Surveillance: Election Interference with Stravidis

The guide for you does it market participants, stay up and watch this debate, trade on it, off the back of it, based on who you think one. How do you go through this? Mike? What's the process? So one of the things we've been saying throughout the election season is just how stable the polls have been, even in the face of obviously historic events in in the United States.

And so I think, as it relates to your question, you know, yes, you know, insofar as it's one of the last big events before the presidential election, it could matter. But our basic thesis is that that this race continues to look awfly stable on Our advice to investors is, you know, look through any volatility that the race itself generates, look to the long term, look to the fundamentals and add to high conviction positions if you do see that volatility.

Mike Powel, you were weaned on blanch Flower economics at Dartmouth College and just a simple idea of wage dynamics and the separation of societies, which which is known and not only what Danny Blanche Follower has done, but others at Dartmouth economics. How divided is this nation now? And what does it mean for investors? So, you know, I'd say the nation, you know, does look divided across a couple of dimensions. Obviously the political polar polarization as historic highs.

But I think as well, when we talk about economics, when we talk about markets, you know, I know we've talked a lot about the k shape nature of the recovery and that agree to which you know, even an aggregate as the economy is surprised to the upside, that's a much different experience for people in different parts of this economy. And I think that's why as we look ahead, you know, this question is you've raised around fiscal stimulus, this question of is the is the recovery going to

become more sustained? Is going to be an awful big part of a market narrative as we go into Micha, A lot of people are believing in this yield curve steepening story, higher longer term yields based on this idea that we will get some sort of fiscal support bill, perhaps this year, definitely next year. How high contenure yields really rise before the Fed steps in? We think this

is a huge issue. Uh And I would say, are are do you want it as a perhaps a little distinct I mean, I think we heard from Governor Brainerd yesterday that the Fed intends to act along the entire yield curve. We see that as a as a signal of of exactly that the Fed is going to be pretty closely watching the nominal curve and not allowing a

tremendous amount of steepening to us. The kind of more compelling reflation dynamic is to expect to see the nominal curve stay more or less stable to a little higher, but but real rates tips to rally even more considerably, so real rates even more negative, and that has pretty important implications for the dollar risk assets globally. So we

think that's the really important dynamic here. Well, make that makes it profoundly difficult to earn financials, and it makes it even easier to stick with what's working right now. What do you say back to the people that are talking up the rotation in the equity market in America? So I'd say two things. And I think we have been talking about a type of rotation the market that it's been less growth to value and more large too small.

We do think that the growth dynamics that are reflationary, fiscal stimulus type path could put in could bring about that type of rotation. But agree with you that you know, in a world where we see real rates lower, when we see the path of of the dollar potentially lower as well, that's also a pretty attractive world for for equities outside the United States risk assets outside the United States, including places like emerging markets. So I'm looking right now.

The low of negative real yields for ten year treasuries, in other words, amount of money are losing to invest in longer term treasuries based on the rate of inflation, hit a record negative point one one percent in September.

How low could this go? I don't want to put any precise numbers on it, but I do think the important point is if you look at um places that have combined kind of significant ongoing monetary accommodation plus fiscal policy, that the place where that has really manifested itself as in is in real rates. I mean, this is what we saw in Japan, this is what we've seen in

other places that have brought this combination to bear. And I think that's where we see the pressure from those two forces coming together in policy really manifesting itself and market. My pile from black Rock, Mike just fantastic to catch up as always joining us from the black Rock Investment Institute. Jeffrey h is with v and White Melon. He is a senior strategist in is wonderfully eclectic about linking foreign

exchange dynamics into everything else that's out there. We're thrilly could join us right now, Jeff, I want to talk about the persistent stronger n men be the Chinese you want. Is that managed by Beijing or is that the market speaking a bit of both it right now? So Beijing is managing it less. I think that that's been clear

for the market to see. For the market now is trying to be okay, You're not managing it Let's see how far we can push them then be stronger before you actually start to want to manage it a bit more because this is getting uncomfortable for China, race is still quite high if you look at whether mon curvid. I'm sure though there are some no big activities in some of the mestic I t O market coming through.

