from there or has it been kind of a wait and see issue. No, it's been consistently strong, and I think a lot of that has to do with um, you know, fear of

higher taxes in the future. And you know, as as the corporate market books frothy um from valuation standpoint, and people want to decouple of equities, they are moving into unis because that uncorrelated as that class with a low historical default rate. Right, So it really checks off two boxes as far as moving to take a seat he even and getting the tax rancomm is a kicker on top of that, what do you expect the changes to be UM when we're when all is finally said and done.

I mean, has there been any Is there a pool going on in the office as to what we're gonna see at the end of all this? You know what, it's an opening gander, right and you know, obviously, like given the path negociations, we could be somewhere in the middle. But if I had to guess, I would say that they get somewhere in moving the needle higher and the not in a tax rate to thirty percent range, but they might have to give up the efforts to repeal

the AsSalt limitations. All right, Eric, talk to us about the taxable municipal moder Market's a fascinating market to me. What's going on there? You know, flutes are still strong and it continues to be one of the biggest performers in fixed incomes year. And you know with the talk of sort of bringing back you go to America bond type program with an infrastructure package later in the year, obviously that's going to bring more eyes to the sector. UM,

but it could also bring more supply. With more supply, we could see spreads y amount and it will just make the sector even more attractive than it is right now. What's the most attractive aspect and unis are the most attractive area and new needs right now? I mean, what are we seeing in terms of UM trends that you like? You know what the biggest areas of I would say return growth this year have been longer duration and lower in yield. We really seem sort of the long end

of the curve performed best. And you know, triple A, triple B and single A metis have really um you know, come in as far as performing on the high grade standpoint. When you look at you needs lower down into high yield, you know, they've certainly been big performers. But you know, if you look at sort of the subsectors of high yield municipal returns, tobacco has been one of the biggest

booster there over the last year. We think there might be some headwinds to com um just given sort of the Biden administrations begin to talk about how they want to increase taxes on cigarettes sales, also limit nicotine in cigaretts and taco products and band mental cigarettes. Right, all of that would be negative from tobacco shipments, which are part of the n s A that fuel up the team in on those bonds, kind of making it tougher and tougher the smoke cigarettes, but easier and easier to

smoke weed. Matt, So go figure what's going on there? Eric has ask you thank you so much for joining us. Eric, I don't see you can die from smoking weed? Is I know? Ericson goes to little Strategies for Bloomberg Intelligence. This is Bloomberg. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm

on Twitter at Matt Miller. Yet on false Sweeney I'm on Twitter at pt Sweeney Before the podcast, you can always catch us worldwide at Bloomberg Radio