Surveillance: Impeachment Discussions with Treyz

Beta Partners. Henrietta, You and the rest of the world have to get to the wonderful Breeze Brady distraction next weekend. There's a small football game in your New Orleans is a nation, seriously as a nation can will still be standing on Friday to get to that important match. I would say, you can't keep New Orleans down. So we'll just kink kinkake our way through this and get to the end. No matter what happens in d C. We

will see that game. We will see that game, but we've got to get through the game of this political crisis as well. Frame out policy makers in Washington. Your expertise with the constitutional crisis we face. I think the next nine days, as you were reminding me earlier, is going to be everything from resignation to the Amendment UM going back to the Confederacy, and things that can be done to um eject lawmakers who are potentially UM fostering rebellion,

to impeachment. Certainly that will be going on all the way through the twenty and then what we've heard from the Democratic leadership in the last a couple of days is that we might actually hold over this idea of impeachment well into one so that Democrats and some Republicans can ensure the President Trump can never run for office again. So I don't think the storyline is going to get

behind us anytime soon. This week will obviously be filled with a lot of job and back and forth, but the nation will move on to a Biden administration and will get there soon enough. Henrietta, help us purse out the reality the substance from the drama. I mean, there's a lot of drama and there's a lot of reality. But what aspects of what we've seen unfold in Washington, d C. With the insurrection, with some of the fallout from how quickly law enforcement responded has long lasting implications

for policy. I think the amazing thing about Wednesday of last week was that we got the Georgia Senate elections and that insurrection at the exact same time. And one of the things I noticed even before the insurrection started was that Republicans were eager to move on to a policy discussion, get away from the sort of cult of personality association the Republican Conference currently has with Donald Trump

and moved to a discussion about policy. And so that actually has driven a number of Republican members in both the House and Senate, and certainly their lobbyists to say, we do want to pass the bill with Joe Biden early in one. I don't want to suggest that this will be a compa a young moment that will last for eternity, but I think we get ninety days here for a sixty vote threshold bipartisan bill against ten to

fifteen Republican votes in the Senate. I'm not really sure exactly how many yet in the House, but those are members who want to have policy to debate, want to be able to move on from the discussion of Donald Trump.

So I don't I think in the immediate term, which is probably the best way to approach the situation right now is just day by day, we are going to see even more optimism for a sixty vote threshold stimulus package right out of the gate and inviided administration that Republicans are expecting to work on, not just hoping to work on, but really expecting to pass with him. So

that's the biggest impact, at least for our plans. This is key and Henrietta, you phrase that so well, This idea that the turmoil that we saw in Washington is actually pushing Republicans and Democrats further towards some sort of consensus to work on policy, to move forward from what they would like to be simply a distraction. How big

could this stimulus be? Great question. I mean, it depends on who you talk to you right now, I think Democrats are gonna start with the humongous ask two, three or four trillion dollars, as we've discussed in the past, Republicans are going to get sticker shock, probably anywhere above seven fifty opening salvos from Republican leadership I've spoken to have suggested a five billion dollar number, but the reality is with Democrats in control, of the House and Senate.

They're not gonna waste their time on a five billion dollar package. So my base case assumption is that at the very low end we get something in the seven D eight hundred billion dollar range. At the high end, maybe at one point eight trillion UM. That's gonna depend on the size of any direct payments they want to get out. As y'all know, the the payments to individuals or any individual side stimulus is expensively just because of how many individuals there are that you need to give

money to. So I don't mean, I don't mean to interrupt, but I am because at least that I remember, there was a Job's report on Friday, and I understand within the original Washington you and everybody else's dealing right now, I'm not even sure the politicians are aware of how ugly that Job's report was. Do they care? And does it create a new urgency around the real crises plural that we have. That's exactly the narrative I think that's important.