But at the end of the day, you know, one strong spot has been exports, right, but a stronger currency that coupee into exports. So the market is going to be testing the PDOC tolerance up ahead. How does remembering diffused leak if you will, to the other currencies of the Pacific RIM and indeed over the US dollar. Well, there's two ways this can happen. One positive one paths less positive. The positive side is stronger than be stronger persons in power for Chinese, you know, the fable Chinese

consumer that the world desperately needs to come through. Then they have more personal power they can spend and lift the economy around them. However, you know, if China actually starts to get worried about this and start the pushback starts to intervene, then career Japan, Taiwan, they're going to get nervous as well. We don't want to localized currency war. But for the time being, I think they're going to be given everyone else a lot of space, especially career.

You know, that's one where I think the market is quite fond of as well. So Jeffrey comes down to tolerance. Let's talk about levels dollar China. Right now. We saw six sixty four earlier in the session. What kind of level do you have in mind? Well, I think when we get to say, you six fifty, you know that kind of the level of the PDOC may need to

take a double taper. Let's go back to two thousand and fourteen, two thousand and fifty, when did the p BOC really start to talk down the room and be well, talk about it being quote que valued. You know that is the key phrase from kago Is now the governor. There. We were heading towards in the six ten. People were talking about it breaking six and heading into five. Nowhere

near there yet. All the PBSC leadership, though they were on the wires yesterday, no one uttered a single to the what about the rim be So it's telling you these levels right now, they're happy with it to continue to advance down to six fifty. Then Jeff, let's build on this the derivatives of this trade stronger China, stronger currency. People have been loading up on copper bit and up the copper price out of those trades have been attached

to that stronger Chinese currency. What do you things vulnerable at the moment, Jeff, So from a positioning point, See, we've already seen the oddie adjust a bit, right, so but for copper, so for Chillian testossie dollar. I actually think in particular BOSSI is not that vulnerable. I would like it to actually move forward a bit after the

rb A figures out its policy path. If you are an oil related currency, I think that's where you don't want to own the China beta because all the comments are repond the leadership next year, and then next week they announced the next five year fan China wants to go green, China wants to move away from fossil fields as well, go for early carbon neutrality and then start to shrink its carbon footprint. So that isn't really a

good stories of possile field. So you saw go along iron or you go those proxies um for oil and energy and the rest. I'm not so sure Okay, So the flip side of the strong un of the strong carper call is the week dollar a call. What could potentially be the catalyst to further the weekend to further weaken the dollar from here, well, I think a massive reallocation story and we're talking mediums along with irrespective what happens to the election, I think that is in place

in it right now. You look at the underlying it for Chinese government bonds, I mean, look at the yields right now at three uh a, three fifteen, three twenty on a head spaces it's some naturally you know, quite solid as well, let alone unheaged flow. So as long as China continues to grow and the rest of the world and the US underperforms on growth, I think that reallocation story into Chinese assets, into Asian assets, which is that performing, I think that will undermine the dollar. It's

not the usual suspect. So markets want to be short dollars against that then and be Korean one. They're looking at Taiwan dollar and the rest and against the euro sterling not so much right now, the kind of in the same vote. All right, in the short term though, there is the potential for underpricing a contested election, underpricing what servis Boras wants to Weinstein called critic chaos that

he's predicting around the US election. Does the dollar strengthen in that type of scenario, um, so, volatility is going to speak heither and one of the drivers. But if we go back to a March kind of scenario where market just scrambles the liquidity, then then probably it will be a dollar positive story. But having said that, all of the facilities established by the Federal Reserve in March, you know, they are still in placeful, they can be

reactivated very very quickly. Right, so I don't think it's going to be as severe as we saw in March. And also just be wary of what you want to own. A dollar against dollar and downside dollar swift downside people might want to own those trades as well as election heades. How much is the U n strengthening on the heels of a Biden win, of the expectation that's being baked into markets. I don't think that is a catholics right now. It's more on the China alone, its own economy, its

own numbers are actually strengthening slow. And also you know, with the app allocation, with what's going on in the equity market, big text ideas coming up, and further opening of the bond market. It's that underlying institutional reallocation to China, which has actually been solding for some time now. And again I think that's music independently of the poles. Now, if the trade relationship there can be let's just say, less chaos over next years, that's going to be positive

for China. But I think they'll be positive for the US in the world as well because gobal trade starts to normalize somewhat. So I don't see any inconsistencies. Would say, good US market and good Chinese market. But for now, I think it's a China standalone story. Jeff, find a question from me. You've always got a favorite trade, what is it right now? So you know right now again, I like the China proxies. I want to own Aussie,

I want to own a Korean one. And on the other side, probably Sterling is my favorite funder right now. I think the BO he's got it wrong. I think they need to do a lot more upp ahead. What's not announced today not enough. So I want to add to my Sterling Shorts, a salary Sterling buyer of the China proxies. Jeff Greater, catch up, sir, Jeff, you of b and y melon. Thank you. This is a joy. I said to the wonderful staff the other day. Can you dread the admiral down? And let's get him in there?

And you know we found him. He's like, you know, he's pandemics. Oh. James Travinis joins us here before an election. We should point out that the last time around he was discussed as a vice president of vice presidential caliber for Secretary Clinton. Were thrilled that he could join. Today. I am thunderstruck, Admiral Stravins by the lack of discussion of our military in this campaign. What happened We have entirely internal focused, Tom and I think we all know

that the pandemic, the economy, getting our teeth straightened. Everything is looking into the economy these days, and as a result, events continue to move in the real world China, Russia and North Korea, on and on um. They're swimming around waiting for the results of this election, and we need to be mindful and I think coming out of the election, Tom Um, these issues, these international issues are going to

bubble to the floor. Well those national issues is there in Obviously, this election can go one of two ways. If I presume a second administration, Trump will be maybe like the first administration. Fine, but there is a mystery to a Biden administration. What would you presume would be his extension to the Pentagon and his extension to state. First of all, look for re engagement in the international scene. That means working more closely with NATO. That means coming

back into the Paris climate of courts. That means nailing down a strategic arms limitation treaty with Russia. Uh, it means putting additional pressure on China in the South China. See, that's something I think both administrations will do. And above all, it will be a very clear eyed view of Russia and the ongoing turbulence that Russia generates in the international system.

So two different paths, I think. Uh. Lastly, I'll say you'll probably see the Biden administration try and cut a new deal with Iran, returning to a nuclear arms deal, but bringing in some additional elements. Um. So I think it'll be more re engagement in the world, more alignment with our allies in a bit more focus on Iran, North Korea, China, and Russia. Speaking of Iran, yesterday, the top U s by chief accused Iran of making direct efforts in interfering with the US election. What do you

make of some of the interference claims so far? And in terms of who wants who to win the election? Clearly the nations I just mentioned, particularly China, Russia, and Iran are involved in attempting to manipulate the election. Iran doesn't have a lot of capability, but they would probably rather see a Biden administration on the theory that Biden administration will go to the negotiating table um China, I

think it would prefer at this point. They've been back and forth, but I think at this point they would prefer a Biden administration simply because less turbulence, less back and forth. I think Russia clearly would favor a Trump administration because not that they have particular love for Donald Trump,

but they loved the division in the country. With your father's service to the nation of the Marine Corps and particularly his tour of duty as a Greek American in the levant Your comment ad on Turkey and the upset of Cypress and the Eastern Mediterranean. Turkey is banking a series of bad decisions lately under President ur Lwan. They're pushing too hard over oil and gas and they're generating

real backlash not just from Greece but from Cyprus, Israel, Egypt. Secondly, they're backing Azerbai John in this nonsense war between Armenia and Azerby John, and thirdly pushing into Olivia. They're on the wrong side of almost every issue from a US perspective at the moment. There's one way to start a book, folks, and there's any number of wonderful books that Stravitus has done. I of course mentioned his Leader's Bookshelf is really a must mustard. I threw it at least as kids the

other night and said, just shut up and read. Just start with start with Sharman the Civil War, and learn about Roberty Lee. There is Admiral a seventeen year old out to see and it was in nineteen seventy two. You had the courage to come out at Naval Academy in nineteen seventy six, and trust me, folks, at that time it was not a popular tour of duty and then you come over to what we've just witnessed with