Urgency and crisis. There's two words that you use are going to propel this package forward. Um. It's beneficial on every single level. Both the need an urgency basis to call this a crisis. The jobs report, the COVID deaths, the shutdowns we're saying nationwide, UM, the worst hospitalization rates we've seen thus far, UM, the crisis of unemployment obviously brought to the fore by the long term unemployed and

the most recent jobs number. And the benefit of a crisis and this urgency that feeds yourself is that you don't have to pay for us. And that is the path of East resistance to getting sixty votes. So all that helps. One final question, Henrietta, does it matter to you, as we're talking with a number of our guests this morning, to see Republicans become in dependence Ala Murkowski of Alaska? That is h humongous. I mean Senators Murkowski, Collins, Romney,

Ben Sass. Those are members who could potentially split the difference between a fifty Republican Democratic majority split in the Senate and really give Democrats a functioning majority. That's what we saw last time in two thousand and one when this happened, it took until May for Republican to defect the Independent Conference and caucus with Democrats. If that happens, um, that really smooths our path to another Reconciliation bill later on.

This should be more stimulus, Henrietta, thank you so much, Tres Veta Partners. There's a question that the fraud that we're seeing come off the top in some stocks and we're seeing commensurate moves within the credit space. It does not seem like it. But perhaps there is not the

same froth. This is one of the big existential questions facing people searching for income, Brian Weinstein, among them Morgan Stanley Investment Management, head of Global fixed Income joining us Now, Brian, are you seeing a similar type of froththiness and aspects of the credit market as people point to in aspects

of equities. Man, after listening to you guys the last few minutes, I feel like we're so we're so boring, um sick be income has some frofit it I like anything else that it's moved up, and it's been a straight line, but nothing really parabolic, right. I think it's been a bit more rational, a bit more slow, led by the FED, led by low rates, and we've seen small reversals that in real yields and in regular interest rates, and but Prence Fed are still type people are still

looking for income. You can't get it. So I feel like there is froth, but it doesn't compare in the same way to the things that you guys were just discussing. Does that affect your investment, this thesis, this idea that

you're not seeing the same froththiness. So that's a green light to continue to go deeper into risk and credit, you know, yes, yes and no. I mean certainly investors are speaking with their whilets and they're moving to risk your assets because he flows into emerging market, flows into things with income like high yield and even bank loans, and what it makes us want to do to be a little bit more slow and steady. I mean pick income is supposed to be a bit more boring than

than than bitcoin or equities. UM. So what we're doing is we're not changing our views based on these manic market moves, and we're trying to take it into accounty the impact of the historical events we're seeing. Right, we don't want to be over overcompetent, but we think more stimulus is coming. Um. We obviously have the Democrats coming, um, so have maybe spead the higher taxes, So all those things are going to play into our into our thought but it's flowing to stay. Brian, you talk in your

research note of winners in losers. If we go back to single digit returns and even bond returns of say four or five, six, seven percent, how do you parse a winner to get out to a double digit return of ten? You have double digit returns and pick sncome keep getting keep getting harder, Um, And so I think what you do is you stick to your fundamental research. Right.

There are all kinds of sectors that have been really beaten up, but by this emming energy for the last couple of years for sure than things like gaming and other other places where the pandemic is hit. So as an active manager, it helps, I think to be slow and steady. We're not going to get double digit returns in a week and a month. You talk about, you know,

things a day or and over a weekend. You know it's it's going to take I think a bit of a longer time, and you'll have to get thematic um active selection right as opposed to just owning credit or just owning high yield. That's not going to get you there. I know you're not doing technical analysis, but what level of the tenure yield up price lower is a trip point, is a Weinstein moment where you say, oops, bonds lower.

I think we're really close. Um. I was surprised actually, and it wasn't a big move, but over as got over one ten that people didn't get more nervous. Tom I would say that fifty range if you don't get the steed coming right out, and then they probably won't

if that doesn't come right out and complain about it. Um, I think that's where people get nervous, because I moved back towards two percent um and you probably do have to have the central banks doing some more unnatural things to count the rate um now with impacts on the dollar, impacts on on psyche and obviously on valuation. So but a lot of people do expect the Fed to jump in, right, I mean you're saying that the Fed would have to, but they would because otherwise you would get some sort

of disruption in credit markets and financial conditions. When you talk about the defense of boring bonds, this idea that there's almost this defensiveness in your discussion. It's not that exciting. But we're stolid, we're steady, we're a reliable investment. Do you see credit as being sustained even with a rise

of yields to fifty and the benchmark rate. Yes, and we're sure there'll be some bumps along the way, right, this will not continue to be a straight line tighter, but we do think you'll see money coming in higher deals to do. Think credit um is on decent footing. And as you say, um, you have to stad at your back somewhere out there, and you have the government at your back more stimulus somewhere out there. So again it won't be the double digit return corporate year um.