Tom Hanks on Greyhound in the North Atlantic Run. What was your thought moving from a seventeen year old kid on the Jeweit in nineteen seventy two, doctor Mr Hanks nineteen forty one. Um, that film is fabulous, but it's based back to books. It's based on an even better book called The Good Shepherd by C. S. Forrester. And that was a book I read as a teenager about those destroyers and those operations. And you know, you can drop a plumb line from that young Jim Staverdus to

being the supreme Allied Commander of NATO. It's all about books and reading and the experiences we have in life. You put them together, you can do anything. Well. Then look at the future of the Navy now, I mean take Forrester and all the romance Patrick Patrick O'Brien, folks, Yes, I've read all twenty one editions of O'Brien, etcetera, etcetera, and the honor of speaking to Gabellian Chronkite about it. Great. Okay, the next navy can that seventeen year old kid in

two thousand twenty one going out of San Diego. Can he have the same vision you had? I think so, And our Navy will be more technological, certainly more cyber, more unmanned vehicles, more integration with special forces, but the same fundamentals of going down to the sea and ships and sailing where millennia of mariners have gone before. We'll

still capture young American men and women. I I think the Navy will be a huge part of our future, and in particular time back to China, the Navy's will in the South China Sea, pushing back on Chinese opportunism there must videz thank you so much before this election. Of course as former work with NATO with Carlyle, and of course I really wanted any number of the books, but where I took that out of that great opening sea power, the history and geopolitics of America and the

Navy as well. I'm the pandemic, Lisa, and I've been following the deaths, the cases, but there's also those in recovery. Here's Jason Farley, uh, professor of nursing the Johns Hopkins University.

We're seeing continued emerging data. There is a recent publication in the journal American Medical Association highly respected journal, showing that they followed patients after their uniqual long set of symptoms for up to two months after they initially became sick, and they found that patient fatigue was the most common symptoms, but they also had lingering symptoms from the respiratory system,

so cough and some some difficulty breathing at times. Some patients, although a smaller proportion less than still have problems with taste and smell. So I think we definitely are seeing some subgroups of people who have longer symptoms. Jason, just

to add to that, what if we let about reinfection. Yeah, we continue to see cases of small numbers of cases, let's be clear, but small numbers of cases of patients who we've identified have recovered from the infection, and I'll have a documented negative test in some of the cases repeatedly negative and then have subsequently developed coronavirus. Again. Um,

it was always within the realm of possibility. We talked about it on this show and in others um that that would possibly occur, and now we're just seeing small members of cases where that information is growing. Jason, what's the latest on the infectiousness of children Initially there was a theory that perhaps they were not infectious. Those of us who have children said that can't possibly be, since they are vectors of disease. Now the idea is that

they can spread the virus. How are we looking in terms of how they compare with a degree of spreading it versus adults. Yeah, so, well there are a couple of points there. So so in terms of how how good at child is that spreading compared to an adult, you know, really they have the as equal a probability of transmission depending on their viral load and how much virus they have and then how much contact they have. So so that's the person. Um we were wrong initially

about them being less ters. You know, with with certain infectious diseases with small kids in particular, like the really little ones. Um, their cough is a little weaker, it's not as forceful, so you would think of as you think of pigpen and a cloud of dust that goes around them. You know that that cloud of dust around the children is a little smaller than our moments adults.

So so there's some data to support that they may be able to spread aerosols a little less far, but overall, they carry a similar amount of virus and therefore are as equally infectious as their adults counterparts are. Family Jason just around down the interview. Let's try and fit finish on a positive note, the improvement in therapeutics. We're looking at the case count, we're looking at hospitalizations again, Jason walked me through therapeutics. How much has improved over the

last six months or so. Yeah, so right now we've got um you know, definitely a glimmer of hope. So the most of the world is now using them dim severre with or without tex and mathasone UM so with those two agents, and it all depends on whether or not you need ventilation or oxygenation. And that's how they're recommendations around the world are moving forward. Uh, people who need oxygen get dex methodzone or indissevere, and then people

who need mechanical ventilation likely get both. There was a recent study that just came out from the w h O that still under peer review that calls to question again the mortality benefit the death benefit of ridissevere. But we had already had good data that showed that redissevere did not reduce death, it reduced symptom burden. So so again are another study that seems to be similar to

what we already know. So what we're seeing is the cases of patients having greater access to these treatments, which is also going to help us reduce ultimately the mortality level as we can scale up these interventions. Someone with knowledge that is a good thing. In silence, Professor Farley, Encyclopedic on the Care of People. Professor Mercy John's Hopkins University.

Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.