But if you do need a couple of percent. As you look in some of these sectors am high yield loans um that still have still have some yield, you can still do okay, even if you'll move up a little bit UM And as you say, the stead will step in at some point. We're in the world. Is the best value right now, Brian? Probably in emerging market still and we've seen the flows in that direction. Things

have been it from a week or dollar um. That's probably just still this thing that has the If the set does step then where's the release valve, Probably in the in the dollar weakening. So yeah, is a is a good spot. Um, Hi yield that down in credit again when you can do your homework and it's not just how yeld data, it's something you know, interesting and unique. Um, those things with yield I think are still places you want to go. Bryan Weinstein, thank you so much. From

Morgan Stanley Investment Management. We appreciate your time to surveillance. Keeps a lovely ship's bill over by the deak where they all sit, and every time I said go to cash, they ring the bell. The bell has been ringing a lot over the last three years. We talked about people to get bonds right that have gotten right low yields. We talk about people who get the equity markets right. But in the world of equities, no one has consistently

done it better. And Benjamin Laylor at HSBC at Tower Hudson's as well, and not only did he nail two years ago, did he nail last year, but this year he continues the enthusiasm. Ben Laylor, thank you so much for joining us. Is all that went on last week shaking your bull conviction? Um? I don't think so. I mean, obviously what went on last week was shocking in sort of very many ways, but I guess the outline for

this year is really unchanged. I mean, we are looking at, I think, just a historic growth year where expectations frankly are still too low, both for GDP growth and for ernsings growth. And I think that's going to be really what's going to drive the surprise, the upside surprise for this year, and and it's going to come against the backdrop of I think still very benevolence sort of policy support UM, and I think that's going to allow evaluations to come down a little bit but still remain much

higher than they have been historically. And that's really I think the combination that you need to focus on for this year. I mean that I think we're setting ourselves up for a very very rare sort of third year of consecutive strong equity game. And so you've you've you've seen it. Count on three fingers how many times you've seen over the last fifty or sixty years that people

are may be right to be cautious yet. But I think that I think that outlook is is what we're playing for here, and I actually probably be a bit better about it now than I did. UM. You know, maybe not because of last week, but certainly over the last a couple of weeks, I think the outlook has probably firmed up. Ben, What's so important here is along

the way there's a nuance of sectors. Is this the blunt instrument of a market just lifting or tell us your sector nuance, the distinctions between two years ago one years ago in your sector allocation? Now, yes, as I would sort of sectors and countries. I mean, I think you definitely get paid to. I mean I prefer to call it out sort of catch up of these sort of value cyclical sectors and also international market rather than

a rotation, because I think everything is going up. I just think this sort of value cyclical and international markets are probably going up a bit more than the sort of winners of last year. But I do think everything's going up um and and the it's a very different environment. I mean, we're I think right now you should be reaching for risk, you should be reaching for growth. M In many ways, that's sort of the opposite of last year.

So we're you know, very focused on places that you know have um you know, value and cyclicals are probably going to grow three to four times more than the sort of winners of last year. This year and you're paying third lower valuations. I mean that's basically I think the outlook for this year. So you know, where do I get that most operating leverage to this, to this environment of higher GDP growth on a half bond fields. Um, it's it's industrials, it's small cap, it's financials, it's it's

the emerging market, it's a bit of Europe. Um. This is where I think that the most unt I mean part of make to make this clear, Ben Laylor's law on the Cleveland Browns exactly talk about an add of the odd of the money call there, Ben, you know, at some point, well, we're about to go into the fourth quarter earning season here, Ben, and at some point earnings have to matter. Can't just be the fed flooding in the market with liquidity. What's your earnings outlook here

for one and maybe into next year? Yeah, So I completely agree with that. I mean a fourth quarter, you know, earnings do need to sort of keep delivering, and and I think they sort of have been right. I Mean, we've just come off two quarters of the biggest earnings beats you've you've ever seen in recent history. Um, And I think this is going to be a sort of another quarter where you see some very strong earnings Beach

one and two. Who's been leading those speech, It's exactly those sectors, um, that I've just been sort of talking about. It's um, it's been those most sort of cytroical sectors with the most depressed earnings. So that's what I'm looking for for this quarter, that sort of narrative to continue of just more earnings beat driving further earnings sort of upgrades and those beat coming out of these most sort

of depressed sectors. But to ance your question to you know, earnings outlook for next year of sorry for this year. I just have to get used to saying that in the US, UM, the US that he was sent internationally, and I think there's probably UM, I think when all this sad and done, those numbers are going to be about at least ten percent too low across the board. When you look back historically, UM, you know, very rarely

the analysts sort of low ball earnings. But when they do, it's either because we're coming out of a recession or it's because we're somewhere along the line we're getting sort of more fiscal stimulus be being poured into the market, and this year we have got both of those things, and potentially we're about to getting even you know another another slug of fiscal expansion. So I think earnings are fas too low. Um, and you know you CONSERNSUS for US this year when all of a sudden done, I

think we're probably close to the thirty alright. So Ben, you've taken your career kind of looking at this global this equity business on a global scale, on globally rate. Here as we start, where do you see some of the best opportunities on a global outlook basis? Yeah, So, as I say, I mean we are definitely looking at you know, assets which should be deeply out of favor for the last decade or so. Um, you know, internationals one and sort of value stroke cyclicals is another one.

I mean those two together have probably underperformed, um you know growth from the US by you know, over two percentage points over the last decade. So this I think is the change, um, both on the value six of

your side, also at your point on the international side. UM. So i'd be looking at I'd be looking at the m you know specifically, Um, you know, the more cyclical bits of em sort of Latin semir frontier market, basically the bit that didn't do well last year, which is really all about China and and bits from Europe, especially sort of domestic cyclical Europe financials in Europe. Until very recently, those were pretty much the cheapest, most out of favor,

most paided, uh sort of segments. Um, that's where i'd be looking. I mean, I guess the sort of caveat um, and I would say, what do you get for that? You basically get twice the growth for those segments that you do in the US, and you're basically only paying a third less in terms of in terms of evaluation. So that's why I think it's worth looking, um, you know, looking internationally, I guess the one caveat is is currencies. Um,

Euro's obviously been strengthening, Yen's obviously been strengthening. And I was just gonna say, that's that's a pretty big headwin for some of these companies, which which are you know, big international players. Um, so sort of just there are some caveats, but what if you don't get that consensus. Mark McCormick was from t D Securities and Ben Laidler.

I mean Marcus really pushed it against consensus. He's got your equity optimism, your optimism on recovery through all of these challenges, and he says, the great unspoken could be strong dour this year. What do the equity markets do if we get a Mark mccormickdollar. Yeah, I mean I think that that that would clearly be negative. I mean I'm not looking for big, significant dollar weakness from here.

I mean you've actually had a lot. I'll you know, I think markets can do well with sort of dollar stabilization, and I'm not and I'm not sure I see the ingredient for you know, meaningfully stronger dollar. Um. But but again, um, the you know, going actually initial point. I mean, if we don't get that bigning surprise and clearly we're gonna make a lot, we're just gonna we're gonna make less money. I mean, I think you're, you know, you're looking us

sort of flatish US year at that point. You know, markets do you know, obviously do a pretty good job of pricing things in ahead of time, which is why you've very rarely se that sort of third year of strong gains. So I think it probably turns um, you know, a pretty strong year into a plast this year. I'm not sure it completely derails it. Um, you know, only

growth is still you know, still a big number. And I think more importantly, I think we begin to focus spent more on on you know, actual actually next year at some point where I still think you're going to see um, you know, I sort of flow through from this year into next year and still decent earnings at that point and a forbearance and and sort of reasonably reasonable forbearance and the bed which I think will support valuations.

Benjo and Lee lu thank you so much. Terror Hud sitting here on optimism within the equity marketing, Well, there are financials, there are investments as well. There's also, of course a constitutional crisis in Washington. For more than anything, we're all living in the pandemic, living the reality of

what we are going to do. Is Katie Peess already out of the Johns Hopkins University system at Adream Health Charlotte, North Carolina, and not so much in the trenches of what we're doing, but in the hey, we've got to get this done. Of what we're doing in vaccination, Kate Pess already, what is your best practice right now to ramp up our vaccination programs. Yes, certainly you all were just talking about, you know, transitioning testing sites larger arenas

into vaccination sites. I do think the more people we can get vaccinated, you know, as soon as possible as supply allows, and making sure that we're prioritizing those at higher risks so that we get the most um kind of impact from protecting the people that may have higher likelihood of possibility. Is money and funding a constraint? Are you limited or is Mount Scion, New York or Cedars Sinai out in l A? Are you people limited by the budgeting of the last mile of vaccination? You know,

the conversations I've been a part of. Budgeting isn't as much of an issue. Certainly, the things are all very expensive. It's how do we functionally get it done and deal with the financial consequences later. Certainly, you know, tremendous work needed, tremendous people resources needed to make that happen. Is there a skill to giving a vaccine? My skill is to hold somebody's hand because I know it's going to hurt so much. I'm kidding folks, But is there a skill?

Is there a skill to giving a shot. So the actual functionality of giving a shot can be done by you know, medical professionals at different levels. You do, and on the off chance that there is a reaction to the vaccine, need to have people able to respond quickly if someone has a reaction. So you do need medical professionals there. You can't just be yeah. I mean, I remember Katie the leap from touch to cycling out to seto menafin, and you know, there was some real doubt

about all these modern fancy antibiotics. What have you learned in a number of weeks about our confidence in having these vaccines both shots? Yeah, so certainly we have an increase in people's confidence as more and more people get vaccine. Having that, we still have a huge, huge, huge way to go to get the protection our community needs. Well, we got a huge way to go. But do we do that with an increasing confidence or we just sort of there and and we have to get it done.

And do you do you suggest that there'll be societal constraints that will force vaccination. Um, you know, I think it's unlikely as far as mandatory vaccination. Is that kind of what you're saying, like an airline says you're not getting on board if you don't have a vaccine. Yeah, so certainly I think private entities may go that route and specifically kind of travel related you know, requiring proof of vaccination to get on a plane and go to

certain areas. Certainly I think that's possible. You know, at the governmental level, I think less likely, at least for a very long time. UM that will happen. The timeline if you sophisticated m R n A vaccines is you know, for anybody to study this and a pro like you are a hack like me. It's really really something. How close are we to what Peter Hotez of Baylor College of Medicine talks about, which is a low cost traditional vaccine to really get this done? Where are we in that? Yes,

certainly getting closer by the day. So the MR and A story is amazing and happened safely and rapidly over a very short period of time. But that doesn't mean that other vaccine candidates, traditional vaccine candidates like you mentioned, weren't being worked on at the same time. So more and more UM research studies are going on to get the level of data to make sure that type of vaccine is protective, and you know, the cost the handling of the current MR and A vaccines are hugely, hugely

kind of blocking getting them out. So as we get these more, more of these candidates that are more easily usable and distributable UM out. It's it's hugely important. There's a ton of work going on to make that happen. Do you envision the Charlotte Charlotte, North Carolina, folks, is Charlotte Convention Center being used as the vaccine site? Is that where we're heading? You know, certainly the Health Department is already using um beau Jangles Coliseum to vaccinate people.

You know, I do think we are going to need larger venues to get the volume of people vaccinated that we need. That's going to mean private healthcare, you know, public Health Department, all groups kind of working together to make that happen. What have you learned about the shock? I mean, so many people are concerned about the shock, and there's this report and that report one out of a million, one out of a hundred thousand, whatever those

numbers are. Are those numbers contained and appropriate or do you have any concern about the research on shock? Yeah? So certainly, the numbers have continued to be low of people that have anaphylactic shock or shock like reactions following the vaccine, which is reassuring as we go out to

larger and larger groups of people. UM, certainly, you know, we need to continue to monitor, but you know, those I would just re enforce that those numbers do stay low and happen in a very small number of people. In the vast majority of people do just fine after the first dose and the second the second dose, what does the second dose do? I really haven't seen a good article on this. I mean, you know, in the old days, folks, we had booster shots. Is that what

this is. It's just a booster really, it is essentially acting like a booster shot, so to kind of the initial ones kind of priming your immune system, your protective system, and then the second dose UM kicks it up further to hopefully get longer duration of protection, higher level of protection. But with that we do see some more side effects as far as arm paining, fevers, feeling kind of crummy, especially in kind fifty five after that second shot. So

people just need to be prepared for that. Dr Pess already, thank you, so much, greatly greatly appreciate it with Adriam Health directors. 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 Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio